Light weekend reading on Rotech


I don’t typically like spending my Friday afternoons reading through meaty Form 10-Qs, but when the company that filed said form is Rotech Healthcare, it becomes a little more interesting.

With so few public companies in the HME industry (and soon one less fewer with Linde’s acquisition of Lincare), one has to treasure these windows into the HME provider’s financial health and psyche, even if most HME providers aren’t anywhere near the size of Rotech (420 locations in 49 states).

This particular Form 10-Q didn’t disappoint. It contains more than a few goodies, including:

•    During the first six months of 2012, Rotech purchased $2.5 million of new and used rental equipment, inventory and certain identifiable intangible assets from competitors existing the HME market. The company has recognized $14.8 million of revenues associated with patients transitioned onto its service through asset and equipment purchases. “We expect that we will continue to evaluate and explore strategic alternatives and opportunities as they may arise, including potential acquisitions, business combination transactions, strategic partnerships or similar transactions,” Rotech stated.

•    The NASDAQ’s review of Rotech’s application for relisting of its common stock “is substantially complete.”

•    Rotech nabbed a total of 23 contracts in Round 1 of competitive bidding: seven for oxygen; six CBAs for enteral; five for CPAP; two for walkers; 2 for standard power wheelchairs; and one for hospital beds. “Based upon CMS information, it appears that approximately 70% of existing providers across the Round 1 CBAs were not awarded contacts and are therefore not able to provide products to new patients,” the company stated. “We have experienced significant volume increases within the CBAs where we were awarded contracts, which we attribute in part to an increase in market share, and we believe that the revenue associated with these volume increases will more than offset the impact of the associated reductions in reimbursement rates over time.”

•    Rotech’s Medicare revenues from the product categories in the 91 additional markets to be included in Round 2 of competitive bidding were about $54 million in 2011.

Read the Form 10-Q from start to finish here. Consider it light weekend reading.