Q3 2011 Earnings Conference Call

November 1, 2011 10:00 AM ET


David Parker – VP, IR

Roger Medel – Director and CEO

Vivian Lopez-Blanco – CFO

Karl Wagner – President, American Anesthesiology


Brian Zimmerman – Deutsche Bank

Joanna Gajuk – Bank of America

Ryan Daniels – William Blair

Bill Bonello – RBC Capital Markets

Robert Mains – Morgan Keegan

Ralph Giacobbe – Credit Suisse

Kevin Ellich – Piper Jaffray

Brooks O'Neill – Dougherty & Company

Matt Weight – Feltl & Company



Ladies and gentlemen, thank you for standing by. Welcome to the MEDNAX 2011 third quarter earnings call. For the conference all the participants are in a listen-only mode. There will be an opportunity for your questions instructions will be given at that time (Operator Instructions) and as a reminder, this call is being recorded.

Now that been said, I'll turn the conference now to the Vice President of Investor Relations Mr. David Parker. Please go ahead.

David Parker

Thank you, John and good morning everyone. Certain statements and information presenting during this conference call may contain forward-looking statements. These forward-looking statements 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 made during this call are made as of today, and MEDNAX undertakes no duty to update or revise any such statements whether as a result of new information, future events or otherwise. 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, including the sections entitled Risk Factors, which is available on the Investors page of our website,

In addition, during this call we will discuss certain non-GAAP items for the three and nine months periods ended September 30, 2010. This morning’s press release contains a detailed GAAP reconciliation table and that is available on the Investors page of our website, Joining me on the call today are Roger Medel, our Chief Executive Officer and Vivian Lopez-Blanco, our Chief Financial Officer.

With that, I would like to turn the call over to Roger.

Roger Medel

Thank you, David and good morning and thanks for joining our conference call this morning. As we take a look at our third quarter and year-to-date results I am going to focus my comments on two key areas that demonstrate the strength and efficiency of our model and our resources as we strive to take great care of our patients. These areas are growth and operating momentum.

With our third quarter results we have demonstrated strong growth and the continuation of our positive operating momentum. Our revenue was up over 16% year-over-year largely as a result of acquisitions completed in the past year and also reflects same unit revenue growth. We also continued to expand operating margins as we successfully integrate new group practices into our existing operations and as we look for ways to improve the efficiency of our National Medical Group.

Supporting our growth efforts, we recently announced that we have expanded our credit facility by $150 million to $500 million and extended it for five years to 2016. This was done for two main reasons; first, we believe this was a good opportunity to access the credit markets to expand our availability of capital and more importantly this highlights the confidence that we have in our ability to invest that capital by continuing to make accretive acquisitions.

This morning we announced the acquisition of Bexar Pediatric Surgery Associates in San Antonio, Texas. This practice consists of five pediatric surgeons and one pediatric plastic surgeon. This is the first pediatric surgery practice that we have acquired and while this is a relatively small sub-specialty we believe it is a welcome addition to our Pediatrix division. Pediatric surgeons provide specialized care for patients ranging from new born to adolescents for all problems or conditions affecting children that require surgical intervention and also have particular expertise in the areas of neonatal and prenatal surgery. From a continuum of care perspective pediatric surgeons typically work closely with neonatologists and pediatric cardiologists.

Bexar Pediatric Surgery Associates have long-term relationships with the large San Antonio area hospitals consistent with the existing and strong relationships our pediatrics group has established in this same metropolitan area. This acquisition further strengthens our relationships with hospitals in the San Antonio area and provides the opportunity for a more collaborative patient care approach and the ability to offer patients a broader continuum of care with our existing hospital partners.

We have further been active throughout the third quarter on the business development side. During the quarter, we completed four acquisitions on September 30 we completed the acquisition of Midwest Maternal-Fetal Medicine in Saint Louis, Missouri. This practice has long standing relationships with three large area hospitals in the Saint Louis community. Their six physicians and 14 clinical and administrative staffs are being integrated into our Pediatrix Medical Group division. As with many of our physician partners Midwest Maternal-Fetal Medicine saw this partnership as a way to enhance quality improvement initiatives share clinical outcomes data and bench practices and have a greater role in advancing healthcare while achieving the best possible outcomes for their patients.

We also have the opportunity to address the continuum of care advantages for our patients as our neonatal specialist currently provide services in two of the three hospitals served by Midwest Maternal-Fetal Medicine. I will touch on the next three acquisitions only briefly since I mentioned them on our second quarter call shortly after we announced them. Nevertheless they are important new practices that we have added to our National Medical Group during this third quarter. Pinnacle Anesthesia is an anesthesia group practice that staffs two hospitals in Southern Palm Beach County, Florida just north of our headquarters as well as several office based physician groups in the area. The clinical and administrative operations of these 15 physicians and 16 nurse anesthetists are currently being integrated into our American Anesthesiology division.

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