Subacute provider Integrated Health Services fell short of analysts' expectations when it announced its fourth-quarter earnings last week.
However, the company surpassed the $1 billion mark in its annual revenues for the first time, and its aggressive dealmaking could make it a leading contender in both the home-health and assisted-living sectors.
The Owings Mills, Md.-based company posted a loss for the fourth quarter ended Dec. 31, 1995, of $68.1 million, or $3.06 per share, compared with net income of $12.7 million, or 49 cents per share, for the year-ago quarter. For the year ended Dec. 31, IHS lost $27 million, or $1.26 per share, compared with net income of $32.6 million, or $1.57 per share, in 1994.
IHS said it recorded $80.6 million in nonrecurring charges against fourth-quarter earnings, resulting from the implementation of financial accounting standards and the termination of a management contract. In addition, an extraordinary charge of $505,000 related to early extinguishment of debt.
Earnings before nonrecurring charges were $13 million, or 52 cents per share, for the fourth quarter, and $55.8 million, or $2.15 per share, for the year.
For the fourth quarter, net revenues rose 31% to $319.2 million. For 1995, IHS posted net revenues of $1.2 billion, a 65% increase from 1994. The company provides post-acute services at more than 600 locations in 40 states.
A recently announced plan to acquire First American Health Care could place the home-care branch of IHS, Symphony Home Care Services, among the top five providers in that sector.
Following a widely publicized Medi-care fraud case, First American and its owners, Robert "Jack" Mills and his wife, Margie, were convicted on several counts last month. The company announced Feb. 22 that it was seeking bankruptcy protection and would merge with IHS for $150 million, plus $100 million to be paid contingent on subsequent performance (Feb. 26, p. 4).
In the assisted-living realm, IHS also could move into one of the top five slots. The company recently signed a letter of intent to merge with Standish Care Co. in a deal worth $23 million, according to Michael Doyle, chairman and chief executive officer at Burlington, Mass.-based Standish. The company runs 18 assisted-living communities in eight Eastern states.
IHS blamed part of its earnings shortfall on an Illinois hospice provider it acquired in December 1994 called Samaritan Care. IHS disclosed that after it took over the company's operations, it discovered evidence of possible Medicare billing fraud. The Justice Department is currently investigating the hospice's previous owner, and IHS has filed charges against that owner for misrepresentation and damages from the transaction.