Pediatrix Medical (MD) 10-Q 2019 Q3 Quarterly report

Exhibit 99.1

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

Overview

On October 31, 2019, pursuant to the previously disclosed Securities Purchase Agreement, dated as of October 10, 2019, by and between MEDNAX Services, Inc., a Florida corporation (“MEDNAX Services”), and wholly-owned subsidiary MEDNAX, Inc., a Florida corporation (the “Company”), and FH MD Buyer, Inc., a Delaware corporation (“Buyer”) and affiliate of Frazier Healthcare Partners, the Company completed the divestiture of MedData Holding Co., a Delaware corporation (“MedData Holding”), and MedDirect Holding Co., a Delaware corporation (“MedDirect Holding” and together with MedData Holdings, the “Purchased Companies”). The Purchased Companies constitute the Company’s management services service line, which operates as MedData. The purchase consideration was comprised of $250 million in cash paid at closing, subject to certain net working capital assumptions, as well as economic consideration in an indirect holding company of Buyer, the value of which is contingent on both short and long-term performance of MedData. The maximum amount payable in respect of such economic consideration is $50 million. The fair value of this contingent consideration is not estimable at this time as the valuation of such consideration is currently in process.

The divestiture of MedData is considered a significant disposition for the Company. As a result, the Company prepared the accompanying unaudited pro forma condensed consolidated financial information in accordance with Article 11 of RegulationS-X.

The Company presented its operations for MedData as discontinued operations in its condensed consolidated financial statements included in the Company’s Form10-Q for the three and nine months ended September 30, 2019. The accompanying unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2019 and for the years ended December 31, 2018, 2017, and 2016 give effect to the divestiture of MedData as if it occurred on January 1, 2016. The accompanying unaudited pro forma condensed consolidated balance sheet gives effect to the divestiture of MedData as if it occurred on September 30, 2019, the end of the most recent period for which a balance sheet is required.

The accompanying unaudited pro forma condensed consolidated financial information should be read in conjunction with (i) the audited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form10-K for the year ended December 31, 2018, and (ii) the unaudited condensed consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” included in the Company’s Quarterly Report on Form10-Q for the three and nine months ended September 30, 2019.

The accompanying unaudited pro forma condensed consolidated financial information is presented based on assumptions, adjustments, and currently available information described in the accompanying notes and is intended for informational purposes only. The unaudited pro forma condensed consolidated financial information is not necessarily indicative of what the Company’s results of operations or financial condition would have been had the divestiture of MedData been completed on the dates assumed. In addition, it is not necessarily indicative of the Company’s future results of operations or financial condition.

MEDNAX, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 2019

(in thousands)

	As Reported		Pro Forma Adjustments			Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	28,890		25,200	(a)	$	54,090
Short-term investments		78,371		—			78,371
Accounts receivable, net		494,699		—			494,699
Prepaid expenses		20,937		—			20,937
Other current assets		19,939		—			19,939
Assets held for sale		322,465		(322,465	)(b)		—
Total current assets		965,301		(297,265	)		668,036
Property and equipment, net		93,731		—			93,731
Goodwill		2,634,874		—			2,634,874
Intangible assets, net		279,605		—			279,605
Operating leaseright-of-use assets		84,279		—			84,279
Other assets		232,871		—			232,871
Total assets	$	4,290,661		(297,265	)	$	3,993,396
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	441,972		—		$	441,972
Current portion of lease liabilities		23,611		—			23,611
Income taxes payable		4,763		—			4,763
Liabilities held for sale		30,444		(30,444	)(b)		—
Total current liabilities		500,790		(30,444	)		470,346
Line of credit		209,800		(209,800	)(a)		—
Long-term debt and finance lease liabilities, net		1,729,377		—			1,729,377
Long-term operating lease liabilities		65,287		—			65,287
Long-term professional liabilities		222,933		—			222,933
Deferred income taxes		61,207		—			61,207
Other liabilities		21,907		—			21,907
Total liabilities		2,811,301		(240,244	)		2,571,057
Commitments and contingencies
Total equity		1,479,360		(57,021	)(c)		1,422,339
Total liabilities and equity	$	4,290,661		(297,265	)	$	3,993,396

See notes to unaudited Pro Forma Condensed Consolidated Financial Statements.

MEDNAX, INC.

UNAUDTED PRO FORMA CONSDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Nine Months Ended September 30, 2019

(in thousands, except per share data)

	As Reported			Pro Forma Adjustments			Pro Forma
Net revenue	$	2,608,167			—		$	2,608,167
Operating expenses:
Practice salaries and benefits		1,860,810			—			1,860,810
Practice supplies and other operating expenses		80,757			—			80,757
General and administrative expenses		307,717			—			307,717
Depreciation and amortization		59,450			—			59,450
Transformational and restructuring related expenses		51,018			—			51,018
Goodwill impairment		1,449,215			—			1,449,215
Total operating expenses		3,808,967			—			3,808,967
(Loss) income from operations		(1,200,800	)		—			(1,200,800	)
Investment and other income		4,242			—			4,242
Interest expense		(91,704	)		5,680	(d)		(86,024	)
Equity in earnings of unconsolidated affiliates		5,475			—			5,475
Totalnon-operating expenses		(81,987	)		5,680			(76,307	)
(Loss) income from continuing operations before income taxes		(1,282,787	)		5,680			(1,277,107	)
Income tax benefit (provision)		99,710			(1,545	)(d)		98,165
(Loss) income from continuing operations		(1,183,077	)		4,135			(1,178,942	)
Income (loss) from discontinued operations, net of tax		(323,956	)		323,956	(e)		—
Net (loss) income	$	(1,507,033	)		328,091		$	(1,178,942	)
Per common and common equivalent share data:
(Loss) income from continuing operations:
Basic	$	(14.11	)	$	0.05		$	(14.06	)
Diluted	$	(14.11	)	$	0.05		$	(14.06	)
Income (loss) from discontinued operations:
Basic	$	3.86	)	$	3.86		$	—
Diluted	$	(3.86	)	$	3.86		$	—
Net (loss) income:
Basic	$	(17.97	)	$	3.91		$	(14.06	)
Diluted	$	(17.97	)	$	3.91		$	(14.06	)
Weighted average common shares:
Basic		83,846						83,846
Diluted		83,846						83,846

MEDNAX, INC.

UNAUDTED PRO FORMA CONSDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Year Ended December 31, 2018

(in thousands, except per share data)

	As Reported			Pro Forma Adjustments (f)			Pro Forma
Net revenue	$	3,647,123		$	(192,313	)	$	3,454,810
Operating expenses:
Practice salaries and benefits		2,535,588			(109,212	)		2,426,376
Practice supplies and other operating expenses		122,028			(13,177	)		108,851
General and administrative expenses		432,378			(28,444	)		403,934
Depreciation and amortization		111,281			(27,449	)		83,832
Total operating expenses		3,201,275			(178,282	)		3,022,993
Income from operations		445,848			(14,031	)		431,817
Investment and other income		4,935			276			5,211
Interest expense		(88,769	)		7,876	(d)		(80,893	)
Equity in earnings of unconsolidated affiliates		6,825			—			6,825
Totalnon-operating expenses		(77,009	)		8,152			(68,857	)
Income before income taxes		368,839			(5,879	)		362,960
Income tax provision		(100,210	)		1,609	(g)(d)		(98,601	)
Net income	$	268,629		$	(4,270	)	$	264,359
Per common and common equivalent share data:
Net income:
Basic		2.95		$	(0.05	)	$	2.90
Diluted		2.93		$	(0.04	)	$	2.89
Weighted average common shares:
Basic		91,104						91,104
Diluted		91,606						91,606

MEDNAX, INC.

UNAUDTED PRO FORMA CONSDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Year Ended December 31, 2017

(in thousands, except per share data)

	As Reported			Pro Forma Adjustments (f)			Pro Forma
Net revenue	$	3,458,312		$	(204,921	)	$	3,253,391
Operating expenses:
Practice salaries and benefits		2,337,734			(110,399	)		2,227,335
Practice supplies and other operating expenses		120,518			(14,074	)		106,444
General and administrative expenses		417,105			(31,241	)		385,864
Depreciation and amortization		102,879			(24,023	)		78,856
Total operating expenses		2,978,236			(179,737	)		2,798,499
Income from operations		480,076			(25,184	)		454,892
Investment and other income		3,953			432			4,385
Interest expense		(74,559	)		3			(74,556	)
Equity in earnings of unconsolidated affiliates		952			—			952
Totalnon-operating expenses		(69,654	)		435			(69,219	)
Income before income taxes		410,422			(24,749	)		385,673
Income tax provision		(90,050	)		9,819	(g)		(80,231	)
Net income	$	320,372		$	(14,930	)	$	305,442
Per common and common equivalent share data:
Net income:
Basic		3.47		$	(0.16	)	$	3.31
Diluted		3.45		$	(0.16	)	$	3.29
Weighted average common shares:
Basic		92,431						92,431
Diluted		92,958						92,958

MEDNAX, INC.

UNAUDTED PRO FORMA CONSDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Year Ended December 31, 2016

(in thousands, except per share data)

	As Reported			Pro Forma Adjustments (f)			Pro Forma
Net revenue	$	3,183,159		$	(141,349	)	$	3,041,810
Operating expenses:
Practice salaries and benefits		2,031,220			(73,579	)		1,957,641
Practice supplies and other operating expenses		118,416			(10,606	)		107,810
General and administrative expenses		372,572			(25,004	)		347,568
Depreciation and amortization		89,264			(15,083	)		74,181
Total operating expenses		2,611,472			(124,272	)		2,487,200
Income from operations		571,687			(17,077	)		554,610
Investment and other income		2,019			258			2,277
Interest expense		(63,092	)		41			(63,051	)
Equity in earnings of unconsolidated affiliates		3,185			—			3,185
Totalnon-operating expenses		(57,888	)		299			(57,589	)
Income before income taxes		513,799			(16,778	)		497,021
Income tax provision		(189,203	)		6,601	(g)		(182,602	)
Net income		324,596			(10,177	)		314,419
Net loss attributable to noncontrolling interests		318			—			318
Net income attributable to MEDNAX, Inc.	$	324,914		$	(10,177	)	$	314,737
Per common and common equivalent share data:
Net income attributable to MEDNAX, Inc.:
Basic	$	3.52		$	(0.11	)	$	3.41
Diluted	$	3.49		$	(0.11	)	$	3.38
Weighted average common shares:
Basic		92,422						92,422
Diluted		93,109						93,109

MEDNAX, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(a) Adjustment reflects the assets and liabilities of the MedData business, which were previously classified as held for sale.

(b) Adjustment reflects the use of cash proceeds from the sale of the MedData business, net of transaction expenses, to repay debt, to the extent debt was outstanding, with the remaining amount as excess cash. The Company did not include a pro forma asset for the contingent consideration payable to the Company as the fair value of such contingent consideration was not able to be estimated on the date of sale as the valuation of such contingent consideration was not yet complete.

(c) Adjustment reflects the estimated loss on the sale of the MedData business. Any change to the estimated loss on sale will be recorded upon completion of the valuation of the contingent consideration referred to in (b).

(d) Adjustment reflects the estimated decrease in interest expense from the use of net cash proceeds from the sale of the MedData business to repay debt and the related income tax impacts from such decrease in interest expense.

(e) Adjustment reflects the historical loss from discontinued operations, net of tax, associated with the MedData business.

(f) Adjustment reflects the discontinued operations of the MedData business, except as otherwise noted.

(g) Adjustment reflects the tax effects of the MedData business divestiture to achieve the pro forma tax for the continuing operations of MEDNAX, Inc.