SEC Company Response from AMN HEALTHCARE SERVICES INC (AMN) (CIK 0001142750) (AMN) — Jan 10, 2020
AMN HEALTHCARE SERVICES INC (AMN) (CIK 0001142750)
Date: Jan. 10, 2020 · CIK: 0001142750 · Accession: 0000950142-20-000087
AI Filing Summary & Sentiment
File numbers found in text: 001-167533
Referenced dates: December 19, 2019
Letter
VIA EDGAR Office of Trade & Services Securities and Exchange Commission Form 10-K for the Year Ended December 31, 2018 Filed February 21, 2019 Form 8-K filed October 31, 2019 File No. 001-167533
Dear Ms. Geddes:
AMN Healthcare Services, Inc. (the “Company”) is submitting this letter in response to the written comments of the staff (the “Staff”) of the Securities and Exchange Commission, dated December 19, 2019, with respect to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and the Company’s Current Report on Form 8-K filed October 31, 2019.
For the convenience of the Staff, set forth below are the Staff’s comments followed by the Company’s responses thereto.
Form 10-K for Fiscal Year Ended December 31, 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
Operating Activities, page 27
1.
Please quantify all variance factors cited pursuant to section 501.04 of staff's Codification of Financial Reporting so that investors may readily understand the magnitude of each. Also, please note citing factors such as operating results and changes in balance sheet items may not provide a sufficient basis to understand how operating cash between comparative periods was affected and varied. In this regard, supplement your analysis with the material drivers underlying the factors cited, as appropriate. Refer to section IV.B.1 of Release No. 33-8350 for guidance.
The Company respectfully acknowledges the Staff’s comment. In future filings, the Company will enhance its disclosure of operating cash flow to quantify all variance factors cited pursuant to section 501.04 of the Codification of Financial Reporting.
An example of disclosure we would include in future filings, as it relates to net cash provided by operating activities for 2018 compared to 2017, would read as follows:
Net cash provided by operating activities for 2018, 2017 and 2016 was $227.0 million, $160.5 million and $133.9 million, respectively. The increase in net cash provided by operating activities for 2018 from 2017 was primarily attributable to (1) increases in accounts payable and accrued expenses between periods of $25.0 million due to timing of payments and an increase in accruals related to the probable settlements of two legal matters, (2) a decrease in income taxes receivable between periods of $30.6 million due to an overpayment of estimated tax in 2017 that offset income tax liability in 2018, and (3) a decrease in prepaid expenses between periods of $6.8 million due to lower insurance prepayments and timing of payments. Our Days Sales Outstanding was 64 and 63 days at December 31, 2018 and December 31, 2017, respectively.
Form 8-K filed October 31, 2019 pursuant to Item 2.02
Press Release by the Company on October 31, 2019 for the Quarterly Period Ended
September 30, 2019 (Exh. 99.1)
Reconciliation of Non-GAAP Items, page 9
2.
Please revise the format of your non-GAAP reconciliations here and for the applicable guidance to reconcile from the most comparable GAAP measure to the corresponding non-GAAP measure for equal or greater prominence of the GAAP measure. Refer to Question 102.10 of the staff’s Compliance and Disclosure Interpretations “Non-GAAP Financial Measures” for guidance.
The Company respectfully acknowledges the Staff’s comment. In future earnings releases, the Company will revise the format of its non-GAAP reconciliations to reconcile from the most comparable GAAP measure to the corresponding non-GAAP measure for equal or greater prominence of the GAAP measure.
An example of the format we would use in future earnings releases, as it relates to the reconciliation of net income to Adjusted EBITDA for the three months ended June 30, 2019 and the three and nine months ended September 30, 2019 and guidance for the three months ended December 31, 2019, would appear as follows:
AMN Healthcare Services, Inc.
Supplemental Financial and Operating Data
(dollars in thousands, except per share data and operating data)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
Revenue
Nurse and allied solutions
$
362,533
$
306,292
$
331,627
$
1,031,189
$
977,199
Locum tenens solutions
84,164
101,102
82,074
246,728
311,516
Other workforce solutions
120,900
119,448
121,476
357,298
318,724
$
567,597
$
526,842
$
535,177
$
1,635,215
$
1,607,439
Reconciliation of Non-GAAP Items:
Net income
$
23,515
$
27,918
$
28,869
86,506
$
106,128
Income tax expense
8,394
10,068
10,222
23,873
30,163
Income before income taxes
31,909
37,986
39,091
110,379
136,291
Interest expense, net, and other
7,830
4,649
6,065
19,568
16,360
Income from operations
39,739
42,635
45,156
129,947
152,651
Depreciation and amortization
17,085
11,296
12,718
41,513
29,788
Share-based compensation (1)
2,825
1,809
3,702
11,713
7,954
Acquisition, integration, and other costs (2)
9,602
(452
)
5,156
18,787
1,474
Legal settlement accrual increases (3)
—
12,140
—
—
12,140
Adjusted EBITDA (4)
$
69,251
$
67,428
$
66,732
$
201,960
$
204,007
Adjusted EBITDA margin (5)
12.2
%
12.8
%
12.5
%
12.4
%
12.7
%
Segment operating income (6)
Nurse and allied solutions
$
47,544
$
42,165
$
48,694
$
144,160
$
137,906
Locum tenens solutions
6,156
10,992
7,128
18,985
34,321
Other workforce solutions
27,806
29,010
27,127
81,121
77,437
81,506
82,167
82,949
244,266
249,664
Unallocated corporate overhead
12,255
14,739
16,217
42,306
45,657
Adjusted EBITDA (4)
$
69,251
$
67,428
$
66,732
$
201,960
$
204,007
AMN Healthcare Services, Inc.
Additional Supplemental Non-GAAP Disclosures
Reconciliation of Guidance Operating Margin to
Guidance Adjusted EBITDA Margin
(unaudited)
Three Months Ended
December 31, 2019
Operating margin
8.2
%
Depreciation and amortization
3.0
%
EBITDA margin
11.2
%
Share-based compensation
0.6
%
Acquisition, integration, and other costs
0.2
%
Adjusted EBITDA margin (7)
12.0
%
————————
(1)
Share-based compensation for the nine months ended September 30, 2019 was impacted by two modifications during the first quarter and effective in 2019, a new vesting condition that resulted in accelerated expense recognition.
(2)
Acquisition, integration, and other costs of $9,602,000 and $18,787,000 for the three and nine months ended September 30, 2019, respectively, include net increases in the fair value of contingent consideration liabilities for recently acquired companies of $4,441,000 and $2,283,000, respectively, and extraordinary legal expenses of approximately $2,100,000 and $6,700,000, respectively. Beginning in 2019, we exclude the impact of extraordinary legal expenses from the calculation of adjusted EBITDA because we believe that these expenses are not indicative of the Company’s operating performance.
(3)
During the third quarter of 2018, the Company recorded increases to its legal accruals established in connection with settlement agreements entered into during September and October 2018 in two class actions related to wage and hour claims, both of which were paid during 2019. For the three months ended September 30, 2018, the increases amounted to $12,140,000. Since the settlements are largely unrelated to the Company’s operating performance, we excluded the impact on adjusted EBITDA and adjusted diluted EPS for the three months ended September 30, 2018. Amounts recorded in prior quarters in these two class actions and legal accruals related to other matters are immaterial and their impact was not excluded from adjusted EBITDA or adjusted diluted EPS.
(4)
Adjusted EBITDA represents net income plus interest expense (net of interest income) and other, income tax expense, depreciation and amortization, acquisition and integration costs, extraordinary legal expenses, legal settlement accrual increases and share-based compensation. Management believes that adjusted EBITDA provides an effective measure of the Company’s results, as it excludes certain items that management believes are not indicative of the Company’s operating performance and is a measure used in the Company’s credit agreement and the indentures governing our 5.125% Senior Notes due 2024 and our 4.625% Senior Notes due 2027. Adjusted EBITDA is not intended to represent cash flows for the period, nor has it been presented as an alternative to income from operations or net income as an indicator of operating performance. Although management believes that some of the items excluded from adjusted EBITDA are not indicative of the Company’s operating performance, these items do impact the statement of comprehensive income, and management therefore utilizes adjusted EBITDA as an operating performance measure in conjunction with GAAP measures such as net income.
(5)
Adjusted EBITDA margin represents adjusted EBITDA divided by revenue.
(6)
Segment operating income represents net income plus interest expense (net of interest income) and other, income tax expense, depreciation and amortization, unallocated corporate overhead, acquisition and integration costs, extraordinary legal expenses, legal settlement accrual increases and share-based compensation.
(7)
Guidance percentage metrics are approximate.
* * *
If you have any questions regarding these responses, please do not hesitate to contact the undersigned at (858) 350-3271 or Todd Champeau at (858) 509-3527.
Very truly yours,
/s/ Brian M. Scott
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AMN Healthcare Services, Inc.
12400 High Bluff Drive
Suite 100
San Diego, California 92130
January 10, 2020
VIA EDGAR
Amy Geddes
Office of Trade & Services
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re:
AMN Healthcare Services, Inc.
Form 10-K for the Year Ended December 31, 2018
Filed February 21, 2019
Form 8-K filed October 31, 2019
File No. 001-167533
Dear Ms. Geddes:
AMN Healthcare Services, Inc. (the “Company”) is submitting this letter in response to the written comments of the
staff (the “Staff”) of the Securities and Exchange Commission, dated December 19, 2019, with respect to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and the Company’s Current Report on Form 8-K filed October
31, 2019.
For the convenience of the Staff, set forth below are the Staff’s comments followed by the Company’s responses
thereto.
Form 10-K for Fiscal Year Ended December 31, 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
Operating Activities, page 27
1.
Please quantify all variance factors cited pursuant to section 501.04 of staff's Codification of Financial
Reporting so that investors may readily understand the magnitude of each. Also, please note citing factors such as operating results and changes in balance sheet items may not provide a sufficient basis to understand how operating cash
between comparative periods was affected and varied. In this regard, supplement your analysis with the material drivers underlying the factors cited, as appropriate. Refer to section IV.B.1 of Release No. 33-8350 for guidance.
The Company respectfully acknowledges the Staff’s comment. In future filings, the Company will enhance its disclosure of operating cash
flow to quantify all variance factors cited pursuant to section 501.04 of the Codification of Financial Reporting.
An example of disclosure we would include in future filings, as it relates to net cash provided by operating activities for 2018
compared to 2017, would read as follows:
Net cash provided by operating activities for 2018, 2017 and 2016 was $227.0 million, $160.5 million and $133.9 million, respectively.
The increase in net cash provided by operating activities for 2018 from 2017 was primarily attributable to (1) increases in accounts payable and accrued expenses between periods of $25.0 million due to timing of payments and an increase in accruals
related to the probable settlements of two legal matters, (2) a decrease in income taxes receivable between periods of $30.6 million due to an overpayment of estimated tax in 2017 that offset income tax liability in 2018, and (3) a decrease in
prepaid expenses between periods of $6.8 million due to lower insurance prepayments and timing of payments. Our Days Sales Outstanding was 64 and 63 days at December 31, 2018 and December 31, 2017, respectively.
Form 8-K filed October 31, 2019 pursuant to Item 2.02
Press Release by the Company on October 31, 2019 for the Quarterly Period Ended
September 30, 2019 (Exh. 99.1)
Reconciliation of Non-GAAP Items, page 9
2.
Please revise the format of your non-GAAP reconciliations here and for the applicable guidance to
reconcile from the most comparable GAAP measure to the corresponding non-GAAP measure for equal or greater prominence of the GAAP measure. Refer to Question 102.10 of the staff’s Compliance and Disclosure Interpretations “Non-GAAP Financial
Measures” for guidance.
The Company respectfully acknowledges the Staff’s comment. In future earnings releases, the Company will revise the format of its
non-GAAP reconciliations to reconcile from the most comparable GAAP measure to the corresponding non-GAAP measure for equal or greater prominence of the GAAP measure.
An example of the format we would use in future earnings releases, as it relates to the reconciliation of net income to Adjusted EBITDA
for the three months ended June 30, 2019 and the three and nine months ended September 30, 2019 and guidance for the three months ended December 31, 2019, would appear as follows:
AMN Healthcare Services, Inc.
Supplemental Financial and Operating Data
(dollars in thousands, except per share data and operating data)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
2019
2018
2019
2019
2018
Revenue
Nurse and allied solutions
$
362,533
$
306,292
$
331,627
$
1,031,189
$
977,199
Locum tenens solutions
84,164
101,102
82,074
246,728
311,516
Other workforce solutions
120,900
119,448
121,476
357,298
318,724
$
567,597
$
526,842
$
535,177
$
1,635,215
$
1,607,439
Reconciliation of Non-GAAP Items:
Net income
$
23,515
$
27,918
$
28,869
86,506
$
106,128
Income tax expense
8,394
10,068
10,222
23,873
30,163
Income before income taxes
31,909
37,986
39,091
110,379
136,291
Interest expense, net, and other
7,830
4,649
6,065
19,568
16,360
Income from operations
39,739
42,635
45,156
129,947
152,651
Depreciation and amortization
17,085
11,296
12,718
41,513
29,788
Share-based compensation (1)
2,825
1,809
3,702
11,713
7,954
Acquisition, integration, and other costs (2)
9,602
(452
)
5,156
18,787
1,474
Legal settlement accrual increases (3)
—
12,140
—
—
12,140
Adjusted EBITDA (4)
$
69,251
$
67,428
$
66,732
$
201,960
$
204,007
Adjusted EBITDA margin (5)
12.2
%
12.8
%
12.5
%
12.4
%
12.7
%
Segment operating income (6)
Nurse and allied solutions
$
47,544
$
42,165
$
48,694
$
144,160
$
137,906
Locum tenens solutions
6,156
10,992
7,128
18,985
34,321
Other workforce solutions
27,806
29,010
27,127
81,121
77,437
81,506
82,167
82,949
244,266
249,664
Unallocated corporate overhead
12,255
14,739
16,217
42,306
45,657
Adjusted EBITDA (4)
$
69,251
$
67,428
$
66,732
$
201,960
$
204,007
AMN Healthcare Services, Inc.
Additional Supplemental Non-GAAP Disclosures
Reconciliation of Guidance Operating Margin to
Guidance Adjusted EBITDA Margin
(unaudited)
Three Months Ended
December 31, 2019
Operating margin
8.2
%
Depreciation and amortization
3.0
%
EBITDA margin
11.2
%
Share-based compensation
0.6
%
Acquisition, integration, and other costs
0.2
%
Adjusted EBITDA margin (7)
12.0
%
————————
(1)
Share-based compensation for the nine months ended September 30, 2019 was impacted by two modifications during the first quarter and effective in 2019, a new vesting condition
that resulted in accelerated expense recognition.
(2)
Acquisition, integration, and other costs of $9,602,000 and $18,787,000 for the three and nine months ended September 30, 2019, respectively, include net increases in the fair
value of contingent consideration liabilities for recently acquired companies of $4,441,000 and $2,283,000, respectively, and extraordinary legal expenses of approximately $2,100,000 and $6,700,000, respectively. Beginning in 2019, we
exclude the impact of extraordinary legal expenses from the calculation of adjusted EBITDA because we believe that these expenses are not indicative of the Company’s operating performance.
(3)
During the third quarter of 2018, the Company recorded increases to its legal accruals established in connection with settlement agreements entered into during September and
October 2018 in two class actions related to wage and hour claims, both of which were paid during 2019. For the three months ended September 30, 2018, the increases amounted to $12,140,000. Since the settlements are largely unrelated to
the Company’s operating performance, we excluded the impact on adjusted EBITDA and adjusted diluted EPS for the three months ended September 30, 2018. Amounts recorded in prior quarters in these two class actions and legal accruals
related to other matters are immaterial and their impact was not excluded from adjusted EBITDA or adjusted diluted EPS.
(4)
Adjusted EBITDA represents net income plus interest expense (net of interest income) and other, income tax expense, depreciation and amortization, acquisition and integration
costs, extraordinary legal expenses, legal settlement accrual increases and share-based compensation. Management believes that adjusted EBITDA provides an effective measure of the Company’s results, as it excludes certain items that
management believes are not indicative of the Company’s operating performance and is a measure used in the Company’s credit agreement and the indentures governing our 5.125% Senior Notes due 2024 and our 4.625% Senior Notes due 2027.
Adjusted EBITDA is not intended to represent cash flows for the period, nor has it been presented as an alternative to income from operations or net income as an indicator of operating performance. Although management believes that some
of the items excluded from adjusted EBITDA are not indicative of the Company’s operating performance, these items do impact the statement of comprehensive income, and management therefore utilizes adjusted EBITDA as an operating
performance measure in conjunction with GAAP measures such as net income.
(5)
Adjusted EBITDA margin represents adjusted EBITDA divided by revenue.
(6)
Segment operating income represents net income plus interest expense (net of interest income) and other, income tax expense, depreciation and amortization, unallocated corporate
overhead, acquisition and integration costs, extraordinary legal expenses, legal settlement accrual increases and share-based compensation.
(7)
Guidance percentage metrics are approximate.
* * *
If you have any questions regarding these responses, please do not hesitate to contact the
undersigned at (858) 350-3271 or Todd Champeau at (858) 509-3527.
Very truly yours,
/s/ Brian M. Scott
Brian M. Scott
Chief Financial Officer
AMN Healthcare Services, Inc.
cc:
Doug Jones
Securities and Exchange Commission
John C. Kennedy, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison LLP