Acquisitions

3 Months Ended

Mar. 31, 2012

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 three months ended March 31, 2012 the Company, through a wholly owned subsidiary, acquired a controlling interest in two centers, one of which was merged into an existing center. During the three months ended March 31,2011 the Company acquired a controlling interest in one center. The aggregate amount paid for the acquisitions during the three months ended March 31, 2012 and 2011 was approximately $8,143,000 and $3,695,000, respectively, and was paid in cash and 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.

At March 31, 2012 and December 31, 2011, the Company had contingent purchase price obligations of $3,522,000 and $5,236,000. During the three months ended March 31, 2012, the Company funded through operating cash flow $1,714,000 of its purchase price obligations. The remaining purchase price obligations are related to the Company's acquisition of 17 centers from National Surgical Care, Inc. (“NSC”) on September 1, 2011. 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, $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.As of March 31, 2012, the Company has recorded in other long-term liabilities in the accompanying balance sheet purchase price obligations related to the Company's estimate of the working capital adjustment and the fair value of the potential additional consideration due to NSC.

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 three months ended March 31, 2012 and 2011 are as follows (in thousands):

		Three Months Ended
		March 31,
		2012		2011
Accounts receivable		$	140	$	216
Supplies, inventory, prepaid and other current assets			74		27
Property and equipment			786		161
Goodwill			11,911		6,414
Accounts payable			(11)		(8)
Other accrued liabilities			(67)		(53)
Long-term debt			-		(150)
	Total fair value		12,833		6,607
	Less: Fair value attributable to noncontrolling interests		4,690		2,912
	Acquisition date fair value of total consideration transferred	$	8,143	$	3,695

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 three months ended March 31, 2012 and 2011, respectively, approximately $7,579,000 and $3,626,000 of goodwill recorded was deductible for tax purposes. Associated with the transactions discussed above, the Company incurred and expensed in other operating expenses approximately $52,000 and $25,000 in acquisition related costs, primarily attorney fees,for the three months ended March 31, 2012and 2011, respectively

Revenues and net earnings included in the three months ended March 31, 2012 and 2011 associated with these acquisitions are as follows (in thousands):

		Three Months Ended
		March 31,
		2012		2011
Revenues		$	215	$	549
Net earnings			74		139
Less: Net earnings attributable to noncontrolling interests			35		85
	Net earnings attributable to AmSurg Corp. common shareholders	$	39	$	54

The unaudited consolidated pro forma results for the three months ended March 31, 2012 and 2011, assuming all 2012 and 2011 acquisitions had been consummated on January 1, 2011, are as follows (in thousands, except per share data):

			Three Months Ended
			March 31,
			2012		2011
Revenues			$	230,770	$	226,640
Net earnings				55,084		77,219
Amounts attributable to AmSurg Corp. common shareholders:
	Net earnings from continuing operations			15,771		14,804
	Net earnings			14,827		14,497
	Net earnings from continuing operations per common share:
		Basic	$	0.52	$	0.49
		Diluted	$	0.50	$	0.48
	Net earnings:
		Basic	$	0.48	$	0.48
		Diluted	$	0.47	$	0.47
	Weighted average number of shares and share equivalents:
		Basic		30,619		30,420
		Diluted		31,401		31,024