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Press release from Business Wire

AmSurg Reports First-Quarter Net Earnings from Continuing Operations of $0.56 Per Diluted Share, or $0.52 Excluding Gain

<p class='bwalignc'> <b>Adjusts 2013 Financial Guidance for Previously Discussed Impact of Sequester</b> </p>

Tuesday, April 23, 2013

AmSurg Reports First-Quarter Net Earnings from Continuing Operations of $0.56 Per Diluted Share, or $0.52 Excluding Gain

16:00 EDT Tuesday, April 23, 2013

NASHVILLE, Tenn. (Business Wire) -- Christopher A. Holden, President and Chief Executive Officer of AmSurg Corp. (NASDAQ: AMSG), today announced financial results for the first quarter ended March 31, 2013. Revenues increased 14% for the quarter to $260.1 million from $228.9 million for the first quarter of 2012. Net earnings from continuing operations attributable to AmSurg common shareholders were $17.8 million, or $0.56 per diluted share, for the first quarter of 2013 compared with $14.8 million, or $0.50 per diluted share, for the first quarter of 2012. Results for the first quarter of 2013 include a pre-tax gain of $2.2 million related to the deconsolidation of a surgery center that AmSurg contributed to a newly formed joint venture with a hospital system partner. Excluding this gain, net earnings from continuing operations per diluted share attributable to AmSurg common shareholders increased 4% to $0.52 per diluted share for the first quarter of 2013.

Mr. Holden said, “AmSurg's earnings for the first quarter met the high end of our guidance, as adjusted for the deconsolidation gain. As anticipated, our results for the first quarter also include the impact of a reduction in workers' compensation reimbursement by the State of California and increased interest expense related to our debt offering in the fourth quarter of 2012, which totaled $0.07 per diluted share in aggregate.

“Our same center revenue declined 2% for the quarter. As we previously discussed, the decline was primarily the result of having two less business days than the first quarter last year, which had a negative impact of approximately 300 basis points on this growth metric. The growth in the Company's revenues and adjusted earnings for the first quarter was primarily due to the acquisition of 17 centers during 2012, including 14 centers in the fourth quarter. In addition, we opened a de novo center during 2012.

“As mentioned above, during the first quarter, we entered into a joint venture with a hospital system. In connection with the formation of the joint venture, we contributed our controlling interest in one surgery center to the joint venture, which resulted in the $2.2 million gain on the deconsolidation of this surgery center. Our joint venture partner also contributed one surgery center to the joint venture. We believe this partnership will provide both economies of scale and potential future growth opportunities in this market. As a result of this transaction, we operated a total of 241 centers at the end of the quarter. We also added three centers under letter of intent to end the quarter with four letters of intent.

“Net cash flows from operating activities were $73.9 million for the first quarter of 2013, compared with $69.1 million for the first quarter of 2012. Excluding distributions to noncontrolling interests, net cash flows from operations were $30.0 million for the first quarter of 2013 compared with $30.1 million in the first quarter of 2012. Our ratio of total debt to trailing 12 months EBITDA as calculated under our credit agreement was 3.2 at March 31, 2013. We continue to expect to generate strong cash flow in 2013, which, combined with availability of $208 million under our revolving credit facility, positions us well to fund our planned growth for the year.

“As we discussed when we issued our 2013 financial guidance, our guidance did not reflect any impact related to sequestration; however, we indicated that, in the event sequestration occurred, we expected it, under then current legislation, to negatively affect our results by $0.06 per diluted share on an annualized basis. Today, we adjust our guidance for the impact of sequestration, which we expect to total $0.05 per diluted share for the year. As a result, we are lowering the high end of our guidance for 2013 same-center revenue growth to 1% from 2%.

“As noted previously, for 2013 we expect our results to reflect increased interest expense of $0.20 per diluted share related to our debt offering in the fourth quarter of 2012, as well as reductions by the State of California in workers' compensation reimbursement that are expected to have a negative impact on 2013 same-center revenues of approximately 100 basis points and on net earnings from continuing operations attributable to common shareholders of $0.06 per diluted share, spread relatively evenly through the year. Our financial guidance for 2013 and, as indicated, the second quarter of 2013 is as follows:

  • Revenues in a range of $1.06 billion to $1.09 billion.
  • Same-center revenue increase of 0% to 1%.
  • Center acquisitions that generate annualized operating income in a range of $25 million to $29 million.
  • Net cash flow provided by operating activities, less distributions to noncontrolling interests, in a range of $140 million to $150 million.
  • Net earnings from continuing operations per diluted share attributable to common shareholders in a range of $2.13 to $2.18, excluding the impact of the deconsolidation gain.
  • For the second quarter of 2013, net earnings from continuing operations per diluted share attributable to common shareholders in a range of $0.55 to $0.57.”

The information contained in the preceding paragraphs, including information regarding the Company's acquisition plans and financial results for future periods, is forward-looking information. Forward-looking information involves known and unknown risks and uncertainties as described below. There can be no assurance that AmSurg will be successful in acquiring the surgery centers described above and the attainment of the financial targets set forth in this press release is dependent on the assumptions described above. The Company's actual results and performance could differ materially from those expressed or implied by the forward-looking information contained in this press release.

Mr. Holden concluded, “Our guidance for 2013 reflects the near-term headwinds we face for the year related to state and federal reimbursement and an uncertain economic and employment environment. We believe that our best response to these pressures is to continue implementing our proven business model to prepare the Company for stronger growth as the headwinds subside.

“We are confident of the long-term growth potential of both the ASC industry and our position as the largest owner and operator of ASCs. Our quality and cost effectiveness is recognized by our physician partners and patients who use our facilities and who continue to be highly satisfied with their experience. At a time of intensifying focus on quality and cost, expanded healthcare access for millions of people and strong demographic trends, we believe long-term demand for our services will expand steadily. As a result, we will remain primarily focused on strengthening our position as the provider of choice for our physician partners through the continued execution and enhancement of our value proposition, on increasing our same-center revenues and on expanding our geographic footprint through accretive acquisitions in a fragmented industry.”

AmSurg Corp. will hold a conference call to discuss this release tomorrow, April 24, 2013, at 9:00 a.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; the Company's ability to generate sufficient cash to service all of its indebtedness; adverse weather and other factors beyond the Company's control that may affect the Company's surgery centers; 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, 2012 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 March 31, 2013, AmSurg owned and operated 241 centers.

 
AMSURG CORP.
Unaudited Selected Consolidated Financial and Operating Data
(Dollars in thousands, except per share amounts)
                     
For the Three Months
Ended March 31,

Statement of Earnings Data:

2013 2012
 
Revenues $ 260,061 $ 228,899
Operating expenses:
Salaries and benefits 81,581 72,115
Supply cost 37,644 32,097
Other operating expenses 53,261 47,132
Depreciation and amortization   8,082   7,341  
Total operating expenses 180,568 158,685
Gain on deconsolidation 2,237 -
Equity in earnings of unconsolidated affiliates   402   395  
Operating income 82,132 70,609
Interest expense   7,544   4,267  
Earnings from continuing operations before income taxes 74,588 66,342
Income tax expense   12,315   10,816  
Net earnings from continuing operations 62,273 55,526
Discontinued operations:
Earnings from operations of discontinued interests in surgery centers, net of income tax - 306
Loss on disposal of discontinued interests in surgery centers, net of income tax   -   (893 )
Net loss from discontinued operations   -   (587 )
Net earnings 62,273 54,939
Less net earnings attributable to noncontrolling interests:
Net earnings from continuing operations 44,462 39,972
Net earnings from discontinued operations   -   191  
Total net earnings attributable to noncontrolling interests   44,462   40,163  
Net earnings attributable to AmSurg Corp. common shareholders $ 17,811 $ 14,776  
Amounts attributable to AmSurg Corp. common shareholders:
Earnings from continuing operations, net of income tax $ 17,811 $ 15,554
Discontinued operations, net of income tax   -   (778 )
Net earnings attributable to AmSurg Corp. common shareholders $ 17,811 $ 14,776  
 
Earnings per share-basic:
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders $ 0.57 $ 0.51
Net loss from discontinued operations attributable to AmSurg Corp. common shareholders   -   (0.03 )
Net earnings attributable to AmSurg Corp. common shareholders $ 0.57 $ 0.48  
Earnings per share-diluted:
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders $ 0.56 $ 0.50
Net loss from discontinued operations attributable to AmSurg Corp. common shareholders   -   (0.02 )
Net earnings attributable to AmSurg Corp. common shareholders $ 0.56 $ 0.47  
 
Weighted average number of shares and share equivalents (000's):
Basic 31,217 30,619
Diluted 31,881 31,401
 
 
AMSURG CORP.
Unaudited Selected Consolidated Financial and Operating Data, continued
(Dollars in thousands)
                     
For the Three Months
Ended March 31,

Operating Data:

2013 2012
 
Continuing centers in operation at end of period (consolidated) 237 223
Continuing centers in operation at end of period (unconsolidated) 4 2
Average number of continuing centers in operation (consolidated) 238 222
New centers added during the period 1 1
Centers discontinued during the period - 2
Centers under development/not opened at end of period - 1
Centers under letter of intent at end of period 4 1
Average revenue per consolidated center $ 660 $ 603
Same center revenues (decrease) increase

(2%

)

5%

 

Procedures performed during the period at consolidated centers 394,313 379,454
Income tax expense attributable to noncontrolling interests $ 186 $ 198
 
Reconciliation of net earnings to EBITDA (1):
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders $ 17,811 $ 15,554
Add: income tax expense 12,315 10,816
Add: interest expense, net 7,544 4,267
Add: depreciation and amortization   8,082     7,341  
EBITDA $ 45,752   $ 37,978  
 
(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)
                       
March 31, December 31,

Balance Sheet Data:

2013 2012
 
Assets
 
Current assets:
Cash and cash equivalents $ 42,413 $ 46,398
Accounts receivable, net of allowance of $24,276 and $22,379, respectively 101,503 96,752
Supplies inventory 18,106 18,406
Deferred income taxes 978 3,088
Prepaid and other current assets   30,142   27,537
Total current assets 193,142 192,181
 
Property and equipment, net 163,189 166,612
Investments in unconsolidated affiliates and long-term notes receivable 16,876 11,274
Goodwill 1,647,180 1,652,002
Intangible assets, net   21,985   22,517
 
Total assets $ 2,042,372 $ 2,044,586
 
Liabilities and Equity
 
Current liabilities:
Current portion of long-term debt $ 19,942 $ 17,407
Accounts payable 19,744 23,509
Accrued salaries and benefits 23,011 29,251
Other accrued liabilities   15,237   14,246
Total current liabilities 77,934 84,413
 
Long-term debt 603,409 620,705
Deferred income taxes 147,125 137,648
Other long-term liabilities 26,677 25,972
Commitments and contingencies
Noncontrolling interests - redeemable 175,709 175,382
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, 31,898,868 and 31,941,441 shares outstanding, respectively

175,532 183,867
Retained earnings   523,432   505,621
Total AmSurg Corp. equity 698,964 689,488
Noncontrolling interests - non-redeemable   312,554   310,978
Total equity   1,011,518   1,000,466
 
Total liabilities and equity $ 2,042,372 $ 2,044,586
 
 
AMSURG CORP.
Unaudited Selected Consolidated Financial and Operating Data, continued
(Dollars in thousands)
                     
For the Three Months
Ended March 31,

Statement of Cash Flow Data:

2013 2012
 
Cash flows from operating activities:
Net earnings $ 62,273 $ 54,939
Adjustments to reconcile net earnings to net cash flows provided by operating activities:
Depreciation and amortization 8,082 7,341
Net loss on sale of long-lived assets - 599
Gain on deconsolidation (2,237 ) -
Share-based compensation 2,050 1,792
Excess tax benefit from share-based compensation (288 ) (79 )
Deferred income taxes 12,929 8,722
Equity in earnings of unconsolidated affiliates, net (402 ) (395 )

Increase (decrease) in cash and cash equivalents, net of effects of acquisition and dispositions, due to changes in:

Accounts receivable, net (1,705 ) (1,119 )
Supplies inventory (201 ) 177
Prepaid and other current assets 17 (633 )
Accounts payable (3,040 ) (1,693 )
Accrued expenses and other liabilities (4,101 ) (985 )
Other, net   488     479  
Net cash flows provided by operating activities 73,865 69,145
 
Cash flows from investing activities:
Acquisition of interest in surgery centers and related transactions (252 ) (9,857 )
Acquisition of property and equipment   (6,110 )   (6,046 )
Net cash flows used by investing activities (6,362 ) (15,903 )
 
Cash flows from financing activities:
Proceeds from long-term borrowings 30,870 19,600
Repayment on long-term borrowings (48,211 ) (30,877 )
Distributions to noncontrolling interests (43,914 ) (39,009 )
Proceeds from issuance of common stock upon exercise of stock options 5,691 2,521
Repurchase of common stock (16,758 ) (2,823 )
Capital contributions and ownership transactions by noncontrolling interests 559 869
Excess tax benefit from share-based compensation 288 79
Financing cost incurred   (13 )   -  
Net cash flows used by financing activities   (71,488 )   (49,640 )
 
Net (decrease) increase in cash and cash equivalents (3,985 ) 3,602
Cash and cash equivalents, beginning of period   46,398     40,718  
Cash and cash equivalents, end of period $ 42,413   $ 44,320  

AmSurg Corp.
Claire M. Gulmi, 615-665-1283
Executive Vice President and Chief Financial Officer

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