Cross Country Healthcare, Inc.
Nov 6, 2013

Cross Country Healthcare Announces Third Quarter 2013 Financial Results

BOCA RATON, Fla.--(BUSINESS WIRE)-- Cross Country Healthcare, Inc. (NASDAQ: CCRN) today announced financial results for the third quarter ended September 30, 2013.

THIRD QUARTER FINANCIAL HIGHLIGHTS

Cross Country Healthcare President and CEO William J. Grubbs commented, "I am pleased with our progress this quarter especially with regards to pricing and cost management which has led to improved profitability. In addition, there are encouraging trends in our nursing position count and book to bill ratio that should help us get the company on a growth path in coming quarters."

THIRD QUARTER OPERATING PERFORMANCE

Third quarter consolidated revenue was $108.0 million, a decrease of 4% from the same quarter last year, and 2% sequentially. The Company's consolidated gross margin was 26.1%, up 160 basis points from the same quarter last year and 100 basis points sequentially. The margin improvement was due to a combination of lower field insurance costs in our staffing businesses and a continued expansion of the bill/pay spread in our nurse and allied staffing business segment. The Company generated $7.2 million in cash flow from operations during the third quarter of 2013, compared with $1.9 million in the third quarter of 2012.

Revenue from the nurse and allied staffing business segment was down 3% from the same quarter last year, and essentially flat sequentially. Contribution income in this segment was $5.2 million, up from $2.5 million in the same quarter last year. The increase in segment contribution income was primarily due to lower insurance costs, a decrease in selling, general and administrative expenses and improved bill/pay spreads, as well as lower housing costs compared to the prior year quarter.

Revenue from the physician staffing business decreased 4% both year over year and sequentially due to lower volume, partially offset by pricing improvement. Contribution income was $2.2 million, down from $3.1 million in the same quarter last year. The decrease was primarily due to a $0.7 million accrual for certain sales taxes in the third quarter of 2013, based on revised estimates of the liability.

Revenue from the other human capital management services business segment was $9.1 million, down 7% from the same quarter last year and 11% sequentially. Contribution income was $0.1 million, up from $0.03 million in the same quarter last year.

Selling, general and administrative expenses in the third quarter were $25.5 million, down 5% from the same quarter last year and 4% sequentially.

Consolidated net income in the third quarter was $0.9 million or $0.03 per diluted share. Income from continuing operations in the third quarter was $1.5 million or $0.05 per diluted share, including a net tax benefit of $0.6 million, primarily related to discrete items. Income from continuing operations in the third quarter of 2012 was $0.7 million or $0.02 per diluted share.

At September 30, 2013, the Company had $32.5 million in cash and cash equivalents and $0.3 million of debt related primarily to capital lease obligations.

OUTLOOK

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, or any material legal or restructuring charges. For the fourth quarter of 2013, the Company expects:

INVITATION TO CONFERENCE CALL

The Company will hold its quarterly conference call on Thursday, November 7, 2013, at 10:00 a.m. to discuss its third quarter 2013 financial results. This call will be webcast live and can be accessed at the Company's website at www.crosscountryhealthcare.com or by dialing 800-857-6331 from anywhere in the U.S. or by dialing 517-623-4781 from non-U.S. locations - Passcode: Cross Country. From November 7th through November 21st, a replay of the webcast will be available at the Company's website and a replay of the conference call will be available by telephone by calling 800-234-2079 from anywhere in the U.S. or 402-220-9687 from non-U.S. locations - Passcode: 2013.

NON-GAAP FINANCIAL MEASURES

This press release and accompanying financial statement tables reference non-GAAP financial measures. Such 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. Such 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. Such 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.

ABOUT CROSS COUNTRY HEALTHCARE

Cross Country Healthcare, Inc. is a leader in healthcare staffing with a primary focus on providing nurse, allied and physician (locum tenens) staffing services and workforce solutions to the healthcare market. The Company believes it is one of the top two providers of nurse and allied staffing services, one of the top four providers of temporary physician staffing services, and one of the top four providers of retained physician and healthcare executive search services. The Company also is a leading provider of education and training programs specifically for the healthcare marketplace. On a company-wide basis, Cross Country Healthcare has approximately 4,000 contracts with hospitals and healthcare facilities, and other healthcare organizations to provide our staffing services and workforce 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 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, 2012, and our other Securities and Exchange Commission filings made prior to the date hereof.

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
Condensed Consolidated Statements of Operations
(Unaudited, amounts in thousands, except per share data)
 
  Three Months Ended     Nine Months Ended
September 30,     September 30,     June 30, September 30,     September 30,
2013 2012 2013 2013 2012
 
Revenue from services $ 108,048 $ 112,258 $ 110,768 $ 329,132 $ 330,905
Operating expenses:
Direct operating expenses 79,864 84,802 82,930 244,234 247,263
Selling, general and administrative expenses 25,504 26,832 26,603 79,172 82,361
Bad debt expense 215 268 132 769 592
Depreciation 890 1,035 1,040 2,952 3,798
Amortization 552 566 566 1,684 1,698
Restructuring costs (a) 109 375 484
Legal settlement charge (b) 750 750
Impairment charge         18,732  
Total operating expenses 107,134   113,503   112,396   330,045   354,444  
Income (loss) from operations 914 (1,245 ) (1,628 ) (913 ) (23,539 )
Other expenses (income):
Foreign exchange (gain) loss (53 ) 108 (110 ) (154 ) 3
Interest expense 190 698 164 634 1,908
Loss on early extinguishment and modification of debt (c) 82 1,419 82
Other (income) expense, net (32 ) (89 ) 10   (83 ) 39  
Income (loss) from continuing operations before income taxes 809 (2,044 ) (1,692 ) (2,729 ) (25,571 )
Income tax benefit (644 ) (2,763 ) (257 ) (1,401 ) (7,811 )
Income (loss) from continuing operations 1,453 719 (1,435 ) (1,328 ) (17,760 )
(Loss) income from discontinued operations, net of income taxes (d) (539 ) (18,319 ) (22 ) 1,943   (14,928 )
Net income (loss) $ 914   $ (17,600 ) $ (1,457 ) $ 615   $ (32,688 )
 
Net income (loss) per common share, basic:
Continuing operations $ 0.05 $ 0.02 $ (0.05 ) $ (0.04 ) $ (0.58 )
Discontinued operations (0.02 ) (0.59 )   0.06   (0.48 )
Net income (loss) $ 0.03   $ (0.57 ) $ (0.05 ) $ 0.02   $ (1.06 )
 
Net income (loss) per common share, diluted:
Continuing operations $ 0.05 $ 0.02 $ (0.05 ) $ (0.04 ) $ (0.58 )
Discontinued operations (0.02 ) (0.59 )   0.06   (0.48 )
Net income (loss) $ 0.03   $ (0.57 ) $ (0.05 ) $ 0.02   $ (1.06 )
 
Weighted average common shares outstanding:
Basic 31,085 30,902 30,961 30,984 30,823
Diluted 31,161 30,925 30,961 30,984 30,823
 
                     
Cross Country Healthcare, Inc.
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA (e)
(Unaudited, amounts in thousands)
 

Three Months Ended

Nine Months Ended

 

September 30,

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

2013

 

2012

 

2013

 

2013

 

2012

 
Income (loss) from operations

 

$

914

 

$

(1,245 )

 

$

(1,628 )

 

$

(913 )

 

$

(23,539 )
Depreciation

 

890

 

1,035

 

1,040

 

2,952

 

3,798

Amortization

 

552

 

566

 

566

 

1,684

 

1,698

Restructuring costs

 

109

 

 

375

 

484

 

Legal settlement charge

 

 

 

750

 

750

 

Impairment charges

 

 

 

 

 

18,732

Equity compensation

 

451

 

 

611

 

 

585

 

 

1,635

 

 

1,980

 
Adjusted EBITDA from continuing operations (e)

 

$

2,916

 

 

$

967

 

 

$

1,688

 

 

$

6,592

 

 

$

2,669

 
 
 
 
Cross Country Healthcare, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, amounts in thousands)
 

 

September 30,

 

December 31,

 

2013

 

2012

Assets
Current assets:
Cash and cash equivalents $ 32,453 $ 10,463
Accounts receivable, net

 

57,773

 

62,674

Deferred tax assets

 

13,371

 

12,561

Income taxes receivable

 

2,843

 

586

Prepaid expenses

 

6,139

 

5,580

Assets held for sale

 

 

46,971

Insurance recovery receivable

 

4,092

 

5,484

Other current assets

 

672

 

 

1,049

 
Total current assets

 

117,343

 

145,368

Property and equipment, net

 

5,878

 

8,235

Trademarks, net

 

48,701

 

48,701

Goodwill, net

 

62,712

 

62,712

Other identifiable intangible assets, net

 

12,808

 

14,492

Debt issuance costs, net

 

521

 

1,610

Non-current deferred tax assets

 

12,960

 

16,182

Indemnity escrow receivable

 

3,750

 

Non-current insurance recovery receivable

 

10,449

 

8,210

Other long-term assets

 

376

 

 

413

 
Total assets $ 275,498   $ 305,923  
 
                   
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 10,302 $ 10,130
Accrued employee compensation and benefits 19,956 21,650
Current portion of long-term debt 146 33,683
Liabilities related to assets held for sale 2,835
Other current liabilities 6,972   4,289  
Total current liabilities 37,376 72,587
Long-term debt 109 176
Long-term accrued claims 17,335 16,347
Other long-term liabilities 7,905   7,691  
Total liabilities 62,725 96,801
 
Commitments and contingencies
 
Stockholders' equity:
Common stock 3 3
Additional paid-in capital 245,860 244,924
Accumulated other comprehensive loss (983 ) (3,083 )
Accumulated deficit (32,107 ) (32,722 )
Total stockholders' equity 212,773 209,122
   
Total liabilities and stockholders' equity $ 275,498   $ 305,923  
 
 
Cross Country Healthcare, Inc.
Segment Data (f)
(Unaudited, amounts in thousands)
 
  Three Months Ended   YOY   Sequential
September 30,   % of   September 30,   % of   June 30,   % of % change % change
2013 Total 2012 Total 2013 Total Fav (Unfav) Fav (Unfav)
 
Revenue from services:
Nurse and allied staffing $ 67,448 63% $ 69,750 62% $ 67,539 61% (3)% —%
Physician staffing 31,485 29% 32,681 29% 32,954 30% (4)% (4)%
Other human capital management services 9,115   8% 9,827   9% 10,275   9% (7)% (11)%
$ 108,048   100% $ 112,258   100% $ 110,768   100% (4)% (2)%
 
Contribution income (g)
Nurse and allied staffing (h) $ 5,156 $ 2,511 $ 3,693 105% 40%
Physician staffing 2,191 3,108 2,457 (30)% (11)%
Other human capital management services 55   25   534   120% (90)%
7,402 5,644 6,684 31% 11%
 
 
Unallocated corporate overhead (h) 4,937 5,288 5,581 7% 12%
Depreciation 890 1,035 1,040 14% 14%
Amortization 552 566 566 2% 2%
Restructuring costs 109 375 (100)% 71%
Legal settlement charge 750 n/a 100%

Impairment charge

      n/a n/a
Income (loss) from operations $ 914   $ (1,245 ) $ (1,628 ) 173% 156%
 
 
 
Nine Months Ended YOY
September 30, % of September 30, % of % change
2013 Total 2012 Total Fav (Unfav)
 
Revenue from services:
Nurse and allied staffing $ 207,736 63% $ 206,904 63% —%
Physician staffing 92,506 28% 92,879 28% —%
Other human capital management services 28,890   9% 31,122   9% (7)%
$ 329,132   100% $ 330,905   100% (1)%
 
Contribution income (g)
Nurse and allied staffing (h) $ 14,192 $ 7,771 83%
Physician staffing 6,820 8,192 (17)%
Other human capital management services 879   1,410   (38)%
21,891 17,373 26%
 
 
Unallocated corporate overhead (h) 16,934 16,684 (1)%
Depreciation 2,952 3,798 22%
Amortization 1,684 1,698 1%
Restructuring costs 484 (100)%
Legal settlement charge 750 (100)%

Impairment charge

  18,732   100%
Loss from operations $ (913 ) $ (23,539 ) 96%
 
 
 
 
Cross Country Healthcare, Inc.
Other Financial Data
(Unaudited)
 
Three Months Ended Nine Months Ended
September 30, September 30, June 30, September 30, September 30,
2013 2012 2013 2013 2012
 
Net cash provided by operating activities (in thousands) $ 7,161 $ 1,903 $ 5,913 $ 11,559 $ 5,706
 

Nurse and allied staffing statistical data:

FTEs (i) 2,282 2,450 2,343 2,382 2,443
Days worked (j) 209,944 225,400 213,213 650,286 669,382
Average nurse and allied staffing revenue per FTE per day (k) $ 321 $ 309 $ 317 $ 319 $ 309
 

Physician staffing statistical data:

Days filled (l) 20,788 22,647 21,999 61,589 64,711
Revenue per days filled (m) $ 1,515 $ 1,443 $ 1,498 $ 1,502 $ 1,435
 

n/a - not applicable

(a) Restructuring costs primarily related to senior management employee severance pay.

(b) Legal settlement charge relates to an agreement in principle to settle a class action lawsuit.

(c) Loss on early extinguishment and modification of debt relate to the write-off of unamortized net debt issuance costs related to the repayment of term loan and revolver in 2013 and modification fees related to our prior credit facility in the third quarter of 2012.

(d) The Company sold its clinical trial services business on February 15, 2013. The clinical trial services business has been classified as discontinued operations. The transaction resulted in a gain on sale of $4.0 million pretax, or $1.7 million after tax.

(e) Adjusted EBITDA, a non-GAAP (Generally Accepted Accounting Principles) financial measure, is defined as income or loss from operations before depreciation, amortization, restructuring costs, legal settlement charges, impairment charges 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 income or loss 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 typically used in the Company's credit facilities in calculating various ratios. 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. Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by the Company's consolidated revenue.

(f) Segment data provided is in accordance with the Segment Reporting Topic of the FASB ASC.

(g) Contribution income is defined as income or loss from operations before depreciation, amortization, restructuring costs, legal settlement charges, 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) Certain prior year amounts have been reclassified to conform to the current period's presentation. In 2013, the Company refined its methodology for allocating certain corporate overhead expenses and the nurse and allied staffing expenses to more accurately reflect this segment's profitability.

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

(j) Days worked is calculated by multiplying the FTEs by the number of days during the respective period.

(k) 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.

(l) Days filled is calculated by dividing the total hours filled during the period by 8 hours.

(m) 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.

Cross Country Healthcare, Inc.
Emil Hensel, 561-237-2020
Chief Financial Officer
ehensel@crosscountry.com

Source: Cross Country Healthcare, Inc.

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