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)  August 9, 2005

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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 August 9, 2005, Cross Country Healthcare, Inc. (“the Company”) issued a press release announcing results for the quarter ended June 30, 2005, 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 August 9, 2005

    




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:  August 10, 2005















3






LINKS


Item 2.02  Results of Operations and Financial Condition

Item 9.01  Financial Statements and Exhibits






 Cross Country -- Exhibit 99.1

Exhibit 99.1


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     NEWS

FOR IMMEDIATE RELEASE


CROSS COUNTRY HEALTHCARE REPORTS SECOND QUARTER 2005 RESULTS

BOCA RATON, Fla. – August 9, 2005 – Cross Country Healthcare, Inc. (Nasdaq: CCRN) today reported revenue of $159.0 million for the second quarter ended June 30, 2005, and income from continuing operations of $1.3 million, or $0.04 per diluted share. Net income for the second quarter of 2005 was $1.2 million, or $0.04 per diluted share. Income from continuing operations and net income for the second quarter of 2005 were negatively impacted by the previously announced after-tax charge of $3.2 million, or $0.10 per diluted share, to increase reserves related to professional liability claims. This charge reduced the Company’s gross profit margin in the second quarter of 2005 by approximately 330 basis points as the Company accounts for professional liability costs as a direct expense. In the second quarter of 2004, the Company had revenue of $163.8 million, income from continuing operations of $4.9 million, or $0.15 per diluted share, and net income of $5.1 million, or $0.16 per diluted share. Cash flow from operations for the second quarter of 2005 was $6.3 million.

For the six month period ended June 30, 2005, Cross Country Healthcare reported revenue of $317.0 million and income from continuing operations of $5.2 million, or $0.16 per diluted share. Net income for the first six months of 2005 was $4.9 million, or $0.15 per diluted share. This compares to revenue of $332.7 million, income from continuing operations of $9.7 million, or $0.30 per diluted share, and net income of $10.0 million, or $0.31 per diluted share, in the first six months of the prior year. Cash flow from operations for the first six months of 2005 was $9.7 million.

“We continue to be encouraged by the dynamics and direction of the current business environment despite the year over year decline in second quarter revenue and volume in our healthcare staffing business segment. Demand in our core nurse staffing business, as measured by the average monthly number of open orders from our hospital customers, remained near the high-point for the year through the second quarter and the first week of August despite reported and anecdotal information of less than robust hospital admissions patterns. We also expect our staffing volume to be up sequentially in the third quarter, driven primarily by our travel nurse staffing business. This suggests to us that the long-awaited return to traditional employment patterns of the aging nursing population could be starting to occur and, we believe, that turnover in nursing positions is the most important driver of demand in the current environment,” said Joseph A. Boshart, President and Chief Executive Officer of Cross Country Healthcare, Inc.

“In addition, we are seeing a greater willingness on the part of our hospital customers to accept higher bill rates in order to attract nurses to their facilities throughout the country. This, more than anything, is likely to be the catalyst for stronger growth in revenue and profitability, as higher bill rates allow for margin expansion as well as higher wages to attract more candidates,” added Mr. Boshart.

Healthcare Staffing

For the second quarter of 2005, the healthcare staffing business segment (travel and per diem nurse, allied health and clinical trials staffing) generated revenue of $147.2 million as compared with revenue of $153.2 million in the same quarter of the prior year. Segment revenue increased slightly sequentially from the first quarter of 2005 and declined 4% from the year ago quarter, primarily reflecting year over year revenue and staffing volume reductions in the nurse staffing business that were partially offset by revenue growth in the clinical trials staffing business. During the second quarter, healthcare staffing volume declined 1% sequentially from the first quarter of 2005 and 4% on a year over year basis.

(more)


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

Tel: (800) 347-2264   Fax: (561) 998-8533   www.crosscountry.com





Contribution income (defined as income from continuing operations before interest, income taxes, depreciation and amortization and corporate expenses not specifically identified to a reporting segment), was $9.5 million in the second quarter of 2005, or 6.5% of segment revenue, as compared to $15.0 million, or 9.8% of segment revenue, in the same quarter of 2004. The decline in contribution margin reflects the charge associated with the professional liability matters, which reduced the contribution margin of the healthcare staffing segment by approximately 360 basis points.

For the first six months of 2005, segment revenue decreased on a year over year basis by 6% to $294.0 million from $312.3 million in the same period a year ago, and contribution income declined by 26% to $22.5 million from $30.6 million in the prior year period.

Other Human Capital Management Services

For the second quarter of 2005, the other human capital management services business segment (education and training and retained search business) generated revenue of $11.8 million, a 12% increase from revenue of $10.6 million in the same quarter in the prior year. Both the retained search and the education and training businesses contributed to the increase in revenue. Contribution income in the second quarter of 2005 improved to $2.1 million, a 10% increase over the same quarter a year ago, reflecting a substantial improvement in the retained search business.

For the first six months of 2005, segment revenue increased on a year over year basis by 13% to $23.1 million from $20.3 million in the same period a year ago, and contribution income rose by 25% to $4.2 million from $3.3 million in the prior year period.

Debt Repayment

During the second quarter of 2005, Cross Country Healthcare made payments of $4.8 million under its term loan and revolving credit facilities. At June 30, 2005, the Company had approximately $38.4 million of total debt on its balance sheet, which represented a 9.8% debt to total capitalization ratio.

Stock Repurchase Program Update

The Company did not repurchase any shares of its common stock during the second quarter of 2005. The Company can purchase up to an additional 469,600 shares at an aggregate price not to exceed approximately $10.8 million under this previously authorized stock repurchase program. Under this program, the shares may be purchased from time-to-time in the open market and may be discontinued at any time at the Company’s discretion. At June 30, 2005, the Company had approximately 32.3 million shares outstanding.

Guidance for Third Quarter of 2005

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 third quarter of 2005 to be in the $161.5 million to $164.5 million range and EPS from continuing operations to be in the range of $0.14 to $0.16 per diluted share.

(more)







Quarterly Conference Call

Cross Country Healthcare will hold a conference call on Wednesday, August 10th at 10:00 a.m. Eastern Time to discuss its second quarter 2005 financial results. This call will be webcast live by Thomson/CCBN and may be accessed at the Company's web site at www.crosscountry.com or by dialing 888-809-8965 from anywhere in the U.S. or by dialing 517-308-9001 from non-U.S. locations – Passcode: Cross Country. A replay of the webcast will be available through August 24th. A replay of the conference call will be available by telephone from approximately 12:00 p.m. Eastern Time on August 10th through August 24th by calling 866-489-2842 from anywhere in the U.S. or by calling 203-369-1657 from non-U.S. locations.

About Cross Country Healthcare

Cross Country Healthcare, Inc. is a leading provider of healthcare staffing services in the United States. The Company has a client base of approximately 3,000 hospitals, pharmaceutical companies and other healthcare providers across all 50 states. Copies of this and other news releases as well as additional information about Cross Country Healthcare can be obtained online at www.crosscountry.com. Shareholders and prospective investors can also register at the corporate web site 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 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’s, 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 the Company's 10-K for the year ended December 31, 2004. 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 the Company's intention to update its guidance quarterly, it should not be assumed that its 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

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

June 30,

    

Six Months Ended

June 30,

    
  

2005

 

2004

  

%
Change

 

2005

 

2004

  

%
Change

 
                    

Revenue from services

 

$

159,000

 

$

163,795

  

(3%)

 

$

317,036

 

$

332,662

  

(5%)

 

Operating expenses:

                   

Direct operating expenses

  

127,714

  

127,216

  

0%

  

251,170

  

259,660

  

(3%)

 

Selling, general and administrative expenses

  

26,562

  

25,278

  

5%

  

52,086

  

49,904

  

4%

 

Bad debt expense

  

37

  

483

  

(92%)

  

439

  

1,099

  

(60%)

 

Depreciation

  

1,215

  

1,318

  

(8%)

  

2,345

  

2,874

  

(18%)

 

Amortization

  

356

  

356

  

  

712

  

868

  

(18%)

 

Total operating expenses

  

155,884

  

154,651

  

1%

  

306,752

  

314,405

  

(2%)

 

Income from operations

  

3,116

  

9,144

  

(66%)

  

10,284

  

18,257

  

(44%)

 

Other expenses:

                   

Interest expense, net

  

952

  

1,157

  

(18%)

  

1,869

  

2,563

  

(27%)

 

Income from continuing operations before income taxes

  

2,164

  

7,987

  

(73%)

  

8,415

  

15,694

  

(46%)

 

Income tax expense

  

838

  

3,059

  

(73%)

  

3,257

  

6,042

  

(46%)

 

Income from continuing operations

  

1,326

  

4,928

  

(73%)

  

5,158

  

9,652

  

(47%)

 

Discontinued operations, net of income taxes

  

(77

)

 

169

  

(146%)

  

(273

)

 

302

  

190%

 

Net income

 

$

1,249

 

$

5,097

  

(75%)

 

$

4,885

 

$

9,954

  

(51%)

 
                    
                    

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

                   

Income from continuing operations

 

$

0.04

 

$

0.15

    

$

0.16

 

$

0.30

    

Discontinued operations, net of income taxes

  

(0.00

)

 

0.01

     

(0.01

)

 

0.01

    

Net income per common share - basic

 

$

0.04

 

$

0.16

    

$

0.15

 

$

0.31

    
                    

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

                   

Income from continuing operations

 

$

0.04

 

$

0.15

    

$

0.16

 

$

0.30

    

Discontinued operations, net of income taxes

  

(0.00

)

 

0.01

     

(0.01

)

 

0.01

    

Net income per common share - diluted

 

$

0.04

 

$

0.16

    

$

0.15

 

$

0.31

    
                    

Weighted average common shares outstanding - basic

  

32,253

  

31,974

     

32,230

  

31,918

    

Weighted average common shares outstanding - diluted

  

32,775

  

32,584

     

32,728

  

32,578

    

——————

(a)

The prior period has been reclassified to conform to the 2005 presentation, primarily due to the reclassification of Cross Country Consulting, Inc.'s results to discontinued operations.








Cross Country Healthcare, Inc.

Condensed Consolidated Balance Sheets

(Unaudited, amounts in thousands)


  

June 30,

2005

 

December 31,

2004

 
    

Assets

       

Current assets:

       

Cash and cash equivalents

 

$

 

$

 

Accounts receivable, net

  

101,494

  

95,439

 

Income taxes receivable

  

6,583

  

3,100

 

Deferred income taxes

  

5,889

  

4,949

 

Other current assets

  

23,438

  

13,199

 

Total current assets

  

137,404

  

116,687

 

Property and equipment, net

  

15,209

  

11,840

 

Goodwill, net

  

302,854

  

302,854

 

Trademarks, net

  

15,499

  

15,499

 

Other identifiable intangible assets, net

  

6,102

  

6,814

 

Other assets, net

  

1,632

  

2,301

 

Total assets

 

$

478,700

 

$

455,995

 
        

Liabilities and Stockholders' Equity

       

Current liabilities:

       

Accounts payable and accrued expenses

 

$

5,553

 

$

5,993

 

Accrued employee compensation and benefits

  

49,238

  

32,031

 

Current portion of long-term debt and note payable

  

2,600

  

2,408

 

Other current liabilities

  

4,305

  

4,326

 

Total current liabilities

  

61,696

  

44,758

 

Deferred income taxes

  

28,835

  

24,996

 

Long-term debt

  

35,770

  

39,867

 

Total liabilities

  

126,301

  

109,621

 
        

Commitments and contingencies

       
        

Stockholders' equity:

       

Common stock

  

3

  

3

 

Additional paid-in capital

  

258,320

  

257,180

 

Retained earnings

  

94,076

  

89,191

 

Total stockholders' equity

  

352,399

  

346,374

 
        

Total liabilities and stockholders' equity

 

$

478,700

 

$

455,995

 









Cross Country Healthcare, Inc.

Segment Data (a) (b)

(Unaudited, dollar amounts in thousands)


  

Three Months Ended
June 30,

    

Six Months Ended
June 30,

   
  

2005

 

2004

  

%
Change

 

2005

 

2004

     

%
Change

 

Revenues from unaffiliated customers:

                  

Healthcare staffing

 

$

147,172

 

$

153,187

  

(4%)

 

$

293,958

 

$

312,317

 

(6%)

 

Other human capital management services

  

11,828

  

10,608

  

12%

  

23,078

  

20,345

 

13%

 
  

$

159,000

 

$

163,795

  

(3%)

 

$

317,036

 

$

332,662

 

(5%)

 
                   

Contribution income (c):

                  

Healthcare staffing

 

$

9,531

 

$

15,015

  

(37%)

 

$

22,540

 

$

30,587

 

(26%)

 

Other human capital management services

  

2,112

  

1,928

  

10%

  

4,161

  

3,336

 

25%

 
   

11,643

  

16,943

  

(31%)

  

26,701

  

33,923

 

(21%)

 
                   

Unallocated corporate overhead

  

6,956

  

6,125

  

14%

  

13,360

  

11,924

 

12%

 

Depreciation

  

1,215

  

1,318

  

(8%)

  

2,345

  

2,874

 

(18%)

 

Amortization

  

356

  

356

  

  

712

  

868

 

(18%)

 

Interest expense, net

  

952

  

1,157

  

(18%)

  

1,869

  

2,563

 

(27%)

 

Income from continuing operations
before income taxes

 

$

2,164

 

$

7,987

  

(73%)

 

$

8,415

 

$

15,694

 

(46%)

 


Cross Country Healthcare, Inc.

Financial Statistics

(Unaudited)


  

Three Months Ended
June 30,

  

 

 

Six Months Ended
June 30,

 

 

 
  

2005

 

2004

  

 

 

2005

 

2004

 

 

 

Net cash provided by operating activities
(in thousands)

 

$

6,326

 

$

18,539

  


 

$

9,652

 

$

26,718

 


 

FTEs (d)

  

5,556

  

5,806

  


  

5,583

  

5,909

 


 

Weeks worked (e)

  

72,228

  

75,478

  


  

145,158

  

153,634

 


 

Average healthcare staffing revenue per FTE per week (f)

 

$

2,038

 

$

2,030

  


 

$

2,025

 

$

2,033

 


 

——————

(a)

Segment data provided is in accordance with FASB Statement 131.

(b)

The prior period has been reclassified to conform to the 2005 presentation, primarily due to the reclassification of Cross Country Consulting, Inc.’s results from continuing operations to discontinued operations. Cross Country Consulting, Inc. was previously included in the other human capital management services business segment.

(c)

Defined as income from continuing operations before interest, income taxes, 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.

(d)

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

(e)

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

(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.