EX-99.1 3 g08373exv99w1.htm EX-99.1 RE-ISSUED FORM 10-K, ITEM 6. Ex-99.1
 

EXHIBIT 99.1
Item 6. Selected Financial Data
     The following selected consolidated financial and other data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and the related notes included elsewhere in this report. The selected consolidated statement of operations data set forth below for each of the three years in the period ended December 31, 2006, and the selected consolidated balance sheet data set forth below at December 31, 2006 and 2005, are derived from our audited consolidated financial statements that are included elsewhere in this report. The selected consolidated statement of operations data set forth below for the years ended December 31, 2003 and 2002, and the selected consolidated balance sheet data set forth below at December 31, 2004, 2003 and 2002, are derived from our audited consolidated financial statements that are not included in this report. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the notes to our audited consolidated financial statements describing the reclassification from continuing operations to discontinued operations of three ambulatory surgery centers and one diagnostic center subsequent to the filing of our Annual Report on Form 10-K for the year ended December 31, 2006.
     The historical results presented below are not necessarily indicative of the results to be expected for any future period.
                                         
    Year Ended December 31,  
    2006     2005     2004     2003     2002  
    (dollars in thousands, except per share amounts)  
Consolidated Statement of Operations Data:
                                        
Revenues
   $ 285,387     $ 241,877     $ 194,480     $ 153,602     $ 124,134  
Cost of revenues
     181,950       148,214       125,143       101,423       79,868  
General and administrative expense
     24,407       21,993       18,449       15,874       14,328  
Depreciation and amortization
     11,913       11,575       9,467       8,004       6,512  
Provision for doubtful accounts
     3,952       3,827       3,376       1,949       4,243  
Income on equity investments
     (2,423 )     (1,273 )     (1,272 )     (402 )     (541 )
Impairment and loss on disposal of long-lived assets
     1,162       1,541       271       437       492  
Gain on sale of long-lived assets
     (1,808 )     (1,785 )     (250 )     (571 )     (457 )
Proceeds from insurance settlement, net
     (410 )     —       —       —       —  
Proceeds from litigation settlement, net
     (588 )     —       —       —       —  
 
                              
Total operating expenses
     218,155       184,092       155,184       126,714       104,445  
 
                              
Operating income
     67,232       57,785       39,296       26,888       19,689  
Minority interests in income of consolidated subsidiaries
     (28,294 )     (24,952 )     (14,899 )     (9,029 )     (5,923 )
Interest expense, net
     (7,108 )     (4,884 )     (4,571 )     (5,216 )     (3,880 )
 
                              
Income before income taxes and discontinued operations
     31,830       27,949       19,826       12,643       9,886  
Provision (benefit) for income taxes
     12,254       10,428       7,633       (3,214 )     (798 )
 
                              
Income from continuing operations
     19,576       17,521       12,193       15,857       10,684  
Gain (loss) from discontinued operations, net of taxes
     (783 )     1,534       1,359       1,667       1,618  
 
                              
Net income
   $ 18,793     $ 19,055     $ 13,552     $ 17,524     $ 12,302  
 
                              
Net income per share — continuing operations:
                                        
Basic
   $ 0.91     $ 0.82     $ 0.62     $ 1.50     $ 1.03  
Diluted
   $ 0.90     $ 0.80     $ 0.60     $ 1.25     $ 0.88  
Net income per share:
                                        
Basic
   $ 0.87     $ 0.90     $ 0.69     $ 1.66     $ 1.19  
Diluted
   $ 0.86     $ 0.86     $ 0.67     $ 1.38     $ 1.01  
Shares used to compute net income per share:
                                        
Basic
     21,546,036       21,285,211       19,736,722       10,536,745       10,349,568  
Diluted
     21,733,103       22,028,591       20,347,385       12,658,620       12,144,140  

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    Year Ended December 31,
    2006   2005   2004   2003   2002
    (dollars in thousands, except per share amounts)
Cash Flow Data — continuing operations:
                                        
Net cash provided by operating activities
   $ 30,386     $ 39,450     $ 25,395     $ 17,125     $ 20,957  
Net cash used in investing activities
     (63,971 )     (67,921 )     (100,904 )     (64,502 )     (14,493 )
Net cash provided by financing activities
     32,413       32,033       84,875       47,406       5,554  
Other Data:
                                        
EBITDA (1)
   $ 50,851     $ 44,408     $ 33,864     $ 25,863     $ 20,278  
EBITDA as a % of revenues
     17.8 %     18.4 %     17.4 %     16.8 %     16.3 %
Number of surgical facilities operated as of the end of period(2)
     59       59       54       44       34  
                                         
    As of December 31,
    2006   2005   2004   2003   2002
    (in thousands)
Consolidated Balance Sheet Data:
                                        
Working capital
   $ 56,643     $ 48,784     $ 41,455     $ 25,979     $ 24,839  
Total assets
     503,806       436,378       365,761       252,784       188,888  
Total long-term debt, less current maturities
     136,533       101,909       69,721       99,419       52,719  
Total stockholders’ equity
     285,279       260,058       237,998       104,015       86,677  
 
(1)   When we use the term “EBITDA,” we are referring to net income plus (a) gain (loss) on discontinued operations, (b) income tax expense (provision), (c) interest expense, net and (d) depreciation and amortization. Minority interest expense represents the interests of third parties, such as physicians, hospitals and other health care providers, that own interests in surgical facilities that we consolidate for financial reporting purposes. We consolidate for financial reporting purposes the financial results of 44 of the 50 surgical facilities in which we owned an interest as of December 31, 2006. Our operating strategy involves sharing ownership of our surgical facilities with physicians, physician groups and hospitals. These third parties own an interest in all but one of the facilities in which we own an interest. We believe that it is preferable to present EBITDA because it excludes the portion of net income attributable to these third-party interests and clarifies for investors our portion of EBITDA generated by our surgical facilities and other operations.
 
    We use EBITDA as a measure of liquidity. We have included it because we believe that it provides investors with additional information about our ability to incur and service debt and make capital expenditures. We also use EBITDA, with some variation in the calculation, to determine our compliance with some of the covenants under our senior credit facility, as well as to determine the interest rate and commitment fee payable under the senior credit facility.
 
    EBITDA is not a measurement of financial performance or liquidity under generally accepted accounting principles. It should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities, or any other measure calculated in accordance with generally accepted accounting principles. The items excluded from EBITDA are significant components in understanding and evaluating financial performance and liquidity. Our calculation of EBITDA is not comparable to the EBITDA measure we have used in prior reports but is consistent with the measure EBITDA less minority interests that we previously reported. Our calculation of these measures may not be comparable to similarly titled measures reported by other companies.

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The following table reconciles EBITDA to net cash provided by operating activities — continuing operations:
                                         
    Year Ended December 31,  
    2006     2005     2004     2003     2002  
    (in thousands)  
    (unaudited)  
EBITDA
   $ 50,851     $ 44,408     $ 33,864     $ 25,863     $ 20,278  
Depreciation and amortization
     (11,913 )     (11,575 )     (9,467 )     (8,004 )     (6,512 )
Interest expense, net
     (7,108 )     (4,884 )     (4,571 )     (5,216 )     (3,880 )
Income taxes
     (12,254 )     (10,428 )     (7,633 )     3,214       798  
Gain (loss) on discontinued operations, net of taxes
     (783 )     1,534       1,359       1,667       1,618  
 
                              
Net income
     18,793       19,055       13,552       17,524       12,302  
 
                              
Depreciation and amortization
     11,913       11,575       9,467       8,004       6,512  
Non-cash compensation expense
     3,865       —       —       —       —  
Non-cash gains and losses
     (645 )     (244 )     21       (134 )     35  
Minority interests in income of consolidated subsidiaries
     28,294       24,952       14,899       9,029       5,923  
Provision (benefit) for income taxes
     12,254       10,428       7,633       (3,214 )     (798 )
Distributions to minority partners
     (25,447 )     (23,049 )     (14,420 )     (10,690 )     (6,177 )
Income on equity investments
     (2,423 )     (1,273 )     (1,272 )     (402 )     (541 )
Provision for bad debts
     3,952       3,827       3,376       1,949       4,243  
Excess tax benefit from share-based compensation
     (201 )     —       —       —       —  
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
                                        
Accounts receivable
     (2,955 )     (5,353 )     (4,735 )     (3,283 )     (3,392 )
Other assets and liabilities
     (17,014 )     (468 )     (3,126 )     (1,658 )     2,850  
 
                              
Net cash provided by operating activities — continuing operations
   $ 30,386     $ 39,450     $ 25,395     $ 17,125     $ 20,957  
 
                              
 
(2)   Includes surgical facilities that we manage but in which we do not have an ownership interest.

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