Summary Commentary

Industry revenue will continue to be limited by supply acquisition and turnover rather than by demand. Retrogression will not be lifted any time in the near future. That is bad news for all companies involved with bringing healthcare personnel in to the country from international locations.

Of note in the gross margin section is that all the public companies had gross margin of 24.4% or more in the fourth quarter, no matter what segment of the business was reported. This is not by accident as all the public companies are taking actions to increase their gross margin. Still, from an overall viewpoint, the gross margin percentage for the public companies noted above remains about 1%-2% lower than it was prior to 2002-2003 in the nurse staffing and travel nurse segments of the market. Longer term, we expect that the gross margin percentage for public companies will rise by 1%-2% in those segments.

The SG&A expenses of the public companies will need to shrink over time to get back to where they were prior to 2004 as they are still out of line with historical percentages by 1-2% of revenue. As we've said previously, healthcare staffing companies probably should have SG&A expenses in the range of 15% to 17% of revenue for travel or per-diem companies and in the range of 18% to 20% for physician and allied staffing companies. These guidelines should allow for EBITDA in the range of 6% to 8% or more if gross margin is properly managed.

The growth in value of any company requires both strong buyer interest and increasing business profits. So if buyer interest wanes, business value diminishes very quickly. The acquisition market is still strong in most segments, although there has been some fall off in acquisition pricing. We are getting concerned about how long acquisition demand will stay strong due to the continuing weakness in the economy and in hospital admissions. Demand in the per-diem staffing area has already weakened.

Jack Lyons, President	William Quish, Senior Managing Director
(860) 653-1450 jlyons@lyonssolutions.com	(860) 653-1455 bquish@lyonssolutions.com

About Lyons Solutions, LLC   We were founded in 1984 as Lyons & Associates, Inc. and today Lyons Solutions, LLC is a premier merger and acquisitions financial advisor to the healthcare staffing industry nationwide. Since 1989 we've completed approximately 30 healthcare staffing industry transactions. We have built an extensive corporate and private equity buyer database and provide sound, practical advice to owners of private companies seeking to execute a business sale, merger, acquisition, recapitalization or management buyout transaction. Seller clients tend to have revenue ranging from $5 million to $100 million. We work with our clients to jointly determine the best time for them to approach the market and then aggressively develop alternatives for our clients to consider. Our senior deal makers actively participate in the Healthcare Staffing Summit, the American Staffing Association (ASA), the New Jersey Staffing Alliance (NJSA), the New York Staffing Association (NYSA) and the Florida Staffing Association (FSA) and have completed over 110 multi-million dollar transactions.