MEDNAX, Inc. (NYSE: MD), the national medical group specializing in neonatal, maternal-fetal, pediatric cardiology, other pediatric subspecialty and anesthesia physician services today reported earnings per share of $1.12 for the three months ended December 31, 2010, that were driven by the Company's successful acquisition efforts throughout the year.
“We enjoyed a record year adding physician groups and we continue to achieve strong results from operations as we execute our strategy of building our network across all of our physician specialties”
MEDNAX's results from operations for the 2010 fourth quarter include revenue growth of 10.6 percent and operating income growth of 10.9 percent compared to the prior-year period, when excluding the impact of a favorable legal settlement in the 2009 fourth quarter.
During 2010, MEDNAX invested $343.0 million to complete 15 physician group practice acquisitions, including two anesthesia practices acquired during the 2010 fourth quarter, as well as to make contingent purchase price payments for previously completed acquisitions.
"We enjoyed a record year adding physician groups and we continue to achieve strong results from operations as we execute our strategy of building our network across all of our physician specialties," said Roger J. Medel, M.D., Chief Executive Officer of MEDNAX. "We are successfully integrating these recently acquired practices into our Pediatrix Medical Group and American Anesthesiology national group practices, identifying ways to improve the operations of these practices. We continue to attract physician groups that are interested in practicing as part of our national group because we bring the administrative support and clinical quality tools that allow physicians to focus on improving patient care."
MEDNAX believes that comparisons of its results from operations for the three months and 12 months ended December 31, 2010, to the 2009 periods are more meaningful if GAAP results are presented on a non-GAAP basis by adjusting the following items:
- Increasing general and administrative expenses for the three months and 12 months ended December 31, 2009, by $1.8 million to exclude proceeds related to the favorable settlement of a legal issue; and
- Increasing the income tax provision by $10.9 million for the 12 months ended December 31, 2010, to exclude the impact from the favorable resolution of certain tax matters.
For the three months ended December 31, 2010, MEDNAX generated net patient service revenue of $368.5 million, up 10.6 percent from $333.3 million for the comparable prior-year period.
MEDNAX's revenue growth was driven by contributions from acquisitions completed since October 2009.
Same-unit revenue growth for the 2010 fourth quarter increased slightly, by two-tenths of one percent from the prior-year period, with patient volume growth of 1.6 percent that was offset by a 1.4 percent decline due to reimbursement-related factors, net, that resulted from a shift toward more of the Company's services reimbursed under lower-paying government programs.
Same-unit revenue growth from patient volume for the 2010 fourth quarter included growth from the Company's neonatal, anesthesia and pediatric cardiology physician services, offset by lower patient volume at maternal-fetal medicine practices. The number of neonatal intensive care unit (NICU) patient days increased by 1.5 percent on a same-unit basis for the 2010 fourth quarter, when compared to the prior-year period.
The percentage of patient services reimbursed under government programs increased by 140 basis points, on a same-unit basis, for the 2010 fourth quarter, when compared with the prior-year period. On a sequential basis, same-unit payor mix shifted by 80 basis points toward a higher percentage reimbursed under government programs.
Operating income for the 2010 fourth quarter was $85.9 million, up 10.9 percent from $77.4 million, non-GAAP, for the prior-year period. GAAP operating income for the 2009 fourth quarter was $79.2 million. General and administrative expenses were 10.7 percent of revenue for the 2010 fourth quarter, an improvement of 78 basis points from 11.5 percent, non-GAAP, for the comparable 2009 period. General and administrative expenses were 11.0 percent of revenue for the 2009 fourth quarter on a GAAP basis.
Operating margin improved to 23.3 percent for the 2010 fourth quarter, from 23.2 percent, non-GAAP, for the prior-year period, as a result of revenue growth associated with the Company's acquisition efforts, offset by a lower rate of same-unit revenue growth. Operating margin for the 2009 fourth quarter was 23.8 percent on a GAAP basis.
MEDNAX generated net income of $53.8 million for the 2010 fourth quarter, or $1.12 per share based on a weighted average 48.0 million shares outstanding. This compares with net income of $49.3 million, or $1.05 per share on a non-GAAP basis, based on a weighted average 47.1 million shares outstanding for the 2009 fourth quarter. GAAP net income for the 2009 fourth quarter was $50.4 million, or $1.07 per share.
For the 12 months ended December 31, 2010, MEDNAX reported revenue of $1.4 billion, up 8.8 percent from $1.3 billion for the comparable prior-year period. Operating income for 2010 was $312.9 million, up 9.0 percent, from $287.2 million, non-GAAP, for the prior year. GAAP operating income for 2009 was $288.9 million.
MEDNAX's net income for 2010 was $191.8 million, or $4.03 per share, non-GAAP, based on a weighted average 47.6 million shares outstanding, which compares with $174.7 million, or $3.76 per share, non-GAAP, based on a weighted average 46.5 million shares outstanding for 2009. GAAP net income was $202.7 million or $4.26 per share for 2010, and $175.8 million, or $3.78 per share for 2009.
At December 31, 2010, MEDNAX had cash and cash equivalents of $26.3 million and net accounts receivable were $181.4 million. The Company had $146.5 million outstanding on its $350 million revolving credit facility at December 31, 2010.
For 2010, MEDNAX generated cash flow from operations of $240.6 million, which included cash flow from operations of $85.1 million for the 2010 fourth quarter.
MEDNAX used $343.0 million of its cash and amounts available under its revolving credit facility to complete 15 physician group practice acquisitions and to make contingent purchase price payments for previously completed acquisitions.
2011 First Quarter Outlook
MEDNAX expects earnings for the three months ending March 31, 2011, will grow by 9 to 15 percent from the prior-year period, to a range of 88 to 93 cents per share.
MEDNAX's 2011 first quarter outlook includes assumptions that total patient volume, across all of its specialties and subspecialties combined, will grow by 1.5 percent, a growth rate that is consistent with the 2010 fourth quarter. As a component of total patient volume, MEDNAX includes estimated NICU patient volume growth of 1.5 percent for the 2011 first quarter, from the prior-year period. MEDNAX's earnings per share range assumes that total patient volume could fluctuate by one-half percent lower to one-half percent higher than its forecast.
Total company same-unit revenue related to net reimbursement factors is projected to be unchanged for the 2011 first quarter, compared to the prior-year period. As a factor impacting net reimbursement, MEDNAX assumes that the percentage of services reimbursed under government programs will be unchanged on a sequential basis, or from the 2010 fourth quarter. On a year-over-year basis, the Company's mix of services reimbursed under government programs for the 2011 first quarter is estimated to be 80 basis points higher. MEDNAX's outlook assumes that same-unit revenue growth related to net reimbursement factors could decrease by one-half percent, or increase by one-half percent, for the 2011 first quarter when compared to the prior-year period.
MEDNAX expects to invest approximately $100 million to acquire group practices within its neonatal, maternal-fetal, pediatric cardiology and other pediatric subspecialty physician services throughout 2011.
MEDNAX's results from operations for the 2011 first quarter, when compared on a sequential basis to the 2010 fourth quarter, will be affected by annual seasonality. These factors include: lower neonatal revenue during the first quarter, on a sequential basis, because there are fewer calendar days than in the fourth quarter, as well as higher expenses associated with Social Security payroll tax expenses that are higher at the beginning of every year, as compared to the fourth quarter of each year. These recurring revenue and expense items impact MEDNAX's revenue, operating income, net income and earnings per share for the first quarter of each year, relative to other quarters throughout the year.
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