Superior Consultant Reports Second Quarter Revenue and Profit
Growth Superior on Track to Exceed 2004 Forecast DEARBORN, Mich.,
July 29 /PRNewswire-FirstCall/ -- Superior Consultant Holdings
Corporation (NASDAQ:SUPC) today reported its second quarter 2004
operating results. For the quarter, the company reported net
revenue of $26.9 million, compared with $22.9 million in the same
quarter a year ago, and $24.6 million in the first quarter of 2004.
The company reported EBITDA for the quarter of $2.5 million and
earnings per diluted share of $0.08, prior to giving effect to a
non-cash charge related to the sale of a building; with the effect
of the building sale, the company reported EBITDA of $1.9 million
and $0.03 per diluted share. The performance compares with EBITDA
of $1.0 million and a net loss of ($0.04) per share in the same
quarter last year, and EBITDA of $1.8 million and earnings per
diluted share of $0.02 in the first quarter of 2004. During the
second quarter, Superior sold an office building, which added to
the company's cash position and simultaneously reduces operating
expenses in subsequent quarters. The transaction added $1.7 million
net cash to the company's balance sheet. The transaction resulted
in a non-cash charge of $562,000 to reflect the difference between
the net sale price and the net book value of the building. The
company expects to realize approximately $125,000 each future
calendar quarter in lower depreciation and operating costs
associated with the company's relocation to more efficient
facilities. Outsourcing net revenue increased 42.8% over the same
quarter in the prior year. During the quarter, the company gained
$128 million in new outsourcing sales. Included among the contract
wins were new, full-service outsourcing contracts with Southwest
Washington Medical Center (Vancouver, Washington) and Port Huron
Hospital (Michigan). The company's outsourcing sales prospect
pipeline increased to $859 million from $790 million. Consulting
net revenue remained consistent with the same quarter in the prior
year and increased 4.5% over last quarter. During the quarter, the
company gained $29.6 million in new consulting bookings, an
increase of 135% over the same quarter of 2003. Included in the
contract wins were the previously announced $12.5 million
multi-year enterprise-wide electronic medical records
implementation project and more than $4 million in initial
implementation work associated with a major electronic medical
records project. "Sustained focus on meeting the most important
needs of our healthcare clients, coupled with resolute pursuit of
the outsourcing and consulting strategy we announced nearly four
years ago, has resulted in the best quarter of financial
performance under our current business model," said Chief Executive
Officer Richard D. Helppie. "We recorded $0.08 earnings per diluted
share, absent the effect of the sale of an under-utilized building.
The second quarter of 2004 is our seventh consecutive quarter of
in-line performance and our third straight quarter of
profitability, and we have an expectation of further growth in
revenue and profitability. As we marked our 20th anniversary of
service to the healthcare industry in May, we are pleased to report
that strong outsourcing and consulting bookings during the quarter
have resulted in a record backlog of $368 million in sold work."
"Superior increased its net revenue over the same quarter last year
and achieved additional operating efficiencies," said Richard R.
Sorensen, Chief Financial Officer. "We reported increases in our
profit, operating margin and EBITDA, and we ended the quarter with
$12.5 million in cash. Uses of cash during the quarter consisted
primarily of capital purchases for software, equipment, and
associated implementation services related to our outsourcing
contracts and debt service associated with our financing
arrangements. As previously announced, we also finalized
commitments for increased financing capacity and further added to
our available cash through the sale of under- utilized real
estate." SG&A in the second quarter improved to 22.5% of net
revenue from 24.1% last quarter and 28.6% in the same quarter of
2003. Days Sales Outstanding (DSO) were 55, compared with 49 last
quarter and 50 one year ago. Operating margin improved to 2.1% in
the quarter, or 4.1% excluding the impact of the building sale,
compared with 1.8% in the prior quarter and (1.0%) in the same
quarter of 2003. Gross margin for the quarter was 26.6%, compared
with 27.6% in the same quarter one year ago and 25.9% last quarter.
"During the quarter, our outsourcing and consulting units turned in
solid results," said George S. Huntzinger, President and Chief
Operating Officer. "Superior's partnership with our clients and our
energized work force means return on investment for our clients,
growth for our colleagues, and returns for our shareholders. As
mentioned in our first quarter earnings release, we have achieved a
level of utilization at the Superior Processing Center, which has
transitioned from the investment stage to become a contributor to
gross margin." "In consulting, we continued to gain new clinical
transformation and revenue cycle engagements during the quarter,
and we saw an increase in strategic and I.T. planning engagements
as well as an increase in implementation work," Huntzinger
continued. "We sold 19 consulting engagements valued in excess of
$200,000, seven of which are valued in excess of $500,000. We
gained 30 new clients during the quarter, eight of which awarded us
contracts valued in excess of $100,000. Accepted proposals for
consulting work totaled $29.6 million for the second quarter. Thus
far in 2004, we have added $41.1 million in consulting sales,"
Huntzinger concluded. OUTLOOK "We are pleased with the results for
the initial half of 2004," said Helppie. "Everyone at Superior is
pleased to see government and industry leaders' growing awareness
of the great potential of information technology's role in
improving quality and reducing the cost of healthcare. We believe
that the macro factors driving our market will help create demand
in the second half of 2004 and into the years beyond." For 2004,
the company confirms its expectation to exceed the upper end of its
revenue, EBITDA, and earnings per basic share forecasts of $107
million, $8.5 million, and $0.13, respectively. * The revenue
forecast for 2004 is based on revenue of $51.5 million for the
initial half of 2004, a current booked backlog of $45 million for
the remainder of the year, and current client indications of an
additional $1.7 million. * The EBITDA forecast is based on results
achieved in the initial half of 2004, expected margins from sold
work, and estimated results of new contracts for 2004. * The
earnings per basic share forecast is based on achievement of $0.11
for the initial half of 2004, absent the effect of the building
sale. For the year, the company expects to reach at least $0.18 per
basic share, absent the effect of the building sale. As previously
announced, Superior expects to continue to show quarterly
improvement over comparable 2003 quarters throughout the year. The
company's guidance is also predicated on anticipated success in
winning and servicing new outsourcing and consulting contracts,
achievement of the anticipated revenue mix between outsourcing and
consulting, and continued expense controls. Superior anticipates
some continued capital expenditures in connection with the launch
and service of outsourcing relationships. The company expects to
meet the capital and cash requirements through the associated
outsourcing revenue streams, operating cash flow, and financing
sources. In April, the company negotiated a larger, more favorable
line of credit with Fifth Third Bank. In addition, the company
negotiated other credit lines for equipment and software financing.
Superior anticipates continued growth in 2005 and the years beyond.
The company has a rising revenue run rate, large backlog of sold
work, and strong sales pipelines. The revenue backlogs for 2005 and
2006 are now $64.2 million and $52.6 million, respectively. Helppie
concluded, "Superior's deep experience with healthcare industry
issues forms the basis for our transformational consulting and
outsourcing services. We are making a positive difference for our
clients and for the healthcare industry. We have successfully
integrated our consulting and outsourcing services in a way that
provides great value for our clients, great opportunity for our
employees, and excellent prospects for our shareholders."
Conference Call Broadcast: Superior Consultant's senior executives
will discuss the second quarter 2004 results during an investor
teleconference scheduled for 11:00 a.m. eastern time on Friday,
July 30, 2004. To listen to the broadcast, participants may log
onto http://www.superiorconsultant.com/ and go to the "Investors"
section of the Web site. We suggest you log onto the Web site 10
minutes prior to the conference call to download and install any
necessary software. Conference Call Replay: An online replay will
be available after 2:30 p.m. eastern time on Friday, July 30, 2004,
under the "Investors" section of http://www.superiorconsultant.com/
. Statements included in this press release which are not
historical in nature, are intended to be, and are hereby identified
as "forward-looking statements" for purposes of the safe harbor
provided by Section 21E of the Securities Exchange Act of 1934, as
amended by Public Law 104-67. Forward- looking statements may be
identified by words including, but not limited to: "anticipate,"
"believe," "intends," "estimates," "promises," "expect," "should,"
"conditioned upon" and similar expressions. This release contains
forward-looking statements relating to future financial results or
business expectations. Business plans may change as circumstances
warrant. Actual results may differ materially as a result of
factors and events which the company is unable to accurately
predict or over which the company has no control. Such factors
include, but are not limited to: the award or loss of significant
client assignments, timing of contracts, recruiting and new
business solicitation efforts, the healthcare market's acceptance
of and demand for the company's offerings, demands upon and
consumption of the company's cash and cash equivalent resources or
changes in the company's access to working capital, regulatory
changes and other factors affecting the financial constraints on
the company's clients, competitive pressures (both domestic and
foreign), the ability to successfully manage currency risk, obtain
foreign work permits and otherwise successfully execute and manage
international contracts, economic factors specific to healthcare,
general economic conditions, unforeseen disruptions in
transportation, communications or other infrastructure components,
acquisitions under consideration and the ability to integrate
acquisitions on a timely basis. Additional information regarding
these risk factors and others, and additional information
concerning the company are included in the company's reports on
file with the Securities and Exchange Commission. About Superior
Consultant Holdings Corporation Recipient of Frost & Sullivan's
2003 Best Bang for the Buck Award for providing services and
solutions with the highest ratio of value to cost, Superior
Consultant is a leading national provider of transformational
outsourcing, management and information technology consulting
services and solutions to the healthcare industry. Superior
specializes in Digital Business Transformation(TM) services that
enable clients to thrive in the information-driven economy, and its
transformational outsourcing, management and information technology
consulting services and solutions help clients plan and execute
better business strategies and meet their fiscal challenges while
advancing clinical quality. Superior's best practices outsourcing
model includes a full range of flexible business process and
information technology solutions, including data center services,
24/7/365 network monitoring and help desk services, facility
management, interim management, and application outsourcing
services. For 20 years, Superior has been recognized as an
innovative leader within the healthcare industry and has been
rewarded with full and partial outsourcing contracts, thousands of
engagements, approximately 170 interim management assignments, and
nearly 3,000 clients. For more information on Superior Consultant
Holdings Corporation simply dial 1-800-PRO-INFO and enter the
Company ticker: SUPC (a no-cost fax-on- demand service) or visit
the Company's Web site at http://www.superiorconsultant.com/ .
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) June 30,
December 31, ASSETS 2004 2003 Current assets Cash and cash
equivalents $12,498 $12,688 Accounts receivable, net 16,338 12,592
Other current assets 4,097 4,000 Total current assets 32,933 29,280
Property and equipment, net 24,932 24,235 Other long-term assets
249 338 Total Assets $58,114 $53,853 LIABILITIES AND STOCKHOLDERS'
EQUITY Current liabilities Notes payable to bank $4,400 $1,900
Other current liabilities 18,181 16,300 Total current liabilities
22,581 18,200 Senior subordinated debentures, net 7,608 7,552
Long-term liabilities 4,005 5,185 Stockholders' equity 23,920
22,916 Total Liabilities and Stockholders' Equity $58,114 $53,853
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per
share amounts) (Unaudited) Three Months Ended Six Months Ended June
30, March 31, June 30, June 30, June 30, 2004 2004 2003 2004 2003
Revenue Consulting Revenue before reimbursements (net revenue)
$13,767 $13,169 $13,718 $26,936 $27,709 Out-of-pocket
reimbursements (1) 1,911 1,459 1,877 3,370 3,650 Total consulting
revenue 15,678 14,628 15,595 30,306 31,359 Outsourcing Revenue
before reimbursements (net revenue) 13,090 11,453 9,168 24,543
17,068 Out-of-pocket reimbursements (1) 101 108 147 209 225 Total
outsourcing revenue 13,191 11,561 9,315 24,752 17,293 Consolidated
revenue 28,869 26,189 24,910 55,058 48,652 Cost of services
Consulting Cost of services before reimbursements (net cost of
services) 8,123 8,445 8,694 16,568 17,175 Out-of-pocket
reimbursements (1) 1,911 1,459 1,877 3,370 3,650 Total consulting
cost of services 10,034 9,904 10,571 19,938 20,825 Outsourcing Cost
of services before reimbursements (net cost of services) 11,577
9,812 7,872 21,389 15,275 Out-of-pocket reimbursements (1) 101 108
147 209 225 Total outsourcing cost of services 11,678 9,920 8,019
21,598 15,500 Consolidated cost of services 21,712 19,824 18,590
41,536 36,325 Gross Profit Consulting 5,644 4,724 5,024 10,368
10,534 Outsourcing 1,513 1,641 1,296 3,154 1,793 Consolidated gross
profit 7,157 6,365 6,320 13,522 12,327 Selling, general and
administrative expenses 6,044 5,923 6,555 11,967 13,370 Loss on
sale of building 562 - - 562 - Earnings (loss) from operations 551
442 (235) 993 (1,043) Other expense, net (205) (256) (150) (461)
(229) Earnings (loss) before income tax benefit 346 186 (385) 532
(1,272) Income tax benefit - - - - - Net earnings (loss) $346 $186
$(385) $532 $(1,272) Net earnings (loss) per share Basic $0.03
$0.02 $(0.04) $0.05 $(0.12) Diluted $0.03 $0.02 $(0.04) $0.05
$(0.12) Weighted average number of common shares outstanding Basic
10,415 10,358 10,765 10,387 10,765 Diluted 11,849 11,682 10,765
11,754 10,765 SUPERIOR CONSULTANT HOLDINGS CORPORATION AND
SUBSIDIARIES SUPPLEMENTAL INFORMATION (In thousands) (Unaudited)
Three Months Ended Six Months Ended June 30, March 31, June 30,
June 30, June 30, 2004 2004 2003 2004 2003 GAAP to Non-GAAP
Reconciliations: Consolidated revenue $28,869 $26,189 $24,910
$55,058 $48,652 Less: Out-of-pocket reimbursements (1) (2,012)
(1,567) (2,024) (3,579) (3,875) Net Revenue $26,857 $24,622 $22,886
$51,479 $44,777 Operating expenses Consolidated cost of services
$21,712 $19,824 $18,590 $41,536 $36,325 Selling, general and
administrative expenses 6,044 5,923 6,555 11,967 13,370 Loss on
sale of building 562 - - 562 - Operating expenses - GAAP 28,318
25,747 25,145 54,065 49,695 Less: loss on sale of building (562) -
- (562) - Less: Out-of-pocket reimbursements (1) (2,012) (1,567)
(2,024) (3,579) (3,875) Operating expenses, as adjusted $25,744
$24,180 $23,121 $49,924 $45,820 Net earnings (loss) - GAAP $346
$186 $(385) $532 $(1,272) Loss on sale of building 562 - - 562 -
Net earnings (loss), excluding loss on sale of building $908 $186
$(385) $1,094 $(1,272) Basic net earnings (loss) per share,
excluding loss on sale of building $0.09 $0.02 $(0.04) $0.11
$(0.12) Diluted net earnings (loss) per share, excluding loss on
sale of building $0.08 $0.02 $(0.04) $0.09 $(0.12) Net earnings
(loss) $346 $186 $(385) $532 $(1,272) Depreciation and amortization
1,354 1,356 1,258 2,710 2,339 Interest expense, net 205 256 150 461
229 Income tax benefit - - - - - EBITDA $1,905 $1,798 $1,023 $3,703
$1,296 2004 EBITDA, as reported $1,905 $3,703 Adjustment for loss
on sale of building 562 562 2004 EBITDA, adjusted for loss on sale
of building, amounts used in 2004 annual EBITDA guidance $2,467
$4,265 Capital expenditures, net of financing $3,026 $2,606 $1,640
$5,632 $3,323 Gross profit % - Consulting(1) 41.0% 35.9% 36.6%
38.5% 38.0% Gross profit % - Outsourcing(1) 11.6% 14.3% 14.1% 12.9%
10.5% Gross profit % - Consolidated(1) 26.6% 25.9% 27.6% 26.3%
27.5% SGA % 22.5% 24.1% 28.6% 23.2% 29.9% Headcount 669 592 569 669
569 (1) In November 2001, the Financial Accounting Standards Board
issued Staff Announcement Topic No. D-103, "Income Statement
Characterization of Reimbursements Received for Out-of-Pocket
Expenses Incurred," which states that reimbursements received for
out-of-pocket expenses should be characterized as revenue in the
income statement. The application of Staff Announcement Topic No.
D-103 does not have an impact on current or previously reported net
earnings (loss) or earnings (loss) per share. We will continue to
use net revenue (revenue before out-of-pocket reimbursements) and
net cost of services (cost of services before out-of-pocket
reimbursements) to compute percentage and margin calculations, as
well as for purposes of comparing the results of operations for the
quarter ended June 30, 2004, to the quarters ended March 31, 2004,
and June 30, 2003, and the six months ended June 30, 2004 to the
six months ended June 30, 2003. DATASOURCE: Superior Consultant
Holdings Corporation CONTACT: Richard D. Helppie - Chief Executive
Officer, Richard R. Sorensen - Chief Financial Officer, Susan M.
Synor - Executive Vice President, all of Superior Consultant
Holdings Corporation, +1-248-386-8300 Web site:
http://www.superiorconsultant.com/
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