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Cross Country Healthcare Reports Fourth Quarter And Full Year 2012 Results

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 leader in healthcare staffing with a primary focus on providing nurse, allied and physician (locum tenens) staffing services and workforce solutions to the healthcare market. The Company believes it is one of the top two providers of nurse and allied staffing services, one of the top four providers of temporary physician staffing services, and one of the top five providers of retained physician and healthcare executive search services. The Company also is a leading provider of education and training programs specifically for the healthcare marketplace. On a company-wide basis, Cross Country Healthcare has approximately 4,000 contracts with hospitals and healthcare facilities, and other healthcare organizations to provide our staffing services and workforce 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 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, 2011, and our other Securities and Exchange Commission filings made prior to the date hereof.

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 Year Ended
December 31, December 31, September 30, December 31, December 31,
2012 2011 2012 2012 2011
 
 
Revenue from services $ 111,731 $ 108,991 $ 112,257 $ 442,635 $ 439,377
Operating expenses:
Direct operating expenses 83,787 78,840 84,802 331,050 319,989
Selling, general and administrative expenses 27,055 26,155 26,832 109,417 104,544
Bad debt expense 195 329 268 786 574
Depreciation (c) 1,107 1,395 1,035 4,905 5,965
Amortization (c) 566 566 566 2,263 2,394
Impairment charges (a)   -     -     -   18,732   -
Total operating expenses   112,710     107,285     113,503   467,153   433,466
(Loss) income from operations (979 ) 1,706 (1,246) (24,518) 5,911
Other (income) expenses:
Foreign exchange (income) loss (65 ) (124 ) 108 (62) (264)
Interest expense, net 433 676 697 2,341 2,856
Loss on modification of debt - - 82 82 -
Other (income) expense, net   (23 )   (70 )   (89)   16   (298)
(Loss) income from continuing operations before income taxes (1,324 ) 1,224 (2,044) (26,895) 3,617
Income tax expense (benefit)   1,661     1,416     (2,763)   (6,150)   2,069
(Loss) income from continuing operations (2,985 ) (192 ) 719 (20,745) 1,548
Discontinued operations, net of income taxes (b)   (6,548 )   724     (18,319)   (21,476)   2,550
Net (loss) income $ (9,533 ) $ 532   $ (17,600) $ (42,221) $ 4,098
 
Net (loss) income per common share, basic:
(Loss) income from continuing operations $ (0.10 ) $ 0.00 $ 0.02 $ (0.67) $ 0.05
Discontinued operations (b)   (0.21 )   0.02     (0.59)   (0.70)   0.08
Net (loss) income $ (0.31 ) $ 0.02   $ (0.57) $ (1.37) $ 0.13
 
Net (loss) income per common share, diluted:
(Loss) income from continuing operations $ (0.10 ) $ 0.00 $ 0.02 $ (0.67) $ 0.05
Discontinued operations (b)   (0.21 )   0.02     (0.59)   (0.70)   0.08
Net (loss) income $ (0.31 ) $ 0.02   $ (0.57) $ (1.37) $ 0.13
 
Weighted average common shares outstanding:
Basic 30,902 31,108 30,902 30,843 31,146
Diluted 30,902 31,117 30,902 30,843 31,192
 
 
 
 
 
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, September 30, December 31, December 31,
2012 2011 2012 2012 2011
(Loss) income from operations $ (979 ) $ 1,706 $ (1,246) $ (24,518) $ 5,911
Depreciation (c) 1,107 1,395 1,035 4,905 5,965
Amortization (c) 566 566 566 2,263 2,394
Impairment charges (a) - - - 18,732 -
Equity compensation   615     645     611   2,595   2,895
Adjusted EBITDA from continuing operations 1,309 4,312 966 3,977 17,165
 
Adjusted EBITDA from discontinued operations 1,905 1,473 1,574 6,363 6,555
         
Adjusted EBITDA (d) $ 3,214   $ 5,785   $ 2,540 $ 10,340 $ 23,720
 
 
 
 
Cross Country Healthcare, Inc.
Condensed Consolidated Balance Sheets (e)
(Unaudited, amounts in thousands)
 
December 31, December 31,
2012 2011
Assets
Current assets:
Cash and cash equivalents $ 10,463 $ 10,648
Short-term cash investments - 1,691
Accounts receivable, net 62,674 71,802
Deferred tax assets 12,561 10,645
Income taxes receivable 586 1,879
Prepaid expenses 5,580 7,441
Assets held for sale 46,971 -
Insurance recovery receivable 5,484 4,741
Other current assets   1,049     701  
Total current assets 145,368 109,548
Property and equipment, net 8,235 12,018
Trademarks, net 48,701 52,053
Goodwill, net 62,712 143,344
Other identifiable intangible assets, net 14,492 21,195
Debt issuance costs, net (e) 1,610 1,199
Non-current deferred tax assets 16,182 -
Other long-term assets   8,623     8,585  
Total assets $ 305,923   $ 347,942  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 10,130 $ 9,018
Accrued employee compensation and benefits 21,650 21,074
Current portion of long-term debt 33,683 16,998
Liabilities related to assets held for sale 2,835 -
Other current liabilities   4,289     4,002  
Total current liabilities 72,587 51,092
Long-term debt 176 25,048
Non-current deferred tax liabilities - 58
Other long-term liabilities   24,038     22,444  
Total liabilities $ 96,801 $ 98,642
 
Commitments and contingencies
 
Stockholders' equity:
Common stock 3 3
Additional paid-in capital 244,924 243,170
Accumulated other comprehensive loss (3,083 ) (3,373 )
(Accumulated deficit) retained earnings   (32,722 )   9,500  
Total stockholders' equity $ 209,122 $ 249,300
   
Total liabilities and stockholders' equity $ 305,923   $ 347,942  
 
 
Cross Country Healthcare, Inc.
Segment Data (f)
(Unaudited, amounts in thousands)
 
Three Months Ended
December 31, December 31, September 30, YOY Sequential
2012 2011 2012 % change   % change
 
Revenue from services:
 
Nurse and allied staffing $ 70,850 $ 70,287 $ 69,750 1% 2%
Physician staffing 30,667 27,928 32,680 10% -6%
Other human capital management services   10,214     10,776     9,827 -5% 4%
$ 111,731   $ 108,991   $ 112,257 3% 0%
 
Contribution income (g)
 
Nurse and allied staffing $ 4,012 $ 5,473 $ 2,950 -27% 36%
Physician staffing 2,460 2,720 3,108 -10% -21%
Other human capital management services   534     852     25 -37% 2036%
$ 7,006 $ 9,045 $ 6,083 -23% 15%
 
 
Unallocated corporate overhead $ 6,312 $ 5,378 $ 5,728 -17% -10%
Depreciation (c) 1,107 1,395 1,035 21% -7%
Amortization (c)   566     566     566 0% 0%
(Loss) income from operations $ (979 ) $ 1,706   $ (1,246) -157% 21%
 
 
 
Year Ended
December 31, December 31, YOY
2012 2011 % change
 
Revenue from services:
 
Nurse and allied staffing $ 277,754 $ 278,793 0%
Physician staffing 123,545 118,781 4%
Other human capital management services   41,336     41,803   -1%
$ 442,635   $ 439,377   1%
 
Contribution income (g)
 
Nurse and allied staffing $ 13,202 $ 22,441 -41%
Physician staffing 10,652 11,320 -6%
Other human capital management services   1,944     3,172   -39%
$ 25,798 $ 36,933 -30%
 
 
Unallocated corporate overhead $ 24,416 $ 22,663 -8%
Depreciation (c) 4,905 5,965 18%
Amortization (c) 2,263 2,394 5%
Impairment charges (a)   18,732     -  

-100%

(Loss) income from operations $ (24,518 ) $ 5,911   -515%
 
 
 
Cross Country Healthcare, Inc.
Other Financial Data
(Unaudited)
 
Three Months Ended Year Ended
December 31, December 31, September 30, December 31, December 31,
2012 2011 2012 2012 2011
Net cash provided by operating activities (in thousands) $ 4,440 $ 3,666 $ 1,903 $ 10,146 $ 18,296
 

Nurse and allied staffing statistical data:

FTEs (h) 2,452 2,457 2,450 2,446 2,472
Days worked (i) 225,584 226,044 225,400 895,236 902,280
Average nurse and allied staffing revenue per FTE per day (j) $ 314 $ 311 $ 309 $ 310 $ 309
 

Physician staffing statistical data:

Days filled (k) 20,290 20,200 22,647 85,001 85,416
Revenue per days filled (l) $ 1,511 $ 1,383 $ 1,443 $ 1,453 $ 1,391
 
 
 
 
(a) Impairment charges relate to the impairment of goodwill in the Company's nurse and allied staffing reporting unit pursuant to the Intangibles-Goodwill and Other Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) No. 350.

(b) Discontinued operations include the results of the Company's clinical trial services business segment which include the impairment of its goodwill and certain trademarks in its third and fourth quarters of 2012. In the fourth quarter of 2012, the Company decided to sell this business segment and completed the sale on February 15, 2013.

(c) Excludes depreciation and amortization of discontinued operations. Total depreciation and amortization included in discontinued operations were (in thousands): 1Q12-$447, 2Q12-$447, 3Q12-$422, 4Q12-$464, 1Q11-$534, 2Q11-$467, 3Q11-$470 and 4Q11-$455.
(d) Adjusted EBITDA, a non-GAAP (Generally Accepted Accounting Principles) financial measure, is defined as (loss) income from operations before depreciation, amortization, impairment charges 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 (loss) 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 typically used in the Company's credit facilities in calculating various ratios. 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) Certain prior year amounts have been reclassified to conform to the current period's presentation.
(f) Segment data provided is in accordance with the Segment Reporting Topic of the FASB ASC.
(g) 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.
(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) Days filled is calculated by dividing the total hours filled during the period by 8 hours.
(l) 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.




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