Apria Healthcare Announces Third Quarter 2004 Financial Results


LAKE FOREST, Calif., Oct. 21, 2004 (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, 2004. Revenues were $364.6 million, a 5.3% increase over revenues of $346.3 million for the third quarter of 2003. Net income for the third quarter was $29.8 million or $.60 per share (diluted) compared to $28.9 million or $.54 per share (diluted) for the comparable quarter of 2003. The Company's overall growth rate was impacted by the Medicare respiratory medication reimbursement cuts ($3.8 million for the quarter and $11.5 million year-to-date) and the Company's decision not to renew its contract with Gentiva CareCentrix, Inc. Excluding those effects, revenue growth was 10.5% for the quarter.

Earnings before interest, taxes, depreciation and amortization (EBITDA) was $85.6 million for the third quarter of 2004 compared to $85.9 million for the third 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 third quarter of 2004, we closed an additional six acquisitions totaling $37 million, resulting in year-to-date purchases of 26 businesses for an approximate value of $147 million," said Lawrence M. Higby, Apria's Chief Executive Officer. "In fact, during the second and third quarters we had an unprecedented nineteen acquisitions totaling $104 million representing 75% more business than we acquired in the comparable period of 2003. This abnormally high level of acquisitions, a good long-term move strategically, had some short-term impacts:



 -- Labor temporarily increased from normal levels as new patients 
    were integrated into our operations.
 -- Days sales outstanding increased to 55 days for the third 
    quarter, up four days from the prior year quarter.  The 
    increase is the result of the delays in billing Medicare 
    while awaiting new provider numbers for all of the locations 
    added by the acquisitions."

"In addition," noted Mr. Higby, "we had higher fuel prices and one-time costs associated with Sarbanes-Oxley compliance activities and consulting expenses that contributed to our costs being, in total, about $4 million above our forecast. An adjustment to reduce our effective tax rate for the year from 38% to 36.1%, stemming from the culmination of a state tax inter-company pricing study, more than offset these cost increases. To insure that we can reverse the higher labor and other expense trends that we saw in the third quarter, we have already taken actions that we believe will lead to cost reductions of at least $4 million in the fourth quarter."

"For the year, we continue to expect revenue to grow in the 5 to 6 percent range due to the acquisitions and the expansion of our respiratory business, and we now believe that earnings per share will grow in the 6 to 8 percent range."

"As for 2005, we applaud the responsible leadership and policy work of Secretary Thompson; Mark McClellan, MD, CMS Administrator; Leslie Norwalk, Deputy Administrator; and Herb Kuhn, Director; as well as the Government Accountability Office (GAO), congressional leaders and members of the Administration who recognized the need for a service fee in connection with providing respiratory medications to patients in their homes. We appreciate the outreach efforts of the Administration to better understand all of the patient care and provider cost issues associated with this very important decision. Although we await the final rule later this month, we are optimistic that the service fee recently endorsed by CMS will ensure that Medicare beneficiaries will continue to have access to these respiratory medications and related homecare in 2005 and beyond."

Apria provides home respiratory therapy, home infusion therapy and home medical equipment through more than 470 branches serving patients in 50 states. With nearly $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

                                      
                                      September 30,  December 31,
 (dollars in thousands)                   2004           2003  
 --------------------------------------------------------------
                                      (unaudited)

             ASSETS

 CURRENT ASSETS:

 Cash and cash equivalents             $   38,858    $  160,553

 Accounts receivable, net of
  allowance for doubtful accounts         223,862       196,413

 Inventories, net                          33,437        29,089

 Other current assets                      52,555        43,280
                                       ----------    ----------

  TOTAL CURRENT ASSETS                    348,712       429,335

 PATIENT SERVICE EQUIPMENT, NET           229,172       209,551

 PROPERTY, EQUIPMENT & IMPROVEMENTS,
  NET                                      49,231        50,192

 OTHER ASSETS, NET                        483,476       354,357
                                       ----------    ----------

  TOTAL ASSETS                         $1,110,591    $1,043,435
                                       ==========    ==========


  LIABILITIES & STOCKHOLDERS' EQUITY

 CURRENT LIABILITIES:

 Accounts payable and accrued
  liabilities                          $  192,577    $  158,574

 Current portion of long-term debt         34,994        31,522
                                       ----------    ----------

  TOTAL CURRENT LIABILITIES               227,571       190,096

 LONG-TERM DEBT, net of current
  portion                                 466,649       469,241

 OTHER NON-CURRENT LIABILITIES             42,829        18,150
                                       ----------    ----------


  TOTAL LIABILITIES                       737,049       677,487

 STOCKHOLDERS' EQUITY                     373,542       365,948
                                       ----------    ----------

  TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY                $1,110,591    $1,043,435
                                       ==========    ==========


                                   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)      2004        2003       2004       2003 
 --------------------------------------------------------------------
 Respiratory therapy      $  245,957 $  233,543 $  735,035 $  688,811

 Infusion therapy             63,639     60,821    182,751    180,655

 Home medical equipment/
  other                       54,972     51,959    157,226    155,210
                          ---------- ---------- ---------- ----------
   NET REVENUES              364,568    346,323  1,075,012  1,024,676

   GROSS PROFIT              262,592    253,194    775,194    747,546

 Provision for doubtful
  accounts                    12,268     12,507     38,548     38,223

 Selling, distribution
  and administrative
  expenses                   200,619    189,748    582,496    558,235

 Amortization of
  intangible assets            1,854        732      4,639      2,143
                          ---------- ---------- ---------- ----------
   OPERATING INCOME           47,851     50,207    149,511    148,945
 Interest expense, net         5,210      3,664     15,119     10,005
                          ---------- ---------- ---------- ----------

   INCOME BEFORE TAXES        42,641     46,543    134,392    138,940
 Income tax expense           12,807     17,686     47,651     52,845
                          ---------- ---------- ---------- ----------

 NET INCOME               $   29,834 $   28,857 $   86,741 $   86,095
                          ========== ========== ========== ==========

 Income per common share-
  assuming dilution       $     0.60 $     0.54 $     1.72 $     1.57
                          ========== ========== ========== ==========

 Weighted average number
  of common shares
  outstanding                 49,792     53,532     50,436     54,792


 Reconciliation -- EBITDA:

  Reported net income     $   29,834 $   28,857 $   86,741 $   86,095

  Add back: Interest
   expense, net                5,210      3,664     15,119     10,005

  Add back: Income tax
   expense                    12,807     17,686     47,651     52,845

  Add back: Depreciation      35,847     34,937    106,323    100,931

  Add back: Amortization
   of intangible assets        1,854        732      4,639      2,143
                          ---------- ---------- ---------- ----------

 EBITDA                   $   85,552 $   85,876 $  260,473 $  252,019
                          ========== ========== ========== ==========


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



                                      Nine Months Ended
                                        September 30, 
                                   ----------------------
 (dollars in thousands)              2004         2003   
 --------------------------------------------------------

 OPERATING ACTIVITIES

 Net income                        $  86,741    $  86,095

 Items included in net income
  not requiring cash:

  Provision for doubtful
   accounts                           38,548       38,223

  Depreciation and amortization      110,962      103,074

  Deferred income taxes and
   other                              24,378       18,473

 Changes in operating assets and
  liabilities, exclusive of
  effects of acquisitions            (62,835)     (47,188)
                                   ---------    ---------

   NET CASH PROVIDED BY
    OPERATING ACTIVITIES             197,794      198,677
                                   ---------    ---------

 INVESTING ACTIVITIES

 Purchases of patient service
  equipment and property,
  equipment and improvements,
  exclusive of effects of
  acquisitions                      (111,890)    (116,544)

 Proceeds from disposition of
  assets                                 158          419

 Cash paid for acquisitions,
  including payments of deferred
  consideration                     (116,120)     (88,791)
                                   ---------    ---------

   NET CASH USED IN INVESTING
    ACTIVITIES                      (227,852)    (204,916)
                                   ---------    ---------


 FINANCING ACTIVITIES

 Net payments on debt                 (5,695)     235,115

 Capitalized debt issuance costs         (37)      (6,584)

 Outstanding checks included in
  accounts payable                    (1,689)      (5,785)

 Repurchases of common stock,
  net                                (84,216)    (108,377)
                                   ---------    ---------

   NET CASH USED IN FINANCING
    ACTIVITIES                       (91,637)     114,369
                                   ---------    ---------


 NET DECREASE IN CASH AND CASH
  EQUIVALENTS                       (121,695)     108,130

 Cash and cash equivalents at
  beginning of year                  160,553       26,383
                                   ---------    ---------

 CASH AND CASH EQUIVALENTS AT
  END OF PERIOD                    $  38,858    $ 134,513
                                   =========    =========


            

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