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Rotech Healthcare Reports First Quarter 2011 Financial Results

^{Published on 2011-05-07 11:55:48 - Market Wire}
 

ORLANDO, Fla.--([ BUSINESS WIRE ])--Rotech Healthcare Inc. (OTCBB: ROHI) (the aCompanya) today announced financial results for the first quarter ended March 31, 2011.

"In comparing first quarter of 2011 with that of 2010, we are pleased to report improvement in profitability with increases in gross profit and adjusted EBITDA percentages, as well as reductions in SG&A percentage"

Highlights for the first quarter ended March 31, 2011 include:

CAPITAL STRUCTURE

• We completed a refinancing of our former Senior Subordinated Notes due 2012 in March 2011 with the issuance of $290.0 million in aggregate principal amount of Senior Second Lien Notes. Along with the October 2010 offering of $230.0 million in Senior Secured Notes to refinance our former payment-in-kind term loan facility, we have now addressed our short-term debt maturities until 2015 and 2018, the respective maturity dates of our Senior Secured Notes and our Senior Second Lien Notes.

GROWTH

• As of March 31, 2011 revenue generating patients (including patients from equipment and asset purchases) in the core product lines of oxygen and CPAP grew 13.6% compared to March 31, 2010.

ADJUSTED EBITDA¹

• Adjusted EBITDA increased 13% to $28.3 million for the three months ended March 31, 2011 from $25.2 million for the three months ended March 31, 2010.
• The Companya™s ratio of net debt to last twelve months Adjusted EBITDA decreased to 4.0 times at March 31, 2011 compared to 4.8 times at March 31, 2010.

aIn comparing first quarter of 2011 with that of 2010, we are pleased to report improvement in profitability with increases in gross profit and adjusted EBITDA percentages, as well as reductions in SG&A percentage,a said Philip Carter, President and Chief Executive Officer. aThis was in spite of a $3.7 million decline in Medicare reimbursements and other non-patient service revenue,a added Mr. Carter.

¹ See accompanying tables for reconciliation to net earnings (loss).

About Rotech Healthcare Inc.

Rotech Healthcare Inc. is one of the largest providers of home medical equipment and related products and services in the United States, with a comprehensive offering of respiratory therapy and durable home medical equipment and related services. The Company provides home medical equipment and related products and services principally to older patients with breathing disorders, such as chronic obstructive pulmonary diseases (COPD), which include chronic bronchitis, emphysema, obstructive sleep apnea and other cardiopulmonary disorders. The Company provides equipment and services in 48 states through approximately 425 operating locations located primarily in non-urban markets.

Forward-Looking Statements

This press release contains certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of section 21E of the Securities Exchange Act of 1934, as amended, and section 27A of the Securities Act of 1933, as amended. These forward-looking statements include all statements regarding the intent, belief or current expectations regarding matters discussed in this press release and all statements which are not statements of historical fact. Words such as aexpects,a aanticipates,a aintends,a aplans,a abelieves,a aestimates,a aprojects,a amay,a awill,a acould,a ashould,a awould,a variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, contingencies and other factors that could cause results, performance or achievements to differ materially from those stated or implied in this press release. The following are some but not all of such risks, uncertainties, contingencies, assumptions and other factors, many of which are beyond the control of the Company, that could cause results, performance or achievements to differ materially from those anticipated: general economic, financial and business conditions; our ability to successfully transition and retain patients associated with equipment and asset purchases; setting of new reimbursement rates and other changes in reimbursement policies, the timing of reimbursements and other legislative initiatives aimed at reducing health care costs associated with Medicare and Medicaid; issues relating to reimbursement by government and third-party payors for the Companya™s products and services generally; the impact of competitive bidding on Medicare volume in the impacted competitive bidding areas; the costs associated with government regulation of the health care industry; health care reform and the effect of changes in federal and state health care regulations generally; whether the Company will be subject to additional regulatory restrictions or penalties; issues relating to our ability to maintain effective internal control over financial reporting and disclosure controls and procedures; compliance with federal and state regulatory agencies, as well as accreditation standards and confidentiality requirements with respect to patient information; the effects of competitions, industry consolidation and referral sources; recruiting, hiring and retaining qualified employees and directors; compliance with various settlement agreements and corporate compliance programs; the costs and effects of legal proceedings; the Companya™s ability to meet our working capital, capital expenditures and other liquidity needs; our ability to maintain compliance with the covenants contained in our indentures for our senior secured notes and our senior second lien notes; our ability to maintain current levels of collectibility on our accounts receivable; and other factors as described in the Companya™s filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. The Company does not undertake any obligation to publicly release any revisions to any forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

Descriptions of Adjusted EBITDA and reconciliations to our GAAP results are included in the tables and notes attached to this press release.

⁽¹⁾ Non-GAAP Measure

^(A) Accounts receivable adjustments associated with specific collection issues that are not considered indicative of our ongoing operating performance. During 2009, we transitioned all patient-related collection activities to a third-party vendor. We experienced extended delays and implementation issues associated with this transition. During the three months ended March 31, 2010, we completed the initial collection phases associated with the early patient balances most impacted by these transition issues and have determined that an additional provision for doubtful accounts in the amount of $5.0 million was required to allow for a lower percentage of collection on patient receivables resulting from these transition issues. Management believes that these transition issues have been fully resolved and the increased provision for doubtful accounts recorded during the three months ended March 31, 2010 is not indicative of expected future rates of patient collections.

^(B) We refinanced our Senior Subordinated Notes due 2012, and recorded a $1.2 million loss on extinguishment of debt related to unamortized debt issuance costs.

^(C) Restructuring expense generally consists of severance costs.

^(D) Other adjustments not considered indicative of our ongoing operating performance.