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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 001-31299
MEDICAL STAFFING NETWORK HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 65-0865171
(State or other jurisdiction I.R.S. Employer Identification No.)
of incorporation or organization)
901 Yamato Road
Suite 110
Boca Raton, Florida 33431
(Address of principal executive offices)
(Zip Code)
(561) 226-9000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [ X ] No [ ]
The number of shares of shares outstanding of each class of the issuer's common
stock, as of August 12, 2002:
30,089,035 shares Common Stock, par value $0.01 par value
MEDICAL STAFFING NETWORK HOLDINGS, INC.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets - December 30, 2001
and June 30, 2002 (Unaudited)................................... 3
Condensed Consolidated Statements of Income - for the
Three Months and Six Months Ended July 1, 2001
(Unaudited) and June 30, 2002 (Unaudited)................... 4
Condensed Consolidated Statements of Cash Flows - Six Months
Ended July 1, 2001 (Unaudited) and June 30, 2002 (Unaudited).... 5
Notes to Condensed Consolidated Financial Statements -
June 30, 2002 (Unaudited)....................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................... 9
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.......................... 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 20
SIGNATURE PAGE.............................................................. 21
2
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
MEDICAL STAFFING NETWORK HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 30, June 30,
2001 2002
------------------------------------
(Unaudited)
Assets
Current assets:
Cash $ 11,253,199 $ 86,301
Accounts receivable, net of allowance for doubtful accounts of $2,181,767
and $2,541,869 at December 30, 2001 and June 30, 2002, respectively 65,190,898 75,440,876
Prepaid expenses 5,032,378 3,243,679
Other current assets 1,014,641 1,231,705
------------------------------------
Total current assets 82,491,116 80,002,561
Furniture and equipment, net 7,315,574 10,061,205
Goodwill and other intangible assets, net of accumulated amortization of
$8,723,481 and $8,840,289 at December 30, 2001 and June 30, 2002, 68,289,316 69,830,236
respectively
Other assets 3,923,288 3,786,697
------------------------------------
Total assets $162,019,294 $163,680,699
====================================
Liabilities, redeemable preferred stock and stockholders' (deficit) equity
Current liabilities:
Accounts payable $ 5,271,571 $ 3,200,804
Accrued payroll and related liabilities 8,948,662 9,879,595
Other current liabilities 3,186,974 3,909,247
Current portion of long-term debt 10,034,721 -
Current portion of capital lease obligations 329,922 954,003
------------------------------------
Total current liabilities 27,771,850 17,943,649
Long-term debt, net of current portion 105,000,000 11,000,000
Senior subordinated debt to related parties 59,319,327 -
Capital lease obligations, net of current portion 661,096 1,555,960
Other liabilities 2,371,960 2,223,352
------------------------------------
Total liabilities 195,124,233 32,722,961
Commitments and contingencies
Redeemable preferred stock 124,616,794 --
Common stockholders' equity:
Common stock, $.01 par value, 75,000,000 authorized: 26,547 and
30,089,035 issued and outstanding at December 30, 2001 and June 30, 265 300,890
2002, respectively
Additional paid-in-capital - 283,699,079
Promissory notes due for purchases of common stock (4,550,877) (4,550,877)
Accumulated other comprehensive loss - (131,384)
Accumulated deficit (153,171,121) (148,359,970)
------------------------------------
Total common stockholders' (deficit) equity (157,721,733) 130,957,738
------------------------------------
Total liabilities, redeemable preferred stock, and common stockholders' $162,019,294 $163,680,699
(deficit) equity ====================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
MEDICAL STAFFING NETWORK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended Six months ended
July 1, 2001 June 30, 2002 July 1, 2001 June 30, 2002
------------------------------------ ------------------------------------
Service revenues $83,209,504 $115,512,170 $153,688,294 $218,740,323
Cost of services rendered 62,406,195 86,226,615 114,916,211 163,109,711
------------------------------------ ------------------------------------
Gross profit 20,803,309 29,285,555 38,772,083 55,630,612
Operating expenses:
Selling, general and administrative 10,767,557 15,377,466 19,780,028 29,880,474
Provision for doubtful accounts 357,472 849,871 648,962 1,390,591
Corporate general and administrative 1,707,565 1,781,282 3,100,081 3,447,248
Depreciation 507,340 932,822 931,101 1,727,227
Amortization 862,702 58,404 1,706,489 116,808
------------------------------------ ------------------------------------
Income from operations 6,600,673 10,285,710 12,605,422 19,068,264
Interest expense, net 3,474,831 1,619,215 6,384,193 5,658,821
------------------------------------ ------------------------------------
Income before provision for income 3,125,842 8,666,495 6,221,229 13,409,443
taxes
Provision for income taxes 1,250,337 3,554,000 2,488,492 5,499,500
------------------------------------ ------------------------------------
Net income 1,875,505 5,112,495 3,732,737 7,909,943
Deduct required dividends on
convertible preferred stock - 640,597 - 3,098,792
------------------------------------ ------------------------------------
Income available to common stockholders $1,875,505 $ 4,471,898 $ 3,732,737 $ 4,811,151
==================================== ====================================
Earnings per share:
Basic earnings per share $ 0.24 $ 0.18 $ 0.48 $ 0.39
==================================== ====================================
Diluted earnings per share $ 0.07 $ 0.17 $ 0.13 $ 0.30
==================================== ====================================
Weighted average number of common
shares outstanding
Basic 7,731,614 24,481,398 7,731,614 12,253,973
Diluted 28,835,957 29,926,986 28,514,182 25,948,136
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
MEDICAL STAFFING NETWORK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six months ended
July 1, June 30,
2001 2002
------------------------------------
Operating activities
Net income $ 3,732,737 $ 7,909,943
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 2,637,590 1,844,035
Accretion of put warrants 2,300,000 -
Amortization of debt issuance cost 456,061 388,491
Deferred income taxes 104,494 1,034,838
Provision for doubtful accounts 648,962 1,390,591
Loss on derivative instrument - 337,738
Changes in operating assets and liabilities:
Accounts receivable (12,059,072) (11,640,569)
Prepaid expenses and other current assets (816,601) 495,132
Other assets (116,093) (210,235)
Accounts payable 166,021 (2,526,913)
Accrued payroll and related liabilities 2,563,058 930,933
Other current liabilities 205,475 (935,455)
Other liabilities 176,215 (161,585)
------------------------------------
Net cash used in operating activities (1,153) (1,143,056)
Investing activities
Cash paid for acquisitions, net of cash acquired (9,769,750) -
Purchases of furniture and equipment, net (1,364,191) (1,545,444)
Capitalized internal software costs (641,863) (997,726)
------------------------------------
Net cash used in investing activities (11,775,804) (2,543,170)
Financing activities
Net proceeds from issuance of common stock - 156,279,090
Exercise of stock options - 5,029
Principal payments under capital lease obligations (78,111) (410,743)
Net borrowings (payments) on outstanding debt 11,951,460 (163,354,048)
------------------------------------
Net cash provided by (used in) financing activities 11,873,349 (7,480,672)
------------------------------------
Net increase (decrease) in cash 96,392 (11,166,898)
Cash at beginning of period 204,915 11,253,199
------------------------------------
Cash at end of period $ 301,307 $ 86,301
====================================
Supplemental disclosure of noncash investing and financing activities
Purchases of equipment through capital leases $ 160,286 $ 1,929,689
====================================
Supplemental disclosures of cash flow information
Interest paid $ 1,532,389 $ 1,091,913
====================================
Income taxes paid $ 2,634,748 $ 1,949,500
====================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
(UNAUDITED)
1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Medical Staffing Network Holdings, Inc. (or the "Company") have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and six months ended June 30, 2002 are not necessarily indicative of the
results that may be expected for the year ended December 29, 2002.
The balance sheet at December 30, 2001 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Registration Statement on Form S-1
(File No. 333-82438).
Certain reclassifications have been made to the prior period amounts to conform
to the current period's presentation.
2 - STOCKHOLDERS EQUITY
On April 12, 2002, the Company approved an amendment to its Certificate of
Incorporation increasing the Company's authorized shares of common stock to
75,000,000 shares and a stock split in the form of a stock dividend of 3.069375
for 1, each of which took effect immediately prior to the closing of the
Company's initial public offering. The financial statements have been restated
to give retroactive recognition to the stock split in the prior periods,
including all references in the consolidated financial statements to number of
shares and per share amounts.
On April 23, 2002, the Company completed its initial public offering of
7,812,500 shares of common stock at $19.00 per share. Additionally, the
underwriters exercised the over-allotment option of 1,171,875 shares, bringing
the total number of shares issued to 8,984,375. Total proceeds received by the
Company, net of estimated expenses related to the initial public offering were
$156.3 million. The proceeds were used to repay $62.9 million of its outstanding
balance under the senior unsecured notes, and approximately $93.4 million of the
Company's outstanding loans under the senior credit facility. Immediately prior
to the completion of the initial public offering, the outstanding shares of
Series I Preferred Stock were converted into 21,075,645 shares of common stock.
6
3 - RECAPITALIZATION OF THE COMPANY
On October 26, 2001, as contemplated by (i) an Agreement dated as of August 20,
2001, as amended on October 26, 2001 (the "Recapitalization Agreement"), by and
among Warburg Pincus Private Equity Fund VIII, L.P., a Delaware limited
partnership ("Warburg Pincus"), MSN Acquisition Corp., a wholly owned subsidiary
of Warburg Pincus, and the Company; and (ii) a Voting, Sale and Retention
Agreement, dated as of August 20, 2001, as amended October 26, 2001 (the
"Stockholders Agreement"), by and among Warburg Pincus, the Company and MSN
Acquisition Corp.; a recapitalization of the Company was completed.
Pursuant to the terms of the Recapitalization Agreement, holders of the
Company's common and convertible preferred stock became entitled to receive
$6.06 per share. Certain of the stockholders, including executive officers,
elected to retain certain of their shares of common stock rather than to receive
the cash consideration for a portion of their shares. These retained shares were
then exchanged for the same securities that the Warburg Pincus-led investment
group (the "Investor Group") received.
Upon completion of the recapitalization, the Investor Group was issued
redeemable preferred stock, common stock and senior unsecured promissory notes,
together representing approximately 85% of the equity ownership in exchange for
cash consideration totaling approximately $156.6 million. In addition, a banking
syndicate extended a senior credit facility to the Company in the amount of
$120.0 million, of which $105.0 million was advanced to the Company at closing.
Together, these funds were used to pay the merger consideration to the former
stockholders, to retire approximately $82.0 million of the then outstanding debt
obligations, to pay transaction fees and expenses of approximately $7.2 million
and to provide the Company with working capital for operations.
The transactions described above have been accounted for as a leveraged
recapitalization of the Company and, accordingly, the Company has retained its
historical cost basis of accounting. The shares repurchased by the Company have
been canceled.
The Company incurred approximately $3.7 million in debt issuance costs related
to these transactions. These costs have been capitalized as long-term assets and
are being amortized over the terms of the indebtedness.
4 - REDEEMABLE PREFERRED STOCK
During the first quarter of 2002, the Company had authorized 15,000,000 shares
of preferred stock, par value $.01, of which 7,000,000 shares had been
designated as Series I Convertible Preferred Stock. The Series I Convertible
Preferred Stock had a stated value of $18.60 and 6,602,865 shares were issued in
connection with the recapitalization. The holders of the Series I Convertible
Preferred Stock were entitled to receive dividends at a rate of 8% per annum of
the stated value compounded quarterly, which were cumulative and accrued whether
or not declared by the Board of Directors and were payable when and as declared
by the Board of Directors pursuant to certain restrictions as defined by the
Company's credit agreement. The Series I Convertible Preferred Stock could be
converted at any time, at the option of the holder on a one-for-one basis by the
holder upon written notice into fully paid and nonassessable shares of the
Company's common stock at an initial conversion price of $6.06, which is subject
to adjustment pursuant to anti-dilution provisions. Upon completion of a
Qualified Public Offering (as defined), each share of Series I Convertible
Preferred Stock was to be automatically converted into common stock at its then
effective conversion price. At any time after October 26, 2009, or upon
consummation of a Change in Control (as defined), the holders of the Series I
Convertible Preferred Stock could require the Company to redeem any or all of
the outstanding shares of the Series I Convertible Preferred Stock at price in
cash equal to the stated value per share plus any accrued but unpaid dividends.
As discussed in Note 2, the outstanding shares of Series I Convertible Preferred
Stock were converted into 21,075,645 shares of common stock in connection with
the completion of the Company's initial public offering on April 23, 2002.
5 - EARNINGS PER SHARE
Three months ended Six months ended
July 1, June 30, July 1, June 30,
2001 2002 2001 2002
-------------------------------- ---------------------------------
Numerator:
Net income before preferred stock dividend $1,875,505 $5,112,495 $3,732,737 $7,909,943
Less preferred stock dividends - 640,597 - 3,098,792
-------------------------------- ---------------------------------
Numerator for basic earnings per share
available to common stockholders $1,875,505 $4,471,898 $3,732,737 $4,811,151
================================ =================================
Effect of dilutive securities:
Add back preferred stock dividend - 640,597 - 3,098,792
-------------------------------- ---------------------------------
Numerator for dilutive earnings per share
available to common stockholders 1,875,505 5,112,495 3,732,737 7,909,943
================================ =================================
-2-
5 - EARNINGS PER SHARE
Three months ended Six months ended
July 1, June 30, July 1, June 30,
2001 2002 2001 2002
-------------------------------- ---------------------------------
Denominator:
Denominator for basic earnings per
share-weighted-average shares 7,731,614 24,481,398 7,731,614 12,253,973
Effect of dilutive shares:
Restricted common shares 1,554,332 - 1,366,495 -
Employee stock options 326,935 1,528,127 253,013 1,351,879
Warrants 2,243,852 - 2,183,836 -
Convertible preferred stock 16,979,224 3,917,461 16,979,224 12,342,284
-------------------------------- ---------------------------------
Dilutive potential common shares 21,104,343 5,445,588 20,782,568 13,694,163
-------------------------------- ---------------------------------
Denominator for diluted earnings per
share-adjusted weighted-average shares and
assumed conversions 28,835,957 29,926,986 28,514,182 25,948,136
================================ =================================
Basic earnings per share $ 0.24$ 0.18 $ 0.48$ 0.39
================================ =================================
Diluted earnings per share $ 0.07$ 0.17 $ 0.13$ 0.30
================================ =================================
6 - COMPREHENSIVE INCOME
Statement of Financial Accounting Standards (SFAS) No. 130, COMPREHENSIVE
INCOME, requires that an enterprise (a) classify items of other comprehensive
income by their nature in the financial statements, and (b) display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the balance
sheet. There are no other components of comprehensive income other than the
Company's consolidated net income and the accumulated derivative gain during the
three and six month periods ended June 30, 2002. The following table sets forth
the computation of comprehensive income for the periods indicated:
Three months ended Six months ended
------------------------------------------------------------------------
July 1, June 30, July 1, June 30,
2001 2002 2001 2002
------------------------------------------------------------------------
Net income $1,875,505 $5,112,495 $3,732,737 $7,909,943
Other comprehensive income:
Unrealized loss on derivative - (313,455) - (131,384)
------------------------------------------------------------------------
Total comprehensive income $1,875,505 $4,799,040 $3,732,737 $7,778,559
========================================================================
-3-
7 - LONG TERM DEBT
On October 26, 2001, in connection with the recapitalization discussed in Note
3, the Company entered into a $120.0 million senior credit facility. The senior
credit facility consists of (i) senior credit notes (Term A) in the amount of
$40.0 million due in October 2006 bearing interest at a variable rate based on
the Company's leverage ratio (as defined), with interest payable at least
quarterly and principal payable quarterly commencing on March 31, 2003; (ii)
senior credit notes (Term B) in the amount of $60.0 million due in October 2007
bearing interest at a variable rate based on the Company's leverage ratio (as
defined), with interest payable at least quarterly and principal payable
quarterly commencing on March 31,, 2003; and (iii) up to $20.0 million of
revolving loans expiring on October 2006, bearing interest at a variable rate
payable at least quarterly.
The senior credit facility is secured by substantially all of the assets of the
Company and contains certain covenants that, among other things, limit the
payment of dividends and restrict additional indebtedness and obligations, and
require maintenance of certain financial ratios.
Also, in connection with the recapitalization, the Company issued Senior
Unsecured Promissory Notes ("Senior Unsecured Notes") to the Investor Group and
the previous stockholders (including officers) in the amount of approximating
$59.3 million. The Senior Unsecured Notes bore interest at 12% per annum
compounding quarterly, with principal and interest due on October 2009. The
holders of the Senior Unsecured Notes had the right to require the Company to
redeem the notes upon the consummation of (i) an underwritten public offering or
(ii) a Change of Control (as defined).
In connection with the Company's initial public offering completed April 23,
2002 and more fully described in Note 2, the Senior Unsecured Promissory Notes
were redeemed in full in the amount of $62.9 million and the senior credit
facility was repaid in the amount of approximately $93.4 million.
As of June 30, 2002, the Company has $15 million available under the revolving
credit facility.
8 - RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
BUSINESS COMBINATIONS and No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. Under
the new rules, goodwill and other intangibles determined to have an infinite
life are no longer amortized but are reviewed annually for impairment. Separable
intangible assets that are not deemed to have an infinite life will continue to
be amortized over their useful lives. The amortization provisions of SFAS No.
142 apply to goodwill and intangible assets acquired after June 30, 2001.
-4-
8 - RECENT ACCOUNTING PRONOUNCEMENTS (continued)
The Company adopted SFAS No. 142 as of December 31, 2001 and, accordingly, no
longer amortizes goodwill. The Company completed the transitional impairment
test of goodwill and intangible assets with an indefinite life during the first
quarter of 2002. Based on the results of this test, the Company determined that
there was no impairment of goodwill or intangible assets with an indefinite life
as of the transition date, December 31, 2001. The adoption of SFAS No. 142
reduced amortization expense by approximately $944,000 and $1,888,000 for the
three and six months ended June 30, 2002, respectively.
The following pro forma information presents net income and basic and diluted
earnings per share, adjusted to exclude amounts no longer being amortized, as if
the adoption of SFAS No. 142 had occurred on January 1, 2001:
Three months Six months
ended ended
July 1, 2001 July 1, 2001
---------------- ---------------
Net income $2,339,872 $4,745,566
Basic net income per share $ 0.30 $ 0.61
Diluted net income per share $ 0.08 $ 0.17
Acquired intangible assets subject to amortization all relate to non-compete
agreements with a gross carrying value of $1,509,000 and related accumulated
amortization of $294,808 as of June 30, 2002.
For the three and six months ended June 30, 2002, amortization expense for
intangible assets was $58,404 and $116,808, respectively. The estimated annual
amortization expense for intangible assets for the current and next five fiscal
years is as follows:
2002......................................... $ 233,615
2003......................................... 233,615
2004......................................... 228,866
2005......................................... 214,615
2006......................................... 214,615
2007......................................... 205,674
-5-
8 - RECENT ACCOUNTING PRONOUNCEMENTS (continued)
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions
of APB Opinion No. 30, Reporting the Results of Operations--Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. The Company adopted SFAS No. 144
on December 31, 2001. The adoption did not affect the Company's financial
position or results of operations for the periods presented.
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS No. 145 will rescind SFAS No. 4 which required all gains and losses from
extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. As a result of SFAS No.
145, the criteria in APB Opinion No. 30, Reporting the Results of Operations
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions will now be used to
classify those gains and losses. SFAS No. 64 amended SFAS No. 4, and is no
longer necessary because SFAS No. 4 has been rescinded. Upon adoption of FASB
145 on December 30, 2002 the Company will be required to reclassify its
extraordinary loss on early extinguishment of debt of $2,731,790 net of tax
benefit of $1,648,184 related to the October 2001 recapitalization transaction
into income from continuing operations.
SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities,
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred rather than when a
commitment to an exit plan is made. It is effective for exit or disposal
activities that are initiated after December 31, 2002. The Company believes the
adoption of SFAS 146 will not affect the Company's financial position or results
of operations. In February 2002, the EITF issued Topic Number D-103 "Income
Statement Characterization of Reimbursements Received for "Out-of-Pocket"
Expenses Incurred", which is effective for financial statements beginning after
December 31, 2001. Topic Number D-103 requires that reimbursements received for
out-of-pocket expenses incurred, generally, be characterized as revenue in the
statement of operations. The Company has adopted Topic Number D-103 in its
-6-
8 - RECENT ACCOUNTING PRONOUNCEMENTS (continued)
quarter ended June 30, 2002. The Company has historically recorded
reimbursements for out-of-pocket expenses as net amounts in cost of services
rendered in the statement of operations. In accordance with the transition
guidance included in Topic Number D-103, adoption required the reclassification
of financial statements for prior periods presented for comparative purposes.
The adoption of Topic Number D-103 did not affect the Company's net income,
financial position or cash flows. The reclassification did affect the
presentation of certain revenue and cost of services rendered items contained
within the Company's financial statements.
Service revenues for the three and six month period ended July 1, 2001 are
presented as follows along with reimbursable expenses that have been
reclassified from cost of services rendered to service revenues in accordance
with Topic Number D-103:
Three months Six months ended
ended July 1, July 1,
2001 2001
------------------------------------
Service revenues (as historically presented) $81,165,893 $151,644,683
Impact of Topic Number D-103 2,043,611 2,043,611
------------------------------------
Service revenues (as currently presented) $83,209,504 $153,688,294
====================================
Cost of service revenues are presented as follows (in thousands):
Three months Six months ended
ended July 1, July 1,
2001 2001
------------------------------------
Cost of services rendered (as historically presented) $60,362,584 $112,872,600
Impact of Topic Number D-103 2,043,611 2,043,611
------------------------------------
------------------------------------
Cost of services rendered (as currently presented) $62,406,195 $114,916,211
====================================
-7-
9 - SUBSEQUENT EVENTS
On July 3, 2002, the Company amended the terms of its senior credit facility
(see note 7) and entered into a $25 million note with terms and rights identical
to its previous Term A note. In accordance with the amendment, the remaining
balance on the existing Term A and Term B notes were paid off.
In July 2002, the Company acquired certain assets of three per diem nursing
companies, STAT Medical Services, Inc., Medical Staffing Services, Inc. and Pro
Med, Inc. for an aggregate cash purchase consideration of approximately $16
million.
-8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes appearing elsewhere herein. This
discussion and analysis contains statements that are forward-looking in nature.
Statements that are predictive in nature, that depend upon or refer to future
events or conditions or that include words such as "expects," "anticipates,"
"intends," "plans," "believes," "estimates," and similar expressions are
forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results and
performance to be materially different from any future results or performance
expressed or implied by these forward-looking statements. These factors include
the following: our ability to attract and retain qualified nurses and other
healthcare personnel, the company's ability to enter into contracts with
healthcare facility clients on terms attractive to the company, the functioning
of our information systems, the effect of existing or future government
regulation and federal and state legislative and enforcement initiatives on our
business, our clients' ability to pay us for our services, the effect of
liabilities and other claims asserted against us, the effect of competition in
the markets we serve, the company's ability to carry out its business strategy.
Although we believe that these statements are based upon reasonable assumptions,
we cannot guarantee future results. Given these uncertainties, the
forward-looking statements discussed herein might not occur.
The Company's condensed consolidated financial statements present a
consolidation of all its operations. This discussion supplements the detailed
information presented in the condensed consolidated financial statements and
notes thereto (which should be read in conjunction with the financial statements
and related notes contained in the Company's Registration Statement on Form S-1,
File No. 333-82438), and is intended to assist the reader in understanding the
financial results and condition of the Company.
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The following table sets forth, for the periods indicated, certain selected
financial data expressed as a percentage of total revenues:
Three months ended Six months ended
-----------------------------------------------------------
July 1, June 30, July 1, June 30,
2001 2002 2001 2002
-----------------------------------------------------------
Service revenues 100.0% 100.0% 100.0% 100.0%
Cost of services revenues 75.0 74.6 74.8 74.6
Gross profit 25.0 25.4 25.2 25.4
Selling, general and administrative expenses (1) 13.4 14.1 13.3 14.3
Corporate and administrative expenses 2.0 1.5 2.0 1.5
EBITDA (2) 9.6 9.8 9.9 9.6
Depreciation and amortization expenses 1.7 0.9 1.7 0.8
Income from operations 7.9 8.9 8.2 8.8
Interest expense, net 4.2 1.4 4.2 2.6
Pre-tax income 3.7 7.5 4.0 6.2
Net income 2.3 4.4 2.4 3.6
(1) Includes provision for doubtful accounts.
(2) We define EBITDA as income before interest, income taxes, depreciation,
amortization and non-recurring recapitalization costs. EBITDA should not be
considered in isolation or as an alternative to net income, cash flows from
operations, investing or financing activities or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles. EBITDA, as we define it, is not necessarily comparable to other
similarly titled captions of other companies.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2002 COMPARED
TO THREE MONTHS ENDED JULY 1, 2001
SERVICE REVENUES. Our service revenues for the three months ended June 30, 2002
increased $32.3 million, or 39%, from $83.2 million for the three months ended
July 1, 2001 to $115.5 million for the three months ended June 30, 2002. The
majority of the increase in revenues for the three months ended June 30, 2002
was attributable to a $26.5 million, or 44%, increase in our per diem nurse
staffing revenues from $59.9 million for the three months ended July 1, 2001 to
$86.4 million for the three months ended June 30, 2002. Of this increase, $22.9
million, or 87%, was the result of year over year organic growth. The remaining
increase of our per diem nurse staffing revenues of $3.5 million, or 13%, came
from our 2001 acquisition.
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Service revenues from our staffing divisions other than the per diem nurse
staffing division collectively increased $5.8 million, or 25%, from $23.3
million for the three months ended July 1, 2001 to $29.1 million for the three
months ended June 30, 2002.
An increase in volume and a shift in mix towards higher billing specialties
accounted for approximately 95% of our overall revenue growth for the three
months ended June 30, 2002 as compared to revenue for the three months ended
July 1, 2001, with the balance of the increase a result of price increases.
COST OF SERVICES RENDERED. Cost of services rendered increased $23.8 million, or
38%, from $62.4 million for the three months ended July 1, 2001 to $86.2 million
for the three months ended June 30, 2002. The increase was attributable to the
39% increase in service revenues.
GROSS PROFIT. Gross profit increased $8.5 million, or 41%, from $20.8 million
for the three months ended July 1, 2001 to $29.3 million for the three months
ended June 30, 2002, representing gross margin percentages of 25.0% for the
three months ended July 1, 2001 and 25.4% for the three months ended June 30,
2002.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $5.1 million, or 46%, from $11.1 million for
the three months ended July 1, 2001 to $16.2 million for the three months ended
June 30, 2002. As a percentage of revenue, selling, general and administrative
expenses increased from 13.4% for the three months ended July 1, 2001 to 14.1%
for the three months ended June 30, 2002. This increase was due to the expenses
required to establish the infrastructure for our de novo branches opened in 2001
and 2002.
CORPORATE AND ADMINISTRATIVE EXPENSES. Corporate and administrative expenses
increased $0.1 million, or 4%, from $1.7 million for the three months ended July
1, 2001 to $1.8 million for the three months ended June 30, 2002. As a
percentage of revenue, corporate and administrative expenses decreased from 2.0%
for the three months ended July 1, 2001 to 1.5% for the three months ended June
30, 2002. The decrease as a percentage of revenue was a result of increased
operating leverage.
EBITDA. As a result of the above, EBITDA increased $3.3 million, or 41% from
$8.0 million for the three months ended July 1, 2001 to $11.3 million for the
three months ended June 30, 2002. As a percentage of revenue, EBITDA increased
from 9.6% for the three months ended July 1, 2001 to 9.8% for the three months
ended June 30, 2002.
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DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization expense
decreased $0.4 million, or 28%, from $1.4 million for the three months ended
July 1, 2001 to $1.0 million for the three months ended June 30, 2002. The
decrease was due primarily to the adoption of FAS No. 142, Intangible Assets.
Included in the $1.4 million for the three months ended July 1, 2001 was
approximately $0.8 million of amortization not recorded in the current period as
a result of the adoption of FAS No. 142. This decrease was offset by an increase
in depreciation expense of approximately $0.4 million related to an increase in
fixed assets.
INCOME FROM OPERATIONS. As a result of the above, income from operations
increased $3.7 million, or 56%, from $6.6 million for the three months ended
July 1, 2001 to $10.3 million for the three months ended June 30, 2002. As a
percentage of revenue, income from operations was 7.9% for the three months
ended July 1, 2001 and 8.9% for the three months ended June 30, 2002.
INTEREST EXPENSE, NET. Net interest expense decreased $1.9 million, or 53% from
$3.5 million for the three months ended July 1, 2001 to $1.6 million for the
three months ended June 30, 2002. The decrease is primarily the result of a
lower average outstanding debt balance due to the use of the proceeds from our
initial public offering to pay down outstanding debt.
INCOME BEFORE INCOME TAXES. Income before income taxes increased $5.6 million,
or 177%, from $3.1 million for the three months ended July 1, 2001 to $8.7
million for the three months ended June 30, 2002.
PROVISION FOR INCOME TAXES. Our provision for income taxes was $1.3 million for
the three months ended July 1, 2001 and $3.6 million for the three months ended
June 30, 2002 representing effective tax rates of 40% for the three months ended
July 1, 2001 and 41% for the three months ended June 30, 2002.
NET INCOME. Net income increased $3.2 million, or 173%, from net income of $1.9
million for the three months ended July 1, 2001 to $5.1 million for the three
months ended June 30, 2002.
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RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO
SIX MONTHS ENDED JULY 1, 2001
SERVICE REVENUES. Our service revenues for the six months ended June 30, 2002
increased $65.0 million, or 42%, from $153.7 million for the six months ended
July 1, 2001 to $218.7 million for the six months ended June 30, 2002. The
majority of the increase in revenues for the six months ended June 30, 2002 was
attributable to a $53.2 million, or 47%, increase in our per diem nurse staffing
revenues from $112.3 million for the six months ended July 1, 2001 to $165.5
million for the six months ended June 30, 2002. Of this increase, $45.6 million,
or 86%, was the result of year over year organic growth. The remaining increase
of our per diem nurse staffing revenues of $7.7 million, or 14%, came from our
2001 acquisition.
Service revenues from our staffing divisions other than the per diem nurse
staffing division collectively increased $11.8 million, or 29%, from $41.4
million for the six months ended July 1, 2001 to $53.2 million for the six
months ended June 30, 2002.
An increase in volume and a shift in mix towards higher billing specialties
accounted for approximately 94% of our overall revenue growth for the six months
ended June 30, 2002 as compared to revenue for the six months ended July 1,
2001, with the balance of the increase a result of price increases.
COST OF SERVICES RENDERED. Cost of services rendered increased $48.2 million, or
42%, from $114.9 million for the six months ended July 1, 2001 to $163.1 million
for the six months ended June 30, 2002. The increase was attributable to the 42%
increase in service revenues.
GROSS PROFIT. Gross profit increased $16.8 million, or 43%, from $38.8 million
for the six months ended July 1, 2001 to $55.6 million for the six months ended
June 30, 2002, representing gross margin percentages of 25.2% for the six months
ended July 1, 2001 and 25.4% for the six months ended June 30, 2002.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $10.9 million, or 53%, from $20.4 million for
the six months ended July 1, 2001 to $31.3 million for the six months ended June
30, 2002. As a percentage of revenue, selling, general and administrative
expenses increased from 13.3% for the six months ended July 1, 2001 to 14.3% for
the six months ended June 30, 2002. This increase was due to the expenses
required to establish the infrastructure for our de novo branches opened in 2001
and 2002.
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CORPORATE AND ADMINISTRATIVE EXPENSES. Corporate and administrative expenses
increased $0.3 million, or 11%, from $3.1 million for the six months ended July
1, 2001 to $3.4 million for the six months ended June 30, 2002. As a percentage
of revenue, corporate and administrative expenses decreased from 2.0% for the
six months ended July 1, 2001 to 1.5% for the six months ended June 30, 2002.
The decrease as a percentage of revenue was a result of increased operating
leverage.
EBITDA. As a result of the above, EBITDA increased $5.7 million, or 37% from
$15.2 million for the six months ended July 1, 2001 to $20.9 million for the six
months ended June 30, 2002. As a percentage of revenue, EBITDA decreased from
9.9% for the six months ended July 1, 2001 to 9.6% for the six months ended June
30, 2002.
DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization expense
decreased $0.8 million, or 30%, from $2.6 million for the six months ended July
1, 2001 to $1.8 million for the six months ended June 30, 2002. The decrease was
due primarily to the adoption of FAS No. 142, Goodwill and Other Intangible
Assets. Included in the $2.6 million for the six months ended July 1, 2001 was
approximately $1.5 million of amortization not recorded in the current period as
a result of the adoption of FAS No. 142. This decrease was offset by an increase
in depreciation expense of approximately $0.7 million related to an increase in
fixed assets.
INCOME FROM OPERATIONS. As a result of the above, income from operations
increased $6.5 million, or 51%, from $12.6 million for the six months ended July
1, 2001 to $19.1 million for the six months ended June 30, 2002. As a percentage
of revenue, income from operations was 8.2% for the six months ended July 1,
2001 and 8.7% for the six months ended June 30, 2002.
INTEREST EXPENSE, NET. Net interest expense decreased $0.7 million, or 11% from
$6.4 million for the six months ended July 1, 2001 to $5.7 million for the six
months ended June 30, 2002. The decrease is primarily the result of a lower
average outstanding debt balance due to the use of the proceeds from our initial
public offering to pay down outstanding debt.
INCOME BEFORE INCOME TAXES. Income before income taxes increased $7.2 million,
or 116%, from $6.2 million for the six months ended July 1, 2001 to $13.4
million for the six months ended June 30, 2002.
PROVISION FOR INCOME TAXES. Our provision for income taxes was $2.5 million for
the six months ended July 1, 2001 and $5.5 million for the six months ended June
30, 2002 representing effective tax rates of 40% for the six months ended July
1, 2001 and 41% for the six months ended June 30, 2002.
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NET INCOME. Net income increased $4.2 million, or 112%, from net income of $3.7
million for the six months ended July 1, 2001 to $7.9 million for the six months
ended June 30, 2002.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
In response to the SEC Release Number 33-8040 "Cautionary Advice Regarding
Disclosure About Critical Accounting Policies" and SEC Release Number 33-8056,
"Commission Statement about Management's Discussion and Analysis of Financial
Condition and Results of Operations," We have identified the following critical
accounting policies that affect the more significant judgments and estimates
used in the preparation of our unaudited condensed consolidated financial
statements. The preparation of our financial statements in conformity with
accounting principles generally accepted in the United States of America
requires us to make estimates and judgments that affect our reported amounts of
assets and liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to asset impairment, accruals for
self-insurance and compensation and related benefits, revenue recognition,
allowance for doubtful accounts, and contingencies and litigation. These
estimates are based on the information that is currently available to us and on
various other assumptions that we believe to be reasonable under the
circumstances. Actual results could vary from those estimates under different
assumptions or conditions.
We believe that the following critical accounting policies affect the more
significant judgments and estimates used in the preparation of the Company's
unaudited condensed consolidated financial statements:
o We have recorded goodwill and other intangibles resulting from our
acquisitions through June 30, 2002. Through December 30, 2001, goodwill
and other intangibles were amortized on a straight-line basis over their
lives of 6 to 20 years. We evaluate the recovery of the carrying amount
of costs in excess of net tangible assets acquired by determining if a
permanent impairment has occurred. This evaluation is done annually or
more frequently if indicators of permanent impairment arise. Indicators
of a permanent impairment include duplication of resources resulting from
acquisitions, instances in which the estimated undiscounted cash flows of
the entity are less than the remaining unamortized balance of the
underlying intangible assets and other factors. At such time as an
impairment is determined, the intangible assets are written off during
that period. If we are required to record an impairment charge in the
future, it would have an adverse impact on our results of operations.
-15-
o We maintain an allowance for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments,
which results in a provision for bad debt expense. We determine the
adequacy of this allowance by continually evaluating individual customer
receivables, considering the customer's financial condition, credit
history and current economic conditions. If the financial condition of
our customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required.
o We maintain an accrual for our health, workers compensation and
professional liability that are partially self-insured and are classified
in other current liabilities in our condensed consolidated balance
sheets. We determine the adequacy of these accruals by periodically
evaluating our historical experience and trends related to health,
workers compensation, and professional liability claims and payments,
based on Company specific actuarial computations and industry experience
and trends. If such information indicates that our accruals are
overstated or understated, we will adjust the assumptions utilized in our
methodologies and reduce or provide for additional accruals as
appropriate.
o We are subject to various claims and legal actions in the ordinary course
of our business. Some of these matters include professional liability and
employee-related matters. Our hospital and healthcare facility clients
may also become subject to claims, governmental inquiries and
investigations and legal actions to which we may become a party relating
to services provided by our professionals. From time to time, and
depending upon the particular facts and circumstances, we may be subject
to indemnification obligations under our contracts with our hospital and
healthcare facility clients relating to these matters. Although we are
currently not aware of any such pending or threatened litigation that we
believe is reasonably likely to have a material adverse effect on us, if
we become aware of such claims against us, we will evaluate the
probability of an adverse outcome and provide accruals for such
contingencies as necessary.
SEASONALITY
Due to the regional and seasonal fluctuations in the hospital patient census of
our hospital and healthcare facility clients and due to the seasonal preferences
for destinations by our temporary healthcare professionals, the number of
healthcare professionals on assignment, revenue and earnings are subject to
moderate seasonal fluctuations. Many of our hospital and healthcare facility
clients are located in areas that experience seasonal fluctuations in
population, particularly Florida, during the winter and summer months. These
facilities adjust their staffing levels to accommodate the change in this
seasonal demand and many of these facilities utilize temporary healthcare
professionals to satisfy these seasonal staffing needs.
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Historically, the number of temporary healthcare professionals on assignment has
increased from December through March followed by declines or minimal growth
from April through November. As a result of all of these factors, results of any
one quarter are not necessarily indicative of the results to be expected for any
other quarter or for any year.
LIQUIDITY AND CAPITAL RESOURCES
In October 2001, an investment group led by Warburg Pincus acquired a majority
interest in our company in a recapitalization that provided us with the proceeds
from new equity and senior debt issuances totaling approximately $156.6 million
and advances from a new senior credit facility totaling $105.0 million.
Together, these funds were used to provide us with working capital for
operations, to retire then-outstanding debt obligations and accrued interest
totaling approximately $82.0 million, as consideration for the acquisition of
the former stockholders' equity interests for approximately $173.0 million, and
to pay recapitalization costs of approximately $7.2 million.
As of June 30, 2002, we had cash totaling approximately $0.1 million, working
capital totaling $62.1 million and unused availability under our revolving
credit facility totaling $15.0 million. We used $1.1 million of cash from
operating activities during the six months ended June 30, 2002 compared to cash
use of $1,153 from operating activities during the six months ended July 1,
2001.
Cash flows from operating activities was positively impacted during the six
months ended June 30, 2002 due to improvements in earnings before non-cash
expenses and was negatively impacted due to cash required to fund our de novo
program. Because we rely on cash flow from operations as a source of liquidity,
we are subject to the risk that a decrease in the demand for our staffing
services could have an adverse impact on our liquidity. Decreased demand for our
staffing services could result from an inability to attract qualified healthcare
professionals, fluctuations in patient occupancy at our hospital and healthcare
facility clients and changes in state and federal regulations relating to our
business.
As of June 30, 2002 our senior credit facility consists of a $100.0 million term
loan arrangement and allows us to borrow up to an additional $20.0 million under
a revolving line of credit. The term loan bears interest at variable effective
interest rates with a weighted average interest rate of 5.8% as of June 30,
2002, and is due in quarterly installments beginning June 30, 2003 through its
maturity in October 2006 for tranche A in the amount of $40 million and October
2007 for
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tranche B in the amount of $60 million. Our senior credit facility is
collateralized by substantially all of our assets and requires us to comply with
various quarterly financial covenants, including covenants for ratios of
leverage and fixed charges to EBITDA.
As of June 30, 2002, there was $11.0 million outstanding under our senior credit
facility. As of June 30, 2002, the weighted average interest rate for the loans
under our senior credit facility was approximately 5.8 %.
As the borrower under the senior credit facility, our subsidiary, Medical
Staffing Network, Inc., may only pay dividends or make other distributions to us
in the amount of $250,000 in any fiscal year to pay our operating expenses. This
limitation on our subsidiary's ability to distribute cash to us will limit our
ability to obtain and service any additional debt at the holding company level.
In addition, our subsidiary is subject to restrictions under the senior credit
facility against incurring additional indebtedness.
Our senior unsecured notes bore interest compounding quarterly at a rate of 12%
per annum and were due in October 2009. Interest was payable in full on the
maturity date. The senior unsecured notes were subordinated to amounts due under
the senior credit facility.
We used a portion of the proceeds of our initial public offering to redeem the
senior unsecured notes in full in the amount of approximately $62.9 million and
to repay approximately $93.4 million of our loans under the senior credit
facility, leaving an outstanding balance on our senior credit facility of $11.0
million.
We believe that our current cash balances, together with our existing credit
lines and other available sources of liquidity and expected cash flows from our
operating activities, will be sufficient for us to meet our current and future
financial obligations, as well as to provide us with funds for working capital,
anticipated capital expenditures and other needs for at least the next 12
months. No assurance can be given, however, that this will be the case. In the
longer term, we may require additional equity and debt financing to meet our
working capital needs, or to fund acquisition activities, if any. There can be
no assurance that additional financing will be available when required or, if
available, will be available on satisfactory terms.
-18-
Quantitative and Qualitative Disclosures About Market Risk
Our exposure to interest rate risk arises principally from the variable rates
associated with our senior credit facility. On June 30, 2002, we had borrowings
of $11.0 million under our senior credit facility that were subject its variable
rates, with a blended rate of 5.8%. As of June 30, 2002, an adverse change of
1.0% in the interest rate of all such borrowings outstanding would have caused
us to incur an increase in interest expense of approximately $0.1 million on an
annual basis after considering the effect of the interest rate swap described
below. During the six months ended June 30, 2002, we were party to an interest
rate swap agreement with a notional amount of $50 million. Under the swap
agreement, the net settlement was computed on a quarterly basis as the
difference between the 90-day LIBOR and the fixed rate of 4.34%. This resulted
in a fixed interest rate on $50 million of borrowings under our credit facility
at 4.34% effective December 24, 2001, plus the applicable margin. The swap
agreement was terminated on May 9, 2002 for approximately $460,000. In addition,
during the six months ended June 30, 2002, there was exposure to market risk
associated with our senior unsecured notes which bore interest at a fixed rate.
The carrying amount of the senior unsecured notes approximated fair value as the
terms of the debt were based on similar terms, maturities, and interest rates as
other debt issues with similar risk factors that are not traded on quoted market
prices. Our senior unsecured notes were redeemed in full with proceeds from our
initial public offering.
Inflation
We do not believe that inflation has had a material effect on our results of
operations in recent years and periods. There can be no assurance, however, that
our business will not be adversely affected by inflation in the future.
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PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Pursuant to a Registration Statement on Form S-1 (File No. 333-82438)
declared effective by the Securities and Exchange Commission on April
17, 2002, the Company sold an aggregate of 8,984,375 shares of Common
Stock (including 1,171,875 shares from the exercise of the
over-allotment option), par value $.01 per share. The offering was
completed on April 23, 2002 and all shares registered in such offering
were sold. The shares of Common Stock were offered to the public at a
price of $19.00 per share for an aggregate public offering price of
$170.7 million. The expenses incurred by the Company in connection with
the issuance and distribution of such shares were approximately $15.7
million. None of such expenses were paid to directors or officers of
the Company or their associates or to persons owning 10% or more of the
Common Stock of the Company. The net offering proceeds to the Company
were approximately $156.3 million. The net proceeds were used to repay
$62.9 million of its outstanding balance under the senior unsecured
notes, and $93.4 million of the Company's outstanding term loans under
the senior credit facility.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
By written consent dated April 12, 2002, the stockholders of the company
approved amendments to the Company's certificate of incorporation and bylaws in
connection with the Company's initial public offering and amendments to the
Company's Stock Incentive Plan and Amended and Restated Stock Option Plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Certification of Robert J. Adamson, Chief Executive Officer of
Medical Staffing Network, Inc. pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oaxley Act of 2002.
99.2 Certification of Kevin S. Little, Chief Financial Officer of
Medical Staffing Network, Inc. pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oaxley Act of 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
MEDICAL STAFFING
NETWORK HOLDINGS, INC.
Dated: August 13, 2002 By: /s/ Robert J. Adamson
--------------------------
Chief Executive Officer and President
By: /s/ Kevin S. Little
--------------------------
Chief Financial Officer
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