AmSurg Announces Second-Quarter Net Earnings from Continuing Operations of $0.41 Per Diluted Share

Christopher A. Holden, President and Chief Executive Officer of AmSurg Corp. (NASDAQ: AMSG), today announced financial results for the second quarter ended June 30, 2011. Revenues for the quarter rose 7% to $188,730,000 from $175,698,000 for the second quarter of 2010. Net earnings from continuing operations attributable to AmSurg common shareholders were $12,758,000, or $0.41 per diluted share, for the second quarter of 2011 compared with $12,716,000, or $0.41 per diluted share, for the second quarter of 2010. As anticipated, the results for the second quarter of 2011 included an incremental negative impact of $0.01 per diluted share from the revision of the Medicare payment system for ASCs and $0.03 per diluted share from the higher interest costs related to the refinancing of the Company’s credit facility in May 2010 and a higher effective tax rate. In addition, these results include acquisition transaction costs of $0.02 per diluted share related to the Company’s definitive merger agreement with National Surgical Care, announced in April 2011.

Revenues for the first six months of 2011 increased 7% to $367,600,000 from $343,725,000 for the same period in 2010. Net earnings from continuing operations attributable to AmSurg common shareholders were $24,433,000, or $0.78 per diluted share, for the first half of 2011 compared with $25,117,000, or $0.82 per diluted share, for first six months of 2010. The results for the first six months of 2011 included an incremental negative impact of $0.02 per diluted share from the revision of the Medicare payment system for ASCs, $0.07 per diluted share from the higher interest costs related to the credit facility refinancing and a higher effective tax rate, and $0.02 per diluted share for acquisition transaction costs.

"We are pleased to see modest strengthening in our comparable-quarter performance for the second quarter versus the first quarter, but our procedure volume, revenues, margins and earnings continue to be negatively affected by the weak national economy and high unemployment. Our revenue growth for the second quarter, which reflected a 7% increase in procedures, was produced largely from the expansion of our centers in operation during the previous year, to 208 at the end of the second quarter of 2011 from 197 at the same time in 2010. We also benefited from a 1% increase in same-center revenue for the comparable quarters. EBITDA less noncontrolling interests was 16.7% of revenue for the second quarter of 2011, which included a negative impact of approximately 60 basis points from the NSC transaction costs, compared with 17.5% for the second quarter last year.

"We added five new centers during the second quarter, comprised of four acquisitions and the opening of a de novo center. The four acquisitions were among the seven centers we had expected to acquire by year-end 2010. We acquired another one of those centers in the first quarter of 2011, have completed the acquisition of the sixth of those centers since the end of the second quarter and are no longer pursuing the acquisition of the seventh center. We ended the second quarter of 2011 with four centers under letter of intent, including the one center since acquired in the third quarter, and with another center under development, which we expect to open in 2012.

"Net cash flows from operating activities were $61.7 million for the second quarter of 2011 compared with $52.6 million for the second quarter of 2010. Excluding distributions to noncontrolling interests, net cash flows from operations were $26.2 million for the latest quarter compared with $17.2 million for the second quarter of 2010, which drove an 11% increase in net cash flows from operations excluding distributions to noncontrolling interests for the first six months of 2011. At the end of the second quarter, the ratio of total debt to trailing 12 months EBITDA was 2.4, we had cash and cash equivalents of $33.0 million and our availability under our revolving credit facility was $252 million.

"On April 7, 2011, we announced a definitive agreement to acquire National Surgical Care (NSC), which we originally expected to complete before the end of the second quarter, subject to normal closing conditions, regulatory approvals and clearance under the Hart-Scott-Rodino Act. We continue to work with NSC toward meeting the conditions to close this transaction. We will incorporate the specific impact of the transaction into our guidance for 2011 only after the transaction is complete. As a result, today, we affirm our existing guidance for 2011 revenue and net earnings from continuing operations per diluted share attributable to common shareholders, and we establish our guidance for the third quarter of 2011, neither of which includes any future expected impact from the NSC transaction:

• Revenues in a range of $740 million to $770 million for 2011.
• Same-center revenues revised to a new range of 0% to 1% for 2011 from the previous range of 0% to a negative 1%.
• The addition of 18 to 20 new centers for the year, not including the NSC transaction.
• Net cash flow provided by operating activities, less distributions to noncontrolling interests, in a range of $90 million to $95 million.
• Net earnings from continuing operations per diluted share attributable to common shareholders for 2011 in a range of $1.64 to $1.68, which includes a negative $0.05 impact from the effect of the revised Medicare payment system, a negative $0.07 impact from higher interest costs related to the refinancing of our revolving credit facility and the higher effective tax rate, and acquisition transaction costs incurred in the second quarter of $0.02 per diluted share related to the NSC transaction.
• Net earnings from continuing operations per diluted share attributable to common shareholders for the third quarter of 2011 in a range of $0.42 to $0.44 per diluted share, including a negative $0.01 impact from the effect of the revised Medicare payment system revision.”

The information contained in the preceding paragraphs is forward-looking information, and the attainment of these targets is dependent not only on AmSurg’s achievement of its assumptions discussed above, but also on the risks and uncertainties listed below that could cause actual results, performance or developments to differ materially from those expressed or implied by this forward-looking information.

Mr. Holden concluded, "We are encouraged by the positive same-center revenues achieved for the second quarter of 2011, but we remain cautious about the sustainability of this improvement in the second half of the year due to the weak economic environment and continuing high unemployment. Moving into 2012, our same-center performance will benefit from the completion of reductions in Medicare rate reimbursement in 2011, with no scheduled reduction in Medicare rates for 2012 for the first time in four years. In addition, we have now cycled the negative comparable-quarter impact of our refinancing at the end of May 2010. We continue to expect the full-year financial impact in 2012 of centers added in 2011 will be significantly more beneficial than their impact in 2011.

"A number of compelling factors also support our longer-term growth prospects, including the aging U.S. population, substantially improved healthcare access for previously uninsured and underserved populations, and ongoing healthcare technology advances that enable additional surgical procedures to migrate from inpatient to outpatient venues. Due in part to the national concern over healthcare quality and the relentless rise in healthcare costs, there is also growing recognition among payers that freestanding ASCs provide high quality in the most affordable modality for many surgical procedures and that a substantial majority of these procedures are still being performed in much more expensive venues. As the country’s leading operator of freestanding ambulatory surgery centers, we are confident AmSurg is favorably positioned to leverage these strong industry dynamics to drive long-term growth in earnings and shareholder value.”

AmSurg Corp. will hold a conference call to discuss this release today at 5:00 p.m. Eastern time. Investors will have the opportunity to listen to the conference call over the Internet by going to www.amsurg.com and clicking "Investors” or by going to www.earnings.com at least 15 minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available at these sites shortly after the call and continue for 30 days.

This press release contains forward-looking statements. These statements, which have been included in reliance on the "safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, involve risks and uncertainties. Investors are hereby cautioned that these statements may be affected by the important factors, among others, set forth in AmSurg’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and other filings with the Securities and Exchange Commission, including the following risks: the risk that payments from third-party payors, including government healthcare programs, may decrease or not increase as the Company’s costs increase; adverse developments affecting the medical practices of the Company’s physician partners; the Company’s ability to maintain favorable relations with its physician partners; the Company’s ability to acquire and develop additional surgery centers on favorable terms; the Company’s ability to grow revenues by increasing procedure volume while maintaining its operating margins and profitability at its existing centers; the Company’s ability to manage the growth in its business; the Company’s ability to obtain sufficient capital resources to complete acquisitions and develop new surgery centers; the Company’s ability to compete for physician partners, managed care contracts, patients and strategic relationships; adverse weather and other factors beyond the Company’s control that may affect the Company’s surgery centers; adverse impacts on the Company’s business associated with current and future economic conditions; the Company’s failure to comply with applicable laws and regulations; the risk of changes in legislation, regulations or regulatory interpretations that may negatively affect the Company; the risk of becoming subject to federal and state investigation; the risk from an unpredictable impact of the Health Reform Law; the risk of regulatory changes that may obligate the Company to buy out interests of physicians who are minority owners of its surgery centers; potential liabilities associated with the Company’s status as a general partner of limited partnerships; liabilities for claims brought against our facilities; the Company’s legal responsibility to minority owners of its surgery centers, which may conflict with its interests and prevent it from acting solely in its best interests; risks associated with the potential write-off of the impaired portion of intangible assets; and potential liability relating to the tax deductibility of goodwill. Consequently, actual results, performance or developments may differ materially from the forward-looking statements included above. AmSurg disclaims any intent or obligation to update these forward-looking statements.

AmSurg Corp. acquires, develops and operates ambulatory surgery centers in partnership with physician practice groups throughout the United States. At June 30, 2011, AmSurg owned a majority interest in 208 continuing centers in operation and had one center under development.