Exhibit 99.01
Continucare Corporation Reports Financial Results for Fourth Quarter and Full Fiscal 2004
MIAMI — (BUSINESS WIRE) — Sept. 28, 2004 — Continucare Corporation (AMEX:CNU) today reported financial results for its fourth quarter and full fiscal 2004.
Fourth Quarter Results
For the three months ended June 30, 2004, total revenue was $27.1 million, compared to $25.5 million for the three months ended June 30, 2003. Income from operations during the fourth fiscal quarter of 2004 increased 57% to $1.9 million compared to income of $1.2 million in the same period one year ago. Income from continuing operations in the fourth quarter of fiscal 2004 increased 73% to $1.6 million compared to income of $0.9 million in the year-ago period. There was no income or loss from discontinued operations during the fourth fiscal quarter compared to a loss of $0.1 million in the year-ago period. Net income for the fourth quarter of fiscal 2004 increased 98% to $1.6 million, or $0.03 per diluted share, compared to a net income of $0.8 million, or $0.02 per diluted share, one year ago.
Full Year Results
For the fiscal year ended June 30, 2004, total revenue was $102.5 million compared to $97.2 million for the fiscal year ended June 30, 2003. Income from operations during fiscal 2004 increased 128% to $5.7 million compared to $2.5 million in the prior fiscal year. Income from continuing operations during fiscal 2004 increased 347% to $6.9 million compared to $1.5 million in the prior fiscal year. Loss from discontinued operations during fiscal 2004 was $1.6 million compared to a loss of $1.5 million in the prior fiscal year. Net income for fiscal 2004 increased to $5.3 million, or $0.11 per diluted share, compared to net income of $58,598, or $0.00 per diluted share, one year ago.
Income from continuing operations during fiscal 2004 includes other income of $2.2 million relating to the settlement of an alleged Medicare obligation. The alleged obligation related to rehabilitation clinics that were previously operated by a former Continucare subsidiary and were sold in 1999. At Continucare’s request the Centers for Medicare & Medicaid Services reconsidered the alleged liability and, in October 2003, notified Continucare that the liability had been reduced from the originally asserted amount of $2.4 million to approximately $200,000.
The discontinued operations reflected in Continucare’s financial results relate to its former home health operations which were disposed of in a series of transactions completed in the third fiscal quarter of fiscal 2004 and a group of independent physician contracts terminated effective January 1, 2003.
Commenting on the financial results, Richard C. Pfenniger, Jr., Continucare’s Chief Executive Officer, said, “Fiscal 2004 was a year of accomplishments for Continucare. During the year we took decisive action to streamline our business by divesting our home health operations which had historically burdened us with operating losses. We significantly strengthened our management, filling the important positions of Executive Vice President — Operations, Senior Vice President — Marketing and Business Development, and Chief Financial Officer with talented executives who will provide us with both important skills and valuable leadership. In addition, we significantly improved our financial position through the conversion of outstanding long-term debt into equity, the addition of new capital through a private placement of common stock, the reduction of other debt through pay downs using cash generated from operations and the favorable resolution of previously alleged Medicare obligations.”
Commenting further, Mr. Pfenniger said, “In addition to the actions we took to strengthen our business during Fiscal 2004, we benefited from higher per member premiums associated with our Medicare Advantage patients resulting from the adoption of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 and the increased phase-in of the Medicare risk adjustment program. All of these factors combined to produce a year of outstanding results that provides much promise for the future.”
Continucare Corporation (http://www.continucare.com), headquartered in Miami, Florida, is a holding company with subsidiaries engaged in the business of providing outpatient physician care services through managed care, Medicare direct and fee for service arrangements.
Except for historical matters contained herein, statements made in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors and others are cautioned that forward-looking statements include risks and uncertainties, which may affect our business and prospects and cause actual results to differ materially from those set forth in the forward-looking statements. These factors include, without limitation, our ability to service our indebtedness and respond to capital needs, the ability to achieve expected levels of patient volumes and control the costs of providing services, pricing pressures exerted on us by managed care organizations, the level of payment we receive from governmental programs and third party payors, the ability to attract and retain qualified medical professionals, future legislation changes in governmental regulations, including possible changes in Medicare programs that may impact reimbursements to health care providers and insurers, the impact of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 and the Medicare Risk Adjustment on payments we receive for our managed care operation , technological and pharmaceutical improvements that increase the cost of providing, or reduce the demand for, health care, changes in revenue mix and claims loss ratio; the ability to enter into and renew managed care provider arrangements on acceptable terms, the loss of significant contracts, our current dependence on two HMOs for substantially all of our revenues, our current dependence on the information systems of our affiliated HMOs for certain information regarding our revenues and expenses, delays in receiving payments, increases in the cost of insurance coverage, including our stop-loss coverage, the possible loss of insurance coverage, the collectibility of uninsured accounts and deductible and co-pay amounts, Federal and state investigations, litigation for medical malpractice and the outcome of any such litigation; changes in estimates and judgments associated with our critical accounting policies, impairment charges that could be required in future periods, general economic conditions and uncertainties generally associated with the health care business. These and other applicable risks, cautionary statements and factors that could cause actual results to differ from our forward-looking statements are included in our annual report on Form 10-K for the fiscal year ended June 30, 2004 and other filings with the SEC. We undertake no obligation to update or revise these forward-looking statements to reflect events or circumstances after the date hereof.
CONTINUCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three-Months EndedYear Ended 6/30/04 6/30/03 6/30/04 6/30/03 Revenue: Medical services revenue, net $ 26,962,935 $ 25,513,723 $ 101,758,761 $ 97,164,834 Management fee revenue 158,194 — 677,927 — Other income 6,048 — 22,829 — Total revenue 27,127,177 25,513,723 102,459,517 97,164,834 Operating expenses: Medical services: Medical claims 20,400,851 19,296,643 76,333,580 74,046,265 Other direct costs 2,904,081 2,552,821 11,665,894 10,696,997 Total medical services 23,304,932 21,849,464 87,999,474 84,743,262 Administrative payroll and employee benefits 904,909 772,164 3,822,949 3,681,446 General and administrative 1,525,589 1,683,843 5,821,871 6,252,347 Gain on extinguishment of debt (500,000 ) — (850,000 ) — Total operating expenses 25,235,430 24,305,471 96,794,294 94,677,055 Income from operations 1,891,747 1,208,252 5,665,223 2,487,779 Other income (expense): Interest income 2,000 1,500 4,793 6,568 Interest expense (263,155 ) (265,850 ) (1,006,082 ) (956,327 ) Medicare settlement related to terminated operations — — 2,218,278 — Income from continuing operations 1,630,592 943,902 6,882,212 1,538,020 Income (loss) from discontinued operations: Home health operations — (425,269 ) (1,666,934 ) (1,830,118 ) Terminated IPA — 305,712 73,091 350,696 Loss from discontinued operations — (119,557 ) (1,593,843 ) (1,479,422 ) Net income $ 1,630,592 $ 824,345 $ 5,288,369 $ 58,598 Basic net income (loss) per common share: Income from continuing operations $ .03 $ .02 $ .16 $ .04 Loss from discontinued operations — — (.04 ) (.04 ) Net income per common share $ .03 $ .02 $ .12 $ — Diluted net income (loss) per common share: Income from continuing operations $ .03 $ .02 $ .14 $ .04 Loss from discontinued operations — — (.03 ) (.04 ) Net income per common share $ .03 $ .02 $ .11 $ — Basic weighted average common shares outstanding 47,728,126 42,379,001 43,763,835 40,776,903 Diluted weighted average common shares outstanding 52,194,597 42,379,001 49,232,716 40,776,903
CONTINUCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30,
2004June 30,
2003ASSETS Current assets: Cash and cash equivalents $ 720,360 $ 160,743 Certificates of deposit, current 101,515 101,258 Accounts receivable, net of allowance for doubtful accounts of approximately $827,000 and $4,823,000 at June 30, 2004 and 2003, respectively 29,591 323,443 Other receivables 423,215 410,765 Due from Medicare, net — 258,930 Due from HMOs, net of a liability for incurred but not reported medical claims expense of approximately $11,450,000 and $13,014,000 at June 30, 2004 and 2003, respectively 3,337,293 1,414,469 Prepaid expenses and other current assets 861,215 565,935 Total current assets 5,473,189 3,235,543 Certificates of deposit 30,000 30,000 Assets related to discontinued operations — 540,398 Equipment, furniture and leasehold improvements, net 492,054 430,382 Goodwill 14,342,510 14,342,510 Managed care contracts, net of accumulated amortization of approximately $2,069,000 and $1,717,000 at June 30, 2004 and 2003, respectively 1,442,858 1,793,431 Deferred financing costs, net of accumulated amortization of $222,500 and $142,160 at June 30, 2004 and 2003, respectively 662,502 518,382 Other assets, net 100,483 109,330 Total assets $ 22,543,596 $ 20,999,976 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 504,151 $ 683,488 Accrued expenses 1,451,888 2,283,048 Due to Medicare, net 14,645 — Liabilities related to discontinued operations 208,484 110,345 Credit facility — 2,315,000 Current portion of convertible subordinated notes payable — 233,716 Current portion of long-term debt — 2,640,943 Current portion of related party note payable 8,052 63,854 Accrued interest payable 710 51,754 Current portion of capital lease obligations 81,163 70,913 Deferred revenue 3,000,000 — Total current liabilities 5,269,093 8,453,061 Deferred revenue — 3,850,000 Capital lease obligations, less current portion 101,177 125,606 Convertible subordinated notes payable, less current portion — 4,122,751 Long term debt, less current portion 29,077 1,341,947 Related party note payable, less current portion 117,717 997,333 Total liabilities 5,517,064 18,890,698 Commitments and contingencies Shareholders' equity: Common stock; $0.0001 par value; 100,000,000 shares authorized, 53,296,379 shares issued and 50,300,186 shares outstanding at June 30, 2004 and 45,375,194 shares issued and 42,379,001 shares outstanding at June 30, 2003 5,031 4,239 Additional paid-in capital 69,907,973 60,279,880 Accumulated deficit (47,461,771 ) (52,750,140 ) Treasury stock (2,996,193 shares at June 30, 2004 and 2003) (5,424,701 ) (5,424,701 ) Total shareholders' equity 17,026,532 2,109,278 Total liabilities and shareholders' equity $ 22,543,596 $ 20,999,976
CONTINUCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30, 2004 2003 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 5,288,369 $ 58,598 Loss from discontinued operations 1,593,843 1,479,422 Income from continuing operations 6,882,212 1,538,020 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization, including amortization of deferred financing costs 1,201,675 1,162,034 Provision for bad debts 104,296 44,333 Medicare settlement related to terminated operations (2,218,278 ) — Loss on disposal of property and equipment — 500 Director compensation paid through the issuance of restricted common stock — 123,000 Gain on extinguishment of debt (850,000 ) — Changes in operating assets and liabilities, excluding the effect of disposals: Accounts receivable 189,556 (272,809 ) Prepaid expenses and other current assets (295,280 ) (24,422 ) Other receivables (12,450 ) 423,462 Other assets 3,763 (29,629 ) Accounts payable and accrued expenses (1,010,497 ) (114,317 ) Due from HMO's, net (1,922,824 ) 384,182 Due to/from Medicare, net 273,575 (137,695 ) Accrued interest payable (51,044 ) 41,046 Net cash provided by continuing operations 2,294,704 3,137,705 Net cash used in discontinued operations (998,872 ) (1,933,360 ) Net cash provided by operating activities 1,295,832 1,204,345 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of property and equipment — 500 Purchase of certificate of deposit (30,000 ) (70,000 ) Proceeds from maturity of certificates of deposit 29,743 99,555 Purchase of property and equipment (144,585 ) (170,273 ) Net cash used in continuing operations (144,842 ) (140,218 ) Net cash (used in) provided by discontinued operations (938 ) 15,751 Net cash used in investing activities (145,780 ) (124,467 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of stock in private placement transaction 3,464,609 — Payments on convertible subordinated notes (233,716 ) (273,896 ) Payments on related party notes (35,953 ) (63,853 ) Principal repayments under capital lease obligation (76,000 ) (112,256 ) Payment of deferred financing costs (15,000 ) (15,000 ) Proceeds from exercise of stock options 351,370 — Net decrease in credit facility (2,315,000 ) — Advances from HMOs — 75,000 Payments on advances from HMOs — (75,000 ) Third party assumption of capital lease obligation — (1,789 ) Repayments to Medicare per agreement (1,730,745 ) (632,751 ) Net cash used in continuing operations (590,435 ) (1,099,545 ) Net cash used in discontinued operations — — Net cash used in financing activities (590,435 ) (1,099,545 ) Net increase (decrease) in cash and cash equivalents 559,617 (19,667 ) Cash and cash equivalents at beginning of fiscal year 160,743 180,410 Cash and cash equivalents at end of fiscal year $ 720,360 $ 160,743 SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING TRANSACTIONS: Stock issued for deferred financing costs $ 870,000 $ 645,541 Stock issued upon conversion of subordinated notes payable 4,043,441 — Stock issued upon conversion of related party note payable 899,465 — Note payable issued for refunds due to Medicare for overpayments — 694,800 Note payable canceled due to settlement of cost report reopening — 222,574 Purchase of furniture and fixtures with proceeds of capital lease obligations 61,820 167,258 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ 563,750 $ 325,337
CONTACT: Continucare Corporation, Miami
Fernando L. Fernandez, 305-350-7555