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IPC The Hospitalist Company Reports Second Quarter 2009 Results
Date:8/6/2009

NORTH HOLLYWOOD, Calif., Aug. 6 /PRNewswire-FirstCall/ -- IPC The Hospitalist Company, Inc. (Nasdaq: IPCM), a leading national hospitalist physician group practice, today announced financial results for the second quarter ended June 30, 2009.

Second Quarter 2009 Highlights (comparisons are to second quarter 2008):

  • Net revenue increased 26% to $74.8 million, with same-market area net revenue growth of 20%
  • Patient encounters increased 21% to 796,000
  • Income from operations rose 46% to $7.0 million
  • Operating margin improved 130 basis points to 9.4%
  • Net income increased 50% to $4.1 million, or $0.25 per diluted share, for the quarter

Six Months Ended June 30, 2009 Highlights (comparisons are to the six months ended June 30, 2008)

  • Net revenue increased 26% to $150.8 million, with same-market area net revenue growth of 20%
  • Patient encounters increased 20% to 1,606,000
  • Income from operations rose 43% to $14.6 million
  • Operating margin improved 120 basis points to 9.7%
  • Net income increased 50% to $8.6 million or $0.53 per diluted share, for the six month period

Adam D. Singer, M.D., Chief Executive Officer of IPC The Hospitalist Company, stated, "We are very pleased with our continued ability to deliver strong revenue growth and operating margin expansion. Our second quarter and year-to-date revenue growth of 26% was driven by increased staffing in our same-market areas, both through hiring and in-market acquisitions, as well as the contribution from our newest markets -- Southeast Florida, entered into during the latter part of 2008, and New Jersey, entered into during the second quarter of this year. Importantly, by leveraging our expenses across a larger revenue base, we have been able to substantially improve our operating margin, which increased by 130 basis points to 9.4% for the quarter and by 120 basis points to 9.7% for the year-to-date period. In addition, our strong cash flow has enabled us to pay off all of our outstanding debt in June of this year."

Dr. Singer added, "In line with our growth strategy, we have completed five acquisitions to date in 2009, including our latest in-market acquisition in Tampa, which we announced today. This acquisition adds 51,000 annual encounters and strengthens our position in the important Florida market. We continue to build our national footprint, expanding into our 19th state with our New Jersey acquisition in June of this year. Our acquisition pipeline remains robust in this highly fragmented industry, and we continue to evaluate opportunities across the hospitalist sector. We remain confident that we can continue to grow and penetrate current and new markets through this combination of organic growth and acquisitions."

Dr. Singer concluded, "While the outcome of healthcare reform remains uncertain, we continue to believe that larger physician organizations will be in a better position to participate in whatever new delivery or payment systems evolve in the healthcare arena. There is clearly a trend toward paying for quality. As a segment of healthcare that provides quality outcomes for reduced costs, we believe any restructuring will recognize that contribution. Also, we expect potential expansion of health insurance coverage to a larger portion of the population to increase our reimbursement."

Second Quarter 2009

Patient encounters for the three months ended June 30, 2009 increased 20.6% to 796,000, compared to 660,000 for the same period last year. Net revenue for the three months ended June 30, 2009 was $74.8 million, an increase of $15.6 million, or 26.4%, from $59.2 million for the three months ended June 30, 2008. Of this $15.6 million increase, $11.7 million, or 75.0%, was attributable to same-market area growth and $3.9 million was attributable to revenue generated from new market acquisitions. The change in same-market area net revenue was primarily the result of a 14.1% increase in patient encounters and a 3.4% increase in patient revenue per encounter.

Physician practice salaries, benefits and other expenses for the three months ended June 30, 2009 were $54.5 million or 72.9% of net revenue, compared to $43.2 million or 73.1% of net revenue for the three months ended June 30, 2008.

General and administrative expenses were 17.0% of net revenue for the three months ended June 30, 2009, as compared to 18.0% of net revenue for the three months ended June 30, 2008.

Income from operations increased $2.2 million, or 46.1%, to $7.0 million, compared to $4.8 million for the same period in the prior year. Operating margin increased to 9.4% for the three months ended June 30, 2009 from 8.1% for the three months ended June 30, 2008.

The effective tax rate for the three months ended June 30, 2009 was 40.0% compared to 42.0% for the three months ended June 30, 2008. The decrease in the effective tax rate reflects a new enterprise zone tax credit recorded for the first time in the fourth quarter of 2008.

Net income increased to $4.1 million for the three months ended June 30, 2009, compared to $2.8 million for the three months ended June 30, 2008, and net income margin increased to 5.5% from 4.7% for the same period in the prior year. The net income margin increase to 5.5% is primarily the result of leveraging general and administrative expenses over a larger revenue base.

Six Months Ended June 30, 2009

Patient encounters for the six months ended June 30, 2009 increased 19.5% to 1,606,000, compared to 1,344,000 for the same period last year. Net revenue for the six months ended June 30, 2009 was $150.8 million, an increase of $31.1 million, or 26.0%, from $119.7 million for the six months ended June 30, 2008. Of this $31.1 million increase, $23.5 million, or 75.6%, was attributable to same-market area growth and $7.6 million was attributable to revenue generated from new market acquisitions. The change in same-market area net revenue was primarily the result of a 13.0% increase in patient encounters and a 4.7% increase in patient revenue per encounter.

Physician practice salaries, benefits and other expenses for the six months ended June 30, 2009 were $109.9 million or 72.9% of net revenue, compared to $87.2 million, or 72.8% of net revenue for the six months ended June 30, 2008.

General and administrative expenses were 16.7% of net revenue for the six months ended June 30, 2009, compared to 17.8% of net revenue for the six months ended June 30, 2008.

Income from operations increased $4.4 million, or 42.6%, to $14.6 million, compared to $10.2 million for the same period in the prior year. The operating margin increased to 9.7% for the six months ended June 30, 2009 from 8.5% for the six months ended June 30, 2008.

The effective tax rate for the six months ended June 30, 2009 was 40.0%, compared to 42.0% for the six months ended June 30, 2008. The decrease in the effective tax rate reflects a new enterprise zone tax credit recorded for the first time in the fourth quarter of 2008.

Net income increased to $8.6 million for the six months ended June 30, 2009, compared to $5.8 million for the six months ended June 30, 2008, and the net income margin increased to 5.7% from 4.8% for the same period in the prior year.

Cash flow from operations for the year-to-date 2009 period was $17.3 million, compared to $16.8 million for the same period of 2008. Days sales outstanding (DSO) decreased to 56 DSO at the end of the period, compared to 60 DSO as of December 31, 2008. During the six month period, the Company expended $7.9 million for physician practices acquired in 2009 and earn-out payments attributable to practices acquired in 2007 and 2008. In addition, in late June 2009, the Company paid off all remaining debt of $7.3 million under its Term Loan and equipment financing loans.

Recent Developments

Yesterday, IPC announced that it acquired Synergy Medical Group, Inc. in Tampa, Florida, building on IPC's established presence in the greater Tampa Bay market. Synergy is a hospitalist group serving three acute care hospitals, two long-term acute care hospitals and seventeen skilled nursing facilities in the Tampa Bay area. Both IPC and Synergy have provided services in this large and growing market for a number of years, although in different facilities. IPC expects to add approximately 51,000 patient encounters annually from this acquisition.

Guidance Update

The Company is updating its guidance for the full year 2009 and now expects revenue to be in the range of $303 million to $308 million and earnings per diluted share to be in the range of $1.05 to $1.12. The Company has provided this outlook based on the following assumptions: (i) an estimated 4.6% increase in the weighted average reimbursement rates for services provided to Medicare patients; (ii) continued growth in same-market areas whether from new hires or in-market acquisitions; (iii) a 40% effective tax rate; and (iv) 16.3 million weighted average diluted shares outstanding for the year. Not included in the assumptions are (i) new market acquisitions; (ii) increased general and administrative expenses as a result of the requirement of FASB Statement 141(R) to expense external costs associated with acquisitions that close subsequent to December 31, 2008; and (iii) gains or losses related to changes in estimates of earn-outs related to acquisitions that close subsequent to December 31, 2008 as required by FASB Statement 141(R).

Conference Call Information

IPC The Hospitalist Company will host an investor conference call to review the quarterly results at 5:00 p.m. ET (2:00 p.m. PT) today. To participate in the conference call, please dial 877-545-1491 (USA) or 719-325-4902 (International). In addition, a dial-up replay of the conference call will be available beginning August 6, 2009 at 8:00 p.m. ET (5:00 p.m. PT) and ending on August 20, 2009. The replay telephone number is 888-203-1112 (USA) or 719-457-0820 (International) Replay Passcode: 4583296. A live webcast of the call will also be available from the Investor Relations section on the corporate website at http://www.hospitalist.com. A webcast replay can be accessed on the corporate website beginning August 8, 2009 at approximately 8:00 p.m. ET (5:00 p.m. PT) and will remain available until August 20, 2009 at 11:59 p.m.

About IPC The Hospitalist Company

IPC The Hospitalist Company, Inc. (NASDAQ: IPCM) is a leading national hospitalist physician group practice focused on the delivery of hospitalist medicine services. IPC's physicians and affiliated providers manage the care of hospitalized patients in coordination with primary care physicians and specialists. The Company provides its hospitalists with the comprehensive training, information technology, and management support systems necessary to improve the quality and reduce the cost of inpatient care in the facilities it serves. For more information, visit the IPC website at www.hospitalist.com.

Safe Harbor Statement

Certain statements and information in this press release may be deemed to be "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Forward-looking statements in this press release may include, but are not limited to, those statements set forth under the section titled "Guidance" regarding projected operating results, revenues, earnings, and IPC's growth opportunities and strategy. Forward-looking statements are often characterized by terminology such as "believe", "hope", "may", "anticipate", "should", "intend", "plan", "will", "expect", "estimate", "project", "positioned", "strategy" and similar expressions. Any forward-looking statements are necessarily based on a variety of estimates and assumptions which, though considered reasonable by the Company, may not be realized and are inherently subject to significant business, economic, competitive, industry, regulatory, market and financial uncertainties and contingencies, many of which are and will be beyond IPC's control. Important risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by any forward-looking statements are described in IPC's most recent Annual Report on Form 10-K, including the section titled "Risk Factors" and actual results could differ materially from those anticipated in forward-looking statements.

In particular the following risks and uncertainties may have such an impact:

  • failure to comply with complex and intensive government regulation of our industry;
  • the adequacy of our insurance coverage and insurance reserves;
  • our ability to recruit and retain qualified physicians;
  • our ability to successfully integrate new acquisitions;
  • the effect of changes in rates or methods of third-party reimbursement; and
  • the high level of competition in our industry.

IPC undertakes no obligation following the date of this press release to update or revise any such statements or projections whether as a result of new information, future events, or otherwise.

     Contacts:                         Amy Glynn/Nick Laudico
     Devra Shapiro                     The Ruth Group
     IPC The Hospitalist Company, Inc. (646) 536-7023/7030
     (818) 766-3502                    aglynn@theruthgroup.com
                                       nlaudico@theruthgroup.com



                        IPC The Hospitalist Company, Inc.
                            Consolidated Balance Sheets
                 (dollars in thousands, except for share data)

                                                         June 30, December 31,
                                                            2009      2008
                                                            ----      ----
      Assets                                         (unaudited)
      Current assets:
        Cash and cash equivalents                        $37,783   $37,394
        Accounts receivable, net                          46,032    44,474
        Prepaid expenses and other current assets          5,706     8,081
                                                           -----     -----
      Total current assets                                89,521    89,949
      Furniture and equipment, net                         2,434     2,452
      Goodwill                                            75,016    63,893
      Other intangible assets, net                         2,620     2,905
      Deferred tax assets, net                             3,492     3,492
                                                           -----     -----
      Total assets                                      $173,083  $162,691
                                                        ========  ========

      Liabilities and Stockholders' Equity
      Current liabilities:
        Accounts payable and accrued liabilities          $4,521    $4,664
        Accrued compensation                              16,815    11,232
        Payables for practice acquisitions                 5,819     2,476
        Medical malpractice and self-insurance
         reserves, current portion                           884       539
        Deferred tax liabilities                             481       481
        Short-term debt and current portion of
         capital leases                                        -     3,471
                                                          ------     -----
      Total current liabilities                           28,520    22,863
      Long-term debt and capital
       leases, less current portion                            -     5,368
      Medical malpractice and self- insurance
       reserves, less current portion                     11,192    11,220
      Other long-term liabilities                            293       293
                                                             ---       ---
      Total liabilities                                   40,005    39,744
      Stockholders' equity:
        Preferred stock, $0.001 par value,
         15,000,000 shares authorized, none issued             -         -
        Common stock, $0.001 par value,
         50,000,000 shares authorized,
         16,113,941 and 16,068,835 shares
         issued and outstanding at June 30,
         2009 and December 31, 2008,
         respectively                                         16        16
        Additional paid-in capital                       123,513   122,024
        Retained earnings                                  9,549       907
                                                           -----       ---
      Total stockholders' equity                         133,078   122,947

                                                        --------  --------
      Total liabilities and
       stockholders' equity                             $173,083  $162,691
                                                        ========  ========



                        IPC The Hospitalist Company, Inc.
                   Condensed Consolidated Statements of Income
                (dollars in thousands, except for per share data)
                                   (unaudited)


                                  Three Months Ended        Six Months Ended
                                        June 30,                June 30,
                                        --------                --------
                                    2009        2008        2009        2008
                                    ----        ----        ----        ----

     Net revenue                 $74,783     $59,154    $150,840    $119,713
     Operating expenses:
       Cost of
        services-physician
        practice salaries,
        benefits and other        54,487      43,237     109,948      87,180
      General and
       administrative             12,702      10,627      25,143      21,359
      Depreciation and
       amortization                  575         487       1,163         944
                                     ---         ---       -----         ---
     Total operating
      expenses                    67,764      54,351     136,254     109,483
                                  ------      ------     -------     -------
     Income from operations        7,019       4,803      14,586      10,230
     Investment income                24         144          65         308
     Interest expense               (169)       (194)       (248)       (579)
                                    ----        ----        ----        ----
      Income before
      income taxes                 6,874       4,753      14,403       9,959
     Income tax provision          2,749       1,997       5,761       4,183
                                   -----       -----       -----       -----
     Net income                    4,125       2,756       8,642       5,776
      Income allocable to
      preferred stockholders           -           -           -        (696)
                                   -----       -----       -----       -----
       Net income
       attributable to
       common stockholders        $4,125      $2,756      $8,642      $5,080
                                  ======      ======      ======      ======

    Per share data:
    Net income per share
     attributable to common
     stockholders-historical:

      Basic                        $0.26       $0.19       $0.54       $0.39
                                   =====       =====       =====       =====

      Diluted                      $0.25       $0.18       $0.53       $0.38
                                   =====       =====       =====       =====

    Weighted average shares:

      Basic                   16,101,969  14,873,501  16,095,698  13,154,045
                              ==========  ==========  ==========  ==========

      Diluted                 16,297,914  15,087,795  16,277,320  13,471,298
                              ==========  ==========  ==========  ==========

    Net income per share
     attributable to common
     stockholders-pro forma:

      Basic                          N/A         N/A         N/A       $0.40
                                     ===         ===         ===       =====

      Diluted                        N/A         N/A         N/A       $0.39
                                     ===         ===         ===       =====

    Weighted average shares:

      Basic                          N/A         N/A         N/A  14,435,184
                                     ===         ===         ===  ==========

      Diluted                        N/A         N/A         N/A  14,661,434
                                     ===         ===         ===  ==========



                      IPC The Hospitalist Company, Inc.
                   Consolidated Statements of Cash Flows
                           (dollars in thousands)
                                (unaudited)

                                                        Six Months Ended
                                                            June 30,
                                                        ----------------
                                                          2009     2008
                                                          ----     ----

      Operating activities
      Net income                                        $8,642   $5,776
      Adjustments to reconcile net income to net cash
       provided by operating activities:
              Depreciation and amortization              1,163      944
              Stock-based compensation expense             954      334
              Changes in assets and liabilities:
                    Accounts receivable                 (1,558)    (702)
                    Prepaid expenses and other current
                     assets                              2,375    5,645
                    Accounts payable                      (143)  (1,277)
                    Accrued compensation                 5,583    4,739
                    Medical malpractice and self-
                     insurance reserves                    317    1,378
                                                           ---    -----
      Net cash provided by operating activities         17,333   16,837
                                                        ------   ------

      Investing activities
      Acquisitions of physician practices               (7,930)  (6,261)
      Purchase of furniture and equipment                 (710)    (968)

                                                        ------   ------
      Net cash used in investing activities             (8,640)  (7,229)
                                                        ------   ------

      Financing activities
      Repayments of long-term debt and capital
       leases, net                                      (8,839) (16,345)
      Net proceeds from issuance of common stock           395   45,879
      Excess tax benefits from stock-based
       compensation                                        140      186
                                                         ------   ------
      Net cash (used in) provided by financing
       activities                                       (8,304)  29,720
                                                        ------   ------


      Net increase in cash and cash equivalents            389   39,328
      Cash and cash equivalents, beginning of period    37,394    6,976

                                                       -------  -------
      Cash and cash equivalents, end of period         $37,783  $46,304
                                                       =======  =======



                           IPC The Hospitalist Company, Inc.
                                     Operating Data
                     Number of Patient Encounter Data (unaudited):

    The following is a summary of the quarterly patient encounters for
     the six consecutive quarters ended June 30, 2009:

                                          For Quarter Ended

                       Mar 31   Jun 30   Sep 30   Dec 31   Mar 31   Jun 30
                         2008     2008     2008     2008     2009    2009
                         ----     ----     ----     ----     ----    ----
    Patient
    Encounters        684,000  660,000  692,000  754,000  810,000 796,000
                      =======  =======  =======  =======  ======= =======


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SOURCE IPC The Hospitalist Company, Inc.
Copyright©2009 PR Newswire.
All rights reserved


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