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AMN Healthcare Reports Third Quarter 2006 Results and Updates Annual Guidance

November 1, 2006
San Diego, CA
NYSE:AHS

SAN DIEGO, Nov. 1 /PRNewswire-FirstCall/ -- AMN Healthcare Services, Inc. (NYSE: AHS), the nation's largest healthcare staffing company, today reported financial results for the third quarter of 2006, with revenue of $282.7 million and diluted earnings per share of $0.28. Third quarter revenue increased 8% from the $261.2 million reported for the second quarter of this year and 69% from the $166.9 million reported for the third quarter of last year. The sequential quarterly increase in revenue was driven primarily by growth in the company's nurse and allied healthcare staffing business and one additional day in the third quarter.

Diluted earnings per share for the third quarter of 2006 was $0.28, compared to $0.21 last quarter and $0.22 for the third quarter of 2005. The increase compared to last quarter is primarily due to higher revenue and gross profit partially offset by increased selling, general and administrative ("SG&A") and income tax expenses. The increase in revenue and diluted earnings per share compared to the same quarter last year were both due to a combination of the company's acquisition of The MHA Group, Inc. ("MHA") in November 2005 and organic growth in the company's nurse and allied healthcare staffing business.

"We are very pleased with our solid third quarter results, which reflect a continued favorable market environment and excellent performance by our team members across all of our business lines," said Susan R. Nowakowski, President and Chief Executive Officer. "We were most encouraged by the increase in traveler count in the nurse and allied healthcare staffing business, which grew by 7% from last quarter to 7,015, the highest volume level in the last 13 quarters. This growth represents the steady demand for our healthcare staffing services as well as the success of our focused investments to expand our new candidate supply of nurse and allied healthcare professionals," added Nowakowski.

Gross profit for the third quarter of 2006 was $76.7 million, representing a 27.1% gross margin, up from the $70.0 million, or 26.8% gross margin, reported in the second quarter of 2006, and the $39.5 million, or 23.7% gross margin, reported in the third quarter of 2005. The increase in gross margin compared to last quarter was due largely to lower health insurance claims in the nurse and allied healthcare staffing business. The increase in gross margin compared to the same quarter last year was primarily attributable to an increase in bill rates in the company's nurse and allied healthcare staffing business as well as the addition of the higher gross margin physician staffing businesses gained through the acquisition of MHA. Third quarter gross margins by business line were 25.4% for nurse and allied healthcare staffing, 26.2% for locum tenens staffing and 60.7% for physician permanent placement services.

SG&A expenses for the third quarter of 2006 were $54.1 million, including stock compensation expense of $1.9 million resulting from the adoption of FAS 123R, as compared to $52.4 million in the second quarter of 2006 and $25.2 million in the third quarter last year. The increase in SG&A expenses as compared to last quarter was due mainly to higher employee expenses to support growth in the nurse and allied healthcare and locum tenens staffing businesses. The increase in SG&A expenses compared to the same quarter last year reflected the addition of MHA, increased employee expenses to support growth in the nurse and allied healthcare staffing business and stock compensation expense resulting from the adoption of FAS 123R. As a percentage of revenue, SG&A expenses excluding stock compensation expense were 18.5% for the third quarter (or 19.1% including stock compensation expense), compared to 19.4% last quarter (or 20.0% including stock compensation expense) and 15.1% for the same quarter last year with or without stock compensation expense.

Income from operations for the third quarter of 2006 was $20.0 million, representing 7.1% of revenue, compared to $15.1 million, or 5.8% of revenue, reported in the second quarter of 2006, and $12.9 million, or 7.7% of revenue, reported in the third quarter of 2005. The increase in operating margin compared to last quarter was due primarily to lower SG&A expenses as a percentage of revenue. The decrease in operating margin as compared to the same quarter last year was mainly due to reporting stock compensation expense from the adoption of FAS 123R.

Net interest expense for the third quarter of this year was $4.2 million, compared to $4.3 million last quarter and $1.5 million in the third quarter of 2005. The increase in net interest expense over the same quarter last year was primarily attributable to interest expense from additional debt used to fund the company's acquisition of MHA.

The company generated approximately $3.8 million in cash flow from operations and paid down $10.6 million in debt during the third quarter of 2006. Total debt outstanding at September 30, 2006 was $199.0 million. Weighted average diluted shares outstanding for the third quarter of 2006 were 34.0 million.

Revenue and Earnings Guidance for Fourth Quarter and Full Year 2006

Revenue for the fourth quarter of 2006 is expected to range from $278 million to $281 million and diluted earnings per share is expected to range from $0.21 to $0.23, which includes an estimated charge of $0.03 for stock compensation expense related to the company's adoption of FAS 123R.

Based on strong results in the third quarter of 2006, management increased its guidance for full year revenue and diluted earnings per share previously issued in August of this year. Management expects full year 2006 revenue to range from $1.07 billion to $1.08 billion and full year diluted earnings per share to range from $0.94 to $0.96, which includes an estimated charge of $0.12 for stock compensation expense.

"Our increased revenue and earnings guidance for the full year 2006 reflect mainly our higher than expected third quarter results," said Nowakowski. "For the fourth quarter, we expect some moderation in revenue and earnings compared to the third quarter mainly due to normal year-end seasonality in our temporary healthcare staffing businesses. However, on a year over year basis we anticipate solid revenue growth from all of our business lines as well as continued improvement in the candidate supply environment due to the strategic investments in marketing and recruiting we began earlier this year," added Nowakowski.

Company Summary

AMN Healthcare Services, Inc. is the largest temporary healthcare staffing company in the United States. As the leading nationwide provider of travel nurse staffing, locum tenens (temporary physician staffing) and physician permanent placement services, the company recruits physicians, nurses and allied healthcare professionals nationally and internationally and places them on variable lengths of assignments and in permanent positions at acute-care hospitals, physician practice groups and other healthcare facilities throughout the United States.

Conference Call on November 2, 2006

AMN Healthcare Services, Inc.'s third quarter 2006 conference call will be held on Thursday, November 2, 2006, at 11:00 a.m. Eastern Time. A live webcast of the call can be accessed through AMN Healthcare's website at www.amnhealthcare.com/investors. Please log in at least 10 minutes prior to the conference call in order to download the applicable audio software. Interested parties may participate live via telephone by dialing (800) 288-9626 in the U.S. or (612) 332-0228 internationally. Following the conclusion of the call, a replay of the webcast will be available at the company's web site within four hours. Alternatively, a telephonic replay of the call will be available at 4:15 p.m. Eastern Time, and can be accessed until November 16, 2006 at midnight Eastern Time, by calling (800) 475-6701 in the U.S. or (320) 365-3844 internationally, with access code 843431.

From time to time, additional information regarding non-GAAP financial measures may be made available on the company's website at www.amnhealthcare.com/investors.

Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The company has tried, whenever possible, to identify these forward-looking statements using words such as "anticipates," "believes," "estimates," "projects," "expects," "plans," "intends," "will," "may" and other similar expressions. Similarly, statements herein that describe the company's business strategy, outlook, objectives, plans, intentions or goals are also forward-looking statements. Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause the company's actual results, performance or achievements to differ materially from those expressed in, or implied by, such statements. These risks and uncertainties may include, but are not limited to: the company's ability to continue to recruit and retain qualified temporary and permanent healthcare professionals at reasonable costs; the company's ability to retain qualified temporary healthcare professionals for multiple assignments at reasonable costs; the company's ability to attract and retain sales and operational personnel; the company's ability to enter into contracts with hospitals, healthcare facility clients, affiliated healthcare networks and physician practice groups on terms attractive to the company and to secure orders related to those contracts; the company's ability to demonstrate the value of its services to its healthcare and facility clients; changes in the timing of hospital, healthcare facility and physician practice group clients' orders for temporary healthcare professionals; the general level of patient occupancy at the company's hospital and healthcare facility clients' facilities; the overall level of demand for services offered by temporary and permanent healthcare staffing providers; the ability of the company's hospital, healthcare facility and physician practice group clients to retain and increase the productivity of their permanent staff; the variation in pricing of the healthcare facility contracts under which the company places temporary healthcare professionals; the company's ability to successfully implement its strategic growth, acquisition and integration strategies; the company's ability to leverage its cost structure; the performance of the company's management information and communication systems; the effect of existing or future government legislation and regulation; the company's ability to grow and operate its business in compliance with legislation and regulations; the challenge to classification of certain of the company's healthcare professionals as independent contractors; the impact of medical malpractice and other claims asserted against the company; the impact on the company's earnings related to share- based payment awards due to changes in accounting rules; the disruption or adverse impact to the company's business as a result of a terrorist attack; the company's ability to carry out its business strategy and maintain sufficient cash flow and capital structure to support the company's business; the loss of key officers and management personnel that could adversely affect the company's ability to remain competitive; the effect of recognition by the company of an impairment to goodwill; and the effect of adjustments by the company to accruals for self-insured retentions. Other factors that could cause actual results to differ from those implied by the forward-looking statements contained in this press release are set forth in the company's Annual Report on Form 10-K for the year ended December 31, 2005, its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006, its Current Reports on Form 8-K, and Registration Statement on Form S-3. These statements reflect the company's current beliefs and are based upon information currently available to it. Be advised that developments subsequent to this press release are likely to cause these statements to become outdated with the passage of time. The company does not intend, however, to update the guidance provided today prior to its next earnings release.

(Logo: http://www.newscom.com/cgi-bin/prnh/20060718/LATU121LOGO)

Contact:
David C. Dreyer
Chief Financial Officer
Christopher Schwartz
Sr. Director, Investor Relations
866.861.3229

 

                        AMN Healthcare Services, Inc.
                 Condensed Consolidated Statements of Income
               (dollars in thousands, except per share amounts)
                                 (unaudited)

                            Three Months Ended           Nine Months Ended
                               September 30,               September 30,
                          2006      2005    % Chg     2006      2005    % Chg
    Revenue             $282,728  $166,883   69.4%  $798,169  $484,414   64.8%
    Cost of revenue      206,036   127,339   61.8%   583,154   371,985   56.8%
       Gross profit       76,692    39,544   93.9%   215,015   112,429   91.2%
                           27.1%     23.7%             26.9%     23.2%
    Expenses:
       Selling, general
        and
        administrative    54,071    25,198  114.6%   154,316    78,199   97.3%
                           19.1%     15.1%             19.3%     16.1%

       Depreciation and
        amortization       2,638     1,481   78.1%     7,628     4,017   89.9%

          Total expenses  56,709    26,679  112.6%   161,944    82,216   97.0%
    Income from
     operations           19,983    12,865   55.3%    53,071    30,213   75.7%
                            7.1%      7.7%              6.6%      6.2%
    Interest expense,
     net                   4,174     1,509  176.6%    12,666     4,998  153.4%
    Income before
     income taxes         15,809    11,356   39.2%    40,405    25,215   60.2%
    Income tax expense     6,337     4,508   40.6%    15,361     9,958   54.3%
    Net income            $9,472    $6,848   38.3%   $25,044   $15,257   64.1%
                            3.4%      4.1%              3.1%      3.1%
    Basic and diluted
     net income per
     common share:
       Basic net income
        per common share   $0.29     $0.24   20.8%     $0.78     $0.53   47.2%
       Diluted net
        income per
        common share       $0.28     $0.22   27.3%     $0.73     $0.48   52.1%

    Weighted average
     common shares
     outstanding - basic  32,453    28,763   12.8%    32,146    28,621   12.3%
    Weighted average
     common shares
     outstanding
     - diluted            33,995    31,673    7.3%    34,313    31,571    8.7%

 

                        AMN Healthcare Services, Inc. Adjusted EBITDA Reconciliation and Supplemental Financial and Operating Data                 (dollars in thousands, except traveler data)
                                 (unaudited)

                         Three Months Ended            Nine Months Ended
                            September 30,                 September 30,
                            % of           % of           % of           % of
                     2006    Rev    2005    Rev    2006    Rev    2005    Rev

    Adjusted
     EBITDA(1)
     Reconciliation:
    Revenue
       Nurse and
        allied
        healthcare
        staffing   $201,925       $166,883       $561,122       $484,414
       Locum
        tenens
        staffing     68,491             --        199,992             --
       Physician
        permanent
        placement
        services     12,312             --         37,055             --
                   $282,728       $166,883       $798,169       $484,414

    Adjusted
     EBITDA(1)
       Nurse and
        allied
        healthcare
        staffing    $16,104  8.0%  $14,386  8.6%  $42,228  7.5%  $34,351  7.1%
       Locum
        tenens
        staffing      4,800  7.0%       --         14,418  7.2%       --
       Physician
        permanent
        placement
        services      3,574  29.0%      --          9,068  24.5%      --
                     24,478   8.7%  14,386  8.6%   65,714   8.2%  34,351  7.1%
    Depreciation
     and
     amortization     2,638          1,481          7,628          4,017
    Non-cash
     stock-based
     compensation     1,857             40          5,015            121
    Interest
     expense, net     4,174          1,509         12,666          4,998
    Income before
     income taxes    15,809         11,356         40,405         25,215
    Income tax
     expense          6,337          4,508         15,361          9,958
    Net income       $9,472         $6,848        $25,044        $15,257

 

                                Three Months Ended         Nine Months Ended
                                   September 30,              September 30,
                               2006     2005   % Chg     2006     2005   % Chg
    Supplemental
     Financial Data:
    Gross Margin
       Nurse and allied
        healthcare staffing    25.4%    23.7%            24.9%    23.2%
       Locum tenens staffing   26.2%       --            26.4%       --
       Physician permanent
        placement services     60.7%       --            60.5%       --

    Supplemental Operating
     Data:
    Nurse and allied
     healthcare staffing
       Average travelers
        on assignment(2)       7,015    6,386   9.8%     6,731    6,375   5.6%
       Revenue per
        traveler per day(3)  $312.88  $284.05  10.1%   $305.36  $278.34   9.7%
       Gross profit per
        traveler per day(3)   $79.44   $67.31  18.0%    $76.07   $64.60  17.8%

    Locum tenens staffing
       Days filled(4)         51,205       --          149,990       --
       Revenue per day
        filled(4)          $1,337.58      $--        $1,333.37      $--
       Gross profit per
        day filled(4)        $350.55      $--          $352.09      $--


(1) Adjusted EBITDA represents net income plus interest expense (net of investment income), income taxes, depreciation and amortization and non-cash stock-based compensation expense. Management presents adjusted EBITDA because it believes that adjusted EBITDA is a useful supplement to net income as an indicator of operating performance. Management believes that adjusted EBITDA is an industry-wide financial measure that is useful both to management and investors when evaluating the company's performance. Management also uses adjusted EBITDA for planning purposes. Management uses adjusted EBITDA to evaluate the company's performance because it believes that adjusted EBITDA more accurately reflects the company's results, as it excludes certain items, in particular non-cash stock-based compensation charges, that management believes are not indicative of the company's operating performance. However, adjusted EBITDA is not intended to represent cash flows for the period, nor has it been presented as an alternative to operating or net income as an indicator of operating performance, and it should not be considered in isolation or as a substitute for measures of performance prepared in accordance with United States generally accepted accounting principles (GAAP). As defined, adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. While management believes that some of the items excluded from adjusted EBITDA are not indicative of the company's operating performance, these items do impact the income statement, and management therefore utilizes adjusted EBITDA as an operating performance measure in conjunction with GAAP measures such as net income.
(2) Average travelers on assignment represents the average number of nurse and allied healthcare professionals on assignment during the period presented.
(3) Revenue per traveler per day and gross profit per traveler per day represent the revenue and gross profit of the company's nurse and allied healthcare staffing segment divided by average travelers on assignment, divided by the number of days in the period presented.
(4) Days filled is calculated by dividing the locum tenens hours filled during the period by 8 hours. Revenue per day filled and gross profit per day filled represent locum tenens revenue and gross profit divided by days filled for the period presented.


                        AMN Healthcare Services, Inc.
                    Condensed Consolidated Balance Sheets
                                (in thousands)
                                 (unaudited)

                                         September 30,  June 30,  December 31,
                                             2006         2006        2005
    Assets
    Current assets:
       Cash and cash equivalents             $3,511      $4,888     $19,110
       Accounts receivable, net             180,410     156,936     154,926
       Deferred income taxes, net            18,369      25,638      31,305
       Other current assets                  18,896      21,821      22,922
          Total current assets              221,186     209,283     228,263

    Fixed assets, net                        22,286      21,876      20,164
    Goodwill, net                           240,324     241,307     240,844
    Intangible and other assets             122,821     125,649     129,116

          Total assets                     $606,617    $598,115    $618,387

    Liabilities and stockholders' equity
    Current liabilities:
       Accounts payable and accrued
        expenses                            $22,582     $22,799     $19,092
       Accrued compensation and benefits     43,167      35,696      32,208
       Current portion of notes payable      10,340      10,750      10,250
       Deferred revenue                       7,533       8,000       7,610
       Other current liabilities             26,583      31,770      59,018
          Total current liabilities         110,205     109,015     128,178

    Notes payable, less current portion     188,700     198,875     194,750
    Deferred income taxes, net               55,343      64,700      65,132
    Other long-term liabilities              27,908      27,290      37,127
          Total liabilities                 382,156     399,880     425,187

    Stockholders' equity                    224,461     198,235     193,200

          Total liabilities and
           stockholders' equity            $606,617    $598,115    $618,387

 

                        AMN Healthcare Services, Inc.
               Condensed Consolidated Statements of Cash Flows
                                (in thousands)
                                 (unaudited)

                                    Three Months Ended     Nine Months Ended
                                   Sept. 30,  Sept. 30,   Sept. 30,  Sept. 30,
                                     2006       2005        2006       2005

    Net cash provided by
     operating activities            $3,799     $2,028     $45,948    $28,196

    Net cash used in investing
     activities                      (2,290)    (1,105)    (42,680)    (3,467)

    Net cash used in financing
     activities                      (2,817)    (1,035)    (18,784)   (13,897)

    Effect of exchange rates
     on cash                            (69)        13         (83)        (1)

       Net (decrease) increase
        in cash and cash
        equivalents                  (1,377)       (99)    (15,599)    10,831

       Cash and cash equivalents
        at beginning of period        4,888     14,838      19,110      3,908

       Cash and cash equivalents
        at end of period             $3,511    $14,739      $3,511    $14,739

SOURCE AMN Healthcare Services, Inc.
11/01/2006
CONTACT: David C. Dreyer, Chief Financial Officer, or Christopher Schwartz, Sr. Director, Investor Relations, both of AMN Healthcare Services, Inc., +1-866-861-3229
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Web site: http://www.amnhealthcare.com
(AHS)
 

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