Cross Country Healthcare, Inc.
Sep 5, 2008

Cross Country Healthcare Reports Second Quarter 2008 Results

BOCA RATON, Fla.--(BUSINESS WIRE)--Aug. 5, 2008--Cross Country Healthcare, Inc. (Nasdaq:CCRN) today reported revenue of $171.0 million in the second quarter ended June 30, 2008, a 3% decrease from revenue of $175.3 million in the prior year quarter. Net income for the second quarter of 2008 increased 17% to $6.4 million, or $0.21 per diluted share, versus net income of $5.5 million, or $0.17 per diluted share in the prior year quarter. Cash flow from operations for the second quarter of 2008 was $15.8 million.

For the six months ended June 30, 2008, the Company generated revenue of $350.2 million and net income of $12.2 million, or $0.39 per diluted share. This compares to revenue of $351.4 million and net income of $10.3 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 2008 was $27.2 million.

"I'm pleased with our second quarter results, especially considering the challenging operating environment in our nurse and allied staffing business. Our profitability met the high end of our guidance for the second quarter, reflecting improved profit margins in all three business segments despite our top-line performance coming in below our range of expectations. While staffing volume in our nurse and allied segment is likely to remain under pressure in the short-term due to weak booking trends, we believe that business strategies we are executing will begin to reverse these negative volume trends later this year," said Joseph A. Boshart, President and Chief Executive Officer of Cross Country Healthcare, Inc. "In our clinical trials services segment, the 27% increase in revenue was due to the acquisitions we made in mid-2007. We continue to work hard to diversify our client base and add new contracts in an effort to counteract delays in the start-up of certain clinical trials and replace large contracts that have and will be ending. As a result, we expect modest sequential segment revenue improvement in the third quarter," added Mr. Boshart.

On July 22, 2008, Cross Country Healthcare announced a definitive agreement to acquire substantially all of the assets of locum tenens (physician staffing) provider MDA Holdings, Inc. (MDA) and its subsidiaries for $112.3 million in cash, plus additional earn-out payments based on 2008 and 2009 performance criteria. In 2007, MDA generated revenue of $158 million. The Company anticipates closing this transaction next month.

"Our second quarter results and the pending acquisition of MDA are consistent with the strategy we have previously communicated. This strategy includes: strengthening our market position and margins in our nurse and allied staffing business, which continues to generate strong cash flow; making strategic acquisitions in high growth, high margin businesses; opportunistically buying back our common stock; and maintaining a strong balance sheet to provide financial flexibility. It is, in part, due to our financial flexibility that the Company has been able to secure attractive financing for this strategic transaction in a difficult credit environment," Mr. Boshart stated.

Nurse and Allied Staffing

For the second quarter of 2008, the nurse and allied staffing business segment (travel and per diem nurse and travel allied staffing) generated revenue of $132.7 million, a 7% decline from the prior year quarter and a 6% decline sequentially from the first quarter of 2008. The revenue decrease reflects a 10% decline in staffing volume from the prior year quarter that was partially offset by a 4% year-over-year increase in travel nurse staffing revenue per hour.

Contribution income (defined as income from operations before depreciation, amortization, and corporate expenses not specifically identified to a reporting segment) increased to $13.9 million in the second quarter of 2008 from $12.9 million in the same quarter a year ago, increasing 8% compared to the prior year quarter as well as sequentially from the first quarter of 2008. This increase primarily reflected further expansion of the bill-pay spread and an improvement in housing costs as a percent of revenue.

For the first six months of 2008, segment revenue decreased 5% on a year-over-year basis to $273.3 million from $287.7 million in the same period a year ago, while contribution income increased 7% to $26.8 million from $25.1 million in the prior year period.

Clinical Trials Services

For the second quarter of 2008, the clinical trials services segment generated revenue of $24.9 million, an increase of 27% from $19.6 million in the prior year quarter. The year-over-year improvement was due to the additional revenue from the acquisitions made during 2007. Contribution income increased 49% in the second quarter of 2008 to $4.4 million from $3.0 million in the same quarter of 2007, reflecting higher contribution from all business units in this segment.

For the first six months of 2008, segment revenue increased 27% on a year-over-year basis to $49.8 million from $39.3 million in the same period a year ago, while contribution income increased 48% to $8.2 million from $5.5 million in the prior year period.

Other Human Capital Management Services

For the second quarter of 2008, the other human capital management services business segment (education and training and retained search) generated revenue of $13.4 million, a 6% increase from revenue of $12.6 million in the same quarter in the prior year, reflecting higher revenue in both the retained search business and the education and training business. Segment contribution income increased 6% to $2.1 million in the second quarter of 2008, from $2.0 million in the prior year quarter, reflecting greater contribution from both the retained search and the education and training businesses.

For the first six months of 2008, segment revenue increased 11% on a year-over-year basis to $27.1 million from $24.4 million in the same period a year ago, while contribution income increased 10% to $4.5 million from $4.1 million in the prior year period.

Debt Repayments/Borrowings

During the second quarter of 2008, the Company decreased its borrowings under its revolving credit facility by $7.5 million from the end of the prior quarter. At June 30, 2008, the Company had $34.3 million of total debt on its balance sheet and a debt, net of cash, to total capitalization ratio of 6.9%. In addition, the Company utilized $4.6 million to complete the earnout related to the 2007 Assent acquisition.

Stock Repurchase Program Update

Cross Country Healthcare repurchased 53,962 shares of its common stock during the second quarter of 2008 at a total cost of $0.7 million, which equates to an average cost of $12.31 per share. These purchases occurred early in the quarter. The Company refrained from repurchasing any additional shares during the quarter due to the timing of negotiations with MDA. As of June 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 and such repurchases may be discontinued at any time at the discretion of the Company. At June 30, 2008, the Company had approximately 30.7 million shares outstanding.

Guidance for Third Quarter 2008

The following statements are based on current management expectations. Such statements are forward-looking and actual results may differ materially. These statements assume the pending acquisition of MDA will close next month and the Company's guidance includes the expected contribution from MDA. These statements do not include the potential impact of any other future mergers, acquisitions, and other business combinations, any significant legal proceedings or any significant repurchases of our common stock.

The Company expects revenue in the third quarter of 2008 to be in the $176 million to $184 million range and earnings per diluted share to be in the range of $0.19 to $0.21. Subject to timing of the close of the MDA acquisition, these estimates include approximately $8 million to $12 million of revenue from MDA and an immaterial contribution to earnings per diluted share.

Quarterly Conference Call

Cross Country Healthcare will hold a conference call on Wednesday, August 6th at 10:00 a.m. Eastern Time to discuss its second 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 888-455-9639 from anywhere in the U.S. or by dialing 210-234-0001 from non-U.S. locations - Passcode: Cross Country. A replay of the webcast will be available through August 20th. A replay of the conference call will be available by telephone from approximately noon on August 6th until August 20th by calling 866-457-5706 from anywhere in the U.S. or 203-369-1289 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 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 4,000 contracts with hospital, 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 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, 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, 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 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.

                    Cross Country Healthcare, Inc.
                  Consolidated Statements of Income
       (Unaudited, amounts in thousands, except per share data)

                   Three Months Ended         Six Months Ended
                        June 30,                  June 30,
                   ------------------        ------------------
                                        %                         %
                     2008      2007   Change   2008      2007   Change
                   --------- -------- ------ --------- -------- ------


Revenue from
 services          $170,951  $175,339   (3%) $350,202  $351,432    0%
Operating
 expenses:
   Direct
    operating
    expenses        125,311   133,736   (6%)  259,385   269,340   (4%)
   Selling,
    general
    and
    administrative
    expenses         32,123    29,923    7%    64,288    59,441    8%
   Bad debt
    expense               -       480 (100%)      484     1,265  (62%)
   Depreciation       1,777     1,505   18%     3,563     2,989   19%
   Amortization         643       370   74%     1,316       739   78%
   Legal
    settlement
    charge                -        21 (100%)        -        34 (100%)
                   --------- --------        --------- --------
Total operating
 expenses           159,854   166,035   (4%)  329,036   333,808   (1%)
                   --------- --------        --------- --------
Income from
 operations          11,097     9,304   19%    21,166    17,624   20%
Other expenses:
   Foreign                              ND                        ND
    exchange loss
    (gain)              (34)        -             (40)        -
   Interest
    expense, net        533       529    1%     1,172     1,015   15%
                   --------- --------        --------- --------
Income before
 income taxes        10,598     8,775   21%    20,034    16,609   21%
Income tax expense    4,227     3,314   28%     7,813     6,346   23%
                   --------- --------        --------- --------
Net income         $  6,371  $  5,461   17%  $ 12,221  $ 10,263   19%
                   ========= ========        ========= ========

Net income per
 common share:
   Basic           $   0.21  $   0.17   24%  $   0.40  $   0.32   25%
                   ========= ========        ========= ========
   Diluted         $   0.21  $   0.17   24%  $   0.39  $   0.31   26%
                   ========= ========        ========= ========

Weighted average
 common shares
 outstanding:
   Basic             30,667    32,038          30,908    32,086
   Diluted           30,853    32,613          31,093    32,730

ND - Not
 determinable
                    Cross Country Healthcare, Inc.
                Condensed Consolidated Balance Sheets
                  (Unaudited, amounts in thousands)

                                                 June 30,
                                                          December 31,
                                                 2008         2007
                                             ------------ ------------
Assets
Current assets:
   Cash and cash equivalents                 $      4,812 $      9,066
   Accounts receivable, net                       107,503      116,133
   Deferred tax assets                              6,531        6,172
   Other current assets                            17,209       17,768
                                             ------------ ------------
Total current assets                              136,055      149,139
Property and equipment, net                        22,147       23,460
Trademarks, net                                    19,073       19,153
Goodwill, net                                     339,602      326,119
Other identifiable intangible assets, net          14,740       15,996
Debt issuance costs, net                              549          424
Other long-term assets                              1,060        1,017
                                             ------------ ------------
Total assets                                 $    533,226 $    535,308
                                             ============ ============

Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable and accrued expenses     $      7,365 $     10,203
   Accrued employee compensation and benefits      27,514       26,102
   Current portion of long-term debt                3,093        5,067
   Income taxes payable                             3,829        1,222
   Other current liabilities                        8,279        7,815
                                             ------------ ------------
Total current liabilities                          50,080       50,409
Non-current deferred tax liabilities               49,544       49,547
Long-term debt                                     31,248       34,385
Other long-term liabilities                         9,962       10,530
                                             ------------ ------------
Total liabilities                                 140,834      144,871

Commitments and contingencies

Stockholders' equity:
   Common stock                                         3            3
   Additional paid-in capital                     235,714      245,844
   Other stockholders' equity                     156,675      144,590
                                             ------------ ------------
Total stockholders' equity                        392,392      390,437

                                             ------------ ------------
Total liabilities and stockholders' equity   $    533,226 $    535,308
                                             ============ ============

                    Cross Country Healthcare, Inc.
                           Segment Data (a)
                  (Unaudited, amounts in thousands)


                                    Three Months Ended
                                         June 30,
                            -----------------------------------
                                      % of              % of
                                      Total             Total     %
                              2008    Revenue   2007    Revenue Change
                            -------- -------- -------- -------- ------

Revenue:
   Nurse and allied
    staffing                $132,665      78% $143,195      82%   (7%)
   Clinical trials services   24,898      14%   19,569      11%   27%
   Other human capital
    management services       13,388       8%   12,575       7%    6%
                            --------          --------
                            $170,951     100% $175,339     100%   (3%)
                            ========          ========

Contribution income (b)
   Nurse and allied
    staffing                $ 13,939          $ 12,863             8%
   Clinical trials services    4,412             2,971            49%
   Other human capital
    management services        2,108             1,990             6%
                            --------          --------
                              20,459            17,824            15%

   Unallocated corporate
    overhead                   6,942             6,624             5%
   Depreciation                1,777             1,505            18%
   Amortization                  643               370            74%
   Legal settlement charge         -                21          (100%)
                            --------          --------
   Income from operations   $ 11,097          $  9,304            19%
                            ========          ========


                                     Six Months Ended
                                         June 30,
                            -----------------------------------
                                      % of              % of
                                      Total             Total     %
                              2008    Revenue   2007    Revenue Change
                            -------- -------- -------- -------- ------

Revenue:
   Nurse and allied
    staffing                $273,331      78% $287,717      82%   (5%)
   Clinical trials services   49,767      14%   39,280      11%   27%
   Other human capital
    management services       27,104       8%   24,435       7%   11%
                            --------          --------
                            $350,202     100% $351,432     100%    0%
                            ========          ========

Contribution income (b)
   Nurse and allied
    staffing                $ 26,800          $ 25,056             7%
   Clinical trials services    8,182             5,533            48%
   Other human capital
    management services        4,503             4,089            10%
                            --------          --------
                              39,485            34,678            14%

   Unallocated corporate
    overhead                  13,440            13,292             1%
   Depreciation                3,563             2,989            19%
   Amortization                1,316               739            78%
   Legal settlement charge         -                34          (100%)
                            --------          --------
   Income from operations   $ 21,166          $ 17,624            20%
                            ========          ========
                   Cross Country Healthcare , Inc.
                         Other Financial Data
                             (Unaudited)

                                Three Months Ended   Six Months Ended
                                     June 30,            June 30,
                                -------------------  -----------------
                                   2008      2007      2008     2007
                                ----------- -------  -------- --------
Net cash provided by operating
 activities
(in thousands)                  $    15,837 $ 8,923  $ 27,172 $  7,355

Nurse and allied staffing
 statistical data:
-------------------------------
FTEs (c)                              4,541   5,067     4,681    5,101
Weeks worked (d)                     59,033  65,871   121,706  132,626
Average nurse and allied
 staffing revenue per FTE per
 week (e)                       $     2,247 $ 2,174  $  2,246 $  2,169
(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.

CONTACT: Cross Country Healthcare, Inc., Boca Raton Howard A. Goldman, Director/Investor & Corporate Relations, 877-686-9779 hgoldman@crosscountry.com
SOURCE: Cross Country Healthcare, Inc.