MDTH Medcath Corp. (MM)

CHARLOTTE, N.C., Nov. 15 /PRNewswire-FirstCall/ -- MedCath Corporation (NASDAQ:MDTH), a healthcare provider focused primarily on the diagnosis and treatment of cardiovascular disease, today announced operating results for its fourth fiscal quarter and fiscal year ended September 30, 2006. Fourth quarter and fiscal year highlights: -- Net revenue increased 5.7% to $177.4 million during the fourth quarter, and increased 5.1% to $706.4 million during the fiscal year. -- Adjusted EBITDA for the fourth quarter totaled $25.7 million. Adjusted EBITDA for the fiscal year increased 2.8% to $96.9 million. -- Adjusted admissions increased 1.9% for the quarter and 4.3% for the fiscal year. Fourth Quarter 2006 Results MedCath's net revenue increased 5.7% to $177.4 million in the fourth quarter of fiscal 2006 from $167.9 million in the fourth quarter of fiscal 2005. Income from operations was $15.7 million in the fourth quarter of fiscal 2006, compared to income from operations of $10.2 million in the fourth quarter of fiscal 2005. Adjusted EBITDA increased 9.4% to $25.7 million from $23.5 million, and income from continuing operations was $4.5 million, or $0.23 per diluted share, in the fourth quarter of fiscal 2006, compared to loss from continuing operations of $(89,000), or $(0.00) per diluted share, in the fourth quarter of fiscal 2005. During fiscal 2006, MedCath sold one hospital and announced its intent to sell another hospital. As a result, both of these hospitals are now reflected as discontinued operations in the 2006 and 2005 results. MedCath's fourth quarter 2006 results contain the following unusual items. Per share amounts reflect minority interest expense, where applicable, and income taxes: -- Reimbursement adjustments that had a $1.8 million favorable impact to net revenue and Adjusted EBITDA and a $910,000 favorable impact to income from continuing operations, or a net impact of $0.04 per diluted share. -- A $230,000, or a net impact of $0.01 per diluted share, unfavorable adjustment to Adjusted EBITDA and a $140,000 unfavorable adjustment to income from continuing operations as a result of a settlement related to prior period rebate expenses. In comparison, MedCath's fourth quarter of fiscal 2005 financial results were impacted by certain items that collectively had a $1.1 million favorable impact to Adjusted EBITDA and a $2.1 million unfavorable impact to income from continuing operations, or a net impact of $0.12 per diluted share. Share-based compensation expense totaled $840,000 in the fourth quarter of 2006, compared to $1.5 million in the fourth quarter of 2005. Adjusted EBITDA disclosed above does not include this expense but the expense is included as a component of income from continuing operations. Fiscal 2006 Results For the fiscal year, MedCath's net revenue increased 5.1% to $706.4 million from $672.0 million in fiscal 2005. Income from operations was $47.5 million in fiscal year 2006, compared to income from operations of $54.7 million in fiscal 2005. Adjusted EBITDA increased 2.8% to $96.9 million from $94.2 million, and income from continuing operations was $6.7 million, or $0.34 per diluted share, in fiscal 2006, compared to income from continuing operations of $7.6 million, or $0.39 per diluted share, in fiscal 2005. MedCath's fiscal 2006 results contain the following unusual items. Per diluted share amounts reflect minority interest expense, where applicable, and income taxes: -- Reimbursement adjustments that had a $1.4 million unfavorable impact to net revenue and Adjusted EBITDA and a $700,000 unfavorable impact to income from continuing operations, or a net impact of $0.04 per diluted share. -- A $1.1 million, or net impact of $0.03 per diluted share, increase in other operating expense related to executive severance. -- A $230,000, or a net impact of $0.01 per diluted share, unfavorable adjustment to Adjusted EBITDA and a $140,000 unfavorable adjustment to income from continuing operations as a result of a settlement related to prior period rebate expenses. -- A $450,000, or $0.01 per diluted share, expense related to the impairment of a workforce management system that the Company has decided to not implement. -- A net $1.4 million, or $0.04 per diluted share, increase in other income related to the settlement of a legal dispute. This settlement is net of related legal expenses. -- A $1.4 million, or net impact of $0.04 per diluted 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 and $58.0 of bank debt. In comparison, MedCath's fiscal 2005 financial results were impacted by certain items that collectively had a $1.1 million favorable impact to Adjusted EBITDA and a $2.1 million unfavorable impact to income from continuing operations, or a net unfavorable impact of $0.10 per diluted share. Share-based compensation expense totaled $13.2 million in fiscal 2006, compared to $1.5 million in fiscal 2005. Adjusted EBITDA disclosed above does not include this expense but the expense is included as a component of income from continuing operations. "During this fiscal year, we put in place several operating initiatives that allowed us to exceed our net revenue, Adjusted EBITDA and income from continuing operations targets," said Ed French, president and chief executive officer. "We have also identified other areas that should provide us with opportunity to further expand market share and margins in 2007." Operating Statistics Hospital admissions for the fourth quarter of fiscal 2006 were flat compared to prior year and adjusted admissions rose 1.9% from the fourth quarter of the previous fiscal year. Same facility hospital division net revenue increased 6.3%, while same facility inpatient catheterization procedures decreased 5.7% and inpatient surgical procedures remained unchanged compared to last year. 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; 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 that accompanies this press release that reconciles Adjusted EBITDA to MedCath's income (loss) from continuing operations. Earnings Conference Call and Web cast Management will discuss and answer questions regarding MedCath's quarterly results Thursday, November 16, 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. 23, 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 9786092. 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 primarily on the diagnosis and treatment of cardiovascular disease. MedCath focuses on serving the unique needs of patients suffering from cardiovascular disease. MedCath owns interests in and operates 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 "Risk Factors" in MedCath's Amendment No. 1 to Form S-3 filed with the Securities and Exchange Commission on October 26, 2006. A copy of this report 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 Twelve Months Ended September 30, September 30, 2006 2005 2006 2005 Net revenue $177,444 $167,881 $706,374 $672,001 Operating expenses: Personnel expense 55,472 52,603 228,350 205,469 Medical supplies expense 47,684 46,458 196,046 189,953 Bad debt expense 14,395 13,348 56,845 48,220 Other operating expenses 35,008 33,426 141,498 135,618 Depreciation 8,863 9,766 34,792 34,862 Amortization 252 290 1,008 1,160 (Gain) loss on disposal of property, equipment and other assets 95 (824) (142) (646) Impairment of long-lived assets 7 2,662 458 2,662 Total operating expenses 161,776 157,729 658,855 617,298 Income from operations 15,668 10,152 47,519 54,703 Other income (expenses): Interest expense (7,952) (8,324) (33,210) (31,832) Interest and other income, net 2,029 1,167 7,733 3,018 Equity in net earnings of unconsolidated affiliates 1,036 802 4,919 3,356 Total other expenses, net (4,887) (6,355) (20,558) (25,458) Income from continuing operations before minority interest, income taxes and discontinued operations 10,781 3,797 26,961 29,245 Minority interest share of earnings of consolidated subsidiaries (3,171) (3,611) (15,521) (15,968) Income from continuing operations before income taxes and discontinued operations 7,610 186 11,440 13,277 Income tax expense 3,120 275 4,729 5,643 Income (loss) from continuing operations 4,490 (89) 6,711 7,634 Income (loss) from discontinued operations, net of taxes 6,449 (2,212) 5,865 1,157 Net income (loss) $10,939 $(2,301) $12,576 $8,791 Earnings (loss) per share, basic Continuing operations $0.24 $- $0.36 $0.42 Discontinued operations 0.34 (0.12) 0.31 0.06 Earnings (loss) per share, basic $0.58 $(0.12) $0.67 $0.48 Earnings (loss) per share, diluted Continuing operations $0.23 $- $0.34 $0.39 Discontinued operations 0.32 (0.12) 0.30 0.06 Earnings (loss) per share, diluted $0.55 $(0.12) $0.64 $0.45 Weighted average number of shares, basic 18,872 18,493 18,656 18,286 Dilutive effect of stock options and restricted stock 1,037 - 899 1,184 Weighted average number of shares, diluted 19,909 18,493 19,555 19,470 MEDCATH CORPORATION SELECTED OPERATING DATA (In thousands, except per share data and selected operating data) (Unaudited) Three Months Ended September 30, 2006 2005 % Change Statement of Operations Data: Net revenue $177,444 $167,881 5.7% Adjusted EBITDA (1) $25,727 $23,514 9.4% Income from operations $15,668 $10,152 54.3% Income (loss) from continuing operations $4,490 $(89) 5144.9% Earnings per share from continuing operations, basic $0.24 $- 100.0% Earnings per share from continuing operations, diluted $0.23 $- 100.0% Twelve Months Ended September 30, 2006 2005 % Change Statement of Operations Data: Net revenue $706,374 $672,001 5.1% Adjusted EBITDA (1) $96,857 $94,209 2.8% Income from operations $47,519 $54,703 (13.1)% Income (loss) from continuing operations $6,711 $7,634 (12.1)% Earnings per share from continuing operations, basic $0.36 $0.42 (14.3)% Earnings per share from continuing operations, diluted $0.34 $0.39 (12.8)% (1) See Supplemental Financial Disclosure--Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures. Three Months Ended September 30, 2006 2005 % Change Selected Operating Data (consolidated)(a): Number of hospitals 9 9 Licensed beds (b) 580 580 Staffed and available beds (c) 563 546 Admissions (d) 9,991 10,021 (0.3)% Adjusted admissions (e) 13,356 13,102 1.9% Patient days (f) 32,258 33,598 (4.0)% Adjusted patient days (g) 43,018 43,614 (1.4)% Average length of stay (days) (h) 3.23 3.35 (3.6)% Occupancy (i) 62.3% 66.9% Inpatient catheterization procedures 5,032 5,335 (5.7)% Inpatient surgical procedures 2,671 2,680 (0.3)% Hospital net revenue $163,867 $154,122 6.3% Twelve Months Ended September 30, 2006 2005 % Change Selected Operating Data (consolidated)(a): Number of hospitals 9 9 Licensed beds (b) 580 580 Staffed and available beds (c) 563 546 Admissions (d) 41,406 39,876 3.8% Adjusted admissions (e) 54,186 51,942 4.3% Patient days (f) 136,532 139,115 (1.9)% Adjusted patient days (g) 178,667 180,248 (0.9)% Average length of stay (days) (h) 3.30 3.49 (5.4)% Occupancy (i) 66.4% 69.8% Inpatient catheterization procedures 21,163 20,760 1.9% Inpatient surgical procedures 10,911 10,815 0.9% Hospital net revenue $648,898 $615,991 5.3% (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 twelve months ended September 30, 2006 and 2005. Three Months Ended Twelve Months Ended September 30, September 30, 2006 2005 2006 2005 (in thousands) Income (loss) from continuing operations $4,490 $(89) $6,711 $7,634 Add: Income tax expense 3,120 275 4,729 5,643 Minority interest share of earnings of consolidated subsidiaries 3,171 3,611 15,521 15,968 Equity in net earnings of unconsolidated affiliates (1,036) (802) (4,919) (3,356) Interest and other income, net (2,029) (1,167) (7,733) (3,018) Interest expense 7,952 8,324 33,210 31,832 Impairment of long-lived assets 7 2,662 458 2,662 (Gain) loss on disposal of property, equipment and other assets 95 (824) (142) (646) Amortization 252 290 1,008 1,160 Depreciation 8,863 9,766 34,792 34,862 Share-based compensation expense 842 1,468 13,222 1,468 Adjusted EBITDA $25,727 $23,514 $96,857 $94,209 DATASOURCE: MedCath Corporation CONTACT: O. Edwin French, President and 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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