NovaCare Announces Restructuring Plan

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NovaCare Announces Restructuring Plan

August 16, 1999 8:19 AM EDT

KING OF PRUSSIA, Pa., Aug. 16 /PRNewswire/ -- NovaCare, Inc. (NYSE: NOV), a

leading national provider of physical rehabilitation, occupational health

and employee services, announced today that its Board of Directors has

approved a restructuring plan, which contemplates the sale of NovaCare's

interest in NovaCare Employee Services, Inc. (Nasdaq: NCES) and the sale of

its outpatient physical rehabilitation and occupational health business

(PROH). Under the restructuring plan, the company may reinvest the net

proceeds from any divestiture in a new business or businesses; however such

reinvestment would be subject to shareholder approval. If the company is

unable, or chooses not, to reinvest in a new business, the plan authorizes

the Board to liquidate the company through a distribution to shareholders

on or after December 31, 2000, unless the Board chooses to liquidate at an

earlier date. The plan allows the Board to seek, at any time, debt

refinancing as an alternative to the sale of one or both NCES and PROH.

" The restructuring plan was the result of careful consideration of the

options available to us at this time, " said E. , chief

executive officer. " The malaise in the long-term care services industry

following implementation of the Balanced Budget Act of 1997 totally

eliminated NovaCare's cash flow derived from that business, seriously

weakening our capital structure. Nevertheless, we remain committed to

repaying the $175 million of subordinated convertible debentures maturing

on January 15, 2000, while maximizing shareholder returns. After exiting

the long-term care services business, selling our orthotics and prosthetics

business for an attractive price, substantially improving the cash flow

from PROH, and entirely paying down our bank debt, the company remains

highly leveraged due to the outstanding subordinated debt. While we believe

that cash flow from remaining operations is sufficient to refinance the

maturing debentures, the business would be too highly leveraged to pursue

an aggressive growth strategy. "

The restructuring plan requires shareholder approval. Proxy materials are

being mailed to shareholders of record at the close of business on July 30,

1999 for a Special Meeting of Shareholders to be held September 21, 1999.

The proxy asks shareholders to authorize: (1) the sale of PROH, (2) the

sale of the company's interest in NCES, and (3) the plan of restructuring.

If the Board ultimately decides to invest the proceeds from these

transactions in a new business, shareholder approval will be sought through

a subsequent proxy.

The company will provide supplemental information to shareholders in the

event the company enters into a definitive agreement prior to the Special

Meeting of Shareholders for either the sale of PROH or the company's

interest in NCES.

NovaCare, Inc. is the nation's second largest provider of outpatient

physical rehabilitation and occupational health services. Its subsidiary,

NovaCare Employee Services Inc., is a leading national professional

employer organization, administering the full array of human resource

functions, including the management of health care benefits and workers'

compensation, for small and medium-sized businesses.

Cautionary Statement

Except for historical information, matters discussed above including, but

not limited to, statements concerning future growth, are forward-looking

statements that are based on management's estimates, assumptions and

projections. Important factors that could cause results to differ

materially from those expected by management include reimbursement system

changes, the productivity of clinicians, pricing of payer contracts,

management retention and development, management's success in introducing

new products and lines of business, the ability of the Company, its

customers and suppliers to complete assessment, testing and remediation of

Year 2000 issues, the ability of the Company to improve its cash flow from

operations, the ability to complete a sale of the outpatient physical

rehabilitation and occupational health business, adverse Internal Revenue

Service rulings with respect to the employer status of employee services

businesses and the Company's ability to implement the employee services

business model. SOURCE NovaCare, Inc.

© PR Newswire. All rights reserved.

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NovaCare Inc to sell assets, may liquidate

August 16, 1999 10:22 AM EDT

KING OF PRUSSIA, Pa., Aug 16 (Reuters) - NovaCare Inc., a provider of

physical rehabilitation, occupational health and employee services, said

Monday that it plans to sell assets and then either reinvest the proceeds

into new businesses or liquidate the company.

The company said that the contemplated asset sale and other actions are

part of a restructuring plan that requires shareholder approval.

NovaCare Inc. said that it plans to sell its interest in NovaCare Employee

Services Inc. (Nasdaq: NCES) and sell its its outpatient physical

rehabilitation and occupational health business (PROH).

The company may reinvest the net proceeds from any divestiture in a new

business or businesses, with such reinvestment subject to shareholder

approval.

NovaCare said that if it is unable, or chooses not, to reinvest in a new

business, the plan authorizes the board of directors to liquidate the

company through a distribution to shareholders on or after December 31,

2000, unless the board chooses to liquidate at an earlier date.

The plan allows the board to seek, at any time, debt refinancing as an

alternative to the sale of the units.

" The malaise in the long-term care services industry following

implementation of the Balanced Budget Act of 1997 totally eliminated

NovaCare's cash flow derived from that business, seriously weakening our

capital structure, " said , chief executive officer, in a

statement.

The company said it remains committed to repaying the $175 million of

subordinated convertible debentures maturing on January 15, 2000.

" After exiting the long-term care services business, selling our orthotics

and prosthetics business for an attractive price, substantially improving

the cash flow from PROH, and entirely paying down our bank debt, the

company remains highly leveraged due to the outstanding subordinated debt, "

continued.

" While we believe that cash flow from remaining operations is sufficient to

refinance the maturing debentures, the business would be too highly

leveraged to pursue an aggressive growth strategy, " he said.

NovaCare Inc. common closed Friday at 1-5/16.

REUTERS

R. Kovacek, MSA, PT

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