MedCath Corporation Completes Recapitalization of Harlingen Medical Center
July 16 2007 - 8:36AM
PR Newswire (US)
CHARLOTTE, N.C., July 16 /PRNewswire-FirstCall/ -- MedCath
Corporation (NASDAQ:MDTH) announced today that it has completed a
recapitalization of its Harlingen Medical Center, located in
Harlingen, Texas. As part of the recapitalization, MedCath and
Valley Baptist Health System, a not-for-profit health system
located in Harlingen, Texas, have each elected to convert a portion
of their existing debt with Harlingen Medical Center to ownership
in the hospital. Following conversion, Harlingen Medical Center is
owned 36.0% by MedCath, 32.1% by Valley Baptist and 31.9% by local
physician investors. In addition, MedCath and Valley Baptist
sponsored the formation of HMC Realty LLC. MedCath holds 36.1% and
Valley Baptist holds 18.6% of HMC Realty LLC, which acquired the
real property of Harlingen Medical Center. HMC Realty LLC entered
into a long-term lease with Harlingen Medical Center. Long- term
financing was provided to HMC Realty LLC by the Healthcare &
Energy Finance group of Citicorp Leasing, Inc. "We're excited to
have Valley Baptist become an owner in Harlingen Medical Center as
we contemplated when we restructured Harlingen Medical Center in
late 2005. We look forward to working with them and our physician
partners to grow and continue to provide quality care to the people
in the Rio Grande Valley area of South Texas," said Ed French,
MedCath's President and Chief Executive Officer. "Through this
recapitalization we have solidified the hospital's ownership and
have greatly improved its capital structure and flexibility."
Valley Baptist made its convertible debt investment in Harlingen
Medical Center in December 2005. "We welcomed the opportunity to
convert our debt to ownership in Harlingen Medical Center earlier
than we originally intended as we recognize the strategic value
afforded us as equity holders in Harlingen Medical Center," said
James G. Springfield, President and Chief Executive of Valley
Baptist Health System in Harlingen, Texas. "We look forward to
working more closely with Harlingen Medical Center, the local
physician investors and MedCath to continue Valley Baptist's
commitment to providing leading care to the local community."
MedCath expects that the recapitalization will be $0.02 accretive
to its annual earnings per share. Beginning with its quarterly
reporting period ending Sept. 30, 2007 MedCath will report the
contribution from Harlingen Medical Center and HMC Realty LLC as
equity in net earnings of unconsolidated affiliates. For the twelve
months ended March 31, 2007, the change in reporting would have
resulted in MedCath reporting lower consolidated net revenue and
Adjusted EBITDA of $75.1 million and $9.9 million, respectively.
MedCath, together with local physicians, opened Harlingen Medical
Center in October 2002. The 114-bed facility includes an 18-bed
Women's Center, a 32- bed Critical Care Unit and a 64-bed
Medical-Surgical Unit. MedCath Corporation, headquartered in
Charlotte, N.C., is a healthcare provider focused on high acuity
services with the diagnosis and treatment of cardiovascular disease
being a primary service offering. MedCath owns interest in and
operates eleven hospitals with a total of 667 licensed beds,
located n Arizona, Arkansas, California, Louisiana, New Mexico,
Ohio, South Dakota, and Texas. In addition, MedCath and its
subsidiary MedCath Partners manage the cardiovascular program at
various hospitals and provide services in diagnostics and
therapeutic facilities in various states. Valley Baptist Health
System, one of the largest and most respected integrated healthcare
systems in South Texas with 850 licensed beds, has hospitals in
Harlingen and Brownsville, and has been serving the Rio Grande
Valley community with distinction since 1925. 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. Risks and uncertainties are
described in detail in "Risk Factors" in MedCath's Registration
Statement on Form S-3/A filed with the Securities and exchange
Commission on March 29, 2007. A copy of this registration
statement, including exhibits, is available on the internet site of
the Securities and Exchange Commission at http://www.sec.gov/. This
release contains references to Adjusted EBITDA, a measure of
MedCath's projected financial performance that is not calculated
and presented in conformity with generally accepted accounting
principles ("GAAP"). Adjusted EBITDA represents MedCath's income
(loss) from continuing operations before interest expense; interest
and other income, net; income tax expense (benefit); depreciation;
amortization; share-based compensation expense; gain (loss) on
disposal of property, equipment and other assets; loss on early
extinguishment of debt; equity in net earnings of unconsolidated
affiliates; and minority interest share of earnings of consolidated
subsidiaries. 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.
DATASOURCE: MedCath Corporation CONTACT: O. Edwin 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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