Cross Country Healthcare Reports Second Quarter 2008 Results

2008-08-05 16:00:00

Cross Country Healthcare Reports Second Quarter 2008 Results

BOCA RATON, Fla.–(EMWNews)–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.

Im 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 Companys 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 Companys 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 Companys 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 managements

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 exchange loss (gain)

(34

)

ND

(40

)

ND

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)

Cross Country Healthcare, Inc., Boca Raton
Howard A. Goldman,

Director/Investor &
Corporate Relations, 877-686-9779
hgoldman@crosscountry.com

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