Crescent Operating, Inc. Enters Into Letter Agreement for the Restructuring of CBHS And Announces Second Quarter Earnings
Press Release: Crescent Operating, Inc.
August 17, 1999
FT. WORTH, TX--Crescent Operating, Inc. ("Crescent Operating") (Nasdaq:COPI) yesterday announced that
Crescent Operating, Crescent Real Estate Equities Limited Partnership ("Crescent Real Estate") (NYSE:CEI),
Magellan Health Services, Inc. ("Magellan") (NYSE:MGL) and Charter Behavioral Health Systems, LLC ("CBHS")
entered into a binding Letter Agreement dated Aug. 10, 1999, relating to a proposed recapitalization of CBHS and
restructuring of relationships among the parties. CBHS is the lessee, under a master lease agreement, of 88 psychiatric
hospitals owned by Crescent Real Estate.
Under the Letter Agreement, Magellan agreed that it will, at the closing of the transactions, transfer its remaining
hospital-based assets (including Charter Advantage, Charter Franchise Services, LLC, the call center assets, the
Charter name and related intellectual property and certain other assets) to CBHS, and cancel its accrued and future
franchise fees. Magellan will also effectively transfer 80% of its CBHS common interest and all of its preferred
interest to CBHS, leaving Magellan with a 10% common membership interest, and Crescent Operating with a 90% common
membership interest and 100% of the preferred membership interest in CBHS. Additionally, it is anticipated that
CBHS management will have the ability to acquire up to 30% of the common membership interests. Crescent Operating
plans to restructure its investment in CBHS so that the closing of the transactions will not result in Crescent
Operating's control of CBHS.
In connection with the execution of the Letter Agreement, Magellan, CBHS, Crescent Real Estate and Crescent Operating
have agreed to provide each other with mutual releases of all claims and disputes against each other, with certain
specified exceptions, and Crescent Real Estate has deferred the August 1999 rent due from CBHS to the last four
months of 1999. Additionally, with the execution of the Letter Agreement, the $2.5 million held in escrow was released
to Crescent Operating in connection with the settlement of the arbitration between Magellan and Crescent Operating.
Magellan and CBHS also have modified and extended their existing arrangement which designates CBHS a preferred
provider of inpatient acute behavioral health services.
The closing of the transactions contemplated by the Letter Agreement is anticipated to take place within 30 days,
subject to the satisfaction of certain customary closing conditions and consents, and other contingencies. If the
closing does not occur within 30 days, the Letter Agreement will terminate unless extended by the parties.
Crescent Operating also announced its results for the three and six months ended June 30, 1999. Net income for
the six months ended June 30, 1999 was $3.6 million, or $0.32 per share (diluted), compared with a net income of
$0.8 million or $0.06 per share (diluted) for the six months ended June 30, 1998. Revenues of $310 million for
the six months ended June 30, 1999 represented a 52% increase over the six months ended June 30, 1998 revenues
of $204 million.
Net income for the three months ended June 30, 1999 was $0.2 million, or $0.01 per share (diluted), compared with
a net income of $1.9 million or $0.16 per share (diluted) for the three months ended June 30, 1998. The change
in net income is primarily attributable to non-recurring investment income of $ 2.4 million from the Hicks-Muse
investment which was recognized during the second quarter of 1998 and decreased profitability of the Hospitality
segment.Revenues of $173 million for the three months ended June 30, 1999 represented a 62% increase over the three
months ended June 30, 1998 revenues of $107 million.
John Goff, Crescent Operating's President and Chief Executive Officer, commented, ``The results for the six months
ended June 1999 are in-line with our internal expectations and we are extremely pleased with the revenue growth
of our equipment sales and leasing segment.''
Jeffrey L. Stevens, Crescent Operating's Executive Vice President and Chief Operating Officer further commented,
``We continue to experience revenue growth in the equipment sales and leasing segment through both same store growth
and strategic acquisitions. Our revenue growth of the equipment sales and leasing segment for the first half of
the year was in excess of 240% with same store growth exceeding 67%. With the close of the Lester and Solveson
acquisitions, we have enhanced our diversity with the addition of these construction crane rental operations.''
Crescent Operating is a diversified management company which through various subsidiaries and affiliates, owns,
leases or operates a portfolio of assets consisting primarily of seven full-service hotels and two destination
health and fitness resorts, an interest in a behavioral health company, an interest in a refrigerated warehouse
operating company, an interest in three real estate development operations, and an equipment sales and leasing
business.
Certain of the statements in this press release constitute forward-looking statements within the meaning of the
federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Although Crescent Operating believes that the expectations reflected
in such forward-looking statements are based upon reasonable assumptions, Crescent Operating's actual results could
differ materially from those set forth in the forward-looking statements. Factors that could cause actual results
to differ materially from Crescent Operating's expectations include, among others, the ability to negotiate final
definitive documents with CBHS, Magellan and Crescent Real Estate, the ability of the Company's segments to continue
to achieve operating results at or above current levels and at a level sufficient to meet current projections,
Crescent Operating's ability to service existing debt and meet other operating expenses, the availability of debt
and equity financing, and the possibility that Crescent Operating's outstanding debt (some of which requires so-called
balloon payments of principal) may be refinanced at higher interest rates or otherwise on terms less favorable
to Crescent Operating, and other general risk factors. For a more complete discussion of these and other risk factors,
please see Crescent Operating's SEC reports, including its annual report on Form 10-K, quarterly reports on Form
10-Q, reports on Form 8-K, and the Company's Registration Statement on Form S-4.
For further information, please contact Rick Knight, Chief Financial Officer at 817/339-2212. Crescent Operating
is also online at www.crescentoperating.com.
CRESCENT OPERATING, INC.
SEGMENT FINANCIAL INFORMATION
FOR THE THREE MONTHS ENDED JUNE 30, 1999
(amounts in thousands except per share data, unaudited)
Equipment
Sales Refrigerated
and Leasing Hospitality Warehousing
Revenues $39,536 $55,478 $ --
Operating expenses 36,948 55,994 1
------- ------- -------
Income (loss) from
operations 2,588 (516) (1)
------- ------- -------
Investment income
(loss) -- 68 (758)
------- ------- -------
Other (income)
expense
Interest expense 1,405 180 --
Interest income (17) (28) --
Other (1) -- --
------- ------- -------
Total other
(income) expense 1,387 152 --
Income (loss)
before income
taxes and
minority
interest 1,201 (600) (759)
Income tax
provision
(benefit) 507 (240) (303)
------- ------- -------
Income (loss)
before minority
interests 694 (360) (456)
Minority interests -- 64 --
------- ------- -------
Net income (loss) $ 694 $ (296) $ (456)
======= ======= =======
Net income (loss)
per share, basic $ 0.06 $ (0.03) $ (0.04)
======= ======= =======
Net income (loss)
per share,
diluted $ 0.06 $ (0.03) $ (0.04)
======= ======= =======
EBITDA
Calculation: (1)
Net income (loss) $ 694 $ (296) $ (456)
Interest expense,
net 1,388 46 47
Income tax
provision
(benefit) 507 (198) 102
Depreciation and
amortization 3,611 239 563
--------- --------- ---------
EBITDA $ 6,200 $ (209) $ 256
========= ========= =========
Land
Development Other Total
Revenues $78,379 $ -- 173,393
Operating expenses 71,155 544 164,642
------- ------- -------
Income (loss) from
operations 7,224 (544) 8,751
------- ------- -------
Investment income
(loss) 4,523 1 3,834
------- ------- -------
Other (income)
expense
Interest expense 3,539 1,905 7,029
Interest income (887) (24) (956)
Other 221 (1) 219
------- ------- -------
Total other
(income) expense 2,873 1,880 6,292
------- ------- -------
Income (loss)
before income
taxes and
minority
interest 8,874 (2,423) 6,293
Income tax
provision
(benefit) 3,415 (2,407) 972
------- ------- -------
Income (loss)
before minority
interests 5,459 (16) 5,321
Minority interests (5,231) -- (5,167)
------- ------- -------
Net income (loss) $ 228 $ (16) $ 154
======= ======= =======
Net income (loss)
per share, basic $ 0.02 $ (0.00) $ 0.01
======= ======= =======
Net income (loss)
per share,
diluted $ 0.02 $ (0.00) $ 0.01
======= ======= =======
EBITDA
Calculation: (1)
Net income (loss) $ 228 $ (16) $ 154
Interest expense,
net 119 1,881 3,481
Income tax
provision
(benefit) 366 (2,407) (1,630)
Depreciation and
amortization 400 (41) 4,772
--------- --------- ---------
EBITDA $ 1,113 $ (583) $ 6,777
========= ========= =========
(1) EBITDA represents earnings before interest, income taxes,
depreciation and amortization. Amounts are calculated based on
the Company's ownership percentage of the EBITDA components.
Management believes that EBITDA can be a meaningful measure of
the Company's operating performance, cash generation and ability
to service debt. However, EBITDA should not be considered as an
alternative to either: (i) net earnings (determined in accordance
with GAAP); (ii) operating cash flow (determined in accordance
with GAAP); or (iii) liquidity. There can be no assurance that
the Company's calculation of EBITDA is comparable to similarly
titled items reported by other companies.
CRESCENT OPERATING, INC.
SEGMENT FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(amounts in thousands except per share data, unaudited)
Equipment
Sales Refrigerated
and Leasing Hospitality Warehousing
----------- ------------ -------------
Revenues $ 66,695 $118,510 $ --
Operating expenses 63,598 116,516 1
----------- ------------ -------------
Income (loss) from operations 3,097 1,994 (1)
----------- ------------ -------------
Investment income (loss) -- 135 732
----------- ------------ -------------
Other (income) expense
Interest expense 2,707 257 --
Interest income (27) (58) --
Other (13) -- --
----------- ------------ -------------
Total other (income) expense 2,667 199 --
----------- ------------ -------------
Income (loss) before income
taxes and minority interest 430 1,930 731
Income tax provision (benefit) 183 772 293
----------- ------------ -------------
Income (loss) before minority
interests 247 1,158 438
Minority interests -- 82 --
----------- ------------ -------------
Net income (loss) $ 247 $ 1,240 $ 438
=========== ============ =============
Net income (loss) per share,
basic $ 0.02 $ 0.12 $ 0.04
=========== ============ =============
Net income (loss) per share,
diluted $ 0.02 $ 0.11 $ 0.04
=========== ============ =============
EBITDA Calculation: (1)
Net income (loss) $ 247 $ 1,240 $ 438
Interest expense, net 2,680 65 233
Income tax provision
(benefit) 183 826 162
Depreciation and
amortization 6,857 523 999
----------- ------------ -------------
EBITDA $ 9,967 $ 2,654 $ 1,832
=========== ============ =============
Land
Development Other Total
----------- ------------ -------------
Revenues $124,936 $ -- $ 310,141
Operating expenses 116,016 964 297,095
----------- ------------ -------------
Income (loss) from operations 8,920 (964) 13,046
----------- ------------ -------------
Investment income (loss) 12,734 240 13,841
----------- ------------ -------------
Other (income) expense
Interest expense 6,123 4,127 13,214
Interest income (1,621) (58) (1,764)
Other 158 (2) 143
----------- ------------ -------------
Total other (income) expense 4,660 4,067 11,593
----------- ------------ -------------
Income (loss) before income
taxes and minority interest 16,994 (4,791) 15,294
Income tax provision (benefit) 6,169 (6,073) 1,344
----------- ------------ -------------
Income (loss) before minority
interests 10,825 1,282 13,950
Minority interests (10,464) -- (10,382)
----------- ------------ -------------
Net income (loss) $ 361 $ 1,282 $ 3,568
=========== ============ =============
Net income (loss) per share,
basic $ 0.04 $ 0.12 $ 0.34
=========== ============ =============
Net income (loss) per share,
diluted $ 0.03 $ 0.12 $ 0.32
=========== ============ =============
EBITDA Calculation: (1)
Net income (loss) $ 361 $ 1,282 $ 3,568
Interest expense, net 189 4,069 7,236
Income tax provision
(benefit) 619 (6,073) (4,283)
Depreciation and
amortization 747 (96) 9,030
----------- ------------ -------------
EBITDA $ 1,916 $ (818) $ 15,551
=========== ============ =============
(1) EBITDA represents earnings before interest, income taxes,
depreciation and amortization. Amounts are calculated based on
the Company's ownership percentage of the EBITDA components.
Management believes that EBITDA can be a meaningful measure of
the Company's operating performance, cash generation and ability
to service debt. However, EBITDA should not be considered as an
alternative to either: (i) net earnings (determined in accordance
with GAAP); (ii) operating cash flow (determined in
accordance with GAAP); or (iii) liquidity. There can be no
assurance that the Company's calculation of EBITDA is comparable
to similarly titled items reported by other companies.
Crescent Operating, Ft. Worth
Rick Knight, 817/339-2212
www.crescentoperating.com