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Cross Country Healthcare announces full year results

The company also announced the appointment of William Burns as chief financial officer, effective April 1, 2014, succeeding Emil Hensel who is retiring. Mr. Burns, a Certified Public Accountant, has served as Group Vice President and Corporate Controller for Gartner, Inc. since 2008, and prior to that served as Chief Accounting Officer for CA Technologies, Inc. Mr. Hensel will remain with the company as Special Advisor until June 3, 2014 to assist in a smooth transition of responsibilities to Mr. Burns.

FOURTH QUARTER FINANCIAL HIGHLIGHTS

Consolidated revenue was $109.2 million, a decrease of 2% from $111.7 million last year.

Adjusted EBITDA from continuing operations (see table titled "Reconciliation of Non-GAAP Financial Measures") increased to $1.8 million, or 1.6% of revenue, from $1.3 million, or 1.2% of revenue, in the prior year quarter.

Loss from continuing operations before income taxes was $7.3 million, compared with a loss from continuing operations before income taxes of $1.3 million, in the prior year quarter.

We incurred acquisition costs of $0.5 million, as well as a non-cash impairment charge of $6.4 million related to certain trade names and a non-cash valuation allowance on our deferred tax assets of $31.2 million.

Loss from continuing operations was $35.5 million, or $1.14 per diluted share, compared with a loss from continuing operations of $3.0 million, or $0.10 per diluted share, in the prior year quarter. Excluding the acquisition costs, as well as the non-cash valuation allowance and impairment charges, loss from continuing operations would have been $0.2 million or close to break-even per diluted share.

Net loss was $35.2 million or $1.13 per diluted share, compared with a net loss of $9.5 million or $0.31 per diluted share in the prior year quarter. Excluding the acquisition costs, as well as the non-cash valuation allowance and impairment charges, net income would have been $0.2 million or close to break-even per diluted share.

Net cash used in operations was $2.9 million.

On December 2, 2013, the Company acquired the operating assets of On Assignment, Inc.'s allied healthcare staffing division for an aggregate purchase price of $28.7 million, subject to post-closing adjustments. Revenue of $3.4 million and contribution income of $0.3 million from the acquisition has been included in our nurse and allied business segment results for 2013.

FULL YEAR FINANCIAL HIGHLIGHTS

Consolidated revenue was $438.3 million, a decrease of 1% from $442.6 million last year.

Adjusted EBITDA from continuing operations (see table titled "Reconciliation of Non-GAAP Financial Measures") increased to $8.4 million, or 1.9% of revenue, from $4.0 million, or 0.9% of revenue, in the prior year.

Loss from continuing operations before income taxes was $10.0 million, compared with a loss from continuing operations before income taxes of $26.9 million, in the prior year.

Loss from continuing operations was $36.9 million, or $1.19 per diluted share, compared with a loss from continuing operations of $20.7 million, or $0.67 per diluted share, in the prior year.

Cash flow from operations was $8.7 million. At the end of the year, the Company had $8.1 million in cash and cash equivalents, $8.6 million of total debt and $19.7 million of availability under its credit facility.

Cross Country Healthcare President and CEO William J. Grubbs commented, "2013 was a year of change and transformation for Cross Country Healthcare and I am encouraged by the progress we have made in our strategic initiatives that position us for growth. We exited 2013 with positive momentum in our two largest segments: Nurse and Allied Staffing and Physician Staffing. I am excited about our prospects in 2014 and going forward."

Grubbs added, "We would like to thank Emil for his 23 years of service with the company, and we wish him well in his future endeavors. We are also pleased to welcome Bill Burns to our company. I look forward to working with him and am confident in his ability to help move the company forward."

FOURTH QUARTER OPERATING PERFORMANCE

Fourth quarter consolidated revenue was $109.2 million, a decrease of 2% from the same quarter last year, and an increase of 1% sequentially. The Company's consolidated gross margin was 26.2%, up 120 basis points from the same quarter last year and 10 basis points sequentially. The margin improvement was due to lower housing and field insurance costs in our staffing businesses, partly offset by higher provider fees in our physician staffing business. Net cash used in operations was $2.9 million during the fourth quarter of 2013, compared with net cash provided by operations of $4.4 million in the fourth quarter of 2012.

Revenue from the nurse and allied staffing business segment increased 1% from the same quarter last year, and 6% sequentially. Contribution income in this segment was $5.0 million, up from $3.6 million in the same quarter last year. The increase in segment contribution income was primarily due to lower housing and insurance costs for our field staff compared to the prior year quarter.

Revenue from the physician staffing business decreased 6% from the same quarter last year, and 8% sequentially due to lower volume in part due to seasonality, partially offset by pricing improvement. Contribution income was $1.8 million, down from $2.5 million in the same quarter last year.

Revenue from the other human capital management services business segment was $9.1 million, down 11% from the same quarter last year and essentially flat sequentially. Contribution loss was $0.1 million, down from a contribution income of $0.5 million in the same quarter last year.

Selling, general and administrative expenses in the fourth quarter were $26.9 million, down 0.4% from $27.1 million from the same quarter last year and up 6% sequentially.

Consolidated net loss in the fourth quarter was $35.2 million or $1.13 per diluted share. Loss from continuing operations in the fourth quarter was $35.5 million or $1.14 per diluted share due to a non-cash valuation allowance on our deferred tax assets, impairment charges and acquisition costs. Loss from continuing operations in the fourth quarter of 2012 was $3.0 million or $0.10 per diluted share.

At December 31, 2013, the Company had $8.1 million in cash and cash equivalents and $8.6 million of total debt primarily related to its revolving credit facility.

OUTLOOK

The following statements are based on current management expectations. Such statements are forward-looking and actual results may differ materially. These statements include an estimated negative impact from inclement weather so far this quarter of approximately $1.5-$2.0 million of revenue and $0.4-$0.5 million of Adjusted EBITDA. 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 first quarter of 2014, the Company expects:

Revenue to be in the $119 million to $121 million range.

Gross profit margin to be approximately 26.0% to 26.5%.

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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