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Beverly Strong First-Quarter Operating Results Generate Continuing Operations EPS Totaling 18 Cents; EBITDA Guidance for 2004 Raised to $175 - $180 Million.

Business Editors/Health/Medical Writers

FORT SMITH, Ark.--(BUSINESS WIRE)--May 4, 2004

Beverly Enterprises, Inc. (NYSE: BEV) today announced that double-digit revenue growth and a significant improvement in operating margins resulted in net income totaling $23.4 million for the first quarter of 2004 (22 cents per share diluted), compared to $12.2 million (12 cents per share diluted) in the same period of 2003.

"During the past three years, we've taken aggressive actions as part of the turnaround of Beverly Enterprises to improve quality of care, upgrade our skilled nursing facility portfolio, grow our service businesses, increase operating efficiencies and strengthen our financial position," said William R. Floyd, Chairman and Chief Executive Officer. "The results of these actions are clearly reflected in our strong first-quarter performance, and the fundamental improvements we've already achieved provide even greater confidence in our ability to achieve substantial gains throughout 2004. Because of the solid operating momentum we've generated, we are raising our 2004 targeted EBITDA (earnings before interest, taxes, depreciation and amortization) range from continuing operations to $175 million to $180 million."

Continuing operations achieved net income of $19.6 million (18 cents per share diluted) in the 2004 period, compared to $157,000 in the year-earlier period. Charges for asset impairments, workforce reductions and other unusual items during the first quarters of 2004 and 2003 totaled $4.1 million and $1.2 million, respectively. Net income and earnings per share continue to benefit from a low Federal tax rate.

Discontinued operations contributed $3.8 million in net income (4 cents per share diluted) in the 2004 first quarter, primarily reflecting net gains on the dispositions of Skilled Nursing Facilities. In the first quarter of 2003, discontinued operations accounted for net income totaling $12 million (12 cents per share diluted), primarily reflecting a gain on the January 2003 sale of outpatient clinics operated by our former MATRIX Rehabilitation business unit.

Revenues for the 2004 first quarter totaled $527.4 million, up 10.7 percent from the year-earlier period. (Revenues for both quarters have been adjusted to exclude discontinued operations.) The revenue gain primarily reflects higher per diem rates, increased occupancy levels and a higher percentage of Medicare patients in Skilled Nursing Facilities, as well as the substantial growth of Beverly's service businesses - Aegis Therapies and Hospice.

Higher EBITDA Margin Reflects Operating Gains

"Our three principal business units - Skilled Nursing Facilities, Aegis Therapies and Hospice - each achieved significant increases in EBITDA, compared with the year-earlier period," Floyd added. "Double-digit revenue growth, coupled with an intense focus on cost-reduction initiatives, generated significant operating gains and resulted in an increase in our overall EBITDA margin to nine percent. That's a gain of 256 basis points from the first quarter of 2003 and 78 basis points from the fourth quarter. An important contributor to this higher margin is the labor management system we implemented late last year. It has proven particularly effective in enabling us to more efficiently address staffing requirements throughout our Skilled Nursing operations, while continuing to improve quality of care. This new system was a key reason for the lower-than-anticipated increase of less than 3.5 percent in our weighted average wage rate, compared to the year-earlier period."

Skilled Nursing Rates, Occupancy and Patient Mix Increase

On a continuing operations basis, Skilled Nursing Facility revenues rose 8.1 percent from the first quarter of 2003, primarily due to an 8 percent increase in the overall per diem rate, a 43 basis-point increase in average occupancy levels and a 62 basis-point improvement in Medicare patients as a percentage of total patient days. Revenue gains and greater efficiency in managing labor costs resulted in an increase in EBITDA of 42 percent and an increase in EBITDA margins of 170 basis points.

Medicare mix rose to 12.5 percent in the 2004 first quarter - the 17th consecutive quarter of year-over-year increases and the highest share of Medicare patients since 1998. Compared with the 2003 first quarter, Medicare average per diem rates increased 9.1 percent, Medicaid rates rose 6.3 percent (6 percent net of the cost of provider taxes) and private/managed care rates were up 3.2 percent.

Strategic Divestitures Continue on Target

Five facilities were divested during the quarter - two sales, two lease terminations and one closure. As part of a strategy to strengthen and streamline its nursing facility portfolio, Beverly has sold or closed 89 under-performing or non-strategic facilities since the 2003 first quarter.

Service Businesses Achieved Double-Digit Profitable Growth

Aegis Therapies achieved another quarter of profitable growth. Revenues from third-party clients were up 70 percent from the 2003 first quarter, reflecting significant business expansion among existing customers and the net addition of 37 new customers during the period. Aegis now provides speech, occupational and physical therapy services to 547 outside customers, as well as to Beverly's skilled nursing facilities. The annualized total revenue run-rate for Aegis at year-end 2004 is expected to exceed $270 million, including $120 million from outside customers.

Hospice operations again achieved double-digit revenue and EBITDA gains during the 2004 first quarter, compared to the year-earlier period. Revenues were up 28 percent and EBITDA was up more than 40 percent, resulting in an increase in Hospice margins of more than 200 basis points. Daily census averaged 984 patients, an increase of 24 percent from the first quarter of 2003.

Beverly shareholders may listen to a discussion by senior management of the company's performance at 8:30 a.m. EDT, May 5 by dialing 1-800-946-0783 or 1-719-457-2658 and entering reservation number 571924. A recording of this conference call will be available from 11:30 a.m. EDT, May 5 until midnight Friday, May 14. Shareholders may dial 1-888-203-1112 or 1-719-457-0820 and enter reservation number 571924 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. This release may contain forward-looking statements, including statements related to performance in 2004 and beyond, made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act 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 payment levels and methodologies and the application of such methodologies by the government and its fiscal intermediaries; the effects of adopting new accounting standards; liabilities and other claims asserted against the company, including patient care liabilities, as well as the resolution of lawsuits brought about by the announcement or settlement of government investigations and increases in the reserves for patient care liabilities; the ability to predict future reserves related to patient care and workers' compensation liabilities; our ability to obtain adequate insurance coverage with financially viable insurance carriers, as well as the ability of our insurance carriers to fulfill their obligations; the ability to replace or refinance debt obligations; the ability to reduce overhead costs, obtain pricing concessions from suppliers, improve the effectiveness of our fundamental business processes and develop new sources of profitable revenues; the ability to execute our strategic growth initiatives and implement our strategy to divest certain of our nursing facilities in a timely manner at fair values; the ability to attract and retain qualified personnel; the availability and terms of capital to fund acquisitions, capital improvements and on-going operations; the competitive environment in which the company operates; the ability to repurchase our stock and changes in the stock price after any such repurchases; 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, Inc. and its operating subsidiaries are leading providers of healthcare services to the elderly in the United States. At March 31, 2004, we operated 368 skilled nursing facilities, as well as 20 assisted living centers, and 24 hospice centers. Through Aegis Therapies, we also offer rehabilitative services on a contract basis to nursing facilities operated by other care providers.


 BEVERLY ENTERPRISES, INC.
 CONSOLIDATED STATEMENTS OF INCOME
 (In thousands, except per share amounts)

 Quarter ended
 March 31,
 -------------------
 2004 2003
 --------- ---------
Revenues $527,420 $476,233
Costs and expenses:
 Wages and related 299,241 286,063
 Provision for insurance and related items 33,729 28,262
 Other operating and administrative 143,166 130,052
 Depreciation and amortization 15,655 14,159
 Asset impairments, workforce reductions and
 other unusual items 4,082 1,187
 --------- ---------
 Total costs and expenses 495,873 459,723
 --------- ---------
Income before other income (expenses) 31,547 16,510
 Other income (expenses):
 Interest expense (11,893) (16,135)
 Interest income 1,374 1,212
 Net gains (losses) on dispositions 37 (194)
 --------- ---------
 Total other expenses, net (10,482) (15,117)
 --------- ---------
Income before provision for income taxes and
 discontinued operations 21,065 1,393
Provision for income taxes 1,442 1,236
 --------- ---------
Income before discontinued operations 19,623 157
Discontinued operations, net of taxes: 2004 - $423
 and 2003 - $0 3,816 12,031
 --------- ---------
Net income $23,439 $12,188
 ========= =========
Net income per share of common stock:
 Basic and diluted:
 Before discontinued operations $0.18 $-
 Discontinued operations 0.04 0.12
 --------- ---------
 Net income per share of common stock $0.22 $0.12
 ========= =========
 Shares used to compute basic net income per
 share 107,301 104,743
 ========= =========
 Shares used to compute diluted net income
 per share 108,426 104,743
 ========= =========

 BEVERLY ENTERPRISES, INC.
 SUPPLEMENTARY INFORMATION

 Quarter ended
 March 31,
 ---------------------
 2004 2003
 ---------- ----------

Number of Nursing Home Facilities:
 Owned 272 317
 Leased 96 130
 Managed -- 1
 ---------- ----------
 Total 368 448
 ========== ==========

Number of Beds:
 Owned 28,325 34,752
 Leased 10,566 14,487
 Managed -- 75
 ---------- ----------
 Total 38,891 49,314
 ========== ==========

Assisted Living Centers 20 29
Home Care Centers 24 47
Outpatient Clinics 10 10

Patient Days 3,089,000 3,074,000


Nursing Home Occupancy - Continuing Ops
 (based on operational beds) 88.36% 87.93%

Patient Mix (based on patient days):
 Medicaid 70.90% 70.85%
 Medicare 12.53% 11.91%
 Private & Other 16.57% 17.24%

Sources of Revenue (based on $):
 Medicaid 50.91% 52.46%
 Medicare 28.42% 26.80%
 Private & Other 20.67% 20.74%

Average per diem rate
 (including ancillaries) $160.55 $148.68

Wages and related expenses as
 a % of revenues 56.74% 60.07%

 BEVERLY ENTERPRISES, INC.
 SUPPLEMENTARY INFORMATION
 ANALYSIS OF REVENUES

 Quarter ended
 March 31,
 ---------------------------
 2004 2003
 ------------- -------------
 REVENUES (In thousands)
 --------

 NURSING FACILITIES:
 MEDICAID $269,435 $250,788
 MEDICARE 123,989 107,592
 PRIVATE & OTHER 93,058 91,561
 ------------- -------------

 SUBTOTAL 486,482 449,941

 AEGIS THERAPIES 27,180 15,960
 HOME CARE 10,970 8,341
 OTHER 2,788 1,991
 ------------- -------------

 TOTALS $527,420 $476,233
 ============= =============


 PATIENT DAYS (In thousands)
 ------------

 MEDICAID 2,190 2,178
 MEDICARE 387 366
 PRIVATE & OTHER 512 530
 ------------- -------------

 TOTALS 3,089 3,074
 ============= =============


 PER DIEM RATE (Including Ancillaries)
 -------------

 MEDICAID $ 122.12 $ 114.92
 MEDICARE - PART A 320.48 293.65
 PRIVATE & OTHER 153.31 148.50
 ------------- -------------

 TOTALS(1) $ 160.55 $ 148.68
 ============= =============
(1) Weighted Average Rates


 BEVERLY ENTERPRISES, INC.
 SUPPLEMENTARY INFORMATION
 ANALYSIS OF OTHER OPERATING AND ADMINISTRATIVE EXPENSES
 (In thousands)

 Quarter ended
 March 31,
 -------------------
 2004 2003
 --------- ---------


SUPPLIES $30,659 $28,844

FOOD 10,777 11,787

UTILITIES 17,337 15,285

OTHER CONTROLLABLES 56,325 46,466

REAL ESTATE
 RENTAL 10,007 10,468

EQUIPMENT RENTAL 4,408 4,384

OTHER NONCONTROLLABLES 13,653 12,818
 --------- ---------

 TOTALS $143,166 $130,052
 ========= =========

 BEVERLY ENTERPRISES, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands)

 March 31, December 31,
 2004 2003
 ----------- ------------
 (Unaudited)
 ASSETS
Current assets:
 Cash and cash equivalents $230,227 (a) $258,815
 Accounts receivable, less allowance for
 doubtful accounts: 2004 - $33,036;
 2003 - $31,615 218,239 (a) 164,635
 Notes receivable, less allowance for
 doubtful notes: 2004 - $2,045;
 2003 - $3,336 6,533 13,724
 Operating supplies 10,250 10,425
 Assets held for sale 3,444 3,498
 Investment in Beverly Funding Corporation 32,246 31,342
 Prepaid expenses and other 30,378 33,377
 ----------- ------------
 Total current assets 531,317 515,816
Property and equipment, net 673,749 694,220
Other assets:
 Goodwill, net 56,835 57,102
 Other, less allowance for doubtful
 accounts and notes: 2004 - $2,495;
 2003 - $2,120 79,649 79,283
 ----------- ------------
 Total other assets 136,484 136,385
 ----------- ------------
 $1,341,550 $1,346,421
 =========== ============

 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable $56,433 $67,572
 Accrued wages and related liabilities 93,050 116,717
 Accrued interest 12,947 6,896
 General and professional liabilities 96,189 93,736
 Federal government settlement obligations 13,447 13,125
 Liabilities held for sale 696 672
 Other accrued liabilities 105,803 102,289
 Current portion of long-term debt 13,125 13,354
 ----------- ------------
 Total current liabilities 391,690 414,361
Long-term debt 549,473 552,873
Other liabilities and deferred items 138,270 141,001
Commitments and contingencies
Stockholders' equity:
 Preferred stock, shares authorized:
 25,000,000 - -
 Common stock, shares issued: 2004 -
 115,526,851; 2003 - 115,594,806 11,553 11,559
 Additional paid-in capital 896,448 895,950
 Accumulated deficit (537,386) (560,825)
 Treasury stock, at cost: 8,283,316 (108,498) (108,498)
 ----------- ------------
 Total stockholders' equity 262,117 238,186
 ----------- ------------
 $1,341,550 $1,346,421
 =========== ============

(a) The decrease in cash and increase in accounts receivable from
 December 31, 2003 primarily relate to the Beverly Funding
 Corporation ("BFC") transaction. BFC ceased purchasing accounts
 receivable from Beverly on March 1, 2004 in order to repay, in
 June, $70 million of medium-term notes. The transaction will
 eliminate the last of Beverly's off-balance sheet financing
 arrangements and is expected to increase our cash position in the
 second quarter of 2004 by at least $32 million. Additional
 information will be provided on the conference call for investors.

 BEVERLY ENTERPRISES, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 (Dollars in thousands)

 Three Months Ended
 March 31,
 ---------------------
 2004 2003
 --------- ---------
Cash flows from operating activities:
 Net income $23,439 $12,188
 Adjustments to reconcile net income to
 net cash provided by (used for)
 operating activities, including
 discontinued operations:
 Depreciation and amortization 15,766 17,867
 Provision for reserves on accounts,
 notes and other receivables, net 6,194 10,745
 Amortization of deferred financing
 costs 624 1,271
 Asset impairments, workforce
 reductions and other unusual items 4,082 1,187
 Gains on dispositions of facilities
 and other assets, net (4,508) (10,168)
 Insurance related accounts (572) 13,662
 Changes in operating assets and
 liabilities, net of acquisitions
 and dispositions:
 Accounts receivable (59,324)(a) (21,058)
 Operating supplies 104 426
 Prepaid expenses 3,923 (6,855)
 Accounts payable and other
 accrued expenses (21,602) (7,888)
 Income taxes (585) 2,382
 Other, net (4,113) (2,401)
 --------- ---------
 Total adjustments (60,011) (830)
 --------- ---------
 Net cash provided by (used
 for) operating activities (36,572)(a) 11,358
Cash flows from investing activities:
 Capital expenditures (9,777) (7,274)
 Proceeds from dispositions of
 facilities and other assets, net 19,198 38,129
 Collections on notes receivable 6,765 183
 Payments for designated funds, net (714) (8,988)
 Other, net (3,746) (3,478)
 --------- ---------
 Net cash provided by investing
 activities 11,726 18,572
Cash flows from financing activities:
 Repayments of long-term debt (3,629) (4,656)
 Repayments of off-balance sheet
 financing - (16,783)
 Proceeds from exercise of stock
 options 293 -
 Deferred financing costs paid (406) (1,817)
 --------- ---------
 Net cash used for financing
 activities (3,742) (23,256)
 --------- ---------
Net increase (decrease) in cash and cash
 equivalents (28,588) 6,674
Cash and cash equivalents at beginning of
 period 258,815 115,445
 --------- ---------
Cash and cash equivalents at end of period $230,227 $122,119
 ========= =========
Supplemental schedule of cash flow
 information:
Cash paid (received) during the period for:
 Interest, net of amounts capitalized $5,218 $14,633
 Income tax payments (refunds), net 2,450 (1,146)

(a) The net change in accounts receivable and the related net cash
 used for operating activities resulted primarily from the Beverly
 Funding Corporation ("BFC") transaction. BFC ceased purchasing
 accounts receivable from Beverly on March 1, 2004 in order to
 repay, in June, $70 million of medium-term notes. The transaction
 will eliminate the last of Beverly's off-balance sheet financing
 arrangements and is expected to increase our cash position in the
 second quarter of 2004 by at least $32 million. Additional
 information will be provided on the conference call for investors.

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Publication:Business Wire
Geographic Code:1USA
Date:May 4, 2004
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