SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2004
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 an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of July 30, 2004, there were outstanding 21,097,022 shares of the registrant’s common stock, par value $.01 per share.
FORM 10-Q FOR QUARTERLY PERIOD ENDED JUNE 30, 2004
INDEX
2
NOVAMED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
| June 30, 2004 |
December 31, 2003 |
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| (unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
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| Cash and cash equivalents |
$ | 6,270 | $ | 11,801 | ||||
| Accounts receivable, net of allowances of $8,633 and $7,611, respectively |
11,267 | 8,219 | ||||||
| Notes and amounts due from affiliated providers |
509 | 1,089 | ||||||
| Notes receivable from related parties |
395 | 597 | ||||||
| Inventory |
1,364 | 1,397 | ||||||
| Current tax assets, net |
279 | 542 | ||||||
| Other current assets |
1,115 | 1,107 | ||||||
| Total current assets |
21,199 | 24,752 | ||||||
| Property and equipment, net |
7,524 | 7,918 | ||||||
| Intangible assets, net |
34,851 | 26,749 | ||||||
| Noncurrent deferred tax assets, net |
3,008 | 4,130 | ||||||
| Other assets, net |
131 | 339 | ||||||
| Total assets |
$ | 66,713 | $ | 63,888 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 5,121 | $ | 4,078 | ||||
| Accrued expenses |
2,449 | 2,374 | ||||||
| Restructuring reserves |
141 | 260 | ||||||
| Current maturities of long-term debt |
180 | 80 | ||||||
| Current liabilities of discontinued operations |
672 | 1,068 | ||||||
| Total current liabilities |
8,563 | 7,860 | ||||||
| Long-term debt, net of current maturities |
167 | 74 | ||||||
| Minority interests |
6,940 | 5,841 | ||||||
| Commitments and contingencies |
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| Stockholders’ equity: |
||||||||
| Series E Junior Participating Preferred Stock, $0.01 par value, 1,912,000 shares authorized, none outstanding at June 30, 2004 and December 31, 2003, respectively |
— | — | ||||||
| Common stock, $0.01 par value, 81,761,465 shares authorized, 25,255,765 and 25,046,195 shares issued at June 30, 2004 and December 31, 2003, respectively |
252 | 250 | ||||||
| Additional paid-in-capital |
78,425 | 77,964 | ||||||
| Accumulated deficit |
(21,471 | ) | (23,641 | ) | ||||
| Treasury stock, at cost, 4,208,743 and 3,843,399 shares at June 30, 2004 and December 31, 2003, respectively |
(6,163 | ) | (4,460 | ) | ||||
| Total stockholders’ equity |
51,043 | 50,113 | ||||||
| Total liabilities and stockholders’ equity |
$ | 66,713 | $ | 63,888 | ||||
The notes to the interim condensed consolidated financial statements
are an integral part of these statements.
3
NOVAMED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data; unaudited)
| Three months ended June 30, |
Six months ended June 30, |
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| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net revenue: |
||||||||||||||||
| Surgical facilities |
$ | 11,143 | $ | 9,281 | $ | 20,492 | $ | 17,828 | ||||||||
| Product sales and other |
4,334 | 4,737 | 9,211 | 9,693 | ||||||||||||
| Total net revenue |
15,477 | 14,018 | 29,703 | 27,521 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Salaries, wages and benefits |
5,225 | 4,991 | 10,303 | 10,232 | ||||||||||||
| Cost of sales and medical supplies |
3,719 | 3,442 | 7,238 | 6,792 | ||||||||||||
| Selling, general and administrative |
3,358 | 2,949 | 6,512 | 5,829 | ||||||||||||
| Depreciation and amortization |
640 | 657 | 1,316 | 1,294 | ||||||||||||
| Total operating expenses |
12,942 | 12,039 | 25,369 | 24,147 | ||||||||||||
| Operating income |
2,535 | 1,979 | 4,334 | 3,374 | ||||||||||||
| Minority interests in earnings of consolidated entities |
1,177 | 678 | 1,930 | 1,255 | ||||||||||||
| Other (income) expense, net |
(22 | ) | (15 | ) | (222 | ) | (133 | ) | ||||||||
| Income before income taxes |
1,380 | 1,316 | 2,626 | 2,252 | ||||||||||||
| Income tax provision |
552 | 526 | 1,050 | 903 | ||||||||||||
| Net income from continuing operations |
828 | 790 | 1,576 | 1,349 | ||||||||||||
| Net income from discontinued operations |
— | — | 594 | 4 | ||||||||||||
| Net income |
$ | 828 | $ | 790 | $ | 2,170 | $ | 1,353 | ||||||||
| Basic earnings per common share: |
||||||||||||||||
| Income from continuing operations |
$ | 0.04 | $ | 0.04 | $ | 0.07 | $ | 0.06 | ||||||||
| Income from discontinued operations |
— | — | 0.03 | — | ||||||||||||
| Net income |
$ | 0.04 | $ | 0.04 | $ | 0.10 | $ | 0.06 | ||||||||
| Diluted earnings per common share: |
||||||||||||||||
| Income from continuing operations |
$ | 0.04 | $ | 0.04 | $ | 0.07 | $ | 0.06 | ||||||||
| Income from discontinued operations |
— | — | 0.03 | — | ||||||||||||
| Net income |
$ | 0.04 | $ | 0.04 | $ | 0.10 | $ | 0.06 | ||||||||
| Weighted average common shares outstanding |
21,018 | 21,441 | 21,123 | 21,622 | ||||||||||||
| Dilutive effect of employee stock options |
1,815 | 315 | 1,918 | 297 | ||||||||||||
| Diluted weighted average common shares outstanding |
22,833 | 21,756 | 23,041 | 21,919 | ||||||||||||
The notes to the interim condensed consolidated financial statements are an integral part of these statements.
4
NOVAMED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands; unaudited)
| Six months ended June 30, |
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| 2004 |
2003 |
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| Cash flows from operating activities: |
||||||||
| Net income from continuing operations |
$ | 1,576 | $ | 1,349 | ||||
| Adjustments to reconcile net income to net cash provided by continuing operations, net of effects of purchase transactions— |
||||||||
| Depreciation and amortization |
1,316 | 1,294 | ||||||
| Deferred taxes |
1,050 | 903 | ||||||
| Gain on sale of minority interests |
(163 | ) | (115 | ) | ||||
| Minority interests |
1,930 | 1,255 | ||||||
| Distributions to minority partners |
(1,831 | ) | (857 | ) | ||||
| Changes in operating assets and liabilities— |
||||||||
| Accounts receivable |
(2,544 | ) | (2,357 | ) | ||||
| Inventory |
118 | (211 | ) | |||||
| Other current assets |
(157 | ) | 315 | |||||
| Accounts payable and accrued expenses |
821 | (40 | ) | |||||
| Other noncurrent assets |
61 | (12 | ) | |||||
| Net cash provided by operating activities |
2,177 | 1,524 | ||||||
| Cash flows from investing activities: |
||||||||
| Payments for acquisitions, net |
(8,133 | ) | — | |||||
| Proceeds from sale of minority interests |
1,048 | 135 | ||||||
| Purchases of property and equipment |
(1,069 | ) | (1,196 | ) | ||||
| Proceeds from sale of property and equipment |
121 | 38 | ||||||
| Proceeds from sale of securities |
74 | — | ||||||