QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of Incorporation or organization) |
(I.R.S. Employer Identification No.) | |
(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol |
Name of each exchange on which registered | ||
Accelerated filer |
☐ | |||||
☑ |
Non-accelerated filer |
☐ | ||||
Smaller reporting company |
Emerging growth company |
Page |
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PART I - FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
3 |
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3 |
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4 |
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5 |
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6 |
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7 |
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Item 2. |
14 |
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Item 3. |
22 |
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Item 4. |
22 |
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PART II - OTHER INFORMATION |
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Item 1. |
23 |
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Item 1A. |
23 |
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Item 2. |
24 |
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Item 6. |
25 |
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26 |
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March 31, 2020 |
December 31, 2019 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | |
$ | |
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Short-term investments |
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Accounts receivable, net |
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Prepaid expenses |
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Income taxes receivable |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Intangible assets, net |
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Operating lease right-of-use assets |
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Deferred income tax assets |
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Other assets |
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Total assets |
$ | |
$ | |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable and accrued expenses |
$ | |
$ | |
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Current portion of finance lease liabilities |
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Current portion of operating lease liabilities |
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Income taxes payable |
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Total current liabilities |
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Line of credit |
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Long-term debt and finance lease liabilities, net |
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Long-term operating lease liabilities |
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Long-term professional liabilities |
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Deferred income tax liabilities |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies |
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Shareholders’ equity: |
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Preferred stock; $ par value; |
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Common stock; $ par value; |
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Additional paid-in capital |
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Retained earnings |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
$ | |
$ | |
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Three Months Ended March 31, |
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2020 |
2019 |
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Net revenue |
$ | |
$ | |
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Operating expenses: |
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Practice salaries and benefits |
|
|
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Practice supplies and other operating expenses |
|
|
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General and administrative expenses |
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Depreciation and amortization |
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|
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Transformational and restructuring related expenses |
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Total operating expenses |
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Income from operations |
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Investment and other (expense) income |
( |
) | |
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Interest expense |
( |
) | ( |
) | ||||
Equity in earnings of unconsolidated affiliates |
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|
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Total non-operating expenses |
( |
) | ( |
) | ||||
(Loss) income from continuing operations before income taxes |
( |
) | |
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Income tax provision |
( |
) | ( |
) | ||||
(Loss) income from continuing operations |
( |
) | |
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Loss from discontinued operations, net of tax |
( |
) | ( |
) | ||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Per common and common equivalent share data: |
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(Loss) income from continuing operations: |
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Basic |
$ | ( |
) | $ | |
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Diluted |
$ | ( |
) | $ | |
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Loss from discontinued operations: |
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Basic |
$ | ( |
) | $ | ( |
) | ||
Diluted |
$ | ( |
) | $ | ( |
) | ||
Net loss: |
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Basic |
$ | ( |
) | $ | ( |
) | ||
Diluted |
$ | ( |
) | $ | ( |
) | ||
Weighted average common shares: |
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Basic |
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|
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Diluted |
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|
Common Stock |
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Number of Shares |
Amount |
Additional Paid-in Capital |
Retained Earnings |
Total Equity |
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2020 |
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Balance at January 1, 2020 |
$ | $ | $ | $ | ||||||||||||||||
Net loss |
— |
— |
— |
( |
) | ( |
) | |||||||||||||
Unrealized holding loss on investments, net of tax (1) |
— |
— |
— |
( |
) |
( |
) | |||||||||||||
Common stock issued under employee stock option, employee stock purchase plan and stock purchase plan |
— |
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Issuance of restricted stock |
( |
) | — |
— |
||||||||||||||||
Forfeitures of restricted stock |
( |
) | — |
— |
— |
— |
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Stock-based compensation expense |
— |
— |
— |
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Repurchased common stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Balance at March 31, 2020 |
$ | $ | $ | $ | ||||||||||||||||
2019 |
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Balance at January 1, 2019 |
$ | $ | $ | $ | ||||||||||||||||
Net loss |
— |
— |
— |
( |
) | ( |
) | |||||||||||||
Unrealized holding loss on investments, net of tax (1) |
— |
— |
— |
( |
) |
( |
) | |||||||||||||
Common stock issued under employee stock option, employee stock purchase plan and stock purchase plan |
— |
|||||||||||||||||||
Issuance of restricted stock |
( |
) | — |
— |
||||||||||||||||
Forfeitures of restricted stock |
( |
) | — |
— |
— |
— |
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Stock swaps |
( |
) | — |
( |
) | — |
( |
) | ||||||||||||
Stock-based compensation expense |
— |
— |
— |
|||||||||||||||||
Repurchased common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
Balance at March 31, 2019 |
$ | $ | $ | $ | ||||||||||||||||
(1) |
Presented within retained earnings on the consolidated balance sheet as the balance is immaterial. |
Three Months Ended March 31, |
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2020 |
2019 |
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Cash flows from operating activities: |
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Net income (loss) |
$ |
( |
) |
$ |
( |
) | ||
Loss from discontinued operations |
|
|
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Adjustments to reconcile net income to net cash from operating activities: |
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Depreciation and amortization |
|
|
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Amortization of premiums, discounts and issuance costs |
|
|
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Stock-based compensation expense |
|
|
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Deferred income taxes |
|
( |
) | |||||
Other |
( |
) | |
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Changes in assets and liabilities: |
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Accounts receivable |
|
( |
) | |||||
Prepaid expenses and other current assets |
|
|
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Other long-term assets |
|
|
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Accounts payable and accrued expenses |
( |
) | ( |
) | ||||
Income taxes payable |
( |
) | |
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Payments of contingent consideration liabilities |
( |
) | ( |
) | ||||
Long-term professional liabilities |
|
( |
) | |||||
Other liabilities |
( |
) | ( |
) | ||||
Net cash used in operating activities – continuing operations |
( |
) | ( |
) | ||||
Net cash provided by operating activities - discontinued operations |
|
|
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Net cash used in operating activities |
( |
) | ( |
) | ||||
Cash flows from investing activities: |
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Acquisition payments, net of cash acquired |
( |
) | ( |
) | ||||
Purchases of investments |
( |
) | |
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Proceeds from maturities or sales of investments |
|
|
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Purchases of property and equipment |
( |
) | ( |
) | ||||
Proceeds from sale of business |
|
|
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Net cash used in investing activities – continuing operations |
( |
) | ( |
) | ||||
Net cash used in investing activities - discontinued operations |
|
( |
) | |||||
Net cash used in investing activities |
( |
) | ( |
) | ||||
Cash flows from financing activities: |
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Borrowings on credit agreement |
|
|
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Payments on credit agreement |
( |
) | ( |
) | ||||
Proceeds from issuance of senior notes |
|
|
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Payments for credit facility amendment and financing costs |
( |
) | ( |
) | ||||
Payments of contingent consideration liabilities |
( |
) | ( |
) | ||||
Payments on finance lease obligations |
( |
) | ( |
) | ||||
Proceeds from issuance of common stock |
|
|
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Repurchases of common stock |
( |
) | ( |
) | ||||
Net cash provided from financing activities – continuing operations |
|
|
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Net cash provided from financing activities - discontinued operations |
|
|
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Net cash provided from financing activities |
|
|
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Net increase in cash and cash equivalents |
|
|
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Cash and cash equivalents at beginning of period |
|
|
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Less cash and cash equivalents of discontinued operations at end of period |
|
( |
) | |||||
Cash and cash equivalents of continuing operations at end of period |
$ | |
$ | |
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1. |
Basis of Presentation and New Accounting Pronouncements: |
2. |
Coronavirus Pandemic (“COVID-19”): |
3. |
Cash Equivalents and Investments: |
March 31, 2020 |
December 31, 2019 |
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Corporate securities |
$ | $ | ||||||
Municipal debt securities |
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Federal home loan securities |
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Certificates of deposit |
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$ | $ | |||||||
4. |
Fair Value Measurements: |
Fair Value |
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Fair Value Category |
March 31, 2020 |
December 31, 2019 |
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Assets: |
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Money market funds |
Level 1 |
$ | $ | |||||||||
Short-term investments |
Level 2 |
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Mutual Funds |
Level 1 |
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Liabilities: |
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Contingent consideration |
Level 3 |
March 31, 2020 |
December 31, 2019 |
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Carrying Amount |
Fair Value |
Carrying Amount |
Fair Value |
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Liabilities: |
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2023 Notes |
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2027 Notes |
5 . |
Accounts Receivable and Net Revenue: |
March 31, 2020 |
December 31, 2019 |
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Gross accounts receivable |
$ | $ | ||||||
Allowance for contractual adjustments and uncollectibles |
( |
) | ( |
) | ||||
$ | $ | |||||||
Three Months Ended March 31, |
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2020 |
2019 |
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Net patient service revenue |
$ | $ | ||||||
Hospital contract administrative fees |
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Other revenue |
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$ | $ | |||||||
Three Months Ended March 31, |
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2020 |
2019 |
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Contracted managed care |
% | % | ||||||
Government |
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Other third-parties |
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Private-pay patients |
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% | % | |||||||
6 . |
Discontinued Operations: |
7. |
Accounts Payable and Accrued Expenses: |
March 31, 2020 |
December 31, 2019 |
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Accounts payable |
$ | $ | ||||||
Accrued salaries and bonuses |
||||||||
Accrued payroll taxes and benefits |
||||||||
Accrued professional liabilities |
||||||||
Accrued contingent consideration |
||||||||
Accrued interest |
||||||||
Other accrued expenses |
||||||||
$ | $ | |||||||
8 |
Common and Common Equivalent Shares: |
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
Weighted average number of common shares outstanding |
|
|
||||||
Weighted average number of dilutive common share equivalents |
— |
|
||||||
Weighted average number of common and common (a) |
|
|
||||||
Antidilutive securities not included in the diluted calculation |
|
|
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(a) |
Due to a loss from continuing operations for the three months ended March 31, 2020, no incremental shares are included because the effect would be antidilutive. |
9 |
Stock Incentive Plans and Stock Purchase Plans: |
10 |
Common Stock Repurchase Programs: |
11 . |
Commitments and Contingencies: |
12. |
Subsequent Event: |
March 31, 2020 |
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Assets |
||||
Cash and cash equivalents |
$ |
|
||
Accounts receivable, net |
|
|||
Prepaid expenses and other assets |
|
|||
Property and equipment, net |
|
|||
Goodwill |
|
|||
Intangible assets, net |
|
|||
$ |
||||
Liabilities |
||||
Accounts payable and accrued expenses |
$ |
|
||
Accrued professional liabilities |
|
|||
Other liabilities |
|
|||
$ |
||||
• |
Clinician Shortage Support |
• |
Strengthening of Supply Chain |
• |
Expanded Virtual Care Offerings |
• |
Early Virus Detection Using Cutting-Edge Imaging Diagnostic Tools |
• |
Virtual Forum to Provide Clinician Support |
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
(Loss) income from continuing operations |
$ | (16,110 |
) | $ | 41,653 |
|||
Interest expense |
27,608 |
30,723 |
||||||
Income tax provision |
2,286 |
8,962 |
||||||
Depreciation and amortization |
18,673 |
20,033 |
||||||
Transformational and restructuring related expenses |
30,907 |
3,544 |
||||||
Adjusted EBITDA from continuing operations |
$ | 63,364 |
$ | 104,915 |
||||
Three Months Ended March 31, |
||||||||||||||||
2020 |
2019 |
|||||||||||||||
Weighted average diluted shares outstanding |
82,799 |
86,545 |
||||||||||||||
(Loss) income from continuing operations and diluted income from continuing operations per share |
||||||||||||||||
Adjustments (1) : |
$ | (16,110 |
) | $ | (0.20 |
) | $ | 41,653 |
$ | 0.48 |
||||||
Amortization (net of tax of $2,740 and $3,449) |
8,220 |
0.10 |
9,325 |
0.11 |
||||||||||||
Stock-based compensation (net of tax of $1,962 and $2,967) |
5,885 |
0.07 |
8,022 |
0.09 |
||||||||||||
Transformational and restructuring expenses (net of tax of $7,727 and $957) |
23,180 |
0.28 |
2,587 |
0.03 |
||||||||||||
Net impact from discrete tax events |
5,077 |
0.07 |
(4,791 |
) | (0.06 |
) | ||||||||||
Adjusted income and diluted EPS from continuing operations |
$ | 26,252 |
$ | 0.32 |
$ | 56,796 |
$ | 0.65 |
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(1) |
Effective tax rates of 25.0% and 27.0% were used to calculate the tax effects of the adjustments in March 31, 2020 and 2019, respectively. The effective tax rates used for the three months ended March 31, 2020 and 2019 exclude the impacts from discrete tax events. |
Three Months Ended March 31, |
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2020 |
2019 |
|||||||
Operating activities |
$ | (146,431 |
) | $ | (60,408 |
) | ||
Investing activities |
(20,220 |
) | (5,271 |
) | ||||
Financing activities |
366,039 |
66,664 |
Period |
Total Number of Shares Repurchased |
Average Price Paid per Share |
Total Number of Shares Purchased as part of the Repurchase Program |
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Repurchase Programs (a) |
||||||||||||
January 1 – January 31, 2020 |
40,150 |
(b) | $ | 27.17 |
— |
(a |
) | |||||||||
February 1 – February 29, 2020 |
— |
— |
— |
(a |
) | |||||||||||
March 1 – March 31, 2020 |
84,950 |
(b) | 17.09 |
— |
(a |
) | ||||||||||
Total |
125,100 |
$ | 20.33 |
— |
(a |
) |
(a) | We have two active repurchase programs. Our July 2013 program allows us to repurchase shares of our common stock up to an amount sufficient to offset the dilutive impact from the issuance of shares under our equity compensation programs, which is estimated to be approximately 1.4 million shares for 2020. Our August 2018 repurchase program allows us to repurchase up to an additional $500.0 million of shares of our common stock, of which we repurchased $395.3 million as of March 31, 2020. |
(b) | Represents shares withheld to satisfy minimum statutory withholding obligations of an aggregate of $2.5 million in connection with the vesting of restricted stock. |
Exhibit No. |
Description | |||
10.1+ |
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31.1+ |
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31.2+ |
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32.1* |
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101.1+ |
Interactive Data File | |||
101.INS+ |
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||
101.SCH+ |
XBRL Schema Document. | |||
101.CAL+ |
XBRL Calculation Linkbase Document. | |||
101.DEF+ |
XBRL Definition Linkbase Document. | |||
101.LAB+ |
XBRL Label Linkbase Document. | |||
101.PRE+ |
XBRL Presentation Linkbase Document. | |||
104+ |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
+ | Filed herewith. |
* | Furnished herewith. |
MEDNAX, INC. | ||||||
Date: May 7, 2020 |
By: |
/s/ Roger J. Medel, M.D. | ||||
Roger J. Medel, M.D. | ||||||
Chief Executive Officer | ||||||
(Principal Executive Officer) | ||||||
Date: May 7, 2020 |
By: |
/s/ Stephen D. Farber | ||||
Stephen D. Farber | ||||||
Chief Financial Officer | ||||||
(Principal Financial Officer) | ||||||
Date: May 7, 2020 |
By: |
/s/ John C. Pepia | ||||
John C. Pepia | ||||||
Chief Accounting Officer | ||||||
(Principal Accounting Officer) |