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Cross Country Healthcare, Inc. Q2 2010 Earnings Call Transcript

In this segment, we have seen significant improvement in the demand in most of the country over the past two months, which is very encouraging to us. More importantly, we continue to add attractive new hospital systems to our roster of vendor management clients, which should allow us to take an even larger size of an increasing market opportunity as we move through the second half of this year.

In our physician staffing business, revenue was up slightly on a sequential basis from the first quarter, essentially mirroring the normal seasonal pattern of this business. As such, we cannot yet ascribe revenue momentum in the segment to improvement in underlying demand trends. However the typical fourth quarter seasonal drop in acquisition in the physician staffing business should be more than offset by building momentum in our Nurse and Allied Staffing business.

In our Clinical Trials Services segment we have increased revenue by 4% sequentially as our staffing activity continued to rebound. The strength in staffing was offset partly by continued weakness in drug safety monitoring, outsourcing and regulatory consulting activity. Staffing activity accounted for 95% of our Clinical Trials segment revenue in the second quarter, substantially above the 75% contribution in the year-ago quarter. Even with this somewhat unfavorable shift in mix for our Clinical Trials segment, gross profit margins for the company as a whole were 200 basis points favorable to the year ago quarter.

Our continued focus on profitability and cash flow allowed us to make the remaining earnout payment in April of nearly $13 million to the sellers to the MDA, which we acquired in 2008 without increasing the company’s debt outstanding in the second quarter. There are no more earnout payments facing the company. Subsequent to the payment of the earnout with the support of our lenders, we elected to amend and extend our revolving credit facility to be co-terminus with our term debt facility in September 2013. While Emil will into more detail in a few moments, I would like to point out that we were able to accomplish this without affecting the rate we pay on our remaining $56 million of term loan outstanding, which carries interest rates currently below market.

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