MDTH Medcath Corp. (MM)

CHARLOTTE, N.C., May 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 second fiscal quarter, which ended March 31, 2006. Second quarter highlights: * Net revenue increased 8.6% to $208.5 million * Adjusted EBITDA of $27.8 million * Adjusted admissions increased 4.6%, driven by market share gains in the Company's newest markets Second Quarter 2006 Results MedCath's net revenue increased 8.6% to $208.5 million in the second quarter of fiscal 2006 from $192.0 million in the second quarter of fiscal 2005. Income from operations was $7.7 million in the second quarter of fiscal 2006, compared to income from operations of $17.8 million in the second quarter of fiscal 2005. Adjusted EBITDA increased 0.6% to $27.8 million from $27.6 million and the loss from continuing operations was $1.9 million, or $0.10 per diluted share, in the second quarter of fiscal 2006, compared to income from continuing operations of $4.3 million, or $0.22 per diluted share, in the second quarter of fiscal 2005. Of note, MedCath's results from continuing operations for the second quarter of fiscal 2006 were negatively impacted by $0.33 per share due to $6.1 million, net of taxes, of non-cash share-based compensation included in personnel expense for stock options issued during the quarter as required under FASB Statement No. 123R that MedCath adopted effective October 1, 2005. MedCath's second quarter of fiscal 2006 financial results contain the following unusual items. Per share amounts reflect minority interest, where applicable, and income taxes: * A $1.0 million, or net impact of $0.03 per share, reduction in revenue due to prior period contractual adjustments related to estimated Medicare and Medicaid cost report settlements, and * A $635,000, or net impact of $0.02 per share, increase in interest expense related to the expensing of deferred loan acquisition costs associated with the prepayment of $11.9 million of senior notes. "We are pleased with our volumes for the quarter, and the ability to translate this incremental growth to improved earnings and margins," said Ed French, MedCath's president and chief executive officer. "We began to see some operational momentum at several of our challenged markets this quarter and we are working hard to maintain this momentum for the remainder of this fiscal year. I am also pleased to have Phil Mazzuca on our team as our Chief Operating Officer to assist in making this happen." Operating Statistics and Cash Flow Hospital admissions for the second quarter of fiscal 2006 increased 7.2% and adjusted admissions rose 4.6% from the second quarter of the previous fiscal year. Net revenue for our majority-owned hospitals increased 8.6%. Net cash provided by operating activities of continuing operations for the second quarter of fiscal 2006 was $14.1 million, down from $18.0 million for the second quarter of fiscal 2005. 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 (loss) from continuing operations before interest expense; interest and other income, net; income tax expense (benefit); depreciation; amortization; non-cash compensation expense related to share-based compensation; gain or loss on disposal of property, equipment and other assets; 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 (loss) 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, 2006. To access the replay, domestic callers should dial (800) 642-1687 and international callers should dial (706) 645-9291. The archived conference ID is 7521424. 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. MedCath focuses on serving the unique needs of patients suffering from cardiovascular disease. MedCath currently owns interests in 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, MedCath manages the cardiovascular program at various hospitals operated by other parties. Further, MedCath provides cardiovascular care services in diagnostic and therapeutic facilities located in various states. 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, 2005. A copy of this report, including exhibits, is available on the internet site of the Commission at http://www.sec.gov/ . MEDCATH CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended March 31, March 31, 2006 2005 2006 2005 Net revenue $208,532 $192,014 $393,653 $376,774 Operating expenses: Personnel expense 73,195 59,402 133,670 116,615 Medical supplies expense 58,484 55,564 110,443 108,050 Bad debt expense 17,826 11,947 32,264 23,431 Other operating expenses 41,480 37,505 82,533 75,905 Depreciation 9,669 9,431 19,310 19,167 Amortization 252 290 504 580 (Gain) loss on disposal of property, equipment and other assets (37) 71 82 74 Total operating expenses 200,869 174,210 378,806 343,822 Income from operations 7,663 17,804 14,847 32,952 Other income (expenses): Interest expense (8,908) (7,775) (17,976) (15,773) Interest and other income, net 1,388 621 2,805 1,016 Equity in net earnings of unconsolidated affiliates 1,410 886 2,475 1,655 Total other expenses, net (6,110) (6,268) (12,696) (13,102) Income from continuing operations before minority interest, income taxes and discontinued operations 1,553 11,536 2,151 19,850 Minority interest share of earnings of consolidated subsidiaries (4,790) (4,402) (7,608) (8,401) Income (loss) from continuing operations before income taxes and discontinued operations (3,237) 7,134 (5,457) 11,449 Income tax expense (benefit) (1,297) 2,856 (2,184) 4,579 Income (loss) from continuing operations (1,940) 4,278 (3,273) 6,870 Income (loss) from discontinued operations, net of taxes - (475) - 1,473 Net income (loss) $ (1,940) $ 3,803 $ (3,273) $ 8,343 Earnings (loss) per share, basic Continuing operations $ (0.10) $ 0.24 $ (0.18) $ 0.38 Discontinued operations - (0.03) - 0.08 Earnings (loss) per share, basic $ (0.10) $ 0.21 $ (0.18) $ 0.46 Earnings (loss) per share, diluted Continuing operations $ (0.10) $ 0.22 $ (0.18) $ 0.36 Discontinued operations - (0.02) - 0.07 Earnings (loss) per share, diluted $ (0.10) $ 0.20 $ (0.18) $ 0.43 Weighted average number of shares, basic 18,618 18,177 18,559 18,110 Dilutive effect of stock options - 1,285 - 1,139 Weighted average number of shares, diluted 18,618 19,462 18,559 19,249 MEDCATH CORPORATION SELECTED OPERATING DATA (In thousands, except per share data and selected operating data) (Unaudited) Three Months Ended March 31, Six Months Ended March 31, 2006 2005 % Change 2006 2005 % Change Statement of Operations Data: Net revenue $208,532 $192,014 8.6% $393,653 $376,774 4.5% Adjusted EBITDA (1) $27,753 $27,596 0.6% $45,366 $52,773 (14.0)% Income from operations $7,663 $17,804 (57.0)% $14,847 $32,952 (54.9)% Income (loss) from continuing operations $(1,940) $4,278 (145.3)% $(3,273) $6,870 (147.6)% Earnings (loss) per share from continuing operations, basic $(0.10) $0.24 (141.7)% $(0.18) $0.38 (147.4)% Earnings (loss) per share from continuing operations, diluted $(0.10) $0.22 (145.4)% $(0.18) $0.36 (150.0)% (1) See Supplemental Financial Disclosure -- Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures. Three Months Ended March 31, Six Months Ended March 31, 2006 2005 % Change 2006 2005 % 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) 660 631 660 631 Admissions (d) 12,566 11,719 7.2% 23,851 22,602 5.5% Adjusted admissions (e) 16,340 15,617 4.6% 31,121 29,893 4.1% Patient days (f) 42,361 42,503 (0.3)% 80,339 79,661 0.9% Adjusted patient days (g) 55,203 56,521 (2.3)% 104,776 104,878 (0.1)% Average length of stay (days) (h) 3.37 3.63 (7.2)% 3.37 3.52 (4.3)% Occupancy (i) 71.3% 74.8% 66.9% 69.4% Inpatient catheterization procedures 6,517 5,891 10.6% 12,209 11,699 4.4% Inpatient surgical procedures 3,516 3,151 11.6% 6,539 5,926 10.3% (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 GAAP FINANCIAL MEASURES TO NON-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 six months ended March 31, 2006 and 2005. Three Months Ended Six Months Ended March 31, March 31, 2006 2005 2006 2005 (in thousands) Income (loss) from continuing operations $(1,940) $4,278 $(3,273) $6,870 Add: Income tax expense (benefit) (1,297) 2,856 (2,184) 4,579 Minority interest share of earnings of consolidated subsidiaries 4,790 4,402 7,608 8,401 Equity in net earnings of unconsolidated affiliates (1,410) (886) (2,475) (1,655) Interest and other income, net (1,388) (621) (2,805) (1,016) Interest expense 8,908 7,775 17,976 15,773 (Gain) loss on disposal of property, equipment and other assets (37) 71 82 74 Amortization 252 290 504 580 Depreciation 9,669 9,431 19,310 19,167 Share-based compensation expense 10,206 - 10,623 - Adjusted EBITDA $27,753 $27,596 $45,366 $52,773 DATASOURCE: MedCath Corporation CONTACT: Ed French, President/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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