MDTH Medcath Corp. (MM)

CHARLOTTE, N.C., Aug. 4 /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 third quarter ended June 30, 2005. Third quarter highlights: - Net revenue increased 10.8% - Hospital division net revenue increased 11.4% - Same facility adjusted admissions increased 9.1% - Income from continuing operations per diluted share of $0.17, up from $0.13 in the third quarter of fiscal 2004 Third Quarter 2005 Results MedCath's net revenue increased 10.8% to $195.1 million in the third quarter of fiscal 2005 from $176.2 million in the third quarter of fiscal 2004. Income from operations was $16.5 million in the third quarter of fiscal 2005, compared to income from operations of $12.2 million in the third quarter of fiscal 2004. Adjusted EBITDA increased 12.9% to $26.5 million from $23.5 million and income from continuing operations was $3.4 million, or $0.17 per diluted share, in the third quarter of fiscal 2005, compared to income from continuing operations of $2.5 million, or $0.13 per diluted share, in the third 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 $2.7 million, or $0.14 per diluted share compared to net income of $1.4 million, or $0.07 per share in the third quarter of fiscal 2004. "We experienced solid net revenue gains during the quarter, primarily driven by an overall increase in patient volumes," said John T. Casey, MedCath's chairman and chief executive officer. "While we also experienced strong growth in our Adjusted EBITDA, our results were negatively impacted by an increase in our bad debt expense that resulted from an overall rise in the number of self-pay patient visits in several of our markets." During the quarter, revenue from self-pay patients, the primary source of bad debt expense, represented 7.4% of net revenue. In comparison, revenue from self-pay patients represented 5.5% of net revenue in the third quarter of fiscal 2004. The increase in self-pay revenue resulted in bad debt expense equaling 7.6% of net revenue in the third quarter of fiscal 2005 versus 5.4% in the third quarter of fiscal 2004. "Also impacting our financial results this quarter were lower than anticipated volumes at our Louisiana Heart Hospital," Casey said. "We have begun implementing strategic initiatives intended to improve this hospital's operating performance. We remain optimistic about the hospital's long-term potential." Operating Statistics, Cash Flow and Income Taxes Total and same facility hospital admissions for the third quarter of fiscal 2005 increased 5.3% and adjusted admissions rose 9.1% from the third quarter of the previous fiscal year. MedCath experienced increases in both inpatient catheterization and inpatient surgical procedures of 4.6% and 12.5% respectively, which contributed to an 11.4% net revenue increase in the hospital division during the quarter versus the prior year. Beginning with the third quarter of fiscal 2005, Heart Hospital of Lafayette and Texsan Heart Hospital, which both opened during the second quarter of fiscal 2004, began to be reported as same facility hospitals. As such, consolidated hospital division and same facility hospital division results are identical for the third quarter's operating statistics and financial comparisons included in this release. Net cash provided by operating activities of continuing operations for the third quarter of fiscal 2005 was $19.5 million. Capital expenditures totaled $3.4 million for the quarter. As of June 30, 2005 cash and cash equivalents totaled $142.1 million, and long-term debt and leases, including current portion, equaled $357.2 million. During the third quarter, MedCath increased its annual effective tax rate to 41.0% resulting in an effective rate of 42.9% for the quarter. The increase in the overall effective rate is based on the impact of certain non-deductible items and other adjustments. 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, Aug. 11, 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 7160923. 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., develops, owns and operates hospitals in partnership with physicians, most of whom are cardiologists and cardiovascular surgeons. While each of its 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 owns and operates 12 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. MedCath also provides consulting and management services tailored to cardiologists and cardiovascular surgeons. 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 proposed legislation to extend the provisions 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 Nine Months Ended June 30, June 30, 2005 2004 2005 2004 Net revenue $195,116 $176,165 $571,890 $499,968 Operating expenses: Personnel expense 58,663 54,818 175,278 154,245 Medical supplies expense 55,838 50,983 163,888 138,940 Bad debt expense 14,814 9,556 38,245 32,819 Other operating expenses 39,313 37,353 115,218 105,468 Pre-opening expenses - - - 5,103 Depreciation 9,517 10,921 28,684 31,074 Amortization 290 290 870 870 Loss (gain) on disposal of property, equipment and other assets 171 24 245 (27) Total operating expenses 178,606 163,945 522,428 468,492 Income from operations 16,510 12,220 49,462 31,476 Other income (expenses): Interest expense (8,454) (6,863) (24,227) (19,925) Interest and other income, net 887 218 1,903 614 Equity in net earnings of unconsolidated affiliates 899 900 2,554 2,624 Total other expenses, net (6,668) (5,745) (19,770) (16,687) Income from continuing operations before minority interest, income taxes and discontinued operations 9,842 6,475 29,692 14,789 Minority interest share of earnings of consolidated subsidiaries (3,956) (2,852) (12,357) (3,878) Income from continuing operations before income taxes and discontinued operations 5,886 3,623 17,335 10,911 Income tax expense 2,528 1,169 7,107 3,978 Income from continuing operations 3,358 2,454 10,228 6,933 Income (loss) from discontinued operations, net of taxes (609) (1,074) 864 (3,845) Net income $2,749 $1,380 $11,092 $3,088 Earnings (loss) per share, basic Continuing operations $0.18 $0.14 $0.56 $0.38 Discontinued operations (0.03) (0.06) 0.05 (0.21) Earnings per share, basic $0.15 $0.08 $0.61 $0.17 Earnings (loss) per share, diluted Continuing operations $0.17 $0.13 $0.53 $0.38 Discontinued operations (0.03) (0.06) 0.04 (0.21) Earnings per share, diluted $0.14 $0.07 $0.57 $0.17 Weighted average number of shares, basic 18,425 17,990 18,216 17,974 Dilutive effect of stock options 1,248 826 1,193 482 Weighted average number of shares, diluted 19,673 18,816 19,409 18,456 MEDCATH CORPORATION SELECTED OPERATING DATA (In thousands, except per share data and selected operating data) (Unaudited) Three Months Ended June 30, 2005 2004 % Change Statement of Operations Data: Net revenue $195,116 $176,165 10.8% Adjusted EBITDA (1) $26,488 $23,455 12.9% Income from operations $16,510 $12,220 35.1% Income from continuing operations $3,358 $2,454 36.8% Earnings per share from continuing operations, basic $0.18 $0.14 33.6% Earnings per share from continuing operations, diluted $0.17 $0.13 30.9% (1) See Supplemental Financial Disclosure -- Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures. Three Months Ended June 30, 2005 2004 % Change Selected Operating Data (consolidated) (a): Number of hospitals 11 11 Licensed beds (b) 672 672 Staffed and available beds (c) 631 601 Admissions (d) 11,345 10,774 5.3% Adjusted admissions (e) 14,963 13,713 9.1% Patient days (f) 39,232 36,460 7.6% Adjusted patient days (g) 51,443 46,255 11.2% Average length of stay (days) (h) 3.46 3.38 2.4% Occupancy (i) 68.3% 66.7% Inpatient catheterization procedures 6,028 5,764 4.6% Inpatient surgical procedures 3,104 2,758 12.5% Hospital division revenue $181,068 $162,573 11.4% Three Months Ended June 30, 2005 2004 % Change Selected Operating Data (same facility)(a): Number of hospitals 11 11 Licensed beds (b) 672 672 Staffed and available beds (c) 631 601 Admissions (d) 11,345 10,774 5.3% Adjusted admissions (e) 14,963 13,713 9.1% Patient days (f) 39,232 36,460 7.6% Adjusted patient days (g) 51,443 46,255 11.2% Average length of stay (days) (h) 3.46 3.38 2.4% Occupancy (i) 68.3% 66.7% Inpatient catheterization procedures 6,028 5,764 4.6% Inpatient surgical procedures 3,104 2,758 12.5% Hospital division revenue $181,068 $162,573 11.4% (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. Same facility for the nine months ended June 30, 2005 excludes the results of Texsan Heart Hospital and Heart Hospital of Lafayette. (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 SELECTED OPERATING DATA (In thousands, except per share data and selected operating data) (Unaudited) Nine Months Ended June 30, 2005 2004 % Change Statement of Operations Data: Net revenue $571,890 $499,968 14.4% Adjusted EBITDA (1) $79,261 $63,393 25.0% Income from operations $49,462 $31,476 57.1% Income from continuing operations $10,228 $6,933 47.5% Earnings per share from continuing operations, basic $0.56 $0.38 49.4% Earnings per share from continuing operations, diluted $0.53 $0.38 40.3% (1) See Supplemental Financial Disclosure -- Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures. Nine Months Ended June 30, 2005 2004 % Change Selected Operating Data (consolidated) (a): Number of hospitals 11 11 Licensed beds (b) 672 672 Staffed and available beds (c) 631 601 Admissions (d) 33,947 30,985 9.6% Adjusted admissions (e) 44,851 39,188 14.5% Patient days (f) 118,893 108,119 10.0% Adjusted patient days (g) 156,264 136,451 14.5% Average length of stay (days) (h) 3.50 3.49 0.3% Occupancy (i) 69.0% 65.7% Inpatient catheterization procedures 17,727 15,871 11.7% Inpatient surgical procedures 9,030 7,768 16.2% Hospital division revenue $530,541 $457,521 16.0% Nine Months Ended June 30, 2005 2004 % Change Selected Operating Data (same facility) (a): Number of hospitals 9 9 Licensed beds (b) 580 580 Staffed and available beds (c) 547 531 Admissions (d) 30,414 29,797 2.1% Adjusted admissions (e) 40,749 37,804 7.8% Patient days (f) 106,099 104,247 1.8% Adjusted patient days (g) 141,431 131,945 7.2% Average length of stay (days) (h) 3.49 3.50 (0.3)% Occupancy (i) 71.0% 71.7% Inpatient catheterization procedures 15,259 14,992 1.8% Inpatient surgical procedures 8,171 7,489 9.1% Hospital division revenue $469,272 $436,131 7.6% (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. Same facility for the nine months ended June 30, 2005 excludes the results of Texsan Heart Hospital and Heart Hospital of Lafayette. (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 nine months ended June 30, 2005 and 2004. Three Months Nine Months Ended June 30, Ended June 30, 2005 2004 2005 2004 (in thousands) Income from continuing operations $3,358 $2,454 $10,228 $6,933 Add: Income tax expense 2,528 1,169 7,107 3,978 Minority interest share of earnings of consolidated subsidiaries 3,956 2,852 12,357 3,878 Equity in net earnings of unconsolidated affiliates (899) (900) (2,554) (2,624) Interest and other income, net (887) (218) (1,903) (614) Interest expense 8,454 6,863 24,227 19,925 Loss (gain) on disposal of property, equipment and other assets 171 24 245 (27) Amortization 290 290 870 870 Depreciation 9,517 10,921 28,684 31,074 Adjusted EBITDA $26,488 $23,455 $79,261 $63,393 DATASOURCE: MedCath Corporation CONTACT: John T. Casey, Chairman and Chief Executive Officer, or James E. Harris, Chief Financial Officer of MedCath Corporation, +1-704-708-6600 Web site: http://www.medcath.com/

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