Companies in the News
AHOM expects low results for 4Q98
American HomePatient (AHOM; Brentwood, TN) said it anticipates its financial results for 4Q98 ended Dec. 31 will be substantially lower than expected. Preliminary evaluations of the company’s financial information for the quarter indicate results will be negatively affected by lower than anticipated revenues and higher than expected general and administrative costs. Management is continuing to evaluate other factors that may affect 4Q98 earnings, AHOM said.
Information currently available indicates that the short fall in revenues is attributable primarily to the exit and de-emphasis of certain lower margin business lines which was achieved by the termination of several select payer contracts and the cessation of certain branch-level products and services.
Concurrently, the company did not experience the revenue improvement in other areas expected to help offset these activities. The general and administrative expenses increase is due primarily to the one-time impact of severance arrangements for several of the company’s recently departed senior executives.
AHOM President/CEO Joseph Furlong said, "We are currently evaluating the company’s strategic direction to determine the appropriate business and product mix for profitable revenue growth going forward. We have already initiated a significant effort to reduce expenses in all areas of the company’s operations."
Under the terms of AHOM’s amended credit agreement, the company is required to meet certain financial covenants that management now believes will not be met based on anticipated 4Q98 results. Consequently, the company anticipates entering into negotiations with its bank group to obtain waivers of financial covenants and/or to amend the credit agreement. The company is current in its payment obligations under the credit agreement. AHOM said it expects to release its earnings for 4Q98 and FY98 in early March.
AHP notices decrease in FY98 sales
American Home Products (Madison, NJ) reported net sales of $13.5 million for FY98, compared to $14.2 million for FY97. Net revenues for the year were impacted by unfavorable foreign exchange, as well as the dispositions of the company’s medical devices businesses and the acquisition of Solvay S.A. (Belgium), the worldwide animal health business.
Net income for FY98 was $2.47 billion, $1.85 per share, compared to $2.04 billion, $1.56 per share, for FY97. Figures for FY97 include one-time costs for the withdrawal of the company’s anti-obesity products.
Results for 4Q98 showed a decrease in net sales with the last quarter of FY98 reporting $3.2 billion, compared to $3.6 billion for FY97. Net income was $349.6 million, 26 cents per share, compared to $571.8 million, 43 cents per share, in the previous year.
IHHI shareholders take loss in 1Q99
In Home Health (IHHI; Minnetonka, MN) reported net income in 1Q99 ended Dec. 31 of $517,000, 2 cents per share, compared to a net income in 1Q98 of $860,000, 3 cents per share. Payment of a required preferred stock dividend to HCR ManorCare (Toledo, OH) resulted in a net loss available to common shareholders of $132,000 for 1Q99, compared to net income available to common shareholders of $186,000 for 1Q98, the company said. The preferred stock dividend relates to an investment of $20 million provided by HCR ManorCare in 1995. Revenue totaled $18.6 million in 1Q99 compared to revenues of $27.9 million in 1Q98.
A reduction in revenue derived from the cost-based Medicare program accounted for 84% of the revenue decrease from last year. The remaining reductions in revenue from the prior year period consisted primarily of reductions in extended hours, including non renewal of unprofitable contracts. Direct costs as a percentage of revenue were reduced to 56% this period from 58% last period.
"Over the past year, the company has significantly reduced its reliance on the cost-based Medicare program, enhanced the efficiency of service delivery to our remaining patient base, and achieved significant reductions in corporate overhead," said Wolfgang von Maack, chairman/CEO. "While these actions have resulted in a reduction of overall revenue, they have contributed to an increase in the company’s gross margins on direct care." Von Maack added that these actions "have enabled the company to minimize the impact of cost limits imposed by the Interim Payment System (IPS) during 1Q99." While IPS remains a significant challenge for IHHI, he said, "the system continues to force many of our weaker competitors to exit our markets, increasing current opportunities for the company to obtain higher margin business and the potential for success under the Prospective Payment System. We have recently enhanced our sales efforts in a number of markets and are prudently evaluating acquisition opportunities where we can leverage our existing resources."
Interwest 1Q99 revenues jump 23%
Interwest Home Medical (Salt Lake City) saw revenues in 1Q99 ended Dec. 31 of $7.7 million, a jump of 23% from 1Q98 revenues of $6.2 million. Net income for 1Q99 was $406,000, 10 cents per share, compared to net income in 1Q98 of $337,000, 8 cents per share. Interwest President/CEO James Robinson said the results of the quarter "clearly reflect the benefits of our renewed focus on our core respiratory/oxygen business. This is especially satisfying after a year of the Medicare oxygen reimbursement. reduction." Robinson added that the company expects to continue the respiratory business focus and cost control measures and will continue to target strategic acquisition opportunities with quality revenue and net income streams with an eye toward enhancing shareholder value. Interwest has expanded to 28 branch locations in Utah, Arizona, Idaho, Nevada, Colorado, Alaska, and California.
Invacare notices 22% sales increase
Invacare (Elyria, OH) reported record sales for FY98, showing $797.5 million in net sales - a 22% increase over the previous fiscal year’s sales of $653.4 million. Net income was $45.8 million, $1.50 per share, compared to $1.6 million, 5 cents per share, in the previous year. The results from FY97 include a non-recurring unusual expense of $1.28 per share.
Malachi Mixon, chairman/CEO, attributed the results to management changes and European sales growth. About 8% of the increase in net sales was due to acquisitions and unfavorable currency translation, the company said. Mixon expects FY99 to repeat 1998’s results with slow profits in the first half of the year while investments are made, then a pay-off in the second half of the year.
Sales for 4Q98 rose 23% to $210.3 million over the previous year’s amount of $170.8 million. Net income was $14.2 million, 47 cents per share, for 4Q98, compared to $3.4 million, 11 cents per share, for 4Q97.
McKessonHBOC reports record 3Q98 revenues
McKessonHBOC (San Francisco) reported record revenues in 3Q98 ended Dec. 31. Before special charges, the company had a net income of $59.4 million, 56 cents a share, compared to $42 million, 43 cents a share, a year earlier. After $17.2 million in charges for 3Q98 acquisitions, 3Q98 net income was $42.2 million, 40 cents a share. Revenues increased 24% to $5.8 billion, not including $2.2 billion in sales to customers’ warehouses.
Court drops charges against Olsten’s Quantum
Olsten Health Services (Melville, NY) said it has been advised by the U.S. Attorney’s Office for the District of New Mexico that it has dropped its criminal charges investigation into certain past practices of Quantum Health Resources, which was acquired by Olsten in June 1996. The investigation had focused on allegations of improper billing and fraud against various federally funded medical assistance programs on the part of Quantum during January 1992 and April 1997.
Respironics’ sales down for 2Q99
Respironics’ (Pittsburgh) sales in 2Q99 ended Dec. 31 totaled $90.2 million, compared to sales in 2Q98 of $95.5 million. The company recorded a net income in 2Q99 of $7.4 million, 23 cents per share, down from 2Q98 net income of $9 million, 27 cents per share. During the quarter, Respironics featured several new products at the major tradeshows, including the Millennium Oxygen Concentrator, the BiPAP Vision Ventilatory Support System, the Esprit Ventilator, and the REMstar LX and Tranquility Auto CPAP units.
Sims’ subsidiary secures contracts
Sims Communications (Irvine, CA) said that its One Medical Service Subsidiary has obtained four sole-provider home medical equipment managed care contracts for its Santa Barbara, CA, network of independent pharmacies and accredited vendors. The company estimates that the agreements will generate $675,000 per year in HME sales. The One Medical Service system allows pharmacies to efficiently sell home healthcare products and services. Besides providing for Joint Commission on the Accreditation of Healthcare Organizations training, the One Medical Service system includes a retail display containing Sims’ point-of-sale terminal and voice and data communications, in which, through voice prompting and touch-tone entry, customers can order more than 5,000 home medical equipment products from the company’s catalog for delivery.
ADP to handle Staff Builders’ payroll
Staff Builders (Lake Success, NY) has contracted with Automatic Data Processing (Roseland, NJ) to handle its payroll check printing, direct deposit, and W-2 processing.
It chose ADP because the payroll service would provide more reliability, reduced costs, and a disaster recovery capability for the company’s 40,000 employees nationwide.
Using ADP, Staff Builders hopes to streamline the human resource and payroll departments, as well as reduce field employee turnover. Historically, ADP has restored employee confidence in the payroll system, and it has reduced their phone calls about ambiguous earnings statements.
Production delays slow Sunrise sales
Second quarter sales for Sunrise Medical (Carlsbad, CA) decreased about 3% from last year due partly to fewer shipping days and production delays in Mexico, according to Chairman/President Richard H. Chandler. Net sales were $163 million for 2Q99 ended Jan. 1, compared to 2Q98 sales of $169 million.
"We announced over 30 new products at the Medtrade show in November, which penalized the second quarter with heavy launch expenses," Chandler said.
Non-recurring expense and income items negatively impacted last year’s earnings, which may account for the 96% increase of net income for 2Q99. Net income rose to $1.8 million, 8 cents per share, from $.9 million, 4 cents per share, the previous year. The decline in revenue was offset by controlled marketing and selling, as well as fewer administrative expenses.