-----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, A+Ks0gZ6pNgGAPDnXU9hwR7laFHK0isSR4n5zCk0dCUP0I5sq6lerorEicj9Qm9f j8burVI8Fz7zKc5ysy5NGA== 0000950144-98-012989.txt : 19981123 0000950144-98-012989.hdr.sgml : 19981123 ACCESSION NUMBER: 0000950144-98-012989 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 DATE AS OF CHANGE: 19981120 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: 98752673 BUSINESS ADDRESS: STREET 1: ONE 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 AMSURG CORP. FORM 10-Q 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 SEPTEMBER 30, 1998 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.) ONE BURTON HILLS BOULEVARD SUITE 350 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 November 11, 1998, there were outstanding 9,533,486 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
SEPTEMBER 30, DECEMBER 31, 1998 1997 ---- ---- ASSETS Current assets: Cash and cash equivalents .................................... $ 4,850,847 $ 3,406,787 Accounts receivable, net ..................................... 11,871,497 8,220,616 Supplies inventory ........................................... 1,119,842 905,992 Deferred income taxes ........................................ 390,000 390,000 Prepaid and other current assets ............................. 1,089,834 1,020,835 ------------ ------------ Total current assets ................................ 19,322,020 13,944,230 Long-term receivables and deposits ................................ 315,264 479,012 Property and equipment, net ....................................... 21,474,451 19,248,464 Intangible assets, net ............................................ 45,865,024 41,566,684 ------------ ------------ Total assets ........................................ $ 86,976,759 $ 75,238,390 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt ............................ $ 1,210,211 $ 1,330,595 Accounts payable ............................................. 1,019,679 922,188 Accrued salaries and benefits ................................ 1,063,222 1,018,844 Other accrued liabilities .................................... 998,266 1,235,626 Current income taxes payable ................................. 238,199 125,396 ------------ ------------ Total current liabilities ........................... 4,529,577 4,632,649 Long-term debt .................................................... 6,989,962 24,969,718 Deferred income taxes ............................................. 838,439 1,185,000 Minority interest ................................................. 11,865,646 9,191,896 Preferred stock, no par value, 5,000,000 shares authorized, 0 and 916,666 shares outstanding, respectively ................... -- 5,267,672 Shareholders' equity: Common stock: Class A, no par value, 20,000,000 shares authorized 9,526,986 and 4,758,091 shares outstanding, respectively 48,057,136 14,636,331 Class B, no par value, 4,800,000 shares authorized, 4,787,131 shares outstanding ........................... 13,528,981 13,528,981 Retained earnings ............................................ 1,337,840 2,099,491 Deferred compensation on restricted stock .................... (170,822) (273,348) ------------ ------------ Total shareholders' equity .......................... 62,753,135 29,991,455 ------------ ------------ Total liabilities and shareholders' equity .......... $ 86,976,759 $ 75,238,390 ============ ============
See accompanying notes to the consolidated financial statements. 2 3 AMSURG CORP. CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------ ------------------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Revenues .............................................. $ 20,125,797 $ 14,566,595 $ 58,074,392 $ 41,047,718 Operating expenses: Salaries and benefits ............................ 5,393,533 4,444,648 16,665,770 12,551,809 Other operating expenses ......................... 7,407,918 5,110,427 20,994,332 14,563,740 Depreciation and amortization .................... 1,660,895 1,287,574 4,912,004 3,510,515 Net loss (gain) on sale of assets ................ -- (826,835) 5,463,509 1,430,148 ------------ ------------ ------------ ------------ Total operating expenses ..................... 14,462,346 10,015,814 48,035,615 32,056,212 ------------ ------------ ------------ ------------ Operating income ............................. 5,663,451 4,550,781 10,038,777 8,991,506 Minority interest ..................................... 3,509,692 2,213,505 9,472,427 6,447,445 Other expenses: Interest expense, net of interest income ......... 172,961 401,256 1,295,882 1,089,651 Distribution cost ................................ -- 458,000 -- 458,000 ------------ ------------ ------------ ------------ Earnings (loss) before income taxes .......... 1,980,798 1,478,020 (729,532) 996,410 Income tax expense .................................... 792,318 543,000 32,119 1,279,000 ------------ ------------ ------------ ------------ Net earnings (loss) .......................... 1,188,480 935,020 (761,651) (282,590) Accretion of preferred stock discount ................. -- 72,649 -- 210,204 ------------ ------------ ------------ ------------ Net earnings (loss) available to common shareholders ..................... $ 1,188,480 $ 862,371 $ (761,651) $ (492,794) ============ ============ ============ ============ Earnings (loss) per common share: Basic ............................................ $ 0.08 $ 0.09 $ (0.07) $ (0.05) Diluted .......................................... $ 0.08 $ 0.09 $ (0.07) $ (0.05) Weighted average number of shares and share equivalents outstanding: Basic ............................................ 14,302,197 9,502,450 11,549,800 9,436,646 Diluted .......................................... 14,659,425 9,837,776 11,549,800 9,436,646
See accompanying notes to the consolidated financial statements. 3 4 AMSURG CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998 1997 ---- ---- Cash flows from operating activities: Net loss .......................................................................... $ (761,651) $ (282,590) Adjustments to reconcile net loss to net cash provided by operating activities: Minority interest ............................................................. 9,472,427 6,447,445 Distributions to minority partners ............................................ (8,880,449) (6,342,236) Depreciation and amortization ................................................. 4,912,004 3,510,515 Deferred income taxes ......................................................... (346,561) -- Amortization of deferred compensation on restricted stock ..................... 102,526 -- Net loss on sale of assets .................................................... 5,463,509 1,494,333 Increase (decrease) in cash, net of effects of acquisitions, due to changes in: Accounts receivable, net ................................................. (2,745,772) (1,255,421) Supplies inventory ....................................................... 767 (41,837) Prepaid and other current assets ......................................... (31,074) (349,775) Other assets ............................................................. (176,511) (686,388) Accounts payable ......................................................... (174,674) (232,429) Accrued expenses and other liabilities ................................... (63,761) 1,063,686 Other, net ............................................................... (27,746) 162,650 ------------ ------------ Net cash flows provided by operating activities .......................... 6,743,034 3,487,953 Cash flows from investing activities: Acquisition of interest in surgery centers and physician practices ................ (11,830,592) (12,626,007) Acquisition of property and equipment ............................................. (4,559,696) (7,423,033) Proceeds from sale of assets ...................................................... 652,000 1,978,462 Decrease in long-term receivables ................................................. 120,739 35,118 ------------ ------------ Net cash flows used in investing activities .............................. (15,617,549) (18,035,460) Cash flows from financing activities: Proceeds from long-term borrowings ................................................ 11,945,222 15,218,330 Repayment on long-term borrowings ................................................. (30,267,101) (2,903,616) Net proceeds from issuance of common stock ........................................ 27,642,423 494,006 Proceeds from capital contributions by minority partners .......................... 1,053,130 2,288,990 Financing cost incurred ........................................................... (55,099) (116,810) ------------ ------------ Net cash flows provided by financing activities .......................... 10,318,575 14,980,900 ------------ ------------ Net increase in cash and cash equivalents .............................................. 1,444,060 433,393 Cash and cash equivalents, beginning of period ......................................... 3,406,787 3,192,408 ------------ ------------ Cash and cash equivalents, end of period ............................................... $ 4,850,847 $ 3,625,801 ============ ============
See accompanying notes to the consolidated financial statements. 4 5 AMSURG CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (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 1997 Annual Report on Form 10-K. Certain amounts of prior periods have been reclassified to conform to the current presentation. (2) SHAREHOLDERS' EQUITY On June 17, 1998, the Company completed a public offering of 3,700,000 shares of Class A Common Stock, for net proceeds of approximately $27,600,000. Concurrent with the public offering, the Series B Convertible Preferred Stock was converted into 605,998 shares of Class A Common Stock. Net proceeds from the offering were used to repay borrowings under the Company's revolving credit facility. During the first quarter of 1998, the holders of the Series A Redeemable Preferred Stock converted their preferred shares into 380,952 shares of Class A Common Stock pursuant to a conversion ratio based on the market price of the Class A Common Stock set forth in the Company's Charter. (3) ACQUISITIONS AND DISPOSITIONS In the nine months ended September 30, 1998, the Company, through wholly owned subsidiaries and in separate transactions, acquired majority interests in four physician practice-based surgery centers. The Company also purchased an additional interest in an existing surgery center. The aggregate purchase price and related cost for the acquisitions was approximately $12,280,000, consisting primarily of cash and Class A Common Stock valued at approximately $450,000, of which the Company assigned approximately $11,030,000 to excess cost over net assets of purchased operations. Subsequent to September 30, 1998, the Company, through a wholly owned subsidiary, acquired a majority interest in a physician practice-based surgery center for approximately $2.0 million. Also in the nine months ended September 30, 1998, a partnership in which the Company through a wholly owned subsidiary owned a 51% interest, sold certain assets comprising a surgery center developed in 1995 for approximately $650,000 and incurred a net loss of $42,914. In May 1998, the Company's Board of Directors approved a plan to dispose of the Company's interests in the two specialty physician practices in which it then owned a majority interest as part of an overall strategy to exit the practice management business and focus solely on the development, acquisition and operation of ambulatory surgery centers and specialty networks. While the Company's past strategy for network development included the ownership of related physician practices, the Company believes that physician practice ownership is not necessary for the successful development of these networks. Because of this change in strategy and the fact that the ownership of physician practices is management intensive and produces lower profit margins than surgery centers, the Company believes that its capital and management resources are better allocated to the development and acquisition of surgery centers and networks. In addition, the Company believes that the ownership of only two physician practices does not allow for the economies of scale and growth opportunities needed to be successful in the physician practice management business. In conjunction with the plan of disposal of these practices, the Company reduced the carrying value of the long-lived assets held for sale by approximately $5,400,000 in the second quarter of 1998, based on the estimated sales proceeds less estimated costs to sell. The Company recognized an income tax benefit of approximately $1,800,000 associated with the estimated loss. The remaining carrying value of the net assets of the practices at the plan of disposal date was approximately $1,700,000. 5 6 AMSURG CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 As of September 30, 1998, the Company had completed the disposal of one of these practices and on October 1, 1998, the Company completed the disposition of the second practice. A summary of the information about the operations of the physician practices for the three and nine months ended September 30, 1998 and 1997 is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------------- ------------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Revenues ................................... $ 634,971 $2,145,321 $4,875,495 $6,749,637 Operating expenses ......................... 559,331 1,898,927 4,382,124 6,022,876 Minority interest .......................... 42,527 86,827 198,188 277,893 Interest expense (income) .................. (2,731) 75,551 111,885 238,093 ---------- ---------- ---------- ---------- Contribution margin before income taxes $ 35,844 $ 84,016 $ 183,298 $ 210,775 ========== ========== ========== ==========
(4) RECENT ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" became effective for the Company during the first quarter of 1998 and its adoption did not have a material impact on the Company's financial reporting practices. SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information" also becomes effective for the Company for the year ended December 31, 1998. The Company is still evaluating the effects of adopting this statement, but does not expect its adoption to have a material effect on the Company's consolidated financial statements. Statement of Position ("SOP") No. 98-5 "Reporting on the Costs of Start-Up Activities" becomes effective for the Company for the year ended December 31, 1999. SOP No. 98-5 requires that start-up costs be expensed as incurred and that upon adoption, all deferred start-up costs be expensed as a cumulative effect of a change in accounting principle. The Company does not anticipate that the adoption of SOP No. 98-5 will have a material effect on the Company's financial position or ongoing results of operations. 6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward-looking statements. These statements, which have been included in reliance on the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, involve risks and uncertainties. The Company's actual operations and results may differ materially from the results discussed in any such forward-looking statements. Factors that might cause such a difference include, but are not limited to, 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 ("HCFA") which would update the ratesetting methodology, payment rates, payment policies and the list of covered surgical procedures for ambulatory surgery centers; and risks relating to the Company's technological systems, including becoming Year 2000 compliant. OVERVIEW The Company develops, acquires and operates practice-based ambulatory surgery centers in partnership with physician practice groups through partnerships and limited liability companies. As of September 30, 1998, the Company owned a majority interest (51% or greater) in 47 surgery centers, owned a majority interest (60%) in a physician practice and had established and was the majority owner (51%) of six start-up specialty physician networks. The Company operated as a majority-owned subsidiary of American Healthcorp, Inc. ("AHC") from 1992 until December 3, 1997 when AHC distributed to its stockholders all of its holdings of AmSurg common stock (the "Distribution"). Prior to the Distribution, the Company effected a recapitalization pursuant to which every three shares of the Company's then outstanding common stock were converted into one share of Class A Common Stock. Immediately following the Recapitalization, AHC exchanged a portion of its shares of Class A Common Stock for shares of Class B Common Stock. The principal purpose of the Distribution was to enable the Company to have access to debt and equity capital markets as an independent, publicly traded company. Upon the Distribution, the Company became a publicly traded company. The following table presents the changes in the number of surgery centers in operation and centers under development during the three and nine months ended September 30, 1998 and 1997. 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 ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ----------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Centers in operation, beginning of period ...... 46 31 39 27 New center acquisitions placed in operation .... 1 2 4 5 New development centers placed in operation -- 5 5 6 Centers sold ................................... -- (3) (1) (3) ----- ----- ----- ----- Centers in operation, end of period ............ 47 35 47 35 ==== ===== ===== ===== Centers under development, end of period ....... 5 14 5 14 ===== ===== ===== =====
Thirty-five of the surgery centers in operation as of September 30, 1998, perform gastrointestinal endoscopy procedures, ten centers perform ophthalmology surgery procedures, one center performs orthopaedic 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. 7 8 During 1998, the Company had a majority interest in two specialty physician practices which were acquired in January 1996 and January 1997, the other partners of which were entities owned by the principal physicians who provide professional medical services to patients of the practices. In May 1998, the Company's Board of Directors approved a plan to dispose of the Company's interests in these two physician practices as part of an overall strategy to exit the practice management business and focus solely on the development, acquisition and operation of ambulatory surgery centers and specialty networks. Accordingly, the Company recorded a charge of $3.6 million, net of income tax benefit of $1.8 million, in the second quarter of 1998 for the estimated loss on the disposal of these assets, and on June 26, 1998 and October 1, 1998, the Company completed the disposition of each of these practices (see Note 3 of the Consolidated Financial Statements). The start-up specialty physician networks are owned through limited partnerships and limited liability companies in which 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 for the Company. These networks were and may 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 September 30, 1998, one network had secured a managed care contract and was operational. The Company intends to expand through the development and acquisition of additional practice-based 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. While the Company generally owns 51% to 70% of the entities that own the surgery center or physician group practice, 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 income or loss of the surgery center/practice 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. Historically, the Company's other significant source of revenues has been the fees for physician services performed by the two physician group practices in which the Company owned a majority interest. However, as a result of the disposition of these practices, the Company will no longer earn such revenue. Practice-based ambulatory surgery centers and physician practices 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 34% of its net revenues from governmental healthcare programs, including Medicare and Medicaid, in the nine months ended September 30, 1998 and 1997, respectively. The Medicare program currently pays ambulatory surgery centers and physicians in accordance with fee schedules which are prospectively determined. Approximately 7% and 11% of the Company's revenues for the nine months ended September 30, 1998 and 1997, respectively, were generated by capitated payment contracts with HMOs. These revenues generally were attributable to contracts held by the physician practices and a surgery center in which the Company held a majority interest. Approximately 66% of the revenue associated with these contracts in the nine months ended September 30, 1998 were a part of the operations of the disposed practices. The other contracts require the surgery centers to provide certain outpatient surgery services for the HMO members on an exclusive basis. The services required by these contracts are provided almost solely by surgery centers in which the Company owns a majority interest. Because the Company is only at risk for the cost of providing relatively limited healthcare services to these HMO members, the Company's risk of overutilization by HMO members is limited to the cost of the supplies, drugs and nursing staff expense required for outpatient surgery. 8 9 The Company's sources of revenues as a percentage of total revenues for the three and nine months ended September 30, 1998 and 1997 are as follows:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Surgery centers .......... 97% 85% 92% 83% Physician practices ...... 3 15 8 16 Other .................... -- -- -- 1 ---- ---- ---- ---- Total ................ 100% 100% 100% 100% ==== ==== ==== ====
RESULTS OF OPERATIONS The following table shows certain statement of operations items expressed as a percentage of revenues for the three and nine months ended September 30, 1998 and 1997:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------- -------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Revenues ................................. 100.0% 100.0% 100.0% 100.0% Operating expenses: Salaries and benefits .................. 26.8 30.5 28.7 30.5 Other operating expenses ............... 36.8 35.1 36.1 35.5 Depreciation and amortization .......... 8.3 8.8 8.5 8.6 Net loss (gain) on sale of assets ...... -- (5.6) 9.4 3.5 ----- ----- ----- ----- Total operating expenses ............. 71.9 68.8 82.7 78.1 ----- ----- ----- ----- Operating income ..................... 28.1 31.2 17.3 21.9 Minority interest ........................ 17.4 15.2 16.3 15.7 Other and expenses: Interest expense, net of interest income 0.9 2.8 2.2 2.7 Distribution cost ...................... -- 3.1 -- 1.1 ----- ----- ----- ----- Earnings (loss) before income taxes .. 9.8 10.1 (1.2) 2.4 Income tax expense ....................... 3.9 3.7 0.1 3.1 ----- ----- ----- ----- Net earnings (loss) .................. 5.9 6.4 (1.3) (0.7) Accretion of preferred stock discount .... -- 0.5 -- 0.5 ----- ----- ----- ----- Net earnings (loss) available to common shareholders ............. 5.9% 5.9% (1.3)% (1.2)% ===== ===== ===== =====
Revenues were $20.1 million and $58.1 million in the three and nine months ended September 30, 1998, respectively, an increase of $5.6 million and $17.0 million, or 38% and 41%, respectively, over revenues in the comparable 1997 periods. The increase is primarily attributable to additional centers in operation during the 1998 periods, partially offset by a reduction of physician practice revenue of $1.5 million and $1.9 million in the three and nine months ended September 30, 1998, respectively. Same-center revenues in the three and nine months ended September 30, 1998, increased by 12%. Same-center growth resulted primarily from increased procedure volume. The Company anticipates further revenue growth during 1998 as a result of additional start-up and acquired centers expected to be placed in operation and from same-center revenue growth, net of the revenue reduction due to the disposition of the physician practices. 9 10 Salaries and benefits expense was $5.4 million and $16.7 million in the three and nine months ended September 30, 1998, respectively, an increase of $949,000 and $4.1 million, or 21% and 33%, respectively, over salaries and benefits expense in the comparable 1997 periods. Salaries and benefits expense as a percentage of revenue decreased in the 1998 periods due to the elimination of physician salaries of the practice disposed of in June 1998. Other operating expenses were $7.4 million and $21.0 million in the three and nine months ended September 30, 1998, respectively, an increase of $2.3 million and $6.4 million, or 45% and 44%, respectively, over other operating expenses in the comparable 1997 periods. These increases resulted primarily from additional centers in operation, from an increase in corporate staff primarily to support growth in the number of centers in operation and anticipated future growth and additional corporate cost associated with being a publicly traded company. These increases were offset by a reduction in physician practice expenses of the practice disposed of in June 1998. The Company anticipates further increases in operating expenses in 1998, primarily due to additional start-up centers and acquired centers expected to be placed in operation, offset by the elimination of physician practice operating expenses of the practices disposed of in 1998. Typically, a start-up center will incur start-up losses 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. Depreciation and amortization expense increased $373,000 and $1.4 million, or 29% and 40%, respectively in the three and nine months ended September 30, 1998, over the comparable 1997 periods, primarily due to 12 additional surgery centers in operation in the 1998 periods compared to the 1997 periods. Net loss on sale of assets in the nine months ended September 30, 1998 resulted primarily from the Company's plan to exit the physician practice management business. In the second quarter of 1998, the Company reduced the carrying value of the long-lived assets of the practices held for sale by approximately $5.4 million based on the estimated sales proceeds less estimated costs to sell. Net gain on sale of assets of $827,000 in the three months ended September 30, 1997 resulted from the sale of a surgery center building and equipment as well as a partial loss recovery from a $2.3 million impairment loss originally recorded in the first quarter of 1997. The combination of these transactions resulted in a net loss on sale of assets of $1.4 million in the nine months ended September 30, 1997. The minority interest in earnings in the three and nine months ended September 30, 1998, increased by $1.3 million and $3.0 million, or 59% and 47%, respectively over the comparable 1997 periods primarily as a result of minority partners' interest in earnings at surgery centers recently added to operations and from increased same-center profitability. Because the 1998 periods reflect a reduction in physician practice revenues, which generate lower profit margins than surgery center revenues, minority interest as a percentage of revenues increased 2.2% and 0.6% in the three and nine months ended September 30, 1998. Interest expense decreased $228,000, or 57%, in the three months ended September 30, 1998 from the comparable 1997 period. Interest expense increased $206,000, or 19%, in the nine months ended September 30, 1998, from the comparable 1997 period. The reduction in the three month period was the result of the repayment of long-term debt from the proceeds of the public offering in June 1998 (see "Liquidity and Capital Resources") and a decrease in the Company's borrowing rate due to a decrease in borrowing levels. The increase in interest expense in the nine month period was due to debt assumed or incurred 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. The increase was partially offset by the reduction in long-term debt due to the application of offering proceeds in June 1998. The Company recognized income tax expense of $792,000 and $32,000 in the three and nine months ended September 30, 1998, respectively, compared to $543,000 and $1.3 million in the comparable 1997 periods, respectively. A tax benefit of $1.8 million was recognized in the nine months ended September 30, 1998 in connection with the net loss on sale of assets recorded in the second quarter of 1998. The Company's effective tax rate in all periods was 40% of earnings prior to the impact of the net loss on sale of assets and differed from the federal statutory income tax rate of 34% primarily due to the impact of state income taxes. Accretion of preferred stock discount in the three and nine months ended September 30, 1997, resulted from the issuance during November 1996 of redeemable preferred stock with a redemption amount of $3.0 million. The preferred stock was recorded at its fair market value, net of issuance costs. From the time of issuance, the Series A Redeemable Preferred Stock was accreted toward its redemption value, including potential dividends, over the redemption term. During the first quarter of 1998, the holders of this series of preferred stock elected to convert their preferred shares into 380,952 shares of Class A Common Stock pursuant to the provisions of the Company's Charter using a conversion ratio based on the market price of the Company's Class A Common Stock. Accordingly, the Company has recorded no accretion in 1998. 10 11 LIQUIDITY AND CAPITAL RESOURCES At September 30, 1998, the Company had working capital of $14.8 million compared to $6.4 million at September 30, 1997. Operating activities for the nine months ended September 30, 1998, generated $6.7 million in cash flow compared to $3.5 million in the comparable 1997 period, an increase of $3.3 million resulting primarily from increased earnings before consideration of gains and losses from sales of assets. Cash and cash equivalents at September 30, 1998 and 1997 were $4.9 million and $3.6 million, respectively. During the nine months ended September 30, 1998, the Company used approximately $11.8 million to acquire interests in four additional 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 $4.6 million in the nine months ended September 30, 1998, of which approximately $1.1 million was funded from the capital contributions of the Company's minority partners. The Company used its cash flow from operations and borrowings on long-term debt of approximately $11.9 million to fund its acquisition and development obligations. On June 17, 1998, the Company completed a public offering of 3,700,000 shares of Class A Common Stock, for net proceeds of $27.6 million. The net proceeds, along with cash flow from operations, were used to repay $30.3 million in borrowings under the Company's revolving credit facility (the "Loan Agreement") and other long-term debt during the nine months ended September 30, 1998. The Company also received cash proceeds of $650,000 from the sale of a surgery center during the nine months ended September 30, 1998. At September 30, 1998, the Company's partnerships and limited liability companies had unfunded construction and equipment purchase commitments for centers under development of approximately $2.2 million, of which the Company expects approximately $2.0 million will be borrowed by the partnerships or limited liability companies while the remainder will be provided by the Company and the physician partners in proportion to their respective ownership interests in the partnerships and limited liability companies. The Company intends to fund its portion out of future cash flows from operations. At September 30, 1998, borrowings under the Company's revolving credit facility were $5.1 million, are due in January 2001 and are guaranteed by the wholly owned subsidiaries of the Company, and in some instances, the underlying assets of certain developed centers. The loan agreement permits the Company to borrow up to $50.0 million to finance the Company's acquisition and development projects at a rate equal to, at the Company's option, the prime rate or LIBOR plus a spread of 1.0% to 2.25%, depending upon borrowing levels. The loan agreement also provides for a fee ranging between .15% and .40% 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 September 30, 1998. On November 20, 1996, the Company issued shares of its Series A Redeemable Preferred Stock and Series B Convertible Preferred Stock to certain unaffiliated institutional investors for net cash proceeds of approximately $5.0 million. The purpose of the offering was to fund the acquisition and development of surgery centers and to provide other working capital as needed prior to being in position to access capital markets as an independent public company. The Series A Preferred Stock, which had a liquidation value of $3.0 million and was subject to redemption at any time at the option of the Company, upon the occurrence of certain events and in 2002 at the option of the holders, was converted during the three months ended March 31, 1998, by its holders into 380,952 shares of Class A Common Stock using a conversion ratio based on market price of the Class A Common Stock pursuant to the provisions of the Company's Charter. Upon the public offering completed on June 17, 1998, the Series B Preferred Stock automatically converted into 605,998 shares of Class A Common Stock as determined by a conversion ratio providing for the issuance of that number of shares which approximated 6% of the equity of the Company determined as of November 20, 1996. 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 is subject to a comment period that has been extended until January 8, 1999, and provides for an implementation date that has been extended to a date no earlier than January 2000. 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 Company believes that the proposed rule if adopted in its current form would adversely affect the Company's annual revenues by approximately 4% at that time. The Company is prepared to take a number of specific actions, including actions to effect certain cost efficiencies in center operations and reduce corporate overhead costs, in anticipation of the implementation of a final rule in order to offset the earnings impact of the rule. There can be no assurance that the Company will be able to implement successfully 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. There also can be no assurance that HCFA will not modify the proposed rule, before it is enacted in final form, in a manner that would adversely impact the Company's financial condition, results of operation and business prospects. 11 12 YEAR 2000 The Company has evaluated its risks associated with software and hardware components which may fail due to the millennium change and has determined these risks include but are not limited to (i) risk that surgical equipment critical to the patient's care may fail, (ii) risk that billing and administration software will not support timely billing and collection efforts and (iii) risks that third party payers will not provide timely reimbursement for services performed. In order to address these risks, the Company has designed and implemented a Year 2000 assessment and action plan. Because the Company generally has no internally designed software systems or hardware components nor does the Company market or support any software or hardware products, the Company has focused its efforts on ensuring that its systems are Year 2000 compliant by implementing a plan designed to evaluate all critical systems purchased from third parties at each of its operating surgery centers and its corporate offices. The assessment plan involves (i) identifying all potential Year 2000 hardware and software components, including but not limited to surgical equipment, office machinery, financial software and general service equipment and components, (ii) contracting with a third party consultant to measure surgical equipment products against their Year 2000 compliance database, (iii) obtaining verification from third parties whether their products are Year 2000 compliant and, if not, the third parties' ability to make the appropriate modifications and (iv) testing systems in a controlled environment to determine their ability to function accurately beyond 1999. In addition, the Company intends to contact all significant suppliers and third party payers to determine if they are Year 2000 compliant and if they will be able to continue to provide products, services or reimbursement in 2000. This assessment plan was initiated in the third quarter of 1998 and is expected to continue throughout 1999. Nearly all of the Company's surgery centers have completed their identification of medical hardware and software and are awaiting the database results from the third party consultant. Most non-medical equipment has also been identified, but testing and/or communication with vendors have not been completed. Based on the ongoing findings of the assessment plan, the Company will begin the remediation process to replace or modify those systems not found to be Year 2000 compliant. Although a complete cost assessment will not be determinable until all operating locations have been fully assessed, the Company currently estimates that the Company and the surgery centers in the aggregate may incur total capitalizable and non-capitalizable costs ranging from $200,000 to $400,000 in 1999 to ensure that all centers and the corporate offices are Year 2000 compliant. However, until the assessment and remediation processes are completed, the Company is unable to estimate with certainty the total costs to make the Company Year 2000 compliant. No significant costs have been incurred to date associated with Year 2000 compliance. All costs to evaluate and make modifications will be expensed as incurred, will generally be shared by the Company's physician partners in proportion to their ownership interest and are not expected to have a significant impact on the Company's financial position or ongoing results of operations. The Company has yet to establish a contingency plan, but intends to formulate one to address its significant risks by the second quarter of 1999. RECENT ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" became effective for the Company during the first quarter of 1998 and its adoption did not have a material impact on the Company's financial reporting practices. SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information" also becomes effective for the Company for the year ended December 31, 1998. The Company is still evaluating the effects of adopting this statement, but does not expect its adoption to have a material effect on the Company's consolidated financial statements. Statement of Position ("SOP") No. 98-5 "Reporting on the Costs of Start-Up Activities" becomes effective for the Company for the year ended December 31, 1999. SOP No. 98-5 requires that start-up costs be expensed as incurred and that upon adoption, all deferred start-up costs be expensed as a cumulative effect of a change in accounting principle. The Company does not anticipate that the adoption of SOP No. 98-5 will have a material effect on the Company's financial position or ongoing results of operations. 12 13 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. Not Applicable. ITEM 5. OTHER INFORMATION. Not Applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 10 Medical Director Agreement dated as of January 1, 1998 between the Company and Bergein F. Overholt, M.D. 27 Financial Data Schedule (for SEC use only) (b) Reports on Form 8-K The Company filed a report on Form 8-K dated August 4, 1998 during the quarter ended September 30, 1998 to report the acquisition of an undivided 57% interest in the assets comprising an ophthalmic ambulatory surgery center in Westlake Village, California. 13 14 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: November 13, 1998 By: /s/ Claire M. Gulmi ------------------------------------- CLAIRE M. GULMI Senior Vice President and Chief Financial Officer(Principal Financial and Duly Authorized Officer) 14 EX-10 2 MEDICAL DIRECTOR AGREEMENT 1 EXHIBIT 10 MEDICAL DIRECTOR AGREEMENT This MEDICAL DIRECTOR AGREEMENT ("Agreement") is entered into effective the 1st day of January, 1998 (the "Effective Date") by and between AmSurg Corp., a Tennessee corporation ("AmSurg") and Bergein F. Overholt, M.D. ("Medical Director"). WITNESSETH: WHEREAS, AmSurg develops, acquires and operates practice-based ambulatory surgery centers in partnership with physician practice groups throughout the United States; and WHEREAS, AmSurg desires to engage the Medical Director to assist AmSurg in the direction and coordination of all medical aspects of AmSurg's operations; and WHEREAS, Medical Director is a physician duly licensed to practice medicine in the State of Tennessee and is willing to serve in the capacity as medical director of AmSurg upon the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the provisions set forth herein and other good and valuable consideration, the receipt of which is hereby acknowledged, AmSurg and the Medical Director agree as follows: AGREEMENT 1. DUTIES AND RESPONSIBILITIES. A. The Medical Director shall be responsible for the direction and coordination of all medical aspects of AmSurg's operations. The Medical Director shall have the duties and responsibilities assigned to him from time to time by the Company's senior management, including but not limited to: (1) assisting in developing policies and procedures for AmSurg's ambulatory surgery centers, physician practices and specialty physician networks; (2) ensuring that AmSurg adopts appropriate medical procedures for implementation in its ambulatory surgery centers that comply with all local, state and federal regulations and policies; (3) acting as a liaison between AmSurg and each of the medical directors of the ambulatory surgery centers owned by AmSurg; (4) acting as a liaison between AmSurg and external organizations and individuals, including managed care organizations, consultants and others; 2 (5) assisting AmSurg with designated compliance program functions; (6) assisting with peer review functions as needed or requested by AmSurg; and (7) assisting the Development staff as requested. B. The Medical Director agrees to devote whatever time is necessary to adequately perform his duties hereunder. The parties anticipate that in order for the Medical Director to adequately fulfill his duties and responsibilities, he will need to devote approximately 150 hours per year to Medical Director duties. 2. COMPENSATION. In consideration of the duties and responsibilities of the Medical Director, AmSurg hereby agrees to pay the Medical Director annual compensation in the amount of $50,000 to be paid in equal monthly installments in arrears due on the first day of each month commencing on the first month after the Effective Date. 3. TERM. A. The initial term of this Agreement shall be for one (1) year from the Effective Date (the "Initial Term"). This Agreement shall be automatically renewed thereafter for additional one (1) year terms unless either party gives the other party written notice of termination no later than 90 days prior to the anniversary date hereof. B. This Agreement may be terminated by either party without cause at any time upon ninety (90) days prior written notice to the other party. 4. DEFAULT. A. The Medical Director shall be in default of this Agreement if he fails to perform any material term hereof, and such failure is not cured within 30 days after receipt of written notice from AmSurg of such failure. In the event of such default, AmSurg shall have the right to terminate this Agreement immediately by written notice to the Medical Director. B. AmSurg shall be in default of this Agreement if it fails to perform any material term hereof and such failure is not cured with 30 days after receipt of written notice from the Medical Director of such failure. In the event of such default, the Medical Director shall have the right to terminate this Agreement immediately by written notice to AmSurg. 2 3 5. IMMEDIATE TERMINATION. Upon the occurrence of either of the following events: A. Personal misconduct by the Medical Director, including, but not limited to, failure to comply with the ethical provisions of the American Medical Association; or B. The conviction of the Medical Director of any crime punishable as a felony involving moral turpitude, immoral conduct or professional misconduct or negligence. Then in such event this Agreement shall terminate immediately and AmSurg shall have the right to engage another physician to serve as Medical Director for AmSurg. 6. INDEPENDENT CONTRACTOR. The relationship between the Medical Director and AmSurg is, and shall remain, one of independent contractorship. Nothing in this Agreement shall be construed to constitute either party as the agent, employee or joint venturer of the other, nor shall either party have the right to bind the other party or make any promises or representations on behalf of the other party. AmSurg shall have no control or direction over the manner in which the Medical Director performs his responsibilities hereunder. The Medical Director shall have no claim against AmSurg for vacation pay, sick leave, retirement benefits, social security, worker's compensation, disability or unemployment insurance benefits or other employee benefits of any kind. 7. INDEMNIFICATION. A. The Medical Director will indemnify and hold harmless AmSurg, its officers and directors from any and all losses, costs, damages, expenses and/or liabilities, including but not limited to any attorney's fees incurred by AmSurg, its officers or directors resulting from any lawsuit, claim or other legal proceeding or threatened proceeding arising out of or in connection with the acts or negligence or deliberate omissions of the Medical Director in the performance of his duties under this Agreement. B. AmSurg will indemnify and hold harmless the Medical Director from any and all losses, costs, damages, expenses and/or liabilities, including but not limited to any attorney's fees incurred by Medical Director resulting from any lawsuit, claim or other legal proceeding or threatened proceeding arising out of or in connection with the acts or omissions of AmSurg or any officer, director or employee of AmSurg in the performance of its obligations under this Agreement. 8. LIMITATION. The Medical Director agrees that during the Initial Term of this Agreement and any renewals thereof, and in the absence of prior written consent of AmSurg, the Medical Director shall not accept similar administrative or medical administrative responsibilities from, or serve in a similar capacity with, any other entity which is at such 3 4 time engaged or is proposing to engage in a business of like or similar nature to the business being conducted by AmSurg that, in the opinion of the Board of Directors of AmSurg, could interfere or conflict with the Medical Director's ability to adequately perform his responsibilities under this Agreement. The Medical Director may serve on the medical staff of hospitals as well as teach, lecture, write or provide consultations and other activities, which are not otherwise prohibited by this Section 8. 9. LIMITED RENEGOTIATION. This Agreement shall be construed to be in accordance with any and all federal and state laws, including laws relating to Medicare, Medicaid and other third party payors. In the event there is a change in such laws, whether by statute, regulation, agency or judicial decision that has any material effect on any term of this Agreement, then the applicable term(s) of the Agreement shall be subject to renegotiation and either party may request renegotiation of the affected term or terms of this Agreement, upon written notice to the other party, to remedy such condition. The parties expressly recognize that upon request for renegotiation, each party has a duty and obligation to the other only to renegotiate the affected term(s) in good faith and, further, the Medical Director expressly agrees that its consent to proposals submitted by AmSurg during renegotiation efforts shall not be unreasonably withheld. Should the parties be unable to renegotiate the term or terms so affected so as to bring it/them into compliance with the statute, regulation, or judicial opinion that rendered it/them unlawful or unenforceable within 30 days of the date on which notice of a desired renegotiation is given, then either party shall be entitled, after the expiration of said 30 day period, to terminate this Agreement upon 30 additional days written notice to the other party. 10. NO REQUIREMENT TO REFER. The parties acknowledge and agree that nothing contained in this Agreement requires the Medical Director to use or recommend the use of facilities or services owned or operated by AmSurg. 11. MISCELLANEOUS. A. Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the state of Tennessee. B. Waiver of Breach. The waiver by a party of any breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach of the same or any other provision hereof by that party. C. Entire Agreement. This instrument contains the entire agreement of the parties and supersedes all prior agreements and understandings between the parties with respect 4 5 to the subject matter hereof. Amendments may be made to this Agreement only upon the written approval of both AmSurg and the Medical Director. D. Severability. The provisions of this Agreement shall be severable, and the invalidity of any provision, or portion thereof, shall not affect the validity of the other provisions. E. Arbitration. All disputes relative to this Agreement shall be resolved by arbitration pursuant to the rules of the American Health Lawyers Association ("AHLA") then pertaining. Arbitration proceedings shall be held in Nashville, Tennessee. The parties may, if they are able to do so, agree upon one arbitrator; otherwise, there shall be three arbitrators selected to resolve disputes pursuant to this Section 11, one named in writing by each party within 15 days after notice of arbitration is served upon either party by the other and a third arbitrator selected by the two arbitrators selected by the parties within 15 days thereafter. If the two arbitrators cannot select a third arbitrator within such 15 days, either party may request that the AHLA select such third arbitrator. If one party does not choose an arbitrator within 15 days, the other party shall request that the AHLA name such other arbitrator. No one shall serve as arbitrator who is in any way financially interested in this Agreement or in the affairs of either party. Each of the parties hereto shall pay its own expenses of arbitration and one-half of the expenses of the arbitrators. If any position by either party hereunder, or any defense or objection thereto, is deemed by the arbitrators to have been unreasonable, the arbitrators shall assess, as part of their award against the unreasonable party or reduce the award to the unreasonable party, all or part of the arbitration expenses (including reasonable attorneys' fees) of the other party and of the arbitrators. F. No Presumption Created. The parties acknowledge that they have independently negotiated the provisions of this Agreement, that they have relied upon their own counsel as to matters of law and any application to this Agreement and that neither party has relied on the other party with regard to such matters of law or application. The parties expressly agree that there shall be no presumption created as a result of either party having prepared in whole or in part any provision of this Agreement. G. Assignment. The Medical Director acknowledges that the services to be rendered by him are unique and personal, and that the Medical Director therefore may not assign such rights, duties or obligations hereunder. The rights, obligations and duties of AmSurg hereunder shall inure to the benefit of and be binding upon successors and assigns of AmSurg. 5 6 H. Notices. Except as otherwise provided in this Agreement, any notice, payment, demand or communication required or permitted to be given by any provision of this Agreement shall be duly given (1) if delivered in writing, personally to the person to whom it is authorized to be given, (2) if sent by certified or registered mail, facsimile, overnight courier service, or telegraph, as follows: If to AmSurg: AmSurg Corp. Suite 350 One Burton Hills Boulevard Nashville, Tennessee 37215 Facsimile: (615) 665-0755 Attn: Claire M. Gulmi If to the Medical Director: Bergein F. Overholt, M.D. Gastrointestinal Associates, P.C. 801 Weisgarber Road Suite 100 Knoxville, Tennessee 37950-9002 Facsimile: (423) 588-2126 or to such other address as either party may from time to time specify by written notice to the other party. Any such notice shall be deemed to be given as of the date so delivered, if delivered personally, as of the date on which the same was deposited in the United States mail, postage prepaid, addressed and sent as aforesaid, or on the date received if sent by electronic facsimile. I. Access to Books and Records. Upon written request of the Secretary of Health and Human Services or the Comptroller General or any other duly authorized representatives thereof, the Medical Director shall make available to the Secretary those contracts, books, documents and records necessary to verify the nature and extent of the cost of providing his services. Such inspection shall be available up to four (4) years after such services are rendered. If the Medical Director carries out any of the duties of the Agreement through a subcontract with a value of Ten Thousand Dollars ($10,000) or more over a 12 month period with a related 6 7 individual or organization, the Medical Director agrees to include this requirement in such subcontract. If a request from the Secretary or her representative is served on the Medical Director, the Medical Director will notify AmSurg in writing prior to responding to the request. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. AMSURG CORP. By:/s/ Ken P. McDonald -------------------------------- Title: President MEDICAL DIRECTOR: /s/ Bergein F. Overholt, M.D. ----------------------------------- Bergein F. Overholt, M.D. 7 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMSURG CORP.'S BALANCE SHEET AS OF SEPTEMBER 30, 1998 AND STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998. U.S. DOLLARS 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 1 4,850,847 0 11,871,497 0 1,119,842 19,322,020 21,474,451 0 86,976,759 4,529,577 0 0 0 61,586,117 (170,822) 86,976,759 0 58,074,392 0 48,035,615 0 0 1,295,882 (729,532) 32,119 (761,651) 0 0 0 (761,651) (0.07) (0.07) Value represents net amount.
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