Results from Continuing Operations Reflect
Significant Recovery in Second Half of Quarter Following Initial
Disruption from COVID-19
Company Anticipates Full Normalization of
Patient Volumes across All Service Lines, Pending Pandemic
MEDNAX, Inc. (NYSE: MD), the national health solutions partner
specializing in prenatal, neonatal, pediatric, and radiology
services, today reported a net loss of $8.03 per share for the
three months ended June 30, 2020, primarily reflecting a non-cash
loss on sale related to the Company’s previously announced
divestiture of American Anesthesiology. On a non-GAAP basis, MEDNAX
reported Adjusted EPS from continuing operations of $0.32.
For the 2020 second quarter, MEDNAX reported the following
results from continuing operations:
- Net revenue of $509 million;
- Net income of $8 million; and
- Adjusted EBITDA of $65 million.
As previously announced, on July 12, Mark S. Ordan was appointed
Chief Executive Officer and a Director of the Company. Mr. Ordan
succeeds Roger J. Medel, M.D., MEDNAX’s founder, who remains a
Director.
“As CEO, I will champion our long standing mission to take great
care of the patient, every day and in every way,” said Mr. Ordan.
“Particularly during such an unprecedented healthcare crisis,
clinicians affiliated with MEDNAX have proved their unwavering
dedication to that mission. I’m most excited about the growth
opportunities available to the Company, and I will work closely
with our clinicians, our streamlined organization and our Board to
support this organization’s success, and its unique and important
role in the healthcare ecosystem.”
Intent to Sell MEDNAX Radiology Solutions and Refocus as
Pediatrix Medical Group
As previously disclosed, MEDNAX is pursuing strategic
alternatives for its radiology medical group, MEDNAX Radiology
Solutions, with the intent of divesting this organization. The
Company is actively engaged in this process, and does not intend to
provide further public comments during its execution.
Through this process, the Company intends to refocus its
resources as a dedicated pediatrics and obstetrics organization,
and, accordingly, MEDNAX intends to return to its original company
name, Pediatrix Medical Group, Inc., pending approval by the
Company’s shareholders at its 2020 annual meeting on September 9th.
Based on its operating results for the second quarter of 2020, the
Company is maintaining its outlook for the initial financial
profile of Pediatrix Medical Group provided as part of its investor
presentation on June 5th, 2020.
“I support our ongoing initiatives to dedicate our focus on our
Pediatrix and Obstetrix Medical Groups, as the leading provider of
specialty women’s health services and pediatric care in the United
States,” said Mr. Ordan. “We believe this focus will enable us to
benefit from proven clinical leadership and innovation, an
extensive national footprint, and significant growth opportunities.
The Company’s growth initiatives have continued throughout this
challenging period, which demonstrates that we are a partner of
choice for health systems across the country.”
Operating Results from Continuing Operations
During the 2020 second quarter, MEDNAX’s operations were
significantly impacted by reductions in patient volumes and revenue
as a result of the COVID-19 pandemic. The impact to net revenue was
greatest during the month of April, and the Company’s operations
began to normalize during the month of May and substantially
recovered during the month of June.
“We believe the rapid recovery in our operating results during
the latter part of the second quarter demonstrates strong
resiliency in demand for the critical, and often acute and
life-saving, nature of services provided by clinicians affiliated
with MEDNAX,” said Stephen D. Farber, Executive Vice President and
Chief Financial Officer. “During the month of April, our revenue
from continuing operations reflected approximately 75 to 80 percent
of normalized, pre-COVID 19 patient volumes. During the month of
June, volumes recovered to approximately 90 to 95 percent of
normalized levels. This recovery has persisted during the month of
July, with some geographic variation, on a preliminary basis.”
As previously disclosed, on May 6, 2020, MEDNAX completed the
sale of its anesthesiology medical group, American Anesthesiology,
to North American Partners in Anesthesia (NAPA). The Company’s
discussion of its results from continuing operations for the three
and six months ended June 30, 2020 and the prior-year periods
excludes the operating results from American Anesthesiology.
“A significant event during the second quarter was our ability
to achieve a transaction to divest our anesthesiology medical
group, American Anesthesiogy, where operating results were
significantly impacted by the COVID-19 pandemic,” said Mr. Farber.
“This transaction enables us to focus our efforts and resources on
our ongoing medical groups, which have proven to enjoy highly
resilient demand and we believe are well positioned to grow and
succeed.”
MEDNAX’s net revenue for the three months ended June 30, 2020
was $509.2 million, compared to $561.2 million for the prior-year
period. MEDNAX’s same-unit revenue declined by 11.7 percent,
modestly offset by growth attributable to recent acquisitions.
The impact to the Company’s operating results from the COVID-19
pandemic is reflected in both same-unit revenue from net
reimbursement-related factors and same-unit revenue attributable to
patient volume, as discussed below.
Same-unit revenue from net reimbursement-related factors
increased by 0.2 percent for the 2020 second quarter as compared to
the prior-year period. During the 2020 second quarter, the Company
received $11.7 million from the provider relief fund established by
the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act,
which was recorded as revenue and, within the Company’s same-unit
revenue, as a contribution to net reimbursement-related factors.
Partially offsetting this contribution, net pricing for services
provided by certain radiology medical groups was negatively
affected by reductions in administrative fees that are based on the
volume of services provided. The net increase in revenue from net
reimbursement-related factors also reflects modest improvements in
managed care contracting and favorable payor mix compared to the
prior-year period. For the quarter, the percentage of services
reimbursed by commercial and other non-government payors increased
by approximately 65 basis points compared with the prior-year
period.
Same-unit revenue attributable to patient volume decreased by
11.9 percent for the 2020 second quarter as compared to the
prior-year period, driven by declines across all service lines.
This decline primarily reflects a significant impact to
operations during the month of April, and a recovery in volumes
during the latter part of the second quarter. The timing of this
most significant impact, and recovery in volumes, was similar
within each of the Company’s major service lines, and MEDNAX does
not currently anticipate long-term effects on the demand for any of
its clinical services following the COVID-19 pandemic.
For the quarter, patient volumes within the Company’s
hospital-based Pediatrix and Obstetrix services lines, which
include neonatal intensive care unit (NICU) and other NICU related
services, patient volumes for the second quarter declined by
approximately 6 percent, with volume in the month of April
declining by approximately 8 percent but recovering to above 95
percent of pre-COVID levels by the end of the second quarter.
Within hospital-based services, neonatal intensive care unit
(NICU) patient days decreased by 5.0 percent for the second quarter
compared to the prior-year period, which reflects lower births at
the hospitals where MEDNAX-affiliated practices provide neonatology
services and a lower rate of admission into the NICU, partially
offset by a modest increase in average length of stay.
For the quarter, patient volumes within the Company’s
office-based Pediatrix and Obstetrix service lines, which include
maternal-fetal medicine, pediatric cardiology and other pediatric
subspecialty services, declined by approximately 16 percent, with
volume in the month of April declining by approximately 25 percent
but recovering to approximately 90 percent of pre-COVID levels by
the end of the second quarter.
For the quarter, radiology services volume declined by
approximately 29 percent, with volume in the month of April
declining by approximately 50 percent but recovering to
approximately 85 to 90 percent of pre-COVID levels by the end of
the second quarter.
For the 2020 second quarter, practice salaries and benefits
expense was $349.3 million, compared to $361.2 million for the
prior-year period, a decrease of $11.9 million. This decrease
primarily reflects reductions in salary expense related to COVID-19
mitigation initiatives.
For the 2020 second quarter, general and administrative expenses
were $77.7 million, as compared to $84.2 million for the prior-year
period. This decrease in general and administrative expenses
compared to the prior-year period reflects salary and net staffing
reductions, partially offset by increases in legal and other
non-labor expenses.
As previously disclosed, MEDNAX has incurred certain expenses
related to transformational and restructuring activities. For the
second quarter of 2020, these expenses totaled $11.5 million,
primarily consisting of external consulting costs and contract
termination fees, compared to $17.9 million for the second quarter
of 2019 and $19.1 million in the first quarter of 2020. As
previously disclosed, a significant amount of historical
transformational and restructuring activities were related to the
Company’s anesthesiology medical group, which was divested during
the second quarter of 2020, and is therefore not included in the
above results. Additionally, as part of MEDNAX’s response to the
COVID-19 pandemic, the Company has curtailed, paused, or is in the
process of narrowing the scope of certain ongoing transformational
and restructuring investments.
Adjusted EBITDA from continuing operations, which is defined as
earnings from continuing operations before interest, taxes,
depreciation, amortization, and transformational and restructuring
related expenses, was $65.2 million for the 2020 second quarter,
compared to $94.2 million for the prior-year period. Funds received
from the provider relief fund established by the CARES Act impacted
Adjusted EBITDA positively by $6.0 million for the 2020 second
quarter.
Depreciation and amortization expense was $14.4 million for the
second quarter of 2020 compared to $13.8 million for the second
quarter of 2019.
Interest expense was $28.3 million for the second quarter of
2020 compared to $31.1 million for the second quarter of 2019. This
decline primarily reflects lower average borrowings compared to the
prior-year period.
MEDNAX generated income from continuing operations of $7.6
million, or $0.09 per diluted share, for the 2020 second quarter,
based on a weighted average 83.7 million shares outstanding. This
compares with income from continuing operations of $20.0 million,
or $0.24 per diluted share, for the 2019 second quarter, based on a
weighted average 83.7 million shares outstanding.
For the second quarter of 2020, MEDNAX reported Adjusted EPS
from continuing operations of $0.32, compared to $0.58 for the
second quarter of 2019. For these periods, Adjusted EPS from
continuing operations is defined as diluted income from continuing
operations per common and common equivalent share excluding
non-cash amortization expense, stock-based compensation expense,
transformational and restructuring related expenses, and discrete
tax items. Funds received from the provider relief fund established
by the CARES Act impacted Adjusted EPS positively by $0.05 for the
2020 second quarter.
For the six months ended June 30, 2020, MEDNAX generated revenue
from continuing operations of $1.07 billion, compared to $1.10
billion in the prior-year period. Adjusted EBITDA from continuing
operations for the six months ended June 30, 2020 was $115.3
million, compared to $165.8 million for the prior year. MEDNAX
reported a loss from continuing operations of $6.1 million, or
$0.07 per share, for the six months ended June 30, 2020, based on a
weighted average 83.1 million shares outstanding, which compares to
income from continuing operations of $42.6 million, or $0.50 per
share, based on a weighted average 85.1 million shares outstanding
for the first six months of 2019. For the six months ended June 30,
2020, MEDNAX reported Adjusted EPS from continuing operations of
$0.52, compared to $0.96 in the same period of 2019.
Financial Position and Cash Flow – Continuing Operations
MEDNAX had cash and cash equivalents of $132.2 million at June
30, 2020, compared to approximately $90 million on May 31, 2020, as
previously disclosed, and net accounts receivable were $345.7
million.
During the second quarter of 2020, MEDNAX generated cash from
continuing operations of $193.4 million, compared to $71.1 million
during the second quarter of 2019.
At June 30, 2020, MEDNAX had no outstanding borrowings under its
$1.2 billion revolving credit facility and had total debt
outstanding of $1.75 billion, consisting solely of its senior
notes, and net debt of $1.62 billion. Additionally, the Company
expects to realize significant one-time cash benefits during the
second half of 2020 that total more than $100 million, including
the collection of remaining working capital retained as part of the
divestiture of American Anesthesiology and certain cash income
taxes receivable.
“A key priority throughout this tremendously challenging period
has been to ensure that we maintain meaningful financial strength
in order to support our national medical group and our commitment
to be there for patients every day,” said Mr. Farber. “Our strong
cash flow generated during the quarter, combined with significant
efforts to reduce expenses, enabled us to do just that, on behalf
of our affiliated clinicians, their patients, and our health system
partners.”
Discontinued Operations
The results for American Anesthesiology are presented as a
component of discontinued operations for the three and six months
ended June 30, 2020 and all prior periods.
During the second quarter, the Company reported a net loss from
discontinued operations of $680 million, which predominantly
reflects a non-cash loss on sale.
Non-GAAP Measures
A reconciliation of Adjusted EBITDA from continuing operations
and Adjusted EPS from continuing operations to the most directly
comparable GAAP measures for the three and six months ended June
30, 2020 and 2019 is provided in the financial tables of this press
release.
Earnings Conference Call
MEDNAX, Inc. will host an investor conference call to discuss
the quarterly results at 10 a.m. ET 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
12:00 p.m. ET today through midnight ET August 6, 2020 by dialing
866.207.1041, access Code 9441311. The replay will also be
available at www.mednax.com.
ABOUT MEDNAX
MEDNAX, Inc. is a national health solutions partner comprised of
the nation's leading providers of physician services. Physicians
and advanced practitioners practicing as part of MEDNAX are
reshaping the delivery of care within their specialties and
subspecialties, using evidence-based tools, continuous quality
initiatives, consulting services, clinical research and
telemedicine to enhance patient outcomes and provide high-quality,
cost-effective care. The Company was founded in 1979, and today,
through its affiliated professional corporations, MEDNAX provides
services through a network of more than 3,000 physicians in all 50
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 (the “Securities Act”),
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 the Company’s 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 the Company’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 the Company
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
the Company’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 the Company’s current reports on Form 8-K,
filed with the Securities and Exchange Commission, and include the
impact of the COVID-19 outbreak on the Company and its financial
condition and results of operations; the effects of economic
conditions on the Company’s business; the effects of the Affordable
Care Act and potential changes thereto or a repeal thereof; the
Company’s relationships with government-sponsored or funded
healthcare programs, including Medicare and Medicaid, and with
managed care organizations and commercial health insurance payors;
the Company’s ability to comply with the terms of its debt
financing arrangements; the impact of the divestiture of the
Company’s anesthesiology medical group; whether the Company will be
able to complete the divestiture of its radiology medical group and
the terms of any such divestiture; the timing and contribution of
future acquisitions; the effects of share repurchases; and the
effects of the Company’s transformation initiatives, including its
reorientation on, and growth strategy for, its pediatrics and
obstetrics business.
MEDNAX, INC.
Consolidated Statements of
Income
(in thousands, except per
share data)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Net revenue
$
509,203
$
561,237
$
1,071,054
$
1,104,249
Operating expenses:
Practice salaries and benefits
349,258
361,203
748,715
731,571
Practice supplies and other operating
expenses
21,433
24,783
46,839
47,107
General and administrative expenses
77,674
84,219
165,232
165,790
Depreciation and amortization
14,393
13,779
28,792
27,584
Transformational and restructuring related
expenses
11,537
17,866
30,581
20,305
Total operating expenses
474,295
501,850
1,020,159
992,357
Income from operations
34,908
59,387
50,895
111,892
Investment and other income
3,851
1,219
3,172
2,866
Interest expense
(28,265)
(31,063)
(55,931)
(61,764)
Equity in earnings of unconsolidated
affiliates
479
1,990
1,824
3,187
Total non-operating expenses
(23,935)
(27,854)
(50,935)
(55,711)
Income (loss) from continuing operations
before income taxes
10,973
31,533
(40)
56,181
Income tax provision
(3,373)
(11,486)
(6,109)
(13,588)
Income (loss) from continuing
operations
7,600
20,047
(6,149)
42,593
Loss from discontinued operations, net of
tax
(680,036)
(28,292)
(684,999)
(293,710)
Net loss
$
(672,436)
$
(8,245)
$
(691,148)
$
(251,117)
Per common and common equivalent share
data (diluted):
Income (loss) from continuing
operations
$
0.09
$
0.24
$
(0.07)
$
0.50
Loss from discontinued operations
$
(8.12)
$
(0.34)
$
(8.25)
$
(3.45)
Net loss
$
(8.03)
$
(0.10)
$
(8.32)
$
(2.95)
Weighted average diluted shares
outstanding
83,745
83,689
83,061
85,087
MEDNAX, Inc.
Reconciliation of Income
(Loss) from Continuing Operations
to Adjusted EBITDA from
Continuing Operations
(in thousands)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Income (loss) from continuing
operations
$
7,600
$
20,047
$
(6,149)
$
42,593
Interest expense
28,265
31,063
55,931
61,764
Income tax provision
3,373
11,486
6,109
13,588
Depreciation and amortization
14,393
13,779
28,792
27,584
Transformational and restructuring related
expenses
11,537
17,866
30,581
20,305
Adjusted EBITDA from continuing
operations
$
65,168
$
94,241
$
115,264
$
165,834
MEDNAX, Inc.
Reconciliation of Diluted
Income (Loss) from Continuing Operations per Share
to Adjusted Income from
Continuing Operations per Diluted Share (“Adjusted EPS”)
(in thousands, except per
share data)
(Unaudited)
Three Months Ended June
30,
2020
2019
Weighted average diluted shares
outstanding
83,745
83,689
Income from continuing operations and
diluted income from continuing operations per share
$
7,600
$
0.09
$
20,047
$
0.24
Adjustments (1):
Amortization (net of tax of $1,731 and
$1,655)
5,193
0.06
4,964
0.06
Stock-based compensation (net of tax of
$1,658 and $2,477)
4,973
0.06
7,430
0.09
Transformational and restructuring related
expenses (net of tax
of $2,884 and $4,467)
8,653
0.11
13,400
0.16
Net impact from discrete tax events
171
—
2,987
0.03
Adjusted income and diluted EPS from
continuing operations
$
26,590
$
0.32
$
48,828
$
0.58
(1) The Company’s blended statutory tax
rate of 25% was used to calculate the tax effects of the
adjustments for the three months ended June 30, 2020 and 2019.
Six Months Ended June
30,
2020
2019
Weighted average diluted shares
outstanding
83,061
85,087
(Loss) income from continuing operations
and diluted income from continuing operations per share
$
(6,149)
$
(0.07)
$
42,593
$
0.50
Adjustments (1):
Amortization (net of tax of $3,454 and
$3,328)
10,363
0.12
9,984
0.12
Stock-based compensation (net of tax of
$3,579 and $5,214)
10,738
0.13
15,639
0.18
Transformational and restructuring related
expenses (net of tax
of $7,645 and $5,076)
22,936
0.28
15,229
0.18
Net impact from discrete tax events
5,028
0.06
(1,601)
(0.02)
Adjusted income and diluted EPS from
continuing operations
$
42,916
$
0.52
$
81,844
$
0.96
(1) The Company’s blended statutory tax rate of 25% was used to
calculate the tax effects of the adjustments for the six months
ended June 30, 2020 and 2019.
MEDNAX, INC.
Balance Sheet
Highlights
(in thousands)
(Unaudited)
As of
As of
June 30, 2020
December 31, 2019
Assets:
Cash and cash equivalents
$
132,151
$
107,870
Investments
90,642
74,510
Accounts receivable, net
345,682
498,869
Other current assets
55,426
38,690
Income taxes receivable
64,428
—
Intangible assets, net
200,408
209,564
Operating lease right-of-use assets
75,817
71,421
Goodwill, other assets, property and
equipment
2,422,658
2,451,096
Assets held for sale
—
693,881
Total assets
$
3,387,212
$
4,145,901
Liabilities and shareholders’
equity:
Accounts payable and accrued expenses
$
360,909
$
453,110
Total debt, net
1,738,602
1,730,425
Operating lease liabilities
78,534
77,067
Other liabilities
382,597
312,298
Liabilities held for sale
—
74,005
Total liabilities
2,560,642
2,646,905
Total shareholders’ equity
826,570
1,498,996
Total liabilities and shareholders’
equity
$
3,387,212
$
4,145,901
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200730005176/en/
Charles Lynch Senior Vice President, Finance and Strategy
954-384-0175, x 5692 charles_lynch@mednax.com
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