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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