8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): February 14, 2005

CONCENTRA OPERATING CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	001-15699	75-2822620
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

5080 Spectrum Drive Suite 1200 - West Tower Addison, Texas	75001
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (972) 364-8000

5080 Spectrum Drive

Suite 400 - West Tower

Addison, Texas 75001

(Former name or former address if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On February 14, 2005, Concentra Operating Corporation issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2004. A copy of this press release is being furnished as an Exhibit 99.1 to this report.

Limitation on Incorporation by Reference.

In accordance with general instruction B.2 of Form 8-K, the information in this report furnished pursuant to Item 2.02 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits.

99.1 Press Release of the Registrant dated February 14, 2005

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

CONCENTRA OPERATING CORPORATION
(Registrant)
By:	/s/ Richard A. Parr II
Name:	Richard A. Parr II
Title:	Executive Vice President, General Counsel & Corporate Secretary

Date: February 14, 2005

INDEX TO EXHIBITS

EXHIBIT NUMBER
99.1	Press Release of the Registrant dated February 14, 2005.

EX-99.1

		EXHIBIT 99.1
Contacts:	Daniel J. Thomas	Thomas E. Kiraly
	President and	Executive Vice President and
	Chief Executive Officer	Chief Financial Officer
	(972) 364-8111	(972) 364-8217

CONCENTRA OPERATING CORPORATION Reports YEAR-END results

ADDISON, Texas, February 14, 2005 – Concentra Operating Corporation (“Concentra” or the “Company”) today announced its results for the fourth quarter and year ended December 31, 2004. The Company reported consolidated Adjusted Earnings Before Interest Taxes Depreciation and Amortization (“Adjusted EBITDA”) of $29,005,000 for the fourth quarter and $154,755,000 for the full year. Concentra computes Adjusted EBITDA in the manner prescribed by its bond indentures. A reconciliation of Adjusted EBITDA to net income is provided within this press release.

Revenue for the fourth quarter of 2004 was $262,638,000 or 2.5% lower than the $269,407,000 reported for the year-earlier period. Operating income was $19,782,000 for the quarter as compared to $23,601,000 for the same quarter last year. Net income for the fourth quarter was $4,557,000, which compares to $13,520,000 for the fourth quarter of 2003. Results for the quarter were adversely affected by a number of factors, including there being one less revenue day in the quarter, the impact of the change in California’s workers’ compensation fee schedule, the Company’s decision to implement Section 404 of the Sarbanes-Oxley Act, and the absence of flu shot revenue due to the nationwide shortage of vaccine.

For the year ended December 31, 2004, revenue increased 4.9% to $1,102,250,000 from $1,050,688,000 for 2003. Operating income for the year declined to $73,025,000 from $106,481,000 for 2003. The decrease in operating income was primarily due to a non-cash impairment charge of $41,682,000 reported in the third quarter related to the write down of goodwill and other long-lived assets of the Company’s Care Management Services segment. Largely because of these impairment charges, the Company reported a net loss for the year of $9,975,000 compared with net income of $43,289,000 in 2003.

“We are pleased to have achieved a strong underlying performance for the full year, despite experiencing the weakness we anticipated in our fourth quarter results,” said Daniel Thomas, Concentra’s President and Chief Executive Officer. “During 2004, our reported results were affected by a number of non-recurring items. In total, we incurred expenses of $6.1 million associated with our second quarter dividend, severance expenses associated with certain senior executives, lease termination costs, and other related expenses. After considering the impact of these items on our reported results, you will find that Concentra delivered a solid increase in its core EBITDA during 2004.

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“Our Health Services division completed the best year in its history,” Thomas continued. “With an overall 12.8% revenue growth rate and a 14.3% growth rate in gross profit, Health Services contributed significantly to our results for the year. These growth rates would have been even stronger had there not been a nationwide shortage of flu vaccine during the fourth quarter. We reported $3.6 million in revenue from flu shots during the fourth quarter of 2003 and had no revenue from these services during the same period in 2004.

“During the quarter, our Network Services results were greatly affected by the California workers’ compensation fee schedule changes enacted in early 2004,” said Thomas. “As we’ve reported throughout this year, these changes have had a significant effect on our financial performance. Since we had our strongest period of revenue from these affected services in the fourth quarter of 2003, we estimate this fee schedule change resulted in a $4.4 million reduction in our fourth quarter revenue and a $5.6 million effect for the full year. These changes, along with other reductions in revenue from our workers’ compensation PPO services, contributed to the slowing of our revenue and earnings growth from the Network Services segment during 2004.

“We believe Concentra is well positioned to achieve a solid growth in revenue and earnings during 2005,” Thomas added. “Year in and year out, in good economies and bad, Concentra has continued to expand and to grow. We believe our diversification and the consistent investments we have made in our business will serve us well during the year to come.”

The Company also noted that during 2004, it expended approximately $4.3 million associated with its implementation of Section 404 of the Sarbanes-Oxley Act. Of this amount, approximately $3.7 million was incurred during the second half of 2004. The Company currently estimates that it will spend approximately $2.6 million associated with these compliance activities during 2005, with this amount being generally incurred in a ratable fashion throughout the course of the year.

At December 31, 2004, Concentra had no borrowings outstanding under its $100,000,000 revolving credit facility and had $61,319,000 in cash and investments. At the conclusion of the fourth quarter, the Company had a Days Sales Outstanding of 61 days versus 58 days for the year-earlier period.

Concentra Operating Corporation, a wholly owned subsidiary of Concentra Inc., is the comprehensive outsource solution for containing healthcare and disability costs. Serving the occupational, auto and group healthcare markets, Concentra provides employers, insurers and payors with a series of integrated services which include employment-related injury and occupational health care, in-network and out-of-network medical claims review and repricing, access to specialized preferred provider organizations, first notice of loss services, case

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management and other cost containment services. Concentra provides its services to approximately 135,000 employer locations and 3,700 insurance companies, group health plans, third-party administrators and other healthcare payors.

A public, listen-only simulcast of Concentra’s fourth quarter conference call will begin at 9:00 a.m. Eastern Standard Time tomorrow (February 15, 2005) and may be accessed via the Company’s web site, www.concentra.com. Investors are requested to access the call at least 15 minutes before the scheduled start time in order to complete a brief registration. An online replay using the same link will be available shortly after the conclusion of the live broadcast and will continue through February 22, 2005.

This press release contains certain forward-looking statements, which the Company is making in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and that the Company’s actual results may differ materially from the results discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the potential adverse impact of governmental regulation on the Company’s operations, changes in nationwide employment and injury rate trends, interruption in its data processing capabilities, operational, financing and strategic risks related to the Company’s capital structure and growth strategy, possible fluctuations in quarterly and annual operations, possible legal liability for adverse medical consequences, competitive pressures, adverse changes in market conditions for the Company’s services, and dependence on key management personnel. Additional factors include those described in the Company’s filings with the Securities and Exchange Commission.

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February 14, 2005

CONCENTRA OPERATING CORPORATION

a wholly owned subsidiary of

CONCENTRA INC.

Unaudited Consolidated Statements of Operations

(in thousands)

	Three Months Ended December 31,						Year Ended December 31,
	2004			2003			2004			2003
REVENUE:
Health Services	$	141,659		$	131,481		$	576,880		$	511,387
Network Services		64,962			71,280			281,374			260,159
Care Management Services		56,017			66,646			243,996			279,142
Total revenue		262,638			269,407			1,102,250			1,050,688
COST OF SERVICES:
Health Services		123,241			110,977			474,343			421,663
Network Services		39,281			41,039			163,800			147,350
Care Management Services		48,380			59,816			215,999			248,312
Total cost of services		210,902			211,832			854,142			817,325
Total gross profit		51,736			57,575			248,108			233,363
General and administrative expenses		31,357			33,012			130,263			122,949
Amortization of intangibles		693			962			3,234			3,933
Unusual charges		(96	)		—			(96	)		—
Loss on impairment		—			—			41,682			—
Operating income		19,782			23,601			73,025			106,481
Interest expense, net		13,236			13,374			55,606			56,318
(Gain) loss on fair value of hedging arrangements		—			—			—			(9,869	)
Loss on early retirement of debt		—			—			14,105			7,837
Other, net		310			505			3,043			2,692
Income before income taxes		6,236			9,722			271			49,503
Provision (benefit) for income taxes		1,679			(3,798	)		10,246			6,214
Net income (loss)	$	4,557		$	13,520		$	(9,975	)	$	43,289

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CONCENTRA OPERATING CORPORATION

a wholly owned subsidiary of

CONCENTRA INC.

Consolidated Balance Sheets

(in thousands)

	December 31, 2004			December 31, 2003
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	61,319		$	42,621
Restricted cash		1,250			—
Accounts receivable, net		175,294			170,444
Prepaid expenses and other current assets		32,011			45,065
Total current assets		269,874			258,130
PROPERTY AND EQUIPMENT, NET		103,058			120,101
GOODWILL AND OTHER INTANGIBLE ASSETS, NET		449,698			483,773
OTHER ASSETS		30,710			25,527
	$	853,340		$	887,531
LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES:
Revolving credit facility	$	—		$	—
Current portion of long-term debt		4,037			4,841
Accounts payable and accrued expenses		123,387			135,862
Total current liabilities		127,424			140,703
LONG-TERM DEBT, NET		730,167			654,393
DEFERRED INCOME TAXES AND OTHER LIABILITIES		58,615			48,425
STOCKHOLDER’S EQUITY (DEFICIT)		(62,866	)		44,010
	$	853,340		$	887,531

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CONCENTRA OPERATING CORPORATION

a wholly owned subsidiary of

CONCENTRA INC.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

	Year Ended December 31,
	2004			2003
OPERATING ACTIVITIES:
Net income (loss)	$	(9,975	)	$	43,289
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation of property and equipment		39,799			45,876
Amortization of intangibles		3,234			3,933
Restricted stock amortization		868			423
Write-off of deferred financing costs		2,505			7,837
Write-off of fixed assets		160			662
(Gain) loss on change in fair value of hedging arrangements		—			(9,869	)
Loss on impairment of goodwill and assets		41,682			—
Unusual charges		(96	)		—
Changes in assets and liabilities:
Accounts receivable, net		(2,972	)		(2,083	)
Prepaid expenses and other assets		14,127			(11,126	)
Accounts payable and accrued expenses		9,541			34,646
Net cash provided by operating activities		98,873			113,588
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired		(6,794	)		(6,237	)
Increase in restricted cash		(1,250	)		—
Purchases of property, equipment and other assets		(27,897	)		(29,648	)
Net cash used in investing activities		(35,941	)		(35,885	)
FINANCING ACTIVITIES:
Borrowings (payments) under the revolving credit facilities, net		—			—
Payment of deferred financing costs		(8,495	)		(13,152	)
Proceeds from the issuance of debt		222,850			518,450
Repayments of debt		(147,926	)		(340,485	)
Payment to terminate hedging arrangements		—			(23,603	)
Contribution to parent		—			(193,912	)
Payment of early debt retirement costs		(11,600	)		—
Distributions to minority interests		(3,445	)		(2,316	)
Payment of dividend to parent		(96,028	)		—
Proceeds from prepaid interest on issued debt		—			768
Contribution from the issuance of common stock by parent		410			266
Other		—			(100	)
Net cash used in financing activities		(44,234	)		(54,084	)
NET INCREASE IN CASH		18,698			23,619
CASH, BEGINNING OF PERIOD		42,621			19,002
CASH, END OF PERIOD	$	61,319		$	42,621

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CONCENTRA OPERATING CORPORATION

a wholly owned subsidiary of

CONCENTRA INC.

Unaudited Reconciliation of Net Income to Adjusted EBITDA

(in thousands)

	Three Months Ended December 31,						Year Ended December 31,
	2004			2003			2004			2003
Net income (loss)	$	4,557		$	13,520		$	(9,975	)	$	43,289
Provision (benefit) for income taxes		1,679			(3,798	)		10,246			6,214
Interest expense, net		13,236			13,374			55,606			56,318
Depreciation expense		9,329			12,054			39,799			45,876
Amortization expense		474			1,068			4,102			4,356
EBITDA		29,275			36,218			99,778			156,053
(Gain) loss on fair value of hedging arrangements		—			—			—			(9,869	)
Loss on impairment		—			—			41,682			—
Loss on early retirement of debt		—			—			14,105			7,837
Unusual charges		(96	)		—			(96	)		—
Minority share of depreciation, amortization and interest		(174	)		(187	)		(714	)		(751	)
Adjusted EBITDA	$	29,005		$	36,031		$	154,755		$	153,270

Computations of Adjusted Earnings Before Interest Taxes Depreciation and Amortization (“Adjusted EBITDA”) have been provided in this press release due to the use of this measure by the holders of the Company’s 9.5% Senior Subordinated Notes and 9.125% Senior Subordinated Notes, and other lenders, for purposes of determining the Company’s performance in light of its debt covenant requirements, which are stated in the Company’s debt agreements as measures that relate to Adjusted EBITDA. Adjusted EBITDA is disclosed because compliance with the liquidity covenants included in these agreements is considered material to the Company. The Company’s computations of this measure may differ from that provided by other companies due to differences in the inclusion or exclusion of items in its computations as compared to that of others. The Company’s measure of Adjusted EBITDA has been made in a manner consistent with the requirements of the indenture that relates to its 9.5% Senior Subordinated Notes and 9.125% Senior Subordinated Notes. Adjusted EBITDA is a measure that is not prescribed for under Generally Accepted Accounting Principles (“GAAP”). Adjusted EBITDA specifically excludes changes in working capital, capital expenditures and other items that are set forth on a cash flow statement presentation of a company’s operating, investing and financing activities, and it also excludes the effects of interest expense, depreciation expense, amortization expense, taxes and other items that are included when determining a company’s net income. As such, the Company would encourage a reader not to use this measure as a substitute for the determination of net income, operating cash flow, or other similar GAAP-related measures, and to use it primarily for the debt covenant compliance purposes above.

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CONCENTRA OPERATING CORPORATION

a wholly owned subsidiary of

CONCENTRA INC.

Supplemental Information

We use certain operating metrics to measure aspects of our operations. Additionally, from time to time, we provide estimates of our possible future financial performance. Our disclosure to you of this information is conditioned in its entirety by the provisions, risk factors and cautionary statements provided for you in the main text of this press release. It is being provided solely to ensure full and fair disclosure to investors in the Company’s existing debt instruments and for no other purpose.

Operating Metrics and Information:

	Three Months Ended December 31,						Year Ended December 31,
	2004			2003			2004			2003
Health centers at period end		257			250			257			250
Total visits to health centers		1,433,455			1,285,525			5,916,170			5,242,515
Same-center performance [a]:
Injury-related visits        %		48.6	%		50.6	%		47.9	%		50.1	%
Visits per business day growth		7.8	%		4.8	%		8.7	%		0.9	%
Revenue per visit growth		(0.3	%)		1.1	%		(0.5	%)		2.5	%
Revenue per business day growth		7.5	%		6.0	%		8.2	%		3.4	%
Revenue (in thousands) [b]	$	117,432		$	108,651		$	491,711		$	445,055

Initial 2005 performance guidance:

All amounts are approximate and reflect current estimates. Actual results may differ materially from provided amounts. This guidance is subject to immediate change and no public update or notice.

Revenue:	$1.135 to $1.160 billion.
Adjusted EBITDA [c]:	$165 to $170 million.
Operating Cash Flow:	$100 to $110 million.
Capital Expenditures:	$43 to $47 million.

Notes:

[a] Our same-center comparisons represent all centers that Health Services has operated for the previous two full years as of the date indicated and includes the effects of any centers acquired and subsequently consolidated into existing centers.

[b] Excludes ancillary services, on-site services and centers acquired within the previous two full years.

[c] Please refer to the discussion on Page 7 of this press release concerning the Company’s computation and use of Adjusted EBITDA.

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