Star Multi Care looking to return to profitability by restructuring

By MEREDITH BONNER

HHBR Editor

Star Multi Care (Huntington Station, NY) has completed a restructuring that it hopes will return the troubled company to profitability. But it is not ruling out other options for relief, including a sale or merger of the company or taking the company private.

Star CEO Stephen Sternbach told HHBR that he is looking at various options for the company, not ruling out anything.

"We are in active discussions with several players in the industry," he said, adding that he hopes to "put some transaction together within the next six to nine months." Sternbach gave no details about the interested parties or what types of deals are being discussed.

Star has recently scaled down its operations in some areas, going from a $57 million company to a $42 million company. Star also has dropped its Medicare operations, which Sternbach said were not making any money for the company. Medicare operations accounted for 15% of the company’s revenues.

"We looked at particular businesses and eliminated businesses that were below profit margins," said Sternbach. Medicare operations were dropped in Florida first, then all operations were eliminated. In Syracuse, NY, Sternbach said, some operations were eliminated because of low profit margins.

"The restructuring was to right size the company," Sternbach told HHBR. "We wanted to consolidate branches to form larger branches to gain profitability again. Now we are right sized, and we will now take a company that is right sized and has good profit margins, and start new to make it a company that has good business books and maintains profitability.

"We have made projections that we will be profitable this year," he added. "We have told the public we are going to be and we will be."

Star’s FY99 revenues were $47.1 million, compared to FY98 revenues of $49.3 million. The company posted a net loss in FY99 of $1.6 million, 30 cents per share, compared to an FY98 net loss of $4.2 million, 84 cents per share.

In mid-September, Star was told by Nasdaq that it no longer met certain criteria for continued listing on its National Market System. Star, at that time, had fallen below the $5 million minimum market value of its public float necessary for continued listing.

Star’s home health services include both skilled and unskilled nursing, and respiratory therapy. Operations are in five states: Florida, New Jersey, New York, Ohio, and Pennsylvania.