NOV press release for their earnings............................
KING OF PRUSSIA, Pa., April 30 /PRNewswire/ -- NovaCare, Inc. (NYSE: NOV), a
national provider of physical rehabilitation and employee services,
announced today net income for the three months ended March 31, 1997, of
$10.1 million or $.16 per share. This compared with a loss of $8.6
million or ($.13) per share for the three months ended March 31, 1996,
which included a restructuring charge and a charge to increase accounts
receivable reserves. Excluding these charges, net income for the prior
year period was $6.9 million or $.11 per share. On this basis, net income
and earnings per share increased 46 percent and 45 percent, respectively,
compared with the third quarter of fiscal 1996.
"Rehabilitation services grew substantially during the third quarter,
contributing to the significant increase in earnings," said John H.
Foster, chairman of NovaCare. "Changes in the U.S. health care system
favor cost- effective settings and outcomes-oriented clinical programs for
the rehabilitation care that returns injured and disabled individuals to
their highest possible level of independence. These are the settings
where NovaCare provides its care.
"We expect strong growth in our rehabilitation services and in our new
employee services business, which provides outsourced human resources
services to small and medium-size employers," continued Foster. "The
obvious advantage to an employer is our ability to control the cost of
health care, particularly rehabilitation and workers' compensation, and
NovaCare's expertise in outsourcing and managing large employee groups in
dispersed locations. The employee services, or professional employer
organization, business offers substantial opportunities to leverage our
strengths to create shareholder value in a related field."
NovaCare's net revenues for the third quarter were $290 million,
representing a 52 percent increase from $191 million in the third quarter
of fiscal 1996, due primarily to NovaCare's entry into the professional
employer organization (PEO) industry in October 1996 and growth in the
company's outpatient and long-term care services businesses. For the
quarter, operating income increased to $21.2 million, compared with
charge-adjusted operating income of $14.3 million in the prior year
period.
Acquisitions of outpatient and PEO companies contributed significantly to
the growth. NovaCare previously announced acquisitions during the third
quarter of three PEO companies, 20 outpatient services and two
occupational health companies. Positive developments during the third
quarter also included improved profit margins in outpatient services due
to successful cost containment programs, growth in new signed contracts as
well as enhanced clinician productivity and pricing in long-term care
services.
The company also announced that in March, the government agency responsible
for administering the Medicare program published its proposal for "salary
equivalency" rates, which will have an impact on the company's long- term
care services business. The rules provide for a 60-day industry comment
period, which is now underway.
"We are pleased that the government is close to resolution on the long-
awaited salary equivalency rates that govern how long-term care facilities
will be reimbursed for contracted rehabilitation services for their
patients," said Timothy E. Foster, chief executive officer of NovaCare.
"However, the proposal that has been released for discussion is based on
flawed data and does not reflect the realities of health care in the
nursing home setting. NovaCare is working with a number of interested
trade organizations to provide accurate data and analysis for review, and
we are confident that a reasonable rate structure will result. As a
result of NovaCare's substantial investments in clinical programs and
systems support for our clinicians, successful cost- cutting initiatives a
year ago, and scale economies, NovaCare is well positioned to continue
serving our long-term care patients with the highest quality care."
NovaCare's year-to-date net revenues were $735 million, a 25 percent
increase compared with $590 million for the nine months ended March 31,
1996. Net income was $26.9 million or $.43 per share for the first nine
months of fiscal 1997, compared with $6.9 million or $.11 per share for
the comparable period in fiscal 1996 ($.35 per share before charges for
restructuring and accounts receivable reserves in fiscal 1996.).
NovaCare, Inc. is the nation's clinical leader in physical rehabilitation,
operating 750 outpatient rehabilitation, orthotics and prosthetics, and
occupational health centers nationwide; and managing rehabilitation
programs in 1,900 long-term care facilities. NovaCare is the nation's
largest employer of rehabilitation clinicians with 17,000 employees across
43 states, treating 35,000 patients per day. NovaCare is also the
nation's second largest professional employer organization (PEO),
providing expert employee services to small and medium-sized businesses.
Cautionary Statement
Except for historical information, matters discussed above are forward-
looking statements that are based on management's estimates, assumptions
and projections. Important factors that could cause results to differ
materially from those expected by management include the timing and nature
of reimbursement changes (including imposition of, and changes in, salary
equivalency rates for Medicare, changes in workers' compensation and other
governmental rate and reimbursement system changes), the number and
productivity of clinicians, decisions by chain customers as to whether to
take therapy and other services in-house, pricing of managed care and
other third party contracts, the direction and success of competitors,
management retention and development, management's success integrating
acquired businesses and in developing and introducing new products and
lines of business, adverse Internal Revenue Service rulings with respect
to the employer status of PEOs, state legislative and regulatory efforts
to control PEOs, and unanticipated market changes.
NovaCare, Inc.
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
March 31, December 31, March 31,
1997 1996 (A) 1996 1997 1996 (A)
Net revenues
Rehabilitation services $238,710 $191,393 $224,677 $672,817 $590,487
Professional employer
organization 159,306 --- 10,335 169,641 ---
Elimination (107,562) --- --- (107,562) ---
290,454 191,393 235,012 734,896 590,487
Cost of services 218,705 146,284 171,980 542,115 431,255
Gross profit
Rehabilitation services 68,380 45,109 62,574 188,954 159,232
Professional employer
organization 5,475 --- 458 5,933 ---
Elimination (2,106) --- --- (2,106) ---
71,749 45,109 63,032 192,781 159,232
Selling, general and
administrative expenses+
6
Rehabilitation services 38,797 33,548 35,295 108,446 101,510
Professional employer
organization 4,011 --- 291 4,302 ---
Elimination (2,106) --- --- (2,106) ---
40,702 33,548 35,586 110,642 101,510
Earnings before interest,
taxes, depreciation and amortization
Rehabilitation services 29,583 11,561 27,279 80,508 57,722
Professional employer
organization 1,464 --- 167 1,631 ---
31,047 11,561 27,446 82,139 57,722
Depreciation 6,173 5,236 5,724 17,831 15,825
Amortization of excess cost
of net assets acquired 3,652 2,504 2,927 9,273 7,456
Provision for restructure
and other special charges --- 13,370 --- --- 13,370
Income from operations 21,222 (9,549) 18,795 55,035 21,071
Investment income 167 816 286 1,543 3,912
Interest expense (3,776) (2,986) (3,280) (10,224) (9,551)
Minority interest (93) (22) (48) (185) (67)
Income before income taxes 17,520 (11,741) 15,753 46,169 15,365
Income taxes 7,427 (3,161) 6,537 19,316 8,495
Net income $10,093 $(8,580) $9,216 $26,853 $6,870
Net income per share $0.16 $(0.13) $0.15 $0.43 $0.11
Weighted average shares
outstanding 63,103 63,813 62,725 63,017 64,560
(A) Net revenues include a $10.5 million pre-tax charge to increase accounts
receivable reserves. |
