USON US Oncology (MM)

US Oncology Reports Financial Results for Second Quarter 2004 HOUSTON, July 23 /PRNewswire-FirstCall/ -- US Oncology, Inc. (NASDAQ:USON) today reported results for the 2004 second quarter. The company recorded quarter-over-quarter and year-over-year increases in revenue, net income and earnings per share for the second quarter 2004. The table below provides a review of second quarter results, as well as the results for the six months ended 2004 along with applicable comparisons: Q2 2004 Q2 2003 % Change Q1 2004 % Change Revenue $ 565.2 $ 491.4 15.0 % $ 525.0 7.7 % Net income $ 24.5 $ 17.7 39.0 % $ 20.1 22.0 % EPS - diluted $ 0.27 $ 0.19 42.1 % $ 0.23 17.4 % EBITDA(1) $ 64.2 $ 52.4 22.5 % $ 56.1 14.5 % Six Months Ended June 30, 2004 2003 % Change Revenue $1,090.2 $ 938.6 16.2% Net income $ 44.7 $33.9 31.7% EPS - diluted $ 0.50 $0.36 38.9% EBITDA(1) $ 120.2 $ 102.5 17.2% (1) See Reconciliation of Selected Financial Data for calculations US Oncology highlights for the second quarter of 2004 are detailed below: -- US Oncology's EBITDA(1) for the second quarter was $64.2 million, compared to $56.1 million for the first quarter of 2004 and $52.4 million in the second quarter of 2003. -- EBITDA(1) for the six months ended June 30, 2004 was $120.2 million, compared to $102.5 million for the six months ended June 30, 2003. -- The company's accounts receivable days outstanding were 44 at the end of the second quarter, compared to 47 at the end of the first quarter 2004 and 43 at the end of the second quarter of 2003. -- Of US Oncology's revenue for the six months ended June 30, 2004, 16.3 percent was generated by practices on the net revenue model. Subsequent to June 30, 2004, the company converted two net revenue practices with a total of 35 doctors to the earnings model. For the six months ended June 30, 2004 these two practices represented 4.6 percent of the company's revenue. -- The company generated operating cash flow for the six months ended June 30, 2004 of $130.1 million compared to $116.6 million for the six months ended June 30, 2003. The increase in operating cash flow is due to a decrease in accounts receivable days outstanding, and an increase in accounts payable days outstanding resulting from renegotiated payment terms with certain vendors. Also contributing to this increase is a decrease in tax payments made during 2004, in anticipation of the fact that the company will be entitled to certain tax benefits upon closing of the merger transaction discussed below. As of July 19, 2004, US Oncology had approximately $276.0 million in cash and equivalents. (1) See Reconciliation of Selected Financial Data for calculations. Update on Merger Transaction The company will hold a special stockholders' meeting on August 20, 2004, to consider its previously announced merger transaction and related matters. The merger is subject to the approval by holders of a majority of the outstanding shares of US Oncology Common Stock and approval by holders of a majority of the outstanding shares of US Oncology's Common Stock not held by US Oncology Holdings, Inc., Oiler Acquisition Corp., Welsh Carson, Anderson & Stowe IX, L.P., its co-investors or members of US Oncology's board or management that are expected to participate in the merger. All stockholders of record as of July 16, 2004, will be entitled to vote at the special meeting. The company filed its definitive proxy statement with the SEC on July 21, 2004, and mailed the proxy to stockholders on July 22, 2004. The merger remains subject to a number of other conditions, including consummation of financing transactions necessary to fund the merger consideration. US Oncology Holdings, Inc. intends to complete the financing arrangements on or prior to the date of the special meeting of stockholders. As previously disclosed, the company has received tenders of notes and related consents to an indenture amendment from holders of more than a majority of the $175 million outstanding principal amount of its 9 5/8% Senior Subordinated Notes due 2012, which was a condition to the merger. In addition, the company received early termination of the waiting period under the Hart-Scott-Rodino Act. The company has also entered into a settlement agreement with the plaintiffs in the previously disclosed lawsuits relating to the merger and naming the company and each of its directors as defendants. The proposed settlement provides for the settlement or dismissal with prejudice of all of the lawsuits. The proposed settlement of the Delaware lawsuit is subject to final approval by the Delaware Court of Chancery, so any settlement may not be final at the time of the special meeting. If the proposed settlement is ultimately not approved by the Delaware Court of Chancery, the litigation could proceed and the plaintiffs could seek the relief sought in their respective complaints. If the company's stockholders approve the merger at the special meeting and the other conditions to the merger have been satisfied at that time, the company would expect to close the merger promptly after the meeting. Financial Exhibits Exhibits, including key operating statistics, financial statements and a reconciliation of selected financial data are included in this news release. Additional Information and Where to Find It US Oncology has filed with the SEC and mailed to stockholders a definitive proxy statement dated July 20, 2004, for the Special Meeting of Stockholders to be held to vote on the proposed merger with an affiliate of Welsh Carson. US Oncology, Welsh Carson, certain co-investors of Welsh Carson and certain members of US Oncology's board and management also filed with the SEC a Schedule 13e-3 and may file other relevant documents with the SEC concerning the proposed merger. Stockholders are urged to read the definitive proxy statement and Schedule 13e-3 and any other relevant documents filed with the SEC because they contain important information about the proposed merger and the interests of the participants in the solicitation of proxies. You can obtain the documents free of charge at the SEC's Web site at http://www.sec.gov/. In addition, you may obtain copies of documents filed with the SEC by US Oncology free of charge by requesting them in writing from US Oncology at 16825 Northchase Drive, Suite 1300, Houston, Texas 77060, Attention: Investor Relations, by telephone at (832) 601-8766 or by e-mail to . Participants in the Solicitation US Oncology, Welsh Carson and their directors, officers and employees may be deemed to be participants in the solicitation of proxies from the US Oncology stockholders. Information concerning persons who may be deemed participants in the solicitation of US Oncology stockholders is set forth in US Oncology's proxy statement for its 2003 annual meeting of stockholders, the Schedule 13D, as amended, filed with the SEC by Welsh Carson, certain co- investors of Welsh Carson and certain members of US Oncology's board and management the definitive proxy statement for the special meeting of stockholders filed with the SEC on July 21, 2004, and the Schedule 13e-3, as amended, previously filed with the SEC. About US Oncology, Inc. US Oncology, headquartered in Houston, Texas, is America's premier cancer care services company. The company provides comprehensive services to a network of affiliated practices comprising more than 900 affiliated physicians in over 490 sites, including 81 integrated cancer centers, in 32 states. US Oncology's mission is to enhance access to high-quality cancer care in America. The company's strategies to accomplish this mission include: (a) helping practices lower their pharmaceutical and administration costs, (b) providing the capital and expertise to expand and diversify into radiation oncology and diagnostic radiology, (c) providing sophisticated management services to enhance profitability, and (d) providing access to and managing clinical research trials. In addition, the company assists practices in negotiations with private payors, in implementing programs to enhance efficiencies with respect to drugs and in expanding service offerings such as positron emission tomography and intensity modulated radiation therapy. 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 possibility that the merger may not occur due to the failure of the parties to satisfy the conditions in the merger agreement, such as the inability of US Oncology Holdings, Inc. to obtain financing, the failure of US Oncology to obtain stockholder approval or the occurrence of events that would have a material adverse effect on US Oncology as described in the merger agreement. Additional risks and uncertainties relating to the Company's operations include recent legislation relating to prescription drug reimbursement under Medicare, including the way in which such legislation is implemented with respect to modifications in practice expense reimbursement, calculation of average sales price, implementation of third-party vendor programs and other matters, the impact of the recent legislation on other aspects of our business (such as private payor reimbursement, the Company's ability to obtain favorable pharmaceutical pricing, the ability of practices to continue offering chemotherapy services to Medicare patients or maintaining existing practice sites, physician response to the legislation, including with respect to retirement or choice of practice setting, development activities, and the possibility of additional impairments of assets, including management services agreements), reimbursement for pharmaceutical products generally, our ability to maintain good relationships with existing practices, expansion into new markets and development of existing markets, our ability to complete cancer centers and PET facilities currently in development, our ability to recover the costs of our investments in cancer centers, our ability to complete negotiations and enter into agreements with practices currently negotiating with us, reimbursement for health-care services, continued efforts by payors to lower their costs, government regulation and enforcement, continued relationships with pharmaceutical companies and other vendors, changes in cancer therapy or the manner in which care is delivered, drug utilization, increases in the cost of providing cancer treatment services and the operations of the Company's affiliated physician practices. Please refer to the Company's filings with the SEC, including its Annual Report on Form 10- K for 2003, as amended, and subsequent filings, for a more extensive discussion of factors that could cause actual results to differ materially from the Company's expectations. US ONCOLOGY, INC. Exhibit 1 Key Operating Statistics (in millions) (unaudited) Q2 2004 Q2 2003 % Change YTD 2004 YTD 2003 % Change Product revenues $ 355.4 $298.9 18.9% $ 687.9 $ 562.4 22.3% Service revenues 209.8 192.5 9.0% 402.3 376.2 6.9% Total revenues $ 565.2 $491.4 15.0% $ 1,090.2 $ 938.6 16.2% Physician Summary: PPM physicians 805 776 3.7% 805 776 3.7% Service Line physicians 109 60 81.7% 109 60 81.7% Total physicians 914 836 9.3% 914 836 9.3% Medical Oncology/ Hematology: Medical oncologists/ hematologist 756 686 10.2% 756 686 10.2% Medical oncology visits (1) 585,413 609,208 (3.9)% 1,164,121 1,194,894 (2.6)% Other oncologists 36 37 (2.7)% 36 37 (2.7)% Radiation Oncology: Radiation oncologists 122 113 8.0% 122 113 8.0 % Radiation treatments per day 2,597 2,584 0.5% 2,584 2,606 (0.8)% Total cancer centers 81 76 6.6% 81 76 6.6 % Imaging/ Diagnostics: PET installations 1 2 (50.0)% 4 4 0 % Total PET installations 25 19 31.6 % 25 19 31.6 % PET scans 7,023 4,752 47.8 % 13,604 8,963 51.8 % New patients enrolled in research studies 718 951 (24.5)% 1,461 1,856 (21.3)% Days sales outstanding 44 43 2.3 % 44 43 2.3 % (1) Visits only include information for practices affiliated under the practice management model and do not include results of service line practices. US ONCOLOGY, INC. Exhibit 2 Condensed Consolidated Statement of Operations and Comprehensive Income (in thousands, except per share data) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 Product revenues $ 355,454 $298,895 $687,929 $562,426 Service revenues 209,789 192,517 402,310 376,196 Total revenues 565,243 491,412 1,090,239 938,622 Cost of product 332,783 277,153 639,549 520,461 Costs of services: Field compensation and benefits 96,461 88,631 189,154 175,663 Other field costs 55,216 56,872 112,017 108,011 Depreciation and amortization 15,131 12,912 28,957 25,913 Total costs of services 166,808 158,415 330,128 309,587 Total costs of product and services 499,591 435,568 969,677 830,048 General and administrative expense 16,616 16,365 29,300 31,941 Depreciation and amortization 5,205 6,054 10,333 11,866 Income from operations 43,831 33,425 80,929 64,767 Other income (expense): Interest expense, net (4,541) (4,952) (8,923) (10,084) Other income 622 - 622 - Income before income taxes 39,912 28,473 72,628 54,683 Income tax provision (15,366) (10,820) (27,962) (20,780) Net income and comprehensive income $ 24,546 $ 17,653 $ 44,666 $ 33,903 Net income per share - basic $ 0.28 $ 0.19 $ 0.52 $ 0.37 Shares used in per share computation - basic 87,192 91,358 86,590 92,165 Net income per share - diluted $ 0.27 $ 0.19 $ 0.50 $ 0.36 Shares used in per share computation - diluted 90,674 93,017 89,975 93,825 US ONCOLOGY, INC. Exhibit 3 Condensed Consolidated Statement of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2004 2003 Cash flows from operating activities: Net income $44,666 $33,903 Non cash adjustments: Depreciation and amortization 39,290 37,779 Deferred income taxes 4,200 12,222 Undistributed earnings (losses) in joint ventures 32 (900) Non cash compensation expense 48 100 Changes in operating assets and liabilities: 41,870 33,468 Net cash provided by operating activities 130,106 116,572 Cash flows from investing activities: Acquisition of property and equipment (37,853) (39,452) Net cash used by investing activities (37,853) (39,452) Cash flows from financing activities: Repayment of other indebtedness (10,001) (14,728) Cash payment in lieu of stock issuance - (710) Proceeds from exercise of options 18,599 895 Purchase of Treasury Stock (4,247) (40,972) Net cash provided (used) by financing activities 4,351 (55,515) Increase in cash and equivalents 96,604 21,605 Cash and equivalents: Beginning of period 124,514 75,029 End of period $ 221,118 $ 96,634 Interest paid $ 9,775 $ 10,720 Taxes paid $ 575 $ 8,755 Non cash transactions: Delivery of Common Stock in affiliation transactions $ 6,585 $ 6,839 US ONCOLOGY, INC. Exhibit 4 Condensed Consolidated Balance Sheet (in thousands) (unaudited) June 30, 2004 December 31, 2003 ASSETS Current assets: Cash and equivalents $ 221,118 $ 124,514 Accounts receivable 316,582 304,507 Other receivables 61,100 47,738 Prepaids and other current assets 17,507 18,451 Inventories 28,768 7,481 Due from affiliates 40,650 43,629 Total current assets 685,725 546,320 Property and equipment, net 362,391 356,125 Service agreements, net 232,541 239,108 Deferred income taxes 6,715 10,915 Other assets 21,820 22,551 Total assets $ 1,309,192 $ 1,175,019 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term indebtedness $ 74,251 $ 79,748 Accounts payable 201,146 160,628 Due to affiliates 88,299 64,052 Accrued compensation costs 20,965 26,316 Income taxes payable 39,911 19,810 Other accrued liabilities 42,027 41,847 Total current liabilities 466,599 392,401 Deferred revenue 7,290 5,349 Long-term indebtedness 183,908 188,412 Total liabilities 657,797 586,162 Minority interest 10,529 10,497 Stockholders' equity 640,866 578,360 Total liabilities and stockholders' equity $ 1,309,192 $ 1,175,019 US ONCOLOGY, INC. Exhibit 5 Reconciliation of Selected Financial Data (in thousands, except per share data) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 Net Income / EPS Income before income taxes $ 39,912 $ 28,473 $ 72,628 $ 54,683 Tax rate 38.5% 38.0% 38.5% 38.0% Net income $ 24,546 $ 17,653 $ 44,666 $ 33,903 Weighted average shares outstanding - diluted 90,674 93,017 89,975 93,825 EPS $ 0.27 $ 0.19 $ 0.50 $ 0.36 EBITDA Net income $ 24,546 $ 17,653 $ 44,666 $ 33,903 Interest expense, net, and other 3,919 4,952 8,301 10,084 Income tax provision 15,366 10,820 27,962 20,780 Depreciation 16,289 14,744 31,147 29,154 Amortization 4,047 4,222 8,143 8,625 EBITDA $ 64,167 $ 52,391 $ 120,219 $ 102,546 Net Cash provided by Operating Activities Net income $ 24,546 $ 17,653 $ 44,666 $ 33,903 Interest expense, net, and other 3,919 4,952 8,301 10,084 Income taxes 15,366 10,820 27,962 20,780 Depreciation 16,289 14,744 31,147 29,154 Amortization 4,047 4,222 8,143 8,625 EBITDA 64,167 52,391 120,219 102,546 Changes in assets and liabilities 39,333 71,498 41,870 33,468 Undistributed earnings (losses) in joint ventures 138 (949) 32 (900) Non-cash stock compensation expense 23 27 48 100 Deferred income taxes 2,200 10,500 4,200 12,222 Interest expense, net, and other (3,919) (4,952) (8,301) (10,084) Income tax expense (15,366) (10,820) (27,962) (20,780) Net cash provided by operating activities $ 86,576 $ 117,695 $ 130,106 $ 116,572 Discussion of Non-GAAP Information In this release, we use the term "EBITDA". EBITDA is earnings before interest, taxes, depreciation and amortization. We believe EBITDA is useful to investors in evaluating companies, and their liquidity and ability to service their indebtedness. Management uses EBITDA to evaluate the company's liquidity and financial condition, both with respect to the business as a whole and individual sites. EBITDA is not calculated in accordance with generally accepted accounting principles of the United States ("GAAP"). EBITDA is derived from relevant items in our GAAP financials. A reconciliation EBITDA to our income statement is included in this release. Management believes that EBITDA is useful to investors, since it provides investors with additional information that is not directly available in a GAAP presentation. In all events, EBITDA is not intended to be a substitute for GAAP measures, and investors are advised to review such non-GAAP measures in conjunction with GAAP information provided by us. DATASOURCE: US Oncology, Inc. CONTACT: Investor Relations, Bruce Broussard, +1-832-601-6103, or , Public Relations, Steve Sievert, +1-832-601-6193, Web site: http://www.usoncology.com/

Copyright