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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 Exchange Act of 1934
Date of Report (date of earliest event reported): August 7, 2007
PEDIATRIX MEDICAL GROUP, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Florida 001-12111 65-0271219
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(State or Other (Commission (IRS Employer
Jurisdiction 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))
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Item 2.02 Results of Operations and Financial Condition.
On August 7, 2007, Pediatrix Medical Group, Inc. (the "Company") issued a press
release ("Press Release") announcing its results of operations for the year
ended December 31, 2006 and for the three months ended March 31, 2007. The Press
Release also announced that the Company has filed its Form 10-K for the year
ended December 31, 2006 and Forms 10-Q for the periods ended June 30, and
September 30, 2006 and March 31, 2007 with the Securities and Exchange
Commission ("SEC"). In addition, the Press Release announced that the Company
restated prior financial statements in its Form 10-K covering periods through
March 31, 2006 to reflect the recording of additional stock-based compensation
expense of $33.2 million, before tax adjustments. A copy of the Press Release is
attached hereto as Exhibit 99.1 and is incorporated herein by reference.
On August 7, 2007, the Company also issued a separate press release ("Second
Quarter Press Release") announcing its results of operations for the three and
six months ended June 30, 2007. A copy of the Second Quarter Press Release is
attached hereto as Exhibit 99.2 and incorporated herein by reference.
The information contained in this Item 2.02, including Exhibit 99.1 and Exhibit
99.2, shall not be deemed "filed" with the SEC 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.
The Company also announced in the Second Quarter Press Release that its Board of
Directors authorized a share repurchase program, pursuant to which the Company
may purchase up to $100 million of its common stock in open market purchases
based upon price, general economic and market conditions and trading
restrictions.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
99.1 -- Press Release dated August 7, 2007.
99.2 -- Press Release dated August 7, 2007.
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: August 7, 2007 By: /s/ Karl B. Wagner
---------------------------------
Name: Karl B. Wagner
Title: Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
- ------------- ---------------------------------------------------------------
99.1 Press Release dated August 7, 2007
99.2 Press Release dated August 7, 2007
Exhibit 99.1
Pediatrix Reports 2006 Full Year, 2007 First Quarter Results
FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--Aug. 7, 2007--Pediatrix
Medical Group, Inc., (NYSE: PDX) today reported record results from
operations for the year ended December 31, 2006, and three months ended
March 31, 2007. These results were delayed while the Audit Committee of
the Company's Board of Directors completed a comprehensive review of
historical stock option grant practices.
For the year ended December 31, 2006, Pediatrix reported:
-- Revenue growth of 18 percent, including same-unit revenue
growth of 11.9 percent;
-- Non-GAAP operating income growth of 24 percent;
-- Non-GAAP operating margin expansion of 132 basis points,
largely as a result of better general and administrative
expense management; and
-- Non-GAAP earnings per share of $2.83, which grew by 22 percent
from the prior year.
For the three months ended March 31, 2007, Pediatrix reported:
-- Revenue growth of 14 percent, principally from same-unit
growth of 10.7 percent;
-- Non-GAAP operating income growth of 23 percent, with a
162-basis point improvement in adjusted operating margin; and
-- Non-GAAP earnings per share growth of 21 percent, to 58 cents.
"Our operating results demonstrate that we continue to execute on
our strategy of growing our national group practice and managing it
more efficiently," said Roger J. Medel, M.D., Chief Executive Officer
of Pediatrix. "We are achieving significant operating efficiencies
while delivering value-added services to our physicians and we remain
confident that our model is attractive to more physician groups within
our core subspecialties, as well as other hospital-based specialties."
Pediatrix's results from operations include certain specific items
that affect the comparability of operating results. These items
include:
-- Equity-based compensation expense of $11.9 million in 2005 and
$20.1 million in 2006;
-- An increase of $20.9 million in estimated liability reserves
during 2005 associated with a previously announced Medicaid
investigation settlement;
-- A gain of $1.6 million on the sale of the Company's aircraft
during the second quarter of 2006;
-- Costs of $4.8 million incurred during the second half of 2006,
and $1.5 million incurred during the 2007 first quarter
related to the Company's recently completed stock-option
review;
-- Employee-benefit expenses of $6.4 million during the 2007
first quarter reflecting the Company's accrual for payment of
taxes on behalf of employees, other than executive officers,
imposed by Section 409A of the Internal Revenue Code; and
-- A reduction in the Company's tax provision of $1.2 million in
the 2007 first quarter.
In this press release, Pediatrix compares its results based on
both generally accepted accounting principles (GAAP) and adjusted, or
non-GAAP, to take into account the items noted above. The Company
believes that excluding these items allows investors to have a more
meaningful understanding of the Company's core operating results.
These non-GAAP, or adjusted, items are related to specific periods
mentioned above, and discussed throughout this release. Pediatrix
provides a detailed reconciliation of non-GAAP to GAAP items in the
tables accompanying this press release.
Year Ended December 31, 2006
Pediatrix reported net patient service revenue for 2006 of $818.6
million, which increased 18 percent when compared with revenue of
$693.7 million for 2005. Same-unit revenue increased by 11.9 percent
as a result of the impact of a new physician code for neonatal
intensive care services introduced at the beginning of 2006, as well
as ongoing reimbursement and patient-volume growth. Revenue growth
attributable to same-unit patient volume was 4.9 percent for 2006 over
2005, and included 3.6 percent patient volume growth at neonatal
intensive care units (NICU) staffed by Pediatrix physicians.
Operating income for 2006 was $198.5 million, as compared with
$146.0 million for the 12 months ended December 31, 2005. When
adjusted, Pediatrix's operating income increased by 24 percent, to
$221.8 million during 2006, from $178.8 million for 2005. Adjusted
operating margin increased to 27.1 percent in 2006, up 132 basis
points from 25.8 percent in 2005.
Pediatrix's net income for 2006 was $124.5 million, up from $87.5
million in 2005. On an adjusted basis, net income grew by 25 percent,
to $139.8 million for 2006 when compared with $111.5 million for 2005.
Earnings per share were $2.52 for 2006 based on a weighted average
49.4 million shares outstanding, which compares with $1.82, based on
48.0 million shares outstanding, for 2005. When adjusted, EPS
increased by 22 percent, to $2.83 in 2006, from $2.32 in 2005.
During 2006, Pediatrix generated cash flow from operations of
$177.3 million, which included the payment of $25.1 million related to
the Medicaid investigation settlement that had accrued during prior
periods. During 2005, Pediatrix generated cash flow from operations of
$162.4 million.
Pediatrix invested $91.8 million in acquisitions during 2006, and
the Company completed eight physician group practice acquisitions
during that period, including four neonatal practices and four
pediatric cardiology practices.
At December 31, 2006, Pediatrix had cash and cash equivalents of
$69.6 million and short-term investments of $65.7 million. Accounts
receivable were $125.6 million.
Three Months Ended March 31, 2007
Comparisons of results for the three months ended March 31, 2007
and 2006, respectively, exclude employee-benefit costs associated with
the Company's accrual for payment of taxes on behalf of employees as
imposed by Internal Revenue Code Section 409A, expenses related to the
stock option review, and the benefit from a reduced tax provision for
the 2007 period.
For the three months ended March 31, 2007, Pediatrix reported net
patient service revenue of $214.5 million, up 14 percent from $187.7
million for the comparable 2006 period.
Same-unit revenue growth was 10.7 percent, which included the
impact of the neonatal code introduced during 2006, as well as
improved reimbursement and higher patient volume. Same-unit revenue
growth attributed to patient volume was 4.4 percent, which included
3.9 percent growth in NICU patient volume, and growth of office-based
practices and newborn screening programs.
Operating income for the 2007 first quarter was $38.5 million as
compared to $37.6 million for the 2006 first quarter. When adjusted,
2007 first quarter operating income was $46.4 million, up 23 percent
from $37.6 million for the comparable 2006 period. First quarter
adjusted operating margin expanded by 162 basis points to 21.6 percent
for 2007, from 20.0 percent for 2006. Pediatrix's first quarter
margins are normally impacted by seasonal issues, specifically a
reduction in the number of billing days for neonatal physician
services, and an increase in payroll-related taxes at the beginning of
each calendar year.
Pediatrix's effective tax rate was reduced to 36.3 percent for the
2007 first quarter as a result of a $1.2 million reduction in the
Company's liability for uncertain tax positions following the
expiration of the statutes of limitations on certain filed tax
returns. Pediatrix's tax rate will be affected by its adoption of the
Financial Accounting Standards Board's Interpretation No. 48, as well
as tax law changes in Texas. For the remainder of 2007, Pediatrix
expects that its effective tax rate will be 39.25 percent.
For the three months ended March 31, 2007, Pediatrix's net income
was $25.6 million, which compares with $23.4 million for the same 2006
period. Adjusted net income of $29.2 million in the 2007 first quarter
increased by 25 percent from $23.4 million for the 2006 first quarter.
On a per share basis, Pediatrix earned 51 cents per share, based
on a weighted average 49.9 million shares outstanding, for the 2007
first quarter, which compares with EPS of 48 cents per share, based on
a weighted average 48.9 million shares outstanding, for the 2006 first
quarter. Adjusted EPS of 58 cents for the 2007 first quarter increased
by 21 percent, from the 2006 first quarter.
During the 2007 first quarter, Pediatrix used $30.8 million of its
cash to fund operations, principally due to the payment of accrued
bonuses earned by physicians under their 2006 incentive compensation
plans, as well as corporate income tax payments.
During the 2007 first quarter, Pediatrix completed the acquisition
of neonatal physician group practices based in San Francisco,
California, and Munster, Indiana. The Company invested $12.0 million
in acquisitions during the period.
At March 31, 2007, Pediatrix had cash and cash equivalents of
$71.6 million and short-term investments of $17.2 million.
Pediatrix's SEC Filings
Today, Pediatrix filed its Annual Report on Form 10-K for the 12
months ended December 31, 2006, as well as quarterly reports on Form
10-Q for the periods ended June 30, 2006, September 30, 2006 and March
31, 2007, bringing the company current in its Securities and Exchange
Commission filings. As a result of the stock option review, Pediatrix
has recorded additional cumulative non-cash stock-based compensation
expense of $33.2 million, before tax adjustments, related to
previously granted stock options. The Company's Form 10-K includes
restated financial statements covering all periods through March 31,
2006.
Reconciliation of Non-GAAP Information
This press release contains non-GAAP information, which includes
income from operations, operating margin, net income and earnings per
share, which is adjusted for certain items as set forth below.
Pediatrix believes that this non-GAAP information is useful to
management and investors reviewing 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 tables reconcile 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:
Non-GAAP Adjustments
Three Months Ended
March 31, Dec. 31, Sept. 30, June 30,
2007 2006 2006 2006
--------- --------- ------------ ---------
(in thousands, except for per share data)
------------------------------------------
Net patient service revenue $214,456 $211,313 $215,755 $203,807
GAAP practice salaries and
benefits 130,945 120,674 120,836 114,419
Equity-based compensation
expense -- (1,174) (1,303) (1,107)
Internal Revenue Code 409A
expense (2,978) -- -- --
--------- --------- ------------ ---------
Non-GAAP practice salaries
and benefits 127,967 119,500 119,533 113,312
GAAP general and
administrative expenses 33,615 28,874 27,971 24,820
Equity-based compensation
expense -- (3,643) (3,799) (3,824)
Gain on sale of aircraft 1,630
Stock option review
expense (1,500) (3,125) (1,675)
Internal Revenue Code 409A
expense (3,408) -- -- --
--------- --------- ------------ ---------
Non-GAAP general and
administrative expenses 28,707 22,106 22,497 22,626
GAAP income from operations 38,523 50,798 56,548 53,560
Net adjustments 7,886 7,942 6,777 3,301
--------- --------- ------------ ---------
Non-GAAP income from
operations 46,409 58,740 63,325 56,861
GAAP income tax provision (14,584) (20,028) (22,434) (20,169)
Net adjustments (4,276) (2,767) (2,326)(a) (1,037)
--------- --------- ------------ ---------
Non-GAAP income tax
provision (18,860) (22,795) (24,760) (21,206)
GAAP net income 25,582 32,415 35,165 33,458
Net adjustments 3,610 5,175 4,451 2,264
Non-GAAP net income 29,192 37,590 39,616 35,722
--------- --------- ------------ ---------
Net income per common and
common equivalent share
(diluted):
GAAP EPS $ 0.51 $ 0.65 $ 0.71 $ 0.68
Net adjustments 0.07 0.11 0.09 0.04
--------- --------- ------------ ---------
Non-GAAP EPS $ 0.58 $ 0.76 $ 0.80 $ 0.72
Weighted average shares used
in computing net income per
common and common
equivalent share (diluted) 49,910 49,714 49,515 49,461
(a) Adjusted income tax provision for the three months ended September
30, 2006, includes the cumulative impact of an increase in the
Company's effective tax rate for 2006.
Share and per-share data for all periods presented have been adjusted
to give effect to the two-for-one stock split that was effective April
28, 2006.
Non-GAAP
Adjustments
12 Months Ended
December December
31, 31,
2006 2005
--------- ---------
(in thousands,
except for
per share data)
-------------------
Net patient service revenue $818,554 $693,700
GAAP practice salaries and benefits 468,498 393,719
Equity-based compensation expense (4,753) (2,796)
------------------
Non-GAAP practice salaries and benefits 463,745 390,923
GAAP general and administrative expense 109,057 116,375
Equity-based compensation expense (15,353) (9,064)
Gain on sale of aircraft 1,630 --
Stock option review expense (4,800) --
Medicaid settlement (20,899)
-------- --------
Non-GAAP general and administrative exp. 90,534 86,412
GAAP income from operations 198,474 146,013
Net adjustments 23,276 32,759
------------------
Non-GAAP income from operations 221,750 178,772
GAAP income tax provision (76,813) (57,419)
Net adjustments (7,956) (8,769)
------------------
Non-GAAP income tax provision (84,769) (66,188)
GAAP net income $124,465 $ 87,509
Net adjustments 15,320 23,990
------------------
Non-GAAP net income $139,785 $111,499
Net income per common and
common equivalent share
(diluted)
GAAP $ 2.52 $ 1.82
Net adjustments 0.31 0.50
------------------
Non-GAAP $ 2.83 $ 2.32
Weighted average shares used in computing net
income per common and common equivalent share
(diluted) 49,387 48,040
Share and per-share data for all periods presented have been adjusted
to give effect to the two-for-one stock split that was effective April
28, 2006.
Investor conference call
Pediatrix Medical Group, Inc. will host an investor conference
call to discuss the quarterly results at 11 a.m. Eastern Time today.
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 2:30 p.m. Eastern Time today through midnight
Eastern Time August 21, 2007 by dialing 800-475-6701, access code
883077. The replay will also be available at www.pediatrix.com.
About Pediatrix
Pediatrix Medical Group, Inc. is the nation's leading provider of
neonatal, maternal-fetal and pediatric physician subspecialty
services. Pediatrix physicians and advanced practitioners are
reshaping the delivery of care within the maternal-fetal, neonatal
intensive care and pediatric cardiology subspecialties, using
evidence-based tools, continuous quality initiatives and 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 neonatal intensive care units, and in many
markets they collaborate with affiliated maternal-fetal medicine,
pediatric cardiology physician subspecialists and pediatric
intensivists to provide a clinical care continuum. Combined, Pediatrix
and its affiliated professional corporations employ more than 950
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 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". Additional factors include, but are not limited to:
the possible discovery of additional facts beyond those reviewed by
the Audit Committee; possible litigation related to the matters
investigated by the Pediatrix's Audit Committee or the restatements to
Pediatrix's financial statements and other historical disclosures; and
any regulatory actions of the SEC or the U.S. Attorney related to such
matters.
Pediatrix Medical Group, Inc.
Consolidated Statements of Income
(Unaudited)
Three months ended
Mar. 31,
Mar. 31, Dec. 31, Sept. 30, June 30, 2006
2007 2006 2006 2006 (restated)
--------- --------- --------- --------- ----------
(in thousands, except for per share data)
--------------------------------------------------
Net patient service
revenue $214,456 $211,313 $215,755 $203,807 $187,679
--------- --------- --------- --------- ----------
Operating expenses:
Practice salaries
and benefits 130,945 120,674 120,836 114,419 112,569
Practice supplies
and other
operating expenses 8,900 8,557 8,092 8,604 7,802
General and
administrative
expenses 33,615 28,874 27,971 24,820 27,392
Depreciation and
amortization 2,473 2,410 2,308 2,404 2,348
--------- --------- --------- --------- ----------
Total operating
expenses 175,933 160,515 159,207 150,247 150,111
--------- --------- --------- --------- ----------
Income from
operations 38,523 50,798 56,548 53,560 37,568
Investment income 1,864 1,735 1,173 478 450
Interest expense (221) (90) (122) (411) (409)
--------- --------- --------- --------- ----------
Income before
income taxes 40,166 52,443 57,599 53,627 37,609
Income tax provision (14,584) (20,028) (22,434) (20,169) (14,182)
--------- --------- --------- --------- ----------
Net income $ 25,582 $ 32,415 $ 35,165 $ 33,458 $ 23.427
========= ========= ========= ========= ==========
Per share data:
Net income per
common and common
equivalent share
(diluted) $ 0.51 $ 0.65 $ 0.71 $ 0.68 $ 0.48
Weighted average
shares used in
computing net
income per common
and common
equivalent share
(diluted) 49,910 49,714 49,515 49,461 48,906
Share and per-share data for all periods presented have been adjusted
to give effect to the two-for-one stock split that was effective April
28, 2006.
Consolidated Statements of Income
12 months ended,
Dec. 31,
Dec. 31, 2005
2006 (restated)
--------- ----------
(in thousands,
except for per
share data)
--------------------
Net patient service revenue $818,554 $693,700
--------------------
Operating expenses:
Practice salaries and benefits 468,498 393,719
Practice supplies and other operating expenses 33,055 27,678
General and administrative expenses 109,057 116,375
Depreciation and amortization 9,470 9,915
--------------------
Total operating expenses 620,080 547,687
--------------------
Income from operations 198,474 146,013
Investment income 3,836 1,177
Interest expense (1,032) (2,262)
--------------------
Income before income taxes 201,278 144,928
Income tax provision (76,813) (57,419)
Net income $124,465 $ 87,509
========= ==========
Per share data:
Net income per common and common equivalent
share (diluted) $ 2.52 $ 1.82
Weighted average shares used in computing net
income per common and common equivalent share
(diluted) 49,387 48,040
Share and per-share data for all periods presented have been adjusted
to give effect to the two-for-one stock split that was effective
April 28, 2006.
Balance Sheet Highlights
As of
Mar. 31, Dec. 31, Dec. 31,
2007 2006 2005
(Unaudited) (restated)
----------- ---------- ----------
(in thousands)
Assets:
Cash & cash equivalents $ 71,632 $ 69,595 $ 11,192
Short-term investments 17,185 65,660 10,920
Accounts receivable, net 127,773 125,573 111,725
Other current assets 50,317 40,771 30,787
Other assets, property and equipment 851,461 833,571 735,779
--------- --------- ---------
Total assets $1,118,368 $1,135,170 $ 900,403
=========== ========== ==========
Liabilities and shareholders'
equity:
Accounts payable & accrued expenses $ 136,855 $ 206,552 $ 175,619
Total debt 575 860 1,504
--------- --------- ---------
Other liabilities 86,090 61,957 41,146
--------- --------- ---------
Total liabilities 223,520 269,369 218,269
Shareholders' equity 894,848 865,801 682,134
--------- --------- ---------
Total liabilities and shareholders'
equity $1,118,368 $1,135,170 $ 900,403
=========== ========== ==========
Other Operating Data
12 Months Ended
December 31,
2006 2005
---------- ----------
Number of:
Births 674,336 629,948
NICU Admissions 80,151 72,876
NICU Patient days 1,472,428 1,347,064
CONTACT: Pediatrix Medical Group, Inc.
Bob Kneeley, 954-384-0175, x-5300
Director, Investor Relations
bob_kneeley@pediatrix.com
Exhibit 99.2
Pediatrix Reports Non-GAAP EPS of 75 Cents for 2007 Second Quarter
Introduces 2007 Second Half EPS Guidance of $1.58 to $1.62
Announces $100 Million Share Repurchase Program
FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--Aug. 7, 2007--Pediatrix
Medical Group, Inc., (NYSE: PDX) today reported non-GAAP earnings per
share of 75 cents for the three months ended June 30, 2007.
During the 2007 second quarter, Pediatrix reported:
-- Revenue of $226.8 million, up 11 percent from the comparable
2006 period;
-- Non-GAAP operating income growth of 16 percent, to $60.0
million, coupled with continued margin expansion;
-- Cash flow from operations of $67.1 million.
"Our results for the 2007 second quarter mark continued progress
in advancing a national group practice model that allows physicians to
focus on patient care while managing the administrative functions of
our practice with increasing efficiency," said Roger J. Medel, M.D.,
Chief Executive Officer of Pediatrix. "We are confident that there are
ample opportunities for us to sustain our historical growth rates
through the continued execution of a proven strategy that adds value
to physicians practicing in a number of specialties."
In this press release, Pediatrix will compare its results based on
both generally accepted accounting principles (GAAP) and adjusted, or
non-GAAP, to exclude certain items. The Company believes that
excluding these items allows investors to have a more meaningful
understanding of the Company's operating results. These specific
non-GAAP, or adjusted, items include expenses of $1.8 million incurred
during the 2007 second quarter associated with the Company's recently
completed stock option review, and a gain of $1.6 million on the sale
of the Company's aircraft during the 2006 second quarter. Pediatrix
provides a detailed reconciliation of non-GAAP to GAAP items in the
tables accompanying this press release.
Pediatrix's net patient service revenue increased by 11 percent to
$226.8 million for the three months ended June 30, 2007, from $203.8
million for the comparable 2006 period. Revenue growth was driven by a
combination of higher patient volume for physician services, improved
reimbursement and acquisitions. Overall same-unit revenue for the 2007
second quarter increased by 8.7 percent, as compared with the same
period of 2006, which includes same-unit revenue growth attributable
to higher patient volume, of 5.3 percent. During the 2007 second
quarter, neonatal intensive care unit patient days increased by 4.2
percent on a same-unit basis.
For the 2007 second quarter, Pediatrix reported operating income
of $58.2 million, which compares with $53.6 million for the 2006
second quarter. Adjusted operating income grew by 16 percent, to $60.0
million for the 2007 period, from $51.9 million, adjusted, for the
comparable 2006 period.
Adjusted operating margin expanded by 99 basis points, to 26.5
percent for the 2007 second quarter from the prior-year period,
largely as a result of continued strong general and administrative
expense management. When adjusted, Pediatrix's general and
administrative expenses increased by 6 percent for the 2007 second
quarter, when compared with the 2006 second quarter, and general and
administrative expenses as a percent of revenue declined by 62 basis
points year over year.
Pediatrix's effective tax rate for the 2007 second quarter
increased to 39.25 percent, as compared to 37.25 percent for the
prior-year period. This increase reflects the Company's adoption of
Financial Accounting Standards Board's Interpretation No. 48, as well
as tax law changes in Texas.
Pediatrix's net income for the 2007 second quarter was $36.3
million, which compares with $33.5 million for the 2006 second
quarter. Adjusted net income of $37.4 million for the 2007 period
increased by 15 percent from $32.6 million for the comparable
prior-year period.
On a per share basis, Pediatrix earned 72 cents for the three
months ended June 30, 2007, based on a weighted average 50.1 million
shares outstanding, which compares with 68 cents, based on a weighted
average 49.5 million shares outstanding, for the comparable 2006
period.
Adjusted earnings per share of 75 cents for the 2007 second
quarter were up 13 percent from 66 cents, adjusted, for the 2006
second quarter.
For the three months ended June 30, 2007, Pediatrix had cash flow
from operations of $67.1 million.
At June 30, 2007, Pediatrix had cash and cash equivalents of
$136.6 million. Net accounts receivable were $132.8 million and
Pediatrix had no amounts outstanding under its $225 million revolving
credit facility at the end of the 2007 second quarter.
For the six months ended June 30, 2007, presented solely on a GAAP
basis, Pediatrix's net patient service revenue was $441.3 million, up
13 percent from the prior-year period. Operating income was $96.8
million for the first half of 2007, and was impacted by expenses of
$9.7 million associated with the Company's stock-option review and
accruals for payments related to Internal Revenue Code Section 409A.
Pediatrix's operating income was $91.1 million for the first half of
2006. Net income for the first half of 2007 was $61.9 million,
compared with $56.9 million for the first half of 2006. On a per share
basis, Pediatrix earned $1.24 for the first half of 2007, based on a
weighted average 50.0 million shares outstanding, which compares with
EPS of $1.16 based on a weighted average 49.2 million shares
outstanding for the first half of 2006.
Pediatrix has completed three physician group practice
acquisitions during 2007, including neonatal physician groups in San
Francisco, California, and Munster, Indiana, and a pediatric
cardiology group practice in San Antonio, Texas. Pediatrix has used
approximately $16 million of its cash thus far this year for physician
group practice acquisitions.
Guidance for the Remainder of 2007
Pediatrix also announced that it expects to earn $1.58 to $1.62
per share for the second half of 2007. Pediatrix's guidance reflects
the higher effective tax rate for all of 2007 and does not include the
impact from expenses associated with the Company's stock option review
beyond June 30, 2007.
The Company's guidance is based on the following key assumptions:
-- Projected same-unit patient volume growth of 3 to 5 percent at
neonatal intensive care units staffed by its physicians;
-- Improved reimbursement from third-party payors of 2 to 4
percent; and
-- Estimated contributions from cash investments of $50 million
to $55 million to acquire physician group practices within its
core neonatal, maternal-fetal and pediatric subspecialty care
throughout 2007, as well as contributions from acquisitions
completed during 2007.
Share Repurchase
Pediatrix's Board of Directors has authorized the Company to
repurchase up to $100 million of its common stock through open market
purchases, from time to time, based on price, general market and
economic conditions and trading restrictions. Pediatrix has not
included any possible impact of this share repurchase program in its
current earnings guidance.
Reconciliation of Non-GAAP Information
This press release contains non-GAAP information, including income
from operations, operating margin, net income and earnings per share
which is adjusted for certain items as set forth below. Pediatrix
believes that this non-GAAP information is useful to management and
investors reviewing 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 tables
reconcile 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:
Non-GAAP Adjustments
Three Months Ended
June 30, June 30,
2007 2006
--------- ---------
(in thousands,
except for per
share data)
-------------------
Net patient service revenue $226,810 $203,807
GAAP general and administrative expenses 29,839 24,820
Gain on sale of aircraft 1,630
Stock option review expense (1,800)
--------- ---------
Non-GAAP general and administrative expenses 28,039 26,450
GAAP operating income 58,239 53,560
Net adjustments 1,800 (1,630)
--------- ---------
Non-GAAP operating income 60,039 51,930
GAAP income tax provision (23,463) (20,169)
Net adjustments (706) 800
--------- ---------
Non-GAAP income tax provision (24,169) (19,369)
GAAP net income 36,315 33,458
Net adjustments 1,094 (830)
--------- ---------
Non-GAAP net income 37,409 32,628
Net income per common and common equivalent share
(diluted):
GAAP EPS $ 0.72 $ 0.68
Adjustment 0.03 (0.02)
--------- ---------
Non-GAAP EPS $ 0.75 $ 0.66
Weighted average shares used in computing net
income per common and common equivalent share
(diluted) 50,125 49,461
Investor conference call
Pediatrix Medical Group, Inc. will host an investor conference
call to discuss the quarterly results at 11 a.m. Eastern Time today.
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 2:30 p.m. Eastern Time today through midnight
Eastern Time August 21, 2007 by dialing 800-475-6701, access code
883077. The replay will also be available at www.pediatrix.com.
About Pediatrix
Pediatrix Medical Group, Inc. is the nation's leading provider of
neonatal, maternal-fetal and pediatric physician subspecialty
services. Pediatrix physicians and advanced practitioners are
reshaping the delivery of care within the maternal-fetal, neonatal
intensive care and pediatric cardiology subspecialties, using
evidence-based tools, continuous quality initiatives and 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 neonatal intensive care units, and in many
markets they collaborate with affiliated maternal-fetal medicine,
pediatric cardiology physician subspecialists and pediatric
intensivists to provide a clinical care continuum. Combined, Pediatrix
and its affiliated professional corporations employ more than 950
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 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". Additional factors include, but are not limited to,
uncertainties related to: the possible discovery of additional facts
beyond those reviewed by the Audit Committee in connection with its
stock option review; possible litigation related to the matters
investigated by the Pediatrix's Audit Committee or the restatements to
Pediatrix's financial statements and other historical disclosures; and
any regulatory actions of the SEC or the U.S. Attorney related to such
matters.
Pediatrix Medical Group, Inc.
Consolidated Statements of Income
(Unaudited)
Three months ended Six Months Ended
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
--------- --------- --------- ---------
(in thousands, except for per share
data)
---------------------------------------
Net patient service revenue $226,810 $203,807 $441,266 $391,486
--------- --------- --------- ---------
Operating expenses:
Practice salaries and
benefits 126,662 114,419 257,607 226,988
Practice supplies and other
operating expenses 9,604 8,604 18,504 16,406
General and administrative
expenses 29,839 24,820 63,454 52,212
Depreciation and
amortization 2,466 2,404 4,939 4,752
-------- -------- -------- ---------
Total operating expenses 168,571 150,247 344,504 300,358
-------- -------- -------- ---------
Income from operations 58,239 53,560 96,762 91,128
Investment income 1,661 478 3,525 928
Interest expense (122) (411) (343) (820)
-------- -------- -------- ---------
Income before income taxes 59,778 53,627 99,944 91,236
Income tax provision (23,463) (20,169) (38,047) (34,351)
Net income $ 36,315 $ 33,458 $ 61,897 $ 56,885
========= ========= ========= =========
Per share data:
Net income per common and
common equivalent share
(diluted) $ 0.72 $ 0.68 $ 1.24 $ 1.16
Weighted average shares used
in computing net income per
common and common
equivalent share (diluted) 50,125 49,461 50,019 49,179
Balance Sheet Highlights
As of
June 30, Dec. 31,
2007 2006
----------- ----------
(Unaudited)
-----------
(in thousands)
Assets:
Cash & cash equivalents $ 136,606 $ 69,595
Short-term investments 14,535 65,660
Accounts receivable, net 132,836 125,573
Other current assets 47,888 40,771
Other assets, property and equipment 857,106 833,571
----------- ----------
Total assets $1,188,971 $1,135,170
=========== ==========
Liabilities and shareholders' equity:
Accounts payable & accrued expenses $ 170,293 $ 206,552
Total debt 527 860
Other liabilities 79,769 61,957
----------- ----------
Total liabilities 250,589 269,369
Shareholders' equity 938,382 865,801
Total liabilities and shareholders' equity $1,188,971 $1,135,170
=========== ==========
CONTACT: Pediatrix Medical Group, Inc.
Bob Kneeley, 954-384-0175, ext. 5300
Director, Investor Relation
bob_kneeley@pediatrix.com