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): May 4, 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 May 4, 2006, MedCath Corporation (“MedCath” or the “Company”) issued a press release announcing the Company’s results of operations for the fiscal quarter ended March 31, 2006. 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; income tax expense (benefit); depreciation; amortization; non-cash share-based compensation expense; gain or loss on disposal of property, equipment and other assets; interest and other income, net; 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.

Item 9.01. Financial Statements and Exhibits

Exhibit 99.1      Press Release dated May 4, 2006
Exhibit 99.2      Financial Update dated May 4, 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: May 4, 2006	By:	/s/James E. Harris
		James E. Harris Executive Vice President and Chief Financial Officer

Page 2

EX-99.1

Exhibit 99.1

MEDCATH CONTACTS:
Ed French	James E. Harris
President/Chief Executive Officer	Chief Financial Officer
(704) 708-6600	(704) 708-6600

MEDCATH CORPORATION REPORTS SECOND QUARTER EARNINGS

     CHARLOTTE, N.C., May 4, 2006 — MedCath Corporation (Nasdaq: MDTH), a healthcare provider focused on the diagnosis and treatment of cardiovascular disease, today announced its operating results for its second fiscal quarter, which ended March 31, 2006.

     Second quarter highlights:

• Net revenue increased 8.6% to $208.5 million

• Adjusted EBITDA of $27.8 million

• Adjusted admissions increased 4.6%, driven by market share gains in the Company’s newest markets

Second Quarter 2006 Results

     MedCath’s net revenue increased 8.6% to $208.5 million in the second quarter of fiscal 2006 from $192.0 million in the second quarter of fiscal 2005. Income from operations was $7.7 million in the second quarter of fiscal 2006, compared to income from operations of $17.8 million in the second quarter of fiscal 2005. Adjusted EBITDA increased 0.6% to $27.8 million from $27.6 million and the loss from continuing operations was $1.9 million, or $0.10 per diluted share, in the second quarter of fiscal 2006, compared to income from continuing operations of $4.3 million, or $0.22 per diluted share, in the second quarter of fiscal 2005. Of note, MedCath’s results from continuing operations for the second quarter of fiscal 2006 were negatively impacted by $0.33 per share due to $6.1 million, net of taxes, of non-cash share-based compensation included in personnel expense for stock options issued during the quarter as required under FASB Statement No. 123R that MedCath adopted effective October 1, 2005.

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

• A $1.0 million, or net impact of $0.03 per share, reduction in revenue due to prior period contractual adjustments related to estimated Medicare and Medicaid cost report settlements, and

• A $635,000, or net impact of $0.02 per share, increase in interest expense related to the expensing of deferred loan acquisition costs associated with the prepayment of $11.9 million of senior notes.

     “We are pleased with our volumes for the quarter, and the ability to translate this incremental growth to improved earnings and margins,” said Ed French, MedCath’s president and chief executive officer. “We began to see some operational momentum at several of our challenged markets this quarter and we are working hard to maintain this momentum for the remainder of this fiscal year. I am also pleased to have Phil Mazzuca on our team as our Chief Operating Officer to assist in making this happen.”

Operating Statistics and Cash Flow

     Hospital admissions for the second quarter of fiscal 2006 increased 7.2% and adjusted admissions rose 4.6% from the second quarter of the previous fiscal year. Net revenue for our majority-owned hospitals increased 8.6%. Net cash provided by operating activities of continuing operations for the second quarter of fiscal 2006 was $14.1 million, down from $18.0 million for the second quarter of fiscal 2005.

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 (loss) from continuing operations before interest expense; interest and other income, net; income tax expense (benefit); depreciation; amortization; non-cash compensation expense related to share-based compensation; 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 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 “MedCath.” A live web cast 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, May 12, 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 7521424. 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 the diagnosis and treatment of cardiovascular disease. MedCath focuses on serving the unique needs of patients suffering from cardiovascular disease. MedCath currently owns interests in and operates twelve hospitals with a total of 727 licensed beds, located in Arizona, Arkansas, California, Louisiana, New Mexico, Ohio, South Dakota, and Texas. In addition, MedCath manages the cardiovascular program at various hospitals operated by other parties. Further, MedCath provides cardiovascular care services in diagnostic and therapeutic facilities located 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. 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.

EX-99.2

Exhibit 99.2

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

	Three Months Ended March 31,						Six Months Ended March 31,
	2006			2005			2006			2005
Net revenue	$	208,532		$	192,014		$	393,653		$	376,774
Operating expenses:
Personnel expense		73,195			59,402			133,670			116,615
Medical supplies expense		58,484			55,564			110,443			108,050
Bad debt expense		17,826			11,947			32,264			23,431
Other operating expenses		41,480			37,505			82,533			75,905
Depreciation		9,669			9,431			19,310			19,167
Amortization		252			290			504			580
(Gain) loss on disposal of property, equipment and other assets		(37	)		71			82			74
Total operating expenses		200,869			174,210			378,806			343,822
Income from operations		7,663			17,804			14,847			32,952
Other income (expenses):
Interest expense		(8,908	)		(7,775	)		(17,976	)		(15,773	)
Interest and other income, net		1,388			621			2,805			1,016
Equity in net earnings of unconsolidated affiliates		1,410			886			2,475			1,655
Total other expenses, net		(6,110	)		(6,268	)		(12,696	)		(13,102	)
Income from continuing operations before minority interest, income taxes and discontinued operations		1,553			11,536			2,151			19,850
Minority interest share of earnings of consolidated subsidiaries		(4,790	)		(4,402	)		(7,608	)		(8,401	)
Income (loss) from continuing operations before income taxes and discontinued operations		(3,237	)		7,134			(5,457	)		11,449
Income tax expense (benefit)		(1,297	)		2,856			(2,184	)		4,579
Income (loss) from continuing operations		(1,940	)		4,278			(3,273	)		6,870
Income (loss) from discontinued operations, net of taxes		—			(475	)		—			1,473
Net income (loss)	$	(1,940	)	$	3,803		$	(3,273	)	$	8,343
Earnings (loss) per share, basic
Continuing operations	$	(0.10	)	$	0.24		$	(0.18	)	$	0.38
Discontinued operations		—			(0.03	)		—			0.08
Earnings (loss) per share, basic	$	(0.10	)	$	0.21		$	(0.18	)	$	0.46
Earnings (loss) per share, diluted
Continuing operations	$	(0.10	)	$	0.22		$	(0.18	)	$	0.36
Discontinued operations		—			(0.02	)		—			0.07
Earnings (loss) per share, diluted	$	(0.10	)	$	0.20		$	(0.18	)	$	0.43
Weighted average number of shares, basic		18,618			18,177			18,559			18,110
Dilutive effect of stock options		—			1,285			—			1,139
Weighted average number of shares, diluted		18,618			19,462			18,559			19,249

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

	Three Months Ended March 31,									Six Months Ended March 31,
	2006			2005			% Change			2006			2005			% Change
Statement of Operations Data:
Net revenue	$	208,532		$	192,014			8.6	%	$	393,653		$	376,774			4.5	%
Adjusted EBITDA (1)	$	27,753		$	27,596			0.6	%	$	45,366		$	52,773			(14.0	)%
Income from operations	$	7,663		$	17,804			(57.0	)%	$	14,847		$	32,952			(54.9	)%
Income (loss) from continuing operations	$	(1,940	)	$	4,278			(145.3	)%	$	(3,273	)	$	6,870			(147.6	)%
Earnings (loss) per share from continuing operations, basic	$	(0.10	)	$	0.24			(141.7	)%	$	(0.18	)	$	0.38			(147.4	)%
Earnings (loss) per share from continuing operations, diluted	$	(0.10	)	$	0.22			(145.4	)%	$	(0.18	)	$	0.36			(150.0	)%
(1) See Supplemental Financial Disclosure—Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures.
	Three Months Ended March 31,									Six Months Ended March 31,
	2006			2005			% Change			2006			2005			% Change
Selected Operating Data (consolidated) (a):
Number of hospitals		11			11						11			11
Licensed beds (b)		672			672						672			672
Staffed and available beds (c)		660			631						660			631
Admissions (d)		12,566			11,719			7.2	%		23,851			22,602			5.5	%
Adjusted admissions (e)		16,340			15,617			4.6	%		31,121			29,893			4.1	%
Patient days (f)		42,361			42,503			(0.3	)%		80,339			79,661			0.9	%
Adjusted patient days (g)		55,203			56,521			(2.3	)%		104,776			104,878			(0.1	)%
Average length of stay (days) (h)		3.37			3.63			(7.2	)%		3.37			3.52			(4.3	)%
Occupancy (i)		71.3	%		74.8	%					66.9	%		69.4	%
Inpatient catheterization procedures		6,517			5,891			10.6	%		12,209			11,699			4.4	%
Inpatient surgical procedures		3,516			3,151			11.6	%		6,539			5,926			10.3	%

(a)	Selected operating data includes consolidated hospitals 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 GAAP FINANCIAL MEASURES
TO NON-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 and six months ended March 31, 2006 and 2005.

	Three Months Ended March 31,						Six Months Ended March 31,
	2006			2005			2006			2005
				(in thousands)
Income (loss) from continuing operations	$	(1,940	)	$	4,278		$	(3,273	)	$	6,870
Add:
Income tax expense (benefit)		(1,297	)		2,856			(2,184	)		4,579
Minority interest share of earnings of consolidated subsidiaries		4,790			4,402			7,608			8,401
Equity in net earnings of unconsolidated affiliates		(1,410	)		(886	)		(2,475	)		(1,655	)
Interest and other income, net		(1,388	)		(621	)		(2,805	)		(1,016	)
Interest expense		8,908			7,775			17,976			15,773
(Gain) loss on disposal of property, equipment and other assets		(37	)		71			82			74
Amortization		252			290			504			580
Depreciation		9,669			9,431			19,310			19,167
Share-based compensation expense		10,206			—			10,623			—
Adjusted EBITDA	$	27,753		$	27,596		$	45,366		$	52,773