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 8, 2007

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) 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 8, 2007, MedCath Corporation (“MedCath” or the “Company”) issued a press release announcing the Company’s results of operations for the fiscal quarter ended December 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; loss on early extinguishment of debt; income tax expense; depreciation; amortization; share-based compensation expense; loss on disposal of property, equipment and other assets; interest and other income, net; equity in net earnings of unconsolidated affiliates; and minority interest share of earnings of consolidated subsidiaries. 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 (loss) from continuing operations.

Item 9.01. Financial Statements and Exhibits

Exhibit 99.1 Press Release dated February 8, 2007
Exhibit 99.2 Financial Update dated February 8, 2007

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 8, 2007	By:	/s/ James E. Harris
		James E. Harris
		Executive Vice President and Chief Financial Officer

EX-99.1

Exhibit 99.1

MEDCATH CONTACTS:
O. Edwin French
President and Chief Executive Officer
(704) 708-6600
James E. Harris
Chief Financial Officer
(704) 708-6600

MEDCATH CORPORATION REPORTS FIRST QUARTER RESULTS

     CHARLOTTE, N.C., Feb. 8, 2007 — MedCath Corporation (Nasdaq: MDTH), a healthcare provider focused primarily on the diagnosis and treatment of cardiovascular disease, today announced operating results for its first fiscal quarter ended December 31, 2006.

     First quarter highlights:

• Net revenue increased 7.3% to $175.5 million during the first quarter.

• Adjusted EBITDA for the first quarter totaled $20.9 million, which includes the negative impact of a $2.7 million reserve established at one hospital to cover potential repayment of Medicare reimbursement.

• Adjusted admissions increased 3.5% for the quarter.

First Quarter 2007 Results

     MedCath’s net revenue increased 7.3% to $175.5 million in the first quarter of fiscal 2007 from $163.6 million in the first quarter of fiscal 2006. Income from operations was $10.7 million in the first quarter of fiscal 2007, compared to income from operations of $7.2 million in the first quarter of fiscal 2006. Adjusted EBITDA in the first quarter of fiscal 2007 increased 26.9% to $20.9 million from $16.5 million in the first quarter of fiscal 2006. Income from continuing operations was $254,000, or $0.01 per diluted share, in the first quarter of fiscal 2007, compared to a loss from continuing operations of $(1.3) million, or $(0.07) per diluted share, in the first quarter of fiscal 2006.

     Earlier this fiscal year, MedCath announced its intention to divest its ownership interest in one hospital. The operating results of this hospital are included in the Company’s results from discontinued operations. During the first fiscal quarter of 2007,

loss from discontinued operations totaled $(5.2) million, or $(0.25) per share, compared to a loss of $(68,000) in first quarter of fiscal 2006, or $0.00 per share. The fiscal first quarter of 2007 loss from discontinued operations includes the impact of $(4.1) million, or $(0.23) per share, in impairment expense.

     MedCath’s first quarter 2007 results from continuing operations contain the following unusual items. Per share amounts reflect minority interest expense, where applicable, and income taxes:

• A $2.7 million, or a net impact of $0.05 per diluted share, reduction in net revenue and Adjusted EBITDA to establish a reserve for repayment of a portion of Medicare reimbursement related to hospital inpatient services provided to patients enrolled in a clinical trial conducted at one of our hospitals between 1998 and 2002 that is under investigation by the U.S. Department of Justice, and

• A $4.5 million, or a net impact of $0.13 per diluted share, loss on early extinguishment of debt. This loss was comprised of a $3.5 million premium related to the repurchase of $36.2 million of our senior notes and approximately $1.0 million related to the acceleration of deferred loan fees.

     In comparison, MedCath’s first quarter of fiscal 2006 financial results were impacted by certain items that collectively had a $2.3 million unfavorable impact to Adjusted EBITDA and a $1.7 million unfavorable impact to income from continuing operations, or a net impact of $0.09 per diluted share.

     Share-based compensation expense totaled $1.0 million in the first quarter of fiscal 2007, compared to $418,000 in the first quarter of 2006. Adjusted EBITDA disclosed above does not include this expense but the expense is included as a component of income from continuing operations.

     “During the quarter we continued in our efforts to establish operating processes and resources that will allow us to reach our goal of achieving a 16% Adjusted EBITDA margin by fiscal year end 2009,” said Ed French, MedCath’s president and chief executive officer. “By intention, our operating improvement efforts so far have focused on supply and revenue cycle management. Additional objectives this year will concentrate on resource utilization across our system as we strive to meet our margin objectives.”

Operating Statistics

     Hospital admissions for the first quarter of fiscal 2007 were down by (1.8) % compared to prior year and adjusted admissions rose 3.5% from the first quarter of the previous fiscal year. Same facility hospital net revenue increased 8.8%, excluding the unusual items reported earlier in this release, while same facility inpatient catheterization procedures decreased (1.6) % and inpatient surgical procedures remained unchanged compared to last year.

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; loss on early extinguishment of debt; interest and other income, net; income tax expense (benefit); depreciation; amortization; share-based compensation expense; loss on disposal of property, equipment and other assets; equity in net earnings of unconsolidated affiliates; and minority interest share of earnings of consolidated subsidiaries. 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 that accompanies this press release that reconciles Adjusted EBITDA to MedCath’s income (loss) from continuing operations.

Earnings Conference Call and Web cast

     Management will discuss and answer questions regarding MedCath’s quarterly results Thursday, Feb. 8, 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 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, Feb. 15, 2007. To access the replay, domestic callers should dial (800) 642-1687 and international callers should dial (706) 645-9291. The archived conference ID is 6870742. 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 primarily on the diagnosis and treatment of cardiovascular disease. MedCath focuses on serving the unique needs of patients suffering from cardiovascular disease. MedCath owns interests in and operates 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 under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on December 14, 2006. A copy of the 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
	December 31,
	2006			2005
Net revenue	$	175,549		$	163,613
Operating expenses:
Personnel expense		57,175			52,493
Medical supplies expense		48,170			46,194
Bad debt expense		13,831			13,055
Other operating expenses		36,465			35,789
Depreciation		8,869			8,557
Amortization		252			252
Loss on disposal of property, equipment and other assets		57			97
Total operating expenses		164,819			156,437
Income from operations		10,730			7,176
Other income (expenses):
Interest expense		(7,458	)		(7,921	)
Loss on early extinguishment of debt		(4,480	)		(1,006	)
Interest and other income, net		2,725			1,397
Equity in net earnings of unconsolidated affiliates		1,438			1,065
Total other expenses, net		(7,775	)		(6,465	)
Income from continuing operations before minority interest, income taxes and discontinued operations		2,955			711
Minority interest share of earnings of consolidated subsidiaries		(2,480	)		(2,818	)
Income (loss) from continuing operations before income taxes and discontinued operations		475			(2,107	)
Income tax expense (benefit)		221			(842	)
Income (loss) from continuing operations		254			(1,265	)
Loss from discontinued operations, net of taxes		(5,150	)		(68	)
Net loss	$	(4,896	)	$	(1,333	)
Earnings (loss) per share, basic
Continuing operations	$	0.01		$	(0.07	)
Discontinued operations		(0.25	)		—
Loss per share, basic	$	(0.24	)	$	(0.07	)
Earnings (loss) per share, diluted
Continuing operations	$	0.01		$	(0.07	)
Discontinued operations		(0.25	)		—
Loss per share, diluted	$	(0.24	)	$	(0.07	)
Weighted average number of shares, basic		20,121			18,501
Dilutive effect of stock options and restricted stock		—			—
Weighted average number of shares, diluted		20,121			18,501

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

	Three Months Ended December 31,
	2006		2005			% Change
Statement of Operations Data:
Net revenue	$	175,549	$	163,613			7.3	%
Adjusted EBITDA (1)	$	20,934	$	16,500			26.9	%
Income from operations	$	10,730	$	7,176			49.5	%
Income (loss) from continuing operations	$	254	$	(1,265	)		120.1	%
Earnings per share from continuing operations, basic	$	0.01	$	(0.07	)		114.3	%
Earnings per share from continuing operations, diluted	$	0.01	$	(0.07	)		114.3	%

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

	Three Months Ended December 31,
	2006			2005			% Change
Selected Operating Data (a):
Number of hospitals		9			9
Licensed beds (b)		580			580
Staffed and available beds (c)		563			578
Admissions (d)		9,730			9,905			(1.8	)%
Adjusted admissions (e)		13,345			12,899			3.5	%
Patient days (f)		34,089			33,282			2.4	%
Adjusted patient days (g)		46,520			43,215			7.6	%
Average length of stay (days) (h)		3.50			3.36			4.2	%
Occupancy (i)		65.8	%		62.6	%
Inpatient catheterization procedures		4,858			4,935			(1.6	)%
Inpatient surgical procedures		2,516			2,517			(0.0	)%
Hospital net revenue	$	161,058		$	149,414			7.8	%

(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 volume. 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 months ended December 31, 2006 and 2005.

	Three Months Ended December 31,
	2006			2005
	(in thousands)
Income (loss) from continuing operations	$	254		$	(1,265	)
Add:
Income tax expense (benefit)		221			(842	)
Minority interest share of earnings of consolidated subsidiaries		2,480			2,818
Equity in net earnings of unconsolidated affiliates		(1,438	)		(1,065	)
Interest and other income, net		(2,725	)		(1,397	)
Interest expense		7,458			7,921
Loss on early extinguishment of debt		4,480			1,006
Loss on disposal of property, equipment and other assets		57			97
Amortization		252			252
Depreciation		8,869			8,557
Share-based compensation expense		1,026			418
Adjusted EBITDA	$	20,934		$	16,500