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Original Source: FD (FAIR DISCLOSURE) WIRE
. Lawrence M. Higby, Apria Healthcare Group, President, CEO & Director
. Amin I. Khalifa, Apria Healthcare Group, EVP & CFO . James E. Baker, Apria Healthcare Group, EVP & Treasurer
Co. discussed 3Q03 results with net income of $28.9m, or $0.54 per share. Top line growth was up 11% and gross profit was 73.1%. EBITDA was $85.9m. Q&A Focus: Stock repurchases, Lawsuit, AWP changes.
A. Key Data From Call 1. Selling, distribution and administrative costs = 54.8% of revenues. 2. Provision for doubtful accounts = 3.6% of revenue. 3. DSO = 51 days. 4. Net income = $28.9m. or $0.54 per share compared to $26.5m or $0.48 3Q02. 5. EBITDA = $85.9m. 6. 3Q03 Capex = $37.3m. 7. YTD cash flow from operations = $198.7m. 8. YTD free cash flow = $82.1m.
S1. Overview [L.H.] 1. Highlights: 1. Top line growth was up 11%. 1. Half organic growth and half from acquisitions. 2. Gross profit at 73.1%. 1. Staying strong because purchasing organization is getting strong contracts, along with solid inventory controls.
2. About even with 2Q03. 3. AHG is slightly disappointed with increase in selling, distribution and administrative costs which were at 54.8% of revenues for 3Q03. 1. 54.6% for 2Q03. 2. Due to higher labor costs during the month of July when AHG was integrating a number of acquisitions. 3. AHG believes this was an aberration and that this is under control. 4. Labor has come down during the month of September and October as a percent of sales. 5. Roll out of UPS system is going well and should lead to cost savings next year. 4. EBITDA improved to 24.8% from 24.4% in 3Q02. 5. YTD free cash flow of $82.1m. 6. Board of directors authorized the AHG to repurchase up to an additional $100m worth of its outstanding common stock. 1. AHG plans $50m in repurchases contemplated by the end of 1Q04 and the balance by the end of 2004. 7. During 3Q03 AHG spent $111m to repurchase 4.2m shares of AHG stock.
S2. Financial Review [A.K.] 1. 3Q03 Financial Highlights: 1. Net revenues increased 11% versus the 3Q02. 2. Respiratory therapy revenues are up 13.7% versus 3Q02. 1. Grew 1.6 points to 67.4% of total revenue. 3. Infusion therapy grew 3.5% compared to the 3Q02. 1. Primarily in the nutritional therapy area. 4. Home medical equipment group grew 8.4%. 5. Acquisition activity contributed half of revenue growth. 1. During 3Q03 AHG completed nine acquisitions at a cost of $44m. 6. For the first nine months of 2003 AHG has purchased $89m of acquisitions, a total of 21 businesses.
7. Provision for doubtful accounts was 3.6% of revenue for 3Q03
compared to 3.7% in 3Q02. 8. DSO decreased one day to 51 days from 2Q03. 9. Effective in 3Q03 AHG has applied provisions of EITF 02-17, entitled "Recognition of Customer Relationship Intangible Assets Recognized in a Business Combination."
1. Amortization, which was minimal in the 3Q03, will go up with
the timing of new acquisitions. 2. Expected to be at least $700,000 of incremental impact in 4Q03 and in future quarters.
10. Pre-tax margins for 3Q03 was 13.4% of revenue as compared to
13.6% for the 3Q02. 1. Due to higher SG&A expenses.
11. Net income for the 3Q03 was $28.9m or $0.54 per share compared to $26.5m or $0.48 3Q02. 12. EBITDA increased 12.9% to $85.9m for 3Q03 reaching 24.8% of revenues. 13. 3Q03 Capex was $37.3m, a decline of $8.4m relative to the 2Q03. 1. Due to the implementation of new purchasing controls. 14. Reached tax milestone in the 3Q03 by utilizing all of the available net operating loss and minimum tax carryovers and now required to pay estimated taxes. 1. Payments are approximately $28m higher than in 3Q02. 15. For the nine months ended September 30, cash flow from operations was $198.7m. 1. Increase of 5.2% from the nine months of the prior year.
S3. Lawsuit Update [L.H.] 1. Key Tab (phonetic) Lawsuit: 1. Progress continues at a somewhat less than satisfactory point at the moment. 2. The government has delayed their comment another 30 days, to around the end of November.
QUESTION AND ANSWER SUMMARY
Q1. (Wayne Cooperman, Cobalt Capital) What is the actual shares outstanding at the end of the quarter? Could you talk a little bit about the projected interest expense? With a $100m plus in cash you have somewhat of a negative carry?
A. (Amin Khalifa) The shares outstanding were 53,352,000.
Q2. (Wayne Cooperman, Cobalt Capital) Was that the actual at the end of the quarter?
A. (Amin …