AmSurg Corp. (AMSG) completed a new revolving credit facility which will replace the earlier $300 million facility, which was scheduled to mature in June 2011. Under the new arrangement, which is set to expire in May 2015, AmSurg will be eligible to borrow up to $375 million.
The refinancing is likely to hit 2010 earnings by 11 cents. AmSurg also completed the private placement of $75 million senior notes maturing in 2020.
AmSurg has been able to deliver strong growth in revenues consistently over the past few years, primarily driven by a three-pronged strategy: adding new centers through acquisitions and development, expanding same-center revenues and increased economies of scale and operating efficiencies.
The latest credit facility and the debt financing should support AmSurg in its acquisitions. The company plans to open 13-16 new centers in 2010, which we believe is achievable. Smaller operators might find the current situation more difficult, which could make acquisitions easier for AmSurg.
However, AmSurg witnessed a decline in same-center procedures and revenues during the first quarter due to severe snowstorms in several areas and the difficult economic environment. Economic uncertainty and unemployment leads to fewer individuals with company-provided insurance which can impact discretionary procedures such as hip and knee replacements, as well as screening procedures such as colonoscopies.
The company also witnessed a decline in same-center procedures in April, which forced it to lower its outlook for 2010. Revenues and EPS are expected in the range of $715−$735 million (earlier guidance of $720−$750 million) and $1.69−$1.75 ($1.77−$1.80 earlier), respectively. Although the plan to open 13−16 new centers remains unchanged, same center revenues are expected to decline 1−2% compared with the earlier projection of flat same-center revenues.
We are Neutral on the stock.
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