Cross Country -- 8-K


 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________

FORM 8-K

______________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) November 3, 2008

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______________

Cross Country Healthcare, Inc.

 (Exact name of registrant as specified in its charter)

______________


Delaware

0-33169

13-4066229

(State or Other Jurisdiction

(Commission

(I.R.S. Employer

of Incorporation)

File Number)

Identification No.)

6551 Park of Commerce Blvd., N.W., Boca Raton, FL 33487

(Address of Principal Executive Office) (Zip Code)

(561) 998-2232

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 








Item 2.02

Results of Operations and Financial Condition

(a)  On November 3, 2008, Cross Country Healthcare, Inc. (“the Company”) issued a press release announcing results for the quarter ended September 30, 2008, a copy of which is attached as Exhibit 99.1 to this Current Report on Form 8-K. This information is being furnished under Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of such section.


Item 7.01

Regulation FD Disclosure


Incorporated by reference is a press release issued by the Company on November 3, 2008, which is attached hereto as Exhibit 99.1. This information is being furnished under Item 7.01 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of such section.


Item 9.01

Financial Statements and Exhibits

(d) Exhibits


          

Exhibit

     

Description

 

 

 

 

 

99.1

 

Press Release issued by the Company on November 3, 2008

 

 

 

 

 

 

 

 




2



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.


         

CROSS COUNTRY HEALTHCARE, INC.

 

 

  

 

 

 

 

By:  

/s/ EMIL HENSEL

 

 

Emil Hensel

Chief Financial Officer

 

 

Dated:  November 6, 2008

















3



LINKS

Item 2.02  Results of Operations and Financial Condition

Item 7.01  Regulation FD Disclosure

Item 9.01  Financial Statements and Exhibits







CC Inc. Color Letterhead

EXHIBIT 99.1


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     NEWS

FOR IMMEDIATE RELEASE


CROSS COUNTRY HEALTHCARE REPORTS THIRD QUARTER 2008 RESULTS


BOCA RATON, Fla. – November 3, 2008 – Cross Country Healthcare, Inc. (Nasdaq: CCRN) today reported revenue of $178.1 million in the third quarter ended September 30, 2008, a 4% decrease from revenue of $185.1 million in the prior year quarter.  Net income for the third quarter of 2008 was $6.2 million, or $0.20 per diluted share, compared to net income of $7.0 million, or $0.22 per diluted share in the prior year quarter.  Cash flow from operations for the third quarter of 2008 was $13.8 million.


For the nine months ended September 30, 2008, the Company generated revenue of $528.3 million and net income of $18.4 million, or $0.59 per diluted share.  This compares to revenue of $536.6 million and net income of $17.3 million, or $0.53 per diluted share, in the first nine months of the prior year.  Cash flow from operations for the first nine months of 2008 was $40.9 million.


“While we generated strong cash flow, improved our gross profit margin and further diversified our revenue mix with the acquisition of the locum tenens (temporary physician staffing) business of MDA Holdings, Inc. (MDA) during the third quarter, the overall environment in which we operate deteriorated significantly,” said Joseph A. Boshart, President and Chief Executive Officer of Cross Country Healthcare.  “Demand, booking activity and volume in our travel nurse staffing business weakened, in large part, due to hospital clients being increasingly reluctant to commit to a contract nurse most often citing low patient census and budget reductions for their hesitation.  Our other businesses also experienced similar reluctance on the part of clients to commit.  Nonetheless, our newly acquired temporary physician staffing business continued its year-over-year growth due to greater demand for physicians as they are revenue generators for hospitals and physician practice groups,” Mr. Boshart said.


“Although our near-term expectations are disappointing to me, and I’m sure to our shareholders, Cross Country Healthcare remains on very sound financial footing with a prudent level of debt and cash flow well in excess of what is required to operate our business on a day-to-day basis.  Given the general tone and uncertainty of the economy, including a further weakening of labor markets, our operations teams will be focused on continuing to provide a high-level of service to our healthcare facility customers and the healthcare professionals that look to us for assignment opportunities.  Meanwhile, our management team will be focused on fundamentals such as cost control and continuing to de-lever our balance sheet using our strong cash flow.  I would like to add that over our history, we have managed through several industry down-turns – and we have always generated positive quarterly earnings.  Moreover, consistent with our strategy that we have communicated for the past several quarters, with the MDA acquisition we successfully diversified into a sector of our industry that has shown consistent growth over the past decade,” added Mr. Boshart.


Nurse and Allied Staffing


For the third quarter of 2008, the nurse and allied staffing business segment (travel and per diem nurse and travel allied staffing) generated revenue of $128.9 million, a 12% decline from the prior year quarter.  The decrease reflected a 13% decline in staffing volume from the prior year quarter that was partially offset by a 2.4% year-over-year increase in the travel nurse staffing hourly bill rate.


Contribution income (defined as income from operations before depreciation, amortization and corporate expenses not specifically identified to a reporting segment) was relatively flat at $14.3 million in the third quarters of both 2008 and 2007.  For the third quarter of 2008, the Company experienced continued expansion of the bill-pay spread and favorable insurance expenses.  However, these improvements were essentially offset by the impact of lower staffing volume.


For the first nine months of 2008, segment revenue decreased 7% to $402.2 million from $433.5 million in the same period a year ago, while contribution income increased 4% to $41.1 million from $39.4 million in the prior year period.


(more)







Physician Staffing


For the third quarter of 2008, physician staffing generated revenue of $10.8 million and $0.9 million in contribution income since the Company’s acquisition of MDA on September 9, 2008.  Pro-forma for the current quarter, physician staffing days filled increased 4% from the prior year quarter to 28,190 and revenue per day filled increased 8% to $1,584.


Physician staffing days filled is derived by dividing the physician staffing hours filled during the respective period by 8 hours.  Revenue per day filled represents segment revenue divided by the number of days filled for the respective period.


Clinical Trials Services


For the third quarter of 2008, the clinical trials services segment generated revenue of $25.4 million, a decrease of 3% from the prior year quarter due primarily to a decline in the drug safety business from the prior year quarter related to a specific client.  Contribution income decreased 26% in the third quarter of 2008 to $3.8 million from the same quarter of 2007 primarily due to a reduction in contribution from the drug safety business.


For the first nine months of 2008, segment revenue increased 15% to $75.2 million from $65.4 million in the same period a year ago, while contribution income increased 13% to $11.9 million from $10.6 million in the prior year period.


Other Human Capital Management Services


For the third quarter of 2008, the other human capital management services business segment (education and training and retained search) generated revenue of $13.0 million, a 2% decrease from the same quarter in the prior year, reflecting lower revenue generated by the education and training business that was partially offset by higher revenue in the retained search business.  Segment contribution income decreased 3% to $1.6 million in the third quarter of 2008 from the prior year quarter, reflecting a decline in contribution from the retained search business that was mostly offset by an increase in contribution from the education and training business.


For the first nine months of 2008, segment revenue increased 7% to $40.1 million from $37.6 million in the same period a year ago, while contribution income increased 6% to $6.1 million from $5.7 million in the prior year period.


Debt Repayments/Borrowings


In conjunction with the MDA acquisition, the Company entered into an amended and restated $200.0 million syndicated credit facility with Wachovia Capital Markets, LLC and certain of its affiliates, Banc of America Securities, LLC, and certain other lenders.  Pursuant to this financing, the Company amended and kept in place its existing $75.0 million revolving credit facility and entered into a new $125.0 million 5-year term loan, from which the proceeds were used to finance the acquisition and to pay-down approximately $6.8 million of debt outstanding on the revolving credit facility.  During the third quarter of 2008, the Company repaid a net of $15.0 million of borrowings under its revolving credit facility.  At September 30, 2008, the Company had $144.4 million of total debt on its balance sheet and a debt, net of unrestricted cash, to total capitalization ratio of 24%.  


Stock Repurchase Program Update


Cross Country Healthcare refrained from repurchasing its common stock during the third quarter of 2008 due to the timing of negotiations and subsequent completion of the MDA acquisition.  As of September 30, 2008, the Company can repurchase up to 1,441,139 shares of its common stock under the current authorization approved in February 2008.  Under this authorization, the shares may be repurchased from time-to-time in the open market subject to the terms of the Company’s credit agreement.  Such repurchases may be discontinued at any time at the discretion of the Company.  Pursuant to the terms of the Company’s credit agreement, as long as its debt leverage ratio (as defined in the Company’s credit agreement) is above 2 to 1 the Company cannot repurchase shares.  As of the end of the third quarter, the Company’s debt leverage ratio was approximately 2.15 to 1.  At September 30, 2008, the Company had approximately 30.8 million shares outstanding.


(more)








Guidance for Fourth Quarter 2008


The following statements are based on current management expectations.  Such statements are forward-looking and actual results may differ materially.  These statements do not include the potential impact of any future mergers, acquisitions and other business combinations, any impairment charges, any significant legal proceedings or any significant repurchases of our common stock.


The Company expects revenue in the fourth quarter of 2008 to be in the $195 million to $199 million range and earnings per diluted share to be in the range of $0.15 to $0.17.  For the full-year, the Company expects 2008 revenue to be in the $723 million to $727 million range and earnings per diluted share to be in the range of $0.74 to $0.76.


Quarterly Conference Call


Cross Country Healthcare will hold a conference call on Monday, November 3rd at 10:00 a.m. Eastern Time to discuss its third quarter 2008 financial results.  This call will be webcast live by CCBN/Thomson and may be accessed at the Company's web site at www.crosscountryhealthcare.com or by dialing 877-917-1549 from anywhere in the U.S. or by dialing 312-470-7109 from non-U.S. locations – Passcode: Cross Country.  A replay of the webcast will be available through November 17th.  A replay of the conference call will be available by telephone from approximately noon on November 3rd until November 17th by calling 800-756-0131 from anywhere in the U.S. or 203-369-3001 from non-U.S. locations.


About Cross Country Healthcare


Cross Country Healthcare, Inc. is a leading provider of nurse and allied staffing services in the United States, a national provider of multi-specialty locum tenens (temporary physician staffing) services, a provider of clinical trials services to global pharmaceutical and biotechnology customers, as well as a provider of other human capital management services focused on healthcare. The Company has approximately 5,000 contracts with hospitals, healthcare providers, pharmaceutical and biotechnology customers, and other healthcare organizations.  Copies of this and other news releases as well as additional information about Cross Country Healthcare can be obtained online at www.crosscountryhealthcare.com.  Shareholders and prospective investors can also register at the corporate website to automatically receive the Company's press releases, SEC filings and other notices by e-mail.


In addition to historical information, this press release 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”, “seeks”, “will” and variations of such words and similar expressions intended to identify forward-looking statements. Forward-looking 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, without limitation, the following: our ability to attract and retain qualified nurses, physicians and other healthcare personnel, costs and availability of short-term housing for our travel nurses and physicians, 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 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, 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 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, and our other Securities and Exchange Commission filings made during 2008.


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 press release. 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 “we,” “us,” “our,” or “Cross Country” in this press release mean Cross Country Healthcare, Inc., its subsidiaries and affiliates.


#   #   #


For further information, please contact:

Howard A. Goldman

Director/Investor & Corporate Relations

Cross Country Healthcare, Inc.

Phone: 877.686.9779

Email: hgoldman@crosscountry.com




Cross Country Healthcare, Inc.

Consolidated Statements of Income

(Unaudited, amounts in thousands, except per share data)

 

 

Three Months Ended
September 30,

 

 

 

Nine Months Ended
September 30,

 

 

 

 

2008

 

2007

 

% Change

 

2008

 

2007

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue from services

     

$

178,134

     

$

185,124

     

(4%)

     

$

528,336

     

$

536,556

     

(2%)

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses

 

 

130,696

 

 

139,266

 

(6%)

 

 

390,081

 

 

408,606

 

(5%)

Selling, general and administrative expenses

 

 

33,475

 

 

31,486

 

6%

 

 

97,763

 

 

90,927

 

8%

Bad debt expense

 

 

203

 

 

––

 

ND

 

 

687

 

 

1,265

 

(46%)

Depreciation

 

 

1,789

 

 

1,370

 

31%

 

 

5,352

 

 

4,359

 

23%

Amortization

 

 

713

 

 

622

 

15%

 

 

2,029

 

 

1,361

 

49%

Legal settlement charge

 

 

––

 

 

––

 

––

 

 

-

 

 

34

 

ND

Total operating expenses

 

 

166,876

 

 

172,744

 

(3%)

 

 

495,912

 

 

506,552

 

(2%)

Income from operations

 

 

11,258

 

 

12,380

 

(9%)

 

 

32,424

 

 

30,004

 

8%

Other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange loss (gain)

 

 

(79)

 

 

59

 

(234%)

 

 

(119)

 

 

59

 

(302%)

Interest expense, net

 

 

788

 

 

808

 

(2%)

 

 

1,960

 

 

1,823

 

8%

Income before income taxes

 

 

10,549

 

 

11,513

 

(8%)

 

 

30,583

 

 

28,122

 

9%

Income tax expense

 

 

4,378

 

 

4,464

 

(2%)

 

 

12,191

 

 

10,810

 

13%

Net income

 

$

6,171

 

$

7,049

 

(12)%

 

$

18,392

 

$

17,312

 

6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.20

 

$

0.22

 

(9%)

 

$

0.60

 

$

0.54

 

11%

Diluted

 

$

0.20

 

$

0.22

 

(9%)

 

$

0.59

 

$

0.53

 

11%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

30,710

 

 

31,954

 

 

 

 

30,842

 

 

32,041

 

 

Diluted

 

 

30,911

 

 

32,433

 

 

 

 

31,032

 

 

32,631

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ND - Not determinable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 






Cross Country Healthcare, Inc.

Condensed Consolidated Balance Sheets

(Unaudited, amounts in thousands)

 

 

September 30,
2008

 

December 31,
2007

 

Assets

     

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

12,637

 

$

9,066

 

Restricted cash

 

 

5,000

 

 

––

 

Accounts receivable, net

 

 

126,380

 

 

116,133

 

Deferred tax assets

 

 

6,472

 

 

6,172

 

Other current assets

 

 

18,962

 

 

17,768

 

Total current assets

 

 

169,451

 

 

149,139

 

Property and equipment, net

 

 

25,639

 

 

23,460

 

Trademarks, net

 

 

64,815

 

 

19,153

 

Goodwill, net

 

 

366,340

 

 

326,119

 

Other identifiable intangible assets, net

 

 

36,933

 

 

15,996

 

Debt issuance costs, net

 

 

2,910

 

 

424

 

Other long-term assets

 

 

1,254

 

 

1,017

 

Total assets

 

$

667,342

 

$

535,308

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

12,885

 

$

10,203

 

Accrued employee compensation and benefits

 

 

39,015

 

 

26,102

 

Current portion of long-term debt

 

 

9,214

 

 

5,067

 

Income taxes payable

 

 

5,041

 

 

1,222

 

Other current liabilities

 

 

8,357

 

 

7,815

 

Total current liabilities

 

 

74,512

 

 

50,409

 

Long-term debt

 

 

135,194

 

 

34,385

 

Non-current deferred tax liabilities

 

 

49,767

 

 

49,547

 

Other long-term liabilities

 

 

9,117

 

 

10,530

 

Total liabilities

 

 

268,590

 

 

144,871

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

Common stock

 

 

3

 

 

3

 

Additional paid-in capital

 

 

237,093

 

 

245,844

 

Other stockholders' equity

 

 

161,656

 

 

144,590

 

Total stockholders' equity

 

 

398,752

 

 

390,437

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

667,342

 

$

535,308

 

 

 

 

 

 

 

 

 





Cross Country Healthcare, Inc.

Segment Data (a)

(Unaudited, amounts in thousands)

 

 

Three Months Ended
September 30,

 

 

 

Nine Months Ended
September 30

 

 

 

 

 

2008

 

 

2007

 

% Change

 

 

2008

 

 

2007

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

   

 

 

   

 

 

   

 

   

 

 

   

 

 

   

 

Nurse and allied staffing

 

$

128,910

 

$

145,780

 

(12%)

 

$

402,241

 

$

433,497

 

(7%)

Physician staffing

 

 

10,831

 

 

––

 

ND

 

 

10,831

 

 

––

 

ND

Clinical trials services

 

 

25,414

 

 

26,164

 

(3%)

 

 

75,181

 

 

65,444

 

15%

Other human capital management services

 

 

12,979

 

 

13,180

 

(2%)

 

 

40,083

 

 

37,615

 

7%

 

 

$

178,134

 

$

185,124

 

(4%)

 

$

528,336

 

$

536,556

 

(2%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contribution income (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nurse and allied staffing

 

$

14,332

 

$

14,329

 

0%

 

$

41,132

 

$

39,385

 

4%

Physician staffing

 

 

928

 

 

––

 

ND

 

 

928

 

 

––

 

ND

Clinical trials services

 

 

3,755

 

 

5,064

 

(26%)

 

 

11,937

 

 

10,597

 

13%

Other human capital management services

 

 

1,589

 

 

1,639

 

(3%)

 

 

6,092

 

 

5,728

 

6%

 

 

 

20,604

 

 

21,032

 

(2%)

 

 

60,089

 

 

55,710

 

8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unallocated corporate overhead

 

 

6,844

 

 

6,660

 

3%

 

 

20,284

 

 

19,952

 

2%

Depreciation

 

 

1,789

 

 

1,370

 

31%

 

 

5,352

 

 

4,359

 

23%

Amortization

 

 

713

 

 

622

 

15%

 

 

2,029

 

 

1,361

 

49%

Legal settlement charge

 

 

––

 

 

––

 

ND

 

 

––

 

 

34

 

(100%)

Income from operations

 

$

11,258

 

$

12,380

 

 

 

$

32,424

 

$

30,004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Cross Country Healthcare , Inc.

Other Financial Data

(Unaudited)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2008

 

2007

 

2008

 

2007

Net cash provided by operating activities (in thousands)

     

$

13,760

     

$

8,611

     

$

40,932

     

$

15,966

 

 

 

 

 

 

 

 

 

 

 

 

 

Nurse and allied staffing statistical data:

 

 

 

 

 

 

 

 

 

 

 

 

FTEs (c)

 

 

4,335

 

 

4,999

 

 

4,566

 

 

5,067

Weeks worked (d)

 

 

56,355

 

 

64,987

 

 

178,074

 

 

197,613

Average nurse and allied staffing revenue per FTE per week (e)

 

$

2,287

 

$

2,243

 

$

2,259

 

$

2,194


(a)

Segment data provided is in accordance with FASB Statement 131.

(b)

Defined as income from operations before depreciation, amortization, and corporate expenses not specifically identified to a reporting segment. Contribution income is a financial measure used by management when assessing segment performance.

(c)

FTEs represent the average number of nurse and allied contract staffing personnel on a full-time equivalent basis.

(d)

Weeks worked is calculated by multiplying the FTEs by the number of weeks during the respective period.

(e)

Average nurse and allied staffing revenue per FTE per week is calculated by dividing the nurse and allied staffing revenue by the number of week worked in the respective periods.  Nurse and allied staffing revenue includes revenue from permanent placement of nurses.