Welcome to the Cross Country Healthcare Third Quarter 2013 Earnings Conference Call. All lines have been placed on a listen-only mode until the question-and-answer portion of today’s call. (Operator Instructions) Today’s call is being recorded. If you have any objections, you may disconnect. I would like to turn the meeting over to Mr. Emil Hensel, Chief Financial Officer of Cross Country Healthcare. 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 is Bill Grubbs, our Chief Executive Officer. On this call, we will review our third quarter 2013 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 of 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 third quarter of 2013, as well as under the caption, Risk Factors in our 10-K for the year ended December 31, 2012 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 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. Also, our remarks during this teleconference reference 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 US 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 Bill.

Okay, thank you, Emil and thank you to everyone who is listening and for your interest in Cross Country Healthcare. I will provide a review of the quarter, as well as an update on the strategic initiatives I discussed in August. Let me start with a quick overview. First, our pre-tax income from continuing operations was positive for the first time since the end of 2011 and although revenue was slightly below expectations this quarter, I am pleased with our financial discipline, pricing improvements, new business pipeline and increased profitability. Our strategic initiatives are on track and I expect these to positively impact our growth in 2014. As reported in our press release, our revenue for the third quarter was a $108 million, down 4% from the prior year with all of our business segments reflecting decreases. The revenue shortfall versus expectations was mostly driven by a softness in our Physician Staffing business. Income from continuing operations before income taxes was $800,000; income from continuing after taxes in the third quarter was $1.5 million or $0.05 per diluted share. Our third quarter adjusted EBITDA exceeded our expectations due to a combination of lower SG&A expenses, lower insurance costs resulting from favorable claims development. SG&A was down $1.3 million or 5% year-over-year and $1.1 million or 4% sequentially. We had previously announced the $4 million to $5 million cost-cutting plan that has mostly been implemented and we are starting to see the impact of these efforts in our numbers. We are reinvesting some of these savings into revenue-generating initiatives. We had another strong quarter of cash generation with $7.2 million of operating cash flow. In our Nurse and Allied Staffing business, year-over-year revenue was down 3% and flat sequentially. However, for the third quarter in a row, the actions of our…

Thank you, Bill. Let me first turn to the results for the third quarter. Revenue in the third quarter was $108 million, down 4% from the prior year and 2% sequentially. Revenue in the third quarter came in within our range of expectations in all of our business except for Physician Staffing, which saw a less robust demand environment in many of our specialties in part due to the increased willingness of physicians to accept permanent employment, thus decreasing the demand for locum tenens services. Our gross margins were 26.1%, up 160 basis points from the prior year and 100 basis points sequentially. The margin improvement was due to a combination of lower field insurance costs in our Staffing businesses and a continued expansion of the bill/pay spread in our Nurse and Allied staffing business segment. SG&A for the quarter was $25.5 million, down 5% year-over-year and 4% sequentially primarily due to lower compensation expenses, partly reflecting the impact of cost reduction measures, as well as lower health insurance costs. The SG&A expenses in the current quarter exclude approximately $100,000 in severance costs related to the restructuring program that we initiated last quarter. Equity-based compensation expense was $450,000 in the third quarter, down 26% from the prior year and 23% sequentially. Adjusted EBITDA from continuing operations as defined in our press release was $2.9 million representing a 2.7% margin. Interest expense of $190,000 was down 73% from the prior year, reflecting the repayment of our revolver balance from the proceeds of the sale of the clinical trial services business in February. Pre-tax income from continuing operations was approximately $800,000, as compared to a loss of $2 million in the prior year and $1.7 million loss in the prior quarter. Tax benefit on income from continuing from operations was $0.6 million…

(Operator Instructions) We have a question from Josh Vogel with Sidoti your line is open. Josh Vogel – Sidoti & Company: Thank you, good morning guys.

Hi, thanks. Josh Vogel – Sidoti & Company: I am not sure if this is difficult, but of the 160 basis point increase in gross margin year-over-year, is it possible you could parse up what came from the lower insurance cost versus bill/pay spread expansion?

Sure, well, let me give you the main contributors to the increase. The first, the largest contributor actually was the – was in the housing area. That was roughly 60 basis points out of the 160 basis points. And it’s really driven by lower rent cost but also by very high efficiency in our housing area. We achieved almost 97% occupancy in the third quarter which is at the high-end of our historical range. The bill/pay spread added another 40 basis points and the rest of it came from a variety of sources including insurance and in the insurance area, there was – the professional liability had – what I would consider about 25 basis points improvements related to an unusual claim that had a favorable resolution in the third quarter where we are able to recover all of our cost of defending our position in that particular lawsuit. So, the majority of the improvement came from housing, bill/pay spread followed by professional liability insurance and health insurance. Josh Vogel – Sidoti & Company: Okay, that’s really helpful. Now, just outside of those items, are there any other leverage that we should be focused on over the next several quarters that could help out margin expansion?

Well, I think, we are seeing a continued favorable trend in bill/pay spread expansion. I think that is an area of focus. We are very much focused on gross profit and I think the results are starting to show up. Josh Vogel – Sidoti & Company: Okay. And I am sorry, I missed it. With your revenue guidance, the Nurse and Allied segment sequentially you expected it to be up in the low to mid-single-digits?

That’s correct. Josh Vogel – Sidoti & Company: Okay. I am curious why your gross margin guidance is expected to be down sequentially. Could you just discuss that?

I think we are being a bit conservative on the gross profit guidance. So, if there is a better chance we could do a bit better than what we decided.

Yes, there are two things that we factored into our guidance. One is historically; the fourth quarter has lower housing efficiency. During the holidays, we have a lot of our travelers going back and we generally find it more cost-effective to keep apartments vacant knowing that they will be returning in January. So it will be more costly for us to close out an apartment and then open it up again in January, so that we do have a drop in efficiency in December. So that’s one piece of it. Another piece of it, as I mentioned, there is about 25 basis points of our gross profit that I would consider to be unusual in nature in Q3. So we eliminate that. And the rest of it, Bill is probably right, there was probably a bit of an element of conservatism. We did anticipate, while we believe that our health insurance costs have reverted back to what is a more normal pattern, for conservatism, we did not necessarily forecast that that we will achieve these same low levels we had in the third quarter. So that’s kind of a locum question and probably in the area of conservatism in our forecast. Josh Vogel – Sidoti & Company: Okay. And just one last one, I will jump back in the queue. You talked about the physician volumes being down as they are accepting more permanent physicians, and can you just talk to that a little bit? Is this like a fundamental shift you are seeing now in this market? And just any comments there would be great.

Yes, I mean, that’s all anecdotal. I don’t know for sure if that’s the number one reason. We certainly performed off of our own expectation, as Emil said, as he was going through the different segments this is the one that fell outside of our own internal range estimates for the quarter. So I am disappointed in our locum tenens at this point and I need to look into why that’s happening. We are seeing more physicians willing to take a permanent role at certainly the acute care facilities that we service. Whether that’s the number one reason or not it’s hard to tell. I think I need to drill down into a little bit more and find out what’s happening in the marketplace. The softness for us in demand has contributed though into October. So, we are still seeing the same trend that we saw in Q3. Josh Vogel – Sidoti & Company: Okay, well, thanks for taking my questions. I appreciate it.

Okay.

Our next question comes from Jeff Silber with BMO Capital Markets. You may ask your question. Jeff Silber – BMO Capital Markets: Thanks, so much. In focusing on the Nurse and Allied segment, you noted an increase in booking activity in the latter half of the quarter and it seems that continued so far in October. Can you give us a little bit more color what’s driving that? Is it external factors, is it internal execution? Any help will be appreciated.

Yes, I think it’s a little bit. We made a push on our MSPs to pay more attention to what we are doing there and we had as I said, an 18% increase in healthcare professional at our MSP accounts through the quarter. So, some of the demand has come from our MSP accounts. We are - the delayed EMR projects that we talked about in Q2 have now started to come in and we have a little over a 800 orders, most of those are 13-week assignments for travel nurses in the EMR project. The fact I will give you a little bit of that. There is a little bit of start, there is about 80 of them that start in 2013, but the bulk of them start in January and February next year on these EMR projects. So our account has gone up. But, if you look at the overall travel nursing orders, it’s more across the board in general. So I think some of that is just our focus on getting out there and driving more market share at our existing customers. So, I feel pretty good about that trends, but I think it’s driven from several things, mostly probably by the MSPs and the EMR projects. Jeff Silber – BMO Capital Markets: Can you just remind us how many MSP contracts you have in place?

We have 24. Jeff Silber – BMO Capital Markets: 24, okay. Great.

We service about a 170 acute care facilities and a little over 500 ambulatory centers. Jeff Silber – BMO Capital Markets: Okay. Great, that’s very helpful. Now, I know you are not giving guidance beyond the current quarter, but just to help us modeling, historically you’ve had or been able to have some sequential growth in revenues between 4Q and 1Q I know last year that didn’t happened. Given the momentum in the business so far, do you think we can see sequential growth in revenues between 4Q and 1Q next year?

I will be very disappointed if we don’t have sequential growth.

Yes, I mean, when I look at these EMR projects and some of the orders we have, and the dates they are supposed to start, I just talked about we have about 800 EMR orders and 90% of those are starting in January and February and they go through the end of May, some of those orders that we have. So, I’d be surprised. The only thing that the one unknown was we had a very robust flu season last year and our January was very strong, even though February and March were a little bit weaker and we have the trend as you described earlier. January was very strong because of the flu season and I just don’t know how strong the flu season will be. So that would be the only thing that would offset the trend that we see today. But I agree with Emil. If we didn’t grow sequentially in Nurse and Allied, I’d be surprised. Jeff Silber – BMO Capital Markets: And given the cost that you’ve taken out of the model, I am assuming if you can generate more revenues than you are expecting in the fourth quarter that the business should be profitable on a quarterly basis?

Yes, I mean, pre-tax profitable, you mean? Jeff Silber – BMO Capital Markets: Yes.

Yes, so, I mean, based on the $107 million to $110 million, that would be pretty close, to be honest with you. If we do a little bit better than what we’ve guided to, I think we would be pre-tax profitable, but we are running right on the edge there. The reason I freed up some of these dollars and it was great to have $2.9 million of EBITDA and $2.7 million relative to what we’ve been doing. We were running at about 1.5% EBITDA. 1.5% EBITDA doesn’t give me any money to invest in the business. I needed to free up some dollars to invest in the business. So, we’ll start putting some of that money back into the business in order to get us to grow. But I am not expecting that to happen in Q4. Everything I am doing is focused on 2014 and beyond. So, we’ll manage the business well in Q4. We’ll make sure we have a decent level of profitability but we are planning for 2014 going forward. Jeff Silber – BMO Capital Markets: All right, that’s great to hear. Thanks so much for the color.

Our next question comes from Tobey Sommer with SunTrust. You may ask your question. Frank Pinkerton– SunTrust: Hi, this is Frank in for Tobey. Wanted to ask about the recent improvement in Nurse and Allied volume, is that different from the normal season pattern and what do you think seasonality is going to mean in 1Q and 4Q?

I think the improvement that we are projecting in the fourth quarter is fairly consistent with historical patterns. What the improvement in bookings that we are seeing currently will primarily affect our Q1 numbers and as Bill indicated the only unknown really is the flu season, but on a sequential basis, we should see a stronger than normal sequential improvement from Q4 to Q1.

So I think there is some seasonality in our orders although I think, well, I know they are running above year-over-year above the actual orders we have in place today. So, I feel good about that. But we had a very robust demand in the first two weeks of December last year and that was the flu season kicking in and of course we won't know whether we get that again until we get into the December timeframe. But right now, we are running ahead of where we would have expected it to from an order perspective. But again, as Emil said, you’ll see most of that in next year not in Q4. Frank Pinkerton– SunTrust: Okay, great, that’s helpful and is it possible to quantify the impact of last year’s flu season?

That’s a hard one because when clients post orders with us they don’t actually designate them as being flu related orders. We just have to look at the kind of the macro picture and I think in my mind there was probably a couple of million dollars of incremental revenue that came – that was flu related, but I can’t prove it out scientifically. Frank Pinkerton– SunTrust: Okay, great, and finally, could you talk a little bit about how are you looking at acquisitions, now that you’ve kind of been with the company for a little bit and have gotten a little bit of a survey of what’s going on in the land and where your has been?

Yes, absolutely, we do have some financial ability to do an acquisition and there are some things out there. There are businesses that are in the $30 million, $40 million, $50 million revenue range that they maybe regional or may have a national footprint mostly in the Allied and per diem sector. We would entertain in all of our sectors, but we have a decent market share in travel nursing and a decent market share in locum tenens. I’d like to beef up my per diem and my allied. We’ve talked in the past that we don’t fill our share of our per diem and allied positions at our MSPs alone never mind on a regular customer base and so I’d like to beef up a little bit more like the market and beef those up. So there are things in the market. We are looking at them and if we find something that fits us and is at the right price, we will do something. Frank Pinkerton– SunTrust: All right. And my last question is, you mentioned education and training and search is seeing some softness, but you expected a turn up going forward what gives you some visibility in terms of the improvement in that group?

Yes, so the search business, I am not seeing as strong a trend as I would like to. So it was still fairly soft on the physician search and the executive search side. But on the education side, we’ve had some strong bookings. They’ve been booking now for their first quarter seminars and they feel pretty good about the bookings they have going into the first quarter. So some of that they are going to get into fourth quarter so that’s why we see a little bit of sequential increase from Q3 to Q4. But, they’ve had some very strong booking orders. They have the schedule of seminars in Q1 and very strong bookings so far. So, we feel pretty good about going into the year with our education business and some of that we are seeing in Q4 as well. Frank Pinkerton– SunTrust: All right, great. Thank you very much.

We have a question from Gary Taylor with Citigroup. You may ask your question.

Hello, Gary.

Gary Taylor with Citigroup, your line is open. Gary Taylor – Citigroup: Can you hear me?

We can hear you now, yes. Gary Taylor – Citigroup: Okay, I am sorry. I just want to ask a very specific micro question and it’s just about in the Physician Staffing business, I know you called out the $700,000 seller accrual for sales taxes and I think we have seen something called out and I think four of the last nine quarters. So I guess, I am starting to get a little confused on how I should kind of look at that as recurring versus non-recurring? My assumption is, when you call it out, you are somewhat suggesting that a portion of the accrual perhaps is catch-up related to prior period. But, if you could just remind us, what you are actually paying sales taxes on in that unit and just kind of we ought to view these periodic call-outs of the accrual? That be helpful.

The – Gary this is Emil. The sales tax accrual that – back in late 2011 we did a comprehensive study of our sales tax liabilities and we accrued based on the estimate that we made back then and we revised a couple of times those estimates as more information became available. We at this point, we believe we are fully accrued for any liability. We have filed voluntary disclosure agreements with all the relevant state jurisdictions. As in the process of filing these, we have concluded that our estimate in one particular state related to physician locum tenens services were as too low and we corrected that estimated in this quarter. This – you are absolutely right that it pertains to prior periods, virtually. Almost the entire $700,000 accrual pertains to prior periods. But we do not see any additional accruals at this point. Gary Taylor – Citigroup: And what exactly generates – just the process of selling your service to the client generates a state sales tax liability that you pay?

That’s correct and you know the sales tax liability is a fairly complex grid of parameter that you have to look at. It varies by line of business, the type of service we provide, whether it’s employees or independent contracts, whether it’s to a for-profit or not-for-profit facility, and it does vary state-by-state. So, there could be – and that complication is what created the initial need for the study and for the accruals that we booked at the end of 2011. Gary Taylor – Citigroup: So it sounds like, as you kind of look at the quarter, you had suggested maybe there were 25 basis points in gross margin related to a favorable insurance – I don’t know if you actually said a reversal or a claim and then the $700,000 versus really what you see was a recurring G&A is above and beyond that, is that correct?

That’s correct. Gary Taylor – Citigroup: Okay, great. That’s all I had. Thanks.

(Operator Instructions) I am showing no further questions from the phone lines at this time.

Okay, great. Well, thank you, everybody. We appreciate your attending today and we will be updating you with our fourth quarter and full year results in February. Thank you.