NASHVILLE, Tenn. _ (November 4, 2014) _ Christopher A. Holden, President and Chief Executive Officer of AmSurg Corp. (NASDAQ: AMSG), today announced financial results for the third quarter ended September 30, 2014. The Company’s results for the quarter included (see page 6 for a reconciliation of all GAAP and non-GAAP financial results): Net revenues of $503.2 million, an increase of 91.3% from the third quarter of 2013; Net loss from continuing operations attributable to AmSurg of $12.1 million; adjusted net earnings of $34.6 million, up 92.4%; Net loss per share from continuing operations attributable to AmSurg of $0.23; adjusted net earnings per diluted share of $0.69, up 23.2% on higher diluted shares outstanding; and Growth of 110.4% in adjusted EBITDA to $95.9 million.
Mr. Holden commented, “We are pleased with AmSurg’s performance for the third quarter, which produced better than expected financial results. In addition, the work to integrate the acquisition of Sheridan, which was completed July 16, 2014, has gone very well. The combination of Sheridan’s leadership position in outsourced physician services with AmSurg’s leadership in ambulatory services has been well-received in our markets and has generated a strong pipeline of cross-selling opportunities. In addition, we continue to have robust pipelines of potential acquisitions across our markets, and we are well-positioned financially to fund our growth strategies. We believe AmSurg represents an innovative and differentiated platform of services and expertise that is highly aligned with the transformation of the healthcare delivery system, including the industry-wide drive to improve quality and lower the costs of care and the development of integrated care systems as the market shifts to value-based payment arrangements.”
Net revenues for Ambulatory Services increased 5.4% for the third quarter, to $277.3 million from $263.0 million for the third quarter of 2013. Same-center revenue grew 1.7% for the third quarter compared with the third quarter last year and has increased 0.6% for the first nine months of 2014. Adjusted EBITDA increased 5.1% to $47.9 million for the third quarter of 2014 from $45.6 million for the prior-year quarter, with adjusted EBITDA margin consistent for each quarter at 17.3%.
During the third quarter, the Ambulatory Services segment added four new ambulatory surgery centers through acquisition, including three centers acquired as part of the Sheridan transaction, two of which are consolidated and one of which is unconsolidated. The fourth acquired center is also unconsolidated. In addition, there were four center dispositions for the third quarter, which resulted in 243 centers in operation at the end of the quarter. Ambulatory Services also had eight centers under letter of intent at the end of the quarter, one of which has since been acquired, and one center under development that is expected to open in 2015.
Net revenues for Physician Services were $225.9 million for the third quarter of 2014, and adjusted EBITDA was $48.0 million, or 21.3% of net revenues. These figures include results from the date of the Sheridan acquisition on July 16, 2014 through the end of the third quarter. For comparison purposes, and inclusive of 15 days of pre-acquisition activity, Physician Services produced an increase in net revenues of 15.8% for the full three months ended September 30, 2014 compared with the third quarter of 2013. This increase was comprised of 3.7% growth in same contract revenues, 0.9% growth in new contract revenues and 11.2% growth in acquisition revenues. Organic growth in net revenues totaled 5.5% for the full third quarter of 2014 and 7.3% for the first nine months of the year. Contributing to organic growth for the quarter, same contract revenues increased 5.1% and new contract revenues increased 0.4%. Same contract revenue growth was comprised of a 2.4% increase in patient encounters and a 2.7% increase in net revenue per patient encounter.
Yesterday, the Physician Services segment completed the acquisition of Desert Neonatology Associates, which provides neonatology services for Banner Health facilities within greater Phoenix, Arizona. This practice has a staff of six physicians and 30 neonatal nurse practitioners and represents Physician Services’ initial entry into the Phoenix market. In addition, a second acquisition has been completed since the end of the third quarter of a three-physician maternal fetal medicine practice located in southern Florida.
At the end of the third quarter of 2014, AmSurg had cash and cash equivalents of $194.1 million and availability of $300.0 million under its revolving credit facility. Net cash flows from operations, excluding distributions to noncontrolling interests and transaction-related costs of $38.4 million, were $113.4 million for the third quarter and $175.6 million for the first nine months of 2014. The Company’s ratio of total debt at the end of the quarter to trailing 12 months EBITDA as calculated under the Company’s credit agreement was 5.4.
Based on the Company’s results for the third quarter and year to date, as well as its outlook for the remainder of 2014, AmSurg today is revising its financial and operating guidance for 2014 and establishing guidance for the fourth quarter of the year. The Company’s guidance for adjusted net earnings per diluted share from continuing operations attributable to common shareholders (“Adjusted EPS”) excludes transaction and severance costs related to acquisitions, 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 $1.60 billion to $1.61 billion; Same-center revenue increase of 1% for Ambulatory Services, 6% to 8% organic revenue growth in Physician Services; Net cash flow provided by operating activities, less distributions to non-controlling interests, in a range of $235 million to $245 million, excluding transaction costs; Adjusted EPS in a range of $2.66 to $2.71; and For the fourth quarter of 2014, Adjusted EPS in a range of $0.70 to $0.73.
The information contained in the preceding paragraphs, including information regarding the Company’s 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 attain the financial targets set forth in this press release. 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.
For the fourth quarter and full year of 2014, non-GAAP adjusted net earnings per diluted share from continuing operations exclude transaction and severance costs related to the acquisition of Sheridan, acquisition-related amortization expense, gains and losses on deconsolidation and share-based compensation expense, net of the tax impact thereon, the exact amount of which are not currently determinable but may be significant. For that reason, the Company is unable to provide fourth quarter and full-year GAAP net earnings guidance.
Changes to Executive Management
Mr. Holden also today announced changes to the Company’s executive management as part of the integration of Sheridan.
Phillip A. Clendenin, formerly the Executive Vice President –Operations of AmSurg, has been named President –Ambulatory Services. Robert Coward, formerly President of Sheridan, has been named President –Physician Services and Chief Development Officer for the Company. In addition, the Company announced that David L. Manning, Executive Vice President and Chief Development Officer of the Company, will be leaving the Company effective December 31, 2014.
Mr. Holden remarked, “David Manning, with his positive endorsement and support for the timing of his succession plan, will complete his extraordinary career at AmSurg at the end of the year. David has been a leader and the driving force in the success of AmSurg since his co-founding of the Company. We are grateful for all of David’s contributions to AmSurg during his many years of service to the Company.
“I also congratulate Phillip and Bob on their new responsibilities. Phillip has a long and successful background in healthcare, including as Senior Vice President of Corporate Services, Senior Vice President –Operations and Executive Vice President –Operations of AmSurg. We recently welcomed Bob to AmSurg as a result of the acquisition of Sheridan, where he has served as President since 2010. Prior to becoming President, Bob served Sheridan as Chief Financial Officer and as Senior Vice President of Operations or Chief Operating Officer since 2000. We look forward to the continuing contributions of these leaders in their new positions.”
AmSurg Corp. will hold a conference call to discuss this release today, November 4, 2014, at 5:00 p.m. Eastern time. Investors will have the opportunity to listen to the conference call over the Internet by going towww.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. operates an Ambulatory Services business that acquires, develops and operates ambulatory surgery centers in partnership with physician practice groups throughout the U.S. AmSurg also operates a Physician Services business that 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. Through these businesses as of September 30, 2014, 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.