EX-99.1 6 d787099dex991.htm EX-99.1

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 Regulation S-X.

The Company presented its operations for MedData as discontinued operations in its condensed consolidated financial statements included in the Company’s Form 10-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 Form 10-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 Form 10-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 lease right-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 |
Total non-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 |
Total non-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 |
Total non-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 |
Total non-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.