Cross Country Healthcare Reports Fourth Quarter and Year-End 2011 Results
Cross Country Healthcare Reports Fourth Quarter and Year-End 2011 Results
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.
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.comor 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.