EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO

 

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 THIRD QUARTER RESULTS

 

ADDISON, Texas, November 9, 2005 – Concentra Operating Corporation (“Concentra” or the “Company”) today announced results for the third quarter ended September 30, 2005. The Company reported consolidated Adjusted Earnings Before Interest Taxes Depreciation and Amortization (“Adjusted EBITDA”) of $46,527,000 for the quarter. This represented an increase of 9.7% over the $42,428,000 in Adjusted EBITDA reported for the same period in 2004. Concentra computes Adjusted EBITDA in the manner prescribed by its bond indentures, and a reconciliation of Adjusted EBITDA to net income is provided within this press release.

 

Revenue for the third quarter of 2005 increased to $289,830,000 from $283,224,000 in the year-earlier period. Operating income was $38,431,000 in the third quarter compared with an operating loss of $8,193,000 in the same period last year. The year-over-year difference primarily related to non-cash impairment charges of $41,682,000 taken in the third quarter last year in connection with the write-down of the goodwill and other long-lived assets of the Company’s Care Management Services segment. Net income for the quarter was $20,778,000 versus a net loss of $26,295,000 in the year-earlier quarter. In addition to the prior-year impairment charges, the Company also incurred a pre-tax loss of $2,290,000 during the third quarter of 2004 related to the early retirement of the remaining $27,579,000 of its 13% Senior Subordinated Notes.

 

Concentra’s revenue on a year-to-date basis increased to $851,673,000 from $834,827,000 in the same period of 2004. Operating income increased to $106,641,000 from $54,238,000 for the first nine months of 2004, with the difference reflecting primarily the impact of the prior-year non-cash impairment charges mentioned above. Net income for the first nine months of the year was $53,589,000 versus a net loss of $14,532,000 in the first nine months of 2004, which included a year-to-date loss on early retirement of debt totaling $14,105,000. For the first nine months of 2005, Adjusted EBITDA was $130,862,000 versus $125,750,000 for the comparable period last year.

 

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Concentra Announces Third Quarter Results

Page 2

November 9, 2005

 

“We’re very pleased with our third quarter operating results,” said Daniel Thomas, Concentra’s President and Chief Executive Officer. “Our Health Services segment provided us with $17.1 million in top-line growth and a $2.9 million increase in gross profit. These results reflect a solid same-center performance and strong increases in the other diversified services we provide through this area of our business. With the recent closing of our acquisition of Occupational Health + Rehabilitation Inc (OH+R), we have expanded our market-leading national footprint of health centers to 300 and are well positioned to continue to expand our presence in the years to come.

 

“While our Network Services segment did reflect a slight decrease in its revenue and earnings during the quarter, we completed our acquisition of Beech Street Corporation shortly after the close of the quarter,” he continued. “This acquisition provides us with a strong national network of contracted providers and an impressive list of new clients. We believe Beech Street will contribute to a resumption of our growth in this segment during the coming year.

 

“The integration of these two newly acquired assets into our Health Services and Network Services business segments continues to proceed according to our plans,” said Thomas. “We look forward to the successful completion of 2005 and to our opportunity to capitalize on our operating achievements and recent acquisitions during the coming new year.”

 

At September 30, 2005, Concentra had $82,481,000 in unrestricted cash and investments. At the conclusion of the third quarter, the Company’s Days Sales Outstanding was 55 days, which represented the lowest level achieved in Concentra’s history. Due in part to these positive working capital trends, the Company’s net cash provided by operating activities for the year to date grew to $96,674,000, which represented an increase of $25,059,000 as compared to the first nine months of 2004.

 

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 preferred provider organizations, first notice of loss services, case management and other cost containment services. Concentra provides its services to approximately 136,000 employer locations and 3,700 insurance companies, group health plans, third-party administrators and other healthcare payors. The Company has 300 health centers located in 40 states. It also operates the Beech Street and FOCUS networks. These provider networks include 544,000 providers, 52,000 ancillary providers and 4,400 acute-care hospitals nationwide.

 

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Concentra Announces Third Quarter Results

Page 3

November 9, 2005

 

A public, listen-only simulcast of Concentra’s third quarter conference call will begin at 9:00 a.m. Eastern Daylight Time tomorrow (November 10, 2005) and may be accessed via the Company’s website, 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 December 10, 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, acquisitions 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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Concentra Announces Third Quarter Results

Page 4

November 9, 2005

 

CONCENTRA OPERATING CORPORATION

a wholly owned subsidiary of

CONCENTRA INC.

Unaudited Consolidated Statements of Operations

(in thousands)

 

     Three Months Ended
September 30,


    Nine Months Ended
September 30,


 
     2005

    2004

    2005

    2004

 

REVENUE:

                                

Health Services

   $ 173,284     $ 156,214     $ 495,089     $ 435,221  

Network Services

     67,541       69,635       203,726       216,412  

Care Management Services

     49,005       57,375       152,858       183,194  
    


 


 


 


Total revenue

     289,830       283,224       851,673       834,827  

COST OF SERVICES:

                                

Health Services

     138,376       124,159       401,134       351,102  

Network Services

     39,580       40,465       120,550       124,519  

Care Management Services

     43,190       51,363       131,309       161,839  
    


 


 


 


Total cost of services

     221,146       215,987       652,993       637,460  
    


 


 


 


Total gross profit

     68,684       67,237       198,680       197,367  

General and administrative expenses

     29,670       32,930       91,717       98,906  

Amortization of intangibles

     583       818       1,748       2,541  

Loss on impairment

     —         41,682       —         41,682  

Gain on sale of assets

     —         —         (1,426 )     —    
    


 


 


 


Operating income (loss)

     38,431       (8,193 )     106,641       54,238  

Interest expense, net

     14,166       14,391       41,281       42,370  

(Gain) loss on fair value of economic hedges

     (662 )     —         131       —    

Loss on early retirement of debt

     —         2,290       —         14,105  

Other, net

     1,105       932       2,602       2,715  
    


 


 


 


Income (loss) before income taxes

     23,822       (25,806 )     62,627       (4,952 )

Provision (benefit) for income taxes

     2,508       (148 )     8,490       8,921  
    


 


 


 


Income (loss) from continuing operations

     21,314       (25,658 )     54,137       (13,873 )

Loss from discontinued operations

     536       637       548       659  
    


 


 


 


Net income (loss)

   $ 20,778     $ (26,295 )   $ 53,589     $ (14,532 )
    


 


 


 


 

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Concentra Announces Third Quarter Results

Page 5

November 9, 2005

 

CONCENTRA OPERATING CORPORATION

a wholly owned subsidiary of

CONCENTRA INC.

Consolidated Balance Sheets

(in thousands)

 

     September 30,
2005


    December 31,
2004


 
     (unaudited)        

ASSETS

                

CURRENT ASSETS:

                

Cash and cash equivalents

   $ 82,481     $ 61,319  

Restricted cash and short-term investments

     4,175       1,250  

Accounts receivable, net

     174,820       175,294  

Prepaid expenses and other current assets

     38,787       32,011  
    


 


Total current assets

     300,263       269,874  

PROPERTY AND EQUIPMENT, NET

     111,729       103,058  

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

     453,473       449,698  

OTHER ASSETS

     31,721       30,710  
    


 


     $ 897,186     $ 853,340  
    


 


LIABILITIES AND STOCKHOLDER’S EQUITY

                

CURRENT LIABILITIES:

                

Revolving credit facility

   $ —       $ —    

Current portion of long-term debt

     3,979       34,092  

Accounts payable and accrued expenses

     135,982       123,387  
    


 


Total current liabilities

     139,961       157,479  

LONG-TERM DEBT, NET

     697,592       700,112  

DEFERRED INCOME TAXES AND OTHER LIABILITIES

     66,840       58,615  

FAIR VALUE OF ECONOMIC HEDGES

     131       —    

STOCKHOLDER’S EQUITY (DEFICIT)

     (7,338 )     (62,866 )
    


 


     $ 897,186     $ 853,340  
    


 


 

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Concentra Announces Third Quarter Results

Page 6

November 9, 2005

 

CONCENTRA OPERATING CORPORATION

a wholly owned subsidiary of

CONCENTRA INC.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

 

     Nine Months Ended
September 30,


 
     2005

    2004

 

OPERATING ACTIVITIES:

                

Net income (loss)

   $ 53,589     $ (14,532 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

                

Depreciation of property and equipment

     26,786       30,470  

Amortization of intangibles

     1,748       2,541  

Restricted stock amortization

     1,095       1,087  

Loss on change in fair value of economic hedges

     131       —    

Loss on impairment of goodwill and assets

     —         41,682  

Gain on sale of assets

     (1,426 )     —    

Write-off of deferred financing costs

     —         2,505  

Write-off of fixed assets

     520       209  

Changes in assets and liabilities:

                

Accounts receivable, net

     834       (12,026 )

Prepaid expenses and other assets

     (10,530 )     10,198  

Accounts payable and accrued expenses

     23,927       9,481  
    


 


Net cash provided by operating activities

     96,674       71,615  

INVESTING ACTIVITIES:

                

Purchases of property, equipment and other assets

     (35,103 )     (19,226 )

Acquisitions, net of cash acquired

     (8,334 )     (6,794 )

Proceeds from sale of assets

     1,699       —    
    


 


Net cash used in investing activities

     (41,738 )     (26,020 )

FINANCING ACTIVITIES:

                

Borrowings (payments) under revolving credit facilities

     —         —    

Repayments of debt

     (33,234 )     (146,918 )

Distributions to minority interests

     (672 )     (1,141 )

Payment of deferred financing costs

     (28 )     (8,595 )

Proceeds from the issuance of debt

     —         222,850  

Dividend to parent

     —         (96,028 )

Payment of early debt retirement costs

     —         (11,600 )

Contribution from the issuance of common stock by parent

     160       410  
    


 


Net cash used in financing activities

     (33,774 )     (41,022 )

NET INCREASE IN CASH

     21,162       4,573  

CASH, BEGINNING OF PERIOD

     61,319       42,621  
    


 


CASH, END OF PERIOD

   $ 82,481     $ 47,194  
    


 


 

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Concentra Announces Third Quarter Results

Page 7

November 9, 2005

 

CONCENTRA OPERATING CORPORATION

a wholly owned subsidiary of

CONCENTRA INC.

Unaudited Reconciliation of Net Income to Adjusted EBITDA

(in thousands)

 

     Three Months Ended
September 30,


    Nine Months Ended
September 30,


 
     2005

    2004

    2005

    2004

 

Net income (loss)

   $ 20,778     $ (26,295 )   $ 53,589     $ (14,532 )

Provision (benefit) for income taxes

     2,508       (148 )     8,490       8,921  

Interest expense, net

     14,166       14,391       41,281       42,370  

Depreciation expense

     9,240       9,716       26,786       30,470  

Amortization expense

     949       1,310       2,843       3,628  
    


 


 


 


EBITDA

     47,641       (1,026 )     132,989       70,857  

(Gain) loss on fair value of economic hedges

     (662 )     —         131       —    

Loss on impairment

     —         41,682       —         41,682  

Loss on early retirement of debt

     —         2,290       —         14,105  

Gain on sale of assets

     —         —         (1,426 )     —    

Discontinued operations – income tax

     (288 )     (343 )     (295 )     (354 )

Minority share of depreciation, amortization and interest

     (164 )     (175 )     (537 )     (540 )
    


 


 


 


Adjusted EBITDA

   $ 46,527     $ 42,428     $ 130,862     $ 125,750  
    


 


 


 


 

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 Announces Third Quarter Results

Page 8

November 9, 2005

 

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
September 30,


    Nine Months Ended
September 30,


 
     2005

    2004

    2005

    2004

 

Health centers at period end

     272       257       272       257  

Total visits to health centers

     1,741,607       1,610,721       4,949,477       4,482,715  

Same-center performance [a]:

                                

Injury-related visits %

     45.6 %     47.3 %     46.0 %     47.6 %

Visits per business day growth

     5.3 %     8.1 %     5.1 %     9.0 %

Revenue per visit growth

     1.0 %     (0.3 %)     1.4 %     (0.6 %)

Revenue per business day growth

     6.3 %     7.8 %     6.5 %     8.4 %

Revenue (in thousands) [b]

   $ 141,500     $ 130,804     $ 406,128     $ 374,279  

 

Current 2005 performance guidance:

 

(Subject to immediate change and no public update or notice; includes the effects of recent acquisitions)

 

Revenue:

  $1.145 billion to $1.175 billion.    

Adjusted EBITDA [c]:

  $165 million to $169 million.    

Operating Cash Flow:

  $105 million to $115 million.    

Capital Expenditures:

  $48 million to $53 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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