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Lincare Reports 2008 Results

Lincare Holdings Inc. (Lincare) has declared revenues of $1.665 billion for the full year of 2008, up 4%, compared with the net revenues of $1.596 billion in the previous year-end. It has reported a net income of $237.2 million, or $3.17 per diluted share, for the full year of 2008, compared with a net income of $226.1 million, or $2.58 per diluted share, in the previous year-end.

For the quarter ended December 31, 2008, revenues were $415.1 million, up 1% over revenues of $412.3 million for the fourth quarter of 2007. The company estimates that the increase in net revenues was comprised of about 7% internal growth, partially offset by Medicare price reductions of about 6% taking effect in 2008. Net income for the quarter ended December 31, 2008, was $58.2 million against net income of $57.6 million for the fourth quarter of 2007. Diluted earnings per share were $0.79 for the quarter ended December 31, 2008, against $0.70 diluted earnings per share for the comparable prior year period.

The company estimates that the increase in net revenues was comprised of about 9% internal growth, partially offset by Medicare price reductions of about 5% taking effect in 2008.

Lincare added 14 new operating centers in the fourth quarter, with 11 of those locations derived from internal expansion and three locations derived from acquisition. For the year ended December 31, 2008, Lincare added 44 new operating centers, with 41 derived from internal expansion and three derived from acquisition. The total number of Lincare locations expanded to 1,063 at the end of 2008.

During the fourth quarter of 2008, Lincare completed the acquisition of a respiratory business located in Florida. Terms of the acquisition were not disclosed.

John P. Byrnes, Lincare’s chief executive officer, said, “We are pleased with Lincare’s operating and financial performance in 2008. We continue to gain market share in our core respiratory business while controlling costs and reinvesting capital to sustain growth. While upcoming Medicare payment reductions will present significant challenges to our company and our industry in 2009, we remain committed to our strategy to remain the market leader in the provision of home-based respiratory therapy services and to expand our reach into markets where we believe we can add value and compete on the basis of efficiency and quality of care.”

Byrnes added, “Our financial position is strong and we achieved significant operating cash flows in 2008.” Lincare generated $439.1 million of cash from operating activities during 2008. Investments of cash during the year included $124.2 million in net capital expenditures and $22.0 million in business acquisition expenditures. The company repurchased 1,009,250 shares of its common stock during the year for $35.2 million and common shares outstanding at December 31, 2008 were 74,393,068 shares. As of December 31, 2008, total debt outstanding was $556.9 million and cash and investments were $133.1 million. The company has $363.0 million available under its revolving credit facility, net of outstanding letters of credit.

The company’s revenues and earnings are anticipated to be impacted in fiscal year 2009 by reductions in Medicare reimbursement for certain items provided by the company to Medicare beneficiaries. The company is still evaluating the potential impact of these changes to its business, but estimates that revenues and operating income in 2009 will be negatively impacted by about $240 million to $255 million. The Medicare reimbursement changes included in this preliminary estimate include about $110 million attributed to scheduled nationwide reductions in Medicare payment amounts of 9.5% for the product categories, including oxygen, that were initially included in competitive bidding and additional Medicare price reductions for stationary oxygen equipment of about 2.5% contained in the 2009 national monthly fee schedule published by the Centers for Medicare and Medicaid Services (“CMS”) in November, 2008. The preliminary estimate also includes $130 million to $145 million in Medicare payment reductions attributed to the implementation of new federal regulations that change the reimbursement methodology for oxygen equipment from continuous monthly payment for as long as the equipment is in use by a Medicare beneficiary to a capped rental arrangement whereby payment for oxygen equipment may not extend beyond a period of continuous use of 36 months.