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 4, 2009

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 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

On February 4, 2009, MedCath issued a press release announcing the Company’s results of operations for the fiscal quarter ended December 31, 2008. A copy of the press release is furnished as Exhibit 99.1.

MedCath is providing reclassified unaudited consolidated statement of operations to reflect the reclassification of the results of operations of Cape Cod Cardiology Services, LLC (Cape Cod), as a discontinued operation for all quarters for the fiscal year ended September 30, 2008. The Company believes this information will be useful to investors in evaluating the performance of MedCath. The reclassified unaudited historical financial information is included in Exhibit 99.3.

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; loss on early extinguishment of debt; income tax expense; depreciation; amortization; impairment of long-lived assets; share-based compensation expense; loss (gain) on disposal of property, equipment and other assets; interest and other income, net; equity in net earnings of unconsolidated affiliates; minority interest share of earnings of consolidated subsidiaries; and pre-opening expenses. 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 measures, 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 accompanies 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 February 4, 2009
Exhibit 99.2	Financial Update dated February 4, 2009
Exhibit 99.3	MedCath Corporation Proforma Consolidated Statements of Operations (Presenting Cape Cod as a Discontinued Operation for Each Period Presented)

Exhibits 99.1, 99.2 and 99.3 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 5, 2009	By:	/s/ Jeffrey L. Hinton
		Jeffrey L. Hinton
		Executive Vice President and Chief Financial Officer

INDEX TO EXHIBITS

Exhibit No.	Description
Exhibit 99.1	Press Release dated February 4, 2009
Exhibit 99.2	Financial Update dated February 4, 2009
Exhibit 99.3	MedCath Corporation Proforma Consolidated Statements of Operations (Presenting Cape Cod as a Discontinued Operation for Each Period Presented)

EX-99.1

Exhibit 99.1

MEDCATH CONTACT:
O. Edwin French	Jeff Hinton
President/Chief Executive Officer	Chief Financial Officer
(704) 708-6600	(704) 708-6600

MEDCATH CORPORATION REPORTS FIRST QUARTER EARNINGS

     CHARLOTTE, N.C., Feb. 4, 2009 — MedCath Corporation (Nasdaq: MDTH), a healthcare provider focused on high acuity healthcare services, predominately the diagnosis and treatment of cardiovascular disease, today announced its operating results for its first quarter of fiscal 2009, which ended December 31, 2008.

Highlights

• Net revenue up 4.4% compared with first quarter of fiscal 2008

• Adjusted EBITDA of $17.2 million

• Operating cash flow from continuing operations of $18.2 million

• EPS from continuing operations of ($0.08); or $0.18, excluding loss on debt refinancing, pre-opening expenses and share-based compensation expense

First Quarter 2009 Results

     MedCath’s reported net revenue increased 4.4% to $153.1 million in the first quarter of fiscal 2009 from $146.7 million in the first quarter of fiscal 2008. Income from operations decreased to $7.9 million from $9.5 million in the first quarter of fiscal 2008 and Adjusted EBITDA decreased to $17.2 million from $21.0 million in the same period of the prior year. MedCath’s income (loss) from continuing operations was ($1.6) million, or ($0.08) per diluted share, in the first quarter of fiscal 2009 compared to $2.3 million, or $0.11 per diluted share, in the first quarter of fiscal 2008.

     MedCath’s operating results for the first quarter of fiscal 2009 include a $7.0 million, or $0.23 per diluted share, decrease in income from continuing operations related to loss on early extinguishment of debt incurred from the company’s entering into a new credit facility in November 2008 and the repurchase of all of the company’s outstanding 9 7/8% Senior Notes in December 2008. MedCath anticipates that the repurchase of the Senior Notes will be $0.19 accretive to its annual earnings per share.

     Adjusted EBITDA in this release does not include share-based compensation or pre-opening expenses, but these items are included as a component of income from continuing operations. Share-based compensation expense totaled $1.0 million in the first quarter of fiscal 2009, or $0.03 per diluted share, compared with a $3.7 million expense, or $0.12 per diluted share, in the first quarter of fiscal 2008. Pre-opening expenses totaled $0.2 million in the first quarter of fiscal 2009, compared with $0.3 million in the first quarter of fiscal 2008.

     As shown below, EPS for the quarter, adjusted for loss on debt refinance, share-based compensation expense and pre-opening expenses totaled $0.18 for the quarter:

EPS from continuing operations	$	(0.08	)
Adjustments (net of tax effect)
Pre-opening expenses	$	0.01
Share-based compensation expense	$	0.03
Loss on Debt Refinancing	$	0.22
EPS, adjusted for above items	$	0.18

     During the first quarter of fiscal 2009, MedCath divested the 51.0% ownership interest in a joint venture held in its MedCath Partners Division. MedCath received approximately $6.9 million in cash consideration for its ownership interest in the joint venture and recognized a $4.0 million gain in income from discontinued operations, net of taxes. The joint venture had net revenue of $2.6 million, Adjusted EBITDA of $0.7 million, net income of $0.2 million and earnings per share of $0.01 for the fiscal quarter ended December 31, 2008. The operating results for this joint venture are included in MedCath’s discontinued operations for the first quarter of fiscal 2009.

     “We are pleased with our first quarter results and progress we’re making toward our strategic transformation and plans to diversify our services,” said Ed French, MedCath’s President and Chief Executive Officer. “We experienced solid sequential earnings growth and margin expansion; and our cash flow from operations was extremely strong. Our expansion plans continue to move forward as planned, and we look to add 149 beds during the next 10 months.”

Operating Statistics, Cash Flow and Capital Expenditures

     Same facility hospital admissions in the first quarter of fiscal 2009 were 6,757, down 5.5% compared with the first quarter of fiscal 2008. Adjusted admissions totaled 9,874, up 0.5% compared with the first quarter of fiscal 2008. Same facility hospital outpatient visits totaled 7,499 in the first quarter of fiscal 2009, up 16.3% in comparison with the first quarter of fiscal 2008.

     MedCath’s commercial admissions of 23.6% were unchanged from the year earlier period and the fourth quarter of fiscal 2008. Self-pay admissions equaled 2.2%

of total admissions in the first quarter of fiscal 2009, in comparison to 2.4% of total admissions in the first quarter of fiscal 2008. Total uncompensated care, which includes charity care plus bad debt expense, equaled 8.5% of hospital division net revenue before the deduction for charity care in the first quarter of fiscal 2009 compared to 9.2% in the first quarter of fiscal 2008 and 10.4% in the fourth quarter of fiscal 2008.

     Net cash provided by operating activities of continuing operations for the first quarter of fiscal 2009 was $18.2 million, which reflects the payment of approximately $2.5 million in interest expense from an earlier quarter in connection with the repurchase of the Senior Notes. Net cash provided by operating activities of continuing operations for the first quarter of fiscal 2008 was breakeven. Cash capital expenditures totaled $30.0 million and included $6.3 million related to maintenance expenditures and $23.7 million related to MedCath’s construction projects not opened.

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; pre-opening expenses; loss on disposal of property, equipment and other assets; loss on early extinguishment of debt; 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 accompanies this press release that reconciles historical Adjusted EBITDA to MedCath’s income from continuing operations.

     Management will discuss and answer questions regarding MedCath’s quarterly results Thursday, February 5, 2009, 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 82073996. 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, March 5, 2009. To access the replay, domestic callers should dial (800) 642-1687 and international callers should dial (706) 645-9291. The archived conference ID is 82073996. 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 nine hospitals with a total of 676 licensed beds, located in Arizona, Arkansas, California, Louisiana, New Mexico, South Dakota, and Texas. MedCath is in the process of developing its tenth hospital, which is anticipated to open in fall 2009, in Kingman, Ariz. 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 requires 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, 2008 filed with the Securities and Exchange Commission on December 15, 2008. Copies of this form including exhibits are 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 December 31,
	2008			2007
Net revenue	$	153,103		$	146,695
Operating expenses:
Personnel expense		50,656			50,384
Medical supplies expense		42,651			38,742
Bad debt expense		11,393			11,285
Other operating expenses		32,235			29,016
Pre-opening expenses		207			248
Depreciation		7,835			7,341
Amortization		149			127
Loss on disposal of property, equipment and other assets		73			28
Total operating expenses		145,199			137,171
Income from operations		7,904			9,524
Other income (expenses):
Interest expense		(2,857	)		(3,931	)
Loss on early extinguishment of debt		(6,961	)		—
Interest and other income, net		100			1,158
Equity in net earnings of unconsolidated affiliates		2,065			2,025
Total other expenses, net		(7,653	)		(748	)
Income from continuing operations before minority interest and income taxes		251			8,776
Minority interest share of earnings of consolidated subsidiaries		(2,776	)		(4,137	)
Income from continuing operations before income taxes		(2,525	)		4,639
Income tax (benefit)/expense		(909	)		2,348
(Loss)/income from continuing operations		(1,616	)		2,291
Income from discontinued operations, net of taxes		3,862			773
Net income	$	2,246		$	3,064
Earnings (loss) per share, basic
Continuing operations	$	(0.08	)	$	0.11
Discontinued operations		0.19			0.03
Earnings (loss) per share, basic	$	0.11		$	0.14
Earnings (loss) per share, diluted
Continuing operations	$	(0.08	)	$	0.11
Discontinued operations		0.19			0.03
Earnings (loss) per share, diluted	$	0.11		$	0.14
Weighted average number of shares, basic		19,599			21,028
Dilutive effect of stock options and restricted stock		—			263
Weighted average number of shares, diluted		19,599			21,291

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

	December 31,			September 30,
	2008			2008
	(Unaudited)
Current assets:
Cash and cash equivalents	$	56,912		$	93,836
Restricted cash		3,163			3,154
Accounts receivable, net		86,572			83,875
Income tax receivable, net		1,696			3,091
Medical supplies		17,838			15,479
Deferred income tax assets		9,978			9,769
Prepaid expenses and other current assets		10,439			9,796
Current assets of discontinued operations		12,770			20,776
Total current assets		199,368			239,776
Property and equipment, net		341,942			323,729
Investments in affiliates		10,742			15,285
Goodwill		60,174			60,174
Other intangible assets, net		5,914			6,063
Other assets		9,748			8,378
Long-term assets of discontinued operations		—			51
Total assets	$	627,888		$	653,456
Current liabilities:
Accounts payable	$	42,128		$	41,642
Accrued compensation and benefits		17,283			16,872
Other accrued liabilities		21,080			24,054
Current portion of long-term debt and obligations under capital leases		15,341			31,920
Current liabilities of discontinued operations		9,510			10,184
Total current liabilities		105,342			124,672
Long-term debt		115,578			115,628
Obligations under capital leases		1,956			2,087
Deferred income tax liabilities		12,276			12,352
Other long-term obligations		4,425			4,454
Total liabilities		239,577			259,193
Minority interest in equity of consolidated subsidiaries		15,880			24,667
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; 21,588,880 issued and 19,634,519 outstanding at December 31, 2008; 21,553,054 issued and 19,598693 outstanding at September 30, 2008		216			216
Paid-in capital		456,531			455,494
Accumulated deficit		(38,892	)		(41,138	)
Accumulated other comprehensive loss		(627	)		(179	)
Treasury stock, at cost;
1,954,361 shares at December 31, 2008
1,954,361 shares at September 30, 2008		(44,797	)		(44,797	)
Total stockholders’ equity		372,431			369,596
Total liabilities and stockholders’ equity	$	627,888		$	653,456

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

	Three Months Ended December 31,
	2008			2007		% Change
Statement of Operations Data:
Net revenue	$	153,103		$	146,695		4.4	%
Adjusted EBITDA (1)	$	17,166		$	20,977		(18.2	)%
Income from operations	$	7,904		$	9,524		(17.0	)%
(Loss)/income from continuing operations	$	(1,616	)	$	2,291		(170.5	)%
Earnings (loss) per share from continuing operations, basic	$	(0.08	)	$	0.11		(172.7	)%
Earnings (loss) per share from continuing operations, diluted	$	(0.08	)	$	0.11		(172.7	)%

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

	Three Months Ended December 31,
	2008			2007			% Change
Selected Operating Data (a):
Number of hospitals		7			7
Licensed beds (c)		509			421
Staffed and available beds (d)		463			404
Admissions (e)		6,757			7,150			(5.5	)%
Adjusted admissions (f)		9,874			9,829			0.5	%
Patient days (g)		25,181			25,460			(1.1	)%
Adjusted patient days (h)		37,044			35,144			5.4	%
Average length of stay (days) (i)		3.73			3.56			4.8	%
Occupancy (j)		59.1	%		68.5	%
Inpatient catheterization procedures (k)		3,552			4,049			(12.3	)%
Inpatient surgical procedures (l)		2,001			1,947			2.8	%
Hospital net revenue	$	144,225		$	137,151			5.2	%
Combined Operating Data (b):
Number of hospitals		9			9
Licensed beds (c)		676			588
Staffed and available beds (d)		628			567
Admissions (e)		9,740			9,769			(0.3	)%
Adjusted admissions (f)		14,622			14,167			3.2	%
Patient days (g)		34,189			33,725			1.4	%
Adjusted patient days (h)		51,162			48,482			5.5	%
Average length of stay (days) (i)		3.51			3.45			1.7	%
Occupancy (j)		59.2	%		64.7	%
Inpatient catheterization procedures (k)		4,385			4,776			(8.2	)%
Inpatient surgical procedures (l)		2,622			2,686			(2.4	)%
Hospital net revenue	$	185,023		$	176,706			4.7	%

(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)	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 Adjusted EBITDA with MedCath’s income from continuing operations as derived directly from MedCath’s unaudited consolidated financial statements for the three months ended December 31, 2008 and 2007.

	Three Months Ended December 31,
	2008			2007
	(in thousands)
(Loss)/income from continuing operations	$	(1,616	)	$	2,291
Add:
Income tax expense		(909	)		2,348
Minority interest share of earnings of consolidated subsidiaries		2,776			4,137
Equity in net earnings of unconsolidated affiliates		(2,065	)		(2,025	)
Interest and other income, net		(100	)		(1,158	)
Loss on early extinguishment of debt		6,961			—
Interest expense		2,857			3,931
Loss on disposal of property, equipment and other assets		73			28
Amortization		149			127
Depreciation		7,835			7,341
Pre-opening expenses		207			248
Share-based compensation expense		998			3,709
Adjusted EBITDA	$	17,166		$	20,977

EX-99.3

Exhibit 99.3

MEDCATH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Restated to present Cape Cod Cardiology Services as a Discontinued Operation
(In thousands, except per share data)
(Unaudited)

	Three Months Ended
	September 30,			June 30,			March 31,			December 31,
	2008			2008			2008			2007
Net revenue	$	148,356		$	154,273		$	154,200		$	146,695
Operating expenses:
Personnel expense		49,645			50,520			49,156			50,384
Medical supplies expense		42,888			42,757			41,656			38,742
Bad debt expense		11,839			10,235			10,332			11,285
Other operating expenses		31,792			29,555			30,425			29,016
Pre-opening expenses		143			149			245			248
Depreciation		7,658			7,505			7,689			7,341
Amortization		149			149			135			127
(Gain) loss on disposal of property, equipment and other assets		(143	)		225			138			28
Total operating expenses		143,971			141,095			139,776			137,171
Income from operations		4,385			13,178			14,424			9,524
Other income (expenses):
Interest expense		(2,642	)		(3,862	)		(3,864	)		(3,931	)
Interest and other income, net		99			284			485			1,158
Equity in net earnings of unconsolidated affiliates		1,049			2,636			2,181			2,025
Total other expenses, net		(1,494	)		(942	)		(1,198	)		(748	)
Income from continuing operations before minority interest and income taxes		2,891			12,236			13,226			8,776
Minority interest share of earnings of consolidated subsidiaries		(1,238	)		(3,865	)		(4,642	)		(4,137	)
Income from continuing operations before income taxes		1,653			8,371			8,584			4,639
Income tax expense		1,670			3,469			3,099			2,348
(Loss)/income from continuing operations		(17	)		4,902			5,485			2,291
Income from discontinued operations, net of taxes		486			6,870			200			773
Net income	$	469		$	11,772		$	5,685		$	3,064
Earnings (loss) per share, basic
Continuing operations	$	(0.00	)	$	0.25		$	0.28		$	0.11
Discontinued operations		0.02			0.35			0.01			0.03
Earnings (loss) per share, basic	$	0.02		$	0.60		$	0.29		$	0.14
Earnings (loss) per share, diluted
Continuing operations	$	(0.00	)	$	0.25		$	0.28		$	0.11
Discontinued operations		0.02			0.35			0.01			0.03
Earnings (loss) per share, diluted	$	0.02		$	0.60		$	0.29		$	0.14
Weighted average number of shares, basic		19,590			19,524			19,841			21,028
Dilutive effect of stock options and restricted stock		65			107			121			263
Weighted average number of shares, diluted		19,655			19,631			19,962			21,291