Radiation Therapy Services earnings impacted by reductions in treatment recommendations and fees

By Lisa Kerner

Charlotte, N.C., March 14 - Radiation Therapy Services Holdings, Inc.'s fourth quarter was "challenging," impacted by greater-than-expected declines in the treatment of prostate cancer, said president and chief executive officer Dr. Daniel Dosoretz during the company's fourth-quarter and full-year 2012 earnings call on Thursday.

Specifically, prostate cancer treatment is being impacted by guidelines from a U.S. task force that recommends against prostate cancer screening for men with a life expectancy of more than 10 years. In addition, a 7% reduction in radiation oncology reimbursement fees for physicians is expected to impact the company's revenues going forward.

According to Dosoretz, Radiation Therapy implemented a number of initiatives in 2012 to offset the expected headwinds of prostate treatment declines and reimbursement rate reductions.

While the prostate declines are expected to carry through the first half of 2013, Dosoretz believes "the worst is behind us," with declines in treatment volumes decelerating.

Had it not been for such prostate declines, the company would have "essentially met its guidelines for financial performance," chief financial officer Bryan Carey said on the call.

"We currently have approximately $20 million of cash and $7.5 million of borrowings under our $140 million revolving credit facility, resulting in net debt of $745 million," said Carey.

Financial highlights

Radiation Therapy reported total pro forma revenues for the fourth quarter of $168.8 million, down slightly from $171.2 million in the same quarter of 2011, due in part to volume declines in the treatment of prostate cancer and lower reimbursement rates.

Total pro forma revenues for the full year were up 5.1% from 2011 at $700.4 million. The increase was mainly attributed to the benefit of previously acquired or newly established integrated cancer care practices and the impact of strategic tuck-in acquisitions.

Fourth-quarter pro forma adjusted EBITDA was $24.2 million, or 14.3% of total pro forma revenues, compared to $28.8 million, or 16.8% of total pro forma revenues, in the prior-year period.

Pro forma adjusted EBITDA for 2012 was $104.7 million, or 14.9% of total pro forma revenues, compared to $122.8 million, or 18.4% of total pro forma revenues for the full-year 2011.

The margin declines for the full year were due to, among other things, volume declines in the treatment of prostate cancer, reductions in the Medicare reimbursement rate and the impact of the termination of certain contracts.

For the fourth quarter, Radiation Therapy reported a net loss of $33.2 million, compared to a net loss of $111.7 million in the fourth quarter of 2011.

The full-year 2012 net loss was $151.1 million, versus $349.9 million for 2011, according to the company's earnings release.

Radiation Therapy is a Fort Myers, Fla.-based provider of advanced radiation therapy and other clinical services to cancer patients.

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