SEC Filings

10-Q
AMSURG CORP filed this Form 10-Q on 11/12/1997
Entire Document
 
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       Accretion of preferred stock discount resulted from the issuance during
November 1996 of redeemable preferred stock with a redemption amount of $3.0
million in November 1996. The preferred stock was recorded at its fair market
value, net of issuance costs. The redeemable preferred stock is being accreted
to its redemption value including potential dividends which will begin in
November 1998 unless redeemed by that date.

LIQUIDITY AND CAPITAL RESOURCES

       Operating activities for the nine month period ended September 30, 1997
generated $9.7 million in cash flow. Investing activities during the nine month
period ended September 30, 1997 used $18.4 million, including $12.6 million used
to acquire interests in five additional surgery centers and an interest in the
urology physician practice, and $7.7 million to acquire property and equipment
for new start-up surgery centers and for new or replacement property at existing
centers, which were partially offset by $2.0 million in proceeds from the sale
of a surgery center building and equipment and the sale of a partnership
interest in two surgery centers. Financing activities during the nine month
period ended September 30, 1997 provided $9.1 million in cash flow, primarily as
a result of (i) net additions to long-term debt of $12.6 million, (ii) minority
partner capital contributions to the Company's partnerships and limited
liability companies of $2.3 million and (iii) $494,000 in cash proceeds from the
issuance of common stock; these financing proceeds were partially offset by $6.3
million in distributions to surgery center minority partners. At September 30,
1997, the Company had $3.3 million in outstanding term loan borrowings under its
amended and restated bank credit agreement which is repayable through June 2000.
The Company also had outstanding borrowings of $17.0 million under a related
revolving credit facility which provides up to $25.0 million in available credit
through April 1999 for acquisitions and development projects. Borrowings under
the bank credit agreement and related credit facility bear interest at a rate
equal to the prime rate or 1.75% above LIBOR or a combination thereof at the
Company's option, plus a .35% fee for unused commitments. At September 30, 1997,
the Company's partnerships and limited liability companies had unfunded
construction and equipment purchase commitments for centers under development of
approximately $3.1 million, of which the Company anticipates approximately $2.1
million will be borrowed under the Company's credit facility (and guaranteed on
a pro rata basis by the physicians) and that the remaining amount will be
provided by the Company and the physician partners in proportion to their
respective ownership interests. The Company intends to fund its portion out of
cash flow from operations.

       On November 20, 1996, the Company issued shares of its Series A Preferred
Stock and Series B Preferred Stock to certain unaffiliated institutional
investors for cash proceeds of approximately $5.0 million, after payment of
offering expenses. The purpose of the offering was to fund the acquisition and
development of surgery centers and to provide other working capital as needed
prior to being in position to access capital markets as an independent public
company following the Distribution. The Series A Preferred Stock has a
liquidation value of $3.0 million and will accrue dividends of 8% per annum on
such liquidation value, commencing November 21, 1998. This stock is subject to
redemption at the Company's option at any time, and is subject to redemption at
the option of the holders on November 20, 2002 and upon the occurrence of
certain events, including a public offering yielding at least $20.0 million in
net proceeds to the Company and/or its stockholders (or $25.0 million in net
proceeds if the Distribution does not occur) (a "Qualified IPO"). The Series A
Preferred Stock may also be converted into shares of Common Stock at the option
of the holders for a limited period of time following the Distribution or upon a
Qualified IPO at the then current market price of the Common Stock. Upon a
Qualified IPO or other triggering event, the Series B Preferred Stock will be
automatically converted into a number of shares of Common Stock that
approximates 6% of the equity of the Company determined as of November 20, 1996,
with that percentage being ratably increased to 8% of the equity of the Company
if a triggering event has not occurred by November 20, 2000. If a Qualified IPO
or other triggering event does not occur by November 20, 2002, the holders of
the Series B Preferred Stock will have the right to sell such stock to the
Company at a formula price.

       Historically the Company has depended on AHC for the majority of its
equity financing. A principal purpose of the Distribution is to permit the
Company to have access to public debt and equity capital markets as an
independent public company. Management believes that the Company will have
access to such capital on more favorable terms as an independent public company
than it could have as a majority-owned subsidiary of AHC, particularly in public
equity markets. While the Company anticipates that its operating activities will
continue to provide positive cash flow and increased revenues, the Company will
require additional financing in order to fund its development and acquisition
plans and to achieve its long-term strategic growth plans. This additional
financing could take the form of a private or public offering of debt or equity
securities or additional bank financing. No assurances can be given that the
necessary financing will be obtainable on terms satisfactory to the Company. The


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