EXHIBIT 99.1
Medical Staffing Network Holdings Announces Fourth Quarter
and Year-End 2006 Operating Results
170 Basis Point Improvement In Gross Profit Percentage Over Prior
Year Quarter - Expecting Continued Improvement In Profitability In 2007
BOCA RATON, Fla.--(BUSINESS WIRE)--March 5, 2007--Medical Staffing
Network Holdings, Inc. (NYSE: MRN), a leading healthcare staffing
company and the largest provider of per diem nurse staffing services
in the nation, today reported revenues of $99.5 million for the fourth
quarter of 2006, an increase of 4.1% over third quarter 2006 revenues
of $95.6 million and 1.9% from fourth quarter 2005 revenues of $97.7
million. The Company's fourth quarter of 2006 contains 14 weeks while
the third quarter of 2006 and the fourth quarter of 2005 contained 13
weeks. Net loss for the fourth quarter of 2006 was $24.8 million, or
$0.82 per diluted share. The Company's 2006 fourth quarter results
were negatively impacted by a pretax noncash goodwill impairment
charge of $28.6 million, which was determined after the Company
completed its annual impairment testing in the fourth quarter, as well
as an after tax noncash valuation allowance charge of $7.4 million
against the Company's net deferred tax assets. Excluding the effects
of the additional week in the fourth quarter, the noncash goodwill
impairment charge, outsourcing implementation costs, the loss on the
early extinguishment of debt and the effects of the valuation
allowance, the Company would have had net income of approximately $0.8
million, or $0.03 per diluted share, for the three months ended
December 31, 2006, as compared with a net loss of $0.3 million, or
$0.01 per diluted share, for the fourth quarter of 2005.
Gross profit was $23.5 million for the fourth quarter of 2006, an
increase of 7.9% from the third quarter of 2006 gross profit of $21.7
million and 9.5% from the fourth quarter of 2005 gross profit of $21.4
million. Excluding the 14th week, gross profit would have been an
improvement on both a sequential and prior year quarter comparative
basis. Gross margin for the fourth quarter of 2006 was 23.6%, an
increase from the gross margin of 22.7% for the third quarter of 2006
and 21.9% for the fourth quarter of 2005. The 170 basis point increase
from the prior year quarter was primarily due to an increase in the
bill-to-pay spread.
Commenting on the fourth quarter's results, Robert J. Adamson,
chairman and chief executive officer, stated, "Our gross margins are
up 170 basis points over the prior year quarter and 90 basis points
sequentially, which should yield significant improvement in
profitability in the coming year. We are very pleased with the
improvement in profitability that we achieved in 2006. Except for
certain charges recorded in the fourth quarter, primarily noncash in
nature, the Company's operating results for the last three quarters of
2006 were the best they have been in nearly three years. Our adjusted
operating income in 2006 more than tripled that of the prior year."
Adamson continued, "We believe that the gains in profitability
that we achieved in 2006, together with a slightly more favorable
pricing environment, will enable us to continue to improve
profitability in 2007."
Selling, general and administrative expenses were $20.6 million,
or 20.7% of revenues, in the fourth quarter of 2006 as compared with
$18.4 million, or 19.2% of revenues, in the third quarter of 2006 and
$20.1 million, or 20.6% of revenues, for the same period of the prior
year. Selling, general and administrative expenses would have been
approximately $19.1 million excluding the 14th week in the fourth
quarter of 2006 and the outsourcing implementation costs. The increase
from the third quarter was primarily attributable to the Company
reinvesting in various organic growth initiatives. The decrease from
the prior year quarter was primarily due to cost reduction measures
and the closure of underperforming branches in the first quarter 2006
restructuring initiative, partially offset by the aforementioned third
quarter reinvestment.
Revenues were $385.5 million for the year ended December 31, 2006
(53 weeks), a decrease of 4.2% from revenues of $402.5 million for the
year ended December 25, 2005 (52 weeks). Excluding the 53rd week, 2006
revenues would have been approximately $378.6 million, a decrease of
6.0% from 2005. Net loss for the year ended December 31, 2006, was
$27.0 million, or $0.89 per share, compared with a net loss of $0.8
million, or $0.03 per share, for the prior year. The net loss for the
year ended December 31, 2006, is inclusive of a pretax charge of $3.1
million associated with the first quarter 2006 restructuring
initiative, noncash pretax charges of $31.8 million (of which $3.2
million was associated with the impairment of goodwill for the
locations closed in the first quarter 2006 restructuring initiative
and $28.6 million was related to the annual goodwill impairment test
performed during the fourth quarter), as well as an after tax noncash
valuation allowance charge of $7.4 million against the Company's net
deferred tax assets. Excluding the effects of the additional week in
2006, the restructuring charge, the noncash goodwill impairment
charges, outsourcing implementation costs, the loss on the early
extinguishment of debt and the effects of the valuation allowance, the
Company would have had net income of approximately $2.4 million, or
$0.08 per diluted share for the year ended December 31, 2006.
Excluding other charges associated with the expense of an acquisition
that was not completed, the Company would have had a net loss of
approximately $0.5 million, or $0.02 per diluted share, for the year
ended December 25, 2005.
Gross profit was $86.1 million for the year ended December 31,
2006, a decrease of 2.4% from the gross profit of $88.2 million for
the prior year. Excluding the 53rd week, gross profit would have been
$84.4 million, a 4.3% decrease from the prior year. Gross margin for
the year ended December 31, 2006, was 22.3%, as compared with 21.9%
for the prior year. The increase in bill-to-pay spread was partially
offset by higher benefit, travel and housing costs.
Selling, general and administrative expenses were $75.6 million,
or 19.6% of revenues, for the year ended December 31, 2006, as
compared with $81.1 million, or 20.1% of revenues, for the prior year.
Selling, general and administrative expenses would have been
approximately $74.1 million excluding the 53rd week of 2006 and the
outsourcing implementation costs. The decrease was primarily due to
cost reduction measures and the closure of underperforming branches in
the first quarter 2006 restructuring initiative.
Conference Call
The Company's management will host a conference call and webcast
to discuss the earnings release at 11:00 a.m. Eastern time on Tuesday,
March 6, 2007. A live webcast, as well as a 30-day replay, of the
conference call will be available online at the Company's website at
www.msnhealth.com or at www.earnings.com.
Company Summary
Medical Staffing Network Holdings, Inc. is the largest provider of
per diem nurse staffing services in the United States. The Company
also provides travel nurse staffing services and is a leading provider
of allied health professionals, including radiology specialists,
diagnostic imaging technicians and clinical laboratory technicians.
This release contains statements that are forward-looking in
nature. Statements that are predictive in nature, that depend upon or
refer to future events or conditions or that include words such as
"expects," "anticipates," "intends," "plans," "believes," "estimates,"
and similar expressions are 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
the following: our ability to increase revenues or market share, our
ability to continue to generate significant amounts of cash flow from
operations, our ability to sustain the improved self insurance claims
experience, our ability to attract and retain qualified nurses and
other healthcare personnel, the overall level of demand for services
provided by temporary nurses, our ability to enter into contracts with
hospital and healthcare facility clients on terms attractive to us,
our ability to maintain the improvement in the spread between bill and
pay rates, our ability to maintain the reduction in the cost of
capital resulting from the amended credit facility, our ability to
obtain additional financing in future periods, the willingness of
hospital and healthcare facility clients to utilize temporary
healthcare staffing services, the general level of patient occupancy
at our hospital and healthcare facility clients, the functioning of
our information systems, the effect of existing or future government
regulation and federal and state legislative and enforcement
initiatives on our business including JCAHO accreditation, our
clients' ability to pay us for our services, our ability to
successfully implement our acquisition and integration strategies, the
effect of liabilities and other claims asserted against us, the effect
of competition in the markets we serve and our ability to carry out
our business strategy. Additional information concerning these and
other important factors can be found within our filings with the
Securities and Exchange Commission. Statements in this release should
be evaluated in light of these important factors. Although we believe
that these statements are based upon reasonable assumptions, we cannot
guarantee future results. Given these uncertainties, the
forward-looking statements discussed in this press release might not
occur.
MEDICAL STAFFING NETWORK HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(unaudited; in thousands, except per share data)
Three Months Ended Year Ended
------------------ -------------------
Dec. 31, Dec. 25, Dec. 31, Dec. 25,
2006 2005 2006 2005
--------- -------- --------- ---------
Service revenues $ 99,527 $97,651 $385,450 $402,507
Cost of services rendered 76,065 76,225 299,374 314,341
--------- -------- --------- ---------
Gross profit 23,462 21,426 86,076 88,166
--------- -------- --------- ---------
Operating expenses:
Selling, general and
administrative 20,595 20,141 75,619 81,087
Depreciation and amortization 931 1,177 3,913 5,259
Impairment of goodwill 28,570 - 31,753 -
Restructuring and other
charges - - 3,089 512
--------- -------- --------- ---------
Total operating expenses 50,096 21,318 114,374 86,858
--------- -------- --------- ---------
Income (loss) from operations (26,634) 108 (28,298) 1,308
Loss on early extinguishment of
debt 79 - 79 -
Interest expense, net 460 662 2,446 2,767
--------- -------- --------- ---------
Loss before benefit from income
taxes (27,173) (554) (30,823) (1,459)
Benefit from income taxes (2,366) (262) (3,826) (660)
--------- -------- --------- ---------
Net loss $(24,807) $ (292) $(26,997) $ (799)
========= ======== ========= =========
Basic and diluted net loss per
share $ (0.82) $ (0.01) $ (0.89) $ (0.03)
========= ======== ========= =========
Weighted average common shares
outstanding:
Basic and diluted 30,257 30,235 30,249 30,233
Operating Statistics:
Hours worked 2,434 2,375 9,450 9,794
MEDICAL STAFFING NETWORK HOLDINGS, INC.
Reconciliation to Adjusted Net Income (Loss)
(unaudited; in thousands, except per share data)
Three Months Ended Year Ended
------------------ ------------------
Dec. 31, Dec. 25, Dec. 31, Dec. 25,
2006 2005 2006 2005
--------- -------- --------- --------
Income (loss) from operations, as
reported (1) (26,634) 108 (28,298) 1,308
Excluding effects of additional
week:
Revenue (2) (6,899) - (6,899) -
Cost of services rendered (3) 5,236 - 5,236 -
Selling, general and
administrative (4) 1,066 - 1,066 -
Add back goodwill impairment
charge 28,570 - 31,753 -
Add back restructuring and other
charges - - 3,089 512
Add back outsourcing
implementation costs (5) 445 - 445 -
--------- -------- --------- --------
Adjusted income from operations
(1) 1,784 108 6,392 1,820
Interest expense, net (460) (662) (2,446) (2,767)
Excluding effect of additional
week - interest (6) 26 - 26 -
--------- -------- --------- --------
Adjusted income (loss) before
income taxes (1) 1,350 (554) 3,972 (947)
Adjusted provision for (benefit
from) income taxes (7) 540 (262) 1,589 (428)
--------- -------- --------- --------
Adjusted net income (loss) (1) $ 810 $ (292) $ 2,383 $ (519)
========= ======== ========= ========
Basic adjusted net income (loss)
per share (1) $ 0.03 $ (0.01) $ 0.08 $ (0.02)
========= ======== ========= ========
Diluted adjusted net income
(loss) per share (1) $ 0.03 $ (0.01) $ 0.08 $ (0.02)
========= ======== ========= ========
Weighted average common shares
outstanding:
Basic 30,257 30,235 30,249 30,233
Diluted 30,323 30,235 30,300 30,233
Operating Statistics:
Hours worked (8) 2,264 2,375 9,280 9,794
(1) These measurements are being provided as management believes they
are a useful supplement to actual operating performance and for
comparison to prior year periods. These measurements are not intended
to represent actual operating results and they should not be
considered in isolation or as a substitute for measures of
performance in accordance with United States generally accepted
accounting principles (GAAP). These measurements have certain
material limitations as compared to the use of the most directly
comparable GAAP financial measures. We compensate for these
limitations by using these measurements as only one of several
comparative tools, together with GAAP measurements, to assist in the
evaluation of our operating performance and comparisons to prior year
periods.
(2) This amount excludes the impact of the additional week in the
three months and year ended December 31, 2006. Revenues of $99.5
million and $385.5 million for the three months and year ended
December 31, 2006 would have decreased by approximately $6.9 million
to approximately $92.6 million and approximately $378.6 million,
respectively.
(3) This amount excludes the impact of the additional week in the
three months and year ended December 31, 2006. Cost of services
rendered of $76.1 million and $299.4 million for the three months and
year ended December 31, 2006 would have decreased by approximately
$5.2 million to approximately $70.8 million and approximately $294.1
million, respectively.
(4) This amount excludes the impact of the additional week on variable
incremental expenses in the three months and year ended December 31,
2006. Selling, general and administrative expenses of $20.6 million
and $75.6 million for the three months and year ended December 31,
2006 would have decreased by approximately $1.1 million. Combined
with the add back of outsourcing implementation costs of
approximately $0.4 million (see note 5 below), selling, general and
administrative expenses for the three months and year ended December
31, 2006 would have been approximately $19.1 million and
approximately $74.1 million, respectively.
(5) This amount relates to implementation costs pursuant to
outsourcing of various corporate administrative processes.
(6) This amount excludes the impact of the additional week in the
three months and year ended December 31, 2006. Interest expense, net
of $0.5 million and $2.4 million for the three months and year ended
December 31, 2006 would have decreased by approximately $26,000 to
approximately $0.4 million and approximately $2.4 million,
respectively.
(7) The provision for income taxes for the three months and year ended
December 31, 2006 are being calculated assuming there was no need in
establishing a valuation allowance against the Company's net current
and noncurrent deferred tax assets. As such, an effective income tax
rate of 40% was used in calculating the adjusted net income for both
the three months and year ended December 31, 2006. In calculating the
provision for (benefit from) income taxes for the adjusted net income
(loss) for the three months and year ended December 25, 2005, the
Company used the same actual effective rate used during each period
to calculate the adjusted provision for (benefit from) income taxes.
(8) The amounts for three months and year ended December 31, 2006 were
reduced by approximately 0.2 million hours to exclude the additional
week during both periods.
MEDICAL STAFFING NETWORK HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(unaudited; in thousands)
Dec. 31, Dec. 25,
2006 2005
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 527 $ 42
Accounts receivable, net 56,717 55,863
Other current assets 5,047 6,542
--------- ---------
Total current assets 62,291 62,447
Furniture and equipment, net 7,691 8,427
Goodwill 99,097 130,589
Other assets, net 2,072 3,453
--------- ---------
Total assets $171,151 $204,916
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 18,209 $ 14,416
Accrued payroll and related liabilities 7,863 6,157
--------- ---------
Total current liabilities 26,072 20,573
Long-term debt 17,036 23,991
Deferred income taxes 4,745 9,790
Other long-term obligations 971 1,314
--------- ---------
Total liabilities 48,824 55,668
Commitments and contingencies
Total stockholders' equity 122,327 149,248
--------- ---------
Total liabilities and stockholders' equity $171,151 $204,916
========= =========
CONTACT: Medical Staffing Network Holdings, Inc.
Jeff Yesner, (561) 322-1303
Vice President, Finance