AmSurg Reports Third-Quarter Net Earnings Per Diluted Share From Continuing Operations Of $0.42, Including NSC Transaction Costs Of $0.03

Christopher A. Holden, President and Chief Executive Officer of AmSurg Corp. (NASDAQ: AMSG), today announced financial results for the third quarter ended September 30, 2011. Revenues for the quarter rose 11% to $195,934,000 from $176,343,000 for the third quarter of 2010. Net earnings from continuing operations attributable to AmSurg common shareholders were $13,069,000, or $0.42 per diluted share, for the third quarter of 2011 compared with $12,844,000, or $0.42 per diluted share, for the third quarter of 2010. As anticipated, the results for the third quarter of 2011 included an incremental negative impact of $0.01 per diluted share from the revision of the Medicare payment system for ASCs, as well as transaction costs of $0.03 per diluted share related to the National Surgical Care (“NSC”) transaction.

Revenues for the first nine months of 2011 increased 8% to $563,534,000 from $520,068,000 for the first nine months of 2010. Net earnings from continuing operations attributable to AmSurg common shareholders were $37,502,000, or $1.20 per diluted share, for the first nine months of 2011 compared with $37,961,000, or $1.24 per diluted share, for the same period in 2010. The results for the first nine months of 2011 included an incremental negative impact of $0.04 per diluted share from the revision of the Medicare payment system for ASCs, $0.05 per diluted share for NSC transaction costs, and $0.07 per diluted share from the higher interest costs related to the refinancing of the Company’s credit facility in May 2010 and a higher effective tax rate.

Mr. Holden remarked, “Our third-quarter results, which included a 1% increase in same-center revenue, indicate that the tenor of our business has improved over the past year, despite the continued impact of the weak national economy and persistent high unemployment. The 11% increase in comparable-quarter revenues was produced primarily by 9% growth in procedures, as well as by a 3% increase in revenue per procedure, which reflected an increasing multi-specialty component in procedure mix. Most of our procedure growth resulted from centers acquired since the third quarter last year.

“Our EBITDA less noncontrolling interests was 16.2% of revenues for the third quarter of 2011, compared with 17.9% for the third quarter of 2010. The NSC transaction costs accounted for approximately 70 basis points of this decline, with the remainder primarily due to the revision to the Medicare payment system for ASCs. Partially offsetting the NSC transaction costs for the third quarter, the NSC centers acquired on September 1, 2011 contributed approximately $0.01 per diluted share to net earnings from continuing operations attributable to AmSurg common shareholders for the quarter.

“The NSC transaction brought 17 new centers to AmSurg, including 15 multi-specialty centers and two gastroenterology centers. Because of our minority ownership position in the two GI centers, their operations have not been consolidated into our financial results. One multi-specialty center is being held for potential sale under a change in control provision and is, therefore, included in our statistics for the third quarter as both an acquired center and a discontinued operation. In addition to the NSC transaction, we acquired two other centers during the third quarter and disposed of a center through an asset sale after its operations had been relocated. Through the first nine months of 2011, we have added eight non-NSC centers, including seven through acquisition and one de novo center. We completed the third quarter with five centers under letter of intent and one center under development, which is expected to open in 2012.

“Net cash flows from operating activities were $62.6 million for the third quarter of 2011 compared with $57.9 million for the third quarter last year. Excluding distributions to noncontrolling interests, net cash flows from operations increased to $26.5 million for the latest quarter, which is 2 times net earnings from continuing operations attributable to AmSurg common shareholders, from $24.8 million for the third quarter of 2010. At September 30, 2011, the ratio of total debt to EBITDA, as calculated under our credit agreement, was 2.8, we had cash and cash equivalents of $35.8 million and our availability under our revolving credit facility was $129.5 million.

“We have previously discussed our expectation that the NSC transaction will be accretive to our established financial guidance for 2011, in a range of $0.02 to $0.03 per diluted share, excluding transaction costs, which are now expected to total approximately $0.09 per diluted share for 2011. We today update our previously established guidance for 2011 to include the impact of the NSC transaction, and we establish our guidance for the fourth quarter of 2011, as follows:

  • Revenues in a range of $770 million to $780 million for 2011, compared with the previous range of $740 million to $770 million.
  • Same-center revenue increase of 1% for 2011, compared with the previous range of 0% to 1%.
  • The addition of 18 to 20 new centers for the year, not including the net 16 centers acquired in the NSC transaction.
  • Net cash flow provided by operating activities, less distributions to noncontrolling interests, in a range of $95 million to $100 million for 2011, compared with the previous range of $90 million to $95 million.
  • Adjusted net earnings from continuing operations per diluted share attributable to common shareholders for 2011 in a range of $1.69 to $1.71 and net earnings from continuing operations per diluted share attributable to common shareholders in a range of $1.60 to $1.62. Adjusted net earnings exclude NSC transaction costs of approximately $0.09 per diluted share, while both adjusted net earnings and net earnings include a negative $0.05 per diluted share impact from the effect of the revised Medicare payment system and a negative $0.07 per diluted share impact from higher interest costs related to the refinancing of our revolving credit facility and the higher effective tax rate.
  • Adjusted net earnings from continuing operations per diluted share attributable to common shareholders for the fourth quarter of 2011 in a range of $0.45 to $0.47 and net earnings from continuing operations per diluted share attributable to common shareholders in a range of $0.41 to $0.43. Adjusted net earnings exclude NSC transaction costs of approximately $0.04 per diluted share, while both adjusted net earnings and net earnings include a negative $0.01 per diluted share impact from the effect of the revised Medicare payment system revision.”

Please see page 9 for a reconciliation of adjusted net earnings from continuing operations per diluted share attributable to AmSurg Corp. common shareholders and net earnings from continuing operations per diluted share attributable to AmSurg Corp. common shareholders.

Mr. Holden concluded, “While we are cautious about the continuing negative effect of the weak economic environment and continuing high unemployment, the NSC transaction, which is expected to contribute to earnings for 2012 in a range of $0.09 to $0.13 per diluted share, is one of several factors that position AmSurg to produce stronger results for 2012. We have also cycled the negative comparable-quarter impact of our refinancing at the end of May 2010, which reduced earnings per diluted share for the first half of 2011 by approximately $0.07. In addition, with the 2011 completion of reductions in Medicare rate reimbursement, which are expected to lower 2011 earnings by $0.05 per diluted share, we face no scheduled reduction in Medicare rates in 2012 for the first time in four years. We further expect that our acquisitions of non-NSC centers during 2011 will produce a significantly more positive financial impact during 2012 than during their partial year as AmSurg centers in 2011.”

The information contained in the preceding paragraphs is forward-looking information, and the attainment of these targets is dependent not only on AmSurg’s achievement of its assumptions discussed above, but also on the risks and uncertainties listed below that could cause actual results, performance or developments to differ materially from those expressed or implied by this forward-looking information.

AmSurg Corp. will hold a conference call to discuss this release today at 5:00 p.m. Eastern time. Investors will have the opportunity to listen to the conference call over the Internet by going to www.amsurg.com and clicking “Investors” or by going to www.earnings.com at least 15 minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available at these sites shortly after the call and continue for 30 days.

This press release contains forward-looking statements. These statements, which have been included in reliance on the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, involve risks and uncertainties. Investors are hereby cautioned that these statements may be affected by the important factors, among others, set forth in AmSurg’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and other filings with the Securities and Exchange Commission, including the following risks: the risk that payments from third-party payors, including government healthcare programs, may decrease or not increase as the Company’s costs increase; adverse developments affecting the medical practices of the Company’s physician partners; the Company’s ability to maintain favorable relations with its physician partners; the Company’s ability to acquire and develop additional surgery centers on favorable terms; the Company’s ability to grow revenues by increasing procedure volume while maintaining its operating margins and profitability at its existing centers; the Company’s ability to manage the growth in its business; the Company’s ability to obtain sufficient capital resources to complete acquisitions and develop new surgery centers; the Company’s ability to compete for physician partners, managed care contracts, patients and strategic relationships; adverse weather and other factors beyond the Company’s control that may affect the Company’s surgery centers; adverse impacts on the Company’s business associated with current and future economic conditions; the Company’s failure to comply with applicable laws and regulations; the risk of changes in legislation, regulations or regulatory interpretations that may negatively affect the Company; the risk of becoming subject to federal and state investigation; the risk from an unpredictable impact of the Health Reform Law; the risk of regulatory changes that may obligate the Company to buy out interests of physicians who are minority owners of its surgery centers; potential liabilities associated with the Company’s status as a general partner of limited partnerships; liabilities for claims brought against our facilities; the Company’s legal responsibility to minority owners of its surgery centers, which may conflict with its interests and prevent it from acting solely in its best interests; risks associated with the potential write-off of the impaired portion of intangible assets; and potential liability relating to the tax deductibility of goodwill. Consequently, actual results, performance or developments may differ materially from the forward-looking statements included above. AmSurg disclaims any intent or obligation to update these forward-looking statements.

AmSurg Corp. acquires, develops and operates ambulatory surgery centers in partnership with physician practice groups throughout the United States. At September 30, 2011, AmSurg owned and operated 225 centers and had one center under development.

 
AMSURG CORP.
Unaudited Selected Consolidated Financial and Operating Data
(Dollars in thousands, except per share amounts)
                       
For the Three Months For the Nine Months
Ended September 30,   Ended September 30,

Statement of Earnings Data:
2011 2010 2011 2010
 
Revenues $ 195,934 $ 176,343 $ 563,534 $ 520,068
 
Operating expenses:
Salaries and benefits 60,841 53,350 173,943 155,594
Supply cost 25,431 23,155 72,466 67,923
Other operating expenses 43,370 36,918 122,039 111,539
Depreciation and amortization   6,559     6,975     18,661     18,498  
 
Total operating expenses 136,201 120,398 387,109 353,554
 
Equity in earnings of unconsolidated affiliates   147     -     147     -  
 
Operating income 59,880 55,945 176,572 166,514
 
Interest expense   3,599     4,040     11,175     9,071  
 
Earnings from continuing operations before income taxes 56,281 51,905 165,397 157,443
Income tax expense   8,486     7,644     25,749     25,165  
 
Net earnings from continuing operations 47,795 44,261 139,648 132,278
 
Discontinued operations:

(Loss) earnings from operations of discontinued interests in surgery centers, net of income tax
(59 ) 971 358 3,094
Loss on disposal of discontinued interests in surgery centers, net of income tax   (119 )   (97 )   (1,384 )   (97 )
 
Net (loss) earnings from discontinued operations   (178 )   874     (1,026 )   2,997  
 
Net earnings 47,617 45,135 138,622 135,275
 
Less net earnings attributable to noncontrolling interests:
Net earnings from continuing operations 34,726 31,417 102,146 94,317
Net (loss) earnings from discontinued operations   (235 )   600     27     2,001  
 
Total net earnings attributable to noncontrolling interests   34,491     32,017     102,173     96,318  
 
Net earnings attributable to AmSurg Corp. common shareholders $ 13,126   $ 13,118   $ 36,449   $ 38,957  
 
Amounts attributable to AmSurg Corp. common shareholders:
Earnings from continuing operations, net of income tax $ 13,069 $ 12,844 $ 37,502 $ 37,961
Discontinued operations, net of income tax   57     274     (1,053 )   996  
 
Net earnings attributable to AmSurg Corp. common shareholders $ 13,126   $ 13,118   $ 36,449   $ 38,957  
 
Earnings per share-basic:

Net earnings from continuing operations attributable to AmSurg Corp. common shareholders
$ 0.43 $ 0.42 $ 1.23 $ 1.26

Net earnings (loss) from discontinued operations attributable to AmSurg Corp. common shareholders
  0.00     0.01     (0.03 )   0.03  
 
Net earnings attributable to AmSurg Corp. common shareholders $ 0.43   $ 0.43   $ 1.20   $ 1.29  
 
Earnings per share-diluted:

Net earnings from continuing operations attributable to AmSurg Corp. common shareholders
$ 0.42 $ 0.42 $ 1.20 $ 1.24

Net earnings (loss) from discontinued operations attributable to AmSurg Corp. common shareholders
  0.00     0.01     (0.03 )   0.03  
 
Net earnings attributable to AmSurg Corp. common shareholders $ 0.42   $ 0.43   $ 1.17   $ 1.27  
 
Weighted average number of shares and share equivalents (000's):
Basic 30,436 30,251 30,424 30,234
Diluted 31,162 30,620 31,174 30,664
 
AMSURG CORP.
Unaudited Selected Consolidated Financial and Operating Data, continued
(Dollars in thousands)
                 
For the Three Months For the Nine Months
Ended September 30, Ended September 30,

Operating Data:
2011 2010 2011 2010
 
Continuing centers in operation at end of period (consolidated) 223 199 223 199
Continuing centers in operation at end of period (unconsolidated) 2 - 2 -
Average number of continuing centers in operation (consolidated) 214 199 208 197
New centers added during the period 19 2 25 4
Centers discontinued during the period 2 - 6 -
Centers under development/not opened at end of period 1 1 1 1
Centers under letter of intent at end of period 5 7 5 7
Average revenue per consolidated center $ 915 $ 887 $ 2,707 $ 2,643
Same center revenues increase (decrease) 1 % (2 %) 1 % (2 %)
Procedures performed during the period at consolidated centers 349,036 319,870 1,009,112 937,542
Income tax expense attributable to noncontrolling interests $ 193 $ 198 $ 497 $ 597
Reconciliation of net earnings to EBITDA (1):

Net earnings from continuing operations attributable to AmSurg Corp. common shareholders
$ 13,069 $ 12,844 $ 37,502 $ 37,961
Add: income tax expense 8,486 7,644 25,749 25,165
Add: interest expense, net 3,599 4,040 11,175 9,071
Add: depreciation and amortization   6,559     6,975     18,661     18,498  
 
EBITDA $ 31,713   $ 31,503   $ 93,087   $ 90,695  
 
(1) EBITDA is defined as earnings before interest, income taxes and depreciation and amortization. EBITDA should not be considered a measure of financial performance under generally accepted accounting principles. Items excluded from EBITDA are significant components in understanding and assessing financial performance. EBITDA is an analytical indicator used by management and the health care industry to evaluate company performance, allocate resources and measure leverage and debt service capacity. EBITDA should not be considered in isolation or as an alternative to net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, EBITDA as presented may not be comparable to other similarly titled measures of other companies. Net earnings from continuing operations attributable to AmSurg Corp. common shareholders is the financial measure calculated and presented in accordance with generally accepted accounting principles that is most comparable to EBITDA as defined.
             
AMSURG CORP.
Unaudited Selected Consolidated Financial and Operating Data, continued
(Dollars in thousands)
     
September 30, December 31,

Balance Sheet Data:
2011 2010
 
Assets
 
Current assets:
Cash and cash equivalents $ 35,839 $ 34,147
Accounts receivable, net of allowance of $14,161 and $13,070, respectively 86,413 67,617
Supplies inventory 13,996 10,157
Deferred income taxes 281 1,509
Prepaid and other current assets 19,123 18,660
Current assets held for sale   357   866  
 
Total current assets 156,009 132,956
 
Property and equipment, net 135,403 119,167
Investments in unconsolidated affiliates 10,857 -
Goodwill 1,151,705 894,497
Intangible assets, net 15,551 11,361
Long-term assets held for sale   143   7,897  
 
Total assets $ 1,469,668 $ 1,165,878  
 
Liabilities and Equity
 
Current liabilities:
Current portion of long-term debt $ 9,454 $ 6,648
Accounts payable 17,077 15,291
Accrued salaries and benefits 20,245 17,952
Other accrued liabilities 6,101 3,136
Current liabilities held for sale   131   536  
 
Total current liabilities 53,008 43,563
 
Long-term debt 417,390 283,215
Deferred income taxes 108,106 90,089
Other long-term liabilities 20,929 24,404
Noncontrolling interests - redeemable 167,652 147,740
Equity:

Common stock, no par value 70,000,000 shares authorized, 31,289,614 and 31,039,770 shares outstanding, respectively
172,780 171,522
Retained earnings 429,510 393,061
Accumulated other comprehensive loss, net of income taxes   -   (515 )
 
Total AmSurg Corp. equity 602,290 564,068
Noncontrolling interests - non-redeemable   100,293   12,799  
 
Total equity   702,583   576,867  
 
Total liabilities and equity $ 1,469,668 $ 1,165,878  
         
AMSURG CORP.
Unaudited Selected Consolidated Financial and Operating Data, continued
(Dollars in thousands)
       
For the Three Months For the Nine Months
Ended September 30,   Ended September 30,

Statement of Cash Flow Data:
2011 2010 2011 2010
 
Cash flows from operating activities:
Net earnings $ 47,617 $ 45,135 $ 138,622 $ 135,275
Adjustments to reconcile net earnings to net cash flows provided by operating activities:
Depreciation and amortization 6,559 6,975 18,661 18,498
Net (gain) loss on sale of long-lived assets (917 ) 159 (1,280 ) 159
Share-based compensation 1,591 885 4,762 3,425
Excess tax benefit from share-based compensation (26 ) (12 ) (489 ) (81 )
Deferred income taxes 7,124 5,372 18,584 13,417
Equity in earnings of unconsolidated affiliates, net (147 ) - (147 ) -

Increase (decrease) in cash and cash equivalents, net of effects of acquisition and dispositions, due to changes in:
Accounts receivable, net 863 (71 ) (671 ) (2,953 )
Supplies inventory 54 135 121 360
Prepaid and other current assets (1,026 ) (2,075 ) 1,480 (180 )
Accounts payable 1,367 520 (2,370 ) (2,253 )
Accrued expenses and other liabilities (795 ) 437 (2,661 ) (1,948 )
Other, net   318     412     995     1,037  
 
Net cash flows provided by operating activities 62,582 57,872 175,607 164,756
 
Cash flows from investing activities:
Acquisition of interest in surgery centers and related transactions (142,826 ) (8,414 ) (188,500 ) (41,615 )
Acquisition of property and equipment (5,029 ) (5,969 ) (15,332 ) (13,500 )
Proceeds from the sale of interests in surgery centers   1,205     -     4,574     -  
 
Net cash flows used in investing activities (146,650 ) (14,383 ) (199,258 ) (55,115 )
 
Cash flows from financing activities:
Proceeds from long-term borrowings 157,541 16,900 230,525 156,589
Repayment on long-term borrowings (34,691 ) (25,381 ) (99,543 ) (164,537 )
Distributions to noncontrolling interests (36,038 ) (33,040 ) (103,398 ) (98,661 )
Proceeds from issuance of common stock upon exercise of stock options 132 141 4,760 683
Repurchase of common stock - - (6,185 ) -
Capital contributions and ownership transactions by noncontrolling interests - 201 698 64
Excess tax benefit from share-based compensation 26 12 489 81
Financing cost incurred   (17 )   (38 )   (2,003 )   (4,440 )
 
Net cash flows provided by (used in) financing activities   86,953     (41,205 )   25,343     (110,221 )
 
Net increase (decrease) in cash and cash equivalents 2,885 2,284 1,692 (580 )
Cash and cash equivalents, beginning of period   32,954     26,513     34,147     29,377  
 
Cash and cash equivalents, end of period $ 35,839   $ 28,797   $ 35,839   $ 28,797  
 
AMSURG CORP.
Reconciliation of Non-GAAP Measures to GAAP Measures
(Unaudited)
                     
For the Three Months For the Year
Ended December 31, 2011   Ended December 31, 2011

2011 Guidance:
Low High Low High
 
Earnings per share-diluted:

Net earnings from continuing operations attributable to AmSurg Corp. common shareholders
$ 0.41 $ 0.43 $ 1.60 $ 1.62
Plus: NSC transaction costs   0.04   0.04   0.09   0.09
 

Adjusted net earnings from continuing operations attributable to AmSurg Corp. common shareholders (1)
$ 0.45 $ 0.47 $ 1.69 $ 1.71
 
(1) We believe the calculation of adjusted net earnings from continuing operations per diluted share attributable to AmSurg Corp. common shareholders provides a better measure of our ongoing performance and provides better comparability to prior periods because it excludes costs incurred in executing the NSC transaction, which are of a nature and significance not generally associated with our historical individual center acquisition activity. Adjusted net earnings from continuing operations per diluted share attributable to AmSurg Corp. common shareholders should not be considered as a measure of financial performance under accounting principles generally accepted in the United States, and the item excluded from it is a significant component in understanding and assessing financial performance. Because adjusted net earnings from continuing operations per diluted share attributable to AmSurg Corp. common shareholders is not a measurement determined in accordance with accounting principles generally accepted in the United States and is thus susceptible to varying calculations, it may not be comparable as presented to other similarly titled measures of other companies.

Copyright Business Wire 2010

More from Press Releases

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

21st Century Fox Scoops Up Local News Stations

21st Century Fox Scoops Up Local News Stations

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Three-Part FREE Webinar Series

Three-Part FREE Webinar Series

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

March 24 Full-Day Course Offering: Professional Approach to Trading SPX