UNITED STATES
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, 1999
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 North Park Drive
Ft. Lauderdale, Florida 33326
(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 9, 1999, the Registrant had 15,502,022 shares of $0.01 par value
common stock outstanding.
<PAGE>
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, 1999 (Unaudited)
and December 31, 1998.........................................................................................3
Condensed Consolidated Statements of Income for the Three and Six Months Ended
June 30, 1999 and 1998 (Unaudited)............................................................................4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1999 and 1998 (Unaudited)............................................................................5
Notes to Condensed Consolidated Financial Statements............................................................6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.....................................................9
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.......................................12
PART II - OTHER INFORMATION....................................................................................13
ITEM 1. Legal Proceedings................................................................................13
ITEM 2. Changes in Securities............................................................................13
ITEM 3. Defaults Upon Senior Securities..................................................................13
ITEM 4. Submission of Matters to a Vote of Security-Holders..............................................14
ITEM 5. Other Information................................................................................14
ITEM 6. Exhibits and Reports on Form 8-K.................................................................14
SIGNATURE......................................................................................................16
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PEDIATRIX MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1999 December 31,
(Unaudited) 1998
------------- -----------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................ $ 588 $ 650
Accounts receivable, net ................................. 71,387 61,599
Prepaid expenses ......................................... 728 682
Income taxes receivable .................................. 2,215 --
Other current assets ..................................... 2,198 769
-------- --------
Total current assets ................................. 77,116 63,700
Property and equipment, net ................................... 12,879 11,942
Other assets, net ............................................. 239,862 195,016
-------- --------
Total assets ......................................... $329,857 $270,658
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses .................... $ 30,086 $ 30,043
Income taxes payable ..................................... -- 3,938
Current portion of note payable .......................... 200 200
Deferred income taxes .................................... 17,902 14,604
-------- --------
Total current liabilities ............................ 48,188 48,785
Line of credit................................................. 41,893 7,850
Note payable .................................................. 2,250 2,350
Deferred income taxes ......................................... 3,716 3,327
Deferred compensation ......................................... 1,683 953
-------- --------
Total liabilities .................................... 97,730 63,265
Minority interest ............................................. 14,081 6,342
Commitments and contingencies
Stockholders' equity:
Preferred stock .......................................... -- --
Common stock ............................................. 155 154
Additional paid-in capital ............................... 132,652 130,720
Retained earnings ........................................ 85,239 70,177
-------- --------
Total stockholders' equity ........................... 218,046 201,051
-------- --------
Total liabilities and stockholders' equity ........... $329,857 $270,658
======== ========
</TABLE>
The accompanying notes are an integral part of
these financial statements
3
<PAGE>
PEDIATRIX MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
(in thousands, except for per share data)
<S> <C> <C> <C> <C>
Net patient service revenue ................................................... $ 56,767 $ 46,144 $ 110,593 $ 83,952
Operating expenses:
Salaries and benefits ...................................................... 35,321 28,584 69,711 52,144
Supplies & other operating expenses ........................................ 5,076 3,393 9,602 6,088
Depreciation and amortization .............................................. 2,971 2,125 5,637 3,813
--------- --------- --------- ---------
Total operating expenses ............................................. 43,368 34,102 84,950 62,045
--------- --------- --------- ---------
Income from operations ............................................... 13,399 12,042 25,643 21,907
Investment income ............................................................. 77 45 152 491
Interest expense .............................................................. (457) (242) (692) (351)
--------- --------- --------- ---------
Income before income taxes ........................................... 13,019 11,845 25,103 22,047
Income tax provision .......................................................... 5,207 4,738 10,041 8,821
--------- --------- --------- ---------
Net income ............................................................... $ 7,812 $ 7,107 $ 15,062 $ 13,226
========= ========= ========= =========
Per share data:
Net income per common and
common equivalent share:
Basic ................................................................ $ .50 $ .47 $ .97 $ .87
========= ========== ========== ==========
Diluted .............................................................. $ .50 $ .45 $ .95 $ .83
========= ========== ========== ==========
Weighted average shares used
in computing net income per
common and common equivalent share:
Basic ................................................................ 15,500 15,226 15,466 15,192
========== ========== ========== ==========
Diluted .............................................................. 15,760 15,900 15,938 15,871
========== ========== ========== ==========
The accompanying notes are an integral part of
these financial statements
</TABLE>
4
<PAGE>
PEDIATRIX MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------------------
1999 1998
----------------- -----------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................... $ 15,062 $ 13,226
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ........................................ 5,637 3,813
Deferred income taxes ................................................ 3,687 3,364
Changes in assets and liabilities:
Accounts receivable ............................................. (9,788) (13,258)
Prepaid expenses and other current assets ....................... (1,037) (107)
Other assets .................................................... 170 116
Accounts payable and accrued expenses ........................... 1,354 1,872
Income taxes .................................................... (5,551) 629
-------- --------
Net cash provided from operating activities ................. 9,534 9,655
-------- --------
Cash flows used in investing activities:
Physician group acquisition payments ..................................... (49,162) (63,891)
Purchase of investments .................................................. -- (9,939)
Proceeds from sale of investments ........................................ -- 36,983
Purchase of property and equipment ....................................... (1,707) (1,401)
-------- --------
Net cash used in investing activities ....................... (50,869) (38,248)
-------- --------
Cash flows from financing activities:
Borrowings on line of credit, net ........................................ 34,043 10,000
Payments on note payable ................................................. (100) (100)
Proceeds from issuance of common stock ................................... 1,573 1,884
Proceeds from issuance of subsidiary stock ............................... 5,757 --
-------- --------
Net cash provided from financing activities ................. 41,273 11,784
-------- --------
Net decrease in cash and cash equivalents ..................................... (62) (16,809)
Cash and cash equivalents at beginning of period .............................. 650 18,562
-------- --------
Cash and cash equivalents at end of period .................................... $ 588 $ 1,753
======== ========
</TABLE>
The accompanying notes are an integral part of
these financial statements
5
<PAGE>
PEDIATRIX MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(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,
1999 are not necessarily indicative of the results of operations to be
expected for the year ended December 31, 1999. 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 24, 1999.
Certain prior year amounts have been reclassified to conform to the
1999 presentation.
2. Business Acquisitions:
During the first six months of 1999, the Company completed the
acquisition of eight physician group practices. Total consideration for
acquisitions approximated $49.2 million in cash and 1,000,000 shares of
stock in a subsidiary of the Company.
The Company has accounted for the acquisitions 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 practices 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 physician group practices
acquired during 1998 and 1999 as if the acquisitions had occurred on
January 1, 1998:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------------------
1999 1998
---------------- ----------------
(in thousands, except for per share data)
<S> <C> <C>
Net patient service revenue $ 118,832 $ 107,964
Net income 15,379 14,172
Net income per share:
Basic .99 .93
Diluted .96 .89
</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.
6
<PAGE>
PEDIATRIX MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
2. Business Acquisitions, Continued:
Historically, the Company has capitalized certain incremental internal
costs directly related to completed acquisitions. Effective January 1,
1999, the Company expensed these costs as incurred. For the three and
six months ended June 30, 1999, such costs totaled approximately
$302,000 and $647,000, respectively.
3. Accounts Payable and Accrued Expenses:
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------- -----------
(in thousands)
<S> <C> <C>
Accounts payable............................ $ 12,545 $ 10,373
Accrued salaries and bonuses................ 3,897 6,433
Accrued payroll taxes and benefits.......... 3,554 4,465
Accrued professional liability coverage..... 6,979 6,866
Other accrued expenses...................... 3,111 1,906
---------- ----------
$ 30,086 $ 30,043
========== ==========
</TABLE>
4. Net Income Per Share:
Basic net income per share is calculated by dividing net income by the
weighted average number of common shares outstanding during the period.
Diluted net income per share is calculated by dividing net income by
the weighted average number of common and potential common shares
outstanding during the period. Potential common shares consist of the
dilutive effect of outstanding options calculated using the treasury
stock method.
5. Comprehensive Income:
During 1998, the Company adopted the provisions of SFAS No. 130,
"Reporting Comprehensive Income," which requires that all items
recognized under accounting standards as components of comprehensive
income be reported in the financial statements. The components of
comprehensive income not reflected in the Company's net income are
related to the unrealized gains and losses on investments. For the
quarters ended June 30, 1999 and 1998, there were no items of other
comprehensive income. For the six months ended June 30, 1999 and 1998,
the net impact of recording these items would be $0 and ($89,000),
respectively.
7
<PAGE>
PEDIATRIX MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
6. 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. These lawsuits are not expected to result in judgments which
would exceed professional liability insurance coverage, and therefore
will not have a material impact on the Company's consolidated results
of operations, financial position or liquidity, notwithstanding any
possible insurance recovery.
In February 1999, the first of several federal securities law class
actions was commenced against the Company and three of its principal
officers in United States District Court for the Southern District of
Florida. Plaintiffs are shareholders purporting to represent a class of
all open market purchasers of the Company's common stock between April
28, 1998, and various dates through and including April 1, 1999. They
claim that during that period the Company violated the antifraud
provisions of the federal securities laws by issuing false and
misleading statements concerning its accounting practices and financial
results, focusing in particular on the capitalization of certain
payments made to employees in connection with acquisitions and revenue
recognition in light of recent inquiries initiated by state
investigators into the Company's billing practices. The complaints seek
damages in an undetermined amount based on the alleged decline in the
value of the common stock after the Company disclosed the
capitalization issue and the inquiries by state investigators. On June
24, 1999, the Judge in the United States District Court for the
Southern District of Florida entered an Order of Consolidation
consolidating into one case the several federal securities law class
action lawsuits. The Judge recently entered two Orders in the case. The
first Order granted the motion made by the three public pension funds
to be appointed as lead plaintiffs and to have their counsel appointed
as lead plaintiffs' counsel. The second Order set the administrative
mechanism for handling the consolidated cases, including the time
limitations for the filing of a consolidated Amended Complaint by
plaintiffs and a responsive pleading by defendants. The Company
continues to believe that the claims are without merit and intends to
defend them vigorously at the appropriate time.
In April 1999, the Company received requests, and in one case a
subpoena, from investigators in Arizona, Colorado and Florida for
information related to its billing practices. The Company is fully
cooperating with these inquiries. Although the Company believes that
its billing practices are proper, the investigations are ongoing and
the Company is unable to predict at this time whether they will have
any material adverse effect on the Company's business, financial
condition or results of operations.
7. Subsequent Events:
In July 1999, the Company purchased shares of common stock in a
subsidiary held by minority shareholders for approximately $17.6
million. The shares purchased represent approximately 23.5% of all
outstanding shares of the subsidiary.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Three Months Ended June 30, 1999 as Compared to Three Months Ended
June 30, 1998
The Company reported net patient service revenue of $56.8 million for
the three months ended June 30, 1999, as compared with $46.1 million for the
same period in 1998, a growth rate of 23.0%. Of this $10.7 million net increase,
$12.2 million, or 114.0% was attributable to new units, including units at which
the Company provides services as a result of acquisitions. Same unit patient
service revenue decreased $1.5 million, or 3.5%, for the three months ended June
30, 1999. The decline in same unit patient service revenue is the result of a
lower acuity level of patient service billed in the three months ended June 30,
1999 as compared to the same period in 1998. Same units are those units at which
the Company provided services for the entire current period and the entire
comparable period.
Salaries and benefits increased $6.7 million, or 23.6% to $35.3 million
for the three months ended June 30, 1999, as compared with $28.6 million for the
same period in 1998. Of this $6.7 million increase, $3.3 million, or 49.3%, was
attributable to hiring new physicians, primarily to support new unit growth, and
the remaining $3.4 million was primarily attributable to increased support staff
and resources added in the areas of nursing, management and billing and
reimbursement and certain internal costs directly related to completed
acquisitions that had historically been capitalized. Supplies and other
operating expenses increased $1.7 million, or 49.6% to $5.1 million for the
three months ended June 30, 1999, as compared with $3.4 million for the same
period in 1998, primarily as a result of increased legal fees related to
government investigations (see Legal Proceedings), new units and the addition of
new outpatient offices. Outpatient services require a higher level of office
supplies than do inpatient services. Depreciation and amortization expense
increased by approximately $846,000, or 39.8%, to $3.0 million for the three
months ended June 30, 1999, as compared with $2.1 million for the same period in
1998, primarily as a result of amortization of goodwill in connection with
acquisitions.
Income from operations increased approximately $1.4 million, or 11.3%,
to $13.4 million for the three months ended June 30, 1999, as compared with
$12.0 million for the same period in 1998. The increase in income from
operations was primarily due to increased volume, principally from acquisitions.
The Company recorded net interest expense of approximately $380,000 for
the three months ended June 30, 1999, as compared with net interest expense of
approximately $197,000 for the same period in 1998. The increase in interest
expense in 1999 is primarily the result of funds used for the acquisition of
physician practices and the use of the Company's line of credit for such
purposes.
The effective income tax rate was approximately 40.0% for the three
month periods ended June 30, 1999 and 1998.
Net income increased 9.9% to $7.8 million for the three months ended
June 30, 1999, as compared with $7.1 million for the same period in 1998.
Diluted net income per common and common equivalent share increased to 50 cents
for the three months ended June 30, 1999, compared to 45 cents for the same
period in 1998.
Six Months Ended June 30, 1999 as Compared to Six Months Ended June 30,
1998
The Company reported net patient service revenue of $110.6 million for
the six months ended June 30, 1999, as compared with $84.0 million for the same
period in 1998, a growth rate of 31.7%. This growth was attributable to new
units at which the Company provides services as a result of acquisitions. Same
unit patient service revenue was essentially flat for the six months ended June
30, 1999. Same units are those units at which the Company provided services for
the entire current period and the entire comparable period.
9
<PAGE>
Salaries and benefits increased $17.6 million, or 33.7% to $69.7
million for the six months ended June 30, 1999, as compared with $52.1 million
for the same period in 1998. Of this $17.6 million increase, $10.3 million, or
58.5%, was attributable to hiring new physicians, primarily to support new unit
growth, and the remaining $7.3 million was primarily attributable to increased
support staff and resources added in the areas of nursing, management and
billing and reimbursement and certain internal costs directly related to
completed acquisitions that had historically been capitalized. Supplies and
other operating expenses increased $3.5 million, or 57.7% to $9.6 million for
the six months ended June 30, 1999, as compared with $6.1 million for the same
period in 1998, primarily as a result of: (i) increased legal fees related to
government investigations (see Legal Proceedings); (ii) additional audit fees
related to the Company's 1998 concurrent audit; (iii) new units; and (iv) the
addition of new outpatient offices. Outpatient services require a higher level
of office supplies than do inpatient services. Depreciation and amortization
expense increased by $1.8 million, or 47.8% to $5.6 million for the six months
ended June 30, 1999, as compared with $3.8 million for the same period in 1998,
primarily as a result of amortization of goodwill in connection with
acquisitions.
Income from operations increased approximately $3.7 million, or 17.1%,
to $25.6 million for the six months ended June 30, 1999, as compared with $21.9
million for the same period in 1998. The increase in income from operations was
primarily due to increased volume, principally from acquisitions.
The Company recorded net interest expense of approximately $540,000 for
the six months ended June 30, 1999, as compared with net interest income of
approximately $140,000 for the same period in 1998. The reduction of interest
income in 1999 is primarily the result of funds used for the acquisition of
physician practices and the use of the Company's line of credit for such
purposes.
The effective income tax rate was approximately 40.0% for the six month
periods ended June 30, 1999 and 1998.
Net income increased 13.9% to $15.1 million for the six months ended
June 30, 1999, as compared with $13.2 million for the same period in 1998.
Diluted net income per common and common equivalent share increased to 95 cents
for the six months ended June 30, 1999, compared to 83 cents for the same period
in 1998.
Liquidity and Capital Resources
As of June 30, 1999, the Company had working capital of approximately
$28.9 million, an increase of $14.0 million from the working capital of $14.9
million available at December 31, 1998.
As of June 30, 1999, the Company had $33.1 million available under its
$75 million line of credit. The Company anticipates that funds available under
its credit facility, together with funds generated from operations, will be
sufficient to meet its working capital requirements and finance any required
capital expenditures for at least the next 12 months. Additionally, the Company
is currently in discussions to increase its line of credit.
Status of Year 2000 Compliance
The Company has completed a review of its computer systems to identify
any software that could be affected by the transition to the year 2000.
Currently, all of the Company's critical systems are year 2000 compliant or are
upgradeable to commercially available versions that are compliant. The Company
anticipates that by the end of the third quarter of 1999 it will have completed
testing on all of its critical systems, which include its clinical, billing,
general ledger, and accounts payable systems. In addition, the Company is
completing an inventory and certain tests of its information technology assets
as well as critical non-information technology related assets and services,
including embedded microprocessors in, for example, ultra-sound machines. It is
expected that the testing and resolution of any issues encountered will be
completed by the end of the third quarter of 1999. The ultimate resolution may
require the replacement of certain equipment owned by the Company. The Company
10
<PAGE>
has not set a limit on the financial resources that may be applied to complete
this project, although, based upon the information that is currently available,
it is expected that the total cost, both capitalized and expensed will not
exceed $500,000.
In preparing for the year 2000, the Company has requested certain
information from its payors, vendors, financial institutions and hospital
customers in order to evaluate their compliance plans and state of readiness.
The Company will continually update this information throughout 1999 in order to
determine what impact, if any these third parties may have on its business.
Pediatrix is in the process of developing a contingency plan to ensure that it
will be able to continue to provide services to its customers on and after
January 1, 2000. However, if a substantial number of payors, vendors and
hospital customers do not make modifications and conversions required on a
timely basis, it could have a material adverse effect on the Company's financial
condition and results of operations.
11
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's unsecured revolving credit facility, mortgage note
payable and certain operating lease agreements are subject to market risk and
interest rate changes. The total amount available under the credit facility is
$75 million. At the Company's option, the credit facility bears interest at
either LIBOR plus .875% or the prime rate. The mortgage note payable bears
interest at the prime rate and the leases bear interest at LIBOR based variable
rates. The outstanding principal balances on the credit facility and note
payable were approximately $41.9 million and $2.5 million, respectively, at June
30, 1999. The outstanding balances related to the operating leases totaled
approximately $12 million at June 30, 1999. Considering the total outstanding
balances under these instruments at June 30, 1999 of approximately $56.4
million, a 1% change in interest rates would result in an impact to pre-tax
earnings of approximately $564,000 per year.
12
<PAGE>
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. These lawsuits are not expected to result in
judgments which would exceed professional liability insurance coverage,
and therefore will not have a material impact on the Company's
consolidated results of operations, financial position or liquidity,
notwithstanding any possible insurance recovery.
In February 1999, the first of several federal securities law
class actions was commenced against the Company and three of its
principal officers in United States District Court for the Southern
District of Florida. Plaintiffs are shareholders purporting to
represent a class of all open market purchasers of the Company's common
stock between April 28, 1998, and various dates through and including
April 1, 1999. They claim that during that period the Company violated
the antifraud provisions of the federal securities laws by issuing
false and misleading statements concerning its accounting practices and
financial results, focusing in particular on the capitalization of
certain payments made to employees in connection with acquisitions and
revenue recognition in light of recent inquiries initiated by state
investigators into the Company's billing practices. The complaints seek
damages in an undetermined amount based on the alleged decline in the
value of the common stock after the Company disclosed the
capitalization issue and the inquiries by state investigators. On June
24, 1999, the Judge of the United States District Court for the
Southern District of Florida entered an Order of Consolidation
consolidating into one case the several federal securities law class
action lawsuits. The Judge recently entered two Orders in the case. The
first Order granted the motion made by the three public pension funds
to be appointed as lead plaintiffs and to have their counsel appointed
as lead plaintiffs' counsel. The second Order set the administrative
mechanism for handling the consolidated cases, including the time
limitations for the filing of a consolidated Amended Complaint by
plaintiffs and a responsive pleading by defendants. The Company
continues to believe that the claims are without merit and intends to
defend them vigorously at the appropriate time.
In April 1999, the Company received requests, and in one case
a subpoena, from investigators in Arizona, Colorado and Florida for
information related to its billing practices. The Company is fully
cooperating with these inquiries. Although the Company believes that
its billing practices are proper, the investigations are ongoing and
the Company is unable to predict at this time whether they will have
any material adverse effect on the Company's business, financial
condition or results of operations.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
13
<PAGE>
Item 4. Submission of Matters to a Vote of Security-Holders
---------------------------------------------------
(a) The Company's Annual Meeting of Shareholders was held on
June 2, 1999.
(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
Against or
or Broker Non-
Name For Withheld Abstained Vote
- --------------------------------------------------------------------------------
Roger J. Medel, M.D., M.B.A. 13,512,323 104,546 0 0
Michael B. Fernandez 13,476,241 140,628 0 0
M. Douglas Cunningham, M.D. 13,512,353 104,516 0 0
Cesar L. Alvarez 13,476,241 140,628 0 0
Waldemar A. Carlo, M.D. 13,474,781 142,088 0 0
Item 5. Other Information
-----------------
This quarterly report contains statements which, to the extent
they are not historical fact, constitute "forward looking statements"
under the securities laws. All forward looking statements involve
risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to differ
materially from those expressed or implied by or in such forward
looking statements. The forward looking statements in this document are
intended to be subject to the safe harbor protection provided under the
securities laws.
For additional information identifying certain other important
factors which may affect the Company's operations and could cause
actual results to vary materially from those anticipated in the forward
looking statements, see the Company's Securities and Exchange
Commission filings, including but not limited to, the discussion
included in the Business section of the Company's Form 10-K under the
heading "Factors to be Considered".
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
14
<PAGE>
(b) Reports on Form 8-K
(i) The Company filed, on April 2, 1999, a Form 8-K dated
March 29, 1999 Reporting under Item 4 (Changes in
Registrant's Certifying Accountant) the dismissal by
the Company of PricewaterhouseCoopers LLP (formerly
Coopers & Lybrand L.L.P.) as the Company's
independent accountants and the appointment of KPMG
LLP as the Company's independent accountants for
fiscal 1999.
(ii) The Company filed, on April 6, 1999, a Form 8-K dated
March 31, 1999 reporting under Item 5 (Other Events)
that the Company's Board of Directors adopted a
Preferred Share Purchase Rights Plan.
15
<PAGE>
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, 1999 By: /s/ Roger J. Medel, M.D.
---------------------------------------------------
Roger J. Medel, M.D., President and Chief Executive
Officer (Principal Executive Officer)
Date: August 13, 1999 By: /s/ Karl B. Wagner
--------------------------------------------------
Karl B. Wagner, Chief Financial Officer (Principal
Financial and Accounting Officer)
16
Exhibit 11.1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ---------------
1999 1998 1999 1998
-------------------- ---------------
(in thousands, except for per share data)
<S> <C> <C> <C> <C>
Basic:
Net income applicable to common
stock $ 7,812 $ 7,107 $15,062 $13,226
======= ======= ======= =======
Weighted average number of
common shares outstanding 15,500 15,226 15,466 15,192
======= ======= ======= =======
Basic net income per share $ .50 $ .47 $ .97 $ .87
======= ======= ======= =======
Diluted:
Net income applicable to common
stock $ 7,812 $ 7,107 $15,062 $13,226
======= ======= ======= =======
Weighted average number of
common shares outstanding 15,500 15,226 15,466 15,192
Weighted average number of
dilutive common stock equivalents 260 674 472 679
------- ------- ------- -------
Weighted average number of
common and common equivalent
shares outstanding 15,760 15,900 15,938 15,871
======= ======= ======= =======
Diluted net income per share $ .50 $ .45 $ .95 $ .83
======= ======= ======= =======
</TABLE>
11.1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1999 AND THE UNAUDITED
CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 588
<SECURITIES> 0
<RECEIVABLES> 71387<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 77116
<PP&E> 12879<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 329857
<CURRENT-LIABILITIES> 48188
<BONDS> 2250
0
0
<COMMON> 155
<OTHER-SE> 132652
<TOTAL-LIABILITY-AND-EQUITY> 329857
<SALES> 0
<TOTAL-REVENUES> 110593
<CGS> 0
<TOTAL-COSTS> 84950
<OTHER-EXPENSES> (152)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 692
<INCOME-PRETAX> 25103
<INCOME-TAX> 10041
<INCOME-CONTINUING> 15062
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15062
<EPS-BASIC> 0.97
<EPS-DILUTED> 0.95
<FN>
<F1> AMOUNTS FOR RECEIVABLES AND PROPERTY, PLANT AND
EQUIPMENT ARE NET OF ANY ALLOWANCES AND ACCUMULATED
DEPRECIATION.
</FN>
</TABLE>
