CHARLOTTE, N.C., Aug. 5 /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 third quarter which ended June 30, 2009.
Highlights -- A 6.1% increase in patient visits, including inpatient and outpatient cases, and emergency department visits, compared to the third quarter of fiscal 2008. -- Operating cash flow from continuing operations of $18.7 million. -- EPS from continuing operations of $0.03 or Adjusted EPS from continuing operations of $0.22, excluding pre-opening expense, stock-based compensation expense and other items. Third Quarter 2009 Results
MedCath's reported net revenue decreased 2.2% to $150.9 million in the third quarter of fiscal 2009 from $154.3 million in the third quarter of fiscal 2008. Income from operations decreased to $2.2 million from $13.2 million in the third quarter of fiscal 2008 and Adjusted EBITDA decreased to $11.3 million from $22.7 million in the same period of the prior year. MedCath's income from continuing operations was $0.6 million, or $0.03 per diluted share, in the third quarter of fiscal 2009 compared to $4.9 million, or $0.25 per diluted share, in the third quarter of fiscal 2008.
"We continue to move forward on our transformation strategy by increasing capacity to diversify our Company's service offering," said Ed French, MedCath's President and Chief Executive Officer. "During the quarter, we completed expansion of our Louisiana Medical Center and Heart Hospital, adding 79 beds to the hospital's infrastructure, and we are on pace to open the Hualapai Mountain Medical Center in October. The addition of this new capacity will allow us to expand the population of patients that can benefit from our proven high-level of care. We are affirmed in our strategy to diversify and mitigate risk associated with single-product reliance as we have embarked upon our expansion investments."
MedCath's operating results for the third quarter of fiscal 2009 reflect the following items:
-- $2.7 million, or $0.08, net per diluted share of the decrease in net revenue and Adjusted EBITDA related to a reduction in the estimated amount of Medicare Disproportionate Share Hospital (DSH) payments certain hospitals were eligible for in prior fiscal years. The primary method for a hospital to qualify for Medicare DSH reimbursement is based on a statutory formula that utilizes the percentage of inpatient days attributable to patients eligible for Medicaid, but not eligible for Medicare Part A, and a base formula called the Supplemental Security Income (SSI) percentage, which is released annually by the Centers for Medicare and Medicaid Services (CMS). Based on the updated SSI percentage provided by CMS in June 2009, MedCath has determined that four hospitals that were previously determined to be eligible for DSH payments in fiscal 2007 and fiscal 2008 would either no longer be eligible for such payments or would be eligible for less payment than initially estimated. -- $0.4 million, or $0.01, net per diluted share of the decrease in Adjusted EBITDA related to the reduction in the estimated amount of charges eligible for Medicaid reimbursement from fiscal 2004 to 2006, which resulted in an updated cost to charge ratio at one of our hospitals. -- $1.1 million, or $0.03, net per diluted share, of the decrease in Adjusted EBITDA related to professional fees associated with an internal assessment of certain controls and procedures completed during the quarter. -- $0.8 million, or net impact of $0.03, net per diluted share of the decrease in Adjusted EBITDA reflects the anticipated settlement of Medicare claims at two of our hospitals related to the identification, return and self-reporting of $0.7 million in reimbursement for certain procedures performed at the two hospitals in prior fiscal years. -- $0.4 million, or $0.01 net per diluted share, of the decrease in Adjusted EBITDA related to severance expense.
Adjusted EBITDA excludes share-based compensation and pre-opening expenses, but these items are included as a component of income from continuing operations. Share-based compensation expense totaled $0.2 million in the third quarter of fiscal 2009, or $0.01 per diluted share, compared to a $1.5 million expense, or $0.05 per diluted share, in the third quarter of fiscal 2008. Pre-opening expenses totaled $0.8 million in the third quarter of fiscal 2009, or $0.02 per diluted share, compared to $0.1 million in the third quarter of fiscal 2008.
Operating Statistics, Cash Flow and Capital Expenditures
Same facility hospital admissions in the third quarter of fiscal 2009 were 6,352, down 14.0% compared with the third quarter of fiscal 2008. Adjusted admissions totaled 10,284, in line with the third quarter of fiscal 2008. Same facility hospital outpatient cases totaled 8,866 in the third quarter of fiscal 2009, up 15.7% in comparison with the third quarter of fiscal 2008.
Total uncompensated care, which includes charity care plus bad debt expense, equaled 9.3% of hospital division net patient revenue before the deduction for charity care in the third quarter of fiscal 2009 and the third quarter of fiscal 2008.
Net cash provided by operating activities of continuing operations for the third quarter of fiscal 2009 was $18.7 million compared to $18.9 million in the third quarter of fiscal 2008. Cash paid for capital expenditures during the quarter totaled $18.6 million, which included $4.8 million related to maintenance expenditures and $13.8 million related to MedCath's construction projects.
Use of Non-GAAP Financial Measures
Included in this press release and the supplemental financial information furnished herewith are certain financial measures that are not generally accepted accounting principles ("non-GAAP"), such as Adjusted earnings before interest, taxes, depreciation, and amortization ("Adjusted EBITDA") and Adjusted diluted earnings per share from continuing operations ("Adjusted EPS"). Adjusted EBITDA represents MedCath's income from continuing operations before interest expense; loss on early extinguishment of debt; income tax expense; depreciation; amortization; share-based compensation expense; (gain) loss on disposal of property, equipment and other assets; interest and other income; equity in net earnings of unconsolidated affiliates; minority interest share of earnings of consolidated subsidiaries; and pre-opening expenses. Adjusted EPS represents MedCath's diluted earnings per share from continuing operations for the three months ended June 30, 2009 adjusted for Medicare Disproportionate Share Hospital ("DSH") adjustments, reduction in Medicaid reimbursements, professional fees for an internal control assessment, settlement of Medicare claims, severance expense, share-based compensation, and pre-opening expenses. MedCath's management uses Adjusted EBITDA to measure the performance of MedCath's various operating entities, to compare actual results to historical and budgeted results, and to make capital allocation decisions. Management provides Adjusted EBITDA and Adjusted EPS 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 and/or Adjusted EPS as a financial performance measure.
Because Adjusted EBITDA and Adjusted EPS are non-GAAP measures, Adjusted EBITDA and Adjusted EPS, 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 and Adjusted EPS to diluted EPS from continuing operations.
Management will discuss and answer questions regarding MedCath's quarterly results on Thursday, August 6, 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 21652039. 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, August 20, 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 21652039. 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 755 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 third quarter operating results required 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, as updated in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009. Copies of our filings with the Securities and Exchange Commission, including exhibits, are available at http://www.sec.gov/.
MEDCATH CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended June 30, June 30, -------- -------- 2009 2008 2009 2008 ---- ---- ---- ---- Net revenue $150,904 $154,273 $462,874 $455,168 Operating expenses: Personnel expense 50,862 50,520 153,644 150,060 Medical supplies expense 44,995 42,757 131,457 123,155 Bad debt expense 12,547 10,235 34,558 31,852 Other operating expenses 31,441 29,555 96,022 88,996 Pre-opening expenses 754 149 1,340 643 Depreciation 7,858 7,505 23,258 22,535 Amortization 230 149 589 411 (Gain) loss on disposal of property, equipment and other assets (26) 225 138 391 --- --- --- --- Total operating expenses 148,661 141,095 441,006 418,043 ------- ------- ------- ------- Income from operations 2,243 13,178 21,868 37,125 Other income (expenses): Interest expense (1,151) (3,862) (5,339) (11,658) Loss on early extinguishment of debt - - (6,702) - Interest and other income 52 284 218 1,930 Equity in net earnings of unconsolidated affiliates 2,265 2,636 7,044 6,842 ----- ----- ----- ----- Total other income (expense), net 1,166 (942) (4,779) (2,886) ----- ---- ------ ------ Income from continuing operations before minority interest and income taxes 3,409 12,236 17,089 34,239 Minority interest share of earnings of consolidated subsidiaries (2,287) (3,865) (9,703) (12,644) ------ ------ ------ ------- Income from continuing operations before income taxes 1,122 8,371 7,386 21,595 Income tax expense 536 3,469 2,998 8,917 --- ----- ----- ----- Income from continuing operations 586 4,902 4,388 12,678 (Loss) income from discontinued operations, net of taxes (90) 6,870 3,936 7,843 --- ----- ----- ----- Net income $496 $11,772 $8,324 $20,521 ==== ======= ====== ======= Earnings per share, basic Continuing operations $0.03 $0.25 $0.22 $0.62 Discontinued operations (0.00) 0.35 0.20 0.38 ----- ---- ---- ---- Earnings per share, basic $0.03 $0.60 $0.42 $1.00 ----- ----- ----- ----- Earnings per share, diluted Continuing operations $0.03 $0.25 $0.22 $0.62 Discontinued operations (0.00) 0.35 0.20 0.38 ----- ---- ---- ---- Earnings per share, diluted $0.03 $0.60 $0.42 $1.00 ----- ----- ----- ----- Weighted average number of shares, basic 19,733 19,524 19,665 20,415 Dilutive effect of stock options and restricted stock - 107 56 89 --- --- --- --- Weighted average number of shares, diluted 19,733 19,631 19,721 20,504 ====== ====== ====== ====== MEDCATH CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share data) June 30, September 30, 2009 2008 ---- ---- (Unaudited) Current assets: Cash and cash equivalents $42,857 $93,836 Restricted cash 3,166 3,154 Accounts receivable, net 76,205 83,875 Income tax receivable, net 3,940 3,091 Medical supplies 18,335 15,479 Deferred income tax assets 7,600 9,769 Prepaid expenses and other current assets 12,235 9,796 Current assets of discontinued operations 10,052 20,776 ------ ------ Total current assets 174,390 239,776 Property and equipment, net 370,418 323,729 Investments in affiliates 13,261 15,285 Goodwill 60,174 60,174 Other intangible assets, net 5,974 6,063 Other assets 13,167 8,378 Long-term assets of discontinued operations - 51 --- --- Total assets $637,384 $653,456 ======== ======== Current liabilities: Accounts payable $40,613 $41,642 Accrued compensation and benefits 17,980 16,872 Other accrued liabilities 25,793 24,054 Current portion of long-term debt and obligations under capital leases 19,133 31,920 Current liabilities of discontinued operations 9,560 10,184 ----- ------ Total current liabilities 113,079 124,672 Long-term debt 104,683 115,628 Obligations under capital leases 4,111 2,087 Deferred income tax liabilities 12,267 12,352 Other long-term obligations 6,882 4,454 ----- ----- Total liabilities 241,022 259,193 Minority interest in equity of consolidated subsidiaries 18,737 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; 21,691,780 issued and 19,737,419 outstanding at June 30, 2009; 21,553,054 issued and 19,598,693 outstanding at September 30, 2008 216 216 Paid-in capital 455,346 455,494 Accumulated deficit (32,814) (41,138) Accumulated other comprehensive loss (326) (179) Treasury stock, at cost; 1,954,361 shares at June 30, 2009 1,954,361 shares at September 30, 2008 (44,797) (44,797) ------- ------- Total stockholders' equity 377,625 369,596 ------- ------- Total liabilities and stockholders' equity $637,384 $653,456 ======== ======== MEDCATH CORPORATION SELECTED OPERATING DATA (In thousands, except per share data and selected operating data) (Unaudited) Three Months Ended Nine Months Ended June 30, June 30, -------- -------- 2009 2008 % Change 2009 2008 % Change ---- ---- -------- ---- ---- -------- Statement of Operations Data: Net revenue $150,904 $154,273 (2.2)% $462,874 $455,168 1.7% Adjusted EBITDA (1) $11,290 $22,747 (50.4)% $49,261 $66,568 (26.0)% Income from operations $2,243 $13,178 (83.0)% $21,868 $37,125 (41.1)% Income from continuing operations $586 $4,902 (88.0)% $4,388 $12,678 (65.4)% Earnings per share from continuing operations, basic $0.03 $0.25 (88.0)% $0.22 $0.62 (64.5)% Earnings per share from continuing operations, diluted $0.03 $0.25 (88.0)% $0.22 $0.62 (64.5)% (1) See Supplemental Financial Disclosure--Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures. Three Months Ended Nine Months Ended June 30, June 30, -------- -------- 2009 2008 % Change 2009 2008 % Change ---- ---- -------- ---- ---- -------- Selected Operating Data (a): Number of hospitals 7 7 7 7 Licensed beds ( c ) 588 449 588 449 Staffed and available beds ( d ) 542 449 542 449 Admissions ( e ) 6,352 7,384 (14.0)% 20,152 22,380 (10.0)% Adjusted admissions ( f ) 10,284 10,341 (0.6)% 30,714 30,979 (0.9)% Patient days ( g ) 25,482 27,132 (6.1)% 78,681 81,853 (3.9)% Adjusted patient days ( h ) 41,174 38,105 8.1% 120,106 113,790 5.6% Average length of stay (days) ( i ) 4.01 3.67 9.3% 3.90 3.66 6.6% Occupancy ( j ) 51.7% 66.4% 53.2% 66.5% Inpatient catheterization procedures ( k ) 3,071 3,961 (22.5)% 10,069 12,244 (17.8)% Inpatient Surgical procedures ( l ) 2,045 2,260 (9.5)% 6,133 6,332 (3.1)% Hospital net revenue $141,665 $144,676 (2.1)% $436,457 $426,300 2.4% Combined Operating Data (b): Number of hospitals 9 9 9 9 Licensed beds ( c ) 755 676 755 676 Staffed and available beds ( d ) 705 612 705 612 Admissions ( e ) 9,187 9,879 (7.0)% 28,917 30,179 (4.2)% Adjusted admissions ( f ) 14,979 14,512 3.2% 44,849 43,838 2.3% Patient days ( g ) 33,885 34,819 (2.7)% 105,350 106,614 (1.2)% Adjusted patient days ( h ) 54,810 50,722 8.1% 162,387 153,697 5.7% Average length of stay (days) ( i ) 3.69 3.52 4.8% 3.64 3.53 3.1% Occupancy ( j ) 52.8% 62.5% 54.7% 63.6% Inpatient catheterization procedures ( k ) 3,786 4,814 (21.4)% 12,427 14,624 (15.0)% Inpatient surgical procedures ( l ) 2,618 2,842 (7.9)% 7,951 8,287 (4.1)% Hospital net revenue $182,058 $183,446 (0.8)% $558,548 $545,892 2.3% ( 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 consolidated financial statements for the three and nine months ended June 30, 2009 and 2008. Three Months Nine Months Ended June 30, Ended June 30, -------------- ------------- 2009 2008 2009 2008 ---- ---- ---- ---- (in thousands) (in thousands) Income from continuing operations $586 $4,902 $4,388 $12,678 Add: Income tax expense 536 3,469 2,998 8,917 Minority interest share of earnings of consolidated subsidiaries 2,287 3,865 9,703 12,644 Equity in net earnings of unconsolidated affiliates (2,265) (2,636) (7,044) (6,842) Interest and other income (52) (284) (218) (1,930) Loss on early extinguishment of debt - - 6,702 - Interest expense 1,151 3,862 5,339 11,658 (Gain) loss on disposal of property, equipment and other assets (26) 225 138 391 Amortization 230 149 589 411 Depreciation 7,858 7,505 23,258 22,535 Pre-opening expenses 754 149 1,340 643 Share-based compensation expense 231 1,541 2,068 5,463 --- ----- ----- ----- Adjusted EBITDA $11,290 $22,747 $49,261 $66,568 ======= ======= ======= ======= The following table reconciles adjusted diluted earnings per share from continuing operations with MedCath's diluted earnings share from continuing operations as derived directly from MedCath's consolidated financial statements for the three months ended June 30, 2009. Diluted earnings per share $0.03 Add: DSH adjustments 0.08 Medicaid reimbursement charges 0.01 Professional fees for internal assessment 0.03 Settlement of Medicare claims 0.03 Severance expense 0.01 Share-based compensation expense 0.01 Pre-opening expense 0.02 ---- Adjusted diluted earnings per share $0.22 =====
MedCath Corporation
CONTACT: O. Edwin French, President/Chief Executive Officer,
+1-704-708-6600, or Art Parker, Interim Chief Financial Officer,
+1-704-708-6600
Web Site: http://www.medcath.com/
