Washington, DC 20549
 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2020
 Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period From _________ to _________
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
Incorporation or organization)
file number
(I.R.S. Employer
Identification Number)
5201 Congress Avenue, Suite 100B
Boca Raton, Florida 33487
(Address of principal executive offices)(Zip Code)
(561) 998-2232
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, par value $0.0001 per shareCCRNThe NASDAQ Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act:
Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company)
Smaller Reporting Company  Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 
The registrant had outstanding 37,460,546 shares of Common Stock, par value $0.0001 per share, as of April 30, 2020.

In addition to historical information, this Form 10-Q contains statements relating to our future results (including certain projections and business trends) that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and are subject to the “safe harbor” created by those sections. Forward-looking statements consist of statements that are predictive in nature, depend upon or refer to future events. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, “suggests”, "appears", “seeks”, “will”, “could”, and variations of such words and similar expressions are intended to identify 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, but are not limited to, the following: the potential impacts of the COVID-19 pandemic on our business, financial condition, and results of operations, our ability to attract and retain qualified nurses, physicians and other healthcare personnel, costs and availability of short-term housing for our travel healthcare professionals, demand for the healthcare services we provide, both nationally and in the regions in which we operate, the functioning of our information systems, the effect of cyber security risks and cyber incidents on our business, 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, our ability to successfully implement our acquisition and development strategies, including our ability to successfully integrate acquired businesses and realize synergies from such acquisitions, the effect of liabilities and other claims asserted against us, the effect of competition in the markets we serve, our ability to successfully defend the Company, its subsidiaries, and its officers and directors on the merits of any lawsuit or determine its potential liability, if any, and other factors set forth in Item 1.A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed and updated in our Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission.
Although we believe that these statements are based upon reasonable assumptions, we cannot guarantee future results and readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date of this filing. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct or (iv) our strategy, which is based in part on this analysis, will be successful. The Company undertakes no obligation to update or revise forward-looking statements.
All references to "the Company", “we”, “us”, “our”, or “Cross Country” in this Quarterly Report on Form 10-Q mean Cross Country Healthcare, Inc., and its consolidated subsidiaries.

March 31, 2020
Item 6.




(Unaudited, amounts in thousands)
 March 31,
December 31,
Current assets:  
Cash and cash equivalents$12,599  $1,032  
Accounts receivable, net of allowances of $3,298 in 2020 and $3,219 in 2019164,801  169,528  
Prepaid expenses6,374  6,097  
Insurance recovery receivable5,130  5,011  
Other current assets1,726  1,689  
Total current assets190,630  183,357  
Property and equipment, net of accumulated depreciation of $24,078 in 2020 and $23,276 in 201911,965  11,832  
Operating lease right-of-use assets16,263  16,964  
Goodwill101,066  101,066  
Trade names, indefinite-lived5,900  5,900  
Other intangible assets, net42,483  44,957  
Other non-current assets18,672  18,298  
Total assets$386,979  $382,374  
Liabilities and Stockholders' Equity
Current liabilities:  
Accounts payable and accrued expenses$51,095  $45,726  
Accrued compensation and benefits37,199  31,307  
Operating lease liabilities - current4,965  4,878  
Other current liabilities5,743  3,554  
Total current liabilities99,002  85,465  
Revolving credit facility67,648  70,974  
Operating lease liabilities - non-current17,992  19,070  
Non-current deferred tax liabilities7,555  7,523  
Long-term accrued claims27,392  26,938  
Contingent consideration  4,867  
Other long-term liabilities5,988  4,037  
Total liabilities225,577  218,874  
Commitments and contingencies
Stockholders' equity:  
Common stock4  4  
Additional paid-in capital305,935  305,643  
Accumulated other comprehensive loss(1,318) (1,240) 
Accumulated deficit(143,864) (141,775) 
Total Cross Country Healthcare, Inc. stockholders' equity160,757  162,632  
Noncontrolling interest in subsidiary645  868  
Total stockholders' equity161,402  163,500  
Total liabilities and stockholders' equity$386,979  $382,374  

See accompanying notes to the condensed consolidated financial statements

(Unaudited, amounts in thousands, except per share data)
 Three Months Ended
 March 31,
Revenue from services$210,064  $195,171  
Operating expenses: 
Direct operating expenses160,461  146,917  
Selling, general and administrative expenses45,881  46,036  
Bad debt expense539  270  
Depreciation and amortization3,296  2,984  
Acquisition and integration-related costs77  512  
Restructuring costs564  1,140  
Total operating expenses210,818  197,859  
Loss from operations(754) (2,688) 
Other expenses (income): 
Interest expense867  1,422  
Loss on early extinguishment of debt  360  
Other income, net(31) (82) 
Loss before income taxes(1,590) (4,388) 
Income tax expense (benefit)178  (3,012) 
Consolidated net loss(1,768) (1,376) 
Less: Net income attributable to noncontrolling interest in subsidiary
321  391  
Net loss attributable to common shareholders$(2,089) $(1,767) 
Net loss per share attributable to common shareholders - Basic and Diluted$(0.06) $(0.05) 
Weighted average common shares outstanding: 
Basic and Diluted35,873  35,700  

See accompanying notes to the condensed consolidated financial statements

(Unaudited, amounts in thousands)
Three Months Ended
 March 31,
Consolidated net loss$(1,768) $(1,376) 
Other comprehensive loss, before income tax: 
Unrealized foreign currency translation (loss) gain(78) 72  
Unrealized loss on interest rate contracts  (350) 
Reclassification adjustment to statement of operations  12  
(78) (266) 
Taxes on other comprehensive loss:
Income tax effect related to unrealized foreign currency translation gain  18  
Income tax effect related to unrealized loss on interest rate contracts  (88) 
Income tax effect related to reclassification adjustment to statement of operations  3  
Other comprehensive loss, net of tax(78) (199) 
Comprehensive loss(1,846) (1,575) 
Less: Net income attributable to noncontrolling interest in subsidiary321  391  
Comprehensive loss attributable to common shareholders$(2,167) $(1,966) 

See accompanying notes to the condensed consolidated financial statements

Three Months Ended March 31, 2020 and 2019
(Unaudited, amounts in thousands)
 Common StockAdditional
Paid-In Capital
Accumulated Other
Comprehensive Loss, net
(Accumulated Deficit) Retained EarningsNoncontrolling Interest in SubsidiaryStockholders’ Equity
Balances at December 31, 201935,871  $4  $305,643  $(1,240) $(141,775) $868  $163,500  
Vesting of restricted stock221  —  (635) —  —  —  (635) 
Equity compensation—  —  927  —  —  —  927  
Foreign currency translation adjustment, net of taxes—  —  —  (78) —  —  (78) 
Distribution to noncontrolling shareholder—  —  —  —  —  (544) (544) 
Net (loss) income—  —  —  —  (2,089) 321  (1,768) 
Balances at March 31, 202036,092  $4  $305,935  $(1,318) $(143,864) $645  $161,402  
 Common StockAdditional
Paid-In Capital
Accumulated Other
Comprehensive Loss, net
(Accumulated Deficit) Retained EarningsNoncontrolling Interest in SubsidiaryStockholders’ Equity
Balances at December 31, 201835,626  $4  $303,048  $(1,462) $(84,062) $670  $218,198  
Exercise of share options4  —  —  —  —  —  —  
Vesting of restricted stock176  —  (777) —  —  —  (777) 
Equity compensation—  —  531  —  —  —  531  
Foreign currency translation adjustment, net of taxes—  —  —  53  —  —  53  
Net change in hedging transaction, net of taxes—  —  —  (252) —  —  (252) 
Distribution to noncontrolling shareholder—  —  —  —  —  (367) (367) 
Net (loss) income—  —  —  —  (1,767) 391  (1,376) 
Balances at March 31, 201935,806  $4  $302,802  $(1,661) $(85,829) $694  $216,010  

See accompanying notes to the condensed consolidated financial statements

(Unaudited, amounts in thousands)
 Three Months Ended
 March 31,
Cash flows from operating activities  
Consolidated net loss$(1,768) $(1,376) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization3,296  2,984  
Provision for allowances881  970  
Deferred income tax expense (benefit)31  (3,146) 
Non-cash lease expense1,191  1,254  
Loss on early extinguishment of debt  360  
Equity compensation927  531  
Other non-cash costs143  365  
Changes in operating assets and liabilities:
Accounts receivable3,846  10,400  
Prepaid expenses and other assets(736) (1,477) 
Accounts payable and accrued expenses11,066  2,841  
Operating lease liabilities(1,467) (1,399) 
Other(248) 480  
Net cash provided by operating activities17,162  12,787  
Cash flows from investing activities  
Acquisition-related settlements  (136) 
Purchases of property and equipment(962) (1,109) 
Net cash used in investing activities(962) (1,245) 
Cash flows from financing activities  
Principal payments on Term Loan  (7,500) 
Debt issuance costs  (568) 
Borrowings under revolving credit facility107,274    
Repayments on revolving credit facility(110,600)   
Cash payments to noncontrolling shareholder(544) (367) 
Other(729) (860) 
Net cash used in financing activities(4,599) (9,295) 
Effect of exchange rate changes on cash(34) 20  
Change in cash and cash equivalents11,567  2,267  
Cash and cash equivalents at beginning of period1,032  16,019  
Cash and cash equivalents at end of period$12,599  $18,286  

See accompanying notes to the condensed consolidated financial statements



Nature of Business

The accompanying condensed consolidated financial statements include the accounts of Cross Country Healthcare, Inc. and its direct and indirect wholly-owned subsidiaries (collectively, the Company). The condensed consolidated financial statements include all assets, liabilities, revenue, and expenses of Cross Country Talent Acquisition Group, LLC, which is controlled by the Company but not wholly-owned. The Company records the ownership interest of the noncontrolling shareholder as noncontrolling interest in subsidiary. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all entries necessary for a fair presentation of such unaudited condensed consolidated financial statements have been included. These entries consisted of all normal recurring items.

The accompanying condensed consolidated financial statements 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 notes required by United States generally accepted accounting principles (U.S. GAAP) for complete financial statements. These operating results are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission. The December 31, 2019 condensed consolidated balance sheet included herein was derived from the December 31, 2019 audited consolidated balance sheet included in the Company’s Annual Report on Form 10-K.

Certain prior year amounts have been reclassified to conform to the current year presentation on the condensed consolidated statements of operations and statements of cash flows, and as presented in Note 3 - Customer Contracts and Note 11 - Segment Data.


Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Management has assessed various accounting estimates and other matters, including those that require consideration of forecasted financial information, in context of the unknown future impacts of the current global outbreak of Coronavirus (COVID-19) using information that is reasonably available to the Company at the time. Significant estimates and assumptions are used for, but not limited to: (1) the valuation of accounts receivable; (2) goodwill, trade names, and other intangible assets; (3) other long-lived assets; (4) share-based compensation; (5) accruals for health, workers’ compensation, and professional liability claims; (6) valuation of deferred tax assets; (7) legal contingencies; (8) income taxes; and (9) sales and other non-income tax liabilities. Accrued insurance claims and reserves include estimated settlements from known claims and actuarial estimates for claims incurred but not reported. Based on current assessment of these estimates there was not a material impact to the Company's consolidated financial statements as of and for the quarter ended March 31, 2020. However, as additional information becomes available to the Company, its future assessment of these estimates, including management's expectations at the time regarding the duration, scope and severity of the pandemic, as well as other factors, could materially and adversely impact the Company's consolidated financial statements in future reporting periods. Actual results could differ from those estimates.

Restructuring Costs

The Company considers restructuring activities to be programs whereby it fundamentally changes its operations, such as closing and consolidating facilities, reducing headcount, and realigning operations in response to changing market conditions. As a result, restructuring costs on the consolidated statements of operations primarily include employee termination costs and lease-related exit costs.


Reconciliation of the employee termination costs and lease-related exit costs beginning and ending liability balance is presented below:

Employee Termination CostsLease-Related Exit Costs
(amounts in thousands)
Balance at January 1, 2020$386  $1,223  
Charged to restructuring costs (a)212    
Payments(292) (56) 
Balance at March 31, 2020$306  $1,167  

(a) Aside from what is presented in the table above, restructuring costs in the condensed consolidated statements of operations for the three months ended March 31, 2020 also include $0.2 million of legal entity reorganization costs and $0.2 million of ongoing lease costs related to the Company's strategic reduction in its real estate footprint which are included as operating lease liabilities - current and non-current in our condensed consolidated balance sheets.

Recently Adopted Accounting Pronouncements

Effective January 1, 2020, the Company adopted ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The Company has adopted this guidance prospectively with no material impact on its condensed consolidated financial statements.

As of the beginning of the first quarter of 2020, the Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires the use of a forward-looking expected credit loss model for accounts receivable, loans, and other financial instruments. The guidance requires a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which it is effective. The Company has adopted this guidance using the modified retrospective approach related to its accounts receivable, resulting in no cumulative adjustment to retained earnings and no material impact on its condensed consolidated financial statements. See Note 3 - Customer Contracts.


The Company's revenues from customer contracts are generated from temporary staffing services and other services. Revenue is disaggregated by segment in the following table. Sales and usage-based taxes are excluded from revenue.

Three Months ended March 31, 2020
And Allied
SearchTotal Segments
(amounts in thousands)
Temporary Staffing Services$184,949  $17,160  $  $202,109  
Other Services3,284  1,021  3,650  7,955  
Total$188,233  $18,181  $3,650  $210,064  
Three Months ended March 31, 2019
And Allied
SearchTotal Segments
(amounts in thousands)
Temporary Staffing Services$172,662  $15,154  $  $187,816  
Other Services2,975  1,005  3,375  7,355  
Total$175,637  $16,159  $3,375  $195,171  

Accounts Receivable, net

The timing of revenue recognition, billings, and collections results in billed and unbilled accounts receivable from our customers which are classified as accounts receivable on the condensed consolidated balance sheets and are presented net of allowances for doubtful accounts and sales allowances. Estimated revenue for the Company's employees', subcontracted employees', and independent contractors’ time worked but not yet billed at March 31, 2020 and December 31, 2019 totaled $44.7 million and $46.1 million, respectively.

The allowance for doubtful accounts is established for losses expected to be incurred on accounts receivable balances. Accounts receivable are written off against the allowance for doubtful accounts when the Company determines amounts are no longer collectible. Judgment is required in the estimation of the allowance and the Company evaluates the collectability of its accounts receivable and contract assets based on a combination of factors. The Company bases its allowance for doubtful account estimates on its historical write-off experience, current conditions, an analysis of the aging of outstanding receivable and customer payment patterns, and specific reserves for customers in adverse condition adjusted for current expectations for the customers or industry. Based on the information currently available, the Company also considered current expectations of future economic conditions, including the impact of COVID-19, when estimating its allowance for doubtful accounts.

The opening balance of the allowance for doubtful accounts is reconciled to the closing balance for expected credit losses as follows:

Allowance for Doubtful Accounts(amounts in thousands)
Balance at January 1, 2020$2,406  
Bad Debt Expense539  
Write-Offs, net of Recoveries(349) 
Balance at March 31, 2020$2,596  

In addition to the allowance for doubtful accounts, the Company maintains a sales allowance for billing-related adjustments which may arise in the ordinary course and adjustments to the reserve are recorded as contra-revenue. The balance of this allowance as of March 31, 2020 and December 31, 2019 was $0.7 million and $0.8 million, respectively.


Total comprehensive loss includes net income or loss, foreign currency translation adjustments, and net change in derivative transactions, net of any related deferred taxes and valuation allowance. Certain of the Company’s foreign subsidiaries use their respective local currency as their functional currency. In accordance with the Foreign Currency Matters Topic of the FASB ASC, assets and liabilities of these operations are translated at the exchange rates in effect on the balance sheet date. Income statement items are translated at the average exchange rates for the period. The cumulative impact of currency fluctuations related to the balance sheet translation is included in accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets and was an unrealized loss of $1.3 million at March 31, 2020 and December 31, 2019.
The income tax impact related to components of other comprehensive loss for the three months ended March 31, 2020 and 2019 is reflected on the condensed consolidated statements of comprehensive loss.


The following table sets forth the components of the numerator and denominator for the computation of the basic and diluted earnings per share:
Three Months Ended
March 31,
(amounts in thousands, except per share data)
Net loss attributable to common shareholders - Basic and Diluted$(2,089) $(1,767) 
Weighted average common shares - Basic35,873  35,700  
Effect of diluted shares:
     Share-based awards    
Weighted average common shares - Diluted35,873  35,700  
Net loss per share attributable to common shareholders - Basic and Diluted$(0.06) $(0.05) 

For the three months ended March 31, 2020 and 2019, no tax benefits were assumed in the weighted average share calculation due to the Company's net operating loss position.

Due to the net loss for the three months ended March 31, 2020 and 2019, 454,920 and 97,184 shares, respectively, were excluded from diluted weighted average shares.



The Company had the following acquired intangible assets:
 March 31, 2020December 31, 2019
(amounts in thousands)
Intangible assets subject to amortization:      
Databases$30,530  $13,032  $17,498  $30,530  $12,269  $18,261  
Customer relationships49,758  27,447  22,311  49,758  26,596  23,162  
Non-compete agreements320  177  143  320  161  159  
Trade names4,500  1,969  2,531  4,500  1,125  3,375  
Other intangible assets, net$85,108  $42,625  $42,483  $85,108  $40,151  $44,957  
Intangible assets not subject to amortization:      
Trade names, indefinite-lived  $5,900    $5,900  

As of March 31, 2020, estimated annual amortization expense is as follows:

Years Ending December 31:(amounts in thousands)

The Company tests reporting units’ goodwill and intangible assets with indefinite lives for impairment annually during the fourth quarter and more frequently if impairment indicators exist. The Company performs quarterly qualitative assessments of significant events and circumstances such as reporting units’ historical and current results, assumptions regarding future performance, strategic initiatives and overall economic factors, including COVID-19, and macro-economic developments, to determine the existence of potential indicators of impairment and assess if it is more likely than not that the fair value of reporting units or intangible assets is less than their carrying value. If indicators of impairments are identified a quantitative impairment test is performed.

In its fourth quarter 2019 testing, the Company determined that the estimated fair value of its reporting units and its indefinite-lived trade name exceeded their respective values for Nurse and Allied Staffing and Physician Staffing with significant cushions. The Company’s Search reporting unit, however, had less than 20% excess fair value over its carrying amount.

As of March 31, 2020, the Company performed a qualitative assessment of each of its reporting units and determined it was not more likely than not that the fair value of its reporting units dropped below their carrying value. Although management believes that the Company's current estimates and assumptions are reasonable and supportable, including its assumptions on the impact and timing related to COVID-19, there can be no assurance that the estimates and assumptions management used for purposes of its qualitative assessment as of March 31, 2020 will prove to be accurate predictions of future performance, leaving the Search reporting unit, in particular, at risk for future impairments.

As of March 31, 2020, goodwill by reporting segment was: $86.4 million for Nurse and Allied Staffing, $2.8 million for Physician Staffing, and $11.9 million for Search, totaling $101.1 million.


For its long-lived assets and definite-lived intangible assets, the Company reviews for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. As of March 31, 2020, the Company performed a qualitative assessment of its trade names and other intangible assets and determined it was not more likely than not that their carrying value may not be recoverable.


2019 ABL Credit Agreement
Effective October 25, 2019, the Company terminated its commitments under its prior senior credit facility entered into in August 2017 (defined below) and entered into an ABL Credit Agreement (Loan Agreement). The Loan Agreement provides for a five-year revolving senior secured asset-based credit facility (ABL) in the aggregate principal amount of up to $120.0 million (as described below), including a sublimit for swing loans up to $15.0 million and a $35.0 million sublimit for standby letters of credit.
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, 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 March 31, 2020, availability under the ABL was $119.0 million and the Company had $67.6 million of borrowings drawn, as well as $19.6 million of letters of credit outstanding related to workers' compensation and professional liability policies, leaving $31.8 million available for borrowing. The balances drawn are presented as revolving credit facility on the condensed consolidated balance sheets and as of March 31, 2020 and December 31, 2019 had a weighted average interest rate of 3.49% and 4.23%, respectively.
As of March 31, 2020, the interest rate spreads and fees under the Loan Agreement were based on LIBOR plus 2.00% for the revolving portion of the borrowing base and LIBOR plus 4.00% on the Supplemental Availability. The Base Rate (as defined by the Loan Agreement) margins would have been 1.00% and 3.00%, respectively, for the revolving portion and Supplemental Availability, respectively. The LIBOR and Base Rate margins are subject to monthly pricing adjustments, pursuant to a pricing matrix based on the Company’s excess availability under the revolving credit facility. In addition, the facility is subject to an unused line fee, letter of credit fees, and an administrative fee. The unused line fee is 0.375% of the average daily unused portion of the revolving credit facility.
The Loan Agreement contains various restrictions and covenants applicable to the Company and its subsidiaries, including a covenant to maintain a minimum fixed charge coverage ratio. The Company was in compliance with this covenant as of March 31, 2020. Obligations under the ABL are secured by substantially all the assets of the borrowers and guarantors, subject to customary exceptions.
Prior Senior Credit Facility
The Company had a prior senior credit facility that included a revolver and term loan. The term loan was payable in quarterly installments and the Company had the right at any time to prepay borrowings in whole or in part, without premium or penalty. In the first quarter of 2019, the Company made an optional prepayment on the term loan of $7.5 million.
Also in the first quarter of 2019, the Company amended its prior senior credit facility to reduce the commitment under the revolving credit facility, among other changes. The amendment was treated as a modification and the fees of $0.6 million paid to its lenders were classified as debt issuance costs.
As a result of the reduction in borrowing capacity under the revolving credit facility, as well as the reduction in the term loan due to the prepayment in the three months ended March 31, 2019, $0.4 million of debt issuance costs were written off. The amount of the write-off is reflected as loss on early extinguishment of debt on the condensed consolidated statements of operations.
Note Payable
On October 30, 2015, the Company completed the acquisition of all of the membership interests of New Mediscan II, LLC, Mediscan Diagnostic Services, LLC, and Mediscan Nursing Staffing, LLC (collectively, Mediscan). In connection with the Mediscan acquisition, the Company assumed contingent purchase price liabilities for a previously acquired business that were payable annually based on certain performance criteria for the years 2016 through 2019, and a second performance criteria related to 2019 payable in three equal installments. Pursuant to the asset purchase agreement, once the earnout amount related to the second performance criteria for 2019 was determined, a note payable documenting the remaining principal and interest was specified as part of the settlement. In the first quarter of 2020, the total earnout amount related to both 2019 performance criterion of $7.4 million was determined, and $0.1 million was paid by the Company. Pursuant to the note payable, the first


installment of $2.4 million will be paid in the second quarter of 2020, the second installment of $2.4 million is payable on January 31, 2021, and the third installment of $2.5 million is to be paid, together with interest at a rate of 2% per annum, accruing from April 1, 2020, on January 31, 2022. As of March 31, 2020, the current portion of the note payable in the amount of $4.9 million is included in other current liabilities and the long-term portion of $2.4 million is included in other long-term liabilities on the condensed consolidated balance sheets.


The Company's lease population of its right-of-use asset and lease liabilities under the Leases Topic of the FASB ASC is substantially related to the rental of office space. The Company enters into lease agreements as lessee for the rental of office space for both its corporate and branch locations that may include options to extend or terminate early. Many of these real estate leases require variable payments of property taxes, insurance, and common area maintenance, in addition to base rent. Certain of the leases have provisions for free rent months during the lease term and/or escalating rent payments and, particularly for the Company’s longer-term leases for its corporate offices, it has received incentives to enter into the leases such as receiving up to a specified dollar amount to construct tenant improvements. These leases do not include residual value guarantees, covenants, or other restrictions.

The table below presents the lease-related assets and liabilities included on the condensed consolidated balance sheets:

Classification on Condensed Consolidated Balance Sheets:March 31, 2020December 31, 2019
(amounts in thousands)
Operating lease right-of-use assets$16,263  $16,964  
Operating lease liabilities - current$4,965  $4,878  
Operating lease liabilities - non-current$17,992  $19,070  

Weighted-average remaining lease term4.5 years4.7 years
Weighted average discount rate6.23 %6.26 %

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities (which do not include short-term leases) recorded on the condensed consolidated balance sheets as of March 31, 2020:

Years Ending December 31:(amounts in thousands)
Total minimum lease payments26,534  
Less: amount of lease payments representing interest(3,577) 
Present value of future minimum lease payments22,957  
Less: current lease obligations(4,965) 
Non-current lease obligations$17,992  


Other Information

The table below provides information regarding supplemental cash flows:

Three Months Ended
March 31,
(amounts in thousands)
Supplemental Cash Flow Information:
Cash paid for amounts included in the measurement of operating lease liabilities$1,835  $1,845  
Right-of-use assets obtained in exchange for new operating lease liabilities$500  $300  

The components of lease expense are as follows:

Three Months Ended
March 31,
(amounts in thousands)
Amounts Included in Condensed Consolidated Statements of Operations:
Operating lease expense$1,523  $1,694  
Short-term lease expense$1,845  $2,159  
Variable and other lease costs$574  $718  

Operating lease expense, short-term lease expense, and variable and other lease costs are included in selling, general and administrative expenses, direct operating expenses, and restructuring costs in the condensed consolidated statements of operations, depending on the nature of the leased asset.

As of March 31, 2020, the Company does not have any material operating leases which have not yet commenced. The Company has an immaterial amount of finance lease contracts related to other equipment rentals which are not included in the above disclosures.

The Fair Value Measurements and Disclosures Topic of the FASB ASC defines fair value as the exchange 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. This topic also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
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.


Items Measured at Fair Value on a Recurring Basis:
The Company’s financial assets/liabilities required to be measured on a recurring basis were its: (1) deferred compensation asset included in other non-current assets; (2) deferred compensation liability included in other long-term liabilities; and (3) contingent consideration liabilities included as other current liabilities and contingent consideration on its condensed consolidated balance sheets.

Deferred compensation—The Company utilizes Level 1 inputs to value its deferred compensation assets and liabilities. The Company’s deferred compensation assets and liabilities are measured using publicly available indices, as per the plan documents.

Contingent consideration liabilities—Potential earnout payments related to the acquisition of Mediscan were contingent upon meeting certain performance requirements through 2019. The long-term portion of these liabilities has been included in contingent consideration, and the short-term portion is included in other current liabilities on the condensed consolidated balance sheets. The Company utilized Level 3 inputs to value these contingent consideration liabilities as significant unobservable inputs were used in the calculation of their fair value. As of December 31, 2019, due to the end of the earnout period, the Company measured the fair value of the liability based on the expected payout related to its Mediscan acquisition. In the first quarter of 2020, the total earnout amounts related to 2019 of $7.4 million was determined, and $0.1 million was paid by the Company. The remaining $7.3 million was documented as a subordinated promissory note payable and is included in other current and other long-term liabilities on the condensed consolidated balance sheets which is not measured at fair value on a recurring basis. See Note 7 - Debt.

The table which follows summarizes the estimated fair value of the Company’s financial assets and liabilities measured on a recurring basis:
Fair Value Measurements
 March 31, 2020December 31, 2019
(amounts in thousands)
Financial Assets:
(Level 1)
Deferred compensation asset$719  $830  
Financial Liabilities:
(Level 1)  
Deferred compensation liability$1,768  $2,216  
(Level 3)
Contingent consideration liabilities$  $7,300  

The opening balances of contingent consideration liabilities are reconciled to the closing balances for fair value measurements of these liabilities categorized within Level 3 of the fair value hierarchy are as follows:

Three Months Ended
March 31,
(amounts in thousands)
Balance at beginning of period$7,300  $7,689  
Payments(100) (100) 
Accretion expense  247  
Valuation adjustment77    
Reclassification to other current and long-term liabilities(7,277)   
Balance at end of period$  $7,836