Metropolitan Health Networks reports increased revenue for 2009 fourth quarter

Mar 2 2010

Metropolitan Health Networks, Inc. (NYSE Amex:MDF), a leading provider of healthcare services in Florida, today announced the financial results for their fourth quarter and year ended December 31, 2009. Highlights include the following:

• Revenue of $354.4 million in 2009, a 11.7% increase compared to 2008;
• Net income of $14.4 million in 2009 or $0.32 per basic share, compared to $10.2 million or $0.21 per basic share in 2008;
• Total customer months increased by 7.2% in 2009 over 2008; and
• Total outstanding shares of common stock reduced by 11.4 million shares since September 30, 2008 to 40.9 million at December 31, 2009; and
• Authorization to increase share repurchase program to 20 million shares of common stock.

Full Year 2009 Financial Highlights:

The Company recognized revenue of $354.4 million for 2009 as compared to $317.2 million for 2008, an increase of $37.2 million or 11.7%. Operating income in 2009 was $23.0 million compared to $16.5 million in 2008. Net income for 2009 was $14.4 million compared to $10.2 million for 2008. Net earnings per share were $0.32 basic and $0.31 diluted for 2009 compared to $0.21 basic and $0.20 diluted for 2008. Weighted average common shares outstanding for 2009 were 44.5 million, basic and 45.9 million, diluted.

Included in the 2009 results was a gain on sale of the HMO of $1.3 million, relating to the settle-up of net equity at the time of sale and included in the 2008 results were the gain on sale of the HMO of $5.9 million and expenses directly related to the sale including employee termination payments and stay bonuses totaling $1.6 million. Operating income adjusted for these items was $21.6 million in 2009 compared to $12.3 million in 2008. These adjusted amounts are non-GAAP measures.

The Company’s consolidated medical expense ratio (“MER”) was 88.5% for 2009 compared to 88.4% in 2008. Year over year medical expense, on a per customer per month basis, increased 4.2% in 2009.

Fourth Quarter Financial Highlights:

The Company recognized revenue of $88.8 million for the fourth quarter as compared to $80.0 million in the 2008 fourth quarter, a 10.9% increase. Operating income was $7.8 million in 2009 compared to $4.9 million in 2008. Net income for the 2009 fourth quarter was $4.8 million or $0.12 per share basic and $0.11 diluted as compared to $2.6 million or $0.05 per share basic and diluted for the same quarter last year.

The Company’s consolidated MER was 84.9% in the fourth quarter of 2009 compared to 88.3% in the same quarter of 2008.

Customer Information:

Medicare Advantage customers increased to 35,500 at December 31, 2009 as compared to 33,000 customers at December 31, 2008, an increase of 2,500 members. Total customer months, the combined total customers for each month of the measurement period, increased by 7.2% to 425,100 in 2009, up from 396,400 in 2008.

Balance Sheet Highlights:

Cash, cash equivalents and short-term investments at December 31, 2009, totaled $33.8 million compared to $36.3 million at December 31, 2008. This reduction is primarily a result of posting $5.0 million of short-term investments to secure a $3.0 million line of credit, and reflecting this collateral as a non-current asset at December 31, 2009. As noted below, $15.9 million was used during 2009 to repurchase 7.8 million shares of the Company’s common stock as well as options exercisable to purchase 684,200 share of our common stock. The Company had a working capital surplus of $27.7 million as of December 31, 2009 as compared to a surplus of $34.5 million as of December 31, 2008, a decrease of $6.8 million or 19.7%. The decrease in working capital is primarily attributable to the posting of collateral for the letter of credit and to the stock repurchases. Stockholders’ equity increased approximately $100,000 or 0.2%, from approximately $42.8 million at December 31, 2008 to approximately $42.9 million at December 31, 2009.

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 December 31, 2009 the Company has repurchased 12.0 million shares of its common stock, and 684,200 options, at an average cost of $1.85 per share. Shares repurchased from January 1 through February 25, 2010 totaled approximately 1.6 million bringing total shares then outstanding to approximately 39.8 million. Approximately 5.7 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, Chief Executive Officer of Metropolitan Health Networks, Inc., commented, “2009’s strong financial results are driven by a number of operating strategies and actions initiated over the past few years. Our customer base has continued growing, we’ve strengthened our risk scoring compliance and medical management capabilities, and our operating expenses have been significantly reduced. We took advantage of short-term weakness in the financial markets for the long-term benefit of our shareholders, reducing our outstanding shares from the inception of the share repurchase program by over 23%.

Earley noted further, “Almost three years ago we recognized the need to advance our business model to better serve and meet the demands of the rapidly growing Medicare population. Centered around customer care and delivering better outcomes more efficiently, we saw value in the Patient Centered Medical Home (PCMH) model of care. This model restores primary care physicians and their staffs to the role of providing and coordinating the full range of care for patients, or in our words, customers. We initiated a series of strategic changes to embark on that path.”

“In 2009 we implemented a number of PCMH related initiatives including the addition of nursing professionals to our medical office staffs, the implementation of electronic prescribing and chronic care disease registries, an investment in a comprehensive electronic medical records system that we expect to be fully operational by late 2010, and the adoption of a comprehensive training program aimed at enhancing both customer satisfaction and employee engagement. While many of these achievements may not be readily evident in our numbers, our recently announced PCMH pilot study results and our high customer satisfaction marks indicate these advances are making a difference both in how we are perceived by our customers and in measurable quality of care metrics. In conjunction with our recent receipt of NCQA recognition, we fully expect the investments we are making in these programs to have an ongoing long-term positive impact on our operations,” Earley concluded.

Conference Call Information:

Metropolitan Health Networks will hold a conference call to review its fourth quarter and full year 2009 results on Tuesday, March 2, 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) 679-8037 (domestic) or (617) 213-4849 (international), pass code #74394818. The call will also be available via web cast at www.metcare.com, http://www.streetevents.com, or http://www.fulldisclosure.com