Shareholders' Equity

12 Months Ended

Dec. 31, 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 was 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. 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. During November 2014, the shares registered on Form S-3 were sold. As a result of that transaction, the Company has no future obligation to register additional shares under the Equity Registration Rights Agreement.

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 which expired on February 9, 2015.  As of December 31, 2014, there was approximately $27.1 million available under the stock repurchase program.

During the year ended 2014, the Company did not purchase any shares under the stock repurchase program.  During the year ended 2013, the Company purchased 1,154,378 shares of the Company’s common stock for approximately $42.7 million, at an average price of $36.93 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 2014 and 2013, the Company repurchased 100,720 shares and 102,252 shares, respectively, of common stock for approximately $4.6 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. Subsequent quarterly dividends, to the extent lawful and declared by the Company’s Board of Directors, will be $1.3125 per share, or $2.3 million, of Mandatory Convertible Preferred Stock. For the year ended December 31, 2014, the Company's Board of Directors declared dividend payments in August and November, respectively, totaling $4.5 million.

c.   Stock Incentive Plans

Transactions in which the Company receives employee and non-employee services in exchange for the Company’s equity instruments or liabilities that are based on the fair value of the Company’s equity securities or may be settled by the issuance of these securities are accounted using a fair value method. The Company applies the Black-Scholes method of valuation in determining share-based compensation expense for option awards. 

Benefits of tax deductions in excess of recognized compensation cost are reported as a financing cash flow, thus reducing the Company’s net operating cash flows and increasing its financing cash flows by $3.2 million, $7.2 million and $1.8 million for the years ended December 31, 2014, 2013 and 2012, respectively.

The Company examines its concentrations of holdings, its historical patterns of award exercises and forfeitures as well as forward-looking factors, in an effort to determine if there were any discernible employee populations.  From this analysis, the Company has identified three employee populations, consisting of senior executives, officers and all other recipients.  The expected volatility rate applied was estimated based on historical volatility.  The expected term assumption applied is based on contractual terms, historical exercise and cancellation patterns and forward-looking factors where present for each population identified.  The risk-free interest rate used is based on the U.S. Treasury yield curve in effect at the time of the grant.  The pre-vesting forfeiture rate is based on historical rates and forward-looking factors for each population identified.  The Company will adjust the estimated forfeiture rate to its actual experience.  The Company intends to retain its earnings to finance growth and development of the business and does not expect to declare or pay any cash dividends in the foreseeable future except as required in accordance with the terms of the Company's mandatory convertible preferred stock.

In May 2014, the Company adopted the AmSurg Corp. 2014 Equity and Incentive Plan.  The Company also has unvested restricted stock and fully vested 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 December 31, 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 for the years ended December 31, 2014, 2013 and 2012 was as follows (in thousands):

	2014		2013		2012
Share-based compensation expense	$	10,104	$	8,321	$	6,692
Fair value of shares vested	15,126		11,742		6,425
Cash received from option exercises	2,630		33,349		18,214
Tax benefit from option exercises	3,177		7,247		1,784

As of December 31, 2014, the Company had total unrecognized compensation cost of approximately $8.4 million related to non-vested awards, which the Company expects to recognize through 2018 and over a weighted average period of 1.2 years.

Average outstanding share-based awards to purchase approximately 20,000 shares of common stock that had an exercise price in excess of the average market price of the common stock during the year ended December 31, 2012 were not included in the calculation of diluted securities under the treasury method for purposes of determining diluted earnings per share due to their anti-dilutive impact. During the years ended December 31, 2014 and 2013, there were no options that were anti-dilutive.

A summary of the status of and changes for non-vested restricted shares for the three years ended December 31, 2014, is as follows:

			Weighted
	Number		Average
	of Shares		Grant Price
Non-vested shares at January 1, 2012	732,412		$	21.91
Shares granted	281,429		26.78
Shares vested	(183,019	)	25.98
Shares forfeited	(2,136	)	26.26
Non-vested shares at December 31, 2012	828,686		$	22.50
Shares granted	291,863		31.66
Shares vested	(360,337	)	21.55
Shares forfeited	(16,343	)	23.11
Non-vested shares at December 31, 2013	743,869		$	26.54
Shares granted	272,780		43.12
Shares vested	(336,160	)	25.69
Shares forfeited	(12,380	)	38.94
Non-vested shares at December 31, 2014	668,109		$	33.51

A summary of stock option activity for the three years ended December 31, 2014 is summarized as follows:

					Weighted
			Weighted		Average
			Average		Remaining
	Number		Exercise		Contractual
	of Shares		Price		Term (in years)
Outstanding at January 1, 2012	2,510,054		$	23.09	3.4
Options exercised with total intrinsic value of $6.3 million	(841,599	)	21.64
Options terminated	(5,625	)	21.85
Outstanding at December 31, 2012	1,662,830		$	23.82	2.9
Options exercised with total intrinsic value of $33.3 million	(1,392,366	)	23.95
Outstanding at December 31, 2013	270,464		$	23.16	2.5
Options exercised with total intrinsic value of $2.6 million	(111,743	)	23.53
Outstanding, Vested and Exercisable at December 31, 2014 with an aggregate intrinsic value of $3.6 million	158,721		$	22.89	1.7

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 December 31, 2014 exercised their options at the Company’s closing stock price on December 31, 2014.

d. Earnings per Share

Basic net earnings attributable to AmSurg Corp. common stockholders, per common share, excludes dilution and is computed by dividing net earnings attributable to AmSurg Corp. common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings attributable to AmSurg common stockholders, per common share is computed by dividing net earnings 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 from continuing operations attributable to AmSurg Corp. and net earnings attributable to AmSurg Corp. common shareholders in periods in which utilizing the if-converted method would be anti-dilutive. For the year ended December 31, 2014, 1.8 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 per share (in thousands, except per share amounts):

	Earnings		Shares	Per Share
	(Numerator)		(Denominator)	Amount
For the year ended December 31, 2014:
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders (basic)	$	50,777	39,311	$	1.29
Effect of dilutive securities options and non-vested shares	—		314
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders (diluted)	$	50,777	39,625	$	1.28
For the year ended December 31, 2013:
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders (basic)	$	71,009	31,338	$	2.27
Effect of dilutive securities options and non-vested shares	—		616
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders (diluted)	$	71,009	31,954	$	2.22
For the year ended December 31, 2012:
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders (basic)	$	60,037	30,773	$	1.95
Effect of dilutive securities options and non-vested shares	—		835
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders (diluted)	$	60,037	31,608	$	1.90