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Cross Country Healthcare Announces Second Quarter 2013 Financial Results

Cross Country Healthcare Announces Second Quarter 2013 Financial Results

Cross Country Healthcare, Inc. (NASDAQ: CCRN) today announced financial results for the second quarter ended June 30, 2013.

SECOND QUARTER FINANCIAL HIGHLIGHTS

Consolidated revenue was $110.8 million compared with $108.8 million last year, an increase of 2%.

Loss from continuing operations was $1.4 million, or $0.05 per diluted share, compared with a loss of $18.8 million, or $0.61 per diluted share, in the prior year that included a non-cash goodwill impairment charge of $12.0 million after-tax, or $0.39 per diluted share.

Adjusted EBITDA (see table titled "Reconciliation of Non-GAAP Financial Measures") increased to $1.7 million, or 1.5% of revenue, compared with $1.6 million, or 1.4% of revenue, in the prior year quarter.

Cash flow from operations was $5.9 million and total debt was $0.4 million at the end of the period. At the end of the quarter, the Company had $25.9 million in cash and cash equivalents and $27.7 million of excess availability under its credit facility.

The Company initiated a restructuring plan to reduce operating costs and recorded a restructuring charge of $0.4 million, pretax, primarily related to senior management employee severance pay.

The Company agreed in principle to settle a wage and hour class action lawsuit in California for $0.75 million, subject to a final binding agreement and approval by the court.

Cross Country Healthcare President and CEO William J. Grubbs commented, "Second quarter performance was in line with our expectations. We generated modest revenue growth and solid operating cash flow and ended the quarter with a very strong liquidity position. Our team demonstrated sound financial discipline with higher bill rates and higher bill/pay spreads in our staffing businesses. As well, we initiated a restructuring program to reduce operating costs. Demand for services within our industry continues to be stable and we remain committed to our strategy of driving revenue growth from our targeted customer segments and increasing Adjusted EBITDA margins."

SECOND QUARTER OPERATING PERFORMANCE

Second quarter consolidated revenue was $110.8 million, an increase of 2% from the same quarter last year, and a slight increase sequentially, due to strong performance of the physician staffing business segment. The Company's consolidated gross margin was 25.1%, up 20 basis points from the same quarter last year and down 110 basis points sequentially. The primary reason for the sequential decline in margin was a favorable professional liability accrual adjustment related to our nurse and allied staffing business segment in the first quarter of 2013. The Company generated $5.9 million in cash flow from operations during the second quarter of 2013, compared with $2.4 million in the second quarter of 2012.

Revenue from the nursing and allied staffing business segment was essentially flat from the same quarter last year, and down 7% sequentially, due to a softer demand environment in the second quarter. Contribution income in this segment was $3.7 million, up from $1.8 million in the same quarter last year. The increase in segment contribution income was due to lower selling, general and administrative expenses and housing costs, as well as improved bill/pay spreads.

Revenue from the physician staffing business increased 7% year over year driven by a combination of price and volume, and increased 17% sequentially, primarily due to higher volume. Contribution income was $2.5 million, down from $2.7 million in the same quarter last year. The decrease was primarily due to unfavorable professional liability claims development in the second quarter of 2013.

Revenue from the other human capital management services business segment was $10.3 million, essentially flat from the same quarter last year and up 8% sequentially. Contribution income was $0.5 million, up from $0.3 million in the same quarter last year.

Selling, general and administrative expenses in the second quarter were $26.6 million, down 4% from the same quarter last year and down 2% sequentially.

The Company's net loss in the second quarter was $1.5 million or $0.05 per diluted share, compared to $14.5 million or $0.47 per diluted share a year ago. Excluding the restructuring costs and legal settlement charge, the adjusted net loss for the second quarter would have been $0.7 million or $0.02 per diluted share (see table titled "Reconciliation of Non-GAAP Financial Measures").

At June 30, 2013, the Company had $25.9 million in cash and cash equivalents and $0.4 million of debt related primarily to capital lease obligations.

OUTLOOK

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 any material legal or restructuring charges. For the third quarter of 2013, the Company expects:

Revenue to be in the $110.0 million to $112.0 million range.

Gross profit margin to be approximately 25.0% to 25.5%.

Adjusted EBITDA margin from continuing operations to be in the 1% to 2% range. Adjusted EBITDA, a non-GAAP financial measure, is defined in the accompanying financial statement tables.

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