October 24, 2000
AMERIPATH, INC. ANNOUNCES 2000
Riviera Beach, FL, October 24, 2000 – AmeriPath, Inc. (Nasdaq:PATH),
the largest physician and laboratory company focused on providing anatomic
pathology, cancer diagnostic and healthcare information services, reported
its financial results for the quarter and nine months ended September 30, 2000.
All reported earnings per share amounts are on a fully diluted basis.
Quarterly Financial Results
Net revenue for the quarter ended September 30, 2000 was $74.9
million, compared to $59.9 million for the third quarter of the
prior year, an increase of 25%. Total unit volume increased to
699,000 biopsies in the third quarter of this year, from 598,000
biopsies in the same period of 1999, a 17% increase. Cytology
specimen volume increased to 424,000 cytology specimens in the
third quarter of 2000 from 342,000 cytology specimens in 1999,
a 24% increase. Same practice net revenue for the third quarter
of 2000 increased by $8.2 million, or 14%, over the third quarter
of the prior year. The remaining increase in net revenue of $6.8
million resulted from the operations of practices that were acquired
after July 1, 1999. Net income for the third quarter of 2000
was $6.9 million, or $0.31 per share, compared to $5.9 million,
or $0.27 per share, for the same period of the prior year.
Year-To-Date Financial Results
For the nine months ended September 30, 2000, AmeriPath reported
net revenue of $216.8 million, an increase of 29% over the $167.6
million reported for the same period in 1999. Same practice net
revenue for the nine month period increased by $21.3 million,
or 13%. Net income for the nine month period in 2000 was $19.9
million, or $0.90 per share, before the impairment charge of
$5.2 million taken in the second quarter of 2000. With the charge,
net income for the nine month period was $16 million, or $0.72
per share. These compare to $16.9 million, or $0.78 per share,
for the same period in 1999. Cash flows from operations for the
nine months ended September 30, 2000 was $30.4 million, or 14%
of net revenue, and $1.37 per share, compared to $27.7 million,
or 17% of net revenue, and $1.27 per share, for the same period
of the prior year. Annualized net revenue per pathologist full-time
equivalents was over $1.0 million.
EBITDA (excluding the one time impairment charge) for the nine
months ended September 30, 2000 was $58.9 million, or 27% of
net revenue, compared to $47.1 million, or 28% of net revenue,
for the comparable period of 1999. Net accounts receivable were
approximately $52.5 million or 60 days sales outstanding. This
is down slightly from the 61 days at the end of the second quarter
of 2000, and is down from the 65 days for the same period of
1999. Collection performance remains strong.
SG&A was 15.9% of net revenue for the first nine months
of 2000 compared to 16.4% for the same period of 1999. The Company
continues to manage its overhead expense line while making investments
in information technology and sales organization staffing.
Same Practice Revenue Growth; Operating Data
The same practice net revenue growth was 14%, or $8.2 million,
for the third quarter, including $2.4 million related to the
increase in Medicare reimbursement. The increase in Medicare
reimbursement includes an estimate of additional reimbursement
as the result of HCFA’s miscalculation of certain 2000
technical relative value units. Inpatient revenues increased
$2.4 million and outpatient revenues increased $5.8 million.
The increase in inpatient revenue was principally due to higher
surgical volumes and clinical revenues, particularly in Texas.
Outpatient revenue increased in almost all dermatopathology practices,
especially in Texas, Pennsylvania, and the de novo operation
in New York. On a same practice comparison, national clinical
lab business increased 21%, or $1.1 million, in the third quarter
2000 from the same period in 1999. Expanded contracts in Texas,
New York, and Pennsylvania contributed to these increases.
Gross Margin
For the third quarter, the Company’s gross margin remains
strong at 53.2%, compared to 53.3% for the same quarter of 1999.
The decrease is partially attributable to the increase in national
clinical lab business. The margin was also affected, to a lesser
extent, by lower start-up margins at the Company’s Center
for Advanced Diagnostics and the de novo lab in New York.
Non-Operating Costs
Non-operating costs for the third quarter, principally amortization
and interest expense, increased 26% from the same period in the
prior year. The increase in amortization expense of $570,000
is primarily related to the increase in intangible assets from
acquisitions and contingent note payments. Interest expense increased
$960,000, or 38%, from the same quarter of 1999. The increase
is due to a higher average outstanding loan balance and an increase
in the effective interest rate from 7.0% to 8.2%. As the result
of the expiration of certain interest rate protection agreements,
the Company anticipates its effective interest rate in the fourth
quarter to be approximately 9.7%.
Initiatives
The Company continues to benefit from a number of key initiatives
in the quarter. The alliance with Genomics Collaborative, Inc.
(“GCI”) began to take shape. The Company made a $1
million investment in GCI, and began the tissue collection process
directed toward building the world’s largest tissue repository.
AmeriPath continues its transition to becoming a fully integrated
healthcare diagnostic information company with the expansion
of its information technology (“IT”) organization.
Four highly qualified personnel were added in the third quarter,
including an Infrastructure Project Manager, NT Operating System
Analyst, Production Control Manager, and a Director of Applications
Development. In addition, the Company formed a strategic alliance
with Per-Se Technologies to assist in the development and implementation
of PathWay SolutionsTM, AmeriPath’s web-based business
intelligence solution designed to provide utilization and outcome
data to AmeriPath’s customers, referring physicians, hospitals,
patients and payors.
The conversion of all of the Company’s billing systems
to the IDX software platform continues. Two operations were successfully
converted during the third quarter, and three are in process.
The conversion process will continue at an aggressive pace in
the fourth quarter, and is currently expected to be completed
by the end of 2001.
The Company’s effective tax rate for the quarter was
41.9%, compared to 43.0% for the prior period. This reduction
was partially due to the Company’s initiative to restructure
certain practices to save state income taxes. Excluding the second
quarter asset impairment charge, the Company anticipates its
effective tax rate for the year to be 42.5%.
In an effort to motivate and retain the Company’s talented
and dedicated employees, a program called Situational LeadershipâII
was instituted, providing our executives, managers, and supervisors
with critical leadership skills to help them develop empowered
work teams and future leaders within an ever-changing and challenging
environment. The program was rolled out in June to 140 managers
and supervisors, will continue until nearly all of the Company’s
managers and supervisors are trained, and will be offered on
an ongoing basis to all new managers and supervisors.
Acquisitions
The Company acquired four pathology practices during the quarter:
two in Texas, enhancing its already strong presence in the Dallas/Ft.
Worth area, and two in Florida. MedGenetics, a cytogenetics facility
in the central Florida region, will be integrated into the Company’s
Center for Advanced Diagnostics, based in Orlando. A small hospital-based
practice in Orange Park, Florida was also acquired. Although
the market for acquisition and affiliation opportunities remains
both competitive and difficult, the Company remains dedicated
to the acquisition of large and strong pedestal and strategic
fold-in pathology practices in existing markets. At present,
the Company is in discussions with a number of pathology practices
of varying sizes. They are located in the Company’s existing
and certain new markets. Two of the practices have a combined
annual net revenue run-rate of approximately $50 million. At
this time, the negotiations are going well, and the Company’s
management is optimistic that one or both of these acquisitions
should be consummated prior to year-end; however, neither of
these acquisitions is the subject of a signed letter of intent
or definitive acquisition agreement. Therefore, no assurance
can be given that either acquisition will be consummated.
CEO’s Perspective
James C. New, Chairman and Chief Executive Officer of AmeriPath,
commented: “The Company’s third quarter produced
strong earnings and cash flow, and we continue to meet analysts’ consensus
estimates. The third quarter of 2000 has been very exciting for
AmeriPath, demonstrating our continued ability to deliver strong
internal growth. Our plans for the fourth quarter and beyond
include the continued investment in sales and marketing in an
effort to further increase same practice revenue in the areas
of dermatopathology, urology, and gastroenterology. Our alliance
with GCI should position AmeriPath in a pivotal and indispensable
role in the development and implementation of molecular and genetic
diagnostics and therapeutics. The Company is also committed to
transitioning from multiple billing and lab information systems
to common platforms, thereby enabling it to leverage it’s
extensive inventory of diagnostic information. These initiatives
should increase our competitive advantage and shape the future
for AmeriPath.”
More detailed information regarding the business, operations
and financial performance of the Company through September 30,
2000, and related and other matters, will be included in the
Company’s Form 10-Q for the quarter ended September 30,
2000, which is expected to be filed with the SEC by November
14, 2000.
As previously announced, the Company will broadcast its third
quarter financial results conference call on Tuesday, October
24, 2000, at 10:00 a.m. EST over the Internet. All stockholders
and investors are encouraged to participate. This event is available
through Investor Broadcast Network’s Vcall website, located
at http://www.vcall.com. Listeners should go to the website at
least fifteen minutes before the event to register, download,
and install any necessary audio software. For those unable to
attend the live broadcast, a replay will be available for the
next 90 days. There is no charge to access the event. A replay
of the call will also be available by telephone beginning at
12:00 p.m., October 24 to 12:00 p.m., October 25. The dial-in
number is 800-633-8284, reservation #16603282. AmeriPath, Inc.
is the nation’s largest physician and laboratory company
focused on providing anatomic pathology cancer, diagnostic, and
healthcare information services to physicians, hospitals, national
clinical laboratories and managed care organizations. The company
presently operates in 14 states and employs 314 physicians who
provide medical services through outpatient pathology laboratories,
hospital inpatient laboratories and outpatient surgery centers.
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The statements of James C. New
and other statements contained in this press release are “forward-looking statements” which
are based on management’s current beliefs and expectations.
Past performance is not necessarily indicative of future results.
In addition, forward-looking statements – which are identified
by words such as “may”, “should”, “believe,” “expect,” “anticipate” and
similar expressions -- are subject to a number of risks and uncertainties
which could cause actual results to differ materially from historical
results or those expected or anticipated. These include risks
and uncertainties relating to demand for pathology services,
pricing, federal and state regulation (and compliance), reimbursement
rates, government and third party payments, the ability to attract,
motivate, and retain pathologists, dependence upon pathologists
and contracts, completion and integration of acquisitions and
affiliations, competitive factors and technology. Further information
regarding risks, uncertainties and other factors that could affect
the Company’s financial results, or could cause actual
results to differ materially from those expected or anticipated,
are included in the Company’s Form 10-K for the year ended
December 31, 1999 and subsequent filings with the SEC.
