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Subject: Companies In The News
Date: Tue, 24 Nov 92 12:40:58 EST
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11/24/92


TITLE Companies In The News Living Centers Of America Thriving As
Independent Firm John A. Jones After going public early this
year, Living Centers of America Inc. last week reported a solid
gain in earnings for its first fiscal year as an independent
firm.  Living Centers, based in Houston, was a subsidiary of ARA
Group Inc. until last February, when it split off as a separate
company.


Investor's Business Daily, Medical - Nursing Homes ranks fourth,
based on six-month stock-price performance with added weight
given to recent months. In this series, leading companies within
the group are reviewed.  The fourth-largest provider of long-term
health care in the U.S., the company operates 216 centers in nine
southern and western states. They include 158 long-term nursing
homes for elderly and infirm patients, and 58 centers to care for
developmentally disabled people.  The centers are licensed for a
total of 19,431 beds, in Texas, Colorado, Florida, Oklahoma,
Louisiana, Nebraska, Wyoming, Arizona and Mississippi.

Stake In Abbey Pharmaceutical

Living Centers also owns 49% of Abbey Pharmaceutical Services
Inc., which provides pharmacy and infusion therapy services and
distributes specialized patient-care products.  Chairman and
Chief Executive Edward L. Kuntz has headed the company since De-
cember 1991. He joined Living Centers as executive vice president
in 1985 after serving as assistant general counsel at ARA Ser-
vices since 1978.  Earnings for the fiscal fourth quarter ended
Sept. 30 rose 63% to 31 cents a share from 19 cents a year ear-
lier on a pro forma basis. Net income was up 59% to $2.88 million
from $1.81 million. Revenue rose 18% to $94.9 million from $80.5
million.  For the full fiscal year, earnings rose 45% to $1.16 a
share from 80 cents the year before. Net income was up 44% to
foto

$10.9 million from $7.58 million. Revenue grew 14% to $349 mil-
lion from $306 million.  Kuntz attributed the year's growth to
increasing occupancy of the centers, effective controls on labor,
operating costs and overhead, and reduced interest expense. Aver-
age occupancy, adjusted for operations the company divested, rose
to 82.1% from 80.9% in 1991.  Living Centers sold its Midwest
operations late last year.  "We have seen strong census growth
across all of our markets," Kuntz said. "We believe this is due
to strengthened facility-level marketing efforts and favorable
demographic trends." He said the company used internal cash to
prepay the next four principal payments on its major bank debt,
eliminating its current obligation.  "The company's strong cash
position has allowed us to reduce our debt to capitalization ra-
tio from 53% to 42% since becoming a public company," Kuntz said.
"We are confident that our financial strength will allow us to
take full advantage of potential growth opportunities."

Kuntz told Investor's Business Daily the company's centers are
closely oriented to their communities, and indicated the company
will continue to expand in the states it operates in now.

"To be successful in this business, you need to geographically
concentrate your efforts in one area," he said.  "Our general
plans are to acquire 3% to 5% new beds every year, or 600 to
1,000 beds. We're pretty much on target to do that in the first
year of going public." Kuntz said the company just cleared the
purchase of a 235-bed facility in Oklahoma City and the lease of
a center in Texas, with plans to develop another one in Texas and
expand three or four of its current facilities.

Two Kinds Of Long-Term Patients

He said there are similarities in the management of nursing homes
and homes for the developmentally disabled.

"We view ourselves as a long-term care company for both geriatric
and mentally retarded patients," he said.  Kuntz said reimburse-
ments for Medicaid patients, who still make up about two-thirds
of the centers' occupants, have grown somewhat to cover increased
costs. He said the company hopes to increase its share of Medi-
care and other insured patients, now 8% of the census. The
remaining 25% are private-pay patients.

"Operationally, they're right on track, if not better," said John
McHugh, an analyst at Kemper Securities Group Inc. in Chicago.
"We changed our investment rating to 'hold' from 'buy' simply be-
cause of price appreciation."

McHugh said the business is growing because of an aging popula-
tion and state limits on new construction, which limit the supply
of nursing-home beds.  "There's also a fundamental switch of
business out of the acute- care (hospital) setting and into suba-
cute units in long-term care centers," he said. "Living Centers'
Medicare and ancillary business is growing very rapidly" with the
addition of specialized medical services at the centers.  Wednes-
day: Grancare Inc.

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