American HomePatient faces big-time trouble

BRENTWOOD, Tenn. - American HomePatient's prospects for paying a $233.6 million bill that's due Aug. 1 don't look very good.

In a recent Securities and Exchange Commission (SEC) filing, American HomePatient stated: "The company will not be able to pay this debt without refinancing. If the unfavorable conditions in the current debt market do not improve, the company believes that refinancing of the debt will be difficult or impossible to achieve. Other factors, such as uncertainty regarding the company's future profitability, could also limit the company's ability to refinance the debt."

American HomePatient may be in the middle of a perfect storm, industry watchers say.

"Refinancing debt is problematic in any environment," said Rick Glass, president of Steven Richards & Associates, a Tarpon Springs, Fla.-based mergers and acquisitions firm. "Never mind with the current credit situation and reimbursement cuts. It's very problematic."

American HomePatient's no stranger to navigating troubled waters. The company entered and then emerged from a Chapter 11 bankruptcy reorganization earlier this decade.

Another reorganization may be in order, industry watchers say.

"In general, if a business is upside down on its balance sheet, sometimes the best option is to reorganize, which permits a cleaner, more viable company to emerge at the end of the process," said Jonathan Sadock, partner and CEO of Paragon Ventures, a Philadelphia-based M&A firm.

If American HomePatient fails to refinance its debt, lenders "would have the right to foreclose on substantially all tangible assets of the company," according to the filing.

That may mean Highland Capital Management, a Dallas-based investment firm that owns nearly half of the outstanding shares in American HomePatient, would take control, industry watchers say. Highland made an unsuccessful bid to buy American HomePatient in 2006.

Attempts to reach Highland were unsuccessful.

Although American HomePatient has been on and off the market for years, its inability to refinance its debt may force the company to pull the trigger on a sale, industry watchers say.

"Everyone has kicked the tires over there, but they think they're worth more than any offer," said Bruce Burns, president of Affinity Ventures, an Albuquerque, N.M.-based M&A firm. "Maybe they'll be more realistic now, and they'll sell at a more advantageous price."



Revenues down, income up

BRENTWOOD, Tenn. - American HomePatient on March 5 reported $67.8 million in revenues for the fourth quarter of 2008 compared to $71.5 million for the same period last year, a 5.2% decrease. Revenues were $266.9 million for 2008 compared to $293 million for 2007, an 8.9% decrease. American HomePatient blames its lackluster revenues to "a change in inhalation drug product mix and the company's de-emphasis of less profitable product lines, such as non-respiratory durable medical equipment and infusion therapy." On a brighter note: Net income was $1.5 million for the fourth quarter of 2008 compared to a net loss of $300,000 for the same period last year. Net income was $500,000 for 2008 compared to a net loss of $5.5 million for 2007. Net income in 2007 was affected by the recording of a $5.6 million change of control expense. American HomePatient credits the improvement in net income in the fourth quarter to improve operating efficiencies and improved accounts receivable collection processes.