-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LaolaAbdvHCd+51QUIyjhL8l1YQHArzZSyLsGzomJmaFixQ2sYJg+pHEs9DtKk8j SxzTdJOc6tIv9XurwBWG+Q== /in/edgar/work/20000814/0000950144-00-010196/0000950144-00-010196.txt : 20000921 0000950144-00-010196.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950144-00-010196 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMSURG CORP CENTRAL INDEX KEY: 0000895930 STANDARD INDUSTRIAL CLASSIFICATION: [8060 ] IRS NUMBER: 621493316 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22217 FILM NUMBER: 697678 BUSINESS ADDRESS: STREET 1: 20 BURTON HILLS BLVD STREET 2: STE 350 CITY: NASHVILLE STATE: TN ZIP: 37215 BUSINESS PHONE: 6156651283 MAIL ADDRESS: STREET 1: ONE BURTON HILLS BLVD. STREET 2: SUITE 350 CITY: NASHVILLE STATE: TN ZIP: 37215 10-Q 1 e10-q.txt AMSURG CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended JUNE 30, 2000 Commission File Number 000-22217 AMSURG CORP. (Exact Name of Registrant as Specified in its Charter) TENNESSEE 62-1493316 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 20 BURTON HILLS BOULEVARD NASHVILLE, TN 37215 (Address of principal executive offices) (Zip code) (615) 665-1283 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of August 11, 2000, there were outstanding 9,787,276 shares of the Registrant's Class A Common Stock, no par value and 4,787,131 shares of the Registrant's Class B Common Stock, no par value. 2 PART I ITEM 1. FINANCIAL STATEMENTS AMSURG CORP. CONSOLIDATED BALANCE SHEETS (ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS)
JUNE 30, DECEMBER 31, 2000 1999 -------- -------- ASSETS Current assets: Cash and cash equivalents................................................. $ 6,945 $ 9,523 Accounts receivable, net of allowance of $2,079 and $2,266, respectively.. 20,566 17,462 Supplies inventory........................................................ 2,208 2,077 Deferred income taxes..................................................... 590 590 Prepaid and other current assets.......................................... 1,646 1,608 -------- -------- Total current assets............................................. 31,955 31,260 Long-term receivables and deposits............................................. 1,946 2,036 Property and equipment, net.................................................... 30,304 27,995 Intangible assets, net......................................................... 87,034 76,577 -------- -------- Total assets..................................................... $151,239 $137,868 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt......................................... $ 1,992 $ 1,809 Notes payable............................................................. -- 1,238 Accounts payable.......................................................... 2,760 1,915 Accrued salaries and benefits............................................. 2,351 2,204 Other accrued liabilities................................................. 2,345 2,594 Current income taxes payable.............................................. 1,303 471 -------- -------- Total current liabilities........................................ 10,751 10,231 Long-term debt................................................................. 42,359 34,901 Deferred income taxes.......................................................... 2,670 2,670 Minority interest.............................................................. 18,452 17,358 Shareholders' equity: Common stock: Class A, no par value, 35,000,000 shares authorized, 9,779,776 and 9,760,228 shares outstanding, respectively.......................... 49,464 49,393 Class B, no par value, 4,800,000 shares authorized, 4,787,131 shares outstanding.................................................. 13,529 13,529 Retained earnings......................................................... 14,014 9,786 -------- -------- Total shareholders' equity....................................... 77,007 72,708 -------- -------- Total liabilities and shareholders' equity....................... $151,239 $137,868 ======== ========
See accompanying notes to the consolidated financial statements. 2 3 AMSURG CORP. CONSOLIDATED STATEMENTS OF EARNINGS (ALL AMOUNTS ARE EXPRESSED IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------ ------------------ 2000 1999 2000 1999 ------- -------- ------- -------- Revenues .................................................. $34,590 $ 24,677 $66,223 $ 48,071 Operating expenses: Salaries and benefits ................................ 10,181 6,801 18,729 13,330 Other operating expenses ............................. 10,590 8,228 21,234 16,411 Depreciation and amortization ........................ 2,335 1,718 4,617 3,414 Gain on sale of assets ............................... -- (33) -- (33) ------- -------- ------- -------- Total operating expenses ......................... 23,106 16,714 44,580 33,122 ------- -------- ------- -------- Operating income ................................. 11,484 7,963 21,643 14,949 Minority interest ......................................... 6,985 4,942 13,143 9,151 Interest expense, net of interest income .................. 914 202 1,625 435 ------- -------- ------- -------- Earnings before income taxes and cumulative effect of an accounting change ........................ 3,585 2,819 6,875 5,363 Income tax expense ........................................ 1,380 1,086 2,647 2,065 ------- -------- ------- -------- Net earnings before cumulative effect of an accounting change .............................. 2,205 1,733 4,228 3,298 Cumulative effect of the change in the method in which pre-opening costs are recorded .......................... -- -- -- (126) ------- -------- ------- -------- Net earnings ..................................... $ 2,205 $ 1,733 $ 4,228 $ 3,172 ======= ======== ======= ======== Basic earnings per common share: Net earnings before cumulative effect of an accounting change ............................................ $ 0.15 $ 0.12 $ 0.29 $ 0.23 Net earnings ......................................... $ 0.15 $ 0.12 $ 0.29 $ 0.22 Diluted earnings per common share: Net earnings before cumulative effect of an accounting change ............................................. $ 0.15 $ 0.12 $ 0.28 $ 0.22 Net earnings ......................................... $ 0.15 $ 0.12 $ 0.28 $ 0.22 Weighted average number of shares and share equivalents outstanding: Basic ................................................ 14,561 14,359 14,559 14,341 Diluted .............................................. 14,856 14,700 14,866 14,710
See accompanying notes to the consolidated financial statements. 3 4 AMSURG CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (ALL AMOUNTS ARE EXPRESSED IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, ------------------- 2000 1999 -------- ------- Cash flows from operating activities: Net earnings ...................................................................... $ 4,228 $ 3,172 Adjustments to reconcile net earnings to net cash provided by operating activities: Minority interest ............................................................. 13,143 9,151 Distributions to minority partners ............................................ (13,013) (7,906) Depreciation and amortization ................................................. 4,617 3,414 Amortization of deferred compensation on restricted stock ..................... -- 68 Net gain on sale of assets .................................................... -- (33) Cumulative effect of an accounting change ..................................... -- 126 Increase (decrease) in cash, net of effects of acquisitions, due to changes in: Accounts receivable, net ................................................. (1,847) (1,593) Supplies inventory ....................................................... 8 (226) Prepaid and other current assets ......................................... (38) (310) Other assets ............................................................. 93 57 Accounts payable ......................................................... 737 43 Accrued expenses and other liabilities ................................... 652 716 Other, net ............................................................... (92) (16) -------- ------- Net cash flows provided by operating activities .......................... 8,488 6,663 Cash flows from investing activities: Acquisition of interest in surgery centers ........................................ (12,378) (3,604) Acquisition of property and equipment ............................................. (3,887) (1,719) Proceeds from sale of assets ...................................................... -- 26 Decrease (increase) in long-term receivables ...................................... 82 (192) -------- ------- Net cash flows used by investing activities .............................. (16,183) (5,489) Cash flows from financing activities: Repayment of notes payable ........................................................ (1,188) (2,385) Proceeds from long-term borrowings ................................................ 13,650 5,933 Repayment on long-term borrowings ................................................. (6,753) (7,540) Net proceeds from issuance of common stock ........................................ 21 107 Proceeds from capital contributions by minority partners .......................... 264 455 Financing cost incurred ........................................................... (877) -- -------- ------- Net cash flows provided (used) by financing activities ................... 5,117 (3,430) -------- ------- Net decrease in cash and cash equivalents .............................................. (2,578) (2,256) Cash and cash equivalents, beginning of period ......................................... 9,523 6,070 -------- ------- Cash and cash equivalents, end of period ............................................... $ 6,945 $ 3,814 ======== =======
See accompanying notes to the consolidated financial statements. 4 5 AMSURG CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of AmSurg Corp. and subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial reporting and in accordance with Rule 10-01 of Regulation S-X. In the opinion of management, the unaudited interim financial statements contained in this report reflect all adjustments, consisting of only normal recurring accruals which are necessary for a fair presentation of the financial position and the results of operations for the interim periods presented. The results of operations for any interim period are not necessarily indicative of results for the full year. The accompanying consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's 1999 Annual Report on Form 10-K. (2) LONG-TERM DEBT On May 5, 2000, the Company refinanced and amended its revolving credit facility to permit the Company to borrow up to $100,000,000 to finance the Company's acquisition and development projects at an interest rate equal to, at the Company's option, the prime rate or LIBOR plus a spread of 1.5% to 3.0%, depending upon borrowing levels. The amended loan agreement also provides for a fee ranging between 0.375% to 0.50% of unused commitments based on borrowing levels and contains certain additional covenants. Borrowings under the amended credit facility are due on May 5, 2003. At June 30, 2000, the Company had $39,250,000 in borrowings outstanding under the revolving credit facility. (3) ACQUISITIONS AND OTHER TRANSACTIONS In the six months ended June 30, 2000, the Company, through wholly owned subsidiaries and in separate transactions, acquired majority interests in three physician practice-based surgery centers. The aggregate purchase price and related cost for the acquisitions was approximately $12,378,000 of which the Company assigned approximately $11,450,000 to excess cost over net assets of purchased operations. Subsequent to June 30, 2000, the Company, through a wholly owned subsidiary, acquired a majority interest in a physician practice-based surgery center for approximately $2.8 million. On January 31, 2000, the Company signed a definitive agreement with Physicians Resource Group, Inc. ("PRG") for the purchase of PRG's majority ownership interest in 11 surgery centers for approximately $40,000,000, two of which were purchased in the transactions described above. Until the closing of the transactions contemplated under the definitive agreement, the Company is to manage the operations of the centers under a management agreement which began on January 1, 2000. 5 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements (all statements other than with respect to historical fact) within the meaning of the federal securities laws, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve known and unknown risks and uncertainties including, without limitation, those described below, some of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate. Therefore there can be no assurance that the forward-looking statements included in this report will prove to be accurate. Actual results could differ materially and adversely from those contemplated by any forward-looking statement. In light of the significant risks and uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the objectives and plans of the Company will be achieved. We undertake no obligation to publicly release any revisions to any forward-looking statements contained herein to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Forward-looking statements and the Company's liquidity, financial condition and results of operations may be affected by the Company's ability to enter into partnership or operating agreements for new practice-based ambulatory surgery centers and new specialty physician networks; its ability to identify suitable acquisition candidates and negotiate and close acquisition transactions; its ability to obtain the necessary financing or capital on terms satisfactory to the Company in order to execute its expansion strategy; its ability to manage growth; its ability to contract with managed care payers on terms satisfactory to the Company for its existing centers and its centers that are currently under development; its ability to obtain and retain appropriate licensing approvals for its existing centers and centers currently under development; its ability to minimize start-up losses of its development centers; its ability to maintain favorable relations with its physician partners; the implementation of the proposed rule issued by the Health Care Financing Administration which would update the ratesetting methodology, payment rates, payment policies and the list of covered surgical procedures for ambulatory surgery centers; risks associated with the Company's status as a general partner of the limited partnerships; and risks relating the Company's technological systems. Additionally, with regard to the pending transaction with Physicians Resource Group, Inc. ("PRG"), factors include, but are not limited to, the parties' respective ability to meet all the conditions of the definitive agreement and the consummation of the transactions contemplated thereunder; the Company's ability to enter into partnership or operating agreements with the physician owners of PRG surgery centers; the Company's ability to effectively integrate the operations of the PRG surgery centers into its operations; and the Company's ability to operate the PRG surgery centers profitably. OVERVIEW The Company develops, acquires and operates practice-based ambulatory surgery centers in partnership with physician practices. As of June 30, 2000, the Company owned a majority interest (51% or greater) in 68 surgery centers and had established seven start-up specialty physician networks, of which it was the majority owner (51%) of six of such networks. The following table presents the changes in the number of surgery centers in operation and centers under development during the three and six months ended June 30, 2000 and 1999. A center is deemed to be under development when a partnership or limited liability company has been formed with the physician group partner to develop the center.
THREE MONTHS SIX MONTHS ENDED ENDED JUNE 30, JUNE 30, ------------- ------------- 2000 1999 2000 1999 ---- ---- ---- ---- Centers in operation, beginning of period.. 65 52 63 52 New center acquisitions placed in operation 2 2 3 2 New development centers placed in operation 1 -- 2 -- ---- ---- ---- ---- Centers in operation, end of period ....... 68 54 68 54 ==== ==== ==== ==== Centers under development, end of period .. 11 5 11 5 ==== ==== ==== ====
Of the surgery centers in operation as of June 30, 2000, 47 centers perform gastrointestinal endoscopy procedures, 18 centers perform ophthalmology surgery procedures, one center performs orthopedic procedures, one center performs otolaryngology procedures and one center performs ophthalmology, urology, general surgery and otolaryngology procedures. The other partner or member in each partnership or limited liability company is in each case an entity owned by physicians who perform procedures at the center. 6 7 The specialty physician networks are owned through limited partnerships and limited liability companies in which, with the exception of one, the Company owns a majority interest. The other partners or members are individual physicians who will provide the medical services to the patient population covered by the contracts the network will seek to enter into with managed care payers. The Company does not expect that the specialty physician networks alone will be a significant source of income. These networks were and will be formed in selected markets primarily as a contracting vehicle for certain managed care arrangements to generate revenues for the Company's practice-based surgery centers. As of June 30, 2000, five networks had secured managed care contracts and were operational. The Company intends to expand through the development and acquisition of additional practice-based ambulatory surgery centers in targeted surgical specialties. In addition, the Company believes that its surgery centers, combined with its relationships with specialty physician practices in the surgery centers' markets, will provide the Company with other opportunities for growth from specialty network development. By using its surgery centers as a base to develop specialty physician networks that are designed to serve large numbers of covered lives, the Company believes that it will strengthen its market position in contracting with managed care organizations. On January 31, 2000, the Company signed a definitive agreement with PRG for the purchase of a portion of PRG's ownership interest in 11 single specialty ophthalmology ambulatory surgery centers for approximately $40 million in cash, two of which have been purchased as of August 11, 2000. In addition, the Company may purchase additional centers from PRG upon completion of satisfactory due diligence. As part of this agreement, the Company began managing these centers under a management agreement beginning on January 1, 2000. PRG has filed for bankruptcy in the United States Bankruptcy Court for the Northern District of Texas. In December 1999 and January 2000, the Company also acquired from PRG, through wholly owned subsidiaries, interests in two surgery centers in separate transactions outside of the definitive agreement. While the Company generally owns a 51% to 70% interest in the entities that own the surgery centers, the Company's consolidated statements of operations include 100% of the results of operations of the entities, reduced by the minority partners' share of the net earnings or loss of the surgery center entities. SOURCES OF REVENUES The Company's principal source of revenues is a facility fee charged for surgical procedures performed in its surgery centers. This fee varies depending on the procedure, but usually includes all charges for operating room usage, special equipment usage, supplies, recovery room usage, nursing staff and medications. Facility fees do not include the charges of the patient's surgeon, anesthesiologist or other attending physicians, which are billed directly to third-party payers by such physicians. Practice-based ambulatory surgery centers such as those in which the Company owns a majority interest depend upon third-party reimbursement programs, including governmental and private insurance programs, to pay for services rendered to patients. The Company derived approximately 40% and 44% of its net revenues from governmental healthcare programs, including Medicare and Medicaid, in the six months ended June 30, 2000 and 1999, respectively. The Medicare program currently pays ambulatory surgery centers and physicians in accordance with fee schedules which are prospectively determined. 7 8 RESULTS OF OPERATIONS The following table shows certain statement of earnings items expressed as a percentage of revenues for the three and six months ended June 30, 2000 and 1999:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------ ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- Revenues .................................................. 100.0% 100.0% 100.0% 100.0% Operating expenses: Salaries and benefits ................................ 29.4 27.6 28.3 27.7 Other operating expenses ............................. 30.6 33.3 32.0 34.1 Depreciation and amortization ........................ 6.8 7.0 7.0 7.1 Gain on sale of assets ............................... -- (0.1) -- -- ----- ----- ----- ----- Total operating expenses ......................... 66.8 67.8 67.3 68.9 ----- ----- ----- ----- Operating income ..................................... 33.2 32.2 32.7 31.1 Minority interest ......................................... 20.2 20.0 19.8 19.0 Interest expense, net of interest income .................. 2.6 0.8 2.5 0.9 ----- ----- ----- ----- Earnings before income taxes and cumulative effect of an accounting change ........................ 10.4 11.4 10.4 11.2 Income tax expense ........................................ 4.0 4.4 4.0 4.3 ----- ----- ----- ----- Net earnings before cumulative effect of an accounting change .............................. 6.4 7.0 6.4 6.9 Cumulative effect of the change in the method in which pre-opening costs are recorded .......................... -- -- -- (0.3) ----- ----- ----- ----- Net earnings ..................................... 6.4% 7.0% 6.4% 6.6% ===== ===== ===== =====
Revenues were $34.6 million and $66.2 million in the three and six months ended June 30, 2000, respectively, an increase of $9.9 million and $18.2 million, or 40% and 38%, respectively, over revenues in the comparable 1999 periods. The increase is primarily attributable to additional centers in operation during 2000. Same-center revenues in the three and six months ended June 30, 2000, increased by 10%. Same-center growth is primarily attributable to additional procedure volume. The Company anticipates further revenue growth during 2000 as a result of additional start-up and acquired centers expected to be placed in operation and from same-center revenue growth. Salaries and benefits expense was $10.2 million and $18.7 million in the three and six months ended June 30, 2000, respectively, an increase of $3.4 million and $5.4 million, or 50% and 41%, respectively, over salaries and benefits expense in the comparable 1999 periods. This increase resulted primarily from additional centers in operation and from an increase in corporate staff primarily to support growth in the number of centers in operation and anticipated future growth. As a percentage of revenues, salaries and benefits increased during the 2000 periods due in part to certain corporate employee bonuses incurred. Other operating expenses were $10.6 million and $21.2 million in the three and six months ended June 30, 2000, respectively, an increase of $2.4 million and $4.8 million, or 29%, over other operating expenses in the comparable 1999 periods. This increase resulted primarily from additional centers in operation. The Company anticipates further increases in operating expenses in 2000, primarily due to additional start-up centers and acquired centers expected to be placed in operation. Typically a start-up center will incur start-up losses while under development and during its initial months of operation and will experience lower revenues and operating margins than an established center until its case load increases to a more optimal operating level, which generally is expected to occur within 12 months after a center opens. 8 9 Depreciation and amortization expense increased $617,000 and $1.2 million, or 36% and 35%, in the three and six months ended June 30, 2000, respectively, over the comparable 1999 periods, primarily due to 14 additional surgery centers in operation in the 2000 periods compared to the 1999 periods. The minority interest in earnings in the three and six months ended June 30, 2000 increased by $2.0 million and $4.0 million, or 41% and 44%, respectively, over the comparable 1999 periods primarily as a result of minority partners' interest in earnings at surgery centers recently added to operations and from increased same-center profitability. Interest expense increased $792,000 and $1.2 million, or 392% and 274%, in the three and six months ended June 30, 2000, respectively, from the comparable 1999 periods. This increase was the result of an increase in debt incurred or assumed in connection with additional acquisitions of interests in surgery centers and interest expense associated with newly opened start-up surgery centers financed partially with bank debt. In addition, the Company is experiencing higher interest rates in 2000 due to a general increase in interest rates as well as an increase in the interest rate structure under the amended credit facility as discussed below. The Company recognized income tax expense of $1.4 million and $2.6 million in the three and six months ended June 30, 2000, respectively, compared to $1.1 million and $2.1 million, respectively, in the comparable 1999 periods. The Company's effective tax rate in the 2000 and 1999 periods was 38.5% of net earnings before income taxes and cumulative effect of an accounting change and differed from the federal statutory income tax rate of 34% primarily due to the impact of state income taxes. Prior to January 1, 1999, deferred pre-opening costs, which consist of costs incurred for surgery centers while under development, had been amortized over one year, starting upon the commencement date of operations. In 1999, the Company adopted Statement of Position No. 98-5 "Reporting on the Costs of Start-Up Activities," which requires that pre-opening costs be expensed as incurred and that upon adoption all unamortized deferred pre-opening costs be expensed as a cumulative effect of a change in accounting principle. Accordingly, as of January 1, 1999, the Company expensed $126,000, net of minority interest and income taxes, as a cumulative effect of an accounting change. LIQUIDITY AND CAPITAL RESOURCES At June 30, 2000, the Company had working capital of $21.2 million compared to $14.8 million at the comparable 1999 period. Operating activities for the six months ended June 30, 2000, generated $8.5 million in cash flows compared to $6.7 million in the comparable 1999 period. Cash and cash equivalents at June 30, 2000 and 1999 were $6.9 million and $3.8 million, respectively. During the six months ended June 30, 2000, the Company used approximately $12.4 million to acquire an interest in practice-based ambulatory surgery centers. In addition, the Company made capital expenditures primarily for new start-up surgery centers and for new or replacement property at existing centers which totaled approximately $3.9 million in the six months ended June 30, 2000, of which approximately $264,000 was funded from the capital contributions of the Company's minority partners. Between notes payable and long-term debt, the Company had net borrowings of $5.7 million during the six months ended June 30, 2000, which were used to fund a portion of its acquisitions and a portion of its development activities. The portion of acquisition and development activity obligations not funded through debt borrowings was funded through existing cash and cash flows from operations. On May 5, 2000, the Company refinanced and amended its revolving credit facility to permit the Company to borrow up to $100.0 million to finance the Company's acquisition and development projects, including the transactions contemplated under the agreement with PRG, at a rate equal to, at the Company's option, the prime rate or LIBOR plus a spread of 1.5% to 3.0%, depending upon borrowing levels. The amended loan agreement also provides for a fee ranging between 0.375% to 0.50% of unused commitments based on borrowing levels. The loan agreement also prohibits the payment of dividends and contains covenants relating to the ratio of debt to net worth, operating performance and minimum net worth. The Company was in compliance with all covenants at June 30, 2000. At June 30, 2000, borrowings under the amended credit facility were $39.3 million, are due on May 5, 2003, and are secured primarily by a pledge of the stock of the Company's subsidiaries and the Company's membership interests in the LLCs. During the three and six months ended June 30, 2000, the Company incurred approximately $877,000 in financing costs associated with the amended credit facility. 9 10 On June 12, 1998, HCFA published a proposed rule that would update the ratesetting methodology, payment rates, payment policies and the list of covered surgical procedures for ambulatory surgery centers. The proposed rule reduces the rates paid for certain ambulatory surgery center procedures reimbursed by Medicare, including a number of endoscopy and ophthalmological procedures performed at the Company's centers. The Medicare, Medicaid and SCHIP Balanced Budget Refinement Act, enacted in November 1999, requires HCFA to either update the surgery center cost survey used in the proposed rule or to phase the new rates and methodology into use over a three-year period. The rule is expected to be revised and published in the fall of 2000 and the Company expects the earliest implementation date to be April 2001. There can be no assurance that the final rule will not adversely impact the Company's financial condition, results of operations and business prospects. The Company believes that the proposed rule if adopted as proposed in June 1998 would adversely affect the Company's annual revenues by approximately 4% at the time of full implementation based on the rates stated therein and the Company's historical procedure mix. However, the Company expects that the earnings impact will be offset by certain actions taken by the Company or that the Company intends to take, including actions to effect certain cost efficiencies in center operations, reduce corporate overhead costs and provide for contingent purchase price adjustments for acquisitions prior to implementation. There can be no assurance that the Company will be able to implement successfully all of these actions or that if implemented the actions will offset fully the adverse impact of the rule, as finally adopted, on the earnings of the Company. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. The Company is evaluating the effects of adopting SFAS No. 133, but does not expect the adoption of this pronouncement to have a material effect on the Company's consolidated financial statements. SEC Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements", released in December 1999 provides guidance for applying generally accepted accounting principles to selected revenue recognition issues. The implementation of SAB 101 is required no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The Company does not expect the application of SAB No. 101 to have a material impact on the Company's consolidated financial statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to market risk from exposure to changes in interest rates based on its financing, investing and cash management activities. The Company utilizes a balanced mix of debt maturities along with both fixed-rate and variable-rate debt to manage its exposure to changes in interest rates. In May 2000 the Company amended, refinanced and increased its credit facility in order to provide for additional borrowings for acquisitions and development projects, and accordingly, the Company will now experience higher interest rates than were provided for under the credit facility prior to this recent amendment. Although there can be no assurances that interest rates will not further change significantly, the Company does not expect such changes in interest rates to have a material effect on net earnings or cash flows in 2000. 10 11 PART II ITEM 1. LEGAL PROCEEDINGS. Not applicable. ITEM 2. CHANGES IN SECURITIES. Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. At the Company's Annual Shareholders Meeting held on May 19, 2000, the following members were elected to the Board of Directors by the vote set forth below:
VOTES VOTES VOTES FOR AGAINST WITHHELD ---------- ------- --------- Class III Director Thomas G. Cigarran 42,638,547 - 1,987,569 Class III Director Debora A. Guthrie 39,399,101 - 5,227,015 Class III Director Bergein F. Overholt, M.D. 42,752,243 - 1,873,873
Also, the following proposal was considered and approved at the Annual Shareholders Meeting by the vote set forth below:
VOTES VOTES VOTES FOR AGAINST WITHHELD ---------- ------- --------- Approval of an amendment to the Company's 1997 Stock Incentive Plan to increase the number of shares reserved for issuance thereunder from 1,120,000 to 1,600,000 7,200,948 3,490,580 29,410
ITEM 5. OTHER INFORMATION. Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 10.1 Amended and Restated Revolving Credit Agreement, dated as of May 5, 2000, among the Company, SunTrust Bank, as administrative agent, Bank of America, N.A., as syndication agent, and various banks and other financial institutions (incorporated by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2000). 27 Financial Data Schedule (for SEC use only) (b) Reports on Form 8-K The Company filed a report on Form 8-K, dated June 5, 2000, during the quarter ended June 30, 2000 to report the acquisition of a 60 % interest in a limited liability company which operates an ambulatory surgery center in Las Vegas, Nevada. 11 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMSURG CORP. Date: August 11, 2000 By: /s/ Claire M. Gulmi --------------------------------------- CLAIRE M. GULMI Senior Vice President and Chief Financial Officer (Principal Financial and Duly Authorized Officer) 12 EX-27 2 ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMSURG CORP.'S BALANCE SHEET AS OF JUNE 30, 2000 AND STATEMENT OF EARNINGS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000. 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 6,945 0 20,566 0 2,208 31,955 30,304 0 151,239 10,751 42,359 0 0 62,993 14,014 151,239 0 66,223 0 44,580 0 0 1,625 6,875 2,647 4,228 0 0 0 4,228 0.29 0.28 Value represents net amount.
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