Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. CROSS COUNTRY HEALTHCARE INC (1141103) 10-K published on Mar 05, 2020 at 3:14 pm
Reporting Period: Dec 30, 2019
The Company’s growth strategy integrates corporate social responsibility. During 2019, the Company partnered with a local nursing college and donated funds to this institution to support the education of nurses, a key part of the Company's business. This investment in a community based institution serves to improve the long-term supply of nurses, and enhances the Company’s reputational value to healthcare professionals, the community and its customers. During the year, the Company also engaged in other investments in its community, such as its participation in Light the Night benefiting the Leukemia and Lymphoma Society, providing sponsorships for various healthcare research and funding initiatives, as well as working as a team on other fundraising efforts for charities such as March of Dimes, American Red Cross, Humane Society, Make a Wish Foundation, and Ronald McDonald House. Our employees are at the heart of our success as a business and these investments allow us to attract and develop an increasingly engaged and diverse workforce. These investments contribute to the sustainability of our business by enhancing our culture, our brand, and our reputation among our employees, our healthcare professionals and our customers.
Supply of Nurses. According to the Bureau of Labor Statistics’ Employment Projections 2016-2026, Registered Nursing (RN) is listed among the top occupations in terms of job growth through 2026. The RN workforce is expected to grow from 2.9 million in 2016 to 3.4 million in 2026, an increase of 438,100 or 15%. The Bureau also projects the need for an additional 203,700 new RNs each year through 2026 to fill newly created positions and to replace retiring nurses. While demand for nurses is expected to grow, there are differing views over the projected growth of supply to support the demand. According to Modern Healthcare, August 17, 2019, certain states are projected to have a shortage while other states are projected to have a surplus by 2030 highlighting an inequitable distribution of the nursing workforce across the U.S. There is also a variation in the types of specialty nurses in demand, which is also regional in nature. Other factors influencing demand are the expected retirement of RNs and the shortage of instructors. It is projected that a million nurses are expected to retire between 2017 and 2030. According to the American Association of Colleges of Nursing, more than 75,000 qualified applicants to bachelor and graduate nursing programs were turned away last year due to factors such as insufficient faculty, clinical sites, or classroom space, and clinical preceptors, as well as budget constraints. We believe these geographic and specialty related shortages should have a positive effect on demand for our services as temporary nurse staffing orders typically increase when nurse vacancy rates rise.
Availability of the ABL commitments is subject to a borrowing base of up to 85% of secured eligible accounts receivable, subject to adjustment at certain quality levels, plus an amount of supplemental availability, initially equal to $16.9 million (Supplemental Availability), and reducing over time in accordance with the terms of the Loan Agreement, minus customary reserves, and subject to customary adjustments. Revolving loans and letters of credit issued under the Loan Agreement reduce availability under the ABL on a dollar-for-dollar basis. Availability under the ABL will be used for general corporate purposes. Additionally, the facility contains an uncommitted accordion provision to increase the amount of the facility by an additional $30.0 million. At December 31, 2019, availability under the ABL was $120.0 million and the Company had $71.0 million of borrowings drawn, as well as $19.9 million of letters of credit outstanding related to workers' compensation and professional liability policies (see Note 2 - Summary of Significant Accounting Policies), leaving $29.1 million available for borrowing.
The initial amounts drawn on the ABL included funds to repay the Company’s then outstanding borrowings of $75.4 million under its August 2017 Credit Facility and $1.3 million for the payment of fees, expenses, and accrued interest, as well as to backstop $21.2 million for outstanding letters of credit. The refinancing was treated as an extinguishment of debt, and, as a result, the Company wrote-off debt issuance costs of approximately $1.4 million in the fourth quarter of 2019, which is included with loss on early extinguishment of debt in the consolidated statements of operations.
In the second quarter of 2019, the Company eliminated certain of its brands as part of a rebranding strategy. and as a result, recorded impairment charges of $14.5 million related to its trade names in Nurse and Allied Staffing. See Note 5 - Goodwill,
In the third quarter of 2019, the Company ceased use of several facilities and is in the process of seeking to sublet some of the space where possible. The decision and change in the use of space resulted in a right-of-use asset impairment charge of $1.2 million. This loss was determined by comparing the fair value of the impacted right-of-use assets to the carrying value of the assets as of the impairment measurement date, in accordance with the Property, Plant and Equipment Topic of the FASB ASC. The fair value of the right-of-use asset was based on the estimated sublease income for the space taking into consideration the time period it will take to obtain a subtenant, the applicable discount rate, and the sublease rate. Furthermore, the Company wrote-off $0.6 million of leasehold improvements and other property and equipment related to these locations. The measurement of the right-of-use asset impairments, using the assumptions described, is a Level 3 measurement.
The Company maintains a 2003 Deferred Compensation Plan and a 2017 Nonqualified Deferred Compensation Plan, each an unfunded non-qualified deferred compensation arrangement, intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended, or the Code. Under the deferred compensation plans, certain designated key employees may elect to defer the receipt of a portion of their annual base salary, bonus and commission to the deferred compensation plans. Generally, payments under the deferred compensation plans automatically commence upon a participant’s retirement, termination of employment or death during employment. Under certain circumstances described in the deferred compensation plans, participants may receive distributions during employment. In connection with the 2017 Deferred Compensation Plan, the Company elected to invest in amounts consistent with the participants' choices of allocations to funds. Participants of the deferred compensation plans are the Company’s unsecured general creditors with respect to the deferred compensation plan