Acquisitions

9 Months Ended

Sep. 30, 2011

Acquisitions

Acquisitions

(4) Acquisitions

The Company accounts for its business combinations under the fundamental requirements of the acquisition method of accounting and under the premise that an acquirer be identified for each business combination. The acquirer is the entity that obtains control of one or more businesses in the business combination and the acquisition date is the date the acquirer achieves control. The assets acquired, liabilities assumed and any noncontrolling interests in the acquired business at the acquisition date are recognized at their fair values as of that date, and the direct costs incurred in connection with the business combination are recorded and expensed separately from the business combination.

As a significant part of its growth strategy, the Company primarily acquires controlling interests in centers. During the nine months ended September 30, 2011 and 2010, the Company, through a wholly owned subsidiary, acquired a controlling interest in 20 centers and four centers, respectively. In addition, the Company acquired a non-controlling interest in two centers during the nine months ended September 30, 2011. The Companyacquired its interest in five centers in separate transactions during the nine months ended September 30, 2011, and acquired 17 centers, including the less than majority owned centers, from National Surgical Care, Inc. (“NSC”) in one transaction on September 1, 2011.

The aggregate amount paid for the acquisitions during the nine months ended September 30, 2011 and 2010 was approximately $188,500,000and $41,615,000, respectively, and was paid in the form of cash and purchase price payable of approximately$422,000 and $0, respectively. The purchase price of the NSC centers was $135,000,000, plus cash for the amount of working capital as of the transaction date in excess of the targeted working capital, as defined in the purchase agreement, plus cash forNSC's interest in the acquired cash in the bank as of the transaction date. The Company withheld $1,700,000 of the purchase price at close due to the expectedexercise by the non-controlling partners at one of the acquired centers to purchase the remaining interest upon a change of control. The Company has agreed to pay as additional consideration, an amount up to $7,500,000 based on a multiple of the excess earnings over the targeted earnings of the acquired centers, if any, from the period of January 1, 2012 to December 31, 2012. In addition to the $1,700,000 of the purchase price withheld, $3,500,000 of the purchase price was placed in an escrow fund to allow for any working capital adjustments up to $500,000, with the remainder allocated to potential indemnity claims, if any, which must be asserted by the Company within one year of the transaction date. In conjunction with the transaction, the Company has engaged a third party valuation firm to obtain assistance in establishing the fair value of certain assets and liabilities including certain tangible and intangible assets of the NSC centers and the contingent purchase price payable related to the additional consideration. The Company's assessment related to the fair value of these items and correlating purchase price allocation are provisional and any adjustments as a result of the finalization of such assessment will be recorded when complete.

These transactions were funded by a combination of operating cash flow and borrowings under the Company's revolving credit facility. The total fair value of an acquisition includes an amount allocated to goodwill, which results from the centers' favorable reputations in their markets, their market positions and their ability to deliver quality care with high patient satisfaction consistent with the Company's business model.

The acquisition date fair value of the total consideration transferred and acquisition date fair value of each major class of consideration for the acquisitions completed in the nine months ended September 30, 2011 and 2010 are as follows (in thousands):

		Nine Months Ended September 30,
		Acquired
		NSC		Individual		Individual
		Centers		Acquisitions		Acquisitions
		2011				2010
Accounts receivable		$	16,032	$	2,180	$	2,033
Supplies, inventory, prepaid and other current assets			5,357		730		792
Investment in unconsolidated subsidiaries			10,710		-		-
Property and equipment			13,347		4,016		1,720
Goodwill			168,544		87,505		60,250
Other intangible assets			-		1,750		-
Accounts payable			(2,574)		(709)		(1,077)
Other accrued liabilities			(4,609)		(150)		(90)
Long-term debt			(2,900)		(2,699)		(199)
Other long-term liabilities			(422)		-		-
	Total fair value		203,485		92,623		63,429
	Less: Fair value attributable to noncontrolling interests		71,322		36,286		21,814
	Acquisition date fair value of total consideration transferred	$	132,163	$	56,337	$	41,615

Fair value attributable to noncontrolling interests is based on significant inputs that are not observable in the market. Key inputs used to determine the fair value include financial multiples used in the purchase of noncontrolling interests in centers. Such multiples, based on earnings, are used as a benchmark for the discount to be applied for the lack of control or marketability. The fair value of noncontrolling interests may be subject to adjustment as the Company completes its initial accounting for acquired intangible assets. For the nine months ended September 30, 2011 and 2010, respectively, approximately $161,000,000 and $40,000,000 of goodwill recorded was deductible for tax purposes. Goodwill deductible for tax purposes associated with the acquisition of NSC centers was $108,000,000 for the nine months ended September 30, 2011. Associated with the transactions discussed above, the Company incurred and expensed in other operating expenses approximately $2,657,000 and $189,000 in acquisition related costs, for the nine months ended September 30, 2011 and 2010, respectively.

Revenues and net earnings included in the nine months ended September 30, 2011 and 2010 associated with these acquisitions are as follows (in thousands):

		Nine Months Ended September 30,
		Acquired
		NSC		Individual		Individual
		Centers		Acquisitions		Acquisitions
		2011				2010
Revenues		$	8,910	$	13,865	$	6,882
Net (loss) earnings			(533)		4,592		2,389
Less: Net earnings attributable to noncontrolling interests			647		2,649		1,448
	Net (loss) earnings attributable to AmSurg Corp. common shareholders	$	(1,180)	$	1,943	$	941

The unaudited consolidated pro forma results for the nine months ended September 30, 2011 and 2010, assuming all 2011 and 2010 acquisitions had been consummated on January 1, 2010, are as follows (in thousands, except per share data):

			Nine Months Ended
			September 30,
			2011		2010
Revenues			$	648,490	$	648,788
Net earnings				151,327		160,298
Amounts attributable to AmSurg Corp. common shareholders:
	Net earnings from continuing operations			41,644		46,761
	Net earnings			40,591		47,750
	Net earnings from continuing operations per common share:
		Basic	$	1.37	$	1.55
		Diluted	$	1.34	$	1.52
	Net earnings:
		Basic	$	1.33	$	1.58
		Diluted	$	1.30	$	1.56
	Weighted average number of shares and share equivalents:
		Basic		30,424		30,234
		Diluted		31,174		30,664