LifeCare Holdings, Inc. Announces Second Quart...(with commercial payors a higher acuity l...),Health

Expenses

Total expenses increased by $3.1 million to $93.6 million for the three months ended June 30, 2009 as compared to $90.5 million for the comparable period in 2008. The increase of $3.1 million was primarily the result of an increase of $2.8 million in other operating expenses and an increase of $1.1 million in the provision for doubtful accounts, offset by a decrease of $1.0 million in net interest expense.

The increase of $2.8 million in other operating expenses was primarily attributable to an increase in clinical purchased services as a result of the treatment of higher acuity patients during the 2009 period, and an increase in insurance expenses as a result of the agreement with the insurance carriers in the amount of $1.0 million related to Hurricane Katrina matters. The provision for doubtful accounts in the 2008 period included a benefit of $0.8 million for collections on accounts that were previously fully reserved, whereas collections on similar reserved accounts in the 2009 period were nominal. The decrease in interest expense was due to lower interest rates on our term debt offset by increased borrowings against our revolving credit facility.

Credit Agreement EBITDA

For the quarter ended June 30, 2009, adjusted EBITDA as defined in our senior credit facility, which we refer to as Credit Agreement EBITDA, was $12.0 million, an increase of $0.8 million, or 7.1% 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. This increase in Credit Agreement EBITDA is principally the result of the increase in n
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