AMN Healthcare Services, Inc. — 2011 Form 10-K
Reporting period: Fiscal year ended December 31, 2011. The filing also reports fourth-quarter results. AMN provides managed workforce solutions and temporary and permanent placement of nurses, allied clinicians and physicians across the United States.
Financial performance
| Metric | 2011 | 2010 |
|---|---|---|
| Revenue | $887.5 million | $669.9 million |
| Gross profit / margin | $249.3 million / 28.1% | $184.4 million / 27.5% |
| Operating income (loss) | $37.6 million | $(43.8) million |
| Continuing operations income (loss), net of tax | $5.0 million | $(52.8) million |
| Net income (loss) | $(26.3) million | $(52.0) million |
| Operating cash flow | $19.3 million | $8.1 million |
- Revenue rose 32.5%, driven by the Medfinders/NFI acquisition and growth in average temporary clinicians on assignment. The 2010 comparison includes NFI only from its September 2010 acquisition date.
- Gross margin improved 0.6 percentage points. Operating margin was approximately 4.2%; the filing reports no continuing-operations impairment charges in 2011, compared with $50.8 million in 2010.
- 2011 net loss included $31.3 million after tax from discontinued home healthcare operations, including $38.9 million of pre-tax goodwill and tradename impairment charges.
- By segment, revenue was $570.7 million for nurse and allied staffing (+53.8%), $277.9 million for locum tenens (+5.0%), and $38.9 million for physician permanent placement (+14.2%). Segment revenue mix was 64%, 31%, and 5%, respectively.
- Fourth-quarter 2011 revenue was $222.1 million, gross profit $62.8 million, continuing-operations income $1.7 million, and net loss $2.4 million.
Liquidity, debt and capital
- Cash and cash equivalents were $4.0 million at year-end; total assets were $535.6 million and stockholders’ equity was $135.7 million.
- Notes payable, including the current portion and net of discount, totaled $202.3 million. The company also had $3.0 million drawn on its $50 million revolving facility and reported $36.6 million of available credit after letters of credit and other usage.
- Operating cash flow improved year over year, but remained well below 2009’s $98.7 million. Days sales outstanding rose to 61 days from 53 days (57 days excluding home healthcare).
- Debt carries floating rates; management estimated a 1 percentage-point rate increase above applicable floors would change 2011 interest expense by about $2.2 million. The company reported compliance with credit covenants at year-end.
- Credit agreements restrict dividends and certain share repurchases. No common shares were repurchased in 2011, and the company did not expect to pay common dividends.
Material changes and outlook
- AMN completed the NFI acquisition in September 2010; its full-year contribution makes year-over-year growth comparisons less comparable. Nurse and allied staffing benefited most, including from acquired revenue and organic assignment growth.
- In the fourth quarter of 2011, AMN decided to divest home healthcare to refocus resources on core businesses. The sale closed January 30, 2012 for $9.65 million cash proceeds; $5.0 million was used to repay first-lien debt.
- Management reported broad-based travel nurse demand growth during 2011, particularly in supply-constrained specialties, and an increase in managed-services relationships. Early in 2012, it observed slightly lower demand amid a mild winter and light flu season, while clinician assignments continued to increase as fill capacity improved.
- Locum tenens demand was generally steady year over year. Physician permanent-placement demand was stagnant for much of 2011 but new searches increased noticeably in the fourth quarter.
- No quantified financial guidance was provided. Management said operating cash generation and revolving-credit availability were expected to fund operations for the next 12 months and beyond; capital expenditures were expected to remain at or below 10% of revenue.
Risks, contingencies and unusual items
- Demand is sensitive to economic conditions, hospital admissions, staffing levels and pricing pressure. Client contracts are generally not long-term, exclusive or guaranteed; managed-services competition and buyer consolidation may weaken pricing or increase customer concentration.
- Recruitment and retention of qualified clinicians, professional-liability exposure, credentialing quality, information-system interruptions, healthcare regulation and changes to reimbursement or healthcare reform could affect operating results.
- AMN reported $23.9 million of uncertain income tax liabilities, including interest and penalties, and is contesting a California employment-tax assessment related to clinician classification. A significant adverse outcome on worker classification could increase payroll-related costs and affect the locum tenens model.
- Substantial floating-rate debt, covenant restrictions and required debt service constrain financial flexibility. Management also cautioned that impairment estimates depend on forecasts; physician permanent placement goodwill had a narrower valuation cushion than other reporting units.
- Management and KPMG reported effective internal control over financial reporting as of year-end; KPMG issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Separate organic growth from acquired NFI revenue and assess whether clinician assignment growth continued after year-end.
- Review the home healthcare sale’s final proceeds, retained working capital, debt repayment and discontinued-operation effects.
- Monitor DSO and collections, cash generation, revolver availability, debt amortization and compliance with credit covenants.
- Track demand, bill rates and margins by segment, especially the nurse staffing recovery and physician permanent-placement search trends.
- Follow the California tax/classification matters, uncertain tax positions and any changes in insurance reserves or goodwill impairment assumptions.