Cross Country Healthcare, Inc. (Nasdaq: CCRN) today reported
revenue of $124.7 million in the fourth quarter ended December 31,
2011, a 10% increase from revenue of $113.7 million in the prior
year quarter and a 5% decrease sequentially from the third quarter
of 2011. Net income was $0.5 million, or $0.02 per diluted share,
and included $0.02 per diluted share for income and non-income tax
expenses related to prior years. This compares to revenue of $113.7
million and a net loss of $6.0 million or ($0.19) per diluted share
in the same quarter of the prior year that included $6.6 million,
or $(0.21) per diluted share, of after-tax trademark impairment
charges related to the acquisition of Medical Doctor Associates
(MDA). Cash flow from operations for the fourth quarter was $3.7
million.
For the year ended December 31, 2011, the Company generated
revenue of $504.0 million and net income of $4.1 million, or $0.13
per diluted share, after the aforementioned tax related matters.
This compares to revenue of $468.6 million and a net loss of $2.8
million, or ($0.09) per diluted share, in the prior year that
included the aforementioned impairment charges. Cash flow from
operations for 2011 was $18.3 million.
“Revenue growth in our nurse and allied staffing segment was a
strong 18% in the fourth quarter, but was slightly below our
expectations which were based on booking momentum maintained
through October that did not hold for the remainder of the year. At
year-end we saw a return to more normal field employee attrition
levels around the holidays which suggests travel nurses have more
leverage in their schedule negotiations with hospitals than they
have had for the past several years. This is typical in a
supply-constrained environment, which is more favorable for our
business than one in which demand is constrained. However, I
believe there has also been some pushback from hospital
administrators whose 2011 budgets likely did not factor in the pace
of recovery in the utilization of temporary nurse and allied labor
that our 2011 results indicate; thus bringing more focus on this
expense category than existed at the same time last year,” said
Joseph A. Boshart, President and Chief Executive Officer of Cross
Country Healthcare, Inc.
“While the pace of growth in our nurse and allied staffing
segment is less rapid than it was last fall, I believe the
environment is conducive to continued strong growth for this
business in 2012. This is due primarily to an improving national
labor market trend, which has historically resulted in RNs being
less willing to work as many hours, and to a lesser extent by an
accelerating opportunity to provide our staffing services to
hospitals implementing electronic medical record technology. In
addition, our clinical trial services business saw modest top-line
improvement and physician staffing was up slightly in the fourth
quarter compared to a year ago. In view of these factors, I remain
optimistic regarding our performance in 2012,” Mr. Boshart
added.
The tax related expenses in the fourth quarter of 2011 mentioned
above relate to two items pertaining to prior years. First, sales
tax and other state non-income based taxes recorded in selling,
general and administrative expenses were adjusted due to a change
in the Company’s estimate of certain prior year non-income based
tax positions. Second, an adjustment to income tax expense was made
to correct an overstatement of prior period deferred tax assets for
share-based payments.
Nurse and Allied Staffing
For the fourth quarter of 2011, the nurse and allied staffing
business segment (travel and per diem nurse and allied health
staffing) generated revenue of $70.3 million, reflecting an 18%
increase from the prior year quarter, but a 4% decrease
sequentially from the third quarter of 2011. The year-over-year
increase and sequential decrease was attributable to changes in
staffing volume with the sequential decline due partly to seasonal
factors. Contribution income (defined as income from operations
before depreciation, amortization and corporate expenses not
specifically identified to a reporting segment) was $5.5 million,
an increase of 5% year-over-year and a 13% decrease sequentially.
The contribution income margin (defined as a percentage of segment
revenue) was 7.8% in the fourth quarter of 2011, a decrease of 100
basis points year-over-year due primarily to a contraction of the
bill-pay spread and higher housing and professional liability
expenses partially offset by lower workers’ compensation expenses.
Sequentially, the contribution income margin declined 80 basis
points due primarily to higher housing costs, along with higher
workers’ compensation expenses and negative operating leverage
partially offset by lower field payroll taxes and travel
expenses.
Segment staffing volume increased 16% from the prior year
quarter, but decreased 4% sequentially from the third quarter of
2011. Travel staffing volume increased 18% on a year-over-year
basis, but decreased 2% on a sequential basis while per diem
staffing volume increased 4% year-over-year, but decreased 15%
sequentially. The average revenue per FTE per day for the fourth
quarter of 2011 was $311, an increase of 2% year-over-year and
unchanged sequentially. For travel nurse staffing, the average
hourly bill rate increased 1% year-over-year, but declined 1% on a
sequential basis.
For the year-ended December 31, 2011, segment revenue increased
15% to $278.8 million from $242.2 million in the prior year.
Contribution income increased 5% to $22.4 million from $21.4
million in the prior year.
Physician Staffing
For the fourth quarter of 2011, the physician staffing business
segment generated revenue of $27.9 million, a slight increase from
the prior year quarter, but a 9% decrease sequentially from the
third quarter of 2011. The year-over-year increase reflected a
change in mix toward a higher staffing volume of lower bill-rate
specialties, while the sequential decline was due to a seasonal
drop-off in staffing volume and change in specialty mix.
Contribution income was $2.7 million, an 8% decrease year-over-year
and a 7% decrease sequentially. The contribution income margin
declined 90 basis points from the prior year quarter due primarily
to the impact of the increase in the aforementioned state
non-income based taxes. Sequentially, the contribution income
margin improved 20 basis points primarily reflecting favorable
professionally liability expenses partially offset by the state
non-income based tax impact. Physician staffing days filled for the
fourth quarter of 2011 was 20,200 days, a 1% decrease from the
prior year quarter and an 11% decrease sequentially. Revenue per
day filled for the fourth quarter of 2011 was $1,383, a 1% increase
year-over-year and 2% sequentially due to a favorable combination
of changes in specialty mix, placement type and bill rate.
For the year-ended December 31, 2011, segment revenue decreased
2% to $118.8 million from $121.6 million in the prior year.
Contribution income decreased 13% to $11.3 million from $13.1
million in the prior year.
Clinical Trial Services
For the fourth quarter of 2011, the clinical trial services
segment generated revenue of $15.7 million, a 3% increase from the
prior year quarter, but a 6% decrease sequentially from the third
quarter of 2011. The year-over-year improvement was due to higher
staffing volume, an increase in drug safety activity partially
offset by lower average bill rates. The sequential decline was
primarily due to three less billable days in the fourth quarter.
Staffing services accounted for 93% of segment revenue.
Contribution income was $1.5 million, a 10% increase year-over-year
due to higher revenue and improvement in the bill-pay spread
partially offset by the impact of the increase in the state
non-income based taxes, but a 34% decrease sequentially due to
lower revenue and slow-down during the holidays that coincides with
a normal reduction of activity in the pharmaceutical industry.
For the year-ended December 31, 2011, segment revenue increased
4% to $64.6 million from $62.0 million in the prior year.
Contribution income increased 3% to $6.6 million from $6.4 million
in the prior year.
Other Human Capital Management Services
For the fourth quarter of 2011, the other human capital
management services business segment (education and training and
retained search) generated revenue of $10.8 million, a 3% decrease
from the prior year quarter, primarily due to a decrease in seminar
attendance in the education and training business. On a sequential
basis, segment revenue increased 5% from the prior quarter
reflecting an increase in the number of seminars and attendance in
the education and training business partially offset by lower
revenue from the retained search business. Contribution income was
$0.9 million, a 33% decrease year-over-year and 13% sequentially.
The year-over-year decrease was primarily due to negative operating
leverage in both the education and training and the retained search
businesses along with the impact of the increase in the state
non-income based taxes related to the retained search business. The
sequential decline was due to lower contribution income from the
retained search business primarily associated with the impact of
the state non-income based taxes partially offset by significant
improvement in the education and training business.
For the year-ended December 31, 2011, segment revenue decreased
2% to $41.8 million from $42.8 million in the prior year.
Contribution income decreased 16% to $3.2 million from $3.8 million
in the prior year.
Debt Outstanding and Credit Facility
During the fourth quarter of 2011, the Company reduced its debt
by $3.9 million from the end of the prior quarter, which included a
$1.0 million optional pre-payment on its term debt. At December 31,
2011, the Company had $42.0 million of total debt on its balance
sheet and a debt, net of $10.6 million in cash and cash
equivalents, to total capitalization ratio of 10.8%. At the end of
the fourth quarter of 2011, the Company’s debt leverage ratio (as
defined in its credit agreement) was 1.73 to 1, well below the 2.50
to 1 maximum allowable ratio effective for the duration of the
credit agreement.
Stock Repurchase Program Update
During the fourth quarter of 2011, the Company repurchased
427,043 shares of its common stock at an average cost of $5.23 per
share. As of December 31, 2011, the Company can repurchase up to
1,014,096 shares of its common stock under its current Board
authorization, subject to the terms of its credit agreement. Shares
may be repurchased from time-to-time in the open market subject to
the constraints of the Company’s credit agreement and such
repurchases may be discontinued at any time at the discretion of
the Company. At December 31, 2011, the Company had approximately
30.8 million shares outstanding.
Guidance for First Quarter 2012
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, or significant legal proceedings. For the first quarter
of 2012, the Company expects:
- Revenue to be in the $126 million to
$128 million range.
- Gross profit margin to be in the 26.5%
to 27.0% range.
- Adjusted EBITDA margin to be in the
3.0% to 3.5% range. Adjusted EBITDA, a non-GAAP financial measure,
is defined in the accompanying financial statement tables.
- Earnings per diluted share to be in the
range of $0.00 to $0.01.
Quarterly Conference Call
The Company will hold its quarterly conference call on Tuesday,
March 6, 2012, at 10:00 a.m. Eastern Time to discuss its fourth
quarter and year-end 2011 financial results. The call will be
webcast live and can be accessed online at
www.crosscountryhealthcare.com or by dialing 888-972-6408 in the
U.S. or 210-234-0087 from non-U.S. locations – Passcode: Cross
Country. Replays of the call will be available through March 20th
online at the same website address or by dialing 800-294-4350 in
the U.S. or 402-220-9777 from non-U.S. locations – Passcode:
2012.
Non-GAAP (Generally Accepted Accounting Principles) Financial
Measures
This press release and accompanying financial statement tables
reference non-GAAP financial measures. Such non-GAAP financial
measures are provided as additional information and should not be
considered substitutes for, or superior to, financial measures
calculated in accordance with U.S. GAAP. Such non-GAAP financial
measures are provided for consistency and comparability to prior
year results; furthermore, management believes they are useful to
investors when evaluating the Company’s performance as it excludes
certain items that management believes are not indicative of the
Company’s operating performance. Such non-GAAP financial measures
may differ materially from the non-GAAP financial measures used by
other companies. The financial statement tables that accompany this
press release include a reconciliation of each non-GAAP financial
measure to the most directly comparable U.S. GAAP financial measure
and a more detailed discussion of each financial measure; as such,
the financial statement tables should be read in conjunction with
the presentation of these non-GAAP financial measures.
About Cross Country Healthcare
Cross Country Healthcare, Inc. is a diversified leader in
healthcare staffing services offering a comprehensive suite of
staffing and outsourcing services to the healthcare market that
include nurse and allied staffing, physician staffing, clinical
trial services and other human capital management services. The
Company believes it is one of the top two providers of travel nurse
and allied staffing services; one of the largest providers of
temporary physician staffing (locum tenens) services; and a leading
provider of clinical trial staffing services, retained physician
search services and educational seminars specifically for the
healthcare marketplace. On a company-wide basis, Cross Country
Healthcare has approximately 4,200 contracts with hospitals and
healthcare facilities, pharmaceutical and biotechnology customers,
and other healthcare organizations to provide its healthcare
staffing and outsourcing solutions. 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 this 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”, “appears”, “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, 2010, and our other Securities and Exchange
Commission filings made during 2011 and 2012.
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
(a)
(Unaudited, amounts in thousands, except per share data)
Three Months Ended Year Ended December
31, December 31, 2011
2010 % Change 2011
2010 % Change Revenue from
services $ 124,729 $ 113,677 10% $ 503,986 $ 468,562 8% Operating
expenses: Direct operating expenses 90,115 81,079 11% 366,044
336,250 9% Selling, general and administrative expenses (b) 29,131
27,147 7% 116,538 108,984 7% Bad debt expense 344 179 92% 579 294
97% Depreciation 1,598 1,887 (15%) 6,791 8,043 (16%) Amortization
818 964 (15%) 3,493 3,851 (9%) Impairment charges (c) -
10,764 (100%) - 10,764
(100%) Total operating expenses 122,006
122,020 0% 493,445 468,186 5%
Income (loss) from operations 2,723 (8,343 ) NM 10,541 376
NM
Other (income) expenses: Foreign exchange (gain) loss (122 ) 4 NM
(247 ) 76 NM Interest expense 676 805 (16%) 2,856 4,245 (33%) Other
income, net (70 ) (50 ) 40% (298 ) (173
) 72% Income (loss) before income taxes 2,239 (9,102 ) NM 8,230
(3,772 ) NM Income tax expense (benefit) (b) 1,707
(3,098 ) NM 4,132 (997 ) NM
Net income (loss)
$ 532 $ (6,004 ) NM $ 4,098 $ (2,775 ) NM
Net income (loss) per common share:
Basic $ 0.02 $ (0.19 ) NM $ 0.13 $ (0.09 ) NM Diluted
$ 0.02 $ (0.19 ) NM $ 0.13 $ (0.09 ) NM
Weighted average common shares outstanding: Basic 31,108 31,103
31,146 31,060 Diluted 31,117 31,103 31,192 31,060
Cross Country Healthcare, Inc. Reconciliation of Non-GAAP
Financial Measures Adjusted EBITDA (d) (Unaudited,
amounts in thousands) Three Months Ended Year
Ended December 31, December 31,
2011 2010 2011
2010
Income (loss) from operations
$ 2,723 $ (8,343 ) $ 10,541 $ 376 Depreciation 1,598 1,887 6,791
8,043 Amortization 818 964 3,493 3,851 Impairment charges (c) -
10,764 - 10,764 Equity compensation 645 715
2,895 2,657 Adjusted EBITDA (d)
$ 5,784 $ 5,987 $ 23,720 $ 25,691
Adjusted EBITDA Margin (d) 4.6 % 5.3 % 4.7 % 5.5 %
Cross Country Healthcare, Inc. Condensed Consolidated
Balance Sheets (a) (Unaudited, amounts in thousands)
December 31, December 31, 2011
2010 Assets Current assets: Cash
and cash equivalents $ 10,648 $ 10,957 Short-term cash investments
1,691 1,870 Accounts receivable, net 71,802 64,395 Deferred tax
assets 10,645 11,801 Income taxes receivable 1,879 6,563 Prepaid
expenses 7,441 6,530 Other current assets 701
649 Total current assets 104,807 102,765 Property and
equipment, net 12,018 14,536 Trademarks, net 52,053 52,055
Goodwill, net 143,344 143,349 Other identifiable intangible assets,
net 21,195 24,681 Debt issuance costs, net 1,199 2,112 Non-current
deferred tax assets - 2,484 Other long-term assets 1,294
1,676 Total assets $ 335,910 $ 343,658
Liabilities and Stockholders' Equity Current
liabilities: Accounts payable and accrued expenses $ 9,018 $ 7,944
Accrued employee compensation and benefits 16,332 14,641 Current
portion of long-term debt 16,998 7,957 Other current liabilities
4,002 4,712 Total current liabilities
46,350 35,254 Long-term debt 25,048 45,556 Non-current deferred tax
liabilities 58 - Other long-term liabilities 15,154
16,839 Total liabilities 86,610 97,649
Commitments and contingencies Stockholders' equity: Common
stock 3 3 Additional paid-in capital 243,170 243,005 Accumulated
other comprehensive loss (3,373 ) (2,401 ) Retained earnings
9,500 5,402 Total stockholders' equity
249,300 246,009 Total liabilities and
stockholders' equity $ 335,910 $ 343,658
Cross Country Healthcare, Inc. Segment Data (e)
(Unaudited, amounts in thousands) Three Months
Ended Year Ended December 31, December 31,
2011 % of Total 2010
% of Total % Change 2011
% of Total 2010 % of Total %
Change Revenue from services: Nurse and
allied staffing $ 70,287 56 % $ 59,417 52 % 18% $ 278,793 55 % $
242,160 52 % 15% Physician staffing 27,928 22 % 27,895 25 % 0%
118,781 24 % 121,599 26 % (2%) Clinical trial services 15,738 13 %
15,301 13 % 3% 64,609 13 % 61,957 13 % 4% Other human capital
management services 10,776 9 % 11,064
10 % (3%) 41,803 8 % 42,846 9 % (2%) $
124,729 100 % $ 113,677 100 % 10% $ 503,986
100 % $ 468,562 100 % 8% Contribution income (f)
Nurse and allied staffing (g) $ 5,473 $ 5,224 5% $ 22,441 $
21,383 5% Physician staffing 2,720 2,958 (8%) 11,320 13,052 (13%)
Clinical trial services 1,472 1,336 10% 6,555 6,391 3% Other human
capital management services 852 1,279
(33%) 3,172 3,768 (16%) 10,517 10,797
(3%) 43,488 44,594 (2%) Unallocated corporate overhead (g)
5,378 5,525 (3%) 22,663 21,560 5% Depreciation 1,598 1,887 (15%)
6,791 8,043 (16%) Amortization 818 964 (15%) 3,493 3,851 (9%)
Impairment charges (c) - 10,764 (100%)
- 10,764 (100%)
Income (loss) from operations
$ 2,723 $ (8,343 ) NM $ 10,541 $ 376
NM
Cross Country Healthcare, Inc. Other
Financial Data (Unaudited) Three Months
Ended Year Ended December 31, December 31,
2011 2010
2011 2010 Net cash provided by
operating activities (in thousands) $ 3,666 $ 6,737 $ 18,296 $
31,522
Nurse and allied
staffing statistical data:
FTEs (h) 2,457 2,124 2,472 2,185 Days worked (i) 226,044 195,408
902,280 797,525 Average nurse and allied staffing revenue
per FTE per day (j) $ 311 $ 304 $ 309 $ 304
Physician staffing
statistical data (k):
Days filled (l) 20,200 20,350 85,416 89,421 Revenue per day filled
(m) $ 1,383 $ 1,371 $ 1,391 $ 1,360 (a) Certain prior year
data has been reclassified to conform to the current year's
presentation.
(b) During the fourth quarter of 2011, the
Company accrued a pretax liability for certain non-income tax
matters related to prior years of approximately $0.5 million ($0.3
million after tax), which is included in selling, general and
administrative expenses on the consolidated statements of
operations. In addition, the Company recorded approximately $0.3
million in income tax expense related to an overstatement of prior
period deferred tax assets for share-based payments.
(c) Impairment charges in the three months
and year ended December 31, 2010, relate to the impairment of
trademarks acquired in the Company's MDA acquisition, of which
$10.0 million was for a trademark in the Company's physician
staffing business segment and $0.7 million was for a trademark in
the Company's nurse and allied staffing business segment.
(d) Adjusted EBITDA, a non-GAAP (Generally
Accepted Accounting Principles) financial measure, is defined as
income from operations before depreciation, amortization and
non-cash equity compensation. Adjusted EBITDA should not be
considered a measure of financial performance under GAAP.
Management presents Adjusted EBITDA because it believes that
Adjusted EBITDA is a useful supplement to income from operations as
an indicator of operating performance. Management uses Adjusted
EBITDA as one performance measure in its annual cash incentive
program for certain members of its management team. In addition,
management monitors Adjusted EBITDA for planning purposes,
including compliance with its debt covenants. Adjusted EBITDA, as
defined, closely matches the operating measure used in the
Company's Debt Leverage Ratio and Minimum Fixed Charge Coverage
Ratio as defined by its Credit Agreement. Management believes
Adjusted EBITDA, as defined, is useful to investors when evaluating
the Company's performance as it excludes certain items that
management believes are not indicative of the Company's operating
performance. Adjusted EBITDA Margin is calculated by dividing
Adjusted EBITDA by the Company's consolidated revenue.
(e) Segment data provided is in accordance with the Segment
Reporting Topic of the FASB ASC.
(f) Defined as income from operations
before depreciation, amortization and corporate expenses not
specifically identified to a reporting segment. Contribution income
is a financial measure used by management when assessing segment
performance.
(g) Certain 2010 segment data has been
reclassified to conform to the 2011 presentation. During 2011, the
Company refined its methodology for allocating certain corporate
overhead expenses to its nurse and allied staffing segment to more
accurately reflect that segment’s profitability.
(h) FTEs represent the average number of nurse and allied contract
staffing personnel on a full-time equivalent basis. (i) Days worked
is calculated by multiplying the FTEs by the number of days during
the respective period.
(j) Average revenue per FTE per day is
calculated by dividing the nurse and allied staffing revenue by the
number of days worked in the respective periods. Nurse and allied
staffing revenue also includes revenue from permanent placement of
nurses.
(k) Beginning in the first quarter of
2011, the Company refined its statistical methodology related to
its physician staffing metrics. Accordingly, historical 2010
quarterly data for these metrics have been revised to conform to
the current year's presentation.
(l) Days filled is calculated by dividing the total hours filled
during the period by 8 hours. (m) Revenue per day filled is
calculated by dividing the applicable revenue generated by the
Company's physician staffing segment by days filled for the period
presented.
NM - Not meaningful
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