Coram Healthcare Announces Second Quarter 1999 Results

Business Wire, August 16, 1999

DENVER--(BUSINESS WIRE)--Aug. 16, 1999--

Company Reports Continuing Top-Line Revenue Growth at

30 Percent for Q2;

$34 Million Negative Impact Related to Master Agreement with Aetna

Coram Healthcare Corporation (NYSE:CRH) reported financial results today for the second quarter ended June 30, 1999.

As previously announced, the Company's results for the quarter reflect the financial impact related to the Master Agreement the Company had with Aetna U.S. Healthcare, Inc. (Aetna), which was terminated effective June 30, 1999. The $34 million impact represents the reduction of revenue and the increase in cost of service for the second quarter of 1999 compared to the first quarter of 1999, totaling approximately $15.1 million and $18.9 million respectively. The Company is in litigation with Aetna regarding the matter, including the breaches of the Master Agreement committed by Aetna that led to the negative financial impact. The Company also announced that it had received waivers of non-compliance with certain covenants under its principal debt agreements.

Comparing the Company's second quarter 1999 results, including the impact of the terminated contract with Aetna, to the same period last year:

o Revenue grew to $152.7 million from $117.2 million, an increase of 30.3%.

o Patient census for the infusion business increased by about 8.7% to approximately 56,100 from 51,600. Therapy days increased by 13.2%.

o EBITDA was $(24.6) million compared to $7.7 million.

o Net loss was $(38.0) million compared to $(4.5) million.

o The loss per share was $(0.77) compared with a loss per share of $(.09).

In addition, during the quarter the Company incurred increased interest expense primarily as a result of changes in the interest rate applicable to its Series A notes from 9.875% to 11.5% effective in April 1999 and increased revolver borrowing on the Company's Senior Credit Facility.

Coram's infusion division sales increased 10.1% from the same period last year, and 2.7% over the first quarter of 1999. The Coram Prescription Services (CPS) revenue grew by 93.5% over the same period last year, and 12.6% quarter over quarter. In addition, CPS grew its EBITDA by 29.7% since the first quarter of 1999.

Coram President and CEO Richard M. Smith, commented, "As we previously disclosed, we terminated the Aetna contract and sued Aetna for misrepresentation, breach of contract and rescission related to a Master Agreement between Coram and Aetna. We are seeking over $50 million in damages. We believe that the legal actions taken are necessary to protect shareholder value and the long-term interests of the Company.

"Despite the lawsuit, we are pleased with our continuing top-line growth, at 30 percent for the quarter. We remain focused on our strategic plan, as evidenced by our increased patient census in our key therapies, growth in our prescription business and improved cash flow. Our ability to now direct our attention to our core business will give us increased opportunities to achieve our growth and profitability objectives."

Mr. Smith continued, "In order to maintain our sales momentum, we intend to market aggressively on all fronts including infusion therapy, the Resource Network, Clinical Research and Medical Informatics, and Coram Prescription Services. Our goal will be to take advantage of the numerous cross-selling opportunities these core businesses create. And, we remain focused on the key therapies that are not only profitable for the Company, but also tend to be the clinically complex therapies where Coram has the most clinical management expertise. The positive results of our enhanced sales focus are now evident--our profitable therapies in the infusion division have increased year over year and our therapy days have increased indicating an increase in long-term patients. The same is true in our Coram Prescription Services. We believe Coram's commitment to quality, and our greatest asset - our employees, who are committed to patients and clinical expertise - will continue to be the foundations for success.

"With this sales growth, we will move forward with our plan to improve our base business operational efficiency. Our clinical and strategic operations teams are reviewing all key operational indicators and implementing process re-design programs aiming for improved efficiency and technology. We believe that we can lead the industry in this regard, and improve our base business' profitability."

The Clinical Research and Medical Informatics Division, launched earlier this year, signed significant new contracts in the quarter. Coram is among the first of the home medical services companies to integrate this business with its core business. "We are the most logical and qualified company to assist with this research given our clinical expertise - more than 1,000 highly skilled nurses and pharmacists - and our patient population," said Mr. Smith. He continued, "The market for pharmaceutical research and development outsourcing is approximately $3.9 billion per year. We intend to capture our share."