Cross Country Healthcare, Inc. (Nasdaq:CCRN) today reported
record quarterly revenue of $205.9 million in the fourth quarter
ended December 31, 2008, and a net loss of $161.3�million, or
($5.22) per diluted share, including non-cash goodwill and other
intangible asset impairment charges of $244.1 million pre-tax.
Excluding the impairment charges, the Company�s net income was $5.6
million, or $0.18 per diluted share for the quarter ended
December�31, 2008. This compares to revenue of $181.7 million and
net income of $7.3 million, or $0.23 per diluted share, in the
prior year. Cash flow from operations for the fourth quarter of
2008 was $10.1 million.
The non-cash impairment charges relate almost entirely to a
goodwill impairment charge in the Company�s nurse and allied
staffing business segment resulting from Cross Country Healthcare�s
annual impairment testing in accordance with Financial Accounting
Standards Board Statement No. 142. The goodwill impairment�charge
results from a combination of depressed equity market values and
lower projected near-term growth rates for the nurse and allied
staffing business arising from the�significant down-turn in the
U.S. economy and adverse labor and financial markets that
deteriorated sharply during the fourth quarter of 2008. The
majority of the goodwill impairment is attributable to the
Company�s initial capitalization in 1999, which was accounted for
as an asset purchase, and the remainder to subsequent nurse and
allied staffing acquisitions made through 2003. These charges�are
not expected to have any impact on the Company�s cash position,
future cash flows or liquidity under its Credit Facility.
For the year ended December�31, 2008, the Company reported
record revenue of $734.2�million and a net loss of $142.9�million,
or ($4.61) per diluted share, including the aforementioned
impairment charges. Excluding these impairment charges, the
Company�s net income was $24.0 million, or $0.78 per diluted share
for the year ended December�31, 2008. This compares to revenue of
$718.3 million and net income of $24.6 million, or $0.76 per
diluted share, in the prior year. Cash flow from operations for the
full-year 2008 was $51.0 million.
�Excluding these impairment charges, our operating results for
the fourth quarter were better than we guided back in November
owing to the strong performance of our MDA physician staffing
business acquired last September. However, the market environment
for our nurse and allied staffing businesses, in particular,
deteriorated at an accelerated rate in the past three months,� said
Joseph A. Boshart, President and Chief Executive Officer of Cross
Country Healthcare, Inc. �We believe this deterioration has
resulted from tighter credit markets, which have increased hospital
borrowing costs, dramatically weaker labor markets and economic
conditions, which are encouraging staff nurses to work more hours
to bolster household income, and relatively weak hospital admission
trends. These factors have combined to produce the weakest demand
environment we�ve seen for this segment since the mid-1990s.�
Mr. Boshart added, �We see no catalyst to turn this situation
around in the near term for our nurse and allied staffing
businesses and therefore have taken a number of steps to optimize
our profitability and cash flow in this weak volume environment.
These steps include reducing employee headcount, decreasing
advertising spending and lowering capital expenditures. In 2008,
our operating cash flow matched the strongest performance in the
Company�s history and we see that strong cash flow continuing so
far in 2009. As of March 6th, we will have repaid more than $25
million of our total debt outstanding since the end of the third
quarter of 2008.�
Nurse and Allied Staffing
For the fourth quarter of 2008, the
nurse and allied staffing business segment (travel and per diem
nurse and travel allied staffing) generated revenue of $123.5
million, reflecting a 14% decrease from the prior year quarter and
a 4% decrease sequentially from the third quarter of 2008.
Contribution income (defined as loss/income from operations before
interest, income taxes, depreciation and amortization, impairment
charges and corporate expenses not specifically identified to a
reporting segment) decreased 18% in the fourth quarter of 2008 to
$12.7 million from $15.6 million in the same quarter a year
ago.
Segment staffing volume decreased 15% from the prior year
quarter and 4% sequentially from the third quarter of 2008,
reflecting declines in each business line. Travel staffing volume
showed comparable year-over-year and sequential trends with the
segment as a whole.
For the full-year 2008, segment revenue decreased 9% to $525.8
million from $576.8 million in 2007, while contribution income
decreased 2% to $53.8 million from $54.9 million in 2007.
Contribution margin improved 70 basis points to 10.2% in 2008 from
9.5% in 2007.
Physician Staffing
For the fourth quarter of 2008, the physician staffing business
segment generated revenue of $45.7 million and contribution income
of $4.8 million. On a pro-forma basis physician staffing days
filled increased 1% from the prior year quarter and revenue per day
filled increased 11%. Physician staffing days filled is derived by
dividing the physician staffing hours filled during the respective
period by 8 hours. Revenue per day filled represents segment
revenue divided by the number of days filled for the respective
period.
Segment revenue since the Company�s acquisition of MDA in
September 2008 was $56.6 million and contribution income was $5.7
million. On a pro-forma basis since the acquisition, physician
staffing days filled increased 3% from the prior year to 34,863 and
revenue per day filled increased 14% to $1,622.
Clinical Trials Services
For the fourth quarter of 2008, the clinical trials services
segment generated revenue of $23.9 million, a decrease of 5% from
$25.2 million in the prior year quarter. Contribution income
decreased 12% in the fourth quarter of 2008 to $3.4 million from
$3.8 million in the prior year reflecting negative operating
leverage as a result of the decline in revenue along with a
stronger dollar during the fourth quarter of 2008 that negatively
impacted the contribution from the UK operation.
For the full-year 2008, segment revenue increased 9% to $99.1
million from $90.6 million in the same period a year ago, while
contribution income increased 6% to $15.3 million from $14.4
million in the prior year period.
Other Human Capital Management Services
For the fourth quarter of 2008, the other human capital
management services business segment (education and training and
retained search) generated revenue of $12.7 million, a 4% decrease
from revenue of $13.3 million in the same quarter in the prior
year, primarily reflecting a decline in the retained search
business. Segment contribution income decreased to $1.4 million in
the fourth quarter of 2008 from $1.9 million in the prior year
quarter, reflecting declines in contribution from both businesses
in this segment.
For the full-year 2008, segment revenue increased 4% to $52.8
million from $50.9 million in the same period a year ago, while
contribution income decreased to $7.4 million from $7.6 million in
the prior year period.
Debt Repayments/Borrowings
During the fourth quarter of 2008, the Company reduced its
borrowings under its term loan and revolving credit facility by
$12.3 million from the end of the prior quarter. At December 31,
2008, the Company had $133.1 million of total debt on its balance
sheet and a debt, net of unrestricted cash, to total capitalization
ratio of 33.5%.
Stock Repurchase Program Update
Cross Country Healthcare did not repurchase shares of its common
stock during the fourth quarter of 2008 under its repurchase
authorization approved in February 2008. As of December 31, 2008,
the Company had authorization to repurchase up to 1,441,139 shares
of its common stock under its current authorization. Shares may be
repurchased from time-to-time in the open market subject to the
terms of the Company�s credit agreement. Such repurchases may be
discontinued at any time at the discretion of the Company. At
December 31, 2008, the Company had approximately 30.8 million
shares outstanding.
Guidance For First Quarter 2009
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, any significant
legal proceedings or repurchases of the Company's common stock.
Cross Country Healthcare expects revenue in the first quarter of
2009 to be in the $173 million to $176 million range and earnings
per diluted share to be in the range of $0.08 to $0.10.
Historically, the gross profit margin in the Company�s nurse and
allied staffing business declines sequentially from the fourth
quarter to the first quarter due to the reset of payroll taxes, as
well as two less days in the first quarter of 2009. This
combination typically results in a sequential decrease in earnings
of approximately $0.04 per diluted share.
Quarterly Conference Call
Cross Country Healthcare will hold a conference call on
Thursday, March 5th at 10:00 a.m. Eastern Time to discuss its
fourth quarter and year-end 2008 financial results. This call will
be webcast live by CCBN/Thomson Financial and may be accessed at
the Company's web site at www.crosscountryhealthcare.com or by
dialing 877-917-1549 from anywhere in the U.S. or by dialing
312-470-7109 from non-U.S. locations � Passcode: Cross Country. A
replay of the webcast will be available through March 19th. A
replay of the conference call will be available by telephone from
approximately noon on March 5th until March 19th by calling
800-677-8851 from anywhere in the U.S. or 203-369-3405 from
non-U.S. locations � Passcode: 2009.
About Cross Country Healthcare
Cross Country Healthcare, Inc. is a diversified leader in
healthcare staffing services. The Company offers a comprehensive
suite of staffing and outsourcing services to the healthcare
market, which together include being a leading national provider of
nurse and allied staffing services and multi-specialty physician
staffing services; a provider of clinical trials services to global
pharmaceutical and biotechnology customers; and a provider of other
human capital management services focused on healthcare. The
Company has more than 5,000 contracts with hospitals and healthcare
facilities, 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, 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, 2007, and our other Securities and
Exchange Commission filings made during 2008.
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
December 31,
Year Ended
December 31,
� �
2008 �
2007 % Change �
2008 �
2007 % Change � � Revenue from services $ 205,911 $
181,716 13% $ 734,247 $ 718,272 2% Operating expenses: Direct
operating expenses 151,579 135,002 12% 541,660 543,608 (0%)
Selling, general and administrative expenses 39,052 31,765 23%
136,815 122,692 12% Bad debt expense 264 294 (10%) 951 1,559 (39%)
Depreciation 2,285 1,950 17% 7,637 6,309 21% Amortization 1,137 690
65% 3,166 2,051 54% Impairment charges (a) 244,094 - ND 244,094 -
ND Legal settlement charge � - � � - ND � - � � 34 (100%) Total
operating expenses � 438,411 � � 169,701 158% � 934,323 � � 676,253
38% (Loss) income from operations (232,500 ) 12,015 NM (200,076 )
42,019 NM Other expenses: Foreign exchange (gain) loss (13 ) 34 NM
(132 ) 93 NM Interest expense, net � 2,265 � � 764 196% � 4,225 � �
2,587 63% (Loss) income before income taxes (234,752 ) 11,217 NM
(204,169 ) 39,339 NM Income tax (benefit) expense � (73,415 ) �
3,949 NM � (61,224 ) � 14,759 NM Net (loss) income $ (161,337 ) $
7,268 NM $ (142,945 ) $ 24,580 NM � Net (loss) income per common
share: Basic $ (5.24 ) $ 0.23 $ (4.64 ) $ 0.77 Diluted $ (5.22 ) $
0.23 $ (4.61 ) $ 0.76 � Weighted average common shares outstanding:
Basic 30,775 31,769 30,825 31,973 Diluted 30,934 32,047 31,007
32,484 �
ND - Not determinable
NM - Not meaningful
Cross Country Healthcare,
Inc.
Reconciliation of Non-GAAP
Financial Measures
Adjusted Net Income and
Adjusted Earnings Per Diluted Share
(Unaudited, amounts in
thousands, except per share data)
� � � � � � � �
Three Months Ended
December 31,
2008
Per
Diluted
Share
Year Ended
December 31,
2008
Per
Diluted
Share
� � Net loss $ (161,337 ) $ (5.22 ) $ (142,945 ) $ (4.61 )
Impairment charges (a) 244,094 7.89 244,094 7.87 Tax effect of
impairment charges � (77,116 ) � (2.49 ) � (77,116 ) � (2.48 )
Adjusted net income and adjusted earnings per diluted share (b) $
5,641 � $ 0.18 � $ 24,033 � $ 0.78 � �
Weighted average common shares
outstanding used in the calculation
of non-GAAP net income per common
share - diluted
30,934 31,007 �
(a) Impairment charges include
goodwill and intangible asset�impairment charges pursuant to FASB
Statement No. 142, Goodwill and Other Intangible Assets and FASB
Statement No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets.
(b) Adjusted net��income and
adjusted earnings per diluted share, non-GAAP financial measures,
are defined as net income and earnings per diluted share before the
non-cash impairment charges related to goodwill and intangible
assets. Adjusted net income and adjusted earnings per diluted
share��should not be considered a measure of financial performance
under generally accepted accounting principles and has been
provided for consistency and comparability of the 2008 results with
net income and earning per diluted share��in the prior periods.
Cross Country Healthcare,
Inc.
Condensed Consolidated Balance
Sheets
(Unaudited, amounts in
thousands)
� � � � � �
December 31,
2008
December 31,
2007
Assets Current assets: Cash and cash equivalents $ 10,173 $
9,066 Restricted cash 5,000 - Accounts receivable, net 117,794
116,133 Deferred tax assets 11,287 5,869 Income taxes receivable
977 - Other current assets � 16,149 � � 17,768 Total current assets
161,380 148,836 Property and equipment, net 25,985 23,460
Trademarks, net 64,443 19,153 Goodwill, net 122,598 326,119 Other
identifiable intangible assets, net 32,459 15,996 Debt issuance
costs, net 2,676 424 Non-current deferred tax assets 15,065 - Other
long-term assets � 1,244 � � 1,017 Total assets $ 425,850 � $
535,005 �
Liabilities and Stockholders' Equity Current
liabilities: Accounts payable and accrued expenses $ 12,440 $
10,203 Accrued compensation and benefits 21,334 26,102 Current
portion of long-term debt 15,826 5,067 Income taxes payable - 1,222
Other current liabilities � 6,682 � � 7,815 Total current
liabilities 56,282 50,409 Non-current deferred tax liabilities -
49,244 Long-term debt 117,255 34,385 Interest rate swaps 2,382 -
Other long-term liabilities � 15,908 � � 10,530 Total liabilities
191,827 144,568 � Commitments and contingencies � Stockholders'
equity: Common stock 3 3 Additional paid-in capital 237,372 245,844
Other stockholders' equity � (3,352 ) � 144,590 Total stockholders'
equity 234,023 390,437 � � Total liabilities and stockholders'
equity $ 425,850 � $ 535,005
Cross Country Healthcare,
Inc.
Segment Data (a)
(Unaudited, amounts in
thousands)
� � � � � � � � � � � � � � � �
Three Months Ended
December 31,
Year Ended
December 31,
� �
2008 % of Total 2007 % of Total
% Change 2008 % of Total 2007 % of
Total % Change � Revenue: Nurse and allied staffing $
123,531 60% $ 143,282 79% (14%) $ 525,772 72% $ 576,779 80% (9%)
Physician staffing 45,727 22% - 0% ND 56,558 8% - 0% ND Clinical
trials services 23,948 12% 25,169 14% (5%) 99,129 14% 90,613 13% 9%
Other human capital management services 12,705 6% 13,265 7% (4%)
52,788 7% 50,880 7% 4% $ 205,911 100% $ 181,716 100% 13% $ 734,247
100% $ 718,272 100% 2% � Contribution income (b) Nurse and allied
staffing $ 12,690 $ 15,556 (18%) $ 53,822 $ 54,941 (2%) Physician
staffing 4,783 - ND 5,711 - ND Clinical trials services 3,364 3,828
(12%) 15,301 14,425 6% Other human capital management services
1,352 1,881 (28%) 7,444 7,609 (2%) 22,189 21,265 4% 82,278 76,975
7% � Unallocated corporate overhead 7,173 6,610 9% 27,457 26,562 3%
Depreciation 2,285 1,950 17% 7,637 6,309 21% Amortization 1,137 690
65% 3,166 2,051 54% Impairment charges 244,094 -
ND
244,094 - ND Legal settlement charge - -
-
- 34 (100%) (Loss) income from operations $ (232,500) $ 12,015 NM $
(200,076) $ 42,019 NM �
ND - Not determinable
NM - Not meaningful
Cross Country Healthcare ,
Inc.
Other Financial Data
(Unaudited)
� � � � � � � � � � � � �
Three Months Ended
December 31,
Year Ended
December 31,
�
2008 2007 % Change 2008 2007
% Change Net cash provided by operating activities (in
thousands) $ 10,061 $ 19,914 (49 %) $ 50,993 $ 35,880 42 % �
Nurse and allied staffing statistical data: FTEs (c)
4,155 4,897 (15 %) 4,463 5,025 (11 %) Weeks worked (d) 54,015
63,661 (15 %) 232,076 261,300 (11 %)
Average revenue per FTE per week
(e)
$ 2,287 $ 2,251 2 % $ 2,266 $ 2,207 3 % �
(a) Segment data provided is in
accordance with FASB Statement 131.
(b) Defined as (loss) income from
operations before depreciation, amortization, 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.
(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 revenue per FTE per
week is calculated by dividing the nurse and allied staffing
revenue by the number of weeks worked in the respective periods.
Nurse and allied staffing revenue also includes revenue from
permanent placement of nurses.
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