##### 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:June 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to.
 American HomePatient, Inc.
 (exact name of registrant as specified in its charter)
 Delaware
    
    0-19532
    
    62-1474680(State or other jurisdiction of
    
    (Commission
    
    (IRS Employer Identification No.)incorporation or organization)
    
    File Number)
 5200 Maryland Way, Suite 400, Brentwood, Tennessee 37027  (Address of principal executive offices)                     (Zip Code)
 (615) 221-8884  (Registrants telephone number, including area code)
 None  (Former name, former address and former fiscal year, if changes since last report)
 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act. (Check one):
 Large accelerated filer o Accelerated filer o Non accelerated filer þ
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
 17,573,389
 
 (Outstanding shares of the issuers common stock as of July 28, 2006)




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##### Table of Contents



AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 INDEX
 Page No.PART I            Financial InformationItem 1. Financial Statements (Unaudited)Interim Condensed Consolidated Balance Sheets
    
    3Interim Condensed Consolidated Statements of Operations 
Three and Six months ended June 30, 2006 and 2005
    
    5Interim Condensed Consolidated Statements of Cash Flows 
Six months ended June 30, 2006 and 2005
    
    6Notes to Interim Condensed Consolidated Financial Statements
    
    8Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    15Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    33Item 4. Controls and Procedures
    
    33Report of Independent Registered Public Accounting Firm
    
    34PART II            Other Information and SignaturesItem 1. Legal Proceedings
    
    35Item 1A. Risk Factors
    
    35Item 4. Submission of Matters to a Vote of Security Holders
    
    39Item 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)
 June 30,
    
    
    December 31,ASSETS
    
    2006
    
    
    2005CURRENT ASSETS:Cash and cash equivalents
    
    $
    7,299,000
    
    
    $
    4,444,000Restricted cash
    
    
    650,000
    
    
    
    650,000Accounts receivable, less allowance for doubtful accounts of
$16,651,000 and $15,964,000, respectively
    
    
    54,718,000
    
    
    
    56,464,000Inventories, net of inventory valuation allowances of $864,000
and $863,000, respectively
    
    
    12,840,000
    
    
    
    14,197,000Prepaid expenses and other current assets
    
    
    4,301,000
    
    
    
    8,674,000Total current assets
    
    
    79,808,000
    
    
    
    84,429,000Property and equipment
    
    
    172,847,000
    
    
    
    172,541,000Less accumulated depreciation and amortization
    
    
    (117,285,000
    )
    
    
    (115,560,000
    )Property and equipment, net
    
    
    55,562,000
    
    
    
    56,981,000Goodwill
    
    
    121,834,000
    
    
    
    121,834,000Investment in joint ventures
    
    
    5,651,000
    
    
    
    8,128,000Other assets
    
    
    17,117,000
    
    
    
    16,262,000Total other assets
    
    
    144,602,000
    
    
    
    146,224,000TOTAL ASSETS
    
    $
    279,972,000
    
    
    $
    287,634,000
  3




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##### Table of Contents



AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
  June 30,
    
    
    December 31,LIABILITIES
AND SHAREHOLDERS DEFICIT
    
    2006
    
    
    2005CURRENT LIABILITIES:Current portion of long-term debt and capital leases
    
    $
    518,000
    
    
    $
    908,000Accounts payable
    
    
    21,771,000
    
    
    
    18,110,000Other payables
    
    
    1,123,000
    
    
    
    1,274,000Short-term note payable
    
    
    1,446,000
    
    
    
    3,805,000Accrued expenses:Payroll and related benefits
    
    
    6,487,000
    
    
    
    10,260,000Insurance, including self-insurance accruals
    
    
    6,948,000
    
    
    
    7,552,000Other
    
    
    5,070,000
    
    
    
    7,385,000Total current liabilities
    
    
    43,363,000
    
    
    
    49,294,000NONCURRENT LIABILITIES:Long-term debt and capital leases, less current portion
    
    
    250,301,000
    
    
    
    250,111,000Other noncurrent liabilities
    
    
    35,000
    
    
    
    50,000Total noncurrent liabilities
    
    
    250,336,000
    
    
    
    250,161,000Total liabilities
    
    
    293,699,000
    
    
    
    299,455,000MINORITY INTEREST
    
    
    653,000
    
    
    
    635,000SHAREHOLDERS DEFICITPreferred stock, $.01 par value; authorized 5,000,000 shares;
none issued and outstanding
    
    
    
    
    
    
    Common stock, $.01 par value; authorized 35,000,000 shares;
issued and outstanding, 17,573,000 and 17,388,000 shares,
respectively
    
    
    176,000
    
    
    
    174,000Additional paid-in capital
    
    
    174,775,000
    
    
    
    174,113,000Accumulated deficit
    
    
    (189,331,000
    )
    
    
    (186,743,000
    )Total shareholders deficit
    
    
    (14,380,000
    )
    
    
    (12,456,000
    )TOTAL LIABILITIES AND SHAREHOLDERS DEFICIT
    
    $
    279,972,000
    
    
    $
    287,634,000
  4




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##### Table of Contents



AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 
 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005REVENUES:Sales and related service revenues, net
    
    $
    34,353,000
    
    
    $
    35,343,000
    
    
    $
    68,514,000
    
    
    $
    69,528,000Rental revenues, net
    
    
    46,683,000
    
    
    
    46,274,000
    
    
    
    93,068,000
    
    
    
    93,577,000Total revenues, net
    
    
    81,036,000
    
    
    
    81,617,000
    
    
    
    161,582,000
    
    
    
    163,105,000EXPENSES:Cost of sales and related services
    
    
    19,997,000
    
    
    
    19,522,000
    
    
    
    40,872,000
    
    
    
    39,298,000Cost of rentals and other revenues, including rental equipment
depreciation of $7,623,000, $6,240,000, $13,840,000
and $11,945,000, respectively
    
    
    11,517,000
    
    
    
    10,108,000
    
    
    
    21,535,000
    
    
    
    19,657,000Operating expenses
    
    
    39,766,000
    
    
    
    39,227,000
    
    
    
    79,304,000
    
    
    
    79,216,000Bad debt expense
    
    
    2,771,000
    
    
    
    2,186,000
    
    
    
    5,563,000
    
    
    
    4,875,000General and administrative
    
    
    4,543,000
    
    
    
    4,108,000
    
    
    
    8,644,000
    
    
    
    8,307,000Depreciation, excluding rental equipment, and amortization
    
    
    950,000
    
    
    
    850,000
    
    
    
    1,872,000
    
    
    
    1,663,000Interest expense, net
    
    
    4,489,000
    
    
    
    4,313,000
    
    
    
    8,691,000
    
    
    
    8,603,000Other expense (income), net
    
    
    12,000
    
    
    
    (100,000
    )
    
    
    (128,000
    )
    
    
    (155,000
    )Total expenses
    
    
    84,045,000
    
    
    
    80,214,000
    
    
    
    166,353,000
    
    
    
    161,464,000Earnings from unconsolidated joint ventures
    
    
    1,382,000
    
    
    
    1,172,000
    
    
    
    2,608,000
    
    
    
    2,379,000(LOSS) INCOME FROM OPERATIONS BEFORE
REORGANIZATION ITEMS AND INCOME TAXES
    
    
    (1,627,000
    )
    
    
    2,575,000
    
    
    
    (2,163,000
    )
    
    
    4,020,000Reorganization expense
    
    
    135,000
    
    
    
    81,000
    
    
    
    251,000
    
    
    
    187,000(LOSS) INCOME FROM OPERATIONS BEFORE INCOME TAXES
    
    
    (1,762,000
    )
    
    
    2,494,000
    
    
    
    (2,414,000
    )
    
    
    3,833,000Provision for income taxes
    
    
    87,000
    
    
    
    87,000
    
    
    
    174,000
    
    
    
    183,000NET (LOSS) INCOME
    
    $
    (1,849,000
    )
    
    $
    2,407,000
    
    
    $
    (2,588,000
    )
    
    $
    3,650,000NET INCOME PER COMMON SHARE:- Basic
    
    $
    (0.11
    )
    
    $
    0.14
    
    
    $
    (0.15
    )
    
    $
    0.21- Diluted
    
    $
    (0.11
    )
    
    $
    0.13
    
    
    $
    (0.15
    )
    
    $
    0.20WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:- Basic
    
    
    17,573,000
    
    
    
    17,345,000
    
    
    
    17,512,000
    
    
    
    17,207,000- Diluted
    
    
    17,573,000
    
    
    
    17,950,000
    
    
    
    17,512,000
    
    
    
    17,917,000
  5




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AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 
 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 Six Months Ended June 30,2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (2,588,000
    )
    
    $
    3,650,000Adjustments to reconcile net (loss) income to net cash provided by
operating activities:Depreciation and amortization
    
    
    15,712,000
    
    
    
    13,608,000Bad debt expense
    
    
    5,563,000
    
    
    
    4,875,000Stock compensation expense
    
    
    320,000
    
    
    
    Equity in earnings of unconsolidated joint ventures
    
    
    (1,649,000
    )
    
    
    (1,472,000
    )Minority interest
    
    
    224,000
    
    
    
    185,000Reorganization items
    
    
    251,000
    
    
    
    187,000Reorganization items paid
    
    
    (256,000
    )
    
    
    (201,000
    )Change in assets and liabilities:Accounts receivable
    
    
    (4,387,000
    )
    
    
    (7,362,000
    )Inventories
    
    
    1,357,000
    
    
    
    1,014,000Prepaid expenses and other current assets
    
    
    4,373,000
    
    
    
    2,467,000Accounts payable, other payables and accrued expenses
    
    
    (3,290,000
    )
    
    
    1,597,000Other assets and liabilities
    
    
    (1,509,000
    )
    
    
    (2,989,000
    )Due to unconsolidated joint ventures, net
    
    
    4,126,000
    
    
    
    1,897,000Net cash provided by operating activities
    
    
    18,247,000
    
    
    
    17,456,000CASH FLOWS FROM INVESTING ACTIVITIES:Additions to property and equipment, net
    
    
    (13,182,000
    )
    
    
    (12,971,000
    )Net cash used in investing activities
    
    $
    (13,182,000
    )
    
    $
    (12,971,000
    )
  6




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AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
  Six Months Ended June 30,2006
    
    
    2005CASH FLOWS FROM FINANCING ACTIVITIES:Distributions to minority interest owners
    
    $
    (206,000
    )
    
    $
    (156,000
    )Proceeds from exercise of employee stock options
    
    
    457,000
    
    
    
    521,000Principal payments on long-term debt and capital leases
    
    
    (102,000
    )
    
    
    (1,033,000
    )Principal payments on short-term note payable
    
    
    (2,359,000
    )
    
    
    (2,284,000
    )Net cash used in financing activities
    
    
    (2,210,000
    )
    
    
    (2,952,000
    )INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    2,855,000
    
    
    
    1,533,000CASH AND CASH EQUIVALENTS, beginning of period
    
    
    4,444,000
    
    
    
    5,772,000CASH AND CASH EQUIVALENTS, end of period
    
    $
    7,299,000
    
    
    $
    7,305,000SUPPLEMENTAL INFORMATION:Cash payments of interest
    
    $
    8,545,000
    
    
    $
    9,693,000Cash payments of income taxes
    
    $
    261,000
    
    
    $
    92,000NON-CASH ACTIVITY:Capital leases entered into for property and equipment
    
    $
    472,000
    
    
    $
    Write-off of related notes receivable and notes payable
    
    $
    570,000
    
    
    $
    
  7




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##### Table of Contents



AMERICAN HOMEPATIENT, INC. AND SUBSIDIARIES
 
 NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 1. BASIS OF PRESENTATION
   2. STOCK BASED COMPENSATION
  8




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Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2005
    
    
    2005Net income  as reported
    
    $
    2,407,000
    
    
    $
    3,650,000Additional compensation expense, net
    
    
    (75,000
    )
    
    
    (225,000
    )Net income  pro forma
    
    
    2,332,000
    
    
    
    3,425,000Net income per common share  as reported- Basic
    
    $
    0.14
    
    
    $
    0.21- Diluted
    
    $
    0.13
    
    
    $
    0.20Net income per common share  pro forma- Basic
    
    $
    0.13
    
    
    $
    0.20- Diluted
    
    $
    0.13
    
    
    $
    0.19
     9




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




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##### Table of Contents



WeightedAverageExerciseWeighted
    
    
    
    
    
    
    
    
    
    
    Price of
    
    
    WeightedAverage
    
    
    
    
    
    
    Options
    
    
    Options
    
    
    AverageWeighted
    
    
    Remaining
    
    
    
    
    
    
    Exercisable
    
    
    Exercisable
    
    
    RemainingAverage
    
    
    Contractual
    
    
    Aggregate
    
    
    at
    
    
    at
    
    
    Contractual
    
    
    AggregateYear of
    
    Options
    
    
    Exercise
    
    
    Exercise
    
    
    Life in
    
    
    Intrinsic
    
    
    June 30,
    
    
    June 30,
    
    
    Life in
    
    
    IntrinsicGrant
    
    Outstanding
    
    
    Prices
    
    
    Price
    
    
    Years
    
    
    Value
    
    
    2006
    
    
    2006
    
    
    Years
    
    
    Value1997
    
    
    52,000
    
    
    $
    21.50
    
    
    $
    21.50
    
    
    
    0.66
    
    
    $
    
    
    
    
    52,000
    
    
    $
    21.50
    
    
    
    0.66
    
    
    $
    1998
    
    
    484,750
    
    
    $
    2.13 to $18.13
    
    
    $
    6.24
    
    
    
    2.25
    
    
    $
    
    
    
    
    484,750
    
    
    $
    6.24
    
    
    
    2.25
    
    
    
    1999
    
    
    200,000
    
    
    $
    0.56
    
    
    $
    0.56
    
    
    
    3.37
    
    
    $
    168,000
    
    
    
    200,000
    
    
    $
    0.56
    
    
    
    3.37
    
    
    
    168,0002000
    
    
    220,000
    
    
    $
    0.17 to $0.30
    
    
    $
    0.18
    
    
    
    4.35
    
    
    $
    269,300
    
    
    
    220,000
    
    
    $
    0.18
    
    
    
    4.35
    
    
    
    269,3002004
    
    
    450,000
    
    
    $
    1.31 to  $1.80
    
    
    $
    1.64
    
    
    
    7.89
    
    
    $
    
    
    
    
    375,000
    
    
    $
    1.70
    
    
    
    7.80
    
    
    
    2005
    
    
    245,000
    
    
    $
    2.21 to  $3.83
    
    
    $
    3.23
    
    
    
    8.63
    
    
    $
    
    
    
    
    117,500
    
    
    $
    3.25
    
    
    
    8.61
    
    
    
    2006
    
    
    560,000
    
    
    $
    3.30
    
    
    $
    3.30
    
    
    
    9.64
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    2,211,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    437,300
    
    
    
    1,449,250
    
    
    
    
    
    
    
    
    
    
    $
    437,300
  WeightedAverageExerciseWeighted
    
    
    
    
    
    
    Price of
    
    
    WeightedAverage
    
    
    Options
    
    
    Options
    
    
    AverageWeighted

    
    
    Remaining
    
    
    Exercisable
    
    
    Exercisable
    
    
    RemainingAverage
    
    
    Contractual
    
    
    at
    
    
    at
    
    
    ContractualYear of
    

    Options
    
    
    Exercise
    
    
    Exercise
    
    
    Life in
    
    
    December 31,
    
    
    December 31,
    
    
    Life inGrant
    
    Outstanding
    
    
    Prices
    
    
    Price
    
    
    Years
    
    
    2005
    
    
    2005
    
    
    Years1996
    
    
    267,750
    
    
    $
    17.50
    
    
    $
    17.50
    
    
    
    0.04
    
    
    
    267,750
    
    
    $
    17.50
    
    
    
    0.041997
    
    
    52,000
    
    
    $
    21.50
    
    
    $
    21.50
    
    
    
    1.12
    
    
    
    52,000
    
    
    $
    21.50
    
    
    
    1.121998
    
    
    520,750
    
    
    $
    2.13 to $18.13
    
    
    $
    5.99
    
    
    
    2.77
    
    
    
    520,750
    
    
    $
    5.99
    
    
    
    2.771999
    
    
    200,000
    
    
    $
    0.56
    
    
    $
    0.56
    
    
    
    3.86
    
    
    
    200,000
    
    
    $
    0.56
    
    
    
    3.862000
    
    
    220,000
    
    
    $
    0.17 to  $0.30
    
    
    $
    0.18
    
    
    
    4.85
    
    
    
    220,000
    
    
    $
    0.18
    
    
    
    4.852004
    
    
    600,000
    
    
    $
    1.31 to  $1.80
    
    
    $
    1.68
    
    
    
    8.34
    
    
    
    425,000
    
    
    $
    1.71
    
    
    
    8.282005
    
    
    245,000
    
    
    $
    2.21 to  $3.83
    
    
    $
    3.23
    
    
    
    9.13
    
    
    
    61,250
    
    
    $
    3.23
    
    
    
    9.132,105,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,746,750
  11




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##### Table of Contents



WeightedAverageOptions
    
    
    Exercise PriceOutstanding at December 31, 2005 and June 30, 2006
    
    
    424,000
    
    
    $
    1.99
  Weighted
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    WeightedRemaining
    
    
    Remaining
    
    
    
    
    
    
    AverageWeighted
    
    
    Contractual
    
    
    Contractual
    
    
    
    
    
    
    ExerciseAverage
    
    
    Life in
    
    
    Life in
    
    
    
    
    
    
    Price of
    
    
    AggregateYear of
    

    Options
    
    
    Exercise
    
    
    Exercise
    
    
    Years
    
    
    Years
    
    
    Options
    
    
    Options
    
    
    IntrinsicGrant
    

    Outstanding
    
    
    Prices
    
    
    Price
    
    
    12/31/05
    
    
    6/30/06
    
    
    Exercisable
    
    
    Exercisable
    
    
    Value1996
    
    
    6,000
    
    
    $
    26.25
    
    
    $
    26.25
    
    
    
    1.00
    
    
    
    0.50
    
    
    
    6,000
    
    
    $
    26.25
    
    
    $
    1997
    
    
    6,000
    
    
    $
    21.06
    
    
    $
    21.06
    
    
    
    2.00
    
    
    
    1.50
    
    
    
    6,000
    
    
    $
    21.06
    
    
    
    1998
    
    
    6,000
    
    
    $
    1.69
    
    
    $
    1.69
    
    
    
    3.00
    
    
    
    2.51
    
    
    
    6,000
    
    
    $
    1.69
    
    
    
    1999
    
    
    6,000
    
    
    $
    0.53
    
    
    $
    0.53
    
    
    
    4.00
    
    
    
    3.51
    
    
    
    6,000
    
    
    $
    0.53
    
    
    
    5,2202000
    
    
    140,000
    
    
    $
    0.20 to  $0.30
    
    
    $
    0.26
    

    
    
    4.61
    
    
    
    4.12
    
    
    
    140,000
    
    
    $
    0.26
    
    
    
    159,8002001
    
    
    15,000
    
    
    $
    0.75
    
    
    $
    0.75
    
    
    
    6.00
    
    
    
    5.51
    
    
    
    15,000
    
    
    $
    0.75
    
    
    
    9,7502002
    
    
    15,000
    
    
    $
    0.15
    
    
    $
    0.15
    
    
    
    7.00
    
    
    
    6.51
    
    
    
    15,000
    
    
    $
    0.15
    
    
    
    18,7502003
    
    
    80,000
    
    
    $
    1.29
    
    
    $
    1.29
    
    
    
    8.00
    
    
    
    7.51
    
    
    
    80,000
    
    
    $
    1.29
    
    
    
    8,8002004
    
    
    100,000
    
    

    $
    1.18 to  $3.46
    
    
    $
    2.32
    
    
    
    8.72
    
    
    
    8.22
    
    
    
    100,000
    
    
    $
    2.32
    
    
    
    2005
    
    
    50,000
    
    
    $
    3.27
    
    
    $
    3.27
    
    
    
    10.00
    
    
    
    9.51
    
    
    
    50,000
    
    
    $
    3.27
    
    
    
    424,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    424,000
    
    
    
    
    
    
    $
    202,320
  3. NET (LOSS) INCOME PER COMMON SHARE
  12




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Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net (loss) income
    
    $
    (1,849,000
    )
    
    $
    2,407,000
    
    
    $
    (2,588,000
    )
    
    $
    3,650,000Weighted average common shares outstanding
    
    
    17,573,000
    
    
    
    17,345,000
    
    
    
    17,512,000
    
    
    
    17,207,000Effect of dilutive options
    
    
    
    
    
    
    605,000
    
    
    
    
    
    
    
    710,000Adjusted diluted common shares outstanding
    
    $
    17,573,000
    
    
    $
    17,950,000
    
    
    $
    17,512,000
    
    
    $
    17,917,000Net (loss) income per common share- Basic
    
    $
    (0.11
    )
    
    $
    0.14
    
    
    $
    (0.15
    )
    
    $
    0.21- Diluted
    
    $
    (0.11
    )
    
    $
    0.13
    
    
    $
    (0.15
    )
    
    $
    0.20
 4. PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
     13




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




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Six Months Ended June 30,2006
    
    2005Oxygen systems
    
    
    37
    %
    
    
    37
    %Inhalation drugs
    
    
    10
    
    
    
    11Nebulizers
    
    
    2
    
    
    
    2Respiratory assist devices
    
    
    22
    
    
    
    19Other respiratory
    
    
    3
    
    
    
    3Total home respiratory therapy services
    
    
    74
    
    
    
    72Enteral nutrition services
    
    
    6
    
    
    
    6Other infusion services
    
    
    6
    
    
    
    7Total home infusion therapy services
    
    
    12
    
    
    
    13Total home medical equipment and supplies
    
    
    14
    
    
    
    15100
    %
    
    
    100
    %
  Revenue Growth
 16




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




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Trends, Events, and Uncertainties
   Reimbursement Changes
 18




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19




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20




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21




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22




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HIPAA
 23




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Medicaid.
 Bankruptcy Appeal
  Critical Accounting Policies and Estimates
  24




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Results of Operations
   Percentage of RevenuesThree Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales and related services
    
    
    24.7
    
    
    
    23.9
    
    
    
    25.3
    
    
    
    24.1Cost of rental, including rental equipment
depreciation
    
    
    14.2
    
    
    
    12.4
    
    
    
    13.3
    
    
    
    12.1Operating expenses
    
    
    49.1
    
    
    
    48.0
    
    
    
    49.1
    
    
    
    48.6Bad debt expenses
    
    
    3.4
    
    
    
    2.7
    
    
    
    3.4
    
    
    
    3.0General and administrative expense
    
    
    5.6
    
    
    
    5.0
    
    
    
    5.3
    
    
    
    5.1Depreciation, excluding rental equipment,
and amortization
    
    
    1.2
    
    
    
    1.0
    
    
    
    1.2
    
    
    
    1.0Interest expense, net
    
    
    5.5
    
    
    
    5.3
    
    
    
    5.4
    
    
    
    5.3Other expense (income), net
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    (0.1
    )Total expenses
    
    
    103.7
    
    
    
    98.2
    
    
    
    102.9
    
    
    
    99.1Earnings from unconsolidated joint
ventures
    
    
    1.7
    
    
    
    1.4
    
    
    
    1.6
    
    
    
    1.5(Loss) income from operations before
reorganization expense and income taxes
    
    
    (2.0
    )
    
    
    3.2
    
    
    
    (1.3
    )
    
    
    2.4Reorganization items
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.1Provision for income taxes
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Net (loss) income
    
    
    (2.3
    )
    
    
    3.0
    %
    
    
    (1.6
    )
    
    
    2.2
    %
 25




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Three Months Ended June 30, 2006 Compared to Three Months Ended June 30, 2005
 Revenues.
 Sales and Related Services Revenues.
 Rental Revenues
 Cost of Sales and Related Services
 Cost of Rental Revenues
 Operating Expenses
 26




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Bad Debt Expense.
 General and Administrative Expenses
 Depreciation and Amortization
 Interest Expense, Net
 Other Expense (Income), Net
 Earnings from Unconsolidated Joint Ventures
 Provision for Income Taxes
 27




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##### Table of Contents



Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
 Revenues.
 Sales and Related Services Revenues.
 Rental Revenues
 Cost of Sales and Related Services
 Cost of Rental Revenues
 Operating Expenses
 28




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Bad Debt Expense.
 General and Administrative Expenses
 Depreciation and Amortization
 Interest Expense, Net
 Other Income, Net
 Earnings from Unconsolidated Joint Ventures
 29




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Provision for Income Taxes
 Liquidity and Capital Resources
        30




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31




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Contractual Obligations and Commercial Commitments
  Twelve Months Ending June 30,
    
    
    After June 30,Total
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010Long-term debt and
capital leases
    
    $
    250,819,000
    
    
    $
    518,000
    
    
    $
    158,000
    
    
    $
    67,000
    
    
    $
    250,051,000
    
    
    $
    25,000Interest on long-term debt
and capital leases
    
    
    53,084,000
    
    
    
    17,216,000
    
    
    
    17,205,000
    
    
    
    17,201,000
    
    
    
    1,462,000
    
    
    
    Operating lease
obligations
    
    
    27,055,000
    
    
    
    12,163,000
    
    
    
    8,231,000
    
    
    
    4,307,000
    
    
    
    1,868,000
    
    
    
    486,000Total contractual cash
obligations
    
    $
    330,958,000
    
    
    $
    29,897,000
    
    
    $
    25,594,000
    
    
    $
    21,575,000
    
    
    $
    253,381,000
    
    
    $
    511,000
       32




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




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Report of Independent Registered Public Accounting Firm
 
     /s/ KPMG LLP 
 34




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1  LEGAL PROCEEDINGS
  
 ITEM 1A  RISK FACTORS
  Medicare Reimbursement Reductions.
 Dependence on Reimbursement by Third-Party Payors.
 35




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Substantial Leverage.
 Bankruptcy Appeal
 Expense Reduction.
 Government Regulation.
 36




---



##### Table of Contents



Collectibility of Accounts Receivable.
 Health Care Initiatives.
 Role of Managed Care.
 Liquidity.
 HIPAA Compliance.
 37




---



##### Table of Contents



Ability to Attract and Retain Management.
 Competition.
 Liability and Adequacy of Insurance.
 38




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ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   Votes
    
    Votes
    
    Votes
    
    
    
    
    
    BrokerFor
    
    Against
    
    Withheld
    
    Abstentions
    
    Non-VotesReelection of Class 3
director Donald R.
Millard
    
    
    14,466,210
    
    
    
    N/A
    
    
    
    2,047,357
    
    
    
    N/A
    
    
    
    N/A
 39




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##### Table of Contents



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




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SIGNATURES
  AMERICAN HOMEPATIENT, INC.August 2, 2006
    By:
    /s/ Stephen L. ClantonStephen L. ClantonChief Financial Officer and An Officer Duly
Authorized to Sign on Behalf of the registrant 41