Metropolitan Health Networks Earns $0.20 Per Share in 2011 First Quarter – Company Increases Share Repurchase Program to 25 Million Shares of Common Stock

BOCA RATON, Fla.--(BUSINESS WIRE)--Metropolitan Health Networks, Inc. (NYSE AMEX: MDF), a leading provider of health care services in Florida, today announced the financial results for their first quarter ended March 31, 2011. Highlights for the quarter include the following:

• Net income of $8 million or $0.20 per basic share, compared to $7.1 million or $0.18 per basic share for the same quarter last year;
• revenue of $94.7 million, compared to $93 million in the first quarter of 2010;
• medical expense ratio of 79.7% compared to 81.7% in first quarter of 2010; and
• the integration of two recently acquired primary care practices, with a third acquisition closed in April.

First Quarter Financial Highlights:

The Company recognized revenue of $94.7 million for the first quarter of 2011 compared to $93 million in the first quarter of 2010, a 1.8% increase. Total medical expense decreased from $76.0 million to $75.5 million in the first quarter of 2011 as compared to the same period in 2010. The Company’s MER was 79.7% in the first quarter of 2011 compared to 81.7% in the same quarter of 2010.

Operating income was $12.8 million in the 2011 first quarter compared to $11.2 million for the same period in 2010. Net income for the 2011 first quarter was $8.0 million or $0.20 per basic share and $0.19 diluted, as compared to $7.1 million or $0.18 per basic share and $0.17 diluted for the same quarter last year.

The Company realized favorable claims development in the first quarter of 2011 of $2.6 million, as compared to favorable claims development of $814,000 in the first quarter of 2010. Adjusted for the favorable claims development, our MER would have been 82.5% in the first quarter of 2011 and 82.6% in the first quarter of 2010.

Customer Information:

Medicare Advantage customers totaled 34,200 at March 31, 2011 as compared to 35,400 customers at March 31, 2010. Total customer months, the combined total customers for each month of the quarter, was 102,800 in 2011, down from 106,700 in 2010.

Balance Sheet Highlights:

Cash, cash equivalents and short-term investments at March 31, 2011 totaled $48.3 million compared to $49.5 million at December 31, 2010. The Company had a working capital surplus of $62.2 million as of March 31, 2011, compared to a surplus of $54.2 million as of December 31, 2010. Stockholders’ equity increased $9.0 million from $67.8 million at December 31, 2010 to $76.8 million at March 31, 2011.

Primary Care Practice Acquisitions:

In the last of quarter of the 2010, the company announced that it had entered into definitive agreements to acquire three primary care practices. During the first quarter of 2011, two of the three acquisitions were completed and integrated, with the third acquisition closed in April. All three of the acquisitions were existing affiliated providers to Metropolitan and provided benefits to approximately 960 customers that are included in the number of Medicare Advantage customers the Company cared for at March 31, 2011. With these additions, the company now owns and operates 13 primary care practices which care for approximately 31% of its Medicare Advantage customers compared to 28% at March 31, 2010.

Share Repurchase Program:

On May 2, 2011, 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 25 million shares. Since October 2008, the company has had a share repurchase program in place, from the inception of the program through March 31, 2011 the Company has repurchased 13.9 million shares of its common stock as well as options exercisable to purchase 684,200 shares of its common stock. The Company did not purchase any additional stock under the program during the first quarter of 2011. With the increased authorization, approximately 10.6 million shares remain 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.

“2011 marks the year where our focus is outward on growth,” states Michael Earley.

Commenting on the results of the quarter, Michael Earley, Chairman and Chief Executive Officer of Metropolitan Health Networks, Inc., stated, “On the heels of a great 2010, we started 2011 with another exceptional quarter. 2011 is a year where we are focusing on growth initiatives. As such, we are deploying resources in this area as we work to identify and secure additional practices, move ahead with plans to build new practices, and examine other expansion opportunities. Unlike the previous two years where our focus was on inward investment and improvement, 2011 marks the year where our focus is outward on growth. The work we have undertaken at all operational levels to bring us to this point has served us well and has set the stage for the next phase of the execution of our strategic plans. All in all we are pleased with the progress we are making and are looking forward to what lies ahead for us this year.”

Conference Call Information:

Metropolitan Health Networks will hold a conference call to review its first quarter 2011 results on Tuesday, May 3, 2011 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 # 11917867. The call will also be available via web cast at www.metcare.com,http://www.streetevents.com, or http://www.fulldisclosure.com.

Participants may pre-register for the call at: https://www.theconferencingservice.com/prereg/key.process?key=PCFUTBQMK

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 May 10, 2011, by dialing (888) 286-8010 (domestic) or (617) 801-6888 (international) using confirmation pass code 85984316.

About Metropolitan Health Networks, Inc.:

Metropolitan is a growing health care organization that provides comprehensive health care 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.

GAAP to Non-GAAP RECONCILIATION

Non-GAAP income from operations is a non-GAAP financial measure under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended. Non-GAAP income from operations is calculated by excluding certain GAAP financial items we believe have less significance to the day-to-day operations of our business.

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) our still limited ability to predict the direct and indirect effects of the healthcare reform laws adopted in 2010; (v) future legislation and changes in governmental regulations; (vi) 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, 2010, and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, which is expected to be filed shortly.