NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
,
2016
and
2015
(in thousands, except per share amounts)
(1) Summary of Significant Accounting Policies
(a) General
AMN Healthcare Services, Inc. was incorporated in Delaware on November 10, 1997. AMN Healthcare Services, Inc. and its subsidiaries (collectively, the “Company”) provide healthcare workforce solutions and staffing services at acute and sub-acute care hospitals and other healthcare facilities throughout the United States.
(b) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of AMN Healthcare Services, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
(c) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. On an ongoing basis, the Company evaluates its estimates, including those related to asset impairment, accruals for self-insurance and compensation and related benefits, contingencies and litigation, and income taxes. The Company bases these estimates on the information that is currently available and on various other assumptions that it believes are reasonable under the circumstances. Actual results could differ from those estimates under different assumptions or conditions.
(d) Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents include currency on hand, deposits with financial institutions and highly liquid investments.
(e) Restricted Cash, Cash Equivalents and Investments
Restricted cash and cash equivalents primarily represent cash and money market funds on deposit with financial institutions and investments represents commercial paper that serves as collateral for the Company’s outstanding letters of credit and captive insurance subsidiary claim payments. See Note (4), “Fair Value Measurement” and Note (8), “Notes Payable and Credit Agreement” for additional information.
(f) Fixed Assets
The Company records furniture, equipment, leasehold improvements and internal-use software at cost less accumulated amortization and depreciation. The Company records equipment acquired under capital leases at the present value of the future minimum lease payments. The Company capitalizes major additions and improvements, and it expenses maintenance and repairs when incurred. The Company calculates depreciation on furniture, equipment and technology and software using the straight-line method based on the estimated useful lives of the related assets (
three
to
ten
years). The Company amortizes leasehold improvements and equipment obtained under capital leases over the shorter of the term of the lease or their estimated useful lives. The Company includes depreciation of equipment obtained under capital leases with depreciation expense in the accompanying consolidated financial statements.
The Company capitalizes costs it incurs to develop internal-use software during the application development stage. Application development stage costs generally include costs associated with internal-use software configuration, coding, installation and testing. The Company also capitalizes costs of significant upgrades and enhancements that result in additional functionality, whereas it expenses as incurred costs for maintenance and minor upgrades and enhancements. The Company amortizes capitalized costs using the straight-line method over
three
to
ten
years once the software is ready for its intended use.
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset group to the future undiscounted net cash flows that are expected to be generated by the asset group. If such asset group is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. The Company reports assets to be disposed of at the lower of the carrying amount or fair value less costs to sell.
(g) Goodwill
The Company records as goodwill the portion of the purchase price that exceeds the fair value of net assets of entities acquired. The Company evaluates goodwill annually for impairment at the reporting unit level and whenever circumstances occur indicating that goodwill may be impaired. The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company determines that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, the quantitative impairment test is unnecessary. The performance of the quantitative impairment test involves a two-step process. The first step of the test involves comparing the fair value of the Company’s reporting units with the reporting unit’s carrying amount, including goodwill. The Company generally determines the fair value of its reporting units using a combination of the income approach (using discounted future cash flows) and the market valuation approach. If the carrying amount of a Company’s reporting unit exceeds its fair value, the Company performs the second step of the test to determine the amount of impairment loss. The second step of the test involves comparing the implied fair value of the Company’s reporting unit’s goodwill with the carrying amount of that goodwill. The amount by which the carrying value of the goodwill exceeds its implied fair value, if any, is recognized as an impairment loss.
(h) Intangible Assets
Intangible assets consist of identifiable intangible assets acquired through acquisitions. Identifiable intangible assets include tradenames and trademarks, customer relationships, non-compete agreements, staffing databases and acquired technology. The Company amortizes intangible assets, other than tradenames and trademarks with an indefinite life, using the straight-line method over their useful lives. The Company amortizes non-compete agreements using the straight-line method over the lives of the related agreements. The Company reviews for impairment intangible assets with estimable useful lives whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
The Company does not amortize indefinite-lived tradenames and trademarks and instead reviews them for impairment annually
.
The Company may first perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, the Company determines that it is more likely than not that the indefinite-lived intangible asset is not impaired, no quantitative fair value measurement is necessary. If a quantitative fair value measurement calculation is required for an indefinite-lived intangible asset, the Company compares its fair value with its carrying amount. If the carrying amount exceeds the fair value, the Company records the excess as an impairment loss.
(i) Insurance Reserves
The Company maintains an accrual for professional liability that is included in accounts payable and accrued expenses and other long-term liabilities in the consolidated balance sheets. The expense is included in the selling, general and administrative expenses in the consolidated statement of comprehensive income. The Company determines the adequacy of this accrual by evaluating its historical experience and trends, loss reserves established by the Company’s insurance carriers, management and third-party administrators, and independent actuarial studies. The Company obtains actuarial studies on a semi-annual basis that use the Company’s actual claims data and industry data to assist the Company in determining the adequacy of its reserves each year. For periods between the actuarial studies, the Company records its accruals based on loss rates provided in the most recent actuarial study and management’s review of loss history and trends. In November 2012, the Company established a captive insurance subsidiary, which provides coverage, on an occurrence basis, for professional liability within its nurse and allied solutions segment. Liabilities include provisions for estimated losses incurred but not yet reported (“IBNR”), as well as provisions for known claims. IBNR reserve estimates involve the use of assumptions that are primarily based upon historical loss experience, industry data and other actuarial assumptions. The Company maintains excess insurance coverage through a commercial carrier for losses above the per occurrence retention.
The Company maintains an accrual for workers compensation, which is included in accrued compensation and benefits and other long-term liabilities in the consolidated balance sheets. The expense relating to healthcare professionals is included in cost of revenue, while the expense relating to corporate employees is included in the selling, general and administrative expenses in the consolidated statement of comprehensive income. The Company determines the adequacy of this accrual by evaluating its historical experience and trends, loss reserves established by the Company’s insurance carriers and third-party administrators, and independent actuarial studies. The Company obtains actuarial studies on a semi-annual basis that use the
Company’s payroll and historical claims data, as well as industry data, to determine the appropriate reserve for both reported claims and IBNR claims for each policy year. For periods between the actuarial studies, the Company records its accruals based on loss rates provided in the most recent actuarial study.
On December 31, 2017, the Company transferred the legacy liabilities in amount of
$31,639
related to its self-insured retention portion of both the workers compensation and locum tenens solutions segment professional liability to its captive insurance subsidiary. This transaction had no impact on the amount of the recorded liabilities in the consolidated balance sheet as of December 31, 2017.
(j) Revenue Recognition
Revenue consists of fees earned from the temporary and permanent placement of healthcare professionals and executives as well as from the Company’s software-as-a-service (SaaS)-based technologies, including its vendor management systems (VMS) and its scheduling software. Revenue from temporary staffing services is recognized as the services are rendered by the healthcare professional. Under the Company’s managed services program arrangements, the Company manages all or a part of a customer’s supplemental workforce needs utilizing its own pool of healthcare professionals along with those of third-party subcontractors, and revenue and the related direct costs are recorded in accordance with the accounting guidance on reporting revenue gross as a principal versus net as an agent. When the Company uses subcontractors and acts as an agent, revenue is recorded net of the related subcontractor’s expense. Revenue from recruitment and permanent placement services is recognized as the services are provided and upon successful placements. The Company’s SaaS-based revenue is recognized ratably over the applicable arrangement’s service period. Fees billed in advance of being earned are recorded as deferred revenue.
(k) Accounts Receivable
The Company records accounts receivable at the invoiced amount. Accounts receivable are non-interest bearing. The Company maintains an allowance for doubtful accounts based on the Company’s historical write-off experience and an assessment of its customers’ financial conditions. The Company also maintains a sales allowance to reserve for potential credits issued to customers, which is based on the Company’s historical experience. The Company has not experienced material bad debts or sales adjustments during the past three years.
(l) Concentration of Credit Risk
The majority of the Company’s business activity is with hospitals located throughout the United States. Credit is extended based on the evaluation of each entity’s financial condition. One customer within the Company’s nurse and allied solutions segment comprised approximately
13%
,
11%
and
11%
of the consolidated revenue of the Company for the fiscal years ended
December 31, 2017
,
2016
and
2015
, respectively.
The Company’s cash and cash equivalents and restricted cash, cash equivalents and investments accounts are financial instruments that are exposed to concentration of credit risk. The Company maintains most of its cash, cash equivalents and investment balances with high-credit quality and federally insured institutions. However, restricted cash equivalents and investment balances may be invested in a non-federally insured money market account and commercial paper. As of
December 31, 2017
and
2016
, there were
$64,315
and
$31,287
, respectively, of restricted cash, cash equivalents and investments, a portion of which was invested in a non-federally insured money market fund and commercial paper. See Note (4), “Fair Value Measurement,” for additional information.
(m) Income Taxes
The Company records income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period the changes are enacted. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. The Company recognizes the effect of income tax positions only if it is more likely than not that such positions will be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in
the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits in income tax expense.
(n) Fair Value of Financial Instruments
The carrying amounts of the Company’s cash equivalents and restricted cash equivalents and investments approximate their respective fair values due to the short-term nature and liquidity of these financial instruments. As it relates to the Company’s Notes (as defined in Note (3) below), which were issued in October 2016 with a fixed rate of
5.125%
, fair value disclosure is detailed in Note (4), “Fair Value Measurement.”
See Note (8), “Notes Payable and Credit Agreement,” for additional information. The fair value of the long-term portion of the Company’s insurance accruals cannot be estimated because the Company cannot reasonably determine the timing of future payments.
(o) Share-Based Compensation
The Company accounts for its share-based employee compensation plans by expensing the estimated fair value of share-based awards on a straight-line basis over the requisite employee service period, which is the vesting period. Restricted stock units (“RSUs”) typically vest at the end of a
three
-year vesting period, however,
33%
of the awards may vest on the
13
th month anniversary of the grant date and
34%
on the second anniversary of the grant date if certain performance targets are met. Share-based compensation cost of RSUs is measured by the market value of the Company’s common stock on the date of grant, and the Company records share-based compensation expense only for those awards that are expected to vest. Performance restricted stock units (“PRSUs”) primarily consist of PRSUs that contain a performance condition dependent on the Company’s adjusted EBITDA margin during the third year of the
three
-year vesting period, with a range of
0%
to
175%
of the target amount granted to be issued under the award. Share-based compensation cost for these PRSUs is measured by the market value of the Company’s common stock on the date of grant, and the amount recognized is adjusted for estimated achievement of the performance conditions. A limited amount of PRSUs contain a market condition dependent upon the Company’s relative and absolute total shareholder return over a
three
-year period, with a range of
0%
to
175%
of the target amount granted to be issued under the award. Share-based compensation cost for these PRSUs is measured using the Monte-Carlo simulation valuation model and is not adjusted for the achievement, or lack thereof, of the performance conditions.
(p) Net Income per Common Share
Share-based awards to purchase
20
,
16
and
9
shares of common stock for the years ended
December 31, 2017
,
2016
and
2015
, respectively, were not included in the calculation of diluted net income per common share because the effect of these instruments was anti-dilutive.
The following table sets forth the computation of basic and diluted net income per common share for the years ended
December 31, 2017
,
2016
and
2015
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
Net income
|
$
|
132,558
|
|
|
$
|
105,838
|
|
|
$
|
81,891
|
|
|
|
|
|
|
|
Net income per common share - basic
|
$
|
2.77
|
|
|
$
|
2.21
|
|
|
$
|
1.72
|
|
Net income per common share - diluted
|
2.68
|
|
|
2.15
|
|
|
1.68
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
47,807
|
|
|
47,946
|
|
|
47,525
|
|
Plus dilutive effect of potential common shares
|
1,623
|
|
|
1,321
|
|
|
1,318
|
|
Weighted average common shares outstanding - diluted
|
49,430
|
|
|
49,267
|
|
|
48,843
|
|
(q) Segment Information
The Company’s operating segments are identified in the same manner as they are reported internally and used by the Company’s chief operating decision maker for the purpose of evaluating performance and allocating resources. The Company has
three
reportable segments: (1) nurse and allied solutions, (2) locum tenens solutions, and (3) other workforce solutions. The nurse and allied solutions segment consists of the Company’s nurse, allied, local and labor disruption and rapid response staffing businesses. The locum tenens solutions segment consists of the Company’s locum tenens staffing business. The other workforce solutions segment consists of the following Company businesses (i) physician permanent placement services, (ii)
healthcare interim leadership staffing and executive search services, (iii) vendor management systems, (iv) recruitment process outsourcing, (v) education, (vi) medical coding and related consulting, and (vii) workforce optimization services.
The Company’s chief operating decision maker relies on internal management reporting processes that provide revenue and operating income by reportable segment for making financial decisions and allocating resources. Segment operating income represents income before income taxes plus depreciation, amortization of intangible assets, share-based compensation, interest expense, net, and other, and unallocated corporate overhead. The Company’s management does not evaluate, manage or measure performance of segments using asset information; accordingly, asset information by segment is not prepared or disclosed.
The following table provides a reconciliation of revenue and operating income by reportable segment to consolidated results and was derived from each segment’s internal financial information as used for corporate management purposes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
Revenue
|
|
|
|
|
|
Nurse and allied solutions
|
$
|
1,238,543
|
|
|
$
|
1,185,095
|
|
|
$
|
953,253
|
|
Locum tenens solutions
|
430,615
|
|
|
424,242
|
|
|
385,091
|
|
Other workforce solutions
|
319,296
|
|
|
292,888
|
|
|
124,721
|
|
|
$
|
1,988,454
|
|
|
$
|
1,902,225
|
|
|
$
|
1,463,065
|
|
Segment operating income
|
|
|
|
|
|
Nurse and allied solutions
|
$
|
182,792
|
|
|
$
|
161,779
|
|
|
$
|
123,969
|
|
Locum tenens solutions
|
51,422
|
|
|
58,757
|
|
|
48,011
|
|
Other workforce solutions
|
81,154
|
|
|
77,450
|
|
|
40,390
|
|
|
315,368
|
|
|
297,986
|
|
|
212,370
|
|
Unallocated corporate overhead
|
60,412
|
|
|
65,335
|
|
|
52,254
|
|
Depreciation and amortization
|
32,279
|
|
|
29,620
|
|
|
20,953
|
|
Share-based compensation
|
10,237
|
|
|
11,399
|
|
|
10,284
|
|
Interest expense, net, and other
|
19,677
|
|
|
15,465
|
|
|
7,790
|
|
Income before income taxes
|
$
|
192,763
|
|
|
$
|
176,167
|
|
|
$
|
121,089
|
|
(r) Recently Adopted Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, “Stock Compensation - Improvements to Employee Share-Based Payment Accounting.” The guidance attempts to simplify the accounting for share-based payment transactions in several areas, including the following: income tax consequences, classification of awards as either equity or liabilities, forfeitures, expected term, and statement of cash flows classification. The Company adopted this pronouncement prospectively beginning January 1, 2017. Accordingly, the prior period has not been adjusted and the primary effects of the adoption for the current period are as follows:
|
|
•
|
The Company recorded
$5,449
of tax benefits within income tax expense for
2017
related to the excess tax benefit on share-based compensation. Prior to adoption, this amount would have been recorded as additional paid-in capital;
|
|
|
•
|
The Company continued to estimate the number of awards expected to be forfeited in accordance with its existing accounting policy, which is to estimate forfeitures when recording share-based compensation expense;
|
|
|
•
|
The Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of its diluted earnings per share for
2017
. The effect of this change on its diluted earnings per share was not significant; and
|
|
|
•
|
For
2017
, cash flows related to excess tax benefits were classified as an operating activity.
|
There were no other material impacts to the Company's consolidated financial statements as a result of adopting this updated standard.
(2) Business Combinations
As set forth below, the Company completed
six
acquisitions from January 1,
2015
through
December 31, 2017
. The Company accounted for each acquisition using the acquisition method of accounting. Accordingly, it recorded the tangible and intangible assets acquired and liabilities assumed at their estimated fair values as of the applicable date of acquisition. For each acquisition, the Company did not incur any material acquisition-related costs.
Peak Provider Solutions Acquisition
On June 3, 2016, the Company completed its acquisition of Peak Provider Solutions (“Peak”), which provides remote medical coding, case management and consulting solutions to hospitals and physician medical groups nationwide. The addition of Peak has expanded the Company’s workforce solutions and enables the Company to offer services in coding diagnosis and procedure codes, which is critical to clinical quality reporting and the financial health of healthcare organizations. The initial purchase price of
$52,125
included (1)
$51,645
cash consideration paid upon acquisition, and (2) a contingent earn-out payment of up to
$3,000
with an estimated fair value of
$480
as of the acquisition date. The contingent earn-out payment was based on the operating results of Peak for the year ended December 31, 2016, which resulted in no earn-out payment. As the acquisition was not considered significant, pro forma information has not been provided. The results of Peak have been included in the Company’s other workforce solutions segment since the date of acquisition. During the third quarter of 2016, an additional
$275
of cash consideration was paid to the selling shareholders for the final working capital settlement.
The allocation of the
$52,400
purchase price, which included the additional cash consideration paid for the final working capital settlement, consisted of (1)
$5,658
of fair value of tangible assets acquired, (2)
$9,346
of liabilities assumed, (3)
$19,220
of identified intangible assets, and (4)
$36,868
of goodwill, none of which is deductible for tax purposes. The fair value of intangible assets primarily includes
$7,600
of trademarks and
$11,500
of customer relationships with a weighted average useful life of approximately
thirteen
years.
HealthSource Global Staffing Acquisition
On January 11, 2016, the Company completed its acquisition of HealthSource Global Staffing (“HSG”), which provides labor disruption and rapid response staffing. The acquisition helps the Company expand its service lines and provide clients with rapid response staffing services. The initial purchase price of
$8,511
included (1)
$2,799
cash consideration paid upon acquisition, funded through cash-on-hand, net of cash received, and settlement of the pre-existing relationship between AMN and HSG, (2)
$2,122
cash holdback for potential indemnification claims, and (3) a tiered contingent earn-out payment of up to
$4,000
with an estimated fair value of
$3,590
as of the acquisition date. The contingent earn-out payment is comprised of (A) up to
$2,000
based on the operating results of HSG for the year ended December 31, 2016, of which,
$1,930
was paid in March 2017, and (B) up to
$2,000
based on the operating results of HSG for the year ending December 31, 2017. As the acquisition is not considered significant, pro forma information has not been provided. The results of HSG have been included in the Company’s nurse and allied solutions segment since the date of acquisition. During the third quarter of 2016, the final working capital settlement resulted in
$292
due from the selling shareholders to the Company, which was settled through a reduction to a cash holdback.
The allocation of the
$8,219
purchase price, which was reduced by the final working capital settlement, consisted of (1)
$1,025
of fair value of tangible assets acquired, (2)
$3,698
of liabilities assumed, (3)
$3,944
of identified intangible assets, and (4)
$6,948
of goodwill, none of which is deductible for tax purposes. The intangible assets include the fair value of trademarks, customer relationships, staffing databases, and covenants not to compete with a weighted average useful life of approximately
eight
years.
B.E. Smith Acquisition
On January 4, 2016, the Company completed its acquisition of B.E. Smith (“BES”), a full-service healthcare interim leadership placement and executive search firm, for
$162,232
in cash, net of cash received, and settlement of the pre-existing relationship between AMN and BES. BES places interim leaders and executives across all healthcare settings, including acute care hospitals, academic medical and children’s hospitals, physician practices, and post-acute care providers. The acquisition provides the Company additional access to healthcare executives and enhances its integrated services to hospitals, health systems, and other healthcare facilities across the nation. The results of BES have been included in the Company’s other workforce solutions segment since the date of acquisition. During the second quarter of 2016,
$524
was returned to the Company for the final working capital settlement.
The allocation of the
$161,708
purchase price, which was reduced by the final working capital settlement, consisted of (1)
$11,953
of fair value of tangible assets acquired, (2)
$7,272
of liabilities assumed, (3)
$65,900
of identified intangible assets, and (4)
$91,127
of goodwill, most of which is deductible for tax purposes. The intangible assets acquired have a weighted
average useful life of approximately
fifteen
years. The following table summarizes the fair value and useful life of each intangible asset acquired:
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Useful Life
|
|
|
|
|
|
(in years)
|
Identifiable intangible assets
|
|
|
|
|
|
Tradenames and Trademarks
|
|
$
|
26,300
|
|
|
20
|
|
Customer Relationships
|
|
25,700
|
|
|
12
|
|
Staffing Database
|
|
13,000
|
|
|
10
|
|
Non-Compete Agreements
|
|
900
|
|
|
5
|
|
|
|
$
|
65,900
|
|
|
|
Onward Healthcare Acquisition
On January 7, 2015, the Company completed its acquisition of Onward Healthcare, including its
two
wholly-owned subsidiaries, Locum Leaders and Medefis (collectively, “OH”), for approximately
$76,643
in cash, funded by cash-on-hand and borrowings under the Company’s Revolver. Onward Healthcare is a national nurse and allied healthcare staffing firm, Locum Leaders is a national locum tenens provider, and Medefis is a provider of a SaaS-based vendor management system for healthcare facilities. The acquisition helps the Company to expand its service lines and its supply and placement capabilities of healthcare professionals to its clients. The results of Onward Healthcare are included in the Company’s nurse and allied solutions segment, the results of Locum Leaders are included in the Company’s locum tenens solutions segment, and the results of Medefis are included in the Company’s other workforce solutions segment, in each case, since the date of acquisition.
The allocation of the
$76,643
purchase price consisted of (1)
$25,216
of fair value of tangible assets acquired (including
$21,313
of accounts receivable), (2)
$22,275
of liabilities assumed (including
$11,113
of accounts payable and accrued expenses), (3)
$30,219
of identified intangible assets, and (4)
$43,483
of goodwill, a portion of which is deductible for tax purposes. The intangible assets include the fair value of tradenames and trademarks, customer relationships, staffing database, acquired technologies, and non-compete agreements. The weighted average useful life of the acquired intangible assets is approximately
eleven
years. The following table summarizes the fair value and useful life of each intangible asset acquired:
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Useful Life
|
|
|
|
|
|
(in years)
|
Identifiable intangible assets
|
|
|
|
|
|
Tradenames and Trademarks
|
|
$
|
8,100
|
|
|
3 - 15
|
|
Customer Relationships
|
|
17,600
|
|
|
10 - 15
|
|
Staffing Database
|
|
2,600
|
|
|
5
|
|
Acquired Technologies
|
|
1,700
|
|
|
8
|
|
Non-Compete Agreements
|
|
219
|
|
|
2
|
|
|
|
$
|
30,219
|
|
|
|
Of the
$43,483
allocated to goodwill,
$23,032
,
$5,241
and
$15,210
were allocated to the Company’s nurse and allied solutions, locum tenens solutions and other workforce solutions segments, respectively.
Other Acquisitions
During 2015, the Company had
two
additional acquisitions: MillicanSolutions (“Millican”) and The First String Healthcare (“TFS”), with a total purchase price of
$11,638
.
(3) Derivative Instruments
In April 2015, the Company entered into an interest rate swap agreement to minimize its exposure to interest rate fluctuations on
$100,000
of its outstanding variable rate debt under one of its Term Loans whereby the Company pays a fixed
rate of
0.983%
per annum and receives a variable rate equal to floating one-month LIBOR. The agreement would have expired on March 30, 2018.
In connection with the Company’s issuance of
$325,000
aggregate principal amount of
5.125%
Senior Notes due 2024 (the “Notes”) and the use of a portion of the proceeds thereof to repay
$138,438
of certain indebtedness under the Term Loans on October 3, 2016, the Company reduced the interest rate swap notional amount to
$40,000
in the fourth quarter of 2016. As a result,
$238
was recorded to interest expense reflecting the settlement amount with the counterparty to reduce the notional amount. See additional information in Note (8), “Notes Payable and Credit Agreement.” At
December 31, 2016
, the interest rate swap agreement had a fair value of
$24
, which is included in other assets in the audited consolidated balance sheet as of
December 31, 2016
. The Company had formally documented the hedging relationship and accounted for this arrangement as a cash flow hedge. On May 3, 2017, the Company terminated the remaining interest rate swap after further repayment of the Term Loans. As a result,
$85
was received upon termination of the contract.
The Company recognizes all derivatives on the balance sheet at fair value based on quotes from an independent pricing service. Gains or losses resulting from changes in the values of the arrangement are recorded in other comprehensive income, net of tax, until the hedged item is recognized in earnings. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instrument that is used in the hedging transaction is highly effective in offsetting changes in fair values or cash flows of the hedged item. When it is determined that a derivative instrument is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively and recognizes subsequent changes in market value in earnings.
(4) Fair Value Measurement
Fair value represents the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which the Company would conduct a transaction, in addition to the assumptions that market participants would use when pricing the related assets or liabilities, including non-performance risk.
A three-level hierarchy prioritizes the inputs to valuation techniques used to measure fair value and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the fair value hierarchy are as follows:
Level 1
—Quoted prices in active markets for identical assets or liabilities.
Level 2
—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3
—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Assets and Liabilities Measured on a Recurring Basis
The Company’s restricted cash equivalents that serve as collateral for the Company’s outstanding letters of credit typically consist of money market funds that are measured at fair value based on quoted prices, which are Level 1 inputs.
As of
December 31, 2017
, the Company’s restricted cash equivalents and investments that serve as collateral for the Company’s captive insurance company consist of commercial paper that is measured at observable market prices for identical securities that are traded in less active markets, which are Level 2 inputs. Of the
$28,708
commercial paper as of
December 31, 2017
,
$6,074
had original maturities greater than three months, which were considered available-for-sale securities. As of
December 31, 2016
, the Company had
$25,610
commercial paper issued and outstanding, of which
$11,152
had original maturities greater than three months and were considered available-for-sale securities.
The Company’s interest rate swap was measured at fair value using a discounted cash flow analysis that included the contractual terms, including the period to maturity, and Level 2 observable market-based inputs, including interest rate curves. The fair value of the swap was determined by netting the discounted future fixed cash receipts payments and the discounted expected variable cash receipts. The variable cash receipts were based on an expectation of future interest rates (forward curves) derived from observable market interest rate yield curves. The valuation also considered credit risk adjustments that
were necessary to reflect the probability of default by the counterparty or the Company, which were considered Level 3 inputs. On May 3, 2017, the Company terminated the remaining interest rate swap.
The Company’s contingent consideration liabilities are measured at fair value using probability-weighted discounted cash flow analysis for the acquired companies, which are Level 3 inputs.
The following tables present information about assets and liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of December 31, 2017
|
Assets (Liabilities)
|
Total
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
Money market funds
|
$
|
2,713
|
|
|
$
|
2,713
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial paper
|
28,708
|
|
|
—
|
|
|
28,708
|
|
|
—
|
|
Acquisition contingent consideration liabilities
|
(2,070
|
)
|
|
—
|
|
|
—
|
|
|
(2,070
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of December 31, 2016
|
Assets (Liabilities)
|
Total
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
Money market funds
|
$
|
4,627
|
|
|
$
|
4,627
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial paper
|
25,610
|
|
|
—
|
|
|
25,610
|
|
|
—
|
|
Interest rate swap asset
|
24
|
|
|
—
|
|
|
24
|
|
|
—
|
|
Acquisition contingent consideration liabilities
|
(6,816
|
)
|
|
—
|
|
|
—
|
|
|
(6,816
|
)
|
The following table sets forth a reconciliation of changes in the fair value of contingent consideration liabilities classified as Level 3 in the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
Balance as of January 1,
|
$
|
(6,816
|
)
|
|
$
|
(3,770
|
)
|
Settlement of TFS earn-out for year ended
December 31, 2015
|
—
|
|
|
1,000
|
|
Contingent consideration earn-out liability from
HSG acquisition on January 11, 2016
|
—
|
|
|
(3,590
|
)
|
Change in fair value of contingent consideration earn-out liabilities from Avantas, TFS and HSG acquisitions
|
(184
|
)
|
|
(456
|
)
|
Settlement of TFS earn-out for year ended
December 31, 2016
|
3,000
|
|
|
—
|
|
Settlement of HSG earn-out for year ended
December 31, 2016
|
1,930
|
|
|
—
|
|
Balance as of December 31,
|
$
|
(2,070
|
)
|
|
$
|
(6,816
|
)
|
Assets Measured on a Non-Recurring Basis
The Company applies fair value techniques on a non-recurring basis associated with valuing potential impairment losses related to its goodwill, indefinite-lived intangible assets, long-lived assets and equity method investment.
The Company evaluates goodwill and indefinite-lived intangible assets annually for impairment and whenever circumstances occur indicating that goodwill or indefinite-lived intangible assets might be impaired. The Company determines the fair value of its reporting units based on a combination of inputs, including the market capitalization of the Company, as well as Level 3 inputs such as discounted cash flows, which are not observable from the market, directly or indirectly. The Company determines the fair value of its indefinite-lived intangible assets using the income approach (relief-from-royalty method) based on Level 3 inputs.
There were
no
impairment charges recorded during the three years ended
December 31, 2017
requiring such measurements.
Other Fair Value Measurement Disclosures
The Company is required to disclose the fair value of financial instruments that are not recognized at fair value in the consolidated balance sheets for which it is practicable to estimate that value. As of
December 31, 2017
, the Company’s Notes have a carrying amount of
$325,000
and an estimated fair value of
$335,156
. Quoted market prices in active markets for identical liabilities based inputs (level 1) were used to estimate fair value. The Notes were issued in October 2016 and have a fixed rate of
5.125%
. As of December 31, 2016, the Company's Notes approximated their fair value as there had been no changes in available rates for similar debt since the date of issuance. See additional information in Note (8), “Notes Payable and Credit Agreement.”
(5) Goodwill and Identifiable Intangible Assets
As of
December 31, 2017
and
2016
, the Company had the following acquired intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
As of December 31, 2016
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
Staffing databases
|
$
|
19,826
|
|
|
$
|
(7,693
|
)
|
|
$
|
12,133
|
|
|
$
|
19,826
|
|
|
$
|
(5,633
|
)
|
|
$
|
14,193
|
|
Customer relationships
|
136,759
|
|
|
(60,764
|
)
|
|
75,995
|
|
|
136,759
|
|
|
(50,309
|
)
|
|
86,450
|
|
Tradenames and trademarks
|
61,369
|
|
|
(16,757
|
)
|
|
44,612
|
|
|
61,369
|
|
|
(12,139
|
)
|
|
49,230
|
|
Non-compete agreements
|
1,697
|
|
|
(958
|
)
|
|
739
|
|
|
1,697
|
|
|
(678
|
)
|
|
1,019
|
|
Acquired technology
|
8,730
|
|
|
(4,513
|
)
|
|
4,217
|
|
|
8,730
|
|
|
(3,298
|
)
|
|
5,432
|
|
|
$
|
228,381
|
|
|
$
|
(90,685
|
)
|
|
$
|
137,696
|
|
|
$
|
228,381
|
|
|
$
|
(72,057
|
)
|
|
$
|
156,324
|
|
Intangible assets not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
Tradenames and trademarks
|
|
|
|
|
$
|
89,400
|
|
|
|
|
|
|
$
|
89,400
|
|
|
|
|
|
|
$
|
227,096
|
|
|
|
|
|
|
$
|
245,724
|
|
Aggregate amortization expense for intangible assets was
$18,628
and
$18,310
for the years ended
December 31, 2017
and
2016
, respectively. Based on the current amount of intangibles subject to amortization, the estimated future amortization expense as of
December 31, 2017
is as follows:
|
|
|
|
|
|
Amount
|
Year ending December 31, 2018
|
$
|
17,555
|
|
Year ending December 31, 2019
|
16,827
|
|
Year ending December 31, 2020
|
13,889
|
|
Year ending December 31, 2021
|
11,899
|
|
Year ending December 31, 2022
|
11,640
|
|
Thereafter
|
65,886
|
|
|
$
|
137,696
|
|
The following table summarizes the activity related to the carrying value of goodwill by reportable segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nurse and Allied
Solutions
|
|
Locum Tenens
Solutions
|
|
Other Workforce Solutions
|
|
Total
|
Balance, January 1, 2016
|
$
|
95,309
|
|
|
$
|
19,743
|
|
|
$
|
89,727
|
|
|
$
|
204,779
|
|
Goodwill from BES acquisition
|
—
|
|
|
—
|
|
|
91,127
|
|
|
91,127
|
|
Goodwill from HSG acquisition
|
8,147
|
|
|
—
|
|
|
—
|
|
|
8,147
|
|
Goodwill from Peak acquisition
|
—
|
|
|
—
|
|
|
36,827
|
|
|
36,827
|
|
Goodwill adjustment for Onward acquisition
|
850
|
|
|
—
|
|
|
—
|
|
|
850
|
|
Goodwill adjustment for TFS acquisition
|
—
|
|
|
—
|
|
|
24
|
|
|
24
|
|
Balance, December 31, 2016
|
104,306
|
|
|
19,743
|
|
|
217,705
|
|
|
341,754
|
|
Goodwill adjustment for HSG acquisition
|
(1,199
|
)
|
|
—
|
|
|
—
|
|
|
(1,199
|
)
|
Goodwill adjustment for Peak acquisition
|
—
|
|
|
—
|
|
|
41
|
|
|
41
|
|
Balance, December 31, 2017
|
$
|
103,107
|
|
|
$
|
19,743
|
|
|
$
|
217,746
|
|
|
$
|
340,596
|
|
Accumulated impairment loss as of
December 31, 2016 and 2017
|
$
|
154,444
|
|
|
$
|
53,940
|
|
|
$
|
6,555
|
|
|
$
|
214,939
|
|
(6) Balance Sheet Details
The consolidated balance sheets detail is as follows as of
December 31, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2017
|
|
2016
|
Other current assets:
|
|
|
|
Restricted cash and cash equivalents
|
25,506
|
|
|
20,271
|
|
Income taxes receivable
|
15,898
|
|
|
361
|
|
Other
|
9,589
|
|
|
13,975
|
|
Other current assets
|
$
|
50,993
|
|
|
$
|
34,607
|
|
|
|
|
|
Fixed assets:
|
|
|
|
Furniture and equipment
|
$
|
29,494
|
|
|
$
|
25,582
|
|
Technology and software
|
132,770
|
|
|
112,405
|
|
Leasehold improvements
|
9,056
|
|
|
6,832
|
|
|
171,320
|
|
|
144,819
|
|
Accumulated depreciation
|
(97,889
|
)
|
|
(84,865
|
)
|
Fixed assets, net
|
$
|
73,431
|
|
|
$
|
59,954
|
|
|
|
|
|
Accounts payable and accrued expenses:
|
|
|
|
Trade accounts payable
|
$
|
31,420
|
|
|
$
|
33,392
|
|
Subcontractor payable
|
41,786
|
|
|
51,973
|
|
Accrued expenses
|
40,403
|
|
|
37,251
|
|
Professional liability reserve
|
7,672
|
|
|
10,254
|
|
Other
|
9,038
|
|
|
4,642
|
|
Accounts payable and accrued expenses
|
$
|
130,319
|
|
|
$
|
137,512
|
|
|
|
|
|
Accrued compensation and benefits:
|
|
|
|
Accrued payroll
|
$
|
33,923
|
|
|
$
|
30,917
|
|
Accrued bonuses and commissions
|
19,489
|
|
|
26,992
|
|
Accrued travel expense
|
3,256
|
|
|
2,972
|
|
Accrued health insurance reserve
|
3,658
|
|
|
3,189
|
|
Accrued workers compensation reserve
|
8,553
|
|
|
8,406
|
|
Deferred compensation
|
49,330
|
|
|
32,690
|
|
Other
|
3,214
|
|
|
2,827
|
|
Accrued compensation and benefits
|
$
|
121,423
|
|
|
$
|
107,993
|
|
|
|
|
|
Other current liabilities:
|
|
|
|
Acquisition related liabilities
|
2,599
|
|
|
6,921
|
|
Other
|
2,547
|
|
|
9,690
|
|
Other current liabilities
|
$
|
5,146
|
|
|
$
|
16,611
|
|
|
|
|
|
Other long-term liabilities:
|
|
|
|
Workers compensation reserve
|
$
|
19,074
|
|
|
$
|
18,708
|
|
Professional liability reserve
|
38,964
|
|
|
37,338
|
|
Deferred rent
|
14,744
|
|
|
13,274
|
|
Unrecognized tax benefits
|
5,270
|
|
|
8,464
|
|
Other
|
1,227
|
|
|
4,312
|
|
Other long-term liabilities
|
$
|
79,279
|
|
|
$
|
82,096
|
|
(7) Income Taxes
The provision for income taxes from operations for the years ended
December 31, 2017
,
2016
and
2015
consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
Current income taxes:
|
|
|
|
|
|
Federal
|
$
|
45,899
|
|
|
$
|
68,312
|
|
|
$
|
22,552
|
|
State
|
8,699
|
|
|
11,441
|
|
|
3,969
|
|
Total
|
54,598
|
|
|
79,753
|
|
|
26,521
|
|
Deferred income taxes:
|
|
|
|
|
|
Federal
|
1,754
|
|
|
(9,115
|
)
|
|
8,896
|
|
State
|
3,853
|
|
|
(309
|
)
|
|
3,781
|
|
Total
|
5,607
|
|
|
(9,424
|
)
|
|
12,677
|
|
Provision for income taxes from operations
|
$
|
60,205
|
|
|
$
|
70,329
|
|
|
$
|
39,198
|
|
Total income tax expense for the years ended
December 31, 2017
,
2016
and
2015
was allocated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
Provision for income taxes from operations
|
$
|
60,205
|
|
|
$
|
70,329
|
|
|
$
|
39,198
|
|
Shareholders’ equity, for compensation expense for tax purposes in excess of amounts recognized for financial reporting purposes
|
—
|
|
|
(3,144
|
)
|
|
(7,176
|
)
|
|
$
|
60,205
|
|
|
$
|
67,185
|
|
|
$
|
32,022
|
|
The Company’s income tax expense differs from the amount that would have resulted from applying the federal statutory rate of
35%
to pretax income from operations because of the effect of the following items during the years ended
December 31, 2017
,
2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
Tax expense at federal statutory rate
|
$
|
67,467
|
|
|
$
|
61,658
|
|
|
$
|
42,381
|
|
State taxes, net of federal benefit
|
7,880
|
|
|
7,597
|
|
|
5,260
|
|
Non-deductible expenses
|
3,849
|
|
|
3,656
|
|
|
3,505
|
|
Share-based compensation
|
(4,889
|
)
|
|
—
|
|
|
—
|
|
Corporate tax rate change impact on deferred income taxes
|
(14,039
|
)
|
|
—
|
|
|
—
|
|
Unrecognized tax benefit
|
(1,175
|
)
|
|
379
|
|
|
(11,464
|
)
|
Other, net
|
1,112
|
|
|
(2,961
|
)
|
|
(484
|
)
|
Income tax expense from operations
|
$
|
60,205
|
|
|
$
|
70,329
|
|
|
$
|
39,198
|
|
The adoption of ASU 2016-09, “Stock Compensation - Improvements to Employee Share-Based Payment Accounting” in the first quarter of 2017, resulted in recording a
$5,449
reduction in income tax expense for the year ended December 31, 2017. Prior to adoption, this amount would have been recorded as additional paid-in capital.
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are presented below as of the years ended
December 31, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2017
|
|
2016
|
Deferred tax assets:
|
|
|
|
Stock compensation
|
$
|
7,723
|
|
|
$
|
11,954
|
|
Deferred compensation
|
12,949
|
|
|
13,079
|
|
Accrued expenses
|
11,343
|
|
|
35,499
|
|
Deferred rent
|
4,033
|
|
|
5,492
|
|
Net operating losses
|
2,650
|
|
|
5,756
|
|
Other
|
4,904
|
|
|
6,576
|
|
Total deferred tax assets
|
$
|
43,602
|
|
|
$
|
78,356
|
|
Deferred tax liabilities:
|
|
|
|
Intangibles
|
$
|
(51,551
|
)
|
|
$
|
(78,201
|
)
|
Fixed assets
|
(15,750
|
)
|
|
(18,847
|
)
|
Other
|
(3,297
|
)
|
|
(2,545
|
)
|
Total deferred tax liabilities
|
$
|
(70,598
|
)
|
|
$
|
(99,593
|
)
|
Valuation allowance
|
$
|
(40
|
)
|
|
$
|
(183
|
)
|
Net deferred tax liabilities
|
$
|
(27,036
|
)
|
|
$
|
(21,420
|
)
|
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management believes it is more likely than not that the Company will realize the benefits of its deferred tax assets, net of the recorded valuation allowance.
The amount of federal net operating losses (“NOL”) carryforward that is available for use in years subsequent to
December 31, 2017
is
$11,250
, which is set to expire by
2029
. The amount of state NOL carryforward that is available for use in years subsequent to
December 31, 2017
is
$4,749
, which is set to expire at various dates between
2018
and
2032
.
A summary of the changes in the amount of unrecognized tax benefits (excluding interest and penalties) for
2017
,
2016
and
2015
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2015
|
Beginning balance of unrecognized tax benefits
|
$
|
6,842
|
|
|
$
|
6,537
|
|
|
$
|
22,890
|
|
Additions based on tax positions related to the current year
|
513
|
|
|
—
|
|
|
—
|
|
Additions based on tax positions of prior years
|
731
|
|
|
868
|
|
|
395
|
|
Reductions due to lapse of applicable statute of limitation
|
(949
|
)
|
|
(563
|
)
|
|
(214
|
)
|
Settlements
|
(2,474
|
)
|
|
—
|
|
|
(16,534
|
)
|
Ending balance of unrecognized tax benefits
|
$
|
4,663
|
|
|
$
|
6,842
|
|
|
$
|
6,537
|
|
At
December 31, 2017
, if recognized, approximately
$4,613
would affect the effective tax rate (including interest).
The Company recognizes interest related to unrecognized tax benefits in income tax expense. The Company had approximately
$606
,
$1,622
and
$1,544
of accrued interest related to unrecognized tax benefits at
December 31, 2017
,
2016
and
2015
, respectively. The amount of interest expense (benefit) recognized in
2017
,
2016
and
2015
was
$(1,016)
,
$78
and
$(4,272)
, respectively.
The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. With few exceptions, as of December 31, 2017, the Company is no longer subject to state, local or foreign examinations by tax authorities for tax years before 2006, and the Company is no longer subject to U.S. federal income or payroll tax examinations for tax years before 2013. The Company’s tax years 2007, 2008, 2009 and 2010 had been under audit by the Internal Revenue Service (“IRS”) for
several years and the Company received a final determination from the IRS in July 2015 on both the Revenue Agent Report (“RAR”) adjustments and Employment Tax Examination Report (“ETER”) assessments, effectively settling these audits with the IRS.
The IRS conducted and completed a separate audit of the Company’s 2011 and 2012 tax years that focused on income and employment tax issues similar to those raised in the 2007 through 2010 examination. The IRS completed its audit during the quarter ended March 31, 2015, and issued its RAR and ETER to the Company with proposed adjustments to the Company’s taxable income for 2011 and 2012 and net operating loss carryforwards from 2010 and assessments for additional payroll tax liabilities and penalties for 2011 and 2012 related to the Company’s treatment of certain non-taxable per diem allowances and travel benefits. The Company filed a Protest Letter for both the RAR and ETER in April 2015. The Company received a final determination from the IRS in November 2017 on both the 2011 and 2012 RAR adjustments and ETER assessments, respectively, effectively settling these audits with the IRS for
$2,000
(including interest) during the fourth quarter of 2017. As a result, the Company recorded federal income tax benefits of approximately
$800
during the quarter ended December 31, 2017 as the settlement was less than the previously recorded uncertain tax position reserve.
The IRS began an audit of the Company’s 2013 tax year during the quarter ended June 30, 2015. The Company believes its reserve for unrecognized tax benefits and contingent tax issues is adequate with respect to all open years. Notwithstanding the foregoing, the Company could adjust its provision for income taxes and contingent tax liability based on future developments.
Tax Cuts and Jobs Act
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from
35
percent to
21
percent.
Tax Act changes that affect the Company in 2017 are primarily tax rate changes on certain deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”).
The Tax Act also establishes new tax laws that will affect 2018 and beyond, including, but not limited to, (1) reduction of the U.S. federal corporate tax rate; (2) the repeal of the domestic production activity deduction; (3) limitations on the deductibility of certain executive compensation; and (4) limitations on various entertainment and meals deductions.
The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.
In connection with the Company's initial analysis of the impact of the Tax Act, the Company recorded a discrete net tax benefit of
$14,039
in the quarter ended December 31, 2017. This net benefit primarily consists of a net benefit for the corporate rate reduction on the Company's existing deferred tax assets and liabilities.
The Company's accounting for the following elements of the Tax Act is incomplete. However, the Company was able to make reasonable estimates of certain effects and, therefore, recorded provisional adjustments for items impacting executive compensation and accounting methods.
(8) Notes Payable and Credit Agreement
(a) The Company
’
s Credit Agreement and Related Credit Facilities
Credit Agreement Prior to February 9, 2018
The Company is party to a credit agreement (as amended to date, the “Credit Agreement”) with several lenders in respect of
three
credit facilities (the “Credit Facilities”), including (A) a
$275,000
revolver facility (the “Revolver”), which includes a
$40,000
sublimit for the issuance of letters of credit and a
$20,000
sublimit for swingline loans, (B) a
$150,000
secured term loan facility (the “Original Term Loan”) and (C) a
$75,000
secured term loan facility (the “Second Term Loan,” and together with the Original Term Loan, the “Term Loans”). The maturity dates of the Revolver and the Original Term Loan, on the one
hand, and the Second Term Loan, on the other hand, are April 18, 2019 and January 4, 2021, respectively. The Company fully repaid all amounts under the Original Term Loan and Second Term Loan in 2016 and 2017, respectively.
On September 19, 2016, the Company entered into another amendment to the Credit Agreement (the “Second Amendment”), which, among other things, permits the Company to increase the commitments that may be obtained under the Credit Agreement by the amount of certain prepayments made thereunder. Accordingly, the Credit Agreement provides that the Company may from time to time obtain an increase in the Revolver or obtain additional term loans or both in an aggregate principal amount not to exceed
$125,000
plus the amount of certain prepayments of Credit Facilities (including
$138,438
of prepayments of the Term Loans made by the Company on October 3, 2016) subject to, among other conditions, the arrangement of additional commitments with financial institutions reasonably acceptable to the Company and the administrative agent.
The Revolver carries an unused fee of
0.25%
to
0.35%
per annum and each standby letter of credit issued under the Revolver is subject to a letter of credit fee ranging from
1.50%
to
2.25%
per annum of the average daily maximum amount available to be drawn under the standby letter of credit, in each case, depending on the Company’s consolidated leverage ratio, as calculated quarterly in accordance with the Credit Agreement. The Second Term Loan was subject to amortization of principal of
5.00%
per year of the original loan amount, which was
$3,750
per annum, and payable in equal quarterly installments. Borrowings under the Second Term Loan and Revolver bear interest at floating rates, at the Company’s option, based upon either LIBOR plus a spread of
1.50%
to
2.25%
or a base rate plus a spread of
0.50%
to
1.25%
. The applicable spread is determined quarterly based upon the Company’s consolidated leverage ratio.
The Credit Agreement contains various customary affirmative and negative covenants, including restrictions on incurrence of additional indebtedness, declaration and payment of dividends, dispositions of assets, consolidation into another entity, and allowable investments. Additionally, there are financial covenants based on the Company’s consolidated leverage ratio and interest coverage ratio as calculated in accordance with the Credit Agreement. The payment obligations under the Credit Agreement may be accelerated upon the occurrence of defined events of default. Additionally, the Credit Agreement no longer requires (as was originally set forth in the original Credit Agreement) the Company to make mandatory prepayments under any of the credit facilities provided thereunder with the proceeds of extraordinary receipts and excess cash flow when certain financial conditions were present. The Credit Facilities are secured by substantially all of the assets of the Company and the common stock or equity interests of its domestic subsidiaries.
In connection with the First Amendment, the Company incurred
$632
in fees paid to lenders and other third parties, of which
$448
was capitalized and amortized to interest expense on a pro rata basis over the remaining term of the Revolver and the term of the Second Term Loan and the remaining amount was recorded as interest expense during the year ended December 31, 2016. The Company incurred de minimis costs in connection with the Second Amendment.
The Revolver is available for working capital, capital expenditures, permitted acquisitions and general corporate purposes of the Company. At
December 31, 2017
, with
$19,320
of outstanding letters of credit collateralized by the Revolver, there was
$255,680
of available credit under the Revolver.
New Credit Agreement
On February 9, 2018, the Company entered into a credit agreement (the “New Credit Agreement”) with several lenders to provide for a
$400,000
secured revolving credit facility (the “Senior Credit Facility”) to replace its then-existing Credit Agreement. The Senior Credit Facility includes a
$50,000
sublimit for the issuance of letters of credit and a
$50,000
sublimit for swingline loans. The obligations of the Company under the New Credit Agreement and the Senior Credit Facility are secured by substantially all of the assets of the Company. Borrowings under the Senior Credit Facility bear interest at floating rates, at the Company’s option, based upon either LIBOR plus a spread of
1.00%
to
2.00%
or a base rate plus a spread of
0.00%
to
1.00%
. The applicable spread is determined quarterly based upon the Company’s consolidated net leverage ratio. The Senior Credit Facility is available for working capital, capital expenditures, permitted acquisitions and general corporate purposes. The maturity date of the Senior Credit Facility is February 9, 2023.
(b) The Company
’s
5.125%
Senior Notes Due 2024
On October 3, 2016, the Company completed the issuance and sale of
$325,000
aggregate principal amount of the Notes, which mature on October 1, 2024. Interest on the Notes is fixed at
5.125%
and payable semi-annually in arrears on April 1 and October 1 of each year, commencing April 1, 2017. With the proceeds from the Notes and cash generated from operations, the Company (1) repaid
$131,250
of Original Term Loan indebtedness, (2) repaid
$7,188
of existing Second Term Loan indebtedness, (3) repaid
$182,500
under the Revolver, and (4) paid
$6,113
of fees and expenses related to the issuance and sale of the Notes, which were recorded as a reduction of the notes payable balance and are being amortized to interest expense over the term of the Notes.
The indenture governing the Notes contains covenants that, among other things, restrict the ability of the Company to:
•
sell assets,
•
pay dividends or make other distributions on capital stock or make payments in respect of subordinated indebtedness,
•
make investments,
•
incur additional indebtedness or issue preferred stock,
•
create, or permit to exist, certain liens,
•
enter into agreements that restrict dividends or other payments from restricted subsidiaries,
•
consolidate, merge or transfer all or substantially all of its assets,
•
engage in transactions with affiliates, and
•
create unrestricted subsidiaries.
These covenants are subject to a number of important exceptions and qualifications. The indenture governing the Notes contains affirmative covenants and events of default that are customary for indentures governing high yield securities. The Notes and the related guarantees thereof are not subject to any registration rights agreements.
(c) Debt Balances
Outstanding debt balances as of
December 31, 2017
and
2016
consisted of the following:
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2017
|
|
2016
|
Second Term Loan
|
—
|
|
|
44,063
|
|
Notes
|
325,000
|
|
|
325,000
|
|
Total debt outstanding
|
325,000
|
|
|
369,063
|
|
Less unamortized fees
|
(5,157
|
)
|
|
(6,121
|
)
|
Less current portion of notes payable
|
—
|
|
|
(3,750
|
)
|
Long-term portion of notes payable
|
$
|
319,843
|
|
|
$
|
359,192
|
|
The aggregate principal amount of the Notes mature on October 1, 2024.
(d) Letters of Credit
At
December 31, 2017
, the Company maintained outstanding standby letters of credit totaling
$21,976
as collateral in relation to its professional liability insurance agreements, workers compensation insurance agreements, and a corporate office lease agreement. Of the
$21,976
outstanding letters of credit, the Company has collateralized
$2,656
in cash and cash equivalents and the remaining amount has been collateralized by the Revolver. Outstanding standby letters of credit at
December 31, 2016
totaled
$15,379
.
(9) Retirement Plans
The Company maintains the AMN Services 401(k) Retirement Savings Plan (the “AMN Plan”), which the Company believes complies with the IRC Section 401(k) provisions. The AMN Plan covers all employees that meet certain age and other eligibility requirements. An annual discretionary matching contribution is determined by the Compensation and Stock Plan Committee of the Board of Directors each year. Employer contribution expenses incurred under the AMN Plan were
$4,486
,
$5,010
and
$1,618
for the years ended
December 31, 2017
,
2016
and
2015
, respectively.
The Company has a deferred compensation plan for certain executives and key employees (the “Plan”). The Plan is not intended to be tax qualified and is an unfunded plan. The Plan is composed of deferred compensation and all related income and losses attributable thereto. Discretionary matching contributions to the Plan are made that vest incrementally so that the employee is fully vested in the match following
five
years of employment with the Company. Under the Plan, participants can defer up to
80%
of their base salary,
90%
of their bonus and
100%
of their vested RSUs or vested PRSUs. An annual discretionary matching contribution is determined by the Compensation and Stock Plan Committee of the Board of Directors each year. Employer contributions under the Plan were
$4,545
,
$3,032
and
$974
for the years ended
December 31, 2017
,
2016
and
2015
, respectively. In connection with the administration of the Plan, the Company has purchased company-owned life insurance policies insuring the lives of certain officers and key employees. The cash surrender value of these policies was
$48,145
and
$32,190
at
December 31, 2017
and
2016
, respectively. The cash surrender value of these insurance policies is included in other assets in the consolidated balance sheets.
(10) Capital Stock
(a) Preferred Stock
The Company has
10,000
shares of preferred stock authorized for issuance in one or more series (including preferred stock designated as Series A Conditional Convertible Preferred Stock), at a par value of
$0.01
per share.
At
December 31, 2017
and
2016
,
no
shares of preferred stock were outstanding.
(b) Treasury Stock
On November 1, 2016, the Company’s Board of Directors approved a share repurchase program under which the Company may repurchase up to
$150,000
of its outstanding common stock. The amount and timing of the purchases will depend on a number of factors including the price of the Company’s shares, trading volume, Company performance, Company liquidity, general economic and market conditions and other factors that the Company’s management believes are relevant. The share repurchase program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time.
The Company intends to make all repurchases and to administer the plan in accordance with applicable laws and regulatory guidelines, including Rule 10b-18 of the Exchange Act, and in compliance with its debt instruments. Repurchases
may be made from cash on hand, free cash flow generated from the Company’s business or from the Company’s Revolver. Repurchases may be made from time to time through open market purchases or privately negotiated transactions. Repurchases may also be made pursuant to one or more plans established pursuant to Rule 10b5-1 under the Exchange Act, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading restrictions.
During
2017
, the Company repurchased
487
shares of its common stock at an average price of
$41.41
per share, resulting in an aggregate purchase price of
$20,164
. During
2016
, the Company repurchased
443
shares of its common stock at an average price of
$29.88
per share, resulting in an aggregate purchase price of
$13,261
.
(11) Share-Based Compensation
(a) Equity Award Plans
Equity Plan
The Company established the AMN Healthcare Equity Plan (as amended or amended and restated from time to time, the “Equity Plan”), which has been approved by the Company’s stockholders. At the time of the Equity Plan’s original adoption in 2006, equity awards, based on the Company’s common stock, could be issued for a maximum of
723
shares plus the number of shares of common stock underlying any grants under the Stock Option Plan (under which there are no longer any outstanding awards) that were forfeited, canceled or terminated (other than by exercise) from and after the effective date of the Equity Plan. Pursuant to the Equity Plan, stock options and stock appreciation rights (“SARs”) granted have a maximum contractual life of
ten
years and have exercise prices that will be determined at the time of grant, which will be no less than fair market value of the underlying common stock on the date of grant. Any shares to be issued under the Equity Plan will be issued by the Company from authorized but unissued common stock or shares of common stock reacquired by the Company. On April 18, 2007, April 9, 2009, April 18, 2012 and April 28, 2017, the Company amended the Equity Plan, with stockholder approval, to increase the number of shares authorized under the Equity Plan by
3,000
,
1,850
,
2,400
and
1,400
, respectively. At
December 31, 2017
and
2016
, respectively,
3,244
and
1,933
shares of common stock were reserved for future grants under the Equity Plan.
Other Plans
From time to time, the Company grants, and has granted, key employees inducement awards outside of the Equity Plan (collectively, “Other Plans”), which have consisted of SARs, options or RSUs. Although these awards are not made under the Equity Plan, the key terms and conditions of the grant are typically the same as equity awards made under the Equity Plan.
Additionally, in February 2014, the Company established the 2014 Employment Inducement Plan, which reserves for issuance
200
shares of common stock for prospective employees of the Company. As of
December 31, 2017
,
200
shares of common stock remained available for future grants under the 2014 Employment Inducement Plan.
(b) Share-Based Compensation
Restricted Stock Units
RSUs and PRSUs (subject to a PRSU being earned) granted under the Equity Plan generally entitle the holder to receive, at the end of a vesting period, a specified number of shares of the Company’s common stock. The following table summarizes RSU and PRSU activity for non-vested awards for the years ended
December 31, 2017
,
2016
and
2015
:
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted Average
Grant Date
Fair Value per
Share
|
Unvested at January 1, 2015
|
1,575
|
|
|
$
|
11.95
|
|
Granted—RSUs
|
203
|
|
|
$
|
22.43
|
|
Granted—PRSUs (1)
|
616
|
|
|
$
|
13.58
|
|
Vested
|
(1,081
|
)
|
|
$
|
9.13
|
|
Canceled/forfeited/expired
|
(76
|
)
|
|
$
|
15.45
|
|
Unvested at December 31, 2015
|
1,237
|
|
|
$
|
16.73
|
|
Granted—RSUs
|
180
|
|
|
$
|
32.65
|
|
Granted—PRSUs (1)
|
361
|
|
|
$
|
20.88
|
|
Vested
|
(641
|
)
|
|
$
|
14.90
|
|
Canceled/forfeited/expired
|
(62
|
)
|
|
$
|
22.57
|
|
Unvested at December 31, 2016
|
1,075
|
|
|
$
|
22.14
|
|
Granted—RSUs
|
166
|
|
|
$
|
40.73
|
|
Granted—PRSUs (1)
|
317
|
|
|
$
|
27.51
|
|
Vested
|
(637
|
)
|
|
$
|
16.88
|
|
Canceled/forfeited/expired
|
(66
|
)
|
|
$
|
30.02
|
|
Unvested at December 31, 2017
|
855
|
|
|
$
|
30.98
|
|
(1) PRSUs granted included both the PRSUs granted during the year at the target amount and the additional shares of prior period granted PRSUs vested during the year in excess of the target shares.
As of
December 31, 2017
, there was
$11,679
unrecognized compensation cost related to non-vested RSUs and PRSUs. The Company expects to recognize such cost over a period of
1.8
years. As of
December 31, 2017
and
2016
, the aggregate intrinsic value of the RSUs and PRSUs outstanding was
$42,103
and
$41,317
, respectively.
Stock Options and SARs
Stock options entitle the holder to purchase, at the end of a vesting period, a specified number of shares of the Company’s common stock at a price per share set at the date of grant. SARs entitle the holder to receive, at the end of a vesting period, shares of the Company’s common stock equal in value to the difference between the exercise price of the SAR, which is set at the date of grant, and the fair market value of the Company’s common stock on the date of exercise.
A summary of stock option and SAR activity under the Stock Option Plan and the Equity Plan and Other Plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Plan
|
|
Equity Plan and Other Plans
|
|
Number
Outstanding
|
|
Weighted-
Average
Exercise Price
per Share
|
|
Number
Outstanding
|
|
Weighted-
Average
Exercise Price
per Share
|
Outstanding at December 31, 2014
|
245
|
|
|
$
|
14.93
|
|
|
948
|
|
|
$
|
10.61
|
|
Granted
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Exercised
|
(245
|
)
|
|
$
|
14.93
|
|
|
(615
|
)
|
|
$
|
10.79
|
|
Canceled/forfeited/expired
|
—
|
|
|
$
|
—
|
|
|
(1
|
)
|
|
$
|
24.95
|
|
Outstanding at December 31, 2015
|
—
|
|
|
$
|
—
|
|
|
332
|
|
|
$
|
10.26
|
|
Granted
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Exercised
|
—
|
|
|
$
|
—
|
|
|
(44
|
)
|
|
$
|
13.69
|
|
Canceled/forfeited/expired
|
—
|
|
|
$
|
—
|
|
|
(2
|
)
|
|
$
|
18.03
|
|
Outstanding at December 31, 2016
|
—
|
|
|
$
|
—
|
|
|
286
|
|
|
$
|
9.67
|
|
Granted
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Exercised
|
—
|
|
|
$
|
—
|
|
|
(24
|
)
|
|
$
|
18.85
|
|
Canceled/forfeited/expired
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Outstanding at December 31, 2017
|
—
|
|
|
$
|
—
|
|
|
262
|
|
|
$
|
8.81
|
|
Vested and expected to vest at December 31, 2017
|
—
|
|
|
$
|
—
|
|
|
262
|
|
|
$
|
8.81
|
|
Exercisable at December 31, 2017
|
—
|
|
|
$
|
—
|
|
|
262
|
|
|
$
|
8.81
|
|
As of
December 31, 2017
, all SARs were fully vested, and there were
no
stock options outstanding. The total intrinsic value of stock options and SARs exercised was
$555
,
$877
and
$10,505
for
2017
,
2016
and
2015
, respectively. At
December 31, 2017
and
2016
, the total intrinsic value of stock options and SARs outstanding and exercisable was
$10,674
and
$8,247
, respectively.
Share-Based Compensation
Total share-based compensation expense for the years ended
December 31, 2017
,
2016
and
2015
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
Share-based employee compensation, before tax
|
$
|
10,237
|
|
|
$
|
11,399
|
|
|
$
|
10,284
|
|
Related income tax benefits
|
(3,985
|
)
|
|
(4,423
|
)
|
|
(3,990
|
)
|
Share-based employee compensation, net of tax
|
$
|
6,252
|
|
|
$
|
6,976
|
|
|
$
|
6,294
|
|
(12) Commitments and Contingencies
(a) Legal
From time to time, the Company is involved in various lawsuits, claims, investigations, and proceedings that arise in the
ordinary course of business. These matters typically relate to professional liability, tax, payroll, contract, competitor disputes and employee-related matters and include individual and collective lawsuits, as well as inquiries and investigations by governmental agencies regarding the Company’s employment practices. Additionally, some of the Company’s clients may also
become subject to claims, governmental inquiries and investigations, and legal actions relating to services provided by the Company’s healthcare professionals. Depending upon the particular facts and circumstances, the Company may also be subject to indemnification obligations under its contracts with such clients relating to these matters. The Company records a liability when management believes an adverse outcome from a loss contingency is both probable and the amount, or a range, can be reasonably estimated. Significant judgment is required to determine both probability of loss and the estimated amount. The Company reviews its loss contingencies at least quarterly and adjusts its accruals and/or disclosures to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, or other new information, as deemed necessary. The most significant matters for which the Company has established loss contingencies are class actions related to wage and hour claims under California and Federal law. Specifically, among other claims in these lawsuits, it is alleged that certain expense reimbursements should be included in the regular rate of pay for purposes of calculating overtime rates, and that employees were not afforded required breaks or compensated for all time worked. While the Company believes that its wage and hour practices conform with law in all material respects, litigation is always subject to inherent uncertainty, and the Company is not able to reasonably predict if any matter will be resolved in a manner that is materially adverse to the Company beyond the amounts accrued.
With regards to outstanding loss contingencies as of
December 31, 2017
, which are included in accounts payable and accrued expenses in the consolidated balance sheet, the Company believes that such matters will not, either individually or in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows.
(b) Leases
The Company leases certain office facilities and equipment under various operating leases. The Company recognizes rent expense on a straight-line basis over the lease term. Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of
December 31, 2017
are as follows:
|
|
|
|
|
|
|
|
Operating
Leases
|
Years ending December 31,
|
|
|
2018
|
|
$
|
16,962
|
|
2019
|
|
16,969
|
|
2020
|
|
16,913
|
|
2021
|
|
16,969
|
|
2022
|
|
16,777
|
|
Thereafter
|
|
66,439
|
|
Total minimum lease payments
|
|
$
|
151,029
|
|
Rent expense under operating leases was
$20,529
,
$18,793
, and
$15,940
for the years ended
December 31, 2017
,
2016
and
2015
, respectively.
(13) Quarterly Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Total Year
|
|
(In thousands, except per share data)
|
Revenue
|
$
|
495,169
|
|
|
$
|
489,803
|
|
|
$
|
494,406
|
|
|
$
|
509,076
|
|
|
$
|
1,988,454
|
|
Gross profit
|
$
|
161,776
|
|
|
$
|
161,012
|
|
|
$
|
159,539
|
|
|
$
|
162,092
|
|
|
$
|
644,419
|
|
Net income
|
$
|
32,008
|
|
|
$
|
31,255
|
|
|
$
|
28,128
|
|
|
$
|
41,167
|
|
|
$
|
132,558
|
|
Net income per share from:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.67
|
|
|
$
|
0.65
|
|
|
$
|
0.59
|
|
|
$
|
0.86
|
|
|
$
|
2.77
|
|
Diluted
|
$
|
0.65
|
|
|
$
|
0.63
|
|
|
$
|
0.57
|
|
|
$
|
0.84
|
|
|
$
|
2.68
|
|
Net income for the fourth quarter of 2017 included a discrete net tax benefit of
$14,039
in connection with the Company's initial analysis of the impact of the Tax Act. See Note (7), “Income Taxes,” for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Total Year
|
|
(In thousands, except per share data)
|
Revenue
|
$
|
468,002
|
|
|
$
|
473,729
|
|
|
$
|
472,636
|
|
|
$
|
487,858
|
|
|
$
|
1,902,225
|
|
Gross profit
|
$
|
151,898
|
|
|
$
|
154,753
|
|
|
$
|
154,467
|
|
|
$
|
158,606
|
|
|
$
|
619,724
|
|
Net income
|
$
|
25,869
|
|
|
$
|
26,322
|
|
|
$
|
27,296
|
|
|
$
|
26,351
|
|
|
$
|
105,838
|
|
Net income per share from:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.54
|
|
|
$
|
0.55
|
|
|
$
|
0.57
|
|
|
$
|
0.55
|
|
|
$
|
2.21
|
|
Diluted
|
$
|
0.53
|
|
|
$
|
0.53
|
|
|
$
|
0.55
|
|
|
$
|
0.54
|
|
|
$
|
2.15
|
|