# AMN Healthcare Services Inc: Form 10-Q for the period ended Mar 31, 2012

- Company: [AMN Healthcare Services Inc](/companies/amn.md) (CIK 1142750)
- Form: 10-Q
- Filed: 2012-05-04
- Accepted by EDGAR: May 4, 2012, 15:48 ET
- Period: 2012-03-31
- Accession: 0001193125-12-211818
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1142750/000119312512211818/d329203d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1142750/000119312512211818/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2012-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2012-01-01 to 2012-03-31 | $226.4m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2012-01-01 to 2012-03-31 | $163.2m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2012-01-01 to 2012-03-31 | $63.2m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2012-01-01 to 2012-03-31 | $47.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2012-01-01 to 2012-03-31 | $12.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2012-01-01 to 2012-03-31 | $5.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2012-01-01 to 2012-03-31 | $3.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2012-01-01 to 2012-03-31 | $4.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2012-01-01 to 2012-03-31 | $0.09 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2012-01-01 to 2012-03-31 | $0.09 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2012-01-01 to 2012-03-31 | 46,164,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2012-01-01 to 2012-03-31 | $9.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2012-01-01 to 2012-03-31 | $1.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2012-03-31 | $4.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2012-03-31 | $201.9m | us-gaap:AssetsCurrent |
| Total assets | at 2012-03-31 | $524.0m | us-gaap:Assets |
| Current liabilities | at 2012-03-31 | $105.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2012-03-31 | $359.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2012-03-31 | $140.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 31,514 characters.

The following discussion should be read in conjunction with, and is qualified in its entirety by, our consolidated financial statements and the notes thereto and other financial information included elsewhere herein and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, filed with the Securities and Exchange Commission on March 9, 2012 (“2011 Annual Report”). 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.” We undertake no obligation to update the forward-looking statements in this filing. References in this filing to “AMN Healthcare,” the “Company,” “we,” “us” and “our” refer to AMN Healthcare Services, Inc. and its wholly owned subsidiaries.

### Overview

We are the nation’s innovator in healthcare workforce solutions, providing managed services and recruitment and placement of physicians, nurses and allied healthcare professionals into temporary and permanent positions with clients throughout the United States. Our clients include acute and sub-acute care hospitals, government facilities, community health centers and clinics, physician practice groups, and several other healthcare-related settings. Our clients utilize our workforce solutions and our healthcare staffing services to cost-effectively manage their clinical workforce needs, both temporary and permanent. Our managed services program enables healthcare organizations to increase their efficiency by managing all of their clinical supplemental recruitment needs through one company.

We conduct business through three reportable segments: nurse and allied healthcare staffing, locum tenens staffing and physician permanent placement services.

For the three months ended March 31, 2012, we recorded revenue of $226.4 million, as compared to $215.8 million for the same period last year. We recorded net income of $4.3 million for the three months ended March 31, 2012, as compared to $2.3 million for the same period last year.

Nurse and allied healthcare staffing segment revenues comprised 68% and 62% of total consolidated revenues in the first quarter of 2012 and 2011, respectively. Through our nurse and allied healthcare staffing segment, we provide hospital and other healthcare facilities with a range of clinical workforce solutions, including: (1) a comprehensive managed services solution in which we manage all of the temporary nursing and allied needs of a client; (2) traditional clinical staffing solutions of variable assignment lengths; and (3) a recruitment process outsourcing program that leverages our expertise and support systems to replace or complement a client’s existing internal recruitment function for permanent placement needs.

Locum tenens staffing segment revenues comprised 28% and 33% of total consolidated revenues in the first quarter of 2012 and 2011, respectively. Through our locum tenens staffing segment, we place physicians of all specialties, as well as dentists, certified registered nurse anesthetists, physician assistants and nurse practitioners, with clients on a temporary basis as independent contractors. These locum tenens physicians and other professionals are used by our healthcare facility and physician practice group clients to fill temporary vacancies created by vacation and leave schedules and to bridge the gap while they seek permanent candidates or explore expansion. Our locum tenens clients represent a diverse group of healthcare organizations throughout the United States, including hospitals, medical groups, occupational medical clinics, individual practitioners, networks, psychiatric facilities, government institutions and managed care entities. The professionals we place are recruited nationwide and are typically placed on multi-week contracts with assignment lengths ranging from a few days up to one year.

Physician permanent placement services segment revenues comprised 4% and 5% of total consolidated revenues in the first quarter of 2012 and 2011, respectively. Through our physician permanent placement services segment, we assist hospitals and physician practice groups throughout the United States in identifying and recruiting physicians for permanent placement. We perform the vast majority of our services on a retained basis, through our Merritt Hawkins brand, for which we are generally paid through a blend of retained hourly, marketing and placement fees. To a smaller degree, we also perform our services on a contingent basis, exclusively through our Kendall & Davis brand, for which fees are paid once physician candidates are ultimately hired by our clients. Our broad specialty offerings include over 70 specialist and sub-specialist opportunities such as internal medicine, family practice and orthopedic surgery.

In January 2012, we completed the sale of our home healthcare services segment. Accordingly, its results of operations were recorded as discontinued operations for the three months ended March 31, 2012 and 2011.

### Management Initiatives

Our growth strategy focuses on providing an innovative and differentiated value and experience to our clients and healthcare professionals. To accomplish this, we have broadened our service offerings beyond our traditional travel nurse and allied temporary staffing, locum tenens staffing, and physician permanent placement services, to include more strategic and recurring revenue sources from innovative clinical workforce solutions offerings such as managed services programs and recruitment process outsourcing. Through these differentiated services, we have built strategic relationships with our clients to assist them in improving their financial, operational and patient care results through productivity and candidate quality enhancements. We continually seek strategic opportunities to expand into complementary service offerings that leverage our core capabilities of recruiting and credentialing clinical professionals, while providing a more recurring stream of revenues that reduces our exposure to economic cycle risk.

### Recent Trends

Toward the end of 2008, demand decreased considerably in the nurse and allied healthcare staffing segment, reaching a low point in 2009, due to widespread and unprecedented economic conditions. Travel nurse demand improved throughout 2010 and 2011, but remained below peak levels experienced in 2007 through 2008. In 2011, we experienced broad based increased travel nurse demand across both managed services program clients and traditional contract clients, as well as across specialties and geographies. The demand growth has been particularly strong for specialty nurses for which there is limited supply. We continue to see our hospital clients migrate to managed services program relationships, and during 2011 we saw revenues from these contracts represent a third of our nurse and allied healthcare staffing business, a substantial increase from 1% in 2008. As a result of these managed service relationships, we have an improved ability to fill the demand and create operational efficiencies.

Within the allied staffing business, in response to the strength in demand for several supply-constrained therapy disciplines and continued weakness in demand for imaging technicians, our mix of business has continued to shift towards therapy staffing.

In our locum tenens staffing segment, generally, market demand in 2011 remained consistent with 2010. Moving into 2012, as a result of market demand and operational changes, we are experiencing improving margins due primarily to more favorable bill rates while holding pay rates relatively stable.

Throughout most of 2011, our physician permanent placement services segment demand remained constrained as we believe clients responded to weak economic conditions and budget pressure by, among other things, utilizing their internal resources for recruiting efforts and limiting their use of external retained permanent placement services. At the beginning of 2012, we have seen an increase in market demand as well as our recruiter productivity.

In 2010, Congress passed the Patient Protection and Affordable Care Act, providing for extensive healthcare reform. The measure is being legally challenged and, if sustained, many of its reforms are scheduled to be phased in over a number of years. Accordingly, many questions remain concerning the impact of this legislation, including to what extent it will cause the government to assume a larger role in the healthcare system, expand healthcare coverage of Americans, and/or impose new and potentially significant restrictions on reimbursement. Given these open questions, we cannot predict the impact of the legislation on our clients or the direct or indirect impact on us. The implementation of such healthcare reforms in their current form would impact our clients and may affect certain aspects of our business, including through: (1) changes to provider reimbursement methods and payment rates, which could impact demand for and pricing of our services; (2) the manner in which we contract with physicians and other healthcare professionals or with hospitals and other healthcare clients; and (3) the imposition of additional medical costs on us.

### Critical Accounting Principles and Estimates

Our critical accounting principles and estimates remain consistent with those reported in our 2011 Annual Report.

### Results of Operations

The following table sets forth, for the periods indicated, selected condensed consolidated statements of comprehensive income data as a percentage of revenue:

|  | Three Months Ended March 31, 2012 | 2011 |
| --- | ---: | ---: |
| Revenue | 100.0% | 100.0% |
| Cost of revenue | 72.1 | 70.9 |
| Gross profit | 27.9 | 29.1 |
| Selling, general and administrative | 20.8 | 22.6 |
| Depreciation and amortization | 1.6 | 2.1 |
| Income from operations | 5.5 | 4.4 |
| Interest expense, net | 2.5 | 2.5 |
| Income from continuing operations before income taxes | 3.0 | 1.9 |
| Income tax expense | 1.5 | 1.1 |
| Income from continuing operations | 1.5 | 0.8 |
| Income from discontinued operations, net of tax | 0.4 | 0.3 |
| Net income | 1.9 | 1.1 |
| Other comprehensive income | 0.0 | 0.0 |
| Comprehensive Income | 1.9% | 1.1% |

### Comparison of Results for the Three Months Ended March 31, 2012 to the Three Months Ended March 31, 2011

***Revenue.*** Revenue increased 5% to $226.4 million for the three months ended March 31, 2012 from $215.8 million for the same period in 2011, primarily due to higher revenue in the nurse and allied healthcare staffing segment, partially offset by lower revenue in the locum tenens staffing and physician permanent placement services segments.

Nurse and allied healthcare staffing segment revenue increased 14% to $153.9 million for the three months ended March 31, 2012 from $134.8 million for the same period in 2011. The increase was primarily attributable to an increase in the average number of temporary healthcare professionals on assignment and an increase in bill rates during the three months ended March 31, 2012.

Locum tenens staffing segment revenue decreased 10% to $63.5 million for the three months ended March 31, 2012 from $70.2 million for the same period in 2011. The decrease was primarily attributable to a decline in the number of days filled by healthcare professionals and an increasing percentage of our days filled being attributable to lower bill rate specialties, partially offset by an increase in the average daily rate billed to clients.

Physician permanent placement services segment revenue decreased 17% to $9.0 million for the three months ended March 31, 2012 from $10.8 million for the same period in 2011. The decrease was primarily attributable to the prior year’s adoption of the accounting guidance on revenue arrangements with multiple deliverables.

***Cost of Revenue.*** Cost of revenue increased 7% to $163.2 million for the three months ended March 31, 2012 from $153.1 million for the same period in 2011. The increase was primarily due to an increase in the average number of temporary healthcare professionals on assignment.

Nurse and allied healthcare staffing segment cost of revenue increased 16% to $113.3 million for the three months ended March 31, 2012 from $97.7 million for the same period in 2011. The increase was primarily attributable to the increase in the average number of temporary healthcare professionals on assignment during the three months ended March 31, 2012 and a $1.6 million actuarial-based workers compensation benefit recorded during the three months ended March 31, 2011.

Locum tenens staffing segment cost of revenue decreased 11% to $46.3 million for the three months ended March 31, 2012 from $51.8 million for the same period in 2011. The decrease was primarily attributable to a decline in the number of days filled by healthcare professionals and an increasing percentage of our days filled being attributable to the lower pay rate specialties.

Physician permanent placement services segment cost of revenue remained flat at $3.6 million for both the three months ended March 31, 2012 and 2011.

***Gross Profit.*** Gross profit increased 1% to $63.2 million for the three months ended March 31, 2012 from $62.7 million for the same period in 2011, representing gross margins of 27.9% and 29.1%, respectively. The decrease in gross margin was due primarily to a $1.6 million actuarial-based workers compensation benefit recorded during the three months ended March 31, 2011 within the nurse and allied healthcare staffing segment and the impact from the adoption of the accounting guidance on revenue arrangements with multiple deliverables effective on January 1, 2011 in the physician permanent placement services segment, offset by improved gross margins in the locum tenens staffing segment. Gross margin by reportable segment for the three months ended March 31, 2012 and 2011 was 26.4% and 27.5% for nurse and allied healthcare staffing, 27.1% and 26.2% for locum tenens staffing and 59.5% and 66.7% for physician permanent placement services, respectively.

***Selling, General and Administrative.*** Selling, general and administrative expenses decreased 3% to $47.2 million for the three months ended March 31, 2012 from $48.7 million for the same period in 2011. The decrease was in part due to a $2.0 million refund received from the California Employment Development Department during the three months ended March 31, 2012 in connection with the settlement of a prior period assessment, partially offset by additional operating expenses supporting the growth in business. Selling, general and administrative expenses broken down between the reportable segments, unallocated corporate overhead and stock-based compensation are as follows ($ amounts in thousands):

|  | Three Months Ended March 31, 2012 | 2011 |
| --- | ---: | ---: |
| Nurse and allied healthcare staffing | $23,533 | $21,953 |
| Locum tenens staffing | 12,827 | 12,390 |
| Physician permanent placement services | 3,655 | 3,410 |
| Unallocated corporate overhead | 5,732 | 8,985 |
| Stock-based compensation | 1,429 | 1,982 |
|  | $47,176 | $48,720 |

***Depreciation and Amortization.*** Amortization expense decreased slightly to $1.8 million for the three months ended March 31, 2012 from $1.9 million for the same period in 2011. Depreciation expense decreased 27% to $1.9 million for the three months ended March 31, 2012 from $2.6 million for the same period in 2011, with the decrease primarily attributable to certain fixed assets becoming fully depreciated during the three months ended March 31, 2012.

***Interest Expense, Net.*** Interest expense, net, remained flat at $5.5 million for both the three months ended March 31, 2012 and 2011.

***Income Tax Expense.*** We recorded an income tax expense of $3.4 million from continuing operations for the three months ended March 31, 2012 as compared to $2.3 million for the same period in 2011, reflecting effective income tax rates of 49.3% and 57.1% for these periods, respectively. The decrease in the effective income tax rate was primarily attributable to the relationship of pre-tax income to permanent differences. See additional information in “Item 1. Condensed Consolidated Financial Statements (unaudited)—Notes to Unaudited Condensed Consolidated Financial Statements—Note 8, Income Taxes.”

***Income From Discontinued Operations.*** During the fourth quarter of 2011, we began the process to divest our home healthcare services segment and completed the sale in January 2012. We classified the home healthcare services segment as assets and liabilities held for sale as of December 31, 2011, and its results of operations as discontinued operations for the three months ended March 31, 2012 and 2011. For the three months ended March 31, 2012, the income from discontinued operations included a $1.2 million gain on sale, net of tax. See additional information in “Item 1. Condensed Consolidated Financial Statements (unaudited)—Notes to Unaudited Condensed Consolidated Financial Statements—Note 2, Discontinued Operations.”

### Liquidity and Capital Resources

In summary, our cash flows were as follows ($ amounts in thousands):

|  | Three Months Ended March 31, 2012 | 2011 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $9,553 | $5,564 |
| Net cash provided by (used in) investing activities | 7,352 | (1,687) |
| Net cash used in financing activities | (15,923) | (1,825) |

Historically, our primary liquidity requirements have been for acquisitions, working capital requirements and debt service under our credit facilities. We have funded these requirements through internally generated cash flow and funds borrowed under our credit facilities. At March 31, 2012, $193.0 million, net of discount, was outstanding under our credit facilities with $39.6 million of available credit under our then-existing revolving credit facility.

We believe that cash generated from operations and available borrowings under our existing revolving credit facility, which we entered into on April 5, 2012, will be sufficient to fund our operations for the next 12 months and beyond. We intend to finance potential future acquisitions either with cash provided from operations, borrowings under our existing revolving credit facility, bank loans, debt or equity offerings, or some combination of the foregoing. The following discussion provides further details of our liquidity and capital resources.

#### Operating Activities:

Net cash provided by operations during the three months ended March 31, 2012 was $9.6 million, compared to $5.6 million for the same period in 2011. The increase in net cash provided by operations during the three months ended March 31, 2012 as compared to the same period in 2011 was primarily attributable to better operating results and a decrease in accounts receivable. Our Days Sales Outstanding (“DSO”) was 57 days at March 31, 2012. DSO was 61 days and 57 days at December 31, 2011 and March 31, 2011, respectively. Excluding the home healthcare services segment, the DSO was 56, 57 and 54 days at March 31, 2012, December 31, 2011 and March 31, 2011, respectively.

#### Investing Activities:

Net cash provided by investing activities during the three months ended March 31, 2012 was $7.4 million, compared to $1.7 million used in for the same period in 2011. The change was related to the proceeds from the sale of the home healthcare services segment, and a reduction in capital expenditures during the three months ended March 31, 2012.

#### Financing Activities:

Net cash used in financing activities during the three months ended March 31, 2012 was $15.9 million primarily due to paying down our outstanding term loan balance during the quarter. During the three months ended March 31, 2011, cash used in financing activities was $1.8 million.

On April 5, 2012, we entered into a Credit Agreement (the “New Credit Agreement”) as more fully described below and used the proceeds from the initial drawdown under the credit facilities set forth in the New Credit Agreement to repay in full all outstanding indebtedness under (1) the Tranche B secured term loan portion (the “First Lien Term Loan”) of the Credit Agreement dated December 23, 2009 (as amended, the “First Lien Credit Agreement”) and (2) the secured term loan (the “Second Lien Term Loan”) under the Credit Agreement dated September 1, 2010 (as amended, the “Second Lien Credit Agreement”). There were no amounts outstanding on the $50 million revolver portion (the “First Lien Revolver”) of the First Lien Credit Agreement as of April 5, 2012.

During the three months ended March 31, 2012, we made the following payments on the First Lien Term Loan: (1) a $4.6 million quarterly principal amortization payment, (2) a $5.0 million voluntary payment using the proceeds from the sale of our home healthcare services business in January 2012 and (3) a $0.2 million payment to satisfy the excess cash flow prepayment requirement for 2011 under the First Lien Credit Agreement. Borrowings under the First Lien Term Loan bore interest at floating rates based upon either a LIBOR (with a LIBOR floor of 1.75%) or a prime interest rate option selected by us, plus a spread of 5.50% and 4.50%, respectively. Borrowings under the Second Lien Term Loan bore interest at floating rates based upon either a LIBOR (with a LIBOR floor of 1.75%) or a prime interest rate option selected by us, plus a spread of 10.00% and 9.00%, respectively. At March 31, 2012, the aggregate principal amount of the First Lien Term Loan and Second Lien Term Loan outstanding (including both the current and long-term portions), net of discount, was $193.0 million.

The First Lien Revolver carried an unused fee of 0.75% per annum. Borrowings under the First Lien Revolver Facility bore interest at floating rates based upon either a LIBOR or a prime interest rate option selected by us, plus a spread of 5.50% and 4.50%, respectively. At March 31, 2012, there was no amount outstanding under the First Lien Revolver. At December 31, 2011, there was $3.0 million outstanding under the First Lien Revolver.

At March 31, 2012, we maintained outstanding standby letters of credit totaling $28.4 million as collateral in relation to our professional liability insurance agreements, workers compensation insurance agreements, and a corporate office lease agreement. Of the $28.4 million outstanding letters of credit, we have cash collateralized $18.0 million and the remaining amount were collateralized by our First Lien Revolver Facility. Outstanding standby letters of credit at December 31, 2011 totaled $28.4 million.

As described above, effective April 5, 2012, we entered into the New Credit Agreement. The New Credit Agreement provides two credit facilities (the “Credit Facilities”), including (A) a $50 million secured revolving credit facility (the “Revolver”) that includes a $20 million sublimit for the issuance of letters of credit and a $15 million sublimit for swingline loans and (B) a $200 million secured term loan credit facility (the “Term Loan”). In addition, the New Credit Agreement provides that we may from time to time obtain an increase in the Revolver or the Term Loan in an aggregate principal amount not to exceed $75 million (with a $37.5 million sublimit for the Revolver) subject to, among other conditions, the arrangement of additional commitments with financial institutions reasonably acceptable to us and the administrative agent. The proceeds from the initial drawdown under the

Credit Facilities were used to repay in full all outstanding indebtedness under the First Lien Credit Agreement and the Second Lien Credit Agreement and to pay related transaction costs. The Credit Facilities are available for working capital, capital expenditures, permitted acquisitions and general corporate purposes of the Company. The standby letters of credit issued under the First Lien Revolver were also rolled under and deemed issued under the new Revolver. The maturity date of the Revolver and the Term Loan is April 5, 2017 and April 5, 2018, respectively. In connection with obtaining the Credit Facilities, we incurred approximately $5.9 million in deferred financing fees which will be capitalized and amortized to interest expense over the term of the New Credit Agreement. In addition, we expect to write off to interest expense $8.6 million of unamortized deferred financing fees and original issue discount and a $1.2 million prepayment penalty associated with the prior credit facilities.

The Revolver carries an unused fee of 0.5% per annum. There are no mandatory reductions in the Revolver. Borrowings under the Revolver bear interest at floating rates based upon either a LIBOR or a prime interest rate option selected by us, plus a spread of 3.75% to 4.25% and 2.75% to 3.25%, respectively, in each case, as specifically determined quarterly based upon our then-existing consolidated leverage ratio (as defined in the New Credit Agreement). The Term Loan is subject to amortization of principal of 1.00% per year of the original Term Loan amount, payable in equal quarterly installments. Borrowings under the Term Loan bear interest at floating rates based upon either a LIBOR (with a floor of 1.25%) or a prime interest rate option selected by us, plus a spread of 4.50% to 4.75% and 3.50% to 3.75%, respectively, in each case, as specifically determined quarterly based upon our then-existing consolidated leverage ratio.

The New Credit Agreement contains various customary affirmative and negative covenants, including restrictions on assumption of additional indebtedness, declaration of dividends, dispositions of assets, consolidation into another entity, capital expenditures in excess of specified amounts and allowable investments. It also contains financial covenants that require us (1) not to exceed a certain maximum consolidated leverage ratio and (2) to maintain a minimum consolidated interest coverage ratio.

### Off-Balance Sheet Arrangements

At March 31, 2012, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

### Potential Fluctuations in Quarterly Results and Seasonality

Due to the regional and seasonal fluctuations in the hospital patient census and staffing needs of our healthcare facility and other clients and due to the seasonal preferences for destinations of our temporary healthcare professionals, revenue, earnings and the number of temporary healthcare professionals on assignment are subject to moderate seasonal fluctuations.

### Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q 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. We based these forward-looking statements on our expectations, estimates, forecasts and projections about future events and about the industry in which we operate. Forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “should,” “would,” “project,” “may,” variations of such words and other similar expressions, including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In addition, any statements that refer to projections of financial items, anticipated growth, future growth and revenues, future economic conditions and performance, plans, objectives and strategies for future operations, expectations, or other characterizations of future events or circumstances are forward-looking statements. All forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those discussed in, or implied by, these forward-looking statements. Factors that could cause actual results to differ materially from those implied by the forward-looking statements in this Quarterly Report on Form 10-Q are set forth in our Annual Report on Form 10-K for the year ended December 31, 2011 and include but are not limited to:

- our ability to sustain and grow our staffing services in a continued significant economic downturn and slow industry;
- the effects of economic downturns or slow recoveries, which could result in less demand for our services;
- our ability to enter into contracts with hospitals, healthcare facility clients, affiliated healthcare networks and physician practice groups on terms attractive to us and to secure orders and searches related to those contracts;
- the level of consolidation and concentration of buyers of healthcare staffing services, which could affect the pricing of our services and our ability to mitigate risk;
- the potential impact on the demand for our services caused by adoption of alternative modes of healthcare delivery;
- any inability on our part to quickly respond to changing marketplace conditions and customer needs;
- the ability of our clients to retain and increase the productivity of their permanent staff, which may negatively affect the demand for our services;
- our ability to grow and operate our business in compliance with employment laws and other legislation, laws and regulations that may directly or indirectly affect us, such as Medicare certification and reimbursement, state licensure, government contracting requirements, the Patient Protection and Affordable Care Act and other state or federal healthcare reform legislation;
- the challenge to the classification of certain of our healthcare professionals as independent contractors;
- the effect of medical malpractice and other claims asserted against us for which we carry significant self-insured retentions;
- any inability on our part to leverage our cost structure effectively;
- access to and undisrupted performance of our management information and communication systems, including the Internet, our candidate and client databases, and payroll and billing software systems;
- any inability on our part to keep our client and provider-facing self-service websites operational and without service interruptions;
- any inability on our part to recruit and retain sufficient quality healthcare professionals at reasonable costs;
- any inability on our part to properly screen and match quality healthcare professionals with suitable placements;
- any inability on our part to successfully attract and retain a sufficient number of quality sales and operational personnel;
- the loss of our key officers and management personnel;
- any inability on our part to maintain at reasonable costs the positive brand identities we have developed;
- any recognition by us of an impairment to goodwill or indefinite lived intangibles;
- the effect of adverse adjustments by us to accruals for self-insured retentions and uncertain income tax liability, which could decrease our earnings or increase our losses, as the case may be, or negatively affect our cash flow; and
- our level of indebtedness and any inability on our part to generate sufficient cash flow to service our debt.

## Market risk

As filed, 1,244 characters.

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. During the first quarter of 2012, our primary exposure to market risk was interest rate risk associated with our debt instruments. During the first quarter of 2012, we had borrowings outstanding under the First Lien Credit Agreement and the Second Lien Credit Agreement. Borrowings under the First Lien Term Loan bore interest at floating rates based upon either a LIBOR (with a LIBOR floor of 1.75%) or a prime interest rate option selected by us, plus a spread of 5.50% and 4.50%, respectively. Borrowings under the Second Lien Term Loan bore interest at floating rates based upon either a LIBOR (with a LIBOR floor of 1.75%) or a prime interest rate option selected by us, plus a spread of 10.00% and 9.00%, respectively. A 1% change in interest rates in excess of the minimum floor on our variable rate debt would have resulted in interest expense fluctuating approximately $0.5 million for the three months ended March 31, 2012.

Our international operations create exposure to foreign currency exchange rate risks. We believe that our foreign currency risk is immaterial.

## Controls and procedures

As filed, 1,225 characters.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of March 31, 2012 were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed May 4, 2012.
Source: SEC EDGAR, the filing index for accession 0001193125-12-211818. Last ingested by Listed: Nov 5, 2026, 17:59 ET. No prices; not investment advice.