Metropolitan Health Networks Reports 2009 Third Quarter Results

http://www.businesswire.com/news/home/20091105005134/en

Company Delivers Record 2009 Customer Base, Revenues and Earnings
WEST PALM BEACH, Fla.--(Business Wire)--
Metropolitan Health Networks, Inc. (NYSE AMEX: MDF), a leading provider of
healthcare services in Florida, today reported the company`s financial results
for the quarter and nine months ended September 30, 2009. Highlights include the
following:

* Revenue of $88.1 million for the third quarter of 2009, an 11.6% increase
compared to the same period in 2008;
* operating income excluding the impact of the sale of the HMO was $3.4 million
for the three months ended September 30, 2009 compared to $2.3 million in the
prior year period;
* revenue for the nine months ended September 30, 2009, of $265.7 million, a
12.0% increase from the same period in 2008;
* operating income excluding the impact of the sale of the HMO was $14.4 million
for the nine months ended September 30, 2009 compared to $7.4 million in 2008;
* a 7.1% increase in total customer months for the nine months ended September
30, 2009 compared to the same period in 2008; and
* the repurchase of 11.2 million shares since October 6, 2008.

Third Quarter Financial Highlights:

The company recognized revenue of $88.1 million for the third quarter as
compared to $78.9 million in the 2008 third quarter, an 11.6% increase.
Operating income before gain on sale of HMO of $3.4 million for the three months
ended September 30, 2009, compared to $662,000 for the same period in 2008.
Included in operating income before gain on sale of the HMO for the third
quarter of 2008 were one-time stay bonuses and termination costs, related to the
sale, of $1.6 million. Net income for the 2009 third quarter was $2.4 million or
$0.05 per share, basic and diluted, as compared to $4.3 million or $0.08 per
share, basic and diluted for the same quarter last year. Excluding the gain on
the sale of the HMO and related stay bonuses, net income for the three months
ended September 30, 2008, would have been $1.7 million or $0.03 per diluted
share.

The company`s medical expense ratio ("MER") was 91.3% in the third quarter of
2009 compared to 90.2% in the same quarter of 2008. Operating expenses dropped
39.8% from $7.0 million in the third quarter of 2008 to $4.2 million in the same
period in 2009, primarily the result of the reduction in administrative costs
resulting from the sale of the Company`s HMO in August 2008.

Nine Months Year to Date Financial Highlights:

For the nine months ended September 30, 2009, the company`s revenue totaled
$265.7 million compared to $237.2 million in the prior year period, an increase
of 12.0%. Operating income before gain on sale of HMO for the nine months ended
September 30, 2009, increased to $14.4 million, compared to $5.9 million for the
same nine months ended September 30, 2008. Included in operating income before
gain on sale of the HMO for the nine months ended September 30, 2008, were
one-time stay bonuses and termination costs, related to the sale, of $1.6
million. Net income was $9.6 million compared to $7.6 million for the same
period of 2008. Earnings per share were $0.21 per basic share and $0.20 per
diluted share, compared to $0.15 per basic share and $0.14 per diluted share for
the nine months ended September 30, 2009 and 2008, respectively. Excluding the
gain on the sale of the HMO and related stay bonuses, net income for the nine
months ended September 30, 2008, would have been $5.1 million or $0.10 per
diluted share.

The company`s MER was 89.7% in the first nine months of 2009 compared to 88.4%
in the first nine months of 2008. Operating expenses dropped 39.5% from $21.6
million in the first nine months of 2008 to $13.0 million in the same period in
2009, primarily the result of the reduction in administrative costs resulting
from the sale of the Company`s HMO.

Customer Information:

The total number of Medicare Advantage customers served by the company increased
by 2,700 between September 2008 and September 2009 to 35,800. With the sale of
the HMO and the new provider risk agreement reached late in the third quarter of
2008 with Humana in the 13 HMO counties, all of our customers are in the core
PSN business. Total customer months, the combined total customers for each month
of the measurement period, increased by 7.1% to 318,300 in the first nine months
of 2009, up from 297,300 in the 2008 period.

Balance Sheet Highlights:

Cash, cash equivalents and investments at September 30, 2009, was approximately
$37.2 million. This compares to $36.3 million at December 31, 2008. The Company
had a working capital surplus of approximately $32.2 million at September 30,
2009, compared to a surplus of approximately $34.5 million as of December 31,
2008. The Company`s total stockholders` equity was approximately $42.0 million
at September 30, 2009 and total common shares outstanding at that date totaled
43.0 million.

Share Repurchase Program:

On August 3, 2009, the Company`s Board of Directors approved a 5 million share
increase to its previously announced share repurchase program bringing the total
number of shares of common stock authorized for repurchase under the program to
15 million shares. Through September 30, 2009 the Company has repurchased 10.5
million shares of its common stock at an average cost of $1.81 per share. Shares
repurchased as of November 2, 2009 totaled approximately 11.2 million. With the
increased authorization, approximately 3.8 million shares are currently
available for purchase under the plan. The number of shares to be repurchased
and the timing of the purchases will be influenced by a number of factors,
including the then prevailing market price of the common stock of the Company,
other perceived opportunities that may become available to the Company, and
regulatory requirements.

Michael Earley, Chairman and Chief Executive Officer of Metropolitan Health
Networks, Inc., commented, "2009 continues to be a very good year for our
business, with continued growth in terms of customers, revenues and earnings.
Our operations and balance sheet remain strong and we are well-positioned to
face the challenges and opportunities that confront our business, and most
health care companies in the future."

Earley continued, "We continue to believe that providing and coordinating care
for people with Medicare will remain a good and growing business that is
demographically driven. Aside from our positive results, we have made important
strides in positioning our company for the future with initiatives such as
e-prescribing, electronic medical records, and the now much-discussed Patient
Centered Medical Home primary care operating model. We recently submitted
applications to secure NCQA ("National Committee for Quality Assurance")
accreditation as Patient Centered Medical Homes for ten of our owned medical
practices. We believe that these and other similar investments will allow us to
deliver more effective and efficient care to our customers, in a
customer-centric environment. We also believe that these strategies are indeed
consistent with real health care reform."

Conference Call Information:

Metropolitan Health Networks will hold a conference call to review its third
quarter 2009 results on Thursday, November 5, 2009 at 11:00 a.m. Eastern. The
call will be hosted by Michael Earley, Chairman and Chief Executive Officer.
Interested parties may access the conference call by dialing the following
numbers: (888) 679-8035 (domestic) or 617-213-4848 (international), pass code #
84390127. The call will also be available via web cast at www.metcare.com,
http://www.streetevents.com, http://www.fulldisclosure.com.

Participants may pre-register for the call at
https://www.theconferencingservice.com/prereg/key.process?key=PGYE6TQCE.
Pre-registrants will be issued a pin number to use when dialing into the live
call which will provide quick access to the conference by bypassing the operator
upon connection.

If you are unable to participate, an audio replay of the call will be available
beginning two hours after the call and will be available until 11:59 p.m. on
November 12, 2009, by dialing (888) 286-8010 (domestic) or (617) 801-6888
(international) using confirmation pass code 66911284.

About Metropolitan Health Networks, Inc.:

Metropolitan is a growing healthcare organization that provides comprehensive
healthcare services for Medicare Advantage members and other patients in
Florida. To learn more about Metropolitan Health Networks, Inc. please visit its
website at www.metcare.com.

Forward Looking Statements:

Except for historical matters contained herein, statements made in this press
release are forward-looking and are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Without limiting the
generality of the foregoing, words such as "may", "will", "to", "plan",
"expect", "believe", "anticipate", "intend", "could", "would", "estimate", or
"continue" or the negative other variations thereof or comparable terminology
are intended to identify forward-looking statements.

Investors and others are cautioned that a variety of factors, including certain
risks, may affect our business and cause actual results to differ materially
from those set forth in the forward-looking statements. These risk factors
include, without limitation, (i) our ability to meet our cost projections under
various provider agreements with Humana; (ii) our failure to accurately estimate
incurred but not reported medical benefits expense; (iii) pricing pressures
exerted on us by managed care organizations and the level of payments we
indirectly receive under governmental programs or from other payors; (iv) future
legislation and changes in governmental regulations; (v) the impact of Medicare
Risk Adjustments on payments we receive for our managed care operations; (vi) a
loss of any of our significant contracts or our ability to increase the number
of Medicare eligible patient lives we manage under these contracts. The Company
is also subject to the risks and uncertainties described in its filings with the
Securities and Exchange Commission, including its Annual Report on Form 10-K for
the year ended December 31, 2008, its Quarterly Report on Form 10-Q for the
quarter ended March 31, 2009, its Quarterly Report on Form 10-Q for the quarter
ended June 30, 2009, and its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2009, which is anticipated to be filed within several business
days.

METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS September 30 December 31,
(unaudited) 2008
CURRENT ASSETS
Cash and equivalents $ 5,163,330 $ 2,701,243
Investments, at fair value 32,029,904 33,641,140
Accounts receivable, net 712,459 286,003
Due from Humana - 2,823,355
Inventory 181,214 315,811
Prepaid expenses 632,654 570,792
Deferred income taxes 599,296 262,874
Other current assets 119,350 266,007
TOTAL CURRENT ASSETS 39,438,207 40,867,225

PROPERTY AND EQUIPMENT, net 1,623,529 1,336,094
RESTRICTED CASH 1,413,528 1,408,089
DEFERRED INCOME TAXES 1,159,293 980,842
OTHER INTANGIBLE ASSETS, net 1,027,223 1,184,142
GOODWILL, net 4,362,332 2,587,332
OTHER ASSETS 774,474 780,631
TOTAL ASSETS $ 49,798,586 $ 49,144,355

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable $ 451,619 $ 483,621
Due to Humana 3,776,123 -
Accrued payroll and payroll taxes 1,300,594 2,288,224
Income taxes payable 729,762 1,865,926
Current portion of long term debt 318,182 -
Accrued termination costs of HMO administrative services agreement - 1,080,000
Accrued expenses 634,691 621,854
TOTAL CURRENT LIABILITIES 7,210,971 6,339,625

LONG-TERM DEBT, net of current portion 556,818 -

TOTAL LIABILITIES 7,767,789 6,339,625

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Preferred stock, par value $.001 per share; stated value $100 per share;
10,000,000 shares authorized; 5,000 issued and outstanding 500,000 500,000
Common stock, par value $.001 per share; 80,000,000 shares authorized;
42,987,000 and 48,251,000 issued and outstanding at September 30, 2009 and December 31, 2008, respectively 42,987 48,251
Additional paid-in capital 27,267,735 37,649,331
Retained earnings 14,220,075 4,607,148
TOTAL STOCKHOLDERS' EQUITY 42,030,797 42,804,730
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 49,798,586 $ 49,144,355

METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Nine Months Ended September 30, Three Months Ended September 30,
2009 2008 2009 2008
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUE $ 265,655,152 $ 237,175,320 $ 88,138,389 $ 78,949,785

MEDICAL EXPENSE
Medical claims expense 227,399,839 200,522,906 76,929,010 68,072,724
Medical center costs 10,795,722 9,247,512 3,582,353 3,175,606
Total Medical Expense 238,195,561 209,770,418 80,511,363 71,248,330
GROSS PROFIT 27,459,591 27,404,902 7,627,026 7,701,455

OPERATING EXPENSES
Payroll, payroll taxes and benefits 7,413,908 9,911,209 2,252,490 2,897,108
General and administrative 5,431,880 8,306,534 1,863,853 2,405,884
Marketing and advertising 202,092 1,739,459 118,334 138,932
Stay bonuses and termination costs - 1,597,674 - 1,597,674
Total Operating Expenses 13,047,880 21,554,876 4,234,677 7,039,598
OPERATING INCOME BEFORE GAIN ON SALE OF HMO SUBSIDIARY 14,411,711 5,850,026 3,392,349 661,857

Gain on sale of HMO subsidiary 811,470 5,797,769 366,470 5,797,769
OPERATING INCOME 15,223,181 11,647,795 3,758,819 6,459,626

OTHER INCOME (EXPENSE)
Investment income, net 351,301 254,547 85,838 28,630
Other income (expense) (6,592 ) (16,805 ) (6,081 ) (10,388 )
Total other income (expense) 344,709 237,742 79,757 18,242

INCOME BEFORE INCOME TAX EXPENSE 15,567,890 11,885,537 3,838,576 6,477,868
INCOME TAX EXPENSE 5,954,963 4,250,590 1,412,095 2,209,542
NET INCOME $ 9,612,927 $ 7,634,947 $ 2,426,481 $ 4,268,326

NET EARNINGS PER COMMON SHARE
Basic $ 0.21 $ 0.15 $ 0.05 $ 0.08
Diluted $ 0.20 $ 0.14 $ 0.05 $ 0.08

Metropolitan Health Networks, Inc., West Palm Beach
Michael Earley, Chief Executive Officer, 561-805-8500
mearley@metcare.com
or
Cameron Associates
Al Palombo, Investor Relations, 212-245-8800 Ext. 209
al@cameronassoc.com

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