Amsurg (AMSG) 10-Q 2001 Q3 Quarterly report

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, 2001

Commission File Number 000-22217

AMSURG CORP.
(Exact Name of Registrant as Specified in its Charter)

Tennessee	62-1493316
(State or other jurisdiction of	(I.R.S. employer
incorporation or organization)	identification no.)

20 Burton Hills Boulevard
Nashville, TN	37215
(Address of principal executive offices)	(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.

     Yes [X]                No [    ]

     As of November 13, 2001, there were outstanding 20,071,080 shares of the Registrant’s Common Stock, no par value.

TABLE OF CONTENTS

Part I
	Consolidated Balance Sheets
	Consolidated Statements of Earnings
	Consolidated Statements of Cash Flows
	Notes to Consolidated Financial Statements
Part II
SIGNATURES

Part I

Item 1. Financial Statements

AMSURG CORP.

Consolidated Balance Sheets

(Dollars in thousands)

					September 30,		December 31,
					2001		2000
				ASSETS
Current assets:
	Cash and cash equivalents				$	10,823	$	7,688
	Accounts receivable, net of allowance of $3,051 and $2,506, respectively					28,414		24,468
	Supplies inventory					3,128		2,645
	Deferred income taxes					636		636
	Prepaid and other current assets					4,150		2,091
		Total current assets				47,151		37,528
Long-term receivables and deposits						1,960		1,861
Property and equipment, net						42,770		39,855
Intangible assets, net						138,874		111,408
		Total assets			$	230,755	$	190,652
			LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Current portion of long-term debt				$	2,496	$	2,296
	Accounts payable					3,892		2,234
	Accrued salaries and benefits					4,045		2,759
	Other accrued liabilities					1,906		2,632
	Current income taxes payable					—		1,018
		Total current liabilities				12,339		10,939
Long-term debt						8,492		59,876
Notes payable and other long-term obligations						1,970		11,956
Deferred income taxes						3,673		3,673
Minority interest						24,255		21,063
Shareholders’ equity:
	Common stock, no par value, 39,800,000 shares authorized, 20,049,195 and 14,738,787 shares outstanding, respectively					150,836		64,293
	Retained earnings					29,190		18,852
		Total shareholders’ equity				180,026		83,145
		Total liabilities and shareholders’ equity			$	230,755	$	190,652

See accompanying notes to the consolidated financial statements.

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AMSURG CORP.

Consolidated Statements of Earnings

(In thousands, except earnings per share)

			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2001		2000		2001		2000
Revenues			$	51,582	$	36,717	$	146,195	$	102,940
Operating expenses:
	Salaries and benefits			14,047		10,088		39,477		28,817
	Supply cost			5,974		4,242		17,078		11,972
	Other operating expenses			10,963		7,792		30,835		21,296
	Depreciation and amortization			3,639		2,631		10,458		7,248
		Total operating expenses		34,623		24,753		97,848		69,333
		Operating income		16,959		11,964		48,347		33,607
Minority interest				9,971		6,932		28,392		20,075
Interest expense, net of interest income				410		1,332		2,720		2,957
		Earnings before income taxes		6,578		3,700		17,235		10,575
Income tax expense				2,634		1,425		6,897		4,072
		Net earnings	$	3,944	$	2,275	$	10,338	$	6,503
Earnings per common share:
		Basic	$	0.20	$	0.16	$	0.58	$	0.45
		Diluted	$	0.19	$	0.15	$	0.56	$	0.44
Weighted average number of shares and share equivalents outstanding:
		Basic		19,971		14,572		17,878		14,563
		Diluted		20,428		14,966		18,529		14,899

See accompanying notes to the consolidated financial statements.

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AMSURG CORP.

Consolidated Statements of Cash Flows

(In thousands)

				Nine Months Ended
				September 30,
				2001			2000
Cash flows from operating activities:
	Net earnings			$	10,338		$	6,503
	Adjustments to reconcile net earnings to net cash provided by operating activities:
		Minority interest			28,392			20,075
		Distributions to minority partners			(28,576	)		(20,021	)
		Depreciation and amortization			10,458			7,248
		Increase (decrease) in cash, net of effects of acquisitions, due to changes in:
			Accounts receivable, net		(1,550	)		(3,221	)
			Supplies inventory		(35	)		127
			Prepaid and other current assets		167			(48	)
			Other assets		—			177
			Accounts payable		1,451			509
			Accrued expenses and other liabilities		4,993			1,444
			Other, net		43			(132	)
			Net cash flows provided by operating activities		25,681			12,661
Cash flows from investing activities:
	Acquisition of interest in surgery centers				(44,779	)		(27,741	)
	Acquisition of property and equipment				(5,883	)		(8,701	)
	Decrease (increase) in long-term receivables				(99	)		125
			Net cash flows used by investing activities		(50,761	)		(36,317	)
Cash flows from financing activities:
	Repayment of notes payable				—			(1,188	)
	Proceeds from long-term borrowings				35,761			34,084
	Repayment on long-term borrowings				(89,768	)		(11,472	)
	Net proceeds from issuance of common stock				79,551			69
	Proceeds from capital contributions by minority partners				2,685			514
	Financing cost incurred				(14	)		(908	)
			Net cash flows provided by financing activities		28,215			21,099
Net increase in cash and cash equivalents					3,135			(2,557	)
Cash and cash equivalents, beginning of period					7,688			9,523
Cash and cash equivalents, end of period				$	10,823		$	6,966

See accompanying notes to the consolidated financial statements.

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AMSURG CORP.

Notes to Consolidated Financial Statements

Nine Months Ended September 30, 2001 and 2000

(1) Basis of Presentation

     The accompanying unaudited consolidated financial statements of AmSurg Corp. and subsidiaries (the “Company”) have been prepared in accordance with generally accepted accounting principles for interim financial reporting and in accordance with Rule 10-01 of Regulation S-X.

     In the opinion of management, the unaudited interim 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 consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s 2000 Annual Report on Form 10-K, as amended.

(2) Long-term Debt

     At September 30, 2001, the Company had $4.4 million in borrowings outstanding under its revolving credit facility which permits the Company to borrow up to $100.0 million to finance its acquisitions and development projects at an interest rate equal to, at the Company’s option, the prime rate or LIBOR plus a spread of 1.5% to 3.0%, depending upon borrowing levels. The loan agreement also provides for a fee ranging between 0.375% to 0.50% of unused commitments based on borrowing levels and contains certain additional covenants. The Company was in compliance with all covenants at September 30, 2001.

(3) Common Stock

     In April 2001, the Company completed a public offering of 4,526,000 shares of Class A Common Stock, for net proceeds of approximately $76.6 million to the Company. Net proceeds from the offering were used to repay borrowings under the Company’s revolving credit facility.

     In July 2001, after receiving shareholder approval, the Company reclassified its Class A and Class B Common Stock into one class of common stock, having the rights of the Class A Common Stock. The Class A and Class B shares were reclassified into one class of common stock using a one-to-one conversion ratio and, as a result, there was no increase in the Company’s total number of shares or book value of common stock outstanding due to the reclassification.

(4) Acquisitions and Other Transactions

     In the nine months ended September 30, 2001, the Company, through wholly owned subsidiaries and in separate transactions, acquired majority interests in 11 physician practice-based surgery centers. The aggregate purchase price and related cost for acquisitions was approximately $34.3 million, of which the Company assigned approximately $31.0 million to excess of cost over net assets of purchased operations. In the nine months ended September 30, 2001, the Company also funded outstanding obligations of $10.5 million associated with 2000 acquisitions.

     In the nine months ended September 30, 2001, the Company signed certain agreements which provide for the sale of the Company’s equity interest in a surgery center limited liability company to an unaffiliated third party upon the fulfillment of certain conditions by the Company. The combined proceeds from these agreements will approximate the Company’s net book value of its equity interest in the LLC as of September 30, 2001. Revenues from this surgery center constituted less than 0.2% of the Company’s consolidated revenues during the nine months ended September 30, 2001.

(5) Subsequent Events

     In October 2001, the Company, through a wholly owned subsidiary, acquired a majority interest in a physician practice-based surgery center for approximately $8.2 million.

(6) Recent Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities. The Company adopted this pronouncement on January 1, 2001, which had no impact on the Company’s consolidated financial statements.

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AMSURG CORP.
Notes to Consolidated Financial Statements, continued

     In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,Business Combinations, and SFAS No. 142,Goodwill and Other Intangible Assets. The provisions of SFAS No. 141 apply to all business combinations initiated after June 30, 2001 and prohibit the use of the pooling-of-interest method for those business combinations. Furthermore, SFAS No. 141 applies to all business combinations accounted for by the purchase method for which the date of acquisition is July 1, 2001 or later. SFAS No. 142 requires, that upon adoption, amortization of goodwill and indefinite life intangible assets will cease and instead, the carrying value of goodwill and indefinite life intangible assets will be evaluated for impairment at least on an annual basis; impairment of carrying value will be evaluated more frequently if certain indicators are encountered. Identifiable intangible assets with a determinable useful life will continue to be amortized over that period and reviewed for impairment in accordance with SFAS No. 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, until the adoption of SFAS No. 144 (discussed below). SFAS No. 142 is effective for fiscal years beginning after December 15, 2001, except for goodwill and intangible assets acquired after June 30, 2001, which are subject immediately to the nonamortization provisions of this statement. The Company adopted SFAS No. 141 and the nonamortization provisions of SFAS No. 142 for four business acquisitions consummated during the third quarter of 2001. The goodwill resulting from these four acquisitions was approximately $9.1 million. The Company is evaluating the impact of SFAS No. 142 on goodwill and other intangible assets existing at June 30, 2001 and has not yet determined the effect of adoption on its financial position and results of operations.

     SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets, issued in August 2001, supersedes SFAS No. 121 and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30,Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. This statement retains certain requirements of SFAS No. 121 relating to the recognition and measurement of impairment of long-lived assets to be held and used. Additionally, this statement results in one accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale and also addresses certain implementation issues related to SFAS No. 121, including the removal of goodwill from its scope due to the issuance of SFAS No. 142. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. The Company has not yet determined the impact of the adoption of SFAS No. 144 on its financial position and results of operations.

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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 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 our ability to enter into partnership or operating agreements for new practice-based ambulatory surgery centers; our ability to identify suitable acquisition candidates and negotiate and close acquisition transactions, including centers under letter of intent; our ability to obtain the necessary financing or capital on terms satisfactory to us in order to execute our expansion strategy; our ability to manage growth; our ability to contract with managed care payers on terms satisfactory to us for our existing centers and our centers that are currently under development; our ability to obtain and retain appropriate licensing approvals for our existing centers and centers currently under development; our ability to minimize start-up losses of our development centers; our ability to maintain favorable relations with our physician partners; the implementation of the proposed rule issued by the Centers for Medicare and Medicaid Services which would update the ratesetting methodology, payment rates, payment policies and the list of covered surgical procedures for ambulatory surgery centers; risks associated with our status as a general partner of the limited partnerships; and risks relating to our technological systems.

Overview

     We develop, acquire and operate practice-based ambulatory surgery centers in partnership with physician practice groups throughout the United States. As of September 30, 2001, we owned a majority interest (51% or greater) in 92 surgery centers.

     The following table presents the changes in the number of surgery centers in operation, centers under development and centers under letter of intent during the three and nine months ended September 30, 2001 and 2000. A center is deemed to be under development when a partnership or limited liability company has been formed with the physician group partner to develop the center.

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2001			2000		2001			2000
Centers in operation, beginning of period		89			68		81			63
New center acquisitions placed in operation		4			2		11			5
New development centers placed in operation		—			4		1			6
Centers disposed (1)		(1	)		—		(1	)		—
Centers in operation, end of period		92			74		92			74
Centers under development, end of period		3			4		3			4
Development centers awaiting CON approval, end of period		—			2		—			2
Average number of centers in operation, during period		93			70		88			67
Centers under letter of intent, end of period		8			9		8			9

(1) We sold our interest in a surgery center in the third quarter of 2001 for its approximate book value.

     Of the surgery centers in operation as of September 30, 2001, 55 centers perform gastrointestinal endoscopy procedures, 31 centers perform ophthalmology surgery procedures, one center performs orthopedic procedures, one center performs otolaryngology procedures and four centers perform procedures in more than one specialty. The other partner or member in each partnership or limited liability company is generally an entity owned by physicians who perform procedures at the center.

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     We intend to expand primarily through the development and acquisition of additional practice-based ambulatory surgery centers in targeted surgical specialties and through future same-center growth. In October 2001, we acquired an interest in one additional surgery center. During the nine months ended September 30, 2001, we signed certain agreements which provided for the sale of our equity interest in a surgery center to an unaffiliated third party upon our fulfillment of certain conditions for net proceeds which approximate the net book value of our equity interest in the surgery center.

     While we generally own 51% to 67% of the entities that own the surgery centers, our consolidated statements of operations include 100% of the results of operations of the entities, reduced by the minority partners’ share of the net earnings or loss of the surgery center entities.

Sources of Revenues

     Substantially all of our revenue is derived from facility fees charged for surgical procedures performed in our surgery centers. This fee varies depending on the procedure, but usually includes all charges for operating room usage, special equipment usage, supplies, recovery room usage, nursing staff and medications. Facility fees do not include the charges of the patient’s surgeon, anesthesiologist or other attending physicians, which are billed directly by the physicians.

     Practice-based ambulatory surgery centers such as those in which we own a majority interest depend upon third-party reimbursement programs, including governmental and private insurance programs, to pay for services rendered to patients. We derived approximately 40% of our net revenues from governmental healthcare programs, primarily Medicare, in the nine months ended September 30, 2001 and 2000. The Medicare program currently pays ambulatory surgery centers in accordance with predetermined fee schedules.

Results of Operations

     The following table shows certain statement of earnings items expressed as a percentage of revenues for the three and nine months ended September 30, 2001 and 2000:

			Three Months Ended						Nine Months Ended
			September 30,						September 30,
			2001			2000			2001			2000
Revenues				100.0	%		100.0	%		100.0	%		100.0	%
Operating expenses:
	Salaries and benefits			27.2			27.4			27.0			28.0
	Supply cost			11.6			11.6			11.7			11.6
	Other operating expenses			21.3			21.2			21.1			20.7
	Depreciation and amortization			7.1			7.2			7.1			7.0
		Total operating expenses		67.2			67.4			66.9			67.3
		Operating income		32.8			32.6			33.1			32.7
Minority interest				19.3			18.9			19.4			19.5
Interest expense, net of interest income				0.8			3.6			1.9			2.9
		Earnings before income taxes		12.7			10.1			11.8			10.3
Income tax expense				5.1			3.9			4.7			4.0
		Net earnings		7.6	%		6.2	%		7.1	%		6.3	%

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     Revenues were $51.6 million and $146.2 million in the three and nine month periods ended September 30, 2001, respectively, an increase of $14.9 million and $43.2 million, or 40% and 42%, respectively, over revenues in the comparable 2000 periods. The increase is primarily attributable to additional centers in operation in 2001 and same-center revenue growth of 9% and 10% in the three and nine months ended September 30, 2001, respectively. Same-center revenue growth is primarily attributable to additional procedure volume. Our centers performed 97,651 and 282,831 procedures during the three and nine month periods ended September 30, 2001, respectively, compared to 72,726 and 207,196 procedures in the comparable 2000 periods. Average revenue per average number of centers in operation was $556,000 and $1.7 million in the three and nine months ended September 30, 2001, respectively, compared to $523,000 and $1.5 million in the comparable 2000 periods. The increase in average revenue per operating center is due to same-center growth and acquisitions of centers that are operationally larger than our average size centers.

     Salaries and benefits expense was $14.0 million and $39.5 million in the three and nine month periods ended September 30, 2001, respectively, an increase of $4.0 million and $10.7 million, or 39% and 37%, respectively, over salaries and benefits expense in the comparable 2000 periods. This increase resulted primarily from an additional 18 centers in operation and from an increase in corporate staff primarily to support growth in the number of centers in operation and anticipated future growth.

     Supply cost was $6.0 million and $17.1 million in the three and nine month periods ended September 30, 2001, respectively, an increase of $1.7 million and $5.1 million, or 41% and 43%, respectively, over supply cost in the comparable 2000 periods. This increase resulted primarily from a 34% and 37% increase in procedures, respectively, over the comparable 2000 periods and an increased mix of ophthalmology procedures, which require more costly supplies than gastroenterology procedures.

     Other operating expenses were $11.0 million and $30.8 million in the three and nine month periods ended September 30, 2001, respectively, an increase of $3.2 million and $9.5 million, or 41% and 45%, respectively, over other operating expenses in the comparable 2000 periods. This increase resulted primarily from additional centers in operation.

     We anticipate further increases in operating expenses in 2001, primarily due to additional start-up centers and acquired 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 until its case load increases to a more optimal operating level, which generally is expected to occur within 12 months after a center opens. At September 30, 2001, we had three centers under development and six centers that had been open for less than one year.

     Depreciation and amortization expense increased $1.0 million and $3.2 million, or 38% and 44%, in the three and nine month periods ended September 30, 2001, respectively, over the comparable 2000 periods, primarily due to 18 additional surgery centers in operation in the 2001 period compared to the 2000 period as well as additional excess of cost over net assets of purchased operations acquired from October 1, 2000 to September 30, 2001.

     Minority interest in earnings in the three and nine month periods ended September 30, 2001 increased by $3.0 million and $8.3 million, or 44% and 41%, respectively, over the comparable 2000 periods primarily as a result of minority partners’ interest in earnings at surgery centers recently added to operations and from increased same-center profitability.

     Interest expense decreased $1.0 million and $237,000 in the three and nine months ended September 30, 2001 or 69% and 8%, respectively, from the comparable 2000 periods. Prior to April 2001, our debt level had grown to approximately $92.5 million primarily due to acquisition-related borrowings. However, proceeds from our public stock offering, as further discussed in Liquidity and Capital Resources, were used to repay a significant portion of our outstanding debt, resulting in lower interest expense in the three and nine months ended September 30, 2001.

     We recognized income tax expense of $2.6 million and $6.9 million in the three and nine month periods ended September 30, 2001, respectively, compared to $1.4 million and $4.1 million in the comparable 2000 periods, respectively. Our effective tax rate in the 2001 and 2000 periods was 40.0% and 38.5%, respectively, of net earnings before income taxes and differed from the federal statutory income tax rate of 35% and 34%, respectively, primarily due to the impact of state income taxes. We expect our effective tax rate during the remainder of 2001 to be approximately 40.0%.

Liquidity and Capital Resources

     At September 30, 2001, we had working capital of $34.8 million compared to $22.5 million at September 30, 2000. Operating activities for the nine months ended September 30, 2001 generated $25.7 million in cash flow compared to $12.7 million in the comparable 2000 period. Cash and cash equivalents at September 30, 2001 and 2000 were $10.8 million and $7.0 million, respectively.

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     During the nine months ended September 30, 2001, we used approximately $44.8 million to acquire interests in practice-based ambulatory surgery centers, including $10.5 million for the funding of other long-term obligations related to acquisitions in 2000. In addition, we made capital expenditures primarily for new start-up surgery centers and for new or replacement property at existing centers which totaled approximately $5.9 million in the nine months ended September 30, 2001. Maintenance capital expenditures, including new capital leases, for the nine months ended September 30, 2001 were $4.2 million. We received approximately $2.7 million from capital contributions of our minority partners. We used our cash flow from operations and net borrowings of long-term debt of $22.6 million to fund our acquisitions and development activity. At September 30, 2001, we and our partnerships and limited liability companies had unfunded construction and equipment purchase commitments for centers under development of approximately $1.0 million, which we intend to fund through additional borrowings of long-term debt, operating cash flow and capital contributions by minority partners.

     In April 2001, we completed a public offering of 4,600,000 shares of Class A Common Stock, including 74,000 shares offered by selling shareholders, for net proceeds to us of approximately $76.6 million. The net proceeds were used to repay borrowings under our revolving credit facility. During the nine months ended September 30, 2001, we also received approximately $2.9 million for the issuance of stock under our employee stock option plans and recognized a related tax benefit of approximately $7.0 million.

     In July 2001, after receiving shareholder approval, we reclassified our Class A and Class B Common Stock into one class of common stock, having the rights of the Class A Common Stock. The Class A and Class B shares were reclassified into one class of common stock using a one-to-one conversion ratio and, as a result, there was no increase in our total number of shares or book value of common stock outstanding due to the reclassification.

     At September 30, 2001, we had $4.4 million outstanding under our revolving credit facility which permits us to borrow up to $100.0 million to finance our acquisition and development projects, at a rate equal to, at our option, the prime rate or LIBOR plus a spread of 1.5% to 3.0%, depending upon borrowing levels. The loan agreement also provides for a fee ranging between 0.375% to 0.50% of unused commitments based on borrowing levels. The loan agreement 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 September 30, 2001. Borrowings under the credit facility are due on May 5, 2003, and are secured primarily by a pledge of the stock of our subsidiaries and our membership interests in the limited liability companies.

     On June 12, 1998, the Department of Health and Human Services, or DHHS, published a proposed rule that would update the ratesetting methodology, payment rates, payment policies and the list of covered surgical procedures for ambulatory surgery centers. If implemented, the proposed rule would reduce the rates paid for certain ambulatory surgery center procedures reimbursed by Medicare, including a number of endoscopy and ophthalmology procedures performed at our centers. However, the Balanced Budget Refinement Act of 1999 and the Benefits Improvement and Protection Act of 2000, or BBRA and BIPA, respectively, made three changes affecting DHHS’ ability to implement a revised prospective payment system based on the June 1998 proposed rule. First, DHHS may not implement a revised prospective payment system before January 2002; second, if DHHS implements a new system based on the June 1998 proposed rule, Centers for Medicare and Medicaid Services, or CMS, must phase in the new rates over four years; and third, DHHS must use data based on a new ambulatory surgery center cost survey from 1999 or later in calculating new rates by January 2003.

     We estimate that if full implementation of new rates based on the June 1998 proposed rule occurred in 2002, it would adversely affect our annual revenues by 4% based on our historical procedure mix. However, we believe due to the four year phase-in of such rates, coupled with updated rates based on new cost data to be used in 2003 and cost efficiencies we expect to implement at both the center and corporate level, that our financial results will not be materially impacted by implementation of the proposed rule’s rates. As of this filing date, DHHS has not communicated an intention to implement a final rule based on the June 1998 proposed rule. There can be no assurance that the implementation of new rates will not adversely impact our financial condition, results of operations and business prospects.

Recent Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard, or SFAS, No. 133,Accounting for Derivative Instruments and Hedging Activities.We adopted this pronouncement on January 1, 2001, which had no impact on our financial statements.

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     In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,Business Combinations,and SFAS No. 142,Goodwill and Other Intangible Assets.The provisions of SFAS No. 141 apply to all business combinations initiated after June 30, 2001 and prohibit the use of the pooling-of-interest method for those business combinations. Furthermore, SFAS No. 141 applies to all business combinations accounted for by the purchase method for which the date of acquisition is July 1, 2001 or later. SFAS No. 142 requires, that upon adoption, amortization of goodwill and indefinite life intangible assets will cease and instead, the carrying value of goodwill and indefinite life intangible assets will be evaluated for impairment at least on an annual basis; impairment of carrying value will be evaluated more frequently if certain indicators are encountered. Identifiable intangible assets with a determinable useful life will continue to be amortized over that period and reviewed for impairment in accordance with SFAS No. 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,until the adoption of SFAS No. 144 (discussed below). SFAS No. 142 is effective for fiscal years beginning after December 15, 2001, except for goodwill and intangible assets acquired after June 30, 2001, which are subject immediately to the nonamortization provisions of this statement. The Company adopted SFAS No. 141 and the nonamortization provisions of SFAS No. 142 for four business acquisitions consummated during the third quarter of 2001. The goodwill resulting from these four acquisitions was approximately $9.1 million. We are evaluating the impact of SFAS No. 142 on goodwill and other intangible assets existing at June 30, 2001 and have not yet determined the effect of adoption on our financial position and results of operations.

     SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets,issued in August 2001, supersedes SFAS No. 121 and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30,Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.This statement retains certain requirements of SFAS No. 121 relating to the recognition and measurement of impairment of long-lived assets to be held and used. Additionally, this statement results in one accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale and also addresses certain implementation issues related to SFAS No. 121, including the removal of goodwill from its scope due to the issuance of SFAS No. 142. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. We have not yet determined the impact of the adoption of SFAS No. 144 on our financial position and results of operations.

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 debt maturities along with both fixed-rate and variable-rate debt to manage our exposure to changes in interest rates. Our debt instruments are primarily indexed to the prime rate or LIBOR. Although there can be no assurances that interest rates will not change significantly, we do not expect such changes in interest rates to have a material effect on our net earnings or cash flow in 2001.

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Part II

Item 1. Legal Proceedings.

     Not applicable.

Item 2. Changes in Securities and Use of Proceeds.

     Effective July 13, 2001, after receiving shareholder approval, we reclassified our Class A and Class B Common Stock into one class of common stock, having the rights of the Class A Common Stock. The Class A and Class B shares were reclassified into one class of common stock under our Second Amended and Restated Charter using a one-to-one conversion ratio and, as a result, there was no increase in our total number of shares or book value of common stock outstanding due to the reclassification.

Item 3. Defaults Upon Senior Securities.

     Not applicable.

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

     At our Annual Shareholders Meeting held on July 11, 2001, the following members were elected to the Board of Directors by the vote set forth below:

		Class A and Class B Common Stock,
		voting together as a single class
		Votes		Votes		Votes
		For		Against		Withheld
Class I Director	James A. Deal		15,173,269		—		397,128
Class I Director	Steven I. Geringer		15,188,324		—		382,073

     Also, the following proposals were considered and approved at the Annual Shareholders Meeting by the votes set forth below:

Approval of an amendment to Article 7 of our Amended and Restated Charter to eliminate our dual class capital structure and to provide for a single, new class of common stock designated as “Common Stock,” no par value, consisting of 39,800,000 shares of common stock authorized for issuance, with each share entitled to one vote, thereby effecting the reclassification of each share of Class A common stock and each share of Class B common stock as one share of Common Stock and to adopt a Second Amended and Restated Charter to reflect this amendment

Class A Common Stock, voting as a separate class

Class B Common Stock, voting as a separate class

Votes

Votes

Votes

Broker

Votes

Votes

Votes

Broker

For

Against

Withheld

Non-Votes

For

Against

Withheld

Non-Votes

9,990,998

55,043

4,047

1,714,250

3,145,285

734

2,220

657,820

	Class A and Class B Common Stock,
	voting together as a single class
	Votes		Votes			Votes
	For		Against		Withheld
Approval of an amendment to Article 7 of our Amended and Restated Charter		15,223,333		342,485			4,579
to eliminate certain unnecessary provisions regarding previously outstanding shares of preferred stock and to confirm the authorized number of shares of preferred stock pursuant to the Company’s “blank check” authority as 5,000,000 shares, and to adopt a Second Amended and Restated Charter to reflect this amendment

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	Class A and Class B Common Stock,
	voting together as a single class
	Votes		Votes		Votes
	For		Against		Withheld
Approval of an amendment to our 1997 Stock Incentive Plan to increase		10,192,314		5,371,453		6,630
the number of shares reserved for issuance under the plan from 1,600,000 to 2,290,000

Item 5. Other Information.

     Not applicable.

Item 6. Exhibits and Reports on Form 8-K.

     (a)  Exhibits

3.1	Second Amended and Restated Charter of the Registrant (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form 10/A-4 (filed on July 13, 2001))
3.2	First Amendment to Amended and Restated Bylaws (incorporated by reference to Exhibit 4.5 to the Company’s Form S-8 (filed July 24, 2001))
4.1	Second Amended and Restated Rights Agreement dated July 12, 2001 (originally dated December 2, 1999, and amended on December 13, 1999), between AmSurg Corp. and SunTrust Bank Atlanta, including the Form of Rights Certificate (Exhibit A) and the Form of Summary Rights (Exhibit B) (incorporated by reference to Exhibit 1 of the Registration Statement on Form 8-A/A-4 (filed with the Commission on July 13, 2001))

     (b)  Reports on Form 8-K

During the quarter ended September 30, 2001, we filed two reports on Form 8-K, each dated July 11, 2001 (filed July 12, 2001), to report pursuant to Item 9 two separate press releases issued on July 11, 2001.

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SIGNATURES

     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:	November 13, 2001	By:	/s/ Claire M. Gulmi Claire M. Gulmi
			Senior Vice President and Chief Financial Officer (Principal Financial and Duly Authorized Officer)

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