LAKE FOREST, Calif., Feb. 7, 2007 (PRIME NEWSWIRE) -- Apria Healthcare Group Inc. (NYSE:AHG), the nation's leading home healthcare company, today announced its financial results for the quarter and year ended December 31, 2006. Net revenues were $391.0 million in the fourth quarter of 2006, an 8.7% increase compared to net revenues of $359.7 million for the fourth quarter of 2005. Net income for the fourth quarter of 2006 was $21.1 million or $0.49 per share (diluted), which includes the positive impact of $0.03 per share of one-time items. This compares to $19.5 million or $0.43 per share reported for the same period last year. Full year revenues increased 2.9% to $1.517 billion in 2006, compared to $1.474 billion for 2005. Net income for 2006 was $75.0 million or $1.75 per share versus $66.9 million or $1.37 per share in 2005.
The comparison in net revenues and net income between 2006 and 2005 should consider the effect of lower Medicare reimbursement in 2006. Such reimbursement reductions include the decrease in payment for oxygen and oxygen equipment, which went into effect in April 2005, but had a partial year impact on the comparison between 2006 and 2005. Also, reimbursement for inhalation drugs was reduced as Medicare lowered the related dispensing fee, and the manufacturer-reported average sales prices, which serve as the basis for drug reimbursement, were generally lower in 2006 than in 2005. The aggregate effect of these Medicare reimbursement reductions on 2006 net revenues was $15 million. The impact to net income and net income per share for 2006 was $9.5 million and $0.22 per share, respectively.
As noted above, net income per share for the fourth quarter and calendar year 2006 was positively impacted by $0.03 for the following non-recurring items: an income tax benefit related to the completion of the 2003 IRS audit, an excise tax refund, and the cash settlement of an insurance claim filed for losses incurred during the 2005 Katrina hurricane. The net income and net income per share comparison between 2006 and 2005 are affected by the costs of the 2005 settlement of a qui tam lawsuit. The impact of that settlement to 2005 net income and net income per share was $16.3 million and $0.33, respectively. In addition, 2005 net income per share was computed on a higher average share base as the company repurchased 7.3 million shares of its common stock in November 2005.
Gross margins were stable in 2006 at 65.6% for both the fourth quarter of 2006 and the full fiscal year. Declines from the levels reported in 2005 are primarily attributable to the Medicare reimbursement reductions noted above and shifts in the product mix.
The provision for doubtful accounts as a percentage of net revenue was 2.6% for 2006, compared to 3.2% in the prior year. This improvement is a direct result of increased cash collections resulting from initiatives to optimize billing processes and to increase collections of patient co-payments.
Selling, distribution and administrative expenses were 53.0% of net revenues in 2006. Adjusted for Medicare reimbursement reductions, the expense percentage would have been 52.5%. These actual and adjusted 2006 expense ratios compare to 53.7% in 2005. The improvement is directly attributable to the realization of savings from cost control measures implemented in 2005 and in early 2006. The favorable variances in the percentages were reflected in all areas of operations, including labor and other operating expenses.
"The objectives and strategies that we set forth at the beginning of 2006 have largely been achieved and in several areas were exceeded," said Lawrence M. Higby, Apria's Chief Executive Officer. "We developed a course of action for the year that emphasized a disciplined execution of our business fundamentals. Additional emphasis was placed on developing the sales organization to drive improved sales growth. The billing and collection initiatives that were executed during 2006 had a single focus: collect cash earlier in the billing cycle. And finally, we leveraged our cost structure to lessen the effects of the Medicare reductions," said Mr. Higby.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were $286.3 million in 2006 compared to $270.1 million in 2005. EBITDA is presented as a supplemental performance measure and is not intended as an alternative to net income or any other measure calculated in accordance with generally accepted accounting principles. Further, EBITDA may not be comparable to similarly titled measures used by other companies. A table reconciling EBITDA to net income is presented at the end of the condensed consolidated financial statements included in this release.
Liquidity and Capital
Free cash flow was $155.7 million in 2006, up from $87.4 million in 2005. The main drivers of the increase in 2006 were a $35 million reduction in income tax payments due primarily to a favorable IRS ruling on the deductibility of interest on the company's convertible notes, increased cash collections, and decreases in working capital requirements. The 2005 total reflects the negative impact of the cash payment of the qui tam settlement. The company has utilized its free cash flow to reduce its revolving credit line balance by $155 million during 2006, lowering the balance to $235 million at December 31, 2006.
Free cash flow is defined as operating cash flow minus capital expenditures and does not include acquisitions or financing activities. It is presented as a supplemental performance measure and is not intended as an alternative to any other cash flow measure calculated in accordance with generally accepted accounting principles. Further, free cash flow may not be comparable to similarly titled measures used by other companies. A table reconciling free cash flow to cash provided by operating activities is presented at the end of the condensed consolidated financial statements included in this release.
Net purchases of patient service equipment in 2006 were 6.6% of net revenue versus 7.1% in 2005. Days sales outstanding (DSO) were 49 at December 31, 2006, down from 57 days at December 31, 2005.
2007 Guidance
Management estimates that revenue growth in 2007 will be in the 4% to 5% range and that the range for net income per share (diluted) will be between $1.78 to $1.82. Free cash flow is anticipated to be in the $95 million to $105 million range. These figures include estimated 2007 Medicare reimbursement reductions which will reduce net income and net income per share by approximately $6.7 million and $0.15 per share, respectively.
Apria provides home respiratory therapy, home infusion therapy and home medical equipment through approximately 500 branches serving patients in all 50 states. With approximately $1.5 billion in annual revenues, it is the nation's leading homecare company.
This release may contain statements regarding anticipated future developments that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Results may differ materially as a result of the risk factors included in the company's filings with the Securities and Exchange Commission and other factors over which the company has no control.
APRIA HEALTHCARE GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, December 31,
(dollars in thousands) 2006 2005
---------------------------------------------------------------------
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 14,657 $ 23,304
Accounts receivable, net of allowance
for doubtful accounts 211,097 226,478
Inventories, net 40,681 42,571
Other current assets 87,369 51,648
---------- ----------
TOTAL CURRENT ASSETS 353,804 344,001
PATIENT SERVICE EQUIPMENT, NET 212,068 225,575
PROPERTY, EQUIPMENT & IMPROVEMENTS, NET 52,975 46,087
OTHER ASSETS, NET 558,985 570,235
---------- ----------
TOTAL ASSETS $1,177,832 $1,185,898
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LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 210,245 $ 166,326
Current portion of long-term debt 2,145 4,465
---------- ----------
TOTAL CURRENT LIABILITIES 212,390 170,791
LONG-TERM DEBT, net of current portion 485,000 640,855
OTHER NON-CURRENT LIABILITIES 70,011 47,088
---------- ----------
TOTAL LIABILITIES 767,401 858,734
STOCKHOLDERS' EQUITY 410,431 327,164
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,177,832 $1,185,898
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APRIA HEALTHCARE GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Year Ended
December 31, December 31,
-------------------- ----------------------
(dollars in thousands,
except per share data) 2006 2005 2006 2005
---------------------------------------------------------------------
Respiratory therapy $ 265,696 $ 246,504 $1,033,267 $1,009,752
Infusion therapy 71,740 64,067 274,723 256,225
Home medical equipment/
other 53,522 49,121 209,317 208,124
--------- --------- ---------- ----------
NET REVENUES 390,958 359,692 1,517,307 1,474,101
GROSS PROFIT 256,557 238,453 995,868 994,813
Provision for doubtful
accounts 9,650 7,538 38,723 46,948
Selling, distribution
and administrative
expenses 205,659 196,120 804,365 792,177
Qui tam settlement and
related costs -- (742) -- 19,258
Amortization of
intangible assets 1,056 1,765 5,080 6,941
--------- --------- ---------- ----------
OPERATING INCOME 40,192 33,772 147,700 129,489
Interest expense, net 6,298 7,225 29,463 22,119
--------- --------- ---------- ----------
INCOME BEFORE TAXES 33,894 26,547 118,237 107,370
Income tax expense 12,801 7,047 43,257 40,429
--------- --------- ---------- ----------
NET INCOME $ 21,093 $ 19,500 $ 74,980 $ 66,941
========= ========= ========== ==========
Income per common share
-- assuming dilution $ 0.49 $ 0.43 $ 1.75 $ 1.37
========= ========= ========== ==========
Weighted average number
of common shares
outstanding 43,212 45,608 42,935 48,985
APRIA HEALTHCARE GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Year Ended
December 31,
--------------------
(dollars in thousands) 2006 2005
---------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 74,980 $ 66,941
Items included in net income not requiring cash:
Provision for doubtful accounts 38,723 46,948
Depreciation and amortization 138,643 140,618
Deferred income taxes and other 32,109 (222)
Changes in operating assets and liabilities,
exclusive of effects of acquisitions (3,138) (47,986)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 281,317 206,299
-------- --------
INVESTING ACTIVITIES
Purchases of patient service equipment and
property, equipment and improvements,
exclusive of effects of acquisitions (125,628) (118,867)
Proceeds from disposition of assets 778 767
Cash paid for acquisitions, including
payments of deferred consideration (8,082) (105,471)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (132,932) (223,571)
-------- --------
FINANCING ACTIVITIES
Net debt (payments) proceeds (162,030) 157,396
Capitalized debt issuance costs (1,119) (15)
Change in book cash overdraft included in
accounts payable (2,128) (2,384)
Issuances of common stock 8,245 21,180
Repurchases of common stock -- (175,000)
-------- --------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (157,032) 1,177
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (8,647) (16,095)
Cash and cash equivalents at beginning of
period 23,304 39,399
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 14,657 $ 23,304
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APRIA HEALTHCARE GROUP INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
RECONCILIATIONS
(unaudited)
Three Months Ended Year Ended
December 31, December 31,
-----------------------------------------
(dollars in thousands) 2006 2005 2006 2005
---------------------------------------------------------------------
Reconciliation - EBITDA:
Reported net income $ 21,093 $ 19,500 $ 74,980 $ 66,941
Add back: Interest
expense, net 6,298 7,225 29,463 22,119
Add back: Income tax
expense 12,801 7,047 43,257 40,429
Add back: Depreciation 32,510 33,854 133,563 133,677
Add back: Amortization of
intangible assets 1,056 1,765 5,080 6,941
-------- -------- -------- --------
Adjusted EBITDA $ 73,758 $ 69,391 $286,343 $270,107
======== ======== ======== ========
Reconciliation - Free Cash Flow:
Net cash provided by
operating activities $ 91,380 $ 78,156 $281,317 $206,299
Less: Purchases of
patient service
equipment and
property, equipment
and improvements,
exclusive of effects
of acquisitions (34,911) (26,745) (125,628) (118,867)
-------- -------- -------- --------
Free cash flow $ 56,469 $ 51,411 $155,689 $ 87,432
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