Pediatrix Earns 80 Cents from Continuing Operations in Second Quarter

  
    
  
  
    
      Pediatrix Medical Group, Inc. (NYSE:PDX) today reported earnings of 80 
      cents per share from continuing operations for the three months ended 
      June 30, 2008, reflecting growth from acquisitions, reimbursement 
      improvements and operating efficiencies, which were partly offset by 
      lower patient volumes at neonatal intensive care units (NICUs).
    
    
      “While our operations continue to be affected 
      by lower same-unit NICU patient volume associated with a decline in the 
      number of births at hospitals where we practice, we continue to expand 
      through acquisitions across several physician specialties and to achieve 
      efficiencies through general and administrative expense management,” 
      said Roger J. Medel, M.D., Chief Executive Officer of Pediatrix. “With 
      the addition of an Atlanta anesthesia practice in July, we’re 
      meeting our growth objectives in this specialty and we remain encouraged 
      by the strategic opportunities available to us with this new platform.”
    
    
      For the three months ended June 30, 2008, Pediatrix reported net patient 
      service revenue of $257.7 million, up 15 percent from $223.3 million for 
      the comparable 2007 period. Revenue growth was driven by contributions 
      from acquisitions completed throughout the previous 12 months, as well 
      as same-unit revenue growth of 5.1 percent.
    
    
      A substantial portion of the Company’s 
      same-unit revenue growth came from reimbursement-related factors that 
      generated growth of 4.4 percent. For the 2008 second quarter, overall 
      patient volume grew by seven-tenths of one percent. Patient volume 
      growth was the result of higher demand at Pediatrix’s 
      office-based maternal-fetal and pediatric cardiology practices, as well 
      as the Company’s hearing screening program, 
      offset in part by a decline of 1.4 percent in NICU patient volume.
    
    
      Income from operations was $62.5 million for the 2008 second quarter, up 
      6 percent from $59.0 million for the comparable prior-year period on a 
      non-GAAP (Generally Accepted Accounting Principles) basis. The 2007 
      second quarter results exclude general and administrative expenses of 
      $1.8 million that were associated with a stock option review.
    
    
      Operating margin declined by 216 basis points, to 24.3 percent for the 
      2008 second quarter, from 26.4 percent, non-GAAP, for the comparable 
      2007 period. The decline in operating margin is largely attributable to 
      lower neonatal patient volume for the 2008 period, as well as the impact 
      of the Company’s entry into anesthesia 
      services and expansion of office-based maternal-fetal and pediatric 
      cardiology practices through acquisition. Pediatrix continues to benefit 
      from its ongoing general and administrative expense management efforts.
    
    
      General and administrative expense as a percent of revenue declined 28 
      basis points to 12.0 percent for the 2008 second quarter when compared 
      to non-GAAP results for the comparable 2007 period.
    
    
      Pediatrix earned income from continuing operations of $38.2 million, or 
      80 cents per share for the three months ended June 30, 2008, based on a 
      weighted average 47.7 million shares outstanding. This compares with 
      $36.8 million, non-GAAP, or 74 cents per share, for the 2007 second 
      quarter, based on a weighted average 50.1 million shares outstanding.
    
    
      Net income for the 2008 second quarter was $37.0 million, and includes a 
      loss from discontinued operations of $1.2 million related to a revision 
      of the gain calculation on the sale of the Company’s 
      newborn metabolic screening laboratory in February 2008. On a per share 
      basis, net income was 78 cents for the 2008 second quarter. For the 
      comparable 2007 period, Pediatrix’s non-GAAP 
      net income was $37.4 million, or 75 cents per share.
    
    
      The Company generated cash flow from operations of $57.3 million during 
      the 2008 second quarter. Excess cash and amounts available under the 
      Company’s revolving credit facility were used 
      to complete group practice acquisitions and repurchase shares through 
      open market transactions.
    
    
      During the 2008 second quarter, Pediatrix completed a $100 million share 
      repurchase program, and acquired four physician group practices, 
      including pediatric cardiology practices in El Paso, Texas, Pembroke 
      Pines, Florida, and Tampa, Florida, and a neonatal physician group 
      practice in Rockville, Maryland. The Company invested capital of $41.1 
      million for acquisitions during the quarter.
    
    
      Pediatrix has completed two acquisitions during the 2008 third quarter 
      to date; an anesthesia group practice based in Atlanta, Georgia, as well 
      as a maternal-fetal medicine group, also in Atlanta.
    
    
      At June 30, 2008, Pediatrix had cash and cash equivalents of $14.2 
      million and accounts receivable were $148.6 million. At the end of the 
      2008 second quarter, the Company had $57.5 million outstanding on its 
      revolving credit facility.
    
    
      For the six months ended June 30, 2008, Pediatrix reported net patient 
      service revenue of $503.3 million, up 16 percent from $434.2 million for 
      the comparable 2007 period. Operating income was $114.5 million, and 
      income from continuing operations, which excludes results from the 
      metabolic screening laboratory that was sold in early 2008, was $70.3 
      million. Earnings per share from continuing operations was $1.46 for the 
      first six months of 2008 based on a weighted average 48.3 million shares 
      outstanding. This compares with operating income of $94.7 million, and 
      income from continuing operations of $60.7 million, or $1.21 per share 
      from continuing operations based on 50.0 million shares outstanding, for 
      the first half of 2007.
    
    
      Earnings Guidance
    
    
      Pediatrix now expects that it will earn between 84 cents and 87 cents 
      per share for each of the third and fourth quarters of 2008. This 
      guidance assumes continued contributions from recent acquisitions as 
      well as practice acquisitions, other than anesthesia, that are expected 
      to be completed throughout the remainder of the year; same-unit revenue 
      growth of 2 to 4 percent from reimbursement-related factors; and a 
      decline in same-unit NICU patient volume of 1 to 4 percent for each 
      period, when compared to the prior-year period.
    
    
      Reconciliation of Non-GAAP Information
    
    
      This press release contains non-GAAP information for the 2007 second 
      quarter related to operating income, operating margin, 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 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
          
        
      
      
        
          (Unaudited)
        
      
      
        
        
        
          Three months ended

          
            June 30, 2007
          
        
      
      
        
        
        
          
            (in thousands, except for per share 
            data)
          
        
      
      
        
        
        
          
            GAAP
          
        
        
           
        
        
          
            Adjustments
          
        
        
           
        
        
          
            Non-GAAP
          
        
      
      
        
          Net patient service revenue
        
        
          
            $
          
        
        
          
            223,262
          
        
        
        
        
        
        
        
        
          
            $
          
        
        
          
            223,262
          
        
      
      
        
          Operating expenses:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Practice salaries and benefits
        
        
        
        
          126,065
        
        
        
        
        
        
        
        
        
        
        
        
          126,065
        
        
        
      
      
        
          Practice supplies and other operating expenses
        
        
        
        
          8,495
        
        
        
        
        
        
        
        
        
        
        
        
          8,495
        
        
        
      
      
        
          General and administrative expenses
        
        
        
        
          29,300
        
        
        
        
        
        
          (1,800
        
        
          )
        
        
        
        
        
        
          27,500
        
        
        
      
      
        
          Depreciation and amortization
        
        
        
        
          
            2,219
          
        
        
        
        
        
        
        
        
        
        
        
        
          
            2,219
          
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total operating expenses
        
        
        
        
          
            166,079
          
        
        
        
        
        
        
        
        
        
        
        
        
          
            164,279
          
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income from operations
        
        
        
        
          57,183
        
        
        
        
        
        
        
        
        
        
        
        
          58,983
        
        
        
      
      
        
          Operating margin
        
        
        
        
          25.6
        
        
          %
        
        
        
        
        
        
        
        
        
        
          26.4
        
        
          %
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Investment income
        
        
        
        
          1,661
        
        
        
        
        
        
        
        
        
        
        
        
          1,661
        
        
        
      
      
        
          Interest expense
        
        
        
        
          
            (122
          
        
        
          
            )
          
        
        
        
        
        
        
        
        
        
        
          
            (122
          
        
        
          
            )
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income from continuing operations before income taxes
        
        
        
        
          58,722
        
        
        
        
        
        
        
        
        
        
        
        
          60,522
        
        
        
      
      
        
          Income tax provision
        
        
        
        
          
            (23,019
          
        
        
          
            )
          
        
        
        
        
          
            (706
          
        
        
          
            )
          
        
        
        
        
        
        
          
            (23,725
          
        
        
          
            )
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income from continuing operations
        
        
        
        
          
            35,703
          
        
        
        
        
        
        
        
        
        
        
        
        
          
            36,797
          
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income from discontinued operations, net of income taxes
        
        
        
        
          
            612
          
        
        
        
        
        
        
        
        
        
        
        
        
          
            612
          
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income
        
        
          
            $
          
        
        
          
            36,315
          
        
        
           
        
        
        
        
          (1,094
        
        
          )
        
        
        
        
          $
        
        
          37,409
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Per common and common equivalent share data (diluted):
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Net income from continuing operations
        
        
          $
        
        
          0.71
        
        
        
        
        
        
          0.03
        
        
        
        
        
        
          $
        
        
          0.74
        
        
        
      
      
        
          Net income from discontinued operations
        
        
          $
        
        
          0.01
        
        
        
        
        
        
          --
        
        
        
        
        
        
          $
        
        
          0.01
        
        
        
      
      
        
          Net income
        
        
          $
        
        
          0.72
        
        
        
        
        
        
          0.03
        
        
        
        
        
        
          $
        
        
          0.75
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Weighted average shares used in computing net income per common and 
          common equivalent share (diluted)
        
        
        
        
          50,125
        
        
        
        
        
        
        
        
        
        
        
        
          50,125
        
        
        
      
    
    
      Earnings conference call
    
    
      Pediatrix Medical Group, Inc. will host an investor conference call to 
      discuss the quarterly results at 10 a.m. (EDT) 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 noon 
      (EDT) today through midnight (EDT) August 22, 2008, by dialing 
      800-475-6701, access code 954423. 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 250 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 1,100 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”.
    
    
      
        
          Pediatrix Medical Group, Inc.
        
      
      
        
          Consolidated Statements of Income
        
      
      
        
          (Unaudited)
        
      
      
        
        
        
          Three months ended
        
        
           
        
        
          Six months ended
        
      
      
        
        
        
          June 30,
        
        
        
        
          June 30,
        
      
      
        
        
        
          
            2008
          
        
        
           
        
        
        
        
          
            2007
          
        
        
        
        
        
        
          
            2008
          
        
        
           
        
        
        
        
          
            2007
          
        
      
      
        
        
        
          
            (in thousands, except for per share 
            data)
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net patient service revenue
        
        
          $
        
        
          257,704
        
        
           
        
        
        
        
          $
        
        
          223,262
        
        
           
        
        
        
        
          $
        
        
          503,277
        
        
           
        
        
        
        
          $
        
        
          434,186
        
        
           
        
      
      
        
          Operating expenses:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Practice salaries and benefits
        
        
        
        
          150,696
        
        
        
        
        
        
        
        
          126,065
        
        
        
        
        
        
        
        
          302,056
        
        
        
        
        
        
        
        
          256,415
        
        
        
      
      
        
          Practice supplies and other operating expenses
        
        
        
        
          10,529
        
        
        
        
        
        
        
        
          8,495
        
        
        
        
        
        
        
        
          20,243
        
        
        
        
        
        
        
        
          16,355
        
        
        
      
      
        
          General and administrative expenses
        
        
        
        
          31,016
        
        
        
        
        
        
        
        
          29,300
        
        
        
        
        
        
        
        
          60,772
        
        
        
        
        
        
        
        
          62,331
        
        
        
      
      
        
          Depreciation and amortization
        
        
        
        
          
            2,939
          
        
        
        
        
        
        
        
        
          
            2,219
          
        
        
        
        
        
        
        
        
          
            5,755
          
        
        
        
        
        
        
        
        
          
            4,397
          
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total operating expenses
        
        
        
        
          
            195,180
          
        
        
        
        
        
        
        
        
          
            166,079
          
        
        
        
        
        
        
        
        
          
            388,826
          
        
        
        
        
        
        
        
        
          
            339,498
          
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income from operations
        
        
        
        
          62,524
        
        
        
        
        
        
        
        
          57,183
        
        
        
        
        
        
        
        
          114,451
        
        
        
        
        
        
        
        
          94,688
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Investment income
        
        
        
        
          645
        
        
        
        
        
        
        
        
          1,661
        
        
        
        
        
        
        
        
          1,958
        
        
        
        
        
        
        
        
          3,525
        
        
        
      
      
        
          Interest expense
        
        
        
        
          
            (335
          
        
        
          
            )
          
        
        
        
        
        
        
          
            (122
          
        
        
          
            )
          
        
        
        
        
        
        
          
            (720
          
        
        
          
            )
          
        
        
        
        
        
        
          
            (343
          
        
        
          
            )
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income from continuing operations before income taxes
        
        
        
        
          62,834
        
        
        
        
        
        
        
        
          58,722
        
        
        
        
        
        
        
        
          115,689
        
        
        
        
        
        
        
        
          97,870
        
        
        
      
      
        
          Income tax provision
        
        
        
        
          
            (24,662
          
        
        
          
            )
          
        
        
        
        
        
        
          
            (23,019
          
        
        
          
            )
          
        
        
        
        
        
        
          
            (45,388
          
        
        
          
            )
          
        
        
        
        
        
        
          
            (37,174
          
        
        
          
            )
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income from continuing operations
        
        
        
        
          
            38,172
          
        
        
        
        
        
        
        
        
          
            35,703
          
        
        
        
        
        
        
        
        
          
            70,301
          
        
        
        
        
        
        
        
        
          
            60,696
          
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income (loss) from discontinued operations, net of income taxes
        
        
        
        
          
            (1,158
          
        
        
          
            )
          
        
        
        
        
        
        
          
            612
          
        
        
        
        
        
        
        
        
          
            22,519
          
        
        
        
        
        
        
        
        
          
            1,201
          
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income
        
        
          $
        
        
          37,014
        
        
           
        
        
        
        
          $
        
        
          36,315
        
        
           
        
        
        
        
          $
        
        
          92,820
        
        
           
        
        
        
        
          $
        
        
          61,897
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Per common and common equivalent share data (diluted):
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income from continuing operations
        
        
          $
        
        
          0.80
        
        
        
        
        
        
          $
        
        
          0.71
        
        
        
        
        
        
          $
        
        
          1.46
        
        
        
        
        
        
          $
        
        
          1.21
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income (loss) from discontinued operations
        
        
        
        
          (0.02
        
        
          )
        
        
        
        
          $
        
        
          0.01
        
        
        
        
        
        
          $
        
        
          0.46
        
        
        
        
        
        
          $
        
        
          0.03
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income
        
        
          $
        
        
          0.78
        
        
        
        
        
        
          $
        
        
          0.72
        
        
        
        
        
        
          $
        
        
          1.92
        
        
        
        
        
        
          $
        
        
          1.24
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Weighted average shares used in computing net income per common and 
          common equivalent share (diluted)
        
        
        
        
          47,654
        
        
        
        
        
        
        
        
          50,125
        
        
        
        
        
        
        
        
          48,293
        
        
        
        
        
        
        
        
          50,019
        
        
        
      
    
    
      
        
          Balance Sheet Highlights

          
            (Unaudited)
          
        
      
      
        
           
        
      
      
        
        
        
           
        
        
          
            As of 
          
          
            June 30, 2008
          
        
        
           
        
        
          
            As of
          
          
            Dec. 31, 2007
          
        
      
      
        
        
        
        
        
          (in thousands)
        
      
      
        
          Assets:
        
        
        
        
        
        
        
        
        
      
      
        
          Cash and cash equivalents
        
        
        
        
          $
        
        
          14,233
        
        
        
        
          $
        
        
          102,843
        
      
      
        
          Short-term investments
        
        
        
        
        
        
          22,989
        
        
        
        
        
        
          18,042
        
      
      
        
          Accounts receivable, net
        
        
        
        
        
        
          148,605
        
        
        
        
        
        
          145,504
        
      
      
        
          Other current assets
        
        
        
        
        
        
          60,177
        
        
        
        
        
        
          97,737
        
      
      
        
          Other assets, property and equipment
        
        
        
        
        
        
          
            980,753
          
        
        
        
        
        
        
          
            938,676
          
        
      
      
        
          Total assets
        
        
        
        
          $
        
        
          
            1,226,757
          
        
        
        
        
          $
        
        
          1,302,802
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Liabilities and shareholders’ equity:
        
        
        
        
        
        
        
        
        
      
      
        
          Accounts payable & accrued expenses
        
        
        
        
          $
        
        
          202,031
        
        
        
        
          $
        
        
          243,120
        
      
      
        
          Total debt
        
        
        
        
        
        
          58,078
        
        
        
        
        
        
          924
        
      
      
        
          Other liabilities
        
        
        
        
        
        
          
            92,095
          
        
        
        
        
        
        
          
            99,706
          
        
      
      
        
          Total liabilities
        
        
        
        
        
        
          352,204
        
        
        
        
        
        
          343,750
        
      
      
        
          Shareholders' equity
        
        
        
        
        
        
          
            874,553
          
        
        
        
        
        
        
          
            959,052
          
        
      
      
        
          Total liabilities and shareholders’ equity
        
        
        
        
          $
        
        
          1,226,757
        
        
        
        
          $
        
        
          1,302,802