8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Date of Report (Date of earliest event reported): November 12, 2009

MEDCATH CORPORATION

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 000-33009
(Commission File Number) 56-2248952
(IRS Employer Identification No.)

10720 Sikes Place
Charlotte, North Carolina 28277
(Address of principal executive offices, including zip code)

(704) 815-7700
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

On November 12, 2009, MedCath Corporation (“MedCath”) issued a press release announcing its results of operations for the fiscal quarter ended September 30, 2009. A copy of the press release is furnished as Exhibit 99.1.

Included in the press release and the supplemental financial information issued by MedCath and furnished herewith as Exhibits 99.1 and 99.2, are certain financial measures that are not generally accepted accounting principles (“non-GAAP”), such as adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”); adjusted diluted earnings per share from continuing operations (“Adjusted EPS”); and Free Cash Flows. Adjusted EBITDA represents MedCath’s (loss) income from continuing operations before interest expense; loss on early extinguishment of debt; income tax (benefit) expense; depreciation; amortization; share-based compensation expense; loss (gain) on disposal of property, equipment and other assets; interest and other income; equity in net earnings of unconsolidated affiliates; minority interest share of earnings of consolidated subsidiaries; impairment of goodwill; and pre-opening expense. Adjusted EPS represents MedCath’s diluted earnings per share from continuing operations for the three months ended September 30, 2009 adjusted for third party payor adjustments, termination of management contract, impairment of goodwill, share-based compensation expense, and pre-opening expense. Free Cash Flows are defined as cash flows from continuing operations less non-expansion capital expenditures. MedCath’s management uses Adjusted EBITDA to measure the performance of MedCath’s various operating entities, to compare actual results to historical and budgeted results, and to make capital allocation decisions. Free Cash Flows are utilized by management to measure the quality of MedCath’s earnings. Management provides Adjusted EBITDA, Adjusted EPS, and Free Cash Flows to investors to assist them in performing their analyses of MedCath’s historical operating results. Further, management believes that many investors in MedCath also invest in, or have knowledge of, other healthcare companies that use Adjusted EBITDA, Adjusted EPS, and/or Free Cash Flows as a financial performance measure.

Because Adjusted EBITDA, Adjusted EPS, and Free Cash Flows are non-GAAP measures, Adjusted EBITDA, Adjusted EPS, and Free Cash Flows, as defined above, may not be comparable to other similarly titled measures of other companies. MedCath has included a supplemental schedule with the financial statements that accompanies this press release that reconciles historical Adjusted EBITDA to MedCath’s income from continuing operations, Adjusted EPS to diluted EPS from continuing operations, and the computation of Free Cash Flows.

Item 9.01. Financial Statements and Exhibits

Exhibit 99.1 Press Release dated November 12, 2009

Exhibit 99.2 Financial Update dated November 12, 2009

Exhibits 99.1 and 99.2 listed in this Item 9.01 are being furnished under Item 2.02 and shall not be deemed “filed” for purpose of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	MEDCATH CORPORATION
Date: November 12, 2009	By:	/s/ James A. Parker
		James A. Parker
		Executive Vice President and Chief Financial Officer

INDEX TO EXHIBITS

Exhibit No.	Description
Exhibit 99.1	Press Release dated November 12, 2009
Exhibit 99.2	Financial Update dated November 12, 2009

EX-99.1

Exhibit 99.1

MEDCATH CONTACT:
O. Edwin French	Art Parker
President/Chief Executive Officer	Chief Financial Officer
(704) 815-7700	(704) 815-7700

MEDCATH CORPORATION REPORTS FOURTH QUARTER EARNINGS

     CHARLOTTE, N.C., Nov 11, 2009 — MedCath Corporation (Nasdaq: MDTH), a healthcare provider focused on high acuity healthcare services, predominately the diagnosis and treatment of cardiovascular disease, today announced its preliminary and unaudited operating results for its fourth quarter and fiscal year which ended September 30, 2009.

Fourth Quarter Summary

• Net revenue of $148.0 million, or $149.4 million after excluding the impact of third-party payor cost report settlements that reduced fourth quarter net revenue by $1.4 million, an increase of 2.0% over the fourth quarter of fiscal 2008.

• Adjusted EBITDA of $11.0 million for the fourth quarter, excluding the impact of third-party payor cost report settlements.

• Operating cash flows from continuing operations of $10.7 million and Free Cash Flows of $3.7 million.

• 4.6% increase in patient visits, including inpatient and outpatient cases, and emergency department visits, compared to the fourth quarter of fiscal 2008.

• EPS from continuing operations of $(3.14) or Adjusted EPS from continuing operations of $0.04, excluding pre-opening expense, stock-based compensation expense and goodwill impairment expense and other items.

Fourth Quarter 2009 Results

     Due to an increase in patient volumes and higher revenue per adjusted admission, MedCath’s net revenue for the fourth quarter of fiscal 2009 increased 1.7% to $148.0 million from $145.5 million in the fourth quarter of fiscal 2008. Loss from operations, which includes a $60.2 million non-cash goodwill impairment expense, was $(62.8) million as compared to income from operations of $4.4 million in the fourth quarter of fiscal 2008. MedCath’s loss from continuing operations was $(61.9) million, or $(3.14) per diluted share, in the fourth quarter of fiscal 2009 compared to income from operations of $0.2 million, or $0.01 per diluted share, in the fourth quarter of fiscal 2008. Adjusted EBITDA decreased to $9.5 million from $11.5 million in the same period of the prior year.

     MedCath’s fourth quarter of fiscal 2009 results include a $60.2 million non-cash impairment charge related to MedCath’s goodwill, which was primarily recognized as a result of MedCath’s going-private transaction in 1998. As required by generally accepted accounting principles, MedCath tested goodwill for impairment by comparing the fair value of the hospital division to its carrying value including goodwill. As a result of MedCath’s sustained decline in market capitalization, MedCath determined that goodwill was impaired as of September 30, 2009. The non-cash impairment expense did not affect MedCath’s operations, cash flow, cash position or access to its bank facility. However, the impairment reduced income from continuing operations by $60.2 million and earnings per share by $(3.05) in the fourth quarter.

     “Despite the net loss incurred this quarter, we have continued to move forward with our transformation strategy by increasing the number of acute care beds in our asset base,” said Ed French, MedCath’s President and Chief Executive Officer. “We most recently opened and received the necessary license for our 70-bed Hualapai Mountain Medical Center, located in Kingman, Arizona, and we look forward to servicing the needs of the Kingman and northern Arizona community. This follows the opening of our new patient tower at Louisiana Medical Center and Heart Hospital in June 2009, increasing that hospital by 79 beds and diversifying the hospital’s service line. With the opening of Hualapai Mountain Medical Center and the expansion of Louisiana Medical Center and Heart Hospital, we now have 825 beds in service, up 22% from a year earlier, allowing us the opportunity to provide meaningful growth in the future.”

     In addition to the non-cash goodwill impairment expense, MedCath’s operating results for the fourth quarter of fiscal 2009 reflect the following items:

• $1.5 million, or $0.04, net per diluted share of the decrease in net revenue and Adjusted EBITDA related to anticipated settlement of third-party payor cost reports at two hospitals, and

• $0.9 million, or $0.03 per diluted share, in amortization expense related to the termination of a management contract at MedCath Partners Division.

     MedCath’s fourth quarter of fiscal 2008 results include the impact of certain items that collectively had a $1.0 million negative impact to net revenue and Adjusted EBITDA and a $0.02 impact to EPS from continuing operations.

     Adjusted EBITDA excludes share-based compensation and pre-opening expenses, but these items are included as a component of (loss) income from continuing operations. Share-based compensation expense totaled $0.3 million in the fourth quarter of fiscal 2009, or $0.01 per diluted share, compared to a benefit of $0.5 million, or $0.01 per diluted share, in the fourth quarter of fiscal 2008. Pre-opening expenses, which are related to the development of Hualapai Mountain Medical Center, totaled $2.2 million in the fourth quarter of fiscal 2009, or $0.05 per diluted share, compared to $0.1 million in the fourth quarter of fiscal 2008.

     During the quarter, MedCath completed the disposition of Sun City Cardiac Centers Associates (“Sun City”) a partnership owned 60% by MedCath Partners, LLC, a wholly owned subsidiary of MedCath, and 40% by certain physician and other investors. As a result of this disposition, the operating results of Sun City are classified as discontinued operations for all reporting periods contained in this press release and accompanying financial statements.

Fourth Quarter Operating Statistics, Cash Flow and Capital Expenditures

     Same facility hospital admissions in the fourth quarter of fiscal 2009 were 6,707, down 3.7% compared with the fourth quarter of fiscal 2008. Adjusted admissions totaled 10,262, up 3.0% compared with the fourth quarter of fiscal 2008. Same facility hospital outpatient cases totaled 16,136 in the fourth quarter of fiscal 2009, up 11.6% in comparison with the fourth quarter of fiscal 2008.

     Total uncompensated care, which includes charity care plus bad debt expense, equaled 12.1% of hospital division net patient revenue before the deduction for charity care in the fourth quarter of fiscal 2009 and 10.5% for the fourth quarter of fiscal 2008. The increase in uncompensated care expense is primarily related to:

1.	An 8.3% increase in self-pay revenue in the quarter, and
2.	Additional reserves of approximately $2.0 million to reflect a reduction in the collection rate and aging of self-pay and the self-pay balance after insurance receivables.

     Net cash provided by operating activities of continuing operations for the fourth quarter of fiscal 2009 increased 8.1% to $10.7 million from $9.9 million in the fourth

quarter of fiscal 2008. Cash paid for capital expenditures during the fourth quarter of fiscal 2009 totaled $21.7 million, which included $7.0 million related to maintenance expenditures and $14.7 million related to MedCath’s construction projects. MedCath’s Free Cash Flows totaled $3.7 million for the fourth quarter of fiscal 2009. As of September 30, 2009, MedCath’s balance sheet included cash and cash equivalents of $32.0 million, total debt and capitalized leases of $127.8 million and total assets of $590.4 million.

Fiscal 2009 Results

     For the fiscal year ended September 30, 2009, MedCath’s net revenue was $602.0 million, an increase of 1.8% when compared to the fiscal year ended September 30, 2008. Adjusted EBITDA was $55.6 million, and loss from continuing operations was ($58.4) million for fiscal 2009 compared to $74.8 million and $12.4 million, respectively for fiscal 2008. EPS was ($2.97) per diluted share for fiscal 2009 compared to $0.61 per diluted share for fiscal 2008.

     MedCath’s fiscal year 2009 results include the impact of certain items that collectively had a $4.5 million negative impact to net revenue, a $12.8 million negative impact to Adjusted EBITDA and a $(3.65) impact to EPS from continuing operations.

     MedCath’s fiscal year 2008 actual results include the impact of certain items that collectively had a $1.4 million negative impact to net revenue, a $7.6 million negative impact to Adjusted EBITDA and a $(0.21) impact to EPS from continuing operations.

     Share-based compensation expense totaled $2.4 million in fiscal 2009, compared to $5.0 million in fiscal 2008. Adjusted EBITDA disclosed above does not include this expense but the expense is included as a component of (loss) income from continuing operations.

Fiscal Year Operating Statistics, Cash Flow and Capital Expenditures

     Same facility hospital admissions for fiscal 2009 were 26,856, down 8.3% compared with the fourth quarter of fiscal 2008. Adjusted admissions totaled 40,964, up 0.2% compared with fiscal 2008. Same facility hospital outpatient cases totaled 61,383 in fiscal 2009, up 11.5% in comparison with fiscal 2008.

     Total uncompensated care, which includes charity care plus bad debt expense, equaled 9.6% of hospital division net patient revenue before the deduction for charity care for fiscal 2009 and 10.1% for fiscal 2008.

     Net cash provided by operating activities of continuing operations for fiscal 2009 increased 48.8% to $64.3 million from $43.2 million in the fourth quarter of fiscal 2008. Cash paid for capital expenditures during fiscal 2009 totaled $93.9 million, which included $24.3 million related to maintenance expenditures and $69.6 million related to MedCath’s construction projects. Free Cash Flows totaled $40.0 million for the 2009 fiscal year and $19.0 million for the 2008 fiscal year.

Use of Non-GAAP Financial Measures

     Included in the press release are certain financial measures that are not generally accepted accounting principles (“non-GAAP”), such as adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”); adjusted diluted earnings per share from continuing operations (“Adjusted EPS”); and Free Cash Flows. Adjusted EBITDA represents MedCath’s (loss) income from continuing operations before interest expense; loss on early extinguishment of debt; income tax (benefit) expense; depreciation; amortization; share-based compensation expense; loss (gain) on disposal of property, equipment and other assets; interest and other income; equity in net earnings of unconsolidated affiliates; minority interest share of earnings of consolidated subsidiaries; impairment of goodwill; and pre-opening expense. Adjusted EPS represents MedCath’s diluted earnings per share from continuing operations for the three months ended September 30, 2009 adjusted for third party payor adjustments, termination of management contract, impairment of goodwill, share-based compensation expense, and pre-opening expense. Free Cash Flows are defined as cash flows from continuing operations less non-expansion capital expenditures. MedCath’s management uses Adjusted EBITDA to measure the performance of MedCath’s various operating entities, to compare actual results to historical and budgeted results, and to make capital allocation decisions. Free Cash Flows are utilized by management to measure the quality of MedCath’s earnings. Management provides Adjusted EBITDA, Adjusted EPS, and Free Cash Flows to investors to assist them in performing their analyses of MedCath’s historical operating results. Further, management believes that many investors in MedCath also invest in, or have knowledge of, other healthcare companies that use Adjusted EBITDA, Adjusted EPS, and/or Free Cash Flows as a financial performance measure.

     Because Adjusted EBITDA, Adjusted EPS, and Free Cash Flows are non-GAAP measures, Adjusted EBITDA, Adjusted EPS, and Free Cash Flows, as defined above, may not be comparable to other similarly titled measures of other companies. MedCath has included a supplemental schedule with the financial statements that accompanies this press release that reconciles historical Adjusted EBITDA to MedCath’s income from continuing operations, Adjusted EPS to diluted EPS from continuing operations, and the computation of Free Cash Flows.

     Management will discuss and answer questions regarding MedCath’s quarterly results on Thursday, November 12, 2009, during a 10 a.m. ET conference call. In the United States, you may participate by dialing (877) 697-5351. International callers should dial (706) 634-0602. The conference ID for both domestic and international callers is 38797546. A live web cast will also be available on MedCath’s web site,

www.medcath.com. This information will be available on the web site on or immediately following the conference call for 30 days. A recorded replay of the call will be available until 11:59 p.m. ET, November 26, 2009. To access the replay, domestic callers should dial (800) 642-1687 and international callers should dial (706) 645-9291. The archived conference ID is 38797546. This press release and the financial information included therewith will be accessible on the web, by going to www.medcath.com, “Investor Relations,” then clicking on “News.”

     MedCath Corporation, headquartered in Charlotte, N.C., is a healthcare provider focused on high acuity services with the diagnosis and treatment of cardiovascular disease being a primary service offering. MedCath owns an interest in and operates ten hospitals with a total of 825 licensed beds, located in Arizona, Arkansas, California, Louisiana, New Mexico, South Dakota, and Texas. In addition, MedCath and its subsidiary MedCath Partners provide services in diagnostic and therapeutic facilities in various states.

# # #

     Parts of this announcement contain forward-looking statements that involve risks and uncertainties. Although management believes that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant economic, regulatory and competitive uncertainties and contingencies that are difficult or impossible to predict accurately and are beyond our control including, but not limited to, enactment of changes in federal law that would limit physician hospital ownership. Actual results could differ materially from those projected in these forward-looking statements. We do not assume any obligation to update these statements in a news release or otherwise should material facts or circumstances change in ways that would affect their accuracy. The preparation of MedCath’s fourth quarter operating results required management to make estimates and assumptions that affect reported amounts of revenues and expenses. There is a reasonable possibility that actual results may vary significantly from those estimates.

     These various risks and uncertainties are described in detail in “Risk Factors” in MedCath’s Annual Report or Form 10-K for the year ended September 30, 2008 filed with the Securities and Exchange Commission on December 15, 2008, as updated in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009. Copies of our filings with the Securities and Exchange Commission, including exhibits, are available at http://www.sec.gov.

EX-99.2

Exhibit 99.2

MEDCATH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

	Three Months Ended September 30,						Twelve Months Ended September 30,
	2009			2008			2009			2008
Net revenue	$	147,966		$	145,511		$	602,042		$	591,611
Operating expenses:
Personnel expense		48,681			49,196			200,927			197,850
Medical supplies expense		43,336			41,835			171,451			161,880
Bad debt expense		14,876			11,828			49,421			43,671
Other operating expenses		31,857			30,637			127,043			118,378
Pre-opening expenses		2,223			143			3,563			786
Depreciation		8,591			7,623			31,755			30,041
Amortization		889			30			1,121			84
Loss (gain) on disposal of property, equipment and other assets		133			(143	)		271			248
Impairment of goodwill		60,174			—			60,174			—
Total operating expenses		210,760			141,149			645,726			552,938
(Loss) income from operations		(62,794	)		4,362			(43,684	)		38,673
Other income (expenses):
Interest expense		(1,452	)		(2,642	)		(6,798	)		(14,300	)
Loss on early extinguishment of debt		—			—			(6,702	)		—
Interest and other income		12			100			237			2,029
Equity in net earnings of unconsolidated affiliates		2,013			1,049			9,057			7,891
Total other income (expense), net		573			(1,493	)		(4,206	)		(4,380	)
(Loss) income from continuing operations before minority interest and income taxes		(62,221	)		2,869			(47,890	)		34,293
Minority interest share of earnings of consolidated subsidiaries		(872	)		(1,181	)		(9,328	)		(12,546	)
(Loss) income from continuing operations before income taxes		(63,093	)		1,688			(57,218	)		21,747
Income tax (benefit) expense		(1,193	)		1,533			1,200			9,374
(Loss) income from continuing operations		(61,900	)		155			(58,418	)		12,373
Income from discontinued operations, net of taxes		3,294			314			8,136			8,617
Net (loss) income	$	(58,606	)	$	469		$	(50,282	)	$	20,990
Earnings (loss) per share, basic
Continuing operations	$	(3.14	)	$	0.01		$	(2.97	)	$	0.62
Discontinued operations		0.17			0.01			0.42			0.43
Earnings (loss) per share, basic	$	(2.97	)	$	0.02		$	(2.55	)	$	1.05
Earnings (loss) per share, diluted
Continuing operations	$	(3.14	)	$	0.01		$	(2.97	)	$	0.61
Discontinued operations		0.17			0.01			0.42			0.43
Earnings (loss) per share, diluted	$	(2.97	)	$	0.02		$	(2.55	)	$	1.04
Weighted average number of shares, basic		19,740			19,590			19,684			19,996
Dilutive effect of stock options and restricted stock		—			65			—			73
Weighted average number of shares, diluted		19,740			19,655			19,684			20,069

MEDCATH CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

	September 30,			September 30,
	2009			2008
	(Unaudited)
Current assets:
Cash and cash equivalents	$	32,014		$	93,836
Restricted cash		—			3,154
Accounts receivable, net		70,410			82,324
Income tax receivable, net		—			3,091
Medical supplies		18,261			15,340
Deferred income tax assets		12,201			9,769
Prepaid expenses and other current assets		13,969			9,756
Current assets of discontinued operations		30,011			22,506
Total current assets		176,866			239,776
Property and equipment, net		382,684			323,094
Investments in affiliates		14,055			15,285
Goodwill		—			60,174
Other intangible assets, net		378			1,133
Other assets		16,465			8,378
Long-term assets of discontinued operations		—			5,616
Total assets	$	590,448		$	653,456
Current liabilities:
Accounts payable	$	40,979		$	41,404
Income tax payable		642			—
Accrued compensation and benefits		18,744			16,744
Other accrued liabilities		24,860			23,322
Current portion of long-term debt and obligations under capital leases		21,243			31,920
Current liabilities of discontinued operations		10,165			11,282
Total current liabilities		116,633			124,672
Long-term debt		102,727			115,628
Obligations under capital leases		3,791			2,087
Deferred income tax liabilities		13,874			12,352
Other long-term obligations		8,893			4,454
Total liabilities		245,918			259,193
Minority interest in equity of consolidated subsidiaries		25,632			24,667
Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; none issued		—			—
Common stock, $0.01 par value, 50,000,000 shares authorized;
21,697,380 issued and 19,743,019 outstanding at September 30, 2009;
21,553,054 issued and 19,598,693 outstanding at September 30, 2008		216			216
Paid-in capital		455,259			455,494
Accumulated deficit		(91,420	)		(41,138	)
Accumulated other comprehensive loss		(360	)		(179	)
Treasury stock, at cost;
1,954,361 shares at September 30, 2009
1,954,361 shares at September 30, 2008		(44,797	)		(44,797	)
Total stockholders’ equity		318,898			369,596
Total liabilities and stockholders’ equity	$	590,448		$	653,456

MEDCATH CORPORATION
SELECTED OPERATING DATA
(In thousands, except per share data and selected operating data)
(Unaudited)

	Three Months Ended September 30,								Twelve Months Ended September 30,
	2009			2008		% Change			2009			2008		% Change
Statement of Operations Data:
Net revenue	$	147,966		$	145,511		1.7	%	$	602,042		$	591,611		1.8	%
Adjusted EBITDA (1)	$	9,538		$	11,530		(17.3	)%	$	55,590		$	74,810		(25.7	)%
(Loss) income from operations	$	(62,794	)	$	4,362		N/M		$	(43,684	)	$	38,673		N/M
(Loss) income from continuing operations	$	(61,900	)	$	155		N/M		$	(58,418	)	$	12,373		N/M
(Loss) earnings per share from continuing operations, basic	$	(3.14	)	$	0.01		N/M		$	(2.97	)	$	0.62		N/M
(Loss) earnings per share from continuing operations, diluted	$	(3.14	)	$	0.01		N/M		$	(2.97	)	$	0.61		N/M

(1) See Supplemental Financial Disclosure—Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures.

N/M — Not meaningful

	Three Months Ended September 30,									Twelve Months Ended September 30,
	2009			2008			% Change			2009			2008			% Change
Selected Operating Data (a):
Number of hospitals		7			7						7			7
Licensed beds (c)		588			509						588			509
Staffed and available beds (d)		502			464						502			464
Admissions (e)		6,707			6,980			(3.9	)%		26,856			29,360			(8.5	)%
Adjusted admissions (f)		10,262			9,976			2.9	%		40,964			40,971			(0.0	)%
Patient days (g)		24,688			25,500			(3.2	)%		103,342			107,353			(3.7	)%
Adjusted patient days (h)		37,720			36,776			2.6	%		157,638			150,559			4.7	%
Average length of stay (days) (i)		3.68			3.65			0.8	%		3.85			3.66			5.2	%
Occupancy (j)		53.5	%		59.7	%					56.4	%		63.4	%
Inpatient catheterization procedures (k)		3,187			3,735			(14.7	)%		13,257			15,979			(17.0	)%
Inpatient surgical procedures (l)		2,050			2,050			0.0	%		8,181			8,383			(2.4	)%
Hospital net revenue	$	141,976		$	139,487			1.8	%	$	578,432		$	565,787			2.2	%
Combined Operating Data (b):
Number of hospitals		9			9						9			9
Licensed beds (c)		755			676						755			676
Staffed and available beds (d)		665			629						665			629
Admissions (e)		9,143			9,997			(8.5	)%		38,055			40,176			(5.3	)%
Adjusted admissions (f)		14,323			14,791			(3.2	)%		59,168			58,669			0.9	%
Patient days (g)		32,572			34,732			(6.2	)%		137,889			141,346			(2.4	)%
Adjusted patient days (h)		50,630			51,281			(1.3	)%		212,826			205,032			3.8	%
Average length of stay (days) (i)		3.56			3.47			2.6	%		3.62			3.52			2.8	%
Occupancy (j)		53.2	%		60.0	%					56.8	%		61.6	%
Inpatient catheterization procedures (k)		3,801			4,524			(16.0	)%		16,230			19,148			(15.2	)%
Inpatient surgical procedures (l)		2,625			2,666			(1.5	)%		10,573			10,954			(3.5	)%
Hospital net revenue	$	180,562		$	179,296			0.7	%	$	739,111		$	725,188			1.9	%

(a)	Selected operating data includes consolidated hospitals in operation as of the end of the period reported in continuing operations but does not include hospitals which are accounted for using the equity method or as discontinued operations in our consolidated financial statements.
(b)	Combined operating data includes hospitals in operation as of the end of the period reported in continuing operations including hospitals which are accounted for using the equity method in our consolidated financial statements.
(c)	Licensed beds represent the number of beds for which the appropriate state agency licenses a facility regardless of whether the beds are actually available for patient use.
(d)	Staffed and available beds represent the number of beds that are readily available for patient use at the end of the period.
(e)	Admissions represent the number of patients admitted for inpatient treatment.
(f)	Adjusted admissions is a general measure of combined inpatient and outpatient volume. We computed adjusted admissions by dividing gross patient revenue by gross inpatient revenue and then multiplying the quotient by admissions.
(g)	Patient days represent the total number of days of care provided to inpatients.
(h)	Adjusted patient days is a general measure of combined inpatient and outpatient volume. We computed adjusted patient days by dividing gross patient revenue by gross inpatient revenue and then multiplying the quotient by patient days.
(i)	Average length of stay (days) represents the average number of days inpatients stay in our hospitals.
(j)	We computed occupancy by dividing patient days by the number of days in the period and then dividing the quotient by the number of staffed and available beds.
(k)	Inpatients with a catheterization procedure represent the number of inpatients with a procedure performed in one of the hospitals’ catheterization labs during the period.
(l)	Inpatient surgical procedures represent the number of surgical procedures performed on inpatients during the period.

MEDCATH CORPORATION
SUPPLEMENTAL FINANCIAL DISCLOSURE — RECONCILIATION OF GAAP FINANCIAL MEASURES
TO NON-GAAP FINANCIAL MEASURES
(Unaudited)

The following table reconciles MedCath’s income from continuing operations as derived directly from MedCath’s consolidated financial statements to Adjusted EBITDA for the three and twelve months ended September 30, 2009 and 2008.

	Three Months Ended September 30,						Twelve Months Ended September 30,
	2009			2008			2009			2008
	(in thousands)						(in thousands)
(Loss) income from continuing operations	$	(61,900	)	$	155		$	(58,418	)	$	12,373
Add:
Income tax (benefit) expense		(1,193	)		1,533			1,200			9,374
Minority interest share of earnings of consolidated subsidiaries		872			1,181			9,328			12,546
Equity in net earnings of unconsolidated affiliates		(2,013	)		(1,049	)		(9,057	)		(7,891	)
Interest and other income		(12	)		(100	)		(237	)		(2,029	)
Loss on early extinguishment of debt		—			—			6,702			—
Interest expense		1,452			2,642			6,798			14,300
Impairment of goodwill		60,174			—			60,174			—
Loss (gain) on disposal of property, equipment and other assets		133			(143	)		271			248
Amortization		889			30			1,121			84
Depreciation		8,591			7,623			31,755			30,041
Pre-opening expenses		2,223			143			3,563			786
Share-based compensation expense		322			(485	)		2,390			4,978
Adjusted EBITDA	$	9,538		$	11,530		$	55,590		$	74,810

The following table reconciles MedCath’s diluted earnings per share from continuing operations as derived directly from MedCath’s consolidated financial statements to Adjusted EPS from continuing operations for the three months ended September 30, 2009 and 2008.

	Three Months Ended September 30,						Twelve Months Ended September 30,
	2009			2008			2009			2008
Diluted earnings per share		($3.14	)	$	0.01			($2.97	)	$	0.61
Add:
Third party payor adjustments		0.04			0.02			0.12			0.03
Termination of management contract		0.03			—			0.03			—
Impairment of goodwill		3.05			—			3.05			—
Operating expense as previously disclosed		—			—			0.28			0.02
Share-based compensation expense		0.01			(0.01	)		0.08			0.14
Pre-opening expense		0.05			—			0.09			0.02
Adjusted diluted earnings per share	$	0.04		$	0.02		$	0.68		$	0.82

The following table reflects the calculation of adjusted free cash flow and adjusted free cash flow per diluted share. Free Cash Flows is commonly defined as cash flows from continuing operations less capital expenditures.

	Three Months Ended September 30,				Twelve Months Ended September 30,
	2009		2008		2009		2008
	(in thousands)					(in thousands)
Cash flow from continuing operations	$	10,722	$	9,894	$	64,333	$	43,190
Less: Non-expansion capital expenditures		6,984		8,022		24,332		24,175
Free cash flows	$	3,738	$	1,872	$	40,001	$	19,015