LifeCare Holdings, Inc. Announces Year-E...(during the 2008 period was primarily the...),Health

Date:3/31/2009

during the 2008 period was primarily the result of inflationary increases in our standard charge rates and certain of our contracts with commercial payors, an increase in the percentage of our revenues generated from commercial payors, and the marginal increases contained in recent annual regulatory updates implemented by CMS during 2008.

Total Expenses

Total expenses decreased by $10.6 million to $371.6 million for the year ended December 31, 2008 as compared to $382.2 million for the comparable period in 2007. Included in the expenses for 2008 is an impairment charge of $18.6 million related to goodwill, and a gain of $9.5 million related to the early extinguishment of debt. Gain on early extinguishment of debt for the year-ended December 31, 2008 was the result of our repurchasing $16.5 million in face amount of our senior subordinated notes for approximately $6.5 million. Partially offsetting the gain was the write-off of capitalized financing cost of $0.5 million recorded in connection with the retirement of these senior subordinated notes. Included in expenses for the year ending December 31, 2007, is a $38.8 million impairment charge related to goodwill and $2.5 million attributable to compensation and benefits accrued in connection with the departure of our former CEO.

Excluding the impairment charge and benefit from the gain on the early extinguishment of debt for 2008, and the impairment charge and the compensation and benefits accrual for 2007, expenses increased by $21.6 million from the same period in the prior year. Rent expense increased by $3.9 million during 2008 in connection with the increases in bed capacity as discussed previously. Net interest expense increased by $1.9 million during 2008 due to interest on the increased amount drawn on the line of credit in 2008 as discussed in the Liquidity and Capital Resources section contained herein. The remaining $15.8 million increas
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