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 THIRD QUARTER RESULTS
COMPANY ANNOUNCES TWO PENDING ACQUISITIONS
ADDISON, Texas, October 25, 2001 - Concentra Operating Corporation
("Concentra") today announced results for the third quarter and nine-month
period ended September 30, 2001. Continuing the positive growth trends achieved
in the first half of 2001, the Company reported $36,851,000 in EBITDA during the
third quarter, which represented an 11% increase when compared to the prior
year. Separately, Concentra announced that it has reached agreements in
principle to acquire National Health Resources, Inc. and Health Network Systems
LLC - both privately held companies - in transactions having a combined value of
approximately $172 million.
Concentra reported a 9% increase in third quarter revenue, which rose to
$209,226,000 from $192,764,000 in the same period last year. Operating income
increased 16% to $26,198,000 versus $22,515,000 for the third quarter of 2000.
The net loss for the quarter was $3,837,000 compared with net income of $805,000
in the year-earlier period. During the quarter, net income was affected by a
non-cash decline of $13,473,000 in the fair value of Concentra's hedging
instruments.
Revenue for the first nine months of 2001 increased 10% to $619,233,000
compared with $564,208,000 for the same period during the prior year. Operating
income increased 16% to $71,903,000 versus $62,100,000 for the first nine months
of 2000. Net loss for the first nine months of 2001 was $428,000 compared with
net income of $3,017,000 in the year-earlier period.
Earnings Before Interest Taxes Depreciation and Amortization ("EBITDA"), as
computed in a manner consistent with the definition set forth in the Company's
$190 million Series A Senior Subordinated Notes, increased 11% to $36,851,000 in
the third quarter of 2001 versus $33,104,000 in the same quarter last year. For
the first nine months of 2001, EBITDA also increased 11% to $103,402,000 from
$92,768,000 during the prior year.
Commenting on the announcement, Daniel J. Thomas, President and Chief
Executive Officer of Concentra, said, "We are pleased to report ongoing growth
during the third quarter, as Concentra continued to produce higher revenue and
cash flows. This performance was particularly gratifying considering the weaker
economic environment that prevailed during the quarter. Although these economic
conditions slowed the growth of our Health Services business, Network Services
demonstrated significant increases as compared to the prior year. We believe
these results clearly demonstrate the benefits of our diversified sources of
revenues and cash flows."
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Concentra Announces Third Quarter Results
Page 2
October 25, 2001
As has been the case throughout 2001, Concentra's growing EBITDA and focus
on working capital management continued to be a key driver in the Company's
ability to achieve increasing cash flows from operations. For the nine months
ending September 30, 2001, Concentra produced $48,706,000 in positive cash flow
from operations as compared to $10,297,000 generated during the same period last
year. As a result of these stronger operating cash flows, Concentra had no
borrowings outstanding under its $100,000,000 revolving credit facility at the
end of the third quarter.
The Company also announced two significant acquisitions which it said would
be financed primarily through the issuance of new equity in Concentra's parent
corporation, Concentra Inc. The larger of the two transactions involves New
York City-based National Healthcare Resources, Inc. ("NHR"). NHR has estimated
2001 revenue of roughly $150 million and EBITDA approaching $19 million, and
provides competitive care management and network services to the workers'
compensation and auto industries on a national level. The second transaction
involves the acquisition of Health Network Systems LLC ("HNS"), founded in 1999
and headquartered in Naperville, Illinois. HNS has expected 2001 revenue of
approximately $5 million and provides complementary network services such as
provider bill re-pricing and provider data management for health plans and other
payors working with multiple Preferred Provider Organization networks.
The Company stated that it will be acquiring NHR for approximately $141
million and HNS for roughly $31 million. Funding for the acquisitions will be
provided through the issuance of approximately $132.5 million in new equity,
composed of an $82.5 million exchange of Concentra Inc. shares for outstanding
NHR shares and a $50 million issuance of new equity to Concentra's current
stockholders, including the Company's lead equity sponsor, Welsh, Carson,
Anderson & Stowe. The balance of the acquisition costs will be provided from
Concentra's cash on hand and approximately $20 million in borrowings under its
revolving line of credit.
The acquisitions are subject to the completion of definitive acquisition
agreements, obtaining required corporate and regulatory approvals, and other
customary closing conditions. Concentra has received the consent of its senior
lenders to undertake the acquisitions and expects to close them in November
2001.
"We believe these acquisitions will both increase Concentra's immediate
earnings and cash flows as well as position us for increased future growth,"
said Thomas. "NHR brings depth to our existing Network Services and Care
Management offerings. In particular, its market position with auto insurers
will assist Concentra in expanding its services to this important payor group.
Additionally, we believe NHR's strengths in the network, bill re-pricing and
independent medical exams arenas clearly complement and strengthen those of
Concentra.
"Our acquisition of HNS also clearly expands Concentra's opportunities for
increased growth," he continued. "Although it is a relatively young company,
HNS has already established itself as an important provider of bill re-pricing,
data management and network management services in the Group Health market.
During the past year, through an existing joint-marketing arrangement, we have
benefited directly from the bill volumes which HNS directs into our out-of-
network bill review services. Through this acquisition, we believe that we will
not only benefit from the strong growth which HNS is demonstrating with its
services, but we will also continue to experience the positive effects of
increased bill referral volumes into our traditional out-of-network products."
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Concentra Announces Third Quarter Results
Page 3
October 25, 2001
The Company noted that since these planned transactions are structured
largely around the issuance of new equity, they are expected to result in
reduced leverage on both a pro-forma and prospective basis. Concentra also
estimates that it will achieve approximately $5 to $10 million in cost synergies
from the NHR acquisition.
Thomas also said that the Company will retain the NHR senior management,
including its President, Chris Garcia, following the acquisition. "NHR is
recognized as a leading service provider in the workers' compensation and auto
marketplace, a characteristic that reflects both the quality of the services it
provides as well as the skill and leadership qualities of its management team.
We are delighted by the prospects of NHR's executive management continuing to
play an important role in the ongoing growth of our combined businesses. With a
vision and business philosophy similar to our own, they will add depth to our
management structure and provide key leadership as we work to integrate our
companies."
Concentra Operating Corporation, the successor to and 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 re-pricing, access to specialized preferred provider organizations, first
notice of loss services, case management and other cost containment services.
As of September 30, 2001, Concentra's Health Services division operated 229
occupational health centers across 70 markets in 32 states.
A public, listen-only simulcast of Concentra's third quarter conference
call will begin at 9:00 a.m. Eastern Daylight Time tomorrow (October 26, 2001)
and may be accessed via the Company's web site, http://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 form and receive
an access password. Listening via the Internet requires Windows Media Player
Version 7, which may be downloaded free of charge from the Company's website.
An online replay will be available shortly after the conclusion of the live
broadcast using the same link and will continue through November 26, 2001.
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, 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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Concentra Announces Third Quarter Results
Page 4
October 25, 2001
CONCENTRA OPERATING CORPORATION
a wholly owned subsidiary of
CONCENTRA INC.
Unaudited Consolidated Statements of Operations
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2001 2000 2001 2000
-------- -------- -------- --------
REVENUE:
Health Services $111,584 $105,696 $327,580 $302,960
Network Services 45,169 39,078 132,845 118,859
Care Management Services 52,473 47,990 158,808 142,389
-------- -------- -------- --------
Total revenue 209,226 192,764 619,233 564,208
COST OF SERVICES:
Health Services 88,160 82,299 260,270 239,407
Network Services 25,735 25,804 79,283 76,180
Care Management Services 46,751 42,308 139,310 126,294
-------- -------- -------- --------
Total cost of services 160,646 150,411 478,863 441,881
-------- -------- -------- --------
Total gross profit 48,580 42,353 140,370 122,327
General and administrative expenses 18,557 16,149 57,152 49,314
Amortization of intangibles 3,825 3,689 11,315 10,913
-------- -------- -------- --------
Operating income 26,198 22,515 71,903 62,100
Interest expense, net 16,564 17,753 50,227 51,489
Loss on fair value of hedging
arrangements 13,473 1,818 16,553 2,764
Other, net 307 (140) 612 (263)
-------- -------- -------- --------
Income (loss) before income taxes (4,146) 3,084 4,511 8,110
Provision (benefit) for income taxes (309) 2,279 4,939 5,093
-------- -------- -------- --------
Net income (loss) $ (3,837) $ 805 $ (428) $ 3,017
======== ======== ======== ========
Prior-year revenue and cost of services have been reclassified to conform to the
Company's current reporting of business segments.
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Concentra Announces Third Quarter Results
Page 5
October 25, 2001
CONCENTRA OPERATING CORPORATION
a wholly owned subsidiary of
CONCENTRA INC.
Condensed Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2001 2000
------------- ------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 14,709 $ 6,549
Accounts receivable, net 170,594 160,418
Prepaid expenses and other current assets 28,978 24,679
-------- --------
Total current assets 214,281 191,646
PROPERTY AND EQUIPMENT, NET 108,717 109,110
GOODWILL AND OTHER INTANGIBLE ASSETS, NET 329,219 323,162
OTHER ASSETS 32,728 32,937
-------- --------
$684,945 $656,855
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LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Revolving credit facility $ -- $ --
Current portion of long-term debt 5,264 5,228
Accounts payable and accrued expenses 78,932 70,189
-------- --------
Total current liabilities 84,196 75,417
LONG-TERM DEBT, NET 553,187 556,334
LONG-TERM DEFERRED TAX AND OTHER LIABILITIES 52,353 51,589
FAIR VALUE OF HEDGING ARRANGEMENTS 26,139 9,586
STOCKHOLDER'S EQUITY (DEFICIT) (30,930) (36,071)
-------- --------
$684,945 $656,855
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