LAKE FOREST, Calif., Oct. 26, 2006 (PRIMEZONE) -- Apria Healthcare Group Inc. (NYSE:AHG), the nation's leading home healthcare company, today announced its financial results for the quarter ended September 30, 2006. Revenues were $382.2 million in the third quarter of 2006 compared to $367.6 million in the third quarter of 2005. Net income for the third quarter of 2006 was $19.3 million or $0.45 per share (diluted). Net income for the third quarter of 2005 was also $19.3 million and net income per share (diluted) was $0.38. The net income per share difference reflects the Company's repurchase of approximately 7.3 million shares of its common stock in the fourth quarter of 2005. Further, the 2005 figures reflect a tax benefit of $2.3 million or $.05 per share taken in the third quarter of 2005 on settlement costs related to the qui tam lawsuit that were initially accrued in the second quarter of 2005.
Net revenue growth for the third quarter of 2006, when compared to the third quarter of 2005, was 4.0%. When adjusted by Medicare reimbursement reductions of $1.8 million, the growth was 4.5%. Gross margins were 65.7% in the third quarter of 2006, compared to 67.7% reported in the third quarter of last year. The decline in the margin is primarily attributable to the Medicare reimbursement reduction noted above, managed care pricing reductions and product mix shifts.
The provision for doubtful accounts as a percentage of net revenue was 2.4%, compared to 3.3% in the comparable period last year. This improvement is a direct result of increased cash collections resulting from initiatives to optimize billing processes and to increase patient co-payments.
Selling, distribution and administrative expenses were 53.0% of net revenues in the third quarter of 2006 compared to 54.8% of net revenues in the third quarter last year. Adjusted for Medicare reimbursement reductions, the 2006 percentage would have been 52.8%. This improvement is directly attributable to the realization of savings from cost control measures put into place in 2005 and in early 2006. The favorable variance in the percentages was reflected in all areas of operations, including labor and other operating expenses.
"We are pleased by our solid performance in the third quarter," said Lawrence M. Higby, Chief Executive Officer. "Our 2006 strategy of focusing on the basics began to show positive results in the second quarter with improvement in many of our operating metrics. In the third quarter, we continued to improve on the various operating metrics and we also saw an improvement in sales growth. We predicted that it would take two or three quarters to build momentum in the sales area, so we're on schedule. We are making progress and are pleased with the improving trend, but the work is not finished."
"The continued reduction in bad debt expense reflects the success of our billing and collection initiatives," Mr. Higby added. "This success is also reflected in our higher than expected free cash flow figures. The credit for our success in this quarter goes to the men and women of Apria who have answered the challenges we laid out in January and are doing a great job."
Earnings before interest, taxes, depreciation and amortization (EBITDA) was $72.5 million in the third quarter of 2006. EBITDA in the third quarter of 2005 was $69.0 million. 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 $36.6 million in the third quarter of 2006, up from $1.6 million in the third quarter of 2005, and $99.2 million for the nine months ended September 30, 2006, versus $36.0 million for the comparable period in 2005. The main drivers of the increases in free cash flow were strong cash collections of receivables; reduced income tax payments due to a favorable IRS ruling; and decreases in working capital requirements. The Company has utilized its free cash flow to reduce its revolving credit line balance by $40 million during the third quarter and $95 million year-to-date.
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 the third quarter of 2006 were 5.2% of net revenue versus 7.4% in the third quarter of 2005. Days sales outstanding (DSO) were 52 days at September 30, 2006, down from 57 days at December 31, 2005.
Apria completed one acquisition in the third quarter for $2.5 million. Annual revenues are estimated at $9.5 million and are predominantly respiratory.
Full Year Outlook
With expected solid revenues in the fourth quarter, management reaffirms its previous sales growth estimate of approximately 3% for the year. Management also reaffirms that net income per share should be within the $1.70 to $1.74 range.
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
September 30, December 31,
(dollars in thousands) 2006 2005
----------------------------------------------------------------------
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 14,057 $ 23,304
Accounts receivable, net of
allowance for doubtful accounts 222,425 226,478
Inventories, net 40,862 42,571
Other current assets 58,402 51,648
------------- -------------
TOTAL CURRENT ASSETS 335,746 344,001
PATIENT SERVICE EQUIPMENT, NET 214,074 225,575
PROPERTY, EQUIPMENT & IMPROVEMENTS, NET 46,634 46,087
OTHER ASSETS, NET 561,827 570,235
------------ ------------
TOTAL ASSETS $1,158,281 $1,185,898
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and
accrued liabilities $ 148,540 $ 166,326
Current portion of long-term debt 6,842 4,465
-------------- --------------
TOTAL CURRENT LIABILITIES 155,382 170,791
LONG-TERM DEBT, net of
current portion 546,658 640,855
OTHER NON-CURRENT LIABILITIES 68,188 47,088
------------- -------------
TOTAL LIABILITIES 770,228 858,734
STOCKHOLDERS' EQUITY 388,053 327,164
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,158,281 $1,185,898
========== ==========
APRIA HEALTHCARE GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
(dollars in thousands,
except per share data) 2006 2005 2006 2005
----------------------------------------------------------------------
Respiratory therapy $ 258,134 $ 249,847 $ 767,571 $ 763,248
Infusion therapy 69,980 65,893 202,983 192,158
Home medical
equipment/other 54,100 51,875 155,795 159,003
--------- -------- --------- ---------
NET REVENUES 382,214 367,615 1,126,349 1,114,409
GROSS PROFIT 251,120 248,921 739,311 756,360
Provision for doubtful
accounts 9,168 12,160 29,073 39,410
Selling, distribution
and administrative
expenses 202,661 201,354 598,706 596,057
Qui tam settlement and
related costs - - - 20,000
Amortization of intangible
assets 1,082 2,047 4,024 5,176
------- ------- ------ --------
OPERATING INCOME 38,209 33,360 107,508 95,717
Interest expense, net 7,862 5,262 23,165 14,894
------- ------- ------- --------
INCOME BEFORE
TAXES 30,347 28,098 84,343 80,823
Income tax expense 11,041 8,843 30,456 33,382
------- ------- ------- -------
NET INCOME $ 19,306 $ 19,255 $ 53,887 $ 47,441
========= ========= ========= =========
Income per common share
-- assuming dilution $ 0.45 $ 0.38 $ 1.26 $ 0.95
========= ======== ========= ========
Weighted average number
of common shares
outstanding 42,787 50,465 42,843 50,111
APRIA HEALTHCARE GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
--------------------------
(dollars in thousands) 2006 2005
---------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 53,887 $ 47,441
Items included in net income not
requiring cash:
Provision for doubtful accounts 29,073 39,410
Depreciation and amortization 105,077 104,999
Deferred income taxes and other 27,277 (4,154)
Changes in operating assets and liabilities,
exclusive of effects of acquisitions (25,377) (59,555)
--------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 189,937 128,141
--------- ---------
INVESTING ACTIVITIES
Purchases of patient service equipment and
property, equipment and improvements,
exclusive of effects of acquisitions (90,717) (92,121)
Proceeds from disposition of assets 722 685
Cash paid for acquisitions, including
payments of deferred consideration (7,794) (101,907)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (97,789) (193,343)
--------- ---------
FINANCING ACTIVITIES
Net debt (payments) proceeds (100,228) 24,544
Capitalized debt issuance costs (1,119) (15)
Outstanding checks included in accounts
payable (3,261) (6,776)
Issuances of common stock 3,213 20,490
------- --------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (101,395) 38,243
--------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (9,247) (26,959)
Cash and cash equivalents at
beginning of period 23,304 39,399
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 14,057 $ 12,440
========== ==========
APRIA HEALTHCARE GROUP INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
RECONCILIATIONS
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
(dollars in thousands) 2006 2005 2006 2005
---------------------------------------------------------------------
Reconciliation – EBITDA:
Reported net income $ 19,306 $ 19,255 $ 53,887 $ 47,441
Add back: Interest
expense, net 7,862 5,262 23,165 14,894
Add back: Income
tax expense 11,041 8,843 30,456 33,382
Add back: Depreciation 33,163 33,552 101,053 99,823
Add back: Amortization
of intangible assets 1,082 2,047 4,024 5,176
------- -------- -------- --------
Adjusted EBITDA $ 72,454 $ 68,959 $ 212,585 $ 200,716
========= ========= ========= =========
Reconciliation – Free Cash Flow:
Net cash provided
by operating
activities $ 61,038 $ 31,822 $ 189,937 $ 128,141
Less: Purchases of
patient service
equipment and
property, equipment
and improvements,
exclusive of effects
of acquisitions (24,453) (30,271) (90,717) (92,121)
--------- --------- --------- ----------
Free cash flow $ 36,585 $ 1,551 $ 99,220 $ 36,020
========= ========== ========= =========