AmSurg Corp. (AMSG) reported an EPS of 41 cents in the second quarter of fiscal 2011, in line with both the Zacks Consensus Estimate and the year-ago earnings. Results for the quarter included a negative impact of 1 cent related to the revision of the Medicare payment system for ambulatory surgical centers (ASCs), interest cost of 3 cents associated with the refinancing of the company’s credit facility in May 2010 and higher effective tax rate. Acquisition transaction cost of 2 cents related to the company’s definitive merger agreement with National Surgical Care (announced in April 2011) also impacted the company’s results in the reported quarter.
AmSurg reported revenues of $188.7 million, beating the Zacks Consensus Estimate of $197 million and 7.4% higher than $175.7 million reported in the year-ago period. The upside in revenues was primarily attributable to a 7% year-over-year growth in total procedures mainly arising from the opening of new centers since 2010 (208 at the end of the second quarter of 2011 versus 197 in the year-ago quarter). Same-center revenues in the quarter edged up 1% year over year.
Operating expenses increased 9.02% year over year led by higher salaries and benefits (up 12.6% to $57.5 million), supply cost (up 6.8% to $24.3 million) coupled with a 7.2% rise in other operating expenses. Although operating income increased 4.1% year over year to $60.2 million, operating margin declined 100 basis points to 31.8% during the quarter.
AmSurg exited second quarter 2011 with $32.9 million ($34.1 million at the end of 2010) in cash and cash equivalents and $252 million available under its revolving credit facility. Net cash flows from operating activities were $61.7 million compared with $52.6 million at the end of second quarter 2010.
Earlier in April 2011, AmSurg decided to acquire Dallas-based National Surgical Care (NSC) for $173.5 million in cash. NSC, with $124.5 million in revenues in 2010, operates 18 ASCs, 16 multi-specialty centers and 2 centers specializing in gastroenterology procedures across the U.S. The transaction, subject to regulatory approvals, is expected to close shortly. The company will consider the impact of this transaction on 2011 guidance, after the deal is complete.
Outlook
AmSurg reaffirmed its outlook for 2011. The company expects to report EPS of $1.64−$1.68 on revenues of $740−$770 million for 2011. The Zacks Consensus EPS Estimate of $1.66 was in line with the company’s guidance whereas revenues of $775 million exceeds the range.
Moreover, for the third quarter of fiscal 2011, EPS is expected in the range of 42−44 cents, in line with the Zacks Consensus Estimate of 43 cents.
The company raised its same-center revenue guidance for 2011 to 0–1% for 2011 from the previous range of negative 1–0%
The company expects to open 18 to 20 new centers in 2011(excluding the NSC transaction). Economic uncertainty continues to be the major concern for AmSurg. The company expects flat-to-declining same-center procedures in 2011.
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