CNU Continucare Corp.

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

• Total revenue increased to $85.7 million, compared to $80.3 million for the same period last year;
• Income from operations increased to $10.3 million, compared to $9.7 million for the same period last year;
• Net income increased to $7.3 million, compared to $5.9 million for the same period last year; and
• Earnings per diluted share increased to $0.12, compared to $0.09 per diluted share for the same period last year.

For the nine-months ended March 31, 2011, total revenue increased to $244.9 million compared to $231.5 million for the same period last year. Income from operations during the nine-month period increased to $29.8 million compared to $27.0 million for the same period last year. Net income for the nine-month period increased to $19.2 million, or $0.31 per diluted share, compared to $16.5 million, or $0.27 per diluted share, for the same period last year.

Continucare’s cash and cash equivalents increased to $44.6 million at March 31, 2011 compared to $37.5 million at June 30, 2010, while working capital increased to $59.6 million at March 31, 2011 compared to $49.5 million at June 30, 2010. Total liabilities were $15.7 million at March 31, 2011 compared to $17.8 million at June 30, 2010. Shareholders’ equity was $156.8 million at March 31, 2011 compared to $136.0 million at June 30, 2010.

“Our track record of continued improvement is exemplified by our third quarter results which marked our 16th consecutive quarter of year-over-year improvement,” said Richard C. Pfenniger, Jr., Continucare Corporation’s Chairman and Chief Executive Officer. “During the quarter, we increased revenues, maintained strong operating margins and improved profitability. In addition, at quarter-end, our cash and working capital positions were at new record levels while 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 March 31,

2011

June 30,

2010

Current assets: Cash and cash equivalents $ 44,623,706 $ 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 $22,566,000 and $23,394,000 at March 31, 2011 and June 30, 2010, respectively

 

18,152,979

18,920,388

Prepaid expenses and other current assets 4,719,198 2,631,136 Deferred income tax assets   226,420   140,057 Total current assets 67,722,303 59,902,781 Property and equipment, net 15,172,276 12,728,184 Goodwill 79,579,182 73,994,444 Intangible assets, net of accumulated amortization of approximately $6,084,000 and $4,705,000 at March 31, 2011 and June 30, 2010, respectively

6,826,196

4,296,507 Deferred income tax assets 3,102,460 2,830,929 Other assets, net   130,490   112,747 Total assets $ 172,532,907 $ 153,865,592 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 1,123,114 $ 810,376 Accrued expenses and other current liabilities 6,601,118 9,041,162 Income taxes payable   409,383   590,673 Total current liabilities 8,133,615 10,442,211 Deferred income tax liabilities 7,517,372 7,145,507 Other liabilities   71,872   249,248 Total liabilities 15,722,859 17,836,966 Commitments and contingencies Shareholders’ equity: Common stock, $0.0001 par value: 100,000,000 shares authorized; 60,619,516 shares issued and outstanding at March 31, 2011 and 60,504,012 shares issued and outstanding at June 30, 2010

 

6,062

6,050

Additional paid-in capital 109,393,341 107,860,204 Accumulated earnings   47,410,645   28,162,372 Total shareholders’ equity   156,810,048   136,028,626 Total liabilities and shareholders’ equity $ 172,532,907 $ 153,865,592    

CONTINUCARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

  Three Months Ended

March 31,

2011   2010   Revenue $ 85,651,548 $ 80,274,545 Operating expenses: Medical services: Medical claims 54,827,436 52,081,382 Other direct costs   10,215,020   8,052,068   Total medical services   65,042,456   60,133,450   Administrative payroll and employee benefits 4,720,727 5,208,903 General and administrative   5,632,261   5,194,384   Total operating expenses   75,395,444   70,536,737   Income from operations 10,256,104 9,737,808 Interest income (expense), net   160,813   (91,105 ) Income before income tax provision 10,416,917 9,646,703 Income tax provision   3,159,571   3,746,092     Net income $ 7,257,346 $ 5,900,611     Net income per common share: Basic $ .12 $ .10   Diluted $ .12 $ .09     Weighted average common shares outstanding: Basic   60,588,236   59,984,393   Diluted   62,591,863   62,186,634      

CONTINUCARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

  Nine Months Ended

March 31,

2011   2010   Revenue $ 244,908,392 $ 231,503,010 Operating expenses: Medical services: Medical claims 157,891,846 155,062,089 Other direct costs   28,826,420   23,425,011   Total medical services   186,718,266   178,487,100   Administrative payroll and employee benefits 12,055,232 12,260,742 General and administrative   16,368,515   13,771,529   Total operating expenses   215,142,013   204,519,371   Income from operations 29,766,379 26,983,639 Interest income (expense), net   190,235   (64,428 ) Income before income tax provision 29,956,614 26,919,211 Income tax provision   10,708,341   10,421,581     Net income $ 19,248,273 $ 16,497,630     Net income per common share: Basic $ .32 $ .28   Diluted $ .31 $ .27     Weighted average common shares outstanding: Basic   60,568,574   59,657,867   Diluted   62,371,087   61,531,035      

CONTINUCARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

  Nine Months Ended

March 31,

2011   2010 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 19,248,273 $ 16,497,630 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,979,892 2,114,468 Change in liability for unrecognized tax benefit (899,357 ) - Provision for bad debt 241,199 - Loss on disposal of fixed assets 11,163 10,946 Loss on impairment of fixed assets - 96,000 Compensation expense related to issuance of stock options 1,454,589 1,125,443 Excess tax benefits related to exercise of stock options (104,888 ) (336,288 ) Deferred income tax expense 13,971 206,238 Changes in operating assets and liabilities: Due from HMOs, net 767,409 848,984 Prepaid expenses and other current assets (964,648 ) (253,450 ) Other assets, net (277 ) 79,498 Accounts payable 45,017 205,799 Accrued expenses and other current liabilities (3,527,410 ) 1,209,457 Income taxes payable   966,125     (154,657 ) Net cash provided by operating activities 20,231,058 21,650,068   CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturity of certificates of deposit 668,755 575,603 Purchase of certificates of deposit - (8,368 ) Acquisition of sleep diagnostic centers, net of cash acquired (10,804,712 ) (1,592,346 ) Purchase of property and equipment   (2,940,978 )   (2,672,866 ) Net cash used in investing activities (13,076,935 ) (3,697,977 )   CASH FLOWS FROM FINANCING ACTIVITIES Principal repayments under capital lease obligations (151,422 ) (250,722 ) Proceeds from exercise of stock options 340,163 844,913 Shares withheld in connection with exercise of stock options (366,491 ) - Excess tax benefits related to exercise of stock options   104,888     336,288   Net cash (used in) provided by financing activities   (72,862 )   930,479     Net increase in cash and cash equivalents 7,081,261 18,882,570 Cash and cash equivalents at beginning of period   37,542,445     13,895,823   Cash and cash equivalents at end of period $ 44,623,706   $ 32,778,393     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 $ 10,627,602   $ 10,370,000   Cash paid for interest $ 15,213   $ 14,120