AmSurg Corp. (AMSG) reported an EPS of 38 cents in the first quarter of fiscal 2011, in line with the Zacks Consensus Estimate but down 7.3% from 41 cents in the year-ago period. Results for the first quarter of 2011 had a negative impact of 1 cent from the revision of the Medicare payment system for ambulatory surgical centers (ASCs) and 4 cents due to higher interest cost related to refinancing of the company’s credit facility in May 2010 and a higher tax rate.
AmSurg reported revenues of $179.4 million, marginally missing the Zacks Consensus Estimate of $180 million but 6% higher than $169.1 million in the year-ago period. The revenue growth during the quarter was based on a 6% yea-over-year growth in total procedures mainly due to the acquisition of nine new centers since the first quarter of 2010. However, the same-center revenues for the quarter were flat with the year-ago quarter.
Operating income increased 5.8% year over year to $62.6 million with operating margin unchanged at 34.9%. Operating expenses increased 6.2% led by higher salaries and benefits (9.6% to $55.7 million), supply cost (2.3% to $23.0 million) coupled with a 4.5% rise in other operating expenses.
AmSurg exited 2011 with $37.7 million ($34.1 million at the end of 2010) of cash and cash equivalents with $196 million available under revolving credit facility. Net cash flows from operating activities were $51.3 million compared to $54.3 million at the end of March 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 spread across the US and includes 16 multi-specialty centers and 2 centers specializing in gastroenterology procedures. The transaction, subject to regulatory approvals, is expected to close by the end of the second quarter. The company plans to fund this acquisition with available cash and additional borrowings based on its revolving credit facility.
AmSurg expects this transaction to be accretive to its 2012 results (excluding transaction costs to its results for 2011). 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 an EPS of $1.64−$1.68 on revenues of $740−$770 million in 2011. The Zacks Consensus EPS Estimate of $1.66 and revenues of $756 million were in line the company’s guidance.
Moreover, for the second quarter of fiscal 2011, EPS is expected to be at 40−42 cents, in line with the Zacks Consensus Estimate of 42 cents.
The company expects to include 18 to 20 new centers for 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.
However, the company expects the completion of reduction in Medicare rate reimbursement in 2011 to boost the fiscal 2012 result.
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