Shareholders' Equity

9 Months Ended

Sep. 30, 2014

Equity [Abstract]

Shareholders' Equity

Shareholders’ Equity

a.   Common Stock

On July 2, 2014, the Company issued 9,775,000 shares of its common stock in a public offering, at $45.00 per share, prior to underwriting discounts, commissions and other related offering expenses of approximately $18.5 million. Proceeds from the issuance were used to satisfy certain debt obligations with the remaining amount utilized to fund a portion of the Sheridan acquisition. In addition, on July 16, 2014, the Company issued 5,713,909 shares of its common stock directly to the former owners of Sheridan as part of the total consideration for the Sheridan acquisition.

In connection with the Sheridan transaction, the Company entered into a registration rights agreement (the “Equity Registration Rights Agreement”) with the former owners of Sheridan, which provides certain demand and piggy-back registration rights with respect to the shares of Company common stock issued pursuant to the Sheridan transaction. Under the Equity Registration Rights Agreement, the Company may be required, at the demand of the former owners of Sheridan, to file a shelf registration statement to register the shares of common stock issued pursuant to the Sheridan transaction. The Equity Registration Rights Agreement provides certain demand rights for registrations of marketed, underwritten offerings; provided, that such demands for marketed, underwritten offerings involve the lesser of (i) securities with a minimum anticipated offering price of at least $100.0 million or (ii) all remaining registrable securities. The Equity Registration Rights Agreement also provides for unlimited demand rights for registrations of non-marketed, underwritten offerings; provided, that such demands involve the lesser of (i) securities with a minimum anticipated offering price of at least $50.0 million or (ii) all remaining registrable securities then held by certain holders of registrable securities. The Company is not obligated to effect more than three demand registrations in a 360 day period (whether marketed or not) or more than one demand registration in any 90 day period (whether marketed or not). The Company may delay the filing or effectiveness of any registration statement for up to 60 days in the event that the Company’s board of directors determines a valid business purpose exists for such delay or suspension; provided, the Company cannot delay or suspend more than three times in any 12 month period and not more than 120 days in the aggregate in any 12 month period.

On October 22, 2014, pursuant to a request under the Equity Registration Rights Agreement, the Company filed a registration statement on Form S-3 with the Securities and Exchange Commission to register the common stock to certain of the former owners of Sheridan.

On April 24, 2012, the Board of Directors authorized a stock purchase program for up to $40.0 million 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 $40.0 million of the Company’s shares of common stock to be purchased through February 9, 2015.  As of September 30, 2014, there was approximately $27.1 million available under the stock repurchase program.

During the nine months ended September 30, 2014, the Company did not purchase any shares under the stock repurchase program.  During the nine months ended September 30, 2013, the Company purchased 920,851 shares of the Company’s common stock for approximately $32.2 million, at an average price of $34.91 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 by withholding a portion of employee restricted stock that vested to cover payroll withholding taxes in accordance with the restricted stock agreements.  During the nine months ended September 30, 2014 and 2013, the Company repurchased 68,748 shares and 102,252 shares, respectively, of common stock for approximately $2.9 million and $3.3 million, respectively.

b. Mandatory Convertible Preferred Stock

On July 2, 2014, the Company issued 1,725,000 shares of its mandatory convertible preferred stock in a public offering, at $100.00 per share, prior to underwriting discounts, commissions and other related offering expenses of approximately $5.9 million.

The mandatory convertible preferred stock pays dividends at an annual rate of 5.25% of the initial liquidation preference of $100 per share. Dividends accrue and cumulate from the date of issuance and, to the extent lawful and declared by the Company's Board of Directors, will be paid on each January 1, April 1, July 1 and October 1 in cash or, at the Company's election (subject to certain limitations), by delivery of any combination of cash and shares of common stock. Each share of the mandatory convertible preferred stock has a liquidation preference of $100, plus an amount equal to accrued and unpaid dividends. Each share of the mandatory convertible preferred stock will automatically convert on July 1, 2017 (subject to postponement in certain cases), into between 1.8141 and 2.2222 shares of common stock (the “minimum conversion rate” and “maximum conversion rate,” respectively), each subject to adjustment. The number of shares of common stock issuable on conversion will be determined based on the average volume weighted average price per share of the Company's common stock over the 20 consecutive trading day period commencing on and including the 22nd scheduled trading day prior to July 1, 2017. At any time prior to July 1, 2017, holders may elect to convert all or a portion of their shares of mandatory convertible preferred stock into shares of common stock at the minimum conversion rate. If any holder elects to convert shares of mandatory convertible preferred stock during a specified period beginning on the effective date of a fundamental change, as defined in the Description of the Mandatory Convertible Preferred Stock (the “Preferred Stock Agreement”), the conversion rate will be adjusted under certain circumstances and such holder will also be entitled to a fundamental change dividend make-whole amount (as defined in the Preferred Stock Agreement).

On August 29, 2014, the Company's Board of Directors declared its first dividend of $1.2979 per share in cash, or $2.2 million, for the Company’s 5.25% Mandatory Convertible Preferred Stock. As of September 30, 2014, the dividend was funded to the paying agent to shareholders of record as of September 15, 2014. Subsequent quarterly dividends, to the extent lawful and declared by the Company’s Board of Directors, will be $1.3125 per share of Mandatory Convertible Preferred Stock.

c.   Stock Incentive Plans

In May 2014, the Company adopted the AmSurg Corp. 2014 Equity and Incentive Plan.  The Company also has options outstanding under the AmSurg Corp. 2006 Stock Incentive Plan, as amended, and the AmSurg Corp. 1997 Stock Incentive Plan, as amended, 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 September 30, 2014, 1,200,000 shares were authorized for grant under the 2014 Equity and Incentive Plan and 1,132,862 shares were available for future equity grants.  Restricted stock granted to outside directors vests over a one year period.  Restricted stock granted to employees vests over four years in three equal installments beginning on the second anniversary of 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 and anti-pledging activities.

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 and nine months ended September 30, 2014 and 2013 was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Share-based compensation expense	$	2,424	$	2,104	$	7,388	$	6,070
Fair value of shares vested	123		1,242		10,481		11,743
Cash received from option exercises	504		9,561		2,150		23,289
Tax benefit from option exercises	198		680		2,288		1,890

As of September 30, 2014, the Company had total unrecognized compensation cost of approximately $10.9 million 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 three and nine months ended September 30, 2014 and 2013, there were no options that were anti-dilutive.

A summary of the status of non-vested restricted shares at September 30, 2014 and changes during the nine months ended September 30, 2014 is as follows:

			Weighted
	Number		Average
	of Shares		Grant Price
Non-vested shares at December 31, 2013	743,869		$	26.54
Shares granted	272,780		43.12
Shares vested	(249,854	)	23.39
Shares forfeited	(12,380	)	38.94
Non-vested shares at September 30, 2014	754,415		$	33.38

A summary of stock option activity for the nine months ended September 30, 2014 is summarized as follows:

					Weighted
			Weighted		Average
			Average		Remaining
	Number		Exercise		Contractual
	of Shares		Price		Term (in years)
Outstanding at December 31, 2013	270,464		$	23.16	2.5
Options exercised with total intrinsic value of $2.2 million	(89,481	)	24.03
Outstanding, Vested and Exercisable at September 30, 2014 with an aggregate intrinsic value of $4.9 million	180,983		$	22.73	1.8

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 September 30, 2014 exercised their options at the Company’s closing stock price on September 30, 2014.

d. Earnings per Share

Basic net earnings (loss) attributable to AmSurg Corp. common stockholders, per common share, excludes dilution and is computed by dividing net earnings (loss) attributable to AmSurg Corp. common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) attributable to AmSurg common stockholders, per common share is computed by dividing net earnings (loss) attributable to AmSurg Corp. common stockholders by the weighted-average number of common shares outstanding during the period plus any potential dilutive common share equivalents, including shares issuable (1) upon the vesting of restricted stock awards as determined under the treasury stock method and (2) upon conversion of the Company's 5.250% Mandatory Convertible Preferred Stock as determined under the if-converted method. For purposes of calculating diluted earnings per share, preferred stock dividends have been subtracted from both net earnings (loss) from continuing operations attributable to AmSurg Corp. and net earnings (loss) attributable to AmSurg Corp. common shareholders in periods in which utilizing the if-converted method would be anti-dilutive. For the three and nine months ended September 30, 2014, 3.4 million common share equivalents related to the Mandatory Convertible Preferred Stock were anti-dilutive and therefore are excluded from the dilutive weighted average number of shares outstanding.

The following is a reconciliation of the numerator and denominators of basic and diluted earnings (loss) per share (in thousands, except per share amounts):

	Three Months Ended September 30,							Nine Months Ended September 30,
	Earnings			Shares	Per Share			Earnings		Shares	Per Share
	(Numerator)			(Denominator)	Amount			(Numerator)		(Denominator)	Amount
2014:
Net earnings (loss) from continuing operations attributable to AmSurg Corp. common shareholders (basic)	$	(10,704	)	46,320	$	(0.23	)	$	25,569	36,620	$	0.70
Effect of dilutive securities options and non-vested shares	—			—				—		406
Net earnings (loss) from continuing operations attributable to AmSurg Corp. common shareholders (diluted)	$	(10,704	)	46,320	$	(0.23	)	$	25,569	37,026	$	0.69
2013:
Net earnings (loss) from continuing operations attributable to AmSurg Corp. common shareholders (basic)	$	16,659		31,376	$	0.53		$	52,192	31,267	$	1.67
Effect of dilutive securities options and non-vested shares	—			615				—		645
Net earnings (loss) from continuing operations attributable to AmSurg Corp. common shareholders (diluted)	$	16,659		31,991	$	0.52		$	52,192	31,912	$	1.64