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): August 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 August 9, 2006, MedCath Corporation (“MedCath” or the “Company”) issued a press release announcing that the Company had updated the previously reported results of operations for the fiscal quarter ended June 30, 2006. Subsequent to its release of the results of operations on August 3, 2006, the Company became aware of new information which impacted an estimated reimbursement from Medicare at one hospital. As such, the financial results for the periods ended June 30, 2006 were updated to reflect this new information. 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 from continuing operations before interest expense; income tax expense; depreciation; amortization; non-cash share-based compensation expense; gain or loss on disposal of property, equipment and other assets; impairment of long-lived 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 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 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 from continuing operations.

Item 9.01. Financial Statements and Exhibits

Exhibit 99.1      Press Release dated August 9, 2006
Exhibit 99.2      Financial Update dated August 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: August 9, 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:
O. Edwin French	James E. Harris
President/Chief Executive Officer	Chief Financial Officer
(704) 708-6600	(704) 708-6600

MEDCATH CORPORATION UPDATES THIRD QUARTER FINANCIAL RESULTS

     CHARLOTTE, N.C., Aug 9, 2006 — MedCath Corporation (Nasdaq: MDTH), a healthcare provider primarily focused on the diagnosis and treatment of cardiovascular disease, today announced that it has updated its previously released third quarter financial results due to information received after its original release on Thursday, August 3, 2006. This update to MedCath’s third quarter financials resulted primarily from a revision to the estimate made for Medicare Disproportionate Share Hospital (DSH) payments for the fiscal year 2005.

     The primary method for a hospital to qualify for Medicare DSH reimbursement is based on a statutory formula that utilizes the percentage of inpatient days attributable to patients eligible for Medicaid, but not eligible for Medicare Part A and a base formula called the Supplemental Security Income (SSI) percentage, which is released annually for the previous year by the Centers for Medicare and Medicaid Services.

     Subsequent to the release of MedCath’s operating results for the period ended June 30, 2006, the Company became aware that the 2005 SSI percentages were available. In reviewing the 2005 SSI percentages, management determined that one of MedCath’s hospitals previously estimated to be eligible for DSH payments for fiscal year 2005 is not eligible for such payments. Based on this new information, MedCath has updated its previously issued financial results. As such, in comparison to the Company’s previously reported results, the updated financial results reflect $1.2 million lower net revenue, income from operations and Adjusted EBITDA, and $470,000 lower income from continuing operations. Earnings from continuing operations per diluted share, previously reported to be $0.30, are $0.27.

     For the fiscal third quarter, MedCath’s net revenue increased 5.6% to $189.8 million from $179.8 million; Adjusted EBITDA increased 16.5% to $28.8 million from $24.7 million; and income from operations increased 13.2% to $17.2 million from $15.2 million. MedCath’s income from continuing operations was $5.3 million, or $0.27 per diluted share, up from $2.6 million or $0.13 per diluted share in the third 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 from continuing operations before interest expense; interest and other income, net; income tax expense; depreciation; amortization; share-based compensation expense; gain or loss on disposal of property, equipment and other assets; impairment of long-lived 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 from continuing operations.

     MedCath Corporation, headquartered in Charlotte, N.C., is a healthcare provider focused primarily on the diagnosis and treatment of cardiovascular disease. MedCath focuses on serving the unique needs of patients suffering from cardiovascular disease. Upon completion of the pending divestiture of its ownership in Tucson Heart Hospital, MedCath will own interest and operate eleven hospitals with a total of 667 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 “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Factors and Forward Looking Statements” in MedCath’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2006. A copy of this report, including exhibits, is available on the internet site of the Securities and Exchange 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 June 30,						Nine Months Ended June 30,
	2006			2005			2006			2005
Net revenue	$	189,832		$	179,787		$	554,156		$	524,156
Operating expenses:
Personnel expense		58,033			53,893			181,211			159,874
Medical supplies expense		52,657			51,047			154,735			148,813
Bad debt expense		14,228			13,874			44,405			36,063
Other operating expenses		37,916			36,286			114,123			107,316
Depreciation		9,366			9,034			27,801			27,214
Amortization		252			290			756			870
Loss (gain) on disposal of property, equipment and other assets		(296	)		148			(237	)		204
Impairment of long-lived assets		451			—			451			—
Total operating expenses		172,607			164,572			523,245			480,354
Income from operations		17,225			15,215			30,911			43,802
Other income (expenses):
Interest expense		(7,870	)		(8,440	)		(25,828	)		(24,129	)
Interest and other income, net		2,977			868			5,748			1,870
Equity in net earnings of unconsolidated affiliates		1,408			899			3,883			2,554
Total other expenses, net		(3,485	)		(6,673	)		(16,197	)		(19,705	)
Income from continuing operations before minority interest, income taxes and discontinued operations		13,740			8,542			14,714			24,097
Minority interest share of earnings of consolidated subsidiaries		(4,742	)		(3,956	)		(12,350	)		(12,357	)
Income from continuing operations before income taxes and discontinued operations		8,998			4,586			2,364			11,740
Income tax expense		3,649			1,952			993			4,814
Income from continuing operations		5,349			2,634			1,371			6,926
Income (loss) from discontinued operations, net of taxes		(439	)		115			266			4,166
Net income	$	4,910		$	2,749		$	1,637		$	11,092
Earnings (loss) per share, basic
Continuing operations	$	0.28		$	0.14		$	0.07		$	0.38
Discontinued operations		(0.02	)		0.01			0.01			0.23
Earnings per share, basic	$	0.26		$	0.15		$	0.08		$	0.61
Earnings (loss) per share, diluted
Continuing operations	$	0.27		$	0.13		$	0.07		$	0.36
Discontinued operations		(0.02	)		0.01			0.01			0.21
Earnings per share, diluted	$	0.25		$	0.14		$	0.08		$	0.57
Weighted average number of shares, basic		18,630			18,425			18,583			18,216
Dilutive effect of stock options and restricted stock		661			1,248			921			1,193
Weighted average number of shares, diluted		19,291			19,673			19,504			19,409

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

	Three Months Ended June 30,									Nine Months Ended June 30,
	2006			2005			% Change			2006			2005			% Change
Statement of Operations Data:
Net revenue	$	189,832		$	179,787			5.6	%	$	554,156		$	524,156			5.7	%
Adjusted EBITDA (1)	$	28,754		$	24,687			16.5	%	$	72,062		$	72,090			(0.0	)%
Income from operations	$	17,225		$	15,215			13.2	%	$	30,911		$	43,802			(29.4	)%
Income from continuing operations	$	5,349		$	2,634			103.1	%	$	1,371		$	6,926			(80.2	)%
Earnings per share from continuing operations, basic	$	0.28		$	0.14			100.0	%	$	0.07		$	0.38			(81.6	)%
Earnings per share from continuing operations, diluted	$	0.27		$	0.13			107.7	%	$	0.07		$	0.36			(80.6	)%
(1) See Supplemental Financial Disclosure—Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures.
	Three Months Ended June 30,									Nine Months Ended June 30,
	2006			2005			% Change			2006			2005			% Change
Selected Operating Data (consolidated) (a):
Number of hospitals		10			10						10			10
Licensed beds (b)		612			612						612			612
Staffed and available beds (c)		595			571						595			571
Admissions (d)		11,115			10,364			7.2	%		32,987			31,119			6.0	%
Adjusted admissions (e)		14,494			13,555			6.9	%		42,822			40,349			6.1	%
Patient days (f)		35,508			36,281			(2.1	)%		109,497			109,738			(0.2	)%
Adjusted patient days (g)		46,318			47,202			(1.9	)%		142,178			141,677			0.4	%
Average length of stay (days) (h)		3.19			3.50			(8.9	)%		3.32			3.53			(5.9	)%
Occupancy (i)		65.6	%		69.8	%					67.4	%		70.4	%
Inpatient catheterization procedures		5,838			5,457			7.0	%		17,029			16,220			5.0	%
Inpatient surgical procedures		2,920			2,915			0.2	%		8,702			8,495			2.4	%

(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 from continuing operations as derived directly from MedCath’s consolidated financial statements for the three and nine months ended June 30, 2006 and 2005.

	Three Months Ended June 30,						Nine Months Ended June 30,
	2006			2005			2006			2005
				(in thousands)
Income from continuing operations	$	5,349		$	2,634		$	1,371		$	6,926
Add:
Income tax expense		3,649			1,952			993			4,814
Minority interest share of earnings of consolidated subsidiaries		4,742			3,956			12,350			12,357
Equity in net earnings of unconsolidated affiliates		(1,408	)		(899	)		(3,883	)		(2,554	)
Interest and other income, net		(2,977	)		(868	)		(5,748	)		(1,870	)
Interest expense		7,870			8,440			25,828			24,129
Impairment of long-lived assets		451			—			451			—
Loss (gain) on disposal of property, equipment and other assets		(296	)		148			(237	)		204
Amortization		252			290			756			870
Depreciation		9,366			9,034			27,801			27,214
Share-based compensation expense		1,756			—			12,380			—
Adjusted EBITDA	$	28,754		$	24,687		$	72,062		$	72,090