Acquisitions

12 Months Ended

Dec. 31, 2012

Acquisitions

Acquisitions

2. 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 2012 and 2011, the Company, through a wholly owned subsidiary, acquired a controlling interest in 17centers, one of which was merged into an existing center, and 24 centers, respectively. In addition, the Company acquired a non-controlling interest in two centers during 2011. The aggregate amount paid for the centers acquired and for settlement of purchase price payable obligations during 2012 and 2011 was approximately $277,388,000 and $239,223,000, respectively, and was paid in cash and funded by a combination of operating cash flow and borrowings under the Company's long term debt structure.

At December 31, 2012 and 2011, the Company had contingent purchase price obligations of $2,744,000 and $5,236,000. During 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 2012, the Company paid NSC $115,000 to settle the working capital adjustment and authorized the release of $3,500,000 from escrow.As of December 31, 2011, the Company had recorded $3,100,000 in other long-term liabilities in the accompanying balance sheet a purchase price obligation related to the Company's estimate of the fair value of the potential additional consideration due to NSC. As of December 31, 2012, the Company's estimate of the fair value of the additional consideration due to NSC is approximately $2,744,000.

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 during 2012 and 2011, including post acquisition date adjustments recorded to finalize purchase price allocations, are as follows (in thousands):

				Acquired
		Individual		NSC		Individual
		Acquisitions		Centers		Acquisitions
		2012		2011
Accounts receivable		$	11,572	$	16,032	$	7,837
Supplies inventory, prepaid and other current assets			4,750		5,744		1,888
Investment in unconsolidated subsidiaries			-		10,710		-
Property and equipment			23,546		18,208		8,350
Goodwill			429,504		167,865		169,777
Other intangible assets			800		268		1,750
Accounts payable			(3,199)		(2,612)		(2,665)
Other accrued liabilities			(2,387)		(5,233)		(415)
Long-term debt			(6,954)		(2,900)		(5,698)
Other long-term liabilities			-		(1,895)		-
	Total fair value		457,632		206,187		180,824
	Less: Fair value attributable to noncontrolling interests		182,073		70,502		72,050
	Acquisition date fair value of total consideration transferred	$	275,559	$	135,685	$	108,774

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 for acquisitions where the purchase price allocation is not finalized may be subject to adjustment as the Company completes its initial accounting for acquired intangible assets. During 2012 and 2011, respectively, approximately $260,547,000 and $212,576,000 of goodwill recorded was deductible for tax purposes. Goodwill deductible for tax purposes associated with the acquisition of NSC centers was approximately $110,000,000 for the year ended December 31, 2011. Associated with the transactions discussed above, the Company incurred and expensed in other operating expenses approximately $700,000 and $3,783,000 in acquisition related costs during 2012 and 2011, respectively. The additional transaction costs incurred for the year ended December 31, 2011 over the year end December 31, 2012 is primarily due to the acquisition of the NSC centers in 2011.

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

				Acquired
		Individual		NSC		Individual
		Acquisitions		Centers		Acquisitions
		2012		2011
Revenues		$	11,247	$	35,130	$	23,534
Net earnings			3,441		4,982		7,251
Less: Net earnings attributable to noncontrolling interests			1,977		3,193		4,213
	Net earnings attributable to AmSurg Corp. common shareholders	$	1,464	$	1,789	$	3,038

The unaudited consolidated pro forma results for the years ended December 31, 2012 and2011, assuming all 2012 acquisitions had been consummated on January 1, 2011 and all 2011 acquisitions had been consummated on January 1, 2010, are as follows (in thousands, except per share data):

			2012		2011
Revenues			$	1,075,748	$	1,050,150
Net earnings				261,397		245,893
Amounts attributable to AmSurg Corp. common shareholders:
	Net earnings from continuing operations			72,777		67,861
	Net earnings			72,755		63,274
	Net earnings from continuing operations per common share:
		Basic	$	2.36	$	2.23
		Diluted	$	2.30	$	2.17
	Net earnings:
		Basic	$	2.36	$	2.08
		Diluted	$	2.30	$	2.03
	Weighted average number of shares and share equivalents:
		Basic		30,773		30,452
		Diluted		31,608		31,211