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): November 10, 2008
MEDCATH CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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000-33009
(Commission File Number)
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56-2248952
(IRS Employer Identification No.)
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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:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a Material Definitive Agreement; Item 2.01. Completion
of Acquisition or Disposition of Assets; Item 2.03. Creation of a Direct
Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of
a Registrant.
On November 10, 2008, MedCath Corporation (“MedCath”) amended and restated its credit agreement
dated as of July 7, 2004 by and among MedCath, as parent guarantor, MedCath Holdings Corp.
(“Holdings”), a wholly-owned subsidiary of MedCath, as borrower, and the lenders from time to time
party thereto. The amended and restated credit agreement (“Credit Agreement”), dated as of
November 10, 2008, among MedCath, as a parent guarantor, Holdings, as the borrower, certain of the
subsidiaries of MedCath party thereto from time to time, as subsidiary guarantors, Bank of America,
N.A., as administrative agent, swing line lender and letter of credit issuer, and each of the
lenders party thereto from time to time, provides for a three-year term loan facility in the amount
of $75.0 million (“Term Loan”) and a revolving credit facility in the amount of $85.0 million
(“Revolver”), which includes a $25.0 million sub-limit for the issuance of stand-by and commercial
letters of credit and a $10.0 million sub-limit for swing-line loans. The aggregate amount
available under the Credit Agreement may be increased by an amount up to $50.0 million.
Borrowings under the Credit Agreement, excluding swing-line loans, bear interest per annum at a
rate equal to the sum of LIBOR plus the applicable margin or the alternate base rate plus the
applicable margin. In some cases, the applicable margin is different for the Revolver and the Term
Loan. Swing-line loans bear interest at the base rate plus the applicable margin. The applicable
margin will vary for loans under the Credit Agreement based on MedCath’s consolidated total
leverage ratio.
The Credit Agreement continues to be guaranteed jointly and severally by MedCath and certain of
MedCath’s existing and future, direct and indirect, subsidiaries and continues to be secured by a
first priority perfected security interest in all of the capital stock or other ownership interests
owned by Holdings, MedCath and the subsidiary guarantors in each of their subsidiaries, and,
subject to certain exceptions in the Credit Agreement or the other loan documents, all other
present and future assets and properties of MedCath, Holdings and the subsidiary guarantors and all
the intercompany notes.
The Credit Agreement requires compliance with certain financial covenants including a consolidated
senior secured leverage ratio test, a consolidated fixed charge coverage ratio test and a
consolidated total leverage ratio test. The Credit Agreement also contains customary restrictions
on, among other things, MedCath’s and its subsidiaries’ ability to incur liens; engage in mergers,
consolidations and sales of assets; incur debt; declare dividends; redeem stock and repurchase,
redeem and/or repay other debt; make loans, advances and investments and acquisitions; and entering
into transactions with affiliates.
The Credit Agreement contains events of default, including cross-defaults to certain indebtedness,
change of control events and events of default customary for syndicated commercial credit
facilities. Upon the occurrence of an event of default, we could be required to immediately repay
all outstanding amounts under the Credit Agreement.
Holdings is required to make mandatory prepayments of principal in specified amounts upon the
occurrence of certain events identified in the Credit Agreement and is permitted to make voluntary
prepayments of principal under the Credit Agreement. The Term Loan is subject to amortization of
principal in quarterly installments commencing on March 31, 2010 in the amounts set forth in the
Credit Agreement.
The foregoing summary is qualified in its entirety by the Credit Agreement, a copy of which is
filed herewith as Exhibit 10.1.
Item 2.02. Results of Operations and Financial Condition
On November 14, 2008, MedCath issued a press release announcing the Company’s results of operations
for the fiscal quarter ended September 30, 2008. A copy of the press release is furnished as
Exhibit 99.1.
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 and Adjusted Free Cash Flows. 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.
Adjusted Free Cash Flows is utilized by management to measure the quality of MedCath’s earnings.
Free Cash Flows is defined as cash flows from continuing operations
less non-expansion capital
expenditures. Management further adjusts the calculation of Free Cash Flows in arriving at
Adjusted Free Cash Flows by adjusting Free Cash Flows to evenly disseminate interest payments paid
twice a year.
Because Adjusted EBITDA and Adjusted Free Cash Flows are non-GAAP measures, Adjusted EBITDA or
Adjusted Free Cash Flows, 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 and cash flows from continuing operations to Adjusted
Free Cash Flows.
Item 9.01. Financial Statements and Exhibits
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Exhibit 10.1*
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Amended and Restated Credit Agreement,
dated as of November 10, 2008, among
MedCath Corporation, as a parent
guarantor, MedCath Holdings Corp., as
the borrower, certain of the
subsidiaries of MedCath Corporation
party thereto from time to time, as
subsidiary guarantors, Bank of America,
N.A., as administrative agent, swing
line lender and letter of credit issuer,
and each of the lenders party thereto
from time to time.
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Exhibit 99.1
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Press Release dated November 14, 2008
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Exhibit 99.2
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Financial Update dated November 14, 2008
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Certain portions of this exhibit have been omitted pursuant to a request for confidential
treatment filed with the Commission.
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Exhibits 99.1 and 99.2 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.