LifeCare Holdings reports $95.0 million net patient service revenue for first-quarter 2010

LifeCare Holdings, Inc. (the "Company") today announced its operating results for the first quarter ended March 31, 2010.  

Net Revenues

Our net patient service revenue of $95.0 million for the three months ended March 31, 2010, is in line with the comparable period in 2009. Patient days in the 2010 period were 59,252, which were 107, or 0.2%, greater than the same period in 2009, while admissions were 2,090, which were 75, or 3.5%, less than the same period in 2009.

However, on a same store basis, which excludes the operations of our former hospital in Muskegon, MI from the 2009 period, our net patient service revenue of $95.0 million for the 2010 period represents an increase of $1.5 million from the 2009 period.  Patient days in the 2010 period of 59,252 increased by 1,196, or 2.1%, while admissions of 2,090 decreased by 37, or 1.7%. On a same store basis, the increase of $1.5 million in our net patient service revenue was primarily attributable to the increase in patient days during the 2010 period.  

Expenses

Total expenses decreased by $3.1 million to $89.3 million for the three months ended March 31, 2010 as compared to $92.4 million for the same period in 2009. However, on a same store basis, which excludes the operations of our former hospital in Muskegon, MI from the 2009 period, total expenses of $89.3 million in the 2010 period decreased by $1.8 million from the 2009 period.  This decrease was primarily attributable to a decrease of $1.3 million in net interest expense as the result of lower interest rates on outstanding borrowings during the 2010 period and the decrease of $11.1 million in outstanding principal of our senior subordinated notes as a result of the repurchase of these notes during the second half of the year ended December 31, 2009.  

Credit Agreement EBITDA

For the quarter ended March 31, 2010, adjusted EBITDA as defined in our senior credit facility, which we refer to as Credit Agreement EBITDA, was $15.6 million, a decrease of $1.7 million, or 9.9% from the prior year period. Credit Agreement EBITDA reflects the elimination of start-up costs and certain other non-recurring/operational expenditures as defined in our credit agreement.  As of March 31, 2010, we believe we were in compliance with all covenants contained in our senior secured credit facility, as amended.

Liquidity and Capital Resources

At March 31, 2010, our outstanding indebtedness consisted of $119.3 million aggregate principal amount of our 9-1/4% senior subordinated notes due 2013, a $243.5 million term loan facility that matures in 2012, and $35.0 million outstanding on our revolving credit facility which matures in 2011. At March 31, 2010, the interest rate applicable to the $243.5 million under our term loan facility was 4.50%, and the weighted average rate on the $35.0 million outstanding balance of the revolving credit facility was 4.26%.

The senior secured credit facility requires us to comply on a quarterly basis with certain financial covenants, including an interest coverage ratio test and a maximum leverage ratio test. These financial covenants become more restrictive on a periodic basis throughout the remaining term of the senior secured credit facility.  In addition, the senior secured credit facility includes various negative covenants, including limitations on indebtedness, liens, investments, permitted businesses and transaction and other matters, as well as certain customary representations and warranties, affirmative covenants and events of default including payment defaults, breach of representations and warranties, covenant defaults, cross defaults to certain indebtedness, certain events of bankruptcy, certain events under ERISA, material judgments, actual or asserted failure of any guaranty or security document supporting the senior secured credit facility to be in full force and effect, change of control, and certain subjective provisions.

We may not be able to continue to satisfy the covenant requirements in subsequent periods. If we are unable to maintain compliance with the covenants contained in our senior secured credit facility, an event of default would occur. During the continuation of an event of default, the lenders under the senior secured credit facility are entitled to take various actions, including accelerating amounts due under the senior secured credit facility, terminating our access to our revolving credit facility and all other actions generally available to a secured creditor. An uncured event of default would have a material adverse effect on our financial position, results of operations and cash flow.  

We believe that our cash on hand, expected cash flows from operations, and potential availability of borrowings under the revolving portion of our senior secured credit facilities will be sufficient to finance our operations, and meet our scheduled debt service requirements for at least the next twelve months.