SEC Filings

AMSURG CORP filed this Form 10-Q on 11/12/1997
Entire Document
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       Depreciation and amortization expense increased $524,000 and $1.4
million, or 69% and 68%, for the three and nine month periods ended September
30, 1997, respectively, over the comparable periods in 1996, primarily due to 12
additional surgery centers and one physician practice in operation in the 1997
periods compared to the 1996 periods. Interest expense increased $178,000 and
$472,000, or 72% and 71%, in the three month and nine month periods ended
September 30, 1997, respectively, over the comparable periods in 1996 due to
debt assumed or incurred in connection with additional acquisitions of interests
in surgery centers and a physician practice plus the interest expense associated
with newly opened start-up surgery centers financed partially with bank debt.

       The Company anticipates further increases in operating expenses during
the remainder of 1997 primarily due from additional start-up centers placed in
operation in excess of the number of development centers historically opened by
the Company within a nine month period. Typically a start-up center will incur
start-up losses during its initial one to three months of operations and
experiences lower revenues and operating margins than an established center
until its case load grows to a more optimal operating level, which generally is
expected to occur within 12 months after a center opens.

       Included in net loss on sale of assets in the nine month period ended
September 30, 1997 is a loss of approximately $2.0 million from the disposition
in September 1997 of the Company's investment in a partnership that owned two
surgery centers acquired in 1994. Various disagreements with the sole physician
partner over the operation of these centers had adversely impacted the
operations of these centers. After a series of discussions and attempts to
resolve these differences, the Company determined that the partners could not
resolve their disagreement and that as a result the carrying value of the assets
associated with this partnership would not likely be fully recovered. The
Company 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 in the first quarter of 1997 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." In September 1997, the Company sold its interest in the partnership assets
to its physician partner and recognized a partial loss recovery. Management
believes it has good relationships with its other physician partners and that
the loss attributable to the partnership discussed above resulted from a unique
set of circumstances. The Company does not believe that the absence of the
operations of these two centers will have a significant impact on the Company's
future ongoing results of operations.

       In addition, net loss on sale of assets includes a gain of approximately
$460,000 from the sale in July 1997 of the surgery center building and equipment
which the Company leased to a gastrointestinal physician practice. In July 1997,
the Company also terminated its management agreement with the physician practice
for the surgery center in which it had no ownership interest but had managed
since 1994.

       Distribution cost in the three and nine month periods ended September 30,
1997 represents costs incurred to date related to effecting the Distribution.

       The Company's minority interest in earnings for the three and nine month
periods ended September 30, 1997 increased by $914,000 and $2.7 million,
respectively, from the comparable 1996 periods primarily as a result of minority
partners' interest in earnings at surgery centers recently added to operations
and from increased profitability at same-centers.

       The Company recognized income tax expense of $543,000 and $1.3 million in
the three and nine month periods ended September 30, 1997, respectively,
compared to $188,000 and $665,000 in the comparable periods in 1996. Because the
net loss on sale of assets may only be deducted for tax purposes against future
capital gains for up to five years, the Company has recognized no tax benefit
associated with this loss in the current period. However, certain tax aspects of
the gain transaction recorded during the nine month period ended September 30,
1997 resulted in income tax expense of approximately $100,000. In addition, the
distribution cost recognized by the Company is not deductible for tax purposes.
The Company's effective tax rate in both periods is 40% of earnings prior to the
impact of the net loss on sale of assets and distribution cost, and differs from
the federal statutory income tax rate of 34% due primarily to the impact of
state income taxes.