AMN Healthcare Services(AMN) - 2020 Q4 - Annual Report

Part I Business AMN Healthcare provides total talent solutions for the U.S. healthcare industry through three segments, focusing on customer relationships, innovation, and strategic acquisitions - The company's mission is to deliver talent and insights to optimize healthcare workforces, provide opportunities for healthcare professionals, and foster a values-based culture[11] - AMN Healthcare operates through three reportable segments as of 2020: (1) Nurse and Allied Solutions, (2) Physician and Leadership Solutions, and (3) Technology and Workforce Solutions[25] - Managed Services Programs (MSPs) are a key part of the business, with approximately $1.7 billion in annualized gross billings under management and accounting for about 50% of consolidated revenue in 2020[26] - Kaiser Foundation Hospitals and its affiliates represented approximately 14% of the company's consolidated revenue and 17% of the nurse and allied solutions segment's revenue for the year ended December 31, 2020[33] Estimated 2020 U.S. Healthcare Staffing Market Size (by SIA) | Market Segment | Estimated 2020 Market Size (in billions) | | :--- | :--- | | Travel Nurse | $6.7 billion | | Per Diem Nurse | $3.5 billion | | Locum Tenens | $3.4 billion | | Allied Healthcare | $3.7 billion | | Total | $17.3 billion | Risk Factors The company faces significant risks related to demand fluctuations, regulatory and legal liabilities, operational challenges including cybersecurity, and financial risks from substantial indebtedness - The COVID-19 pandemic has caused significant fluctuations in demand for staffing services and could continue to adversely affect business operations and financial results[45][47][51] - Consolidation among healthcare delivery organizations could increase their bargaining power, negatively affecting service pricing. A single client, Kaiser Foundation Hospitals, accounted for approximately 14% of consolidated revenue in 2020, representing a concentration risk[56][57][58] - The company is subject to legal proceedings and claims related to medical malpractice, employment laws (including wage and hour class actions), and privacy regulations, which could result in substantial liabilities[64][65][66] - Cybersecurity incidents and security breaches pose a significant risk, as the company collects and stores sensitive personal and proprietary information, and a breach could lead to legal claims, operational disruption, and reputational damage[85][86][87] - As of December 31, 2020, the company's total indebtedness was $862.6 million, which could increase vulnerability to adverse economic conditions and limit operational flexibility due to restrictive covenants[104] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[114] Properties All company properties are leased office facilities, with principal locations in San Diego, California, and Dallas, Texas, deemed adequate for current needs Principal Leased Office Spaces (as of Dec 31, 2020) | Location | Square Feet | | :--- | :--- | | San Diego, California | 175,672 | | Dallas, Texas | 108,502 | Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 12, "Commitments and Contingencies," in the Financial Statements and Supplementary Data section - Details on legal proceedings are located in Note 12 of the Consolidated Financial Statements[115] Mine Safety Disclosures This item is not applicable to the company's business operations - Not applicable[116] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities AMN Healthcare's common stock trades on the NYSE under 'AMN,' with no cash dividends paid or anticipated, and no share repurchases in 2020 - The company's common stock trades on the New York Stock Exchange under the ticker symbol "AMN"[117] - No cash dividends have been paid in the past, and the company does not expect to pay them in the future, instead retaining earnings for business operations, debt repayment, and potential share repurchases[120] - The company did not repurchase any shares of its common stock during 2020 under its authorized repurchase program[119] Selected Financial Data This section provides a five-year summary of key financial data from 2016 to 2020, showing revenue growth and fluctuating net income, with comparability affected by acquisitions Five-Year Selected Financial Data (in thousands, except per share data) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $2,393,714 | $2,222,107 | $2,136,074 | $1,988,454 | $1,902,225 | | Gross Profit | $791,778 | $743,465 | $696,383 | $644,419 | $619,724 | | Income from Operations | $149,265 | $176,915 | $202,828 | $212,440 | $191,632 | | Net Income | $70,665 | $113,988 | $141,741 | $132,558 | $105,838 | | Diluted EPS | $1.48 | $2.40 | $2.91 | $2.68 | $2.15 | | Total Assets | $2,353,507 | $1,931,646 | $1,492,721 | $1,253,957 | $1,186,881 | | Total Notes Payable | $862,649 | $617,159 | $320,607 | $319,843 | $362,942 | | Total Stockholders' Equity | $819,677 | $736,742 | $638,990 | $562,527 | $449,383 | - The comparability of financial data is affected by acquisitions, including Stratus Video in 2020, Advanced and Silversheet in 2019, and MedPartners in 2018[125] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, including an 8% revenue increase in 2020, segment reorganization, pandemic impact, liquidity, and critical accounting policies - Effective in 2020, the company reorganized into three reportable segments: (1) Nurse and Allied Solutions, (2) Physician and Leadership Solutions, and (3) Technology and Workforce Solutions[130] Comparison of Results for Year Ended Dec 31, 2020 vs. 2019 | Metric | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Revenue | $2,393.7M | $2,222.1M | +8% | | Gross Profit | $791.8M | $743.5M | +6% | | Gross Margin | 33.1% | 33.5% | -40 bps | | Net Income | $70.7M | $114.0M | -38% | Segment Revenue Performance (2020 vs. 2019) | Segment | 2020 Revenue | 2019 Revenue | Change | | :--- | :--- | :--- | :--- | | Nurse and Allied Solutions | $1,699.3M | $1,562.6M | +9% | | Physician and Leadership Solutions | $466.6M | $562.8M | -17% | | Technology and Workforce Solutions | $227.8M | $96.8M | +135% | - The COVID-19 pandemic significantly impacted demand, with historically high demand for nurses in late 2020, while demand for other services like locum tenens and permanent placement declined due to the suspension of elective procedures[136][140] - Net cash from operating activities increased to $256.8 million in 2020 from $224.9 million in 2019, partly due to the deferral of employer payroll taxes under the CARES Act[166] - Net cash used in investing activities was $538.2 million in 2020, primarily for the acquisition of Stratus Video for $476.5 million[167] - Critical accounting policies include the valuation and impairment testing of goodwill and indefinite-lived intangible assets, estimation of professional liability reserves, and accounting for contingent liabilities and income taxes[188][189][193][194] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate fluctuations on variable-rate debt, with foreign currency risk considered immaterial due to predominantly U.S. revenue - The primary market risk is interest rate risk from variable interest debt instruments[200] - Foreign currency risk is considered immaterial because substantially all revenue was generated in the United States in 2020[200] Financial Statements and Supplementary Data This section includes audited consolidated financial statements, the independent auditor's unqualified report, and notes detailing acquisitions, debt structure, and legal contingencies - The independent auditor, KPMG LLP, issued an unqualified opinion on the consolidated financial statements. Critical Audit Matters identified were the professional liability reserve and the fair value of intangible assets acquired in the Stratus Video acquisition[204][209][210][212] Key Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $533,735 | $560,499 | | Goodwill | $864,485 | $595,551 | | Total Assets | $2,353,507 | $1,931,646 | | Total Current Liabilities | $422,957 | $378,105 | | Notes Payable, net | $857,961 | $617,159 | | Total Liabilities | $1,533,830 | $1,194,904 | | Total Stockholders' Equity | $819,677 | $736,742 | - The company completed the acquisition of Stratus Video on February 14, 2020, for a purchase price of $485.7 million, resulting in $269.0 million of goodwill and $228.0 million of identified intangible assets[283][284] - As of December 31, 2020, the company had $871.9 million in total debt outstanding, consisting of the Additional Term Loan, 2027 Senior Notes, and 2029 Senior Notes[353] - The company is involved in wage and hour class action lawsuits. Due to a recent adverse appellate court ruling in the Clarke Matter, the company recorded an additional accrual of $20.0 million in the fourth quarter of 2020 and estimates a possible additional loss of up to $15.0 million[375][376] Changes In and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding accounting principles or financial disclosure - None reported[379] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2020, excluding the Stratus Video acquisition - Management concluded that disclosure controls and procedures were effective as of December 31, 2020[380] - Management concluded that internal control over financial reporting was effective as of December 31, 2020, based on the COSO framework[381] - The assessment of internal control over financial reporting excluded the Stratus Video business, which was acquired in 2020[382] Other Information Director Michael M.E. Johns, M.D., will not seek re-election at the 2021 annual meeting, leading to a reduction in the Board of Directors to eight members - Board member Michael M.E. Johns, M.D., will not stand for re-election at the 2021 annual meeting after 12 years of service[395] - The Board of Directors will be reduced to eight members following the 2021 annual meeting[395] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Annual Meeting Proxy Statement, including the Code of Ethics for Senior Financial Officers - Information is incorporated by reference from the 2021 Annual Meeting Proxy Statement[396] - The company has adopted a Code of Ethics for Senior Financial Officers, available on its investor relations website[396] Executive Compensation Information concerning executive compensation is incorporated by reference from the 2021 Annual Meeting Proxy Statement - Information is incorporated by reference from the 2021 Annual Meeting Proxy Statement[398] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information is incorporated by reference from the 2021 Annual Meeting Proxy Statement, detailing securities to be issued and available for future issuance under equity plans - Information on security ownership is incorporated by reference from the 2021 Annual Meeting Proxy Statement[398] Equity Compensation Plan Information (as of Dec 31, 2020) | Plan Category | Number of Securities to be Issued Upon Exercise | Weighted-Average Exercise Price | Number of Securities Remaining for Future Issuance | | :--- | :--- | :--- | :--- | | Approved by security holders | 696,200 | $— | 2,829,752 | | Not approved by security holders | 20,944 | $— | 179,056 | | Total | 717,144 | $— | 3,008,808 | Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2021 Annual Meeting Proxy Statement - Information is incorporated by reference from the 2021 Annual Meeting Proxy Statement[405] Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the 2021 Annual Meeting Proxy Statement - Information is incorporated by reference from the 2021 Annual Meeting Proxy Statement[406] Part IV Exhibits and Financial Statement Schedules This section lists consolidated financial statements and exhibits filed with the report, with all financial statement schedules omitted as information is presented elsewhere - This section contains the list of consolidated financial statements filed with the report[408] - All financial statement schedules were omitted because the required information is presented elsewhere or is not applicable[408] - A detailed list of exhibits filed with the report is provided, including acquisition agreements, debt indentures, and executive certifications[409][410][412] Form 10-K Summary The company did not provide a Form 10-K summary - None[416]