* Medicare Reimbursement Changes Lead to $0.25 Per Share Operating Loss
* Goodwill Write-Down of $4.6 Million (Net of tax)
* Restructuring Reduces Operating Costs by $7 Million Annually
LOUISVILLE, Ky., Aug. 14 /PRNewswire/ -- Caretenders HealthCorp
(Nasdaq: CTND) today reported its financial results for the quarter ended June
30, 1998 and announced its restructuring of the Company's operations to
improve its financial performance.
First Quarter Results
For the quarter ended June 30, 1998 the Company reported a net loss from
operations (excluding one-time items) of ($780,354) or ($0.25) per share
versus net income of $292,569 or $0.09 per share in the prior year. These
results were principally due to the impact of the Interim Payment System for
Medicare home health services legislated by the Balanced Budget Act of 1997
(BBA), which became effective for the Company April 1, 1998, and the reaction
of the home health market place to these new rules. Material portions of the
rules were not published by HCFA until March 31, 1998, the day before the June
1998 quarter began. The Company reported a net loss of $5.7 million after
one-time charges relating to a write-down in goodwill and required accounting
changes.
"As we indicated in our last earnings release, the changes in Medicare
payments for home care services are having a profound negative impact on the
entire industry and our Company," said William B. Yarmuth, Chairman and CEO.
"The Interim Payment System imposed new and lower limitations on costs that
will be reimbursed by the Medicare program. These changes have caused
confusion among referral sources leading to lower admissions and lower
utilization of home care nationwide. As a result we incurred pre-tax
operating costs of about $1 million in excess of reimbursement." Material
portions of the rules were not published by HCFA until March 31, 1998, the day
before the June 1998 quarter began.
Restructuring Plan Implemented
"In July 1998 in response to the previously unforeseen implications of IPS
the Company executed a restructuring plan to significantly lower operating
costs. The restructuring included work force reduction, branch closings, and
changes in compensation programs," Yarmuth said. "These actions will reduce
operating costs by an annualized amount of approximately $7 million ($4.9
million of which is expected to be realized in the current fiscal year).
These cost reductions should enable the Company to return to profitable
operation in both the third and fourth quarters."
As a part of this restructuring program, the Company recorded a one-time
write-down of goodwill of $7.0 million before taxes ($4.6 million after tax)
due to the Medicare reimbursement impact on the home health operating
environment. Additionally, the Company plans to record a charge of $550,000
before taxes ($323,000 after tax) in the second quarter for severance, branch
closing and other one-time costs associated with the July restructuring
activities.
The Company also recorded a one-time after-tax charge of $383,000 in the
quarter for a change in its method of accounting for deferred pre-opening
costs. This change is mandated by the recently issued "AICPA Statement of
Position 98-5 Reporting on the Costs of Start-up Activities." Previously,
generally accepted accounting principles (GAAP) permitted these costs to be
deferred and amortized. The new rules will require all public reporting
companies to expense these costs as incurred.
Company Remains Positive on the Future of Home and Community Based Care
"Despite all of the issues currently facing our industry we are positive
about, and committed to, the future of home and community-based health care.
We remain committed to the expansion and development of our business,"
Yarmuth said. "We believe the actions taken in out restructuring plan, and
the resulting lower operating costs will allow us to operate successfully
within the current Medicare reimbursement environment. We continue to be
pleased with the progress of our adult day care operations where revenues grew
by 17% and contribution grew by 32% as compared to the same quarter last
year."
Quarter ended June 30,
1998 1997 Change %
Net Revenues $23,666,455 $21,521,250 $ 2,145,205 10.0%
Net income (loss) from
operations $ (780,355) $ 292,569 $(1,072,924) NM
Goodwill write-down,
net of tax (4,585,361) -- (4,585,361)
Cumulative effect on prior years of change in
accounting principle
(net of tax) (382,515) -- (382,515)
Reported Net Income
(loss) $(5,748,231) $ 292,569 $(6,040,800) NM
Weighted Average Shares Outstanding
Basic 3,120,413 3,119,436 977 0.0%
Diluted 3,120,413 3,143,945 (23,532) -0.7%
Earnings Per Share - Basic
Net income (loss) from
operations $ (0.25) $ 0.09 $ (0.34) NM
Goodwill write-down,
net of tax (1.47) -- (1.47)
Cumulative effect on prior years of change
in accounting principle
(net of tax) (0.12) -- (0.12) 0.0%
Reported Net
Income (loss) $ (1.84) $ 0.09 $ (1.94) NM
NM - not meaningful
Caretenders HealthCorp provides home and community based health care
services in Kentucky, Maryland, Alabama, Massachusetts, Connecticut, Indiana,
Ohio, Virginia and Florida.
All statements, other than statements of historical facts, included in
this news release, including the Company's ability to maintain operating costs
at levels below reimbursements and the objectives and expectations of
management for future operating results, are forward-looking statements.
These forward-looking statements are based on the Company's current
expectations. Although the Company believes that the expectations with
respect to internal matters reflected in such forward-looking statements are
reasonable, there can be no assurance that such expectations will prove to be
correct.
Because forward-looking statements involve risks and uncertainties, the
Company's actual results could differ materially. The potential risks and
uncertainties which could cause actual results to differ materially could
include the Company's ability to achieve cost savings without negatively
impacting operations; the impact of further changes in the Medicare
reimbursement system, including the ultimate implementation of a prospective
payment system; government regulation; health care reform; pricing pressures
from third-party payors; and changes in laws and interpretations of laws
relating to the healthcare industry. For a more complete discussion regarding
these and other factors which could affect the Company's financial
performance, refer to the Company's Securities and Exchange Commission filing
on Form 10-K for the year ended March 31, 1998, in particular information
under the headings "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The Company disclaims any
intent or obligation to update its forward-looking statements.
SOURCE Caretenders HealthCorp
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Company News On-Call: http://www.prnewswire.com or
fax, 800-758-5804, ext. 784275
CONTACT:
William Yarmuth or Steve Guenthner,
Caretenders HealthCorp, 502-899-5355
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