Ken P. McDonald, President and Chief Executive Officer of AmSurg Corp. (NASDAQ: AMSG), today announced financial results for the second quarter and six months ended June 30, 2006. Revenues increased 22% to a record $119,955,000 for the second quarter from $98,206,000 for the second quarter of 2005. Net earnings from continuing operations were $10,104,000, or $0.33 per diluted share, which included expense of $0.03 per diluted share for FAS 123R, for the second quarter of 2006 compared with $10,045,000, or $0.33 per diluted share for the second quarter last year. Excluding the impact of FAS 123R, net earnings from continuing operations per diluted share for the second quarter of 2006 would have increased 9% to $0.36 from $0.33 for the second quarter of 2005.
For the first six months of 2006, revenues increased 23% to $233,589,000 from $189,469,000 for the first half of 2005. Net earnings from continuing operations were $18,829,000, or $0.62 per diluted share, which included expense of $0.08 per diluted share for FAS 123R, for the first six months of 2006 compared with $18,796,000, or $0.62 per diluted share, for the first six months last year. Excluding the impact of FAS 123R, net earnings from continuing operations per diluted share for the first half of 2006 would have increased 13% to $0.70 from $0.62 for the first six months of 2005.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2006 2005 2006 2005
------- ------- ------- -------
Net earnings from
continuing operations
per diluted share,
excluding impact of FAS
123R(1) $ 0.36 $ 0.33 (2) $ 0.70 $ 0.62 (2)
Share-based payment
expense (0.03) (0.03)(3) (0.08) (0.05)(3)
------- ------- ------- -------
Net earnings from
continuing operations
per diluted share $ 0.33 (2) $ 0.30 $ 0.62 (2) $ 0.57
======= ======= ======= =======
(1) Net earnings from continuing operations per diluted share,
excluding impact of FAS 123R, is not a measurement determined in
accordance with accounting principles generally accepted in the
United States. AmSurg believes its calculation of net earnings
from continuing operations per diluted share, excluding impact of
FAS 123R, in this press release is a useful measure of the
Company's ongoing performance because it provides comparability to
periods prior to the adoption of FAS 123R and disclosures of its
operations on the same basis as that used by management. Net
earnings from continuing operations per diluted share, excluding
impact of FAS 123R, 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.
(2) Net earnings from continuing operations per diluted share, GAAP
basis.
(3) Pro forma share-based payment expense, as if the Company adopted
FAS 123R on January 1, 2005.
Mr. McDonald remarked, "AmSurg produced same-center revenue growth of 5% for the second quarter of 2006, which we primarily attribute to procedure growth. Consistent with our established guidance, we continue to expect that we will generate same-center revenue growth for the third and fourth quarters of 2006 in a range of 3% to 4%. In addition, we expect that combining this growth with the 6% increase in same-center revenues for the first half of 2006 will produce growth for the full year in a range of 4% to 5%.
"Our total revenue growth of 22% for the second quarter was primarily the result of growth in total procedures, which increased 17% for the quarter compared to the second quarter of 2005. Average revenue per procedure increased 4.6% for the quarter, primarily because of the increase in the number of orthopedic and multi-specialty centers in operation since June 2005.
"We had 153 centers in operation at the end of the second quarter of 2006 compared with 138 centers in operation at the same time in the previous year. We completed the quarter with four de novo centers under development and three centers awaiting CON approval. We expect to open one of the de novo centers under development in 2006. We also had two centers under letter of intent at the quarter end and have added three more centers under letter of intent since the start of the third quarter. We remain confident of achieving our targeted range of adding 12 to 15 centers for full-year 2006."
Based on AmSurg's financial and operating performance for the second quarter and first six months of 2006, and its outlook on the operating environment for the remainder of 2006, the Company's guidance for full-year 2006 is as follows:
-- Revenues in a range of $445 million to $465 million.
-- Same-center revenue growth of 4% to 5%.
-- The addition of 12 to 15 new centers for the year.
-- Net earnings from continuing operations per diluted share as follows:
Twelve Months
------------------------- Three Months
Ending Ended Ending
Dec. 31, 2006 Dec. 31, Sept. 30, 2006
(Guidance) 2005 (Guidance)
------------- -------- --------------
Net earnings per
diluted share,
excluding impact of
FAS 123R $1.37 - 1.39 $ 1.21 (1) $0.33 - 0.34
Share-based payment
expense (0.14) (0.11)(2) (0.03)
------------- -------- --------------
Net earnings per
diluted share $1.23 - 1.25 (1) $ 1.10 $0.30 - 0.31 (1)
============= ======== ==============
(1) Net earnings from continuing operations per diluted share, GAAP
basis.
(2) Pro forma share-based payment expense, as if the Company had
adopted FAS 123R in 2005.
The Company continues to expect The Center for Medicare and Medicaid Services to propose changes in the rate setting methodology, payment rates, payment policies and the list of covered surgical procedures for ambulatory surgery centers this summer. Any proposed changes to the payment methodology or rates will be subject to a comment period before finalization and are not expected to be implemented prior to January 1, 2008. During the six months ended June 30, 2006, the Company derived 34% of its revenues from Medicare and Medicaid.
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.
Mr. McDonald concluded, "We are pleased with the improvement in our same-center revenues for the first two quarters of 2006. We are confident that our ability to achieve our goals will continue to be supported by favorable demographics, by the increasing demand for high quality, low cost care and by the strengths inherent in our leadership of the single specialty surgery center industry."
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 "Investor Relations" 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 through the end of business on October 24, 2006.
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, 2005, and other filings with the Securities and Exchange Commission, including the following risks: the risk that payments from third-party payors may decrease or not increase as the Company's costs increase; changes in the rate setting methodology, payment rates, payment policies and the list of covered surgical procedures for ambulatory surgery centers by the Centers for Medicare and Medicaid Services; the Company's ability to maintain favorable relations with its physician partners; the Company's ability to identify suitable acquisition and development candidates and negotiate and close transactions in a timely manner and on favorable terms; the Company's ability to grow revenues at its existing centers; risks associated with weather and other factors that may affect the Company's surgery centers located in Florida; the Company's ability to manage the growth in its business; the Company's ability to obtain the necessary financing or capital on terms satisfactory to it to execute its expansion strategy; the Company's ability to compete for physician partners, managed care contracts, patients and strategic relationships; the Company's ability to obtain and retain appropriate licensing approvals for its existing centers and centers currently under development and to comply with applicable laws; the risk of changes in legislation, regulations or regulatory interpretations that may negatively affect the Company; the risk of legislative or regulatory changes that would prohibit physician ownership in ambulatory surgery centers; risks associated with the Company's status as a general partner of limited partnerships; the Company's ability to obtain the necessary financing to fund the purchase of its physician partners' minority interests in the event of a regulatory change that would require such a purchase; and risks associated with the valuation and 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. develops, acquires and manages physician practice-based ambulatory surgery centers in partnership with surgical and other group practices. At June 30, 2006, AmSurg owned a majority interest in 153 centers and had four centers under development and three centers awaiting CON approval.
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: 2006 2005 2006 2005
-------------------------- ---------- ---------- ---------- ----------
Revenues $119,955 $98,206 $233,589 $189,469
Operating expenses:
Salaries and benefits 34,742 26,659 69,607 52,322
Supply cost 14,427 10,778 27,422 20,696
Other operating expenses 23,158 19,233 44,976 37,414
Depreciation and
amortization 4,329 3,758 8,504 7,329
---------- ---------- ---------- ----------
Total operating expenses 76,656 60,428 150,509 117,761
---------- ---------- ---------- ----------
Operating income 43,299 37,778 83,080 71,708
Minority interest 24,631 20,337 48,360 39,046
Interest expense, net 2,049 918 3,751 1,746
---------- ---------- ---------- ----------
Earnings from continuing
operations before
income taxes 16,619 16,523 30,969 30,916
Income tax expense 6,515 6,478 12,140 12,120
---------- ---------- ---------- ----------
Net earnings from
continuing operations 10,104 10,045 18,829 18,796
Discontinued operations:
Loss from operations of
discontinued interests in
surgery centers, net of
income tax - (121) - (220)
Loss on disposal of
discontinued interests in
surgery centers, net of
income tax - (243) - (243)
Loss from discontinued
operations - (364) - (463)
---------- ---------- ---------- ----------
Net earnings $10,104 $9,681 $18,829 $18,333
========== ========== ========== ==========
Basic earnings per common
share:
Net earnings from
continuing operations $0.34 $0.34 $0.63 $0.64
Net earnings $0.34 $0.33 $0.63 $0.62
Diluted earnings per common
share:
Net earnings from
continuing operations $0.33 $0.33 $0.62 $0.62
Net earnings $0.33 $0.32 $0.62 $0.61
Weighted average number of
shares and share
equivalents (000's):
Basic 29,794 29,537 29,744 29,494
Diluted 30,472 30,165 30,345 30,094
Operating Data:
---------------
Continuing centers in
operation at end of period 153 138 153 138
Centers under
development/not opened at
end of period 4 5 4 5
Development centers
awaiting CON approval at
end of period 3 - 3 -
Centers under letter of
intent 2 4 2 4
Average number of centers
in operation 153 133 153 131
Average revenue per center $784 $737 $1,527 $1,450
Same center revenues
increase 5% 5% 6% 4%
Procedures performed during
the period 218,280 186,711 430,790 357,138
Cash flows provided by
operating activities $12,571 $12,550 $33,912 $30,877
Cash flows used by
investing activities $(9,248) $(18,799) $(34,732) $(40,621)
Cash flows (used by)
provided by financing
activities $(6,364) $6,684 $(1,998) $11,845
Reconciliation of net
earnings to EBITDA and
adjusted EBITDA (1):
Net earnings from
continuing operations $10,104 $10,045 $18,829 $18,796
Add: income tax expense 6,515 6,478 12,140 12,120
Add: interest expense,
net 2,049 918 3,751 1,746
Add: depreciation and
amortization 4,329 3,758 8,504 7,329
---------- ---------- ---------- ----------
EBITDA 22,997 21,199 43,224 39,991
Add: share-based
compensation expense 1,467 - 4,041 -
---------- ---------- ---------- ----------
Adjusted EBITDA $24,464 $21,199 $47,265 $39,991
========== ========== ========== ==========
AMSURG CORP.
Unaudited Selected Consolidated Financial and Operating Data
(In thousands)
June 30, Dec. 31,
Balance Sheet Data: 2006 2005
------------------ ---------- -----------
Cash and cash equivalents $17,678 $20,496
Accounts receivable, net 52,399 46,387
Working capital 67,158 61,072
Total assets 557,129 527,816
Long-term debt and other long-term liabilities 125,302 125,712
Minority interest 51,281 47,271
Shareholders' equity 320,783 294,618
(1) EBITDA is defined as earnings before interest, income taxes and
depreciation and amortization. Adjusted EBITDA is defined as
earnings before interest, income taxes, depreciation and
amortization and share-based compensation expense. EBITDA and
adjusted EBITDA should not be considered a measure of financial
performance under generally accepted accounting principles. Items
excluded from EBITDA and adjusted EBITDA are significant
components in understanding and assessing financial performance.
EBITDA and adjusted EBITDA are analytical indicators used by
management and the health care industry to evaluate company
performance, allocate resources and measure leverage and debt
service capacity. EBITDA and adjusted EBITDA should not be
considered in isolation or as alternatives 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 and adjusted EBITDA are not measurements
determined in accordance with generally accepted accounting
principles and are thus susceptible to varying calculations,
EBITDA and adjusted EBITDA as presented may not be comparable to
other similarly titled measures of other companies. Net earnings
from continuing operations is the financial measure calculated and
presented in accordance with generally accepted accounting
principles that is most comparable to EBITDA and adjusted EBITDA
as defined.