##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended:September 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from

to.
 American HomePatient, Inc.
 (exact name of registrant as specified in its charter)
 Delaware
    
    0-19532
    
    62-1474680(State or other jurisdiction of
    
    (Commission
    
    (IRS Employer Identification No.)incorporation or organization)
    
    File Number)
 5200 Maryland Way, Suite 400, Brentwood, Tennessee 37027  (Address of principal executive offices) (Zip Code)
 (615) 221-8884  (Registrants telephone number, including area code)
 None  (Former name, former address and former fiscal year, if changes since last report)
 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act. (Check one):
 Large accelerated filer o Accelerated filer o Non accelerated filer þ
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
 17,573,389  (Outstanding
shares of the issuers common stock as of October 30, 2006)




---



##### 



AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 INDEX
 Page No.PART I
    
    Financial InformationItem 1.
    
    Financial Statements (Unaudited)Interim Condensed Consolidated Balance Sheets
    
    3Interim Condensed Consolidated Statements of Operations  Three and Nine months ended September 30, 2006 and 2005
    
    5Interim Condensed Consolidated Statements of Cash Flows  Nine months ended September 30, 2006 and 2005
    
    6Notes to Interim Condensed Consolidated Financial Statements
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    15Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    34Item 4.
    
    Controls and Procedures
    
    34Report of Independent Registered Public Accounting Firm
    
    35PART II
    
    Other Information and SignaturesItem 1.
    
    Legal Proceedings
    
    36Item 1A.
    
    Risk Factors
    
    36Item 6.
    
    Exhibits
    
    40Signatures
    
    
    
    41EX-15.1 Awareness Letter of KPMG LLP.Ex-31.1 Section 302 CertificationEx-31.2 Section 302 CertificationEx-32.1 Section 906 CertificationEx-32.2 Section 906 Certification
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
  AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 
 INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
 (unaudited)
 September 30,
    
    
    December 31,2006
    
    
    2005ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    8,397,000
    
    
    $
    4,444,000Restricted cash
    
    
    650,000
    
    
    
    650,000Accounts receivable, less allowance for doubtful accounts of
$16,822,000 and $15,964,000, respectively
    
    
    55,460,000
    
    
    
    56,464,000Inventories, net of inventory valuation allowances of $955,000
and $863,000, respectively
    
    
    12,780,000
    
    
    
    14,197,000Prepaid expenses and other current assets
    
    
    3,608,000
    
    
    
    8,674,000Total current assets
    
    
    80,895,000
    
    
    
    84,429,000Property and equipment
    
    
    165,668,000
    
    
    
    172,541,000Less accumulated depreciation and amortization
    
    
    (112,695,000
    )
    
    
    (115,560,000
    )Property and equipment, net
    
    
    52,973,000
    
    
    
    56,981,000Goodwill
    
    
    121,834,000
    
    
    
    121,834,000Investment in joint ventures
    
    
    5,651,000
    
    
    
    8,128,000Other assets
    
    
    15,950,000
    
    
    
    16,262,000Total other assets
    
    
    143,435,000
    
    
    
    146,224,000TOTAL ASSETS
    
    $
    277,303,000
    
    
    $
    287,634,000
  3




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##### Table of Contents



AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
  September 30,
    
    
    December 31,2006
    
    
    2005LIABILITIES AND SHAREHOLDERS DEFICITCURRENT LIABILITIES:Current portion of long-term debt and capital leases
    
    $
    983,000
    
    
    $
    908,000Accounts payable
    
    
    21,728,000
    
    
    
    18,110,000Other payables
    
    
    1,042,000
    
    
    
    1,274,000Short-term note payable
    
    
    856,000
    
    
    
    3,805,000Accrued expenses:Payroll and related benefits
    
    
    5,252,000
    
    
    
    10,260,000Insurance, including self-insurance accruals
    
    
    6,506,000
    
    
    
    7,552,000Other
    
    
    5,403,000
    
    
    
    7,385,000Total current liabilities
    
    
    41,770,000
    
    
    
    49,294,000NONCURRENT LIABILITIES:Long-term debt and capital leases, less current portion
    
    
    250,235,000
    
    
    
    250,111,000Other noncurrent liabilities
    
    
    27,000
    
    
    
    50,000Total noncurrent liabilities
    
    
    250,262,000
    
    
    
    250,161,000Total liabilities
    
    
    292,032,000
    
    
    
    299,455,000MINORITY INTEREST
    
    
    618,000
    
    
    
    635,000SHAREHOLDERS DEFICITPreferred stock, $.01 par value; authorized 5,000,000 shares;
none issued and outstanding
    
    
    
    
    
    
    Common stock, $.01 par value; authorized 35,000,000 shares;
issued and outstanding, 17,573,000 and 17,388,000 shares,
respectively
    
    
    176,000
    
    
    
    174,000Additional paid-in capital
    
    
    174,881,000
    
    
    
    174,113,000Accumulated deficit
    
    
    (190,404,000
    )
    
    
    (186,743,000
    )Total shareholders deficit
    
    
    (15,347,000
    )
    
    
    (12,456,000
    )TOTAL LIABILITIES AND SHAREHOLDERS DEFICIT
    
    $
    277,303,000
    
    
    $
    287,634,000
  4




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##### Table of Contents



AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 
 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited)
 Three Months Ended Sept. 30,
    
    
    Nine Months Ended Sept. 30,2006
    
    
    2005
    
    
    2006
    
    
    2005REVENUES:Sales and related service revenues, net
    
    $
    35,128,000
    
    
    $
    35,297,000
    
    
    $
    103,642,000
    
    
    $
    104,825,000Rental revenues, net
    
    
    47,051,000
    
    
    
    46,410,000
    
    
    
    140,119,000
    
    
    
    139,987,000Total revenues, net
    
    
    82,179,000
    
    
    
    81,707,000
    
    
    
    243,761,000
    
    
    
    244,812,000EXPENSES:Cost of sales and related services
    
    
    20,912,000
    
    
    
    19,344,000
    
    
    
    61,784,000
    
    
    
    58,642,000Cost of rentals and other revenues, including rental equipment
depreciation of $8,789,000, $6,277,000, $22,629,000
and $18,173,000, respectively
    
    
    12,777,000
    
    
    
    10,116,000
    
    
    
    34,312,000
    
    
    
    29,773,000Operating expenses
    
    
    38,836,000
    
    
    
    39,692,000
    
    
    
    118,140,000
    
    
    
    118,908,000Bad debt expense
    
    
    2,541,000
    
    
    
    2,203,000
    
    
    
    8,104,000
    
    
    
    7,078,000General and administrative
    
    
    4,396,000
    
    
    
    4,177,000
    
    
    
    13,040,000
    
    
    
    12,484,000Depreciation, excluding rental equipment, and amortization
    
    
    925,000
    
    
    
    776,000
    
    
    
    2,797,000
    
    
    
    2,439,000Interest expense, net
    
    
    4,297,000
    
    
    
    4,304,000
    
    
    
    12,988,000
    
    
    
    12,907,000Other income, net
    
    
    (349,000
    )
    
    
    (262,000
    )
    
    
    (477,000
    )
    
    
    (417,000
    )Total expenses
    
    
    84,335,000
    
    
    
    80,350,000
    
    
    
    250,688,000
    
    
    
    241,814,000Earnings from unconsolidated joint ventures
    
    
    1,203,000
    
    
    
    1,245,000
    
    
    
    3,811,000
    
    
    
    3,624,000(LOSS) INCOME FROM OPERATIONS BEFORE
REORGANIZATION ITEMS AND INCOME TAXES
    
    
    (953,000
    )
    
    
    2,602,000
    
    
    
    (3,116,000
    )
    
    
    6,622,000Reorganization expense
    
    
    33,000
    
    
    
    146,000
    
    
    
    284,000
    
    
    
    333,000(LOSS) INCOME FROM OPERATIONS BEFORE INCOME TAXES
    
    
    (986,000
    )
    
    
    2,456,000
    
    
    
    (3,400,000
    )
    
    
    6,289,000Provision for income taxes
    
    
    87,000
    
    
    
    87,000
    
    
    
    261,000
    
    
    
    270,000NET (LOSS) INCOME
    
    $
    (1,073,000
    )
    
    $
    2,369,000
    
    
    $
    (3,661,000
    )
    
    $
    6,019,000NET (LOSS) INCOME PER COMMON SHARE:- Basic
    
    $
    (0.06
    )
    
    $
    0.14
    
    
    $
    (0.21
    )
    
    $
    0.35- Diluted
    
    $
    (0.06
    )
    
    $
    0.13
    
    
    $
    (0.21
    )
    
    $
    0.34WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:- Basic
    
    
    17,573,000
    
    
    
    17,377,000
    
    
    
    17,533,000
    
    
    
    17,265,000- Diluted
    
    
    17,573,000
    
    
    
    18,018,000
    
    
    
    17,533,000
    
    
    
    17,959,000
  5




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##### Table of Contents



AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 
 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited)
 Nine Months Ended Sept. 30,2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (3,661,000
    )
    
    $
    6,019,000Adjustments to reconcile net (loss) income to net cash provided by
operating activities:Depreciation and amortization
    
    
    25,426,000
    
    
    
    20,612,000Bad debt expense
    
    
    8,104,000
    
    
    
    7,078,000Stock compensation expense
    
    
    426,000
    
    
    
    Equity in earnings of unconsolidated joint ventures
    
    
    (2,401,000
    )
    
    
    (2,271,000
    )Minority interest
    
    
    318,000
    
    
    
    295,000Reorganization items
    
    
    284,000
    
    
    
    333,000Reorganization items paid
    
    
    (268,000
    )
    
    
    (383,000
    )Change in assets and liabilities:Accounts receivable
    
    
    (7,670,000
    )
    
    
    (9,496,000
    )Inventories
    
    
    1,417,000
    
    
    
    1,043,000Prepaid expenses and other current assets
    
    
    5,066,000
    
    
    
    2,868,000Accounts payable, other payables and accrued expenses
    
    
    (4,779,000
    )
    
    
    (2,476,000
    )Other assets and liabilities
    
    
    (666,000
    )
    
    
    (2,670,000
    )Due to unconsolidated joint ventures, net
    
    
    4,878,000
    
    
    
    2,797,000Net cash provided by operating activities
    
    
    26,474,000
    
    
    
    23,749,000CASH FLOWS FROM INVESTING ACTIVITIES:Additions to property and equipment, net
    
    
    (19,536,000
    )
    
    
    (18,951,000
    )Net cash used in investing activities
    
    $
    (19,536,000
    )
    
    $
    (18,951,000
    )
  6




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##### Table of Contents



AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
  Nine Months Ended Sept. 30,2006
    
    
    2005CASH FLOWS FROM FINANCING ACTIVITIES:Distributions to minority interest owners
    
    $
    (335,000
    )
    
    $
    (220,000
    )Proceeds from exercise of employee stock options
    
    
    457,000
    
    
    
    529,000Principal payments on long-term debt and capital leases
    
    
    (158,000
    )
    
    
    (1,035,000
    )Principal payments on short-term note payable
    
    
    (2,949,000
    )
    
    
    (2,878,000
    )Net cash used in financing activities
    
    
    (2,985,000
    )
    
    
    (3,604,000
    )INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    3,953,000
    
    
    
    1,194,000CASH AND CASH EQUIVALENTS, beginning of period
    
    
    4,444,000
    
    
    
    5,772,000CASH AND CASH EQUIVALENTS, end of period
    
    $
    8,397,000
    
    
    $
    6,966,000SUPPLEMENTAL INFORMATION:Cash payments of interest
    
    $
    12,881,000
    
    
    $
    15,456,000Cash payments of income taxes
    
    $
    426,000
    
    
    $
    270,000NON-CASH ACTIVITY:Capital leases entered into for property and equipment
    
    $
    927,000
    
    
    $
    Write-off of related notes receivable and notes payable
    
    $
    570,000
    
    
    $
    
  7




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##### Table of Contents



AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 
 NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 1. BASIS OF PRESENTATION
   2. STOCK BASED COMPENSATION




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##### Table of Contents



Three Months
    
    
    Nine MonthsEnded Sept. 30,
    
    
    Ended Sept. 30,2005
    
    
    2005Net income  as reported
    
    $
    2,369,000
    
    
    $
    6,019,000Additional compensation expense, net
    
    
    (73,000
    )
    
    
    (298,000
    )Net income  pro forma
    
    
    2,296,000
    
    
    
    5,721,000Net income per common share  as reported- Basic
    
    $
    0.14
    
    
    $
    0.35- Diluted
    
    $
    0.13
    
    
    $
    0.34Net income per common share  pro forma- Basic
    
    $
    0.13
    
    
    $
    0.33- Diluted
    
    $
    0.13
    
    
    $
    0.32
     9




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##### Table of Contents



WeightedAverageOptions
    
    
    Exercise PriceOutstanding at December 31, 2005
    
    
    2,105,500
    
    
    $
    5.16Granted
    
    
    560,000
    
    
    
    3.30Exercised
    
    
    (185,000
    )
    
    
    1.86Canceled
    
    
    (267,750
    )
    
    
    17.50Outstanding at March 31, 2006
    
    
    2,212,750
    
    
    $
    3.47Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Canceled
    
    
    (1,000
    )
    
    
    18.13Outstanding at June 30, 2006
    
    
    2,211,750
    
    
    
    3.47Granted
    
    
    10,000
    
    
    
    0.61Exercised
    
    
    
    
    
    
    Canceled
    
    
    (500
    )
    
    
    18.13Outstanding at September 30, 2006
    
    
    2,221,250
    
    
    
    3.45
  10




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##### Table of Contents



WeightedAverageExerciseWeighted
    
    
    
    
    
    
    
    
    
    
    Price of
    
    
    WeightedAverage
    
    
    
    
    
    
    Options
    
    
    Options
    
    
    AverageWeighted
    
    
    Remaining
    
    
    
    
    
    
    Exercisable
    
    
    Exercisable
    
    
    RemainingAverage
    
    
    Contractual
    
    
    Aggregate
    
    
    at
    
    
    at
    
    
    Contractual
    
    
    AggregateYear of
    
    Options
    
    
    Exercise
    
    Exercise
    
    
    Life in
    
    
    Intrinsic
    
    
    Sept. 30,
    
    
    Sept. 30
    
    
    Life in
    
    
    IntrinsicGrant
    
    Outstanding
    
    
    Prices
    
    Price
    
    
    Years
    
    
    Value
    
    
    2006
    
    
    2006
    
    
    Years
    
    
    Value1997
    
    
    52,000
    
    
    $21.50
    
    $
    21.50
    
    
    
    0.41
    
    
    $
    
    
    
    
    52,000
    
    
    $
    21.50
    
    
    
    0.41
    
    
    $
    1998
    
    
    484,250
    
    
    $2.13 to $18.13
    
    $
    6.23
    
    
    
    2.01
    
    
    
    
    
    
    
    484,250
    
    
    $
    6.23
    
    
    
    2.01
    
    
    
    1999
    
    
    200,000
    
    
    $0.56
    
    $
    0.56
    
    
    
    3.12
    
    
    
    28,000
    
    
    
    200,000
    
    
    $
    0.56
    
    
    
    3.12
    
    
    
    28,0002000
    
    
    220,000
    
    
    $0.17 to $0.30
    
    $
    0.18
    
    
    
    4.10
    
    
    
    115,300
    
    
    
    220,000
    
    
    $
    0.18
    
    
    
    4.10
    
    
    
    115,3002004
    
    
    450,000
    
    
    $1.31 to $1.80
    
    $
    1.64
    
    
    
    7.64
    
    
    
    
    
    
    
    375,000
    
    
    $
    1.70
    
    
    
    7.55
    
    
    
    2005
    
    
    245,000
    
    
    $2.21 to $3.83
    
    $
    3.23
    
    
    
    8.38
    
    
    
    
    
    
    
    117,500
    
    
    $
    3.25
    
    
    
    8.36
    
    
    
    2006
    
    
    570,000
    
    
    $0.61 to $3.30
    
    $
    3.25
    
    
    
    9.40
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    2,221,250
    
    
    
    
    
    
    
    
    
    
    
    
    $
    143,300
    
    
    
    1,448,750
    
    
    
    
    
    
    
    
    
    
    $
    143,300
  WeightedAverageExerciseWeighted
    
    
    
    
    
    Price of
    
    WeightedAverage
    
    Options
    
    Options
    
    AverageWeighted
    
    Remaining
    
    Exercisable
    
    Exercisable
    
    RemainingAverage
    
    Contractual
    
    at
    
    at
    
    ContractualYear of
    
    Options
    
    Exercise
    
    Exercise
    
    Life in
    
    December 31,
    
    December 31,
    
    Life inGrant
    
    Outstanding
    
    Prices
    
    Price
    
    Years
    
    2005
    
    2005
    
    Years1996
    
    
    267,750
    
    
    $17.50
    
    $
    17.50
    
    
    
    0.04
    
    
    
    267,750
    
    
    $
    17.50
    
    
    
    0.041997
    
    
    52,000
    
    
    $21.50
    
    $
    21.50
    
    
    
    1.12
    
    
    
    52,000
    
    
    $
    21.50
    
    
    
    1.121998
    
    
    520,750
    
    
    $2.13 to $18.13
    
    $
    5.99
    
    
    
    2.77
    
    
    
    520,750
    
    
    $
    5.99
    
    
    
    2.771999
    
    
    200,000
    
    
    $0.56
    
    $
    0.56
    
    
    
    3.86
    
    
    
    200,000
    
    
    $
    0.56
    
    
    
    3.862000
    
    
    220,000
    
    
    $0.17 to $0.30
    
    $
    0.18
    
    
    
    4.85
    
    
    
    220,000
    
    
    $
    0.18
    
    
    
    4.852004
    
    
    600,000
    
    
    $1.31 to $1.80
    
    $
    1.68
    
    
    
    8.34
    
    
    
    425,000
    
    
    $
    1.71
    
    
    
    8.282005
    
    
    245,000
    
    
    $2.21 to $3.83
    
    $
    3.23
    
    
    
    9.13
    
    
    
    61,250
    
    
    $
    3.23
    
    
    
    9.132,105,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,746,750
  11




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##### Table of Contents



WeightedAverageOptions
    
    Exercise PriceOutstanding at December 31, 2005 and September 30, 2006
    
    
    
    424,000
    
    $
    
    1.99
  Weighted
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    WeightedRemaining
    
    
    Remaining
    
    
    
    
    
    
    AverageWeighted
    
    
    Contractual
    
    
    Contractual
    
    
    
    
    
    
    ExerciseAverage
    
    
    Life in
    
    
    Life in
    
    
    
    
    
    
    Price of
    
    
    AggregateYear of
    
    Options
    
    
    Exercise
    
    Exercise
    
    
    Years
    
    
    Years
    
    
    Options
    
    
    Options
    
    
    IntrinsicGrant
    
    Outstanding
    
    
    Prices
    
    Price
    
    
    12/31/05
    
    
    9/30/06
    
    
    Exercisable
    
    
    Exercisable
    
    
    Value1996
    
    
    6,000
    
    
    $26.25
    
    $
    26.25
    
    
    
    1.00
    
    
    
    0.25
    
    
    
    6,000
    
    
    $
    26.25
    
    
    $
    1997
    
    
    6,000
    
    
    $21.06
    
    $
    21.06
    
    
    
    2.00
    
    
    
    1.25
    
    
    
    6,000
    
    
    $
    21.06
    
    
    
    1998
    
    
    6,000
    
    
    $1.69
    
    $
    1.69
    
    
    
    3.00
    
    
    
    2.25
    
    
    
    6,000
    
    
    $
    1.69
    
    
    
    1999
    
    
    6,000
    
    
    $0.53
    
    $
    0.53
    
    
    
    4.00
    
    
    
    3.25
    
    
    
    6,000
    
    
    $
    0.53
    
    
    
    1,0202000
    
    
    140,000
    
    
    $0.20 to $0.30
    
    $
    0.26
    
    
    
    4.61
    
    
    
    3.87
    
    
    
    140,000
    
    
    $
    0.26
    
    
    
    61,8002001
    
    
    15,000
    
    
    $0.75
    
    $
    0.75
    
    
    
    6.00
    
    
    
    5.25
    
    
    
    15,000
    
    
    $
    0.75
    
    
    
    2002
    
    
    15,000
    
    
    $0.15
    
    $
    0.15
    
    
    
    7.00
    
    
    
    6.26
    
    
    
    15,000
    
    
    $
    0.15
    
    
    
    8,2502003
    
    
    80,000
    
    
    $1.29
    
    $
    1.29
    
    
    
    8.00
    
    
    
    7.26
    
    
    
    80,000
    
    
    $
    1.29
    
    
    
    2004
    
    
    100,000
    
    
    $1.18 to $3.46
    
    $
    2.32
    
    
    
    8.72
    
    
    
    7.97
    
    
    
    100,000
    
    
    $
    2.32
    
    
    
    2005
    
    
    50,000
    
    
    $3.27
    
    $
    3.27
    
    
    
    10.00
    
    
    
    9.26
    
    
    
    50,000
    
    
    $
    3.27
    
    
    
    424,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    424,000
    
    
    
    
    
    
    $
    71,070
  3. NET (LOSS) INCOME PER COMMON SHARE
  12




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Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net (loss) income
    
    $
    (1,073,000
    )
    
    $
    2,369,000
    
    
    $
    (3,661,000
    )
    
    $
    6,019,000Weighted average common shares outstanding
    
    
    17,573,000
    
    
    
    17,377,000
    
    
    
    17,533,000
    
    
    
    17,265,000Effect of dilutive options
    
    
    
    
    
    
    641,000
    
    
    
    
    
    
    
    694,000Adjusted diluted common shares outstanding
    
    $
    17,573,000
    
    
    $
    18,018,000
    
    
    $
    17,533,000
    
    
    $
    17,959,000Net (loss) income per common share- Basic
    
    $
    (0.06
    )
    
    $
    0.14
    
    
    $
    (0.21
    )
    
    $
    0.35- Diluted
    
    $
    (0.06
    )
    
    $
    0.13
    
    
    $
    (0.21
    )
    
    $
    0.34
 4. PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
     13




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5. GOODWILL IMPAIRMENT ANALYSIS
    14




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ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 including, without limitation, statements
containing the words believes, anticipates, intends, expects, estimates, projects,
may, plan, will, likely, could and words of similar import. Such statements include
statements concerning the Companys Approved Plan (as defined in Note 4 to the interim condensed
consolidated financial statements), other effects and consequences of the Bankruptcy Filing (as
defined in Note 4 to the interim condensed consolidated financial statements), forecasts upon which
the Approved Plan is based, business strategy, the ability to satisfy interest expense and
principal repayment obligations, operations, cost savings initiatives, industry, economic
performance, financial condition, liquidity and capital resources, adoption of, or changes in,
accounting policies and practices, existing government regulations and changes in, or the failure
to comply with, governmental regulations, legislative proposals for healthcare reform, the ability
to enter into strategic alliances and arrangements with managed care providers on an acceptable
basis, and changes in reimbursement policies. Such statements are not guarantees of future
performance and are subject to various risks and uncertainties. The Companys actual results may
differ materially from the results discussed in such forward-looking statements because of a number
of factors, including those identified in the Risk Factors section and elsewhere in this
Quarterly Report on Form 10-Q. The forward-looking statements are made as of the date of this
Quarterly Report on Form 10-Q and the Company does not undertake to update the forward-looking
statements or to update the reasons that actual results could differ from those projected in the
forward-looking statements.
 Overview
  15




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Nine Months Ended Sept. 30,2006
    
    2005Oxygen systems
    
    
    37
    %
    
    
    37
    %Inhalation drugs
    
    
    10
    
    
    
    11Nebulizers
    
    
    2
    
    
    
    2Respiratory assist devices
    
    
    22
    
    
    
    19Other respiratory
    
    
    3
    
    
    
    4Total home respiratory therapy services
    
    
    74
    
    
    
    73Enteral nutrition services
    
    
    6
    
    
    
    6Other infusion services
    
    
    6
    
    
    
    6Total home infusion therapy services
    
    
    12
    
    
    
    12Total home medical equipment and supplies
    
    
    14
    
    
    
    15100
    %
    
    
    100
    %
  Revenue Growth
 16




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Bad Debt Expense
 Cash Flow.
 Days Sales Outstanding
 Unbilled Revenue.
 17




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Productivity and Profitability
  Trends, Events, and Uncertainties
   18




---



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Reimbursement Changes
     19




---



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20




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21




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22




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23




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HIPAA
  Medicaid.
 Resolution of Bankruptcy Appeal
  24




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Critical Accounting Policies and Estimates
  Results of Operations
  25




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Percentage of Revenues
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales and related services
    
    
    25.4
    
    
    
    23.7
    
    
    
    25.3
    
    
    
    24.0Cost of rental, including rental equipment
depreciation
    
    
    15.5
    
    
    
    12.3
    
    
    
    14.1
    
    
    
    12.2Operating expenses
    
    
    47.3
    
    
    
    48.6
    
    
    
    48.5
    
    
    
    48.5Bad debt expenses
    
    
    3.1
    
    
    
    2.7
    
    
    
    3.3
    
    
    
    2.9General and administrative expense
    
    
    5.3
    
    
    
    5.1
    
    
    
    5.3
    
    
    
    5.1Depreciation, excluding rental equipment,
and amortization
    
    
    1.1
    
    
    
    0.9
    
    
    
    1.1
    
    
    
    1.0Interest expense, net
    
    
    5.2
    
    
    
    5.3
    
    
    
    5.3
    
    
    
    5.3Other income, net
    
    
    (0.4
    )
    
    
    (0.3
    )
    
    
    (0.2
    )
    
    
    (0.2
    )Total expenses
    
    
    102.5
    
    
    
    98.3
    
    
    
    102.7
    
    
    
    98.8Earnings from unconsolidated joint
ventures
    
    
    1.5
    
    
    
    1.5
    
    
    
    1.6
    
    
    
    1.5(Loss) income from operations before
reorganization expense and income taxes
    
    
    (1.0
    )
    
    
    3.2
    
    
    
    (1.1
    )
    
    
    2.7Reorganization items
    
    
    0.0
    
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.1Provision for income taxes
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Net (loss) income
    
    
    (1.1
    )%
    
    
    2.9
    %
    
    
    (1.3
    )%
    
    
    2.5
    %
 26




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Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005
 Revenues.
 Sales and Related Services Revenues.
 Rental Revenues
 Cost of Sales and Related Services
 Cost of Rental Revenues
 27




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Operating Expenses
 Bad Debt Expense.
 General and Administrative Expenses
 Depreciation and Amortization
 Interest Expense, Net
 Other Expense (Income), Net
 Earnings from Unconsolidated Joint Ventures
 Provision for Income Taxes
 28




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##### Table of Contents



Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005
 Revenues.
 Sales and Related Services Revenues.
 Rental Revenues
 Cost of Sales and Related Services
 Cost of Rental Revenues
 29




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Operating Expenses
 Bad Debt Expense.
 General and Administrative Expenses
 Depreciation and Amortization
 Interest Expense, Net
 Other Income, Net
 30




---



##### Table of Contents



Earnings from Unconsolidated Joint Ventures
 Provision for Income Taxes
 Liquidity and Capital Resources
       31




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32




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Contractual Obligations and Commercial Commitments
  Twelve Months Ending September 30,After Sept. 30,Total
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010Long-term debt and
capital leases
    
    $
    251,218,000
    
    
    $
    983,000
    
    
    $
    109,000
    
    
    $
    250,062,000
    
    
    $
    51,000
    
    
    $
    13,000Interest on long-term debt
and capital leases
    
    
    48,745,000
    
    
    
    17,213,000
    
    
    
    17,204,000
    
    
    
    14,327,000
    
    
    
    1,000
    
    
    
    Operating lease
obligations
    
    
    23,609,000
    
    
    
    11,112,000
    
    
    
    7,196,000
    
    
    
    3,575,000
    
    
    
    1,434,000
    
    
    
    292,000Total contractual cash
obligations
    
    $
    323,572,000
    
    
    $
    29,308,000
    
    
    $
    24,509,000
    
    
    $
    267,964,000
    
    
    $
    1,486,000
    
    
    $
    305,000
       33




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ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4
 CONTROLS AND PROCEDURES
  34




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
      
 35




---



##### Table of Contents



PART
II. OTHER INFORMATION
 
 ITEM 1
 LEGAL PROCEEDINGS
  
 ITEM
1A  RISK FACTORS
  Medicare Reimbursement Reductions.
 Dependence on Reimbursement by Third-Party Payors.
 Substantial Leverage.
 36




---



##### Table of Contents



Expense Reduction.
 Government Regulation.
 Collectibility of Accounts Receivable.
 Health Care Initiatives.
 37




---



##### Table of Contents



Role of Managed Care.
 Liquidity.
 HIPAA Compliance.
 Continued Accreditation
 38




---



##### Table of Contents



Ability to Attract and Retain Management.
 Competition.
 Liability and Adequacy of Insurance.
 39




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##### Table of Contents



ITEM 6  EXHIBITS
 EXHIBITNUMBER
    
    DESCRIPTION OF EXHIBITS2.1
    
    Second Amended Joint Plan of Reorganization Proposed by the Debtors and the Official
Unsecured Creditors Committee dated January 2, 2003 (incorporated by reference to Exhibit 99.3
to the Companys Current Report on Form 8-K filed on March 27, 2003).3.1
    
    Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the
Companys Registration Statement No. 33-42777 on Form S-1).3.2
    
    Certificate of Amendment to the Certificate of Incorporation of the Company dated October 31,
1991 (incorporated by reference to Exhibit 3.2 to Amendment No. 2 to the Companys
Registration Statement No. 33-42777 on Form S-1).3.3
    
    Certificate of Amendment to the Certificate of Incorporation of the Company Dated May 14,
1992 (incorporated by reference to the Companys Registration Statement on Form S-8 dated
February 16, 1993).3.4
    
    Certificate of Ownership and Merger merging American HomePatient, Inc. into Diversicare Inc.
dated May 11, 1994 (incorporated by reference to Exhibit 4.4 to the Companys Registration
Statement No.33-89568 on Form S-2).3.5
    
    Certificate of Amendment to the Certificate of Incorporation of the Company dated June 8,
1996 (incorporated by reference to Exhibit 3.5 to the Companys Quarterly Report on Form 10-Q
for the quarter ended September 30, 2004).3.6
    
    Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.3 to the Companys
Registration Statement No. 33-42777 on Form S-1).15.1
    
    Awareness Letter of KPMG LLP.31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  Chief Executive
Officer.31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  Chief Financial
Officer.32.1
    
    Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002  Chief Executive Officer.32.2
    
    Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002  Chief Financial Officer.
 40




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SIGNATURES
  AMERICAN HOMEPATIENT, INC.November 1, 2006
    By:
    /s/ Stephen L. ClantonStephen L. ClantonChief Financial Officer and An Officer Duly
Authorized to Sign on Behalf of the registrant 41