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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 001-12111

 

Mednax, Inc.

(Exact name of registrant as specified in its charter)

 

 

Florida

 

26-3667538

(State or other jurisdiction of

Incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1301 Concord Terrace

Sunrise, Florida

 

33323

(Address of principal executive offices)

 

(Zip Code)

(954) 384-0175

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock, par value $.01 per share

 

MD

 

New York Stock Exchange

 

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 for 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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☐

On July 30, 2021, the registrant had outstanding 86,306,731 shares of Common Stock, par value $.01 per share.

 

 

 


 

Mednax, Inc.

 

INDEX

 

 

Page

PART I - FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

3

 

 

 

 

Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 (Unaudited)

3

 

 

 

 

Consolidated Statements of Income for the Three and Six Months Ended

June 30, 2021 and 2020 (Unaudited)

4

 

 

 

 

Consolidated Statements of Equity for the Three and Six Months Ended

June 30, 2021 and 2020 (Unaudited)

5

 

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended

June 30, 2021 and 2020 (Unaudited)

6

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

7

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

13

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

22

 

 

 

Item 4.

Controls and Procedures

22

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

23

 

 

 

Item 1A.

Risk Factors

23

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

23

 

 

 

Item 6.

Exhibits

24

 

 

 

SIGNATURES

25

 

2


 

Mednax, Inc.

Consolidated Balance Sheets

(in thousands)

(Unaudited)

 



 

June 30, 2021

 

 

December 31, 2020

 

ASSETS

 



 

 



 

Current assets:

 



 

 



 

Cash and cash equivalents

 

$

338,157

 

 

$

1,123,843

 

Short-term investments

 

 

100,763

 

 

 

104,870

 

Accounts receivable, net

 

 

248,055

 

 

 

241,931

 

Prepaid expenses

 

 

18,896

 

 

 

16,898

 

Income taxes receivable

 

 

29,055

 

 

 

Other current assets

 

 

17,387

 

 

 

61,806

 

Total current assets

 

 

752,313

 

 

 

1,549,348

 

Property and equipment, net

 

 

68,481

 

 

 

76,191

 

Goodwill

 

 

1,487,105

 

 

 

1,477,968

 

Intangible assets, net

 

 

19,989

 

 

 

26,642

 

Operating and finance lease right-of-use assets

 

 

56,508

 

 

 

55,972

 

Deferred income tax assets

 

 

56,329

 

 

 

54,472

 

Other assets

 

 

114,405

 

 

 

107,355

 

Total assets

 

$

2,555,130

 

 

$

3,347,948

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

329,918

 

 

$

423,183

 

Current portion of finance lease liabilities

 

 

2,339

 

 

 

2,219

 

Current portion of operating lease liabilities

 

 

18,848

 

 

 

18,933

 

Total current liabilities

 

 

351,105

 

 

 

444,335

 

Long-term debt and finance lease liabilities, net

 

 

996,643

 

 

 

1,742,586

 

Long-term operating lease liabilities

 

 

39,977

 

 

 

40,970

 

Long-term professional liabilities

 

 

267,319

 

 

 

265,274

 

Deferred income tax liabilities

 

 

48,428

 

 

 

61,746

 

Other liabilities

 

 

42,534

 

 

 

45,320

 

Total liabilities

 

 

1,746,006

 

 

 

2,600,231

 

Commitments and contingencies

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

Preferred stock; $.01 par value; 1,000 shares authorized; none issued

 

 

 

 

 

Common stock; $.01 par value; 200,000 shares authorized; 86,337 and 85,593 shares
   issued and outstanding, respectively

 

 

863

 

 

 

856

 

Additional paid-in capital

 

 

1,039,231

 

 

 

1,029,453

 

Accumulated other comprehensive income

 

 

2,513

 

 

 

3,530

 

Retained deficit

 

 

(233,701

)

 

 

(286,354

)

Total Mednax, Inc. shareholders’ equity

 

 

808,906

 

 

 

747,485

 

Noncontrolling interest

 

 

218

 

 

 

232

 

Total equity

 

 

809,124

 

 

 

747,717

 

Total liabilities and equity

 

$

2,555,130

 

 

$

3,347,948

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

3


 

Mednax, Inc.

Consolidated Statements of Income

(in thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net revenue

 

$

472,959

 

 

$

415,441

 

 

$

919,712

 

 

$

856,686

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Practice salaries and benefits

 

 

317,035

 

 

 

282,985

 

 

 

636,047

 

 

 

599,264

 

Practice supplies and other operating expenses

 

 

24,182

 

 

 

20,173

 

 

 

46,394

 

 

 

44,015

 

General and administrative expenses

 

 

70,968

 

 

 

60,488

 

 

 

137,484

 

 

 

127,930

 

Gain on sale of building

 

 

(7,280

)

 

 

 

 

 

(7,280

)

 

 

 

Depreciation and amortization

 

 

8,106

 

 

 

6,751

 

 

 

16,137

 

 

 

13,554

 

Transformational and restructuring related expenses

 

 

9,932

 

 

 

10,479

 

 

 

14,810

 

 

 

26,555

 

Total operating expenses

 

 

422,943

 

 

 

380,876

 

 

 

843,592

 

 

 

811,318

 

Income from operations

 

 

50,016

 

 

 

34,565

 

 

 

76,120

 

 

 

45,368

 

Investment and other income

 

 

4,176

 

 

 

3,576

 

 

 

10,143

 

 

 

2,530

 

Interest expense

 

 

(16,879

)

 

 

(28,265

)

 

 

(34,524

)

 

 

(55,930

)

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

(14,532

)

 

 

 

Equity in earnings of unconsolidated affiliate

 

 

577

 

 

 

305

 

 

 

1,072

 

 

 

799

 

Total non-operating expenses

 

 

(12,126

)

 

 

(24,384

)

 

 

(37,841

)

 

 

(52,601

)

Income (loss) from continuing operations before income taxes

 

 

37,890

 

 

 

10,181

 

 

 

38,279

 

 

 

(7,233

)

Income tax provision

 

 

(7,363

)

 

 

(3,097

)

 

 

(2,408

)

 

 

(4,182

)

Income (loss) from continuing operations

 

 

30,527

 

 

 

7,084

 

 

 

35,871

 

 

 

(11,415

)

Income (loss) from discontinued operations, net of tax

 

 

4,478

 

 

 

(679,520

)

 

 

16,768

 

 

 

(679,733

)

Net income (loss)

 

 

35,005

 

 

 

(672,436

)

 

 

52,639

 

 

 

(691,148

)

Net loss attributable to noncontrolling interest

 

 

6

 

 

 

 

 

 

14

 

 

 

 

Net income (loss) attributable to Mednax, Inc.

 

$

35,011

 

 

$

(672,436

)

 

$

52,653

 

 

$

(691,148

)

Per common and common equivalent share data:

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.36

 

 

$

0.08

 

 

$

0.42

 

 

$

(0.14

)

Diluted

 

$

0.36

 

 

$

0.08

 

 

$

0.42

 

 

$

(0.14

)

Income (loss) from discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.05

 

 

$

(8.14

)

 

$

0.20

 

 

$

(8.18

)

Diluted

 

$

0.05

 

 

$

(8.11

)

 

$

0.19

 

 

$

(8.18

)

Net income (loss) attributable to Mednax, Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.41

 

 

$

(8.06

)

 

$

0.62

 

 

$

(8.32

)

Diluted

 

$

0.41

 

 

$

(8.03

)

 

$

0.61

 

 

$

(8.32

)

Weighted average common shares:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

84,912

 

 

 

83,490

 

 

 

84,660

 

 

 

83,061

 

Diluted

 

 

85,933

 

 

 

83,744

 

 

 

85,653

 

 

 

83,061

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

4


 

Mednax, Inc.

Consolidated Statements of Equity

(in thousands)

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

 

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Retained

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit1

 

 

Equity

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2021

 

 

85,593

 

 

$

856

 

 

$

1,029,453

 

 

$

3,530

 

 

$

(286,122

)

 

$

747,717

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,642

 

 

 

17,642

 

Net loss attributable to noncontrolling interest (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

(8

)

Unrealized holding loss on investments, net of tax

 

 

 

 

 

 

 

 

 

 

 

(1,133

)

 

 

 

 

 

(1,133

)

Common stock issued under employee stock option,
   employee stock purchase plan and stock purchase plan

 

 

52

 

 

 

 

 

 

1,042

 

 

 

 

 

 

 

 

 

1,042

 

Issuance of restricted stock

 

 

660

 

 

 

7

 

 

 

(7

)

 

 

 

 

 

 

 

 

 

Forfeitures of restricted stock

 

 

(13

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,717

 

 

 

 

 

 

 

 

 

3,717

 

Repurchased common stock

 

 

(82

)

 

 

(1

)

 

 

(1,993

)

 

 

 

 

 

 

 

 

(1,994

)

Balance at March 31, 2021

 

 

86,210

 

 

$

862

 

 

$

1,032,212

 

 

$

2,397

 

 

$

(268,488

)

 

$

766,983

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,011

 

 

 

35,011

 

Net loss attributable to noncontrolling interest (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6

)

 

 

(6

)

Unrealized holding gain on investments, net of tax

 

 

 

 

 

 

 

 

 

 

 

116

 

 

 

 

 

 

116

 

Common stock issued under employee stock option,
   employee stock purchase plan and stock purchase plan

 

 

71

 

 

 

1

 

 

 

1,535

 

 

 

 

 

 

 

 

 

1,536

 

Issuance of restricted stock

 

 

69

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Forfeitures of restricted stock

 

 

(5

)

 

 

(1

)

 

 

1

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,735

 

 

 

 

 

 

 

 

 

5,735

 

Repurchased common stock

 

 

(8

)

 

 

 

 

 

(251

)

 

 

 

 

 

 

 

 

(251

)

Balance at June 30, 2021

 

 

86,337

 

 

$

863

 

 

$

1,039,231

 

 

$

2,513

 

 

$

(233,483

)

 

$

809,124

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2020

 

 

84,248

 

 

$

842

 

 

$

987,942

 

 

$

78

 

 

$

510,134

 

 

$

1,498,996

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,712

)

 

 

(18,712

)

Unrealized holding loss on investments, net of tax

 

 

 

 

 

 

 

 

 

 

 

(213

)

 

 

 

 

 

(213

)

Common stock issued under employee stock option,
   employee stock purchase plan and stock purchase plan

 

 

78

 

 

 

1

 

 

 

1,831

 

 

 

 

 

 

 

 

 

1,832

 

Issuance of restricted stock

 

 

968

 

 

 

10

 

 

 

(10

)

 

 

 

 

 

 

 

 

 

Forfeitures of restricted stock

 

 

(19

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

8,035

 

 

 

 

 

 

 

 

 

8,035

 

Repurchased common stock

 

 

(125

)

 

 

(1

)

 

 

(2,541

)

 

 

 

 

 

 

 

 

(2,542

)

Balance at March 31, 2020

 

 

85,150

 

 

$

852

 

 

$

995,257

 

 

$

(135

)

 

$

491,422

 

 

$

1,487,396

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(672,436

)

 

 

(672,436

)

Unrealized holding gain on investments, net of tax

 

 

 

 

 

 

 

 

 

 

 

2,078

 

 

 

 

 

 

2,078

 

Common stock issued under employee stock option,
   employee stock purchase plan and stock purchase plan

 

 

277

 

 

 

3

 

 

 

2,541

 

 

 

 

 

 

 

 

 

2,544

 

Issuance of restricted stock

 

 

200

 

 

 

2

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

Forfeitures of restricted stock

 

 

(57

)

 

 

(1

)

 

 

1

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,489

 

 

 

 

 

 

 

 

 

7,489

 

Repurchased common stock

 

 

(34

)

 

 

(1

)

 

 

(500

)

 

 

 

 

 

 

 

 

(501

)

Balance at June 30, 2020

 

 

85,536

 

 

$

855

 

 

$

1,004,786

 

 

$

1,943

 

 

$

(181,014

)

 

$

826,570

 

 

(1)
Presented within retained earnings on the consolidated balance sheet as the balance is immaterial.

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

 

5


 

Mednax, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

52,653

 

 

$

(691,148

)

(Income) loss from discontinued operations

 

 

(16,768

)

 

 

679,733

 

Adjustments to reconcile net income (loss) to net cash from operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

16,137

 

 

 

13,554

 

Amortization of premiums, discounts and issuance costs

 

 

1,838

 

 

 

2,785

 

Loss on early extinguishment of debt

 

 

14,532

 

 

 

 

Stock-based compensation expense

 

 

9,452

 

 

 

13,174

 

Deferred income taxes

 

 

(17,033

)

 

 

37,896

 

Other

 

 

(1,205

)

 

 

(855

)

Gain on sale of building

 

 

(7,280

)

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(26,005

)

 

 

29,735

 

Prepaid expenses and other current assets

 

 

40,800

 

 

 

(1,913

)

Other long-term assets

 

 

(1,859

)

 

 

1,186

 

Accounts payable and accrued expenses

 

 

(54,453

)

 

 

(114,543

)

Income taxes receivable

 

 

(28,165

)

 

 

(70,487

)

Long-term professional liabilities

 

 

(715

)

 

 

17,797

 

Other liabilities

 

 

(10,413

)

 

 

27,585

 

Net cash used in operating activities – continuing operations

 

 

(28,484

)

 

 

(55,501

)

Net cash (used in) provided by operating activities - discontinued operations

 

 

(117

)

 

 

102,052

 

Net cash (used in) provided by operating activities

 

 

(28,601

)

 

 

46,551

 

Cash flows from investing activities:

 

 

 

 

 

 

Acquisition payments, net of cash acquired

 

 

(7,207

)

 

 

(75

)

Purchases of investments

 

 

(8,355

)

 

 

(32,335

)

Proceeds from maturities or sales of investments

 

 

10,745

 

 </