SEC Filings

10-12G/A
AMSURG CORP filed this Form 10-12G/A on 05/21/1997
Entire Document
 
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primarily from the physician group practices and a start-up center. Physician
group practices generally have lower operating margins than ambulatory surgery
centers. Because the two physician practices in which AmSurg now has a majority
ownership have both greater revenues and greater operating expenses as a
percentage of revenues than any single center, the acquisition of the urology
physician practice and the inclusion in operations of the gastroenterology and
primary care physician practice for the full 1997 period compared to two months
in the comparable period in 1996 caused the practices to have a
disproportionately large impact on operating margins. Salaries and benefits
expense and other operating expenses as a percentage of revenues also increased
because there existed one newly opened start-up surgery center in the three
month period ended March 31, 1997. Typically start-up centers initially
experience lower operating margins until their respective case load grows to a
more optimal operating level, which generally is expected to occur within 12
months after a center opens.
    
 
     Depreciation and amortization expense increased $416,000, or 62%, in the
three month period ended March 31, 1997 over the comparable period in 1996,
primarily due to 11 additional surgery centers and one physician practice in
operation in the 1997 period compared to the 1996 period. The increase of
$116,000, or 55%, in interest expense for the three month period ended March 31,
1997 over the comparable period in 1996 is primarily attributable to debt
assumed or incurred in connection with additional acquisitions of interests in
surgery centers and physician practices plus the interest expense associated
with newly opened start-up surgery centers financed partially with bank debt.
 
   
     Impairment loss of $2,321,000 in the three month period ended March 31,
1997 represents a charge in accordance with Statement of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of." AmSurg determined that an impairment in
the asset carrying value at one of its partnerships that owns two surgery
centers acquired in 1994 had taken place and as a result it recorded an
impairment of asset carrying value associated with these centers. Various
disagreements with the sole physician partner over the operation of these
centers have adversely impacted the operations of these centers. After a series
of discussions and attempts to resolve their differences occurring in March
1997, AmSurg determined in April 1997 that the partners could not resolve their
disagreements and that as a result the carrying value of the assets associated
with this partnership is not likely to be fully recovered. In determining that
an impairment had occurred, AmSurg projected the undiscounted cash flows from
these centers and determined these cash flows to be less than the carrying value
of the long-lived assets attributable to this partnership. Accordingly an
impairment loss equal to the excess of the carrying value of the long-lived
assets over the present value of the estimated future cash flows was recorded.
While there has been no final decision, AmSurg believes that the most probable
outcome will be the discontinuance of its involvement with these centers. It is
management's intent to pursue a course of resolution that is as economically
favorable as possible to AmSurg. AmSurg believes it has good relationships with
its other physician partners and that the impairment loss attributable to the
partnership discussed above resulted from a unique set of circumstances. The
revenues and the pretax loss after minority interest for these two centers for
the three month period ended March 31, 1997, before consideration of this
impairment loss, were $148,000 and $7,000, respectively. AmSurg does not believe
that the operations of these two centers subsequent to March 31, 1997 will have
any significant impact on AmSurg's future ongoing results of operations. See
"RISK FACTORS -- Risks Related to Intangible Assets."
    
 
     Minority partners' interest in earnings for the three month period ended
March 31, 1997 rose to $1,948,000 from $1,196,000 for the comparable period in
1996, an increase of 63%, primarily as a result of minority partners' interest
in earnings at surgery centers added to operations and from increased
same-center profitability.
 
     AmSurg recognized tax expense of $329,000 in the three month period ended
March 31, 1997 compared to $236,000 in the comparable period in 1996. Because
the loss incurred associated with the impairment loss discussed above may only
be deducted for tax purposes against future capital gains up to five years,
AmSurg has recognized no tax benefit associated with this loss in the current
period. AmSurg's effective tax rate is 40% of earnings prior to the impairment
loss in both periods, and differs from the federal statutory income tax rate of
34% due primarily to the impact of state income taxes.
 
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