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 9, 2006

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) 708-6600
(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 240.13d-4(c))

Item 2.02. Results of Operations and Financial Condition

The information contained herein is being furnished pursuant to Item 2.02 of Form 8-K, “Results of Operations and Financial Condition.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On February 9, 2006, MedCath Corporation (“MedCath” or the “Company”) issued a press release announcing the Company’s results of operations for the fiscal quarter ended December 31, 2005. A copy of the press release and financial update are furnished as Exhibits 99.1 and 99.2.

Included in the press release and the supplemental financial information issued by the Company and furnished herewith as Exhibits 99.1 and 99.2, are certain non-GAAP financial measures, including Adjusted EBITDA. Adjusted EBITDA represents MedCath’s income (loss) from continuing operations before interest expense; taxes; depreciation; amortization; gain or loss on disposal of property, equipment and other assets; interest and other income, net; equity in net earnings of unconsolidated affiliates; minority interest; and share-based compensation expense. MedCath’s management uses Adjusted EBITDA to measure the performance of the company’s various operating entities, to compare actual results to historical and budgeted results, and to make capital allocation decisions. Management provides Adjusted EBITDA to investors to assist them in performing their analysis 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 as a financial performance measure. Because Adjusted EBITDA is a non-GAAP measure, Adjusted EBITDA, 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 accompany this press release that reconciles historical Adjusted EBITDA to MedCath’s income (loss) from continuing operations.

Item 9.01. Financial Statements and Exhibits

Exhibit 99.1      Press Release dated February 9, 2006
Exhibit 99.2      Financial Update dated February 9, 2006

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 9, 2006	By:	/s/James E. Harris
		James E. Harris Executive Vice President and Chief Financial Officer

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EX-99.1

Exhibit 99.1

MEDCATH CONTACTS:
John T. Casey	James E Harris
Chairman/Chief Executive Officer	Chief Financial Officer
(704) 708-6600	(704) 708-6600

MEDCATH CORPORATION REPORTS FIRST QUARTER EARNINGS

     CHARLOTTE, N.C., Feb 9, 2006 — MedCath Corporation (Nasdaq: MDTH), a healthcare provider focused on the diagnosis and treatment of cardiovascular disease, today announced its operating results for its first fiscal quarter, which ended December 31, 2005.

     First quarter highlights:

• Net revenue increased 0.2% to $185.1 million

• Adjusted EBITDA of $17.6 million, which includes $2.6 million of unusual, negative items for the quarter

• Adjusted admissions increased 3.5% despite an unexpected service interruption at one hospital during the quarter

First Quarter 2006 Results

     MedCath’s net revenue increased 0.2% to $185.1 million in the first quarter of fiscal 2006 from $184.8 million in the first quarter of fiscal 2005. Income from operations was $7.2 million in the first quarter of fiscal 2006, compared to $15.1 million in the first quarter of fiscal 2005. Adjusted EBITDA was $17.6 million compared to $25.2 million and the net loss from continuing operations was $(1.3) million, or $(0.07) per diluted share, in the first quarter of fiscal 2006, compared to net income from continuing operations of $2.6 million, or $0.14 per diluted share, in the first quarter of fiscal 2005.

     MedCath’s first quarter of fiscal 2006 financial results contain the following unusual items. Per share amounts reflect minority interest, where applicable, and income taxes:

• A $1.1 million, or net impact of $0.04 per share, increase in other operating expenses related to executive severance.

• An approximate $600,000, or $0.01 per share, decrease in Adjusted EBITDA related to disruption of patient services at our Arizona Heart Hospital. In December, patient services were disrupted due to water damage after the hospital’s sprinkler system discharged to extinguish a small fire.

• A combined $900,000, or $0.03 per share, decrease in Adjusted EBITDA due to a reduction in net revenue from a contractual adjustment related to an estimated settlement of a state cost report at one of our hospitals, and an increase in other operating expense related to the renovation and repair costs at one of our newer hospitals necessary to correct a construction defect.

     In addition to these events that impacted our Adjusted EBITDA for the first quarter of fiscal 2006, we also had the following items unfavorably impact our results:

• A $417,000, or $0.01 per share, increase in personnel expense related to the expensing of stock options as required under FASB Statement No. 123R that MedCath adopted effective October 1, 2005.

• A $716,000, or $0.02 per share, increase in interest expense related to the write-off of deferred loan fees associated with the prepayment of $58 million of bank debt.

     “As we have discussed in the past, we have several hospitals that are currently facing operating challenges that are specific to their markets,” said John T. Casey, MedCath’s chairman and chief executive officer. “Over the past several months, the executive management team, led by Ed French, our interim COO, has been working closely to put in place strategic initiatives to improve the operating performance of these hospitals. We believe we are seeing these efforts pay off as operations are improving. We are optimistic that these efforts will be continue to be successful.”

Operating Statistics and Cash Flow

     Hospital admissions for the first quarter of fiscal 2006 increased 3.7% and adjusted admissions rose 3.5% from the first quarter of the previous fiscal year. Hospital division net revenue increased 0.2%. Inpatient catheterization procedures decreased (2.0)% and inpatient surgical procedures increased 8.9%.

     Cash flow from continuing operations totaled $12.1 million in the first quarter of fiscal 2006, in comparison to $17.1 million in the first quarter of fiscal 2005.

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2006 Outlook

     For its fiscal year 2006, which ends September 30, 2006, MedCath estimates its primary financial measures to be in the following range:

Net revenue	$780.0 million to $800.0 million
Adjusted EBITDA	$93.0 million to $97.0 million
Net income	$7.5 million to $8.5 million
Capital expenditures, recurring operations	$35.0 million to $40.0 million

     The above guidance excludes the financial impact of the unusual items incurred during the first quarter of fiscal 2006, which are outlined as part of this earnings release and does not include any estimate of non-cash personnel expenses related to the expensing of stock options in future periods.

Use of Non-GAAP Financial Measures

     This release contains measures of MedCath’s historical financial performance that are not calculated and presented in conformity with generally accepted accounting principles (“GAAP”), including Adjusted EBITDA. Adjusted EBITDA represents MedCath’s income from continuing operations before interest expense; interest and other income, net; taxes; depreciation; amortization; non-cash personnel expense related to the expensing of stock options; gain or loss on disposal of property, equipment and other assets; equity in net earnings of unconsolidated affiliates; and minority interest. MedCath’s management uses Adjusted EBITDA to measure the performance of the company’s various operating entities, to compare actual results to historical and budgeted results, and to make capital allocation decisions. Management provides Adjusted EBITDA to investors to assist them in performing their analysis 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 as a financial performance measure. Because Adjusted EBITDA is a non-GAAP measure, Adjusted EBITDA, 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 accompany this press release that reconciles historical Adjusted EBITDA to MedCath’s income (loss) from continuing operations.

     Management will discuss and answer questions regarding MedCath’s quarterly results today during a 2 p.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 “MedCath.” A live webcast will also be available on the company’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, February 16, 2006. To access the replay, domestic callers should dial (800) 642-1687 and international callers should dial (706) 645-9291. The archived conference ID is 4771398. 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.”

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MedCath Corporation, headquartered in Charlotte, N.C., develops, owns and operates hospitals in partnership with physicians, most of whom are cardiologists and cardiovascular surgeons. While each of its hospitals is licensed as a general acute care hospital, MedCath focuses on serving the unique needs of patients suffering from cardiovascular disease. Together with its physician partners who own equity interests in them, MedCath owns and operates 12 hospitals with a total of 727 licensed beds, located in Arizona, Arkansas, California, Louisiana, New Mexico, Ohio, South Dakota and Texas. In addition to its hospitals, MedCath provides cardiovascular care services in diagnostic and therapeutic facilities located in various states and through mobile cardiac catheterization laboratories

# # #

     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. 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.

     These various risks and uncertainties are described in detail in Exhibit 99.1 to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 14, 2005. A copy of this report, including exhibits, is available on the Internet site of the Commission at http://www.sec.gov. These risks and uncertainties include, among others, the impact of legislation proposed to extend provisions of the Medicare Prescription Drug Improvement Act of 2003 and other healthcare reform initiatives, possible reductions or changes in reimbursements from government or third party payors that would decrease our revenue, a negative finding by a regulatory organization with oversight of one of our hospitals, and changes in medical or other technology and reimbursement rates for new technologies.

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EX-99.2

Exhibit 99.2

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

	Three Months Ended December 31,
	2005			2004
Net revenue	$	185,121		$	184,760
Operating expenses:
Personnel expense		60,475			57,213
Medical supplies expense		51,959			52,486
Bad debt expense		14,438			11,484
Other operating expenses		41,053			38,400
Depreciation		9,641			9,736
Amortization		252			290
Loss on disposal of property, equipment and other assets		119			3
Total operating expenses		177,937			169,612
Income from operations		7,184			15,148
Other income (expenses):
Interest expense		(9,068	)		(7,998	)
Interest and other income, net		1,417			395
Equity in net earnings of unconsolidated affiliates		1,065			769
Total other expenses, net		(6,586	)		(6,834	)
Income from continuing operations before minority interest, income taxes and discontinued operations		598			8,314
Minority interest share of earnings of consolidated subsidiaries		(2,818	)		(3,999	)
Income (loss) from continuing operations before income taxes and discontinued operations		(2,220	)		4,315
Income tax expense (benefit)		(887	)		1,723
Income (loss) from continuing operations		(1,333	)		2,592
Income from discontinued operations, net of taxes		—			1,948
Net income (loss)	$	(1,333	)	$	4,540
Earnings (loss) per share, basic
Continuing operations	$	(0.07	)	$	0.14
Discontinued operations		—			0.11
Earnings (loss) per share, basic	$	(0.07	)	$	0.25
Earnings (loss) per share, diluted				$
Continuing operations	$	(0.07	)		0.14
Discontinued operations		—			0.10
Earnings (loss) per share, diluted	$	(0.07	)	$	0.24
Weighted average number of shares, basic		18,501			18,045
Dilutive effect of stock options		—			932
Weighted average number of shares, diluted		18,501			18,977

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

	Three Months Ended December 31,
	2005			2004		% Change
Statement of Operations Data:
Net revenue	$	185,121		$	184,760		0.2	%
Adjusted EBITDA (1)	$	17,613		$	25,177		(30.0	)%
Income from operations	$	7,184		$	15,148		(52.6	)%
Income (loss) from continuing operations	$	(1,333	)	$	2,592		(151.4	)%
Earnings (loss) per share from continuing operations, basic	$	(0.07	)	$	0.14		(150.0	)%
Earnings (loss) per share from continuing operations, diluted	$	(0.07	)	$	0.14		(150.0	)%

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

	Three Months Ended December 31,
	2005			2004			% Change
Selected Operating Data (a):
Number of hospitals		11			11
Licensed beds ( b )		672			672
Staffed and available beds ( c )		667			631
Admissions ( d )		11,285			10,883			3.7	%
Adjusted admissions ( e )		14,785			14,282			3.5	%
Patient days ( f )		37,978			37,158			2.2	%
Adjusted patient days ( g )		49,590			48,393			2.5	%
Average length of stay (days) ( h )		3.37			3.41			(1.2	)%
Occupancy ( i )		61.9	%		64.0	%
Inpatient catheterization procedures		5,692			5,808			(2.0	)%
Inpatient surgical procedures		3,023			2,775			8.9	%
Hospital division revenue	$	171,604		$	171,229			0.2	%

(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)	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.
(c)	Staffed and available beds represent the number of beds that are readily available for patient use at the end of the period.
(d)	Admissions represent the number of patients admitted for inpatient treatment.
(e)	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.
(f)	Patient days represent the total number of days of care provided to inpatients.
(g)	Adjusted patient days is a general measure of combined inpatient and outpatient days. We computed adjusted patient days by dividing gross patient revenue by gross inpatient revenue and then multiplying the quotient by patient days.
(h)	Average length of stay (days) represents the average number of days inpatients stay in our hospitals.
(i)	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.

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

The following table reconciles Adjusted EBITDA with MedCath’s income (loss) from continuing operations as derived directly from MedCath’s consolidated financial statements for the three months ended December 31, 2005 and 2004.

	Three Months Ended December 31,
	2005			2004
	(in thousands)
Income (loss) from continuing operations	$	(1,333	)	$	2,592
Add:
Income tax expense (benefit)		(887	)		1,723
Minority interest share of earnings of consolidated subsidiaries		2,818			3,999
Equity in net earnings of unconsolidated affiliates		(1,065	)		(769	)
Interest and other income, net		(1,417	)		(395	)
Interest expense		9,068			7,998
Loss on disposal of property, equipment and other assets		119			3
Amortization		252			290
Depreciation		9,641			9,736
Share-based compensation expense		417			—
Adjusted EBITDA	$	17,613		$	25,177

     The following table reconciles estimated Adjusted EBITDA with MedCath’s estimated net income for the guidance for the fiscal year ending September 30, 2006.

	Fiscal 2006 Guidance Range
	(in millions)
Net income	$	7.5	$	8.5
Add:
Income tax expense (benefit)		5.0		5.6
Minority interest share of earnings of consolidated subsidiaries		13.0		15.4
Total other expenses, net		26.0		26.0
Amortization		1.0		1.0
Depreciation		40.5		40.5
Adjusted EBITDA	$	93.0	$	97.0