UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
———————
FORM 10-Q
———————
þ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 20192020
Or
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period From _________ to _________
cchlogoq314a10.jpgccrn-20200331_g1.jpg
———————
CROSS COUNTRY HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
———————
Delaware0-3316913-4066229
(State or other jurisdiction of

Incorporation or organization)
Commission

file number
(I.R.S. Employer

Identification Number)
5201 Congress Avenue, Suite 100B
Boca Raton, Florida 33487
(Address of principal executive offices)(Zip Code)
(561) 998-2232
(Registrant’s telephone number, including area code)


Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
———————
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, par value $0.0001 per shareCCRNThe NASDAQ Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes o No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ¨ Accelerated filer þ Non-accelerated filer ¨ (Do not check if a smaller reporting company)
Smaller Reporting Company ¨ Emerging growth company o


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
The registrant had outstanding 36,826,00337,460,546 shares of Common Stock, par value $0.0001 per share, as of April 26, 2019.30, 2020.




INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
 
In addition to historical information, this Form 10-Q 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”, "appears", “seeks”, “will”, “could”, and variations of such words and similar expressions are intended to identify forward-looking statements. These 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, but are not limited to, the following: the potential impacts of the COVID-19 pandemic on our business, financial condition, and results of operations, our ability to attract and retain qualified nurses, physicians and other healthcare personnel, costs and availability of short-term housing for our travel healthcare professionals, 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 cyber security risks and cyber incidents on our business, 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, including our ability to successfully integrate acquired businesses and realize synergies from such acquisitions, 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 1.A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018,2019, as filed and updated in our Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission.
 
Although we believe that these statements are based upon reasonable assumptions, we cannot guarantee future resultsand 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 filing. 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 "the Company", “we”, “us”, “our”, or “Cross Country” in this Quarterly Report on Form 10-Q mean Cross Country Healthcare, Inc., and its consolidated subsidiaries.




CROSS COUNTRY HEALTHCARE, INC.
 
INDEX
 
FORM 10-Q
 
March 31, 2019
2020
PAGE
Item 6.


i




PART I. FINANCIAL INFORMATION


ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


CROSS COUNTRY HEALTHCARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, amounts in thousands)
 March 31,
2020
December 31,
2019
Assets
Current assets:  
Cash and cash equivalents$12,599  $1,032  
Accounts receivable, net of allowances of $3,298 in 2020 and $3,219 in 2019164,801  169,528  
Prepaid expenses6,374  6,097  
Insurance recovery receivable5,130  5,011  
Other current assets1,726  1,689  
Total current assets190,630  183,357  
Property and equipment, net of accumulated depreciation of $24,078 in 2020 and $23,276 in 201911,965  11,832  
Operating lease right-of-use assets16,263  16,964  
Goodwill101,066  101,066  
Trade names, indefinite-lived5,900  5,900  
Other intangible assets, net42,483  44,957  
Other non-current assets18,672  18,298  
Total assets$386,979  $382,374  
Liabilities and Stockholders' Equity
Current liabilities:  
Accounts payable and accrued expenses$51,095  $45,726  
Accrued compensation and benefits37,199  31,307  
Operating lease liabilities - current4,965  4,878  
Other current liabilities5,743  3,554  
Total current liabilities99,002  85,465  
Revolving credit facility67,648  70,974  
Operating lease liabilities - non-current17,992  19,070  
Non-current deferred tax liabilities7,555  7,523  
Long-term accrued claims27,392  26,938  
Contingent consideration—  4,867  
Other long-term liabilities5,988  4,037  
Total liabilities225,577  218,874  
Commitments and contingencies
Stockholders' equity:  
Common stock  
Additional paid-in capital305,935  305,643  
Accumulated other comprehensive loss(1,318) (1,240) 
Accumulated deficit(143,864) (141,775) 
Total Cross Country Healthcare, Inc. stockholders' equity160,757  162,632  
Noncontrolling interest in subsidiary645  868  
Total stockholders' equity161,402  163,500  
Total liabilities and stockholders' equity$386,979  $382,374  

See accompanying notes to the condensed consolidated financial statements
1
 March 31,
2019
 December 31,
2018
Assets   
Current assets:   
Cash and cash equivalents$18,286
 $16,019
Accounts receivable, net of allowances of $3,811 in 2019 and $3,705 in 2018154,758
 166,128
Prepaid expenses4,844
 6,208
Insurance recovery receivable7,003
 4,186
Other current assets1,593
 2,364
Total current assets186,484
 194,905
Property and equipment, net of accumulated depreciation of $34,582 in 2019 and $33,476 in 201813,641
 13,628
Operating lease right-of-use assets20,965
 
Goodwill101,081
 101,060
Trade names20,402
 20,402
Other intangible assets, net53,298
 55,182
Non-current deferred tax assets26,944
 23,750
Other non-current assets18,620
 18,076
Total assets$441,435
 $427,003
    
Liabilities and Stockholders' Equity   
Current liabilities: 
  
Accounts payable and accrued expenses$48,143
 $43,744
Accrued compensation and benefits31,690
 33,332
Current portion of long-term debt
 5,235
Operating lease liabilities - current5,063
 
Other current liabilities4,892
 3,075
Total current liabilities89,788
 85,386
Long-term debt, less current portion75,489
 77,944
Operating lease liabilities - non-current22,426
 
Long-term accrued claims29,887
 29,299
Contingent consideration4,812
 7,409
Other long-term liabilities3,023
 8,767
Total liabilities225,425
 208,805
    
Commitments and contingencies

 

    
Stockholders' equity: 
  
Common stock4
 4
Additional paid-in capital302,802
 303,048
Accumulated other comprehensive loss(1,661) (1,462)
Accumulated deficit(85,829) (84,062)
Total Cross Country Healthcare, Inc. stockholders' equity215,316
 217,528
Noncontrolling interest in subsidiary694
 670
Total stockholders' equity216,010
 218,198
Total liabilities and stockholders' equity$441,435
 $427,003



CROSS COUNTRY HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, amounts in thousands, except per share data)
 Three Months Ended
 March 31,
 20202019
Revenue from services$210,064  $195,171  
Operating expenses: 
Direct operating expenses160,461  146,917  
Selling, general and administrative expenses45,881  46,036  
Bad debt expense539  270  
Depreciation and amortization3,296  2,984  
Acquisition and integration-related costs77  512  
Restructuring costs564  1,140  
Total operating expenses210,818  197,859  
Loss from operations(754) (2,688) 
Other expenses (income): 
Interest expense867  1,422  
Loss on early extinguishment of debt—  360  
Other income, net(31) (82) 
Loss before income taxes(1,590) (4,388) 
Income tax expense (benefit)178  (3,012) 
Consolidated net loss(1,768) (1,376) 
Less: Net income attributable to noncontrolling interest in subsidiary321  391  
Net loss attributable to common shareholders$(2,089) $(1,767) 
Net loss per share attributable to common shareholders - Basic and Diluted$(0.06) $(0.05) 
Weighted average common shares outstanding: 
Basic and Diluted35,873  35,700  

See accompanying notes to the condensed consolidated financial statements
2
 Three Months Ended
 March 31,
 2019 2018
    
Revenue from services$195,171
 $210,288
Operating expenses:   
Direct operating expenses146,917
 156,535
Selling, general and administrative expenses46,036
 45,634
Bad debt expense270
 199
Depreciation and amortization2,984
 2,909
Acquisition-related contingent consideration247
 213
Acquisition and integration costs265
 115
Restructuring costs1,140
 435
Total operating expenses197,859
 206,040
(Loss) income from operations(2,688) 4,248
Other expenses (income):   
Interest expense1,422
 1,266
Loss on early extinguishment of debt360
 
Other income, net(82) (101)
(Loss) income before income taxes(4,388) 3,083
Income tax (benefit) expense(3,012) 1,163
Consolidated net (loss) income(1,376) 1,920
Less: Net income attributable to noncontrolling interest in subsidiary391
 278
Net (loss) income attributable to common shareholders$(1,767) $1,642
    
Net (loss) income per share attributable to common shareholders - Basic$(0.05) $0.05
    
Net (loss) income per share attributable to common shareholders - Diluted$(0.05) $0.05
    
Weighted average common shares outstanding:   
Basic35,700
 35,803
Diluted35,700
 36,087



CROSS COUNTRY HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOMELOSS
(Unaudited, amounts in thousands)
Three Months Ended
 March 31,
 20202019
Consolidated net loss$(1,768) $(1,376) 
Other comprehensive loss, before income tax: 
Unrealized foreign currency translation (loss) gain(78) 72  
Unrealized loss on interest rate contracts—  (350) 
Reclassification adjustment to statement of operations—  12  
(78) (266) 
Taxes on other comprehensive loss:
Income tax effect related to unrealized foreign currency translation gain—  18  
Income tax effect related to unrealized loss on interest rate contracts—  (88) 
Income tax effect related to reclassification adjustment to statement of operations—   
—  (67) 
Other comprehensive loss, net of tax(78) (199) 
Comprehensive loss(1,846) (1,575) 
Less: Net income attributable to noncontrolling interest in subsidiary321  391  
Comprehensive loss attributable to common shareholders$(2,167) $(1,966) 

See accompanying notes to the condensed consolidated financial statements
3
 Three Months Ended
 March 31,
 2019 2018
Consolidated net (loss) income$(1,376) $1,920
    
Other comprehensive loss, before income tax:   
Unrealized foreign currency translation gain (loss)72
 (27)
Unrealized loss on interest rate contracts(350) (228)
Reclassification adjustment to interest expense12
 

(266) (255)
Taxes on other comprehensive loss:   
Income tax expense (benefit) related to foreign currency translation adjustments18
 (4)
Income tax benefit related to unrealized gain on interest rate contracts(88) (57)
Income tax expense related to reclassification adjustment to interest expense3
 
 (67) (61)
Other comprehensive loss, net of tax(199) (194)
    
Comprehensive (loss) income(1,575) 1,726
Less: Net income attributable to noncontrolling interest in subsidiary391
 278
Comprehensive (loss) income attributable to common shareholders$(1,966) $1,448



CROSS COUNTRY HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended March 31, 2020 and 2019
(Unaudited, amounts in thousands)

 Common StockAdditional
Paid-In Capital
Accumulated Other
Comprehensive Loss, net
(Accumulated Deficit) Retained EarningsNoncontrolling Interest in SubsidiaryStockholders’ Equity
SharesDollars
Balances at December 31, 201935,871  $ $305,643  $(1,240) $(141,775) $868  $163,500  
Vesting of restricted stock221  —  (635) —  —  —  (635) 
Equity compensation—  —  927  —  —  —  927  
Foreign currency translation adjustment, net of taxes—  —  —  (78) —  —  (78) 
Distribution to noncontrolling shareholder—  —  —  —  —  (544) (544) 
Net (loss) income—  —  —  —  (2,089) 321  (1,768) 
Balances at March 31, 202036,092  $ $305,935  $(1,318) $(143,864) $645  $161,402  
 Common StockAdditional
Paid-In Capital
Accumulated Other
Comprehensive Loss, net
(Accumulated Deficit) Retained EarningsNoncontrolling Interest in SubsidiaryStockholders’ Equity
SharesDollars
Balances at December 31, 201835,626  $ $303,048  $(1,462) $(84,062) $670  $218,198  
Exercise of share options —  —  —  —  —  —  
Vesting of restricted stock176  —  (777) —  —  —  (777) 
Equity compensation—  —  531  —  —  —  531  
Foreign currency translation adjustment, net of taxes—  —  —  53  —  —  53  
Net change in hedging transaction, net of taxes—  —  —  (252) —  —  (252) 
Distribution to noncontrolling shareholder—  —  —  —  —  (367) (367) 
Net (loss) income—  —  —  —  (1,767) 391  (1,376) 
Balances at March 31, 201935,806  $ $302,802  $(1,661) $(85,829) $694  $216,010  

See accompanying notes to the condensed consolidated financial statements
4
 Common Stock Additional
Paid-In Capital
 Accumulated Other
Comprehensive Loss, net
 (Accumulated Deficit) Retained Earnings Noncontrolling Interest in Subsidiary Stockholders’ Equity
Shares Dollars
Balances at December 31, 201735,838
 $4
 $305,362
 $(1,166) $(67,111) $630
 $237,719
Exercise of share options8
 
 
 
 
 
 
Vesting of restricted stock and performance stock awards102
 
 (621) 
 
 
 (621)
Equity compensation
 
 469
 
 
 
 469
Stock repurchase and retirement(242) 
 (2,885) 
 
 
 (2,885)
Foreign currency translation adjustment, net of taxes
 
 
 (23) 
 
 (23)
Net change in hedging transaction, net of taxes
 
 
 (171) 
 
 (171)
Distribution to noncontrolling shareholder
 
 
 
 
 (308) (308)
Net income
 
 
 
 1,642
 279
 1,921
Balances at March 31, 201835,706
 $4
 $302,325
 $(1,360) $(65,469) $601
 $236,101
           
 

Balances at December 31, 201835,626
 $4
 $303,048
 $(1,462) $(84,062) $670
 $218,198
Exercise of share options4
 
 
 
 
 
 
Vesting of restricted stock and performance stock awards176
 
 (777) 
 
 
 (777)
Equity compensation
 
 531
 
 
 
 531
Foreign currency translation adjustment, net of taxes
 
 
 53
 
 
 53
Net change in hedging transaction, net of taxes
 
 
 (252) 
 
 (252)
Distribution to noncontrolling shareholder
 
 
 
 
 (367) (367)
Net (loss) income
 
 
 
 (1,767) 391
 (1,376)
Balances at March 31, 201935,806
 $4
 $302,802
 $(1,661) $(85,829) $694
 $216,010




CROSS COUNTRY HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, amounts in thousands)
 Three Months Ended
 March 31,
 20202019
Cash flows from operating activities  
Consolidated net loss$(1,768) $(1,376) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization3,296  2,984  
Provision for allowances881  970  
Deferred income tax expense (benefit)31  (3,146) 
Non-cash lease expense1,191  1,254  
Loss on early extinguishment of debt—  360  
Equity compensation927  531  
Other non-cash costs143  365  
Changes in operating assets and liabilities:
Accounts receivable3,846  10,400  
Prepaid expenses and other assets(736) (1,477) 
Accounts payable and accrued expenses11,066  2,841  
Operating lease liabilities(1,467) (1,399) 
Other(248) 480  
Net cash provided by operating activities17,162  12,787  
Cash flows from investing activities  
Acquisition-related settlements—  (136) 
Purchases of property and equipment(962) (1,109) 
Net cash used in investing activities(962) (1,245) 
Cash flows from financing activities  
Principal payments on Term Loan—  (7,500) 
Debt issuance costs—  (568) 
Borrowings under revolving credit facility107,274  —  
Repayments on revolving credit facility(110,600) —  
Cash payments to noncontrolling shareholder(544) (367) 
Other(729) (860) 
Net cash used in financing activities(4,599) (9,295) 
Effect of exchange rate changes on cash(34) 20  
Change in cash and cash equivalents11,567  2,267  
Cash and cash equivalents at beginning of period1,032  16,019  
Cash and cash equivalents at end of period$12,599  $18,286  

See accompanying notes to the condensed consolidated financial statements
5
 Three Months Ended
 March 31,
 2019 2018
Cash flows from operating activities   
Consolidated net (loss) income$(1,376) $1,920
Adjustments to reconcile net (loss) income to net cash provided by operating activities:   
Depreciation and amortization2,984
 2,909
Provision for allowances970
 671
Deferred income tax (benefit) expense(3,146) 825
Non-cash lease expense1,254
 
Loss on early extinguishment of debt360
 
Equity compensation531
 469
Other non-cash costs365
 322
Changes in operating assets and liabilities:   
Accounts receivable10,400
 12,598
Prepaid expenses and other assets(1,477) (477)
Accounts payable and accrued expenses2,841
 (5,786)
Operating lease liabilities(1,399) 
Other liabilities480
 (178)
Net cash provided by operating activities12,787
 13,273
    
Cash flows from investing activities 
  
Acquisition-related settlements(136) (24)
Purchases of property and equipment(1,109) (1,003)
Net cash used in investing activities(1,245) (1,027)
    
Cash flows from financing activities 
  
Principal payments on Term Loans(7,500) (1,250)
Debt issuance costs(568) 
Stock repurchase and retirement
 (2,885)
Other(1,227) (1,014)
Net cash used in financing activities(9,295) (5,149)
    
Effect of exchange rate changes on cash20
 (13)
    
Change in cash and cash equivalents2,267
 7,084
Cash and cash equivalents at beginning of period16,019
 25,537
Cash and cash equivalents at end of period$18,286
 $32,621



CROSS COUNTRY HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


1.ORGANIZATION AND BASIS OF PRESENTATION

1. ORGANIZATION AND BASIS OF PRESENTATION

Nature of Business


The accompanying condensed consolidated financial statements include the accounts of Cross Country Healthcare, Inc. and its direct and indirect wholly-owned subsidiaries (collectively, the Company). The condensed consolidated financial statements include all assets, liabilities, revenue, and expenses of Cross Country Talent Acquisition Group, LLC, which is controlled by the Company but not wholly-owned. The Company records the ownership interest of the noncontrolling shareholder as noncontrolling interest in subsidiary. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all entries necessary for a fair presentation of such unaudited condensed consolidated financial statements have been included. These entries consisted of all normal recurring items.


The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by United States generally accepted accounting principles (U.S. GAAP) for complete financial statements. These operating results are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.2020.


These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 20182019 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission. The December 31, 20182019 condensed consolidated balance sheet included herein was derived from the December 31, 20182019 audited consolidated balance sheet included in the Company’s Annual Report on Form 10-K.


LiquidityCertain prior year amounts have been reclassified to conform to the current year presentation on the condensed consolidated statements of operations and Operationsstatements of cash flows, and as presented in Note 3 - Customer Contracts and Note 11 - Segment Data.


On March 29, 2019, the Company amended the terms of its senior credit facility and subsequently made an optional prepayment of $7.5 million on its outstanding debt. As of March 31, 2019, the Company was in compliance with its financial covenants under its amended senior credit facility. See Note 8 - Debt.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Use of Estimates


The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Management has assessed various accounting estimates and other matters, including those that require consideration of forecasted financial information, in context of the unknown future impacts of the current global outbreak of Coronavirus (COVID-19) using information that is reasonably available to the Company at the time. Significant estimates and assumptions are used for, but not limited to: (1) the valuation of accounts receivable; (2) goodwill, trade names, and other intangible assets; (3) other long-lived assets; (4) share-based compensation; (5) accruals for health, workers’ compensation, and professional liability claims; (6) valuation of deferred tax assets; (7) purchase price allocation; (8) fair value of interest rate swap agreement; (9) legal contingencies; (10) contingent considerations; (11)(8) income taxes; and (12)(9) sales and other non-income tax liabilities. Accrued insurance claims and reserves include estimated settlements from known claims and actuarial estimates for claims incurred but not reported. Based on current assessment of these estimates there was not a material impact to the Company's consolidated financial statements as of and for the quarter ended March 31, 2020. However, as additional information becomes available to the Company, its future assessment of these estimates, including management's expectations at the time regarding the duration, scope and severity of the pandemic, as well as other factors, could materially and adversely impact the Company's consolidated financial statements in future reporting periods. Actual results could differ from those estimates.


Restructuring Costs


The Company considers restructuring activities to be programs whereby it fundamentally changes its operations, such as closing and consolidating facilities, reducing headcount, and realigning operations in response to changing market conditions. As a result, restructuring costs on the consolidated statements of operations primarily include on-going benefit costs for its employees, exitemployee termination costs and other costs including write-offs related to abandoned locations.lease-related exit costs.


Effective January 1, 2019, in conjunction with the adoption of ASC 842, certain office locations that the Company vacated in connection with restructuring activities were included in the measurement of its beginning operating lease liabilities. Previous accruals related to these locations of $0.3 million have been presented as a reduction to the operating lease right-of-use assets on the condensed consolidated balance sheets.





6



Reconciliation of the on-going benefitemployee termination costs and lease-related exit costs beginning and ending liability balance is presented below:

On-Going Benefit CostsEmployee Termination CostsLease-Related Exit Costs
(amounts in thousands)(amounts in thousands)
Balance at January 1, 2019$556
Balance at January 1, 2020Balance at January 1, 2020$386  $1,223  
Charged to restructuring costs(a)1,104
212  —  
Payments(373)Payments(292) (56) 
Balance at March 31, 2019$1,287
Balance at March 31, 2020Balance at March 31, 2020$306  $1,167  

________________

(a) Aside from what is presented in the table above, restructuring costs in the condensed consolidated statements of operations for the three months ended March 31, 2020 also include $0.2 million of legal entity reorganization costs and $0.2 million of ongoing lease costs related to the Company's strategic reduction in its real estate footprint which are included as operating lease liabilities - current and non-current in our condensed consolidated balance sheets.

Recently Adopted Accounting Pronouncements


Effective January 1, 2019,2020, the Company adopted ASU No. 2016-02, Leases2018-13, Fair Value Measurement (Topic 842)820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which requires that, as lessee, leases, as defined bymodifies the standard, are to be recognizeddisclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the balance sheet as right-of-use assetsconcepts in the Concepts Statement, including the consideration of costs and as lease liabilities. The Company elected not to apply the recognition requirements to short-term leases, and to apply the transition method, which is applied prospectively, measuring and recognizing the initial right-of-use asset and liability at January 1, 2019, without revising comparative period information or disclosure. In addition, the Company elected the package of transition provisions available for expired or existing contracts, which allowed the Company to forego assessment of: (1) whether contracts are or contain leases, (2) lease classification, and (3) initial direct costs. Consistent with current accounting, all of the Company's existing leases identified under ASC 840 will be treated as operating leases.benefits. The Company has also elected the practical expedient to not separate non-lease components from the lease components to which they relate, and instead account for each as a single lease component, for all ofadopted this guidance prospectively with no material impact on its underlying asset classes. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses.condensed consolidated financial statements.


As of the laterbeginning of January 1, 2019 or each lease’s respective commencement date,the first quarter of 2020, the Company recorded lease liabilities equaladopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires the use of a forward-looking expected credit loss model for accounts receivable, loans, and other financial instruments. The guidance requires a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the present valuebeginning of the first reporting period in which it is effective. The Company has adopted this guidance using the modified retrospective approach related to its remaining minimum lease paymentsaccounts receivable, resulting in no cumulative adjustment to retained earnings and right-of-use assets equal to the corresponding lease liability adjusted for any prepaid or accrued lease payments and the remaining balance of lease incentives received. At the transition date, the right of use asset and total lease liabilities were $22.0 million and $28.6 million, respectively. The difference between the right-of use-asset and lease liabilities is due to the derecognition of accrued lease payments of $7.2 million, previously included in other current and non-current liabilities, and prepaid rent of $0.6 million, previously included in prepaid expenses.no material impact on its condensed consolidated financial statements. See Note 103 - Leases.Customer Contracts.




7


3. REVENUE RECOGNITIONCUSTOMER CONTRACTS
The Company's revenues from customer contracts are generated from temporary staffing services and other services, areservices. Revenue is disaggregated by segment in the following table. Sales and usage-based taxes are excluded from revenue.


Three Months ended March 31, 2020
Nurse
And Allied
Staffing
Physician
Staffing
SearchTotal Segments
(amounts in thousands)
Temporary Staffing Services$184,949  $17,160  $—  $202,109  
Other Services3,284  1,021  3,650  7,955  
Total$188,233  $18,181  $3,650  $210,064  
Three Months ended March 31, 2019
Nurse
And Allied
Staffing
Physician
Staffing
SearchTotal Segments
(amounts in thousands)
Temporary Staffing Services$172,662  $15,154  $—  $187,816  
Other Services2,975  1,005  3,375  7,355  
Total$175,637  $16,159  $3,375  $195,171  
 Three Months ended March 31, 2019
 Nurse
And Allied
Staffing Segment
 Physician
Staffing Segment
 Search
Services Segment
 Total
 (amounts in thousands)
Temporary Staffing Services$172,653
 $15,154
 $
 $187,807
Other Services3,420
 1,005
 2,939
 7,364
Total$176,073
 $16,159
 $2,939
 $195,171


Accounts Receivable, net

The timing of revenue recognition, billings, and collections results in billed and unbilled accounts receivable includes estimatedfrom our customers which are classified as accounts receivable on the condensed consolidated balance sheets and are presented net of allowances for doubtful accounts and sales allowances. Estimated revenue for the Company's employees', subcontracted employees', and independent contractors’ time worked but not yet invoiced. Atbilled at March 31, 20192020 and December 31, 2018, the Company's estimate of amounts that had been worked but had not been billed2019 totaled $43.0$44.7 million and $44.1$46.1 million, respectively, and are included inrespectively.

The allowance for doubtful accounts is established for losses expected to be incurred on accounts receivable balances. Accounts receivable are written off against the allowance for doubtful accounts when the Company determines amounts are no longer collectible. Judgment is required in the estimation of the allowance and the Company evaluates the collectability of its accounts receivable and contract assets based on a combination of factors. The Company bases its allowance for doubtful account estimates on its historical write-off experience, current conditions, an analysis of the aging of outstanding receivable and customer payment patterns, and specific reserves for customers in adverse condition adjusted for current expectations for the customers or industry. Based on the Company's condensed consolidated balance sheets.



7


4.    ACQUISITIONS

Advantage RN

Effective July 1, 2017,information currently available, the Company acquired allalso considered current expectations of future economic conditions, including the impact of COVID-19, when estimating its allowance for doubtful accounts.

The opening balance of the assets of Advantage RN, LLC and its subsidiaries (collectively, Advantage)allowance for cash consideration of $86.6 million, net of cash acquired. The total purchase price of $88.0 million was subjectdoubtful accounts is reconciled to a net working capital reduction of $0.6 million at the closing and an additional $0.8 million was received during the third quarter of 2017balance for expected credit losses as the final adjustment for net working capital. Additionally, $0.6 million of the purchase price was deferred as of the closing and was duefollows:

Allowance for Doubtful Accounts(amounts in thousands)
Balance at January 1, 2020$2,406 
Bad Debt Expense539 
Write-Offs, net of Recoveries(349)
Balance at March 31, 2020$2,596 

In addition to the seller within 20 months, less any Cobra and healthcare payments incurred byallowance for doubtful accounts, the Company on behalf ofmaintains a sales allowance for billing-related adjustments which may arise in the seller. The Company incurred approximately $0.5 million in COBRA expenses since the Advantage acquisitionordinary course and in February 2019, releasedadjustments to the seller the remaining liability of $0.1 million. 

Included in the amount paid at closing were two escrow accounts, the first was $14.5 million which related to tax liabilities and the second was $7.5 million which was to cover any post-close liabilities. On July 28, 2017, $7.3 million related to the tax liabilities was released from escrow, leaving areserve are recorded as contra-revenue. The balance of $7.2 million. On April 3, 2019, $4.3 million related to the tax liabilities was disbursed to pay taxes and the remaining $2.9 million was released from escrow to the seller. In the first quarter of 2019, $7.0 million related to the post-close liabilities was released from escrow, leaving a balance of $0.5 million to cover pending post-close liabilities.

Mediscan

On October 30, 2015, the Company completed the acquisition of all of the membership interests of New Mediscan II, LLC, Mediscan Diagnostic Services, LLC, and Mediscan Nursing Staffing, LLC (collectively, Mediscan). In connection with the Mediscan acquisition, the Company assumed contingent purchase price liabilities for a previously acquired business that are payable annually based on specific performance criteria for the 2016 through 2019 years. Payments related to the years 2016 through 2018 were limited to $0.3 million and 2019 is uncapped. During the three months ended March 31, 2019 and 2018, the Company paid $0.1 million each period related to the years 2018 and 2017, respectively. Asthis allowance as of March 31, 2020 and December 31, 2019 the fair value of the remaining obligations was estimated at $7.8$0.7 million and is included in other current liabilities and contingent consideration on the condensed consolidated balance sheets. See Note 11 - Fair Value Measurements.$0.8 million, respectively.


5.COMPREHENSIVE INCOME


8


4. COMPREHENSIVE LOSS
 
Total comprehensive income (loss)loss includes net income or loss, foreign currency translation adjustments, and net change in derivative transactions, net of any related deferred taxes.taxes and valuation allowance. Certain of the Company’s foreign subsidiaries use their respective local currency as their functional currency. In accordance with the Foreign Currency Matters Topic of the FASB ASC,assets and liabilities of these operations are translated at the exchange rates in effect on the balance sheet date. Income statement items are translated at the average exchange rates for the period. The cumulative impact of currency fluctuations related to the balance sheet translation is included in accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets and was an unrealized loss of $1.2$1.3 million at March 31, 20192020 and $1.3 million at December 31, 2018. The cumulative impact of net changes in derivative instruments included in other comprehensive loss in the condensed consolidated balance sheets was an unrealized loss of $0.4 million at March 31, 2019 and $0.2 million at December 31, 2018. See Note 9 - Derivative.2019.
 
The income tax impact related to components of other comprehensive income (loss)loss for the three months ended March 31, 20192020 and 20182019 is reflected on the condensed consolidated statements of comprehensive income.loss.




5. EARNINGS PER SHARE
8



6.EARNINGS PER SHARE

The following table sets forth the components of the numerator and denominator for the computation of the basic and diluted earnings per share:
 Three Months Ended
March 31,
2019 2018
 (amounts in thousands, except per share data)
Numerator:   
Net (loss) income attributable to common shareholders - Basic and Diluted$(1,767) $1,642
    
Denominator:   
Weighted average common shares - Basic35,700
 35,803
Effective of diluted shares:   
     Share-based awards
 284
Weighted average common shares - Diluted35,700
 36,087
    
Net (loss) income per share attributable to common shareholders - Basic$(0.05) $0.05
    
Net (loss) income per share attributable to common shareholders - Diluted$(0.05) $0.05
Three Months Ended
March 31,
20202019
(amounts in thousands, except per share data)
Numerator:
Net loss attributable to common shareholders - Basic and Diluted$(2,089) $(1,767) 
Denominator:
Weighted average common shares - Basic35,873  35,700  
Effect of diluted shares:
     Share-based awards—  —  
Weighted average common shares - Diluted35,873  35,700  
Net loss per share attributable to common shareholders - Basic and Diluted$(0.06) $(0.05) 


For the three months ended March 31, 20192020 and 2018,2019, no tax benefits were assumed in the weighted average share calculation due to the Company's net operating loss position.


Due to the net loss for the three months ended March 31, 2020 and 2019, 454,920 and 97,184 shares, respectively, were excluded from diluted weighted average shares.



7.9


6. GOODWILL, TRADE NAMES, AND OTHER INTANGIBLE ASSETS


The Company had the following acquired intangible assets:
 March 31, 2020December 31, 2019
 Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
(amounts in thousands)
Intangible assets subject to amortization:      
Databases$30,530  $13,032  $17,498  $30,530  $12,269  $18,261  
Customer relationships49,758  27,447  22,311  49,758  26,596  23,162  
Non-compete agreements320  177  143  320  161  159  
Trade names4,500  1,969  2,531  4,500  1,125  3,375  
Other intangible assets, net$85,108  $42,625  $42,483  $85,108  $40,151  $44,957  
Intangible assets not subject to amortization:      
Trade names, indefinite-lived  $5,900    $5,900  
 March 31, 2019 December 31, 2018
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 (amounts in thousands)
Intangible assets subject to amortization:           
Databases$30,530
 $9,979
 $20,551
 $30,530
 $9,216
 $21,314
Customer relationships49,758
 24,121
 25,637
 49,758
 23,296
 26,462
Non-compete agreements320
 113
 207
 320
 97
 223
Trade names8,879
 1,976
 6,903
 8,879
 1,696
 7,183
Other intangible assets, net$89,487
 $36,189
 $53,298
 $89,487
 $34,305
 $55,182
Intangible assets not subject to amortization: 
  
  
  
  
  
Trade names 
  
 20,402
  
  
 20,402
  
  
 $73,700
  
  
 $75,584






9



As of March 31, 2019,2020, estimated annual amortization expense is as follows:


Years Ending December 31:(amounts in thousands)
2020$7,214  
20216,105  
20226,028  
20235,926  
20245,289  
Thereafter11,921  
 $42,483  
Years Ending December 31:(amounts in thousands)
2019$5,651
20207,431
20217,131
20226,780
20236,677
Thereafter19,628
 $53,298


The Company tests reporting units’ goodwill and intangible assets with indefinite lives for impairment annually during the fourth quarter and more frequently if impairment indicators exist. The Company performs quarterly qualitative assessments of significant events and circumstances such as reporting units’ historical and current results, assumptions regarding future performance, strategic initiatives and overall economic factors, including COVID-19, and macro-economic developments, to determine the existence of potential indicators of impairment and assess if it is more likely than not that the fair value of reporting units or intangible assets is less than their carrying value. If indicators of impairments are identified a quantitative impairment test is performed.

In its fourth quarter 2019 testing, the Company determined that the estimated fair value of its reporting units and its indefinite-lived trade name exceeded their respective values for Nurse and Allied Staffing and Physician Staffing with significant cushions. The Company’s Search reporting unit, however, had less than 20% excess fair value over its carrying amount.

As of March 31, 2019,2020, the Company performed a qualitative assessment of each of its reporting units and determined it was not more likely than not that the fair value of its reporting units dropped below their carrying value. As a result, management concluded that no impairment testing was warranted as of March 31, 2019. AlthoughAlthough management believes that the Company's current estimates and assumptions are reasonable and supportable, including its assumptions on the impact and timing related to COVID-19, there can be no assurance that the estimates and assumptions mademanagement used for purposes of the impairment testingits qualitative assessment as of March 31, 2020 will prove to be accurate predictions of future performance.performance, leaving the Search reporting unit, in particular, at risk for future impairments.


As of March 31, 2019,2020, goodwill by reporting segment was: $88.9$86.4 million for Nurse and Allied Staffing, $2.8 million for Physician Staffing, and $9.4$11.9 million for Search, Services, totaling $101.1 million.



8.10


For its long-lived assets and definite-lived intangible assets, the Company reviews for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. As of March 31, 2020, the Company performed a qualitative assessment of its trade names and other intangible assets and determined it was not more likely than not that their carrying value may not be recoverable.

7. DEBT


2019 ABL Credit Agreement
Effective October 25, 2019, the Company terminated its commitments under its prior senior credit facility entered into in August 2017 (defined below) and entered into an ABL Credit Agreement (Loan Agreement). The Loan Agreement provides for a five-year revolving senior secured asset-based credit facility (ABL) in the aggregate principal amount of up to $120.0 million (as described below), including a sublimit for swing loans up to $15.0 million and a $35.0 million sublimit for standby letters of credit.
Availability of the ABL commitments is subject to a borrowing base of up to 85% of secured eligible accounts receivable, subject to adjustment at certain quality levels, plus an amount of supplemental availability, and reducing over time in accordance with the terms of the Loan Agreement, minus customary reserves, and subject to customary adjustments. Revolving loans and letters of credit issued under the Loan Agreement reduce availability under the ABL on a dollar-for-dollar basis. Availability under the ABL will be used for general corporate purposes. Additionally, the facility contains an uncommitted accordion provision to increase the amount of the facility by an additional $30.0 million. At March 31, 2020, availability under the ABL was $119.0 million and the Company had $67.6 million of borrowings drawn, as well as $19.6 million of letters of credit outstanding related to workers' compensation and professional liability policies, leaving $31.8 million available for borrowing. The balances drawn are presented as revolving credit facility on the condensed consolidated balance sheets and as of March 31, 2020 and December 31, 2019 had a weighted average interest rate of 3.49% and 4.23%, respectively.
As of March 31, 2020, the interest rate spreads and fees under the Loan Agreement were based on LIBOR plus 2.00% for the revolving portion of the borrowing base and LIBOR plus 4.00% on the Supplemental Availability. The Base Rate (as defined by the Loan Agreement) margins would have been 1.00% and 3.00%, respectively, for the revolving portion and Supplemental Availability, respectively. The LIBOR and Base Rate margins are subject to monthly pricing adjustments, pursuant to a pricing matrix based on the Company’s excess availability under the revolving credit facility. In addition, the facility is subject to an unused line fee, letter of credit fees, and an administrative fee. The unused line fee is 0.375% of the average daily unused portion of the revolving credit facility.
The Company's long-term debt consistsLoan Agreement contains various restrictions and covenants applicable to the Company and its subsidiaries, including a covenant to maintain a minimum fixed charge coverage ratio. The Company was in compliance with this covenant as of March 31, 2020. Obligations under the ABL are secured by substantially all the assets of the following:borrowers and guarantors, subject to customary exceptions.
 March 31, 2019 December 31, 2018
 Principal Debt Issuance Costs Principal Debt Issuance Costs
 (amounts in thousands)
Term Loan, interest 5.5% and 4.8% at March 31, 2019 and December 31, 2018, respectively$76,377
 $(888) $83,876
 $(697)
Less current portion
 
 (5,235) 
Long-term debt$76,377
 $(888) $78,641
 $(697)

Amended and RestatedPrior Senior Credit Facility

On March 29,The Company had a prior senior credit facility that included a revolver and term loan. The term loan was payable in quarterly installments and the Company had the right at any time to prepay borrowings in whole or in part, without premium or penalty. In the first quarter of 2019, the Company entered into a Second Amendment (Second Amendment)made an optional prepayment on the term loan of $7.5 million.
Also in the first quarter of 2019, the Company amended its prior senior credit facility to its Amended and Restated Credit Agreement that,reduce the commitment under the revolving credit facility, among other administrative changes, modifies the following: (1) changes the financial leverage ratio from Consolidated Total Leverage to Consolidated Net Leverage and permits a maximum Consolidated Net Leverage Ratio of 4.60:1.00 for the periods of December 31, 2018 through June 30, 2019, 4.25:1:00 for the period ended September 30, 2019, to 4.00:1.00 for the period ended December 31, 2019, 3.75:1.00 for the period ended March 31, 2020, 3.50:1.00 for the period ending June 30, 2020, 3.25:1.00 for the period ending September 30, 2020, and maintains 3.00:1:00 for the periods thereafter and as adjusted pursuant to a Specified and Qualified Permitted Acquisition (as defined therein); (2) the Applicable Margin definition has been revised to: modify Level V to be greater than or equal to 3.00:1.00 but less than 3.50:1.00; adds an additional Level VI if the Consolidated Net Leverage is greater than or equal to 3.50:1.00 but less than 4.00:1.00; and adds an additional Level VII if Consolidated Net Leverage Ratio is greater than 4.00:1.00.changes. The added Levels VI and VII result in an increase in the Applicable Margin for borrowing from their respective prior Levels by 25 basis points for each and an increase of 5 basis points to the Commitment Fee for each; (3) adds an additional financial covenant for the quarters ending March 31, 2019 through and including the quarter ending December 31, 2019, that requires the Consolidated Asset Coverage Ratio to be no less than 1.10:1.00; and (4) the exercise of a $40.0 million Optional Reduction of the Aggregate Revolving Commitments from $115 million to $75 million.

The Second Amendment has beenamendment was treated as a modification and accordingly, the fees of $0.6 million paid to its lenders in connection with the amendment are includedwere classified as $0.3 million of debt issuance costs associated with the revolving credit agreement, and $0.3 million ascosts.
As a reduction to the carrying amountresult of the term loan. The fees will be amortized to interest


10


expense over the term of the arrangement. In addition, in the three months ended March 31, 2019, $0.3 million of debt issuance costs was written off due to the reduction in borrowing capacity under the revolving credit facility, which is included in loss on early extinguishment on the consolidated statement of operations.

On March 29, 2019, the Company also made an optional prepayment of $7.5 million on its Term Loan, which has been allocated to the next five scheduled quarterly payments and a portion of the sixth payment. The Company has the right at any time and from time to time to prepay any borrowing, in whole or in part, without premium or penalty, by giving written notice (or telephonic notice promptly confirmed in writing). The Company is required to prepay the Amended Credit Facilities under certain circumstances including from net cash proceeds from asset sales or dispositions in excess of certain thresholds, as well as from net cash proceeds from the issuance of certain debt by the Company.

As of March 31, 2019, the aggregate scheduled maturities ofreduction in the term loan are as follows:
 Term Loan
 (amounts in thousands)
Through Years Ending December 31: 
2019$
20203,407
20216,980
202265,990
2023
Thereafter
Total$76,377
Subjectdue to the Amended and Restated Credit Agreement, the Company pays interest on: (i) each Base Rate Loan at the Base Rate (as defined therein) plus the Applicable Marginprepayment in effect from time to time, (ii) each LIBOR Index Rate Loan at the One Month LIBOR Index Rate (as defined therein) plus the Applicable Margin in effect from time to time, and (iii) each Eurodollar Loan at the Adjusted LIBOR for the applicable Interest Period (as defined therein) in effect for such Loan plus the Applicable Margin in effect from time to time. The Applicable Margin, as of any date, is a percentage per annum determined by reference to the applicable Consolidated Net Leverage Ratio (as defined by the agreement) in effect on such date.
As of March 31, 2019, the Amended Term Loan and Amended Revolving Credit Facility bore interest at a rate equal to One Month LIBOR plus 3.00%. The interest rate is subject to an increase of 2.00% if an event of default exists under the Amended and Restated Credit Agreement. The Company is required to pay a commitment fee on the average daily unused portion of the Amended Revolving Credit Facility, based on the Applicable Margin which is 0.45% as of March 31, 2019. During the three months ended March 31, 2018,2019, $0.4 million of debt issuance costs were written off. The amount of the write-off is reflected as loss on early extinguishment of debt on the condensed consolidated statements of operations.
Note Payable
On October 30, 2015, the Company entered into an interest rate swapcompleted the acquisition of all of the membership interests of New Mediscan II, LLC, Mediscan Diagnostic Services, LLC, and Mediscan Nursing Staffing, LLC (collectively, Mediscan). In connection with the Mediscan acquisition, the Company assumed contingent purchase price liabilities for a previously acquired business that were payable annually based on certain performance criteria for the years 2016 through 2019, and a second performance criteria related to reduce its exposure2019 payable in three equal installments. Pursuant to fluctuations in the interest rates associated with its debt, which was effective April 2, 2018. See Note 9 - Derivative.

The Amended and Restated Credit Agreement contains customary representations, warranties, and affirmative covenants. The Amended and Restated Credit Agreement also contains customary negative covenants, subject to some exceptions, on: (i) indebtedness and preferred equity, (ii) liens, (iii) fundamental changes, (iv) investments, (v) restricted payments, and (vi) sale of assets and certain other restrictive agreements. The Amended and Restated Credit Agreement also contains customary events of default, such as payment defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency,asset purchase agreement, once the occurrence of a defined change in control and the failure to observe the negative covenants and other covenantsearnout amount related to the operationsecond performance criteria for 2019 was determined, a note payable documenting the remaining principal and interest was specified as part of the Company’s business.

settlement. In additionthe first quarter of 2020, the total earnout amount related to both 2019 performance criterion of $7.4 million was determined, and $0.1 million was paid by the Company. Pursuant to the Consolidated Total Leverage rationote payable, the first

11


installment of $2.4 million will be paid in the second quarter of 2020, the second installment of $2.4 million is payable on January 31, 2021, and the Consolidated Asset Coverage ratio mentioned previously, the Amended and Restated Credit Agreement also includesthird installment of $2.5 million is to be paid, together with interest at a financial covenantrate of a minimum Consolidated Fixed Charge Coverage ratio (as defined therein) as of the end of each fiscal quarter of 1.50:1.00.2% per annum, accruing from April 1, 2020, on January 31, 2022. As of March 31, 2019,2020, the Company was in compliance with allcurrent portion of the financial covenants and other covenants containednote payable in the Amended and Restated Credit Agreement.

The obligations under the Amended and Restated Credit Agreement are guaranteed by allamount of the Company’s domestic wholly-owned subsidiaries and are secured by a first-priority security interest in the Collateral (as defined therein).
As of March 31, 2019, the Company had $20.6$4.9 million letters of credit outstanding, which relate to the Company’s workers’ compensation and professional liability insurance policies.



11


9.    DERIVATIVE

The Company has an interest rate swap agreement that, at initiation, effectively fixed the interest rate on 50% of the amortizing balance of the Company’s term debt, exclusive of the credit spread on the debt. The interest rate swap agreement requires the Company to pay a fixed rate to the respective counterparty of 2.627% per annum on an amortizing notional amount corresponding with the initial term loan payment schedule, and to receive from the respective counterparty, interest payments based on the applicable notional amounts and 1 month USD LIBOR, with no exchanges of notional amounts. As of March 31, 2019 and December 31, 2018, the interest rate swap is treated as a cash flow hedge and its fair value of a $0.6 million liability and a $0.2 million liability, respectively, is included in other current liabilities and non-currentthe long-term portion of $2.4 million is included in other long-term liabilities on the condensed consolidated balance sheets. See Note 11 - Fair Value Measurements.


10.LEASES

The Company has lease contracts related to the rental of office space, housing for its healthcare professionals on assignments, and other equipment rentals. 8. LEASES

The Company's lease population included in the recognition of its beginning right-of-use asset and lease liabilities under the new standardLeases Topic of the FASB ASC is substantially related to itsthe rental of office locations.space. The Company enters into lease agreements as lessee for the rental of office space for both its corporate and branch locations that may include options to extend or terminate early. Many of these real estate leases require variable payments of property taxes, insurance, and common area maintenance, in addition to base rent. The variable portion of these lease payments is not included in the right-of-use assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in lease expense in selling, general and administrative expense on the condensed consolidated statement of operations. These leases do not include residual value guarantees, covenants, or other restrictions. Certain of the leases have provisions for free rent months during the lease term and/or escalating rent payments. In addition,payments and, particularly for the Company’s longer-term leases for its corporate offices, it has received incentives to enter into the leases such as receiving up to a specified dollar amount to construct tenant improvements. Pursuant to ASC 840, these lease incentives resulted in deferred rent credits. Upon adoption of the ASC 842, these deferred rent credits reduced the beginning operating right-of-use asset recognized and, consistent with the prior guidance will be recognized as a reduction to future rent expense over the expected remaining term of the respective leases.These leases do not include residual value guarantees, covenants, or other restrictions.

The Company determines whether an arrangement constitutes a lease and records lease liabilities and right-of-use assets on its consolidated balance sheets at lease commencement. Lease liabilities are measured based on the present value of the total lease payments not yet paid discounted based on its incremental borrowing rate, as the rate implicit in the lease is not determinable. Its incremental borrowing rate is estimated based on what it would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease. As such, the Company estimates its incremental borrowing rate based on an analysis of publicly traded debt securities of companies with credit and financial profiles similar to its own. Right-of-use assets are measured based on the corresponding lease liability adjusted for: (i) payments made to the lessor at or before the commencement date, (ii) initial direct costs, and (iii) tenant incentives under the lease. Rent expense commences when the lessor makes the underlying asset available to us. The Company does not assume renewals or early terminations unless it is reasonably certain to exercise these options at commencement. For short-term leases, rent expense is recognized in the condensed consolidated statements of operations on a straight-line basis over the lease term.


The table below presents the lease-related assets and liabilities included on the condensed consolidated balance sheets:

Classification on Condensed Consolidated Balance Sheets:March 31, 2019Classification on Condensed Consolidated Balance Sheets:March 31, 2020December 31, 2019
(amounts in thousands)(amounts in thousands)
Operating lease right-of-use assets$20,965
Operating lease right-of-use assets$16,263  $16,964  
Operating lease liabilities - current$5,063
Operating lease liabilities - current$4,965  $4,878  
Operating lease liabilities - non-current$22,426
Operating lease liabilities - non-current$17,992  $19,070  

Weighted-average remaining lease term5.3 years
Weighted average discount rate (a)6.24%
Weighted-average remaining lease term4.5 years4.7 years
Weighted average discount rate6.23 %6.26 %
________________

(a)Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.


The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities (which do not include short-term leases) recorded on the condensed consolidated balance sheets:sheets as of March 31, 2020:


Years Ending December 31:(amounts in thousands)
2020$4,582  
20216,121  
20225,205  
20234,757  
20243,382  
Thereafter2,487  
Total minimum lease payments26,534  
Less: amount of lease payments representing interest(3,577) 
Present value of future minimum lease payments22,957  
Less: current lease obligations(4,965) 
Non-current lease obligations$17,992  










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Years Ending December 31:(amounts in thousands)
2019$4,914
20206,572
20215,702
20224,929
20234,702
Thereafter5,869
Total minimum lease payments32,688
Less: amount of lease payments representing interest(5,199)
Present value of future minimum lease payments27,489
Less: current lease obligations(5,063)
Non-current lease obligations$22,426

Future minimum lease payments, as of December 31, 2018, associated with non-cancelable operating lease agreements with terms of one year or more are as follows: 
Years Ending December 31:(amounts in thousands)
2019$7,451
20206,287
20215,407
20224,857
20234,700
Thereafter5,893
Total minimum lease payments$34,595

Other Information


The table below provides information regarding supplemental cash flows:
 March 31, 2019
 (amounts in thousands)
Supplemental Cash Flow Information: 
Cash paid for amounts included in the measurement of operating lease liabilities$1,845
ROU assets obtained in exchange for new operating lease liabilities$300

Three Months Ended
March 31,
20202019
(amounts in thousands)
Supplemental Cash Flow Information:
Cash paid for amounts included in the measurement of operating lease liabilities$1,835  $1,845  
Right-of-use assets obtained in exchange for new operating lease liabilities$500  $300  

The components of lease expense are as follows:

Three Months Ended
March 31,
March 31, 201920202019
(amounts in thousands)(amounts in thousands)
Amounts Included in Condensed Consolidated Statements of Operations: Amounts Included in Condensed Consolidated Statements of Operations:
Operating lease expense$1,694
Operating lease expense$1,523  $1,694  
Short-term lease expense$2,159
Short-term lease expense$1,845  $2,159  
Variable and other lease costs$718
Variable and other lease costs$574  $718  


Operating lease expense, short-term lease expense, and variable and other lease costs are included in selling, general and administrative expenses, and direct operating expenses, onand restructuring costs in the Company's condensed consolidated statements of operations, depending on the nature of the leased asset.


As of March 31, 2019,2020, the Company does not have any material operating leases which have not yet commenced. The Company has an immaterial amount of finance lease contracts related to other equipment rentals which are not included in the above disclosures.




9. FAIR VALUE MEASUREMENTS
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11.FAIR VALUE MEASUREMENTS
 
The Fair Value Measurements and Disclosures Topic of the FASB ASC defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
 
Level 1—Quoted prices in active markets for identical assets or liabilities.
 
Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 

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Items Measured at Fair Value on a Recurring Basis:
 
The Company’s financial assets/liabilities required to be measured on a recurring basis were its: (1) deferred compensation asset included in other non-current assets; (2) deferred compensation liability included in other long-term liabilities; and (3) contingent consideration liabilities interest rate swap agreement included inas other current and non-current liabilities and contingent consideration liabilities.on its condensed consolidated balance sheets.


Deferred compensation—The Company utilizes Level 1 inputs to value its deferred compensation assets and liabilities. The Company’s deferred compensation assets and liabilities are measured using publicly available indices, that define the liability amounts, as per the plan documents.


Interest rate swap agreement—The Company utilized Level 2 inputs to value its interest rate swap agreement. See Note 8 - Debt and Note 9 - Derivative.

Contingent consideration liabilities—Potential earnout payments related to the acquisition of Mediscan arewere contingent upon meeting certain performance requirements through 2019. The long-term portion of these liabilities has been included in contingent consideration, and the short-term portion is included in other current liabilities on the condensed consolidated balance sheets. The Company utilized Level 3 inputs to value these contingent consideration liabilities as significant unobservable inputs were used in the calculation of their fair value. As of December 31, 2019, due to the end of the earnout period, the Company measured the fair value of the liability based on the expected payout related to its Mediscan acquisition. In the first quarter of 2020, the total earnout amounts related to 2019 of $7.4 million was determined, and $0.1 million was paid by the Company. The Mediscan contingent consideration liability has beenremaining $7.3 million was documented as a subordinated promissory note payable and is included in other current and other long-term liabilities on the condensed consolidated balance sheets which is not measured at fair value usingon a discounted cash flow model in a Monte Carlo simulation setting, utilizing significant unobservable inputs, including the expected volatility of the acquisitions' gross profits and an estimated discount rate commensurate with the risks of the expected gross profit stream.recurring basis. See Note 47 - Acquisitions.Debt.

The fair value of contingent consideration and the associated liabilities will be adjusted to fair value at each reporting date until actual settlement occurs, with the changes in fair value and related accretion reflected as acquisition-related contingent consideration on the condensed consolidated statements of operations. Significant increases (decreases) in the volatility or in any of the probabilities of success, or decreases (increases) in the discount rate would result in a significantly higher (lower) fair value, respectively, and commensurate changes to these liabilities.

















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The table which follows summarizes the estimated fair value of the Company’s financial assets and liabilities measured on a recurring basis:
 
Fair Value Measurements
 March 31, 2020December 31, 2019
(amounts in thousands)
Financial Assets:
(Level 1)
Deferred compensation asset$719  $830  
Financial Liabilities:
(Level 1)  
Deferred compensation liability$1,768  $2,216  
(Level 3)
Contingent consideration liabilities$—  $7,300  
 March 31, 2019 December 31, 2018
Financial Liabilities:(amounts in thousands)
(Level 1) 
  
Deferred compensation$1,782
 $1,725
(Level 2)   
Interest rate swaps$572
 $234
(Level 3)   
Contingent consideration liabilities$7,836
 $7,689


The opening balances of contingent consideration liabilities are reconciled to the closing balances for fair value measurements of these liabilities categorized within Level 3 of the fair value hierarchy are as follows:

Three Months Ended
March 31,
20202019
(amounts in thousands)
Balance at beginning of period$7,300  $7,689  
Payments(100) (100) 
Accretion expense—  247  
Valuation adjustment77  —  
Reclassification to other current and long-term liabilities(7,277) —  
Balance at end of period$—  $7,836  


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 Contingent Consideration
 Liabilities
 (amounts in thousands)
December 31, 2018$7,689
Payments(100)
Accretion expense247
March 31, 2019$7,836


Items Measured at Fair Value on a Non-Recurring Basis:


The Company's non-financial assets, such as goodwill, trade names, other intangible assets, right-of-use assets, and property and equipment, are measured at fair value when there is an indicator of impairment and are recorded at fair value only when an impairment charge is recognized. During an evaluation of goodwill, trade names,See Note 6 - Goodwill, Trade Names, and other intangible assets during the fourth quarter of 2018, the carrying value of goodwill and trade names in the Physician Staffing reporting unit exceeded their fair values. As a result, the Company recorded impairment charges that incorporated fair value measurements based on Level 3 inputs. For the three months ended March 31, 2019, no impairment charges were recognized.Other Intangible Assets.


Other Fair Value Disclosures:
 
Financial instruments not measured or recorded at fair value in the accompanying condensed consolidated balance sheets consist of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses, and short and long-term debt.expenses. The estimated fair value of accounts receivable and accounts payable and accrued expenses approximate their carrying amount due to the short-term nature of these instruments. The estimated fairCompany’s note payable is included in other current and long-term liabilities on the condensed consolidated balance sheets. Due to its relatively short-term nature, the carrying value of the note payable approximates its fair value. The carrying amount of the Company's debt was calculated using a discounted cash flow analysisSenior Secured Asset-Based Loan approximates fair value because the interest rates are variable and appropriate valuation methodologies using Level 2 inputs from availablereflective of market information.rates.



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The carrying amounts and estimated fair value of the Company’s significant financial instruments that were not measured at fair value are as follows:

March 31, 2019 December 31, 2018 March 31, 2020December 31, 2019
Carrying
Amount
 Fair
Value
 Carrying
Amount
 Fair
Value
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Financial Liabilities:  (amounts in thousands)  Financial Liabilities:(amounts in thousands)
(Level 2) 
  
  
  
(Level 2)    
Term Loan, net$75,489
 $75,300
 $83,179
 $81,800
Note PayableNote Payable$7,277  $7,277  $—  $—  
Senior Secured Asset-Based LoanSenior Secured Asset-Based Loan$67,648  $67,648  $70,974  $70,974  
 

Concentration of Credit Risk:


The Company has invested its excess cash in highly-rated overnight funds and other highly-rated liquid accounts. The Company is exposed to credit risk associated with these investments, as the cash balances typically exceed the current Federal Deposit Insurance Corporation (FDIC) limit of $250,000. The Company minimizes its credit risk relating to these positions by monitoring the financial condition of the financial institutions involved and by primarily conducting business with large, well established financial institutions and diversifying its counterparties.
The Company generally does not require collateral and mitigates its credit risk by performing credit evaluations and monitoring at-risk accounts. The allowance for doubtful accounts represents the Company’s estimate of uncollectible receivables based on a review of specific accounts and the Company’s historical collection experience. See Note 2 - Summary of Significant Accounting Policies. The Company writes off specific accounts based on an ongoing review of collectability as well as past experience with the customer. TheThe Company’s contract terms typically require payment between 15 to 60 days from the date of invoice and are considered past due based on the particular negotiated contract terms. Overall, based on the large number of customers in differing geographic areas, primarily throughout the United States and its territories, the Company believes the concentration of credit risk is limited.
 
12.STOCKHOLDERS’ EQUITY
10.STOCKHOLDERS’ EQUITY
 
Stock Repurchase Program
 
During the three months ended March 31, 2020 and 2019, the Company did not0t repurchase any shares of its Common Stock. During the three months ended March 31, 2018, the Company repurchased and retired 242,400 shares of its Common Stock for $2.9 million, at an average market price of $11.88 per share, under an authorized share repurchase program.

As of March 31, 2019,2020, the Company hashad 510,004 shares of Common Stock under the current share repurchase program available to repurchase, subject to certain conditions in the Company's Amended and Restated Credit Agreement.













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Share-Based Payments


The following table summarizes restricted stock awards and performance stock awards activity issued under the 2017 Plan for the three months ended March 31, 2019:2020:


Restricted Stock AwardsPerformance Stock Awards
 Number of
Shares
Weighted
Average
Grant Date
Fair Value
Number of Target
Shares
Weighted
Average
Grant Date
Fair Value
Unvested restricted stock awards, January 1, 2020996,794  $8.54  364,557  $9.66  
Granted703,611  $6.74  286,415  $6.74  
Vested(315,809) $8.63  —  $—  
Forfeited(7,685) $7.89  (63,235) $14.36  
Unvested restricted stock awards, March 31, 20201,376,911  $7.43  587,737  $7.73  
 Restricted Stock Awards Performance Stock Awards
 Number of
Shares
 Weighted
Average
Grant Date
Fair Value
 Number of Target
Shares
 Weighted
Average
Grant Date
Fair Value
Unvested restricted stock awards, January 1, 2019589,120
 $12.00
 365,149
 $12.35
Granted696,545
 $7.03
 182,189
 $7.03
Vested(273,716) $11.48
 
 $
Forfeited(19,349) $11.81
 (161,653) $12.48
Unvested restricted stock awards, March 31, 2019992,600
 $8.88
 385,685
 $9.79


Restricted stock awards granted under the Company’s 2017 Plan entitle the holder to receive, at the end of a vesting period, a specified number of shares of the Company’s common stock. Share-based compensation expense is measured by the market


16


value of the Company’s stock on the date of grant. The shares vest ratably over a three year period ending on the anniversary date of the grant, and vesting is subject to the employee's continuing employment. There is no partial vesting and any unvested portion is forfeited. Pursuant to the 2017 Plan, the number of target shares that are issued for performance-based stock awards are determined based on the level of attainment of the targets. In the first quarter of 2020, it was determined that the performance stock awards that were granted in 2017 were not earned and, accordingly, those shares were forfeited.


During the three months ended March 31, 2020, $0.9 million was included in selling, general and administrative expenses related to share-based payments, and a net of 221,492 shares of Common Stock were issued upon the vesting of restricted stock.

During the three months ended March 31, 2019, $0.5 million was included in selling, general and administrative expenses related to share-based payments, and a net of 176,436 shares of Common Stock were issued upon the vesting of restricted stock.


During the three months ended March 31, 2018, $0.5 million was included in selling, general and administrative expenses related to share-based payments, and a net of 101,834 shares of Common Stock were issued upon the vesting of restricted stock.

11. SEGMENT DATA
13.SEGMENT DATA


In accordance with the Segment Reporting Topic of the FASB ASC, the Company reports three3 business segments – Nurse and Allied Staffing, Physician Staffing, and Search Services.Search. The Company manages and segments its business based on the services it offers to its customers as described below:

Nurse and Allied Staffing – Nurse and Allied Staffing provides traditional staffing, recruiting, and value-added workforce solutions including: temporary and permanent placement of travel and local branch-based nurse and allied professionals, MSP services, education healthcare services, and outsourcing services. Its clients include: public and private acute-care and non-acute care hospitals, government facilities, public schools and charter schools, outpatient clinics, ambulatory care facilities, physician practice groups, retailers, and many other healthcare providers throughout the United States.

Physician Staffing – Physician Staffing provides physicians in many specialties, as well as certified registered nurse anesthetists, nurse practitioners, and physician assistants as independent contractors on temporary assignments throughout the United States at various healthcare facilities, such as acute and non-acute care facilities, medical group practices, government facilities, and managed care organizations.

Search Services – Search Services includes retained and contingent search services for physicians, healthcare executives, and other healthcare professionals, as well as recruitment process outsourcing.


● Nurse and Allied Staffing – Nurse and Allied Staffing provides traditional staffing, recruiting, and value-added total talent solutions including: temporary and permanent placement of travel and local branch-based nurse and allied professionals, MSP services, education healthcare services, and outsourcing services. Its clients include: public and private acute-care and non-acute care hospitals, government facilities, public schools and charter schools, outpatient clinics, ambulatory care facilities, physician practice groups, retailers, and many other healthcare providers throughout the United States.

● Physician Staffing – Physician Staffing provides physicians in many specialties, as well as certified registered nurse anesthetists, nurse practitioners, and physician assistants as independent contractors on temporary assignments throughout the United States at various healthcare facilities, such as acute and non-acute care facilities, medical group practices, government facilities, and managed care organizations.

● Search – Search includes retained and contingent search services for physicians, healthcare executives, and other healthcare professionals, as well as recruitment process outsourcing.

The Company’s managementCompany evaluates performance of each segment primarily based on revenue and contribution income. The Company defines contribution income as income or loss from operations before depreciation and amortization, acquisition and integrationintegration-related costs, acquisition-related contingent consideration, restructuring costs, legal settlement charges, impairment charges, and corporate overhead. Contribution income is a financial measure used by managementthe Company when assessing segment performance and is provided in accordance with the Segment Reporting Topic of the FASB ASC. The Company’s managementCompany does not evaluate, manage, or measure

16


performance of segments using asset information; accordingly, total asset information by segment is not prepared or disclosed. The information in the following table is derived from the segments’ internal financial information as used for corporate management purposes. Certain corporate expenses are not allocated to and/or among the operating segments.




17


Information on operating segments and areconciliation to incomeloss from operations for the periods indicated are as follows:

Three Months Ended
March 31,
 20202019
 (amounts in thousands)
Revenue from services:    
Nurse and Allied Staffing$188,233  $175,637  
Physician Staffing18,181  16,159  
Search3,650  3,375  
$210,064  $195,171  
Contribution income (loss):
Nurse and Allied Staffing$14,157  $14,296  
Physician Staffing631  405  
Search(335) (423) 
14,453  14,278  
Corporate overhead (a)11,270  12,330  
Depreciation and amortization3,296  2,984  
Acquisition and integration-related costs77  512  
Restructuring costs564  1,140  
Loss from operations$(754) $(2,688) 
_______________

(a) Corporate overhead includes unallocated executive leadership and other centralized corporate functional support costs such as finance, IT, legal, human resources, and marketing, as well as public company expenses and corporate-wide projects (initiatives).

In the second quarter of 2019, the Company merged its permanent search recruitment brands. As a result, for the three months ended March 31, 2019, $0.4 million of revenue and $0.1 million of contribution income were reclassified from Nurse and Allied Staffing to Search to conform to the current period presentation.


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 Three Months Ended
 March 31,
 2019 2018
 (amounts in thousands)
Revenue from services: 
  
Nurse and Allied Staffing$176,073
 $185,105
Physician Staffing16,159
 21,560
Search Services2,939
 3,623
 $195,171
 $210,288
    
Contribution income:   
Nurse and Allied Staffing$14,156
 $16,760
Physician Staffing405
 1,500
Search Services(283) 312
 14,278
 18,572
    
Corporate overhead12,330
 10,652
Depreciation and amortization2,984
 2,909
Acquisition-related contingent consideration247
 213
Acquisition and integration costs265
 115
Restructuring costs1,140
 435
(Loss) income from operations$(2,688) $4,248



14.12. CONTINGENCIES
 
Legal Proceedings


From time to time, the Company is involved in various litigation, claims, investigations, and other proceedings that arise in the ordinary course of its business. These matters primarily relate to employee-related matters that include individual and collective claims, professional liability, tax, and payroll practices. The Company establishes reserves when available information indicates that a loss is probable and an amount or range of loss can be reasonably estimated. These assessments are performed at least quarterly and are based on the information available to management at the time and involve a significant management judgment to determine the probability and estimated amount of potential losses, if any. Based on the available information considered in its reviews, the Company adjusts its loss contingency accruals and its disclosures as may be required. Actual outcomes or losses may differ materially from those estimated by the Company's current assessments, including available insurance recoveries, which would impact itsthe Company's profitability. Adverse developments in existing litigation claims or legal proceedings involving the Company or new claims could require itmanagement to establish or increase litigation reserves or enter into unfavorable settlements or satisfy judgments for monetary damages for amounts in excess of current reserves, which could adversely affect itsthe Company's financial results. With regard toThe Company believes the outcome of any outstanding loss contingencies as of March 31, 2019, the Company believes the outcome of these matters2020 will not have a material adverse effect on its business, financial condition, results of operations or cash flows. In October 2019, the Company received a grand jury subpoena directed to Advantage On Call whose assets were purchased by Cross Country Healthcare, Inc. in 2017. The subpoena appears to relate to an investigation of home healthcare services and healthcare staffing services. The Company is cooperating with the investigation.


Sales and Other State Non-Income Tax Liabilities


The Company's sales and other state non-income tax filings are subject to routine audits by authorities in the jurisdictions where it conducts business in the United States which may result in assessments of additional taxes. The Company accrues sales and other non-income tax liabilities based on the Company's best estimate of its probable liability utilizing currently available information and interpretation of relevant tax regulations. Non-incomeGiven the nature of the Company's business, significant subjectivity exists as to both whether sales and other state non-income taxes can be assessed on its activity and how the sales tax will ultimately be measured by the relevant jurisdictions. The Company makes a determination for each reporting period whether the estimates for sales and other non-income taxes in certain states should be revised. The expense is included in selling, general and administrative expenses on itsin the Company's condensed consolidated statements of operations and the liability is reflected in sales tax payable within other current liabilities as of March 31, 20192020 and December 31, 2018, on2019, in its condensed consolidated balance sheets.




13. INCOME TAXES
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15.INCOME TAXES
 
For the three months ended March 31, 2019 and 2018,2020, the Company calculated its incomeeffective tax expense or benefit using an estimatedrate based on year-to-date results as opposed to the three months ended March 31, 2019, whereby the Company calculated its effective tax rate estimating its annual effective tax rate which is applied to the Company’s pretax income or loss as of the interim period.rate. The Company’s effective tax rate for the three months ended March 31, 2019 and 20182020 was 68.6% and 37.7%, respectively, including the impact ofnegative 11.2% which included immaterial discrete items. Excluding discrete items, the Company’sThe Company's effective tax rate for the three months ended March 31, 2019 was 68.6% including the impact of discrete items and 2018 was 73.8% and 35.3%, respectively. The effectiveexcluding discrete items. As a result of the Company's valuation allowance on substantially all of its domestic deferred tax ratesassets, income tax expense for the first quarter ofthree months ended March 31, 2020 was primarily impacted by international and state taxes. The Company did not maintain a material valuation allowance during the three months ended March 31, 2019 and, 2018 wereas a result, income tax expense for the three months ended March 31, 2019 was primarily impacted by the nondeductibilitynon-deductibility of certain per diem expenses, the officers' compensation limitation, and international and state taxes.
The Company will continueCoronavirus Aid, Relief and Economic Security Act, also known as the CARES Act, was signed into law on March 27, 2020. Among other things, the CARES Act provided for an immediate refund of Alternative Minimum Tax credits as compared to assess the realizability of its deferred2017 Tax Act’s scheduled refunds through 2021. Accordingly, an additional $0.3 million is presented as a current income tax receivable within other current assets and,in the condensed consolidated balance sheets as of March 31, 2019, has maintained a $1.2 million valuation allowance against certain state net operating losses. The Company's current year assumptions are consistent with estimates and plans used to manage its business. In the event that actual results differ from these estimates, or the Company adjusts these estimates in future periods for current trends or changes in its estimating assumptions, the Company may modify the level of the valuation allowance.2020.


As of March 31, 2020 and December 31, 2019, the Company had a valuation allowance of $37.3 million. The valuation allowance was recorded against all domestic deferred tax assets not more likely than not to be realized. The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support its reversal.

As of March 31, 2020, the Company had approximately $0.7 million of unrecognized tax benefits included in other current liabilities and other long-term liabilities, ($5.9$6.3 million, net of deferred taxes, which would affect the effective tax rate if recognized).

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recognized. During the three months ended March 31, 2019,2020, the Company had gross increases of $0.4$0.3 million to its current year unrecognized tax benefits related to federal and state tax provisions.issues.


The tax years of 2008 and 20102012 through 20182019 remain open to examination by certain taxing jurisdictions to which the Company is subject to tax.tax, other than certain states in which the statute of limitations has been extended.


16.14. RELATED PARTY TRANSACTIONS

The Company provides services to entities which are affiliated with certain members of the Company’s Board of Directors. Management believes services with related parties were conducted on terms equivalent to those prevailing in an arm's-length transaction. Revenue and accounts receivable related to these transactions were less than $0.1 million for the three months ended March 31, 2019 and March 31, 2018.


The Company has a 68% ownership interest in Cross Country Talent Acquisition Group, LLC, a joint venture between the Company and a hospital system. The Company generated revenue providing staffing services to the hospital system of $5.6 million and $4.4 million for both the three months ended March 31, 20192020 and March 31, 2018, respectively.2019. At March 31, 20192020 and December 31, 2018,2019, the Company had a receivable balance of $3.1$2.2 million and $2.8$1.7 million, respectively, and a payable balance of $0.4$0.3 million and $0.3$0.5 million, respectively.


SubsequentThe Company has entered into an arrangement for digital marketing services provided by a firm that is related to Mr. Clark, the Company's acquisitionCo-Founder and Chief Executive Officer. Mr. Clark is a minority shareholder in the firm's parent company and is a member of Mediscan on October 30, 2015, Mediscan continuedthe parent company's Board of Directors. The terms of the arrangement are equivalent to operate at premises owned,those prevailing in part,an arm's-length transaction and have been approved by the founding membersCompany through its related party process. The digital marketing firm manages a limited number of Mediscan. Thedigital publishers covering various Company paid $0.1 million in rent expensebrands for these premises fora monthly management fee. During the three months ended March 31, 2018. 2020, the Company incurred less than $0.1 million in expenses related to these fees.

In the fourthfirst quarter of 2018,2020, the Company vacatedentered into a note payable related to contingent consideration assumed as part of a prior period acquisition. The payees of the premises.note are controlled by an employee of the sellers who remained with the Company. The note payable has a balance of $7.3 million at March 31, 2020. See Note 7 - Debt.


17.15. RECENT ACCOUNTING PRONOUNCEMENTS


In August 2018,On March 12, 2020, the FASB issued ASU No. 2018-15, Intangibles - Goodwill2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and Other - Internal-Use Software (Subtopic 350-40), Customer's Accountingexceptions for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The amendments in this update alignapplying GAAP to contracts, hedging relationships, and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. When elected, the requirementsoptional expedients for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirementsmodifications must be applied consistently for capitalizing implementation costs incurred to developall eligible contracts or obtain internal-use software (and hosting arrangements that include an internal use software license).transactions. The amendments in this update are effective for public business entities for fiscal years beginning afteras of March 12, 2020 through December 15,31, 2022. As of March 31, 2020, the Company is not impacted by this guidance; however, it will continue to assess the potential impact on its debt contracts and future hedging relationships, if applicable, through the effective period.

In December 2019, and interim periods within those fiscal years, and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted for all entities, including adoption in an interim period. The Company expects to early adopt this standard, on a prospective basis, in its second quarter of 2019.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement2019-12, Income Taxes (Topic 820)740), Disclosure Framework - Changes toSimplifying the Disclosure RequirementsAccounting for Fair Value Measurement. Income Taxes. The amendments in this update modifysimplify the disclosure requirements on fair value measurementsaccounting for income taxes by removing certain exceptions to the general principles in Topic 820, Fair Value Measurement, based on740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019,2020, and should be applied either prospectivelyon a prospective, retrospective, or retrospectivelymodified retrospective basis depending on the nature of the disclosure. An entity is permitted to early adopt any removed or modified


19


disclosures upon issuance of this update and delayamendment. Early adoption of the additional disclosures until their effective date.amendments is permitted. The Company is currently in the process of evaluating this standard and expects to adopt the full provisionsstandard in its first quarter of 2020.2021.


In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendments in this update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected based on historical experience, current conditions, and reasonable supportable forecasts. The amendments in this update are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted no sooner than the first quarter of 2019. A modified retrospective approach is required for all investments, except debt securities for which an other-than-temporary impairment had been recognized prior to the effective date, which will require a prospective transition approach and should be applied either prospectively or retrospectively depending on the nature of the disclosure. The Company is currently in the process of evaluating this standard and expects to adopt the full provisions in its first quarter of 2020.

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The purpose of the following Management’s Discussion and Analysis (MD&A) is to help facilitate the understanding of significant factors influencing the quarterly operating results, financial condition, and cash flows of the Company. Additionally, the MD&A also conveys our expectations of the potential impact of known trends, events, or uncertainties that may impact future results. This discussion supplements the detailed information presented in the condensed consolidated financial statementsMD&A is provided as a supplement to, and notes thereto which should be read in conjunction with, the consolidated financial statements and related notes contained in the Company’sour Annual Report on Form 10-K for the year ended December 31, 2018.2019, our financial statements and the accompanying notes to our financial statements, as well as the Item 1A. Risk Factors contained herein.
 

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Business Overview
 
We provide healthcare staffing, recruiting andtotal talent management services, including strategic workforce solutions, tocontingent staffing, permanent placement and other consultative services for healthcare clients. We recruit and place highly qualified healthcare professionals in virtually every specialty and area of expertise. Our diverse client base includes both clinical and nonclinical settings, servicing acute care hospitals, physician practice groups, outpatient and ambulatory-care centers, nursing facilities, both public schools and charter schools, rehabilitation and sports medicine clinics, government facilities, and homecare. Through our customers through anational staffing teams and network of 69 office locations, throughout the United States. Our services include placingwe offer our workforce solutions and we are able to place clinicians on travel and per diem assignments, local short-term contracts and permanent positions. In addition, we offer flexibleOur workforce management solutions to our customers including:include managed service programs (MSP)(MSPs), education healthcare, as well aselectronic medical record (EMR) transition staffing, recruitment process outsourcing (RPO), internal resource pool (IRP), and other outsourcing and value-addedconsultative services as described in Item 1. Business in our Annual Report on Form 10-K for the year ended December 31, 2018. In addition, we2019. By utilizing our various solutions, clients are able to better plan their personnel needs, talent acquisition and management processes, strategically flex and balance their workforce, access quality healthcare personnel, and provide both retained and contingent placement servicescontinuity of care for healthcare executives, physicians, and other healthcare professionals.improved patient outcomes.


We manage and segment our business based on the nature of the services we offer to our customers. As a result, in accordance with the Segment Reporting Topic of the FASB ASC, we report three business segments – Nurse and Allied Staffing, Physician Staffing, and Search.

● Nurse and Allied Staffing – Nurse and Allied Staffing represented approximately 89% of our total revenue in the first quarter of 2020. The Nurse and Allied Staffing segment provides workforce solutions and traditional staffing, including temporary and permanent placement of travel nurses and allied professionals, as well as per diem and contract nurses and allied personnel. We also staff healthcare personnel and substitute teachers in public and charter schools. We provide flexible workforce solutions to our healthcare clients through diversified offerings designed to meet their unique needs, including: MSP, optimal workforce solutions (OWS), EMR, IRP and consulting services.

● Physician Staffing – Physician Staffing represented approximately 9% of our total revenue in the first quarter of 2020. Physician Staffing provides physicians in many specialties, as well as certified registered nurse anesthetists, nurse practitioners, and physician assistants as independent contractors on temporary assignments throughout the United States.

● SearchSearch Services.represented approximately 2% of our total revenue in the first quarter of 2020. Search includes retained and contingent search services for physicians, healthcare executives, and other healthcare professionals, as well as RPO.

Nurse and Allied Staffing – Nurse and Allied Staffing represented approximately 90% of our total revenue in the first quarter of 2019. Nurse and Allied Staffing provides traditional staffing, recruiting, and value-added workforce solutions including: temporary and permanent placement of travel and local branch-based nurse and allied professionals, MSP services, education healthcare services, and outsourcing services.

Physician Staffing – Physician Staffing represented approximately 8% of our total revenue in the first quarter of 2019. Physician Staffing provides physicians in many specialties, as well as certified registered nurse anesthetists, nurse practitioners, and physician assistants under our Medical Doctor Associates (MDA) brand as independent contractors on temporary assignments throughout the United States.

Search Services – Search Services represented approximately 2% of our total revenue in the first quarter of 2019. Search Services includes retained and contingent search services for physicians, healthcare executives, and other healthcare professionals, as well as RPO.


Summary of Operations


For the quarter ended March 31, 2019,2020, revenue from services decreased 7%increased 8% year-over-year to $195.2$210.1 million, with declines in all of our business reporting segments. The decrease in our Nurse and Allied Staffing segment was primarily due to lowera higher volume inof travel nurse staffing, and local staffing.higher average bill rates. The decreaseincrease in revenue was partially offset by revenue declines in our Physician Staffing segment waslocal staffing and education healthcare services primarily due to lower volume.


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We incurred $1.1 milliondriven by the changing landscape in restructuring charges duringMarch from the COVID-19 pandemic. Profitability in the first quarter was impacted by $0.6 million of 2019 primarily comprisedrestructuring costs, $0.7 million of severanceaccelerated amortization expense in connection with our rebranding initiative, and $0.5 million of costs as part of a cost savings initiative.incurred related to our applicant tracking system replacement. Net loss attributable to common shareholders was $1.8$2.1 million, or a loss of $0.05$0.06 per share.

For the three months ended March 31, 2019,2020, we generated cash flow from operating activities of $12.8 million. During the first quarter$17.2 million and repaid a net of 2019, we made an optional principal prepayment of $7.5$3.3 million on our Term Loan.senior-secured asset-based credit facility (ABL). Due to the uncertainty from COVID-19, as a precautionary measure we opted to hold more cash than we might have otherwise. As of March 31, 2019,2020, we had $18.3$12.6 million of cash and cash equivalents, and availability under the ABL of $119.0 million, with $67.6 million of borrowings drawn under our ABL, and $19.6 million of undrawn letters of credit outstanding, leaving $31.8 million available for borrowing.

COVID Response

Early in March, we experienced an increase in demand for crisis assignments from our customers as a principal balanceresult of $76.4 million outstandingthe COVID-19 pandemic impacting the U.S. Beginning in March and continuing into the second quarter, we have placed more than a thousand nurses on COVID-19 assignments with the majority going to our MSP partners in hot spots such as New York and Washington. As these assignments typically require higher compensation to the healthcare professionals, we have seen higher than normal average bill rates. Since late in the first quarter, the Company has experienced both positive and negative impacts on its business including a significant number of crisis assignments as well as the cancellation of non-COVID-19 assignments by

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certain facilities due to low census and deferred elective procedures. Additionally, since mid-March 2020, schools have remained closed and as a result we are seeing a sharp decline in revenue from our education business that is being partially offset by teletherapy services for the same clients. Overall, demand remains volatile, as orders initially surged due to the crisis needs, and have since trended downward as clients have reduced their contingent labor based on their unique situations.

As part of our COVID-19 response, we established a cross-functional crisis team with representation from all parts of our business to ensure rapid response to our customers’ needs. As a result of the mandated shelter in place orders, our more than 1,600 employees were successfully able to work from home with minimal disruption. Generally, travel has been suspended and we have altered the way we communicate through the increased use of videoconferencing. Our response to this pandemic has helped us identify better ways to execute our client-facing and back-office operations which we expect to benefit from as we move forward.

While the impact on the first quarter was not considered significant for us, indications are that our second quarter’s results will be subject to more volatility. Due to the uncertainty across the healthcare industry, we are unable to predict the overall impact on our Term Loan. On March 29, 2019,business for the second quarter. As the country resumes normal operations as part of the phased in recovery, however, we entered into an amendmentexpect demand for these services to rebound in the second quarter. We are proactively working with our credit agreement which, among other changes, reducedcustomers to address their crisis needs, as well as to plan for the recovery of their normal operations.

We believe our borrowing capacityliquidity remains high as we have taken steps to preserve cash, ending the quarter with cash of $12.6 million and $31.8 million available for borrowing. In addition, we do not expect the future impacts of COVID-19 to have a significant impact on our ability to maintain compliance with our financial covenants under our revolving credit facility from $115.0 millionfacility.

We had a very successful experience with our employees working remotely while the shelter in place orders remain in effect with minimal disruption. We believe the combination of the successful first quarter launch of Cross Country Marketplace, our proprietary on-demand staffing platform, and the ability of our employees to $75.0 million. See Note 8 - Debtefficiently work remotely will allow us to greatly reduce our condensed consolidated financial statements. Asoffice footprint throughout the country. We also remain on target for full implementation of March 31, 2019, there were no amounts drawn on our revolving credit facilityapplicant tracking system in the third quarter of 2020, which we believe will create further efficiencies. Finally, we continue to evaluate our cost structure and $20.6 million of letters of credit outstanding.have taken steps in the second quarter to realize additional cost savings through further centralization and automation efforts.


Refer to Item 1A. Risk Factors for further discussion about potential additional risks and uncertainties.

See Results of Operations, Segment Results, and Liquidity and Capital Resources sections that follow for further information.


Operating Metrics


We evaluate our financial condition by tracking operating metrics and financial results specific to each of our segments. Key operating metrics include hours worked, days filled, number of FTEs, revenue per FTE, and revenue per day filled. Other operating metrics include number of open orders, candidate applications, contract bookings, length of assignment, bill and pay rates, and renewal and fill rates, number of active searches, and number of placements. These operating metrics are representative of trends that assist management in evaluating business performance. Due to the timing of our business process and other factors, certain of these operating metrics may not necessarily correlate to the reported GAAP results for the periods presented. Some of the segment financial results analyzed include revenue, operating expenses, and contribution income. In addition, we monitor cash flow as well as operating and leverage ratios to help us assess our liquidity needs.


Business SegmentBusiness Measurement
Nurse and Allied StaffingFTEs represent the average number of Nurse and Allied Staffing contract personnel on a full-time equivalent basis.
Average revenue per FTE per day is calculated by dividing the Nurse and Allied Staffing revenue per FTE by the number of days worked in the respective periods. Nurse and Allied Staffing revenue also includes revenue from the permanent placement of nurses.
Physician StaffingDays filled is calculated by dividing the total hours invoiced during the period, including an estimate for the impact of accrued revenue, by 8 hours.
Revenue per day filled is calculated by dividing revenue as reported by days filled for the period presented.





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Results of Operations
 
The following table summarizes, for the periods indicated, selected condensed consolidated statements of operations data expressed as a percentage of revenue. Our historical results of operations are not necessarily indicative of future operating results. 
Three Months EndedThree Months Ended
March 31,March 31,
2019 2018 20202019
Revenue from services100.0 % 100.0 %Revenue from services100.0 %100.0 %
Direct operating expenses75.3
 74.4
Direct operating expenses76.4  75.3  
Selling, general and administrative expenses23.6
 21.7
Selling, general and administrative expenses21.8  23.6  
Bad debt expense0.1
 0.1
Bad debt expense0.3  0.1  
Depreciation and amortization1.5
 1.4
Depreciation and amortization1.6  1.5  
Acquisition-related contingent consideration0.1
 0.1
Acquisition and integration costs0.1
 0.1
Acquisition and integration-related costsAcquisition and integration-related costs—  0.2  
Restructuring costs0.6
 0.2
Restructuring costs0.3  0.6  
(Loss) income from operations(1.3) 2.0
Loss from operationsLoss from operations(0.4) (1.3) 
Interest expense0.7
 0.6
Interest expense0.4  0.7  
Loss on early extinguishment of debt0.2
 
Loss on early extinguishment of debt—  0.2  
Other income, net
 (0.1)Other income, net—  —  
(Loss) income before income taxes(2.2) 1.5
Income tax (benefit) expense(1.5) 0.6
Consolidated net (loss) income(0.7) 0.9
Loss before income taxesLoss before income taxes(0.8) (2.2) 
Income tax expense (benefit)Income tax expense (benefit)—  (1.5) 
Consolidated net lossConsolidated net loss(0.8) (0.7) 
Less: Net income attributable to noncontrolling interest in subsidiary0.2
 0.1
Less: Net income attributable to noncontrolling interest in subsidiary0.2  0.2  
Net (loss) income attributable to common shareholders(0.9)% 0.8 %
Net loss attributable to common shareholdersNet loss attributable to common shareholders(1.0)%(0.9)%





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Comparison of Results for the Three Months Ended March 31, 20192020 compared to the Three Months Ended March 31, 20182019

Three Months Ended March 31,Three Months Ended March 31,
    Increase (Decrease) Increase (Decrease)Increase (Decrease)Increase (Decrease)
2019 2018 $ %20202019$%
(Amounts in thousands)(Amounts in thousands)
Revenue from services$195,171
 $210,288
 $(15,117) (7.2)%Revenue from services$210,064  $195,171  $14,893  7.6 %
Direct operating expenses146,917
 156,535
 (9,618) (6.1)%Direct operating expenses160,461  146,917  13,544  9.2 %
Selling, general and administrative expenses46,036
 45,634
 402
 0.9 %Selling, general and administrative expenses45,881  46,036  (155) (0.3)%
Bad debt expense270
 199
 71
 35.7 %Bad debt expense539  270  269  99.6 %
Depreciation and amortization2,984
 2,909
 75
 2.6 %Depreciation and amortization3,296  2,984  312  10.5 %
Acquisition-related contingent consideration247
 213
 34
 16.0 %
Acquisition and integration costs265
 115
 150
 130.4 %
Acquisition and integration-related costsAcquisition and integration-related costs77  512  (435) (85.0)%
Restructuring costs1,140
 435
 705
 162.1 %Restructuring costs564  1,140  (576) (50.5)%
(Loss) income from operations(2,688) 4,248
 (6,936) (163.3)%
Loss from operationsLoss from operations(754) (2,688) 1,934  71.9 %
Interest expense1,422
 1,266
 156
 12.3 %Interest expense867  1,422  (555) (39.0)%
Loss on early extinguishment of debt360
 
 360
 100.0 %Loss on early extinguishment of debt—  360  (360) (100.0)%
Other income, net(82) (101) 19
 18.8 %Other income, net(31) (82) 51  62.2 %
(Loss) income before income taxes(4,388) 3,083
 (7,471) (242.3)%
Income tax (benefit) expense(3,012) 1,163
 (4,175) (359.0)%
Consolidated net (loss) income(1,376) 1,920
 (3,296) (171.7)%
Loss before income taxesLoss before income taxes(1,590) (4,388) 2,798  63.8 %
Income tax expense (benefit)Income tax expense (benefit)178  (3,012) 3,190  105.9 %
Consolidated net lossConsolidated net loss(1,768) (1,376) (392) (28.5) 
Less: Net income attributable to noncontrolling interest in subsidiary391
 278
 113
 40.6 %Less: Net income attributable to noncontrolling interest in subsidiary321  391  (70) (17.9)%
Net (loss) income attributable to common shareholders$(1,767) $1,642
 $(3,409) (207.6)%
Net loss attributable to common shareholdersNet loss attributable to common shareholders$(2,089) $(1,767) $(322) (18.2)%


Revenue from services
 
Revenue from services decreased 7.2%increased 7.6%, to $210.1 million for the three months ended March 31, 2020, as compared to $195.2 million for the three months ended March 31, 2019, as compared to $210.3 millionreflecting higher revenue growth in all three segments. Revenue for the three months ended March 31, 2018,2020 was negatively impacted by COVID-19 due to suspended services resulting from school closures and, to a lesser extent, volume declines for all our business reporting segments.in local staffing. See further discussion in Segment Results.


Direct operating expenses


Direct operating expenses are comprised primarily of field employee compensation and independent contractor expenses, housing expenses, travel expenses, and related insurance expenses. Direct operating expenses decreased $9.6increased $13.5 million or 6.1%9.2%, to $160.5 million for the three months ended March 31, 2020, as compared to $146.9 million for the three months ended March 31, 2019, as compared to $156.5 million for the three months ended March 31, 2018.2019. As a percentage of total revenue, direct operating expenses increased to 75.3%76.4% compared to 74.4%75.3% in the prior year period primarily due to lower bill-pay spreadaverage pay rates rising faster than bill rates in our staffing businesses.Nurse and Allied Staffing.


Selling, general and administrative expenses
 
Selling, general and administrative expenses increased 0.9%decreased 0.3%, to $45.9 million for the three months ended March 31, 2020, as compared to $46.0 million for the three months ended March 31, 2019, as compared to $45.6 million for the three months ended March 31, 2018, due to higher consulting and other professional service fees, partially offset by the cost savings and efficiency initiatives undertaken over the last several quarters. The main driver for the increase in consulting fees was the impact from costs related to the replacement of our legacy applicant tracking system for our travel nurse business.2019. As a percentage of total revenue, selling, general and administrative expenses increaseddecreased to 21.8% for the three months ended March 31, 2020 as compared to 23.6% for the three months ended March 31, 2019, primarily as compared to 21.7%a result of improved operating leverage.

Depreciation and amortization expense

Depreciation and amortization expense for the three months ended March 31, 2018.



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Depreciation and amortization expense

Depreciation and amortization expense2020 increased slightly to$3.0 $3.3 million as compared to $3.0 million for the three months ended March 31, 2019 from $2.9 million2019. Amortization expense increased due to accelerated amortization of trade names in our Nurse and Allied Staffing segment, associated with our rebranding initiatives. As a percentage of revenue,

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depreciation and amortization expense was 1.6% for the three months ended March 31, 2018. As a percentage of revenue, depreciation2020 and amortization expense was 1.5% and 1.4% for the three months ended March 31, 20192019.

Acquisition and 2018, respectively.integration-related costs


Acquisition-related contingent consideration

Acquisition-related contingent consideration includesAcquisition and integration-related costs include costs for prior acquisitions, costs incurred for potential transactions, and accretion and valuation adjustments on our contingent consideration liabilitiesliability related to the Mediscan acquisition,acquisition. In the first quarter of 2020, the final earnout amount related to the contingent consideration was determined. See Note 7 - Debt.

Restructuring costs

Restructuring costs were primarily comprised of employee termination costs, ongoing lease costs related to the Company's strategic reduction of its real estate footprint, and reorganization costs as part of our planned cost savings initiatives, and totaled $0.2$0.6 million for bothduring the three months ended March 31, 2020. During the three months ended March 31, 2019, and March 31, 2018, respectively. See Note 10 - Fair Value Measurements to our condensed consolidated financial statements.

Acquisition and integration costs
Acquisition and integrationrestructuring costs during the three months ended March 31, 2019 were $0.3totaled $1.1 million and related to the Advantage and American Personnel, Inc. (AP Staffing) acquisitions, as well as expenses incurred for potential transactions. During the three months ended March 31, 2018, acquisition and integration costs were $0.1 million and related to the Advantage acquisition. See Note 4 - Acquisitions to our condensed consolidated financial statements.

Restructuring costs

Restructuring costs were primarily comprised of severance costs incurred in connection with our cost savings initiatives and totaled $1.1initiatives.

Interest expense
Interest expensewas $0.9 million and $0.4 million duringfor the three months ended March 31, 2019 and 2018, respectively.

Interest expense
Interest expensewas $1.42020 as compared to $1.4 million for the three months ended March 31, 2019, compared to $1.3 million for the three months ended March 31, 2018, due to lower average borrowings and a higherlower effective rate. The effective interest rate on our term loan borrowings which increased to 5.8%was 4.4% for the three month period ended March 31, 20192020 compared to 4.4%5.8% for the three months ended March 31, 2018. See Note 8 - Debt to our condensed consolidated financial statements.2019.


Loss on early extinguishment of debt


Loss on early extinguishment of debt was $0.4 million for the three months ended March 31, 2019, relating to the write-off of
debt issuance costs in connection with a reduction in borrowing capacity under the revolving credit facility, and an optional
principal prepayment of $7.5 million made on our Term Loanterm loan in the first quarter of 2019. There were no similar charges for the three months ended March 31, 2020.


Income tax (benefit) expense
 
Income tax benefit totaled $3.0expense was $0.2 million for the three months ended March 31, 2020, including immaterial discrete items. For the three months ended March 31, 2019, compared towe recorded an income tax expensebenefit of $1.2$3.0 million, including the impact of discrete items, and $3.2 million excluding discrete items. As a result of the Company’s valuation allowance on substantially all of its domestic deferred tax assets, income tax expense for the three months ended March 31, 2018.2020 was primarily impacted by international and state taxes. The effectiveCompany did not maintain a material valuation allowance during the three months ended March 31, 2019 and as a result, income tax ratesexpense for the first quarter ofthree months ended March 31, 2019 and 2018 werewas primarily impacted by the nondeductibilitynon-deductibility of certain per diem expenses, the officers’ compensation limitation, and international and state taxes. See Note 13 - Income Taxes to our condensed consolidated financial statements.











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Segment Results
 
Information on operating segments and a reconciliation to (loss) income from operations for the periods indicated are as follows:
Three Months Ended
March 31,
 20202019
 (amounts in thousands)
Revenue from services:    
Nurse and Allied Staffing$188,233  $175,637  
Physician Staffing18,181  16,159  
Search3,650  3,375  
$210,064  $195,171  
Contribution income (loss):
Nurse and Allied Staffing$14,157  $14,296  
Physician Staffing631  405  
Search(335) (423) 
14,453  14,278  
Corporate overhead11,270  12,330  
Depreciation and amortization3,296  2,984  
Acquisition and integration-related costs77  512  
Restructuring costs564  1,140  
Loss from operations$(754) $(2,688) 
 Three Months Ended
 March 31,
 2019 2018
 (amounts in thousands)
Revenue from services: 
  
Nurse and Allied Staffing$176,073
 $185,105
Physician Staffing16,159
 21,560
Search Services2,939
 3,623
 $195,171
 $210,288
    
Contribution income:   
Nurse and Allied Staffing$14,156
 $16,760
Physician Staffing405
 1,500
Search Services(283) 312
 14,278
 18,572
    
Corporate overhead12,330
 10,652
Depreciation and amortization2,984
 2,909
Acquisition-related contingent consideration247
 213
Acquisition and integration costs265
 115
Restructuring costs1,140
 435
(Loss) income from operations$(2,688) $4,248


In the second quarter of 2019, the Company merged its permanent search recruitment brands. As a result, for the three months ended March 31, 2019, $0.4 million of revenue and $0.1 million of contribution income were reclassified from Nurse and
See Note 13 - Segment DataAllied Staffing to our condensed consolidated financial statements.Search to conform to the current period presentation.


Certain statistical data for our business segments for the periods indicated are as follows:
Three Months Ended
March 31,March 31,Percent
20202019ChangeChange
Nurse and Allied Staffing statistical data:
FTEs7,145  7,017  128  1.8 %
Average Nurse and Allied Staffing revenue per FTE per day$290  $278  12  4.3 %
Physician Staffing statistical data:
Days filled10,199  10,280  (81) (0.8)%
Revenue per day filled$1,783  $1,572  211  13.4 %
 Three Months Ended    
 March 31, March 31,   Percent
 2019 2018 Change Change
        
Nurse and Allied Staffing statistical data:       
FTEs7,017
 7,466
 (449) (6.0)%
Average Nurse and Allied Staffing revenue per FTE per day$279
 $275
 4
 1.5 %
        
Physician Staffing statistical data:       
Days filled10,280
 14,250
 (3,970) (27.9)%
Revenue per day filled$1,572
 $1,513
 59
 3.9 %


See definition of Business Measurement under the Operating Metrics section of our Management's Discussion and Analysis.






















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Segment Comparison - Three Months Ended March 31, 20192020 compared to the Three Months Ended March 31, 20182019


Nurse and Allied Staffing


Revenue from Nurse and Allied Staffing decreased $9.0increased $12.6 million, or 4.9%7.2%, to $176.1$188.2 million for the three months ended March 31, 2020, compared to $175.6 million for the three months ended March 31, 2019, comparedprimarily due to $185.1 millionthe continued increase in the number of FTEs and average bill rates throughout the quarter. Revenue for the three months ended March 31, 2018, predominantly2020 was negatively impacted by COVID-19 due to suspended services resulting from school closures and, to a lesser extent, volume declines in travel nurse and local staffing. These declines were partially offset by increases in travel allied and education healthcare staffing.staffing.
 
Contribution income from Nurse and Allied Staffing decreased $2.6$0.1 million or 15.5%1.0%, to $14.2 million for the three months ended March 31, 2019,2020, compared to $16.8$14.3 million for the three months ended March 31, 2018, primarily due to lower travel nurse volumes combined with lower travel nurse and allied bill rates.2019. As a percentage of segment revenue, contribution income margin was 8.0%7.5% for the three months ended March 31, 2019,2020, compared to 9.1%8.1% for the three months ended March 31, 2018.2019.

Operating Metrics


The average number of Nurse and Allied Staffing FTEs on contract during the three months ended March 31, 2019 decreased 6.0%2020 increased 1.8% from the three months ended March 31, 2018.2019, reflecting an increase in travel nurse staffing partially offset by local staffing. The average Nurse and Allied Staffing revenue per FTE per day increased 1.5%.4.3%, reflecting higher average bill rates related to increased pricing.


Physician Staffing
 
Revenue from Physician Staffing decreased $5.4increased $2.0 million, or 25.1%12.5%, to $18.2 million for the three months ended March 31, 2020, compared to $16.2 million for the three months ended March 31, 2019, comparedprimarily due to $21.6higher bill rates due to mix as well as one additional day in the quarter.
Contribution income from Physician Staffing increased $0.2 million, or 55.8% to $0.6 million for the three months ended March 31, 2018, primarily due to a lower number of days filled, partially offset by higher bill rates due to mix.
Contribution income from Physician Staffing decreased $1.1 million, or 73.0%2020, compared to $0.4 million for the three months ended March 31, 2019, compared to $1.5 million for the three months ended March 31, 2018.2019. As a percentage of segment revenue, contribution income was 3.5% for the three months ended March 31, 2020, compared to 2.5% for the three months ended March 31, 2019, compared to 7.0%driven by higher revenue and lower selling, general and administrative expenses.

Total days filled for Physician Staffing for the three months ended March 31, 2018, driven by the lower revenue, partially offset by lower selling, general, and administrative expenses.

Operating Metrics

Total days filled for the three months ended March 31, 20192020 were 10,28010,199 as compared with 14,25010,280 in the prior year. Revenue per day filled was $1,572$1,783 as compared with $1,513$1,572 in the prior year, due to a shift in the mix of business.


Search Services
 
Revenue from Search Services decreased $0.7increased $0.3 million, or 18.9%8.1%, to $2.9$3.7 million for the three months ended March 31, 2020, compared to $3.4 million for the three months ended March 31, 2019, compareddue to $3.6an increase in executive search and RPO revenue, partially offset by declines in physician search.

Contribution loss from Search was $0.3 million for the three months ended March 31, 2018, due2020, compared to a decline in both executive and physician searches.

Segment contribution loss of $0.4 million for the three months ended March 31, 2019 was $0.3 million, compared to income for the three months ended March 31, 2018 of $0.3 million.2019.


Corporate Overhead


Corporate overhead includes unallocated executive leadership and other centralized corporate functional support costs such as finance, IT, legal, human resources, and marketing, as well as public company expenses and corporate-wide projects (initiatives). Corporate overhead increaseddecreased to $11.3 million for the three months ended March 31, 2020, from $12.3 million for the three months ended March 31, 2019, from $10.7 milliondue to lower consulting and other professional service fees, as well as the impact of our cost savings initiatives. As a percentage of consolidated revenue, corporate overhead was 5.4% for the three months ended March 31, 2018, primarily due to higher consulting2020 and other professional service fees, partly offset by the impact of cost savings and efficiency initiatives. As a percentage of consolidated revenue, unallocated corporate overhead was 6.3% for the three months ended March 31, 2019 and 5.1% for the three months ended March 31, 2018.2019.


Transactions with Related Parties


See Note 1614 - Related Party Transactions to our condensed consolidated financial statements.








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Liquidity and Capital Resources
 
At March 31, 2019,2020, we had $18.3$12.6 million in cash and cash equivalents and $76.4$67.6 million of Term Loan outstanding, at par.borrowings drawn under our senior secured asset-based revolving credit facility. Working capital decreased by $12.8$6.3 million to $96.7$91.6 million as of March 31, 2019,2020, compared to $109.5$97.9 million as of December 31, 2018. Our net2019. As of March 31, 2020, our days' sales outstanding, (DSO), which excludesnet of amounts owed to subcontractors, decreased 5was 56 days to 57 days as of March 31, 2019, compared to 62 days as ofrepresenting a 2 day improvement from December 31, 2018.2019.


Our operating cash flow constitutes our primary source of liquidity, and historically, has been sufficient to fund our working capital, capital expenditures, internal business expansion, and debt service, including our commitments as described in the Commitments table which follows. Wein our Form 10-K for the year ended December 31, 2019. Although there is uncertainty related to the anticipated impact of COVID-19 on our future results, we expect to meet our future needs for working capital, capital expenditures, internal business expansion, and debt service from a combination of cash on hand, operating cash flows, and funds available through the revolving loan portion of our Amended and Restated Credit Agreement.ABL. See debt discussion which follows.


Net cash provided by operating activities was $17.2 million in the three months ended March 31, 2020, compared to $12.8 million in the three months ended March 31, 2019, compared to $13.3 million in the three months ended March 31, 2018, primarily due to increasedstronger collections and the timing of payments.disbursements.


Net cash used in investing activities was$1.2 million in the three months ended March 31, 2019, compared to $1.0 million in the three months ended March 31, 2018.2020, compared to $1.2 million in the three months ended March 31, 2019. Net cash used in both periods was for capital expenditures, and acquisition-related settlements. Capital expenditures in the three months ended March 31, 2019 were primarily related to the project to replace our legacy applicant tracking system for our travel nurse business.staffing and for acquisition-related settlements in the three months ended March 31, 2019.
Net cash used in financing activities during the three months ended March 31, 20192020 was $9.3$4.6 million, compared to $5.1$9.3 million during the three months ended March 31, 2018.2019. During the three months ended March 31, 2020, we used cash to repay our ABL of $3.3 million, $0.6 million for income taxes on share-based compensation, $0.6 million for noncontrolling shareholder payments, and $0.1 million of contingent consideration. During the three months ended March 31, 2019, we used cash to make an optional principal prepayment on our Term Loanterm loan of $7.5 million and paid $0.6 million in debt issuance costs in connection with the Second Amendmentrelated to an amendment to our Amended and Restated Credit Facility, and paid $1.2 million for other financing activities. During the three months ended March 31, 2018, weprior senior credit facility. We also used cash to repurchase and retire $2.9 million in shares of Common Stock, repay $1.3 million on our Term Loan, and pay $1.0$0.8 million for other financing activities.income taxes on share-based compensation, $0.3 million for noncontrolling shareholder payments, and $0.1 million of contingent consideration.
 
Debt


2019 ABL Credit FacilitiesAgreement

On March 29, 2019, we entered into a Second Amendment to our Amended and Restated Credit Agreement. In addition, we made an optional principal prepayment of $7.5 million on the term loan portion of our facility. As more fully described in Note 8 - Debt to our condensed consolidated financial statements, as ofAt March 31, 2019, our Amended2020, availability under the ABL was $119.0 million and Restated Credit Agreement,we had $67.6 million of borrowings drawn, as amended, provides us with a $151.4well as $19.6 million committed facility, including a term loan and a $75.0of letters of credit outstanding, leaving $31.8 million revolving credit facility (Amended Revolving Credit Facility) (together with the Amended Term Loan, the Amended Credit Facilities).available for borrowing.


As of March 31, 2019,2020, the Applicable Margin, as defined ininterest rate spreads and fees under the Amended and Restated CreditLoan Agreement was 3.00%were based on LIBOR plus 2.00% for Eurodollar Loansthe revolving portion of the borrowing base and LIBOR Index Rate Loans and 2.00% forplus 4.00% on the Supplemental Availability. The Base Rate Loans. As(as defined by the Loan Agreement) margins would have been 1.00% and 3.00%, respectively, for the revolving portion and Supplemental Availability, respectively. The LIBOR and Base Rate margins are subject to monthly pricing adjustments, pursuant to a pricing matrix based on our excess availability under the revolving credit facility. In addition, the facility is subject to an unused fee, letter of credit fees, and an administrative fee. The Loan Agreement contains various restrictions and covenants applicable to the Company and its subsidiaries, including a covenant to maintain a minimum fixed charge coverage ratio. We were in compliance with the fixed charge coverage ratio covenant as of March 31, 2019, we had $76.4 million principal balance on the Amended Term Loan and $20.6 million in letters of credit outstanding.2020.


Stockholders’ Equity
 
See Note 12 - Stockholders' Equity to our condensed consolidated financial statements.




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Commitments and Off-Balance Sheet Arrangements
 
As of March 31, 2019,2020, we do not have any off-balance sheet arrangements.

The following table reflects our contractual obligations and other Our commitments as of Marchover the next five years did not change materially from December 31, 2019:
Commitments Total Remainder of 2019 2020 2021 2022 2023 Thereafter
  (Unaudited, amounts in thousands)
Term Loan (a) $76,376
 $
 $3,406
 $6,980
 $65,990
 $
 $
Interest on debt (b) 17,904
 5,204
 5,188
 4,861
 2,651
 
 
Contingent consideration (c) 8,712
 180
 2,844
 2,844
 2,844
 
 
Operating lease obligations (d) 32,688
 4,914
 6,572
 5,702
 4,929
 4,702
 5,869
  $135,680
 $10,298
 $18,010
 $20,387
 $76,414
 $4,702
 $5,869
_______________
(a)Under our Amended and Restated Credit Agreement, we are required to comply with certain financial covenants. Our inability to comply with the required covenants or other provisions could result in default under our amended credit facilities. In the event of any such default and our inability to obtain a waiver of the default, all amounts outstanding under the Amended Credit Facilities could be declared immediately due and payable. As of March 31, 2019, we are in compliance with the financial covenants and other covenants contained in the Amended and Restated Credit Agreement.
(b)Interest on debt represents payments due through maturity for our Term Loan, calculated using the July 1, 2019 applicable LIBOR and margin rate totaling 5.5% on approximately 41% of the Term Loan balance, and a fixed interest rate of 5.1% on the other approximately 59% of the Term Loan balance, taking into account the interest rate swap. See Note 9 - Derivative to our condensed consolidated financial statements.
(c)The contingent consideration represents the estimated payments due to the sellers related to the Mediscan acquisition, including accretion. See Note 4 - Acquisitions to our condensed consolidated financial statements. We have included the payments in the table based on our best estimates of the amounts and dates when the contingencies may be resolved.
(d)Represents future minimum lease payments associated with operating lease agreements with original terms of more than one year.

2019. See Note 1412 - Contingencies to our condensed consolidated financial statements.

In addition to the above disclosed contractual obligations, we have accrued uncertain tax positions, pursuant to the Income Taxes Topic of the FASB ASC, of $5.9 million at March 31, 2019. Based on the uncertainties associated with the settlement of these items, we are unable to make reasonably reliable estimates of the period of potential settlements, if any, with the taxing authorities.

Critical Accounting Policies and Estimates


Our critical accounting policies and estimates remain consistent with those reported in our Annual Report on Form 10-K for the year ended December 31, 2018,2019, filed with the SEC, other than the adoption of ASU No. 2014-09, Leases2016-13, Financial Instruments -

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Credit Losses (Topic 842) 326), Measurement of Credit Losses on Financial Instruments as discussed in Note 2 - Summary of Significant Accounting Policies and Note 103 - LeasesCustomer Contracts to our condensed consolidated financial statements.


Recent Accounting Pronouncements


See Note 1715 - Recent Accounting Pronouncements to our condensed consolidated financial statements.



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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk


We have been exposed to interest rate risk associated with our debt instruments which have had interest based on variable rates. As of March 31, 2020, we are exposed to the risk of fluctuation in interest rates relating to our outstanding senior secured term loanABL Credit Agreement (ABL) entered into on August 1, 2017 withOctober 25, 2019. Our ABL charges us interest at a variable interest rate. As a result,rate based on either LIBOR or Base Rate (as defined) plus an applicable margin.

In March 2018, we entered into an interest rate swap agreement, which effectivelyinitially fixed the interest rate on 50% of the amortizing balance ofon our term debt, exclusive of the credit spread on the debt. We have determined that theThe interest rate swap qualifiesqualified as a cash flow hedge in accordance with Accounting Standards Codification


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(ASC) 815, the Derivatives and Hedging. See Note 9 - Derivative Topic of the FASB ASC and the resulting changes in fair value of the interest rate swap were recorded to our condensed consolidated financial statements. Excludingother comprehensive (loss) income and reclassified to interest expense over the impactlife of the term debt. In September 2019, in anticipation of entering into the ABL, we terminated our interest rate swap agreements, aagreement.

A 1% change in interest rates on our variable rate debt would have resulted in interest expense fluctuating approximately $0.8$0.2 million and $1.0 million for both the three months ended March 31, 2020 and 2019, and March 31, 2018, respectively.excluding the impact of the interest rate swap agreement. Considering the effect of our interest rate swap agreement in a 1% change in interest rates on our variable rate debt would have resulted in approximately $0.1 million change in interest expense fluctuating approximately $0.4 million for the three months ended March 31, 2019. See Note 7 - Debt to our condensed consolidated financial statements.

Refer to our Form 10-K Item 1A. Risk Factors under "The interest rates under our ABL Credit Agreement may be impacted by the phase-out of the London Interbank Offered Rate (LIBOR)" for discussion of the interest rate risk related to the potential phase-out of LIBOR in 2021.

Other Risks


There have been no material changes to our other exposures as disclosed in our Annual Report on Form 10-K filed for the year ended December 31, 2018.2019.


ITEM 4.CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES

We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this report. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, communicated to management, including the Chief Executive Officer and the Chief Financial Officer, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports required under the Exchange Act of 1934, as amended, is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, in order to allow timely decisions regarding any required disclosure.


There were no changes in our internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. On January 1, 2019, we adopted ASC 842, Leases. We implemented internal controls and we are utilizing a new lease accounting information system to enable the preparation of financial information as part of the adoption. There were no significant changeshave not experienced any material impact to our internal controlcontrols over financial reporting despite the fact that most of our employees are working remotely due to the adoption ofCOVID-19 pandemic. We are continually monitoring and assessing the new standard.




COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.


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PART II. – OTHER INFORMATION
 
ITEM 1.LEGAL PROCEEDINGS

ITEM 1. LEGAL PROCEEDINGS

From time to time, we arethe Company is involved in various litigation, claims, investigations, and other proceedings that arise in the ordinary course of ourits business. These matters primarily relate to employee-related matters that include individual and collective claims, professional liability, tax, and payroll practices. We establishThe Company establishes reserves when available information indicates that a loss is probable and an amount or range of loss can be reasonably estimated. These assessments are performed at least quarterly and are based on the information available to management at the time and involve a significant management judgment to determine the probability and estimated amount of potential losses, if any. Based on the available information considered in ourits reviews, we adjust ourthe Company adjusts its loss contingency accruals and ourits disclosures as may be required. Actual outcomes or losses may differ materially from those estimated by ourthe Company's current assessments, including available insurance recoveries, which would impact ourits profitability. Adverse developments in existing litigation claims or legal proceedings involving ourthe Company or new claims could require usit to establish or increase litigation reserves or enter into unfavorable settlements or satisfy judgments for monetary damages for amounts in excess of current reserves, which could adversely affect ourits financial results. With regard toThe Company believes the outcome of any outstanding loss contingencies as of March 31, 2019, we believe the outcome of these matters2020 will not have a material adverse effect on ourits business, financial condition, results of operations or cash flows. In October 2019, the Company received a grand jury subpoena directed to Advantage On Call whose assets were purchased by the Company in 2017. The subpoena appears to relate to an investigation of home healthcare services and healthcare staffing services. The Company is cooperating with the investigation.


ITEM 1A.
ITEM 1A. RISK FACTORS

There are no material changes
In addition to our Risk Factors as previously disclosed the other information set forth in this report, careful consideration should be given to the factors discussed in Item 1A, “Risk Factors”in our Form 10-K for the year ended December 31, 2018.2019, all of which could materially affect our business, financial condition or future results. The risks described herein and therein are not the only risks facing us. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may adversely affect our business, financial condition and/or operating results. The below Risk Factor has been updated to reflect the heightened impact of the COVID-19 pandemic since we filed our Annual Report on Form 10-K for the year ended December 31, 2019. As described herein, the COVID-19 pandemic may adversely affect our business and financial results and may also have the effect of exacerbating many of the other risks described in this section and in the “Risk Factors”section of our Annual Report on Form 10-K for the year ended December 31, 2019.



Our operations and financial results have been and may continue to be negatively affected by the current ongoing COVID-19 pandemic and could be materially harmed by COVID-19 or the emergence and effects related to any other pandemics, epidemics, or other public health crisis.

Our operations and financial results have been and may continue to be adversely affected by the ongoing COVID-19 pandemic and changes in national or global economic conditions related thereto.

During the COVID-19 pandemic, certain of our healthcare professionals have been exposed, diagnosed and or quarantined as a result of the virus. If, as a result of such risks, our healthcare professionals do not want to, or are not able to provide services, it could negatively impact our supply and ability to provide staffing services to our customers. In addition, patients have canceled or deferred elective procedures or otherwise avoided medical treatment resulting in reduced census at our hospital customers. Additionally, healthcare facilities, such as ambulatory surgi-centers and other outpatient facilities, have been shut down temporarily. This has resulted in the cancellation of certain of our healthcare professionals (e.g. operating room nurses, physical therapists, surgeons, advanced practitioners, and many others) working at those facilities or under contract to provide services at those facilities in the future. In addition, the normal operations of our healthcare facility customers may be disrupted and impacted in ways that are difficult to predict and their financials could be adversely affected. This would not just negatively impact our staffing and workforce solutions business, but would also have an adverse effect on our search businesses (contingent, permanent, and retained) as healthcare customers may delay making decisions for executives, physicians, nurses, and other full-time staff. In addition to the negative impact on demand from our hospital and healthcare facility customers, school closures in the wake of the COVID-19 pandemic have had an adverse impact on our school staffing.

The financial impact to our healthcare customers from COVID-19 or any other pandemic, epidemic, outbreak of an infectious disease or other public health crisis may also impact their ability to pay for our services timely or altogether, including invoices for services provided prior to such an event that were in process. Such a failure to pay for our services timely or altogether would have an impact on our collections, resulting in a negative financial impact on our Company.



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Finally, while we have disaster plans in place for all of our locations and we are able to operate remotely, the potential continuation of the COVID-19 pandemic, or the emergence of another pandemic, epidemic, or outbreak is difficult to predict and could adversely affect our operations. In particular, our operations are headquartered in South Florida and if our employees are working remotely as a result of a public health crisis during hurricane season and electricity, wi-fi and other resources are temporarily restricted or not available, it could negatively impact our operations and financial results.


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ITEM 6. EXHIBITS
ITEM 6.No.EXHIBITSDescription
No.Description
10.1
*31.1
 10.2 #*31.2
*31.1
*31.2
**32.1
**32.2
*32.2
**101.INSXBRL Instance Document
**101.SCHXBRL Taxonomy Extension Schema Document
**101.DEFXBRL Taxonomy Extension Definition Linkbase Document
**101.LABXBRL Taxonomy Extension Label Linkbase Document
**101.CALXBRL Taxonomy Extension Calculation Linkbase Document
**101.PREXBRL Taxonomy Extension Presentation Linkbase Document
#104Represents a management contract or compensatory plan or arrangementCover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*Filed herewith
*Filed herewith
**Furnished herewith





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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
CROSS COUNTRY HEALTHCARE, INC.
CROSS COUNTRY HEALTHCARE, INC.
Date: May 1, 20197, 2020By:/s/ William J. Burns
William J. Burns

Executive Vice President & Chief Financial Officer (Principal Accounting and Financial Officer)











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