DYNACQ International Dynacq Healthcare Inc. - The Surgical Model of the Future

Dynacq Reports 52% Increase in Third Quarter Net Income to $6.3 Million
Dynacq International Inc. (Nasdaq/NM:DYII) today reported another strong financial performance in the quarter ended May 31, 2003. Net patient service revenues increased to $25,606,000 from $19,585,000, or 31%, from the corresponding prior year quarter. Net income for the quarter rose 52% to $6,277,000 from $4,127,000 for the comparable prior year quarter and fully diluted earnings per share increased to $0.40 from $0.27, or 48%, from the corresponding prior year quarter.

During the quarter ended May 31, 2003, Dynacq's flagship facility, the Vista Medical Center Hospital in Pasadena, Texas, continued its steady growth performance. Net patient service revenue at the hospital increased to $21,327,000 from $15,844,000, or 35%, from the corresponding prior year quarter.

The new hospital in Baton Rouge, La., Vista Surgical Hospital of Baton Rouge, completed its first full quarter of operations. Even though this hospital did not contribute positively to the overall consolidated net income, management is encouraged by the increase in procedures performed at this location month to month within this quarter. The Company expects this hospital to be profitable in the fourth quarter and will continue to focus its resources to increase revenues at this location.

Comparing nine months ended May 31, 2003 to the same period in 2002, net revenues increased 34% to $64,668,000 from $48,297,000 for the corresponding prior year period. Net income rose 37% to $15,173,000 from $11,047,000 in the prior year period. Basic earnings per share, before cumulative effect of a change in accounting principle, increased 31% to $0.98 from $0.75 and fully diluted earnings per share increased 29% to $0.94 from $0.73 for the corresponding prior year period. During the first quarter of fiscal 2003, Dynacq recorded a one-time gain of $528,000, net of tax, related to a write-off of negative goodwill associated with the adoption of SFAS 142, Goodwill and Other Intangible Assets, as a cumulative effect of a change in accounting principle. The basic and diluted earnings per share after this one-time gain for the nine months ended May 31, 2003 were $1.02 and $0.97, respectively.

Dynacq Chairman and CEO, Chiu M. Chan, said, "I am especially pleased that the continued success of the Houston facilities has permitted the Company to achieve such strong net earnings growth, even with the expected initial earnings drag from the start-up of the new hospital in Baton Rouge, La. As the Baton Rouge facility begins to achieve profitability, the ongoing success of the management and clinical teams in implementing our strategic growth plan should accelerate."

"While establishing the Baton Rouge facility to operate on a sound basis, we are also taking steps to expand further over the next few years. We are in the early stages of development work with several locations for potential new hospitals. We want to grow at a pace strategically consistent with our strong financial performance."

Dynacq International Inc. (www.dynacq.com) provides surgical healthcare services and related ancillary services through surgical hospital facilities and outpatient surgical centers. Dynacq specializes in creating surgical facilities that are models of quality patient care, efficiency, technology, clinical skills and profitability.

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Summarized selected financial data:

                     Three months ended         Nine months ended
                           May 31,                    May 31,
                  ------------------------- -------------------------
                      2003         2002         2003         2002
                      ----         ----         ----         ----
Operating Data:
Net patient
 service revenue   $25,606,146  $19,584,545  $64,667,579  $48,297,084
Operating expenses  14,606,451   12,589,601   38,182,357   29,848,668
                  ------------ ------------ ------------ ------------
Operating income    10,999,695    6,994,944   26,485,222   18,448,416
Other income, net      243,481       27,353      500,219      188,685

Minority interests
 in earnings          (801,962)    (664,690)  (2,630,064)  (1,701,956)

Provision for
 income taxes       (4,163,956)  (2,230,442)  (9,710,958)  (5,888,338)

Cumulative effect
 of a change in
 accounting
 principle, net
 of tax                      -            -      528,153            -
                  ------------ ------------ ------------ ------------
Net income          $6,277,258   $4,127,165  $15,172,572  $11,046,807
                  ============ ============ ============ ============
Basic earnings per
 common share:
   Income before
    cumulative
    effect of a
    change in
    accounting
    principle            $0.42        $0.28        $0.98        $0.75
   Cumulative
    effect of a
    change in
    accounting
    principle                -            -         0.04            -
                  ------------ ------------ ------------ ------------
                         $0.42        $0.28        $1.02        $0.75
                  ============ ============ ============ ============
Diluted earnings
 per common share:
   Income before
    cumulative
    effect of a
    change in
    accounting
    principle            $0.40        $0.27        $0.94        $0.73
   Cumulative
    effect of a
    change in
    accounting
    principle                -            -         0.03            -
                  ------------ ------------ ------------ ------------
                         $0.40        $0.27        $0.97        $0.73
                  ============ ============ ============ ============
Weighted average
   common shares
    (basic)         14,875,100   14,797,989   14,860,739   14,797,989
Weighted average
   common shares
    (diluted)       15,573,752   15,057,681   15,555,003   15,057,681

Statement of Cash
 Flows Data:
Cash provided by
 operating
 activities                                  $14,035,386   $8,692,117
Cash used in
 investing
 activities                                  (16,262,975)  (3,747,971)
Cash used in
 financing
 activities                                   (1,214,573)  (3,313,727)

                                               May 31,    August 31,
                                                2003         2002
                                            ------------ ------------
Balance Sheet
 Data:
Cash and cash
 equivalents                                  $4,141,594   $7,583,756
Accounts
 receivable, net                              32,020,645   24,340,971
Other current
 assets                                        3,791,620    1,679,555
Property and
 equipment, net                               31,565,516   16,715,425
Other assets                                     949,860      758,914
                                            ------------ ------------
Total assets                                 $72,469,235  $51,078,621
                                            ------------ ------------
Current
 liabilities                                  $8,413,629   $3,111,015
Other liabilities                              4,441,438    3,399,233
Total
 stockholders'
 equity                                       59,614,168   44,568,373
                                            ------------ ------------
Total liabilities
 and stockholders'
 equity                                      $72,469,235  $51,078,621
                                            ============ ============

Certain statements contained in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, without limitation, Dynacq's ability to continue growing, the ability of the hospital at Baton Rouge to be profitable, positively impact future earnings, achieve profitability, gain additional momentum, and contribute to net income, continued strong growth of the Houston facilities, and Dynacq's ability to continue to provide high quality healthcare services and facilities. Although the Company believes its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results will not differ materially from its expectations. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. More detailed information about factors that may cause actual results to materially differ is contained in the Company's filings with the Securities and Exchange Commission. The words "looking forward," "believe," "expect," "likely" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date that such statements were made. The Company undertakes no obligation to update any forward-looking statements contained in this press release.


Contact:
     Dynacq International Inc., Houston
     James N. Baxter, 212-666-3399
     jimbaxter@dynacq.com



Source: Dynacq International Inc.

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