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Apria to Take Hefty 3rd-Quarter Charge

Health industry: The Costa Mesa company also plans to raise $50 million in convertible bonds deal.


Apria Healthcare Group Inc., attempting to clean up its financial books, said Thursday it took a $160-million charge for its third quarter.

In a related move, the problem-ridden Costa Mesa home health company also said it plans to raise $50 million by offering stockholders the rights to purchase bonds that can be converted into stock.

Steve Reznick, an analyst at ML Stern Inc., in Beverly Hills, said the company is making the rights offering to raise cash to satisfy bankers' concerns over the size of the third-quarter charge.

He said the write-off caused the company to violate terms of its major bank-lending agreement, but bankers gave their approval on the condition that Apria move to shore up its finances.

"The key is the $50-million cash infusion," Reznick noted.

The company previously had warned investors to expect a big charge. The stock slipped 19 cents a share Thursday to close at $3.56 in trading on the New York Stock Exchange.

Overall, the company reported a third-quarter loss of $194.7 million, or $3.76 per share, compared with net income of $16.2 million, or 31 cent a share, for the same period last year. Revenue slumped 28% to $219.4 million from $304.4 million, reflecting its move to shed unprofitable businesses.

The one-time charges of $160 million in the recent quarter stem from a corporate restructuring announced last summer. In addition to divesting money-losing operations, Apria has moved to cut expenses, conserve capital and expand its business of providing respiratory therapy to patients in their homes.

The biggest chunk of the charge--$97.5 million--came from dropping the unprofitable businesses and closing branches. Other items included severance costs for terminated employees.

A registration statement for the rights offering is expected to be filed in the near future with the Securities and Exchange Commission. The record date for the rights offering will be Dec. 1.

The company said the rights would entitle shareholders to purchase new convertible bonds on a basis proportionate to their stock holdings. The bonds would mature in 2003 and the rights likely would trade on the New York Stock Exchange.

The company said that one of its largest investors, Relational Investors LLC, is prepared to buy up bonds not purchased by others.

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