Integrated Health posts large gain Profit of $41.5 million nearly double '97 quarter's

Earnings

July 21, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

Showing the effects of two sizable acquisitions, Integrated Health Services Inc. of Owings Mills posted yesterday second-quarter profit nearly double those of the same quarter last year.

Integrated's profit for the quarter was $41.5 million, up from with $22.1 million, before one-time charges, in the year-ago quarter. After taking those one-time charges -- for terminating its agreement to acquire Coram Healthcare and for costs of refinancing debt -- the company posted a net loss of $8.9 million in the second quarter of 1997.

Per-share earnings, diluted, for the quarter that ended June 30 were 76 cents, beating consensus estimates by a penny. In the corresponding quarter last year, the company earned 68 cents a share before one-time charges but lost 18 cents a share after the charges.

Revenue for the quarter was $816.9 million, up 78 percent from $457.9 million in the second quarter of 1997.

The revenue jump reflects the acquisition last year of RoTech Medical Corp., which offers home respiratory services and durable medical equipment, and several nursing homes and other facilities that had been owned by Horizon/CMS Healthcare. Integrated paid out more than $2 billion in stock, cash and assumed debt in the two acquisitions.

The acquisitions were major steps in Integrated's strategy of assembling a full array of services nationally for patients who have left hospitals.

While growing dramatically, Integrated improved its operating margin to 21.2 percent in the second quarter of 1998, compared with 16.4 percent a year earlier, before interest, taxes, depreciation and amortization, the company reported.

"The underlying fundamentals are even a little stronger than they appear," said Jean Swenson, an analyst for BT Alex. Brown. She said the company's home nursing operations have been "a real drain on earnings" but that Integrated has been moving to close unprofitable operations.

Also, she said, management has indicated it is seeking to sell or spin off its home nursing division, which should improve margins in the future.

Integrated's stock closed yesterday at $34.9375 a share, down 68.75 cents for the day.

The company also said yesterday that its chairman and chief executive officer, Dr. Robert Elkins, has sold or intends to sell about 400,000 shares of stock to pay taxes on stock options he had exercised. Altogether, he has exercised options on 1.5 million shares since fall.

As part of the option process, Elkins had exchanged 430,000 shares to pay for stock.

The net effect of Elkins' moves is to bring his shares and options to 2.9 million shares, from 2.2 million before the transactions began. There are 56 million shares and options outstanding.

Swenson said analysts see Elkins' increased holdings of common stock as an expression of confidence in his company but that "at the end of the day, it's not a big difference."

Pub Date: 7/21/98

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