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Cross Country Healthcare Reports Second Quarter 2011 Results

Cross Country Healthcare Reports Second Quarter 2011 Results

Cross Country Healthcare, Inc. has reported revenue of $126.0 million in the second quarter ended June 30, 2011, a 3% increase sequentially from the first quarter of 2011 and a 7% increase from revenue of $117.8 million in the prior year quarter. Net income in the second quarter of 2011, which benefited from a lower than expected effective income tax rate due to discrete items, was $1.6 million, or $0.05 per diluted share, as compared to $1.2 million, or $0.04 per diluted share, in the same quarter of the prior year. Cash flow from operations for the second quarter of 2011 was $10.0 million.

For the six months ended June 30, 2011, the Company generated revenue of $248.1 million and net income of $1.8 million, or $0.06 per diluted share, which included the aforementioned discrete tax items. This compares to revenue of $239.2 million and net income of $2.3 million, or $0.07 per diluted share, in the first six months of the prior year. Cash flow from operations for the first six months of 2011 was $11.4 million.

"Our second quarter results highlight the continued recovery in the markets we serve as all four of our business segments produced revenue growth from the prior quarter. The strongest momentum was generated in our largest segment, nurse and allied staffing, of which the sequential improvement was seasonally atypical for us. Currently, the number of FTEs on contract in this segment is up more than 20% year-over-year," said Joseph A. Boshart, President and Chief Executive Officer of Cross Country Healthcare, Inc. "Additionally, due in large part to the broad-based resurgence in demand, the dynamics in our nurse and allied staffing business are much better than they were for the last several years. While our managed service provider (MSP) staffing service and staffing for electronic medical record implementations continue to be staples of our business, I am especially encouraged by the significant increase in demand from other accounts that have largely been dormant over the past few years. In fact, non-MSP clients currently account for a substantial majority of our open nurse staffing job orders, which provide our healthcare professionals with even more options to choose from. Said another way, success today is driven much more by supply than demand. And although we are in a supply constrained environment, this greater diversity in job orders should enable us to further improve our recruitment and retention of nurses," he added.

"The gross profit margin for the Company as a whole declined 110-basis-points from the prior year quarter due primarily to higher housing costs in our nurse and allied staffing business along with the shift in mix of our consolidated revenue toward this faster growing, but lower margin segment. We expect that improving pricing trends in this segment will provide some margin relief later this year," Mr. Boshart said.

Nurse and Allied Staffing

For the second quarter of 2011, the nurse and allied staffing business segment (travel and per diem nurse and allied health staffing) generated revenue of $68.3 million, reflecting a 2% sequential increase from the first quarter of 2011 and a 14% increase from the prior year quarter. The sequential and year-over-year increases were due to higher staffing volume. Contribution income (defined as income from operations before depreciation, amortization and corporate expenses not specifically identified to a reporting segment) was $5.6 million, a 12% increase sequentially from the first quarter of 2011 due primarily to higher revenue along with the normal seasonal reduction of payroll taxes. Contribution income decreased 1% year-over-year due to higher housing costs and higher SG&A expenses primarily associated with MSP-related activity, which more than offset the benefit from greater staffing volume.

Segment staffing volume increased 2% sequentially from the first quarter of 2011, and increased 14% from the prior year quarter. Travel staffing volume increased 2% on a sequential basis and increased 17% on a year-over-year basis. Per diem staffing volume increased 3% sequentially and 2% on a year-over-year basis. The average revenue per FTE per day for the second quarter of 2011 was $305, a decrease of 1% sequentially and a slight increase from the prior year. For travel nurse staffing, the average hourly bill rate increased slightly on a sequential basis and decreased slightly year-over-year.

For the first six months of 2011, segment revenue increased 9% to $135.1 million from $124.5 million in the same period a year ago, while contribution income decreased 5% to $10.6 million from $11.2 million in the prior year period.

Physician Staffing

For the second quarter of 2011, the physician staffing business segment generated revenue of $30.6 million, a 4% increase sequentially from the first quarter of 2011, but a 2% decrease from the prior year quarter. The sequential increase was due to higher staffing volume and a favorable shift in the mix of specialties. The year-over-year decrease reflected lower staffing volume that was partially offset by a favorable mix of higher bill-rate specialties. Contribution income was $2.9 million, a 5% increase sequentially due to higher revenue, but a 22% decrease year-over-year due to lower revenue in the current quarter and a favorable professional liability accrual adjustment in the prior year quarter. Physician staffing days filled for the second quarter of 2011 was 21,737 days, a 5% increase sequentially, but a 5% decrease from the prior year quarter. Revenue per day filled for the second quarter of 2011 was $1,408, a 1% decrease sequentially and a 4% increase year-over-year due to a shift in mix.

For the first six months of 2011, segment revenue decreased 4% to $60.0 million from $62.4 million in the same period a year ago, while contribution income decreased 14% to $5.7 million from $6.6 million in the prior year period.

Clinical Trial Services

For the second quarter of 2011, the clinical trial services segment generated revenue of $16.5 million, a 5% increase sequentially from the first quarter of 2011 and a 4% increase from the prior year quarter. The sequential and year-over-year improvement was due to higher staffing volume that was partially offset by lower bill rates. Staffing accounted for 95% of segment revenue. Contribution income was $1.6 million, a 20% increase sequentially due to higher staffing volume and improved operating leverage, but a 9% decrease year-over-year due primarily to lower permanent placement revenue.

For the first six months of 2011, segment revenue increased 4% to $32.1 million from $31.0 million in the same period a year ago, while contribution income decreased 13% to $2.8 million from $3.3 million in the prior year period.

Other Human Capital Management Services

For the second quarter of 2011, the other human capital management services business segment (education and training and retained search) generated revenue of $10.7 million, a 6% increase sequentially from the first quarter of 2011, but a 2% decrease from the prior year quarter. Segment contribution income was $0.9 million, a 143% increase sequentially and a 19% increase from the prior year quarter due to significant revenue and operating improvement in the retained search business offset by declines in the education and training business.

For the first six months of 2011, segment revenue decreased 2% to $20.8 million from $21.3 million in the same period a year ago, while contribution income decreased 26% to $1.3 million from $1.8 million in the prior year period.

Debt Outstanding and Credit Facility

During the second quarter of 2011, the Company reduced its debt by $1.9 million from the end of the prior quarter. At June 30, 2011, the Company had $50.0 million of total debt on its balance sheet and a debt, net of $16.0 million in cash and cash equivalents, to total capitalization ratio of 11.3%. At the end of the second quarter of 2011, the Company's debt leverage ratio (as defined in its credit agreement) was 2.17 to 1, below the 2.50 to 1 maximum allowable ratio effective for the duration of the credit agreement.

Guidance for Third Quarter 2011

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 third quarter of 2011, the Company expects:

-- Revenue to be in the $128.0 million to $130.0 million range.

-- Gross profit margin to be approximately 27.0%.

-- Adjusted EBITDA to be in the 4.5% to 5.0% 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 $0.03 to $0.05.

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