##### 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:March 31, 2008
 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)
  þ o
  Large accelerated filer o   
    Accelerated filer o
    Non-accelerated filer o
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
  
 (Outstanding
shares of the issuers common stock as of April 30, 2008)




---



##### 



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
months ended March 31, 2008 and 2007
    
    
    5Interim Condensed Consolidated Statements of Cash Flows  Three
months ended March 31, 2008 and 2007
    
    
    6Notes to Interim Condensed Consolidated Financial Statements
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    16Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 4T.
    
    Controls and Procedures
    
    
    33Report of Independent Registered Public Accounting Firm
    
    
    34PART II
    
    Other Information and SignaturesItem 1A.
    
    Risk Factors
    
    
    35Item 6.
    
    Exhibits
    
    
    40Signatures
    
    
    
    
    41EX-15.1 Awareness Letter of KPMG LLP.Ex-31.1 Section 302 Certification of the CEOEx-31.2 Section 302 Certification of the CFOEx-32.1 Section 906 Certification of the CEOEx-32.2 Section 906 Certification of the CFO
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
  AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 
 INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
 March 31,
    
    
    December 31,ASSETS
    
    2008
    
    
    2007CURRENT ASSETS:Cash and cash equivalents
    
    $
    14,093,000
    
    
    $
    11,018,000Restricted cash
    
    
    250,000
    
    
    
    250,000Accounts receivable, less allowance for doubtful accounts of
$10,526,000 and $11,822,000, respectively
    
    
    41,339,000
    
    
    
    45,142,000Inventories, net of inventory valuation allowances of $570,000
and $639,000 respectively
    
    
    10,165,000
    
    
    
    11,616,000Prepaid expenses and other current assets
    
    
    8,705,000
    
    
    
    13,099,000Total current assets
    
    
    74,552,000
    
    
    
    81,125,000Property and equipment
    
    
    150,260,000
    
    
    
    151,970,000Less accumulated depreciation and amortization
    
    
    (112,978,000
    )
    
    
    (111,239,000
    )Property and equipment, net
    
    
    37,282,000
    
    
    
    40,731,000Goodwill
    
    
    122,093,000
    
    
    
    122,093,000Investment in joint ventures
    
    
    7,541,000
    
    
    
    8,447,000Other assets
    
    
    17,405,000
    
    
    
    17,732,000Total other assets
    
    
    147,039,000
    
    
    
    148,272,000TOTAL ASSETS
    
    $
    258,873,000
    
    
    $
    270,128,000
  3




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##### Table of Contents



AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
  March 31,
    
    
    December 31,LIABILITIES AND SHAREHOLDERS DEFICIT
    
    2008
    
    
    2007CURRENT LIABILITIES:Current portion of long-term debt and capital leases
    
    $
    6,189,000
    
    
    $
    8,221,000Accounts payable
    
    
    16,168,000
    
    
    
    16,558,000Other payables
    
    
    1,047,000
    
    
    
    1,092,000Short-term notes payable
    
    
    111,000
    
    
    
    274,000Deferred revenue
    
    
    6,298,000
    
    
    
    6,265,000Accrued expenses:Payroll and related benefits
    
    
    5,044,000
    
    
    
    9,151,000Insurance, including self-insurance accruals
    
    
    5,859,000
    
    
    
    5,778,000Other
    
    
    5,238,000
    
    
    
    8,940,000Total current liabilities
    
    
    45,954,000
    
    
    
    56,279,000NONCURRENT LIABILITIES:Long-term debt and capital leases, less current portion
    
    
    233,217,000
    
    
    
    236,189,000Deferred tax liability
    
    
    4,594,000
    
    
    
    3,474,000Other noncurrent liabilities
    
    
    51,000
    
    
    
    51,000Total noncurrent liabilities
    
    
    237,862,000
    
    
    
    239,714,000Total liabilities
    
    
    283,816,000
    
    
    
    295,993,000MINORITY INTEREST
    
    
    528,000
    
    
    
    550,000SHAREHOLDERS 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 shares
    
    
    176,000
    
    
    
    176,000Additional paid-in capital
    
    
    175,896,000
    
    
    
    175,506,000Accumulated deficit
    
    
    (201,543,000
    )
    
    
    (202,097,000
    )Total shareholders deficit
    
    
    (25,471,000
    )
    
    
    (26,415,000
    )TOTAL LIABILITIES AND SHAREHOLDERS DEFICIT
    
    $
    258,873,000
    
    
    $
    270,128,000
  4




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##### Table of Contents



AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 
 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 Three Months Ended March 31,2008
    
    
    2007REVENUES:Sales and related service revenues, net
    
    $
    28,378,000
    
    
    $
    31,910,000Rental revenues, net
    
    
    40,836,000
    
    
    
    45,023,000Total revenues, net
    
    
    69,214,000
    
    
    
    76,933,000EXPENSES:Cost of sales and related services
    
    
    14,318,000
    
    
    
    20,051,000Cost of rentals and other revenues, including rental equipment
depreciation of $7,235,000 and $7,520,000, respectively
    
    
    9,452,000
    
    
    
    10,412,000Operating expenses
    
    
    34,300,000
    
    
    
    35,023,000Bad debt expense
    
    
    1,349,000
    
    
    
    2,509,000General and administrative
    
    
    4,782,000
    
    
    
    4,549,000Depreciation, excluding rental equipment, and amortization
    
    
    1,079,000
    
    
    
    713,000Interest expense, net
    
    
    3,905,000
    
    
    
    4,092,000Other income, net
    
    
    (386,000
    )
    
    
    (160,000
    )Change of control income (See Note 6)
    
    
    (68,000
    )
    
    
    Total expenses
    
    
    68,731,000
    
    
    
    77,189,000Earnings from unconsolidated joint ventures
    
    
    1,341,000
    
    
    
    1,492,000INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES
    
    
    1,824,000
    
    
    
    1,236,000Provision for income taxes (See Note 4)
    
    
    1,270,000
    
    
    
    87,000INCOME FROM CONTINUING OPERATIONS
    
    $
    554,000
    
    
    $
    1,149,000DISCONTINUED OPERATIONS:Loss from discontinued operations, net of tax
    
    
    
    
    
    
    (76,000
    )NET INCOME
    
    $
    554,000
    
    
    $
    1,073,000NET INCOME(LOSS) PER COMMON SHARE  BASICIncome from continuing operations
    
    $
    0.03
    
    
    $
    0.07Loss from discontinued operations
    
    
    
    
    
    
    (0.01
    )NET INCOME PER COMMON SHARE  BASIC
    
    $
    0.03
    
    
    $
    0.06NET INCOME(LOSS) PER COMMON SHARE  DILUTEDIncome from continuing operations
    
    $
    0.03
    
    
    $
    0.06Loss from discontinued operations
    
    
    
    
    
    
    NET INCOME PER COMMON SHARE  DILUTED
    
    $
    0.03
    
    
    $
    0.06WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:- Basic
    
    
    17,573,000
    
    
    
    17,573,000- Diluted
    
    
    17,814,000
    
    
    
    17,937,000
  5




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##### Table of Contents



AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 
 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 Three Months Ended March 31,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    554,000
    
    
    $
    1,073,000Adjustments to reconcile net income to net cash provided by
operating activities:Change of control income
    
    
    (68,000
    )
    
    
    Deferred tax expense
    
    
    1,120,000
    
    
    
    Depreciation and amortization
    
    
    8,314,000
    
    
    
    8,242,000Bad debt expense
    
    
    1,349,000
    
    
    
    2,583,000Stock compensation expense
    
    
    55,000
    
    
    
    260,000Equity in earnings of unconsolidated joint ventures
    
    
    (882,000
    )
    
    
    (1,005,000
    )Minority interest
    
    
    95,000
    
    
    
    100,000Change in assets and liabilities:Accounts receivable
    
    
    2,454,000
    
    
    
    949,000Inventories
    
    
    1,451,000
    
    
    
    481,000Prepaid expenses and other current assets
    
    
    4,394,000
    
    
    
    (1,965,000
    )Deferred revenue
    
    
    33,000
    
    
    
    (180,000
    )Accounts payable, other payables and accrued expenses
    
    
    (8,502,000
    )
    
    
    (6,365,000
    )Other assets and liabilities
    
    
    212,000
    
    
    
    596,000Due to unconsolidated joint ventures, net
    
    
    1,788,000
    
    
    
    2,134,000Net cash provided by operating activities
    
    
    12,367,000
    
    
    
    6,903,000CASH FLOWS FROM INVESTING ACTIVITIES:Additions to property and equipment, net
    
    
    (4,008,000
    )
    
    
    (3,168,000
    )Net cash used in investing activities
    
    $
    (4,008,000
    )
    
    $
    (3,168,000
    )
  6




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##### Table of Contents



AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
  Three Months Ended March 31,2008
    
    
    2007CASH FLOWS FROM FINANCING ACTIVITIES:Distributions to minority interest owners
    
    $
    (117,000
    )
    
    $
    (147,000
    )Principal payments on long-term debt and capital leases
    
    
    (5,004,000
    )
    
    
    (590,000
    )Proceeds on short-term note payable
    
    
    
    
    
    
    3,203,000Principal payments on short-term note payable
    
    
    (163,000
    )
    
    
    (792,000
    )Net cash (used in) provided by financing activities
    
    
    (5,284,000
    )
    
    
    1,674,000INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    3,075,000
    
    
    
    5,409,000CASH AND CASH EQUIVALENTS, beginning of period
    
    
    11,018,000
    
    
    
    6,786,000CASH AND CASH EQUIVALENTS, end of period
    
    $
    14,093,000
    
    
    $
    12,195,000SUPPLEMENTAL INFORMATION:Cash payments of interest
    
    $
    4,163,000
    
    
    $
    4,241,000Cash payments of income taxes
    
    $
    152,000
    
    
    $
    84,000Non-Cash
Activity:Capital leases entered into for property and equipment
and changes in accounts payable related to purchases of
property and equipment
    
    $
    742,000
    
    
    $
    1,618,000Change of control:Other liabilities
    
    $
    (403,000
    )
    
    $
    Additional paid-in capital
    
    $
    335,000
    
    
    $
    
  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
   8




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##### Table of Contents



WeightedAverageOptions
    
    
    Exercise PriceOutstanding at December 31, 2007
    
    
    2,539,150
    
    
    $
    2.61Granted
    
    
    485,000
    
    
    
    1.03Exercised
    
    
    
    
    
    
    Canceled
    
    
    (109,150
    )
    
    
    18.13Outstanding at March 31, 2008
    
    
    2,915,000
    
    
    $
    1.77
  WeightedAverageGrant-dateNonvested Options
    
    Options
    
    
    Fair ValueBalance at December 31, 2007
    
    
    481,250
    
    
    $
    1.82Granted
    
    
    485,000
    
    
    
    0.76Vested
    
    
    (190,834
    )
    
    
    2.10Forfeited
    
    
    
    
    
    
    Balance at March 31, 2008
    
    
    775,416
    
    
    $
    1.09
 9




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##### Table of Contents



WeightedWeighted
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    Contractual
    
    
    AggregateWeighted
    
    
    
    
    
    
    
    
    
    
    Price of
    
    
    Life in
    
    
    IntrinsicAverage
    
    
    
    
    
    
    Options
    
    
    Options
    
    
    Years of
    
    
    ValueWeighted
    
    
    Remaining
    
    
    
    
    
    
    Exercisable
    
    
    Exercisable
    
    
    Options
    
    
    of OptionsAverage
    
    
    Contractual
    
    
    Aggregate
    
    
    at
    
    
    at
    
    
    Exercisable
    
    
    ExercisableYear of
    
    Options
    
    
    Exercise
    
    
    Exercise
    
    
    Life in
    
    
    Intrinsic
    
    
    March 31,
    
    
    March 31,
    
    
    at March 31,
    
    
    at March 31,Grant
    
    Outstanding
    
    
    Prices
    
    
    Price
    
    
    Years
    
    
    Value
    
    
    2008
    
    
    2008
    
    
    2008
    
    
    20081998
    
    
    360,000
    
    
    $
    2.13
    
    
    $
    2.13
    
    
    
    0.69
    
    
    
    
    
    
    
    360,000
    
    
    $
    2.13
    
    
    
    0.69
    
    
    
    1999
    
    
    200,000
    
    
    $
    0.56
    
    
    $
    0.56
    
    
    
    1.61
    
    
    
    32,000
    
    
    
    200,000
    
    
    $
    0.56
    
    
    
    1.61
    
    
    
    32,0002000
    
    
    220,000
    
    
    $
    0.17 to $0.30
    
    
    $
    0.18
    
    
    
    2.60
    
    
    
    119,700
    
    
    
    220,000
    
    
    $
    0.18
    
    
    
    2.60
    
    
    
    119,7002004
    
    
    450,000
    
    
    $
    1.31 to $1.80
    
    
    $
    1.64
    
    
    
    6.14
    
    
    
    
    
    
    
    450,000
    
    
    $
    1.64
    
    
    
    6.14
    
    
    
    2005
    
    
    170,000
    
    
    $
    2.21 to $3.55
    
    
    $
    2.97
    
    
    
    6.85
    
    
    
    
    
    
    
    165,000
    
    
    $
    2.97
    
    
    
    6.84
    
    
    
    2006
    
    
    505,000
    
    
    $
    0.61 to $3.30
    
    
    $
    3.25
    
    
    
    7.90
    
    
    
    
    
    
    
    412,500
    
    
    $
    3.28
    
    
    
    7.89
    
    
    
    2007
    
    
    525,000
    
    
    $
    1.25 to $2.40
    
    
    $
    1.63
    
    
    
    8.99
    
    
    
    
    
    
    
    332,084
    
    
    $
    1.61
    
    
    
    8.95
    
    
    
    2008
    
    
    485,000
    
    
    $
    1.03
    
    
    $
    1.03
    
    
    
    9.92
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    2,915,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    151,700
    
    
    
    2,139,584
    
    
    
    
    
    
    
    
    
    
    $
    151,700
  WeightedWeighted
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    Contractual
    
    
    AggregateWeighted
    
    
    
    
    
    
    
    
    
    
    Price of
    
    
    Life in
    
    
    IntrinsicAverage
    
    
    
    
    
    
    Options
    
    
    Options
    
    
    Years of
    
    
    ValueWeighted
    
    
    Remaining
    
    
    
    
    
    
    Exercisable
    
    
    Exercisable
    
    
    Options
    
    
    of OptionsAverage
    
    
    Contractual
    
    
    Aggregate
    
    
    at
    
    
    at
    
    
    Exercisable
    
    
    ExercisableYear of
    
    Options
    
    
    Exercise
    
    
    Exercise
    
    
    Life in
    
    
    Intrinsic
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    at Dec. 31,
    
    
    at Dec. 31,Grant
    
    Outstanding
    
    
    Prices
    
    
    Price
    
    
    Years
    
    
    Value
    
    
    2007
    
    
    2007
    
    
    2007
    
    
    20071998
    
    
    469,150
    
    
    $
    2.13 to $18.13
    
    
    $
    5.85
    
    
    
    0.77
    
    
    
    
    
    
    
    469,150
    
    
    $
    5.85
    
    
    
    0.77
    
    
    
    1999
    
    
    200,000
    
    
    $
    0.56
    
    
    $
    0.56
    
    
    
    1.86
    
    
    
    98,000
    
    
    
    200,000
    
    
    $
    0.56
    
    
    
    1.86
    
    
    
    98,0002000
    
    
    220,000
    
    
    $
    0.17 to $0.30
    
    
    $
    0.18
    
    
    
    2.85
    
    
    
    192,300
    
    
    
    220,000
    
    
    $
    0.18
    
    
    
    2.85
    
    
    
    192,3002004
    
    
    450,000
    
    
    $
    1.31 to $1.80
    
    
    $
    1.64
    
    
    
    6.39
    
    
    
    
    
    
    
    450,000
    
    
    $
    1.64
    
    
    
    6.39
    
    
    
    2005
    
    
    170,000
    
    
    $
    2.21 to $3.55
    
    
    $
    2.97
    
    
    
    7.10
    
    
    
    
    
    
    
    127,500
    
    
    $
    2.97
    
    
    
    7.10
    
    
    
    2006
    
    
    505,000
    
    
    $
    0.61 to $3.30
    
    
    $
    3.25
    
    
    
    8.15
    
    
    
    
    
    
    
    327,500
    
    
    $
    3.28
    
    
    
    8.14
    
    
    
    2007
    
    
    525,000
    
    
    $
    1.25 to $2.40
    
    
    $
    1.63
    
    
    
    9.24
    
    
    
    
    
    
    
    263,750
    
    
    $
    1.61
    
    
    
    9.21
    
    
    
    2,539,150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    290,300
    
    
    
    2,057,900
    
    
    
    
    
    
    
    
    
    
    $
    290,300
  10




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##### Table of Contents



WeightedAverageOptions
    
    
    Exercise PriceOutstanding at December 31, 2007 and March 31, 2008
    
    
    502,000
    
    
    $
    1.35
  Weighted
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    Weighted
    
    
    Aggregate
    
    
    AggregateRemaining
    
    
    Remaining
    
    
    
    
    
    
    Average
    
    
    Intrinsic
    
    
    IntrinsicWeighted
    
    
    Contractual
    
    
    Contractual
    
    
    
    
    
    
    Exercise
    
    
    Value
    
    
    ValueAverage
    
    
    Life in
    
    
    Life in
    
    
    
    
    
    
    Price of
    
    
    of Options
    
    
    of OptionsYear of
    
    Options
    
    
    Exercise
    
    
    Exercise
    
    
    Years
    
    
    Years
    
    
    Options
    
    
    Options
    
    
    Exercisable
    
    
    ExercisableGrant
    
    Outstanding
    
    
    Prices
    
    
    Price
    
    
    12/31/2007
    
    
    3/31/2008
    
    
    Exercisable
    
    
    Exercisable
    
    
    12/31/2007
    
    
    3/31/20081998
    
    
    6,000
    
    
    $
    1.69
    
    
    $
    1.69
    
    
    
    1.00
    
    
    
    0.75
    
    
    
    6,000
    
    
    $
    1.69
    
    
    
    
    
    
    
    1999
    
    
    6,000
    
    
    $
    0.53
    
    
    $
    0.53
    
    
    
    2.00
    
    
    
    1.75
    
    
    
    6,000
    
    
    $
    0.53
    
    
    
    3,120
    
    
    
    1,1402000
    
    
    140,000
    
    
    $
    0.20 to $0.30
    
    
    $
    0.26
    
    
    
    2.62
    
    
    
    2.37
    
    
    
    140,000
    
    
    $
    0.26
    
    
    
    110,800
    
    
    
    64,6002001
    
    
    15,000
    
    
    $
    0.75
    
    
    $
    0.75
    
    
    
    4.00
    
    
    
    3.75
    
    
    
    15,000
    
    
    $
    0.75
    
    
    
    4,500
    
    
    
    2002
    
    
    15,000
    
    
    $
    0.15
    
    
    $
    0.15
    
    
    
    5.00
    
    
    
    4.76
    
    
    
    15,000
    
    
    $
    0.15
    
    
    
    13,500
    
    
    
    8,5502003
    
    
    80,000
    
    
    $
    1.29
    
    
    $
    1.29
    
    
    
    6.00
    
    
    
    5.76
    
    
    
    80,000
    
    
    $
    1.29
    
    
    
    
    
    
    
    2004
    
    
    100,000
    
    
    $
    1.18 to $3.46
    
    
    $
    2.32
    
    
    
    6.72
    
    
    
    6.47
    
    
    
    100,000
    
    
    $
    2.32
    
    
    
    
    
    
    
    2005
    
    
    50,000
    
    
    $
    3.27
    
    
    $
    3.27
    
    
    
    8.00
    
    
    
    7.76
    
    
    
    50,000
    
    
    $
    3.27
    
    
    
    
    
    
    
    2006
    
    
    50,000
    
    
    $
    1.40
    
    
    $
    1.40
    
    
    
    9.00
    
    
    
    8.76
    
    
    
    50,000
    
    
    $
    1.40
    
    
    
    
    
    
    
    2007
    
    
    40,000
    
    
    $
    1.12
    
    
    $
    1.12
    
    
    
    10.00
    
    
    
    9.76
    
    
    
    40,000
    
    
    $
    1.12
    
    
    
    
    
    
    
    502,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    502,000
    
    
    
    
    
    
    $
    131,920
    
    
    $
    74,290
  11




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##### Table of Contents



3. NET INCOME (LOSS) PER COMMON SHARE
   Three Months Ended March 31,2008
    
    
    2007Net income
    
    $
    554,000
    
    
    $
    1,073,000Weighted average common shares outstanding
    
    
    17,573,000
    
    
    
    17,573,000Effect of dilutive options
    
    
    241,000
    
    
    
    364,000Adjusted diluted common shares outstanding
    
    
    17,814,000
    
    
    
    17,937,000Net income (loss) per common share  basicIncome from continuing operations
    
    $
    0.03
    
    
    $
    0.07Loss from discontinued operations
    
    
    
    
    
    
    (0.01
    )Net income per common share  basic
    
    $
    0.03
    
    
    $
    0.06Net income (loss) per common share  dilutedIncome from continuing operations
    
    $
    0.03
    
    
    $
    0.06Loss from discontinued operations
    
    
    
    
    
    
    Net income per common share  diluted
    
    $
    0.03
    
    
    $
    0.06
 4. INCOME TAXES
  12




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5. DISCONTINUED OPERATIONS
   6. CHANGE OF CONTROL
  13




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7. RECENTLY ADOPTED ACCOUNTING STANDARDS
  14




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o
    
    Level 1 Unadjusted quoted prices for identical assets or liabilities in
active markets.o
    
    Level 2 Inputs other than Level 1 that are based on observable market data.
These include: quoted prices for similar assets in active markets, quoted prices for
identical assets in inactive markets, inputs that are observable that are not prices (such
as interest rates, credit risks, etc.) and inputs that are derived from or corroborated by
observable markets.o
    
    Level 3 Developed from unobservable data, reflecting our own assumptions.
   Money Market Accounts
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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 business strategy, the ability to satisfy interest expense and
principal repayment obligations or to refinance those 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 current and future reimbursement rates, as well as
reimbursement reductions and the Companys ability to mitigate the impact of the reductions. 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
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Three Months Ended March 31,2008
    
    2007Oxygen systems
    
    
    39
    %
    
    
    38
    %Inhalation drugs
    
    
    9
    
    
    
    12Nebulizers
    
    
    2
    
    
    
    2Respiratory assist devices
    
    
    27
    
    
    
    24Other respiratory
    
    
    3
    
    
    
    2Total home respiratory therapy services
    
    
    80
    %
    
    
    78
    %Enteral nutrition services
    
    
    5
    
    
    
    5Other infusion services
    
    
    5
    
    
    
    6Total home infusion therapy services
    
    
    10
    %
    
    
    11
    %Total home medical equipment and supplies
    
    
    10
    %
    
    
    11
    %100
    %
    
    
    100
    %
  Revenue Growth
 17




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##### Table of Contents



Bad Debt Expense
 Cash Flow.
 Days Sales Outstanding
 Unbilled Revenue.
 18




---



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Productivity and Profitability
 Trends, Events, and Uncertainties
   19




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Reimbursement Changes and the Companys Response
 Competitive Bidding
   20




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Accreditation
  21




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DRA Reimbursement Impact
 
    
    The DRA contains a provision that eliminated the Medicare capped rental methodology
for certain items of durable medical equipment, including wheelchairs, beds, and
respiratory assist devices. The DRA changes the rental period to thirteen months, at
which time the rental payments stop and title to the equipment is transferred to the
beneficiary. The effective date of the provision to eliminate the capped rental
methodology applies to items for which the first rental month occurs on or after
January 1, 2006 and, as a result, there was no impact to the Companys revenue in 2006.
The impact of this change will be realized over a period of several years which began
in 2007. When fully phased in, the Company estimates that the annual impact of the
elimination of the capped rental payment methodology for durable medical equipment and
respiratory assist devices will be a reduction in rental revenue of approximately $3.0
million.
    
    The DRA also contains a provision that limits the duration of monthly Medicare
rental payments on oxygen equipment to 36 months. Prior to the DRA, Medicare provided
indefinite monthly reimbursement for the rental of oxygen equipment as long as the
patient needed the equipment and met medical qualifications. The effective date for
the implementation of the 36 month rental cap for oxygen equipment was January 1, 2006.
In the case of individuals who received oxygen equipment on or prior to December 31,
2005, the 36 month period began on January 1, 2006. Therefore, the transfer of title
of oxygen equipment from the Company to the beneficiary will begin in 2009. Subsequent
to transfer of title, the reimbursement rate for portable oxygen will increase from
$31.79 per month to $77.45 per month. Additional payments would also be made for
maintenance and service of the oxygen equipment subsequent to the 36th month
and not covered under the manufacturers warranty. Since the reimbursement rates for
this maintenance and service have not been finalized, the Company is unable to
accurately quantify the overall financial impact beginning in 2009 of the 36 month cap
for oxygen equipment; however, such impact will be material.
    
    On August 3, 2006, CMS published a Proposed Rule to implement the changes required
by the DRA relating to the payment for oxygen, oxygen equipment, and capped rental DME
items. The rule, which became final November 9, 2006 (DRA Implementation Rule),
establishes revised payment classes and reimbursement rates for oxygen and oxygen
equipment effective January 1, 2007, including revised rates for concentrators, liquid
and gas stationary systems, and portable liquid and gas equipment. The DRA
Implementation Rule also establishes a reimbursement rate for portable oxygen
generating equipment and changes regulations related to maintenance reimbursement and
equipment replacement reimbursement. Under the DRA Implementation Rule, during the
initial 36 months of rental, the reimbursement rate for concentrators and stationary
liquid and gas systems is $198.40 per month for calendar years 2007 and 2008, $193.21
per month for 2009, and $189.39 per month for 2010. For liquid or gas portable
equipment, the reimbursement rate is a $31.79 add-on per month from 2007 through 2010,
and for oxygen generating portable equipment, the reimbursement rate is an add-on of
$51.63 per month for 2007 through 2010. During 2006, the Companys
 22




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average Medicare reimbursement rate for concentrators and stationary equipment was
$199.84 per month, with a portable add-on of $31.79 per month. Under the competitive
bidding process, the single payment rate for oxygen in the 10 CBAs cannot exceed those
established by the DRA. In the first round of competitive bidding, the average payment
rate for stationary oxygen and portable oxygen will be $140.82 per month and $23.52 per
month, respectively.
 NPPV Changes
 Inhalation Drug Changes
   Reduction in the Reimbursement for Oxygen Equipment
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Surety Bond Proposal
 24




---



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Federal
Register
 Proposed Supplier and Quality Standards
   25




---



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Product Mix
 Critical Accounting Policies and Estimates
  Results of Operations
  26




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Percentage of RevenuesThree Months Ended March 31,2008
    
    2007Revenues
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales and related services
    
    
    20.7
    
    
    
    26.1Cost of
rental, including rental equipment depreciation
    
    
    13.7
    
    
    
    13.5Operating expenses
    
    
    49.6
    
    
    
    45.5Bad debt expense
    
    
    1.9
    
    
    
    3.3General and administrative
    
    
    6.9
    
    
    
    5.9Depreciation, excluding rental equipment, and
amortization
    
    
    1.6
    
    
    
    0.9Interest expense, net
    
    
    5.6
    
    
    
    5.3Other income, net
    
    
    (0.6
    )
    
    
    (0.2
    )Change of
control income
    
    
    (0.1
    )
    
    
    Total expenses
    
    
    99.3
    %
    
    
    100.3
    %Earnings from unconsolidated joint ventures
    
    
    1.9
    %
    
    
    1.9
    %Income from continuing operations before income
taxes
    
    
    2.6
    
    
    
    1.6Provision for income taxes
    
    
    1.8
    
    
    
    0.1Net income from continuing operations
    
    
    0.8
    %
    
    
    1.5
    %Operating loss from discontinued operations, net
of tax
    
    
    0.0
    %
    
    
    (0.1
    )%Net income
    
    
    0.8
    %
    
    
    1.4
    %
 27




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Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
 Revenues.
 Sales and Related Services Revenues.
 Rental Revenues
 Cost of Sales and Related Services
 Cost of Rental Revenues
 Operating Expenses
 Bad Debt Expense.
 28




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General and Administrative Expenses
 Depreciation and Amortization
 Interest Expense, Net
 Other Income, Net
 Earnings from Unconsolidated Joint Ventures
 Provision for Income Taxes
 29




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Liquidity and Capital Resources
        30




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31




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##### Table of Contents



Contractual Obligations and Commercial Commitments
  Twelve Months Ending March 31,
    
    
    After March 31,Total
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2012Long-term debt and
capital leases
    
    $
    239,406,000
    
    
    $
    6,189,000
    
    
    $
    233,179,000
    
    
    $
    38,000
    
    
    $
    
    
    
    $
    Interest on long-term debt
and capital leases
    
    
    21,686,000
    
    
    
    16,328,000
    
    
    
    5,358,000
    
    
    
    
    
    
    
    
    
    
    
    Operating lease
obligations
    
    
    15,135,000
    
    
    
    7,536,000
    
    
    
    5,480,000
    
    
    
    1,538,000
    
    
    
    364,000
    
    
    
    217,000Total contractual cash
obligations
    
    $
    276,227,000
    
    
    $
    30,053,000
    
    
    $
    244,017,000
    
    
    $
    1,576,000
    
    
    $
    364,000
    
    
    $
    217,000
     32




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ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM
4T  CONTROLS AND PROCEDURES
  33




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Report of Independent Registered Public Accounting Firm
 
      
 34




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PART II. OTHER INFORMATION
 
 ITEM
1A  RISK FACTORS
  The Companys secured debt becomes due on August 1, 2009.
  Continued reductions in Medicare and Medicaid reimbursement rates could have a material adverse
effect on the Companys results of operations and financial condition.
  Reductions in reimbursement rates from third-party payors could have a material adverse effect on
the Companys revenues, net income, cash flows and capital resources.
  35




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##### Table of Contents



Highland Capital Management, L.P. controls approximately 48% of the Companys common stock and
holds a majority of the Companys $238.6 million secured debt, which may allow Highland to exert
significant influence on certain aspects of our business.
  The Company is subject to extensive government regulation, and the Companys inability to comply
with existing or future laws, regulations or standards could have a material adverse effect on the
Companys operations, financial condition, business, or prospects.
  Because of reimbursement reductions, the Company must continue to find ways to grow revenues and
reduce expenses in order to generate earnings and cash flow.
  36




---



##### Table of Contents



The Company has substantial accounts receivable, and increased bad debt expense or delays in
collecting accounts receivable could have a material adverse effect on the Companys cash flows and
results of operations.
  New healthcare legislation or other changes in the administration or interpretation of government
health care programs or initiatives may have a material adverse effect on the Company.
  The Company depends on retaining and obtaining profitable managed care contracts, and the Companys
business may be materially adversely affected if it is unable to retain or obtain such managed care
contracts.
  37




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##### Table of Contents



The Companys common stock trades on the over-the-counter bulletin board, which reduces the
liquidity of an investment in the Company.
  Compliance with privacy regulations under HIPAA could result in significant costs to the Company
and delays in its collection of accounts receivable.
   The Company is highly dependent upon its senior management The Companys historical financial
results and reimbursement environment, among other factors, may limit the Companys ability to
attract and retain qualified personnel, which in turn could adversely affect profitability.
 The market in which the Company operates is highly competitive, and if the Company is unable to
compete successfully, its business will be materially adversely affected.
  38




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The provision of healthcare services entails an inherent risk of liability, and the Companys
insurance may not be sufficient to effectively protect the Company from all claims.
  39




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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).3.7
    
    Amendment to the Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the
Companys Current Report on Form 8-K dated November 5, 2007).10.1
    
    Amendment No. 2 to Amended and Restated American HomePatient, Inc. 1991 Nonqualified Stock
Option Plan (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form
8-K dated March 3, 2008).15.1
    
    Awareness Letter of KPMG LLP.31.1
    
    Certification pursuant to Rule 13a-14(a)/15d-14(a)  Chief Executive Officer.31.2
    
    Certification pursuant to Rule 13a-14(a)/15d-14(a)  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.May 1, 2008
    By:
    /s/ Stephen L. ClantonStephen L. ClantonChief Financial Officer and An Officer Duly
Authorized to Sign on Behalf of the registrant 41