UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 31, 2014
MEDNAX, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Florida | 001-12111 | 26-3667538 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
1301 Concord Terrace
Sunrise, Florida 33323
(Address of principal executive office) (zip code)
Registrant’s telephone number, including area code (954) 384-0175
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02 | Results of Operations and Financial Condition. |
On July 31, 2014, MEDNAX, Inc., a Florida corporation (the “Company”), issued a press release announcing the results of its operations for the three months and six months ended June 30, 2014 (the “Second Quarter Release”). A copy of the Second Quarter Release is attached hereto as Exhibit 99.1 and is hereby incorporated in this Current Report by reference. The information contained in this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement or other document filed by the Company under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits. |
99.1—Press Release of MEDNAX, Inc. dated July 31, 2014.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MEDNAX, INC. | ||||||
| Date: July 31, 2014 |
By: | /s/ Vivian Lopez-Blanco | ||||
| Vivian Lopez-Blanco | ||||||
| Chief Financial Officer | ||||||
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 |
Press Release of MEDNAX, Inc. dated July 31, 2014. | |
Exhibit 99.1
FOR MORE INFORMATION:
Charles Lynch
Vice President, Strategy and Investor Relations
954-384-0175, x-5692
charles_lynch@mednax.com
FOR IMMEDIATE RELEASE
MEDNAX Reports 2014 Second Quarter EPS of $0.79
Expects Third Quarter EPS of $0.82 to $0.86
FORT LAUDERDALE, Fla., July 31, 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 $0.79 per share for the three months ended June 30, 2014, an increase of 16% over the prior-year period.
For the 2014 second quarter compared to the prior year period, MEDNAX reported:
| • | Revenue growth of 12.5 percent to $596 million; |
| • | Operating income growth of 14.4 percent to $130 million; and |
| • | Net income growth of 14.2 percent to $79 million. |
“Our strong operating results reflect continued success in our active growth strategy,” said Roger J. Medel, M.D., Chief Executive Officer of MEDNAX. “We continue to see attractive opportunities in our acquisition pipeline, and have now completed eight additions in 2014, including one so far in the third quarter. 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 as they provide great care to our patients.”
MEDNAX’s net patient service revenue for the three months ended June 30, 2014 increased by 12.5 percent, to $595.5 million, from $529.2 million for the comparable prior-year period, largely driven by contributions from acquisitions completed since April 2013.
MEDNAX’s revenue growth attributable to contributions from recently acquired practices was 9.2 percent, while overall same-unit revenue grew by 3.3 percent when compared to the prior year period.
During the three months ended June 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 second quarter results include approximately $16.0 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 $2.5 million in revenue, or less than $0.01 per diluted share on a comparable basis, in the prior-year period.
Same-unit growth from net reimbursement-related factors was 2.6 percent. This was principally due to the favorable impact of the parity revenue recorded during the three months ended June 30, 2014, continued modest improvements in reimbursements received from third-party commercial payors resulting from the Company’s ongoing contract renewal process, and a slight increase in revenue from a shift in payor mix to commercial payors from government payors, year-over-year.
On a same-unit basis, the percentage of services reimbursed under government programs shifted by 30 basis points toward a lower percentage of services reimbursed under government programs for the 2014 second quarter when compared with the prior-year period.
Same-unit growth attributable to patient volume increased by 70 basis points for the 2014 second quarter when compared to the prior-year period. Volume growth in our anesthesia, neonatal intensive care, and other pediatric services was somewhat offset by declines in maternal-fetal medicine and pediatric cardiology services. For the 2014 second quarter, compared to the 2013 period, same-unit neonatal intensive care unit (NICU) patient days were up 0.7 percent.
Operating income for the 2014 second quarter was $129.7 million, up 14.4 percent from $113.4 million for the prior-year period. Operating margin was 21.8 percent for the 2014 second quarter, as compared to 21.4 percent for the prior-year period. The increase of 35 basis points was primarily the result of slower growth in practice salaries and benefits and general and administrative expenses as compared to revenue.
For the 2014 second quarter, general and administrative expenses were $60.8 million, as compared to $54.6 million for the prior-year period, a growth rate of 11.4 percent, somewhat lower than the rate of revenue growth. General and administrative expenses as a percentage of net patient service revenue was 10.2 percent for the three months ended June 30, 2014, slightly lower than in the prior-year period.
MEDNAX generated net income of $79.0 million for the 2014 second quarter, or $0.79 per share based on a weighted average 99.9 million shares outstanding. This compares with net income of $69.2 million, or $0.68 per share, for the 2013 second quarter, based on a weighted average 101.1 million shares outstanding.
Through the first half of 2014, MEDNAX has generated revenue of $1.16 billion, up 12.6% from $1.03 billion for the prior-year period. Operating income for the six months ended June 30, 2014, grew by 14.1% to $233.8 million, up from $204.9 million for the first half of
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2013. MEDNAX earned net income of $142.7 million, or $1.42 per share, through June 30, 2014, based on a weighted average 100.2 million shares outstanding, which compares to net income of $124.6 million, or $1.23 per share, based on a weighted average 100.9 million shares for the first half of 2013.
MEDNAX had cash and cash equivalents of $17.7 million at June 30, 2014, and net accounts receivable were $327.4 million.
During the 2014 second quarter, MEDNAX generated cash flow from operations of $134.2 million, as compared to $126.6 million for the 2013 second quarter.
MEDNAX used approximately $73.4 million of its cash during the 2014 second quarter to fund acquisitions and to make contingent purchase price payments for previously completed acquisitions. During the second quarter of 2014, three physician group practices were acquired, becoming part of American Anesthesiology, and the Company also acquired a small, complementary consulting services company. Through the first half of 2014, MEDNAX acquired a total of six physician group practices, five becoming part of American Anesthesiology and one becoming part of Pediatrix Medical Group.
Since the end of the 2014 second quarter, MEDNAX has announced the acquisition of Associated Anesthesiologists of Joliet, S.C., a private physician group practice based in Joliet, IL, and its related entities, which on a combined basis provide anesthesia and pain-management services in southern Illinois and northern Indiana through 85 full-time anesthesia providers (37 anesthesiologists and 48 anesthetists) and 12 other clinical and administrative staff.
2014 Third Quarter Outlook
For the 2014 third quarter, MEDNAX expects earnings will be in a range of $0.82 to $0.86 per share. This outlook assumes that total same-unit revenue growth for the three months ended September 30, 2014 will grow by 2.0 percent to 4.0 percent from the prior-year period. This same-unit revenue growth will be driven primarily by net reimbursement growth, including the positive impact from parity. The forecast estimates volume to be 0.5 percent higher to 1.5 percent higher for the 2014 third quarter, as compared to the 2013 third quarter.
Included in the outlook for the 2014 third quarter is approximately $0.05 per share from Medicaid parity, reflecting the impacts from incentive compensation and income taxes.
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. August 14, 2014 by dialing 800.475.6701, access Code 330897. The replay will also be available at www.mednax.com.
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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 2,150 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 more than 2,500 physicians in 34 states and Puerto Rico. Additional information is available at www.mednax.com.
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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 June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net patient service revenue |
$ | 595,544 | $ | 529,180 | $ | 1,161,883 | $ | 1,031,895 | ||||||||
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| Operating expenses: |
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| Practice salaries and benefits |
372,216 | 331,922 | 744,256 | 661,123 | ||||||||||||
| Practice supplies and other operating expenses |
22,466 | 19,416 | 43,882 | 38,916 | ||||||||||||
| General and administrative expenses |
60,829 | 54,601 | 119,243 | 107,919 | ||||||||||||
| Depreciation and amortization |
10,361 | 9,870 | 20,732 | 19,014 | ||||||||||||
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| Total operating expenses |
465,872 | 415,809 | 928,113 | 826,972 | ||||||||||||
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| Income from operations |
129,672 | 113,371 | 233,770 | 204,923 | ||||||||||||
| Investment and other income |
335 | 396 | 1,970 | 798 | ||||||||||||
| Interest expense |
(2,188 | ) | (1,673 | ) | (3,559 | ) | (2,862 | ) | ||||||||
| Equity in earnings of unconsolidated affiliate |
150 | — | 150 | — | ||||||||||||
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| Total non-operating expenses |
(1,703 | ) | (1,277 | ) | (1,439 | ) | (2,064 | ) | ||||||||
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| Income before income taxes |
127,969 | 112,094 | 232,331 | 202,859 | ||||||||||||
| Income tax provision |
48,944 | 42,876 | 89,646 | 78,274 | ||||||||||||
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| Net income |
79,025 | 69,218 | 142,685 | 124,585 | ||||||||||||
| Less: Net income attributable to noncontrolling interests |
(9 | ) | — | (9 | ) | — | ||||||||||
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| Net income attributable to MEDNAX, Inc. |
$ | 79,016 | $ | 69,218 | $ | 142,676 | $ | 124,585 | ||||||||
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| Net income attributable to MEDNAX, Inc. common and common equivalent share (diluted) |
$ | 0.79 | $ | 0.68 | $ | 1.42 | $ | 1.23 | ||||||||
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| Weighted average shares used in computing net income attributable to MEDNAX, Inc. per common and common equivalent share (diluted) |
99,866 | 101,098 | 100,226 | 100,942 | ||||||||||||
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Balance Sheet Highlights
(in thousands)
(Unaudited)
| As of | As of | |||||||
| June 30, 2014 | December 31, 2013 | |||||||
| Assets: |
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| Cash and cash equivalents |
$ | 17,713 | $ | 31,137 | ||||
| Short-term investments |
7,568 | 6,457 | ||||||
| Accounts receivable, net |
327,410 | 285,397 | ||||||
| Other current assets |
55,007 | 45,134 | ||||||
| Goodwill, other assets, property and equipment |
2,766,802 | 2,640,591 | ||||||
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| Total assets |
$ | 3,174,500 | $ | 3,008,716 | ||||
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| Liabilities and equity: |
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| Accounts payable and accrued expenses |
$ | 241,766 | $ | 308,754 | ||||
| Total debt |
178,693 | 27,235 | ||||||
| Other liabilities |
349,264 | 329,739 | ||||||
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| Total liabilities |
769,723 | 665,728 | ||||||
| Total equity |
2,404,777 | 2,342,988 | ||||||
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| Total liabilities and equity |
$ | 3,174,500 | $ | 3,008,716 | ||||
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