Zacks_Analysts' Blog : Amsurg Struggles in 3Q, Ups Outlook - Analyst Blog

AmSurg Corp. (AMSG) reported EPS of 42 cents in the third quarter of fiscal 2011, missing the Zacks Consensus Estimate by a penny. Reported EPS also remained flat year over year. 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) and 3 cents related to the company’s National Surgical Care (NSC) transaction.

AmSurg reported an 11% growth in revenues to $195.9 million in the quarter, below the Zacks Consensus Estimate of $200 million. The upside in revenues was primarily attributable to a 9% rise in procedures and a 3% increase in revenue per procedure, which reflected higher multi-specialty components in procedure mix. Same-center revenues in the quarter budged up 1% year over year.

Operating expenses increased 13.1% year over year due to higher salaries and benefits (up 14.0% to $60.8 million), supply cost (up 9.8% to $25.4 million) and other operating expenses (up 17.5% to $43.3 million). As a result, operating margin declined 130 basis points to 30.4% during the quarter.

AmSurg exited the third quarter of 2011 with $35.8 million in cash and cash equivalents versus $34.1 million at the end of 2010, and $129.5 million available under its revolving credit facility. Net cash flows from operating activities were $62.6 million compared with $57.9 million at the end of third quarter 2010.

Earlier in September this year, AmSurg acquired NSC for $135 million in cash. With this acquisition, AmSurg gained 17 new centers including 15 multi-specialty centers and 2 gastroenterology centers in the US. In addition to the NSC transaction, the company also acquired 2 other centers during the quarter and sold a center.

Outlook

AmSurg updated its financial outlook for 2011 in order to include the impact of the NSC transaction. 

The company currently expects adjusted EPS in the range of $1.69−$1.71 (previous range was $1.64−$1.68) on revenues of $770−$780 million ($740−$770 million) for 2011. AmSurg also raised same-center revenue guidance for 2011 to 1% (0–1%) and expects to open 18 to 20 new centers (excluding the 16 NSC centers).