CROSS COUNTRY HEALTHCARE INC - FORM 8-K/A - EX-99.4 - UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION - September 15, 2017

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EX-99.3 - AUDITED CONSOLIDATED BALANCE SHEETS OF ADVANTAGE RN, LLC AND SUBSIDIARIES AS OF - CROSS COUNTRY HEALTHCARE INCccrn_ex993.htm
EX-99.2 - AUDITED CONSOLIDATED BALANCE SHEETS OF ADVANTAGE RN, LLC AND SUBSIDIARIES AS OF - CROSS COUNTRY HEALTHCARE INCccrn_ex992.htm
EX-99.1 - UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET OF ADVANTAGE RN, LLC AND SUBSIDIA - CROSS COUNTRY HEALTHCARE INCccrn_ex991.htm
EX-23.1 - CONSENT OF HAMMERMAN, GRAF, HUGHES & COMPANY, INC., INDEPENDENT AUDITORS - CROSS COUNTRY HEALTHCARE INCccrn_ex231.htm
8-K/A - AMENDED CURRENT REPORT - CROSS COUNTRY HEALTHCARE INCccrn_8ka.htm
 
Exhibit 99.4
 
Cross Country Healthcare, Inc.
Unaudited Pro Forma Condensed Combined Financial Information
 
On July 5, 2017, Cross Country Healthcare, Inc. (the “Company” or “CCH”) completed the acquisition of substantially all of the assets and business of Advantage RN, LLC and its subsidiaries (collectively, “Advantage”), effective July 1, 2017, pursuant to the terms of an Asset Purchase Agreement, dated as of June 13, 2017, among the Company, Advantage and certain of the members of Advantage (the “Acquisition”). The Company acquired Advantage for a purchase price of $88 million, subject to a final net working capital adjustment. At closing, the Company paid $86.8 million, net of cash acquired, using $19.9 million in available cash and $66.9 million in borrowings under its Credit Facility, including a $40 million incremental term loan. The amount paid at closing was subject to an initial net working capital adjustment of $0.6 million, and an additional $0.6 million was deferred and is due to the sellers within 20 months, less any COBRA and health care expenses incurred by the Company on behalf of the sellers. The Company expects to receive $0.8 million as a purchase price adjustment on its final net working capital settlement.
 
The acquisition has been accounted for in accordance with FASB ASC 805, Business Combinations, using the acquisition method. The results of Advantage’s operations will be included in the consolidated statements of operations from its date of acquisition.
 
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2016 and for the six months ended June 30, 2017, gives effect to the acquisition as if the transaction had occurred at January 1, 2016. The unaudited pro forma condensed combined balance sheet as of June 30, 2017 gives effect to the acquisition as if it had occurred on June 30, 2017. The historical information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the acquisition, (2) factually supportable, and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results.
 
The unaudited pro forma combined financial information is based on the historical financial statements of Advantage and the Company, giving effect to the transaction using the acquisition method of accounting and the assumptions and adjustments described in the accompanying notes to the pro forma condensed combined financial information. A preliminary purchase price allocation has been used to prepare the pro forma balance sheet and income statements. Other identifiable intangible assets such as trade names, databases, customer relationships, and noncompete agreements were assigned useful lives ranging between 5-12 years for the purpose of estimating amortization expense used in the pro forma adjustments. The final purchase price allocation will be determined when the Company has completed its valuation analysis and may differ materially from the preliminary allocations used in the pro forma adjustments reflected herein. The final allocations may include (1) changes in the net realizable value of accounts receivable and the fair value of property and equipment, (2) changes in the allocations to intangible assets such as trade names, databases, customer relationships, and noncompete agreements, as well as goodwill, and (3) changes in the fair values of other assets and liabilities.
 
The unaudited pro forma information does not purport to be indicative of the combined results of operations that actually would have taken place if transactions had occurred on such dates. The unaudited pro forma information does not reflect any cost savings or operating synergies that the combined company may achieve as a result of the acquisition or the costs to integrate the operations of Advantage with the Company.
 
 
 
 
 
1
 

Cross Country Healthcare, Inc.
Pro Forma Condensed Statement of Operations
(unaudited, amounts in thousands)

 
 
Year Ended December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CCH
 
 
Advantage
 
 
Pro Forma
 
 
 
Pro Forma
 
 
 
As reported
 
 
(a)
 
 
Adjustments
 
 
 
Combined
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue from services
 $833,537 
 $103,692 
 $(2,325)
(b)
 $934,904 
Operating expenses:
    
    
    
 
    
Direct operating expenses
  611,802 
  80,239 
  (2,378)
(b)
  689,663 
Selling, general and administrative expenses
  179,820 
  13,313 
  (122)
(b)
  193,011 
Bad debt expense
  593 
  - 
  53 
(b)
  646 
Depreciation
  4,168 
  - 
  122 
(b)
  4,290 
Amortization
  5,014 
  - 
  2,745 
(c)
  7,759 
Acquistion-related contingent consideration
  814 
  - 
  - 
 
  814 
Acquistion and integration costs
  78 
  - 
  - 
 
  78 
Restructuring charges
  753 
  - 
  88 
(b)
  841 
Impairment charge
  24,311 
  - 
  - 
 
  24,311 
   Total operating expenses
  827,353 
  93,552 
  508 
 
  921,413 
 
    
    
    
 
    
Income from operations
  6,184 
  10,140 
  (2,833)
 
  13,491 
 
    
    
    
 
    
Other expenses:
    
    
    
 
    
Gain on derivative liability
  (5,805)
  - 
  - 
 
  (5,805)
Interest expense
  6,106 
  192 
  1,914 
(d)
  8,212 
Loss on early extinguishment of debt
  1,568 
  - 
  - 
 
  1,568 
Other (income) expense, net
  (230)
  1,414 
  (853)
(e)
  331 
Income (loss) before income taxes
  4,545 
  8,534 
  (3,894)
 
  9,185 
Income tax (benefit) expense
  (4,186)
  - 
  1,216 
(f)
  (2,970)
Consolidated net income (loss)
  8,731 
  8,534 
  (5,110)
 
  12,155 
Less: Net income attributable to noncontrolling interest in subsidiary
  764 
  - 
  - 
 
  764 
Net income (loss) attributable to common shareholders
 $7,967 
 $8,534 
 $(5,110)
 
 $11,391 
 
    
    
    
 
    
Net income per share attributable to common shareholders - Basic
 $0.25 
    
    
 
 $0.35 
Net income per share attributable to common shareholders - Diluted
 $0.15 
    
    
 
 $0.25 
 
    
    
    
 
    
Weighted average shares outstanding - Basic
  32,132 
    
    
 
  32,132 
Weighted average shares outstanding - Diluted
  36,246 
    
    
 
  36,246 
 
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
 for the Year Ended December 31, 2016
(amounts in thousands)

 
(a) 
Represents the audited historical results of Advantage for the period presented.
(b)
Reclassifications to conform to the Company’s statement of operations presentation.
(c) 
Pro forma adjustment to record the estimated intangibles amortization expense.
(d) 
Represents adjustment to: 1) exclude interest expense on debt of Advantage not assumed - $(192); and 2) include the estimated interest expense including amortization of fees for the incremental borrowings - $2,106.
(e) 
Pro forma adjustment to exclude: 1) transaction-related costs - $137; 2) legal fees related to an excluded liability-$462; 3) other nonrecurring costs that will not continue post-acquisition such as stock purchase distributions and board expenses - $166; and 4) restructuring charges reclassified - $88.
(f)
Tax benefit was adjusted for the impact of amortization of indefinite-lived intangible assets and state income taxes.
 
 
2
 
 
Cross Country Healthcare, Inc.
Pro Forma Condensed Statement of Operations
(unaudited, amounts in thousands)
 
 
 
Six Months Ended June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CCH
 
 
Advantage
 
 
Pro Forma
 
 
 
Pro Forma
 
 
 
As Reported
 
 
(a)
 
 
Adjustments
 
 
 
Combined
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue from services
 $416,886 
 $52,526 
 $(1,425)
(b)
 $467,987 
Operating expenses:
    
    
    
 
    
Direct operating expenses
  307,083 
  41,102 
  (1,467)
(b)
  346,718 
Selling, general and administrative expenses
  93,836 
  6,855 
  (58)
(b)
  100,633 
Bad debt expense
  649 
  - 
  42 
(b)
  691 
Depreciation
  2,331 
  - 
  58 
(b)
  2,389 
Amortization
  2,145 
  - 
  1,373 
(c)
  3,518 
Acquistion-related contingent consideration
  551 
  - 
  - 
 
  551 
Acquistion and integration costs
  587 
  - 
  (587)
(d)
  - 
Restructuring charges
  - 
  - 
  9 
(b)
  9 
    Total operating expenses
  407,182 
  47,957 
  (630)
 
  454,509 
 
    
    
    
 
    
Income from operations
  9,704 
  4,569 
  (795)
 
  13,478
 
    
    
    
 
    
Other expenses:
    
    
    
 
    
Gain on derivative liability
  (1,581)
  - 
  - 
 
  (1,581)
Interest expense
  1,754 
  90 
  950 
(e)
  2,794 
Loss on early extinguishment of debt
  4,969 
  - 
  - 
 
  4,969 
Other (income) expense, net
  (59)
  991 
  (438)
(f)
  494 
Income (loss) before income taxes
  4,621 
  3,488 
  (1,307)
 
  6,802 
Income tax expense
  1,119 
  - 
  603 
(g)
  1,722 
Consolidated net income (loss)
  3,502 
  3,488 
  (1,910)
 
  5,080 
Less: Net income attributable to noncontrolling interest in subsidiary
  662 
  - 
  - 
 
  662 
Net income (loss) attributable to common shareholders
 $2,840 
 $3,488 
 $(1,910)
 
 $4,418 
 
    
    
    
 
    
Net income per share attributable to common shareholders - Basic
 $0.08 
    
    
 
 $0.13 
Net income per share attributable to common shareholders - Diluted
 $0.05 
    
    
 
 $0.10 
 
    
    
    
 
    
Weighted average shares outstanding - Basic
  34,269 
    
    
 
  34,269 
Weighted average shares outstanding - Diluted
  36,250 
    
    
 
  36,250 
 
Notes to the Unaudited Pro Forma Condensed Combined Statement of Operations
for the Six Months Ended June 30, 2017
(amounts in thousands)
 
(a) 
Represents the unaudited historical results of Advantage for the period presented.
(b)
Reclassifications to conform to the Company’s statement of operations presentation.
(c) 
Pro forma adjustment to record the estimated intangibles amortization expense.
(d)
Pro forma adjustment to exclude acquisition costs of the Company directly attributable to the transaction.
(e) 
Represents adjustment to: 1) exclude interest expense on debt of Advantage not assumed - $(90); and 2) include the estimated interest expense including amortization of fees for the incremental borrowings - $1,040.
(f) 
Pro forma adjustment to exclude: 1) transaction-related costs - $50; 2) legal fees related to an excluded liability-$333; 3) other nonrecurring costs that will not continue post-acquisition such as board expenses - $46; and 4) restructuring charges reclassified - $9.
(g) 
Tax benefit was adjusted for the impact of amortization of indefinite-lived intangible assets and state income taxes.
 

 
3
 
 
Cross Country Healthcare, Inc.
Pro Forma Combined Balance Sheets as of June 30, 2017
(unaudited, amounts in thousands)
 
 
 
CCH As Reported
 
 
Advantage (a)
 
 
Pro Forma Adjustments
 
 
 
Pro Forma Combined
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
  Cash and cash equivalents
 $33,936 
 $3,845 
 $(23,897)
(b)
 $13,884 
  Accounts receivable, net
  155,903 
  14,633 
  (367)
(c)
  170,169 
  Prepaid expenses
  6,230 
  266 
  (129)
(c)
  6,367 
  Insurance recovery recceivable
  3,197 
  - 
 -
 
  3,197 
  Other current assets
  1,249 
  189 
  882
(c)
 2,320
Total current assets
  200,515 
  18,933 
  (23,511)
 
 195,937
Property and equipment, net
  13,862 
  331 
 2
(c)
  14,195 
Trade names, net
  35,402 
  - 
  4,500 
(d)
  39,902 
Goodwill, net
  79,648 
  - 
  44,889
(d)
  124,537
Other Intangible assets, net
  34,690 
  - 
  24,100 
(d)
  58,790 
Debt issuance costs, net
  - 
  - 
  - 
 
  - 
Other assets
  18,373 
  - 
  - 
 
  18,373 
Total assets
 $382,490 
 $19,264 
 $49,980
 
 $451,734
 
    
    
    
 
    
Current liabilities:
    
    
    
 
    
  Accounts payable and accrued expenses
 $52,435 
 $462 
 $399 
(e)
 $53,296 
  Accrued employee compensation and benefits
  31,073 
  1,903 
  (505)
(e)
  32,471 
  Current portion of long-term debt, capital lease, and revolver
  2,258 
  6,074 
  24,426 
(f)
  32,758 
  Other current liabilities
  3,839 
  - 
  707
(e)
  4,546
Total current liabilities
  89,605 
  8,439 
  25,027
 
  123,071
Noncurrent deferred tax liabilities
  14,353 
  - 
  - 
 
  14,353 
Long-term accrued claims
  29,066 
  - 
  - 
 
  29,066 
Long-term debt
  35,344 
  1,817 
  34,548 
(f)
  71,709 
Contingent consideration
  4,390 
  - 
  - 
 
  4,390 
Convertible notes
  - 
  - 
  - 
 
  - 
Other long-term liabiltities
  8,084 
  - 
  - 
 
  8,084 
Total liabilities
  180,842 
  10,256 
  59,575
 
  250,673
Commitments and contingencies
    
    
    
 
    
Stockholders' equity
    
    
    
 
    
  Common stock
  4 
  - 
  - 
 
  4 
  Additional paid-in-capital
  303,917 
  - 
  - 
 
  303,917 
  Retained earnings -Expense
  (101,784)
  - 
  (587)
(g)
  (102,371)
  Other stockholders' equity
  (1,183)
  9,008 
  (9,008)
(h)
  (1,183)
Total Cross Country Healthcare, Inc. stockholders' equity
  200,954 
  9,008 
  (9,595)
 
  200,367 
  Noncontrolling interest
  694 
  - 
  - 
 
  694 
Total stockholders' equity
  201,648 
  9,008 
  (9,595)
 
  201,061 
Total liabilities and stockholders' equity
 $382,490 
 $19,264 
 $49,980
 
 $451,734
 
Notes to the Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 30, 2017
(amounts in thousands)
 
(a) 
Represents the unaudited historical balance sheet of Advantage as of June 30, 2017.
(b) 
Pro forma adjustment to exclude cash not acquired and reflect cash used in the transaction including fees for the incremental term loan.
(c) 
Pro forma adjustment to remove and revalue assets and reflect estimated receivable for net working capital adjustment.
(d) 
Pro forma adjustment to record the estimated fair values of intangible assets.
(e) 
Pro forma adjustment to reflect: 1) excluded liabilities and holdback liabilities pursuant to the asset purchase agreement; and 2) accrued transaction expenses.
(f) 
Pro forma adjustment to remove Advantage debt, which was not assumed - $(7,891), and to add the incremental borrowings, net of fees - $66,865 to fund the acquisition.
(g) 
Pro forma adjustment to reflect acquisition and integration expenses.
(h) 
Represents the elimination of Advantage's equity.
 
 
4

CROSS COUNTRY HEALTHCARE INC Reports