Beverly Announces Second Quarter Results.Business Editors & Health/Medical Writers FORT SMITH, Ark.--(BW HealthWire)--July 30, 2002 Beverly Enterprises, Inc. (NYSE NYSE See: New York Stock Exchange :BEV) today announced that, primarily because of previously disclosed increases in patient care liability reserves, it recorded a loss of $14 million or 13 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. in the second quarter of 2002. During the comparable period in 2001, Beverly earned $5.6 million (five cents per share diluted), which included special charges totaling $7.9 million primarily related to the sale of Florida nursing home properties Home Properties (NYSE: HME) is a real estate investment trust (REIT) that owns and manages apartments and apartment properties in the Midwest, New England, Mid-Atlantic and Southeast Florida. It manages or owns over 47,000 apartments. . As previously announced, Beverly increased its patient care liability reserves for prior policy-years by $43.3 million (including a special charge of $22.2 million related to its former Florida properties) and increased accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. by $5 million in the second quarter for the current policy-year. Second quarter results include a charge of $6.3 million related to the pending resolution of previously disclosed patient care issues at certain California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). nursing homes. This pending settlement is not expected to have a material adverse impact on Beverly's nursing home operations in future periods. Results also include a $6.9 million credit related to the company's current assessment of estimated reserves from previous charges for settlements of Federal government investigations. Revenues totaled $634.7 million in the 2002 second quarter, compared to $680.8 million in the year-earlier period. Licensed beds declined by 13.7 percent, primarily reflecting the strategic sale of Florida facilities and the disposal of certain other under-performing nursing homes. Compared to the 2001 second quarter, nursing home average occupancy was up 115 basis points to 87.6 percent, and average per diem per diem adj. or n. Latin for "per day," it is short for payment of daily expenses and/or fees of an employee or an agent. rates rose six percent to $147.74. "Our core nursing home, contract rehabilitation rehabilitation: see physical therapy. therapy services and outpatient outpatient /out·pa·tient/ (-pa-shent) a patient who comes to the hospital, clinic, or dispensary for diagnosis and/or treatment but does not occupy a bed. out·pa·tient n. rehab businesses continued to achieve strong operating and financial results," said William R. Floyd, Beverly Chairman and Chief Executive Officer. "Adjustments for projected increases in patient care liability reserves should not detract from detract from verb 1. lessen, reduce, diminish, lower, take away from, derogate, devaluate << OPPOSITE enhance verb 2. the performance improvements we've made throughout our operating units operating unit A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon and support groups in more recent periods. Excluding the impact of these adjustments, earnings per share exceeded our objective for the second quarter." Continuing Gains in Nursing Home, AEGIS and Matrix Operations On a same-facility basis, nursing home operating profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. (earnings before interest, taxes, depreciation, amortization and special charges) rose 25 percent from the second quarter of 2001, on a 6.2 percent increase in revenues. Operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: (operating profit as a percentage of net operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. ) again exceeded 10 percent on both actual and same-facility bases. Average wage rates increased only 5 percent from the 2001 second quarter. Patient mix continued to strengthen during the second quarter of 2002, with Medicare as a percentage of total revenues reaching 26.5 percent - the highest level since the second quarter of 1998 and an increase of 139 basis points from the second quarter of 2001. As a percentage of total patient days, Medicare rose 89 basis points from the 2001 second quarter to 11.2 percent. For the first six months of 2002, average per diem nursing home rates increased 5.1 percent for Medicaid patients, 6.6 percent for Medicare and 5.5 percent for private/other, compared to the first half of 2001. Revenues from rehabilitation therapy services provided by AEGIS Therapies to third-party nursing homes more than tripled from the year-earlier second quarter and were up nearly 18 percent sequentially, reflecting the addition of 26 more non-Beverly facilities. Operating profits rose 12 percent on a comparable basis from the 2001 second quarter. Matrix Rehabilitation, which provides non-geriatric outpatient therapy services at 153 clinics in key markets, again exceeded its internal financial objective and achieved an operating profit in the 2002 second quarter, compared to a loss in the year-earlier period. As disclosed in the 2002 first quarter earnings announcement, Beverly has been reviewing the long-term viability of its home medical equipment business unit - MK Medical, based in Fresno (CA). In conjunction with this review, Beverly began investigating past billing practices at that unit, and has retained an independent third party to audit MK Medical's billing of government payors to determine whether there have been any overpayments. Until the results of this Beverly-initiated audit are known, the extent of potential overpayments, penalties or fines cannot be quantified, but they could have a material adverse effect on Beverly's results of operations. Annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. cash receipts since the October 1998 acquisition of MK Medical have averaged about $20 million, of which approximately $15 million relates to government payors. Outlook for Second Half "We've modified our operating plan for the balance of 2002, and our proforma earnings objective is now 12 cents per share diluted for the third quarter and 13 cents for the fourth," Floyd said. "This reflects increased accruals for current policy-year patient care liabilities of $7.5 million for each of these quarters. "Our 2002 operating plan continues to be based on Medicare funding being extended at current levels. We're very encouraged by recent indications from the Senate in support of existing Medicare funding levels, and believe that Congress will avoid any actions that would severely impact the quality of care for the elderly or impede im·pede tr.v. im·ped·ed, im·ped·ing, im·pedes To retard or obstruct the progress of. See Synonyms at hinder1. [Latin imped their access to it. "Overall increases in Medicaid rates for 2002 are projected to be in line with our original estimate. Budget pressure in certain states could be alleviated al·le·vi·ate tr.v. al·le·vi·at·ed, al·le·vi·at·ing, al·le·vi·ates To make (pain, for example) more bearable: a drug that alleviates cold symptoms. See Synonyms at relieve. by legislation currently pending in Congress and supported by the National Governors Association that would provide an additional $6 billion in Federal funds Federal Funds Funds deposited to regional Federal Reserve Banks by commercial banks, including funds in excess of reserve requirements. Notes: These non-interest bearing deposits are lent out at the Fed funds rate to other banks unable to meet overnight reserve for Medicaid spending. This is another encouraging development." Beverly shareholders may listen to a discussion by senior management of the Company's performance and prospects at 8:30 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT today by dialing 1-800-238-9007 or 1-719-457-2622 and using reservation number 442707. A recording of this conference call will be available from 10:30 a.m. EDT today until midnight Tuesday, August 6. Shareholders may dial 1-888-203-1112 and enter reservation number 442707 to access the recording. This release is intended to be disclosure through methods reasonably designed to provide broad, non-exclusionary distribution to the public in compliance with the Securities and Exchange Commission's Fair Disclosure Regulation. The release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , including statements related to expected 2002 performance, made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. These risks and uncertainties include: national and local economic conditions, including their effect on the availability and cost of labor, utilities and materials; the effect of government regulations and changes in regulations governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. the healthcare industry, including the Company's compliance with such regulations; changes in Medicare and Medicaid Medicare and Medicaid U.S. government programs in effect since 1966. Medicare covers most people 65 or older and those with long-term disabilities. Part A, a hospital insurance plan, also pays for home health visits and hospice care. payment levels and methodologies and the application of such methodologies by the government and its fiscal intermediaries fiscal intermediary Part A Contractor Medicare A private company that has a contract with Medicare to pay part A and some part B bills. See Medicare, Part A. ; liabilities and other claims asserted against the Company, including patient care liabilities, as well as the resolution of lawsuits brought about by the announcement of the federal government investigations or the settlements of such investigations; the ability to predict future reserves related to patient care liabilities; the ability to attract and retain qualified personnel; the availability and terms of capital to fund acquisitions and capital improvements; the competitive environment in which the Company operates; the ability to maintain and increase census levels; and demographic changes. These and other risks and uncertainties that could affect future results are addressed in the Company's filings with the Securities and Exchange Commission, including Forms 10-K and 10-Q. Beverly Enterprises and its operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. comprise a leading provider of healthcare services to the elderly in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . They operate 462 skilled nursing facilities skilled nursing facility n. Abbr. SNF An establishment that houses chronically ill, usually elderly patients, and provides long-term nursing care, rehabilitation, and other services. , as well as 29 assisted living as·sist·ed living n. A living arrangement in which people with special needs, especially older people with disabilities, reside in a facility that provides help with everyday tasks such as bathing, dressing, and taking medication. centers, 53 home care and hospice hospice, program of humane and supportive care for the terminally ill and their families; the term also applies to a professional facility that provides care to dying patients who can no longer be cared for at home. centers and 153 outpatient therapy clinics. Through AEGIS Therapies, they also offer rehabilitative re·ha·bil·i·tate tr.v. re·ha·bil·i·tat·ed, re·ha·bil·i·tat·ing, re·ha·bil·i·tates 1. To restore to good health or useful life, as through therapy and education. 2. services on a contract basis to nursing homes operated by other care providers.
BEVERLY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Quarter ended Six months ended
June 30, June 30,
------------------ ----------------------
2002 2001 2002 2001
-------- -------- ---------- ----------
Net operating revenues $633,689 $679,978 $1,255,464 $1,339,446
Interest income 1,044 811 2,143 1,198
-------- -------- ---------- ----------
Total revenues 634,733 680,789 1,257,607 1,340,644
Costs and expenses:
Operating and
administrative:
Wages and related 379,305 423,497 756,203 832,328
Other 207,701 196,889 393,152 391,695
Interest 16,606 20,273 33,827 39,383
Depreciation and
amortization 22,265 22,150 43,986 46,614
Florida insurance
adjustment 22,179 -- 22,179 --
California investigation
settlement and related
costs 6,300 -- 6,300 --
Adjustment to estimated
reserves related to
settlements of federal
government investigations (6,940) -- (6,940) --
Asset impairments,
workforce reductions and
other unusual items -- 7,854 -- 115,543
-------- -------- ---------- ----------
Total costs and
expenses 647,416 670,663 1,248,707 1,425,563
-------- -------- ---------- ----------
Income (loss) before
provision for (benefit
from) income taxes (12,683) 10,126 8,900 (84,919)
Provision for (benefit
from) income taxes 1,331 4,558 2,410 (38,213)
-------- -------- ---------- ----------
Net income (loss) $(14,014) $ 5,568 $ 6,490 $ (46,706)
======== ======== ========== ==========
Net income (loss) per share
of common stock:
Basic and diluted net
income (loss) per share
of common stock $ (0.13) $ 0.05 $ 0.06 $ (0.45)
======== ======== ========== ==========
Shares used to compute
basic net income (loss)
per share 104,731 103,884 104,587 103,795
======== ======== ========== ==========
Shares used to compute
diluted net income
(loss) per share 104,731 105,691 105,996 103,795
======== ======== ========== ==========
BEVERLY ENTERPRISES, INC.
SUPPLEMENTARY INFORMATION
PRO FORMA ANALYSIS OF EARNINGS
(Unaudited)
(In thousands, except per share amounts)
Quarter ended Six months ended
June 30, June 30,
------------------ ------------------
2002 2001 2002 2001
-------- -------- -------- --------
Income (loss) before
provision for (benefit from)
income taxes, as reported $(12,683) $ 10,126 $ 8,900 $(84,919)
Adjustment for special
charges:
Florida insurance
adjustment 22,179 -- 22,179 --
California investigation
settlement and related
costs 6,300 -- 6,300 --
Adjustment to estimated
reserves related to
settlements of federal
government investigations (6,940) -- (6,940) --
Asset impairments,
workforce reductions and
other unusual items -- 7,854 -- 115,543
-------- -------- -------- --------
Income before provision for
income taxes, as adjusted 8,856 17,980 30,439 30,624
Provision for income taxes,
as adjusted 3,276 6,473 11,262 11,025
-------- -------- -------- --------
Net income $ 5,580 $ 11,507 $ 19,177 $ 19,599
======== ======== ======== ========
Diluted income per common
share, as adjusted $ 0.05 $ 0.11 $ 0.18 $ 0.19
======== ======== ======== ========
Weighted average shares used
to compute diluted income
per common share,
as adjusted 106,388 105,691 105,996 105,430
======== ======== ======== ========
Note: For purposes of this pro forma analysis, the provision for
income taxes, as adjusted, assumes an annual effective tax rate of 37%
for 2002 and 36% for 2001.
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