Exclusive Interview With The President And CEO: Cross Country Healthcare, Inc. (CCRN) - Joseph A. Boshart
January 24, 2012 - The Wall Street Transcript has just published Staffing & Outsourcing Services Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Joseph A. Boshart has served as President and Chief Executive Officer of Cross Country Healthcare, Inc., since July 1999, and formerly served in such capacities at the company's predecessor since 1994. He has served as a Director since July 1999. Mr. Boshart served as a Director of AllianceCare, Inc., from January 2004 to March 2009. He holds a B.S. degree in economics from the University of Michigan.
TWST: Please start with a brief company history and an overview of Cross Country Healthcare's current operations.
Mr. Boshart: The roots of Cross Country began in the mid-1980s. It was founded here in South Florida, in Boca Raton. It was acquired in 1991 by W. R. Grace, which was a fairly large multinational conglomerate that had interests in chemicals and health care. I was a Grace employee and came to Cross Country as its President in January 1993, so I'm about to have my 19th anniversary with the company, and shortly thereafter, became Chief Executive Officer. I've maintained those titles through various iterations of the company. Grace sold the business to a private equity firm and management in 1999, and we went public in October 2001. The business has actually a very interesting business model with some strong characteristics, particularly its high cash-flow-generating nature.
Today we're an over-500 million-revenue company, and I believe we have a little over 12 million of PP And E on our balance sheet, so it doesn't take a lot of assets to sustain and drive growth in this business. Therefore, in my experience, when the business is good, this is a good cash flow business, and when the environment's difficult, it becomes a great cash flow business because we have no inventory. And as volume declines, we generate greater-than-expected cash flow.
TWST: I was going to ask, and you probably answered this, at least in part, what the key macro and health care industry trends are that affect your business. Is there anything else you would add?
Mr. Boshart: Hospitals are our primary customer base. Following hospitals, it would be medical practices, which hire our locum tenen docs, and that we target for retained search. The government, particularly the federal government, is a significant customer, particularly of our physician business. Pharmaceutical and biotechnology companies are also our customers. Each of those will have their own issues, but, by far and away, the factors that most significantly impact our business are the two I described.
The strength of the overall labor market, which affects the elasticity of nursing services - the misnomer of the nursing business is there is a shortage of nurses, and what is true is that there is a shortage of nurses willing to work as many hours as hospitals need them to work, 24 hours a day, at wages hospitals are willing to pay. Again, hospitals are unwilling to clear the market, and for a very good reason. You can't have 50% of your labor costs, 25% of your operating costs, growing at some multiple of the rate of reimbursement growth, so hospitals do compress wages. Hospitals aren't reimbursed for nursing services specifically as they are for physician or rehab services, for example, or other allied services.
TWST: What were the key takeaways or highlights from your most recent quarterly earnings?
Mr. Boshart: The company is recovering from the deep trough that we experienced in 2009 and 2010. In the third quarter of 2011, we were up 13% consolidated revenue year over year in the third quarter. Our EBITDA was up 24%. We doubled EPS. Because we're delevering the company, our interest costs are substantially lower. Our depreciation and amortization costs have declined year over year. So the growth in income profile is actually pretty attractive, and because of the delevering and growth of EBITDA, we obviously are deleveraging our balance sheet rapidly as the denominator grows and the numerator declines.
And we expect that to continue with a very similar profile. In the fourth quarter of 2011, when we look at year over year, we expect the dynamics to be pretty similar, although sequentially, the fourth quarter tends to be a somewhat seasonally lower revenue quarter for the company, particularly in our physician locums business. But most of our businesses do suffer margin declines around the holidays. There is a lot more breakage during the holidays than we experience at any other time of the year.
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