Beverly Enterprises, Inc. (BEI) (NYSE: BEV) today announced that
net income for the third quarter of 2005 totaled $22 million (18
cents per share diluted), compared to $24.4 million (20 cents per
share diluted) in the same period of 2004. Net income for the two
periods reflected the following: -- 2005 third-quarter expenses
totaling $11.5 million (9 cents per share diluted) relating to the
process of selling the company, -- reclassification of 22 nursing
facilities in California to Continuing Operations, with results
restated to reflect increases in Continuing Operations pre-tax
income of $1.2 million for the 2005 third quarter and $1.3 million
for the comparable 2004 period, and -- 2005 third-quarter pre-tax
income of $2.9 million (2 cents per share diluted) due to
retroactive Medicaid rate increases in California. Excluding
sale-related expenses and the retroactive Medicaid increases, net
income from continuing operations totaled $30.1 million (24 cents
per share diluted) in the 2005 third quarter, a 28 percent increase
from $23.5 million (20 cents per share diluted) in the year-earlier
period. Discontinued operations (which no longer includes on-going
California nursing facility results) accounted for income of
$520,000 in the 2005 third quarter and $1.1 million in the
comparable 2004 period. Revenues for the 2005 third quarter totaled
$583.9 million, up 11 percent from $524.8 million in the same
period in 2004. Excluding retroactive California Medicaid rate
adjustments, 2005 third-quarter revenues were up 10 percent from
the year-earlier period. For the first nine months - and excluding
sale process expenses ($36.6 million or 29 cents per share diluted)
and retroactive Medicaid rate adjustments in California,
Pennsylvania and Indiana ($19.9 million or 16 cents per share
diluted) - net income from continuing operations totaled $95.8
million (77 cents per share diluted) in 2005, a 35 percent increase
from $71.1 million (59 cents per share diluted) from the comparable
2004 period (excluding early debt extinguishment costs in that
year). Revenues for the first nine months of 2005 were up 15
percent from the year-earlier period (10 percent excluding
retroactive Medicaid adjustments). "We achieved strong operating
and financial results in all our major business units, compared to
the 2004 third quarter," said William R. Floyd, BEI Chairman and
Chief Executive Officer. "Revenue, EBITDA and operating margins
were up significantly in Nursing Facilities, Aegis Therapies and
AseraCare Hospice/Home Health. As a result, our total EBITDA for
the third quarter was up 15 percent to $57.1 million and our
overall EBITDA margin averaged 9.9 percent (comparison excludes
impact of retroactive Medicaid rate adjustments). "EBITDA in our
Nursing Facilities increased 19 percent, and the EBITDA margin was
up a full percentage point - reflecting revenue increases,
continuing improvement in patient mix and higher census levels.
Aegis Therapies also recorded another strong quarter, as continuing
growth in its client base contributed to substantial increases in
EBITDA and EBITDA margin. AseraCare Hospice/Home Health revenues
were up more than 50 percent, and both its EBITDA and EBITDA margin
showed significant increases." Floyd continued: "Our performance
continues to reflect fundamental operating improvements we've been
making during the past three years, as well as initiatives we've
developed to generate on-going profitable growth in all our
businesses. I'm particularly proud of the results our associates
have achieved this year - despite the challenges posed by the
on-going sale process. They remain sharply focused on providing
quality care and on accomplishing our financial objectives." Note:
EBITDA is earnings from continuing operations before interest
expense, interest income, taxes, depreciation and amortization;
EBITDA for 2005 third quarter has been adjusted to exclude expenses
relating to the sale of the company and earnings relating to
retroactive Medicaid rate increases. EBITDA margin is EBITDA as a
percentage of total adjusted revenues. FINANCIAL AND OPERATIONAL
HIGHLIGHTS General -- Third-quarter 2005 net income from continuing
operations up 28 percent (comparison excludes sale process costs
and retroactive Medicaid rate increases in California). -- Net
income increase primarily reflects revenue, EBITDA and margin
improvements in all three principal businesses - Nursing
Facilities, Aegis Therapies and AseraCare Hospice/Home Health. --
Overall EBITDA margin averaged 9.9 percent for the 2005 third
quarter, up more than 40 basis points from the year-earlier period
(comparison excludes retroactive Medicaid revenues and sale
expenses). -- Capital investments, primarily to support business
unit growth, totaled $23 million in the 2005 third quarter, a 43
percent increase from the investments made in the year-earlier
period. Nursing Facilities -- California Medicaid rate adjustment
(retroactive to August 1, 2004) increased 2005 third-quarter
revenue by $8 million and raised related provider tax expense by
$3.1 million, for a net pre-tax income benefit of $4.9 million.
This included a net adjustment to pre-tax income of $2.9 million
related to prior periods. -- Excluding favorable impact of
California rate adjustment, 2005 third-quarter EBITDA increased 19
percent and EBITDA margin rose 100 basis points (compared to
year-earlier period). -- EBITDA gains (excluding retroactive
California rate adjustment) primarily reflect 7.5 percent revenue
increase, continuing improvements in patient mix and higher census.
-- Occupancy in the 345 facilities in continuing operations rose
110 basis points (compared to the 2004 third quarter) to an average
of 90.5 percent. Total nursing patient days also increased. --
Medicare patient days as a percentage of total patient days
averaged 12.5 percent for the 2005 third quarter, up 130 basis
points from the year-earlier period. -- Medicare revenues as a
percentage of total revenues averaged 29.8 percent, up 240 basis
points from the 2004 third quarter (comparison excludes impact of
retroactive Medicaid increases). -- Total Medicare revenues rose 16
percent, reflecting treatment of higher acuity patients, increased
patient volume and a 2.8 percent increase in rates (effective
October 1, 2004). -- During the 2005 third quarter, Medicaid rate
increases were approved for California that significantly improved
the projected cash flows for Beverly's 22 remaining skilled nursing
facilities in that state, which were being held for sale as part of
Discontinued Operations. Primarily because the potential sales
value is now expected to be less than the present value of expected
future cash flows resulting from the higher rates, the Board of
Directors approved termination of marketing efforts on these
facilities, resulting in their reclassification as Continuing
Operations. Results for both the 2005 and 2004 third quarter have
been restated to reflect this change. Aegis Therapies / AseraCare
-- Aegis Therapies third-party revenues increased 25 percent ($7.9
million) over 2004 third quarter. This gain reflects continuing
growth in its client base as well as 4.4 percent volume-based
growth in revenue per nursing home contract during the past 12
months. Client-initiated turnover averaged less than 2 percent for
the quarter. -- Aegis raised its EBITDA significantly and also
achieved a strong increase in its EBITDA margin from 2004
third-quarter levels, primarily due to lower bad debt expense
associated with improved collections. Operating margins were in the
high teens. -- Aegis continued to build a solid foundation for
growth through aggressive hiring of therapists during the quarter,
resulting in a 24 percent increase in full-time-equivalent staff
(compared to the 2004 third quarter). Retention of existing staff
averaged 88 percent. -- AseraCare Hospice/Home Health revenues
increased 51 percent ($9.8 million) compared to the 2004 third
quarter, including an increase of $3.6 million from the opening of
17 new hospice locations. -- AseraCare achieved substantial
increases in both EBITDA and EBITDA margin. -- Average daily
hospice census was 2,620, up 46 percent from the 2004 third-quarter
level - reflecting a same-location increase in ADC of 25 percent
and a 21 percent increase due to the opening of 17 new hospice
locations during the past 12 months. -- AseraCare also opened three
home health agencies during the quarter. BEI shareholders may
listen to a discussion this morning by senior management of the
company's performance at 8:30 a.m. ET by dialing 1-888-208-1812 or
1-719-457-2654 and entering reservation number 6347931. A recording
of this conference call will be available from 11:30 a.m. ET today
until midnight November 17. Shareholders may dial 1-888-203-1112 or
1-719-457-0820 and enter reservation number 6347931 to access the
recording. FORWARD-LOOKING STATEMENTS The statements in this
document relating to matters that are not historical facts are
forward-looking statements based on management's beliefs and
assumptions using currently available information and expectations
as of the date hereof. Forward-looking statements are not
guarantees of future performance and involve certain risks and
uncertainties, including the risks and uncertainties detailed from
time to time in BEI's filings with the Securities and Exchange
Commission. In particular, statements regarding the consummation of
the merger with North American Senior Care are subject to risks
that the conditions to the transaction will not be satisfied,
including the risk that regulatory approvals will not be obtained.
In addition, our results of operations, financial condition and
cash flows may be adversely impacted by the recently concluded
auction process and the announcement of the proposed transaction
with North American Senior Care, which may impact our ability to
attract and retain customers, management and employees. We have
incurred and will continue to incur advisory fees and other
expenses relating to the auction process and the transaction with
North American Senior Care. Although BEI believes that the
expectations reflected in such forward-looking statements are
reasonable, it cannot give any assurances that these expectations
will prove to be correct. BEI assumes no duty to publicly update or
revise such statements, whether as a result of new information,
future events or otherwise. Beverly Enterprises, Inc. and its
operating subsidiaries are leading providers of healthcare services
to the elderly in the United States. At September 30, 2005, it
operated 345 skilled nursing facilities, as well as 18 assisted
living centers, and 66 hospice/home care centers. Through Aegis
Therapies, the company offers rehabilitative services on a contract
basis to nursing facilities operated by other care providers. -0-
*T BEVERLY ENTERPRISES, INC. SUPPLEMENTARY INFORMATION Quarter
Ended Nine Months Ended September 30, September 30,
--------------------- --------------------- 2005 2004 2005 2004
---------- ---------- ---------- ---------- Number of Nursing Home
Facilities: Owned 263 264 263 264 Leased 82 91 82 91 ----------
---------- ---------- ---------- Total 345 355 345 355 ==========
========== ========== ========== Number of Beds: Owned 27,079
27,327 27,079 27,327 Leased 9,110 10,004 9,110 10,004 ----------
---------- ---------- ---------- Total 36,189 37,331 36,189 37,331
========== ========== ========== ========== Assisted Living Centers
18 18 18 18 Hospice/Home Care Centers 66 45 66 45 Outpatient
Clinics - 10 - 10 Continuing Operations: Nursing Patient Days
2,947,000 2,944,000 8,715,000 8,770,000 Nursing Home Occupancy
(based on operational beds) 90.49% 89.43% 89.78% 88.98% Operational
beds 35,423 35,776 35,423 35,776 Patient Mix (based on patient
days): Medicaid 71.15% 72.08% 70.66% 71.34% Medicare 12.52% 11.21%
12.97% 11.93% Private & Other 16.33% 16.71% 16.37% 16.73%
Sources of Revenue (based on $):(1) Medicaid 49.26% 51.52% 48.92%
51.07% Medicare 29.77% 27.33% 30.18% 27.82% Private & Other
20.97% 21.15% 20.90% 21.11% Nursing Average per diem rate
(including ancillaries) $172.27 $159.68 $172.24 $158.94 Hospice
Average Daily Census 2,620 1,792 2,436 1,293 Aegis Outside
Contracts 627 592 627 592 Wages and related expenses as a % of
revenues 56.71% 59.42% 55.13% 57.86% (1) Excludes the retroactive
Medicaid rate adjustments in Indiana, Pennsylvania and California.
BEVERLY ENTERPRISES, INC. SUPPLEMENTARY INFORMATION ANALYSIS OF
REVENUES Quarter Ended Nine Months Ended September 30, September
30, ------------------- ----------------------- 2005 2004 2005 2004
--------- --------- ----------- ----------- REVENUES (In thousands)
-------- NURSING FACILITIES: MEDICAID $290,586 $270,632 $ 894,287 $
786,532 MEDICARE 125,051 108,149 383,829 338,759 PRIVATE &
OTHER 97,630 94,181 286,235 276,255 --------- --------- -----------
----------- SUBTOTAL 513,267 472,962 1,564,351 1,401,546 AEGIS
THERAPIES 39,864 31,975 113,068 89,023 ASERACARE 28,876 19,062
79,225 42,214 OTHER 1,935 843 4,911 4,013 --------- ---------
----------- ----------- TOTALS $583,942 $524,842 $1,761,555
$1,536,796 ========= ========= =========== =========== NURSING
PATIENT DAYS (In thousands) -------------------- MEDICAID 2,097
2,122 6,158 6,257 MEDICARE 369 330 1,130 1,046 PRIVATE & OTHER
481 492 1,427 1,467 --------- --------- ----------- -----------
TOTALS 2,947 2,944 8,715 8,770 ========= ========= ===========
=========== NURSING PER DIEM RATES (Including Ancillaries)
---------------------- MEDICAID(1) $ 136.14 $ 126.04 $ 135.01 $
124.38 MEDICARE - PART A 339.00 327.58 339.64 323.82 PRIVATE &
OTHER 162.51 156.82 162.73 155.48 --------- --------- -----------
----------- TOTALS(2) $ 172.27 $ 159.68 $ 172.24 $ 158.94 =========
========= =========== =========== (1) Excludes the retroactive
Medicaid rate adjustments in Indiana, Pennsylvania and California.
(2 ) Weighted average rates BEVERLY ENTERPRISES, INC. SUPPLEMENTARY
INFORMATION ANALYSIS OF OTHER OPERATING AND ADMINISTRATIVE EXPENSES
(In thousands) Quarter Ended Nine Months Ended September 30,
September 30, ------------------- ------------------- 2005 2004
2005 2004 --------- --------- --------- --------- SUPPLIES $31,635
$29,062 $93,663 $87,231 FOOD 10,226 10,014 30,161 30,332 UTILITIES
14,668 13,206 44,344 42,176 OTHER CONTROLLABLES 60,346 55,356
175,010 162,014 REAL ESTATE RENTAL 8,958 8,457 26,408 25,150
EQUIPMENT RENTAL 5,516 4,801 15,872 13,524 OTHER NONCONTROLLABLES
(1) 25,178 14,066 110,048 41,609 --------- --------- ---------
--------- TOTALS $156,527 $134,962 $495,506 $402,036 =========
========= ========= ========= (1) 2005 increases primarily relate
to additional provider tax expense. BEVERLY ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
September 30, December 31, 2005 2004 ------------- -------------
(Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents
$217,843 $215,665 Accounts receivable - less allowance for doubtful
accounts: 2005 - $24,119; 2004 - $26,320 270,396 235,477 Notes
receivable, less allowance for doubtful notes: 2005 - $2,717; 2004
- $1,686 4,729 2,786 Operating supplies 9,308 9,660 Assets held for
sale - 3,542 Prepaid expenses and other 44,984 37,266 -------------
------------- Total current assets 547,260 504,396 Property and
equipment, net 672,583 664,311 Other assets: Goodwill, net 122,090
124,066 Other, less allowance for doubtful accounts and notes: 2005
- $1,027; 2004 - $1,538 69,614 68,612 ------------- -------------
Total other assets 191,704 192,678 ------------- -------------
$1,411,547 $1,361,385 ============= ============= LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $66,541
$67,778 Accrued wages and related liabilities 93,617 104,037
Accrued interest 8,787 3,602 General and professional liabilities
58,187 54,216 Federal government settlement obligations 15,386
14,359 Liabilities held for sale - 676 Other accrued liabilities
105,341 83,097 Current portion of long-term debt 8,158 12,240
------------- ------------- Total current liabilities 356,017
340,005 Long-term debt 536,544 545,943 Other liabilities and
deferred items 153,366 203,024 Commitments and contingencies
Stockholders' equity: Preferred stock, shares authorized:
25,000,000 - - Common stock, shares issued: 2005 - 117,812,924;
2004 - 116,621,715 11,781 11,662 Additional paid-in capital 912,400
902,053 Accumulated deficit (450,063) (532,804) Treasury stock, at
cost: 8,283,316 (108,498) (108,498) ------------- -------------
Total stockholders' equity 365,620 272,413 -------------
------------- $1,411,547 $1,361,385 ============= =============
Note: The balance sheet at December 31, 2004 has been derived from
the audited consolidated financial statements at that date but does
not include all of the information and footnotes required by
accounting principles generally accepted in the United States for
complete financial statements. BEVERLY ENTERPRISES, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in
thousands) Nine Months Ended September 30, ---------------------
2005 2004 ---------- ---------- Cash flows from operating
activities: Net income $82,741 $21,916 Adjustments to reconcile net
income to net cash provided by (used for) operating activities,
including discontinued operations: Depreciation and amortization
53,973 47,656 Provision for reserves on accounts, notes and other
receivables, net 6,530 10,772 Amortization of deferred financing
costs 2,072 2,107 Asset impairments, workforce reductions and other
unusual items 479 3,799 Costs related to early extinguishments of
debt - 40,430 Costs related to the sales process of the Company
36,566 - Gains on dispositions of facilities and other assets, net
(2,493) (455) Insurance related accounts (49,455) (12,833) Changes
in operating assets and liabilities, net of acquisitions and
dispositions: Accounts receivable (45,161) (53,955) Prepaid
expenses and other receivables 933 8,139 Accounts payable and other
accrued expenses (20,034) (23,140) Income taxes payable 3,081
(2,497) Other, net 1,872 (4,219) ---------- ---------- Total
adjustments (11,637) 15,804 ---------- ---------- Net cash provided
by operating activities 71,104 37,720 Cash flows from investing
activities: Capital expenditures (68,194) (37,964) Payments for
acquisitions, net of cash acquired - (71,479) Proceeds from
dispositions of facilities and other assets, net 14,158 22,346
Collections on notes receivable 63 32,268 Payments for designated
funds, net (185) (958) Proceeds from Beverly Funding Corporation
investment - 28,956 Other, net (6,409) (24,316) ----------
---------- Net cash used for investing activities (60,567) (51,147)
Cash flows from financing activities: Proceeds from issuance of new
debt 5,200 211,384 Repayments of long-term debt (18,681) (207,479)
Proceeds from exercise of stock options 5,428 1,399 Deferred
financing costs paid (306) (43,332) ---------- ---------- Net cash
used for financing activities (8,359) (38,028) ----------
---------- Net increase (decrease) in cash and cash equivalents
2,178 (51,455) Cash and cash equivalents at beginning of period
215,665 258,815 ---------- ---------- Cash and cash equivalents at
end of period $217,843 $207,360 ========== ========== Supplemental
schedule of cash flow information: Cash paid (received) during the
year for: Interest, net of amounts capitalized $24,834 $30,969
Income tax payments (refunds), net (1,831) 5,821 Beverly
Enterprises, Inc. 2005 and 2004 Continuing Operations EBITDA (as
adjusted) Reconciliation (In millions) Quarter Ended September 30,
------------------- 2005 2004 ---------- -------- Revenues $583.9
$524.8 Less: Retroactive California revenue adjustment 5.0 -
---------- -------- Revenues, as adjusted $578.9 $524.8 EBITDA, as
adjusted $57.1 $49.5 Less: Depreciation and amortization (19.4)
(15.6) Interest expense, net (8.3) (9.8) Costs related to early
extinguishment of debt - (0.2) Costs related to the sales process
of the Company (11.5) - Add back: Retroactive California
adjustment, net 2.9 - ---------- -------- Pre-tax income $20.8
$23.9 ========== ======== Beverly Enterprises, Inc. 2005 and 2004
Nursing EBITDA (as adjusted) Reconciliation (In millions) Quarter
Ended September 30, ------------------- 2005 2004 ---------
--------- Revenues $513.3 $473.0 Less: Retroactive California
revenue adjustment 5.0 - --------- --------- Revenues, as adjusted
$508.3 $473.0 EBITDA, as adjusted $51.4 $43.1 Less: Depreciation
and amortization (16.9) (13.2) Interest expense, net (1.2) (1.3)
Add back: Retroactive California adjustment, net 2.9 - ---------
--------- Pre-tax income $36.2 $28.6 ========= ========= BEVERLY
ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In
thousands, except per share amounts) Quarter Ended Nine Months
Ended September 30, September 30, -------------------
----------------------- 2005 2004 2005 2004 --------- ---------
----------- ----------- Revenues $583,942 $524,842 $1,761,555
$1,536,796 Costs and expenses: Wages and related 331,126 311,850
971,216 889,193 Provision for insurance and related items 35,807
29,590 97,416 94,225 Other operating and administrative 156,527
134,962 495,506 402,036 Depreciation and amortization 19,355 15,624
53,621 45,863 Asset impairments, workforce reductions and other
unusual items 504 (473) 479 1,122 --------- --------- -----------
----------- Total costs and expenses 543,319 491,553 1,618,238
1,432,439 --------- --------- ----------- ----------- Income before
other income (expenses) 40,623 33,289 143,317 104,357 Other income
(expenses): Interest expense (10,704) (11,089) (32,051) (34,965)
Costs related to early extinguishment of debt - (176) - (40,430)
Costs related to the sales process of the Company (11,514) -
(36,566) - Interest income 2,407 1,246 6,434 4,090 Net gains on
dispositions 44 582 667 614 --------- --------- -----------
----------- Total other expenses, net (19,767) (9,437) (61,516)
(70,691) --------- --------- ----------- ----------- Income before
provision for (benefit from) income taxes and discontinued
operations 20,856 23,852 81,801 33,666 Provision for (benefit from)
income taxes (590) 536 2,688 3,038 --------- --------- -----------
----------- Income before discontinued operations 21,446 23,316
79,113 30,628 Discontinued operations, net of taxes: for the
quarters 2005 - $(80) and 2004 - $(59); for the nine months 2005 -
$(1,438) and 2004 - $286 520 1,084 3,628 (8,712) Net income $21,966
$24,400 $82,741 $21,916 ========= ========= =========== ===========
Net income (loss) per share of common stock: Basic: Before
discontinued operations $0.20 $0.22 $0.72 $0.28 Discontinued
operations - 0.01 0.04 (0.08) --------- --------- -----------
----------- Net income per share of common stock $0.20 $0.23 $0.76
$0.20 ========= ========= =========== =========== Shares used to
compute basic net income (loss) per share 109,506 108,039 109,246
107,613 ========= ========= =========== =========== Diluted: Before
discontinued operations $0.18 $0.19 $0.64 $0.27 Discontinued
operations - 0.01 0.03 (0.07) --------- --------- -----------
----------- Net income per share of common stock $0.18 $0.20 $0.67
$0.20 ========= ========= =========== =========== Shares used to
compute diluted net income (loss) per share 127,184 124,493 126,862
124,105 ========= ========= =========== =========== *T
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