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AmSurg Reports Fourth-Quarter and 2014 Results

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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.

AMSURG CORP.

Unaudited Selected Consolidated Financial and Operating Data

(In thousands, except earnings per share)

Three Months Ended December 31, Year Ended December 31,

Statement of Earnings Data:

2014 2013 2014 2013
Revenues $ 645,619 $ 279,095 $ 1,738,950 $ 1,057,196
Provision for uncollectibles (63,808 ) (117,001 )
Net revenues 581,811 279,095 1,621,949 1,057,196
Operating expenses:
Salaries and benefits 288,037 84,658 694,576 327,585
Supply cost 43,732 41,462 164,296 153,126
Other operating expenses 93,685 58,041 284,928 216,501
Transaction costs 5,209 15 33,890 300
Depreciation and amortization 22,811 8,330 60,344 32,400
Total operating expenses 453,474 192,506 1,238,034 729,912
Gain on deconsolidation 3,411 2,237
Equity in earnings of unconsolidated affiliates 3,577 958 7,038 3,151
Operating income 131,914 87,547 394,364 332,672
Interest expense, net 30,379 7,184 83,285 29,525
Debt extinguishment costs 16,887
Earnings from continuing operations before income taxes 101,535 80,363 294,192 303,147
Income tax expense 22,301 13,015 48,103 48,654
Net earnings from continuing operations 79,234 67,348 246,089 254,493
Net earnings (loss) from discontinued operations (150 ) 3,820 (1,296 ) 7,051
Net earnings 79,084 71,168 244,793 261,544
Less net earnings attributable to noncontrolling interests 51,705 51,610 191,092 188,841
Net earnings attributable to AmSurg Corp. shareholders 27,379 19,558 53,701 72,703
Preferred stock dividends (2,264 ) (4,503 )
Net earnings attributable to AmSurg Corp. common shareholders $ 25,115 $ 19,558 $ 49,198 $ 72,703
Amounts attributable to AmSurg Corp. common shareholders:
Earnings from continuing operations, net of income tax $ 25,311 $ 18,931 $ 50,777 $ 71,009
Earnings (loss) from discontinued operations, net of income tax (196 ) 627 (1,579 ) 1,694
Net earnings attributable to AmSurg Corp. common shareholders $ 25,115 $ 19,558 $ 49,198 $ 72,703
Basic earnings per share attributable to AmSurg Corp. common shareholders:
Net earnings from continuing operations $ 0.53 $ 0.60 $ 1.29 $ 2.27
Net earnings (loss) from discontinued operations 0.02 (0.04 ) 0.05
Net earnings $ 0.53 $ 0.62 $ 1.25 $ 2.32
Diluted earnings per share attributable to AmSurg Corp. common shareholders:
Net earnings from continuing operations $ 0.53 $ 0.59 $ 1.28 $ 2.22
Net earnings (loss) from discontinued operations 0.02 (0.04 ) 0.05
Net earnings $ 0.53 $ 0.61 $ 1.24 $ 2.28
Weighted average number of shares and share equivalents outstanding:
Basic 47,384 31,549 39,311 31,338
Diluted 47,828 32,082 39,625 31,954

AMSURG CORP.

Unaudited Selected Consolidated Financial and Operating Data, continued

(In thousands, except earnings per share)

Three Months Ended December 31, Year Ended December 31,
2014 2013 2014 2013
Reconciliation of net earnings to Adjusted net earnings (1):
Net earnings attributable to AmSurg Corp. shareholders $ 27,379 $ 19,558 $ 53,701 $ 72,703
(Earnings) loss from discontinued operations 327 510 2,220 (1,694 )
Amortization of purchased intangibles 12,179 22,148
Share-based compensation 2,716 2,251 10,104 8,321
Gain on deconsolidation (3,411 ) (2,237 )
Transaction costs 5,209 15 33,890 300
Debt extinguishment costs 16,887
Deferred financing write-off 12,763
Total pre-tax adjustments 20,431 2,776 94,601 4,690
Tax effect 8,172 2,046 34,140 2,560
Total adjustments, net 12,259 730 60,461 2,130
Adjusted net earnings $ 39,638 $ 20,288 $ 114,162 $ 74,833
Basic shares outstanding 47,384 31,549 39,311 31,338
Effect of dilutive securities options and non-vested shares 3,891 533 2,152 616
Diluted shares outstanding, if converted 51,275 32,082 41,463 31,954
Adjusted earnings per share $ 0.77 $ 0.63 $ 2.75 $ 2.34
Reconciliation of net earnings to Adjusted EBITDA (2):
Net earnings attributable to AmSurg Corp. shareholders $ 27,379 $ 19,558 $ 53,701 $ 72,703
(Earnings) loss from discontinued operations 196 (627 ) 1,579 (1,694 )
Interest expense, net 30,379 7,184 83,285 29,525
Income tax expense 22,301 13,015 48,103 48,654
Depreciation and amortization 22,811 8,330 60,344 32,400
EBITDA 103,066 47,460 247,012 181,588
Adjustments:
Share-based compensation 2,716 2,251 10,104 8,321
Transaction costs 5,209 15 33,890 300
Gain on deconsolidation (3,411 ) (2,237 )
Debt extinguishment costs 16,887
Total adjustments 7,925 2,266 57,470 6,384
Adjusted EBITDA $ 110,991 $ 49,726 $ 304,482 $ 187,972
Segment Information:
Ambulatory Services Adjusted EBITDA $ 51,904 $ 49,726 $ 197,377 $ 187,972
Physician Services Adjusted EBITDA 59,087 107,105
Adjusted EBITDA $ 110,991 $ 49,726 $ 304,482 $ 187,972
Net Revenue by Segment:
Ambulatory Services $ 295,729 $ 279,095 $ 1,109,935 $ 1,057,196
Physician Services 286,082 512,014
Total net revenue $ 581,811 $ 279,095 $ 1,621,949 $ 1,057,196

See footnotes on page 12

AMSURG CORP.

Unaudited Selected Consolidated Financial and Operating Data, continued

(In thousands, except earnings per share and operating data)

Three Months Ended December 31, Year Ended December 31,

Operating Data- Ambulatory Services:

2014 2013 2014 2013
Centers in operation at end of period (consolidated) 237 233 237 233
Centers in operation at end of period (unconsolidated) 9 3 9 3
Average number of continuing centers in operation (consolidated) 235 232 233 230
New centers added during the period 4 1 10 6
Centers discontinued during the period 1 2 6 3
Centers under development/not opened at end of period 2 2
Centers under letter of intent at end of period 5 5 5 5
Average revenue per consolidated center $ 1,258 $ 1,203 $ 4,755 $ 4,594
Same center revenues increase 1.1 % 2.0 % 0.7 % 0.6 %
Procedures performed during the period at consolidated centers 434,285 421,364 1,645,350 1,609,761

Operating Data- Physician Services:

Three Months Ended

December 31, 2014

Year Ended

December 31, 2014

Same contract revenue growth 9.7 % 6.3 %
New contract revenue growth 1.7 % 2.2 %
Total organic revenue growth 11.4 % 8.5 %
Three Months Ended March 31, 2015 Year Ended December 31, 2015

2015 Guidance Reconciliation:

Low High Low High
Reconciliation of net earnings to Adjusted net earnings (1):
Net earnings attributable to AmSurg Corp. shareholders $ 18,500 $ 20,000 $ 127,500 $ 131,500
Amortization of purchased intangibles 12,000 12,000 50,000 50,000
Share-based compensation 3,800 3,800 13,800 13,800
Transaction costs 450 450 1,800 1,800
Total pre-tax adjustments 16,250 16,250 65,600 65,600
Tax effect 6,500 6,500 26,240 26,240
Total adjustments, net 9,750 9,750 39,360 39,360
Adjusted net earnings $ 28,250 $ 29,750 $ 166,860 $ 170,860
Diluted shares outstanding, if converted 51,500 51,500 51,500 51,500
Adjusted earnings per share $ 0.55 $ 0.58 $ 3.24 $ 3.32
Reconciliation of net earnings to Adjusted EBITDA (2):
Net earnings attributable to AmSurg Corp. shareholders $ 127,500 $ 131,500
Interest expense, net 121,000 120,800
Income tax expense 84,900 87,600
Depreciation and amortization 96,000 95,500
EBITDA 429,400 435,400
Adjustments:
Share-based compensation 13,800 13,800
Transaction costs 1,800 1,800
Total adjustments 15,600 15,600
Adjusted EBITDA $ 445,000 $ 451,000

See footnotes on page 12

AMSURG CORP.

Unaudited Selected Consolidated Financial and Operating Data, continued

(In thousands)

December 31, December 31,

Balance Sheet Data:

2014 2013
Assets
Current assets:
Cash and cash equivalents $ 208,079 $ 50,840
Restricted cash and marketable securities 10,219
Accounts receivable, net of allowance of $113,357 and $27,862, respectively 233,053 105,072
Supplies inventory 19,974 18,414
Prepaid and other current assets 115,362 36,699
Total current assets 586,687 211,025
Property and equipment, net 180,448 163,690
Investments in unconsolidated affiliates 75,475 15,526
Goodwill 3,381,149 1,758,970
Intangible assets, net 1,273,879 27,867
Other assets 25,886 866
Total assets $ 5,523,524 $ 2,177,944
Liabilities and Equity
Current liabilities:
Current portion of long-term debt $ 18,826 $ 20,844
Accounts payable 29,585 27,501
Accrued salaries and benefits 140,044 32,294
Accrued interest 29,644 1,885
Other accrued liabilities 67,986 7,346
Total current liabilities 286,085 89,870
Long-term debt 2,232,186 583,298
Deferred income taxes 633,480 176,020
Other long-term liabilities 89,443 25,503
Commitments and contingencies
Noncontrolling interests – redeemable 184,099 177,697
Equity:

Mandatory convertible preferred stock, no par value, 5,000 shares authorized, 1,725 and 0 shares issued and outstanding, respectively

166,632
Common stock, no par value, 70,000 shares authorized, 48,113 and 32,353 shares outstanding, respectively 885,393 185,873
Retained earnings 627,522 578,324
Total AmSurg Corp. equity 1,679,547 764,197
Noncontrolling interests – non-redeemable 418,684 361,359
Total equity 2,098,231 1,125,556
Total liabilities and equity $ 5,523,524 $ 2,177,944

AMSURG CORP.

Unaudited Selected Consolidated Financial and Operating Data, continued

(In thousands)

Three Months Ended December 31,

Year Ended December 31,

Statement of Cash Flow Data:

2014 2013 2014 2013
Cash flows from operating activities:

Net earnings $ 79,084 $ 71,168 $ 244,793 $ 261,544
Adjustments to reconcile net earnings to net cash flows provided by operating activities:
Depreciation and amortization 22,811 8,330 60,344 32,400
Amortization of deferred loan costs 2,070 17,715 1,977
Provision for uncollectibles 69,559 139,274 21,947
Net (gain) loss on sale of long-lived assets 375 (1,552 ) 2,843 (1,468 )
Gain on deconsolidation (3,411 ) (2,237 )
Share-based compensation 2,716 2,251 10,104 8,321
Excess tax benefit from share-based compensation (889 ) (5,357 ) (3,177 ) (7,247 )
Deferred income taxes (608 ) 8,528 30,780 38,363
Equity in earnings of unconsolidated affiliates (3,577 ) (958 ) (7,038 ) (3,151 )
Debt extinguishment costs 4,536
Increases (decreases) in cash and cash equivalents, net of acquisitions and dispositions:
Accounts receivable (71,905 ) 142 (137,663 ) (23,244 )
Supplies inventory (274 ) 470 (206 ) 132
Prepaid, supplies and other current assets 15,323 (4,307 ) (9,091 ) (5,308 )
Accounts payable 1,567 3,264 (8,440 ) 441
Accrued expenses and other liabilities 17,807 (127 ) 66,175 6,693
Other, net 2,261 2,039 4,833 3,661
Net cash flows provided by operating activities 136,320 83,891 412,371 332,824
Cash flows from investing activities:
Acquisitions and related expenses (45,410 ) (14,139 ) (2,184,058 ) (73,594 )
Acquisition of property and equipment (17,108 ) (8,145 ) (40,217 ) (28,856 )
Proceeds from sale of interests in surgery centers 2,100 3,402 7,069 3,553
Purchases of marketable securities (2,988 ) (6,474 )
Maturities of marketable securities 3,486 3,486
Other (7,023 ) 52 (4,941 ) 159
Net cash flows used in investing activities (66,943 ) (18,830 ) (2,225,135 ) (98,738 )
Cash flows from financing activities:
Proceeds from long-term borrowings 2,559 32,769 2,048,958 162,204
Repayment on long-term borrowings (5,432 ) (50,407 ) (408,475 ) (202,083 )
Distributions to noncontrolling interests (50,654 ) (47,068 ) (190,097 ) (184,149 )
Proceeds from preferred stock offering 172,500
Cash dividends for preferred shares (2,264 ) (4,503 )
Proceeds from common stock offering 439,875
Proceeds from issuance of common stock upon exercise of stock options 480 10,060 2,630 33,349
Repurchase of common stock (1,725 ) (10,483 ) (4,615 ) (45,964 )
Excess tax benefit from share-based compensation 889 5,357 3,177 7,247
Payments of equity issuance costs (128 ) (24,494 )
Financing costs incurred (138 ) (65 ) (65,811 ) (1,322 )
Other 1,034 113 858 1,074
Net cash flows provided by (used in) financing activities (55,379 ) (59,724 ) 1,970,003 (229,644 )
Net increase in cash and cash equivalents 13,998 5,337 157,239 4,442
Cash and cash equivalents, beginning of year 194,081 45,503 50,840 46,398
Cash and cash equivalents, end of year $ 208,079 $ 50,840 $ 208,079 $ 50,840
AMSURG CORP.
Unaudited Selected Consolidated Financial and Operating Data, continued
(In thousands, except earnings per share)

Presented below is certain statement of earnings and operating data for 2014, which have been restated in order to present additional discontinued operations.

For the Three Months Ended

For the Nine

Months Ended

Sept. 30,

2014

March, 31 June 30, Sept. 30,

Statement of Earnings Data:

2014 2014 2014
Revenue $ 259,561 $ 278,227 $ 555,543 $ 1,093,331
Provision for uncollectibles (53,193 ) (53,193 )
Net revenue 259,561 278,227 502,350 1,040,138
Operating expenses:
Salaries and benefits 82,149 84,053 240,337 406,539
Supply cost 37,805 40,873 41,886 120,564
Other operating expenses 54,168 55,812 81,263 191,243
Transaction costs 3,579 25,102 28,681
Depreciation and amortization 8,259 8,436 20,838 37,533
Total operating expenses 182,381 192,753 409,426 784,560
Gain on deconsolidation 2,045 1,366 3,411
Equity in earnings of unconsolidated affiliates 764 539 2,158 3,461
Operating income 79,989 87,379 95,082 262,450
Interest expense, net 6,960 6,892 39,054 52,906
Debt extinguishment costs 16,887 16,887
Earnings from continuing operations before income taxes 73,029 80,487 39,141 192,657
Income tax expense 12,982 12,798 22 25,802
Net earnings from continuing operations 60,047 67,689 39,119 166,855
Net earnings (loss) from discontinued operations 68 483 (1,697 ) (1,146 )
Net earnings 60,115 68,172 37,422 165,709
Net earnings attributable to noncontrolling interests 42,920 49,211 47,256 139,387
Net earnings (loss) attributable to AmSurg Corp. shareholders 17,195 18,961 (9,834 ) 26,322
Preferred stock dividends (2,239 ) (2,239 )
Net earnings (loss) attributable to AmSurg Corp. common shareholders $ 17,195 $ 18,961 $ (12,073 ) $ 24,083
Amounts attributable to AmSurg Corp. common shareholders:
Earnings (loss) from continuing operations, net of income tax $ 17,392 $ 18,771 $ (10,697 ) $ 25,466
Earnings (loss) from discontinued operations, net of income tax (197 ) 190 (1,376 ) (1,383 )
Net earnings (loss) attributable to AmSurg Corp. common shareholders $ 17,195 $ 18,961 $ (12,073 ) $ 24,083
Basic earnings (loss) per share attributable to AmSurg Corp. common shareholders:
Net earnings (loss) from continuing operations $ 0.55 $ 0.59 $ (0.23 ) $ 0.70
Net earnings (loss) from discontinued operations (0.01 ) 0.01 (0.03 ) (0.04 )
Net earnings (loss) $ 0.54 $ 0.60 $ (0.26 ) $ 0.66
Diluted earnings (loss) per share attributable to AmSurg Corp. common shareholders:
Net earnings (loss) from continuing operations $ 0.54 $ 0.58 $ (0.23 ) $ 0.69
Net earnings (loss) from discontinued operations (0.01 ) 0.01 (0.03 ) (0.04 )
Net earnings (loss) $ 0.54 $ 0.59 $ (0.26 ) $ 0.65
Weighted average number of shares and share equivalents outstanding:
Basic 31,716 31,825 46,320 36,620
Diluted 32,120 32,233 46,320 37,026
AMSURG CORP.
Unaudited Selected Consolidated Financial and Operating Data, continued
(In thousands, except earnings per share)

Presented below is certain statement of earnings and operating data for 2013, which have been restated in order to present additional discontinued operations.

For the Three Months Ended
March 31,

2013

June 30,

2013

Sept. 30,

2013

Dec. 31,

2013

Year Ended

Dec. 31, 2013

Statement of Earnings Data:

Net revenues $ 253,364 $ 262,497 $ 262,240 $ 279,095 $ 1,057,196
Operating expenses:
Salaries and benefits 79,839 79,897 83,191 84,658 327,585
Supply cost 36,377 38,144 37,143 41,462 153,126
Other operating expenses 51,269 52,417 54,774 58,041 216,501
Transaction costs 35 140 110 15 300
Depreciation and amortization 7,874 7,986 8,210 8,330 32,400
Total operating expenses 175,394 178,584 183,428 192,506 729,912
Gain on deconsolidation 2,237 2,237
Equity in earnings of unconsolidated affiliates 402 696 1,095 958 3,151
Operating income 80,609 84,609 79,907 87,547 332,672
Interest expense, net 7,540 7,509 7,292 7,184 29,525
Earnings from continuing operations before income taxes 73,069 77,100 72,615 80,363 303,147
Income tax expense 12,001 12,493 11,145 13,015 48,654
Net earnings from continuing operations 61,068 64,607 61,470 67,348 254,493
Net earnings from discontinued operations 1,205 1,229 797 3,820 7,051
Net earnings 62,273 65,836 62,267 71,168 261,544
Net earnings attributable to noncontrolling interests 44,462 47,273 45,496 51,610 188,841
Net earnings attributable to AmSurg Corp. common shareholders $ 17,811 $ 18,563 $ 16,771 $ 19,558 $ 72,703
Amounts attributable to AmSurg Corp. common shareholders:
Earnings from continuing operations, net of income tax $ 17,349 $ 18,093 $ 16,636 $ 18,931 $ 71,009
Discontinued operations, net of income tax 462 470 135 627 1,694
Net earnings attributable to AmSurg Corp. common shareholders $ 17,811 $ 18,563 $ 16,771 $ 19,558 $ 72,703
Basic earnings per share attributable to AmSurg Corp. common shareholders:
Net earnings from continuing operations $ 0.56 $ 0.58 $ 0.53 $ 0.60 $ 2.27
Net earnings from discontinued operations 0.01 0.02 0.02 0.05
Net earnings $ 0.57 $ 0.59 $ 0.53 $ 0.62 $ 2.32
Diluted earnings per share attributable to AmSurg Corp. common shareholders:
Net earnings from continuing operations $ 0.54 $ 0.57 $ 0.52 $ 0.59 $ 2.22
Net earnings from discontinued operations 0.01 0.01 0.02 0.05
Net earnings $ 0.56 $ 0.58 $ 0.52 $ 0.61 $ 2.28
Weighted average number of shares and share equivalents outstanding:
Basic 31,217 31,208 31,376 31,549 31,338
Diluted 31,881 31,862 31,991 32,082 31,954

AMSURG CORP.

Footnotes to Reconciliations of Non-GAAP Measures to GAAP Measures

(1) 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 the gains or loss from deconsolidations, which are non-cash in nature, acquisition costs, including associated debt extinguishment costs and deferred financing write-off, and acquisition-related amortization expense (the majority of which relate to the Sheridan transaction and which are of a nature and significance not generally associated with our historical individual center acquisition activity) and share-based compensation expense. 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. For purposes of calculating adjusted earnings per share, the Company utilizes the if-converted method to determine the number of diluted shares outstanding. In periods where utilizing the if-converted method is anti-dilutive, the mandatory convertible preferred stock will not be included in the calculation of diluted shares outstanding.
(2) We define Adjusted EBITDA of AmSurg as earnings before interest, income taxes, depreciation, amortization, share-based compensation, acquisition costs and gains or losses on deconsolidations and discontinued operations. Adjusted EBITDA should not be considered a measure of financial performance under generally accepted accounting principles. Items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Adjusted 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. Adjusted 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 Adjusted EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, Adjusted 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 Adjusted EBITDA as defined.

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