UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
___________________
FORM
10-Q
ý
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|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
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For
the quarterly period ended March 31, 2006
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OR
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
|
For
the transition period from __________ to __________
COMMISSION
FILE NUMBER: 0-26625
NOVAMED,
INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
36-4116193
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer Identification No.)
|
980
North Michigan Avenue, Suite 1620, Chicago, Illinois 60611
(Address
of principal executive offices)
Registrant's
telephone, including area code:
(312) 664-4100
___________________
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer ¨ Accelerated
filer x Non-accelerated
filer ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No x
As
of May
2, 2006, there were outstanding 23,457,343 shares of the registrant's common
stock, par value $.01 per share.
NOVAMED,
INC. AND SUBSIDIARIES
FORM
10-Q FOR QUARTERLY PERIOD ENDED MARCH 31, 2006
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PART
OR ITEM
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PAGE
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3
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3
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4
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5
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6
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13
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17
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17
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18
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18
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19
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Item
1. |
Interim
Condensed Consolidated Financial Statements
(unaudited)
|
NOVAMED,
INC. AND SUBSIDIARIES
|
|
(Dollars
in thousands, except per share
data)
|
|
|
|
March
31,
|
|
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December 31,
|
|
ASSETS |
|
|
2006
|
|
|
2005
|
|
Current
assets: |
|
|
(unaudited)
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
3,172
|
|
$
|
1,690
|
|
Accounts
receivable, net of allowances of $14,352 and
$13,941, respectively
|
|
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14,152
|
|
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11,933
|
|
Notes
and amounts due from related parties
|
|
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506
|
|
|
541
|
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Inventory
|
|
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2,221
|
|
|
2,012
|
|
Other
current assets
|
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1,230
|
|
|
1,310
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Total
current assets
|
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21,281
|
|
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17,486
|
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Property
and equipment, net
|
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11,952
|
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9,940
|
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Intangible
assets, net
|
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79,819
|
|
|
68,299
|
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Noncurrent
deferred tax assets, net
|
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2,276
|
|
|
470
|
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Other
assets, net
|
|
|
947
|
|
|
967
|
|
Total
assets
|
|
$
|
116,275
|
|
$
|
97,162
|
|
|
|
|
|
|
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LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
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Current
liabilities:
|
|
|
|
|
|
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Accounts
payable
|
|
$
|
6,832
|
|
$
|
5,529
|
|
Accrued
expenses and income taxes payable
|
|
|
4,187
|
|
|
4,897
|
|
Current
maturities of long-term deb
|
|
|
682
|
|
|
302
|
|
Current
liabilities of discontinued operations
|
|
|
86
|
|
|
89
|
|
Total
current liabilities
|
|
|
11,787
|
|
|
10,817
|
|
Long-term
debt, net of current maturities
|
|
|
29,719
|
|
|
17,404
|
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Minority
interests
|
|
|
11,247
|
|
|
10,266
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Commitments
and contingencies
|
|
|
|
|
|
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Stockholders’
equity:
|
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|
|
|
|
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Series
E Junior Participating Preferred Stock, $0.01 par value,
1,912,000 shares authorized, none outstanding at March
31, 2006 and December 31, 2005, respectively
|
|
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—
|
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|
—
|
|
Common
stock, $0.01 par value, 81,761,465 shares authorized,
28,143,238 and 26,783,396 shares issued at
March 31, 2006 and December 31, 2005, respectively
|
|
|
281
|
|
|
268
|
|
Additional
paid-in-capital
|
|
|
89,022
|
|
|
84,830
|
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Deferred
compensation
|
|
|
—
|
|
|
(1,572
|
)
|
Accumulated
deficit
|
|
|
(16,027
|
)
|
|
(17,393
|
)
|
Treasury
stock, at cost, 4,691,895 and 4,386,641 shares at
March 31, 2006 and December 31, 2005, respectively
|
|
|
(9,754
|
)
|
|
(7,458
|
)
|
Total
stockholders’ equity
|
|
|
63,522
|
|
|
58,675
|
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Total
liabilities and stockholders’ equity
|
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$
|
116,275
|
|
$
|
97,162
|
|
The
notes
to the interim condensed consolidated financial statements are
an
integral part of these statements.
NOVAMED,
INC. AND SUBSIDIARIES
|
|
(Amounts
in thousands, except per share data;
unaudited)
|
|
|
Three
months ended
March
31,
|
|
|
|
2006
|
|
2005
|
|
Net
revenue:
|
|
|
|
|
|
Surgical
facilities
|
|
$
|
17,865
|
|
$
|
13,423
|
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Product
sales and other
|
|
|
6,051
|
|
|
4,863
|
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Total
net revenue
|
|
|
23,916
|
|
|
18,286
|
|
|
|
|
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|
|
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Operating
expenses:
|
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|
|
|
|
|
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Salaries,
wages and benefits
|
|
|
8,045
|
|
|
6,012
|
|
Cost
of sales and medical supplies
|
|
|
5,892
|
|
|
4,445
|
|
Selling,
general and administrative
|
|
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4,503
|
|
|
3,798
|
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Depreciation
and amortization
|
|
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719
|
|
|
576
|
|
Total
operating expenses
|
|
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19,159
|
|
|
14,831
|
|
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Operating
income
|
|
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4,757
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3,455
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Minority
interests in earnings of consolidated entities
|
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2,218
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1,522
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Earnings
of non-consolidated affiliate
|
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(20
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)
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(61
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)
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Other
(income) expense, net
|
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281
|
|
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(15
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)
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Income
before income taxes
|
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2,278
|
|
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2,009
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Income
tax provision
|
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911
|
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|
804
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Net
income from continuing operations
|
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1,367
|
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|
1,205
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Net
(loss) income from discontinued operations
|
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(1
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)
|
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149
|
|
Net
income
|
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$
|
1,366
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$
|
1,354
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Basic
earnings per common share:
|
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Income
from continuing operations
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$
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0.06
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$
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0.05
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Income
from discontinued operations
|
|
|
—
|
|
|
0.01
|
|
Net
income
|
|
$
|
0.06
|
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$
|
0.06
|
|
|
|
|
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Diluted
earnings per common share:
|
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|
|
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Income
from continuing operations
|
|
$
|
0.06
|
|
$
|
0.05
|
|
Income
from discontinued operations
|
|
|
—
|
|
|
0.01
|
|
Net
income
|
|
$
|
0.06
|
|
$
|
0.06
|
|
|
|
|
|
|
|
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Weighted
average common shares outstanding
|
|
|
22,829
|
|
|
21,482
|
|
Dilutive
effect of employee stock options
|
|
|
1,783
|
|
|
2,281
|
|
Diluted
weighted average common shares outstanding
|
|
|
24,612
|
|
|
23,763
|
|
The
notes
to the interim condensed consolidated financial statements are an integral
part
of these statements.
NOVAMED,
INC. AND SUBSIDIARIES
|
|
(Dollars
in thousands; unaudited)
|
|
|
Three
months ended
March
31,
|
|
|
|
2006
|
|
2005
|
|
Cash
flows from operating activities: |
|
|
|
|
|
Net
income
|
|
$
|
1,366
|
|
$
|
1,354
|
|
Adjustments
to reconcile net income to net cash provided by continuing
operations, net of effects of purchase transactions—
|
|
|
|
|
|
|
|
Net
loss (earnings) of discontinued operations
|
|
|
1
|
|
|
(149
|
)
|
Depreciation
and amortization
|
|
|
719
|
|
|
576
|
|
Current
and deferred taxes
|
|
|
911
|
|
|
804
|
|
Stock-based
compensation expense
|
|
|
417
|
|
|
—
|
|
Earnings
of non-consolidated affiliate
|
|
|
(20
|
)
|
|
(61
|
)
|
Gain
on sale of minority interests
|
|
|
(9
|
)
|
|
—
|
|
Minority
interests
|
|
|
2,218
|
|
|
1,522
|
|
Distributions
to minority partners
|
|
|
(1,888
|
)
|
|
(1,845
|
)
|
Changes
in operating assets and liabilities—
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(1,767
|
)
|
|
(977
|
)
|
Inventory
|
|
|
(17
|
)
|
|
(97
|
)
|
Other
current assets
|
|
|
237
|
|
|
218
|
|
Accounts
payable and accrued expenses
|
|
|
530
|
|
|
691
|
|
Other
noncurrent assets
|
|
|
24
|
|
|
41
|
|
Net
cash provided by operating activities
|
|
|
2,722
|
|
|
2,077
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Payments
for acquisitions, net
|
|
|
(12,617
|
)
|
|
(4,109
|
)
|
Purchase
of written option
|
|
|
—
|
|
|
(3,600
|
)
|
Proceeds
from sale of minority interests
|
|
|
60
|
|
|
—
|
|
Purchases
of property and equipment
|
|
|
(474
|
)
|
|
(748
|
)
|
Proceeds
from sale of property and equipment
|
|
|
18
|
|
|
22
|
|
Other
|
|
|
—
|
|
|
40
|
|
Net
cash used in investing activities
|
|
|
(13,013
|
)
|
|
(8,395
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Borrowings
under revolving line of credit
|
|
|
21,000
|
|
|
14,100
|
|
Payments
under revolving line of credit
|
|
|
(9,000
|
)
|
|
(7,100
|
)
|
Proceeds
from the issuance of common stock
|
|
|
96
|
|
|
200
|
|
Payments
of other debt, debt issuance fees and capital lease
obligations
|
|
|
(319
|
)
|
|
(165
|
)
|
Net
cash provided by financing activities
|
|
|
11,777
|
|
|
7,035
|
|
|
|
|
|
|
|
|
|
Cash
flows from discontinued operations:
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
(4
|
)
|
|
(14
|
)
|
Investing
activities
|
|
|
—
|
|
|
52
|
|
Net
cash (used in) provided by discontinued operations
|
|
|
(4
|
)
|
|
38
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
1,482
|
|
|
755
|
|
Cash
and cash equivalents, beginning of period
|
|
|
1,690
|
|
|
500
|
|
Cash
and cash equivalents, end of period
|
|
$
|
3,172
|
|
$
|
1,255
|
|
The
notes
to the interim condensed consolidated financial statements are
an
integral part of these statements.
NOVAMED,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2006
(Dollars
in thousands, except per share data; unaudited)
The
information contained in the interim consolidated financial statements and
notes
is condensed from that which would appear in the annual consolidated financial
statements. Accordingly, the interim condensed consolidated financial statements
included herein should be read in conjunction with the consolidated financial
statements as of and for the year ended December 31, 2005, filed by NovaMed,
Inc. with the Securities and Exchange Commission on Form 10-K. The unaudited
interim condensed consolidated financial statements as of March 31, 2006 and
for
the three months ended March 31, 2006 and 2005, include all normal recurring
adjustments which management considers necessary for a fair presentation. The
results of operations for the interim periods are not necessarily indicative
of
the results that may be expected for the entire fiscal year.
2.
|
STATEMENT
OF CASH FLOWS - SUPPLEMENTAL
|
|
|
Three
months ended
March
31,
|
|
|
|
2006
|
|
2005
|
|
Supplemental
cash information: |
|
|
|
|
|
Interest
paid
|
|
$
|
243
|
|
$
|
90
|
|
Income
taxes paid
|
|
|
—
|
|
|
30
|
|
Income
tax refunds received
|
|
|
—
|
|
|
(21
|
)
|
Non
cash investing and financing activities:
On
February 1, 2006, the estate of Stephen J. Winjum exercised all remaining stock
options held by the estate to acquire 1,330,730 shares of common stock. Per
the
terms of the stock option agreements and the Company’s stock incentive plans,
the estate tendered to the Company 305,254 shares of the Company’s common stock
that the estate owned to fund the $2,295 aggregate exercise price. The Company
added these tendered shares into treasury. As a result of this transaction,
the
Company recorded additional paid-in-capital of $5,213, which includes a deferred
tax asset of $2,930.
During
the first quarter of 2005, the Company received 31,200 shares of its common
stock from a former affiliated physician as final settlement of a lawsuit.
Treasury shares were recorded at $197 and this amount was reported as income
from discontinued operations. The Company also received 17,518 shares of its
common stock to repay $104 of outstanding notes receivable from one of its
divestiture transactions.
During
the first quarter of 2006, the Company obtained medical equipment by entering
into capital leases for $263. The Company did not enter into any capital leases
during the first three months of 2005.
Inventory
consists primarily of optical products such as eyeglass frames, optical lenses
and contact lenses, as well as surgical supplies used in connection with the
operation of the Company's ambulatory surgery centers (ASCs).
Balances
as of: |
|
March
31,
2006
|
|
December
31,
2005
|
|
Optical
products
|
|
$
|
880
|
|
$
|
824
|
|
Surgical
supplies
|
|
|
1,161
|
|
|
967
|
|
Other
|
|
|
180
|
|
|
221
|
|
Total
inventory
|
|
$
|
2,221
|
|
$
|
2,012
|
|
NOVAMED,
INC. AND SUBSIDIARIES
NOTES
TO THE INTERIM
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (continued)
March
31, 2006
(Dollars
in thousands, except per share data; unaudited)
Goodwill
balances by reportable segment are summarized in the table below:
|
|
|
Unamortized
Goodwill
|
|
|
|
|
|
|
|
Surgical
Facilities
|
|
|
Product
Sales
|
|
|
Other
|
|
|
Total
|
|
|
Other
Intangibles
|
|
Balance
December 31, 2005
|
|
$
|
61,805
|
|
$
|
5,475
|
|
$
|
941
|
|
$
|
68,221
|
|
$
|
78
|
|
Acquisitions
|
|
|
11,527
|
|
|
—
|
|
|
—
|
|
|
11,527
|
|
|
—
|
|
Amortization
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
Balance
March 31, 2006
|
|
$
|
73,332
|
|
$
|
5,475
|
|
$
|
941
|
|
$
|
79,748
|
|
$
|
71
|
|
The
Company generally acquires majority equity interests in ASCs through the
purchase method of accounting. The results of operations are included in the
consolidated financial statements of the Company from the date of acquisition.
During the first quarter of 2006 the Company made the following acquisitions,
none of which was significant enough to require pro forma disclosure.
Effective
January 31, 2006, the Company acquired an additional 15% interest in its Pain
Management Center located in New Albany, Indiana. The Company purchased 7.5%
from each of its existing partners, increasing the Company’s ownership in this
ASC to 51%. Prior to this additional purchase, the Company consolidated this
ASC
because it maintained effective control over the ASCs assets and operations.
The
Company continues to consolidate this ASC.
Effective
January 31, 2006, the Company’s ASC located in Berkley, Michigan redeemed its
retiring partner’s entire interest in this ASC, issuing a promissory note
payable in eight quarterly installments through November 1, 2007. This
physician’s 24% interest was allocated proportionately among the remaining
partners. This increased the Company’s interest in this ASC to 67% from its
previous 51% ownership interest.
On
February 21, 2006, the Company acquired a 65% interest in the Preston Plaza
Surgery Center, a multi-specialty ASC located in Dallas, Texas, for $12,450,
of
which the Company allocated $10,859 to goodwill. The acquisition was funded
from
the Company’s credit facility.
6.
|
DISCONTINUED
OPERATIONS
|
Effective
November 1, 2005, the Company sold its 80% interest in an ASC located in St.
Joseph, Missouri to its physician-partners resulting in net gain on sale of
$71.
The Company sold its interest due to state licensure issues unique to this
ASC
as well as its limited growth potential. The operating results of this ASC
prior
to November 1, 2005, are reported as discontinued operations.
During
the first quarter of 2005 the Company received 31,200 shares of its common
stock
as settlement of a dispute related to liquidating damages due the Company from
a
former affiliated physician. The value of these shares as of the settlement
date
is reported as income from discontinued operations.
.
NOVAMED,
INC. AND SUBSIDIARIES
NOTES
TO THE INTERIM
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (continued)
March
31, 2006
(Dollars
in thousands, except per share data; unaudited)
The
discontinued operations reserve balance was $86 and $89 at March 31, 2006 and
December 31, 2005, respectively. The reserve is for remaining costs from exiting
the physician practice management business completed in 2003. The operating
results of discontinued operations are summarized below.
|
|
|
Three
months ended
March
31,
|
|
|
|
|
2006
|
|
|
2005
|
|
Net
revenue
|
|
$
|
—
|
|
$
|
215
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
1
|
|
|
160
|
|
Litigation
settlement
|
|
|
—
|
|
|
(197
|
)
|
Minority
interests
|
|
|
—
|
|
|
10
|
|
Income
before income taxes
|
|
|
(1
|
)
|
|
242
|
|
Income
tax provision
|
|
|
—
|
|
|
93
|
|
Net
income per statement of operations
|
|
$
|
(1
|
)
|
$
|
149
|
|
7.
|
OTHER
(INCOME) EXPENSE
|
|
|
|
Three
months ended
March
31,
|
|
|
|
|
2006
|
|
|
2005
|
|
Interest
expense
|
|
$
|
393
|
|
$
|
114
|
|
Interest
income
|
|
|
(17
|
)
|
|
(12
|
)
|
Gain
on sale of minority interests
|
|
|
(9
|
)
|
|
—
|
|
Other,
net
|
|
|
(86
|
)
|
|
(117
|
)
|
Other
(income) expense, net
|
|
$
|
281
|
|
$
|
(15
|
)
|
During
the first quarter of 2006 the Company sold a 3% minority interest in its
Maryville, Illinois ASC to a physician thereby increasing minority ownership
in
this ASC to 23%. This transaction resulted in a net gain on the sale of minority
interest of $9 in the first quarter of 2006.
8.
|
REVOLVING
CREDIT FACILITY
|
At
March
31, 2006, the Company had $29,000 of borrowings outstanding under its revolving
credit facility and was in compliance with all of its credit agreement
covenants. The maximum commitment available under the facility is the lesser
of
$50,000 or the maximum allowed under the calculated ratio limitations and
expires June 30, 2008. Maximum borrowing availability and applicable interest
rates under the facility are calculated based on a ratio of total indebtedness
to earnings before interest, taxes, depreciation and amortization. Interest
on
borrowings under the facility is payable at an annual rate equal to the
Company’s lender’s published base rate plus the applicable borrowing margin
ranging from 0% to .5% or LIBOR plus a range from 1.25% to 2.0%, varying
depending upon the Company’s ratios and ability to meet other financial
covenants. The credit agreement contains covenants that include limitations
on
indebtedness, liens, capital expenditures, acquisitions, investments and share
repurchases, as well as restrictions on the payment of dividends. The weighted
average interest rate on credit line borrowings during the first quarter of
2006
was 6.12%. In addition, the Company paid a fee of .175% on the unused portion
of
the commitment. The weighted average interest rate on credit line borrowings
at
March 31, 2006 was 6.11%.
NOVAMED,
INC. AND SUBSIDIARIES
NOTES
TO THE INTERIM
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (continued)
March
31, 2006
(Dollars
in thousands, except per share data; unaudited)
The
Company has two outstanding letters of credit issued to two of its optical
products buying group vendors in the amounts of $220 and $110 that expire on
March 31, 2007 and December 31, 2006, respectively. The outstanding letters
of
credit reduce the amount available under the credit facility.
9.
|
STOCK
BASED COMPENSATION
|
Effective
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
No. 123 (revised 2004), “Share Based Payment” (SFAS 123(R)), applying the
modified prospective method. Prior to the adoption of SFAS 123(R), the Company
applied the provisions of APB Opinion No. 25, “Accounting for Stock Issued to
Employees,” in accounting for its stock-based awards, and accordingly,
recognized no compensation cost for its stock plans other than for its
restricted stock awards. Under
the
modified prospective method, SFAS 123(R) applies to new awards and to awards
that were outstanding as of December 31, 2005 that are subsequently vested,
modified, repurchased or cancelled. Compensation expense recognized during
the
first quarter of 2006 includes the portion vesting during the period for (1)
all
share-based payments granted prior to, but not yet vested as of December 31,
2005, based on the grant date fair value estimated in accordance with the
original provisions of Statement of Financial Accounting Standards No. 123,
“Accounting for Stock-Based Compensation” (SFAS 123) and (2) all share-based
payments granted subsequent to December 31, 2005, based on the grant-date fair
value estimated using the Black-Scholes option-pricing model. No stock options
were granted to employees during the first quarter of 2006. Stock compensation
expense of $303 was recognized during the first quarter of 2006 on existing
stock options. As a result of the Company’s decision to adopt the modified
prospective method, prior period results have not been restated.
The
following table illustrates the effect on net income and earnings per share
if
the Company had applied the fair value recognition provisions of SFAS 123 for
the three months ended March 31, 2005:
Three
months ended March 31, 2005 |
|
|
|
|
|
|
|
Net
income - as reported
|
|
$
|
1,354
|
|
Deduct:
Total stock based compensation expense, net of related tax
effects
|
|
|
(180
|
)
|
Pro
forma net income
|
|
$
|
1,174
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
Basic
— as reported
|
|
$
|
0.06
|
|
Basic
— pro forma
|
|
$
|
0.05
|
|
Diluted
— as reported
|
|
$
|
0.06
|
|
Diluted
— pro forma
|
|
$
|
0.05
|
|
Before
adoption of SFAS 123(R), pro forma disclosures reflected the fair value of
each
option grant estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions for stock
options granted during the three months ended March 31, 2005:
Three
months ended March 31, 2005
|
|
|
|
Expected
option life in years
|
|
|
4
|
|
Risk-free
interest rate
|
|
|
3.42
|
%
|
Dividend
yield
|
|
|
—
|
|
Expected
volatility
|
|
|
70.8
|
%
|
Per
share fair value
|
|
$
|
3.64
|
|
NOVAMED,
INC. AND SUBSIDIARIES
NOTES
TO THE INTERIM
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (continued)
March
31, 2006
(Dollars
in thousands, except per share data; unaudited)
A
summary
of stock based compensation activity within the Company’s stock-based
compensation plans for the three months ended March 31, 2006 is as
follows:
|
|
Number
of Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual Term (Years)
|
|
Aggregate
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2005
|
|
|
5,932,796
|
|
$
|
3.40
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,350,390
|
)
|
$
|
1.73
|
|
|
|
|
|
|
|
Canceled
|
|
|
(120,000
|
)
|
$
|
12.00
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2006
|
|
|
4,462,406
|
|
$
|
3.69
|
|
|
6.0
|
|
$
|
15,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at March 31, 2006
|
|
|
3,316,019
|
|
$
|
3.15
|
|
|
5.0
|
|
$
|
13,089
|
|
The
aggregate intrinsic value for stock options outstanding and exercisable is
defined as the difference between the market value of the Company’s stock as of
the end of the period and the exercise price of the stock options. The total
intrinsic value of stock options exercised during the first quarter of 2006
was
$7,250. As a result of the stock options exercised, the Company
recorded additional paid-in-capital of $5,292, which includes $2,968 of tax
benefits recognized. During the first quarter of 2006, cash received from
stock options exercised was $42. On February 1, 2006, the estate of Stephen
J.
Winjum exercised all remaining stock options held by the estate to acquire
1,330,730 shares of common stock. Per the terms of the stock option agreements
and the Company’s stock incentive plans, the estate tendered to the Company
305,254 shares of the Company’s common stock that the estate owned to fund the
$2,295 aggregate exercise price. The Company added these tendered shares into
treasury resulting in an increase in treasury stock of $2,295.
The
following is a summary of nonvested stock option activity:
|
|
Number
of Shares
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
|
|
|
|
|
|
Nonvested
at December 31, 2005
|
|
|
1,284,805
|
|
$
|
2.64
|
|
Granted
|
|
|
—
|
|
|
—
|
|
Vested
|
|
|
(138,418
|
)
|
$
|
2.19
|
|
Canceled
|
|
|
—
|
|
|
—
|
|
Nonvested
at March 31, 2006
|
|
|
1,146,387
|
|
$
|
2.69
|
|
At
March
31, 2006, there was $3,085 of total unrecognized compensation cost related
to
nonvested stock options. This cost will be recognized over 3.75
years.
NOVAMED,
INC. AND SUBSIDIARIES
NOTES
TO THE INTERIM
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (continued)
March
31, 2006
(Dollars
in thousands, except per share data; unaudited)
The
Company also grants restricted stock awards to certain employees. Restricted
stock awards are valued at the closing market value of the Company’s common
stock on the day prior to the grant, and the total value of the award is
recognized as expense ratably over the vesting period of the employees receiving
the grants. The Company did not grant restricted stock awards during the first
quarter of 2006. As of March 31, 2006, the total amount of unrecognized
compensation expense related to nonvested restricted stock awards was
approximately $1,470, which is expected to be recognized over a weighted-average
period of approximately 3.7 years. The Company recognized compensation expense
of $101 during the first quarter of 2006 on existing restricted stock
awards.
The
Company has an employee stock purchase plan (“ESPP”) for all eligible employees.
Under the plan, shares of the Company’s common stock may be purchased at
six-month intervals at 85% of the lower of the fair market value on the first
or
the last day of each six-month period. Approximately 9,000 and 10,000 shares
were purchased under this plan during the three months ended March 31, 2006
and
2005, respectively. Under the provisions of SFAS 123(R), the Company recognized
compensation expense of $12 during the first quarter of 2006. At March 31,
2006,
101,500 shares were reserved for future issuance under the ESPP.
The
table
below presents information about operating data and segment assets as of and
for
the three months ended March 31, 2006 and 2005:
|
|
Surgical
Facilities
|
|
Product
Sales
|
|
Other
|
|
Corporate
|
|
Total
|
|
Three
months ended March
31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
|
$
|
17,865
|
|
$
|
3,985
|
|
$
|
2,045
|
|
$
|
21
|
|
$
|
23,916
|
|
Earnings
(loss) before taxes
|
|
|
2,875
|
|
|
984
|
|
|
283
|
|
|
(1,864
|
)
|
|
2,278
|
|
Depreciation
and amortization
|
|
|
582
|
|
|
54
|
|
|
21
|
|
|
62
|
|
|
719
|
|
Interest
income
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
17
|
|
Interest
expense
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
380
|
|
|
393
|
|
Capital
expenditures
|
|
|
294
|
|
|
91
|
|
|
19
|
|
|
70
|
|
|
474
|
|
Accounts
receivable
|
|
|
7,568
|
|
|
5,808
|
|
|
700
|
|
|
76
|
|
|
14,152
|
|
Identifiable
assets
|
|
|
94,185
|
|
|
12,962
|
|
|
1,901
|
|
|
7,227
|
|
|
116,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended March
31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
|
$
|
13,423
|
|
$
|
3,021
|
|
$
|
1,842
|
|
$
|
—
|
|
$
|
18,286
|
|
Earnings
(loss) before taxes
|
|
|
2,533
|
|
|
592
|
|
|
161
|
|
|
(1,277
|
)
|
|
2,009
|
|
Depreciation
and amortization
|
|
|
440
|
|
|
42
|
|
|
26
|
|
|
68
|
|
|
576
|
|
Interest
income
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
12
|
|
Interest
expense
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
110
|
|
|
114
|
|
Capital
expenditures
|
|
|
591
|
|
|
65
|
|
|
58
|
|
|
34
|
|
|
748
|
|
Accounts
receivable
|
|
|
6,075
|
|
|
4,625
|
|
|
634
|
|
|
136
|
|
|
11,470
|
|
Identifiable
assets
|
|
|
67,757
|
|
|
11,589
|
|
|
1,854
|
|
|
5,183
|
|
|
86,383
|
|
NOVAMED,
INC. AND SUBSIDIARIES
NOTES
TO THE INTERIM
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (continued)
March
31, 2006
(Dollars
in thousands, except per share data; unaudited)
On
April
13, 2006 the Company acquired a 55% interest in the American Surgery Centers
of
South Texas, located in San Antonio, Texas.
On
May 2,
2006 the Company acquired a 51% interest in the Eye Surgery Center of Arkansas,
located in Jonesboro, Arkansas.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis presents our consolidated financial condition
at March 31, 2006 and the results of operations for the three months ended
March
31, 2006 and 2005. You should read the following discussion together with our
condensed consolidated financial statements and the related notes contained
elsewhere in this quarterly report. In addition to the historical information
provided below, we have made certain estimates and forward-looking statements
that involve risks and uncertainties. Our actual results could differ materially
from those anticipated or implied by these estimates and forward-looking
statements as a result of certain factors, including those discussed in the
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS on page 17 of this
quarterly report.
Overview
We
consider our core business to be the ownership and operation of ambulatory
surgery centers (ASCs). As of March 31, 2006, we owned and operated 29 ASCs
of
which 26 were jointly owned with physician-partners. We also own other
businesses including an optical laboratory, an optical products purchasing
organization, and a marketing products and services company. We also provide
management services to two eye care practices.
First
Quarter 2006 Financial
Highlights:
|
·
|
Consolidated
net revenue increased 30.8% to $23.9 million. Surgical facilities
net
revenue increased 33.1% to $17.9 million (same-facility net surgical
revenue increased 4.9% to $14.0
million).
|
|
·
|
Operating
income increased 37.7% to $4.8 million. Operating income included
$0.4
million of non-cash stock compensation expense recorded in the first
quarter of 2006 compared to zero in the first quarter of
2005.
|
|
·
|
Acquired
a majority interest in an ASC in Dallas, Texas for $12.5
million.
|
Results
of Operations
The
following table summarizes our operating results as a percentage of total net
revenue:
|
|
Three
months ended
March
31,
|
|
|
|
2006
|
|
2005
|
|
Net
Revenue:
|
|
|
|
|
|
Surgical
facilities
|
|
|
74.7
|
%
|
|
73.4
|
%
|
Product
sales and other
|
|
|
25.3
|
|
|
26.6
|
|
Total
net revenue
|
|
|
100.0
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Salaries,
wages and benefits
|
|
|
33.6
|
|
|
32.9
|
|
Cost
of sales and medical supplies
|
|
|
24.6
|
|
|
24.3
|
|
Selling,
general and administrative
|
|
|
18.8
|
|
|
20.8
|
|
Depreciation
and amortization
|
|
|
3.0
|
|
|
3.1
|
|
Total
operating expenses
|
|
|
80.0
|
|
|
81.1
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
20.0
|
|
|
18.9
|
|
|
|
|
|
|
|
|
|
Minority
interests in earnings of consolidated entities
|
|
|
9.3
|
|
|
8.3
|
|
Other
(income) expense, net
|
|
|
1.1
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
9.6
|
|
|
11.0
|
|
Income
tax provision
|
|
|
3.8
|
|
|
4.4
|
|
Net
income from continuing operations
|
|
|
5.8
|
|
|
6.6
|
|
Net
income from discontinued operations
|
|
|
—
|
|
|
0.8
|
|
Net
income
|
|
|
5.8
|
%
|
|
7.4
|
%
|
Three
Months Ended March 31, 2006 Compared to the Three Months Ended March 31,
2005
Net
Revenue
Consolidated.
Total
net revenue increased 30.8% from $18.3 million to $23.9 million. Net revenue
by
segment is discussed below.
Surgical
Facilities.
The
table below summarizes surgical facilities net revenue and procedures performed
for the first quarter of 2006 and 2005. Revenues generated from surgical
facilities are derived from the fees charged for the procedures performed in
our
ASCs and through our laser services agreements. Our procedure volume is directly
impacted by the number of ASCs we operate, the number of excimer lasers in
service, and their respective utilization rates. Net surgical facilities revenue
increased 33.1% from $13.4 million to $17.9 million. This increase was primarily
the result of $3.8 million of increased net revenue from ASCs acquired or
developed after January 1, 2005 (“new ASCs”) and a $0.7 million increase from
ASCs that we owned for the entire comparable reporting periods
(“same-facility”). The increase in same-facility revenue was primarily the
result of a 4.7% increase in net revenue per procedure due to a change in
procedure mix.
|
|
Three
Months Ended
March
31,
|
|
Increase
|
|
Dollars
in thousands |
|
2006
|
|
2005
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
Surgical
Facilities:
|
|
|
|
|
|
|
|
Same-facility:
|
|
|
|
|
|
|
|
Net
revenue
|
|
$
|
13,963
|
|
$
|
13,310
|
|
$
|
653
|
|
#
of procedures
|
|
|
17,239
|
|
|
17,189
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
New
ASCs:
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
|
$
|
3,902
|
|
$
|
113
|
|
$
|
3,789
|
|
#
of procedures
|
|
|
5,136
|
|
|
124
|
|
|
5,012
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
Sales and Other.
The
table below summarizes net product sales and other revenue by significant
business component. Net product sales and other revenue increased 24.4% from
$4.9 million to $6.1 million. Net revenue at our marketing products and services
business increased $0.6 million. This increase is due to increased services
provided to medical device manufacturers. Net revenue at our optical laboratory
business increased $0.3 million due to an increase in existing customer orders
and improved external marketing. Net revenue from our ophthalmology practice
increased $0.2 million primarily due to an increase in the number of patient
visits.
|
|
Three
Months Ended
March
31,
|
|
Increase
|
|
Dollars
in thousands |
|
2006
|
|
2005
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
Product
Sales:
|
|
|
|
|
|
|
|
Optical
laboratories
|
|
$
|
1,593
|
|
$
|
1,286
|
|
$
|
307
|
|
Optical
products purchasing organization
|
|
|
686
|
|
|
594
|
|
|
92
|
|
Marketing
products and services
|
|
|
1,260
|
|
|
649
|
|
|
611
|
|
Optometric
practice/retail store
|
|
|
446
|
|
|
492
|
|
|
(46
|
)
|
|
|
|
3,985
|
|
|
3,021
|
|
|
964
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
Ophthalmology
practice
|
|
|
1,973
|
|
|
1,735
|
|
|
238
|
|
Other
|
|
|
93
|
|
|
107
|
|
|
(14
|
)
|
|
|
|
2,066
|
|
|
1,842
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Net Product Sales and Other Revenue
|
|
$
|
6,051
|
|
$
|
4,863
|
|
$
|
1,188
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries,
Wages and Benefits
Consolidated.
Salaries, wages and benefits expense increased 33.8% from $6.0 million to $8.0
million. As a percentage of net revenue, salaries, wages and benefits expense
increased from 32.9% to 33.6% primarily due to $0.4 million of stock based
compensation expense recorded in the first quarter of 2006. Salaries, wages
and
benefits expense by segment is discussed below.
Surgical
Facilities.
Salaries, wages and benefits expense in our surgical facilities segment
increased 44.8% from $2.8 million to $4.1 million. The increase was the result
of staff costs associated with new ASCs and staffing required at same-facility
ASCs that experienced increased procedure volume.
Product
Sales and Other.
Salaries, wages and benefits expense in our product sales and other segments
increased 11.6% from $1.9 million to $2.1 million. The increase is primarily
due
to additional staff required to service increased volume within our marketing
products and services business, optical laboratory business and ophthalmology
practice.
Corporate. Salaries,
wages and benefits expense increased 42.9% to $1.8 million from $1.3 million.
The increase was primarily due to $0.4 million of stock based compensation
expense recorded in the first quarter of 2006, additional employees required
to
service the new ASCs and annual salary increases.
Cost
of Sales and Medical Supplies
Consolidated.
Cost of
sales and medical supplies expense increased 32.6% from $4.4 million to $5.9
million. As a percentage of net revenue, cost of sales and medical supplies
expense increased from 24.3% to 24.6%. Cost of sales and medical supplies
expense by segment is discussed below.
Surgical
Facilities.
Cost of
sales and medical supplies expense in our surgical facilities segment increased
33.8% from $3.2 million to $4.2 million. The expense increase was primarily
the
result of costs associated with our new ASCs and increased procedure
volumes at
some
of our same-facility ASCs.
Product
Sales and Other.
Cost of
sales and medical supplies expense in our product sales and other segments
increased 29.3% from $1.3 million to $1.7 million primarily due to costs
associated with increased orders for products within our marketing products
and
services business and optical laboratory business.
Selling,
General and Administrative
Consolidated.
Selling,
general and administrative expense increased 18.6% from $3.8 million to $4.5
million. As a percentage of net revenue, selling, general and administrative
expense decreased from 20.8% to 18.8%. The percentage decrease is primarily
due
to minimal increases in corporate overhead expenses necessary to service the
new
ASCs. Selling, general and administrative expense by segment is discussed
below.
Surgical
Facilities.
Selling,
general and administrative expense in our surgical facilities segment increased
25.0% from $2.9 million to $3.6 million. The increase is due to costs associated
with our new ASCs and increased professional fees which include management
and
billing/collections fees charged to the ASCs for services rendered by corporate
personnel.
Product
Sales and Other.
Selling,
general and administrative expense in our product sales and other segments
remained flat at $0.9 million.
Corporate.
Corporate selling, general and administrative expense decreased 92.1% from
$51,000 to $4,000. This decrease was primarily due to increased management
fees
and billing/collections fees charged to the operating segments for services
rendered by certain corporate personnel. Fees charged to our new ASCs accounted
for the majority of the decrease. This decrease was partially offset by costs
associated with the restatement of our previously filed financial statements
(See Note 2 of the Notes to Consolidated Financial Statements included in our
Annual Report on Form 10-K for the fiscal year ended December 31,
2005).
Depreciation
and Amortization.
Depreciation and amortization expense increased 24.8% from $0.6 million to
$0.7
million due to increases in depreciation associated with our new ASCs and
capital expenditures in our surgical facilities segment.
Minority
Interests and Other (Income) Expense.
Minority interests in the earnings of our ASCs were $2.2 million in 2006 as
compared to $1.5 million in 2005. Of this increase, 94.8% is attributable to
new
ASCs.
Provision
for Income Taxes.
Our
effective tax rate was unchanged at 40.0%. Our effective tax rate is affected
by
expenses that are deducted from operations in arriving at pre-tax income that
are not allowed as a deduction on our federal income tax return.
Liquidity
and Capital Resources
Operating
activities in the first quarter of 2006 generated $2.7 million in cash flow
from
continuing operations compared to $2.1 million in the comparable 2005 period.
The increase in operating cash flow from continuing operations resulted
primarily from an increase in earnings after adding back the $0.4 million
non-cash impact of stock compensation expense recorded in the first quarter
of
2006.
Investing
activities in the first quarter of 2006 resulted in negative cash flow of $13.0
million. Investing activities in the first quarter of 2006 included the
acquisition of one ASC for $12.5 million, and the purchase of property and
equipment for $0.5 million. Investing activities in the first quarter of 2005
resulted in negative cash flow of $8.4 million which included the acquisition
of
one ASC for $4.1 million, the buy-out of the Overland Park call option for
$3.6
million and the purchase of property and equipment for $0.7 million.
Cash
flows from financing activities in the first quarter of 2006 included $12.0
million of net borrowings under our credit facility and $0.1 million from the
exercise of stock options and issuance of stock to employees as part of our
employee stock purchase plan, offset by $0.3 million of capital lease obligation
payments. Cash flows from financing activities in the first quarter of 2005
included $7.0 million of net borrowings under our credit facility and $0.2
million from the exercise of stock options and issuance of stock to employees
as
part of our employee stock purchase plan, offset by $0.2 million of capital
lease obligation payments. At March 31, 2006, we had $29.0 million of borrowings
outstanding under our revolving credit facility and were in compliance with
all
of our credit agreement covenants. The maximum commitment available under the
facility is the lesser of $50.0 million or the maximum allowed under the
calculated ratio limitations and expires June 30, 2008. Maximum borrowing
availability and applicable interest rates under the facility are calculated
based on a ratio of total indebtedness to earnings before interest, taxes,
depreciation and amortization. Interest on borrowings under the facility are
payable at an annual rate equal to our lender’s published base rate plus the
applicable borrowing margin ranging from 0% to .5% or LIBOR plus a range from
1.25% to 2.0%, varying depending upon our ratios and ability to meet other
financial covenants. The credit agreement contains covenants that include
limitations on indebtedness, liens, capital expenditures, acquisitions,
investments and share repurchases, as well as restrictions on the payment of
dividends.
As
of
March 31, 2006, we had cash and cash equivalents of $3.2 million and working
capital of $9.5 million.
We
expect
our cash flow from operations and funds available under our existing credit
facility to be sufficient to fund our operations for at least 12 months. Our
future capital requirements and the adequacy of our available funds will depend
on many factors, including the timing of our acquisition and expansion
activities, capital requirements associated with our surgical facilities, and
the future cost of surgical equipment.
We
are a
party to option agreements with three physicians pursuant to which the
physicians have the right to purchase or sell equity interests in three of
our
ASCs. These are summarized as follows:
|
·
|
One
of our existing physician-partners who owns a 30% interest in our
Thibodaux, LA ASC has the right to sell us up to a 10% interest in
the ASC
in November 2006. The
purchase price of this 10% interest is based on a multiple of the
ASC’s
twelve-month trailing earnings before
interest, taxes, depreciation and amortization (“EBITDA”);
|
|
·
|
Two
of our existing physician-partners who each own a 14.5% interest
in our
Richmond, VA ASC have the right to sell us back their equity interests
for
the initial price paid at any time;
and
|
|
·
|
We
have an option to purchase an additional 26% equity interest from
our
physician-partner in our Ft. Lauderdale, Florida ASC to enable us
to
increase our interest in the ASC to a majority equity interest. The
purchase price of this 26% interest is based on a multiple of the
ASC’s
twelve-month trailing EBITDA. If we elect not to exercise this option
by
July 2007, we have the option to sell our minority interest to our
physician-partner for the original purchase price paid. If we elect
not to
exercise that option by September 2007, our physician-partner has
the
option to purchase our minority interest at the original purchase
price
paid.
|
We
have a
nonexclusive supply agreement with Alcon Laboratories, Inc. pursuant to which
we
can procure and utilize excimer lasers and other equipment manufactured by
Alcon. Through the termination date of December 31, 2006, we will pay Alcon
monthly based on the number of procedures performed on each of our LADARVision
Systems. We are required to pay for a minimum number of annual procedures on
each LADARVision System during the remaining term, whether or not these
procedures are performed. Assuming we do not procure additional LADARVision
Systems under the agreement, the annual minimum commitment for 2006 would be
approximately $0.8 million.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS. This Form 10-Q contains certain
"forward-looking statements" that reflect our current expectations regarding
our
future results of operations, performance and achievements. These
forward-looking statements are made pursuant to the safe harbor provisions
of
the Private Securities Litigation Reform Act of 1995. We have tried, wherever
possible, to identify these forward-looking statements by using words such
as
"anticipates," "believes," "estimates," "expects," "plans," "intends" and
similar expressions. These statements reflect our current beliefs and are based
on information currently available to us. Accordingly, these statements are
subject to certain risks, uncertainties and contingencies that could cause
our
actual results, performance or achievements in 2006 and beyond to differ
materially from those expressed in, or implied by, such statements. These risks
and uncertainties include: our ability to acquire, develop or manage a
sufficient number of profitable surgical facilities, including facilities that
are not exclusively dedicated to eye-related procedures; reduced prices and
reimbursement rates for surgical procedures; our ability to maintain successful
relationships with the physicians who use our surgical facilities; the
application of existing or proposed government regulations, or the adoption
of
new laws and regulations, that could limit our business operations, require
us
to incur significant expenditures or limit our ability to relocate our
facilities if necessary; and demand for elective surgical procedures. See
“Management’s Discussion and Analysis of Financial Conditions and Results of
Operations - Risk Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2005 for further discussion. You should not place undue reliance
on
any forward-looking statements. We undertake no obligation to update or revise
any such forward-looking statements that may be made to reflect events or
circumstances after the date of this Form 10-Q or to reflect the occurrence
of
unanticipated events.
Our
exposure to interest rate risk relates primarily to our debt obligations and
temporary cash investments. Interest rate risk is managed through variable
rate
and term borrowings under our credit facility. On March 31, 2006, we had $29
million outstanding under our credit facility. Our revolving line of credit
bears interest at an annual rate equal to our lender’s published base rate plus
applicable borrowing margin ranging from 0% to 0.50% or LIBOR plus a range
from
1.25% to 2.00%, varying upon our ability to meet financial covenants.
We
do not
use any derivative financial instruments relating to the risk associated with
changes in interest rates.
Evaluation
of Disclosure Controls and Procedures
We
maintain a system of disclosure controls and procedures, as such term is defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed
to ensure that information required to be disclosed by us in the reports that
we
file under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to our management, including our
President and Chief Executive Officer and Executive Vice President and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosures.
We
have
carried out an evaluation under the supervision and with the participation
of
the Company’s management, including the Company’s President and Chief Executive
Officer and Executive Vice President and Chief Financial Officer (its principal
executive officer and principal financial officer), of the effectiveness of
the
design and operation of our disclosure controls and procedures as of the end
of
the period covered by this report. Based on their evaluation, the President
and
Chief Executive Officer and Executive Vice President and Chief Financial Officer
concluded that such disclosure controls and procedures were effective as of
the
end of the period covered by this report to ensure that required information
will be disclosed on a timely basis in our reports filed under the Exchange
Act.
In
designing and evaluating the disclosure controls and procedures, our management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and our management necessarily was required to apply their judgment
in evaluating the cost-benefit relationship of possible controls and procedures.
We believe our disclosure controls and procedures provide such reasonable
assurance.
Changes
in Internal Control Over Financial Reporting
There
were no changes in the Company’s internal control over financial reporting (as
such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred
during the quarterly period ended March 31, 2006 that have materially affected,
or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
|
Subsidiaries
of the Registrant
|
|
|
|
Certification
by the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
|
|
Certification
by the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
|
|
Certification
of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act
of
2002
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
|
|
NOVAMED,
INC. |
|
|
|
Date:
May
5,
2006 |
By: |
/s/ Scott
T.
Macomber |
|
|
|
Scott
T. Macomber
Executive
Vice
President and Chief Financial Officer
(on behalf of Registrant and as principal financial
officer)
|
|
|
|
Date:
May
5,
2006 |
By: |
/s/ John
P.
Hart |
|
|
|
John
P.
Hart
Vice President, Corporate Controller
(as principal accounting
officer)
|