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Cross Country Healthcare Reports Third Quarter 2011 Results

Cross Country Healthcare Reports Third Quarter 2011 Results

Cross Country Healthcare, Inc has reported revenue of $131.2 million in the third quarter ended September 30, 2011, a 13% increase from revenue of $115.7 million in the prior year quarter and a 4% increase sequentially from the second quarter of 2011. Net income in the third quarter of 2011 was $1.8 million, or $0.06 per diluted share, as compared to $0.9 million, or $0.03 per diluted share, in the same quarter of the prior year. Cash flow from operations for the third quarter of 2011 was $3.3 million.

For the nine months ended September 30, 2011, the Company generated revenue of $379.3 million and net income of $3.6 million, or $0.11 per diluted share. This compares to revenue of $354.9 million and net income of $3.2 million, or $0.10 per diluted share, in the first nine months of the prior year. Cash flow from operations for the first nine months of 2011 was $14.6 million.

"Our nurse and allied staffing segment delivered strong top and bottom line growth year-over-year in the third quarter driven by a broad-based resurgence in demand," said Joseph A. Boshart, President and Chief Executive Officer of Cross Country Healthcare, Inc. "The fact that net weeks booked were up 24% during the third quarter suggests the fourth quarter should show similar year-over-year comparisons, which also bodes well for our largest segment as we enter 2012. Currently, there appears to be nothing in our metrics that would be consistent with an economic slowdown from current levels," said Mr. Boshart.

"Our clinical trial services business saw modest top-line improvement in the third quarter both sequentially and compared to a year ago. More importantly, margins in this segment were much improved versus the comparable periods and were an important contributor to our improved performance in the third quarter. Our physician staffing business continued to show signs of recovery in the third quarter. And while we anticipate this business will experience a normal seasonal sequential decline in the fourth quarter, we expect revenue in this segment to be up year-over-year for the first time since 2008. Additionally, I am especially pleased with the much improved performance of our retained physician and executive search business in the third quarter," Mr. Boshart added.

Nurse and Allied Staffing

For the third quarter of 2011, the nurse and allied staffing business segment (travel and per diem nurse and allied health staffing) generated revenue of $73.4 million, reflecting a 26% increase from the prior year quarter and an 8% sequential increase from the second quarter of 2011. The year-over-year and sequential increases were due primarily 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 $6.3 million, an increase of 27% year-over-year and 12% sequentially. As a percentage of segment revenue, contribution income was 8.6% in the third quarter of 2011, an increase of 10 basis points year-over-year and 40 basis points sequentially. The sequential increase was due primarily to accrual adjustments related to workers' compensation and professional liability.

Segment staffing volume increased 23% from the prior year quarter and 4% sequentially from the second quarter of 2011. Travel staffing volume increased 24% on a year-over-year basis and 4% on a sequential basis while per diem staffing volume increased 18% year-over-year and 4% sequentially. The average revenue per FTE per day for the third quarter of 2011 was $311, an increase of 2% both year-over-year and sequentially. For travel nurse staffing, the average hourly bill rate increased 1% year-over-year and 2% on a sequential basis.

For the first nine months of 2011, segment revenue increased 14% to $208.5 million from $182.7 million in the same period a year ago, while contribution income increased 5% to $17.0 million from $16.2 million in the prior year period.

Physician Staffing

For the third quarter of 2011, the physician staffing business segment generated revenue of $30.8 million, a 2% decrease from the prior year quarter but a 1% increase sequentially from the second quarter of 2011. The year-over-year decrease reflected a shift in the mix to lower bill-rate specialties, while the sequential improvement was due to an increase in staffing volume partially offset by an unfavorable shift in specialty mix. Contribution income was $2.9 million, a 16% decrease year-over-year but a 1% increase sequentially. Contribution income as a percentage of segment revenue declined 170 basis points from the prior year quarter due primarily to a combination of higher physician expenses and lower permanent placement revenue. Physician staffing days filled for the third quarter of 2011 was 22,811 days, essentially flat with the prior year quarter but a 5% increase sequentially. Revenue per day filled for the third quarter of 2011 was $1,351, a 1% decrease year-over-year and 4% sequentially due to an unfavorable shift in the mix of specialties.

For the first nine months of 2011, segment revenue decreased 3% to $90.9 million from $93.7 million in the same period a year ago, while contribution income decreased 15% to $8.6 million from $10.1 million in the prior year period.

Clinical Trial Services

For the third quarter of 2011, the clinical trial services segment generated revenue of $16.8 million, a 7% increase from the prior year quarter and 2% sequentially from the second quarter of 2011. The year-over-year and sequential improvement was due to higher staffing volume that was partially offset by lower bill rates. Staffing accounted for 93% of segment revenue. Contribution income was $2.2 million, a 26% increase year-over-year and 44% sequentially due primarily to revenue improvement and margin gain in both the staffing and non-staffing components of this segment.

For the first nine months of 2011, segment revenue increased 5% to $48.9 million from $46.7 million in the same period a year ago, while contribution income increased 1% to $5.1 million from the prior year period.

Other Human Capital Management Services

For the third quarter of 2011, the other human capital management services business segment (education and training and retained search) generated revenue of $10.2 million, a 2% decrease from the prior year quarter and 4% sequentially from the second quarter of 2011. Segment contribution income was $1.0 million, a 46% increase year-over-year and 4% sequentially due to improvement in the retained search business partially offset by a decline in the education and training business due to lower seminar attendance.

For the first nine months of 2011, segment revenue decreased 2% to $31.0 million from $31.8 million in the same period a year ago, while contribution income decreased 7% to $2.3 million from $2.5 million in the prior year period.

Debt Outstanding and Credit Facility

During the third quarter of 2011, the Company reduced its debt by $4.0 million from the end of the prior quarter. At September 30, 2011, the Company had $46.0 million of total debt on its balance sheet and a debt, net of $14.3 million in cash and cash equivalents, to total capitalization ratio of 10.7%. At the end of the third quarter of 2011, the Company's debt leverage ratio (as defined in its credit agreement) was 1.89 to 1, below the 2.50 to 1 maximum allowable ratio effective for the duration of the credit agreement. At the current debt leverage ratio, the Company is permitted to use its excess cash to repurchase up to $2.5 million of its common stock pursuant to an existing Board authorization.

Guidance for Fourth 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 fourth quarter of 2011, the Company expects:

Revenue to be in the $126 million to $128 million range.

Gross profit margin to be in the 27.0% to 27.5% range.

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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