Apria Healthcare Announces 2007 Second Quarter Financial Results


LAKE FOREST, Calif., July 31, 2007 (PRIME NEWSWIRE) -- Apria Healthcare Group Inc. (NYSE:AHG), one of the nation's leading home healthcare companies, today announced its financial results for the quarter ended June 30, 2007.

Revenues were $394.0 million, which represents a 4.8% increase compared to revenues of $376.1 million in the second quarter of 2006. Second quarter 2007 net income was $20.8 million, an increase of 12.8% from $18.5 million in the second quarter of 2006. Current quarter diluted earnings per share were $0.47, which includes a one-time positive impact of $0.01 per share resulting from the settlement of a 2005 tax issue. This compares to $0.43 diluted earnings per share for the comparable prior year period.

Gross margins were 65.9% in the second quarter of 2007, compared to 65.7% reported in the second quarter of last year.

Days sales outstanding (DSO) were 48 days at June 30, 2007, down from 52 days at June 30, 2006. This improvement is a direct result of increased cash collections resulting from initiatives to optimize billing processes and to increase patient co-payments. The provision for doubtful accounts as a percentage of revenues was 2.8%, compared to 2.6% in the corresponding period last year.

Selling, distribution and administrative expenses were 53.1% of revenues, which is flat with the first quarter of 2007 and 0.4% higher compared to 52.7% in the second quarter of last year.

"We are pleased with our continued strong performance in the second quarter," said Lawrence M. Higby, Chief Executive Officer. "Growth over the prior year, and sequentially with the first quarter, is encouraging, and our sales force segmentation strategy is gaining traction. The planned expansion of our sales force was primarily responsible for the slight increase in SD&A expenses and, as previously announced, we believe the larger and more focused sales force will contribute to accelerating revenue growth. Operationally, the initiatives we put in place in 2006 and early 2007 in the areas of asset utilization and revenue management continue to show improved results."

Earnings before interest, taxes, depreciation and amortization (EBITDA) was $71.4 million in the second quarter of 2007, representing a 2.1% decrease over EBITDA of $72.9 million in the second quarter of 2006. The decrease was due to Medicare cuts and the investments in the Company's sales force. 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 $63.6 million in the second quarter of 2007, compared to $63.3 million in the second quarter of 2006. Contributing to the strong free cash flow was a reduction in capital expenditures and strong cash collections of receivables. Total capital expenditures in the second quarter of 2007 were 5.9% of revenues versus 7.3% in the second quarter of 2006. The reduction in capital expenditures is primarily attributable to initiatives to improve asset utilization.

During the quarter, the Company reduced its $500 million revolving credit line balance by $55 million. As of June 30, 2007, the outstanding balance on the revolver was $155 million.

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.

2007 Guidance

Management affirms its previous estimate of 2007 revenue growth in the 4% to 5% range and net income per share (diluted) of $1.78 to $1.82. The Company's free cash flow estimate also remains unchanged.

Apria provides home respiratory therapy, home infusion therapy and home medical equipment through approximately 500 branches serving patients in all 50 states. With over $1.5 billion in annual revenues, it is one of the nation's leading home healthcare companies.

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)                         2007           2006
 ---------------------------------------------------------------------
                                            (unaudited)
                  ASSETS

 CURRENT ASSETS:
 Cash and cash equivalents                   $   28,483     $   14,657
 Accounts receivable, net of allowance
  for doubtful accounts                         211,307        211,097
 Inventories, net                                38,624         40,681
 Other current assets                            77,557         78,502
                                             ----------     ----------
     TOTAL CURRENT ASSETS                       355,971        344,937

 PATIENT SERVICE EQUIPMENT, NET                 195,502        212,068
 PROPERTY, EQUIPMENT & IMPROVEMENTS, NET         59,807         52,975
 OTHER ASSETS, NET                              556,075        558,516
                                             ----------     ----------
     TOTAL ASSETS                            $1,167,355     $1,168,496
                                             ==========     ==========


     LIABILITIES & STOCKHOLDERS' EQUITY

 CURRENT LIABILITIES:
 Accounts payable and accrued
  liabilities                                $  192,986     $  201,378
 Current portion of long-term debt                   --          2,145
                                             ----------     ----------
     TOTAL CURRENT LIABILITIES                  192,986        203,523

 LONG-TERM DEBT, net of current portion         405,000        485,000
 OTHER NON-CURRENT LIABILITIES                   99,448         69,542
                                             ----------     ----------

     TOTAL LIABILITIES                          697,434        758,065

 STOCKHOLDERS' EQUITY                           469,921        410,431
                                             ----------     ----------

     TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY                   $1,167,355     $1,168,496
                                             ==========     ==========


                     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)     2007        2006        2007        2006
 ---------------------------------------------------------------------
 Respiratory therapy      $269,440    $256,289    $537,712    $509,437
 Infusion therapy           72,297      68,231     141,265     133,003
 Home medical
  equipment/other           52,307      51,559     104,357     101,695
                          --------    --------    --------    --------
     NET REVENUES          394,044     376,079     783,334     744,135

     GROSS PROFIT          259,559     247,109     514,053     488,191

 Provision for doubtful
  accounts                  11,093       9,737      20,791      19,905
 Selling, distribution
  and administrative
  expenses                 209,406     198,352     415,985     396,045
 Amortization of
  intangible assets            706       1,665       1,698       2,942
                          --------    --------    --------    --------
     OPERATING INCOME       38,354      37,355      75,579      69,299
 Interest expense, net       5,000       8,016      10,826      15,303
                          --------    --------    --------    --------
     INCOME BEFORE TAXES    33,354      29,339      64,753      53,996
 Income tax expense         12,525      10,881      24,780      19,415
                          --------    --------    --------    --------
     NET INCOME           $ 20,829    $ 18,458    $ 39,973    $ 34,581
                          ========    ========    ========    ========
 Income per common
  share - assuming
  dilution                $   0.47    $   0.43    $   0.91    $   0.81
                          ========    ========    ========    ========
 Weighted average
  number of common
  shares outstanding        44,232      42,789      44,110      42,871


                      APRIA HEALTHCARE GROUP INC.
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (unaudited)

                                                 Six Months Ended
                                                     June 30,
                                             -------------------------
 (dollars in thousands)                         2007           2006
 ---------------------------------------------------------------------

 OPERATING ACTIVITIES
 Net income                                  $   39,973     $   34,581
 Items included in net income not
  requiring cash:
   Provision for doubtful accounts               20,791         19,905
   Depreciation and amortization                 67,049         70,832
   Deferred income taxes, share-based
    compensation and other                       11,350         16,828
 Changes in operating assets and
  liabilities, exclusive of effects of
  acquisitions                                   (7,553)       (13,246)
                                             ----------     ----------
     NET CASH PROVIDED BY OPERATING
      ACTIVITIES                                131,610        128,900
                                             ----------     ----------


 INVESTING ACTIVITIES
 Purchases of patient service equipment
  and property, equipment and
  improvements, exclusive of effects of
  acquisitions                                  (55,811)       (66,264)
 Proceeds from disposition of assets                 52            648
 Cash paid for acquisitions, including
  payments of deferred consideration                 --         (5,040)
                                             ----------     ----------
     NET CASH USED IN INVESTING
      ACTIVITIES                                (55,759)       (70,656)
                                             ----------     ----------


 FINANCING ACTIVITIES
 Net payment on debt                            (82,145)       (58,720)
 Issuances of common stock                       16,554          2,873
 Other                                            3,566          6,119
                                             ----------     ----------
     NET CASH USED IN FINANCING
      ACTIVITIES                                (62,025)       (49,728)
                                             ----------     ----------

 NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                               13,826          8,516

 Cash and cash equivalents at beginning
  of period                                      14,657         23,304
                                             ----------     ----------
 CASH AND CASH EQUIVALENTS AT END OF
  PERIOD                                     $   28,483     $   31,820
                                             ==========     ==========


                     APRIA HEALTHCARE GROUP INC.
             CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           RECONCILIATIONS
                             (unaudited)

                           Three Months Ended       Six Months Ended
                                June 30,                June 30,
                          --------------------    --------------------
 (dollars in thousands)     2007        2006        2007        2006
 ---------------------------------------------------------------------
 Reconciliation - EBITDA:
   Reported net income    $ 20,829    $ 18,458    $ 39,973    $ 34,581
   Add back: Interest
    expense, net             5,000       8,016      10,826      15,303
   Add back: Income
    tax expense             12,525      10,881      24,780      19,415
   Add back:
    Depreciation            32,388      33,926      65,351      67,890
   Add back:
    Amortization of
    intangible assets          706       1,665       1,698       2,942
                          --------    --------    --------    --------
 Adjusted EBITDA          $ 71,448    $ 72,946    $142,628    $140,131
                          ========    ========    ========    ========

 Reconciliation - Free
  Cash Flow:
   Net cash provided
    by operating
    activities            $ 86,721    $ 90,737    $131,610    $128,900
   Less: Purchases of
    patient service
    equipment and
    property, equipment
    and improvements,
    exclusive of
    effects of
    acquisitions           (23,139)    (27,430)    (55,811)    (66,264)
                          --------    --------    --------    --------
 Free cash flow           $ 63,582    $ 63,307    $ 75,799    $ 62,636
                          ========    ========    ========    ========


            

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