MEDNAX first quarter revenue increases 15% to $382.3 million

MEDNAX, Inc. (NYSE: MD) today reported earnings per share of 94 cents for the three months ended March 31, 2011, that were driven by strong revenue growth from both acquisitions and same-unit revenue, that led to operating margin expansion.

For the 2011 first quarter, compared to the prior-year period, MEDNAX reported:

• Revenue growth of 15 percent to $382.3 million;
• Operating income growth of 19 percent to $75.7 million;
• Operating margin expansion of 72 basis points to 19.8 percent;
• Net income growth of 19 percent to $45.5 million; and
• Earnings per share growth of 16 percent to 94 cents.

"Our results for the 2011 first quarter reflect the significant contributions we're generating from our ongoing acquisition program, as well as better than expected same-unit revenue growth for the period," said Roger J. Medel, M.D., Chief Executive Officer of MEDNAX. "We continue to achieve solid operating margin improvements as we grow our presence across all of our physician specialties and subspecialties, and integrate newly acquired practices into our national group model."

MEDNAX's net patient service revenue for the 2011 first quarter grew by 15 percent to $382.3 million from $332.9 million for the comparable 2010 period. Revenue growth included contributions from acquisitions completed during the previous 12 months, as well as a 3.7 percent increase in same-unit revenue.

Same-unit revenue growth from net reimbursement-related factors was 2.2 percent, and was driven principally by improved reimbursement from third-party commercial payors, as well as a shift in the mix of the Company's services reimbursed under commercial-payor programs, from government programs, during the period. Same-unit payor mix for the 2011 first quarter improved by 120 basis points from the prior-year period. Same-unit revenue growth attributable to patient volume increased by 1.5 percent, and included strong volume growth from the Company's anesthesia, neonatal and pediatric cardiology practices. The number of neonatal intensive care unit (NICU) patient days increased by 0.7 percent on a same-unit basis for the 2011 first quarter, compared to the prior-year.

MEDNAX had income from operations of $75.7 million for the 2011 first quarter, a 19 percent improvement from $63.6 million for the prior-year period.

Operating margin improved to 19.8 percent for the 2011 first quarter, up 72 basis points from 19.1 percent for the prior-year period. Operating margin improvement was a result of the Company's revenue growth from acquisitions, as well as same-unit revenue growth and continued effective management of administrative expenses.

General and administrative expenses grew by 10 percent for the 2011 first quarter from the prior-year period, and continue to grow at a rate considerably lower than revenue growth. General and administrative expenses were 10.9 percent of revenue for the 2011 period, a 51 basis-point improvement from the prior year.

Net income for the three months ended March 31, 2011, was $45.5 million, up 19 percent from $38.3 million for the prior-year period.

MEDNAX's earnings per share for the 2011 first quarter increased by 16 percent to 94 cents, based on a weighted average 48.4 million shares outstanding, from 81 cents, based on a weighted average 47.3 million shares outstanding for the 2010 first quarter.

MEDNAX had cash and cash equivalents of $15.0 million at March 31, 2011, and net accounts receivable were $188.2 million. At the end of the 2011 first quarter, the Company had $176.5 million outstanding on its $350 million revolving credit facility.

During the 2011 first quarter, MEDNAX used $14.5 million of its cash to fund operations, which compares with $41.6 million of cash used to fund operations for the 2010 first quarter. MEDNAX typically uses cash during the first quarter of each year as it pays incentive bonuses, principally to physicians, and employee benefit plan matching contributions that had accrued during the prior year.

MEDNAX also used $10.1 million of its cash during the 2011 first quarter to fund three physician group practice acquisitions and to make contingent purchase price payments for previously completed acquisitions. During the 2011 first quarter, MEDNAX acquired a maternal-fetal medicine practice and a pediatric after-hours clinic, both in San Antonio, Texas, as well as a pediatric cardiology practice based in Miami, Florida.

Outlook

MEDNAX expects earnings for the 2011 second quarter to be in a range of $1.11 to $1.17 per share. MEDNAX's forecast earnings per share range assumes that total same-unit revenue for the three months ended June 30, 2011, will be between 1 percent and 3.5 percent higher than for the prior-year period.

The forecast anticipates that same-unit growth will be evenly divided between volume growth and net reimbursement growth.

The same-unit revenue growth range assumes combined volume growth across all MEDNAX physician specialties, as well as variability related to reimbursement factors, including the mix of services reimbursed under commercial and government payors and improvements from commercial contract rates.