COVENTRY ANNOUNCES YEAR-END RESULTS AND NONRECURRING FOURTH QUARTER CHARGE OF $41 MILLION; COMPANY ALSO REAFFIRMS STRATEGIC INITIATIVES.NASHVILLE, Tenn.--(BUSINESS WIRE)--Feb. 24, 1997--Coventry Corporation (NASDAQ/NMS:CVTY) today reported operating results for the fourth quarter and year ended December 31, 1996. In addition to recognizing a nonrecurring fourth quarter charge of $41 million, the Company increased medical reserves by $25 million, attributable to the Company's quarterly reserve setting process, including adjusting for settlement of prior quarters. For the fourth quarter ended December 31, 1996, revenues totaled $289.6 million, a 30% gain over the prior year's $222.7 million. Net loss for the fourth quarter, including a $41 million nonrecurring pre-tax charge to earnings and a $4.9 million pre-tax gain from the sale of Champion Dental, was $52.1 million, or $1.58 per share, compared with a net loss of $13.5 million, or $0.42 per share, for the year-earlier period. Net loss before the nonrecurring items for the quarter ended December 31, 1996, was $21.3 million, or $0.65 per share. For the year ended December 31, 1996, revenues were $1,057.1 million, up 24% over prior year revenues of $852.4 million. Net loss for the year, including nonrecurring items, was $61.3 million, or $1.86 per share, compared with earnings of $18,000, or $0.00 per share, for the prior year. As a result of management's recent intensive review, the Company recorded nonrecurring charges Nonrecurring Charge An expense occurring only once on a company's financial statement. Notes: An extraordinary item is an example of a nonrecurring charge. Also known as "nonrecurring item". of $41 million in the quarter ended December 31, 1996, to increase reserves related to accounts receivable 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 long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. contracts, to write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. certain capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. assets, including goodwill, as well as several other items. As a result of these charges, the Company is in default of its required year-end financial covenants. Coventry is continuing to negotiate with its lenders with regards to amending and restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). its credit facility, including application of the proceeds of anticipated asset sale transactions, timing and amounts of required principle repayments, and historic and future financial covenant compliance. Management expects to have this process completed by March 31. Allen Al·len , Edgar 1892-1943. American anatomist who is noted for his studies of hormones and for the discovery (1923) of estrogen. F. Wise, president and chief executive officer of Coventry, in commenting on the Company's financial results, said, "During the past four months, we have exhaustively ex·haus·tive adj. 1. Treating all parts or aspects without omission; thorough: an exhaustive study. 2. Tending to exhaust. reviewed Coventry's operations and the results of that review highlighted the need to strengthen certain balance sheet reserves. We understand the issues, both operational and financial, and have initiated measures to address our problems." The Company has accelerated its efforts to reduce overall administrative and medical costs, solidify so·lid·i·fy v. so·lid·i·fied, so·lid·i·fy·ing, so·lid·i·fies v.tr. 1. To make solid, compact, or hard. 2. To make strong or united. v.intr. pricing, monitor the Company's balance sheet, and focus resources on the Company's most profitable lines of business. Progress on some of those initiatives includes: Strong Enrollment Growth December 31, 1996, enrollment in the Company's health plans increased by 199,000 members, or 28.6% over the prior year, to 894,000 while, during the same period, HMO HMO health maintenance organization. HMO n. A corporation that is financed by insurance premiums and has member physicians and professional staff who provide curative and preventive medicine within certain financial, and other at-risk enrollment grew by 138,000, or 22.9%. The Company continues to aggressively market its services across multiple products in each of its markets. Pricing Dale B. Wolf, chief financial officer for Coventry, said, "The Company has strengthened its pricing processes and disciplines. While we recognize that continued growth is essential to our success, we will grow in a financially responsible way. We believe we are entering into an improved pricing environment in our major markets. Coventry's major competitors have been adversely affected by the same pricing pressures as we have, thus creating the likelihood of more reasonable price increases in our markets throughout 1997 and 1998." Focus Resources Coventry has recently taken several actions to focus its resources on its core HMO business. It recently announced its intention to sell its group medical practices in Pittsburgh, Pennsylvania “Pittsburgh” redirects here. For the region, see Pittsburgh Metropolitan Area. Pittsburgh (pronounced IPA: /ˈpɪtsbɚg/) is the second largest city in the Commonwealth of Pennsylvania. , and St. Louis, Missouri Missouri, state, United States Missouri (mĭz  r`ē, –ə), one of the midwestern states of the United States. . In addition to financial gains from these anticipated
sales, the successful divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of these business units will enable
the signing of long-term global capitation CAPITATION. A poll tax; an imposition which is yearly laid on each person according to his estate and ability.2. The Constitution of the United States provides that "no capitation, or other direct tax, shall be laid, unless in proportion to the census, or agreements with major provider organizations that will reduce Coventry's medical costs for approximately 23% of its risk enrollment, or 172,000 members. At the end of 1996, Coventry completed the sale of its St. Louis, Missouri-based Champion Dental Plan, resulting in a one-time pre-tax gain of $4.9 million. Coventry has previously announced its intention to divest To deprive or take away. Divest is usually used in reference to the relinquishment of authority, power, property, or title. If, for example, an individual is disinherited, he or she is divested of the right to inherit money. itself of its Medicaid Medicaid, national health insurance program in the United States for low-income persons; established in 1965 with passage of the Social Security Amendments and now run by the Centers for Medicare and Medicaid Services. HMO in Florida and is in negotiations with potential acquirors. Re-Engineering In an effort to improve service and reduce costs, the Company is engaged in a disciplined process to re-engineer Claims, Information Systems, and Customer Service. The process will involve the installation of self-directed, cross-functional teams In business, a cross-functional team is a group of people with different functional expertise working toward a common goal. It may include people from finance, marketing, operations, and human resources departments. . While such a disciplined process does not create an immediate reduction in expense, the Company believes it is the most responsible way to improve service and create a lasting lower cost structure, a critical ingredient to success in the managed care industry. New Management The Company has already added several experienced leaders. Robert A. Mayer joined Coventry's largest plan, HealthAmerica, as senior vice president and chief operations officer. At the corporate level, a new vice president of operations and systems, Skip Carroll Car·roll , James 1854-1907. British-born American physician noted for his research on yellow fever. In 1900 he deliberately infected himself with the disease for experimental purposes. , along with Ed Arnold, who is experienced in installation of self-directed teams, joined the Company to lead the process re-engineering effort. Also at the corporate level, senior vice president and chief financial officer, Dale B. Wolf, is heading up overall financial management, underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. , rating, and reserve control, as well as expense-control functions and other general senior management responsibilities. Wise added, "We have tremendous presence in good markets where we are well regarded for our service and the quality of our health care. We remain committed to delivering the highest quality health care in all our communities. Our status as ranked by the National Committee of Quality Assurance (NCQA NCQA National Committee on Quality Assurance, see there ) and other regulatory bodies continues to be of the highest caliber. We are well positioned in membership strength, marketplace concentration and product diversity. Our Missouri Medicaid program is doing very well and our Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. risk initiative is steadily increasing its contribution to profitability. We have repositioned our balance sheet to address our reserve needs. With the problems of the past behind us, we can turn our attention to capitalizing on our strengths." Coventry Corporation, headquartered in Nashville, Tennessee “Nashville” redirects here. For other uses, see Nashville (disambiguation). Nashville is the capital and the second most populous city of the U.S. state of Tennessee, after Memphis. , is a managed health care company that provides a wide range of health benefits and services to 894,000 members in a broad cross section of employer and government-funded groups in Pennsylvania Pennsylvania (pĕnsəlvā`nyə), one of the Middle Atlantic states of the United States. It is bordered by New Jersey, across the Delaware River (E), Delaware (SE), Maryland (S), West Virginia (SW), Ohio (W), and Lake Erie and New York , Ohio, West Virginia West Virginia, E central state of the United States. It is bordered by Pennsylvania and Maryland (N), Virginia (E and S), and Kentucky and, across the Ohio R., Ohio (W). Facts and Figures Area, 24,181 sq mi (62,629 sq km). Pop. , Missouri, Illinois Illinois, river, United States Illinois, river, 273 mi (439 km) long, formed by the confluence of the Des Plaines and Kankakee rivers, NE Ill., and flowing SW to the Mississippi at Grafton, Ill. It is an important commercial and recreational waterway. , Virginia and Florida. The Company operates from regional headquarters in Pittsburgh and Harrisburg, Pennsylvania This article is about the capital city of the Commonwealth of Pennsylvania. For other places named Harrisburg, see Harrisburg (disambiguation). Harrisburg is the capital of the Commonwealth of Pennsylvania, a state of the United States of America. ; St. Louis, Missouri; Richmond, Virginia Richmond IPA: [ɹɯʒmɐnɖ] is the capital of the Commonwealth of Virginia, in the United States. ; and Jacksonville, Florida “Jacksonville” redirects here. For other uses, see Jacksonville (disambiguation). Jacksonville is the largest city in the state of Florida and the county seat of Duval County. . This press release contains forward-looking information. The 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. are 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 may be significantly impacted by certain risks and uncertainties described herein and in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed with the Securities and Exchange Commission for the year ended December 31, 1995. -0-
COVENTRY CORPORATION
Unaudited Financial Highlights
(In thousands, except per share and membership data)
Three Months Ended Year Ended
December 31, December 31,
Percent Percent
1996 1995 Change 1996 1995 Change
Operating
revenues $289,552 $222,733 30.0% $1,057,129 $852,390 24.0%
Operating
earnings (loss) (74,371) (23,410) NM (91,346) (1,275) NM
Earnings (loss)
before income
taxes and
minority
interests (68,778) (22,904) NM (84,224) 1,549 NM
Net earnings
(loss) (52,139) (13,523) NM (61,287) 18 NM
Earnings (loss)
per share $ (1.58) $ (0.42) NM $ (1.86) $ 0.00 NM
Weighted average
number of common
and common
equivalent
shares
outstanding 33,024 32,416 1.9% 33,011 32,164 2.6%
COVENTRY CORPORATION
UNAUDITED FINANCIAL HIGHLIGHTS
December 31,
1996 1995 % Change
Total enrollment by market:
Western Pennsylvania 296,396 252,153 17.6%
Central Pennsylvania 245,051 158,760 54.4%
St. Louis 253,602 189,647 33.7%
Richmond 70,985 68,765 3.2%
Jacksonville 28,042 26,162 7.2%
Total 894,076 695,487 28.6%
Risk enrollment by market:
Western Pennsylvania 250,831 221,176 13.4%
Central Pennsylvania 173,151 120,369 43.9%
St. Louis 229,028 177,752 28.8%
Richmond 60,055 57,796 3.9%
Jacksonville 28,042 26,162 7.2%
Total 741,107 603,255 22.9%
Non-risk enrollment 152,969 92,232 65.9%
Total 894,076 695,487 28.6%
January 1,
1997 1996 % Change
Total enrollment by market:
Western Pennsylvania(1) 297,984 281,834 5.7%
Central Pennsylvania 253,615 209,563 21.0%
St. Louis 260,045 196,795 32.1%
Richmond 63,399 68,371 (7.3)%
Jacksonville 26,848 24,212 10.9%
Total 901,891 780,775 11.6%
Risk enrollment by market:
Western Pennsylvania(1) 262,770 237,999 10.4%
Central Pennsylvania 182,897 139,029 31.6%
St. Louis 237,129 185,096 28.1%
Richmond 53,615 57,339 (6.5)%
Jacksonville 26,848 24,212 10.9%
Total 763,259 643,675 18.6%
Non-risk enrollment 138,632 137,100 2.0%
Total 901,891 780,775 15.5%
(1) Western Pennsylvania January 1, 1996, enrollment includes 15,800
members from the Aetna Health Plans' acquisition, which was
finalized in the first quarter of 1996.
COVENTRY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except per share data)
Three Months Ended Year Ended
December 31, December 31,
1996 1995 1996 1995
Operating revenues:
Managed care premiums $278,501 $220,399 $1,035,778 $844,032
Managed care services 11,051 2,334 21,351 8,358
Total operating
revenues 289,552 222,733 1,057,129 852,390
Operating expenses:
Health benefits 275,417 200,024 930,739 713,226
Selling, general and
administrative 55,955 42,120 165,081 123,523
Provision for
multi-year contracts 1,800 - 9,793 -
Depreciation and
amortization 30,751 3,999 42,862 14,666
Merger costs - - - 2,250
Total operating
expenses 363,923 246,143 1,148,475 853,665
Operating earnings (loss) (74,371) (23,410) (91,346) (1,275)
Other income, net of
interest expense 5,593 506 7,122 2,824
Earnings (loss) before
income taxes and
minority interest (68,778) (22,904) (84,224) 1,549
Provision for (benefit
from) income taxes (16,682) (9,426) (22,860) 1,530
Minority interest in
earnings (loss) of
consolidated subsidiary,
net of income tax 43 45 (77) 1
Net earnings (loss) $(52,139) $(13,523) $ (61,287) $ 18
Net earnings (loss) per
common and common
equivalent share $ (1.58) $ (0.42) $ (1.86) $ 0.00
Weighted average number of
common and common
equivalent shares
outstanding 33,024 32,416 33,011 32,164
Certain 1995 amounts have been reclassified to conform to 1996
presentation.
COVENTRY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
December 31, December 31,
1996 1995
ASSETS:
Current assets:
Cash and short term investments $ 98,007 $ 85,843
Other current assets 86,428 57,593
Total current assets 184,435 143,436
Long-term assets 264,510 242,239
TOTAL ASSETS $ 448,945 $ 385,675
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Medical costs payable $ 146,082 $ 92,160
Other current liabilities 117,919 64,103
Total current liabilities 264,001 156,263
Long-term liabilities 84,517 75,561
Total liabilities 348,518 231,824
Stockholders' equity 100,427 153,851
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 448,945 $ 385,675
CONTACT: Coventry Corp., Nashville Dale B. Wolf, 615/391-2448 |
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