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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 JUNE 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 August 13, 2001, there were outstanding 20,033,426 shares of
the Registrant's Common Stock, no par value.
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PART I
ITEM 1. FINANCIAL STATEMENTS
AMSURG CORP.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31,
2001 2000
-------- ------------
ASSETS
Current assets:
Cash and cash equivalents .............................................. $ 11,658 $ 7,688
Accounts receivable, net of allowance of $2,734 and $2,506, respectively 25,646 24,468
Supplies inventory ..................................................... 2,806 2,645
Deferred income taxes .................................................. 636 636
Prepaid and other current assets ....................................... 1,929 2,091
-------- --------
Total current assets .......................................... 42,675 37,528
Long-term receivables and deposits .......................................... 1,932 1,861
Property and equipment, net ................................................. 41,036 39,855
Intangible assets, net ...................................................... 131,091 111,408
-------- --------
Total assets .................................................. $216,734 $190,652
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ...................................... $ 2,502 $ 2,296
Accounts payable ....................................................... 2,644 2,234
Accrued salaries and benefits .......................................... 2,994 2,759
Other accrued liabilities .............................................. 1,759 2,632
Current income taxes payable ........................................... 813 1,018
-------- --------
Total current liabilities ..................................... 10,712 10,939
Long-term debt .............................................................. 8,411 59,876
Notes payable and other long-term obligations ............................... 1,970 11,956
Deferred income taxes ....................................................... 3,673 3,673
Minority interest ........................................................... 23,045 21,063
Shareholders' equity:
Common stock:
Class A, no par value, 35,000,000 shares authorized, 14,713,784 and
9,951,656 shares outstanding, respectively ....................... 130,148 50,764
Class B, no par value, 4,800,000 shares authorized, 4,787,131
shares outstanding ............................................... 13,529 13,529
Retained earnings ...................................................... 25,246 18,852
-------- --------
Total shareholders' equity .................................... 168,923 83,145
-------- --------
Total liabilities and shareholders' equity .................... $216,734 $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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
2001 2000 2001 2000
------- ------- ------- -------
Revenues .............................................. $49,474 $34,590 $94,613 $66,223
Operating expenses:
Salaries and benefits ............................ 13,374 10,181 25,430 18,729
Supply cost ...................................... 5,519 3,949 11,104 7,730
Other operating expenses ......................... 10,367 6,641 19,872 13,504
Depreciation and amortization .................... 3,567 2,335 6,819 4,617
------- ------- ------- -------
Total operating expenses ..................... 32,827 23,106 63,225 44,580
------- ------- ------- -------
Operating income ............................. 16,647 11,484 31,388 21,643
Minority interest ..................................... 9,876 6,985 18,421 13,143
Interest expense, net of interest income .............. 589 914 2,310 1,625
------- ------- ------- -------
Earnings before income taxes ................. 6,182 3,585 10,657 6,875
Income tax expense .................................... 2,473 1,380 4,263 2,647
------- ------- ------- -------
Net earnings ................................. $ 3,709 $ 2,205 $ 6,394 $ 4,228
======= ======= ======= =======
Earnings per common share:
Basic ............................................ $ 0.20 $ 0.15 $ 0.38 $ 0.29
Diluted .......................................... $ 0.19 $ 0.15 $ 0.36 $ 0.28
Weighted average number of shares and share equivalents
outstanding:
Basic ........................................ 18,912 14,561 16,831 14,559
Diluted ...................................... 19,621 14,856 17,580 14,866
See accompanying notes to the consolidated financial statements.
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AMSURG CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS ENDED
JUNE 30,
-----------------------
2001 2000
-------- --------
Cash flows from operating activities:
Net earnings ...................................................................... $ 6,394 $ 4,228
Adjustments to reconcile net earnings to net cash provided by operating activities:
Minority interest ............................................................. 18,421 13,143
Distributions to minority partners ............................................ (18,632) (13,013)
Depreciation and amortization ................................................. 6,819 4,617
Increase (decrease) in cash, net of effects of acquisitions, due to changes in:
Accounts receivable, net ................................................. (378) (1,847)
Supplies inventory ....................................................... 71 8
Prepaid and other current assets ......................................... 180 (38)
Other assets ............................................................. -- 93
Accounts payable ......................................................... 262 737
Accrued expenses and other liabilities ................................... 1,297 652
Other, net ............................................................... 92 (92)
-------- --------
Net cash flows provided by operating activities .......................... 14,526 8,488
Cash flows from investing activities:
Acquisition of interest in surgery centers ........................................ (34,528) (12,378)
Acquisition of property and equipment ............................................. (4,332) (3,887)
Decrease (increase) in long-term receivables ...................................... (71) 82
-------- --------
Net cash flows used by investing activities .............................. (38,931) (16,183)
Cash flows from financing activities:
Repayment of notes payable ........................................................ -- (1,188)
Proceeds from long-term borrowings ................................................ 30,461 13,650
Repayment on long-term borrowings ................................................. (82,668) (6,753)
Net proceeds from issuance of common stock ........................................ 77,999 21
Proceeds from capital contributions by minority partners .......................... 2,593 264
Financing cost incurred ........................................................... (10) (877)
-------- --------
Net cash flows provided by financing activities .......................... 28,375 5,117
-------- --------
Net increase in cash and cash equivalents .............................................. 3,970 (2,578)
Cash and cash equivalents, beginning of period ......................................... 7,688 9,523
-------- --------
Cash and cash equivalents, end of period ............................................... $ 11,658 $ 6,945
======== ========
See accompanying notes to the consolidated financial statements.
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AMSURG CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 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 June 30, 2001, the Company had $4.2 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 June 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.
(4) ACQUISITIONS AND OTHER TRANSACTIONS
In the six months ended June 30, 2001, the Company, through wholly
owned subsidiaries and in separate transactions, acquired majority interests in
seven physician practice-based surgery centers. The aggregate purchase price and
related cost for the acquisitions was approximately $24.1 million, of which the
Company assigned approximately $22.6 million to excess of cost over net assets
of purchased operations. In the six months ended June 30, 2001, the Company also
funded outstanding obligations of $10.5 million associated with 2000
acquisitions.
In the six months ended June 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 June 30, 2001. Revenues from this surgery center
constituted less than 0.2% of the Company's consolidated revenues during the six
months ended June 30, 2001.
(5) SUBSEQUENT EVENTS
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.
Through August 13, 2001, the Company, through a wholly owned subsidiary
acquired a majority interest in four physician practice-based surgery centers
for approximately $11.6 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. SFAS No. 141 will require that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001 and that the use of
the pooling-of-interest method is no longer allowed. SFAS No. 142 requires that
upon adoption, amortization of goodwill will cease and instead, the carrying
value of goodwill will be evaluated for impairment on an annual basis.
Identifiable intangible assets will continue to be amortized over their useful
lives 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. SFAS No. 142 is effective for fiscal years beginning after December 15,
2001. The Company is evaluating the impact of the adoption of these standards
and has not yet determined the effect of adoption 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 June 30, 2001, we owned a majority interest (51% or greater) in 89
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 six months ended June 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2001 2000 2001 2000
---- ---- ---- ----
Centers in operation, beginning of period ........... 87 65 81 63
New center acquisitions placed in operation ......... 1 2 7 3
New development centers placed in operation ......... 1 1 1 2
-- -- -- --
Centers in operation, end of period ................. 89 68 89 68
== == == ==
Centers under development, end of period ............ 3 9 3 9
Development centers awaiting CON approval,
end of period ................................... 1 2 1 2
Average number of centers in operation, during period 88 66 86 65
Centers under letter of intent, end of period ....... 6 7 6 7
Of the surgery centers in operation as of June 30, 2001, 55 centers
perform gastrointestinal endoscopy procedures, 29 centers perform ophthalmology
surgery procedures, one center performs orthopedic procedures, one center
performs otolaryngology procedures and three 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. As of August 13, 2001, we had
acquired interests in four additional surgery centers. During the six months
ended June 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 the
fulfillment of certain conditions by the Company for net proceeds which
approximate the net book value of our equity interest in the surgery center.
While we generally own 51% to 70% 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 six months ended June 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 six months ended June 30, 2001 and
2000:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
2001 2000 2001 2000
------ ------ ------ ------
Revenues ............................... 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries and benefits ............. 27.0 29.4 26.9 28.3
Supply cost ....................... 11.2 11.4 11.7 11.6
Other operating expenses .......... 21.0 19.2 21.0 20.4
Depreciation and amortization ..... 7.2 6.8 7.2 7.0
----- ----- ----- -----
Total operating expenses ...... 66.4 66.8 66.8 67.3
----- ----- ----- -----
Operating income .............. 33.6 33.2 33.2 32.7
Minority interest ...................... 19.9 20.2 19.5 19.8
Interest expense, net of interest income 1.2 2.6 2.4 2.5
----- ----- ----- -----
Earnings before income taxes .. 12.5 10.4 11.3 10.4
Income tax expense ..................... 5.0 4.0 4.5 4.0
----- ----- ----- -----
Net earnings .................. 7.5% 6.4% 6.8% 6.4%
===== ===== ===== =====
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Revenues were $49.5 million and $94.6 million in the three and six
month periods ended June 30, 2001, respectively, an increase of $14.9 million
and $28.4 million, or 43%, 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 six months ended
June 30, 2001, respectively. Same-center revenue growth is primarily
attributable to additional procedure volume. Our centers performed 96,144 and
185,180 procedures during three and six month periods ended June 30, 2001,
respectively, compared to 69,990 and 134,470 procedures in the comparable 2000
periods. Average revenue per operating center was $564,000 and $1.1 million in
the three and six months ended June 30, 2001, respectively, compared to $524,000
and $1.0 million in the comparable 2000 periods. The increase in average revenue
per operating center is due primarily to a greater mix of ophthalmology
procedures, which normally are reimbursed at a higher rate than gastroenterology
procedures, our predominant procedure type.
Salaries and benefits expense was $13.4 million and $25.4 million in
the three and six month periods ended June 30, 2001, respectively, an increase
of $3.2 million and $6.7 million, or 31% and 36%, respectively, over salaries
and benefits expense in the comparable 2000 periods. This increase resulted
primarily from an additional 21 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 $5.5 million and $11.1 million in the three and six
month periods ended June 30, 2001, respectively, an increase of $1.6 million and
$3.4 million, or 40% and 44%, respectively, over supply cost in the comparable
2000 periods. This increase resulted primarily from a 37% and 38% 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 $10.4 million and $19.9 million in the
three and six month periods ended June 30, 2001, respectively, an increase of
$3.7 million and $6.4 million, or 56% and 47%, 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 June 30, 2001, we
had three centers under development and 10 centers that had been open for less
than one year.
Depreciation and amortization expense increased $1.2 million and $2.2
million, or 53% and 48%, in the three and six month periods ended June 30, 2001,
respectively, over the comparable 2000 periods, primarily due to 21 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 July 1, 2000 to June 30, 2001.
Minority interest in earnings in the three and six month periods ended
June 30, 2001 increased by $2.9 million and $5.3 million, or 41% and 40%,
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 $0.3 million in the three months ended June
30, 2001 and increased $0.7 million in the six months ended June 30, 2001, or
36% and 42%, 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 months ended June 30, 2001.
We recognized income tax expense of $2.5 million and $4.3 million in
the three and six month periods ended June 30, 2001, respectively, compared to
$1.4 million and $2.6 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 June 30, 2001, we had working capital of $32.0 million compared to
$21.2 million at June 30, 2000. Operating activities for the six months ended
June 30, 2001 generated $14.5 million in cash flow compared to $8.5 million in
the comparable 2000 period. Cash and cash equivalents at June 30, 2001 and 2000
were $11.7 million and $7.7 million, respectively.
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During the six months ended June 30, 2001, we used approximately $34.5
million to acquire interests in practice-based ambulatory surgery centers,
including $10.5 million for the funding of other long-term obligations related
to recent 2000 acquisitions. 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 $4.3 million in the six months ended June
30, 2001. Maintenance capital expenditures, including new capital leases, for
the six months ended June 30, 2001 were $1.4 million. We received approximately
$2.6 million from capital contributions of our minority partners. We used our
cash flow from operations and net borrowings of long-term debt of $24.4 million
to fund our acquisitions and development activity.
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 six
months ended June 30, 2001, we also recognized approximately $1.4 million for
the issuance of stock under our employee stock option plans, including related
tax benefit of approximately $1.3 million.
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.
At June 30, 2001, we had $4.2 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 June 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. The proposed rule reduces the rates paid for certain
ambulatory surgery center procedures reimbursed by Medicare, including a number
of endoscopy and ophthalmology procedures performed at our centers. DHHS
initially planned to implement these new rates in the spring of 2001. However,
the Benefits Improvement and Protection Act of 2000, or BIPA, made three changes
to the June 1998 proposed rule. First, BIPA deferred the date on which the
proposal becomes effective to January 2002; second, BIPA requires the phase-in
of the new rates over four years; and third, it requires that DHHS use data
beginning in January 2003 based on a new surgery center cost survey from 1999 or
later in calculating new rates.
We estimate that if full implementation of the new rates occurred in
January 2002, they would adversely affect our annual revenues by 4% based on the
proposed rates and our historical procedure mix. However, we believe due to the
four year phase-in of the new rates, coupled with updated rates based on a new
cost survey 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 the rule's implementation. There can be no assurance that
the implementation of this rule 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 consolidated financial statements.
In July 2001, the Financial Accounting Standards Board issued SFAS No.
141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 will require that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001 and that the use of
the pooling-of-interest method is no longer allowed. SFAS No. 142 requires that
upon adoption, amortization of goodwill will cease and instead, the carrying
value of goodwill will be evaluated for impairment on an annual basis.
Identifiable intangible assets will continue to be amortized over their useful
lives 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. SFAS No. 142 is effective for fiscal years beginning after December 15,
2001. We are evaluating the impact of the adoption of these standards and have
not yet determined the effect of adoption on our financial position and results
of operations.
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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, 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 under the
Company's Second Amended and Restated Charter 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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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
Not applicable.
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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: August 14, 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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