(CXSNF) reports 480% increase in earnings: Counsel Corp <CXS.TO> announcement/Q4 results..
(Full text of press release from Canadian Corporate News)
MARCH 24, 1998
Counsel Corporation Announces 1997 Fourth Quarter and Year
End Results
TORONTO, ONTARIO--Counsel Corporation today reported its
financial results for the fourth quarter and year ended
December 31, 1997. Net earnings for the fourth quarter of 1997
were US$14.7 million, up 480 percent from US$2.5 million a
year earlier. Basic and fully diluted earnings per share were
53 cents for the most recent quarter, compared with 9 cents in
the 1996 fourth quarter.
For the year ended December 31, 1997 earnings from
operations, before realization of value in operating
businesses, increased 68 percent to US$44.8 million from
US$26.7 million for the year ended December 31, 1996. Net
earnings for 1997 were US$17.1 million or US$0.61 per share,
basic and fully diluted, compared with US$28.5 million or
US$1.12 per share basic, US$1.04 per share fully diluted, for
1996. The weighted average number of common shares outstanding
increased to 27.9 million in 1997 from 24.4 million in 1996.
Earnings for 1997 included pre-tax gains on realization of
value in operating businesses of US$14.8 million, due
primarily to the reverse takeover of Counsel affiliate
Capstone Pharmacy Services Inc. by Pharmacy Corporation of
America to form PharMerica Inc. in December. This compares
with gains on realization totaling US$36.2 million in 1996 due
primarily to the sale of 650,000 shares of affiliate American
HomePatient Inc. and a dilution gain arising from the public
offering of 10.35 million Capstone Pharmacy shares.
Counsel has been active in the US health care sector since
1983. It is engaged primarily in three health care segments:
specialty retail pharmacy, home health care and institutional
pharmacy.
Stadtlander Drug Co., Counsel's specialty retail pharmacy
operation, was acquired at the beginning of July 1996. At the
end of June 1997 Counsel increased its ownership to 99 percent
from 64.4 percent. Stadtlander manages the pharmaceutical
needs of patients with high-risk, high-cost chronic medical
conditions.
During the fourth quarter, Stadtlander continued to pursue
its growth strategy of working to dominate the disease states
it already services and entering into new disease states with
favourable growth potential, including providing disease
management services to correctional facilities.. Effective
October 1, 1997, Stadtlander acquired the assets and
operations of Health Management, Inc., a specialty retail
pharmacy provider to patients with chronic medical conditions.
This acquisition expanded Stadtlander's transplant patient
base by more than 7,000 to 14,000. As a result, Stadtlander
now serves nearly four times as many transplant patients as
its nearest competitor and is better positioned to serve
managed care and Medicaid populations in all of its disease
states, including HIV/AIDS. As well, this expands
Stadtlander's presence in two additional markets: oncology and
infertility and provides a platform for entering into the
mental health segment. Last week, Stadtlander announced that
it had entered into a long-term agreement with Novartis
Pharmaceuticals Corporation, a leader in transplant therapies,
intended to enhance the quality of care for transplant
recipients. Together, Stadtlander and Novartis will combine
their collective strengths to introduce an innovative program
for transplant recipients that supports a patient-oriented
"best care" approach through patient education and advanced
pharmaceutical care. This is the second major initiative with
a pharmaceutical company, following the introduction of Tempo
PD, an alliance formed in September 1997 between Stadtlander
and DuPont Merck for treatment of Parkinson's patients.
Counsel's consolidation of Stadtlander's revenues and
operating earnings for 1997 increased by 155 percent and 114
percent, respectively, over 1996 when its results were only
consolidated with Counsel's for the second half of the year.
Revenues for the fourth quarter of 1997 increased by 32
percent over the same period in 1996 due to the Health
Management acquisition; however, operating earnings decreased
by 16 percent due primarily to higher staffing and other costs
related to the integration of the Health Management business.
Counsel's 27 percent-owned American HomePatient Inc.
(NASDAQ:AHOM) is one of the largest diversified providers of
home health care services in the US with over 300 centres in
35 states. Its primary product and service offerings include
respiratory services, infusion therapy, parenteral and enteral
nutrition and medical equipment for patients in the home.
American HomePatient's revenues increased 44 percent to
US$387.3 million in 1997 from US$268.3 million in 1996. In
September, American HomePatient announced its plans to
aggressively respond to the 30 percent reimbursement rate cuts
for Medicare home oxygen services included in the 1997
Balanced Budget Act by fundamentally reshaping the company for
long term growth and value creation. Consequently, American
HomePatient recorded a pre-tax charge of US$67 million in the
third quarter relating to the restructuring plan, goodwill
write-down and related charges. This resulted in a net loss
for the year ended December 31, 1997 of US$25.9 million or
(US$1.75) per share compared to net earnings of US$15.2
million or US$1.10 per share for 1996. Excluding the
non-recurring pre-tax charges of US$67 million, earnings per
share were US$1.30 for1997.
As a result of the reverse takeover, effective December 3,
1997, of Capstone Pharmacy by Pharmacy Corporation of America
to form PharMerica Inc. (NASDAQ - DOSE), Counsel's interest in
the combined company decreased to 9.0 percent so that it no
longer was a "significantly influenced corporation" for
accounting purposes. Consequently, Counsel ceased to account
for its investment in PharMerica/Capstone on the equity method
beginning with the fourth quarter of 1997 and therefore none
of PharMerica's or Capstone's 1997 fourth quarter revenues or
earnings are included in Counsel's statement of earnings.
Counsel's holding of PharMerica is now classified as a
portfolio investment and accounted for by the cost method.
PharMerica is one of the foremost US providers of quality,
cost-effective pharmacy products and services to the long-term
care, assisted living, subacute and skilled nursing industries
(servicing approximately 365,000 beds) as well as online
pharmacy (serving approximately 165,000 patients),
mail-service workers' compensation (serving approximately
82,000 patients), including the catastrophically injured
population, and correctional institutions (serving
approximately 140,000 inmates).
Allan Silber, Chairman and CEO of Counsel, said, "We are
pleased with the progress made in 1997 by the Counsel group of
companies. Each business has made difficult decisions for
restructuring or growth and enters 1998 with strong earnings
momentum and a lower cost environment."
COUNSEL CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands of US$)
December 31 December 31
1997 1996
------------ -----------
ASSETS
Current assets:
Cash and short term investments $ 17,423 $ 53,683
Amounts receivable 83,314 59,018
Income taxes recoverable 8,470 3,676
Inventory 21,254 5,361
Other assets 7,246 5,356
Deferred income taxes 6,902 2,890
--------- ---------
145,238 134,084
--------- ---------
Mortgages and other advances 4,442 4,582
Long term care facilities 26,376 27,241
Other assets 17,628 11,540
Portfolio investment - PharMerica, Inc 89,345 --
Goodwill 57,071 10,585
--------- ---------
248,604 169,593
--------- ---------
$ 393,842 $ 303,677
--------- ---------
--------- ---------
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ 93,170 $ --
Accounts payable and
accrued charges 68,582 90,450
Deferred revenue 4,139 3,250
Mortgages and loans payable 3,236 6,511
--------- ---------
169,127 100,211
--------- ---------
Deferred revenue 3,035 5,686
Mortgages and loans payable 21,056 22,697
Other long term debt 50,684 50,659
Deferred income taxes 8,177 6,066
--------- ---------
82,952 85,108
--------- ---------
252,079 185,319
Minority interest 599 2,344
Shareholders' equity 141,164 116,014
--------- ---------
$ 393,842 $ 303,677
--------- ---------
--------- ---------
COUNSEL CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(in thousands of US$)
For The Three Months For the Year
Ended December 31 Ended December 31
(Unaudited)
--------------------- ---------------------
Revenues (Note 2) $ 155,405 $ 128,876 $ 596,039 $ 347,666
--------------------- ---------------------
--------------------- ---------------------
Earnings (Note 2)
From operating businesses
Specialty retail
pharmacy $ 5,236 $ 6,261 $ 23,073 10,837
Home health care 2,044 1,884 8,561 7,735
Institutional pharmacy - 697 3,213 2,197
Clinical laboratory 328 463 1,083 877
Long term care 214 217 875 889
Realization of value in
operating businesses 10,048 (153) 14,810 36,153
Interest and
other income 2,299 1,152 7,972 4,167
--------------------- ---------------------
Earnings before
undernoted expenses 20,169 10,521 59,587 62,811
Corporate 1,544 743 6,572 3,691
Interest 2,973 1,486 7,734 4,125
Amortization 1,674 1,183 5,345 3,101
Home health care
restructuring
charges (537) - 17,446 -
--------------------- ---------------------
Earnings before
income taxes 14,515 7,109 22,490 51,894
and minority interest
Income taxes (303) 3,260 2,375 21,094
Minority interest 73 1,310 2,992 2,315
--------------------- ---------------------
Net earnings $ 14,745 $ 2,539 $ 17,123 $ 28,485
--------------------- ---------------------
--------------------- ---------------------
Earnings per common share
Net earnings
$ 14,745 $ 2,539 $ 17,123 $ 28,485
Dividends on
special shares - - -
(1,193)
Interest on equity
component of
debentures payable (40) (7) (171)
(7)
--------------------- ---------------------
Net earnings
applicable
to common
shares $ 14,705 $ 2,532 $ 16,952 $ 27,285
--------------------- ---------------------
--------------------- ---------------------
Per common share
- basic $ 0.53 $ 0.09 $ 0.61 $ 1.12
- fully diluted $ 0.53 $ 0.09 $ 0.61 $ 1.04
Weighted average
number of common
shares outstanding 27,924 24,374 27,924 24,374
--------------------- ---------------------
COUNSEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year ended December 31, 1997
1. Accounting for investments
Consolidated subsidiaries
The consolidated financial statements include the accounts of
Counsel Corporation (the Company) and all companies over which
it
has voting control.
The Company's principal operating subsidiaries and its
respective
voting interest in each subsidiary as at December 31, 1997 and
1996 are as follows:
1997 1996
Counsel Healthcare Assets Inc. 100 percent 100 percent
Stadtlander Drug Co. Inc. 99.0 percent 64.4 percent U. S.
Laboratory Corp. 50.1 percent 50.1 percent
Significantly influenced corporations
Corporations over which voting control does not exist but
significant influence is exercised are carried on the equity
method. Amortization of the difference between acquisition cost
and the underlying fair value of the net identifiable assets
acquired at the date of acquisition is included in amortization
expense.
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