Aurora Diagnostics, the Florida-based pathology laboratory with national aspirations, is eyeing its options as its revenue base has eroded over the past year. The company confirmed that it has retained investment banking firm Evercore Partners to assist in a potential restructuring or acquisitions. “Like all pathology lab companies, we have been affected by the recent reimbursement reductions by the Centers for Medicare and Medicaid Services,” said Aurora Executive Vice President Bruce Walton. “Our executives have discussed it candidly in our regular financial reports and investor calls.” Aurora is owned by the Boston-based growth equity firm Summit Partners. It has about 115 pathologists and more than 900 nonphysician employees. It performed some 2.1 million accessions last year. According to a recent filing with the Securities and Exchange Commission (SEC), Aurora posted revenue for the third quarter, ending Sept. 30, of $62.1 million, a 10.5 percent drop compared to the year-ago quarter. For the first nine months of the year, revenue was down more than $25 million, a drop of nearly 12 percent. And while the company posted a modest operating profit in the quarter, it still posted a net loss of nearly $3.5 million. Altogether, Aurora reported only $2.3 million cash […]
Aurora Diagnostics, the Florida-based pathology laboratory with national aspirations, is eyeing its options as its revenue base has eroded over the past year.
The company confirmed that it has retained investment banking firm Evercore Partners to assist in a potential restructuring or acquisitions.
“Like all pathology lab companies, we have been affected by the recent reimbursement reductions by the Centers for Medicare and Medicaid Services,” said Aurora Executive Vice President Bruce Walton. “Our executives have discussed it candidly in our regular financial reports and investor calls.”
Aurora is owned by the Boston-based growth equity firm Summit Partners. It has about 115 pathologists and more than 900 nonphysician employees. It performed some 2.1 million accessions last year.
According to a recent filing with the Securities and Exchange Commission (SEC), Aurora posted revenue for the third quarter, ending Sept. 30, of $62.1 million, a 10.5 percent drop compared to the year-ago quarter. For the first nine months of the year, revenue was down more than $25 million, a drop of nearly 12 percent. And while the company posted a modest operating profit in the quarter, it still posted a net loss of nearly $3.5 million.
Altogether, Aurora reported only $2.3 million cash on hand, down from $10.8 million at the end of 2012. And despite the dip in revenue, accounts receivable were up $1.3 million to $30.9 million at the end of the quarter, suggesting some slowing of collectables. Its interest payments for the first nine months of the year were $24.4 million, or about 13 percent of revenues.
The company acknowledged in the SEC filing that business conditions have had a significant impact on free cash flow and that it may be taking significant impairment charges in the fourth quarter. It took a $114.5 million impairment charge in 2012, also related to what company officials called a difficult business climate.
As a result of the current business environment, Walton said the company was exploring acquiring other pathology practices, saying it has the capital to do so. It has also expanded its sales staff.
Michael Snyder, president of Clinical Lab Business Solutions, a New York-area consulting firm, noted that the reductions in reimbursement to labs from the Medicare program and commercial payers should not have hit Aurora any worse than any other company operating in the same space.
“Their debt seems to be a large issue,” Snyder said. He added that their management should be scrutinized for allowing indebtedness to reach such a high level. That outside help has been retained is not a surprise, according to Snyder.
“Sounds like a case of when everything goes wrong in a really tough industry,” he said.
Takeaway: Aurora Diagnostics’ seeking outside help is emblematic of the collateral damage from eroding reimbursements in the lab sector.
