Rotech dips on earnings delay; Allied Waste strengthens on Pricewaterhouse re-audit

By Sara Rosenberg

New York, Aug. 13 - Rotech Healthcare Inc.'s bank loans fell about 2 points in the secondary on Tuesday following the announcement that submission of the company's second quarter financial report to creditors will be delayed, according to a fund manager. Meanwhile, Allied Waste Industries Inc. saw a one-point improvement after Pricewaterhouse Cooper LLP findings on financial results proved to be in line with the company's previously reported financial findings.

Rotech was bid at about 981/4, down from a quote of par a few days ago, the fund manager said.

KPMG, the company's auditor, will not be able to complete its review of the financial report by Aug. 14, a company press release said. The review is focusing on proper accounting treatment of sales following the revelation that an independent contractor, who is a former Rotech employee, had a pattern of falsified sales with respect to bulk sales to the Department of Veterans Affairs.

Furthermore, Rotech has engaged the government contracts consulting firm Navigant Consulting, Inc. and the law firm of Latham & Watkins to conduct an internal investigation, which is nearing completion, the company press release said.

The delay in reporting the financial results places the company in technical default under its bank credit facility and 9½% senior subordinated notes. The company has 30 days to cure the default.

"Rotech had a conference call this afternoon," the fund manager said. "They said they're 98% done with the review and they don't expect any surprises."

"I don't think [this news] is such a big deal," a trader said. "It will blow over."

The bank debt went down today more on investor nervousness of the mention of fraud by a company due to recent events, such as WorldCom Inc. and Adelphia Communications Corp., the trader explained.

Rotech is an Orlando, Fla. provider of home respiratory care and durable medical equipment and services to patients with breathing disorders.

Allied Waste, a Scottsdale, Ariz. waste management company, went up about a point to a bid of 96 and an offer of 98, according to the trader.

"It was a relief pop more than anything else since there was no bad news," the trade explained.

Allied Waste announced on Tuesday that Pricewaterhouse Coopers LLP unqualified opinion report covering financial statements is unchanged from the company's previously issued financial statements.

Furthermore, "the SEC's review of the company's 2001 Form 10-K, March 31, 2002 Form 10-Q and July 31, 2002 Form 8-K has been completed without further comment and without any requirement to restate or amend any previous filings," a company press release said.

Pricewaterhouse replaced Arthur Andersen LLP and was retained to re-audit the financial statements for 2001 in order to provide investors with additional confidence.

"We are pleased that PWC was able to complete its audit in such a timely fashion," said Tom Ryan, executive vice president and chief financial officer, in the press release. "This also speaks volumes to the capabilities of the Allied organization and our commitment to the integrity, objectivity and clarity in presentation of our financial statements. As we stated earlier this year in our annual report, we are committed to providing the markets with information on the company that we ourselves would appreciate as investors."

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