2008-08-06 16:00:00
Medical Staffing Network Holdings Announces Second Quarter 2008 Operating Results
Revenue Increased 52% Over Prior Year Quarter; Revenue Essentially
Flat Sequentially
BOCA RATON, Fla.–(EMWNews)–Medical Staffing Network Holdings, Inc. (NYSE: MRN) today reported
revenue of $143.0 million for the second quarter of 2008, an increase of
52.2% from the second quarter of 2007 revenue of $94.0 million. Net loss
for the second quarter of 2008 was $52.7 million, or $1.74 per diluted
share, as compared with net income of $1.7 million, or $0.06 per diluted
share, for the second quarter of 2007. Included in the net loss for the
second quarter of 2008 were pretax non-cash impairment charges to
goodwill and other indefinite lived intangible assets of $59.8 million
and $3.1 million, respectively.
Commenting on the second quarter’s results,
Robert J. Adamson, chairman and chief executive officer, stated, “During
the second quarter, despite the continuing effects of economic headwinds
that suppress growth in hospital admissions, our quarterly revenue was
essentially flat on a sequential basis. As a result of the acquisitions
made in 2007 and the double-digit organic revenue growth in our allied
health staffing division, our revenue increased by more than 50%
year-over-year, which has improved our operating results. In June, we
reduced our operating overhead in excess of $5 million annually.
Assuming industry conditions do not deteriorate further, these cost
reductions could yield improved operating leverage in subsequent
quarters.”
Adamson concluded, “We continue to have
success in improving our bill-to-pay rate spread. As a result of this
focus, our gross profit margin increased by 40 basis points
year-over-year. Improved margins, coupled with double-digit organic
revenue growth from our allied health staffing division and the
reduction of operating expenses, are the foundation for our optimism
that our third quarter results will show continued improvement.”
Kevin S. Little, president and chief financial officer, commented, “We
recorded impairment charges to goodwill and other indefinite lived
intangible assets as a result of the challenging industry dynamics
currently being experienced, affecting both quarterly results and our
assessments of future growth rates of the healthcare staffing industry.
These charges are non-cash and have no effect on our liquidity or debt
covenants. In fact, during the second quarter, we were able to reduce
our DSO by three days to 53 days. This reduction, combined with cash
generated by operations of nearly $9.0 million for the quarter, enabled
us to repay all outstanding borrowings on our revolving credit facility
as of the end of quarter. At June 29, 2008, we had more than $22 million
immediately available for borrowing and $4.5 million in cash on hand.”
Gross profit was $35.7 million for the second quarter of 2008, an
increase of 54.9% from the second quarter of 2007 gross profit of $23.0
million. Gross margin for the second quarter of 2008 was 24.9%, an
increase from 24.5% for the second quarter of 2007. The 40 basis point
year-over-year improvement was primarily attributable to a continued
focus on gross margin expansion. Selling, general and administrative
expenses were $29.9 million, or 20.9% of revenues, in the second quarter
of 2008 as compared with $19.3 million, or 20.5% of revenues, for the
comparable prior year period.
Excluding stock-based compensation expense of $0.1 million, other
charges of $0.2 million relating to severance payments made in the
second quarter and the aforementioned impairment charges, the Company’s
adjusted earnings before interest, taxes, depreciation and amortization
(AEBITDA) for the second quarter of 2008 increased 60.0% to $6.0 million
as compared with $3.8 million for the second quarter of 2007. Excluding
the aforementioned impairment charges and assuming a 40% effective tax
rate, adjusted net income for the second quarter of 2008 would have been
$0.9 million, or $0.03 per diluted share, as compared with $1.5 million,
or $0.05 per diluted share, for the second quarter of 2007.
Revenues were $288.3 million for the six months ended June 29, 2008, an
increase of 56.3% from revenues of $184.5 million for the comparable
prior year period. Net loss for the six months ended June 29, 2008, was
$52.0 million, or $1.71 per diluted share, compared with net income of
$1.7 million, or $0.05 per diluted share, in the prior year period.
Included in the net loss for the six months ended June 29, 2008, were
pretax non-cash impairment charges to goodwill and other indefinite
lived intangible assets of $59.8 million and $3.1 million, respectively.
Gross profit was $70.7 million for the six months ended June 29, 2008,
an increase of 60.5% from the gross profit of $44.1 million for the
comparable prior year period. Gross margin for the six months ended June
29, 2008, was 24.5%, an increase from the gross margin of 23.9% for the
comparable prior year period. The 60 basis point year-over-year
improvement was primarily attributable to a continued focus on gross
margin expansion. Selling, general and administrative expenses were
$59.2 million, or 20.5% of revenues, for the six months ended June 29,
2008, as compared with $39.1 million, or 21.2% of revenues, for the
comparable prior year period.
Excluding stock-based compensation expense of $0.2 million, other
charges of $0.5 million (of which $0.2 million related to the second
quarter severance payments and $0.3 million related to the duplicative
costs incurred in the first quarter in connection with the termination
of an outsourcing initiative) and the aforementioned impairment charges,
the Company’s AEBITDA for the six months ended
June 29, 2008, increased 145.6% to $12.1 million as compared with $4.9
million for the comparable prior year period. Excluding the
aforementioned impairment charges and assuming a 40% effective tax rate,
adjusted net income for the six months ended June 29, 2008, would have
been $1.6 million, or $0.05 per diluted share, as compared with $1.5
million, or $0.05 per diluted share, for the six months ended July 1,
2007.
Conference Call
The Company’s management will host a
conference call and webcast to discuss the earnings release at 11:00
a.m. Eastern time on Thursday, August 7, 2008. A live webcast, as well
as a 30-day replay, of the conference call will be available online at
the Company’s website at www.msnhealth.com
or at www.earnings.com.
Company Summary
Medical Staffing Network Holdings, Inc. is the third largest diversified
healthcare staffing company in the United States as measured by
revenues. The Company is the leading provider of per diem nurse staffing
services and is also a leading provider of travel, allied health and
vendor managed services.
Reasons for Presentation of Non-GAAP Financial Measures
Statements made in this release include non-GAAP financial measures.
Such information is provided as additional information, not as an
alternative to our consolidated financial statements presented in
accordance with generally accepted accounting principles (GAAP), and is
intended to enhance an overall understanding of our current financial
performance. We believe the non-GAAP financial measures provide useful
information to management, investors and prospective investors by
excluding certain charges and other amounts that we believe are not
indicative of our core operating results. These non-GAAP measures are
included to provide management, our investors and prospective investors
with an alternative method for assessing our operating results in a
manner that is focused on the performance of our ongoing operations and
to provide a more consistent basis for comparison between quarters. One
of the non-GAAP financial measures presented is AEBITDA which consists
of net income (loss) before income taxes, interest, loss on early
extinguishment of debt, depreciation and amortization, restructuring and
other charges, outsourcing implementation costs and non-cash impairment
of goodwill, which might not be calculated in the same manner as, and
thus might not be comparable to, similarly titled measures reported by
other companies. The financial statement table included within the
condensed consolidated statements of operations includes a
reconciliation of the non-GAAP financial measure to the most directly
comparable GAAP financial measure.
This press release includes certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements include all statements other than those made solely with
respect to historical fact. These statements involve known and
unknown risks, uncertainties and other factors that may cause the
registrant’s 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 the following: our ability to maintain the revenue
run-rate experienced in the first few months following the InteliStaf
merger; our ability to maintain the level of success achieved to date
with regards to the InteliStaf integration plan; our ability to attract
and retain qualified nurses and other healthcare personnel; our ability
to maintain demand for services provided by temporary healthcare
professionals if lower than expected levels of patient occupancy at our
hospital and healthcare facility clients continue; the effect of higher
unemployment rates on our ability to successfully recruit additional
healthcare professionals; the effect of the general level of economic
activity on our business as such activity is impacted by factors beyond
our control (i.e. inflation, recession, weather conditions, acts of
war); our ability to remain competitive in obtaining and retaining
hospital and healthcare facility clients and temporary healthcare
professionals; our continued ability to secure and fill new orders from
our hospital and healthcare facility clients; the effect of fluctuations
in hospital and healthcare facility patient occupancy on our business;
our clients’ inability to pay us for our
services; the effects of healthcare reform on our business; our exposure
to increased costs and risks associated with increasing and new
corporate governance regulation compliance; the effect of existing or
future government regulation and federal and state legislative and
enforcement initiatives on our business including Joint Commission
certification; the proper functioning of our information systems; our
ability to successfully implement our acquisition strategies; our
ability to successfully integrate completed acquisitions into our
current operations; our ability to obtain additional financing, if
required, in future periods; our ability to leverage our cost structure;
the effect of significant legal actions and other claims asserted
against us on our business; our ability to sustain the improved
self-insurance claims experience; our continued ability to
attract, develop and retain sales and recruitment personnel; the
departure of key officers and senior management personnel; the effect of
our recognition of any impairment to goodwill on our earnings; the
effect of higher than anticipated travel business housing costs on our
margins; the ability of our executive officers, directors and
significant stockholders to influence matters requiring stockholder
approval; the provisions in our corporate documents and Delaware law
that could delay or prevent a transaction considered favorable by our
stockholders; and the possible decline in value of our stock price. Additional
information concerning these and other important factors can be found
within the registrant’s filings with the
Securities and Exchange Commission. Forward-looking statements in
this press release should be evaluated in light of these important
factors. Although the registrant believes that these statements
are based upon reasonable assumptions, the registrant cannot provide any
assurances regarding future results. The registrant undertakes no
obligation to revise or update any forward-looking statements, or to
make any other forward-looking statements, whether as a result of new
information, future events or otherwise.
MEDICAL STAFFING NETWORK HOLDINGS, INC. |
||||||||||||||
Condensed Consolidated Statements of Operations |
||||||||||||||
(unaudited; in thousands, except per share data) |
||||||||||||||
|
|
|||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||
June 29, |
|
July 1, |
June 29, |
|
July 1, |
|||||||||
2008 |
2007 |
2008 |
2007 |
|||||||||||
|
||||||||||||||
Service revenues |
$ |
143,029 |
$ |
93,953 |
$ |
288,252 |
$ |
184,471 |
||||||
Cost of services rendered |
|
107,361 |
|
|
70,923 |
|
217,528 |
|
|
140,406 |
||||
Gross profit |
|
35,668 |
|
|
23,030 |
|
70,724 |
|
|
44,065 |
||||
|
||||||||||||||
Operating expenses: |
||||||||||||||
Selling, general and administrative |
29,875 |
19,279 |
59,184 |
39,139 |
||||||||||
Depreciation and amortization |
1,554 |
893 |
3,046 |
1,791 |
||||||||||
Impairment of goodwill |
59,817 |
– |
59,817 |
– |
||||||||||
Impairment of intangible assets |
|
3,100 |
|
|
– |
|
3,100 |
|
|
– |
||||
Total operating expenses |
|
94,346 |
|
|
20,172 |
|
125,147 |
|
|
40,930 |
||||
|
||||||||||||||
Income (loss) from operations |
(58,678 |
) |
2,858 |
(54,423 |
) |
3,135 |
||||||||
Minority interest in income of subsidiary |
71 |
– |
126 |
– |
||||||||||
Interest expense, net |
|
2,694 |
|
|
344 |
|
5,735 |
|
|
719 |
||||
|
||||||||||||||
Income (loss) before provision for (benefit from) income taxes |
(61,443 |
) |
2,514 |
(60,284 |
) |
2,416 |
||||||||
Provision for (benefit from) income taxes |
|
(8,717 |
) |
|
795 |
|
(8,334 |
) |
|
766 |
||||
Net income (loss) |
$ |
(52,726 |
) |
$ |
1,719 |
$ |
(51,950 |
) |
$ |
1,650 |
||||
|
||||||||||||||
Basic and diluted net income (loss) per share |
$ |
(1.74 |
) |
$ |
0.06 |
$ |
(1.71 |
) |
$ |
0.05 |
||||
|
||||||||||||||
Weighted average common shares outstanding: |
||||||||||||||
Basic |
30,315 |
30,262 |
30,314 |
30,261 |
||||||||||
Diluted |
30,315 |
30,305 |
30,314 |
30,341 |
||||||||||
|
||||||||||||||
Reconciliation to AEBITDA: |
||||||||||||||
Net income (loss) |
$ |
(52,726 |
) |
$ |
1,719 |
$ |
(51,950 |
) |
$ |
1,650 |
||||
Provision for (benefit from) income taxes |
(8,717 |
) |
795 |
(8,334 |
) |
766 |
||||||||
Interest expense, net |
2,694 |
344 |
5,735 |
719 |
||||||||||
Depreciation and amortization |
1,554 |
893 |
3,046 |
1,791 |
||||||||||
Stock based compensation expense |
125 |
8 |
250 |
16 |
||||||||||
Restructuring and other charges |
166 |
– |
476 |
– |
||||||||||
Impairment of goodwill |
59,817 |
– |
59,817 |
– |
||||||||||
Impairment of intangible assets |
|
3,100 |
|
|
– |
|
3,100 |
|
|
– |
||||
AEBITDA |
$ |
6,013 |
|
$ |
3,759 |
$ |
12,140 |
|
$ |
4,942 |
||||
|
||||||||||||||
Summary Cash Flow Information: |
||||||||||||||
Cash flow provided by operating activities |
$ |
8,880 |
$ |
3,977 |
$ |
11,472 |
$ |
3,062 |
||||||
|
||||||||||||||
Operating Statistics: |
||||||||||||||
Hours worked |
3,206 |
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