1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MAY 15, 2001 COMMISSION FILE NUMBER: 0-26762 PEDIATRIX MEDICAL GROUP, INC. (Exact name of registrant as specified in its charter) FLORIDA (State or other jurisdiction of incorporation or organization) 65-0271219 (I.R.S. employer identification no.) 1301 CONCORD TERRACE SUNRISE, FLORIDA 33323-2825 (Address of principal executive offices, including zip code) (954) 384-0175 (Registrant's telephone number, including area code) ================================================================================
2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. This Form 8-K/A amends the current report on Form 8-K of Pediatrix Medical Group, Inc. ("Pediatrix" or the "Registrant") filed May 25, 2001 to include in Item 7(a) unaudited financial statements of Magella Healthcare Corporation ("Magella") as of and for the three months ended March 31, 2001, and in Item 7(b) pro forma financial information as of and for the three months ended March 31, 2001 with respect to the merger completed on May 15, 2001 among Pediatrix, Infant Acquisition Corp. and Magella. A description of the merger is contained in Pediatrix's proxy statement/prospectus dated April 12, 2001. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. The unaudited condensed consolidated balance sheet of Magella as of March 31, 2001, unaudited condensed consolidated statements of income of Magella for the three months ended March 31, 2000 and 2001, the unaudited condensed consolidated statements of cash flows of Magella for the three months ended March 31, 2000 and 2001, and the accompanying notes, are filed as Exhibit 99.1 to this current report on Form 8-K/A and are incorporated herein by reference. (b) PRO FORMA FINANCIAL INFORMATION. The unaudited pro forma condensed combined balance sheet of Pediatrix and Magella as of March 31, 2001, the unaudited pro forma condensed combined consolidated statement of income of Pediatrix and Magella for the three months ended March 31, 2001, and the accompanying notes, are filed as Exhibit 99.2 to this current report on Form 8-K/A and are incorporated herein by reference. (c) EXHIBITS. See Exhibit Index. 2
3 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: July 27, 2001 By: /s/ KARL B. WAGNER -------------------------------- Name: Karl B. Wagner Title: Chief Financial Officer 3
4 EXHIBIT INDEX 2.1 Agreement and Plan of Merger dated as of February 14, 2001, among Pediatrix Medical Group, Inc., Infant Acquisition Corp. and Magella Healthcare Corporation (incorporated by reference to Annex A of Pediatrix's Registration Statement on Form S-4, as amended (Registration No. 333-57164)). 99.1 Unaudited condensed consolidated balance sheet of Magella Healthcare Corporation as of March 31, 2001, unaudited condensed consolidated statements of income of Magella Healthcare Corporation for the three months ended March 31, 2000 and 2001, unaudited condensed consolidated statements of cash flows of Magella Healthcare Corporation for the three months ended March 31, 2000 and 2001, and accompanying notes (filed herewith). 99.2 Unaudited pro forma condensed combined balance sheet of Pediatrix Medical Group, Inc. and Magella Healthcare Corporation as of March 31, 2001, unaudited pro forma condensed combined consolidated statement of income of Pediatrix Medical Group, Inc. and Magella Healthcare Corporation for the three months ended March 31, 2001, and accompanying notes (filed herewith).
1 EXHIBIT 99.1 MAGELLA HEALTHCARE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) MARCH 31, 2001 --------------------- (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents ..................... $ 997 Accounts receivable, net ...................... 11,867 Prepaid expenses .............................. 1,032 Deferred income taxes ......................... 5,673 -------- Total current assets ...................... 19,569 Property and equipment, net ........................ 4,029 Goodwill and other assets, net ..................... 101,669 -------- Total assets .............................. $125,267 ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Line of credit ................................ $ 26,600 Current portion of capital lease obligations .. 224 Current portion of long-term debt ............. 8,250 Accounts payable and accrued expenses ......... 4,772 Income taxes payable .......................... 2,658 -------- Total current liabilities ................. 42,504 -------- Long term debt ..................................... 15,238 Deferred income taxes .............................. 1,628 Capital lease obligations .......................... 364 -------- Total liabilities ......................... 59,734 -------- Commitments and contingencies Series A convertible preferred stock ............... 42 Additional paid-in capital ......................... 41,739 Shareholders' equity: Common stock .................................. 446 Additional paid-in capital .................... 17,492 Retained earnings ............................. 5,814 -------- Total shareholders' equity ................ 23,752 -------- Total liabilities and shareholders' equity $125,267 ======== The accompanying notes are an integral part of these condensed consolidated financial statements
2 MAGELLA HEALTHCARE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED MARCH 31, -------------------------- 2001 2000 ------- ------- (IN THOUSANDS) Net patient service revenue .................................... $23,507 $17,977 Operating expenses: Salaries and benefits ....................................... 13,808 10,780 Supplies and other operating expenses ....................... 2,010 1,708 Depreciation and amortization ............................... 1,683 1,526 ------- ------- Total operating expenses .............................. 17,501 14,014 ------- ------- Income from operations ................................ 6,006 3,963 Interest expense, net .......................................... 840 886 ------- ------- Income before income taxes ............................ 5,166 3,077 Income tax provision ........................................... 2,170 1,292 ------- ------- Net income ................................................ $ 2,996 $ 1,785 ======= ======= The accompanying notes are an integral part of these condensed consolidated financial statements 2
3 MAGELLA HEALTHCARE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED MARCH 31, ---------------------------- 2001 2000 -------- -------- (IN THOUSANDS) Cash flows from operating activities: Net income ............................................................... $ 2,996 $ 1,785 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization ........................................ 1,683 1,526 Debt issuance amortization ........................................... 40 37 Changes in assets and liabilities: Accounts receivable ............................................. 1,317 212 Prepaid expenses and other current assets ....................... (648) 90 Accounts payable and accrued expenses ........................... (2,881) (1,118) Income taxes payable ........................................... 1,074 683 -------- -------- Net cash provided from operating activities ................. 3,581 3,215 -------- -------- Cash flows from investing activities: Physician group acquisition payments ..................................... (3,350) (7,120) Purchase of property and equipment ....................................... (448) (334) -------- -------- Net cash used in investing activities ....................... (3,798) (7,454) -------- -------- Cash flows from financing activities: Redemption of common stock from stockholder .............................. -- (788) Proceeds from long-term debt ............................................. 12,400 6,900 Payments on long-term debt ............................................... (11,100) (1,528) Payments of capital lease obligations .................................... (86) (85) -------- -------- Net cash provided from financing activities ................. 1,214 4,499 -------- -------- Net increase in cash and cash equivalents ..................................... 997 260 Cash and cash equivalents at beginning of period .............................. -- 478 -------- -------- Cash and cash equivalents at end of period .................................... $ 997 $ 738 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements 3
4 MAGELLA HEALTHCARE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 (UNAUDITED) 1. BASIS OF PRESENTATION: The accompanying unaudited condensed consolidated financial statements of MAGELLA Healthcare Corporation (the "Company" or "Magella") 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 months ended March 31, 2001 are not necessarily indicative of the results of operations to be expected for the year ended December 31, 2001. 2. BUSINESS ACQUISITIONS: In January 2001, the Company completed the acquisition of a neonatology group practice. Total consideration and related costs for this acquisition approximated $4.5 million, consisting of $3.2 million in cash and $1.3 million in convertible subordinated notes. The Company accounts for acquisitions using the purchase method of accounting and the excess of cost over fair value of net assets acquired is amortized on a straight-line basis over 25 years. The results of operations of acquired practices have been included in the consolidated financial statements from the dates of acquisition. 3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following: MARCH 31, 2001 ---------------- (IN THOUSANDS) Accounts payable ................. $ 790 Accrued salaries and bonuses ..... 1,136 Accrued payroll taxes and benefits 1,279 Other accrued expenses ........... 1,567 ------ $4,772 ====== 4. CONVERTIBLE SUBORDINATED NOTES In January 2001, the Company retired $1.6 million of 6% convertible subordinated notes which were initially due on December 31, 2003. 5. SUBSEQUENT EVENTS On May 8, 2001, holders of $5 million of 3% convertible subordinated notes elected to convert their notes into 5 million shares of Magella common stock. On May 14, 2001 the Company accelerated the vesting of all outstanding stock options. As a result the Company incurred compensation expense of approximately $12 million. On May 15, 2001, the Company completed its merger with Pediatrix Medical Group, Inc. ("Pediatrix") which was previously announced on February 15, 2001. 4
5 MAGELLA HEALTHCARE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (UNAUDITED) Under the terms of the merger agreement, Pediatrix issued approximately 7.3 million shares of Pediatrix common stock in exchange for all outstanding shares of Maqella capital stock (including shares of Magella non-voting common stock that were issued upon the exercise immediately prior to the merger of substantially all outstanding warrants of Magella), and assumed certain obligations to issue up to 1.39 million shares of Pediatrix common stock pursuant to Magella stock option plans. Pediatrix also guaranteed approximately $16.0 million of Magella's convertible subordinated notes which are convertible into approximately 600,000 shares of Pediatrix common stock. Additionally, Pediatrix repaid approximately $23.5 million of Magella's bank debt and approximately $2,446,000 of Magella's convertible subordinated notes in connection with the merger. 5
1 EXHIBIT 99.2 PEDIATRIX MEDICAL GROUP, INC. AND MAGELLA HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS On May 15, 2001, Pediatrix Medical Group, Inc. ("Pediatrix") and Magella Healthcare Corporation ("Magella") completed their previously announced merger pursuant to the Agreement and Plan of Merger dated as of February 14, 2001 among Pediatrix, Infant Acquisition Corp., a wholly owned subsidiary of Pediatrix ("Infant Acquisition"), and Magella. Infant Acquisition was merged with and into Magella with Magella surviving the merger as a wholly owned subsidiary of Pediatrix. Both Pediatrix and Magella, through their respective subsidiaries and affiliated physician groups, provide neonatal and perinatal physician services in the United States. The following unaudited pro forma condensed combined consolidated financial statements have been prepared to illustrate the effects of the merger on the historical financial position and operation results of Pediatrix using the purchase method of accounting. The following unaudited pro forma condensed combined consolidated balance sheet as of March 31, 2001 gives effect to the merger as if it occurred as of that date. The following unaudited pro forma condensed combined consolidated statement of income for the three months ended March 31, 2001 gives effect to the merger as if it had occurred as of January 1, 2001. The pro forma information is based upon, and should be read in conjunction with, the historical consolidated financial statements of Pediatrix and the historical consolidated financial statements of Magella, including the accompanying notes thereto. For Pediatrix, those financial statements are incorporated by reference to Pediatrix's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, and Pediatrix's Annual Report on Form 10-K for the year ended December 31, 2000, as amended. For Magella, those financial statements are included in Item 7(a) of this Current Report on Form 8-K/A and incorporated by reference to Pediatrix's Registration Statement on Form S-4, as amended (Registration No. 333-57164). The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the consolidated financial position or consolidated results of operations that would have been reported had the merger occurred on the dates indicated, nor does this pro forma information represent a forecast of the consolidated financial position at any future date or the consolidated results of operations for any future period. No effect has been given in the unaudited pro forma condensed combined consolidated statement of income for costs that may be incurred in integrating the operations of the two companies. 1
2 PEDIATRIX MEDICAL GROUP, INC. AND MAGELLA HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2001 (IN THOUSANDS, UNAUDITED) HISTORICAL HISTORICAL PRO FORMA PEDIATRIX MAGELLA ADJUSTMENTS AS ADJUSTED ------------- -------------- --------------- -------------- ASSETS Current assets: Cash $ 1,756 $ 997 $ -- $ 2,753 Accounts receivable, net 67,086 11,867 -- 78,953 Prepaid expenses 906 1,032 -- 1,938 Other current assets 917 5,673 (5,673) (b) 917 ------------ -------------- --------------- -------------- Total current assets 70,665 19,569 (5,673) 84,561 Property and equipment, net 10,024 4,029 -- 14,053 Other assets, net 239,384 101,669 106,545 (a10) 447,598 ------------ -------------- --------------- -------------- Total assets $ 320,073 $ 125,267 $ 100,872 $ 546,212 ============ ============== =============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Line of credit $ 15,800 $ 26,600 $ 2,446 (c) $ 44,846 Current portion of long-term debt -- 8,250 (5,000) (a8) 3,250 Current portion of capital lease obligations -- 224 -- 224 Accounts payable and accrued expenses 28,260 4,772 1,750 (a4) 38,682 1,520 (a6) 500 (a7) 1,880 (a9) Income taxes payable 8,059 2,658 -- 10,717 Deferred income taxes 10,538 -- (5,673) (b) 4,865 ------------ -------------- --------------- -------------- Total current liabilities 62,657 42,504 (2,577) 102,584 Long-term debt -- 15,238 (2,446) (c) 12,792 Deferred income taxes 7,512 1,628 -- 9,140 Capital lease obligations -- 364 -- 364 Deferred compensation 3,899 -- -- 3,899 ------------ -------------- --------------- -------------- Total liabilities 74,068 59,734 (5,023) 128,779 ------------ -------------- --------------- -------------- Convertible preferred stock -- 41,781 (41,781) (a5) -- Shareholder's equity: Common stock 159 446 (446) (a5) 232 71 (a1) 2 (a2) Additional paid-in capital 136,041 17,492 (17,492) (a5) 307,396 147,849 (a1) 4,574 (a2) 18,932 (a3) Retained earnings 109,805 5,814 (5,814) (a5) 109,805 ------------ -------------- --------------- -------------- Total stockholders' equity 246,005 23,752 147,676 417,433 ------------ -------------- --------------- -------------- Total liabilities and shareholders' equity $ 320,073 $ 125,267 $ 100,872 $ 546,212 ============ ============== =============== ============== 2
3 PEDIATRIX MEDICAL GROUP, INC. AND MAGELLA HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2001 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNAUDITED) HISTORICAL HISTORICAL PRO FORMA PEDIATRIX MAGELLA ADJUSTMENTS AS ADJUSTED ---------------- -------------- -------------- ------------- Net revenue $ 63,920 $ 23,507 $ -- $ 87,427 ---------------- -------------- -------------- ------------- Cost and expenses: Salaries and benefits 46,480 13,808 -- 60,288 Supplies and other operating expenses 6,857 2,010 -- 8,867 Depreciation and amortization 3,578 1,683 1,066 (d) 6,327 ---------------- -------------- -------------- ------------- Total operating expenses 56,915 17,501 1,066 75,482 ---------------- -------------- -------------- ------------- Operating income 7,005 6,006 (1,066) 11,945 Interest expense, net 452 840 (38) (e) 1,254 ---------------- -------------- -------------- ------------- Income before tax 6,553 5,166 (1,028) 10,691 Provision for income taxes 2,949 2,170 16 (e) 5,135 ---------------- -------------- -------------- ------------- Net income $ 3,604 $ 2,996 $ (1,013) $ 5,587 ================ ============== ============== ============= Per share data: Net income per common and common equivalent share: Basic $ 0.23 $ 0.24 ================ ============= Diluted $ 0.22 $ 0.23 (g) ================ ============= Weighted average shares used in computing net income per common and common equivalent share: Basic 15,895 7,293 (f) 23,188 ================ ============== ============= Diluted 16,692 8,210 (f) 24,902 ================ ============== ============= 3
4 PEDIATRIX MEDICAL GROUP, INC. AND MAGELLA HEALTHCARE CORPORATION NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS The purchase price for Magella pursuant to the Merger Agreement is comprised of the following: o Pediatrix issued 7,074,100 shares of its common stock in exchange for all the outstanding shares of Magella common and preferred stock. In the merger, holders of outstanding shares of Magella stock received one-thirteenth of a share of Pediatrix common stock for each outstanding share of Magella common stock that they held or each share of Magella common stock into which outstanding shares of other classes or series of Magella stock that they held were convertible immediately prior to the merger. o Pediatrix issued 218,699 shares of its common stock in exchange for shares of Magella nonvoting common stock issued immediately prior to the merger upon the previously agreed, cashless exercise of certain outstanding Magella warrants. The cashless exercise was based upon the average daily closing price of Pediatrix common stock for the five consecutive trading days immediately preceding May 15, 2001, the effective date of the merger, which average price was $26.91. o Pursuant to the merger agreement, each outstanding option to purchase Magella common stock that was issued by Magella and not exercised at the effective time of the merger became an option to purchase the number of shares of Pediatrix common stock equal to one-thirteenth of the number of shares of Magella common stock which could have been obtained immediately before the effective time of the merger upon the exercise of the option. The exercise price of each such option per share of Pediatrix common stock equals the exercise price per share of Magella common stock subject to the option immediately before the effective date of the merger multiplied by 13. All Magella stock options issued prior to the date of the merger agreement became vested immediately prior to the effective date of the merger. The pro forma adjustments for the transaction are as follows: (a) To record the purchase price for Magella paid by Pediatrix. For purposes of the pro forma financial information, the value of Pediatrix common stock issued in the merger is based on the average of the closing prices of the Pediatrix common stock as quoted on the New York Stock Exchange for the two trading days prior to and the two days after the announcement of the merger. Such average amount was $20.91 per share. In addition, the estimated fair value of the obligation to furnish Pediatrix common stock upon the exercise of Magella stock options after the merger was based on the Black-Scholes option pricing model. For purposes of the unaudited pro forma condensed combined consolidated financial statements, the purchase price has been allocated as follows (in thousands): (1) Fair value of Pediatrix common stock issued for the outstanding stock of Magella (approximately 7.1 million shares).............. $147,920 (2) Fair value of Pediatrix common stock issued or to be issued for Magella nonvoting common stock issued immediately prior to the merger upon the previously agreed, cashless exercise of certain outstanding Magella warrants (approximately 219,000 shares).................... 4,576 4
5 (3) Fair value of Magella options for approximately 1,389,000 shares of Pediatrix common stock to be issued upon exercise............................................ 18,932 (4) Estimated direct transaction costs....................... 1,750 -------- Total purchase price..................................... $173,178 ======== Allocation of the purchase price: (5) Net book value of Magella (including convertible preferred stock) (Pediatrix management believes that the book value of assets acquired, except goodwill, and liabilities assumed approximates fair value)............................................... $65,533 (6) Adjust liabilities for employment severance (determined based upon contractual commitments as a result of the change in control)............................................... (1,520) (7) Adjust liabilities for office closure and relocation (costs associated with the closure of Magella's corporate office and the relocation of staff and office equipment as determined by Pediatrix management in accordance with EITF 95-3)................................ (500) (8) Adjust current portion of long-term debt to reflect conversion of certain of Magella's subordinated convertible notes....... 5,000 (9) Accrue for Magella transaction costs and other expenses... (1,880) (10) Goodwill.................................................. 106,545 -------- Total..................................................... $173,178 ======== Pediatrix is in the process of identifying the fair values of tangible assets acquired. It is expected that the remaining excess cost will be recorded as goodwill and amortized over a period of 25 years. Pediatrix does not believe that there will be any significant intangible assets recorded, other than goodwill, as a result of the transaction. (b) To reclassify deferred tax assets on the consolidated balance sheet of Magella to a net deferred tax liability for Pediatrix. (c) Certain of Magella's subordinated convertible notes contain provisions giving their holders an option to accelerate payment of such debt upon the occurrence of certain events, including the merger. As a result of the merger, the holders of approximately $2,446,000 in convertible notes elected to accelerate the payment of such debt. Pediatrix used funds available under its existing line of credit to repay these subordinated convertible notes. (d) To record the amortization of the excess of cost over net assets acquired resulting from the allocation of the purchase price over the estimated fair value of tangible assets acquired. The pro forma adjustments assume a 25-year amortization period. Such amortization will not be deductible for tax purposes. (e) To record the interest savings as a result of the conversion of certain of Magella's subordinated convertible notes. (f) The weighted average number of shares of Pediatrix common stock to be issued in connection with the transaction. The outstanding shares used in the diluted net income per share calculation includes the weighted average number of shares of Pediatrix common stock to be issued upon the conversion of the Magella convertible subordinated notes. (g) The calculation of diluted net income per share includes the reversal of interest expense, net of tax, recorded on the Magella convertible subordinated notes of approximately $137,000. 5