MEDNAX third quarter net income increases 15.7% to $58.2 million

MEDNAX, Inc. (NYSE: MD), the national medical group specializing in neonatal, maternal-fetal, pediatric cardiology, other pediatric subspecialties and anesthesia physician services, today reported earnings per share of $1.19 for the three months ended September 30, 2011.

“We are especially pleased with our results for the third quarter and the continuation of our positive operating momentum”

MEDNAX's results from operations for the 2011 third quarter include revenue growth of 16.1 percent and operating income growth of 16.8 percent compared to the prior-year period.

"We are especially pleased with our results for the third quarter and the continuation of our positive operating momentum," said Roger J. Medel, M.D., Chief Executive Officer of MEDNAX. "The third quarter also demonstrates our continuing ability to effectively grow by acquiring well-established and well-recognized groups and integrating them in a way that advances our commitment to patient care, while achieving efficiencies through the delivery of administrative services to support our physicians and advanced practitioners."

For the three months ended September 30, 2011, MEDNAX generated net patient service revenue of $407.7 million up 16.1 percent from $351.1 million for the comparable prior-year period.

MEDNAX's revenue growth attributable to contributions from recently acquired practices was 11.1 percent, while same-unit revenue grew by 5.0 percent for the 2011 third quarter when compared to the 2010 third quarter.

Same-unit revenue growth from reimbursement-related factors was 3.1 percent for the 2011 third quarter, and was due principally to continued modest improvements in reimbursements received from third-party commercial payors as a result of the Company's ongoing contract renewal processes, partially offset by a shift in the mix of the Company's patients to those covered by lower-paying government programs. The percentage of services reimbursed under government programs increased 80 basis points for the 2011 third quarter, when compared with the prior-year period.

Same-unit revenue attributable to patient volume grew by 1.9 percent for the 2011 third quarter when compared to the prior-year period, driven by growth across all our specialties. For the 2011 third quarter, same-unit neonatal intensive care unit (NICU) patient days increased by 1.3 percent when compared to the prior-year period.

Operating income for the 2011 third quarter was $95.0 million, up 16.8 percent from $81.4 million for the prior-year period while operating margin improved by 13 basis points, to 23.3 percent, on a year-over-year comparison. MEDNAX's operating income growth continues to exceed revenue growth as the Company successfully integrates newly acquired physician group practices into its established operations infrastructure. For the 2011 third quarter, general and administrative expenses declined by 13 basis points as a percent of revenue, to 10.6 percent when compared to the prior-year period.

MEDNAX believes that comparisons of its net income and earnings per share for the three months and nine months ended September 30, 2011, to the 2010 periods are more meaningful if the three and nine month 2010 GAAP net income and earnings per share are presented on a non-GAAP basis by increasing the income tax provision (and decreasing net income) by $10.9 million, to exclude the impact from the favorable resolution of certain tax matters.

For the 2011 third quarter, MEDNAX's net income grew by 15.7 percent, to $58.2 million as compared to non-GAAP net income of $50.3 for the 2010 third quarter. GAAP net income was $61.3 million for the 2010 third quarter. Earnings per share was $1.19 for the three months ended September 30, 2011, based on a weighted average 48.9 million shares outstanding, which compares with non-GAAP earnings per share of $1.06 for the 2010 comparable period, based on a weighted average 47.5 million shares outstanding. GAAP earnings per share was $1.29 for the 2010 third quarter.

Through the first nine months of 2011, MEDNAX generated revenue of $1.18 billion, up 14.6 percent from $1.03 billion for the prior-year period. Operating income for the nine months ended September 30, 2011, grew by 16.2 percent to $263.9 million, up from $227.0 million for the first nine months of 2010. MEDNAX generated net income of $159.6 million, or $3.28 per share through September 30, 2011, based on a weighted average 48.7 million shares outstanding. This compares to the first nine months of 2010 when MEDNAX earned non-GAAP net income of $138.0 million, or $2.91 per share based on a weighted average 47.4 million shares outstanding. GAAP net income was $148.9 million, or $3.14 per share for the nine months ended September 30, 2010.

At September 30, 2011, MEDNAX had cash and cash equivalents of $35.7 million and net accounts receivable were $207.1 million. The Company had $50.0 million outstanding on its revolving credit facility at September 30, 2011. On October 24, 2011, MEDNAX announced that it has amended and restated its $350 million revolving credit facility into an expanded $500 million credit facility and also extended it to 2016. The Company plans to continue to use the credit facility as a funding source, in addition to cash flow, for future acquisitions as well as other corporate purposes.

For the 2011 third quarter, MEDNAX generated cash flow from operations of $100.1 million. Cash flow from operations for the nine months ended September 30, 2011, was $180.9 million, and the Company has used approximately $83.6 million to acquire physician group practices and to make contingent purchase price payments for previously completed acquisitions. The Company also used $96.5 million to reduce amounts outstanding under its revolving credit facility.

As of today, MEDNAX has announced the acquisition of eight physician group practices this year, including three providing maternal-fetal medicine services, two pediatric subspecialty groups, one neonatal, one pediatric cardiology, and one anesthesia group.

2011 Fourth Quarter Outlook

For the 2011 fourth quarter, MEDNAX expects that earnings will be in a range of $1.15 to $1.20 per share. This outlook assumes that total same-unit revenue for the three months ended December 31, 2011, will grow by 2 percent to 4 percent from the prior-year period. This same-unit growth forecast is expected to be evenly divided between patient volume growth across all MEDNAX physician specialties and net reimbursement growth, including improvements from commercial contract rates as well as variability in the mix of services reimbursed under commercial and government payor programs.