Concentra Operating Corporation Reports Second Quarter Results.

Business Editors & Health/Medical Writers

ADDISON, Texas--(BUSINESS WIRE)--Aug. 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.

"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.

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.

                    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.

                    CONCENTRA OPERATING CORPORATION
                     a wholly owned subsidiary of
                            CONCENTRA INC.
                      Consolidated Balance Sheets
                            (in thousands)

                                                  June 30,    Dec. 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
                                                  ========   ========


                    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.