MEDNAX first-quarter revenue increases 10% to $332.9 million

MEDNAX, Inc. (NYSE: MD) today reported non-GAAP earnings of 82 cents per share for the 2010 first quarter that was principally the result of revenue growth from acquisitions as well as operating efficiencies generated through the effective management of the Company's administrative infrastructure.

“Our most recent results reflect an organization that continues to grow, and, at the same time, applies its management resources to improve the efficiency of its existing clinical and administrative activities”

MEDNAX's non-GAAP earnings per share for the three months ended March 31, 2010 excludes the effect of certain tax-related reserves. On a GAAP basis, earnings per share were 81 cents for the period.

For the 2010 first quarter, compared to the prior year, MEDNAX reported:

• Revenue growth of 10 percent, to $332.9 million;
• Operating income growth of 12 percent to $63.6 million;
• Operating margin expansion of 46 basis points; and
• Non-GAAP net income growth of 13 percent to $38.6 million.

"Our most recent results reflect an organization that continues to grow, and, at the same time, applies its management resources to improve the efficiency of its existing clinical and administrative activities," said Roger J. Medel, M.D., Chief Executive Officer of MEDNAX. "We are encouraged by the continued interest of physician groups to practice as part of our national medical group, and that's reflected both in the transactions completed so far this year, as well as the ongoing strong interest among physicians considering joining us."

MEDNAX's net patient service revenue for the three months ended March 31, 2010, increased by 10 percent, to $332.9 million, from $303.9 million for the comparable 2009 period, largely as a result of contributions from acquisitions completed since the beginning of 2009.

For the 2010 first quarter, same-unit revenue increased by 2.2 percent, when compared to the prior-year period, as a result of reimbursement improvements, which were offset by lower same-unit patient volume.

Same-unit growth related to reimbursement factors was 2.5 percent and was driven by better reimbursement from commercial third-party payors. The percentage of patient services reimbursed under government programs increased by 295 basis points for the 2010 first quarter when compared against the prior-year period, or approximately 60 basis points when compared sequentially, or against the 2009 fourth quarter.

Total patient volume declined by 0.3 percent for the 2010 first quarter, compared to the 2009 first quarter, which included a reduction of 0.7 percent in same-unit neonatal intensive care unit (NICU) patient days, as well as a decline in patient volume at the Company's maternal-fetal practices. This was offset by same-unit patient volume growth in the Company's anesthesia and pediatric cardiology practices, as well as other pediatric specialty and hearing screen programs.

MEDNAX's income from operations for the 2010 first quarter was $63.6 million, up 12 percent from $56.6 million for the prior-year period. Operating margin improved by 46 basis points to 19.09 percent for the 2010 first quarter, when compared with the 2009 first quarter as a result of general and administrative expense management.

General and administrative expense growth of 4 percent for the 2010 first quarter was at a rate considerably slower than the rate of revenue growth due to the Company's ongoing expense management efforts, benefits from the timing of normal annual expenses, as well as administrative efficiencies related to the Company's anesthesia practices. During the 2009 second and third quarters, MEDNAX migrated billing and collections functions for two of its anesthesia practices from outsourced billing companies to administrative resources that were added as part of an anesthesia practice acquisition completed in late 2008.

For the 2010 first quarter, MEDNAX's effective tax rate was 39.5 percent as a result of an increase in reserves required for specific tax positions, an increase of 60 basis points from the 38.9 percent tax rate the Company anticipates for all of 2010.

Net income for the 2010 first quarter was $38.6 million, non-GAAP, up 13 percent from $34.1 million for the prior-year period. Earnings per share of 82 cents, non-GAAP, for the 2010 first quarter was based on a weighted average 47.3 million shares outstanding for the 2010 first quarter, an 11 percent increase from 74 cents per share, based on a weighted average 45.9 million shares outstanding, for the 2009 first quarter. On a GAAP basis, MEDNAX's net income was $38.3 million, or 81 cents per share, for the 2010 first quarter.

MEDNAX had cash and cash equivalents of $23.9 million at March 31, 2010, and net accounts receivable were $174.0 million. At the end of the 2010 first quarter the Company had $129.0 million outstanding on its $350 million revolving credit facility.

During the 2010 first quarter, MEDNAX used $41.6 million of its cash to fund operations, which compares with $22.0 million of cash used to fund operations for the 2009 first quarter. The Company typically has negative cash flow during the first quarter of each year as it pays incentive bonuses, principally to physicians, and employee benefit plan matching contributions that accrue during the prior year.

In addition, during the 2010 first quarter MEDNAX used $40.2 million of its cash for acquisitions and contingent purchase price payments for previously completed acquisitions. MEDNAX acquired three neonatal physician groups and one maternal-fetal medicine physician group practice during the 2010 first quarter.

Outlook

MEDNAX expects to earn $1.00 to $1.05 per share for the 2010 second quarter. The Company's outlook anticipates same-unit NICU patient volume to be flat, to as much as 1 percent higher for the 2010 second quarter, when compared with the 2009 second quarter. In addition, the Company's 2010 second quarter outlook assumes that the percentage of services reimbursed under government programs for the period will be as much as one percentage point higher to as much as one percentage point lower on a sequential basis, or when compared against the 2010 first quarter.

MEDNAX's outlook anticipates contributions from practice acquisitions within its neonatal, maternal-fetal, pediatric cardiology and other pediatric specialty physician services to contribute to 2010 second quarter earnings.

MEDNAX, Inc.,