SECURITIES AND EXCHANGE COMMISSION

CROSS COUNTRY HEALTHCARE, INC.

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 every Interactive Data File required to be submitted 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:

Smaller Reporting Company ¨ ☐ Emerging growth company o☐

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 ~~36,877,022~~37,460,546 shares of Common Stock, par value $0.0001 per share, as of ~~October 31, 2019.~~April 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.

~~September 30, 2019~~

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 2019	164,801		169,528


Prepaid expenses	6,374		6,097
Insurance recovery receivable	5,130		5,011

Other current assets	1,726		1,689
Total current assets	190,630		183,357
Property and equipment, net of accumulated depreciation of $24,078 in 2020 and $23,276 in 2019	11,965		11,832
Operating lease right-of-use assets	16,263		16,964
Goodwill	101,066		101,066
Trade names, indefinite-lived	5,900		5,900

Other intangible assets, net	42,483		44,957



Other non-current assets	18,672		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 benefits	37,199		31,307







Operating lease liabilities - current	4,965		4,878
Other current liabilities	5,743		3,554
Total current liabilities	99,002		85,465
Revolving credit facility	67,648		70,974

Operating lease liabilities - non-current	17,992		19,070
Non-current deferred tax liabilities	7,555		7,523
Long-term accrued claims	27,392		26,938

Contingent consideration	—		4,867

Other long-term liabilities	5,988		4,037
Total liabilities	225,577		218,874

Commitments and contingencies

Stockholders' equity:
Common stock	4		4
Additional paid-in capital	305,935		305,643
Accumulated other comprehensive loss	(1,318)		(1,240)
Accumulated deficit	(143,864)		(141,775)
Total Cross Country Healthcare, Inc. stockholders' equity	160,757		162,632
Noncontrolling interest in subsidiary	645		868
Total stockholders' equity	161,402		163,500
Total liabilities and stockholders' equity	$	386,979	$	382,374

See accompanying notes to the condensed consolidated financial statements

September 30,
2019 December 31,
2018
Assets
Current assets:
Cash and cash equivalents $ 9,458
$ 16,019
Accounts receivable, net of allowances of $3,375 in 2019 and $3,705 in 2018 170,339
166,128
Prepaid expenses 3,764
6,208
Insurance recovery receivable 4,631
4,186
Other current assets 1,496
2,364
Total current assets 189,688
194,905
Property and equipment, net of accumulated depreciation of $34,617 in 2019 and $33,476 in 2018 11,953
13,628
Operating lease right-of-use assets 17,796
—
Goodwill 101,066
101,060
Trade names, indefinite-lived 5,900
20,402
Other intangible assets, net 48,725
55,182
Non-current deferred tax assets —
23,750
Other non-current assets 18,863
18,076
Total assets $ 393,991
$ 427,003

Liabilities and Stockholders' Equity
Current liabilities:

Accounts payable and accrued expenses $ 50,291
$ 43,744
Accrued compensation and benefits 34,683
33,332
Current portion of long-term debt —
5,235
Operating lease liabilities - current 4,936
—
Other current liabilities 3,578
3,075
Total current liabilities 93,488
85,386
Long-term debt, less current portion 70,556
77,944
Operating lease liabilities - non-current 20,112
—
Non-current deferred tax liabilities 7,824
95
Long-term accrued claims 29,616
29,299
Other long-term liabilities 8,748
16,081
Total liabilities 230,344
208,805

Commitments and contingencies

Stockholders' equity:

Common stock 4
4
Additional paid-in capital 304,764
303,048
Accumulated other comprehensive loss (1,244 ) (1,462 )
Accumulated deficit (140,631 ) (84,062 )
Total Cross Country Healthcare, Inc. stockholders' equity 162,893
217,528
Noncontrolling interest in subsidiary 754
670
Total stockholders' equity 163,647
218,198
Total liabilities and stockholders' equity $ 393,991
$ 427,003

CROSS COUNTRY HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, amounts in thousands, except per share data)


	Three Months Ended
	March 31,
	2020		2019

Revenue from services	$	210,064	$	195,171
Operating expenses:
Direct operating expenses	160,461		146,917
Selling, general and administrative expenses	45,881		46,036
Bad debt expense	539		270
Depreciation and amortization	3,296		2,984


Acquisition and integration-related costs	77		512
Restructuring costs	564		1,140


Total operating expenses	210,818		197,859
Loss from operations	(754)		(2,688)
Other expenses (income):

Interest expense	867		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 subsidiary	321		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 Diluted	35,873		35,700

See accompanying notes to the condensed consolidated financial statements

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018

Revenue from services $ 209,200
$ 200,717
$ 607,128
$ 615,577
Operating expenses:

Direct operating expenses 158,194
149,155
456,280
456,573
Selling, general and administrative expenses 44,407
44,086
136,387
135,004
Bad debt expense 588
502
1,503
1,312
Depreciation and amortization 2,907
2,892
9,448
8,764
Acquisition-related contingent consideration (426 ) 16
74
449
Acquisition and integration costs —
70
311
261
Restructuring costs 1,607
1,351
2,884
1,979
Legal settlement charges —
—
1,600
—
Impairment charges 1,804
—
16,306
—
Total operating expenses 209,081
198,072
624,793
604,342
Income (loss) from operations 119
2,645
(17,665 ) 11,235
Other expenses (income):

Interest expense 1,398
1,512
4,258
4,225
Loss on derivative 1,284
—
1,284
—
Loss on early extinguishment of debt 94
36
508
36
Other income, net (54 ) (170 ) (212 ) (369 )
(Loss) income before income taxes (2,603 ) 1,267
(23,503 ) 7,343
Income tax expense 94
1,385
31,840
3,717
Consolidated net (loss) income (2,697 ) (118 ) (55,343 ) 3,626
Less: Net income attributable to noncontrolling interest in subsidiary 431
323
1,226
886
Net (loss) income attributable to common shareholders $ (3,128 ) $ (441 ) $ (56,569 ) $ 2,740

Net (loss) income per share attributable to common shareholders - Basic $ (0.09 ) $ (0.01 ) $ (1.58 ) $ 0.08

Net (loss) income per share attributable to common shareholders - Diluted $ (0.09 ) $ (0.01 ) $ (1.58 ) $ 0.08

Weighted average common shares outstanding:

Basic 35,865
35,594
35,797
35,682
Diluted 35,865
35,594
35,797
35,881

CROSS COUNTRY HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~(LOSS) INCOME~~LOSS

(Unaudited, amounts in thousands)


	Three Months Ended
	March 31,
	2020		2019
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	—		3

	—		(67)
Other comprehensive loss, net of tax	(78)		(199)

Comprehensive loss	(1,846)		(1,575)
Less: Net income attributable to noncontrolling interest in subsidiary	321		391
Comprehensive loss attributable to common shareholders	$	(2,167)	$	(1,966)

See accompanying notes to the condensed consolidated financial statements

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
Consolidated net (loss) income $ (2,697 ) $ (118 ) $ (55,343 ) $ 3,626

Other comprehensive income, before income tax:

Unrealized foreign currency translation (loss) gain (29 ) (94 ) 44
(184 )
Unrealized (loss) gain on interest rate contracts (104 ) 203
(1,078 ) 222
Reclassification adjustment to statement of operations 1,284
62
1,312
148

1,151
171
278
186
Taxes on other comprehensive income:
Income tax effect related to foreign currency translation adjustments 7
(24 ) 25
(41 )
Income tax effect related to unrealized (loss) gain on interest rate contracts (325 ) 51
(571 ) 56
Income tax expense related to reclassification adjustment to statement of operations 86
16
93
38
Valuation allowance adjustment 292
—
513
—
60
43
60
53
Other comprehensive income, net of tax 1,091
128
218
133

Comprehensive (loss) income (1,606 ) 10
(55,125 ) 3,759
Less: Net income attributable to noncontrolling interest in subsidiary 431
323
1,226
886
Comprehensive (loss) income attributable to common shareholders $ (2,037 ) $ (313 ) $ (56,351 ) $ 2,873

CROSS COUNTRY HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Three Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

(Unaudited, amounts in thousands)


	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, 2019	35,871		$	4		$	305,643	$	(1,240)	$	(141,775)	$	868	$	163,500

Vesting of restricted stock	221		—			(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, 2020	36,092		$	4		$	305,935	$	(1,318)	$	(143,864)	$	645	$	161,402

	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, 2018	35,626		$	4		$	303,048	$	(1,462)	$	(84,062)	$	670	$	218,198
Exercise of share options	4		—			—		—		—		—		—
Vesting of restricted stock	176		—			(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, 2019	35,806		$	4		$	302,802	$	(1,661)	$	(85,829)	$	694	$	216,010

See accompanying notes to the condensed consolidated financial statements

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 June 30, 2019 35,860
$ 4
$ 303,795
$ (2,335 ) $ (137,503 ) $ 727
$ 164,688
Exercise of share options 2
—
—
—
—
—
—
Vesting of restricted stock and performance stock awards 5
—
(13 ) —
—
—
(13 )
Equity compensation —
—
982
—
—
—
982
Foreign currency translation adjustment, net of taxes —
—
—
(29 ) —
—
(29 )
Net change in hedging transaction, net of taxes —
—
—
1,120
—
—
1,120
Distribution to noncontrolling shareholder —
—
—
—
—
(404 ) (404 )
Net (loss) income —
—
—
—
(3,128 ) 431
(2,697 )
Balances at September 30, 2019 35,867
$ 4
$ 304,764
$ (1,244 ) $ (140,631 ) $ 754
$ 163,647

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 June 30, 2018 35,606
$ 4
$ 301,353
$ (1,160 ) $ (63,930 ) $ 604
$ 236,871
Exercise of share options 3
—
—
—
—
—
—
Vesting of restricted stock and performance stock awards 5
—
(27 ) —
—
—
(27 )
Equity compensation —
—
981
—
—
—
981
Stock repurchase and retirement (33 ) —
(300 ) —
—
—
(300 )
Foreign currency translation adjustment, net of taxes —
—
—
(70 ) —
—
(70 )
Net change in hedging transaction, net of taxes —
—
—
197
—
—
197
Distribution to noncontrolling shareholder —
—
—
—
—
(279 ) (279 )
Net (loss) income —
—
—
—
(441 ) 323
(118 )
Balances at September 30, 2018 35,581
$ 4
$ 302,007
$ (1,033 ) $ (64,371 ) $ 648
$ 237,255

~~CROSS COUNTRY HEALTHCARE, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY~~

~~Nine Months Ended September 30, 2019 and 2018~~

~~(Unaudited, amounts in thousands)~~

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, 2018 35,626
$ 4
$ 303,048
$ (1,462 ) $ (84,062 ) $ 670
$ 218,198
Exercise of share options 10
—
—
—
—
—
—
Vesting of restricted stock and performance stock awards 231
—
(801 ) —
—
—
(801 )
Equity compensation —
—
2,517
—
—
—
2,517
Foreign currency translation adjustment, net of taxes —
—
—
43
—
—
43
Net change in hedging transaction, net of taxes —
—
—
175
—
—
175
Distribution to noncontrolling shareholder —
—
—
—
—
(1,142 ) (1,142 )
Net (loss) income —
—
—
—
(56,569 ) 1,226
(55,343 )
Balances at September 30, 2019 35,867
$ 4
$ 304,764
$ (1,244 ) $ (140,631 ) $ 754
$ 163,647

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, 2017 35,838
$ 4
$ 305,362
$ (1,166 ) $ (67,111 ) $ 630
$ 237,719
Exercise of share options 19
—
—
—
—
—
—
Vesting of restricted stock and performance stock awards 156
—
(719 ) —
—
—
(719 )
Equity compensation —
—
2,364
—
—
—
2,364
Stock repurchase and retirement (432 ) —
(5,000 ) —
—
—
(5,000 )
Foreign currency translation adjustment, net of taxes —
—
—
(143 ) —
—
(143 )
Net change in hedging transaction, net of taxes —
—
—
276
—
—
276
Distribution to noncontrolling shareholder —
—
—
—
—
(868 ) (868 )
Net income —
—
—
—
2,740
886
3,626
Balances at September 30, 2018 35,581
$ 4
$ 302,007
$ (1,033 ) $ (64,371 ) $ 648
$ 237,255

CROSS COUNTRY HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, amounts in thousands)


	Three Months Ended
	March 31,
	2020		2019
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 amortization	3,296		2,984

Provision for allowances	881		970
Deferred income tax expense (benefit)	31		(3,146)
Non-cash lease expense	1,191		1,254




Loss on early extinguishment of debt	—		360

Equity compensation	927		531

Other non-cash costs	143		365
Changes in operating assets and liabilities:
Accounts receivable	3,846		10,400
Prepaid expenses and other assets	(736)		(1,477)


Accounts payable and accrued expenses	11,066		2,841
Operating lease liabilities	(1,467)		(1,399)
Other	(248)		480
Net cash provided by operating activities	17,162		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 facility	107,274		—
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 equivalents	11,567		2,267
Cash and cash equivalents at beginning of period	1,032		16,019
Cash and cash equivalents at end of period	$	12,599	$	18,286

See accompanying notes to the condensed consolidated financial statements

Nine Months Ended
September 30,
2019 2018
Cash flows from operating activities
Consolidated net (loss) income $ (55,343 ) $ 3,626
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization 9,448
8,764
Provision for allowances 2,554
3,658
Deferred income tax expense 31,456
3,046
Non-cash lease expense 3,799
—
Impairment charges 16,306
—
Equity compensation 2,517
2,364
Other non-cash costs 962
1,454
Changes in operating assets and liabilities:
Accounts receivable (6,766 ) 2,745
Prepaid expenses and other assets 1,483
(1,145 )
Accounts payable and accrued expenses 7,797
(1,675 )
Operating lease liabilities (4,355 ) —
Other 1,035
(1,080 )
Net cash provided by operating activities 10,893
21,757

Cash flows from investing activities

Acquisition-related settlements —
(149 )
Purchases of property and equipment (2,042 ) (3,405 )
Net cash used in investing activities (2,042 ) (3,554 )

Cash flows from financing activities

Principal payments on Term Loan (12,500 ) (8,750 )
Stock repurchase and retirement —
(5,000 )
Other (2,913 ) (1,841 )
Net cash used in financing activities (15,413 ) (15,591 )

Effect of exchange rate changes on cash 1
(84 )

Change in cash and cash equivalents (6,561 ) 2,528
Cash and cash equivalents at beginning of period 16,019
25,537
Cash and cash equivalents at end of period $ 9,458
$ 28,065

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, ~~2018~~2019 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission. The December 31, ~~2018~~2019 condensed consolidated balance sheet included herein was derived from the December 31, ~~2018~~2019 audited consolidated balance sheet included in the Company’s Annual Report on Form 10-K.

Certain prior year amounts have been reclassified to conform to the current year presentation on the condensed consolidated ~~balance sheets~~statements of operations and statements of cash flows, and as presented in Note 3 - ~~Revenue Recognition~~Customer Contracts and Note 1311 - Segment Data.


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 the 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 employee termination costs and lease-related exit costs.

~~Effective January 1, 2019, in conjunction with the adoption of the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-02,~~ ~~Leases~~ (Topic 842), described below, 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.

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

Employee Termination Costs Lease-Related Exit Costs
(amounts in thousands)
Balance at January 1, 2019 $ 556
$ 127
Charged to restructuring costs 1,104
—
Payments (373 ) (62 )
Balance at March 31, 2019 1,287
65
Charged to restructuring costs 137
—
Payments (592 ) (22 )
Balance at June 30, 2019 832
43
Charged to restructuring costs 238
1,310
Payments (615 ) (75 )
Balance at September 30, 2019 $ 455
$ 1,278



	Employee Termination Costs		Lease-Related Exit Costs
	(amounts in thousands)
Balance at January 1, 2020	$	386	$	1,223
Charged to restructuring costs (a)	212		—
Payments	(292)		(56)
Balance 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

~~As of the beginning of the second quarter of 2019,~~Effective January 1, 2020, the Company ~~early~~ adopted ASU No. ~~2018-15,~~ ~~Intangibles~~2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - ~~Goodwill~~Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and ~~Other - Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract,~~ which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license).benefits. The Company has adopted this guidance prospectively ~~to all implementation costs incurred after the date of adoption~~ with no material impact on its condensed consolidated financial statements.

~~Effective January 1, 2019,~~As of the beginning of the first quarter of 2020, the Company adopted ASU No. ~~2016-02,~~ ~~Leases~~2016-13, Financial Instruments - Credit Losses (Topic ~~842)~~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 ~~that,~~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 lessee, leases, as defined by the standard, are to be recognized on the balance sheet as right-of-use assets and as lease liabilities. The Company elected not to apply the recognition requirements to short-term leases (leases with terms of twelve months or less), 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.~~beginning of the first reporting period in which it is effective. The Company has ~~also elected~~adopted this guidance using the ~~practical expedient~~modified retrospective approach related to ~~not separate non-lease components from the lease components~~its accounts receivable, resulting in no cumulative adjustment to ~~which they relate,~~retained earnings and ~~instead account for each as a single lease component, for all of~~no material impact on its ~~underlying asset classes. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses.~~

As of the later of January 1, 2019 or each lease’s respective commencement date, the Company recorded lease liabilities equal to the present value of its remaining minimum lease payments 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.condensed consolidated financial statements. See Note 103 - ~~Leases.~~Customer Contracts.

3. ~~REVENUE RECOGNITION~~CUSTOMER CONTRACTS

The Company's revenues from customer contracts are generated from temporary staffing services and other ~~services, are~~services. 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		Search		Total Segments
	(amounts in thousands)
Temporary Staffing Services	$	184,949	$	17,160	$	—	$	202,109
Other Services	3,284		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		Search		Total Segments
	(amounts in thousands)
Temporary Staffing Services	$	172,662	$	15,154	$	—	$	187,816
Other Services	2,975		1,005		3,375		7,355
Total	$	175,637	$	16,159	$	3,375	$	195,171

Three Months ended September 30, 2019
Nurse
And Allied
Staffing Physician
Staffing Search Total Segments
(amounts in thousands)
Temporary Staffing Services $ 181,640
$ 19,236
$ —
$ 200,876
Other Services 3,334
1,171
3,819
8,324
Total $ 184,974
$ 20,407
$ 3,819
$ 209,200

Three Months ended September 30, 2018
Nurse
And Allied
Staffing Physician
Staffing Search Total Segments
(amounts in thousands)
Temporary Staffing Services $ 172,825
$ 19,643
$ —
$ 192,468
Other Services 3,120
1,515
3,614
8,249
Total $ 175,945
$ 21,158
$ 3,614
$ 200,717

Nine Months ended September 30, 2019
Nurse
And Allied
Staffing Physician
Staffing Search Total Segments
(amounts in thousands)
Temporary Staffing Services $ 532,036
$ 51,217
$ —
$ 583,253
Other Services 9,362
3,377
11,136
23,875
Total $ 541,398
$ 54,594
$ 11,136
$ 607,128

Nine Months ended September 30, 2018
Nurse
And Allied
Staffing Physician
Staffing Search Total Segments
(amounts in thousands)
Temporary Staffing Services $ 529,662
$ 59,816
$ —
$ 589,478
Other Services 9,826
4,236
12,037
26,099
Total $ 539,488
$ 64,052
$ 12,037
$ 615,577

Accounts Receivable, net

The timing of revenue recognition, billings, and collections results in billed and unbilled accounts receivable ~~includes estimated~~from 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. At September 30, 2019~~billed at March 31, 2020 and December 31, ~~2018, the Company's estimate of amounts that had been worked but had not been invoiced~~2019 totaled ~~$45.8~~$44.7 million and ~~$44.1~~$46.1 million, ~~respectively, and are included in~~respectively.

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.~~

~~4. ACQUISITIONS~~

~~Advantage RN~~

~~Effective July 1, 2017,~~information currently available, the Company ~~acquired all~~also 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 subject~~doubtful 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 2017~~balance 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 due to the seller within 20 months, less any Cobra and healthcare payments incurred by the Company on behalf of the seller. The Company incurred approximately $0.5 million in COBRA expenses since the Advantage acquisition and, in February 2019, released to the seller the remaining liability of $0.1 million. follows:

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 a 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 years 2016 through 2019. Payments related to the years 2016 through 2018 were limited to $0.3 million annually and 2019 is uncapped. During each of the nine months ended September 30, 2019 and 2018, the Company paid $0.3 million related to the years 2018 and 2017. As of September 30, 2019, the fair value of the remaining obligations was estimated at $7.5 million and is included in other current and other long-term liabilities on the condensed consolidated balance sheets. See Note 11 - Fair Value Measurements.


5.Allowance for Doubtful Accounts	~~COMPREHENSIVE INCOME~~(amounts in thousands)
Balance at January 1, 2020	$	2,406
Bad Debt Expense	539
Write-Offs, net of Recoveries	(349)
Balance at March 31, 2020	$	2,596

In addition to the allowance for doubtful accounts, the Company maintains a sales allowance for billing-related adjustments which may arise in the ordinary course and adjustments to the reserve are recorded as contra-revenue. The balance of this allowance as of March 31, 2020 and December 31, 2019 was $0.7 million and $0.8 million, respectively.

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 ~~if applicable.~~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 million at September 30, 2019 and~~ $1.3 million at March 31, 2020 and December 31, 2018. In the third quarter of 2019, as a result of the recognition of an unrealized loss on the termination of the Company's interest rate swap agreement, the balance in other comprehensive loss was reversed. As of December 31, 2018, the cumulative impact of net changes in derivative instruments was a loss of $0.2 million. See Note 9 - Derivative.2019.

The income tax impact related to components of other comprehensive ~~(loss) income~~loss for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is reflected on the condensed consolidated statements of comprehensive (loss) income. During the second quarter of 2019, the Company established a valuation allowance on its deferred tax assets. As a result, the first quarter's tax impact recorded through other comprehensive income was reversed.loss.

5. EARNINGS PER SHARE


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,
															2020			2019
													(amounts in thousands, except per share data)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(amounts in thousands, except per share data)
Numerator:												Numerator:
Net (loss) income attributable to common shareholders - Basic and Diluted	$	(3,128	)	$	(441	)	$	(56,569	)	$	2,740

Net loss attributable to common shareholders - Basic and Diluted												Net loss attributable to common shareholders - Basic and Diluted	$	(2,089)		$	(1,767)

Denominator:												Denominator:
Weighted average common shares - Basic	35,865			35,594			35,797			35,682		Weighted average common shares - Basic	35,873			35,700
Effect of diluted shares:												Effect of diluted shares:
Share-based awards	—			—			—			199		Share-based awards	—			—

Weighted average common shares - Diluted	35,865			35,594			35,797			35,881		Weighted average common shares - Diluted	35,873			35,700

Net (loss) income per share attributable to common shareholders - Basic	$	(0.09	)	$	(0.01	)	$	(1.58	)	$	0.08

Net (loss) income per share attributable to common shareholders - Diluted	$	(0.09	)	$	(0.01	)	$	(1.58	)	$	0.08

Net loss per share attributable to common shareholders - Basic and Diluted												Net loss per share attributable to common shareholders - Basic and Diluted	$	(0.06)		$	(0.05)

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ 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 ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, 454,920 and ~~the three months ended September 30, 2018, 317,905, 177,449, and 130,965~~97,184 shares, respectively, were excluded from diluted weighted average shares.

7.6. GOODWILL, TRADE NAMES, AND OTHER INTANGIBLE ASSETS

The Company had the following acquired intangible assets:


	March 31, 2020										December 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 relationships	49,758		27,447		22,311		49,758		26,596		23,162
Non-compete agreements	320		177		143		320		161		159
Trade names	4,500		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

September 30, 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
$ 11,506
$ 19,024
$ 30,530
$ 9,216
$ 21,314
Customer relationships 49,758
25,771
23,987
49,758
23,296
26,462
Non-compete agreements 320
145
175
320
97
223
Trade names 7,700
2,161
5,539
8,879
1,696
7,183
Other intangible assets, net $ 88,308
$ 39,583
$ 48,725
$ 89,487
$ 34,305
$ 55,182
Intangible assets not subject to amortization:

Trade names, indefinite-lived

$ 5,900

$ 20,402

As of ~~September 30, 2019,~~March 31, 2020, estimated annual amortization expense is as follows:


Years Ending December 31:	(amounts in thousands)
2020	$	7,214
2021	6,105
2022	6,028
2023	5,926
2024	5,289
Thereafter	11,921
	$	42,483

Years Ending December 31: (amounts in thousands)
2019 $ 1,791
2020 7,056
2021 6,848
2022 6,772
2023 6,669
Thereafter 19,589
$ 48,725

~~Trade names~~The Company tests reporting units’ goodwill and ~~other~~ 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.

~~As part of evolving~~

In its ~~go-to-market strategy, in the second~~fourth quarter of 2019 testing, the Company ~~began eliminating certain brands across all~~determined that the estimated fair value of its ~~segments. The Company’s rebranding efforts resulted in a $14.5 million write-off of~~reporting units and its indefinite-lived trade names related to its Nurse and Allied Staffing business segment, which is presented as impairment charges on the condensed consolidated statements of operations. In addition, certain finite-lived trade names were accelerated, which resulted in additional amortization expense related to the Company'sname exceeded their respective values for Nurse and Allied Staffing and Physician Staffing ~~business segments of $0.1 million and $0.5 million, respectively, during the quarter ended June 30, 2019, and $0.3 million related to~~with significant cushions. The Company’s Search reporting unit, however, had less than 20% excess fair value over its ~~Physician Staffing business segment during the quarter ended September 30, 2019. There was no additional amortization expense for Nurse and Allied Staffing in the quarter ended September 30, 2019.~~carrying amount.

As of ~~September 30, 2019,~~March 31, 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 September 30, 2019. Although~~Although 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 ~~made~~management used for purposes of ~~the impairment testing~~its qualitative assessment as of March 31, 2020 will prove to be accurate predictions of future ~~performance.~~

~~As a result of~~performance, leaving the ~~Company merging its permanent search recruitment brands into its Search segment in the second quarter of 2019, $2.4 million of goodwill was reassigned to its~~ Search reporting unit, ~~from Nurse and Allied Staffing.~~ in particular, at risk for future impairments.

As of ~~September 30, 2019,~~March 31, 2020, goodwill by reporting segment was: $86.4 million for Nurse and Allied Staffing, $2.8 million for Physician Staffing, and $11.9 million for Search, totaling $101.1 million. ~~See Note 13 - Segment Data.~~

September 30, 2019 December 31, 2018
Principal Debt Issuance Costs Principal Debt Issuance Costs
(amounts in thousands)
Term Loan, interest 5.4% and 4.8% at September 30, 2019 and December 31, 2018, respectively $ 71,376
$ (820 ) $ 83,876
$ (697 )
Less current portion —
—
(5,235 ) —
Long-term debt $ 71,376
$ (820 ) $ 78,641
$ (697 )

~~Amended~~For its long-lived assets and ~~Restated Senior Credit Facility~~

~~On September 30, 2019,~~definite-lived intangible assets, the Company ~~entered into a Third Amendment (Third Amendment) to its Amended and Restated Credit Agreement dated August 1, 2017 that modified~~reviews for impairment whenever events or changes in circumstances indicate the following: (1) reduced the Aggregate Revolving Commitments from $75.0 million to $65.0 million on the effective date, to $55.0 million on October 31, 2019, to $45.0 million on November 30, 2019, and to $35.0 million on December 31, 2019; (2) reduced the Lettercarrying amount may not be recoverable. As of Credit sublimit from $35.0 million to $25.0 million; (3) changed the maximum Consolidated Net Leverage Ratio from 4.25:1:00 to 4.60:1:00 for the period ending September 30, 2019; and (4) changed the minimum Consolidated Fixed Charge Coverage Ratio from 1.50:1.00 to 1.10:1.00 for the period ending September 30, 2019. The Company was in compliance with the covenants contained in the Amended and Restated Credit Agreement as of September 30, 2019.

On March 29, 2019, the Company entered into a Second Amendment (Second Amendment) to its Amended and Restated Credit Agreement that, among other administrative changes, modified the following: (1) changed the financial leverage ratio from Consolidated Total Leverage to Consolidated Net Leverage and permitted 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 ending September 30, 2019, 4.00:1.00 for the period ending December 31, 2019, 3.75:1.00 for the period ending 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 maintained 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 was revised to: modify Level V to be greater than or equal to 3.00:1.00 but less than 3.50:1.00; added 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 added an additional Level VII if Consolidated Net Leverage Ratio is greater than 4.00:1.00. The added Levels VI and VII resulted 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) added 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) lowered the Aggregate Revolving Commitments from $115.0 million to $75.0 million through the exercise of a $40 million Optional Reduction.

Both amendments were treated as modifications. As a result, debt issuance costs were written off and included as loss on early extinguishment of debt on the consolidated condensed statement of operations. In addition, fees paid in connection with the Second Amendment of $0.6 million in the first six months of 2019, as well as $0.1 million paid in fees in the third quarter of 2019 in connection with the Third Amendment, were included as debt issuance costs associated with the revolving credit facility and as a reduction to the carrying amount of the term loan and were expected to be amortized to interest expense over the remaining term of the arrangement.

~~On March 29, 2019 and June 28, 2019,~~ the Company ~~made optional prepayments~~performed a qualitative assessment of ~~$7.5 million~~its trade names and $5.0 million, respectively, on its Term Loan, which have been allocated to the next consecutive scheduled quarterly payments resulting in the next seven and a portion of the eighth payment being prepaid. The Company had 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 was required to prepay its Term Loan and Revolving Credit Facility 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 September 30, 2019, the aggregate scheduled maturities of the term loan were as follows:~~

Term Loan
(amounts in thousands)
Through Years Ending December 31:
2019 $ —
2020 —
2021 5,386
2022 65,990
2023 —
Thereafter —
Total $ 71,376

Subject to the terms of the Amended and Restated Credit Agreement, the Company paid interest on: (i) each Base Rate Loan at the Base Rate (as defined therein) plus the Applicable Margin 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, was 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 September 30, 2019, the Amended Term Loan and Amended Revolving Credit Facility bore interest at a rate equal to One Month LIBOR plus 3.25%. The interest rate was subject to an increase of 2.00% if an event of default exists under the Amended and Restated Credit Agreement. The Company was 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 0.50% as of September 30, 2019. During the three months ended March 31, 2018, the Company entered into an interest rate swap to reduce its exposure to fluctuations in the interest rates associated with its debt, which was effective April 2, 2018. The Company terminated its interest rate swap agreement on September 26, 2019. See Note 9 - Derivative.

The Amended and Restated Credit Agreement contained customary representations, warranties, and affirmative covenants. The Amended and Restated Credit Agreement also contained 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 ofother intangible assets and ~~certain other restrictive agreements. The Amended and Restated~~determined it was not more likely than not that their carrying value may not be recoverable.

2019 ABL Credit Agreement also contained customary events of default, such as payment defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency, the occurrence of a defined change in control and the failure to observe the negative covenants and other covenants related to the operation of the Company’s business.

The obligations under the Amended and Restated Credit Agreement were guaranteed by all 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 September 30, 2019, the Company had $20.6 million letters of credit outstanding, which related to the Company’s workers’ compensation and professional liability insurance policies.~~

~~ABL Loan Agreement October 2019~~

OnEffective 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 ~~new $120.0 million~~five-year revolving senior secured asset-based credit facility ~~(the ABL) and terminated its commitments under its Amended and Restated Credit Agreement.~~

The initial amounts drawn on the new ABL included funds to repay its then outstanding borrowings of $75.4 million under its prior Amended and Restated Credit Agreement and $1.3 million for the payment of fees, expenses, and accrued interest, as well as to backstop $21.2 million for outstanding letters of credit, leaving $21.4 million of borrowing availability. The refinancing is treated as extinguishment of debt, and, as a result, the Company expects to recognize an additional loss on early extinguishment of debt(ABL) in the ~~fourth quarter~~aggregate principal amount of ~~2019 of approximately $1.4~~up to $120.0 million ~~related to the write-off of debt issuance costs.~~

~~The ABL provides for a five-year revolving credit facility,~~(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, ~~initially equal to $16.9 million,~~ and reducing over time in accordance with the terms of the ~~definitive loan agreement for the ABL (the~~ Loan ~~Agreement),~~Agreement, minus customary reserves, and subject to customary adjustments. ~~As of the closing, the amount of the borrowing base was $119.3 million.~~ 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.

~~Borrowings~~ At March 31, 2020, availability under the ABL ~~generally bear~~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 ~~at a variable~~ 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 ~~either~~ LIBOR orplus 2.00% for the revolving portion of the borrowing base and LIBOR plus 4.00% on the Supplemental Availability. The Base Rate ~~plus an applicable margin,~~(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 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. 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 borrowers and guarantors, ~~under the ABL,~~ subject to customary exceptions.

Prior Senior Credit Facility

The Loan Agreement also contains customary events of default. If an event of default under the Loan Agreement occurs and is continuing, then the administrative agent or the requisite lenders may declare any outstanding obligations under the Loan Agreement to be immediately due and payable. In addition, if the Company or any of its subsidiaries becomes the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, than any outstanding obligations under the Loan Agreement will automatically become due and payable.

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 made 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~~optional prepayment on the ~~debt. The interest rate swap agreement required~~term loan of $7.5 million.

Also in the first quarter of 2019, the Company amended its prior senior credit facility to ~~pay a fixed rate to~~reduce the ~~respective counterparty of 2.627% per annum on an amortizing notional amount corresponding with~~commitment under 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 December 31, 2018, the interest rate swaprevolving credit facility, among other changes. The amendment was treated as a ~~cash flow hedge~~modification and the fees of $0.6 million paid to its ~~fair value~~lenders were classified as debt issuance costs.

As a result of the reduction in borrowing capacity under the revolving credit facility, as well as the reduction in the term loan due to the prepayment in the three months ended March 31, 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.

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 ~~$0.2~~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 2019 payable in three equal installments. Pursuant to the asset purchase agreement, once the earnout amount related to the second performance criteria for 2019 was determined, a note payable documenting the remaining principal and interest was specified as part of the settlement. In the first quarter of 2020, the total earnout amount related to both 2019 performance criterion of $7.4 million ~~liability~~was determined, and $0.1 million was paid by the Company. Pursuant to the note payable, the first

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 third installment of $2.5 million is to be paid, together with interest at a rate of 2% per annum, accruing from April 1, 2020, on January 31, 2022. As of March 31, 2020, the current portion of the note payable in the amount of $4.9 million is included in other current liabilities and the long-term portion of $2.4 million is included in other long-term liabilities on the condensed consolidated balance sheets.

The Company anticipated entering into the new asset-based credit facility that closed in October 2019 (See Note 8 - Debt). In contemplation of that, the Company terminated its interest rate swap agreement by making a cash payment of $1.3 million on September 26, 2019, which is included in net cash provided by operating activities on the condensed consolidated statement of cash flows. As the forecasted interest payments related to the swap were no longer expected to occur, the unrealized amount of loss that had accumulated in other comprehensive loss was recognized resulting in a $1.3 million loss in the third quarter of 2019, included in loss on derivative on the condensed consolidated statement of operations.

~~The Company has lease contracts related to the rental of office space, housing for its healthcare professionals on assignments, and other equipment rentals.~~ The Company's lease population ~~included in the recognition~~ of its ~~beginning~~ right-of-use asset and lease liabilities under the Leases Topic of the FASB ASC is substantially related to the rental of office 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. These ~~lease incentives resulted in deferred rent credits. Upon adoption of the~~ ~~Leases~~ Topic of the FASB ASC, 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.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:



~~Weighted-average remaining lease term~~	~~4.9 years~~
~~Weighted average discount rate (a)~~	~~6.26~~	%


Weighted-average remaining lease term	4.5 years		4.7 years
Weighted average discount rate	6.23	%	6.26	%

~~________________~~

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 as of ~~September 30, 2019:~~March 31, 2020:


Years Ending December 31:	(amounts in thousands)
2020	$	4,582
2021	6,121
2022	5,205
2023	4,757
2024	3,382
Thereafter	2,487
Total minimum lease payments	26,534
Less: amount of lease payments representing interest	(3,577)
Present value of future minimum lease payments	22,957
Less: current lease obligations	(4,965)
Non-current lease obligations	$	17,992

Years Ending December 31: (amounts in thousands)
2019 $ 1,254
2020 6,775
2021 5,924
2022 5,042
2023 4,696
Thereafter 5,869
Total minimum lease payments 29,560
Less: amount of lease payments representing interest (4,512 )
Present value of future minimum lease payments 25,048
Less: current lease obligations (4,936 )
Non-current lease obligations $ 20,112
12

~~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
2020 6,287
2021 5,407
2022 4,857
2023 4,700
Thereafter 5,893
Total minimum lease payments $ 34,595

Other Information

The table below provides information regarding supplemental cash flows:


	Three Months Ended
	March 31,
	2020		2019
	(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

Nine Months Ended
September 30, 2019
(amounts in thousands)
Supplemental Cash Flow Information:
Cash paid for amounts included in the measurement of operating lease liabilities $ 5,619
Right-of-use assets obtained in exchange for new operating lease liabilities $ 872

The components of lease expense are as follows:


						Three Months Ended
	Three Months Ended		Nine Months Ended			March 31,
	September 30, 2019					2020		2019
	(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	$	1,646	$	5,038	Operating lease expense	$	1,523	$	1,694
Short-term lease expense	$	2,124	$	6,232	Short-term lease expense	$	1,845	$	2,159
Variable and other lease costs	$	598	$	1,975	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. In the third quarter of 2019, the Company ceased use of several facilities and is in the process of seeking to sublet some of the space where possible. The decision and change in the use of space resulted in a right-of-use asset impairment charge of $1.2 million, presented as impairment charges on the condensed consolidated statements of operations. See Note 11 - Fair Value Measurements.

As of ~~September 30, 2019,~~March 31, 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.


~~11.~~	~~FAIR VALUE MEASUREMENTS~~

9. 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.

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; ~~(3) interest rate swap agreement included in other current~~ and ~~other long-term liabilities; and (4)~~(3) contingent consideration liabilities included inas other current liabilities and ~~other long-term liabilities.~~contingent consideration 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, as per the plan documents.

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

Contingent consideration liabilities—Potential earnout payments related to the acquisition of Mediscan ~~are~~were contingent upon meeting certain performance requirements through 2019. The long-term portion of these liabilities has been included in ~~other long-term liabilities,~~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. The Mediscan contingent consideration liability had been measured at fair value through June 30, 2019 using 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. As of ~~September 30,~~December 31, 2019, due to the end of the earnout period, ~~approaching,~~ the Company measured the fair value of the liability based on the expected ~~payout. See Note 4 - Acquisitions.~~

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 ~~fair value of contingent consideration~~remaining $7.3 million was documented as a subordinated promissory note payable and ~~the associated~~is included in other current and other long-term 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)balance sheets which is not measured at fair value ~~respectively, and commensurate changes to these liabilities.~~on a recurring basis. See Note 7 - Debt.

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, 2020		December 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

September 30, 2019 December 31, 2018
(amounts in thousands)
Financial Assets:
(Level 1)
Deferred compensation asset $ 723
$ —
Financial Liabilities:
(Level 1)

Deferred compensation liability $ 2,019
$ 1,725
(Level 2)
Interest rate swaps $ —
$ 234
(Level 3)
Contingent consideration liabilities $ 7,484
$ 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,
	2020		2019
	(amounts in thousands)
Balance at beginning of period	$	7,300	$	7,689


Payments	(100)		(100)
Accretion expense	—		247
Valuation adjustment	77		—
Reclassification to other current and long-term liabilities	(7,277)		—
Balance at end of period	$	—	$	7,836

Contingent Consideration
Liabilities
(amounts in thousands)
December 31, 2018 $ 7,689
Payments (100 )
Valuation adjustment 247
March 31, 2019 7,836
Valuation adjustment 253
June 30, 2019 8,089
Payments (179 )
Valuation adjustment (426 )
September 30, 2019 $ 7,484

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, 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.

In the second quarter of 2019, the Company eliminated certain of its brands as part of a rebranding strategy. and as a result, recorded impairment charges of $14.5 million related to its trade names in Nurse and Allied Staffing. See Note 76 - Goodwill, Trade Names, and Other Intangible Assets.

In the third quarter of 2019, the Company ceased use of several facilities and is in the process of seeking to sublet some of the space where possible. The decision and change in the use of space resulted in a right-of-use asset impairment charge of $1.2 million. This loss was determined by comparing the fair value of the impacted right-of-use assets to the carrying value of the

~~assets as of the impairment measurement date, in accordance with the~~ ~~Property, Plant and Equipment~~ Topic of the FASB ASC. The fair value of the right-of-use asset was based on the estimated sublease income for the space taking into consideration the time period it will take to obtain a subtenant, the applicable discount rate, and the sublease rate. Furthermore, the Company wrote-off a total of $0.6 million of leasehold improvements and other property and equipment related to these locations. The measurement of the right-of-use asset impairments, using the assumptions described, is a level 3 measurement.

Impairment charges on the condensed consolidated statement of operations include impairment of the trade names, the right-of-use assets, leasehold improvements, and property and equipment, and totaled $16.3 million for the nine months ended September 30, 2019.

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 fair~~Company’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 analysis~~Senior Secured Asset-Based Loan approximates fair value because the interest rates are variable and ~~appropriate valuation methodologies using Level 2 inputs from available~~reflective of market ~~information.~~rates.

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


	September 30, 2019				December 31, 2018					March 31, 2020						December 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	$	70,556	$	71,400	$	83,179	$	81,800

Note Payable									Note Payable	$	7,277	$	7,277	$	—	$	—
Senior Secured Asset-Based Loan									Senior 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. ~~The~~The 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.~~10.STOCKHOLDERS’ EQUITY

Stock Repurchase Program

During the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, the Company did ~~not~~0t repurchase any shares of its Common Stock. ~~During the nine months ended September 30, 2018,~~As of March 31, 2020, the Company ~~repurchased and retired 432,439 shares of its Common Stock for $5.0 million, at an average market price of $11.54 per share, under an authorized share repurchase program.~~

~~As of September 30, 2019, the Company has~~had 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.

2015

Share-Based Payments

The following table summarizes restricted stock awards and performance stock awards activity issued under the 2017 Plan for the ~~nine~~three months ended ~~September 30, 2019:~~March 31, 2020:


	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, 2020	996,794	$	8.54	364,557	$	9.66
Granted	703,611	$	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, 2020	1,376,911	$	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, 2019 589,120
$ 12.00
365,149
$ 12.35
Granted 837,099
$ 7.06
192,939
$ 7.06
Vested (331,395 ) $ 11.66
—
$ —
Forfeited (84,515 ) $ 9.26
(189,619 ) $ 12.25
Unvested restricted stock awards, September 30, 2019 1,010,309
$ 8.52
368,469
$ 9.64

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 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 ~~and nine~~ months ended ~~September 30, 2019, $1.0~~March 31, 2020, $0.9 million ~~and $2.5 million, respectively,~~ was included in selling, general and administrative expenses related to share-based payments, and a net of ~~5,233 and 230,986~~221,492 shares ~~respectively,~~ of Common Stock were issued upon the vesting of restricted stock.

During the three ~~and nine~~ months ended ~~September 30, 2018, $1.0~~March 31, 2019, $0.5 million ~~and $2.4 million, respectively,~~ was included in selling, general and administrative expenses related to share-based payments, and a net of ~~5,460 and 155,914~~176,436 shares ~~respectively,~~ of Common Stock were issued upon the vesting of restricted stock.


~~13.~~	~~SEGMENT DATA~~

11. SEGMENT DATA

In accordance with the Segment Reporting Topic of the FASB ASC, the Company reports ~~three~~3 business segments – Nurse and Allied Staffing, Physician Staffing, and 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 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.~~

● 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 management~~Company 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 ~~integration~~integration-related costs, ~~acquisition-related contingent consideration,~~ restructuring costs, legal settlement charges, impairment charges, and corporate overhead. Contribution income is a financial measure used by ~~management~~the Company when assessing segment performance

and is provided in accordance with the Segment Reporting Topic of the FASB ASC. The ~~Company’s management~~Company does not evaluate, manage, or measure

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.

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


	Three Months Ended					Nine Months Ended						Three Months Ended
	September 30,					September 30,						March 31,
	2019			2018		2019			2018			2020		2019
	(amounts in thousands)											(amounts in thousands)
Revenue from services:											Revenue from services:
Nurse and Allied Staffing	$	184,974		$	175,945	$	541,398		$	539,488	Nurse and Allied Staffing	$	188,233	$	175,637
Physician Staffing	20,407			21,158		54,594			64,052		Physician Staffing	18,181		16,159
Search	3,819			3,614		11,136			12,037		Search	3,650		3,375
	$	209,200		$	200,717	$	607,128		$	615,577		$	210,064	$	195,171

Contribution income (loss):											Contribution income (loss):
Nurse and Allied Staffing	$	16,097		$	16,507	$	46,504		$	50,064	Nurse and Allied Staffing	$	14,157	$	14,296
Physician Staffing	811			1,307		1,724			4,190		Physician Staffing	631		405
Search	78			97		(526		)	833		Search	(335)		(423)
	16,986			17,911		47,702			55,087			14,453		14,278

Corporate overhead	10,975			10,937		34,744			32,399
Corporate overhead (a)											Corporate overhead (a)	11,270		12,330
Depreciation and amortization	2,907			2,892		9,448			8,764		Depreciation and amortization	3,296		2,984
Acquisition-related contingent consideration	(426		)	16		74			449
Acquisition and integration costs	—			70		311			261

Acquisition and integration-related costs											Acquisition and integration-related costs	77		512
Restructuring costs	1,607			1,351		2,884			1,979		Restructuring costs	564		1,140
Legal settlement charges	—			—		1,600			—
Impairment charges	1,804			—		16,306			—
Income (loss) from operations	$	119		$	2,645	$	(17,665	)	$	11,235

Loss from operations											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 ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019, $0.4 ~~million and $1.3~~ million of revenue ~~respectively, and less than $0.1 million~~ and $0.1 million of contribution income ~~respectively,~~ were reclassified from Nurse and Allied Staffing to Search to conform to the current period presentation.

~~14.~~12. CONTINGENCIES

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 the Company's profitability. Adverse developments in existing litigation claims or legal proceedings involving the Company or new claims could require management 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 the Company's financial results. In the second quarter of 2019, the Company recorded $1.6 million in legal settlement charges related to the resolution of a medical malpractice lawsuit, as well as a 2019 California wage and hour class action settlement agreement which remains subject to court approval. The Company believes the outcome of any outstanding loss contingencies as of ~~September 30, 2019~~March 31, 2020 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-income~~Given 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 its~~in the Company's condensed consolidated statements of operations and the liability is reflected in sales tax payable within other current liabilities as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018, on~~2019, in its condensed consolidated balance sheets.

For the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, the Company calculated its effective tax rate based on year-to-date results ~~pursuant~~as opposed to the ~~Income Taxes~~ ~~Topic of~~three months ended March 31, 2019, whereby the ~~FASB ASC, as opposed to~~Company calculated its effective tax rate estimating its annual effective tax rate. ~~For the three and nine months ended September 30, 2018, the Company estimated its annual effective tax rate and applied that rate to year-to-date results.~~ The Company’s effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 was negative ~~3.6% and negative 135.5%, respectively, including the impact of~~11.2% which included immaterial discrete items. ~~Excluding discrete items, the Company’s effective tax rate for the three and nine months ended September 30, 2019 was a negative 7.0% and 2.6%, respectively.~~ The Company's effective tax rate for the three months ended ~~September 30,~~March 31, 2019 was 68.6% including the impact of discrete items and 73.8% 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, 2020 was primarily impacted by international and state ~~taxes while~~taxes. The Company did not maintain a material valuation allowance during the ~~effective~~three months ended March 31, 2019 and, as a result, income tax ~~rate~~expense for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 was primarily impacted by the ~~additional valuation allowance, impairment~~non-deductibility of ~~indefinite-lived intangibles,~~certain per diem expenses, the officers' compensation limitation, and international and state taxes.

InThe Coronavirus Aid, Relief and Economic Security Act, also known as the ~~second quarter~~CARES Act, was signed into law on March 27, 2020. Among other things, the CARES Act provided for an immediate refund of ~~2019, management assessed~~Alternative Minimum Tax credits as compared to the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the Company's existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended June 30, 2019. On the basis of this evaluation,2017 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 in the condensed consolidated balance sheets as of March 31, 2020.

As of March 31, 2020 and December 31, 2019, the Company had a valuation allowance of ~~$36.0 million~~$37.3 million. The valuation allowance was recorded ~~($35.8 million of which was recorded as income tax expense and $0.2 million as a reduction of other comprehensive income) to reduce the portion of the~~against all domestic deferred tax ~~asset that is~~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 September 30, 2019 and December 31, 2018, the Company had valuation allowances of $37.7 million and $1.2 million, respectively. The September 30, 2019 valuation allowance applied to all domestic deferred tax assets other than certain deferred tax assets expected to be realized. The December 31, 2018 valuation allowance applied to the uncertainty of the realization of certain state net operating losses.

As of ~~September 30, 2019,~~March 31, 2020, the Company had approximately $0.7 million of unrecognized tax benefits included in other current liabilities and other long-term liabilities, ~~($5.7~~$6.3 million, net of deferred taxes, which would affect the effective tax rate if ~~recognized).~~

recognized. During the three months ended September 30, 2019, the Company reduced its unrecognized tax benefits by $0.9 million related to statute of limit expirations and a change in expected tax resolutions, the majority of which was offset by valuation allowance. For the

~~nine months ended September 30, 2019,~~March 31, 2020, the Company had gross ~~decreases~~increases of ~~$0.1~~$0.3 million to its current year unrecognized tax benefits related to federal and state tax ~~provisions.~~issues.

The tax years 2012 through ~~2018~~2019 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 such services were conducted on terms equivalent to those prevailing in an arm's-length transaction. Revenue related to these transactions was $0.1 million for both the three and nine months ended September 30, 2019, and less than $0.1 million for both the three and nine months ended September 30, 2018. Accounts receivable due from these entities at September 30, 2019 and December 31, 2018 was less than $0.1 million.

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 ~~$6.3 million and $18.2~~$5.6 million for both the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020 and ~~$5.4 million and $14.5 million for the three and nine months ended September 30, 2018, respectively.~~2019. At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company had a receivable balance of ~~$2.9~~$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.

~~Subsequent~~The Company has entered into an arrangement for digital marketing services provided by a firm that is related to Mr. Clark, the Company's ~~acquisition~~Co-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 continued~~the 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 members~~Company through its related party process. The digital marketing firm manages a limited number of ~~Mediscan. The~~digital publishers covering various Company ~~paid~~brands for a monthly management fee. During the three months ended March 31, 2020, the Company incurred less than $0.1 million ~~and $0.3 million, respectively,~~ in ~~rent expense for~~expenses related to these ~~premises for the three and nine months ended September 30, 2018.~~ fees.

In the ~~fourth~~first quarter of ~~2018,~~2020, the Company ~~vacated~~entered 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. ~~2018-13,~~ ~~Fair Value Measurement~~2020-04, Reference Rate Reform (Topic ~~820)~~848), ~~Disclosure Framework - Changes~~Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying 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 ~~Disclosure Requirements~~optional expedients for ~~Fair Value Measurement.~~ ~~The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820,~~ ~~Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits.~~contract modifications must be applied consistently for all eligible contracts or transactions. The amendments in this update are effective as of March 12, 2020 through December 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, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for ~~all~~Income Taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. 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 amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2019,~~2020, and should be applied either ~~prospectively~~on a prospective, retrospective, or ~~retrospectively~~modified retrospective basis depending on the ~~nature of the disclosure. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this update and delay~~amendment. 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 provisions~~standard 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.

~~18. SUBSEQUENT EVENTS~~

In October 2019, the Company's senior credit facility was replaced by a new $120.0 million senior secured asset-based credit facility (ABL). The ABL provides for a five-year revolving credit facility, including a sublimit for swing loans up to $15.0 million and a $35.0 million sublimit for standby letters of credit. Availability under the ABL is subject to a borrowing base, which was $119.3 million at closing. See Note 8 - Debt.

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 statements~~MD&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’s~~our 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.

We provide ~~healthcare staffing, recruiting and~~ total 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 a~~national staffing teams and network of 65 office locations, ~~throughout the United States. Our services include placing~~we 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 flexible~~Our workforce ~~management~~ solutions ~~to our customers including:~~include managed service programs ~~(MSP)~~(MSPs), ~~education healthcare, as well as~~electronic medical record (EMR) transition staffing, recruitment process outsourcing (RPO), internal resource pool (IRP), and other outsourcing and ~~value-added~~consultative services as described in Item 1. Business in our Annual Report on Form 10-K for the year ended December 31, ~~2018. In addition, we~~2019. 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 services~~continuity 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 88% of our total revenue in the third quarter of 2019. 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.

● 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 10% of our total revenue in the third quarter of 2019. 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.

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

● 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.

● Search – Search 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.

Summary of Operations

For the quarter ended ~~September 30, 2019,~~March 31, 2020, revenue from services increased 4%8% year-over-year to ~~$209.2~~$210.1 million, primarily due to a higher volume of travel nurse staffing, and higher average bill rates. The increase in revenue was partially offset by revenue declines in our local staffing and education healthcare services primarily driven ~~primarily~~ by ~~higher volumes.~~the changing landscape in March from the COVID-19 pandemic. Profitability in the first quarter was impacted by ~~higher compensation~~$0.6 million of restructuring costs, ~~which drove lower bill-pay spreads. Profitability~~$0.7 million of accelerated amortization expense in ~~the third quarter was also impacted by restructuring activities that resulted in additional restructuring charges~~connection with our rebranding initiative, and $0.5 million of ~~$1.6 million and impairment charges of $1.8 million, primarily~~costs incurred related to ~~leased space we expect to sublease. In addition, we recognized a loss on derivative for the early termination of an interest rate swap of $1.3 million in anticipation of the expected refinancing of~~ our ~~senior credit facility in the fourth quarter.~~applicant tracking system replacement. Net loss attributable to common shareholders was ~~$3.1~~$2.1 million, or a loss of ~~$0.09~~$0.06 per share.

For the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, we generated cash flow from operating activities of ~~$10.9~~$17.2 million and ~~made optional debt prepayments~~repaid a net of ~~$12.5~~$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 ~~September 30, 2019,~~March 31, 2020, we had ~~$9.5~~$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.

Early in March, we experienced an increase in demand for crisis assignments from our customers as a ~~principal balance~~result of ~~$71.4 million outstanding~~the 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

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,~~business for the second quarter. As the country resumes normal operations as part of the phased in recovery, however, we expect demand for these services to rebound in the second quarter. We are proactively working with our customers to address their crisis needs, as well as to plan for the recovery of their normal operations.

We believe our liquidity remains high as we have taken steps to preserve cash, ending the quarter with cash of $12.6 million and ~~there were no amounts drawn~~$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. ~~In October 2019,~~

We had a very successful experience with our ~~senior credit facility was replaced by a new $120.0 million senior secured asset-based credit facility (ABL). See Note 8 - Debt~~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 efficiently work remotely will allow us to greatly reduce our ~~condensed consolidated financial statements.~~office footprint throughout the country. We also remain on target for full implementation of our applicant tracking system in the third quarter of 2020, which we believe will create further efficiencies. Finally, we continue to evaluate our cost structure and 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.

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. 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 Segment			Business Measurement
Nurse and Allied Staffing			FTEs 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 Staffing			Days 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.

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 Ended
	March 31,
	2020		2019
Revenue from services	100.0	%	100.0	%
Direct operating expenses	76.4		75.3
Selling, general and administrative expenses	21.8		23.6
Bad debt expense	0.3		0.1
Depreciation and amortization	1.6		1.5


Acquisition and integration-related costs	—		0.2
Restructuring costs	0.3		0.6


Loss from operations	(0.4)		(1.3)

Interest expense	0.4		0.7

Loss on early extinguishment of debt	—		0.2
Other income, net	—		—
Loss before income taxes	(0.8)		(2.2)
Income tax expense (benefit)	—		(1.5)


Consolidated net loss	(0.8)		(0.7)
Less: Net income attributable to noncontrolling interest in subsidiary	0.2		0.2
Net loss attributable to common shareholders	(1.0)	%	(0.9)	%

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
Revenue from services 100.0 % 100.0 % 100.0 % 100.0 %
Direct operating expenses 75.6
74.3
75.1
74.2
Selling, general and administrative expenses 21.2
22.0
22.5
21.9
Bad debt expense 0.3
0.3
0.2
0.2
Depreciation and amortization 1.4
1.4
1.6
1.4
Acquisition-related contingent consideration (0.2 ) —
—
0.1
Acquisition and integration costs —
—
—
0.1
Restructuring costs 0.8
0.7
0.5
0.3
Legal settlement charges —
—
0.3
—
Impairment charges 0.8
—
2.7
—
Income (loss) from operations 0.1
1.3
(2.9 ) 1.8
Interest expense 0.7
0.8
0.7
0.7
Loss on derivative 0.6
—
0.2
—
Loss on early extinguishment of debt 0.1
—
0.1
—
Other income, net —
(0.1 ) —
(0.1 )
(Loss) income before income taxes (1.3 ) 0.6
(3.9 ) 1.2
Income tax expense —
0.7
5.2
0.6
Consolidated net (loss) income (1.3 ) (0.1 ) (9.1 ) 0.6
Less: Net income attributable to noncontrolling interest in subsidiary 0.2
0.1
0.2
0.2
Net (loss) income attributable to common shareholders (1.5 )% (0.2 )% (9.3 )% 0.4 %

Comparison of Results for the Three Months Ended ~~September 30, 2019~~March 31, 2020 compared to the Three Months Ended ~~September 30, 2018~~March 31, 2019


	Three Months Ended September 30,												Three Months Ended March 31,
							Increase (Decrease)			Increase (Decrease)							Increase (Decrease)		Increase (Decrease)
	2019			2018			$			%			2020		2019		$		%
	(Amounts in thousands)												(Amounts in thousands)
Revenue from services	$	209,200		$	200,717		$	8,483		4.2	%	Revenue from services	$	210,064	$	195,171	$	14,893	7.6	%
Direct operating expenses	158,194			149,155			9,039			6.1	%	Direct operating expenses	160,461		146,917		13,544		9.2	%
Selling, general and administrative expenses	44,407			44,086			321			0.7	%	Selling, general and administrative expenses	45,881		46,036		(155)		(0.3)	%
Bad debt expense	588			502			86			17.1	%	Bad debt expense	539		270		269		99.6	%
Depreciation and amortization	2,907			2,892			15			0.5	%	Depreciation and amortization	3,296		2,984		312		10.5	%
Acquisition-related contingent consideration	(426		)	16			(442		)	NM
Acquisition and integration costs	—			70			(70		)	(100.0	)%

Acquisition and integration-related costs												Acquisition and integration-related costs	77		512		(435)		(85.0)	%
Restructuring costs	1,607			1,351			256			18.9	%	Restructuring costs	564		1,140		(576)		(50.5)	%
Impairment charges	1,804			—			1,804			100.0	%
Income from operations	119			2,645			(2,526		)	(95.5	)%

Loss from operations												Loss from operations	(754)		(2,688)		1,934		71.9	%
Interest expense	1,398			1,512			(114		)	(7.5	)%	Interest expense	867		1,422		(555)		(39.0)	%
Loss on derivative	1,284			—			1,284			100.0	%

Loss on early extinguishment of debt	94			36			58			161.1	%	Loss on early extinguishment of debt	—		360		(360)		(100.0)	%
Other income, net	(54		)	(170		)	116			68.2	%	Other income, net	(31)		(82)		51		62.2	%
(Loss) income before income taxes	(2,603		)	1,267			(3,870		)	(305.4	)%
Income tax expense	94			1,385			(1,291		)	(93.2	)%
Loss before income taxes												Loss 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 loss	(2,697		)	(118		)	(2,579		)	NM		Consolidated net loss	(1,768)		(1,376)		(392)		(28.5)
Less: Net income attributable to noncontrolling interest in subsidiary	431			323			108			33.4	%	Less: Net income attributable to noncontrolling interest in subsidiary	321		391		(70)		(17.9)	%
Net loss attributable to common shareholders	$	(3,128	)	$	(441	)	$	(2,687	)	(609.3	)%	Net loss attributable to common shareholders	$	(2,089)	$	(1,767)	$	(322)	(18.2)	%

Revenue from services

Revenue from services increased ~~4.2%~~7.6%, to ~~$209.2~~$210.1 million for the three months ended ~~September 30, 2019,~~March 31, 2020, as compared to ~~$200.7~~$195.2 million for the three months ended ~~September 30, 2018, primarily driven by~~March 31, 2019, reflecting higher revenue ~~from Nurse and Allied Staffing~~growth in all three segments. Revenue for the three months ended March 31, 2020 was negatively impacted by COVID-19 due to ~~an increase~~suspended services resulting from school closures and, to a lesser extent, volume declines in ~~volume.~~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 increased ~~$9.0~~$13.5 million or ~~6.1%~~9.2%, to ~~$158.2~~$160.5 million for the three months ended ~~September 30, 2019,~~March 31, 2020, as compared to ~~$149.2~~$146.9 million for the three months ended ~~September 30, 2018.~~March 31, 2019. As a percentage of total revenue, direct operating expenses increased to ~~75.6%~~76.4% compared to ~~74.3%~~75.3% in the prior year period primarily due to ~~higher compensation~~average pay rates rising faster than bill rates in Nurse and Allied Staffing ~~driving a lower bill-pay spread.~~.

Selling, general and administrative expenses

Selling, general and administrative expenses ~~increased 0.7%~~decreased 0.3%, to ~~$44.4~~$45.9 million for the three months ended ~~September 30, 2019,~~March 31, 2020, as compared to ~~$44.1~~$46.0 million for the three months ended ~~September 30, 2018.~~March 31, 2019. As a percentage of total revenue, selling, general and administrative expenses decreased to ~~21.2%~~21.8% for the three months ended ~~September 30, 2019~~March 31, 2020 as compared to ~~22.0%~~23.6% for the three months ended ~~September 30, 2018.~~March 31, 2019, primarily as a result of improved operating leverage.

Depreciation and amortization expense

Depreciation and amortization expense ~~was$2.9 million~~ for ~~both~~ the three months ended ~~September 30, 2019 and 2018. The acceleration~~March 31, 2020 increased to $3.3 million as compared to $3.0 million for the three months ended March 31, 2019. Amortization expense increased due to accelerated amortization of ~~amortization on the~~ trade names ~~related to~~in our ~~Physician~~Nurse and Allied Staffing ~~business~~ segment, associated with our rebranding initiatives. As a percentage of revenue,

depreciation and amortization expense was ~~offset by lower depreciation expense due to write-offs~~1.6% for the three months ended March 31, 2020 and ~~fully amortized property~~1.5% for the three months ended March 31, 2019.

Acquisition and ~~equipment. See Note 7 - Goodwill, Trade Names,~~integration-related costs

Acquisition and ~~Other Intangible Assets to our condensed consolidated financial statements.~~

~~Acquisition-related contingent consideration~~

~~Acquisition-related contingent consideration includes~~integration-related costs include costs for prior acquisitions, costs incurred for potential transactions, and accretion and valuation adjustments on our contingent consideration ~~liabilities, substantially~~liability related to the Mediscan ~~acquisition, and~~acquisition. In the first quarter of 2020, the final earnout amount related to the contingent consideration was ~~a benefit of $0.4 million for the three months ended September 30, 2019 and less than $0.1 million for the three months ended September 30, 2018.~~determined. See Note 117 - ~~Fair Value Measurements to our condensed consolidated financial statements.~~Debt.

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 ~~lease-related exit~~reorganization costs as part of our planned cost savings initiatives, and totaled ~~$1.6 million and $1.4~~$0.6 million during the three months ended ~~September 30, 2019 and 2018, respectively.~~

~~Impairment charges~~

March 31, 2020. During the three months ended ~~September 30,~~March 31, 2019, restructuring costs totaled $1.1 million and were primarily comprised of severance costs incurred in connection with our ~~restructuring activities we ceased using leased space which resulted in an evaluation of related long-lived assets pursuant to the~~ ~~Property, Plant and Equipment~~ ~~Topic of the FASB ASC. The evaluation resulted in impairment charges related to our right-of-use assets of $1.2~~cost savings initiatives.

Interest expensewas $0.9 million ~~and $0.6 million of impairment related to property and equipment. There were no similar charges~~ for the three months ended ~~September 30, 2018.~~

~~Interest expense~~

~~Interest expensewas~~March 31, 2020 as compared to $1.4 million for the three months ended ~~September 30,~~March 31, 2019, ~~as compared~~due to ~~$1.5 million for the three months ended September 30, 2018. The impact of~~ lower average borrowings ~~was offset by~~and a ~~higher~~lower effective rate. The effective interest rate on our ~~term loan~~ borrowings ~~increased to 6.4%~~was 4.4% for the three month period ended ~~September 30, 2019~~March 31, 2020 compared to ~~5.3%~~5.8% for the three months ended ~~September 30, 2018.~~March 31, 2019.

Loss on ~~derivative~~early extinguishment of debt

Loss on ~~derivative~~early extinguishment of debt was ~~$1.3~~$0.4 million for the three months ended ~~September 30,~~March 31, 2019, ~~which was paid~~relating to ~~terminate~~the write-off of

debt issuance costs in connection with a reduction in borrowing capacity under the revolving credit facility, and an ~~interest rate hedge related to~~optional

principal prepayment of $7.5 million made on our term loan ~~that was subsequently refinanced~~ in ~~October~~the first quarter of 2019. There were no similar charges for the three months ended ~~September 30, 2018.~~March 31, 2020.

~~Loss on early extinguishment of debt~~

Loss on early extinguishment of debt of $0.1 million for the three months ended September 30, 2019 related to write-offs of debt issuance costs resulting from a reduction in borrowing capacity on our revolving credit facility. Loss on early extinguishment of debt was not material for the three months ended September 30, 2018 and related to the optional prepayment of $5.0 million made on our Amended Term Loan on September 28, 2018.

Income tax expense ~~totaled $0.1~~was $0.2 million for the three months ended ~~September 30, 2019, compared to $1.4 million for~~March 31, 2020, including immaterial discrete items. For the three months ended ~~September 30, 2018. Income~~March 31, 2019, we recorded an income tax benefit of $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 ~~September 30, 2019~~March 31, 2020 was primarily impacted by international and state taxes. ~~Income~~The Company did not maintain a material valuation allowance during the three months ended March 31, 2019 and as a result, income tax expense for the three months ended ~~September 30, 2018~~March 31, 2019 was primarily impacted by the non-deductibility of certain per diem expenses, the officers’ compensation limitation, and international and state taxes. See Note 1513 - Income Taxes to our condensed consolidated financial statements.

~~Comparison of Results for the Nine Months Ended September 30, 2019 compared to the Nine Months Ended September 30, 2018~~

Nine Months Ended September 30,
Increase (Decrease) Increase (Decrease)
2019 2018 $ %
(Amounts in thousands)
Revenue from services $ 607,128
$ 615,577
$ (8,449 ) (1.4 )%
Direct operating expenses 456,280
456,573
(293 ) (0.1 )%
Selling, general and administrative expenses 136,387
135,004
1,383
1.0 %
Bad debt expense 1,503
1,312
191
14.6 %
Depreciation and amortization 9,448
8,764
684
7.8 %
Acquisition-related contingent consideration 74
449
(375 ) (83.5 )%
Acquisition and integration costs 311
261
50
19.2 %
Restructuring costs 2,884
1,979
905
45.7 %
Legal settlement charges 1,600
—
1,600
100.0 %
Impairment charges 16,306
—
16,306
100.0 %
(Loss) income from operations (17,665 ) 11,235
(28,900 ) (257.2 )%
Interest expense 4,258
4,225
33
0.8 %
Loss on derivative 1,284
—
1,284
100.0 %
Loss on early extinguishment of debt 508
36
472
NM
Other income, net (212 ) (369 ) 157
42.5 %
(Loss) income before income taxes (23,503 ) 7,343
(30,846 ) (420.1 )%
Income tax expense 31,840
3,717
28,123
756.6 %
Consolidated net (loss) income (55,343 ) 3,626
(58,969 ) NM
Less: Net income attributable to noncontrolling interest in subsidiary 1,226
886
340
38.4 %
Net (loss) income attributable to common shareholders $ (56,569 ) $ 2,740
$ (59,309 ) NM

~~Revenue from services~~

Revenue from services decreased 1.4%, to $607.1 million for the nine months ended September 30, 2019, as compared to $615.6 million for the nine months ended September 30, 2018, due to lower volume in our Physician Staffing and Search businesses, partially offset by an increase in volume in our Nurse and Allied Staffing business. See further discussion in Segment Results.

~~Direct operating expenses~~

Direct operating expenses decreased $0.3 million or 0.1%, to $456.3 million for the nine months ended September 30, 2019, as compared to $456.6 million for the nine months ended September 30, 2018. As a percentage of total revenue, direct operating expenses increased to 75.1% compared to 74.2% in the prior year period primarily due to a lower bill-pay spread in our Nurse and Allied staffing business.

~~Selling, general and administrative expenses~~

Selling, general and administrative expenses increased 1.0%, to $136.4 million for the nine months ended September 30, 2019, as compared to $135.0 million for the nine months ended September 30, 2018, due to higher healthcare costs, consulting and other professional service fees, and candidate attraction-related expenses, partially offset by our cost savings initiatives. The main driver for the increase in consulting fees was related to costs incurred in connection with the replacement of our applicant

tracking system for our travel nurse business. As a percentage of total revenue, selling, general and administrative expenses increased to 22.5% for the nine months ended September 30, 2019 as compared to 21.9% for the nine months ended September 30, 2018.

~~Depreciation and amortization expense~~

~~Depreciation and amortization expenseincreased to~~$9.4 million for the nine months ended September 30, 2019 from $8.8 million for the nine months ended September 30, 2018. The increase is due to accelerated amortization of trade names of $0.9 million associated with our rebranding initiatives, partly offset by lower depreciation expense related to fully amortized assets that have not been replaced. See Note 7 - Goodwill, Trade Names, and Other Intangible Assets and Note 11 - Fair Value Measurements to our condensed consolidated financial statements.

~~Acquisition-related contingent consideration~~

Acquisition-related contingent consideration for the nine months ended September 30, 2019 was $0.1 million and included accretion and valuation adjustments on our contingent consideration liabilities related to the Mediscan acquisition. Acquisition-related contingent consideration for the nine months ended September 30, 2018 was $0.4 million and substantially related to the Mediscan acquisition. In the third quarter of 2018, we determined that the contingent consideration earnout for USR would not be achieved and the entire liability was reversed. See Note 11 - Fair Value Measurements to our condensed consolidated financial statements.

~~Acquisition and integration costs~~

Acquisition and integration costs was $0.3 million for both the nine months ended September 30, 2019 and 2018, and related to prior acquisitions. These costs also included expenses incurred for potential transactions for the nine months ended September 30, 2019.

~~Restructuring costs~~

Restructuring costs were primarily comprised of employee termination costs and lease-related exit costs, and totaled $2.9 million and $2.0 million during the nine months ended September 30, 2019 and 2018, respectively.

~~Legal settlement charges~~

Legal settlement charges totaled $1.6 million during the nine months ended September 30, 2019 and related to the resolution of a medical malpractice lawsuit, as well as a California wage and hour class action settlement agreement. There were no similar charges for the nine months ended September 30, 2018.

~~Impairment charges~~

During the three months ended September 30, 2019, in connection with our restructuring activities we ceased using leased space which resulted in an evaluation of related long-lived assets pursuant to the ~~Property, Plant and Equipment~~ Topic of the FASB ASC. The evaluation resulted in impairment charges related to our right-of-use assets of $1.2 million and $0.6 million of impairment related to property and equipment. In addition, as part of evolving our go-to-market strategy, in the second quarter of 2019, we eliminated certain brands across all of our segments as part of our rebranding initiatives and, as a result, $14.5 million of indefinite-lived trade names related to Nurse and Allied Staffing were written off as impairment charges. There were no similar charges for the nine months ended September 30, 2018. See Note 7 - Goodwill, Trade Names, and Other Intangible Assets and Note 11 - Fair Value Measurements to our condensed consolidated financial statements.

~~Interest expense~~

~~Interest expense~~was $4.3 million for the nine months ended September 30, 2019, as compared to $4.2 million for the nine months ended September 30, 2018. The effective interest rate on our term loan borrowings increased to 6.2% for the nine month period ended September 30, 2019 compared to 4.9% for the nine months ended September 30, 2018. The impact of higher average interest rates was partly offset by lower average borrowings in the nine months ended September 30, 2019 due to optional debt prepayments on the Term Loan. See Note 8 - Debt to our condensed consolidated financial statements.

~~Loss on derivative~~

Loss on derivative was $1.3 million for the nine months ended September 30, 2019, which was paid to terminate an interest rate hedge related to our term loan that was subsequently refinanced in October 2019. There were no similar charges for the nine months ended September 30, 2018.

~~Loss on early extinguishment of debt~~

Loss on early extinguishment of debt of $0.5 million for the nine months ended September 30, 2019 related to write-offs of debt issuance costs resulting from a reduction in borrowing capacity on our revolving credit facility, as well as optional debt prepayments of $12.5 million made on our Term Loan. Loss on early extinguishment of debt was not material for the nine months ended September 30, 2018 and related to the optional prepayment of $5.0 million made on our Amended Term Loan on September 28, 2018.

~~Income tax expense~~

Income tax expense totaled $31.8 million and $3.7 million for the nine months ended September 30, 2019 and 2018, respectively. Income tax expense for the nine months ended September 30, 2019 included $35.8 million of additional valuation allowance recorded as a discrete item, and was also impacted by international and state taxes as well as the impairment of indefinite-lived intangibles. Income tax expense for the nine months ended September 30, 2018 was primarily impacted by the non-deductibility of certain per diem expenses, the officers’ compensation limitation, and international and state taxes.

Information on operating segments and a reconciliation to (loss) income from operations for the periods indicated are as follows:


	Three Months Ended
	March 31,
	2020		2019
	(amounts in thousands)
Revenue from services:
Nurse and Allied Staffing	$	188,233	$	175,637
Physician Staffing	18,181		16,159
Search	3,650		3,375
	$	210,064	$	195,171

Contribution income (loss):
Nurse and Allied Staffing	$	14,157	$	14,296
Physician Staffing	631		405
Search	(335)		(423)
	14,453		14,278

Corporate overhead	11,270		12,330
Depreciation and amortization	3,296		2,984



Acquisition and integration-related costs	77		512
Restructuring costs	564		1,140


Loss from operations	$	(754)	$	(2,688)

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
(amounts in thousands)
Revenue from services:

Nurse and Allied Staffing $ 184,974
$ 175,945
$ 541,398
$ 539,488
Physician Staffing 20,407
21,158
54,594
64,052
Search 3,819
3,614
11,136
12,037
$ 209,200
$ 200,717
$ 607,128
$ 615,577

Contribution income (loss):
Nurse and Allied Staffing $ 16,097
$ 16,507
$ 46,504
$ 50,064
Physician Staffing 811
1,307
1,724
4,190
Search 78
97
(526 ) 833
16,986
17,911
47,702
55,087

Corporate overhead 10,975
10,937
34,744
32,399
Depreciation and amortization 2,907
2,892
9,448
8,764
Acquisition-related contingent consideration (426 ) 16
74
449
Acquisition and integration costs —
70
311
261
Restructuring costs 1,607
1,351
2,884
1,979
Legal settlement charges —
—
1,600
—
Impairment charges 1,804
—
16,306
—
Income (loss) from operations $ 119
$ 2,645
$ (17,665 ) $ 11,235

In the second quarter of 2019, the Company merged its permanent search recruitment brands. As a result, for the three ~~and nine~~

months ended ~~September 30, 2018, certain~~March 31, 2019, $0.4 million of revenue and $0.1 million of contribution income ~~amounts~~ were reclassified from Nurse and

Allied Staffing to Search to conform to the current period presentation. ~~See Note 13 - Segment Data to our condensed consolidated financial statements.~~

Certain statistical data for our business segments for the periods indicated are as follows:


	Three Months Ended
	March 31,		March 31,			Percent
	2020		2019		Change	Change

Nurse and Allied Staffing statistical data:
FTEs	7,145		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 filled	10,199		10,280		(81)	(0.8)	%
Revenue per day filled	$	1,783	$	1,572	211	13.4	%

Three Months Ended
September 30, September 30, Percent
2019 2018 Change Change

Nurse and Allied Staffing statistical data:
FTEs 7,083
6,953
130
1.9 %
Average Nurse and Allied Staffing revenue per FTE per day $ 284
$ 275
9
3.3 %

Physician Staffing statistical data:
Days filled 11,675
13,375
(1,700 ) (12.7 )%
Revenue per day filled $ 1,748
$ 1,582
166
10.5 %

Nine Months Ended
September 30, September 30, Percent
2019 2018 Change Change

Nurse and Allied Staffing statistical data: (a)
FTEs 7,039
7,187
(148 ) (2.1 )%
Average Nurse and Allied Staffing revenue per FTE per day $ 282
$ 275
7
2.5 %

Physician Staffing statistical data: (a)
Days filled 32,709
41,611
(8,902 ) (21.4 )%
Revenue per day filled $ 1,669
$ 1,539
130
8.4 %

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

Segment Comparison - Three Months Ended ~~September 30, 2019~~March 31, 2020 compared to the Three Months Ended ~~September 30, 2018~~March 31, 2019

Nurse and Allied Staffing

Revenue from Nurse and Allied Staffing increased ~~$9.1~~$12.6 million, or ~~5.1%~~7.2%, to ~~$185.0~~$188.2 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$175.9~~$175.6 million for the three months ended ~~September 30, 2018,~~March 31, 2019, primarily due to ~~higher volume and demand in travel staffing, partly related to an~~the continued increase in ~~demand~~the number of FTEs and average bill rates throughout the quarter. Revenue for the three months ended March 31, 2020 was negatively impacted by COVID-19 due to suspended services resulting from ~~our MSPs,~~school closures and, ~~modest price increases.~~to a lesser extent, volume declines in local staffing.

Contribution income from Nurse and Allied Staffing decreased ~~$0.4~~$0.1 million or ~~2.5%~~1.0%, to ~~$16.1~~$14.2 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$16.5~~$14.3 million for the three months ended ~~September 30, 2018, primarily due to a lower bill-pay spread.~~March 31, 2019. As a percentage of segment revenue, contribution income margin was ~~8.7%~~7.5% for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~9.4%~~8.1% for the three months ended ~~September 30, 2018.~~March 31, 2019.

The average number of Nurse and Allied Staffing FTEs on contract during the three months ended ~~September 30, 2019~~March 31, 2020 increased ~~1.9%~~1.8% from the three months ended ~~September 30, 2018.~~March 31, 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 ~~3.3%~~4.3%, reflecting higher average bill ~~rates.~~rates related to increased pricing.

Revenue from Physician Staffing ~~decreased $0.8~~increased $2.0 million, or ~~3.5%~~12.5%, to ~~$20.4~~$18.2 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$21.2~~$16.2 million for the three months ended ~~September 30, 2018,~~March 31, 2019, primarily due to ~~a lower number of days filled, partially offset by~~ higher bill rates ~~primarily~~ due to ~~mix. Revenue and days filled~~mix as well as one additional day in the ~~third quarter of 2019 increased 13.2% and 8.6%, respectively, from the second quarter of 2019.~~quarter.

Contribution income from Physician Staffing ~~decreased $0.5~~increased $0.2 million, or ~~37.9%~~55.8% to ~~$0.8~~$0.6 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$1.3~~$0.4 million for the three months ended ~~September 30, 2018.~~March 31, 2019. As a percentage of segment

revenue, contribution income was ~~4.0%~~3.5% for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~6.2%~~2.5% for the three months ended ~~September 30, 2018, primarily~~March 31, 2019, driven by higher revenue and lower ~~revenue.~~selling, general and administrative expenses.

Total days filled for Physician Staffing for the three months ended ~~September 30, 2019~~March 31, 2020 were ~~11,675~~10,199 as compared with ~~13,375~~10,280 in the prior year. Revenue per day filled was ~~$1,748~~$1,783 as compared with ~~$1,582~~$1,572 in the prior year, due to a shift in the mix of business.

Revenue from Search increased ~~$0.2~~$0.3 million, or ~~5.7%~~8.1%, to ~~$3.8~~$3.7 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$3.6~~$3.4 million for the three months ended ~~September 30, 2018,~~March 31, 2019, due to an increase in executive search and RPO revenue, partially offset by declines in physician ~~placements.~~search.

Contribution ~~income~~loss from Search was ~~$0.1~~$0.3 million for ~~both~~ the three months ended ~~September 30, 2019 and 2018.~~March 31, 2020, compared to contribution loss of $0.4 million for the three months ended March 31, 2019.

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 ~~increased~~decreased to ~~$11.0~~$11.3 million for the three months ended ~~September 30, 2019,~~March 31, 2020, from ~~$10.9~~$12.3 million for the three months ended ~~September 30, 2018.~~March 31, 2019, due 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 ~~5.2% for the three months ended September 30, 2019 and~~ 5.4% for the three months ended ~~September 30, 2018.~~

~~Segment Comparison - Nine Months Ended September 30, 2019 compared to the Nine Months Ended September 30, 2018~~

~~Nurse~~March 31, 2020 and ~~Allied Staffing~~

~~Revenue from Nurse and Allied Staffing increased $1.9 million, or 0.4%, to $541.4 million~~6.3% for the ~~nine~~three months ended September 30, 2019, compared to $539.5 million for the nine months ended September 30, 2018, primarily due to higher average bill rates partly offset by lower volume. Volume declines in local staffing were partially offset by increases in travel allied and education healthcare staffing. Our bill rates benefited from a higher mix of premium rate business.March 31, 2019.

Contribution income from Nurse and Allied Staffing decreased $3.6 million or 7.1%, to $46.5 million for the nine months ended September 30, 2019, compared to $50.1 million for the nine months ended September 30, 2018, primarily due to a lower bill-pay spread in travel nurse and travel allied. As a percentage of segment revenue, contribution income margin was 8.6% for the nine months ended September 30, 2019, compared to 9.3% for the nine months ended September 30, 2018.



Delaware	0-33169	13-4066229
(State or other jurisdiction of Incorporation or organization)	Commission file number	(I.R.S. Employer Identification Number)



Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, par value $0.0001 per share	CCRN	The NASDAQ Stock Market



			PAGE

PART I. – FINANCIAL INFORMATION				1

Item 1.		Condensed Consolidated Financial Statements	1

		Condensed Consolidated Balance Sheets (Unaudited)	1

		Condensed Consolidated Statements of Operations (Unaudited)	2

		Condensed Consolidated Statements of Comprehensive ~~(Loss) Income~~Loss (Unaudited)	3

		Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	4

		Condensed Consolidated Statements of Cash Flows (Unaudited)	65

		Notes to Condensed Consolidated Financial Statements (Unaudited)	76

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	2419

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	3829

Item 4.		Controls and Procedures	3829

PART II. – OTHER INFORMATION				3930

Item 1.		Legal Proceedings	3930

Item 1A.		Risk Factors	3930

Item 6.		Exhibits	32

~~Item 6.~~Signatures			~~Exhibits~~	4033

~~Signatures~~	41



	September 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	9,458		$	16,019
Accounts receivable, net of allowances of $3,375 in 2019 and $3,705 in 2018	170,339			166,128
Prepaid expenses	3,764			6,208
Insurance recovery receivable	4,631			4,186
Other current assets	1,496			2,364
Total current assets	189,688			194,905
Property and equipment, net of accumulated depreciation of $34,617 in 2019 and $33,476 in 2018	11,953			13,628
Operating lease right-of-use assets	17,796			—
Goodwill	101,066			101,060
Trade names, indefinite-lived	5,900			20,402
Other intangible assets, net	48,725			55,182
Non-current deferred tax assets	—			23,750
Other non-current assets	18,863			18,076
Total assets	$	393,991		$	427,003

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$	50,291		$	43,744
Accrued compensation and benefits	34,683			33,332
Current portion of long-term debt	—			5,235
Operating lease liabilities - current	4,936			—
Other current liabilities	3,578			3,075
Total current liabilities	93,488			85,386
Long-term debt, less current portion	70,556			77,944
Operating lease liabilities - non-current	20,112			—
Non-current deferred tax liabilities	7,824			95
Long-term accrued claims	29,616			29,299
Other long-term liabilities	8,748			16,081
Total liabilities	230,344			208,805

Commitments and contingencies

Stockholders' equity:
Common stock	4			4
Additional paid-in capital	304,764			303,048
Accumulated other comprehensive loss	(1,244		)	(1,462		)
Accumulated deficit	(140,631		)	(84,062		)
Total Cross Country Healthcare, Inc. stockholders' equity	162,893			217,528
Noncontrolling interest in subsidiary	754			670
Total stockholders' equity	163,647			218,198
Total liabilities and stockholders' equity	$	393,991		$	427,003



	Three Months ended September 30, 2019
	Nurse And Allied Staffing		Physician Staffing		Search		Total Segments
	(amounts in thousands)
Temporary Staffing Services	$	181,640	$	19,236	$	—	$	200,876
Other Services	3,334		1,171		3,819		8,324
Total	$	184,974	$	20,407	$	3,819	$	209,200

	Three Months ended September 30, 2018
	Nurse And Allied Staffing		Physician Staffing		Search		Total Segments
	(amounts in thousands)
Temporary Staffing Services	$	172,825	$	19,643	$	—	$	192,468
Other Services	3,120		1,515		3,614		8,249
Total	$	175,945	$	21,158	$	3,614	$	200,717

	Nine Months ended September 30, 2019
	Nurse And Allied Staffing		Physician Staffing		Search		Total Segments
	(amounts in thousands)
Temporary Staffing Services	$	532,036	$	51,217	$	—	$	583,253
Other Services	9,362		3,377		11,136		23,875
Total	$	541,398	$	54,594	$	11,136	$	607,128

	Nine Months ended September 30, 2018
	Nurse And Allied Staffing		Physician Staffing		Search		Total Segments
	(amounts in thousands)
Temporary Staffing Services	$	529,662	$	59,816	$	—	$	589,478
Other Services	9,826		4,236		12,037		26,099
Total	$	539,488	$	64,052	$	12,037	$	615,577



	September 30, 2019					December 31, 2018
	Principal		Debt Issuance Costs			Principal			Debt Issuance Costs
	(amounts in thousands)
Term Loan, interest 5.4% and 4.8% at September 30, 2019 and December 31, 2018, respectively	$	71,376	$	(820	)	$	83,876		$	(697	)
Less current portion	—		—			(5,235		)	—
Long-term debt	$	71,376	$	(820	)	$	78,641		$	(697	)



	Term Loan
	(amounts in thousands)
Through Years Ending December 31:
2019	$	—
2020	—
2021	5,386
2022	65,990
2023	—
Thereafter	—
Total	$	71,376


Classification on Condensed Consolidated Balance Sheets:	September 30, 2019		Classification on Condensed Consolidated Balance Sheets:	March 31, 2020		December 31, 2019
	(amounts in thousands)			(amounts in thousands)
Operating lease right-of-use assets	$	17,796	Operating lease right-of-use assets	$	16,263	$	16,964
Operating lease liabilities - current	$	4,936	Operating lease liabilities - current	$	4,965	$	4,878
Operating lease liabilities - non-current	$	20,112	Operating lease liabilities - non-current	$	17,992	$	19,070


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



	Contingent Consideration
	Liabilities
	(amounts in thousands)
December 31, 2018	$	7,689
Payments	(100		)
Valuation adjustment	247
March 31, 2019	7,836
Valuation adjustment	253
June 30, 2019	8,089
Payments	(179		)
Valuation adjustment	(426		)
September 30, 2019	$	7,484


~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~



	Nine Months Ended September 30,
							Increase (Decrease)			Increase (Decrease)
	2019			2018			$			%
	(Amounts in thousands)
Revenue from services	$	607,128		$	615,577		$	(8,449	)	(1.4	)%
Direct operating expenses	456,280			456,573			(293		)	(0.1	)%
Selling, general and administrative expenses	136,387			135,004			1,383			1.0	%
Bad debt expense	1,503			1,312			191			14.6	%
Depreciation and amortization	9,448			8,764			684			7.8	%
Acquisition-related contingent consideration	74			449			(375		)	(83.5	)%
Acquisition and integration costs	311			261			50			19.2	%
Restructuring costs	2,884			1,979			905			45.7	%
Legal settlement charges	1,600			—			1,600			100.0	%
Impairment charges	16,306			—			16,306			100.0	%
(Loss) income from operations	(17,665		)	11,235			(28,900		)	(257.2	)%
Interest expense	4,258			4,225			33			0.8	%
Loss on derivative	1,284			—			1,284			100.0	%
Loss on early extinguishment of debt	508			36			472			NM
Other income, net	(212		)	(369		)	157			42.5	%
(Loss) income before income taxes	(23,503		)	7,343			(30,846		)	(420.1	)%
Income tax expense	31,840			3,717			28,123			756.6	%
Consolidated net (loss) income	(55,343		)	3,626			(58,969		)	NM
Less: Net income attributable to noncontrolling interest in subsidiary	1,226			886			340			38.4	%
Net (loss) income attributable to common shareholders	$	(56,569	)	$	2,740		$	(59,309	)	NM



Commitments	Total		Remainder of 2019		2020		2021		2022		2023		Thereafter
	(Unaudited, amounts in thousands)
Term Loan (a)	$	71,376	$	—	$	—	$	5,386	$	65,990	$	—	$	—
Interest on debt (b)	13,463		1,437		4,772		4,684		2,570		—		—
Contingent consideration (c)	7,565		—		2,495		2,535		2,535		—		—
Operating lease obligations (d)	29,560		1,254		6,775		5,924		5,042		4,696		5,869
	$	121,964	$	2,691	$	14,042	$	18,529	$	76,137	$	4,696	$	5,869


~~10.~~	~~LEASES~~


~~(b)~~	~~Interest on debt represents payments due through maturity for our Term Loan, calculated using the October 1, 2019 applicable LIBOR and margin rate totaling 5.3%.~~


~~(c)~~	The contingent consideration represents the estimated payments due to the seller 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.~~


~~ITEM 3.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~



~~No.~~		~~Description~~

~~10.1 #~~		~~Offer Letter between Cross Country Healthcare, Inc. and Buffy White, dated March 6, 2019~~
*31.1
~~10.2 #~~	~~Relocation Agreement between Cross Country Healthcare, Inc. and Buffy White, dated May 21 2019~~

*31.1	Certification pursuant to Rule 13a-14(a) and Rule 15d-14 (a) by Kevin C. Clark, ~~President,~~Co-Founder , Chief Executive Officer, Director (Principal Executive Officer)

*31.2		Certification pursuant to Rule 13a-14(a) and Rule 15d-14 (a) by William J. Burns, EVP & Chief Financial Officer (Principal Accounting and Financial Officer)

**32.1		Certification pursuant to 18 U.S.C. Section 1350 by Kevin C. Clark, ~~President,~~Co-Founder, Chief Executive Officer, Director (Principal Executive Officer)

**32.2		Certification pursuant to 18 U.S.C. Section 1350 by William J. Burns, EVP & Chief Financial Officer (Principal Accounting and Financial Officer)

**101.INS		XBRL Instance Document

**101.SCH		XBRL Taxonomy Extension Schema Document

**101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

**101.LAB		XBRL Taxonomy Extension Label Linkbase Document

**101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

**101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

#104		~~Represents a management contract or compensatory plan or arrangement~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*		~~Filed herewith~~

*		Filed herewith

**		Furnished herewith


			CROSS COUNTRY HEALTHCARE, INC.

Date: May 7, 2020			~~CROSS COUNTRY HEALTHCARE, INC.~~
By:
~~Date: November 5, 2019~~	~~By:~~	/s/ William J. Burns
				William J. Burns Executive Vice President & Chief Financial Officer (Principal Accounting and Financial Officer)