<PAGE> 1
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, 2000
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 11, 2000, there were outstanding 9,787,276 shares of the
Registrant's Class A Common Stock, no par value and 4,787,131 shares of the
Registrant's Class B Common Stock, no par value.
<PAGE> 2
PART I
ITEM 1. FINANCIAL STATEMENTS
AMSURG CORP.
CONSOLIDATED BALANCE SHEETS
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 6,945 $ 9,523
Accounts receivable, net of allowance of $2,079 and $2,266, respectively.. 20,566 17,462
Supplies inventory........................................................ 2,208 2,077
Deferred income taxes..................................................... 590 590
Prepaid and other current assets.......................................... 1,646 1,608
-------- --------
Total current assets............................................. 31,955 31,260
Long-term receivables and deposits............................................. 1,946 2,036
Property and equipment, net.................................................... 30,304 27,995
Intangible assets, net......................................................... 87,034 76,577
-------- --------
Total assets..................................................... $151,239 $137,868
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................................... $ 1,992 $ 1,809
Notes payable............................................................. -- 1,238
Accounts payable.......................................................... 2,760 1,915
Accrued salaries and benefits............................................. 2,351 2,204
Other accrued liabilities................................................. 2,345 2,594
Current income taxes payable.............................................. 1,303 471
-------- --------
Total current liabilities........................................ 10,751 10,231
Long-term debt................................................................. 42,359 34,901
Deferred income taxes.......................................................... 2,670 2,670
Minority interest.............................................................. 18,452 17,358
Shareholders' equity:
Common stock:
Class A, no par value, 35,000,000 shares authorized, 9,779,776 and
9,760,228 shares outstanding, respectively.......................... 49,464 49,393
Class B, no par value, 4,800,000 shares authorized, 4,787,131
shares outstanding.................................................. 13,529 13,529
Retained earnings......................................................... 14,014 9,786
-------- --------
Total shareholders' equity....................................... 77,007 72,708
-------- --------
Total liabilities and shareholders' equity....................... $151,239 $137,868
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE> 3
AMSURG CORP.
CONSOLIDATED STATEMENTS OF EARNINGS
(ALL AMOUNTS ARE EXPRESSED IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
2000 1999 2000 1999
------- -------- ------- --------
<S> <C> <C> <C> <C>
Revenues .................................................. $34,590 $ 24,677 $66,223 $ 48,071
Operating expenses:
Salaries and benefits ................................ 10,181 6,801 18,729 13,330
Other operating expenses ............................. 10,590 8,228 21,234 16,411
Depreciation and amortization ........................ 2,335 1,718 4,617 3,414
Gain on sale of assets ............................... -- (33) -- (33)
------- -------- ------- --------
Total operating expenses ......................... 23,106 16,714 44,580 33,122
------- -------- ------- --------
Operating income ................................. 11,484 7,963 21,643 14,949
Minority interest ......................................... 6,985 4,942 13,143 9,151
Interest expense, net of interest income .................. 914 202 1,625 435
------- -------- ------- --------
Earnings before income taxes and cumulative effect
of an accounting change ........................ 3,585 2,819 6,875 5,363
Income tax expense ........................................ 1,380 1,086 2,647 2,065
------- -------- ------- --------
Net earnings before cumulative effect of an
accounting change .............................. 2,205 1,733 4,228 3,298
Cumulative effect of the change in the method in which
pre-opening costs are recorded .......................... -- -- -- (126)
------- -------- ------- --------
Net earnings ..................................... $ 2,205 $ 1,733 $ 4,228 $ 3,172
======= ======== ======= ========
Basic earnings per common share:
Net earnings before cumulative effect of an accounting
change ............................................ $ 0.15 $ 0.12 $ 0.29 $ 0.23
Net earnings ......................................... $ 0.15 $ 0.12 $ 0.29 $ 0.22
Diluted earnings per common share:
Net earnings before cumulative effect of an accounting
change ............................................. $ 0.15 $ 0.12 $ 0.28 $ 0.22
Net earnings ......................................... $ 0.15 $ 0.12 $ 0.28 $ 0.22
Weighted average number of shares and share
equivalents outstanding:
Basic ................................................ 14,561 14,359 14,559 14,341
Diluted .............................................. 14,856 14,700 14,866 14,710
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE> 4
AMSURG CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(ALL AMOUNTS ARE EXPRESSED IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings ...................................................................... $ 4,228 $ 3,172
Adjustments to reconcile net earnings to net cash provided by operating activities:
Minority interest ............................................................. 13,143 9,151
Distributions to minority partners ............................................ (13,013) (7,906)
Depreciation and amortization ................................................. 4,617 3,414
Amortization of deferred compensation on restricted stock ..................... -- 68
Net gain on sale of assets .................................................... -- (33)
Cumulative effect of an accounting change ..................................... -- 126
Increase (decrease) in cash, net of effects of acquisitions, due to changes in:
Accounts receivable, net ................................................. (1,847) (1,593)
Supplies inventory ....................................................... 8 (226)
Prepaid and other current assets ......................................... (38) (310)
Other assets ............................................................. 93 57
Accounts payable ......................................................... 737 43
Accrued expenses and other liabilities ................................... 652 716
Other, net ............................................................... (92) (16)
-------- -------
Net cash flows provided by operating activities .......................... 8,488 6,663
Cash flows from investing activities:
Acquisition of interest in surgery centers ........................................ (12,378) (3,604)
Acquisition of property and equipment ............................................. (3,887) (1,719)
Proceeds from sale of assets ...................................................... -- 26
Decrease (increase) in long-term receivables ...................................... 82 (192)
-------- -------
Net cash flows used by investing activities .............................. (16,183) (5,489)
Cash flows from financing activities:
Repayment of notes payable ........................................................ (1,188) (2,385)
Proceeds from long-term borrowings ................................................ 13,650 5,933
Repayment on long-term borrowings ................................................. (6,753) (7,540)
Net proceeds from issuance of common stock ........................................ 21 107
Proceeds from capital contributions by minority partners .......................... 264 455
Financing cost incurred ........................................................... (877) --
-------- -------
Net cash flows provided (used) by financing activities ................... 5,117 (3,430)
-------- -------
Net decrease in cash and cash equivalents .............................................. (2,578) (2,256)
Cash and cash equivalents, beginning of period ......................................... 9,523 6,070
-------- -------
Cash and cash equivalents, end of period ............................................... $ 6,945 $ 3,814
======== =======
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE> 5
AMSURG CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(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 1999 Annual Report on Form 10-K.
(2) LONG-TERM DEBT
On May 5, 2000, the Company refinanced and amended its revolving credit
facility to permit the Company to borrow up to $100,000,000 to finance the
Company's acquisition 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 amended 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. Borrowings under the amended
credit facility are due on May 5, 2003. At June 30, 2000, the Company had
$39,250,000 in borrowings outstanding under the revolving credit facility.
(3) ACQUISITIONS AND OTHER TRANSACTIONS
In the six months ended June 30, 2000, the Company, through wholly
owned subsidiaries and in separate transactions, acquired majority interests in
three physician practice-based surgery centers. The aggregate purchase price and
related cost for the acquisitions was approximately $12,378,000 of which the
Company assigned approximately $11,450,000 to excess cost over net assets of
purchased operations.
Subsequent to June 30, 2000, the Company, through a wholly owned
subsidiary, acquired a majority interest in a physician practice-based surgery
center for approximately $2.8 million.
On January 31, 2000, the Company signed a definitive agreement with
Physicians Resource Group, Inc. ("PRG") for the purchase of PRG's majority
ownership interest in 11 surgery centers for approximately $40,000,000, two of
which were purchased in the transactions described above. Until the closing of
the transactions contemplated under the definitive agreement, the Company is to
manage the operations of the centers under a management agreement which began on
January 1, 2000.
5
<PAGE> 6
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 the control of the Company. Although
the Company believes 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 the objectives and plans of the Company will be achieved. We
undertake no obligation to publicly release any revisions to any forward-looking
statements contained herein to reflect events and circumstances occurring after
the date hereof or to reflect the occurrence of unanticipated events.
Forward-looking statements and the Company's liquidity, financial
condition and results of operations may be affected by the Company's ability to
enter into partnership or operating agreements for new practice-based ambulatory
surgery centers and new specialty physician networks; its ability to identify
suitable acquisition candidates and negotiate and close acquisition
transactions; its ability to obtain the necessary financing or capital on terms
satisfactory to the Company in order to execute its expansion strategy; its
ability to manage growth; its ability to contract with managed care payers on
terms satisfactory to the Company for its existing centers and its centers that
are currently under development; its ability to obtain and retain appropriate
licensing approvals for its existing centers and centers currently under
development; its ability to minimize start-up losses of its development centers;
its ability to maintain favorable relations with its physician partners; the
implementation of the proposed rule issued by the Health Care Financing
Administration which would update the ratesetting methodology, payment rates,
payment policies and the list of covered surgical procedures for ambulatory
surgery centers; risks associated with the Company's status as a general partner
of the limited partnerships; and risks relating the Company's technological
systems. Additionally, with regard to the pending transaction with Physicians
Resource Group, Inc. ("PRG"), factors include, but are not limited to, the
parties' respective ability to meet all the conditions of the definitive
agreement and the consummation of the transactions contemplated thereunder; the
Company's ability to enter into partnership or operating agreements with the
physician owners of PRG surgery centers; the Company's ability to effectively
integrate the operations of the PRG surgery centers into its operations; and the
Company's ability to operate the PRG surgery centers profitably.
OVERVIEW
The Company develops, acquires and operates practice-based ambulatory
surgery centers in partnership with physician practices. As of June 30, 2000,
the Company owned a majority interest (51% or greater) in 68 surgery centers and
had established seven start-up specialty physician networks, of which it was the
majority owner (51%) of six of such networks.
The following table presents the changes in the number of surgery
centers in operation and centers under development during the three and six
months ended June 30, 2000 and 1999. 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.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------- -------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Centers in operation, beginning of period.. 65 52 63 52
New center acquisitions placed in operation 2 2 3 2
New development centers placed in operation 1 -- 2 --
---- ---- ---- ----
Centers in operation, end of period ....... 68 54 68 54
==== ==== ==== ====
Centers under development, end of period .. 11 5 11 5
==== ==== ==== ====
</TABLE>
Of the surgery centers in operation as of June 30, 2000, 47 centers
perform gastrointestinal endoscopy procedures, 18 centers perform ophthalmology
surgery procedures, one center performs orthopedic procedures, one center
performs otolaryngology procedures and one center performs ophthalmology,
urology, general surgery and otolaryngology procedures. The other partner or
member in each partnership or limited liability company is in each case an
entity owned by physicians who perform procedures at the center.
6
<PAGE> 7
The specialty physician networks are owned through limited partnerships
and limited liability companies in which, with the exception of one, the Company
owns a majority interest. The other partners or members are individual
physicians who will provide the medical services to the patient population
covered by the contracts the network will seek to enter into with managed care
payers. The Company does not expect that the specialty physician networks alone
will be a significant source of income. These networks were and will be formed
in selected markets primarily as a contracting vehicle for certain managed care
arrangements to generate revenues for the Company's practice-based surgery
centers. As of June 30, 2000, five networks had secured managed care contracts
and were operational.
The Company intends to expand through the development and acquisition
of additional practice-based ambulatory surgery centers in targeted surgical
specialties. In addition, the Company believes that its surgery centers,
combined with its relationships with specialty physician practices in the
surgery centers' markets, will provide the Company with other opportunities for
growth from specialty network development. By using its surgery centers as a
base to develop specialty physician networks that are designed to serve large
numbers of covered lives, the Company believes that it will strengthen its
market position in contracting with managed care organizations.
On January 31, 2000, the Company signed a definitive agreement with PRG
for the purchase of a portion of PRG's ownership interest in 11 single specialty
ophthalmology ambulatory surgery centers for approximately $40 million in cash,
two of which have been purchased as of August 11, 2000. In addition, the Company
may purchase additional centers from PRG upon completion of satisfactory due
diligence. As part of this agreement, the Company began managing these centers
under a management agreement beginning on January 1, 2000. PRG has filed for
bankruptcy in the United States Bankruptcy Court for the Northern District of
Texas. In December 1999 and January 2000, the Company also acquired from PRG,
through wholly owned subsidiaries, interests in two surgery centers in separate
transactions outside of the definitive agreement.
While the Company generally owns a 51% to 70% interest in the entities
that own the surgery centers, the Company's 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
The Company's principal source of revenues is a facility fee charged
for surgical procedures performed in its 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 to
third-party payers by such physicians.
Practice-based ambulatory surgery centers such as those in which the
Company owns a majority interest depend upon third-party reimbursement programs,
including governmental and private insurance programs, to pay for services
rendered to patients. The Company derived approximately 40% and 44% of its net
revenues from governmental healthcare programs, including Medicare and Medicaid,
in the six months ended June 30, 2000 and 1999, respectively. The Medicare
program currently pays ambulatory surgery centers and physicians in accordance
with fee schedules which are prospectively determined.
7
<PAGE> 8
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, 2000 and
1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues .................................................. 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries and benefits ................................ 29.4 27.6 28.3 27.7
Other operating expenses ............................. 30.6 33.3 32.0 34.1
Depreciation and amortization ........................ 6.8 7.0 7.0 7.1
Gain on sale of assets ............................... -- (0.1) -- --
----- ----- ----- -----
Total operating expenses ......................... 66.8 67.8 67.3 68.9
----- ----- ----- -----
Operating income ..................................... 33.2 32.2 32.7 31.1
Minority interest ......................................... 20.2 20.0 19.8 19.0
Interest expense, net of interest income .................. 2.6 0.8 2.5 0.9
----- ----- ----- -----
Earnings before income taxes and cumulative effect
of an accounting change ........................ 10.4 11.4 10.4 11.2
Income tax expense ........................................ 4.0 4.4 4.0 4.3
----- ----- ----- -----
Net earnings before cumulative effect of an
accounting change .............................. 6.4 7.0 6.4 6.9
Cumulative effect of the change in the method in which
pre-opening costs are recorded .......................... -- -- -- (0.3)
----- ----- ----- -----
Net earnings ..................................... 6.4% 7.0% 6.4% 6.6%
===== ===== ===== =====
</TABLE>
Revenues were $34.6 million and $66.2 million in the three and six
months ended June 30, 2000, respectively, an increase of $9.9 million and $18.2
million, or 40% and 38%, respectively, over revenues in the comparable 1999
periods. The increase is primarily attributable to additional centers in
operation during 2000. Same-center revenues in the three and six months ended
June 30, 2000, increased by 10%. Same-center growth is primarily attributable to
additional procedure volume. The Company anticipates further revenue growth
during 2000 as a result of additional start-up and acquired centers expected to
be placed in operation and from same-center revenue growth.
Salaries and benefits expense was $10.2 million and $18.7 million in
the three and six months ended June 30, 2000, respectively, an increase of $3.4
million and $5.4 million, or 50% and 41%, respectively, over salaries and
benefits expense in the comparable 1999 periods. This increase resulted
primarily from additional 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. As a percentage of revenues, salaries and benefits
increased during the 2000 periods due in part to certain corporate employee
bonuses incurred.
Other operating expenses were $10.6 million and $21.2 million in the
three and six months ended June 30, 2000, respectively, an increase of $2.4
million and $4.8 million, or 29%, over other operating expenses in the
comparable 1999 periods. This increase resulted primarily from additional
centers in operation.
The Company anticipates further increases in operating expenses in
2000, 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.
8
<PAGE> 9
Depreciation and amortization expense increased $617,000 and $1.2
million, or 36% and 35%, in the three and six months ended June 30, 2000,
respectively, over the comparable 1999 periods, primarily due to 14 additional
surgery centers in operation in the 2000 periods compared to the 1999 periods.
The minority interest in earnings in the three and six months ended
June 30, 2000 increased by $2.0 million and $4.0 million, or 41% and 44%,
respectively, over the comparable 1999 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 increased $792,000 and $1.2 million, or 392% and 274%,
in the three and six months ended June 30, 2000, respectively, from the
comparable 1999 periods. This increase was the result of an increase in debt
incurred or assumed in connection with additional acquisitions of interests in
surgery centers and interest expense associated with newly opened start-up
surgery centers financed partially with bank debt. In addition, the Company is
experiencing higher interest rates in 2000 due to a general increase in interest
rates as well as an increase in the interest rate structure under the amended
credit facility as discussed below.
The Company recognized income tax expense of $1.4 million and $2.6
million in the three and six months ended June 30, 2000, respectively, compared
to $1.1 million and $2.1 million, respectively, in the comparable 1999 periods.
The Company's effective tax rate in the 2000 and 1999 periods was 38.5% of net
earnings before income taxes and cumulative effect of an accounting change and
differed from the federal statutory income tax rate of 34% primarily due to the
impact of state income taxes.
Prior to January 1, 1999, deferred pre-opening costs, which consist of
costs incurred for surgery centers while under development, had been amortized
over one year, starting upon the commencement date of operations. In 1999, the
Company adopted Statement of Position No. 98-5 "Reporting on the Costs of
Start-Up Activities," which requires that pre-opening costs be expensed as
incurred and that upon adoption all unamortized deferred pre-opening costs be
expensed as a cumulative effect of a change in accounting principle.
Accordingly, as of January 1, 1999, the Company expensed $126,000, net of
minority interest and income taxes, as a cumulative effect of an accounting
change.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the Company had working capital of $21.2 million
compared to $14.8 million at the comparable 1999 period. Operating activities
for the six months ended June 30, 2000, generated $8.5 million in cash flows
compared to $6.7 million in the comparable 1999 period. Cash and cash
equivalents at June 30, 2000 and 1999 were $6.9 million and $3.8 million,
respectively.
During the six months ended June 30, 2000, the Company used
approximately $12.4 million to acquire an interest in practice-based ambulatory
surgery centers. In addition, the Company made capital expenditures primarily
for new start-up surgery centers and for new or replacement property at existing
centers which totaled approximately $3.9 million in the six months ended June
30, 2000, of which approximately $264,000 was funded from the capital
contributions of the Company's minority partners.
Between notes payable and long-term debt, the Company had net
borrowings of $5.7 million during the six months ended June 30, 2000, which were
used to fund a portion of its acquisitions and a portion of its development
activities. The portion of acquisition and development activity obligations not
funded through debt borrowings was funded through existing cash and cash flows
from operations.
On May 5, 2000, the Company refinanced and amended its revolving credit
facility to permit the Company to borrow up to $100.0 million to finance the
Company's acquisition and development projects, including the transactions
contemplated under the agreement with PRG, at a 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 amended loan agreement also provides for a fee ranging
between 0.375% to 0.50% of unused commitments based on borrowing levels. The
loan agreement also prohibits the payment of dividends and contains covenants
relating to the ratio of debt to net worth, operating performance and minimum
net worth. The Company was in compliance with all covenants at June 30, 2000. At
June 30, 2000, borrowings under the amended credit facility were $39.3 million,
are due on May 5, 2003, and are secured primarily by a pledge of the stock of
the Company's subsidiaries and the Company's membership interests in the LLCs.
During the three and six months ended June 30, 2000, the Company incurred
approximately $877,000 in financing costs associated with the amended credit
facility.
9
<PAGE> 10
On June 12, 1998, HCFA 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 ophthalmological procedures
performed at the Company's centers. The Medicare, Medicaid and SCHIP Balanced
Budget Refinement Act, enacted in November 1999, requires HCFA to either update
the surgery center cost survey used in the proposed rule or to phase the new
rates and methodology into use over a three-year period. The rule is expected to
be revised and published in the fall of 2000 and the Company expects the
earliest implementation date to be April 2001. There can be no assurance that
the final rule will not adversely impact the Company's financial condition,
results of operations and business prospects.
The Company believes that the proposed rule if adopted as proposed in
June 1998 would adversely affect the Company's annual revenues by approximately
4% at the time of full implementation based on the rates stated therein and the
Company's historical procedure mix. However, the Company expects that the
earnings impact will be offset by certain actions taken by the Company or that
the Company intends to take, including actions to effect certain cost
efficiencies in center operations, reduce corporate overhead costs and provide
for contingent purchase price adjustments for acquisitions prior to
implementation. There can be no assurance that the Company will be able to
implement successfully all of these actions or that if implemented the actions
will offset fully the adverse impact of the rule, as finally adopted, on the
earnings of the Company.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. The Company is
evaluating the effects of adopting SFAS No. 133, but does not expect the
adoption of this pronouncement to have a material effect on the Company's
consolidated financial statements.
SEC Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in
Financial Statements", released in December 1999 provides guidance for applying
generally accepted accounting principles to selected revenue recognition issues.
The implementation of SAB 101 is required no later than the fourth fiscal
quarter of fiscal years beginning after December 15, 1999. The Company does not
expect the application of SAB No. 101 to have a material impact on the Company's
consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk from exposure to changes in
interest rates based on its financing, investing and cash management activities.
The Company utilizes a balanced mix of debt maturities along with both
fixed-rate and variable-rate debt to manage its exposure to changes in interest
rates. In May 2000 the Company amended, refinanced and increased its credit
facility in order to provide for additional borrowings for acquisitions and
development projects, and accordingly, the Company will now experience higher
interest rates than were provided for under the credit facility prior to this
recent amendment. Although there can be no assurances that interest rates will
not further change significantly, the Company does not expect such changes in
interest rates to have a material effect on net earnings or cash flows in 2000.
10
<PAGE> 11
PART II
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Company's Annual Shareholders Meeting held on May 19, 2000, the
following members were elected to the Board of Directors by the vote set forth
below:
<TABLE>
<CAPTION>
VOTES VOTES VOTES
FOR AGAINST WITHHELD
---------- ------- ---------
<S> <C> <C> <C> <C>
Class III Director Thomas G. Cigarran 42,638,547 - 1,987,569
Class III Director Debora A. Guthrie 39,399,101 - 5,227,015
Class III Director Bergein F. Overholt, M.D. 42,752,243 - 1,873,873
</TABLE>
Also, the following proposal was considered and approved at the Annual
Shareholders Meeting by the vote set forth below:
<TABLE>
<CAPTION>
VOTES VOTES VOTES
FOR AGAINST WITHHELD
---------- ------- ---------
<S> <C> <C> <C>
Approval of an amendment to the Company's 1997
Stock Incentive Plan to increase the number of
shares reserved for issuance thereunder from
1,120,000 to 1,600,000 7,200,948 3,490,580 29,410
</TABLE>
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 Amended and Restated Revolving Credit Agreement,
dated as of May 5, 2000, among the Company, SunTrust
Bank, as administrative agent, Bank of America, N.A.,
as syndication agent, and various banks and other
financial institutions (incorporated by reference to
Exhibit 10.1 of the Quarterly Report on Form 10-Q for
the quarter ended March 31, 2000).
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
The Company filed a report on Form 8-K, dated June 5,
2000, during the quarter ended June 30, 2000 to report the
acquisition of a 60 % interest in a limited liability company
which operates an ambulatory surgery center in Las Vegas,
Nevada.
11
<PAGE> 12
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 11, 2000 By: /s/ Claire M. Gulmi
---------------------------------------
CLAIRE M. GULMI
Senior Vice President and Chief
Financial Officer (Principal Financial
and Duly Authorized Officer)
12
