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Metropolitan Health Networks (MDF) Reports Record First Quarter 2010 Results

Press Release Source: Metropolitan Health Networks, Inc. On Tuesday May 4, 2010, 7:00 am EDT

WEST PALM BEACH, Fla.–(BUSINESS WIRE)–Metropolitan Health Networks, Inc. (NYSE AMEX:MDF), a leading provider of healthcare services in Florida, today announced the financial results for their first quarter ended March 31, 2010. Highlights include the following:

  • Net income of $7.1 million in the first quarter of 2010 or $0.18 per basic share, compared to $4.0 million or $0.09 per basic share in the year ago quarter;
  • Medical expense ratio of 81.7% compared to 87.9% in first quarter of 2009; and
  • Total outstanding shares of common stock reduced by 1.7 million shares since December 31, 2009 to 39.7 million at March 31, 2010.

First Quarter Financial Highlights:

The Company recognized revenue of $93.0 million for the first quarter of 2010 as compared to $90.4 million in the 2009 first quarter, a 2.9% increase. Medical expense, on a per customer per month basis, decreased 5.4% in the first quarter of 2010 as compared to the same period in 2009. The Company’s consolidated MER was 81.7% in the first quarter of 2010 compared to 87.9% in the same quarter of 2009.

Operating income was $11.2 million in 2010 first quarter compared to $6.4 million in 2009. Net income for the 2010 first quarter was $7.1 million or $0.18 per share basic and $0.17 diluted as compared to $4.0 million or $0.09 per basic share and $.08 diluted for the same quarter last year.

Customer Information:

Medicare Advantage customers increased to 35,400 at March 31, 2010 as compared to 34,900 customers at March 31, 2009, an increase of 500 members. Total customer months, the combined total customers for each month of the measurement period, increased by 1.1% to 106,700 in 2010, up from 105,500 in 2009.

Balance Sheet Highlights:

Cash, cash equivalents and short-term investments at March 31, 2010 totaled $30.3 million compared to $33.8 million at December 31, 2009. This reduction is primarily a result of the continued repurchase of our common stock and the increase in the amount due from Humana partially offset by our net income and the sale of short-term investments. During the quarter, we repurchased 1.7 million shares of our common stock for $3.9 million. Our net working capital increased to $33.4 million at March 31, 2010 from $27.7 million at December 31, 2009, an increase of $5.7 million or 20.6%.

Share Repurchase Program:

On February 24, 2010, the Company’s Board of Directors approved a 5 million share increase to its previously announced share repurchase program bringing the total number of shares of common stock authorized for repurchase under the program to 20 million shares. From the inception of the program through March 31, 2010 the Company has repurchased 13.7 million shares of its common stock, and options exercisable to purchase 684,200 shares of our common stock, at an average cost of $1.90 per share. Shares repurchased from January 1 through March 31, 2010 totaled approximately 1.7 million reducing total shares then outstanding to approximately 39.7 million. Approximately 5.6 million shares remain available for purchase under the plan. The number of shares to be repurchased and the timing of the purchases will be influenced by a number of factors, including the then prevailing market price of the common stock of the Company, other perceived opportunities that may become available to the Company, and regulatory requirements.

Michael Earley, Chairman and Chief Executive Officer of Metropolitan Health Networks, Inc., commented, “We are delighted with our first quarter results. 2010 is a year of transition and challenge for the Medicare Advantage industry as we face declining base premiums. A combination of strategies including improved medical management, continuing focus on revenue compliance, reduced plan benefits and the elimination of unprofitable plans resulted in a terrific start to the year. While one quarter doesn’t make a trend, and we don’t assume these outstanding results are a trend, it is clear that our efforts are positioning us for another good year, and convince us that our business model initiatives are further positioning us for continued success.”

Earley noted further, “While net membership grew slightly, we note that we and our industry faced dramatic uncertainty during the health care reform debate of the last 18 months. As we have often discussed, management’s decision to focus our resources and energy on improving our operations was clearly the right strategy for our company. We achieved record bottom line results in 2009, continuing through Q1 2010, but more importantly we made significant progress developing and implementing the Patient Centered Medical Home model of primary care and related initiatives. Investment in these efforts continue, of course, but we are already seeing tangible results today in terms of improved customer satisfaction, employee engagement, and medical and financial outcomes from these initiatives. With passage of the recent legislation, the paths and opportunities in the future are clearer, and we are better prepared to focus on growth. We believe that Medicare Advantage will continue as a viable and attractive health care alternative for the soon to boom senior population, and we believe that consumer-centric, coordinated care will best serve this market in terms of customer satisfaction, effective outcomes and efficiency.”

Conference Call Information:

Metropolitan Health Networks will hold a conference call to review its first quarter 2010 results on Tuesday, May 4, 2010 at 11:00 a.m. Eastern. The call will be hosted by Michael Earley, Chief Executive Officer. Interested parties may access the conference call by dialing the following numbers: (888) 713-4214 (domestic) or (617) 213-4866 (international), pass code #30871557. The call will also be available via web cast at http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.metcare.com&esheet=6274995&lan=en_US&anchor=www.metcare.com&index=1&md5=906cb1e56c893d304f8a8a62ce8ba7e2, http://www.streetevents.com, or http://www.fulldisclosure.com.

Participants may pre-register for the call at: https://www.theconferencingservice.com/prereg/key.process?key=P8RMVEA6K

Pre-registrants will be issued a pin number to use when dialing into the live call which will provide quick access to the conference by bypassing the operator upon connection.

If you are unable to participate, an audio replay of the call will be available beginning two hours after the call and will be available until 11:59 p.m. on May 11, 2010, by dialing (888) 286-8010 (domestic) or (617) 801-6888 (international) using confirmation pass code 80118615.

About Metropolitan Health Networks, Inc.:

Metropolitan Health Networks, Inc. with its group of “Metcare of Florida” primary care practices is a growing healthcare organization that provides comprehensive healthcare services for Medicare Advantage customers and other patients in Florida. To learn more about Metropolitan please visit its website at http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.metcare.com&esheet=6274995&lan=en_US&anchor=www.metcare.com&index=5&md5=d68c6582bc90e92bd3933fa2b3d821cc.

GAAP to Non-GAAP RECONCILIATION

Non-GAAP income from operations is a non-GAAP financial measure under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended. Non-GAAP income from operations is calculated by excluding certain GAAP financial items we believe have less significance to the day-to-day operations of our business.

Forward Looking Statements:

Except for historical matters contained herein, statements made in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Without limiting the generality of the foregoing, words such as “may”, “will”, “to”, “plan”, “expect”, “believe”, “anticipate”, “intend”, “could”, “would”, “estimate”, or “continue” or the negative other variations thereof or comparable terminology are intended to identify forward-looking statements.

Investors and others are cautioned that a variety of factors, including certain risks, may affect our business and cause actual results to differ materially from those set forth in the forward-looking statements. These risk factors include, without limitation, (i) our dependence on Humana and our ability to maintain and/or renew our agreements with them on acceptable terms; (ii) the impact of potential reductions in funding for Medicare programs and other healthcare reform initiatives and legislation, especially the new health care reform legislation passed in March 2010, (iii) our ability to effectively manage our medical expenses, (iv) our failure to accurately estimate incurred but not reported medical benefits expense and (v) the impact of Medicare Risk Adjustments on payments we receive for our managed care operations. The Company is also subject to the risks and uncertainties described in its filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2009, and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, which is anticipated to be filed shortly.

METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2010 December 31,
(unaudited) 2009
ASSETS
CURRENT ASSETS
Cash and equivalents $ 5,476,042 $ 6,794,809
Investments, at fair value 24,822,082 27,036,310
Due from Humana, net 7,417,844
Accounts receivable from patients, net 761,354 517,314
Inventory 243,175 216,170
Prepaid expenses 740,270 427,985
Deferred income taxes 679,333 510,816
Other current assets 52,000 211,649
TOTAL CURRENT ASSETS 40,192,100 35,715,053
PROPERTY AND EQUIPMENT, net 1,903,254 1,909,635
RESTRICTED CASH AND INVESTMENTS 4,663,528 6,444,678
DEFERRED INCOME TAXES, net of current portion 1,110,209 1,167,475
OTHER INTANGIBLE ASSETS, net 833,915 930,569
GOODWILL 4,362,332 4,362,332
OTHER ASSETS 814,868 802,500
TOTAL ASSETS $ 53,880,206 $ 51,332,242
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable $ 181,328 $ 455,306
Accrued payroll and payroll taxes 2,372,545 2,959,708
Income taxes payable 3,133,090 2,271,638
Due to Humana, net 1,385,200
Accrued expenses 820,486 618,575
Current portion of long-term debt 318,182 318,182
TOTAL CURRENT LIABILITIES 6,825,631 8,008,609
LONG-TERM DEBT, net of current portion 397,727 397,727
TOTAL LIABILITIES 7,223,358 8,406,336
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred stock, par value $.001 per share; stated value $100 per share;
10,000,000 shares authorized; 5,000 issued and outstanding 500,000 500,000
Common stock, par value $.001 per share; 80,000,000 shares authorized;
39,748,704 and 40,902,391 issued and outstanding at March 31, 2010 and December 31, 2009, respectively 39,749 40,902
Additional paid-in capital 19,932,150 23,329,290
Retained earnings 26,184,949 19,055,714
TOTAL STOCKHOLDERS’ EQUITY 46,656,848 42,925,906
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 53,880,206 $ 51,332,242
METROPOLITAN HEALTH NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
2010 2009
(unaudited) (unaudited)
REVENUE $ 93,042,035 $ 90,440,732
MEDICAL EXPENSE
Medical claims expense 72,047,709 75,921,028
Medical center costs 3,983,746 3,584,522
Total Medical Expense 76,031,455 79,505,550
GROSS PROFIT 17,010,580 10,935,182
OPERATING EXPENSES
Payroll, payroll taxes and benefits 3,778,803 2,709,095
General and administrative 1,958,600 1,826,258
Marketing and advertising 137,026 39,047
Total Operating Expenses 5,874,429 4,574,400
OPERATING INCOME BEFORE GAIN ON SALE OF HMO SUBSIDIARY 11,136,151 6,360,782
Gain on sale of HMO subsidiary 62,440
OPERATING INCOME 11,198,591 6,360,782
OTHER INCOME:
Investment income 193,283 231,968
Other (expense) income (436 ) 2,985
Total Other Income 192,847 234,953
INCOME BEFORE INCOME TAXES 11,391,438 6,595,735
INCOME TAX EXPENSE 4,262,200 2,561,264
NET INCOME $ 7,129,238 $ 4,034,471
NET EARNINGS PER COMMON SHARE:
Basic $ 0.18 $ 0.09
Diluted $ 0.17 $ 0.08
Tuesday, May 4th, 2010 Uncategorized
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