Cross Country Healthcare Reports Third Quarter 2009 Results

http://www.businesswire.com/news/home/20091102006391/en

BOCA RATON, Fla.--(Business Wire)--
Cross Country Healthcare, Inc. (Nasdaq: CCRN) today reported revenue of $129.6
million in the third quarter ended September 30, 2009, a 27% decrease from
revenue of $178.1 million in the prior year quarter. Net income for the third
quarter of 2009 was $1.0 million, or $0.03 per diluted share, a decline of 84%
compared to net income of $6.2 million, or $0.20 per diluted share, in the prior
year quarter. On a sequential basis, revenue decreased 13% from the second
quarter of 2009, while net income decreased 58%. Cash flow from operations for
the third quarter of 2009 was $19.5 million.

For the nine months ended September 30, 2009, the Company generated revenue of
$454.1 million and net income of $6.3 million, or $0.20 per diluted share. This
compares to revenue of $528.3 million and net income of $18.4 million, or $0.59
per diluted share, in the first nine months of the prior year. Cash flow from
operations for the first nine months of 2009 was $69.9 million.

"The improvement in contract bookings activity within our nurse and allied
staffing business that we first noted in our second quarter earnings release in
August is continuing. Keep in mind that it takes several months for sequential
volume growth to materialize after booking trends begin to improve due to the
typical three-month contract length and the normal one-month delay from the time
a contract is booked to the assignment start," said Joseph A. Boshart, President
and Chief Executive Officer of Cross Country Healthcare, Inc. "While it took
most of the third quarter to halt the negative momentum of our staffing volume
resulting from the extraordinary weakness in demand during the months leading up
to this summer, since mid-September our travel staffing volume has increased 6%.
This improvement in staffing volume has resulted from a significant increase in
demand since the spring, with current open order levels for travel nurses six
times the levels seen prior to the summer," he said.

Mr. Boshart continued, "Our analysis of the increase in demand indicates that it
is spread across numerous nursing specialties and suggests the increase is not
just related to the H1N1 virus or normal seasonality, which leads us to believe
it should be sustainable. While we do not expect our staffing volume to parallel
the rapid increase in demand, it does change the constraint on our growth from
one of demand to one of supply. So the primary challenge we now face is a more
familiar one to us - recruiting enough qualified nurses to meet increasing
demand for contract nursing services."

"Our other businesses, which include physician staffing and clinical trials
services, are also exhibiting varying degrees of stabilization to the extent
that we can say with some confidence that we believe the trough in our business
activity will be the second half of 2009. Moreover, as a result of effective
margin management, cost controls and a reduction of receivables, our strong cash
flow has allowed us to de-lever our balance sheet by $75 million in the past
twelve months. During the third quarter alone we reduced our debt outstanding by
$24 million," said Mr. Boshart.

Nurse and Allied Staffing

For the third quarter of 2009, the nurse and allied staffing business segment
(travel and per diem nurse and travel allied staffing) generated revenue of
$64.1 million, reflecting a 50% decrease from the prior year quarter and an 18%
decrease sequentially from the second quarter of 2009. Contribution income
(defined as income from operations before depreciation and amortization,
impairment charges and corporate expenses not specifically identified to a
reporting segment) decreased 56% in the third quarter of 2009 to $6.2 million
from $14.3 million in the same quarter a year ago, and decreased 13%
sequentially from the second quarter of 2009. The decreases in revenue and
contribution income reflect a sharp decline in demand for temporary nurse and
allied staffing services from a year ago primarily due to the economic
environment and its impact on the national labor market.

Segment staffing volume decreased 48% from the prior year quarter and 19%
sequentially from the second quarter of 2009. The average revenue per FTE per
week for the third quarter of 2009 declined 3.5% from the prior year quarter due
to a higher mix of per diem staffing coupled with a change in the mix within per
diem to lower-skilled professionals. The average hourly bill rate in the travel
nurse staffing business was essentially flat year-over-year.

For the first nine months of 2009, segment revenue decreased 38% on a
year-over-year basis to $247.7 million from $402.2 million in the same period a
year ago, while contribution income decreased 43% to $23.5 million from $41.1
million in the prior year period.

Physician Staffing

For the third quarter of 2009, the physician staffing business segment generated
revenue of $39.6 million, a 3% decrease sequentially from the second quarter of
2009, while contribution income in the third quarter of 2009 was $4.0 million, a
4% decrease sequentially from the second quarter of 2009. Physician staffing
days filled for the third quarter of 2009 were 24,395 days, a pro forma decrease
of 13% from the prior year quarter. Revenue per day filled for the third quarter
of 2009 was $1,651, a pro forma 4% increase from the prior year quarter,
reflecting a favorable change in the mix of business.

The Company believes the recession, the stock market decline and the weakened
housing market appear to have delayed the retirement plans of many older
physicians. This dynamic, in conjunction with fewer elective surgeries, has
resulted in a decrease in demand for temporary physicians, particularly in such
specialties as anesthesiology and surgery.

For the first nine months of 2009, segment revenue was $118.6 million and
contribution income was $11.3 million. No meaningful prior period comparisons
are available as the Company acquired its physician staffing business in
September of 2008.

Clinical Trials Services

For the third quarter of 2009, the clinical trials services segment generated
revenue of $16.4 million, a decrease of 35% from $25.4 million in the prior year
quarter and a decrease of 15% sequentially from the second quarter of 2009.
Contribution income decreased 56% in the third quarter of 2009 to $1.7 million
from $3.8 million in the prior year and decreased 27% sequentially from the
second quarter of 2009.

The environment for clinical trials services has been weak during the year
stemming from a slow-down in clinical trials caused largely by economic factors
and financial market conditions, along with uncertainty concerning R&D
activities following mergers and acquisitions in the pharmaceutical and
biotechnology sectors. The Company is seeing gradual improvement in the core
contract staffing component of its business while continuing to experience
weakness in its other service offerings due to project-specific factors in its
CRO activities and in drug safety monitoring activities.

For the first nine months of 2009, segment revenue decreased 24% on a
year-over-year basis to $56.8 million from $75.2 million in the same period a
year ago, while contribution income decreased 49% to $6.1 million from $11.9
million in the prior year period.

Other Human Capital Management Services

For the third quarter of 2009, the other human capital management services
business segment (education and training and retained search) generated revenue
of $9.6 million, a 26% decrease from revenue of $13.0 million in the same
quarter in the prior year, reflecting a lower number of retained searches and
lower average seminar attendance. Segment contribution income decreased 57% to
$0.7 million in the third quarter of 2009 from $1.6 million in the prior year
quarter primarily as a result of weakness in the retained physician search
business. On a sequential basis, segment revenue decreased 7% while contribution
income increased 107% from the second quarter of 2009.

For the first nine months of 2009, segment revenue decreased 23% on a
year-over-year basis to $31.0 million from $40.1 million in the same period a
year ago, while contribution income decreased 68% to $1.9 million from $6.1
million in the prior year period.

Debt Repayments

During the third quarter of 2009, the Company reduced borrowings on its debt
outstanding by $23.6 million from the end of the prior quarter. At September 30,
2009, the Company had $69.5 million of total debt on its balance sheet and a
debt, net of cash, to total capitalization ratio of 18.4%. At the end of the
third quarter of 2009, the Company`s debt leverage ratio (as defined in its
credit agreement) was 1.7 to 1, which is well under the 2.5 to 1 maximum
allowable ratio that became effective September 30, 2009, and remains in effect
for the duration of the credit agreement, which expires in September 2013.
Subsequent to the end of the third quarter, the Company made a $3.0 million
optional pre-payment on its term debt as a result of its continued strong cash
flow.

Fourth Quarter 2009 Guidance

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, any significant legal proceedings or repurchases of the Company's
common stock.

Cross Country Healthcare expects revenue in the fourth quarter of 2009 to be in
the $120 million to $123 million range and earnings per diluted share to be in
the range of $0.02 to $0.04. For the full year ended December 31, 2009, the
Company expects revenue to be in the $574 million to $577 million range and
earnings per diluted share to be in the range of $0.22 to $0.24.

Quarterly Conference Call

Cross Country Healthcare will hold a conference call on Tuesday, November 3rd at
10:00 a.m. Eastern Time to discuss its third quarter 2009 financial results.
This call will be webcast live and may be accessed at the Company's website at
www.crosscountryhealthcare.com or by dialing 888-947-9022 from anywhere in the
U.S. or by dialing 415-228-4733 from non-U.S. locations - Passcode: Cross
Country. A replay of the webcast will be available from November 3rd through
November 17th. A replay of the conference call will be available by telephone
from approximately noon Eastern Time on November 3rd until November 17th by
calling 866-470-7050 from anywhere in the U.S. or 203-369-1484 from non-U.S.
locations - Passcode: 2009.

About Cross Country Healthcare

Cross Country Healthcare, Inc. is a diversified leader in healthcare staffing
services. The Company offers a comprehensive suite of staffing and outsourcing
services to the healthcare market, which together include being a leading
national provider of nurse and allied staffing services and multi-specialty
physician staffing services; a provider of clinical trials services to global
pharmaceutical and biotechnology customers; and a provider of other human
capital management services focused on healthcare. The Company has more than
5,000 contracts with hospitals and healthcare facilities, pharmaceutical and
biotechnology customers, and other healthcare organizations. Copies of this and
other news releases as well as additional information about Cross Country
Healthcare can be obtained online at www.crosscountryhealthcare.com.
Shareholders and prospective investors can also register at the corporate
website to automatically receive the Company's press releases, SEC filings and
other notices by e-mail.

In addition to historical information, this press release contains statements
relating to our future results (including certain projections and business
trends) that are "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and are subject to the
"safe harbor" created by those sections. Forward-looking statements consist of
statements that are predictive in nature, depend upon or refer to future events.
Words such as "expects", "anticipates", "intends", "plans", "believes",
"estimates", "suggests", "seeks", "will" and variations of such words and
similar expressions intended to identify forward-looking statements.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results and performance to be materially
different from any future results or performance expressed or implied by these
forward-looking statements. These factors include, without limitation, the
following: our ability to attract and retain qualified nurses, physicians and
other healthcare personnel, costs and availability of short-term housing for our
travel nurses and physicians, demand for the healthcare services we provide,
both nationally and in the regions in which we operate, the functioning of our
information systems, the effect of existing or future government regulation and
federal and state legislative and enforcement initiatives on our business, our
clients` ability to pay us for our services, our ability to successfully
implement our acquisition and development strategies, the effect of liabilities
and other claims asserted against us, the effect of competition in the markets
we serve, our ability to successfully defend the Company, its subsidiaries, and
its officers and directors on the merits of any lawsuit or determine its
potential liability, if any, and other factors set forth in Item 1A. "Risk
Factors" in the Company`s Annual Report on Form 10-K for the year ended December
31, 2008, and our other Securities and Exchange Commission filings made during
2009.

Although we believe that these statements are based upon reasonable assumptions,
we cannot guarantee future results and readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect management`s
opinions only as of the date of this press release. There can be no assurance
that (i) we have correctly measured or identified all of the factors affecting
our business or the extent of these factors` likely impact, (ii) the available
information with respect to these factors on which such analysis is based is
complete or accurate, (iii) such analysis is correct or (iv) our strategy, which
is based in part on this analysis, will be successful. The Company undertakes no
obligation to update or revise forward-looking statements. All references to
"we," "us," "our," or "Cross Country" in this press release mean Cross Country
Healthcare, Inc., its subsidiaries and affiliates.

Cross Country Healthcare, Inc.
Consolidated Statements of Income
(Unaudited, amounts in thousands, except per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 % Change 2009 2008 % Change

Revenue from services $ 129,635 $ 178,134 (27 %) $ 454,098 $ 528,336 (14 %)
Operating expenses:
Direct operating expenses 94,281 130,696 (28 %) 332,890 390,081 (15 %)
Selling, general and administrative expenses 28,858 33,475 (14 %) 96,325 97,763 (1 %)
Bad debt expense (303 ) 203 (249 %) (227 ) 687 (133 %)
Depreciation 2,034 1,789 14 % 6,645 5,352 24 %
Amortization 1,005 713 41 % 3,046 2,029 50 %
Total operating expenses 125,875 166,876 (25 %) 438,679 495,912 (12 %)
Income from operations 3,760 11,258 (67 %) 15,419 32,424 (52 %)
Other expenses (income):
Foreign exchange loss (gain) 18 (79) 123 % 31 (119 ) 126 %
Interest expense, net 1,664 788 111 % 4,878 1,960 149 %
Other income (193 ) - ND (193 ) - ND
Income before income taxes 2,271 10,549 (78 %) 10,703 30,583 (65 %)
Income tax expense 1,303 4,378 (70 %) 4,407 12,191 (64 %)
Net income $ 968 $ 6,171 (84 %) $ 6,296 $ 18,392 (66 %)

Net income per common share:
Basic $ 0.03 $ 0.20 (85 %) $ 0.20 $ 0.60 (67 %)
Diluted $ 0.03 $ 0.20 (85 %) $ 0.20 $ 0.59 (66 %)

Weighted average common shares outstanding:
Basic 30,814 30,710 30,793 30,842
Diluted 31,002 30,911 30,963 31,032

ND - Not determinable

September 30, December 31,
2009 2008
Assets
Current assets:
Cash and cash equivalents $ 12,003 $ 10,173
Restricted cash - 5,000
Accounts receivable, net 70,316 117,794
Deferred tax assets 11,911 11,287
Income taxes receivable - 977
Other current assets 8,629 16,149
Total current assets 102,859 161,380
Property and equipment, net 21,481 25,985
Trademarks, net 64,557 64,443
Goodwill, net 130,698 122,598
Other identifiable intangible assets, net 29,568 32,459
Debt issuance costs, net 1,800 2,676
Other long-term assets 16,799 16,309
Total assets $ 367,762 $ 425,850

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 8,539 $ 12,440
Accrued employee compensation and benefits 17,602 21,334
Current portion of long-term debt 5,863 15,826
Income taxes payable 2,248 -
Other current liabilities 7,095 6,682
Total current liabilities 41,347 56,282

Long-term debt 63,619 117,255
Interest rate swaps 1,811 2,382
Other long-term liabilities 17,568 15,908
Total liabilities 124,345 191,827

Commitments and contingencies

Stockholders' equity:
Common stock 3 3
Additional paid-in capital 238,909 237,372
Accumulated other comprehensive loss (3,273 ) (4,834)
Retained earnings 7,778 1,482
Total stockholders' equity 243,417 234,023

Total liabilities and stockholders' equity $ 367,762 $ 425,850

Cross Country Healthcare, Inc.
Segment Data (a)
(Unaudited, amounts in thousands)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 % of Total 2008 % of Total % Change 2009 % of Total 2008 % of Total % Change

Revenue:

Nurse and allied staffing $ 64,053 49 % $ 128,910 73 % (50 %) $ 247,664 54 % $ 402,241 76 % (38 %)
Physician staffing 39,595 31 % 10,831 6 % NM 118,600 26 % 10,831 2 % NM
Clinical trials services 16,426 13 % 25,414 14 % (35 %) 56,816 13 % 75,181 14 % (24 %)
Other human capital management services 9,561 7 % 12,979 7 % (26 %) 31,018 7 % 40,083 8 % (23 %)
$ 129,635 100 % $ 178,134 100 % (27 %) $ 454,098 100 % $ 528,336 100 % (14 %)

Contribution income (b)

Nurse and allied staffing $ 6,236 $ 14,332 (56 %) $ 23,466 $ 41,132 (43 %)
Physician staffing 3,961 928 NM 11,334 928 NM
Clinical trials services 1,652 3,755 (56 %) 6,111 11,937 (49 %)
Other human capital management services 682 1,589 (57 %) 1,940 6,092 (68 %)
12,531 20,604 (39 %) 42,851 60,089 (29 %)

Unallocated corporate overhead 5,732 6,844 (16 %) 17,741 20,284 (13 %)
Depreciation 2,034 1,789 14 % 6,645 5,352 24 %
Amortization 1,005 713 41 % 3,046 2,029 50 %
Income from operations $ 3,760 $ 11,258 (67 %) $ 15,419 $ 32,424 (52 %)

Cross Country Healthcare, Inc.
Other Financial Data
(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Net cash provided by operating activities (in thousands) $ 19,466 $ 13,760 $ 69,876 $ 40,932

Nurse and allied staffing statistical data:
FTEs (c) 2,234 4,335 2,876 4,566
Weeks worked (d) 29,042 56,355 112,164 178,074
Average nurse and allied staffing revenue per FTE per week (e) $ 2,206 $ 2,287 $ 2,208 $ 2,259

(a) Segment data provided is in accordance with the Segment Reporting Topic of the Financial Accounting Standards Board Accounting Standards Codification.
(b) Defined as income from operations before depreciation, amortization, impairment charges and corporate expenses not specifically identified to a reporting segment. Contribution income is a financial measure used by management when assessing segment performance.
(c) FTEs represent the average number of nurse and allied contract staffing personnel on a full-time equivalent basis.
(d) Weeks worked is calculated by multiplying the FTEs by the number of weeks during the respective period.
(e) Average revenue per FTE per week is calculated by dividing the nurse and allied staffing revenue by the number of weeks worked in the respective periods. Nurse and allied staffing revenue also includes revenue from permanent placement of nurses.

Cross Country Healthcare, Inc.
Howard A. Goldman, Director/Investor & Corporate Relations
877-686-9779
Email: hgoldman@crosscountry.com

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