Beverly Earns 13 Cents Per Share Diluted in Third Quarter on a Pro Forma Basis, Reflecting Continued Strong Performances By Nursing Home and Contract Rehab Businesses.Business Editors/Health and Medical Writers FORT SMITH, Ark.--(BW HealthWire)--Oct. 30, 2001 Beverly Enterprises, Inc. (NYSE NYSE See: New York Stock Exchange : BEV) today announced that continued revenue growth and improved operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: enabled it to earn 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 third quarter of 2001, on a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis using a 36 percent annual effective tax rate. Because of asset impairments and other unusual items related to the planned sale of its Florida nursing home operations, Beverly's anticipated 36 percent tax rate was increased in March 2001 to an estimated 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. effective rate of 45 percent. Based on this higher tax rate, Beverly earned $12,073,000 (11 cents per share diluted) in the 2001 third quarter, compared to a loss of $22,471,000 (22 cents per share diluted) in the year-earlier period. The 2000 third quarter included special charges - primarily for increased patient care liability costs, workforce reductions and other unusual items - which totaled $49,043,000. Revenues totaled $691,902,000 in the 2001 third quarter, up nearly four percent from $665,889,000 in the year-earlier period. On a same-facility basis, revenues grew nearly seven percent from the 2000 third quarter. This primarily reflected a 10 percent increase in 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. nursing home rates. "Strong business unit performance produced earnings that exceeded our internal objective by more than 10 percent. This stronger-than-anticipated performance was led by Beverly Healthcare and AEGIS Therapies," said William R. Floyd, Chief Executive Officer and President. "Operating improvements and cost reductions increased our margin(a) for the third quarter to 9.3 percent, the highest level for the year. It was up 49 basis points from the second quarter of this year, 78 basis points from the first quarter and 22 basis points from the 2000 third quarter. (a) Operating margin is earnings before interest, taxes, depreciation, amortization and special charges as a percentage of total 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. . For the nine months ended September 30, 2001 - excluding special charges and using a 36 percent tax rate - net income totaled $33,647,000 (32 cents per share diluted) on revenues of $2,032,546,000. After special charges totaling $115,543,000 primarily related to the Florida sale and using the resulting 45 percent tax rate, the company reported a net loss for the first nine months of $34,633,000 (33 cents per share diluted). For the same period in 2000 and including special charges of $49,043,000, Beverly reported a net loss of $7,688,000 (8 cents per share diluted). Continued Strength in Nursing Home Operations Nursing home revenues in the third quarter were up 4.5 percent from the year-earlier period, despite a two percent decline in the number of beds in operation. Occupancy averaged 86.6 percent - the highest quarterly rate achieved during 2001 and up 30 basis points sequentially - as 75 percent of Beverly's nursing homes met or exceeded targeted census levels. Where market conditions were appropriate, sections of nursing homes were closed to reduce labor costs and improve overall profitability. This management action was a principal cause of the 31 basis point decline in occupancy from the third quarter of 2000. "Our Medicare business grew significantly in the 2001 third quarter compared to the year-earlier period, and was up more than 400 basis points as a share of revenues to 24.5 percent and up 89 basis points to 10.1 percent as a component of patient days," Floyd noted. "The Medicare per diem rose 16 percent from the third quarter of last year, reflecting rate increases and higher acuity acuity /acu·i·ty/ (ah-ku´i-te) clarity or clearness, especially of vision. a·cu·i·ty n. Sharpness, clearness, and distinctness of perception or vision. levels. This daily rate was off slightly on a sequential basis due to normal fluctuations in patient acuity." Beverly opened six more Alzheimer's care units during the quarter, bringing the total number in operation to 47. The 30 units that have completed the initial start-up phase are generating higher occupancy levels and incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. profits for the host facilities. Another 20 units are scheduled to open during the fourth quarter. Weighted average wage rates increased 6.2 percent from the 2000 third quarter, the lowest year-over-year increase since the third quarter of 1999. "We're encouraged that wage pressures have abated Abated, an ancient technical term applied in masonry and metal work to those portions which are sunk beneath the surface, as in inscriptions where the ground is sunk round the letters so as to leave the letters or ornament in relief. From 1911 Encyclopædia Britannica somewhat, although the cost and availability of labor continue to be a challenge in several markets. Nevertheless, we've made steady progress in reducing the use of temporary agency help, and cut these costs 17 percent compared to the third quarter of last year," Floyd noted. "The long-term care long-term care (LTC), n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. sector generally has benefited from economic slow-downs in the past, and we may be seeing the early signs of that phenomenon once again." Florida Sale Update The tragic events of September 11 have resulted in the capital markets taking a more conservative posture posture /pos·ture/ (pos´choor) the attitude of the body.pos´tural pos·ture n. 1. A position of the body or of body parts. 2. toward investment in all sectors of the economy, as financial institutions have been reassessing the risk/reward profile of their investment portfolios. These developments may have a potential impact on the timing of the sale of Beverly's Florida properties. At the end of last week, Beverly learned that the financing sources being used by FC Properties, the purchaser, had changed. FC Properties currently is completing revised financing arrangements. Under this new structure, Beverly may provide $20 million in secured financing. While the financing arrangements are being finalized See finalization. , Beverly intends to lease its Florida properties to Florida Health Care Properties on or about December 1. This will facilitate transfer of operations and ensure continuity of quality care for the patients, while addressing Beverly's concern about liability costs in Florida. Rent payments to Beverly will offset any continuation of fixed costs fixed costs, n.pl the costs that do not change to meet fluctuations in enrollment or in use of services (e.g., salaries, rent, business license fees, and depreciation). , including interest and rent expense, associated with retaining the properties during this interim period. Significant Growth at AEGIS Therapies Revenues generated by AEGIS Therapies for contract rehabilitation rehabilitation: see physical therapy. services provided to non-Beverly nursing homes doubled compared to the third quarter of 2000. "We started on another 23 contracts for rehabilitation services during the third quarter," Floyd said. "Because we're targeting those operators who focus on patients requiring extensive rehabilitation, the average revenue per contract has grown significantly throughout the year. We now provide services to more than 300 non-Beverly nursing homes and other facilities, and we believe we've only scratched the surface in this attractive market." Negotiations Continue with CMS (1) See content management system and color management system. (2) (Conversational Monitor System) Software that provides interactive communications for IBM's VM operating system. Beverly continues to negotiate with officials from the Centers for Medicare and Medicaid Services The Centers for Medicare and Medicaid Services (CMS), previously known as the Health Care Financing Administration (HCFA), is a federal agency within the United States Department of Health and Human Services (DHHS) that administers the Medicare program and (CMS) to resolve certain prior-year reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. issues. A final resolution has not yet been reached, and a settlement amount remains difficult to estimate. Beverly remains confident that a settlement will not hamper its ability to execute its strategic plan and to achieve continuing operating improvements. Financial Position Strengthened Beverly continues to strengthen its financial position by reducing patient accounts receivables accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying and total debt levels, while increasing capital investment to enhance the competitiveness of its nursing homes. "We made additional progress during the third quarter in reducing the accounts receivable balance from nursing home operations. Days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). dropped another four days, for a total year-to-date improvement of more than 17 days or 22 percent," Floyd said. "We reduced gross accounts receivable in that operation by more than $21 million during the third quarter, with significant reductions in every payor category. Improvements during the first three quarters of the year total $93 million, and we intend further cash collection improvements to bring the total reductions in accounts receivables to more than $100 million by year-end." Improved cash collection enabled Beverly to reduce total debt by $17 million during the quarter and achieve a total cash balance of $71 million. Capital expenditures reached a more normal $23 million level for the 2001 third quarter, up 29 percent from the year-earlier period and 17 percent sequentially. Approximately $119 million remains available under Beverly's revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility. Building Momentum for Profitable Growth "Our progress during the first nine months of 2001 reflects a clear strategic direction, an unrelenting focus on execution, and a commitment to achieve better and more consistent financial results," Floyd noted. "We are determined to finish this turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. year by achieving our objective of fourth quarter EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. from operations of 14 cents per share diluted on a pro forma basis." Floyd continued: "We approach 2002 with significant operating and financial momentum, as well as a renewed sense of confidence in our ability to shape an even more promising future for Beverly. Our 2002 operating plan, which we will finalize fi·nal·ize tr.v. fi·nal·ized, fi·nal·iz·ing, fi·nal·iz·es To put into final form; complete or conclude: "They have jointly agreed ... by year-end, reflects our expectation that Medicaid rate increases will average about four percent and that current provisions of the Medicare program will be extended for at least a year, with a modest inflationary in·fla·tion·ar·y adj. Of, associated with, or tending to cause inflation: inflationary prices; inflationary policies. Adj. 1. increase in October. It also reflects projected increases of 20 percent in employee benefit costs. Patient care liability costs will benefit from the Florida sale, and we anticipate that current reserves will be adequate. Based on all these factors, our objective for earnings from operations in 2002 is 57 to 61 cents per share diluted." Beverly shareholders may listen today at 8:30 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy to a discussion by senior management of the Company's performance and prospects by dialing 212-896-6087. A recording of this conference call will be available from 10:30 a.m. EST today until 6:00 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. Friday, November 2. Shareholders may dial 800-633-8284 or 858-812-6440 and enter reservation 19769868 (pound sign) 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 2001 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: licensing of operators and closing the sale of the Florida properties; 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 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 currently operate 524 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 34 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 (including the Florida operations), 56 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. agencies and 161 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)
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Net operating
revenues $ 690,875 $ 665,284 $ 2,030,321 $ 1,966,625
Interest income 1,027 605 2,225 2,079
------------ ----------- ------------ ------------
Total revenues 691,902 665,889 2,032,546 1,968,704
Costs and expenses:
Operating and administrative:
Wages and
related 428,254 409,657 1,260,582 1,215,208
Other 198,692 195,552 590,387 579,072
Interest 19,637 20,011 59,020 59,942
Depreciation and
amortization 23,369 24,457 69,983 75,171
Asset impairments,
workforce
reductions
and other
unusual items ___ 4,627 115,543 4,627
Additional
provision for
patient care
claims ___ 44,416 ___ 44,416
------------ ------------ ------------ ------------
Total costs and
expenses 669,952 698,720 2,095,515 1,978,436
------------ ------------ ------------ ------------
Income (loss) before
provision for
(benefit from)
income taxes 21,950 (32,831) (62,969) (9,732)
Provision for
(benefit from)
income taxes 9,877 (10,360) (28,336) (2,044)
------------ ------------ ------------ ------------
Net income (loss) $ 12,073 $ (22,471)$ (34,633)$ (7,688)
============ ============ ============ ============
Net income (loss) per share of common stock:
Basic:
Net income
(loss) per
share of
common stock $ 0.12 $ (0.22)$ (0.33)$ (0.08)
============ ============ ============ ============
Shares used to
compute net
income (loss)
per share 104,264 102,473 103,953 102,027
============ ============ ============ ============
Diluted:
Net income
(loss) per
share of
common stock $ .11 $ (0.22)$ (0.33)$ (0.08)
============ ============ ============ ============
Shares used to
compute net
income (loss)
per share 106,572 102,473 103,953 102,027
============ ============ ============ ============
BEVERLY ENTERPRISES, INC.
SUPPLEMENTARY INFORMATION
PRO FORMA ANALYSIS OF EARNINGS
(Unaudited)
(In thousands, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Income (loss)
before provision for (benefit from)
income taxes,
as reported $ 21,950 $ (32,831)$ (62,969)$ (9,732)
Adjustments for special charges:
Asset impairments,
workforce
reductions and
other unusual
items ___ 4,627 115,543 4,627
Additional
provision for
patient care
claims ___ 44,416 ___ 44,416
------------ ------------ ------------ ------------
Income before
provision for
income taxes, as
adjusted 21,950 16,212 52,574 39,311
Provision for
income taxes, as
adjusted 7,902 5,836 18,927 14,152
------------ ------------ ------------ ------------
Net income $ 14,048 $ 10,376 $ 33,647 $ 25,159
============ ============ ============ ============
Diluted income per
common share, as
adjusted $ 0.13 $ 0.10 $ 0.32 $ 0.25
============ ============ ============ ============
Weighted average shares used to compute diluted
income per
common share,
as adjusted 106,572 103,165 105,813 102,299
============ ============ ============ ============
Note: For purposes of this pro forma analysis, the provision for
income taxes, as adjusted, assumes an annual effective tax rate of 36%
for 2001 and 2000.
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