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. Acquisitions in which the Company is able to exert significant influence but does not have control are accounted for using the equity method.

Ambulatory Services Acquisitions

During 2015 and 2014, the Company, through a wholly-owned subsidiary, acquired a controlling interest in seven and eight surgery centers, respectively. Of the centers acquired during 2014, three were acquired as part of the Sheridan transaction and five were individually acquired in separate transactions. The aggregate amount paid for the centers and for settlement of purchase price payable obligations during December 31, 2015 and 2014 was approximately $131.3 million and $50.9 million, 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 acquisitions completed during the year ended December 31, 2015 consist of the following:



Acquired Operations	Location	Date Acquired	Specialty
River Drive Surgery & Laser Center, LLC	Elmwood Park, NJ	February 2015	Ophthalmology
Campus Surgery Center, LLC	Daly City, CA	June 2015	Multi-Specialty
Waverly Surgery Center, LLC	Palo Alto, CA	June 2015	Multi-Specialty
Surgical Center at Millburn, LLC	Millburn-East Willow, NJ	July 2015	Multi-Specialty
Eye Surgery Center of Western Ohio, LLC	Lima, OH	August 2015	Ophthalmology
Surgical Specialty Center of Northeastern PA, LLC	Forty Fort, PA	October 2015	Multi-Specialty
South Portland Surgical Center, LLC	Tualatin, OR	November 2015	Multi-Specialty

Physician Services Acquisitions

The Company completed the acquisition of nine physician practices in 2015 and two physician practices in 2014 following the acquisition of Sheridan. During 2015 and 2014, the total consideration consisted of cash of $831.4 million and $19.0 million, respectively, which was funded at closing through available cash, current year operating cash flow and borrowings through the Company's credit facility. The acquisitions completed during the year ended December 31, 2015 consist of the following:



Acquired Operations	Location	Date Acquired	Specialty
Ambulatory Anesthesia Care, PC	Mountainside, NJ	January 2015	Anesthesia
Sheridan Radiology Management Services, Inc.	Beachwood, OH	January 2015	Radiology
Radiology Associates of Hollywood, P.A.	Pembroke Pines, FL	March 2015	Radiology
Halifax Anesthesiology Associates, P.A.	Daytona Beach, FL	April 2015	Anesthesia
Coastal Anesthesiology Consultants, P.A.	St. Augustine, FL	July 2015	Anesthesia
Bay Area Anesthesia, LLC	Tampa, FL	August 2015	Anesthesia
Valley Anesthesia Consultants, Ltd.	Phoenix, AZ	November 2015	Anesthesia
Chandler Emergency Medical Group, LLC	Phoenix, AZ	December 2015	Emergency
Northside Anesthesiology Consultants, LLC	Atlanta, GA	December 2015	Anesthesia

As a result of certain acquisitions completed during the year ended December 31, 2014, the Company has agreed to pay as additional consideration, amounts which are contingent on the acquired entities achieving future performance metrics. As of December 31, 2015 and December 31, 2014, the Company had accrued $5.5 million and $20.7 million, respectively, as a component of accrued liabilities and other long-term liabilities in the accompanying consolidated balance sheets which represents management's estimate of the fair values of the contingent consideration. During the year ended December 31, 2015, the Company made a payment of $28.7 million, of which $15.7 million was to settle the amount recorded at the acquisition date and represents a financing outflow in the consolidated statement of cash flows. As of December 31, 2015, the Company estimates it may have to pay between $5.0 million and $6.0 million in future contingent payments for acquisitions made prior to December 31, 2014 based upon the current projected financial performance or anticipated achievement of other targets of the acquired operations. The current estimate of future contingent payments could increase or decrease depending upon the actual performance of the acquisitions over each respective measurement period. During the year ended December 31, 2015, the Company recorded a net increase of $10.0 million based on results of operations of the associated acquisitions, of which $8.8 million is included in other operating expenses in the accompanying consolidated statements of earnings. Additionally, the Company recorded an increase in the contingent liability of $3.5 million during the year ended December 31, 2015 as a result of the acquisition accounting associated with the purchase of Sheridan. The acquisitions completed during the year ended December 31, 2015 did not contain provisions for contingent consideration.

The Company utilizes Level 3 inputs, which include unobservable data, to measure the fair value of the contingent consideration. The fair value was determined utilizing future forecasts of both earnings and other performance metrics which are expected to be achieved during the performance period, in accordance with each respective purchase agreement. In estimating the fair value, management developed various scenarios and weighted the probable outcome of each scenario using a range of expected probability specific to each agreement. Management utilized a market rate to discount the results of such analysis in order to record the present value of the expected future payout. The timing of the payments of the additional consideration varies by agreement but is expected to occur within one to three years from the respective date of acquisition.

Sheridan Acquisition

On July 16, 2014 (the “acquisition date”), the Company completed the acquisition of Sheridan in a cash and stock transaction. At closing, the Company paid approximately $2.1 billion in cash and issued 5,713,909 shares of its common stock to the former owners of Sheridan in exchange for all of the outstanding equity interests of Sheridan. The shares issued to Sheridan were valued at approximately $272.0 million based on the closing price of the Company's common stock on July 16, 2014. The acquisition of Sheridan enhances the growth profile and diversity of the Company focusing on complementary specialties across the healthcare continuum.

To fund the transaction, the Company completed offerings of common stock and mandatory convertible preferred stock resulting in the issuance of 9,775,000 shares of common stock and 1,725,000 shares of mandatory convertible preferred stock. Proceeds from the common stock offering and mandatory preferred stock offering, net of transaction fees, were approximately $421.3 million and $166.6 million, respectively. In addition, on July 16, 2014, the Company entered into a new senior secured credit facility, which includes an $870.0 million term loan and a $300.0 million revolving credit facility, and completed a private offering of $1.1 billion aggregate principal amount of 5.625% senior unsecured notes due 2022.

Fees and expenses associated with the Sheridan transaction, which includes fees incurred related to the Company's equity issuances and debt financings, was approximately $139.1 million during the year ended December 31, 2014. Approximately $53.0 million was capitalized as deferred financing costs, $24.5 million was related to the equity offerings and recorded as a reduction to equity, $31.9 million was expensed as transaction costs, $12.8 million was amortized through interest expense and $16.9 million was recorded as debt extinguishment costs during the year ended December 31, 2014.

Purchase Price Allocations

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 2015 and 2014, including post acquisition date adjustments recorded to purchase price allocations, are as follows (in thousands):



	2015			2014
	Individual			Individual
	Acquisitions ⁽¹⁾			Acquisitions			Sheridan
Accounts receivable	$	62,216		$	1,816		$	130,260
Other current assets	21,477			1,075			105,757
Property and equipment	15,484			3,294			20,185
Goodwill	682,458			101,865			1,534,656
Intangible assets	420,414			14,207			1,200,028
Other long-term assets	342			—			50,304
Accounts payable	(3,641		)	(2,519		)	(5,862		)
Other accrued liabilities	(45,386		)	(626		)	(118,548		)
Deferred income taxes	(88,728		)	—			(432,792		)
Other long-term liabilities	(4,958		)	(8,588		)	(69,456		)
Long-term debt	(6,046		)	(717		)	(4,594		)
Total fair value	1,053,632			109,807			2,409,938
Less: Fair value attributable to noncontrolling interests	85,443			39,371			24,365
Acquisition date fair value of total consideration transferred	$	968,189		$	70,436		$	2,385,573


(1)	Represents the preliminary allocation of fair value of acquired assets and liabilities associated with these acquisitions at December 31, 2015.

During 2015, no significant changes were made to the purchase price allocation of assets and liabilities, existing at the date of acquisition, related to individual acquisitions completed in 2014. During 2015, factors became known to the Company that resulted in changes to the purchase price allocation of assets and liabilities, existing at the date of acquisition, related to Sheridan and resulted in a net decrease to goodwill of $8.3 million, an increase to other accrued expenses, a decrease to other current assets and a decrease to deferred income taxes.

The total fair value of acquisitions completed by the Company include amounts allocated to goodwill, which result from the acquisitions' 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. 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 primarily from acquisitions of 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. Additionally, the Company continues to obtain information relative to the fair values of assets acquired, liabilities assumed and any noncontrolling interests associated with acquisitions completed in the last twelve months. Acquired assets and assumed liabilities include, but are not limited to, fixed assets, licenses, intangible assets and professional liabilities. The valuations are based on appraisal reports, discounted cash flow analyses, actuarial analyses or other appropriate valuation techniques to determine the fair value of the assets acquired or liabilities assumed. A majority of the deferred income taxes recognized as a component of the Company's purchase price allocation is a result of the difference between the book and tax basis of the amortizable intangible assets recognized. The amount allocated to the deferred income tax liability is subject to change as a result of the final allocation of purchase price to amortizable intangibles. The Company expects to finalize the purchase price allocation for its most recent acquisitions as soon as practical.

During the year ended December 31, 2015, the Company incurred approximately $8.3 million of transaction costs associated with its acquisition of surgery centers and physician practices. During the year ended December 31, 2014, the Company incurred approximately $33.9 million of transaction costs primarily associated with the acquisition of Sheridan. Such costs excluded those amounts that were either capitalized or expensed as part of the financing transactions associated with acquisitions.

Revenues and net earnings included in the years ended December 31, 2015 and 2014 associated with completed acquisitions are as follows (in thousands):



	2015		2014
	Individual		Individual
	Acquisitions		Acquisitions		Sheridan
Net revenue	$	179,113	$	20,844	517,213

Net earnings	26,901		5,155		26,776
Less: Net earnings attributable to noncontrolling interests	7,448		2,859		459
Net earnings attributable to AmSurg Corp. common shareholders	$	19,453	$	2,296	$	26,317

The unaudited consolidated pro forma results for the years ended December 31, 2015 and 2014, assuming all 2015 acquisitions had been consummated on January 1, 2014, all 2014 acquisitions had been consummated on January 1, 2013 are as follows (in thousands):



	2015		2014
Net revenue	$	2,858,544	$	2,680,273
Net earnings	401,950		322,653
Amounts attributable to AmSurg Corp. common shareholders:
Net earnings	170,453		104,548
Net earnings per common share:
Basic	$	3.55	$	2.21
Diluted	$	3.48	$	2.20