Shareholders' Equity

9 Months Ended

Sep. 30, 2016

Equity [Abstract]

Shareholders' Equity

Shareholders’ Equity

a. Common Stock

During December 2015, the Company issued 5,835,000 shares of its common stock in a public offering, at $80.00 per share, prior to underwriting discounts, commissions, and other related offering expenses of approximately $19.1 million. Proceeds were used to repay a portion of the Company's revolving credit facility, to fund a portion of the acquisitions completed during the three months ended December 31, 2015 and for general corporate purposes.

In addition, the Company repurchases shares by withholding a portion of employee restricted stock that vests to cover payroll withholding taxes in accordance with the restricted stock agreements. During the nine months ended September 30, 2016 and 2015, the Company repurchased 83,587 shares and 67,000 shares, respectively, of common stock for approximately $6.1 million and $3.7 million, respectively.

b. Preferred Stock

The Company has 1,725,000 shares outstanding of its mandatory convertible preferred stock. 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 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 the conversion rate will be adjusted under certain circumstances and such holder will also be entitled to a fundamental change dividend make-whole amount.

During each of the nine months ended September 30, 2016 and 2015, the Company's Board of Directors declared three dividends each of $1.3125 per share in cash, or $2.3 million, for the Company’s mandatory convertible preferred stock. As ofSeptember 30, 2016, the dividend declared in August 2016 was funded to the paying agent to be paid to shareholders of record as of September 15, 2016.

c. Stock Incentive Plans

In May 2014, the Company adopted the AmSurg Corp. 2014 Equity and Incentive Plan (the “2014 Plan”), which was amended in May 2016. The amendment increased the number of shares that may be awarded under the 2014 Plan from 1,200,000 to 3,200,000. The Company also has unvested restricted stock and fully vested options outstanding under the AmSurg Corp. 2006 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, 2016, 3,200,000 shares were authorized for grant under the 2014 Plan and 2,408,787 shares were available for future equity grants. Restricted stock granted to outside directors vests on the first anniversary of the date of grant. Restricted stock granted to employees generally 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 requirements and restrictions.

The Company has not issued options 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, 2016 and 2015 is as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Share-based compensation expense	$	6,175	$	3,727	$	21,243	$	11,319
Fair value of shares vested	1,105		—		19,348		13,220
Cash received from option exercises	—		276		450		2,356
Tax benefit from exercises of share based awards	176		246		3,910		3,779

As of September 30, 2016, the Company had total unrecognized compensation cost of approximately $36.3 million related to non-vested awards, which the Company expects to recognize through 2020 and over a weighted average period of 1.1 years. For the three and nine months ended September 30, 2016 and 2015, there were no options that were anti-dilutive.

A summary of the status of non-vested restricted shares at September 30, 2016 and changes during the nine months ended September 30, 2016 is as follows:

			Weighted
	Number		Average
	of Shares		Grant Price
Non-vested shares at December 31, 2015	734,101		$	44.73
Shares granted	586,791		74.00
Shares vested	(263,425	)	39.09
Shares forfeited	(11,952	)	59.47
Non-vested shares at September 30, 2016	1,045,515		$	62.41

In addition to the non-vested restricted shares, during the nine months ended September 30, 2016, the Company granted 74,752 performance-based restricted stock units (RSUs) to certain of its officers and physician employees. The weighted average fair value of the Company's common stock on the grant date of these RSUs was $74.09. Subject to achieving applicable performance thresholds, the RSUs will vest ratably over a three year period from the grant date. The conversion of the RSUs to restricted stock is contingent on the Company’s achievement of a specified one-year financial performance goal for the year ended December 31, 2016 and, if achieved, would occur during the first quarter of 2017. If the financial performance goal is not achieved, the RSUs will be forfeited. The number of RSUs that will ultimately be received by the holders range from 0% to 150% of the units granted, depending on the Company’s level of achievement with respect to the financial performance goal. At September 30, 2016, the Company believes the RSUs will vest at approximately 100%.

A summary of stock option activity for the nine months ended September 30, 2016 is summarized as follows:

					Weighted
			Weighted		Average
			Average		Remaining
	Number		Exercise		Contractual
	of Shares		Price		Term (in years)
Outstanding at December 31, 2015	33,751		$	22.98	1.1
Options exercised with total intrinsic value of $1.0 million	(19,718	)	22.84
Options terminated	(4,200	)	21.07
Outstanding, Vested and Exercisable at September 30, 2016 with an aggregate intrinsic value of $0.4 million	9,833		$	24.09	0.5

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, 2016 exercised their options at the Company’s closing stock price on September 30, 2016.

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 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 nine months ended September 30, 2015, approximately 3.1 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. For the three and nine months ended September 30, 2016, approximately 3.1 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):

	Three Months Ended September 30,					Nine Months Ended September 30,
	Earnings		Shares	Per Share		Earnings		Shares	Per Share
	(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount
2016:
Net earnings attributable to AmSurg Corp. common shareholders (basic)	$	37,690	53,757	$	0.70	$	110,094	53,720	$	2.05
Effect of dilutive securities, options and non-vested shares	—		501			—		432
Net earnings attributable to AmSurg Corp. common shareholders (diluted)	$	37,690	54,258	$	0.69	$	110,094	54,152	$	2.03
2015:
Net earnings attributable to AmSurg Corp. common shareholders (basic)	$	40,397	47,707	$	0.85	$	90,582	47,652	$	1.90
Preferred stock dividends	2,264		—			—		—
Effect of dilutive securities, options and non-vested shares	—		3,568			—		398
Net earnings attributable to AmSurg Corp. common shareholders (diluted)	$	42,661	51,275	$	0.83	$	90,582	48,050	$	1.89