CNU Continucare Corp.

Continucare Corporation (NYSE: CNU) today reported record financial results for its second quarter of fiscal 2011. Financial highlights for the quarter include:

• Total revenue increased to $80.3 million, a 7% increase compared to $75.3 million for the same period last year;
• Income from operations increased to $10.1 million, a 17% increase compared to $8.6 million for the same period last year;
• Net income increased to $6.2 million, a 17% increase compared to $5.3 million for the same period last year;
• Earnings per diluted share increased to $0.10 compared to $0.09 per diluted share for the same period last year.

For the six-month period ended December 31, 2010, total revenue increased to $159.3 million compared to $151.2 million for the same period last year. Income from operations during the six-month period increased 13% to $19.5 million compared to $17.2 million for the same period last year. Net income for the six-month period increased 13% to $12.0 million, or $0.19 per diluted share, compared to $10.6 million, or $0.17 per diluted share, for the same period last year.

Continucare’s cash and cash equivalents increased to $38.2 million at December 31, 2010 compared to $37.5 million at June 30, 2010, while working capital increased to $51.4 million at December 31, 2010 compared to $49.5 million at June 30, 2010. Total liabilities decreased to $15.4 million at December 31, 2010 compared to $17.8 million at June 30, 2010. Shareholders’ equity was $148.7 million at December 31, 2010 compared to $136.0 million at June 30, 2010.

“Our second quarter results marked our 15th consecutive quarter of year-over-year improvement,” said Richard C. Pfenniger, Jr., Continucare’s Chairman and Chief Executive Officer. “Higher revenues and outstanding utilization outcomes resulted in improved margins, record operating profits and increased net income. At quarter end, our cash and working capital positions also reached new record levels and our balance sheet remained virtually free of long-term debt.”

About Continucare Corporation

Continucare provides primary care physician services on an outpatient basis through a network of medical facilities. Continucare has 18 well appointed 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 primary physician affiliates in South Florida, assisting them with medical utilization, pharmacy management and specialist network development, thereby allowing them more time for patient care. Also, through its subsidiary, Seredor Corporation, Continucare operates or manages more than 70 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 December 31, 2010 June 30,

2010

Current assets: Cash and cash equivalents $ 38,228,964 $ 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 $20,902,000 and $23,394,000 at December 31, 2010 and June 30, 2010, respectively

 

16,257,826

18,920,388

Prepaid expenses and other current assets 4,705,880 2,631,136 Deferred income tax assets   147,885   140,057 Total current assets 59,340,555 59,902,781 Property and equipment, net 14,569,403 12,728,184 Goodwill 79,670,896 73,994,444 Intangible assets, net of accumulated amortization of approximately $5,565,000 and $4,705,000 at December 31, 2010 and June 30, 2010, respectively

7,344,827

4,296,507 Deferred income tax assets 2,987,376 2,830,929 Other assets, net   177,414   112,747 Total assets $ 164,090,471 $ 153,865,592 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 1,142,196 $ 810,376 Accrued expenses and other current liabilities 6,017,863 9,041,162 Income taxes payable   779,019   590,673 Total current liabilities 7,939,078 10,442,211 Deferred income tax liabilities 7,372,451 7,145,507 Other liabilities   89,717   249,248 Total liabilities 15,401,246 17,836,966 Commitments and contingencies Shareholders’ equity: Common stock, $0.0001 par value: 100,000,000 shares authorized; 60,569,609 shares issued and outstanding at December 31, 2010 and 60,504,012 shares issued and outstanding at June 30, 2010

 

6,057

6,050

Additional paid-in capital 108,529,874 107,860,204 Accumulated earnings   40,153,294   28,162,372 Total shareholders’ equity   148,689,225   136,028,626 Total liabilities and shareholders’ equity $ 164,090,471 $ 153,865,592

CONTINUCARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

  Three Months Ended

December 31,

2010     2009     Revenue $ 80,314,998 $ 75,256,100 Operating expenses: Medical services: Medical claims 50,208,880 50,356,650 Other direct costs   10,027,926     7,800,724   Total medical services   60,236,806     58,157,374   Administrative payroll and employee benefits 4,183,225 3,792,742 General and administrative   5,807,178     4,698,632   Total operating expenses   70,227,209     66,648,748   Income from operations 10,087,789 8,607,352 Other income (expense): Interest income 18,532 15,672 Interest expense   (5,447 )   (3,135 ) Income before income tax provision 10,100,874 8,619,889 Income tax provision   3,902,704     3,331,210     Net income $ 6,198,170   $ 5,288,679     Net income per common share: Basic $ .10   $ .09   Diluted $ .10   $ .09     Weighted average common shares outstanding: Basic   60,566,692     59,571,382   Diluted   62,469,159     61,329,587  

CONTINUCARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

  Six Months Ended

December 31,

2010     2009     Revenue $ 159,256,843 $ 151,228,464 Operating expenses: Medical services: Medical claims 103,064,411 102,980,709 Other direct costs   18,611,401     15,372,943   Total medical services   121,675,812     118,353,652   Administrative payroll and employee benefits 7,334,506 7,051,839 General and administrative   10,736,254     8,577,143   Total operating expenses   139,746,572     133,982,634   Income from operations 19,510,271 17,245,830 Other income (expense): Interest income 41,359 33,183 Interest expense   (11,938 )   (6,505 ) Income before income tax provision 19,539,692 17,272,508 Income tax provision   7,548,770     6,675,489     Net income $ 11,990,922   $ 10,597,019     Net income per common share: Basic $ .20   $ .18   Diluted $ .19   $ .17     Weighted average common shares outstanding: Basic   60,558,743     59,494,605   Diluted   62,260,699     61,203,236  

CONTINUCARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

  Six Months Ended

December 31,

2010     2009   CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 11,990,922 $ 10,597,019 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,876,146 1,340,723 Provision for bad debt 161,390 - Loss on disposal of fixed assets 9,086 3,597 Compensation expense related to issuance of stock options 724,432 594,808 Excess tax benefits related to exercise of stock options (55,228 ) (210,480 ) Deferred tax expense 62,669 40,369 Changes in operating assets and liabilities: Due from HMOs, net 2,662,562 4,409,420 Prepaid expenses and other current assets (929,586 ) (672,405 ) Other assets, net (47,201 ) 6,079 Accounts payable 30,443 (170,229 ) Accrued expenses and other current liabilities (4,991,395 ) (464,881 ) Income taxes payable   1,286,101     (77,565 ) Net cash provided by operating activities 12,780,341 15,396,455   CASH FLOWS FROM INVESTING ACTIVITIES Purchase of certificates of deposit - (9,746 ) Proceeds from maturity of certificates of deposit 668,755 - Acquisition of sleep diagnostic centers, net of cash acquired (10,839,964 ) (1,609,827 ) Purchase of property and equipment   (1,746,913 )   (2,002,287 ) Net cash used in investing activities (11,918,122 ) (3,621,860 )   CASH FLOWS FROM FINANCING ACTIVITIES Principal repayments under capital lease obligations (120,947 ) (189,038 ) Proceeds from exercise of stock options 183,850 668,088 Shares withheld in connection with exercise of stock options (293,831 ) - Excess tax benefits related to exercise of stock options   55,228     210,480   Net cash (used in) provided by financing activities   (175,700 )   689,530     Net increase in cash and cash equivalents 686,519 12,464,125 Cash and cash equivalents at beginning of period   37,542,445     13,895,823   Cash and cash equivalents at end of period $ 38,228,964   $ 26,359,948     SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Purchase of property and equipment with proceeds of capital lease obligations $ -   $ 222,172     SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for taxes $ 6,200,000   $ 7,100,000   Cash paid for interest $ 11,938   $ 6,505