AMN Healthcare Services, Inc. — Q1 2012 Form 10-Q
Reporting period: Three months ended March 31, 2012. The filing is unaudited. AMN provides healthcare workforce solutions, including nurse and allied staffing, locum tenens staffing, and physician permanent placement. Home healthcare results are presented as discontinued operations following the segment’s sale in January 2012.
Financial performance
| Metric | Q1 2012 | Q1 2011 |
|---|---|---|
| Revenue | $226.4 million | $215.8 million |
| Gross profit / margin | $63.2 million / 27.9% | $62.7 million / 29.1% |
| Operating income | $12.3 million | $9.5 million |
| Continuing-operations income | $3.5 million | $1.7 million |
| Net income / diluted EPS | $4.3 million / $0.09 | $2.3 million / $0.05 |
| Operating cash flow | $9.6 million | $5.6 million |
| Cash and cash equivalents at period end | $4.9 million | $3.9 million at March 31, 2011 |
All financial amounts above are rounded; financial statements are generally presented in thousands. Revenue rose 5%, while gross profit increased 1%; lower gross margin reflected, among other factors, a favorable $1.6 million workers’ compensation benefit in the prior-year quarter and the effect of revenue accounting in physician placement. Operating income improved as SG&A and depreciation and amortization declined.
- Segment revenue: Nurse and allied staffing $153.9 million, up 14%; locum tenens $63.5 million, down 10%; physician permanent placement $9.0 million, down 17%.
- Segment operating income: Nurse and allied staffing $17.1 million versus $15.1 million; locum tenens $4.4 million versus $6.0 million; physician permanent placement $1.7 million versus $3.8 million.
- Margins: Nurse and allied gross margin was 26.4% versus 27.5%; locum tenens 27.1% versus 26.2%; physician permanent placement 59.5% versus 66.7%.
- Cash flows: Investing provided $7.4 million, including $8.35 million of home healthcare sale proceeds; financing used $15.9 million, primarily for debt repayments. Cash increased $0.9 million during the quarter.
Balance sheet, debt and liquidity
At March 31, 2012, total assets were $524.0 million, total liabilities $359.3 million, and stockholders’ equity $140.6 million. Cash was $4.9 million; restricted cash and investments were $18.2 million. Notes payable, net of discount and including current maturities, were approximately $193.0 million. There were no revolver borrowings at quarter-end, and $39.6 million of availability remained under the then-existing revolving facility. Days sales outstanding were 57 days, compared with 61 days at December 31, 2011.
On April 5, 2012, after quarter-end, AMN entered into new secured facilities: a $50 million revolver and a $200 million term loan, with potential incremental commitments of up to $75 million subject to conditions. Proceeds repaid the prior credit agreements. The revolver matures in 2017 and the term loan in 2018; the term loan amortizes at 1% annually. The new agreement includes leverage and interest-coverage covenants. AMN expects to expense $8.6 million of prior financing fees and original issue discount and a $1.2 million prepayment penalty, in addition to capitalizing approximately $5.9 million of new financing fees. Management said operating cash flow and available revolver borrowings were expected to fund operations for the next 12 months and beyond.
Changes, outlook and notable items
- Revenue growth was led by nurse and allied staffing, reflecting more professionals on assignment and higher bill rates. Locum tenens revenue fell with fewer days filled and a shift toward lower-bill-rate specialties; physician placement revenue also declined.
- Management reported improving locum tenens margins in early 2012, citing more favorable bill rates while pay rates remained relatively stable. It also reported increased physician placement demand and recruiter productivity at the beginning of 2012. These are commentary, not quantified financial guidance.
- The home healthcare sale closed January 30 for $9.65 million, including $1.3 million held in escrow at March 31. The company used $5.0 million of proceeds to repay term debt. The quarter included $0.8 million of income from discontinued operations, including a $1.2 million after-tax sale gain; the disposed segment itself reported a $0.4 million after-tax operating loss.
- A California employment-tax dispute was settled in March. The company received a $2.012 million refund and recorded the amount as a reduction in SG&A.
- Management estimated a 48.5% annual effective tax rate for 2012; Q1 continuing-operations tax expense was $3.4 million and the effective rate was 49.3%.
- Risks cited include economic weakness and changing staffing demand, client consolidation and pricing pressure, healthcare reform and reimbursement changes, recruiting and retaining professionals, worker-classification and employment-law issues, malpractice claims and self-insured exposure, systems continuity, goodwill or intangible impairment, tax and insurance accrual estimates, and debt-service capacity. Demand and revenue are subject to moderate seasonality.
Important facts for investors to verify
- Whether nurse and allied staffing growth and early-2012 demand trends continued, and how segment margins evolved.
- The terms and covenant headroom under the April 5 refinancing, the actual post-refinancing debt balance and interest cost, and the expected charges from refinancing.
- Collection trends, DSO, working-capital needs, and whether cash generation supports liquidity and debt service.
- The final release of the $1.3 million home healthcare sale escrow and any related adjustments.
- Whether the estimated 2012 tax rate and assumptions for deferred tax assets, legal matters, and self-insurance accruals changed.