Medical Staffing Network Holdings, Inc. (NYSE: MRN) today reported
revenue of $135.8 million for the third quarter of 2008, a decrease
of 12.2% from the third quarter 2007 revenue of $154.7 million. Net
income for the third quarter of 2008 was $2.5 million, or $0.08 per
diluted share, as compared with a net loss of $1.7 million, or
$0.06 per diluted share, for the third quarter of 2007. The net
loss for the third quarter of 2007 included restructuring and other
charges of $3.0 million and a $1.9 million non-cash goodwill
impairment charge relating to the third quarter of 2007 integration
plan for the acquisition of InteliStaf Holdings, Inc. and a loss on
early extinguishment of debt of $0.3 million. Cash flow generated
from operations was $6.4�million for the third quarter of 2008,
resulting in an increase of cash on hand to $8.8 million at
September 28, 2008. Commenting on the third quarter�s results,
Robert J. Adamson, chairman and chief executive officer, stated,
�The healthcare industry is facing significant challenges due in
large part to the current economic conditions. Hospitals are
experiencing unprecedented low census levels in several states
resulting in softer demand for our services, particularly in
Florida and California. However, the lower levels of demand are
regionalized, and there are areas of the country in which demand
remains strong, such as in the Pacific Northwest. While we are
disappointed with our sequential decrease in revenue, we are very
pleased to be able to report a 14% sequential increase in our
AEBITDA, from $6.0 million in the second quarter of 2008 to $6.9
million in the third quarter of 2008, resulting from our continued
focus on gross margin expansion and cost containment measures.�
Adamson continued, �In an effort to enhance the visibility of our
revenue stream, we have focused our per diem branches on expanding
the amount of local contracts they staff, and we have also
continued to invest in our vendor management services (VMS) sales
team. Local contracts are longer-length assignments of more than
two weeks staffed by our per diem branches. An increasing portion
of our per diem division�s revenue, approximately 25% of the
division�s third quarter of 2008 revenue, is coming from these
local contracts. Additionally, we have had recent successes in our
VMS operations as we have been awarded six contracts thus far in
2008. These six contracts represent an aggregate estimated
annualized gross revenue opportunity of more than $20 million, a
majority of which is incremental to our current revenue run rate.�
Adamson concluded, �In negotiating the current difficulties facing
healthcare staffing companies, Medical Staffing Network�s current
management team benefits from its experience in managing through
prior industry down cycles. I am confident that we are taking the
correct proactive steps at this time to maximize our
profitability.� The Company�s local per diem and travel nurse
staffing division revenues for the third quarter of 2008 were down
sequentially from the second quarter of 2008 and the comparable
prior year period due to a lower number of hours worked by per diem
nursing professionals and fewer travel nurses on assignment. The
Company�s allied staffing division revenues were also down
sequentially from the second quarter of 2008 and the comparable
prior year period, primarily due to a lower number of hours worked
by clinical research and rehabilitation professionals, partially
offset by a higher number of hours worked by laboratory, pharmacy
and ambulatory professionals. Gross profit was $34.3 million for
the third quarter of 2008, a decrease of 7.3% from the third
quarter of 2007 gross profit of $37.0 million. Gross margin for the
third quarter of 2008 was 25.3%, an increase from 23.9% for the
third quarter of 2007. The 140 basis point improvement over the
comparable prior year period was primarily attributable to an
executive-driven bill rate and margin expansion initiative.
Selling, general and administrative expenses were $27.5 million, or
20.2% of revenues, in the third quarter of 2008 as compared with
$28.7 million, or 18.5% of revenues, for the comparable prior year
period. The Company�s AEBITDA (as defined later) for the three
months ended September 28, 2008, was $6.9 million as compared with
$8.3 million for the comparable prior year period. Revenues were
$424.1 million for the nine months ended September 28, 2008, an
increase of 25.0% from revenues of $339.2 million for the
comparable prior year period. Net loss for the nine months ended
September 28, 2008, was $49.4 million, or $1.63 per diluted share,
while the Company had a net loss of $0.1 million for the comparable
prior year period. Included in the net loss for the nine months
ended September 28, 2008, were pretax non-cash impairment charges
to goodwill and other indefinite lived intangible assets of $59.8
million and $3.1 million, respectively. The net loss for the nine
months ended September 30, 2007, included restructuring and other
charges of $3.0 million and a $1.9 million non-cash goodwill
impairment charge relating to the third quarter integration plan
for the acquisition of InteliStaf and a loss on early
extinguishment of debt of $0.3 million. Cash flow generated from
operations was $17.9�million for the nine months ended
September�28, 2008. Gross profit was $105.0 million for the nine
months ended September 28, 2008, an increase of 29.5% from the
gross profit of $81.1 million for the comparable prior year period.
Gross margin for the nine months ended September 28, 2008, was
24.8%, a 90 basis point improvement from the gross margin of 23.9%
for the comparable prior year period. Selling, general and
administrative expenses were $86.2 million, or 20.3% of revenues,
for the nine months ended September 28, 2008, as compared with
$67.8 million, or 20.0% of revenues, for the comparable prior year
period. The Company�s AEBITDA for the nine months ended September
28, 2008, was $19.0 million as compared with $13.3 million for the
comparable prior year period. 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 Friday, November 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; our ability to recognize the
benefits of the realignment of our per diem branch network; the
amount of costs, expenses, and charges related to the realignment
of our per diem branch network; 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;
our ability to maintain our listing on the New York Stock Exchange;
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 � Nine Months Ended Sept. 28, � Sept. 30, Sept.
28, � Sept. 30, 2008 2007 2008 2007 Service revenues $ 135,836 $
154,690 $ 424,088 $ 339,161 Cost of services rendered � 101,525 �
117,671 � � 319,053 � � 258,077 � Gross profit � 34,311 � 37,019 �
� 105,035 � � 81,084 � � Operating expenses: Selling, general and
administrative 27,489 28,671 86,197 67,810 Depreciation and
amortization 1,536 1,662 4,582 3,453 Restructuring and other
charges 33 2,978 509 2,978 Impairment of goodwill � 1,925 59,817
1,925 Impairment of intangible assets � � � � � � 3,100 � � � �
Total operating expenses � 29,058 � 35,236 � � 154,205 � � 76,166 �
� Income (loss) from operations 5,253 1,783 (49,170 ) 4,918 Loss on
early extinguishment of debt � 278 � 278 Minority interest in
income of subsidiary 83 83 209 83 Interest expense, net � 2,643 �
3,346 � � 8,378 � � 4,065 � � Income (loss) before provision for
(benefit from) income taxes 2,527 (1,924 ) (57,757 ) 492 Provision
for (benefit from) income taxes � � � (180 ) � (8,334 ) � 586 � Net
income (loss) $ 2,527 $ (1,744 ) $ (49,423 ) $ (94 ) � Basic and
diluted net income (loss) per share $ 0.08 $ (0.06 ) $ (1.63 ) $ �
� � Weighted average common shares outstanding: Basic 30,315 30,262
30,314 30,262 Diluted 30,321 30,262 30,314 30,262 � Reconciliation
to AEBITDA: Net income (loss) $ 2,527 $ (1,744 ) $ (49,423 ) $ (94
) Provision for (benefit from) income taxes � (180 ) (8,334 ) 586
Interest expense, net 2,643 3,346 8,378 4,065 Loss on early
extinguishment of debt � 278 � 278 Depreciation and amortization
1,536 1,662 4,582 3,453 Stock based compensation expense 124 59 374
75 Restructuring and other charges 33 2,978 509 2,978 Impairment of
goodwill � 1,925 59,817 1,925 Impairment of intangible assets � � �
� � � 3,100 � � � � AEBITDA $ 6,863 $ 8,324 � $ 19,003 � $ 13,266 �
� Summary Cash Flow Information: Cash flow provided by operating
activities $ 6,445 $ (5,627 ) $ 17,917 $ (2,566 ) � Operating
Statistics: Hours worked 2,993 3,657 9,417 8,158 MEDICAL STAFFING
NETWORK HOLDINGS, INC. Reconciliation to Adjusted Net Income (1)
(unaudited; in thousands, except per share data) � � Three Months
Ended � Nine Months Ended Sept. 28, � Sept. 30, Sept. 28, � Sept.
30, 2008 2007 2008 2007 Income (loss) from operations, as reported
$ 5,253 $ 1,783 $ (49,170 ) $ 4,918 Restructuring and other charges
33 2,978 509 2,978 Impairment of goodwill � 1,925 59,817 1,925
Impairment of intangible assets � � � � � � � 3,100 � � � �
Adjusted income from operations (1) 5,286 6,686 14,256 9,821 Loss
on early extinguishment of debt � (278 ) � (278 ) Minority interest
in income of subsidiary (83 ) (83 ) (209 ) (83 ) Interest expense,
net � (2,643 ) � (3,346 ) � (8,378 ) � (4,065 ) Adjusted income
before income taxes (1) 2,560 2,979 5,669 5,395 Adjusted provision
for income taxes (2) � 1,024 � � 1,192 � � 2,268 � � 2,158 �
Adjusted net income (1) $ 1,536 � $ 1,787 � $ 3,401 � $ 3,237 �
Basic and diluted adjusted net income per share (1) � $ 0.05 � $
0.06 � $ 0.11 � $ 0.11 � � Weighted average common shares
outstanding: Basic 30,315 30,262 30,314 30,262 Diluted 30,321
30,303 30,333 30,328 � (1) Certain measurements are being provided
as management believes they are a useful supplement to actual
operating performance and for comparison to prior year periods.
These measurements are not intended to represent actual operating
results and they should not be considered in isolation or as a
substitute for measures of performance in accordance with United
States generally accepted accounting principles (GAAP). These
measurements have certain material limitations as compared to the
use of the most directly comparable GAAP financial measures. We
compensate for these limitations by using these measurements as
only one of several comparative tools, together with GAAP
measurements, to assist in the evaluation of our operating
performance and comparisons to prior year periods. � (2) The
provision for income taxes for the three and nine months ended
September 28, 2008 and September 30, 2007, is being calculated
assuming there was no need to record a valuation allowance against
the Company�s net deferred income tax assets. As such, an effective
income tax rate of 40% was used in calculating the adjusted net
income for both the three and nine months ended September�28, 2008
and September 30, 2007. MEDICAL STAFFING NETWORK HOLDINGS, INC.
Condensed Consolidated Balance Sheets (unaudited; in thousands) � �
Sept. 28, 2008 � Dec. 30, 2007 ASSETS Current assets: Cash and cash
equivalents $ 8,762 $ 1,898 Accounts receivable, net 83,989 98,376
Other current assets � 5,458 � 5,529 Total current assets 98,209
105,803 � Furniture and equipment, net 11,973 9,944 Goodwill
126,775 184,257 Intangible assets, net 9,720 14,637 Other assets,
net � 4,933 � 5,215 � Total assets $ 251,610 $ 319,856 �
LIABILITIES AND STOCKHOLDERS� EQUITY Current liabilities: Accounts
payable and accrued expenses $ 39,253 $ 45,702 Accrued payroll and
other current liabilities 10,382 12,245 Current portion of
long-term debt � 1,000 � 1,000 Total current liabilities 50,635
58,947 � Long-term debt 123,000 128,185 Deferred income taxes �
8,334 Other long-term obligations � 7,002 � 4,219 Total liabilities
180,637 199,685 � Minority interest 402 402 � Commitments and
contingencies � Total stockholders� equity � 70,571 � 119,769 �
Total liabilities and stockholders� equity $ 251,610 $ 319,856
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