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Continucare Corporation Reports Financial Results for First Quarter of Fiscal 2007

Posted on: Monday, 13 November 2006, 09:01 CST

Continucare Corporation (AMEX:CNU) today reported financial results for the three months ended September 30, 2006, the first quarter of Continucare's 2007 fiscal year. Financial highlights for the quarter and other recent events include:

Completion of the Miami Dade Health Centers acquisition;

Total revenue of $35.9 million, a 20% increase from $29.9 million in the first quarter of fiscal 2006;

Income from operations of $2.1 million compared to $2.2 million for the same period last year;

Income before income taxes remained unchanged at $2.3 million as compared to the same period last year; and

Net income remained unchanged at $1.4 million, or $0.03 per diluted share, as compared to the same period a year ago.

"We are very pleased with the progress of our business," stated Richard C. Pfenniger, Jr., Continucare's Chairman and Chief Executive Officer. "The quarterly results reflect solid revenue growth driven largely by increases in our risk managed Medicare patient population. With the acquisition of the Miami Dade Health Centers now completed, we are working diligently to realize the expected benefits of the combination while we continue our work to achieve further organic growth for our entire business."

Balance Sheet

Continucare's cash and cash equivalents were $12.0 million at September 30, 2006 compared to $10.7 million at June 30, 2006 while working capital increased to $17.9 million at September 30, 2006 from $15.6 million at June 30, 2006 and total liabilities were reduced to $2.0 million at September 30, 2006 from $3.1 million at June 30, 2006. The long-term portion of debt at September 30, 2006 was $0.1 million. Shareholders' equity increased to $38.8 million at September 30, 2006 from $37.0 million at June 30, 2006.

Miami Dade Health Centers

Continucare's financial results for its first fiscal quarter of 2007 do not reflect the Miami Dade Health Centers acquisition. The financial results of the combined company will be reflected in Continucare's financial statements beginning with its second fiscal quarter of 2007. Continucare continues to expect that the transaction will be accretive to earnings during the first full year of combined operations, but also anticipates incurring between approximately $0.5 million and $0.7 million in charges during its second quarter of fiscal 2007 relating to the restructuring of the former Miami Dade Health Centers operations. These restructuring charges are not expected to recur in future periods.

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. Currently, through its network of medical facilities and IPAs, Continucare provides health care services for approximately 42,000 patients. 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 integrate 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 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, 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 two HMOs for substantially all of our revenues, including 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, 2006 and other filings with the SEC. 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)

September 30, 2006

June 30, 2006

ASSETS

Current assets:

Cash and cash equivalents

$

12,005,651 

$

10,681,685 

Other receivables, net

317,942 

231,832 

Due from HMOs, net

6,265,871 

6,339,526 

Prepaid expenses and other current assets

547,838 

689,096 

Deferred tax assets, net

658,768 

658,768 

Total current assets

19,796,070 

18,600,907 

Certificates of deposit, restricted

1,145,130 

1,126,987 

Equipment, furniture and leasehold improvements, net

1,057,021 

824,220 

Goodwill, net

14,342,510 

14,342,510 

Managed care contracts, net

649,031 

737,234 

Deferred tax assets, net

3,206,346 

3,881,061 

Other assets, net

641,187 

551,927 

Total assets

$

40,837,295 

$

40,064,846 

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

661,221 

$

575,925 

Accrued expenses and other current liabilities

1,203,683 

2,401,933 

Total current liabilities

1,864,904 

2,977,858 

Capital lease obligations, less current portion

139,274 

112,068 

Total liabilities

2,004,178 

3,089,926 

Commitments and contingencies

Shareholders' equity:

Common stock

5,025 

5,024 

Additional paid-in capital

64,299,128 

63,838,051 

Accumulated deficit

(25,471,036)

(26,868,155)

Total shareholders' equity

38,833,117 

36,974,920 

Total liabilities and shareholders' equity

$

40,837,295 

$

40,064,846 

CONTINUCARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Three Months Ended

September 30,

2006 

2005 

Revenue:

Medical services revenue, net

$

35,881,917 

$

29,729,636 

Management fee revenue and other income

51,682 

141,514 

Total revenue

35,933,599 

29,871,150 

Operating expenses:

Medical services:

Medical claims

27,061,040 

21,406,178 

Other direct costs

3,311,195 

3,132,425 

Total medical services

30,372,235 

24,538,603 

Administrative payroll and employee benefits

1,625,235 

1,395,347 

General and administrative

1,836,359 

1,702,206 

Total operating expenses

33,833,829 

27,636,156 

Income from operations

2,099,770 

2,234,994 

Other income (expense):

Interest income

154,122 

59,141 

Interest expense

(2,934)

(2,969)

Income before income tax provision

2,250,958 

2,291,166 

Income tax provision

853,839 

852,414 

Net income

$

1,397,119 

$

1,438,752 

Net income per common share:

Basic

$

.03 

$

.03 

Diluted

$

.03 

$

.03 

Weighted average common shares outstanding:

Basic

50,247,936 

49,859,938 

Diluted

51,521,917 

51,642,853 

CONTINUCARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended

September 30,

2006 

2005 

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

1,397,119 

$

1,438,752 

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

Depreciation and amortization

170,834 

157,382 

Loss on disposal of fixed assets

35,924 

- 

Provision for bad debts

50,225 

12,463 

Recognition of compensation expense related to issuance of stock options

320,784 

250,394 

Deferred tax expense

674,715 

760,256 

Changes in operating assets and liabilities, excluding the effect of disposals:

Other receivables, net

(136,335)

(49,996)

Due from HMOs, net

73,655 

(1,983,949)

Prepaid expenses and other current assets

141,258 

218,084 

Other assets, net

94,321 

- 

Accounts payable

85,296 

(148,290)

Accrued expenses and other current liabilities

(1,206,457)

(490,592)

Net cash provided by continuing operations

1,701,339 

164,504 

Net cash used in discontinued operations

- 

(30,972)

Net cash provided by operating activities

1,701,339 

133,532 

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of certificates of deposit

(18,143)

(9,442)

Proceeds from sales of fixed assets

25,000 

- 

Purchase of property and equipment

(319,326)

(28,085)

Acquisition costs related to MDHC Companies

(183,581)

- 

Net cash used in investing activities

(496,050)

(37,527)

CASH FLOWS FROM FINANCING ACTIVITIES

Repayments on note payable

- 

(260,000)

Excess tax benefit from exercise of stock options

125,419 

- 

Principal repayments under capital lease obligations

(21,617)

(18,489)

Proceeds from exercise of stock options

14,875 

358,668 

Repurchase and retirement of common stock

- 

(696,134)

Net cash provided by (used in) financing activities

118,677 

(615,955)

Net increase (decrease) in cash and cash equivalents

1,323,966 

(519,950)

Cash and cash equivalents at beginning of period

10,681,685 

5,780,544 

Cash and cash equivalents at end of period

$

12,005,651 

$

5,260,594 

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING TRANSACTIONS:

Purchase of equipment, furniture and fixtures with proceeds of capital lease obligations

$

57,031 

$

- 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for taxes

$

30,000 

$

- 

Cash paid for interest

$

2,934 

$

2,969 

Source: Business Wire

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