pediatrix(US:MD)2020-11-06 12:01Divestitures and Strategic Focus - MEDNAX divested its anesthesiology services medical group for a cash payment of $50.0 million on May 6, 2020, with a potential contingent interest valued between $0 to $250 million [88]. - The company entered into an agreement to divest its radiology services medical group for $885.0 million cash on September 9, 2020, as part of its strategy to refocus on pediatrics and obstetrics [89]. Financial Performance and Revenue - Net revenue for the three months ended September 30, 2020, was $460.6 million, a 1.3% increase from $454.9 million in the same period of 2019 [113]. - Same-unit net revenue declined by $1.7 million, or 0.4%, due to a decrease in patient service volumes by $19.2 million, or 4.3%, partially offset by a $17.5 million, or 3.9%, increase from net reimbursement-related factors [113]. - Net revenue attributable to continuing operations was $1.32 billion for the nine months ended September 30, 2020, with a slight decrease of $3.8 million, or 0.3%, primarily due to COVID-19 impacts [126]. - Same-unit net revenue declined by $25.3 million, or 1.9%, with a decrease of $60.3 million, or 4.6%, related to patient service volumes [126]. - Loss from continuing operations was $14.1 million for the nine months ended September 30, 2020, compared to income of $32.3 million for the same period in 2019 [136]. Operational Adjustments and Cost Management - MEDNAX experienced a significant decline in elective surgeries and radiological studies due to COVID-19, but volumes began to normalize in May 2020 and substantially recovered in June 2020 [81]. - The company implemented salary reductions of up to 50% for executive officers and enacted furloughs for non-clinical employees to preserve financial flexibility during the pandemic [82]. - MEDNAX's transformation and restructuring initiatives aim to improve operational efficiency and reduce general and administrative expenses, although the scope was reduced due to COVID-19 [92]. - Practice salaries and benefits increased by $8.6 million, or 2.9%, to $309.9 million for the three months ended September 30, 2020 [114]. - General and administrative expenses rose to $66.3 million, an increase of $3.0 million, with expenses as a percentage of net revenue at 14.4% compared to 13.9% in the prior year [116]. COVID-19 Impact and Response - During the nine months ended September 30, 2020, MEDNAX's affiliated physician practices received approximately $20.0 million in relief payments under the CARES Act [86]. - The percentage of patient service revenue reimbursed under government-sponsored healthcare programs increased compared to the same period in 2019, indicating a shift towards lower reimbursement rates [91]. - The company anticipates that COVID-19 will continue to materially impact its financial results, but the ultimate impact remains uncertain [85]. - MEDNAX expanded its telehealth offerings through a national multi-specialty virtual clinic to support clinicians and patients during COVID-19 [84]. Future Outlook and Financial Projections - The company anticipates a higher rate of growth in clinician compensation expense, which could adversely affect financial performance [114]. - The company expects to continue operationalizing provisions of the Medicare Access and CHIP Reauthorization Act (MACRA) and assess any further changes to the law [101]. - The company anticipates that funds generated from operations, along with current cash and available funds under the Credit Agreement, will be sufficient to meet working capital requirements and contractual obligations for at least the next 12 months [154]. Debt and Liquidity - As of September 30, 2020, cash and cash equivalents attributable to continuing operations were $294.5 million, an increase from $107.9 million at December 31, 2019 [140]. - The company has $750.0 million in 5.25% senior unsecured notes due 2023, accruing interest of $39.4 million per annum, and $1.0 billion in 6.25% senior unsecured notes due 2027, accruing interest of $62.5 million per annum [150]. - The company maintains a minimum availability under the Credit Agreement of $300.0 million through the third quarter of 2021 [147]. - The Credit Agreement includes a $1.2 billion unsecured revolving credit facility, maturing on March 28, 2024, with interest rates based on the company's consolidated leverage ratio [148]. - The company recorded a total liability related to professional liability risks of $297.8 million as of September 30, 2020, with $55.5 million classified as a current liability [153].