Welcome to the Cross Country Healthcare second quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. (Operator Instructions) Today’s conference is being recorded and if you have any objections, you may disconnect at this time. I would now like to turn the meeting over to Mr. Howard Goldman, Director of Investor and Corporate Relations. Sir, you may begin.

Good morning and thank you for listening to our conference call, which is also being webcast and for your interest in the company. With me today are Joe Boshart, our President and Chief Executive Officer and Emil Hensel, our Chief Financial Officer. On this call we will review our second quarter 2010 results, for which we distributed our earnings press release after the close of business yesterday. If you do not have a copy, it is available on our website at www.crosscountryhealthcare.com. Replay information for this call is also provided in the press release. Before we begin, I’d first like to remind everyone that this discussion contains forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as expects, anticipates, 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 were set forth under the forward-looking statement section of our press release for the second quarter of 2010, as well as under the caption "Risk Factors" in our 10-K for the year ended December 31, 2009 and our other Securities and Exchange Commission filings made during 2010. Although we believe that these statements are based upon reasonable assumptions, we cannot guarantee future results. Given these uncertainties, the forward-looking statements discussed on this teleconference might not occur. Cross Country Healthcare does not have a policy of updating or revising forward-looking statements and thus it should not be assumed that our silence over time means that actual events are occurring as expressed or implied in such forward-looking statements. And now, I will turn the call over to Joe.

Thank you, Howard. And thank to everyone listening in this morning for your interest in Cross Country Healthcare. As reported in our press release issued last evening, our revenue for the second quarter of 2010 was $118 million, down 21% from a year ago. Net income was $1.2 million, down 49% from the year-ago quarter. EPS was $0.04 per diluted share versus $0.07 in the year-ago quarter and cash flow for the second quarter was $13 million. On a sequential basis, revenue was down 3% while net income was up 4% from the first quarter. As I stated on our last earnings call in May, I believe we have weathered the worst of the downturn in our operating environment. While demand for our Nurse and Allied and Physician staffing services is well off levels of two to three years ago, we expect our sequential performance to improve beginning in September and to continue into the fourth quarter. We based these expectations on improving trends in our Nurse and Allied Staffing business which represented 51% of total revenue in the second quarter. In this segment, we have seen significant improvement in the demand in most of the country over the past two months, which is very encouraging to us. More importantly, we continue to add attractive new hospital systems to our roster of vendor management clients, which should allow us to take an even larger size of an increasing market opportunity as we move through the second half of this year. In our physician staffing business, revenue was up slightly on a sequential basis from the first quarter, essentially mirroring the normal seasonal pattern of this business. As such, we cannot yet ascribe revenue momentum in the segment to improvement in underlying demand trends. However the typical fourth quarter seasonal drop…

Thank you, Joe and good morning everyone. First, I will go over the results for the second quarter and then review our revenue and earnings guidance for the third quarter that we provided in the press release issued last evening. Revenue in the second quarter was $118 million, down 21% versus the prior year and 3% sequentially. The revenue decline reflects primarily the soft demand in our Nurse and Physician staffing businesses earlier this year, which we believe was caused by the weak national labor market. More recently we have seen an improvement in demand for travel nursing services which should allow us to generate sequential revenue growth in the fourth quarter based on normal lags in this business. Our gross profit margin was 28.6%, up 200 basis points over the prior year quarter, and 90 basis points sequentially. The margin improvement was due to a change in business mix among segments, coupled with improvements in the bill-pay spread as well as lower housing and professional liability expenses. SG&A expenses in the second quarter were down 14% from the prior year, reflecting our actions taken to reduce overhead expenses during the past year. On a sequential basis, SG&A expenses were down 2% reflecting lower payroll taxes. Our SG&A expenses in the second quarter included approximately $700,000 in equity-based compensation expenses as compared to approximately $400,000 in the prior year quarter. During the second quarter, we reversed approximately $200,00 of bad debt expense reflecting an improvement in the quality of our receivables. Net interest expense was $1.1 million, down 26% from the prior year quarter reflecting the continued delevering of our balance sheet made possible by our strong operating cash flow. As Joe indicated, during the second quarter we amended and extended our revolving credit facility to be co-terminus with our…

(Operator Instructions) Our first question comes from Paul Condra with BMO Capital Markets. Paul Condra – BMO Capital Markets: I just want to talk about some of the operating margins that you’re seeing in the Nurse and Allied and also the Physician Staffing segments. I wonder if you could just give a little more detail around how sustainable you think those levels are looking at the rest of the year for the contribution margin?

Let me focus first on the gross profit margins. We had a 200 basis points improvement year-over-year and about 90 basis points improvement on a sequential basis. Some of the year-over-year improvement can be attributed to mix. I would estimate roughly 80 basis points out of the 200 has to do with changes in segment mix as our higher gross profit margin segments had a higher percentage of the overall revenue contribution. The remainder is probably evenly split between or roughly evenly split between three other factors; improvement in our bill pay spread in our Nurse and Allied segment is one of those factors, lower housing expenses also in the Nurse and Allied segment and lower professional liability expenses in our Physician segment. These factors are sustainable in my opinion although there was an element of onetime accrual adjustment in the professional liability having to do with better than expected loss development and lower risk specialty mix in our Physician Staffing business. And overlaid on top of all of this is the lower SG&A burden that all of our operating units are carrying as a result of the steps we have taken during the last year. If you look at it from a sequential standpoint, the gross profit improvement, a large part of it has to do with the professional liability accrual adjustment in our Physician Staffing segment, paid old taxes in the second quarter. Paul Condra – BMO Capital Markets: You are talking about some increases in volume going into the third quarter. How does that impact the SG&A expenses and –

So we expect our SG&A expenses and this one could be relatively flat on a sequential basis. So in this short term we don’t expect a significant impact on SG&A.

And just to clarify, we expect volume to be really increasing beginning in September. So towards the end of the third quarter by carrying through into fourth quarter and that’s really a function of the book to bill information that Emil provided in his prepared comments. We had pretty weak production, particularly in the first quarter, it was just okay in the second quarter but below a 100%, which is needed to sustain the level of volume that we have. So we had weakness heading into the third quarter but things have been pretty strong since June. Therefore we expect volumes to pick up in September but really that would begin to show up more materially in the fourth quarter reflecting the historical, the last couple of months of bookings, but also reflecting some pretty attractive new VMS clients that we are bringing on in the fourth quarter. Paul Condra – BMO Capital Markets: Are you seeing that more in the Travel or on the per diem side, if you could make any comments there?

It is, Travel is by far and away our biggest subset within the Nurse and Allied segment but it will affect both, but the greatest absolute benefit will be felt in our Travel Nursing business.

Our next question is from Chris Rigg with SFG. Chris Rigg – SFG: I was just wondering if you could give us some color about the structure of the staffing contracts particularly in the travel nurse staffing business. Has anything changed, sort of the length of time or the lead time to booking? Any color there would be great.

As far as I am concerned at the onset of the decline in the business, we did see a modest reduction in the length of contracts if anything that has begun to go the other way, we are seeing longer contracts more typically. And I would just as the number of open orders has increased over the last couple of months, and it’s been a significant increase on the order of, let’s 60% from early June to where we are today, so a noticeable increase. The quality of the orders appears to be improving as well. So it definitely calls for some encouragement for us. Unfortunately it doesn’t really show up in our third quarter guidance but we do have a high level of confidence that our fourth quarter is going to look better and conceivably can be, show some year-over-year gains for the first time in a number of quarters. Chris Rigg – SFG: And to your point there, so you are expecting or you feel reasonably confident that you could see year-to-year revenue growth in Q4?

It’s not guaranteed but it is certainly a possibility. Chris Rigg – SFG: Okay. And you would characterize that, at this point, it’s much more than just the normal seasonal uptick from Q3 to Q4, there’s truly a rebound in demand?

Yes, when you talk about seasonal demand in the Nursing business, you are really talking about the key Sunbelt States of Florida and Arizona and that is not what is driving the increase, it’s really national, and regions that historically are important to us, we are seeing improvement in the New England, in the Northwest; California, which had been weakening is recovering. So we are encouraged, I mean we – Arizona, which had been approaching zero, a key state for us historically, typically one of top five is almost three times the level of acquisition today than it was a year ago and in the heat of summer and particularly in the Phoenix market. So that’s encouraging. So we think there are a lot of good things happening and it is widely geographically dispersed. A year ago, we had a similar uptick and we talked about it, I believe in our third quarter call last year, in hindsight and the benefit of more information, that uptick appeared to be largely correlated to the number of or the percent of physician business with H1N1 indications, if you overlay the increase in our orders to the increase in physician visits with H1N1 indications, and then the tailoff towards December, it was almost the same chart. So on hindsight, that was largely a function of H1N1. Today there is really nothing you can correlate it to that, nothing in the news that would suggest what it is, we hear from the hospital and public companies and our private clients that surgeries continue to be weak. So we think there is some level of fatigue in nurses that have been working more hours than they were accustomed to. I think that’s beginning to show up in the numbers. The labor markets have been positive but not strongly positive but you are not seeing job losses, you are seeing job gains typically year-over-year. So we are encouraged that this is real and likely to be sustainable.

And just to add to that, when we look at our demand, it’s not only the absolute number of positions that has been increasing, but also the number of active accounts has been increasing as well. So it’s not that our needs are coming from a concentrated subset of hospitals. The breadth of the demand is also broadening.

Our next question is from Tobey Sommer with SunTrust Robinson Humphrey. Tobey Sommer – SunTrust Robinson Humphrey: A quick follow-up to the last question. You talked about a 5% to 10% potential sequential pick-up if the bookings trends remain in the Travel segment in the fourth quarter. What would normal seasonality to the extent we can remember what that’s like, do sequentially from 3Q to 4Q in the Travel business?

Really the seasonal effect is primarily felt in the second half of December, typically the fourth quarter, the first couple of months in the fourth quarter remained quite strong and then it drops of very steeply around the middle of December right before Christmas and New Years. Generally we have about 20% drop in the second half of December.

I think just to add to that, seasonality, a normal seasonality would show up in the third quarter. We would typically see a slight increase in activity in the third quarter. Our guidance does not suggest that is going to happen this year. And I would put the normal seasonal increase in the third to the fourth quarter in a low single digit range. Tobey Sommer – SunTrust Robinson Humphrey: Okay. Just to clarify, if you were going to see a seasonal uptick in third quarter revenue, you would have already seen it in the bookings, correct?

Correct. Tobey Sommer – SunTrust Robinson Humphrey: Okay. I had a question about M&A. We’ve got what once was a significant industry player and still is out there in bankruptcy and we’ve seen some activity in the space recently. Does the change in your available liquidity suggest anything about your appetite to participate?

I think in our prepared remarks, we believe the condition of the market increases the likelihood of the potential for acquisitions. I would just caveat that by saying we have historically maintained certain disciplines, so that – certain return criteria that we look for, and we will stick to those. The fact that industry recently had a fairly significant consolidation event, we think will be good for us. In the absence of us doing anything, we think that’s actually a benefit to us as it eliminates our competitor, a key competitor in many RFP processes by large systems that are coming out, looking a vendor manager someone to manage that, a temporary clinical staffing activity. We don’t feel we have to do something and we feel we are in a good position right now. VMS is a key trend within our business, but we have had a lot of success in winning VMS contracts. We have today a breadth of offerings that covers Travel Nurse, Travel Allied, per diem nurse, and we have a pretty robust platform to manage VMS contracts. So we don’t feel like we have to do anything strategically to improve our position. So I would describe our interest as being opportunistic. If we believe we can add value to our shareholders in the short and long term, we are going to do that and we have the capacity to do it but if we are unable to find an attractive acquisition at the right price, we are prepared to grow the business organically as we go forward. Tobey Sommer – SunTrust Robinson Humphrey: What is the total available liquidity now, given the changes in some of your capacity? And then, Joe, could you comment about the number of recruiters you have now and how you view the available capacity in those recruiters to serve a larger revenue base?

Let me address the liquidity question first. The current revolver capacity is $50 million, we have about another $10 million or so in cash and short-term investments. Now, offsetting some of that is about $12.5 million of letters of credit backed up by our revolver. Having said all of this, for a small acquisition, we obviously have the capacity to do it out of our revolver but for a significant acquisition we would expect to go back to our banking syndicate and for a new term debt. Our leverage ratio is 2 to 1, so we have ample capacity to increase our senior debt.

As to the second part of your question, our recruiter count is down about 40% from the peak. By comparison, our volume is down about 60% from the peak, the recent peak. So I believe we have very substantial capacity to add without adding recruiters and it would be our intention not to add significantly to our recruiter count. And where we have lost recruiters been typically in those – the least tenured just couldn’t earn an adequate living where we are highly commissioned and the way we compensate our recruiters. So our best people, our most tenured people with the most capacity are the ones we have and I think we have enormous capacity. If we have a 20% improvement in volume, I don’t think we would add a recruiter to accommodate that. As we go forward and if the industry trends look sustainable, look attractive, then we will start thinking about adding recruiters but right now I think we are very comfortable with who we have and the number we have.

And the next question is from Gary Taylor with Citigroup. Gary Taylor – Citigroup: Just a couple quick ones. The lower professional liability expense, I guess the positive development, how large was that?

Well, it was about 50 basis points of gross profit margin improvement can be attributed to that. It came really entirely from the physician staffing segment where professional liability expenses were trending down to a change in mix amount specialties and also geographic areas as well as some favorable loss development.

Just as an example, anesthesiologists are among the most expensive to ensure, that’s what we see in the greatest decline. For example, our anesthesiology historically was our number one specialty, today it’s not in the top two. The silver lining is our professional liability goes down commensurately. Gary Taylor – Citigroup: I certainly understand the mix trend and what the right run rate expense should be there. I was just trying to understand if there was kind of an extra benefit in the quarter that maybe wasn’t go-forward. But it sounds like you’re primarily saying because of the change in mix, this will continue to be lower than it has been historically.

Certainly we will expect that for the remainder for this year. Gary Taylor – Citigroup: Just coming back to M&A a little bit, and I know you’ve made a couple comments on it already. I think kind of my significant question, particularly seeing how the market has responded to the other transaction we saw is, what are your thoughts around using your stock as currency with the stock price down, roughly cut in half from where it was two years ago before we started into this downturn?

Historically we haven’t used our stock in transactions. Having said that, in this environment where – we have had a couple of head fakes, I don’t want to say that what we are experiencing now is a head fake, but I wouldn’t want bet our shareholders that we have got to figure it out and it’s a trend line up from here. So I would be more inclined to be conservative in the structuring of a transaction. And I think every transaction is different and we would just want to make sure that we are not adding too much leverage to the business, not counting on too many synergies to make an acquisition work and one way to lower the risk profile is to use equity. So I don’t want to tell you that we would never use it but it’s not – hasn’t been our historical MO to use stock to grow the business through acquisition. Does that answer the question? Gary Taylor – Citigroup: Yes, it does pretty well. I guess maybe another slightly different angle is people that are willing to sell their businesses in this environment, if they believe there’s a cyclical upturn out there, somewhere might be more attracted to having stock that would benefit from that cyclical upturn versus having cash, which may not. So do you sense any change or preference in appetite among sellers who presumably are selling businesses that have probably been pretty depressed over the last couple of years as well?

Yes, I think every deal is different. I think it depends on who the sellers are and what their objectives were and are going forward. Sorry, I would hate to paint myself into a corner as far as deal structuring. I guess what we would commit to is we are going to do our darndest make sure that it’s a good deal for our shareholders, that we are maintaining a discipline and achieving the kind of return objectives that we have looked for historically.

At this time, there are no further questions.

Okay, thank you everyone listening again for your time and attention and we will look forward to updating you in November on our third quarter. Thanks very much.

Thank you for participating on today’s conference. The conference has concluded. You may disconnect at this time.