SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 8, 2000
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CONCENTRA OPERATING CORPORATION
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(Exact Name of Registrant as Specified in Charter)
Nevada 001-15699 75-2822620
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
312 Union Wharf, Boston, Massachusetts 02109
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (617)367-2163
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Not applicable
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 5. Other Events.
On February 8, 2000, the Company issued a press relaease with respect
to financial results for the fourth quarter of 1999. The press release is
attached hereto as Exhibit 99.1 and incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
99.1 Press Release, dated February 8, 2000.
<PAGE>
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 OPERATING CORPORATION
By: /s/ RICHARD A. PARR II
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Richard A. Parr II
Executive Vice President
and General Counsel
Date: February 17, 2000
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Exhibit Page
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99.1 Press Release, dated February 8, 2000. 6
Contacts: Daniel J. Thomas Thomas E. Kiraly
President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
(617) 367-2163 (617) 619-5101
CONCENTRA OPERATING CORPORATION REPORTS
FOURTH QUARTER AND YEAR-END RESULTS
BOSTON, Mass. (February 8, 2000) - Concentra Operating Corporation
("Concentra") today announced a 15% increase in fourth quarter revenues and a 9%
increase in EBITDA over the same period in the prior year. These gains were
driven by solid growth in the Company's Health Services, Concentra Preferred
Systems and First Notice Systems lines of business compared with the same
quarter last year.
Revenues for the fourth quarter increased to $175,255,000 from
$151,911,000 in the same period last year. Operating income for the quarter
increased to $12,157,000 versus a loss of $6,328,000 last year. Concentra
reported a net loss for the fourth quarter of 1999 of $2,029,000 compared with a
net loss of $4,967,000 in the fourth quarter of 1998.
For the year ended December 31, 1999, revenues increased 12% to
$681,412,000 from $611,056,000 for 1998. Operating income for the year declined
to $14,253,000 compared with $55,200,000 last year. The net loss for the year
ended December 31, 1999, was $26,504,000 compared with net income of $22,486,000
in 1998.
Earnings before interest, taxes, depreciation and amortization
(EBITDA), as computed in a manner consistent with the definition set forth in
the Company's $190 million Series A Senior Subordinated Notes, increased 9% to
$22,455,000 in the fourth quarter of 1999 versus $20,686,000 in the comparable
1998 period. For the year, EBITDA declined 6% to $104,701,000 versus
$111,668,000 in 1998.
Net income for the full year ended December 31, 1999, includes a
non-recurring charge of $54,419,000 ($45,884,000 after tax) incurred in the
third quarter of 1999 primarily for fees, expenses and restructuring charges
associated with the August 1999 acquisition of Concentra by Welsh Carson
Anderson & Stowe and its equity partners. Similarly, results for the fourth
quarter and full year ended December 31, 1998, include non-recurring charges of
$20,514,000 ($12,103,000 after tax) and $33,114,000 ($21,703,000 after tax),
respectively. The fourth quarter charge primarily reflected expenses related to
severance, facility closings and consolidation, as well as the write-off of
certain assets. The Company's results for the full year of 1998 include a charge
taken in the first quarter, which reflected fees, expenses and restructuring
charges primarily associated with its acquisition of Preferred Payment Systems.
<PAGE>
Concentra Reports Year-End Results
Page 2
February 8, 2000
"We are pleased to note continued progress and growth in the Company's
core business lines during the fourth quarter," said Daniel J. Thomas, President
and Chief Executive Officer of Concentra. "The Company's top-line growth and
stronger cash flows reflected a re-acceleration in revenue growth following our
transition to a private company during the third quarter. This growth occurred
most notably in our Concentra Health Services unit, which comprised 50% of total
fourth quarter revenues and continued to post attractive gains in same-market
revenues during the quarter. We are also pleased to report that Concentra Health
Services completed a total of 19 transactions in 1999, which added a record 53
occupational health centers to our market-leading national network.
Additionally, the fourth quarter reflected a continuation of strong
year-over-year growth in our Concentra Preferred Systems and our First Notice
Systems businesses. Our business development and new sales pipeline remain very
strong in each of our core businesses.
"Of course, some aspects of our operations, such as our field case
management business, have not yet met our near-term objectives for growth and
cash flow," he continued. "Recently, we have added several seasoned
professionals to our senior management team in order to address these challenges
more aggressively. New positions within our organization include a new Chief
Information Officer, a new President of case management services, a new Vice
President of Sales for our managed care services, and a Senior Vice President to
coordinate and promote our sales and marketing efforts company-wide. Considering
these steps, the ongoing progress of our core operations, and a new business
pipeline that is the strongest we have seen in years, we are entering 2000 with
solid momentum and the opportunity to improve our performance in the coming
year."
Thomas also noted that the Company's results for the quarter included
the effects of $3.3 million in "one-time or transitory charges," the absence of
which would have resulted in EBITDA of approximately $25.7 million during the
quarter. These charges included operating losses associated with the deliberate
acceleration of the planned acquisition of an occupational health center
development corporation, expenses associated with the start-up of a
drug-screening laboratory in Memphis, Tennessee, and certain other
administrative and consulting costs. "While these costs do not constitute
'non-recurring' charges for accounting purposes, their exclusion does contribute
to a better understanding of the Company's underlying fourth quarter
performance," said Thomas.
According to Thomas, Concentra ended 1999 with $4 million of revolver
borrowings under its $100 million bank line of credit, reflecting
lower-than-expected borrowings at year-end. He noted that the Company was in
full compliance with its covenants under its senior credit facilities at
December 31, 1999. However, with respect to its compliance in future quarters,
the Company is considering meeting with its lenders to review whether a change
in certain financial covenants may be necessary.
<PAGE>
Concentra Reports Year-End Results
Page 3
February 8, 2000
Concentra Operating Corporation is the successor to and a wholly owned
subsidiary of Concentra Managed Care, Inc. Concentra 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 loss, injury care, specialist networks and specialized cost containment to
the disability and automobile injury markets. Currently, the Company operates
the nation's largest network of occupational healthcare facilities, with 210
centers located in 63 markets in 32 states. The Company has approximately 1,050
field case managers who provide medical management and return to work services
in 49 states, the District of Columbia, and Canada. The Company also has 86
service locations that provide specialized cost containment services including
utilization management, telephonic case management, first notice of loss
reporting, and retrospective bill review.
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, completion of the Company's
annual audit, 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.
<PAGE>
Concentra Reports Year-End Results
Page 4
February 8, 2000
CONCENTRA OPERATING CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
CONCENTRA MANAGED CARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
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1999 1998 1999 1998
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(RESTATED) (RESTATED)
<S> <C> <C> <C> <C>
REVENUE:
Health services $ 87,643,000 $ 65,791,000 $ 330,064,000 $ 259,481,000
Managed care services:
Specialized cost containment 52,454,000 46,544,000 204,084,000 183,734,000
Field case management 35,158,000 39,576,000 147,264,000 167,841,000
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Total managed care services 87,612,000 86,120,000 351,348,000 351,575,000
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Total revenue 175,255,000 151,911,000 681,412,000 611,056,000
COST OF SERVICES:
Health services 73,326,000 55,978,000 265,083,000 201,181,000
Managed care services 68,234,000 68,128,000 269,406,000 268,116,000
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Total cost of services 141,560,000 124,106,000 534,489,000 469,297,000
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Total gross profit 33,695,000 27,805,000 146,923,000 141,759,000
General and administrative expenses 18,073,000 11,602,000 65,291,000 45,326,000
Amortization of intangibles 3,465,000 2,017,000 12,960,000 8,119,000
Non-recurring charge -- 20,514,000 54,419,000 33,114,000
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Operating (loss) income 12,157,000 (6,328,000) 14,253,000 55,200,000
Interest expense 16,165,000 4,898,000 35,779,000 18,021,000
Interest income (176,000) (1,720,000) (2,900,000) (4,659,000)
Other, net (244,000) (44,000) (391,000) 44,000
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(Loss) income before income taxes (3,588,000) (9,462,000) (18,235,000) 41,794,000
(Benefit) provision for income taxes (1,559,000) (4,495,000) 8,269,000 19,308,000
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Net (loss) income $ (2,029,000) $ (4,967,000) $ (26,504,000) $ 22,486,000
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</TABLE>
The consolidated statements of operations above include the post-
recapitalization transaction operating results of Concentra Operating
Corporation, a wholly owned subsidiary of Concentra Managed Care, Inc. and the
pre-recapitalization transaction operating results of Concentra Managed Care,
Inc. The recapitalization transaction was completed on August 17, 1999. The
consolidated statements of operations also include all non-recurring charges
related to the recapitalization transaction.
<PAGE>
Concentra Reports Year-End Results
Page 5
February 8, 2000
CONCENTRA OPERATING CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
CONCENTRA MANAGED CARE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
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ASSETS UNAUDITED
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 14,371,000 $ 101,128,000
Marketable securities -- 5,000,000
Accounts receivable, net 156,239,000 127,615,000
Prepaid expenses, tax assets and other current assets 28,674,000 33,094,000
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Total current assets 199,284,000 266,837,000
PROPERTY AND EQUIPMENT, NET 104,068,000 85,926,000
GOODWILL AND OTHER INTANGIBLE ASSETS, NET 324,984,000 277,953,000
MARKETABLE SECURITIES -- 10,583,000
OTHER ASSETS 25,768,000 15,495,000
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$ 654,104,000 $ 656,794,000
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LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Revolving credit facilities $ 4,000,000 $ --
Current portion of long-term debt 3,805,000 55,000
Accounts payable, accrued income tax and expenses 89,109,000 64,912,000
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Total current liabilities 96,914,000 64,967,000
LONG-TERM DEBT 559,942,000 327,870,000
DEFERRED INCOME TAXES AND OTHER LIABILITIES 36,521,000 24,082,000
STOCKHOLDERS' (DEFICIT) EQUITY (39,273,000) 239,875,000
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$ 654,104,000 $ 656,794,000
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</TABLE>
The consolidated balance sheet as of December 31, 1999 represents the financial
position of Concentra Operating Corporation, including all non-recurring charges
related to the August 17, 1999 recapitalization transaction. The consolidated
balance sheet as of December 31, 1998 represents the financial position of
Concentra Managed Care, Inc.
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