LAKE FOREST, Calif., Feb. 10, 2005 (PRIMEZONE) -- Apria Healthcare Group Inc. (NYSE:AHG), the nation's leading home healthcare company, today announced its financial results for the quarter and fiscal year ended December 31, 2004. Revenues were $376.4 million in the fourth quarter, a 5.7% increase over revenues of $356.3 million for the comparable period in 2003. Net income for the fourth quarter was $27.3 million or $.55 per share (diluted), compared to $29.9 million or $.58 per share for the fourth quarter of 2003. Revenues for the year ended December 31, 2004 were $1,451 million, a 5.1% increase over 2003 revenues of $1,381 million. Net income for 2004 was $114.0 million or $2.27 per share, compared to $116.0 million or $2.15 per share in 2003.
Adjustment for Comparability
Reported net income for the quarter and year ended December 31, 2004 includes the write-off of unamortized debt issuance costs of $2.7 million, associated with the November 2004 refinancing of the Company's bank loans. Management believes it is useful to compare results for the 2003 and 2004 periods after adjusting 2004 net income and earnings per share to exclude this charge. For the fourth quarter 2004, net income as so adjusted would be $29.0 million or $.59 per share and for the full year 2004, net income as so adjusted would be $115.7 million or $2.31 per share.
As previously reported, the Company's overall revenue growth rate and earnings were impacted by the Medicare respiratory medication reimbursement cuts ($3.7 million for the fourth quarter and $15.2 million for the year) and the Company's decision not to renew its contract with Gentiva CareCentrix, Inc. Excluding those effects, revenue growth was 10.8% for the fourth quarter and 9.6% for the year.
Earnings before interest, taxes, depreciation and amortization (EBITDA) was $88.1 million for the fourth quarter of 2004 compared to $89.2 million for the fourth quarter of 2003. 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.
During the fourth quarter, Apria closed one acquisition for $1.6 million, bringing the total number of acquisitions for the year to 27 for an aggregate consideration of $148.7 million. Days sales outstanding improved to 52 days at December 31, 2004 from 55 days reported at September 30, 2004. This trend is primarily attributable to the timing of acquisitions in 2004. Delays in billing occur as patient data from acquisitions is converted to Apria's systems and as Medicare provider numbers for newly acquired locations are obtained.
"In the third quarter of 2004, we reported an increase in operating expenses due primarily to integration activities related to the unprecedented number of acquisitions that we closed in the second and third quarters, and one-time costs associated with Sarbanes-Oxley compliance activities and other consulting expenses," said Lawrence M. Higby, Apria's Chief Executive Officer. "While we are still incurring integration costs for the late third quarter acquisitions, we are happy to report that fourth quarter sales, distribution and administrative expenses have decreased to 54.5% of net revenues, compared to 55.0% in the third quarter. When comparing the fourth quarter of 2004 to the 53.2% reported in the fourth quarter of 2003, the issues noted above must be considered in conjunction with the lower revenue base resulting from the Medicare reimbursement reductions. We continue to monitor our expenses as we introduce a number of productivity initiatives aimed at lowering our costs."
2005 Outlook
In December 2004, The Centers for Medicare and Medicaid Services ("CMS") announced that the Office of Inspector General ("OIG") needed to collect additional information before the 2005 fee schedules for oxygen could be finalized. CMS further announced in January 2005, that since the data from the OIG had not yet been received, CMS will continue to pay the 2004 fee schedule amounts for oxygen claims until the 2005 fee schedules are finalized. CMS noted that 2005 claims that were paid based on 2004 fee schedule amounts would not be retroactively adjusted. When CMS determines this fee, the Company will provide earnings per share guidance for 2005.
Annual Meeting of Stockholders
The Company also announced that its Board of Directors has established March 11, 2005 as the record date for its Annual Meeting of Stockholders, which will be held on April 20, 2005. The only scheduled item of business for the Annual Meeting will be the reelection of seven of its Directors. Two of the Company's current Directors, Ralph Whitworth, Chairman, and Beverly Benedict Thomas, have decided not to stand for reelection.
In commenting on his decision, Mr. Whitworth, a principal of Relational Investors, LLC, said, "Serving as Apria's Chairman during its spectacular transformation since April of 1998 is among the most satisfying experiences in my business career. Apria is now the unrivaled industry leader and our stock price has appreciated 330%, giving our shareholders a 20% annualized return over that period. My decision does not reflect my view of Apria's future prospects, but rather my evolving priorities. With Apria solidly positioned for continued excellent performance, I will now be able to devote additional attention to more pressing ongoing projects."
The Board has elected David L. Goldsmith, who has served on Apria's Board for 18 years, to be Chairman of the Board following the Annual Meeting of Stockholders. "Besides being the largest individual shareholder on Apria's Board," noted Mr. Whitworth, "David has an ideal combination of leadership qualities and industry expertise. He is superbly qualified to lead Apria's Board as it addresses the opportunities and challenges ahead. He has my unequivocal endorsement and the unanimous support of the Board."
Apria provides home respiratory therapy, home infusion therapy and home medical equipment through approximately 475 branches serving patients in 50 states. With over $1.4 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.
(Financial tables attached) APRIA HEALTHCARE GROUP INC. CONDENSED CONSOLIDATED BALANCE SHEETS December 31, December 31, (dollars in thousands) 2004 2003 --------------------------------------------------------------------- (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 39,399 $ 160,553 Accounts receivable, net of allowance for doubtful accounts 219,364 196,413 Inventories, net 40,295 29,089 Other current assets 49,252 43,280 ---------- ---------- TOTAL CURRENT ASSETS 348,310 429,335 PATIENT SERVICE EQUIPMENT, NET 224,801 209,551 PROPERTY, EQUIPMENT & IMPROVEMENTS, NET 51,012 50,192 OTHER ASSETS, NET 483,541 354,357 ---------- ---------- TOTAL ASSETS $1,107,664 $1,043,435 ========== ========== LIABILITIES & STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued liabilities $ 173,435 $ 160,738 Current portion of long-term debt 4,901 31,522 ---------- ---------- TOTAL CURRENT LIABILITIES 178,336 192,260 LONG-TERM DEBT, net of current portion 474,846 469,241 OTHER NON-CURRENT LIABILITIES 48,298 15,986 ---------- ---------- TOTAL LIABILITIES 701,480 677,487 STOCKHOLDERS' EQUITY 406,184 365,948 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,107,664 $1,043,435 ========== ========== APRIA HEALTHCARE GROUP INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) Three Months Ended Years Ended December 31, December 31, --------------------- --------------------- (dollars in thousands, except per share data) 2004 2003 2004 2003 --------------------------------------------------------------------- Respiratory therapy $ 255,822 $ 241,595 $ 990,857 $ 930,406 Infusion therapy 63,911 61,205 246,662 241,860 Home medical equipment/other 56,704 53,469 213,930 208,679 ---------- ---------- ---------- ---------- NET REVENUES 376,437 356,269 1,451,449 1,380,945 GROSS PROFIT 268,636 256,656 1,043,830 1,004,202 Provision for doubtful accounts 10,019 12,931 48,567 51,154 Selling, distribution and administrative expenses 205,000 189,564 787,496 747,799 Amortization of intangible assets 2,073 1,507 6,712 3,650 ---------- ---------- ---------- ---------- OPERATING INCOME 51,544 52,654 201,055 201,599 Interest expense, net 4,901 5,021 20,020 15,026 Write-off of debt issuance costs 2,730 -- 2,730 -- ---------- ---------- ---------- ---------- INCOME BEFORE TAXES 43,913 47,633 178,305 186,573 Income tax expense 16,645 17,736 64,297 70,581 ---------- ---------- ---------- ---------- NET INCOME $ 27,268 $ 29,897 $ 114,008 $ 115,992 ========== ========== ========== ========== Income per common share- assuming dilution $ 0.55 $ 0.58 $ 2.27 $ 2.15 ========== ========== ========== ========== Weighted average number of common shares outstanding 49,326 51,888 50,159 54,066 Reconciliation -- EBITDA: Reported net income $ 27,268 $ 29,897 $ 114,008 $ 115,992 Add back: Interest expense, net 4,901 5,021 20,020 15,026 Add back: Write-off debt issuance costs 2,730 -- 2,730 -- Add back: Income tax expense 16,645 17,736 64,297 70,581 Add back: Depreciation 34,439 35,021 140,762 135,952 Add back: Amortization of intangible assets 2,073 1,507 6,712 3,650 ---------- ---------- ---------- ---------- Adjusted EBITDA $ 88,056 $ 89,182 $ 348,529 $ 341,201 ========== ========== ========== ========== Reconciliation -- adjusted net income and EPS: Reported net income $ 27,268 $ 29,897 $ 114,008 $ 115,992 Add back: Write-off debt issuance costs, net of taxes 1,695 -- 1,695 -- ---------- ---------- ---------- ---------- Adjusted net income $ 28,963 $ 29,897 $ 115,703 $ 115,992 ========== ========== ========== ========== Reported EPS -- assuming dilution $ 0.55 $ 0.58 $ 2.27 $ 2.15 Add back: Write-off of debt issuance costs, net of taxes 0.04 -- 0.04 -- ---------- ---------- ---------- ---------- Adjusted EPS $ 0.59 $ 0.58 $ 2.31 $ 2.15 ========== ========== ========== ========== APRIA HEALTHCARE GROUP INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Years Ended December 31, ------------------------- (dollars in thousands) 2004 2003 --------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 114,008 $ 115,992 Items included in net income not requiring cash: Provision for doubtful accounts 48,567 51,154 Depreciation and amortization 147,474 139,602 Deferred income taxes and other 23,384 17,197 Changes in operating assets and liabilities, exclusive of effects of acquisitions (57,422) (60,040) --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 276,011 263,905 --------- --------- INVESTING ACTIVITIES Purchases of patient service equipment and property, equipment and improvements, exclusive of effects of acquisitions (141,755) (144,007) Proceeds from disposition of assets 211 774 Cash paid for acquisitions, including payments of deferred consideration (144,234) (99,403) --------- --------- NET CASH USED IN INVESTING ACTIVITIES (285,778) (242,636) --------- --------- FINANCING ACTIVITIES Net payments on debt (28,346) 225,066 Capitalized debt issuance costs (2,775) (6,649) Outstanding checks included in accounts payable 1,419 632 Issuance of common stock 18,315 12,323 Repurchases of common stock, net (100,000) (118,471) --------- --------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (111,387) 112,901 --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS (121,154) 134,170 Cash and cash equivalents at beginning of year 160,553 26,383 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 39,399 $ 160,553 ========= =========