LAKE FOREST, Calif., Sept. 11, 2008 (GLOBE NEWSWIRE) -- Apria Healthcare Group Inc. (NYSE:AHG), the nation's leading home healthcare company, today announced its financial results for the quarter ended June 30, 2008. As previously disclosed, the Company has been in the process of evaluating its accounts receivable reserves. As a result of that evaluation, the Company concluded that its accounts receivable reserves were over-reserved by $1.5 million, or 3.9% of pre-tax net income for the quarter ended June 30, 2008. In addition, subsequent to the release of preliminary earnings on July 30, 2008, the Company identified and recorded a $650,000, or 1.7% of pre-tax net income for the quarter ended June 30, 2008, warranty obligation error relating to replacement obligations for Medicare equipment required to be transferred to patients after thirteen months. The net effect of these two items resulted in an $850,000, or 2.2% of pre-tax net income for the quarter ended June 30, 2008, increase to the quarter's pre-tax net income. These corrections have been recorded in the quarterly period ended June 30, 2008. The Company also conducted a review of its accounts receivable reserves in the prior period financial statements and concluded that none of the prior periods were materially misstated and that no restatement is required for any prior period as a result of these errors.
As part of the Company's review of its accounts receivable reserves, the Company evaluated its internal control over financial reporting relating to the calculation of accounts receivable reserves and concluded that the Company did not effectively design and perform certain control activities to prevent or detect material misstatements that might exist in the Company's reserve for uncollectible accounts receivable and, therefore, a material weakness existed in the Company's internal control over financial reporting. In light of the material weakness in internal control over financial reporting, the Company also concluded that its disclosure controls and procedures were not effective as of December 31, 2007 or March 31, 2008. The Company therefore will be filing an amendment to its Form 10-K for the period ended December 31, 2007, and an amendment to its Form 10-Q for the period ended March 31, 2008, to amend its disclosures concerning the effectiveness of its internal control over financial reporting and disclosure controls and procedures for such periods. The Company anticipates filing the Form 10-K/A for the fiscal year ended December 31, 2007, the Form 10-Q/A for the quarter ended March 31, 2008, and the Form 10-Q for the quarter ended June 30, 2008, on Thursday, September 11, 2008.
Results for the Period Ended June 30, 2008
For the three months ended June 30, 2008, revenue grew over the prior year by 35.5% to $531.2 million from $391.9 million in the three months ended June 30, 2007, with revenue increases of 2.2% for home respiratory therapy and 184.3% for home infusion therapy. For the six months ended June 30, 2008, revenue growth over the prior year was 35.3% to $1.1 billion from $782.7 million in the six months ended June 30, 2007, with revenue increases of 2.3% in respiratory therapy and 187.4% for infusion therapy. The increase in home infusion therapy, for both the three and six months ended June 30, 2008, was the result of the Coram acquisition which took place in December 2007. Second quarter 2008 net income was $23.2 million, an increase of 20.3%, compared to $19.3 million in the second quarter of 2007. For the six months ended June 30, 2008, net income was $43.9 million, an increase of 9.5% from $40.1 million in the six months ended June 30, 2007. All results reported in this release include the impact of the Coram acquisition and Medicare payment reductions.
Net income per share on a diluted basis was $0.52 for the quarter ended June 30, 2008, compared to $0.44 in the comparable prior year period. For the six months ended June 30, 2008, net income per share on a diluted basis was $0.99, compared to $0.91 in the six months ended June 30, 2007. These results include Medicare cuts of approximately $0.08 year over year, which were primarily respiratory therapy Medicare drug cuts, and one-time expenses of approximately $0.02.
As expected, due to the acquisition of Coram, the Company's gross margin decreased in the second quarter of 2008 to 60.6%, compared to 65.7% reported in the second quarter of last year. Gross margins were 60.8% in the six months ended June 30, 2008, compared to 65.6% in the six months ended June 30, 2007.
Days sales outstanding (DSO) were 51 days at June 30, 2008 and 49 days at June 30, 2007. The provision for doubtful accounts as a percentage of revenues was 1.0% for the second quarter of 2008, compared to 2.8% in the corresponding period last year. For the six months ended June 30, 2008, the provision for doubtful accounts was 1.5%, compared to 2.7% for the six months ended June 30, 2007.
Selling, distribution and administrative expenses were 51.2% of revenues, a 2.2% reduction from 53.4% in the second quarter of last year. For the six months ended June 30, 2008, selling, distribution and administrative expenses were 51.0%, compared to 53.1% in the six months ended June 30, 2007.
Earnings before interest, taxes, depreciation and amortization (EBITDA) was $78.3 million in the second quarter of 2008, representing a 12.7% increase over EBITDA of $69.5 million in the second quarter of 2007. EBITDA was $156.1 million in the six months ended June 30, 2008, representing a 9.6% increase over prior year EBITDA of $142.4 million in the six months ended June 30, 2007. 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
During the second quarter, the Company reduced the outstanding balance on its $500 million revolving credit line by a net amount of $45 million. As of June 30, 2008, the outstanding balance on the revolver was $364 million.
Free cash flow was $54.1 million in the second quarter of 2008, compared to $63.6 million in the second quarter of 2007. Free cash flow was $61.1 million for the six months ended June 30, 2008, compared to $75.8 million for the six months ended June 30, 2007.
