Full Press Release Details
INDEX TO FINANCIAL STATEMENTS
| Audited Consolidated Financial Statements of Apria, Inc. | ||||
| Report of Independent Registered Public Accounting Firm (PCAOB ID 34) | 2 | |||
| Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020 | 4 | |||
| Consolidated Statements of Income for the years ended December 31, 2021, December 31, 2020 and December 31, 2019 | 5 | |||
| Consolidated Statements of Stockholders Equity for the years ended December 31, 2021, December 31, 2020 and December 31, 2019 | 6 | |||
| Consolidated Statements of Cash Flows for the years ended December 31, 2021, December 31, 2020 and December 31, 2019 | 7 | |||
| Notes to Consolidated Financial Statements | 9 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Apria, Inc.
Opinion on the Financial Statements
accompanying consolidated balance sheets of Apria, Inc. (the Company ) as of December 31, 2021 and 2020, the related consolidated statements of income, stockholders equity (deficit), and cash flows, for each of the three years
in the period ended December 31, 2021, and the related notes (collectively referred to as the financial statements ). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United
financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on the Company s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control over
financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of
the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our
Critical Audit Matter
matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accounts Receivable and Net Revenues Fee-for-service arrangements
Refer to Note 1 to the financial statements
Critical Audit Matter Description
Management reports accounts receivable and net revenues from fee-for service arrangements at the
amounts estimated to be received under reimbursement arrangements with third-party payors, including private insurers, prepaid health plans, Medicare, Medicaid, and patients. Due to the nature of the industry and the reimbursement environment in
which the Company operates, certain estimates are required to record total net revenues under fee-for-service arrangements of $918 million for the year ended
December 31, 2021, and accounts receivable at their net realizable value of $82 million as of December 31, 2021.
Accounts receivable and net
fee-for-service revenues are based on contractually agreed-upon rates for services provided, reduced by estimated adjustments, including variable consideration for
implicit price concessions for sales revenue. These estimates are determined utilizing historical realization data under a portfolio approach which is then assessed by management to evaluate whether adjustments should be made based on accounts
receivable aging trends, other operating trends, and relevant business conditions such as governmental and managed care payor claims processing procedures.
Given the inherent subjectivity necessary to determine the estimated adjustments to net fee-for service
revenues and the net realizable value of accounts receivable, auditing such estimates required a high degree of auditor judgement.
the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management s estimated adjustments to
determine the net realizable value of accounts receivable and net fee-for-service revenues included the following, among others:
We tested management s analysis used to estimate the value of accounts receivable and amounts to be received under fee-for-service revenue contracts by:
/s/ Deloitte & Touche LLP
Costa, Mesa, California
We have served as the Company s auditor since 1998.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| December 31, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 219,561 | $ | 195,197 | ||||
| Accounts receivable | 81,720 | 74,774 | ||||||
| Inventories | 8,754 | 6,680 | ||||||
| Prepaid expenses and other current assets | 23,242 | 24,003 | ||||||
| TOTAL CURRENT ASSETS | 333,277 | 300,654 | ||||||
| NONCURRENT RESTRICTED CASH | 515 | |||||||
| PATIENT EQUIPMENT, less accumulated depreciation of $366,126 and $356,888 as of December 31, 2021 and December 31, 2020, respectively | 221,534 | 223,972 | ||||||
| PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET | 21,281 | 25,419 | ||||||
| INTANGIBLE ASSETS, NET | 71,651 | 61,497 | ||||||
| OPERATING LEASE RIGHT-OF-USE ASSETS | 71,808 | 57,869 | ||||||
| GOODWILL | 28,985 | |||||||
| EQUITY METHOD INVESTMENT | 2,809 | |||||||
| DEFERRED INCOME TAXES, NET | 4,338 | 18,258 | ||||||
| NOTE RECEIVABLE, RELATED PARTY (Note 12) | 2,071 | |||||||
| OTHER ASSETS | 17,160 | 17,315 | ||||||
| TOTAL ASSETS | $ | 775,429 | $ | 704,984 | ||||
| LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 133,485 | $ | 116,886 | ||||
| Accrued payroll and related taxes and benefits | 52,484 | 55,628 | ||||||
| Other accrued liabilities | 32,687 | 33,513 | ||||||
| Deferred revenue | 28,296 | 25,821 | ||||||
| Current portion of operating lease liabilities | 23,419 | 23,977 | ||||||
| Current portion of long-term debt | 36,458 | 20,833 | ||||||
| TOTAL CURRENT LIABILITIES | 306,829 | 276,658 | ||||||
| LONG-TERM DEBT, less current portion | 341,001 | 376,389 | ||||||
| OPERATING LEASE LIABILITIES, less current portion | 48,304 | 35,358 | ||||||
| DEFERRED INCOME TAXES, NET | 7,312 | |||||||
| OTHER NONCURRENT LIABILITIES | 32,250 | 42,924 | ||||||
| TOTAL LIABILITIES | 735,696 | 731,329 | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 10) | ||||||||
| STOCKHOLDERS EQUITY (DEFICIT) | ||||||||
| Preferred stock, $0.01 par value: 100,000,000 authorized; no shares issued as of December 31, 2021 and February 10, 2021 (Note 1) | ||||||||
| Common stock, $0.01 par value: 1,000,000,000 authorized; 35,521,594 and 35,210,915 shares issued and outstanding as of December 31, 2021 and February 10, 2021, respectively (Note 1) | 355 | |||||||
| Additional paid-in capital | 954,933 | 954,087 | ||||||
| Accumulated deficit | (915,555 | ) | (980,432 | ) | ||||
| TOTAL STOCKHOLDERS EQUITY (DEFICIT) | 39,733 | (26,345 | ) | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) | $ | 775,429 | $ | 704,984 |
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
| Year Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Net revenues: | ||||||||||||
| Fee-for-service arrangements | $ | 917,652 | $ | 883,846 | $ | 870,344 | ||||||
| Capitation | 227,623 | 224,871 | 218,531 | |||||||||
| TOTAL NET REVENUES | 1,145,275 | 1,108,717 | 1,088,875 | |||||||||
| Costs and expenses: | ||||||||||||
| Cost of net revenues: | ||||||||||||
| Product and supply costs | 206,167 | 192,667 | 206,067 | |||||||||
| Patient equipment depreciation | 101,040 | 101,319 | 97,386 | |||||||||
| Home respiratory therapists costs | 16,479 | 16,882 | 19,560 | |||||||||
| Other | 17,602 | 17,402 | 17,701 | |||||||||
| TOTAL COST OF NET REVENUES | 341,288 | 328,270 | 340,714 | |||||||||
| Selling, distribution and administrative | 706,633 | 709,299 | 720,746 | |||||||||
| TOTAL COSTS AND EXPENSES | 1,047,921 | 1,037,569 | 1,061,460 | |||||||||
| OPERATING INCOME | 97,354 | 71,148 | 27,415 | |||||||||
| Interest expense and other | 11,781 | 6,308 | 5,112 | |||||||||
| Interest income and other | (254 | ) | (498 | ) | (1,446 | ) | ||||||
| Gain from derecognition of nonfinancial asset | (3,994 | ) | ||||||||||
| INCOME BEFORE INCOME TAXES | 89,821 | 65,338 | 23,749 | |||||||||
| Income tax expense | 24,153 | 19,199 | 8,127 | |||||||||
| Loss from equity method investment | 791 | |||||||||||
| NET INCOME | $ | 64,877 | $ | 46,139 | $ | 15,622 | ||||||
| February 10, 2021 through December 31, 2021 | ||||||||||||
| Basic and diluted earnings per share: | ||||||||||||
| Net income attributable to common stockholders | $ | 63,338 | ||||||||||
| Weighted average common shares outstanding: | ||||||||||||
| Basic | 35,325,734 | |||||||||||
| Diluted | 38,113,601 | |||||||||||
| Net income per common share: | ||||||||||||
| Basic | $ | 1.79 | ||||||||||
| Diluted | $ | 1.66 |
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
(In thousands, except share data)
| Preferred Stock | Common Stock | Additional Paid In Capital | Accumulated Deficit | Total Stockholders Equity (Deficit) | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
| Balance as of December 31, 2018 | $ | $ | $ | 1,327,445 | $ | (1,042,193 | ) | $ | 285,252 | |||||||||||||||||||
| Dividends | (175,000 | ) | (175,000 | ) | ||||||||||||||||||||||||
| Stock-based compensation | 8,642 | 8,642 | ||||||||||||||||||||||||||
| Net income | 15,622 | 15,622 | ||||||||||||||||||||||||||
| Balance as of December 31, 2019 | $ | $ | $ | 1,161,087 | $ | (1,026,571 | ) | $ | 134,516 | |||||||||||||||||||
| Dividends | (210,000 | ) | (210,000 | ) | ||||||||||||||||||||||||
| Stock-based compensation | 3,000 | 3,000 | ||||||||||||||||||||||||||
| Net income | 46,139 | 46,139 | ||||||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | 954,087 | $ | (980,432 | ) | $ | (26,345 | ) | ||||||||||||||||||
| IPO Transactions (Note 1) | 35,210,915 | 352 | (352 | ) | ||||||||||||||||||||||||
| Distributions | (776 | ) | (776 | ) | ||||||||||||||||||||||||
| Stock-based compensation | 8,249 | 8,249 | ||||||||||||||||||||||||||
| Common stock issued upon exercise of stock appreciation rights, net of shares withheld for tax | 310,679 | 3 | (6,275 | ) | (6,272 | ) | ||||||||||||||||||||||
| Net income | 64,877 | 64,877 | ||||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | 35,521,594 | $ | 355 | $ | 954,933 | $ | (915,555 | ) | $ | 39,733 |
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| OPERATING ACTIVITIES | ||||||||||||
| Net income | $ | 64,877 | $ | 46,139 | $ | 15,622 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Depreciation | 113,378 | 114,656 | 111,001 | |||||||||
| Amortization of intangible assets | 1,670 | 574 | 574 | |||||||||
| Non-cash lease expense | 27,068 | 27,313 | 27,596 | |||||||||
| Deferred income taxes | 21,232 | 16,441 | 9,390 | |||||||||
| Stock-based compensation | 8,249 | 3,000 | 8,642 | |||||||||
| Amortization of deferred debt issuance costs | 1,101 | 1,358 | 1,107 | |||||||||
| Loss on sale and dispositions of patient equipment and other | 6,516 | 4,186 | 4,130 | |||||||||
| Loss from unconsolidated joint venture | 791 | |||||||||||
| Gain from derecognition of nonfinancial asset | (3,994 | ) | ||||||||||
| Changes in operating assets and liabilities, net of effects from acquisitions: | ||||||||||||
| Accounts receivable | (6,538 | ) | 9,297 | 13,456 | ||||||||
| Inventories | 356 | 169 | 315 | |||||||||
| Prepaid expenses and other assets | 2,801 | (10,971 | ) | 2,332 | ||||||||
| Accounts payable | 17,343 | (3,215 | ) | (15,086 | ) | |||||||
| Accrued payroll and related taxes and benefits | (3,222 | ) | 6,977 | 7,929 | ||||||||
| Operating lease liabilities | (28,619 | ) | (25,348 | ) | (29,494 | ) | ||||||
| Income taxes payable | 59 | (240 | ) | (1,448 | ) | |||||||
| Deferred revenue | 983 | 961 | (610 | ) | ||||||||
| Legal reserve | 1,250 | (11,700 | ) | |||||||||
| Accrued expenses | (13,304 | ) | 17,116 | 6,394 | ||||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 211,997 | 196,713 | 161,850 | |||||||||
| INVESTING ACTIVITIES | ||||||||||||
| Purchases of patient equipment and property, equipment and improvements | (119,148 | ) | (109,097 | ) | (114,485 | ) | ||||||
| Proceeds from sale of patient equipment and other | 17,384 | 17,370 | 21,772 | |||||||||
| Preferred distribution from equity method investment | 3,000 | |||||||||||
| Issuance of note receivable, related party | (2,071 | ) | ||||||||||
| Cash paid for acquisitions, net of cash received | (43,373 | ) | ||||||||||
| NET CASH USED IN INVESTING ACTIVITIES | (144,208 | ) | (91,727 | ) | (92,713 | ) | ||||||
| FINANCING ACTIVITIES | ||||||||||||
| Payments on asset financing | (15,216 | ) | (22,560 | ) | (31,353 | ) | ||||||
| Proceeds from revolving credit facility | 5,000 | |||||||||||
| Disbursements to revolving credit facility | (5,000 | ) | ||||||||||
| Borrowings on debt | 260,000 | 150,000 | ||||||||||
| Payments on debt | (20,833 | ) | (8,958 | ) | ||||||||
| Payments on deferred financing costs | (2,962 | ) | (2,763 | ) | ||||||||
| Payments of dividends | (210,000 | ) | (175,000 | ) | ||||||||
| Distribution payments | (589 | ) | ||||||||||
| Payments for tax withholdings from equity-based compensation activity | (6,272 | ) | ||||||||||
| NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | (42,910 | ) | 15,520 | (59,116 | ) | |||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | 24,879 | 120,506 | 10,021 | |||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD | 195,197 | 74,691 | 64,670 | |||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ | 220,076 | $ | 195,197 | $ | 74,691 |
Continued on following page.
SUPPLEMENTAL DISCLOSURES See Note 6 Debt and
Note 8 Income Taxes for a discussion of cash paid for interest and income taxes, respectively.
NON-CASH INVESTING AND FINANCING TRANSACTIONS Purchases of patient equipment and property, equipment and improvements exclude purchases that remain unpaid at the end of the respective period. Such amounts are
included in the following period s purchases. Unpaid purchases were $50.6 million, $55.1 million, and $59.8 million as of December 31, 2021, 2020 and 2019, respectively. Unpaid purchases include $9.2 million,
$15.7 million, and $24.4 million of patient equipment and property, equipment and improvements acquired under extended payment terms as of December 31, 2021, 2020 and 2019, respectively. See Note 9 Leases for a
discussion of right-of-use assets obtained in exchange for new operating lease liabilities. The Company made a non-cash
contribution of software and other intellectual property ( IP ) in the year ended December 31, 2021 to a joint venture with a fair value of $9.0 million. See Note 1 Summary of Significant Accounting Policies for a
discussion of the equity method investment. See Note 2 Acquisitions for a discussion of unpaid contingent consideration and the net working capital adjustment receivable in connections with the acquisitions.
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation The accompanying consolidated financial statements and related notes have been prepared in accordance with
accounting principles generally accepted in the United States of America ( GAAP ) and are presented in U.S. dollars. These consolidated financial statements include the accounts of Apria, Inc. (the Company ) and its
subsidiaries. The Company had no items of other comprehensive income; as such, its comprehensive income is the same as the net income for all periods presented. Intercompany transactions and accounts have been eliminated in consolidation.
In connection with the completion of the Company s initial public offering (the IPO or offering ), the Company
underwent a reorganization transaction (see Company Background Initial public offering) and Apria Healthcare Group Inc. ( Apria Healthcare Group ) became an indirect wholly owned subsidiary of the Company on February 10, 2021. As
a result of the reorganization transaction, the Company directly or indirectly owns all of the equity interests in Apria Healthcare Group and is the holding company of the Company s business. The merger was accounted for as a reorganization of
entities under common control. As a result, the consolidated financial statements of the Company recognize the assets and liabilities received in the merger at their historical carrying amounts as reflected in the historical consolidated financial
statements of Apria Healthcare Group, the accounting predecessor. Furthermore, prior to the offering, the Company s business was conducted through Apria Healthcare Group, which did not have a common capital structure with Apria, Inc. and
therefore, the Company has not presented the historical capital structure of Apria Healthcare Group within the financial statements. As such, the Company computed earnings per share ( EPS ) for the period the Company s common stock
was outstanding during 2021, referred to as the Post-IPO period. The Company has defined the Post-IPO period as February 10, 2021, the effective date of the pre-IPO reorganization and the completion of the offering, through December 31, 2021. See below for a discussion of the reorganization transaction and EPS calculations.
Company Background Apria, Inc., a Delaware corporation formed on March 22, 2018, is the financial reporting entity following
the Company s IPO in February 2021.
The Company operates in the home healthcare segment of the healthcare industry, providing a
variety of clinical and administrative support services and related products and supplies, most of which are prescribed by a physician as part of a care plan. Essentially all products and services offered by the Company are provided through the
Company s network of approximately 300 branch, distribution and other locations, which are located throughout the United States. The Company provides services and products in one operating segment: home respiratory therapy/home medical
equipment. The Company provides patients in their homes with products and services which are primarily paid for by a third-party payor, such as Medicare, Medicaid, a managed care plan or another third-party insurer. Sales are primarily derived from
referral sources such as hospital discharge planners, medical groups or independent physicians.
Initial public offering In
February 2021, the Company completed an underwritten offering (in which an entity associated with Blackstone Inc. (the selling stockholder ) sold an aggregate of 8,625,000 shares of common stock, including 1,125,000 shares sold pursuant
to the full exercise of the underwriters option to purchase additional shares. The Company did not receive any proceeds from the shares sold by the selling stockholder and the Company incurred offering related expenses of approximately
$6.0 million, which were incurred and paid on the Company s behalf prior to the offering by Apria Healthcare Group.
connection with the completion of the offering, the Company underwent a reorganization transaction. On February 10, 2021, a newly formed indirect subsidiary of the Company merged with and into Apria Healthcare Group, with Apria Healthcare Group
surviving. As a result, Apria Healthcare Group became an indirect wholly owned subsidiary of the Company. The Company s stockholders who previously held their ownership interest prior to the IPO through Apria Holdings LLC ( Holdings )
(as the 100% direct owner of Apria Healthcare Group) received an aggregate of 35,210,915 shares of newly issued common stock of the Company with a par value of $0.01 per share.
In connection with the IPO, the Company s certificate of incorporation (the
Charter ) and bylaws were each amended and restated, effective on February 10, 2021. The Charter authorizes 1,000,000,000 shares of common stock with a par value of $0.01 per share. Each share of common stock is entitled to one vote
per share on all matters on which stockholders are entitled to vote generally, including the election or removal of directors. The Charter also authorizes 100,000,000 shares of preferred stock, par value $0.01 per share, of which there were no
shares of preferred stock issued or outstanding immediately after the IPO or as of December 31, 2021.
Investment On August 16, 2021, the Company and a group of investors that includes the American Association for Homecare, VGM Group, Inc., AdaptHealth, LLC., Lincare Inc. and Rotech Healthcare Inc. entered into a joint venture
agreement to form DMEscripts LLC ( JV ), an independent e-prescribing company dedicated to improving the patient, prescriber and provider experience by eliminating inefficiencies and reducing
paperwork. The Company contributed IP in exchange for a 40% membership interest in the JV, 50% of which is a nonvoting interest. The Company accounted for the contribution of the IP in accordance with Accounting Standards Codification
( ASC ) No. 610- 20, Gains and Losses from the Derecognition of Nonfinancial Assets. The Company s ownership interest in the JV is a
non-managing interest. The Company determined that the JV was a variable interest entity, but does not consolidate the JV because the Company was not the primary beneficiary. The Company accounts for its