IHS posts 6.25% increase in quarterly earnings Owings Mills firm eyes further acquisitions in home health field

July 24, 1996|By Abbe Gluck | Abbe Gluck,SUN STAFF

Integrated Health Services Inc. said yesterday that net income rose 6.25 percent in its second quarter, in line with analysts' expectations, as the Owings Mills company increased its flexibility to fund further acquisitions in the home health services industry.

Profit before extraordinary items for the quarter ended June 30 rose to $15.3 million, or 56 cents per share, from $14.4 million, or 54 cents, in 1995.

IHS recorded an extraordinary expense of $1.4 million for the early extinguishment of debt this quarter.

After that expense, earnings were $13.8 million, or 51 cents per share, compared with $13.9 million, or 52 cents, in the second quarter of 1995.

IHS also recorded an extraordinary expense of $500,000 in the second quarter of 1995.

The company posted revenue for the quarter of $336.2 million, a 17 percent increase from $286.7 million a year earlier.

"It was a very good quarter," said IHS Executive Vice President Marc B. Levin, adding that the company will continue its "efforts to pursue home health acquisitions."

In May, IHS acquired both Rehab Management Systems Inc., a Florida therapy provider with more than $13 million in revenue, and Hospice of the Great Lakes, a $9 million Chicago provider.

And in June, the company announced the sale of its pharmacy division to Capstone Pharmacy Services Inc. for $150 million.

Also that month, IHS said it registered with the Securities and Exchange Commission for an initial public offering of stock in its wholly owned assisted living division, Integrated Living Communities.

In addition, during the quarter IHS increased its credit line from $500 million to $700 million.

The report was in line with the expectations of analysts, who predicted earnings per share (before extraordinary items) of 56 cents, according to an I/B/E/S survey of 13 analysts last week.

"The company said, 'Look, it's a whole new world out there and we're going to aggressively do the things that need to be done to prepare for it, and if that means we have to slow down in 1996 to prepare, that's what we're going to do,' " said Susan D. Besto, an analyst at Legg Mason in Baltimore.

Besto and other analysts said part of that preparation means raising cash.

"From a capital perspective, the company has delivered on what it said," agreed D. Scott Mackesy of Dean Witter Reynolds in New York.

In addition to positioning itself for the future, Mackesy added that IHS had a successful quarter in terms of its present nTC operations. "Their occupancy in the base nursing home business continues to be one of the highest we've seen," he said.

IHS reported occupancy of 93 percent for a quarter in which "we've seen a lot of other companies trail off," he said.

However, analysts also predicted earnings per share would fall to 53 cents in the third quarter.

"Earnings in the next two quarters will really depend on whether the company buys First American," said Besto.

In February, IHS announced an agreement to buy First American Health Care of Brunswick, Ga., the nation's largest privately held home health services provider.

"If the acquisition continues to be delayed, the quarterly earnings will be higher," she said.

IHS operates more than 600 post-acute care facilities in 40 states, serving patients recuperating from hospitalization or illness, as well as those with rehabilitation or home health care needs.

Pub Date: 7/24/96

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