MedCath Corporation Reports Third Quarter Fiscal 2010 Earnings

MEDCATH CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended June 30,

Nine Months Ended June 30,

2010

2009

2010

2009

Net revenue

$ 131,847

$ 124,588

$ 390,815

$ 381,410

Operating expenses:

Personnel expense

44,546

43,854

136,055

131,884

Medical supplies expense

35,706

36,472

107,453

105,829

Bad debt expense

13,642

10,406

36,241

28,798

Other operating expenses

29,935

26,537

89,292

81,039

Pre-opening expenses

-

754

866

1,340

Depreciation

7,636

6,466

23,054

19,179

Amortization

8

8

24

24

Impairment of property and equipment

22,813

-

42,761

-

Loss (gain) on disposal of property, equipment and other assets

20

(54)

39

127

Total operating expenses

154,306

124,443

435,785

368,220

(Loss) Income from operations

(22,459)

145

(44,970)

13,190

Other income (expenses):

Interest expense

(1,131)

(396)

(3,337)

(3,074)

Loss on early extinguishment of debt

-

-

-

(6,702)

Interest and other income

62

48

156

220

Loss on note receivable

-

-

(1,507)

-

Equity in net earnings of unconsolidated affiliates

2,262

2,265

6,870

7,044

Total other income (expense), net

1,193

1,917

2,182

(2,512)

(Loss) income from continuing operations before income taxes

(21,266)

2,062

(42,788)

10,678

Income tax (benefit) expense

(8,642)

171

(17,929)

1,287

Income (loss) from continuing operations

(12,624)

1,891

(24,859)

9,391

Income from discontinued operations, net of taxes

2,163

878

3,895

8,793

Net (loss) income

(10,461)

2,769

(20,964)

18,184

Less: Net income attributable to noncontrolling interest

(2,355)

(2,273)

(5,718)

(9,860)

Net (loss) income attributable to MedCath Corporation

$ (12,816)

$        496

$ (26,682)

$     8,324

Amounts attributable to MedCath Corporation common stockholders:

(Loss) income from continuing operations, net of taxes

$ (14,155)

$          23

$ (29,246)

$     1,708

Income from discontinued operations, net of taxes

1,339

473

2,564

6,616

Net (loss) income

$ (12,816)

$        496

$ (26,682)

$     8,324

(Loss) earnings per share, basic

(Loss) income from continuing operations attributable to MedCath Corporation common stockholders

$     (0.71)

$           -

$     (1.48)

$       0.09

Income from discontinued operations attributable to MedCath Corporation common stockholders

0.07

0.03

0.13

0.33

(Loss) earnings per share, basic

$     (0.64)

$       0.03

$     (1.35)

$       0.42

(Loss) earnings per share, diluted

(Loss) income from continuing operations attributable to MedCath Corporation common stockholders

$     (0.71)

$           -

$     (1.48)

$       0.09

Income from discontinued operations attributable to MedCath Corporation common stockholders

0.07

0.03

0.13

0.33

(Loss) earnings per share, diluted

$     (0.64)

$       0.03

$     (1.35)

$       0.42

Weighted average number of shares, basic

19,897

19,733

19,823

19,665

Dilutive effect of stock options and restricted stock

-

-

-

56

Weighted average number of shares, diluted

19,897

19,733

19,823

19,721

MEDCATH CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

June 30,

September 30,

2010

2009

(Unaudited)

Current assets:

Cash and cash equivalents

$          27,396

$            31,883

Accounts receivable, net

61,230

58,913

Income tax receivable

1,192

-

Medical supplies

15,888

15,459

Deferred income tax assets

12,272

12,161

Prepaid expenses and other current assets

13,711

13,471

Current assets of discontinued operations

26,172

44,978

Total current assets

157,861

176,865

Property and equipment, net

289,861

341,394

Investments in affiliates

10,301

14,055

Other assets

7,460

10,785

Deferred income tax assets

603

-

Non-current assets of discontinued operations

46,741

47,349

Total assets

$        512,827

$          590,448

Current liabilities:

Accounts payable

$          27,559

$            35,920

Income tax payable

-

297

Accrued compensation and benefits

17,148

16,118

Other accrued liabilities

20,647

23,277

Current portion of long-term debt and obligations

  under capital leases

15,808

21,187

Current liabilities of discontinued operations

19,062

19,832

Total current liabilities

100,224

116,631

Long-term debt

56,250

66,563

Obligations under capital leases

7,459

4,596

Deferred income tax liabilities

-

13,874

Other long-term obligations

5,262

8,533

Long-term liabilities of discontinued operations

35,872

35,721

Total liabilities

205,067

245,918

Commitments and contingencies

Redeemable noncontrolling interest

6,095

7,448

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;

 22,446,727 issued and 20,492,366 outstanding at June 30, 2010;

 22,104,917 issued and 20,150,556 outstanding at September 30, 2009

216

216

Paid-in capital

457,058

455,259

Accumulated deficit

(118,102)

(91,420)

Accumulated other comprehensive loss

(395)

(360)

Treasury stock, at cost;

1,954,361 shares at March 31, 2010

1,954,361 shares at September 30, 2009

(44,797)

(44,797)

Total MedCath Corporation stockholders' equity

293,980

318,898

Noncontrolling interest

7,685

18,184

Total equity

301,665

337,082

Total liabilities and equity

$        512,827

$          590,448

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,

2010

2009

% Change

2010

2009

% Change

Statement of Operations Data:

Net revenue

$ 131,847

$ 124,588

5.8%

$ 390,815

$ 381,410

2.5%

Adjusted EBITDA (1)

$   10,238

$   12,920

(20.8)%

$   25,820

$   41,298

(37.5)%

(Loss) Income from operations

$ (22,459)

$        145

(15589.0)%

$ (44,970)

$   13,190

(440.9)%

(Loss) income from continuing operations, net of taxes

$ (14,155)

$          23

(61643.5)%

$ (29,246)

$     1,708

(1812.3)%

(Loss) income per share from continuing operations, basic

$     (0.71)

$           -

(100.0)%

$     (1.48)

$       0.09

(1744.4)%

(Loss) income per share from continuing operations, diluted

$     (0.71)

$           -

(100.0)%

$     (1.48)

$       0.09

(1744.4)%

(1)   See Supplemental Financial Disclosure-Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures.

Three Months Ended June 30,

Nine Months Ended June 30,

2010

2009

% Change

2010
Same
Facility

% Change

2010

2009

% Change

2010
Same
Facility

% Change

Selected Operating Data (a):

Number of hospitals

7

6

6

7

6

6

Licensed beds (c)

600

530

530

600

530

530

Staffed and available beds (d)

514

484

444

514

484

444

Admissions (e)

6,526

5,653

15.4%

6,042

6.9%

19,347

17,883

8.2%

18,176

1.6%

Adjusted admissions (f)

9,741

8,594

13.3%

8,837

2.8%

28,436

25,621

11.0%

26,252

2.5%

Patient days (g)

24,276

22,795

6.5%

22,582

(0.9)%

72,536

69,841

3.9%

68,073

(2.5)%

Adjusted patient days (h)

36,474

34,803

4.8%

33,284

(4.4)%

107,012

100,167

6.8%

98,809

(1.4)%

Average length of stay (days) (i)

3.72

4.03

(7.7)%

3.74

(7.2)%

3.75

3.91

(4.1)%

3.75

(4.1)%

Occupancy (j)

51.9%

51.8%

55.9%

51.7%

52.9%

56.2%

Inpatient catheterization procedures (k)

2,971

2,735

8.6%

2,903

6.1%

8,824

8,993

(1.9)%

8,624

(4.1)%

Inpatient surgical procedures (l)

1,865

1,809

3.1%

1,769

(2.2)%

5,463

5,394

1.3%

5,237

(2.9)%

Hospital net revenue

$ 127,613

$ 118,104

8.1%

$ 120,148

1.7%

$ 377,402

$ 363,790

3.7%

$ 358,086

(1.6)%

Combined Operating Data (b):

Number of hospitals

9

8

8

9

8

8

Licensed beds (c)

767

697

697

767

697

697

Staffed and available beds (d)

678

647

608

678

647

608

Admissions (e)

9,079

8,521

6.5%

8,595

0.9%

27,143

26,683

1.7%

25,972

(2.7)%

Adjusted admissions (f)

13,993

13,288

5.3%

13,089

(1.5)%

41,528

39,751

4.5%

39,344

(1.0)%

Patient days (g)

32,365

31,192

3.8%

30,671

(1.7)%

97,344

96,503

0.9%

92,881

(3.8)%

Adjusted patient days (h)

49,970

48,428

3.2%

46,780

(3.4)%

148,184

142,436

4.0%

139,981

(1.7)%

Average length of stay (days) (i)

3.56

3.66

(2.7)%

3.57

(2.5)%

3.59

3.62

(0.8)%

3.58

(1.1)%

Occupancy (j)

52.5%

53.0%

55.4%

52.6%

54.6%

56.0%

Inpatient catheterization procedures (k)

3,663

3,450

6.2%

3,595

4.2%

10,928

11,347

(3.7)%

10,728

(5.5)%

Inpatient surgical procedures (l)

2,480

2,381

4.2%

2,384

0.1%

7,177

7,211

(0.5)%

6,951

(3.6)%

Hospital net revenue

$ 170,658

$ 158,497

7.7%

$ 163,193

3.0%

$ 502,693

$ 485,882

3.5%

$ 483,377

(0.5)%

(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 the three and nine months ended June 30, 2010 exclude the results of Hualapai Mountain 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 the loss from continuing operations, net of taxes attributable to MedCath Corporation's common stockholders as derived directly from MedCath Corporation's consolidated financial statements to Adjusted EBITDA for the three and nine months ended June 30, 2010 and 2009.

Three Months Ended June 30,

Nine Months Ended June 30,

2010

2009

2010

2009

(in thousands)

(in thousands)

(Loss) income from continuing operations, net of taxes

$ (14,155)

$        23

$ (29,246)

$     1,708

Add:

Income tax (benefit) expense

(8,642)

171

(17,929)

1,287

Net income attributable to noncontrolling interest

1,531

1,868

4,387

7,683

Equity in net earnings of unconsolidated affiliates

(2,262)

(2,265)

(6,870)

(7,044)

Interest and other income

(62)

(48)

(156)

(220)

Loss on note receivable

-

-

1,507

-

Loss on early extinguishment of debt

-

-

-

6,702

Interest expense

1,131

396

3,337

3,074

Loss (gain) on disposal of property, equipment and other assets

20

(54)

39

127

Impairment of property and equipment

22,813

-

42,761

-

Amortization

8

8

24

24

Depreciation

7,636

6,466

23,054

19,179

Pre-opening expenses

-

754

866

1,340

Share-based compensation expense

553

231

2,379

2,068

Professional fees for strategic plans

1,667

-

1,667

-

DSH and Medicaid adjustments

-

3,064

-

3,064

Professional fees for internal assessment

-

1,106

-

1,106

Settlement of Medicare claims

-

840

-

840

Severance expense

-

360

-

360

Adjusted EBITDA

$  10,238

$ 12,920

$  25,820

$   41,298

The following table reconciles MedCath Corporation's diluted (loss) earnings per share from continuing operations, net of taxes attributable to MedCath Corporations common stockholders as derived directly from MedCath's consolidated financial statements to Adjusted diluted (loss) earnings per share from continuing operations for the three and nine months ended June 30, 2010 and 2009. 

Three Months Ended June 30,

Nine Months Ended June 30,

2010

2009

2010

2009

Diluted (loss) earnings per share

$     (0.71)

$         -

$     (1.48)

$       0.09

Add:

Impairment of property and equipment

0.69

-

1.23

-

Loss on note receivable

-

-

0.05

-

DSH and Medicaid adjustments

-

0.09

-

0.09

Professional fees for internal assessment

-

0.03

-

0.03

Professional fees for strategic plans

0.05

-

0.05

-

Settlement of Medicare claims

-

0.03

-

0.03

Severance expense

-

0.01

-

0.01

Loss on debt refinancing

-

-

-

0.22

Share-based compensation expense

0.02

0.01

0.08

0.07

Pre-opening expense

-

0.02

0.02

0.04

Adjusted diluted earnings (loss) per share

$      0.05

$     0.19

$     (0.05)

$       0.58