UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.  20549  FORM
10-Q  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  For the Quarterly Period EndedMarch 31, 2014  AMSURG
CORP. (Exact Name of Registrant as Specified in its Charter)  Tennessee
 000-22217
 62-1493316(State or Other Jurisdiction of Incorporation)
 (Commission
  File Number)
 (I.R.S. Employer
  Identification No.)20 Burton Hills BoulevardNashville, Tennessee
 
 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 [  ]  Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).  Yes [X]                   No [  ]  Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company.  See definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.   (Check one):  Large accelerated filer  [X]                                      Accelerated
filer                  [  ] Non-accelerated filer    [   ]                                      Smaller reporting company
[  ]  Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [  ]                    No [X]  As of April 30, 2014 there were outstanding 32,531,056
shares of the registrant’s Common Stock, no par value.


---



Table
  of Contents to Form 10-Q for the Three Months Ended March 31, 2014Part
  I
 Financial
  InformationItem 1.
 Financial Statements
 
 1Item
  2.
 Management’s
  Discussion and Analysis of Financial Condition and Results of Operations
 
 19Item
  3.
 Quantitative
  and Qualitative Disclosures About Market Risk
 
 26Item
  4.
 Controls
  and Procedures
 
 26Part
  II
 Other
  InformationItem
  1.
 Legal
  Proceedings
 
 27Item
  1A.
 Risk
  Factors
 
 27Item
  2.
 Unregistered
  Sales of Equity Securities and Use of Proceeds
 
 27Item
  3.
 Defaults
  Upon Senior Securities
 
 27Item
  4.
 Mine
  Safety Disclosures
 
 27Item
  5.
 Other
  Information
 
 27Item
  6.
 Exhibits
 
 28Signature
 
 29
   i


---



Part I  Item 1.  Financial Statements  AmSurg Corp. Consolidated Balance Sheets March 31, 2014 (unaudited) and December 31, 2013 (In thousands)  March 31,
 
 December 31,2014
 
 2013AssetsCurrent assets:Cash and cash
  equivalents
 
 $
 47,116
 
 $
 50,840Accounts
  receivable, net of allowance of $29,120 and $27,862, respectively
 
 
 106,209
 
 
 105,072Supplies
  inventory
 
 
 18,433
 
 
 18,414Deferred income
  taxes
 
 
 1,026
 
 
 3,097Prepaid and
  other current assets
 
 
 37,151
 
 
 33,602Total current
  assets
 
 
 209,935
 
 
 211,025Property and
  equipment, net
 
 
 169,006
 
 
 169,895Investments in
  unconsolidated affiliates and other
 
 
 19,484
 
 
 16,392Goodwill
 
 
 1,764,623
 
 
 1,758,970Intangible
  assets, net
 
 
 21,093
 
 
 21,662Total assets
 
 $
 2,184,141
 
 $
 2,177,944Liabilities
  and EquityCurrent
  liabilities:Current portion
  of long-term debt
 
 $
 20,285
 
 $
 20,844Accounts payable
 
 
 25,359
 
 
 27,501Accrued salaries
  and benefits
 
 
 26,218
 
 
 32,294Other accrued
  liabilities
 
 
 12,387
 
 
 9,231Total current
  liabilities
 
 
 84,249
 
 
 89,870Long-term debt
 
 
 564,937
 
 
 583,298Deferred income
  taxes
 
 
 185,882
 
 
 176,020Other long-term
  liabilities
 
 
 25,753
 
 
 25,503Commitments and
  contingenciesNoncontrolling
  interests – redeemable
 
 
 177,683
 
 
 177,697Preferred stock,
  no par value, 5,000 shares authorized, no shares issued or outstanding
 
 
 -
 
 
 -Equity:Common stock, no
  par value, 70,000 shares authorized, 32,505 and 32,353 shares outstanding,
  respectively
 
 
 186,894
 
 
 185,873Retained
  earnings
 
 
 595,519
 
 
 578,324Total AmSurg
  Corp. equity
 
 
 782,413
 
 
 764,197Noncontrolling
  interests – non-redeemable
 
 
 363,224
 
 
 361,359Total equity
 
 
 1,145,637
 
 
 1,125,556Total
  liabilities and equity
 
 $
 2,184,141
 
 $
 2,177,944
 See accompanying notes to

the unaudited consolidated financial statements.  1


---



Item

1.Financial Statements – (continued)
 AmSurg Corp. Consolidated Statements of Earnings and Comprehensive Income
(unaudited) Three Months Ended March 31, 2014 and 2013 (In thousands, except earnings per share)   Three Months Ended March 31,2014
 
 2013Revenues
 $
 263,107
 
 $
 258,189Operating
  expenses:Salaries and
  benefits
 
 83,194
 
 
 80,958Supply cost
 
 38,720
 
 
 37,213Other operating
  expenses
 
 55,269
 
 
 52,727Depreciation and
  amortization
 
 8,374
 
 
 8,008Total operating
  expenses
 
 185,557
 
 
 178,906Gain on
  deconsolidation
 
 2,045
 
 
 2,237Equity in
  earnings of unconsolidated affiliates
 
 764
 
 
 402Operating income
 
 80,359
 
 
 81,922Interest expense
 
 6,963
 
 
 7,542Earnings from
  continuing operations before income taxes
 
 73,396
 
 
 74,380Income tax
  expense
 
 13,057
 
 
 12,269Net earnings
  from continuing operations
 
 60,339
 
 
 62,111Discontinued
  operations:Earnings from
  operations of discontinued interests in surgery centers, net of income tax
 
 137
 
 
 162Loss on disposal
  of discontinued interests in surgery centers, net of income tax
 
 (362)
 
 
 -Net (loss)
  earnings from discontinued operations
 
 (225)
 
 
 162Net earnings and
  comprehensive income
 
 60,114
 
 
 62,273Less net
  earnings and comprehensive income attributable to noncontrolling interests:Net earnings
  from continuing operations
 
 42,835
 
 
 44,361Net earnings
  from discontinued operations
 
 84
 
 
 101Total net
  earnings and comprehensive income attributable to noncontrolling interests
 
 42,919
 
 
 44,462Net earnings and
  comprehensive income attributable to AmSurg Corp. common shareholders
 $
 17,195
 
 $
 17,811Amounts
  attributable to AmSurg Corp. common shareholders:Earnings from
  continuing operations, net of income tax
 $
 17,504
 
 $
 17,750Discontinued
  operations, net of income tax
 
 (309)
 
 
 61Net earnings and
  comprehensive income attributable to AmSurg Corp. common shareholders
 $
 17,195
 
 $
 17,811Earnings per
  share-basic:Net earnings
  from continuing operations attributable to AmSurg Corp. common shareholders
 $
 0.55
 
 $
 0.57Net loss from
  discontinued operations attributable to AmSurg Corp. common shareholders
 
 (0.01)
 
 
 -Net earnings
  attributable to AmSurg Corp. common shareholders
 $
 0.54
 
 $
 0.57Earnings per
  share-diluted:Net earnings
  from continuing operations attributable to AmSurg Corp. common shareholders
 $
 0.55
 
 $
 0.56Net loss from
  discontinued operations attributable to AmSurg Corp. common shareholders
 
 (0.01)
 
 
 -Net earnings
  attributable to AmSurg Corp. common shareholders
 $
 0.54
 
 $
 0.56Weighted average
  number of shares and share equivalents outstanding:Basic
 
 31,716
 
 
 31,217Diluted
 
 32,120
 
 
 31,881
 See accompanying notes to

the unaudited consolidated financial statements.  2


---



Item

1.Financial Statements – (continued)
 AmSurg Corp. Consolidated Statements of Changes in Equity (unaudited) Three Months Ended March 31, 2014 and 2013 (In thousands)  AmSurg Corp. Shareholders
 
 
 
 
 
 NoncontrollingNoncontrolling
 
 
 
 Interests –Interests –
 
 Total
 
 RedeemableCommon Stock
 
 Retained
 
 Non-
 
 Equity
 
 (Temporary
 
 NetShares
 
 Amount
 
 Earnings
 
 Redeemable
 
 (Permanent)
 
 Equity)
 
 EarningsBalance at
  December 31, 2013
 
 32,353
 
 $
 185,873
 
 $
 578,324
 
 $
 361,359
 
 $
 1,125,556
 
 $
 177,697Issuance of
  restricted common stock
 
 200
 
 
 -
 
 
 -
 
 
 -
 
 
 -
 
 
 -Stock options
  exercised
 
 20
 
 
 488
 
 
 -
 
 
 -
 
 
 488
 
 
 -Stock
  repurchased
 
 (68)
 
 
 (2,857)
 
 
 -
 
 
 -
 
 
 (2,857)
 
 
 -Share-based
  compensation
 
 -
 
 
 2,458
 
 
 -
 
 
 -
 
 
 2,458
 
 
 -Tax benefit
  related to exercise of stock options
 
 -
 
 
 1,727
 
 
 -
 
 
 -
 
 
 1,727
 
 
 -Net earnings
 
 -
 
 
 -
 
 
 17,195
 
 
 12,219
 
 
 29,414
 
 
 30,700
 
 $
 60,114Distributions to
  noncontrolling interests, net of capital contributions
 
 -
 
 
 -
 
 
 -
 
 
 (12,753)
 
 
 (12,753)
 
 
 (30,441)Purchase of
  noncontrolling interest
 
 -
 
 
 286
 
 
 -
 
 
 (286)
 
 
 -
 
 
 -Sale of
  noncontrolling interest
 
 -
 
 
 (1,081)
 
 
 -
 
 
 1,665
 
 
 584
 
 
 -Acquisitions and
  other transactions impacting noncontrolling interests
 
 -
 
 
 -
 
 
 -
 
 
 3,976
 
 
 3,976
 
 
 -Disposals and
  other transactions impacting noncontrolling interests
 
 -
 
 
 -
 
 
 -
 
 
 (2,956)
 
 
 (2,956)
 
 
 (273)Balance at March
  31, 2014
 
 32,505
 
 $
 186,894
 
 $
 595,519
 
 $
 363,224
 
 $
 1,145,637
 
 $
 177,683Balance at
  January 1, 2013
 
 31,941
 
 $
 183,867
 
 $
 505,621
 
 $
 310,978
 
 $
 1,000,466
 
 $
 175,382Issuance of
  restricted common stock
 
 263
 
 
 -
 
 
 -
 
 
 -
 
 
 -
 
 
 -Cancellation of
  restricted common stock
 
 (14)
 
 
 -
 
 
 -
 
 
 -
 
 
 -
 
 
 -Stock options
  exercised
 
 237
 
 
 5,691
 
 
 -
 
 
 -
 
 
 5,691
 
 
 -Stock
  repurchased
 
 (528)
 
 
 (16,758)
 
 
 -
 
 
 -
 
 
 (16,758)
 
 
 -Share-based
  compensation
 
 -
 
 
 2,050
 
 
 -
 
 
 -
 
 
 2,050
 
 
 -Tax benefit
  related to exercise of stock options
 
 -
 
 
 1,630
 
 
 -
 
 
 -
 
 
 1,630
 
 
 -Net earnings
 
 -
 
 
 -
 
 
 17,811
 
 
 12,232
 
 
 30,043
 
 
 32,230
 
 $
 62,273Distributions to
  noncontrolling interests, net of capital contributions
 
 -
 
 
 -
 
 
 -
 
 
 (11,891)
 
 
 (11,891)
 
 
 (31,823)Purchase of
  noncontrolling interest
 
 -
 
 
 (304)
 
 
 -
 
 
 (133)
 
 
 (437)
 
 
 (316)Sale of
  noncontrolling interest
 
 -
 
 
 (644)
 
 
 -
 
 
 1,419
 
 
 775
 
 
 236Acquisitions and
  other transactions impacting noncontrolling interests
 
 -
 
 
 -
 
 
 -
 
 
 266
 
 
 266
 
 
 -Disposals and
  other transactions impacting noncontrolling interests
 
 -
 
 
 -
 
 
 -
 
 
 (317)
 
 
 (317)
 
 
 -Balance at March
  31, 2013
 
 31,899
 
 $
 175,532
 
 $
 523,432
 
 $
 312,554
 
 $
 1,011,518
 
 $
 175,709
 See accompanying notes to

the unaudited consolidated financial statements.  3


---



Item

1.Financial Statements – (continued)
 AmSurg Corp. Consolidated Statements of Cash Flows (unaudited) Three Months Ended March 31, 2014 and 2013 (In thousands)  Three Months Ended March 31,2014
 
 2013Cash flows from
  operating activities:Net earnings
 $
 60,114
 
 $
 62,273Adjustments to
  reconcile net earnings to net cash flows provided by operating activities:Depreciation and
  amortization
 
 8,374
 
 
 8,008Net loss on sale
  of long-lived assets
 
 604
 
 
 -Gain on
  deconsolidation
 
 (2,045)
 
 
 (2,237)Share-based
  compensation
 
 2,458
 
 
 2,050Excess tax
  benefit from share-based compensation
 
 (1,727)
 
 
 (288)Deferred income
  taxes
 
 11,933
 
 
 12,929Equity in
  earnings of unconsolidated affiliates
 
 (764)
 
 
 (402)Increases
  (decreases) in cash and cash equivalents, net of effects of acquisitions and
  dispositions, due to changes in:Accounts
  receivable, net
 
 (1,651)
 
 
 (1,705)Supplies
  inventory
 
 (245)
 
 
 (201)Prepaid and
  other current assets
 
 (3,638)
 
 
 17Accounts payable
 
 (3,578)
 
 
 (3,040)Accrued expenses
  and other liabilities
 
 (606)
 
 
 (4,101)Other, net
 
 590
 
 
 562Net cash flows
  provided by operating activities
 
 69,819
 
 
 73,865Cash flows from
  investing activities:Acquisition of
  interests in surgery centers and related transactions
 
 (5,038)
 
 
 (252)Acquisition of
  property and equipment
 
 (7,038)
 
 
 (6,110)Proceeds from
  sale of interests in surgery centers
 
 1,111
 
 
 -Other
 
 (418)
 
 
 -Net cash flows
  used in investing activities
 
 (11,383)
 
 
 (6,362)Cash flows from
  financing activities:Proceeds from
  long-term borrowings
 
 31,945
 
 
 30,870Repayment on
  long-term borrowings
 
 (50,853)
 
 
 (48,211)Distributions to
  noncontrolling interests
 
 (43,194)
 
 
 (43,914)Proceeds from
  issuance of common stock upon exercise of stock options
 
 488
 
 
 5,691Repurchase of
  common stock
 
 (2,857)
 
 
 (16,758)Capital
  contributions and ownership transactions by noncontrolling interests
 
 584
 
 
 559Excess tax
  benefit from share-based compensation
 
 1,727
 
 
 288Financing cost
  incurred
 
 -
 
 
 (13)Net cash flows
  used in financing activities
 
 (62,160)
 
 
 (71,488)Net decrease in
  cash and cash equivalents
 
 (3,724)
 
 
 (3,985)Cash and cash
  equivalents, beginning of period
 
 50,840
 
 
 46,398Cash and cash
  equivalents, end of period
 $
 47,116
 
 $
 42,413
  See accompanying notes to

the unaudited consolidated financial statements.  4


---



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 interests, primarily 51%, in limited partnerships (“LPs”)
and limited liability companies (“LLCs”) which own and operate ambulatory
surgery centers (“centers”).The
Company does not have an ownership interest in a LP or LLC greater than 51%
which it does not consolidate.  The Company has ownership interests of less
than 51% in seven LPs and LLCs, three of which it consolidates as the Company
has substantive participation rights and four of which it does not consolidate
as the Company’s rights are limited to protective rights only.The
consolidated financial statements include the accounts of the Company and its wholly
owned subsidiaries and the consolidated LPs and LLCs.  Consolidation of suchLPsand LLCs is necessary as the
Company’s wholly owned subsidiaries have primarily 51% or more of the financial
interest, are the general partner or majority member with all the duties,
rights and responsibilities thereof, are responsible for the day-to-day
management of theLPsand
LLCs, and have control of the entities.  The responsibilities of the Company’s
noncontrolling partners (LPs and noncontrolling members) 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 the incurrence of debt which they are generally required
to guarantee on a pro rata basis based upon their respective ownership interests. 
Intercompany profits, transactions and balances have been eliminated.  AllLPsand LLCs and noncontrolling
partners are referred to herein as “partnerships” and “partners”, respectively.  Ownership interests in consolidated subsidiaries held
by parties other than the Company are identified and generally presented in the
consolidated financial statements within the equity section but separate from
the Company’s equity.  However, with instances in which certain redemption
features that are not solely within the control of the Company are present,
classification of noncontrolling interests outside of permanent equity is
required.  Consolidated net income attributable to the Company and to the
noncontrolling interests are identified and presented on the face of the
consolidated statements of earnings and comprehensive income; changes in
ownership interests are accounted for as equity transactions; and when a
subsidiary is deconsolidated, any retained noncontrolling equity investment in
the former subsidiary and the gain or loss on the deconsolidation of the
subsidiary is measured at fair value.  Certain transactions with noncontrolling
interests are also classified within financing activities in the statements of
cash flows.  As further described in note 11, upon the occurrence
of various fundamental regulatory changes, the Company would be obligated,
under the terms of certain partnership and operating agreements, to purchase
the noncontrolling interests related to a substantial majority of the Company’s
partnerships.  While the Company believes that the likelihood of a change in
current law that would trigger such purchases was remote as of March 31, 2014,
the occurrence of such regulatory changes is outside the control of the Company. 
As a result, these noncontrolling interests that are subject to this redemption
feature are not included as part of the Company’s equity and are classified as
noncontrolling interests – redeemable on the Company’s consolidated balance
sheets.  Center profits and losses of consolidated entities are
allocated to the Company’s partners in proportion to their ownership
percentages and reflected in the aggregate as net earnings attributable to
noncontrolling interests.  The partners of the Company’s center partnerships
typically are organized as general partnerships,LPsor LLCs that are not subject to federal income tax.  Each partner shares in the
pre-tax earnings of the center in which it is a partner.  Accordingly, the
earnings attributable to noncontrolling interests in each of the Company’s
consolidated partnerships are generally determined on a pre-tax basis, and
total net earnings attributable to noncontrolling interests are presented after
net earnings.  However, the Company considers the impact of the net earnings
attributable to noncontrolling interests on earnings before income taxes in
order to determine the amount of pre-tax earnings on which the Company must
determine its tax expense.  In addition, distributions from the partnerships
are made to both the Company’s wholly owned subsidiaries and the partners on a
pre-tax basis.  Investments in unconsolidated
affiliates in which the Company exerts significant influence but does not
control or otherwise consolidate are accounted for using the equity method. 
These investments are included as investments in unconsolidated affiliates and
other in the accompanying consolidated balance sheets. The Company’s share of
the profits and losses from these investments are reported in equity in
earnings of unconsolidated affiliates in the accompanying consolidated
statement of earnings and comprehensive income.  The Company monitors its
investments for other-than-temporary impairment by considering factors such as
current economic and market conditions and the operating performance of the
companies and records reductions in carrying values when necessary.  Each of the Company’s centers have similar economic characteristics
and are aggregated into a single component. The Company operates this component
as one reportable business segment, the ownership and operation of ambulatory
surgery centers.  These unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) for interim financial reporting and in
accordance with Rule 10-01 of Regulation S-X.  In the opinion of management,
the unaudited interim consolidated 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 unaudited consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company’s 2013 Annual Report on Form 10-K. Certain prior year amounts in the
accompanying consolidated financial statements and these notes have been
reclassified to reflect the impact of additional discontinued operations as
further discussed in note 5.    5


---



Item 1.Financial Statements – (continued) 
 AmSurg Corp. Notes to the Unaudited

Consolidated Financial Statements – (continued)
 (2)  Use of Estimates  The preparation of financial statements in conformity with GAAP
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
March 31, 2014 and December 31, 2013 reflect allowances for contractual
adjustments of $280,582,000 and $289,937,000, respectively, and allowances for
bad debt expense of $29,120,000 and $27,862,000, respectively.  For the three
months ended March 31, 2014 and 2013, bad debt expense from continuing
operations was approximately $5,208,000 and $5,900,000, respectively, and is
included in other operating expenses in the accompanying consolidated
statements of earnings and comprehensive income.  (3)  Revenue Recognition  Center revenues consist of billing for the use of the centers’
facilities directly to the patient or third-party payor and, at certain of the
Company’s centers (primarily centers that perform gastrointestinal endoscopy
procedures), billing for anesthesia services provided by medical professionals
employed or contracted by the Company’s centers.  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 adjustments from third-party medical service payors
including Medicare and Medicaid.  During each of the three months ended March
31, 2014 and 2013, the Company derived approximately 25% of its revenues from
governmental healthcare programs, primarily Medicare and managed Medicare
programs.  Concentration of credit risk with respect to other payors is limited
due to the large number of such payors.  (4)  Acquisitions and Investments in Unconsolidated Affiliates  As a significant part of its growth strategy,
the Company primarily acquires controlling interests in centers.  The Company accounts for its
business combinations under the fundamental requirements of the acquisition
method of accounting and under the premise that an acquirer be identified for
each business combination.  The acquirer is the entity that obtains control of
one or more businesses in the business combination and the acquisition date is
the date the acquirer achieves control.  The assets acquired, liabilities
assumed and any noncontrolling interests in the acquired business at the
acquisition date are recognized at their fair values as of that date, and the
direct costs incurred in connection with the business combination are recorded
and expensed separately from the business combination.  Acquisitions in which
the Company is able to exert significant influence but does not have control
are accounted for using the equity method.  Equity method investments are
initially recorded at cost, unless such investments are a result of the Company
entering into a transaction whereby the Company loses control of a previously
controlled entity but retains a noncontrolling interest.  Such transactions,
which result in the deconsolidation of a previously consolidated entity, are
measured at fair value.  During the three months ended March 31, 2014 the Company,
through a wholly owned subsidiary, acquired a controlling interest in one
center. The aggregate amount paid for the center acquired during the three
months ended March 31, 2014 was approximately $5,038,000, net of cash acquired,
and was paid in cash and funded by a combination of operating cash flow and
borrowings under the Company’s revolving credit facility.  The total fair value
of an acquisition includes an amount allocated to goodwill, which results from
the centers’ favorable reputations in their markets, their market positions and
their ability to deliver quality care with high patient satisfaction consistent
with the Company’s business model.  In conjunction with
the Company’s acquisition of 17 centers from National Surgical Care, Inc.  (“NSC”)
on September 1, 2011, the Company agreed to pay as additional consideration an
amount up to $7,500,000 based on a multiple of the excess earnings over the
targeted earnings of the acquired centers, if any, from the period of January
1, 2012 to December 31, 2012.  During the three months ended March 31, 2013,
the Company paid NSC $2,744,000 as final settlement of the additional
consideration due in accordance with the purchase agreement.  6


---



Item 1.Financial Statements – (continued) 
 AmSurg Corp. Notes to the Unaudited

Consolidated Financial Statements – (continued)
 The acquisition date
fair value of the total consideration transferred and acquisition date fair
value of each major class of consideration for the acquisition completed in the
three months ended March 31, 2014 and 2013, including post acquisition date
adjustments recorded to finalize purchase price allocations, are as follows (in
thousands):  Three Months Ended March 31,2014
 
 2013Accounts
  receivable
 $
 417
 
 $
 -Supplies,
  inventory, prepaid and other current assets
 
 81
 
 
 -Property and
  equipment
 
 429
 
 
 -Goodwill
 
 8,260
 
 
 -Accounts payable
 
 (125)
 
 
 -Other accrued
  liabilities
 
 (39)
 
 
 -Total fair value
 
 9,023
 
 
 -Less:  Fair
  value attributable to noncontrolling interests
 
 3,985
 
 
 -Acquisition date
  fair value of total consideration transferred
 $
 5,038
 
 $
 -
  Fair value attributable to noncontrolling
interests is based on significant inputs that are not observable in the
market.  Key inputs used to determine the fair value include financial
multiples used in the purchase of noncontrolling interests in centers.  Such
multiples, based on earnings, are used as a benchmark for the discount to be
applied for the lack of control or marketability.  The fair value of
noncontrolling interests for acquisitions where the purchase price allocation
is not finalized may be subject to adjustment as the Company completes its
initial accounting for acquired intangible assets.  For the three months ended
March 31, 2014 approximately $4,670,000 of goodwill recorded was deductible for
tax purposes.  The acquisition related costs incurred by the Company were not
significant for the three months ended March 31, 2014 and 2013,respectively.  Revenues and net
earnings included in the three months ended March 31, 2014 and 2013 associated
with this acquisition are as follows (in thousands):  Three Months Ended March 31,2014
 
 2013Revenues
 $
 1,031
 
 $
 -Net earnings
 
 245
 
 
 -Less:  Net
  earnings attributable to noncontrolling interests
 
 151
 
 
 -Net earnings
  attributable to AmSurg Corp. common shareholders
 $
 94
 
 $
 -
  The unaudited consolidated pro forma results
for the three months ended March 31, 2014 and 2013, assuming all 2014 acquisitions
had been consummated on January 1, 2013 and all 2013 acquisitions had been consummated
on January 1, 2012, are as follows (in thousands, except per share data):  Three Months Ended March 31,2014
 
 2013Revenues
 
 $
 263,107
 
 $
 270,371Net earnings
 
 
 60,114
 
 
 65,385Amounts
  attributable to AmSurg Corp. common shareholders:Net earnings
  from continuing operations
 
 
 17,504
 
 
 18,830Net earnings
 
 
 17,195
 
 
 18,891Net earnings
  from continuing operations per common share:Basic
 
 $
 0.55
 
 $
 0.60Diluted
 
 $
 0.54
 
 $
 0.59Net earnings:Basic
 
 $
 0.54
 
 $
 0.61Diluted
 
 $
 0.54
 
 $
 0.59Weighted average
  number of shares and share equivalents:Basic
 
 
 31,716
 
 
 31,217Diluted
 
 
 32,120
 
 
 31,881
  7


---



Item 1.Financial Statements – (continued) 
 AmSurg Corp. Notes to the Unaudited

Consolidated Financial Statements – (continued)
 During the three
months ended March 31, 2014, the Company entered into a transaction whereby it
contributed a controlling interest in one center in exchange for $600,000 and a
noncontrolling interest in an entity jointly owned by a hospital that, after
the completion of the transaction, controls the contributed center.  During the
three months ended March 31, 2013, the Company entered into a transaction
whereby it contributed cash of $252,000 plus a controlling interest in one
center in exchange for a noncontrolling interest in an entity jointly owned by
a hospital that, after the completion of the transaction, controlled the
contributed center and one additional center. Management of the Company
believes these structures provide both economies of scale and potential future
growth opportunities in the markets in which the centers are located.  As a
result of these transactions, the Company recorded in the accompanying
consolidated balance sheets as a component of investments in unconsolidated
affiliates and other, the fair value of the noncontrolling interest in the
entities which control the contributed centers of approximately $1,238,000 and
$5,200,000 as of the three months ended March 31, 2014 and 2013, respectively. 
Accordingly, during the three months ended March 31, 2014 and 2013, the Company
recognized a gain on deconsolidation in the accompanying consolidated
statements of earnings and comprehensive income of approximately $2,045,000 and
$2,237,000, respectively.  In each of these transactions, the gain on
deconsolidation was determined based on the difference between the fair value
of the Company’s noncontrolling interest in the new entity and the carrying value
of both the tangible and intangible assets of the contributed centers
immediately prior to each transaction.  (5)  Dispositions  During the three months ended March 31, 2014 and the year ended
December 31, 2013, the Company initiated the disposition of certain of its
centers due to management’s assessment of the Company’s strategy in the market
and due to the limited growth opportunities at these centers.  Results of
operations (net of income tax) of the centers discontinued for the three months
ended March 31, 2014 and 2013 are as follows (in thousands):  Three Months Ended March 31,2014
 
 2013Cash proceeds
  from disposal
 $
 1,147
 
 $
 -Net (loss)
  earnings from discontinued operations
 
 (225)
 
 
 162Net (loss)
  earnings from discontinued operations attributable to AmSurg Corp.
 
 (309)
 
 
 61
  The results of operations of discontinued centers have been
classified as discontinued operations in all periods presented.  Results of
operations of the combined discontinued centers for the three months ended
March 31, 2014 and 2013 are as follows (in thousands):  Three Months Ended March 31,2014
 
 2013Revenues
 $
 1,048
 
 $
 1,872Earnings before
  income taxes
 
 172
 
 
 209Net earnings
 
 137
 
 
 162
  (6)  Goodwill and Intangible Assets  The changes in the carrying amount of goodwill for the three
months endedMarch 31, 2014are as
follows (in thousands):  Balance as of
  December 31, 2013
 $
 1,758,970Goodwill
  acquired, including post acquisition adjustments
 
 8,328Goodwill
  disposed, including impact of deconsolidation transaction
 
 (2,675)Balance as of
  March 31, 2014
 $
 1,764,623
  8


---



Item 1.Financial Statements – (continued) 
 AmSurg Corp. Notes to the Unaudited

Consolidated Financial Statements – (continued)
 Amortizable intangible assets atMarch 31, 2014and December 31, 2013
consisted of the following (in thousands):  March 31, 2014
 
 December 31, 2013Gross
 
 
 
 
 
 
 
 GrossCarrying
 
 Accumulated
 
 
 
 
 Carrying
 
 AccumulatedAmount
 
 Amortization
 
 Net
 
 Amount
 
 Amortization
 
 NetDeferred
  financing cost
 $
 15,814
 
 $
 (5,452)
 
 $
 10,362
 
 $
 15,814
 
 $
 (4,953)
 
 $
 10,861Agreements,
  contracts and other intangible assets
 
 3,448
 
 
 (2,542)
 
 
 906
 
 
 3,448
 
 
 (2,472)
 
 
 976Total
  amortizable intangible assets
 $
 19,262
 
 $
 (7,994)
 
 $
 11,268
 
 $
 19,262
 
 $
 (7,425)
 
 $
 11,837
  Amortization of intangible assets for the three months ended March
31, 2014 and 2013 was $569,000 and $545,000, respectively.  Estimated
amortization of intangible assets for the remainder of 2014 and the following
five years and thereafter is $1,682,000, $2,241,000, $2,240,000, $1,986,000, $1,423,000,
$859,000 and $837,000, respectively.  The Company expects to recognize
amortization of intangible assets over a weighted average period of 5.5 years
with no expected residual values.  At March 31, 2014and
December 31, 2013, other non-amortizable intangible assets related to
restrictive covenant arrangements were $9,825,000, respectively.  (7)Long-term
Debt  Long-term debt at March 31, 2014 and December 31, 2013 was
comprised of the following (in thousands):  March 31,
 
 December 31,2014
 
 2013Revolving credit
  agreement
 
 $
 237,500
 
 $
 252,500Senior Unsecured
  Notes due 2020 (5.625%)
 
 
 250,000
 
 
 250,000Senior Secured
  Notes due 2020 (8.04%)
 
 
 66,964
 
 
 69,643Other debt due
  through 2025
 
 
 20,193
 
 
 21,149Capitalized
  lease arrangements due through 2026
 
 
 10,565
 
 
 10,850585,222
 
 
 604,142Less current
  portion
 
 
 20,285
 
 
 20,844Long-term debt
 
 $
 564,937
 
 $
 583,298
  a.     Credit Facility  On June 14, 2013, the Company amended its revolving credit
agreement to adjust the interest rate spreads and extend the maturity date by
one year.The revolving credit agreement, as
amended, permits the Company to borrow up to $475,000,000 at an interest rate
equal to, at the Company’s option, the base rate plus 0.25% to 1.00% or LIBOR
plus 1.25% to 2.00%, or a combination thereof; provides for a fee of 0.25% to
0.40% of unused commitments; and contains certain covenants relating to the
ratio of debt to operating performance measurements, interest coverage ratios
and minimum net worth.  Borrowings under the revolving credit agreement mature
in June 2018 and are secured primarily by a pledge of the stock of the
Company’s wholly-owned subsidiaries and the Company’s partnership and
membership interests in the LPs and LLCs.  The Companywas in compliance
with the covenants contained in the revolving credit agreement at March 31,
2014.  b.     Senior Unsecured Notes  On November 20, 2012, the Company completed a private offering of
$250,000,000 aggregate principal amount of 5.625% senior unsecured notes due
2020 (the “Senior Unsecured Notes”).  On May 31, 2013 the Company completed an
offer to exchange the outstanding Senior Unsecured Notes for an equal amount of
such notes that are registered under the Securities Act of 1933, as amended.
The net proceeds from the issuance of the Senior Unsecured Notes were used to
reduce the outstanding indebtedness under the Company’s revolving credit
agreement. The Senior Unsecured Notes are general unsecured obligations of the
Company and are guaranteed by its existing and subsequently acquired or
organized wholly owned domestic subsidiaries. The Senior Unsecured Notes arepari
passuin right of payment with all the existing and future senior debt of
the Company and senior to all existing and future subordinated debt of the
Company. Interest on the Senior Unsecured Notes accrues at the rate of 5.625%
per annum and is payable semi-annually in arrears on May 30 and
November 30, through the maturity date of November 30, 2020. Prior to November 30, 2015, the Company
may redeem up to 35% of the aggregate principal amount of the Senior Unsecured
Notes at a redemption price of 105.625% of the principal amount thereof, plus
accrued and unpaid interest and liquidated damages, if any, using proceeds of
one or more equity offerings.  On or after November 30, 2015, the Company
may redeem the Senior Unsecured Notes in whole or in part. The redemption price
for such a 9


---



Item 1.Financial Statements – (continued) 
 AmSurg Corp. Notes to the Unaudited

Consolidated Financial Statements – (continued)
 redemption (expressed as percentages of
principal amount) is set forth below, plus accrued and unpaid interest and
liquidated damages, if any, if redeemed during the twelve-month period
beginning on November 30 of the years indicated below:  Period
 
 Redemption Price2015
 
 104.219%2016
 
 102.813%2017
 
 101.406%2018 and
  thereafter
 
 100.000%
  The SeniorUnsecured Notes contain certain covenants which, among other things, limit, but
may not restrict the Company’s ability to enter into or guarantee additional
borrowings, sell preferred stock, pay dividends and repurchase stock.  The
Companywas in compliance with the covenants contained inthe indenture relating to the SeniorUnsecured Notes at March 31, 2014.  c.     Senior Secured Notes  The Company issued $75,000,000 principal
amount of senior secured notes (the “Senior Secured Notes”) on May 28, 2010
pursuant to a note purchase agreement.  The Senior Secured Notes mature on May
28, 2020.  The Senior Secured Notes, which were originally issued with a stated
interest rate of 6.04%, were amended on November 7, 2012 to allow for the
Company’s issuance of the Senior Unsecured Notes, which resulted in an increase
in the annual interest rate to 8.04%, and included certain other adjustments to
the existing covenants.  The Senior Secured Notes arepari passuwith
the indebtedness under the Company’s revolving credit agreement and the Senior
Unsecured Notes and principal payments began in August 2013.  The note purchase
agreement governing the Senior Secured Notes contains covenants similar to the
covenants in the revolving credit agreement and includes a make whole provision
in the event of any prepayment of principle.  The Company was in compliance
with the covenants contained in the note purchase agreement relating to the
Senior Secured Notes at March 31, 2014.  (8)  Fair Value Measurements  The fair value of a financial instrument is
the amount at which the instrument could be exchanged in an orderly transaction
between market participants to sell the asset or transfer the liability.  The
inputs used by the Company to measure fair value are classified into the
following hierarchy:  Level 1:  Quoted prices in active markets
for identical assets or liabilities.  Level 2:  Inputs other than quoted prices included
in Level 1 that are observable for the asset or liability through corroboration
with market data at the measurement date.  Level 3:  Unobservable inputs that reflect
management’s best estimate of what market participants would use in pricing the
asset or liability at the measurement date.  In determining the fair value of assets and liabilities that are
measured on a recurring basis at March 31, 2014 and December 31, 2013, the
Company utilized Level 2 inputs to perform such measurements methods, which
were commensurate with the market approach.  As of March 31, 2014 and December 31, 2013, the fair
value of the supplemental executive and director retirement savings plan
investments, which are included in prepaid and other current assets in the
accompanying consolidated balance sheets, was $16,175,000 and $13,313,000,
respectively. The fair values were determined using the calculated net asset values
obtained from the plan administrator and observable inputs of similar public
mutual fund investments (Level 2). There were no transfers to or from Levels 1
and 2 during the three months ended March 31, 2014.  Cash and cash equivalents, receivables and payables are reflected in the
financial statements at cost, which approximates fair value.  The fair value of
fixed rate long-term debt, with a carrying value of $345,253,000, was
$365,111,000 atMarch 31, 2014.  The
fair value of variable rate long-term debt approximates its carrying value of $239,969,000
atMarch 31, 2014.  With the
exception of the Company’s Senior Unsecured Notes, the fair value of fixed rate
debt (Level 2) is determined based on an estimation of discounted future cash
flows of the debt at rates currently quoted or offered to the Company for
similar debt instruments of comparable maturities by its lenders.  The fair
value of the Company’s Senior Unsecured Notes (Level 1) is determined based on
quoted prices in an active market.  10


---



Item 1.Financial Statements – (continued) 
 AmSurg Corp. Notes to the Unaudited

Consolidated Financial Statements – (continued)
 (9)  Shareholders’
Equity  a.   Common Stock  On April 24, 2012, the Board of Directors authorized a stock
purchase program for up to $40,000,000 of the Company’s shares of common
stock.  The Company completed this repurchase program in August 2013.  On
August 9, 2013, the Board of Directors authorized a stock purchase program for
up to $40,000,000 of the Company’s shares of common stock to be purchased
through February 9, 2015.  As of March 31, 2014, there was approximately
$27,100,000 available under the stock repurchase program.  During the three months ended March 31, 2014, the Company did not
purchase any shares under the stock repurchase program.  During the three
months ended March 31, 2013, the Company purchased 438,668 shares of the
Company’s common stock for approximately $13,943,000, at an average price of
$31.76 per share, in order to mitigate the dilutive effect of shares issued upon
the exercise of stock options pursuant to the Company’s stock incentive plans.  In addition, the Company repurchases shares to cover payroll
withholding taxes in connection with the vesting of restricted stock awards in
accordance with the restricted stock agreements.  During the three months ended
March 31, 2014, and 2013, the Company repurchased 68,014 shares and 89,788
shares, respectively, of common stock for approximately $2,857,000 and
$2,815,000, respectively.  b.   Stock Incentive Plans  In May 2006, the Company adopted the AmSurg Corp. 2006 Stock
Incentive Plan.  The Company also has options outstanding under the AmSurg
Corp. 1997 Stock Incentive Plan, under which no additional awards may be
granted.  Under these plans, the Company has granted restricted stock and
non-qualified options to purchase shares of common stock to employees and
outside directors from its authorized but unissued common stock.  At March 31,
2014, 2,760,250 shares were authorized for grant under the 2006 Stock Incentive
Plan and 763,445 shares were available for future equity grants, including
601,327 shares available for issuance as restricted stock.  Restricted stock
granted to outside directors prior to 2012 vested over a two year period and
restricted stock granted to outside directors during 2012 and after vest over a
one year period.  Restricted stock granted to employees during 2010 and
thereafter vests over four years in three equal installments beginning on the
second anniversary of the date of grant.  Restricted stock granted to employees
prior to 2010 vests at the end of four years from the date of grant.  The fair
value of restricted stock is determined based on the closing bid price of the
Company’s common stock on the grant date.  Under Company policy, shares held by
outside directors and senior management are subject to certain holding
restrictions.  No options have been issued subsequent to 2008 and all outstanding
options are fully vested.  Options were granted at market value on the date of
the grant and vested over four years.  Outstanding options have a term of ten
years from the date of grant.  Other information pertaining to share-based activity during the
three months ended March 31, 2014and 2013 was as follows (in thousands):  Three Months Ended March 31,2014
 
 2013Share-based
  compensation expense
 
 $
 2,458
 
 $
 2,050Fair value of
  shares vested
 
 
 9,175
 
 
 9,182Cash received
  from option exercises
 
 
 488
 
 
 5,691Tax benefit from
  option exercises
 
 
 1,727
 
 
 288
  As of March
31, 2014, the Company had total unrecognized compensation cost of approximately
$13,227,000 related to non-vested awards, which the Company expects to
recognize through 2018 and over a weighted average period of 1.2 years.  For the period ended March 31, 2014 and 2013, there were no
options that were anti-dilutive.  A summary of the status of non-vested restricted shares at March
31, 2014 and changes during the three months ended March 31, 2014 is as
follows:  WeightedNumber
 
 Averageof Shares
 
 Grant PriceNon-vested
  shares at December 31, 2013
 743,869
 
 $
 26.54Shares granted
 200,391
 
 
 42.38Shares vested
 (218,405)
 
 
 21.62Non-vested
  shares at March 31, 2014
 725,855
 
 $
 32.40
  11


---



Item 1.Financial Statements – (continued) 
 AmSurg Corp. Notes to the Unaudited

Consolidated Financial Statements – (continued)
 A summary of stock option activity for the
three months ended March 31, 2014 is summarized as follows:  WeightedAverageWeighted
 
 RemainingNumber
 
 Average
 
 Contractualof Shares
 
 Exercise Price
 
 Term (in years)Outstanding at
  December 31, 2013
 270,464
 
 $
 23.16
 
 2.5Options
  exercised with total intrinsic value of $488,000
 (19,921)
 
 
 24.49Outstanding at
  March 31, 2014 with aggregate intrinsic value of $6,020,000
 250,543
 
 $
 23.05
 
 2.2Vested at March
  31, 2014 with aggregate intrinsic value of  $6,020,000
 250,543
 
 $
 23.05
 
 2.2Exercisable at
  March 31, 2014 with aggregate intrinsic value of $6,020,000
 250,543
 
 $
 23.05
 
 2.2
 The aggregate intrinsic value represents the total pre-tax
intrinsic value received by the option holders on the exercise date or that
would have been received by the option holders had all holders of in-the-money
outstanding options at March 31, 2014 exercised their options at the Company’s
closing stock price on March 31, 2014.  c.   Earnings per Share  The following is a reconciliation of the numerator and
denominators of basic and diluted earnings per share (in thousands, except per
share amounts):  Three Months Ended March 31,Earnings
 
 Shares
 
 Per Share(Numerator)
 
 (Denominator)
 
 Amount2014:Net earnings
  from continuing operations attributable to AmSurg Corp. per common share
  (basic)
 
 $
 17,504
 
 31,716
 
 $
 0.55Effect of
  dilutive securities options and non-vested shares
 
 
 -
 
 404Net earnings
  from continuing operations attributable to AmSurg Corp. per common share
  (diluted)
 
 $
 17,504
 
 32,120
 
 $
 0.55Net earnings
  attributable to AmSurg Corp. per common share (basic)
 
 $
 17,195
 
 31,716
 
 $
 0.54Effect of
  dilutive securities options and non-vested shares
 
 
 -
 
 404Net earnings
  attributable to AmSurg Corp.  per common share (diluted)
 
 $
 17,195
 
 32,120
 
 $
 0.542013:Net earnings
  from continuing operations attributable to AmSurg Corp. per common share
  (basic)
 
 $
 17,750
 
 31,217
 
 $
 0.57Effect of
  dilutive securities options and non-vested shares
 
 
 -
 
 664Net earnings
  from continuing operations attributable to AmSurg Corp. per common share
  (diluted)
 
 $
 17,750
 
 31,881
 
 $
 0.56Net earnings
  attributable to AmSurg Corp. per common share (basic)
 
 $
 17,811
 
 31,217
 
 $
 0.57Effect of
  dilutive securities options and non-vested shares
 
 
 -
 
 664Net earnings
  attributable to AmSurg Corp. per common share (diluted)
 
 $
 17,811
 
 31,881
 
 $
 0.56
  (10)  Income Taxes  The Company files a consolidated federal income tax return. 
Income taxes are accounted for under the asset and liability method.  Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.  Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled.  The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.  The Company applies recognition thresholds and measurement
attributes for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return as it relates to
accounting for uncertainty in income taxes.  In addition, it is the Company’s
policy to recognize interest accrued and penalties, if any, related to
unrecognized benefits as income tax expense in its consolidated statement of
earnings and 12


---



Item 1.Financial Statements – (continued) 
 AmSurg Corp. Notes to the Unaudited

Consolidated Financial Statements – (continued)
 comprehensive income.  The Company does
not expect significant changes to its tax positions or liability for tax
uncertainties during the next 12 months.  The Company and its subsidiaries file U.S. federal and various
state tax returns.  With few exceptions, the Company is no longer subject to
U.S. federal or state income tax examinations for years prior to 2010.  (11)  Commitments and Contingencies  The Company and its subsidiaries 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, workers’
compensation liability and property damage.  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 subsidiaries.  Management is not aware of any claims against it
or its subsidiaries which would have a material financial impact on the
Company.  Certain of the Company’s wholly owned subsidiaries, as general
partners in the LPs, are responsible for all debts incurred but unpaid by the LPs. 
As manager of the operations of the LPs, the Company has the ability to limit
potential liabilities by curtailing operations or taking other operating
actions.  In the event of a change in current law that would prohibit the
physicians’ current form of ownership in the partnerships, the Company would be
obligated to purchase the physicians’ interests in a substantial majority of
the Company’s partnerships.  The purchase price to be paid in such event would
be determined by a predefined formula, as specified in the partnership
agreements.  The Company believes the likelihood of a change in current law
that would trigger such purchases was remote as ofMarch 31, 2014.  On December 27, 2012, the Company entered into a lease agreement
with an initial term of 15 years plus renewal options, pursuant to which the
Company has agreed to lease an approximately 110,000 square foot building to be
constructed in Nashville, Tennessee. The Company intends that the building will
serve as its corporate headquarters beginning in 2015. Prior to taking
possession, the Company may terminate the agreement if the landlord fails to
satisfy certain construction milestones.  The Company’s annual rental
obligation at the inception of the lease, which will occur upon completion of construction
currently estimated to occur in late 2014, is approximately $2,300,000 and
increases by 1.9% annually thereafter during the initial term. In addition to
base rent, the Company will pay additional rent consisting of, among other
things, operating expenses, real estate taxes and insurance costs. The landlord
will provide the Company with an allowance of approximately $4,400,000 for
certain interior tenant improvements.  (12)  Recent Accounting Pronouncements  In April 2014, the Financial Accounting Standards Board issued Accounting
Standards Update (“ASU”) 2014-08 “Presentation of Financial Statements and
Property, Plant and Equipment” which raised the threshold for a disposal to
qualify as a discontinued operation and requires certain new disclosures for
individually material disposals that do not meet the new definition of a
discontinued operation.  The ASU’s intent is to reduce the number of disposals
reported as discontinued operations by focusing on strategic shifts that have
or will have a major effect on the Company’s operations and financial results
rather than routine disposals that are not a change in the Company’s strategy.  The
guidance is effective for interim and annual periods beginning after December
15, 2014, with earlier adoption permitted.  From time to time, the Company will
dispose of certain of its centers due to management’s assessment of the
Company’s strategy in the market and due to limited growth opportunities at
those centers.  Historically, these dispositions were classified as
discontinued operations and recorded separately from continuing operations. 
When adopted, this ASU will require the Company to record the results of
operations and the associated gain or loss from similar dispositions as a
component of continuing operations.  The Company does not believe this ASU will
have a material impact on the Company’s consolidated financial position or cash
flows.  (13)  Supplemental Cash Flow Information  Supplemental cash flow information for the three months ended
March 31, 2014 and 2013 is as follows (in thousands):  Three Months Ended March 31,2014
 
 2013Cash paid during
  the period for:Interest
 $
 3,132
 
 $
 3,547Income taxes,
  net of refunds
 
 65
 
 
 69Non-cash
  investing and financing activities:Increase
  (decrease) in accounts payable associated with acquisition of property and
  equipment
 
 1,111
 
 
 (675)Capital lease
  obligations
 
 116
 
 
 -
  13


---



Item 1.Financial Statements – (continued) 
 AmSurg Corp. Notes to the Unaudited

Consolidated Financial Statements – (continued)
 (14)  Financial Information for the Company
and Its Subsidiaries  The
Senior Unsecured Notes are senior unsecured obligations of the Company and are
guaranteed by its existing and subsequently acquired or organized wholly owned
domestic subsidiaries.  The Senior Unsecured Notes are guaranteed on a full and
unconditional and joint and several basis, with limited exceptions considered
customary for such guarantees, including the release of the guarantee when a
subsidiary's assets are sold. The following condensed consolidating financial
statements present the Company (as parent issuer), the subsidiary guarantors,
the subsidiary non-guarantors and consolidating adjustments. These condensed
consolidating financial statements have been prepared and presented in
accordance with SEC Regulation S-X Rule 3-10 "Financial Statements of
Guarantors and Issuers of Guaranteed Securities Registered or Being
Registered."  The operating and investing activities of the separate legal
entities are fully interdependent and integrated. Accordingly, the results of
the separate legal entities are not representative of what the operating
results would be on a stand-alone basis.  Condensed
  Consolidating Balance Sheet - March 31, 2014 (In thousands)Guarantor
 
 Non-Guarantor
 
 Consolidating
 
 TotalParent Issuer
 
 Subsidiaries
 
 Subsidiaries
 
 Adjustments
 
 ConsolidatedAssetsCurrent assets:Cash and cash
  equivalents
 $
 5,562
 
 $
 -
 
 $
 41,554
 
 $
 -
 
 $
 47,116Accounts
  receivable, net
 
 -
 
 
 -
 
 
 106,209
 
 
 -
 
 
 106,209Supplies
  inventory
 
 52
 
 
 -
 
 
 18,381
 
 
 -
 
 
 18,433Deferred income
  taxes
 
 1,026
 
 
 -
 
 
 -
 
 
 -
 
 
 1,026Prepaid and
  other current assets
 
 28,618
 
 
 -
 
 
 13,350
 
 
 (4,817)
 
 
 37,151Total current
  assets
 
 35,258
 
 
 -
 
 
 179,494
 
 
 (4,817)
 
 
 209,935Property and
  equipment, net
 
 10,129
 
 
 -
 
 
 158,877
 
 
 -
 
 
 169,006Investments in
  unconsolidated affiliates and other
 
 1,489,635
 
 
 1,458,185
 
 
 -
 
 
 (2,928,336)
 
 
 19,484Goodwill and
  intangible assets, net
 
 20,185
 
 
 -
 
 
 909
 
 
 1,764,622
 
 
 1,785,716Total assets
 $
 1,555,207
 
 $
 1,458,185
 
 $
 339,280
 
 $
 (1,168,531)
 
 $
 2,184,141Liabilities
  and EquityCurrent
  liabilities:Current portion
  of long-term debt
 $
 10,714
 
 $
 -
 
 $
 9,571
 
 $
 -
 
 $
 20,285Accounts payable
 
 1,014
 
 
 -
 
 
 28,972
 
 
 (4,627)
 
 
 25,359Accrued
  liabilities
 
 24,092
 
 
 -
 
 
 14,703
 
 
 (190)
 
 
 38,605Total current
  liabilities
 
 35,820
 
 
 -
 
 
 53,246
 
 
 (4,817)
 
 
 84,249Long-term debt
 
 543,750
 
 
 -
 
 
 52,009
 
 
 (30,822)
 
 
 564,937Deferred income
  taxes
 
 185,882
 
 
 -
 
 
 -
 
 
 -
 
 
 185,882Other long-term
  liabilities
 
 7,342
 
 
 -
 
 
 18,411
 
 
 -
 
 
 25,753Noncontrolling
  interests – redeemable
 
 -
 
 
 -
 
 
 63,691
 
 
 113,992
 
 
 177,683Equity:Total AmSurg
  Corp. equity
 
 782,413
 
 
 1,458,185
 
 
 113,448
 
 
 (1,571,633)
 
 
 782,413Noncontrolling
  interests – non-redeemable
 
 -
 
 
 -
 
 
 38,475
 
 
 324,749
 
 
 363,224Total equity
 
 782,413
 
 
 1,458,185
 
 
 151,923
 
 
 (1,246,884)
 
 
 1,145,637Total
  liabilities and equity
 $
 1,555,207
 
 $
 1,458,185
 
 $
 339,280
 
 $
 (1,168,531)
 
 $
 2,184,141
 14


---



Item 1.Financial Statements – (continued) 
 AmSurg Corp. Notes to the Unaudited

Consolidated Financial Statements – (continued)
  Condensed
  Consolidating Balance Sheet - December 31, 2013 (In thousands)Guarantor
 
 Non-Guarantor
 
 Consolidating
 
 TotalParent Issuer
 
 Subsidiaries
 
 Subsidiaries
 
 Adjustments
 
 ConsolidatedAssetsCurrent assets:Cash and cash
  equivalents
 $
 6,710
 
 $
 -
 
 $
 44,130
 
 $
 -
 
 $
 50,840Accounts
  receivable, net
 
 -
 
 
 -
 
 
 105,072
 
 
 -
 
 
 105,072Supplies
  inventory
 
 33
 
 
 -
 
 
 18,381
 
 
 -
 
 
 18,414Deferred income
  taxes
 
 3,097
 
 
 -
 
 
 -
 
 
 -
 
 
 3,097Prepaid and
  other current assets
 
 23,993
 
 
 -
 
 
 13,971
 
 
 (4,362)
 
 
 33,602Total current
  assets
 
 33,833
 
 
 -
 
 
 181,554
 
 
 (4,362)
 
 
 211,025Property and
  equipment, net
 
 9,829
 
 
 -
 
 
 160,066
 
 
 -
 
 
 169,895Investments in
  unconsolidated affiliates and other
 
 1,484,974
 
 
 1,453,596
 
 
 -
 
 
 (2,922,178)
 
 
 16,392Goodwill and
  intangible assets, net
 
 20,684
 
 
 -
 
 
 978
 
 
 1,758,970
 
 
 1,780,632Total assets
 $
 1,549,320
 
 $
 1,453,596
 
 $
 342,598
 
 $
 (1,167,570)
 
 $
 2,177,944Liabilities
  and EquityCurrent
  liabilities:Current portion
  of long-term debt
 $
 10,714
 
 $
 -
 
 $
 10,130
 
 $
 -
 
 $
 20,844Accounts payable
 
 1,972
 
 
 -
 
 
 29,487
 
 
 (3,958)
 
 
 27,501Accrued
  liabilities
 
 27,419
 
 
 -
 
 
 14,510
 
 
 (404)
 
 
 41,525Total current
  liabilities
 
 40,105
 
 
 -
 
 
 54,127
 
 
 (4,362)
 
 
 89,870Long-term debt
 
 561,429
 
 
 -
 
 
 53,246
 
 
 (31,377)
 
 
 583,298Deferred income
  taxes
 
 176,020
 
 
 -
 
 
 -
 
 
 -
 
 
 176,020Other long-term
  liabilities
 
 7,569
 
 
 -
 
 
 17,934
 
 
 -
 
 
 25,503Noncontrolling
  interests – redeemable
 
 -
 
 
 -
 
 
 63,704
 
 
 113,993
 
 
 177,697Equity:Total AmSurg
  Corp. equity
 
 764,197
 
 
 1,453,596
 
 
 114,671
 
 
 (1,568,267)
 
 
 764,197Noncontrolling
  interests – non-redeemable
 
 -
 
 
 -
 
 
 38,916
 
 
 322,443
 
 
 361,359Total equity
 
 764,197
 
 
 1,453,596
 
 
 153,587
 
 
 (1,245,824)
 
 
 1,125,556Total
  liabilities and equity
 $
 1,549,320
 
 $
 1,453,596
 
 $
 342,598
 
 $
 (1,167,570)
 
 $
 2,177,944
 15


---



Item 1.Financial Statements – (continued) 
 AmSurg Corp. Notes to the Unaudited

Consolidated Financial Statements – (continued)
  Condensed
  Consolidating Statement of Earnings and Comprehensive Income - For the Three
  Months Ended March 31, 2014 (In thousands)Guarantor
 
 Non-Guarantor
 
 Consolidating
 
 TotalParent Issuer
 
 Subsidiaries
 
 Subsidiaries
 
 Adjustments
 
 ConsolidatedRevenues
 $
 6,127
 
 $
 -
 
 $
 261,589
 
 $
 (4,609)
 
 $
 263,107Operating
  expenses:Salaries and
  benefits
 
 14,485
 
 
 -
 
 
 68,830
 
 
 (121)
 
 
 83,194Supply cost
 
 -
 
 
 -
 
 
 38,720
 
 
 -
 
 
 38,720Other operating
  expenses
 
 4,166
 
 
 -
 
 
 55,591
 
 
 (4,488)
 
 
 55,269Depreciation and
  amortization
 
 825
 
 
 -
 
 
 7,549
 
 
 -
 
 
 8,374Total operating
  expenses
 
 19,476
 
 
 -
 
 
 170,690
 
 
 (4,609)
 
 
 185,557Gain on
  deconsolidation
 
 2,045
 
 
 2,045
 
 
 -
 
 
 (2,045)
 
 
 2,045Equity in
  earnings of unconsolidated affiliates
 
 48,052
 
 
 48,052
 
 
 -
 
 
 (95,340)
 
 
 764Operating income
 
 36,748
 
 
 50,097
 
 
 90,899
 
 
 (97,385)
 
 
 80,359Interest expense
 
 6,452
 
 
 -
 
 
 511
 
 
 -
 
 
 6,963Earnings from
  continuing operations before income taxes
 
 30,296
 
 
 50,097
 
 
 90,388
 
 
 (97,385)
 
 
 73,396Income tax
  expense
 
 12,704
 
 
 -
 
 
 353
 
 
 -
 
 
 13,057Net earnings
  from continuing operations
 
 17,592
 
 
 50,097
 
 
 90,035
 
 
 (97,385)
 
 
 60,339Net earnings
  (loss) from discontinued operations
 
 (397)
 
 
 -
 
 
 172
 
 
 -
 
 
 (225)Net earnings and
  comprehensive income
 
 17,195
 
 
 50,097
 
 
 90,207
 
 
 (97,385)
 
 
 60,114Less net
  earnings and comprehensive income attributable to noncontrolling interests:Net earnings
  from continuing operations
 
 -
 
 
 -
 
 
 42,835
 
 
 -
 
 
 42,835Net earnings
  from discontinued operations
 
 -
 
 
 -
 
 
 84
 
 
 -
 
 
 84Total net
  earnings and comprehensive income attributable to noncontrolling interests
 
 -
 
 
 -
 
 
 42,919
 
 
 -
 
 
 42,919Net earnings and
  comprehensive income attributable to AmSurg Corp. common shareholders
 $
 17,195
 
 $
 50,097
 
 $
 47,288
 
 $
 (97,385)
 
 $
 17,195Amounts
  attributable to AmSurg Corp. common shareholders:Earnings from
  continuing operations, net of income tax
 $
 17,592
 
 $
 50,097
 
 $
 47,200
 
 $
 (97,385)
 
 $
 17,504Discontinued
  operations, net of income tax
 
 (397)
 
 
 -
 
 
 88
 
 
 -
 
 
 (309)Net earnings and
  comprehensive income attributable to AmSurg Corp. common shareholders
 $
 17,195
 
 $
 50,097
 
 $
 47,288
 
 $
 (97,385)
 
 $
 17,195
 16


---



Item 1.Financial Statements – (continued) 
 AmSurg Corp. Notes to the Unaudited

Consolidated Financial Statements – (continued)
  Condensed
  Consolidating Statement of Earnings and Comprehensive Income - For the Three
  Months Ended March 31, 2013 (In thousands)Guarantor
 
 Non-Guarantor
 
 Consolidating
 
 TotalParent Issuer
 
 Subsidiaries
 
 Subsidiaries
 
 Adjustments
 
 ConsolidatedRevenues
 $
 5,716
 
 $
 -
 
 $
 256,711
 
 $
 (4,238)
 
 $
 258,189Operating
  expenses:Salaries and
  benefits
 
 15,421
 
 
 -
 
 
 65,650
 
 
 (113)
 
 
 80,958Supply cost
 
 -
 
 
 -
 
 
 37,213
 
 
 -
 
 
 37,213Other operating
  expenses
 
 5,060
 
 
 -
 
 
 51,792
 
 
 (4,125)
 
 
 52,727Depreciation and
  amortization
 
 772
 
 
 -
 
 
 7,236
 
 
 -
 
 
 8,008Total operating
  expenses
 
 21,253
 
 
 -
 
 
 161,891
 
 
 (4,238)
 
 
 178,906Gain on
  deconsolidation
 
 2,237
 
 
 2,237
 
 
 -
 
 
 (2,237)
 
 
 2,237Equity in
  earnings of unconsolidated affiliates
 
 49,955
 
 
 49,955
 
 
 -
 
 
 (99,508)
 
 
 402Operating income
 
 36,655
 
 
 52,192
 
 
 94,820
 
 
 (101,745)
 
 
 81,922Interest expense
 
 6,923
 
 
 -
 
 
 619
 
 
 -
 
 
 7,542Earnings from
  continuing operations before income taxes
 
 29,732
 
 
 52,192
 
 
 94,201
 
 
 (101,745)
 
 
 74,380Income tax
  expense
 
 11,877
 
 
 -
 
 
 392
 
 
 -
 
 
 12,269Net earnings
  from continuing operations
 
 17,855
 
 
 52,192
 
 
 93,809
 
 
 (101,745)
 
 
 62,111Net earnings
  (loss) from discontinued operations
 
 (44)
 
 
 -
 
 
 206
 
 
 -
 
 
 162Net earnings and
  comprehensive income
 
 17,811
 
 
 52,192
 
 
 94,015
 
 
 (101,745)
 
 
 62,273Less net
  earnings and comprehensive income attributable to noncontrolling interests:Net earnings
  from continuing operations
 
 -
 
 
 -
 
 
 44,361
 
 
 -
 
 
 44,361Net earnings
  from discontinued operations
 
 -
 
 
 -
 
 
 101
 
 
 -
 
 
 101Total net
  earnings and comprehensive income attributable to noncontrolling interests
 
 -
 
 
 -
 
 
 44,462
 
 
 -
 
 
 44,462Net earnings and
  comprehensive income attributable to AmSurg Corp. common shareholders
 $
 17,811
 
 $
 52,192
 
 $
 49,553
 
 $
 (101,745)
 
 $
 17,811Amounts
  attributable to AmSurg Corp. common shareholders:Earnings from
  continuing operations, net of income tax
 $
 17,855
 
 $
 52,192
 
 $
 49,448
 
 $
 (101,745)
 
 $
 17,750Discontinued
  operations, net of income tax
 
 (44)
 
 
 -
 
 
 105
 
 
 -
 
 
 61Net earnings and
  comprehensive income attributable to AmSurg Corp. common shareholders
 $
 17,811
 
 $
 52,192
 
 $
 49,553
 
 $
 (101,745)
 
 $
 17,811
 17


---



Item 1.Financial Statements – (continued) 
 AmSurg Corp. Notes to the Unaudited

Consolidated Financial Statements – (continued)
  Condensed
  Consolidating Statement of Cash Flows - For the Three Months Ended March 31,
  2014 (In thousands)Parent
 
 Guarantor
 
 Non-Guarantor
 
 Consolidating
 
 TotalIssuer
 
 Subsidiaries
 
 Subsidiaries
 
 Adjustments
 
 ConsolidatedCash flows from
  operating activities:Net cash flows
  provided by operating activities
 $
 18,482
 
 $
 48,096
 
 $
 96,257
 
 $
 (93,016)
 
 $
 69,819Cash flows from
  investing activities:Acquisition of
  interests in surgery centers and related transactions
 
 -
 
 
 (5,082)
 
 
 -
 
 
 44
 
 
 (5,038)Acquisition of
  property and equipment
 
 (1,237)
 
 
 -
 
 
 (5,801)
 
 
 -
 
 
 (7,038)Proceeds from
  sale of interests in surgery centers
 
 -
 
 
 1,111
 
 
 -
 
 
 -
 
 
 1,111Other
 
 (629)
 
 
 211
 
 
 -
 
 
 -
 
 
 (418)Net cash flows
  used in investing activities
 
 (1,866)
 
 
 (3,760)
 
 
 (5,801)
 
 
 44
 
 
 (11,383)Cash flows from
  financing activities:Proceeds from
  long-term borrowings
 
 30,000
 
 
 -
 
 
 1,945
 
 
 -
 
 
 31,945Repayment on
  long-term borrowings
 
 (47,679)
 
 
 -
 
 
 (3,174)
 
 
 -
 
 
 (50,853)Distributions to
  owners, including noncontrolling interests
 
 -
 
 
 (44,920)
 
 
 (91,290)
 
 
 93,016
 
 
 (43,194)Changes in
  intercompany balances with affiliates, net
 
 556
 
 
 -
 
 
 (556)
 
 
 -
 
 
 -Other financing
  activities, net
 
 (641)
 
 
 584
 
 
 43
 
 
 (44)
 
 
 (58)Net cash flows
  used in financing activities
 
 (17,764)
 
 
 (44,336)
 
 
 (93,032)
 
 
 92,972
 
 
 (62,160)Net decrease in
  cash and cash equivalents
 
 (1,148)
 
 
 -
 
 
 (2,576)
 
 
 -
 
 
 (3,724)Cash and cash
  equivalents, beginning of period
 
 6,710
 
 
 -
 
 
 44,130
 
 
 -
 
 
 50,840Cash and cash
  equivalents, end of period
 $
 5,562
 
 $
 -
 
 $
 41,554
 
 $
 -
 
 $
 47,116
  Condensed Consolidating
  Statement of Cash Flows - For the Three Months Ended March 31, 2013 (In
  thousands)Parent
 
 Guarantor
 
 Non-Guarantor
 
 Consolidating
 
 TotalIssuer
 
 Subsidiaries
 
 Subsidiaries
 
 Adjustments
 
 ConsolidatedCash flows from
  operating activities:Net cash flows
  provided by operating activities
 $
 23,940
 
 $
 49,577
 
 $
 99,411
 
 $
 (99,063)
 
 $
 73,865Cash flows from
  investing activities:Acquisition of
  interests in surgery centers and related transactions
 
 -
 
 
 (242)
 
 
 -
 
 
 (10)
 
 
 (252)Acquisition of
  property and equipment
 
 (853)
 
 
 -
 
 
 (5,257)
 
 
 -
 
 
 (6,110)Net cash flows
  used in investing activities
 
 (853)
 
 
 (242)
 
 
 (5,257)
 
 
 (10)
 
 
 (6,362)Cash flows from
  financing activities:Proceeds from
  long-term borrowings
 
 29,700
 
 
 -
 
 
 1,170
 
 
 -
 
 
 30,870Repayment on
  long-term borrowings
 
 (45,024)
 
 
 -
 
 
 (3,187)
 
 
 -
 
 
 (48,211)Distributions to
  owners, including noncontrolling interests
 
 -
 
 
 (49,486)
 
 
 (93,491)
 
 
 99,063
 
 
 (43,914)Changes in
  intercompany balances with affiliates, net
 
 533
 
 
 -
 
 
 (533)
 
 
 -
 
 
 -Other financing
  activities, net
 
 (10,792)
 
 
 151
 
 
 398
 
 
 10
 
 
 (10,233)Net cash flows
  used in financing activities
 
 (25,583)
 
 
 (49,335)
 
 
 (95,643)
 
 
 99,073
 
 
 (71,488)Net decrease in
  cash and cash equivalents
 
 (2,496)
 
 
 -
 
 
 (1,489)
 
 
 -
 
 
 (3,985)Cash and cash
  equivalents, beginning of period
 
 7,259
 
 
 -
 
 
 39,139
 
 
 -
 
 
 46,398Cash and cash
  equivalents, end of period
 $
 4,763
 
 $
 -
 
 $
 37,650
 
 $
 -
 
 $
 42,413
  (15)  Subsequent Events  The Company assessed events occurring subsequent to March 31, 2014
for potential recognition and disclosure in the unaudited consolidated
financial statements. No events have occurred that would require adjustment to
or disclosure in the unaudited consolidated financial statements.   18


---



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 in this report and
in our Annual Report on Form 10-K for the year ended December 31, 2013 and
listed below in this report, 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 risks and uncertainties and the other risks and uncertainties
discussed in this report, in our Annual Report on Form 10-K for the year ended
December 31, 2013 under “Item 1A. – Risk Factors”, as well as other unknown
risks and uncertainties:  •       the risk that payments from third-party payors,
including government healthcare programs, may decrease or not increase as costs
increase; •       our ability to acquire and develop additional
surgery centers on favorable terms; •       our ability to compete for physician partners,
managed care contracts, patients and strategic relationships; •       adverse developments affecting the medical
practices of our physician partners; •       our ability to maintain favorable relations
with our physician partners; •our ability to grow revenues by
increasing procedure volume while maintaining operating margins and
profitability at our existing centers; •our ability to manage the growth in
our business and integrate acquired businesses; •our ability to obtain sufficient capital
resources to complete acquisitions and develop new surgery centers; •our ability to generate sufficient
cash to service all of our indebtedness; •adverse weather and other factors
beyond our control that may affect our surgery centers; •our failure to comply with
applicable laws and regulations; •our failure to effectively and
timely transition to the ICD-10 coding system; •the risk of changes in legislation,
regulations or regulatory interpretations that may negatively affect us; •the risk of becoming subject to
federal and state investigation; •the risk from an unpredictable
impact of the Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Reconciliation Act of 2010 (collectively, the “Health
Reform Law”); •the risk of regulatory changes that
may obligate us to buy out interests of physicians who are minority owners of
our surgery centers; •potential liabilities associated
with our status as a general partner of limited partnerships; •liabilities for claims brought
against our facilities; •our legal responsibility to
minority owners of our surgery centers, which may conflict with our interests
and prevent us from acting solely in our best interests; •potential write-offs of the
impaired portion of intangible assets; and •potential liabilities relating to
the tax deductibility of goodwill.  19


---



Item. 2.Management’s Discussion and Analysis of Financial Condition and Results

of Operations – (continued)
 Overview  We acquire, develop and operate ambulatory
surgery centers (“centers” or “ASCs”) in partnership primarily with
physicians.  As of March 31, 2014, we had 242 operating ASCs, of which we owned
a majority interest (primarily 51%) in 235 ASCs and owned a minority interest
in seven ASCs (three of which are consolidated). The following table presents
the number of procedures performed at our continuing centers and changes in the
number of ASCs in operation, under development and under letter of intent for
the three months ended March 31, 2014 and 2013.  An ASC is deemed to be under
development when a limited partnership (“LP”) or limited liability company (“LLC”)
has been formed with the physician partners to develop the ASC.  Three Months Ended March 31,2014
 
 2013Procedures
 389,987
 
 391,703Continuing
  centers in operation, end of period (consolidated)
 238
 
 233Continuing
  centers in operation, end of period (unconsolidated)
 4
 
 4Average number
  of continuing centers in operation, during period
 239
 
 234New centers
  added during period
 1
 
 1Centers
  discontinued during period
 1
 
 -Centers under
  development, end of period
 1
 
 -Centers under
  letter of intent, end of period
 7
 
 4
  Of the continuing centers in operation at March 31, 2014, 151
centers performed gastrointestinal endoscopy procedures, 48 centers performed
procedures in multiple specialties, 36 centers performed ophthalmology
procedures and seven centers performed orthopaedic procedures.  We intend to
expand primarily through the acquisition and development of additional centers
and through future same-center growth.  Our growth strategy for 2014 includes
the acquisition and development of additional centers, which on an annual basis
we expect would generate additional operating income of $25 million to $29
million.  We anticipate that because the majority of these acquisitions will
occur in the latter part of 2014, their contribution to our 2014 operating
income would not be significant.  We expect a 1% to 2% increase in our
same-center revenue for 2014, which reflects positive rate adjustments from the
Centers for Medicare and Medicaid Services (“CMS”) in 2014. Our same-center
revenue guidance also reflects the expected impact of sequestration.  During
the three months ended March 31, 2014 compared to the same 2013 period, our
same-center revenues decreased 2% primarily due to the impact of inclement
weather that impacted our centers and adversely affected our procedure volumes.  While we own less than 100% of each of the
entities that own the centers, our consolidated statements of earnings include
100% of the results of operations of each of our consolidated entities, reduced
by the noncontrolling partners’ interests share of the net earnings or loss of
the surgery center entities.  The noncontrolling ownership interest in each LP
or LLC is generally held directly or indirectly by physicians who perform
procedures at the center.  Our share of the profits and losses of four
non-consolidated entities are reported in equity in earnings of unconsolidated
affiliates in our consolidated statement of earnings.  Sources of
Revenues  Our revenues are derived from facility fees
charged for surgical procedures performed in our centers and, at certain of our
centers (primarily centers that perform gastrointestinal endoscopy procedures),charges for anesthesia services provided by medical
professionals employed or contracted by our centers.  These fees vary
depending on the procedure, but usually include all charges for operating room
usage, special equipment usage, supplies, recovery room usage, nursing staff
and medications.  Facility fees do not include professional fees charged by the
physicians that perform the surgical procedures.Revenues
are recorded at the time of the patient encounter and billings for such
procedures are made on or about that same date. At the majority of our centers,
it is our policy to collect patient co-payments and deductibles at the time the
surgery is performed. Our revenues are recorded net of estimated contractual
adjustments from third-party medical service payors. Our billing and accounting
systems provide us historical trends of the centers’ cash collections and
contractual write-offs, accounts receivable agings and established fee
adjustments from third-party payors. These estimates are recorded and monitored
monthly for each of our centers as revenues are recognized. Our ability to
accurately estimate contractual adjustments is dependent upon and supported by
the fact that our centers perform and bill for limited types of procedures, the
range of reimbursement for those procedures within each surgery center
specialty is very narrow and payments are typically received within 15 to 45
days of billing. These estimates are not, however, established from billing
system generated contractual adjustments based on fee schedules for the
patient’s insurance plan for each patient encounter.  ASCs depend upon third-party reimbursement programs,
including governmental and private insurance programs, to pay for substantially
all of the services rendered to patients.  We derived approximately 25% of our
revenues for each of the three months ended March 31, 2014 and 2013,
respectively, from governmental healthcare programs, primarily Medicare and managed
Medicare programs, and the remainder from a wide mix of commercial payors and
patient co-pays and deductibles.  The Medicare program currently pays ASCs in
accordance with predetermined fee schedules.Our
centers are not required to file cost reports and, accordingly, we have no
unsettled amounts from governmental third-party payors.  ASCs are paid under the Medicare program based upon
a percentage of the payments to hospital outpatient departments pursuant to the
hospital outpatient prospective patient system and reimbursement rates for ASCs
are increased annually based on increases in the consumer price index (“CPI”).
Effective for federal fiscal year (“FFY”) 2011 and subsequent years, the Health
Reform Law provides for the annual CPI increases 20


---



Item. 2.Management’s Discussion and Analysis of Financial Condition and Results

of Operations – (continued)
 applicable
to ASCs to be reduced by a productivity adjustment, which is based on
historical nationwide productivity gains. In 2013, reimbursement rates
increased by 0.6%, which positively impacted our 2013 revenues by approximately
$2.5 million and our net earnings per diluted share by $0.02. In 2014,
reimbursement rates increased by 1.2%, which we estimate will positively impact
our 2014 revenues by approximately $6.0 million, net of the continued effects
of sequestration, as discussed below. There can be no assurance that CMS will
not revise the ASC payment system or that any annual CPI increases will be
material.  The Budget Control Act of 2011 (“BCA”) requires automatic spending
reductions of $1.2 trillion for FFYs 2013 through 2021, minus any deficit
reductions enacted by Congress and debt service costs. The percentage reduction
for Medicare may not be more than 2% for a FFY, with a uniform percentage
reduction across all Medicare programs. These BCA-mandated spending cuts are
commonly referred to as "sequestration." Sequestration began on March
1, 2013, and CMS imposed a 2% reduction on Medicare claims as of April 1, 2013.
These reductions have been extended through FFY 2024. We cannot predict with
certainty what other deficit reduction initiatives may be proposed by Congress,
whether Congress will attempt to restructure or suspend sequestration or the
impact sequestration may have on our centers.  Based on current volumes, we
estimate that the imposed spending reductions will have a negative impact on
2014 revenues of approximately $1.5 million, concentrated in the three months
ended March 31, 2014.  The Health Reform
Law represents significant change across the healthcare industry.  The Health
Reform Law contains a number of provisions designed to reduce Medicare program spending,
including the annual productivity adjustment discussed above that reduces
payment updates to ASCs.  However, the Health Reform Law also expands coverage
of uninsured individuals through a combination of public program expansion and
private sector health insurance reforms.  For example, the Health Reform Law
has expanded eligibility under existing Medicaid programs in states that have
not opted out of the expansion, created financial penalties on individuals who
fail to carry insurance coverage, established affordability credits for those
not enrolled in an employer-sponsored health plan, resulted in the
establishment of, or participation in, a health insurance exchange for each
state and allowed states to create federally funded, non-Medicaid plans for
low-income residents not eligible for Medicaid.  The Health Reform Law also
required a number of private health insurance market reforms, including a ban
on lifetime limits and pre-existing condition exclusions, new benefit mandates,
and increased dependent coverage.  Many health plans are required to cover, without cost-sharing,
certain preventive services designated by the U.S. Preventive Services Task
Force, including screening colonoscopies.  Medicare now covers these preventive
services without cost-sharing, and states that provide Medicaid coverage of
these preventive services without cost-sharing receive a one percentage point
increase in their federal medical assistance percentage for these services.  Health insurance market reforms that expand insurance coverage may
result in an increased volume for certain procedures at our centers.  However, certain
of the provisions of the Health Reform Law are not currently effective, and the
provisions may be amended, repealed or delayed or their impact could be offset
by reductions in reimbursement under the Medicare program.  It is unclear what
the resulting impact of the Health Reform Law will be on the number of
uninsured individuals or what the payment terms will be for individuals covered
by the Medicaid expansion or who purchase coverage through health insurance
exchanges. Further, the employer mandate, which requires firms with 50 or more
full-time employees to offer health insurance or pay fines, has been delayed
until January 1, 2015 and will not be fully implemented until January 1, 2016. 
The federal online insurance marketplace and certain state exchanges
experienced significant technical issues that negatively impacted the ability
of individuals to purchase health insurance.  These technical issues are being
addressed, but additional implementation issues could lead to further delays of
the individual mandate tax penalties, delays in individuals obtaining health
insurance and a reduction in the number of individuals choosing to purchase
health insurance rather than paying the individual mandate tax penalties.  In addition, the Health Reform Law established a Medicare Shared
Savings Program, which created Accountable Care Organizations (“ACOs”) to allow
groups of doctors, hospitals and other healthcare providers to come together
voluntarily to provide coordinated high quality care to Medicare patients.
Under the Health Reform Law, CMS may contract directly with ACOs. The formation
of ACOs or other coordinated care models could negatively impact our centers
and the medical practices of our physician partners.  Because of the many variables involved, including the law’s
complexity, lack of implementing definitive regulations or interpretive
guidance, gradual or partially delayed implementation, amendments, repeal, or
further implementation delays, we are unable to predict the net effect of the
reductions in Medicare spending, the expected increases in revenues from
increased procedure volumes, and numerous other provisions in the law that may
affect us.  We are further unable to foresee how individuals and employers will
respond to the choices afforded them by the Health Reform Law.  Thus, we cannot
predict the full impact of the Health Reform Law on us at this time.  CMS is increasing its administrative audit efforts through
the nationwide expansion of the recovery audit contractor (“RAC”) program. 
RACs are private contractors that have historically conducted post-payment
reviews of providers and suppliers that bill Medicare to detect and correct
improper payments for services. CMS has also established the Recovery Audit
Prepayment Review (“RAPR”) demonstration that allows RACs to perform
pre-payment reviews on certain types of claims that historically result in high
rates of improper payments, beginning with claims for certain hospital
services, but potentially including other facility types in the future. The
RAPR demonstration began in 2012 and runs for a three year period.The U.S. Department of Health and Human
Services (“HHS”)has
suspended the assignment of new Medicare appeals to Administrative Law Judges
for at least two years beginning July 16, 2013, so that HHS may work through a
backlog of appeals.  Thus, we will experience a significant delay in appealing
any RAC payment denials that occur during the suspension period. The Health
Reform Law expands the RAC program’s scope to include Medicaid claims.  In
addition to RACs, other contractors, such as Medicaid Integrity Contractors,
perform payment audits to identify and correct improper payments.  We could
incur costs associated with appealing any alleged overpayments and be required
to repay any alleged overpayments identified by these or other administrative
audits. 21


---



Item. 2.Management’s Discussion and Analysis of Financial Condition and Results

of Operations – (continued)
  We expect value-based purchasing programs,
including programs that condition reimbursement on patient outcome measures, to
become more common and to involve a higher percentage of reimbursement amounts.
CMS has promulgated three national coverage determinations that prevent
Medicare from paying for certain serious, preventable medical errors performed
in any healthcare facility, such as surgery performed on the wrong patient or
the wrong site.  Several commercial payors also do not reimburse providers for
certain preventable adverse events.  CMS established a quality reporting
program for ASCs under which ASCs that fail to report on certain required
quality measures will receive a 2% reduction in reimbursement for calendar year
2014.  We have implemented programs and procedures at each of our centers to
comply with the quality reporting program prescribed by CMS.  Further, as
required by the Health Reform Law, HHS reported to Congress on its plan for
implementing a value-based purchasing program for ASCs that would tie Medicare
payments to quality and efficiency measures. As required by the Health Reform
Law, HHS studied whether to expand to ASCs its current policy of not paying
additional amounts for care provided to treat conditions acquired during an
inpatient hospital stay and reported to Congress that it would not be feasible
to expand the policy in its current form, but that further exploration of other
payment policies aimed at this same goal should be undertaken.  In addition to payment from governmental
programs, ASCs derive a significant portion of their revenues from private
healthcare insurance plans. These plans include both standard indemnity
insurance programs as well as managed care programs, such as preferred provider
organizations and health maintenance organizations.  The strengthening of
managed care systems nationally has resulted in substantial competition among
providers of surgery center services that contract with these systems. Further,
most of the plans offered through the health insurance exchanges provide for
narrow networks that restrict the number of participating providers or tiered
networks that impose significantly higher cost sharing obligations on patients
who obtain services from providers in a disfavored tier. Exclusion from
participation in a managed care network or assignment to a disfavored tier
could result in material reductions in patient volume and revenues.  Some of
our competitors have greater financial resources and market penetration than we
do.  We believe that all payors, both governmental and private, will continue
their efforts over the next several years to reduce healthcare costs and that
their efforts will generally result in a less stable market for healthcare
services. While no assurances can be given concerning the ultimate success of
our efforts to contract with healthcare payors, we believe that our position as
a low‐cost alternative for certain surgical procedures should enable our
centers to compete effectively in the evolving healthcare marketplace.  Critical Accounting Policies  A summary of
significant accounting policies is disclosed in our 2013 Annual Report on Form
10-K.  Our critical accounting policies are further described under the caption
“Critical Accounting Policies” in Management’s Discussion and Analysis of
Financial Condition and Results of Operations in our 2013 Annual Report on Form
10-K.  There have been no changes in the nature of our critical accounting
policies or the application of those policies since December 31, 2013.  Results of
Operations  Our revenues are directly related to the number of procedures
performed at our centers.  Our overall growth in procedure volume is impacted
directly by the increase in the number of centers in operation and the growth
in procedure volume at existing centers.  We increase our number of centers
through both acquisitions and developments.  Procedure growth at an existing
center may result from additional contracts entered into with third-party
payors, increased market share of our physician partners, additional physicians
utilizing the center and/or scheduling and operating efficiencies gained at the
surgery center.  A significant measurement of how much our revenues grow from
year to year for existing centers is our same-center revenue percentage.  We
define our same-center group each year as those centers that contain full
year-to-date operations in both comparable reporting periods, including the
expansion of the number of operating centers associated with a LP or LLC.  Our
2014 same-center group, comprised of 232 centers and constituting approximately
97% of our total number of consolidated centers, experienced a 2% decline in
revenue during the three months ended March 31, 2014 as compared to the three
months ended March 31, 2014 primarily due to significant widespread inclement
weather which impacted 38% of our centers, including certain centers that do
not routinely experience adverse weather during this time of year.  Expenses directly and indirectly related to
procedures performed at our centers include clinical and administrative
salaries and benefits, supply cost and other operating expenses such as linen
cost, repair and maintenance of equipment, billing fees and bad debt expense. 
The majority of our corporate salary and benefits cost is associated directly
with the number of centers we own and manage and tends to grow in proportion to
the growth of our centers in operation.  Our centers and corporate offices also
incur costs that are more fixed in nature, such as lease expense, legal fees,
property taxes, utilities and depreciation and amortization.  Center profits are allocated to our noncontrolling partners in
proportion to their individual ownership percentages and reflected in the
aggregate as total net earnings attributable to noncontrolling interests and
are presented after net earnings.  The noncontrolling partners of our center
LPs and LLCs typically are organized as general partnerships, LPs or LLCs that
are not subject to federal income tax.  Each noncontrolling partner shares in
the pre-tax earnings of the center of which it is a partner.  Accordingly, net
earnings attributable to the noncontrolling interests in each of our center LPs
and LLCs are generally determined on a pre-tax basis, and pre-tax earnings are presented
before net earnings attributable tononcontrolling
interests have been subtracted.  The effective tax rate on pre-tax earnings
as presented is approximately 17.8%.  However, the effective tax rate based on
pre-tax earnings attributable to AmSurg Corp. common shareholders, on an annual
basis, will remain near the historical percentage of 40%, excluding the varying
impact from gains and losses from deconsolidation and disposal of centers.  We
file a consolidated federal income tax return and numerous state income tax
returns with varying tax rates.  Our income tax expense reflects the blending
of these rates.  22


---



Item. 2.Management’s Discussion and Analysis of Financial Condition and Results

of Operations – (continued)
 Our interest expense results primarily from
our borrowings used to fund acquisition and development activity, as well as
interest incurred on capital leases.  Net earnings from continuing operations
attributable to AmSurg Corp. common shareholders are disclosed on the unaudited
consolidated statements of earnings.  The following table shows certain statement of earnings items
expressed as a percentage of revenues for the three months ended March 31, 2014
and 2013:  Three Months Ended  March 31,2014
 
 2013Revenues
 100.0%
 
 100.0%Operating
  expenses:Salaries and
  benefits
 31.6
 
 31.4Supply cost
 14.7
 
 14.4Other operating
  expenses
 21.0
 
 20.4Depreciation and
  amortization
 3.2
 
 3.1Total operating
  expenses
 70.5
 
 69.3Gain on
  deconsolidation
 0.7
 
 0.9Equity in
  earnings of unconsolidated affiliates
 0.3
 
 0.1Operating income
 30.5
 
 31.7Interest expense
 2.6
 
 2.9Earnings from
  continuing operations before income taxes
 27.9
 
 28.8Income tax
  expense
 5.0
 
 4.8Net earnings from
  continuing operations
 22.9
 
 24.0Discontinued
  operations:Earnings from
  operations of discontinued interests in surgery centers, net of income tax
 0.1
 
 0.1Loss on disposal
  of discontinued interests in surgery centers, net of income tax
 (0.2)
 
 -Net (loss)
  earnings from discontinued operations
 (0.1)
 
 0.1Net earnings
 22.8
 
 24.1Less net
  earnings and comprehensive income attributable to noncontrolling interests:Net earnings
  from continuing operations
 16.3
 
 17.2Net earnings
  from discontinued operations
 -
 
 -Total net
  earnings and comprehensive income attributable to noncontrolling interests
 16.3
 
 17.2Net earnings
  attributable to AmSurg Corp. common shareholders
 6.5%
 
 6.9%Amounts
  attributable to AmSurg Corp. common shareholders:Earnings from
  continuing operations, net of income tax
 6.7%
 
 6.9%Discontinued
  operations, net of income tax
 (0.2)
 
 -Net earnings and
  comprehensive income attributable to AmSurg Corp. common shareholders
 6.5%
 
 6.9%
  Quarter Ended March 31, 2014
Compared to Quarter Ended March 31, 2013  The number of procedures
performed in our ASCs remained relatively flat during the three months ended
March 31, 2014 compared to the 2013 period with 389,987 and 391,703 procedures
being performed in the three months ended March 31, 2014 and 2013,
respectively.  Revenues increased $4.9 million, or 2%, to $263.1 million in the
three months ended March 31, 2014 from $258.2 million in the comparable 2013
period.  Our revenue was impacted during the three months ended March 31, 2014
primarily due to the following:  ·centers acquired or opened in 2013,
which contributed $10.4 million of additional revenues in the three months
ended March 31, 2014 due to having a full period of operations in 2014; ·center acquired in 2014, which
generated $1.0 million in revenues during the three months ended March 31,
2014; and ·approximately $6.0 million of
revenue decline for the three months ended March 31, 2014, recognized by our
2014 same-center group, reflecting a 2% decrease, primarily as a result of
inclement weather that occurred across the country that impacted over 38% of
our centers, resulting in canceled procedures, center closures and delays in
re-establishing normal daily procedure volumes.  Salaries and benefits
increased $2.2 million, or 3%, to $83.2 million in the three months ended March
31, 2014 from $81.0 million in the comparable 2013 period.  Salaries and
benefits as a percentage of revenues increased by 20 basis points in the three
months ended March 31, 2014, compared to 23


---



Item. 2.Management’s Discussion and Analysis of Financial Condition and Results

of Operations – (continued)
 the three
months ended March 31, 2013.  Staff at newly acquired and developed centers, as
well as the additional staffing required at existing centers, resulted in a 5%
increase in salaries and benefits at our centers in the three months ended
March 31, 2014.  Furthermore, we experienced a decrease in salaries and
benefits at our corporate offices due to lower bonus and deferred compensation
expense incurred during the three months ended March 31, 2014 compared to the
2013 period.  Supply cost increased
$1.5 million, or 4%, to $38.7 million in the three months ended March 31, 2014
from $37.2 million in the comparable 2013 period.  The increase was primarily
the result of an increase in our average supply cost per procedure of 5% due in
part to higher cost per procedure at certain of our multispecialty centers.  Other operating expenses increased $2.5 million, or 5%, to
$55.3 million in the three months ended March 31, 2014 from $52.7 million in
the comparable 2013 period.  The additional expense in the 2014 period resulted
primarily from:  ·an increase of $2.0
million in other operating expenses at our 2014 same-center group; and ·centers acquired or
opened during 2013, which resulted in an increase of $1.7 million in other
operating expenses in the three months ended March 31, 2014.  Depreciation and amortization expense increased $366,000,
or 5%, in the three months endedMarch 31, 2014, primarily as a result of
centers acquired during 2013.  We anticipate further increases in operating expenses in
2014, primarily due to additional acquired centers and an additional start-up
center currently under development.  Typically, a start-up center will
incur start-up losses while under development and during its initial months of
operation and will experience lower revenues and operating margins than an established
center.  This typically continues until the case load at the center grows
to a more normal operating level, which generally is expected to occur within
12 months after the center opens. At March 31, 2014, we had one center under
development.  During
the three months ended March 31, 2014, we contributed a controlling interest in
one center in exchange for $600,000 and a noncontrolling interest in an entity
that controls the contributed center after the completion of the transaction. 
As a result of the transaction, we recognized a gain on deconsolidation of
approximately $2.0 million.  This gain was determined based on the difference
between the fair value of the retained noncontrolling interestunder the new ownership and operating
structureand the carrying value of both the
tangible and intangible assets of the entity immediately prior to the
transaction.  However, due to a tax asset valuation allowance established in
connection with the transaction, the net gain was approximately $550,000.  Interest expense decreased $579,000, or 8%, to $7.0
million from $7.5 million, in the three months ended March 31, 2014, primarily
due to a lower outstanding balance on the revolving credit facility during the
three months ended March 31, 2014 compared to the three months ended March 31,
2013.  See “— Liquidity and Capital Resources.”  We recognized income tax expense of $13.1 million in the
three months ended March 31, 2014 compared to $12.3 million in the three months
ended March 31, 2013.  Our effective tax rate during the three months ended
March 31, 2014 was 17.8% of earnings from continuing operations before income
taxes.  This differs from the federal statutory income tax rate of 35.0%
primarily due to the exclusion of the noncontrolling interests’ share of pre-tax
earnings and the impact of state income taxes.  Because we deduct goodwill
amortization for tax purposes only, more than 60% of our income tax expense is
deferred and our deferred tax liability continues to increase, which would only
be due in part or in wholeupon the disposition of a portion or all of our centers.  During
the three months ended March 31, 2014, we classified one surgery center in
discontinued operations, which was sold during the period.  We pursued the
disposition of this center due to our assessment of its limited growth
opportunities.  This center’s results of operations and gains and losses associated
with its disposition have been classified as discontinued operations in all
periods presented.  We recognized an after-tax loss on the disposition of
discontinued interests in the center of $362,000 during the three months ended
March 31, 2014.  The net earnings from the operations of the discontinued
center was $137,000 and $162,000 during the three months ended March 31, 2014
and 2013, respectively.  Noncontrolling
interests in net earnings for the three months ended March 31, 2014 decreased
$1.6 million, or 4%, to $42.9 million from $44.5 million in the comparable 2013
period, primarily as a result of the one disposition and one deconsolidation
recorded during the period.  The net earnings from discontinued operations
attributable to noncontrolling interests was $84,000 and $101,000 during the
three months ended March 31, 2014 and 2013, respectively.  Liquidity and
Capital Resources  Cash and cash equivalents atMarch 31, 2014and 2013 were $47.1million and $42.4million,
respectively.  AtMarch 31, 2014, we had
working capital of $125.7million, compared to
$121.1million at December 31, 2013. 
Operating activities forthe three months ended March
31, 2014generated $69.8million in
cash flow from operations, compared to $73.9 million inthe three months ended March 31, 2013.  The decrease in operating
cash flow resulted primarily from lower net earnings in the 2014 period compared
to the 2013 period.  Positive operating cash flows of individual centers are
the sole source of cash used to make distributions to our wholly-owned
subsidiaries, as well as to our physician partners, which we are obligated to
make on a monthly basis in accordance with each partnership’s partnership or
operating agreement.  Distributions to 24


---



Item. 2.Management’s Discussion and Analysis of Financial Condition and Results

of Operations – (continued)
 noncontrolling
interests, which is considered a financing activity, in the three months endedMarch 31, 2014and 2013 were $43.2 million and $43.9
million, respectively.  The
principal source of our operating cash flow is the collection of accounts
receivable from governmental payors, commercial payors and individuals.  Each
of our centers bills for services as delivered, usually within a few days
following the date of the procedure.  Generally, unpaid amounts that are 30
days past due are rebilled based on a standard set of procedures.  If amounts
remain uncollected after 60 days, our centers proceed with a series of
late-notice notifications until amounts are either collected, contractually
written off in accordance with contracted rates or determined to be
uncollectible, typically after 90 to 120 days.  Receivables determined to be
uncollectible are written off and such amounts are applied to our estimate of
allowance for bad debts as previously established in accordance with our policy
for bad debt expense.  The amount of actual write-offs of account balances for
each of our centers is continuously compared to established allowances for bad debt
to ensure thatsuch allowances are
adequate.  AtMarch 31, 2014and 2013, our net
accounts receivable represented 38 and 36 days of revenue outstanding, respectively.  During the three
months endedMarch 31, 2014, we had total
acquisition and capital expenditures of $12.0million,
which included:  ·$5.0 millionfor the acquisition of interests in ASCs and related
transactions; and ·$7.1million for new or replacement property at existing centers
including $116,000 in new capital leases.  AtMarch 31, 2014, we had unfunded
construction and equipment purchase commitments for our new corporate
headquarters and for centers under development or under renovation of
approximately $3.2million, which we intend to fund through
additional borrowings of long-term debt, operating cash flow and capital
contributions by our partners.  On June 14, 2013, we
amended our revolving credit agreement to adjust the interest rate spreads and
extend the maturity date by one year from June 2017 to June 2018; and the
interest rate spread on our LIBOR option was reduced to LIBOR plus 1.25% to
2.0% from LIBOR plus 1.50% to 2.25%.  At March 31, 2014, we had $237.5 million
available under our revolving credit agreement.  During 2012, we
completed a private offering of $250.0 million aggregate principle amount of
5.625% senior unsecured notes due 2020 (the “Senior Unsecured Notes”).In May 2013, we completed an exchange of the
outstanding Senior Unsecured Notes for an equal amount of such notes that are
registered under the Securities Act of 1933, as amended.Interest
accrues at the rate of 5.625% per annum and is payable semi-annually in arrears
on May 30th and November 30th, through the maturity date
on November 30, 2020.  At March 31, 2014, we had approximately $4.7 million in
accrued interest associated with the Senior Unsecured Notes reflected in other
accrued liabilities.  The Senior Unsecured Notes contain certain covenants which,
among other things, limit our ability to enter into or guarantee additional
borrowing, sell preferred stock, pay dividends and repurchase stock, in each
case subject to certain exceptions.  During the three months endedMarch 31, 2014, we had net repayments on long-term
debt of $18.9 million.  AtMarch 31, 2014, we
had $237.5 million outstanding under our revolving credit agreement, $250.0
million outstanding pursuant to our Senior Unsecured Notes and $67.0 million
outstanding pursuant to our 8.04% senior secured notes due 2020 (the “Senior
Secured Notes”).  Our Senior Secured Notes began to amortize in quarterly
installments beginning in August 2013.  As ofMarch
31, 2014, we were in compliance with all covenants contained in our
revolving credit agreement, the note purchase agreement governing our Senior
Secured Notes and the indenture governing our Senior Unsecured Notes.  During
the three months ended March 31, 2014, we received approximately $500,000 from
the exercise of stock options under our employee stock incentive plans.  The
tax benefit received from the exercise of those options was approximately $1.7
million.  On August 9, 2013,
our Board of Directors approved a stock repurchase program for up to $40.0
million of our shares of common stock to be purchased through February 9,
2015.  As of March 31, 2014, there was approximately $27.1 million available
under the stock repurchase program.  We intend to fund the purchase price for
shares acquired under the plan using cash generated from the proceeds received
when employees exercise stock options, cash generated from our operations or
borrowings under our revolving credit facility.  During the three
months endedMarch 31, 2014, we repurchased 68,014
shares with a value of approximately $2.9 million to cover payroll withholding
taxes in connection with the vesting of restricted stock awards in accordance
with the restricted stock agreements.  25


---



Item. 2.Management’s Discussion and Analysis of Financial Condition and Results

of Operations – (continued)
 Recent Accounting Pronouncements  In April 2014, the
Financial Accounting Standards Board issued Accounting Standards Update (“ASU”)
2014-08 “Presentation of Financial Statements and Property, Plant and
Equipment” which raised the threshold for a disposal to qualify as a
discontinued operation and requires certain new disclosures for individually
material disposals that do not meet the new definition of a discontinued
operation.  The ASU’s intent is to reduce the number of disposals reported as
discontinued operations by focusing on strategic shifts that have or will have
a major effect on our operations and financial results rather than routine
disposals that are not a change in our strategy.  The guidance is effective for
interim and annual periods beginning after December 15, 2014, with earlier
adoption permitted.  From time to time, we will dispose of certain of our
centers due to management’s assessment of our strategy in the market and due to
limited growth opportunities at those centers.  Historically, these
dispositions were classified as discontinued operations and recorded separately
from continuing operations.  When adopted, this ASU will require us to record
the results of operations and the associated gain or loss from similar
dispositions as a component of continuing operations.  We do not believe this
ASU will have a material impact on our consolidated financial position or cash
flows.  Item
3.  Quantitative and Qualitative Disclosures About Market Risk  We are subject to market risk primarily from exposure to changes
in interest rates based on our financing, investing and cash management
activities.  We utilize a balanced mix of maturities along with both fixed rate
and variable rate debt to manage our exposures to changes in interest rates. 
Our variable debt instruments are primarily indexed to the prime rate or
LIBOR.  Interest rate changes would result in gains or losses in the market
value of our fixed rate debt portfolio due to differences in market interest
rates and the rates at the inception of the debt agreements.  Based upon our
indebtedness atMarch 31, 2014, a 100 basis
point interest rate change would impact our net earnings and cash flow by approximately
$1.4 million annually.  Although there can be no assurances that interest rates
willnot change significantly, we do not expect changes in interest
rates to have a material effect on our net earnings or cash flows in 2014.  Item 4. 
Controls and Procedures  Evaluation of Disclosure Controls and
Procedures  Under the supervision and with the
participation of our management team, including our chief executive officer and
chief financial officer, we conducted an evaluation of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934, as amended, or the Exchange Act) as of March 31, 2014. 
Based on that evaluation, our chief executive officer (principal executive
officer) and chief financial officer (principal accounting officer) have
concluded that our disclosure controls and procedures are effective to allow
timely decisions regarding disclosure of material information required to be
included in our periodic reports.  Changes in Internal Control Over Financial
Reporting  During the period covered by this report,
there has been no change in our internal control over financial reporting that
has materially affected or is reasonably likely to materially affect our
internal control over financial reporting.   26


---



Part
II  Item 1.Legal Proceedings  There have
been no material changes to the legal proceedings we previously described in
our 2013 Annual Report on Form 10-K during thethreemonths ended March 31, 2014.  Item 1A.Risk Factors  There
have not been any material changes to the risk factors previously disclosed in
our Annual Report on Form 10-K for the year ended December 31, 2013.  Item 2.        Unregistered Sales of Equity
Securities and Use of Proceeds  Issuer Purchases of Equity Securities(d) Maximum Number(a) Total
 
 
 
 (c) Total Number of
 
 
 (or Approximate DollarNumber of
 
 (b) Average
 
 Shares (or Units)
 
 
 Value) of Shares (orShares
 
 Price Paid
 
 Purchased as Part of
 
 
 Units) That May Yet(or Units)
 
 per Share
 
 Publicly Announced
 
 
 Be Purchased UnderPeriod
 Purchased (1)
 
 (or Unit)
 
 Plans or Programs
 
 
 the Plans or ProgramsJanuary 1, 2014
  through January 31, 2014
 18,648
 
 $
 42.65
 
 -
 
 $
 27,078,575
 (2)February 1, 2014
  through February 28, 2014
 49,283
 
 
 41.75
 
 -
 
 
 27,078,575March 1, 2014
  through March 31, 2014
 83
 
 
 42.79
 
 -
 
 
 27,078,575Total
 68,014
 
 $
 42.00
 
 -
 
 $
 27,078,575
  (1)During the three months ended March 31, 2014,
we repurchased 68,014 shares with a value of approximately $2.9 million to
cover payroll withholding taxes in connection with the vesting of restricted
stock awards in accordance with the restricted stock agreements.  (2)On August 9, 2013, we announced that our
Board of Directors had authorized a stock repurchase program, allowing for the
purchase of up to $40,000,000 of our outstanding common stock over an 18 month
period through February 9, 2015. Item 3.        Defaults Upon Senior
Securities  Not applicable.  Item 4.        Mine Safety Disclosures  Not applicable.  Item 5.        Other Information  Not applicable.  27


---



Item 6.        Exhibits   10.1     Form of Indemnification Agreement
with directors, executive officers and advisors (incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K, dated February 4, 2014)  10.2Third Amended and Restated Employment
Agreement, dated January 30, 2014, between AmSurg and Claire M. Gulmi
(incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K,
dated February 4, 2014)  10.3Third Amended and Restated Employment
Agreement, dated January 30, 2014, between AmSurg and David L. Manning
(incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K,
dated February 4, 2014)  10.4     Amended and Restated Employment
Agreement, dated January 30, 2014, between AmSurg and Phillip A. Clendenin
(incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K,
dated February 4, 2014)  10.5     Amended and Restated
Employment Agreement, dated January 30, 2014, between AmSurg and Kevin D.
Eastridge (incorporated by reference to Exhibit 10.5 to the Current Report on
Form 8-K, dated February 4, 2014)  31.1     Certification of President and
Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002  31.2     Certification of Executive Vice
President and Chief Financial Officer pursuant to Rule 13a-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  32.1     Certification pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002  101      Interactive data files pursuant to
Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at March 31,
2014 and December 31, 2013, (ii) the Consolidated Statements of Earnings and
Comprehensive Income for the three month periods ended March 31, 2014 and 2013,
(iii) the Consolidated Statements of Changes in Equity for the three month
periods ended March 31, 2014 and 2013, (iv) the Consolidated Statements of Cash
Flows for the three month periods ended March 31, 2014 and 2013 and (v) the
notes to the Unaudited Consolidated Financial Statements for the three month
periods ended March 31, 2014 and 2013.   28


---



Signature  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:  May 1, 2014By:
 /s/ Claire M. GulmiClaire M. GulmiExecutive Vice President andChief Financial Officer(Principal Financial and Duly Authorized Officer)
  29


---