Medical Staffing Network Holdings Announces Fourth Quarter 2004 Operat

    Business Editors/Medical Editors

    BOCA RATON, Fla.--(BUSINESS WIRE)--March 9, 2005--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 $98.5 million for the fourth quarter of 2004, a decrease of 7.3% from third quarter 2004 revenues of $106.2 million and a decrease of 8.7% from fourth quarter 2003 revenues of $107.8 million. The Company essentially broke even for the fourth quarter of 2004, compared to income from continuing operations for the third quarter of 2004 of $0.3 million, or $0.01 per diluted share, and a loss from continuing operations of $1.6 million, or $0.05 per diluted share, for the fourth quarter of 2003. The loss in the fourth quarter of 2003 included a non-cash after tax charge of $2.1 million, or $0.07 per diluted share, resulting from the write-off of certain fees associated with the Company's early extinguishment of a debt facility.
    Commenting on the fourth quarter's results, Robert J. Adamson, chief executive officer, stated, "We continue to experience unpredictable and difficult market conditions. Disappointing hospital admissions have impacted the demand for our services and caused the modest decline in revenue. Large healthcare systems such as Tenet Healthcare have reported reductions in patient volumes. Healthcare facilities continue to increase the workload of their internal staff and deemphasize utilization of supplemental staffing. We do not believe this is sustainable long term as it is neither cost effective nor appropriate for meeting nurse to patient ratios. While we are not satisfied with our results, we believe that MSN has continued to perform much better that its peers in the healthcare per diem industry. We are pleased with the early stage growth of our new non-healthcare staffing initiatives. The market conditions in this segment of the staffing industry are much more favorable and we look forward to building on this emerging platform in the future."
    Kevin S. Little, president and chief operating officer, added, "We believe the trend toward vendor consolidation is continuing to gain traction and that the larger more sophisticated staffing companies will benefit from this trend. We are pleased to be working with the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) to develop the multi-site healthcare staffing company certification program. We served as a pilot company for this new JCAHO program and expect to undergo the certification process in 2005. Based on discussions with some of our healthcare facility clients, we believe the certification will be an important differentiator going forward."
    Gross profit was $22.1 million for the fourth quarter of 2004, a 4.1% decrease from third quarter of 2004 gross profit of $23.0 million and a decrease of 8.5% from fourth quarter of 2003 gross profit of $24.2 million. The year-over-year decrease was due to the decline in revenues resulting from a decrease in the number of hours worked by professionals. Gross margin for the fourth quarter of 2004 was 22.4%, an increase from the gross margins of 21.7% for the third quarter of 2004 and consistent with the 22.4% for the fourth quarter of 2003. The increase from the third quarter of 2004 was primarily due to more favorable professional liability and workers compensation claims experience.
    Selling, general and administrative expenses decreased to $16.2 million, or 16.4% of revenues, in the fourth quarter of 2004 compared with $17.2 million, or 15.9% of revenues, for the same period of the prior year. The decrease is primarily due to branch consolidations and other cost saving measures. Corporate and administrative expenses increased to $4.1 million, or 4.1% of revenues, in the fourth quarter of 2004 compared with $3.3 million, or 3.0% of revenues, for the same period of the prior year. The increase was primarily due to higher professional fees including those associated with Sarbanes-Oxley implementation and compliance.
    Revenues were $417.1 million for the year ended December 26, 2004, an 18.7% decrease from revenues of $513.0 million for the prior year. The loss from continuing operations for the year ended December 26, 2004, was $1.3 million, or $0.04 per share, compared with income from continuing operations of $5.5 million, or $0.18 per diluted share, (inclusive of the aforementioned non-cash after tax charge of $0.07 per diluted share related to the early extinguishment of debt) for the prior year. Cash flow from operating activities was $26.7 million for the year ended December 26, 2004, compared with $36.7 million for the prior year.
    Gross profit was $90.0 million for the year ended December 26, 2004, a 21.6% decrease from gross profit of $114.8 million for the prior year. The decrease was due to a decline in revenues resulting from a decrease in the number of hours worked by professionals coupled with a decrease in gross margin. Gross margin was 21.6% for the year ended December 26, 2004, as compared with 22.4% for the comparable prior year period. The year-over-year margin decrease was primarily due to higher costs associated with unemployment taxes, workers compensation and professional liability insurance.
    Selling, general and administrative expenses decreased to $66.6 million, or 16.0% of revenues, for the year ended December 26, 2004, compared with $78.8 million, or 15.4% of revenues, for the prior year. The decrease is primarily due to the closing of locations and other cost reduction programs implemented as a part of the restructuring initiative and the pretax restructuring charge of $0.8 million recorded in the second quarter of 2003. Corporate and administrative expenses increased to $15.5 million, or 3.7% of revenues, for the year ended December 26, 2004, compared with $11.7 million, or 2.3% of revenues, for the prior year. The increase was primarily due to higher professional fees, including those associated with Sarbanes-Oxley implementation and compliance, and a charge recorded in the second quarter of 2004 associated with executive severance and search costs.

    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 Thursday, March 10. A live webcast, as well as a 30-day replay, of the conference call will be available online at the Company's website at http://www.msnhealth.com or at http://www.fulldisclosure.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 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, 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 JHACO accreditation, our clients' ability to pay us for our services, 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 Twelve Months Ended Ended ----------------------------------- Dec. 26, Dec. 28, Dec. 26, Dec. 28, 2004 2003 2004 2003 -------- -------- -------- --------

Service revenues $98,459 $107,831 $417,058 $512,985 Cost of services rendered 76,360 83,672 327,075 398,224 -------- -------- -------- -------- Gross profit 22,099 24,159 89,983 114,761 -------- -------- -------- --------

Operating expenses: Selling, general and administrative 16,167 17,167 66,576 78,771 Corporate and administrative 4,077 3,248 15,491 11,748 Depreciation and amortization 1,404 1,691 6,316 6,773 -------- -------- -------- -------- Total operating expenses 21,648 22,106 88,383 97,292 -------- -------- -------- --------

Income from operations 451 2,053 1,600 17,469 Loss from early extinguishment of debt - 3,555 - 3,555 Interest expense, net 790 1,136 3,541 4,685 -------- -------- -------- --------

Income (loss) from continuing operations before provision for (benefit from) income taxes (339) (2,638) (1,941) 9,229 Provision for (benefit from) income taxes (261) (1,015) (615) 3,708 -------- -------- -------- --------

Income (loss) from continuing operations (78) (1,623) (1,326) 5,521 Loss from discontinued operations, net of taxes - - - (506) -------- -------- -------- --------

Net income (loss) $(78) $(1,623) $(1,326) $5,015 ======== ======== ======== ========

Basic income (loss) from continuing operations $- $(0.05) $(0.04) $0.18 Discontinued operations, net of taxes - - - (0.01) -------- -------- -------- -------- Basic net income (loss) per share $- $(0.05) $(0.04) $0.17 ======== ======== ======== ========

Diluted income (loss) from continuing operations $- $(0.05) $(0.04) $0.18 Discontinued operations, net of taxes - - - (0.02) -------- -------- -------- -------- Diluted net income (loss) per share $- $(0.05) $(0.04) $0.16 ======== ======== ======== ========

Weighted average common shares outstanding: Basic 30,231 30,208 30,228 30,190 Diluted 30,231 30,208 30,228 30,807

Operating Statistics: Hours worked 2,329 2,501 9,837 12,137

MEDICAL STAFFING NETWORK HOLDINGS, INC. Condensed Consolidated Balance Sheets (unaudited; in thousands)

Dec. 26, Dec. 28, 2004 2003 --------- --------

ASSETS Current assets: Cash and cash equivalents $345 $825 Accounts receivable, net 57,478 68,602 Other current assets 11,164 13,785 --------- -------- Total current assets 68,987 83,212

Furniture and equipment, net 8,481 11,377 Goodwill, net 129,474 125,028 Other assets, net 3,961 9,253 --------- --------

Total assets $210,903 $228,870 ========= ========

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and other current liabilities $12,457 $8,138 Accrued payroll and related liabilities 6,597 6,616 --------- -------- Total current liabilities 19,054 14,754

Long-term debt 31,760 54,978 Deferred income taxes 9,808 7,115 Other long-term obligations 255 736 --------- -------- Total liabilities 60,877 77,583

Total stockholders' equity 150,026 151,287 --------- --------

Total liabilities and stockholders' equity $210,903 $228,870 ========= ========

--30--JAR/mi*

CONTACT: Medical Staffing Network Holdings, Inc., Boca Raton Robert J. Adamson, 561-322-1303

KEYWORD: FLORIDA INDUSTRY KEYWORD: MEDICAL HUMAN RESOURCES BANKING EARNINGS CONFERENCE CALLS SOURCE: Medical Staffing Network Holdings, Inc.

Copyright Business Wire 2005