Prospect Medical Holdings Reports Fiscal 2008 Fourth Quarter and Year-End Financial Results

Business Wire, Dec 29, 2008

Adjusted EBITDA for the fourth quarter and full fiscal year 2008 was $11.6 million and $40.1 million, respectively (see reconciliation tables in this release).

SEGMENT RESULTS

IPA Management

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Managed care revenues for the fourth quarter of fiscal 2008 increased by approximately $757,000, or 1.5%, compared with the fourth quarter of fiscal 2007. This 2008 increase reflects the net impact of lower HMO enrollment and rate increases. Managed care revenues for the full year rose 38.0%, to $202.8 million, reflecting a $60.8 million increased contribution from ProMed, given its inclusion for a full year in fiscal 2008, combined with the net effect of decreased enrollment and rate increases at Prospect's legacy IPAs.

Managed care cost of revenues decreased to 73.8% and 78.3% of total managed care revenues for the fiscal 2008 fourth quarter and full year, from 85.5% and 81.4%, respectively, in the fiscal 2007 fourth quarter and full year. These decreases resulted from several factors, including improved per enrollee reimbursements, improved contracting, and the inclusion of ProMed for all of fiscal 2008.

Higher general and administrative ("G&A") expenses for the fiscal 2008 fourth quarter and year were primarily due to the inclusion of the acquired entities for the entire periods in fiscal 2008.

Income from unconsolidated joint ventures amounted to approximately $439,000 and $2.6 million in the 2008 fiscal fourth quarter and full year, respectively. This compares to approximately $349,000 and $2.7 million in the 2007 fiscal fourth quarter and full year, respectively.

Operating income for the fiscal 2008 fourth quarter was $5.7 million, as compared to an operating loss of $27.5 million in the fourth quarter of fiscal 2007, including consideration of each of the items discussed above. The operating income for all of fiscal 2008 amounted to $13.2 million, as compared to an operating loss of approximately $24.1 million for all of fiscal 2007, including consideration of each of the items discussed above.

Hospital Services (Since August 8, 2007)

Prospect's Hospital Services segment consists of Alta's four community-based hospitals in southern California, acquired in August 2007.

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The information above reflects the segment results for the periods since Alta's acquisition, which, during fiscal 2007, represented fifty-four days.

Given Alta's acquisition date, comparison with fiscal 2007 periods is not meaningful. However, for the periods detailed above, key performance indicators, including utilization rates, net inpatient revenue per admission and net inpatient revenue per patient day have each increased.

There has been no change in the number of hospitals, average licensed beds, or average available beds.

Discontinued Operations

The Company sold its Antelope Valley ("AV") entities effective August 1, 2008. Pre-sale results are classified as discontinued operations in the financial statements, for all periods presented. Revenues for the AV entities totaled approximately $14.7 million and $18.1 million during the fiscal years ended September 30, 2008 (AV included for 10 months) and 2007. During fiscal 2008, the AV entities' ten month net loss from operations (exclusive of any gain on sale) was approximately $0.4 million. During fiscal 2007, the AV entities' net loss from operations was approximately $10.0 million (primarily comprised of an $8.9 million, after tax, write down of associated goodwill and other intangibles).