Medcath (MDTH) 8-K Medcath Corporation Reports Fourth Quarter Earnings

Exhibit 99.2

MEDCATH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

	Three Months Ended September 30,						Twelve Months Ended September 30,
	2009			2008			2009			2008
Net revenue	$	147,966		$	145,511		$	602,042		$	591,611
Operating expenses:
Personnel expense		48,681			49,196			200,927			197,850
Medical supplies expense		43,336			41,835			171,451			161,880
Bad debt expense		14,876			11,828			49,421			43,671
Other operating expenses		31,857			30,637			127,043			118,378
Pre-opening expenses		2,223			143			3,563			786
Depreciation		8,591			7,623			31,755			30,041
Amortization		889			30			1,121			84
Loss (gain) on disposal of property, equipment and other assets		133			(143	)		271			248
Impairment of goodwill		60,174			—			60,174			—
Total operating expenses		210,760			141,149			645,726			552,938
(Loss) income from operations		(62,794	)		4,362			(43,684	)		38,673
Other income (expenses):
Interest expense		(1,452	)		(2,642	)		(6,798	)		(14,300	)
Loss on early extinguishment of debt		—			—			(6,702	)		—
Interest and other income		12			100			237			2,029
Equity in net earnings of unconsolidated affiliates		2,013			1,049			9,057			7,891
Total other income (expense), net		573			(1,493	)		(4,206	)		(4,380	)
(Loss) income from continuing operations before minority interest and income taxes		(62,221	)		2,869			(47,890	)		34,293
Minority interest share of earnings of consolidated subsidiaries		(872	)		(1,181	)		(9,328	)		(12,546	)
(Loss) income from continuing operations before income taxes		(63,093	)		1,688			(57,218	)		21,747
Income tax (benefit) expense		(1,193	)		1,533			1,200			9,374
(Loss) income from continuing operations		(61,900	)		155			(58,418	)		12,373
Income from discontinued operations, net of taxes		3,294			314			8,136			8,617
Net (loss) income	$	(58,606	)	$	469		$	(50,282	)	$	20,990
Earnings (loss) per share, basic
Continuing operations	$	(3.14	)	$	0.01		$	(2.97	)	$	0.62
Discontinued operations		0.17			0.01			0.42			0.43
Earnings (loss) per share, basic	$	(2.97	)	$	0.02		$	(2.55	)	$	1.05
Earnings (loss) per share, diluted
Continuing operations	$	(3.14	)	$	0.01		$	(2.97	)	$	0.61
Discontinued operations		0.17			0.01			0.42			0.43
Earnings (loss) per share, diluted	$	(2.97	)	$	0.02		$	(2.55	)	$	1.04
Weighted average number of shares, basic		19,740			19,590			19,684			19,996
Dilutive effect of stock options and restricted stock		—			65			—			73
Weighted average number of shares, diluted		19,740			19,655			19,684			20,069

MEDCATH CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

	September 30,			September 30,
	2009			2008
	(Unaudited)
Current assets:
Cash and cash equivalents	$	32,014		$	93,836
Restricted cash		—			3,154
Accounts receivable, net		70,410			82,324
Income tax receivable, net		—			3,091
Medical supplies		18,261			15,340
Deferred income tax assets		12,201			9,769
Prepaid expenses and other current assets		13,969			9,756
Current assets of discontinued operations		30,011			22,506
Total current assets		176,866			239,776
Property and equipment, net		382,684			323,094
Investments in affiliates		14,055			15,285
Goodwill		—			60,174
Other intangible assets, net		378			1,133
Other assets		16,465			8,378
Long-term assets of discontinued operations		—			5,616
Total assets	$	590,448		$	653,456
Current liabilities:
Accounts payable	$	40,979		$	41,404
Income tax payable		642			—
Accrued compensation and benefits		18,744			16,744
Other accrued liabilities		24,860			23,322
Current portion of long-term debt and obligations under capital leases		21,243			31,920
Current liabilities of discontinued operations		10,165			11,282
Total current liabilities		116,633			124,672
Long-term debt		102,727			115,628
Obligations under capital leases		3,791			2,087
Deferred income tax liabilities		13,874			12,352
Other long-term obligations		8,893			4,454
Total liabilities		245,918			259,193
Minority interest in equity of consolidated subsidiaries		25,632			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;
21,697,380 issued and 19,743,019 outstanding at September 30, 2009;
21,553,054 issued and 19,598,693 outstanding at September 30, 2008		216			216
Paid-in capital		455,259			455,494
Accumulated deficit		(91,420	)		(41,138	)
Accumulated other comprehensive loss		(360	)		(179	)
Treasury stock, at cost;
1,954,361 shares at September 30, 2009
1,954,361 shares at September 30, 2008		(44,797	)		(44,797	)
Total stockholders’ equity		318,898			369,596
Total liabilities and stockholders’ equity	$	590,448		$	653,456

MEDCATH CORPORATION
SELECTED OPERATING DATA
(In thousands, except per share data and selected operating data)
(Unaudited)

	Three Months Ended September 30,								Twelve Months Ended September 30,
	2009			2008		% Change			2009			2008		% Change
Statement of Operations Data:
Net revenue	$	147,966		$	145,511		1.7	%	$	602,042		$	591,611		1.8	%
Adjusted EBITDA (1)	$	9,538		$	11,530		(17.3	)%	$	55,590		$	74,810		(25.7	)%
(Loss) income from operations	$	(62,794	)	$	4,362		N/M		$	(43,684	)	$	38,673		N/M
(Loss) income from continuing operations	$	(61,900	)	$	155		N/M		$	(58,418	)	$	12,373		N/M
(Loss) earnings per share from continuing operations, basic	$	(3.14	)	$	0.01		N/M		$	(2.97	)	$	0.62		N/M
(Loss) earnings per share from continuing operations, diluted	$	(3.14	)	$	0.01		N/M		$	(2.97	)	$	0.61		N/M

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

N/M — Not meaningful

	Three Months Ended September 30,									Twelve Months Ended September 30,
	2009			2008			% Change			2009			2008			% Change
Selected Operating Data (a):
Number of hospitals		7			7						7			7
Licensed beds (c)		588			509						588			509
Staffed and available beds (d)		502			464						502			464
Admissions (e)		6,707			6,980			(3.9	)%		26,856			29,360			(8.5	)%
Adjusted admissions (f)		10,262			9,976			2.9	%		40,964			40,971			(0.0	)%
Patient days (g)		24,688			25,500			(3.2	)%		103,342			107,353			(3.7	)%
Adjusted patient days (h)		37,720			36,776			2.6	%		157,638			150,559			4.7	%
Average length of stay (days) (i)		3.68			3.65			0.8	%		3.85			3.66			5.2	%
Occupancy (j)		53.5	%		59.7	%					56.4	%		63.4	%
Inpatient catheterization procedures (k)		3,187			3,735			(14.7	)%		13,257			15,979			(17.0	)%
Inpatient surgical procedures (l)		2,050			2,050			0.0	%		8,181			8,383			(2.4	)%
Hospital net revenue	$	141,976		$	139,487			1.8	%	$	578,432		$	565,787			2.2	%
Combined Operating Data (b):
Number of hospitals		9			9						9			9
Licensed beds (c)		755			676						755			676
Staffed and available beds (d)		665			629						665			629
Admissions (e)		9,143			9,997			(8.5	)%		38,055			40,176			(5.3	)%
Adjusted admissions (f)		14,323			14,791			(3.2	)%		59,168			58,669			0.9	%
Patient days (g)		32,572			34,732			(6.2	)%		137,889			141,346			(2.4	)%
Adjusted patient days (h)		50,630			51,281			(1.3	)%		212,826			205,032			3.8	%
Average length of stay (days) (i)		3.56			3.47			2.6	%		3.62			3.52			2.8	%
Occupancy (j)		53.2	%		60.0	%					56.8	%		61.6	%
Inpatient catheterization procedures (k)		3,801			4,524			(16.0	)%		16,230			19,148			(15.2	)%
Inpatient surgical procedures (l)		2,625			2,666			(1.5	)%		10,573			10,954			(3.5	)%
Hospital net revenue	$	180,562		$	179,296			0.7	%	$	739,111		$	725,188			1.9	%

(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 MedCath’s income from continuing operations as derived directly from MedCath’s consolidated financial statements to Adjusted EBITDA for the three and twelve months ended September 30, 2009 and 2008.

	Three Months Ended September 30,						Twelve Months Ended September 30,
	2009			2008			2009			2008
	(in thousands)						(in thousands)
(Loss) income from continuing operations	$	(61,900	)	$	155		$	(58,418	)	$	12,373
Add:
Income tax (benefit) expense		(1,193	)		1,533			1,200			9,374
Minority interest share of earnings of consolidated subsidiaries		872			1,181			9,328			12,546
Equity in net earnings of unconsolidated affiliates		(2,013	)		(1,049	)		(9,057	)		(7,891	)
Interest and other income		(12	)		(100	)		(237	)		(2,029	)
Loss on early extinguishment of debt		—			—			6,702			—
Interest expense		1,452			2,642			6,798			14,300
Impairment of goodwill		60,174			—			60,174			—
Loss (gain) on disposal of property, equipment and other assets		133			(143	)		271			248
Amortization		889			30			1,121			84
Depreciation		8,591			7,623			31,755			30,041
Pre-opening expenses		2,223			143			3,563			786
Share-based compensation expense		322			(485	)		2,390			4,978
Adjusted EBITDA	$	9,538		$	11,530		$	55,590		$	74,810

The following table reconciles MedCath’s diluted earnings per share from continuing operations as derived directly from MedCath’s consolidated financial statements to Adjusted EPS from continuing operations for the three months ended September 30, 2009 and 2008.

	Three Months Ended September 30,						Twelve Months Ended September 30,
	2009			2008			2009			2008
Diluted earnings per share		($3.14	)	$	0.01			($2.97	)	$	0.61
Add:
Third party payor adjustments		0.04			0.02			0.12			0.03
Termination of management contract		0.03			—			0.03			—
Impairment of goodwill		3.05			—			3.05			—
Operating expense as previously disclosed		—			—			0.28			0.02
Share-based compensation expense		0.01			(0.01	)		0.08			0.14
Pre-opening expense		0.05			—			0.09			0.02
Adjusted diluted earnings per share	$	0.04		$	0.02		$	0.68		$	0.82

The following table reflects the calculation of adjusted free cash flow and adjusted free cash flow per diluted share. Free Cash Flows is commonly defined as cash flows from continuing operations less capital expenditures.

	Three Months Ended September 30,				Twelve Months Ended September 30,
	2009		2008		2009		2008
	(in thousands)					(in thousands)
Cash flow from continuing operations	$	10,722	$	9,894	$	64,333	$	43,190
Less: Non-expansion capital expenditures		6,984		8,022		24,332		24,175
Free cash flows	$	3,738	$	1,872	$	40,001	$	19,015