Cross Country Healthcare Inc. (CCRN) filed Quarterly Report for the period ended 2009-09-30.
Cross Country Inc. is a provider of healthcare staffing services. They also provide staffing of clinical research professionals and allied healthcare professionals such as radiology technicians rehabilitation therapists and respiratory therapists. Their staffing operations are complemented by other human capital management services including search and recruitment consulting education and training and resource management services. Cross Country Healthcare Inc. has a market cap of $256.4 million; its shares were traded at around $8.32 with a P/E ratio of 15.1 and P/S ratio of 0.3.
Highlight of Business Operations:
For the quarter ended September 30, 2009, our revenue was $129.6 million, and net income was $1.0 million, or $0.03 per diluted share. Cash flow provided by operating activities for the first nine months of 2009, was $69.9 million and was primarily used to repay debt. During the nine months ended September 30, 2009, we also used cash on hand to pay our earnout obligations of $7.5 million related to our recent acquisitions. We ended the quarter with total debt of $69.5 million and $12.0 million of cash, resulting in a ratio of debt, net of cash, to total capitalization of 18.4% as of September 30, 2009.
On September 9, 2008, we consummated the acquisition of substantially all of the assets of privately-held MDA Holdings, Inc. and its subsidiaries and all of the outstanding stock of a subsidiary of MDA Holdings, Inc. (collectively, MDA). We paid $115.9 million in cash at closing, which included $3.6 million as an estimated net working capital adjustment which was subject to final adjustments. Of the cash paid at closing, approximately $8.7 million was being held in escrow to cover any post-closing liabilities (Indemnification Escrow) and $0.3 million was being held in escrow to cover any net working capital adjustments (Net Working Capital Escrow). During the fourth quarter of 2008, approximately $1.6 million of the Indemnification Escrow was released to us and recorded to goodwill as a reduction in purchase price. Also during the fourth quarter of 2008, we finalized the net working capital adjustment and calculated an additional payment to the sellers of approximately $0.1 million which was paid and included in goodwill as additional purchase price. In connection with this net working capital adjustment, the entire Net Working Capital Escrow of $0.3 million was also released to the sellers. Additionally, a post-closing adjustment to the purchase price of approximately $0.3 million was paid to the sellers in the fourth quarter of 2008 and is included in goodwill as additional purchase price.
Based on an independent third-party appraisal, we assigned the following values to intangible assets: $46.0 million to trademarks with an indefinite life and not subject to amortization, $21.0 million for customer relations with a useful life of 12 years, $1.1 million to database with a useful life of 9 years, and $1.0 million to noncompete agreements with a weighted average useful life of 4 years. The excess of purchase price over the fair value of net tangible and intangible assets acquired approximated $26.4 million and was recorded as goodwill, which is expected to be deductible for tax purposes. Additional acquisition costs of approximately $0.7 million and $0.6 million are included as goodwill on the consolidated balance sheets at September 30, 2009 and December 31, 2008, respectively.
On July 18, 2007, we completed an acquisition of the shares of privately-held Assent Consulting (Assent) for $19.6 million in cash paid at closing, including $1.0 million which was held in escrow to cover any post-closing liabilities. The purchase price was subject to a working capital adjustment that was settled with a payment of $0.5 million to us in the fourth quarter of 2007. This transaction also includes an earnout provision up to a maximum of $4.9 million based on 2007 and 2008 performance criteria. This contingent consideration was not related to the sellers’ employment. In the second quarter of 2008, we paid $4.6 million related to 2007 performance satisfying all earnout amounts potentially due to the seller in accordance with the asset purchase agreement. Of this payment, $2.0 million was being held in escrow, subject to forfeiture to us, to the extent a 2008 performance milestone was not achieved. However, based on 2008 performance, the full amount was released to the seller in the first quarter of 2009. The entire payment was allocated to goodwill as additional purchase price, in accordance the Business Combinations Topic of the FASB ASC. In addition, in the first quarter of 2009, the escrow for post-closing liabilities of $1.0 million was released to the sellers.
Revenue from services decreased $48.5 million, or 27.2%, to $129.6 million for the three months ended September 30, 2009, as compared to $178.1 million for the three months ended September 30, 2008. The decrease was primarily due to a decrease in revenue from our nurse and allied staffing business segment, as well as decreases in our clinical trials services and other human capital management services business segments, which were partially offset by the added revenue of MDA. Excluding the results of the MDA acquisition, consolidated revenue from services decreased $78.2 million or 46.9%, reflecting a challenging operating environment for all of our business segments.
Selling, general and administrative expenses decreased $4.6 million, or 13.8%, to $28.9 million for the three months ended September 30, 2009, as compared to $33.5 million for the three months ended September 30, 2008. The decrease in selling, general and administrative expenses was primarily due to our efforts to reduce overhead expenses, partially offset by the additional expenses from the MDA acquisition and severance costs of $0.3 million.
CCRN is in the portfolios of Third Avenue Management.
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