September 21, 2009 - MEDNAX, Inc. (MD-NYSE) through its subsidiaries, provides neonatal, maternal-fetal, other pediatric subspecialty, and anesthesia physician services in the United States and Puerto Rico. The company's neonatal care services include clinical care to babies born prematurely or with complications through neonatologists, neonatal nurse practitioners, and other pediatric clinicians.

The company's pediatric cardiology care services consist of inpatient and outpatient pediatric cardiology care of the fetus, infant, child, and adolescent patients with congenital heart defects and acquired heart disease, as well as adults with congenital heart defects through pediatric cardiologist sub specialists, pediatric nurse practitioners, echocardiographers, diagnostic technicians, and exercise physiologists.

Its other pediatric subspecialty care services include care of critically ill or injured children and adolescents through pediatric intensivists. The company provides anesthesia care through a team of physician anesthesiologists, certified registered nurse anesthetists, and anesthesia assistants. It also conducts clinical research, monitors clinical outcomes and implements clinical quality initiatives. As of December 31, 2008, the company's network comprised 1,274 affiliated physicians, including 844 neonatal physicians. MEDNAX was founded in 1979 and is based in Sunrise, Florida.

MEDNAX is acting as a consolidator in an industry that has many individual or small groups practicing neonatal and pediatric services as well as anesthesia services. This year it's already spent $75 million on buying these types of practices. In the last quarter's conference call, management announced another acquisition was imminent and that it could be rather large.

MEDNAX is expanding its anesthesia business, and integrating its billilng system into one location in Raleigh, N.C.. That move improved collections and operating margins. In fact, the CFO of the company is presiding over this division, suggesting that it plays an important role in the company's future.

A couple of concerns should be noted. First, the anesthesia business has a strong reliance on government reimbursements. That makes it vulnerable to bureaucratic decisions that may or may not reflect the cost of the service or the quality. Second, with the economy in such straits, will there be as many babies born as everyone is looking to cut back on expenses? So far, that has not happened, but even if it did, for long term investors, it would suggest that when the economy improves, the birth rate will as well.

More numbers: Market Cap is $2.4 billion. Forward P/E is 13.67. Price to Book is 2.25. Operating margin for the last 12 months was 21.79% while the Profit margin was 12.93%. Total revenues in 2008 were $1.068 billion. (This year's estimate is for $1.28 billion, up 20%.) There's $31.19 million in cash or 67 cents a share in cash. Total debt is $152.8 million which is 27% of capital. Book Value per share is $22.79. 52-week range has been $23.36 to $58.15. There are 46.38 million shares outstanding with Insiders holding 1.4%. Institutions have 94.6%. There is no dividend.

MEDNAX should see continued growth. And if the birth rate holds or starts to increase, expect all the numbers to get revised higher. The new pursuit of anesthesia is currently paying off but the government reimbursement caveat is a wise one to heed. This is a stock that traded at $72.50 at the beginning of 2008 then lost a lot of ground, finally bottoming in November of last year at $23.36. It can move quickly. It's recovered quite a bit of the loss. Can it keep going and break into new highs? Only time will tell.

Company Web site: www.mednax.com

- Ted Allrich