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 September 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) <TABLE> <CAPTION> Florida 65-0271219 <S> <C> (State or other jurisdiction of incorporation (I.R.S. Employer Identification No.) or organization) </TABLE> 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 November 7, 1999, the Registrant had 15,575,185 shares of $0.01 par value common stock outstanding.
<TABLE> <CAPTION> PEDIATRIX MEDICAL GROUP, INC. INDEX ----- Page ---- <S> <C> PART I - FINANCIAL INFORMATION - ------------------------------ ITEM 1. Financial Statements Condensed Consolidated Balance Sheets as of September 30, 1999 (Unaudited) and December 31, 1998.........................................................................................3 Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 1999 and 1998 (Unaudited).......................................................................4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 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 and Use of Proceeds........................................................13 ITEM 3. Defaults Upon Senior Securities..................................................................13 ITEM 4. Submission of Matters to a Vote of Security-Holders..............................................13 ITEM 5. Other Information................................................................................14 ITEM 6. Exhibits and Reports on Form 8-K.................................................................14 SIGNATURE......................................................................................................15 - --------- </TABLE> 2
<TABLE> <CAPTION> PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PEDIATRIX MEDICAL GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 1999 December 31, (Unaudited) 1998 ------------------ ------------------- (in thousands) <S> <C> <C> ASSETS Current assets: Cash and cash equivalents ..................... $ 442 $ 650 Accounts receivable, net....................... 77,823 61,599 Prepaid expenses............................... 639 682 Income taxes receivable........................ 3,577 -- Other current assets........................... 984 769 ------------------ ------------------- Total current assets....................... 83,465 63,700 Property and equipment, net......................... 13,405 11,942 Other assets, net................................... 242,819 195,016 ------------------ ------------------- Total assets............................... $ 339,689 $ 270,658 ================== =================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses.......... $ 32,211 $ 30,043 Income taxes payable........................... -- 3,938 Line of credit................................. 56,793 -- Current portion of note payable................ 200 200 Deferred income taxes.......................... 19,042 14,604 ------------------ ------------------- Total current liabilities.................. 108,246 48,785 Line of credit...................................... -- 7,850 Note payable........................................ 2,200 2,350 Deferred income taxes............................... 4,024 3,327 Deferred compensation............................... 2,137 953 ------------------ ------------------- Total liabilities...................... 116,607 63,265 Minority interest................................... -- 6,342 Commitments and contingencies Stockholders' equity: Preferred stock................................ -- -- Common stock................................... 155 154 Additional paid-in capital..................... 132,703 130,720 Retained earnings.............................. 90,224 70,177 ------------------ ------------------- Total stockholders' equity................. 223,082 201,051 ------------------ ------------------- Total liabilities and stockholders' equity. $ 339,689 $ 270,658 ================== =================== </TABLE> The accompanying notes are an integral part of these financial statements 3
<TABLE> <CAPTION> PEDIATRIX MEDICAL GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------------------------- ------------------------------------- 1999 1998 1999 1998 ---------------- --------------- --------------- ---------------- (in thousands, except for per share data) <S> <C> <C> <C> <C> Net patient service revenue ........... $ 57,921 $ 49,351 $ 168,514 $ 133,303 Operating expenses: Salaries and benefits .............. 39,329 30,334 109,040 82,478 Supplies & other operating expenses 5,774 3,575 15,376 9,663 Depreciation and amortization ...... 3,168 2,372 8,805 6,185 --------- --------- --------- --------- Total operating expenses ..... 48,271 36,281 133,221 98,326 --------- --------- --------- --------- Income from operations ....... 9,650 13,070 35,293 34,977 Investment income ..................... 59 38 211 529 Interest expense ...................... (964) (392) (1,656) (743) --------- --------- --------- --------- Income before income taxes ... 8,745 12,716 33,848 34,763 Income tax provision .................. 3,760 5,086 13,801 13,907 --------- --------- --------- --------- Net income ....................... $ 4,985 $ 7,630 $ 20,047 $ 20,856 ========= ========= ========= ========= Per share data: Net income per common and common equivalent share: Basic ......................... $ .32 $ .50 $ 1.30 $ 1.37 ========= ========= ========= ========= Diluted ....................... $ .32 $ .48 $ 1.27 $ 1.31 ========= ========= ========= ========= Weighted average shares used in computing net income per common and common equivalent share: Basic ........................ 15,502 15,256 15,438 15,214 ========= ========= ========= ========= Diluted ...................... 15,724 15,971 15,846 15,904 ========= ========= ========= ========= </TABLE> The accompanying notes are an integral part of these financial statements 4
<TABLE> <CAPTION> PEDIATRIX MEDICAL GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, ------------------------------------------- 1999 1998 ----------------- ----------------- (in thousands) <S> <C> <C> Cash flows from operating activities: Net income ............................................................... $ 20,047 $ 20,856 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization ........................................ 8,805 6,185 Deferred income taxes ................................................ 5,135 6,174 Changes in assets and liabilities: Accounts receivable ............................................. (16,224) (18,731) Prepaid expenses and other current assets ....................... (234) (295) Other assets .................................................... (10) 202 Accounts payable and accrued expenses ........................... 3,598 7,416 Income taxes .................................................... (6,877) (39) -------- -------- Net cash provided from operating activities ................. 14,240 21,768 -------- -------- Cash flows used in investing activities: Physician group acquisition payments ..................................... (50,629) (81,989) Purchase of investments .................................................. -- (9,939) Proceeds from sale of investments ........................................ -- 36,982 Purchase of subsidiary stock ............................................. (17,151) -- Purchase of property and equipment ....................................... (2,813) (2,803) -------- -------- Net cash used in investing activities ....................... (70,593) (57,749) -------- -------- Cash flows from financing activities: Borrowings on line of credit, net ........................................ 48,943 15,275 Payments on note payable.................................................. (150) (150) Proceeds from issuance of common stock ................................... 1,595 2,903 Proceeds from issuance of subsidiary stock ............................... 5,757 -- -------- -------- Net cash provided from financing activities .......... 56,145 18,028 -------- -------- Net decrease in cash and cash equivalents ..................................... (208) (17,953) Cash and cash equivalents at beginning of period .............................. 650 18,562 -------- -------- Cash and cash equivalents at end of period .................................... $ 442 $ 609 ======== ======== </TABLE> The accompanying notes are an integral part of these financial statements 5
PEDIATRIX MEDICAL GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 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 have been prepared in accordance with interim financial reporting instructions to Form 10-Q and Article 10 of Regulation S-X, and accordingly, 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 nine months ended September 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 nine months of 1999, the Company completed the acquisition of ten physician group practices. Total consideration for acquisitions approximated $50.6 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> Nine Months Ended September 30, ---------------------------------------- 1999 1998 ---------------- ---------------- (in thousands, except for per share data) <S> <C> <C> Net patient service revenue $ 177,214 $ 166,366 Net income 20,361 22,159 Net income per share: Basic 1.32 1.46 Diluted 1.28 1.39 </TABLE> 6
PEDIATRIX MEDICAL GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued (Unaudited) 2. Business Acquisitions, Continued: 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. 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 nine months ended September 30, 1999, such costs totaled approximately $35,000 and $682,000, respectively. 3. Accounts Payable and Accrued Expenses: Accounts payable and accrued expenses consist of the following: <TABLE> <CAPTION> September 30, December 31, 1999 1998 -------------------- -------------------- (in thousands) <S> <C> <C> Accounts payable............................ $ 12,974 $ 10,373 Accrued salaries and bonuses................ 4,167 6,433 Accrued payroll taxes and benefits.......... 5,108 4,465 Accrued professional liability coverage..... 6,850 6,866 Other accrued expenses...................... 3,112 1,906 -------------------- --------------------- $ 32,211 $ 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: For the quarters ended September 30, 1999 and 1998, comprehensive income was $5.0 million and $7.6 million, respectively. For the nine months ended September 30, 1999 and 1998, comprehensive income was $20.0 million and $20.8 million, respectively. 7
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. Therefore, the Judge 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. Plaintiffs filed a Consolidated Amended Class Action Complaint on August 20, 1999. On October 7, 1999, the Company filed a Motion to Dismiss the Consolidated Amended Complaint. Plaintiffs filed an answering memorandum on November 5, 1999, and the Company's reply memorandum is due on November 22, 1999. 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. Subsidiary Stock Purchase: In July 1999, the Company purchased shares of common stock in a subsidiary company for approximately $17.7 million. The minority shares purchased were held by certain officers and employees of the Company and represented approximately 23.5% of all outstanding shares of the subsidiary. The Company has accounted for the transaction using the purchase method of accounting and the excess of cost over the book value of the shares acquired of $3.6 million is being amortized on a straight-line basis over 25 years. As a result of the purchase, the subsidiary is wholly-owned by the Company. 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- Results of Operations Three Months Ended September 30, 1999 as Compared to Three Months Ended September 30, 1998 The Company reported net patient service revenue of $57.9 million for the three months ended September 30, 1999, as compared with $49.4 million for the same period in 1998, a growth rate of 17.4%. This growth is attributable to new units at which the Company provides services as a result of acquisitions. Same unit patient service revenue decreased $3.5 million, or 7.1%, for the three months ended September 30, 1999. The decline in same unit patient service revenue is primarily the result of a lower acuity level of patient service billed in the three months ended September 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 $9.0 million, or 29.7% to $39.3 million for the three months ended September 30, 1999, as compared with $30.3 million for the same period in 1998. Of this $9.0 million increase, $5.3 million, or 58.9%, was attributable to hiring new physicians, primarily to support new unit growth, and the remaining $3.7 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 $2.2 million, or 61.5% to $5.8 million for the three months ended September 30, 1999, as compared with $3.6 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 $796,000, or 33.6%, to $3.2 million for the three months ended September 30, 1999, as compared with $2.4 million for the same period in 1998, primarily as a result of amortization of goodwill in connection with acquisitions. Income from operations decreased approximately $3.4 million, or 26.2%, to $9.7 million for the three months ended September 30, 1999, as compared with $13.1 million for the same period in 1998. The Company recorded net interest expense of approximately $905,000 for the three months ended September 30, 1999, as compared with net interest expense of approximately $354,000 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 43.0% and 40.0% for the three month periods ended September 30, 1999 and 1998, respectively. The increase was the result of lower operating income with a constant level of non-deductible goodwill. Net income decreased 34.7% to $5.0 million for the three months ended September 30, 1999, as compared with $7.6 million for the same period in 1998. Diluted net income per common and common equivalent share decreased to 32 cents for the three months ended September 30, 1999, compared to 48 cents for the same period in 1998. 9
Nine Months Ended September 30, 1999 as Compared to Nine Months Ended September 30, 1998 The Company reported net patient service revenue of $168.5 million for the nine months ended September 30, 1999, as compared with $133.3 million for the same period in 1998, a growth rate of 26.4%. This growth is attributable to new units at which the Company provides services as a result of acquisitions. Same unit patient service revenue decreased $4.1 million, or 3.7%, for the nine months ended September 30, 1999. 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 $26.5 million, or 32.2% to $109.0 million for the nine months ended September 30, 1999, as compared with $82.5 million for the same period in 1998. Of this $26.5 million increase, $15.7 million, or 59.2%, was attributable to hiring new physicians, primarily to support new unit growth, and the remaining $10.8 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 $5.7 million, or 59.1% to $15.4 million for the nine months ended September 30, 1999, as compared with $9.7 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 $2.6 million, or 42.4% to $8.8 million for the nine months ended September 30, 1999, as compared with $6.2 million for the same period in 1998, primarily as a result of amortization of goodwill in connection with acquisitions. Income from operations increased approximately $316,000, or .9%, to $35.3 million for the nine months ended September 30, 1999, as compared with $35.0 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 $1.4 million for the nine months ended September 30, 1999, as compared with net interest expense of approximately $214,000 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 40.8% and 40.0% for the nine month periods ended September 30, 1999 and 1998, respectively. Net income decreased 3.9% to $20.0 million for the nine months ended September 30, 1999, as compared with $20.9 million for the same period in 1998. Diluted net income per common and common equivalent share decreased to $1.27 for the nine months ended September 30, 1999, compared to $1.31 for the same period in 1998. Liquidity and Capital Resources As of September 30, 1999, the Company had a working capital deficit of approximately $24.8 million, a decrease of $39.7 million from the working capital of $14.9 million available at December 31, 1998. This decline is the result of the Company's line of credit being classified as a current liability as of September 30,1999. As of September 30, 1999, the Company had $18.2 million available under its $75 million line of credit. The Company is currently evaluating its options to secure long-term financing. 10
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. The Company has completed testing and implementation of all of its critical systems, which include its clinical, billing, general ledger, and accounts payable systems. In addition, the Company has completed 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, ultrasound machines. The Company 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 finalizing its contingency plan to ensure that it will be able to continue to provide services to its customers on and after January 1, 2000. This plan includes education of physicians to ensure that they are up to date on the provision of emergency services in instances where they may experience equipment failure. In addition, the Company is instituting a mechanism to verify that the payors are not experiencing problems processing payments. 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
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 $56.8 million and $2.4 million, respectively, at September 30, 1999. The outstanding balances related to the operating leases totaled approximately $13.6 million at September 30, 1999. Considering the total outstanding balances under these instruments at September 30, 1999 of approximately $72.8 million, a 1% change in interest rates would result in an impact to pre-tax earnings of approximately $728,000 per year. 12
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. Therefore, 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. Plaintiffs filed a Consolidated Amended Class Action Complaint on August 20, 1999. On October 7, 1999, the Company filed a Motion to Dismiss the Consolidated Amended Complaint. Plaintiffs filed an answering memorandum on November 5, 1999, and the Company's reply memorandum is due on November 22, 1999. 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 and Use of Proceeds ----------------------------------------- Not applicable. Item 3. Defaults Upon Senior Securities ------------------------------- Not applicable. Item 4. Submission of Matters to a Vote of Security-Holders --------------------------------------------------- Not applicable. 13
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 10.38 Employment Agreement between Pediatrix and Karl B. Wagner 11.1 Statement Re: Computation of Per Share Earnings 27.1 Financial Data Schedule (b) Reports on Form 8-K None. 14
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: November 12, 1999 By: /s/ Roger J. Medel, M.D. ----------------------------------------------- Roger J. Medel, M.D., President and Chief Executive Officer (Principal Executive Officer) Date: November 12, 1999 By: /s/ Karl B. Wagner ------------------------------------------------ Karl B. Wagner, Chief Financial Officer (Principal Financial and Accounting Officer) 15