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 FIRST QUARTER RESULTS
ADDISON, Texas, May 6, 2002 - Concentra Operating Corporation
("Concentra") today announced results for the first quarter ended March 31,
2002. The Company reported Consolidated Earnings Before Interest Taxes
Depreciation and Amortization ("EBITDA") of $30,084,000 in the first quarter of
2002 versus $29,024,000 in the same quarter last year.
Revenue for the first quarter increased 19% to $238,380,000 from
$200,758,000 in the year-earlier quarter. Operating income increased 8% to
$20,313,000 from $18,767,000 in the same period last year. Net income for the
quarter totaled $5,145,000 compared with a net loss of $5,438,000 for the first
quarter of 2001.
Results for the first quarter included one-time revenue and expense
adjustments related to a change in accounting estimate for accounts receivable
reserves. Following an extensive review of the Company's accounts receivable
history and collection experience, utilizing new data provided by recently
implemented information systems, Concentra determined that additional sales
allowances and bad debt reserves of $7,106,000 were required as of March 31,
2002. This reserve increase related primarily to the Company's Health Services
segment, offset by reserve reductions in other segments. This analysis also
indicated that the reserve amounts being provided for current billings are
sufficient and need no adjustment at this time. These additional allowances were
the primary contributing factors to a decrease in the Company's days sales
outstanding ("DSO") from 73 days at the conclusion of 2001 to 66 days at March
31, 2002, which reflects the lowest level in the Company's history since its
formation in 1997. Through an increased focus on collections and working capital
management, the Company's DSO has been declining from a peak of 83 days in
September of 1999 to its new level. This net addition to receivables allowances
was partially offset by a one-time $3,867,000 reduction in employee benefits
during the quarter. Excluding these adjustments, the Company's EBITDA for the
first quarter of 2002 would have been $33,323,000.
Commenting on the results, Daniel J. Thomas, President and Chief
Executive Officer of Concentra, said, "We are pleased to report that Concentra
has continued to turn in a solid operational and financial performance in spite
of the generally challenging national economic conditions that have restrained
employment growth and hiring activities, which are key drivers for our Health
Services and other workers' compensation-related businesses. Nevertheless, we
saw good overall operating results during the quarter, despite the one-time
adjustments which affected the quarter. This relatively strong operating
performance relates both to year-over-year growth in our Care Management
Services segment and to the initial effects of the synergies which we are
realizing from our acquisition of National Healthcare Resources, Inc."
-MORE-
Concentra Announces First Quarter Results
Page 2
May 6, 2002
Commenting specifically about the Company's Health Services segment,
Thomas noted that visit trends continued to reflect a year-over-year decline in
the first quarter due to the ongoing effects of lower nationwide employment and
related injury trends. "Even though we remained largely on track for revenue and
EBITDA growth in the first quarter, we currently believe the economic slowdown
we have faced during the quarter has been deeper and more protracted than we
originally expected," said Thomas. However, Thomas also stated that the Company
has been seeing improvement in these trends during the second quarter and
believes that the Company's performance will benefit from this apparent recovery
in job growth.
At March 31, 2002, due primarily to seasonal working capital
requirements, Concentra had borrowings of $21,500,000 outstanding under its
$100,000,000 revolving credit facility. This compares with borrowings of
$17,000,000 at the year-earlier date. The Company stated that higher
year-over-year borrowings relate primarily to the Company's use of approximately
$20 million in revolver borrowings as a part of its financing for its
acquisition of National Healthcare Resources, Inc. in November of 2001.
Concentra's first quarter net income was positively affected by a
$5,190,000 gain in the value of the Company's interest rate hedging arrangements
as compared to a decrease in value of $6,726,000 during the first quarter of
2001. The increase in fair value of the Company's fixed-rate hedging
arrangements was primarily the result of a general increase in interest rate
expectations during the quarter. Changes in the fair value of the Company's
hedging arrangements are non-cash in nature and will ultimately offset each
other on a cumulative basis if Concentra holds the underlying instruments to
maturity.
Additionally, Concentra's net income benefited from the effects of
adopting Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangibles," as of December 31, 2001. Under this new accounting standard,
Concentra is required to discontinue its amortization of goodwill for periods
subsequent to 2001. During the first quarter, the Company had amortization
expense of $929,000 as compared to $3,677,000 during the same period last year.
On a pro-forma basis, the Company would have amortized $69,000 during the first
quarter of 2001 had this new accounting standard been in effect during that
comparative period.
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.
Concentra provides its services to over 130,000 employers and 3,000 insurance
companies, health plans and third party administrators nationwide.
-MORE-
Concentra Announces First Quarter Results
Page 3
May 6, 2002
A public, listen-only simulcast of Concentra's first quarter conference
call will begin at 9:00 a.m. Eastern Daylight Time tomorrow (May 7, 2002) 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. An online replay will be available shortly after the conclusion of the
live broadcast using the same link and will continue through June 7, 2002.
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 workplace injury trends, 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.
-MORE-
Concentra Announces First Quarter Results
Page 4
May 6, 2002
CONCENTRA OPERATING CORPORATION
a wholly owned subsidiary of
CONCENTRA INC.
Unaudited Consolidated Statements of Operations
(in thousands)
Three Months Ended
March 31,
-------------------------------
2002 2001
------------- -------------
REVENUE:
Health Services $ 101,676 $ 106,352
Network Services 57,229 42,345
Care Management Services 79,475 52,061
------------- -------------
Total revenue 238,380 200,758
COST OF SERVICES:
Health Services 93,826 88,101
Network Services 33,551 26,247
Care Management Services 67,372 45,295
------------- -------------
Total cost of services 194,749 159,643
------------- -------------
Total gross profit 43,631 41,115
General and administrative expenses 22,389 18,671
Amortization of intangibles 929 3,677
------------- -------------
Operating income 20,313 18,767
Interest expense, net 16,421 16,910
(Gain) loss on fair value of hedging arrangements (5,190) 6,726
Loss of acquired affiliate, net of tax - 1,116
Other, net 368 7
------------- -------------
Income (loss) before income taxes 8,714 (5,992)
Provision (benefit) for income taxes 3,569 (554)
------------- -------------
Net income (loss) $ 5,145 $ (5,438)
============= =============
Concentra's first quarter 2001 bad debt expense of $2.7 million has been
reclassified from a reduction to revenue to cost of services to conform to
the classifications used in 2002. This reclassification resulted from a
change in Concentra's process and methodology for estimating bad debt and
sales allowances.
-MORE-
Concentra Announces First Quarter Results
Page 5
May 6, 2002
CONCENTRA OPERATING CORPORATION
a wholly owned subsidiary of
CONCENTRA INC.
Unaudited Consolidated Balance Sheets
(in thousands)
March 31, December 31,
2002 2001
------------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,327 $ 7,308
Accounts receivable, net 175,677 181,023
Prepaid expenses and other current assets 37,509 38,760
------------- -------------
Total current assets 221,513 227,091
PROPERTY AND EQUIPMENT, NET 131,293 132,302
GOODWILL AND OTHER INTANGIBLE ASSETS, NET 478,489 475,500
OTHER ASSETS 32,312 32,072
------------- -------------
$ 863,607 $ 866,965
============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Revolving credit facility $ 21,500 $ 6,000
Current portion of long-term debt 5,106 4,211
Accounts payable and accrued expenses 113,485 133,908
------------- -------------
Total current liabilities 140,091 144,119
LONG-TERM PORTION OF DEBT 551,242 552,270
DEFERRED INCOME TAXES AND OTHER LIABILITIES 67,156 67,094
FAIR VALUE OF HEDGING ARRANGEMENTS 20,694 25,883
STOCKHOLDER'S EQUITY 84,424 77,599
------------- -------------
$ 863,607 $ 866,965
============= =============
-MORE-
Concentra Announces First Quarter Results
Page 6
May 6, 2002
CONCENTRA OPERATING CORPORATION
a wholly owned subsidiary of
CONCENTRA INC.
Reconciliation of Net Income (Loss) to EBITDA
(in thousands)
Three Months Ended
March 31,
-------------------------------
2002 2001
------------- -------------
Net (income) loss $ 5,145 $ (5,438)
Provision (benefit) for income taxes 3,569 (554)
Interest expense, net 16,421 16,910
(Gain) loss on fair value of hedging
arrangements (5,190) 6,726
Equity in loss of acquired affiliate, net of tax -- 1,116
Other, net 368 7
------------- -------------
Operating income 20,313 18,767
Depreciation expense 9,195 6,576
Amortization of intangibles 929 3,677
Minority interest (353) 4
------------- -------------
EBITDA $ 30,084 $ 29,024
============ ============
-END-