MedCath Corporation Reports Third Fiscal Quarter Earnings

Aug 09, 2011, 17:00 ET from MedCath Corporation

CHARLOTTE, N.C., Aug. 9, 2011 /PRNewswire/ -- MedCath Corporation (Nasdaq: MDTH), a healthcare provider focused on high acuity healthcare services, today announced operating results for its third fiscal quarter ended June 30, 2011. The results for MedCath’s third fiscal quarter include Heart Hospital of New Mexico and Arkansas Heart Hospital, which were sold on August 1, 2011.    

Third Fiscal Quarter Highlights

  • Net revenue of $91.8 million, down 1.4% compared to the third quarter of fiscal 2010.
  • Total admissions and adjusted admissions of 4,779 and 7,249, down 1.2% and 0.7%, respectively, compared to the third quarter of fiscal 2010.
  • Loss from continuing operations of ($3.1) million and Adjusted EBITDA of $4.6 million, down 41.0% compared to third quarter of fiscal 2010.
  • Diluted loss per share from continuing operations of ($0.15) and Adjusted EPS of ($0.03).
  • Total cash of $113.7 million as of the end of the third quarter of fiscal 2011 after repayment of $30.2 million in third party debt outstanding.

Third Quarter of Fiscal 2011 Results Compared to Third Quarter of Fiscal 2010 Results

MedCath's reported net revenue decreased 1.4% to $91.8 million in the third quarter of fiscal 2011 compared to $93.1 million in the third quarter of fiscal 2010. Net income was $12.3 million in the third quarter of fiscal 2011 compared to a net loss of $(12.8) million in the third quarter of fiscal 2010. MedCath's loss from continuing operations was $(3.1) million, or $(0.15) per diluted share, in the third quarter of fiscal 2011 compared to $(14.8) million, or $(0.74) per diluted share, in the third quarter of fiscal 2010.

MedCath's third quarter of fiscal 2011 financial results included the following items:

  • $0.8 million, or ($0.02) per diluted share, in long-lived asset impairment expense in the Corporate division related to undeveloped land located adjacent to one of MedCath’s hospitals;
  • $2.7 million, or ($0.09) per diluted share, of professional fees and other expenses incurred in connection with MedCath's strategic options process announced on March 1, 2010; and
  • $0.4 million, or ($0.01) per diluted share, in share-based compensation expense.
  • MedCath's third quarter of fiscal 2010 financial results included the following items:
  • $22.8 million, or ($0.69) per diluted share, in impairment expense;
  • $0.6 million, or ($0.02) per diluted share, in share-based compensation expense; and
  • $1.4 million, or ($0.06) per diluted share, of professional fees and other expenses incurred in connection with MedCath's strategic options process announced on March 1, 2010.

Adjusted EBITDA was $4.6 million in the third quarter of fiscal 2011 compared to $7.8 million in the same period of the prior year. MedCath's Adjusted EPS for the third quarter of fiscal 2011 was $(0.03) compared with $0.03 in the third quarter of fiscal 2010.

Commenting on the quarter, O. Edwin French, MedCath President and Chief Executive Officer, stated, "During our third fiscal quarter, we continued to make progress regarding our strategic options process, completing the sale of our MedCath Partners division and announcing two hospital transactions that closed August 1. Operationally, our results this quarter were impacted by a 9.8% reduction in open heart procedures, contributing to a decline in net revenue and Adjusted EBITDA, and lower financial results at one hospital that was sold during our fourth quarter of fiscal 2011.”

Operating Statistics and Debt Repayment

MedCath's financial results for the third fiscal quarter ended June 30, 2011, reflect a 1.2% decrease in total admissions and a 0.7% decrease in adjusted admissions compared to the third quarter of fiscal 2010. Hospital outpatient cases, including emergency department visits, totaled 15,493 in the third quarter of fiscal 2011, up 8.6% compared to the third quarter of fiscal 2010.

Total uncompensated care, which includes charity care plus bad debt expense, equaled 13.6% of hospital division net patient revenue before the deduction for charity care in the third quarter of fiscal 2011 compared to 13.1% in the third quarter of fiscal 2010.

We received $29.8 million in cash from the sale of assets during the third quarter of fiscal 2011, which was used, together with cash on hand, to repay $30.2 million in third party debt outstanding.

Update on Strategic Options Process

On August 1, 2011, MedCath announced the completion of separate transactions related to the sale of its equity interest in Arkansas Heart Hospital and the sale of substantially all the assets of Heart Hospital of New Mexico. These transactions represented the eighth and ninth transactions since MedCath announced its strategic options process in March 2010. MedCath anticipates that final net proceeds from these two transactions, after liquidation of retained assets and prior to payment of any contingent or unknown liabilities, to be approximately $122.0 million. Following these transactions, MedCath owns interest and operates four hospitals, three of which it owns a majority interest and one in which it owns a minority interest.

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 calculated and presented in conformity with generally accepted accounting principles ("non-GAAP measures"), such as adjusted earnings before interest, taxes, depreciation, and amortization ("Adjusted EBITDA") and adjusted diluted earnings per share from continuing operations ("Adjusted EPS"). The supplemental financial information furnished herewith provides a quantitative reconciliation of Adjusted EBITDA and Adjusted EPS based on the following calculations as and for the periods identified below.

Adjusted EBITDA for the third fiscal quarter of 2011 represents MedCath's loss from continuing operations, net of taxes attributable to MedCath's common stockholders; income tax benefit, net income attributable to noncontrolling interests; equity in net earnings of unconsolidated affiliates; interest and other income; interest expense; loss on disposal of property, equipment and other assets; impairment on long-lived assets; depreciation; share-based compensation expense, and professional fees associated with MedCath's exploration of strategic options. Adjusted EPS for the third fiscal quarter of fiscal 2011 represents MedCath's diluted loss per share from continuing operations adjusted for professional fees associated with MedCath's consideration of strategic options; impairment on long-lived assets and share-based compensation expense.

Adjusted EBITDA for the first nine months of fiscal 2011 represents MedCath's loss from continuing operations, net of taxes attributable to MedCath's common stockholders; income tax benefit, net income attributable to noncontrolling interests; equity in net earnings of unconsolidated affiliates; interest and other income; gain on sale of unconsolidated affiliates; interest expense; (gain) loss on disposal of property, equipment and other assets; impairment on long-lived assets; depreciation; share-based compensation expense; professional fees associated with MedCath's exploration of strategic options, and sales tax refunds. Adjusted EPS for the first nine months of fiscal 2011 represents MedCath's diluted loss per share from continuing operations adjusted for gain on sale of unconsolidated affiliates; professional fees associated with MedCath's consideration of strategic options; sales tax refunds; impairment on long-lived assets and share-based compensation expense.

Adjusted EBITDA for the third fiscal quarter of 2010 represents MedCath's loss from continuing operations, net of taxes attributable to MedCath's common stockholders, income tax benefit; net income attributable to noncontrolling interests; equity in earnings of unconsolidated affiliates; interest and other income, net; interest expense; loss on disposal of property, equipment and other assets; depreciation; share-based compensation expense, impairment on long-lived assets, and professional fees associated with MedCath's exploration of strategic options. Adjusted EPS for the third fiscal quarter of fiscal 2010 represents MedCath's diluted loss per share from continuing operations adjusted for share-based compensation expense; impairment loss on long-lived assets, and professional fees associated with MedCath's exploration of strategic options.

Adjusted EBITDA for the first nine months of fiscal quarter of 2010 represents MedCath's loss from continuing operations, net of taxes attributable to MedCath's common stockholders, income tax benefit; net income attributable to non-controlling interests; equity in earnings of unconsolidated affiliates; interest and other income, net; loss on note receivable; interest expense; (gain) loss on disposal of property, equipment and other assets; impairment of long-lived assets; depreciation; per-opening expenses; share-based compensation expense, and professional fees associated with MedCath's exploration of strategic options. Adjusted EPS for the third fiscal quarter of fiscal 2010 represents MedCath's diluted loss per share from continuing operations adjusted for professional fees associated with MedCath's exploration of strategic options; impairment on long-lived assets; loss on note receivable; share-based compensation expense, 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 attributable to MedCath's common stockholders and Adjusted EPS to diluted EPS from continuing operations.

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. MedCath owns an interest in and operates four hospitals with a total of 366 licensed beds, located in Arizona, California, Louisiana,  and Texas.

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, the implementation of healthcare reform legislation and future enactment of changes in federal law that would further 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 of fiscal 2011 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, 2010 filed with the Securities and Exchange Commission on December 14, 2010, as amended. Copies of our filings with the Securities and Exchange Commission, including exhibits, are available at www.sec.gov to review.

MEDCATH CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

























Three Months Ended June 30,


Nine Months Ended June 30,





2011


2010


2011


2010












Net revenue


$                       91,839


$                      93,139


$                    273,617


$                    271,625

Operating expenses:










Personnel expense


31,514


31,090


96,490


93,950


Medical supplies expense


24,219


23,559


66,573


68,938


Bad debt expense


10,767


10,782


30,483


28,196


Other operating expenses


23,919


21,915


69,476


64,005


Pre-opening expenses


-


-


-


866


Depreciation


3,745


5,389


12,092


15,773


Impairment of long-lived assets


810


22,813


20,358


37,513


(Gain) loss on disposal of property, equipment and other assets


(212)


12


(141)


43



Total operating expenses


94,762


115,560


295,331


309,284

Loss from operations


(2,923)


(22,421)


(21,714)


(37,659)

Other income (expenses):










Interest expense


(556)


(1,050)


(2,605)


(3,046)


Interest and other income


76


56


615


141


Gain on sale of unconsolidated affiliates


-


-


15,391


-


Loss on note receivable


-


-


-


(1,507)


Equity in net earnings of unconsolidated affiliates


303


1,391


1,679


3,984



Total other income (expense), net


(177)


397


15,080


(428)

Loss from continuing operations before income taxes


(3,100)


(22,024)


(6,634)


(38,087)

Income tax benefit


(1,862)


(8,818)


(5,370)


(15,840)

Loss from continuing operations


(1,238)


(13,206)


(1,264)


(22,247)

Income from discontinued operations, net of taxes


15,260


2,745


53,475


1,283

Net (loss) income


14,022


(10,461)


52,211


(20,964)

Less: Net income attributable to noncontrolling interests


(1,691)


(2,355)


(16,336)


(5,718)

Net income (loss) attributable to MedCath Corporation


$                       12,331


$                    (12,816)


$                      35,875


$                    (26,682)












Amounts attributable to MedCath Corporation common stockholders:










Loss from continuing operations, net of taxes


$                       (3,088)


$                    (14,823)


$                      (8,754)


$                    (27,298)


Income from discontinued operations, net of taxes


15,419


2,007


44,629


616


Net income (loss)


$                       12,331


$                    (12,816)


$                      35,875


$                    (26,682)












Earnings (loss) per share, basic










Loss from continuing operations attributable to MedCath Corporation common stockholders


$                         (0.15)


$                        (0.74)


$                        (0.43)


$                        (1.38)


Income from discontinued operations attributable to MedCath Corporation common stockholders


0.76


0.10


2.21


0.03


Earnings (loss) per share, basic


$                           0.61


$                        (0.64)


$                          1.78


$                        (1.35)












Earnings (loss) per share, diluted










Loss from continuing operations attributable to MedCath Corporation common stockholders


$                         (0.15)


$                        (0.74)


$                        (0.43)


$                        (1.38)


Income from discontinued operations attributable to MedCath Corporation common stockholders


0.76


0.10


2.21


0.03


Earnings (loss) per share, diluted


$                           0.61


$                        (0.64)


$                          1.78


$                        (1.35)












Weighted average number of shares, basic


20,245


19,829


20,132


19,823

Dilutive effect of stock options and restricted stock


7


-


6


-

Weighted average number of shares, diluted


20,252


19,829


20,138


19,823



MEDCATH CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)











June 30,


September 30,




2011


2010




(Unaudited)









Current assets:





Cash and cash equivalents

$                    113,669


$                      32,892


Accounts receivable, net

44,423


42,141


Income tax receivable

-


6,188


Medical supplies

10,338


10,540


Deferred income tax assets

8,678


13,247


Prepaid expenses and other current assets

12,259


13,339


Current assets of discontinued operations

45,495


49,963



Total current assets

234,862


168,310

Property and equipment, net

143,815


174,287

Other assets

22,416


15,983

Non-current assets of discontinued operations

3,083


135,958



Total assets

$                    404,176


$                    494,538







Current liabilities:





Accounts payable

$                      17,088


$                      15,550


Income tax payable

7,158


-


Accrued compensation and benefits

12,662


15,951


Other accrued liabilities

16,126


16,155


Current portion of long-term debt and obligations





  under capital leases

2,339


16,566


Current liabilities of discontinued operations

13,533


36,291



Total current liabilities

68,906


100,513

Long-term debt

-


52,500

Obligations under capital leases

4,295


5,999

Other long-term obligations

3,062


5,053

Long-term liabilities of discontinued operations

-


36,469



Total liabilities

76,263


200,534







Commitments and contingencies










Redeemable noncontrolling interest

8,280


11,534







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;





 22,270,012 issued and 20,315,651 outstanding at June 30, 2011;





 22,423,666 issued and 20,469,305 outstanding at September 30, 2010

216


216


Paid-in capital

458,729


457,725


Accumulated deficit

(103,916)


(139,791)


Accumulated other comprehensive loss

-


(444)


Treasury stock, at cost;





1,954,361 shares at June 30, 2011 and September 30, 2010

(44,797)


(44,797)



Total MedCath Corporation stockholders' equity

310,232


272,909


Noncontrolling interest

9,401


9,561

Total equity


319,633


282,470



Total liabilities and equity

$                    404,176


$                    494,538



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,





2011


2010


% Change


2011


2010


% Change
















Statement of Operations Data:















Net revenue




$          91,839


$           93,139


(1.4)%


$      273,617


$      271,625


0.7%

Adjusted EBITDA (1)




$            4,589


$             7,783


(41.0)%


$        19,558


$        20,352


(3.9)%

Loss from operations




$          (2,923)


$         (22,421)


(87.0)%


$      (21,714)


$      (37,659)


(42.3)%

Loss from continuing operations, net of taxes




$          (3,088)


$         (14,823)


(79.2)%


$        (8,754)


$      (27,298)


(67.9)%

Loss per share from continuing operations, basic




$            (0.15)


$             (0.74)


(79.3)%


$          (0.43)


$          (1.38)


(68.4)%

Loss per share from continuing operations, diluted




$            (0.15)


$             (0.74)


(79.3)%


$          (0.43)


$          (1.38)


(68.4)%
















(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,





2011


2010


% Change


2011


2010


% Change
















Selected Operating Data (a):















Number of hospitals




5


5




5


5



Licensed beds (c)




421


421




421


421



Staffed and available beds (d)




380


380




380


380



Admissions (e)




4,779


4,835


(1.2)%


14,115


14,244


(0.9)%

Adjusted admissions (f)




7,249


7,300


(0.7)%


21,308


21,051


1.2%

Patient days (g)




17,672


18,223


(3.0)%


52,741


53,588


(1.6)%

Adjusted patient days (h)




26,939


27,546


(2.2)%


80,088


79,461


0.8%

Average length of stay (days) (i)




3.70


3.77


(1.9)%


3.74


3.76


(0.5)%

Occupancy (j)




51.1%


52.7%




50.8%


51.7%



Inpatient catheterization procedures (k)




2,002


2,048


(2.2)%


5,731


6,073


(5.6)%

Inpatient surgical procedures (l)




1,125


1,216


(7.5)%


3,343


3,474


(3.8)%

Hospital net revenue




$          91,766


$           93,030


(1.4)%


$      273,379


$      271,293


0.8%
















Combined Operating Data (b):















Number of hospitals




6


6




6


6



Licensed beds (c)




533


533




533


533



Staffed and available beds (d)




489


489




489


489



Admissions (e)




6,353


6,543


(2.9)%


19,260


19,685


(2.2)%

Adjusted admissions (f)




10,366


10,520


(1.5)%


30,953


31,154


(0.6)%

Patient days (g)




22,556


23,416


(3.7)%


68,769


70,125


(1.9)%

Adjusted patient days (h)




36,612


37,336


(1.9)%


110,136


110,168


(0.0)%

Average length of stay (days) (i)




3.55


3.58


(0.8)%


3.57


3.56


0.3%

Occupancy (j)




50.7%


52.6%




51.5%


52.5%



Inpatient catheterization procedures (k)




2,134


2,217


(3.7)%


6,232


6,673


(6.6)%

Inpatient surgical procedures (l)




1,527


1,640


(6.9)%


4,580


4,640


(1.3)%

Hospital net revenue




$        117,525


$         118,618


(0.9)%


$      352,849


$      346,598


1.8%
















(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 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, 2011 and 2010.


















Three Months Ended June 30,


Nine Months Ended June 30,






2011


2010


2011


2010






(in thousands)


(in thousands)













Loss from continuing operations, net of taxes



$                            (3,088)


$                      (14,823)


$                            (8,754)


$                      (27,298)

Add:










Income tax benefit



(1,862)


(8,818)


(5,370)


(15,840)

Net income attributable to noncontrolling interests



1,850


1,617


7,490


5,051

Equity in net earnings of unconsolidated affiliates



(303)


(1,391)


(1,679)


(3,984)

Interest and other income



(76)


(56)


(615)


(141)

Loss on note receivable



-


-


-


1,507

Gain on sale of unconsolidated affiliates



-


-


(15,391)


-

Interest expense



556


1,050


2,605


3,046

(Gain) loss on disposal of property, equipment and other assets



(212)


12


(141)


43

Impairment of long-lived assets



810


22,813


20,358


37,513

Depreciation



3,745


5,389


12,092


15,773

Pre-opening expenses



-


-


-


866

Share-based compensation expense



428


554


3,282


2,380

Professional fees for strategic options process



2,741


1,436


7,768


1,436

Sales tax refunds, net



-


-


(2,087)


-

Adjusted EBITDA



$                             4,589


$                          7,783


$                           19,558


$                        20,352





















The following table reconciles MedCath Corporation's diluted (loss) earnings per share from continuing operations, net of taxes attributable to MedCath Corporation's common stockholders as derived directly from MedCath's consolidated financial statements to Adjusted diluted earnings per share from continuing operations (inclusive of the effect of dilutive shares) for the three and nine months ended June 30, 2011 and 2010.














Three Months Ended June 30,


Nine Months Ended June 30,




2011


2010


2011


2010











Diluted (loss) earnings per share



$                              (0.15)


$                          (0.74)


$                              (0.43)


$                          (1.38)

Add:










Gain on sale of unconsolidated affiliates



-


-


(0.47)


-

Professional fees for strategic options process



0.09


0.06


0.23


0.04

Sales tax refunds



-


-


(0.06)


-

Impairment of long-lived assets



0.02


0.69


0.62


1.15

Loss on note receivable



-


-


-


0.05

Share-based compensation expense



0.01


0.02


0.10


0.07

Pre-opening expense



-


-


-


0.03

Adjusted diluted (loss) earnings per share



$                              (0.03)


$                            0.03


$                              (0.01)


$                          (0.04)



SOURCE MedCath Corporation



RELATED LINKS

http://www.medcath.com