1
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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-26762
PEDIATRIX MEDICAL GROUP, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0271219
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
1455 NORTH PARK DRIVE
FT. LAUDERDALE, FLORIDA 33326
(Address of principal executive offices)
(Zip Code)
(954) 384-0175
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
At November 3, 1997, the Registrant had 15,076,010 shares of $0.01 par value
common stock outstanding.
Page 1 of 13
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PEDIATRIX MEDICAL GROUP, INC.
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of September 30, 1997 (Unaudited),
and December 31, 1996......................................................................................... 3
Condensed Consolidated Statements of Income for the Three and Nine Months Ended
September 30, 1997, and 1996 (Unaudited)...................................................................... 4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1997, and 1996 (Unaudited)...................................................................... 5
Notes to Condensed Consolidated Financial Statements............................................................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................................................... 9
PART II - OTHER INFORMATION..................................................................................... 11
SIGNATURES...................................................................................................... 13
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PEDIATRIX MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1997 1996
(UNAUDITED)
------------------ -------------------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents $ 11,322 $ 18,435
Investments in marketable securities 27,026 57,218
Accounts receivable, net 32,957 23,396
Prepaid expenses 1,354 1,283
Other current assets 450 375
Income taxes receivable -- 202
------------------ ------------------
Total current assets 73,109 100,909
Property and equipment, net 9,573 8,676
Other assets, net 102,130 49,441
================== ==================
Total assets $ 184,812 $ 159,026
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 14,812 $ 13,423
Income taxes payable 2,159 --
Current portion of note payable 200 200
Deferred income taxes 8,292 6,099
------------------ ------------------
Total current liabilities 25,463 19,722
Note payable 2,600 2,750
Deferred income taxes 1,265 233
------------------ ------------------
Total liabilities 29,328 22,705
------------------ ------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock -- --
Common stock 151 149
Additional paid-in capital 120,570 116,037
Retained earnings 34,744 20,165
Unrealized gain (loss) on investments 19 (30)
------------------ ------------------
Total stockholders' equity 155,484 136,321
------------------ ------------------
Total liabilities and stockholders' equity $ 184,812 $ 159,026
================== ==================
The accompanying notes are an integral part of
these financial statements
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PEDIATRIX MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------- -------------------------------------
1997 1996 1997 1996
---------------- --------------- --------------- ----------------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
Net patient service revenue $ 34,444 $ 22,404 $ 92,056 $ 56,339
Operating expenses:
Salaries and benefits 21,874 14,526 59,257 36,863
Supplies & other operating expenses 2,467 1,740 6,927 4,222
Depreciation and amortization 1,278 543 3,069 1,111
--------------- -------------- -------------- ---------------
Total operating expenses 25,619 16,809 69,253 42,196
--------------- -------------- -------------- ---------------
Income from operations 8,825 5,595 22,803 14,143
Investment income 422 535 1,720 1,457
Interest expense (76) (80) (225) (142)
--------------- -------------- -------------- ---------------
Income before income taxes 9,171 6,050 24,298 15,458
Income tax provision 3,668 2,485 9,719 6,246
--------------- -------------- -------------- ---------------
Net income $ 5,503 $ 3,565 $ 14,579 $ 9,212
=============== ============== ============== ===============
Per share data:
Net income per common and common
common equivalent share:
Primary $ .35 $ .24 $ .93 $ .65
=============== ============== ============== ===============
Fully diluted $ .35 $ .24 $ .93 $ .65
=============== ============== ============== ===============
Weighted average shares used in
computing net income per
common and common equivalent
share:
Primary 15,853 14,994 15,692 14,188
=============== ============== ============== ===============
Fully diluted 15,853 15,047 15,745 14,215
=============== ============== ============== ===============
The accompanying notes are an integral part of
these financial statements
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PEDIATRIX MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------------------
1997 1996
---------------- -----------------
(IN THOUSANDS)
Cash flows provided (used) by operating activities:
Net income $ 14,579 $ 9,212
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,069 1,111
Deferred income taxes 3,225 3,096
Changes in assets and liabilities:
Accounts receivable (9,561) (8,789)
Prepaid expenses and other current assets (146) 92
Income taxes receivable/payable 4,495 2,053
Other assets (218) 260
Accounts payable and accrued expenses 2,711 4,207
--------------- ---------------
Net cash provided by operating activities 18,154 11,242
--------------- ---------------
Cash flows provided (used) by investing activities:
Physician group acquisition payments (56,163) (39,002)
Purchase of investments (10,424) (38,459)
Proceeds from sale of investments 40,665 27,851
Purchase of property and equipment (1,597) (3,825)
--------------- ---------------
Net cash used in investing activities (27,519) (53,435)
--------------- ---------------
Cash flows provided (used) by financing activities:
Proceeds from mortgage loan -- 3,000
Payments on note payable (150) (815)
Proceeds from issuance of common stock 2,402 59,516
Payments made to retire common stock -- (45)
--------------- ---------------
Net cash provided by financing activities 2,252 61,656
--------------- ---------------
Net increase (decrease) in cash and cash equivalents (7,113) 19,463
Cash and cash equivalents at beginning of period 18,435 18,499
--------------- ---------------
Cash and cash equivalents at end of period $ 11,322 $ 37,962
=============== ===============
The accompanying notes are an integral part of
these financial statements
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PEDIATRIX MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
of Pediatrix Medical Group, Inc. (the "Company" or "Pediatrix")
presented herein do not include all disclosures required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, these financial statements include all
adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of interim periods.
The results of operations for the three and nine months ended
September 30, 1997, are not necessarily indicative of the results of
operations to be expected for the year ended December 31, 1997. 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 31, 1997.
2. BUSINESS ACQUISITIONS:
During the first nine months of 1997, the Company completed the
acquisition of nine physician group practices in various locations
throughout the country. Additionally, three neonatal intensive care
units (NICUs) were added through the Company's internal marketing
activities. Total cash paid for these units approximated $52 million,
adding a total of 29 NICUs.
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 1996 and 1997 as if the acquisitions
had occurred on January 1, 1996:
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------------------
1997 1996
------------------ ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net patient service revenue $ 98,659 $ 82,256
Net income 14,675 10,478
Net income per share:
Primary .94 .74
Fully diluted .93 .74
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
The pro forma results do not necessarily represent results which would
have occurred if the acquisitions had taken place at the beginning of
the period, nor are they indicative of the results of future combined
operations.
3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consists of the following:
SEPTEMBER 30, DECEMBER 31,
1997 1996
---------------- --------------
(IN THOUSANDS)
Accounts payable.............................. $ 2,592 $ 2,489
Accrued salaries and bonuses.................. 4,479 3,508
Accrued payroll taxes and benefits............ 3,007 2,009
Accrued professional liability coverage....... 3,373 2,413
Other accrued expenses........................ 1,361 3,004
---------------- --------------
$ 14,812 $ 13,423
================ ==============
4. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE:
Primary and fully diluted net income per share is calculated by
dividing net income by the weighted average number of common and
common equivalent shares outstanding during the period. Common
equivalent shares consist of the dilutive effect of outstanding
options calculated using the treasury stock method.
5. CONTINGENCIES:
During the ordinary course of business, the Company has become a party
to pending and threatened legal actions and proceedings, most of which
involve claims of medical malpractice and are generally covered by
insurance. The Company believes that the outcome of such legal actions
and proceedings will not have a material adverse effect on the
Company's financial condition, results of operations or liquidity,
notwithstanding any possible insurance recovery.
The Company is currently under examination by the Internal Revenue
Service for the tax years ended December 31, 1992, 1993, and 1994. The
IRS has challenged certain deductions that, if disallowed, would
result in additional taxes of approximately $4.5 million, plus
interest. The Company has reviewed the IRS matters under consideration
and believes that the tax returns are substantially correct as filed.
The Company intends to vigorously contest the proposed adjustments and
believes it has adequately provided for any liability that may result
from this examination. The Company and its tax advisors believe that
the ultimate resolution of the examination will not have a material
effect on the Company's consolidated financial position, results of
operations or cash flows.
The Company has been notified by a hospital customer of a dispute
regarding the interpretation of the customer's contract with the
Company. The customer believes that the Company should refund
approximately $7.5 million of payments made to the Company over the
last five years. The
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
Company disagrees with the customer's interpretation of the contract
and believes that the matter will be resolved amicably. In the
unlikely event that the Company cannot resolve this matter amicably,
the Company intends to vigorously litigate the matter and assert all
its legal defenses. The Company believes that the ultimate resolution
of the matter will not have a material effect on the Company's
consolidated financial position, results of operations or cash flows.
6. CHANGES TO ACCOUNTING PRONOUNCEMENTS:
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share". This statement is designed to improve the
earnings per share ("EPS") information provided in financial
statements by simplifying the existing computational guidelines,
revising the disclosure requirements, and increasing the comparability
of EPS data on an international basis. SFAS 128 is effective for
financial statements issued for periods ending after December 15,
1997. Under the provisions of SFAS 128, basic EPS would have been $.37
and $.25 for the three months ended September 30, 1997, and 1996,
respectively, and $.97 and $.68 for the nine months ended September
30, 1997, and 1996, respectively. Diluted EPS would have been the same
as the reported amounts.
7. SUBSEQUENT EVENTS:
Subsequent to September 30, 1997, the Company completed the
acquisition of one physician group practice. Total cash paid for this
acquisition approximated $3.5 million. The acquisition will be
accounted for using the purchase method of accounting.
On October 21, 1997 the Company increased the amount of funds
available under its credit facility from $30.0 million to $75.0
million.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997, AS COMPARED TO THREE MONTHS
ENDED SEPTEMBER 30, 1996
The Company reported net patient service revenue of $34.4 million for
the three months ended September 30, 1997, as compared with $22.4 million for
the same period in 1996, a growth rate of 53.7%. This $12.0 million increase
was primarily attributable to new units, including units at which the Company
provides services as a result of acquisitions. Same unit patient service
revenue, exclusive of administrative fees, was essentially flat for the three
months ended September 30, 1997, compared to the same period in 1996. Same
units are those units at which the Company provided services for the entire
period for which the percentage is calculated and the entire comparable period.
Salaries and benefits increased $7.4 million, or 50.6% to $21.9
million for the three months ended September 30, 1997, as compared with $14.5
million for the same period in 1996. Of this $7.4 million increase, $5.4
million was attributable to hiring new physicians, primarily to support new
unit growth, and the remaining $2.0 million was primarily attributable to
increased support staff and resources added in the areas of nursing, executive
management and billing and reimbursement. Supplies and other operating expenses
increased $727,000, or 41.8% to $2.5 million for the three months ended
September 30, 1997, as compared with $1.7 million for the same period in 1996,
primarily as a result of new units. Depreciation and amortization expense
increased by $735,000, or 135.4% to $1.3 million for the three months ended
September 30, 1997, as compared with $543,000 for the same period in 1996,
primarily as a result of amortization of goodwill in connection with
acquisitions.
Income from operations increased approximately $3.2 million, or 57.7%,
to $8.8 million for the three months ended September 30, 1997, as compared with
$5.6 million for the same period in 1996. The increase in income from
operations was primarily due to increased volume, principally from
acquisitions.
The Company earned investment income of approximately $422,000 for the
three months ended September 30, 1997, as compared with $535,000 for the same
period in 1996. The decrease in investment income resulted primarily from funds
used in connection with acquisitions.
The effective income tax rate was approximately 40% and 41% for the
three month periods ended September 30, 1997, and 1996, respectively.
Net income increased 54.4% to $5.5 million for the three months ended
September 30, 1997, as compared with $3.6 million for the same period in 1996.
Net income as a percentage of net patient service revenue increased to 16.0%
for the three months ended September 30, 1997, compared to 15.9% for the same
period in 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1997, AS COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1996
The Company reported net patient service revenue of $92.1 million for
the nine months ended September 30, 1997, as compared with $56.3 million for
the same period in 1996, a growth rate of 63.4%. This $35.8 million increase
was primarily attributable to new units. Same unit patient service revenue,
exclusive of administrative fees, increased $600,000, or 1.7%, for the nine
months ended September 30, 1997, compared to the same period in 1996. Same
units are those units at which the Company provided services for the entire
period for which the percentage is calculated and the entire comparable period.
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Salaries and benefits increased $22.4 million, or 60.7% to $59.3
million for the nine months ended September 30, 1997, as compared with $36.9
million for the same period in 1996. Of this $22.4 million increase, $16.7
million was attributable to hiring new physicians, primarily to support new
unit growth, and the remaining $5.7 million was primarily attributable to
increased support staff and resources added in the areas of nursing, executive
management and billing and reimbursement. Supplies and other operating expenses
increased $2.7 million, or 64.1% to $6.9 million for the nine months ended
September 30, 1997, as compared with $4.2 million for the same period in 1996,
primarily as a result of new units. Depreciation and amortization expense
increased by $2.0 million, or 176.2% to $3.1 million for the nine months ended
September 30, 1997, as compared with $1.1 million for the same period in 1996,
primarily as a result of amortization of goodwill in connection with
acquisitions.
Income from operations increased approximately $8.7 million, or 61.2%,
to $22.8 million for the nine months ended September 30, 1997, as compared with
$14.1 million for the same period in 1996. The increase in income from
operations was primarily due to increased volume, principally from
acquisitions.
The Company earned investment income of approximately $1.7 million for
the nine months ended September 30, 1997, as compared with $1.5 million for the
same period in 1996. The increase in investment income resulted primarily from
additional funds available for investment due to proceeds from the secondary
public offering completed in the third quarter of 1996 as well as cash flow
from operations. These amounts were offset by funds used in connection with
acquisitions.
The effective income tax rate was approximately 40% for the nine month
periods ended September 30, 1997, and 1996.
Net income increased 58.3% to $14.6 million for the nine months ended
September 30, 1997, as compared with $9.2 million for the same period in 1996.
Net income as a percentage of net patient service revenue decreased to 15.8%
for the nine months ended September 30, 1997, compared to 16.4% for the same
period in 1996, primarily as a result of amortization of goodwill in connection
with acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company had working capital of
approximately $47.6 million, a decrease of $33.6 million from the working
capital of $81.2 million available at December 31, 1996. The decrease is
principally a result of funds utilized for acquisitions during the first nine
months of 1997, offset by cash generated from operations.
During the nine months ended September 30, 1997, capital expenditures
amounted to approximately $1.6 million principally for computer hardware and
software and furniture and fixtures. For the remainder of 1997, the Company
anticipates capital expenditures of approximately $500,000, principally for
computer hardware and software.
On October 21, 1997 the Company increased the amount of funds
available under its credit facility from $30.0 million to $75.0 million. The
Company anticipates that funds generated from operations together with cash and
marketable securities on hand and funds available under its credit facility,
will be sufficient to meet its working capital requirements and finance any
required capital expenditures for at least the next twelve months.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
During the ordinary course of business, the Company has
become a party to pending and threatened legal actions and
proceedings, most of which involve claims of medical malpractice and
are generally covered by insurance. The Company believes that the
outcome of such legal actions and proceedings will not have a material
adverse effect on the Company's financial condition, results of
operations or liquidity, notwithstanding any possible insurance
recovery.
The Company is currently under examination by the Internal
Revenue Service for the tax years ended December 31, 1992, 1993, and
1994. The IRS has challenged certain deductions that, if disallowed,
would result in additional taxes of approximately $4.5 million, plus
interest. The Company has reviewed the IRS matters under consideration
and believes that the tax returns are substantially correct as filed.
The Company intends to vigorously contest the proposed adjustments and
believes it has adequately provided for any liability that may result
from this examination. The Company and its tax advisors believe that
the ultimate resolution of the examination will not have a material
effect on the Company's consolidated financial position, results of
operations or cash flows.
The Company has been notified by a hospital customer of a
dispute regarding the interpretation of the customer's contract with
the Company. The customer believes that the Company should refund
approximately $7.5 million of payments made to the Company over the
last five years. The Company disagrees with the customer's
interpretation of the contract and believes that the matter will be
resolved amicably. In the unlikely event that the Company cannot
resolve this matter amicably, the Company intends to vigorously
litigate the matter and assert all its legal defenses. The Company
believes that the ultimate resolution of the matter will not have a
material effect on the Company's consolidated financial position,
results of operations or cash flows.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
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PART II - OTHER INFORMATION - (CONTINUED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.36 Amendment No. 2 to First Amended and Restated Credit
Agreement, dated October 21, 1997, between Pediatrix,
certain PA contractors, BankBoston and SunTrust Bank.
11.1 Statement Re: Computation of Per Share Earnings
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
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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, 1997 By: /s/ Roger J. Medel
--------------------------------------------------------
Roger J. Medel, President and Chief Executive
Officer (Principal Executive Officer)
Date: November 12, 1997 By: /s/ Lawrence M. Mullen
--------------------------------------------------------
Lawrence M. Mullen, Vice President and Chief
Financial Officer (Principal Financial and Accounting
Officer)
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EXHIBIT 10.36
AMENDMENT NO. 2
TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of October 21,1997
This Agreement, dated as of October 21, 1997, is among Pediatrix
Medical Group, Inc., a Florida corporation, the Related Entities of Pediatrix
Medical Group, Inc. from time to time party hereto, the Lenders from time to
time party hereto including SunTrust Bank/South Florida, National Association
(the "Prior Lender") as Lender under the Revolving Loan, and BankBoston, N.A.
(formerly known as The First National Bank of Boston), both in its capacity as
a Lender under the Revolving Loan and the Mortgage Loan and in its capacity as
agent for itself and the other Lenders (collectively the foregoing parties, the
"Credit Parties") and SunTrust Bank/Central Florida, National Association (the
"New Lender"). The parties agree as follows:
1. REFERENCE TO CREDIT AGREEMENT; DEFINITIONS. Reference is made to the
First Amended and Restated Credit Agreement dated as of June 27, 1996
(the "Credit Agreement"), as amended and in effect from time to time,
among the Credit Parties hereto. Terms defined in the Credit Agreement
and not otherwise defined herein are used herein with the meanings so
defined.
2. ASSIGNMENT AND ASSUMPTION.
2.1. Assignment and Assumption. In consideration of the payment by
the New Lender to the Prior Lender of good and valuable
consideration and of the other agreements, conditions,
representations and warranties contained herein, effective
upon receipt by the Prior Lender of such consideration (the
"Effective Time"):
(a) the Prior Lender hereby sells, transfers and
assigns to the New Lender (i) all of its right, title and
interest in and to the Credit Obligations, and (ii) all of
its rights and obligations under the Credit Agreement and the
other Credit Documents, in each case as in effect as of the
date hereof, and
(b) the New Lender hereby accepts such rights,
titles and interests and such rights and assumes such
obligations on the terms and conditions contained herein.
Notwithstanding anything to the contrary herein, the New Lender shall
not assume any obligation under any Credit Document to be performed by
the Prior Lender prior to the Effective Time and the Prior Lender
shall retain its rights under the Credit Documents to the extent set
forth in Section 3. The Borrowers specifically consent to the
foregoing assignment and assumption.
2
2.2 Certain Effects of Assignment and Assumption. From and after
the Effective Time, the Prior Lender agrees that the New
Lender shall be entitled, except to the extent set forth in
Section 3, to all of its rights, powers and privileges under
the Credit Agreement and the other Credit Documents, in each
case as in effect as of the date hereof, including, without
limitation, (a) the rights to receive all monies payable
under the Credit Documents from and after the Effective Time,
whether on account of principal, interest (whether accrued
before or after the Effective Time), fees, indemnities,
increased costs, additional amounts or otherwise (but
excluding indemnities and additional amounts for the benefit
of the Prior Lender to the extent set forth in Section 3),
(b) the right to set-off and to appropriate and apply
deposits of the Company as set forth in the Credit Documents,
(c) the right to receive notices, requests, demands and other
communications and (d) the right to supplement, modify or
amend the Credit Documents and to grant waivers thereunder.
2.3 Replacement of Prior Lender. Upon the Effective Time, the New
Lender shall become party to the Credit Agreement and the
other Credit Documents as though it were the Lender and a
signatory thereto and, except as expressly otherwise provided
herein, shall have all of the rights and obligations of the
Lender under the Credit Agreement and the other Credit
Documents and the Prior Lender shall be released from its
obligations under the Credit Agreement and such other Credit
Documents to a corresponding extent, and no further consent
or action by any party shall be required. From and after the
Effective Time, for purposes of the Credit Agreement and the
other Credit Documents, the term "Lender" shall mean the New
Lender.
3. SURVIVAL OF INDEMNITIES. Notwithstanding the other provisions of this
Agreement, the transfers and assignments made pursuant hereto and any future
amendment of the Credit Agreement or any other Credit Document, the
indemnification provisions and other provisions of the Credit Agreement and the
other Credit Documents assigned hereby that expressly survive the termination
of the Credit Agreement or such other Credit Documents, each as in effect
immediately prior to the execution hereof, shall continue to inure to the
benefit of the Prior Lender with respect to any events which happened or
actions taken or omitted to be taken prior to the Effective Time, without
derogating from any rights of the New Lender against the Company with respect
to any events which happened or actions taken or omitted to be taken prior to
the Effective Time that the New Lender may have acquired in its capacity as
Lender from and after the Effective Time pursuant to the transfers and
assignments provided in this Agreement. The Prior Lender will give the Company
prompt notice of any claim made against it, or the incurring of any expense or
liability, for which it may seek indemnity or reimbursement from the Company
under such provisions.
4. RELEASE. In consideration of the agreements by the Prior Lender hereunder
and for other valuable consideration, the receipt and sufficiency of which are
acknowledged, the Company fully releases, discharges and covenants not to sue
the Prior Lender or any of its
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3
directors, officers, employees, agents, accountants, attorneys, consultants and
each Person, if any, that controls it, from and with respect to any claims,
liabilities, actions and suits of every nature, whether in law, at equity or
otherwise, arising from or relating to the Credit Agreement or the other Credit
Documents or any event which happened or action taken or omitted to be taken
prior to the date hereof with respect thereto or which arises from or relates
to the Credit Documents, the Credit Security, the Credit Obligations or any
possible refinancing or restructuring thereof.
5. NOTICES. All notices and other communications required to be given or
made to the New Lender under this Agreement, the Credit Agreement or any Credit
Document shall be given or made at its address set forth on the signature page
hereof or at such other address as the New Lender shall have specified and
actually delivered to the addressor. All notices and other communications
required to be given or made to the other parties hereto shall be given or made
at the respective addresses provided in or pursuant to the Credit Agreement.
6. NO WAIVER. Nothing contained herein shall constitute a waiver by the
New Lender of any Defaults or Events of Default now existing or hereafter
arising under the Credit Documents.
7. AMENDMENT TO CREDIT AGREEMENT. Subject to all the terms and conditions
hereof, the Credit Agreement is hereby amended as follows, effective as of the
later of October 10, 1997 and the date each of the conditions in Section 4
hereof is satisfied or waived:
7.1. Amendment of Section 1.34. Section 1.34. of the Credit
Agreement is hereby amended and restated to read as follows:
"1.34. "Consolidated Fixed Charges" means, for any period,
the sum of:
(a) the aggregate amount of interest, including payments in
the nature of interest under Capitalized Leases and Interest Rate
Protection Agreements, paid or accrued by the Company and its Related
Entities (whether such interest is reflected as an item of expense or
capitalized) in accordance with GAAP on a consolidated basis;
plus (b) the aggregate amount of all mandatory scheduled payments,
prepayments and sinking fund payments with respect to principal paid
or accrued by the Company and its Related Entities in respect of
Financing Debt, including payments in the nature of principal under
Capitalized Leases and Interest Rate Protection Agreements, in
accordance with GAAP on a Consolidated basis;
plus (c) any mandatory dividends paid or payable by the Company or
any of its Related Entities to third parties.
7.2. Amendment of Section 1.63. Section 1.63. of the Credit
Agreement is hereby amended and restated to read as follows:
-3-
4
"1.63. "Final Maturity Date" means (i) with respect to the
Revolving Loan, September 30, 2000 and (ii) with respect to
the Mortgage Loan, June 30, 2003.
7.3. Amendment of Section 2.1.2. Section 2.1.2. of the Credit
Agreement is hereby amended and restated to read as follows:
"2.1.2. Maximum Amount of Revolving Credit. The term "Maximum
Amount of Revolving Credit" means, on any date, the lesser of
(a) $75,000,000 or (b) the amount (in an integral multiple of
$1,000,000) to which the then applicable amount shall have
been irrevocably reduced from time to time by notice from the
Company to the Agent."
7.4. Amendment of Section 6.5.2. Section 6.5.2 of the Credit
Agreement is hereby amended to read in its entirety as
follows:
"6.5.2 Consolidated Total Debt to EBITDA. Consolidated
Financing Debt shall not on any date exceed 300% of
Consolidated EBITDA for the most recently completed period of
four consecutive fiscal quarters, provided, however, for
these purposes, Consolidated EBITDA shall exclude
non-recurring charges."
7.5. Amendment of Section 6.5.3. Section 6.5.3 of the Credit
Agreement is hereby amended to read in its entirety as
follows:
"6.5.3. Consolidated Total Debt Service. On the last day of
each fiscal quarter of the Company and its Related Entities,
Operating Cash Flow shall be at least 200% of Consolidated
Fixed Charges for the period of four consecutive fiscal
quarters then ended.
7.6. Amendment of Section 6.5.4. Section 6.5.4 of the Credit
Agreement is hereby amended to read in its entirety as
follows:
"6.5.4. Consolidated Net Worth. On the last day of each
fiscal quarter, the Consolidated Net Worth shall equal at
least $76,000,000, plus the aggregate net proceeds of any
offerings of equity interests in the Company or any of its
Related Entities occurring on or after the Initial Closing
Date.
7.7. Amendment of Section 6.11. Section 6.11. of the Credit
Agreement is hereby amended to read in its entirety as
follows:
"6.11. Capital Expenditures. None of the Borrowers will
make Capital Expenditures exceeding $3,000,000 in the
aggregate in any fiscal year."
-4-
5
7.8. Amendment of Section 11.1. Section 11.1. of the Credit
Agreement is hereby amended to read in its entirety as
follows:
"11.1. Interests in Credits. The percentage interest of
each Lender in the Revolving Loan and Mortgage Loan, and the
related Commitments, shall be computed based on the maximum
principal amount for each Lender as follows:
Maximum Percentage
------- ----------
Principal Amount Percentage Interest of
---------------- ---------- -----------
of Revolving Interest of Principal of Mortgage
---------------- ----------- ------------ -------
Lender Loan Revolving Loan Mortgage Loan Loan
------ ---- ---- ------------- ----
BankBoston, $37,500,000 50% $3,000,000 100%
N.A.
SunTrust/Central $37,500,000 50% $ 0 0%
Florida =========== === ========== ===
Total $75,000,000 100% $3,000,000 100%
8. NO DEFAULT. In order to induce the Lenders to enter into this Amendment
and to continue to extend credit to the Borrowers under the Credit Agreement as
amended hereby, each of the Borrowers represents and warrants that, after
giving effect to this Amendment, no Default under the Credit Agreement as
amended hereby exists.
9. CONDITIONS. On or prior to the Amendment Date:
9.1. Each Borrower shall have duly executed and delivered to the
Agent a Revolving Note for each Lender, dated as of June 27,
1996;
9.2. Each Borrower shall have delivered to the Agent an Officers
Certificate in the form of Exhibit 5.4.1 to the Credit Agreement
certifying that the representations and warranties contained
in Section 7 of the Credit Agreement are true and correct on and
as of the Amendment Date with the same force and effect as
though made on and as of such date (except as to any
representation or warranty which refers to a specific earlier
date); that the Borrowers are in compliance with the convenants
contained in Section 6 of the Credit Agreement and no Default
shall exist on the Amendment Date prior to or immediately after
giving effect to the requested extension of credit; and that no
Material Adverse Change has occurred since December 31, 1995;
-5-
6
9.3. The making of the requested Amendment and extension of credit
shall not (a) subject any Lender to any penalty or special
tax (other than a Tax for which the Borrowers are required to
reimburse the Lenders under Section 3.5 of the Credit
Agreement), (b) be prohibited by any Legal Requirement or (c)
violate any credit restraint program of the executive branch
of the government of the United States of America, the Board
of Governors of the Federal Reserve System or any other
governmental or administrative agency so long as any Lender
reasonably believes that compliance is in the best interests
of the Lender.
9.4. This Amendment. the Credit Agreement and each other Credit
Document and the transactions contemplated hereby and thereby
shall have been authorized by all necessary corporate or
other proceedings of the Borrowers. All necessary consents,
approvals and authorizations of any governmental or
administrative agency or any other Person of any of the
transactions contemplated hereby or by any other Credit
Document shall have been obtained and shall be in full force
and effect;
9.5. All legal and corporate proceedings in connection with the
transactions contemplated by this Amendment, the Credit
Agreement and each other Credit Document shall be
satisfactory in form and substance to the Agent and the Agent
shall have received copies of all documents, including
certified copies of the Charter and By-Laws of the Borrowers
and the other Obligors, records of corporate proceedings,
certificates as to signatures and incumbency of officers and
opinions of counsel, which the Agent may have reasonably
requested in connection therewith, such documents where
appropriate to be certified by proper corporate or
governmental authorities.
10. MISCELLANEOUS. Except to the extent specifically amended hereby, the
provisions of the Credit Agreement shall remain unmodified, and the Credit
Agreement as amended hereby is confirmed as being in full force and effect.
This Amendment may be executed in any number of counterparts which together
shall constitute one instrument, shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts (other than
conflict of laws rules), and shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, including as such
successors and assigns all holders of Credit Obligations.
-6-
7
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered by their duly authorized officers as of the date first
above written.
PEDIATRIX MEDICAL GROUP, INC.
By: /s/ Lawrence M. Mullen
------------------------------------------
Title:
PEDIATRIX MEDICAL GROUP OF
FLORIDA, INC.
By: /s/ Lawrence M. Mullen
------------------------------------------
Title:
PEDIATRIX MEDICAL GROUP, P.C. (WV)
By: /s/ Lawrence M. Mullen
------------------------------------------
Title:
PEDIATRIX MEDICAL GROUP, P.C.
(VA)
By: /s/ Lawrence M. Mullen
------------------------------------------
Title:
8
PEDIATRIX MEDICAL GROUP, S.P.
(PR)
By: /s/ Carlos Perez, M.D.
------------------------------------------
Title:
PEDIATRIX MEDICAL GROUP, P.A.
(NJ)
By: /s/ Lawrence M. Mullen
------------------------------------------
Title:
PEDIATRIX MEDICAL GROUP OF
KANSAS, P.A.
By: /s/ Eduardo A. Otero, M.D.
------------------------------------------
Title:
PEDIATRIX MEDICAL GROUP
NEONATOLOGY
AND PEDIATRIC INTENSIVE CARE
SPECIALISTS OF NEW YORK, P.C.
By: /s/ Willard Helmuth, M.D.
------------------------------------------
Title:
PEDIATRIX MEDICAL GROUP OF
CALIFORNIA, P.C.
By: /s/ Carlos Perez, M.D.
-----------------------------------------
Title:
9
PEDIATRIX MEDICAL GROUP OF
ILLINOIS, P.C.
By: /s/ Brian UDell, M.D.
-------------------------------------------
Title:
PEDIATRIX MEDICAL GROUP OF
MICHIGAN, P.C.
By: /s/ Lawrence M. Mullen
-------------------------------------------
Title:
PEDIATRIX MEDICAL GROUP OF
PENNSYLVANIA, P.C.
By: /s/ Brian UDell, M.D.
-------------------------------------------
Title:
PEDIATRIX MEDICAL GROUP OF
TEXAS, P.A.
By: /s/ Stephen Haskins, M.D.
-------------------------------------------
Title:
PEDIATRIX MEDICAL GROUP OF
OHIO, CORP.
By: /s/ Lawrence M. Mullen
-------------------------------------------
Title:
NEONATAL SPECIALISTS, LTD. (AZ)
By: /s/ Lawrence M. Mullen
-------------------------------------------
Title:
10
PEDIATRIX MEDICAL GROUP OF
COLORADO, P.C.
By: /s/ Eric Kurzweil, M.D.
-------------------------------------------
Title:
ST. JOSEPH NEONATOLOGY
CONSULTANTS, P.A.
By: /s/ Stephen Haskins, M.D.
-------------------------------------------
Title:
PERNOLL MEDICAL GROUP OF
NEVADA, LTD. D/B/A PEDIATRIX MEDICAL
GROUP OF NEVADA
By: /s/ Lawrence M. Mullen
-------------------------------------------
Title:
PEDIATRIX MEDICAL GROUP OF
SOUTH CAROLINA, P.A.
By: /s/ Lawrence M. Mullen
-------------------------------------------
Title:
FLORIDA REGIONAL NEONATAL
ASSOCIATES, P.A.
By: /s/ Lawrence M. Mullen
-------------------------------------------
Title:
11
PEDIATRIX MEDICAL GROUP, INC.
(Utah)
By: /s/ Lawrence M. Mullen
-----------------------------------------
Title:
PEDIATRIX MEDICAL GROUP OF
NEW
MEXICO, P.C.
By: /s/ Lawrence M. Mullen
-----------------------------------------
Title:
PEDIATRIX MEDICAL GROUP OF
WASHINGTON, INC., P.C.
By: /s/ Lawrence M. Mullen
-----------------------------------------
Title:
PEDIATRIX MEDICAL GROUP OF
INDIANA, P.C.
By: /s/ Brian UDell, M.D.
-----------------------------------------
Title:
FORT WORTH NEONATAL
ASSOCIATES, P.A.
By: /s/ Stephen Haskins, M.D.
-----------------------------------------
Title:
12
PMG ACQUISITION CORP.
By: /s/ Lawrence M. Mullen
-----------------------------------------
Title:
PEDIATRIX MEDICAL GROUP OF
PUERTO RICO, P.S.C.
By: /s/ Carlos Perez, M.D.
-----------------------------------------
Title:
13
BANKBOSTON, N.A.
(formerly known as The First National Bank
of Boston)
By: /s/ Gregory G. O'Brien
------------------------------------------
Gregory G. O'Brien
Managing Director
BankBoston, N.A.
New England Corporate Banking
100 Federal Street
Boston, Massachusetts 02110
Telecopy: (617) 434-1279
Telex: 940581
14
SUNTRUST BANK/SOUTH FLORIDA,
NATIONAL ASSOCIATION
By /s/ Janet Sammons
----------------------------------------------
Name:
Title:
SunTrust Bank/South Florida, National Association
501 E. Las Olas Boulevard
7th Floor
Fort Lauderdale, Florida 33301
Telecopy (954) 765-7240
STATE OF GEORGIA
COUNTY OF FULTON
On the _____ day of ____________ personally appeared
___________________________, as the ____________ PRESIDENT of SunTrust Bank,
South Florida, National Association, and before me executed the attached
AMENDMENT NO. 2 TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT among Pediatrix
Medical Group, Inc., the Related Entities of Pediatrix Medical Group, Inc. from
time to time and the Lenders from time to time party hereto including SunTrust
Bank, South Florida, National Association as lender under the Revolving Loan.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal, in
the state and county aforesaid.
-------------------------------------------------------
Signature of Notary Public, State of
-------------------------------------------------------
(Print, Type or Stamp Commissioned Name of
Notary Public) Personally known _________; OR Produced
identification
Type of identification produced:
-------------------------------------------------------
15
(Notary Seal)
SUNTRUST BANK/CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By /s/ Janet Sammons
-------------------------------------------------
Name:
Title:
SunTrust Bank/Central Florida, National Association
Health Care Banking Group
Mail Code: 0-1101
200 S. Orange Avenue
Orlando, Florida 32801
Telecopy (407) 237-5489
STATE OF GEORGIA
COUNTY OF FULTON
On the _____ day of ____________ personally appeared
___________________________, as the ____________ PRESIDENT of SunTrust Bank,
Central Florida, National Association, and before me executed the attached
AMENDMENT NO. 2 TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT among Pediatrix
Medical Group, Inc., the Related Entities of Pediatrix Medical Group, Inc. from
time to time and the Lenders from time to time party thereto including SunTrust
Bank, Central Florida, National Association as lender under the Revolving Loan.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal, in
the state and county aforesaid.
---------------------------------------------------
Signature of Notary Public, State of
---------------------------------------------------
(Print, Type or Stamp Commissioned Name of
Notary Public) Personally known _________; OR
Produced identification
Type of identification produced:
---------------------------------------------------
16
--------------------------------------------------
(Notary Seal)
1
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------- -----------------------------------
1997 1996 1997 1996
---------------------------------- -----------------------------------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
Income applicable to common stock $ 5,503 $ 3,565 $ 14,579 $ 9,212
Weighted average number of common and common
share equivalents outstanding:
Primary:
Weighted average number of common shares
outstanding 15,065 14,232 14,984 13,454
Weighted average number of dilutive
common share equivalents 788 762 708 734
------------- -------------- -------------- --------------
Weighted average number of common and
common share equivalents outstanding for
primary earnings per share
15,853 14,994 15,692 14,188
============= ============== ============== ==============
Fully diluted:
Weighted average number of common shares
outstanding 15,065 14,232 14,984 13,454
Weighted average number of dilutive
common stock equivalents 788 815 761 761
------------- -------------- -------------- --------------
Weighted average number of common
and common equivalent shares outstanding
for fully diluted earnings per share 15,853 15,047 15,745 14,215
============= ============== =============== ==============
Income per share:
Primary $ .35 $ .24 $ .93 $ .65
============= ============== =============== ==============
Fully diluted $ .35 $ .24 $ .93 $ .65
============= ============== =============== ==============
5
1,000
9-MOS
DEC-31-1997
JAN-01-1997
SEP-30-1997
11,322
27,026
32,957
0
0
73,109
9,573
0
184,812
25,463
2,600
0
0
151
155,333
184,812
0
92,056
0
69,253
(1,720)
0
225
24,298
9,719
14,579
0
0
0
14,579
.93
.93
AMOUNTS FOR RECEIVABLES AND PROPERTY PLANT AND EQUIPMENT ARE NET OF ANY
ALLOWANCES AND ACCUMULATED DEPRECIATION.
