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US Oncology Reports Fourth Quarter and Yearend 2008 Results
Date:2/26/2009

HOUSTON, Feb. 26 /PRNewswire/ -- US Oncology, Inc. ("US Oncology" or "the Company"), one of the nation's largest cancer care services companies, reported revenue of $842.7 million, EBITDA of $52.3 million, Adjusted EBITDA of $55.2 million, net income of $0.5 million and operating cash flow of $64.2 million for the three months ended December 31, 2008.

For the year ended December 31, 2008, prior to a first quarter non-cash charge of $380.0 million for impairment of goodwill, US Oncology reported revenue of $3.3 billion, EBITDA of $214.7 million, Adjusted EBITDA of $219.6 million, net income of $9.5 million and operating cash flow of $141.5 million.

    US Oncology Fourth Quarter and Yearend Results

    *  Adjusted EBITDA for the fourth quarter of 2008 was $55.2 million,
       compared to $58.0 million for the fourth quarter of 2007 and
       $54.8 million for the third quarter of 2008.  The decrease from the
       fourth quarter of 2007 includes a $4.4 million decline due to reduced
       utilization of Erythropoiesis-Stimulating Agents ("ESAs").

    *  Adjusted EBITDA for 2008 increased to $219.6 million from
       $218.8 million in 2007 despite a $26 million reduction in earnings from
       ESAs.  Increases in average daily patient volumes reflecting the
       increase in physicians affiliated under comprehensive service
       agreements ("CSA") and cost management more than offset the impact of
       reduced ESA utilization.

    *  During the fourth quarter of 2008, the US Oncology network decreased by
       16 physicians, primarily due to retiring physicians, partially offset
       by 32 physicians who joined the network during the quarter.  During the
       first two months of 2009, 47 physicians started practicing in the
       network, including the addition of six medical oncologists and eight
       urologists with practices in existing US Oncology markets and twelve
       urologists under a new CSA relationship.  In addition, as of
       February 25, 2009, 32 physicians had executed agreements to join US
       Oncology and are expected to start practicing in the network during
       2009.  Also, as of February 25, 2009, three integrated cancer centers
       were under construction, and are expected to be completed and
       operational in the second half of 2009.

Bruce Broussard, president and chief executive officer, stated, "The organization has made great strides in advancing strategic initiatives that support our vision of being the premier cancer care services organization. We advanced our objectives of delivering cost effective care, improving the patient experience and advancing clinical treatment during 2008 as follows:

    *  We launched Innovent Oncology, an oncology-specific care management
       program;

    *  We significantly expanded the installed base of iKnowMed, an
       oncology-specific EMR, to over 700,000 electronic patient charts;

    *  Our lean six sigma program has improved efficiencies in our care
       delivery and drug management processes in over 50 percent of our
       largest practices;

    *  We enrolled approximately 3,500 patients in clinical research trials;
       and

    *  Our network was selected as one of the top research-accruing members
       for the Radiation Therapy Oncology Group.

We continue to transform the organization from a practice management company to a national cancer care platform with deep clinical capabilities. The strengthening of our clinical capabilities coupled with pressures on medical oncology practices is increasing our development success, contributing to our overall patient growth of ten percent.

Management continues to make strategic advancements while focusing on tactical operations. During 2008, we were able to maintain level Adjusted EBITDA of $219 million as compared to 2007, and a liquidity position of $230 million, even with the loss of $26 million from ESA's and in a challenging economic climate."

Broussard continued: "In 2009, we expect to accelerate the growth of our national businesses while continuing to expand our physician network. We have launched our Targeted Physician Services program which is intended to further differentiate us in the market place and accelerate our development activities. Innovent Oncology has begun to achieve sales momentum in the payer community. We have added a Contract Research Organization ("CRO") offering to expand the package of services delivered by our research team and have commenced the roll out of our esoteric lab initiative focused on specialty diagnostics. In addition, we will be launching a new online portal that provides a premier online resource and community environment for our entire physician network. Lastly, we will be launching our "United in Healing" co- branding campaign with our network practices that we believe will expand the visibility of our network and our mission as a premier cancer care services organization that provides the right treatment, at the right time, for the right patient."

Results of Operations

The Company operates and manages its business through four operating segments. The table below compares the results of the year and fourth quarter of 2008 to the results of the corresponding year and fourth quarter of 2007 and the third quarter of 2008 (dollars in millions).


                Q4      Q4      %     Q3       %                         %
               2008    2007  Change  2008   Change  2008      2007    Change
    Revenue
    Medical
     oncology
     services $581.9  $529.4   9.9  $557.4    4.4 $2,251.4  $2,088.2    7.8
    Cancer
     center
     services   92.7    87.1   6.4    92.0    0.8    367.1     349.9    4.9
    Pharmaceutical
     services  604.9   599.7   0.9   634.0   (4.6) 2,486.7   2,282.8    8.9
    Research
     and other  16.8    12.3  36.6    14.5   15.9     58.9      51.2   15.0
    Eliminations
     (1)      (453.6) (456.9)  0.7  (476.2)   4.7 (1,859.9) (1,771.3)  (5.0)
    Total     $842.7  $771.6   9.2  $821.7    2.6 $3,304.2  $3,000.8   10.1

    Operating
     income
     (loss)
    Medical
     oncology
     services  $16.9   $19.3 (12.4)  $16.9      -    $73.2     $79.7   (8.2)
    Cancer
     center
     services   22.4    20.1  11.4    21.6    3.7     88.0      87.7    0.3
    Pharmaceutical
     services   24.4    28.1 (13.2)   24.5   (0.4)    95.3      90.9    4.8
    Research
     and other  (1.5)   (0.3) nm(4)   (1.3) (15.4)    (4.8)     (0.8)  nm(4)
    Corporate
     costs(2)  (32.9)  (32.9)    -   (33.1)   0.6   (137.1)   (128.8)  (6.4)
    Impairment
     and
     restructuring
     charges(3) (2.9)   (6.8) nm(4)   (0.3)  nm(4)  (384.9)    (15.1)  nm(4)
    Total      $26.4   $27.5  (4.0)  $28.3   (6.7) $(270.3)   $113.6   nm(4)

    EBITDA
    Medical
     oncology
     services  $16.9   $19.3 (12.4)  $16.9      -    $73.2     $79.7   (8.2)
    Cancer
     center
     services   31.9    29.9   6.7    31.1    2.6    125.9     126.8   (0.7)
    Pharmaceutical
     services   25.1    29.4 (14.6)   25.5   (1.6)   100.0      96.1    4.1
    Research
     and other  (1.5)   (0.2) nm(4)   (1.3) (15.4)    (4.7)     (0.3)  nm(4)
    Corporate
     costs(2)  (17.2)  (20.4) 15.7   (17.4)   1.1    (74.8)    (83.5)  10.4
    Impairment
     and
     restructuring
     charges(3) (2.9)   (6.8) nm(4)   (0.3)  nm(4)  (384.9)    (15.1)  nm(4)
    Total      $52.3   $51.2   2.1   $54.5   (4.0) $(165.3)   $203.7   nm(4)
    Adjusted
     EBITDA(3) $55.2   $58.0  (4.8)  $54.8    0.7   $219.6    $218.8    0.4
    Net income
     (loss)      0.5     0.3  nm(4)    3.9  (87.2)  (370.5)      7.2   nm(4)
    Operating
     cash flow  64.2    74.6 (13.9)   35.1   82.9    141.5     198.0  (28.5)

    (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)  Corporate costs relate primarily to general and administrative
         expenses in support of our network.
    (3)  Impairment and restructuring charges and the loss on debt
         extinguishment are excluded from Adjusted EBITDA. During the fourth
         quarter of 2007, these charges consisted of $0.9 million related to
         the medical oncology segment, $1.2 million to the cancer center
         services segment and $4.7 million to corporate costs. During 2007,
         $1.6 million related to the medical oncology services segment,
         $4.2 million to the cancer center services segment and $9.3 million
         to corporate costs.
    (4)  Not meaningful.

Medical Oncology Services

During the fourth quarter of 2008, medical oncology services revenue was $581.9 million, an increase of $52.5 million, or 9.9 percent, from the fourth quarter of 2007 which reflects higher medical oncology visits due to both physician additions and increased productivity. The Company also experienced increased volumes of treatment drugs offset by lower volumes of supportive care drugs. Comparing the same periods, EBITDA was $16.9 million, a decrease of $2.4 million, as the impact of reduced ESA utilization offset earnings associated with revenue growth.

Compared to the third quarter of 2008, medical oncology services revenue increased $24.5 million, or 4.4 percent, which is consistent with an increase in average daily visits. EBITDA remained consistent at $16.9 million as the revenue increase was offset by slightly higher drug costs in the fourth quarter.

During 2008, medical oncology services revenue increased $163.2 million, or 7.8 percent, while EBITDA decreased $6.5 million, or 8.2 percent. The revenue increase reflects higher average daily visits from the growth of affiliated medical oncologists in our network. Partially offsetting the revenue growth, and contributing to the EBITDA decline, were reduced utilization of ESAs, increased drug costs and the impact of amendments to management service agreements in 2007.

Cancer Center Services

Cancer center services revenue in the fourth quarter of 2008 was $92.7 million, an increase of $5.6 million, or 6.4 percent, as compared to the fourth quarter of 2007 which reflects increased radiation treatment and diagnostic scan volumes and increases in physicians affiliated under comprehensive service agreements. We continue to experience a shift toward advanced targeted radiation therapies, which enhance care to patients, and are reimbursed at higher rates than conventional radiation therapies but generally have lower treatment volumes. EBITDA in the fourth quarter of 2008 was $31.9 million, an increase of $2.0 million, or 6.7 percent, from the fourth quarter of 2007 which is consistent with the revenue increase from the prior year.

Fourth quarter cancer center services revenue increased $0.7 million, or 0.8 percent, and EBITDA increased $0.8 million, or 2.6 percent from the third quarter of 2008 reflecting an increase in daily radiation treatments/diagnostic scans partially offset by two fewer operating days in the fourth quarter.

During 2008, cancer center services revenue increased $17.2 million, or 4.9 percent, and EBITDA decreased $0.9 million, or 0.7 percent, from the prior year. The revenue increase reflects higher volumes, an increase in physicians affiliated under comprehensive service agreements, and continued migration toward advanced targeted radiation therapies. Partially offsetting the revenue growth, and contributing to the EBITDA decline, were reduced management fees due to amendments to management service agreements in 2007.

Pharmaceutical Services

Pharmaceutical services revenue in the fourth quarter of 2008 was $604.9 million, an increase of $5.2 million, or 0.9 percent, as compared to the fourth quarter of 2007. The revenue increase is primarily due to increased average drug purchases per OPS physician which consisted of higher volumes of treatment drugs (offset by lower volumes of supportive care drugs) and higher revenue from our oral oncology specialty pharmacy. These increases were partially offset by lower utilization of ESAs. Pharmaceutical services EBITDA was $25.1 million for the fourth quarter of 2008, a decrease of $4.3 million as compared to the fourth quarter of 2007 primarily reflecting lower utilization of ESAs.

Pharmaceutical services revenue in the fourth quarter of 2008 decreased $29.1 million, or 4.6 percent, and EBITDA decreased $0.4 million, or 1.6 percent, from the preceding quarter. These decreases reflect two fewer operating days in the fourth quarter and a decrease in the average number of physicians affiliated under OPS agreements. Contributing to the decrease in physicians was the impact of a 16 physician practice formerly affiliated under an OPS agreement that converted to a CSA arrangement effective October 1, 2008.

During 2008, pharmaceutical services revenue increased $203.9 million, or 8.9 percent to $2.5 billion, and EBITDA increased $3.9 million, or 4.1 percent, over the prior year. The revenue increase is primarily due to the higher number of physicians affiliated through CSA agreements during the year as well as the increases/decreases in treatment versus supportive care drugs referred to previously and increased revenue from our oral oncology specialty pharmacy. The impact from the addition of physicians was partially offset by lower utilization of ESAs.

Corporate Costs

Corporate costs, which represent general and administrative expenses, excluding stock-based compensation, were $17.2 million in the fourth quarter of 2008, compared to $20.4 million in the fourth quarter of 2007 and $17.4 million in the third quarter of 2008. During 2008, corporate costs were $74.8 million, compared to $83.5 million in 2007. The decreases from each of the prior periods are due to the continued management of controllable costs, primarily in areas such as personnel expenses and professional fees.

Impairment and Restructuring Charges

    The components of impairment and restructuring charges are as follows (in
millions):


                      Q4            Q4           Q3          Q2         Q1
                     2008          2007         2008        2008       2008
    Severance costs  $2.0           $-         $0.2        $0.4        $1.3
    Future lease
     obligations      1.0          0.2            -           -           -
    Goodwill            -            -            -           -       380.0
    Services
     agreement, net     -          4.7            -           -           -
    Property and
     equipment, net     -          1.8            -           -           -
    Other            (0.1)         0.1            -         0.1           -
                     $2.9         $6.8         $0.2        $0.5      $381.3


                     2008          2007
    Severance costs  $3.9           $-
    Future lease
     obligations      1.0          0.8
    Goodwill        380.0            -
    Services
     agreement, net     -          9.3
    Property and
     equipment, net     -          5.0
                   $384.9        $15.1

During the fourth quarter of 2008, the Company recognized restructuring charges of $2.9 million related to employee severance and lease termination fees. During the fourth quarter of 2007, the Company recognized impairment charges of $6.5 million related primarily to a $4.7 million write-off of a service agreement intangible asset which was terminated in connection with the conversion of a CSA practice to an OPS agreement.

During 2008, the Company recognized $384.9 million in impairment and restructuring charges which relate primarily to a $380.0 million impairment charge to goodwill in the medical oncology services segment in the first quarter. The charge reflects the Company's continued diversification resulting in reduced dependencies on the medical oncology segment as a source of earnings and the impact of safety concerns surrounding the use of ESAs. During 2007, the Company recognized $15.1 million in impairment and restructuring charges. In addition to the practice which affiliated under an OPS agreement at the end of 2007, the Company recognized charges for two other markets due to market-specific conditions.

Net Income

Net income for the fourth quarter of 2008 was $0.5 million which represents an increase of $0.2 million from net income of $0.3 million reported in the fourth quarter of 2007. Lower LIBOR interest rates and a gain of $0.8 million on a real estate sale during the fourth quarter of 2008, partially offset by a $1.1 million decrease in operating income led to the increase in net income.

For 2008, net loss was $370.5 million, a decrease of $377.7 million compared to fiscal year 2007 net income of $7.2 million. The results of 2008 include restructuring and impairment charges of $384.9 million primarily due to a $380.0 million non-cash impairment charge related to goodwill in the medical oncology services segment. Excluding impairment and restructuring charges, income from operations decreased $14.1 million as the impact of management fee reductions and lower utilization of ESAs was partially offset by an increase in affiliated physicians and higher operating volumes.

Cash Flow

Cash from operations in the fourth quarter of 2008 was $64.2 million, compared to $74.6 million for the fourth quarter of 2007 and $35.1 million for the third quarter of 2008. The $10.4 million decrease in operating cash flow from the fourth quarter of 2007 reflects increasing working capital requirements associated with growing network volumes. The $29.1 million increase from the third quarter of 2008 reflects semiannual interest payments on the indebtedness of US Oncology in the third quarter of 2008.

The Company generated $141.5 million in cash from operations during 2008 compared to $198.0 million in 2007. The decrease in operating cash flow is primarily due to purchases made under new generic drug inventory management programs as well as higher working capital requirements associated with revenue growth and increasing network volumes.

As of February 25, 2009, the Company had approximately $85.2 million of cash and investments, and availability under the revolving credit facility of $136.7 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 Risk Evaluation and Mitigation Strategy ("REMS") proposal by manufacturers was filed with the FDA in August, 2008. 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, however we believe it may be released during the first quarter of 2009. 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.

It is not possible to estimate the impact of the REMS (on EBITDA) as it relates to prescribing patterns, until the REMS is in effect (expected to be sometime in 2009). We believe a possible impact of the REMS could be further reductions in ESA utilization.

During the fourth quarter of 2008, $6.2 million of the Company's Adjusted EBITDA was attributable to utilization of ESAs by our network physicians. For the fourth quarter of 2007 and third quarter of 2008, EBITDA from ESA utilization by our network physicians was $10.7 million and $6.9 million, respectively. During the full year, EBITDA from ESA utilization was $32.1 million in 2008 and $58.0 million in 2007.

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. There were no material developments in either of these matters during 2008 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 $52.2 million, Adjusted EBITDA of $55.1 million, net loss of $16.5 million and operating cash flow of $64.2 million for the quarter ended December 31, 2008. For the year ended December 31, 2008, Holdings reported EBITDA of $(165.7) million, Adjusted EBITDA of $219.2 million, net loss of $412.5 million and operating cash flow of $128.5 million. The operating results of US Oncology and Holdings are reconciled below (in millions).


                                 Q4       Q4        Q3        Q2       Q1
                                2008     2007      2008      2008     2008

    US Oncology Net
     Income (Loss)              $0.5     $0.3      $3.9      $3.2    $(378.1)

    Less:  Interest expense    (11.2)   (12.7)    (10.5)    (10.0)     (12.1)
           Unrealized gain
            (loss) on swap     (15.3)   (11.6)     (4.2)     14.3      (16.0)
           General and
            administrative
            expense             (0.1)       -      (0.1)        -          -
           Effective tax rate
            differential         9.6      9.2       5.1      (0.4)       8.8

    Holdings Net Income
     (Loss)                   $(16.5)  $(14.8)    $(5.8)     $7.1    $(397.4)


                                                     Year Ended December 31,
                                                      2008             2007

    US Oncology Net Income (Loss)                   $(370.5)           $7.2

    Less:  Interest expense                           (43.7)          (42.2)
           Unrealized loss on swap                    (21.2)          (11.9)
           General and administrative expense          (0.4)           (0.1)
           Loss on extinguishment of debt                 -           (12.9)
           Effective tax rate differential             23.3            24.9

    Holdings Net Loss                               $(412.5)         $(35.0)

Compared to the fourth quarter of 2007 and third quarter of 2008, the unrealized loss on swap, which relates to changes in fair value of the Holdings interest rate swap, increased by $3.7 million and $11.1 million, respectively. During 2008, the unrealized loss increased by $9.3 million from 2007.

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 interest payments on the portion of Holdings' indebtedness that is serviced with cash interest and on a portion of the interest due on US Oncology's variable rate senior secured credit facility. The non-cash unrealized loss on the interest rate swap is excluded from Adjusted EBITDA.

As of December 31, 2008, the indebtedness issued by US Oncology Holdings, Inc., amounted to $456.8 million. The Company elected to settle interest on this indebtedness for the semi-annual interest period from September 16, 2008 through March 15, 2009, entirely through the issuance of additional notes.

The Company and Holdings will broadcast their 2008 fourth quarter financial results by conference call on February 26, 2009 at 10:00 A.M. Central Standard Time. The archived replay of the event will be available through the news center on the Company's website (http://www.usoncology.com).

About US Oncology, Inc.

US Oncology, headquartered in Houston, Texas works closely with physicians, manufacturers and payers 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's expertise in supporting every aspect of the cancer care delivery system -- from drug development to treatment and outcomes measurement, enables the Company to help increase the efficiency and safety of cancer care. US Oncology is affiliated with 1,211 physicians operating in 456 locations, including 94 radiation oncology facilities in 39 states. For more information, visit the Company's Web site, http://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 a general downturn in the U.S. or global economy, 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, 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 existing 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 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, 2007, and subsequent filings, 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), minority 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 loss on early extinguishment of debt and impairment and restructuring 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)

                     Q4      Q4     %      Q3     %                      %
                    2008    2007 Change   2008  Change  2008    2007  Change
    Physician Summary:

    Medical
     oncologists    757     705   7.4     754    0.4     757     705   7.4
    Radiation
     oncologists    160     146   9.6     159    0.6     160     146   9.6
    Other
     oncologists     62      52  19.2      62      -    62      52  19.2
    Total CSA
     physicians     979     903   8.4     975    0.4     979     903   8.4

    OPS physicians  232     296 (21.6)    252   (7.9)    232     296 (21.6)
    Total
     physicians   1,211   1,199   1.0   1,227   (1.3)  1,211   1,199   1.0

    Daily Operating
     Statistics:

    Medical oncology
     visits (1)  11,148  10,224   9.0  10,712    4.1  10,816  10,028   7.9
    Radiation
     treatments/
     diagnostic
     scans(2)(4)  3,833   3,680   4.2   3,687    4.0   3,731   3,642   2.4

    Other Statistics:

    Radiation
     oncology
     facilities
     (3)(4)          94      88   6.8      92    2.2      94      88   6.8

    Linear
     accelerators   119     114   4.4     118    0.8     119     114   4.4

    PET systems      37      34   8.8      36    2.8      37      34   8.8

    New patients
     enrolled in
     research
     studies
     during the
     period         814     809   0.6     718   13.4   3,447   3,050  13.0

    Accounts
     receivable
     days
     outstanding     33      33     -      33      -      33      33     -


    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 fourth quarter of 2008 includes 80 integrated cancer centers and
         14 radiation-only facilities, the third quarter of 2008 includes
         80 integrated cancer centers and 12 radiation-only facilities and the
         fourth quarter of 2007 includes 77 integrated cancer centers and
         11 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 Ended    Three Months Ended
                                         December 31,          September 30,
                                     2008            2007          2008

    Product revenue                $568,034        $509,914      $556,359
    Service revenue                 274,625         261,656       265,377
     Total revenue                  842,659         771,570       821,736

    Cost of products                553,302         497,290       537,029

    Cost of services:
     Operating compensation and
      benefits                      132,507         122,100       131,158
     Other operating costs           84,403          73,755        81,310
     Depreciation and amortization   17,538          18,569        17,898
    Total cost of services          234,448         214,424       230,366

    Total cost of products and
     services                       787,750         711,714       767,395
    General and administrative
     expenses                        17,577          20,689        18,078
    Impairment and restructuring
     charges                          2,888           6,771           271
    Depreciation and amortization     8,050           4,887         7,684
                                    816,265         744,061       793,428

    Income from operations           26,394          27,509        28,308

    Other income (expense):
     Interest expense, net          (23,444)        (24,148)      (22,679)
     Minority interest expense         (877)         (1,743)         (715)
     Other income                       843               -             -

    Income before income taxes        2,916           1,618         4,914
    Income tax provision             (2,445)         (1,316)       (1,039)

    Net income                         $471            $302        $3,875


                              US ONCOLOGY, INC.
                CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                (in thousands)

                                                         Year Ended
                                                        December 31,
                                                     2008           2007

    Product revenue                               $2,224,704     $1,970,106
    Service revenue                                1,079,473      1,030,672
     Total revenue                                 3,304,177      3,000,778

    Cost of products                               2,163,943      1,925,547

    Cost of services:
     Operating compensation and benefits             523,939        479,177
     Other operating costs                           321,947        293,677
     Depreciation and amortization                    72,790         73,159
    Total cost of services                           918,676        846,013

    Total cost of products and services            3,082,619      2,771,560
    General and administrative expenses               76,883         84,326
    Impairment and restructuring charges             384,929         15,126
    Depreciation and amortization                     30,017         16,172
                                                   3,574,448      2,887,184

    Income (loss) from operations                   (270,271)       113,594

    Other income (expense):
     Interest expense, net                           (92,757)       (95,342)
     Minority interests                               (3,324)        (3,619)
     Other income                                      2,213              -

    Income (loss) before income taxes               (364,139)        14,633
    Income tax provision                              (6,351)        (7,447)

    Net income (loss)                              $(370,490)        $7,186


                              US ONCOLOGY, INC.
                CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                (in thousands)
                                 (unaudited)

                                                          Year Ended
                                                         December 31,
                                                      2008           2007

    Cash flows from operating activities:
    Net cash provided by operating activities       $141,487       $198,030
    Cash flows from investing activities:
     Net proceeds from sale of assets                  5,347            750
     Acquisition of property and equipment           (88,743)       (90,850)
     Investments in unconsolidated subsidiaries       (3,257)        (4,745)
     Net payments in affiliation transactions        (52,467)          (134)
     Distributions from minority interests             2,116            254
     Proceeds from contract separation                     -          1,555
    Net cash used in investing activities           (137,004)       (93,170)
    Cash flows from financing activities:
     Repayment of advance to parent                        -       (150,000)
     Net distributions to parent                     (13,004)       (75,501)
     Proceeds from other indebtedness                  4,000          1,323
     Repayment of term loan                          (34,937)        (7,487)
     Repayment of other indebtedness                  (2,171)        (2,761)
     Debt financing costs                               (143)        (1,554)
     Distributions to minority interests              (3,609)        (1,925)
     Contributions from minority interests               576              -
     Contributions of proceeds from exercise
      of stock options                                    25            535
    Net cash used in financing activities            (49,263)      (237,370)

    Decrease in cash and equivalents                 (44,780)      (132,510)
    Cash and equivalents:
     Beginning of year                               149,256        281,766
     End of year                                    $104,476       $149,256


                              US ONCOLOGY, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEET
                                (in thousands)
                                 (unaudited)

                                                  December 31,  December 31,
                                                      2008           2007

    ASSETS
    Current assets:
     Cash and equivalents                           $104,476       $149,256
     Accounts receivable                             364,336        341,860
     Other receivables                                25,707         97,401
     Prepaid expenses and other current assets        20,682         22,801
     Inventories                                     130,967         82,822
     Deferred income taxes                             4,373          4,260
     Due from affiliates                              66,428         60,295
      Total current assets                           716,969        758,695
    Property and equipment, net                      410,248        399,621
    Service agreements, net                          273,646        223,850
    Goodwill                                         377,270        757,270
    Other assets                                      64,720         69,214
      Total assets                                $1,842,853     $2,208,650
    LIABILITIES AND STOCKHOLDER'S EQUITY
    Current liabilities:
     Current maturities of long-term indebtedness    $10,677        $38,613
     Accounts payable                                266,190        241,093
     Due to affiliates                               136,913        177,265
     Accrued compensation cost                        40,776         30,045
     Accrued interest payable                         26,266         24,949
     Income taxes payable                              2,727          6,735
     Other accrued liabilities                        34,804         37,763
      Total current liabilities                      518,353        556,463
    Deferred revenue                                   6,894          8,380
    Deferred income taxes                             35,139         33,532
    Long-term indebtedness                         1,061,133      1,031,569
    Other long-term liabilities                       12,347         11,166
      Total liabilities                            1,633,866      1,641,110
    Minority interests                                13,572         13,217
    Stockholder's equity:
     Common stock, $0.01 par value, 100 shares
      authorized, issued and outstanding                   1              1
     Additional paid-in-capital                      560,768        549,186
     Retained earnings (deficit)                    (365,354)         5,136
      Stockholder's equity                           195,415        554,323
                                                  $1,842,853     $2,208,650


                              US ONCOLOGY, INC.
      RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA
                                (in thousands)
                                 (unaudited)

                            Three Months  Three Months
                               Ended         Ended         Year Ended
                            December 31,   September 30,   December 31,
                           2008     2007      2008        2008      2007

    Net income (loss)      $471     $302     $3,875    $(370,490)    $7,186
    Add back:
      Interest expense,
       net               23,444   24,148     22,679       92,757     95,342
      Income tax
       provision          2,445    1,316      1,039        6,351      7,447
      Depreciation and
       amortization      25,588   23,456     25,582      102,807     89,331
      Amortization of
       stock compensation   334      275        649        2,103        753
      Minority interest
       expense              877    1,743        715        3,324      3,619
      Other income         (843)       -          -       (2,213)         -

    EBITDA               52,316   51,240     54,539     (165,361)   203,678
    Plus:
      Impairment and
       restructuring
       charges            2,888    6,771        271      384,929     15,126
    Adjusted EBITDA      55,204   58,011     54,810      219,568    218,804

      Changes in assets
       and liabilities   28,916   40,014      6,429       19,533     81,023
      Deferred income
       tax provision
       (benefit)          5,941    2,087     (2,431)       1,494        992
      Interest expense,
       net              (23,444) (24,148)   (22,679)     (92,757)   (95,342)
      Income tax
       provision         (2,445)  (1,316)    (1,039)      (6,351)    (7,447)
    Net cash provided by
     operating
     activities         $64,172  $74,648    $35,090     $141,487   $198,030


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SOURCE US Oncology, Inc.
Copyright©2009 PR Newswire.
All rights reserved


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