EX-99 2 form8k073107ex99-1.htm EXHIBIT 99.1, PRESS RELEASE
 

Exhibit 99.1

July 31, 2007
       26220 Enterprise Court
       Lake Forest, California 92630
       Tel  949.639.2000
       Fax  949.587.1850
  For Further Information, Contact:                                      
Lawrence M. Higby                     Chris A. Karkenny
Chief Executive Officer    or        Chief Financial Officer
949.639.4960                                949.639.4990

APRIA HEALTHCARE ANNOUNCES
2007 SECOND QUARTER FINANCIAL RESULTS


        LAKE FOREST, CA… July 31, 2007…Apria Healthcare Group Inc. (NYSE:AHG), one of the nation’s leading home healthcare companies, today announced its financial results for the quarter ended June 30, 2007.

        Revenues were $394.0 million, which represents a 4.8% increase compared to revenues of $376.1 million in the second quarter of 2006. Second quarter 2007 net income was $20.8 million, an increase of 12.8% from $18.5 million in the second quarter of 2006. Current quarter diluted earnings per share were $0.47, which includes a one-time positive impact of $0.01 per share resulting from the settlement of a 2005 tax issue. This compares to $0.43 diluted earnings per share for the comparable prior year period.

        Gross margins were 65.9% in the second quarter of 2007, compared to 65.7% reported in the second quarter of last year.

        Days sales outstanding (DSO) were 48 days at June 30, 2007, down from 52 days at June 30, 2006. This improvement is a direct result of increased cash collections resulting from initiatives to optimize billing processes and to increase patient co-payments. The provision for doubtful accounts as a percentage of revenues was 2.8%, compared to 2.6% in the corresponding period last year.

        Selling, distribution and administrative expenses were 53.1% of revenues, which is flat with the first quarter of 2007 and 0.4% higher compared to 52.7% in the second quarter of last year.

        “We are pleased with our continued strong performance in the second quarter,” said Lawrence M. Higby, Chief Executive Officer. “Growth over the prior year, and sequentially with the first quarter, is encouraging, and our sales force segmentation strategy is gaining traction. The planned expansion of our sales force was primarily responsible for the slight increase in SD&A expenses and, as previously announced, we believe the larger and more focused sales force will contribute to accelerating revenue growth. Operationally, the initiatives we put in place in 2006 and early 2007 in the areas of asset utilization and revenue management continue to show improved results.”

        Earnings before interest, taxes, depreciation and amortization (EBITDA) was $71.4 million in the second quarter of 2007, representing a 2.1% decrease over EBITDA of $72.9 million in the second quarter of 2006. The decrease was due to Medicare cuts and the investments in the Company’s sales force. EBITDA is presented as a supplemental performance measure and is not intended as an alternative to net income 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 end of the condensed consolidated financial statements included in this release.

Liquidity and Capital

        Free cash flow was $63.6 million in the second quarter of 2007, compared to $63.3 million in the second quarter of 2006. Contributing to the strong free cash flow was a reduction in capital expenditures and strong cash collections of receivables. Total capital expenditures in the second quarter of 2007 were 5.9% of revenues versus 7.3% in the second quarter of 2006. The reduction in capital expenditures is primarily attributable to initiatives to improve asset utilization.

        During the quarter, the Company reduced its $500 million revolving credit line balance by $55 million. As of June 30, 2007, the outstanding balance on the revolver was $155 million.

        Free cash flow is defined as operating cash flow minus capital expenditures and does not include acquisitions or financing activities. It is presented as a supplemental performance measure and is not intended as an alternative to any other cash flow measure calculated in accordance with generally accepted accounting principles. Further, free cash flow may not be comparable to similarly titled measures used by other companies. A table reconciling free cash flow to cash provided by operating activities is presented at the end of the condensed consolidated financial statements included in this release.

2007 Guidance

        Management affirms its previous estimate of 2007 revenue growth in the 4% to 5% range and net income per share (diluted) of $1.78 to $1.82. The Company’s free cash flow estimate also remains unchanged.

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        Apria provides home respiratory therapy, home infusion therapy and home medical equipment through approximately 500 branches serving patients in all 50 states. With over $1.5 billion in annual revenues, it is one of the nation’s leading home healthcare companies.

        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

  June 30, December 31,
(dollars in thousands) 2007 2006

ASSETS       (unaudited)      
CURRENT ASSETS:            
  Cash and cash equivalents   $28,483   $14,657  
  Accounts receivable, net of allowance for doubtful accounts   211,307    211,097  
  Inventories, net   38,624    40,681  
  Other current assets    77,557    78,502  


           TOTAL CURRENT ASSETS     355,971    344,937  
    
PATIENT SERVICE EQUIPMENT, NET    195,502    212,068  
PROPERTY, EQUIPMENT & IMPROVEMENTS, NET    59,807    52,975  
OTHER ASSETS, NET    556,075    558,516  


           TOTAL ASSETS    $1,167,355   $1,168,496  


LIABILITIES AND STOCKHOLDERS’ EQUITY   
CURRENT LIABILITIES:   
  Accounts payable and accrued liabilities    $192,986   $201,378  
  Current portion of long-term debt    -    2,145  


           TOTAL CURRENT LIABILITIES     192,986    203,523  
    
LONG-TERM DEBT, net of current portion    405,000    485,000  
OTHER NON-CURRENT LIABILITIES    99,448    69,542  


           TOTAL LIABILITIES     697,434    758,065  
STOCKHOLDERS’ EQUITY    469,921    410,431  


           TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY    $1,167,355   $1,168,496  



APRIA HEALTHCARE GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)

  Three Months Ended
June 30,
Six Months Ended
June 30,
 

(dollars in thousands, except per share data) 2007 2006 2007 2006

Respiratory therapy     $ 269,440   $ 256,289   $ 537,712   $ 509,437  
Infusion therapy    72,297    68,231    141,265    133,003  
Home medical equipment/other    52,307    51,559    104,357    101,695  




           NET REVENUES     394,044    376,079    783,334    744,135  
 
           GROSS PROFIT     259,559    247,109    514,053    488,191  
 
Provision for doubtful accounts    11,093    9,737    20,791    19,905  
Selling, distribution and administrative expenses    209,406    198,352    415,985    396,045  
Amortization of intangible assets    706    1,665    1,698    2,942  




           OPERATING INCOME     38,354    37,355    75,579    69,299  
Interest expense, net    5,000    8,016    10,826    15,303  




           INCOME BEFORE TAXES     33,354    29,339    64,753    53,996  
Income tax expense    12,525    10,881    24,780    19,415  




           NET INCOME    $ 20,829   $ 18,458   $ 39,973   $ 34,581  




         
         
Income per common share - assuming dilution   $ 0.47   $ 0.43   $ 0.91   $ 0.81  




Weighted average number of common shares outstanding    44,232    42,789    44,110    42,871  

APRIA HEALTHCARE GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

  Six Months Ended
June 30,
 
(dollars in thousands) 2007 2006

OPERATING ACTIVITIES            
  Net income   $39,973   $34,581  
  Items included in net income not requiring cash:  
     Provision for doubtful accounts    20,791    19,905  
     Depreciation and amortization    67,049    70,832  
     Deferred income taxes, share-based compensation and other    11,350    16,828  
Changes in operating assets and liabilities, exclusive of effects of acquisitions    (7,553 )  (13,246 )


           NET CASH PROVIDED BY OPERATING ACTIVITIES    131,610    128,900  

INVESTING ACTIVITIES
  
  Purchases of patient service equipment and property,  
     equipment and improvements, exclusive of effects of acquisitions    (55,811 )  (66,264 )
  Proceeds from disposition of assets    52    648  
  Cash paid for acquisitions, including payments of deferred consideration    -    (5,040 )


          NET CASH USED IN INVESTING ACTIVITIES    (55,759 )  (70,656 )

FINANCING ACTIVITIES
  
Net payments on debt    (82,145 )  (58,720 )
Issuances of common stock    16,554    2,873  
Other    3,566    6,119  


          NET CASH USED IN FINANCING ACTIVITIES    (62,025 )  (49,728 )


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS    13,826    8,516  
Cash and cash equivalents at beginning of period    14,657    23,304  


CASH AND CASH EQUIVALENTS AT END OF PERIOD   $28,483   $31,820  



APRIA HEALTHCARE GROUP INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RECONCILIATIONS

(unaudited)

  Three Months Ended
June 30,
Six Months Ended
June 30,
 

(dollars in thousands) 2007 2006 2007 2006

Reconciliation – EBITDA:

     Reported net income
    $ 20,829   $ 18,458   $ 39,973   $ 34,581  
     Add back:   Interest expense, net    5,000    8,016    10,826    15,303  
     Add back:   Income tax expense    12,525    10,881    24,780    19,415  
     Add back:   Depreciation    32,388    33,926    65,351    67,890  
     Add back:   Amortization of intangible assets    706    1,665    1,698    2,942  




Adjusted EBITDA   $ 71,448   $ 72,946   $142,628   $140,131  







Reconciliation – Free Cash Flow:

     Net cash provided by operating activities
    $ 86,721   $ 90,737   $ 131,610   $ 128,900  
     Less: Purchases of patient service equipment and
       property, equipment and improvements, exclusive
       of effects of acquisitions
    (23,139 )  (27,430 )  (55,811 )  (66,264 )




Free cash flow   $ 63,582   $ 63,307   $75,799   $62,636  










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