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): February 3, 2010

MEDCATH CORPORATION

(Exact name of registrant as specified in its charter)

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

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 February 3, 2010, MedCath Corporation (“MedCath”) issued a press release announcing its results of operations for the fiscal quarter ended December 31, 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 (loss) earnings per share from continuing operations (“Adjusted EPS”); and free cash flows. Adjusted EBITDA represents MedCath’s loss from continuing operations, net of taxes before interest expense; loss on early extinguishment of debt; income tax benefit; depreciation; amortization; share-based compensation expense; loss on disposal of property, equipment and other assets; interest and other income; equity in net earnings of unconsolidated affiliates; net income attributable to noncontrolling interest; and pre-opening expense. Adjusted EPS represents MedCath’s diluted loss per share from continuing operations for the three months ended December 31, 2009 adjusted for 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 February 3, 2010

Exhibit 99.2 Financial Update dated February 3, 2010

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: February 4, 2010	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 February 3, 2010
Exhibit 99.2	Financial Update dated February 3, 2010

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 FIRST QUARTER EARNINGS

          CHARLOTTE, N.C., Feb 3, 2010 — MedCath Corporation (Nasdaq: MDTH), a healthcare provider focused on high acuity healthcare services, predominately the diagnosis and treatment of cardiovascular disease, today announced its unaudited operating results for its first quarter of fiscal 2010, which ended December 31, 2009.

First Quarter 2010 Highlights

• Same facility hospital admissions and outpatient cases were up 2.0% and 5.8%, respectively, for the first quarter of fiscal 2010 compared to the same period of the prior year.

• Same facility hospital non-cardiovascular admissions increased 17% for the first quarter of 2010 compared to the same period of the prior year.

• Same facility hospital emergency department visits increased 14.7% in the first quarter of fiscal 2010 compared to the same period of the prior year.

          References in this release to same facility results exclude the impact of Hualapai Mountain Medical Center (“HMMC”), our newest hospital located in Kingman, Arizona, for the first quarter of fiscal 2010, its first quarter of operations.

First Quarter 2010 Results

          MedCath’s net revenue for the first quarter of fiscal 2010 decreased 2.0% to $147.3 million from $150.2 million in the first quarter of fiscal 2009. Contributing to the revenue decline was lower cases and net revenue related to cardiovascular services, primarily heart surgeries, offset by revenue from MedCath’s newest hospital and revenue growth in non-cardiovascular cases at several recently expanded hospitals. During the quarter, non-cardiovascular inpatient net revenue represented 25% of net inpatient revenue, compared to 17% in the first quarter of 2009. Loss from continuing operations, net of taxes was $(2.5) million, or $(0.13) per diluted share compared to $(1.9) million, or $(0.10) per diluted share, for the same period of the prior year. Adjusted EBITDA decreased to $7.8 million for the first quarter of fiscal 2010 from $16.1 million in the same period of the prior year.

Same Facility First Quarter 2010 Results

          Same facility net revenue decreased 5.0% from $150.2 million to $142.7 million for the first quarter of fiscal 2010 compared to the same period of the prior year. Same facility loss from continuing operations, net of taxes was $(0.2) million, or $(0.01) per diluted share, compared to a loss from continuing operations, net of taxes of $(1.9) million in the first quarter of fiscal 2009, or $(0.10) per diluted share. Same facility Adjusted EBITDA was $10.1 million for the first quarter of fiscal 2010.

          “The significant increase we experienced this quarter in our non-cardiovascular related net patient revenue is indicative that expansion at several of our hospitals is providing benefit to the communities we serve as well as to our Company,” said Ed French, MedCath’s President and Chief Executive Officer. “Although we are disappointed with our core cardiovascular net patient revenue this quarter, we are encouraged by our overall increase in admissions and outpatient cases.”

          Adjusted EBITDA excludes share-based compensation and pre-opening expenses, but these items are included as a component of loss from continuing operations. Share-based compensation expense totaled $0.6 million in the first quarter of fiscal 2010, or $0.02 per diluted share, compared to $1.0 million, or $0.03 per diluted share, in the first quarter of fiscal 2009. Pre-opening expenses related to the development of HMMC totaled $0.9 million, or $0.02 per diluted share, in the first quarter of fiscal 2010, compared to $0.2 million, or $0.01 per diluted share, in the first quarter of fiscal 2009.

          HMMC contributed $4.6 million to net revenue, $(3.2) million to EBITDA, which includes $0.9 million of pre-opening expenses, and $(2.3) million to loss from continuing operations, net of taxes, or $(0.12) per diluted share.

First Quarter Operating Statistics, Cash Flow and Capital Expenditures

          Same facility hospital admissions in the first quarter of fiscal 2010 were 6,938, up 2.0% compared to the first quarter of fiscal 2009. Adjusted admissions totaled 10,043, up 1.7% compared with the first quarter of fiscal 2009. Same facility hospital outpatient cases totaled 16,671 in the first quarter of fiscal 2010, up 5.8% compared to the first quarter of fiscal 2009.

          Total same facility uncompensated care, which includes charity care plus bad debt expense, equaled 9.6% of same facility hospital division net patient revenue before the deduction for charity care in the first quarter of fiscal 2010 versus 8.5% for the first quarter of fiscal 2009.

          Net cash provided by operating activities of continuing operations for the first quarter of fiscal 2010 was $3.9 million, down from $18.9 million in the first quarter of fiscal 2009. Cash provided by operating activities for the first quarter of fiscal 2010 includes $7.3 million cash used by HMMC, MedCath’s newest hospital. Cash paid for capital expenditures during the first quarter of fiscal 2010 totaled $9.3 million, which included $4.5 million related to maintenance expenditures and $4.8 million related to MedCath’s construction projects. As of the first quarter of fiscal 2010, MedCath’s balance sheet included cash and cash equivalents of $22.8 million, total debt and capitalized leases of $122.2 million and total assets of $558.1 million.

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”); and adjusted diluted (loss) earnings per share from continuing operations (“Adjusted EPS”). Adjusted EBITDA represents MedCath’s loss from continuing operations, net of taxes before interest expense; loss on early extinguishment of debt; income tax benefit; depreciation; amortization; share-based compensation expense; loss on disposal of property, equipment and other assets; interest and other income; equity in net earnings of unconsolidated affiliates; net income attributable to noncontrolling interest; and pre-opening expense. Adjusted EPS represents MedCath’s diluted loss per share from continuing operations for the three months ended December 31, 2009 adjusted for share-based compensation expense and pre-opening expense. 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. Further, management believes that many investors in MedCath also invest in, or have knowledge of, other healthcare companies that use Adjusted EBITDA and Adjusted EPS as a financial performance measure.

          Because Adjusted EBITDA and Adjusted EPS are non-GAAP measures, Adjusted EBITDA and Adjusted EPS, 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 and Adjusted EPS to diluted EPS from continuing operations.

          Same facility non-GAAP measures are also computed as defined above with the exception that they exclude the impact of Hualapai Mountain Medical Center.

          Management will discuss and answer questions regarding MedCath’s quarterly results on Thursday, February 4, 2010, during a 10 a.m. EST 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 52092862. 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. EST, February 18, 2010. To access the replay, domestic callers should dial (800) 642-1687 and international callers should dial (706) 645-9291. The archived conference ID is 52092862. 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 first 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, 2009 filed with the Securities and Exchange Commission on December 15, 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 December 31,
	2009			2008
Net revenue	$	147,260		$	150,245
Operating expenses:
Personnel expense		51,821			50,169
Medical supplies expense		41,859			41,642
Bad debt expense		11,925			11,429
Other operating expenses		34,452			31,902
Pre-opening expenses		866			207
Depreciation		9,035			7,801
Amortization		8			30
Loss on disposal of property, equipment and other assets		137			73
Total operating expenses		150,103			143,253
(Loss) income from operations		(2,843	)		6,992
Other income (expenses):
Interest expense		(1,813	)		(2,857	)
Loss on early extinguishment of debt		—			(6,961	)
Interest and other income		74			101
Equity in net earnings of unconsolidated affiliates		1,516			2,065
Total other income (expense), net		(223	)		(7,652	)
Loss from continuing operations before income taxes		(3,066	)		(660	)
Income tax benefit		(1,539	)		(1,108	)
(Loss) income from continuing operations		(1,527	)		448
(Loss) income from discontinued operations, net of taxes		(288	)		4,921
Net (loss) income		(1,815	)		5,369
Less: Net income attributable to noncontrolling interest		(841	)		(3,123	)
Net (loss) income attributable to MedCath Corporation	$	(2,656	)	$	2,246
Amounts attributable to MedCath Corporation common stockholders:
Loss from continuing operations, net of taxes	$	(2,511	)	$	(1,915	)
(Loss) income from discontinued operations, net of taxes		(145	)		4,161
Net (loss) income	$	(2,656	)	$	2,246
(Loss) earnings per share, basic
Income from continuing operations attributable to MedCath Corporation common stockholders	$	(0.13	)	$	(0.10	)
Income (loss) from discontinued operations attributable to MedCath Corporation common stockholders		—			0.21
(Loss) earnings per share, basic	$	(0.13	)	$	0.11
(Loss) earnings per share, diluted
Income from continuing operations attributable to MedCath Corporation common stockholders	$	(0.13	)	$	(0.10	)
Income (loss) from discontinued operations attributable to MedCath Corporation common stockholders		—			0.21
(Loss) earnings per share, diluted	$	(0.13	)	$	0.11
Weighted average number of shares, basic		19,743			19,599
Dilutive effect of stock options and restricted stock		—			—
Weighted average number of shares, diluted		19,743			19,599

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

	December 31,			September 30,
	2009			2009
	(Unaudited)
Current assets:
Cash and cash equivalents	$	22,760		$	32,014
Accounts receivable, net		72,596			70,410
Income tax receivable		1,037			—
Medical supplies		18,929			18,261
Deferred income tax assets		12,069			12,201
Prepaid expenses and other current assets		15,313			13,969
Current assets of discontinued operations		11,942			30,011
Total current assets		154,646			176,866
Property and equipment, net		383,850			385,926
Investments in affiliates		7,931			14,055
Other intangible assets, net		327			378
Other assets		11,331			13,223
Total assets	$	558,085		$	590,448
Current liabilities:
Accounts payable	$	39,562		$	40,979
Income tax payable		—			642
Accrued compensation and benefits		16,136			18,744
Other accrued liabilities		20,975			24,860
Current portion of long-term debt and obligations under capital leases		18,279			21,243
Current liabilities of discontinued operations		9,907			10,165
Total current liabilities		104,859			116,633
Long-term debt		99,058			101,871
Obligations under capital leases		4,861			4,647
Deferred income tax liabilities		14,069			13,874
Other long-term obligations		7,436			8,893
Total liabilities		230,283			245,918
Noncontrolling interests — redeemable		4,297			7,448
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; 21,595,880 issued and 20,482,448 outstanding at December 31, 2009; 21,595,880 issued and 20,150,556 outstanding at September 30, 2009		216			216
Paid-in capital		455,273			455,259
Accumulated deficit		(94,076	)		(91,420	)
Accumulated other comprehensive loss		(304	)		(360	)
Treasury stock, at cost;
1,113,432 shares at December 31, 2009
1,445,324 shares at September 30, 2009		(44,797	)		(44,797	)
Total MedCath Corporation stockholders’ equity		316,312			318,898
Noncontrolling interest		7,193			18,184
Total equity		323,505			337,082
Total liabilities and equity	$	558,085		$	590,448

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

	Three Months Ended December 31,
	2009			2008			%Change
Statement of Operations Data:
Net revenue	$	147,260		$	150,245			(2.0	)%
Adjusted EBITDA (1)	$	7,811		$	16,101			(51.5	)%
(Loss) income from operations	$	(2,843	)	$	6,992			(140.7	)%
Loss from continuing operations, net of taxes	$	(2,511	)	$	(1,915	)		(31.1	)%
Loss per share from continuing operations, basic	$	(0.13	)	$	(0.10	)		(30.0	)%
Loss per share from continuing operations, diluted	$	(0.13	)	$	(0.10	)		(30.0	)%

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

	Three Months Ended December 31,
	2009			2008			%Change			2009 Same Facility			%Change
Selected Operating Data (a):
Number of hospitals		8			7						7
Licensed beds (c)		658			509						588
Staffed and available beds (d)		572			463						502
Admissions (e)		7,163			6,801			5.3	%		6,938			2.0	%
Adjusted admissions (f)		10,497			9,874			6.3	%		10,043			1.7	%
Patient days (g)		26,352			25,181			4.7	%		25,423			1.0	%
Adjusted patient days (h)		39,336			37,044			6.2	%		37,526			1.3	%
Average length of stay (days) (i)		3.68			3.70			(0.5	)%		3.66			(1.1	)%
Occupancy (j)		50.1	%		59.1	%					55.0	%
Inpatient catheterization procedures (k)		3,307			3,552			(6.9	)%		3,265			(8.1	)%
Inpatient surgical procedures (l)		1,949			2,001			(2.6	)%		1,909			(4.6	)%
Hospital net revenue	$	142,346		$	144,225			(1.3	)%	$	137,753			(4.5	)%
Combined Operating Data (b):
Number of hospitals		10			9						9
Licensed beds (c)		825			676						755
Staffed and available beds (d)		735			628						665
Admissions (e)		9,645			9,807			(1.7	)%		9,420			(3.9	)%
Adjusted admissions (f)		14,626			14,622			0.0	%		14,172			(3.1	)%
Patient days (g)		34,167			34,189			(0.1	)%		33,238			(2.8	)%
Adjusted patient days (h)		52,205			51,162			2.0	%		50,395			(1.5	)%
Average length of stay (days) (i)		3.54			3.49			1.4	%		3.53			1.1	%
Occupancy (j)		50.5	%		59.2	%					54.3	%
Inpatient catheterization procedures (k)		3,997			4,385			(8.8	)%		3,955			(9.8	)%
Inpatient surgical procedures (l)		2,490			2,622			(5.0	)%		2,450			(6.6	)%
Hospital net revenue	$	182,340		$	185,023			(1.5	)%	$	177,747			(3.9	)%

(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. Same facility for the three months ended December 31, 2009 exclude the results of Hualapai Mountain Medical Center.
(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 the loss from continuing operations, net of taxes attributable to MedCath Corporation’s common stockholders as derived directly from MedCath Corporation’s consolidated financial statements to Adjusted EBITDA for the three months ended December 31, 2009 and 2008.

	Three Months Ended December 31,
	2009			2008
	(in thousands)
Loss from continuing operations, net of taxes	$	(2,511	)	$	(1,915	)
Add:
Income tax benefit		(1,539	)		(1,108	)
Net income attributable to noncontrolling interest		984			2,363
Equity in net earnings of unconsolidated affiliates		(1,516	)		(2,065	)
Interest and other income		(74	)		(101	)
Loss on early extinguishment of debt		—			6,961
Interest expense		1,813			2,857
Loss on disposal of property, equipment and other assets		137			73
Amortization		8			30
Depreciation		9,035			7,801
Pre-opening expenses		866			207
Share-based compensation expense		608			998
Adjusted EBITDA	$	7,811		$	16,101

The following table reconciles MedCath Corporation’s diluted loss per share from continuing operations, net of taxes attributable to MedCath Corporations common stockholders as derived directly from MedCath’s consolidated financial statements to Adjusted diluted (loss) earnings per share from continuing operations for the three months ended December 31, 2009 and 2008.

	Three Months Ended December 31,
	2009			2008
Diluted loss per share	$	(0.13	)	$	(0.10	)
Add:
Loss on debt refinancing		—			0.22
Share-based compensation expense		0.02			0.03
Pre-opening expense		0.02			0.01
Adjusted diluted (loss) earnings per share		($0.09	)	$	0.16

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 December 31,
	2009			2008
	(in thousands)
Cash flow from continuing operations	$	3,878		$	18,854
Less: Non-expansion capital expenditures		4,530			6,320
Free cash flow	$	(652	)	$	12,534