##### 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, 2010
 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
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(do not check if a smaller reporting company)
Smaller reporting company þ o þ
 17,573,389
 (Outstanding shares of the issuers common stock as of May 3, 2010)




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##### 



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, 2010 and 2009
    
    5Interim Condensed Consolidated Statements of Cash Flows  Three
months ended March 31, 2010 and 2009
    
    6Notes to Interim Condensed Consolidated Financial Statements
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    20Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    37Item 4T.
    
    Controls and Procedures
    
    37Report of Independent Registered Public Accounting Firm
    
    38PART II
    
    Other Information and SignaturesItem 1A.
    
    Risk Factors
    
    39Item 6.
    
    Exhibits
    
    45Signatures
    
    
    
    47EX-10.1EX-10.2EX-10.3EX-15.1EX-31.1EX-31.2EX-32.1EX-32.2
  2




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PART I. FINANCIAL INFORMATION
 
  AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 
 INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
 March 31,
    
    
    December 31,ASSETS
    
    2010
    
    
    2009CURRENT ASSETS:Cash and cash equivalents
    
    $
    19,832,000
    
    
    $
    23,613,000Restricted cash
    
    
    
    
    
    
    250,000Accounts receivable, less allowance for doubtful accounts of
$4,568,000 and $4,199,000, respectively
    
    
    32,402,000
    
    
    
    29,968,000Inventories, net of inventory valuation allowances of $191,000
and $212,000, respectively
    
    
    11,039,000
    
    
    
    12,240,000Prepaid expenses and other current assets
    
    
    5,805,000
    
    
    
    6,690,000Total current assets
    
    
    69,078,000
    
    
    
    72,761,000Property and equipment
    
    
    139,756,000
    
    
    
    142,166,000Less accumulated depreciation and amortization
    
    
    (106,273,000
    )
    
    
    (108,376,000
    )Property and equipment, net
    
    
    33,483,000
    
    
    
    33,790,000Goodwill
    
    
    123,621,000
    
    
    
    123,621,000Other assets
    
    
    16,531,000
    
    
    
    16,977,000Total other assets
    
    
    140,152,000
    
    
    
    140,598,000TOTAL ASSETS
    
    $
    242,713,000
    
    
    $
    247,149,000
  3




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AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
  March 31,
    
    
    December 31,LIABILITIES AND SHAREHOLDERS DEFICIT
    
    2010
    
    
    2009CURRENT LIABILITIES:Current portion of long-term debt and capital leases
    
    $
    227,327,000
    
    
    $
    229,120,000Accounts payable
    
    
    15,148,000
    
    
    
    14,153,000Other payables
    
    
    775,000
    
    
    
    788,000Deferred revenue
    
    
    6,039,000
    
    
    
    5,292,000Accrued expenses:Payroll and related benefits
    
    
    6,081,000
    
    
    
    6,961,000Insurance, including self-insurance accruals
    
    
    5,286,000
    
    
    
    5,258,000Other
    
    
    3,628,000
    
    
    
    3,466,000Total current liabilities
    
    
    264,284,000
    
    
    
    265,038,000NONCURRENT LIABILITIES:Capital leases, less current portion
    
    
    
    
    
    
    3,000Deferred tax liability
    
    
    13,026,000
    
    
    
    12,031,000Other noncurrent liabilities
    
    
    101,000
    
    
    
    82,000Total noncurrent liabilities
    
    
    13,127,000
    
    
    
    12,116,000Total liabilities
    
    
    277,411,000
    
    
    
    277,154,000SHAREHOLDERS DEFICITAmerican HomePatient, Inc. shareholders deficit:Preferred 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
    
    
    177,127,000
    
    
    
    177,094,000Accumulated deficit
    
    
    (219,211,000
    )
    
    
    (214,681,000
    )Total American HomePatient, Inc. shareholders deficit
    
    
    (41,908,000
    )
    
    
    (37,411,000
    )Noncontrolling interests
    
    
    7,210,000
    
    
    
    7,406,000Total shareholders deficit
    
    
    (34,698,000
    )
    
    
    (30,005,000
    )TOTAL LIABILITIES AND SHAREHOLDERS DEFICIT
    
    $
    242,713,000
    
    
    $
    247,149,000
  4




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AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 
 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 Three Months Ended March 31,2010
    
    
    2009REVENUES:Sales and related service revenues, net
    
    $
    29,099,000
    
    
    $
    27,374,000Rental revenues, net
    
    
    37,906,000
    
    
    
    38,786,000Total revenues, net
    
    
    67,005,000
    
    
    
    66,160,000EXPENSES:Cost of sales and related services
    
    
    14,569,000
    
    
    
    14,378,000Cost of rentals and other revenues, including rental equipment
depreciation of $5,769,000 and $6,410,000, respectively
    
    
    8,065,000
    
    
    
    8,568,000Operating expenses
    
    
    34,457,000
    
    
    
    35,065,000Bad debt expense
    
    
    1,796,000
    
    
    
    1,296,000General and administrative
    
    
    5,116,000
    
    
    
    5,126,000Depreciation, excluding rental equipment, and amortization
    
    
    932,000
    
    
    
    1,024,000Interest expense, net
    
    
    3,798,000
    
    
    
    3,866,000Other (income) expense
    
    
    (87,000
    )
    
    
    14,000Change of control income
    
    
    (3,000
    )
    
    
    (3,000
    )Total expenses
    
    
    68,643,000
    
    
    
    69,334,000LOSS FROM OPERATIONS BEFORE INCOME
TAXES
    
    
    (1,638,000
    )
    
    
    (3,174,000
    )Provision for income taxes
    
    
    1,135,000
    
    
    
    1,164,000NET LOSS
    
    $
    (2,773,000
    )
    
    $
    (4,338,000
    )Less: Net income attributable to the noncontrolling interests
    
    $
    (996,000
    )
    
    $
    (830,000
    )NET LOSS ATTRIBUTABLE TO AMERICAN
HOMEPATIENT, INC.
    
    
    (3,769,000
    )
    
    
    (5,168,000
    )NET LOSS PER COMMON SHARE ATTRIBUTABLE TO
AMERICAN HOMEPATIENT, INC. COMMON SHAREHOLDERS- Basic
    
    $
    (0.21
    )
    
    $
    (0.29
    )- Diluted
    
    $
    (0.21
    )
    
    $
    (0.29
    )WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:- Basic
    
    
    17,573,000
    
    
    
    17,573,000- Diluted
    
    
    17,573,000
    
    
    
    17,573,000
  5




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AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 
 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 Three Months Ended March 31,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net loss attributable to American HomePatient, Inc.
    
    $
    (3,769,000
    )
    
    $
    (5,168,000
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Change of control income
    
    
    (3,000
    )
    
    
    (3,000
    )Gain on sale of infusion branch
    
    
    
    
    
    
    (184,000
    )Deferred tax expense
    
    
    995,000
    
    
    
    1,069,000Depreciation and amortization
    
    
    6,701,000
    
    
    
    7,434,000Bad debt expense
    
    
    1,796,000
    
    
    
    1,296,000Stock compensation expense
    
    
    57,000
    
    
    
    90,000Net income attributable to noncontrolling interests
    
    
    996,000
    
    
    
    830,000Change in assets and liabilities:Restricted cash
    
    
    250,000
    
    
    
    Accounts receivable
    
    
    (4,230,000
    )
    
    
    5,943,000Inventories
    
    
    1,201,000
    
    
    
    2,156,000Prepaid expenses and other current assets
    
    
    885,000
    
    
    
    2,900,000Deferred revenue
    
    
    (14,000
    )
    
    
    (1,165,000
    )Accounts payable, other payables and accrued expenses
    
    
    (837,000
    )
    
    
    (3,908,000
    )Other assets and liabilities
    
    
    433,000
    
    
    
    1,751,000Net cash provided by operating activities
    
    
    4,461,000
    
    
    
    13,041,000CASH FLOWS FROM INVESTING ACTIVITIES:Cash payments for additions to property and equipment, net
    
    
    (5,254,000
    )
    
    
    (5,606,000
    )Proceeds from sale of infusion branch
    
    
    
    
    
    
    271,000Net cash used in investing activities
    
    $
    (5,254,000
    )
    
    $
    (5,335,000
    )
  6




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AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
  Three Months Ended March 31,2010
    
    
    2009CASH FLOWS FROM FINANCING ACTIVITIES:Distributions to noncontrolling interests
    
    $
    (1,202,000
    )
    
    $
    (1,299,000
    )Contributions from noncontrolling interests
    
    
    10,000
    
    
    
    Principal payments on long-term debt and capital leases
    
    
    (1,796,000
    )
    
    
    (7,670,000
    )Net cash used in financing activities
    
    
    (2,988,000
    )
    
    
    (8,969,000
    )DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (3,781,000
    )
    
    
    (1,263,000
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    23,613,000
    
    
    
    18,831,000CASH AND CASH EQUIVALENTS, end of period
    
    $
    19,832,000
    
    
    $
    17,568,000SUPPLEMENTAL INFORMATION:Cash payments of interest
    
    $
    3,840,000
    
    
    $
    3,954,000Cash payments of income taxes
    
    $
    130,000
    
    
    $
    76,000Non-Cash Activity:Capital leases entered into for property and equipment
    
    $
    
    
    
    $
    1,153,000Changes in accounts payable related to purchases of
property and equipment
    
    $
    1,108,000
    
    
    $
    (634,000
    )Change of control:Other liabilities
    
    $
    21,000
    
    
    $
    6,000Additional paid-in capital
    
    $
    (24,000
    )
    
    $
    (9,000
    )Cumulative adjustment for deferred revenue
    
    $
    761,000
    
    
    $
    Supplemental Disclosure of Investing Activities:Disposition of infusion branch:Inventories sold
    
    $
    
    
    
    $
    87,000
  7




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AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 
 NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 1. BASIS OF PRESENTATION
    2. CONSOLIDATION OF 50%-OWNED JOINT VENTURES
  8




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March 31,
    
    
    December 31,2010
    
    
    2009Cash
    
    $
    1,367,000
    
    
    $
    1,669,000Accounts receivable, net
    
    
    3,874,000
    
    
    
    3,597,000Property and equipment, net
    
    
    3,547,000
    
    
    
    3,534,000Other assets
    
    
    2,949,000
    
    
    
    2,989,000Total assets
    
    $
    11,737,000
    
    
    $
    11,789,000Accounts payable and accrued expenses
    
    $
    449,000
    
    
    $
    878,000Deferred revenue
    
    
    761,000
    
    
    
    Total liabilities
    
    $
    1,210,000
    
    
    $
    878,000
 3. GOING CONCERN AND LIQUIDITY
  9




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4. SUBSEQUENT EVENTS
    
    
    The Company agreed to retire at a 15% discount a portion of its outstanding secured
debt obligations held by a single entity that is equal to approximately 4.5% of the total
outstanding secured debt.
 
    
    Highland and its affiliates, who collectively beneficially own approximately 48% of the
outstanding common stock of the Company as of the date of the Restructuring Support
Agreement, each agreed to vote their stock in favor of the Reincorporation.
 
    
    Conditioned upon approval of the Reincorporation by the Companys stockholders, the
Company agreed to carry out the Reincorporation. In the Reincorporation, stockholders in
the Company will become stockholders in a new parent company of the Registrant incorporated
in Nevada (the New Company).
 
    
    If the Reincorporation is approved and carried out as described above, the New Company
agreed that it would then commence a self-tender offer to its stockholders (other than
Highland and its affiliates) at $0.67 per share. This tender offer will not occur if the
Reincorporation is not approved.
 
    
    In the event this self-tender offer is accepted by a number of the New Companys
stockholders holding shares which together with the shares owned by Highland and its
affiliates, represent at least 90% of the number of its outstanding shares, and subject to
other
customary closing conditions, the New Company agreed that it would repurchase all of the
tendered shares.
 10




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
    
    If the self-tender offer is accepted, the Lenders have agreed to restructure its debt
into two four-year secured term loans. This restructuring will not occur if the tender
offer does not close. The first lien term loan would be in a principal amount of
approximately $100.0 million, and the second lien term loan would have a principal amount
of approximately $126.4 million. The second lien term loan would bear a higher rate of
interest than the first lien term loan (however, the substantial majority of interest under
the second lien term loan could be paid in kind at the election of the Company), but would
rank junior in priority pursuant to the terms of a customary intercreditor agreement. Both
term loans would have a variable interest rate component, but in all instances would bear
interest at a rate higher than the current 6.785% fixed interest rate on the Companys
Secured Debt.
 
    
    If the self-tender offer is completed, but less than 100% of the shares of the New
Company not owned by Highland or its affiliates are tendered, Highland has agreed to take
all actions to cause the Company to initiate a follow-on merger at the conclusion of the
self-tender offer pursuant to which the remaining shares of common stock in the New Company
not held by Highland and its affiliates would be cancelled in exchange for sixty-seven
cents ($0.67) per share. Highland then would cause the Company to de-register its stock
pursuant to federal securities laws.
     11




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5. STOCK BASED COMPENSATION
      WeightedAverageOptions
    
    
    Exercise PriceOutstanding at December 31, 2009
    
    
    2,736,000
    
    
    $
    1.55Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    Outstanding at March 31, 2010
    
    
    2,736,000
    
    
    $
    1.55
  12




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WeightedAverageGrant-dateNonvested Options
    
    Options
    
    
    Fair ValueBalance at December 31, 2009
    
    
    834,917
    
    
    $
    0.52Granted
    
    
    
    
    
    
    Vested
    
    
    (355,334
    )
    
    
    0.61Forfeited
    
    
    
    
    
    
    Balance at March 31, 2010
    
    
    479,583
    
    
    $
    0.44
  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
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    20102000
    
    
    220,000
    
    
    $
    0.17 to $0.30
    
    
    $
    0.18
    
    
    
    0.60
    
    
    
    5,300
    
    
    
    220,000
    
    
    $
    0.18
    
    
    
    0.60
    
    
    
    5,3002004
    
    
    450,000
    
    
    $
    1.31 to $1.80
    
    
    $
    1.64
    
    
    
    4.14
    
    
    
    
    
    
    
    450,000
    
    
    $
    1.64
    
    
    
    4.14
    
    
    
    2005
    
    
    170,000
    
    
    $
    2.21 to $3.55
    
    
    $
    2.97
    
    
    
    4.85
    
    
    
    
    
    
    
    170,000
    
    
    $
    2.97
    
    
    
    4.85
    
    
    
    2006
    
    
    470,000
    
    
    $
    0.61 to $3.30
    
    
    $
    3.24
    
    
    
    5.90
    
    
    
    
    
    
    
    467,500
    
    
    $
    3.26
    
    
    
    5.90
    
    
    
    2007
    
    
    496,000
    
    
    $
    1.25 to $2.40
    
    
    $
    1.63
    
    
    
    7.00
    
    
    
    
    
    
    
    477,250
    
    
    $
    1.62
    
    
    
    6.98
    
    
    
    2008
    
    
    525,000
    
    
    $
    0.85 to $1.03
    
    
    $
    1.02
    
    
    
    7.94
    
    
    
    
    
    
    
    336,667
    
    
    $
    1.02
    
    
    
    7.93
    
    
    
    2009
    
    
    405,000
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    
    8.92
    
    
    
    
    
    
    
    135,000
    
    
    $
    0.22
    
    
    
    8.92
    
    
    
    2,736,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,300
    
    
    
    2,256,417
    
    
    
    
    
    
    
    
    
    
    $
    5,300
  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
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    20082000
    
    
    220,000
    
    
    $
    0.17 to $0.30
    
    
    $
    0.18
    
    
    
    0.85
    
    
    
    
    
    
    
    220,000
    
    
    $
    0.18
    
    
    
    0.85
    
    
    
    2004
    
    
    450,000
    
    
    $
    1.31 to $1.80
    
    
    $
    1.64
    
    
    
    4.39
    
    
    
    
    
    
    
    450,000
    
    
    $
    1.64
    
    
    
    4.39
    
    
    
    2005
    
    
    170,000
    
    
    $
    2.21 to $3.55
    
    
    $
    2.97
    
    
    
    5.10
    
    
    
    
    
    
    
    170,000
    
    
    $
    2.97
    
    
    
    5.10
    
    
    
    2006
    
    
    470,000
    
    
    $
    0.61 to $3.30
    
    
    $
    3.24
    
    
    
    6.14
    
    
    
    
    
    
    
    467,500
    
    
    $
    3.26
    
    
    
    6.14
    
    
    
    2007
    
    
    496,000
    
    
    $
    1.25 to $2.40
    
    
    $
    1.63
    
    
    
    7.24
    
    
    
    
    
    
    
    418,583
    
    
    $
    1.63
    
    
    
    7.23
    
    
    
    2008
    
    
    525,000
    
    
    $
    0.85 to $1.03
    
    
    $
    1.02
    
    
    
    8.18
    
    
    
    
    
    
    
    175,000
    
    
    $
    1.02
    
    
    
    8.18
    
    
    
    2009
    
    
    405,000
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    
    9.16
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    9.16
    
    
    
    2,736,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    1,901,083
    
    
    
    
    
    
    
    
    
    
    $
    
 13




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##### Table of Contents



WeightedAverageOptions
    
    
    Exercise PriceOutstanding at December 31, 2009 and March 31, 2010
    
    
    570,000
    
    
    $
    1.18
  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
    
    
    12/31/2009
    
    
    3/31/2010
    
    
    Exercisable
    
    
    Exercisable
    
    
    12/31/2009
    
    
    3/31/20102000
    
    
    140,000
    
    
    $
    0.20 to $0.30
    
    
    $
    0.26
    
    
    
    0.61
    
    
    
    0.37
    
    
    
    140,000
    
    
    $
    0.26
    
    
    
    
    
    
    
    2001
    
    
    15,000
    
    
    $
    0.75
    
    
    $
    0.75
    
    
    
    2.00
    
    
    
    1.75
    
    
    
    15,000
    
    
    $
    0.75
    
    
    
    
    
    
    
    2002
    
    
    15,000
    
    
    $
    0.15
    
    
    $
    0.15
    
    
    
    3.00
    
    
    
    2.76
    
    
    
    15,000
    
    
    $
    0.15
    
    
    
    
    
    
    
    7502003
    
    
    80,000
    
    
    $
    1.29
    
    
    $
    1.29
    
    
    
    4.00
    
    
    
    3.76
    
    
    
    80,000
    
    
    $
    1.29
    
    
    
    
    
    
    
    2004
    
    
    100,000
    
    
    $
    1.18 to $3.46
    
    
    $
    2.32
    
    
    
    4.71
    
    
    
    4.47
    
    
    
    100,000
    
    
    $
    2.32
    
    
    
    
    
    
    
    2005
    
    
    50,000
    
    
    $
    3.27
    
    
    $
    3.27
    
    
    
    6.00
    
    
    
    5.76
    
    
    
    50,000
    
    
    $
    3.27
    
    
    
    
    
    
    
    2006
    
    
    50,000
    
    
    $
    1.40
    
    
    $
    1.40
    
    
    
    7.01
    
    
    
    6.76
    
    
    
    50,000
    
    
    $
    1.40
    
    
    
    
    
    
    
    2007
    
    
    40,000
    
    
    $
    1.12
    
    
    $
    1.12
    
    
    
    8.01
    
    
    
    7.76
    
    
    
    40,000
    
    
    $
    1.12
    
    
    
    
    
    
    
    2008
    
    
    40,000
    
    
    $
    0.12
    
    
    $
    0.12
    
    
    
    9.01
    
    
    
    8.76
    
    
    
    40,000
    
    
    $
    0.12
    
    
    
    400
    
    
    
    3,2002009
    
    
    40,000
    
    
    $
    0.14
    
    
    $
    0.14
    
    
    
    10.00
    
    
    
    9.76
    
    
    
    40,000
    
    
    $
    0.14
    
    
    
    
    
    
    
    2,400570,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    570,000
    
    
    
    
    
    
    $
    400
    
    
    $
    6,350
  14




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##### Table of Contents



6. NET (LOSS) INCOME PER COMMON SHARE
   Three Months Ended March 31,2010
    
    
    2009Net loss attributable to AmericanHomePatient, Inc.
    
    $
    (3,769,000
    )
    
    $
    (5,168,000
    )Weighted average common shares outstanding
    
    
    17,573,000
    
    
    
    17,573,000Effect of dilutive options
    
    
    
    
    
    
    Adjusted diluted common shares outstanding
    
    
    17,573,000
    
    
    
    17,573,000Net loss per common share attributable toAmerican HomePatient, Inc. commonshareholders- Basic
    
    $
    (0.21
    )
    
    $
    (0.29
    )- Diluted
    
    $
    (0.21
    )
    
    $
    (0.29
    )
 7. INCOME TAXES
   15




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8. CHANGE OF CONTROL
    16




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9. FAIR VALUE MEASUREMENTS
  
    
    Level 1 inputs are quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Company has the ability to access at the measurement
date.
 
    
    Level 2 inputs are inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly or indirectly.
 
    
    Level 3 inputs are unobservable inputs for the asset or liability.
  17




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Money Market Accounts
  10. SECURED DEBT
   11. RECENTLY ADOPTED ACCOUNTING STANDARDS
  18




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12. GOODWILL IMPAIRMENT ANALYSIS
    19




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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 proposed Reincorporation and the related transactions, the Companys
business strategy, the ability to satisfy interest expense and principal repayment obligations or
to otherwise address 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
  20




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Three months ended March 31,2010
    
    2009Oxygen systems
    
    
    38
    %
    
    
    37
    %Sleep therapy
    
    
    36
    
    
    
    34Inhalation drugs
    
    
    6
    
    
    
    5Nebulizers
    
    
    2
    
    
    
    2Other respiratory
    
    
    2
    
    
    
    4Total home respiratory therapy services
    
    
    84
    %
    
    
    82
    %Enteral nutrition services
    
    
    5
    
    
    
    5Other infusion services
    
    
    4
    
    
    
    4Total home infusion therapy services
    
    
    9
    %
    
    
    9
    %Total home medical equipment and supplies
    
    
    7
    %
    
    
    9
    %100
    %
    
    
    100
    %
  Revenue Growth
 21




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##### Table of Contents



Bad Debt Expense.
 Cash Flow.
 Days Sales Outstanding.
 22




---



##### Table of Contents



Unbilled Revenues.
 Productivity and Profitability.
 Trends, Events, and Uncertainties
  23




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##### Table of Contents



The Companys Secured Debt Matured on August 1, 2009.
 Reimbursement Changes and the Companys Response
 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. As a result, the impact of this change was realized over a period of
several years which began in 2007.
    
    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 financial impact of
the reduction in revenue associated with the 36 month cap began in 2009. The DRA
provided for the transfer of title of the oxygen equipment from the supplier to the
patient at the end of the 36 month period. With the enactment of the Medicare
Improvement for Patients and Providers Act of 2008 (MIPPA) in July of 2008, the
provision related to the transfer of title of oxygen equipment was repealed effective
January 1, 2009; however MIPPA did not repeal the cap on rental payments subsequent to
the 36th month. MIPPA also established new payment rules and supplier
responsibilities following the 36 month rental period, the most significant of which
are described below.
 
    
    A suppliers responsibility to service an oxygen patient ends at the
time the oxygen equipment has been in continuous use by the patient for the
equipments reasonable useful lifetime (currently defined by the Centers for
Medicare and Medicaid Services (CMS) as five years for oxygen equipment).
However, the supplier may replace this equipment and a new 36 month rental period
and new reasonable useful
 24




---



##### Table of Contents



lifetime period is started on the date the replacement item is delivered. Oxygen
equipment that is lost, stolen, or irreparably damaged may also be replaced and a
new 36 month rental period and new reasonable useful lifetime period is started
(with CMS approval). A new certificate of medical necessity is required when oxygen
equipment is replaced in each of the situations described above.
 
    
    A change in oxygen equipment modalities (e.g. from a concentrator to a
stationary liquid system) prior to the end of the reasonable useful lifetime does
not result in the start of a new 36 month rental period or new reasonable useful
lifetime period, unless the change is medically justified and supported by written
documentation from the patients physician. In addition, replacing oxygen
equipment that is not functioning properly prior to the end of the reasonable
useful lifetime period does not result in the start of a new 36 month rental period
or new reasonable useful lifetime period. Finally, the transfer by a beneficiary
to a new supplier prior to the end of the reasonable useful lifetime period does
not result in the start of a new 36 month rental period or new reasonable useful
lifetime period.
    
    Suppliers furnishing liquid or gaseous oxygen equipment during the
initial 36 month rental period will be required to continue furnishing oxygen
contents for any period of medical need following the 36 month rental cap for the
remainder of the reasonable useful lifetime of the equipment. The reimbursement
rate for portable oxygen contents increases from approximately $29 per month during
the 36 month rental period to approximately $77 per month after the 36 month rental
period. At the start of a new 36 month rental period, the reimbursement rate for
portable oxygen contents will revert back to approximately $29 per month.
    
    Suppliers are responsible for performing any repairs or maintenance
and servicing of the oxygen equipment that is necessary to ensure that the
equipment is in good working order for the reasonable useful lifetime of the oxygen
equipment. No payment will be made for supplies, repairs, or maintenance and
servicing during the initial 36 month rental period. Effective July 2010,
beginning six months after the 36 month cap, a maintenance and servicing payment of
$66 will be paid every six months. The maintenance and servicing fee covers all
maintenance and servicing needed during the six month period. The supplier is
responsible for performing all necessary maintenance, servicing and repair of the
equipment at the time it is needed and must also visit the beneficiarys home
during the first month of each six month period to inspect the equipment and
perform any necessary maintenance and servicing needed at the time of each visit.
    
    The Companys financial results were materially and adversely impacted
beginning in 2009 as a result of changes in oxygen reimbursement as described
above. Including the 50% owned joint ventures, net revenue and net income were
reduced in the twelve months of 2009 by approximately $20.0 million and $18.8
million, respectively, as a result of the reimbursement changes related to the 36
month oxygen cap.
 
    
    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
 25




---



##### Table of Contents



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 was approximately $199 per month for calendar years 2007 and 2008, approximately
$193 per month for 2009, and approximately $189 per month for 2010. Under the DRA
Implementation Rule, the reimbursement rate for liquid or gas portable equipment during
the initial 36 months of rental is approximately $32 per month from 2007 through 2010.
As a result of the enactment of MIPPA in July of 2008, the above reimbursement rates
were decreased by 9.5% beginning on January 1, 2009. Including the 50% owned joint
ventures, the Company estimates the reduction in the rate for concentrators and
stationary systems for 2010 will reduce net revenue and net income by approximately $0.8
million in 2010.
 Competitive Bidding
   26




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##### Table of Contents



Accreditation
  27




---



##### Table of Contents



Positive Airway Pressure (PAP) Devices
  Surety Bond
 Provider Enrollment, Chain and Ownership System
 28




---



##### Table of Contents



Proposals to Further Reduce the Reimbursement for Oxygen Equipment
  Proposed Supplier Standards
 29




---



##### Table of Contents



Critical Accounting Policies and Estimates
  Results of Operations
  30




---



##### Table of Contents



Percentage of RevenuesThree Months Ended March 31,2010
    
    2009Revenues
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales and related services
    
    
    21.7
    
    
    
    21.7Cost of rental, including rental equipment depreciation
    
    
    12.0
    
    
    
    13.0Operating expenses
    
    
    51.4
    
    
    
    53.0Bad debt expense
    
    
    2.7
    
    
    
    2.0General and administrative
    
    
    7.6
    
    
    
    7.7Depreciation, excluding rental equipment, and
amortization
    
    
    1.4
    
    
    
    1.5Interest expense, net
    
    
    5.7
    
    
    
    5.8Other income, net
    
    
    (0.1
    )
    
    
    Change of control income
    
    
    
    
    
    
    Total expenses
    
    
    102.4
    %
    
    
    104.7
    %Loss from operations before income taxes
    
    
    (2.4
    )
    
    
    (4.7
    )Provision for income taxes
    
    
    1.7
    
    
    
    1.8Net loss
    
    
    (4.1
    )%
    
    
    (6.5
    )%Less: Net income attributable to the noncontrolling
interests
    
    
    (1.5
    )
    
    
    (1.3
    )Net loss attributable to American
HomePatient, Inc.
    
    
    (5.6
    )%
    
    
    (7.8
    )%
 31




---



##### Table of Contents



Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009
 Revenues.
 Sales and Related Services Revenues.
 Rental Revenues
 Cost of Sales and Related Services
 Cost of Rental Revenues
 Operating Expenses
 Bad Debt Expense.
 32




---



##### Table of Contents



General and Administrative Expenses
 Depreciation and Amortization
 Interest Expense, Net
 Other Income, Net
 Provision for Income Taxes
 Liquidity and Capital Resources
  33




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##### Table of Contents



34




---



##### Table of Contents



Greater than(In thousands)
    
    Total
    
    0-90
    
    91-180
    
    180 daysMarch 31, 2010
    
    $
    36,634
    
    
    $
    33,148
    
    
    $
    3,259
    
    
    $
    227Percent of total
    
    
    100
    %
    
    
    90
    %
    
    
    9
    %
    
    
    1
    %December 31, 2009
    
    $
    33,646
    
    
    $
    30,242
    
    
    $
    2,967
    
    
    $
    437Percent of total
    
    
    100
    %
    
    
    90
    %
    
    
    9
    %
    
    
    1
    %
   35




---



##### Table of Contents



Contractual Obligations and Commercial Commitments
  Twelve Months Ending March 31,
    
    
    After March 31,Total
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2014Secured debt and
capital leases
    
    $
    227,327,000
    
    
    $
    227,327,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest on secured debt
and capital leases*
    
    
    5,631,000
    
    
    
    5,631,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating lease
obligations
    
    
    13,017,000
    
    
    
    6,695,000
    
    
    
    4,289,000
    
    
    
    1,846,000
    
    
    
    187,000
    
    
    
    Total contractual cash
obligations
    
    $
    245,975,000
    
    
    $
    239,653,000
    
    
    $
    4,289,000
    
    
    $
    1,846,000
    
    
    $
    187,000
    
    
    $
    
    
 *
    
    Interest on the Secured Debt in the table above includes interest obligations through August 10,
2010, which is the date the Restructuring Support Agreement may be terminated if the
Reincorporation has not occurred. 36




---



##### Table of Contents



ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4T  CONTROLS AND PROCEDURES
  37




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
       
 38




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1A  RISK FACTORS
  The Companys secured debt became due on August 1, 2009 and was not repaid.
  The Companys failure to complete the proposed Reincorporation and related transactions could
negatively affect the Company and its stockholders.
  39




---



##### Table of Contents




    
    the market price of the Companys common stock may reflect a market assumption
that the Reincorporation will occur, and a failure to complete the Reincorporation
could result in a decline in the market price of the Companys common stock;
    
    certain costs relating to the Reincorporation, such as legal, accounting and
financial advisory fees, are payable by the Company whether or not the Reincorporation
is completed;
    
    under certain circumstances, if the Reincorporation is not completed, the
Company may be required to pay the Lenders a termination fee of up to $2.26 million;
    
    there may be substantial disruption to the Companys business and a distraction
of management and employees from day-to-day operations, because matters related to the
Reincorporation may require substantial commitments of their time and resources;
    
    uncertainty about the effect of the Reincorporation may adversely affect the
Companys relationships with its employees, suppliers and other persons with whom the
Company has business relationships; and
    
    there may be lawsuits filed against the Company relating to the
Reincorporation.
 Highland Capital Management, L.P. controls approximately 48% of the Companys common stock and
controls a majority of the Companys $226.4 million secured debt, which may allow Highland to exert
significant influence on the Company.
  Reductions in Medicare and Medicaid reimbursement rates, as well as reductions from other third
party payors, are having a material adverse effect on the Companys results of operations and
financial condition, and future reductions could have further adverse effects.
  40




---



##### Table of Contents



The Company maintains substantial leverage.
  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.
  41




---



##### Table of Contents



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.
  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.
  42




---



##### Table of Contents



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.
  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.
     43




---



##### Table of Contents



The Company is highly dependent upon its senior management.
  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.
  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.
  44




---



##### Table of Contents



ITEM 6  EXHIBITS
 EXHIBITNUMBER
    
    DESCRIPTION OF EXHIBITS3.1
    
    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
    
    Seventh Forbearance Agreement dated January 14, 2010, by American HomePatient, Inc., certain
of its direct and indirect subsidiaries, and NexBank, SSB, as agent, and the forebearing
holders as identified therein (attached).10.2
    
    Eighth Forbearance Agreement dated February 12, 2010, by American HomePatient, Inc., certain
of its direct and indirect subsidiaries, and NexBank, SSB, as agent, and the forebearing
holders as identified therein (attached).10.3
    
    Ninth Forbearance Agreement dated March 12, 2010, by American HomePatient, Inc., certain of
its direct and indirect subsidiaries, and NexBank, SSB, as agent, and the forebearing holders
as identified therein (attached).10.4
    
    Restructuring Support Agreement entered into by the Company, Highland Capital Management,
L.P. and senior lenders dated April 27, 2010 (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K dated April 28, 2010.15.1
    
    Awareness Letter of KPMG LLP.31.1
    
    Certification pursuant to Rule 13a-14(a)/15d-14(a)  Chief Executive Officer.
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##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION OF EXHIBITS31.2
    
    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.
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##### Table of Contents



SIGNATURES
  AMERICAN HOMEPATIENT, INC.May 5, 2010
    By:
    /s/ Stephen L. ClantonStephen L. ClantonChief Financial Officer and An Officer Duly
Authorized to Sign on Behalf of the registrant 47