MDTH Medcath Corp. (MM)

CHARLOTTE, N.C., Aug. 9 /PRNewswire-FirstCall/ -- MedCath Corporation (NASDAQ:MDTH), a healthcare provider primarily focused on the diagnosis and treatment of cardiovascular disease, today announced that it has updated its previously released third quarter financial results due to information received after its original release on Thursday, August 3, 2006. This update to MedCath's third quarter financials resulted primarily from a revision to the estimate made for Medicare Disproportionate Share Hospital (DSH) payments for the fiscal year 2005. The primary method for a hospital to qualify for Medicare DSH reimbursement is based on a statutory formula that utilizes the percentage of inpatient days attributable to patients eligible for Medicaid, but not eligible for Medicare Part A and a base formula called the Supplemental Security Income (SSI) percentage, which is released annually for the previous year by the Centers for Medicare and Medicaid Services. Subsequent to the release of MedCath's operating results for the period ended June 30, 2006, the Company became aware that the 2005 SSI percentages were issued. In reviewing the 2005 SSI percentages, management determined that one of MedCath's hospitals previously estimated to be eligible for DSH payments for fiscal year 2005 is not eligible for such payments. Based on this new information, MedCath has updated its previously issued financial results. As such, in comparison to the Company's previously reported results, the updated financial results reflect $1.2 million lower net revenue, income from operations and Adjusted EBITDA, and $470,000 lower income from continuing operations. Earnings from continuing operations per diluted share, previously reported to be $0.30, are $0.27. For the fiscal third quarter, MedCath's net revenue increased 5.6% to $189.8 million from $179.8 million; Adjusted EBITDA increased 16.5% to $28.8 million from $24.7 million; and income from operations increased 13.2% to $17.2 million from $15.2 million. MedCath's income from continuing operations was $5.3 million, or $0.27 per diluted share, up from $2.6 million or $0.13 per diluted share in the third 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 from continuing operations before interest expense; interest and other income, net; income tax expense; depreciation; amortization; share-based compensation expense; gain or loss on disposal of property, equipment and other assets; impairment of long-lived 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 from continuing operations. MedCath Corporation, headquartered in Charlotte, N.C., is a healthcare provider focused primarily on the diagnosis and treatment of cardiovascular disease. MedCath focuses on serving the unique needs of patients suffering from cardiovascular disease. Upon completion of the pending divestiture of its ownership in Tucson Heart Hospital, MedCath will own interest and operate eleven hospitals with a total of 667 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 "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Factors and Forward Looking Statements" in MedCath's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2006. A copy of this report, including exhibits, is available on the internet site of the Securities and Exchange Commission at http://www.sec.gov/. MEDCATH CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended June 30, June 30, 2006 2005 2006 2005 Net revenue $189,832 $179,787 $554,156 $524,156 Operating expenses: Personnel expense 58,033 53,893 181,211 159,874 Medical supplies expense 52,657 51,047 154,735 148,813 Bad debt expense 14,228 13,874 44,405 36,063 Other operating expenses 37,916 36,286 114,123 107,316 Depreciation 9,366 9,034 27,801 27,214 Amortization 252 290 756 870 Loss (gain) on disposal of property, equipment and other assets (296) 148 (237) 204 Impairment of long-lived assets 451 - 451 - Total operating expenses 172,607 164,572 523,245 480,354 Income from operations 17,225 15,215 30,911 43,802 Other income (expenses): Interest expense (7,870) (8,440) (25,828) (24,129) Interest and other income, net 2,977 868 5,748 1,870 Equity in net earnings of unconsolidated affiliates 1,408 899 3,883 2,554 Total other expenses, net (3,485) (6,673) (16,197) (19,705) Income from continuing operations before minority interest, income taxes and discontinued operations 13,740 8,542 14,714 24,097 Minority interest share of earnings of consolidated subsidiaries (4,742) (3,956) (12,350) (12,357) Income from continuing operations before income taxes and discontinued operations 8,998 4,586 2,364 11,740 Income tax expense 3,649 1,952 993 4,814 Income from continuing operations 5,349 2,634 1,371 6,926 Income (loss) from discontinued operations, net of taxes (439) 115 266 4,166 Net income $4,910 $2,749 $1,637 $11,092 Earnings (loss) per share, basic Continuing operations $0.28 $0.14 $0.07 $0.38 Discontinued operations (0.02) 0.01 0.01 0.23 Earnings per share, basic $0.26 $0.15 $0.08 $0.61 Earnings (loss) per share, diluted Continuing operations $0.27 $0.13 $0.07 $0.36 Discontinued operations (0.02) 0.01 0.01 0.21 Earnings per share, diluted $0.25 $0.14 $0.08 $0.57 Weighted average number of shares, basic 18,630 18,425 18,583 18,216 Dilutive effect of stock options and restricted stock 661 1,248 921 1,193 Weighted average number of shares, diluted 19,291 19,673 19,504 19,409 MEDCATH CORPORATION SELECTED OPERATING DATA (In thousands, except per share data and selected operating data) (Unaudited) Three Months Ended June 30, Nine Months Ended June 30, 2006 2005 % Change 2006 2005 % Change Statement of Operations Data: Net revenue $189,832 $179,787 5.6% $554,156 $524,156 5.7% Adjusted EBITDA (1) $28,754 $24,687 16.5% $72,062 $72,090 (0.0)% Income from operations $17,225 $15,215 13.2% $30,911 $43,802 (29.4)% Income from continuing operations $5,349 $2,634 103.1% $1,371 $6,926 (80.2)% Earnings per share from continuing operations, basic $0.28 $0.14 100.0% $0.07 $0.38 (81.6)% Earnings per share from continuing operations, diluted $0.27 $0.13 107.7% $0.07 $0.36 (80.6)% (1) See Supplemental Financial Disclosure--Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures. Three Months Ended Nine Months Ended June 30, June 30, 2006 2005 % Change 2006 2005 % Change Selected Operating Data (consolidated) (a): Number of hospitals 10 10 10 10 Licensed beds (b) 612 612 612 612 Staffed and available beds (c) 595 571 595 571 Admissions (d) 11,115 10,364 7.2% 32,987 31,119 6.0% Adjusted admissions (e) 14,494 13,555 6.9% 42,822 40,349 6.1% Patient days (f) 35,508 36,281 (2.1)% 109,497 109,738 (0.2)% Adjusted patient days (g) 46,318 47,202 (1.9)% 142,178 141,677 0.4% Average length of stay (days) (h) 3.19 3.50 (8.9)% 3.32 3.53 (5.9)% Occupancy (i) 65.6% 69.8% 67.4% 70.4% Inpatient catheterization procedures 5,838 5,457 7.0% 17,029 16,220 5.0% Inpatient surgical procedures 2,920 2,915 0.2% 8,702 8,495 2.4% (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. (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 from continuing operations as derived directly from MedCath's consolidated financial statements for the three and nine months ended June 30, 2006 and 2005. Three Months Ended Nine Months Ended June 30, June 30, 2006 2005 2006 2005 (in thousands) Income from continuing operations $5,349 $2,634 $1,371 $6,926 Add: Income tax expense 3,649 1,952 993 4,814 Minority interest share of earnings of consolidated subsidiaries 4,742 3,956 12,350 12,357 Equity in net earnings of unconsolidated affiliates (1,408) (899) (3,883) (2,554) Interest and other income, net (2,977) (868) (5,748) (1,870) Interest expense 7,870 8,440 25,828 24,129 Impairment of long-lived assets 451 - 451 - Loss (gain) on disposal of property, equipment and other assets (296) 148 (237) 204 Amortization 252 290 756 870 Depreciation 9,366 9,034 27,801 27,214 Share-based compensation expense 1,756 - 12,380 - Adjusted EBITDA $28,754 $24,687 $72,062 $72,090 DATASOURCE: MedCath Corporation CONTACT: O. Edwin French, President - 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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