Beverly Earns 8 Cents Per Share Diluted in First Quarter, Before Special Charges.Business Editors, Health/Medical Writers FORT SMITH, Ark.--(BW HealthWire)--May 8, 2001 Beverly Enterprises, Inc. (NYSE NYSE See: New York Stock Exchange : BEV) today announced that strong business unit operating results enabled it to earn eight 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 first quarter of 2001, before previously announced special charges related to the planned sale of Florida nursing operations ($86,066,000) and for workforce reductions, reorganization costs and other unusual items ($21,623,000). After these special pre-tax charges totaling $107,689,000, there was a net loss of $52,274,000 (50 cents per share diluted) in the 2001 first quarter, compared to net income of $6,261,000 (six cents per share diluted) in the year-earlier period. Revenues totaled $659,855,000 in the 2001 first quarter, up two percent from $646,927,000 in the year-earlier period, despite a 32-facility reduction in the number of nursing homes operated. Revenues grew six percent from the 2000 first quarter on a same-facility basis, and overall reflected an 8.8 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. Beverly's nursing home and AEGIS Therapies businesses each exceeded operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. objectives for the first quarter, and - on a same-facility basis - also improved over 2000 first-quarter performance levels. The overall operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: (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. ) during the 2001 first quarter rose by eight basis points from the year-earlier period to 8.47 percent. "We exceeded aggressive internal targets for the quarter and are off to a solid start for 2001," said William R. Floyd, President and Chief Executive Officer. "We increased revenues, controlled costs and improved margins during the same quarter that we also implemented a major reorganization of 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 functions." Floyd continued: "We reorganized re·or·gan·ize v. re·or·gan·ized, re·or·gan·iz·ing, re·or·gan·iz·es v.tr. To organize again or anew. v.intr. To undergo or effect changes in organization. primarily to increase overall effectiveness and to enable our local business units to provide better services at lower costs. During that process, we also identified about $8 million in annual overhead cost reductions. We've reinvested about half these savings in operations to improve clinical care and to increase management support. We also strengthened local business office resources to improve cash collections, and these efforts already have reduced our 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). by 10 percent during the first quarter of 2001." Planned Sale of Florida Operations As previously announced, Beverly intends to sell its 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. , 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 and certain other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. in Florida. Management formally adopted this plan during the first quarter of 2001, and accounting standards require that these operations be reported as "assets held for sale" at March 31, 2001 at their present estimated fair market value, net of selling costs. This results in a special charge against pre-tax earnings of $86,066,000, even though the assets have not yet been sold. The charge includes the costs of acquiring certain nursing facilities that will be included in the sale, but that currently are subject to operating leases Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. under an off-balance sheet financing arrangement. Beverly currently is negotiating with a potential purchaser of its Florida operations. Other potential purchasers have expressed interest in acquiring all or portions of Beverly's Florida portfolio. No definitive agreements are in place, and Beverly will not comment further until there is a firm commitment. Sale of these operations is expected to be accretive to Beverly's operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before , and proceeds would be used primarily to reduce debt. Nursing Home Operations Nursing home revenues rose 2.5 percent from the 2000 first quarter, even though Beverly operated 32 fewer facilities during the 2001 period. Operating profits exceeded internal targets for both the Coastal and Heartland divisions. Same-facility average occupancy was about flat, although overall occupancy during the first quarter declined nearly one percentage point from the year-earlier period. As a percentage of total revenues, Medicare increased 170 basis points, 2001 first quarter compared to the year-earlier period, and 275 basis points sequentially. The Medicare share of total patient days rose to 10.43 percent, the highest level since the second quarter of 1998. This improved payor mix reflects better coordination among admissions, nursing and 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. support functions, as well as improved documentation practices. Utilization of rehabilitation rehabilitation: see physical therapy. therapy services for Medicare patients increased nearly 10 percent, and average length of stay increased nearly one day since the 2000 first quarter. (A one-day increase in average length of stay for Medicare patients would generate 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. 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. revenue totaling about $15 million.) Floyd noted: "The 23 Alzheimer's care units we opened during 2000 achieved internal objectives for incremental census and contributed to a 150-basis point average improvement in operating margins at the host facilities. We opened eight additional Alzheimer's care units during the first quarter of 2001, and plan another 36 units during the balance of the year. These units answer a critical need for compassionate com·pas·sion·ate adj. 1. Feeling or showing compassion; sympathetic. See Synonyms at humane. 2. Granted to an individual because of an emergency or other unusual circumstances: care for the victims of Alzheimer's disease Alzheimer's disease (ăls`hī'mərz, ôls–), degenerative disease of nerve cells in the cerebral cortex that leads to atrophy of the brain and senile dementia. , while also providing a profitable growth vehicle for our company." Service Businesses A key element of the company's three-year Strategic Plan is accelerating the internal growth of existing services businesses - primarily rehabilitation services through AEGIS Therapies and Beverly Home Care. Both units outperformed internal expectations during the 2001 first quarter. "We began to offer contract rehabilitation services to other nursing home operators during 2000, using our own facilities as a platform for expansion," Floyd noted. "The non-Beverly portion of this business is experiencing significant growth this year, and our current run-rate is more than double the level it was at year-end 2000. We now plan to offer this service - through the recently renamed AEGIS Therapies - in states where Beverly has no nursing home presence. By demonstrating to other providers that we can help enhance their results, we're able to build a key internal capability with very attractive margins." New Credit Facility During April Beverly issued $200 million of 9 5/8 percent Senior Notes due 2009. The company also finalized See finalization. a $150 million revolving credit agreement Revolving credit agreement A legal commitment in which a bank promises to lend a customer up to a specified maximum amount during a specified period. revolving credit agreement See line of credit. with its banking group. These financing transactions replace a $375 million credit facility that was to expire at the end of 2001, as previously disclosed. Excluding any debt-reduction actions, total interest costs for 2001 would increase about $3 million over 2000 levels. Outlook Floyd said: "We're committed to consistently meeting short-term objectives, while also building a strong foundation for the more successful Beverly envisioned in our three-year Strategic Plan. We're encouraged by our strong operating results during the first quarter, and look forward to continued performance improvements during the balance of the year. The operating gains we've already achieved should help offset significant cost increases we're experiencing for patient care liability and for employee medical benefits, as well as for utilities, which were about $1.5 million more than the higher level than we planned for the first quarter. The cost and availability of labor also continue to be major challenges, although the growth rate of our average wages shows some signs of decelerating. "Our performance plan calls for nine cents a share in operating earnings during the second quarter, and our annual objective for 2001 is 40 cents per share diluted before special items. These targets do not reflect the planned sale of our Florida operations." 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. It 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: 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 liability costs, 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 dispose of To determine the fate of; to exercise the power of control over; to fix the condition, application, employment, etc. of; to direct or assign for a use. See also: Dispose our Florida nursing home operations; the ability to control our 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 528 skilled nursing facilities, as well as 34 assisted living centers, 58 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 163 outpatient therapy clinics. Through AEGIS Therapies, they also offer rehabilitative 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
March 31,
2001 2000
------------ ------------
Net operating revenues $ 659,468 $ 646,102
Interest income 387 825
------------ ------------
Total revenues 659,855 646,927
Costs and expenses:
Operating and administrative:
Wages and related 408,831 400,420
Other 194,806 191,455
Interest 19,110 19,618
Depreciation and amortization 24,464 25,336
Asset impairments, workforce
reductions and other
unusual items 107,689 ---
------------ ------------
Total costs and expenses 754,900 636,829
------------ ------------
Income (loss) before provision
for (benefit from) income taxes (95,045) 10,098
Provision for (benefit from)
income taxes (42,771) 3,837
------------ ------------
Net income (loss) $ (52,274) $ 6,261
============ ============
Net income (loss) per share
of common stock:
Basic and diluted:
Net income (loss) per share
of common stock $ (0.50) $ 0.06
============ ============
Shares used to compute basic
net income (loss) per share 103,705 102,281
============ ============
Shares used to compute
diluted net income (loss)
per share 103,705 102,402
============ ============
BEVERLY ENTERPRISES, INC.
SUPPLEMENTARY INFORMATION
PRO FORMA ANALYSIS OF EARNINGS
(Unaudited)
(In thousands, except per share amounts)
Three months ended
March 31,
2001 2000
------------ ------------
Income (loss) before provision
for (benefit from) income
taxes, as reported $ (95,045) $ 10,098
Adjustment for special charges:
Asset impairments, workforce
reductions and other
unusual items 107,689 ---
------------ ------------
Income before provision for
income taxes, as adjusted 12,644 10,098
Provision for income taxes,
as adjusted 4,552 3,837
------------ ------------
Net income $ 8,092 $ 6,261
============ ============
Diluted income per share,
as adjusted $ 0.08 $ 0.06
============ ============
Weighted average shares used to
compute diluted income
per common share, as adjusted 105,157 102,402
============ ============
Note: For purposes of this pro forma analysis, the provision for
income taxes, as adjusted, assumes annual effective tax rates of 36%
for 2001 and 38% for 2000.
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