Annual Report NovaMed Kristin Catlin ACG2021 Sect. 004

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Annual ReportNovaMedKristin CatlinACG2021
Sect. 004
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Executive Summary

• NovaMed Inc. is a healthcare services company
  that acquires, develops and operates ambulatory
  surgery centers (ASCs) in joint ownership with
  physicians throughout the United States. NovaMed
  currently owns and operates 30 ASCs in 16 states.
• NovaMed Annual Report

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Part A. Introduction

• Chief Executive Officer Thomas S. Hall
• Location of home office Chicago, Illinois
• Ending date of latest fiscal year December 31,
  2005
• NovaMeds owns and operates ambulatory surgery
  centers, optical laboratories, optical products
  purchasing organization and a marketing products
  and services business
• Main geographic area of activity United Sates

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Part A. Audit Report

• Name of the companys independent auditors
  PricewaterhouseCoopersLLP
• In review of NovaMeds 2005 consolidated
  financial statements, the auditing committee has
  declared the statements to be in compliance with
  the accounting principles generally accepted in
  the United States.

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Part A. Stock Market Information

• Most recent price of the companys stock 7.30
• Twelve month trading range of the companys
  stock 4.10-7.25
• Dividend per share 0.00
• Date of the above information April 21, 2006
• I believe that NovaMed is a good investment. The
  company is acquiring more surgery centers and the
  stock price is steadily increasing.

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Part B. Industry Situation and Company Plans

• NovaMed is continuing to grow. In 2005 alone, the
  company acquired four new ambulatory surgery
  centers. NovaMed plans to acquire and develop new
  ASCs, strengthen and build relationships with
  existing and new physician-partners, and continue
  to increase revenue and improve operating margins
  in their existing ASCs.

http//novamed.com/
http//finance.yahoo.com/q/pr?snova
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Part C. Income Statement

• The format is most like a multi-step
• NovaMed has increased in operating and net
  income, and gross profit since 2004. As the
  NovaMed acquires more ASCs, their income and
  profits increase, respectively.

2005 2004
Gross Profit 61,598 thousand 48,214 thousand
Operating Income 16,357 thousand 10,885 thousand
Net Income 5,589 thousand 2,846 thousand
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Part C. Balance Sheet
Assets Liabilities Stockholder Equity
2005 97,162 thousand 38,487 thousand 58,675 thousand
2004 76,787 thousand 25,966 thousand 50,821 thousand

• The stockholders equity account remained
  relatively stable with a moderate increase from
  2004 to 2005. The liabilities account increased
  fairly dramatically with a 12,521 thousand
  change.

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Part C. Statement of Cash Flows

• Cash flows from operations is significantly more
  than net income for the past two years (11,759
  thousand vs 5,589 thousand).
• The company is growing through investing
  activities (acquisitions, property, equipment,
  minority interests, securities).
• The companys primary source of financing is
  borrowings under revolving credit agreement
• Overall, cash has increased significantly over
  the past two years.

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Part D. Accounting Policies

• NovaMed consolidates the accounts of an ASC in
  which it does not hold a majority ownership
  interest. NovaMed uses the equity method of
  accounting for the other ASCs in which it owns a
  minority interest. The company consolidates two
  physician practice management (PPM) entities
  under the guidance of EITF 97-2. Inventory
  consists of optical products and surgical
  supplies used in operating the companys ASCs.

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Topics of the Notes to the Financial Statements

• General Information
• Restatement
• Summary of Significant Accounting Policies
• Earnings Per Common Share
• Statement of Cash Flows-Supplemental
• Acquisitions and Sales of Minority Interests
• Property and Equipment
• Goodwill and Other Intangible Assets
• Accrued Expenses

• Discontinued Operations
• Income Taxes
• Long-Term Debt
• Operating and Capital Leases
• Commitments and Contingents
• Stockholders Equity
• Employee Benefit Plans
• Operating Segments
• Related-Party Transactions
• Subsequent Events
• Quarterly Financial Data

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Part E. Financial AnalysisLiquidity Ratios
2005 2004
Working Capital 7,029 thousand 1,928 thousand
Current Ratio 1.65 1.16
Receivable Turnover 7.35 times 5.76 times
Average days sales uncollected 49.66 days 63.37 days
Inventory turnover 11.14 times 8.76 times
Average days inventory on hand 32.76 days 41.67 days

• As the number of ASCs NovaMed acquires increases,
  so does its working capital, current ratio,
  receivable, and inventory turnover.

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Part E. Financial AnalysisProfitability Ratios
2005 2004
Profit Margin 6.89 4.47
Asset Turnover .93 times .73 times
Return on assets 6.43 3.27
Return on equity 10.21 5.20

• The profit margin, asset turnover, return on
  assets, and return on equity have all increased
  from 2004 to 2005 due to additional ASCs
  acquired, thus increasing profits, assets, and
  stockholders equity.

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Part E. Financial AnalysisSolvency Ratio
2005 2004
Debt to equity 18.44 24.06

• The debt to equity ratio of 18.44 for 2005 and
  24.06 for 2004 means that NovaMed receives the
  majority of its financing from investors.

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Part E. Financial AnalysisMarket Strength Ratios
2005 2004
Price/earnings per share 29.2 times 47.9 times
Dividend yield _______ _______