Amsurg (AMSG) 10-Q 2009 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2009

Commission File Number 000-22217

AMSURG CORP.

(Exact Name of Registrant as Specified in its Charter)

Tennessee (State or other jurisdiction of incorporation or organization)	62-1493316 (I.R.S. Employer Identification No.)
20 Burton Hills Boulevard Nashville, TN (Address of principal executive offices)	37215 (Zip code)

(615) 665-1283
(Registrant’s Telephone Number, Including Area Code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesþ Noo

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yeso Noo

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerþ	Accelerated filero	Non-accelerated filero	Smaller reporting companyo
		(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yeso Noþ

     As of August 7, 2009 there were outstanding 30,661,928 shares of the registrant’s Common Stock, no par value.

Table of Contents to Form 10-Q for the Three Months Ended June 30, 2009

Part I
Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3. Quantitative and Qualitative Disclosures About Market Risk	21
Item 4. Controls and Procedures	21
Item 4T. Controls and Procedures	21
Part II
Item 1. Legal Proceedings	22
Item 1A. Risk Factors	22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3. Defaults Upon Senior Securities	22
Item 4. Submission of Matters to a Vote of Security Holders	22
Item 5. Other Information	22
Item 6. Exhibits	23
Signature	24
EX-11
EX-31.1
EX-31.2
EX-32.1

i

Part I

Item 1. Financial Statements

AmSurg Corp.
Consolidated Balance Sheets
June 30, 2009 (unaudited) and December 31, 2008
(Dollars in thousands)

	June 30,			December 31,
	2009			2008
Assets
Current assets:
Cash and cash equivalents	$	28,156		$	31,548
Accounts receivable, net of allowance of $12,112 and $11,757, respectively		67,650			63,602
Supplies inventory		7,815			8,083
Deferred income taxes		1,658			1,378
Prepaid and other current assets		14,538			17,223
Current assets held for sale		113			25
Total current assets		119,930			121,859
Long-term receivables and other assets		61			46
Property and equipment, net		109,653			111,884
Goodwill, net		694,752			661,693
Intangible assets, net		9,640			10,221
Long-term assets held for sale		645			176
Total assets	$	934,681		$	905,879
Liabilities and Equity
Current liabilities:
Current portion of long-term debt	$	5,710		$	6,801
Accounts payable		12,100			14,240
Accrued salaries and benefits		15,260			12,040
Other accrued liabilities		3,006			3,246
Income taxes payable		912			—
Current liabilities held for sale		310			35
Total current liabilities		37,298			36,362
Long-term debt		254,209			265,835
Deferred income taxes		63,179			54,758
Other long-term liabilities		21,850			22,416
Other long-term liabilities held for sale		34			—
Commitments and contingencies
Noncontrolling interests – redeemable		75,986			63,202
Preferred stock, no par value, 5,000,000 shares authorized, no shares issued or outstanding		—			—
Equity:
Common stock, no par value,70,000,000 shares authorized, 30,661,108 and 31,342,241 shares outstanding, respectively		161,846			172,192
Retained earnings		317,284			291,088
Accumulated other comprehensive loss, net of income taxes		(2,301	)		(2,851	)
Total AmSurg Corp. shareholders’ equity		476,829			460,429
Noncontrolling interests – non-redeemable		5,296			2,877
Total equity		482,125			463,306
Total liabilities and equity	$	934,681		$	905,879

See accompanying notes to the unaudited consolidated financial statements.

1

Item 1. Financial Statements — (continued)

AmSurg Corp.
Consolidated Statements of Earnings (unaudited)
Three Months and Six Months Ended June 30, 2009 and 2008
(In thousands, except earnings per share)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Revenues	$	168,844		$	150,722		$	332,268		$	296,301
Operating expenses:
Salaries and benefits		49,388			43,536			98,380			85,927
Supply cost		20,967			17,689			40,833			34,588
Other operating expenses		34,383			30,385			68,422			60,452
Depreciation and amortization		5,702			5,198			11,349			10,317
Total operating expenses		110,440			96,808			218,984			191,284
Operating income		58,404			53,914			113,284			105,017
Interest expense		2,038			2,503			4,065			5,295
Earnings from continuing operations before income taxes		56,366			51,411			109,219			99,722
Income tax expense		9,365			8,394			17,911			16,310
Net earnings from continuing operations, net of income tax expense		47,001			43,017			91,308			83,412
Discontinued operations:
Earnings from operations of discontinued interests in surgery centers, net of income tax expense		115			146			123			458
Loss on disposal of discontinued interests in surgery centers, net of income tax benefit		(263	)		(1,309	)		(263	)		(1,309	)
Net loss from discontinued operations		(148	)		(1,163	)		(140	)		(851	)
Net earnings		46,853			41,854			91,168			82,561
Less net earnings attributable to noncontrolling interests:
Net earnings from continuing operations		33,203			30,573			64,897			59,346
Net earnings from discontinued operations		70			37			75			265
Total net earnings attributable to noncontrolling interests		33,273			30,610			64,972			59,611
Net earnings attributable to AmSurg Corp.	$	13,580		$	11,244		$	26,196		$	22,950
Amounts attributable to AmSurg Corp. common shareholders:
Earnings from continuing operations, net of tax	$	13,798		$	12,444		$	26,411		$	24,066
Discontinued operations, net of tax		(218	)		(1,200	)		(215	)		(1,116	)
Net earnings attributable to AmSurg Corp.	$	13,580		$	11,244		$	26,196		$	22,950
Earnings per share-basic:
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders	$	0.45		$	0.40		$	0.85		$	0.77
Net loss from discontinued operations attributable to AmSurg Corp. common shareholders		(0.01	)		(0.04	)		(0.01	)		(0.04	)
Net earnings attributable to AmSurg Corp. common shareholders	$	0.44		$	0.36		$	0.85		$	0.73
Earnings per share-diluted:
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders	$	0.45		$	0.39		$	0.85		$	0.75
Net loss from discontinued operations attributable to AmSurg Corp. common shareholders		(0.01	)		(0.04	)		(0.01	)		(0.04	)
Net earnings attributable to AmSurg Corp. common shareholders	$	0.44		$	0.35		$	0.84		$	0.72
Weighted average number of shares and share equivalents outstanding:
Basic		30,660			31,479			30,952			31,388
Diluted		30,828			31,962			31,117			31,876

See accompanying notes to the unaudited consolidated financial statements.

2

Item 1. Financial Statements — (continued)

AmSurg Corp.
Consolidated Statements of Comprehensive Income (unaudited)
Three Months and Six Months Ended June 30, 2009 and 2008
(In thousands)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2009		2008		2009		2008
Net earnings	$	46,853	$	41,854	$	91,168	$	82,561
Other comprehensive income, net of tax:
Gain on interest rate swap, net of tax		391		1,018		550		44
Comprehensive income, net of tax		47,244		42,872		91,718		82,605
Less comprehensive income attributable to noncontrolling interests		33,273		30,610		64,972		59,611
Comprehensive income attributable to AmSurg Corp.	$	13,971	$	12,262	$	26,746	$	22,994

See accompanying notes to the unaudited consolidated financial statements.

3

Item 1. Financial Statements — (continued)

AmSurg Corp.
Consolidated Statements of Changes in Equity
Six Months Ended June 30, 2009 and 2008 (unaudited)
(In thousands)

																		Non-
	AmSurg Corp. Shareholders											Non-						Controlling
									Accumulated			controlling						Interests –
									Other			Interests –			Total			Redeemable
	Common Stock						Retained		Comprehensive			Non-			Equity			(Temporary			Net
	Shares			Amount			Earnings		Loss			redeemable			(Permanent)			Equity)			Earnings
Balance at December 31, 2008		31,342		$	172,192		$	291,088	$	(2,851	)	$	2,877		$	463,306		$	63,202
Issuance of restricted common stock		162			—			—		—			—			—			—
Cancellation of restricted common stock		(12	)		—			—		—			—			—			—
Stock repurchased		(831	)		(12,587	)		—		—			—			(12,587	)		—
Share-based compensation		—			2,241			—		—			—			2,241			—
Net earnings		—			—			26,196		—			1,942			28,138			63,030		$	91,168
Distribution to noncontrolling interests, net of capital contributions		—			—			—		—			(1,684	)		(1,684	)		(62,799	)
Acquisitions and other transactions impacting noncontrolling interests		—			—			—		—			2,161			2,161			12,553
Gain on interest rate swap, net of income tax expense of $355		—			—			—		550			—			550			—
Balance at June 30, 2009		30,661		$	161,846		$	317,284	$	(2,301	)	$	5,296		$	482,125		$	75,986
Balance at January 1, 2008		31,203		$	168,620		$	244,042	$	(1,437	)	$	2,537		$	413,762		$	59,469
Issuance of restricted common stock		148			—			—		—			—			—			—
Cancellation of restricted common stock		(5	)		—			—		—			—			—			—
Stock options exercised		171			3,003			—		—			—			3,003			—
Share-based compensation		—			2,408			—		—			—			2,408			—
Tax benefit related to exercise of stock options		—			464			—		—			—			464			—
Net earnings		—			—			22,950		—			1,770			24,720			57,841		$	82,561
Distribution to noncontrolling interests, net of capital contributions		—			—			—		—			(1,450	)		(1,450	)		(54,859	)
Acquisitions and other transactions impacting noncontrolling interests		—			—			—		—			139			139			585
Gain on interest rate swap, net of income tax expense of $28		—			—			—		44			—			44			—
Balance at June 30, 2008		31,517		$	174,495		$	266,992	$	(1,393	)	$	2,996		$	443,090		$	63,036

See accompanying notes to the unaudited consolidated financial statements.

4

Item 1. Financial Statements — (continued)

AmSurg Corp.
Consolidated Statements of Cash Flows (unaudited)
Six Months Ended June 30, 2009 and 2008
(In thousands)

	Six Months Ended
	June 30,
	2009			2008
Cash flows from operating activities:
Net earnings	$	91,168		$	82,561
Adjustments to reconcile net earnings to net cash flows provided by operating activities:
Depreciation and amortization		11,349			10,317
Net loss on sale and impairment of long-lived assets held for sale		434			861
Share-based compensation		2,241			2,408
Excess tax benefit from share-based compensation		—			(478	)
Deferred income taxes		7,141			5,932
Increase (decrease) in cash and cash equivalents, net of effects of acquisitions and dispositions, due to changes in:
Accounts receivable, net		(3,093	)		(2,899	)
Supplies inventory		372			(174	)
Prepaid and other current assets		545			1,100
Accounts payable		310			(1,803	)
Accrued expenses and other liabilities		4,261			188
Other, net		264			662
Net cash flows provided by operating activities		114,992			98,675
Cash flows from investing activities:
Acquisition of interests in surgery centers		(19,246	)		(23,597	)
Acquisition of property and equipment		(11,430	)		(9,438	)
Repayment of notes receivable		2,147			1,250
Net cash flows used in investing activities		(28,529	)		(31,785	)
Cash flows from financing activities:
Proceeds from long-term borrowings		41,150			35,156
Repayment on long-term borrowings		(53,933	)		(54,829	)
Distributions to noncontrolling interests		(64,506	)		(56,857	)
Proceeds from issuance of common stock upon exercise of stock options		—			2,989
Repurchase of common stock		(12,587	)		—
Proceeds from capital contributions by noncontrolling interests		23			548
Excess tax benefit from share-based compensation		—			478
Financing cost incurred		(2	)		(9	)
Net cash flows used in financing activities		(89,855	)		(72,524	)
Net decrease in cash and cash equivalents		(3,392	)		(5,634	)
Cash and cash equivalents, beginning of period		31,548			29,953
Cash and cash equivalents, end of period	$	28,156		$	24,319

See accompanying notes to the unaudited consolidated financial statements.

5

Item 1. Financial Statements — (continued)

AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements

(1) Basis of Presentation

AmSurg Corp. (the “Company”), through its wholly owned subsidiaries, owns majority interests, primarily 51%, in limited partnerships and limited liability companies (“LLCs”) which own and operate ambulatory surgery centers (“centers”). The Company also has majority ownership interests in other limited partnerships and LLCs formed to develop additional centers. The consolidated financial statements include the accounts of the Company and its subsidiaries and the majority owned limited partnerships and LLCs in which the Company’s wholly owned subsidiaries are the general partner or majority member. Consolidation of such limited partnerships and LLCs is necessary as the Company’s wholly owned subsidiaries have 51% or more of the financial interest, are the general partner or majority member with all the duties, rights and responsibilities thereof, are responsible for the day-to-day management of the limited partnerships and LLCs, and have control of the entities. The responsibilities of the Company’s noncontrolling partners (limited partners and noncontrolling members) are to supervise the delivery of medical services, with their rights being restricted to those that protect their financial interests, such as approval of the acquisition of significant assets or the incurrence of debt which they are generally required to guarantee on a pro rata basis based upon their respective ownership interests. Intercompany profits, transactions and balances have been eliminated. All limited partnerships and LLCs and noncontrolling partners and members are referred to herein as partnerships and partners, respectively.

Effective January 1, 2009, the Company adopted Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 160,“Noncontrolling Interests in Consolidated Financial Statements, an Amendment of Accounting Research Bulletin No. 51.”SFAS No. 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in a parent’s ownership of a noncontrolling interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parent’s ownership interest while the parent retains its controlling financial interest and fair value measurement of any retained noncontrolling equity investment. SFAS No. 160 generally requires the Company to clearly identify and present ownership interests in subsidiaries held by parties other than the Company in the consolidated financial statements within the equity section but separate from the Company’s equity. However, in instances in which certain redemption features that are not solely within the control of the issuer are present, classification of noncontrolling interests outside of permanent equity is required. It also requires the amounts of consolidated net income attributable to the Company and to the noncontrolling interests to be clearly identified and presented on the face of the consolidated statements of income; changes in ownership interests to be accounted for as equity transactions; and when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary and the gain or loss on the deconsolidation of the subsidiary to be measured at fair value. The implementation of SFAS No. 160 also results in the cash flow impact of certain transactions with noncontrolling interests being classified within financing activities. Such treatment is consistent with the view that under SFAS No. 160 transactions between the Company (or its subsidiaries) and noncontrolling interests are considered to be equity transactions. The adoption of SFAS No. 160 has been applied retrospectively for all periods presented.

As further described in note 11, upon the occurrence of various fundamental regulatory changes, the Company could be obligated, under the terms of certain of its investees’ partnership and operating agreements, to purchase some or all of the noncontrolling interests related to certain of the Company’s partnerships. While we believe that the likelihood of a change in current law that would trigger such purchases was remote as of June 30, 2009, the occurrence of such regulatory changes is outside the control of the Company. As a result, these noncontrolling interests that are subject to this redemption feature are not included as part of the Company’s equity and are carried as noncontrolling interests – redeemable on the Company’s consolidated balance sheets.

Center profits and losses are allocated to the Company’s partners in proportion to their ownership percentages and reflected in the aggregate as net earnings attributable to noncontrolling interests. The partners of the Company’s center partnerships typically are organized as general partnerships, limited partnerships or limited liability companies that are not subject to federal income tax. Each partner shares in the pre-tax earnings of the center in which it is a partner. Accordingly, the earnings attributable to noncontrolling interests in each of the Company’s partnerships are generally determined on a pre-tax basis. In accordance with SFAS No. 160, total net earnings attributable to noncontrolling interests are presented after net earnings. However, the Company must consider the impact of the net earnings attributable to noncontrolling interests or earnings before income taxes in order to determine the amount of pre-tax earnings on which the Company must determine its tax expense. In addition, distributions from the partnerships are made to both the Company’s wholly-owned subsidiaries and the partners on a pre-tax basis.

The presentation of common stock as of December 31, 2008 has been corrected to combine the previously presented balance of common stock of $177,624,000 with deferred compensation of $5,432,000, totaling $172,192,000. The aggregation of these equity line items was deemed necessary in order to conform to SFAS No. 123(R),“Share-Based Payment,” and had no impact on total equity.

The Company operates in one reportable business segment, the ownership and operation of centers.

These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and in accordance with Rule 10-01 of

6

Item 1. Financial Statements – (continued)

AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements – (continued)

Regulation S-X. In the opinion of management, the unaudited consolidated financial statements contained in this report reflect all adjustments, consisting of only normal recurring accruals, which are necessary for a fair presentation of the financial position and the results of operations for the interim periods presented. The results of operations for any interim period are not necessarily indicative of results for the full year.

The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s 2008 Annual Report on Form 10-K.

(2) Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The determination of contractual and bad debt allowances constitutes a significant estimate. Some of the factors considered by management in determining the amount of such allowances are the historical trends of the centers’ cash collections and contractual and bad debt write-offs, accounts receivable agings, established fee schedules, contracts with payors and procedure statistics. Accordingly, net accounts receivable at June 30, 2009 and December 31, 2008 reflect allowances for contractual adjustments of $100,608,000 and $94,053,000, respectively, and allowances for bad debt expense of $12,112,000 and $11,757,000, respectively. Bad debt expense is included in other operating expenses and was $4,312,000 and $8,793,000 for the three and six months ended June 30, 2009, respectively, and $3,804,000 and $8,419,000 for the three and six months ended June 30, 2008, respectively.

(3) Revenue Recognition

Center revenues consist of billing for the use of the centers’ facilities (the “facility fee”) directly to the patient or third-party payor and, in limited instances, billing for anesthesia services. Such revenues are recognized when the related surgical procedures are performed. Revenues exclude any amounts billed for physicians’ surgical services, which are billed separately by the physicians to the patient or third-party payor.

Revenues from centers are recognized on the date of service, net of estimated contractual adjustments from third-party medical service payors including Medicare and Medicaid. During both the six months ended June 30, 2009 and 2008, the Company derived approximately 32% of its revenues from Medicare and Medicaid. Concentration of credit risk with respect to other payors is limited due to the large number of such payors.

(4) Stock Incentive Plans

In May 2006, the Company adopted the AmSurg Corp. 2006 Stock Incentive Plan. The Company also has options outstanding under the AmSurg Corp. 1997 Stock Incentive Plan, under which no additional options may be granted. Under these plans, the Company has granted restricted stock and non-qualified options to purchase shares of common stock to employees and outside directors from its authorized but unissued common stock. Restricted stock granted to outside directors vests one-third on the date of grant, with the remaining shares vesting over a two-year term and is restricted from trading for five years from the date of grant. Restricted stock granted to employees vests at the end of four years from the date of grant. The fair value of restricted stock is determined based on the closing bid price of the Company’s common stock on the grant date.

Options are granted at market value on the date of the grant. Prior to 2007, granted options vested ratably over four years. Options granted in 2007 and 2008 vest at the end of four years from the grant date. Options have a term of ten years from the date of grant. No options have been issued in 2009. At June 30, 2009, 2,725,725 shares were authorized for grant under the 2006 Stock Incentive Plan and 1,529,150 shares were available for future equity grants, including 476,100 shares available for issuance as restricted stock.

The Company recorded share-based compensation expense to employees of $1,167,000 and $2,241,000 in the three and six months ended June 30, 2009, respectively, and $1,342,000 and $2,408,000 in the three and six months ended June 30, 2008, respectively. The total fair value of shares vested during the three and six months ended June 30, 2009 was $427,000 and $4,425,000, respectively, and in the three and six months ended June 30, 2008 was $367,000 and $5,384,000, respectively. During the six months ended June 30, 2009, no stock options were exercised. Cash received from option exercises for the six months ended June 30, 2008 was approximately $2,989,000. The actual tax benefit realized for the tax deductions from option exercises of the share-based payment arrangements totaled approximately $546,000 in the six months ended June 30, 2008. As of June 30, 2009, the Company had total unrecognized compensation cost of approximately $7,322,000 related to non-vested awards, which the Company expects to recognize through 2013 and over a weighted-average period of 1.3 years.

7

Item 1. Financial Statements — (continued)

AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements — (continued)

Outstanding share-based awards to purchase approximately 2,625,000 and 742,000 shares of common stock that had an exercise price in excess of the average market price of the common stock during the periods ended June 30, 2009 and 2008, respectively, were not included in the calculation of diluted securities options under the treasury method for purposes of determining diluted earnings per share due to their anti-dilutive impact.

A summary of the status of non-vested restricted shares at June 30, 2009 and changes during the six months ended June 30, 2009 is as follows:

				Weighted
	Number			Average
	of			Grant
	Shares			Price
Non-vested shares at December 31, 2008		327,751		$	23.83
Shares granted		161,923			19.33
Shares vested		(6,069	)		21.36
Shares forfeited		(12,141	)		23.43
Non-vested shares at June 30, 2009		471,464		$	22.87

Options outstanding and exercisable under the stock option plans as of June 30, 2009 and stock option activity for the six months ended June 30, 2009 is summarized as follows:

						Weighted
						Average
				Weighted		Remaining
	Number			Average		Contractual
	of			Exercise		Term
	Shares			Price		(in years)
Outstanding at December 31, 2008		3,275,803		$	22.23		6.1
Options granted		—			—
Options exercised		—			—
Options terminated		(75,527	)	$	23.73
Outstanding at June 30, 2009 with aggregate intrinsic value of $3,760,000		3,200,276		$	22.20		5.5
Vested or expected to vest at June 30, 2009 with aggregate intrinsic value of $3,752,000		3,104,268		$	22.16		5.0
Exercisable at June 30, 2009 with aggregate intrinsic value of $3,702,000		2,463,710		$	21.92		4.9

The aggregate intrinsic value represents the total pre-tax intrinsic value received by the option holders on the exercise date or that would have been received by the option holders had all holders of in-the-money outstanding options at June 30, 2009 exercised their options at the Company’s closing stock price on June 30, 2009.

The Company issued no options during the six months ended June 30, 2009. The Company, using the Black-Scholes option pricing model for all stock option awards on the date of grant, determined that the weighted average fair value of options at the date of grant issued during the six months ended June 30, 2008 was $8.20 by applying the following assumptions (dollars in thousands, except per share amounts):

	Six Months Ended
	June 30, 2008
Applied assumptions:
Expected term/life of options in years		5.1
Forfeiture rate		—
Average risk-free interest rate		2.7	%
Volatility rate		31.9	%
Dividends		—

8

Item 1. Financial Statements — (continued)

AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements — (continued)

The expected volatility rate applied was estimated based on historical volatility. The expected term assumption applied is based on contractual terms, historical exercise and cancellation patterns and forward-looking factors where present for each population of employee identified. The risk-free interest rate used is based on the U.S. Treasury yield curve in effect at the time of the grant. The pre-vesting forfeiture rate is based on historical rates and forward-looking factors for each population of employee identified. The Company will adjust the estimated forfeiture rate to its actual experience over the vesting period. The Company is precluded from paying dividends under its credit facility, and therefore, there is no expected dividend yield.

(5) Acquisitions and Dispositions

In December 2007, the FASB issued SFAS No. 141R,“Business Combinations,”which replaces SFAS No. 141,“Business Combinations.”SFAS No. 141R retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date the acquirer achieves control. SFAS No. 141R requires an entity to record separately from the business combination the direct costs, where previously these costs were included in the total allocated purchase price of the acquisition. SFAS No. 141R requires an entity to recognize the assets acquired, liabilities assumed and any noncontrolling interests in the acquired business at the acquisition date, at their fair values as of that date. This compares to the cost allocation method previously required by SFAS No. 141. SFAS No. 141R requires an entity to recognize as an asset or liability at fair value for certain contingencies, either contractual or non-contractual, if certain criteria are met. Finally, SFAS No. 141R requires an entity to recognize contingent consideration at the date of acquisition, based on the fair value at that date. SFAS No. 141R is effective for business combinations completed on or after the first annual reporting period beginning on or after December 15, 2008. The standard is to be applied prospectively to business combinations for which the acquisition date is on or after January 1, 2009, except for the amended provisions related to the accounting for income taxes which are applied retrospectively. Upon adoption of this standard, there was no impact to the Company’s results of operations and financial condition for acquisitions previously completed. The standard and its required disclosure have been applied to acquisitions completed in 2009. The adoption of SFAS No. 141R did not have a material effect on the Company’s results of operations or cash flows.

As a significant part of its growth strategy, the Company acquires controlling interests in centers. During the six months ended June 30, 2009, the Company, through a wholly owned subsidiary and in separate transactions, acquired a 51% controlling interest in four centers. The aggregate amount paid for the acquisitions, approximately $19,246,000, was paid in cash and funded by a combination of operating cash flow and borrowings under the Company’s credit facility. The total fair value of an acquisition includes an amount allocated to goodwill, which results from the centers’ favorable reputations in their markets, their market positions and their ability to deliver quality care with high patient satisfaction consistent with the Company’s business model.

The acquisition date fair value of the total consideration transferred and acquisition date fair value of each major class of consideration for the four acquisitions completed in the six months ended June 30, 2009 are as follows (in thousands):

Accounts receivable	$	766
Prepaid and other current assets		81
Property and equipment		617
Accounts payable		(131	)
Goodwill (approximately $18,400 deductible for tax purposes)		32,845
Total fair value		34,178
Less: Fair value attributable to noncontrolling interests		14,932
Acquisition date fair value of total consideration transferred	$	19,246

Fair value attributable to noncontrolling interests is based on significant inputs that are not observable in the market and therefore are considered Level 3 measurements as defined in SFAS No. 157,“Fair Value Measurements.”Key inputs used to determine the fair value include financial multiples used in the purchase of noncontrolling interests in centers. Such multiples, based on earnings, are used as a benchmark for the discount to be applied for the lack of control or marketability. The fair value of noncontrolling interests may be subject to adjustment as the Company completes its initial accounting for acquired intangible assets. Such initial accounting is provisional as the Company continues to analyze other noncontrolling market transactions.

The Company incurred and expensed in other operating expenses approximately $52,000 in acquisition related costs, primarily attorney fees, in the six months ended June 30, 2009.

9

Item 1. Financial Statements — (continued)

AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements — (continued)

Revenues and net earnings included in the six months ended June 30, 2009 associated with these acquisitions are as follows (in thousands):

	Six Months Ended
	June 30, 2009
Revenues	$	4,053
Net earnings		1,511
Less: Net earnings attributable to noncontrolling interests		915
Net earnings attributable to AmSurg Corp.	$	596

The unaudited consolidated pro forma results for the six months ended June 30, 2009 and 2008, assuming all 2009 and 2008 acquisitions had been consummated on January 1, 2008, are as follows (in thousands, except per share data):

	2009		2008
Revenues	$	333,351	$	335,813
Net earnings		91,517		93,841
Amounts attributable to AmSurg Corp. common shareholders:
Net earnings from continuing operations		26,450		26,744
Net earnings		26,235		25,628
Net earnings from continuing operations per common share:
Basic	$	0.85	$	0.85
Diluted	$	0.85	$	0.84
Net earnings:
Basic	$	0.85	$	0.82
Diluted	$	0.84	$	0.80
Weighted average number of shares and share equivalents:
Basic		30,952		31,388
Diluted		31,117		31,876

During the three months ended June 30, 2009, the Company decided to pursue the sale of its interest in a surgery center. The decision to dispose of this center was the result of management’s assessment of the limited growth and operational opportunities at the center. The results of operations of this center and the net loss associated with its disposition have been classified as discontinued operations, and the 2008 periods have been restated. At June 30, 2009, the Company held this center and one additional surgery center for sale, and these transactions are expected to be completed by December 31, 2009. Results of operations of all discontinued surgery centers disposed of or classified as held for sale in 2009 and 2008 for the three and six months ended June 30, 2009 and 2008 are as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2009		2008		2009		2008
Revenues	$	385	$	2,036	$	836	$	4,288
Earnings before income taxes		143		140		154		506
Net earnings		115		146		123		458

10

Item 1. Financial Statements — (continued)

AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements — (continued)

(6) Intangible Assets

Amortizable intangible assets at June 30, 2009 and December 31, 2008 consisted of the following (in thousands):

	June 30, 2009							December 31, 2008
	Gross							Gross
	Carrying		Accumulated					Carrying		Accumulated
	Amount		Amortization			Net		Amount		Amortization			Net
Deferred financing cost	$	2,746	$	(2,163	)	$	583	$	2,744	$	(2,018	)	$	726
Customer and restrictive covenant agreements		3,180		(1,518	)		1,662		3,180		(1,418	)		1,762
Total amortizable intangible assets	$	5,926	$	(3,681	)	$	2,245	$	5,924	$	(3,436	)	$	2,488

Amortization of intangible assets for the three months ended June 30, 2009 and 2008 was $123,000 and $119,000, respectively, and for the six months ended June 30, 2009 and 2008 was $245,000 and $237,000, respectively. Estimated amortization of intangible assets for the remainder of 2009 and the following five years and thereafter is $256,000, $510,000, $366,000, $224,000, $223,000, $223,000 and $443,000, respectively.

The changes in the carrying amount of goodwill for the three and six months ended June 30, 2009 and 2008 are as follows (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Balance, beginning of period	$	687,433		$	553,133		$	661,693		$	546,915
Goodwill acquired and adjusted during period		7,709			15,391			33,449			22,485
Goodwill disposed or held for sale during period		(390	)		(944	)		(390	)		(1,820	)
Balance, end of period	$	694,752		$	567,580		$	694,752		$	567,580

At June 30, 2009 and December 31, 2008, other non-amortizable intangible assets related to restrictive covenant arrangements were $7,395,000 and $7,733,000, respectively.

(7) Long-term Debt

The Company’s revolving credit facility permits the Company to borrow up to $300,000,000 to, among other things, finance its acquisition and development projects and any stock repurchase programs at an interest rate equal to, at the Company’s option, the prime rate or LIBOR plus 0.50% to 1.50%, or a combination thereof; provides for a fee of 0.15% to 0.30% of unused commitments; prohibits the payment of dividends; and contains certain covenants relating to the ratio of debt to net worth, operating performance and minimum net worth. Borrowings under the revolving credit facility mature in July 2011. At June 30, 2009, the Company had $240,500,000 outstanding under its revolving credit facility, secured primarily by a pledge of the stock of our subsidiaries that serve as the general partners of our limited partnerships and our partnership and membership interests in the limited partnerships and limited liability companies, and was in compliance with all covenants. The Company had other long-term debt of $19,419,000 including the current portion of long-term debt of $5,710,000 at June 30, 2009.

(8) Derivative Instruments

In March 2008, the FASB issued SFAS No. 161,“Disclosures about Derivative Instruments and Hedging Activities.”SFAS No. 161 is intended to enhance the current disclosure framework in SFAS No. 133,“Accounting for Derivative Instruments and Hedging Activities,” (“SFAS No. 133”) by requiring that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. This disclosure is intended to better convey the purpose of derivative use in terms of risks that the entity is intending to manage. SFAS No. 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008 and became effective for the Company beginning with the first quarter of 2009. The adoption of SFAS No. 161 did not have a material effect on the Company’s financial position, results of operations or cash flows.

The Company entered into an interest rate swap agreement in April 2006, the objective of which is to hedge exposure to the variability of the future expected cash flows attributable to the variable interest rate of a portion of the Company’s outstanding balance under its revolving credit facility. The interest rate swap has a notional amount of $50,000,000. The Company pays to

11

Item 1. Financial Statements — (continued)

AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements — (continued)

the counterparty a fixed-rate of 5.365% of the notional amount of the interest rate swap and receives a floating rate from the counterparty based on LIBOR. The interest rate swap matures in April 2011. In the opinion of management and as permitted by SFAS No. 133, the interest rate swap (as a cash flow hedge) is a fully effective hedge. Payments or receipts of cash under the interest rate swap are shown as a part of operating cash flow, consistent with the interest expense incurred pursuant to the credit facility. The value of the swap represents the estimated amount the Company would have paid as of June 30, 2009 upon termination of the agreement based on a valuation obtained from the financial institution that is the counterparty to the interest rate swap agreement. An increase in the fair value of the interest rate swap of $644,000 and $905,000 was included in other comprehensive income for the three and six months ended June 30, 2009, respectively. An increase of $1,674,000 and $72,000 in the fair value of the interest rate swap was included in other comprehensive income for the three and six months ended June 30, 2008, respectively. Accumulated other comprehensive loss, net of income taxes, was $2,301,000 and $2,851,000 at June 30, 2009 and December 31, 2008, respectively.

The fair values of derivative instruments in the consolidated balance sheets as of June 30, 2009 and 2008 were as follows (in thousands):

Asset Derivatives June 30,

Liability Derivatives June 30,

2009

2008

2009

2008

Balance

Balance

Balance

Balance

Sheet

Fair

Sheet

Fair

Sheet

Fair

Sheet

Fair

Location

Value

Location

Value

Location

Value

Location

Value

Derivatives designated as hedging

Other

Other

Other

Other

instruments under

assets,

assets,

long-term

long-term

Statement 133

net

$

—

net

$

—

liabilities

$

3,784

liabilities

$

2,292

(9) Fair Value Measurements

Cash and cash equivalents, receivables and payables are reflected in the financial statements at cost, which approximates fair value. The fair value of fixed rate long-term debt, with a carrying value of $64,133,000, was $61,112,000 at June 30, 2009. The fair value of variable-rate long-term debt, with a carrying value of $195,786,000, was $185,768,000 at June 30, 2009.

In September 2006, the FASB issued SFAS No. 157. This statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The statement became effective for the Company beginning January 1, 2008, except for disclosures of non-financial assets and liabilities, which were delayed by FASB Staff Position No. 157-2 until January 1, 2009, which did not have an impact on the Company’s disclosures.

In determining the fair value of assets and liabilities that are measured on a recurring basis, the following measurement methods were applied as of June 30, 2009 in accordance with SFAS No. 157 and were commensurate with the market approach (in thousands):

			Fair Value Measurements at
			Reporting Date Using:
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	June 30, 2009		Assets		Inputs		Inputs
Assets:
Supplemental executive retirement savings plan investments	$	3,784	$	—	$	3,784	$	—
Liabilities:
Supplemental executive retirement savings plan obligations	$	3,528	$	—	$	3,528	$	—
Interest rate swap agreement		3,784		—		3,784		—
Total liabilities	$	7,312	$	—	$	7,312	$	—

The supplemental executive retirement savings plan investments and obligations are included in prepaid and other current assets and accrued salaries and benefits, respectively. The interest rate swap agreement is included in other long-term liabilities.

12

Item 1. Financial Statements — (continued)

AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements — (continued)

(10) Income Taxes

In June 2006, the FASB issued FASB Interpretation (“FIN”) No. 48,“Accounting for Uncertainty in Income Taxes – an Interpretation of SFAS No. 109,”which clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with SFAS No. 109,“Accounting for Income Taxes.”FIN No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It is the Company’s policy to recognize interest accrued and penalties, if any, related to unrecognized benefits as income tax expense in its statement of earnings. The Company does not expect significant changes to its tax positions or FIN No. 48 liability during the next 12 months.

The Company and its subsidiaries file U.S. federal and various state tax returns. With few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations for years prior to 2005.

(11) Commitments and Contingencies

The Company and its partnerships are insured with respect to medical malpractice risk on a claims-made basis. The Company also maintains insurance for general liability, director and officer liability and property damage. Certain policies are subject to deductibles. In addition to the insurance coverage provided, the Company indemnifies its officers and directors for actions taken on behalf of the Company and its partnerships. Management is not aware of any claims against it or its partnerships which would have a material financial impact on the Company.

The Company’s wholly owned subsidiaries, as general partners in the limited partnerships, are responsible for all debts incurred but unpaid by the limited partnerships. As manager of the operations of the limited partnerships, the Company has the ability to limit potential liabilities by curtailing operations or taking other operating actions.

In the event of a change in current law that would prohibit the physicians’ current form of ownership in the partnerships, the Company would be obligated to purchase the physicians’ interests in substantially all of the Company’s partnerships. The purchase price to be paid in such event would be determined by a predefined formula, as specified in the partnership agreements. The Company believes the likelihood of a change in current law that would trigger such purchases was remote as of June 30, 2009.

(12) Recent Accounting Pronouncements

FASB Staff Position FAS 107-b,“Interim Disclosures about Fair Value of Financial Instruments,” (the “FSP”) is effective for interim and annual periods ending after June 15, 2009 and expands the fair value disclosures required for all financial instruments within the scope of SFAS No. 107. The FSP will also require entities to disclose the methods and significant assumptions used to estimate the fair value of financial instruments in financial statements on an interim and annual basis and to highlight any changes from prior periods. The adoption of the FSP did not have a material affect on the Company’s financial position, results of operations or cash flows.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS No. 165”). SFAS No. 165 establishes general standards of accounting for and disclosures of events that occur after the balance sheet dated but before financial statements are issued or are available to be issued. SFAS No. 165 is effective for interim or annual financial periods ending after June 15, 2009 and was adopted by the Company at June 30, 2009. The adoption of SFAS No. 165 did not have a material effect on the Company’s consolidated financial statements.

13

Item 1. Financial Statements — (continued)

AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements — (continued)

(13) Supplemental Cash Flow Information

Supplemental cash flow information for the six months ended June 30, 2009 and 2008 is as follows (in thousands):

	Six Months Ended
	June 30,
	2009			2008
Cash paid during the period for:
Interest	$	4,037		$	5,330
Income taxes, net of refunds		7,970			10,268
Non-cash investing and financing activities:
Decrease in accounts payable associated with acquisition of property and equipment		(2,866	)		(623	)
Capital lease obligations incurred to acquire equipment		127			283
Effect of acquisitions:
Assets acquired, net of cash and adjustments		34,578			24,722
Liabilities assumed and noncontrolling interests		15,332			1,125
Payment for assets acquired	$	19,246		$	23,597

(14) Subsequent Events

The Company assessed events occurring subsequent to June 30, 2009 through August 10, 2009 for potential recognition and disclosure in the consolidated financial statements. No events have occurred that would require adjustment to or disclosure in the consolidated financial statements which were issued on August 10, 2009.

14

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains certain forward-looking statements (all statements other than with respect to historical fact) within the meaning of the federal securities laws, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve known and unknown risks and uncertainties including, without limitation, those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and listed below, some of which are beyond our control. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate. Therefore there can be no assurance that the forward-looking statements included in this report will prove to be accurate. Actual results could differ materially and adversely from those contemplated by any forward-looking statement. In light of the significant risks and uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. We undertake no obligation to publicly release any revisions to any forward-looking statements in this discussion to reflect events and circumstances occurring after the date hereof or to reflect unanticipated events.

Forward-looking statements and our liquidity, financial condition and results of operations, may be affected by the following risks and uncertainties and the other risks and uncertainties discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 under “Item 1A. – Risk Factors,” as well as other unknown risks and uncertainties:

• adverse impacts on our business associated with current and future economic conditions;

• the risk that payments from third-party payors, including government healthcare programs, may decrease or not increase as our costs increase;

• adverse developments affecting the medical practices of our physician partners;

• our ability to maintain favorable relations with our physician partners;

• our ability to acquire and develop additional surgery centers on favorable terms;

• our ability to grow revenues by increasing procedure volume while maintaining operating margins and profitability at our existing centers;

• our ability to manage the growth in our business;

• our ability to obtain sufficient capital resources to complete acquisitions and develop new surgery centers;

• our ability to compete for physician partners, managed care contracts, patients and strategic relationships;

• adverse weather and other factors beyond our control that may affect our surgery centers;

• our failure to comply with applicable laws and regulations;

• the risk of changes in legislation, regulations or regulatory interpretations that may negatively affect us;

• the risk of becoming subject to federal and state investigation;

• the risk of regulatory changes that may obligate us to buy out the ownership interests of physicians who are minority owners of our surgery centers;

• potential liabilities associated with our status as a general partner of limited partnerships;

• liabilities for claims brought against our facilities;

• our legal responsibility to minority owners of our surgery centers, which may conflict with our interests and prevent us from acting solely in our best interests;

• risks associated with the potential write-off of the impaired portion of intangible assets; and

• potential liabilities relating to the tax deductibility of goodwill.

15

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (continued)

Overview

We develop, acquire and operate ambulatory surgery centers, or centers or ASCs, in partnership with physicians. As of June 30, 2009, we owned a majority interest (51% or greater) in 193 ASCs. The following table presents the changes in the number of ASCs in operation, under development and under letter of intent for the three and six months ended June 30, 2009 and 2008. An ASC is deemed to be under development when a limited partnership or limited liability company has been formed with the physician partners to develop the ASC.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Centers in operation, beginning of period		193			177			190			176
New center acquisitions placed in operation		1			2			4			4
New development centers placed in operation		1			—			1			—
Centers disposed		—			(2	)		—			(2	)
Centers held for sale		(2	)		(1	)		(2	)		(2	)
Centers in operation, end of period		193			176			193			176
Centers under development, end of period		2			3			2			3
Development centers awaiting regulatory approval, end of period		—			1			—			1
Average number of continuing centers in operation, during period		192			171			192			171
Centers under letter of intent, end of period		1			5			1			5

Of the continuing centers in operation at June 30, 2009, 135 centers performed gastrointestinal endoscopy procedures, 36 centers performed ophthalmology surgery procedures, 16 centers performed procedures in multiple specialties and six centers performed orthopedic procedures. We intend to expand primarily through the acquisition and development of additional ASCs in targeted surgical specialties and through future same-center growth. Our growth targets for 2009 include the acquisition or development of 13 to 16 surgery centers. We expect our growth for same-center revenue to be flat in 2009, compared to our recent historical average of 3% to 5%, due to the economic outlook in 2009, which we believe will result in reduced patient visits and surgical procedures.

While we generally own 51% of the entities that own the centers, our consolidated statements of earnings include 100% of the results of operations of the entities, reduced by noncontrolling interests’ share of the net earnings or loss of the center entities. The noncontrolling interest in each limited partnership or limited liability company is generally held directly or indirectly by physicians who perform procedures at the center.

Sources of Revenues

Substantially all of our revenues are derived from facility fees charged for surgical procedures performed in our surgery centers. These fees vary depending on the procedure, but usually include all charges for operating room usage, special equipment usage, supplies, recovery room usage, nursing staff and medications and, in limited instances, billing for anesthesia services. Facility fees do not include the charges of the patient’s surgeon, anesthesiologist or other attending physicians, which are billed directly by the physicians. Our revenues are recorded net of estimated contractual adjustments from third-party medical service payors.

ASCs depend upon third-party reimbursement programs, including governmental and private insurance programs, to pay for services rendered to patients. The amount of payment a surgery center receives for its services may be adversely affected by market and cost factors as well as other factors over which we have no control, including changes to the Medicare and Medicaid payment systems and the cost containment and utilization decisions of third-party payors. We derived approximately 32% of our revenues in both the six months ended June 30, 2009 and 2008 from governmental healthcare programs, primarily Medicare, and the remainder from a wide mix of commercial payors and patient co-pays and deductibles. The Medicare program currently pays ASCs in accordance with predetermined fee schedules.

Effective January 1, 2008, the Centers for Medicare and Medicaid Services, or CMS, revised the payment system for services provided in ASCs. The key points of the revised payment system as it relates to us are:

• ASCs are paid based upon a percentage of the payments to hospital outpatient departments pursuant to the hospital outpatient prospective payment system;

• a scheduled phase in of the revised rates over four years, beginning January 1, 2008; and

• planned annual increases in the ASC rates beginning in 2010 based on the consumer price index, or CPI.

16

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (continued)

The revised payment system has resulted in a significant reduction in the reimbursement rates for gastroenterology procedures, which comprise approximately 75% of the procedures performed by our surgery centers, and certain ophthalmology and pain procedures. We estimate that our net earnings per share were negatively impacted by $0.05 in 2008 by the revised payment system. Based upon our current procedure mix, payor mix and volume, we believe the 2009 payment rates will reduce our net earnings per diluted share in 2009 by approximately $0.07 as compared to 2008 and that our diluted earnings per share in each of 2010 and 2011 will be reduced by an incremental $0.07 as compared to the prior year as a result of the scheduled reduction in rates in those years. Beginning in 2010, reimbursement rates for our ASCs should be increased annually based on increases in the CPI. In July 2009, CMS announced proposed reimbursement rates for 2010, which included a 0.6% CPI increase. There can be no assurance, however, that CMS will not further revise the payment system to reduce or eliminate these annual increases, or that any annual CPI increases will be material. Any increase in reimbursement rates as a result of a CPI adjustment in 2011 could partially offset the scheduled payment reductions in 2011.

CMS is increasing its administrative audit efforts through the nationwide expansion of the recovery audit contractor, or RAC, program. RACs are private contractors that conduct post-payment reviews of providers and suppliers that bill Medicare to detect and correct improper payments for services. We could incur costs associated with appealing any alleged overpayments and be required to repay any alleged overpayments identified by these or other administrative audits.

We expect value-based purchasing programs, including programs that condition reimbursement on patient outcome measures, to become more common and involve a higher percentage of reimbursement amounts. Effective January 15, 2009, CMS promulgated three national coverage determinations that prevent Medicare from paying for certain serious, preventable medical errors performed in any healthcare facility, such as surgery performed on the wrong patient. Several commercial payors also do not reimburse providers for certain preventable adverse events. In addition, a 2006 federal law authorizes CMS to require ASCs to submit data on certain quality measures. ASCs that fail to submit the required data would face a two percentage point reduction in their annual reimbursement rate increase. CMS has not yet implemented the quality measure reporting requirement, but has announced that it expects to do so in a future rulemaking.

In addition to payment from governmental programs, ASCs derive a significant portion of their revenues from private healthcare insurance plans. These plans include both standard indemnity insurance programs as well as managed care programs, such as PPOs and HMOs.

Critical Accounting Policies

A summary of significant accounting policies is disclosed in our 2008 Annual Report on Form 10-K. Our critical accounting policies are further described under the caption “Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2008 Annual Report on Form 10-K. There have been no changes in the nature of our critical accounting policies or the application of those policies since December 31, 2008.

Results of Operations

Our revenues are directly related to the number of procedures performed at our centers. Our overall growth in procedure volume is impacted directly by the increase in the number of centers in operation and the growth in procedure volume at existing centers. We increase our number of centers through both acquisitions and developments. Procedure growth at any existing center may result from additional contracts entered into with third-party payors, increased market share of our physician partners, additional physicians utilizing the center and/or scheduling and operating efficiencies gained at the center. A significant measurement of how much our revenues grow from year to year for existing centers is our same-center revenue percentage. We define our same-center group each year as those centers that contain full year-to-date operations in both comparable reporting periods, including the expansion of the number of operating centers associated with a limited partnership or limited liability company. Our 2009 same-center group, comprised of 172 centers and constituting approximately 90% of our total number of centers, had 0% revenue growth during the six months ended June 30, 2009. We expect our same-center revenue growth to be flat in 2009. We have reduced our same-center revenue growth target for 2009 from our recent historical averages of 3% to 5% due to the economic outlook in 2009, which we believe will result in reduced patient visits and surgical procedures.

Expenses directly and indirectly related to procedures performed at our centers include clinical and administrative salaries and benefits, supply cost and other operating expenses such as linen cost, repair and maintenance of equipment, billing fees and bad debt expense. The majority of our corporate salary and benefits cost is associated directly with the number of centers we own and manage and tends to grow in proportion to the growth of our centers in operation. Our centers and corporate offices also incur costs that are more fixed in nature, such as lease expense, legal fees, property taxes, utilities and depreciation and amortization.

Our interest expense results primarily from our borrowings used to fund acquisition and development activity, as well as interest incurred on capital leases.

Beginning in 2009, we adopted Statement of Financial Accounting Standards, or SFAS, No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an Amendment of Accounting Research Bulletin No. 51.” While the adoption of SFAS No. 160 did not have an impact on our net earnings or net earnings per diluted share, the presentation of our financial statements has been

17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (continued)

changed. Net earnings attributable to noncontrolling interests, previously referred to as minority interest, is now reported after net earnings. Surgery center profits are allocated to our noncontrolling partners in proportion to their individual ownership percentages and reflected in the aggregate as total net earnings attributable to noncontrolling interests. The noncontrolling partners of our center limited partnerships and limited liability companies typically are organized as general partnerships, limited partnerships or limited liability companies that are not subject to federal income tax. Each noncontrolling partner shares in the pre-tax earnings of the center of which it is a partner. Accordingly, net earnings attributable to the noncontrolling interests in each of our center limited partnerships and limited liability companies are generally determined on a pre-tax basis.

The most significant impact of this financial statement presentation is on the determination of pre-tax earnings, which is presented before net earnings attributable to noncontrolling interests has been subtracted. Accordingly, the effective tax rate on pre-tax earnings as presented has been reduced to approximately 16%. However, the effective tax rate based on pre-tax earnings attributable to AmSurg Corp. common shareholders, on an annual basis, will remain near the historical percentage of 39.6%. We file a consolidated federal income tax return and numerous state income tax returns with varying tax rates. Our income tax expense reflects the blending of these rates.

Net earnings from continuing operations attributable to AmSurg Corp. common shareholders are supplementally disclosed on the consolidated statements of earnings.

The following table shows certain statement of earnings items expressed as a percentage of revenues for the three and six months ended June 30, 2009 and 2008:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Revenues		100.0	%		100.0	%		100.0	%		100.0	%
Operating expenses:
Salaries and benefits		29.2			28.9			29.6			29.0
Supply cost		12.4			11.7			12.3			11.7
Other operating expenses		20.4			20.2			20.6			20.4
Depreciation and amortization		3.4			3.4			3.4			3.5
Total operating expenses		65.4			64.2			65.9			64.6
Operating income		34.6			35.8			34.1			35.4
Interest expense, net of interest income		1.2			1.7			1.2			1.8
Earnings from continuing operations before income taxes		33.4			34.1			32.9			33.6
Income tax expense		5.6			5.6			5.4			5.5
Net earnings from continuing operations, net of income tax expense		27.8			28.5			27.5			28.1
Discontinued operations:
Earnings from operations of discontinued interests in surgery centers, net of income tax expense		0.1			0.1			—			0.1
Loss on disposal of discontinued interests in surgery centers, net of income tax benefit		(0.2	)		(0.8	)		(0.1	)		(0.4	)
Net loss from discontinued operations		(0.1	)		(0.7	)		(0.1	)		(0.3	)
Net earnings		27.7			27.8			27.4			27.8
Less net earnings attributable to noncontrolling interests:
Net earnings from continuing operations		19.7			20.3			19.5			20.0
Net earnings from discontinued operations		—			—			—			0.1
Total net earnings attributable to noncontrolling interests		19.7			20.3			19.5			20.1
Net earnings attributable to AmSurg Corp.		8.0	%		7.5	%		7.9	%		7.7	%
Amounts attributable to AmSurg Corp. common shareholders:
Earnings from continuing operations, net of tax		8.1	%		8.3	%		8.0	%		8.1	%
Discontinued operations, net of tax		(0.1	)		(0.8	)		(0.1	)		(0.4	)
Net earnings attributable to AmSurg Corp.		8.0	%		7.5	%		7.9	%		7.7	%

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (continued)

Revenues increased $18.1 million, or 12%, to $168.8 million and $36.0 million, or 12%, to $332.3 million in the three and six months ended June 30, 2009, respectively, from $150.7 million and $296.3 million in the comparable 2008 periods. Our procedures increased by 34,775, or 12%, to 313,797 and 70,658, or 13%, to 616,823 in the three and six months ended June 30, 2009, respectively, from 279,022 and 546,165 in the comparable 2008 periods. The additional revenues and procedures resulted primarily from:

• centers acquired or opened in 2008, which contributed $16.5 million and $33.2 million of additional revenues in the three and six months ended June 30, 2009, respectively, due to having a full period of operations in 2009; and

• centers acquired and opened in 2009, which generated $1.8 million and $3.0 million in revenues during the three and six months ended June 30, 2009, respectively.

Staff at newly acquired and developed centers, as well as the additional staffing required at existing centers due to increased volume, resulted in a 14% and 13% increase in salaries and benefits at our surgery centers in the three and six months ended June 30, 2009, respectively. We experienced a 13% and 21% increase in salaries and benefits at our corporate offices during the three and six months ended June 30, 2009, respectively. The increase in corporate office salaries and benefits was primarily due to year over year salary increases, additional employees, primarily in our information technology area, and higher bonus expense incurred during the 2009 period. Salaries and benefits increased in total by 13% and 14% to $49.4 million and $98.4 million in the three and six months ended June 30, 2009, respectively, from $43.5 million and $85.9 million in the comparable 2008 periods. Salaries and benefits as a percentage of revenues increased in the three and six months ended June 30, 2009 compared to the comparable 2008 period primarily due to the impact of flat revenue growth in 2009.

Supply cost was $21.0 million and $40.8 million in the three and six months ended June 30, 2009, respectively, an increase of $3.3 million and $6.2 million, or 19% and 18%, over supply cost in the comparable 2008 periods. This increase was primarily the result of additional procedure volume. Our average supply cost per procedure in the three and six months ended June 30, 2009 increased by approximately $3. This increase is primarily related to higher utilization of disposable supplies at our gastroenterology centers and greater use of premium cataract lenses.

Other operating expenses increased $4.0 million, or 13%, and $8.0 million, or 13%, to $34.4 million and $68.4 million in the three and six months ended June 30, 2009, respectively, from $30.4 million and $60.5 million in the comparable 2008 periods. The additional expense in the 2009 periods resulted primarily from:

• centers acquired or opened during 2008, which resulted in an increase of $2.9 million and $6.0 million in other operating expenses in the three and six months ended June 30, 2009, respectively;

• an increase of $1.0 million and $1.5 million in other operating expenses at our 2009 same-center group in the three and six months ended June 30, 2009, respectively, resulting primarily from additional procedure volume and general inflationary cost increases; and

• centers acquired and opened during 2009, which resulted in an increase of $321,000 and $546,000 in other operating expenses in the three and six months ended June 30, 2009, respectively.

Depreciation and amortization expense increased 10% to $504,000 and $1.0 million in the three and six months ended June 30, 2009, respectively, from the comparable 2008 periods, primarily as a result of centers acquired since 2008 and newly developed centers in operation, which have an initially higher level of depreciation expense due to their construction costs.

We anticipate further increases in operating expenses in 2009, primarily due to additional acquired centers and additional start-up centers expected to be placed in operation. Typically, a start-up center will incur start-up losses while under development and during its initial months of operation and will experience lower revenues and operating margins than an established center. This typically continues until the procedure volume at the center grows to a more normal operating level, which generally is expected to occur within 12 months after the center opens. At June 30, 2009, we had two centers under development and two centers that had been open for less than one year.

Interest expense decreased $465,000 and $1.2 million, or 19% and 23%, to $2.0 million and $4.1 million in the three and six months ended June 30, 2009, respectively, from the comparable 2008 periods, primarily due to a reduced average interest rate in 2009. See “– Liquidity and Capital Resources.”

We recognized income tax expense from continuing operations of $9.4 million and $17.9 million in the three and six months ended June 30, 2009, respectively, compared to $8.4 million and $16.3 million in the comparable 2008 periods. Effective January 1, 2009, we adopted SFAS No. 160. Our effective tax rate in the three and six months ended June 30, 2009 was 16.6% and 16.4%, respectively, of earnings from continuing operations before income taxes. This differs from the federal statutory income tax rate of 35.0%, primarily due to the exclusion of the noncontrolling interests share of pre-tax earnings and the impact of state income taxes. Because we deduct goodwill amortization for tax purposes only, our deferred tax liability continues to increase, which would only be due in part or in whole upon the disposition of a portion or all of our surgery centers.

Net earnings attributable to noncontrolling interests in the three and six months ended June 30, 2009 increased 9% to $2.7 million and $5.4 million, respectively, from the comparable 2008 periods, primarily as a result of net earnings associated with surgery centers

19

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (continued)

recently added to operations. As a percentage of revenues, net earnings attributable to noncontrolling interests decreased to 19.7% from 20.3% and to 19.5% from 20.1% in the three and six months ended June 30, 2009, respectively, as a result of reduced center profit margins caused by lower same-center revenue growth.

We recorded a $263,000 loss on disposal of discontinued interest in surgery centers, net of income taxes during the three months ended June 30, 2009. We have two centers classified as held for sale at June 30, 2009. The net earnings from operations of all centers disposed of or to be disposed of in 2009 and 2008 have been reclassified to discontinued operations in all periods presented.

Liquidity and Capital Resources

Cash and cash equivalents at June 30, 2009 and 2008 were $28.2 million and $24.3 million, respectively. At June 30, 2009, we had working capital of $82.9 million, compared to $85.5 million at December 31, 2008. Operating activities for the six months ended June 30, 2009 generated $115.0 million in cash flow from operations, compared to $98.7 million in the six months ended June 30, 2008. The increase in operating cash flow resulted primarily from higher net earnings in the 2009 period and a reduction of three days outstanding in our accounts receivable due to increased collections from patient copays and deductibles at the date of service, increased electronic payments received from commercial payors and improved insurance verification and claim documentation. Due to the adoption of SFAS No. 160, we no longer include distributions to noncontrolling interests within net cash flows from operating activities.

The principal source of our operating cash flow is the collection of accounts receivable from governmental payors, commercial payors and individuals. Each of our surgery centers bills for services as delivered, usually within several days following the date of the procedure. Generally, unpaid amounts that are 30 days past due are rebilled based on a standard set of procedures. If amounts remain uncollected after 60 days, our surgery centers proceed with a series of late-notice notifications until amounts are either collected, contractually written off in accordance with contracted rates or determined to be uncollectible, typically after 90 to 120 days. Receivables determined to be uncollectible are written off and such amounts are applied to our estimate of allowance for bad debts as previously established in accordance with our policy for allowance for bad debt expense. The amount of actual write-offs of account balances for each of our surgery centers is continuously compared to established allowances for bad debt to ensure that such allowances are adequate. At June 30, 2009 and 2008, our accounts receivable represented 35 and 38 days of revenue outstanding, respectively.

During the six months ended June 30, 2009, we had total acquisitions and capital expenditures of $30.7 million, which included:

• $19.2 million for acquisitions of interests in ASCs;

• $10.4 million for new or replacement property at existing centers, including $127,000 in new capital leases; and

• $1.1 million for centers under development.

At June 30, 2009, we had unfunded construction and equipment purchase commitments for centers under development or under renovation of approximately $2.7 million, which we intend to fund through additional borrowings of long-term debt, operating cash flow and capital contributions by our partners.

During the six months ended June 30, 2009, we received $898,000 on the payment of a short-term note receivable for the sale of a center in 2008. In addition, we collected approximately $1.2 million on a note receivable related to the sale of a center in 2004. The note is secured by a pledge of a 51% ownership interest in the center, is guaranteed by the physician partners at the center and is due in installments through 2009. The balance of this note at June 30, 2009 was $417,000.

During the six months ended June 30, 2009, we had net repayments on long-term debt of $12.8 million, and at June 30, 2009 we had $240.5 million outstanding under our revolving credit facility. Pursuant to our credit facility, we may borrow up to $300.0 million to, among other things, finance our acquisition and development projects and any stock repurchase programs at a rate equal to, at our option, the prime rate, LIBOR plus 0.50% to 1.50% or a combination thereof. The loan agreement provides for a fee of 0.15% to 0.30% of unused commitments, prohibits the payment of dividends and contains covenants relating to the ratio of debt to net worth, operating performance and minimum net worth. We were in compliance with all covenants at June 30, 2009. Borrowings under the revolving credit facility are due in July 2011 and are secured primarily by a pledge of the stock of our subsidiaries that serve as the general partners of our limited partnerships and our partnership and membership interests in the limited partnerships and limited liability companies.

Positive operating cash flows of individual centers are the sole source of cash used to make distributions to our wholly-owned subsidiaries, as well as to the partners, which we are obligated to make on a monthly basis in accordance with each partnership’s partnership or operating agreement. Distributions to noncontrolling interests in the six months ended June 30, 2009 and 2008 were $64.5 million and $56.9 million, respectively. Distributions to noncontrolling interests increased $7.6 million, primarily as a result of additional centers in operation.

In September 2008, our board of directors authorized a stock repurchase program for up to $25.0 million of our outstanding common stock. During the six months ended June 30, 2009, we repurchased 830,700 shares, which completed this program. On April 22, 2009, our board of directors approved an additional stock repurchase program for up to $40.0 million of our outstanding shares of common stock over the next 18 months. We intend to fund the purchase price for shares acquired using primarily cash

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (continued)

generated from our operations and borrowings under our credit facility. The size, cost and timing of any repurchases may result in a reduction in the number of center acquisitions we complete during 2009. As of June 30, 2009, no shares had been repurchased pursuant to this plan.

Recent Accounting Pronouncements

In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161,“Disclosures about Derivative Instruments and Hedging Activities.”SFAS No. 161 is intended to enhance the current disclosure framework in SFAS No. 133,“Accounting for Derivative Instruments and Hedging Activities,” (“SFAS No. 133”) by requiring that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. This disclosure is intended to better convey the purpose of derivative use in terms of risks that the entity is intending to manage. SFAS No. 161 became effective for us beginning with the first quarter of 2009. The adoption of SFAS No. 161 did not have a material effect on our financial position, results of operations or cash flows.

FASB Staff Position on 107-b, “Interim Disclosures about Fair Value of Financial Instruments,”the FSP, is effective for interim and annual periods ending after June 15, 2009 and expands the fair value disclosures required for all financial instruments within the scope of SFAS No. 107. The FSP also requires entities to disclose the methods and significant assumptions used to estimate the fair value of financial instruments in financial statements on an interim and annual basis and to highlight any changes from prior periods. The adoption of the FSP did not have a material effect on our financial position, results of operations or cash flows.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS No. 165”). SFAS No. 165 establishes general standards of accounting for and disclosures of events that occur after the balance sheet dated but before financial statements are issued or are available to be issued. SFAS No. 165 is effective for interim or annual financial periods ending after June 15, 2009. The adoption of SFAS No. 165 did not have a material effect on our financial position, results of operations or cash flows.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to market risk from exposure to changes in interest rates based on our financing, investing and cash management activities. We utilize a balanced mix of maturities along with both fixed-rate and variable-rate debt to manage our exposures to changes in interest rates. Our debt instruments are primarily indexed to the prime rate or LIBOR. We entered into an interest rate swap agreement in April 2006 in which $50.0 million of the principal amount outstanding under the revolving credit facility will bear interest at a fixed-rate of 5.365% for the period from April 28, 2006 to April 28, 2011. Interest rate changes would result in gains or losses in the market value of our debt portfolio due to differences in market interest rates and the rates at the inception of the debt agreements. Based upon our indebtedness at June 30, 2009, a 100 basis point interest rate change would impact our net earnings and cash flow by approximately $1.2 million annually. Although there can be no assurances that interest rates will not change significantly, we do not expect changes in interest rates to have a material effect on our net earnings or cash flows in 2009.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management team, including our chief executive officer and chief financial officer, we conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of June 30, 2009. Based on that evaluation, our chief executive officer (principal executive officer) and chief financial officer (principal accounting officer) have concluded that our disclosure controls and procedures are effective to allow timely decisions regarding disclosure of material information required to be included in our periodic reports.

Changes in Internal Control Over Financial Reporting

During the period covered by this report, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

Item 4T. Controls and Procedures

Not applicable.

21

Part II

Item 1.Legal Proceedings

          Not applicable.

Item 1A.Risk Factors

          Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

          Not applicable.

Item 3. Defaults Upon Senior Securities

          Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

          At our Annual Meeting of Shareholders held on May 21, 2009, the following members were elected to the Board of Directors for the terms set forth below:

	Term		Votes		Votes
	Expires		For		Withheld
Thomas G. Cigarran, Class III Director		2012		19,890,796		9,386,296
Debora A. Guthrie, Class III Director		2012		28,904,040		373,052

     In addition to the foregoing directors, the following table sets forth the other members of the Board of Directors whose term of office continued after the Annual Meeting and the year in which his or her term expires:

	Term
	Expires
James A. Deal, Class I Director		2010
Steven I. Geringer, Class I Director		2010
Claire M. Gulmi, Class I Director		2010
Henry D. Herr, Class II Director		2011
Christopher A. Holden, Class II Director		2011
Kevin P. Lavender, Class II Director		2011
Ken P. McDonald, Class II Director		2011

     Also, the following proposal was considered and approved at the Annual Meeting of Shareholders by the votes set forth below:

	Votes		Votes		Votes		Votes
	For		Against		Withheld		Abstained
Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2009		29,131,181		139,136		—		6,775

Item 5. Other Information

          Not applicable.

22

Item 6. Exhibits

Exhibits
11	Earnings Per Share
31.1	Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a)
31.2	Certification of Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a)
32.1	Section 1350 Certification

23

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AMSURG CORP.
Date: August 10, 2009	By:	/s/ Claire M. Gulmi
		Claire M. Gulmi
		Executive Vice President and Chief Financial Officer of the Company (Principal Financial and Duly Authorized Officer)

24