-- Same facility adjusted admissions up 4.6% in second quarter of fiscal 2008
compared to the second quarter of fiscal 2007
CHARLOTTE, N.C., May 6 /PRNewswire-FirstCall/ -- MedCath Corporation
(Nasdaq: MDTH), a healthcare provider focused on high acuity healthcare
services, predominately the diagnosis and treatment of cardiovascular disease,
today announced its operating results for its second fiscal quarter, which
ended March 31, 2008.
Second Quarter 2008 Results
On April 21, 2008 MedCath announced preliminary results for the second
quarter of fiscal 2008. This press release presents the final results for the
quarter on an actual and a same facility basis.
During its fourth quarter of fiscal 2007, MedCath completed the
recapitalization of Harlingen Medical Center ("HMC"). As part of the
recapitalization, MedCath's ownership in HMC was reduced from a majority
ownership to a minority ownership. Due to this change in ownership, MedCath
began accounting for HMC as an equity investment in the quarter ended
September 30, 2007. As such, MedCath's consolidated operating results for the
quarter ended March 31, 2008 exclude net revenue, income from operations and
Adjusted EBITDA of HMC. In comparison, MedCath's consolidated actual results
for the comparable quarter of the previous fiscal year include the
consolidated financial results of HMC.
During its second quarter of fiscal 2008, MedCath announced that it had
entered into a definitive agreement to sell substantially all of the assets of
its Dayton Heart Hospital, located in Dayton, Ohio. As such, MedCath now
accounts for Dayton Heart Hospital as an asset held for sale for all periods
presented.
Any reference to same facility results in this press release excludes HMC
and Dayton Heart Hospital for the second quarter of fiscal 2007.
MedCath's reported net revenue decreased 11.0% to $157.1 million in the
second quarter of fiscal 2008 from $176.6 million in the second quarter of
fiscal 2007, which included $23.9 million attributable to HMC. On a same
facility basis, net revenue increased 2.8% from $152.8 million. Income from
operations decreased 1.3% to $15.4 million in the second quarter of fiscal
2008 from $15.6 million in the second quarter of fiscal 2007. On a same
facility basis, income from operations increased 19.4% from $12.9 million.
Adjusted EBITDA decreased 11.2% to $23.8 million in the second quarter of
fiscal 2008 from $26.8 million in the second quarter of fiscal 2007. On a
same facility basis, Adjusted EBITDA increased 5.3%. Income from continuing
operations was $6.0 million, or $0.30 per diluted share, in the second quarter
of fiscal 2008, compared to income from continuing operations of $4.7 million,
or $0.22 per diluted share, in the second quarter of fiscal 2007. On a same
facility basis, MedCath's second quarter of fiscal 2007 income from continuing
operations would have been $3.9 million, or $0.18 per diluted share, had HMC
been accounted for as an equity investment in the second quarter of fiscal
2007.
MedCath's operating results for the quarter ended March 31, 2008 reflects
a $0.2 million decrease in net revenue and Adjusted EBITDA related to
settlement of third-party cost reports. In comparison, MedCath's operating
results for the quarter ended March 31, 2007 reflect a $3.1 million reduction
in net revenue and Adjusted EBITDA due to an increase in a reserve previously
established for repayment of a portion of Medicare reimbursement. Share-based
compensation expense totaled $0.2 million in the second quarter of fiscal
2008, or $0.01 per diluted share, compared to $2.1 million, or $0.05 per
diluted share, in the second quarter of fiscal 2007. Pre-opening expenses
totaled $0.3 million, or $0.02 per diluted share, in the second quarter of
fiscal 2008. MedCath did not incur pre-opening expenses in the second quarter
of fiscal 2007. Adjusted EBITDA in this release does not include share-based
compensation expense or pre-opening expenses, but these expenses are included
as a component of income from continuing operations.
"Our quarterly results affirm our strategic direction to increase our bed
capacity and asset base to diversify our service lines and revenue," said O.
Edwin French, MedCath's President and Chief Executive Officer. "Though we're
not immune to industry pressures, as we grow our small facilities and add
incremental revenues, we expect to see commensurate earnings growth. In the
meantime, as we evolve we have grown income from continuing operations and
earnings per share year-over-year while continuing to tell the quality story.
Operating Statistics, Cash Flow and Capital Expenditures
Same facility hospital adjusted admissions for the second quarter of
fiscal 2008 increased 4.6% from the second quarter of the prior fiscal year.
Same facility hospital net revenue increased 4.7%, or 2.3% after adjusting
second quarter of 2008's revenue for a $0.2 million cost report settlement,
and 2007's revenue for a reserve that reduced net revenue by $3.1 million.
Net cash provided by operating activities of continuing operations for the
second quarter of fiscal 2008 was $15.4 million, up from $13.1 million for the
second quarter of fiscal 2007.
Capital expenditures, including $4.6 million in expenditures related to
MedCath's growth initiatives, totaled $13.0 million in the second quarter of
fiscal 2008 in comparison to $6.6 million in the second quarter of fiscal
2007.
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; pre-opening expenses; loss on
disposal of property, equipment and other assets; loss on early extinguishment
of debt; equity in net earnings of unconsolidated affiliates; minority
interest share of earnings of consolidated subsidiaries, share-based
compensation, and pre-opening expenses. 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 Wednesday, May 7, 2008, during a 9 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 44446703. A live web cast will also be available on
the company's web site, 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 14,
2008. To access the replay, domestic callers should dial (800) 642-1687 and
international callers should dial (706) 645-9291. The archived conference ID
is 44446703. This press release and the financial information included
therewith will be accessible on the web, by going to 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. Following completion
of the divestiture of Dayton Heart Hospital, MedCath will own an interest in
and operate nine hospitals with a total of 616 licensed beds, located in
Arizona, Arkansas, California, Louisiana, New Mexico, South Dakota, and Texas.
MedCath is in the process of developing its tenth hospital in Kingman,
Arizona. In addition, MedCath and its subsidiary MedCath Partners 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 including, but not limited to, enactment
of changes in federal law that would limit physician hospital ownership.
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 Annual Report or Form 10-K for the year ended September
30, 2007 filed with the Securities and Exchange Commission on December 14,
2007. Copies of this form 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 Six Months Ended
March 31, March 31,
2008 2007 2008 2007
Net revenue $157,098 $176,640 $305,948 $337,026
Operating expenses:
Personnel expense 49,638 55,977 100,503 107,918
Medical supplies expense 43,097 47,099 82,726 91,254
Bad debt expense 10,332 14,635 21,617 27,762
Other operating expenses 30,419 34,257 59,565 67,358
Pre-opening expenses 245 - 493 -
Depreciation 7,709 8,180 15,074 16,450
Amortization 135 127 262 379
Loss on disposal of property,
equipment and other assets 138 796 166 853
Total operating expenses 141,713 161,071 280,406 311,974
Income from operations 15,385 15,569 25,542 25,052
Other income (expenses):
Interest expense (3,864) (5,693) (7,796) (13,028)
Loss on early extinguishment of
debt - (662) - (5,142)
Interest and other income, net 488 1,805 1,657 4,525
Equity in net earnings of
unconsolidated affiliates 2,181 1,482 4,206 2,920
Total other expenses, net (1,195) (3,068) (1,933) (10,725)
Income from continuing operations
before minority interest
and income taxes 14,190 12,501 23,609 14,327
Minority interest share of
earnings of consolidated
subsidiaries (5,114) (3,268) (9,566) (5,474)
Income from continuing operations
before income taxes 9,076 9,233 14,043 8,853
Income tax expense 3,099 4,504 5,448 4,486
Income from continuing operations 5,977 4,729 8,595 4,367
Income (loss) from discontinued
operations, net of taxes (292) 1,521 154 (3,013)
Net income $5,685 $6,250 $8,749 $1,354
Earnings (loss) per share, basic
Continuing operations $0.30 $0.23 $0.42 $0.21
Discontinued operations (0.01) 0.07 0.01 (0.14)
Earnings per share, basic $0.29 $0.30 $0.43 $0.07
Earnings (loss) per share, diluted
Continuing operations $0.30 $0.22 $0.41 $0.20
Discontinued operations (0.01) 0.07 0.01 (0.14)
Earnings per share, diluted $0.29 $0.29 $0.42 $0.06
Weighted average number of shares,
basic 19,841 21,019 20,438 20,568
Dilutive effect of stock options
and restricted stock 121 625 202 634
Weighted average number of shares,
diluted 19,962 21,644 20,640 21,202
MEDCATH CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, September 30,
2008 2007
(Unaudited)
Current assets:
Cash and cash equivalents $85,256 $140,276
Restricted cash 8,500 -
Accounts receivable, net 99,529 85,943
Medical supplies 15,583 13,928
Deferred income tax assets 13,560 12,389
Prepaid expenses and other current assets 5,663 6,197
Current assets of discontinued operations 3,273 13,680
Income tax expense
Total current assets 231,364 272,413
Property and equipment, net 281,365 270,663
Investments in affiliates 4,850 5,718
Goodwill 62,740 62,740
Other intangible assets, net 6,187 6,448
Other assets 6,420 6,531
Long-term assets of discontinued operations 26,544 44,902
Total assets $619,470 $669,415
Current liabilities:
Accounts payable $34,754 $30,933
Income tax payable 1,492 10,552
Accrued compensation and benefits 17,094 18,567
Other accrued liabilities 12,065 13,421
Current portion of long-term debt
and obligations under capital leases 4,504 4,089
Current liabilities of
discontinued operations 6,090 15,810
Total current liabilities 75,999 93,372
Long-term debt 144,394 146,398
Obligations under capital leases 1,514 1,793
Deferred income tax liabilities 11,855 12,018
Other long-term obligations 415 460
Long-term liabilities of
discontinued components 853 13
Total liabilities 235,030 254,054
Minority interest in equity of
consolidated subsidiaries 27,752 29,737
Stockholders' equity:
Preferred stock, $0.01 par value,
10,000,000 shares authorized; none issued - -
Common stock, $0.01 par value, 50,000,000
shares authorized; 21,451,144 issued and
19,496,783 outstanding at March 31, 2008;
21,271,144 issued and 21,202,244
outstanding at September 30, 2007 215 213
Paid-in capital 454,956 447,688
Accumulated deficit (53,379) (61,821)
Accumulated other comprehensive loss (307) (62)
Treasury stock, at cost; 68,900 shares
at March 31, 2007 1,954,361 shares at
March 31, 2008 (44,797) (394)
Total stockholders' equity 356,688 385,624
Total liabilities and
stockholders' equity $619,470 $669,415
MEDCATH CORPORATION
SELECTED OPERATING DATA
(In thousands, except per share data and selected operating data)
(Unaudited)
Three Months Ended March 31,
2008 2007 % Change
Statement of Operations Data:
Net revenue $157,098 $176,640 (11.1)%
Adjusted EBITDA (1) $23,825 $26,772 (11.0)%
Income from operations $15,385 $15,569 (1.2)%
Income from continuing operations $5,977 $4,729 26.4%
Earnings per share from continuing
operations, basic $0.30 $0.23 30.4%
Earnings per share from continuing
operations, diluted $0.30 $0.22 36.4%
Six Months Ended March 31,
2008 2007 % Change
Statement of Operations Data:
Net revenue $305,948 $337,026 (9.2)%
Adjusted EBITDA (1) $45,459 $45,860 (0.9)%
Income from operations $25,542 $25,052 2.0%
Income from continuing operations $8,595 $4,367 96.8%
Earnings per share from continuing
operations, basic $0.42 $0.21 100.0%
Earnings per share from continuing
operations, diluted $0.41 $0.20 105.0%
(1) See Supplemental Financial Disclosure--Reconciliation of GAAP
Financial Measures to Non-GAAP Financial Measures.
Three Months Ended March 31,
2008 2007 % Change
Selected Operating Data (a):
Number of hospitals 7 8
Licensed beds (c) 449 533
Staffed and available beds (d) 433 512
Admissions (e) 7,855 9,876 (20.5)%
Adjusted admissions (f) 10,817 13,470 (19.7)%
Patient days (g) 29,039 34,010 (14.6)%
Adjusted patient days (h) 40,247 46,173 (12.8)%
Average length of stay (days) (i) 3.70 3.44 7.6%
Occupancy (j) 73.7% 73.8%
Inpatient catheterization procedures
(k) 4,225 4,904 (13.8)%
Inpatient surgical procedures (l) 2,120 2,565 (17.3)%
Hospital net revenue $144,778 $162,092 (10.7)%
Selected Operating Data - Same
Facility (a):
Number of hospitals 7 7
Licensed beds (c) 449 421
Staffed and available beds (d) 433 404
Admissions (e) 7,855 7,929 (0.9)%
Adjusted admissions (f) 10,817 10,338 4.6%
Patient days (g) 29,039 28,156 3.1%
Adjusted patient days (h) 40,247 36,755 9.5%
Average length of stay (days) (i) 3.70 3.55 4.2%
Occupancy (j) 73.7% 77.4%
Inpatient catheterization procedures (k) 4,225 4,666 (9.5)%
Inpatient surgical procedures (l) 2,120 2,049 3.5%
Hospital net revenue $144,778 $138,213 4.7%
Combined Operating Data (b):
Number of hospitals 9 9
Licensed beds (c) 616 588
Staffed and available beds (d) 596 567
Admissions (e) 10,539 10,819 (2.6)%
Adjusted admissions (f) 15,164 14,533 4.3%
Patient days (g) 37,812 37,716 0.3%
Adjusted patient days (h) 54,130 50,349 7.5%
Average length of stay (days) (i) 3.59 3.49 2.9%
Occupancy (j) 69.7% 73.9%
Inpatient catheterization procedures
(k) 5,025 5,523 (9.0)%
Inpatient surgical procedures (l) 2,754 2,832 (2.8)%
Hospital net revenue $186,045 $179,263 3.8%
Six Months Ended March 31,
2008 2007 % Change
Selected Operating Data (a):
Number of hospitals 7 8
Licensed beds (c) 449 533
Staffed and available beds (d) 433 512
Admissions (e) 15,005 18,802 (20.2)%
Adjusted admissions (f) 20,645 25,745 (19.8)%
Patient days (g) 54,499 64,880 (16.0)%
Adjusted patient days (h) 75,381 88,422 (14.7)%
Average length of stay (days) (i) 3.63 3.45 5.2%
Occupancy (j) 68.8% 69.6%
Inpatient catheterization procedures
(k) 8,685 9,279 (6.4)%
Inpatient surgical procedures (l) 3,180 4,851 (34.4)%
Hospital net revenue $281,929 $311,062 (9.4)%
Selected Operating Data - Same
Facility (a):
Number of hospitals 7 7
Licensed beds (c) 449 421
Staffed and available beds (d) 433 404
Admissions (e) 15,005 15,020 (0.1)%
Adjusted admissions (f) 20,645 19,576 5.5%
Patient days (g) 54,499 53,769 1.4%
Adjusted patient days (h) 75,381 70,297 7.2%
Average length of stay (days) (i) 3.63 3.58 1.4%
Occupancy (j) 68.8% 73.1%
Inpatient catheterization procedures
(k) 8,685 8,861 (2.0)%
Inpatient surgical procedures (l) 3,180 4,185 (24.0)%
Hospital net revenue $281,929 $268,729 4.9%
Combined Operating Data (b):
Number of hospitals 9 9
Licensed beds (c) 616 588
Staffed and available beds (d) 596 567
Admissions (e) 20,308 20,707 (1.9)%
Adjusted admissions (f) 29,326 27,886 5.2%
Patient days (g) 71,537 72,166 (0.9)%
Adjusted patient days (h) 102,599 96,611 6.2%
Average length of stay (days) (i) 3.52 3.49 0.9%
Occupancy (j) 65.6% 69.9%
Inpatient catheterization procedures
(k) 10,212 10,521 (2.9)%
Inpatient surgical procedures (l) 4,553 5,385 (15.5)%
Hospital net revenue $362,751 $345,552 5.0%
(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. Same facility for all periods presented excludes
Harlingen Medical Center.
(b) Combined operating data includes hospitals in operation as of the end
of the period reported in continuing operations including hospitals
which are accounted for using the equity method in our consolidated
financial statements.
(c) 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.
(d) Staffed and available beds represent the number of beds that are
readily available for patient use at the end of the period.
(e) Admissions represent the number of patients admitted for inpatient
treatment.
(f) 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.
(g) Patient days represent the total number of days of care provided to
inpatients.
(h) 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.
(i) Average length of stay (days) represents the average number of days
inpatients stay in our hospitals.
(j) 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.
(k) Inpatients with a catheterization procedure represent the number of
inpatients with a procedure performed in one of the hospitals'
catheterization labs during the period.
(l) 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 six months ended March 31, 2008 and
2007.
Three Months Ended Six Months Ended
March 31, March 31,
2008 2007 2008 2007
(in thousands)
Income from continuing operations $5,977 $4,729 $8,595 $4,367
Add:
Income tax expense 3,099 4,504 5,448 4,486
Minority interest share of earnings
of consolidated subsidiaries 5,114 3,268 9,566 5,474
Equity in net earnings of
unconsolidated affiliates (2,181) (1,482) (4,206) (2,920)
Interest and other income, net (488) (1,805) (1,657) (4,525)
Loss on early extinguishment of debt - 662 - 5,142
Interest expense 3,864 5,693 7,796 13,028
Loss on disposal of property,
equipment and other assets 138 796 166 853
Amortization 135 127 262 379
Depreciation 7,709 8,180 15,074 16,450
Pre-opening expenses 245 - 493 -
Share-based compensation expense 213 2,100 3,922 3,126
Adjusted EBITDA $23,825 $26,772 $45,459 $45,860
The following table presents MedCath's condensed statement of operations
data for the three and six months ended March 31, 2008 on a pro forma
basis to reflect the reclassification of Harlingen Medical Center (HMC)
from a consolidated subsidiary to an equity investment.
Three Months Ended March 31,
Adjustments 2007
2007 to Decon- (Pro Forma 2008
(Actual) solidate Same
HMC Facility)
(in thousands)
Net Revenue $176,640 $(23,879) $152,761 $157,098
Income from operations 15,569 (2,695) 12,874 15,385
Income from continuing operations
before minority interest
and income taxes 12,501 (840) 11,661 14,190
Income from continuing operations
before income taxes 9,233 (840) 8,393 9,076
Income from continuing operations 4,729 (840) 3,889 5,977
Net income (loss) $6,250 $(840) $5,410 $5,685
Earnings (loss) per share, basic $0.30 $(0.04) $0.26 $0.29
Earnings (loss) per share, diluted $0.29 $(0.04) $0.25 $0.29
Weighted average number of shares,
basic 21,019 - 21,019 19,841
Dilutive effect of stock options
and restricted stock 625 - 625 121
Weighted average number of shares,
diluted 21,644 - 21,644 19,962
Six Months Ended March 31,
Adjustments 2007
2007 to Decon- (Pro Forma 2008
(Actual) solidate Same
HMC Facility)
(in thousands)
Net Revenue $337,026 $(42,333) $294,693 $305,948
Income from operations 25,052 (3,545) 21,507 25,542
Income from continuing operations
before minority interest
and income taxes 14,327 (491) 13,836 23,609
Income from continuing operations
before income taxes 8,853 (491) 8,362 14,043
Income from continuing operations 4,367 (491) 3,876 8,595
Net income (loss) $1,354 $(491) $863 $8,749
Earnings (loss) per share, basic $0.07 $(0.02) $0.05 $0.43
Earnings (loss) per share,
diluted $0.06 $(0.02) $0.04 $0.42
Weighted average number of
shares, basic 20,568 - 20,568 20,438
Dilutive effect of stock options
and restricted stock 634 - 634 202
Weighted average number of
shares, diluted 21,202 - 21,202 20,640
SOURCE MedCath Corporation
O. Edwin French, President/Chief Executive Officer, or Art Parker, Interim
Chief Financial Officer, both of MedCath Corporation, +1-704-708-6600
