HOUSTON, Nov. 5 /PRNewswire/ -- US Oncology, Inc. ("US Oncology" or "the
Company"), one of the nation's largest cancer care services companies,
reported revenue of $901.5 million, Adjusted EBITDA of $62.1 million, EBITDA
of $54.3 million, net loss of $0.9 million and operating cash flow of $62.5
million for the three months ended September 30, 2009.
Third Quarter Operating Results
-- Adjusted EBITDA for the third quarter of 2009 increased to $62.1
million
from $54.8 million for the same period in 2008 due primarily to growth
in our network of physicians, increases in patient volumes in medical
oncology, radiation and diagnostics, combined with improved
performance
in our Informatics and patient assistance services groups.
-- During the third quarter of 2009, total revenue increased by 9.7
percent
compared to the same period in 2008 as patient volumes and our network
of physicians continues to expand. At September 30, 2009, 40
additional
physicians were affiliated under Comprehensive Strategic Alliance
("CSA") agreements to provide comprehensive practice management
services
as compared to the same date in 2008. Also, during the third quarter
of
2009, 48 net physicians joined under Targeted Physician Services
("TPS")
relationships, which include one or more of our Oncology
Pharmaceutical
Services ("OPS"), Research, Innovent Oncology or iKnowMed offerings.
Currently, we have a development pipeline of 220 physicians, the
largest
pipeline in our history. As of September 30, 2009, there were 14
physicians with signed agreements to join our network within the next
90
to 120 days and one integrated cancer center under construction
expected
to be operational before the end of the current year. Since the end
of
the third quarter of 2008, total physician growth was 6.8 percent.
Chairman and Chief Executive Officer Bruce Broussard stated: "We continue to
grow our network and patient volumes in all segments. The growth is greatly
attributable to the recruitment of physicians, branding at the local level,
combined with continued growth in our local sales force. This is a testimony
to the strong benefits of the US Oncology network and the community cancer
care environment.
We are proud of our operational progression, however, we feel we have further
opportunities in many of our programs.
In addition to our practice-based growth, we are experiencing improvement in
our healthcare informatics initiatives. Healthcare informatics sales
increased $1.4 million to $9.8 million in the current year-to-date period, an
increase of 17 percent from the same period in the prior year. In addition,
during the quarter we launched our physician portal, which has early promising
signs of success. During the third quarter, we completed a major upgrade of
iKnowMed, providing increased functionality combined with a more robust
database platform. Currently, iKnowMed has over 850,000 patient charts, 13.5
million visits and supports over 900 physicians across the nation. In
addition, iKnowMed is the central tool in managing our Pathways, Research and
Healthcare Informatics.
We remain excited about the future of US Oncology. We recognize reimbursement
pressures will continue, however, long-term healthcare policies will reward
national organizations focused on improving the effectiveness and efficiency
of patient care through advanced information technology and an integrated care
management model."
Results of Operations
The Company operates and manages its business through four operating segments.
The table below compares the results of the third quarter of 2009 to the
results of the corresponding period of the prior year and the preceding
quarter (dollars in millions).
Q3 Q3 % Q2 %
2009 2008 Change 2009 Change
---- ---- ------ ---- ------
Revenue
Medical oncology
services $610.3 $557.4 9.5 $605.6 0.8
Cancer center
services 99.5 92.0 8.2 97.1 2.5
Pharmaceutical
services 645.4 634.0 1.8 624.2 3.4
Research and
other 17.2 14.5 18.6 18.4 (6.5)
Eliminations(1) (470.9) (476.2) 1.1 (463.7) (1.6)
------ ------ ------
Total $901.5 $821.7 9.7 $881.6 2.3
====== ====== ======
Operating income
(loss) (2)
Medical oncology
services $19.1 $16.9 13.0 $17.2 11.0
Cancer center
services 24.7 21.6 14.4 25.0 (1.2)
Pharmaceutical
services 24.9 24.5 1.6 24.9 -
Research and
other 0.1 (1.3) nm (5) 1.3 (92.3)
Corporate
costs(3) (34.3) (33.1) (3.6) (31.2) (9.9)
Impairment and
restructuring
charges(4) (4.1) (0.3) nm (5) (0.4) nm (5)
---- ---- ----
Total $30.4 $28.3 7.4 $36.8 (17.4)
===== ===== =====
EBITDA (2)
Medical oncology
services $19.1 $16.9 13.0 $17.2 11.0
Cancer center
services 35.4 31.1 13.8 34.6 2.3
Pharmaceutical
services 25.4 25.5 (0.4) 25.4 ---
Research and
other 0.2 (1.3) nm (5) 1.4 (85.7)
Corporate
costs(3) (18.0) (17.4) (3.4) (15.9) (13.2)
Loss on early
extinguishment
of debt(4) (3.7) - nm (5) (22.4) 83.5
Impairment and
restructuring
charges(4) (4.1) (0.3) nm (5) (0.4) nm (5)
---- ---- ----
Total $54.3 $54.5 (0.4) $39.9 36.1
===== ===== =====
Adjusted
EBITDA(4) $62.1 $54.8 13.3 $62.7 (1.0)
Net income
(loss)
attributable to
US Oncology,
Inc. $(0.9) $3.9 nm (5) $(7.6) 88.2
Operating cash
flow $62.5 $35.1 78.1 $42.5 47.1
(1) Eliminations represent the sale of pharmaceuticals from our
distribution center (pharmaceutical services segment) to our
practices affiliated under comprehensive service agreements
(medical oncology segment).
(2) Operating income (loss) differs from segment EBITDA by the amount
of depreciation and amortization attributed to the segment results.
(3) Corporate costs relate primarily to general and administrative
expenses in support of our network.
(4) Loss on early extinguishment of debt and impairment and restructuring
charges are excluded from Adjusted EBITDA.
(5) Not meaningful.
Medical Oncology Services
During the third quarter of 2009, medical oncology services revenue was $610.3
million, an increase of $52.9 million, or 9.5 percent, from the third quarter
of 2008 which reflects higher medical oncology visits due primarily to
physician additions, increased productivity and an increase in other services.
Revenue growth was partially offset by lower utilization of ESAs by
affiliated physicians. EBITDA increased to $19.1 million from $16.9 million,
or 13.0 percent, primarily due to earnings associated with revenue growth and
margin increases in the current period from the conversion of a particular
chemotherapy drug to generic status.
Medical oncology services revenue increased by $4.7 million, or 0.8 percent,
and EBITDA increased by $1.9 million from the second quarter of 2009 primarily
due to physician additions and the impact of the continued shift of certain
drugs to generic alternatives.
We continue to experience a shift of certain branded single source drugs to
generic status. For each newly generic drug, earnings typically temporarily
increase because drug cost declines significantly, while reimbursement remains
at the branded price for a period of months. However, after reimbursement
adjusts, earnings with respect to a generic drug are typically significantly
lower than the earnings from a branded pharmaceutical. Although use of
generic drugs ultimately results in lower earnings, we support the conversion
to generic products because of our dedication to cost-effective care.
Cancer Center Services
Cancer center services revenue in the third quarter of 2009 was $99.5 million,
an increase of $7.5 million, or 8.2 percent, from the third quarter of 2008.
EBITDA was $35.4 million in the third quarter of 2009, an increase of $4.3
million, or 13.8 percent, from the third quarter of 2008. These increases
reflect higher radiation treatment and diagnostic scan volumes due primarily
to additional radiation oncologists affiliated under comprehensive service
agreements, a continued shift toward advanced targeted radiation therapies
that are reimbursed at higher rates and additional investments in diagnostic
and radiation equipment.
Cancer center services revenue increased $2.4 million, or 2.5 percent, and
EBITDA increased $0.8 million, or 2.3 percent, from the second quarter of 2009
which reflects improved reimbursement primarily due to a service mix increase
in advanced targeted radiation therapies as discussed above.
Pharmaceutical Services
Pharmaceutical services revenue in the third quarter of 2009 was $645.4
million, an increase of $11.4 million, or 1.8 percent, as compared to the
third quarter of 2008. The revenue increase is primarily due to an increase
in the number of physicians affiliated under OPS agreements from the prior
year. Pharmaceutical services EBITDA was $25.4 million for the third quarter
of 2009 and $25.5 million for the third quarter of 2008 as the impact of
increased EBITDA from our Healthcare Informatics and AccessMed services was
offset by reduced margins on fees under OPS agreements.
Pharmaceutical services revenue in the third quarter of 2009 increased $21.2
million, or 3.4 percent, as compared to the second quarter of 2009. This
increase reflects higher pharmaceutical volumes associated with our network of
affiliated physicians. EBITDA of $25.4 million remained consistent with the
preceding quarter.
Research and Other Services
Research and other services revenue in the third quarter of 2009 was $17.2
million, an increase of $2.7 million, or 18.6 percent, compared to the third
quarter of 2008. The revenue increase is primarily due to an increase in
blood and marrow transplant cases at some of our CSA physicians' practices and
reduced accruals for amounts payable to physicians for research activities
under new incentive programs. The new incentives reflect our strategy to
expand the existing research network, launch a contract research organization,
and create aligned incentives with participating physicians that encourage
long-term value creation. Because the new incentives focus on long-term
growth, accruals for amounts due to researchers for third quarter of 2009
activities were lower than in the prior year. In the third quarter of 2009,
EBITDA from research and other services was $0.2 million, an increase of $1.5
million from the third quarter of 2008. Partially offsetting the revenue
increase, the third quarter of 2009 reflects higher start up costs for new
service offerings such as Innovent Oncology.
Research and other services revenue and EBITDA in the third quarter of 2009
decreased $1.2 million, from the second quarter of 2009 primarily due to the
timing of completion of certain research patient cycles, and
quarter-to-quarter fluctuations related to investments in new businesses that
are classified within this segment.
Corporate Costs
Corporate costs, which represent general and administrative expenses excluding
stock-based compensation, were $18.0 million in the third quarter of 2009
versus $17.4 million in the third quarter of 2008. The increase from prior
year and as compared to the second quarter of 2009, is due primarily to
consulting fees related to accelerating the Company's growth strategies. These
fees were partially offset by continued focus on cost management efforts which
were implemented earlier in the year.
Organizational Changes
During the third quarter of 2009, the Company's Executive Chairman retired and
Bruce Broussard, the Company's Chief Executive Officer, was elevated to
Chairman and Chief Executive Officer. In addition, Grant Bogle was promoted
to Executive Vice President of the Integrated Solutions Group and Dr. Roy
Beveridge assumed the role of Executive Vice President and Medical Director.
Also, two new directors, Yon Jorden and Todd Vannucci, were elected to the
Company's Board of Directors. Ms. Jorden will also serve on the Company's
Audit Committee.
The Company incurred a restructuring charge of $4.1 million primarily related
to benefits payable as a result of the retirement of its Executive Chairman in
the third quarter of 2009.
In connection with the Company's ongoing evaluation of its growth strategies,
the Company has determined it will exit the Oncology Reimbursement Solutions
business which will no longer be available as a separate service offering. As
a result, a charge of approximately $3 million is expected to be incurred
during the fourth quarter of 2009.
Loss on Early Extinguishment of Debt
In August 2009, we entered into a credit agreement for a $120 million senior
secured revolving credit facility which matures August 2012. This senior
secured revolving credit facility replaced the revolving portion of the senior
secured credit facility that was scheduled to mature in August 2010. In
connection with the termination of the revolving portion of the senior secured
credit facility, the Company recognized a loss on early extinguishment of debt
of $3.7 million related to the write-off of unamortized debt issuance costs
and for transaction costs associated with terminating the facility. This
compares to a loss on early extinguishment of debt of $22.4 million in the
second quarter of 2009 associated with the refinancing transaction in June
which replaced our $436.7 million senior secured term loan facility and our
$300 million 9.0% senior notes with $775 million senior secured notes due in
2017.
Net Income (Loss)
Net loss for the third quarter of 2009 was $0.9 million compared to net income
of $3.9 million in the third quarter of 2008 and a net loss of $7.6 million in
the second quarter of 2009. Compared to the second quarter of 2009, the net
loss decreased primarily because the loss on early extinguishment of debt
associated with the refinancing transaction in June was partially offset by
higher interest expense. The decrease from the third quarter of 2008 is
primarily due to the higher interest expense related to the refinanced notes
and loss on early extinguishment of debt on the new revolving credit facility.
Cash Flow
Cash from operations in the third quarter of 2009 was $62.5 million, compared
to $35.1 million and $42.5 million generated from operations for the third
quarter of 2008 and the second quarter of 2009, respectively. The $27.4
million increase in operating cash flow from the third quarter of 2008
reflects increased collections due to revenue growth and lower receivable days
outstanding, as well as an $8.9 million income tax refund received in the
current year. The $20.0 million increase from the second quarter of 2009
reflects the $8.9 million income tax refund and lower payments due to timing
of annual physician bonuses earned on their efficient use of capital.
As of November 4, 2009, the Company had approximately $160 million of cash and
investments, and availability under its revolving credit facility of $89.6
million.
Contingencies and Risks
On July 30, 2008, the United States Food and Drug Administration ("FDA")
published a final new label for Erythropoiesis-Stimulating Agents ("ESAs")
drugs Aranesp and Procrit. This action was taken contemporaneously to the
previous national coverage decision ("NCD") by the Centers for Medicare and
Medicaid Services ("CMS") establishing criteria for reimbursement by Medicare
for the ESA usage issued on July 30, 2007. Unlike the NCD from CMS, the
label indication directs appropriate physician prescribing and applies to all
patients and payers. A proposed Risk Evaluation and Mitigation Strategy
("REMS") for ESAs was filed by ESA manufacturers with the FDA in August, 2008
but is not yet final or publicly available. The REMS is expected to focus on
future ESA prescribing guidelines and may require additional patient
consent/education requirements, medical guides and physician registration
procedures. The length of time required for the FDA to approve the REMS and
for manufacturers to implement the new program is uncertain and it presently
remains under discussion between the manufacturers and the FDA. Once
implemented, the REMS will outline additional, if any, procedural steps that
will be required for qualified physicians to order and prescribe ESAs for
their patients.
We believe it is not possible to estimate the full impact of the REMS (on
EBITDA) as it relates to prescribing patterns, until the REMS is in effect
which is expected to be in late 2009 or early 2010. We believe a possible
impact of the REMS could be further significant reductions in ESA utilization.
On October 30, 2009, CMS announced final changes to policies and payment rates
for services to be furnished under the 2010 physician fee schedule. Under the
provisions, if the Congress fails to act to avert the scheduled 21.2% cut
pursuant to the current Sustainable Growth Rate ("SGR") formula for setting
aggregate Physician Fee Schedule ("PFS") spending, EBITDA could be reduced by
approximately $16 million. We expect that Congress, as in previous years,
will enact legislation to avert a 21.2% SGR reduction. If such legislation is
enacted, we currently estimate the impact to 2010 EBITDA of changes to CMS
policies and payment rates will be approximately $1 million to $2 million,
reflecting lower reductions to radiation and medical oncology and diagnostic
imaging than the proposed changes issued in July which were expected to have
between $5-$10 million impact to 2010 EBITDA, excluding the SGR cut.
As previously disclosed, during the fourth quarter of 2005, we received a
subpoena from the United States Department of Justice's Civil Litigation
Division ("DOJ") requesting a broad range of information about us and our
business, generally in relation to our contracts and relationships with
pharmaceutical manufacturers. Also, as previously disclosed, the Company is
currently involved in litigation with a formerly affiliated practice in
Oklahoma. In addition, as previously disclosed, the Company and an affiliated
practice have received a request for information from the Federal Trade
Commission and a state Attorney General relating to an antitrust investigation
of a recent transaction in which a group of physicians joined the affiliated
practice. Also, as previously disclosed, on July 29, 2009 the Company
received a subpoena from the U.S. Attorney's Office, Eastern District of New
York, seeking documents relating to its contracts and relationships with a
pharmaceutical manufacturer and its business and activities relating to that
manufacturer's products. There were no material developments in these matters
during the third quarter of 2009 or through the date of this release.
Results of US Oncology Holdings, Inc.
The results of US Oncology exclude those of its parent company, US Oncology
Holdings, Inc. ("Holdings"). US Oncology conducts all substantive operations
and, with the exception of nominal administrative expenses and items related
to capitalization, the results of Holdings are substantially identical to
those of US Oncology. Holdings reported EBITDA of $54.1 million, Adjusted
EBITDA of $62.0 million, net loss of $20.3 million and operating cash flow of
$55.8 million for the quarter ended September 30, 2009. The operating results
of US Oncology and Holdings are reconciled below (in millions):
Q3 Q3 Q2
2009 2008 2009
---- ---- ----
US Oncology Net Income (Loss) $(0.9) $3.9 $(7.6)
Less: General and administrative
expense (0.1) (0.1) -
Interest expense (9.6) (10.5) (9.7)
Unrealized loss on swap (7.6) (4.2) (1.7)
Effective tax rate differential (2.1) 5.1 1.6
---- --- ---
Holdings Net Loss $(20.3) $(5.8) $(17.4)
====== ===== ======
Compared to the third quarter of 2008 and the second quarter of 2009, the
unrealized loss on swap which reflects changes in fair value of the Holdings
interest rate swap, increased by $3.4 million and $5.9 million, respectively.
Changes in the fair value of the interest rate swap are reported currently in
earnings. Although the interest rate swap is not accounted for as a cash flow
hedge, the Company believes the swap, economically, remains a hedge against
the variability of a portion of interest accruing on Holdings' indebtedness.
As of September 30, 2009, the indebtedness issued by US Oncology Holdings,
Inc., amounted to $494.0 million. In September 2009, the Company settled
interest on this indebtedness for the semi-annual interest period ending
September 15, 2009, entirely through the issuance of additional notes and
elected to settle interest due on March 15, 2010 entirely through the issuance
of additional notes.
Equity Restructuring
On October 1, 2009, we completed a conversion of our outstanding Series A and
Series A-1 preferred shares into an additional number of common shares based
upon the preferred share liquidation value and a stated conversion price of
$1.50 per common share. In addition, we amended our management and board of
directors equity incentive plans to allow for additional authorized shares and
awarded a portion of the incrementally authorized shares. As a result of
these transactions, the Series A and Series A-1 preferred shares are no longer
outstanding and the number of outstanding common shares increased from 148.4
million shares to 422.5 million shares.
The Company and Holdings will broadcast their 2009 third quarter financial
results by conference call and simultaneous webcast on November 5, 2009 at
3:00 P.M. Central Time. Additional information will be available in the News
Room on the Company's website, www.usoncology.com, on the day of the earnings
announcement.
US/Canada Dial-in #: (877) 615-1716
Conference ID #: 35009873
Web Cast Link: This link gives participants access to the live and/or archived
event. This URL can be distributed for posting on various websites, or for
inclusion in email notifications.
http://event.meetingstream.com/r.htm?e=169952&s=1&k=565C135921BC68CC6CACAE0ED25CBA0A
The archived replay of the event will be available through the News Room on
the Company's website (www.usoncology.com).
About US Oncology, Inc.
US Oncology, headquartered in The Woodlands, Texas works closely with
physicians, payers, biotechnology, pharmaceutical and medical equipment
manufacturers, to identify and deliver innovative services that enhance
patient access to advanced cancer care. US Oncology supports one of the
nation's foremost cancer treatment and research networks, accelerating the
availability and use of evidence-based medicine and shared best practices.
US Oncology uses its expertise in supporting most aspects of the cancer care
delivery system - from drug development to distribution and outcomes
measurement - enabling the Company to help increase the efficiency and safety
of cancer care. US Oncology is affiliated with 1,310 physicians operating in
493 locations, including 98 radiation oncology facilities in 39 states. For
more information, visit the Company's website, www.usoncology.com.
This news release contains forward-looking statements, including statements
that include the words "believes," "expects," "anticipates," "estimates,"
"intends," "plans," "projects," or similar expressions and statements
regarding our prospects. All statements other than statements of historical
fact included in this news release are forward-looking statements. Although
the Company believes that the expectations reflected in such statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Such expectations are subject to risks and uncertainties,
including the impact of a recession in the U.S. or global economy, the
possibility of healthcare reform in the United States and its impact on cancer
care specifically, the Company's reliance on pharmaceuticals for the majority
of its revenues, the Company's ability to maintain favorable pharmaceutical
pricing and favorable relationships with pharmaceutical manufacturers and
other vendors, concentration of pharmaceutical purchasing and favorable
pricing with a limited number of vendors, prescription drug reimbursement,
such as reimbursement for ESAs, and other reimbursement under Medicare
(including reimbursement for radiation and diagnostic services), reimbursement
for medical services by non-governmental payers and cost-containment efforts
by such payers, including whether such payers adopt coverage guidelines
regarding ESAs or pharmaceutical reimbursement methodologies that are similar
to Medicare coverage, other changes in the manner patient care is reimbursed
or administered, continued migration to generic alternatives for branded
pharmaceuticals, the impact of increasing unemployment (which may result in a
larger population of uninsured and under insured patients), the decisions of
employers to increase the financial responsibility of individuals under health
insurance programs afforded to their employees, the Company's ability to
service its substantial indebtedness and comply with related covenants in debt
agreements, the Company's ability to fund its operations through operating
cash flow or utilization of its credit facility or its ability to obtain
additional financing on acceptable terms, the instability of capital and
credit markets, including the potential that certain financial institutions
may be unable to honor existing financing commitments, the Company's ability
to implement strategic initiatives, the Company's ability to maintain good
relationships with existing practices and expand into new markets and
development of existing markets, modifications to, and renegotiation of,
existing economic arrangements, the Company's ability to complete cancer
centers and PET facilities currently in development and its ability to recover
investments in cancer centers, government regulation, investigation and
enforcement, increases in the cost of providing cancer treatment services, the
operations of the Company's affiliated physician practices, and potential
impairments that could result from declining market valuations. Please refer
to the US Oncology Holdings, Inc. filings with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for the year ended
December 31, 2008, and subsequent filings with the SEC for a more extensive
discussion of factors that could cause actual results to differ materially
from the Company's expectations.
Discussion of Non-GAAP Information
In this release, the Company uses the term "EBITDA" and "Adjusted EBITDA".
EBITDA is earnings before interest, taxes, depreciation and amortization
(including amortization of stock compensation), noncontrolling interest
expense and other income (expense). EBITDA is not calculated in accordance
with accounting principles generally accepted in the United States of America
("GAAP"). Adjusted EBITDA is EBITDA before impairment and restructuring
charges, loss on early extinguishment of debt and other non-cash charges.
These measures are derived from relevant items in the Company's GAAP financial
statements. A reconciliation of Adjusted EBITDA to operating cash flow is
included in this release.
The Company believes EBITDA is useful to investors in evaluating the value of
companies in general, and in evaluating the liquidity of companies with debt
service obligations and their ability to service their indebtedness.
Management uses EBITDA as a key indicator to evaluate liquidity and financial
condition, both with respect to the business as a whole and with respect to
individual sites in the US Oncology network. Adjusted EBITDA is useful to
investors as it eliminates certain amounts that are unusual in nature and not
currently expected to be part of the Company's ongoing operational
performance. The Company's senior secured credit facility also requires that
it comply on a quarterly basis with certain financial covenants that include
Adjusted EBITDA as a financial measure. Management believes that EBITDA and
Adjusted EBITDA are useful to investors, since they provide investors with
additional information that is not directly available in a GAAP presentation.
As a non-GAAP measure, EBITDA and Adjusted EBITDA should not be viewed as
alternatives to the Company's GAAP financial statements, but should be read as
a supplement to, and in conjunction with, the Company's GAAP financial
statements.
US ONCOLOGY, INC.
KEY OPERATING STATISTICS
(unaudited)
Q3 Q3 % Q2 %
2009 2008 Change 2009 Change
---- ---- ------ ---- ------
Physician Summary:
------------------
Medical oncologists 766 754 1.6 751 2.0
Radiation oncologists 164 159 3.1 159 3.1
Other oncologists 85 62 37.1 79 7.6
--- --- ---
Total CSA physicians 1,015 975 4.1 989 2.6
----- --- ---
OPS physicians 295 252 17.1 247 19.4
--- --- ---
Total physicians 1,310 1,227 6.8 1,236 6.0
===== ===== =====
Total physicians signed but
not started at the end of the
period 17 44 (61.4) 84 (79.8)
=== === ===
Daily Operating Statistics:
---------------------------
Medical oncology visits (1) 11,220 10,712 4.7 11,181 0.3
Radiation treatments/
diagnostic scans (2)(4) 3,850 3,687 4.4 3,857 (0.2)
Other Statistics:
-----------------
Radiation oncology
facilities (3)(4) 98 92 6.5 94 4.3
Linear accelerators 124 118 5.1 121 2.5
PET systems 39 36 8.3 38 2.6
New patients enrolled in
research studies during the
period 704 718 (1.9) 740 (4.9)
Accounts receivable days
outstanding 30 33 (9.1) 30 -
Notes to Key Operating Statistics:
(1) Medical oncology visits include information for practices affiliated
under comprehensive service agreements only, and do not include the
results of OPS practices.
(2) Represents technology-based treatments, including IMRT treatments and
diagnostic scans, provided through our integrated cancer centers and
radiation-only facilities at CSA practices.
(3) The third quarter of 2009 includes 81 integrated cancer centers and
17 radiation-only facilities, the second quarter of 2009 includes 79
integrated cancer centers and 15 radiation-only facilities and the
third quarter of 2008 includes 80 integrated cancer centers and 12
radiation-only facilities.
(4) Radiation treatments/diagnostic scans and facilities do not include
cancer centers operated by unconsolidated joint ventures in which the
Company or an affiliated practice has a financial interest.
US ONCOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands)
(unaudited)
Three Months Three Months
Ended Ended
September 30, June 30,
------------- -------
2009 2008 2009
---- ---- ----
Product revenue $608,035 $556,359 $594,572
Service revenue 293,419 265,377 287,075
------- ------- -------
Total revenue 901,454 821,736 881,647
Cost of products 596,208 537,029 582,219
Cost of services:
Operating compensation and
benefits 140,321 131,158 138,146
Other operating costs 84,824 81,310 82,648
Depreciation and amortization 19,090 17,898 17,935
------ ------ ------
Total cost of services 244,235 230,366 238,729
Total cost of products and services 840,443 767,395 820,948
General and administrative expenses 18,792 18,078 16,256
Impairment and restructuring charges 4,117 271 381
Depreciation and amortization 7,700 7,684 7,237
----- ----- -----
871,052 793,428 844,822
Income from operations 30,402 28,308 36,825
Other income (expense):
Interest expense, net (28,016) (22,679) (22,484)
Loss on early extinguishment of
debt (3,672) - (22,353)
Other income (expense) - - 37
--- --- ---
Income (loss) before income taxes (1,286) 5,629 (7,975)
Income tax benefit (provision) 1,332 (1,039) 1,324
----- ----- -----
Net income (loss) 46 4,590 (6,651)
Less: Net income attributable to
noncontrolling interests (912) (715) (944)
--- --- ---
Net income (loss) attributable to
Company $(866) $3,875 $(7,595)
=== ===== =====
US ONCOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands)
(unaudited)
Nine Months Ended
September 30,
-------------
2009 2008
---- ----
Product revenue $1,765,687 $1,656,670
Service revenue 859,975 804,848
------- -------
Total revenue 2,625,662 2,461,518
Cost of products 1,730,012 1,610,641
Cost of services:
Operating compensation and
benefits 416,107 391,432
Other operating costs 248,168 237,544
Depreciation and
amortization 54,590 55,252
------ ------
Total cost of services 718,865 684,228
Total cost of products and
services 2,448,877 2,294,869
General and administrative
expenses 53,179 59,306
Impairment and restructuring
charges 5,907 382,041
Depreciation and amortization 22,470 21,967
------ ------
2,530,433 2,758,183
Income (loss) from operations 95,229 (296,665)
Other income (expense):
Interest expense, net (73,122) (69,313)
Loss on early extinguishment
of debt (26,025) -
Other income 37 1,370
--- -----
Loss before income taxes (3,881) (364,608)
Income tax provision (948) (3,905)
---- ------
Net loss (4,829) (368,513)
Less: Net income
attributable to
noncontrolling interests (2,615) (2,447)
------ ------
Net loss attributable to
Company $(7,444) $(370,960)
======= =========
US ONCOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
September 30,
-------------
2009 2008
---- ----
Cash flows from operating activities:
Net cash provided by operating activities $136,031 $77,315
-------- -------
Cash flows from investing activities:
Acquisition of property and equipment (66,696) (60,037)
Net proceeds from sale of assets - 3,747
Net payments in affiliation transactions (4,393) (41,216)
Investment in unconsolidated
subsidiaries (7,790) (3,486)
Distributions from unconsolidated
subsidiaries 3,509 1,493
----- -----
Net cash used in investing activities (75,370) (99,499)
------- -------
Cash flows from financing activities:
Proceeds from senior secured notes 758,926 -
Proceeds from other indebtedness - 4,000
Net borrowings under revolving facility - 20,000
Net distributions to parent (11,064) (13,004)
Repayment of term loan (436,666) (34,937)
Repayment of senior notes (311,578) -
Repayment of other indebtedness (9,405) (1,293)
Debt financing costs (21,188) (103)
Distributions to noncontrolling
interests (1,627) (2,626)
Contributions from noncontrolling
interests - 466
Contributions of proceeds from exercise
of stock options - 25
--- ---
Net cash used in financing activities (32,602) (27,472)
------- -------
Increase (decrease) in cash and
equivalents 28,059 (49,656)
Cash and equivalents:
Beginning of period 104,476 149,256
------- -------
End of period $132,535 $99,600
======== =======
US ONCOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)
September 30, December 31,
2009 2008
---- ----
ASSETS
Current assets:
Cash and equivalents $132,535 $104,476
Accounts receivable 369,943 364,336
Other receivables 28,772 25,707
Prepaid expenses and other
current assets 24,385 20,682
Inventories 120,576 130,967
Deferred income taxes 5,424 4,373
Due from affiliates 29,014 66,428
------ ------
Total current assets 710,649 716,969
Property and equipment, net 413,376 410,248
Service agreements, net 261,781 273,646
Goodwill 377,270 377,270
Other assets 73,144 64,720
------ ------
Total assets $1,836,220 $1,842,853
========== ==========
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term
indebtedness $11,310 $10,677
Accounts payable 291,174 266,190
Due to affiliates 112,674 136,913
Accrued compensation cost 43,936 40,776
Accrued interest payable 14,547 26,266
Income taxes payable 2,047 2,727
Other accrued liabilities 36,592 34,804
------ ------
Total current liabilities 512,280 518,353
Deferred revenue 7,509 6,894
Deferred income taxes 36,529 35,139
Long-term indebtedness 1,075,644 1,061,133
Other long-term liabilities 11,220 12,347
------ ------
Total liabilities 1,643,182 1,633,866
Equity:
Common stock, $0.01 par value,
100 shares authorized,
issued and outstanding 1 1
Additional paid-in-capital 551,275 560,768
Retained deficit (372,798) (365,354)
-------- --------
Total Company stockholders'
equity 178,478 195,415
Noncontrolling interests 14,560 13,572
------ ------
Total equity 193,038 208,987
------- -------
Total liabilities and equity $1,836,220 $1,842,853
========== ==========
US ONCOLOGY, INC.
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA
(in thousands)
(unaudited)
Nine
Three Months Ended Months Ended
------------------ ------------
Sept. Sept. June Sept. Sept.
30, 30, 30, 30, 30,
2009 2008 2009 2009 2008
------ ------ ----- ------ -----
Net income (loss) $46 $4,590 $(6,651) $(4,829) $(368,513)
Add back:
Interest expense,
net 28,016 22,679 22,484 73,122 69,313
Income tax
provision
(benefit) (1,332) 1,039 (1,324) 948 3,905
Depreciation and
amortization 26,790 25,581 25,172 77,060 77,218
Amortization of
stock compensation 735 649 268 1,571 1,769
Other (income)
expense - - (37) (37) (1,370)
--- --- --- --- ------
EBITDA 54,255 54,538 39,912 147,835 (217,678)
Plus:
Loss on early
extinguishment of
debt 3,672 - 22,353 26,025 -
Impairment and
restructuring
charges 4,117 271 381 5,907 382,041
Other non-cash
charges 98 - 65 163 -
--- --- --- --- ---
Adjusted EBITDA 62,142 54,809 62,711 179,930 164,363
Changes in assets
and liabilities 28,735 6,430 4,301 29,832 (9,383)
Deferred income tax
provision
(benefit) (1,717) (2,431) (3,324) 339 (4,447)
Interest expense,
net (28,016) (22,679) (22,484) (73,122) (69,313)
Income tax
(benefit)
provision 1,332 (1,039) 1,324 (948) (3,905)
----- ------ ----- ---- ------
Net cash provided
by operating
activities $62,476 $35,090 $42,528 $136,031 $77,315
======= ======= ======= ======== =======
SOURCE US Oncology, Inc.
Michael A. Sicuro, Chief Financial Officer of US Oncology, Inc.,
+1-281-863-6426
