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8-K - FORM 8-K - APRIA HEALTHCARE GROUP INCd575572d8k.htm

Exhibit 99.1

 

LOGO

 

FOR IMMEDIATE RELEASE         INVESTOR CONTACT:
     

 

Peter A. Reynolds

     

Principal Financial Officer and

Chief Accounting Officer

      949-639-2000

Apria Healthcare Group Inc. Announces Second Quarter 2013

Financial Results

LAKE FOREST, California – August 9, 2013 – 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 June 30, 2013.

2013 Second Quarter Highlights

Net revenues in the three months ended June 30, 2013 were $620.6 million, compared to $607.7 million in the three months ended June 30, 2012, an increase of $12.9 million or 2.1%. Revenue for the three months ended June 30, 2013 increased primarily due to increased volume in the home infusion therapy segment partially offset by decreased volume in the home respiratory and home medical equipment segment.

Adjusted EBITDA before projected cost savings and synergies1 for the three months ended June 30, 2013 was $89.9 million compared to $62.4 million in the three months ended June 30, 2012, an increase of 44.1%.

Free cash flow for the three months ended June 30, 2013 was $(13.4) million compared to $(48.1) million in the three months ended June 30, 2012, an increase of $34.7 million.

Net loss for the three months ended June 30, 2013 was $36.1 million.

EBITDA for the three months ended June 30, 2013 was $70.5 million.

Refinancing of Debt. On April 5, 2013, we entered into a senior secured credit agreement (the “Senior Secured Term Loan”), among Apria, as borrower, Sky Acquisition LLC, as parent, the other guarantors party thereto from time to time, Bank of America, N.A., as administrative agent, U.S. Bank National Association as collateral agent, certain other agents party thereto and a syndicate of financial institutions and institutional lenders.

On April 5, 2013, we borrowed $900.0 million in aggregate principal amount of term loans under the Senior Secured Term Loan.

We used proceeds from the borrowings under the Senior Secured Term Loan to: (i) redeem all of our outstanding 11.25% Senior Secured Notes due 2014 (Series A-1) (the “Series A-1 Notes”); (ii) redeem an aggregate principal amount of $160.0 million of our outstanding 12.375% Senior Secured Notes due 2014 (Series A-2) (the “Series A-2 Notes” and, together with the Series A-1 Notes, the “Notes”); and (iii) pay fees and expenses associated with the entering into the Senior Secured Term Loan and the redemption of the Notes.

 

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).

 

1


2013 First Six Months Highlights

Net revenues in the six months ended June 30, 2013 were $1,235.4 million, compared to $1,203.4 million in the six months ended June 30, 2012, an increase of $32.0 million or 2.7%. Revenue for the six months ended June 30, 2013 increased primarily due to increased volume in the home infusion therapy segment partially offset by decreased volume in the home respiratory and home medical equipment segment.

Adjusted EBITDA before projected cost savings and synergies1 for the six months ended June 30, 2013 was $161.0 million compared to $121.1 million in the six months ended June 30, 2012, an increase of 32.9%.

Free cash flow for the six months ended June 30, 2013 was $(11.8) million compared to $(63.5) million in the six months ended June 30, 2012, an increase of $51.7 million.

Net loss for the six months ended June 30, 2013 was $38.0 million.

EBITDA for the six months ended June 30, 2013 was $129.1 million.

Certain Credit Statistics

Our net leverage ratio, defined as the ratio of net debt to Adjusted EBITDA, was 3.4x at June 30, 2013.

Conference Call

As previously announced, Apria will hold a conference call to discuss its second quarter 2013 results on August 9, 2013 at 1:00 p.m. (Eastern Daylight Time). The conference call can be accessed over the phone by dialing 1-888-536-6116 or, for international callers, 1-706-679-8204 or through the Investor Relations page of the Company’s website at www.apria.com. The passcode for the call is Apria.

A replay of the conference call will be available two hours after the call and can be accessed by dialing 1-855-859-2056 or, for international callers, 1-404-537-3406 or through the Investor Relations page of the Company’s website. The passcode for the replay is 95154998. The replay will be available until August 23, 2013.

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, risks associated with the Company’s reorganization plans, as well as other 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 510 locations in the United States. With $2.4 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.

 

2


Apria Healthcare Group Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

     June 30, 2013     December 31, 2012  
     (in thousands, except share data)  
ASSETS   

CURRENT ASSETS

    

Cash and cash equivalents

   $ 15,853      $ 27,080   

Accounts receivable, less allowance for doubtful accounts of $58,539 and $53,017 at June 30, 2013 and December 31, 2012, respectively

     333,997        344,421   

Inventories

     73,019        68,075   

Deferred expenses

     3,409        3,798   

Prepaid expenses and other current assets

     21,455        16,890   
  

 

 

   

 

 

 

TOTAL CURRENT ASSETS

     447,733        460,264   

PATIENT SERVICE EQUIPMENT, less accumulated depreciation of $191,107 and $185,774 at June 30, 2013 and December 31, 2012, respectively

     191,596        186,460   

PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET

     73,631        76,823   

GOODWILL

     258,725        258,725   

INTANGIBLE ASSETS, NET

     133,409        133,781   

DEFERRED DEBT ISSUANCE COSTS, NET

     15,187        30,207   

OTHER ASSETS

     29,253        26,448   
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 1,149,534      $ 1,172,708   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ DEFICIT     

CURRENT LIABILITIES

    

Accounts payable

   $ 146,270      $ 157,530   

Accrued payroll and related taxes and benefits

     62,091        70,547   

Deferred income taxes

     1,310        986   

Other accrued liabilities

     69,666        74,464   

Deferred revenue

     27,153        27,785   

Current portion of long-term debt

     39,086        25,195   
  

 

 

   

 

 

 

TOTAL CURRENT LIABILITIES

     345,576        356,507   

LONG-TERM DEBT, net of current portion

     1,039,752        1,017,515   

DEFERRED INCOME TAXES

     68,997        68,907   

INCOME TAXES PAYABLE AND OTHER NON-CURRENT LIABILITIES

     61,880        61,203   
  

 

 

   

 

 

 

TOTAL LIABILITIES

     1,516,205        1,504,132   

COMMITMENTS AND CONTINGENCIES

    

STOCKHOLDERS’ DEFICIT

    

Common stock, $0.01 par value: 1,000 shares authorized; 100 shares issued at June 30, 2013 and December 31, 2012

     —         —     

Additional paid-in capital

     697,955        695,211   

Accumulated deficit

     (1,064,626     (1,026,635
  

 

 

   

 

 

 

TOTAL STOCKHOLDERS’ DEFICIT

     (366,671     (331,424
  

 

 

   

 

 

 
   $ 1,149,534      $ 1,172,708   
  

 

 

   

 

 

 

 

3


Apria Healthcare Group Inc.

Condensed Consolidated Statements of Operations

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2013     2012     2013     2012  
     (Unaudited)     (Unaudited)  
     (in thousands)     (in thousands)  

Net revenues:

        

Fee for service arrangements

   $ 575,299      $ 561,447      $ 1,144,819      $ 1,113,063   

Capitation

     45,324        46,225        90,559        90,322   
  

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL NET REVENUES

     620,623        607,672        1,235,378        1,203,385   
  

 

 

   

 

 

   

 

 

   

 

 

 

Costs and expenses:

        

Cost of net revenues:

        

Product and supply costs

     230,149        214,136        450,903        421,548   

Patient service equipment depreciation

     22,690        20,386        42,148        41,082   

Home respiratory therapy services

     5,739        7,018        11,388        14,307   

Nursing services

     10,306        10,709        20,259        21,932   

Other

     4,436        3,948        8,844        8,994   
  

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL COST OF NET REVENUES

     273,320        256,197        533,542        507,863   

Provision for doubtful accounts

     13,092        20,790        36,227        32,648   

Selling, distribution and administrative

     293,455        308,837        592,604        626,259   

Amortization of intangible assets

     186        483        372        1,144   
  

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL COSTS AND EXPENSES

     580,053        586,307        1,162,745        1,167,914   
  

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING INCOME

     40,570        21,365        72,633        35,471   

Interest expense

     32,177        33,878        66,389        67,395   

Loss on early retirement of debt

     44,221        —         44,221        —    

Interest income and other

     (643     (69     (1,153     (771
  

 

 

   

 

 

   

 

 

   

 

 

 

LOSS BEFORE TAXES

     (35,185     (12,444     (36,824     (31,153

Income tax expense

     913        292        1,167        1,190   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET LOSS

   $ (36,098   $ (12,736   $ (37,991   $ (32,343
  

 

 

   

 

 

   

 

 

   

 

 

 

 

4


Apria Healthcare Group Inc.

Condensed Consolidated Statements of Cash Flows

 

     Six Months Ended
June 30,
 
     2013     2012  
           (As Restated)  
     (Unaudited)  
     (in thousands)  

OPERATING ACTIVITIES

    

Net loss

   $ (37,991   $ (32,343

Items included in net loss not requiring cash:

    

Provision for doubtful accounts

     36,227        32,648   

Depreciation

     56,078        57,082   

Amortization of intangible assets

     372        1,144   

Amortization of deferred debt issuance costs

     6,328        7,025   

Deferred income taxes

     413        275   

Profit interest compensation

     2,744        1,565   

Gain on sale of patient service equipment and other

     (10,184     (12,146

Loss on early retirement of debt

     44,221        —    

Changes in operating assets and liabilities, exclusive of effects of acquisitions:

    

Accounts receivable

     (25,804     (58,787

Inventories

     (4,943     (11,740

Prepaid expenses and other assets

     (7,371     7,903   

Accounts payable

     (9,982     8,772   

Accrued payroll and related taxes and benefits

     (8,456     (7,826

Income taxes payable

     245        429   

Deferred revenue, net of related expenses

     (243     70   

Accrued expenses

     (4,365     4,450   
  

 

 

   

 

 

 

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

     37,289        (1,479
  

 

 

   

 

 

 

INVESTING ACTIVITIES

    

Purchases of patient service equipment and property, equipment and improvements, exclusive of effects of acquisitions

     (70,450     (85,113

Proceeds from sale of patient service equipment and other

     21,328        23,111   

Cash paid for acquisitions

           (121
  

 

 

   

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

     (49,122     (62,123
  

 

 

   

 

 

 

FINANCING ACTIVITIES

    

Proceeds from ABL Facility

     346,000        209,000   

Payments on ABL Facility

     (341,000     (150,000

Payments on Series A-1 Notes

     (700,000     —    

Payments on Series A-2 Notes

     (160,000     —    

Proceeds from Senior Secured Term Loan

     900,000        —    

Premium paid on early retirement of Series A-1 and A-2 Notes

     (24,641     —    

Debt issuance costs on Senior Secured Term Loan

     (10,628     —    

Payment of original issue discount associated with Senior Secured Term Loan

     (9,000     —    

Payments on other long-term debt

     (125     (173

Cash paid on profit interest units

     —         (82
  

 

 

   

 

 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

     606        58,745   
  

 

 

   

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

     (11,227     (4,857

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

     27,080        29,096   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

   $ 15,853      $ 24,239   
  

 

 

   

 

 

 

 

5


Apria Healthcare Group Inc.

2nd Quarter 2013 Financial Summary

 

     Three Months Ended
June 30,
    $ Variance
Fav/(Unfav)
    % Variance
Fav/(Unfav)
 
($ in millions)        2013             2012          

Net Revenue

   $ 620.6      $ 607.7      $ 12.9        2.1

Gross Profit

     347.3        351.5        (4.2     (1.2 )% 

% Margin

     56.0     57.8    

Provision for Doubtful Accounts

     13.1        20.8        7.7        37.0

% of Net Revenue

     2.1     3.4    

Selling, Distribution and Administrative

     293.5        308.8        15.3        5.0

% of Net Revenue

     47.3     50.8    

Net Loss

     (36.1     (12.7     (23.4     (184.3 )% 

EBITDA

     70.5        50.2        20.3        40.4

Adjusted EBITDA Before Projected Cost Savings and Synergies

     89.9        62.4        27.5        44.1

% of Net Revenue

     14.5     10.3    

 

     Six Months Ended
June 30,
    $ Variance
Fav/(Unfav)
    % Variance
Fav/(Unfav)
 
($ in millions)        2013             2012          

Net Revenue

   $ 1,235.4      $ 1,203.4      $ 32.0        2.7

Gross Profit

     701.8        695.5        6.3        0.9

% Margin

     56.8     57.8    

Provision for Doubtful Accounts

     36.2        32.6        (3.6     (11.0 )% 

% of Net Revenue

     2.9     2.7    

Selling, Distribution and Administrative

     592.6        626.3        33.7        5.4

% of Net Revenue

     48.0     52.0    

Net Loss

     (38.0     (32.3     (5.7     (17.6 )% 

EBITDA

     129.1        93.7        35.4        37.8

Adjusted EBITDA Before Projected Cost Savings and Synergies

     161.0        121.1        39.9        32.9

% of Net Revenue

     13.0     10.1    

 

 

6


Segment Revenue Performance

 

($ in millions)    Three Months Ended
June 30,
     $  Variance
Fav/(Unfav)
    %  Variance
Fav/(Unfav)
 
     2013      2012       

Home Respiratory Therapy and Home Medical Equipment

   $ 290.6       $ 303.4       $ (12.8     (4.2 )% 

Home Infusion Therapy

     330.0         304.3         25.7        8.4
  

 

 

    

 

 

    

 

 

   

Total Net Revenue

   $ 620.6       $ 607.7       $ 12.9        2.1
  

 

 

    

 

 

    

 

 

   

 

($ in millions)    Six Months Ended
June 30,
     $  Variance
Fav/(Unfav)
    %  Variance
Fav/(Unfav)
 
     2013      2012       

Home Respiratory Therapy and Home Medical Equipment

   $ 589.2       $ 604.3       $ (15.1     (2.5 )% 

Home Infusion Therapy

     646.2         599.1         47.1        7.9
  

 

 

    

 

 

    

 

 

   

Total Net Revenue

   $ 1,235.4       $ 1,203.4       $ 32.0        2.7
  

 

 

    

 

 

    

 

 

   

Cash and Cash Equivalents, Capitalization & Certain Credit Statistics

The following table indicates the cash and cash equivalents, capitalization and certain credit statistics as of June 30, 2013:

 

($ in millions)    June 30,
2013
 

Cash and Cash Equivalents

   $ 15.9   

Debt

  

Asset Based Revolving Credit Facility

     30.0   

Senior Secured Term Loan

     900.0   

Series A-2 Notes

     157.5   

Capital Leases & Other

     0.1   
  

 

 

 

Total Debt

   $ 1,087.6   

Shareholders’ Deficit

     (366.7
  

 

 

 

Total Capitalization

   $ 720.9   
  

 

 

 

Net Leverage Ratio Calculations

  

Net Debt1

   $ 1,071.7   

Adjusted EBITDA2

   $ 311.3   

Net Leverage Ratio3

     3.4x   

 

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, 2013.

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 was 3.5×.

 

7


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-2 Notes and the credit agreements governing our ABL Facility and the Senior Secured Term Loan 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, loss on early retirement of debt, income tax expense and depreciation and amortization.

Adjusted EBITDA is defined as net income (loss), plus interest expense, net, loss on early retirement of debt, provision (benefit) for income taxes and depreciation and amortization, further adjusted for certain other non-cash items, costs incurred related to initiatives, cost reduction and other adjustment items that are permitted by the covenants included in the indenture governing our Series A-2 Notes and the credit agreements governing our ABL Facility and the Senior Secured Term Loan.

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, net of proceeds from the sale of patient service equipment and other, 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.

 

8


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)    2013     2012     2013     2012     2013  

Net Loss

   $ (36.1   $ (12.7   $ (38.0   $ (32.3   $ (266.1

Interest expense, net

     31.6        33.8        65.3        66.6        132.2   

Loss on early retirement of debt (1)

     44.2        —          44.2        —          44.2   

Income tax expense (benefit)

     0.9        0.3        1.2        1.2        (130.9

Depreciation and amortization

     29.9        28.8        56.4        58.2        112.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     70.5        50.2        129.1        93.7        (108.4

Non-cash impairment of goodwill, intangible and long-lived assets

     —          —          —          —          350.0   

Non-cash items

     7.6        6.0        13.9        12.4        24.4   

Costs incurred related to

Initiatives and non-recurring items

     10.0        4.4        14.5        11.5        36.3   

Other adjustments

     1.8        1.8        3.5        3.5        7.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA Before Projected Cost

Savings and Synergies

   $ 89.9      $ 62.4      $ 161.0      $ 121.1        309.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

Projected cost savings and synergies

             2.0   
          

 

 

 

Adjusted EBITDA

           $ 311.3   
          

 

 

 

 

(1) Reflects $24.6 million of premiums paid to the holders of the redeemed Series A-1 Notes and the portion of the Series A-2 Notes that were redeemed for the three and six months ended June 30, 2013. Reflects $19.6 million of unamortized debt issuance costs related to the Series A-1 Notes and the portion of the Series A-2 Notes that were redeemed in the three and six months ended June 30, 2013.

Reconciliation of Free Cash Flow

 

(in millions)    Three Months Ended
June  30, 2013
    Six Months Ended
June 30, 2013
 

Net Loss

   $ (36.1   $ (38.0

Non-cash items

     87.0        136.2   

Change in operating assets and liabilities

     (41.1     (60.9
  

 

 

   

 

 

 

Net cash provided by operating activities

     9.8        37.3   

Purchases of patient service equipment, property, equipment and improvements

     (33.5     (70.4

Proceeds from sale of patient service equipment and other

     10.3        21.3   
  

 

 

   

 

 

 

Free Cash Flow

   $ (13.4   $ (11.8
  

 

 

   

 

 

 

 

9