MDTH Medcath Corp. (MM)

CHARLOTTE, N.C., Nov. 17 /PRNewswire-FirstCall/ -- MedCath Corporation (NASDAQ:MDTH), a healthcare provider focused on the diagnosis and treatment of cardiovascular disease, today announced operating results for its fourth fiscal quarter, which ended September 30, 2005. Fourth quarter highlights: - Net revenue increased 4.5% to $186.7 million - Adjusted EBITDA of $21.7 million, excluding $1.5 million in non-cash personnel expense related to the accelerated vesting of certain unvested options - Adjusted admissions increased 5.3%. Cardiovascular inpatient admissions increased 3.0% Fourth Quarter 2005 Results MedCath's net revenue increased 4.5% to $186.7 million in the fourth quarter of fiscal 2005 from $178.6 million in the fourth quarter of fiscal 2004. Income from operations was $7.2 million in the fourth quarter of fiscal 2005, compared to income from operations of $5.6 million in the fourth quarter of fiscal 2004. Adjusted EBITDA decreased 7.0% to $21.7 million from $23.3 million, and loss from continuing operations was $(2.1) million, or $(0.11) per basic and diluted share, in the fourth quarter of fiscal 2005, compared to loss from continuing operations of $(6.2) million, or $(0.34) per basic and diluted share, in the fourth quarter of fiscal 2004. MedCath's fourth quarter of fiscal 2005 financial results include the following unusual items, including the related impact on earnings per share, after minority interest, where applicable, and income taxes: - A $1.7 million, or a net impact of $0.05 per share, increase in operating expense related to several items, including incremental costs associated with Sarbanes-Oxley implementation, senior management recruiting and relocation expenses, estimated expenses incurred at one hospital due to Hurricane Katrina, legal fees related to a previously disclosed lawsuit filed by MedCath against an information technology company, and other miscellaneous items. - A net increase of $0.02 per share, related to a $2.7 million decrease in supply expense due to a reduction of an accrual at one hospital, offset in part by $1.2 million in additional depreciation expense at one hospital. - $2.7 million, or $0.08 per share, in combined impairment expense related to management's decision to discontinue implementation of certain accounting software, as well as the determination that the carrying value of a management contract in the diagnostics division exceeded its fair value. In comparison, MedCath's fourth quarter of fiscal 2004 financial results were negatively impacted by the following unusual items, including the related impact on earnings per share, after minority interest, where applicable, and income taxes: - Loss on debt refinancing totaling $5.5 million, or a net impact of $0.18 per share, related to a refinancing transaction completed in the quarter; - Impairment expense of $7.2 million, or $0.25 per share, related to MedCath's decision to discontinue implementation of a healthcare information system; - Correction of a construction deficiency at one hospital that reduced Adjusted EBITDA by $760,000 and earnings per share by $0.02; and - Nonrecurring tax benefits that favorably impacted earnings per share by $0.03. "We experienced lower than expected cardiovascular volumes at several facilities. Our operating results were also hurt by increases in our bad debt and supply expenses," said John Casey, chairman and chief executive officer. "I am pleased that we did manage to increase revenues from a year earlier. "We're focused on improving results in our most challenging markets," Casey said. "Ed French, who recently joined us as interim Chief Operating Officer, is putting in place the necessary near-term strategic initiatives to address these markets." Operating Statistics Hospital admissions for the fourth quarter of fiscal 2005 increased 3.9% and adjusted admissions rose 5.3% from the fourth quarter of the previous fiscal year. Same facility hospital division net revenue increased 5.5%, same facility inpatient catheterization procedures increased 5.8% and inpatient surgical procedures increased 4.5%. 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 or loss 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; minority interest; and non-cash share based compensation. 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. Earnings Conference Call and Webcast 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 webcast 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, Nov. 24, 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 9937968. 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 Twelve Months Ended September 30, September 30, 2005 2004 2005 2004 Net revenue $186,670 $178,637 $758,560 $678,605 Operating expenses: Personnel expense 59,657 55,437 234,935 209,682 Medical supplies expense 52,441 50,715 216,329 189,655 Bad debt expense 15,418 13,218 53,663 46,037 Other operating expenses 38,950 35,955 154,168 141,423 Pre-opening expenses - - - 5,103 Depreciation 10,887 10,033 39,571 41,107 Amortization 290 290 1,160 1,160 Loss (gain) on disposal of property, equipment and other assets (814) 114 (569) 87 Impairments of long-lived assets 2,662 7,227 2,662 7,227 Total operating expenses 179,491 172,989 701,919 641,481 Income from operations 7,179 5,648 56,641 37,124 Other income (expenses): Interest expense (8,716) (7,839) (32,943) (27,764) Interest and other income, net 1,187 249 3,090 863 Loss on debt refinancing - (5,090) - (5,090) Equity in net earnings of unconsolidated affiliates 802 916 3,356 3,540 Total other expenses, net (6,727) (11,764) (26,497) (28,451) Income (loss) from continuing operations before minority interest, income taxes and discontinued operations 452 (6,116) 30,144 8,673 Minority interest share of earnings of consolidated subsidiaries (3,611) (3,381) (15,968) (7,259) Income (loss) from continuing operations before income taxes and discontinued operations (3,159) (9,497) 14,176 1,414 Income tax expense (benefit) (1,082) (3,313) 6,025 665 Income (loss) from continuing operations (2,077) (6,184) 8,151 749 Income (loss) from discontinued operations, net of taxes (224) (527) 640 (4,372) Net income (loss) $(2,301) $(6,711) $8,791 $(3,623) Earnings (loss) per share, basic Continuing operations $(0.11) $(0.34) $0.45 $0.04 Discontinued operations (0.01) (0.03) 0.03 (0.24) Earnings per share, basic $(0.12) $(0.37) $0.48 $(0.20) Earnings (loss) per share, diluted Continuing operations $(0.11) $(0.34) $0.42 $0.04 Discontinued operations (0.01) (0.03) 0.03 (0.24) Earnings per share, diluted $(0.12) $(0.37) $0.45 $(0.20) Weighted average number of shares, basic 18,493 18,014 18,286 17,984 Dilutive effect of stock options - - 1,184 - Weighted average number of shares, diluted 18,493 18,014 19,470 17,984 MEDCATH CORPORATION SELECTED OPERATING DATA (In thousands, except per share data and selected operating data) (Unaudited) Three Months Ended September 30, 2005 2004 % Change Statement of Operations Data: Net revenue $186,670 $178,637 4.5% Adjusted EBITDA (1) $21,672 $23,312 (7.0)% Income from operations $7,179 $5,648 27.1% Income (loss) from continuing operations $(2,077) $(6,184) 66.4% Earnings (loss) per share from continuing operations, basic $(0.11) $(0.34) 67.3% Earnings (loss) per share from continuing operations, diluted $(0.11) $(0.34) 67.3% (1) See Supplemental Financial Disclosure--Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures. Twelve Months Ended September 30, 2005 2004 % Change Statement of Operations Data: Net revenue $758,560 $678,605 11.8% Adjusted EBITDA (1) $100,933 $86,705 16.4% Income from operations $56,641 $37,124 52.6% Income (loss) from continuing operations $8,151 $749 988.3% Earnings (loss) per share from continuing operations, basic $0.45 $0.04 970.3% Earnings (loss) per share from continuing operations, diluted $0.42 $0.04 905.2% (1) See Supplemental Financial Disclosure--Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures. Three Months Ended September 30, 2005 2004 % Change Selected Operating Data (consolidated) (a): Number of hospitals 11 11 Licensed beds (b) 672 672 Staffed and available beds (c) 638 596 Admissions (d) 11,370 10,940 3.9% Adjusted admissions (e) 14,926 14,178 5.3% Patient days (f) 37,675 36,645 2.8% Adjusted patient days (g) 49,122 47,158 4.2% Average length of stay (days) (h) 3.31 3.35 (1.2)% Occupancy (i) 64.2% 66.8% Inpatient catheterization procedures 6,155 5,817 5.8% Inpatient surgical procedures 2,966 2,838 4.5% Hospital division revenue $173,313 $164,285 5.5% Twelve Months Ended September 30, 2005 2004 % Change Selected Operating Data (consolidated) (a): Number of hospitals 11 11 Licensed beds (b) 672 672 Staffed and available beds (c) 638 596 Admissions (d) 45,304 41,924 8.1% Adjusted admissions (e) 59,764 53,344 12.0% Patient days (f) 156,568 144,764 8.2% Adjusted patient days (g) 205,360 183,606 11.8% Average length of stay (days) (h) 3.46 3.45 0.3% Occupancy (i) 67.2% 66.4% Inpatient catheterization procedures 23,882 21,688 10.1% Inpatient surgical procedures 11,996 10,606 13.1% Hospital division revenue $703,854 $621,806 13.2% Three Months Ended September 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) 638 596 Admissions (d) 11,370 10,940 3.9% Adjusted admissions (e) 14,926 14,178 5.3% Patient days (f) 37,675 36,645 2.8% Adjusted patient days (g) 49,122 47,158 4.2% Average length of stay (days) (h) 3.31 3.35 (1.2)% Occupancy (i) 64.2% 66.8% Inpatient catheterization procedures 6,155 5,817 5.8% Inpatient surgical procedures 2,966 2,838 4.5% Hospital division revenue $173,313 $164,285 5.5% Twelve Months Ended September 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) 546 531 Admissions (d) 40,395 39,692 1.8% Adjusted admissions (e) 54,034 50,759 6.5% Patient days (f) 139,222 137,532 1.2% Adjusted patient days (g) 185,147 175,241 5.7% Average length of stay (days) (h) 3.45 3.46 (0.3)% Occupancy (i) 69.9% 70.8% Inpatient catheterization procedures 20,446 20,032 2.1% Inpatient surgical procedures 10,811 10,101 7.0% Hospital division revenue $617,170 $582,312 6.0% (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 twelve months ended September 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 (loss) from continuing operations as derived directly from MedCath's consolidated financial statements for the three and twelve months ended September 30, 2005 and 2004. Three Months Ended Twelve Months Ended September 30, September 30, 2005 2004 2005 2004 (in thousands) Income (loss) from continuing operations $(2,077) $(6,184) $8,151 $749 Add: Income tax expense (benefit) (1,082) (3,313) 6,025 665 Minority interest share of earnings of consolidated subsidiaries 3,611 3,381 15,968 7,259 Equity in net earnings of unconsolidated affiliates (802) (916) (3,356) (3,540) Interest and other income, net (1,187) (249) (3,090) (863) Interest expense 8,716 7,839 32,943 27,764 Loss on debt refinancing - 5,090 - 5,090 Impairments of long-lived assets 2,662 7,227 2,662 7,227 Loss (gain) on disposal of property, equipment and other assets (814) 114 (569) 87 Amortization 290 290 1,160 1,160 Depreciation 10,887 10,033 39,571 41,107 Share-based compensation expense 1,468 - 1,468 - Adjusted EBITDA $21,672 $23,312 $100,933 $86,705 DATASOURCE: MedCath Corporation CONTACT: John T. Casey, Chairman and Chief Executive Officer, or James E. Harris, Chief Financial Officer, both of MedCath Corporation, +1-704-708-6600 Web site: http://www.medcath.com/

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