Acquires 14 Centers During Quarter with Record Total Annualized Operating Income of $60 Million Establishes Financial Guidance for 2013
NASHVILLE, Tenn. ─ (February 25, 2013) ─ 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, 2012. Revenues increased 10% for the quarter to $244.2 million from $221.1 million for the fourth quarter of 2011. Net earnings from continuing operations attributable to AmSurg common shareholders were $15.7 million, or $0.49 per diluted share, for the fourth quarter of 2012 compared with $13.6 million, or $0.43 per diluted share, for the fourth quarter of 2011. The 2011 period included acquisition transaction costs of $0.02 per diluted share. Excluding these costs from the prior year, net earnings from continuing operations per diluted share attributable to AmSurg common shareholders increased 9% for the fourth quarter of 2012.
Revenues for the year ended December 31, 2012 increased 19% to $928.5 million from $777.6 million for 2011. Net earnings from continuing operations attributable to AmSurg common shareholders increased to $62.6 million, or $1.98 per diluted share, for 2012 from $50.4 million, or $1.61 per diluted share, for 2011. Included in results for 2011 were acquisition transaction costs of $0.07 per diluted share. Excluding these costs from 2011, net earnings from continuing operations per diluted share attributable to AmSurg common shareholders increased
19% for 2012.
Mr. Holden said, “We are pleased with AmSurg’s operating and financial performance for the fourth quarter, which produced same-center revenue growth of 3% for the quarter and for all of 2012, up from 1% for the comparable periods in 2011. Our fourth-quarter earnings included a negative impact from Hurricane Sandy of an estimated $0.01 per diluted share. In addition, our acquisition strategy contributed significantly to our 19% growth in revenue and earnings per diluted share for full-year 2012 and, through a record level of activity in the fourth quarter, will continue to fuel our growth in 2013. We completed the acquisition of 14 centers during the fourth quarter that generate a record $60 million in annualized operating income, all of which were single-center transactions.
“During the quarter, we also merged the operations of one center into another center and added two centers to discontinued operations. As a result, we completed 2012 with 240 centers in operation compared with 224 at the end of 2011. We had two additional centers under letter of intent at the end of 2012. “Net cash flows from operating activities were $79.5 million for the fourth quarter of 2012 compared with $67.8 million for the fourth quarter of 2011. Excluding distributions to noncontrolling interests, net cash flows from operations increased 22% to $39.7 million from $32.5 million. In addition to maintenance and development capital expenditures of $8.1 million, we primarily applied cash flow to fund a portion of our acquisition costs for the fourth quarter. Net operating cash flows, excluding distributions, for all 2012 increased 27% to $132.7 million, and our maintenance and development capital expenditures for the year were $28.9 million.
“During the quarter, we also enhanced our capital structure through a $250 million offering of 5.625% senior notes due 2020, the proceeds of which were used to reduce the
outstanding balance on our revolving credit facility. As previously discussed, this offering, in addition to supporting our fourth-quarter acquisitions, was designed to use the strength of our balance sheet to optimize our capital structure in support of our long-term growth. Through the offering, we took advantage of historically low interest rates and also significantly increased the percentage of our fixed-rate debt. Also as previously discussed, we expect the offering to increase 2013 interest expense by approximately $0.20 per diluted share after tax versus 2012. While this increase will offset a portion of the incremental earnings expected from the fourth quarter acquisitions, we expect the strengthening of our capital structure to meaningfully improve our ability to implement our long-term growth strategies.
“At the end of 2012, our ratio of total debt to trailing 12 months EBITDA as calculated under our credit agreement was 3.2 compared with 2.9 at the end of 2011. We believe that this
relatively low ratio, after two consecutive years of annual acquisition expenditures that were multiple times greater than our historical average, highlights the strengths of our business model. With a continued anticipation of strong cash flow generation in 2013 and with availability of $195 million under our revolving credit facility, we are well positioned to fund our planned growth for the year.
“Today, we establish our financial guidance for 2013, as well as our guidance for the first quarter of the year. We expect our results to reflect the increased interest expense of $0.20 per diluted share discussed above, 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. We will also have two less business days in the first quarter of 2013 compared with the first quarter of 2012. Our 2013 financial guidance is as follows:
Revenues in a range of $1.06 billion to $1.09 billion.
Same-center revenue increase of 0% to 2%.
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 $2.18 to $2.23.
For the first quarter of 2013, net earnings from continuing operations per diluted share attributable to common shareholders in a range of $0.50 to $0.52.
“Our 2013 financial guidance does not include any impact related to sequestration. In the event that sequestration occurs under current legislation, it would negatively affect our results by $0.06 per diluted share on an annualized basis.”
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 strong fourth-quarter acquisition activity and our improved same-center revenue performance in a slowly strengthening economic environment support our ability to achieve our growth objectives for 2013. While we expect to continue to face headwinds in the near term from the uncertain strength of the economy and turmoil in the healthcare industry related to the Patient Protection Affordable Care Act (PPACA) and the national debate on taxes and spending, we believe trends favoring the long-term growth of the free-standing ASC industry and, in particular, AmSurg have not diminished.
“We expect industry procedures to continue to be positively affected by the demographics of the baby boom generation and by the increased access to insurance expected to be provided to at least 30 million people under PPACA. Concurrent with this increasing demand, the value proposition of lower cost, high quality care that we provide through our centers is resonating with payers, patients and physicians. Operating the largest number of freestanding ASCs in the country, the Company is well-positioned to drive long-term organic growth as a result of these industry forces.
“AmSurg also has an unequaled record of consistent growth through acquisition in an industry that remains highly fragmented. In addition to our strong operating cash flow generation, we believe our access to capital is a competitive advantage in implementing our center acquisition strategy. Through our continued fundamental focus on differentiating AmSurg through a physician-centric culture, we further believe we have built a market-leading position as the physician partner of choice. With these competitive strengths in an industry experiencing favorable long-term growth trends, we are confident of our ability to achieve long-term growth in earnings and shareholder value.”
AmSurg Corp. will hold a conference call to discuss this release today at 4:30 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 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; 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; 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, 2011 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, 2012, AmSurg owned and operated 240 centers.