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Apria Healthcare Group Inc. Announces Third Quarter 2012 Financial Results

LAKE FOREST, Calif., Nov. 14, 2012 (GLOBE NEWSWIRE) -- Apria Healthcare Group Inc. ("Apria" or the "Company"), a quality, cost-efficient provider of home healthcare products and services in the United States, today announced its financial results for the quarter ended September 30, 2012.

2012 Third Quarter Highlights

Net revenues in the three months ended September 30, 2012 were $608.5 million, compared to $584.9 million in the three months ended September 30, 2011, an increase of $23.6 million or 4.0%. Revenue for the three months ended September 30, 2012 increased primarily due to increased volume in the home infusion therapy segment and the home respiratory therapy and home medical equipment segment.

Adjusted EBITDA before projected cost savings and synergies1 for the three months ended September 30, 2012 was $74.4 million.

Net loss for the three months ended September 30, 2012 was $175.7 million. Our net loss for the three month period ended September 30, 2012 reflects the following non-cash impairment charge based on the results of the Company's impairment testing as of September 30, 2012 and the tax impact associated with the impairment charge:

(i) Trade name impairment of $280.0 million, $200.0 million of which relates to the home respiratory therapy/home medical equipment reporting unit and $80.0 million of which relates to the home infusion therapy reporting unit; and

(ii) Tax benefit of $104.0 million relating to the intangible assets impairment.

All of these items resulted in a $176.0 million increase in our net loss in the three months ended September 30, 2012.

EBITDA for the three months ended September 30, 2012 was $(221.6) million, which includes a $280.0 million non-cash impairment charge described above.

2012 First Nine Months Highlights

Net revenues in the nine months ended September 30, 2012 were $1,811.9 million, compared to $1,698.0 million in the nine months ended September 30, 2011, an increase of $113.9 million or 6.7%. Revenue for the nine months ended September 30, 2012 increased primarily due to increased volume in the home infusion therapy segment and the home respiratory therapy and home medical equipment segment, as well as the acquisition of Praxair assets in March 2011.

1 This press release includes several metrics, including EBITDA, Adjusted EBITDA and Adjusted EBITDA before projected cost savings and synergies 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 and synergies and their reconciliation to net income (loss).

Adjusted EBITDA before projected cost savings and synergies1 for the nine months ended September 30, 2012 was $195.6 million.

Net loss for the nine months ended September 30, 2012 was $208.1 million. Our net loss for the nine month period ended September 30, 2012 reflects the following non-cash impairment charge based on the results of the Company's impairment testing as of September 30, 2012 and the tax impact associated with the impairment charge:

(i) Trade name impairment of $280.0 million, $200.0 million of which relates to the home respiratory therapy/home medical equipment reporting unit and $80.0 million of which relates to the home infusion therapy reporting unit; and

(ii) Tax benefit of $104.0 million relating to the intangible assets impairment.

All of these items resulted in a $176.0 million increase in our net loss in the nine months ended September 30, 2012.

EBITDA for the nine months ended September 30, 2012 was $(127.9) million, which includes a $280.0 million non-cash impairment charge described above.

Certain Credit Statistics

Our net leverage ratio, defined as the ratio of net debt to Adjusted EBITDA, was 3.7x at September 30, 2012.

Conference Call

As previously announced, Apria will hold a conference call to discuss its third quarter 2012 results on November 14, 2012 at 1:00 p.m. (Eastern Standard 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 two hours after the call and can be accessed by dialing 855-859-2056 or, for international callers, 404-537-3406 or through the Investor Relations page of the Company's website. The passcode for the replay is 49337938. The replay will be available until November 28, 2012.

A 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's management 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 captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition" in the Company's filings with the Securities and Exchange Commission. 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.

Apria provides home respiratory therapy, home infusion therapy and home medical equipment services through approximately 540 locations in the United States. With $2.3 billion in annual revenues, it is one of the nation's leading home healthcare companies. For more information, visit www.apria.com or www.coramhc.com.

Apria Healthcare Group Inc.
Condensed Consolidated Balance Sheets
September 30, 2012 December 31, 2011
(unaudited)
(in thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 15,528 $ 29,096
Accounts receivable, less allowance for doubtful accounts of $54,106 and $53,934 at September 30, 2012 and December 31, 2011, respectively 362,710 337,212
Inventories 66,154 57,683
Deferred income taxes 168
Deferred expenses 3,533 3,681
Prepaid expenses and other current assets 13,799 23,927
TOTAL CURRENT ASSETS 461,724 451,767
PATIENT SERVICE EQUIPMENT, less accumulated depreciation of $184,263 and $176,526 at September 30, 2012 and December 31, 2011, respectively 184,935 166,769
PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET 77,126 83,768
GOODWILL 258,725 258,725
INTANGIBLE ASSETS, NET 204,000 485,366
DEFERRED DEBT ISSUANCE COSTS, NET 33,975 44,636
OTHER ASSETS 13,053 11,513
TOTAL ASSETS $ 1,233,538 $ 1,502,544
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 142,484 $ 135,572
Accrued payroll and related taxes and benefits 76,585 69,217
Deferred income taxes 829
Other accrued liabilities 100,200 66,694
Deferred revenue 28,511 28,649
Current portion of long-term debt 6,270 10,301
TOTAL CURRENT LIABILITIES 354,879 310,433
LONG-TERM DEBT, net of current portion 1,017,531 1,017,755
DEFERRED INCOME TAXES 93,656 200,225
INCOME TAXES PAYABLE AND OTHER NON-CURRENT LIABILITIES 48,512 49,480
TOTAL LIABILITIES 1,514,578 1,577,893
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common stock, $0.01 par value: 1,000 shares authorized; 100 shares issued at September 30, 2012 and December 31, 2011
Additional paid-in capital 693,233 690,870
Accumulated deficit (974,273 ) (766,219 )
TOTAL STOCKHOLDERS' DEFICIT (281,040 ) (75,349 )
$ 1,233,538 $ 1,502,544

Apria Healthcare Group Inc.
Condensed Consolidated Statements of Operations
Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
(in thousands)
Net revenues:
Fee for service arrangements $ 562,867 $ 542,391 $ 1,675,930 $ 1,572,304
Capitation 45,606 42,483 135,928 125,661
TOTAL NET REVENUES 608,473 584,874 1,811,858 1,697,965
Costs and expenses:
Cost of net revenues:
Product and supply costs 215,681 190,241 637,229 558,563
Patient service equipment depreciation 20,301 27,588 61,383 73,470
Home respiratory therapy services 6,650 6,726 20,957 18,829
Nursing services 10,422 10,677 32,354 31,204
Other 4,200 4,322 13,194 10,796
TOTAL COST OF NET REVENUES 257,254 239,554 765,117 692,862
Provision for doubtful accounts 13,495 14,511 46,143 51,353
Selling, distribution and administrative 307,131 307,810 933,390 907,508
Amortization of intangible assets 344 1,172 1,488 3,370
Non-cash impairment of intangible assets 280,000 280,000
TOTAL COSTS AND EXPENSES 858,224 563,047 2,026,138 1,655,093
OPERATING (LOSS) INCOME (249,751 ) 21,827 (214,280 ) 42,872
Interest expense 33,794 33,228 101,189 99,158
Interest income and other (311 ) 176 (1,082 ) (114 )
LOSS BEFORE TAXES (283,234 ) (11,577 ) (314,387 ) (56,172 )
Income tax benefit (107,523 ) (6,890 ) (106,333 ) (21,024 )
NET LOSS $ (175,711 ) $ (4,687 ) $ (208,054 ) $ (35,148 )

Apria Healthcare Group Inc.
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30,
2012 2011
(in thousands)
OPERATING ACTIVITIES
Net loss $ (208,054 ) $ (35,148 )
Items included in net loss not requiring cash:
Provision for doubtful accounts 46,143 51,353
Depreciation 84,935 100,095
Amortization of intangible assets 1,488 3,370
Non-cash impairment of intangible assets 280,000
Amortization of deferred debt issuance costs 10,661 9,130
Deferred income taxes (105,572 ) (12,302 )
Profit interest compensation 2,465 2,278
Loss on disposition of assets and other 14,949 12,906
Changes in operating assets and liabilities, exclusive of effects of acquisitions:
Accounts receivable (71,642 ) (94,432 )
Inventories (8,471 ) 1,356
Prepaid expenses and other assets 8,587 (1,929 )
Accounts payable 16,325 11,668
Accrued payroll and related taxes and benefits 7,368 18,578
Income taxes payable (1,677 ) (11,290 )
Deferred revenue, net of related expenses 10 2,938
Accrued expenses 34,218 33,211
NET CASH PROVIDED BY OPERATING ACTIVITIES 111,733 91,782
INVESTING ACTIVITIES
Purchases of patient service equipment and property, equipment and improvements, exclusive of effects of acquisitions (121,008 ) (114,089 )
Proceeds from disposition of assets 186 162
Cash paid for acquisitions (121 ) (23,478 )
NET CASH USED IN INVESTING ACTIVITIES (120,943 ) (137,405 )
FINANCING ACTIVITIES
Proceeds from ABL Facility 317,000
Payments on ABL Facility (321,000 )
Payments on other long-term debt (256 ) (1,200 )
Debt issuance costs (3,387 )
Cash paid on profit interest units (102 ) (1,000 )
NET CASH USED IN FINANCING ACTIVITIES (4,358 ) (5,587 )
NET DECREASE IN CASH AND CASH EQUIVALENTS (13,568 ) (51,210 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 29,096 109,137
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,528 $ 57,927

Apria Healthcare Group Inc.
3rd Quarter 2012 Financial Summary
Three Months Ended September 30, $ VarianceFav/(Unfav) % VarianceFav/(Unfav)
($ in millions) 2012 2011
Net Revenue $ 608.5 $ 584.9 $ 23.6 4.0 %
Gross Profit 351.2 345.3 5.9 1.7 %
% Margin 57.7% 59.0%
Provision for Doubtful Accounts 13.5 14.5 1.0 6.9 %
% of Net Revenue 2.2% 2.5%
Selling, Distribution and Administrative 307.1 307.8 0.7 0.2 %
% of Net Revenue 50.5% 52.6%
Non-Cash Impairment of Intangible Assets 280.0 (280.0 ) (100.0) %
% of Net Revenue 46.0% 0.0%
Net Loss (175.7)(a) (4.7) (171.0 ) (3,638.3) %
EBITDA (221.6)(b) 59.6 (281.2 ) (471.8) %
Adjusted EBITDA Before Projected Cost Savings and Synergies 74.4 76.5 (2.1 ) (2.7) %
% of Net Revenue 12.2% 13.1%

(a) Net loss for the three month period ended September 30, 2012 reflects the following non-cash impairment charge based on the results of the Company's impairment testing as of September 30, 2012 and the tax impact associated with the impairment charge:

(i) Trade name impairment of $280.0 million, $200.0 million of which relates to the home respiratory therapy/home medical equipment reporting unit and $80.0 million of which relates to the home infusion therapy reporting unit; and

(ii) Tax benefit of $104.0 million relating to the intangible assets impairment.

All of these items resulted in a $176.0 million increase in our net loss in the three months ended September 30, 2012.

(b) EBITDA for the three months ended September 30, 2012 includes a $280.0 million non-cash impairment charge described above.



Nine Months Ended September 30, $ VarianceFav/(Unfav) % VarianceFav/(Unfav)
($ in millions) 2012 2011
Net Revenue $ 1,811.9 $ 1,698.0 $ 113.9 6.7 %
Gross Profit 1,046.7 1,005.1 41.6 4.1 %
% Margin 57.8% 59.2%
Provision for Doubtful Accounts 46.1 51.4 5.3 10.3 %
% of Net Revenue 2.5% 3.0%
Selling, Distribution and Administrative 933.4 907.5 (25.9 ) (2.9) %
% of Net Revenue 51.5% 53.4%
Non-Cash Impairment of Intangible Assets 280.0 (280.0 ) (100.0) %
% of Net Revenue 15.5% 0.0%
Net Loss (208.1)(a) (35.1) (173.0 ) (492.9) %
EBITDA (127.9)(b) 146.3 (274.2 ) (187.4) %
Adjusted EBITDA Before Projected Cost Savings and Synergies 195.6 198.7 (3.1 ) (1.6) %
% of Net Revenue 10.8% 11.7%

(a) Net loss for the nine month period ended September 30, 2012 reflects the following non-cash impairment charge based on the results of the Company's impairment testing as of September 30, 2012 and the tax impact associated with the impairment charge:

(i) Trade name impairment of $280.0 million, $200.0 million of which relates to the home respiratory therapy/home medical equipment reporting unit and $80.0 million of which relates to the home infusion therapy reporting unit; and

(ii) Tax benefit of $104.0 million relating to the intangible assets impairment.

All of these items resulted in a $176.0 million increase in our net loss in the nine months ended September 30, 2012.

(b) EBITDA for the nine months ended September 30, 2012 includes a $280.0 million non-cash impairment charge described above.


Segment Revenue Performance

($ in millions) Three Months Ended September 30, $ Variance % Variance
2012 2011 Fav/(Unfav) Fav/(Unfav)
Home Respiratory Therapy and Home Medical Equipment $ 298.9 $ 293.4 $ 5.5 1.9 %
Home Infusion Therapy 309.6 291.5 18.1 6.2 %
Total Net Revenue $ 608.5 $ 584.9 $ 23.6 4.0 %

($ in millions) Nine Months Ended September 30, $ Variance % Variance
2012 2011 Fav/(Unfav) Fav/(Unfav)
Home Respiratory Therapy and Home Medical Equipment $ 902.3 $ 862.1 $ 40.2 4.7 %
Home Infusion Therapy 909.6 835.9 73.7 8.8 %
Total Net Revenue $ 1,811.9 $ 1,698.0 $ 113.9 6.7 %

Cash and Cash Equivalents, Capitalization & Certain Credit Statistics

The following table indicates the cash and cash equivalents, capitalization and certain credit statistics as of September 30, 2012:

($ in millions) September 30, 2012
Cash and Cash Equivalents $ 15.5
Debt
Asset Based Revolving Credit Facility 6.0
Series A-1 Notes 700.0
Series A-2 Notes 317.5
Capital Leases & Other 0.3
Total Debt $ 1,023.8
Shareholders' Deficit (281.0 )
Total Capitalization $ 742.8
Net Leverage Ratio Calculations
Net Debt1 $ 1,008.3
Adjusted EBITDA2 $ 274.9
Net Leverage Ratio3 3.7x

1 Net debt is defined as total debt less cash and cash equivalents. This amount does not reflect outstanding letters of credit.

2 For the twelve months ended September 30, 2012.

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 and synergies is 3.8x.

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, Adjusted EBITDA before projected cost savings and synergies and Free Cash Flow. EBITDA, Adjusted EBITDA, Adjusted EBITDA before projected cost savings and synergies and Free Cash Flow 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, Adjusted EBITDA before projected cost savings and synergies and Free Cash Flow 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 and synergies permitted in calculating covenant compliance under the indenture governing our Series A-1 Notes and Series A-2 Notes and the credit agreement governing our ABL Facility.

Adjusted EBITDA before projected cost savings and synergies is defined as Adjusted EBITDA less the projected cost savings and synergies that we expect to realize in connection with cost savings, restructuring and other similar initiatives.

Free Cash Flow is defined as cash provided by operating activities less purchases of patient service equipment and property, equipment and improvements, exclusive of effects of acquisitions.

The following tables provide reconciliation of EBITDA, Adjusted EBITDA, Adjusted EBITDA before projected cost savings and synergies and Free Cash Flow for the periods presented to the respective most closely comparable financial measures calculated in accordance with GAAP.


Reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA before projected cost savings and synergies

Three Months Ended
September 30,
Nine Months Ended
September 30,
LTM
September 30,
(in millions) 2012 2011 2012 2011 2012
Net Loss $ (175.7) $ (4.7) $ (208.1) $ (35.1) $ (920.2)
Interest expense, net 33.4 33.6 100.1 99.0 133.1
Income tax benefit (107.5) (6.9) (106.3) (21.0) (60.6)
Depreciation and
amortization
28.2 37.6 86.4 103.4 116.5
EBITDA (221.6) 59.6 (127.9) 146.3 (731.2)
Non-cash impairment of goodwill, intangible and long-lived assets 280.0 280.0 937.9
Non-cash items 5.0 5.4 17.4 15.2 24.4
Costs incurred related to Initiatives and non-recurring items 9.2 9.7 20.8 32.0 28.1
Other adjustments 1.8 1.8 5.3 5.2 7.0
Adjusted EBITDA Before
Projected Cost Savings
and Synergies
$ 74.4 $ 76.5 $ 195.6 $ 198.7 $ 266.2
Projected cost savings and synergies 8.7
Adjusted EBITDA $ 274.9

Reconciliation of Free Cash Flow

(in millions) Three Months Ended
September 30, 2012
Nine Months Ended
September 30, 2012
Net Loss (a) $ (175.7) $ (208.1)
Non-cash items (b) 224.5 335.1
Change in operating assets and liabilities 41.5 (15.3)
Net cash provided by operating activities 90.3 111.7
Less: Purchases of patient service equipment and property, equipment and improvements (35.9) (121.0)
Free Cash Flow $ 54.4 $ (9.3)

(a) Net loss for the three and nine month periods ended September 30, 2012 reflects the following non-cash impairment charge based on the results of the Company's impairment testing as of September 30, 2012 and the tax impact associated with the impairment charge:

(i) Trade name impairment of $280.0 million, $200.0 million of which relates to the home respiratory therapy/home medical equipment reporting unit and $80.0 million of which relates to the home infusion therapy reporting unit; and

(ii) Tax benefit of $104.0 million relating to the intangible assets impairment.

All of these items resulted in a $176.0 million increase in our net loss in the three and nine months ended September 30, 2012.

(b) The three and nine months ended September 30, 2012 include a $280.0 million non-cash impairment charge described above.

CONTACT: INVESTOR CONTACT: Chris A. Karkenny Executive Vice President, Chief Financial Officer 949-639-2000Source:Apria Healthcare Group Inc.