CNU Continucare Corp.

Continucare Corporation (NYSE: CNU) today reported financial results for its first quarter of fiscal 2011. Financial highlights for the quarter and other recent events include:

• Total revenue increased to $78.9 million, compared to $76.0 million for the same period last year;
• Income from operations increased to $9.4 million, compared to $8.6 million for the same period last year;
• Net income increased to $5.8 million, or $0.09 per diluted share, as compared to $5.3 million, or $0.09 per diluted share, for the same period last year;
• Further expansion of Seredor Corporation, a sleep services subsidiary, through the completion of three acquisitions; and
• The listing of Continucare’s common stock on the New York Stock Exchange effective November 1, 2010.

Continucare’s cash and cash equivalents was $34.3 million at September 30, 2010 compared to $37.5 million at June 30, 2010, while working capital was $44.7 million at September 30, 2010 compared to $49.5 million at June 30, 2010. Total liabilities were $18.3 million at September 30, 2010 compared to $17.8 million at June 30, 2010. Shareholders’ equity was $142.1 million at September 30, 2010 compared to $136.0 million at June 30, 2010.

“We are extremely pleased with our first quarter results. This represents our 14th consecutive quarter of year-over-year improvement and the results were a record for the fiscal period,” said Richard C. Pfenniger, Jr., Continucare’s Chairman and Chief Executive Officer. “Higher revenues and outstanding utilization outcomes resulted in improved margins, higher operating profits and increased net income. In addition, in the quarter we further expanded our sleep service subsidiary, Seredor Corporation, by completing three acquisitions while continuing to maintain an exceptionally healthy balance sheet.”

About Seredor Corporation

Seredor is a wholly-owned subsidiary of Continucare that operates and manages over 70 sleep diagnostic centers in 15 states. The centers conduct sleep studies to determine whether patients suffer from sleep disorders and, if so, the severity of the condition. Seredor's clinical staff is expertly trained in sleep disorders and works in partnership with physicians, respiratory therapists, and other clinicians utilizing state-of-the-art equipment to effectively diagnose and treat patients. The most common sleep disorder, obstructive sleep apnea or OSA, is a serious health condition that afflicts more than 18 million adults in the United States. For more information please visit www.seredor.com.

About Continucare Corporation

Continucare provides primary care physician services on an outpatient basis through a network of medical facilities. 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 medical management services to independent physician affiliates who practice primary care medicine in South Florida. Also, through its subsidiary, Seredor Corporation, Continucare operates sleep diagnostic centers in 15 states. 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 including the following: our operations are dependent on three health maintenance organizations; under our most important contracts we are responsible for the cost of medical services to our patients in return for a capitated fee; our revenues will be affected by the Medicare Risk Adjustment program; if we are unable to manage medical benefits expense effectively, our profitability will likely be reduced; a failure to estimate incurred but not reported medical benefits expense accurately will affect our profitability; we compete with many health care providers for patients and HMO affiliations; we may not be able to successfully recruit or retain existing relationships with qualified physicians and medical professionals; our business exposes us to the risk of medical malpractice lawsuits; we primarily operate in Florida; a significant portion of our voting power is concentrated; we are dependent on our executive officers and other key employees; we depend on the management information systems of our affiliated HMOs; we depend on our information processing systems; the volatility of our stock price; a failure to successfully implement our business strategy could materially and adversely affect our operations and growth opportunities; our intangible assets represent a substantial portion of our total assets; competition for acquisition targets and acquisition financing and other factors may impede our ability to acquire other businesses and may inhibit our growth; our acquisitions could result in integration difficulties, unexpected expenses, diversion of management’s attention and other negative consequences; recently enacted health care reform, including The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010, could have a material adverse effect on our business; a decrease to our Medicare capitation payments may have a material adverse effect on our results of operations, financial position and cash flows; we are subject to government regulation; the health care industry is subject to continued scrutiny; our insurance coverage may not be adequate, and rising insurance premiums could negatively affect our profitability; deficit spending and economic downturns could negatively impact our results of operations; and many factors that increase health care costs are largely beyond our ability to control. 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 most recent annual report on Form 10-K 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

September 30,

2010

June 30,

2010

Current assets: Cash and cash equivalents $ 34,346,447 $ 37,542,445 Certificate of deposit

-

668,755 Due from HMOs, net of a liability for incurred but not reported medical claims expense of approximately $22,484,000 and $23,394,000 at September 30, 2010 and June 30, 2010, respectively 17,157,442

18,920,388

Prepaid expenses and other current assets 3,948,085 2,631,136 Deferred income tax assets   139,615   140,057 Total current assets 55,591,589 59,902,781 Property and equipment, net 14,268,131 12,728,184 Goodwill 79,650,746 73,994,444 Intangible assets, net of accumulated amortization of approximately $5,032,000 and $4,705,000 at September 30, 2010 and June 30, 2010, respectively 7,877,740

4,296,507

Deferred income tax assets 2,880,592 2,830,929 Other assets, net   178,416   112,747 Total assets $ 160,447,214 $ 153,865,592 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 1,516,470 $ 810,376 Accrued expenses and other current liabilities 6,277,952 9,041,162 Income taxes payable   3,128,446   590,673 Total current liabilities 10,922,868 10,442,211 Deferred income tax liabilities 7,260,494 7,145,507 Other liabilities   146,972   249,248 Total liabilities 18,330,334 17,836,966 Commitments and contingencies Shareholders’ equity: Common stock, $0.0001 par value: 100,000,000 shares authorized; 60,553,546 shares issued and outstanding at September 30, 2010 and 60,504,012 shares issued and outstanding at June 30, 2010 6,055

6,050

Additional paid-in capital 108,155,699 107,860,204 Accumulated earnings   33,955,126   28,162,372 Total shareholders’ equity   142,116,880   136,028,626 Total liabilities and shareholders’ equity $ 160,447,214 $ 153,865,592  

CONTINUCARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

  Three Months Ended

September 30,

2010   2009   Revenue $ 78,941,845 $ 75,972,366 Operating expenses: Medical services: Medical claims 52,855,531 52,624,059 Other direct costs   8,583,475     7,572,219   Total medical services   61,439,006     60,196,278   Administrative payroll and employee benefits 3,151,280 3,259,097 General and administrative   4,929,076     3,878,513   Total operating expenses   69,519,362     67,333,888   Income from operations 9,422,483 8,638,478 Other income (expense): Interest income 22,827 17,510 Interest expense   (6,490 )   (3,370 ) Income before income tax provision 9,438,820 8,652,618 Income tax provision   3,646,066     3,344,279     Net income $ 5,792,754   $ 5,308,339     Net income per common share: Basic $ .10   $ .09   Diluted $ .09   $ .09     Weighted average common shares outstanding: Basic   60,550,244     59,416,938   Diluted   62,051,689     61,075,996    

CONTINUCARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

  Three Months Ended

September 30,

2010   2009 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 5,792,754 $ 5,308,339 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 786,392 620,104 Provision for bad debts 161,390 - Compensation expense related to issuance of stock options 398,589 296,895 Excess tax benefits related to exercise of stock options - (83,172 ) Deferred tax expense 65,766 8,420

Changes in operating assets and liabilities, net of acquisitions:

Due from HMOs, net 1,762,946 5,659,734 Prepaid expenses and other current assets (171,791 ) 194,225 Other assets, net (30,426 ) 31,063 Accounts payable 404,717 (132,121 ) Accrued expenses and other liabilities (4,749,550 ) (1,754,081 ) Income taxes payable   3,580,300     1,095,859   Net cash provided by operating activities 8,001,087 11,245,265   CASH FLOWS FROM INVESTING ACTIVITIES Purchase of certificates of deposit - (5,628 ) Proceeds from maturity of certificate of deposit 668,755 - Acquisition of sleep diagnostics centers, net of cash acquired (10,840,201 ) (1,348,614 ) Purchase of property and equipment   (879,714 )   (1,094,691 ) Net cash used in investing activities

(11,051,160

) (2,448,933 )   CASH FLOWS FROM FINANCING ACTIVITIES Principal repayments under capital lease obligations (42,836 ) (38,826 ) Proceeds from exercise of stock options 69,000 55,200 Shares withheld in connection with exercise of stock options (172,089 ) - Excess tax benefits related to exercise of stock options   -     83,172   Net cash (used in) provided by financing activities   (145,925 )   99,546     Net (decrease) increase in cash and cash equivalents (3,195,998 ) 8,895,878 Cash and cash equivalents at beginning of period   37,542,445     13,895,823   Cash and cash equivalents at end of period

$

34,346,447

  $ 22,791,701     SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for taxes $ -   $ 2,240,000   Cash paid for interest $ 6,490   $ 3,370