MEDCATH REPORTS 4TH QTR NET REVENUE INCREASED 30.7%.

MedCath Corporation (NASDAQ:MDTH), Charlotte, N.C. a national provider of cardiovascular services, has announced its operating results for its fourth quarter and fiscal year ended Sept. 30, 2003.

Fourth Quarter 2003 and Fiscal 2003 Results

MedCath's net revenue increased 30.7% to $144.4 million in the fourth quarter of fiscal 2003 from $110.5 million in the fourth quarter of fiscal 2002. Loss from operations was $56.5 million in the fourth quarter of fiscal 2003, compared to income from operations of $7.4 million in the fourth quarter of fiscal 2002. Adjusted EBITDA decreased 22.5% to $12.8 million from $16.5 million and net loss was $62.1 million, or $3.46 per diluted share in the fourth quarter of fiscal 2003, compared to net income of $1.4 million, or $0.08 per diluted share in the fourth quarter of fiscal 2002. As disclosed in previous filings with the Securities and Exchange Commission, MedCath elected Sept. 30 as its annual goodwill impairment test date. Included in these results is a $58.9 million non-cash impairment of MedCath's goodwill expensed in the fourth quarter of fiscal 2003 in accordance with Statement of Financial Accounting Standards (SFAS) No. 142.

For the fiscal year, MedCath's net revenue increased 13.7% to $543.0 million from $477.6 million in fiscal 2002. Loss from operations was $33.7 million, compared to income from operations of $55.8 million in fiscal 2002. Adjusted EBITDA decreased 27.6% to $66.9 million from $92.4 million, and net loss was $60.3 million, or $3.35 per diluted share, compared to net income of $24.4 million, or $1.34 per diluted share, in fiscal 2002. The impairment of goodwill, as discussed above, had the same impact on the fiscal year results.

"Despite the net loss incurred this quarter, operationally we are pleased with the growth in patient admissions and the related increase in procedures," stated John T. Casey, MedCath's president and chief executive officer. "This volume trend was a continuation of year-over-year growth from our third quarter results. Financially, this strong volume did not produce the level of earnings that we prefer due to higher medical supplies expense, an increase in bad debt expense, the expected ramp-up expenses at our newest hospitals, and the impairment of goodwill."

The $58.9 million non-cash expense recorded as a result of the company's impairment of goodwill did not affect MedCath's operations, cash flow or cash position. However, the impairment reduced net income by $58.9 million and earnings per share by $3.28 and $3.27 in the quarter and fiscal year, respectively. The majority of MedCath's goodwill was recognized as a result of the company's going-private transaction in 1998.

In addition, costs related to an offering of debt securities that MedCath elected to delay and a general restructuring of MedCath's primary loan facilities lowered fourth quarter Adjusted EBITDA by $633,000 and increased fourth quarter interest expense by $425,000. These items lowered earnings per share $0.06 in the quarter. Also during the quarter ended Sept. 30, 2003, net revenue and Adjusted EBITDA were lower by $1.2 million, or $.07 per diluted share, due to an unanticipated change in the capital cost reimbursement methodology by one of the company's Medicare fiscal intermediaries that affected patient discharges from Aug. 11, 2003 through Sept. 30, 2003. As discussed in MedCath's Form 10-Q for the quarter ended June 30, 2003, we received notice on Aug. 11, 2003 that the Medicare fiscal intermediary was changing its interpretation of the capital reimbursement regulations. MedCath is in active discussions with the Centers for Medicare and Medicaid Services ("CMS") as to the appropriateness of this change in interpretation and as to its effective date.

Expenses related to projects under development - pre-opening expenses - totaled $3.0 million in the fourth quarter of fiscal 2003, compared to $4.2 million in the fourth quarter of fiscal 2002. Adjusted EBITDA before pre- opening expenses, which management considers an important measure of MedCath's results of recurring operations, decreased 23.6% to $15.9 million from $20.7 million.

For the fiscal year 2003, pre-opening expenses totaled $10.1 million, compared to $8.3 million in fiscal 2002. Adjusted EBITDA before pre-opening expenses decreased 23.5% to $77.0 million from $100.7 million.

Operating Statistics

Hospital admissions for the fourth quarter of fiscal 2003 increased 43.4% and adjusted admissions rose 44.9% from the fourth quarter of the previous fiscal year. Hospital division net revenue increased 37.6%. Same facility admissions increased 15.0%, adjusted admissions increased 12.8%, inpatient catheterization procedures increased 17.3% and inpatient surgeries increased 11.2%, all of which contributed to the increase in same facility hospital division net revenue of 12.2% during the quarter versus the prior year.

For the year, hospital admissions increased 15.6% and adjusted admissions increased 18.8% from fiscal year 2002. Hospital division net revenue increased 19.3%. Same facility admissions declined 0.9%, adjusted admissions declined 0.1%, inpatient catheterization procedures increased 4.7%, and inpatient surgeries increased 6.4%. Same facility hospital division net revenue increased 4.6% in fiscal 2003 as compared to fiscal 2002.

Capital Expenditures and Cash Flow

Capital expenditures for the fourth quarter of fiscal 2003 were $30.9 million compared to $42.7 million for the fourth quarter of fiscal 2002. Of the $30.9 million in capital expenditures this quarter, $20.6 million related specifically to MedCath's development activities, compared to $34.7 million for the fourth quarter of fiscal 2002. Cash flow from operations for the fourth quarter of fiscal 2003 was $10.5 million, down from $19.5 million for the fourth quarter of fiscal 2002.

Use of Non-GAAP Financial Measures

MedCath Corporation, headquartered in Charlotte, N.C., develops, owns and operates hospitals in partnership with physicians, most of whom are cardiologists and cardiovascular surgeons. While each of its hospitals is licensed as a general acute care hospital, MedCath focuses on serving the unique needs of patients suffering from cardiovascular disease. Together with its physician partners who own equity interests in them, MedCath owns and operates eleven heart hospitals with a total of 667 licensed beds, located in Arizona, Arkansas, California, Louisiana, New Mexico, Ohio, South Dakota, Texas and Wisconsin. MedCath has begun developing its twelfth and thirteenth hospitals, which will be located in San Antonio, Texas; and Lafayette, Louisiana, respectively. In addition to its hospitals, MedCath provides cardiovascular care services in diagnostic and therapeutic facilities located in various states and through mobile cardiac catheterization laboratories. MedCath also provides consulting and management services tailored to cardiologists and cardiovascular surgeons.

For more information, call 704/708-6600 or visit http://www.medcath.com.