MedCath's 2005 Fiscal Results Expected to be Below Earlier Guidance
October 25 2005 - 8:30AM
PR Newswire (US)
John Casey to Resume Chief Executive Officer Position CHARLOTTE,
N.C., Oct. 25 /PRNewswire-FirstCall/ -- MedCath Corporation
(NASDAQ:MDTH), a national provider of cardiovascular care,
announced today that the Company's operating results for the fiscal
year ending September 30, 2005 will come in lower than
earlier-issued guidance. In addition, MedCath announced that
Chairman John T. Casey would resume the Chief Executive Officer
position. Charlie Slaton, who became Chief Executive Officer
effective October 1, has resigned from the Company to pursue other
interests. The MedCath board of directors will begin an active
search for a new Chief Executive Officer; however, until a suitable
candidate is named and in place, Mr. Casey will continue in the
full-time role of CEO. "I want to thank Charlie for his two years
of commitment and service to MedCath, and wish him the best in his
future endeavors," Casey said. MedCath anticipates that fiscal 2005
revenue will range between $756.0 million and $758.0 million, and
Adjusted EBITDA will range between $95.7 million and $97.7 million.
This revised annual guidance implies fourth quarter net revenue of
between $184.0 million and $186.0 million, and Adjusted EBITDA of
between $16.4 million and $18.4 million. Management's revised
guidance includes approximately $2.2 million in expenses incurred
during the fourth quarter that were not anticipated when the
original guidance was provided. These include expenses associated
with Hurricane Katrina, incremental first year costs associated
with Sarbanes-Oxley compliance, expenses for the recruiting and
relocation of certain senior management positions, legal fees
related to a previously disclosed suit filed by MedCath against an
information technology company as well as other miscellaneous
unexpected items. Management is currently conducting its annual
review of all long-lived assets to assess potential impairments at
September 30, 2005. As such, management is rescinding its
previously issued guidance on income from continuing operations.
Further, management's revised Adjusted EBITDA guidance excludes
non-cash compensation expense associated with the accelerated
vesting of certain unvested options that occurred September 30,
2005, as detailed in the Form 8-K filed by MedCath with the
Securities and Exchange Commission on October 6, 2005. Factors
having a greater than expected negative impact on MedCath's fourth
quarter hospital division operating results include: * Lower than
anticipated financial results at certain of MedCath's newer
hospitals, including Harlingen Medical Center, Louisiana Heart
Hospital and Heart Hospital of Lafayette. Several factors impacted
these hospitals during the quarter, including lower than
anticipated volumes and higher than anticipated bad debt expense at
all three hospitals, and higher than anticipated operating expense
at Louisiana Heart Hospital. Management estimates that Louisiana
Heart Hospital's Adjusted EBITDA was negatively impacted by
approximately $600,000 due to operating expenses incurred to remain
open and continue to provide healthcare services following the
landfall of Hurricane Katrina. * Lower than anticipated
cardiovascular volumes at several of MedCath's other hospitals.
MedCath's same facility adjusted admissions increased 5.4% during
the fourth quarter of fiscal 2005 versus the fourth quarter of
fiscal 2004; however, the number of cardiovascular procedures
performed during the quarter grew at a lower rate. * Significantly
lower than anticipated operating results at one of MedCath's
southwestern hospitals, primarily due to an unfavorable shift in
the type of inpatient cardiovascular procedures performed at the
hospital in comparison to the prior year. "We are disappointed with
our current operating results, and are taking action that we
believe will improve our results," Casey said. "Our immediate
efforts are focused on improving our operating performance in those
markets that were the primary contributors to our poor performance
this quarter." MedCath will provide additional information
regarding its fourth quarter performance in mid-November as part of
its earnings release and management conference call. 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
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 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. This release contains measures of MedCath's 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.
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 our newer hospitals, 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. DATASOURCE: MedCath
Corporation CONTACT: John Casey, Chairman/Chief Executive Officer,
+1-704-708-6600, or James Harris, Chief Financial Officer,
+1-704-708-6600, both of MedCath Corporation
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