Tennessee | 001-36531 | 62-1493316 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
1A Burton Hills Boulevard | ||
Nashville, Tennessee | 37215 | |
(Address of Principal Executive Offices) | (Zip Code) |
[X] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(d) | Exhibits: |
AMSURG CORP. | ||
By: | /s/ Claire M. Gulmi | |
Claire M. Gulmi | ||
Executive Vice President and Chief Financial Officer | ||
(Principal Financial and Duly Authorized Officer) |
Exhibit | ||
Number | Description | |
99.1 | Unaudited pro forma condensed combined financial statements as of and for the nine months ended September 30, 2016, for the year ended December 31, 2015, and the notes related thereto. |
• | the structure of the transaction whereby AmSurg’s wholly owned subsidiary, Newco, will be the surviving legal entity of the Mergers and will be the registrant with the U.S. Securities and Exchange Commission. Newco will also be the entity to issue shares to the former Envision stockholders; |
• | the composition of management, which was the most determinative factor when evaluating the collective weight of evidence of the combined company, will be the current Chief Executive Officer and Chief Financial Officer of AmSurg; and |
• | the governing body of Newco will consist of 14 directors evenly split between former directors of AmSurg and Envision with no director having the ability to cast a tie breaking vote. |
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET | ||||||||||||||||||||
September 30, 2016 | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Historical | Historical | Pro Forma | ||||||||||||||||||
AmSurg | Envision | Reclassifications | Adjustments | Combined | ||||||||||||||||
Assets | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 106,058 | $ | 190,033 | $ | — | $ | (3,864,101 | ) | 4(e) | $ | 299,085 | ||||||||
4,045,000 | 4(e) | |||||||||||||||||||
(177,905 | ) | 4(e) | ||||||||||||||||||
Restricted cash and marketable securities | 12,794 | 52,646 | — | — | 65,440 | |||||||||||||||
Accounts receivable, net | 424,895 | 1,341,202 | — | — | 1,766,097 | |||||||||||||||
Supplies inventory | 22,505 | 38,739 | — | — | 61,244 | |||||||||||||||
Prepaid and other current assets | 64,454 | 81,265 | — | 31,073 | 4(d) | 176,792 | ||||||||||||||
Total current assets | 630,706 | 1,703,885 | — | 34,067 | 2,368,658 | |||||||||||||||
Property and equipment, net | 227,213 | 383,947 | — | — | 611,160 | |||||||||||||||
Investments in unconsolidated affiliates | 111,006 | — | 3,336 | 4(a) | — | 114,342 | ||||||||||||||
Goodwill | 4,300,102 | 3,386,263 | — | (3,386,263 | ) | 4(c) | 9,262,607 | |||||||||||||
— | 4,962,505 | 4(c) | ||||||||||||||||||
Intangible assets, net | 1,678,927 | 1,062,400 | — | (1,062,400 | ) | 4(b) | 3,695,227 | |||||||||||||
— | 2,016,300 | 4(b) | ||||||||||||||||||
Other assets | 48,985 | 119,313 | (3,336 | ) | 4(a) | — | 164,962 | |||||||||||||
Total assets | $ | 6,996,939 | $ | 6,655,808 | $ | — | $ | 2,564,209 | $ | 16,216,956 | ||||||||||
Liabilities and Equity | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Current portion of long-term debt | $ | 22,020 | $ | 24,904 | $ | — | $ | 2,879 | 4(e) | $ | 49,803 | |||||||||
Accounts payable | 27,191 | 65,686 | — | — | 92,877 | |||||||||||||||
Accrued salaries and benefits | 213,298 | — | 311,172 | 4(a) | — | 524,470 | ||||||||||||||
Accrued interest | 18,577 | — | 10,305 | 4(a) | (6,151 | ) | 4(e) | 22,731 | ||||||||||||
Other accrued liabilities | 101,625 | 666,794 | (311,172 | ) | 4(a) | (14,115 | ) | 3 | 405,827 | |||||||||||
(10,305 | ) | 4(a) | (27,000 | ) | 4(e) | |||||||||||||||
Total current liabilities | 382,711 | 757,384 | — | (44,387 | ) | 1,095,708 | ||||||||||||||
Long-term debt | 2,591,895 | 3,055,440 | — | (3,809,318 | ) | 4(e) | 5,792,627 | |||||||||||||
— | 3,920,266 | 4(e) | ||||||||||||||||||
34,344 | 3 | |||||||||||||||||||
Deferred income taxes | 760,504 | 388,661 | — | 609,381 | 3 | 1,479,710 | ||||||||||||||
— | (263,618 | ) | 3 | |||||||||||||||||
(15,218 | ) | 3 | ||||||||||||||||||
Insurance reserves | — | 255,674 | 58,711 | 4(a) | — | 314,385 | ||||||||||||||
Other long-term liabilities | 129,897 | 66,946 | (58,711 | ) | 4(a) | — | 138,132 | |||||||||||||
Noncontrolling interests - redeemable | 177,877 | — | — | — | 177,877 | |||||||||||||||
Equity: | ||||||||||||||||||||
Preferred stock, no par value (1) | 166,632 | — | — | (166,615 | ) | 4(i) | 17 | |||||||||||||
Common stock, no par value (1) | 1,361,581 | 1,872 | — | (1,872 | ) | 4(i) | 1,174 | |||||||||||||
— | (1,360,407 | ) | 4(i) | |||||||||||||||||
Additional paid-in capital | — | 1,690,833 | — | (1,690,833 | ) | 4(i) | 5,768,447 | |||||||||||||
— | 5,768,447 | 4(i) | ||||||||||||||||||
Retained earnings | 891,507 | 369,912 | — | (369,912 | ) | 4(i) | 844,898 | |||||||||||||
— | (46,609 | ) | 4(d) | |||||||||||||||||
Accumulated other comprehensive loss | — | (560 | ) | — | 560 | 4(i) | — | |||||||||||||
Total equity before non-redeemable noncontrolling interests | 2,419,720 | 2,062,057 | — | 2,132,759 | 6,614,536 | |||||||||||||||
Noncontrolling interests - non-redeemable | 534,335 | 69,646 | — | — | 603,981 | |||||||||||||||
Total equity | 2,954,055 | 2,131,703 | — | 2,132,759 | 7,218,517 | |||||||||||||||
Total liabilities and equity | $ | 6,996,939 | $ | 6,655,808 | $ | — | $ | 2,564,209 | $ | 16,216,956 |
(1) | Subsequent to the Mergers, Newco common stock and Newco preferred stock will each have a par value of $0.01 per share. |
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS | |||||||||||||||||||
For the nine months ended September 30, 2016 | |||||||||||||||||||
(In thousands, except earnings per share data) | |||||||||||||||||||
Historical | Historical | Pro Forma | |||||||||||||||||
AmSurg | Envision | Reclassifications | Adjustments | Combined | |||||||||||||||
Revenues | $ | 2,646,940 | $ | 8,661,352 | $ | — | $ | — | $ | 11,308,292 | |||||||||
Provision for uncollectibles | (341,547 | ) | (3,784,026 | ) | — | — | (4,125,573 | ) | |||||||||||
Net Revenue | 2,305,393 | 4,877,326 | — | — | 7,182,719 | ||||||||||||||
Operating expenses: | |||||||||||||||||||
Salaries and benefits | 1,275,131 | 3,427,921 | (2,066 | ) | 4(a) | (9,290 | ) | 4(g) | 4,697,400 | ||||||||||
— | 5,704 | 4(g) | |||||||||||||||||
Supply cost | 144,618 | — | 54,556 | 4(a) | — | 199,174 | |||||||||||||
Insurance expense | — | 108,799 | 57,149 | 4(a) | — | 165,948 | |||||||||||||
Selling, general and administrative expenses | — | 122,336 | (122,336 | ) | 4(a) | — | — | ||||||||||||
Other operating expenses | 333,755 | 772,877 | (54,556 | ) | 4(a) | — | 1,068,357 | ||||||||||||
(57,149 | ) | 4(a) | — | ||||||||||||||||
(48,906 | ) | 4(a) | — | ||||||||||||||||
122,336 | 4(a) | — | |||||||||||||||||
Transaction and restructuring costs | 23,431 | 7,726 | 50,972 | 4(a) | (48,000 | ) | 4(d) | 34,129 | |||||||||||
Depreciation and amortization | 90,711 | 178,075 | — | 108 | 4(b) | 268,894 | |||||||||||||
Total operating expenses | 1,867,646 | 4,617,734 | — | (51,478 | ) | 6,433,902 | |||||||||||||
Net gain on disposals and deconsolidations | 6,739 | — | — | — | 6,739 | ||||||||||||||
Equity in earnings of unconsolidated affiliates | 18,375 | 1,758 | — | — | 20,133 | ||||||||||||||
Operating income | 462,861 | 261,350 | — | 51,478 | 775,689 | ||||||||||||||
Interest expense, net | 95,638 | 117,751 | — | 2,712 | 4(f) | 216,101 | |||||||||||||
Interest income from restricted assets | — | (749 | ) | — | — | (749 | ) | ||||||||||||
Realized loss on investments | — | 191 | — | — | 191 | ||||||||||||||
Other income, net | — | (743 | ) | — | — | (743 | ) | ||||||||||||
Earnings from continuing operations before income taxes | 367,223 | 144,900 | — | 48,766 | 560,889 | ||||||||||||||
Income tax expense | 83,820 | 53,611 | — | 19,506 | 4(h) | 156,937 | |||||||||||||
Net earnings from continuing operations | 283,403 | 91,289 | — | 29,260 | 403,952 | ||||||||||||||
Less net earnings from continuing operations attributable to noncontrolling interests | 166,517 | 10,118 | — | — | 176,635 | ||||||||||||||
Net earnings from continuing operations | 116,886 | 81,171 | — | 29,260 | 227,317 | ||||||||||||||
Preferred stock dividends | (6,792 | ) | — | — | — | (6,792 | ) | ||||||||||||
Net earnings from continuing operations attributable to common shareholders | $ | 110,094 | $ | 81,171 | $ | — | $ | 29,260 | $ | 220,525 | |||||||||
Earnings per share from continuing operations attributable to common shareholders: | |||||||||||||||||||
Basic | $ | 2.05 | $ | 1.90 | |||||||||||||||
Diluted | $ | 2.03 | $ | 1.85 | |||||||||||||||
Weighted average number of shares and share equivalents outstanding: | |||||||||||||||||||
Basic | 53,720 | 62,563 | 4(j) | 116,283 | |||||||||||||||
Diluted | 54,152 | 65,258 | 4(j) | 119,410 |
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS | |||||||||||||||||||
For the year ended December 31, 2015 | |||||||||||||||||||
(In thousands, except earnings per share data) | |||||||||||||||||||
Historical | Historical | Pro Forma | |||||||||||||||||
AmSurg | Envision | Reclassifications | Adjustments | Combined | |||||||||||||||
Revenues | $ | 2,832,958 | $ | 9,853,009 | $ | — | $ | — | $ | 12,685,967 | |||||||||
Provision for uncollectibles | (266,074 | ) | (4,405,093 | ) | — | — | (4,671,167 | ) | |||||||||||
Net Revenue | 2,566,884 | 5,447,916 | — | — | 8,014,800 | ||||||||||||||
Operating expenses: | |||||||||||||||||||
Salaries and benefits | 1,314,392 | 3,922,273 | (3,942 | ) | 4(a) | (6,590 | ) | 4(g) | 5,238,817 | ||||||||||
— | 12,684 | 4(g) | |||||||||||||||||
Supply cost | 184,222 | — | 52,489 | 4(a) | — | 236,711 | |||||||||||||
Insurance expense | — | 145,829 | 56,836 | 4(a) | — | 202,665 | |||||||||||||
Selling, general and administrative expenses | — | 120,158 | (120,158 | ) | 4(a) | — | — | ||||||||||||
Other operating expenses | 397,794 | 681,342 | (52,489 | ) | 4(a) | 904 | 4(g) | 1,075,181 | |||||||||||
(56,836 | ) | 4(a) | — | ||||||||||||||||
(15,692 | ) | 4(a) | — | ||||||||||||||||
120,158 | 4(a) | — | |||||||||||||||||
Transaction and restructuring costs | 8,324 | 30,169 | 19,634 | 4(a) | — | 58,127 | |||||||||||||
Depreciation and amortization | 97,493 | 182,897 | — | 20,699 | 4(b) | 301,089 | |||||||||||||
Total operating expenses | 2,002,225 | 5,082,668 | — | 27,697 | 7,112,590 | ||||||||||||||
Net gain on deconsolidations | 36,694 | — | — | — | 36,694 | ||||||||||||||
Equity in earnings of unconsolidated affiliates | 16,152 | 353 | — | — | 16,505 | ||||||||||||||
Operating income | 617,505 | 365,601 | — | (27,697 | ) | 955,409 | |||||||||||||
Interest expense, net | 121,586 | 117,183 | — | 51,204 | 4(f) | 289,973 | |||||||||||||
Interest income from restricted assets | — | (651 | ) | — | — | (651 | ) | ||||||||||||
Realized gains on investments | — | (21 | ) | — | — | (21 | ) | ||||||||||||
Other expense, net | — | 966 | — | — | 966 | ||||||||||||||
Earnings from continuing operations before income taxes | 495,919 | 248,124 | — | (78,901 | ) | 665,142 | |||||||||||||
Income tax expense | 113,790 | 97,374 | — | (31,560 | ) | 4(h) | 179,604 | ||||||||||||
Net earnings from continuing operations | 382,129 | 150,750 | — | (47,341 | ) | 485,538 | |||||||||||||
Less net earnings from continuing operations attributable to noncontrolling interests | 218,181 | 5,858 | — | — | 224,039 | ||||||||||||||
Net earnings from continuing operations | 163,948 | 144,892 | — | (47,341 | ) | 261,499 | |||||||||||||
Preferred stock dividends | (9,056 | ) | — | — | — | (9,056 | ) | ||||||||||||
Net earnings from continuing operations attributable to common shareholders | $ | 154,892 | $ | 144,892 | $ | — | $ | (47,341 | ) | $ | 252,443 | ||||||||
Earnings per share from continuing operations attributable to common shareholders: | |||||||||||||||||||
Basic | $ | 3.22 | $ | 2.28 | |||||||||||||||
Diluted | $ | 3.18 | $ | 2.22 | |||||||||||||||
Weighted average number of shares and share equivalents outstanding: | |||||||||||||||||||
Basic | 48,058 | 62,563 | 4(j) | 110,621 | |||||||||||||||
Diluted | 51,612 | 62,017 | 4(j) | 113,629 |
Total outstanding shares of Envision common stock as of October 24, 2016 | 187,313 | ||
Exchange ratio | 0.334 | ||
Shares of Newco to be issued | 62,563 | ||
Fair value of Newco common stock to be issued (1) | $ | 4,070,349 | |
Fair value of Envision equity awards (2) | 171,076 | ||
Preliminary estimated aggregate merger consideration | $ | 4,241,425 |
(1) | Amount was determined based on the price per share of AmSurg common stock of $65.06 as of October 24, 2016. |
(2) | Amount includes the fair value of 8.9 million vested Envision equity awards plus the fair value allocated to the pre-combination service of an additional 2.6 million unvested Envision equity awards. The fair value of options was determined using the Black-Scholes-Merton model while the fair value of restricted stock units was calculated using the market price of AmSurg common stock on October 24, 2016. The remaining fair value of the unvested Envision equity awards will be recognized as compensation expense in earnings subsequent to the Mergers as further discussed in Note 4 to the Unaudited Pro Forma Condensed Combined Financial Statements. |
Assets acquired: | |||
Cash and cash equivalents | $ | 190,033 | |
Accounts receivable, net | 1,341,202 | ||
Other current assets | 172,650 | ||
Property and equipment (1) | 383,947 | ||
Goodwill | 4,962,505 | ||
Intangible assets | 2,016,300 | ||
Other assets | 119,313 | ||
Liabilities assumed: | |||
Accounts payable, accrued expenses and other liabilities (2) | (718,365 | ) | |
Current portion of long-term debt | (24,904 | ) | |
Long-term debt (3) | (3,089,784 | ) | |
Deferred income taxes (4) | (719,206 | ) | |
Other long-term liabilities | (322,620 | ) | |
Noncontrolling interests - non-redeemable (5) | (69,646 | ) | |
Net assets acquired | $ | 4,241,425 |
(1) | We believe that preliminarily, subject to further valuation analysis, the carrying value of property and equipment approximates fair value and the historical useful lives are reasonable. Therefore, no adjustments have been made to either carrying value or historical depreciation. |
(2) | Amount includes Envision's historical accounts payable, accrued expenses and other liabilities of $732.5 million, net of elimination of $14.1 million of deferred rent credits. |
(3) | Amount represents the historical book value of Envision debt of $3.1 billion adjusted by $34.3 million, which includes a $3.7 million discount associated with Envision's senior unsecured notes due 2022 and $38.0 million to eliminate existing deferred financing costs and existing original issue discounts. |
(4) | Amount includes Envision's historical deferred tax liabilities of $388.7 million, net of eliminations of $263.6 million of deferred tax liabilities related to historical intangible assets, plus approximately $609.4 million of deferred tax liabilities related to intangible assets acquired that are not expected to be deductible for tax purposes, and offset by a deferred tax asset of $15.2 million resulting from the elimination of historical Envision deferred financing costs. |
(5) | We believe that preliminarily, subject to further valuation analysis, the carrying value of non-redeemable non-controlling interests approximates fair value. |
a) | Conforming reclassifications. Adjusts the historical presentation of AmSurg's and Envision's financial statements to conform to Newco's expected post-Mergers presentation. |
b) | Intangible assets. Adjustments to eliminate Envision’s historical identifiable intangible assets of $1.1 billion and to adjust historical related amortization of $106.4 million for the year ended December 31, 2015 and $95.2 million for the nine months ended September 30, 2016 to reflect the preliminary estimated fair values of the acquired identifiable intangible assets and related amortization. Management has determined such amounts based on estimates and assumptions that it considers to be reasonable based on the allocation of comparable transactions. The primary assets include customer relationships, trade names, frequencies and licenses and other agreements/contracts. These assumptions are subject to further analysis and may change, which would result in a change to the incremental amortization adjustment included in the unaudited pro forma financial information. |
Estimated Weighted Average Useful life (years) | ||||
Customer relationships | $ | 1,754,500 | 15 | |
Trade names | 169,500 | Indefinite | ||
Agreements, contracts and other | 50,500 | 5 | ||
Frequencies and licenses | 41,800 | Indefinite | ||
Total fair value of intangible assets | $ | 2,016,300 |
c) | Goodwill. Adjustment to record goodwill resulting from the Mergers of $5.0 billion offset by elimination of Envision's historical goodwill of $3.4 billion. Goodwill represents the residual of the purchase price over the fair value of the identified assets acquired and liabilities assumed. Goodwill is not amortized but evaluated for impairment annually or more frequently if events or changes in circumstances indicate impairment. |
d) | Transaction-related costs. Historical transaction-related costs of $48.0 million incurred by AmSurg and Envision in the nine months ended September 30, 2016, directly related to the Merger, have been excluded for pro forma informational purposes. The adjustment also records estimated transaction fees paid to third parties related to the Mergers and the related financing, including related income tax effects as follows (in thousands): |
Termination fee related to the AmSurg Senior Unsecured Notes due 2020 | $ | 7,970 | |
Other estimated transaction fees | 95,000 | ||
Less: Transaction costs incurred as of September 30, 2016 | (48,000 | ) | |
54,970 | |||
Disposal of deferred financing fees related to: | |||
AmSurg Term Loan and Credit Facility | 19,321 | ||
AmSurg Senior Unsecured Notes due 2020 | 3,391 | ||
22,712 | |||
Total estimated transaction fees and disposal of deferred financing costs | 77,682 | ||
Expected tax benefit | (31,073 | ) | |
Estimated reduction to retained earnings at September 30, 2016 | $ | 46,609 |
e) | Long-term debt obligations. Adjustments to record the repayment of certain of AmSurg's debt as of September 30, 2016. Newco will use cash on hand and borrowings pursuant to a term borrowing and a notes offering to repay indebtedness and fund transaction costs. Adjustments to recognize $3.5 billion of borrowings from a new term loan facility, original issue discount of $35.0 million and deferred financing costs of $48.0 million. Adjustments also recognize $550.0 million of 6.25% Senior Notes due 2024, net of deferred financing costs of $6.9 million. The transactions contemplated by the Merger Agreement and the related financing have not yet been consummated. |
Sources: | |||
Term loan facility | $ | 3,495,000 | |
6.25% Senior Notes due 2024 | 550,000 | ||
Total Sources | $ | 4,045,000 | |
Uses: | |||
Cash payments related to refinancing and debt repayments: | |||
Envision Term Loan | $ | (2,258,676 | ) |
AmSurg Term Loan | (850,425 | ) | |
AmSurg Senior Unsecured Notes due 2020 | (250,000 | ) | |
AmSurg Revolving Credit Facility | (400,000 | ) | |
Envision ABL Credit Facility | (105,000 | ) | |
Total debt repayments | (3,864,101 | ) | |
Termination fee related to the AmSurg Senior Unsecured Notes due 2020 | (7,970 | ) | |
Accrued interest related to the AmSurg Senior Unsecured Notes due 2020 | (4,688 | ) | |
Accrued interest related to the Envision Term Loan | (274 | ) | |
Remaining estimated transaction fees (1) | (74,000 | ) | |
Other accrued interest | (1,189 | ) | |
Financing fees (2) | (89,784 | ) | |
Total fees related to refinancing | (177,905 | ) | |
Excess cash to the balance sheet | (2,994 | ) | |
Total Uses | $ | (4,045,000 | ) |
(1) | Of the remaining estimated transaction fees to be paid, $27.0 million was accrued in the historical financial statements of AmSurg and Envision. |
(2) | Financing fees will be capitalized as deferred financing costs against long-term debt and amortized accordingly. |
Outstanding Principal | Current Debt | Deferred Financing Costs | Total | ||||||||||||
Debt Extinguished: | |||||||||||||||
Envision Term Loan | $ | 2,258,676 | $ | (23,371 | ) | $ | — | $ | 2,235,305 | ||||||
AmSurg Term Loan B | 850,425 | (8,700 | ) | (15,408 | ) | 826,317 | |||||||||
AmSurg Senior Unsecured Notes due 2020 | 250,000 | — | (3,391 | ) | 246,609 | ||||||||||
AmSurg Revolving Credit Facility | 400,000 | — | (3,913 | ) | 396,087 | ||||||||||
Envision ABL Credit Facility | 105,000 | — | — | 105,000 | |||||||||||
$ | 3,864,101 | $ | (32,071 | ) | $ | (22,712 | ) | $ | 3,809,318 | ||||||
New Debt: | |||||||||||||||
Term loan facility | $ | 3,495,000 | $ | (34,950 | ) | $ | (82,909 | ) | $ | 3,377,141 | |||||
6.25% Senior Notes due 2024 | 550,000 | — | (6,875 | ) | 543,125 | ||||||||||
$ | 4,045,000 | $ | (34,950 | ) | $ | (89,784 | ) | $ | 3,920,266 |
Nine Months Ended | Year Ended | ||||||
September 30, 2016 | December 31, 2015 | ||||||
Financing transactions | $ | 126,469 | $ | 168,625 | |||
Existing Envision senior unsecured notes due 2022 | 28,829 | 38,438 | |||||
Existing AmSurg senior unsecured notes due 2022 | 46,406 | 61,875 | |||||
Deferred loan costs and premium/discount amortization | 12,317 | 16,423 | |||||
Capitalized leases and other debt, net of interest income | 2,080 | 4,612 | |||||
Total estimated interest costs | 216,101 | 289,973 | |||||
Less: Historical interest expense, net | |||||||
AmSurg | (95,638 | ) | (121,586 | ) | |||
Envision | (117,751 | ) | (117,183 | ) | |||
Net interest expense adjustment | $ | 2,712 | $ | 51,204 |
g) | Stock Compensation Expense. At completion, Envision equity awards will be converted into Newco equity awards after giving effect to the Exchange Ratio. Share-based compensation expense, following the completion of the Mergers, will reflect the fair value of the awards as of the completion date for the portion that was allocated to post-combination services. This adjustment eliminates the historical stock compensation expense of $6.6 million and $9.3 million for the year ended December 31, 2015 and the nine months ended September 30, 2016, respectively and records stock compensation expense of $12.7 million and $5.7 million related to post-combination service of |
h) | Income Taxes. Adjustments to record the income tax impact of the acquisition accounting adjustments which primarily relate to intangible assets, interest expense and stock compensation expense. The income tax expense impact of the pro forma adjustment was determined by applying AmSurg's historical tax rate of 40% to the pre-tax amount of the Merger-related pro forma adjustments. The incremental deferred income tax liabilities were calculated based on the income tax effect of the increase in the book value of the net assets of Envision reflected in the purchase price allocation, excluding the amount attributable to goodwill, using AmSurg's historical tax rate of 40% which approximates the statutory rate. The tax adjustments could change based upon management's final determination of the fair value of assets acquired and liabilities assumed. |
Equity: | Adjustments | ||
Preferred stock | |||
Conversion of AmSurg preferred stock to Newco preferred stock with par value of $0.01 | $ | (166,615 | ) |
Common stock | |||
Elimination of Envision common stock | $ | (1,872 | ) |
Conversion of AmSurg common stock to Newco common stock with par value of $0.01 | $ | (1,361,033 | ) |
Issuance of common stock pursuant to the Mergers | 626 | ||
Total conversion to common stock | $ | (1,360,407 | ) |
Additional paid-in capital | |||
Elimination of Envision additional paid-in capital | $ | (1,690,833 | ) |
Conversion of AmSurg common stock to Newco common stock with par value of $0.01 | $ | 1,361,033 | |
Issuance of common stock pursuant to the Mergers | 4,240,799 | ||
Conversion of AmSurg preferred stock to Newco preferred stock with par value of $0.01 | 166,615 | ||
Total conversion to additional paid-in capital | $ | 5,768,447 | |
Retained earnings | |||
Elimination of Envision retained earnings | $ | (369,912 | ) |
Impact of transaction related costs | $ | (46,609 | ) |
Accumulated other comprehensive loss | |||
Elimination of Envision accumulated other comprehensive loss | $ | 560 |
j) | Earnings per share. Represents the adjustment to convert 187.3 million shares of Envision common stock into 62.6 million shares of Newco common stock at the conversion ratio of 0.334 per share. Basic net earnings attributable to Newco common stockholders, per common share, excludes dilution and is computed by dividing net earnings attributable to Newco common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings attributable to Newco common stockholders, per common share is computed by dividing net earnings attributable to Newco 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 stock options and restricted stock awards as determined under the treasury stock method and (2) upon |