NovaMed announces results for the third quarter ended September 30, 2009

NovaMed, Inc. (Nasdaq: NOVA), a leading operator of ambulatory surgery centers in partnership with physicians, today announced results for the third quarter ended September 30, 2009. Total net revenue grew to $38,768,000, up 8% from $36,050,000 in the prior year third quarter.

Net income from continuing operations attributable to NovaMed in the third quarter of 2009 increased 4% to $1,862,000 from $1,798,000 in the prior year third quarter. Diluted earnings from continuing operations per common share attributable to NovaMed increased 14% to $0.08 in the third quarter of 2009 from $0.07 in the third quarter of 2008. Net cash provided by operations increased 15% to $7,133,000, or $0.30 per diluted share, in the third quarter of 2009 from $6,196,000, or $0.25 per diluted share, in the prior year third quarter. Interest expense in the third quarter of 2009 included non-cash, imputed interest of $1,075,000, or $0.03 per diluted share, recorded in accordance with NovaMed’s adoption of Accounting Standards Codification (“ASC”) 470-20 (formerly FASB Staff Position APB 14-1). Third quarter 2008 results have been recast to include imputed interest of $985,000, or $0.02 per diluted share. Same-facility revenue declined 1% in the third quarter of 2009.

“We are pleased with our third quarter results,” commented Thomas S. Hall, Chairman, President and Chief Executive Officer of NovaMed, Inc. “Although the economy continues to present us with challenges, we are encouraged by the improvement in same-facility revenue growth over the prior two quarters. Keep in mind that our second quarter is generally our strongest quarter. Our strong cash flow from operations of $7.1 million was 3.8 times net income from continuing operations attributable to NovaMed. With capital expenditures of just over $700,000 in the quarter, our free cash flow was over $6.4 million which continued to allow us to deleverage our balance sheet in the third quarter.”

Highlights of third quarter continuing operations include:

• Earnings per diluted share from continuing operations increased 14% to $0.08
• Cash flow from operations increased 15% to $7,133,000
• Total net revenue increased 8% to $38,768,000
• EBITDA increased 9% to $7,217,000
• Diluted shares outstanding decreased 7% to 23,409,000

For the nine months ended September 30, 2009, total net revenue grew to $116,634,000, up 11% from $105,043,000 for the first nine months last year, despite a 2% decline in same-facility net revenue. Net income from continuing operations attributable to NovaMed increased 10% to $5,713,000 in the first nine months of 2009 compared to $5,177,000 in the first nine months of 2008. Diluted earnings from continuing operations per common share attributable to NovaMed increased 19% to $0.25 in the first nine months of 2009 from $0.21 in the first nine months of 2008. Net cash provided by operations increased 13% to $19,225,000, or $0.83 per diluted share, in the first nine months of 2009 from $16,998,000, or $0.68 per diluted share, in the first nine months of 2008. Interest expense in the first nine months of 2009 included non-cash, imputed interest of $3,125,000, or $0.08 per diluted share, recorded in accordance with NovaMed’s adoption of ASC 470-20. The results for the first nine months of 2008 have been recast to include imputed interest of $2,861,000, or $0.07 per diluted share.

“As we announced on September 1, 2009, we completed the amendment to our credit agreement which provides us with an $80 million senior secured credit facility with reasonable terms in light of today’s credit markets,” added Mr. Hall. “At the end of the third quarter we had $44 million borrowed under this credit facility. With $19.2 million in cash flow from operations for the first nine months of 2009 and capital expenditures of $3.3 million, this left us with just over $15.9 million of free cash flow. From an acquisition perspective, we are pursuing several opportunities and we intend to use our free cash flow and credit facility to fund these transactions. However, until we close a deal we will continue to use our free cash flow to pay down debt and deleverage our balance sheet.”