NovaMed reports total net revenue of $39.8M for fourth-quarter 2009

“NovaMed continues to execute well in a difficult environment as demonstrated by our fourth quarter results and the significant improvement in our same-facility revenue growth,” commented Thomas S. Hall, Chairman, President and Chief Executive Officer of NovaMed, Inc. “December was a very strong month for surgical procedures performed in our surgery centers. While we are encouraged by the continuing improvement in same-facility revenue growth, we remain cautious as to how this trend will develop over the next several quarters. Our strong cash flow from operations of $6.3 million was 3.5 times net income from continuing operations attributable to NovaMed. With capital expenditures of $416,000 in the quarter, our free cash flow of $5.9 million continued to allow us to deleverage our balance sheet in the fourth quarter.”

Highlights of fourth quarter continuing operations include:

• Earnings per diluted share from continuing operations increased 14% to $0.08
• Cash flow from operations of $6,324,000
• Total net revenue increased 10% to $39,809,000
• Same-facility net revenue increased 6%

For the year ended December 31, 2009, total net revenue grew to $156,444,000, up 11% from $141,220,000 in 2008. Same-facility net revenue in 2009 was flat with 2008. Net income from continuing operations attributable to NovaMed increased 8% to $7,511,000 in 2009 compared to $6,966,000 in 2008. Diluted earnings from continuing operations per common share attributable to NovaMed increased 14% to $0.32 in 2009 from $0.28 in 2008. Net cash provided by operations in 2009 was $25,549,000, or $1.10 per diluted share. Interest expense in 2009 included non-cash, imputed interest of $4,225,000, or $0.11 per diluted share, recorded in accordance with NovaMed’s adoption of ASC 470-20. The results for 2008 have been recast to include imputed interest of $3,867,000, or $0.09 per diluted share.

“2009 was a year of both growth and deleveraging for NovaMed,” added Mr. Hall. “With $25.5 million in cash flow from operations in 2009 and capital expenditures of $3.7 million, this left us with just over $21.8 million of free cash flow. With this free cash flow we reduced our long-term debt by over $20 million. In 2010 we plan to seek out attractive acquisition candidates and will continue to use our free cash flow to delever in the meantime.”

Impact of Adoption of ASC 470-20

Effective January 1, 2009, NovaMed adopted ASC 470-20, Debt with Conversion and Other Options. ASC 470-20 impacts the accounting treatment of our 1.0% convertible senior subordinated notes due June 15, 2012. As required by ASC 470-20, prior period results are recast to conform to the new pronouncement. As noted above, the adoption of ASC 470-20 added non-cash, imputed interest expense of $4,225,000 and $3,867,000 to 2009 and 2008, respectively. We estimate that the adoption of ASC 470-20 will add approximately $4.6 million of imputed interest expense to our 2010 results of operations. However, the adoption of ASC 470-20 will not have an impact on our cash flows.