Dynacq Healthcare, Inc. Announces Financial Results for the Fiscal Quarter Ended May 31, 2008

HOUSTON--(BUSINESS WIRE)—July 15, 2008--Dynacq Healthcare, Inc. (DYII) today reported financial results for the third fiscal quarter ended May 31, 2008. For the fiscal quarter ended May 31, 2008, the Company had income from continuing operations of $1.2 million, or $0.07 per share, compared to $2.9 million, or $0.18 per share, in the fiscal quarter ended May 31, 2007. All per share amounts are calculated on a fully diluted basis. The decline in income from continuing operation of $1.7 million, or 58%, was primarily due to a change in the Company’s revenue recognition method to recognize the lower reimbursement amounts payable for workers’ compensation cases as a result of the Texas Workers’ Compensation (TWCC) Fee Guidelines effective March 1, 2008. The Company’s revenue recognition method for the corresponding third fiscal quarter of prior year ended May 31, 2007 was based on the trailing twelve months average collection ratio.

Results of Operations   Net patient service revenues for the quarter increased by $1.6 million, or 13%, from $12.6 million in 2007 to $14.2 million in 2008.  The increase in revenues is primarily due to an increase in inpatient cases and additional revenues of $1.3 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, offset by the reduction in net revenue recognized on workers’ compensation cases based on the new TWCC Fee Guidelines effective March 1, 2008.    Net income for the quarter ended May 31, 2008 was $1 million, or $0.06 per share, versus $2.6 million, or $0.17 per share, in the quarter ended May 31, 2007.     Net patient service revenues for the nine months ended May 31, 2008 increased by $17.3 million, or 54%, from $31.8 million in 2007 to $49.1 million in 2008.  The increase in revenues includes additional revenues of $5.8 million on closed MDR accounts receivable, offset by the reduction in net revenue recognized on workers’ compensation cases based on the new TWCC Fee Guidelines effective March 1, 2008.  Income from continuing operations for the nine months ended May 31, 2008 was $8.3 million, or $0.50 per share, versus $2.2 million, or $0.14 per share, in the same period in 2007.                                                                                                                                                                        Net income was $10.8 million, or $0.65 per share, for the nine months ended May 31, 2008 versus $573,000, or $0.04 per share, for the same period in 2007.   Recent Developments   The DeAn Joint Venture, which was formed for the purpose of constructing, owning and operating a hospital in Shanghai, China, had entered into land use agreements with the Chinese government under which it leased, for a term of 50 years, approximately 28.88 acres of government-owned land.  On July 14, 2008, the Company agreed to sell its interest in the property owned by the DeAn Joint Venture for the construction of the hospital for approximately $4.6 million U.S., net of commissions.    The Company has formed a wholly owned subsidiary, Dynacq Huai Bei Healthcare, Inc., a Chinese corporation, to provide healthcare management services in China, and has entered into a management agreement with RuiAn City Department of Health to manage the operations, human resources and financials of the RuiAn Hospital in China effective June 1, 2008.    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