Lincare Holdings (LNCR), a leading provider of oxygen and respiratory therapies, reported fourth quarter fiscal 2010 earnings per share of 48 cents, matching the Zacks Consensus Estimate while exceeding the year-ago earnings of 41 cents. Net income climbed 13.4% year over year to $46.1 million on the back of higher revenues.
For fiscal 2010, earnings of $1.87 per share also came in line with the Zacks Consensus Estimate and surpassed the year-ago earnings of $1.32. Profit cruised by a third year over year to $181.6 million.
Revenues for the fourth quarter leaped 4% year over year to $422.1 million, but missed the Zacks Consensus Estimate of $426 million. For the full year, sales rose 7.7% year over year to $1,669 million, also trailing the Zacks Consensus Estimate of $1,673 million. Revenues for the quarter and fiscal year include an unfavorable impact of $16 million and $34.9 million, respectively, associated with Medicare payment changes.
Operating income for the quarter jumped roughly 10% year over year to $84.5 million with operating margin increasing to 20% from 18.9% a year ago owing to higher sales.
Lincare generated $360.8 million (up 2.2% year over year) in cash from operation during fiscal 2010 and spent $110.2 million and $11.4 million in net capital expenditures and business acquisitions, respectively. Cash and investments rose more than two and half fold year over year to $204.2 million while total long-term debt increased 2% to $494.9 million.
Florida-based Lincare is one of the leading providers of oxygen and other respiratory therapy services to patients at home. It offers services for chronic obstructive pulmonary disease (“COPD”), emphysema, chronic bronchitis or asthma, supplemental oxygen and other respiratory therapy services.
Lincare provides services and equipment to more than 750,000 customers across the U.S through 1,090 local centers. The company remains committed to boosting sales through its leadership in respiratory therapy services and expansion of product range.
Lincare derives a major portion of its revenue from government sources and is therefore vulnerable to reimbursement rate cuts. Center for Medicare and Medicaid Services (“CMS”) has launched a new “Competitive Bidding Program” for items of durable medical equipment (“DME”) including home oxygen in nine metropolitan markets effective 2011. The bidding is aimed at determining the reimbursement rates offered by Medicare for DME in these markets.
The CMS released, on November 3, 2010, the list of suppliers who have signed contracts with the Medicare program to offer certain medical equipment and supplies to beneficiaries in nine metropolitan markets across the U.S. under the competitive bidding program. As anticipated, Lincare was awarded contracts in two of these nine markets, Charlotte and Miami.
While Lincare is well placed to be a winner in the home oxygen space in the long run, its near-term outlook is plagued by an uncertain reimbursement environment. The CMS bidding program represents a major headwind for the company as it will substantially affect its oxygen business resulting from the cap on reimbursement rates.
(Note: We are reissuing this blog to correct an error. The initial article, published February 8, 2011, contained an error that referred to Gentiva Health Services [GTIV] as a competitor. It is not accurately considered thus, and the original article should not be relied upon.)
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