EARNINGS......
Thursday November 12, 5:23 pm Eastern Time
Company Press Release
ProMedCo Announces Record Third Quarter Results
Meets Expectations for Seventh Consecutive Quarter Since IPO
Other Major Initiatives:
FORT WORTH, Texas--(BUSINESS WIRE)--Nov. 12, 1998-- -- New Affiliation -- More Selective Affiliation Strategy -- Change in Amortization Policy -- Stock Buyback -- Expansion of Credit Facility
ProMedCo Management Company (Nasdaq/NM:PMCO - news) today announced financial results for the third quarter and nine months ended September 30, 1998. The Company said that its third quarter results met analysts' expectations for the seventh consecutive quarter since its initial public offering in March 1997.
Financial Performance
--------------------------------------------------------------------------------
For the quarter ended September 30, 1998, net physician groups revenue was $81.3 million, up 177% from $29.3 million a year ago. Reflecting today's announced change in amortization policy, net income for the quarter totaled $3.7 million, or $0.16 per share (diluted), on 23.5 million shares, versus net income of $1.6 million, or $0.11 per share (diluted), on 15.3 million shares, in the prior-year period. On a sequential basis, net income for the third quarter of 1998 increased 20.3% over the second quarter of 1998.
For the nine months ended September 30, 1998, net physician groups revenue was $215.5 million, up 184% from $75.8 million a year ago. Net income for the nine-month period totaled $9.1 million, or $0.45 per share (diluted), on 20.4 million shares, versus net income of $3.2 million, or $0.23 per share (diluted), on 13.9 million shares, in the prior-year period. Results for 1997 include the operations of Western Medical Management Corp., Inc., which was consummated on March 17, 1997, and accounted for as a pooling of interests.
New Affiliation
--------------------------------------------------------------------------------
The Company also announced that it has signed a letter of intent to affiliate with South Florida Healthcare Associates (SFHCA) and has entered into an interim management agreement with the 35 physician group. The Company believes that this transaction is additional confirmation of physicians' recognition of the value of an affiliation with ProMedCo. The asset acquisition is expected to close in early 1999, subject to final physician shareholder approval. Other terms of the transaction were not announced.
SFHCA is the largest group of physicians in South Palm Beach County, Florida, and operates in multiple locations throughout the area. The group has the dominant primary care position in a very high growth, secondary market where there is a significant shortage of primary care physicians. In addition to this affiliation, the Company also recently closed two previously announced transactions, Shah Associates, a 32-physician multi-specialty group located in southern Maryland, and Medical Associates of Pinellas, a 42- provider group located in Clearwater, Florida.
Leadership
--------------------------------------------------------------------------------
H. Wayne Posey, ProMedCo's president and chief executive officer, said, ''As a result of our focus on pre-managed care, secondary markets and our discipline in executing this strategy, we have differentiated ProMedCo from other physician practice management companies and have secured a leadership role in our industry. We are recognized by physicians and investors for our disciplined approach and ability to translate strategy into strong performance. With leadership comes responsibility, and we are hopeful that we can help lead our industry by taking the proactive step of adopting an even more selective affiliation strategy. We believe that such an affiliation strategy will accelerate the reduction in consideration paid for affiliations and improve return on invested capital.''
More Selective Affiliation Strategy
--------------------------------------------------------------------------------
Mr. Posey continued, ''As suggested by the affiliation we announced today and others we are currently negotiating, we have experienced no decline in opportunities to affiliate with physician groups. Unlike others in our industry, we are announcing this more selective strategy, not out of necessity, but because it's the right thing to do. We believe that pursuing overly aggressive growth rates is not in the long-term best interests of our shareholders, physicians or our industry. We are confident that this affiliation strategy will generate a strong and more realistic 17% to 20% annual earnings growth rate for the Company for the foreseeable future. Also, a more selective affiliation strategy has many benefits for our company in addition to reduced affiliation pricing, including an even stronger focus on infrastructure and maintaining a strong internal growth rate, a hallmark of our company.''
Mr. Posey added, ''With an exceptionally strong pipeline, and given the absence of significant competition in the multi-specialty sector, we are ideally positioned to be more discriminating, taking full advantage of our leadership position and an improving pricing environment. We believe this strategy will ensure affiliations with groups having strong physician leadership and enable us to focus even more attention on operations and existing relationships, which will further increase long-term value for our physicians and shareholders.''
Change in Amortization Policy
--------------------------------------------------------------------------------
The Company announced today that, effective with the third quarter of 1998, it has changed its policy regarding amortization of intangible assets from 30 years to 25 years in order to respond to certain SEC guidelines. Consistent with its earlier statements, the Company expects the impact to be minimal - approximately $0.01 per share per quarter, or $0.04 per share for the coming year. The third quarter and nine months earnings per share results announced today were reduced by $0.01 reflecting that change in policy. This action will be treated as a change in accounting estimate and does not require the Company to restate reported results for prior periods. It in no way reflects a change in management's estimate of the value and expected duration of its relationships with its physician groups and will have no impact on cash flow or the Company's operations.
Stock Repurchase
--------------------------------------------------------------------------------
ProMedCo also announced that the Company authorized the adoption of a common stock repurchase program whereby the Company may repurchase up to $10 million of its common stock, from time to time, in the open market and in privately negotiated transactions on terms and conditions acceptable to the Company. It is ProMedCo's belief that its shares at current market prices represent an attractive investment for the Company. ProMedCo currently has approximately 23.5 million shares of common stock outstanding on a fully diluted basis.
Credit Facility
--------------------------------------------------------------------------------
ProMedCo also announced that it is in final stages of establishing a new, substantially expanded, senior credit facility with a syndicate of banks led by Bank of America. This new facility will replace the existing senior credit facility and will be used to refinance existing senior debt, finance new physician group affiliations, expand existing physician groups and for general corporate purposes.
In closing, Mr. Posey said, ''We are extremely well positioned. The expansion of our credit facility and our more selective affiliation pace ensures that we will have ample resources for continued strong growth. We are a disciplined company, and we intend to continue carefully constructing the most sound growth platform with the greatest stability in the PPM industry.''
This press release contains ''forward-looking statements'' which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on current expectations and may be significantly impacted by certain risks and uncertainties described herein and in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1997. There can be no assurance that statements made in this press release relating to future events will be achieved.
ProMedCo, headquartered in Fort Worth, Texas, is a physician practice management company. ProMedCo's focus is to affiliate with primary care-driven, multi-specialty physician groups in pre-managed care, secondary markets. The Company provides expertise in managed care, access to capital, information systems and experienced management.
PROMEDCO MANAGEMENT COMPANY
Financial Highlights(1)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------- ------------------
1998 1997 1998 1997
-------- ------- -------- -------
Physician groups revenue, net $ 81,254 $29,303 $215,496 $75,760
Net income $ 3,666 $ 1,602 $ 9,141 $ 3,164
Net earnings per share:
Basic $ 0.17 $ 0.13 $ 0.52 $ 0.29
Diluted $ 0.16 $ 0.11 $ 0.45 $ 0.23
Weighted average shares outstanding:
Basic 21,450 12,043 17,662 10,915
Diluted 23,540 15,260 20,446 13,927
(1)Includes results for the full period in each year for Western
Medical Management Corp., Inc., which was consummated on March 17,
1997, and accounted for as a pooling-of-interests.
Supplemental Data:(1) Three Months Ended
------------------
March 31, June 30,
1998 1998
--------- --------
Net income $ 2,727 $ 3,371
Net earnings per share (diluted) $ 0.12 $ 0.14
Weighted average shares outstanding (diluted) 23,391 23,762
(1)Reflects the pro forma effects of the stock offering in May
1998 and the change in amortization of service agreement rights from
30 years to 25 years as if both had occurred at the beginning of the
year.
--------------------------------------------------------------------------------
Contact:
ProMedCo Management Company, Fort Worth
H. Wayne Posey or Robert D. Smith, 817/335-5035
--------------------------------------------------------------------------------
|
