Board Authorizes Share Repurchase of Up To an Additional $600 Million
Credit Facility Expanded to $1.5 Billion
FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--Oct. 30, 2014--
MEDNAX, Inc. (NYSE: MD), the national medical group specializing in
neonatal, anesthesia, maternal-fetal, pediatric cardiology, and other
pediatric physician services, today reported earnings of $0.86 per share
for the three months ended September 30, 2014, an increase of 13% over
the prior-year period.
For the 2014 third quarter compared to the prior year period, MEDNAX
reported:
-
Revenue growth of 12.9 percent to $627 million;
-
Operating income growth of 12.0 percent to $138 million; and
-
Net income growth of 12.0 percent to $86 million.
“Our strong operating results reflect continued success in our active
growth strategy,” said Roger J. Medel, M.D., Chief Executive Officer of
MEDNAX. “Our same-unit growth accelerated from the first half of the
year, including improvement in same-unit volumes. We continue to see
attractive opportunities in our acquisition pipeline, and have announced
nine practice additions in 2014, including one in the third quarter and
two so far in the fourth quarter. In addition, we have completed two
very complementary non-practice acquisitions, one during the third
quarter, which enhance both our ability to deliver value to our
physicians and hospital partners and our ability to provide services to
non-affiliated physicians. As we continue to expand our national group
practice, we will also remain focused on improving our operating
efficiency and enhancing our capabilities to support our physicians and
hospital partners as they provide great care to our patients.”
MEDNAX also announced today that its Board of Directors has authorized
the repurchase of up to an additional $600 million of the Company’s
common stock. This authorization is incremental to the Company’s
existing authorization to repurchase its common stock up to an amount
sufficient to offset the dilutive impact from the issuance of shares
under Company’s equity programs. MEDNAX intends to utilize various
methods to effect the share repurchases, including, among others, open
market purchases, which are expected to commence in the near term, as
well as an accelerated share repurchase program. The amount and timing
of purchases will depend on several factors, including general economic
and market conditions and trading restrictions.
In order to fund future growth as well as the expanded share repurchase
program, MEDNAX has replaced its existing $800 million credit facility
with an expanded $1.5 billion credit facility, composed of a $1.3
billion unsecured revolving line of credit and a $200 million term loan.
“The authorization of this additional share repurchase program reflects
our confidence in the national group practice business model and our
ongoing commitment to enhance shareholder value,” said Dr. Medel. “Our
primary use of cash will remain focused on the pursuit of acquisitions
across all our physician specialties and in support of those
specialties, and we see many opportunities to use our capital toward
that end. At the same time, we believe that with the combination of our
ongoing cash flow from operations and our expanded credit facility, we
have sufficient access to capital to continue our acquisition growth
strategy while concurrently undertaking shareholder-friendly uses of
capital.”
Operating Results
MEDNAX’s net revenue for the three months ended September 30, 2014
increased by 12.9 percent, to $626.5 million, from $554.7 million for
the comparable prior-year period, driven by a mix of contributions from
acquisitions and same-unit growth.
MEDNAX’s revenue growth attributable to contributions from recently
acquired practices was 7.9 percent, while overall same-unit revenue grew
by 5.0 percent when compared to the prior year period.
During the three months ended September 30, 2014, MEDNAX recorded parity
revenue from payors within those states that are now paying at the
Medicare rate for Medicaid services as a result of the Patient
Protection and Affordable Care Act. MEDNAX’s third quarter results
include approximately $17.2 million in parity revenue that contributed
approximately $0.05 to its net income per diluted share, reflecting the
impacts of incentive compensation and income taxes, compared to
approximately $10.5 million in revenue, or approximately $0.03 per
diluted share on a comparable basis, in the prior-year period.
Same-unit growth from net reimbursement-related factors was 2.9 percent.
This was principally due to the favorable impact of the parity revenue
recorded during the three months ended September 30, 2014 and continued
modest improvements in reimbursements received from third-party
commercial payors resulting from the Company’s ongoing contract renewal
process, partially offset by a slight decrease in revenue from a shift
in payor mix to government payors from commercial payors, year-over-year.
On a same-unit basis, the percentage of services reimbursed under
government programs shifted by 30 basis points toward a higher
percentage of services reimbursed under government programs for the 2014
third quarter when compared with the prior-year period.
Same-unit growth attributable to patient volume increased by 2.1 percent
for the 2014 third quarter when compared to the prior-year period.
Volume growth in our hospital-based anesthesia, neonatal intensive care
and other pediatric services was partially offset by declines in
pediatric cardiology and maternal-fetal medicine services. For the 2014
third quarter, compared to the 2013 period, same-unit neonatal intensive
care unit (NICU) patient days were up 2.3 percent.
Operating income for the 2014 third quarter was $138.1 million, up 12.0
percent from $123.3 million for the prior-year period. Operating margin
was 22.0 percent for the 2014 third quarter, as compared to 22.2 percent
for the prior-year period. The decrease of 18 basis points was primarily
the result of the variability in margins due to the mix of practices
acquired since July 2013, partially offset by slower growth in general
and administrative expenses as compared to revenue.
For the 2014 third quarter, general and administrative expenses were
$60.6 million, as compared to $54.7 million for the prior-year period, a
growth rate of 11.0 percent. General and administrative expenses as a
percentage of net patient service revenue was 9.7 percent for the three
months ended September 30, 2014, slightly lower than in the prior-year
period.
MEDNAX generated net income of $86.2 million for the 2014 third quarter,
or $0.86 per share based on a weighted average 100.1 million shares
outstanding. This compares with net income of $77.0 million, or $0.76
per share, for the 2013 third quarter, based on a weighted average 101.2
million shares outstanding.
Through the nine months of 2014, MEDNAX has generated revenue of $1.8
billion, up 12.7% from $1.6 billion for the prior-year period. Operating
income for the nine months ended September 30, 2014, grew by 13.3% to
$371.9 million, up from $328.2 million for the first nine months of
2013. MEDNAX earned net income of $228.9 million, or $2.28 per share,
through September 30, 2014, based on a weighted average 100.2 million
shares outstanding, which compares to net income of $201.5 million, or
$2.00 per share, based on a weighted average 101.0 million shares for
the first nine months of 2013.
MEDNAX had cash and cash equivalents of $71.8 million at September 30,
2014, and net accounts receivable were $345.2 million.
During the 2014 third quarter, MEDNAX generated cash flow from
operations of $159.4 million, as compared to $157.9 million for the 2013
third quarter.
MEDNAX used approximately $213.3 million of its cash during the 2014
third quarter to fund acquisitions and to make contingent purchase price
payments for previously completed acquisitions. During the third quarter
of 2014, one physician group practice was acquired, becoming part of
American Anesthesiology, and the Company also acquired MedData, a
rapidly-growing provider of revenue cycle management services, including
professional and facility coding, billing and collections, as well as an
industry leading early out / patient pay solution, to emergency
department, hospitalist, and other physician specialty groups, as well
as to hospitals. Through the first nine months of 2014, MEDNAX acquired
a total of seven physician group practices, six joining American
Anesthesiology and one joining Pediatrix Medical Group, as well as
acquiring MedData and a small, complementary consulting services
company, for a total of nine acquisitions.
Since the end of the 2014 third quarter, MEDNAX has announced the
acquisitions of Houston Perinatal Associates, a private physician group
practice based in Houston, TX, and NEXus Medical Group, LLC and its
subsidiary, Meridian Anesthesia Consultants, LLC, based in Macon, GA.
2014 Fourth Quarter Outlook
For the 2014 fourth quarter, MEDNAX expects earnings will be in a range
of $0.83 to $0.87 per share. This outlook assumes that total same-unit
revenue growth for the three months ended December 31, 2014 will grow by
two percent to four percent from the prior-year period. The forecast
estimates that this growth will be evenly divided between volume and net
reimbursement-related factors.
Included in the outlook for the 2014 fourth quarter is approximately
$0.06 per share from Medicaid parity, reflecting the impacts from
incentive compensation and income taxes, compared to $0.05 per share in
the 2013 fourth quarter.
Earnings conference call
MEDNAX, Inc., will host an investor conference call to discuss the
quarterly results at 10 a.m., E.D.T. today. The conference call Webcast
may be accessed from the Company’s Website, www.mednax.com.
A telephone replay of the conference call will be available from noon
Eastern Time today through midnight E.D.T. November 13, 2014 by dialing
800.475.6701, access Code 338690. The replay will also be available at www.mednax.com.
ABOUT MEDNAX
MEDNAX, Inc. is a national medical group that comprises the nation's
leading providers of neonatal, anesthesia, maternal-fetal and pediatric
medical and surgical subspecialty services. The Company is reshaping the
delivery of care within its specialties and subspecialties using
evidence-based tools, continuous quality initiatives and clinical
research to enhance patient outcomes and provide high-quality,
cost-effective care. Pediatrix Medical Group, a division of MEDNAX, was
founded in 1979 and includes neonatal physicians who provide services at
more than 360 neonatal intensive care units, and collaborate with
affiliated maternal-fetal medicine, pediatric cardiology, pediatric
critical care and physician subspecialists to provide a clinical care
continuum. Pediatrix is also the nation's largest provider of newborn
hearing screens. American Anesthesiology, a division of MEDNAX, was
established in 2007 and includes more than 2,225 anesthesiologists and
advanced practitioners who provide anesthesia care to patients in
connection with surgical and other procedures as well as pain
management. MEDNAX, through its affiliated professional corporations,
employs approximately 2,575 physicians in 34 states and Puerto Rico.
Additional information is available at www.mednax.com.
Certain statements and information in this press release may be
deemed to contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements may
include, but are not limited to, statements relating to our objectives,
plans and strategies, and all statements, other than statements of
historical facts, that address activities, events or developments that
we intend, expect, project, believe or anticipate will or may occur in
the future. These statements are often characterized by terminology such
as “believe”, “hope”, “may”, “anticipate”, “should”, “intend”, “plan”,
“will”, “expect”, “estimate”, “project”, “positioned”, “strategy” and
similar expressions, and are based on assumptions and assessments made
by MEDNAX’s management in light of their experience and their perception
of historical trends, current conditions, expected future developments
and other factors they believe to be appropriate. Any forward-looking
statements in this press release are made as of the date hereof, and
MEDNAX undertakes no duty to update or revise any such statements,
whether as a result of new information, future events or otherwise.
Forward-looking statements are not guarantees of future performance and
are subject to risks and uncertainties. Important factors that could cause
actual results, developments, and business decisions to differ
materially from forward-looking statements are described in MEDNAX’s
most recent Annual Report on Form 10-K and its Quarterly Reports on Form
10-Q, including the sections entitled “Risk Factors”, as well MEDNAX’s
current reports on Form 8-K, filed with the Securities and
Exchange Commission.
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MEDNAX, INC.
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
626,506
|
|
|
$
|
554,730
|
|
|
$
|
1,788,389
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|
|
$
|
1,586,625
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|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practice salaries and benefits
|
|
|
394,794
|
|
|
|
346,879
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|
|
|
1,139,050
|
|
|
|
1,008,002
|
|
|
Practice supplies and other operating expenses
|
|
|
21,570
|
|
|
|
19,445
|
|
|
|
65,452
|
|
|
|
58,361
|
|
|
General and administrative expenses
|
|
|
60,643
|
|
|
|
54,654
|
|
|
|
179,886
|
|
|
|
162,573
|
|
|
Depreciation and amortization
|
|
|
11,356
|
|
|
|
10,461
|
|
|
|
32,088
|
|
|
|
29,475
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|
|
Total operating expenses
|
|
|
488,363
|
|
|
|
431,439
|
|
|
|
1,416,476
|
|
|
|
1,258,411
|
|
|
Income from operations
|
|
|
138,143
|
|
|
|
123,291
|
|
|
|
371,913
|
|
|
|
328,214
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|
|
Investment and other income
|
|
|
563
|
|
|
|
372
|
|
|
|
2,533
|
|
|
|
1,170
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|
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Interest expense
|
|
|
(2,019
|
)
|
|
|
(1,507
|
)
|
|
|
(5,578
|
)
|
|
|
(4,369
|
)
|
|
Equity in earnings of unconsolidated affiliate
|
|
|
725
|
|
|
|
—
|
|
|
|
875
|
|
|
|
—
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|
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Total non-operating expenses
|
|
|
(731
|
)
|
|
|
(1,135
|
)
|
|
|
(2,170
|
)
|
|
|
(3,199
|
)
|
|
Income before income taxes
|
|
|
137,412
|
|
|
|
122,156
|
|
|
|
369,743
|
|
|
|
325,015
|
|
|
Income tax provision
|
|
|
51,174
|
|
|
|
45,198
|
|
|
|
140,820
|
|
|
|
123,472
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|
|
Net income
|
|
|
86,238
|
|
|
|
76,958
|
|
|
|
228,923
|
|
|
|
201,543
|
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
(31
|
)
|
|
|
—
|
|
|
|
(40
|
)
|
|
|
—
|
|
|
Net income attributable to MEDNAX, Inc.
|
|
$
|
86,207
|
|
|
$
|
76,958
|
|
|
$
|
228,883
|
|
|
$
|
201,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to MEDNAX, Inc. common and common
equivalent share (diluted)
|
|
$
|
0.86
|
|
|
$
|
0.76
|
|
|
$
|
2.28
|
|
|
$
|
2.00
|
|
|
Weighted average shares used in computing net income attributable
to MEDNAX, Inc. per common and common equivalent share (diluted)
|
|
|
100,145
|
|
|
|
101,178
|
|
|
|
100,168
|
|
|
|
100,962
|
|
|
|
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|
|
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|
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|
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Balance Sheet Highlights
(in thousands)
|
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(Unaudited)
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As of
|
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As of
|
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|
|
September 30, 2014
|
|
December 31, 2013
|
|
Assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ 71,822
|
|
$ 31,137
|
|
Short-term investments
|
|
7,281
|
|
6,457
|
|
Accounts receivable, net
|
|
345,169
|
|
285,397
|
|
Other current assets
|
|
56,789
|
|
45,134
|
|
Goodwill, other assets, property and equipment
|
|
2,997,156
|
|
2,640,591
|
|
Total assets
|
|
$ 3,478,217
|
|
$ 3,008,716
|
|
|
|
|
|
|
|
Liabilities and equity:
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$ 300,321
|
|
$ 308,754
|
|
Total debt
|
|
288,500
|
|
27,235
|
|
Other liabilities
|
|
384,284
|
|
329,739
|
|
Total liabilities
|
|
973,105
|
|
665,728
|
|
Total equity
|
|
2,505,112
|
|
2,342,988
|
|
Total liabilities and equity
|
|
$ 3,478,217
|
|
$ 3,008,716
|
|
|
|
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Source: MEDNAX, Inc.
MEDNAX, Inc.
Charles Lynch, 954-384-0175, x-5692
Vice
President, Strategy and Investor Relations
charles_lynch@mednax.com