What drove the drop in reported 1996 earnings relative to the underlying business?

The fourth quarter included pretax non-recurring charges of $125.2 million, primarily to complete the integration of Hillhaven. These included a $65.3 million charge for the disposition of 34 nursing centers, a $39.6 million charge for integrating the institutional pharmacy business into Vencare, and a $20.3 million provision for the planned replacement of one hospital and three nursing centers. Excluding these items, income from operations was $127.9 million.

How large is each of the company's business segments?

For 1996, nursing center revenues totaled approximately $1.6 billion, or 62% of total revenues. Hospital revenues were approximately $551 million, or 21% of total revenues. Vencare revenues were approximately $387 million, or 15%. Assisted and independent living revenues were approximately $52 million, or 2%.

What is the company's exposure to government payors?

Medicare and Medicaid were each 31% of total revenues in 1996. The filing notes that these programs are subject to statutory changes and proposed federal budget reductions, and that the company cannot predict the outcome of pending healthcare reform or budget legislation.

What major transaction occurred after year-end 1996?

On March 21, 1997, the company completed the TheraTx Merger, paying $17.10 in cash per TheraTx share. TheraTx provides subacute rehabilitation and respiratory therapy program management and operates 29 skilled nursing facilities. The merger is being accounted for using the purchase method, and the company entered a new $1.6 billion credit facility on March 18, 1997 to replace its $1 billion facility.

What is the company's planned capital spending for 1997?

Planned capital expenditures in 1997, excluding acquisitions, are expected to approximate $200 million to $250 million, including significant spending on nursing center improvements and the expansion of Atria's assisted and independent living business. The company also plans to spend approximately $200 million over the next two years to improve existing facilities and expand services for higher acuity patients.

VTR 10-K FY1996 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 26, 1997. Cited figures are marked; the original filing is the authoritative source.

Vencor, Inc. (now Ventas, Inc.) reported 1996 revenues of $2.58 billion^a, up from $2.32 billion in 1995, and net income of $48.0 million, or $0.68 per fully diluted share, compared with a net loss of $14.9 million in 1995.

Results were weighed down by $125.2 million^b of pretax non-recurring charges recorded in the fourth quarter, primarily to complete the integration of Hillhaven, including a $65.3 million charge for the planned sale of 34 nursing centers and a $39.6 million charge tied to consolidating the institutional pharmacy business into Vencare. Excluding non-recurring items, the company reported 1996 income from operations of $127.9 million ($1.81 per share, fully diluted). Nursing centers remained the largest revenue source at $1.6 billion, or 62% of total revenues, followed by Vencare at $387 million and hospitals at $551 million.

The company operated 38 long-term acute care hospitals, 313 skilled nursing centers, 34 institutional pharmacies and, through its majority-owned affiliate Atria Communities, 21 assisted and independent living communities. Cash provided by operations rose to $183.5 million^c in 1996 from $113.6 million in 1995, and long-term debt declined to $710.5 million from $778.1 million. Stockholders' equity was $797.1 million at year-end 1996.

The filing's most significant subsequent event was the March 21, 1997 acquisition of TheraTx, Incorporated for $17.10^d per share in cash, financed under a new $1.6 billion bank credit facility that replaced the prior $1 billion facility. The filing also notes that Medicare and Medicaid reimbursement policy changes, including proposed federal budget reductions, could affect future revenues.

02—Key points

Key Highlights

Revenues of $2,577.8 million in 1996, up from $2,324.0 million in 1995 and $2,032.8 million in 1994.
Net income of $48.0 million ($0.68 per fully diluted share) in 1996, versus a net loss of $14.9 million in 1995, after fourth-quarter non-recurring charges of $125.2 million pretax.
Income from operations excluding non-recurring transactions was $127.9 million ($1.81 per share, fully diluted) in 1996.
Cash provided by operations was $183.5 million in 1996, compared with $113.6 million in 1995.
Acquisition of TheraTx, Incorporated completed March 21, 1997 at $17.10 per share in cash, funded by a new $1.6 billion bank credit facility.
Long-term debt decreased to $710.5 million at December 31, 1996 from $778.1 million a year earlier, and the company repurchased 1,950,000 shares for $55.3 million during 1996.
Medicare represented 31% of 1996 total revenues and Medicaid 31%, underscoring exposure to government reimbursement policy.

03—Questions

Frequently Asked Questions

What drove the drop in reported 1996 earnings relative to the underlying business?
The fourth quarter included pretax non-recurring charges of $125.2 million, primarily to complete the integration of Hillhaven. These included a $65.3 million charge for the disposition of 34 nursing centers, a $39.6 million charge for integrating the institutional pharmacy business into Vencare, and a $20.3 million provision for the planned replacement of one hospital and three nursing centers. Excluding these items, income from operations was $127.9 million.
How large is each of the company's business segments?
For 1996, nursing center revenues totaled approximately $1.6 billion, or 62% of total revenues. Hospital revenues were approximately $551 million, or 21% of total revenues. Vencare revenues were approximately $387 million, or 15%. Assisted and independent living revenues were approximately $52 million, or 2%.
What is the company's exposure to government payors?
Medicare and Medicaid were each 31% of total revenues in 1996. The filing notes that these programs are subject to statutory changes and proposed federal budget reductions, and that the company cannot predict the outcome of pending healthcare reform or budget legislation.
What major transaction occurred after year-end 1996?
On March 21, 1997, the company completed the TheraTx Merger, paying $17.10 in cash per TheraTx share. TheraTx provides subacute rehabilitation and respiratory therapy program management and operates 29 skilled nursing facilities. The merger is being accounted for using the purchase method, and the company entered a new $1.6 billion credit facility on March 18, 1997 to replace its $1 billion facility.
What is the company's planned capital spending for 1997?
Planned capital expenditures in 1997, excluding acquisitions, are expected to approximate $200 million to $250 million, including significant spending on nursing center improvements and the expansion of Atria's assisted and independent living business. The company also plans to spend approximately $200 million over the next two years to improve existing facilities and expand services for higher acuity patients.

04—Continue

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