LAKE FOREST, Calif., July 21, 2005 (PRIMEZONE) -- Apria Healthcare Group Inc. (NYSE:AHG), the nation's leading home healthcare company, today announced its financial results for the quarter ended June 30, 2005. Revenues were $374.9 million in the second quarter of 2005, a 4.3% increase over revenues of $359.6 million for the second quarter in 2004. Net income for the second quarter of 2005 was $22.8 million or $.46 per share (diluted), compared to $29.1 million or $.57 per share for the same period last year.
The comparison of revenues between the second quarters of 2005 and 2004 was impacted by the Medicare reimbursement reductions that went into effect January 1, 2005 and the Company's decision not to renew its contract with Gentiva CareCentrix, Inc., the effect of which began during the first half of 2004. Further, the second quarter of 2005 represents the first period affected by the Medicare reimbursement reductions for oxygen that had been delayed by the Centers for Medicare and Medicaid Services. Excluding the effects of these issues, revenue growth was 7.6%. The Medicare reductions and the contract exit also negatively impacted net income.
Earnings before interest, taxes, depreciation and amortization (EBITDA) was $76.0 million for the second quarter of 2005 compared to $89.0 million for the second quarter of 2004. EBITDA is presented as a supplemental performance measure and is not meant to be considered as an alternative to net income or cash flows from operating activities 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 bottom of the condensed consolidated statements of income included in this release.
Sales, distribution and administrative expenses were 56.1% of net revenues in the second quarter of 2005, compared to 54.1% for the second quarter last year. The increase in the percentage is primarily attributable to the lower revenue base resulting from the Medicare reimbursement reductions. Excluding the effect of the reductions, expenses would have been 54.9% of net revenues. The remaining increase is due to higher fuel prices and health benefit expense increases.
"We are pleased with our second quarter results," said Lawrence M. Higby, Apria's Chief Executive Officer. "We increased pretax earnings over the first quarter despite the fact that the Medicare reimbursement reduction for oxygen went into effect at the beginning of the second quarter. An improved gross margin and lower bad debt expense due to rebounding cash collections helped offset the effect of the reimbursement cuts."
During the second quarter, Apria closed seven acquisitions for total consideration of $67.3 million. The most notable of these was the acquisition of the U.S. homecare operations of Air Liquide Health Care America Corporation (d/b/a VitalAire), a business with a high respiratory mix and 18 locations located predominantly in the Northern half of Florida.
Days sales outstanding (DSO) were 56 days at June 30, 2005, up from 53 days reported at the same date last year, but down from 57 days at March 31, 2005.
2005 Outlook
Reflecting the Medicare reimbursement reductions and related product pricing changes, revenue growth for the year is estimated to be in the 5% to 6% range. Earnings per share for 2005 are estimated in the $1.90 to $1.95 range.
Qui Tam Litigation Update
As previously reported, since mid-1998 Apria has been the subject of an investigation conducted by the U.S. Attorney's office in Los Angeles and the U.S. Department of Health and Human Services, concerning a possible liability that may result from incomplete or inaccurate documentation supporting a portion of the Company's Medicare billings during the period from mid-1995 through 1998. Also as previously reported, Apria and government representatives are having discussions seeking to narrow their differences with respect to information developed in the course of the investigation. The outcome of these discussions cannot be predicted.
To date, management has been unable to estimate the amount or range of liability that may result from these proceedings and, therefore, has not recorded any related accruals. Depending upon the progress of its discussions with the government prior to the filing of Apria's quarterly report on Form 10-Q with the Securities and Exchange Commission in August, the Company may be in a position at that time to estimate at least the lower boundary of the range of such potential liability. In that event an appropriate accrual will be reflected in the results for the quarter ended June 30, 2005. Any such accrual, if made, could result in a material change in the results of operations from the amounts reported in this press release.
Potential Transaction
As reported in a press release dated June 7, 2005, Apria announced that its Board of Directors has commenced a process in which interested parties are able to evaluate and then indicate their interest in a potential acquisition of the Company. After such an evaluation, if one or more parties express interest in proceeding with an acquisition at an attractive price level, the Board of Directors will consider the possibility of entering into such a transaction, but no assurance can be given that any transaction will be entered into or consummated. If a decision to proceed with an acquisition is agreed to, it is estimated that the transaction would be concluded around year-end.
Apria provides home respiratory therapy, home infusion therapy and home medical equipment through 500 branches serving patients in 50 states. With $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
June 30, December 31,
(dollars in thousands) 2005 2004
--------------------------------------------------------------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 13,028 $ 39,399
Accounts receivable, net
of allowance for doubtful
accounts 234,864 219,365
Inventories, net 38,964 40,295
Other current assets 47,039 49,252
---------- ----------
TOTAL CURRENT ASSETS 333,895 348,311
PATIENT SERVICE EQUIPMENT, NET 235,383 224,801
PROPERTY, EQUIPMENT & IMPROVEMENTS,
NET 48,968 51,012
OTHER ASSETS, NET 569,505 483,540
---------- ----------
TOTAL ASSETS $1,187,751 $1,107,664
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LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities $ 158,629 $ 173,434
Current portion of long-term debt 2,510 4,901
---------- ----------
TOTAL CURRENT LIABILITIES 161,139 178,335
LONG-TERM DEBT, net of current portion 501,600 475,957
OTHER NON-CURRENT LIABILITIES 48,522 47,187
---------- ----------
TOTAL LIABILITIES 711,261 701,479
STOCKHOLDERS' EQUITY 476,490 406,185
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,187,751 $1,107,664
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APRIA HEALTHCARE GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(dollars in thousands, ------------------ ----------------
except per share data)
2005 2004 2005 2004
--------------------------------------------------------------------
Respiratory therapy $255,913 $246,691 $513,401 $489,077
Infusion therapy 64,562 60,424 126,265 119,112
Home medical
equipment/other 54,456 52,447 107,128 102,254
-------- -------- -------- --------
NET REVENUES 374,931 359,562 746,794 710,443
GROSS PROFIT 266,044 260,642 528,669 512,602
Provision for doubtful
accounts 12,582 12,811 27,250 26,280
Selling, distribution and
administrative expenses 210,364 194,537 415,933 381,877
Amortization of intangible
assets 1,509 1,509 3,129 2,785
-------- -------- -------- --------
OPERATING INCOME 41,589 51,785 82,357 101,660
Interest expense, net 4,865 4,954 9,632 9,909
-------- -------- -------- --------
INCOME BEFORE TAXES 36,724 46,831 72,725 91,751
Income tax expense 13,916 17,772 24,747 34,845
-------- -------- -------- --------
NET INCOME $ 22,808 $ 29,059 $ 47,978 $ 56,906
======== ======== ======== ========
Income per common share-
assuming dilution $ 0.46 $ 0.57 $ 0.96 $ 1.12
======== ======== ======== ========
Weighted average number of
common shares outstanding 50,082 50,675 49,933 50,758
Reconciliation -- EBITDA:
Reported net income $ 22,808 $ 29,059 $ 47,978 $ 56,906
Add back: Interest
expense, net 4,865 4,954 9,632 9,909
Add back: Income tax
expense 13,916 17,772 24,747 34,845
Add back: Depreciation 32,940 35,728 66,271 70,476
Add back: Amortization of
intangible assets 1,509 1,509 3,129 2,785
-------- -------- -------- --------
EBITDA $ 76,038 $ 89,022 $151,757 $174,921
======== ======== ======== ========
APRIA HEALTHCARE GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
---------------------
(dollars in thousands) 2005 2004
-------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 47,978 $ 56,906
Items included in net income not
requiring cash:
Provision for doubtful accounts 27,250 26,280
Depreciation and amortization 69,400 73,261
Deferred income taxes and other (3,759) 13,537
Changes in operating assets and
liabilities, exclusive of effects of
acquisitions (43,100) (32,186)
--------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 97,769 137,798
--------- ---------
INVESTING ACTIVITIES
Purchases of patient service equipment
and property, equipment and
improvements, exclusive of effects of
acquisitions (63,299) (77,801)
Proceeds from disposition of assets 183 79
Cash paid for acquisitions, including
payments of deferred consideration (96,229) (100,052)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (159,345) (177,774)
--------- ---------
FINANCING ACTIVITIES
Net payments on debt 21,512 (16,767)
Capitalized debt issuance costs (15) (37)
Outstanding checks included in accounts
payable (3,308) (4,353)
Issuances of common stock 17,016 11,619
Repurchases of common stock, net -- (53,033)
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES 35,205 (62,571)
--------- ---------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (26,371) (102,547)
Cash and cash equivalents at beginning
of year 39,399 160,553
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 13,028 $ 58,006
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