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SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2003

Commission File Number 000-22217

AMSURG CORP.

(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 [  ]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes [X]       No [  ]

     As of May 13, 2003 there were outstanding 19,734,659 shares of the registrant’s Common Stock, no par value.

Table of Contents

Table of Contents to Form 10-Q for the Three Months Ended March 31, 2003

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Part I

Item 1.  Financial Statements

AmSurg Corp.
Consolidated Balance Sheets
March 31, 2003 (unaudited) and December 31, 2002
(Dollars in thousands)

See accompanying notes to the unaudited consolidated financial statements.

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Item 1.  Financial Statements – (continued)

AmSurg Corp.
Consolidated Statements of Earnings (unaudited)
(In thousands, except earnings per share)

See accompanying notes to the unaudited consolidated financial statements.

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Item 1.  Financial Statements – (continued)

AmSurg Corp.
Consolidated Statements of Cash Flows (unaudited)
(In thousands)

See accompanying notes to the unaudited consolidated financial statements.

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Item 1.  Financial Statements – (continued)

AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements

(1)    Basis of Presentation

AmSurg Corp. (the “Company”), through its wholly owned subsidiaries, owns majority interests, primarily 51% and up to 67% in certain instances, in limited partnerships and limited liability companies (“LLCs”) which own and operate practice-based ambulatory surgery centers (“centers”). The Company also has majority ownership interests in other partnerships and LLCs formed to develop additional centers. The consolidated financial statements include the accounts of the Company and its subsidiaries and the majority owned limited partnerships and LLCs in which the Company is the general partner or member. Consolidation of such partnerships and LLCs is necessary as the Company has 51% or more of the financial interest, is the general partner or majority member with all the duties, rights and responsibilities thereof and is responsible for the day-to-day management of the partnership or LLC. The limited partner or minority member responsibilities are to supervise the delivery of medical services, with their rights being restricted to those that protect their financial interests, such as approval of the acquisition of significant assets or incurring debt which they, as physician limited partners or members, are required to guarantee on a pro rata basis based upon their respective ownership interests. Intercompany profits, transactions and balances have been eliminated. All subsidiaries and minority owners are herein referred to as partnerships and partners, respectively.

These financial statements 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 2002 Annual Report on Form 10-K.

(2)    Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The determination of contractual and bad debt allowances constitutes a significant estimate. Some of the factors considered by management in determining the amount of such allowances are the historical trends of the centers’ cash collections and contractual and bad debt write-offs, accounts receivable agings, established fee schedules, relationships with payors and procedure statistics. Accordingly, net accounts receivable at March 31, 2003 and December 31, 2002, reflect allowances for contractual adjustments of $27,145,000 and $25,451,000, respectively, and allowances for bad debt expense of $4,597,000 and $3,986,000, respectively.

(3)    Revenue Recognition

Center revenues consist of the billing for the use of the centers’ facilities (the “facility fee”) directly to the patient or third-party payor, and in limited instances, billing for anesthesia services. Such revenues are recognized when the related surgical procedures are performed. Revenues exclude any amounts billed for physicians’ surgical services, which are billed separately by the physicians to the patient or third-party payor.

Revenues from centers are recognized on the date of service, net of estimated contractual allowances from third-party payors including Medicare and Medicaid. During the three months ended March 31, 2003 and 2002, approximately 41% and 39%, respectively, of the Company’s revenues were derived from the provision of services to patients covered under Medicare and Medicaid. Concentration of credit risk with respect to other payors is limited due to the large number of such payors.

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Item 1.  Financial Statements – (continued)

AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements – (continued)

(4)    Stock-Based Compensation

The Company accounts for its stock option plan in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. No stock-based employee compensation cost is reflected in net earnings for the three months ended March 31, 2003 and 2002. Disclosure in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” to reflect the pro forma earnings per share as if the fair value of all stock-based awards on the date of grant are recognized over the vesting period is presented below.

The estimated weighted average fair values of the options granted during the three months ended March 31, 2003 and 2002 at the date of grant using the Black-Scholes option pricing model as promulgated by SFAS No. 123 in were $6.13 and $6.94 per share, respectively. In applying the Black–Scholes model, the Company assumed no dividends, an expected life for the options of four years, a forfeiture rate of 15% and an average risk free interest rate of 3.0% and 4.1% for the three months ended March 31, 2003 and 2002, respectively. The Company also assumed a volatility rate of 47% and 46% for the three months ended March 31, 2003 and 2002, respectively. Had the Company used the Black-Scholes estimates to determine compensation expense for the options granted in the three months ended March 31, 2003 and 2002, net earnings and net earnings per share attributable to common shareholders would have been reduced to the following pro forma amounts (in thousands, except per share amounts):

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Item 1.  Financial Statements – (continued)

AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements – (continued)

(5)    Intangible Assets

Amortizable intangible assets at March 31, 2003 and December 31, 2002 consisted of the following (in thousands):

Estimated amortization of intangible assets for the remainder of 2003 and the following three years and thereafter is $241,000, $322,000, $322,000, $272,000 and $141,000, respectively.

The changes in the carrying amount of goodwill for the three months ended March 31, 2003 and 2002 are as follows (in thousands):

(6)    Long-term Debt

The Company’s revolving credit facility as amended on March 4, 2003 permits the Company to borrow up to $100,000,000 to finance its acquisitions and development projects and stock repurchase program at an interest rate equal to, at the Company’s option, the prime rate or LIBOR plus a spread of 1.0% to 2.25% or a combination thereof, provides for a fee of 0.50% of unused commitments, prohibits the payment of dividends and contains certain covenants relating to the ratio of debt to net worth, operating performance and minimum net worth. At March 31, 2003, the Company had $26,700,000 outstanding under its revolving credit facility and was in compliance with all covenants.

(7)    Acquisitions and Other Transactions

In the three months ended March 31, 2003, the Company, through a wholly owned subsidiary, acquired a majority interest in a physician practice-based surgery center. The amount paid for the acquisition and other acquisition costs was $9,723,000.

(8)    Commitments and Contingencies

The Company and its partnerships and LLCs are insured with respect to medical malpractice risk on a claims-made basis. The Company also maintains insurance for general liability, director and officer liability and property. Certain policies are subject to deductibles. In addition to the insurance coverage provided, the Company indemnifies its officers and directors for actions taken on behalf of the Company and its partnerships and LLCs. Management is not aware of any claims against it or its partnerships or LLCs which would have a material effect on the Company’s consolidated financial position or consolidated results of operations.

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Item 1.  Financial Statements – (continued)

AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements – (continued)

The Company or its wholly owned subsidiaries, as general partners in the limited partnerships, are responsible for all debts incurred but unpaid by the partnership. As manager of the operations of the partnership, the Company has the ability to limit its potential liabilities by curtailing operations or taking other operating actions.

In the event of a change in current law which would prohibit the physicians’ current form of ownership in the partnerships or LLCs, the Company is obligated to purchase the physicians’ interests in the partnerships or LLCs. The purchase price to be paid in such event is determined by a predefined formula, as specified in the partnership or operating agreements.

(9)    Subsequent Events

In January 2003, the Company’s Board of Directors authorized a stock repurchase program which allows the Company to purchase up to $25,000,000 of its common stock through August 2004. Subsequent to March 31, 2003, the Company purchased and retired 845,200 shares of the Company’s common stock at an aggregate purchase price of $21,243,000 under this program, which was funded primarily through borrowings under its credit facility.

(10)    Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 addresses accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement is effective for fiscal years beginning after June 15, 2002. SFAS No. 143 establishes accounting standards for recognition and measurement of liability for an asset retirement obligation and the associated retirement costs. This statement applies to all entities and to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain obligations of lessees. The implementation of SFAS No. 143 did not have a material effect on the Company’s consolidated financial position or consolidated results of operations.

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operations, plant closings, or other exit or disposal activities. The provisions of this statement are effective for exit or disposal activities initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material effect on the Company’s consolidated financial position or consolidated results of operations.

In November 2002, the FASB issued Interpretation No. (“FIN”) 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No. 5, 57 and 107 and Rescission of FASB Interpretation No. 34.” The interpretation requires that upon issuance of a guarantee, the entity must recognize a liability for the fair value of the obligation it assumes under that obligation. This interpretation is intended to improve the comparability of financial reporting by requiring identical accounting for guarantees issued with separately identified consideration and guarantees issued without separately identified consideration. The initial recognition and measurement provision of FIN 45 are applicable to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did not have a material effect on the Company’s consolidated financial position or consolidated results of operations.

In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities.” FIN 46 addresses consolidation by business enterprises of variable interest entities that have certain characteristics. This interpretation applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first fiscal year beginning after June 15, 2003 to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The Company did not create or obtain an interest in any variable interest entities that contain the characteristics addressed in FIN 46 during the three months ended March 31, 2003.

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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 those relating 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 our control. Although we believe 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 our objectives and plans will be achieved. We undertake no obligation to publicly release any revisions to any forward-looking statements in this discussion to reflect events and circumstances occurring after the date hereof or to reflect unanticipated events.

Forward-looking statements and our liquidity, financial condition and results of operations may be affected by the following, as well as other unknown risks and uncertainties:

•

our ability to enter into partnership or operating agreements for new practice-based ambulatory surgery centers;

•

our ability to identify suitable acquisition candidates and negotiate and close acquisition transactions, including centers under letter of intent;

•

our ability to obtain the necessary financing or capital on terms satisfactory to us in order to execute our expansion strategy;

•

our ability to generate and manage growth;

•

our ability to contract with managed care payors on terms satisfactory to us for our existing centers and our centers that are currently under development;

•

our ability to obtain and retain appropriate licensing approvals for our existing centers and centers currently under development;

•

our ability to minimize start-up losses of our development centers;

•

our ability to maintain favorable relations with our physician partners;

•

updates by the Department of Health and Human Services, or DHHS, to the rate setting methodology, payment rates, payment policies and the list of covered surgical procedures for ambulatory surgery centers;

•

risks associated with our status as a general partner of the limited partnerships;

•

our ability to maintain our technological capabilities in compliance with regulatory requirements;

•

risks associated with the valuation and tax deductibility of goodwill, as well as potential losses on disposal of goodwill associated with a disposition of an individual center;

•

risks of legislative or regulatory changes that would prohibit physician ownership in ambulatory surgery centers; and

•

our ability to obtain the necessary financing to fund the purchase of our physician partners’ minority interests in the event of a regulatory change that would require such a purchase.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations – (continued)

Overview

We develop, acquire and operate practice-based ambulatory surgery centers in partnership with physician practice groups. As of March 31, 2003, we owned a majority interest (51% or greater) in 107 surgery centers.

The following table presents the changes in the number of surgery centers in operation and centers under development and centers under letter of intent during the three months ended March 31, 2003 and 2002. 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.