Cross Country Healthcare, Inc. (Nasdaq: CCRN) today reported
revenue of $129.6 million in the third quarter ended September 30,
2009, a 27% decrease from revenue of $178.1 million in the prior
year quarter. Net income for the third quarter of 2009 was
$1.0 million, or $0.03 per diluted share, a decline of 84%
compared to net income of $6.2 million, or $0.20 per diluted share,
in the prior year quarter. On a sequential basis, revenue decreased
13% from the second quarter of 2009, while net income decreased
58%. Cash flow from operations for the third quarter of 2009 was
$19.5 million.
For the nine months ended September 30, 2009, the Company
generated revenue of $454.1 million and net income of $6.3 million,
or $0.20 per diluted share. This compares to revenue of $528.3
million and net income of $18.4 million, or $0.59 per diluted
share, in the first nine months of the prior year. Cash flow from
operations for the first nine months of 2009 was $69.9 million.
“The improvement in contract bookings activity within our nurse
and allied staffing business that we first noted in our second
quarter earnings release in August is continuing. Keep in mind that
it takes several months for sequential volume growth to materialize
after booking trends begin to improve due to the typical
three-month contract length and the normal one-month delay from the
time a contract is booked to the assignment start,” said Joseph A.
Boshart, President and Chief Executive Officer of Cross Country
Healthcare, Inc. “While it took most of the third quarter to halt
the negative momentum of our staffing volume resulting from the
extraordinary weakness in demand during the months leading up to
this summer, since mid-September our travel staffing volume has
increased 6%. This improvement in staffing volume has resulted from
a significant increase in demand since the spring, with current
open order levels for travel nurses six times the levels seen prior
to the summer,” he said.
Mr. Boshart continued, “Our analysis of the increase in demand
indicates that it is spread across numerous nursing specialties and
suggests the increase is not just related to the H1N1 virus or
normal seasonality, which leads us to believe it should be
sustainable. While we do not expect our staffing volume to parallel
the rapid increase in demand, it does change the constraint on our
growth from one of demand to one of supply. So the primary
challenge we now face is a more familiar one to us – recruiting
enough qualified nurses to meet increasing demand for contract
nursing services.”
“Our other businesses, which include physician staffing and
clinical trials services, are also exhibiting varying degrees of
stabilization to the extent that we can say with some confidence
that we believe the trough in our business activity will be the
second half of 2009. Moreover, as a result of effective margin
management, cost controls and a reduction of receivables, our
strong cash flow has allowed us to de-lever our balance sheet by
$75 million in the past twelve months. During the third quarter
alone we reduced our debt outstanding by $24 million,” said Mr.
Boshart.
Nurse and Allied Staffing
For the third quarter of 2009, the nurse and allied staffing
business segment (travel and per diem nurse and travel allied
staffing) generated revenue of $64.1 million, reflecting a 50%
decrease from the prior year quarter and an 18% decrease
sequentially from the second quarter of 2009. Contribution income
(defined as income from operations before depreciation and
amortization, impairment charges and corporate expenses not
specifically identified to a reporting segment) decreased 56% in
the third quarter of 2009 to $6.2 million from $14.3 million in the
same quarter a year ago, and decreased 13% sequentially from the
second quarter of 2009. The decreases in revenue and contribution
income reflect a sharp decline in demand for temporary nurse and
allied staffing services from a year ago primarily due to the
economic environment and its impact on the national labor
market.
Segment staffing volume decreased 48% from the prior year
quarter and 19% sequentially from the second quarter of 2009. The
average revenue per FTE per week for the third quarter of 2009
declined 3.5% from the prior year quarter due to a higher mix of
per diem staffing coupled with a change in the mix within per diem
to lower-skilled professionals. The average hourly bill rate in the
travel nurse staffing business was essentially flat
year-over-year.
For the first nine months of 2009, segment revenue decreased 38%
on a year-over-year basis to $247.7 million from $402.2 million in
the same period a year ago, while contribution income decreased 43%
to $23.5 million from $41.1 million in the prior year period.
Physician Staffing
For the third quarter of 2009, the physician staffing business
segment generated revenue of $39.6 million, a 3% decrease
sequentially from the second quarter of 2009, while contribution
income in the third quarter of 2009 was $4.0 million, a 4% decrease
sequentially from the second quarter of 2009. Physician staffing
days filled for the third quarter of 2009 were 24,395 days, a pro
forma decrease of 13% from the prior year quarter. Revenue per day
filled for the third quarter of 2009 was $1,651, a pro forma 4%
increase from the prior year quarter, reflecting a favorable change
in the mix of business.
The Company believes the recession, the stock market decline and
the weakened housing market appear to have delayed the retirement
plans of many older physicians. This dynamic, in conjunction with
fewer elective surgeries, has resulted in a decrease in demand for
temporary physicians, particularly in such specialties as
anesthesiology and surgery.
For the first nine months of 2009, segment revenue was $118.6
million and contribution income was $11.3 million. No meaningful
prior period comparisons are available as the Company acquired its
physician staffing business in September of 2008.
Clinical Trials Services
For the third quarter of 2009, the clinical trials services
segment generated revenue of $16.4 million, a decrease of 35% from
$25.4 million in the prior year quarter and a decrease of 15%
sequentially from the second quarter of 2009. Contribution income
decreased 56% in the third quarter of 2009 to $1.7 million from
$3.8 million in the prior year and decreased 27% sequentially from
the second quarter of 2009.
The environment for clinical trials services has been weak
during the year stemming from a slow-down in clinical trials caused
largely by economic factors and financial market conditions, along
with uncertainty concerning R&D activities following mergers
and acquisitions in the pharmaceutical and biotechnology sectors.
The Company is seeing gradual improvement in the core contract
staffing component of its business while continuing to experience
weakness in its other service offerings due to project-specific
factors in its CRO activities and in drug safety monitoring
activities.
For the first nine months of 2009, segment revenue decreased 24%
on a year-over-year basis to $56.8 million from $75.2 million in
the same period a year ago, while contribution income decreased 49%
to $6.1 million from $11.9 million in the prior year period.
Other Human Capital Management Services
For the third quarter of 2009, the other human capital
management services business segment (education and training and
retained search) generated revenue of $9.6 million, a 26% decrease
from revenue of $13.0 million in the same quarter in the prior
year, reflecting a lower number of retained searches and lower
average seminar attendance. Segment contribution income decreased
57% to $0.7 million in the third quarter of 2009 from $1.6 million
in the prior year quarter primarily as a result of weakness in the
retained physician search business. On a sequential basis, segment
revenue decreased 7% while contribution income increased 107% from
the second quarter of 2009.
For the first nine months of 2009, segment revenue decreased 23%
on a year-over-year basis to $31.0 million from $40.1 million in
the same period a year ago, while contribution income decreased 68%
to $1.9 million from $6.1 million in the prior year period.
Debt Repayments
During the third quarter of 2009, the Company reduced borrowings
on its debt outstanding by $23.6 million from the end of the prior
quarter. At September 30, 2009, the Company had $69.5 million of
total debt on its balance sheet and a debt, net of cash, to total
capitalization ratio of 18.4%. At the end of the third quarter of
2009, the Company’s debt leverage ratio (as defined in its credit
agreement) was 1.7 to 1, which is well under the 2.5 to 1 maximum
allowable ratio that became effective September 30, 2009, and
remains in effect for the duration of the credit agreement, which
expires in September 2013. Subsequent to the end of the third
quarter, the Company made a $3.0 million optional pre-payment on
its term debt as a result of its continued strong cash flow.
Fourth Quarter 2009 Guidance
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 or valuation
allowances, any significant legal proceedings or repurchases of the
Company's common stock.
Cross Country Healthcare expects revenue in the fourth quarter
of 2009 to be in the $120 million to $123 million range and
earnings per diluted share to be in the range of $0.02 to $0.04.
For the full year ended December 31, 2009, the Company expects
revenue to be in the $574 million to $577 million range and
earnings per diluted share to be in the range of $0.22 to
$0.24.
Quarterly Conference Call
Cross Country Healthcare will hold a conference call on Tuesday,
November 3rd at 10:00 a.m. Eastern Time to discuss its third
quarter 2009 financial results. This call will be webcast live and
may be accessed at the Company's website at
www.crosscountryhealthcare.com or by dialing 888-947-9022 from
anywhere in the U.S. or by dialing 415-228-4733 from non-U.S.
locations – Passcode: Cross Country. A replay of the webcast will
be available from November 3rd through November 17th. A replay of
the conference call will be available by telephone from
approximately noon Eastern Time on November 3rd until November 17th
by calling 866-470-7050 from anywhere in the U.S. or 203-369-1484
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, 2008, and our other Securities and Exchange
Commission filings made during 2009.
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 Nine Months
Ended September 30, September 30,
2009 2008 % Change
2009 2008 % Change
Revenue from services $ 129,635 $ 178,134 (27 %) $ 454,098
$
528,336 (14 %) Operating expenses: Direct operating expenses 94,281
130,696 (28 %) 332,890 390,081 (15 %)
Selling, general and
administrative expenses
28,858 33,475 (14 %) 96,325 97,763 (1 %) Bad debt expense (303 )
203 (249 %) (227 ) 687
(133
%) Depreciation 2,034 1,789 14 % 6,645 5,352 24 % Amortization
1,005 713 41 % 3,046
2,029 50 % Total operating expenses 125,875
166,876 (25 %) 438,679 495,912
(12 %) Income from operations 3,760 11,258 (67 %) 15,419 32,424 (52
%) Other expenses (income): Foreign exchange loss (gain) 18 (79)
123 % 31 (119 ) 126 % Interest expense, net 1,664 788 111 % 4,878
1,960 149 % Other income (193 ) - ND (193 )
- ND Income before income taxes 2,271 10,549 (78 %)
10,703 30,583 (65 %) Income tax expense 1,303
4,378 (70 %) 4,407 12,191 (64 %) Net
income $ 968 $ 6,171 (84 %) $ 6,296 $ 18,392
(66 %) Net income per common share: Basic $ 0.03 $
0.20 (85 %) $ 0.20 $ 0.60 (67 %) Diluted $ 0.03
$ 0.20 (85 %) $ 0.20 $ 0.59 (66 %)
Weighted average common shares outstanding: Basic 30,814 30,710
30,793 30,842 Diluted 31,002 30,911 30,963 31,032 ND - Not
determinable
September 30,
December 31,
2009 2008 Assets Current assets: Cash
and cash equivalents $ 12,003 $ 10,173 Restricted cash - 5,000
Accounts receivable, net 70,316 117,794 Deferred tax assets 11,911
11,287 Income taxes receivable - 977 Other current assets
8,629 16,149 Total current assets 102,859 161,380
Property and equipment, net 21,481 25,985 Trademarks, net 64,557
64,443 Goodwill, net 130,698 122,598 Other identifiable intangible
assets, net 29,568 32,459 Debt issuance costs, net 1,800 2,676
Other long-term assets 16,799 16,309 Total
assets $ 367,762 $ 425,850
Liabilities and
Stockholders' Equity Current liabilities: Accounts payable and
accrued expenses $ 8,539 $ 12,440 Accrued employee compensation and
benefits 17,602 21,334 Current portion of long-term debt 5,863
15,826 Income taxes payable 2,248 - Other current liabilities
7,095 6,682 Total current liabilities 41,347
56,282 Long-term debt 63,619 117,255 Interest rate swaps
1,811 2,382 Other long-term liabilities 17,568
15,908 Total liabilities 124,345 191,827 Commitments and
contingencies Stockholders' equity: Common stock 3 3
Additional paid-in capital 238,909 237,372 Accumulated other
comprehensive loss (3,273 ) (4,834) Retained earnings 7,778
1,482 Total stockholders' equity 243,417
234,023 Total liabilities and stockholders'
equity $ 367,762 $ 425,850
Cross Country
Healthcare, Inc. Segment Data (a) (Unaudited, amounts
in thousands)
Three Months Ended Nine Months
Ended September 30, September 30,
2009 % of Total 2008
% of Total % Change 2009
% of Total 2008 % of
Total % Change
Revenue:
Nurse and allied staffing $ 64,053 49 % $ 128,910 73 % (50
%) $ 247,664 54 % $ 402,241 76 % (38 %) Physician staffing 39,595
31 % 10,831 6 % NM 118,600 26 % 10,831 2 % NM Clinical trials
services 16,426 13 % 25,414 14 % (35 %) 56,816 13 % 75,181 14 % (24
%) Other human capital management services 9,561 7 %
12,979 7 % (26 %) 31,018 7 % 40,083 8 % (23 %) $
129,635 100 % $ 178,134 100 % (27 %) $ 454,098 100 % $ 528,336 100
% (14 %) Contribution income (b) Nurse and allied
staffing $ 6,236 $ 14,332 (56 %) $ 23,466 $ 41,132 (43 %) Physician
staffing 3,961 928 NM 11,334 928 NM Clinical trials services 1,652
3,755 (56 %) 6,111 11,937 (49 %) Other human capital management
services 682 1,589 (57 %) 1,940 6,092
(68 %) 12,531 20,604 (39 %) 42,851 60,089 (29 %) Unallocated
corporate overhead 5,732 6,844 (16 %) 17,741 20,284 (13 %)
Depreciation 2,034 1,789 14 % 6,645 5,352 24 % Amortization
1,005 713 41 % 3,046 2,029 50 % Income from
operations $ 3,760 $ 11,258 (67 %) $ 15,419 $ 32,424 (52 %)
Cross Country Healthcare,
Inc.
Other Financial Data (Unaudited)
Three Months Ended Nine Months Ended September
30, September 30, 2009 2008
2009 2008 Net cash provided by
operating activities (in thousands) $ 19,466 $ 13,760 $ 69,876 $
40,932
Nurse and allied staffing statistical
data: FTEs (c) 2,234 4,335 2,876 4,566 Weeks worked (d)
29,042 56,355 112,164 178,074 Average nurse and allied staffing
revenue per FTE per week (e) $ 2,206 $ 2,287 $ 2,208 $ 2,259
(a) Segment data provided is in
accordance with the Segment Reporting Topic of the Financial
Accounting Standards Board Accounting Standards Codification.
(b) Defined as 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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