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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): FEBRUARY 4, 1999
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CONCENTRA MANAGED CARE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 000-22751 04-3363415
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of incorporation) Identification Number)
312 UNION WHARF
BOSTON, MASSACHUSETTS 02109
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (617) 367-2163
NOT APPLICABLE
(former address if changed since last report)
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ITEM 5. OTHER EVENTS
See the press release attached hereto as Exhibit 99.1 dated February 4, 1999
announcing revenues and earnings for the quarter and year ended December 31,
1998 for Concentra Managed Care, Inc.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS
99.1 Press Release of the Registrant dated February 4, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONCENTRA MANAGED CARE, INC.
(Registrant)
By: /s/ Richard A. Parr
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Name: Richard A. Parr II
Title: Executive Vice President and General Counsel
Date: February 4, 1999
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INDEX TO EXHIBITS
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<CAPTION>
EXHIBIT
NUMBER PAGE
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<S> <C>
99.1 Press Release of Registrant dated February 4, 1999
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EXHIBIT 99.1
Contact: Joseph F. Pesce, CFO
Concentra Managed Care, Inc.
(617) 367-2163, Ext. 5101
CONCENTRA MANAGED CARE REPORTS
FOURTH QUARTER AND YEAR-END RESULTS
BOSTON, Mass. (February 4, 1999) - Concentra Managed Care, Inc.
(Nasdaq/NM: CCMC) today announced revenues and earnings for the fourth quarter
and year ended December 31, 1998.
Revenues for the fourth quarter increased 14% to $153,450,000 from
$134,797,000 in the same period last year. Operating income for the quarter
totaled $14,360,000 compared with $17,779,000 last year. Net income for the
fourth quarter was $7,136,000 or $0.15 per diluted share versus pro forma net
income of $8,217,000 or $0.17 per diluted share a year ago.
For the year ended December 31, 1998, revenues increased 25% to
$616,780,000 from $493,879,000 for 1997. Operating income for 1998 was
$88,981,000 compared with $71,676,000 last year. Net income for 1998 totaled
$44,189,000 or $0.93 per diluted share versus pro forma net income of
$36,229,000 or $0.78 per diluted share last year.
The results described above for the fourth quarter of 1998 exclude a
non-recurring charge of $20,514,000 ($12,103,000 after-tax or $0.26 per diluted
share), which primarily consists of expenses related to severance, facility
closings and consolidation, and the write-off of certain assets. Similarly,
results for the full year ended December 31, 1998, exclude non-recurring charges
totaling $33,114,000 ($21,703,000 after-tax), reflecting both the fourth quarter
charge as well as a charge of $12,600,000 reported in the first quarter of 1998
related to fees and expenses primarily associated with the February 1998
acquisition of Preferred Payment Systems. The results for the year ended
December 31, 1997, exclude a non-recurring charge of $38,625,000 ($29,040,000
after-tax) related to the August 1997 merger of Concentra's predecessor
companies.
"The past several months have marked a distinct transition for our
Company as Concentra has shifted its focus from achieving top-line growth to a
goal of stable and consistent profitability over the long-term," said Daniel J.
Thomas, President and Chief Executive Officer of the Company. "Some of the
business we added in late 1997 and early 1998, particularly for field case
management and cost containment services, provided substantial additions to our
revenues. Yet, because of discounted pricing and start-up costs, this new
business generated minimal incremental earnings. Moreover, our focus on revenue
expansion distracted our attention from issues concerning the implementation of
new technology and the integration of our services, both of which we believe
will ultimately lead to more efficient and effective business processes and, in
turn, better information and outcomes for our customers.
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"As the expenses associated with workplace safety and injury care
continue to mount, there is no question that the markets we serve, including
workers' compensation, auto and disability insurance, remain strong," he
continued. "Concentra continues to be well-positioned to serve these growing
markets with a full continuum of services that address the entire injury
episode. Based on this continuum, Concentra has the unique ability to bundle
service solutions to minimize the cost of injury care, speed recovery, and get
people back to work as quickly as possible.
"While the industry backdrop is positive, however, we know there is
significant work still to be done in redefining our business model to meet the
needs and expectations of our customers and stockholders. We have made headway
in renegotiating certain underperforming contracts and reallocating our
resources in light of current business conditions. Also, we have commenced a
number of new technology initiatives that will allow us to integrate our people,
services and systems more effectively, manage our business better, and improve
the outcomes of the services we offer to customers. While these efforts will not
begin to benefit our operations in any substantial way until 2000 and beyond, we
believe they will ultimately enable us to expand the Company's revenue base and
achieve higher profit margins.
"As we continue to focus on profitability and investment in new
technologies and processes, we expect to see overall revenue growth slow to
about 15% for 1999. Additionally, many of these new initiatives will have a
near-term adverse impact on margins and earnings. Consequently, we project
earnings per diluted share of approximately $0.90 to $0.95 for 1999. These
expectations should be viewed in the context of the results for the second half
of 1998 following the initiation of these changes. Beyond 1999, we anticipate
that total revenues will grow in the 12% to 15% range and annual earnings growth
will re-accelerate to a range of approximately 15% to 18%," he concluded.
Thomas noted that the Company has completed a number of transactions
since September 30, 1998, which have added 18 occupational medicine centers to
Concentra's health services division. Several of these transactions, which
increased the number of centers in the Company's nationwide network to 156 at
year end and 169 at the present date, involved joint ventures with hospital
systems and entry into new markets. Concentra believes it will be able to
continue its expansion strategy in 1999 by adding approximately 15 to 20 more
centers during the balance of the year.
Separately, the Company announced that as a result of the non-recurring
charge taken in the fourth quarter of 1998, it was not in compliance with
certain leverage ratio covenants of the Senior Credit Facility. The Company has
requested, and received, a temporary waiver from all of its lenders of any such
default. Currently, there are no borrowings outstanding under this facility.
Concentra also reported that the Special Committee of the Board of
Directors continues to work with its advisor, BT Alex. Brown, to evaluate the
various strategic alternatives available to the Company. The Board formed this
committee late last year to consider a range of options, including remaining
independent and pursuing its existing or a modified strategy, or pursuing one of
the expressions of interest received by the Company regarding the possible
acquisition of some
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CCMC Reports Year-end Results
Page 7
February 4, 1999
or all of the Company's common stock. The Special Committee plans to complete
its evaluation and make a recommendation to the full Board of Directors by the
end of the first quarter of 1999.
Concentra Managed Care is the leading provider and comprehensive
outsource solution for cost containment and fully integrated care management in
the occupational, auto, and group healthcare markets. Concentra offers
prospective and retrospective services to employers and insurers of all sizes,
providing pre-employment testing, loss prevention services, first report of
injury, injury care, specialist networks and specialized cost containment to the
disability and automobile injury markets. At December 31, 1998, the Company had
89 field case management offices, with approximately 1,100 field case managers
who provide medical management and return to work services in 49 states, the
District of Columbia, and Canada. The Company also had 85 service locations that
provide specialized cost containment services including utilization management,
telephonic case management, and retrospective bill review. The Company operates
the nation's largest network of occupational healthcare centers, managing the
practices of 278 physicians located in 156 centers in 45 markets in 24 states as
of December 31, 1998.
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, consummation of
transactions involving the acquisition of some or all of the Company's common
stock and related financing transactions, and interruption in its data
processing capabilities, operational financing and strategic risks related to
the Company's growth strategy, possible fluctuations in quarterly and annual
operations, and 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.
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CCMC Reports Year-end Results
Page 8
February 4, 1999
CONCENTRA MANAGED CARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
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1998 1997 1998 1997
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RESTATED RESTATED
<S> <C> <C> <C> <C>
REVENUES:
Field case management $ 39,576,000 $ 36,552,000 $ 167,841,000 $ 138,723,000
Specialized cost containment 46,544,000 41,024,000 183,734,000 142,919,000
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Managed care services 86,120,000 77,576,000 351,575,000 281,642,000
Health services 67,330,000 57,221,000 265,205,000 212,237,000
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Total revenues 153,450,000 134,797,000 616,780,000 493,879,000
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COST OF SERVICES:
Managed care services 68,128,000 59,603,000 268,116,000 217,263,000
Health services 57,279,000 44,762,000 205,986,000 158,987,000
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Total cost of services 125,407,000 104,365,000 474,102,000 376,250,000
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Total gross profit 28,043,000 30,432,000 142,678,000 117,629,000
General and administrative
expenses 11,654,000 10,684,000 45,530,000 40,008,000
Amortization of intangibles 2,029,000 1,969,000 8,167,000 5,945,000
Non-recurring charge 20,514,000 -- 33,114,000 38,625,000
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Operating (loss) income (6,154,000) 17,779,000 55,867,000 33,051,000
Interest expense 4,898,000 3,773,000 18,021,000 12,667,000
Interest income (1,720,000) (83,000) (4,659,000) (2,297,000)
Other, net 130,000 584,000 711,000 1,619,000
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(Loss) income before
income taxes (9,462,000) 13,505,000 41,794,000 21,062,000
(Benefit) provision for income taxes (4,495,000) 4,903,000 19,308,000 11,062,000
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Net (loss) income $ (4,967,000) $ 8,602,000 $ 22,486,000 $ 10,000,000
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Pro forma net income* $ 8,217,000 $ 7,189,000
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Basic pro forma and actual
(loss) earnings per share* $ (0.11) $ 0.19 $ 0.48 $ 0.17
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Weighted average common shares
outstanding 47,092,000 43,346,000 46,451,000 42,774,000
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Diluted pro forma and actual
(loss) earnings per share* $ (0.11) $ 0.17 $ 0.47 $ 0.16
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Weighted average common shares
and equivalents outstanding 47,092,000 47,793,000 47,827,000 46,895,000
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</TABLE>
* Net income and earnings per share for the three and twelve months ended
December 31, 1997, have been calculated as if Preferred Payment Systems, Inc.
("PPS") had been subject to federal and state income taxes for the entire
period, based upon an effective tax rate indicative of the statutory rates in
effect. Prior to its acquisition by the Company during the first quarter of
1998, PPS elected to be taxed as an S Corporation and, accordingly, was not
subject to federal and state income taxes in certain jurisdictions.
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CCMC Reports Year-end Results
Page 9
February 4, 1999
CONCENTRA MANAGED CARE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
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RESTATED
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 104,478,000 $ 12,576,000
Marketable securities 5,000,000 --
Accounts receivable, net 128,522,000 106,963,000
Prepaid expenses, tax assets and other current assets 29,706,000 26,212,000
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Total current assets 267,706,000 145,751,000
PROPERTY AND EQUIPMENT, AT COST 139,414,000 104,054,000
Less: Accumulated depreciation and amortization (52,478,000) (38,351,000)
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NET PROPERTY AND EQUIPMENT 86,936,000 65,703,000
GOODWILL AND OTHER INTANGIBLE ASSETS, NET 280,377,000 262,592,000
MARKETABLE SECURITIES 10,583,000 --
OTHER ASSETS 11,561,000 8,925,000
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$ 657,163,000 $ 482,971,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit facilities $ -- $ 49,000,000
Current portion of long-term debt 55,000 7,497,000
Accounts payable, accrued income tax and expenses 65,281,000 52,136,000
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Total current liabilities 65,336,000 108,633,000
LONG-TERM DEBT, NET OF CURRENT PORTION 327,870,000 150,103,000
DEFERRED INCOME TAXES AND OTHER LIABILITIES 24,082,000 17,794,000
STOCKHOLDERS' EQUITY:
Common stock 471,000 436,000
Paid-in capital 270,654,000 257,022,000
Unrealized gain on marketable securities 60,000 --
Retained deficit (31,310,000) (51,017,000)
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Total stockholders' equity 239,875,000 206,441,000
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$ 657,163,000 $ 482,971,000
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