Cross Country Healthcare, Inc.
Mar 17, 2014

Cross Country Healthcare Announces Updated Fourth Quarter & Full Year 2013 Financial Results

BOCA RATON, Fla.--(BUSINESS WIRE)-- Cross Country Healthcare, Inc. (NASDAQ:CCRN) filed its Form 10-K today reflecting an accounting adjustment to its unaudited fourth quarter and full year 2013 financial results previously reported on March 5, 2014. The adjustment reflects an increase of $17.4 million in the non-cash valuation allowance on deferred tax assets. When calculating the non-cash valuation allowance on deferred tax assets, deferred tax liabilities related to indefinite-lived intangible assets (such as goodwill) were incorrectly netted against the deferred tax assets. There is no change to Adjusted EBITDA, Adjusted (Loss) Income from Continuing Operations, Adjusted Net Income or net cash flow from operating activities, or the amount of cash taxes the Company will pay related to its operations.

This $17.4 million adjustment increased the net loss for the three months ended December 31, 2013 from $35.2 million to $52.6 million. For the year ended December 31, 2013, net loss increased from $34.6 million to $52.0 million. Updated financial tables showing the impact of the adjustment are attached.

In light of this accounting adjustment, management has concluded that a material weakness existed in the controls related to the Company's oversight and review of non-cash, non-routine estimates and that, as a result, internal control over financial reporting and disclosure controls and procedures were not effective. Management is undertaking steps to remediate the material weakness, including the development of enhanced procedures and processes. Management believes in the future these additional control procedures will, when fully implemented, remediate this material weakness.

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 3,000 active 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, 2013, 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

Consolidated Statements of Operations

(Unaudited, amounts in thousands, except per share data)
 
  Three Months Ended   Year Ended
December 31,     December 31,   September 30, December 31,   December 31,
2013 (a) 2012 2013 2013 (a) 2012
 
Revenue from services $ 109,179 $ 111,731 $ 108,048 $ 438,311 $ 442,635
Operating expenses:
Direct operating expenses 80,617 83,787 79,864 324,851 331,050
Selling, general and administrative expenses 26,945 27,055 25,504 106,117 109,417
Bad debt expense 309 195 215 1,078 786
Depreciation 934 1,107 890 3,886 4,905
Amortization 610 566 552 2,294 2,263
Acquisition costs (a) 473 473
Restructuring costs (b) 109 484
Legal settlement charge (c) 750
Impairment charges (d)   6,400             6,400     18,732  
Total operating expenses   116,288     112,710     107,134     446,333     467,153  
(Loss) income from operations (7,109 ) (979 ) 914 (8,022 ) (24,518 )
Other expenses (income):
Foreign exchange loss (gain) 22 (65 ) (53 ) (132 ) (62 )
Interest expense 215 433 190 849 2,341
Loss on early extinguishment and modification of debt (e) 1,419 82
Other (income) expense, net   (36 )   (23 )   (32 )   (119 )   16  
(Loss) income from continuing operations before income taxes (7,310 ) (1,324 ) 809 (10,039 ) (26,895 )
Income tax expense (benefit)   45,612     1,661     (644 )   44,211     (6,150 )
(Loss) income from continuing operations (52,922 ) (2,985 ) 1,453 (54,250 ) (20,745 )
Income (loss) from discontinued operations, net of income taxes (f)   338     (6,548 )   (539 )   2,281     (21,476 )
Net (loss) income $ (52,584 ) $ (9,533 ) $ 914   $ (51,969 ) $ (42,221 )
 
Net (loss) income per common share, basic: