AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 2003
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------
APRIA HEALTHCARE GROUP INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 33-0488566
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification Number)
Organization)
26220 Enterprise Court
Lake Forest, CA 92630
(949) 639-2000
(Address, including Zip Code, and Telephone Number,
including Area Code, of Registrant's Principal Executive Offices)
Robert S. Holcombe, Esq.
26220 Enterprise Court
Lake Forest, CA 92630
(949) 639-2000
(Address, including Zip Code, and Telephone Number,
including Area Code, of Agent for Service)
Copies to:
Jeff R. Hudson, Esq.
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
(213) 229-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective and upon conversion
of the 3 3/8% convertible senior notes due September 1, 2033.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
If delivery of this prospectus is expected to be made pursuant to Rule
434, check the following box.[ ]
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT TO AGGREGATE AGGREGATE AMOUNT
TITLE OF EACH CLASS OF SECURITIES BE PRICE OFFERING OF
TO BE REGISTERED REGISTERED PER UNIT PRICE REGISTRATION FEE
---------------- ---------- -------- ----- ----------------
3 3/8% Convertible Senior Notes
due 2033 $250,000,000(1) 100%(2) $250,000,000(2) $20,225
Common Stock, par value $0.001 per
share 7,171,300(3) N/A N/A (4)
(1) The aggregate principal amount of 3 3/8% Convertible Senior Notes due 2033
that were issued by the Registrant on August 20, 2003.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(i) under the Securities Act, exclusive of accrued
interest, if any.
(3) Represents the number of shares of the Registrant's common stock that are
initially issuable upon conversion of the Convertible Senior Notes
registered hereby. The estimated number of shares of common stock to be
issued is based on an initial conversion ratio of 28.6852 shares of the
Registrant's common stock per $1,000 principal amount of Convertible
Senior Notes, and assumes conversion of all of the Convertible Senior
Notes into shares of the Registrant's common stock. In addition to the
shares set forth in this table, pursuant to Rule 416 under the Securities
Act of 1933, as amended, this Registration Statement also covers such
additional number of shares of common stock as may be issuable from time
to time upon the conversion of the Convertible Senior Notes as a result of
stock splits, stock dividends, capitalizations or similar events and the
antidilution provisions thereof.
(4) Pursuant to Rule 457(i) under the Securities Act of 1933, as amended, no
additional registration fee is required with respect to the shares of
common stock issuable upon conversion of the Convertible Senior Notes
because no additional consideration will be received upon conversion.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
The information in this prospectus is not complete and may be changed. The
selling securityholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any jurisdiction where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 18, 2003
APRIA HEALTHCARE GROUP INC.
$250,000,000
3 3/8% CONVERTIBLE SENIOR NOTES DUE SEPTEMBER 1, 2033
AND
SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THE NOTES
--------------------
This prospectus relates to up to $250 million in aggregate principal
amount of 3 3/8% Convertible Senior Notes due 2033 (the "notes"), which may be
offered and sold from time to time by certain of the securityholders of Apria
Healthcare Group Inc. ("Apria" or "the company"). Apria issued the notes in a
private placement at an issue price of $1,000 per note (100% of the principal
amount at maturity) and received approximately $244.4 million in net proceeds
upon issuance of the notes. Selling securityholders may use this prospectus to
resell the notes and the shares of common stock issuable upon conversion of the
notes as described in the "Plan of Distribution" Section beginning on page 53 of
this prospectus.
The notes bear interest at the rate of 3 3/8% per year. Interest on the
notes is payable on September 1 and March 1 of each year, beginning on March 1,
2004. In addition, under certain circumstances, Apria will pay contingent
interest on the notes, as described herein. The notes will be subject to United
States federal income tax rules applicable to contingent debt instruments. See
"Material U.S. Federal Income Tax Considerations" beginning on page 42. The
notes will mature on September 1, 2033, unless earlier converted, redeemed or
repurchased by Apria. Apria may redeem some or all of the notes at any time
after September 8, 2010 at a redemption price equal to 100% of the principal
amount of the notes to be redeemed plus accrued and unpaid interest (and
contingent interest and additional amounts, if any) to the redemption date. The
holder of the notes may require Apria to repurchase some or all of the notes at
a repurchase price equal to 100% of the principal amount of the notes plus
accrued and unpaid interest, including contingent interest and additional
amounts, if any, up to, but excluding the applicable repurchase date on
September 1, 2008, September 1, 2010, September 1, 2013, September 1, 2018,
September 1, 2023 and September 1, 2028 or at any time prior to their maturity
following a fundamental change as described in this prospectus. Apria will have
the right, in lieu of paying cash, to pay the repurchase price due on September
1, 2010, September 1, 2013, September 1, 2018, September 1, 2023 or September 1,
2028 by delivering shares of its common stock or a combination of cash and
shares of its common stock.
The notes are convertible during certain periods by holders into shares of
Apria common stock initially at a conversion rate of 28.6852 shares of common
stock per $1,000 principal amount of notes, subject to adjustment in certain
events, under the following circumstances: (1) during specified periods, if the
price of Apria's common stock reaches, or the trading price of the notes falls
below, specified thresholds described in this prospectus; (2) if Apria calls the
notes for redemption; (3) upon the occurrence of certain corporate transactions;
or (4) if the notes are assigned a rating, during any period in which the credit
rating assigned to the notes falls below a specified rating or the notes are no
longer rated by the rating agency that assigned the initial rating. Upon
conversion, Apria will have the right to deliver, in lieu of common stock, cash
or a combination of cash and common stock in the amounts described in this
prospectus.
Apria will not receive any of the proceeds from the sale of the notes or
the shares hereunder. The selling securityholders may offer the notes and the
shares of common stock issuable upon their conversion through public or private
transactions, on or off the New York Stock Exchange, at prevailing market
prices, or at privately negotiated prices. All costs, expenses and fees in
connection with the registration of the notes will be borne by Apria.
The notes are traded in the Private Offerings, Resales and Trading through
Automatic Linkages Market, commonly referred to as the PORTAL Market. Apria does
not intend to list the notes on any other national securities exchange or
automated quotation system.
Apria's common stock is listed on the New York Stock Exchange under the
symbol "AHG." The last reported sale price of Apria's common stock on November
17, 2003 was $30.51 per share.
YOU SHOULD CAREFULLY CONSIDER THE "RISK FACTORS" DISCUSSION BEGINNING ON
PAGE 9 OF THIS PROSPECTUS BEFORE PURCHASING ANY OF THE SECURITIES BEING OFFERED
BY THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This date of this prospectus is November 18, 2003
TABLE OF CONTENTS
Page
----
Forward-Looking Statements.................................................. 1
Where You Can Find Additional Information;
Incorporation Of Certain Information By Reference......................... 2
Prospectus Summary.......................................................... 3
Risk Factors................................................................ 9
Ratio Of Earnings To Fixed Charges.......................................... 16
Use Of Proceeds............................................................. 16
Price Range Of Common Stock And Dividend Policy............................. 17
Description Of Notes........................................................ 18
Description Of Apria's Capital Stock........................................ 40
Material U.S. Federal Income Tax Considerations............................. 42
Selling Securityholders..................................................... 49
Plan Of Distribution........................................................ 53
Legal Matters............................................................... 54
Experts..................................................................... 54
FORWARD-LOOKING STATEMENTS
This prospectus (including the documents incorporated herein by reference)
contains statements that are not based on historical facts. All of those
forward-looking statements are uncertain. Apria has based those forward-looking
statements on, among other things, projections and estimates regarding the
economy in general, the healthcare industry and other factors that impact
Apria's results of operations. These statements involve known and unknown risks,
uncertainties and other factors that may cause Apria's actual results, levels of
activity, performance or achievements to be materially different from any
results, levels of activity, performance or achievements expressed or implied by
any forward-looking statements. In some cases, forward-looking statements that
involve risks and uncertainties contain terminology such as "may," "will,"
"should," "could," "expects," "intends," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or "continue" or variations of these terms
or other comparable terminology.
Key factors that may have an impact on Apria include the following:
- trends and developments affecting the collectibility of accounts
receivable;
- government legislative and budget developments which could affect
reimbursement levels for products and services provided by Apria;
- the ongoing government investigation regarding patients covered by
Medicare and other federal programs;
- the effectiveness of Apria's operating systems and controls;
- healthcare reform and the effect of federal and state healthcare
regulations;
- pricing pressures from large payors;
- the successful implementation of the company's acquisition strategy and
integration of acquired businesses;
- the reasons discussed under "Risk Factors" of the prospectus; and
- other factors described in Apria's filings with the Securities and
Exchange Commission.
In addition, the military and national security activities in which the
United States is currently engaged, have and could continue to have significant
impacts on the United States economy and government spending priorities. The
effects of any further such developments, including, but not limited to a
prolonged occupation in Iraq, pose significant risks and uncertainties to
Apria's business. Among other things, deficit spending by the government as the
result of adverse developments in the economy and the costs of the military and
national security activities could lead to increased pressure to reduce
government expenditures for other purposes, including government-funded programs
such as Medicare and Medicaid.
In making forward-looking statements, Apria has made certain assumptions,
including assumptions relating to reimbursement rates and policies, the costs
associated with government regulation of the healthcare industry, the effects of
competition and industry consolidation, internal growth and acquisitions and the
outcome of various legal and regulatory proceedings. If the assumptions and
estimates Apria has used differ materially from what actually occurs, then
actual results could vary significantly from those projected in or implied by
the forward-looking statements. Any forward-looking statement in this prospectus
speaks only as of the date of this prospectus. Apria is under no duty to, and
does not intend to, update or revise any of the forward-looking statements after
the date of this prospectus except as may be required by law.
1
WHERE YOU CAN FIND ADDITIONAL INFORMATION;
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Apria files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission or the SEC. You
may read and copy any document Apria files at the SEC's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Apria's SEC
filings are also available to the public from the SEC's website at
http://www.sec.gov. Apria's common stock is listed on the NYSE under the symbol
"AHG" and all such reports, proxy statements and other information filed by
Apria with the NYSE may be inspected at the NYSE's offices at 20 Broad Street,
New York, New York, 10005.
Apria "incorporates by reference" in this prospectus certain information
that Apria files with the SEC, which means that Apria can disclose important
information to you by referring you to another document that Apria has filed
with the SEC. The information incorporated by reference is an important part of
this prospectus. Any statement that is contained in this prospectus or a
document incorporated by reference in this prospectus shall be modified or
superseded for the purposes of this prospectus to the extent that a statement
contained in this prospectus or in any other subsequently filed document that is
also incorporated by reference in this prospectus modifies or supersedes such
prior statement. Any such statement so modified or superseded shall not be
considered, except as so modified or superseded, to constitute a part of this
prospectus.
Apria incorporates by reference the documents listed below and any filings
Apria makes with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after the date of this prospectus but before the
end of the offering made under this prospectus:
- Apria's annual report on Form 10-K for the fiscal year ended December 31,
2002;
- Apria's quarterly report on Form 10-Q for the quarterly periods ended
March 31, 2003, June 30, 2003 and September 30, 2003;
- Apria's current reports on Form 8-K as filed with the SEC on January 23,
2003, April 23, 2003 and August 18, 2003;
- The information set forth in Apria's definitive proxy statement for its
2003 annual meeting of stockholders under the caption "Approval of the
2003 Performance Incentive Plan;"
- Apria's Registration Statement on Form 8-A, as amended, filed on February
11, 1992 under Apria's prior name, Abbey Healthcare Group Incorporated;
and
- Apria's Registration Statement on form S-3, filed on August 7, 2001, as
amended.
You should read the information relating to Apria in this prospectus
together with the information in the documents incorporated by reference.
Nothing contained herein shall be deemed to incorporate information furnished
to, but not filed with, the SEC.
Upon written or oral request, Apria will provide any person, including
beneficial owners, to whom a copy of this prospectus is delivered, a copy of any
documents incorporated by reference in this prospectus but not delivered along
with this prospectus free of charge, excluding all exhibits, unless Apria
specifically incorporated by reference an exhibit in this prospectus. Any such
requests should be addressed to:
Apria Healthcare Group Inc.
Attention: General Counsel
26220 Enterprise Court
Lake Forest, CA 92630
Telephone: (949) 639-2000
Facsimile: (949) 587-9075
2
The following summary provides an overview of selected information about Apria
and the offering and may not contain all of the information that is important to
you. This summary is qualified in its entirety by the more detailed information,
including the financial data and related notes, included or incorporated by
reference in this prospectus. You should carefully consider the information
under the caption "Risk Factors" in this prospectus, before making an investment
decision.
PROSPECTUS SUMMARY
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that Apria filed with
the SEC using a "shelf" registration or continuous offering process. Under this
shelf prospectus, the selling securityholders may, from time to time, sell the
securities described in this prospectus in one or more offerings. This
prospectus provides you with a general description of the securities the selling
securityholders may offer. Each time a selling securityholder sells securities,
the selling securityholder is required to provide you with this prospectus, and,
in some cases, a prospectus supplement containing specific information about the
selling securityholder and the terms of the offering. That prospectus supplement
may include a discussion of any risk factors or other special considerations
applicable to those securities. Any prospectus supplement may also add, update,
or change information in this prospectus. If there is any inconsistency between
the information in this prospectus and any prospectus supplement, you should
rely on the information in the prospectus supplement.
This brief summary highlights selected information from this document. It
does not contain all of the information that is important to potential
investors. You should read both this prospectus and any prospectus supplement
together with the additional information described under the heading "Where You
Can Find Additional Information" on page 2.
APRIA HEALTHCARE GROUP INC.
Apria is one of the largest providers of home healthcare services in the
U.S. with a broad service offering in home respiratory therapy, home infusion
therapy and home medical equipment. Apria provides a variety of clinical
services and related products and supplies to patients in all 50 states through
approximately 425 branches. Through its geographic coverage and diversity of
products and services, Apria can offer these services to the patient
beneficiaries of national and regional managed care and government payors. In
2002, approximately 66% of Apria's revenue was derived from managed care payors,
28% from Medicare and 6% from Medicaid. Apria's payor mix provides a balance to
government reimbursement changes.
The aging U.S. population, the comparative cost of the acute care setting
and the introduction of new technologies, which allow patients to receive
medically appropriate care at home without sacrificing quality, have all
contributed to the growth of Apria's service lines. Additionally, Apria has
enhanced its growth with an acquisition strategy targeted in the respiratory
therapy service line. Apria derived approximately 67% of its revenues from the
respiratory therapy service line in 2002 and for the nine months ended September
30, 2003 compared to 18% from infusion therapy and 15% from home medical
equipment.
Apria operates each of its service lines across a common information
systems platform for all its branches, which has led to enhanced financial
controls, receivables collection and inventory management. These systems also
enable Apria to service large managed care contracts and provide the utilization
and cost reporting data required by these payors.
The following table provides examples of the services and products that
Apria offers:
SERVICE LINE EXAMPLES OF SERVICES AND PRODUCTS
------------ ---------------------------------
Home respiratory therapy Provision of oxygen systems,
home ventilators, sleep apnea
equipment, nebulizers and
respiratory medications and
related services
Home infusion therapy Intravenous administration of
anti-infectives, pain
management, chemotherapy,
nutrients (also administered
through a feeding tube) and
other medications and related
services
Home medical equipment Provision of patient safety
items, and ambulatory and
in-home equipment, such as
wheelchairs and hospital beds
STRATEGY
Apria is pursuing an operating strategy that is designed to increase its
market share and improve its profitability. Key elements of this strategy are as
follows:
- Maintain Focus on Existing Service Offerings. Apria continues to focus on
growth in its core businesses of home respiratory therapy, home infusion
therapy and home medical equipment. Apria believes that offering all three
services with broad geographic coverage gives it a competitive advantage
over its competitors with respect to the sale of these services to its
managed care, hospital and certain physician customers and enables it to
maintain a diversified revenue base. Apria plans to continue its emphasis
on growth in the home respiratory therapy line, which historically has
produced higher gross margins than the other service lines.
- Supplement Internal Growth with Selective Acquisitions. Apria continues to
pursue strategically complementary acquisition opportunities, with an
emphasis on home respiratory therapy businesses. Apria operates in a
highly fragmented market, which provides an attractive opportunity to
drive growth through acquisitions. During 2002, Apria completed 17
acquisitions comprised largely of respiratory therapy businesses for an
aggregate consideration of $78.3 million and during the nine months ended
September 30, 2003, Apria acquired 21 companies comprised largely of home
respiratory therapy businesses for an aggregate consideration of $88.6
million.
- Reduce Costs and Increase Margins and Cash Flows. Apria's management team
continues to develop and apply "best practices" and implement strategic
programs throughout the company with the aim of achieving greater
standardization and enhanced productivity. Success with such programs has
resulted in reduced costs and increased margins and cash flow. Apria has
implemented standardized clinical and delivery models, billing and
collection practices and common operating procedures in its field
locations and has centralized purchasing for inventory, patient service
equipment and supplies. Apria continues to focus resources on identifying
opportunities for further productivity improvements.
RATIO OF EARNINGS TO FIXED CHARGES
The following table presents Apria's historical ratios of earnings to
fixed charges for the years ended December 31, 1998, 1999, 2000, 2001 and 2002
and for the nine months ended September 30, 2003.
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------ SEPTEMBER 30,
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
Ratio(1)....................... --(2) 2.3x 2.8x 3.7x 9.9x 9.8x
(1) Computed by dividing pre-tax net income before fixed charges by fixed
charges. Fixed charges means the sum of the following: interest expense,
amortized premiums, discounts and capitalized expenses related to
indebtedness, and an estimate of the interest within rental expense.
(2) Earnings were inadequate to cover fixed charges by $204.9 million.
4
THE OFFERING
ISSUER.............................. Apria Healthcare Group Inc., a Delaware
corporation.
SECURITIES OFFERED.................. $250,000,000 principal amount of 3 3/8%
Convertible Senior Notes due 2033 and the
shares of common stock that may be issued
upon surrender and conversion of the
notes.
MATURITY DATE....................... September 1, 2033, unless earlier
converted, redeemed or repurchased.
RANKING............................. The notes are direct, unsecured and
unsubordinated obligations of Apria. The
notes rank equal in priority with all of
Apria's existing and future unsecured and
unsubordinated indebtedness and senior in
right of payment to any subordinated
indebtedness that Apria may incur in the
future. The notes effectively rank junior
to all of Apria's existing and future
secured indebtedness to the extent of the
value of the assets securing such
indebtedness. In addition, Apria's rights
and the rights of its creditors,
including the holders of the notes, to
participate in the assets of a subsidiary
during its liquidation or reorganization
are effectively subordinated to all
existing and future liabilities of that
subsidiary, including guarantees by the
subsidiary of Apria's indebtedness. In
addition to the notes, as of September
30, 2003, Apria's long-term debt
consisted of a $400 million senior
secured credit facility with a syndicate
of lenders. This credit facility is
secured by substantially all of the
assets of Apria and its subsidiaries and
guaranteed by all of Apria's
subsidiaries. As of September 30, 2003,
Apria had $250.5 million outstanding
under the credit facility. In addition,
Apria's subsidiaries had additional
liabilities of $135.8 million, excluding
intercompany payables.
INTEREST............................ 3 3/8% per year on the principal amount,
payable semi-annually in arrears on
September 1 and March 1 of each year,
beginning March 1, 2004.
CONTINGENT INTEREST................. Beginning with the period commencing on
September 8, 2010 and ending February 28,
2011, and for each of the six-month
periods thereafter commencing on March 1,
2011, Apria will pay contingent interest
during the applicable interest period if
the average trading price of the notes
during the five trading days ending on
the third day immediately preceding the
first day of the applicable interest
period equals or exceeds 120% of the
principal amount of the notes. The amount
of contingent interest payable per $1,000
principal amount of notes during the
applicable interest period will equal an
annual rate of 0.25% of the average
trading price of such $1,000 principal
amount of notes during the applicable
five-trading-day reference period,
payable in arrears.
CONVERSION RIGHTS................... You may convert the notes into shares of
Apria's common stock at a conversion rate
of 28.6852 shares per $1,000 principal
amount of notes (equal to a conversion
price of approximately $34.86 per share),
subject to adjustment, only under the
following circumstances:
5
- during any fiscal quarter, if the
last reported sale price of Apria's
common stock is greater than or equal
to 130% of the conversion price for at
least 20 trading days in the period of
30 consecutive trading days ending on
the last trading day of the preceding
fiscal quarter;
- during the five business day period
after a five consecutive trading day
period in which the trading price per
$1,000 principal amount of the notes
for each day of that period was less
than 98% of the product of the closing
sale price per share of Apria's common
stock and the applicable conversion
rate;
- if the notes have been called for
redemption by Apria;
- upon the occurrence of specified
corporate transactions described under
"Description of Notes--Conversion
Rights--Conversion Upon Specified
Corporate Transactions;" or
- after the date, if ever, on which
either Moody's Investors Service, Inc.
or Standard & Poor's Rating Services
assigns an initial credit rating to the
notes, during any period in which the
credit rating assigned to the notes by
either Moody's or S&P is three or more
rating subcategories below the initial
credit rating assigned by Moody's or
S&P, as the case may be, or any period
in which the notes are no longer rated
by either Moody's or S&P, as the case
may be, if such ratings agency had
previously rated the notes.
The notes have not been assigned a credit
rating by any rating agency. Apria does
not intend and has no obligation to
obtain a credit rating for the notes and
there is no certainty that any such
credit rating will be assigned to the
notes.
You will not receive any cash payment or
additional shares representing accrued
and unpaid interest upon conversion of a
note, except in limited circumstances.
Instead, interest, including contingent
interest and additional amounts, if any,
will be deemed paid by the common stock
issued to you upon conversion. Notes
called for redemption may be surrendered
for conversion prior to the close of
business on the second business day
immediately preceding the redemption
date.
Upon conversion, Apria will have the
right to deliver, in lieu of its shares
of common stock, cash or a combination of
cash and shares of common stock in
amounts described under "Description of
Notes--Conversion Rights--Payment Upon
Conversion."
6
SINKING FUND........................ None
OPTIONAL REDEMPTION................. Prior to September 8, 2010, the notes
will not be redeemable. On or after
September 8, 2010, Apria may redeem for
cash some or all of the notes, at any
time and from time to time, upon at least
30 days' notice for a price equal to 100%
of the principal amount of the notes to
be redeemed plus any accrued and unpaid
interest (including contingent interest,
if any) to but excluding the redemption
date.
REPURCHASE OF NOTES BY APRIA AT THE
OPTION OF THE HOLDER................ You may require Apria to repurchase some
or all of your notes on September 1,
2008, September 1, 2010, September 1,
2013, September 1, 2018, September 1,
2023 and September 1, 2028 at a
repurchase price equal to 100% of the
principal amount of the notes being
repurchased, plus any accrued and unpaid
interest, including contingent interest
and additional amounts, if any, up to but
excluding the applicable repurchase date.
Any notes that Apria is required to
repurchase on September 1, 2008 will be
paid for in cash. For any notes that
holders require Apria to purchase on
September 1, 2010, September 1, 2013,
September 1, 2018, September 1, 2023 or
September 1, 2028, Apria may, at its
option, pay the repurchase price in cash
or shares of its common stock valued at
the market price or a combination of cash
and shares of its common stock.
FUNDAMENTAL CHANGE.................. If Apria undergoes a fundamental change
(as defined in this prospectus) prior to
maturity, you will have the right, at
your option, to require Apria to
repurchase some or all of your notes at a
repurchase price equal to 100% of the
principal amount of the notes being
repurchased, plus any accrued and unpaid
interest, including contingent interest
and additional amounts, if any, up to but
excluding the applicable repurchase date.
REGISTRATION RIGHTS................. Apria agreed to file the shelf
registration statement which this
prospectus forms a part, with the SEC
with respect to the notes and Apria's
common stock issuable upon conversion of
the notes. Apria agreed to use its
commercially reasonable efforts to cause
the registration statement to be declared
effective by the SEC no later than 180
days after the first date of original
issuance of the notes, or February 16,
2004. If the registration statement is
not declared effective by February 16,
2004, Apria will be required to pay
additional amounts to the holders of the
notes and holders of the common stock
issued upon conversion thereof.
U.S.FEDERAL INCOME
TAX CONSIDERATIONS................. Under the indenture governing the notes,
Apria agreed, and by acceptance of a
beneficial interest in a note each
holder of a note will be deemed to have
agreed, to treat the notes as
indebtedness for United States federal
income tax purposes that is subject to
the Treasury regulations governing
contingent payment debt instruments. For
United States federal income tax
purposes, interest income on the notes
will accrue at the
7
rate of 8.625% per year, compounded
semi-annually, which represents the
yield on comparable noncontingent,
nonconvertible, fixed rate debt
instruments with terms and conditions
otherwise similar to the notes that
Apria would issue. A United States
Holder (as defined in "Material U.S.
Federal Income Tax Considerations") will
be required to accrue interest income on
a constant yield to maturity basis at
this rate (subject to certain
adjustments), with the result that a
United States Holder generally will
recognize taxable income significantly
in excess of regular interest payments
received while the notes are
outstanding.
A United States Holder will also
recognize gain or loss on the sale,
conversion, exchange or retirement of a
note in an amount equal to the difference
between the amount realized on the sale,
conversion, exchange or retirement,
including the fair market value of
Apria's common stock received, and the
United States Holder's adjusted tax basis
in the note. Any gain recognized on the
sale, conversion, exchange or retirement
of a note generally will be ordinary
interest income; any loss will be
ordinary loss to the extent of the
interest previously included in income,
and thereafter, capital loss. See
"Material U.S. Federal Income Tax
Considerations."
USE OF PROCEEDS..................... The selling securityholders will receive
all of the proceeds from the sale of the
securities offered pursuant to this
prospectus. Apria will not receive any
of the proceeds from the sale of the
securities offered pursuant to this
prospectus.
TRUSTEE, PAYING AGENT AND CONVERSION
AGENT............................... U.S. Bank National Association
BOOK-ENTRY FORM..................... The notes are issued in book-entry form
and are represented by a global
certificate or certificates deposited
with, or on behalf of, The Depository
Trust Company ("DTC") and registered in
the name of a nominee of DTC. Beneficial
interests in any of the notes will be
shown on, and transfers will be effected
only through, records maintained by DTC
or its nominee and any such interest may
not be exchanged for certificated
securities except in limited
circumstances.
TRADING............................. The notes trade on The Portal Market of
the National Association of Securities
Dealers. However, Apria can provide no
assurances as to the liquidity of, or
trading market for the notes.
NYSE SYMBOL FOR APRIA'S SHARES OF
COMMON STOCK........................ Apria's shares of common stock are listed
on the New York Stock Exchange under the
symbol "AHG."
8
RISK FACTORS
You should consider the following risk factors, in addition to the other
information presented in this prospectus and the documents incorporated by
reference in this prospectus, in particular, the information set forth in
Apria's Form 10-Q for the quarterly period ended September 30, 2003 and Form
10-K for the annual period ended December 31, 2002, under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in evaluating Apria, Apria's business and an investment in the
notes. Any of the following risks, as well as other risks and uncertainties,
could seriously harm Apria's business and financial results and cause the value
of the notes and common stock to decline, which in turn could cause you to lose
all or part of your investment.
RISKS RELATING TO APRIA'S BUSINESS
COLLECTIBILITY OF ACCOUNTS RECEIVABLE--APRIA'S FAILURE TO MAINTAIN OR IMPROVE
ITS CONTROLS AND PROCESSES OVER BILLING AND COLLECTING OR THE DETERIORATION OF
THE FINANCIAL CONDITION OF ITS PAYORS COULD HAVE A SIGNIFICANT NEGATIVE IMPACT
ON ITS RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
The collection of accounts receivable is one of Apria's most significant
challenges and requires constant focus and involvement by management and ongoing
enhancements to information systems and billing center operating procedures.
Further, some of Apria's payors may experience financial difficulties, or may
otherwise not pay accounts receivable when due, resulting in increased
write-offs. There can be no assurance that Apria will be able to maintain its
current levels of collectibility and days sales outstanding in future periods.
If Apria is unable to properly bill and collect its accounts receivable, its
results will be adversely affected.
MEDICARE REIMBURSEMENT RATES--CONTINUED REDUCTIONS IN MEDICARE REIMBURSEMENT
RATES COULD HAVE A MATERIAL ADVERSE EFFECT ON APRIA'S RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
The Balanced Budget Act of 1997 contained several provisions that have
affected Apria's Medicare reimbursement levels. Subsequent legislation--the
Medicare Balanced Budget Refinement Act of 1999 and the Medicare, Medicaid and
SCHIP Benefits Improvement and Protection Act of 2000--mitigated some of the
effects of the original legislation. However, there are various pending issues,
including pending legislation, that may further impact Medicare reimbursement to
Apria in the future.
The Balanced Budget Act of 1997 granted streamlined authority to the
Secretary of the U.S. Department of Health and Human Services to increase or
reduce the reimbursement for home medical equipment, including oxygen, by up to
15% each year under an inherent reasonableness authority. In December 2002, the
Centers for Medicare and Medicaid Services, or CMS, issued an interim final rule
that establishes a process by which such adjustments may be made. The rule
applies to all Medicare Part B services except those paid under a physician fee
schedule or a prospective payment system.
In June 2003, the U.S. House of Representatives and the U.S. Senate passed
alternative bills that, if enacted, would include provisions that would affect
Medicare Part B reimbursement policies for items and services provided by Apria.
Through mid-November, the two chambers worked to reconcile the differences
between these bills, but it remains uncertain whether Congress can agree to a
consensus Medicare bill that can be enacted this year. The Medicare bill that
passed the House on June 27, 2003 would establish a competitive acquisition
program for durable medical equipment, or DME, under Medicare Part B, which
would include a number of items, therapies and drugs provided by Apria. Such a
competitive bidding process, if implemented, could result in lower reimbursement
rates, exclude certain items and services from coverage or impose limits on
increases in reimbursement rates. In contrast, the Medicare bill passed by the
Senate on June 27, 2003 would not impose a competitive acquisition system on
DME. Rather, the Senate bill would place a 5-year freeze on annual payment
increases for DME.
The House and Senate Medicare bills of June 2003 would also take differing
approaches to reimbursement for the types of prescription drugs typically
provided by Apria under Medicare Part B. Under the House bill, reimbursement for
the drug component of home infusion and inhalation therapies covered under
Medicare Part B would be determined under the competitive acquisition program
for DME. In contrast, the Senate bill would reduce
9
the reimbursement level for prescription drugs (currently set at 95 percent of
the average wholesale price) under Medicare Part B to the lesser of 85 percent
of the average wholesale price or the widely available market price. Any such
reductions below 85 percent of average wholesale price would be limited to no
more than a 15 percent reduction each year. The Senate bill would enable the
Medicare program to offset payment reductions for drugs by establishing
additional payments for services rendered in providing home infusion drug
therapy or to partially offset such reductions for home inhalation drug therapy.
In a separate initiative, the Administrator of CMS has indicated that if
Congress does not enact prescription drug pricing changes this year, CMS would
implement drug reimbursement changes under its regulatory authority. On August
20, 2003 CMS issued a Notice of Proposed Rulemaking in which it outlined
potential models for changing Part B reimbursement levels for covered drugs. It
is not yet clear as to which model for reimbursement rate reductions will be
effected or whether alternative or additional reductions will be proposed.
Some states have already adopted, or are contemplating adopting, some form
of the proposed alternate pricing methodology for certain drugs and biologicals
under the Medicaid program. In at least 20 states, these changes have reduced
the level of reimbursement received by Apria without a corresponding offset or
increase to compensate for the service costs incurred. In several of those
states, Apria has elected to stop accepting new Medicaid patient referrals for
the affected drugs. The company is continuing to provide services to patients
already on service, and for those who receive other Medicaid-covered
respiratory, home medical equipment or infusion therapies.
Since Medicare accounted for approximately 28% of Apria's net revenues for
the fiscal year 2002, any further reduction in reimbursement rates could result
in lower revenues, earnings and cash flows. Apria can provide no assurance to
prospective investors that the reimbursement reductions described above, or that
additional reductions, will not be made.
FEDERAL INVESTIGATION--THE OUTCOME OF THE FEDERAL GOVERNMENT'S INVESTIGATION OF
APRIA'S MEDICARE AND OTHER BILLING PRACTICES COULD HAVE A MATERIAL NEGATIVE
IMPACT ON APRIA'S OPERATIONS AND FINANCIAL CONDITION.
Since mid-1998 Apria has been the subject of an investigation conducted by
the U.S. Attorney's office in Los Angeles and the U.S. Department of Health and
Human Services. The investigation concerns the documentation supporting Apria's
billing for services provided to patients whose healthcare costs are paid by
Medicare and other federal programs. Apria has been informed that the
investigation is the result of civil qui tam litigation filed on behalf of the
government against Apria. To date, the U.S. Attorney's office has not informed
Apria of any decision to intervene in the qui tam actions; however, it could
reach a decision with respect to intervention at any time.
Government representatives and counsel for the plaintiffs in the qui tam
actions asserted in July 2001 that, by a process of extrapolation from a sample
of 300 patient files to all of Apria's billings to the federal government during
the three-and-one-half year sample period, Apria could be liable to the
government under the False Claims Act for more than $9 billion, consisting of
extrapolated overpayment liability, treble damages and penalties of up to
$10,000 for each allegedly false claim derived from the extrapolation. Apria has
acknowledged that there may be errors and omissions in supporting documentation
affecting a portion of its billings, however, it considers the assertions and
amounts described above to be unsupported both legally and factually.
Apria has been exchanging information and having discussions with
government representatives in an attempt to explore whether it will be possible
to resolve this matter on a basis that would be considered fair and reasonable
by all parties. Apria cannot provide any assurances as to the outcome of these
discussions, however, or as to the outcome of the qui tam litigation in the
absence of a settlement. At this time management cannot estimate the possible
loss or range of loss that may result from these proceedings and therefore has
not recorded any related accruals.
If a judge, jury or administrative agency were to determine that false
claims were submitted to federal healthcare programs or that there were
significant overpayments by the government, Apria could face civil and
administrative claims for refunds, sanctions and penalties for amounts that
would be highly material to its business, results of operations and financial
condition, including the exclusion of Apria from participation in federal
healthcare programs. Apria can provide no assurance as to the outcome of these
proceedings.
10
OPERATING SYSTEMS AND CONTROLS--APRIA'S IMPLEMENTATION OF SIGNIFICANT SYSTEM
MODIFICATIONS COULD HAVE A DISRUPTIVE EFFECT ON RELATED TRANSACTION PROCESSING
AND COULD ULTIMATELY HAVE A SIGNIFICANT NEGATIVE IMPACT ON ITS RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
Apria has developed the functionality that enables the infusion therapy
business to operate on the same computer information system or "platform" as the
respiratory therapy/home medical equipment business. Previously, the infusion
therapy application operated on a separate platform which had limited support.
The new system functionality has been introduced in four regions; the
company-wide rollout is expected to continue into late 2003. Additionally, Apria
completed the implementation of supply chain management software during 2002.
Apria is working on the second phase of this project, which is the
implementation of production and distribution planning software. Finally, Apria
has effected certain changes to its systems in order to comply with the standard
electronic transaction and code sets provisions of the federal Health Insurance
Portability and Accountability Act of 1996, or HIPAA. The implementation of
these system changes could have a disruptive effect on related transaction
processing.
GOVERNMENT REGULATION; HEALTHCARE REFORM--NON-COMPLIANCE WITH LAWS AND
REGULATIONS APPLICABLE TO APRIA'S BUSINESS AND FUTURE CHANGES IN THOSE LAWS AND
REGULATIONS COULD HAVE A MATERIAL ADVERSE EFFECT ON APRIA.
Apria is subject to stringent laws and regulations at both the federal and
state levels, requiring compliance with burdensome and complex billing,
substantiation and record-keeping requirements. Financial relationships between
Apria and physicians and other referral sources are subject to strict and
ambiguous limitations. In addition, the provision of services, pharmaceuticals
and equipment are subject to strict licensing and safety requirements.
Violations of these laws and regulations could subject Apria to severe fines,
facility shutdowns and possible exclusion from participation in federal
healthcare programs such as Medicare and Medicaid. Government officials and the
public will continue to debate healthcare reform. Changes in healthcare law, new
interpretations of existing laws, or changes in payment methodology may have a
dramatic effect on Apria's business and results of operations.
COMPLIANCE WITH NEW REGULATIONS UNDER HIPAA, RELATING TO THE TRANSMISSION AND
PRIVACY OF HEALTH INFORMATION COULD IMPOSE ADDITIONAL SIGNIFICANT COSTS ON
APRIA'S OPERATIONS.
Numerous federal and state laws and regulations govern the collection,
dissemination, use and confidentiality of patient-identifiable health
information, including HIPAA. HIPAA requires Apria to comply with standards for
the use and disclosure of health information within the company and with third
parties, such as payors, business associates and customers. These include
standards for common healthcare electronic transactions and code sets, such as
claims information, plan eligibility, payment information and the use of
electronic signatures, and privacy and electronic security of individually
identifiable health information. Each set of HIPAA regulations has a specified
compliance date and requires healthcare providers, including Apria, in addition
to health plans and clearinghouses, to develop and maintain policies and
procedures with respect to protected health information that is used or
disclosed.
The HIPAA regulations mandate that standardized transaction and code sets
be developed and used for electronic billing purposes by all payors in the
United States, including both government and private health plans. While the
Medicare program has historically used a uniform set of transaction codes for
electronic claim submission and payment, certain billing codes have varied among
the different state Medicaid programs and certain health plans. It is currently
unknown whether every existing billing code used by certain Medicaid and private
health plans for products provided in the home care setting will have a
corresponding code in the final HIPAA transaction sets. Under HIPAA, authority
for approving, modifying, adding or deleting codes lies solely with the Health
Care Procedure Coding System or HCPCS panel, operating under the auspices of
CMS. In mid-October 2003, the panel posted the revised HCPCS list for 2004 on
its web site. The panel approved very few new codes. The probability that some
payors will not be fully compliant by January 1, 2004 makes it likely that Apria
will experience an increase in claim rejections or denials in early 2004,
despite the fact that CMS has directed its DME regional carriers to deploy
contingency plans that allow them to continue accepting former codes for an
as-yet undetermined amount of time. Ultimately, this could impact the company's
net revenue line and the collectibility of its accounts receivable. In addition,
the absence of new codes for certain higher-cost respiratory products and
services could have an impact on gross profit margins, since the panel only
allows one code per certain equipment category, regardless of the actual
equipment provided to the patients per a physician's prescription and patient
preference.
11
The absence of standardized codes for products or services provided by Apria
also may preclude the company from submitting electronic claims to certain
payors. Such an outcome would require submitting paper claims, which could
ultimately result in delays and difficulties in collecting these claims and
could have a material adverse effect on Apria's financial position and operating
results.
If Apria does not comply with existing or new laws and regulations related
to patient health information, the company could be subject to criminal or civil
sanctions. New health information standards, whether implemented pursuant to
HIPAA or otherwise, could have a significant effect on the manner in which Apria
handles healthcare related data and communicates with payors, and the cost of
complying with these standards could be significant.
REVOCATION OF CUSTOMER HOSPITAL SUPPLY NUMBERS MAY HAVE AN ADVERSE IMPACT ON THE
COMPANY'S RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
CMS officials have recently initiated actions to revoke the Medicare
supplier numbers of a variety of DME suppliers, including eleven of Apria's
current hospital customers. Under contractual arrangements, Apria provides home
healthcare items and services to hospitals on a wholesale basis to service the
hospitals' discharged patients. Apria bills the hospitals for all such items and
services and the hospitals, in turn, bill patients and third party payors,
including Medicare. In order for a hospital to bill Medicare for these home
healthcare items and services, it must have a Medicare supplier number.
In its revocation notices to Apria's eleven hospital customers, CMS has
asserted that these contractual arrangements do not comply with certain Medicare
regulations promulgating "supplier standards," adherence to which is required as
a condition of having a supplier number. The government has construed the
supplier standards to require a supplier to perform directly through its own
employees some types of services that the hospitals have contracted to have
Apria perform. The Medicare-funded revenues paid to Apria by the eleven hospital
customers who have received revocation notices represent approximately one-half
of one percent of the company's annual revenues. Apria believes its arrangements
with hospitals are consistent with all applicable regulations and that CMS is
acting improperly in revoking the hospitals' supplier numbers.
The revocations are presently scheduled to become effective on December 8,
2003, but Apria and certain of the hospitals have requested that the revocations
be delayed to allow for consideration of, and adequate time to transition to,
other appropriate arrangements for the patients being served. Apria and certain
of the hospitals are in discussions with CMS regarding the hospitals' retaining
their Medicare supplier numbers and entering into alternative arrangements with
Apria that would satisfy CMS' interpretation of the regulations. Under most of
the alternative arrangements being considered, Apria's future revenues from the
affected markets would be likely to decrease.
The company cannot predict the outcome of these discussions with the
government and the hospitals, however, and no assurance can be given that the
ultimate resolution of this issue will not have an adverse effect on the
company's financial results.
PRICING PRESSURES--APRIA BELIEVES THAT CONTINUED PRESSURE TO REDUCE HEALTHCARE
COSTS COULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY.
The current market continues to exert pressure on healthcare companies to
reduce healthcare costs, resulting in reduced margins for home healthcare
providers such as Apria. Larger buyer and supplier groups exert additional
pricing pressure on home healthcare providers. These include managed care
organizations, which control an increasing portion of the healthcare economy.
Apria has a number of contractual arrangements with managed care organizations
and other parties, although no individual arrangement accounted for more than
10% of Apria's net revenues in 2002. Certain competitors of Apria may have or
may obtain significantly greater financial and marketing resources than Apria.
In addition, relatively few barriers to entry exist in local home healthcare
markets. As a result, Apria could encounter increased competition in the future
that may increase pricing pressure and limit its ability to maintain or increase
its market share.
ACQUISITION STRATEGY--APRIA MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE ACQUIRED
BUSINESSES, WHICH COULD HAVE AN ADVERSE EFFECT ON ITS RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
12
Apria's strategic plan includes growth through the acquisition of other
companies. Such growth involves a number of risks, including:
- difficulties in integration;
- substantial diversion of management's attention from day-to-day
operations;
- the failure to realize anticipated benefits such as cost savings and
revenue enhancements;
- the assumption of liabilities of an acquired business (including
unforeseen liabilities);
- the potentially substantial transaction costs associated with
acquisitions; and
- difficulties related to assimilating the products, services,
personnel and systems of an acquired business.
In connection with past acquisitions, Apria has found that the
labor-intensive patient qualification process and conversion of patient files
onto Apria's billing systems can shift focus away from Apria's routine
processes. These activities and the time required to obtain provider numbers
from government payors often delay billing of the newly acquired business, which
may delay cash collections. Moreover, excessive delays may make certain items
uncollectible. The successful integration of an acquired business is also
dependent on the size of the acquired business, condition of the patient files,
complexity of system conversions and local management's execution of the
integration plan. If Apria is not successful in integrating acquired businesses,
its results will be adversely affected.
RISKS RELATED TO THE NOTES
APRIA MAY NOT HAVE THE FUNDS NECESSARY TO REPURCHASE THE NOTES UPON A REPURCHASE
DATE OR UPON A FUNDAMENTAL CHANGE AS REQUIRED BY THE INDENTURE GOVERNING THE
NOTES.
On September 1, 2008, and following a fundamental change as described
under "Description of Notes--Repurchase of Notes by Apria at Option of Holder
upon a Fundamental Change," holders of the notes may require Apria to repurchase
their notes for cash. In addition, on September 1, 2010, September 1, 2013,
September 1, 2018, September 1, 2023 and September 1, 2028, holders of notes may
require Apria to repurchase their notes, at Apria's option in cash or shares of
its common stock or a combination thereof. A fundamental change may also
constitute an event of default under, and result in the acceleration of the
maturity of, Apria's then-existing indebtedness. Apria cannot assure you that it
will have sufficient financial resources, or will be able to arrange financing,
to pay the repurchase price in cash with respect to any notes tendered by
holders for repurchase on any of these dates or upon a fundamental change. In
addition, restrictions in Apria's then-existing credit facilities or other
indebtedness may not allow it to repurchase the notes. Apria's failure to
repurchase the notes when required would result in an event of default with
respect to the notes.
In addition, if a holder requires Apria to purchase all or a portion of
its notes and Apria elects to deliver common stock in satisfaction of its
obligation but fails to deliver such common stock, and Apria then becomes the
subject of a bankruptcy proceeding, a holder may not be able to rescind its
notice obligating Apria to purchase all or a portion of its notes, and a
holder's claim may be subordinated to all of Apria's existing and future
obligations. Furthermore, it is unclear how such a subordinated claim would be
valued.
THE TRADING PRICES OF THE NOTES WILL BE SIGNIFICANTLY AFFECTED BY THE TRADING
PRICES OF APRIA'S COMMON STOCK.
Apria expects that the trading prices of the notes in the secondary market
will be significantly affected by the trading prices of Apria's common stock,
the general level of interest rates and Apria's credit quality. This may result
in greater volatility in the trading prices of the notes than would be expected
for nonconvertible debt securities.
It is impossible to predict whether the price of Apria's common stock or
interest rates will rise or fall. Trading prices of Apria's common stock will be
influenced by Apria's operating results and prospects and by economic,
13
financial, regulatory and other factors. In addition, general market conditions,
including the level of, and fluctuations in, the trading prices of equity
securities generally, and sales of substantial amounts of common stock by Apria
in the market after the offering of the notes, or the perception that such sales
may occur, could affect the price of Apria's common stock.
THE NOTES WILL BE EFFECTIVELY SUBORDINATED TO THE LIABILITIES OF APRIA'S
SUBSIDIARIES AND ANY OF APRIA'S INDEBTEDNESS THAT IS GUARANTEED BY APRIA'S
SUBSIDIARIES.
The notes will be effectively subordinated to all existing and future
liabilities of Apria's subsidiaries and any of Apria's indebtedness that is
guaranteed by Apria's subsidiaries. These liabilities may include indebtedness,
trade payables, guarantees, lease obligations and letter of credit obligations.
Each of Apria's subsidiaries is a guarantor under Apria's senior secured credit
facility, under which Apria may borrow up to $400.0 million. As of September 30,
2003, Apria had $250.5 million outstanding under its senior secured credit
facility. Apria's rights and the rights of Apria's creditors, including the
holders of the notes, to participate in the assets of any subsidiary upon that
subsidiary's liquidation or reorganization will be subject to the prior claims
of the subsidiary's creditors and of the holders of any indebtedness or other
obligations guaranteed by that subsidiary (including the lenders under Apria's
senior secured credit facility), except to the extent that Apria may itself be a
creditor with recognized claims against the subsidiary. However, even if Apria
is a creditor of one of Apria's subsidiaries, Apria's claims would still be
effectively subordinated to any security interests in, or mortgages or other
liens on, the assets of that subsidiary and would be subordinate to any
indebtedness of the subsidiary senior to that held by Apria. As of September 30,
2003, Apria's subsidiaries had liabilities of $135.8 million, excluding
intercompany payables.
THE NOTES ARE UNSECURED AND, THEREFORE, ARE EFFECTIVELY SUBORDINATED TO ANY OF
APRIA'S SECURED DEBT.
The notes are not secured by any of Apria's assets or those of its
subsidiaries. In addition, the notes are not guaranteed by Apria's subsidiaries.
As a result, the notes are effectively subordinated to Apria's senior secured
credit facility, which is secured by substantially all of the assets of Apria
and its subsidiaries and guaranteed by Apria's subsidiaries. The notes would
also be effectively subordinated to any other secured debt that Apria may incur.
As of September 30, 2003, Apria had $250.5 million outstanding under Apria's
senior secured credit facility and could incur up to $400 million of
indebtedness under such senior secured facility. In any liquidation,
dissolution, bankruptcy or other similar proceeding, the holders of Apria's
secured debt may assert rights against the secured assets in order to receive
full payment of their debt before the assets may be used to pay the holders of
the notes.
APRIA'S HOLDING COMPANY STRUCTURE MAY ADVERSELY AFFECT APRIA'S ABILITY TO MEET
APRIA'S DEBT SERVICE OBLIGATIONS UNDER THE NOTES.
Substantially all of Apria's consolidated assets are held by Apria's
subsidiaries. Accordingly, Apria's cash flow and its ability to service Apria's
debt, including the notes, depends on the results of operations of its
subsidiaries and upon the ability of such subsidiaries to provide Apria cash,
whether in the form of management fees, dividends, loans or otherwise, to pay
amounts due on its obligations, including the notes. Apria's subsidiaries are
separate and distinct legal entities and have no obligation, contingent or
otherwise, to make payments on the notes or to make any funds available for that
purpose. In addition, dividends, loans or other distributions from such
subsidiaries to Apria may be subject to contractual and other restrictions and
are subject to other business considerations.
AN ACTIVE TRADING MARKET FOR THE NOTES MAY NOT DEVELOP.
There is currently no public market for the notes. Apria does not intend
to list the notes on any national securities exchange or automated quotation
system. Apria cannot assure you that an active or sustained trading market for
the notes will develop or that the holders will be able to sell their notes. The
initial purchasers of the notes have informed Apria that they intend to make a
market in the notes. However, the initial purchasers are not obligated to do so
and may cease any market-making activities at any time in their sole discretion
without notice.
Moreover, even if you are able to sell your notes, Apria cannot assure you
as to the price at which any sales will be made. Future trading prices of the
notes will depend on many factors, including, among other things, prevailing
interest rates, Apria's operating results, the price of Apria's common stock and
the market for similar securities. Historically, the market for convertible debt
has been subject to disruptions that have caused volatility in prices. It is
14
possible that the market for the notes will be subject to disruptions which may
have a negative effect on the holders of the notes, regardless of Apria's
prospects or financial performance.
IF YOU HOLD NOTES, YOU WILL NOT BE ENTITLED TO ANY RIGHTS WITH RESPECT TO
APRIA'S COMMON STOCK, BUT YOU WILL BE SUBJECT TO ALL CHANGES MADE WITH RESPECT
TO APRIA'S COMMON STOCK.
If you hold notes, you will not be entitled to any rights with respect to
Apria's common stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions on Apria's common stock), but you
will be subject to all changes affecting the common stock. You will have rights
with respect to Apria's common stock only if and when Apria delivers shares of
common stock to you upon conversion of your notes and, in limited cases, under
the conversion rate adjustments applicable to the notes. For example, in the
event that an amendment is proposed to Apria's certificate of incorporation or
by-laws requiring stockholder approval and the record date for determining the
stockholders of record entitled to vote on the amendment occurs prior to
delivery of the common stock to you, you will not be entitled to vote on the
amendment, although you will nevertheless be subject to any changes in the
powers, preferences or special rights of Apria's common stock.
APRIA MAY ISSUE ADDITIONAL SHARES OF COMMON STOCK AND THEREBY MATERIALLY AND
ADVERSELY AFFECT THE PRICE OF APRIA'S COMMON STOCK.
Apria is not restricted from issuing additional common stock during the
life of the notes. If Apria issues additional shares of common stock, the price
of Apria's common stock and, in turn, the price of the notes may be materially
and adversely affected.
THE CONDITIONAL CONVERSION FEATURES OF THE NOTES COULD RESULT IN YOU RECEIVING
LESS THAN THE VALUE OF THE COMMON STOCK INTO WHICH A NOTE IS CONVERTIBLE.
The notes are convertible into common stock only if specified conditions
are met. If the specific conditions for conversion are not met, you may not be
able to receive the value of the common stock into which the notes would
otherwise be convertible.
THE SALE OF THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES COULD
ADVERSELY AFFECT THE PRICE OF APRIA'S COMMON STOCK.
The sale in the public market of the common stock issuable upon the
conversion of some or all of the notes could adversely affect prevailing market
prices of Apria's common stock. In addition, the existence of the notes may
encourage short selling by market participants because the conversion of the
notes could depress the price of Apria's common stock.
YOU SHOULD CONSIDER THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF OWNING
THE NOTES.
The notes will be characterized as contingent payment debt instruments for
U.S. federal income tax purposes. Consequently, the notes will be treated as
issued with original issue discount for U.S. federal income tax purposes, and
you will be required to include such tax original issue discount in your gross
income as it accrues regardless of your tax accounting. The amount of tax
original issue discount required to be included by you in gross income for each
year generally will be in excess of the payments and accruals on the notes for
non-tax purposes and in advance of the receipt of cash or other property
attributable thereto in that year.
You will recognize gain or loss on the sale, purchase by Apria at your
option, exchange, conversion or redemption of a note in an amount equal to the
difference between the amount realized, including the fair market value of any
Apria common stock received, and your adjusted tax basis in the note. Any gain
recognized by you on the sale, purchase by Apria at your option, exchange,
conversion or redemption of a note will be treated as ordinary interest income
and any loss will be ordinary loss to the extent of the interest previously
included in gross income and, thereafter, capital loss. Holders should consult
their tax advisors regarding the deductibility of any such capital loss. A
discussion of the United States federal income tax consequences of ownership for
the notes is contained in this prospectus under the heading "Material U.S.
Federal Income Tax Considerations."
15
RATIO OF EARNINGS TO FIXED CHARGES
The following table presents Apria's historical ratios of earnings to
fixed charges for the years ended December 31, 1998, 1999, 2000, 2001 and 2002
and for the nine months ended September 30, 2003.
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
---------------------------------- SEPTEMBER 30,
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
Ratio(1)................. --(2) 2.3x 2.8x 3.7x 9.9x 9.8x
(1) Computed by dividing pre-tax net income before fixed charges by fixed
charges. Fixed charges means the sum of the following: interest expense,
amortized premiums, discounts and capitalized expenses related to
indebtedness, and an estimate of the interest within rental expense.
(2) Earnings were inadequate to cover fixed charges by $204.9 million.
USE OF PROCEEDS
The selling securityholders will receive all of the proceeds from the sale
of the securities offered pursuant to this prospectus. Apria will not receive
any of the proceeds from the sale of the securities offered pursuant to this
prospectus.
The approximately $244.4 million received by Apia as net proceeds for the
private placement of the notes in August 2003 was used to purchase approximately
$100.0 million worth of shares of Apria common stock sold short by purchasers of
the notes concurrently with their purchases of the notes in negotiated
transactions. Apria intends to use the balance of such proceeds for general
corporate purposes, which may include additional share repurchases and
acquisitions in accordance with Apria's strategic growth strategy within the
next 12 months.
16
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Apria's common stock is traded on the New York Stock Exchange under the
symbol "AHG." The following table reflects the range of the reported high and
low sale prices on the NYSE Composite Tape for the periods indicated.
HIGH LOW
---- ---
YEAR ENDED DECEMBER 31, 2001:
First quarter.................................... $ 30.00 $ 20.40
Second quarter............................ ..... 29.49 23.78
Third quarter.................................... 29.85 21.00
Fourth quarter................................... 25.75 19.50
YEAR ENDED DECEMBER 31, 2002:
First quarter.................................... $ 24.95 $ 20.79
Second quarter................................... 28.50 20.25
Third quarter.................................... 25.50 18.80
Fourth quarter................................... 25.68 20.75
YEAR ENDING DECEMBER 31, 2003:
First quarter.................................... $ 24.23 $ 20.50
Second quarter................................... 25.10 22.45
Third quarter.................................... 29.00 24.42
Fourth quarter (through November 17, 2003)....... 31.69 27.05
On November 17, 2003, the last reported sale price for Apria's common
stock on the New York Stock Exchange was $30.51 per share.
Apria has not paid any dividends since its inception and does not intend
to pay any dividends on its common stock in the foreseeable future. In addition,
Apria is a party to a $400,000,000 senior secured credit facility that imposes
numerous restrictions on Apria, including, but not limited to, a limitation on
the payment of dividends. However, it is Apria's present intention to repurchase
shares of its common stock from time to time, pursuant to the repurchase plans
described herein.
17
DESCRIPTION OF NOTES
Apria issued the notes under an indenture dated as of August 20, 2003,
between Apria and U.S. Bank National Association, as trustee. The notes and the
shares of common stock issuable upon conversion of the notes are covered by a
registration rights agreement. You may request a copy of the indenture and the
registration rights agreement from the trustee.
The following description is a summary of the material provisions of the
notes, the indenture and the registration rights agreement and does not purport
to be complete. This summary is subject to and is qualified by reference to all
the provisions of the notes and the indenture, including the definitions of
certain terms used in the indenture, and to all provisions of the registration
rights agreement. Wherever particular provisions or defined terms of the
indenture or form of note are referred to, these provisions or defined terms are
incorporated in this registration statement by reference. Apria urges you to
read the indenture because it, and not this description, defines your rights as
a holder of the notes.
As used in this "Description of Notes" section, references to "Apria,"
"the company" and "issuer" refer only to Apria Healthcare Group Inc. and do not
include its subsidiaries.
GENERAL
The notes will mature on September 1, 2033 unless earlier converted,
redeemed or repurchased. You have the option, subject to certain qualifications
and the satisfaction of certain conditions and during the periods described
below, to convert your notes into shares of Apria's common stock at an initial
conversion rate of 28.6852 shares of common stock per $1,000 principal amount of
notes. This is equivalent to an initial conversion price of approximately $34.86
per share of common stock. The conversion rate is subject to adjustment if
certain events occur. Upon a surrender of your notes for conversion, Apria will
have the right to deliver, in lieu of its shares of common stock, cash or a
combination of cash and shares of common stock in amounts described below under
" -- Payment Upon Conversion." Even if Apria elects to deliver shares of common
stock upon conversion of a note, you will not receive fractional shares but a
cash payment to account for any such fractional share. You will not receive any
cash payment for interest, or contingent interest or additional amounts, if any,
accrued and unpaid to the conversion date except under the limited circumstances
described below.
If any interest payment date, maturity date, redemption date or repurchase
date, including upon the occurrence of a fundamental change, as described below,
falls on a day that is not a business day, the required payment will be made on
the next succeeding business day with the same force and effect as if made on
the date that the payment was due, and no additional interest will accrue on
that payment for the period from and after the interest payment date, maturity
date, redemption date or repurchase date, including upon the occurrence of a
fundamental change, as described below, as the case may be, to that next
succeeding business day.
The notes were issued only in denominations of $1,000 principal amount and
integral multiples thereof. References to "a note" or "each note" in this
prospectus refer to $1,000 principal amount of the notes. The notes are limited
to an aggregate principal amount of $250.0 million and were initially offered at
a price to investors of $1,000 per note.
As used in this registration statement, "business day" means any day,
other than a Saturday or Sunday, that is neither a legal holiday nor a day on
which commercial banks are authorized or required by law, regulation or
executive order to close in The City of New York.
Any reference to "common stock" means the common stock, par value $0.001
per share, of Apria Healthcare Group Inc.
RANKING
The notes are the direct, unsecured and unsubordinated obligations of
Apria. The notes rank equal in priority with all of Apria's existing and future
unsecured and unsubordinated indebtedness and senior in right of payment to
18
any subordinated indebtedness that Apria may incur in the future. The notes
effectively rank junior to all of Apria's existing and future secured
indebtedness to the extent of the value of the assets securing such
indebtedness. In addition, Apria's rights and the rights of its creditors,
including the holders of the notes, to participate in the assets of a subsidiary
during its liquidation or reorganization are effectively subordinated to all
existing and future liabilities of that subsidiary, including guarantees by the
subsidiary of Apria's indebtedness. As of September 30, 2003, in addition to the
notes, Apria's long-term debt consisted of a $400.0 million senior secured
credit facility with a syndicate of lenders. This credit facility is secured by
substantially all of the assets of Apria and its subsidiaries and guaranteed by
all of Apria's subsidiaries. As of September 30, 2003, Apria had $250.5 million
outstanding under the credit facility. In addition, Apria's subsidiaries had
additional liabilities of $135.8 million, excluding intercompany payables.
INTEREST
The notes bear interest at a rate of 3 3/8% per year. Apria will also pay
contingent interest on the notes in the circumstances described under " --
Contingent Interest." Interest, including contingent interest and additional
amounts, if any, shall be payable semi-annually in arrears on September 1 and
March 1 of each year, commencing March 1, 2004.
Interest on a note, including contingent interest and additional amounts,
if any, will be paid to the person in whose name the note is registered at the
close of business on the August 15 or February 15, as the case may be (each, a
"record date"), immediately preceding the relevant interest payment date,
whether or not such day is a business day; provided, however, that interest,
including contingent interest and additional amounts, if any, payable upon
redemption or repurchase by Apria will be paid to the person to whom principal
is payable, unless the redemption date or repurchase date, as the case may be,
is an interest payment date. Interest will be calculated on the basis of a
360-day year consisting of twelve 30-day months and will accrue from August 20,
2003 or from the most recent date to which interest has been paid or duly
provided for.
CONTINGENT INTEREST
Beginning with the period commencing on September 8, 2010 and ending on
February 28, 2011, and for each of the six-month periods thereafter commencing
on March 1, 2011, Apria will pay contingent interest on the interest payment
date for the applicable interest period if the average trading price of the
notes during the five trading days ending on the third day immediately preceding
the first day of the applicable interest period equals or exceeds 120% of the
principal amount of the notes.
On any interest payment date when contingent interest shall be payable,
the contingent interest payable per note will equal 0.25% per year of the
average trading price of such note during the applicable five trading-day
reference period. For United States federal income tax purposes, the notes will
constitute contingent payment debt instruments.
Apria will notify the holders of the notes upon a determination that they
will be entitled to receive contingent interest with respect to any six-month
interest period.
For purposes of this section, the "trading price" of a note on any date of
determination shall be determined by Apria and shall be the average of the
secondary market bid quotations per note obtained by the bid solicitation agent
for $5.0 million aggregate principal amount of notes at approximately 3:30 p.m.,
New York City time, on such determination date from three independent nationally
recognized securities dealers Apria selects, provided that if:
- at least three such bids are not obtained by the bid solicitation
agent, or
- in its reasonable judgment, the bid quotations are not indicative of
the secondary market value of notes as of such determination date,
then the trading price for such determination date will equal (1) the applicable
conversion rate of the notes as of such determination date multiplied by (2) the
average last reported sale price (as defined below) of its common stock on the
five trading days ending on such determination date.
19
The bid solicitation agent will initially be the trustee. Apria may change
the bid solicitation agent, but the bid solicitation agent will not be its
affiliate. The bid solicitation agent will solicit bids from securities dealers
that are believed by Apria to be willing to bid for the notes.
OPTIONAL REDEMPTION BY APRIA
No sinking fund is provided for the notes. Prior to September 8, 2010, the
notes will not be redeemable. On or after September 8, 2010, Apria may redeem
the notes in whole or in part at any time for a redemption price in cash equal
to 100% of the principal amount of the notes to be redeemed, plus any accrued
and unpaid interest, including contingent interest and additional amounts, if
any, up to but excluding the redemption date.
If the redemption date is an interest payment date, interest, including
contingent interest and additional amounts, if any, shall be paid on such
interest payment date to the record holder on the relevant record date.
Notes or portions of notes called for redemption will be convertible by
the holder until the close of business on the second business day prior to the
redemption date. Apria's notice of redemption will inform the holders of its
election to deliver shares of its common stock or to pay cash in lieu of
delivery of common shares with respect to any notes or portions thereof
converted prior to the redemption date.
Apria will provide not less than 30 nor more than 60 days' notice of
redemption by mail to each registered holder of notes to be redeemed. If the
redemption notice is given and funds are deposited as required, then interest
will cease to accrue on and after the redemption date on those notes or portions
of notes called for redemption.
If Apria decides to redeem fewer than all of the outstanding notes, the
trustee will select the notes to be redeemed (in principal amounts of $1,000 or
integral multiples thereof) by lot, on a pro rata basis or by another method the
trustee considers fair and appropriate. If the trustee selects a portion of your
notes for partial redemption and you convert a portion of your notes, the
converted portion will be deemed to be from the portion selected for redemption.
Apria may not redeem the notes if it has failed to pay any interest,
including contingent interest and additional amounts, if any, on the notes when
due and such failure to pay is continuing. Apria will notify all of the holders
if it redeems any of the notes.
CONVERSION RIGHTS
Subject to the qualifications and the satisfaction of the conditions and
during the periods described below, you may convert each of your notes into
shares of common stock of Apria initially at a conversion rate of 28.6852 shares
of common stock per $1,000 principal amount of notes, which is equivalent to an
initial conversion price of approximately $34.86 per share of common stock based
on the issue price per note. The conversion rate and the equivalent conversion
price in effect at any given time are referred to as the "applicable conversion
rate" and the "applicable conversion price," respectively, and will be subject
to adjustment as described below. You may convert fewer than all of your notes
so long as the notes converted are an integral multiple of $1,000 principal
amount. Upon surrender of a note for conversion, Apria may choose to deliver, in
lieu of shares of its common stock, cash or a combination of cash and shares of
common stock, as described below under " -- Payment Upon Conversion."
You may convert your notes into shares of common stock of Apria only in
the following circumstances, which are described in more detail below, and to
the following extent:
- in whole or in part, upon satisfaction of a sale price condition;
- in whole or in part, upon satisfaction of a trading price condition;
- if any of your notes are called for redemption, those notes, or
portions thereof, that have been so called;
- in whole or in part, upon the occurrence of specified corporate
transactions; or
20
- in whole or in part, if a credit ratings event occurs.
If Apria calls your notes for redemption, you may convert the notes only
until the close of business on the second business day prior to the redemption
date unless Apria fails to pay the redemption price. If you have already
delivered a repurchase election with respect to a note as described under either
" -- Repurchase of Notes by Apria at the Option of the Holder" or " --
Repurchase of Notes by Apria at Option of Holder upon a Fundamental Change," you
may not surrender that note for conversion until you have withdrawn the
repurchase election in accordance with the indenture.
Upon conversion of a note, you will not receive any cash payment of
interest, including contingent interest and additional amounts, if any, unless
such conversion occurs between a regular record date and the interest payment
date to which it relates. Even if Apria elects to deliver shares of common stock
upon surrender of a note for conversion, Apria will not issue fractional shares
of common stock. Instead, Apria will pay cash in lieu of fractional shares based
on the last reported sale price of the common stock on the trading day prior to
the conversion date. Apria's delivery to you of the full number of shares of its
common stock into which a note is convertible, together with any cash payment
for any fractional share, will be deemed to satisfy its obligation to pay:
- the principal amount of the note; and
- accrued but unpaid interest, including contingent interest and
additional amounts, if any, to but excluding the conversion date.
As a result, accrued but unpaid interest, including contingent interest and
additional amounts, if any, up to but excluding the conversion date will be
deemed to be paid in full rather than cancelled, extinguished or forfeited. For
a discussion of your tax treatment upon receipt of common stock of Apria upon
conversion, see "Material U.S. Federal Income Tax Considerations."
Notwithstanding the preceding paragraph, if notes are converted after the
close of business on a record date but prior to the opening of business on the
next succeeding interest payment date, holders of such notes at the close of
business on the record date will receive the interest, including contingent
interest and additional amounts, if any, payable on such notes on the
corresponding interest payment date notwithstanding the conversion. Such notes,
upon surrender for conversion, must be accompanied by funds equal to the amount
of interest, including contingent interest and additional amounts, if any,
payable on the notes so converted; provided that no such payment need be made
(1) if Apria has specified a redemption date or a repurchase date relating to a
fundamental change that is after a record date and prior to the next interest
payment date or (2) to the extent of any overdue interest, including any
contingent interest and additional amounts, if any, if any overdue interest
exists at the time of conversion with respect to such note.
If you convert notes, Apria will pay any documentary, stamp or similar
issue or transfer tax due on the issue of shares of its common stock upon the
conversion, unless the tax is due because you request the shares to be issued or
delivered to another person, in which case you will pay that tax.
CONVERSION UPON SATISFACTION OF SALE PRICE CONDITION
You may surrender your notes for conversion into common stock of Apria in
any fiscal quarter, and only during such fiscal quarter, if the last reported
sale price per share of Apria's common stock for at least 20 trading days during
the period of 30 consecutive trading days ending on the last trading day of the
previous fiscal quarter is greater than or equal to 130% of the applicable
conversion price per share of Apria's common stock on such last trading day.
Upon surrender of your notes for conversion, Apria will have the right to
deliver, in lieu of shares of common stock, cash or a combination of cash and
shares of common stock, as described below under " -- Payment Upon Conversion."
The "last reported sale price" of common stock of Apria on any date means
the closing sale price per share, or if no closing sale price is reported, the
average of the bid and asked prices or, if more than one in either case, the
average of the average bid and the average asked prices, on such date as
reported in composite transactions for the
21
principal United States securities exchange on which Apria's common stock is
traded or, if Apria's common stock is not listed on a United States national or
regional securities exchange, as reported by the Nasdaq National Market. If the
common stock of Apria is not listed for trading on a U.S. national or regional
securities exchange and not reported by the Nasdaq National Market on the
relevant date, the "last reported sale price" will be the last quoted bid price
for Apria's common stock in the over-the-counter market on the relevant date as
reported by the National Quotation Bureau Incorporated or similar organization.
If the common stock of Apria is not so quoted, the "last reported sale price"
will be the average of the mid-point of the last bid and asked prices for
Apria's common stock on the relevant date from each of at least three
independent nationally recognized investment banking firms selected by Apria for
this purpose.
CONVERSION UPON SATISFACTION OF TRADING PRICE CONDITION
You may surrender your notes for conversion into shares of common stock of
Apria prior to maturity during the five business day period after any five
consecutive trading day period in which the trading price per $1,000 principal
amount of notes, as determined following a request by a holder of notes in
accordance with the procedures described below, for each day of that period was
less than 98% of the product of the last reported sale price of Apria's common
stock and the applicable conversion rate (the "trading price condition");
provided, however, that you may not convert your notes in reliance on this
provision after September 1, 2028 if on any trading day during such measurement
period the last reported sale price of Apria's common stock was between 100% and
130% of the then current conversion price of the notes. Upon surrender of your
notes for conversion, Apria will have the right to deliver, in lieu of shares of
common stock, cash or combination of cash and shares of common stock, as
described below under " -- Payment Upon a Conversion."
For purposes of this section, the "trading price" of the notes on any date
of determination means the average of the secondary market bid quotations per
note obtained by the trustee for $5.0 million aggregate principal amount of the
notes at approximately 3:30 p.m., New York City time, on such determination date
from three independent nationally recognized securities dealers Apria selects,
provided that if:
- three such bids cannot reasonably be obtained by the trustee, but
two such bids are obtained, then the average of the two bids shall
be used, and
- if only one such bid can reasonably be obtained by the trustee, that
one bid shall be used.
If, as of such date of determination, the trustee cannot reasonably obtain at
least one bid for $5.0 million aggregate principal amount of the notes from a
nationally recognized securities dealer then the trading price per $1,000
principal amount of notes will be deemed to be less than 98% of the product of
the last reported sale price of Apria's common stock and the number of shares
issuable upon conversion of $1,000 principal amount of the notes.
In connection with any conversion upon satisfaction of the above trading
price condition, the trustee shall have no obligation to determine the trading
price of the notes unless Apria has requested such determination; and Apria
shall have no obligation to make such request unless you provide Apria with
reasonable evidence that the trading price per $1,000 principal amount of notes
would be less than 98% of the product of the last reported sale price of Apria's
common stock and the number of shares of common stock issuable upon conversion
of $1,000 principal amount of the notes. At such time, Apria shall instruct the
trustee to determine the trading price of the notes beginning on the next
trading day and on each successive trading day until the trading price per
$1,000 principal amount of notes is greater than or equal to 98% of the product
of the last reported sale price of Apria's common stock and the number of shares
of common stock issuable upon conversion of $1,000 principal amount of the
notes.
CONVERSION UPON NOTICE OF REDEMPTION
If Apria calls any or all of the notes for redemption, you may convert any
of your notes that have been called for redemption into shares of Apria's common
stock at any time prior to the close of business on the second business day
prior to the redemption date. Upon surrender of your notes for conversion, Apria
will have the right to deliver, in lieu of shares of common stock, cash or a
combination of cash and shares of common stock, as described below under " --
Payment Upon Conversion."
22
CONVERSION UPON SPECIFIED CORPORATE TRANSACTIONS
If Apria elects to:
- distribute to all holders of Apria's common stock certain rights
entitling them to purchase, for a period expiring within 45 days
after the date of the distribution, shares of Apria's common stock
at less than the last reported sale price of a share of Apria's
common stock on the trading day immediately preceding the
declaration date of the distribution; or
- distribute to all holders of Apria's common stock, assets (including
cash), debt securities or rights to purchase Apria's securities,
which distribution has a per share value as determined by Apria's
board of directors exceeding 10% of the last reported sale price of
Apria's common stock on the trading day immediately preceding the
declaration date for such distribution,
Apria must notify holders of the notes at least 20 business days prior to the
ex-dividend date for such distribution. Once Apria has given such notice,
holders may surrender their notes for conversion at any time until the earlier
of the close of business on the business day immediately prior to the
ex-dividend date or any announcement that such distribution will not take place.
No holder may exercise this right to convert if the holder otherwise will
participate in the distribution without conversion. The "ex-dividend" date is
the first date upon which a sale of the common stock does not automatically
transfer the right to receive the relevant distribution from the seller of the
common stock to its buyer. Upon surrender of your notes for conversion, Apria
will have the right to deliver, in lieu of shares of common stock, cash or a
combination of cash and shares of common stock, as described below under " --
Payment Upon Conversion."
In addition, if Apria is a party to a consolidation, merger or binding
share exchange, in each case pursuant to which its common stock would be
converted into cash or property other than securities, a holder may surrender
notes for conversion at any time from and after the date which is 15 days prior
to the anticipated effective date of the transaction until and including the
date which is 15 days after the actual effective date of such transaction. If
Apria engages in certain reclassifications of its common stock or is a party to
a consolidation, merger, binding share exchange or transfer of all or
substantially all of its assets, in each case pursuant to which its common stock
is converted into cash, securities or other property, then at the effective time
of the transaction, the right to convert a note into Apria's common stock will
be changed into a right to convert a note into the kind and amount of cash,
securities or other property which a holder would have received if the holder
had converted its notes immediately prior to the applicable record date for such
transaction. If Apria engages in any transaction described in the preceding
sentence, the conversion rate will not be adjusted. If the transaction also
constitutes a fundamental change, a holder can require Apria to redeem all or a
portion of its notes as described under " -- Repurchase of Notes by Apria at
Option of Holder upon a Fundamental Change."
CONVERSION UPON CREDIT RATINGS EVENT
After the date, if ever, on which either Moody's Investors Service, Inc.
or Standard & Poor's Rating Services assigns an initial credit rating to the
notes, you will have the right to surrender any or all of your notes for
conversion into shares of Apria's common stock during any period in which the
credit rating assigned to the notes by either Moody's or S&P is three or more
rating subcategories below the initial credit rating assigned by Moody's or S&P,
as the case may be, or any period in which the notes are no longer rated by
either Moody's or S&P, as the case may be, if such ratings agency had previously
rated the notes. The notes have not been assigned a credit rating by any rating
agency. Apria does not intend and has no obligation to obtain a credit rating
for the notes and there is no certainty that any such credit rating will be
assigned to the notes. Upon surrender of your notes for conversion, Apria will
have the right to deliver, in lieu of shares of common stock, cash or a
combination of cash and shares of common stock, as described below under " --
Payment Upon Conversion."
CONVERSION PROCEDURES
To convert your note into common stock you must do each of the following:
23
- complete and manually sign the conversion notice on the back of the
note, or a facsimile of the conversion notice, and deliver this
irrevocable notice to the conversion agent;
- surrender the note to the conversion agent;
- if required, furnish appropriate endorsements and transfer
documents;
- if required, pay all transfer or similar taxes; and
- if required, pay funds equal to interest payable on the next
interest payment date.
The date you comply with these requirements is the conversion date under
the indenture. If your interest is a beneficial interest in a global note, to
convert you must comply with the last three requirements listed above and comply
with the depositary's procedures for converting a beneficial interest in a
global note.
The conversion agent will, on your behalf, convert the notes into shares
of common stock of Apria. You may obtain copies of the required form of the
conversion notice from the conversion agent. A certificate, or a book-entry
transfer through DTC, for the number of full shares of common stock of Apria
into which any notes are converted, together with a cash payment for any
fractional share, will be delivered through the conversion agent as soon as
practicable, but no later than the fifth business day, following the conversion
date.
As described below under " -- Payment Upon Conversion," Apria will have
the right to deliver, in lieu of its shares of common stock, cash or a
combination of cash and shares of common stock in amounts described below under
" -- Payment Upon Conversion."
PAYMENT UPON CONVERSION
Conversion on or Prior to a Redemption Notice Date or the Final Notice
Date. In the event that Apria receives your notice of conversion on or prior to
(1) the redemption date, which is the date on which Apria gives notice of its
optional redemption of notes as described under " -- Optional Redemption by
Apria" or (2) the final notice date, which is the date that is 20 days prior to
maturity, the following procedures will apply:
- If Apria chooses to satisfy all or any portion of its obligation to
convert the notes (the "conversion obligation") in cash, Apria will
notify holders through the trustee of the dollar amount to be
satisfied in cash, which must be expressed either as 100% of the
conversion obligation or as a fixed dollar amount, at any time on or
before the date that is two business days following the conversion
date. If Apria timely elects to pay cash for any portion of the
shares otherwise issuable to holders upon conversion, holders may
retract the conversion notice at any time during the two business
days following the final day of the notice period described above
(the "conversion retraction period"). No such retraction can be
made, and a conversion notice shall be irrevocable, if Apria does
not elect to deliver cash in lieu of shares, other than cash in lieu
of fractional shares. Upon the expiration of a conversion retraction
period, a conversion notice shall be irrevocable. If Apria elects to
satisfy all or any portion of the conversion obligation in cash, and
the conversion notice has not been retracted, then settlement,
either in cash or in cash and shares, will occur on the business day
following the final day of the 20 trading day period beginning on
the day after the final day of the conversion retraction period (the
"cash settlement averaging period"). If Apria does not elect to
satisfy any part of the conversion obligation in cash, other than
cash in lieu of any fractional shares, delivery of the common shares
into which the notes are converted, and cash in lieu of any
fractional shares will occur through the conversion agent as
described above as soon as practicable on or after the conversion
date.
Settlement amounts will be computed as follows:
- If Apria elects to satisfy the entire conversion obligation in
shares, Apria will deliver to holders a number of shares equal to
(i) the aggregate principal amount of notes to be converted divided
by 1,000 multiplied by (ii) the applicable conversion rate. In
addition, Apria will pay cash for any fractional common share based
on the last reported sale price of the common shares on the trading
day
24
immediately preceding the conversion date.
- If Apria elects to satisfy the entire conversion obligation in
cash, Apria will deliver to holders cash in an amount equal to
the product of:
- a number equal to (i) the aggregate principal
amount of notes to be converted divided by 1,000
multiplied by (ii) the conversion rate, and
- the average last reported sale price of its shares
of common stock during the cash settlement
averaging period.
If Apria elects to satisfy a fixed portion (other than 100%) of the
conversion obligation in cash, Apria will deliver to holders the specified cash
amount (the "cash amount") and a number of its shares of common stock equal to
the greater of (i) zero and (ii) the excess, if any, of the number of shares
calculated as if Apria elected to satisfy the entire conversion obligation in
shares over the number of shares equal to the sum, for each day of the cash
settlement averaging period, of (x) 5% of the cash amount, divided by (y) the
last reported sale price of its shares of common stock. In addition, Apria will
pay cash for all fractional common shares based on the average last reported
sale price of its shares of common stock during the cash settlement averaging
period.
"Trading day" means a day during which trading in securities generally
occurs on the New York Stock Exchange or, if Apria's common stock is not listed
on the New York Stock Exchange, on the principal other national or regional
securities exchange on which Apria's common stock is then listed or, if its
common stock is not listed on a national or regional securities exchange, on the
National Association of Securities Dealers Automated Quotation System or, if its
common stock is not quoted on the National Association of Securities Dealers
Automated Quotation System, on the principal other market on which Apria's
common shares is then traded; provided that no day on which trading of Apria's
common shares is suspended on such exchange or other trading market will count
as a trading day.
Conversion After a Redemption Notice Date or the Final Notice Date. With
respect to conversion notices that Apria receives after a redemption notice date
or the final notice date, Apria will not send individual notices of its election
to satisfy all or any portion of the conversion obligation in cash. If Apria
elects to redeem all or a portion of the notes, its notice of redemption will
inform the holders of its election to deliver shares of its common stock or cash
with respect to notes converted prior to the redemption date as described below
under " -- Optional Redemption." In addition, if Apria chooses to satisfy all or
any portion of the conversion obligation with respect to conversions after the
final notice date in cash, on or before the final notice date Apria will send a
single notice to holders indicating the dollar amount to be satisfied in cash
(which must be expressed either as 100% of the conversion obligation or as a
fixed dollar amount).
In the event that Apria receives notice of conversion after a redemption
notice date or the final notice date from holders of notes, settlement amounts
will be computed and settlement dates will be determined in the same manner as
set forth above under " -- Conversion On or Prior to a Redemption Notice Date or
the Final Notice Date," except that the "cash settlement averaging period" shall
be the 20 trading day period beginning on the trading day after the conversion
date. If a conversion notice is received from holders of notes after a
redemption notice date or the final notice date, such holders will not be
allowed to retract the conversion notice. Settlement (in cash and/or shares)
will occur on the business day following the final day of such cash settlement
averaging period. If Apria does not elect to satisfy any part of the conversion
obligation in cash, other than cash in lieu of any fractional shares, delivery
of the common shares into which the notes are converted, and cash in lieu of any
fractional shares, will occur through the conversion agent as described above as
soon as practicable on or after the conversion date.
CONVERSION RATE ADJUSTMENTS
The applicable conversion rate will be subject to adjustment, without
duplication, upon the occurrence of any of the following events:
(1) the payment to all holders of common stock of dividends or other
distributions payable in shares of Apria's common stock or its other
capital stock;
25
(2) the issuance to all holders of Apria's common stock of rights, warrants or
options, other than pursuant to any dividend reinvestment or share
purchase plans, entitling them, for a period of up to 60 days from the
date of issuance of the rights, warrants or options, to subscribe for or
purchase common stock at less than the current market price thereof;
provided, that the applicable conversion rate will be readjusted to the
extent that such rights, warrants or options are not exercised prior to
their expiration;
(3) subdivisions, splits and combinations of Apria's common stock;
(4) distributions to all holders of Apria's common stock of evidences of its
indebtedness, shares of capital stock, securities, cash, property or
assets (excluding any dividend or distribution covered by clause (1) or
(2) above); in the event that Apria makes a distribution to all holders of
its common stock consisting of capital stock of, or similar equity
interests in, a subsidiary or other business unit of Apria, the conversion
rate will be adjusted based on the market value of the securities so
distributed relative to the current market price of its common stock, in
each case based on the average closing sale prices of those securities for
the 10 trading days commencing on and including the fifth trading day
after the date on which "ex-dividend trading" commences for such dividend
or distribution on the New York Stock Exchange or such other national or
regional exchange or market on which the securities are then listed or
quoted; or
(5) the successful completion of a tender or exchange offer made by Apria or
any of its subsidiaries for shares of Apria's common stock which involves
an aggregate consideration per share that exceeds its market
capitalization divided by the total number of outstanding shares of common
stock on the expiration of the tender or exchange offer.
In the event that Apria makes a cash distribution described in clause (4)
above, the conversion rate will be adjusted by dividing:
- the conversion rate, by
- a fraction, (1) the numerator of which will be the current market
price per share of its common stock and (2) the denominator of which
will be the current market price per share of its common stock plus
the amount per share of such distribution.
If Apria adopts a rights plan while notes remain outstanding, holders of
notes will receive, upon conversion of notes, in addition to shares of its
common stock, the rights under the rights plan unless, prior to the conversion,
the rights have expired, terminated or been redeemed or unless the rights have
separated from its common stock, in which case the applicable conversion rate
will be adjusted at the time of separation as if Apria distributed to all
holders of Apria's common stock shares of its common stock, evidences of
indebtedness or assets described in clause (4) above, subject to readjustment
upon the subsequent expiration, termination or redemption of the rights.
In addition to these adjustments, Apria may increase the conversion rate
as its board of directors deems advisable to avoid or diminish any income tax to
holders of its capital stock resulting from any dividend or distribution of
capital stock (or rights to acquire capital stock) or from any event treated as
such for income tax purposes. Apria may also, from time to time, to the extent
permitted by applicable law, increase the conversion rate by any amount for any
period of at least 20 days if its board of directors has determined that such
increase would be in its best interests. If Apria's board of directors makes
such a determination, it will be conclusive. Apria will give holders of notes at
least 15 days' notice of such an increase in the conversion rate. For a
discussion of the United States federal income tax treatment of an adjustment to
the conversion rate of the notes, see "Material U.S. Federal Income Tax
Considerations -- Interest Accruals on the Notes -- Constructive Dividends."
The "current market price" per share of common stock on any day means the
average of the last reported sale price for the 10 consecutive trading days from
and including the ex-dividend trading with respect to the issuance or
distribution requiring the computation. For purposes of this paragraph, the term
"ex-dividend trading," when used with respect to any issuance or distribution,
will mean the first date on which the common stock trades regular way on the
applicable exchange or in the applicable market without the right to receive the
issuance or distribution.
26
No adjustment to the conversion rate or the ability of a holder of a note
to convert will be made if the holder will otherwise participate in the
distribution without conversion.
The applicable conversion rate will not be adjusted:
- upon the issuance of any shares of Apria's common stock pursuant to
any present or future plan providing for the reinvestment of
dividends or interest payable on its securities and the investment
of additional optional amounts in shares of its common stock under
any plan;
- upon the issuance of any shares of Apria's common stock or options
or rights to purchase those shares pursuant to any present or future
employee, director or consultant benefit plan or program of or
assumed by Apria or any of its subsidiaries;
- upon the issuance of any shares of Apria's common stock pursuant to
any option, warrant, right or exercisable, exchangeable or
convertible security not described in the preceding bullet and
outstanding as of the date the notes were first issued;
- for a change in the par value of the common stock; or
- for accrued and unpaid interest, including contingent interest and
additional amounts, if any.
Adjustments to the applicable conversion rate will be calculated to the
nearest 1/10,000th of a share. No adjustment to the applicable conversion rate
will be required unless the adjustment would require an increase or decrease of
at least 1.0% of the applicable conversion rate. However, any adjustments which
are not required to be made because they would have required an increase or
decrease of less than 1.0% will be carried forward and taken into account in any
subsequent adjustment.
REPURCHASE OF NOTES BY APRIA AT THE OPTION OF THE HOLDER
You have the right to require Apria to repurchase all or a portion of your
notes on September 1, 2008, September 1, 2010, September 1, 2013, September 1,
2018, September 1, 2023 and September 1, 2028 (each, a "repurchase date").
Apria will be required to repurchase any outstanding note for which you
deliver a written repurchase notice to the paying agent (which will initially be
the trustee). This notice must be delivered during the period beginning at any
time from the opening of business on the date that is 20 business days prior to
the repurchase date until the close of business on the business day prior to the
repurchase date. You may withdraw your repurchase notice at any time prior to
the close of business on the business day prior to the repurchase date. If a
repurchase notice is given and withdrawn during that period, Apria will not be
obligated to repurchase the notes listed in the notice. Apria's repurchase
obligation will be subject to certain additional conditions described below.
The repurchase price payable will be equal to 100% of the principal amount
of the notes to be repurchased plus any accrued and unpaid interest, including
contingent interest and additional amounts, if any, to but excluding the
repurchase date.
In the case of any notes that you require Apria to purchase on September
1, 2008, Apria is required to pay the repurchase price in cash. In the case of
any notes that you require Apria to repurchase on September 1, 2010, September
1, 2013, September 1, 2018, September 1, 2023 or September 1, 2028, Apria may
choose to pay the repurchase price in cash or shares of its common stock valued
at the market price or a combination of cash and shares of its common stock.
Apria's right to pay all or any of the repurchase price in shares of its common
stock is subject to additional conditions specified below.
If Apria elects for the September 1, 2010, September 1, 2013, September 1,
2018, September 1, 2023 or September 1, 2028 repurchase date to pay the
repurchase price in whole or in part in shares of common stock, the number of
shares of common stock to be delivered by Apria will be equal to the portion of
the purchase price to be paid in shares of common stock divided by the market
price of Apria's common stock. The market price of Apria's
27
common stock will be determined prior to the applicable repurchase date, as
described below. If Apria elects to pay the repurchase price in whole or in part
in shares of common stock, Apria will pay cash in lieu of fractional shares in
an amount based upon the market price of its common stock.
As used under this caption, "market price" means, with respect to any
repurchase date, the average of the last reported sale price per share of
Apria's common stock for the 20 consecutive trading days ending on the third
business day prior to the applicable repurchase date (or, if such third business
day is not a trading day, then ending on the last trading day prior to such
third business day), appropriately adjusted to take into account the occurrence,
during the period commencing on the first trading day of such 20 trading-day
period and ending on the applicable repurchase date of any event requiring an
adjustment of the conversion rate under the indenture.
Because the market price of Apria's common stock is determined prior to
the applicable repurchase date, you will bear the market risk with respect to
the value of the shares of its common stock, if any, to be received from the
date the market price is determined to the date you receive such shares. In
addition, the market price of Apria's common stock is an average price rather
than the price as of a single date.
On or before the 25th business day prior to each repurchase date, Apria
will provide to the trustee, the paying agent and all holders of notes at their
addresses shown in the register of the registrar, and to beneficial owners as
required by applicable law, a notice stating, among other things:
- the repurchase price;
- the last date on which a holder may exercise the repurchase right;
- the repurchase date;
- whether Apria will pay the repurchase price in cash, in shares of
its common stock or any combination thereof, specifying the
percentage or amounts of each;
- if Apria elects to pay the repurchase price in whole or in part with
shares of its common stock, the method of calculating the market
price of its common stock;
- the name and address of the paying agent and the conversion agent;
- the applicable conversion rate and any adjustments to the applicable
conversion rate;
- that the notes with respect to which a repurchase election has been
given by the holder may be converted only if the holder withdraws
the repurchase election in accordance with the terms of the
indenture; and
- the procedures that holders must follow to require Apria to
repurchase their notes.
Your notice electing to require Apria to repurchase notes must state:
- if certificated notes have been issued, the note certificate numbers
of the notes to be repurchased;
- the portion of the principal amount of notes to be repurchased,
which must equal $1,000 or an integral multiple thereof;
- that the notes are to be repurchased by Apria pursuant to the
applicable provisions of the notes and the indenture; and
- if Apria has elected to pay the repurchase price in shares of its
common stock but the repurchase price is ultimately to be paid to
the holder entirely in cash because any of the conditions to payment
in common stock is not satisfied prior to the close of business on
the business day immediately preceding the repurchase date, whether
you elect:
28
- to withdraw the repurchase election as to some or all of the notes
to which it relates; or
- to receive cash in respect of the entire repurchase price for all
notes subject to the repurchase election.
If you fail to indicate your choice with respect to this election, you
will be deemed to have elected to receive cash in respect of the entire
repurchase price for all notes subject to the repurchase election in these
circumstances. For a discussion of the tax treatment of a holder receiving cash,
shares of common stock or any combination thereof, see "Material U.S. Federal
Income Tax Considerations."
If your notes are not in certificated form, your repurchase notice must
comply with appropriate DTC procedures.
No notes may be repurchased at the option of holders if there has occurred
and is continuing an event of default other than an event of default that is
cured by the payment of the repurchase price of the notes.
You may withdraw any repurchase notice in whole or in part by delivering a
written notice of withdrawal to the paying agent prior to the close of business
on the business day prior to the repurchase date. The withdrawal notice must
state:
- the principal amount of the withdrawn notes;
- if certificated notes have been issued, the certificate numbers of
the withdrawn notes; and
- the principal amount, if any, which remains subject to the
repurchase notice.
If your notes are not in certificated form, your withdrawal notice must
comply with appropriate DTC procedures.
To receive payment of the repurchase price, you must either effect
book-entry transfer of your notes or deliver your notes, together with necessary
endorsements, to the office of the paying agent after delivery of your
repurchase notice. Payment of the repurchase price for a note will be made
promptly following the later of the repurchase date and the time of book-entry
transfer or delivery of the note.
If the paying agent holds money or securities sufficient to pay the
repurchase price of the notes on the business day following the repurchase date,
then, on and after such date:
- the notes will cease to be outstanding and interest will cease to
accrue (whether or not book-entry transfer of the notes has been
made or the notes have been delivered to the paying agent); and
- all other rights of the holders will terminate (other than the right
to receive the repurchase price upon transfer or delivery of the
notes).
Apria's right to pay the repurchase price for notes in whole or in part in
shares of its common stock is subject to various conditions, including:
- Apria providing timely written notice, as described above, of its
election to pay all or part of the repurchase price in shares of
common stock;
- Apria's common stock being then listed on a national or regional
securities exchange or quoted on the Nasdaq Automated Quotation
System;
- information necessary to calculate the market price of Apria's
common stock being published in a daily newspaper of national
circulation or being otherwise readily publicly available;
- registration of the shares of Apria's common stock under the
Securities Act or the Exchange Act, in each case if required; and
29
- Apria obtaining any necessary qualification or registration under
applicable state securities law or the availability of an exemption
from such qualification and registration.
If the required conditions are not satisfied with respect to a holder
prior to the close of business on the business day immediately preceding the
repurchase date, Apria will pay the repurchase price for such holder's notes
entirely in cash. Apria may not change its election with respect to the form in
which Apria will pay the repurchase price once Apria has given the notice that
Apria is required to give, except as described in the preceding sentence.
Apria will comply with the provisions of Rule 13e-4 and any other tender
offer rules under the Exchange Act that may be applicable at the time of its
repurchase notice. If then required by the applicable rules, Apria will file a
Schedule TO or any other schedule required in connection with any offer by Apria
to repurchase the notes.
REPURCHASE OF NOTES BY APRIA AT OPTION OF HOLDER UPON A FUNDAMENTAL CHANGE
If a fundamental change (as defined below in this section) occurs at any
time prior to the maturity date, you will have the right, at your option, to
require Apria to repurchase any or all of your notes, or any portion of the
principal amount thereof that is equal to $1,000 or an integral multiple of
$1,000. The fundamental change repurchase price Apria is required to pay is
equal to 100% of the principal amount of the notes to be purchased plus accrued
and unpaid interest, including contingent interest and additional amounts, if
any, up to but excluding the fundamental change repurchase date.
A "fundamental change" will be deemed to have occurred at the time after
the notes are originally issued that any of the following occurs:
- a "person" or "group" within the meaning of Section 13(d) of the
Exchange Act other than Apria, its subsidiaries or Apria or its
subsidiaries employee benefit plans, files a Schedule TO or any
other schedule, form or report under the Exchange Act disclosing
that such person or group has become the direct or indirect ultimate
"beneficial owner," as defined in Rule 13d-3 under the Exchange Act,
of more than 50% of the total voting power of all shares of Apria's
capital stock that are entitled to vote generally in the election of
directors; or
- consummation of any share exchange, consolidation or merger of Apria
or any sale, lease or other transfer in one transaction or a series
of transactions of all or substantially all of the consolidated
assets of Apria and its subsidiaries, taken as a whole, to any
person other than Apria or one or more of its subsidiaries, pursuant
to which its common stock will be converted into cash, securities or
other property; provided, however, that a transaction where the
holders of Apria's voting capital stock immediately prior to such
transaction have directly or indirectly more than 50% of the
aggregate voting power of all shares of capital stock of the
continuing or surviving corporation or transferee entitled to vote
generally in the election of directors immediately after such event
shall not be a fundamental change.
A fundamental change will not be deemed to have occurred in respect of
either of the foregoing, however, if either:
- the last reported sale price of Apria's common stock for any five
trading days within the 10 consecutive trading days ending
immediately before the later of the fundamental change or the public
announcement thereof, equals or exceeds 105% of the applicable
conversion price of the notes immediately before the fundamental
change or the public announcement thereof; or
- at least 90% of the consideration, excluding cash payments for
fractional shares, in the transaction or transactions constituting
the fundamental change consists of shares of capital stock traded on
a national securities exchange or quoted on the Nasdaq National
Market or which will be so traded or quoted when issued or exchanged
in connection with a fundamental change (these securities being
referred to as "publicly traded securities") and as a result of this
transaction or transactions the notes become convertible into such
publicly traded securities.
For purposes of the above paragraph the term "capital stock" of any person
means any and all shares (including
30
ordinary shares or American Depositary Shares), interests, participations or
other equivalents however designated of corporate stock or other equity
participations, including partnership interests, whether general or limited, of
such person and any rights (other than debt securities convertible or
exchangeable into an equity interest), warrants or options to acquire an equity
interest in such person.
On or before the 15th day after the occurrence of a fundamental change,
Apria will provide to all holders of the notes and the trustee and paying agent
a notice of the occurrence of the fundamental change and of the resulting
repurchase right. Such notice shall state, among other things:
- the events causing a fundamental change;
- the date of the fundamental change;
- the last date on which a holder may exercise the repurchase right;
- the fundamental change repurchase price;
- the fundamental change repurchase date;
- the name and address of the paying agent;
- the applicable conversion rate and any adjustments to the applicable
conversion rate;
- that the notes with respect to which a fundamental change repurchase
election has been given by the holder may be converted only if the
holder withdraws the fundamental change repurchase election in
accordance with the terms of the indenture; and
- the procedures that holders must follow to require Apria to
repurchase their notes.
To exercise the repurchase right, you must deliver prior to the close of
business on the business day immediately preceding the fundamental change
repurchase date, subject to extension to comply with applicable law, the notes
to be repurchased, duly endorsed for transfer, together with a written
repurchase election and the form entitled "Form of Fundamental Change Repurchase
Notice" on the reverse side of the notes duly completed, to the paying agent.
Your repurchase election must state:
- if certificated notes have been issued, the certificate numbers of
the notes to be delivered for repurchase;
- the portion of the principal amount of notes to be repurchased,
which must be $1,000 or an integral multiple thereof; and
- that the notes are to be repurchased by Apria pursuant to the
applicable provisions of the notes and the indenture.
If the notes are not in certificated form, your notice must comply with
appropriate DTC procedures.
No notes may be repurchased at the option of holders upon a fundamental
change if there has occurred and is continuing an event of default other than an
event of default that is cured by the payment of the fundamental change
repurchase price of the notes.
You may withdraw any repurchase election, in whole or in part, by a
written notice of withdrawal delivered to the paying agent prior to the close of
business on the business day prior to the fundamental change repurchase date.
The notice of withdrawal shall state:
- the principal amount of the withdrawn notes;
- if certificated notes have been issued, the certificate numbers of
the withdrawn notes; and
31
- the principal amount, if any, which remains subject to the
repurchase notice.
If the notes are not in certificated form, your notice must comply with
appropriate DTC procedures.
Apria will be required to repurchase the notes no later than 30 days after
the date of its notice of the occurrence of the relevant fundamental change
subject to extension to comply with applicable law. You will receive payment of
the fundamental change repurchase price promptly following the later of the
fundamental change repurchase date or the time of book-entry transfer or the
delivery of the notes. If the paying agent holds money or securities sufficient
to pay the fundamental change repurchase price of the notes on the business day
following the fundamental change repurchase date, then:
- the notes will cease to be outstanding and interest will cease to
accrue, whether or not book-entry transfer of the notes is made or
whether or not the note is delivered to the paying agent; and
- all other rights of the holders will terminate, other than the right
to receive the fundamental change repurchase price upon delivery or
transfer of the notes.
Apria will comply with the provisions of Rule 13e-4 and any other tender
offer rules under the Exchange Act that may be applicable at the time of its
repurchase of notes upon a fundamental change. If then required by the
applicable rules, Apria will file a Schedule TO or any other schedule required
in connection with any offer by Apria to repurchase the notes.
The rights of the holders to require Apria to repurchase their notes upon
a fundamental change could discourage a potential acquirer of Apria. The
fundamental change repurchase feature, however, is not the result of
management's knowledge of any specific effort to accumulate shares of Apria's
common stock, to obtain control of Apria by any means or part of a plan by
management to adopt a series of anti- takeover provisions. Instead, the
fundamental change purchase feature is a standard term contained in other
offerings of debt securities similar to the notes that have been marketed by the
initial purchasers. The terms of the fundamental change repurchase feature
resulted from negotiations between the initial purchasers and Apria.
The term "fundamental change" is limited to specified transactions and may
not include other events that might adversely affect Apria's financial
condition. In addition, the requirement that Apria offers to repurchase the
notes upon a fundamental change may not protect holders in the event of a highly
leveraged transaction, reorganization, merger or similar transaction involving
Apria.
The definition of fundamental change includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of "all or substantially all"
of Apria's consolidated assets. There is no precise, established definition of
the phrase "substantially all" under applicable law. Accordingly, the ability of
a holder of the notes to require Apria to repurchase its notes as a result of
the conveyance, transfer, sale, lease or other disposition of less than all of
Apria's assets may be uncertain.
If a fundamental change were to occur, Apria may not have enough funds to
pay the fundamental change repurchase price. If Apria fails to repurchase the
notes when required following a fundamental change, Apria will be in default
under the indenture. In addition, Apria has, and may in the future incur, other
indebtedness with similar change in control provisions permitting its holders to
accelerate or to require Apria to purchase its indebtedness upon the occurrence
of similar events or on some specific dates.
MERGER AND SALE OF ASSETS BY APRIA
The indenture provides that Apria may not consolidate with or merge with
or into any other person or sell, convey, transfer or lease its properties and
assets substantially as an entirety to another person, unless:
- Apria is the surviving person or the resulting, surviving or
transferee person, if other than Apria, is organized and existing
under the laws of the United States, any state thereof or the
District of Columbia;
32
- the successor person assumes all of its obligations under the notes
and the indenture;
- immediately after giving effect to such transaction, there is no
event of default or event that, with notice or passage of time or
both, would become an event of default; and
- Apria has delivered to the trustee an officers' certificate and an
opinion of counsel each stating that such consolidation, merger,
sale, conveyance, transfer or lease complies with these
requirements.
Upon any permitted consolidation, merger, conveyance, transfer or lease,
the resulting, surviving or transferee person shall succeed to and be
substituted for Apria, and may exercise its rights and powers under the
indenture and the notes, and after any such contemplated transaction, Apria will
be relieved of all obligations and covenants under the indenture and the notes.
EVENTS OF DEFAULT; NOTICE AND WAIVER
The following will be events of default under the indenture:
- Apria fails to pay principal of the notes when due at maturity, upon
redemption, upon repurchase or otherwise;
- Apria fails to pay any interest, including contingent interest and
additional amounts, if any, on the notes when due and such failure
continues for a period of 30 days past the applicable due date;
- Apria fails to provide notice of the occurrence of a fundamental
change on a timely basis;
- default in Apria's obligation to convert the notes into shares of
its common stock upon exercise of a holder's conversion right;
- default in Apria's obligation to repurchase the notes at the option
of a holder upon a fundamental change or on any other repurchase
date;
- default in Apria's obligation to redeem the notes after it has
exercised its option to redeem;
- Apria fails to perform or observe any of the covenants in the
indenture for 60 days after written notice to Apria from the trustee
or the holders of at least 25% in principal amount of the
outstanding notes;
- default by Apria or any of its subsidiaries in the payment of the
principal or interest on any mortgage, agreement or other instrument
under which there may be outstanding, or by which there may be
secured or evidenced, any of its indebtedness or indebtedness of any
of its subsidiaries for money borrowed in excess of $10.0 million in
the aggregate, whether such indebtedness now exists or shall
hereafter be created, resulting in such indebtedness becoming or
being declared due and payable, and such acceleration shall not have
been rescinded or annulled within 30 days after written notice of
such acceleration has been received by Apria or such subsidiary;
- final unsatisfied judgments not covered by insurance aggregating in
excess of $10.0 million rendered against Apria or any of its
subsidiaries and not stayed, bonded or discharged within 60 days;
and
- certain events involving Apria's bankruptcy, insolvency or
reorganization.
The trustee may withhold notice to the holders of the notes of any
default, except defaults in payment of principal or interest, including
contingent interest or additional amounts, if any, on the notes. However, the
trustee must consider it to be in the interest of the holders of the notes to
withhold this notice.
If an event of default occurs and continues, the trustee or the holders of
at least 25% in principal amount of the outstanding notes may declare the
principal and accrued and unpaid interest, including contingent interest and
additional amounts, if any, on the outstanding notes to be immediately due and
payable. In case of certain events of
33
bankruptcy or insolvency involving Apria, the principal and accrued and unpaid
interest, including contingent interest and additional amounts, if any, on the
notes will automatically become due and payable. However, if Apria cures all
defaults, except the nonpayment of principal or interest, including contingent
interest and additional amounts, if any, that became due as a result of the
acceleration, and meet certain other conditions, with certain exceptions, this
declaration may be cancelled and the holders of a majority of the principal
amount of outstanding notes may waive these past defaults.
The holders of a majority of outstanding notes will have the right to
direct the time, method and place of any proceedings for any remedy available to
the trustee, subject to limitations specified in the indenture.
No holder of the notes may pursue any remedy under the indenture, except
in the case of a default in the payment of principal or interest, including
contingent interest or additional amounts, if any, on the notes, unless:
- the holder has given the trustee written notice of an event of
default;
- the holders of at least 25% in principal amount of outstanding notes
make a written request, and offer reasonable indemnity, to the
trustee to pursue the remedy;
- the trustee does not receive an inconsistent direction from the
holders of a majority in principal amount of the notes;
- the holder or holders have offered reasonable security or indemnity
to the trustee against any costs, liability or expense of the
trustee; and
- the trustee fails to comply with the request within 60 days after
receipt of the request and offer of indemnity.
The indenture will require Apria every year to deliver to the trustee a
statement as to performance of its obligations under the indenture and as to any
defaults.
A default in the payment of the notes, or a default with respect to the
notes that causes them to be accelerated, may give rise to a cross-default under
Apria's credit facility or other indebtedness.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The indenture will generally cease to be of any further effect with
respect to the notes, if:
- Apria has delivered to the trustee for cancellation all outstanding
notes, with certain limited exceptions, or
- all notes not previously delivered to the trustee for cancellation
have become due and payable, whether at stated maturity or any
redemption date or any repurchase date, including upon the
occurrence of a fundamental change, or upon conversion or otherwise,
and Apria has deposited with the trustee as trust funds the entire
amount in cash and/or its common stock, as applicable under the
terms of the indenture, sufficient to pay all the outstanding notes,
and if, in either case, Apria also pays or causes to be paid all other sums
payable under the indenture by Apria.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The notes are not subject to any defeasance provisions under the
indenture.
MODIFICATION AND WAIVER
The consent of the holders of a majority in principal amount of the
outstanding notes is required to modify or amend the indenture. However, a
modification or amendment requires the consent of the holder of each outstanding
note if it would:
34
- reduce the principal amount of or change the stated maturity of any
note;
- reduce the rate or extend the time for payment of interest,
including contingent interest or additional amounts, if any, on any
note;
- reduce any amount payable upon redemption or repurchase of any note,
including upon the occurrence of a fundamental change, or change the
time at which or circumstances under which the notes may or shall be
redeemed or repurchased;
- impair the right of a holder to institute suit for payment on any
note;
- change the currency in which any note is payable;
- impair the right of a holder to convert any note or reduce the
number of common shares or any other property receivable upon
conversion;
- reduce the quorum or voting requirements under the indenture;
- change any obligation of Apria to maintain an office or agency in
the places and for the purposes specified in the indenture;
- subject to specified exceptions, modify certain of the provisions of
the indenture relating to modification or waiver of provisions of
the indenture; or
- reduce the percentage of notes required for consent to any
modification of the indenture.
Apria is permitted to modify certain provisions of the indenture without
the consent of the holders of the notes, including to:
- add guarantees with respect to the notes or secure the notes;
- evidence the assumption of its obligations by a successor person
under the provisions of the indenture relating to consolidations,
mergers and sales of assets;
- surrender any of its rights or powers under the indenture,
including, without limitation, its right to pay any part of the
repurchase price of the notes with shares of common stock as
provided for by the indenture occurring on a date after the date of
such amendment;
- add covenants or events of default for the benefit of the holders of
notes;
- cure any ambiguity or correct any inconsistency in the indenture, so
long as such action will not adversely affect the interests of
holders;
- to modify or amend the indenture to permit the qualification of the
indenture or any supplemental indenture under the Trust Indenture
Act of 1939 as then in effect;
- establish the forms or terms of the notes;
- evidence the acceptance of appointment by a successor trustee; and
- make other changes to the indenture or forms or terms of the notes,
provided no such change individually or in the aggregate with all
other such changes has or will have a material adverse effect on the
interests of the holders of the notes.
35
CALCULATIONS IN RESPECT OF NOTES
Apria will be responsible for making all calculations called for under the
notes. These calculations include, but are not limited to, determinations of the
market prices of Apria's common stock, the amount of accrued interest, including
contingent interest and additional amounts, if any, payable on the notes and the
conversion price of the notes. Apria will make all these calculations in good
faith, and, absent manifest error, its calculations will be final and binding on
holders of notes. Apria will provide a schedule of its calculations to each of
the trustee and the conversion agent, and each of the trustee and the conversion
agent is entitled to rely upon the accuracy of its calculations without
independent verification. The trustee will forward Apria's calculations to any
holder of notes upon the request of that holder.
TRUSTEE, PAYING AGENT AND CONVERSION AGENT
Apria has appointed U.S. Bank National Association, the trustee under the
indenture, as paying agent, conversion agent, note registrar and custodian for
the notes. The trustee or its affiliates may also provide banking and other
services to Apria in the ordinary course of their business. The trustee is under
no obligation to exercise any of the rights or powers vested in it under the
indenture at the request, order or direction of any of the securityholders,
unless the securityholders have offered to the trustee reasonable security or
indemnity satisfactory to it against the costs, expenses and liabilities which
may be incurred therein.
NOTICES
Except as otherwise described herein, notice to registered holders of the
notes will be given by mail to the addresses as they appear in the security
register. Notices will be deemed to have been given on the date of such mailing.
GOVERNING LAW
The notes and the indenture shall be governed by, and construed in
accordance with, the laws of the State of New York.
FORM, DENOMINATION, EXCHANGE, REGISTRATION AND TRANSFER
The notes were issued:
- in fully registered form;
- without interest coupons; and
- in denominations of $1,000 principal amount and integral multiples
of $1,000. Holders may present notes for conversion, registration of
transfer and exchange at the office maintained by Apria for such
purpose, which will initially be the Corporate Trust Office of the
trustee in The City of New York.
PAYMENT AND PAYING AGENT
Apria will maintain an office in the Borough of Manhattan, The City of New
York, where Apria will pay the principal on the notes and you may present the
notes for conversion, registration of transfer or exchange for other
denominations, which shall initially be an office or agency of the trustee.
Apria may pay interest on any notes represented by the registered certificated
securities referred to below by check mailed to your address as it appears in
the note register, provided that if you are a holder with an aggregate principal
amount in excess of $2.0 million, you will be paid, at your written election, by
wire transfer in immediately available funds.
Payments on the notes represented by the global note referred to below
will be made to The Depository Trust Company, New York, New York, which is
referred to herein as DTC, or its nominee, as the case may be, as the registered
owner thereof, in immediately available funds. Apria expects that DTC or its
nominee, upon receipt of any payment on the notes represented by a global note,
will credit participants' accounts with payments in amounts
36
proportionate to their respective beneficial interests in the global note as
shown in the records of DTC or its nominee. Apria also expects that payments by
participants to owners of beneficial interests in the global note held through
such participants will be governed by standing instructions and customary
practice as is now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. The participants will be
responsible for those payments. Transfers between participants in DTC will be
effected in accordance with DTC rules and will be settled in immediately
available funds.
BOOK-ENTRY DELIVERY AND SETTLEMENT
Apria initially issued the notes in the form of one permanent global note
in definitive, fully registered, book-entry form. The global note was deposited
on behalf of DTC and registered in the name of Cede & Co., as nominee of DTC.
DTC has advised Apria as follows:
- DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered under Section 17A
of the Securities Exchange Act of 1934.
- DTC holds securities that its participants deposit with DTC and
facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited
securities, through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical
movement of securities certificates.
- Direct participants include securities brokers and dealers, trust
companies, clearing corporations and other organizations.
- DTC is owned by a number of its direct participants and by the New
York Stock Exchange, Inc., the American Stock Exchange LLC and the
National Association of Securities Dealers, Inc.
- Access to the DTC system is also available to others, such as
securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a direct
participant, either directly or indirectly.
- The rules applicable to DTC and its participants are on file with
the SEC.
Apria has provided the following descriptions of the operations and
procedures of DTC solely as a matter of convenience. These operations and
procedures are solely within the control of DTC and are subject to change by
them from time to time. None of the Company, the initial purchasers nor the
trustee takes any responsibility for these operations or procedures, and you are
urged to contact DTC or its participants directly to discuss these matters.
Under procedures established by DTC:
- Upon deposit of the global notes with DTC or its custodian, DTC
credited on its internal system the accounts of direct participants
designated by the initial purchasers with portions of the principal
amounts of the global notes.
- Ownership of the notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained
by DTC or its nominee, with respect to interests of direct
participants, and the records of direct and indirect participants,
with respect to interests of persons other than participants.
The laws of some jurisdictions require that purchasers of securities take
physical delivery of those securities in definitive form. Accordingly, the
ability to transfer interests in the notes represented by a global note to those
persons may be limited. In addition, because DTC can act only on behalf of its
participants, who in turn act on behalf of persons who hold interests through
participants, the ability of a person having an interest in notes
37
represented by a global note to pledge or transfer those interests to persons or
entities that do not participate in DTC's system, or otherwise to take actions
in respect of such interest, may be affected by the lack of a physical
definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of a global note,
DTC or that nominee will be considered the sole owner or holder of the notes
represented by that global note for all purposes under the indenture and under
the notes. Except as provided below, owners of beneficial interests in a global
note will not be entitled to have notes represented by that global note
registered in their names, will not receive or be entitled to receive physical
delivery of certificated notes and will not be considered the owners or holders
thereof under the indenture or under the notes for any purpose, including with
respect to the giving of any direction, instruction or approval to the trustee.
Accordingly, each holder owning a beneficial interest in a global note must rely
on the procedures of DTC and, if that holder is not a direct or indirect
participant, on the procedures of the participant through which that holder owns
its interest, to exercise any rights of a holder of notes under the indenture or
the global note.
Notes represented by a global security will be exchangeable for registered
certificated securities with the same terms only if: (1) DTC is unwilling or
unable to continue as depositary or if DTC ceases to be a clearing agency
registered under the Exchange Act and a successor depositary is not appointed by
Apria within 90 days; (2) Apria decides to discontinue use of the system of
book-entry transfer through DTC or any successor depositary; or (3) a default
under the indenture occurs and is continuing.
Neither Apria nor the trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of notes
by DTC, or for maintaining, supervising or reviewing any records of DTC relating
to the notes.
REGISTRATION RIGHTS
On August 20, 2003, Apria entered into a registration rights agreement
with the initial purchasers. The following summary of the registration rights
provided in the registration rights agreement and the notes is not complete. You
should refer to the registration rights agreement filed as an exhibit to the
registration statement of which this prospectus is a part, for a full
description of the registration rights that apply to the notes.
Under the registration rights agreement, Apria agreed for the benefit of
the holders of the notes and the common stock issuable upon conversion of the
notes that Apria will, at its cost:
- file with the SEC no later than the 90th day after the first date of
original issuance of the notes, the shelf registration statement of which
this prospectus forms a part, covering resales of the notes and the common
stock issuable upon conversion thereof pursuant to Rule 415 under the
Securities Act;
- use commercially reasonable efforts to cause the shelf registration
statement to be declared effective under the Securities Act no later than
180 days after the first date of original issuance of the notes; and
- keep the shelf registration statement effective until the earlier
of:
- the second anniversary of the last date of original issuance of the
notes;
- the expiration of the holding period applicable to the notes and the
shares of common stock issuable upon conversion of the notes held by
non-affiliates under Rule 144(k); and
- such time as all of the notes and the common stock issuable upon
conversion thereof cease to be outstanding or have been sold either
pursuant to the shelf registration statement or pursuant to Rule 144
under the Securities Act or any similar provision then in force.
Apria may suspend the effectiveness of the shelf registration statement or
the use of this prospectus which forms a part of the shelf registration
statement during specified periods under certain circumstances relating to
pending corporate developments, public filings with the SEC and similar events.
Apria need not specify the nature of the event giving rise to a suspension in
any notice to the holders of the notes. Any suspension period shall not exceed
an
38
aggregate of:
- 45 days in any three-month period; or
- 120 days for all periods in any 12-month period.
A holder who elects to sell securities pursuant to this shelf registration
statement will:
- be required to be named as a selling securityholder in the related
prospectus;
- be required to deliver a prospectus to purchasers;
- be subject to the civil liability provisions under the Securities
Act in connection with any sales; and
- be subject to the provisions of the registration rights agreement,
including indemnification provisions.
Under the registration rights agreement Apria will:
- pay all expenses of this shelf registration statement;
- provide each registered holder with copies of the prospectus;
- notify holders when this shelf registration statement has become
effective; and
- take other reasonable actions as are required to permit unrestricted
resales of the notes and common stock issued upon conversion of the
notes in accordance with the terms and conditions of the
registration rights agreement.
The plan of distribution of the shelf registration statement permits
resales of registrable securities by selling securityholders though brokers and
dealers.
39
DESCRIPTION OF APRIA'S CAPITAL STOCK
COMMON STOCK
Apria's authorized common stock consists of 150,000,000 shares of common
stock. All authorized shares of common stock have a par value of $0.001 per
share and are entitled to one vote per share on all matters submitted to a vote
of stockholders. In the event of a liquidation, dissolution or winding up of
Apria, the holders of the common stock are entitled to share ratably in all
assets remaining after all liabilities and the liquidation preference
attributable to any outstanding preferred stock have been paid. Subject to any
preferential rights held by holders of preferred stock, holders of the common
stock are entitled to receive ratably such dividends as may be declared by the
board of directors out of funds legally available therefor. However, it is not
presently anticipated that dividends will be paid on common stock in the
foreseeable future, and certain of the debt instruments to which Apria is a
party prohibit or restrict the payment of dividends. Holders of common stock
have no preemptive rights and have no rights to convert their common stock into
any other securities, and there are no redemption provisions with respect to
such shares.
As of September 30, 2003, there were 50,978,921 shares of common stock
outstanding. As of September 30, 2003, there were reserved for issuance upon the
exercise of options and awards, 11,088,461 shares of common stock, of which
5,121,461 shares of common stock were outstanding.
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.
Apria's common stock is currently listed on the New York Stock Exchange
under the symbol "AHG."
For further details regarding the terms of Apria's common stock, please
refer to Apria's charter and bylaws, as filed with the SEC and the descriptions
contained in Apria's Registration Statement on Form 8-A, filed on February 11,
1992 under Apria's prior name, Abbey Healthcare Group Incorporated, as amended
and Apria's Registration Statement on form S-3, filed on August 7, 2001, as
amended, and incorporated herein by reference.
PREFERRED STOCK
Apria's authorized preferred stock consists of 10,000,000 shares of
preferred stock. All authorized shares of the preferred stock have a par value
of $0.001 per share. Apria's board of directors has the authority to issue
shares of preferred stock in one or more series and to fix the designation and
relative powers, preferences and rights and qualifications, limitations, or
restrictions of all shares of each such series, including without limitation
dividend rates, conversion rights, voting rights, redemption and sinking fund
provisions, liquidation preferences, and the number of shares constituting each
such series, without further vote or action by the stockholders. The issuance of
the preferred stock could decrease the amount of earnings and assets available
for distribution to holders of common stock or adversely affect the rights and
powers, including voting rights, of the holders of common stock. The issuance of
the preferred stock could have the effect of delaying, deferring, or preventing
a change in control of Apria without further action by the stockholders.
As of the date hereof there were no outstanding shares of preferred stock.
Apria has no present plans to issue any shares of preferred stock.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
Apria has shares of common stock and preferred stock available for future
issuance without stockholder approval. Apria may use these additional shares for
a variety of corporate purposes, including future public or private offerings to
raise additional capital, facilitating corporate acquisitions or paying a
dividend on its capital stock.
The existence of unissued and unreserved shares of common stock and
preferred stock may enable Apria's board of directors to issue shares to persons
friendly to current management or to issue preferred stock with terms that could
render more difficult or discourage a third party's attempt to obtain control of
Apria by means of a merger, tender offer, proxy contest or otherwise, thereby
protecting the continuity of the company's management. In
40
addition, Apria's issuance of preferred stock could adversely affect the voting
power of holders of common stock and the likelihood that such holders will
receive dividend payments and payments upon liquidation.
DELAWARE LAW AND SPECIFIED CHARTER AND BY-LAW PROVISIONS
Business combinations. Apria is subject to the provisions of Section 203
of the Delaware General Corporation Law. Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes mergers, asset sales and other transactions resulting in a
financial benefit to the interested stockholder. Subject to specified
exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
the corporation's voting stock.
Limitation of liability; indemnification. Apria's charter contains
provisions permitted under the Delaware General Corporation Law limiting
relating to the liability of directors. The provisions eliminate a director's
liability for monetary damages for a breach of fiduciary duty, except in
circumstances involving certain wrongful acts, such as the breach of a
director's duty of loyalty, acts or omissions that involve intentional
misconduct or a knowing violation of law or transactions from which the director
derived an improper personal benefit. Furthermore, Apria's by-laws contain
provisions to indemnify directors and officers to the fullest extent permitted
by the General Corporation Law of Delaware. These provisions do not limit or
eliminate Apria's right or the right of any of its stockholders to seek non-
monetary relief, such as an injunction or rescission in the event of a breach by
a director or an officer of his or her duty of care. Apria believes that these
provisions assist the company in attracting and retaining qualified individuals
to serve as directors.
Stockholder action; special meeting of stockholders. Apria's by-laws
provide that stockholders may take action at a duly called annual or special
meeting of stockholders. Apria's by-laws further provide that special meetings
of the stockholders may be called by the board of directors, by a special
committee of the board of directors vested with the power to call special
meetings, or by the stockholders holding of record a majority of the outstanding
shares entitled to vote at such meeting.
Advance notice requirements for stockholder proposals and director
nominations. Apria's by-laws provide that stockholders seeking to bring business
before an annual meeting of stockholders must meet specified procedural
requirements. These provisions may preclude stockholders from bringing matters
before an annual meeting of stockholders.
41
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material U.S. federal income tax
consequences of the ownership and disposition of the notes and Apria common
stock into which the notes may be converted. This discussion applies only to
holders that hold the notes and Apria common stock as capital assets for U.S.
federal income tax purposes.
This discussion does not describe all of the tax consequences that may be
relevant to a holder in light of its particular circumstances or to holders
subject to special rules, such as:
- certain financial institutions;
- insurance companies;
- dealers and certain traders in securities;
- persons holding the notes or Apria common stock as part of a
"straddle," "hedge," "conversion" or other risk reduction
transaction;
- United States Holders (as defined below) whose functional currency
is not the U.S. dollar;
- certain former citizens or residents of the United States;
- partnerships or other entities classified as partnerships for U.S.
federal income tax purposes; and
- persons subject to the alternative minimum tax.
This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), administrative pronouncements, judicial decisions and final,
temporary and proposed Treasury regulations, changes to any of which subsequent
to the date of this prospectus may affect the tax consequences described herein,
possibly with retroactive effect. Persons considering the purchase of the notes
are urged to consult their tax advisers with regard to the application of the
U.S. federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
CLASSIFICATION OF THE NOTES
The notes will be treated as indebtedness for U.S. federal income tax
purposes. Under the indenture governing the notes, Apria will agree, and by
acceptance of a beneficial interest in a note each holder of a note will be
deemed to have agreed, to treat the notes as indebtedness for U.S. federal
income tax purposes that is subject to the Treasury regulations governing
contingent payment debt instruments (the "contingent payment debt regulations").
Pursuant to the terms of the indenture, Apria and every holder agree, in the
absence of an administrative determination or judicial ruling to the contrary,
to be bound by Apria's application of the contingent payment debt regulations to
the notes, including Apria's determination of the projected payment schedule (as
described below) and the rate at which interest will be deemed to accrue on the
notes for U.S. federal income tax purposes. Recently, the Internal Revenue
Service (the "IRS") issued Revenue Ruling 2002-31 and Notice 2002-36, addressing
the U.S. federal income tax classification and treatment of instruments similar,
although not identical, to the notes, and concluded that the instruments
addressed in that published guidance were subject to the contingent payment debt
regulations. In addition, the IRS also clarified various aspects of the
potential applicability of certain other provisions of the Code to the
instruments addressed in that published guidance. However, the applicability of
the contingent payment debt regulations and Revenue Ruling 2002-31 to any
particular instruments, such as the notes, is uncertain. In addition, no rulings
have been sought or are expected to be sought from the IRS with respect to any
of the U.S. federal income tax consequences discussed below, and no assurance
can be given that the IRS will not take contrary positions. As a result, no
assurance can be given that the IRS will not assert that the notes should be
treated differently. A different treatment of the notes could affect the amount,
timing and character of income, gain or loss with respect to an investment in
the notes. Accordingly, you are urged to consult your tax adviser regarding the
U.S. federal income tax consequences of an investment in the notes and with
respect to any tax consequences arising
42
under the laws of any state, local or foreign taxing jurisdiction.
The remainder of this discussion assumes that the notes will be treated as
indebtedness subject to the contingent payment debt regulations as described
above.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a beneficial owner
of a note or Apria common stock that is for U.S. federal income tax purposes:
- a citizen or resident of the United States, as determined for United
States Federal income tax purposes;
- a corporation, or other entity taxable as a corporation for U.S.
federal income tax purposes, created or organized in or under the
laws of the United States or of any political subdivision thereof;
- an estate, the income of which is subject to U.S. federal income
taxation regardless of its source; or
- a trust if a court within the United States can exercise primary
supervision over its administration, and one or more United States
persons have the authority to control all of the substantial
decisions of that trust, or certain electing trusts that were in
existence on August 20, 1996, and were treated as domestic trusts on
the previous date.
INTEREST ACCRUALS ON THE NOTES
Under the contingent payment debt regulations, a United States Holder,
regardless of its method of accounting for U.S. federal income tax purposes,
will be required to accrue interest income, as original issue discount for U.S.
federal income tax purposes, on the notes on a constant yield basis at an
assumed yield (the "comparable yield") determined at the time of issuance of the
notes. Accordingly, United States Holders generally will be required to include
interest in gross income, in each taxable year prior to maturity of the notes,
in excess of the regular interest payments on the notes. The comparable yield
for the notes is based on the yield at which Apria could issue a nonconvertible
fixed rate debt instrument with no contingent payments, but with terms otherwise
similar to those of the notes. Apria has determined the comparable yield to be
8.625%, compounded semi-annually.
Solely for purposes of determining the amount of interest income that a
United States Holder will be required to accrue, Apria is required to construct
a "projected payment schedule" in respect of the notes representing a series of
payments the amount and timing of which would produce a yield to maturity on the
notes equal to the comparable yield. Holders that wish to obtain the projected
payment schedule may do so by contacting Apria Healthcare Group Inc., 26220
Enterprise Court, Lake Forest, California 92630, Attention: Treasurer.
NEITHER THE COMPARABLE YIELD NOR THE PROJECTED PAYMENT SCHEDULE
CONSTITUTES A REPRESENTATION BY APRIA REGARDING THE ACTUAL AMOUNT THAT WILL BE
PAID ON THE NOTES, OR THE VALUE AT ANY TIME OF APRIA COMMON STOCK INTO WHICH THE
NOTES MAY BE CONVERTED.
For U.S. federal income tax purposes, a United States Holder is required
under the contingent payment debt regulations to use the comparable yield and
the projected payment schedule established by Apria in determining interest
accruals and adjustments in respect of a note, unless such United States Holder
timely discloses and justifies the use of a different comparable yield and
projected payment schedule to the IRS. Pursuant to the terms of the indenture,
Apria and every United States Holder agree, in the absence of an administrative
determination or judicial ruling to the contrary, to be bound by Apria's
determination of the comparable yield and projected payment schedule.
Based on the comparable yield and the issue price of the notes, a United
States Holder of a note, regardless of its method of tax accounting, will be
required to accrue as interest income the sum of the daily portions of interest
on the notes for each day in the taxable year on which the United States Holder
holds the note, adjusted upward or downward to reflect the difference, if any,
between the actual and projected amount of any contingent payments on the notes
(as set forth below). The issue price of the notes is the first price at which a
substantial amount of the notes
43
is sold to the public, excluding bond houses, brokers or similar persons or
organizations acting in the capacity as underwriters, placement agents or
wholesalers (the "issue price").
The daily portions of interest in respect of a note are determined by
allocating to each day in an accrual period the ratable portion of interest on
the note that accrues in the accrual period. The amount of interest on a note
that accrues in an accrual period is the product of the comparable yield on the
note (adjusted to reflect the length of the accrual period) and the adjusted
issue price of the note. The adjusted issue price of a note at the beginning of
the first accrual period will equal its issue price and for any accrual periods
thereafter will be (x) the sum of the issue price of such note and any interest
previously accrued thereon (disregarding any positive or negative adjustments
described below) minus (y) the amount of any projected payments on the notes for
previous accrual periods (without regard to the actual amount paid).
In addition to the interest accrual discussed above, a United States
Holder will be required to recognize interest income equal to the amount of the
excess of actual payments over projected payments (a "positive adjustment") in
respect of a note for a taxable year. For this purpose, the payments in a
taxable year include the fair market value of property (including Apria's common
stock) received in that year. If a United States Holder receives actual payments
that are less than the projected payments in respect of a note for a taxable
year, the United States Holder will incur a "negative adjustment" equal to the
amount of such difference. This negative adjustment will (i) first reduce the
amount of interest in respect of the note that a United States Holder would
otherwise be required to include in income in the taxable year and (ii) to the
extent of any excess, will give rise to an ordinary loss equal to that portion
of such excess that does not exceed the excess of (A) the amount of all previous
interest inclusions under the note over (B) the total amount of the United
States Holder's net negative adjustments treated as ordinary loss on the note in
prior taxable years. A net negative adjustment is not subject to the two percent
floor limitation imposed on miscellaneous deductions under Section 67 of the
Code. Any negative adjustment in excess of the amounts described in (i) and (ii)
will be carried forward to offset future interest income in respect of the notes
or to reduce the amount realized on a sale, conversion, exchange or retirement
of the notes.
Sale, Conversion, Exchange or Retirement of the Notes
Upon a sale, conversion, exchange or retirement of a note for cash or
Apria common stock, a United States Holder will generally recognize gain or loss
equal to the difference between the amount realized on the sale, conversion,
exchange or retirement, including the fair market value of Apria's common stock
received, if any, and such United States Holder's adjusted tax basis in the
note. A United States Holder's adjusted tax basis in a note will generally be
equal to the United States Holder's purchase price for the note, increased by
any interest income previously accrued by the United States Holder, determined
without regard to any positive or negative adjustments to interest accruals
described above, and decreased by the amount of any projected payments on the
note for previous accrual periods, without regard to the actual amount paid. In
the case of a United States Holder that purchases the notes in the secondary
market for an amount that differs from the adjusted issue price of the note at
the time of purchase, the adjusted tax basis must also be increased or decreased
by the amount of any positive or negative adjustment, respectively, that the
U.S. holder is required to make as a result of the purchase at such price. A
United States Holder generally will treat any gain as ordinary interest income
and any loss as ordinary loss to the extent of the excess of previous interest
inclusions over the total negative adjustments previously taken into account as
ordinary loss, and the balance as capital loss. The deductibility of capital
losses is subject to limitations.
A United States Holder's initial tax basis in Apria common stock received
upon a conversion of a note will equal the then current fair market value of
such common stock. The United States Holder's holding period for the common
stock received may commence on the day immediately following the date of
conversion and not on the date of acquisition of the note. However, the matter
is not entirely certain and United States Holders may be entitled to include
their holding period for the notes as part of their holding period for the Apria
common stock received upon conversion. United States Holders should consult
their tax advisors regarding the proper application of the holding period rules
to their situation.
44
Purchases of Notes at a Price other than the Adjusted Issue Price
If a United States Holder purchases a note in the secondary market for an
amount that differs from the adjusted issue price of the note at the time of
purchase, the United States Holder will be required to accrue interest income on
the note in accordance with the comparable yield even if market conditions have
changed since the date of issuance. Except to the extent described below as to
notes that are deemed to be "exchange listed," a United States Holder must
reasonably determine whether the difference between the purchase price for a
note and the adjusted issue price of a note is attributable to a change in
expectation as to the contingent amounts potentially payable in respect of the
note, a change in interest rates since the note were issued, or both, and
allocate the difference accordingly. Adjustments allocated to a change in
interest rates will cause, as the case may be, a "positive adjustment" or a
"negative adjustment" to interest inclusion. If the purchase price of a note is
less than its adjusted issue price of the note, a positive adjustment will
result, and if the purchase price is more than the adjusted issue price of the
note, a negative adjustment will result. To the extent that an adjustment is
attributable to a change in interest rates, it must be reasonably allocated to
the daily portions of interest over the remaining term of the note. To the
extent that the difference between the purchase price for the note and the
adjusted issue price of the note is attributable to a change in expectations as
to the contingent amounts potentially payable in respect of the note (and not to
a change in the market interest rates), a United States Holder will be required
to reasonably allocate that difference to the contingent payments. Adjustments
allocated to the contingent payments will be taken into account as "positive" or
"negative" adjustments, as the case may be, when the contingent payments are
made. Any negative or positive adjustment of the kind described above will
decrease or increase, respectively, the tax basis in the note.
Finally, if a note is deemed to be "exchange listed" property then,
instead of allocating the difference between adjusted issue price of the note
and the United States holder's tax basis in the note to any projected payments,
the holder generally would be permitted, but not required, to allocate such
difference on a pro rata basis to the daily portions of interest determined
under the projected payment schedule over the remaining term of the note. This
pro rata allocation, however, would not be reasonable and thus would not be
permitted to the extent that the allocation produces a deemed yield on the note
that is less than the applicable federal rate for the note as of the issue date
(which was 4.31% based on semi-annual compounding). The notes will be considered
"exchange listed" if they are listed on either a national securities exchange or
an interdealer quotation system sponsored by a national securities association.
Currently, the notes are not considered to be "exchange listed."
Certain United States Holders will receive Forms 1099-OID reporting
interest accruals on their note. Those forms will not, however, reflect the
effect of any positive or negative adjustments resulting from the purchase of a
note in the secondary market at a price that differs from its adjusted issue
price on the date of purchase. United States Holders are urged to consult their
tax advisor as to whether, and how, such adjustments should be made to the
amounts reported on any Form 1099-OID
Constructive Dividends
If at any time Apria increases the conversion rate, either at Apria's
discretion or pursuant to the anti-dilution provisions, the increase may be
deemed to be the payment of a taxable dividend to the United States Holders of
the notes.
Generally, a reasonable increase in the conversion rate in the event of
stock dividends or distributions of rights to Apria's stockholders to subscribe
for Apria common stock will not be a taxable dividend.
Taxation of Distributions on Common Stock
Distributions with respect to shares of Apria common stock received upon a
conversion of a note, other than certain pro rata distributions of common
shares, will be treated as dividends to the extent paid out of current or
accumulated earnings and profits, as determined under U.S. federal income tax
principles, and will be includible in gross income by the United States Holder
and taxable as ordinary income when received or accrued, in accordance with such
United States Holder's method of tax accounting. If a distribution exceeds
Apria's current and accumulated earnings and profits, the excess will be first
treated as a tax-free return of the United States Holder's investment, to the
extent of United States Holder's tax basis in the common stock. Any remaining
excess will be treated as a capital gain. Under recently enacted legislation,
dividends received by noncorporate United States
45
Holders on Apria common stock may be subject to U.S. federal income tax at
preferential rates applicable with respect to capital gains if certain
conditions are met. United States Holders should consult their own tax advisers
regarding the implications of this new legislation in their particular
circumstances.
Sale or Other Taxable Disposition of Common Stock
Gain or loss realized by a United States Holder on the sale or other
taxable disposition of Apria's common stock received upon conversion of a note
will be recognized as capital gain or loss for U.S. federal income tax purposes,
and will be long-term capital gain or loss if the United States Holder held the
common stock for more than one year. The amount of the United States Holder's
gain or loss will be equal to the difference between the United States Holder's
adjusted tax basis in the common stock disposed of and the amount realized on
the disposition. The deductibility of capital losses is subject to limitations.
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means a beneficial
owner of a note or Apria common stock that is an individual, a corporation, an
estate or trust, that is not a United States Holder.
Notes
All payments on the notes made to a Non-United States Holder, including a
payment in Apria's common stock or cash pursuant to a conversion, exchange or
retirement and any gain realized on a sale of the notes, will be exempt from
U.S. federal income and withholding tax, provided that:
- the Non-United States Holder does not own, actually or
constructively, 10% or more of the total combined voting power of
all classes of Apria's stock entitled to vote and is not a
controlled foreign corporation (as defined in the Code) related,
directly or indirectly, to Apria through stock ownership and is not
a bank receiving certain types of interest,
- the certification requirement described below has been fulfilled
with respect to the Non-United States Holder,
- such gain or payments are not effectively connected with the conduct
by such Non-United States Holder of a trade or business in the
United States,
- in the case of gain realized on the sale, conversion, exchange or
retirement of the notes, Apria is not, and has not been within the
shorter of the five-year period preceding such sale, conversion,
exchange or retirement or the period the Non-United States Holder
held the notes, a U.S. real property holding corporation (as defined
in the Code). Apria believes that it is not, and does not anticipate
becoming, a U.S. real property holding corporation for U.S. federal
income tax purposes; and
- in the case of gain realized by an individual Non-United States
Holder on the sale, conversion, exchange or retirement of the notes,
the Non-United States Holder is not present in the United States for
at least 183 days or more during the taxable year of the disposition
or certain other requirements are not met.
However, if a Non-United States Holder were deemed to have received a
constructive dividend (see " -- Tax Consequences to United States Holders --
Constructive Dividends" above), the Non-United States Holder generally will be
subject to United States withholding tax at a 30% rate, subject to reduction by
an applicable treaty, on the taxable amount of the dividend. A Non-United States
Holder who is subject to withholding tax under such circumstances should consult
his own tax adviser as to whether he can obtain a refund for all or a portion of
the withholding tax.
The certification requirement referred to above will be fulfilled if the
beneficial owner of a note certifies on IRS Form W-8BEN, under penalties of
perjury, that it is not a U.S. person and provides its name and address.
If a Non-United States Holder of a note is engaged in a trade or business
in the United States, and if payments on
46
or gain realized on a sale or other disposition of the note are effectively
connected with the conduct of this trade or business, the Non-United States
Holder, although exempt from U.S. withholding tax, will generally be taxed in
the same manner as a United States Holder (see " -- Tax Consequences to United
States Holders" above), except that the Non-United States Holder will be
required to provide a properly executed IRS Form W-8ECI in order to claim an
exemption from withholding tax. These Non-United States Holders should consult
their own tax advisers with respect to other tax consequences of the ownership
of the notes, including the possible imposition of a 30% branch profits tax in
the case of corporate Non-United States Holders.
Distributions on Common Stock
Dividends paid to a Non-United States Holder of Apria's common stock
generally will be subject to U.S. withholding tax at a 30% rate, subject to
reduction under an applicable treaty. In order to obtain a reduced rate of
withholding, a Non-United States Holder will be required to provide a properly
executed IRS Form W-8BEN certifying its entitlement to benefits under a treaty.
A Non-United States Holder who is subject to withholding tax under such
circumstances should consult his own tax adviser as to whether he can obtain a
refund for all or a portion of the withholding tax.
If a Non-United States Holder of Apria's common stock is engaged in a
trade or business in the United States, and if the dividends are effectively
connected with the conduct of this trade or business, the Non-United States
Holder, although exempt from U.S. withholding tax, will generally be taxed in
the same manner as a United States Holder (see " -- Tax Consequences to United
States Holders" above), except that the Non-United States Holder will be
required to provide a properly executed IRS Form W-8ECI in order to claim an
exemption from withholding tax. These Non-United States Holders should consult
their own tax advisers with respect to other tax consequences of the ownership
of Apria's common stock, including the possible imposition of a 30% branch
profits tax in the case of corporate Non-United States Holders.
Sale or Other Taxable Disposition of the Common Stock
A Non-United States Holder generally will not be subject to U.S. federal
income and withholding tax on gain realized on a sale or other disposition of
the common stock received upon a conversion of a note, unless (a) the gain is
effectively connected with the conduct by such Non-United States Holder of a
trade or business in the United States, (b) in the case of a Non-United States
Holder who is a nonresident alien individual, the individual is present in the
United States for 183 or more days in the taxable year of the disposition and
certain other conditions are met, or (c) Apria is or has been a U.S. real
property holding corporation (as defined in the Code) at any time within the
shorter of the five year period preceding such sale, exchange or disposition and
the period the Non-United States Holder held the common stock. Apria believe
that it is not, and does not anticipate becoming, a U.S. real property holding
corporation for U.S. federal income tax purposes.
If a Non-United States Holder of Apria's common stock is engaged in a
trade or business in the United States, and if the gain on the common stock is
effectively connected with the conduct of this trade or business, the Non-United
States Holder will generally be taxed in the same manner as a United States
Holder (see " -- Tax Consequences to United States Holders" above). These
Non-United States Holders should consult their own tax advisers with respect to
other tax consequences of the disposition of the common stock, including the
possible imposition of a 30% branch profits tax in the case of corporate
Non-United States Holders.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information returns may be filed with the IRS in connection with payments
on the notes, Apria's common stock and the proceeds from a sale or other
disposition of the notes or Apria's common stock. A United States Holder may be
subject to United States backup withholding tax on these payments if it fails to
provide its taxpayer identification number to the paying agent and comply with
certification procedures or otherwise establish an exemption from backup
withholding. A Non-United States Holder may be subject to United States backup
withholding tax on these payments unless the Non-United States Holder complies
with certification procedures to establish that it is not a U.S. person. The
certification procedures required of Non-United States Holders to claim the
exemption from withholding tax on certain payments on the notes, described
above, will satisfy the certification requirements necessary to avoid the backup
withholding tax as well. The amount of any backup withholding from a payment
will
47
be allowed as a credit against the holder's U.S. federal income tax liability
and may entitle the holder to a refund, provided that the required information
is timely furnished to the IRS.
DISCLOSURE AUTHORIZATION
Notwithstanding anything express or implied to the contrary in this
prospectus and the documents referred to herein, each prospective investor and
actual investor, and each of the respective employees, representatives and
agents of such prospective investor and actual investor, may disclose to any and
all persons, without limitation of any kind, the tax treatment and tax structure
of the transaction and all materials of any kind that are provided to any such
persons relating to such tax treatment and tax structure. However, the foregoing
does not constitute an authorization to disclose Apria's identity or that of
Apria's affiliates, agents or advisers, or, except to the extent relating to
such tax structure or tax treatment, any specific pricing terms or commercial or
financial information.
48
SELLING SECURITYHOLDERS
On August 20, 2003, Apria issued and sold the notes in private placement
transactions to the initial purchasers. The initial purchasers sold the notes to
"qualified institutional buyers," as defined in Rule 144A under the Securities
Act, in transactions exempt from the registration requirements of the Securities
Act. The selling securityholders, including their transferees, pledgees, donees
or successors, may from time to time, offer and sell any or all of the notes and
shares issued upon conversion of the notes pursuant to this prospectus or a
prospectus supplement. The selling securityholders will receive the proceeds
from this offering. Apria will not receive any of the proceeds from this
offering.
The following table sets forth certain information with respect to the
selling securityholders and the respective principal amounts of notes and shares
of common stock beneficially owned by each selling securityholder. Apria
obtained such information from the selling securityholders. To Apria's
knowledge, none of the selling securityholders has, or within the past three
years has had, any position, office or other material relationship with Apria or
any of Apria's predecessors or affiliates. Because each selling securityholder
may offer all or some portion of the notes or the common stock issuable upon
conversion thereof pursuant to this prospectus and the number of shares of
common stock into which the notes are convertible is subject to adjustment, no
estimate can be given as to the amount of notes or the common stock issuable
upon conversion thereof that will be held by the selling securityholders upon
consummation of any sales. In addition, the selling securityholders identified
below may have sold, transferred or otherwise disposed of all or a portion of
their notes since the date on which they provided the information regarding
their notes in transactions exempt from the registration requirements of the
Securities Act.
49
PRINCIPAL NUMBER OF NUMBER OF
AMOUNT SHARES OF MAXIMUM SHARES OF
OF NOTES COMMON NUMBER OF COMMON STOCK
BENEFICIALLY PERCENTAGE STOCK SHARES OF BENEFICIALLY
OWNED AND OF NOTES BENEFICIALLY COMMON STOCK OWNED AFTER THE
SELLING SECURITY HOLDER OFFERED HEREBY OUTSTANDING OWNED(1) TO BE SOLD(1) OFFERING(5)
----------------------- --------------- ---------- --------- -------------- ------------
DBAG London $38,000,000 15.20% 1,090,037 1,090,037 --
Nomura Securities Intl Inc. $17,500,000 7.00% 503,491 501,991 1,500
Tribeca Investments, Ltd. $14,500,000 5.80% 415,935 415,935 --
Argent LowLev Convertible Arbitrage Fund Ltd. $11,700,000 4.68% 335,616 335,616 --
Credit Lyonnais Securities (USA) Inc. $9,000,000 3.60% 258,166 258,166 --
BNP Paribas Equity Strategies, SNC $8,425,000 3.37% 258,662 241,672 16,990
Gala Offshore Master Fund Ltd. $8,100,000 3.24% 232,350 232,350 --
MLQA Convertible Securities Arbitrage Ltd. $7,500,000 3.00% 215,139 215,139 --
Calamos(R) Convertible Fund - Calamos(R) Investment Trust $6,665,000 2.67% 191,186 191,186 --
Argent Classic Convertible Arbitrage Fund (Bermuda) Ltd. $6,000,000 2.40% 172,111 172,111 --
Sunrise Partners Limited Partnership $6,000,000 2.40% 180,711 172,111 8,600
GLG Market Neutral Fund $5,000,000 2.00% 143,426 143,426 --
Highbridge International LLC $5,000,000 2.00% 143,426 143,426 --
Triborough Partners International Ltd. $4,550,000 1.82% 130,517 130,517 --
National Bank of Canada $4,500,000 1.80% 129,083 129,083 --
St. Thomas Trading, Ltd. $4,290,000 1.72% 123,059 123,059 --
Sage Capital $3,350,000 1.34% 96,095 96,095 --
Canyon Value Realization Fund (Cayman), Ltd. $3,280,000 1.31% 94,087 94,087 --
Man Convertible Bond Master Fund, Ltd. $3,210,000 1.28% 92,079 92,079 --
Canyon Capital Arbitrage Master Fund, Ltd. $2,400,000 * 68,844 68,844 --
Class C Trading Company, Ltd. $2,100,000 * 60,238 60,238 --
Argent LowLev Convertible Arbitrage Fund LLC $2,000,000 * 57,370 57,370 --
S.A.C. Capital Associates, LLC $2,000,000 * 69,870 57,370 12,500
The Coast Fund, L.P. $2,000,000 * 57,370 57,370 --
TQA Master Plus Fund, Ltd. $1,985,000 * 56,940 56,940 --
Triborough Partners LLC $1,950,000 * 55,936 55,936 --
Lyxor/Gala II Fund Ltd. $1,900,000 * 54,501 54,501 --
Lyxor Master Fund $1,900,000 * 54,501 54,501 --
Argent Classic Convertible Arbitrage Fund L.P. $1,800,000 * 51,633 48,764 --
BNP Paribas Arbitrage $1,500,000 * 43,027 43,027 --
Singlehedge U.S. Convertible Arbitrage Fund $1,387,000 * 39,786 39,786 --
The Dow Chemical Company Employees' Retirement Plan $1,355,000 * 38,868 38,868 --
White River Securities LLC $1,250,000 * 35,856 35,856 --
Bear Stearns & Co. Inc. $1,250,000 * 35,856 35,856 --
Sturgeon Limited $1,204,000 * 34,536 34,536 --
50
Canyon Value Realization Fund, L.P. $1,200,000 * 34,422 34,422 --
Silver Convertible Arbitrage Fund, LDC $1,200,000 * 34,422 34,422 --
JMG Triton Offshore Fund, Ltd. $1,000,000 * 28,685 28,685 --
McMahan Securities Co. L.P. $1,000,000 * 28,685 28,685
SPT $915,000 * 26,246 26,246 --
Xavex Convertible Arbitrage 2 Fund $900,000 * 25,816 25,816 --
Zurich Institutional Benchmarks Master Fund Ltd. $815,000 * 23,378 23,378 --
Delta Airlines Master Trust $740,000 * 21,227 21,227 --
Boilermaker - Blacksmith Pension Trust $725,000 * 20,796 20,796 --
TQA Master Fund, Ltd. $679,000 * 19,477 19,477 --
Union Carbide Retirement Account $625,000 * 17,928 17,928 --
Argent Classic Convertible Arbitrage Fund II, L.P. $600,000 * 17,211 17,211 --
Xavex Convertible Arbitrage 10 Fund $600,000 * 17,211 17,211 --
Lyxor/Convertible Arbitrage Fund Limited $571,000 * 16,379 16,379 --
CNH CA Master Account, L.P. $500,000 * 14,342 14,342 --
Quest Global Convertible Master Fund, Ltd. $500,000 * 14,342 14,342 --
Canyon Value Realization Mac 18, Ltd. (RMF) $480,000 * 13,768 13,768 --
Dorinco Reinsurance Company $410,000 * 11,760 11,760 --
Zurich Institutional Benchmark Master Fund Ltd $400,000 * 11,474 11,474 --
Port Authority of Allegheny County Retirement and
Disability Allowance Plan for the Employees
Represented by Local 85 of the Amalgamated
Transit Union $335,000 * 9,609 9,609 --
SSI Hedged Convertible Market Neutral L.P. $256,000 * 7,343 7,343 --
Deutsche Bank Securities Inc. $250,000 * 7,171 7,171 --
Quest/Lighthouse Multi Strategy Master Fund $250,000 * 7,171 7,171 --
Delta Pilots Disability and Survivorship Trust $215,000 * 6,167 6,167 --
The California Wellness Foundation $215,000 * 6,167 6,167 --
HFR Ca Global Select Master Trust $200,000 * 5,737 5,737
BP Amoco PLC Master Trust $189,000 * 5,421 5,421 --
Louisiana Workers' Compensation Corporation $185,000 * 5,306 5,306 --
LDG Limited $179,000 * 5,134 5,134 --
Univar USA Inc. Retirement Plan $160,000 * 4,589 4,589 --
City of Knoxville Pension System $155,000 * 4,446 4,446 --
Macomb County Employees' Retirement System $155,000 * 4,446 4,446 --
51
RBC Alternative Assets, L.P. $150,000 * 4,302 4,302 --
Aventis Pension Master Trust $135,000 * 3,872 3,872 --
SSI Blended Market Neutral L.P. $129,000 * 3,700 3,700 --
Xavex Convertible Arbitrage 7 Fund $129,000 * 3,700 3,700 --
Sphinx Convertible Arb Fund SPC $128,000 * 3,671 3,671 --
Calamos(R) Convertible Portfolio - Calamos(R) Advisors Trust $90,000 * 2,581 2,581 --
SCI Endowment Care Common Trust Fund - National
Fiduciary Services $85,000 * 2,438 2,438 --
The Fondren Foundation $75,000 * 2,151 2,151 --
Knoxville Utilities Board Retirement System $70,000 * 2,007 2,007 --
CEMEX Pension Plan $68,000 * 1,950 1,950 --
Hotel Union & Hotel Industry of Hawaii Pension Plan $68,000 * 1,950 1,950 --
Prisma Foundation $48,000 * 1,376 1,376 --
SCI Endowment Care Common Trust Fund - Suntrust $42,000 * 1,204 1,204 --
Kettering Medical Center Funded Depreciation Account $40,000 * 1,147 1,147 --
The Cockrell Foundation $37,000 * 1,061 1,061 --
Sphinx Fund $22,000 * 631 631 --
SCI Endowment Care Common Trust Fund - First Union $18,000 * 516 516 --
Lexington Vantage Fund $14,000 * 401 401 --
Viacom Inc. Pension Plan Master Trust $6,000 * 172 172 --
Jefferies & Company Inc. $2,000 * 57 57 --
Any other holders of notes or future transferees, pledgees,
donees of or from any such holder(2)(3) $37,489,000 15.00% 1,075,379 1,075,379 --
------------ ------ --------- --------- ------
Total.................................................. $250,000,000 100% 7,210,890 7,171,300(4) 39,590
* Indicates ownership of less than 1%.
(1) Assumes conversion of all of the holder's notes at a conversion rate of
28.6852 shares of common stock per $1,000 principal amount at maturity of notes,
rounded down to the nearest whole number of shares. However, this conversion
rate is subject to adjustment as described under "Description of Notes -
Conversion Rights." As a result, the amount of common stock issuable upon
conversion of the notes may increase or decrease in the future.
(2) Information concerning other selling securityholders, if any, will be set
forth in supplements to this prospectus from time to time, if required.
(3) Assumes that any other holders of notes, or any future transferees,
pledgees, donees or successors of or from any such other holders of notes, do
not beneficially own any common stock other than the shares of common stock
issuable upon conversion of the notes at the initial conversion rate.
(4) Assumes conversion of all $250,000,000 principal amount of notes at a
conversion rate of 28.6852 shares of common stock per $1,000 principal amount at
maturity of notes rounded down to the nearest whole number of shares. This total
may not reflect the actual number of shares to be issued by Apria because
holders of notes will not receive fractional shares upon conversion, but a cash
payment to account for any such fractional share.
(5) Assumes selling securityholders sell maximum number of shares issued upon
conversion of the notes.
52
PLAN OF DISTRIBUTION
Apria is registering the notes and associated shares of common stock on
behalf of the selling securityholders. The selling securityholders and their
successors, which term includes their transferees, pledgees or donees or their
successors, may, from time to time, sell the notes and shares directly to
purchasers. Alternatively, the selling securityholders may offer the notes and
shares from time to time to or through underwriters, broker/dealers or agents,
who may receive compensation in the form of underwriting discounts, concessions
or commissions from the selling securityholders and/or the purchasers of the
securities, for whom they may act as agents. The compensation as to a particular
broker/dealer may be in excess of customary commissions. The selling
securityholders and any underwriters, broker/dealers or agents that participate
in the distribution of notes and shares may, in connection with these sales, be
deemed to be "underwriters" within the meaning of the Securities Act, and any
profit from the sale of such securities by them and any underwriter,
broker/dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act.
The selling securityholders may sell the notes and shares from time to
time, in one or more transactions at fixed prices, at prevailing market prices
at the time of sale, at varying prices determined at the time of sale or at
negotiated prices, as determined by the selling securityholders. The sale of the
notes and shares may be effected in transactions:
- on any national securities exchange or quotation service on which
the notes or Apria common stock may be listed or quoted at the time
of sale, including The Portal Market of the National Association of
Securities Dealers, Inc. with respect to the notes and the New York
Stock Exchange with respect to the conversion shares;
- in the over-the-counter market;
- in transactions otherwise than on such exchanges or services or in
the over-the-counter market; or
- through the writing of options.
In addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act may be sold pursuant to Rule 144
rather than pursuant to this prospectus. The selling securityholders may not
sell any security described in this prospectus and may not transfer, devise or
gift such securities by other means not described in this prospectus.
These sales may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
transaction. The selling securityholders may also enter into hedging
transactions with broker/dealers in connection with the sales of the notes and
shares. These broker/dealers may in turn engage in short sales of the notes and
shares in the course of hedging their positions. The selling securityholders may
sell the notes and shares to close out short positions, or loan or pledge the
notes and shares to broker/dealers that, in turn, may sell the notes and shares.
At the time a particular offering of the notes and shares is made, if
required, a prospectus supplement will be distributed setting forth the names of
the selling securityholders, the aggregate amount of notes and shares being
offered, and, to the extent required, the terms of the offering, including the
name or names of any underwriters, broker/dealers or agents, any discounts,
commissions and other terms constituting compensation from the selling
securityholders and any discounts, commission or concessions allowed or
reallowed or paid to the broker/dealers.
To comply with certain states' securities laws, if applicable, the selling
securityholders must offer or sell the notes and shares in such jurisdictions
only through registered or licensed brokers/dealers. In addition, in some states
the selling securityholders may not sell the notes and shares unless the notes
and shares have been registered or qualified for sale in the applicable state or
an exemption from registration or qualification is available and the conditions
of which have been satisfied.
53
Pursuant to the registration rights agreement, all expenses of the
registration of notes and shares will be paid by Apria, including, without
limitation, any SEC filing fees and expenses of compliance with state securities
or "blue sky" laws; provided, however, that the selling securityholders will pay
all underwriting discounts and selling commissions, if any. The selling
securityholders will be indemnified by Apria against certain civil liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith. Apria will be indemnified by the selling
securityholders against certain civil liabilities, including certain liabilities
under the Securities Act, or will be entitled to contribution in connection
therewith.
Pursuant to the registration rights agreement, Apria is required to use
commercially reasonable efforts to keep the shelf registration statement
continuously effective until the earlier of August 20, 2005, or the date on
which the notes and shares are permitted to be freely sold or distributed to the
public pursuant to Rule 144(k) of the Securities Act or the date on which there
are no outstanding notes. Notwithstanding the foregoing obligations, Apria may,
under certain circumstances, postpone or suspend the filing or the effectiveness
of the shelf registration statement, or any amendments or supplement thereto, or
the sale of notes and shares hereunder. See "Description of Notes --
Registration Rights."
LEGAL MATTERS
The validity of the notes offered hereby will be passed upon for Apria by
Gibson, Dunn & Crutcher LLP, Los Angeles, California.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this prospectus by reference from Apria's annual
report on Form 10-K for the year ended December 31, 2002 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
54
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated fees and expenses payable by
Apria in connection with the issuance and distribution of the securities
registered hereby:
SEC Registration fee ....................... $ 20,225
Printing, duplicating and engraving expenses $120,000*
Legal fees and expenses .................... $300,000*
Accounting fees and expenses ............... $100,000*
Miscellaneous .............................. $ 25,000*
--------
Total ................................... $565,225
========
----------
* Estimate
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law, as amended,
allows a corporation to include a provision in its certificate of incorporation
limiting or eliminating the personal liability of directors of the corporation
to the corporation or its stockholders for monetary damages for a breach of
fiduciary duty as a director, except where the director (a) breached his/her
duty of loyalty to the corporation or its stockholders, (b) acted not in good
faith or in knowing violation of a law, (c) authorized the payment of a dividend
or approved a stock repurchase in violation of Delaware General Corporation Law
or (d) obtained an improper personal benefit from a transaction.
Section 145 of the Delaware General Corporate Law permits a corporation to
indemnify a person who was or is a party or is threatened to be made a party to
any threatened, pending or completed third party proceeding, other than an
action by or in the right of the Registrant, by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation
against expenses including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding. The power to indemnify applies (a) if such
person is successful on the merits or otherwise in defense of any action, suit
or proceeding, or (b) if such person acted in good faith and in a manner such
person reasonably believed to be in, or not opposed to, the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that such person's conduct was unlawful. In a
derivative action, i.e., one by or in the right of the corporation, the
corporation is permitted to indemnify any of its directors or officers against
expenses, including attorneys' fees, actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, except that
the corporation shall not indemnify such person if such person shall have been
adjudged liable to the corporation, unless and only to the extent that the court
in which such action or suit was brought shall determine upon application that
such person is fairly and reasonably entitled to indemnity for such expenses
despite such adjudication of liability. The rights granted under this section of
the Delaware General Corporate Law are not exclusive of any other rights to
which such person is entitled. The corporation may purchase and maintain
insurance on behalf of such persons against any liability asserted against or
incurred by such persons in any capacity as or arising out of such persons'
status as an director, officer, employee or agent of the corporation.
Section 174 of the Delaware General Corporation Law provides, among other
things, that all directors who willfully or negligently approve an unlawful
payment of dividends or an unlawful stock purchase or redemption may be held
liable for the full amount paid out in connection with these actions. A director
who was either absent when the unlawful actions were approved or dissented at
the time, may avoid liability by causing his or her dissent to these actions to
be entered in the books containing the minutes of the meetings of the board of
directors at the time the action occurred or immediately after the absent
director receives notice of the unlawful acts. Any director against
II-1
whom a claim is successfully asserted may recover contribution from any other
directors who voted or concurred in the unlawful action.
Article 8 of Apria's Restated Certificate of Incorporation, as amended,
includes a provision eliminating the personal liability of its directors for
monetary damages for breach of fiduciary duty as a director to the fullest
extent authorized by, and subject to the limitations expressed in Delaware law.
In addition, as permitted by Section 145 of the Delaware General Corporation
Law, Article 8 of the Restated Certificate provides that Apria is required to
indemnify its directors and officers against any liabilities, losses or related
expenses that they may incur by reason of serving or having served as directors
or officers of Apria, or serving or having served at the request of Apria as a
director, officer, trustee, partner, employee or agent of any entity in which
Apria has an interest, to the fullest extent permitted by Delaware law. Apria is
authorized to provide by bylaw, agreement or otherwise for indemnification of
directors, officers, employees and agents in excess of the indemnification
otherwise permitted by applicable law. The rights conferred in the Restated
Certificate are not exclusive of any other right which the director or officer
may have, or thereafter acquire under any statute, provision of the Restated
Certificate, bylaw, agreement or otherwise. The bylaws of Apria provide that
Apria may maintain director and officer liability insurance at its own expense.
ITEM 16. EXHIBITS.
See Exhibit Index attached hereto and incorporated by reference.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to
II-2
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) The undersigned Registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report, to securityholders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act of in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Act.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lake Forest, State of California, on November 18,
2003.
APRIA HEALTHCARE GROUP INC.
By: /s/ AMIN I. KHALIFA
----------------------------------------------------
Amin I. Khalifa
Executive Vice President and Chief Financial Officer
POWERS OF ATTORNEY
KNOWN ALL PERSONS BY THESE PRESENT, that each persons whose signature
appears below does hereby constitute and appoints Lawrence M. Higby, Amin I.
Khalifa and Robert S. Holcombe, and each of them, with full power of
substitution and full power to act without the other, his true and lawful
attorney-in-fact and agent to act for him or her in his or her name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and any subsequent
registration statement the Company may hereafter file with the Securities and
Exchange Commission pursuant to Rule 462(b) under the Securities Act of 1933 to
register additional shares of common stock, and to file this Registration
Statement, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
order to effectuate the same as fully, to all intents and purposes, as they, he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do to cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated below.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LAWRENCE M. HIGBY President, Chief Executive Officer and November 18, 2003
----------------------------------- Director (Principal Executive Officer)
Lawrence M. Higby
/s/ AMIN I. KHALIFA Executive Vice President and Chief Financial November 18, 2003
----------------------------------- Officer (Principal Financial Officer and
Amin I. Khalifa Accounting Officer)
/s/ RALPH W. WHITWORTH
-----------------------------------
Ralph W. Whitworth Director November 18, 2003
Director
-----------------------------------
Vicente Anido, Jr.
Director
-----------------------------------
I.T. Corley
/s/ DAVID L. GOLDSMITH Director November 18, 2003
-----------------------------------
David L. Goldsmith
II-4
SIGNATURE TITLE DATE
--------- ----- ----
/s/ RICHARD H. KOPPES
----------------------------------- Director November 18, 2003
Richard H. Koppes
/s/ PHILIP R. LOCHNER, JR.
----------------------------------- Director November 18, 2003
Philip R. Lochner, Jr.
/s/ JERI L. LOSE
----------------------------------- Director November 18, 2003
Jeri L. Lose
/s/ BEVERLY BENEDICT THOMAS
----------------------------------- Director November 18, 2003
Beverly Benedict Thomas
II-5
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
1.1# Purchase Agreement, dated as of August 15, 2003, between Apria
Healthcare Group Inc., and Banc of America Securities LLC, J.P.
Morgan Securities Inc., Morgan Stanley & Co. Incorporated as
representatives of the several initial purchasers.
3.1 Restated Certificate of Incorporation, dated June 28, 1995,
incorporated by reference to Abbey's Registration Statement on Form
S-4 (Registration No. 33-90658), and its appendices, as filed on
March 27, 1995.
3.2 Certificate of Ownership and Merger merging Apria Healthcare Group
Inc. into Abbey and amending Abbey's Restated Certificate of
Incorporation to change Abbey's name to "Apria Healthcare Group
Inc," filed as Exhibit 3.2 to the Annual Report on Form 10-K of
Apria Healthcare Group Inc. for the year ended December 31, 2001,
and incorporated herein by reference.
3.3 Amended and Restated Bylaws of Apria Healthcare Group Inc., as
amended on May 5, 1998, filed as Exhibit 3.2 to the Quarterly Report
on Form 10-Q of Apria Healthcare Group Inc. for the quarter ended
June 30, 1998, and incorporated herein by reference.
3.4 Amended and Restated Bylaws of Apria Healthcare Group Inc., as
amended on September 3, 2002, filed as Exhibit 3.1 to the Quarterly
Report on Form 10-Q of Apria Healthcare Group Inc. for the quarter
ended September 30, 2002, and incorporated herein by reference.
3.5 Amended and Restated Bylaws of Apria Healthcare Group Inc., as
amended on November 20, 2002, filed as Exhibit 3.7 to the Annual
Report on Form 10-K of Apria Healthcare Group Inc. for the year
ended December 31, 2002, and incorporated herein by reference.
4.1# Form of 3-3/8% Convertible Senior Note due 2033 (included in Exhibit
4.3).
4.2 Certificate of Designation, incorporated by reference to Abbey's
Registration Statement on Form S-4 (Registration No. 33-90658), and
its appendices, as filed on March 27, 1995.
4.3# Indenture, dated August 20, 2003, between Apria Healthcare Group
Inc. and U.S. Bank National Association, as Trustee.
4.4# Registration Rights Agreement, dated as of August 20, 2003, by and
among Apria Healthcare Group Inc., Banc of America Securities LLC,
J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated,
as representatives of the initial purchasers.
5.1# Opinion of Gibson, Dunn & Crutcher LLP.
8.1# Opinion of Gibson, Dunn & Crutcher LLP re: tax matters.
12.1# Computation of Ratios of Earnings to Fixed Charges.
23.1# Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1).
23.2# Consent of Deloitte & Touche LLP.
24.1# Power of Attorney (included on signature page of this registration
statement).
25.1# Form T-1 Statement of Eligibility of Trustee under the Trust
Indenture Act of 1939, as amended, of U.S. Bank National
Association, as Trustee.
----------------------------
# filed herewith
II-6