Medcath (MDTH) 8-K Medcath Corporation Reports Second Quarter Earnings

EXHIBIT 99.1

MEDCATH CONTACTS:
O. Edwin French	Art Parker
President/Chief Executive Officer	Interim Chief Financial Officer
(704) 708-6600	(704) 708-6600

MEDCATH CORPORATION REPORTS SECOND QUARTER EARNINGS

• Same facility adjusted admissions up 4.6% in second quarter of fiscal 2008 compared to the second quarter of fiscal 2007

• Cash flow from continuing operations up 17.6% in second quarter of fiscal 2008 compared to second quarter of fiscal 2007

          CHARLOTTE, N.C., May, 6, 2008 – 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 second fiscal quarter, which ended March 31, 2008.

Second Quarter 2008 Results

          On April 21, 2008 MedCath announced preliminary results for the second quarter of fiscal 2008. This press release presents the final results for the quarter on an actual and a same facility basis.

          During its fourth quarter of fiscal 2007, MedCath completed the recapitalization of Harlingen Medical Center (“HMC”). As part of the recapitalization, MedCath’s ownership in HMC was reduced from a majority ownership to a minority ownership. Due to this change in ownership, MedCath began accounting for HMC as an equity investment in the quarter ended September 30, 2007. As such, MedCath’s consolidated operating results for the quarter ended March 31, 2008 exclude net revenue, income from operations and Adjusted EBITDA of HMC. In comparison, MedCath’s consolidated actual results for the comparable quarter of the previous fiscal year include the consolidated financial results of HMC.

          During its second quarter of fiscal 2008, MedCath announced that it had entered into a definitive agreement to sell substantially all of the assets of its Dayton Heart Hospital, located in Dayton, Ohio. As such, MedCath now accounts for Dayton Heart Hospital as an asset held for sale for all periods presented.

          Any reference to same facility results in this press release excludes HMC and Dayton Heart Hospital for the second quarter of fiscal 2007.

          MedCath’s reported net revenue decreased 11.0% to $157.1 million in the second quarter of fiscal 2008 from $176.6 million in the second quarter of fiscal 2007, which included $23.9 million attributable to HMC. On a same facility basis, net revenue increased 2.8% from $152.8 million. Income from operations decreased 1.3% to $15.4 million in the second quarter of fiscal 2008 from $15.6 million in the second quarter of fiscal 2007. On a same facility basis, income from operations increased 19.4% from $12.9 million. Adjusted EBITDA decreased 11.2% to $23.8 million in the second quarter of fiscal 2008 from $26.8 million in the second quarter of fiscal 2007. On a same facility basis, Adjusted EBITDA increased 5.3%. Income from continuing operations was $6.0 million, or $0.30 per diluted share, in the second quarter of fiscal 2008, compared to income from continuing operations of $4.7 million, or $0.22 per diluted share, in the second quarter of fiscal 2007. On a same facility basis, MedCath’s second quarter of fiscal 2007 income from continuing operations would have been $3.9 million, or $0.18 per diluted share, had HMC been accounted for as an equity investment in the second quarter of fiscal 2007.

          MedCath’s operating results for the quarter ended March 31, 2008 reflects a $0.2 million decrease in net revenue and Adjusted EBITDA related to settlement of third-party cost reports. In comparison, MedCath’s operating results for the quarter ended March 31, 2007 reflect a $3.1 million reduction in net revenue and Adjusted EBITDA due to an increase in a reserve previously established for repayment of a portion of Medicare reimbursement. Share-based compensation expense totaled $0.2 million in the second quarter of fiscal 2008, or $0.01 per diluted share, compared to $2.1 million, or $0.05 per diluted share, in the second quarter of fiscal 2007. Pre-opening expenses totaled $0.3 million, or $0.02 per diluted share, in the second quarter of fiscal 2008. MedCath did not incur pre-opening expenses in the second quarter of fiscal 2007. Adjusted EBITDA in this release does not include share-based compensation expense or pre-opening expenses, but these expenses are included as a component of income from continuing operations.

          “Our quarterly results affirm our strategic direction to increase our bed capacity and asset base to diversify our service lines and revenue,” said O. Edwin French, MedCath’s President and Chief Executive Officer. “Though we’re not immune to industry pressures, as we grow our small facilities and add incremental revenues, we expect to see commensurate earnings growth. In the meantime, as we evolve we have grown income from continuing operations and earnings per share year-over-year while continuing to tell the quality story.

Operating Statistics, Cash Flow and Capital Expenditures

          Same facility hospital adjusted admissions for the second quarter of fiscal 2008 increased 4.6% from the second quarter of the prior fiscal year. Same facility hospital net revenue increased 4.7%, or 2.3% after adjusting second quarter of 2008’s revenue

for a $0.2 million cost report settlement, and 2007’s revenue for a reserve that reduced net revenue by $3.1 million. Net cash provided by operating activities of continuing operations for the second quarter of fiscal 2008 was $15.4 million, up from $13.1 million for the second quarter of fiscal 2007.

          Capital expenditures, including $4.6 million in expenditures related to MedCath’s growth initiatives, totaled $13.0 million in the second quarter of fiscal 2008 in comparison to $6.6 million in the second quarter of fiscal 2007.

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; minority interest share of earnings of consolidated subsidiaries, share-based compensation, 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 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 Wednesday, May 7, 2008, during a 9 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 44446703. 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 14, 2008. To access the replay, domestic callers should dial (800) 642-1687 and international callers should dial (706) 645-9291. The archived conference ID is 44446703. 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. Following completion of the divestiture of Dayton Heart Hospital, MedCath will own an interest in and operate nine hospitals with a total of 616 licensed beds, located in Arizona, Arkansas, California, Louisiana, New

Mexico, South Dakota, and Texas. MedCath is in the process of developing its tenth hospital in Kingman, Arizona. 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.

          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, 2007 filed with the Securities and Exchange Commission on December 14, 2007. Copies of this form including exhibits are available on the internet site of the Securities and Exchange Commission at http://www.sec.gov.

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

	Three Months Ended March 31,						Six Months Ended March 31,
	2008			2007			2008			2007
Net revenue	$	157,098		$	176,640		$	305,948		$	337,026
Operating expenses:
Personnel expense		49,638			55,977			100,503			107,918
Medical supplies expense		43,097			47,099			82,726			91,254
Bad debt expense		10,332			14,635			21,617			27,762
Other operating expenses		30,419			34,257			59,565			67,358
Pre-opening expenses		245			—			493			—
Depreciation		7,709			8,180			15,074			16,450
Amortization		135			127			262			379
Loss on disposal of property, equipment and other assets		138			796			166			853
Total operating expenses		141,713			161,071			280,406			311,974
Income from operations		15,385			15,569			25,542			25,052
Other income (expenses):
Interest expense		(3,864	)		(5,693	)		(7,796	)		(13,028	)
Loss on early extinguishment of debt		—			(662	)		—			(5,142	)
Interest and other income, net		488			1,805			1,657			4,525
Equity in net earnings of unconsolidated affiliates		2,181			1,482			4,206			2,920
Total other expenses, net		(1,195	)		(3,068	)		(1,933	)		(10,725	)
Income from continuing operations before minority interest and income taxes		14,190			12,501			23,609			14,327
Minority interest share of earnings of consolidated subsidiaries		(5,114	)		(3,268	)		(9,566	)		(5,474	)
Income from continuing operations before income taxes		9,076			9,233			14,043			8,853
Income tax expense		3,099			4,504			5,448			4,486
Income from continuing operations		5,977			4,729			8,595			4,367
Income (loss) from discontinued operations, net of taxes		(292	)		1,521			154			(3,013	)
Net income	$	5,685		$	6,250		$	8,749		$	1,354
Earnings (loss) per share, basic
Continuing operations	$	0.30		$	0.23		$	0.42		$	0.21
Discontinued operations		(0.01	)		0.07			0.01			(0.14	)
Earnings per share, basic	$	0.29		$	0.30		$	0.43		$	0.07
Earnings (loss) per share, diluted
Continuing operations	$	0.30		$	0.22		$	0.41		$	0.20
Discontinued operations		(0.01	)		0.07			0.01			(0.14	)
Earnings per share, diluted	$	0.29		$	0.29		$	0.42		$	0.06
Weighted average number of shares, basic		19,841			21,019			20,438			20,568
Dilutive effect of stock options and restricted stock		121			625			202			634
Weighted average number of shares, diluted		19,962			21,644			20,640			21,202

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

	March 31,			September 30,
	2008			2007
	(Unaudited)
Current assets:
Cash and cash equivalents	$	85,256		$	140,276
Restricted cash		8,500			—
Accounts receivable, net		99,529			85,943
Medical supplies		15,583			13,928
Deferred income tax assets		13,560			12,389
Prepaid expenses and other current assets		5,663			6,197
Current assets of discontinued operations		3,273			13,680
Total current assets		231,364			272,413
Property and equipment, net		281,365			270,663
Investments in affiliates		4,850			5,718
Goodwill		62,740			62,740
Other intangible assets, net		6,187			6,448
Other assets		6,420			6,531
Long-term assets of discontinued operations		26,544			44,902
Total assets	$	619,470		$	669,415
Current liabilities:
Accounts payable	$	34,754		$	30,933
Income tax payable		1,492			10,552
Accrued compensation and benefits		17,094			18,567
Other accrued liabilities		12,065			13,421
Current portion of long-term debt and obligations under capital leases		4,504			4,089
Current liabilities of discontinued operations		6,090			15,810
Total current liabilities		75,999			93,372
Long-term debt		144,394			146,398
Obligations under capital leases		1,514			1,793
Deferred income tax liabilities		11,855			12,018
Other long-term obligations		415			460
Long-term liabilities of discontinued components		853			13
Total liabilities		235,030			254,054
Minority interest in equity of consolidated subsidiaries		27,752			29,737
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; 21,451,144 issued and 19,496,783 outstanding at March 31, 2008; 21,271,144 issued and 21,202,244 outstanding at September 30, 2007		215			213
Paid-in capital		454,956			447,688
Accumulated deficit		(53,379	)		(61,821	)
Accumulated other comprehensive loss		(307	)		(62	)
Treasury stock, at cost; 68,900 shares at March 31, 2007 1,954,361 shares at March 31, 2008		(44,797	)		(394	)
Total stockholders’ equity		356,688			385,624
Total liabilities and stockholders’ equity	$	619,470		$	669,415

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,
	2008		2007		% Change			2008		2007		% Change
Statement of Operations Data:
Net revenue	$	157,098	$	176,640		(11.1	)%	$	305,948	$	337,026		(9.2	)%
Adjusted EBITDA (1)	$	23,825	$	26,772		(11.0	)%	$	45,459	$	45,860		(0.9	)%
Income from operations	$	15,385	$	15,569		(1.2	)%	$	25,542	$	25,052		2.0	%
Income from continuing operations	$	5,977	$	4,729		26.4	%	$	8,595	$	4,367		96.8	%
Earnings per share from continuing operations, basic	$	0.30	$	0.23		30.4	%	$	0.42	$	0.21		100.0	%
Earnings per share from continuing operations, diluted	$	0.30	$	0.22		36.4	%	$	0.41	$	0.20		105.0	%

(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,
	2008			2007			% Change			2008			2007			% Change
Selected Operating Data (a):
Number of hospitals		7			8						7			8
Licensed beds (c)		449			533						449			533
Staffed and available beds (d)		433			512						433			512
Admissions (e)		7,855			9,876			(20.5	)%		15,005			18,810			(20.2	)%
Adjusted admissions (f)		10,817			13,470			(19.7	)%		20,645			25,711			(19.7	)%
Patient days (g)		29,039			34,010			(14.6	)%		54,499			64,767			(15.9	)%
Adjusted patient days (h)		40,247			46,173			(12.8	)%		75,381			88,021			(14.4	)%
Average length of stay (days) (i)		3.70			3.44			7.6	%		3.63			3.44			5.5	%
Occupancy (j)		73.7	%		73.8	%					68.8	%		69.5	%
Inpatient catheterization procedures (k)		4,225			4,904			(13.8	)%		8,274			9,284			(10.9	)%
Inpatient surgical procedures (l)		2,120			2,565			(17.3	)%		4,069			4,910			(17.1	)%
Hospital net revenue	$	144,778		$	162,092			(10.7	)%	$	281,929		$	307,987			(8.5	)%
Selected Operating Data — Same Facility (a):
Number of hospitals		7			7						7			7
Licensed beds (c)		449			421						449			421
Staffed and available beds (d)		433			404						433			404
Admissions (e)		7,855			7,929			(0.9	)%		15,005			15,020			(0.1	)%
Adjusted admissions (f)		10,817			10,338			4.6	%		20,645			19,529			5.7	%
Patient days (g)		29,039			28,156			3.1	%		54,499			53,907			1.1	%
Adjusted patient days (h)		40,247			36,755			9.5	%		75,381			70,306			7.2	%
Average length of stay (days) (i)		3.70			3.55			4.2	%		3.63			3.59			1.1	%
Occupancy (j)		73.7	%		77.4	%					68.8	%		73.3	%
Inpatient catheterization procedures (k)		4,225			4,666			(9.5	)%		8,274			8,866			(6.7	)%
Inpatient surgical procedures (l)		2,120			2,049			3.5	%		4,069			3,950			3.0	%
Hospital net revenue	$	144,778		$	138,213			4.7	%	$	281,929		$	265,654			6.1	%
Combined Operating Data (b):
Number of hospitals		9			9						9			9
Licensed beds (c)		616			588						616			588
Staffed and available beds (d)		596			567						596			567
Admissions (e)		10,539			10,819			(2.6	)%		20,308			20,714			(2.0	)%
Adjusted admissions (f)		15,164			14,533			4.3	%		29,326			27,851			5.3	%
Patient days (g)		37,812			37,716			0.3	%		71,537			71,962			(0.6	)%
Adjusted patient days (h)		54,130			50,349			7.5	%		102,599			96,108			6.8	%
Average length of stay (days) (i)		3.59			3.49			2.9	%		3.52			3.47			1.4	%
Occupancy (j)		69.7	%		73.9	%					65.6	%		69.7	%
Inpatient catheterization procedures (k)		5,025			5,523			(9.0	)%		9,801			10,527			(6.9	)%
Inpatient surgical procedures (l)		2,754			2,832			(2.8	)%		5,442			5,427			0.3	%
Hospital net revenue	$	186,045		$	179,263			3.8	%	$	362,751		$	342,477			5.9	%

(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. Same facility for all periods presented excludes Harlingen Medical Center.
(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 consolidated financial statements for the three and six months ended March 31, 2008 and 2007.

	Three Months Ended March 31,						Six Months Ended March 31,
	2008			2007			2008			2007
	(in thousands)
Income from continuing operations	$	5,977		$	4,729		$	8,595		$	4,367
Add:
Income tax expense		3,099			4,504			5,448			4,486
Minority interest share of earnings of consolidated subsidiaries		5,114			3,268			9,566			5,474
Equity in net earnings of unconsolidated affiliates		(2,181	)		(1,482	)		(4,206	)		(2,920	)
Interest and other income, net		(488	)		(1,805	)		(1,657	)		(4,525	)
Loss on early extinguishment of debt		—			662			—			5,142
Interest expense		3,864			5,693			7,796			13,028
Loss on disposal of property, equipment and other assets		138			796			166			853
Amortization		135			127			262			379
Depreciation		7,709			8,180			15,074			16,450
Pre-opening expenses		245			—			493			—
Share-based compensation expense		213			2,100			3,922			3,126
Adjusted EBITDA	$	23,825		$	26,772		$	45,459		$	45,860

The following table presents MedCath’s condensed statement of operations data for the three and six months ended March 31, 2008 on a pro forma basis to reflect the reclassification of Harlingen Medical Center (HMC) from a consolidated subsidiary to an equity investment.

	Three Months Ended March 31,									Six Months Ended March 31,
			Adjustments to			2007						Adjustments to			2007
	2007		Deconsolidate			(Pro Forma Same				2007		Deconsolidate			(Pro Forma Same
	(Actual)		HMC			Facility)		2008		(Actual)		HMC			Facility)		2008
			(in thousands)									(in thousands)
Net Revenue	$	176,640	$	(23,879	)	$	152,761	$	157,098	$	337,026	$	(42,333	)	$	294,693	$	305,948
Income from operations		15,569		(2,695	)		12,874		15,385		25,052		(3,545	)		21,507		25,542
Income from continuing operations before minority interest and income taxes		12,501		(840	)		11,661		14,190		14,327		(491	)		13,836		23,609
Income from continuing operations before income taxes		9,233		(840	)		8,393		9,076		8,853		(491	)		8,362		14,043
Income from continuing operations		4,729		(840	)		3,889		5,977		4,367		(491	)		3,876		8,595
Net income (loss)	$	6,250	$	(840	)	$	5,410	$	5,685	$	1,354	$	(491	)	$	863	$	8,749
Earnings (loss) per share, basic	$	0.30	$	(0.04	)	$	0.26	$	0.29	$	0.07	$	(0.02	)	$	0.05	$	0.43
Earnings (loss) per share, diluted	$	0.29	$	(0.04	)	$	0.25	$	0.29	$	0.06	$	(0.02	)	$	0.04	$	0.42
Weighted average number of shares, basic		21,019		—			21,019		19,841		20,568		—			20,568		20,438
Dilutive effect of stock options and restricted stock		625		—			625		121		634		—			634		202
Weighted average number of shares, diluted		21,644		—			21,644		19,962		21,202		—			21,202		20,640