- Net Revenue increased 1.3% to $526.0 million over the prior year third quarter
- Adjusted EBITDA before projected cost savings items for Q3 2010 was $86.0 million1
LAKE FOREST, Calif., Nov. 5, 2010 (GLOBE NEWSWIRE) -- Apria Healthcare Group Inc. ("Apria"), a quality, cost-efficient provider of home healthcare products and services in the United States, today announced its financial results for the three and nine months ended September 30, 2010.
2010 Third Quarter Highlights
Net revenues increased $6.5 million, or 1.3%, to $526.0 million in the three months ended September 30, 2010 from $519.5 million in the three months ended September 30, 2009. The increase in revenue was due primarily to an increase in home infusion therapy revenue. This increase was primarily offset by a decrease in revenue due to the non-renewal or termination of, or changes to, certain payor contracts. We expect to continue to strategically evaluate our payor contracts.
Net loss for the three months ended September 30, 2010 was $0.1 million.
EBITDA for the three months ended September 30, 2010 was $67.1 million.
Adjusted EBITDA before projected cost savings items for the three months ended September 30, 2010 was $86.0 million.
2010 First Nine Months Highlights
Net revenues decreased $5.4 million, or 0.3%, to $1,553.1 million in the nine months ended September 30, 2010 from $1,558.5 million in the nine months ended September 30, 2009. The decrease in revenue was due primarily to the non-renewal or termination of, or changes to, certain payor contracts. We expect to continue to strategically evaluate our payor contracts. The revenue decrease was partially offset by increases in home infusion therapy revenue. In addition, revenue in the nine months ended September 30, 2009 was positively impacted by the recognition of monthly rental revenue previously deferred for services that were initiated prior to certain 2009 Medicare reimbursement reductions.
Net income for the nine months ended September 30, 2010 was $2.4 million.
EBITDA for the nine months ended September 30, 2010 was $200.3 million.
Adjusted EBITDA before projected cost savings items for the nine months ended September 30, 2010 was $257.5 million.
Cash flow provided by operations for the nine months ended September 30, 2010, was $94.1 million compared to cash provided by operations of $140.1 million for the same period of 2009. The decrease in cash flow provided by operations is primarily related to an increase in accounts receivable due to delays in collections from the outsourcing of our billing and collections process.
Certain Credit Statistics
Adjusted EBITDA for the twelve months ended September 30, 2010 was $386.1 million. Our net leverage ratio, defined as the ratio of net debt to Adjusted EBITDA, was 2.2x at September 30, 2010.
Cost Reduction Initiatives Update
The following table summarizes our cost reduction initiatives as of September 30, 2010:
|
(in millions) |
As of September 30, 2010 |
| Realized Savings to Date | $ 144.2 |
| Projected Cost Savings Items Not Yet Realized | 27.6 |
| Total Expected Annual Savings | $ 171.8 |
Conference Call
As previously announced, Apria will hold a conference call to discuss its third quarter 2010 results on November 5, 2010 at 1:00 p.m. (Eastern Daylight Time). The conference call can be accessed live over the phone by dialing 866-900-5939 or, for international callers, 706-758-0130 or through the Investor Relations page of the Company's website at www.apria.com. The passcode for the live call is Apria.
A replay of the conference call will be available one hour after the call and can be accessed by dialing 800-642-1687, or for international callers, 706-645-9291 or through the Investor Relations page of the Company's website. The passcode for the replay is 15189214. The replay will be available until November 19, 2010.
A quarterly financial results presentation will be made available immediately prior to the call on the Investor Relations page of the Company's website at www.apria.com.
Forward Looking Statements
Statements contained herein that are not historical facts and that reflect the current view of Apria Healthcare Group Inc. (the "Company") about future events and financial performance are hereby identified as "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Some of these statements can be identified by terms and phrases such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "could," "should," "may," "plan," "project," "predict" and similar expressions. The Company cautions that such "forward looking statements," including without limitation, those relating to the Company's future business prospects, revenue, working capital, professional liability expense, liquidity, capital needs, interest costs and income, wherever they occur in this or in other statements attributable to the Company, are necessarily estimates reflecting the judgment of the Company's senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the "forward looking statements." Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include but are not limited to current or future government regulation of the healthcare industry, exposure to professional liability lawsuits and governmental agency investigations, the adequacy of insurance coverage and insurance reserves, as well as those factors detailed under the caption "Risk Factors" in the Company's quarterly report on Form 10-Q for the three and nine month periods ended September 30, 2010 ("10-Q") filed with the Securities and Exchange Commission and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in said 10-Q. The Company's "forward looking statements" speak only as of the date hereof and the Company disclaims any intent or obligation to update "forward looking statements" herein to reflect changed assumptions, the occurrence of unanticipated events, or changes to future operating results over time.
About Apria Healthcare Group Inc.
We are a quality, cost-efficient provider of home healthcare products and services in the United States, offering a comprehensive range of home respiratory therapy, home infusion therapy and home medical equipment services to over two million patients annually in all 50 states through approximately 500 locations. We hold market-leading positions across all of our major service lines—making us a leader in the homecare market. By targeting the managed care segment of the population, we are better positioned than many of our competitors to minimize risks associated with changes in Medicare/Medicaid reimbursement rates. We are focused on being the industry's highest-quality provider of homecare services, while maintaining our commitment to being a low-cost operator. Our integrated product and service offerings, combined with our national scale and strong reputation, provide us with a strategic advantage in attracting customers, which include almost all of the national and regional managed care and government payors in the United States, and in retaining our referral base of more than 70,000 physicians, discharge planners, hospitals and third-party payors.
1 This press release includes several metrics, including EBITDA, Adjusted EBITDA and Adjusted EBITDA before projected cost savings items that are not calculated in accordance with Generally Accepted Accounting Principles ("GAAP"). See "Definition of Terms and Reconciliation of Non-GAAP Financial Measures" section at the end of this press release for the definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDA before projected cost savings items and their reconciliation to net income (loss).
| Apria Healthcare Group Inc. | ||
| Condensed Consolidated Balance Sheets | ||
| September 30, 2010 | December 31, 2009 | |
| (Unaudited) | ||
| ASSETS | (in thousands, except share data) | |
| CURRENT ASSETS | ||
| Cash and cash equivalents | $151,798 | $158,163 |
| Short-term investments | 253 | 23,673 |
| Accounts receivable, less allowance for doubtful accounts of $47,859 and $39,927 at September 30, 2010 and December 31, 2009, respectively | 308,392 | 252,133 |
| Inventories | 69,490 | 68,267 |
| Deferred income taxes | 88,010 | 87,016 |
| Deferred expenses | 3,219 | 3,049 |
| Prepaid expenses and other current assets | 25,112 | 24,362 |
| TOTAL CURRENT ASSETS | 646,274 | 616,663 |
| PATIENT SERVICE EQUIPMENT, less accumulated depreciation of $134,054 and | ||
| $97,874 at September 30, 2010 and December 31, 2009, respectively | 175,342 | 198,808 |
| PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET | 79,221 | 80,227 |
| GOODWILL | 760,247 | 759,197 |
| INTANGIBLE ASSETS, NET | 579,992 | 582,259 |
| DEFERRED DEBT ISSUANCE COSTS, NET | 56,510 | 63,110 |
| OTHER ASSETS | 7,384 | 8,783 |
| TOTAL ASSETS | $2,304,970 | $2,309,047 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| CURRENT LIABILITIES | ||
| Accounts payable | $88,835 | $123,856 |
| Accrued payroll and related taxes and benefits | 62,690 | 66,842 |
| Other accrued liabilities | 126,531 | 100,768 |
| Deferred revenue | 27,176 | 27,253 |
| Current portion of long-term debt | 1,575 | 1,690 |
| TOTAL CURRENT LIABILITIES | 306,807 | 320,409 |
| LONG-TERM DEBT, net of current portion | 1,018,257 | 1,019,456 |
| DEFERRED INCOME TAXES | 264,709 | 259,030 |
| INCOME TAXES PAYABLE AND OTHER NON-CURRENT LIABILITIES | 30,892 | 31,421 |
| TOTAL LIABILITIES | 1,620,665 | 1,630,316 |
| COMMITMENTS AND CONTINGENCIES | ||
| STOCKHOLDERS' EQUITY | ||
| Common stock, $0.01 par value: 1,000 shares authorized; 100 shares issued at September 30, 2010 and December 31, 2009 | — | — |
| Additional paid-in capital | 687,561 | 684,445 |
| Accumulated deficit | ($3,256) | ($5,714) |
| TOTAL STOCKHOLDERS' EQUITY | 684,305 | 678,731 |
| $2,304,970 | $2,309,047 | |
| Apria Healthcare Group Inc. | |||||
| Condensed Consolidated Statements of Operations | |||||
| Three Months Ended | Nine Months Ended | ||||
| September 30, | September 30, | ||||
| 2010 | 2009 | 2010 | 2009 | ||
| (Unaudited) | (Unaudited) | ||||
| (in thousands) | |||||
| Net revenues: | |||||
| Fee for service/product arrangements | $486,027 | $479,193 | $1,433,562 | $1,434,063 | |
| Capitation arrangements | 39,987 | 40,322 | 119,506 | 124,411 | |
| TOTAL NET REVENUES | 526,014 | 519,515 | 1,553,068 | 1,558,474 | |
| Costs and expenses: | |||||
| Cost of net revenues: | |||||
| Product and supply costs | 167,198 | 156,479 | 488,265 | 474,244 | |
| Patient service equipment depreciation | 23,094 | 25,490 | 71,843 | 77,659 | |
| Amortization of intangible assets | – | 42,200 | – | 42,200 | |
| Home respiratory therapy services | 5,456 | 8,887 | 21,671 | 26,239 | |
| Nursing services | 9,258 | 9,338 | 27,258 | 27,105 | |
| Other | 2,978 | 3,261 | 9,871 | 8,718 | |
| TOTAL COST OF NET REVENUES | 207,984 | 245,655 | 618,908 | 656,165 | |
| Provision for doubtful accounts | 10,981 | 13,256 | 39,801 | 38,760 | |
| Selling, distribution and administrative | 271,157 | 264,567 | 787,738 | 790,959 | |
| Amortization of intangible assets | 1,035 | (215) | 3,777 | 2,740 | |
| TOTAL COSTS AND EXPENSES | 491,157 | 523,263 | 1,450,224 | 1,488,624 | |
| OPERATING INCOME (LOSS) | 34,857 | (3,748) | 102,844 | 69,850 | |
| Interest expense | 32,736 | 32,055 | 97,971 | 96,624 | |
| Interest income and other | (250) | (530) | (555) | (1,021) | |
| INCOME (LOSS) BEFORE TAXES | 2,371 | (35,273) | 5,428 | (25,753) | |
| Income tax expense (benefit) | 2,476 | (12,292) | 2,970 | (6,310) | |
| NET (LOSS) INCOME | $(105) | $(22,981) | $2,458 | $(19,443) | |
| Apria Healthcare Group Inc. | ||
| Condensed Consolidated Statements of Cash Flows | ||
| Nine Months Ended | ||
| September 30, | ||
| 2010 | 2009 | |
| (Unaudited) | ||
| (in thousands) | ||
| OPERATING ACTIVITIES | ||
| Net income (loss) | $2,458 | $(19,443) |
| Items included in net income (loss) not requiring cash: | ||
| Provision for doubtful accounts | 39,801 | 38,760 |
| Depreciation | 93,722 | 95,164 |
| Amortization of intangible assets | 3,777 | 44,940 |
| Amortization of deferred debt issuance costs | 7,919 | 5,503 |
| Deferred income taxes | 4,686 | (11,443) |
| Profit interest compensation | 3,194 | 6,165 |
| Loss on disposition of assets and other | 12,472 | 9,486 |
| Other | — | (4,945) |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | (96,060) | (23,756) |
| Inventories | (1,223) | 1,852 |
| Prepaid expenses and other assets | (270) | (5,647) |
| Accounts payable, exclusive of book-cash overdraft | 2,730 | (15,168) |
| Accrued payroll and related taxes and benefits | (4152) | 256 |
| Income taxes payable | (2126) | 3,434 |
| Deferred revenue, net of related expenses | (247) | (1,907) |
| Accrued expenses | 27,357 | 16,843 |
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 94,038 | 140,094 |
| INVESTING ACTIVITIES | ||
| Purchases of patient service equipment and property, equipment and improvements | (84,682) | (101,926) |
| Purchases of short-term investments | (8,087) | (27,875) |
| Maturities of short-term investments | 31,507 | 1,746 |
| Proceeds from disposition of assets | 634 | 6,828 |
| Cash paid for acquisition | (2,260) | (1,161) |
| NET CASH USED IN INVESTING ACTIVITIES | (62,888) | (122,388) |
| FINANCING ACTIVITIES | ||
| Proceeds from ABL Facility | — | 630 |
| Payments on ABL Facility | — | (6,630) |
| Payments on Senior Secured Bridge Credit Agreement | — | (1,010,000) |
| Proceeds from issuance of Series A-1 Notes | — | 700,000 |
| Proceeds from issuance of Series A-2 Notes | — | 317,500 |
| Payments on other long-term debt | (1,314) | (2,170) |
| Change in book-cash overdraft included in accounts payable | (32,533) | (4,644) |
| Debt issuance costs | (3,590) | (18,495) |
| Equity contributions | — | 2,075 |
| Cash paid on profit interest units | (78) | — |
| NET CASH USED IN FINANCING ACTIVITIES | (37,515) | (21,734) |
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (6,365) | (4,028) |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 158,163 | 168,018 |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $151,798 | $163,990 |
| Apria Healthcare Group Inc. | ||||
| 3rd Quarter Financial Summary | ||||
| Three Months Ended | ||||
| September 30, | $ Variance | % Variance | ||
| ($ in millions)) | 2010 | 2009 | Fav/(Unfav) | Fav/(Unfav) |
| Net Revenue | $ 526.0 | $ 519.5 | $ 6.5 | 1.3 % |
| Gross Profit | 318.0 | 273.9 | 44.1 | 16.1 % |
| % Margin | 60.5% | 52.7% | ||
| Selling, Distribution and Administrative | 271.2 | 264.6 | (6.6) | (2.5)% |
| % of Net Revenue | 51.6% | 50.9% | ||
| Adjusted EBITDA Before Projected Cost Savings Items | 86.0 | 96.2 | (10.2) | (10.6) % |
| % Margin | 16.3% | 18.5% | ||
| Net Loss | (0.1) | (23.0) | 22.9 | 99.6% |
| EBITDA | 67.1 | 69.7 | (2.6) | (3.7)% |
| Nine Months Ended | ||||
| September 30, | $ Variance | % Variance | ||
| 2010 | 2009 | Fav/(Unfav) | Fav/(Unfav) | |
| Net Revenue | $ 1,553.1 | $ 1,558.5 | $ (5.4) | (0.3) % |
| Gross Profit | 934.2 | 902.3 | 31.9 | 3.5% |
| % Margin | 60.1% | 57.9% | ||
| Selling, Distribution and Administrative | 787.7 | 791.0 | 3.3 | 0.4% |
| % of Net Revenue | 50.7% | 50.8% | ||
| Adjusted EBITDA Before Projected Cost Savings Items | 257.5 | 276.2 | (18.7) | (6.8) % |
| % Margin | 16.6% | 17.7% | ||
| Net Income (Loss) | 2.4 | (19.4) | 21.8 | 112.4% |
| EBITDA | 200.3 | 210.2 | (9.9) | (4.7)% |
| Apria Healthcare Group Inc. | ||||
| 3rd Quarter Financial Summary (continued) | ||||
| Service Line Revenue Performance | ||||
| ($ in millions) | ||||
| Three Months Ended | ||||
| September 30, | $ Variance | % Variance | ||
| 2010 | 2009 | Fav/(Unfav) | Fav/(Unfav) | |
| Home Respiratory Therapy and Home | $270.2 | $284.6 | $(14.4) | (5.1%) |
| Medical Equipment | ||||
| Home Infusion Therapy | 255.8 | 234.9 | 20.9 | 8.9% |
| Total Net Revenue | $526.0 | $519.5 | $6.5 | 1.3% |
| Nine Months Ended | ||||
| September 30, | $ Variance | % Variance | ||
| 2010 | 2009 | Fav/(Unfav) | Fav/(Unfav) | |
| Home Respiratory Therapy and Home | $821.7 | $871.8 | $(50.1) | (5.7%) |
| Medical Equipment | ||||
| Home Infusion Therapy | 731.4 | 686.7 | 44.7 | 6.5% |
| Total Net Revenue | $1,553.1 | $1,558.5 | $(5.4) | (0.3%) |
Cash, Cash Equivalents and Short-term Investments, Capitalization & Certain Credit Statistics
The following table indicates the cash, cash equivalents and short-term investments, capitalization and certain credit statistics as of September 30, 2010:
| ($ in millions) |
September 30, 2010 |
| Cash, Cash Equivalents and Short-term Investments | $ 152.1 |
| Debt | |
| Asset Based Revolving Credit Facility | -- |
| Series A-1 Notes | 700.0 |
| Series A-2 Notes | 317.5 |
| Capital Leases & Other | 2.3 |
| Total Debt | $ 1,019.8 |
| Shareholders' Equity | 684.3 |
| Total Capitalization | $ 1,704.1 |
| Net Leverage Ratio Calculations | |
| Net Debt1 | $ 867.8 |
| Adjusted EBITDA2 | $ 386.1 |
| Net Leverage Ratio3 | 2.2 x |
| 1 Net debt is defined as total debt less cash, cash equivalents and short-term investments. | |
| 2 For the twelve months ended September 30, 2010. | |
|
3 Net leverage ratio is defined as the ratio of net debt to Adjusted EBITDA. The net leverage ratio calculated using Adjusted EBITDA before projected cost savings items would have been 2.4x. |
|
Definition of Terms and Reconciliation of Non-GAAP Financial Measures
This press release includes several metrics which are not calculated in accordance with GAAP, including EBITDA, Adjusted EBITDA and Adjusted EBITDA before projected cost savings items. EBITDA, Adjusted EBITDA and Adjusted EBITDA before projected cost savings items are not recognized terms under GAAP and do not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, these measures are not intended to be measures of free cash flow available for management's discretionary use, as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Our presentation of EBITDA, Adjusted EBITDA and Adjusted EBITDA before projected cost savings items may not be comparable to other similarly titled measures of other companies. We believe that such measures provide useful information about our financial condition and covenant compliance under the indenture governing our Series A-1 Notes and Series A-2 Notes and in our ABL Facility to investors and we compensate for the limitations of using non-GAAP financial measures by presenting them together with GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.
EBITDA is defined as net income (loss) before interest expense, net, income tax expense and depreciation and amortization.
Adjusted EBITDA is defined as net income (loss) before interest expense, net, income tax expense and depreciation and amortization further adjusted to exclude certain non-cash items, costs incurred related to initiatives, other adjustment items and projected cost savings items permitted in calculating covenant compliance under the indenture governing our Series A-1 Notes and the Series A-2 Notes and the credit agreement governing our ABL Facility.
Adjusted EBITDA before projected cost savings items is defined as Adjusted EBITDA less the projected cost savings items that we expect to realize in connection with cost savings, restructuring and other similar initiatives.
The following tables provide reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA before projected cost savings items for the periods presented to net income (loss), which we believe is the most closely comparable financial measures calculated in accordance with GAAP.
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
LTM September 30, |
|||
| (in millions) | 2010 | 2009 | 2010 | 2009 | 2010 |
| Net (Loss) Income | $ (0.1) | $ (23.0) | $ 2.4 | $ (19.4) | $ 18.1 |
| Interest expense, net | 32.4 | 31.6 | 97.4 | 95.8 | 129.7 |
| Income tax expense (benefit) | 2.5 | (12.3) | 3.0 | (6.3) | 0.8 |
| Depreciation and amortization | 32.3 | 73.4 | 97.5 | 140.1 | 130.4 |
| EBITDA | 67.1 | 69.7 | 200.3 | 210.2 | 279.0 |
| Non-cash items | 4.3 | 6.4 | 15.7 | 15.7 | 23.6 |
| Costs incurred related to initiatives | 12.4 | 18.3 | 33.3 | 44.8 | 45.9 |
| Other adjustments | 2.2 | 1.8 | 8.2 | 5.5 | 10.0 |
| Adjusted EBITDA Before Projected Cost Savings Items | $ 86.0 | $ 96.2 | $ 257.5 | $ 276.2 | 358.5 |
| Projected cost savings | 27.6 | ||||
| Adjusted EBITDA | $ 386.1 | ||||