EXHIBIT 99.1
[GRAPHIC REMOVED HERE]
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 SECOND QUARTER RESULTS
ADDISON, Texas, August 6, 2002 - Concentra Operating Corporation
("Concentra") today announced results for the second quarter and six-month
period ended June 30, 2002. The Company reported Consolidated Earnings Before
Interest Taxes Depreciation and Amortization ("EBITDA") of $36,664,000.
Revenue for the second quarter increased 17% to $251,598,000 compared with
$214,881,000 for the same period last year. Operating income increased slightly
to $27,034,000 versus $26,938,000 for the second quarter of 2001. Net income for
the quarter totaled $2,466,000 compared with $7,305,000 in the year-earlier
period. Revenue for the first half of 2002 increased 18% to $489,978,000
compared with $415,639,000 for the prior-year period. Operating income increased
4% to $47,347,000 versus $45,705,000 for the first half of 2001. Net income for
the first six months of 2002 was $7,611,000 compared with $1,867,000 in the
year-earlier period. The Company's growth in revenue related primarily to its
acquisition of National Healthcare Resources, Inc. in November of 2001.
EBITDA, as computed in a manner consistent with the definition set forth in
the Company's $190 million Series A Senior Subordinated Notes, declined 2% to
$36,664,000 in the second quarter of 2002 versus $37,527,000 in the same quarter
last year. For the first half of 2002, EBITDA was $66,748,000 compared with
$66,551,000 in the same period last year.
Commenting on the results, Daniel J. Thomas, Chief Executive Officer of
Concentra, said, "We are pleased that Concentra has been able to sustain a
consistent level of year-over-year EBITDA performance despite the effects which
the nation's economy and lower employment levels have had on our workers'
compensation-related businesses. During the quarter, we began to see
improvements in our health services business trends which corresponded to the
gradual improvements that have been reported in the nation's economy. However,
our overall performance during the quarter was affected by the lingering effects
of the overall decline in the economy and the impact it has had on the number of
nationwide workers' compensation injuries. The decline we experienced in our
health services business during the fall of last year through the spring of this
year is now being felt by our later-stage workers' compensation businesses in
our network services and care management services segments.
-MORE-
Concentra Announces Second Quarter Results
Page 2
August 6, 2002
"I believe our stable overall performance demonstrates the benefits which
we enjoy in being a company with diversified services and markets, and we're
optimistic about the opportunities to resume our traditional rates of growth
toward the end of this year," said Thomas.
Thomas also announced that Frederick C. Dunlap recently joined the Company
as its new President and Chief Operating Officer. "Fred brings a tremendous
amount of management and industry experience to Concentra. We're pleased to have
him on board and we are confident he will contribute significantly to our future
success." Thomas stated that in connection with the departure of the Company's
previous Chief Operating Officer, Concentra incurred a charge in the second
quarter of $788,000 for related expenses.
The Company also stated that year-to-date results reflect one-time revenue
and expense adjustments totaling $7,106,000 related to a change in accounting
estimate for accounts receivable reserves which was made during the first
quarter. These increased reserve amounts were partially offset by a one-time
$3,867,000 reduction in employee benefits during the first quarter.
Stockholder's equity increased to $143,400,000 during the quarter, due in
part to the contribution from the Company's parent company, Concentra Inc., of
$53,274,000 in net cash proceeds from the issuance of a $55,000,000
payment-in-kind bridge note facility to Concentra Inc. This bridge note facility
and the corresponding equity contribution to Concentra were made to finance the
redemption by Concentra on July 24, 2002 of $47,500,000 of the outstanding 13%
senior subordinated notes, and the payment of a 13% premium associated with the
redemption. As a result of having additional cash on hand at June 30, 2002
associated with this equity contribution, Concentra had no borrowings
outstanding under its $100,000,000 revolving credit facility as of the end of
the quarter. The Company also continued to report improvements in its Days Sales
Outstanding which fell to 64 days at the end of the second quarter.
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 approximately 100,000 employers and 3,000
insurance companies, health plans and third party administrators nationwide.
A public, listen-only simulcast of Concentra's second quarter conference
call will begin at 9:00 a.m. ET tomorrow and may be accessed via the Company's
web site, concentra.com. Investors are invited to access the call at least 15
minutes before the start time in order to complete a brief registration form and
receive an entry password. An online replay will be available shortly after the
conclusion of the live broadcast using the same link and will continue through
September 7, 2002.
-MORE-
Concentra Announces Second Quarter Results
Page 3
August 6, 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 Second Quarter Results
Page 4
August 6, 2002
CONCENTRA OPERATING CORPORATION
a wholly owned subsidiary of
CONCENTRA INC.
Unaudited Consolidated Statements of Operations
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- -------------------------------
2002 2001 2002 2001
------------- ------------- ------------- -------------
REVENUE:
Health Services $ 120,868 $ 115,276 $ 222,544 $ 221,628
Network Services 56,260 45,331 113,489 87,676
Care Management Services 74,470 54,274 153,945 106,335
------------ ------------- ------------- -------------
Total revenue 251,598 214,881 489,978 415,639
COST OF SERVICES:
Health Services 94,620 89,641 188,446 177,742
Network Services 35,437 27,301 68,988 53,548
Care Management Services 66,659 47,264 134,031 92,559
------------ ------------- ------------- -------------
Total cost of services 196,716 164,206 391,465 323,849
------------ ------------- ------------- -------------
Total gross profit 54,882 50,675 98,513 91,790
General and administrative expenses 26,919 19,924 49,308 38,595
Amortization of intangibles 929 3,813 1,858 7,490
------------ ------------- ------------- -------------
Operating income 27,034 26,938 47,347 45,705
Interest expense, net 16,520 16,753 32,941 33,663
Loss (gain) on fair value of hedging
arrangements 6,374 (3,646) 1,184 3,080
Equity in loss of acquired
affiliate, net of tax -- 426 -- 1,542
Other, net 256 298 624 305
------------ ------------- ------------- -------------
Income before income taxes 3,884 13,107 12,598 7,115
Provision for income taxes 1,418 5,802 4,987 5,248
------------ ------------- ------------- -------------
Net income $ 2,466 $ 7,305 $ 7,611 $ 1,867
============ ============= ============= =============
Concentra's second quarter and year-to-date 2001 bad debt expense of $3.0
million and $5.6 million, respectively, have 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 during the first
quarter of 2002.
-MORE-
Concentra Announces Second Quarter Results
Page 5
August 6, 2002
CONCENTRA OPERATING CORPORATION
a wholly owned subsidiary of
CONCENTRA INC.
Consolidated Balance Sheets
(in thousands)
June 30, December 31,
2002 2001
------------- -------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 44,077 $ 7,308
Accounts receivable, net 178,052 181,023
Prepaid expenses and other current assets 40,629 38,760
------------- -------------
Total current assets 262,758 227,091
PROPERTY AND EQUIPMENT, NET 129,357 132,302
GOODWILL AND OTHER INTANGIBLE ASSETS, NET 478,545 475,500
OTHER ASSETS 35,628 32,072
------------- -------------
$ 906,288 $ 866,965
============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Revolving credit facilities $ -- $ 6,000
Current portion of long-term debt 5,079 4,211
Accounts payable and accrued expenses 108,213 133,908
------------- -------------
Total current liabilities 113,292 144,119
LONG-TERM DEBT 550,212 552,270
LONG-TERM DEFERRED TAX AND OTHER LIABILITIES 72,316 67,094
FAIR VALUE OF HEDGING ARRANGEMENTS 27,068 25,883
STOCKHOLDER'S EQUITY 143,400 77,599
------------- -------------
$ 906,288 $ 866,965
-MORE-
Concentra Announces Second Quarter Results
Page 6
August 6, 2002
CONCENTRA OPERATING CORPORATION
a wholly owned subsidiary of
CONCENTRA INC.
Reconciliation of Net Income to EBITDA
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- -------------------------------
2002 2001 2002 2001
------------- ------------- ------------- -------------
Net income $ 2,466 $ 7,305 $ 7,611 $ 1,867
Provision for income taxes 1,418 5,802 4,987 5,248
Interest expense, net 16,520 16,753 32,941 33,663
Loss (gain) on fair value of hedging
arrangements 6,374 (3,646) 1,184 3,080
Equity in loss of acquired
affiliate, net of tax -- 426 -- 1,542
Other, net 256 298 624 305
------------- ------------- ------------- -------------
Operating income 27,034 26,938 47,347 45,705
Depreciation expense 9,227 7,141 18,422 13,717
Amortization of intangibles 929 3,813 1,858 7,490
Minority interest (526) (365) (879) (361)
------------- ------------- ------------- -------------
EBITDA $ 36,664 $ 37,527 $ 66,748 $ 66,551
============= ============= ============= =============
Computations of Earnings Before Interest Taxes Depreciation and Amortization
("EBITDA") have been provided in this press release primarily due to the use of
this measure by the holders of the Company's 13% Senior Subordinated Notes, and
other lenders, for purposes of determining our performance in light of our debt
covenant requirements, which are stated in the Company's debt agreements as
measures which relate to EBITDA. Our computation of this measure may differ from
that provided by other companies due to differences in the inclusion or
exclusion of items in our computations as compared to that of others. Our
measure of EBITDA has been made in a manner consistent with the requirements of
the indenture which relates to our 13% Senior Subordinated Notes. EBITDA is a
measure which is not prescribed for under Generally Accepted Accounting
Principles ("GAAP"). EBITDA specifically excludes changes in working capital,
capital expenditures and other items which are set forth on a cash flow
statement presentation of a company's operating, investing and financing
activities, nor does it include the effects of interest expense, depreciation
expense, amortization expense, taxes and other items which are included when
determining a company's net income. As such, we would encourage a reader not to
use this measure as a substitute for the determination of net income, operating
cash flow, or other similar GAAP-related measures, and to use it primarily for
the debt covenant compliance purposes described above.
-END-