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Third Quarter 2008 Results
During its fourth quarter of fiscal 2007, MedCath completed therecapitalization of Harlingen Medical Center ("HMC"). As part of therecapitalization, MedCath's ownership in HMC was reduced from a majorityownership to a minority ownership. Due to this change in ownership, MedCathbegan accounting for HMC as an equity investment in the quarter endedSeptember 30, 2007. Any reference to same facility results in this pressrelease accounts for the operations of HMC as an equity investment in thethird quarter of 2007.
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On a same facility basis, MedCath's net revenue decreased 1.7% to $157.1million in the third quarter of fiscal 2008 from $159.8 million in the thirdquarter of fiscal 2007. Same facility income from operations decreased 33.8%to $14.1 million from $21.3 million in the third quarter of fiscal 2007 andAdjusted EBITDA, excluding certain items, decreased 18.4% to $24.0 millionfrom $29.4 million in the same period of the prior year. MedCath's samefacility income from continuing operations was $5.3 million, or $0.27 perdiluted share, in the third quarter of fiscal 2008 compared to $10.1 million,or $0.46 per diluted share, in the third quarter of fiscal 2007.
Sequentially, net revenue and Adjusted EBITDA, excluding certain items,for the third quarter of fiscal 2008 were the same as net revenue and AdjustedEBITDA, excluding certain items, for the second quarter of fiscal 2008.Income from continuing operations before income taxes, excluding share-basedcompensation expense, increased 11.5% sequentially.
MedCath's operating results for the quarter ended June 30, 2008 include$0.3 million, or $0.01 per diluted share, in legal expense associated with anon-patient care claim. In comparison, MedCath's operating results for thequarter ended June 30, 2007 include a charge of $0.4 million, or $0.01 perdiluted share, related to the settlement of third-party cost reports. Share-based compensation expense totaled $1.5 million in the third quarter of fiscal2008, or $0.05 per diluted share, compared to $0.7 million, or $0.02 perdiluted share, in the third quarter of fiscal 2007. Pre-opening expensestotaled $0.2 million in the third quarter of fiscal 2008. MedCath did notincur pre-opening expenses in the third quarter of fiscal 2007. AdjustedEBITDA, excluding certain items, in this release does not include any of theabove named items, but these items are included as a component of income fromcontinuing operations.
MedCath's hospitals provide care to certain patients who meet specificfinancial poverty guidelines at discounted rates, which we refer to as charitycare discounts. As such, the amount of these discounts for services does notappear in our net revenue. For the quarter, charity care discounts reduced ournet revenue $4.3 million in comparison to $1.2 million in the prior year.Total bad debt expense plus charity care discounts showed sequentialimprovement to 9.3% of same facility hospital net revenue excluding charitycare discounts, compared to 10.5% in the second quarter of fiscal 2008 and7.8% in the third quarter of fiscal 2007. On a same facility basis, gross selfpay revenue was $13.1 million in the third quarter of fiscal 2008 as comparedto $11.4 million in the third quarter of fiscal 2007 and $10.7 million in thesecond quarter of fiscal 2008.
"Despite the challenges we experienced this quarter related to lower thanplanned volumes due to medical group disruptions in two markets and thecontinued migration of certain stent procedures from an inpatient servicesetting to outpatient, we remain confident in our growth
