Updates 2014 Financial Guidance for the
Acquisition of Sheridan Healthcare
Christopher A. Holden, President and Chief Executive Officer of
AmSurg Corp. (NASDAQ: AMSG), today announced financial results for
the second quarter ended June 30, 2014. Revenues increased 5% for
the quarter to $281.1 million from $267.1 million for the second
quarter of 2013. Net earnings from continuing operations
attributable to AmSurg common shareholders were $19.0 million, or
$0.59 per diluted share, for the second quarter of 2014 compared
with $18.4 million, or $0.58 per diluted share, for the second
quarter of 2013. Results for the second quarter of 2014 included an
after-tax net gain of $0.8 million, or $0.03 per diluted share,
related to the deconsolidation of three surgery centers that AmSurg
contributed to two joint ventures created during the quarter with
new hospital system partners, as well as after-tax transaction
expense of $2.1 million, or $0.07 per diluted share, related to the
previously announced acquisition of Sheridan Healthcare (the
“Sheridan Transaction”). Excluding these items, adjusted net
earnings from continuing operations per diluted share attributable
to AmSurg common shareholders for the second quarter of 2014 were
$0.63, up 9% from $0.58 for the second quarter last year. Please
see page 6 for a reconciliation of all GAAP and non-GAAP financial
results in this news release.
For the first six months of 2014, revenues were $544.2 million,
an increase of 4% from $525.3 million for the same period in 2013.
Net earnings from continuing operations attributable to AmSurg
common shareholders were $36.5 million, or $1.13 per diluted share,
for the first half of 2014 compared with $36.2 million, or $1.13
per diluted share, for the first half last year. These results
included after-tax net deconsolidation gains of $1.4 million, or
$0.04 per diluted share, for 2014 and $1.3 million, or $0.04 per
diluted share, for 2013. In addition, the results for the first
half of 2014 include after-tax transaction expense of $2.1 million,
or $0.07 per diluted share, related to the Sheridan Transaction.
Excluding these items, adjusted net earnings from continuing
operations per diluted share attributable to AmSurg common
shareholders for the first six months of 2014 were $1.16 compared
with $1.10 for the first half of 2013.
“AmSurg’s financial results met our expectations for the second
quarter,” commented Mr. Holden. “We benefitted from a 1% increase
in same-center revenue, despite having one less business day in the
quarter compared with the second quarter last year. Average revenue
per procedure increased 4% on a comparable-quarter basis, primarily
due to changing procedure mix.
“During the second quarter, we continued to act on opportunities
to partner with health systems in attractive markets, by agreeing
with two new health systems to create ambulatory surgery center
(ASC) joint ventures. We contributed our controlling interests in
three centers to these joint ventures. We also acquired one center
to end the quarter with 243 centers. We had six centers under
letter of intent at the end of the second quarter and one de novo
center under development, which we expect to open in 2015.
“In July, CMS announced proposed 2015 ASC reimbursement rates.
We estimate these rates will positively impact our 2015 revenue by
approximately $7 million. These proposed rates are subject to final
approval in November 2014.
“Further, we launched a new era at AmSurg during the second
quarter with our agreement to acquire Sheridan Healthcare, a
leading national provider of outsourced physician services to
hospitals, ASCs and other healthcare facilities. On July 16, 2014,
we completed this transaction for approximately $2.35 billion in
cash and stock. AmSurg financed the cash portion of the transaction
through a combination of common and preferred stock offerings, a
new senior secured credit facility and the issuance of senior
unsecured notes. Through this transaction, we have effectively
doubled the Company’s size, strengthened our geographic, payor and
revenue diversity and accelerated expected revenue growth, greatly
enlarged our addressable market, created a strongly differentiated
competitive market position and substantially enhanced our organic
and acquisition growth opportunities. In addition to the ample
growth opportunities represented just in our respective customer
bases, we believe the combination of our operations gives us a
unique and scaled platform with which to strategically engage
physician groups, health systems and payers as the healthcare
industry shifts to greater performance and payment risk.”
AmSurg remains positioned to fund its organic and acquisition
growth strategies for the post-merger company. The Company has
significant net cash flows from operations, which, excluding
distributions to noncontrolling interests, totaled $62 million for
the first six months of 2014. In addition, AmSurg’s new senior
secured credit facility includes a $300 million revolving credit
facility under which the Company currently has no borrowings.
AmSurg today is revising its financial and operating guidance
for 2014, primarily for the impact of the Sheridan Transaction, and
establishing guidance for the third quarter of 2014. During the
third quarter, the Company will record the transaction fees related
to the Sheridan Transaction, which will be in excess of $50 million
and which will result in a net loss for the third quarter. Due to
this transaction, AmSurg will now provide guidance on adjusted net
earnings per diluted share from continuing operations attributable
to common shareholders (“Adjusted EPS”). Adjusted EPS for all
periods will exclude transaction and severance costs related to the
acquisition, acquisition-related amortization expense, gains or
losses on deconsolidations and share-based compensation expense.
The Company’s guidance is as follows:
- Revenues in a range of $1.61 billion to
$1.63 billion.
- Same-center revenue increase of 1% to
2% for ASCs, 6% to 8% organic revenue growth in physician
services.
- Net cash flow provided by operating
activities, less distributions to noncontrolling interests, in a
range of $170 million to $180 million, excluding transaction
costs.
- Adjusted EPS in a range of $2.61 to
$2.66.
- For the third quarter of 2014, Adjusted
EPS in a range of $0.63 to $0.65.
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 completing the acquisitions 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, “In considering the many compelling
reasons for bringing together the complementary businesses of
AmSurg and Sheridan Healthcare, we were struck by the foundational
commitment that Sheridan has always demonstrated to adding value
for its physician staff. This same commitment drives AmSurg and is
the focus of our value proposition for our physician partners. We
are confident that integrating our similar physician-centric
cultures will strengthen both businesses and position our Company
for long-term growth in earnings and shareholder value.”
AmSurg Corp. will hold a conference call to discuss this release
today, July 31, 2014, 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” 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 costs
increase; the potential loss of collections and revenue if the
Company is unable to timely enroll providers in the Medicare and
Medicaid programs; the Company’s ability to acquire and develop
additional surgery centers and its ability to acquire or develop
additional relationships with providers for outsourced physician
services on favorable terms; the Company’s ability to compete for
physician partners, managed care contracts, patients and strategic
relationships; adverse developments affecting the medical practices
of the Company’s physician partners and affiliated practices; the
Company’s ability to maintain favorable relations with its
physician partners, affiliated practices and clients; the Company’s
ability to grow revenues by increasing procedure volume while
maintaining operating margins and profitability within its existing
centers and outsourced physician services operations; the Company’s
ability to manage the growth in its business, successfully
integrate and operate acquired businesses and achieve expected
benefits from acquisitions; the Company’s ability to obtain
sufficient capital resources to complete acquisitions and develop
new surgery centers or operations related to its outsourced
physician services; 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 its surgery
centers or operations of its outsourced physician services; the
Company’s failure to comply with applicable laws and regulations;
the Company’s failure to effectively and timely transition to the
ICD-10 coding system; 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
Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Reconciliation Act of 2010; the risk of
regulatory changes that may obligate the Company to buy out
interests of physicians who are minority owners of its surgery
centers; the risk that non-competition agreements in place with the
Company’s physicians or other clinical employees may not be
enforceable; the risk of payment delays, forfeiture of payment or
civil and criminal penalties related to failing to satisfy any
notification and reapplication requirements for any acquired
companies to maintain licensure, certification and other
authorities to operate after an acquisition; potential liabilities
associated with the Company’s status as a general partner of
limited partnerships; liabilities for claims brought against the
Company; the risk that the Company’s reserves established with
respect to its losses covered under its insurance programs are not
adequate; the Company’s legal responsibility to minority owners of
its surgery centers, which may conflict with its interests and
prevent the Company from acting solely in its best interests;
potential write-offs of the impaired portion of intangible assets;
and potential liabilities 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, 2013 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 U.S. and provides outsourced physician services in multiple
specialties to hospitals, ASCs and other healthcare facilities,
primarily in the areas of anesthesiology, children’s services,
emergency medicine and radiology. AmSurg owns and operates 243 ASCs
in 34 states and provides physician services in 25 states,
employing more than 2,600 physicians and other healthcare
professionals.
AMSURG CORP.
Unaudited Selected Consolidated
Financial and Operating Data
(In thousands, except earnings per
share)
Three Months Ended June 30, Six Months Ended June
30,
Statement of
Earnings Data:
2014 2013 2014
2013 Revenues $ 281,105 $ 267,102 $ 544,212 $ 525,291
Operating expenses: Salaries and benefits 84,866 81,085 168,060
162,043 Supply cost 41,283 38,989 80,003 76,202 Other operating
expenses 60,331 53,925 115,600 106,652 Depreciation and
amortization 8,550 8,125 16,924 16,133 Total
operating expenses 195,030 182,124 380,587 361,030 Gain on
deconsolidation 1,366 — 3,411 2,237 Equity in earnings of
unconsolidated affiliates 539 696 1,303 1,098
Operating income 87,980 85,674 168,339 167,596 Interest expense
6,894 7,512 13,857 15,054 Earnings from
continuing operations before income taxes 81,086 78,162 154,482
152,542 Income tax expense 12,921 12,710 25,978
24,979 Net earnings from continuing operations 68,165 65,452
128,504 127,563 Discontinued operations: Earnings from operations
of discontinued interests in surgery centers, net of income tax —
384 137 546 Gain (loss) on disposal of discontinued interests in
surgery centers, net of income tax 7 — (355 ) — Net
earnings (loss) from discontinued operations 7 384
(218 ) 546 Net earnings and comprehensive income 68,172 65,836
128,286 128,109 Less net earnings and comprehensive income
attributable to noncontrolling interests: Net earnings from
continuing operations 49,211 47,035 92,046 91,396 Net earnings from
discontinued operations — 238 84 339 Total net
earnings and comprehensive income attributable to noncontrolling
interests 49,211 47,273 92,130 91,735 Net
earnings and comprehensive income attributable to AmSurg Corp.
common shareholders $ 18,961 $ 18,563 $ 36,156
$ 36,374 Amounts attributable to AmSurg Corp. common shareholders:
Earnings from continuing operations, net of income tax $ 18,954 $
18,417 $ 36,458 $ 36,167 Discontinued operations, net of income tax
7 146 (302 ) 207 Net earnings and comprehensive
income attributable to AmSurg Corp. common shareholders $ 18,961
$ 18,563 $ 36,156 $ 36,374 Earnings per
share-basic: Net earnings from continuing operations attributable
to AmSurg Corp. common shareholders $ 0.60 $ 0.59 $ 1.15 $ 1.16 Net
earnings (loss) from discontinued operations attributable to AmSurg
Corp. common shareholders — — (0.01 ) 0.01 Net
earnings attributable to AmSurg Corp. common shareholders $ 0.60
$ 0.59 $ 1.14 $ 1.17 Earnings per
share-diluted: Net earnings from continuing operations attributable
to AmSurg Corp. common shareholders $ 0.59 $ 0.58 $ 1.13 $ 1.13 Net
earnings (loss) from discontinued operations attributable to AmSurg
Corp. common shareholders — — (0.01 ) 0.01 Net
earnings attributable to AmSurg Corp. common shareholders $ 0.59
$ 0.58 $ 1.12 $ 1.14 Weighted average number
of shares and share equivalents outstanding: Basic 31,825 31,208
31,770
31,213 Diluted 32,233 31,862
32,177
31,872
AMSURG CORP.
Unaudited Selected Consolidated
Financial and Operating Data, continued
(Dollars in thousands)
Three Months Ended June 30, Six Months Ended June
30,
Operating
Data:
2014 2013 2014
2013 Continuing centers in operation at end of
period (consolidated) 236 239 236 239 Continuing centers in
operation at end of period (unconsolidated) 7 4 7 4 Average number
of continuing centers in operation (consolidated) 238 234 238 234
New centers added during the period 1 2 2 2 Centers discontinued
during the period — — 1 — Centers under development/not opened at
end of period 1 — 1 — Centers under letter of intent at end of
period 6 5 6 5 Average revenue per consolidated center $ 1,182 $
1,141 $ 2,284 $ 2,245 Same center revenues increase (decrease) 1 %
0 % (1 )% (1 )% Procedures performed during the period at
consolidated centers 420,575 415,786 810,562 807,489 Income tax
expense attributable to noncontrolling interests $ 176 $ 182 $ 344
$ 368
AMSURG CORP.
Reconciliations of Non-GAAP Measures to
GAAP Measures
(In thousands)
Three Months Ended June 30, Six Months Ended June
30, 2014 2013 2014
2013 Reconciliation of net earnings to Adjusted
EBITDA (1): Net earnings from continuing operations
attributable to AmSurg Corp. common shareholders $ 18,954 $ 18,417
$ 36,458 $ 36,167 Income tax expense 12,921 12,710 25,978 24,979
Interest expense, net 6,894 7,512 13,857 15,054 Depreciation and
amortization 8,550 8,125 16,924 16,133 Share-based compensation
2,506 1,916 4,964 3,966 Acquisition costs 3,572 140 3,579 175 Gain
on deconsolidation (1,366 ) — (3,411 ) (2,237 )
Adjusted
EBITDA $ 52,031 $ 48,820 $ 98,349 $ 94,237
Three Months Ended June 30, Six Months
Ended June 30, 2014 2013 2014 2013
Reconciliation of net earnings per share-diluted to adjusted net
earnings per share-diluted (2): Net earnings from continuing
operations attributable to AmSurg Corp. common shareholders $ 0.59
$ 0.58 $ 1.13 $ 1.13 Gain on deconsolidation, net of tax (0.03 ) —
(0.04 ) (0.04 ) Acquisition costs, net of tax 0.07 —
0.07 —
Adjusted net earnings from continuing
operations attributable to AmSurg Corp. common stockholders $
0.63 $ 0.58 $ 1.16 $ 1.10
(1)
We define Adjusted EBITDA of AmSurg as
earnings before interest, income taxes, depreciation, amortization,
share-based compensation, acquisition costs and gains or losses on
deconsolidations. Adjusted EBITDA should not be considered a
measure of financial performance under generally accepted
accounting principles. Items excluded from Adjusted EBITDA are
significant components in understanding and assessing financial
performance. Adjusted 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. Adjusted 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 Adjusted EBITDA is not a measurement determined in
accordance with generally accepted accounting principles and is
thus susceptible to varying calculations, Adjusted 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 Adjusted
EBITDA as defined.
(2)
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 the gains or loss from
deconsolidations, which are non-cash in nature, and acquisition
costs (the majority of which relate to the Sheridan 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.
AMSURG CORP.
Unaudited Selected Consolidated
Financial and Operating Data, continued
(In thousands)
June 30, December 31,
Balance Sheet
Data:
2014 2013 Assets Current assets: Cash and cash
equivalents $ 44,911 $ 50,840 Accounts receivable, net of allowance
of $30,414 and $27,862, respectively 110,538 105,072 Supplies
inventory 18,808 18,414 Deferred income taxes 3,386 3,097 Prepaid
and other current assets 34,658 33,602 Total current assets
212,301 211,025 Property and equipment, net 168,839 169,895
Investments in unconsolidated affiliates and other 26,546 16,392
Goodwill 1,794,493 1,758,970 Intangible assets, net 20,829
21,662 Total assets $ 2,223,008 $ 2,177,944
Liabilities
and Equity Current liabilities: Current portion of long-term
debt $ 20,208 $ 20,844 Accounts payable 26,353 27,501 Accrued
salaries and benefits 29,849 32,294 Other accrued liabilities 9,771
9,231 Total current liabilities 86,181 89,870 Long-term debt
556,793 583,298 Deferred income taxes 194,181 176,020 Other
long-term liabilities 25,695 25,503 Commitments and contingencies
Noncontrolling interests – redeemable 177,063 177,697 Equity:
Preferred stock, no par value, 5,000 shares authorized, no shares
issued or outstanding — — Common stock, no par value, 70,000 shares
authorized, 32,572 and 32,353 shares outstanding, respectively
189,822 185,873 Retained earnings 614,480 578,324 Total
AmSurg Corp. equity 804,302 764,197 Noncontrolling interests –
non-redeemable 378,793 361,359 Total equity 1,183,095
1,125,556 Total liabilities and equity $ 2,223,008 $
2,177,944
AMSURG CORP.
Unaudited Selected Consolidated
Financial and Operating Data, continued
(In thousands)
Three Months Ended June 30, Six Months Ended June
30,
Statement of Cash
Flow Data:
2014 2013 2014
2013 Cash flows from operating activities: Net earnings $
68,172 $ 65,836 $ 128,286 $ 128,109 Adjustments to reconcile net
earnings to net cash flows provided by operating activities:
Depreciation and amortization 8,550 8,125 16,924 16,133 Net loss on
sale of long-lived assets 7 — 611 — Gain on deconsolidation (1,366
) — (3,411 ) (2,237 ) Share-based compensation 2,506 1,916 4,964
3,966 Excess tax benefit from share-based compensation (363 ) (922
) (2,090 ) (1,210 ) Deferred income taxes 5,939 6,400 17,872 19,329
Equity in earnings of unconsolidated affiliates (539 ) (696 )
(1,303 ) (1,098 ) Increases (decreases) in cash and cash
equivalents, net of effects of acquisitions and dispositions, due
to changes in: Accounts receivable, net (4,328 ) (3,516 ) (5,979 )
(5,221 ) Supplies inventory 238 (119 ) (7 ) (320 ) Prepaid and
other current assets 1,328 (2,074 ) (2,310 ) (2,057 ) Accounts
payable 1,181 689 (2,397 ) (2,351 ) Accrued expenses and other
liabilities 1,375 1,946 769 (2,155 ) Other, net 1,062 1,100
1,652 1,662 Net cash flows provided by
operating activities 83,762 78,685 153,581 152,550 Cash flows from
investing activities: Acquisition of interests in surgery centers
and related transactions (19,399 ) (18,094 ) (24,437 ) (18,346 )
Acquisition of property and equipment (9,037 ) (6,362 ) (16,075 )
(12,472 ) Proceeds from sale of interests in surgery centers 981 55
2,092 — Other (963 ) — (1,381 ) 55 Net cash flows
used in investing activities (28,418 ) (24,401 ) (39,801 ) (30,763
) Cash flows from financing activities: Proceeds from long-term
borrowings 42,301 40,052 74,246 70,922 Repayment on long-term
borrowings (51,473 ) (48,011 ) (102,326 ) (96,222 ) Distributions
to noncontrolling interests (48,816 ) (47,612 ) (92,010 ) (91,526 )
Proceeds from issuance of common stock upon exercise of stock
options 1,158 8,037 1,646 13,728 Repurchase of common stock —
(9,406 ) (2,857 ) (26,164 ) Capital contributions and ownership
transactions by noncontrolling interests (1,082 ) 377 (498 ) 936
Excess tax benefit from share-based compensation 363 922 2,090
1,210 Financing cost incurred — (1,133 ) — (1,146 )
Net cash flows used in financing activities (57,549 ) (56,774 )
(119,709 ) (128,262 ) Net decrease in cash and cash equivalents
(2,205 ) (2,490 ) (5,929 ) (6,475 ) Cash and cash equivalents,
beginning of period 47,116 42,413 50,840
46,398 Cash and cash equivalents, end of period $ 44,911
$ 39,923 $ 44,911 $ 39,923
AmSurg Corp.Claire M. Gulmi, 615-665-1283Executive Vice
President andChief Financial Officer
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