Announces Exploration of Strategic Options for AMR, Evolution Health
Introduces 2017 Financial Outlook
NASHVILLE, Tenn. & GREENWOOD VILLAGE, Colo. – (February 28, 2017) – Envision Healthcare Corporation (“Envision”) (NYSE: EVHC) today reported financial results for the three months and 12 months ended December 31, 2016. Envision was formed December 1, 2016, with the merger (“the Merger”) of AMSURG Corp. (“AMSURG”) and Envision Healthcare Holdings, Inc. (“EHH”). As a result of the Merger, the Company’s financial results included in today’s press release reflect AMSURG’s results for the 12 months ended December 31, 2016, and EHH’s results for December 1 through December 31, 2016.
Highlights for the Fourth Quarter of 2016:
- Net revenues of $1.39 billion;
- A net loss attributable to Envision common stockholders of $137.8 million, or $1.84 per share, as a result of merger-related costs, including an impairment charge of $221 million primarily related to the planned phase-out of the Sheridan trade name, transaction and integration costs and debt extinguishment costs;
- Adjusted net earnings of $92.0 million;
- Adjusted net earnings per diluted share of $1.15; and
- Adjusted EBITDA of $208.7 million.
Highlights for 2016:
- Net revenues of $3.70 billion, which consists of $3.15 billion related to AMSURG for 2016 and $546.0 million from EHH for the month of December;
- Net loss attributable to common stockholders of $27.7 million, or $0.47 per share;
- Adjusted net earnings of $266.7 million;
- Adjusted net earnings per diluted share of $4.23;
- Adjusted EBITDA of $631.0 million; and
A reconciliation of all historical GAAP and non-GAAP financial results is included on page 6 of this press release. Envision is also including certain supplemental projected adjusted EBITDA and same-contract performance of its results for the full year of 2016. The supplemental projected information, which includes the results of EHH for the 12 months ended December 31, 2016, and is included on page 9 of this press release, is a non-GAAP measure being provided for informational purposes only.
“We are making great strides in integrating the operations of AMSURG and Envision following our transformative merger of equals, and we are on track to achieve our target cost synergies,” said Christopher A. Holden, President and Chief Executive Officer of Envision. “Since completing the merger, we are executing on an ambitious plan that includes a strategic review of our core strengths, and we will explore strategic options that may lead to a redeployment of our resources in order to increase stockholder value.
“Our results for the 2016 fourth quarter were impacted by lower-than-anticipated volume growth in both our physician services and medical transportation segments, which we have taken into account when developing our outlook for 2017. We remain committed to achieving operational excellence at Envision, and we are excited about the opportunities to grow this organization. During the fourth quarter of 2016, we completed three Physician Services acquisitions in anesthesia and neonatology. During the first quarter of 2017, we have completed four acquisitions in anesthesia, emergency medicine, radiology and ambulatory services. These transactions, as well as our ongoing discussions with healthcare providers and health systems, validate the strong market positioning and potential Envision has as an integrated and scaled national provider across a broad continuum of clinical network solutions.”
Following completion of the Merger, Envision is reporting its results for three segments: Physician Services, which includes AMSURG’s legacy Sheridan Healthcare and EHH’s legacy EmCare and Evolution Health, Medical Transportation and Ambulatory Services.
Net revenues for physician services were $865.8 million for the fourth quarter of 2016, which compares with $378.1 million for the prior-year period. Physician services revenue growth was driven by the inclusion of one month of physician services revenue from EHH of $347.9 million as a result of the Merger. Excluding the one month of results from EHH, Physician Services revenues grew by 37.0%, which consisted of acquisition growth of 34.3%, new contract growth of 1.9% and contribution of 0.8% from services provided at existing contracts.
When calculated on a same-contract basis, which excludes the impact of EHH, Physician Services net revenue grew by 2.3%, day adjusted, and included 0.3% volume growth, and 2.0% growth in revenue per patient encounter. Same-contract volume growth was impacted by a lower rate of growth in anesthesia services in specific markets as well as a high prior-year comparable growth rate.
Adjusted EBITDA of $120.5 million in the fourth quarter of 2016 increased from $74.1 million for the prior-year period. Adjusted EBITDA includes $32.9 million from EHH’s Physician Services as a result of the Merger.
For the 12 months ended December 31, 2016, Physician Services generated net revenues of $2.23 billion and Adjusted EBITDA of $366.3 million.
AMSURG’s legacy Physician Services had 6.3% same-contract growth for the 12 months ended December 31, 2016, which consisted of 3.7% related to patient volume and 2.6% due to rate. EHH’s legacy Physician Services had same-contract growth of 6.4% during 2016, which consisted of 3.3% growth from volume and 3.1% from rate. EHH’s same-contract growth includes supplemental results from EHH prior to the completion of the Merger.
Envision’s Medical Transportation segment information, which reflects results from AMR, generated net revenues of $198.1 million and Adjusted EBITDA of $24.6 million for the month of December 2016.
For the 12 months ended December 31, 2016, Medical Transportation’s same-market revenue for the Medical Transportation segment increased by 2.8% in 2016, which was comprised of volume growth of 2.9% and a 0.1% decline attributable to rate. Medical Transportation’s same-market growth includes supplemental results from prior to the completion of the Merger.
Net revenues for the fourth quarter of 2016 were $326.7 million, which compares with $326.2 million for the prior-year period. Same-center revenue increased by 3.4%, day adjusted, for the fourth quarter of 2016, which was comprised of 0.6% increase in procedure volume and a 2.8% increase in net revenue per procedure. Net revenue growth was impacted by centers that were deconsolidated since the fourth quarter of 2015. Deconsolidated centers contributed incremental revenues of $8.3 million for the fourth quarter of 2015.
Ambulatory Services generated Adjusted EBITDA of $63.6 million in the fourth quarter of 2016, which compares to $63.3 million for the prior-year period.
For 2016, Ambulatory Services generated revenue of $1.27 billion, an increase of 3.1% from 2015. Adjusted EBITDA of $240.1 million in 2016 grew by 6.1% from $226.2 million in 2015.
Ambulatory Services operated 260 ASCs and one surgical hospital at December 31, 2016. Ambulatory Services added one de novo center and disposed of one center during the quarter.
Envision had cash and cash equivalents of $331.6 million and availability of $677.3 million under its asset-based lending facility as of December 31, 2016. Net cash flows from operations, less distributions to noncontrolling interests and excluding transaction costs, were $293.0 million for 2016. The Company’s ratio of total debt at December 31, 2016, to trailing 12 months EBITDA as calculated under the Company’s credit agreement was 4.3 times.
Exploration of Strategic Options
Envision is also announcing that it will explore strategic options for its American Medical Response (AMR) business and Evolution Health population health management services. Those options include potential joint ventures, other alternative structures or possible divestiture. AMR is the nation’s largest medical transportation provider with more than 4.5 million annual patient transports. Evolution Health is a population health management and post-acute, home health and hospice provider.
Envision today established its financial and operating guidance for 2017 and the first quarter of the year. The Company’s guidance is as follows:
- Net revenues of $10.4 billion to $10.7 billion;
- Same-contract revenue growth for Physician Services of 3% to 4%;
- Same-center revenue growth for Medical Transportation of 2% to 3%;
- Same-center revenue growth for Ambulatory Services of 2% to 3%;
- Adjusted EBITDA of $1.365 billion to $1.415 billion;
- Adjusted EPS for 2017 $4.06 to $4.31; and
- For the first quarter of 2017, Adjusted EPS of $0.75 to $0.81, which includes the expected impact of seasonally higher payroll tax expenses in Physician Services.
Non-GAAP Adjusted EBITDA guidance for the full year of 2017 excludes interest expense, income taxes, depreciation, amortization, share-based compensation, impairment charges, debt extinguishment costs, transaction and integration costs, changes in contingent purchase price consideration, gain or loss on deconsolidations and discontinued operations. Non-GAAP Adjusted EPS guidance for the full year and first quarter of 2017 excludes acquisition-related transaction and integration costs, acquisition-related amortization expense, gains and losses on future deconsolidation transactions, share-based compensation, impairment charges and debt extinguishment costs, net of tax impact. Envision is not providing a reconciliation of its Adjusted EBITDA and Adjusted EPS guidance because the exact amount of such exclusions are not currently determinable. These amounts may be significant and may vary significantly from period to period (see page 6 for a reconciliation of all historical GAAP and non-GAAP financial results).
Conference Call Information
Envision will host a conference call at 5:00 p.m. Eastern Time today to discuss its financial results. The live broadcast of Envision’s quarterly conference call will be available on-line by going to www.evhc.net and clicking on the link to Investors. The on-line replay will follow shortly after the call and continue for 30 days.
About Envision Healthcare Corporation
Envision Healthcare Corporation is a leading provider of physician-led services, ambulatory surgery services, post-acute care and medical transportation. Physician-led services encompass providers at more than 780 hospitals in 45 states and the District of Columbia and include leadership positions in emergency department and hospitalist services, anesthesiology, radiology, and women’s and children’s services, as well as offerings in general surgery and office-based medicine. As a market leader in ambulatory surgical care, the company owns and operates 260 surgery centers and one surgical hospital in 35 states and the District of Columbia, with medical specialties ranging from gastroenterology to ophthalmology and orthopedics. Post-acute care is delivered through an array of clinical professionals and integrated technologies designed to contribute to efficient and effective population health management strategies. As a leader in healthcare transportation services, the Company operates in 38 states and the District of Columbia. In total, the Company offers a differentiated suite of clinical solutions on a national scale, creating value for health systems, payors, providers and patients. For additional information, visit www.evhc.net
Certain statements and information in this communication may be deemed to be “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, statements relating to the Company’s financial and operating objectives, plans and strategies, and all statements (other than statements of historical facts) that address activities, events or developments that the Company intends, expects, projects, believes or anticipates will or may occur in the future. These statements are often characterized by terminology such as “believe,” “hope,” “may,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions, and are based on assumptions and assessments made by the Company’s management in light of their experience and their perception of historical trends, current conditions, expected future developments, and other factors they believe to be appropriate. Any forward-looking statements in this communication are made as of the date hereof, and the Company undertakes no duty to update or revise any such statements, whether as a result of new information, future events or otherwise. Forward-looking statements are not guarantees of future performance. Whether actual results will conform to expectations and predictions is subject to known and unknown risks and uncertainties, including: (i) risks and uncertainties discussed in the reports and other documents that the Company files with the Securities and Exchange Commission; (ii) general economic, market, or business conditions; (iii) the impact of legislative or regulatory changes, such as changes to the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010; (iv) changes in governmental reimbursement programs; (v) decreases in revenue and profit margin under fee-for-service contracts due to changes in volume, payor mix and reimbursement rates; (vi) the loss of existing contracts; (vii) risks associated with the ability to successfully integrate the Company’s operations and employees following the merger; (viii) the ability to realize anticipated benefits and synergies of the business combination; (ix) the potential impact of the consummation of the transaction on the Company’s relationships, including with employees, customers and competitors; and (x) other circumstances beyond the Company’s control.