MEDNAX Reports GAAP EPS of $1.07 for 2009 Fourth Quarter

MEDNAX, Inc. (NYSE: MD), the national medical group providing hospital-based neonatal, anesthesia and pediatric physician services and office-based maternal-fetal and pediatric cardiology physician services, reported earnings per share for the three months ended December 31, 2009, of $1.07 on a GAAP basis, or $1.00 per share when adjusted to exclude the favorable impact of a legal settlement and lower tax rate for the period.

For the three months ended December 31, 2009, MEDNAX’s net patient service revenue was $333.3 million, up 12 percent from $297.8 million for the comparable 2008 period, and included strong growth from acquisitions, as well as organic growth.

Overall same-unit revenue grew by 4.6 percent for the 2009 fourth quarter over the prior-year period. Growth from reimbursement-related factors was 2.7 percent, and the percentage of services reimbursed under government programs was essentially unchanged from the 2009 third quarter. For the 2009 fourth quarter, same-unit revenue growth attributable to patient volume was 1.9 percent across all of the Company’s services. Patient volume at neonatal intensive care units (NICUs) staffed by the Company’s physicians was essentially flat, declining by 0.1 percent for the 2009 fourth quarter when compared to the prior-year period.

When presented on a GAAP basis, MEDNAX’s results from operations for the three months ended December 31, 2009 include items that make comparisons difficult. MEDNAX believes that comparisons to prior periods should be made on a non-GAAP basis after adjusting the following items:

* Increasing general and administrative expense by $1.8 million to exclude proceeds related to the favorable settlement of a legal issue; and
* Increasing the Company’s tax provision by $1.7 million, net, to exclude a reduction in tax reserves due to the expiration of statutes of limitations, newly implemented state tax-planning strategies and the tax impact related to the proceeds from the legal settlement.

For the three months ended December 31, 2009, MEDNAX’s non-GAAP operating income was $77.4 million, an increase of 18 percent from $65.4 million for the comparable prior-year period. Operating margin increased by 128 basis points to 23.23 percent, non-GAAP, for the 2009 fourth quarter from 21.95 percent for the comparable 2008 period.

MEDNAX’s margin improvement was largely attributable to lower practice salaries and benefits expense, as a percent of net patient service revenue, resulting from the mix of practices acquired by the Company during the previous 12 months as well as revenue growth at same-unit practices that generated operating efficiencies for the period.

For the 2009 fourth quarter, MEDNAX’s net income was $47.0 million, non-GAAP, a 20 percent increase from $39.0 million for the comparable prior-year period. Earnings per share of $1.00, non-GAAP, for the 2009 fourth quarter is based on a weighted average 47.1 million shares outstanding and compares with EPS of 85 cents, based on 45.9 million shares outstanding, for the 2008 fourth quarter. On a GAAP basis, MEDNAX’s net income was $50.4 million, or $1.07 per share, for the 2009 fourth quarter.

Cash flow from operations for the 2009 fourth quarter was $72.9 million, and the Company used $48.0 million of its cash for practice acquisitions during the period and to make contingent purchase price payments for previously completed acquisitions. MEDNAX acquired an anesthesia group practice based in Wilmington, North Carolina, and two neonatal group practices providing care to patients in Covington, Louisiana, and Alexandria, Louisiana, during the 2009 fourth quarter.

MEDNAX had cash and cash equivalents of $26.5 million at December 31, 2009, and accounts receivable were $164.4 million. The Company had $50 million outstanding on its $350 million revolving credit facility at December 31, 2009.

MEDNAX’s results from operations for the 12 months ended December 31, 2009, are presented on a GAAP basis and include net patient service revenue of $1.3 billion, up 21 percent from $1.1 billion for 2008. Same-unit revenue increased by 5.1 percent during 2009, when compared with 2008, which was comprised of same-unit growth related to volume of 3.2 percent, and same-unit growth related to reimbursement-related factors of 1.9 percent. Same-unit NICU volume grew by 1.7 percent for 2009 when compared with 2008.

Operating income for 2009 was $288.9 million, up 19 percent from $242.0 million for 2008. Income from continuing operations and net income were $175.8 million in 2009, or $3.78 per share based on a weighted average 46.5 million shares outstanding. This compares with income from continuing operations of $146.7 million, or $3.11 per share for 2008. Net income for 2008 was $169.2 million, or $3.59 per share, for 2008, based on a weighted average 47.2 million shares outstanding and included income from discontinued operations of $22.5 million, or 48 cents per share, related to the sale of the Company’s metabolic screening laboratory.

For 2009, MEDNAX generated cash flow from operations of $241.4 million. The Company used $151.3 million to complete 11 physician group practice acquisitions during the year and to make contingent purchase price payments for previously completed acquisitions. In addition, the Company reduced amounts outstanding under its revolving credit facility by $89.5 million during 2009.