NovaMed Reports 33 Percent Increase in Net Income and EPS

CHICAGO -- NovaMed, Inc. today reported results for the third quarter ended Sept. 30, 2007. Highlights of third quarter continuing operations include:

-- Surgical facilities net revenue increased 24 percent to $27,626,000

-- Total net revenue increased 20 percent to $33,390,000

-- Operating income increased 27 percent to $7,898,000

-- Net income increased 33 percent to $1,914,000

-- Earnings per share increased 33 percent to $0.08

-- Cash flow from operations was $5,230,000

-- Total surgical procedures increased 27 percent to 33,602

-- Same-facility net revenue growth was flat

For the third quarter ended Sept. 30, 2007, total net revenue was $33,390,000, up 20 percent from $27,774,000 in the prior year third quarter. Net revenue from surgical facilities was $27,626,000, up 24 percent from $22,249,000 in the prior year third quarter. This revenue increase was primarily due to a 27 percent increase in total surgical procedures performed in the third quarter of 2007 as compared to the same period in the prior year. On a same-facility basis, surgical facilities net revenue and procedures were flat with the prior year third quarter. Product sales and other revenue was $5,764,000 in the third quarter of 2007, up 4 percent from $5,525,000 in the prior year third quarter.

Operating income in the third quarter of 2007 increased 27 percent to $7,898,000, or 24 percent of net revenue, from $6,212,000, or 22 percent of net revenue, in the same period last year. Net interest expense in the third quarter of 2007 increased 20 percent to $1,009,000, compared to the same period last year, but decreased 31 percent from the second quarter of 2007 due to the interest savings associated with the recently completed $75,000,000 convertible note financing. Net income and earnings per share from continuing operations in the third quarter of 2007 were $1,914,000 and $0.08 per diluted share, both up 33 percent from $1,438,000 and $0.06 per diluted share, in the prior year third quarter. Net cash provided by continuing operations was $5,230,000, or 2.7 times net income, and up 63 percent over the prior year third quarter.

For the nine months ended Sept. 30, 2007, total net revenue was $97,259,000, up 23 percent from $78,731,000 for the first nine months last year. Net revenue from surgical facilities was $79,615,000, up 30 percent from $61,219,000 for the first nine months last year. This revenue increase was primarily due to a 32 percent increase in total surgical procedures performed in the first nine months of 2007 as compared to the same period in the prior year. On a same-facility basis, surgical facilities net revenue increased 6 percent over the comparable period in 2006. Product sales and other revenue was $17,644,000 for the nine months ended September 30, 2007 compared to $17,512,000 in the same period last year.

Operating income for the first nine months of 2007 increased 33 percent to $22,684,000, or 23 percent of net revenue, from $17,046,000, or 22 percent of net revenue, in the same period last year. Net interest expense in the first nine months of 2007 increased 112 percent to $3,794,000, compared to the same period last year, due to higher borrowing costs and an increase in outstanding borrowings to fund the acquisition of surgery centers. Net income from continuing operations for the first nine months of 2007 was $4,878,000, or $0.19 per diluted share, compared to $4,458,000, or $0.18 per diluted share, in the same period last year. Net cash provided by continuing operations was $10,878,000, or 2.2 times net income.

Commenting on the third quarter results, Thomas S. Hall, chairman, president and CEO of NovaMed, said, “We are pleased with the growth in our total revenue and net income, our strong cash flow and the continuing improvement in our operating income margin. We were able to achieve 33 percent growth in earnings per share in spite of flat same-facility revenues. Our same-facility revenues in the third quarter were impacted by a weak September and very strong results in the prior year third quarter.”

“We believe that it is important to highlight our significant cash flow from operations of over $5.2 million in the third quarter and almost $10.9 million for the nine months ending Sept. 30, 2007,” added Hall. “Increasing cash flow improves our balance sheet and means more of our acquired growth can be funded internally. This cash flow and approximately $100 million available under our credit facility positions us well to continue to fund our growth strategy.”

NovaMed acquires, develops and operates ambulatory surgery centers in partnership with physicians. NovaMed currently has ownership interests in 38 surgery centers located in 18 states.

Source: NovaMed

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