Thank you for standing by and welcome to the Cross Country Healthcare First Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Howard Goldman, Director of Investor and Corporate Relations. Thank you, 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 first quarter 2012 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, appears, 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 statements section of our press release for the first quarter of 2012 as well as under the caption Risk Factors in our 10-K for the year ended December 31, 2011 and our other SEC filings. 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 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. Also our remarks during this teleconference refer to non-GAAP financial measures. Such non-GAAP financial measures are provided as additional information and should not be considered substitutes for or superior to financial measures calculated in accordance with U.S. GAAP. More information related to these non-GAAP financial measures is contained in our press release. And now, I’ll turn the call over to Joe.

Thank you, Howard, and thank you to everyone listening in. As reported in our press release issued last evening, our revenue for the first quarter of 2012 was $127 million, up 4% from a year ago, and up 2% sequentially from the fourth quarter. We had a net loss in the first quarter of $584,000 or $0.02 per diluted share. This compares to net income of $0.01 per diluted share in a year ago quarter. Cash flow from operations for the first quarter was $1.4 million. The year-over-year revenue growth in our Nurse and Allied Staffing segment slowed to 4% in the first quarter. I believe that shift in momentum reflected a greater focus by hospitals on temporary nurse staffing usage during year-end budget discussions that along with seasonality and a weak flu season caused demand for contract nurses to decrease by more than one-third from mid-November to mid-February. Further exacerbating this was the loss of a large MSP account in September of 2011, just prior to the year-end contraction in demand. More recently, we’ve seen demand for our contract nurses increase by more than 30% from mid-February to the first week of May, although bookings have not yet caught up with this improvement in demand. Moreover this improvement does not include anticipated positions from one of the nation’s leading healthcare systems which has recently selected us as their MSP provider. To put this into perspective, the projected annual spend for nurse staffing by this new account represents approximately triple the revenue we derived from the MSP account lost last September. In addition to this notable win, we have several smaller MSP contracts we anticipate onboarding over the next several months. We expect all of this business to begin ramping up in the third quarter and to be fully in…

Thank you, Joe, and good morning, everyone. First, I will go over the results for the first quarter and then review our revenue and earnings guidance for the second quarter that we provided in the press release issued last evening. Revenue in the first quarter was $127 million, up 4% versus the prior year and 2% sequentially. Our Nurse and Allied Staffing segment revenue grew by 4% year-over-year, partly as a result of one more billing day. Our Clinical Trial Services and retained search businesses also contributed to the year-over-year revenue growth. The sequential revenue growth was driven by the improved performance of our physician staffing, Clinical Trial Services and retained service businesses, partly offset by a 1% revenue decline in our Nurse and Allied Staffing segment attributable to one less billing day than in the prior quarter. Our gross profit margin was 26.5%, down 50 basis points from the prior year and 120 basis points sequentially. The year-over-year margin decrease was due to a combination of higher payroll taxes and higher compensation expenses partially offset by a greater contribution from our retained search business, which has the highest gross profit margin among all of our businesses. The sequential margin decrease is due primarily to the reset of payroll taxes and higher professional liability expenses stemming from a favorable accrual adjustment in the fourth quarter of 2011. SG&A for the quarter was $31.1 million, which includes approximately $400,000 of sales and other non-income tax adjustments relating to prior year amount, as well as approximately $600,000 in equity-based compensation expenses. Excluding the non-income tax adjustments relating to prior periods, the SG&A expense as a percentage of revenue was up 60 basis points, reflecting investments we have made during 2011 in our MSP delivery infrastructure. On a sequential basis, SG&A as a…

[Operator Instructions] Our first question comes from Tobey Sommer, SunTrust.

I had a question for you about the MSP business. The contracts that you just signed up that will be ramping, what kind of either volume of nurses or value could that have when it’s fully implemented?

Well, I’m not sure we want to give that level of detail. I would just put it in some perspective. It’s certainly one of the 2 largest we’ve ever won and is likely to have more immediate impact than the prior largest that we won. Order of magnitude, somewhere in the 10% of current volume when fully implemented and possibly more.

Okay. And then, could you comment about what the trends have been and your expectations are for MSP pricing kind of this year and maybe over the longer term?

If you look at our bill-pay spreads, Tobey, they’re increasing largely because bill rates are increasing. We increased roughly 3% year-over-year in the first quarter. Our expectation this year is really not the 3%, it’s more in the 1% to 2% range. So that was a better than expected outcome in the first quarter, some of which may be the geographic mix of our business. So at this point, I’m not expecting MSP to weigh on either pricing or bill-pay spreads.

Okay. And then last question for me, I’ll get back in the queue. Could you give a little bit more color as to what you think is driving the expected improvement that you commented on vis-à-vis the physician’s business?

Yes, I just think the physician business has been under pressure from the change behavior of doctors in particular who have been much more willing to become employees of healthcare systems. When you look at the universal physicians in the country, the percent employee by healthcare systems -- hospitals and healthcare systems has gone from roughly a quarter to more than a half in roughly 5 years. So that’s an extraordinary change, I guess, in the psychology of physicians. So since healthcare systems make up more than half of the revenue we derive in our physician business, it has been a headwind to that segment. Having said that, I think the dust is starting to settle. And I don’t think fundamentally whether the doctor is self employed or employed by a healthcare system is still going to need to take vacations, they’re still going to have leaves and that’s really what drives that business. So as long as we have less doctors knocking on the door of healthcare systems looking for employment, we would expect the business to return to a more normal trend line of growth, which historically has been 10%-plus. We’re not expecting that in 2012 but we do expect the business to grow for the first time in several years. Tobey, you there?

Our next question comes from Jeff Silber from BMO Capital Markets.

Just to delve a little bit further into the first quarter revenue performance, you mentioned a number of issues, I was wondering if we could possibly try to quantify or rank the different issues in terms of their impact on the quarter?

It is difficult to do, Jeff. My own belief is that budget pressures were the most significant impact on that, roughly more than 1/3 pull back in orders we saw from November to mid-February. I talked about the loss of a fairly significant MSP account that was on the order of roughly 100 FTEs. But as it relates to the positions, excuse me, physicians, there were no physicians from that account in November and therefore it didn’t affect the decline. So to me it was an underlying pullback in demand driven by hospitals more focused because of the budget, the fact that the budget process highlights the increased usage of temporary nurse and allied labor. It’s not unprecedented that they would go back to HR and say, hey that’s -- that’s more than we expected. You’re not doing what you’re supposed to be doing, why aren’t you recruiting more effectively? So there is a little bit of a snap back as the HR responds or the nurse staffing responds. So we’re going to run some more carrier builder ads, we’re going to run some ads in nursing spectrum. When those ads come back 4 to 6 weeks later and not delivering the desired results, eventually our phone rings to a greater extent again. And if you just look at the number of accounts, the open orders, they really followed a pretty significant pattern from, again, seasonality contributing maybe 20% to 30% of that. From November to February, there is always a seasonal decline in orders as the snowbird states Arizona and Florida start to get through their winter season. They’re not looking to bring on more temporary labor. But to me, by far and away, the biggest impact was the budgetary impact. Census was also quoted by our clients. To be honest, I know the flu season was particularly weak, and we did hear from clients that census was particularly weak around year-end. In my experience, a lot of the time census, when you hear census it’s really budget. So it’s difficult to kind of parse those 2. So if I had to rank them, budget far and away, the seasonality and then census.

Okay, great. That’s helpful, I appreciate that. In your comments talking about the Nurse and Allied segment, I think you had mentioned that the hours per FTE went down. Can we just get a little bit more color on that?

Yes, to us that is generally an indication that nurses are called off, our clients have the option of calling our nurses off a few shifts during their assignment. And when the census is weak, that’s to happen. So it’s kind of an indication, it would correlate with our assumption that the weak flu season was a contributing factor to the revenue performance in the Nurse and Allied segment.

Is that something you just started seeing this quarter? Forgive me, was this something you had seen last year as well?

Well, we were actually comparing it to last year. So when say that the hours per FTE decreased, they were compared to last year. Last year, we had the reverse, the hours were stronger than we expected.

Throughout most of 2011 or just the first quarter 2011?

Just the first quarter, it tends to follow a kind of a normal seasonal pattern during the year. Normally in the first quarter, you tend to see higher utilization in terms of hours per FTE and we did not see that this year.

Okay, great. And in terms of the gross margin, were there any unusual adjustments either positive or negative during the quarter?

Not on the gross margin line, the only thing noteworthy is that when you compare our gross margin sequentially versus Q4, the 2 things that you need to keep in mind that are significant, one is the impact of the reset of payroll taxes and the other one, a large favorable accrual adjustment for professional liability that we benefited in the fourth quarter of 2011. But other than those 2 factors, there was nothing unusual.

Okay. And you mentioned a new credit facility coming up this quarter, are there going to be any one-time charges associated with that?

We are likely to write off some unamortized loan fees. I anticipate that number to be in the $200,000 to $300,000 range. So it’s not a big number, and that is not included in our guidance.

Okay, great. And then just other guidance-related question, what should we be modeling for capital spending for the rest of the year?

We had spent only about a $0.5 million in the first quarter which is a little lower than what we expect on a run rate basis. I think for the year as a whole we still think we’re going to be in the $3 million to $4 million range, probably at a lower end of that range.

We did get another question coming from Tobey Sommer, SunTrust.

I was wondering if you could describe the trends you’re seeing in your housing cost for travelers and any kind of color you can give on the real estate market for rentals?

Actually we are -- when you’re looking at on book of business basis, our average housing costs is very stable, in fact may have been slightly down as a percentage of revenue, but I believe that is really a function of geographic mix, because when you look at it on a same-store basis, we do see pressure on our housing costs and typically mid to high single digit increases when an apartment has been used. So that is being matched to some extent by geographic mix.

Back to the physician staffing, do you think that that trend towards where hospitals have been lifting out physicians and hiring entire practices and groups that that has run its course or maybe some more color on what your expectations are for that trend would be useful?

Well, given the very steep slope of change, I would not expect the growth to continue at that same pace, but I’m also not prepared to say it, the trend is completed. Again, we’re really looking for is just kind of little more consistency and less of a chaotic environment. And I think that’s what we’re seeing.

Have you seen doctors that may have joined up with a hospital 2 or 3 years ago, now leaving those hospitals and going back into Locum Tenens? I’m just kind of curious because when they sold their practices perhaps, there was a term of commitment and perhaps some of those initial adopters are seeing those terms expire.

I’m not sure I can anecdotally extract that from our Locum’s business. Probably a better indicator would be our retained physician search placement business. And that business is showing much better trends than it did this time last year. I mean, the performance year-over-year was significantly favorable. So when I look at that, that suggests that there is something happening as it relates to turnover. And I guess we’re pretty well positioned on both the perm and locum side to benefit from a little higher levels of vacancy and turnover in the physician space.

Okay. Last question for me. Any significant opportunities in the governmental space, particularly VA that are of interest that you’re seeing on the horizon?

Government is a pretty important part of our business, and it has been very stable and we have a lot of optimism around that space. There is demand. There is opportunity, and we’re pretty well-positioned to take advantage of it.

And I show no further questions at this time.

Well, we appreciate everyone’s interest in the company and we look forward to updating you on our second quarter sometime in August. Take care.

That does conclude today’s conference. Thank you for participating. You may disconnect at this time.