UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 9)
MEDCATH CORPORATION (MDTH)
(Name of Issuer)
Common Stock
(Title of Class of Securities)
58404W109
(CUSIP Number)
David Nierenberg
The D3 Family Funds
19605 NE 8th Street
Camas, WA 98607
(360) 604-8600
With a copy to:
Henry Lesser, Esq.
DLA Piper US LLP
2000 University Avenue
East Palo Alto, CA 94303
(650) 833-2000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 26, 2007
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D and is filing this
schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box |_|.
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only)
The D3 Family Fund, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) |X|
(b) |_|
3 SEC USE ONLY
4 SOURCE OF FUNDS (See Instructions)
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Washington
7 SOLE VOTING POWER
NUMBER OF 465,296 Common shares (2.2%)
SHARES -----------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 0
REPORTING -----------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
465,296
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
--------------------------------------------------------------------------------
|
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
For the reporting person listed on this page, 465,296; for all reporting
persons as a group, 2,728,011 shares (13.1%)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
|_|
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.1%
14 TYPE OF REPORTING PERSON (See Instructions)
PN
2
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only)
The DIII Offshore Fund, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) |X|
(b) |_|
3 SEC USE ONLY
4 SOURCE OF FUNDS (See Instructions)
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Bahamas
7 SOLE VOTING POWER
NUMBER OF 459,066 common shares (2.2%)
SHARES -----------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 0
REPORTING -----------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
459,066
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
--------------------------------------------------------------------------------
|
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
For the reporting person listed on this page, 459,066; for all reporting
persons as a group, 2,728,011 shares (13.1%)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
|_|
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.1%
14 TYPE OF REPORTING PERSON (See Instructions)
PN
3
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only)
The D3 Family Bulldog Fund, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) |X|
(b) |_|
3 SEC USE ONLY
4 SOURCE OF FUNDS (See Instructions)
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Washington
7 SOLE VOTING POWER
NUMBER OF 1,712,685 common shares (8.2%)
SHARES -----------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 0
REPORTING -----------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
1,712,685
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
--------------------------------------------------------------------------------
|
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
For the reporting person listed on this page, 1,712,685; for all reporting
persons as a group, 2,728,011 shares (13.1%)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
|_|
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.1%
14 TYPE OF REPORTING PERSON (See Instructions)
PN
4
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only)
The D3 Family Canadian Fund, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) |X|
(b) |_|
3 SEC USE ONLY
4 SOURCE OF FUNDS (See Instructions)
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Washington
7 SOLE VOTING POWER
NUMBER OF 90,964 common shares (0.4%)
SHARES -----------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 0
REPORTING -----------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
90,964
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
--------------------------------------------------------------------------------
|
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
For the reporting person listed on this page, 90,964 shares; for all
reporting persons as a group, 2,728,011 shares (13.1%)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
|_|
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.1%
14 TYPE OF REPORTING PERSON (See Instructions)
PN
5
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only)
Nierenberg Investment Management Company, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) |X|
(b) |_|
3 SEC USE ONLY
4 SOURCE OF FUNDS (See Instructions)
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Washington
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -----------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 2,728,011 shares (13.1%)
REPORTING -----------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
2,728,011 shares
--------------------------------------------------------------------------------
|
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
For the reporting person listed on this page, 2,728,011; for all reporting
persons as a group, 2,728,011 shares (13.1%)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
|_|
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.1%
14 TYPE OF REPORTING PERSON (See Instructions)
CO
6
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only)
Nierenberg Investment Management Offshore, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) |X|
(b) |_|
3 SEC USE ONLY
4 SOURCE OF FUNDS (See Instructions)
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Bahamas
--------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -----------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 459,066 common shares (2.2%)
REPORTING -----------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
459,066 common shares
--------------------------------------------------------------------------------
|
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
For the reporting person listed on this page, 459,066; for all reporting
persons as a group, 2,728,011 shares (13.1%)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
|_|
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.1%
14 TYPE OF REPORTING PERSON (See Instructions)
CO
7
This Amendment No. 9 to Schedule 13D (this "Amendment") amends the
below-indicated items from the Schedule 13D previously filed by or on behalf of
the undersigned parties (the "Reporting Persons"), as previously amended (the
"Schedule 13D"), by supplementing such Items with the information below:
Item 3. Source and Amount of Funds or Other Consideration.
The source of funds for purchases of Shares by each of the Reporting
Persons is the working capital of the applicable Fund. The aggregate purchase
price for the purchases of Shares reported in Item 5 was $445,364.
Item 4. Purpose of Transaction.
We have continued increasing our ownership of MDTH because the company's
share price remains deeply discounted from its intrinsic value, even though MDTH
has the strongest balance sheet and the best growth prospects in the for-profit
hospital industry. We now own 2,728,011 MDTH shares, 13.1% of the company, and
are the company's largest outside shareholder.
We believe, if MDTH were to trade at a price commensurate with its growth,
profitability, and balance sheet, that its share price should be approximately
150% higher, nearly $60 per share, in three years.
Because MDTH's shares have been so deeply under-valued recently we
enthusiastically endorse the company's recent decision to spend up to $59M to
repurchase its shares. We encourage MDTH to spend all $59M opportunistically
repurchasing shares, provided it can acquire shares at highly advantageous
prices. In fact, if and when MDTH spends the full $59M, we call on the company
to authorize the opportunistic repurchase of up to three million additional
shares, so it can drive the company's return on shareholder equity up into
double digits.
For the reasons set forth below (which update the substantive discussion in our
March 2006 Schedule 13D) we believe that completing and extending the share
repurchase program, provided shares can be bought at advantageous prices, makes
abundant sense:
1. Through the recent recapitalization of its Harlingen, Texas
hospital; the sale of its Lafayette, Louisiana hospital; and
increasingly profitable core operations at its remaining hospitals,
MDTH, at the time it committed to the share repurchase program, had
reduced its net debt to zero. The company enjoys the strongest
balance sheet in the hospital industry. Most of its public and
private for-profit competitors carry very substantial levels of
debt.
2. MDTH, beginning July 15, 2008, will be able to redeem two-thirds of
its debt, its $102M of 9 7/8% senior notes. Given the dramatic
improvement in MDTH's operational performance since the company
originally issued that debt, the company should be able to refinance
at more attractive rates and terms.
3. MDTH also has an opportunity to monetize the assets on its balance
sheet, generating cash with which to pay down, or even pay off, the
senior notes. There could be a terrific opportunity for the new CFO
to explore possible sale-leaseback transactions of the company's
real estate portfolio. MDTH owns the land and buildings at all of
its hospitals except Austin and Harlingen, Texas. According to
MDTH's most recent Form
8
10-K, its historical cost for the land is $25.5M and $231M for the
buildings. Recent hospital sale-leaseback transactions have been
priced at the cap rates of a lifetime.
4. The company's payer mix has been improving and, through new and
expanded managed care contracts, should continue to improve,
boosting margins and reducing political risk. As MDTH demonstrated
on its December 20, 2007 Analyst Day, from fiscal 2004 through the
fourth quarter of fiscal 2007, Medicare and Medicaid, as a
percentage of MDTH hospital division revenues, have fallen from 57%
to 47.8% while commercial payers have grown from 36% to 42.4%.
5. Possible Congressional efforts to penalize hospitals partially owned
by physicians are seriously misunderstood and their potential impact
exaggerated. The overwhelming reason why physicians refer patients
to MDTH hospitals is because MDTH hospitals are designed and
operated to maximize physician productivity and patients' clinical
outcomes. Patient transport is minimized; nursing oversight and
accessibility are maximized; physicians have ready access to
diagnostic tests and to surgical suites; and patients heal better
and faster in MDTH hospitals. Even if Congress were to limit or ban
physician ownership, these clinical and productivity benefits would
continue driving physician preference for MDTH hospitals.
MDTH's growth strategy carries unusually low risk and capital intensity, even as
the company drives revenues up 50%, to north of $1 billion, by 2010-2011. First,
MDTH is adding surgical revenues at existing hospitals by recruiting physicians
in specialty areas beyond cardiology. Second, MDTH is adding 135 beds at its
existing hospitals by building out already shelled space, at a remarkably low
cost of only $170,000 per bed. Third, MDTH is adding a tower at its Louisiana
Heart Hospital and Medical Center and may do the same on several of its other
existing hospital campuses.
The previous statements by the Reporting Persons regarding their investment in
MDTH represent solely their own analyses and judgments, based on
publicly-available information and their own internal evaluation thereof. Those
statements are not intended, and should not be relied on, as investment advice
to any other investor or prospective investor. To the extent those statements
reflect assessments of possible future developments, those assessments are
inherently subject to the uncertainties associated with all assessments of
future events; actual developments may materially differ as a result of
circumstances affecting MDTH and/or extrinsic factors such as developments in
the company's industry and the economic environment. The Reporting Persons
reserve the right to change their internal evaluation of this investment in the
future, as well as to increase or decrease their investment depending on their
evaluation, and to discuss the company and their investment in it with the
directors and executive officers of the company and third parties, without
further amending the Schedule 13D except as required by applicable rules.
Item 5. Interest in Securities of the Issuer.
(a, b) The Reporting Persons, in the aggregate, beneficially own 2,728,011
common shares, constituting approximately 13.1% of the outstanding Shares.
(c) Since the prior amendment to the Schedule 13D the following purchases
of Shares were made by the Reporting Persons in open market transactions:
9
Fund Transaction Date Shares Bought Price
---- ---------------- -------------- -----
D3 Family Canadian Fund LP 12/19/2007 88 22.70
D3 Family Fund LP 12/19/2007 4,950 22.70
D3 Family Bulldog Fund LP 12/19/2007 13,400 22.70
D3 Family Canadian Fund LP 12/20/2007 50 22.75
D3 Family Fund LP 12/20/2007 214 22.75
D3 Family Bulldog Fund LP 12/20/2007 900 22.75
|
10
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, each of the
undersigned certifies that the information set forth in the Statement is true,
complete and correct.
D3 Family Fund, L.P., D3 Family Bulldog Fund,
and D3 Family Canadian Fund, L.P.
By: Nierenberg Investment Management
Company, Inc.
Its: General Partner
December 27, 2007 By: /s/ David Nierenberg
------------------ -------------------------------------------
David Nierenberg, President
DIII Offshore Fund, L.P.
By: Nierenberg Investment Management
Offshore, Inc.
Its: General Partner
December 27, 2007 By: /s/ David Nierenberg
------------------ -------------------------------------------
David Nierenberg, President
Nierenberg Investment Management Company, Inc.
December 27, 2007 By: /s/ David Nierenberg
------------------ -------------------------------------------
David Nierenberg, President
Nierenberg Investment Management Offshore, Inc.
December 27, 2007 By: /s/ David Nierenberg
------------------ -------------------------------------------
David Nierenberg, President
|
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