MDTH Medcath Corp. (MM)

MedCath Corporation Reports Second Quarter Earnings CHARLOTTE, N.C., May 6 /PRNewswire-FirstCall/ -- MedCath Corporation , a healthcare provider focused on the diagnosis and treatment of cardiovascular disease, today announced its operating results for its second quarter ended March 31, 2004. Second quarter highlights: - Net revenue increased 28.2%, including a $1.4 million favorable impact due to the filing of 2003 Medicare cost reports. - Same facility hospital net revenue increased 18.1%, including a $1.1 million favorable impact due to the filing of 2003 Medicare cost reports. - Same facility adjusted admissions increased 21.5% - Earnings per diluted share equaled $0.14, including a $.06 per share favorable impact due to the filing of 2003 Medicare cost reports. - MedCath opened Texsan Heart Hospital in San Antonio, and Heart Hospital of Lafayette in Louisiana during the quarter Second Quarter 2004 Results MedCath's net revenue increased 28.2% to $173.3 million in the second quarter of fiscal 2004 from $135.2 million in the second quarter of fiscal 2003. Income from operations was $10.1 million in the second quarter of fiscal 2004, compared to income from operations of $7.6 million in the second quarter of fiscal 2003. Adjusted EBITDA increased 19.9% to $21.4 million from $17.9 million and net income was $2.6 million, or $0.14 per diluted share, in the second quarter of fiscal 2004, compared to net income of $588,000, or $.03 per diluted share, in the second quarter of fiscal 2003. Expenses related to projects under development -- pre-opening expenses -- totaled $2.1 million, compared to $2.8 million in the second quarter of fiscal 2003. Adjusted EBITDA before pre-opening expenses increased 13.8% to $23.5 million from $20.7 million in the second quarter of fiscal 2003. During the second quarter of fiscal 2004, MedCath filed its Medicare cost reports for fiscal 2003 and recognized contractual allowance adjustments, which favorably impacted MedCath's net revenue and Adjusted EBITDA by $1.4 million, and net income by $1.0 million. The EPS impact from these settlements was $.06. In comparison, during the second quarter of fiscal 2003, MedCath's Medicare cost report filings for fiscal 2002 favorably impacted net revenue and Adjusted EBITDA $770,000, net income by $569,000 and EPS by $.03. "With the opening of our Texsan Heart Hospital in San Antonio and our Heart Hospital of Lafayette this quarter, we have successfully opened five hospitals in the last 18 months," said John T. Casey, MedCath's president and chief executive officer. "Our focus at these facilities is to establish a new quality standard in the market, grow market share and control operating costs. In addition, at our established facilities we are in the process of enhancing operating strategies to allow us to improve financial performance and continue to deliver quality care." Operating Statistics Hospital admissions for the second quarter of fiscal 2004 increased 29.5% and adjusted admissions rose 32.3% from the second quarter of the previous fiscal year. Hospital division net revenue increased 35.8%. Same facility admissions increased 19.2%, adjusted admissions increased 21.5%, inpatient catheterization procedures increased 14.8% and inpatient surgical procedures increased 7.7%, which contributed to the increase in same facility hospital division net revenue of 18.1% during the quarter versus the prior year. Excluding the favorable impact of a prior year contractual adjustment, same facility hospital division net revenue increased 17.2%. "We are extremely pleased with the volumes experienced at our same facility hospitals during the quarter," Casey said. "Even after excluding from our same facility base our Harlingen Medical Center, which opened in October 2002, and our Bakersfield Heart Hospital, which was in the process of reopening its Emergency Department during last year's second quarter, we achieved same facility adjusted admissions growth of 8.9%. We are extremely pleased with these volume results." Capital Expenditures and Bad Debt Capital expenditures for the second quarter of fiscal 2004 were $26.8 million compared to $32.0 million for the second quarter of fiscal 2003. Of the $26.8 million in capital expenditures this quarter, $25.1 million related specifically to MedCath's development activities, compared to $26.0 million for the second quarter of fiscal 2003. During the quarter, bad debt expense equaled 5.6% of net revenue, a decline from 8.8% in MedCath's first quarter of fiscal 2004. The decline represented increased cash collections during the second quarter in comparison to the first quarter of 2004, increased qualification of Medicaid eligible patients, and improved collection of commercial insurance co-pays and deductibles at the time of service. "We are very pleased with the results of our accounts receivable management this quarter," said James E. Harris, MedCath's chief financial officer. "We are especially pleased with the efforts of the financial personnel at our hospitals, particularly the business office personnel, and their commitment to several new collection initiatives." Use of Non-GAAP Financial Measures This release contains measures of MedCath's historical and expected financial performance that are not calculated and presented in conformity with generally accepted accounting principles ("GAAP"), including Adjusted EBITDA and Adjusted EBITDA before pre-opening expenses. Adjusted EBITDA represents MedCath's net income before interest expense; interest income; taxes; depreciation; amortization; gain or loss on disposal of property, equipment and other assets; other income, net; equity in net earnings of unconsolidated affiliates; and minority interest. Adjusted EBITDA before pre-opening expenses represents Adjusted EBITDA, as defined above, adjusted to exclude costs incurred during development and prior to the opening of a facility (pre-opening expenses). MedCath's management uses Adjusted EBITDA and Adjusted EBITDA before pre-opening expenses 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, and Adjusted EBITDA before pre-opening expenses, as defined above, may not be comparable to other similarly titled measures of other companies. MedCath's management provides Adjusted EBITDA before pre-opening expenses to investors to provide a financial measure of MedCath's operations that excludes the effect of hospitals under development during the reporting period. MedCath has included a supplemental schedule with the accompanying financial statements that accompany this press release that reconciles historical and expected Adjusted EBITDA and Adjusted EBITDA before pre-opening expenses to MedCath's net income or loss. 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 (800) 795-1259. International callers should dial (785) 832-1508. 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, May 13, 2004. To access the replay, domestic callers should dial (888) 566-0831 and international callers should dial (402) 220-0121. 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. While each of its majority-owned hospitals is licensed as a general acute care hospital, MedCath focuses on serving the unique needs of patients suffering from cardiovascular disease. Together with its physician partners who own equity interests in them, MedCath owns and operates thirteen hospitals with a total of 759 licensed beds, located in Arizona, Arkansas, California, Louisiana, New Mexico, Ohio, South Dakota, Texas and Wisconsin. In addition to its hospitals, MedCath provides cardiovascular care services in diagnostic and therapeutic facilities located in various states and through mobile cardiac catheterization laboratories. MedCath also provides consulting and management services tailored to cardiologists and cardiovascular surgeons. 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 -- Risk Factors -- to our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission. A copy of this annual report, including exhibits, is available on the Internet site of the Commission at http://www.sec.gov/ . These risks and uncertainties include, among others, the impact of the Medicare Prescription Drug Improvement Act of 2003 and other healthcare reform initiatives, possible reductions or changes in reimbursements from government or third party payers that would decrease our revenue, greater than anticipated losses at new hospitals during the ramp up period, a negative finding by a regulatory organization with oversight of one of our hospitals, and changes in medical or other technology and reimbursement rates for new technologies. MEDCATH CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended March 31, March 31, 2004 2003 2004 2003 Net revenue $173,286 $135,187 $329,912 $256,288 Operating expenses: Personnel expense 54,586 43,402 103,439 83,152 Medical supplies expense 46,979 32,616 89,596 60,564 Bad debt expense 9,640 4,903 23,499 10,137 Other operating expenses 38,566 33,601 71,521 62,823 Pre-opening expenses 2,087 2,789 5,531 5,195 Depreciation 11,008 9,870 21,451 19,387 Amortization 290 437 580 874 Loss (gain) on disposal of property, equipment and other assets 36 18 (48) 88 Total operating expenses 163,192 127,636 315,569 242,220 Income from operations 10,094 7,551 14,343 14,068 Other income (expenses): Interest expense (7,198) (6,242) (13,787) (12,448) Interest income 161 339 394 791 Other income, net 2 80 6 103 Equity in net earnings of unconsolidated affiliates 1,147 1,064 1,724 1,818 Total other expenses, net (5,888) (4,759) (11,663) (9,736) Income before minority interest and income taxes 4,206 2,792 2,680 4,332 Minority interest share of (earnings) losses of consolidated subsidiaries 65 (1,811) 31 (2,702) Income before income taxes 4,271 981 2,711 1,630 Income tax expense (1,630) (393) (1,003) (652) Net income $2,641 $588 $1,708 $978 Earnings per share, basic: $0.15 $0.03 $0.10 $0.05 Earnings per share, diluted: $0.14 $0.03 $0.09 $0.05 Weighted average number of shares, basic 17,985 18,012 17,967 18,012 Dilutive effect of stock options 514 45 300 61 Weighted average number of shares, diluted 18,499 18,057 18,267 18,073 MEDCATH CORPORATION SELECTED OPERATING DATA (In thousands, except per share data and selected operating data) (Unaudited) Three Months Ended March 31, 2004 2003 % Change Statement of Operations Data: Net revenue $173,286 $135,187 28.2% Adjusted EBITDA (a) $21,428 $17,876 19.9% Adjusted EBITDA, before pre-opening expenses (a) $23,515 $20,665 13.8% Income from operations $10,094 $7,551 33.7% Net income $2,641 $588 349.1% Earnings per share, diluted $0.14 $0.03 366.7% (a) See Supplemental Financial Disclosure--Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures. MEDCATH CORPORATION SELECTED OPERATING DATA (In thousands, except per share data and selected operating data) (Unaudited) Six Months Ended March 31, 2004 2003 % Change Statement of Operations Data: Net revenue $329,912 $256,288 28.7% Adjusted EBITDA (a) $36,326 $34,417 5.5% Adjusted EBITDA, before pre-opening expenses (a) $41,857 $39,612 5.7% Income from operations $14,343 $14,068 2.0% Net income $1,708 $978 74.6% Earnings per share, diluted $0.09 $0.05 80.0% (a) See Supplemental Financial Disclosure--Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures. Three Months Ended March 31, 2004 2003 % Change Selected Operating Data (consolidated): Number of hospitals 12 9 Licensed beds (a) 704 580 Staffed and available beds (b) 593 464 Admissions (c) 10,781 8,326 29.5% Adjusted admissions (d) 13,590 10,274 32.3% Patient days (e) 38,048 30,638 24.2% Average length of stay (days) (f) 3.53 3.68 (4.1)% Occupancy (g) 70.5% 73.4% Inpatient Catheterization Procedures 5,569 4,359 27.8% Inpatient Surgical Procedures 2,733 2,281 19.8% Hospital Division revenue $159,625 $117,558 35.8% Six Months Ended March 31, 2004 2003 % Change Selected Operating Data (consolidated): Number of hospitals 12 9 Licensed beds (a) 704 580 Staffed and available beds (b) 593 464 Admissions (c) 20,436 15,100 35.3% Adjusted admissions (d) 25,766 18,652 38.1% Patient days (e) 72,342 55,377 30.6% Average length of stay (days) (f) 3.54 3.67 (3.5)% Occupancy (g) 66.7% 65.6% Inpatient Catheterization Procedures 10,266 8,192 25.3% Inpatient Surgical Procedures 5,078 4,173 21.7% Hospital Division revenue $301,058 $221,501 35.9% Three Months Ended March 31, 2004 2003 % Change Selected Operating Data (same facility): Number of hospitals 8 8 Licensed beds (a) 522 522 Staffed and available beds (b) 489 457 Admissions (c) 9,893 8,298 19.2% Adjusted admissions (d) 12,436 10,233 21.5% Patient days (e) 35,214 30,573 15.2% Average length of stay (days) (f) 3.56 3.68 (3.3)% Occupancy (g) 79.1% 74.3% Inpatient Catheterization Procedures 4,990 4,345 14.8% Inpatient Surgical Procedures 2,448 2,273 7.7% Hospital Division revenue $138,662 $117,405 18.1% (a) 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. (b) Staffed and available beds represent the weighted average number of beds that are readily available for patient use during the period. (c) Admissions represent the number of patients admitted for inpatient treatment. (d) 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. (e) Patient days represent the total number of days of care provided to inpatients. (f) Average length of stay (days) represents the average number of days inpatients stay in our hospital. (g) 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. Six Months Ended March 31, 2004 2003 % Change Selected Operating Data (same facility): Number of hospitals 8 8 Licensed beds (a) 522 522 Staffed and available beds (b) 489 457 Admissions (c) 19,093 15,072 26.7% Adjusted admissions (d) 23,987 18,611 28.9% Patient days (e) 68,190 55,312 23.3% Average length of stay (days) (f) 3.57 3.67 (2.7)% Occupancy (g) 76.2% 66.5% Inpatient Catheterization Procedures 9,403 8,178 15.0% Inpatient Surgical Procedures 4,637 4,165 11.3% Hospital Division revenue $269,074 $221,348 21.6% (a) 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. (b) Staffed and available beds represent the weighted average number of beds that are readily available for patient use during the period. (c) Admissions represent the number of patients admitted for inpatient treatment. (d) 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. (e) Patient days represent the total number of days of care provided to inpatients. (f) Average length of stay (days) represents the average number of days inpatients stay in our hospital. (g) 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 NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES (Unaudited) The following table reconciles Adjusted EBITDA and Adjusted EBITDA, before pre-opening expenses with MedCath's Net income (loss) as derived directly from MedCath's consolidated financial statements for the three months and six months ended March 31, 2004 and 2003. Three Months Ended Six Months Ended March 31, March 31, 2004 2003 2004 2003 (in thousands) Net income $2,641 $588 $1,708 $978 Add: Income tax expense 1,630 393 1,003 652 Minority interest share of earnings (losses) of consolidated subsidiaries (65) 1,811 (31) 2,702 Equity in net earnings of unconsolidated affiliates (1,147) (1,064) (1,724) (1,818) Other income, net (2) (80) (6) (103) Interest income (161) (339) (394) (791) Interest expense 7,198 6,242 13,787 12,448 Loss (gain) on disposal of property, equipment and other assets 36 18 (48) 88 Amortization 290 437 580 874 Depreciation 11,008 9,870 21,451 19,387 Adjusted EBITDA $21,428 $17,876 $36,326 $34,417 Add: Pre-opening expenses 2,087 2,789 5,531 5,195 Adjusted EBITDA, before pre-opening expenses $23,515 $20,665 $41,857 $39,612 DATASOURCE: MedCath Corporation CONTACT: John T. Casey, 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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