Pediatrix Reports Record Results for 2007 Fourth Quarter
Introduces 2008 Quarterly EPS Guidance
FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--Feb. 6, 2008--Pediatrix Medical Group, Inc. (NYSE:PDX) today reported results for the three and 12 months ended December 31, 2007, that reflect continued revenue and earnings growth as a result of strong same-unit growth, acquisitions and operating margin expansion.
Pediatrix reported earnings per share for the three months ended December 31, 2007, of 84 cents, which includes a two-cent per share benefit due to a reduction in reserves for uncertain tax positions.
For the 2007 fourth quarter, Pediatrix reported results that include:
-- Revenue growth of 20 percent, to a record $250.4 million,
driven largely by same-unit revenue growth of 12.9 percent;
-- Record operating income of $64.4 million, a 22 percent
increase over the 2006 non-GAAP operating income, which
excludes costs of $3.1 million related to the Company's stock
option review; and
-- Record cash flow from operations of $89.4 million.
"This was another solid quarter and year for our organization as we continue to execute our strategy of expanding our physician services capabilities within our historic subspecialties and now into anesthesia," said Roger J. Medel, M.D., Pediatrix's Chief Executive Officer. "Our results reflect the long-term strength of our business model, which delivers value to physicians practicing in an environment that gives them more time for patients, and includes clinical information systems that are used to identify opportunities to improve patient care within our specialties. At the same time, our model makes it possible for us to generate results that consistently yield sustained growth and efficient management."
For the three months ended December 31, 2007, Pediatrix reported net patient service revenue of $250.4 million, up 20 percent from $207.9 for the comparable 2006 period.
Same-unit revenue increased by 12.9 percent, largely as a result of favorable reimbursement from third-party payors including an increase in physician services' reimbursement from the Texas Medicaid program. Same-unit revenue growth associated with patient volume increased by 4.6 percent for the 2007 fourth quarter, when compared with the prior-year period. Patient volume at neonatal intensive care units staffed by Pediatrix physicians grew by 4.0 percent on a same-unit basis during the 2007 fourth quarter over the prior-year period.
The balance of revenue growth for the 2007 fourth quarter is attributable to contributions from physician group practices acquired throughout the prior 12 months, including the acquisition of the Company's first anesthesia group practice in September 2007.
Income from operations was up 22 percent, to $64.4 million for the 2007 fourth quarter, from $52.6 million, non-GAAP, for the 2006 fourth quarter, which excludes costs of $3.1 million incurred during the 2006 fourth quarter related to the Company's stock option review. Operating margin of 25.7 percent for the 2007 fourth quarter improved by 40 basis points over the non-GAAP operating margin for the prior-year period.
Operating margin improvement was largely the result of favorable reimbursement trends as well as the Company's ongoing general and administrative expense management, offset by slightly higher practice salaries and benefits expense, as a percent of revenue, attributable to the inclusion of the anesthesia group practice. General and administrative expenses as a percent of revenue were 11.2 percent for the 2007 fourth quarter, down 90 basis points from 12.1 percent, on a non-GAAP basis, for the comparable 2006 period.
Pediatrix's effective tax rate for the 2007 fourth quarter was reduced to 37.97 percent as a result of an $800,000 reduction in the Company's accrued liability for uncertain tax positions following the expiration of statutes of limitations on certain filed tax returns. When excluding the $800,000 reduction to Pediatrix's tax provision, the Company's effective tax rate was 39.2 percent, which results in non-GAAP income from continuing operations of $39.7 million for the 2007 fourth quarter, up 17 percent from $33.8 million, non-GAAP, for the same period of 2006.
In December 2007, Pediatrix announced that it entered a definitive agreement to sell its metabolic screening laboratory to Perkin-Elmer, Inc. As a consequence, Pediatrix's results reflect the contributions of that laboratory, for all periods presented, as income from discontinued operations, net of income taxes.
Net income, non-GAAP, was $40.5 million for the 2007 fourth quarter, up 17 percent from $34.6 million for the 2006 fourth quarter. Net income growth for the 2007 fourth quarter, when compared with the 2006 period, was lower than operating income growth resulting from less investment income as the Company used its cash to acquire physician group practices and repurchase its common stock.
On a per share basis, Pediatrix's net income grew by 18 percent, to 82 cents, non-GAAP when excluding the two-cents per share reduction in the income tax provision, for the 2007 fourth quarter, which also includes two cents per share from discontinued operations. For the 2006 fourth quarter, net income per share was 70 cents, non-GAAP, when excluding costs relating to the Company's stock option review. The 2006 fourth quarter net income per share includes one cent per share from discontinued operations.
For the three months ended December 31, 2007, Pediatrix had a weighted average 49.3 million shares outstanding, down from a weighted average 49.7 million shares outstanding for the comparable 2006 period.
Pediatrix had cash and cash equivalents of $102.8 million at December 31, 2007, and accounts receivable were $145.5 million.
Cash flow from operations were $89.4 million for the 2007 fourth quarter, and Pediatrix used $17.0 million of its cash for physician group practice acquisitions during the period, and $32.6 million to repurchase its common shares under a completed program authorized in August 2007. Pediatrix has not repurchased any of its shares under a program authorized in December 2007.
Pediatrix's results from operations for the calendar years 2007 and 2006, when presented on a GAAP basis, include items that make comparisons difficult. Pediatrix believes that comparisons should be made on a non-GAAP basis after adjusting the following items:
-- Reducing expenses of $6.4 million accrued during 2007 for
employee benefits associated with a tax under Section 409A of
the Internal Revenue Code;
-- Excluding costs of $5.2 million during 2007 and $4.8 million
during 2006 incurred as a result of the Company's stock-option
review;
-- Increasing the Company's tax provision by $2 million for the
12 months ended December 31, 2007, related to the expiration
of the statute of limitations on certain tax returns; and
-- Increasing general and administrative expenses for the 12
months ended December 31, 2006, to exclude a gain of $1.6
million on the sale of the Company's aircraft.
For the 12 months ended December 31, 2007, Pediatrix's net patient service revenue grew by 14 percent, to $917.6 million, from $804.7 million for 2006. Non-GAAP operating income grew by 18 percent, to $232.5 million in 2007, from $197.6 million in 2006. Net income was $147.8 million on a non-GAAP basis, up 16 percent from $127.3 million. On a per share basis, Pediatrix earned $2.96, non-GAAP, based on a weighted average 49.9 million shares outstanding, which compares with $2.58 for 2006, based on a weighted average 49.4 million shares outstanding.
During 2007, Pediatrix generated cash flow from operations of $188.5 million. Pediatrix used $119.1 million to complete 10 physician group practice acquisitions, and repurchased $100 million of its common stock through open market transactions.
Outlook
Pediatrix is providing additional detail relating to its previously issued guidance for 2008 by introducing quarterly earnings per share guidance for the year, presented in the following table:
Estimated
------------------
Earnings Per Share
------------------
First Quarter $0.67 to $0.69
Second Quarter $0.85 to $0.87
Third Quarter $0.92 to $0.95
Fourth Quarter $0.91 to $0.94
------------------
Total $3.35 to $3.45
Pediatrix's 2008 guidance assumes the Company will achieve same-unit patient volume growth of 3 to 5 percent, plus same-unit reimbursement growth of 2 to 4 percent that includes increased reimbursement from the Texas Medicaid program. In addition, Pediatrix expects to invest $70 to $75 million of capital in base-business acquisitions during 2008.
Reconciliation of Non-GAAP Information
This press release contains non-GAAP information, including, operating income, operating margin, income tax provision, net income and earnings per share, which is adjusted for certain items as set forth below. Pediatrix believes that this non-GAAP information is useful to management and investors reviewing financial and business trends related to its results of operations and that when non-GAAP information is viewed with GAAP information, investors are provided with a meaningful understanding of Pediatrix's ongoing operating and financial performance. This information is not intended to be considered in isolation, or as a substitute of GAAP financial information. The following tables reconcile non-GAAP financial information to net income per common share, which Pediatrix believes are the most comparable GAAP measures:
Non-GAAP Adjustments
Three Months Ended Three Months Ended
December 31, 2007 December 31, 2006
GAAP Adjust- Non- GAAP Adjust- Non-
ments GAAP ments GAAP
--------- ------- --------- --------- ------- ---------
Net patient
service
revenue $250,356 $250,356 $207,905 $207,905
--------- --------- --------- ---------
Operating
expenses:
Practice
salaries and
benefits 145,565 145,565 120,107 120,107
Practice
supplies and
other
operating
expenses 9,461 9,461 7,846 7,846
General and
administrative
expenses 28,119 28,119 28,348 (3,125) 25,223
Depreciation
and
amortization 2,831 2,831 2,083 2,083
--------- --------- --------- ---------
Total operating
expenses 185,976 185,976 158,384 (3,125) 155,259
--------- --------- --------- ------- ---------
Income from
operations 64,380 64,380 49,521 3,125 52,646
Investment
income 1,209 1,209 1,735 1,735
Interest
expense (259) (259) (90) (90)
--------- --------- --------- ---------
Income from
continuing
operations
before income
taxes 65,330 65,330 51,166 3,125 54,291
Income tax
provision (24,806) (800) (25,606) (19,492) (949) (20,441)
--------- ------- --------- --------- ------- ---------
Income from
continuing
operations 40,524 (800) 39,724 31,674 2,176 33,850
--------- ------- --------- --------- ------- ---------
Income from
discontinued
operations,
net of income
taxes 743 743 741 741
--------- --------- --------- ---------
Net income $ 41,267 (800) $ 40,467 $ 32,415 2,176 $ 34,591
========= ======= ========= ========= ======= =========
Per common and
common
equivalent
share data
(diluted):
Net income from
continuing
operations $ 0.82 (0.02) $ 0.80 $ 0.64 0.05 $ 0.69
Net income from
discontinued
operations $ 0.02 $ 0.02 $ 0.01 $ 0.01
Net income $ 0.84 (0.02) $ 0.82 $ 0.65 0.05 $ 0.70
Weighted
average shares
used in
computing net
income per
common and
common
equivalent
share
(diluted) 49,311 49,311 49,714 49,714
Non-GAAP Adjustments
12 Months Ended 12 Months Ended
December 31, 2007 December 31, 2006
GAAP Adjust- Non- GAAP Adjust- Non-
ments GAAP ments GAAP
---------- -------- --------- --------- ------- ---------
Net patient
service
revenue $917,644 $917,644 $804,696 $804,696
---------- --------- --------- ---------
Operating
expenses:
Practice
salaries and
benefits 533,306 (2,978) 530,328 466,168 466,168
Practice
supplies and
other
operating
expenses 34,078 34,078 29,247 29,247
General and
administrative
expenses 119,766 (8,608) 111,158 106,786 (3,170) 103,616
Depreciation
and
amortization 9,594 9,594 8,084 8,084
---------- --------- --------- ---------
Total
operating
expenses 696,744 (11,586) 685,158 610,285 (3,170) 607,115
---------- --------- --------- ---------
Income from
operations 220,900 11,586 232,486 194,411 3,170 197,581
Investment
income 6,855 6,855 3,836 3,836
Interest
expense (749) (749) (1,032) (1,032)
---------- --------- --------- ---------
Income from
continuing
operations
before
income taxes 227,006 11,586 238,592 197,215 3,170 200,385
Income tax
provision (86,987) (6,528) (93,515) (75,107) (366) (75,473)
---------- -------- --------- --------- ------- ---------
Income from
continuing
operations 140,019 5,058 145,077 122,108 2,804 124,912
---------- -------- --------- --------- ------- ---------
Income from
discontinued
operations,
net of
income taxes 2,703 2,703 2,357 2,357
---------- --------- --------- ---------
Net income $142,722 5,058 $147,780 $124,465 2,804 $127,269
========== ======== ========= ========= ======= =========
Per common
and common
equivalent
share data
(diluted):
Net income
from
continuing
operations $ 2.81 0.10 $ 2.91 $ 2.47 0.06 $ 2.53
Net income
from
discontinued
operations $ 0.05 $ 0.05 $ 0.05 $ 0.05
Net income $ 2.86 0.10 $ 2.96 $ 2.52 0.06 $ 2.58
Weighted
average
shares used
in computing
net income
per common
and common
equivalent
share
(diluted) 49,904 49,904 49,387 49,387
The following table reconciles the specific GAAP to non-GAAP items for the three and 12 months ended December 31, 2007 and 2006:
Non-GAAP Adjustments
Three Months Ended Dec. 31, 12 Months Ended Dec. 31,
2007 2006 2007 2006
------------- ------------- ------------ -----------
(in thousands, except for per share data)
----------------------------------------------------
Net patient
service revenue $ 250,356 $ 207,905 $ 917,644 $ 804,696
GAAP practice
salaries and
benefits 145,565 120,107 533,306 466,168
Internal Revenue
Code 409A
expense -- -- (2,978) --
Non-GAAP practice
salaries and
benefits 145,565 120,107 530,328 466,168
GAAP general and
administrative
expenses 28,119 28,348 119,766 106,786
Gain on sale of
aircraft -- -- -- 1,630
Stock option
review expense -- (3,125) (5,200) (4,800)
Internal Revenue
Code 409A
expense -- -- (3,408) --
Non-GAAP general
and
administrative
expenses 28,119 25,223 111,158 103,616
GAAP income from
operations 64,380 49,521 220,900 194,411
Net adjustments -- 3,125 11,586 3,170
Non-GAAP income
from operations 64,380 52,646 232,486 197,581
GAAP income tax
provision (24,806) (19,492) (86,987) (75,107)
Net adjustments (800) (949) (6,528) (366)
Non-GAAP income
tax provision (25,606) (20,441) (93,515) (75,473)
GAAP income from
continuing
operations 40,524 31,674 140,019 122,108
Net adjustments (800) 2,176 5,058 2,804
Non-GAAP income
from continuing
operations 39,724 33,850 145,077 124,912
GAAP net income 41,267 32,415 142,722 124,465
Net adjustments (800) 2,176 5,058 2,804
Non-GAAP net
income 40,467 34,591 147,780 127,269
Net income per
common and common
equivalent share
(diluted):
GAAP EPS $ 0.84 $ 0.65 $ 2.86 $ 2.52
Net adjustments (0.02) 0.05 0.10 0.06
Non-GAAP EPS $ 0.82 $ 0.70 $ 2.96 $ 2.58
Weighted average
shares used in
computing net
income per common
and common
equivalent share
(diluted) 49,311 49,714 49,904 49,387
GAAP Operating
Margin 25.72% 23.82% 24.07% 24.16%
Internal Revenue
Code 409A
expense -- -- 0.70% --
Gain on sale of
aircraft -- -- -- -0.20%
Stock option
review expense -- 1.50% 0.57% 0.60%
Non-GAAP Operating
Margin 25.72% 25.32% 25.34% 24.56%
Earnings conference call
Pediatrix Medical Group, Inc. will host an investor conference call to discuss the quarterly results at 10 a.m. (EST) today. The conference call Webcast may be accessed from the Company's Website, www.pediatrix.com. A telephone replay of the conference call will be available from 1:30 p.m. (EST) today through midnight (EST) February 20, 2008, by dialing 800-475-6701, access code 907442. The replay will also be available at www.pediatrix.com.
About Pediatrix
Pediatrix Medical Group, Inc. is the nation's leading provider of neonatal, maternal-fetal and pediatric physician subspecialty services and recently expanded to include anesthesiology services. Pediatrix physicians and advanced practitioners are reshaping the delivery of care within the maternal-fetal, neonatal intensive care and pediatric cardiology subspecialties, using evidence-based tools, continuous quality initiatives and clinical research to enhance patient outcomes and provide high-quality, cost-effective care. Founded in 1979, its neonatal physicians provide services at more than 240 neonatal intensive care units, and in many markets they collaborate with affiliated maternal-fetal medicine, pediatric cardiology physician subspecialists and pediatric intensivists to provide a clinical care continuum. Combined, Pediatrix and its affiliated professional corporations employ more than 1,050 physicians in 32 states and Puerto Rico. Pediatrix is also the nation's largest provider of newborn hearing screens. Additional information is available at www.pediatrix.com.
Certain statements and information in this press release may be deemed to be "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. 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 are forward-looking statements. 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 Pediatrix'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 Pediatrix 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 Pediatrix's most recent Annual Report on Form 10-K, including the section entitled "Risk Factors". Additional factors include, but are not limited to: the possible discovery of additional facts beyond those reviewed by the Audit Committee; litigation related to the matters investigated by the Pediatrix's Audit Committee or the restatements to Pediatrix's financial statements and other historical disclosures; and any regulatory actions of the SEC or the U.S. Attorney related to such matters.
Pediatrix Medical Group, Inc.
Consolidated Statements of Income
(Unaudited)
Three months ended 12 months ended
December 31, December 31,
2007 2006 2007 2006
---------- ---------- --------- ---------
(in thousands, except for per share data)
-----------------------------------------
Net patient service revenue $ 250,356 $ 207,905 $917,644 $804,696
---------- ---------- --------- ---------
Operating expenses:
Practice salaries and
benefits 145,565 120,107 533,306 466,168
Practice supplies and other
operating expenses 9,461 7,846 34,078 29,247
General and administrative
expenses 28,119 28,348 119,766 106,786
Depreciation and
amortization 2,831 2,083 9,594 8,084
---------- ---------- --------- ---------
Total operating expenses 185,976 158,384 696,744 610,285
---------- ---------- --------- ---------
Income from operations 64,380 49,521 220,900 194,411
Investment income 1,209 1,735 6,855 3,836
Interest expense (259) (90) (749) (1,032)
---------- ---------- --------- ---------
Income from continuing
operations before income
taxes 65,330 51,166 227,006 197,215
Income tax provision (24,806) (19,492) (86,987) (75,107)
---------- ---------- --------- ---------
Income from continuing
operations 40,524 31,674 140,019 122,108
---------- ---------- --------- ---------
Income from discontinued
operations, net of income
taxes 743 741 2,703 2,357
---------- ---------- --------- ---------
Net income $ 41,267 $ 32,415 $142,722 $124,465
========== ========== ========= =========
Per common and common
equivalent share data
(diluted):
Net income from continuing
operations $ 0.82 $ 0.64 $ 2.81 $ 2.47
Net income from discontinued
operations $ 0.02 $ 0.01 $ 0.05 $ 0.05
Net income $ 0.84 $ 0.65 $ 2.86 $ 2.52
Weighted average shares used
in computing net income per
common and common
equivalent share (diluted) 49,311 49,714 49,904 49,387
Balance Sheet Highlights
(Unaudited)
As of As of
Dec. 31, 2007 Dec. 31, 2006
------------- -------------
(in thousands)
Assets:
Cash and cash equivalents $ 102,843 $ 69,595
Short-term investments 18,042 65,660
Accounts receivable, net 145,504 125,573
Other current assets 97,737 40,771
Other assets, property and equipment 938,676 833,571
------------- -------------
Total assets $ 1,302,802 $ 1,135,170
============= =============
Liabilities and shareholders' equity:
Accounts payable & accrued expenses $ 243,120 $ 206,552
Total debt 924 860
------------- -------------
Other liabilities 99,706 61,957
------------- -------------
Total liabilities 343,750 269,369
Shareholders' equity 959,052 865,801
------------- -------------
Total liabilities and shareholders' equity $ 1,302,802 $ 1,135,170
============= =============
Other Operating Data
12 Months Ended
December 31,
2007 2006
------------ ------------
Number of:
Births 707,274 674,336
NICU Admissions 85,059 80,151
NICU Patient days 1,556,093 1,472,428
CONTACT: Pediatrix Medical Group, Inc., Fort Lauderdale
Bob Kneeley, Director, Investor Relations
954-384-0175, x-5300
bob_kneeley@pediatrix.com
SOURCE: Pediatrix Medical Group, Inc.