Acquisitions

9 Months Ended

Sep. 30, 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 nine months ended September 30, 2012,the Company, through a wholly owned subsidiary, acquired a controlling interest in three centers, one of which was merged into an existing center. During the nine months endedSeptember 30, 2011, the Company acquired a controlling interest in 20 centers. The aggregate amount paid for the centers acquired and for settlement of purchase price payable obligations during the nine months ended September 30, 2012 and 2011 was approximately $16,097,000and $188,500,000, 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 September 30, 2012 and December 31, 2011, the Company had contingent purchase price obligations of $3,100,000 and $5,236,000. During the nine months ended September 30, 2012, the Company funded through operating cash flow $1,829,000 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 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.During the nine months ended September 30, 2012, the Company paid NSC $115,000 to settle the working capital adjustment and authorized the release from escrow of $500,000 related to the working capital adjustment. As of September 30, 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 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 nine months ended September 30, 2012 and 2011 are as follows (in thousands):

		Nine Months Ended September 30,
				Acquired
		Individual		NSC		Individual
		Acquisitions		Centers		Acquisitions
		2012		2011
Accounts receivable		$	323	$	16,032	$	2,180
Supplies, inventory, prepaid and other current assets			143		5,357		730
Investment in unconsolidated affiliates			-		10,710		-
Property and equipment			1,203		13,347		4,016
Goodwill			21,940		168,544		87,505
Other intangible assets			150		-		1,750
Accounts payable			(104)		(2,574)		(709)
Other accrued liabilities			(137)		(4,609)		(150)
Long-term debt			-		(2,900)		(2,699)
Other long-term liabilities			-		(422)		-
	Total fair value		23,518		203,485		92,623
	Less: Fair value attributable to noncontrolling interests		9,250		71,322		36,286
	Acquisition date fair value of total consideration transferred	$	14,268	$	132,163	$	56,337

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, 2012 and 2011, respectively, approximately $13,255,000 and $161,000,000 of goodwill recorded was deductible for tax purposes. Goodwill deductible for tax purposes associated with the acquisition of the 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 $128,000 and $2,657,000 in acquisition related costs, primarily attorney fees,for the nine months ended September 30, 2012and 2011, respectively

Revenues and net earnings included in the nine months ended September 30, 2012 and 2011 associated with these acquisitions are as follows (in thousands):

		Nine Months Ended September 30,
				Acquired
		Individual		NSC		Individual
		Acquisitions		Centers		Acquisitions
		2012		2011
Revenues		$	1,979	$	8,910	$	13,865
Net earnings			623		(533)		4,592
Less: Net earnings attributable to noncontrolling interests			329		647		2,649
	Net earnings attributable to AmSurg Corp. common shareholders	$	294	$	(1,180)	$	1,943

The unaudited consolidated pro forma results for the nine months ended September 30, 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):

			Nine Months Ended
			September 30,
			2012		2011
Revenues			$	694,390	$	686,562
Net earnings				166,152		185,694
Amounts attributable to AmSurg Corp. common shareholders:
	Net earnings from continuing operations			48,027		44,180
	Net earnings			46,422		43,324
	Net earnings from continuing operations per common share:
		Basic	$	1.56	$	1.45
		Diluted	$	1.52	$	1.42
	Net earnings:
		Basic	$	1.51	$	1.42
		Diluted	$	1.47	$	1.39
	Weighted average number of shares and share equivalents:
		Basic		30,727		30,424
		Diluted		31,558		31,174