AMN Healthcare Announces Third Quarter 2010 Results

SAN DIEGO, Nov. 4, 2010 /PRNewswire-FirstCall/ -- AMN Healthcare Services, Inc. (NYSE: AHS) today announced operating results for the third quarter of 2010. Financial highlights are as follows:

(Dollars in millions, except per share amounts)


Q3

2010

% Chg

Q3 2009

% Chg

Q2 2010

Revenue

$176.3

6%

18%

Gross Profit

$48.3

6%

17%

Net Loss

($51.3)

NM

NM

Net Loss per Share

($1.48)

NM

NM

Adjusted EBITDA*

$9.8

(8%)

1%

Adjusted EPS*

$0.00

NM

NM

* See notes (2) and (4) under "Supplemental Financial and Operating Data" for a reconciliation of non-GAAP items.

NM – Not meaningful




Key business highlights for the third quarter are as follows:

  • The closing of the Medfinders acquisition expanded AMN's market share in temporary healthcare staffing by over 30%
  • Consolidated revenues were up 18% sequentially. Excluding the impact of the acquisition, consolidated revenues were up 4% sequentially
  • Nurse and Allied staffing revenues were up 5% sequentially and Locum Tenens and Physician Permanent Placement revenues were each up 3% sequentially, excluding the impact of the acquisition  
  • Our focus on Managed Services Programs is translating into industry-leading growth in Nurse and Allied staffing volumes
  • SG&A levels as a percentage of revenues remain steady, excluding acquisition-related costs
  • EPS was impacted by a $49.8 million non-cash impairment charge related to goodwill and certain other intangible assets from acquisitions prior to Medfinders, in addition to $5 million in financing costs and $6 million in integration costs related to the Medfinders acquisition during the quarter.

"All of our business segments delivered sequential organic growth for a second consecutive quarter. Contributing the most was our Nurse and Allied staffing business which posted a third consecutive quarter of growth. Our continued strategy of becoming a stronger partner with our clients through our Managed Services Programs is enabling AMN to deliver industry-leading growth amidst a modest economic and market recovery environment," said Susan R. Salka, President and Chief Executive Officer of AMN Healthcare.

"We are also very excited about the short and long-term benefits added from the Medfinders acquisition.  In addition to the strengthening of our core staffing and recruitment businesses, we are now also the leader in providing clinical Managed Services Programs, which continues to be a capability increasingly desired by our clients.  Our ability to provide key strategic workforce solutions, which help healthcare organizations meet both their financial and patient care delivery goals, is a central part of our growth strategy.  Combining with Medfinders also allows AMN to achieve further cost efficiencies, revenue synergies and leverage best practices through the consolidation of operational functions," added Salka.

Third Quarter 2010 Results

For the third quarter of 2010 (which includes one month of financial results from the Medfinders acquisition), combined revenue was $176 million, an increase of 6% from prior year and up 18% from prior quarter. Revenue from one month performance of the acquisition contributed $21 million to the quarter.  Third quarter revenue for the Nurse and Allied staffing segment was $93 million, an increase of 13% from the same quarter last year and up 23% sequentially. Excluding the impact of the acquisition for the month of September, the Nurse and Allied segment third quarter revenue was $79 million reflecting a 5% sequential increase.  The Locum Tenens staffing segment generated revenue of $70 million, a decrease of 8% from prior year but up 6% sequentially. Third quarter Physician Permanent Placement revenue was $9 million, a decrease of 1% from prior year and up 4% sequentially.  Excluding the acquisition, the Locum Tenens and the Physician Permanent Placement segments reflected sequential increases of 3%.  Through the acquisition, the company introduced the new segment of Home Healthcare services in the third quarter, which generated revenue of $5 million in the month of September.

Gross margin in the third quarter of 2010 was 27.4%, consistent with prior year and a decrease of 20 bps compared to the previous quarter. The decrease as compared to prior quarter was mainly attributable to a decrease in Locum Tenens staffing gross margin offset by a higher gross margin from the acquired businesses which contributed 50 bps gross margin improvement in the quarter.

Selling, general and administrative ("SG&A") expenses for the third quarter of 2010 were 26.5% as a percentage of revenue compared to 22.2% in the same quarter last year. Third quarter SG&A increased by $10 million over the same period in the prior year and increased by $12 million as compared to the prior quarter, due primarily to additional acquisition and integration related costs totaling $6 million and the  SG&A costs of the acquired business for the month of September which also totaled $6 million. Acquisition and integration related costs for the quarter include charges consisting mainly of severance payments related to workforce reductions and professional services fees incurred to assist with due diligence, accounting, tax, legal and other advisory services associated  with the acquisition and the related integration efforts.

In connection with the acquisition and the associated additional financing, the company incurred additional financing costs of which $5 million were charged directly to interest expense in the period.

Unrelated to the transaction, in accordance with accounting guidance on goodwill and other intangible assets, the company incurred $49.8 million in non-cash impairment charges relating to goodwill and certain other intangible assets resulting from prior acquisitions. These impairment charges are non-cash expenses and will not have any impact on the company's cash position, future cash flows or debt covenants.

Third quarter GAAP net loss per diluted common share was ($1.48) and included the negative impacts of ($1.25) of non-cash goodwill and other intangible asset impairment charges, ($0.13) of acquisition related charges and ($0.09) for the write off of financing costs. Third quarter GAAP net loss per diluted common share for the quarter also includes the impact of assumed accumulated dividends on the preferred securities issued in connection with the acquisition having an impact of ($0.01) per common share.

As of September 30, 2010, cash and cash equivalents totaled $2 million, compared to $27 million as of December 31, 2009. Total term debt outstanding, net of discount, as of September 30, 2010 was $217 million, with no borrowings on the revolver portion of the credit facility.

Business Trends and Outlook

Going into the fourth quarter, the Nursing and Allied staffing business continues to experience positive momentum overall. The strength of our Managed Services business is expected to help deliver slight sequential growth in the fourth quarter, overcoming the typical seasonal declines. The Physician businesses are expected to decline sequentially, in line with the typical seasonal trends. The Home Healthcare business is expected to experience a slight sequential decrease compared to historic levels. Consolidated revenues in the fourth quarter are expected to be between $215 million and $220 million, which is essentially flat on a pro forma basis compared with the third quarter. Gross margin is anticipated to increase nominally due to the inclusion of Medfinders for a full quarter.  

About AMN Healthcare Services

AMN Healthcare Services, Inc. is the nation's largest provider of comprehensive healthcare staffing and workforce solutions. As the leading provider of travel nurse, per diem (local) nurse, allied and locum tenens (temporary physician) staffing and physician permanent placement services, AMN Healthcare recruits and places healthcare professionals on assignments of variable lengths and in permanent positions with clients throughout the United States. AMN Healthcare is also the nation's largest provider of healthcare managed services programs and recruitment process outsourcing solutions. Settings staffed include acute-care hospitals, government facilities, community health centers and clinics, physician practice groups, and a host of other healthcare settings. AMN Healthcare also provides home healthcare services in select regions. For more information, visit http://www.amnhealthcare.com.

Conference Call on November 4, 2010

AMN Healthcare Services, Inc.'s third quarter 2010 conference call will be held on Thursday, November 4, 2010, at 5:00 p.m. Eastern Time. A live webcast of the call can be accessed through AMN Healthcare's website at http://amnhealthcare.investorroom.com/presentations. Please log in at least 10 minutes prior to the conference call in order to download the applicable audio software. Interested parties may participate live via telephone by dialing (800) 230-1096 in the U.S. or (612) 332-0228 internationally. Following the conclusion of the call, a replay of the webcast will be available at the company's website. A telephonic replay of the call will also be available at 7:30 p.m. Eastern Time on November 4, 2010, and can be accessed until 11:59 p.m. Eastern Time on November 24, 2010, by calling (800) 475-6701 in the U.S. or (320) 365-3844 internationally, with access code 173172.

Non-GAAP Measures

This earnings release contains certain non-GAAP financial information. These measures are not in accordance with, or an alternative to, generally accepted accounting principles in the United States ("GAAP"), and may be different from non-GAAP measures reported by other companies. From time to time, additional information regarding non-GAAP financial measures may be made available on the company's website at http://www.amnhealthcare.com/investors.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include expectations regarding fourth quarter demand, revenue and gross margin, and the benefits of the Medfinders acquisition including its impact on operating efficiencies and revenue synergies. The company based these forward-looking statements on its current expectations and projections about future events. Actual results could differ materially from those discussed in, or implied by, these forward-looking statements. Forward-looking statements are identified by words such as "believe," "anticipate," "expect," "intend," "plan," "will," "may" and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Factors that could cause actual results to differ from those implied by the forward-looking statements contained in this press release are set forth in the company's Annual Report on Form 10-K for the year ended December 31, 2009 and its other quarterly and periodic reports filed with the SEC. These statements reflect the company's current beliefs and are based upon information currently available to it. Be advised that developments subsequent to this press release are likely to cause these statements to become outdated with the passage of time.

AMN Healthcare Services, Inc.

Condensed Consolidated Statements of Operations

(dollars in thousands, except per share amounts)

(unaudited)


Three Months Ended


Nine Months Ended


September 30,


June 30,


September 30,


2010

2009


2010


2010

2009









Revenue

$  176,313

$  166,357


$  149,282


$  468,889

$  615,092

Cost of revenue

127,995

120,749


108,111


339,356

451,824

Gross profit

48,318

45,608


41,171


129,533

163,268


27.4%

27.4%


27.6%


27.6%

26.5%

Operating expenses:








  Selling, general and administrative

46,762

36,933


34,594


113,306

124,853


26.5%

22.2%


23.2%


24.2%

20.3%

  Depreciation and amortization

3,787

3,495


3,163


10,248

10,404









  Impairment and restructuring charges

49,782

6,200


--


49,782

186,977









       Total operating expenses

100,331

46,628


37,757


173,336

322,234

Income (loss) from operations

(52,013)

(1,020)


3,414


(43,803)

(158,966)









Interest expense, net

8,793

2,063


2,583


14,013

6,582

        Income (loss) before income taxes

(60,806)

(3,083)


831


(57,816)

(165,548)

Income tax expense (benefit)

(9,516)

(1,088)


694


(7,443)

(46,093)

        Net income (loss)

$  (51,290)

$  (1,995)


$  137


$  (50,373)

$  (119,455)









Net income (loss) per common share:








     Basic

$  (1.48)

$  (0.06)


$  0.00


$  (1.52)

$  (3.66)

     Diluted

$  (1.48)

$  (0.06)


$  0.00


$  (1.52)

$  (3.66)









Weighted average common shares outstanding:








     Basic

34,777

32,630


32,760


33,397

32,609

     Diluted

34,777

32,630


33,566


33,397

32,609













AMN Healthcare Services, Inc.

Supplemental Financial and Operating Data

(dollars in thousands, except operating data)

(unaudited)















Three Months Ended


Nine Months Ended


September 30,


June 30,


September 30,



2010


2009



2010



2010


2009

Revenue













 Nurse and allied healthcare staffing

$

93,059

$

82,140


$

75,605


$

243,855

$

357,127

 Locum tenens staffing


69,555


75,488



65,349



195,292


229,375

 Physician permanent placement services


8,676


8,729



8,328



24,719


28,590

 Home Healthcare


5,023


-



-



5,023


-


$

176,313

$

166,357


$

149,282


$

468,889

$

615,092














Reconciliation of Non-GAAP Items:


























Segment Operating Income(1)













 Nurse and allied healthcare staffing

$

8,602

$

4,592


$

7,250


$

24,586

$

30,390

 Locum tenens staffing


5,364


7,548



6,399



17,234


22,355

 Physician permanent placement services


1,699


2,215



1,978



5,643


7,877

 Home Healthcare


469


-



-



469


-



16,134


14,355



15,627



47,932


60,622

  Unallocated corporate overhead


6,353


3,749



5,916



17,997


15,446

Adjusted EBITDA(2)


9,781


10,606



9,711



29,935


45,176














Depreciation and amortization


3,787


3,495



3,163



10,248


10,404

Stock-based compensation


1,955


1,931



2,040



6,344


6,761

Acquisition related costs


6,270


-



1,094



7,364


-

Impairment and restructuring charges


49,782


6,200



-



49,782


186,977

Interest expense, net


8,793


2,063



2,583



14,013


6,582

Income (loss) before income taxes


(60,806)


(3,083)



831



(57,816)


(165,548)

Income tax expense (benefit)


(9,516)


(1,088)



694



(7,443)


(46,093)

Net income (loss)

$

(51,290)

$

(1,995)


$

137


$

(50,373)

$

(119,455)



























GAAP based diluted net loss per share (EPS)

$

(1.48)

$

(0.06)



$      0.00


$

(1.52)

$

(3.66)

 Adjustments:













 Acquisition related costs


0.13





0.02



0.16



 Impairment and restructuring charges


1.25


0.11






1.28


3.97

 Financing costs


0.09








0.11



Impact of assumed preferred dividends(3)


0.01








0.01



 Non-recurring legal expense












0.02

Adjusted diluted earnings per share (4)

$

0.00

$

0.05



$       0.02


$

0.04

$

0.33




























Three Months Ended



Nine Months Ended



September 30,



June 30,



September 30,



2010


2009



2010



2010


2009

Gross Margin













  Nurse and allied healthcare staffing


25.7%


24.4%



25.5%



25.8%


23.9%

  Locum tenens staffing


25.3%


27.2%



26.2%



25.9%


26.5%

  Physician permanent placement services


56.2%


57.7%



56.9%



57.0%


59.5%

  Home Healthcare


37.4%


N/A



N/A



37.4%


N/A














Operating Data:













Nurse and allied healthcare staffing













   Average healthcare professionals on assignment (5)


3,220


2,704



2,475



2,733


3,951

   Revenue per healthcare professional per day(6)

$

314.09

$

330.19



335.65



326.84

$

331.10

   Gross profit per healthcare professional per day(6)

$

80.87

$

80.50



85.66



84.47

$

79.21














Locum tenens  staffing













   Days filled (7)


49,931


53,032



46,456



139,453


160,137

   Revenue per day filled(7)

$

1,393.02

$

1,423.44



1,406.66



1,400.41

$

1,432.37

   Gross profit per day filled(7)

$

352.54

$

387.47



368.89



362.47

$

379.76











































  1. Segment Operating Income represents net income (loss) plus interest expense (net of interest income), income taxes, depreciation and amortization, impairment and restructuring charges, unallocated corporate expenses, and stock-based compensation expense. Management believes that Segment Operating Income is an industry wide financial measure that is useful both to management and investors when evaluating the company's performance. Management also uses Segment Operating Income for planning purposes. Segment Operating Income is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation and allocation of costs.
  2. Adjusted EBITDA represents net income (loss) plus interest expense (net of interest income), income taxes, depreciation and amortization, acquisition related costs, impairment and restructuring charges, and stock-based compensation expense. Management presents adjusted EBITDA because it believes that adjusted EBITDA is a useful supplement to net income as an indicator of operating performance. Management believes that adjusted EBITDA is an industry wide financial measure that is useful both to management and investors when evaluating the company's performance. Management also uses adjusted EBITDA for planning purposes. Management uses adjusted EBITDA to evaluate the company's performance because it believes that adjusted EBITDA provides an effective measure of the company's results, as it excludes certain items that management believes are not indicative of the company's operating performance and considers measures used in credit facilities. However, adjusted EBITDA is not intended to represent cash flows for the period, nor has it been presented as an alternative to income (loss) from operations or net income (loss) as an indicator of operating performance, and it should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. As defined, adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. While management believes that some of the items excluded from adjusted EBITDA are not indicative of the company's operating performance, these items do impact the income statement, and management therefore utilizes adjusted EBITDA as an operating performance measure in conjunction with GAAP measures such as net income.
  3. For purposes of calculating the loss per share for the three and nine months ended September 30, 2010, the calculation assumes the accrual of dividends on the preferred shares issued in connection with the Mefinders acquisition regardless of whether such dividends are declared or accrued. The impact of the dividend in the quarter from the date of the acquisition was to increase the loss per common share by $0.01 per share for the three months then ended.
  4. Adjusted EPS represents GAAP EPS excluding the impact of acquisition related costs, restructuring and impairment charges, financing costs, non-recurring legal expenses and accumulated preferred stock dividends. In addition, for purpose of the calculation it is assumed that shareholders have approved the conversion feature of the preferred stock. Management presents adjusted EPS because it believes that adjusted EPS is a useful supplement to diluted net loss per share as an indicator of operating performance. Management believes such a measure provides a picture of the company's results that is more comparable among periods since it excludes the impact of items that may recur occasionally, but tend to be irregular as to timing, thereby distorting comparisons between periods. However, investors should note that this non-GAAP measure involves judgment by management (in particular, judgment as to what is classified as a special item to be excluded from adjusted EPS). As defined, adjusted EPS is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. While management believes that some of the items excluded from adjusted EPS are not indicative of the company's operating performance, these items do impact the income statement, and management therefore utilizes adjusted EPS as an operating performance measure in conjunction with GAAP measures such as GAAP EPS.
  5. Average healthcare professionals on assignment represents the average number of nurse and allied healthcare professionals on assignment during the period presented.
  6. Revenue per healthcare professional per day and gross profit per healthcare professional per day represent the revenue and gross profit of the company's nurse and allied healthcare staffing segment divided by average healthcare professionals on assignment, divided by the number of days in the period presented.
  7. Days filled is calculated by dividing the locum tenens hours filled during the period by 8 hours. Revenue per day filled and gross profit per day filled represent revenue and gross profit of the company's locum tenens staffing segment divided by days filled for the period presented.

AMN Healthcare Services, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)



September 30,

June 30,

December 31,


2010

2010

2009

Assets




Current assets:




 Cash and cash equivalents

$  2,077

$  41,368

$  27,053

 Accounts receivable, net

128,247

89,746

89,150

 Accounts receivable, subcontractor

15,778

7,309

348

 Prepaid expenses

7,183

6,595

6,550

 Income taxes receivable

3,422

2,666

3,900

 Deferred income taxes, net

11,706

8,534

8,534

 Other current assets

1,209

1,209

1,902

   Total current assets

169,622

157,427

137,437

Restricted cash and cash equivalents

20,961

20,961

22,025

Fixed assets, net

23,195

17,103

19,970

Deposits and other assets

20,232

13,898

14,368

Deferred income taxes, net

6.648

-

-

Goodwill

157,351

79,868

79,868

Intangible assets, net

163,958

112,947

115,336





    Total assets

$  561,967

$  402,204

$       389,004





Liabilities and stockholders' equity




Current liabilities:




 Accounts payable and accrued expenses

$         39,725

$      28,294

$          18,057

 Accrued compensation and benefits

42,290

27,405

24,054

 Current portion of notes payable

11,562

8,250

5,500

 Deferred revenue

7,701

6,018

5,084

 Other current liabilities

12,348

9,055

10,404

   Total current liabilities

113,626

79,022

63,099





Notes payable, less current portion and discount

205,046

95,317

100,121

Deferred income taxes, net

-

406

789

Other long-term liabilities

61,118

52,488

54,151

   Total liabilities

379,790

227,233

218,160





Preferred Stock

28,639

Stockholders' equity

153,538

174,971

170,844





Total liabilities and stockholders' equity

$  561,967

$  402,204

$  389,004








AMN Healthcare Services, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)




Three Months Ended

Nine Months Ended


September 30,

June 30,

September 30,


2010

2009

2010

2010

2009







Net cash provided by (used in) operating activities

$  (15,021)

$  19,205

$  6,546

$  3,240

$  93,150







Net cash provided by (used in) investing activities

(3,835)

(3,924)

462

(4,041)

(6,358)







Net cash used in financing activities

(20,462)

(16,157)

(2,211)

(24,209)

(75,531)







Effect of exchange rates on cash

27

9

4

34

44







 Net increase (decrease) in cash and cash equivalents

(39,291)

(867)

4,801

(24,976)

11,305







 Cash and cash equivalents at beginning of period

41,368

23,488

36,567

27,053

11,316







 Cash and cash equivalents at end of period

$  2,077

$  22,621

$  41,368

$  2,077

$  22,621



Contact:

Amy C. Chang

Vice President, Investor Relations

866.861.3229



SOURCE AMN Healthcare Services, Inc.