Apria Healthcare lowers expectations

Monday, October 31, 2005

LAKE FOREST, Calif. - Hurricane-related expenses, gas costs and reimbursement cuts for respiratory meds have squelched growth at Apria Healthcare. The HME announced in early October that revenues for the third quarter dropped to less than 1% growth over last year. While Apria claims its oxygen and enteral lines remain strong, it concedes its DME, respiratory meds and infusion therapy lines have taken a hit. As a result, the company downgraded its growth projections for 2005 to 2%-3% from 5%-6%. The news came as no surprise to Balaji Gandhi, an analyst with Pacific Growth Equities in Boston. He's noticed Apria has been relying on non-operating metrics to meet expectations. "The quality of earnings is lower," he said. "Earnings haven't been caused by improved sales or reduced operations costs; they've been caused by a lower tax rate or a lower debt ratio." Apria also cited discounted contractual arrangements with hospitals as a reason for the "slowing trend." In another hit, the provider's inability to sell itself, sent shares falling by 4.4% to $20.51 in early October. In June, Apria hired Morgan Stanley to explore the possible sale of the company.