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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (date of earliest event reported): February 8, 2006
PEDIATRIX MEDICAL GROUP, INC.
-----------------------------
(Exact Name of Registrant as Specified in Its Charter)
Florida 001-12111 65-0271219
- ------------------------------ ------------------ --------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1301 Concord Terrace
Sunrise, Florida 33323
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(Address of principal executive office)
Registrant's telephone number, including area code (954) 384-0175
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c
Item 2.02. Results of Operations and Financial Condition.
On February 8, 2006, Pediatrix Medical Group, Inc. (the "Company") issued a
press release announcing its results of operations for the three and twelve
months ended December 31, 2005 (the "Release"). A copy of the Release is
attached hereto as Exhibit 99.1 and is hereby incorporated in this Current
Report by reference. The information contained in this Item 2.02, including
Exhibit 99.1, shall not be deemed "filed" with the Securities and Exchange
Commission nor incorporated by reference in any registration statement or other
document filed by the Company under the Securities Act of 1933, as amended,
except as shall be expressly set forth by specific reference in such filing.
Item 7.01 Regulation FD Disclosure.
The Company also announced in the Release that it has increased its
previously announced earnings per share guidance for 2006 and introduced its
quarterly earnings per share guidance. The information contained in this Item
7.01, including Exhibit 99.1, shall not be deemed "filed" with the Securities
and Exchange Commission nor incorporated by reference in any registration
statement or other document filed by the Company under the Securities Act of
1933, as amended, except as shall be expressly set forth by specific reference
in such filing.
Item 8.01. Other Events.
In the Release, the Company announced that it had reached an agreement in
principle as to a settlement amount of $25.1 million relating to the previously
disclosed federal and state Medicaid and TRICARE investigation. The amount of
the settlement is subject to necessary governmental approvals. The settlement is
also subject to the negotiation and approval of a definitive settlement
agreement by state and federal authorities. The last five sentences of the first
paragraph, the first sentence of the fourth paragraph and the thirteenth and
fourteenth paragraphs of the Release describing the financial settlement and the
last textual paragraph of the Release containing cautionary statements regarding
forward looking information is hereby incorporated by reference in this Current
Report.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
Not applicable
(b) Pro Forma Financial Information.
Not applicable
(c) Exhibits
99.1 -- Press Release dated February 8, 2006
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 hereunto duly authorized.
PEDIATRIX MEDICAL GROUP, INC.
Date: February 8, 2006 By: /s/ Karl B. Wagner
------------------
Name: Karl B. Wagner
Title: Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release dated February 8, 2006.
Exhibit 99.1
Pediatrix Reports Non-GAAP EPS of
$1.30 for 2005 Fourth Quarter, Reaches Financial Settlement in
Principle on Medicaid, TRICARE Investigation
FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--Feb. 8, 2006--Pediatrix
Medical Group, Inc. (NYSE: PDX), today reported results from
operations for the three and 12 months ended December 31, 2005. In
addition, Pediatrix announced that it has reached an agreement in
principle on the amount of a financial settlement with the U.S.
Department of Justice for a previously announced national Medicaid and
TRICARE investigation. Pediatrix has agreed to pay $25.1 million to
settle the investigation, subject to obtaining necessary governmental
approvals. This amount relates to services provided from January 1996
through December 1999. Completion of this settlement will conclude all
pending governmental investigations of the Company's billing for
neonatal services. Claims for the period 2000 to 2002 were reviewed as
part of the investigation and Pediatrix is not making any payments for
these periods.
Pediatrix reported earnings per share of 65 cents for the three
months ended December 31, 2005, when including the impact of
equity-based compensation of $5.5 million before taxes and a $14.9
million pre-tax charge to increase existing reserves related to the
government investigation. A portion of that charge is not
tax-deductible. When excluding those items, Pediatrix earned $1.30 per
share for the 2005 fourth quarter, an increase of 18 percent from
$1.10 per share for the comparable 2004 period.
Pediatrix is the nation's leading provider of newborn, maternal
fetal and pediatric subspecialty physician services. Its results for
the 2005 fourth quarter include:
-- Strong management of general and administrative expenses,
which continue to decline as a percent of revenue when viewed
on a comparable basis that excludes equity-based compensation
expense and the change in reserves related to the Medicaid and
TRICARE investigation; and
-- Continued robust cash flow from operations, which exceeded $47
million for the period. Pediatrix used its cash to complete a
$50 million share repurchase program that had been authorized
in November 2005.
"Our agreement in principle with the government on financial terms
is an important step forward in resolving these coding and billing
issues," said Roger J. Medel, M.D., Chief Executive Officer of
Pediatrix. "Throughout this period, we have remained focused on
executing our core strategy. Our 2005 financial results reflect the
strength of our business model and our ability to attract and retain
physicians to our national group practice. We are encouraged by our
prospects for sustained growth within our existing clinical expertise
as we simultaneously look to extend our national group practice model
to other physician specialties with characteristics that are similar
to our newborn physician services."
For the three months ended December 31, 2005, Pediatrix reported
net patient service revenue of $177.7 million, up 10 percent from
$161.0 million for the comparable 2004 period. Revenue growth included
contributions from acquisitions, as well as same-unit revenue growth
of 3.5 percent. Same-unit revenue included patient volume growth of
1.7 percent at neonatal intensive care units (NICUs) staffed by
Pediatrix physicians, contributions from other services including
maternal-fetal medicine and pediatric cardiology physician
subspecialties and a slight increase in revenue from
reimbursement-related factors.
On a GAAP basis, income from operations for the 2005 fourth
quarter was $29.7 million and net income was $15.9 million, resulting
in earnings per share of 65 cents based on a weighted average 24.4
million shares outstanding.
When adjusted to exclude equity-based compensation and the charge
to increase its Medicaid-investigation reserves, Pediatrix reported
operating income of $50.0 million for the 2005 fourth quarter, up 25
percent from $40.2 million for the comparable 2004 period. When
excluding these adjustments, general and administrative expenses of
$20.8 million were 11.7 percent of revenue, a reduction of 73 basis
points from the comparable period of 2004. Non-GAAP net income of
$31.6 million for the 2005 fourth quarter increased by 23 percent from
$25.8 million for the 2004 fourth quarter.
For the three months ended December 31, 2005, non-GAAP earnings
per share were $1.30 based on a weighted average 24.4 million shares
outstanding, up 18 percent from $1.10 per share, based on a weighted
average 23.5 million shares outstanding for the 2004 period.
During the 2005 fourth quarter, cash flow from operations was
$47.8 million.
Pediatrix had cash and cash equivalents of $11.2 million at
December 31, 2005, and accounts receivable of $111.7 million. Days
sales outstanding remained at less than 60.
For the 12 months ended December 31, 2005, Pediatrix had record
net patient service revenue of $693.7 million, operating income of
$147.7 million and net income of $89.0 million, all on a GAAP basis.
GAAP earnings per share of $3.72 are based on a weighted average 23.9
million shares outstanding. For all of 2005, Pediatrix had same-unit
revenue growth of 5.6 percent, including same-unit NICU patient volume
growth of 4.0 percent.
Pediatrix generated cash flow from operations of $162.4 million
for 2005, up 31 percent from $123.8 million in 2004. During 2005,
Pediatrix invested $91.9 million in physician group practice
acquisitions, including $6.2 million during the 2005 fourth quarter,
paid off amounts outstanding under its credit facility, and completed
a $50 million share repurchase program that had been authorized in
November 2005.
The Company's agreement in principle with governmental authorities
arises from an investigation, coordinated by the U.S. Department of
Justice, of Pediatrix's Medicaid, TRICARE and Federal Employees Health
Benefits Program billings. The agreement on the financial terms is
subject to, among other things, completion of negotiation and approval
of a final settlement agreement with relevant federal and state
governmental authorities, including the Department of Justice and the
Office of Inspector General of the Department of Health and Human
Services. There can be no assurance that a definitive settlement
agreement will be reached.
Pediatrix had been informed of the national investigation in June
2003, and has cooperated fully with investigators.
Outlook
As a result of the completion of the share repurchase program,
Pediatrix now expects that earnings per share for 2006 will be $4.83
to $4.93 on a GAAP basis, or $5.42 to $5.52 per share when excluding
the after-tax impact of equity-based compensation. Pediatrix is also
introducing quarterly earnings per share guidance for 2006, presented
in the following table on a GAAP basis and on an adjusted basis that
excludes the impact of estimated equity-based compensation expense:
Estimated GAAP Estimated Adjusted
EPS Equity-based Estimated EPS
Compensation
Expense
-------------- ---------------- -------------
First Quarter $0.95 to $0.97 $ 0.13 $1.08 to $1.10
Second Quarter $1.22 to $1.24 $ 0.14 $1.36 to $1.38
Third Quarter $1.33 to $1.36 $ 0.16 $1.49 to $1.52
Fourth Quarter $1.33 to $1.36 $ 0.16 $1.49 to $1.52
---------------- ------- --------------
Total $4.83 to $4.93 $ 0.59 $5.42 to $5.52
Pediatrix expects that cash flow from operations will exceed $170
million during 2006, excluding any payments that may be made in
connection with a final settlement of the national Medicaid and
TRICARE investigation.
Reconciliation of Non-GAAP Information
This press release contains non-GAAP information, including income
from operations, operating margin, net income and earnings per share
as adjusted to exclude equity-based compensation expense and expenses
related to a pre-tax charge as a result of an increase of the
estimated liability relating to the Medicaid and TRICARE
investigation. Pediatrix believes that the presentation of non-GAAP
guidance provides useful information to management and investors
regarding financial and business trends related to its results of
operations and that when non-GAAP information is viewed with GAAP
information, investors are provided with a meaningful understanding of
Pediatrix's ongoing operating financial performance. This information
is not intended to be considered in isolation, or as a substitute of
GAAP financial information. The following table reconciles non-GAAP
financial information to income from operations, net income and net
income per common share which Pediatrix believes are the most
comparable GAAP measures:
Three Months Ended
December 31, 2005
GAAP Adjustments Adjusted
---------- ----------- ----------
(in thousands except per share data)
Net patient service revenue $ 177,695 $ -- $ 177,695
-------- --------
Operating expenses:
Practice salaries and benefits 98,115 (1,188) 96,927
Practice supplies and other
operating expenses 7,569 -- 7,569
General and administrative expenses 39,956 (19,188) 20,768
Depreciation and amortization 2,400 -- 2,400
-------- --------
Total operating expenses 148,040 -- 127,664
-------- --------
Income from operations 29,655 -- 50,031
Operating margin 16.7% 28.2%
Investment income 534 -- 534
Interest expense (209) -- (209)
-------- --------
Income before income taxes 29,980 -- 50,356
Income tax provision (14,110) 4,648 (18,758)
-------- --------
Net income $ 15,870 -- $ 31,598
======== ========
Per share data:
Net income per common and common
equivalent share (diluted) $ 0.65 -- $ 1.30
Weighted average shares used in
computing net income per common
and common equivalent share
(diluted) 24,384 -- 24,384
Investor conference call
Pediatrix Medical Group, Inc. will host an investor conference
call to discuss the quarterly results at 10 a.m. (EST) today. During
that call, members of Pediatrix's management team are expected to
discuss quarterly earnings guidance for 2006. The conference call
Webcast may be accessed from the Company's website, www.pediatrix.com.
A telephone replay of the conference call will be available from 1:30
p.m. Eastern Time today through midnight Eastern Time February 15,
2006 by dialing 800-475-6701, access code 816253. The replay will also
be available at www.pediatrix.com.
About Pediatrix
Pediatrix Medical Group, Inc. (NYSE: PDX) is the nation's leading
provider of newborn, maternal-fetal and pediatric physician
subspecialty services. Pediatrix physicians and advanced nurse
practitioners are reshaping the delivery of maternal-fetal and newborn
care by identifying best demonstrated processes and participating in
clinical research to enhance patient outcomes and provide
high-quality, cost-effective care. Founded in 1979, its neonatal
physicians provide services at more than 240 NICUs, and through
Obstetrix, its perinatal physicians provide services in many markets
where Pediatrix's neonatal physicians practice. Combined, Pediatrix
and its affiliated professional corporations employ more than 850
physicians in 32 states and Puerto Rico. Pediatrix is also the
nation's largest provider of newborn hearing screens and newborn
metabolic screening. Additional information is available at
www.pediatrix.com.
Certain statements and information in this press release may be
deemed to be "forward-looking statements" within the meaning of the
Federal Private Securities Litigation Reform Act of 1995.
Forward-looking statements may include, but are not limited to,
statements relating to our results of operations, objectives, plans
and strategies, and all statements (other than statements of
historical facts) that address activities, events or developments that
we intend, expect, project, believe or anticipate will or may occur in
the future are forward-looking statements. These statements are often
characterized by terminology such as "believe", "hope", "may",
"anticipate", "should", "intend", "plan", "will", "expect",
"estimate", "project", "positioned", "strategy" and similar
expressions, and are based on assumptions and assessments made by
Pediatrix's management in light of their experience and their
perception of historical trends, current conditions, expected future
developments and other factors they believe to be appropriate. Any
forward-looking statements in this press release are made as of the
date hereof, and Pediatrix undertakes no duty to update or revise any
such statements, whether as a result of new information, future events
or otherwise. Forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties. Important
factors that could cause actual results, developments, and business
decisions to differ materially from forward-looking statements are
described in Pediatrix's most recent Annual Report on Form 10-K,
including the section entitled "Risk Factors".
Pediatrix Medical Group, Inc.
Consolidated Statements of Income
Three months ended 12 months ended
December 31, December 31,
2005 2004 2005 2004
-------- -------- -------- --------
(Unaudited) (Unaudited)
(in thousands, except for per share data)
-------------------------------------------
Net patient service
revenue $177,695 $160,993 $693,700 $619,629
-------- -------- -------- --------
Operating expenses:
Practice salaries and
benefits 98,115 91,406 393,137 350,354
Practice supplies and
other operating
expenses 7,569 7,048 27,678 24,254
General and
administrative
expenses 39,956 19,990 115,304 79,445
Depreciation and
amortization 2,400 2,355 9,915 9,353
-------- -------- -------- --------
Total operating expenses 148,040 120,799 546,034 463,406
-------- -------- -------- --------
Income from operations 29,655 40,194 147,666 156,223
-------- -------- -------- --------
Operating Margin 16.7% 25.0% 21.3% 25.2%
Investment income 534 539 1,177 893
Interest expense (209) (441) (2,262) (1,295)
-------- -------- -------- --------
Income before income
taxes 29,980 40,292 146,581 155,821
Income tax provision (14,110) (14,507) (57,544) (57,542)
-------- -------- -------- --------
Net income $ 15,870 $ 25,785 $ 89,037 $ 98,279
======== ======== ======== ========
Per share data:
Net income per common
and common
equivalent share
(diluted) $ 0.65 $ 1.10 $ 3.72 $ 3.97
Weighted average
shares used in
computing net income
per common and
common equivalent
share (diluted) 24,384 23,461 23,930 24,747
Balance Sheet Highlights
As of As of
Dec. 31, 2005 Dec. 31,
(Unaudited) 2004
-------------- -----------
(in thousands)
Assets:
Cash & cash equivalents $ 11,192 $ 7,011
Short-term investments 10,920 9,961
Accounts receivable, net 111,725 107,860
Other current assets 30,787 27,402
Other assets, property and equipment 735,779 636,655
---------- ----------
Total assets $ 900,403 $ 788,889
========== ==========
Liabilities and shareholders' equity:
Accounts payable & accrued expenses $ 164,749 $ 128,991
Total debt 1,504 55,312
Other liabilities 42,359 33,555
---------- ----------
Total liabilities 208,612 217,858
Shareholders' equity 691,791 571,031
---------- ----------
Total liabilities and shareholders' equity $ 900,403 $ 788,889
========== ==========
Other Operating Data
12 Months Ended
December 31,
2005 2004
---------- ----------
Number of:
Births 629,948 567,794
NICU Admissions 72,876 63,115
NICU Patient days 1,347,064 1,195,936
CONTACT: Pediatrix Medical Group, Inc., Fort Lauderdale
Bob Kneeley, 954-384-0175 Ext: 5300
bob_kneeley@pediatrix.com