Metropolitan Health Networks Reports 2009 Third Quarter Results

Company Delivers Record 2009 Customer Base, Revenues and Earnings

• Press Release
• Source: Metropolitan Health Networks, Inc.
• On 7:00 am EST, Thursday November 5, 2009

WEST PALM BEACH, Fla.--(BUSINESS WIRE)--Metropolitan Health Networks, Inc. (NYSE AMEX: MDF), a leading provider of healthcare services in Florida, today reported the company’s financial results for the quarter and nine months ended September 30, 2009. Highlights include the following:

• Revenue of $88.1 million for the third quarter of 2009, an 11.6% increase compared to the same period in 2008;
• operating income excluding the impact of the sale of the HMO was $3.4 million for the three months ended September 30, 2009 compared to $2.3 million in the prior year period;
• revenue for the nine months ended September 30, 2009, of $265.7 million, a 12.0% increase from the same period in 2008;
• operating income excluding the impact of the sale of the HMO was $14.4 million for the nine months ended September 30, 2009 compared to $7.4 million in 2008;
• a 7.1% increase in total customer months for the nine months ended September 30, 2009 compared to the same period in 2008; and
• the repurchase of 11.2 million shares since October 6, 2008.

Related Quotes

Symbol	Price	Change
MDF	2.02	+0.08

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Third Quarter Financial Highlights:

The company recognized revenue of $88.1 million for the third quarter as compared to $78.9 million in the 2008 third quarter, an 11.6% increase. Operating income before gain on sale of HMO of $3.4 million for the three months ended September 30, 2009, compared to $662,000 for the same period in 2008. Included in operating income before gain on sale of the HMO for the third quarter of 2008 were one-time stay bonuses and termination costs, related to the sale, of $1.6 million. Net income for the 2009 third quarter was $2.4 million or $0.05 per share, basic and diluted, as compared to $4.3 million or $0.08 per share, basic and diluted for the same quarter last year. Excluding the gain on the sale of the HMO and related stay bonuses, net income for the three months ended September 30, 2008, would have been $1.7 million or $0.03 per diluted share.

The company’s medical expense ratio (“MER”) was 91.3% in the third quarter of 2009 compared to 90.2% in the same quarter of 2008. Operating expenses dropped 39.8% from $7.0 million in the third quarter of 2008 to $4.2 million in the same period in 2009, primarily the result of the reduction in administrative costs resulting from the sale of the Company’s HMO in August 2008.

Nine Months Year to Date Financial Highlights:

For the nine months ended September 30, 2009, the company’s revenue totaled $265.7 million compared to $237.2 million in the prior year period, an increase of 12.0%. Operating income before gain on sale of HMO for the nine months ended September 30, 2009, increased to $14.4 million, compared to $5.9 million for the same nine months ended September 30, 2008. Included in operating income before gain on sale of the HMO for the nine months ended September 30, 2008, were one-time stay bonuses and termination costs, related to the sale, of $1.6 million. Net income was $9.6 million compared to $7.6 million for the same period of 2008. Earnings per share were $0.21 per basic share and $0.20 per diluted share, compared to $0.15 per basic share and $0.14 per diluted share for the nine months ended September 30, 2009 and 2008, respectively. Excluding the gain on the sale of the HMO and related stay bonuses, net income for the nine months ended September 30, 2008, would have been $5.1 million or $0.10 per diluted share.

The company’s MER was 89.7% in the first nine months of 2009 compared to 88.4% in the first nine months of 2008. Operating expenses dropped 39.5% from $21.6 million in the first nine months of 2008 to $13.0 million in the same period in 2009, primarily the result of the reduction in administrative costs resulting from the sale of the Company’s HMO.

Customer Information:

The total number of Medicare Advantage customers served by the company increased by 2,700 between September 2008 and September 2009 to 35,800. With the sale of the HMO and the new provider risk agreement reached late in the third quarter of 2008 with Humana in the 13 HMO counties, all of our customers are in the core PSN business. Total customer months, the combined total customers for each month of the measurement period, increased by 7.1% to 318,300 in the first nine months of 2009, up from 297,300 in the 2008 period.

Balance Sheet Highlights:

Cash, cash equivalents and investments at September 30, 2009, was approximately $37.2 million. This compares to $36.3 million at December 31, 2008. The Company had a working capital surplus of approximately $32.2 million at September 30, 2009, compared to a surplus of approximately $34.5 million as of December 31, 2008. The Company’s total stockholders’ equity was approximately $42.0 million at September 30, 2009 and total common shares outstanding at that date totaled 43.0 million.

Share Repurchase Program:

On August 3, 2009, 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 15 million shares. Through September 30, 2009 the Company has repurchased 10.5 million shares of its common stock at an average cost of $1.81 per share. Shares repurchased as of November 2, 2009 totaled approximately 11.2 million. With the increased authorization, approximately 3.8 million shares are currently 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, “2009 continues to be a very good year for our business, with continued growth in terms of customers, revenues and earnings. Our operations and balance sheet remain strong and we are well-positioned to face the challenges and opportunities that confront our business, and most health care companies in the future.”

Earley continued, “We continue to believe that providing and coordinating care for people with Medicare will remain a good and growing business that is demographically driven. Aside from our positive results, we have made important strides in positioning our company for the future with initiatives such as e-prescribing, electronic medical records, and the now much-discussed Patient Centered Medical Home primary care operating model. We recently submitted applications to secure NCQA (“National Committee for Quality Assurance”) accreditation as Patient Centered Medical Homes for ten of our owned medical practices. We believe that these and other similar investments will allow us to deliver more effective and efficient care to our customers, in a customer-centric environment. We also believe that these strategies are indeed consistent with real health care reform.”

Conference Call Information:

Metropolitan Health Networks will hold a conference call to review its third quarter 2009 results on Thursday, November 5, 2009 at 11:00 a.m. Eastern. The call will be hosted by Michael Earley, Chairman and Chief Executive Officer. Interested parties may access the conference call by dialing the following numbers: (888) 679-8035 (domestic) or 617-213-4848 (international), pass code # 84390127. The call will also be available via web cast at www.metcare.com, http://www.streetevents.com, http://www.fulldisclosure.com.

Participants may pre-register for the call at https://www.theconferencingservice.com/prereg/key.process?key=PGYE6TQCE. 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 November 12, 2009, by dialing (888) 286-8010 (domestic) or (617) 801-6888 (international) using confirmation pass code 66911284.

About Metropolitan Health Networks, Inc.:

Metropolitan is a growing healthcare organization that provides comprehensive healthcare services for Medicare Advantage members and other patients in Florida. To learn more about Metropolitan Health Networks, Inc. please visit its website at www.metcare.com.

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 ability to meet our cost projections under various provider agreements with Humana; (ii) our failure to accurately estimate incurred but not reported medical benefits expense; (iii) pricing pressures exerted on us by managed care organizations and the level of payments we indirectly receive under governmental programs or from other payors; (iv) future legislation and changes in governmental regulations; (v) the impact of Medicare Risk Adjustments on payments we receive for our managed care operations; (vi) a loss of any of our significant contracts or our ability to increase the number of Medicare eligible patient lives we manage under these contracts. 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, 2008, its Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, its Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, which is anticipated to be filed within several business days.

Metropolitan Health Networks, Inc., West Palm Beach
Michael Earley, Chief Executive Officer, 561-805-8500
mearley@metcare.com
or
Cameron Associates
Al Palombo, Investor Relations, 212-245-8800 Ext. 209
al@cameronassoc.com