UNITED STATES
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 June 30, 2004

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 August 5, 2004 there were outstanding 30,344,326 shares of the registrant’s Common Stock, no par value.

Table of Contents to Form 10-Q for the Six Months Ended June 30, 2004

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Part I

Item 1.     Financial Statements

AmSurg Corp.
Consolidated Balance Sheets
June 30, 2004 (unaudited) and December 31, 2003
(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)
Three Months and Six Months Ended June 30, 2004 and 2003
(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)
Six Months Ended June 30, 2004 and 2003
(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 65% 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 Company operates in one reportable business segment, the ownership and operation of ambulatory surgery 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, is responsible for the day-to-day management of the partnership or LLC and has control of the entities. 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 2003 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, contracts with payors and procedure statistics. Accordingly, net accounts receivable at June 30, 2004 and December 31, 2003 reflect allowances for contractual adjustments of $35,273,000 and $32,447,000, respectively, and allowances for bad debt expense of $4,993,000 and $4,956,000, respectively.

(3) Revenue Recognition

Center revenues consist of 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 six months ended June 30, 2004 and 2003, approximately 39% and 41%, 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 and six months ended June 30, 2004 and 2003. Pro forma earnings and earnings per share, as if the fair value of all stock-based awards on the date of grant are recognized over the vesting period by applying the Black-Scholes option pricing model, is presented below (dollars 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) Acquisitions and Dispositions

In the six months ended June 30, 2004, the Company, through a wholly owned subsidiary, acquired majority interests in three physician practice-based surgery centers. The aggregate amount paid for the acquisitions and other acquisition costs was $24,048,000.

During the six months ended June 30, 2004, in two separate transactions the Company sold its interests in three surgery centers and recognized an after tax gain of $1,241,000. The centers’ results of operations have been classified as discontinued operations and prior periods have been restated. Results of operations of the combined discontinued surgery centers for the three and six months ended June 30, 2004 and 2003 are as follows (in thousands):

At December 31, 2003, the discontinued surgery centers had combined working capital of $736,000, total assets of $3,895,000 and net assets of $3,348,000.

(6) Intangible Assets

Amortizable intangible assets at June 30, 2004 and December 31, 2003 consisted of the following (in thousands):

Estimated amortization of intangible assets for the remainder of 2004 and the following four years is $178,000, $356,000, $306,000, $156,000 and $26,000, respectively.

The changes in the carrying amount of goodwill for the three and six months ended June 30, 2004 and 2003 are as follows (in thousands):

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Item 1.     Financial Statements — (continued)

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

(7) Long-term Debt

The Company’s revolving credit facility, as amended on March 10, 2004, permits the Company to borrow up to $125,000,000 to finance its acquisitions and development projects and stock repurchase programs at an interest rate equal to, at the Company’s option, the prime rate or LIBOR plus a spread of 1.25% to 2.25% or a combination thereof, provides for a fee of 0.375% to 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 June 30, 2004, the Company had $53,000,000 outstanding under its revolving credit facility and was in compliance with all covenants.

(8) Shareholders’ Equity

In February 2004, the Company’s Board of Directors approved a 3-for-2 stock split to be effected in the form of a 50% stock dividend. The new shares were distributed on March 24, 2004 to shareholders of record at the close of business on March 8, 2004. All prior period shares outstanding, earnings per share and prices per share have been adjusted to reflect the stock split.

In March 2004, the Company’s Board of Directors approved a stock repurchase program which allows the Company to purchase up to $25,000,000 of its common stock through September 2005. This authorization was in addition to a $25,000,000 repurchase program authorized in February 2003, under which the Company has repurchased 1,267,800 shares for $21,243,000 and may purchase additional shares through August 2004. No shares of common stock were purchased during the six months ended June 30, 2004.

Effective May 21, 2004, the Company’s Second Amended and Restated Charter was amended to increase its authorized shares of capital stock from 44,800,000 to 75,000,000 and to increase its authorized shares of common stock, no par value, from 39,800,000 to 70,000,000.

(9) 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.

The Company’s wholly owned subsidiaries that are general partners in the limited partnerships are responsible for all debts incurred but unpaid by the respective partnerships. As manager of the operations of the partnerships, the Company’s subsidiaries have the ability to limit 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.

(10) Subsequent Events

In July 2004, the Company’s board of directors approved the sale of the Company’s interest in a surgery center, which was thereafter closed effective August 1, 2004 for $12,500,000 in the form of a secured note receivable. The note is secured by a pledge of 51% ownership interest in the center, is guaranteed by the physician partners at the center and is due in installments through 2009. The Company will recognize a pre-tax gain on the sale of its discontinued interest in the surgery center of approximately $7,200,000 in the third quarter of 2004 associated with the transaction. In addition, beginning in the third quarter of 2004, operations from this center will be classified a part of discontinued operations.

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Item 1.     Financial Statements — (continued)

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

(11) Recent Accounting Pronouncements

In December 2003, the Financial Accounting Standards Board issued Interpretation No. (“FIN”) 46 (revised 2003), “Consolidation of  Variable Interest Entities.” This interpretation, which replaces FIN 46, addresses consolidation by business enterprises of variable interest entities (“VIE”) when certain characteristics are present. This interpretation applies immediately to VIEs created after December 31, 2003, and to VIEs in which an enterprise obtains an interest after that date. Interests held in VIEs created on or before December 31, 2003 are not subject to the provisions of this interpretation until the end of the first reporting period after March 15, 2004 unless the VIE meets the definition of a special-purpose entity as defined by this statement. This interpretation must be applied for special purpose entities as of the first reporting period subsequent to December 15, 2003. As of June 30, 2004, the Company does not have any entities that are considered to be special purpose entities. The adoption of the remaining portion of the interpretation did not have a material effect on the Company’s consolidated financial position or consolidated results of operations.

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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 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 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 and the other risks and uncertainties discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003 under the caption “Business — Risk Factors,” 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 grow revenues at our existing centers;

•

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;

•

the ability of our physician partners to recruit additional physicians to their practice;

•

our ability to maintain favorable relations with our physician partners;

•

changes in medical staff at our centers;

•

changes in the rate setting methodology, payment rates, payment policies and the list of covered surgical procedures for ambulatory surgery centers by the Centers for Medicare & Medicaid Services;

•

the risk of legislative or regulatory changes that would establish uniform rates for outpatient surgical services, regardless of setting;

•

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;

•

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 June 30, 2004, we owned a majority interest (51% or greater) in 117 surgery centers.

The following table presents the changes in the number of surgery centers in operation, under development and under letter of intent during the three and six months ended June 30, 2004 and 2003. 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.