AmSurg Beats Estimates Marginally

AmSurg Corp.'s (AMSG - Analyst Report) third-quarter earnings per share came in at 44 cents, slightly above the Zacks Consensus Estimate of 43 cents and the year-ago performance of 39 cents.

Revenues for the quarter increased 11% to $167.8 million compared to $150.7 million in the year ago period. The company reported a 6% rise in net earnings to $13.4 million, compared to $12.6 million in the third quarter of 2008. Third-quarter results included a negative impact from the effect of the revision of the Medicare payment system for ambulatory surgery centers (ASCs).

While the addition of 19 centers in operation during the last twelve months was primarily responsible for the robust growth in revenue, performance of same-center revenues remained lackluster due to the current economic conditions. Additionally, the Medicare rule revision reduced same center revenues by approximately 100 basis points.

Operating margin recorded a decline of 106 basis points to 33.82%, compared to 34.88% in the third quarter of 2008, driven by an increase in salary-related costs as well as other operating expenses.

AmSurg's balance sheet improved further after the robust performance. The company's cash flow from operating activities was $61.1 million at the end of the reported quarter, up from $55.5 million in the corresponding period last year. We are pleased to note that AmSurg made prudent use of the available funds (after capital expenditures of $5.4 million) by reducing its debt burden by $21.8 million.

As a result of the improvement in capital structure, total debt to capitalization at the quarter's end improved to 32.6% from 37.2% at the end of 2008. In addition, the ratio of total debt to trailing 12 months EBITDA also improved to 2, compared with 2.4 at the end of 2008.

Based on a strong performance, AmSurg raised the lower end of its previously-announced 2009 earnings outlook. The company now expects revenues and earnings in the range of $660 million - $680 million and $1.70 - $1.71, respectively. AmSurg reaffirmed its guidance for the addition of 13-16 centers in 2009, a majority of which are expected to be completed later this year.