NovaMed Reports 65 Percent Increase in Net Income from Continuing Operations

CHICAGO -- NovaMed, Inc. today reported results for the first quarter ended March 31, 2005. First quarter continuing operations highlights were:

-- Surgical facilities net revenue increased 46 percent to $13,638,000

-- Total net revenue increased 30 percent to $18,501,000

-- Net income increased 65 percent to $1,232,000

-- Earnings per share increased 67 percent to $0.05

For the first quarter ended March 31, 2005, total net revenue was $18,501,000, up 30 percent from $14,225,000 in the prior year first quarter. Net revenue from surgical facilities was $13,638,000, up 46 percent from $9,349,000 in the prior year first quarter. This revenue increase was primarily due to a 52 percent increase in total surgical procedures performed in the first quarter of 2005 as compared to the same period in the prior year. On a same-facility basis, surgical facilities net revenue increased 7 percent over the prior year first quarter. Product sales and other revenue was $4,863,000 in the first quarter of 2005, down slightly compared to the prior year first quarter.

Operating income in the first quarter of 2005 increased 95 percent to $3,510,000, or 19% of net revenue, from $1,799,000, or 13 percent of net revenue, in the same period last year. Net income from continuing operations in the first quarter of 2005 increased 65 percent to $1,232,000, or $0.05 per diluted share, from $747,000, or $0.03 per diluted share, in the prior year first quarter. The first quarter results for 2004 included a pre-tax gain on the sale of minority interests of $190,000.

During the first quarter of 2005, NovaMed purchased a surgery center in Berkley, Michigan. NovaMed entered into a definitive agreement in April to purchase a surgery center in Denver, and anticipates closing this transaction later this month. In addition, during April NovaMed sold a 26 percent minority interest in its Columbus, Ga. surgery center to 11 doctors and a 29 percent minority interest in its Richmond, Va. surgery center to two doctors.

Commenting on the first quarter results, Scott T. Macomber, executive vice president and CFO of NovaMed, said, "We are pleased with our operating results in the first quarter and our significant year-to-year growth including our solid same-facility revenue growth of 7 percent. Our six percentage point increase in our operating income margin contributing to a 95 percent increase in operating income shows the positive leverage we can realize from our revenue growth."

"Our results so far this year show that we are successfully executing our growth strategy," added Macomber. "We continue to pursue attractive surgery center acquisition opportunities and we expect to announce additional acquisitions this year. We also remain focused on producing same-facility growth by attracting new physicians to our surgery centers."

NovaMed acquires, develops and operates ambulatory surgery centers in partnership with physicians. NovaMed currently has ownership interests in 26 surgery centers located in 14 states. NovaMed's executive offices are located in Chicago.

Source: NovaMed, Inc.

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