MDTH Medcath Corp. (MM)

MedCath Corporation Reports Third quarter Earnings CHARLOTTE, N.C., Aug. 12 /PRNewswire-FirstCall/ -- MedCath Corporation (NASDAQ:MDTH), a healthcare provider focused on the diagnosis and treatment of cardiovascular disease, today announced its operating results for its third quarter, which ended June 30, 2004. Third quarter highlights: - Net revenue increased 27.0% - Same facility hospital net revenue increased 16.1% - Same facility adjusted admissions increased 15.6% - Earnings per diluted share equaled $0.07 Third Quarter 2004 Results MedCath's net revenue increased 27.0% to $180.8 million in the third quarter of fiscal 2004 from $142.3 million in the third quarter of fiscal 2003. Income from operations was $11.1 million in the third quarter of fiscal 2004, compared to income from operations of $8.7 million in the third quarter of fiscal 2003. Adjusted EBITDA increased 17.4% to $23.1 million from $19.7 million and net income was $1.4 million, or $0.07 per diluted share, in the third quarter of fiscal 2004, compared to net income of $778,000, or $0.04 per diluted share, in the third quarter of fiscal 2003. During the third quarter of fiscal 2004 there were no expenses related to projects under development -- pre-opening expenses -- compared to $1.9 million in the third quarter of fiscal 2003. "We experienced a solid quarter in terms of patient volume and revenue," said John T. Casey, MedCath's chairman, president and chief executive officer. "Our focus is to optimize our operations in order to achieve improved financial results while maintaining our commitment to providing leading quality cardiovascular care." Operating Statistics Hospital admissions for the third quarter of fiscal 2004 increased 24.9% and adjusted admissions rose 26.5% from the third quarter of the previous fiscal year. Hospital division net revenue increased 32.7%. Same facility admissions increased 13.2%, adjusted admissions increased 15.6%, inpatient catheterization procedures increased 10.1% and inpatient surgical procedures increased 11.0%, which contributed to the increase in same facility hospital division net revenue of 16.1% during the quarter versus the prior year. Capital Expenditures Capital expenditures for the third quarter of fiscal 2004 were $4.7 million compared to $21.2 million for the third quarter of fiscal 2003. Of the $4.7 million in capital expenditures this quarter, $2.2 million related specifically to MedCath's development activities, compared to $15.7 million for the third quarter of fiscal 2003. "This quarter marks the end of our capital spending related to the five new hospitals that have opened over the past 22 months," said Mr. Casey. "Our capital expenditures will be more related to maintenance of our current operations over the next few quarters as we look to optimize operations from our newest facilities although there will be capital expenditures for new joint venture opportunities as they become available." Debt Offering Shortly after its quarter end, MedCath completed a $150 million offering of 9-7/8% senior notes and closed a $200 million senior secured credit facility. Net proceeds from the senior notes, together with $100 million from the senior secured credit facility and approximately $37 million of cash on hand, was used to refinance debt and capital lease obligations of approximately of $277 million and pay transaction fees of approximately $10 million. The financial impact of closing the transaction will be reflected in MedCath's operating results for its fourth quarter ending September 30, 2004. MedCath expects its fourth quarter operating results to be reduced by approximately $0.19 per share due to the write-off of loan fees, the payment of prepayment fees and a non-cash charge related to three interest rate swaps associated with a portion of the refinanced debt. Prospectively, the increase in net interest expense associated with the transaction will result in an approximate $0.09 per share annual impact to MedCath. "We are very excited to have completed this recapitalization of our long-term debt structure," said James E. Harris, MedCath's chief financial officer. "This new financing provides us with greater flexibility and allows us to better support our operations and fund our growth." 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 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) 905-0392. International callers should dial (785) 832-0326. 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, Aug. 19, 2004. To access the replay, domestic callers should dial (888) 562-3376 and international callers should dial (402) 220-1185. 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 filed with the Securities and Exchange Commission. A copy of this quarterly 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 Nine Months Ended June 30, June 30, 2004 2003 2004 2003 Net revenue $180,785 $142,343 $510,697 $398,631 Operating expenses: Personnel expense 57,070 43,693 160,509 126,845 Medical supplies expense 51,837 37,722 141,433 98,286 Bad debt expense 9,778 6,448 33,277 16,585 Other operating expenses 38,969 32,924 110,490 95,747 Pre-opening expenses - 1,854 5,531 7,049 Depreciation 11,747 10,734 33,198 30,121 Amortization 290 282 870 1,156 Loss (gain) on disposal of property, equipment and other assets 27 6 (21) 94 Total operating expenses 169,718 133,663 485,287 375,883 Income from operations 11,067 8,680 25,410 22,748 Other income (expenses): Interest expense (7,300) (6,456) (21,087) (18,904) Interest income 212 312 606 1,103 Other income, net 11 93 17 196 Equity in net earnings of unconsolidated affiliates 900 1,075 2,624 2,893 Total other expenses, net (6,177) (4,976) (17,840) (14,712) Income before minority interest and income taxes 4,890 3,704 7,570 8,036 Minority interest share of earnings of consolidated subsidiaries (2,852) (2,288) (2,821) (4,990) Income before income taxes 2,038 1,416 4,749 3,046 Income tax expense (658) (638) (1,661) (1,290) Net income $1,380 $778 $3,088 $1,756 Earnings per share, basic: $0.08 $0.04 $0.17 $0.10 Earnings per share, diluted: $0.07 $0.04 $0.17 $0.10 Weighted average number of shares, basic 17,990 17,990 17,974 18,004 Dilutive effect of stock options 826 11 482 52 Weighted average number of shares, diluted 18,816 18,001 18,456 18,056 MEDCATH CORPORATION SELECTED OPERATING DATA (In thousands, except per share data and selected operating data) (Unaudited) Three Months Ended June 30, Nine Months Ended June 30, 2004 2003 % Change 2004 2003 % Change Statement of Operations Data: Net revenue $180,785 $142,343 27.0% $510,697 $398,631 28.1% Adjusted EBITDA (a) $23,131 $19,702 17.4% $59,457 $54,119 9.9% Adjusted EBITDA, before pre-opening expenses (a) $23,131 $21,556 7.3% $64,988 $61,168 6.2% Income from operations $11,067 $8,680 27.5% $25,410 $22,748 11.7% Net income $1,380 $778 77.4% $3,088 $1,756 75.9% Earnings per share, diluted $0.07 $0.04 75.0% $0.17 $0.10 70.0% (a) See Supplemental Financial Disclosure--Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures. Three Months Ended June 30, 2004 2003 % Change Selected Operating Data (consolidated): Number of hospitals 12 9 Licensed beds (a) 704 580 Staffed and available beds (b) 609 485 Admissions (c) 10,898 8,724 24.9% Adjusted admissions (d) 13,881 10,970 26.5% Patient days (e) 36,872 30,760 19.9% Adjusted patient days (f) 46,810 38,631 21.2% Average length of stay (days) (g) 3.38 3.53 (4.2)% Occupancy (h) 66.5% 69.7% Inpatient Catheterization Procedures 5,850 4,621 26.6% Inpatient Surgical Procedures 2,777 2,310 20.2% Hospital Division revenue $167,193 $126,036 32.7% Nine Months Ended June 30, 2004 2003 % Change Selected Operating Data (consolidated): Number of hospitals 12 9 Licensed beds (a) 704 580 Staffed and available beds (b) 609 485 Admissions (c) 31,332 23,817 31.6% Adjusted admissions (d) 39,651 29,607 33.9% Patient days (e) 109,214 86,137 26.8% Adjusted patient days (f) 137,911 107,040 28.8% Average length of stay (days) (g) 3.49 3.62 (3.6)% Occupancy (h) 65.5% 65.1% Inpatient Catheterization Procedures 16,116 12,813 25.8% Inpatient Surgical Procedures 7,855 6,483 21.2% Hospital Division revenue $468,250 $347,537 34.7% Three Months Ended June 30, 2004 2003 % Change Selected Operating Data (same facility): Number of hospitals 9 9 Licensed beds (a) 580 580 Staffed and available beds (b) 531 485 Admissions (c) 9,875 8,724 13.2% Adjusted admissions (d) 12,677 10,970 15.6% Patient days (e) 33,538 30,760 9.0% Adjusted patient days (f) 42,890 38,631 11.0% Average length of stay (days) (g) 3.40 3.53 (3.7)% Occupancy (h) 69.4% 69.7% Inpatient Catheterization Procedures 5,090 4,621 10.1% Inpatient Surgical Procedures 2,564 2,310 11.0% Hospital Division revenue $146,274 $126,036 16.1% Nine Months Ended June 30, 2004 2003 % Change Selected Operating Data (same facility): Number of hospitals 8 8 Licensed beds (a) 522 522 Staffed and available beds (b) 489 465 Admissions (c) 28,375 23,480 20.8% Adjusted admissions (d) 35,884 29,128 23.2% Patient days (e) 99,832 85,248 17.1% Adjusted patient days (f) 125,983 105,776 19.1% Average length of stay (days) (g) 3.52 3.63 (3.0)% Occupancy (h) 74.5% 67.2% Inpatient Catheterization Procedures 14,150 12,608 12.2% Inpatient Surgical Procedures 6,995 6,372 9.8% Hospital Division revenue $401,890 $340,607 18.0% (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) 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. (g) Average length of stay (days) represents the average number of days inpatients stay in our hospital. (h) 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 June 30, 2004 and 2003. Three Months Ended Nine Months Ended June 30, June 30, 2004 2003 2004 2003 (in thousands) Net income $1,380 $778 $3,088 $1,756 Add: Income tax expense 658 638 1,661 1,290 Minority interest share of earnings (losses) of consolidated subsidiaries 2,852 2,288 2,821 4,990 Equity in net earnings of unconsolidated affiliates (900) (1,075) (2,624) (2,893) Other income, net (11) (93) (17) (196) Interest income (212) (312) (606) (1,103) Interest expense 7,300 6,456 21,087 18,904 Loss (gain) on disposal of property, equipment and other assets 27 6 (21) 94 Amortization 290 282 870 1,156 Depreciation 11,747 10,734 33,198 30,121 Adjusted EBITDA $23,131 $19,702 $59,457 $54,119 Add: Pre-opening expenses - 1,854 5,531 7,049 Adjusted EBITDA, before pre-opening expenses $23,131 $21,556 $64,988 $61,168 DATASOURCE: MedCath Corporation CONTACT: John T. Casey, Chairman/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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