MDTH Medcath Corp. (MM)

MedCath Corporation Reports Second Quarter Earnings National Study Shows MedCath Hospitals Excel Once Again in Key Patient Care Measures CHARLOTTE, N.C., May 5 /PRNewswire-FirstCall/ -- MedCath Corporation (NASDAQ:MDTH), a healthcare provider focused on the diagnosis and treatment of cardiovascular disease, today announced its operating results for its second quarter ended March 31, 2005, and the results of the fourth annual comparative study on quality of care at MedCath hospitals. Second quarter highlights: - Net revenue increased 13.8% - Same facility hospital division net revenue increased 5.3% - Same facility adjusted admissions increased 9.0% - Earnings from continuing operations per diluted share of $0.22 Second Quarter 2005 Results MedCath's net revenue increased 13.8% to $192.0 million in the second quarter of fiscal 2005 from $168.7 million in the second quarter of fiscal 2004. Income from operations was $17.8 million in the second quarter of fiscal 2005, compared to income from operations of $11.4 million in the second quarter of fiscal 2004. Adjusted EBITDA increased 24.7% to $27.6 million from $22.1 million and income from continuing operations was $4.3 million, or $0.22 per diluted share, in the second quarter of fiscal 2005, compared to income from continuing operations of $3.7 million, or $0.20 per diluted share, in the second quarter of fiscal 2004. Net income for the quarter, including the results of The Heart Hospital of Milwaukee, which is accounted for as discontinued operations, totaled $3.8 million, or $0.20 per diluted share compared to net income of $2.6 million, or $0.14 per share in the second quarter of fiscal 2004. "Overall, we are pleased with our second quarter and our core business is well positioned for continued growth," said John T. Casey, MedCath's chairman and chief executive officer. "In addition, we expect that our considerable new business efforts will begin to result in the announcement of several new strategic partnerships in the near future." Operating Statistics and Cash Flow Hospital admissions for the second quarter of fiscal 2005 increased 10.3% and adjusted admissions rose 16.7% from the second quarter of the previous fiscal year. Hospital division net revenue increased 15.0%. Same facility admissions increased 1.6%, adjusted admissions increased 9.0%, and inpatient surgical procedures increased 10.3%, which contributed to the increase in same facility hospital division net revenue of 5.3% during the quarter versus the prior year. Net cash provided by operating activities of continuing operations for the second quarter of fiscal 2005 was $19.1 million, up from $5.2 million for the second quarter of fiscal 2004. The Lewin Group Report MedCath also reported that The Lewin Group, Inc., a nationally recognized consultant to the health and human services industries, has released data demonstrating once again high-quality outcomes for MedCath heart hospitals compared with peer community hospitals across the country. The report, "A Comparative Study of Patient Severity, and Quality of Care between MedCath Heart Hospitals and Peer Hospitals," analyzes publicly available Medicare data for the federal fiscal year 2003. Compared with a sample of 1,013 peer community hospitals that perform open-heart surgery, the report indicated that, on average, MedCath heart hospitals: - Have a 17.8% lower in-hospital mortality rate for Medicare cardiac cases, on a risk-adjusted basis. - Have 23% shorter lengths of stay for cardiac cases, on a severity-adjusted basis (3.69 days vs. 4.79 days). - Discharge a higher proportion of patients to their homes (86.9 % versus 71.1%) and transfer a lower proportion of patients to other facilities or home health agencies. - Have lower rates of medical complications versus inpatients treated at the peer community hospitals, based on an analysis of secondary diagnostic codes. This is the fourth consecutive year that MedCath contracted with Lewin to conduct the study, and the results are consistent with the previous three years. The nine hospitals that MedCath operated in the fiscal year that ended Sept. 30, 2003, were compared with 1,013 peer hospitals that perform open-heart surgery in the United States (189 of which were major teaching hospitals). MedCath now operates 12 hospitals. "It's clear from the Lewin studies that our commitment to patient-focused care results in consistently superior clinical outcomes," Casey said. "We look forward to working with our physician partners to continue to deliver this level of care to our existing communities." Use of Non-GAAP Financial Measures This release contains measures of MedCath's historical financial performance that are not calculated and presented in conformity with generally accepted accounting principles ("GAAP"), including Adjusted EBITDA. Adjusted EBITDA represents MedCath's income from continuing operations before interest expense; taxes; depreciation; amortization; gain or loss on disposal of property, equipment and other assets; interest and other income, net; equity in net earnings of unconsolidated affiliates; and minority interest. MedCath's management uses Adjusted EBITDA to measure the performance of the company's various operating entities, to compare actual results to historical and budgeted results, and to make capital allocation decisions. Management provides Adjusted EBITDA to investors to assist them in performing their analysis of MedCath's historical operating results. Further, management believes that many investors in MedCath also invest in, or have knowledge of, other healthcare companies that use Adjusted EBITDA as a financial performance measure. Because Adjusted EBITDA is a non-GAAP measure, Adjusted EBITDA, as defined above, may not be comparable to other similarly titled measures of other companies. MedCath has included a supplemental schedule with the financial statements that accompany this press release that reconciles historical Adjusted EBITDA to MedCath's income from continuing operations. Management will discuss and answer questions regarding MedCath's quarterly results today during a 10 a.m. ET conference call. In the United States, you may participate by dialing (877) 697-5351. International callers should dial (706) 634-0602. The conference ID for both domestic and international callers is "MedCath." A live web cast will also be available on the company's web site, http://www.medcath.com/. This information will be available on the web site on or immediately following the conference call for 30 days. A recorded replay of the call will be available until 11:59 p.m. ET, May 12, 2005. To access the replay, domestic callers should dial (800) 642-1687 and international callers should dial (706) 645-9291. The archived conference ID is 5283891. This press release and the financial information included therewith will be accessible on the web, by going to http://www.medcath.com/, "Investor Relations," then clicking on "News." MedCath Corporation, headquartered in Charlotte, N.C., is a healthcare provider focused on the diagnosis and treatment of cardiovascular disease. While each of its majority-owned hospitals is licensed as a general acute care hospital, MedCath focuses on serving the unique needs of patients suffering from cardiovascular disease. Together with its physician partners who own equity interests in them, MedCath currently owns and operates twelve hospitals with a total of 727 licensed beds, located in Arizona, Arkansas, California, Louisiana, New Mexico, Ohio, South Dakota, and Texas. In addition to its hospitals, MedCath provides cardiovascular care services in diagnostic and therapeutic facilities located in various states and through mobile cardiac catheterization laboratories. Parts of this announcement contain forward-looking statements that involve risks and uncertainties. Although management believes that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant economic, regulatory and competitive uncertainties and contingencies that are difficult or impossible to predict accurately and are beyond our control. Actual results could differ materially from those projected in these forward-looking statements. We do not assume any obligation to update these statements in a news release or otherwise should material facts or circumstances change in ways that would affect their accuracy. These various risks and uncertainties are described in detail in Exhibit 99.1 to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 14, 2004. A copy of this report, including exhibits, is available on the Internet site of the Commission at http://www.sec.gov/. These risks and uncertainties include, among others, the impact of the Medicare Prescription Drug Improvement Act of 2003 and other healthcare reform initiatives, possible reductions or changes in reimbursements from government or third party payors that would decrease our revenue, greater than anticipated losses at new hospitals during the ramp up period, a negative finding by a regulatory organization with oversight of one of our hospitals, and changes in medical or other technology and reimbursement rates for new technologies. MEDCATH CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended March 31, March 31, 2005 2004 2005 2004 Net revenue $192,014 $168,680 $376,774 $323,803 Operating expenses: Personnel expense 59,402 52,415 116,615 99,427 Medical supplies expense 55,564 45,980 108,050 87,957 Bad debt expense 11,947 9,475 23,431 23,263 Other operating expenses 37,505 36,595 75,905 68,115 Pre-opening expenses - 2,087 - 5,103 Depreciation 9,431 10,430 19,167 20,153 Amortization 290 290 580 580 Loss (gain) on disposal of property, equipment and other assets 71 33 74 (51) Total operating expenses 174,210 157,305 343,822 304,547 Income from operations 17,804 11,375 32,952 19,256 Other income (expenses): Interest expense (7,775) (6,742) (15,773) (13,062) Interest and other income, net 621 161 1,016 396 Equity in net earnings of unconsolidated affiliates 886 1,147 1,655 1,724 Total other expenses, net (6,268) (5,434) (13,102) (10,942) Income from continuing operations before minority interest, income taxes and discontinued operations 11,536 5,941 19,850 8,314 Minority interest share of (earnings) losses of consolidated subsidiaries (4,402) 65 (8,401) (1,026) Income from continuing operations before income taxes and discontinued operations 7,134 6,006 11,449 7,288 Income tax expense 2,856 2,292 4,579 2,809 Income from continuing operations 4,278 3,714 6,870 4,479 Income (loss) from discontinued operations, net of taxes (475) (1,073) 1,473 (2,771) Net income $3,803 $2,641 $8,343 $1,708 Earnings (loss) per share, basic Continuing operations $0.24 $0.21 $0.38 $0.25 Discontinued operations (0.03) (0.06) 0.08 (0.15) Earnings per share, basic $0.21 $0.15 $0.46 $0.10 Earnings (loss) per share, diluted Continuing operations $0.22 $0.20 $0.36 $0.24 Discontinued operations (0.02) (0.06) 0.07 (0.15) Earnings per share, diluted $0.20 $0.14 $0.43 $0.09 Weighted average number of shares, basic 18,177 17,985 18,110 17,967 Dilutive effect of stock options 1,285 514 1,139 300 Weighted average number of shares, diluted 19,462 18,499 19,249 18,267 MEDCATH CORPORATION SELECTED OPERATING DATA (In thousands, except per share data and selected operating data) (Unaudited) Three Months Ended Six Months Ended March 31, March 31, 2005 2004 % Change 2005 2004 % Change Statement of Operations Data: Net revenue $192,014 $168,680 13.8% $376,774 $323,803 16.4% Adjusted EBITDA (1) $27,596 $22,128 24.7% $52,773 $39,938 32.1% Income from operations $17,804 $11,375 56.5% $32,952 $19,256 71.1% Income from continuing operations $4,278 $3,714 15.2% $6,870 $4,479 53.4% Earnings per share from continuing operations, basic $0.24 $0.21 14.0% $0.38 $0.25 52.2% Earnings per share from continuing operations, diluted $0.22 $0.20 9.5% $0.36 $0.24 51.7% (1) See Supplemental Financial Disclosure--Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures. Three Months Ended Six Months Ended March 31, March 31, 2005 2004 % Change 2005 2004 % Change Selected Operating Data (consolidated) (a): Number of hospitals 11 11 11 11 Licensed beds (b) 672 672 672 672 Staffed and available beds (c) 631 585 631 585 Admissions (d) 11,719 10,627 10.3% 22,602 20,213 11.8% Adjusted admissions (e) 15,617 13,386 16.7% 29,893 25,470 17.4% Patient days (f) 42,503 37,571 13.1% 79,661 71,659 11.2% Adjusted patient days (g) 56,521 47,252 19.6% 104,878 90,154 16.3% Average length of stay (days) (h) 3.63 3.54 2.5% 3.52 3.55 (0.8)% Occupancy (i) 74.8% 70.6% 69.4% 66.9% Inpatient catheterization procedures 5,891 5,453 8.0% 11,699 10,107 15.8% Inpatient surgical procedures 3,151 2,688 17.2% 5,926 5,010 18.3% Hospital division revenue $178,244 $155,019 15.0% $349,473 $294,949 18.5% Three Months Ended Six Months Ended March 31, March 31, 2005 2004 % Change 2005 2004 % Change Selected Operating Data (same facility): Number of hospitals 9 9 9 9 Licensed beds (b) 580 580 580 580 Staffed and available beds (c) 547 531 547 531 Admissions (d) 10,499 10,338 1.6% 20,365 19,924 2.2% Adjusted admissions (e) 14,206 13,037 9.0% 27,320 25,121 8.8% Patient days (f) 38,076 36,621 4.0% 71,420 70,709 1.0% Adjusted patient days (g) 51,401 46,110 11.5% 95,414 89,012 7.2% Average length of stay (days) (h) 3.63 3.54 2.5% 3.51 3.55 (1.1)% Occupancy (i) 77.3% 75.8% 71.7% 72.8% Inpatient catheterization procedures 5,041 5,248 (3.9)% 10,141 9,902 2.4% Inpatient surgical procedures 2,870 2,603 10.3% 5,401 4,925 9.7% Hospital division revenue $157,803 $149,927 5.3% $310,872 $289,856 7.3% (a) Selected operating data includes consolidated hospitals as of the end of the period reported in continuing operations but does not include hospitals which are accounted for using the equity method or as discontinued operations in our consolidated financial statements. (b) Licensed beds represent the number of beds for which the appropriate state agency licenses a facility regardless of whether the beds are actually available for patient use. (c) Staffed and available beds represent the number of beds that are readily available for patient use at the end of the period. (d) Admissions represent the number of patients admitted for inpatient treatment. (e) Adjusted admissions is a general measure of combined inpatient and outpatient volume. We computed adjusted admissions by dividing gross patient revenue by gross inpatient revenue and then multiplying the quotient by admissions. (f) Patient days represent the total number of days of care provided to inpatients. (g) Adjusted patient days is a general measure of combined inpatient and outpatient days. We computed adjusted patient days by dividing gross patient revenue by gross inpatient revenue and then multiplying the quotient by patient days. (h) Average length of stay (days) represents the average number of days inpatients stay in our hospitals. (i) We computed occupancy by dividing patient days by the number of days in the period and then dividing the quotient by the number of staffed and available beds. MEDCATH CORPORATION SUPPLEMENTAL FINANCIAL DISCLOSURE - RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES (Unaudited) The following table reconciles Adjusted EBITDA with MedCath's income from continuing operations as derived directly from MedCath's consolidated financial statements for the three and six months ended March 31, 2005 and 2004. Three Months Ended Six Months Ended March 31, March 31, 2005 2004 2005 2004 (in thousands) Income from continuing operations $4,278 $3,714 $6,870 $4,479 Add: Income tax expense 2,856 2,292 4,579 2,809 Minority interest share of earnings (losses) of consolidated subsidiaries 4,402 (65) 8,401 1,026 Equity in net earnings of unconsolidated affiliates (886) (1,147) (1,655) (1,724) Interest and other income, net (621) (161) (1,016) (396) Interest expense 7,775 6,742 15,773 13,062 Loss (gain) on disposal of property, equipment and other assets 71 33 74 (51) Amortization 290 290 580 580 Depreciation 9,431 10,430 19,167 20,153 Adjusted EBITDA $27,596 $22,128 $52,773 $39,938 DATASOURCE: MedCath Corporation CONTACT: John T. Casey, Chairman/Chief Executive Officer, +1-704-708-6600, or James E. Harris, Chief Financial Officer, +1-704-708-6600, both of MedCath Corporation Web site: http://www.medcath.com/

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