CHARLOTTE, N.C., Feb. 4 /PRNewswire-FirstCall/ -- MedCath Corporation , a healthcare provider focused on high acuity healthcare services, predominately the diagnosis and treatment of cardiovascular disease, today announced its operating results for its first quarter of fiscal 2009, which ended December 31, 2008.
Highlights -- Net revenue up 4.4% compared with first quarter of fiscal 2008 -- Adjusted EBITDA of $17.2 million -- Operating cash flow from continuing operations of $18.2 million -- EPS from continuing operations of ($0.08); or $0.18, excluding loss on debt refinancing, pre-opening expenses and share-based compensation expense First Quarter 2009 Results
MedCath's reported net revenue increased 4.4% to $153.1 million in the first quarter of fiscal 2009 from $146.7 million in the first quarter of fiscal 2008. Income from operations decreased to $7.9 million from $9.5 million in the first quarter of fiscal 2008 and Adjusted EBITDA decreased to $17.2 million from $21.0 million in the same period of the prior year. MedCath's income (loss) from continuing operations was ($1.6) million, or ($0.08) per diluted share, in the first quarter of fiscal 2009 compared to $2.3 million, or $0.11 per diluted share, in the first quarter of fiscal 2008.
MedCath's operating results for the first quarter of fiscal 2009 include a $7.0 million, or $0.23 per diluted share, decrease in income from continuing operations related to loss on early extinguishment of debt incurred from the company's entering into a new credit facility in November 2008 and the repurchase of all of the company's outstanding 9-7/8% Senior Notes in December 2008. MedCath anticipates that the repurchase of the Senior Notes will be $0.19 accretive to its annual earnings per share.
Adjusted EBITDA in this release does not include share-based compensation or pre-opening expenses, but these items are included as a component of income from continuing operations. Share-based compensation expense totaled $1.0 million in the first quarter of fiscal 2009, or $0.03 per diluted share, compared with a $3.7 million expense, or $0.12 per diluted share, in the first quarter of fiscal 2008. Pre-opening expenses totaled $0.2 million in the first quarter of fiscal 2009, compared with $0.3 million in the first quarter of fiscal 2008.
As shown below, EPS for the quarter, adjusted for loss on debt refinance, share-based compensation expense and pre-opening expenses totaled $0.18 for the quarter:
EPS from continuing operations $ (0.08) Adjustments (net of tax effect) Pre-opening expenses $ 0.01 Share-based compensation expense $ 0.03 Loss on Debt Refinancing $ 0.22 EPS, adjusted for above items $ 0.18
During the first quarter of fiscal 2009, MedCath divested the 51.0% ownership interest in a joint venture held in its MedCath Partners Division. MedCath received approximately $6.9 million in cash consideration for its ownership interest in the joint venture and recognized a $4.0 million gain in income from discontinued operations, net of taxes. The joint venture had net revenue of $2.6 million, Adjusted EBITDA of $0.7 million, net income of $0.2 million and earnings per share of $0.01 for the fiscal quarter ended December 31, 2008. The operating results for this joint venture are included in MedCath's discontinued operations for the first quarter of fiscal 2009.
"We are pleased with our first quarter results and progress we're making toward our strategic transformation and plans to diversify our services," said Ed French, MedCath's President and Chief Executive Officer. "We experienced solid sequential earnings growth and margin expansion; and our cash flow from operations was extremely strong. Our expansion plans continue to move forward as planned, and we look to add 149 beds during the next 10 months."
Operating Statistics, Cash Flow and Capital Expenditures
Same facility hospital admissions in the first quarter of fiscal 2009 were 6,757, down 5.5% compared with the first quarter of fiscal 2008. Adjusted admissions totaled 9,874, up 0.5% compared with the first quarter of fiscal 2008. Same facility hospital outpatient visits totaled 7,499 in the first quarter of fiscal 2009, up 16.3% in comparison with the first quarter of fiscal 2008.
MedCath's commercial admissions of 23.6% were unchanged from the year earlier period and the fourth quarter of fiscal 2008. Self-pay admissions equaled 2.2% of total admissions in the first quarter of fiscal 2009, in comparison to 2.4% of total admissions in the first quarter of fiscal 2008. Total uncompensated care, which includes charity care plus bad debt expense, equaled 8.5% of hospital division net revenue before the deduction for charity care in the first quarter of fiscal 2009 compared to 9.2% in the first quarter of fiscal 2008 and 10.4% in the fourth quarter of fiscal 2008.
Net cash provided by operating activities of continuing operations for the first quarter of fiscal 2009 was $18.2 million, which reflects the payment of approximately $2.5 million in interest expense from an earlier quarter in connection with the repurchase of the Senior Notes. Net cash provided by operating activities of continuing operations for the first quarter of fiscal 2008 was breakeven. Cash capital expenditures totaled $30.0 million and included $6.3 million related to maintenance expenditures and $23.7 million related to MedCath's construction projects not opened.
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; and minority interest share of earnings of consolidated subsidiaries. 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 Thursday, February 5, 2009, during a 10 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 82073996. A live web cast 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, March 5, 2009. To access the replay, domestic callers should dial (800) 642-1687 and international callers should dial (706) 645-9291. The archived conference ID is 82073996. 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 high acuity services with the diagnosis and treatment of cardiovascular disease being a primary service offering. MedCath owns an interest in and operates nine hospitals with a total of 676 licensed beds, located in Arizona, Arkansas, California, Louisiana, New Mexico, South Dakota, and Texas. MedCath is in the process of developing its tenth hospital, which is anticipated to open in fall 2009, in Kingman, Ariz. 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. The preparation of MedCath's first quarter operating results requires management to make estimates and assumptions that affect reported amounts of revenues and expenses. There is a reasonable possibility that actual results may vary significantly from those estimates.
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, 2008 filed with the Securities and Exchange Commission on December 15, 2008. 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 December 31, 2008 2007 Net revenue $153,103 $146,695 Operating expenses: Personnel expense 50,656 50,384 Medical supplies expense 42,651 38,742 Bad debt expense 11,393 11,285 Other operating expenses 32,235 29,016 Pre-opening expenses 207 248 Depreciation 7,835 7,341 Amortization 149 127 Loss on disposal of property, equipment and other assets 73 28 Total operating expenses 145,199 137,171 Income from operations 7,904 9,524 Other income (expenses): Interest expense (2,857) (3,931) Loss on early extinguishment of debt (6,961) - Interest and other income, net 100 1,158 Equity in net earnings of unconsolidated affiliates 2,065 2,025 Total other expenses, net (7,653) (748) Income from continuing operations before minority interest and income taxes 251 8,776 Minority interest share of earnings of consolidated subsidiaries (2,776) (4,137) Income from continuing operations before income taxes (2,525) 4,639 Income tax (benefit)/expense (909) 2,348 (Loss)/income from continuing operations (1,616) 2,291 Income from discontinued operations, net of taxes 3,862 773 Net income $2,246 $3,064 Earnings (loss) per share, basic Continuing operations $(0.08) $0.11 Discontinued operations 0.19 0.03 Earnings (loss) per share, basic $0.11 $0.14 Earnings (loss) per share, diluted Continuing operations $(0.08) $0.11 Discontinued operations 0.19 0.03 Earnings (loss) per share, diluted $0.11 $0.14 Weighted average number of shares, basic 19,599 21,028 Dilutive effect of stock options and restricted stock - 263 Weighted average number of shares, diluted 19,599 21,291 MEDCATH CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share data) December 31, September 30, 2008 2008 (Unaudited) Current assets: Cash and cash equivalents $56,912 $93,836 Restricted cash 3,163 3,154 Accounts receivable, net 86,572 83,875 Income tax receivable, net 1,696 3,091 Medical supplies 17,838 15,479 Deferred income tax assets 9,978 9,769 Prepaid expenses and other current assets 10,439 9,796 Current assets of discontinued operations 12,770 20,776 Total current assets 199,368 239,776 Property and equipment, net 341,942 323,729 Investments in affiliates 10,742 15,285 Goodwill 60,174 60,174 Other intangible assets, net 5,914 6,063 Other assets 9,748 8,378 Long-term assets of discontinued operations - 51 Total assets $627,888 $653,456 Current liabilities: Accounts payable $42,128 $41,642 Accrued compensation and benefits 17,283 16,872 Other accrued liabilities 21,080 24,054 Current portion of long-term debt and obligations under capital leases 15,341 31,920 Current liabilities of discontinued operations 9,510 10,184 Total current liabilities 105,342 124,672 Long-term debt 115,578 115,628 Obligations under capital leases 1,956 2,087 Deferred income tax liabilities 12,276 12,352 Other long-term obligations 4,425 4,454 Total liabilities 239,577 259,193 Minority interest in equity of consolidated subsidiaries 15,880 24,667 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; 21,588,880 issued and 19,634,519 outstanding at December 31, 2008; 21,553,054 issued and 19,598693 outstanding at September 30, 2008 216 216 Paid-in capital 456,531 455,494 Accumulated deficit (38,892) (41,138) Accumulated other comprehensive loss (627) (179) Treasury stock, at cost; 1,954,361 shares at December 31, 2008 1,954,361 shares at September 30, 2008 (44,797) (44,797) Total stockholders' equity 372,431 369,596 Total liabilities and stockholders' equity $627,888 $653,456 MEDCATH CORPORATION SELECTED OPERATING DATA (In thousands, except per share data and selected operating data) (Unaudited) Three Months Ended December 31, 2008 2007 % Change Statement of Operations Data: Net revenue $153,103 $146,695 4.4 % Adjusted EBITDA (1) $17,166 $20,977 (18.2)% Income from operations $7,904 $9,524 (17.0)% (Loss)/income from continuing operations $(1,616) $2,291 (170.5)% Earnings (loss) per share from continuing operations, basic $(0.08) $0.11 (172.7)% Earnings (loss) per share from continuing operations, diluted $(0.08) $0.11 (172.7)% (1) See Supplemental Financial Disclosure--Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures. Three Months Ended December 31, 2008 2007 % Change Selected Operating Data ( a ): Number of hospitals 7 7 Licensed beds ( c ) 509 421 Staffed and available beds ( d ) 463 404 Admissions ( e ) 6,757 7,150 (5.5)% Adjusted admissions ( f ) 9,874 9,829 0.5% Patient days ( g ) 25,181 25,460 (1.1)% Adjusted patient days ( h ) 37,044 35,144 5.4% Average length of stay (days) ( i ) 3.73 3.56 4.8% Occupancy ( j ) 59.1% 68.5% Inpatient catheterization procedures ( k ) 3,552 4,049 (12.3)% Inpatient surgical procedures ( l ) 2,001 1,947 2.8% Hospital net revenue $144,225 $137,151 5.2% Combined Operating Data ( b ): Number of hospitals 9 9 Licensed beds ( c ) 676 588 Staffed and available beds ( d ) 628 567 Admissions ( e ) 9,740 9,769 (0.3)% Adjusted admissions ( f ) 14,622 14,167 3.2% Patient days ( g ) 34,189 33,725 1.4% Adjusted patient days ( h ) 51,162 48,482 5.5% Average length of stay (days) ( i ) 3.51 3.45 1.7% Occupancy ( j ) 59.2% 64.7% Inpatient catheterization procedures ( k ) 4,385 4,776 (8.2)% Inpatient surgical procedures ( l ) 2,622 2,686 (2.4)% Hospital net revenue $185,023 $176,706 4.7% ( 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. ( 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 unaudited consolidated financial statements for the three months ended December 31, 2008 and 2007. Three Months Ended December 31, 2008 2007 (in thousands) (Loss)/income from continuing operations $(1,616) $2,291 Add: Income tax expense (909) 2,348 Minority interest share of earnings of consolidated subsidiaries 2,776 4,137 Equity in net earnings of unconsolidated affiliates (2,065) (2,025) Interest and other income, net (100) (1,158) Loss on early extinguishment of debt 6,961 - Interest expense 2,857 3,931 Loss on disposal of property, equipment and other assets 73 28 Amortization 149 127 Depreciation 7,835 7,341 Pre-opening expenses 207 248 Share-based compensation expense 998 3,709 Adjusted EBITDA $17,166 $20,977
