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Acquisition Starting to Pay Off for AMN

AMN HEALTHCARE

CEO: Susan R. Salka.

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Revenue: $689.2 million in 2010; $759.8 million in 2009.

Net loss: $52 million in 2010; $122.2 million in 2009.

No. of local employees: 507.

Headquarters: Carmel Valley.

Year founded: 1985.

Stock symbol and exchange: AHS on the New York Stock Exchange.

Company description: Provides travel nurses, local per diem nurses, and physician staffing services.

AMN Healthcare, a nursing and medical staffing firm, is seeing the benefits from last year’s acquisition of another medical staffing business in the form of higher revenue, although the deal isn’t resulting in profits just yet.

For the fourth quarter, San Diego-based AMN reported March 8 a net loss of $1.6 million, compared with a net loss of $2.7 million for the like quarter of 2009. Yet its revenue grew 52 percent to $220 million compared with the final quarter of 2009.

Chief Executive Officer Susan R. Salka said while the acquisition of Texas-based Medfinders Inc. was the main reason for the big jump in sales, the company also grew its core business line of supplying hospitals and health clinics with traveling nurses, which increased 25 percent year over year.

AMN’s fourth quarter was the fourth consecutive one of improved revenue, and the first time it’s seen a year-over-year rise in revenue in two years, Salka said.

For the full year, AMN reported a net loss of $52 million, compared with a net loss of $122.2 million for 2009. The annual revenue was $689.2 million, down 9 percent from 2009. In 2008, AMN’s revenue was $1.22 billion.

Analyst: Revenues to Rise

While AMN doesn’t provide an annualized forecast, Jeffrey Silber of BMO Capital Markets Corp. estimated that its 2011 revenue will finish at $914 million, up by a third from last year.

Silber also increased his estimate on AMN’s per share earnings from 13 to 14 cents, and its target price at year end from $6 to $8. However, Silber kept his recommendation at market perform or hold.

Listed as AHS on the New York Stock Exchange, AMN ranks 11th on the San Diego Business Journal’s latest Largest Public Companies list with $759.8 million in fiscal 2009 revenue.

Salka said the business will complete the integration of Medfinders this month, and that it should expand market share for what already is the nation’s largest health care staffing company.

Benefits of the Deal

AMN, which announced completion of the deal Sept. 1, said it anticipates gains of about $8 million in earnings before income taxes and depreciation costs this year from the acquisition.

The deal will give AMN a more diverse portfolio of offerings, analysts noted. While AMN’s core business involves providing traveling nurses for 13-week assignments, on average, Medfinders’ model includes temporary nurses to more localized facilities and shorter stints, as well as nurses for the home care market. It also provides management services to health facilities.

Salka said the company is already enjoying cross-selling opportunities from the acquisition. Since the purchase, AMN signed 20 new managed staffing provider contracts that will generate about $45 million annually.

AMN said its gross margin in the fourth quarter declined to 28.1 percent, down 30 basis points from the prior year’s fourth quarter, while the full year’s gross margin was 27.8 percent, up from 26.9 percent for 2009.

Selling, general and administrative expenses increased by $11 million compared with the like quarter in the prior year due mainly from the Medfinders acquisition costs. Its expenses also included $1.2 million in bad debt related to a radiology contract that didn’t pay as it should have, AMN said.

Looking to Reduce Debt

According to a November securities filing, AMN paid $193 million for the company that is the parent of Nursefinders. The amount was comprised of stock, cash and assuming $133 million in Medfinders’ debt.

As of Dec. 31, AMN reported debt of $215 million. Salka said a key goal is to reduce that amount by about half in the next two years.

Like Silber, another AMN stock analyst wasn’t overwhelmed by the company’s most recent financial report, maintaining his neutral or hold rating on the stock.

Ty Govatos of CL King & Associates in Albany, N.Y., said, “While the temporary nurse staffing business seems to be in the initial stages of a rebound, the rate of recovery remains uncertain.”

Govatos said AMN has only two competitors in the same managed service provider market — Cross Country TravCorps and Medical Staffing Networks Healthcare, which is emerging from bankruptcy.

“The growing importance of MSP (managed service providers) should allow AMN and Cross Country to capture share from the rest of the country,” Govatos said in his report.

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