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

APRIA HEALTHCARE GROUP INC - FORM 8-K - EX-99.1 - PRESS RELEASE - November 14, 2012

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APRIA HEALTHCARE GROUP INC Reports

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8-K - FORM 8-K - APRIA HEALTHCARE GROUP INC	d436608d8k.htm

Exhibit 99.1

LOGO

Apria Healthcare Group Inc. Announces Third Quarter 2012

Financial Results

LAKE FOREST, California – November 14, 2012 – 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.

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.

3^rd Quarter 2012 Financial Summary


	Three Months Ended September 30,						$ Variance Fav/(Unfav)			% Variance Fav/(Unfav)
($ in millions)	2012			2011			$ Variance Fav/(Unfav)			% Variance Fav/(Unfav)
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,						$ Variance Fav/(Unfav)			% Variance Fav/(Unfav)
($ in millions)	2012			2011			$ Variance Fav/(Unfav)			% Variance Fav/(Unfav)
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)

(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 Fav/(Unfav)		% Variance Fav/(Unfav)
	2012		2011		$ Variance Fav/(Unfav)		% Variance 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 Fav/(Unfav)		% Variance Fav/(Unfav)
	2012		2011		$ Variance Fav/(Unfav)		% Variance 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 3.8×.

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 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)

(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.

FOR IMMEDIATE RELEASE

INVESTOR CONTACT:

Chris A. Karkenny

Executive Vice President,

Chief Financial Officer