AmSurg Reports Net Earnings From Continuing Operations Of $0.51 Per Diluted Share For Second-Quarter 2012

Christopher A. Holden, President and Chief Executive Officer of AmSurg Corp. (NASDAQ: AMSG), today announced financial results for the second quarter ended June 30, 2012. Revenues for the quarter were $231.6 million, a 23% increase from $187.5 million for the second quarter of 2011. Net earnings from continuing operations attributable to AmSurg common shareholders increased to $16.2 million, or $0.51 per diluted share, for the second quarter of 2012 from $12.7 million, or $0.40 per diluted share, for the second quarter of 2011, which included acquisition transaction costs of $0.02 per diluted share. Excluding these costs from the prior year, net earnings from continuing operations per diluted share attributable to AmSurg common shareholders increased 21% to $0.51 for the latest quarter from $0.42 for the second quarter last year.

Revenues for the first six months of 2012 increased 26% to $461.8 million from $365.2 million for the same period in 2011. Net earnings from continuing operations attributable to AmSurg common shareholders increased to $31.9 million, or $1.01 per diluted share, for the first six months of 2012 from $24.3 million, or $0.78 per diluted share, for the first half of 2011, which included acquisition transaction costs of $0.02 per diluted share. Excluding these costs from the prior year, net earnings from continuing operations per diluted share attributable to AmSurg common shareholders increased 26% to $1.01 for the first half of 2012 from $0.80 for the comparable 2011 period.

Mr. Holden remarked, “AmSurg’s second-quarter results represent the third consecutive quarter in which our revenues have grown in excess of 20% on a comparable-quarter basis. For the latest quarter, this growth was driven by a 3% increase in same-center revenue, as well as an expansion in the number of centers in operation to 228 at the quarter’s end from 206 centers at the end of the second quarter last year. Our centers produced a 14% increase in procedures for the latest quarter compared with the second quarter last year, and revenue per procedure increased 8%, consistent with the growth in multi-specialty centers as a percentage of our center mix since the second quarter last year.

“During the second quarter, we completed the scheduled opening of one de novo center. We also had seven centers under letter of intent at the end of the quarter. We primarily applied our free cash flow for the quarter to net repayments of long-term debt of $27.9 million, which contributed to an improvement in our ratio of total debt to trailing 12 months EBITDA as calculated under our credit agreement to 2.6 compared with 2.8 and 2.9 at March 31, 2012 and December 31, 2011, respectively.

“Net cash flows from operating activities increased 21% for the second quarter of 2012 to $74.5 million from $61.7 million for the second quarter of 2011. Excluding distributions to noncontrolling interests, net cash flows from operations grew 17% to $30.7 million from $26.2 million. Excluding distributions to noncontrolling interests, our cash flow was 1.9 times net earnings from continuing operations attributable to AmSurg common shareholders.

“In late June, we amended our credit agreements, which increased availability under our revolving credit agreement by $25 million to $475 million, reduced the interest rate on the outstanding borrowings under the agreement and extended its term through June 2017. At the end of the second quarter, our availability under our revolving credit facility was $159 million, and we had cash and cash equivalents of $37.6 million. With expectations for continued substantial cash flow during 2012, we believe we are well positioned to fund our planned growth for the year.

“Based on our performance through the first half of 2012 and our outlook for the remainder of the year, we today affirm our established financial guidance for 2012, while increasing the lower end of the expected range of same-center revenue growth for the year. We also establish our guidance for the third quarter of 2012, which reflects our more typical seasonality, as well as one less operating day than the second quarter of 2012 and the third quarter last year, as follows:
  • Revenues in a range of $905 million to $925 million for 2012.
  • Same-center revenue increase of 2% to 3% for 2012, up from the prior range of 1% to 3%.
  • Center acquisitions for 2012 that generate annualized operating income in a range of $25 million to $29 million, including approximately $2 million from centers acquired in the first half of 2012.
  • Net cash flow provided by operating activities, less distributions to noncontrolling interests, in a range of $115 million to $120 million for 2012.
  • Net earnings from continuing operations per diluted share attributable to common shareholders for 2012 in a range of $1.97 to $2.01.
  • Net earnings from continuing operations per diluted share attributable to common shareholders for the third quarter of 2012 in a range of $0.47 to $0.49.”

Mr. Holden concluded, “We are pleased with the improved operating environment evidenced by two consecutive quarters of at least 3% same-center revenue growth, compared with 1% for the first two quarters last year. While not discounting the potential impact of uncertain economic conditions and high unemployment, our second-quarter results support our confidence in meeting our guidance of revenue and earnings growth in the mid to high teens for 2012.

“Beyond 2012, we expect AmSurg’s unique positioning in the free-standing ASC industry to support sustained growth. In operating the largest number of centers in the country, we are playing a significant role in expanding access to lower cost, high quality healthcare at a time when demand for such access from patients, payers and physicians is expected to steadily grow for the foreseeable future. In addition to organic growth, we have an unequaled record of expanding our center base through acquisition in an industry that remains highly fragmented. As the only public company focused on ambulatory care, we believe our access to capital represents a competitive advantage in implementing our center acquisition strategy, in addition to our strong cash flows and financial position. We further believe that we have built a market-leading position as the physician partner of choice due to our fundamental commitment to differentiating AmSurg through a physician-centric culture. As a result of our competitive strengths in an industry experiencing favorable long-term growth trends, we are confident of our prospects for producing long-term growth in earnings and shareholder value.”

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 important factors, including, but not limited to, 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 compete for physician partners, managed care contracts, patients and strategic relationships; 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; 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; uncertainties regarding the 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; potential liability relating to the tax deductibility of goodwill; and other risk factors described in AmSurg’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and other filings with the Securities and Exchange Commission. 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 June 30, 2012, AmSurg owned and operated 228 centers.

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

Statement of Earnings Data:
2012 2011 2012 2011
 
Revenues $ 231,581 $ 187,522 $ 461,792 $ 365,248
 
Operating expenses:
Salaries and benefits 70,957 57,127 143,410 112,380
Supply cost 33,169 23,938 65,386 46,418
Other operating expenses 48,681 40,393 96,090 78,153
Depreciation and amortization   7,463     6,133     14,838     12,046  
 
Total operating expenses 160,270 127,591 319,724 248,997
 
Equity in earnings of unconsolidated affiliates   316     -     711     -  
 
Operating income 71,627 59,931 142,779 116,251
 
Interest expense   4,159     3,631     8,428     7,573  
 
Earnings from continuing operations before income taxes 67,468 56,300 134,351 108,678
Income tax expense   11,263     8,899     22,204     17,166  
 
Net earnings from continuing operations 56,205 47,401 112,147 91,512
 
Discontinued operations:
Earnings (loss) from operations of discontinued interests in surgery centers, net of income tax - 60 (110 ) 758
Loss on disposal of discontinued interests in surgery centers, net of income tax   (660 )   (1,084 )   (1,553 )   (1,265 )
 
Net loss from discontinued operations   (660 )   (1,024 )   (1,663 )   (507 )
 
Net earnings 55,545 46,377 110,484 91,005
 
Less net earnings attributable to noncontrolling interests:
Net earnings from continuing operations 40,009 34,718 80,232 67,224
Net earnings (loss) from discontinued operations   -     29     (60 )   458  
 
Total net earnings attributable to noncontrolling interests   40,009     34,747     80,172     67,682  
 
Net earnings attributable to AmSurg Corp. common shareholders $ 15,536   $ 11,630   $ 30,312   $ 23,323  
 
Amounts attributable to AmSurg Corp. common shareholders:
Earnings from continuing operations, net of income tax $ 16,196 $ 12,683 $ 31,915 $ 24,288
Discontinued operations, net of income tax   (660 )   (1,053 )   (1,603 )   (965 )
 
Net earnings attributable to AmSurg Corp. common shareholders $ 15,536   $ 11,630   $ 30,312   $ 23,323  
 
Earnings per share-basic:

Net earnings from continuing operations attributable to AmSurg Corp. common shareholders
$ 0.53 $ 0.42 $ 1.04 $ 0.80

Net loss from discontinued operations attributable to AmSurg Corp. common shareholders
  (0.02 )   (0.03 )   (0.05 )   (0.03 )
 
Net earnings attributable to AmSurg Corp. common shareholders $ 0.51   $ 0.38   $ 0.99   $ 0.77  
 
Earnings per share-diluted:

Net earnings from continuing operations attributable to AmSurg Corp. common shareholders
$ 0.51 $ 0.40 $ 1.01 $ 0.78

Net loss from discontinued operations attributable to AmSurg Corp. common shareholders
  (0.02 )   (0.03 )   (0.05 )   (0.03 )
 
Net earnings attributable to AmSurg Corp. common shareholders $ 0.49   $ 0.37   $ 0.96   $ 0.75  
 
Weighted average number of shares and share equivalents (000's):
Basic 30,743 30,415 30,681 30,418
Diluted 31,577 31,335 31,489 31,180
 
 
AMSURG CORP.
Unaudited Selected Consolidated Financial and Operating Data, continued
(Dollars in thousands, except per share amounts)
       
For the Three Months For the Six Months
Ended June 30, Ended June 30,

Operating Data:
2012 2011 2012 2011
 

Continuing centers in operation at end of period (consolidated)
226 206 226 206

Continuing centers in operation at end of period (unconsolidated)
2 - 2 -

Average number of continuing centers in operation (consolidated)
225 206 225 203
New centers added during the period 1 5 2 6
Centers discontinued during the period - 1 2 2
Centers under development/not opened at end of period - 1 - 1
Centers under letter of intent at end of period 7 4 7 4
Average revenue per consolidated center $ 1,028 $ 912 $ 2,054 $ 1,798
Same center revenues increase 3 % 1 % 4 % 1 %
Procedures performed during the period at consolidated centers 385,630 338,331 768,180 656,601
Income tax expense attributable to noncontrolling interests $ 210 $ 175 $ 422 $ 304
Reconciliation of net earnings to EBITDA (1):

Net earnings from continuing operations attributable to AmSurg Corp. common shareholders
$ 16,196 $ 12,683 $ 31,915 $ 24,288
Add: income tax expense 11,263 8,899 22,204 17,166
Add: interest expense, net 4,159 3,631 8,428 7,573
Add: depreciation and amortization   7,463     6,133     14,838     12,046  
 
EBITDA $ 39,081   $ 31,346   $ 77,385   $ 61,073  
 

(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)
           
June 30, December 31,

Balance Sheet Data:
2012 2011
 
Assets
 
Current assets:
Cash and cash equivalents $ 37,649 $ 40,718
Accounts receivable, net of allowance of $23,009 and $18,844, respectively 90,446 93,454
Supplies inventory 14,741 15,039
Deferred income taxes 2,478 2,129
Prepaid and other current assets   21,813   21,875
 
Total current assets 167,127 173,215
 
Property and equipment, net 143,830 144,558
Investment in unconsolidated affiliates and long-term notes receivable 11,851 10,522
Goodwill 1,240,422 1,229,298
Intangible assets, net   16,248   15,425
 
Total assets $ 1,579,478 $ 1,573,018
 
Liabilities and Equity
 
Current liabilities:
Current portion of long-term debt $ 10,018 $ 10,800
Accounts payable 17,442 19,746
Current income taxes payable - 1,796
Accrued salaries and benefits 22,576 22,224
Other accrued liabilities   9,664   9,088
 
Total current liabilities 59,700 63,654
 
Long-term debt 409,726 447,963
Deferred income taxes 125,853 114,167
Other long-term liabilities 28,480 28,131
Commitments and contingencies
Noncontrolling interests - redeemable 171,412 170,636
Preferred stock, no par value, 5,000,000 shares authorized, no shares issued or outstanding - -
Equity:

Common stock, no par value, 70,000,000 shares authorized, 31,624,480 and 31,283,772 shares outstanding, respectively
174,690 173,187
Retained earnings   473,370   443,058
 
Total AmSurg Corp. equity 648,060 616,245
Noncontrolling interests - non-redeemable   136,247   132,222
 
Total equity   784,307   748,467
 
Total liabilities and equity $ 1,579,478 $ 1,573,018
 
       
AMSURG CORP.
Unaudited Selected Consolidated Financial and Operating Data, continued
(Dollars in thousands)
 
For the Three Months For the Six Months
Ended June 30, Ended June 30,

Statement of Cash Flow Data:
2012 2011 2012 2011
 
Cash flows from operating activities:
Net earnings $ 55,545 $ 46,377 $ 110,484 $ 91,005
Adjustments to reconcile net earnings to net cash flows provided by operating activities:
Depreciation and amortization 7,463 6,133 14,838 12,046
Net (gain) loss on sale of long-lived assets - (465 ) 599 (363 )
Share-based compensation 1,620 1,578 3,412 3,171
Excess tax benefit from share-based compensation (450 ) (61 ) (529 ) (463 )
Deferred income taxes 4,666 5,814 13,388 11,460
Equity in earnings of unconsolidated affiliates, net (316 ) - (711 ) -

Increase (decrease) in cash and cash equivalents, net of effects of acquisition and dispositions, due to changes in:
Accounts receivable, net 4,054 (290 ) 2,935 (1,534 )
Supplies inventory 156 141 333 67
Prepaid and other current assets 302 1,144 (331 ) 2,506
Accounts payable 2,594 (1,590 ) 901 (3,737 )
Accrued expenses and other liabilities (1,631 ) 2,666 (2,616 ) (1,866 )
Other, net   476     298     921     733  
 
Net cash flows provided by operating activities 74,479 61,745 143,624 113,025
 
Cash flows from investing activities:
Acquisition of interest in surgery centers and related transactions (115 ) (41,979 ) (9,972 ) (45,674 )
Acquisition of property and equipment (8,523 ) (5,959 ) (14,569 ) (10,303 )
Proceeds from the sale of interests in surgery centers   -     3     -     3,369  
 
Net cash flows used in investing activities (8,638 ) (47,935 ) (24,541 ) (52,608 )
 
Cash flows from financing activities:
Proceeds from long-term borrowings 13,778 57,364 33,378 72,984
Repayment on long-term borrowings (41,640 ) (40,076 ) (72,517 ) (64,852 )
Distributions to noncontrolling interests (43,750 ) (35,497 ) (82,759 ) (67,360 )
Distributions received from unconsolidated affiliates 400 - 400 -
Proceeds from issuance of common stock upon exercise of stock options 4,151 891 6,672 4,628
Repurchase of common stock (4,396 ) - (7,219 ) (6,185 )
Capital contributions and ownership transactions by noncontrolling interests 250 675 1,119 698
Excess tax benefit from share-based compensation 450 61 529 463
Financing cost incurred   (1,755 )   (1,982 )   (1,755 )   (1,986 )
 
Net cash flows used in financing activities   (72,512 )   (18,564 )   (122,152 )   (61,610 )
 
Net decrease in cash and cash equivalents (6,671 ) (4,754 ) (3,069 ) (1,193 )
Cash and cash equivalents, beginning of period   44,320     37,708     40,718     34,147  
 
Cash and cash equivalents, end of period $ 37,649   $ 32,954   $ 37,649   $ 32,954  

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