MEDNAX, Inc. (NYSE: MD) today reported earnings per share of $1.04 for the three months ended June 30, 2010, that were driven by contributions resulting from the Company's acquisitions and ongoing operating efficiencies.
“We are excited about the progress we're making to build our national anesthesia group practice, as well as our ability to grow our organization in the near future through acquisitions across each of our physician specialties.”
For the 2010 second quarter, MEDNAX reported:
- Revenue growth of 9 percent from the prior-year period;
- Operating income growth of 10 percent, year-over-year; and
- Cash flow from operations of $91.7 million.
"We are posting solid financial results from operations for the second quarter and first half of the year that continue to reflect the successful execution of our strategy of acquiring physician groups and integrating them into our national medical group in a way that creates efficiencies in the delivery of patient care," said Roger J. Medel, M.D., Chief Executive Officer of MEDNAX. "We are excited about the progress we're making to build our national anesthesia group practice, as well as our ability to grow our organization in the near future through acquisitions across each of our physician specialties."
MEDNAX's revenue of $349.1 million for the three months ended June 30, 2010, increased by 9 percent from $319.8 million for the comparable prior-year period due largely to contributions from acquisitions. Same-unit revenue growth of 2.3 percent included continued growth from reimbursement-related factors of 2.7 percent, partially offset by lower overall same-unit patient volume of 0.4 percent. Same-unit patient volume at neonatal intensive care units (NICUs) staffed by physicians affiliated with MEDNAX was essentially unchanged for the 2010 second quarter when compared with the prior-year period.
Revenue growth from reimbursement-related factors included continued improvement from third-party commercial payors. In addition, the percentage of services reimbursed under government programs increased by 90 basis points during the 2010 second quarter, on a same-unit basis, when compared with the prior-year period. The Company's same-unit payor mix improved during the 2010 second quarter, with the percentage of services reimbursed under government programs during the second quarter declining by 150 basis points when compared sequentially to the 2010 first quarter.
Income from operations for the 2010 second quarter was $82.1 million, up 10 percent from $74.8 million for the 2009 second quarter.
General and administrative expenses as a percent of revenue declined to 11.2 percent for the 2010 second quarter, a 13-basis point improvement from the prior-year period, as a result of the Company's acquisitions and continued administrative efficiencies that include the integration of billing services related to the Company's anesthesia practices throughout last year. General and administrative expense improvement was offset slightly by normal annual expenses that occurred in the 2010 second quarter that in the prior year had been incurred during the first quarter.
For the 2010 second quarter, operating margin improved by 14 basis points, to 23.5 percent, from the prior-year period.
MEDNAX's effective tax rate for the 2010 second quarter was 39.25 percent, which was 265 basis points lower than the prior-year period. The tax rate for the 2009 second quarter of 41.9 percent included the recognition of a non-deductible loss and an increase in reserves required for uncertain tax positions.
MEDNAX generated net income of $49.4 million for the 2010 second quarter, which compares to $43.2 million for the prior-year period. On a per share basis, MEDNAX earned $1.04, based on a weighted average 47.5 million shares outstanding, for the 2010 second quarter, which compares with EPS of 93 cents, based on a weighted average 46.3 million shares outstanding for the 2009 second quarter.
For the first half of 2010, MEDNAX reported net patient service revenue of $682.0 million, up 9 percent from $623.7 million for the first half of 2009. Operating income grew by 11 percent to $145.7 million for the six months ended June 30, 2010, from $131.4 million for the comparable 2009 period. Net income for the 2010 first half increased to $87.6 million from $77.3 million. Earnings per share were $1.85 through the first six months of 2010, based on a weighted average 47.4 million shares outstanding, which compares with $1.68, based on a weighted average 46.1 million shares outstanding for the first half of 2009.
At June 30, 2010, MEDNAX had cash and cash equivalents of $26.1 million and net accounts receivable were $179.0 million. At the end of the 2010 second quarter, the Company had $58.0 million outstanding on its $350 million revolving credit facility, a reduction of $71.0 million from March 31, 2010.
During the 2010 second quarter the Company generated cash flow from operations of $91.7 million, and MEDNAX used its cash to fund acquisitions and reduce amounts outstanding under its line of credit.
During the 2010 second quarter MEDNAX used $20.0 million of its cash to fund physician group practice acquisitions and to make contingent purchase price payments for previously completed acquisitions.
MEDNAX announced the completion of three neonatal physician group practice acquisitions during the 2010 second quarter, including groups in Syracuse, New York, Fort Myers, Florida, and Fort Lauderdale, Florida. Through the first half of 2010, seven physician group practice acquisitions have been completed, including six neonatal groups and one maternal-fetal medicine group practice.
Outlook
MEDNAX expects that earnings for the three months ended September 30, 2010, will be in a range of $1.03 to $1.07 per share. This outlook assumes weighted average shares outstanding of 47.9 million, and anticipates that same-unit patient volume at neonatal intensive care units will decline by 1 to 3 percent when compared with the three months ended September 30, 2009. NICU patient volume for the 2009 third quarter increased by 4 percent from the 2008 third quarter. MEDNAX's outlook also assumes that the percentage of services reimbursed under government programs will increase by 1 to 2 percentage points on a sequential basis, or when compared against the 2010 second quarter. Historically, MEDNAX's payor mix shifts toward a higher percentage of its services reimbursed from government programs during the third quarter.
MEDNAX's outlook does not incorporate contributions from practice acquisitions within its anesthesia physician services specialty.
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