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 KING OF PRUSSIA, Pa., Oct. 25 /PRNewswire/ -- NovaCare, Inc. (NYSE: NOV), today announced a 24 percent increase in first quarter income from operations for the quarter ended Sept. 30, 1993. Net revenues totaled $155.0 million, representing a 32 percent increase from $117.3 million in the first quarter of fiscal 1993. Gross profit as a percentage of revenues was 31 percent, unchanged from the comparable period in fiscal 1993. Income from operations increased to $22.7 million from $18.3 million a year ago.
 Net income for the quarter was $.25 per common share, compared to $.24 for the three months ended Sept. 30, 1992. The modest improvement in net income relative to the 24 percent increase in operating income was due primarily to two factors. First, the most recent quarter reflected the interest expense associated with NovaCare's 5.5 percent subordinated convertible debentures issued in January 1993, and second, higher state and federal tax rates, together with tax law changes, accounted for most of the increase in the effective tax rate compared to the same period in fiscal 1993.
 First quarter 1994 results do not reflect the previously announced acquisition of Rehabilitation Hospital Corporation of America, which was closed on Oct. 14, 1993.
 "We are pleased with our continued progress in establishing NovaCare as the nation's leading low-cost provider of quality comprehensive rehabilitation services," said John H. Foster, chairman and chief executive officer.
 "Each of our businesses performed well this quarter. Increased occupancy in our medical rehabilitation hospitals, successful hiring of therapists and managers in the contract services group and a favorable patient mix and higher productivity in the O&P businesses were among the favorable trends," said Mr. Foster. "In the O&P business we opened several new patient care centers and successfully completed the transition to the NovaCare name and identity at each of our 109 centers."
 NovaCare is the largest employer of rehabilitation therapists in the country. More than 630 full-time equivalent therapists were hired in NovaCare's contract services business during the quarter. Therapist turnover, generally at a seasonal peak in the first quarter, was 33 percent, compared to 28 percent in the first quarter of fiscal 1993. At the end of September, 4,903 full-time equivalent therapists were employed in the company's contract services business, representing a 43 percent increase from September 1992.
 NovaCare's medical rehabilitation hospital occupancy, which is typically at its lowest during the summer months, increased to 62 percent from 56 percent in the comparable period in fiscal 1993.
 Last week, NovaCare announced a definitive agreement and plan of merger with RehabClinics, Inc., the nation's largest provider of outpatient physical therapy services, with 180 clinics in 22 states. The merger requires regulatory and stockholder approvals and is expected to close in early 1994.
 "We believe that NovaCare should continue to benefit from the changes taking place in our country's health care system," said Mr. Foster. "First, numerous studies have shown that a dollar spent on rehabilitation saves between $11 and $30 in future medical costs, and second, today's focus on value is increasing the demand for lower cost settings like nursing homes and outpatient clinics, which will be NovaCare's largest markets."
 NovaCare, Inc., is the largest provider of contract rehabilitation therapy and orthotic and prosthetic patient care services in the United States. In addition, the company operates 12 acute care medical rehabilitation hospitals and a number of freestanding comprehensive outpatient rehabilitation facilities and community re-entry programs. With operations in 42 states, NovaCare employees currently treat more than 26,000 patients per day.
 Condensed Consolidated Statements of Operations
 (In thousands, except share related data)
 Three months ended Sept. 30, June 30,
 1993 1992 1993
 Net revenues $154,972 $117,321 $152,907
 Cost of services 107,294 80,430 102,583
 Gross profit 47,678 36,891 50,324
 Selling, general and
 administrative expenses 24,960 18,561 24,768
 Merger and other non-recurring
 expenses -- -- --
 Income from operations 22,718 18,330 25,556
 Other income (expense), net (2,217) (152) (2,299)
 Income before income taxes 20,501 18,178 23,257
 Income taxes 8,058 6,122 8,737
 Net income $ 12,443 $ 12,056 $ 14,520
 Net income per share $ 0.25 $ 0.24 $ 0.29
 Weighted average number of
 shares outstanding 50,313,076 50,412,063 50,174,347
 -0- 10/25/93
 /CONTACT: Susan Campbell, director of investor relations, 215-992-7425, or Carol Klein, vice president - communications, 215-992-7240, both of NovaCare/

CO: NovaCare, Inc. ST: Pennsylvania IN: HEA SU: ERN

GK-TA -- NY088 -- 6470 10/25/93 15:50 EDT
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Publication:PR Newswire
Date:Oct 25, 1993

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