Cross Country Healthcare, Inc.
Mar 8, 2011

Cross Country Healthcare Reports Fourth Quarter and Year-End 2010 Results

BOCA RATON, Fla.--(BUSINESS WIRE)-- Cross Country Healthcare, Inc. (Nasdaq: CCRN) today reported revenue of $113.7 million in the fourth quarter ended December 31, 2010 and a net loss of $6.0 million, or ($0.19) per diluted share. Adjusted net income, a non-GAAP financial measure as defined in the accompanying financial statement tables, was $0.6 million, or $0.02 per diluted share on an adjusted basis, and excluded $6.6 million of after-tax trademark impairment charges related to the Medical Doctor Associates acquisition. In the same quarter of the prior year, the Company had revenue of $124.1 million and net income of $0.4 million, or $0.01 per diluted share. Adjusted net income was $1.7 million, or $0.05 per diluted share on an adjusted basis, and excluded an impairment charge and a legal settlement charge totaling $1.3 million after-tax. Cash flow from operations for the fourth quarter of 2010 was $6.7 million.

For the year ended December 31, 2010, the Company generated revenue of $468.6 million and had a net loss of $2.8 million, or ($0.09) per diluted share. Adjusted net income was $3.8 million, or $0.12 per diluted share on an adjusted basis. This compares to revenue of $578.2 million and net income of $6.7 million, or $0.22 per diluted share in the prior year. Adjusted net income in the prior year was $8.0 million, or $0.26 per diluted share on an adjusted basis. Cash flow from operations for the year ended December 31, 2010 was $31.5 million.

"The fourth quarter of 2010 appears to be the nadir of the most challenging period in our Company's history as our revenue expectation is for solid sequential growth in the first quarter of 2011," said Joseph A. Boshart, President and Chief Executive Officer of Cross Country Healthcare, Inc. "I continue to believe our strategy and operating discipline has put us in an attractive position relative to our major competitors. In particular, our early and internally-developed entry in 2003 into the managed service provider (MSP) delivery model has paid significant dividends for us, especially during this recent demand constrained environment," he added.

Mr. Boshart continued, "In our nurse and allied staffing business, demand for travel nurses is currently running at more than double the level of a year ago, although it remains well below historical levels. Our expectation for revenue improvement is being driven largely by our best-in-class MSP solution, which currently accounts for approximately 30% of our nurse and allied FTEs. Moreover, the number of hospitals where we have been awarded MSP status but have not yet implemented our program gives us confidence that our momentum is sustainable. We are also encouraged by the growth taking place in our clinical trial services business, which is the result of solid performance in the staffing component of this business. Meanwhile, in our physician staffing business, so far this year we have seen more positive indicators, but we remain only cautiously optimistic, in part, because of the limited visibility in this segment."

Nurse and Allied Staffing

For the fourth quarter of 2010, the nurse and allied staffing business segment (travel and per diem nurse and allied health staffing) generated revenue of $59.4 million, reflecting a 2% sequential increase from the third quarter of 2010, but a 9% decrease from the prior year quarter of $65.4 million. The sequential increase was due to higher FTE staffing volume. Contribution income (defined as income from operations before depreciation, amortization, impairment charges and corporate expenses not specifically identified to a reporting segment) increased 6% sequentially due to higher revenue and lower workers' compensation expenses, but decreased 22% to $5.6 million in the fourth quarter of 2010 from $7.2 million in the same quarter a year ago due to lower operating leverage.

Segment staffing volume increased 2% sequentially from the third quarter of 2010, but decreased 8% from the prior year quarter. Travel staffing volume increased 3% on a sequential basis, but decreased 8% on a year-over-year basis. The segment revenue per FTE per day for the fourth quarter of 2010 was $304, essentially unchanged sequentially and down 1% on a year-over-year basis. For travel nurse staffing the average hourly bill rate decreased 1% sequentially and 3% year-over-year.

For the year-ended December 31, 2010, segment revenue decreased 23% to $242.2 million from $313.0 million in the prior year. Contribution income decreased 25% to $22.9 million from $30.6 million in the prior year.

Physician Staffing

For the fourth quarter of 2010, the physician staffing business segment generated revenue of $27.9 million, an 11% decrease sequentially from the third quarter of 2010 and a 16% decrease from $33.3 million in the prior year quarter reflecting a decline in demand and change in mix of physician specialties. Contribution income decreased 16% sequentially due to a decline in revenue that was partially offset by lower professional liability expenses and decreased 23% year-over-year due to lower operating leverage. Physician staffing days filled for the fourth quarter of 2010 was 17,924 days, an 11% decrease sequentially and an 18% decrease from the prior year quarter. Revenue per day filled for the fourth quarter of 2010 was $1,556, up fractionally on a sequential basis and a 2% increase from the prior year quarter due to a change in the mix of specialties.

For the year-ended December 31, 2010, segment revenue decreased 20% to $121.6 million from $151.9 million in the prior year. Contribution income decreased 14% to $13.1 million from $15.2 million in the prior year.

The Company believes the lingering effects of the recession and the weak housing market continue to delay the retirement plans of many physicians. These factors, along with a trend in which hospitals have had increased success in directly hiring physicians, have resulted in a decrease in demand for temporary physicians.

Clinical Trial Services

For the fourth quarter of 2010, the clinical trial services segment generated revenue of $15.3 million, a 2% decrease sequentially from the third quarter of 2010 and a 3% increase from $14.9 million in the prior year quarter. The sequential decrease was due to three less billable days, while the year-over-year increase was due to a higher average contract bill rate in the staffing business, which accounted for more than 90% of segment revenue. Contribution income was $1.3 million, a decrease of 25% sequentially due to the aforementioned fewer billable days and weakness in the non-staffing components of this segment, but a 46% increase on a year-over-year basis due primarily to significantly lower SG&A expenses in the fourth quarter of 2010.

For the year-ended December 31, 2010, segment revenue decreased 14% to $62.0 million from $71.7 million in the prior year. Contribution income decreased 9% to $6.4 million from $7.0 million in the prior year.

Other Human Capital Management Services

For the fourth quarter of 2010, the other human capital management services business segment (education and training and retained search) generated revenue of $11.1 million, a 6% increase sequentially from the third quarter of 2010 and a 4% increase from revenue of $10.7 million in the prior year quarter. Segment contribution income increased 90% sequentially and increased 24% from the prior year quarter to $1.3 million in the fourth quarter of 2010 due to improvements in both the education and the retained search businesses.

For the year-ended December 31, 2010, segment revenue increased 3% on a year-over-year basis to $42.8 million from $41.7 million in the prior year. Contribution income increased 27% to $3.8 million from $3.0 million in the prior year.

Debt Outstanding and Credit Facility

During the fourth quarter of 2010, the Company reduced its debt by $1.6 million from the end of the prior quarter. At December 31, 2010, the Company had $53.5 million of total debt on its balance sheet and a debt, net of cash, to total capitalization ratio of 14.2%. At the end of the fourth quarter of 2010, the Company's debt leverage ratio (as defined in its credit agreement) was 2.1 to 1, below the 2.5 to 1 maximum allowable ratio effective for the duration of the credit agreement. Non-cash impairment charges have no impact on the Company's debt covenant calculation.

Guidance for First Quarter 2011

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, any impairment charges or valuation allowances, any significant legal proceedings or repurchases of the Company's common stock.

For the first quarter of 2011, the Company expects:

Quarterly Conference Call

Cross Country Healthcare will hold a conference call on Wednesday, March 9th at 10:00 a.m. Eastern Time to discuss its fourth quarter and year-end 2010 financial results. This call will be webcast live and may be accessed at the Company's website at www.crosscountryhealthcare.com or by dialing 888-972-6408 from anywhere in the U.S. or by dialing 210-234-0087 from non-U.S. locations — Passcode: Cross Country. A replay of the webcast will be available from March 9th through March 23rd. A replay of the conference call will be available by telephone from approximately noon Eastern Time on March 9th until March 23rd by calling 800-666-8984 from anywhere in the U.S. or 402-220-0269 from non-U.S. locations — Passcode: 2010.

Non-GAAP (Generally Accepted Accounting Principles) Financial Measures

This press release and accompanying financial statement tables reference non-GAAP financial measures including non-GAAP adjusted EBITDA, non-GAAP adjusted net income and non-GAAP adjusted earnings per diluted share. These non-GAAP financial measures are provided as additional information and should not be considered substitutes for, or superior to, financial measures calculated in accordance with U.S. GAAP. These non-GAAP financial measures are provided for consistency and comparability to prior year results; furthermore, management believes they are useful to investors when evaluating the Company's performance as it excludes certain items that management believes are not indicative of the Company's operating performance. These non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies. The financial statement tables that accompany this press release include a reconciliation of each non-GAAP financial measure to the most directly comparable U.S. GAAP financial measure and a more detailed discussion of each financial measure; as such, the financial statement tables should be read in conjunction with the presentation of these non-GAAP financial measures.

Correction for Barclays Capital Global Healthcare Conference Presentation

The following corrects certain information in the Company's previously issued press release on March 3, 2011: Cross Country Healthcare, Inc. is scheduled to make a presentation on Tuesday, March 15, 2011, at 2:00 p.m. Eastern Time at the Barclays Capital Global Healthcare Conference being held at the Lowes Miami Beach Hotel in Miami Beach, Florida.

About Cross Country Healthcare

Cross Country Healthcare, Inc. is a diversified leader in healthcare staffing services offering a comprehensive suite of staffing and outsourcing services to the healthcare market that include nurse and allied staffing, physician staffing, clinical trial services and other human capital management services. The Company believes it is one of the top two providers of travel nurse and allied staffing services; one of the top three providers of temporary physician staffing (locum tenens) services; a leading provider of clinical trials staffing services and retained physician search services; and a provider of educational seminars, specifically for the healthcare marketplace. On a company-wide basis, Cross Country Healthcare has approximately 4,500 contracts with hospitals and healthcare facilities, pharmaceutical and biotechnology customers, and other healthcare organizations to provide our healthcare staffing and outsourcing solutions. 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 this 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", "appears", "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, 2009, and our other Securities and Exchange Commission filings made during 2010 and 2011.

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 Operations (a)

 

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

 
Three Months Ended Year Ended
December 31, December 31,
2010 2009

% Change

 

2010 2009

% Change

 

 
 
Revenue from services $ 113,677 $ 124,139

(8%)

 

$ 468,562 $ 578,237

(19%)

 

Operating expenses:
Direct operating expenses 81,079 88,997

(9%)

 

336,250 424,984

(21%)

 

Selling, general and administrative expenses 27,147 27,462

(1%)

 

108,984 120,690

(10%)

 

Bad debt expense 179 227

(21%)

 

294 -

ND

 

Depreciation 1,887 2,128

(11%)

 

8,043 8,773

(8%)

 

Amortization 964 972

(1%)

 

3,851 4,018

(4%)

 

Impairment charges (b) 10,764 1,726

524%

 

10,764 1,726

524%

 

Legal settlement charge (c)   -     345  

(100%)

 

  -     345  

(100%)

 

Total operating expenses   122,020     121,857  

0%

 

  468,186     560,536  

(16%)

 

(Loss) income from operations (8,343 ) 2,282

NM

 

376 17,701

(98%)

 

Other expenses (income):

Foreign exchange loss

4 35

(89%)

 

76 66

15%

 

Interest expense, net 755 1,296

(42%)

 

4,072 6,174

(34%)

 

Other income   -     -  

-

 

  -     (193 )

100%

 

(Loss) income before income taxes (9,102 ) 951

NM

 

(3,772 ) 11,654

NM

 

Income tax (benefit) expense   (3,098 )   553  

NM

 

  (997 )   4,960  

NM

 

Net (loss) income $ (6,004 ) $ 398  

NM

 

$ (2,775 ) $ 6,694  

NM

 

 
Net (loss) income per common share:
Basic $ (0.19 ) $ 0.01  

NM

 

$ (0.09 ) $ 0.22  

NM

 

Diluted $ (0.19 ) $ 0.01  

NM

 

$ (0.09 ) $ 0.22  

NM

 

 
Weighted average common shares outstanding:
Basic 31,103 30,917 31,060 30,825
Diluted 31,103 31,108 31,060 30,999
 
 
Cross Country Healthcare, Inc.
Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA, Adjusted Pretax Income, Adjusted Net Income and Adjusted Earnings Per Diluted Share

(Unaudited, amounts in thousands, except per share data)
 
Three Months Ended Year Ended
December 31, December 31,
2010 2009 2010 2009
(Loss) income from operations $ (8,343 ) $ 2,282 $ 376 $ 17,701
Depreciation 1,887 2,128 8,043 8,773
Amortization 964 972 3,851 4,018
Impairment charges (b) 10,764 1,726 10,764 1,726
Legal settlement charge (c) - 345 - 345
Equity compensation   715     599     2,657     1,963  
Adjusted EBITDA (d) $ 5,987   $ 8,052   $ 25,691   $ 34,526  
 
Net (loss) income $ (6,004 ) $ 398 $ (2,775 ) $ 6,694
Impairment charges (b) 10,764 1,726 10,764 1,726
Legal settlement charge (c)   -     345     -     345  
Adjusted pretax income (e) 4,760 2,469 7,989 8,765
Tax effect of impairment charges (4,164 ) (673 ) (4,164 ) (673 )
Tax effect of legal settlement charge   -     (136 )   -     (136 )
Adjusted net income (e) $ 596   $ 1,660   $ 3,825   $ 7,956  
 
 
Net (loss) income per common share - diluted $ (0.19 ) $ 0.01 $ (0.09 ) $ 0.22
Impairment charges per diluted share 0.35 0.05 0.35 0.05
Legal settlement charge per diluted share   -     0.01     -     0.01  
Adjusted pretax income per diluted share 0.16 0.07 0.26 0.28
Tax effect of impairment charges per diluted share (0.14 ) (0.02 ) (0.14 ) (0.02 )
Tax effect of legal settlement charge per diluted share   -     (0.00 )   -     (0.00 )
Adjusted earnings per diluted share (e) $ 0.02   $ 0.05   $ 0.12   $ 0.26  
 

Weighted average common shares outstanding used in the calculation of non-GAAP Adjusted earnings per diluted share

31,151 31,108 31,160 30,999
 
 
Cross Country Healthcare, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, amounts in thousands)
 
December 31, December 31,
2010 2009
Assets
Current assets:
Cash and cash equivalents $ 10,957 $ 6,861
Short-term cash investments 1,870 1,708
Accounts receivable, net 64,395 70,172
Deferred tax assets 11,801 11,794
Income taxes receivable 5,595 7,405
Other current assets   9,796     7,794  
Total current assets 104,414 105,734
Property and equipment, net 14,536 19,706
Trademarks, net 52,055 62,858
Goodwill, net 143,349 130,701
Other identifiable intangible assets, net 24,681 28,572
Debt issuance costs, net 2,112 1,536
Non-current deferred tax assets 2,484 5,390
Other long-term assets   4,577     2,092  
Total assets $ 348,208   $ 356,589  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 7,944 $ 8,143
Accrued employee compensation and benefits 17,258 16,140
Current portion of long-term debt 7,957 5,733
Interest rate swaps - current - 1,427
Other current liabilities   3,744     3,113  
Total current liabilities 36,903 34,556
 
Long-term debt 45,556 56,781
Other long-term liabilities   19,740     19,181  
Total liabilities 102,199 110,518
 
Commitments and contingencies
 
Stockholders' equity:
Common stock 3 3
Additional paid-in capital 243,005 240,870
Other comprehensive income (2,401 ) (2,979 )
Retained earnings   5,402     8,177  
Total stockholders' equity 246,009 246,071
   
Total liabilities and stockholders' equity $ 348,208   $ 356,589  
 
Cross Country Healthcare, Inc.
Segment Data (f)
(Unaudited, amounts in thousands)
 
Three Months Ended Year Ended
December 31, December 31,
2010

% of
Total

2009  

% of
Total

% Change 2010

% of
Total

2009  

% of
Total

% Change
 
Revenue:
 
Nurse and allied staffing $ 59,417 52% $ 65,374 53% (9%) $ 242,160 52% $ 313,038 54% (23%)
Physician staffing 27,895 25% 33,253 27% (16%) 121,599 26% 151,853 26% (20%)
Clinical trial services 15,301 13% 14,862 12% 3% 61,957 13% 71,678 13% (14%)
Other human capital management services   11,064   10%   10,650   8% 4%   42,846   9%   41,668   7% 3%
$ 113,677   100% $ 124,139   100% (8%) $ 468,562   100% $ 578,237   100% (19%)
 
Contribution income (g)
 
Nurse and allied staffing $ 5,623 $ 7,175 (22%) $ 22,888 $ 30,641 (25%)
Physician staffing 2,958 3,831 (23%) 13,052 15,165 (14%)
Clinical trial services 1,336 918 46% 6,391 7,029 (9%)
Other human capital management services   1,279     1,033   24%   3,768     2,973   27%
11,196 12,957 (14%) 46,099 55,808 (17%)
Unallocated corporate overhead 5,924 5,504 8% 23,065 23,245 (1%)
Depreciation 1,887 2,128 (11%) 8,043 8,773 (8%)
Amortization 964 972 (1%) 3,851 4,018 (4%)
Impairment charges 10,764 1,726 524% 10,764 1,726 524%
Legal settlement charge   -     345   (100%)   -     345   (100%)
(Loss) income from operations $ (8,343 ) $ 2,282   NM $ 376   $ 17,701   (98%)
 
 
Cross Country Healthcare, Inc.
Other Financial Data
(Unaudited)
 
Three Months Ended Year Ended
December 31, December 31,
2010 2009 2010 2009
Net cash provided by operating activities (in thousands) (a) $ 6,737 $ 2,476 $ 31,522 $ 72,400
 
Nurse and allied staffing statistical data:
FTEs (h) 2,124 2,314 2,185 2,735
Days worked (i) 195,408 212,888 797,525 998,275
Average nurse and allied staffing revenue per FTE per day (j) $ 304 $ 307 $ 304 $ 314
 
Physician staffing statistical data:
Days filled (k) 17,924 21,851 78,346 95,253
Revenue per day filled (l) $ 1,556 $ 1,522 $ 1,552 $ 1,594
 
(a) Prior year data has been reclassified to conform to the current year's presentation.
(b) Impairment charges in the three months and year ended December 31, 2010, relate to the impairment of trademarks acquired in the Company's MDA acquisition, of which $10.0 million was for a trademark in the Company's physician staffing business segment and $0.7 million was for a trademark in the Company's nurse and allied staffing business segment. Impairment charges in the three months and year ended December 31, 2009 relate to an impairment of a specific trademark and database in the Company's clinical trial services business segment.
(c) Legal settlement charge relates to an agreement to settle a class action lawsuit (Maureen Petray and Carina Higareda v. MedStaff, Inc.).
(d) Adjusted EBITDA, a non-GAAP (Generally Accepted Accounting Principles) financial measure, is defined as (loss) income from operations before depreciation, amortization, non-cash impairment charges, a legal settlement charge related to a class action lawsuit (named above), and non-cash equity compensation. Adjusted EBITDA should not be considered a measure of financial performance under GAAP. Management presents Adjusted EBITDA because it believes that Adjusted EBITDA is a useful supplement to (loss) income from operations as an indicator of operating performance. Management uses Adjusted EBITDA as one performance measure in its annual cash incentive program for certain members of its management team. In addition, management monitors Adjusted EBITDA for planning purposes, including compliance with its debt covenants. Adjusted EBITDA, as defined, closely matches the operating measure used in the Company's Debt Leverage Ratio and Minimum Fixed Charges Ratio as defined by its Credit Agreement. Management believes Adjusted EBITDA, as defined, is useful to investors when evaluating the Company's performance as it excludes certain items that management believes are not indicative of the Company's operating performance.
(e) Adjusted pretax income, Adjusted net income and Adjusted earnings per diluted share, non-GAAP financial measures, are defined by pretax income, net income and earnings per diluted share before the non-cash impairment charges and a legal settlement charge related to a class action lawsuit (see footnote c above). Adjusted pretax income, Adjusted net income and Adjusted earnings per diluted share should not be considered a measure of financial performance under GAAP and have been provided for consistency and comparability of the 2010 results with the prior periods. Management believes such a measure provides a picture of the Company's results that is more comparable among periods since it excludes the impact of items that may recur occasionally, but tend to be irregular as to timing, thereby distorting comparisons between periods.
(f) Segment data provided is in accordance with the Segment Reporting Topic of the FASB ASC.
(g) Defined as income from operations before depreciation, amortization, impairment charges and corporate expenses not specifically identified to a reporting segment. Contribution income is a financial measure used by management when assessing segment performance.
(h) FTEs represent the average number of nurse and allied contract staffing personnel on a full-time equivalent basis.
(i) Days worked is calculated by multiplying the FTEs by the number of days during the respective period.
(j) Average revenue per FTE per day is calculated by dividing the nurse and allied staffing revenue by the number of days worked in the respective periods. Nurse and allied staffing revenue also includes revenue from permanent placement of nurses.
(k) Days filled is calculated by dividing the total hours filled during the period by 8 hours.
(l) Revenue per day filled is calculated by dividing the applicable revenue generated by the Company's physician staffing segment by days filled for the period presented.
 
ND - Not determinable
NM - Not meaningful
 

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

Source: Cross Country Healthcare, Inc.

News Provided by Acquire Media