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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2001
Commission File No.: 001-16753
AMN HEALTHCARE SERVICES, INC.
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Delaware
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06-1500476 | |
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(State or Other Jurisdiction of
Incorporation or Organization) |
(I.R.S. Employer
Identification No.) |
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12235 El Camino Real, Suite 200
San Diego, California (Address of principal executive offices) |
92130
(Zip Code) |
Registrant’s Telephone Number, Including Area Code: (858) 792-0711
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
As of March 15, 2002, the approximate aggregate market value of voting stock held by non-affiliates of the registrant was $381,123,080 based on a closing sale price of $26.50 per share. As of March 15, 2002, there were 42,289,770 shares of common stock, $0.01 par value, outstanding.
Documents Incorporated By Reference: None.
Table of Contents
TABLE OF CONTENTS
| Item | Page | |||||||
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| PART I | ||||||||
| 1. | Business | 1 | ||||||
| 2. | Properties | 14 | ||||||
| 3. | Legal Proceedings | 14 | ||||||
| 4. | Submission of Matters to a Vote of Security Holders | 14 | ||||||
| PART II | ||||||||
| 5. | Market for the Registrant’s Common Stock and Related Stockholder Matters | 15 | ||||||
| 6. | Selected Consolidated Financial and Operating Data | 16 | ||||||
| 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18 | ||||||
| 7A. | Quantitative and Qualitative Disclosures about Market Risk | 30 | ||||||
| 8. | Financial Statements and Supplementary Data | 31 | ||||||
| 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 55 | ||||||
| PART III | ||||||||
| 10. | Directors and Executive Officers of the Registrant | 55 | ||||||
| 11. | Executive Compensation | 55 | ||||||
| 12. | Security Ownership of Certain Beneficial Owners and Management | 55 | ||||||
| 13. | Certain Relationships and Related Transactions | 55 | ||||||
| PART IV | ||||||||
| 14. | Exhibits, Financial Statement Schedules and Reports on Form 8-K | 55 | ||||||
| Signatures | 59 | |||||||
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PART I
Item 1. Business
Our Company
We are a leading temporary healthcare staffing company and the largest nationwide provider of travel nurse staffing services, one of the fastest growing segments of the temporary healthcare staffing industry. We recruit nurses and allied health professionals, our “temporary healthcare professionals,” and place them on temporary assignments, typically for 13 weeks away from their permanent homes, at hospitals and healthcare facilities throughout the United States. Approximately 90% of our temporary healthcare professionals are nurses, while the remainder are technicians, therapists and technologists. We are actively working with a pre-screened pool of prospective temporary healthcare professionals, of whom over 6,800 were on assignment during the fourth quarter of 2001.
In recent years our business has grown significantly, outpacing the growth of the temporary healthcare staffing market. From 1996 to 2001, our revenue and Adjusted EBITDA (as defined in footnote (6) of “Item 6. Selected Consolidated Financial and Operating Data” below) increased at compound annual growth rates of 61% and 65%, respectively. Approximately two-thirds of this growth was generated through the organic growth of our operations, while the remaining one-third was generated through strategic acquisitions. On a combined basis, assuming all of our acquisitions had occurred on January 1, 1996, the compound annual growth rate of our revenues from 1996 to 2001 would have been 36%. Additionally, since 1999, the pace of our organic growth has accelerated. On the same combined basis as discussed above, for the year ended December 31, 2001, we generated revenues of $528.4 million and Adjusted EBITDA of $59.4 million, representing organic compound annual growth rates of 52% and 72%, respectively, since 1999.
We market our services to two distinct customer bases: (1) temporary healthcare professionals and (2) hospital and healthcare facility clients. We use a multi-brand recruiting strategy to enhance our ability to successfully attract temporary healthcare professionals in the United States and internationally. Our five separate brand names, American Mobile Healthcare, Medical Express, NursesRx, Preferred Healthcare Staffing and O’Grady-Peyton International, have distinct geographic market strengths and brand images. Our large number of hospital and healthcare facility clients allows us to offer traveling positions in all 50 states, and in a variety of work environments. In addition, we provide our temporary healthcare professionals with an attractive benefits package, including free or subsidized housing, travel reimbursement, professional development opportunities, a 401(k) plan and health insurance. We believe that we attract temporary healthcare professionals due to our long-standing reputation for providing a high level of service, our numerous job opportunities, our benefit packages, our innovative marketing programs and our most effective recruiting tool, word-of-mouth referrals from our thousands of current and former temporary healthcare professionals.
We have established a growing and diverse hospital and healthcare facility client base, ranging from national healthcare providers to premier teaching and regional hospitals. At the end of 2001 we had over 2,800 hospital and healthcare facility clients. Over 95% of our temporary healthcare professional assignments are at acute-care hospitals. We currently hold contracts with over 40% of all acute-care hospitals in the United States. Our clients include hospitals and healthcare systems such as Georgetown University Hospital, HCA, Kaiser Permanente, NYU Medical Center, Stanford Health Care, UCLA Medical Center and The University of Chicago Hospitals. We also provide services to sub-acute healthcare facilities, dialysis centers, clinics and schools. Hospital and healthcare facilities utilize our services to help cost-effectively manage staff shortages, new unit openings, seasonal variations, budgeted vacant positions, long-term leaves of absence and other flexible staffing needs.
Industry Overview
In 2000, total healthcare expenditures in the United States were estimated at $1.3 trillion, representing approximately 13% of the U.S. gross domestic product, and had grown approximately 8% over 1999 according to the Centers for Medicare & Medicaid Services. Over the next decade, an aging U.S. population and advances in medical technology are expected to drive increases in hospital patient populations and the
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Within the healthcare staffing sector, temporary staffing has emerged as an increasingly utilized method to efficiently deliver healthcare services. In the mid-1990s, several factors prompted the increased usage of temporary staffing at hospitals. A principal factor was cost containment. Managed care, Medicare, Medicaid and competitive pressures created renewed emphasis on cost containment. Among other responses, this led acute-care hospitals to redesign their staffing models to reduce their levels of fixed staffing and to include a variable staffing component.
The temporary healthcare staffing industry accounted for $7.2 billion in revenues in 2000 and this amount is projected to increase by 21%, to $8.7 billion in 2001, according to estimates by The Staffing Industry Report . Approximately 70% of the temporary healthcare staffing industry is comprised of nurse staffing and approximately 30% is comprised of allied health, physicians and other healthcare professionals. Temporary healthcare staffing has experienced strong historical growth since 1996, growing at a compound annual growth rate of 13%, but this growth accelerated to approximately 15% during 1999 and 2000. Within the temporary healthcare staffing industry, we believe that travel nurse staffing is one of the fastest growing segments.
Demand and Supply Drivers
Since the mid-1990s, changes in the healthcare industry prompted a permanent shift in staffing models that led to an increased usage of temporary staffing at hospitals and other healthcare facilities. The supply of professionals choosing travel healthcare as a short-term or long-term career option has also grown alongside increased demand for temporary healthcare professionals. We believe that this expanded demand and supply pattern will continue, particularly in the travel nurse staffing sector, because of the following drivers:
Demand Drivers
| • | Demographics and Advances in Medicine and Technology. As the U.S. population ages and as advances in medicine result in longer life expectancy, it is likely that chronic illnesses and hospital populations will continue to increase. We believe that these factors will increase the demand for both temporary and permanent nurses, as well as for allied health professionals. In addition, advances in healthcare technology have increased the demand for specialty nurses who are qualified to operate advanced medical equipment or perform complex medical procedures. | |
| • | Shift to Flexible Staffing Models. Nurse wages comprise the largest percentage of hospitals’ labor expenses. Cost containment initiatives and a renewed focus on cost-effective healthcare service delivery continue to lead many hospitals and other healthcare facilities to adopt flexible staffing models that include reduced permanent staffing levels and increased utilization of flexible staffing sources, such as traveling nurses. | |
| • | Nursing Shortage. Most regions of the United States are experiencing a shortage of nurses. The American Hospital Association estimated that up to 126,000 position vacancies existed in 2001 for registered nurses, representing approximately 10% of the hospital-based nursing workforce. The Journal of the American Medical Association has reported that the registered nurse workforce is expected to be 20% below projected requirements by 2020. Faced with increasing demand for and a shrinking supply of nurses, hospitals are utilizing more temporary nurses to meet staffing requirements. Factors contributing to the current and projected declining supply of nurses include: |
| — | Decreasing Number of Entrants to Nursing School and New Nursing Graduates. According to the American Association of Colleges of Nursing, enrollment in all basic nursing education programs (baccalaureate, associate or diploma) fell by approximately 5% each year from 1995 to 2000. | |
| — | Nurses Leaving Patient Care Environments for Less Stressful and Demanding Careers. Career opportunities for nurses have expanded beyond the traditional bedside role. Pharmaceutical companies, insurance companies, HMOs and hospital service and supply companies increasingly |
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| offer nurses attractive positions which involve less demanding work schedules and physical requirements. | ||
| — | Aging Nurse Population. The average age of a registered nurse is estimated to be 45.2 years old, an increase of 8.4% since 1988. By 2010, 40% of the nurse population is expected to be older than 50, as compared to 29% of nurses that were older than 50 in 2000. As a growing number of nurses retire, the nursing shortage is likely to worsen. |
| • | Seasonality. Hospitals in areas that experience significant seasonal fluctuations in population, such as Florida or Arizona during the winter months, must be able to efficiently adjust their staffing levels to accommodate the change in demand. Many of these hospitals utilize temporary healthcare professionals to satisfy these seasonal staffing needs. | |
| • | Family and Medical Leave Act. The adoption of the Family and Medical Leave Act in 1993, which mandates 12-week job-protected maternity and dependent care leave, continues to create temporary nursing vacancies at healthcare facilities. Approximately 94% of the registered nurses working at healthcare facilities in the United States are women. | |
| • | State Legislation Requiring Healthcare Facilities to Utilize More Nurses. In response to concerns by consumer groups over the quality of care provided in healthcare facilities and concerns by nursing organizations about the increased workloads and pressures placed upon nurses, several states have passed or introduced legislation that is expected to increase the demand for nurses. |
| — | Minimum Nurse-to-Patient Ratios. California passed legislation in 1999 which is expected to go into effect in January 2003 that requires the establishment of minimum nurse-to-patient ratios throughout all hospitals. Several states are considering similar legislation. | |
| — | Limitation of Mandatory Overtime. Many healthcare facilities require their permanent staff to work overtime to cover staffing shortages. Maine, Oregon and New Jersey have passed legislation that limits mandatory overtime for nurses, and similar legislation has already been introduced in several other states. |
Supply Drivers
| • | Traditional Reasons for a Healthcare Professional to Work on a Travel Assignment. Traveling allows healthcare professionals to explore new areas of the United States, work at prestigious hospitals, learn new skills, build their resumes and avoid unwanted workplace politics that may accompany a permanent position. Other benefits to temporary healthcare professionals include free or subsidized housing, professional development opportunities, competitive wages, health insurance and completion bonuses for some assignments. All of these opportunities have been constant supply drivers, bringing a growing number of new healthcare professionals into traveling. | |
| • | Word-of-Mouth Referrals. New applicants are most often referred to travel staffing companies by current or former temporary healthcare professionals. Growth in the number of healthcare professionals that have traveled, as well as the increased number of hospital and healthcare facilities that utilize temporary healthcare professionals, creates more opportunities for referrals. | |
| • | More Nurses Choosing Traveling Due to the Nursing Shortage. In times of nursing shortages, nurses with permanent jobs generally feel more secure about their employment prospects. They have a higher degree of confidence that they can leave their permanent position to take a travel assignment and have the ability to return to a permanent position in the future. Additionally, during a nursing shortage, permanent staff nurses are often required to assume greater responsibility and patient loads, work mandatory overtime and deal with increased pressures within the hospital. Many experienced nurses consequently choose to leave their permanent employer, and look for a more flexible and rewarding position. | |
| • | New Legislation Allowing Nurses to Become More Mobile. The Mutual Recognition Compact Legislation, promoted by the National Council of State Boards of Nursing, allows nurses to work more |
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| freely within states participating in the Compact Legislation without obtaining new state licenses. The recognition legislation began in 1999 and had been passed in 16 states as of December 2001. |
Growth Strategy
Our goal is to expand our leadership position within the temporary healthcare staffing sector in the United States. The key components of our business strategy include:
| • | Expanding Our Network of Qualified Temporary Healthcare Professionals. Through our recruiting efforts both in the United States and internationally, we continue to expand our network of qualified temporary healthcare professionals. We have exhibited substantial growth in our temporary healthcare professional network over the past five years primarily through referrals from our current and former temporary healthcare professionals, as well as through advertising and direct mailings. While we expect these methods to continue to gain momentum, we are implementing creative ways to attract additional qualified healthcare professionals. Two recent examples include our acquisition of O’Grady-Peyton International, the leading recruiter of registered nurses from English-speaking foreign countries for placement in the United States, and Internet recruitment tools such as our NurseZone.com website, which is a leading nurse community site on the Internet. | |
| • | Strengthening and Expanding Our Relationships with Hospitals and Healthcare Facilities. We seek to continue to strengthen and expand our relationships with our hospital and healthcare facility clients, and to develop new relationships. Because we possess one of the largest national networks of temporary nurse and allied health professionals, we are well positioned to offer our hospital and healthcare facility clients effective solutions to meet their staffing needs. We currently hold contracts with over 40% of all acute-care hospitals in the United States and we believe there is an opportunity to further grow our existing relationships and develop new relationships with hospitals and healthcare facilities. | |
| • | Leveraging Our Business Model and Large Hospital and Healthcare Facility Client Base to Increase Productivity. We seek to increase our productivity through our proven multi-brand recruiting strategy, large network of temporary healthcare professionals, established hospital and healthcare facility client relationships, proprietary information systems, innovative marketing and recruitment programs, training programs and centralized administrative support systems. Our multi-brand recruiting strategy allows a recruiter in any of our brands to take advantage of all of our nationwide placement opportunities. In addition, our information systems and support personnel permit our recruiters to spend more time focused on temporary healthcare professionals’ needs and placing them on appropriate assignments in hospitals or healthcare facilities. Implementation of our business model at our acquired brands has resulted in significant increases in our productivity. | |
| • | Expanding Service Offerings Through New Staffing Solutions. In order to further enhance the growth in our business and improve our competitive position in the healthcare staffing sector, we continue to explore new service offerings. We have most recently introduced temporary and permanent programs for U.S. and Canadian newly- graduated nurses, specialty training opportunities, vendor management for hospitals and healthcare facilities, permanent placement of nurses and placement of temporary healthcare professionals in Canadian hospital and healthcare facilities. | |
| • | Capitalizing on Strategic Acquisition Opportunities. In order to enhance our competitive position, we will continue to selectively explore strategic acquisitions. In the past after we have made acquisitions, we have sought to leverage our hospital relationships and orders across our brands, integrate back-office functions and maintain brand differentiation for temporary healthcare professional recruitment purposes. We also implement our proven business model in order to achieve greater productivity, operating efficiencies and financial results. |
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Business Overview
Services Provided
Hospitals and healthcare facilities generally obtain supplemental staffing from two sources, local temporary (per diem) agencies and national travel healthcare staffing companies. Per diem staffing, which has historically comprised the majority of the temporary healthcare staffing industry, involves the placement of locally-based healthcare professionals on very short-term assignments, such as daily shift work, on an as needed (per diem) basis. Hospitals and healthcare facilities often give minimal advance notice of their per diem assignments, and require a quick turnaround from their staffing agencies, generally less than 24 hours. Travel staffing, on the other hand, provides healthcare facilities with staffing solutions to address anticipated staffing requirements, typically for 13 weeks. In contrast to per diem agencies, travel staffing companies select from a national (and in some cases international) skilled labor pool and provide pre-screened candidates to their hospital and healthcare facility clients, usually at a lower cost. We focus on the travel segment of the temporary healthcare staffing industry, and provide both nurse and allied health temporary healthcare professionals to our hospital and healthcare facility clients.
Nurses. We provide medical nurses, surgical nurses, specialty nurses, licensed practical or vocational nurses, and advanced practice nurses in a wide range of specialties for travel assignments throughout the United States. We place our qualified nurse professionals with premier, nationally recognized hospitals and hospital networks. The majority of our assignments are in acute-care hospitals, including teaching institutions, trauma centers and community hospitals. Nurses comprise approximately 90% of the total temporary healthcare professionals currently working for us.
Allied Health Professionals. We also provide allied health professionals to acute-care hospitals and other healthcare facilities such as skilled nursing facilities, rehabilitation clinics and schools. Allied health professionals include such disciplines as surgical technologists, respiratory therapists, medical and radiology technologists, dialysis technicians, speech pathologists and rehabilitation assistants. Allied health professionals comprise approximately 10% of the total temporary healthcare professionals currently working for us.
Multi-Brand Recruiting
In order to enhance our opportunities to expand our network of traveling professionals, we choose to recruit temporary healthcare professionals in the United States and internationally separately under each of our five established and recognized brand names: American Mobile Healthcare, Medical Express, NursesRx, Preferred Healthcare Staffing and O’Grady-Peyton International. While all of our brands have the capability to place temporary healthcare professionals on assignments that we have throughout the United States using the same placement opportunities, or “orders,” our brands have distinct geographic market strengths and brand images which enhances our recruitment opportunities.
It is common for temporary healthcare professionals to register with more than one brand in order to utilize more than one recruiter. Our multi-brand recruiting strategy provides us with a competitive advantage, as potential temporary healthcare professionals are able to work with more than one of our brand recruiters. Accordingly, we believe that our probability of successfully placing the temporary healthcare professional on assignment is enhanced.
To our hospital and healthcare facility clients, however, we market and administer our services under the single corporate brand of AMN Healthcare. Hospitals and healthcare facility clients in turn have the advantage of managing one contract with us, but receiving the benefit of five nationally known brands that recruit temporary healthcare professionals for their open positions.
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The following chart depicts our single staffing provider and multi-brand recruiting model:
| Multi-Brand Recruiting Single Staffing Provider |
National Presence and Diversified Hospital and Healthcare Facility Client Base
We offer our temporary healthcare professionals nationwide placement opportunities and provide temporary staffing solutions to our hospital and healthcare facility clients that are located throughout the United States. We typically have open temporary healthcare professional requests, or orders, in all 50 states. The largest percentage of these open orders are typically concentrated in the most heavily populated states, including approximately 17% in Florida, 15% in California, 6% in Arizona, 6% in Texas and 5% in Maryland.
The number of our hospital and healthcare facility clients that we serve has grown from approximately 600 in 1993 to over 2,800 hospital and healthcare facility clients at the end of 2001. Over 95% of our temporary healthcare professional assignments are at acute-care hospitals. In addition to acute-care hospitals, we also provide services to sub-acute healthcare facilities, dialysis centers, clinics and schools. We currently hold contracts with over 40% of all acute-care hospitals in the United States. Our clients include hospitals and healthcare systems such as Georgetown University Hospital, HCA, Kaiser Permanente, NYU Medical Center, Scripps Health Systems, Stanford Health Care, Swedish Health Services, Texas Children’s Hospital, UCLA Medical Center and The University of Chicago Hospitals. As of December 31, 2001, no single client, including affiliated groups, comprised more than 10% of our temporary healthcare professionals on assignment and no single client facility comprised more than 2% of our temporary healthcare professionals on assignment.
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Our Business Model
We have developed and continually refined our business model to achieve greater levels of productivity and efficiency. Our model is designed to optimize the communication with, and service to, both our temporary healthcare professionals and our hospital and healthcare facility clients.
The following graph illustrates the elements of our business model:
Marketing and Recruitment of New Temporary Healthcare Professionals
We believe that nursing and allied health professionals are attracted to us because of our customer service and relationship-oriented approach, our competitive compensation and benefits package, and our large and diverse offering of work assignments which provide the opportunity to travel to numerous attractive locations throughout the United States.
We believe that our multi-brand recruiting strategy makes us more effective at reaching a larger number of temporary healthcare professionals. Because it is common for these healthcare professionals to register with more than one brand in the industry, we believe that by offering five distinct brands we increase our ability to recruit temporary healthcare professionals. Each brand has its own distinct marketing identity to prospective temporary healthcare professionals, and we utilize different strategies in presenting each of the brands as unique. We tailor the marketing of each of our brands through a combination of websites, journal advertising, conferences and conventions, direct mail, printed marketing material and, most importantly, through personal word-of-mouth referrals from current and former temporary healthcare professionals. Referrals from our current and former temporary healthcare professionals are our largest source of new temporary healthcare professionals applying with us. We also operate NurseZone.com, a leading nurse community website. This website caters to the professional and personal lives of nurses, and offers nursing news and updates, links to other Internet sites, discounted products and services, continuing education courses and career opportunities sponsored by our five recruitment brands, including an online temporary healthcare professional application process. In late 2001, we introduced Travelnursing.com, a website where nurses can learn about benefits and opportunities available in traveling. Our five leading brands are featured on the website, including an easy and efficient online application process where nurses can complete one application online and have it sent to each of the brands of their choice.
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Screening/Quality Management
Through our quality management department, we screen each candidate prior to their placement and we continue to evaluate each temporary healthcare professional after they are placed to ensure adequate performance as well as to determine feasibility for future placements. Our internal processes are designed to ensure that each temporary healthcare professional has the appropriate experience, credentials and skills for the assignments that they accept. Our experience has shown us that well-matched placements result in satisfied temporary healthcare professionals and healthcare facility clients. Our screening and quality management process includes three principal stages:
| Initial screening. Each new temporary healthcare professional candidate who submits an application with us must meet certain criteria, including appropriate prior work experience and proper educational and licensing credentials. We independently verify each applicant’s work history and references to reasonably ensure that our hospital and healthcare facility clients may depend on our temporary healthcare professionals for clinical competency and personal reliability. Our proprietary clinical skills checklists, developed for each healthcare specialty area, are used by our hospital and healthcare facility clients’ hiring managers as a basis for evaluating candidates and conducting interviews, and for facilitating the selection of a temporary healthcare professional who can meet the hospital or healthcare facility client’s specific needs. | |
| Assignment specific screening. Once an assignment is accepted by a temporary healthcare professional, our quality management department tracks the necessary documentation and license verification required for the temporary healthcare professional to meet the requirements set forth by us, the hospital or healthcare facility, and, when required, the applicable state board of health or nursing. These requirements may include obtaining copies of specific health records, drug screening, criminal background checks and certain certifications or continuing education courses. | |
| Ongoing evaluation. We continually evaluate our temporary healthcare professionals’ performance through a verbal and written evaluation process. We receive these evaluations directly from our hospital and healthcare facility clients, and use the feedback to determine appropriate future assignments for each temporary healthcare professional. |
Sales and Marketing to Hospitals and Healthcare Facilities
Our team of regional client service directors markets our services to prospective hospital and healthcare facility clients, and supervises ongoing contract management of existing clients in their territory. We market ourselves to hospitals and healthcare facilities under one corporate brand name, AMN Healthcare, a single staffing provider with five recruitment sources of temporary healthcare professionals: American Mobile Healthcare, Medical Express, NursesRx, Preferred Healthcare Staffing and O’Grady-Peyton International.
The number of our hospital and healthcare facility clients that we serve has grown from approximately 600 in 1993 to over 2,800 clients at the end of 2001. Over 95% of our temporary healthcare professional assignments are at acute-care hospitals. In addition to acute-care hospitals, we also provide services to sub-acute healthcare facilities, dialysis centers, clinics and schools. Our hospital and healthcare facility clients include 15 of the top 16 hospitals in the United States as ranked by US News and World Report in its July 2001 Best Hospitals Honor Roll.
Account Management
Once hospital and healthcare facility contracts are obtained by our regional client service directors, our hospital account managers are responsible for soliciting and receiving orders from these clients and working with our recruiters to fill those orders with qualified temporary healthcare professionals. An “order” is a request from a client hospital or healthcare facility for a temporary healthcare professional to fill an assignment. Hospital account managers regularly call and solicit orders from our clients, who also submit orders via the Internet and by fax. Depending upon their size and specific needs, one hospital or healthcare facility client may have up to 50 open orders at one time.
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Our average number of orders for upcoming assignments has increased significantly during the past three years. The combination of an increasing number of open orders and a greater number of nurses choosing to travel benefits us by providing us with numerous assignments to offer and an increasing supply of new temporary healthcare professional applicants to place. Our growth in open orders can be attributed to factors including:
| • | continuing increased demand for traveling nurses; | |
| • | our extensive network of temporary healthcare professionals; | |
| • | our brand recognition and reputation as a quality provider of temporary healthcare staffing services; and | |
| • | our increased number of hospital and healthcare facility client relationships. |
Because hospitals often list their orders with multiple service providers, open orders may also be listed with our competitors. An order will generally be filled by the company that provides a suitable candidate first, highlighting the need for a large network of temporary healthcare professionals and integrated operating and information systems to quickly and effectively match hospital and healthcare facility client needs with appropriate temporary healthcare professionals.
Placement
Orders are entered into our information network and are available to the recruiters at all of our recruitment brands. Our recruiters provide our hospital account managers with the personnel profiles of the temporary healthcare professionals who have expressed an interest in a particular assignment. The hospital account manager approves the profiles to be sent to the hospital or healthcare facility client, follows up to arrange a telephone interview between the temporary healthcare professional and the hospital, and confirms offers and placements with the hospital or healthcare facility.
Our recruiters seek to develop and maintain strong and long-lasting relationships with our temporary healthcare professionals. Each recruiter manages a group of pre-screened temporary healthcare professionals and works to understand the unique needs and desires of each healthcare professional. The recruiter will present open order assignments to a temporary healthcare professional, request that the personnel profile be submitted for placement consideration, arrange a telephone interview with assistance from the hospital account managers, make any special requests for housing and generally facilitate each placement.
In the case of our international temporary healthcare professionals, the recruiters at our O’Grady-Peyton International brand, including those located in the United Kingdom, Australia, New Zealand and South Africa, assist candidates in preparing for the national nursing examination and subsequently obtaining a U.S. nursing license. These recruiters also assist our international temporary healthcare professionals to obtain petitions to become lawful permanent residents or to obtain work visas prior to their arrival in the United States.
Throughout the typical 13-week assignment, the recruiter will work with the temporary healthcare professional to review their progress and to determine whether the person would like to extend the length of the current assignment, or move to a new hospital or healthcare facility at the end of the assignment term. Our international temporary healthcare professionals are typically placed on longer-term, 18-month assignments as a result of our substantial investment in bringing them to work in the United States. Near completion of the 18-month assignment, our recruiters will work with these temporary healthcare professionals to explore their options for new assignments, including our more traditional 13-week arrangements.
We share orders among our various brands to increase placement opportunities for our temporary healthcare professionals. Our growth in placement volume has been driven by enabling our recruiters at all of our brands to offer more open assignment orders to their temporary healthcare professionals. For example, we have been successful with this order sharing strategy at Medical Express over the last three years, where 88% of Medical Express placements of temporary healthcare professionals during the fourth quarter of 2001 were with clients who had not been hospital or healthcare facility clients of Medical Express prior to its acquisition.
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Housing
We offer substantially all of our temporary healthcare professionals free or subsidized housing while on assignment. Our housing department is primarily consolidated and managed at our San Diego corporate headquarters. Our housing department facilitates the leasing of all apartments and furniture, manages utilities, and arranges all housing and roommate assignments for the thousands of temporary healthcare professionals that we place each year. We generally offer our temporary healthcare professionals a free two-bedroom apartment to share with another temporary healthcare professional. If a temporary healthcare professional desires to have a private, one-bedroom apartment, they typically pay a housing fee to us to cover the incremental costs. If a temporary healthcare professional chooses not to accept housing provided by us, they receive a monthly housing stipend in lieu of an apartment. Generally, our international temporary healthcare professionals are provided with increased travel reimbursements and assistance with immigration costs in lieu of free or subsidized housing. We currently lease over 3,900 apartments nationwide with a monthly housing expense of over $4 million.
Housing expenses are typically included in the hourly or weekly fees that we charge to our hospital and healthcare facility clients. Based on the contracted billing rate and gross profit for each hospital or healthcare facility client, we estimate a budget for our housing coordinators to utilize when locating apartments for each assignment. We carefully monitor performance of actual housing costs incurred to the housing costs budgeted for each placement. If housing costs rise in a particular city or region, our housing department tracks these trends and communicates with our regional client service directors to obtain increased billing rates to cover these costs. In the past, we generally have been successful in obtaining rate increases from our hospital and healthcare facility clients to cover the increased housing costs. We also negotiate contracts with national property management and furniture rental companies to leverage our size and obtain more favorable pricing and terms.
Temporary Healthcare Professional Payroll
During 2001, approximately 93% of our working temporary healthcare professionals were on our payroll, while approximately 7% were paid directly by the hospital or healthcare facility client. Providing payroll services is a value-added and convenient service that hospitals and healthcare facilities increasingly expect from their supplemental staffing sources. To provide convenience and flexibility to our hospital and healthcare facility clients, we accommodate several different payroll cycles, and allow the client to choose the cycle that most closely matches that of their permanent staff. This enables our hospital and healthcare facility clients to integrate management of temporary healthcare professional scheduling and overtime with their permanent staff.
Consistent accuracy and timeliness of making payroll payments is essential to the retention of our temporary healthcare professionals. Our internal payroll service group currently receives and processes timesheets for over 6,400 temporary healthcare professionals. Payroll is typically processed within 72 hours after the completion of each pay period, heightening the importance of having adequately trained and skilled payroll personnel and appropriate operating and information systems. We process our payroll utilizing a leading national payroll processing service that can accommodate our large quantity of transactions and the many federal, state and local withholding and employer taxing requirements across the United States.
Our payroll service group offers our temporary healthcare professionals several service benefits, including multi-account direct deposit, automatic 401(k) deductions, dependent care and flexible spending account deductions and housing co-pays when the temporary healthcare professional chooses to upgrade to a private one-bedroom apartment, rather than a free shared two-bedroom apartment.
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Temporary Healthcare Professional Benefits
In our effort to attract and retain highly qualified traveling professionals, we offer a variety of benefits to our temporary healthcare professionals. These benefits include:
| • | Completion Bonuses. Many of our assignments offer special completion bonuses, which we pay in a lump sum once the temporary healthcare professional has completed his or her 13-week assignment. When offered, completion bonuses usually range from $500 to $4,000 for a 13-week assignment and are typically billed as a separate cost to the hospital client, with a small markup to cover employer taxes and overhead. | |
| • | Travel Reimbursement. Temporary healthcare professionals receive travel reimbursement for each assignment. Reimbursements are calculated on a “per mile” basis with a cap on the total, and are often billed as a separate cost to the hospital or healthcare facility client. | |
| • | Referral Bonuses. Through our referral bonus program, a temporary healthcare professional receives a bonus if he or she successfully refers a new temporary healthcare professional. | |
| • | 401(k) Plan and Dependent Care and Medical Reimbursement. We offer immediate enrollment in our 401(k) plan, including matching employer contributions after 1,000 hours of continued service. In addition, we provide pre-tax deductions for employee dependent care expenses and a medical spending account. | |
| • | Group Medical, Dental and Life Insurance. We pay 100% of premium expenses for medical, dental and life insurance. | |
| • | Professional Development Center. We are a fully accredited provider of continuing education by the American Nurses Credentialing Center. Through our professional development center, our temporary healthcare professionals receive free continuing education courses and seminars. In addition, they can obtain the information needed to apply for licensure in the state where they will travel. | |
| • | 24-Hour Management and Clinical Support. It is our goal to always be available to our temporary healthcare professionals. Professionals with emergencies can be connected 24 hours per day with a clinical liaison, recruitment manager or housing manager to help resolve their problem. |
Hospital Billing
To accommodate the needs of our hospital clients, we offer two types of billing: payroll contracts and flat rate contracts. During 2001 we have billed approximately 93% of working temporary healthcare professionals based on payroll contracts and approximately 7% based on flat rate contracts.
Payroll Contracts. Under a payroll contract, the temporary healthcare professional is our employee for payroll and benefits purposes. Under this arrangement, we bill our hospital and healthcare facility clients at an hourly rate which effectively includes reimbursement for recruitment fees, wages and benefits for the temporary healthcare professional, employer taxes, and housing expenses. Overtime, shift differential and holiday hours worked are typically billed at a premium rate. We in turn pay the temporary healthcare professional’s wages, housing and travel costs and benefits. Providing payroll services is a value-added and convenient service that hospitals and healthcare facilities increasingly expect from their supplemental staffing sources. Providing these payroll services, which is cash flow intensive, also gives us a competitive edge over smaller staffing firms.
Flat Rate Contracts. With flat rate billing, the temporary healthcare professional is placed on the hospital or healthcare facility client’s payroll. We bill the hospital a “flat” weekly rate that includes reimbursement for recruitment fees, temporary healthcare professional benefits and typically housing expenses. Generally, if the temporary healthcare professional works overtime, there is not an opportunity for us to receive increased fees under a flat rate contract.
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Table of Contents
Information Systems
Our primary management information and communications systems are centralized and controlled in our corporate headquarters and are utilized in each of our staffing offices. Our financial systems are primarily centralized at our corporate headquarters and our operational reporting is standardized at all of our offices. To facilitate payroll for our corporate employees and our temporary healthcare professionals, we utilize a system provided by a national payroll processing service.
During the past few years, we have developed a proprietary information system called American Mobile Information Exchange, or “AMIE.” AMIE is a Windows-based, interactive system that is an important tool in maximizing our productivity and accommodating our multi-brand recruiting strategy. The system was custom-designed for our business model, including integrated processes for temporary healthcare professional and healthcare facility contract management, matching of temporary healthcare professionals to available assignments, temporary healthcare professional file submissions for placements, quality management tracking, controlling compensation packages and managing healthcare facility contract and billing terms. AMIE provides our staff with fast, detailed information regarding individual temporary healthcare professionals and hospital and healthcare facility clients. AMIE also provides a platform for interacting and transacting with temporary healthcare professionals and hospital and healthcare facility clients via the Internet.
Risk Management
We have developed an integrated risk management program that focuses on loss analysis, education and assessment in an effort to reduce our operational costs and risk exposure. We continually analyze our losses on professional liability claims and workers compensation claims to identify trends. This allows us to focus our resources on those areas that may have the greatest impact on us. We have also developed educational materials for distribution to our temporary healthcare professionals that are targeted to address specific work-injury risks. In addition, we have compiled a universal safety manual that every temporary healthcare professional receives each year.
In addition to our proactive measures, we engage in a peer review process of any incidents involving our temporary healthcare professionals. Upon notification of a temporary healthcare professional’s involvement in an incident that may result in liability for us, a team of registered nurses reviews the temporary healthcare professional’s actions. Our peer review committee makes a prompt determination regarding whether the temporary healthcare professional will continue the assignment and whether we will place the temporary healthcare professional on future assignments.
Competition
The healthcare staffing industry is highly competitive. We compete with both national firms and local and regional firms. We compete with these firms to attract nurses and other healthcare professionals as temporary healthcare professionals and to attract hospital and healthcare facility clients. We compete for temporary healthcare professionals on the basis of customer service and expertise, the quantity, diversity and quality of assignments available, compensation packages, and the benefits that we provide to a temporary healthcare professional while they are on an assignment. We compete for hospital and healthcare facility clients on the basis of the quality of our temporary healthcare professionals, the timely availability of our professionals with requisite skills, the quality, scope and price of our services, our recruitment expertise and the geographic reach of our services.
We believe that larger, nationally established firms enjoy distinct competitive advantages over smaller, local and regional competitors in the travel healthcare staffing industry. Continuing nursing shortages and factors driving the demand for nurses over the past several years have made it increasingly difficult for hospitals to meet their staffing needs. More established firms have a critical mass of available nursing candidates, substantial word-of-mouth referral networks and established brand names, enabling them to attract a consistent flow of new applicants. Larger firms can also more easily provide payroll services billing, which is cash flow intensive, to healthcare providers. As a result, sizable and established firms such as ours have had a significant advantage over smaller participants.
12
Table of Contents
Some of our competitors in the temporary healthcare staffing sector include Cross Country, InteliStaf, Medical Staffing Network and RehabCare Group.
Government Regulation
The healthcare industry is subject to extensive and complex federal and state laws and regulations related to professional licensure, conduct of operations, payment for services and payment for referrals. Our business, however, is not directly impacted by or subject to the extensive and complex laws and regulations that generally govern the healthcare industry. The laws and regulations which are applicable to our hospital and healthcare facility clients could indirectly impact our business to a certain extent, but because we provide services on a contract basis and are paid directly by our hospital and healthcare facility clients, we do not have any direct Medicare or managed care reimbursement risk.
Some states require state licensure for businesses that employ and/or assign healthcare personnel to provide healthcare services on-site at hospitals and other healthcare facilities. We are currently licensed in all eleven states that require such licenses.
Most of the temporary healthcare professionals that we employ are required to be individually licensed or certified under applicable state laws. We take reasonable steps to ensure that our employees possess all necessary licenses and certifications in all material respects.
We recruit some temporary healthcare professionals from Canada for placement in the United States. Canadian healthcare professionals can come to the United States on TN Visas under the North American Free Trade Agreement. TN Visas are renewable, one-year temporary work visas, which generally allow immediate entrance into the United States provided the healthcare professional presents at the border proof of waiting employment in the United States and evidence of the necessary healthcare practice licenses.
With respect to our recruitment of international
temporary healthcare professionals through our
O’Grady-Peyton International brand, we must comply with
certain United States immigration law requirements, including
the Illegal Immigration Reform and Immigrant Responsibility Act
of 1996. We primarily bring temporary healthcare professionals
to the United States as immigrants, or lawful permanent
residents (commonly referred to as “green card”
holders). We screen foreign temporary healthcare professionals
and assist them in preparing for the national nursing
examination and subsequently obtaining a U.S. nursing license.
We file petitions with the Immigration and Naturalization
Service for a temporary healthcare professional to become a
permanent resident of the United States or obtain necessary work
visas. Generally, such petitions are accompanied by proof that
the temporary healthcare professional has either passed the
Commission on Graduates of Foreign Nursing Schools Examination
or holds a full and unrestricted state license to practice
professional nursing as well as a contract between us and the
temporary healthcare professional demonstrating that there is a
bona fide job offer.
Employees
As of December 31, 2001, we had 805
full-time corporate employees. We believe that our employee
relations are good. The following chart shows our number of
full-time corporate employees by department:
224
46
194
205
115
21
805
During the fourth quarter of 2001, we had over 6,800 temporary healthcare professionals working on assignment.
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Table of Contents
Item 2. Properties
We believe that our properties are adequate for
our current needs. In addition, we believe that adequate space
can be obtained to meet our foreseeable business needs. We are
currently negotiating to buy or lease for approximately ten
years a new, 125,000 square foot headquarters building in San
Diego, California. We currently lease office space in nine
locations, as identified in the chart below:
Item 3.
Legal
Proceedings
Location
Square Feet
95,677
34,631
19,427
15,600
5,656
1,399
988
958
767
175,103
We are subject to various claims and legal actions in the ordinary course of our business. Some of these matters include professional liability, employee-related matters and inquiries and investigations by governmental agencies regarding our employment practices. We are not aware of any pending or threatened litigation that we believe is reasonably likely to have a material adverse effect on us.
Our hospital and healthcare facility clients may also become subject to claims, governmental inquiries and investigations and legal actions to which we may become a party relating to services provided by our professionals. From time to time, and depending upon the particular facts and circumstances, we may be subject to indemnification obligations under our contracts with our hospital and healthcare facility clients relating to these matters. At this time, we are not aware of any such pending or threatened litigation that we believe is reasonably likely to have a material adverse effect on us.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2001.
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Table of Contents
PART II
| Item 5. | Market for Registrant’s Common Equity and Related Stockholder Matters |
Our common stock has traded on the New York Stock
Exchange under the symbol “AHS” since our initial
public offering on November 13, 2001. Prior to that time,
there was no public trading market for our common stock. The
following table sets forth, for the period indicated, the high
and low sales prices reported by the New York Stock Exchange.
High
Low
$
27.90
$
21.00
As of March 15, 2002, there were 42,289,770 shares of our common stock issued and outstanding that were held by 3,481 stockholders of record. There were no sales of unregistered securities during the fourth quarter of 2001.
We have not paid any dividends in the past and currently do not expect to pay cash dividends or make any other distributions in the future. We expect to retain our future earnings, if any, for use in the operation and expansion of our business. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon our financial condition, results of operations, capital requirements and such other factors as our board deems relevant. In addition, our ability to declare and pay dividends on our common stock is subject to covenants in our revolving credit facility. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”
15
Table of Contents
Item 6. Selected Consolidated Financial and Operating Data
You should read the selected financial and
operating data presented below in conjunction with
“Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and
“Item 8. Financial Statements and Supplemental
Data” appearing elsewhere in this Annual Report on
Form 10-K. Our statement of operations data for the years
ended December 31, 2001, 2000 and 1999, and the balance
sheet data at December 31, 2001 and 2000 are derived from,
and are qualified by reference to, the audited financial
statements included elsewhere in this Annual Report on
Form 10-K. The statement of operations data for the years
ended December 31, 1998 and 1997 and the balance sheet data
at December 31, 1999, 1998 and 1997 are derived from our
audited financial statements that do not appear herein. Our
historical results are not necessarily indicative of our results
of operations to be expected in the future.
Predecessor(1)
Period From
Period From
January 1,
December 4,
Through
Through
Years Ended December 31,
December 3,
December 31,
1997
1997(2)
1998
1999
2000
2001
(dollars and shares in thousands, except per share data)
$
63,570
$
5,209
$
87,718
$
146,514
$
230,766
$
517,794
49,510
4,118
67,244
111,784
170,608
388,284
14,060
1,091
20,474
34,730
60,158
129,510
9,560
845
12,804
20,677
30,728
71,483
—
—
—
—
22,379
31,881
—
90
1,163
1,721
2,387
5,562
68
7
171
325
916
2,151
—
—
—
12,404
1,500
1,955
9,628
942
14,138
35,127
57,910
113,032
4,432
149
6,336
(397
)
2,248
16,478
(174
)
(183
)
(2,476
)
(4,030
)
(10,006
)
(13,933
)
4,258
(34
)
3,860
(4,427
)
(7,758
)
2,545
—
(9
)
(657
)
(1,325
)
—
—
(195
)
(9
)
(1,571
)
872
2,560
(1,476
)
4,063
(52
)
1,632
(4,880
)
(5,198
)
1,069
—
—
—
(730
)
—
(5,455
)
$
4,063
$
(52
)
$
1,632
$
(5,610
)
$
(5,198
)
$
(4,386
)
N/A
N/A
$
0.09
$
(0.26
)
$
(0.23
)
$
(0.14
)
N/A
N/A
17,751
21,715
22,497
30,641
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Table of Contents
Predecessor(1)
Period From
Period From
January 1,
December 4,
Through
Through
Years Ended December 31,
December 3,
December 31,
1997
1997(2)
1998
1999
2000
2001
(dollars and shares in thousands, except per share data)
N/A
N/A
N/A
67
%
58
%
124
%
1,155
1,194
1,444
2,289
3,166
5,964
N/A
N/A
N/A
59
%
38
%
88
%
$
172
$
112
$
690
$
1,656
$
2,358
$
4,497
$
4,500
$
246
$
7,670
$
14,053
$
29,430
$
58,027
N/A
N/A
N/A
83
%
109
%
97
%
As of December 31,
1997
1998
1999
2000
2001
$
1,124
$
888
$
503
$
546
$
31,968
9,054
13,159
21,655
44,149
116,478
42,229
65,337
79,878
209,410
308,929
25,151
37,596
74,006
122,889
—
12,348
19,477
(2,111
)
67,070
271,905
| (1) | We were incorporated on November 10, 1997. We had no operations until we acquired AMN Healthcare, Inc. on December 4, 1997. Therefore, the statement of operations data for the period January 1, 1997 through December 3, 1997 reflect the activity of AMN Healthcare, Inc. only. See “Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 4.” |
| (2) | Reflects our statement of operations data from December 4, 1997 through December 31, 1997. We were incorporated on November 10, 1997, but had no operations until we acquired AMN Healthcare, Inc. on December 4, 1997. See “Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 4.” |
| (3) | Non-cash stock-based compensation represents compensation expense related to our stock option plans to reflect the difference between the fair market value and the exercise price of stock options previously issued to our officers. See “Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 9.” |
| (4) | Transaction costs represent costs incurred in connection with our 1999 recapitalization, our acquisition of Preferred Healthcare Staffing in 2000, and our initial public offering in 2001. |
| (5) | On October 18, 1999, the minority stockholder of one of our subsidiaries exchanged his shares of the subsidiary for our shares. As a result, no minority interest is reflected after that date. |
| (6) | Adjusted EBITDA represents income (loss) from operations plus depreciation, amortization, transaction costs and non-cash stock-based compensation expense. Adjusted EBITDA is presented because we believe that it is a widely accepted financial indicator used by certain investors and securities analysts to analyze and compare companies on the basis of operating performance. Adjusted EBITDA is not intended to represent cash flows for the period, nor has it been presented as an alternative to operating income as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with accounting principles generally accepted in the United States of America. Adjusted EBITDA, as we define it, is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. |
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Table of Contents
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with, and is qualified in its entirety by, our financial statements and the notes thereto and other financial information included elsewhere in this Annual Report on Form 10-K. Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are “forward-looking statements.” See “— Special Note Regarding Forward-Looking Statements.”
Overview
We are a leading temporary healthcare staffing company and the largest nationwide provider of travel nurse staffing services, one of the fastest growing segments of the temporary healthcare staffing industry. We recruit nurses and allied health professionals, our “temporary healthcare professionals,” and place them on temporary assignments, typically for 13 weeks away from their permanent homes, at hospitals and healthcare facilities throughout the United States.
We derive substantially all of our revenue from fees paid directly by hospitals and healthcare facilities rather than from payments by government or other third parties. We enter into two types of contracts with our hospital and healthcare facility clients: flat rate contracts and payroll contracts. Under a flat rate contract, the temporary healthcare professional becomes an employee of the hospital or healthcare facility and is placed on their payroll. We bill the hospital or healthcare facility a “flat” weekly rate to compensate us for providing recruitment, housing and travel services. Alternatively, under a payroll contract, the temporary healthcare professional is our employee. We then bill our hospital or healthcare facility client at an hourly rate to compensate us for the temporary healthcare professional’s wages and benefits, as well as for recruitment, housing and travel services. Our clients generally prefer payroll contracts because this arrangement eliminates significant employee and payroll administrative burdens for them. Although the temporary healthcare professional wage and benefits billed under a payroll contract primarily represent a pass-through cost component for us, we are able to generate greater profits by providing these value-added services. While payroll contracts generate more gross profit than flat rate contracts, the gross margin generated is lower due to the pass-through of the temporary healthcare professional’s compensation costs. Over the past five years, we, and the industry as a whole, have migrated towards a greater utilization of payroll contracts. During 2001, approximately 93% of our contracts with our hospital and healthcare facility clients have been payroll contracts.
Since 1998 we have completed four strategic acquisitions. We acquired Medical Express, Inc. in November 1998, which strengthened our presence in the Pacific Northwest and Mountain states. During 2000, we completed the acquisitions of Nurses RX, Inc. in June, and Preferred Healthcare Staffing, Inc. in November, which strengthened our presence in the Eastern and Southern regions of the United States. We completed our fourth acquisition in May 2001, acquiring O’Grady-Peyton International (USA), Inc., the leading recruiter of registered nurses from English-speaking foreign countries for placement in the United States. Each of these acquisitions has been accounted for by the purchase method of accounting. Therefore, the operating results of the acquired entities are included in our results of operations commencing on the date of acquisition of each entity. As a result, our results of operations following each acquisition may not be comparable with our prior results.
At the completion of our initial public offering in November 2001, options to purchase 5,182,000 shares of our common stock that we granted to members of our management became immediately vested. These options had an average exercise price $12.45 below the initial public offering price of $17.00 per share. As a result, we recorded approximately $18.8 million of non-cash stock-based compensation expense in the fourth quarter of 2001, of which $18.7 million was related to these options. In addition, we also recorded $13.1 million of non-cash stock-based compensation expense in the first three quarters of 2001 and $22.4 million for 2000. We also retired all of our indebtedness (approximately $145.2 million) with the proceeds from and upon the completion of our initial public offering. The retirement of debt resulted in an extraordinary charge against earnings of approximately $5.5 million, net of income tax benefits, related to the write-off of the unamortized discount on our senior subordinated notes and unamortized deferred financing
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Table of Contents
Results of Operations
The following table sets forth, for the periods indicated, certain statement of operations data as a percentage of our revenue. Our results of operations are reported as a single business segment.
| Years Ended December 31, | ||||||||||||
|
|
||||||||||||
| 1999 | 2000 | 2001 | ||||||||||
|
|
|
|
||||||||||
|
Consolidated Statement of
Operations:
|
||||||||||||
|
Revenue
|
100.0 | % | 100.0 | % | 100.0 | % | ||||||
|
Cost of revenue
|
76.3 | 73.9 | 75.0 | |||||||||
|
|
|
|
||||||||||
|
Gross profit
|
23.7 | 26.1 | 25.0 | |||||||||
|
Selling, general and administrative (excluding
non-cash stock-based compensation)
|
14.1 | 13.3 | 13.8 | |||||||||
|
Non-cash stock-based compensation
|
— | 9.7 | 6.2 | |||||||||
|
Amortization and depreciation expense
|
1.4 | 1.4 | 1.5 | |||||||||
|
Transaction costs
|
8.5 | 0.7 | 0.4 | |||||||||
|
|
|
|
||||||||||
|
Income (loss) from operations
|
(0.3 | ) | 1.0 | 3.1 | ||||||||
|
Interest expense, net
|
2.7 | 4.4 | 2.7 | |||||||||
|
|
|
|
||||||||||
|
Income (loss) before minority interest,
income taxes and extraordinary item
|
(3.0 | ) | (3.4 | ) | 0.4 | |||||||
|
Minority interest in earnings of subsidiary
|
(0.9 | ) | — | — | ||||||||
|
Income tax (expense) benefit
|
0.6 | 1.1 | (0.2 | ) | ||||||||
|
Extraordinary loss on extinguishment of debt, net
of income tax benefit
|
(0.5 | ) | — | (1.0 | ) | |||||||
|
|
|
|
||||||||||
|
Net loss
|
(3.8 | )% | (2.3 | )% | (0.8 | )% | ||||||
|
|
|
|
||||||||||
Comparison of Results for the Year Ended December 31, 2000 to the Year Ended December 31, 2001
Revenue. Revenue increased 124%, from $230.8 million for 2000 to $517.8 million for 2001. Of the $287.0 million increase, approximately $160.6 million was attributable to expansion of our existing brands through growth in the number of temporary healthcare professionals and enhancements in contract terms with our hospital and healthcare facility clients, representing an organic growth rate for our recurring operations of 70%. The total number of temporary healthcare professionals on assignment in our existing brands grew 40% and contributed approximately $92.8 million to the increase. Enhancements in contract terms included increases in hourly rates charged to hospital and healthcare facility clients that accounted for approximately $38.5 million of this increase, and a shift in the mix of payroll versus flat rate temporary healthcare professional contracts that accounted for approximately $29.3 million of this increase. The remainder of the increase, $126.4 million, was attributable to the acquisitions of NursesRx in June 2000, Preferred Healthcare Staffing in November 2000 and O’Grady-Peyton International in May 2001.
Cost of Revenue. Cost of revenue increased 128%, from $170.6 million for 2000 to $388.3 million for 2001. Of the $217.7 million increase, approximately $122.6 million was attributable to the organic growth of our existing brands, and approximately $95.1 million was attributable to the acquisitions of NursesRx, Preferred Healthcare Staffing and O’Grady-Peyton International.
Gross Profit. Gross profit increased 115%, from $60.2 million for 2000 to $129.5 million for 2001, representing gross margins of 26.1% and 25.0%, respectively. The decrease in the gross margin was primarily attributable to a larger pass-through of price increases in the form of benefits to our temporary healthcare
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Table of Contents
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 133%, from $30.7 million for 2000 to $71.5 million for 2001. Of the $40.8 million increase, approximately $18.4 million was attributable to the acquisitions of NursesRx, Preferred Healthcare Staffing and O’Grady-Peyton International. The remaining increase of $22.4 million was primarily attributable to increases in nurse professional development, information systems development, marketing, recruiting, and administrative and office expenses in support of the recent and anticipated growth in temporary healthcare professionals under contract.
Non-Cash Stock-Based Compensation. We recorded non-cash compensation charges of $22.4 million in 2000 and $31.9 million in 2001 in connection with our stock option plans to reflect the difference between the fair market value and the exercise price of previously issued stock options.
Amortization and Depreciation Expense. Amortization expense increased from $2.4 million for 2000 to $5.6 million for 2001. This increase was attributable to the additional goodwill associated with the acquisitions of NursesRx, Preferred Healthcare Staffing and O’Grady-Peyton International. Depreciation expense increased from $0.9 million for 2000 to $2.2 million for 2001. This increase was primarily attributable to the acquisitions of NursesRx, Preferred Healthcare Staffing and O’Grady-Peyton International and the purchase of furniture and equipment to support our recent and anticipated growth.
Transaction Costs. Transaction costs of $2.0 million for 2001 relate to the termination of an advisory agreement in conjunction with our initial public offering. Transaction costs of $1.5 million for 2000 relate to the non-capitalized costs incurred in connection with the acquisition of Preferred Healthcare Staffing.
Interest Expense, Net. Interest expense, net increased from $10.0 million for 2000 to $13.9 million for 2001. Of the $3.9 million increase, approximately $3.7 million was attributable to additional borrowings incurred in conjunction with the acquisitions of NursesRx, Preferred Healthcare Staffing and O’Grady-Peyton International. The remaining increase was primarily due to the new accounting treatment for derivative instruments under SFAS No. 133. Beginning January 1, 2001, SFAS No. 133, as amended, required us to recognize the changes to the fair value of our derivative hedging instruments as a component of interest expense.
Income Tax (Expense) Benefit. The provision for income tax for 2000 was a benefit of $2.6 million as compared to income tax expense of $1.5 million for 2001, reflecting effective income tax rates of a 33% benefit and 58% expense for these periods, respectively. The differences between these effective tax rates and our expected effective tax rate of 41% are primarily attributable to the effect of various permanent tax difference items, the impact of which is magnified by the reduction in pre-tax income created by the non-cash stock-based compensation charge.
Extraordinary Loss On Extinguishment of Debt, Net of Income Tax Benefit. The $5.5 million extraordinary loss on extinguishment of debt for 2001 was attributable to the retirement of all of our indebtedness (approximately $145.2 million) with the proceeds from and upon the completion of our initial public offering. This charge was related to the write-off of unamortized discount on our senior subordinated notes and unamortized deferred financing costs and loan fees resulting from the early extinguishment of our existing indebtedness, and a prepayment premium resulting from the early extinguishment of the senior subordinated notes.
Comparison of Results for the Year Ended December 31, 1999 to the Year Ended December 31, 2000
Revenue. Revenue increased 58%, from $146.5 million in 1999 to $230.8 million for 2000. Of the $84.3 million increase, approximately $63.0 million was attributable to expansion of our existing brands through growth in the number of temporary healthcare professionals and enhancements in contract terms with our hospital and healthcare facility clients, representing an organic growth rate for our recurring operations of 43%. The total number of temporary healthcare professionals on assignment in our existing brands grew 27% and contributed approximately $39.1 million of the increase. Enhancements in contract terms included
20
Table of Contents
Cost of Revenue. Cost of revenue increased 53%, from $111.8 million for 1999 to $170.6 million for 2000. Of the $58.8 million increase, approximately $43.2 million was primarily attributable to the organic growth of our existing brands and approximately $15.6 million was attributable to the acquisitions of NursesRx and Preferred Healthcare Staffing.
Gross Profit. Gross profit increased 73%, from $34.7 million for 1999 to $60.2 million for 2000, representing gross margins of 23.7% and 26.1%, respectively. The increase in gross margin was primarily attributable to increases in hourly rates charged to our hospital and healthcare facility clients and to the acquisition of NursesRx, which historically had higher gross margins than us.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 49%, from $20.7 million for 1999 to $30.7 million for 2000. Of the $10.0 million increase in selling, general and administrative expenses, approximately $3.6 million was attributable to the acquisitions of NursesRx and Preferred Healthcare Staffing. The remaining increase, $6.4 million, was primarily attributable to increases in marketing, recruiting, office and administrative expenses and development and implementation of information systems to support the growth in temporary healthcare professionals under contract.
Non-Cash Stock-Based Compensation. We recorded non-cash compensation charges of $22.4 million in 2000 in connection with our stock option plans to reflect the difference between the fair market value and the exercise price of previously issued stock options. No charge was recorded in 1999.
Amortization and Depreciation Expense. Amortization expense increased from $1.7 million for 1999 to $2.4 million for 2000. This increase was attributable to the additional goodwill associated with the acquisitions of NursesRx and Preferred Healthcare Staffing. Depreciation expense increased from $0.3 million for 1999 to $0.9 million for 2000. This increase was attributable to the acquisitions of NursesRx and Preferred Healthcare Staffing, the purchase of furniture and equipment and the depreciation of internally developed computer software.
Transaction Costs. Transaction costs of $1.5 million for 2000 relate to the non-capitalized costs incurred in connection with the acquisition of Preferred Healthcare Staffing. Transaction costs of $12.4 million for 1999 relate to costs incurred in connection with our recapitalization in November 1999.
Interest Expense, Net. Interest expense, net increased from $4.0 million for 1999 to $10.0 million for 2000. The $6.0 million increase was primarily attributable to additional borrowings incurred in connection with our recapitalization in November 1999 and with the acquisitions of NursesRx and Preferred Healthcare Staffing in 2000.
Minority Interest in Earnings of Subsidiary. An officer of ours owned a minority interest in AMN Healthcare, Inc., our primary operating subsidiary, until October 1999. Just prior to our November 1999 recapitalization, this stockholder exchanged his shares of our subsidiary for shares of our common stock, eliminating this minority ownership interest. The $1.3 million in minority interest in earnings of our subsidiary for 1999 represents this minority interest in the earnings of AMN Healthcare, Inc. for the period January 1, 1999 through October 18, 1999.
Income Tax (Expense) Benefit. The income tax benefit for 1999 was $1.3 million, including the tax benefit of the extraordinary loss on early extinguishment of debt, as compared to a benefit of $2.6 million for 2000, reflecting effective income tax benefit rates of 18.8% and 33.0% for these periods, respectively. The differences between these effective tax rates and our expected effective rate of 41.0% is primarily attributable to the effect of the minority interest in 1999 and the effect of various permanent tax difference items, the impact of which is magnified by the reduction in pre-tax income resulting from the non-cash stock-based compensation charge in 2000.
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Table of Contents
Extraordinary Loss On Extinguishment of Debt,
Net of Income Tax Benefit.
The
$0.7 million extraordinary loss on extinguishment of debt
for 1999 was attributable to the write-off of deferred financing
costs associated with our November 1999 recapitalization.
Liquidity and Capital Resources
Historically, our primary liquidity requirements
have been for debt service under our credit facility,
acquisitions and working capital requirements. We have funded
these requirements through internally generated cash flow and
funds borrowed under our existing credit facility. At
December 31, 2001, we had no debt outstanding under our
revolving credit facility. Upon the completion of our initial
public offering in November 2001, we amended and restated our
credit agreement in order to eliminate all of our term loans and
to provide for a secured revolving credit facility of up to
$50.0 million in borrowing capacity. The revolving credit
facility has a maturity date of November 16, 2004 and
contains a letter of credit sub-facility and a swing-line loan
sub-facility. Borrowings under this revolving credit facility
bear interest at floating rates based upon either a LIBOR or
prime interest rate option selected by us, plus a spread, to be
determined based on the outstanding amount of the revolving
credit facility. Our amended and restated credit agreement
contains a minimum fixed charge coverage ratio, a maximum
leverage ratio and other customary covenants. Amounts available
under our revolving credit facility may be used for working
capital and general corporate purposes, subject to various
limitations.
We have relatively low capital investment
requirements. Capital expenditures were $1.7 million,
$2.4 million and $4.5 million in 1999, 2000 and 2001,
respectively. In 2001, our primary capital expenditures were
$2.2 million for purchased and internally developed
software and $2.3 million for computers, furniture and
equipment and other expenditures. We expect our capital
expenditure requirements to be similar in the future, other than
costs related to our new corporate headquarters including
leasehold improvements, furniture and equipment. See
“Item 2. Properties.”
Our business acquisition expenditures were
$91.8 million in 2000 and $13.0 million in 2001. We had no
business acquisition expenditures during 1999. During 2000, we
completed the acquisitions of NursesRx and Preferred Healthcare
Staffing and in May 2001, we acquired O’Grady-Peyton
International. These acquisitions were financed through a
combination of bank debt and equity investments. In connection
with our acquisition of NursesRx, we are obligated to make a
$3.0 million payment to the former shareholders,
$1.0 million of which was paid on June 30, 2001 and
the remainder of which is to be paid in two equal installments
of $1.0 million on June 28, 2002 and June 30,
2003. In connection with our acquisition of O’Grady-Peyton
International, we are obligated to pay to the former
shareholders of O’Grady-Peyton International an aggregate
amount of up to $5.3 million in May 2002 based on
O’Grady-Peyton International’s revenue and earnings.
There is also additional contingent consideration of up to
$2.4 million subject to collection of an outstanding
receivable from a customer. We expect to be able to finance any
future acquisitions either with cash provided from operations,
borrowings under our revolving credit facility, bank loans, debt
or equity offerings, or some combination of the foregoing.
Our principal working capital need is for
accounts receivable, which has increased with the growth in our
business. Our principal sources of cash to fund our working
capital needs are cash generated from operating activities and
borrowings under our revolving credit facility. Net cash
provided by operations for 2001 was $1.7 million, resulting
primarily from cash earnings generated by us offset by the
growth in working capital.
We believe that cash generated from operations,
the remaining net proceeds from our initial public offering and
borrowings under our revolving credit facility will be
sufficient to fund our operations for the next 12 months.
At December 31, 2001 and 2000, we did not
have any relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured
finance or special purpose entities, which would have been
established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes.
In addition, we do not engage in trading activities involving
non-exchange traded contracts. As such, we are not materially
exposed to any financing, liquidity, market or credit risk that
could arise if we had engaged in such relationships. We do not
have relationships or transactions with
22
Critical Accounting Principles and
Estimates
In response to the SEC’s Release Numbers
33-8040 “Cautionary Advice Regarding Disclosure About
Critical Accounting Policies” and 33-8056, “Commission
Statement about Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” we have
identified the following critical accounting policies that
affect the more significant judgments and estimates used in the
preparation of our consolidated financial statements. The
preparation of our financial statements in conformity with
accounting principles generally accepted in the United States of
America requires us to make estimates and judgments that affect
our reported amounts of assets and liabilities, revenues and
expenses, and related disclosures of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates,
including those related to asset impairment, accruals for
self-insurance and compensation and related benefits, revenue
recognition, allowance for doubtful accounts, and contingencies
and litigation. We state these accounting policies in the notes
to the consolidated financial statements and at relevant
sections in this discussion and analysis. These estimates are
based on the information that is currently available to us and
on various other assumptions that we believe to be reasonable
under the circumstances. Actual results could vary from those
estimates under different assumptions or conditions.
We believe that the following critical accounting
policies affect the more significant judgments and estimates
used in the preparation of our consolidated financial statements:
23
Potential Fluctuations in Quarterly Results
and Seasonality
Due to the regional and seasonal fluctuations in
the hospital patient census of our hospital and healthcare
facility clients and due to the seasonal preferences for
destinations by our temporary healthcare professionals, the
number of temporary healthcare professionals on assignment,
revenue and earnings are subject to moderate seasonal
fluctuations. Many of our hospital and healthcare facility
clients are located in areas that experience seasonal
fluctuations in population, such as Florida and Arizona, during
the winter and summer months. These facilities adjust their
staffing levels to accommodate the change in this seasonal
demand and many of these facilities utilize temporary healthcare
professionals to satisfy these seasonal staffing needs.
Historically the number of temporary healthcare
professionals on assignment has increased during January through
March followed by declines or minimal growth during April
through August. During September through November, our temporary
healthcare professional count has historically increased,
followed by a decline in December. Seasonality of revenue and
earnings is expected to continue. As a result of all of these
factors, results of any one quarter are not necessarily
indicative of the results to be expected for any other quarter
or for any year.
Inflation
Although inflation has abated during the last
several years, the rate of inflation in healthcare related
services continues to exceed the rate experienced by the economy
as a whole. Our contracts typically provide for an annual
increase in the fees paid to us by our clients based on
increases in various inflation indices allowing us to pass on
inflation costs to our clients. Historically, these increases
have generally offset the increases in costs incurred by us.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 133,
Accounting for Derivative
Instruments and Hedging Activities
. This statement, as
amended, establishes accounting and reporting standards
requiring that all derivative instruments (including certain
derivative instruments embedded in other contracts) be recorded
in the balance sheet as either an asset or a liability measured
at its fair value. This statement requires that changes in the
derivative’s fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. The
accounting provisions for qualifying hedges allow a
derivative’s gains and losses to offset related results of
the hedged item in the income statement and require that the
company must formally document, designate and assess the
effectiveness of transactions that qualify for hedge accounting.
We implemented this pronouncement in January 2001. At
December 31, 2001 we did not hold any derivative
instruments.
In July 2001, the FASB issued SFAS No. 141,
Business Combinations,
and SFAS No. 142,
Goodwill
and Other Intangible Assets
. SFAS No. 141 requires that
the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all
purchase method business combinations completed after
June 30, 2001. SFAS No. 141 also specifies the
criteria that intangible assets acquired in a purchase method
business combination must meet to be recognized and reported
apart from goodwill, noting that any purchase price allocable to
an assembled workforce may not be accounted for separately. SFAS
No. 142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead
tested for impairment at least annually in accordance with the
provisions of SFAS No. 142. SFAS No. 142 also requires
that intangible assets with definite useful lives be amortized
over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment in accordance with
SFAS No. 121,
Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of.
SFAS No. 141 requires that we evaluate
existing intangible assets and goodwill that were acquired in
prior purchase business combinations, and make any necessary
reclassifications in order to conform with the
24
As of the date of adoption of FAS No. 142,
January 1, 2002, we had unamortized goodwill in the amount
of $127.8 million and unamortized identifiable intangible
assets in the amount of $871,000, all of which are subject to
the transition provisions of SFAS Nos. 141 and 142.
Amortization expense related to goodwill was $2.3 million
and $5.3 million for the year ended December 31, 2000
and the year ended December 31, 2001, respectively. We
adopted SFAS No. 142 as of January 1, 2002 and
determined that we will not recognize any transitional
impairment losses in 2002. We have also reevaluated the
classifications of our existing intangible assets and goodwill
in accordance with SFAS No. 141 and have determined that
the current classifications conform with the criteria in SFAS
No. 141.
In August 2001, the FASB issued SFAS
No. 143,
Accounting for Asset Retirement
Obligations
, which addresses financial accounting and
reporting for obligations associated with the retirement of
tangible long-lived assets and for the associated asset
retirement costs. The standard applies to tangible long-lived
assets that have a legal obligation associated with their
retirement that results from the acquisition, construction or
development or normal use of the asset. SFAS No. 143
requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The
fair value of the liability is added to the carrying amount of
the associated asset and this additional carrying amount is
depreciated over the remaining life of the asset. The liability
is accreted at the end of each period through charges to
operating expense. SFAS No. 143 is effective for fiscal
years beginning after June 15, 2002. We do not anticipate
that the financial impact of this statement will have a material
effect on our consolidated financial statements.
In October 2001, the FASB issued SFAS
No. 144,
Accounting for the Impairment or Disposal of
Long-Lived Assets
, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets.
While SFAS No. 144 supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of
, it retains many of the
fundamental provisions of SFAS No. 121, including the
recognition and measurement of the impairment of long-lived
assets to be held and used, and the measurement of long-lived
assets to be disposed of by sale. SFAS No. 144 also
supersedes the accounting and reporting provisions of Accounting
Principles Board Opinion (APB) No. 30,
Reporting
the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions
, for the
disposal of a segment of a business. However, it retains the
requirement in APB No. 30 to report separately discontinued
operations and extends that reporting to a component of an
entity that either has been disposed of (by sale, abandonment,
or in a distribution to owners) or is classified as held for
sale. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001. We do not anticipate that the
financial impact of this statement will have a material effect
on our consolidated financial statements.
Special Note Regarding Forward-Looking
Statements
This Annual Report on Form 10-K 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. These statements relate to expectations concerning
matters that are not historical facts. Such forward-looking
statements may be identified by words such as
“anticipates,” “believes,” “can,”
“continue,” “could,” “estimates,”
“expects,” “intends,” “may,”
“plans,” “potential,” “predicts,”
“should,” or “will” or the negative of these
terms or other comparable terminology. These statements and all
phases of our operations are subject to known and unknown risks,
uncertainties and other factors, some of which are identified
herein and in our Form S-1 filed with the Securities and
Exchange Commission on November 12, 2001 (File
No. 333-65168). Readers are cautioned not to place undue
reliance on these forward-looking
25
Risk Factors
You should read the following risk factors
carefully in connection with evaluating us and the
forward-looking statements contained in this Annual Report on
Form 10-K. Any of the following risks could materially
adversely affect our company, operating results, financial
condition and the actual outcome of matters as to which
forward-looking statements are made in this Annual Report on
Form 10-K. Certain statements in “Risk Factors”
constitute “forward-looking statements.” Our actual
results could differ materially from those projected in the
forward-looking statements as a result of certain factors and
uncertainties set forth below and elsewhere in this Annual
Report on Form 10-K. See “— Special Note
Regarding Forward–Looking Statements.”
If we are unable to attract qualified nurses
and other allied healthcare professionals for our healthcare
staffing business at reasonable costs, it could increase our
operating costs and negatively impact our business.
We rely significantly on our ability to attract
and retain nurses and other allied healthcare professionals who
possess the skills, experience and licenses necessary to meet
the requirements of our hospital and healthcare facility
clients. We compete for healthcare staffing personnel with other
temporary healthcare staffing companies and with hospitals and
healthcare facilities. We must continually evaluate and expand
our temporary healthcare professional network to keep pace with
our hospital and healthcare facility clients’ needs.
Currently, there is a shortage of qualified nurses in most areas
of the United States, competition for nursing personnel is
increasing, and salaries and benefits have risen. We may be
unable to continue to increase the number of temporary
healthcare professionals that we recruit, decreasing the
potential for growth of our business. Our ability to attract and
retain temporary healthcare professionals depends on several
factors, including our ability to provide temporary healthcare
professionals with assignments that they view as attractive and
to provide them with competitive benefits and wages. We cannot
assure you that we will be successful in any of these areas. The
cost of attracting temporary healthcare professionals and
providing them with attractive benefit packages may be higher
than we anticipate and, as a result, if we are unable to pass
these costs on to our hospital and healthcare facility clients,
our profitability could decline. Moreover, if we are unable to
attract and retain temporary healthcare professionals, the
quality of our services to our hospital and healthcare facility
clients may decline and, as a result, we could lose clients.
We operate in a highly competitive market and
our success depends on our ability to remain competitive in
obtaining and retaining hospital and healthcare facility clients
and temporary healthcare professionals.
The temporary healthcare staffing business is
highly competitive. We compete in national, regional and local
markets with full-service staffing companies and with
specialized temporary staffing agencies. Some of our competitors
in the temporary nurse staffing sector include Cross Country,
InteliStaf, Medical Staffing Network and RehabCare Group. Some
of these companies may have greater marketing and financial
resources than us. We believe that the primary competitive
factors in obtaining and retaining hospital and healthcare
facility clients are identifying qualified healthcare
professionals for specific job requirements, providing qualified
employees in a timely manner, pricing services competitively and
effectively monitoring employees’ job performance. We
compete for temporary healthcare professionals based on the
quantity, diversity and quality of assignments offered,
compensation packages and the benefits that we provide.
Competition for hospital and healthcare facility clients and
temporary healthcare professionals may increase in the future
and, as a result, we may not be able to remain competitive. To
the extent competitors seek to gain or retain market share by
reducing prices or increasing marketing expenditures, we could
lose revenues or hospital and healthcare facility clients and
our margins could decline, which could seriously harm our
26
Our business depends upon our ability to
secure and fill new orders from our hospital and healthcare
facility clients because we do not have long-term agreements or
exclusive contracts with them.
We do not have long-term agreements or exclusive
guaranteed order contracts with our hospital and healthcare
facility clients. The success of our business is dependent upon
our ability to continually secure new orders from hospitals and
other healthcare facilities and to fill those orders with our
temporary healthcare professionals. Our hospital and healthcare
facility clients are free to place orders with our competitors
and choose to use temporary healthcare professionals that our
competitors offer them. Therefore, we must maintain positive
relationships with our hospital and healthcare facility clients.
If we fail to maintain positive relationships with our hospital
and healthcare facility clients, we may be unable to generate
new temporary healthcare professional orders and our business
may be adversely affected.
Fluctuations in patient occupancy at the
hospital and healthcare facilities of our clients may adversely
affect the demand for our services and therefore the
profitability of our business.
Demand for our temporary healthcare staffing
services is significantly affected by the general level of
patient occupancy at our hospital and healthcare clients’
facilities. When occupancy increases, temporary employees are
often added before full-time employees are hired. As occupancy
decreases, hospital and healthcare facility clients typically
will reduce their use of temporary employees before undertaking
layoffs of their regular employees. In addition, we may
experience more competitive pricing pressure during periods of
occupancy downturn. Occupancy at our healthcare clients’
facilities also fluctuates due to the seasonality of some
elective procedures. We are unable to predict the level of
patient occupancy at any particular time and its effect on our
revenues and earnings.
Healthcare reform could negatively impact our
business opportunities, revenues and margins.
The U.S. government has undertaken efforts to
control growing healthcare costs through legislation, regulation
and voluntary agreements with medical care providers and drug
companies. In the recent past, the U.S. Congress has considered
several comprehensive healthcare reform proposals. The proposals
were generally intended to expand healthcare coverage for the
uninsured and reduce the growth of total healthcare
expenditures. While the U.S. Congress did not adopt any
comprehensive reform proposals, members of Congress may raise
similar proposals in the future. If any of these proposals are
approved, hospitals and other healthcare facilities may react by
spending less on healthcare staffing, including nurses. If this
were to occur, we would have fewer business opportunities, which
could have a material adverse effect on our business.
State governments have also attempted to control
the growth of healthcare costs. For example, the state of
Massachusetts implemented a regulation that limits the hourly
rate paid to temporary nursing agencies for registered nurses,
licensed practical nurses and certified nurses aides. While the
current regulation does not apply to us, if similar regulations
were to be applied to longer term contracts in states in which
we operate, our revenues and margins could decrease.
Furthermore, third party payors, such as health
maintenance organizations, increasingly challenge the prices
charged for medical care. Failure by hospitals and other
healthcare facilities to obtain full reimbursement from those
third party payors could reduce the demand or the price paid for
our services.
We operate in a regulated industry and changes
in regulations or violations of regulations may result in
increased costs or sanctions that could reduce our revenues and
profitability.
The healthcare industry is subject to extensive
and complex federal and state laws and regulations related to
professional licensure, conduct of operations, payment for
services and payment for referrals. If we fail to comply with
the laws and regulations that are directly applicable to our
business, we could suffer civil and/or criminal penalties or be
subject to injunctions or cease and desist orders.
27
Our business is generally not subject to the
extensive and complex laws that apply to our hospital and
healthcare facility clients, including laws related to Medicare,
Medicaid and other federal and state healthcare programs.
However, these laws and regulations could indirectly affect the
demand or the prices paid for our services. For example, our
hospital and healthcare facility clients could suffer civil
and/or criminal penalties and/or be excluded from participating
in Medicare, Medicaid and other healthcare programs if they fail
to comply with the laws and regulations applicable to their
businesses. In addition, our hospital and healthcare facility
clients could receive reduced reimbursements, or be excluded
from coverage, because of a change in the rates or conditions
set by federal or state governments. In turn, violations of or
changes to these laws and regulations that adversely affect our
hospital and healthcare facility clients could also adversely
affect the prices that these clients are willing or able to pay
for our services.
Significant legal actions could subject us to
substantial liabilities.
In recent years, our hospital and healthcare
facility clients have become subject to an increasing number of
legal actions alleging malpractice or related legal theories.
Because our temporary healthcare professionals provide medical
care, claims may be brought against our temporary healthcare
professionals and us relating to the quality of medical care
provided by our temporary healthcare professionals while on
assignment at our hospital and healthcare facility clients. We
and our temporary healthcare professionals are at times named in
these lawsuits regardless of our contractual obligations or the
standard of care provided by our temporary healthcare
professionals. In some instances, we are required to indemnify
hospital and healthcare facility clients contractually against
some or all of these potential legal actions. Also, because most
of our temporary healthcare professionals are our employees, we
may be subject to various employment claims and contractual
disputes regarding the terms of a temporary healthcare
professional’s employment. We maintain a policy of
$10 million for employment practices coverage with an
additional excess coverage of $10 million. We also have two
layers of professional and general liability coverage. The
professional and general liability coverage consists of primary
coverage with limits of $1 million per occurrence and
$3 million in the aggregate and an umbrella policy with
limits of $20 million. However, our insurance coverage may
not cover all claims against us or continue to be available to
us at a reasonable cost. Also, we may not be able to pass on all
or any portion of increased insurance costs to our hospital and
healthcare facility clients. If we are unable to maintain
adequate insurance coverage or if any claims are not covered by
insurance, we may be exposed to substantial liabilities.
We may be legally liable for damages resulting
from our hospital and healthcare facility clients’
mistreatment of our traveling healthcare personnel.
Because we are in the business of placing our
temporary healthcare professionals in the workplaces of other
companies, we are subject to possible claims by our temporary
healthcare professionals alleging discrimination, sexual
harassment, negligence and other similar activities by our
hospital and healthcare facility clients. The cost of defending
such claims, even if groundless, could be substantial and the
associated negative publicity could adversely affect our ability
to attract and retain qualified individuals in the future.
We may not be able to successfully complete
the integration of our recent acquisitions.
We recently acquired two companies in the
temporary healthcare staffing industry: Preferred Healthcare
Staffing and O’Grady-Peyton International. These
acquisitions involve significant risks and uncertainties,
including difficulties integrating acquired personnel and other
corporate cultures into our business, the potential loss of key
employees or customers of acquired companies, the assumption of
liabilities and exposure to unforeseen liabilities of acquired
companies and the diversion of management attention from
existing operations. We may not be able to fully integrate the
operations of the acquired businesses with our own in an
efficient and cost-effective manner. In addition, through our
most recent acquisition, O’Grady-Peyton International, we
are now involved in new international temporary healthcare
professional recruitment markets where we have limited or no
experience. Our failure to effectively integrate either of these
businesses could have an adverse effect on our financial
condition and results of operations.
28
Difficulties in maintaining our management
information and communications systems may result in increased
costs that reduce our profitability.
Our ability to deliver our staffing services to
our hospital and healthcare facility clients and manage our
internal systems depends to a large extent upon the performance
of our management information and communications systems. If
these systems do not adequately support our operations, or if we
are required to incur significant additional costs to maintain
or expand these systems, our business and financial results
could be materially adversely affected.
Our operations may deteriorate if we are
unable to continue to attract, develop and retain our sales
personnel.
Our success is dependent upon the performance of
our sales personnel, especially regional client service
directors, hospital account managers and recruiters. The number
of individuals who meet our qualifications for these positions
is limited and we may experience difficulty in attracting
qualified candidates. In addition, we commit substantial
resources to the training, development and support of these
individuals. Competition for qualified sales personnel in the
line of business in which we operate is strong and there is a
risk that we may not be able to retain our sales personnel after
we have expended the time and expense to recruit and train them.
The loss of key senior management personnel
could adversely affect our ability to remain
competitive.
We believe that the success of our business
strategy and our ability to operate profitably depends on the
continued employment of our senior management team, led by
Steven Francis, Susan Nowakowski and Donald Myll. Other than
Steven Francis, none of our senior management team has an
employment contract with us. If Steven Francis or other members
of our senior management team become unable or unwilling to
continue in their present positions, our business and financial
results could be materially adversely affected.
Our existing majority stockholder controls
us.
HWH Capital Partners, L.P. and some of its
affiliates, whom we refer to collectively as the “HWP
stockholders,” own approximately 62.5% of the outstanding
shares of our common stock. As a result, the HWP stockholders
are able to control us and direct our affairs, including the
election of directors and approval of significant corporate
transactions. This concentration of ownership also may delay,
defer or even prevent a change in control of our company, and
make some transactions more difficult or impossible without the
support of these stockholders. These transactions might include
proxy contests, tender offers, mergers or other purchases of
common stock that could give our other stockholders the
opportunity to realize a premium over the then-prevailing market
price for shares of our common stock.
We have a substantial amount of goodwill on
our balance sheet. Our level of goodwill may have the effect of
decreasing our earnings or increasing our losses.
As of December 31, 2001, we had
$127.8 million of unamortized goodwill on our balance
sheet, which represents the excess of the total purchase price
of our acquisitions over the fair value of the net assets
acquired. At December 31, 2001, goodwill represented 41% of
our total assets.
Through December 31, 2001, we amortized
goodwill on a straight-line basis over the estimated period of
future benefit of 25 years. In July 2001, the Financial
Accounting Standards Board issued SFAS No. 141,
Business
Combinations
, and SFAS No. 142,
Goodwill and Other
Intangible Assets
. SFAS No. 141 requires that the
purchase method of accounting be used for all business
combinations initiated after June 30, 2001, as well as all
purchase method business combinations completed after
June 30, 2001. SFAS No. 142 requires that, subsequent
to January 1, 2002, goodwill not be amortized but rather
that it be reviewed annually for impairment. In the event
impairment is identified, a charge to earnings would be
recorded. We have adopted the provisions of SFAS No. 141
and SFAS No. 142. Although it does not affect our cash
flow, amortization of goodwill or an impairment charge to
earnings has the effect of decreasing our earnings or increasing
our losses,
29
Table of Contents
•
We have recorded goodwill and intangibles
resulting from our acquisitions completed in the past four
years. Through December 31, 2001, goodwill and intangibles
have been amortized on a straight-line basis over their
respective lives of 25 years and 4 years,
respectively. Upon the adoption of SFAS No. 142 on
January 1, 2002, we ceased amortizing goodwill and will
perform an annual impairment analysis to assess the
recoverability of the goodwill, in accordance with the
provisions of SFAS No. 142. If we are required to record an
impairment charge in the future, it would have an adverse impact
on our results of operations.
•
We maintain an accrual for our health and workers
compensation self-insurance, which is classified in accrued
compensation and benefits in our consolidated balance sheets. We
determine the adequacy of these accruals by periodically
evaluating our historical experience and trends related to both
health and workers compensation claims and payments, information
provided to us by our insurance broker and industry experience
and trends. If such information indicates that our accruals are
overstated or understated, we will adjust the assumptions
utilized in our methodologies and reduce or provide for
additional accruals as appropriate.
•
We maintain an allowance for doubtful accounts
for estimated losses resulting from the inability of our
customers to make required payments, which results in bad debt
expense. We determine the adequacy of this allowance by
continually evaluating individual customer receivables,
considering the customer’s financial condition, credit
history and current economic conditions. If the financial
condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional
allowances may be required.
•
We are subject to various claims and legal
actions in the ordinary course of our business. Some of these
matters include professional liability, employee-related matters
and investigations by governmental agencies regarding our
employment practices. Our hospital and healthcare facility
clients may also become subject to claims, governmental
inquiries and investigations and legal actions to which we may
become a party relating to services provided by our
professionals. From time to time, and depending upon the
particular facts and circumstances, we may be subject to
indemnification obligations under our contracts with our
hospital and healthcare facility clients relating to these
matters. Although we are currently not aware of any such pending
or threatened litigation that we believe is reasonably likely to
have a material adverse effect on us, if we become aware of such
assessments against the Company, we
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will evaluate the probability of an adverse
outcome and provide accruals for such contingencies as necessary.
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Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk has been interest rate risk associated with our debt instruments. In instances where we have had variable (floating) rate debt, we attempted to minimize our interest rate risk by entering into interest rate swap or cap instruments. Our corporate policy is to enter into derivative instruments only if the purpose of such instruments is to hedge a known underlying risk.
A 1% change in interest rates on variable rate debt would have resulted in interest expense fluctuating approximately $46,000 for 1999, $73,000 for 2000 and $58,000 for 2001, respectively. At December 31, 2001, we had no outstanding debt. A 1% change in the interest rates on short-term investments would have resulted in interest income fluctuating by approximately $50,000 for 2001.
30
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Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | ||||
|
|
||||
|
Independent Auditors’ Report
|
32 | |||
|
Consolidated Balance Sheets as of
December 31, 2000 and 2001
|
33 | |||
|
Consolidated Statements of Operations for the
years ended December 31, 1999, 2000 and 2001
|
34 | |||
|
Consolidated Statements of Stockholders’
Equity for the years ended December 31, 1999, 2000 and 2001
|
35 | |||
|
Consolidated Statements of Cash Flows for the
years ended December 31, 1999, 2000 and 2001
|
36 | |||
|
Notes to Consolidated Financial Statements
|
37-54 | |||
31
Table of Contents
INDEPENDENT AUDITORS’ REPORT
The Board of Directors and Stockholders
We have audited the accompanying consolidated
balance sheets of AMN Healthcare Services, Inc. and
subsidiaries, (the Company), as of December 31, 2000 and
2001, and the related consolidated statements of operations,
stockholders’ equity, and cash flows for each of the years
in the three-year period ended December 31, 2001. These
consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of AMN Healthcare Services,
Inc. and subsidiaries as of December 31, 2000 and 2001, and
the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 2001,
in conformity with accounting principles generally accepted in
the United States of America.
San Diego, California
32
KPMG LLP
Table of Contents
AMN HEALTHCARE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
December 31,
2000
2001
ASSETS
$
546
$
15,654
—
16,314
63,401
105,416
—
4,803
2,973
7,810
1,839
1,943
68,759
151,940
5,006
7,713
10,565
19,406
102
617
118,423
127,752
6,555
1,501
$
209,410
$
308,929
LIABILITIES AND STOCKHOLDERS’
EQUITY
$
556
$
1,643
2,431
5,625
11,017
23,965
1,745
—
342
—
7,500
—
1,019
4,229
24,610
35,462
115,389
—
2,341
1,562
142,340
37,024
288
423
136,735
345,821
(69,953
)
(74,339
)
67,070
271,905
$
209,410
$
308,929
See accompanying notes to consolidated financial statements.
33
Table of Contents
AMN HEALTHCARE SERVICES, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
Years Ended December 31,
1999
2000
2001
$
146,514
$
230,766
$
517,794
111,784
170,608
388,284
34,730
60,158
129,510
20,677
30,728
71,483
—
22,379
31,881
1,721
2,387
5,562
325
916
2,151
12,404
1,500
1,955
35,127
57,910
113,032
(397
)
2,248
16,478
4,030
10,006
13,933
(4,427
)
(7,758
)
2,545
(1,325
)
—
—
872
2,560
(1,476
)
(4,880
)
(5,198
)
1,069
(730
)
—
(5,455
)
$
(5,610
)
$
(5,198
)
$
(4,386
)
$
(0.23
)
$
(0.23
)
$
0.04
(0.03
)
—
(0.18
)
$
(0.26
)
$
(0.23
)
$
(0.14
)
21,715
22,497
30,641
See accompanying notes to consolidated financial statements.
34
Table of Contents
AMN HEALTHCARE SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
Retained
Accumulated
Common Stock
Additional
Earnings
Other
Paid-in
(Accumulated
Comprehensive
Shares
Amount
Capital
Deficit)
Income (Loss)
Total
21,451
$
214
$
17,684
$
1,579
$
—
$
19,477
(21,187
)
(212
)
(19,143
)
(62,915
)
—
(82,270
)
4,464
45
1,537
2,191
—
3,773
15,647
157
59,362
—
—
59,519
—
—
3,000
—
—
3,000
—
—
—
(5,610
)
—
(5,610
)
20,375
204
62,440
(64,755
)
—
(2,111
)
8,460
84
51,916
—
—
52,000
—
—
22,379
—
—
22,379
—
—
—
(5,198
)
—
(5,198
)
28,835
288
136,735
(69,953
)
—
67,070
—
—
31,881
—
—
31,881
11,500
115
177,225
—
—
177,340
1,955
20
(20
)
—
—
—
—
—
—
—
(589
)
(589
)
—
—
—
—
123
123
—
—
—
—
466
466
—
—
—
(4,386
)
—
(4,386
)
(4,386
)
42,290
$
423
$
345,821
$
(74,339
)
$
—
$
271,905
See accompanying notes to consolidated financial statements.
35
Table of Contents
AMN HEALTHCARE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
Years Ended December 31,
1999
2000
2001
$
(5,610
)
$
(5,198
)
$
(4,386
)
2,046
3,303
7,713
1,325
—
—
1,157
—
6,996
260
435
2,906
633
4,188
4,381
(1,196
)
(9,727
)
(8,649
)
—
22,379
31,881
1
17
(2
)
(7,847
)
(23,572
)
(39,482
)
(2,976
)
1,921
(4,668
)
(36
)
(63
)
(515
)
(232
)
68
2,652
1,195
3,772
11,700
—
1,745
(7,548
)
1,676
(1,334
)
(342
)
42
480
(958
)
(9,562
)
(1,586
)
1,679
—
—
(16,314
)
(1,656
)
(2,350
)
(4,497
)
—
(91,793
)
(12,971
)
(1,656
)
(94,143
)
(33,782
)
—
(18
)
(94
)
76,675
48,180
18,000
(5,338
)
(1,405
)
(1,261
)
(37,596
)
(2,500
)
(147,861
)
(82,270
)
—
—
59,519
52,000
177,340
(157
)
(485
)
1,087
10,833
95,772
47,211
(385
)
43
15,108
888
503
546
$
503
$
546
$
15,654
$
3,269
$
5,853
$
10,149
$
2,723
$
4,640
$
14,054
$
3,773
$
—
$
—
$
273
$
2,544
$
2,116
$
—
$
109
$
142
$
—
$
16,644
$
6,120
—
81,315
14,579
—
1,036
200
—
(4,693
)
(4,787
)
—
—
(3,141
)
—
(2,509
)
—
$
—
$
91,793
$
12,971
See accompanying notes to consolidated financial statements.
36
Table of Contents
AMN HEALTHCARE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(1) Summary of Significant Accounting
Policies
(a) General
On April 19, 2001, AMN Holdings, Inc.
changed its name to AMN Healthcare Services, Inc. (Services).
Services was incorporated in Delaware on November 10, 1997.
On December 4, 1997, Services acquired 80% of the
outstanding common stock of AMN Healthcare, Inc. (AMN). On
November 18, 1998, AMN purchased 100% of Medical Express,
Inc. (MedEx). Pursuant to a share exchange completed on
October 18, 1999, AMN became a wholly owned subsidiary of
Services. On June 28, 2000, AMN purchased 100% of Nurses
RX, Inc. (NRx). On November 28, 2000, AMN purchased 100% of
Preferred Healthcare Staffing, Inc. (PHS). On May 1, 2001,
AMN purchased 100% of O’Grady-Peyton International (USA),
Inc. (OGP). On July 1, 2001, MedEx and PHS were collapsed
into AMN. Also on July 1, 2001, NRx changed its name to
Worldview Healthcare, Inc. (Worldview). Services, AMN, Worldview
and OGP collectively are referred to herein as the Company. The
Company recruits nurses and allied health professionals and
places them on temporary assignments at hospitals and other
healthcare facilities throughout the United States.
(b) Principles
of Consolidation
The accompanying consolidated financial
statements include the accounts of Services, AMN, Worldview and
OGP. All significant intercompany balances and transactions have
been eliminated in consolidation.
(c) Minority
Interest
On October 18, 1999, the minority
stockholder of AMN exchanged its shares of AMN for shares of
Services resulting in the elimination of the minority interest
in AMN and the consolidation of all of the AMN shareholder
interests in the Services shareholder group. Services’ only
asset was its investment in AMN, and no other assets or
consideration was exchanged in this transaction. The relative
ownership interests in Services and AMN before and after this
event remained the same. Following this exchange, AMN became a
wholly owned subsidiary. The exchange of shares was accounted
for at historical cost and purchase accounting was not applied.
The assets, liabilities and earnings of AMN and its subsidiary,
MedEx, are consolidated in the accompanying financial
statements, and the ownership interests of the minority
stockholder of AMN is reported as minority interest through
October 18, 1999.
(d) Cash
and Cash Equivalents
The Company considers all highly liquid
investments with an original maturity of three months or less to
be cash equivalents. Cash and cash equivalents include currency
on hand, deposits with financial institutions and highly liquid
investments. At December 31, 2000 and 2001, the Company had
$434,000 and $6,785,000 respectively, in deposits with major
financial institutions that exceeded the federally insured limit
of $100,000.
(e) Short-Term
Held-to-Maturity Investments
The Company invests in highly liquid instruments
with strong credit ratings. Investments with a maturity greater
than three months, but less than one year, at the time of
purchase are considered to be short-term investments. All
short-term investments are classified as held-to-maturity
because the Company has the ability and intent to hold the
securities until maturity. Held-to-maturity securities are
stated at amortized cost. Premiums and discounts are amortized
or accreted over the life of the related held to maturity
investment as adjustments to yield using the effective interest
rate method.
37
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(f) Fixed
Assets
Furniture, equipment, leasehold improvements and
software are stated at cost. Equipment acquired under capital
leases are stated at the present value of the future minimum
lease payments. Additions and improvements are capitalized and
maintenance and repairs are expensed when incurred. Depreciation
on furniture, equipment and software is calculated using the
straight-line method based on the estimated useful lives of the
related assets (generally three to five years). Leasehold
improvements and equipment obtained under capital leases are
amortized over the shorter of the term of the lease or the
useful life. Amortization of equipment obtained under capital
leases is included in depreciation in the accompanying
consolidated financial statements.
(g) Goodwill
The excess of purchase price over the fair value
of the net assets of entities acquired is recorded as goodwill
and amortized on a straight-line basis over the estimated period
of future benefit of 25 years. The Company assesses the
recoverability of this intangible asset by determining whether
the amortization of the goodwill balance over its remaining life
can be recovered through future operating cash flows of the
acquired operation. The amount of goodwill impairment, if any,
is measured based on the projected discounted future operating
cash flows using a discount rate reflecting the Company’s
average cost of funds. The assessment of the recoverability of
goodwill will be impacted if estimated future operating cash
flows are not achieved. On January 1, 2002, the Company
adopted Statement of Financial Accounting Standard
(SFAS) No. 142,
Goodwill and Other Intangible
Assets
and ceased amortization of goodwill (see
Note 1(t)).
(h) Other
Intangibles
Other intangibles consist of debt issuance costs
related to notes payable and the Company’s credit facility,
and to non-compete covenants. Debt issuance costs are deferred
and amortized to interest expense using the effective interest
method over the respective term of the notes and credit
facility. Non-compete covenants were recorded as a result of
acquisitions and are amortized over the life of the related
agreements.
(i) Concentration
of Credit Risk
The majority of the Company’s business
activity is with hospitals located throughout the United States.
Credit is extended based on the evaluation of each entity’s
financial condition and collateral is generally not required.
Credit losses have been within management’s expectations.
(j) Revenue
Recognition
Revenue is recognized in the period in which
services are provided. Provisions for discounts to customers and
other adjustments are provided for in the period the related
revenue is recorded.
(k) Advertising
Expenses
Advertising costs are expensed as incurred.
(l) Income
Taxes
The Company records income taxes using the asset
and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in operations in the period
that includes the enactment date.
38
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(m) Impairment
of Long-Lived Assets
Long-lived assets and certain identifiable
intangibles are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount
of an asset to future net cash flows, undiscounted and without
interest, expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.
(n) Fair
Value of Financial Instruments
The carrying amounts of cash and cash
equivalents, short-term held-to-maturity investments, accounts
receivable, income taxes receivable, other current assets,
deposits, bank overdraft, accounts payable and accrued expenses,
accrued compensation and benefits and other current liabilities
approximates their respective fair values due to the short-term
nature and liquidity of these financial instruments.
(o) Common
Stock Split
On November 19, 1999, the Company effected a
200-for-1 stock split of its common stock. On October 18,
2001, the Company effected a 43.10849-for-1 stock split of its
common stock. All references in the consolidated financial
statements to number of shares outstanding, price per share and
per share amounts related to Services have been retroactively
restated to reflect the stock splits for all periods presented.
(p) Stock-Based
Compensation
The Company applies the intrinsic value-based
method of accounting prescribed by Accounting Principles Board
(APB) Opinion No. 25,
Accounting for Stock Issued to
Employees
, and related interpretations including Financial
Accounting Standards Board (FASB) Interpretation No. 44,
Accounting for Certain Transactions involving Stock
Compensation an interpretation of APB Opinion No. 25
to
account for its stock option plans. Under this method,
compensation expense for fixed plans is measured on the date of
grant only if the then current market price of the underlying
stock exceeded the exercise price and is recorded on a
straight-line basis over the applicable vesting period.
Compensation expense for variable plans is recorded at the end
of each reporting period until the related performance criteria
is met in accordance with FIN No. 28, and is measured based
on the excess of the then current market price of the underlying
stock over the exercise price. SFAS No. 123,
Accounting
for Stock-Based Compensation
, established accounting and
disclosure requirements using a fair value-based method of
accounting for stock-based employee compensation plans. As
allowed by SFAS No. 123, the Company has elected to
continue to apply the intrinsic value-based method of accounting
described above, and has adopted the disclosure requirements of
SFAS No. 123.
(q) Net
Loss per Common Share
Basic net loss per common share is calculated by
dividing net loss by the weighted average number of common
shares outstanding during the reporting period. Diluted net loss
per common share reflects the effects of potentially dilutive
securities (common stock options and warrants).
Options to purchase 5,182,000 and 5,815,000
shares of common stock at December 31, 2000 and 2001,
respectively, and warrants to purchase 2,518,000 shares of
common stock at December 31, 1999 and 2000 and during the
year ended December 31, 2001 were not included in the
calculation of diluted net loss per common share because the
effect of these instruments was anti-dilutive. There were no
outstanding warrants at December 31, 2001.
39
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(r) Other
Comprehensive Income
SFAS No. 130,
Reporting Comprehensive
Income
, establishes rules for the reporting of comprehensive
income and its components. The Company’s net loss is the
same as total comprehensive loss for the years ended
December 31, 1999, 2000 and 2001.
(s) Derivative
Instruments
The Company adopted Statement of Financial
Accounting Standards No. 133
Accounting for Derivative
Instruments and Hedging Activities
(SFAS 133) on
January 1, 2001. SFAS 133 requires that all derivative
instruments be recorded on the balance sheet at fair value.
Gains or losses resulting from changes in the values of those
derivatives are accounted for depending upon the use of the
derivative and whether it qualifies for hedge accounting. The
Company uses derivative instruments to manage the fluctuations
in cash flows resulting from interest rate risk on variable-rate
debt financing. These instruments include interest swap and cap
agreements. The Company does not hold or issue derivative
financial instruments for trading purposes. Prior to the
adoption of SFAS 133, net gains or losses were recorded monthly
on the date earned and were included in interest expense in the
consolidated statements of operations. As the Company did not
meet the extensive documentation and administration requirements
of SFAS 133, the Company determined it did not qualify for hedge
accounting treatment on its existing derivatives.
Although the Company’s interest rate swap
and cap agreements were designated as cash flow hedges, the
Company did not apply hedge accounting treatment. As SFAS 133
requires that all unrealized gains and losses on derivatives not
qualifying for hedge accounting be recognized currently through
earnings, the Company accounted for all of its interest rate
swap and cap agreements in this manner. Upon adoption of
SFAS 133 on January 1, 2001, the Company recorded a
transition adjustment in the amount of $589,000 to accumulated
other comprehensive loss per SFAS 133 transition
guidelines, and began amortizing the transition adjustment to
interest expense over the term of the related agreements of four
years. Of the $589,000 transition adjustment, $123,000 was
amortized to interest expense during fiscal 2001.
In November 2001, the Company paid $896,000 to
terminate all derivative instrument agreements. The unamortized
value of the transition adjustment at the time the derivative
instrument agreements were terminated of $466,000 was
reclassified from other comprehensive loss to interest expense.
The Company recorded a net gain of $140,000, through interest
expense, on the change in fair value of its interest rate swap
and cap contracts during the year ended December 31, 2001.
(t) New
Accounting Pronouncements
In July 2001, the FASB issued SFAS No. 141,
Business Combinations
, and SFAS No. 142,
Goodwill
and Other Intangible Assets
. SFAS No. 141 requires the
use of the purchase method for all business combinations
initiated after June 30, 2001 and provides guidance on
purchase accounting related to the recognition of intangible
assets and accounting for negative goodwill. SFAS No. 142
changes the accounting for goodwill from an amortization method
to an impairment-only approach. Under SFAS No. 142,
goodwill will be tested annually and whenever events or
circumstances occur indicating that goodwill might be impaired.
The Company adopted the provisions of SFAS
No. 142 as of January 1, 2002. Upon adoption of SFAS
No. 142, the Company ceased amortization of goodwill and
performed the two-step transitional impairment test. SFAS
No. 142 requires the impairment test be applied to the
relevant “reporting unit” which may differ from the
specific entities acquired from which the goodwill arose. Due to
the integrated nature of the Company’s operations and lack
of differing economic characteristics between the Company’s
subsidiaries, the entire Company was determined to be one single
reporting unit. Under the provisions of SFAS No. 142, the
40
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Company performed the transitional goodwill
impairment assessment which resulted in no impairment to the
carrying value of goodwill as of January 1, 2002.
(u) Segment
Information
SFAS No. 131,
Disclosures about Segments
of an Enterprise and Related Information
, establishes annual
and interim reporting standards for an enterprise’s
operating segments and related disclosures about its products,
services, geographic areas and major customers. An operating
segment is defined as a component of an enterprise that engages
in business activities from which it may earn revenues and incur
expenses, and about which separate financial information is
regularly evaluated by the chief operating decision maker in
deciding how to allocate resources. This statement allows
aggregation of similar operating segments into a single
operating segment if the businesses are considered similar under
the criteria of this statement. For all periods presented, the
Company believes it operated in a single segment, temporary
healthcare staffing.
(v) Use
of Estimates
The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make a number of
estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(w) Reclassifications
Certain amounts in the 2000 consolidated
financial statements have been reclassified to conform to the
2001 presentation.
(2) Common Stock Offering
In November 2001, the Company issued 11,500,000
shares of its common stock (common stock offering) in an initial
public offering and raised proceeds of $177,340,000, net of
issuance costs. In connection with the common stock offering,
the underwriters exercised their over-allotment option
representing 1,500,000 shares of the issued common stock. The
Company used the net proceeds from the common stock offering for
general corporate purposes and included the repayment of
indebtedness of $145,182,000 in November 2001 (see Note 7).
(3) Leveraged Recapitalization
On November 19, 1999, Services consummated a
leveraged recapitalization (the 1999 Recapitalization) pursuant
to which the Company’s outstanding debt and capital stock
were restructured. As part of the 1999 Recapitalization, the
Company obtained $70.0 million in new and senior debt
financing and $20.0 million in new debt financing through
the issuance of senior subordinated notes. The Company also sold
15,647,000 shares to AMN Acquisition Corp. (Acquisition), a
newly-formed entity created by the new majority stockholder to
effect the 1999 Recapitalization, for cash consideration of
$59.5 million. Acquisition acquired an additional 3,413,000
shares directly from existing shareholders for cash
consideration of $13.0 million. After the reorganization,
Acquisition held 19,060,000 shares of Services, representing a
93.5% ownership interest. Existing stockholders retained shares
representing the remaining 6.5% ownership interest in Services.
Proceeds from the equity and debt financing were used to retire
existing debt, repurchase stock of existing stockholders and pay
fees and expenses incurred in connection with the
recapitalization. These transactions were recognized as capital
and debt transactions with no change to recorded amounts for
existing assets and liabilities. On March 29, 2001, AMN
Acquisition Corp. was merged into AMN Healthcare Services, Inc.
41
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
In conjunction with the 1999 Recapitalization,
the Company incurred the following charges which are included in
the 1999 results of operations: (i) an extraordinary loss
of $730,000 (net of tax benefit of $427,000) from the retirement
of debt outstanding prior to the 1999 Recapitalization; and
(ii) transaction costs of $12,404,000 comprised of bonus
payments and option buyouts of $6,503,000, a warrant buyout of
$1,077,000 and professional service fees of $4,824,000
(including the payment of $2,587,000 to the majority stockholder
of Services). In addition, the Company incurred $5,050,000 in
financing costs, which were recorded as deferred financing costs
and amortized over the term of the related debt.
(4) Acquisitions
(a) AMN
On December 4, 1997, Services acquired 80%
of the outstanding common stock of AMN for total consideration
of $33,513,000. The transaction has been accounted for in the
accompanying consolidated financial statements using the
purchase method of accounting, and the assets and liabilities of
AMN were recorded at fair value as of the acquisition date. In
connection with this transaction, the Company recorded goodwill
of $26,985,000, which is being amortized over 25 years.
Also in connection with this transaction, the Company borrowed
$25,151,000 from a bank and incurred deferred financing costs
totaling $1,084,000, which were being amortized over the life of
the loans until the 1999 Recapitalization when they were written
off.
On November 18, 1998, in connection with the
acquisition of MedEx, Services acquired an additional 2.77% of
AMN for $2,050,000.
(b) MedEx
On November 18, 1998, Services acquired 100%
of the issued and outstanding stock of MedEx in exchange for
2,638,000 shares of Services common stock valued at $3,448,000
and cash of $16,362,000, for a total purchase price of
$19,809,000. The transaction was accounted for using the
purchase method of accounting, and the assets and liabilities of
MedEx were recorded at fair value as of the acquisition date. In
connection with this transaction, the Company recorded goodwill
of $15,332,000, which is being amortized over 25 years.
(c) NRx
On June 28, 2000, AMN acquired 100% of the
issued and outstanding stock of NRx. The acquisition was
recorded using the purchase method of accounting. Thus, the
results of operations from the acquired assets are included in
the Company’s consolidated financial statements from the
acquisition date. The purchase price to the former shareholders
of NRx included a payment of $16,181,000 in cash and $3,000,000
to be paid in three equal installments of $1,000,000 each on
June 29, 2001, June 28, 2002, and June 30, 2003,
provided that the terms of the agreement are met. Since the
deferred payment in the amount of $3,000,000 is not interest
bearing, AMN recorded the present value of the future payments
on the date of the acquisition utilizing an interest rate of
9.5%. In June 2001, the Company paid the first installment of
$1,000,000. As of December 31, 2001, the present value of
the amount due on June 29, 2002 is $955,000 and is included
in other current liabilities. As of December 31, 2001, the
present value of the amounts due on June 30, 2003 is
$876,000 and is included in other long-term liabilities.
AMN acquired NRx’s assets of $4,239,000,
assumed its liabilities of $1,610,000, and recorded goodwill in
the amount of $15,484,000, which is being amortized over
25 years. AMN allocated $836,000 of the purchase price to
the noncompete covenant, which is being amortized over the
four-year life of the covenant. As of December 31, 2000 and
2001, the unamortized cost of the covenant was $730,000 and
$521,000, respectively.
42
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(d) PHS
On November 28, 2000, AMN acquired 100% of
the issued and outstanding stock of PHS. The acquisition was
recorded using the purchase method of accounting. Thus, the
results of operations from the acquired assets are included in
the Company’s consolidated financial statements from the
acquisition date. The purchase price to the former stockholders
of PHS included a payment of $75,041,000 in cash (net of cash
received), of which $4,000,000 was delivered to an escrow agent
on the acquisition date in accordance with the purchase
agreement. The funds held in escrow were released to the former
shareholder in the amount of $2,000,000 on May 31, 2001 and
$2,000,000 on December 31, 2001.
AMN acquired PHS’s assets of $12,405,000
(net of cash received), assumed its liabilities of $3,083,000,
and recorded goodwill in the amount of $65,831,000, which is
being amortized over 25 years. AMN allocated $200,000 to
the noncompete covenant, which is being amortized over the
four-year life of the covenant. As of December 31, 2000 and
2001, the unamortized cost of this covenant was $195,000 and
$145,000, respectively.
(e) OGP
On May 1, 2001, AMN acquired 100% of the
issued and outstanding stock of OGP, a healthcare staffing
company specializing in the recruitment of nurses domestically
and from English-speaking foreign countries. The acquisition was
recorded using the purchase method of accounting. Thus, the
results of operations from the acquired assets are included in
the Company’s consolidated financial statements from the
acquisition date. The purchase price paid to the former
stockholders of OGP included a payment of $12,971,000 in cash
(net of cash received), and $800,000 which was delivered to an
escrow agent on the acquisition date in accordance with the
purchase agreement. The funds held in escrow are to be released
to the former shareholders on November 1, 2002, provided
that terms of the agreement are met. The OGP acquisition was
financed by an $18,000,000 term loan bearing interest at a rate
of either the higher of (i) the federal funds rate plus
0.5%, (ii) the prime rate plus 2% or (iii) LIBOR plus
3.75%, depending on the composition of the loan. This loan was
paid in full in November 2001 with the proceeds from the common
stock offering (see Note 7).
Included in the asset purchase agreement is an
earn-out provision whereby AMN agreed to pay the OGP selling
stockholders additional consideration contingent on certain
annual revenue results of OGP. The Company accrued $3,141,000
for this earn-out provision and has recorded this amount as
additional goodwill and other current liabilities as of
December 31, 2001. Earn-out payments, if earned, are capped
at $5,340,000 and are to be paid in April 2002. There is also
additional contingent consideration of up to $2,369,000
dependant upon collection of an outstanding receivable from a
customer if received prior to May 2002.
AMN acquired OGP’s assets of $6,120,000 (net
of cash received), assumed its liabilities of $4,787,000, and
recorded goodwill in the amount of $14,579,000, including the
$3,141,000 earn-out provision accrual, which is being amortized
over 25 years. AMN allocated $200,000 of the purchase price
to the noncompete agreement, which is being amortized over the
four-year life of the agreement. As of December 31, 2001,
the unamortized cost of this covenant was $171,000.
(f) Pro
Forma Consolidated Results of Operations
The following summary presents pro forma
consolidated results of operations for the years ended
December 31, 1999, 2000, and 2001 as if the NRx, PHS and
OGP acquisitions described above had occurred on January 1,
1999. The following unaudited pro forma financial information
gives effect to certain adjustments, including the amortization
of intangible assets and interest expense on acquisition debt
and depreciation on fixed assets. The pro forma financial
information is not necessarily indicative of the operating
results that would have occurred had the acquisitions been
consummated as of the dates indicated, nor are they necessarily
indicative of future operating results (in thousands, except per
share amounts).
43
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(5) Balance Sheet Details
The consolidated balance sheets detail is as
follows as of December 31, 2000 and 2001 (in thousands):
44
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Included in fixed assets is equipment acquired
through capital leases in the amount of $109,000 and $251,000 as
of December 31, 2000 and 2001, respectively. Accumulated
amortization on these capital leases is $48,000 and $85,000 as
of December 31, 2000 and 2001, respectively.
(6) Income Taxes
The provision (benefit) for income taxes for the
years ended December 31, 1999, 2000, and 2001 consists of
the following (in thousands):
45
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The Company’s income tax expense (benefit)
differs from the amount that would have resulted from applying
the federal statutory rate of 35% to pretax income (loss)
because of the effect of the following items during the years
ended December 31, 1999, 2000, and 2001 (in thousands):
The tax effects of temporary differences that
give rise to significant portions of deferred tax assets and
deferred tax liabilities are presented below as of
December 31, 2000, and 2001 (in thousands):
Management believes it is more likely than not
that the results of the future operations will generate
sufficient taxable income to realize the deferred tax assets
and, accordingly, has not provided a valuation allowance.
All outstanding debt at December 31, 2000
was repaid in full in fiscal 2001. Of the $147,861,000 of
payments made on notes payable during fiscal 2001, $145,182,000
was paid with proceeds from the November
46
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
2001 common stock offering. In connection with
the pay-off of these notes, the Company wrote off the following:
$2,054,000 of unamortized discount on senior subordinated notes,
$4,894,000 of loans fees and $320,000 of deferred financing
costs. The Company also incurred a pre-payment penalty of
$997,000 in connection with the extinguishment of debt. These
items have been reflected net of tax in the accompanying
consolidated statement of operations as an extraordinary loss on
extinguishment of debt. The Company had no outstanding debt at
December 31, 2001.
Notes payable consisted of the following:
The Company’s outstanding debt instruments
at December 31, 2000 were secured by all assets of the
Company and the common stock of its subsidiaries.
During 2000, the Company entered into interest
rate swap agreements as a means to hedge its interest rate
exposure on debt instruments. In addition, the Company’s
credit agreement required that the Company maintain protection
against fluctuations in interest rates providing coverage in an
aggregate notional amount equal to $25,000,000. At
December 31, 2000, the Company had three interest rate
swaps outstanding with major financial institutions that
effectively converted variable-rate debt to fixed rate. Two
swaps had notional amounts of $25,000,000 each, whereby the
Company paid fixed rates of 6.585% and 6.57%, respectively, and
47
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
received a floating three-month LIBOR. The third
swap had a notional amount of $40,000,000, which decreased by
$325,000 at the end of each three-month period beginning
December 29, 2000. Under this agreement, the Company paid a
fixed rate of 6.5% and received a floating three-month LIBOR.
All agreements were to expire in December 2001 and no initial
investments were made to enter into these agreements. These
agreements were terminated in November 2001.
Effective December 6, 1999, the Company
entered into a three-year interest rate cap agreement. The
agreement applied to $25,000,000, which was 50% of the term loan
outstanding on that date. The agreement provided a 7% interest
rate cap on the three-month LIBOR rate. The cost of the
agreement of $289,000 was included in deferred financing costs,
and was amortized over the three-year term of the agreement.
This agreement was terminated in November 2001.
In conjunction with the 1999 Recapitalization,
$37,412,000 of notes payable were repaid in 1999 with proceeds
from the new borrowings. In connection with the early pay-off of
these notes, debt issuance costs of $1,157,000 were written off
and are reflected net of tax in the accompanying consolidated
statements of operations for the year ended December 31,
1999 as an extraordinary loss on extinguishment of debt.
On January 26, 1998, the Company entered
into an interest rate collar agreement with a bank to reduce the
impact of changes in interest rates on its floating rate
long-term debt. The agreement required the Company to make
payments to the bank for the difference between the selected
interest rate, based on a three-month LIBOR, and the floor rate
as specified in the agreement. In addition, the agreement
entitled the Company to receive payments from the bank for the
difference between the selected interest rate, based on
three-month LIBOR, and the cap rate as specified in the
agreement. On November 19, 1999, the Company paid $25,000
to terminate this agreement.
In November 2001, the Company entered into the
Amended and Restated Credit Agreement (Credit Agreement) with
various lenders. This credit agreement provides for borrowings
up to $50 million under a revolving credit agreement, which
includes up to $10 million of borrowings under letter of
credit obligations and up to $10 million of borrowings
under swingline loans. Borrowings are secured by the
Company’s pledged assets of facilities and properties owned
or leased and the Company’s capital stock. The revolving
credit agreement provides for various interest rates depending
on the type of borrowing (5.25%-5.5% at December 31, 2001)
and is due quarterly. The revolving credit agreement carries an
unused fee of .5% per annum. The letter of credit obligations
provides for various interest rates depending on when the type
of borrowing is paid off (6.25%-6.5% at December 31, 2001)
and is due annually. The swingline loans provides for interest
at a base rate (4.75%-5% at December 31, 2001) and is due
quarterly. The Company’s amended and restated credit
agreement contains a minimum fixed charge coverage ratio, a
maximum leverage ratio and other customary covenants. At
December 31, 2001, the Company had no borrowings under the
credit agreement. The credit agreement expires on
November 16, 2004.
The Company maintains the AMN Healthcare
Retirement Savings Plan (the AMN Plan), a profit sharing plan
that complies with the Internal Revenue Code
Section (IRC) 401(k) provisions. The AMN Plan covers
substantially all employees that meet certain age and other
eligibility requirements. An annual discretionary matching
contribution is determined by the Board of Directors each year
and may be up to a maximum 6% of eligible compensation paid to
all participants during the plan year. The amount of the
employer contributions was $213,000, $422,000 and $1,139,000 for
the years ended December 31, 1999, 2000 and 2001,
respectively. Employees of PHS became eligible under the AMN
Plan at the date of acquisition.
48
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
NRx maintained a separate profit sharing plan and
OGP maintained a separate salary deferral plan. Both plans
complied with the Internal Revenue Code Section 401(k)
provisions and covered substantially all employees that met
certain age and service requirements. No matches were provided
under this plan. Effective January 1, 2001, NRx employees
were eligible to participate in the AMN Plan and the NRx plan
was terminated. Effective January 1, 2002, OGP employees
were eligible to participate in the AMN Plan and the OGP plan
was terminated.
In January 2002, the Company established The
Executive Nonqualified Excess Plan of AMN Healthcare, Inc. (the
Executive Plan), a deferred compensation plan that replaces the
AMN Plan for certain executives and which complies with the
IRC 401(k) provisions. The Executive Plan covers employees
that meet certain eligibility requirements. An annual
discretionary matching contribution will be determined by the
Board of Directors each year.
(9) Stockholders’ Equity
In July 2001, the 2001 stock option plan (2001
Plan) was established to provide a means to attract and retain
employees. The maximum number of options to be granted under the
plan is 2,178,000. Unless the plan is otherwise modified, a
maximum of 544,500 options may be granted in any calendar year.
Exercise prices will be determined at the time of grant and will
be no less than fair market value. The options shall vest and
become exercisable in increments of 25% on each of the first
four anniversaries of the date of grant. The plan expires on the
tenth anniversary of the effective date. At December 31,
2001, 1,545,000 shares of common stock were reserved for
future grants related to the 2001 Plan.
In November 1999, Services established two
performance stock option plans (the 1999 Plans) to provide for
the grant of options to upper management of AMN. Options for a
maximum of 4,040,000 shares of common stock were authorized
at an exercise price of $3.80 per option for grants within
120 days of the 1999 Recapitalization and not less than the
fair market value in the case of subsequent grants. Options
under the plan vest 25% per year beginning in 2000 if certain
earnings performance criteria are met and the grantee remains an
employee. If the Company does not meet the performance criteria
for the particular year, that portion of the option, which was
eligible to become vested, will terminate. Options that vest
expire in nine to ten years from the grant date. During 2000,
options for an additional 1,493,000 shares were reserved
under the 1999 Plans. At December 31, 2000 and 2001,
351,000 shares of common stock were reserved for future
grants related to the 1999 Plans. Pursuant to the amended
provisions of the 1999 Plans, all options previously granted
under the 1999 Plans became fully vested upon the November 2001
common stock offering and are exercisable over a four-year term.
In December 1997, AMN established a stock
incentive plan to provide an equity-based incentive plan to
certain officers and key employees. Options for a maximum of
10,400,000 shares of common stock were authorized. In
conjunction with the 1999 Recapitalization, all options
previously granted related to this plan were repurchased by the
Company for $3,953,000, which is included in transaction costs
for the year ended December 31, 1999 in the accompanying
consolidated statements of operations.
In accordance with the provisions of SFAS
No. 123, the Company applies APB Opinion No. 25 and
related interpretations in accounting for its 1999 Plans and
2001 Plan. Accordingly, because the 1999 Plans were performance
based and certain grants under the 2001 Plan were granted at
less than fair market value, the Company recorded compensation
expense of $22,379,000 and $31,881,000 in 2000 and 2001,
respectively.
49
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
A summary of stock option activity under the 1999
Plans and the 2001 Plan are as follows:
The following table summarizes options
outstanding and exercisable as of December 31, 2001:
Under SFAS No. 123, the weighted average per
share fair value of the options granted during 1999, 2000 and
2001 was $0.97, $1.83 and $9.90, respectively, on the date of
grant. Fair value under SFAS No. 123 is determined using
the Black-Scholes option-pricing model with the following
assumptions:
50
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Had compensation expense been recognized for
stock-based compensation plans in accordance with SFAS
No. 123, the Company would have recorded the following net
loss and net loss per share amounts (in thousands, except per
share amounts):
(b) Common
Stock Warrants
On November 19, 1999, in connection with the
issuance of its $20,000,000 senior subordinated notes, Services
issued warrants to purchase 2,518,000 shares of its common stock
at $3.80 per share. These warrants were exercisable upon
issuance and were to expire at the earlier of a qualified public
stock offering, as defined, or November 19, 2009. The fair
value of the warrants of $3,000,000 was based upon a third-party
valuation and was recorded as a discount to the related senior
subordinated notes payable. This discount was amortized to
interest expense over the term of the notes using the effective
interest method. Discount amortization was $58,000, $468,000 and
$420,000 in 1999, 2000 and 2001, respectively. In conjunction
with the November 2001 common stock offering, these warrants
were converted into 1,955,000 shares of common stock. The
warrants were converted using the market value of the stock at
the first date of the common stock offering of $17 per share and
563,000 warrants were forfeited in this cashless exercise.
On December 5, 1997, AMN granted warrants to
purchase 19,000 shares of AMN’s common stock, at $12.45 per
share, to a bank in connection with certain loans. The warrants
were immediately exercisable and were to expire ten years from
the date of issuance. In conjunction with the 1999
Recapitalization, these warrants were repurchased by the Company
for $1,077,000, which is included in transaction costs for the
year ended December 31, 1999 in the accompanying
consolidated statements of operations.
(c) Stockholders’
Agreement
The stockholders of Services entered into various
stockholders’ agreements and a registration rights
agreement conferring certain rights and restrictions, including
among others: restrictions on transfers of shares, “tag
along” and “drag along” rights, rights to acquire
shares, and piggyback registration rights, as defined in the
agreement. These agreements each terminated upon the November
2001 common stock offering pursuant to the terms of such
agreements and were replaced with a single registration rights
agreement with similar terms among the same parties.
(10) Related Party Transactions
(a) Majority
stockholder
During 2000 and 2001, the Company paid an
affiliate of the majority stockholders a fee for management
advisory services provided to the Company in the amounts of
$150,000 and $113,000, respectively, which is included in
selling, general and administrative expenses. At the completion
of the Company’s common stock offering in November 2001,
the Company paid a fee to this affiliate of $1,955,000 and the
agreement governing these fees was then terminated. This
advisory fee is included as transaction costs for the year ended
December 31, 2001 in the accompanying consolidated
statement of operations.
In June 2000, the Company issued shares to a
controlling stockholder as consideration for an aggregate
capital contribution of $10,061,000 in connection with the
Company’s acquisition of NRx. In November 2000, the Company
issued shares to this same stockholder as consideration for an
aggregate capital contribution of $35,600,000 in connection with
the Company’s acquisition of PHS. Also in connection with
the acquisition of
51
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
PHS, the Company paid $1,500,000 to an affiliate
of the controlling stockholder in exchange for advisory
services. This advisory fee is included as transaction costs for
the year ended December 31, 2000 in the accompanying
consolidated statement of operations.
In November 1999, the Company paid $3,700,000 to
a controlling stockholder to reimburse it for expenses incurred
in the Company’s 1999 recapitalization. Also in connection
with the Company’s 1999 recapitalization, the Company paid
$1,500,000 in advisory fees and $32,000 in out-of-pocket
expenses to its previous majority stockholder. These costs are
included as transaction costs for the year ended
December 31, 1999 in the accompanying consolidated
statement of operations.
(b) Minority
stockholders
In June 2000, the Company issued shares to two
minority stockholders as consideration for aggregate capital
contributions of $1,320,000 and $619,000 in connection with the
acquisition of NRx. In November 2000, the Company issued shares
to one of the minority stockholders as consideration for an
aggregate capital contribution of $4,400,000 in connection with
the acquisition of PHS.
In connection with the Company’s 1999
recapitalization, the Company paid $100,000 in advisory fees to
a minority stockholder.
The Company received services from an advertising
agency which was 30% owned by a minority stockholder during
1999, 2000 and 2001. The Company incurred expenses of $31,000,
$40,000 and $39,000 in 1999, 2000 and 2001, respectively related
to these services.
(11) Commitments and
Contingencies
(a) Legal
The Company is party to legal actions in the
normal course of business. In the opinion of management and
legal counsel, the outcome of legal actions will not have a
material impact on the financial position or results of
operations of the Company.
52
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(b) Leases
The Company leases certain office facilities and
equipment under various operating and capital leases that expire
over the next five years. Future minimum lease payments under
noncancelable operating leases (with initial or remaining lease
terms in excess of one year) and future minimum capital lease
payments as of December 31, 2001 are as follows (in
thousands):
Obligations under capital leases are included in
other current and other long-term liabilities, respectively, in
the accompanying financial statements. Rent expense was
$1,077,000, $1,810,000 and $3,282,000 for the years ended
December 31, 1999, 2000, and 2001, respectively.
(12) Quarterly Financial Data
(Unaudited)
53
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
54
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Pro Forma
Years Ended December 31,
1999
2000
2001
$
229,864
$
326,355
$
528,376
$
235
$
8,492
$
17,547
$
(7,822
)
$
(4,221
)
$
1,315
$
(8,553
)
$
(4,221
)
$
(4,141
)
$
(0.39
)
$
(0.19
)
$
(0.14
)
21,715
22,497
30,641
December 31,
2000
2001
$
64,331
$
108,658
(930
)
(3,242
)
$
63,401
$
105,416
$
3,538
$
6,025
2,798
4,974
432
621
6,768
11,620
(1,762
)
(3,907
)
$
5,006
$
7,713
$
123,622
$
138,204
(5,199
)
(10,452
)
$
118,423
$
127,752
$
6,742
$
633
1,136
1,336
7,878
1,969
(1,323
)
(468
)
$
6,555
$
1,501
Table of Contents
December 31,
2000
2001
$
6,915
$
11,517
1,285
4,857
767
3,352
475
2,132
1,575
2,107
$
11,017
$
23,965
December 31,
1999
2000
2001
$
(103
)
$
5,954
$
6,032
—
1,213
1,475
(103
)
7,167
7,507
(925
)
(8,550
)
(7,566
)
(271
)
(1,177
)
(1,275
)
(1,196
)
(9,727
)
(8,841
)
$
(1,299
)
$
(2,560
)
$
(1,334
)
Table of Contents
December 31,
1999
2000
2001
$
(2,418
)
$
(2,715
)
$
(2,002
)
(210
)
24
130
730
—
—
464
—
—
—
171
168
—
—
127
135
(40
)
243
$
(1,299
)
$
(2,560
)
$
(1,334
)
December 31,
2000
2001
$
8,453
$
20,402
1,454
—
1,026
—
461
815
425
421
314
1,221
506
433
12,639
23,292
(1,232
)
(2,601
)
(633
)
(447
)
(209
)
(838
)
(2,074
)
(3,886
)
$
10,565
$
19,406
(7)
Notes Payable and Related Derivative
Instruments and Credit Agreement
(a)
Notes Payable and Related Derivative
Instruments
Table of Contents
December 31,
2000
2001
(in thousands)
$
20,000
$
—
2,818
—
15,045
—
47,500
—
32,500
—
7,500
—
125,363
—
(2,474
)
—
122,889
—
(7,500
)
—
$
115,389
$
—
Table of Contents
(b)
Credit Agreement
(8)
Retirement Plans
Table of Contents
(a)
Stock Option Plans
Table of Contents
1999 Plans
2001 Plan
Weighted-
Weighted-
Options
Average
Options
Average
Outstanding
Exercise Price
Outstanding
Exercise Price
—
$
—
—
$
—
3,636,000
3.80
—
—
—
—
—
—
—
—
—
—
3,636,000
3.80
—
—
1,546,000
6.30
—
—
—
—
—
—
—
—
—
—
5,182,000
4.55
—
—
—
—
633,000
9.46
—
—
—
—
—
—
—
—
5,182,000
$
4.55
633,000
$
9.46
—
$
—
—
$
—
Options Outstanding
Options Exercisable
Weighted-
Weighted-
Average
Weighted-
Average
Weighted-
Remaining
Average
Remaining
Average
Exercise
Number
Contractual
Exercise
Number
Contractual
Exercise
Price
Outstanding
Life (Years)
Price
Outstanding
Life (Years)
Price
$
3.80
3,838,000
8
$
3.80
—
—
$
—
6.68
1,344,000
8
6.68
—
—
—
5,182,000
—
$
9.09
547,000
9
$
9.09
—
—
$
—
11.92
86,000
10
11.92
—
—
—
633,000
—
1999
2000
2001
5
5
5
5.95
%
5.30
%
4.39
%
60
%
60
%
60
%
0
%
0
%
0
%
Table of Contents
1999
2000
2001
$
(5,610
)
$
(4,992
)
$
(6,645
)
$
(0.26
)
$
(0.22
)
$
(0.22
)
Table of Contents
Table of Contents
Capital
Operating
Leases
Leases
$
141
$
4,139
89
2,817
16
1,613
3
741
249
$
9,310
(12
)
237
(133
)
$
104
Year Ended December 31, 2001
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter(a)
Total Year
(In thousands, except per share data)
$
103,055
$
116,114
$
137,939
$
160,686
$
517,794
$
25,126
$
29,809
$
34,840
$
39,735
$
129,510
$
655
$
1,174
$
2,749
$
(3,509
)
$
1,069
$
655
$
1,174
$
2,749
$
(8,964
)
$
(4,386
)
$
0.02
$
0.04
$
0.10
$
(0.10
)
$
0.04
$
0.02
$
0.04
$
0.10
$
(0.25
)
$
(0.14
)
Table of Contents
Year Ended December 31, 2000
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
Total Year
(In thousands, except per share data)
$
44,951
$
46,045
$
60,717
$
79,053
$
230,766
$
11,381
$
11,137
$
16,466
$
21,174
$
60,158
$
(1,546
)
$
(2,560
)
$
194
$
(1,286
)
$
(5,198
)
$
(1,546
)
$
(2,560
)
$
194
$
(1,286
)
$
(5,198
)
$
0.07
$
(0.12
)
$
0.01
$
(0.05
)
$
(0.23
)
$
0.07
$
(0.12
)
$
0.01
$
(0.05
)
$
(0.23
)
(a)
Fourth quarter 2001 net loss includes an
after-tax extraordinary charge of $5.5 million ($0.15 per
share) for the early extinguishment of debt.
Table of Contents
| Item 9. | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure |
In February 2000, in connection with our recapitalization, our board of directors elected to change our independent auditors from Deloitte & Touche LLP to KPMG LLP. In connection with Deloitte & Touche LLP’s audit of the financial statements for the year ended December 31, 1998, there were no disagreements with Deloitte & Touche LLP on any matters of accounting principles or practices, financial statement disclosures or auditing scope or procedures, nor any reportable events. Deloitte & Touche LLP’s report on our financial statements for the year ended December 31, 1998 contained no adverse opinions or disclaimers of opinion and was not modified or qualified as to uncertainty, audit scope or accounting principles. We have provided Deloitte & Touche LLP with a copy of the disclosure contained in this section of this Annual Report on Form 10K. Prior to retaining KPMG LLP, we did not consult with KPMG LLP regarding the application of accounting principles to a specified transaction or the type of audit opinion that might be rendered on our financial statements.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required by this item is incorporated by reference to the Proxy Statement to be distributed in connection with our next annual meeting of stockholders.
Item 11. Executive Compensation
Information required by this item is incorporated by reference to the Proxy Statement to be distributed in connection with our next annual meeting of stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required by this item is incorporated by reference to the Proxy Statement to be distributed in connection with our next annual meeting of stockholders.
Item 13. Certain Relationships and Related Transactions
Information required by this item is incorporated by reference to the Proxy Statement to be distributed in connection with our next annual meeting of stockholders.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of the report.
(1) Consolidated Financial Statements
(2) Financial Statement Schedules
Schedule II — Valuation and
Qualifying Accounts
55
(3) Exhibits
56
57
(b) Reports on
Form 8-K
58
Independent Auditors’ Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders’
Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Table of Contents
Exhibit
Number
Description
3.1
Amended and Restated Certificate of Incorporation
of AMN Healthcare Services, Inc.*
3.2
By-laws of AMN Healthcare Services, Inc.*
4.1
Specimen Stock Certificate.*
4.2
Registration Rights Agreement, dated as of
November 16, 2001, among the Registrant, HWH Capital
Partners, L.P., HWH Nightingale Partners, L.P.,
HWP Nightingale Partners II, L.P., HWP Capital
Partners II, L.P., BancAmerica Capital Investors SBIC I,
L.P., the Francis Family Trust dated May 24, 1996 and
Steven Francis.*
10.1
Acquisition Agreement, dated as of
October 1, 1999, among the Registrant, AMN Healthcare,
Inc., AMN Acquisition Corp., Olympus Growth Fund II, L.P.,
Olympus Growth Executive Fund, L.P., Steven Francis, as Trustee
of the Francis Family Trust dated May 24, 1996, Gayle
Francis, as Trustee of the Francis Family Trust dated
May 24, 1996, Todd Johnson and Deborah Johnson.**
10.2
Stock Purchase Agreement, dated as of
June 23, 2000, by and between AMN Healthcare, Inc., Suzanne
Confoy and George Robert Kraus, Jr.**
10.3
Stock Purchase Agreement, dated as of
October 12, 2000, by and between AMN Healthcare, Inc. and
Preferred Employers Holdings, Inc.**
10.4
Stock Purchase Agreement, dated as of
April 3, 2001, by and between AMN Healthcare, Inc., Joseph
O’Grady and Teresa O’Grady-Peyton.**
10.5
Note and Warrant Purchase Agreement, dated as of
November 19, 1999, between the Registrant and BancAmerica
Capital Investors SBIC I, L.P.**
10.6
First Amendment to Note and Warrant Purchase
Agreement, dated as of November 21, 2000, by and among the
Registrant and BancAmerica Capital Investors SBIC I, L.P.**
10.7
Subscription Agreement, dated as of
November 28, 2000, between the Registrant and BancAmerica
Capital Investors SBIC I, L.P.**
10.8
Warrant Agreement, dated as of November 19,
1999, among the Registrant, BancAmerica Capital Investors
SBIC I, L.P. and each of the warrantholders who are or may
become a party thereto.**
10.9
AMN Holdings, Inc. 1999 Performance Stock Option
Plan, as amended.**
10.10
AMN Holdings, Inc. 1999 Super-Performance Stock
Option Plan, as amended.**
10.11
AMN Healthcare Services, Inc. 2001 Stock Option
Plan.**
10.12
Employment and Non-Competition Agreement, dated
as of November 19, 1999, among AMN Holdings, Inc., AMN
Acquisition Corp. and Steven Francis.**
10.13
Executive Severance Agreement, dated as of
November 19, 1999, between AMN Healthcare, Inc. and
Susan Nowakowski.**
10.14
Executive Severance Agreement, dated as of
May 21, 2001, between AMN Healthcare, Inc. and Donald
Myll.**
10.15
1999 Performance Stock Option Plan Stock Option
Agreement, dated as of November 19, 1999, between the
Registrant and Steven Francis.**
10.16
Amendment, dated as of December 13, 2000, to
the 1999 Performance Stock Option Plan Stock Option Agreement,
dated as of November 19, 1999, between the Registrant and
Steven Francis.**
10.17
Amendment No. 2, dated as of July 24,
2001, to the 1999 Performance Stock Option Plan Stock Option
Agreement, dated as of November 19, 1999, as amended
December 13, 2000, between the Registrant and Steven Francis.**
10.18
1999 Super-Performance Stock Option Plan Stock
Option Agreement, dated as of November 19, 1999, between
the Registrant and Steven Francis.**
10.19
Amendment, dated as of December 13, 2000, to
the Super-Performance Stock Option Plan Stock Option Agreement,
dated as of November 19, 1999, between the Registrant and
Steven Francis.**
Table of Contents
Exhibit
Number
Description
10.20
Amendment No. 2, dated as of July 24,
2001, to the 1999 Super-Performance Stock Option Plan Stock
Option Agreement, dated as of November 19, 1999, as amended
December 13, 2000, between the Registrant and Steven
Francis.**
10.21
1999 Performance Stock Option Plan Stock Option
Agreement, dated as of November 19, 1999, between the
Registrant and Susan Nowakowski.**
10.22
Amendment, dated as of December 13, 2000, to
the 1999 Performance Stock Option Plan Stock Option Agreement,
dated as of November 19, 1999, between the Registrant and
Susan Nowakowski.**
10.23
Amendment No. 2, dated as of July 24,
2001, to the 1999 Performance Stock Option Plan Stock Option
Agreement, dated as of November 19, 1999, as amended
December 13, 2000, between the Registrant and Susan
Nowakowski.**
10.24
1999 Super-Performance Stock Option Plan Stock
Option Agreement, dated as of November 19, 1999, between
the Registrant and Susan Nowakowski.**
10.25
Amendment, dated as of December 13, 2000, to
the Super-Performance Stock Option Plan Stock Option Agreement,
dated as of November 19, 1999, between the Registrant and
Susan Nowakowski.**
10.26
Amendment No. 2, dated as of July 24,
2001, to the 1999 Super-Performance Stock Option Plan Stock
Option Agreement, dated as of November 19, 1999, as amended
December 13, 2000, between the Registrant and Susan
Nowakowski.**
10.27
1999 Performance Stock Option Plan Stock Option
Agreement, dated as of November 20, 2000, between the
Registrant and Susan Nowakowski.**
10.28
Amendment, dated as of July 24, 2001, to the
1999 Performance Stock Option Plan Stock Option Agreement, dated
as of November 20, 2000, between the Registrant and Susan
Nowakowski.**
10.29
1999 Super-Performance Stock Option Plan Stock
Option Agreement, dated as of November 20, 2000, between
the Registrant and Susan Nowakowski.**
10.30
Amendment, dated as of July 24, 2001, to the
1999 Super-Performance Stock Option Plan Stock Option Agreement,
dated as of November 20, 2000, between the Registrant and
Susan Nowakowski.**
10.31
1999 Performance Stock Option Plan Stock Option
Agreement, dated as of December 13, 2000, between the
Registrant and Steven Francis.**
10.32
Amendment, dated as of July 24, 2001, to the
1999 Performance Stock Option Plan Stock Option Agreement, dated
as of December 13, 2000, between the Registrant and Steven
Francis.**
10.33
1999 Super-Performance Stock Option Plan Stock
Option Agreement, dated as of December 13, 2000, between
the Registrant and Steven Francis.**
10.34
Amendment, dated as of July 24, 2001, to the
1999 Super-Performance Stock Option Plan Stock Option Agreement,
dated as of December 13, 2000, between the Registrant and
Steven Francis.**
10.35
1999 Performance Stock Option Plan Stock Option
Agreement, dated as of December 13, 2000, between the
Registrant and Susan Nowakowski.**
10.36
Amendment, dated as of July 24, 2001, to the
1999 Performance Stock Option Plan Stock Option Agreement, dated
as of December 13, 2000, between the Registrant and Susan
Nowakowski.**
10.37
1999 Super-Performance Stock Option Plan Stock
Option Agreement, dated as of December 13, 2000, between
the Registrant and Susan Nowakowski.**
10.38
Amendment, dated as of July 24, 2001, to the
1999 Super-Performance Stock Option Plan Stock Option Agreement,
dated as of December 13, 2000, between the Registrant and
Susan Nowakowski.**
10.39
2001 Stock Option Plan Stock Option Agreement,
dated as of May 21, 2001, between the Registrant and Donald
Myll.**
10.40
AMN Healthcare Services, Inc. 2001 Senior
Management Bonus Plan.**
10.41
Amended and Restated Financial Advisory
Agreement, dated as of November 16, 2001, between the
Registrant and Haas Wheat & Partners, L.P.*
Table of Contents
Exhibit
Number
Description
10.42
Amended and Restated Credit Agreement, dated as
of November 16, 2001, by and among AMN Healthcare, Inc., as
borrower, AMN Healthcare Services, Inc., Worldview Healthcare,
Inc. and O’Grady-Peyton International (USA), Inc., as
guarantors, and the lenders party thereto.*
16.1
Letter from Deloitte & Touche LLP regarding
change in certifying accountant.**
21.1
Subsidiaries of the Registrant.**
23.1
Independent Auditors’ Report on Schedule and
Consent.*
24.1
Power of Attorney (included on signature pages).
*
Filed herewith.
**
Incorporated by reference to the exhibits filed
with the Registrant’s Registration Statement on
Form S-1 (File No. 333-65168).
No reports on Form 8-K were filed during the
quarter ended December 31, 2001.
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| AMN HEALTHCARE SERVICES, INC. | |
| /s/ STEVEN FRANCIS | |
|
_________________________________________
Name: Steven Francis |
| Title: | Director, President and Chief Executive |
| Officer |
We, the undersigned officers and directors of AMN Healthcare Services, Inc., hereby severally constitute Steven Francis, Susan Nowakowski and Donald Myll and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, any and all amendments to this Annual Report on Form 10-K, and generally do all such things in our name and behalf in such capacities to enable AMN Healthcare Services, Inc. to comply with the applicable provisions of the Securities Exchange Act of 1934, and all requirements of the Securities and Exchange Commission, and we hereby ratify and confirm our signatures as they may be signed by our said attorneys, or any of them, to any and all such amendments.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated and on the 15th day of March, 2002.
| /s/ ROBERT HAAS | |
|
_________________________________________
Name: Robert Haas |
|
| Title: Chairman of the Board and Director | |
| /s/ STEVEN FRANCIS | |
|
_________________________________________
Name: Steven Francis |
| Title: | Director, President and Chief Executive Officer |
| /s/ MICHAEL GALLAGHER | |
|
_________________________________________
Name: Michael Gallagher |
|
| Title: Director | |
| /s/ WILLIAM MILLER III | |
|
_________________________________________
Name: William Miller III |
|
| Title: Director | |
| /s/ ANDREW STERN | |
|
_________________________________________
Name: Andrew Stern |
|
| Title: Director | |
| /s/ DOUGLAS WHEAT | |
|
_________________________________________
Name: Douglas Wheat |
|
| Title: Director | |
| /s/ DONALD MYLL | |
|
_________________________________________
Name: Donald Myll |
| Title: | Chief Accounting Officer and Chief |
| Financial Officer |
59
Table of Contents
Schedule II
AMN HEALTHCARE SERVICES, INC.
VALUATION AND QUALIFYING ACCOUNTS
(*) Accounts written off
Balance at the
Balance
Beginning
Provision from
at End
Allowance for Doubtful Accounts
of Year
Provision
Acquisitions
Deductions(*)
of Year
(in thousands)
$
135
$
260
—
$
(139
)
$
256
$
256
$
435
$
441
$
(202
)
$
930
$
930
$
2,906
$
171
$
(765
)
$
3,242
See accompanying independent auditors’ report
60