AmSurg Reports Fourth-Quarter and 2014 Results

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, 2014. The Company’s results for the quarter included:

• Net revenues of $581.8 million, an increase of 108% from the fourth quarter of 2013;
• Net earnings from continuing operations attributable to AmSurg common shareholders of $25.3 million; adjusted net earnings of $39.6 million, up 95% from the fourth quarter of 2013;
• Net earnings per diluted share from continuing operations attributable to AmSurg common shareholders of $0.53; adjusted net earnings per diluted share of $0.77, up 22% on 60% higher diluted shares outstanding; and
• Adjusted EBITDA of $111.0 million, a 123% increase from the fourth quarter of 2013.

See pages 6 and 7 for a reconciliation of all GAAP and non-GAAP financial results.

For the year ended December 31, 2014, net revenues increased 53% to $1.62 billion from 2013. Net earnings from continuing operations attributable to AmSurg common shareholders were $50.8 million for 2014, and adjusted net earnings increased 53% to $114.2 million from 2013. Net earnings per diluted share from continuing operations attributable to AmSurg common shareholders were $1.28 for 2014, and adjusted net earnings per diluted share were $2.75, up 18% from 2013 on 30% higher diluted shares outstanding. Adjusted EBITDA for 2014 was $304.5 million.

Mr. Holden commented, “AmSurg generated strong financial performance for the fourth quarter of 2014. We are pleased with our 22% growth in adjusted net earnings per diluted share from the fourth quarter of 2013. Sheridan made a significant contribution in its first full quarter as a part of the Company. Operational integration with Sheridan is essentially completed. A strong cultural affinity between the two organizations has been a key factor to our smooth transition. At our core, we share a vision and commitment to build physician-centric organizations to ensure delivery of the highest quality care.

“The Company remains committed to the investment thesis for the AmSurg / Sheridan combination. We have achieved our targeted cost synergies and remain confident in our plan to achieve the $5 million of revenue synergies through a combination of acquisition, new contracts and health system ASC joint ventures. In the fourth quarter, we completed two physician services acquisitions and converted to Sheridan anesthesia at one of our ASCs. We have a strong development pipeline for both ambulatory and physician services. The market is active with ample opportunity to deploy our target of over $200 million in development capital in 2015. We are pleased with our early momentum and the breadth of outstanding synergistic opportunities. We believe our differentiated market position and current market conditions support our positive outlook and guidance for 2015.”

Ambulatory Services

Net revenues for Ambulatory Services increased 6% for the fourth quarter of 2014, to $295.7 million from $279.1 million for the fourth quarter of 2013. Same-center revenue grew 1.1% for the fourth quarter compared with the fourth quarter of 2013 and increased 0.7% for full-year 2014. Adjusted EBITDA increased 4% to $51.9 million for the fourth quarter of 2014 from $49.7 million for the same prior-year quarter. Adjusted EBITDA margin was 17.6% for the fourth quarter of 2014 compared with 17.8% for the fourth quarter of 2013.

During the fourth quarter, Ambulatory Services acquired four ambulatory surgery centers, including one center acquired as part of the Sheridan transaction, and disposed of one center. Ambulatory Services acquired 10 centers for the full year and had 246 centers in operation at year end. There were also five centers under letter of intent at year end, one of which has since been acquired, and two centers under development, one of which is expected to open in 2015.

Physician Services

Net revenues for Physician Services were $286.1 million for the fourth quarter of 2014. Adjusted EBITDA was $59.1 million for the latest quarter, and adjusted EBITDA margin was 20.7%.

Comparable-quarter revenue growth for Physician Services was 17.4% and was comprised of 7.2% growth in same contract revenues, 2.3% growth in new contract revenues and 7.9% growth in acquisition revenues. Organic growth in net revenues totaled 11.4% for the fourth quarter of 2014 reflecting a 9.7% increase in same contract revenues and a 1.7% increase in new contract revenues. Same contract revenue growth for the fourth quarter was comprised of a 2.2% increase in patient encounters and a 7.4% increase in net revenue per patient encounter. Organic growth increased 8.5% for 2014 from 2013, reflecting a 6.3% increase in same contract revenues and a 2.2% increase in new contract revenues. Same contract revenue growth for 2014 was comprised of a 2.3% increase in patient encounters and a 4.0% increase in net revenue per patient encounter.

During the fourth quarter, Physician Services completed two acquisitions of children’s services practices. Subsequent to the end of 2014, two additional acquisitions were completed, which have previously been announced.

Liquidity

At the end of 2014, AmSurg had cash and cash equivalents of $208.1 million and availability of $300.0 million under its revolving credit facility. Net cash flows from operations, less distributions to noncontrolling interests and excluding transaction-related costs, were $91.7 million for the fourth quarter. For full-year 2014, net cash flows from operations, less distributions to noncontrolling interests and excluding transaction-related costs, were $267.3 million. The Company’s ratio of total debt at the end of 2014 to trailing 12 months EBITDA as calculated under the Company’s credit agreement was 5.3.

Guidance

AmSurg today is establishing its financial and operating guidance for 2015 and for the first 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 for the first quarter of 2015 includes the normal season impact of higher salaries and benefits expense at the start of a new year, as well as ongoing trends in compensation. The Company’s guidance is as follows:

• Revenues in a range of $2.44 billion to $2.47 billion;
• Same-center revenue increase of 1% to 3% for Ambulatory Services, 5% to 7% organic revenue growth in Physician Services;
• Adjusted EBITDA of $445 million to $451 million;
• Adjusted EPS in a range of $3.24 to $3.32; and
• For the first quarter of 2015, adjusted EPS in a range of $0.55 to $0.58, which includes the higher salary-related expenses historically experienced in Physician Services.

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 first quarter and full year of 2015, non-GAAP adjusted net earnings per diluted share from continuing operations exclude acquisition-related transaction costs, acquisition-related amortization expense, gains and losses on deconsolidation and share-based compensation expense, net of the tax impact thereon (see pages 6 and 7 for a reconciliation of all GAAP and non-GAAP financial results).

Conference Call

AmSurg Corp. will hold a conference call to discuss this release Thursday, February 26, 2015, at 9:00 a.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.

Safe Harbor

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 Current Report on Form 8-K filed with the Securities and Exchange Commission on June 23, 2014, and Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as updated by 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.

About AmSurg

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 December 31, 2014, AmSurg owns and operates 246 ASCs in 34 states and provides physician services in 24 states, employing more than 2,800 physicians and other healthcare professionals.