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AmSurg Reports Fourth-Quarter Net Earnings Per Diluted Share from Continuing Operations of $0.44 Including NSC Transaction Costs of $0.02

Christopher A. Holden, President and Chief Executive Officer of AmSurg Corp. (NASDAQ: AMSG), today announced financial results for the fourth quarter and year ended December 31, 2011. Revenues for the fourth quarter were $223,336,000, an increase of 22% from $183,371,000 for the fourth quarter of 2010. Net earnings from continuing operations attributable to AmSurg common shareholders were $13,697,000, or $0.44 per diluted share, for the fourth quarter of 2011 compared with $13,183,000, or $0.43 per diluted share, for the fourth quarter of 2010. Adjusted net earnings from continuing operations per diluted share attributable to AmSurg common shareholders were $0.46 for the fourth quarter of 2011, which excluded transaction costs of $0.02 related to the National Surgical Care (“NSC”) transaction. The results for the fourth quarter of 2011 included an incremental negative impact of $0.01 per diluted share from the revision of the Medicare payment system for ASCs. The operations of the acquired NSC centers contributed $0.04 per diluted share to net earnings from continuing operations attributable to AmSurg common shareholders for the quarter.

Revenues for 2011 increased 12% to $786,870,000 from $703,439,000 for 2010. Net earnings from continuing operations attributable to AmSurg common shareholders were $51,199,000, or $1.64 per diluted share, for 2011 compared with $51,144,000, or $1.67 per diluted share, for 2010. Adjusted net earnings from continuing operations per diluted share attributable to AmSurg common shareholders were $1.71 for 2011, which excluded NSC transaction costs of $0.07. The results for 2011 included an incremental negative impact of $0.05 per diluted share from the revision of the Medicare payment system for ASCs and $0.07 per diluted share from the higher interest costs related to the refinancing of the Company’s credit facility in May 2010 and a higher effective tax rate. The operations of the acquired NSC centers contributed $0.05 per diluted share to net earnings from continuing operations attributable to AmSurg common shareholders for 2011.

Mr. Holden, remarked, “AmSurg produced strong revenue growth for the fourth quarter of 2011, which reflected a 15% increase in procedures and a 6% increase in revenue per procedure, as procedures from multi-specialty facilities accounted for a larger percentage of our procedure mix. The growth in procedures for the quarter was driven by a combination of factors that we expect will also drive revenue growth in 2012. The majority of the growth resulted from the NSC transaction in September, which added 14 multi-specialty centers to our fourth-quarter revenue stream, as well as two gastroenterology centers whose operations are not consolidated in our operating results because of our minority ownership position. In addition, for the fourth quarter we produced our third consecutive quarterly increase in same-center revenue of 1%. We also acquired three additional centers during the fourth quarter, one of which is a multi-specialty center that, by a substantial margin, is the largest single-center acquisition we have ever completed. This center generates annualized operating income that is approximately seven times our average center operating income.

“Including these fourth-quarter acquisitions, we added 11 non-NSC centers during 2011, comprised of 10 acquired centers and one de novo center. The non-NSC centers acquired in 2011 generate annualized operating income of approximately $29 million. We completed 2011 with two centers under letter of intent or contract and one center under development, which is expected to open in 2012. Since the beginning of 2012, we have acquired the assets of one of these centers and combined its operations with one of our existing centers.

“Net cash flows from operating activities were $67.8 million for the fourth quarter of 2011 compared with $65.8 million for the fourth quarter of 2010. Excluding distributions to noncontrolling interests, net cash flows from operations were $32.5 million for the latest quarter compared with $32.4 million for the fourth quarter of 2010 and $104.7 million for full-year 2011 versus $98.5 million for 2010. In addition to this substantial operating cash flow, the ratio of total debt to EBITDA, as calculated under our credit agreement, was 2.9 at the end of 2011; we had cash and cash equivalents of $40.7 million; and our availability under our revolving credit facility was $99.0 million. As a result, we believe we are well positioned to fund our planned growth for 2012.

“We today establish our guidance for 2012 and the first quarter of 2012, as follows:

  • Revenues in a range of $900 million to $920 million for 2012.
  • Same-center revenue increase of 0% to 2% for 2012.
  • Center acquisitions for 2012 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 $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 $1.95 to $1.99.
  • Net earnings from continuing operations per diluted share attributable to common shareholders for the first quarter of 2012 in a range of $0.47 to $0.49.”

Mr. Holden concluded, “Notwithstanding our continuing caution over slow economic growth and high unemployment, we believe AmSurg is positioned to produce significantly stronger earnings growth for 2012. This expectation reflects our $239 million acquisition spend for 2011, which, while a record amount, only increased our debt leverage ratio by 70 basis points. The 27 acquired and de novo centers we added during 2011 are larger and more weighted toward multi-specialty centers than our previous center mix. We expect these centers, the majority of which were added after the beginning of September, to produce much stronger results for 2012 on a full year of operations.

“In addition, we expect our comparable-period growth for 2012 to reflect the absence of several factors that had a negative impact on our comparable results for 2011 versus 2010. Specifically, our 2011 net earnings from continuing operations per diluted share attributable to common shareholders reflected an incremental negative impact, compared with 2010, of: (i) $0.07 as a result of our refinancing in May 2010; (ii) $0.07 from NSC transaction costs; and (iii) $0.05 due to reductions in Medicare rate reimbursement.

“We are also optimistic about our longer-term growth prospects. Demand for the types of procedures performed in our centers is growing due to strong demographic trends and expanded access. In addition, technology and other improvements continue to drive more procedures to an outpatient setting, and the value proposition of freestanding ASCs – built on providing high quality care in the lowest cost modality – continues to gain traction. Against this increase in demand, ASC industry capacity has remained virtually flat for the past two years. As a result, we believe AmSurg, as the operator of the largest number of ASCs in the country, will benefit from this increasing demand, which will support long-term organic growth. In addition, in an industry that remains highly fragmented, we have a robust pipeline of acquisition opportunities, and we expect to continue to expand our long-term record of successfully acquiring, integrating and growing ASCs.”

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 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 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; the risk from an unpredictable 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, 2010 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 December 31, 2011, AmSurg owned and operated 228 centers and had one center under development.

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

Statement of Earnings Data:

2011 2010 2011 2010
 
Revenues $ 223,336 $ 183,371 $ 786,870 $ 703,439
 
Operating expenses:
Salaries and benefits 69,151 56,215 243,094 211,809
Supply cost 31,541 23,807 104,007 91,730
Other operating expenses 49,720 36,648 171,759 148,187
Depreciation and amortization   7,514     6,430     26,175     24,928  
 
Total operating expenses 157,926 123,100 545,035 476,654
 
Equity in earnings of unconsolidated affiliates   466     -     613     -  
 
Operating income 65,876 60,271 242,448 226,785
 
Interest expense   4,172     4,415     15,347     13,486  
 
Earnings from continuing operations before income taxes 61,704 55,856 227,101 213,299
Income tax expense   10,092     8,626     35,841     33,791  
 
Net earnings from continuing operations 51,612 47,230 191,260 179,508
 
Discontinued operations:

Earnings from operations of discontinued interests in surgery centers, net of income tax

39 626 397 3,720
Loss on disposal of discontinued interests in surgery centers, net of income tax   (159 )   (2,635 )   (1,543 )   (2,732 )
 
Net loss from discontinued operations   (120 )   (2,009 )   (1,146 )   988  
 
Net earnings 51,492 45,221 190,114 180,496
 
Less net earnings attributable to noncontrolling interests:
Net earnings from continuing operations 37,915 34,047 140,061 128,364
Net earnings from discontinued operations   29     306     56     2,307  
 
Total net earnings attributable to noncontrolling interests   37,944     34,353     140,117     130,671  
 
Net earnings attributable to AmSurg Corp. common shareholders $ 13,548   $ 10,868   $ 49,997   $ 49,825  
 
Amounts attributable to AmSurg Corp. common shareholders:
Earnings from continuing operations, net of income tax $ 13,697 $ 13,183 $ 51,199 $ 51,144
Discontinued operations, net of income tax   (149 )   (2,315 )   (1,202 )   (1,319 )
 
Net earnings attributable to AmSurg Corp. common shareholders $ 13,548   $ 10,868   $ 49,997   $ 49,825  
 
Earnings per share-basic:

Net earnings from continuing operations attributable to AmSurg Corp. common shareholders

$ 0.45 $ 0.43 $ 1.68 $ 1.69

Net loss from discontinued operations attributable to AmSurg Corp. common shareholders

  -     (0.08 )   (0.04 )   (0.04 )
 
Net earnings attributable to AmSurg Corp. common shareholders $ 0.44   $ 0.36   $ 1.64   $ 1.65  
 
Earnings per share-diluted:

Net earnings from continuing operations attributable to AmSurg Corp. common shareholders

$ 0.44 $ 0.43 $ 1.64 $ 1.67

Net loss from discontinued operations attributable to AmSurg Corp. common shareholders

  -     (0.08 )   (0.04 )   (0.04 )
 
Net earnings attributable to AmSurg Corp. common shareholders $ 0.43   $ 0.35   $ 1.60   $ 1.62  
 
Weighted average number of shares and share equivalents (000's):
Basic 30,537 30,318 30,452 30,255
Diluted 31,323 30,763 31,211 30,689
 
 
AMSURG CORP.
Unaudited Selected Consolidated Financial and Operating Data, continued
(Dollars in thousands)
       
For the Three Months For the Twelve Months
Ended December 31, Ended December 31,

Operating Data:

2011 2010 2011 2010
 
Continuing centers in operation at end of period (consolidated) 226 202 226 202
Continuing centers in operation at end of period (unconsolidated) 2 - 2 -
Average number of continuing centers in operation (consolidated) 224 200 212 198
New centers added during the period 3 3 27 7
Centers discontinued during the period - 5 5 5
Centers under development/not opened at end of period 1 1 1 1
Centers under letter of intent at end of period 2 8 2 8
Average revenue per consolidated center $ 999 $ 918 $ 3,711 $ 3,561
Same center revenues increase (decrease) 1 % 0 % 1 % (2 %)
Procedures performed during the period at consolidated centers 379,444 330,045 1,388,556 1,267,587
Income tax expense attributable to noncontrolling interests $ 120 $ 31 $ 617 $ 628
 
Reconciliation of net earnings to EBITDA (1):

Net earnings from continuing operations attributable to AmSurg Corp. common shareholders

$ 13,697 $ 13,183 $ 51,199 $ 51,144
Add: income tax expense 10,092 8,626 35,841 33,791
Add: interest expense, net 4,172 4,415 15,347 13,486
Add: depreciation and amortization   7,514     6,430     26,175     24,928  
 
EBITDA $ 35,475   $ 32,654   $ 128,562   $ 123,349  
 

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

$ 0.44 $ 0.43 $ 1.64 $ 1.67
Plus: NSC transaction costs   0.02     -     0.07     -  
 

Adjusted net earnings from continuing operations attributable to AmSurg Corp. common shareholders

$ 0.46   $ 0.43   $ 1.71   $ 1.67  
 
(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.
 
(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 costs incurred in executing the NSC 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
(Dollars in thousands)
           
December 31, December 31,

Balance Sheet Data:

2011 2010
 
Assets
 
Current assets:
Cash and cash equivalents $ 40,718 $ 34,147
Accounts receivable, net of allowance of $18,844 and $13,070, respectively 93,454 67,617
Supplies inventory 15,039 10,157
Deferred income taxes 2,129 1,509
Prepaid and other current assets 21,875 18,660
Current assets held for sale   -   866  
 
Total current assets 173,215 132,956
 
Property and equipment, net 144,558 119,167
Investments in unconsolidated affiliates 10,522 -
Goodwill 1,229,298 894,497
Intangible assets, net 15,425 11,361
Long-term assets held for sale   -   7,897  
 
Total assets $ 1,573,018 $ 1,165,878  
 
Liabilities and Equity
 
Current liabilities:
Current portion of long-term debt $ 10,800 $ 6,648
Accounts payable 19,746 15,291
Current income taxes payable 1,796 -
Accrued salaries and benefits 22,224 17,952
Other accrued liabilities 9,088 3,136
Current liabilities held for sale   -   536  
 
Total current liabilities 63,654 43,563
 
Long-term debt 447,963 283,215
Deferred income taxes 114,167 90,089
Other long-term liabilities 28,131 24,404
Noncontrolling interests - redeemable 170,636 147,740
Equity:

Common stock, no par value 70,000,000 shares authorized, 31,283,772 and 31,039,770 shares outstanding, respectively

173,187 171,522
Retained earnings 443,058 393,061
Accumulated other comprehensive loss, net of income taxes   -   (515 )
 
Total AmSurg Corp. equity 616,245 564,068
Noncontrolling interests - non-redeemable   132,222   12,799  
 
Total equity   748,467   576,867  
 
Total liabilities and equity $ 1,573,018 $ 1,165,878  
 
 
AMSURG CORP.
Unaudited Selected Consolidated Financial and Operating Data, continued
(Dollars in thousands)
             
For the Three Months For the Twelve Months
Ended December 31, Ended December 31,

Statement of Cash Flow Data:

2011 2010 2011 2010
 
Cash flows from operating activities:
Net earnings $ 51,492 $ 45,221 $ 190,114 $ 180,496
Adjustments to reconcile net earnings to net cash flows provided by operating activities:
Depreciation and amortization 7,927 6,430 26,175 24,928
Net (gain) loss on sale of long-lived assets (238 ) 4,084 (1,518 ) 4,243
Share-based compensation 1,416 1,444 6,178 4,869
Excess tax benefit from share-based compensation (488 ) (119 ) (977 ) (200 )
Deferred income taxes 5,039 4,830 23,623 18,247
Equity in earnings of unconsolidated affiliates, net (466 ) - (613 ) -

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

Accounts receivable, net (1,451 ) 3,666 (2,122 ) 713
Supplies inventory 47 (901 ) 168 (541 )
Prepaid and other current assets (642 ) (3,184 ) 838 (3,364 )
Accounts payable 165 2,033 (2,205 ) (220 )
Accrued expenses and other liabilities 4,990 2,116 2,329 168
Other, net   25     199     1,433     1,236  
 
Net cash flows provided by operating activities 67,816 65,819 243,423 230,575
 
Cash flows from investing activities:
Acquisition of interest in surgery centers and related transactions (50,723 ) (12,075 ) (239,223 ) (53,690 )
Acquisition of property and equipment (6,838 ) (5,775 ) (22,170 ) (19,275 )
Proceeds from the sale of interests in surgery centers   2,452     60     7,026     60  
 
Net cash flows used in investing activities (55,109 ) (17,790 ) (254,367 ) (72,905 )
 
Cash flows from financing activities:
Proceeds from long-term borrowings 58,344 20,030 288,869 176,619
Repayment on long-term borrowings (29,564 ) (31,423 ) (129,107 ) (195,960 )
Distributions to noncontrolling interests (35,326 ) (33,449 ) (138,724 ) (132,110 )
Proceeds from issuance of common stock upon exercise of stock options 2,112 1,900 6,872 2,583
Repurchase of common stock (3,822 ) - (10,007 ) -
Capital contributions and ownership transactions by noncontrolling interests (38 ) 160 660 224
Excess tax benefit from share-based compensation 488 119 977 200
Financing cost incurred   (22 )   (16 )   (2,025 )   (4,456 )
 
Net cash flows provided by (used in) financing activities   (7,828 )   (42,679 )   17,515     (152,900 )
 
Net increase in cash and cash equivalents 4,879 5,350 6,571 4,770
Cash and cash equivalents, beginning of period   35,839     28,797     34,147     29,377  
 
Cash and cash equivalents, end of period $ 40,718   $ 34,147   $ 40,718   $ 34,147  

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