MDTH Medcath Corp. (MM)

CHARLOTTE, N.C., Aug. 2 /PRNewswire-FirstCall/ -- MedCath Corporation (NASDAQ:MDTH), a healthcare provider focused on high acuity healthcare services including the diagnosis and treatment of cardiovascular disease, today announced its operating results for its third fiscal quarter, which ended June 30, 2007. Third quarter highlights: - Net revenue increased 5.6% to $192.3 million - Adjusted EBITDA rose 3.5% to $29.8 million - Adjusted admissions increased 2.4% Third Quarter 2007 Results MedCath's net revenue increased 5.6% to $192.3 million in the third quarter of fiscal 2007 from $182.0 million in the third quarter of fiscal 2006. Income from operations was $20.2 million in the third quarter of fiscal 2007, compared to income from operations of $17.9 million in the third quarter of fiscal 2006. Adjusted EBITDA in the third quarter of fiscal 2007 increased 3.5% to $29.8 million from $28.8 million in the third quarter of fiscal 2006. Income from continuing operations was $8.6 million, or $0.39 per diluted share, in the third quarter of fiscal 2007, compared to income from continuing operations of $5.9 million, or $0.30 per diluted share, in the third quarter of fiscal 2006. MedCath's third quarter of fiscal 2007 financial results contain a $385,000, or a net impact of $0.01 per diluted share, decrease in net revenue and adjusted EBITDA due to the settlement of Medicare cost reports related to prior periods. MedCath's third quarter of fiscal 2006 financial results were impacted by certain unusual items that collectively had a $1.4 million unfavorable impact to net revenue and adjusted EBITDA and a $0.1 million, or $0.01 per diluted share, unfavorable impact to income from continuing operations. Share-based compensation expense totaled $0.7 million or $0.02 per diluted share in the third quarter of fiscal 2007, compared to $1.8 million or $0.05 per diluted share in the third quarter of fiscal 2006. Adjusted EBITDA disclosed above does not include this expense but the expense is included as a component of income from continuing operations. "Our third quarter results reflect our continued efforts to improve our operating margins and efficiency while maintaining our commitment to providing quality health care," said Ed French, MedCath's president and chief executive officer. "Our opportunities to add new facilities and services continue to increase and we look forward to announcing a new project in the foreseeable future." Operating Statistics and Cash Flow Hospital adjusted admissions for the third quarter of fiscal 2007 increased 2.4% from the third quarter of the previous fiscal year. Same facility hospital net revenue increased 7.5%. Net cash provided by operating activities of continuing operations for the third quarter of fiscal 2007 was $21.5 million, down from $26.7 million for the third quarter of fiscal 2006. Capital expenditures totaled $9.1 million in the third quarter of fiscal 2007 in comparison to $6.3 million in the third quarter of fiscal 2006. 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; loss (gain) on disposal of property, equipment and other assets; loss on early extinguishment of debt; impairment of long-lived assets; 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 analyses 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 accompanies this press release that reconciles historical Adjusted EBITDA to MedCath's income 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, August 8, 2007. To access the replay, domestic callers should dial (800) 642-1687 and international callers should dial (706) 645-9291. The archived conference ID is 10112053. 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 high acuity services with the diagnosis and treatment of cardiovascular disease being a primary service offering. 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 and its subsidiary MedCath Partners manage the cardiovascular program at various hospitals and provide services in diagnostic and therapeutic facilities 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 Registration Statement on Form S-3/A filed with the Securities and Exchange Commission on March 29, 2007 and its Quarterly Report or Form 10-Q for the quarter ended June 30, 2007. Copies of this registration statement and Form 10-Q, including exhibits, are 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, 2007 2006 2007 2006 Net revenue $192,278 $182,047 $560,319 $528,930 Operating expenses: Personnel expense 59,338 55,362 177,869 172,878 Medical supplies expense 50,310 50,497 149,129 148,362 Bad debt expense 15,881 13,840 45,157 42,450 Other operating expenses 37,650 35,316 111,439 106,489 Depreciation 8,629 8,725 26,270 25,930 Amortization 126 252 505 756 Loss (gain) on disposal of property, equipment and other assets 188 (296) 1,047 (237) Impairment of long-lived assets - 451 - 451 Total operating expenses 172,122 164,147 511,416 497,079 Income from operations 20,156 17,900 48,903 31,851 Other income (expenses): Interest expense (5,224) (7,583) (18,450) (23,888) Loss on early extinguishment of debt - - (5,142) (1,370) Interest and other income, net 1,752 2,971 6,285 5,704 Equity in net earnings of unconsolidated affiliates 1,175 1,408 4,095 3,883 Total other expenses, net (2,297) (3,204) (13,212) (15,671) Income from continuing operations before minority interest, income taxes and discontinued operations 17,859 14,696 35,691 16,180 Minority interest share of earnings of consolidated subsidiaries (3,914) (4,742) (10,354) (12,350) Income from continuing operations before income taxes and discontinued operations 13,945 9,954 25,337 3,830 Income tax expense 5,315 4,060 10,642 1,609 Income from continuing operations 8,630 5,894 14,695 2,221 Income (loss) from discontinued operations, net of taxes 635 (984) (4,076) (584) Net income $9,265 $4,910 $10,619 $1,637 Earnings (loss) per share, basic Continuing operations $0.41 $0.31 $0.70 $0.11 Discontinued operations 0.03 (0.05) (0.19) (0.03) Earnings (loss) per share, basic $0.44 $0.26 $0.51 $0.08 Earnings (loss) per share, diluted Continuing operations $0.39 $0.30 $0.69 $0.11 Discontinued operations 0.03 (0.05) (0.19) (0.03) Earnings (loss) per share, diluted $0.42 $0.25 $0.50 $0.08 Weighted average number of shares, basic 21,144 18,630 20,760 18,583 Dilutive effect of stock options and restricted stock 682 661 650 921 Weighted average number of shares, diluted 21,826 19,291 21,410 19,504 MEDCATH CORPORATION SELECTED OPERATING DATA (In thousands, except per share data and selected operating data) (Unaudited) Three Months Ended June 30, 2007 2006 % Change Statement of Operations Data: Net revenue $192,278 $182,047 5.6% Adjusted EBITDA (1) $29,799 $28,788 3.5% Income from operations $20,156 $17,900 12.6% Income from continuing operations $8,630 $5,894 46.4% Earnings per share from continuing operations, basic $0.41 $0.31 32.3% Earnings per share from continuing operations, diluted $0.39 $0.30 30.0% Nine Months Ended June 30, 2007 2006 % Change Statement of Operations Data: Net revenue $560,319 $528,930 5.9% Adjusted EBITDA (1) $80,574 $71,131 13.3% Income from operations $48,903 $31,851 53.5% Income from continuing operations $14,695 $2,221 561.6% Earnings per share from continuing operations, basic $0.70 $0.11 536.4% Earnings per share from continuing operations, diluted $0.69 $0.11 527.3% (1) See Supplemental Financial Disclosure--Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures. Three Months Ended June 30, 2007 2006 % Change Selected Operating Data (a): Number of hospitals 9 9 Licensed beds ( b ) 580 580 Staffed and available beds ( c ) 563 563 Admissions ( d ) 10,339 10,606 (2.5)% Adjusted admissions ( e ) 14,156 13,829 2.4% Patient days ( f ) 34,291 34,131 0.5% Adjusted patient days ( g ) 46,679 44,518 4.9% Average length of stay (days) ( h ) 3.32 3.22 3.1% Occupancy ( i ) 66.9% 66.6% Inpatients with a catheterization procedures (j) 5,247 5,549 (5.4)% Inpatient surgical procedures (k) 2,780 2,759 0.8% Hospital net revenue $180,135 $167,563 7.5% Nine Months Ended June 30, 2007 2006 % Change Selected Operating Data (a): Number of hospitals 9 9 Licensed beds ( b ) 580 580 Staffed and available beds ( c ) 563 563 Admissions ( d ) 30,740 31,415 (2.1)% Adjusted admissions ( e ) 41,943 40,808 2.8% Patient days ( f ) 105,601 104,287 1.3% Adjusted patient days ( g ) 143,348 135,505 5.8% Average length of stay (days) ( h ) 3.44 3.32 3.6% Occupancy ( i ) 68.7% 67.9% Inpatients with a catheterization procedures (j) 15,463 16,137 (4.2)% Inpatient surgical procedures (k) 8,055 8,093 (0.5)% Hospital net revenue $519,137 $485,031 7.0% (a) Selected operating data includes consolidated hospitals in operation 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 volume. 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. (j) Inpatients with a catheterization procedure represent the number of inpatients with a procedure performed in one of the hospitals' catheterization labs during the period. (k) Inpatient surgical procedures represent the number of surgical procedures performed on inpatients during the period. 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, 2007 and 2006. Three Months Ended Nine Months Ended June 30, June 30, 2007 2006 2007 2006 (in thousands) Income from continuing operations $8,630 $5,894 $14,695 $2,221 Add: Income tax expense 5,315 4,060 10,642 1,609 Minority interest share of earnings of consolidated subsidiaries 3,914 4,742 10,354 12,350 Equity in net earnings of unconsolidated affiliates (1,175) (1,408) (4,095) (3,883) Interest and other income, net (1,752) (2,971) (6,285) (5,704) Loss on early extinguishment of debt - - 5,142 1,370 Interest expense 5,224 7,583 18,450 23,888 Impairment of long-lived assets - 451 - 451 Loss (gain) on disposal of property, equipment and other assets 188 (296) 1,047 (237) Amortization 126 252 505 756 Depreciation 8,629 8,725 26,270 25,930 Share-based compensation expense 700 1,756 3,849 12,380 Adjusted EBITDA $29,799 $28,788 $80,574 $71,131 DATASOURCE: MedCath Corporation CONTACT: O. Edwin French, President-Chief Executive Officer, +1-704-708-6600, James E. Harris, Chief Financial Officer, +1-704-708-6600, both of MedCath Web site: http://www.medcath.com/

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