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Continucare Corporation Reports 82% Increase in Net Income for Second Quarter of Fiscal 2008

Posted on: Wednesday, 6 February 2008, 09:01 CST

Continucare Corporation (AMEX:CNU) today reported financial results for its second quarter of fiscal 2008. Financial highlights for the quarter and other recent events include:

Opening of first three Continucare ValuClinic® walk-in clinics;

Total revenue of $61.5 million, an 11% increase compared to $55.4 million in the second quarter of fiscal 2007;

Income from operations of $3.9 million, a 74% increase compared to $2.2 million for the same period last year;

Net income of $2.5 million, an 82% increase compared to $1.4 million for the same period a year ago; and

Earning per diluted share increased to $0.04 compared to $0.02 per diluted share in the second quarter of fiscal 2007.

For the six-months ended December 31, 2007, total revenue increased 34% to $122.4 million compared to $91.3 million in the same period one year ago. Income from operations during the six-month period increased 58% to $6.8 million compared to $4.3 million for the same period one year ago. Net income for the six-month period increased 60% to $4.4 million, or $0.06 per diluted share, compared to $2.8 million, or $0.05 per diluted share, for the prior year period.

Continucare's cash and cash equivalents increased to $15.3 million at December 31, 2007 from $7.3 million at June 30, 2007, while working capital increased to $22.0 million at December 31, 2007 from $17.5 million at June 30, 2007. Total liabilities decreased to $11.9 million at December 31, 2007 from $12.9 million at June 30, 2007. Shareholders' equity increased to $107.7 million at December 31, 2007 from $104.1 million at June 30, 2007.

"We are extremely pleased with the progress of our business and consistent track record of solid financial performance," said Richard C. Pfenniger, Jr., Continucare's Chairman and Chief Executive Officer. "Our second fiscal quarter financial results reflect continued improvement in our operations. Notably, our net income increased 82% compared to the second quarter of our prior fiscal year. This improvement resulted from a combination of higher revenue and a lower medical expense ratio. During the quarter we also continued to strengthen our financial position by increasing our cash and working capital positions while our balance sheet remained virtually free of long-term indebtedness. We were successful in strengthening our financial position even as we actively pursued the repurchase of our shares. In addition, we continued to make progress with Continucare ValuClinic®, our new line of retail-based convenient care clinics. We opened our first location in December, followed by two more in January."

Stock Repurchase Program

Continucare also announced that its Board of Directors had approved a 3.0 million share increase to its previously announced stock repurchase program bringing the total number of shares authorized for repurchase to 5.5 million. Since the inception of the program, Continucare has repurchased 3,024,767 shares of its common stock at a total cost of approximately $7.4 million. With the increased authorization, an aggregate of 2,475,233 shares are currently available for purchase under the plan. The plan authorizes management, at its discretion, to repurchase shares from time to time in the open market or in privately negotiated transactions subject to market conditions and other factors.

About Continucare ValuClinic®

Continucare ValuClinic® is a new line of consumer-oriented, retail-based walk-in clinics that offer treatment for common illnesses such as the flu, bronchitis, strep throat, pink eye, skin infections and seasonal allergies, in a quick, convenient, and patient-friendly health care setting. Continucare ValuClinic® offers other high demand health care services such as common vaccinations, physical examinations and diagnostic screenings. The clinics are staffed primarily by certified nurse practitioners and physician assistants and are open seven days a week with extended hours on weekdays. No appointment is necessary and fees for services represent a meaningful discount to care provided in more traditional health care settings. For more information please visit www.valuclinic.net.

About Continucare Corporation

Continucare provides primary care physician services on an outpatient basis through a network of medical facilities and independent physician affiliates (IPAs) in the State of Florida. Continucare has 18 medical offices equipped with state-of-the-practice technology and staffed with experienced physicians and a comprehensive support staff. In addition, Continucare provides health practice management services to IPAs who practice primary care medicine in South Florida. Continucare assists these physicians with medical utilization and pharmacy management and specialist network development, freeing them to devote more time to patient care. For more information please visit www.continucare.com.

Except for historical matters contained herein, statements made in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors and others are cautioned that forward-looking statements are subject to risks and uncertainties that may affect our business and prospects and cause our actual results to differ materially from those set forth in the forward-looking statements. These factors include, without limitation, the risk that the current trend in revenue or income growth may not continue or may be less than anticipated, risks and uncertainties relating to our ability to implement our growth strategy and to manage future growth, including our ability to achieve expected levels of patient volumes and control the costs of providing services, risks and uncertainties relating to our acquisition of Miami Dade Health Centers, Inc. and its affiliated companies, including the risk that we may not realize the expected benefits of the acquisition, the risk that we may be unable to successfully complete the integration of the Miami Dade Health Centers companies into our business and achieve expected synergies, and the risk that further restructuring or other acquisition-related charges may be required in future periods, risks relating to the timely opening of Continucare ValuClinic health centers as currently scheduled, risks relating to pricing and other pressures exerted on us by managed care organizations, the risk that the impact of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 and the Medicare Risk Adjustment on payments we receive for our managed care operations may not continue to be positive for us and that risk corridor adjustment charges in future periods may be greater than in the past, the risk that future legislation, changes in governmental regulations, including possible changes in Medicare programs, could adversely impact our operations or reduce reimbursements to health care providers and insurers, risks and uncertainties relating to our current dependence on three HMOs for substantially all of our revenues, including the loss of our managed care agreements with any of these HMOs and our ability to work together effectively with our HMO affiliates, uncertainties relating to technological and pharmaceutical improvements that increase the cost of providing, or reduce the demand for, health care, and general economic conditions and uncertainties generally associated with the health care business. These and other applicable risks, cautionary statements and factors that could cause actual results to differ from our forward-looking statements are included in our annual report on Form 10-K for the fiscal year ended June 30, 2007 and other filings with the SEC and we urge you to read those documents. We undertake no obligation to update or revise these forward-looking statements to reflect events or circumstances after the date hereof except as required by law.

CONTINUCARE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

ASSETS

December 31, 2007

June 30,

2007

Current assets:

Cash and cash equivalents

$

15,280,153

$

7,262,247

Other receivables, net

197,971

308,111

Due from HMOs, net of a liability for incurred but not reported medical claims of approximately $22,204,000 and $23,618,000 at December 31, 2007 and June 30, 2007, respectively

9,475,012

13,525,092

Prepaid expenses and other current assets

1,085,806

1,273,593

Deferred tax assets, net

571,561

740,264

Total current assets

26,610,503

23,109,307

Certificates of deposit, restricted

1,266,854

1,176,635

Property and equipment, net

8,671,825

8,509,454

Goodwill, net of accumulated amortization of approximately $7,610,000

73,204,582

73,670,225

Intangible assets, net of accumulated amortization of approximately $1,548,000 and $929,000 at December 31, 2007 and June 30, 2007, respectively

7,111,666

7,731,000

Managed care contracts, net of accumulated amortization of approximately $3,302,000 and $3,126,000 at December 31, 2007 and June 30, 2007, respectively

208,016

384,422

Deferred tax assets, net

2,392,218

2,289,811

Other assets, net

85,696

66,694

Total assets

$

119,551,360

$

116,937,548

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

680,836

$

1,007,869

Accrued expenses and other current liabilities

3,380,255

4,542,097

Income taxes payable

591,235

67,398

Total current liabilities

4,652,326

5,617,364

Capital lease obligations, less current portion

151,094

165,191

Deferred tax liabilities

6,215,512

6,215,483

Other liabilities

843,341

881,125

Total liabilities

11,862,273

12,879,163

Commitments and contingencies

Shareholders' equity:

Common stock, $0.0001 par value: 100,000,000 shares authorized; 69,665,936 shares issued and 69,548,436 shares outstanding at December 31, 2007 and 70,043,086 shares issued and outstanding at June 30, 2007

6,967

7,004

Additional paid-in capital

123,813,649

124,616,091

Accumulated deficit

(16,131,529

)

(20,564,710

)

Total shareholders' equity

107,689,087

104,058,385

Total liabilities and shareholders' equity

$

119,551,360

$

116,937,548

CONTINUCARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Three Months Ended

December 31,

2007

2006

Revenue

$

61,485,447

$

55,399,607

Operating expenses:

Medical services:

Medical claims

43,847,320

40,123,259

Other direct costs

6,940,714

6,393,501

Total medical services

50,788,034

46,516,760

Administrative payroll and employee benefits

2,689,879

2,740,149

General and administrative

4,156,778

3,932,673

Total operating expenses

57,634,691

53,189,582

Income from operations

3,850,756

2,210,025

Other income (expense):

Interest income

201,390

50,621

Interest expense

(4,536

)

(36,187

)

Income before income tax provision

4,047,610

2,224,459

Income tax provision

1,535,925

843,784

Net income

$

2,511,685

$

1,380,675

Net income per common share:

Basic

$

.04

$

.02

Diluted

$

.04

$

.02

Weighted average common shares outstanding:

Basic

69,816,147

70,091,102

Diluted

70,970,949

71,232,537

CONTINUCARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Six Months Ended

December 31,

2007

2006

Revenue

$

122,408,109

$

91,333,204

Operating expenses:

Medical services:

Medical claims

88,724,515

67,184,301

Other direct costs

13,533,793

9,704,695

Total medical services

102,258,308

76,888,996

Administrative payroll and employee benefits

5,423,114

4,365,384

General and administrative

7,931,108

5,769,032

Total operating expenses

115,612,530

87,023,412

Income from operations

6,795,579

4,309,792

Other income (expense):

Interest income

360,503

204,743

Interest expense

(11,954

)

(39,121

)

Income before income tax provision

7,144,128

4,475,414

Income tax provision

2,710,947

1,697,623

Net income

$

4,433,181

$

2,777,791

Net income per common share:

Basic

$

.06

$

.05

Diluted

$

.06

$

.05

Weighted average common shares outstanding:

Basic

69,928,201

60,169,568

Diluted

71,102,303

61,377,276

CONTINUCARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six Months Ended

December 31,

2007

2006

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

4,433,181

$

2,777,791

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

1,239,607

830,052

Loss on disposal of fixed assets

-

35,924

Provision for bad debts

181,081

105,795

Compensation expense related to issuance of stock options

637,303

752,258

Excess tax benefits related to exercise of stock options

-

(249,362

)

Deferred tax expense

(212,891

)

1,296,780

Changes in operating assets and liabilities:

Other receivables, net

(70,941

)

(148,783

)

Due from HMOs, net

4,599,115

(418,791

)

Prepaid expenses and other current assets

172,787

(815,469

)

Other assets, net

(19,002

)

762,739

Accounts payable

(327,033

)

340,649

Accrued expenses and other current liabilities

(981,567

)

120,704

Income taxes payable

523,837

242,749

Net cash provided by operating activities

10,175,477

5,633,036

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of certificates of deposit

(90,219

)

(30,740

)

Proceeds from sales of fixed assets

-

25,000

Acquisition of MDHC Companies, net of cash acquired

-

(6,033,017

)

Purchase of property and equipment

(603,965

)

(512,114

)

Acquisition costs related to MDHC Companies

-

(359,147

)

Net cash used in investing activities

(694,184

)

(6,910,018

)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from note payable

-

1,813,317

Repayments on note payable

-

(1,813,317

)

Proceeds from long-term debt

-

6,916,079

Repayment on long-term debt

(6,083

)

(14,679,439

)

Excess tax benefits related to exercise of stock options

-

249,362

Principal repayments under capital lease obligations

(17,522

)

(46,836

)

Proceeds from exercise of stock options

64,375

17,275

Payment of fees related to issuance of stock

(45,000

)

(41,820

)

Repurchase of common stock

(1,459,157

)

-

Net cash used in financing activities

(1,463,387

)

(7,585,379

)

Net increase (decrease) in cash and cash equivalents

8,017,906

(8,862,361

)

Cash and cash equivalents at beginning of period

7,262,247

10,681,685

Cash and cash equivalents at end of period

$

15,280,153

$

1,819,324

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

Purchase of property and equipment with proceeds of capital lease obligations

$

38,922

$

81,736

Retirement of treasury stock

$

1,178,744

$

-

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for taxes

$

2,400,000

$

164,000

Cash paid for interest

$

11,954

$

39,121

Source: Business Wire

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