##### Table of Contents



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 Ended September 30, 2007
 Commission File Number 000-22217
 AMSURG CORP.
 (Exact Name of Registrant as Specified in its Charter)
 Tennessee(State or other jurisdiction of 
incorporation or organization)
    
    62-1493316(I.R.S. Employer
Identification No.)20 Burton Hills Boulevard 
Nashville, TN(Address of principal executive offices)
    
    37215(Zip code)
 (615) 665-1283  (Registrants Telephone Number, Including Area Code)
  þ o
  þ o o
  o þ




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Table of Contents to
Form 10-Q for the Nine Months Ended September 30, 2007
 Part IItem 1. Financial Statements
    
    
    1Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4. Controls and Procedures
    
    
    17Item 4T. Controls and Procedures
    
    
    17Part IIItem 1. Legal Proceedings
    
    
    17Item 1A. Risk Factors
    
    
    17Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17Item 3. Defaults Upon Senior Securities
    
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    
    17Item 5. Other Information
    
    
    17Item 6. Exhibits
    
    
    18Signature
    
    
    19Ex-11 Earnings Per ShareEx-31.1 Section 302 Certification of the CEOEx-31.2 Section 302 Certification of the CFOEx-32.1 Section 906 Certification of the CEO & CFO
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##### Table of Contents



Part I
 
 Item 1. Financial Statements
 AmSurg Corp.
Consolidated Balance Sheets
September 30, 2007 (unaudited) and December 31, 2006
(Dollars in thousands)
 September 30,
    
    December 31,2007
    
    2006AssetsCurrent assets:Cash and cash equivalents
    
    $
    19,922
    
    
    $
    20,083Accounts receivable, net of allowance of $7,429 and $6,628, respectively
    
    
    60,415
    
    
    
    51,546Supplies inventory
    
    
    6,248
    
    
    
    6,183Deferred income taxes
    
    
    1,468
    
    
    
    915Prepaid and other current assets
    
    
    16,745
    
    
    
    15,276Total current assets
    
    
    104,798
    
    
    
    94,003Long-term receivables and other assets
    
    
    2,763
    
    
    
    4,091Property and equipment, net
    
    
    96,138
    
    
    
    89,175Intangible assets, net
    
    
    483,597
    
    
    
    402,763Total assets
    
    $
    687,296
    
    
    $
    590,032Liabilities and Shareholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    4,139
    
    
    $
    3,367Accounts payable
    
    
    10,876
    
    
    
    11,098Accrued salaries and benefits
    
    
    13,780
    
    
    
    11,534Other accrued liabilities
    
    
    2,736
    
    
    
    1,413Total current liabilities
    
    
    31,531
    
    
    
    27,412Long-term debt
    
    
    149,989
    
    
    
    123,948Deferred income taxes
    
    
    41,205
    
    
    
    39,350Other long-term liabilities
    
    
    12,812
    
    
    
    3,873Minority interest
    
    
    58,523
    
    
    
    52,341Preferred stock, no par value, 5,000,000 shares authorized, no shares issued
or outstanding
    
    
    
    
    
    
    Shareholders equity:Common stock, no par value, 70,000,000 shares authorized, 30,862,480
and 29,933,932 shares outstanding, respectively
    
    
    164,136
    
    
    
    143,077Accumulated other comprehensive loss, net of income taxes
    
    
    (752
    )
    
    
    (470
    )Retained earnings, net of ($634) cumulative adjustment to beginning
retained earnings on January 1, 2007 for change in accounting for
uncertainty in income taxes
    
    
    229,852
    
    
    
    200,501Total shareholders equity
    
    
    393,236
    
    
    
    343,108Total liabilities and shareholders equity
    
    $
    687,296
    
    
    $
    590,032
  1




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##### Table of Contents



Item 1.
Financial Statements  (continued)
 AmSurg Corp.
Consolidated Statements of Earnings (unaudited)
Three Months and Nine Months Ended September 30, 2007 and 2006
(In thousands, except earnings per share
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues
    
    $
    132,103
    
    
    $
    113,546
    
    
    $
    390,198
    
    
    $
    343,260Operating expenses:Salaries and benefits
    
    
    38,988
    
    
    
    33,757
    
    
    
    115,169
    
    
    
    102,288Supply cost
    
    
    15,514
    
    
    
    13,004
    
    
    
    44,970
    
    
    
    39,631Other operating expenses
    
    
    26,694
    
    
    
    22,987
    
    
    
    79,262
    
    
    
    66,850Depreciation and amortization
    
    
    4,874
    
    
    
    4,303
    
    
    
    14,286
    
    
    
    12,698Total operating expenses
    
    
    86,070
    
    
    
    74,051
    
    
    
    253,687
    
    
    
    221,467Operating income
    
    
    46,033
    
    
    
    39,495
    
    
    
    136,511
    
    
    
    121,793Minority interest
    
    
    26,003
    
    
    
    22,137
    
    
    
    77,292
    
    
    
    70,117Interest expense, net of interest income
    
    
    2,215
    
    
    
    1,924
    
    
    
    6,899
    
    
    
    5,669Earnings from continuing operations
before income taxes
    
    
    17,815
    
    
    
    15,434
    
    
    
    52,320
    
    
    
    46,007Income tax expense
    
    
    6,916
    
    
    
    6,050
    
    
    
    20,230
    
    
    
    18,035Net earnings from continuing operations
    
    
    10,899
    
    
    
    9,384
    
    
    
    32,090
    
    
    
    27,972Discontinued operations:(Loss) earnings from operations of
discontinued interests in surgery centers,
net of income tax (benefit) expense
    
    
    (204
    )
    
    
    34
    
    
    
    (73
    )
    
    
    275Loss on disposal of discontinued interest in
surgery centers, net of income tax benefit
    
    
    (705
    )
    
    
    (56
    )
    
    
    (558
    )
    
    
    (56
    )Net (loss) earnings from discontinued
operations
    
    
    (909
    )
    
    
    (22
    )
    
    
    (631
    )
    
    
    219Net earnings
    
    $
    9,990
    
    
    $
    9,362
    
    
    $
    31,459
    
    
    $
    28,191Basic earnings per common share:Net earnings from continuing operations
    
    $
    0.35
    
    
    $
    0.31
    
    
    $
    1.05
    
    
    $
    0.94Net earnings
    
    $
    0.32
    
    
    $
    0.31
    
    
    $
    1.03
    
    
    $
    0.95Diluted earnings per common share:Net earnings from continuing operations
    
    $
    0.35
    
    
    $
    0.31
    
    
    $
    1.04
    
    
    $
    0.92Net earnings
    
    $
    0.32
    
    
    $
    0.31
    
    
    $
    1.02
    
    
    $
    0.93Weighted average number of shares and share
equivalents outstanding:Basic
    
    
    30,778
    
    
    
    29,875
    
    
    
    30,455
    
    
    
    29,787Diluted
    
    
    31,175
    
    
    
    30,423
    
    
    
    30,922
    
    
    
    30,371
  2




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##### Table of Contents



Item 1.
Financial Statements  (continued)
 AmSurg Corp.
Consolidated Statements of Cash Flows (unaudited)
Nine Months Ended September 30, 2007 and 2006
(In thousands
 Nine Months EndedSeptember 30,2007
    
    
    2006Cash flows from operating activities:Net earnings
    
    $
    31,459
    
    
    $
    28,191Adjustments to reconcile net earnings to net cash flows provided by
operating activities:Minority interest
    
    
    77,292
    
    
    
    70,117Distributions to minority partners
    
    
    (75,305
    )
    
    
    (66,793
    )Share-based compensation
    
    
    3,324
    
    
    
    5,513Depreciation and amortization
    
    
    14,286
    
    
    
    12,698Deferred income taxes
    
    
    6,180
    
    
    
    3,843Excess tax benefit from share-based compensation
    
    
    (2,809
    )
    
    
    (1,052
    )Net loss on sale and impairment of long-lived assets
    
    
    1,518
    
    
    
    91Decrease (increase) in cash and cash equivalents, net of
effects of acquisitions and dispositions, due to changes in:Accounts receivable, net
    
    
    (4,598
    )
    
    
    (3,511
    )Supplies inventory
    
    
    223
    
    
    
    (208
    )Prepaid and other current assets
    
    
    1,218
    
    
    
    656Accounts payable
    
    
    (341
    )
    
    
    (958
    )Accrued expenses and other liabilities
    
    
    4,398
    
    
    
    5,595Other, net
    
    
    (282
    )
    
    
    15Net cash flows provided by operating activities
    
    
    56,563
    
    
    
    54,197Cash flows from investing activities:Acquisition of interests in surgery centers
    
    
    (84,769
    )
    
    
    (49,811
    )Acquisition of property and equipment
    
    
    (16,533
    )
    
    
    (13,603
    )Proceeds from sale of surgery center
    
    
    1,885
    
    
    
    597Decrease in long-term receivables
    
    
    1,918
    
    
    
    1,943Net cash flows used in investing activities
    
    
    (97,499
    )
    
    
    (60,874
    )Cash flows from financing activities:Proceeds from long-term borrowings
    
    
    91,264
    
    
    
    86,176Repayment on long-term borrowings
    
    
    (66,897
    )
    
    
    (82,266
    )Proceeds from issuance of common stock upon exercise of stock options
    
    
    13,452
    
    
    
    2,790Proceeds from capital contributions by minority partners
    
    
    154
    
    
    
    139Excess tax benefit from share-based compensation
    
    
    2,809
    
    
    
    1,052Financing cost incurred
    
    
    (7
    )
    
    
    (399
    )Net cash flows provided by financing activities
    
    
    40,775
    
    
    
    7,492Net (decrease) increase in cash and cash equivalents
    
    
    (161
    )
    
    
    815Cash and cash equivalents, beginning of period
    
    
    20,083
    
    
    
    20,496Cash and cash equivalents, end of period
    
    $
    19,922
    
    
    $
    21,311
  3




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##### Table of Contents



Item 1.
Financial Statements  (continued)
 AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements
 (1) Basis of Presentation
       (2) Use of Estimates
  4




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Item 1.
Financial Statements  (continued)
 AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements  (continued)
  (3) Revenue Recognition
   (4) Share-Based Compensation
  WeightedAverageWeighted
    
    RemainingNumber
    
    Average
    
    Contractualof
    
    Exercise
    
    TermShares
    
    Price
    
    (in years)Outstanding at December 31, 2006
    
    
    4,589,532
    
    
    $
    20.46
    
    
    
    7.1Options granted
    
    
    360,293
    
    
    
    22.81Options exercised with aggregate intrinsic value of $7,639,000
    
    
    (851,242
    )
    
    
    15.80Options terminated
    
    
    (176,288
    )
    
    
    23.16Outstanding at September 30, 2007 with aggregate intrinsic value
of $9,292,000
    
    
    3,922,295
    
    
    $
    21.57
    
    
    
    6.9Exercisable at September 30, 2007 with aggregate intrinsic value
of $8,139,000
    
    
    1,387,922
    
    
    $
    20.58
    
    
    
    6.0
  5




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##### Table of Contents



Item 1.
Financial Statements  (continued)
 AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements  (continued)
  Share-Based Payment (Revised 2004).
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Applied assumptions:Weighted average fair value of
options at the date of grant
    
    
    
    
    
    $
    7.8
    3
    
    $
    8.6
    1
    
    $
    7.6
    6Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expected term/life of options in years
    
    
    
    
    
    
    3.5
    
    
    
    4.8
    
    
    
    4.1Forfeiture rate
    
    
    
    
    
    
    13.5
    %
    
    
    0.1
    %
    
    
    11.2
    %Average risk-free interest rate
    
    
    
    
    
    
    5.0
    %
    
    
    4.8
    %
    
    
    4.6
    %Volatility rate
    
    
    
    
    
    
    37.1
    %
    
    
    34.4
    %
    
    
    37.7
    %
  (5) Acquisitions and Dispositions
   6




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##### Table of Contents



Item 1.
Financial Statements  (continued)
 AmSurg Corp.
Notes to the Unaudited Consolidated Financial Statements  (continued)
   Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Revenues
    
    $
    4
    
    
    $
    1,539
    
    
    $
    1,564
    
    
    $
    5,414(Loss) earnings before income taxes
    
    
    (335
    )
    
    
    57
    
    
    
    (119
    )
    
    
    453Net (loss) earnings
    
    
    (204
    )
    
    
    34
    
    
    
    (73
    )
    
    
    275
 (6) Intangible Assets
 Amortizable intangible assets at September 30, 2007 and December 31, 2006 consisted of the
following (in thousands):
 September 30, 2007
    
    December 31, 2006Gross
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    
    
    
    
    Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Net
    
    Amount
    
    Amortization
    
    NetDeferred financing cost
    
    $
    2,510
    
    
    $
    1,669
    
    
    $
    841
    
    
    $
    2,503
    
    
    $
    1,503
    
    
    $
    1,000Agreements not to compete
    
    
    1,000
    
    
    
    1,000
    
    
    
    
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    Total amortizable
intangible assets
    
    $
    3,510
    
    
    $
    2,669
    
    
    $
    841
    
    
    $
    3,503
    
    
    $
    2,503
    
    
    $
    1,000
   Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Balance, beginning of period
    
    $
    448,020
    
    
    $
    371,362
    
    
    $
    397,147
    
    
    $
    347,424Goodwill acquired (adjusted) during period
    
    
    27,910
    
    
    
    20,360
    
    
    
    79,834
    
    
    
    44,298Goodwill disposed during period
    
    
    (207
    )
    
    
    (721
    )
    
    
    (1,258
    )
    
    
    (721
    )Balance, end of period
    
    $
    475,723
    
    
    $
    391,001
    
    
    $
    475,723
    
    
    $
    391,001
  7




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##### Table of Contents



Item 1. Financial Statements  (continued)
 AmSurg Corp.  Notes to the Unaudited Consolidated Financial Statements  (continued)
 (7) Long-term Debt
  Accounting for Derivative
Investments and Hedging Activities,
 (8) Impairment of Long-lived Assets
  (9) Income Taxes
 Accounting for Uncertainty in Income Taxes  an interpretation of SFAS No. 109, Accounting for Income Taxes.
 8




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##### Table of Contents



Item 1. Financial Statements  (continued)
 AmSurg Corp.  Notes to the Unaudited Consolidated Financial Statements  (continued)
  (10) Commitments and Contingencies
    (11) Recent Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities.
 (12) Subsequent Events
  9




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
   
    
    changes in the reimbursement system for outpatient surgical procedures under the
Medicare program;
    
    the risk that payments from third-party payors, including government healthcare
programs, may decrease or not increase as our costs increase;
    
    our ability to maintain favorable relations with our physician partners;
    
    our ability to acquire and develop additional surgery centers on favorable terms;
    
    our ability to grow revenues at our existing centers;
    
    our ability to manage the growth in our business;
    
    our ability to obtain sufficient capital resources to complete acquisitions and develop
new surgery centers;
    
    our ability to compete for physician partners, managed care contracts, patients and
strategic relationships;
    
    risks associated with weather and other factors that may affect our surgery centers
located in Florida;
    
    our failure to comply with applicable laws and regulations;
    
    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 of regulatory changes that may obligate us to buy out interests of physicians
who are minority owners of our surgery centers;
    
    risks associated with our status as a general partner of limited partnerships;
    
    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;
    
    risks associated with the write-off of the impaired portion of intangible assets; and
    
    risks associated with the tax deductibility of goodwill.
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (continued)
 Overview
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Centers in operation, beginning of the period
    
    
    165
    
    
    
    153
    
    
    
    156
    
    
    
    149New center acquisitions placed in operation
    
    
    6
    
    
    
    4
    
    
    
    15
    
    
    
    7New development centers placed in operation
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Centers disposed
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    (1
    )Centers in operation, end of the period
    
    
    170
    
    
    
    156
    
    
    
    170
    
    
    
    156Centers under development, end of period
    
    
    4
    
    
    
    4
    
    
    
    4
    
    
    
    4Development centers awaiting regulatory
approval, end of period
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Centers held for sale, end of period (1)
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Average number of continuing centers in
operation, during period
    
    
    167
    
    
    
    150
    
    
    
    167
    
    
    
    149Centers under letter of intent, end of period
    
    
    3
    
    
    
    2
    
    
    
    3
    
    
    
    2
 
 (1)
    
    We completed the disposition in October 2006.   Sources of Revenues
   11




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (continued)
    
    
    CMSs estimate that the revised ASC rates would be 65% of the corresponding rates of the
hospital outpatient prospective payment system;
    
    a scheduled phase in of the revised rates over four years, beginning January 1, 2008;
    
    an annual increase in the ASC rates beginning in 2010 based on the consumer price index;
and
    
    an expansion of the list of procedures that can be performed in an ASC.
  Critical Accounting Policies
  Results of Operations
    12




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (continued)
     Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Salaries and benefits
    
    
    29.5
    
    
    
    29.7
    
    
    
    29.5
    
    
    
    29.8Supply cost
    
    
    11.8
    
    
    
    11.5
    
    
    
    11.5
    
    
    
    11.5Other operating expenses
    
    
    20.2
    
    
    
    20.2
    
    
    
    20.3
    
    
    
    19.5Depreciation and amortization
    
    
    3.7
    
    
    
    3.8
    
    
    
    3.7
    
    
    
    3.7Total operating expenses
    
    
    65.2
    
    
    
    65.2
    
    
    
    65.0
    
    
    
    64.5Operating income
    
    
    34.8
    
    
    
    34.8
    
    
    
    35.0
    
    
    
    35.5Minority interest
    
    
    19.7
    
    
    
    19.5
    
    
    
    19.8
    
    
    
    20.4Interest expense, net of interest income
    
    
    1.6
    
    
    
    1.7
    
    
    
    1.8
    
    
    
    1.7Earnings from continuing operations
before income taxes
    
    
    13.5
    
    
    
    13.6
    
    
    
    13.4
    
    
    
    13.4Income tax expense
    
    
    5.2
    
    
    
    5.3
    
    
    
    5.2
    
    
    
    5.3Net earnings from continuing operations
    
    
    8.3
    
    
    
    8.3
    
    
    
    8.2
    
    
    
    8.1Net (loss) earnings from discontinued
operations
    
    
    (0.7
    )
    
    
    
    
    
    
    (0.1
    )
    
    
    0.1Net earnings
    
    
    7.6
    %
    
    
    8.3
    %
    
    
    8.1
    %
    
    
    8.2
    %
  
    
    15 centers acquired in the nine months ended September 30, 2007, which generated $10.0
million and $21.6 million in revenues during the three and nine months ended September 30,
2007, respectively;
    
    eight centers acquired or opened throughout 2006, which generated $3.7 million and $15.8
million of additional revenues due to having a full period of operations in the three and
nine months ended September 30, 2007, respectively; and
 13




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (continued)
 
    
    $5.2 million and $9.3 million of revenue growth for the three and nine months ended
September 30, 2007, respectively, recognized by our 2007 same-center group, reflecting a 5%
and 4% increase, respectively, primarily as a result of procedure growth.
     
    
    an increase of $1.1 million and $5.0 million in other operating expenses from our 2007
same-center group in the three and nine months ended September 30, 2007, respectively,
resulting primarily from additional procedure volume and general inflationary cost
increases, as well as a $1.3 million impairment charge and property loss incurred in the
nine-month period at a center that will be relocating its facility during 2008;
    
    15 centers acquired during the three and nine months ended September 30, 2007,
respectively, which resulted in an increase of $1.9 million and $3.8 million, respectively,
in other operating expenses; and
    
    eight centers acquired or opened in 2006, which resulted in an increase of $500,000 and
$2.2 million in other operating expenses due to having a full period of operations in the
three and nine months ended September 30, 2007, respectively.
   14




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (continued)
    Accounting for Uncertainty in Income
Taxes  an interpretation of SFAS No. 109,
  Liquidity and Capital Resources
   15




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (continued)
   
    
    $84.8 million for acquisitions of interests in practice-based ASCs;
    
    $13.4 million for new or replacement property at existing surgery centers, including
$590,000 in new capital leases; and
    
    $3.7 million for surgery centers under development.
     Recent Accounting Pronouncements
 Accounting for Income Taxes.
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities.
 16




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (continued)
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 Item 4T Controls and Procedures.
  
 Part II
 
 Item 1 Legal Proceedings.
  
 Item 1A Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  17




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##### Table of Contents



Item 6. Exhibits.
 Exhibits11
    
    Earnings Per Share31.1
    
    Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a)31.2
    
    Certification of Executive Vice President and Chief Financial Officer pursuant to
Rule 13a-14(a)32.1
    
    Section 1350 Certification
 18




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##### Table of Contents



Signature
  AMSURG CORP.Date: November 2, 2007
    By:
    /s/ Claire M. GulmiClaire M. GulmiExecutive Vice President and
Chief Financial Officer
(Principal Financial, Accounting and
Duly Authorized Officer) 19