APRIA HEALTHCARE GROUP INC - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - APRIA HEALTHCARE GROUP INC	d8k.htm

Exhibit 99.1

LOGO


FOR IMMEDIATE RELEASE		INVESTOR CONTACT:

		Chris Karkenny
		Executive Vice President, Chief Financial Officer
		949-639-2000

Apria Healthcare Group Inc. Announces 2^nd Quarter 2011

Financial Results

LAKE FOREST, California – August 10, 2011 – 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 quarter ended June 30, 2011.

2011 Second Quarter Highlights

Net revenues in the three months ended June 30, 2011 were $576.3 million, compared to $518.2 million in the three months ended June 30, 2010. Revenue for the three months ended June 30, 2011 increased primarily due to an increase in home infusion therapy segment revenue and the previously announced acquisition of Praxair assets. The revenue increase was partially offset by the non-renewal or termination of, or changes to, certain payor contracts among other factors.

Net loss for the three months ended June 30, 2011 was $9.4 million.

EBITDA¹ for the three months ended June 30, 2011 was $53.8 million.

Adjusted EBITDA before projected cost savings and synergies¹ for the three months ended June 30, 2011 was $70.1 million.

2011 First Six Months Highlights

Net revenues in the six months ended June 30, 2011 were $1,113.1 million, compared to $1,027.1 million in the six months ended June 30, 2010. Revenue for the six months ended June 30, 2011 increased primarily due to an increase in home infusion therapy segment revenue and the previously announced acquisition of Praxair assets. The revenue increase was partially offset by the non-renewal or termination of, or changes to, certain payor contracts among other factors.

Net loss for the six months ended June 30, 2011 was $30.5 million.

EBITDA¹ for the six months ended June 30, 2011 was $86.7 million.

Adjusted EBITDA before projected cost savings and synergies¹ for the six months ended June 30, 2011 was $122.2 million.

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).

Recent Events – Amended and Restated Asset Based Line (“ABL”) Facility

On August 8, 2011, the Company entered into an amended and restated senior secured asset-based revolving credit facility, or ABL Facility. This amended and restated ABL Facility increased the borrowing capacity (subject to borrowing base) under the original ABL Facility from $150.0 million to $250.0 million. The ABL Facility continues to be secured by accounts receivable and inventory of the Company.

Certain Credit Statistics

Adjusted EBITDA before projected cost savings and synergies¹ for the twelve months ended June 30, 2011 was $258.0 million.

Our net leverage ratio, defined as the ratio of net debt to Adjusted EBITDA¹, was 3.7x at June 30, 2011.

Cost Reduction Initiatives Update

The following table summarizes our cost reduction initiatives as of June 30, 2011:


($ in millions)	As of June 30, 2011
Realized Savings to Date	$	165.7
Projected Cost Savings and Synergies Not Yet Realized		13.0

Total Expected Annual Savings	$	178.7

Conference Call

As previously announced, Apria will hold a conference call to discuss its second quarter 2011 results on August 10, 2011 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 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 88789002. The replay will be available until August 24, 2011.

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 caption “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 550 locations in the United States. With over $2 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


	June 30, 2011			December 31, 2010
	(Unaudited)
	(in thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	27,144		$	109,137
Accounts receivable, less allowance for doubtful accounts of $58,419 and $56,559 at June 30, 2011 and December 31, 2010, respectively		328,983			282,798
Inventories		55,400			73,894
Deferred income taxes		58,847			58,028
Deferred expenses		3,410			3,061
Prepaid expenses and other current assets		21,913			20,221

TOTAL CURRENT ASSETS		495,697			547,139
PATIENT SERVICE EQUIPMENT, less accumulated depreciation of $167,345 and $144,074 at June 30, 2011 and December 31, 2010, respectively		199,612			169,878
PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET		87,130			83,893
GOODWILL		765,245			760,088
INTANGIBLE ASSETS, NET		577,106			578,957
DEFERRED DEBT ISSUANCE COSTS, NET		47,730			53,659
OTHER ASSETS		9,178			7,523

TOTAL ASSETS	$	2,181,698		$	2,201,137


LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	107,683		$	86,637
Accrued payroll and related taxes and benefits		57,643			59,073
Other accrued liabilities		92,286			90,447
Deferred revenue		29,748			26,504
Current portion of long-term debt		695			1,323

TOTAL CURRENT LIABILITIES		288,055			263,984
LONG-TERM DEBT, net of current portion		1,017,926			1,018,098
DEFERRED INCOME TAXES		207,658			222,743
INCOME TAXES PAYABLE AND OTHER NON-CURRENT LIABILITIES		32,625			31,000

TOTAL LIABILITIES		1,546,264			1,535,825
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value: 1,000 shares authorized; 100 shares issued at June 30, 2011 and December 31, 2010		—			—
Additional paid-in capital		689,041			688,458
Accumulated deficit		(53,607	)		(23,146	)

TOTAL STOCKHOLDERS’ EQUITY		635,434			665,312

	$	2,181,698		$	2,201,137

Apria Healthcare Group Inc.

Condensed Consolidated Statements of Operations


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	(Unaudited)						(Unaudited)
	(in thousands)
Net revenues:
Fee for service/product arrangements	$	534,229		$	477,699		$	1,029,913		$	947,535
Capitation arrangements		42,119			40,479			83,178			79,519

TOTAL NET REVENUES		576,348			518,178			1,113,091			1,027,054

Costs and expenses:
Cost of net revenues:
Product and supply costs		190,882			164,234			368,322			321,067
Patient service equipment depreciation		24,077			23,693			45,882			48,749
Home respiratory therapy services		6,130			8,022			12,103			16,215
Nursing services		10,596			8,912			20,527			18,000
Other		3,747			3,271			6,474			6,893

TOTAL COST OF NET REVENUES		235,432			208,132			453,308			410,924
Provision for doubtful accounts		16,578			12,933			36,842			28,820
Selling, distribution and administrative		303,070			258,843			599,698			516,581
Amortization of intangible assets		1,121			1,085			2,198			2,742

TOTAL COSTS AND EXPENSES		556,201			480,993			1,092,046			959,067

OPERATING INCOME		20,147			37,185			21,045			67,987
Interest expense		33,026			32,663			65,930			65,235
Interest income and other		(39	)		(222	)		(290	)		(305	)

(LOSS) INCOME BEFORE TAXES		(12,840	)		4,744			(44,595	)		3,057
Income tax (benefit) expense		(3,403	)		1,378			(14,134	)		494

NET (LOSS) INCOME	$	(9,437	)	$	3,366		$	(30,461	)	$	2,563

Apria Healthcare Group Inc.

Condensed Consolidated Statements of Cash Flows


	Six Months Ended June 30,
	2011			2010
	(Unaudited) (in thousands)
OPERATING ACTIVITIES
Net (loss) income	$	(30,461	)	$	2,563
Items included in net (loss) income not requiring cash:
Provision for doubtful accounts		36,842			28,820
Depreciation		63,625			62,439
Amortization of intangible assets		2,198			2,742
Amortization of deferred debt issuance costs		5,928			5,198
Deferred income taxes		(15,903	)		2,470
Profit interest compensation		1,583			2,203
Loss on disposition of assets and other		8,202			9,099
Changes in operating assets and liabilities, exclusive of effects of acquisitions:
Accounts receivable		(83,027	)		(76,257	)
Inventories		8,324			7,855
Prepaid expenses and other assets		(3,134	)		(3,672	)
Accounts payable, exclusive of book cash overdraft		19,692			(7,226	)
Accrued payroll and related taxes and benefits		(1,621	)		1,649
Income taxes payable		396			(768	)
Deferred revenue, net of related expenses		2,895			462
Accrued expenses		3,067			(2,859	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		18,606			34,718


INVESTING ACTIVITIES
Purchases of patient service equipment and property, equipment and improvements, exclusive of effects of acquisitions		(76,415	)		(55,783	)
Purchases of short-term investments		—			(8,087	)
Maturities of short-term investments		—			25,685
Proceeds from disposition of assets		153			101
Cash paid for acquisitions		(22,538	)		(1,960	)

NET CASH USED IN INVESTING ACTIVITIES		(98,800	)		(40,044	)


FINANCING ACTIVITIES
Payments on other long-term debt		(799	)		(867	)
Change in book cash overdraft included in accounts payable		—			(32,533	)
Debt issuance costs		—			(2,887	)
Cash paid on profit interest units		(1,000	)		(78	)

NET CASH USED IN FINANCING ACTIVITIES		(1,799	)		(36,365	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(81,993	)		(41,691	)
Cash and cash equivalents at beginning of period		109,137			158,163

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	27,144		$	116,472

Apria Healthcare Group Inc.

2^nd Quarter 2011 Financial Summary


	Three Months Ended June 30,						$ Variance Fav/(Unfav)			% Variance Fav/(Unfav)
($ in millions)	2011			2010			$ Variance Fav/(Unfav)			% Variance Fav/(Unfav)
Net Revenue	$	576.3		$	518.2		$	58.1			11.2	%

Gross Profit		340.9			310.0			30.9			10.0	%
% Margin		59.2	%		59.8	%

Provision for Doubtful Accounts		16.6			12.9			(3.7	)		(28.7	)%
% of Net Revenue		2.9	%		2.5	%

Selling, Distribution and Administrative		303.1			258.8			(44.3	)		(17.1	)%
% of Net Revenue		52.6	%		50.0	%

Adjusted EBITDA Before Projected Cost Savings and Synergies		70.1			87.3			(17.2	)		(19.7	)%
% of Net Revenue		12.2	%		16.8	%

Net (Loss) Income		(9.4	)		3.4			(12.8	)		(376.5	)%

EBITDA		53.8			69.3			(15.5	)		(22.4	)%


	Six Months Ended June 30,						$ Variance Fav/(Unfav)			% Variance Fav/(Unfav)
($ in millions)	2011			2010			$ Variance Fav/(Unfav)			% Variance Fav/(Unfav)
Net Revenue	$	1,113.1		$	1,027.1		$	86.0			8.4	%

Gross Profit		659.8			616.1			43.7			7.1	%
% Margin		59.3	%		60.0	%

Provision for Doubtful Accounts		36.8			28.8			(8.0	)		(27.8	)%
% of Net Revenue		3.3	%		2.8	%

Selling, Distribution and Administrative		599.7			516.6			(83.1	)		(16.1	)%
% of Net Revenue		53.9	%		50.3	%

Adjusted EBITDA Before Projected Cost Savings and Synergies		122.2			171.5			(49.3	)		(28.7	)%
% of Net Revenue		11.0	%		16.7	%

Net (Loss) Income		(30.5	)		2.6			(33.1	)		(1,273.1	)%

EBITDA		86.7			133.2			(46.5	)		(34.9	)%

Service Line Revenue Performance


($ in millions)	Three Months Ended June 30,				$ Variance		% Variance
	2011		2010		Fav/(Unfav)		Fav/(Unfav)
Home Respiratory Therapy and Home Medical Equipment	$	292.6	$	273.1	$	19.5		7.1	%
Home Infusion Therapy		283.7		245.1		38.6		15.7	%

Total Net Revenue	$	576.3	$	518.2	$	58.1		11.2	%


($ in millions)	Six Months Ended June 30,				$ Variance		% Variance
	2011		2010		Fav/(Unfav)		Fav/(Unfav)
Home Respiratory Therapy and Home Medical Equipment	$	568.7	$	551.5	$	17.2		3.1	%
Home Infusion Therapy		544.4		475.6		68.8		14.5	%

Total Net Revenue	$	1,113.1	$	1,027.1	$	86.0		8.4	%

Cash and Cash Equivalents, Capitalization & Certain Credit Statistics

The following table indicates the cash and cash equivalents, capitalization and certain credit statistics as of June 30, 2011:


($ in millions)	June 30, 2011
Cash and Cash Equivalents	$	27.1

Debt
Asset Based Revolving Credit Facility		—
Series A-1 Notes		700.0
Series A-2 Notes		317.5
Capital Leases & Other		1.1

Total Debt	$	1,018.6
Shareholders’ Equity		635.4

Total Capitalization	$	1,654.0


Net Leverage Ratio Calculations
Net Debt¹	$	991.5
Adjusted EBITDA²	$	271.0
Net Leverage Ratio³		3.7	×

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 June 30, 2011.

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 3.8×.

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 June 30,					Six Months Ended June 30,					LTM June 30,
(in millions)	2011			2010		2011			2010		2011
Net (Loss) Income	$	(9.4	)	$	3.4	$	(30.5	)	$	2.6	$	(50.5	)
Interest expense, net		33.0			32.6		65.5			65.0		130.3
Income tax (benefit) expense		(3.4	)		1.4		(14.1	)		0.5		(22.5	)
Depreciation and amortization		33.6			31.9		65.8			65.1		129.3

EBITDA		53.8			69.3		86.7			133.2		186.6
Non-cash items		5.3			5.6		9.8			11.3		20.1

Costs incurred related to initiatives		9.2			10.2		22.2			21.0		43.4
Other adjustments		1.8			2.2		3.5			6.0		7.9

Adjusted EBITDA Before Projected Cost Savings and Synergies	$	70.1		$	87.3	$	122.2		$	171.5		258.0

Projected cost savings and synergies												13.0

Adjusted EBITDA											$	271.0

Definition of Terms and Reconciliation of Non-GAAP Financial Measures (continued)

Reconciliation of Free Cash Flow


($ in millions)	Three Months Ended June 30, 2011			Six Months Ended June 30, 2011
Net Loss	$	(9.4	)	$	(30.5	)
Non-cash items		54.4			102.5
Change in operating assets and liabilities		(60.6	)		(53.4	)

Net cash (used in) provided by operating activities		(15.6	)		18.6
Less: Purchases of patient service equipment and property, equipment and improvements		(42.3	)		(76.4	)

Free Cash Flow	$	(57.9	)	$	(57.8	)

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