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.