Dynacq Healthcare, Inc. Announces Financial Results for the Fiscal Quarter Ended February 29, 2008

HOUSTON--(BUSINESS WIRE)—April 8, 2008--Dynacq Healthcare, Inc. (DYII) today reported financial results for the second fiscal quarter ended February 29, 2008. For the fiscal quarter ended February 29, 2008, the Company had income from continuing operations of $4.8 million, or $0.29 per share, compared to a loss from continuing operations of $139,000, or $(0.01) per share, in the fiscal quarter ended February 28, 2007. All per share amounts are calculated on a fully diluted basis.

Results of Operations   Net patient service revenues for the quarter increased by $11.8 million, or 127%, from $9.3 million in 2007 to $21.1 million in 2008.  The increase in revenues is primarily due to an increase in inpatient cases and due to additional revenues of $3.8 million recognized based on settlements reached with insurance carriers for Medical Dispute Resolution (MDR) accounts receivable with dates of service ranging from 2001 to 2005.    Net income for the quarter ended February 29, 2008 was $7.4 million, or $0.44 per share, versus net loss of $1.1 million, or $(0.07) per share, in the quarter ended February 28, 2007.   During the quarter ended February 29, 2008, the Company sold its Baton Rouge facility, which was reported as discontinued operations.  The gain on sale of this facility was $2.8 million, or $0.17 per share, net of income taxes.   Net patient service revenues for the six months ended February 29, 2008 increased by $15.7 million, or 81%, from $19.2 million in 2007 to $34.9 million in 2008.  The increase in revenues includes additional revenues of $4.5 million on closed MDR accounts receivable.  Income from continuing operations for the six months ended February 29, 2008 was $7.0 million, or $0.42 per share, versus loss from continuing operations of $0.8 million, or $(0.05) per share, in the same period in 2007.  Net income was $9.8 million, or $0.59 per share, for the six months ended February 29, 2008 versus net loss of $2.0 million, or $(0.13) per share, for the same period in 2007.   Highlights of Last Four Quarterly Earnings     2nd quarter ended 2/29/08 1st quarter ended 11/30/07 4th quarter ended 8/31/07 3rd quarter ended 5/31/07 Income from continuing operations $4.8 million $2.2 million $2.1 million $2.6 million Net income $7.4 million $2.4 million $3.6 million $2.6 million Earnings per share:         Income from continuing operations $0.29 $0.13 $0.13 $0.16 Net income $0.44 $0.14 $0.22 $0.17       Recent Developments   The amount of additional revenues from MDR settlements reached in the first six months of the current fiscal year may not be indicative of the amounts that may be obtained from settlements reached for the remainder of the fiscal year ending August 31, 2008 or even after that. The Company is unable to estimate with any certainty the progress of the settlements for the remaining cases.   Starting March 1, 2008, Texas Workers’ Compensation 2008 Acute Care Hospital Outpatient and Inpatient Facility Fee Guidelines became effective. The reimbursement amounts are determined by applying the most recently adopted and effective Medicare reimbursement formula and factors as published annually in the Federal Register.  However, if the maximum allowable reimbursement for the procedure performed cannot be calculated using these fee guidelines, then reimbursement shall be determined on a fair and reasonable basis.    Based on this new Fee Guideline, the reimbursement due the Company for workers’ compensation cases will be lower than previously experienced.  Although the Company has not yet completed its evaluation of the negative impact this will have for cases starting March 1, 2008, it anticipates discontinuing its focus on Texas workers’ compensation cases because of these lower reimbursement rates. The Company’s patient service revenues may decrease as a result of both the decreased number of procedures and the lower reimbursement rates for workers’ compensation procedures still being performed.   Stock Repurchase Program   In addition the Company announced a program to repurchase up to 2 million shares of its common stock from time to time in open market transactions at prevailing prices in accordance with the “safe harbor” provisions of Rule 10b-18 of the Securities Exchange Act of 1934. The Company is making daily purchases of its common stock through a single broker at a purchase price not in excess of the higher of the highest independent bid or the last independent transaction price reported on NASDAQ at the time of purchase.  Company purchases will not be the opening purchase reported in the consolidated system nor made during the 30 minutes before the scheduled close of the primary trading session on NASDAQ, and the total volume of shares purchased by the Company and any of its affiliates in a single day will not exceed 25% of the average daily trading volume reported for the Company’s stock for the four calendar weeks preceding the week in which the purchase is to be made.  The stock repurchase plan will expire when the maximum number of shares has been repurchased, but may be discontinued by the Company at any time.   Additional Information

Dynacq Healthcare, Inc. ("www.dynacq.com") is a holding company. Its subsidiaries provide surgical healthcare services and related ancillary services through hospital facilities. Certain statements included in this press release, which are not historical facts, are forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent our expectations or beliefs, intentions, future events, future performance, business prospects and involve certain risks and uncertainties, including those described in our public filings with the United States Securities and Exchange Commission, also including, but not limited to, changes in interest rates, competitive pressures, changes in customer mix, changes in third party reimbursement rates, financial stability of major customers, changes in government regulations or the interpretation of these regulations, changes in supplier relationships, growth opportunities, cost savings, revenue enhancements, synergies and other benefits anticipated from acquisition transactions, difficulties relative to integrating acquired business, the accounting and tax treatments of acquisitions, and asserted and unasserted claims, which could cause actual results to differ materially from those indicated in the forward-looking statements. The forward-looking statements by their nature involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors. You are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date herein. The risks and uncertainties that may cause these forward-looking statements to prove to be incorrect include, without limitation, adverse effects of litigation or regulatory actions, inability to negotiate desired terms with proposed joint venture partners, and favorable regulatory determinations for availability of financing options and other transactions.   Contact: Dynacq Healthcare, Inc., Houston Philip S. Chan, 713-378-2000 info@dynacq.com Source: Dynacq Healthcare, Inc