AmSurg Announces Third-Quarter Net Earnings from Continuing Operations of $0.44 Per Diluted Share

October 22, 2009 4:01 PM EDT

NASHVILLE, Tenn.--(BUSINESS WIRE)-- Christopher A. Holden, President and Chief Executive Officer of AmSurg Corp. (NASDAQ: AMSG), today announced financial results for the third quarter ended September 30, 2009. Revenues for the third quarter increased 11% to $167,873,000 from $150,749,000 for the third quarter of 2008. Net earnings from continuing operations attributable to AmSurg common shareholders were $13,393,000, up 6% from $12,595,000. Net earnings from continuing operations per diluted share attributable to AmSurg common shareholders increased 13% to $0.44 for the third quarter of 2009 from $0.39 for the third quarter of 2008. As expected, the results for the third quarter of 2009 included an incremental negative impact of $0.02 per diluted share from the effect of the revision of the Medicare payment system for ASCs.

Revenues for the first nine months of 2009 increased 12% to $500,141,000 from $447,050,000 for the first nine months in 2008. Net earnings from continuing operations attributable to AmSurg common shareholders rose 9% to $39,804,000 from $36,661,000. Net earnings from continuing operations per diluted share attributable to AmSurg common shareholders increased 12% to $1.29 from $1.15 for the comparable period in 2008. The results for the first nine months of 2009 included an incremental negative impact of $0.06 per diluted share from the effect of the revision of the Medicare payment system for ASCs.

Mr. Holden commented, "We are pleased with our third-quarter performance given the continued impact of the economic downturn and Medicare payment system revision. As expected, our revenues and earnings were consistent with the seasonally stronger second quarter of 2009. The addition of 19 centers in operation since the end of the third quarter of 2008 primarily accounted for our 11% procedure growth for the third quarter of 2009 from the third quarter of 2008. Same-center revenue was flat with the third quarter last year, reflecting current economic conditions. In addition, the impact of the Medicare rule revision reduced same center revenue by approximately 100 basis points.

"During the third quarter, we completed the acquisition of a small GI center. Through the first nine months of 2009, we have acquired five centers and opened one de novo center. At the quarter's end, we had two centers under development, one of which is expected to open in the fourth quarter and one in 2010, and two centers under letter of intent, one of which we have subsequently acquired.

"Our net cash flow provided by operating activities was $61,076,000 for the third quarter of 2009 compared with $55,500,000 for the third quarter of 2008. Distributions to noncontrolling interests were $32,689,000 and $32,136,000 for the third quarters of 2009 and 2008, respectively, and are included in cash flows from financing activities.

"After third-quarter capital expenditures of $5.4 million primarily for maintenance and a center under development, we applied the majority of our available cash flow to reduce our debt by $21.8 million. As a result, our total debt to capitalization at the quarter's end improved to 32.6% from 37.2% at the end of 2008. The ratio of total debt to trailing 12 months EBITDA also improved to 2.0 compared with 2.4 at the end of 2008.

"Consistent with our guidance, we continue to expect net cash flow provided by operating activities less distributions to noncontrolling interests in a range of $95 million to $100 million for 2009, which should be sufficient to fund the majority of our capital needs. Our cash and cash equivalents totaled $30.6 million at the end of the third quarter and our availability under our revolving credit facility, which matures in July 2011, was approximately $79.7 million.

"As we have discussed previously, our guidance for the addition of 13 to 16 centers for 2009 anticipated that the majority of our acquisitions would be completed late in the year and would have little impact on our 2009 earnings. Our pipeline of potential acquisitions is robust, and we expect to meet our guidance for center additions.

"Today, we have revised our earnings guidance by raising the low end of the previously established range. This revision reflects our earnings performance through the first nine months of 2009. We have remained cautious in establishing earnings guidance for the fourth quarter because of the continuing weak economic environment. Our financial guidance for 2009 and the fourth quarter of 2009 is as follows:

    --  Revenues in a range of $660 million to $680 million for 2009.
    --  Same-center revenue growth is expected to be flat for the full year,
        which includes a negative impact of one percentage point from the effect
        of the Medicare payment system revision.
    --  The addition of 13 to 16 new centers for the year.
    --  Net earnings from continuing operations per diluted share attributable
        to common shareholders for 2009 in a range of $1.70 to $1.71, including
        a negative $0.07 impact from the effect of the revised Medicare payment
        system revision, compared with the previous guidance of $1.69 to $1.71.
    --  Net earnings from continuing operations per diluted share attributable
        to common shareholders for the fourth quarter of 2009 in a range of
        $0.41 to $0.42 per diluted share."

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. Holden concluded, "AmSurg has continued to produce consistent, profitable results in the most difficult operating environment the Company has experienced. We believe the industry dynamics underlying these results combined with the strengths of our proven business model offer continuing potential for sustained long-term growth, despite the current limited visibility due to the economic environment. Simply put, ASCs provide high quality care in the most cost-effective, yet clinically appropriate, modality for an increasing number of surgical procedures. Demand for access to these procedures is growing. As one of the country's leading ASC providers, we remain confident in our ability to manage through the current environment and to achieve our long-term growth objectives."

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 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, 2008, and other filings with the Securities and Exchange Commission, including the following risks: adverse impacts on the Company's business associated with current and future economic conditions; 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 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; 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, 2009, AmSurg owned a majority interest in 194 continuing centers in operation and had two centers 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                  2009         2008         2009       2008
Earnings Data:

Revenues                      $ 167,873    $ 150,749    $ 500,141  $ 447,050

Operating
expenses:

 Salaries and                   51,328       44,206       149,708    130,133
 benefits

 Supply cost                    20,365       17,351       61,198     51,939

 Other operating                33,660       31,352       102,082    91,804
 expenses

 Depreciation and               5,743        5,252        17,092     15,569
 amortization

  Total operating               111,096      98,161       330,080    289,445
  expenses

  Operating income              56,777       52,588       170,061    157,605

Interest                        1,921        2,331        5,986      7,626
expense, net

  Earnings from continuing
  operations before income      54,856       50,257       164,075    149,979
  taxes

Income tax                      8,944        8,017        26,855     24,327
expense

  Net earnings from
  continuing                    45,912       42,240       137,220    125,652
  operations

Discontinued
operations:

 (Loss) earnings from
 operations of discontinued
 interest in surgery            (1      )    (207    )    122        251
 centers, net of income
 taxes

 Gain (loss) on disposal of
 discontinued interest in       411          674          148        (635    )
 surgery centers, net of
 income taxes

  Net gain (loss) from          410          467          270        (384    )
  discontinued operations

  Net earnings                  46,322       42,707       137,490    125,268

Less net earnings
attributable to
noncontrolling interests:

 Net earnings from              32,519       29,645       97,416     88,991
 continuing operations

 Discontinued                   -            678          75         943
 operations

  Total net earnings
  attributable to               32,519       30,323       97,491     89,934
  noncontrolling interests

  Net earnings attributable   $ 13,803     $ 12,384     $ 39,999   $ 35,334
  to AmSurg Corp.

Amounts attributable to
AmSurg Corp. common
shareholders:

  Net earnings from
  continuing                  $ 13,393     $ 12,595     $ 39,804   $ 36,661
  operations

  Discontinued                  410          (211    )    195        (1,327  )
  operations

   Net earnings               $ 13,803     $ 12,384     $ 39,999   $ 35,334

Basic earnings per common
share attributable to AmSurg
Corp. common shareholders

  Net earnings from
  continuing                  $ 0.44       $ 0.40       $ 1.30     $ 1.16
  operations

  Discontinued                  0.01         (0.01   )    0.01       (0.04   )
  operations

   Net earnings               $ 0.46       $ 0.39       $ 1.30     $ 1.12

Diluted earnings per common
share attributable to AmSurg
Corp. common shareholders

  Net earnings from
  continuing                  $ 0.44       $ 0.39       $ 1.29     $ 1.15
  operations

  Discontinued                  0.01         (0.01   )    0.01       (0.04   )
  operations

   Net earnings               $ 0.45       $ 0.38       $ 1.29     $ 1.10

Weighted average number of
shares and share equivalents
(000's):

 Basic                          30,195       31,719       30,699     31,499

 Diluted                        30,528       32,303       30,921     32,018

AMSURG CORP.

Unaudited Selected Consolidated Financial and Operating Data, continued

(Dollars in thousands, except per share amounts)

                              For the Three Months      For the Nine Months

                              Ended September 30,       Ended September 30,

Operating                     2009         2008         2009         2008
Data:

Continuing centers in           194          175          194          175
operation at end of period

New centers
added during                    1            3            6            7
the period

Centers under
development/not opened at       2            3            2            3
end of period

Centers under
letter of                       2            13           2            13
intent

Average number of               194          173          192          171
centers in operation

Average
revenue per                   $ 865        $ 870        $ 2,602      $ 2,608
center

Same center
revenues                        0       %    4       %    0       %    4       %
increase

Procedures performed            310,676      279,537      927,499      825,702
during the period

Income tax expense
attributable to               $ 93         $ 168        $ 439        $ 451
noncontrolling interests

Reconciliation of
net earnings to
EBITDA (1):

 Net earnings from
 continuing operations        $ 13,393     $ 12,595     $ 39,804     $ 36,661
 attributable to AmSurg
 Corp. common shareholders

 Add: income                    8,944        8,017        26,855       24,327
 tax expense

 Add:
 interest                       1,921        2,331        5,986        7,626
 expense, net

 Add:
 depreciation                   5,743        5,252        17,092       15,569
 and
 amortization

  EBITDA                      $ 30,001     $ 28,195     $ 89,737     $ 84,183

(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,  Dec. 31,

Balance Sheet Data:                                  2009           2008

Assets

Current assets:

 Cash and cash equivalents                           $ 30,646       $ 31,548

 Accounts receivable, net of allowance of $11,724      66,647         63,602
 and $11,757 respectively

 Supplies                                              7,811          8,083
 inventory

 Deferred income taxes                                 1,666          1,378

 Prepaid and other current                             13,640         17,223
 assets

 Current assets held for                               115            25
 sale

  Total current assets                                 120,525        121,859

Long-term receivables and                              58             46
deposits

Property and equipment, net                            109,271        111,884

Goodwill, net                                          694,067        661,693

Intangible                                             9,896          10,221
assets, net

Long-term assets held for                              640            176
sale

  Total assets                                       $ 934,457      $ 905,879

Liabilities and
Shareholders' Equity

Current
liabilities:

 Current portion of                                  $ 5,341        $ 6,801
 long-term debt

 Accounts                                              10,961         14,240
 payable

 Accrued salaries and                                  19,272         12,040
 benefits

 Other accrued liabilities                             3,309          3,246

 Current liabilities held                              283            35
 for sale

  Total current liabilities                            39,166         36,362

Long-term debt                                         232,792        265,835

Deferred income taxes                                  67,354         54,758

Other long-term liabilities                            22,105         22,416

Long-term liabilities held                             35             -
for sale

Noncontrolling interests -                             76,096         63,202
redeemable

Equity:

 Common stock, no par value 70,000,000 shares
 authorized, 30,670,843 and 31,342,241 shares          162,806        172,192
 outstanding, respectively

 Retained                                              331,087        291,088
 earnings

 Accumulated other comprehensive loss, net of          (2,151  )      (2,851  )
 income taxes

  Total AmSurg Corp. shareholders'                     491,742        460,429
  equity

  Noncontrolling interests -                           5,167          2,877
  non-redeemable

  Total equity                                         496,909        463,306

  Total liabilities and                              $ 934,457      $ 905,879
  shareholders' equity

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      2009         2008         2009          2008
Data:

Cash flows
from operating
activities:

 Net earnings               $ 46,322     $ 42,707     $ 137,490     $ 125,268

 Adjustments to reconcile
 net earnings to net cash
 flows provided by
 operating activities:

  Depreciation
  and                         5,743        5,252        17,092        15,569
  amortization

  Net loss on sale and
  impairment of long-lived    -            215          434           1,076
  assets held for sale

  Share-based                 861          1,293        3,102         3,701
  compensation

  Excess tax benefit from     (27     )    (838    )    (27      )    (1,316   )
  share-based compensation

  Deferred                    4,099        4,258        11,240        10,190
  income taxes

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

   Accounts
   receivable,                991          (164    )    (2,102   )    (3,063   )
   net

   Supplies                   4            190          376           16
   inventory

   Prepaid and
   other current              476          872          1,021         1,972
   assets

   Accounts                   (1,254  )    38           (944     )    (1,765   )
   payable

   Accrued expenses
   and other                  3,877        2,228        8,138         2,416
   liabilities

   Other,                     (16     )    (551    )    248           111
   net

    Net cash flows
    provided by operating     61,076       55,500       176,068       154,175
    activities

Cash flows
from investing
activities:

 Acquisition of interest
 in surgery centers and       (370    )    (19,213 )    (19,705  )    (42,810  )
 related transactions

 Acquisition of
 property and                 (5,079  )    (4,127  )    (16,509  )    (13,565  )
 equipment

 Proceeds from sale           -            3,753        898           3,753
 of surgery center

 Repayment of
 notes                        417          209          1,666         1,459
 receivable

    Net cash flows used in    (5,032  )    (19,378 )    (33,650  )    (51,163  )
    investing activities

Cash flows
from financing
activities:

 Proceeds from
 long-term                    11,309       22,615       52,459        57,771
 borrowings

 Repayment on
 long-term                    (33,116 )    (32,824 )    (87,049  )    (87,653  )
 borrowings

 Distributions to
 noncontrolling               (32,689 )    (32,136 )    (97,195  )    (88,993  )
 interests

 Proceeds from issuance of
 common stock upon            178          6,946        178           9,935
 exercise of stock options

 Repurchase of                -            -            (12,587  )    -
 common stock

 Capital contributions and
 ownership transactions by    746          -            858           548
 noncontrolling interests

 Excess tax benefit from      27           838          27            1,316
 share-based compensation

 Financing                    (9      )    (23     )    (11      )    (32      )
 cost incurred

    Net cash flows used in    (53,554 )    (34,584 )    (143,320 )    (107,108 )
    financing activities

Net increase (decrease) in    2,490        1,538        (902     )    (4,096   )
cash and cash equivalents

Cash and cash equivalents,    28,156       24,319       31,548        29,953
beginning of period

Cash and cash equivalents,  $ 30,646     $ 25,857     $ 30,646      $ 25,857
end of period

    Source: AmSurg Corp.

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