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 6, 2006

[http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=4476543&doc=2]

______________

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 6, 2006, the Company issued a press release announcing results for the quarter  ended September  30, 2006,  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 9.01

Financial Statements and Exhibits

(c)

Exhibits


Exhibit

 

Description

 

     

 

99.1

 

Press Release issued by the Company on November 6, 2006

 

 

 

 

 

 




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, 2006















3



LINKS


Item 2.02  Results of Operations and Financial Condition

Item 9.01  Financial Statements and Exhibits






United States Securities & Exchange Commission EDGAR Filing

Exhibit 99.1



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   NEWS

FOR IMMEDIATE RELEASE


CROSS COUNTRY HEALTHCARE REPORTS THIRD QUARTER 2006 RESULTS


BOCA RATON, Fla. – November 6, 2006 – Cross Country Healthcare, Inc. (Nasdaq: CCRN) today reported revenue of $162.9 million and net income of $0.1 million, or $0.00 per diluted share for the third quarter ended September 30, 2006. Net income for the third quarter was negatively impacted by a previously disclosed after-tax charge of approximately $5.4 million, or $0.17 per diluted share, related to the settlement of a lawsuit. Excluding this charge, the Company had net income of $5.5 million, or $0.17 per diluted share. A year earlier, the Company had revenue of $163.1 million and net income of $5.0 million, or $0.15 per diluted share in the third quarter of 2005. Cash flow from operations for the third quarter of 2006 was $9.6 million.

For the nine month period ended September 30, 2006, Cross Country Healthcare reported revenue of $479.4 million and net income of $9.1 million, or $0.28 per diluted share, which includes the aforementioned after-tax charge associated with the legal settlement. This compares to revenue of $481.7 million and net income of $9.9 million, or $0.30 per diluted share, in the first nine months of the prior year. Cash flow from operations for the first nine months of 2006 was $29.7 million.

“We are pleased to report improving operating performance and continued strong cash flow generation in the third quarter. Excluding the legal settlement charge, our net income per diluted share of $0.17 would have been two-cents ahead of the prior year quarter and above the guidance range for the third quarter that we provided in August. We also completed the strategic Metropolitan Research acquisition during the third quarter, which we believe substantially enhances the scope of our clinical staffing service offerings” said Joseph A. Boshart, President and Chief Executive Officer of Cross Country Healthcare, Inc.

“Despite relatively weak hospital admission trends in the first half of 2006, our core travel nurse staffing business regained traction during the third quarter and this improved momentum is continuing into the fourth quarter. In addition, our organic clinical research staffing business appears to be on a solid growth track and the new Metropolitan Research business is continuing the attractive growth trend it had achieved prior to our acquisition,” added Mr. Boshart.

Healthcare Staffing

For the third quarter of 2006, the healthcare staffing business segment (travel and per diem nurse, travel allied health and clinical research staffing) generated revenue of $151.4 million, a 4.5% sequential increase from the second quarter of 2006 and essentially unchanged from the prior year quarter. The sequential improvement reflected an increase in revenue from travel staffing, the added revenue from the Metropolitan Research acquisition and an organic increase from clinical research staffing, which was partially offset by lower revenue from per diem nurse staffing. On a year-over-year basis, revenue from clinical research and travel staffing was higher while per diem staffing was lower than the third quarter of 2005. Segment staffing volume (excluding Metropolitan Research) increased 1% sequentially from the second quarter of 2006 and was 5% lower than the prior year quarter – travel staffing volume increased slightly on a sequential basis and was 4% lower on a year-over-year basis.

Contribution income (defined as income from continuing operations before interest, income taxes, depreciation and amortization, legal settlement charge and corporate expenses not specifically identified to a reporting segment), decreased slightly in the third quarter of 2006 to $15.2 million from $15.3 million in the same quarter of 2005, reflecting improved contributions from clinical research and travel staffing that were offset by a lower contribution from per diem staffing. Additionally, during the third quarter of 2006, the bill-pay spread in the travel nurse staffing business expanded while housing costs continued to increase.


(more)







For the first nine months of 2006, segment revenue decreased by 1% to $443.9 million from $446.9 million in the same period a year ago, while contribution income increased 16% to $42.5 million from $36.7 million in the prior year period.


Other Human Capital Management Services


For the third quarter of 2006, the other human capital management services business segment (education and training and retained search) generated revenue of $11.5 million, a 2% decrease from revenue of $11.7 million in the same quarter in the prior year. The decline reflected a decrease in revenue from the education and training business that was partially offset by higher revenue from the retained search business. Segment contribution income of $2.2 million was essentially flat in the third quarter of 2006 compared with the prior year quarter.


For the first nine months of 2006, segment revenue increased 2% to $35.5 million from $34.8 million in the same period a year ago, and contribution income rose by 12% to $7.1 million from $6.4 million in the prior year period.


Debt Repayment


At September 30, 2006, the Company had $20.7 million of total debt on its balance sheet, which includes $16.0 million drawn from its revolving credit facility to fund the recently completed Metropolitan Research acquisition. These borrowings were offset by net payments of $5.7 million from operating cash flow during the third quarter. At the end of the third quarter the Company had a debt to total capitalization ratio of 5.3%.


Stock Repurchase Program Update


The Company repurchased 74,400 shares of its common stock during the third quarter of 2006 at an average cost of $16.35 per share. The Company can purchase up to an additional 74,872 shares under its stock repurchase program authorized in November 2002. In May 2006, the Company’s Board of Directors authorized a new stock repurchase program whereby the Company may repurchase up to an additional 1.5 million of its common shares, subject to the constraints of the Company’s current credit agreement. The new stock repurchase authorization will commence upon the completion of the previously authorized stock repurchase program. Under these authorizations, the shares may be repurchased from time-to-time in the open market and may be discontinued at any time at the discretion of the Company. At September 30, 2006, the Company had approximately 32.0 million shares outstanding.


Guidance For Fourth Quarter 2006


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 or other business combinations, repurchases of the Company's common stock, or pending legal matters.


Based on the present industry dynamics, Cross Country Healthcare expects revenue in the fourth quarter of 2006 to be in the $172 million to $175 million range and EPS per diluted share to be in the range of $0.17 to $0.19.


Quarterly Conference Call


Cross Country Healthcare will hold a conference call on Tuesday, November 7th at 10:00 a.m. Eastern Time to discuss its third quarter 2006 financial results. This call will be webcast live by Thomson Financial and may be accessed at the Company's web site at www.crosscountry.com or by dialing 888-395-6878 from anywhere in the U.S. or by dialing 517-319-9285 from non-U.S. locations – Passcode: Cross Country. A replay of the webcast will be available through November 21st. A replay of the conference call will be available by telephone from approximately noon on November 7th until November 21st by calling 866-489-2878 from anywhere in the U.S. or by calling 203-369-1663 from non-U.S. locations.


(more)










About Cross Country Healthcare


Cross Country Healthcare, Inc. is a leading provider of healthcare staffing services in the United States. The Company has a national client base of approximately 3,000 hospitals, pharmaceutical companies and other healthcare providers. 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.


This release contains forward-looking 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", “suggests” 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: our ability to attract and retain qualified nurses and other healthcare personnel, costs and availability of short-term apartment leases for our travel nurses, 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 under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2005. Although we believe that these statements are based upon reasonable assumptions, we cannot guarantee future results. Given these uncertainties, the forward-looking statements discussed in this press release might not occur. While it is our intention to update guidance quarterly, it should not be assumed that our silence over time means that actual events are occurring as expressed or implied in such forward-looking statements.


# # #


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.

Condensed Consolidated Statements of Income (a)

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

 

 

Three Months Ended
September 30,

 

 

 

 

Nine Months Ended
September 30,

 

 

 

 

 

 

2006

 

2005

 

% Change

 

2006

 

2005

 

% Change

 

Revenue from services

   

$

162,876

   

$

163,144

   

 

(0%)

   

$

479,407

   

$

481,673

   

 

(0%)

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses

 

 

125,083

 

 

125,234

 

 

(0%)

 

 

367,983

 

 

377,898

 

 

(3%)

 

Selling, general and administrative
expenses

 

 

26,790

 

 

26,686

 

 

0%

 

 

81,779

 

 

78,772

 

 

4%

 

Bad debt expense

 

 

 

 

145

 

 

(100%)

 

 

22

 

 

583

 

 

(96%)

 

Depreciation

 

 

1,315

 

 

1,206

 

 

9%

 

 

4,020

 

 

3,551

 

 

13%

 

Amortization

 

 

418

 

 

356

 

 

17%

 

 

1,130

 

 

1,068

 

 

6%

 

Legal settlement charge

 

 

8,827

 

 

 

 

ND

 

 

8,827

 

 

 

 

ND

 

Total operating expenses

 

 

162,433

 

 

153,627

 

 

6%

 

 

463,761

 

 

461,872

 

 

0%

 

Income from operations

 

 

443

 

 

9,517

 

 

(95%)

 

 

15,646

 

 

19,801

 

 

(21%)

 

Other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

273

 

 

953

 

 

(71%)

 

 

979

 

 

2,822

 

 

(65%)

 

Income from continuing operations
before income taxes

 

 

170

 

 

8,564

 

 

(98%)

 

 

14,667

 

 

16,979

 

 

(14%)

 

Income tax expense

 

 

50

 

 

3,314

 

 

(98%)

 

 

5,660

 

 

6,571

 

 

(14%)

 

Income from continuing operations

 

 

120

 

 

5,250

 

 

(98%)

 

 

9,007

 

 

10,408

 

 

(13%)

 

Discontinued operations, net of
income taxes

 

 

2

 

 

(268

)

 

(101%)

 

 

118

 

 

(541

)

 

(122%)

 

Net income

 

$

122

 

$

4,982

 

 

(98%)

 

$

9,125

 

$

9,867

 

 

(8%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income/(loss) per common share –
basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.00

 

$

0.16

 

 

 

 

$

0.28

 

$

0.32

 

 

 

 

Discontinued operations, net of
income taxes

 

 

0.00

 

 

(0.01

)

 

 

 

 

0.00

 

 

(0.01

)

 

 

 

Net income

 

$

0.00

 

$

0.15

 

 

 

 

$

0.28

 

$

0.31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income/(loss) per common share -
diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.00

 

$

0.16

 

 

 

 

$

0.28

 

$

0.32

 

 

 

 

Discontinued operations, net of
income taxes

 

 

0.00

 

 

(0.01

)

 

 

 

 

0.00

 

 

(0.02

)

 

 

 

Net income

 

$

0.00

 

$

0.15

 

 

 

 

$

0.28

 

$

0.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares
outstanding - basic

 

 

32,067

 

 

32,290

 

 

 

 

 

32,095

 

 

32,250

 

 

 

 

Weighted average common shares
outstanding - diluted

 

 

32,618

 

 

32,943

 

 

 

 

 

32,721

 

 

32,800

 

 

 

 

———————

ND - Not determinable

(a)

The prior period has been reclassified to conform to the 2006 presentation.









Reconciliation of Net Income and Net Income Per Diluted Share Excluding Legal Settlement Charge to Net Income (a)

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



 

 

Three
Months Ended
September 30,
2006

 

Net income excluding legal settlement charge

   

$

5,543

 

Legal settlement charge – pretax

 

 

(8,827

)

Taxes benefit from legal settlement charge

 

 

3,406

 

Net income

 

$

122

 

 

 

 

 

 

Net income/(loss) per common share - diluted:

 

 

 

 

Net income excluding legal settlement charge

 

$

0.17

 

Legal settlement charge – pretax

 

 

(0.27

)

Tax benefit from legal settlement charge

 

 

0.10

 

Net income

 

$

0.00

 

 

 

 

 

 

Weighted average common shares outstanding – diluted

 

 

32,618

 

———————

(a)

In the three months ended September 30, 2006, the Company estimated a legal settlement charge related to its previously announced agreement to settle a specific class action lawsuit in California. The settlement amount relates to prior period matters and accordingly skews the comparisons to the prior year's quarter and the guidance provided in the Company's second quarter press release. Accordingly, the Company has adjusted net income by $5.5 million and net income per diluted share by $0.17, for this charge in it's discussion of the quarter's results to provide comparative information to investors.








Cross Country Healthcare, Inc.

Condensed Consolidated Balance Sheets

(Unaudited, amounts in thousands)

 

 

September 30,
2006

 

December 31,
2005

 

Assets

   

 

 

   

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents  

 

$

 

$

 

Accounts receivable, net

 

 

107,343

 

 

107,787

 

Deferred tax assets

 

 

7,444

 

 

7,642

 

Income taxes receivable

 

 

5,030

 

 

2,752

 

Other current assets

 

 

17,310

 

 

22,571

 

Total current assets

 

 

137,127

 

 

140,752

 

Property and equipment, net

 

 

19,108

 

 

16,477

 

Trademarks, net

 

 

17,199

 

 

15,499

 

Goodwill, net

 

 

307,749

 

 

302,854

 

Other identifiable intangible assets, net

 

 

10,450

 

 

5,390

 

Debt issuance costs, net

 

 

600

 

 

689

 

Total assets

 

$

492,233

 

$

481,661

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

12,998

 

$

12,082

 

Accrued employee compensation and benefits

 

 

40,259

 

 

47,940

 

Current portion of long-term debt

 

 

2,619

 

 

5,483

 

Other current liabilities

 

 

13,816

 

 

4,378

 

Total current liabilities

 

 

69,692

 

 

69,883

 

Non-current deferred tax liabilities

 

 

38,331

 

 

32,546

 

Long-term debt

 

 

18,062

 

 

19,946

 

Total liabilities

 

 

126,085

 

 

122,375

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

Common stock

 

 

3

 

 

3

 

Additional paid-in capital

 

 

253,503

 

 

255,340

 

Other stockholders' equity

 

 

112,642

 

 

103,943

 

Total stockholders' equity

 

 

366,148

 

 

359,286

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

492,233

 

$

481,661

 









Cross Country Healthcare, Inc.
Segment Data (a) (b)

(Unaudited, amounts in thousands)

 

 

Three Months Ended
September 30,

 

 

 

 

Nine Months Ended
September 30,

 

 

 

 

 

 

2006

 

2005

 

% Change

 

2006

 

2005

 

% Change

 

Revenue from unaffiliated customers:

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Healthcare staffing

 

$

151,401

 

$

151,414

 

 

(0%)

 

$

443,928

 

$

446,866

 

 

(1%)

 

Other human capital management
services

 

 

11,475

 

 

11,730

 

 

(2%)

 

 

35,479

 

 

34,807

 

 

2%

 

 

 

$

162,876

 

$

163,144

 

 

(0%)

 

$

479,407

 

$

481,673

 

 

(0%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contribution income (c):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Healthcare staffing

 

$

15,213

 

$

15,310

 

 

(1%)

 

$

42,522

 

$

36,694

 

 

16%

 

Other human capital management
services

 

 

2,181

 

 

2,197

 

 

(1%)

 

 

7,097

 

 

6,358

 

 

12%

 

 

 

 

17,394

 

 

17,507

 

 

(1%)

 

 

49,619

 

 

43,052

 

 

15%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unallocated corporate overhead

 

 

6,391

 

 

6,428

 

 

(1%)

 

 

19,996

 

 

18,632

 

 

7%

 

Depreciation

 

 

1,315

 

 

1,206

 

 

9%

 

 

4,020

 

 

3,551

 

 

13%

 

Amortization

 

 

418

 

 

356

 

 

17%

 

 

1,130

 

 

1,068

 

 

6%

 

Legal Settlement

 

 

8,827

 

 

 

 

ND

 

 

8,827

 

 

 

 

ND

 

Interest expense, net

 

 

273

 

 

953

 

 

(71%)

 

 

979

 

 

2,822

 

 

(65%)

 

Income from continuing operations
before income taxes

 

$

170

 

$

8,564

 

 

(98%)

 

$

14,667

 

$

16,979

 

 

(14%)

 


Cross Country Healthcare, Inc.

Other Financial Data

(Unaudited)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2006

 

2005

 

2006

 

2005

 

Net cash provided by operating activities (in thousands)

   

$

9,610

   

$

11,214

   

$

29,711

   

$

20,866

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statistical data (excluding Metropolitan Research):

 

 

 

 

 

 

 

 

 

 

 

 

 

FTEs (d)

 

 

5,294

 

 

5,574

 

 

5,320

 

 

5,580

 

Weeks worked (e)

 

 

68,822

 

 

72,462

 

 

207,480

 

 

217,620

 

Average healthcare staffing revenue per FTE per week (f)

 

 

2,171

 

 

2,090

 

 

2,130

 

 

2,053

 

———————

ND - Not determinable

(a)

Segment data provided is in accordance with FASB Statement 131.

(b)

Certain 2005 quarterly amounts have been reclassified to conform to 2006 presentation.

(c)

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

(d)

FTEs represent the average number of contract staffing personnel on a full-time equivalent basis. FTEs excludes Metropolitan Research.

(e)

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

(f)

Average healthcare staffing revenue per FTE per week is calculated by dividing the healthcare staffing revenue by the number of weeks worked in the respective periods. Healthcare staffing revenue includes revenue from permanent placement of nurses. Amounts exclude Metropolitan Research.