-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JNNZ2+0YQ5n723rK1xt2M1mYLE74GhkMekIDloWj4MyaeEUEx/T/dg9Ktt4zCfJM hfbsXFwIR4mONaewIlo3fQ== 0000890566-96-001916.txt : 19961118 0000890566-96-001916.hdr.sgml : 19961118 ACCESSION NUMBER: 0000890566-96-001916 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMEDISYS INC CENTRAL INDEX KEY: 0000896262 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOME HEALTH CARE SERVICES [8082] IRS NUMBER: 113131700 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24260 FILM NUMBER: 96665178 BUSINESS ADDRESS: STREET 1: 3029 S SHERWOOD FOREST BLVD STE 300 CITY: BATON ROUGE STATE: LA ZIP: 70816 BUSINESS PHONE: 5042922031 MAIL ADDRESS: STREET 1: 3029 SOUTH SHERWOOD FOREST BLVD STREET 2: SUITE 300 CITY: BATON ROUGE STATE: LA ZIP: 70816 FORMER COMPANY: FORMER CONFORMED NAME: ANALYTICAL NURSING MANAGEMENT CORP DATE OF NAME CHANGE: 19940819 FORMER COMPANY: FORMER CONFORMED NAME: M&N CAPITAL CORP DATE OF NAME CHANGE: 19930125 10-Q 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q - -------------------------------------------------------------------------------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 or [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to___________________ Commission file number: 0-24260 AMEDISYS, INC. (Exact Name of Registrant as Specified in Charter) DELAWARE 11-3131700 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 3029 S. SHERWOOD FOREST BLVD., STE. 300 BATON ROUGE, LA 70816 (Address of principal executive offices including zip code) (504) 292-2031; (800) 467-2662 (Registrant's telephone number, including area code) Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Number of shares of Common Stock outstanding as of September 30, 1996: 2,583,864 shares 1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995......................................................3 Consolidated Statements of Income for the Three and Nine Months ended September 30, 1996, and 1995.....................................4 Consolidated Statements of Cash Flows for the Nine Months ended September 30, 1996, and 1995.....................................5 Notes to Consolidated Financial Statements.............................7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................................8 General................................................................8 Industry Overview......................................................8 Company Overview of Business Segments Physician Services............................................9 Alternative Site Providers Outpatient Surgery...........................................10 Nursing Services Home Health Care.............................................10 Supplemental Staffing........................................11 New Development.......................................................12 Results of Operations.................................................12 Liquidity and Capital Resources.......................................14 Inflation.............................................................14 Seasonality...........................................................14 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS.....................................................15 ITEM 2. CHANGES IN SECURITIES.................................................15 ITEM 3. DEFAULTS UPON SENIOR SECURITIES.......................................15 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................15 ITEM 5. OTHER INFORMATION.....................................................15 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................15 2 Amedisys, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS as of September 30, 1996 and December 31, 1995 (Unaudited) ASSETS September 30, December 31, 1996 1995 Current Assets: Cash ............................................. $ 2,383,453 $ 870,004 Accounts Receivable, Net of Allowance for Doubtful Accounts of $733,912 in September 1996 and $258,670 in Dec 1995 ........ 7,414,761 6,124,269 Prepaid Expenses ................................. 363,187 432,930 Other Current Assets ............................. 460,233 219,610 ----------- ----------- Total Current Assets ......................... 10,621,634 7,646,813 Notes Receivable: Related Parties .................................. 270,758 402,736 Other ............................................ 1,444 0 Property, Plant and Equipment, Net ................. 3,348,140 2,449,468 Assets held for Sale, Net .......................... 64,174 76,456 Other Assets, Net .................................. 1,599,270 961,254 ----------- ----------- Total Assets ................................. $15,905,420 $11,536,727 =========== =========== LIABILITIES Current Liabilities: Notes Payable .................................... $ 3,933,814 $ 2,456,971 Current Portion of Long-Term Debt ................ 659,523 659,523 Accounts Payable ................................. 1,357,258 402,140 Accrued Expenses: Payroll and Payroll Taxes ...................... 964,040 862,498 Income Taxes ................................... 50,724 287,987 Insurance ...................................... 827,037 483,155 Other .......................................... 1,141,126 616,869 ----------- ----------- Total Current Liabilities .................. 8,933,522 5,769,143 Notes Payable to Related Parties ................... 1,047,227 987,924 Long-Term Debt ..................................... 1,110,014 502,469 ----------- ----------- Total Liabilities .......................... 11,090,763 7,259,536 ----------- ----------- Minority Interest .................................. 19,090 3,345 ----------- ----------- STOCKHOLDERS' EQUITY Common Stock ..................................... 2,585 2,584 Additional paid-in capital ....................... 1,983,791 1,976,593 Stock Subscriptions Receivable ................... -71,719 -83,967 Retained Earnings ................................ 2,880,910 2,378,636 ----------- ----------- Total Stockholders' Equity ................... 4,795,567 4,273,846 ----------- ----------- Total Liabilities and Stockholders' Equity . $15,905,420 $11,536,727 =========== =========== See accompanying notes to financial statements. 3 AMEDISYS, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME for the three and nine months ended September 30, 1996 and 1995 (Unaudited)
Three Months Ended Nine Months Ended ------------------------------------------------------------------------------------------------- September 96 September 95 September 96 September 95 Income: Service revenue $11,762,546 100.0% $9,822,546 100.0% $33,647,998 100.0% $27,747,776 100.0% Cost of service revenue 6,841,997 58.2% 5,887,914 59.9% 19,168,820 57.0% 16,973,499 61.2% -------------- ---------------- ----------------- ----------------- Gross margin 4,920,549 41.8% 3,934,632 40.1% 14,479,178 43.0% 10,774,277 38.8% -------------- ---------------- ----------------- ----------------- General and administrative expenses: Salaries and benefits 2,619,508 22.3% 1,722,223 17.5% 7,567,966 22.5% 4,673,297 16.8% Other 2,095,433 17.8% 1,931,953 19.7% 5,866,605 17.4% 5,028,129 18.1% -------------- ---------------- ----------------- ----------------- Total general and administrative expenses 4,714,941 40.1% 3,654,176 37.2% 13,434,571 39.9% 9,701,426 35.0% -------------- ---------------- ----------------- ----------------- Operating income 205,608 1.7% 280,456 2.9% 1,044,607 3.1% 1,072,851 3.9% -------------- ---------------- ----------------- ----------------- Other income and expense: Interest income 4,687 0.0% 8,662 0.1% 37,026 0.1% 57,044 0.2% Interest expense -157,506 -1.3% -103,343 -1.1% -399,354 -1.2% -292,468 -1.1% Miscellaneous 19,307 0.2% 15,275 0.2% 103,189 0.3% 57,866 0.2% -------------- ---------------- ----------------- ----------------- Total other income and expenses -133,512 -1.1% -79,406 -0.8% -259,139 -0.8% -177,558 -0.6% -------------- ---------------- ----------------- ----------------- Income before income taxes and minority interest 72,096 0.6% 201,050 2.0% 785,468 2.3% 895,293 3.2% Provision (Benefit) for estimated income taxes 25,500 0.2% -43,045 -0.4% 267,450 0.8% 83,455 0.3% -------------- ---------------- ----------------- ----------------- Income before minority interest 46,596 0.4% 244,095 2.5% 518,018 1.5% 811,838 2.9% Minority interest in consolidated subsidiary 9,321 0.1% 13,366 0.1% -15,745 0.0% 18,053 0.1% ============== ================ ================= ================= Net income $55,917 0.5% $257,461 2.6% $502,273 1.5% $829,891 3.0% ============== ================ ================= ================= Earnings per common share $0.02 $0.10 $0.19 $0.32 ============== ================ ================= ================= Proforma information (unaudited): Net income (historical) $829,891 Proforma adjustments: Income taxes on Surgicare results 190,760 ================= Proforma net income $639,131 ================= Proforma earnings per common share $0.25 ================= See accompanying notes to financial statements.
4 Amedisys, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS for the nine months ended September 30, 1996 and 1995 (Unaudited)
Cash Flows from operating activities: September 96 September 95 Net Income .................................................. $ 502,273 $ 829,891 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization ........................... 566,628 481,038 Provision for bad debts ................................. 593,780 341,241 Minority interest in affiliated company ................. 15,745 -18,053 (Gain) loss on disposal of property and equipment ....... -3,711 7,088 Changes in assets and liabilities: (Increase) decrease in accounts receivable ............ -1,884,271 53,753 (Increase) decrease in prepaid expenses ............... 69,743 -77,949 (Increase) in other current assets .................... -240,623 -115,847 (Increase) in other assets ............................ -627,910 -36,198 Increase in accounts payable .......................... 955,119 129,538 Increase in accrued expenses .......................... 732,419 632,112 ---------- ---------- Net cash provided by operating activities ........ 679,192 2,226,614 ---------- ---------- Cash flow from investing activities: Purchase of furniture, fixtures & equipment ................. -1,452,648 -340,074 Proceeds from sale of furniture, fixtures & equipment ....... 156,388 51,197 Decrease in notes receivable from related parties ........... 3,868 29,758 ---------- ---------- Net cash (used in) investing activities ........... -1,292,392 -259,119 ---------- ---------- Cash flow from financing activities: Cash received in acquisition ................................ 0 10,890 Cash distributions to Surgicare members ..................... 0 -942,531 Net increase (decrease) in borrowings on line of credit ..... 1,476,843 -196,285 Payments on notes payable ................................... -653,059 -629,338 Proceeds from note payables ................................. 1,358,819 226,395 (Decrease) in note payable to related parties ............... -75,401 -21,673 Proceeds from common stock .................................. 7,199 0 Decrease in stock subscriptions ............................. 12,248 86,971 ---------- ---------- Net cash provided by (used in) financing activities 2,126,649 -1,465,571 ---------- ---------- Net increase in cash and cash equivalents ..................... 1,513,449 501,924 Cash and cash equivalents at December 31, 1995 and 1994 ....... 870,004 140,803 ---------- ---------- Cash and cash equivalents at September 30, 1996 and 1995 ...... $2,383,453 $ 642,727 ========== ==========
See accompanying notes to financial statements. 5 AMEDISYS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. UNAUDITED FINANCIAL INFORMATION The financial information as of September 30, 1996 and 1995, included herein is unaudited; however, such information reflects, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) that are necessary to present fairly the results of operations for such periods. Results of operations for the interim periods are not necessarily indicative of results of operations which will be realized for the year ending December 31, 1996. 2. BUSINESS COMBINATION As of June 30, 1995, the Company acquired a 100% membership interest in Surgical Care Centers of Texas, L.C. ("SCC"). SCC provides outpatient surgery facilities to physicians in Houston, Texas. SCC operates two facilities totaling seven operating rooms. The Company acquired all the issued and outstanding membership interest in SCC in exchange for 1,000,000 shares of Company common stock. Upon the closing of the transaction, the former members of SCC owned approximately 40% of the issued and outstanding capital stock of the Company. This transaction has been accounted for as a pooling of interest and accordingly the Company's financial statements have been restated to include the results of SCC for all periods presented. 3. INCOME TAXES The subsidiaries in which the Company owns interests greater than 80% file a consolidated federal income tax return. These subsidiaries include all nursing services and SCC beginning on July 1, 1995. SCC is a limited liability company and through June 30, 1995, the individual owners were responsible for all income taxes. Therefore, no provision has been made for income taxes on the income of SCC for the periods prior to July 1, 1995. The primary care subsidiaries file individual income tax returns. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company's results of operations and financial condition. This discussion should be read in conjunction with the Consolidated Financial Statements appearing in Item 1. GENERAL AMEDISYS, INC., ("Company") provides physician practice management services and alternate site provider services of outpatient surgery, home health care and supplemental staffing. As of June 30, 1995 the Company merged with Surgical Care Centers of Texas, L.C. ("SCC") by acquiring all of the members' interests for 1,000,000 shares of Company common stock. Upon the closing of the transaction, the former members of Surgical Care Centers of Texas, L.C. owned approximately 40% of the issued and outstanding capital stock of the Company. This transaction has been accounted for as a pooling of interests and accordingly, the Company's financial statements have been restated to include the results of SCC for all periods presented. The financial statements of the Company include all subsidiaries which are wholly owned by the Company. AMEDISYS, INC. operates in eight states including Louisiana, Texas, Tennessee, Missouri, Kansas, Mississippi, North Carolina, and Minnesota. The Company has a concentration of business operations in Louisiana and Texas. The Company is currently developing FutureCare, Inc., an integrated delivery system of health care. The differentiating feature of FutureCare is that Independent Practice Associations (IPAs) of physicians will be linked with alternative site providers such as outpatient surgery and home health care so that a strategic alliance of cost effective services are formed. Such a system could deliver quality health care at a significantly lower cost. As payors move toward global fee arrangements, the Company will be in a competitive negotiating position. FutureCare will be majority owned and controlled by physicians licensed and practicing in the State of Louisiana and funded with a Louisiana securities offering of $2.0 to $6.0 million. FutureCare Inc. is developing a Preferred Provider Organization (PPO) and FutureCare Health Plans, Inc., a subsidiary and licensed Health Maintenance Organization (HMO) in the State of Louisiana. At the completion of the securities offering, FutureCare, Inc. will own 70% of FutureCare Health Plan, Inc. and AMEDISYS will own 30%. AMEDISYS will manage the system. INDUSTRY OVERVIEW The Company believes that the health care industry is in a period of rapid change being driven by employers who want to reduce the cost of providing health care benefits to their employees and by federal and state governments who want to decrease spending on Medicare and Medicaid programs. Managed care is emerging as a possible solution. Managed Care Organizations (MCOs) include Health Maintenance Organizations and Preferred Provider Organizations. MCOs negotiate with providers for discounted fees, in exchange for an increase in the volume of patients and reduced premiums to the employers for health care coverage. One of the strategies used by MCOs to reduce the cost of medical services is to rely on primary care physicians to provide services, while acting as a "gate keeper" of referrals to specialists. A second strategy is to contract with selected providers who can offer comprehensive and cost effective services to large service or geographical areas. Providers can achieve these features through alliances, mergers or acquisitions. They can also develop "economies of scale" in purchasing supplies and consolidating business functions, as well as using medical personnel efficiently. A third strategy is to prepay for medical services to providers based on the number of patients who choose to use their services and who are in the payor network. These fee arrangements may be based on a single medical service line such as physicians' services or they may cover several "bundled" services. One of the key factors to reducing the overall costs of health care is reducing hospital utilization. Using alternative services such as home health care and outpatient surgery can achieve that outcome. Average hospital 8 days per 1,000 enrollees have continually declined over the past decade for commercial HMOs using member group practices of the Unified Medical Group Association (UMGA), dropping 44% to 151 days in 1994 from 269 days in 1984. The physician is the key health care provider who controls the utilization of the health care system. By providing incentive, the physician is motivated to use the system's alternative site services which are cost effective, and reduce health care expenditures. The Company believes its integrated delivery system can provide that structure for the individual physicians, group practices and physician networks. Another key industry factor which may affect the Company's business operations is the proposed change of the Medicare home health care payment system from reimbursement of costs to the prospective pay system. The proposed change would pay on a predetermined per visit rate and allow the home health care provider to earn a profit on Medicare fees if its costs are controlled to a level below prospective pay reimbursement caps. The Company has been positioning for this change by monitoring costs and developing efficiencies which could reduce costs under a new system. COMPANY OVERVIEW OF BUSINESS SEGMENTS PHYSICIAN SERVICES AMEDISYS Physician Services consists of Physician Practice Management services and development of Independent Practice Associations. The Company believes that Physician Practice Management (PPM) Companies are positioned to consolidate a significant untapped market. According to the Medical Group Management Association (MGMA), there are approximately 600,000 physicians in the U. S., and 16,500 medical groups to which 185,000 physicians belong. Less than 5% of all group practices have been acquired or are affiliated with investor owned PPM companies. In the AMEDISYS system, the physician can remain independent but have access to information and business systems which allow the practice to remain competitive. The physician can choose to use the Company's management services or to join an Independent Practice Association developed and/or managed by the Company. Leverage in negotiating contracts with managed care organizations is a key reason physicians belong to Independent Practice Associations. Negotiating strength is particularly attractive in capitated (prepaid) managed care contracts. According to MGMA, 53% of all group practices derived revenue from at-risk managed care contracts in 1994. Capitated managed care revenue rose from 13% in 1992 to an average of 20% of total medical revenues for all group practices in 1993, while at-risk discounted fee-for-service revenues held steady at 10% of total revenue. The percentage of groups that derived revenue from at-risk HMO / PPO contracts rose with group size in 1994. For large groups with 76 to 150 full-time physicians, this percentage has increased steadily since 1992. In 1994, 85% of such groups derived revenue from at-risk contracts. AMEDISYS' affiliated Independent Physician Associations (IPAs) have a higher percentage of primary care physicians than traditional IPAs. Primary care physicians are the first access point to the managed care system. Managed care emphasizes primary care, and efficiently delivered services at an affordable cost. Providers give MCOs discounted fees for a volume of patients. In capitated arrangements MCOs pre-pay physicians for their services with a negotiated flat fee per patient in the plan regardless of the services performed. Providers, including physicians and hospitals, form integrated networks to achieve a critical mass of patients which are attractive to large managed care groups. The Company is positioning itself for continuing integration and consolidation by developing Physician Practice Management and IPA network services to assist physicians in remaining independent but aligned in a larger entity. In February, 1996, the Company formed FutureCare, Inc., a Louisiana Corporation (FutureCare), to establish an HMO and an integrated delivery system (IDS) with a PPO. The Company has provided $1 million in financing to 9 FutureCare Health Plans of Louisiana, Inc. to enable it to meet the capital requirements for an HMO license in Louisiana. As of September 30, 1996, the Company had committed to advance up to $300,000 in development expenses which are expected to be reimbursed from the proceeds of a Louisiana securities offering of FutureCare stock. The Company currently owns 100% of FutureCare stock; however, upon completion of FutureCare's offering, the Company will exchange its shares in FutureCare for a 30% interest in FutureCare Health Plans, Inc. AMEDISYS will manage the business operations of FutureCare, Inc. and FutureCare Health Plans of Louisiana, Inc. The Company will derive management fees and participate as a home care and ambulatory surgery center provider with other alternate site providers in the system. ALTERNATIVE SITE PROVIDERS OUTPATIENT SURGERY AMEDISYS entered the outpatient surgery industry in June 1995 through the acquisition of Surgical Care Centers of Texas, L.C., which was a pioneer in opening the first outpatient surgery center in Texas sixteen years ago. This subsidiary operates two outpatient surgery centers in the Houston, Texas area and recently changed its name to AMEDISYS Surgery Centers, L.C. AMEDISYS recently opened St. Luke's Surgery Center, a new ambulatory surgery center in Hammond, Louisiana. The center is a joint venture with area surgeons. It has twenty-two participating physicians, state-of- the-art equipment, four operating rooms and two procedure rooms. St. Luke's is the only outpatient surgery facility in the community and offers easy access and convenience to physicians and patients. The Company is aggressively pursuing other locations for start-ups as well as acquisitions to expand its outpatient surgery operations. The Company believes that this industry will grow because outpatient surgery procedures cost 25-40% less than hospital surgeries and advances in technology allow more procedures to be performed in the outpatient setting. Specifically, endoscopic and laser technologies are reducing the invasive nature of certain procedures and lowering the amount of time required in surgery and post-surgical care. Pain management techniques are also a rising trend in outpatient surgery procedures. Outpatient surgery centers have a strong appeal to physicians because of flexible operating schedules, shorter turnaround times of operating suites and flexibility to provide specialized equipment and personalized services for the physicians and the patients. According to SMG Marketing Group, independent surgery centers represented approximately 66% of all outpatient operating rooms in 1994. NURSING SERVICES HOME HEALTH CARE Home health care is one of the fastest growing industries in the U.S. The annual industry growth rate in home health care spending was 24% from 1986 to 1991 and 32% from 1992 to 1994. According to the Health Care Financing Administration, U.S. home health care spending was $26 billion in 1995 with $17 billion spent in home health care nursing services. Home health care has further growth potential as payors strive to reduce hospital stays. According to the SOCIAL SECURITY BULLETIN ANNUAL STATISTICAL SUPPLEMENT, an average day in a hospital costs $1,756 and an average skilled nursing visit in home care costs $83. Even with pharmacy and home medical equipment added to service charges, the savings potential is significant. With cost containment and reduction strategies at a premium in Medicare, Medicaid and private health plans, the Company expects home care to be an attractive alternative to hospital care. 10 Due to the pressure from MCOs to contract with a limited number of home care agencies and to select agencies with geographic coverage, central intake systems of information, comprehensive services and moderate fees, consolidation and affiliation trends are emerging. These trends present acquisition and management opportunities for the Company. The Company is continuing to build a critical mass of home care agencies through internal and external growth. The Company had two acquisitions of local agencies in 1995. AMEDISYS also developed the Home Care Alliance of Louisiana in 1995. This alliance is a consortium of independent home care agencies who are Medicare certified and accredited by the Joint Commission on Accreditation of Healthcare Organizations. The alliance is positioned to negotiate with MCOs for discounted fee for service and capitated contracts. AMEDISYS is the network manager and provides central intake and business systems to the affiliated agencies. AMEDISYS has positioned itself to handle changes in the home care business by establishing systems that are necessary in the new health care environment. The Company has a proprietary software system which features a single entry system, integration of payroll and general ledger requirements with accounting measures. The software package also has detailed multifaceted reporting systems which meet Medicare and private insurance guidelines. AMEDISYS currently leases its system to other agencies. The Company currently has a well established network of twenty home health care offices. AMEDISYS is distinguished by its specialty home care services and a staff dominated by RNs and professional therapists. In addition to these services, AMEDISYS has expanded its product line to include private duty, psychiatric home care and additional rehabilitation services. AMEDISYS received JCAHO accreditation with commendation in 1995 which assures MCOs, Medicare and Medicaid, as well as physicians and patients that the agency has met national quality standards and places the Company in a competitive position for state-wide and regional insurance, MCOs and governmental contracts. The Company offers management services to independent home care agencies through its AMEDISYS Resource Management division. Management services include home health licensing, regulatory compliance, administrative support services, clinical support services, billing and reimbursement systems and proposal and bid development. SUPPLEMENTAL STAFFING AMEDISYS has successfully provided supplemental staffing services for 11 years. The industry has undergone many changes and the Company has remained competitive by being reliable and responsive to the needs of clients. AMEDISYS distinguishes itself from its competitors in the following ways: (1) clinical managers at each office recruit nurses and manage client services, (2) 24-hour access to staffing coordinators using computerized scheduling and information systems, (3) rigorous orientation and screening procedures, and (4) a proprietary software scheduling program which generates faster scheduling response time than traditional methods. AMEDISYS has diversified its services and client base to meet a changing health care delivery system. Ancillary personnel such as physical and occupational therapists are assigned to home care agencies and registered nurses are placed in subacute care units of long term care facilities. These units require a higher level of nursing skill than the facility typically must provide to meet government requirements. The Company also offers management of "pools" of nurses employed by hospitals to fill temporary needs. Hospitals can gain greater efficiency and lower costs by sharing nurse resources across a hospital system or among cooperating facilities. AMEDISYS has systems which facilitate this process. The continuing trend of downsizing hospital staffs and the nurses' desire to achieve flexibility and independence offer continuing opportunities for recruiting qualified nurses for supplemental staffing. The Company believes that strong staffing companies will continue to serve needs in high census periods and in markets where hospital consolidation has peaked and core staffing levels have been reduced. 11 The Company currently operates 12 offices which provide supplemental staffing. Many of these offices share resources and costs with home care services. The Company services 300 medical facilities in eight states with the largest concentration in Louisiana and Texas. NEW DEVELOPMENT The Company signed a non-binding Letter of Intent on August 26, 1996 to purchase the assets of Axar Fye Surgery Center, located in Lafayette, Louisiana, following completion of the due diligence process. The Company signed a letter of intent on October 17, 1996 to merge with Complete Management, Inc. (CMI) following completion of the due diligence process and shareholder approval. If the merger is completed, AMEDISYS, INC. would become a wholly owned subsidiary of CMI. CMI is a provider of physician practice management services in the State of New York. It is a public company (AMEX:CMI) with $96.4 million in assets and $10.2 million in net revenue and $2.4 million in earnings for the six months ended June 30, 1996. RESULTS OF OPERATIONS The Company experienced significant growth in revenues for the three and nine months ended September 30, 1996 compared to the same period last year. The Company's revenue increased by 19.8% and 21.3% for the three and nine months ended September 30, 1996 compared to the same periods last year. The revenue growth is attributable to an increase in both the nursing services and outpatient surgery divisions. Gross margins increased 1.7% and 4.2% as a percentage of revenue and general and administrative expenses increased 2.9% and 4.9% as a percentage of revenue for the same period. Home health revenues are associated with higher general and administrative expenses proportional to revenue than the Company's other business segments because of the Medicare cost reimbursement payment system. General and administrative expenses also increased because of the addition of clinical personnel in the outpatient surgery centers and staff increases in physician services in corporate development and operations. The Company also added several positions to senior mangement including a Chief Operating Officer with fifteen years of health care management experience with public and private companies. Operating income as a percentage of revenue decreased 1.2% for the three months ended September 30, 1996 and decreased .8% for the nine months ended September 30, 1996 as compared to the same periods ended September 30, 1995. The decrease was attributable to the nursing services and physician services divisions. Net income decreased as a percentage of revenue by 2.1% and 1.5% for the three and nine months ended September 30, 1996 as compared to the same periods in 1995. The decrease is due primarily to the write-off of approximately $450,000 in loans to the primary care subsidiaries which were determined to be uncollectible during the three months ended September 30, 1995, resulting in a tax benefit of $130,000, and losses in nursing services and physician services divisions in 1996. Physician services' revenues increased 14.3% and 15.9% for the three and nine months ended September 30, 1996 compared to the same periods in 1995. Operating loss of physician services increased to $108,000 for the three months ended September 30, 1996 from a loss of $70,000 in 1995. The increase in revenue was due to a three year, $10 million contract signed with the state of Louisiana to provide physicians to a state run facility. The Company terminated several physician practice contracts in the third quarter of 1996 which resulted in losses. The Company intends to replace the previous physician practice contracts with management agreements with physician networks and FutureCare, Inc. Outpatient surgery revenues increased 39.0% and 21.6% for the three and nine months ended September 30, 1996 as compared to the same periods in 1995. The increases are attributable to aggressive marketing efforts to increase physician participation and the volume of procedures being performed at the centers. The case load increased 48.7% and 29.9% for the same comparative periods. Gross margins, as a percentage of revenues, increased 10.8% and 9.0% in the three and nine months ended September 30, 1996, as compared to the same periods in 1995 due to the increased revenues. General and administrative expenses, as a percentage of revenues, increased 15.2% and 15.2% in the same periods due to a decision made by management to improve the quality of operations by increasing clinical personnel and upgrading equipment to attract more physicians to the facility as 12 well as meet accreditation standards. Operating income, as a percentage of revenues, decreased 4.5% for the three months ended September 30, 1996 and decreased 6.1% for the nine months ended September 30, 1996 as compared to the same period in 1995 due to the previously discussed reasons. Nursing services revenues increased 18.0% and 21.6% for the three and nine months ended September 30, 1996 compared to the three and nine months ended September 30, 1995. Increases in revenue are attributable to internal growth in home health care. Home health care visits increased by 31.2% and 44.7% during these periods. Despite the increased revenues, the nursing services segment experienced a decrease in operating income as a percentage of revenue of 2.4% and 1.9% for the three and nine months ended September 30, 1996 compared to the same periods in 1995. This decrease was due to the expiration of three hospital contracts in the Company supplemental staffing division. The Company also operated above its cost limits as presribed by Medicare in three regional locations. PHYSICIAN SERVICES (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED --------------------------------- ----------------------------------- SEPT. 96 SEPT. 95 SEPT. 96 SEPT. 95 --------------- ------------ ------------- ------------ REVENUE $720 100.0% $630 100.0% $2,080 100.0% $1,795 100.0% COST OF REVENUE 549 76.3% 369 58.6% 1,429 68.7% 1,182 65.8% ---- --- ------ ----- GROSS MARGIN 171 23.7% 261 41.4% 651 31.3% 613 34.2% GEN. & ADMIN. 279 38.8% 331 52.5% 689 33.1% 38 52.3% ---- --- ------ ----- OPERATING INCOME $(108) (15.0%) $(70) (11.1%) $ (38) 1.8% $(325)(18.1%) ===== ==== ====== ===== OUTPATIENT SURGERY (DOLLARS IN THOUSANDS) THREE MONTHS ENDED NINE MONTHS ENDED --------------------------------- ----------------------------------- SEPT. 96 SEPT. 95 SEPT. 96 SEPT. 95 --------------- ------------ ------------- ------------ REVENUE $1,261 100.0% $907 100.0% $3,214 100.0% $2,644 100.0% COST OF REVENUE 361 28.6% 357 39.4% 896 27.9% 976 36.9% ------- ---- ------- ------- GROSS MARGIN 900 71.4% 550 60.6% 2,318 72.1% 1,668 63.1% GEN. & ADMIN. 555 44.0% 261 28.8% 1,377 42.8% 731 27.6% ------ ---- ----- ------- OPERATING INCOME $ 345 27.4% $289 31.9% $ 941 29.3% $ 937 35.4% ======= ==== ====== ====== NURSING SERVICES (DOLLARS IN THOUSANDS) THREE MONTHS ENDED NINE MONTHS ENDED --------------------------------- ----------------------------------- SEPT. 96 SEPT. 95 SEPT. 96 SEPT. 95 --------------- ------------ ------------- ------------ REVENUE $9,781 100.0% $8,286 100.0% $28,353 100.0% $23,310 100.0% COST OF REVENUE 5,932 60.6% 5,162 62.3% 16,844 59.4% 14,815 63.6% ------ ----- ------ ------ GROSS MARGIN 3,849 39.4% 3,124 37.7% 11,509 40.6% 8,495 36.4% GEN. & ADMIN. 4,008 41.0% 3,062 37.0% 11,625 41.0% 8,042 34.5% ----- ----- ------ ------ OPERATING INCOME $(159) (1.6%) $ 62 0.8% $ (116) 0.0% $ 453 1.9% ====== ====== ======= ========
13 LIQUIDITY AND CAPITAL RESOURCES At September 30, 1996, the Company had revolving bank lines of credit of $4,500,000 bearing interest at the banks' prime rate plus 1%. As of September 30, 1996, $550,000 was available under those lines of credit. The lines of credit are collateralized by 80% of eligible receivables from private payors and 75% from government entities. Eligible receivables are defined principally as trade accounts that are aged less than 90 days for private payors and 120 days for government entities. To date, the Company has no other source of external financing. The Company's operating activities provided $679,192 during the first nine months of 1996, whereas such activities provided $2,219,126 in cash during the first nine months of 1995. This change is primarily attributable to increased home health care revenue and receivables. Net cash used in investing activities increased to $1,292,392 during the first nine months of 1996 from $251,361 in the nine months ended June 30, 1995. This increase is attributable to fixed asset acquisitions in the current period. These assets consist primarily of equipment purchased for the Company's ambulatory surgical center. Financing activities provided $2,126,649 during the first nine months of 1996, whereas these activities used $1,465,571in the nine months ended 1995. The change is primarily due to an increase in the Company's borrowings on its line of credit. At September 30, 1996, the Company had working capital of $1,688,112 and stockholder's equity of $4,795,567. The Company's ratio of total liabilities to equity at September 30, 1996 was 2.31 to 1.0. The Company's sources of external and internal financing are limited. The Company may need to obtain additional financing, either through public or private securities offerings or borrowing, in order to meet future capital requirements. INFLATION The Company does not believe that inflation has had a material effect on its results of operations. The Company expects that any increase in costs attributable to inflation in the future would be offset by an increase in fees charged for services. SEASONALITY The demand for the Company's home health care services is not typically influenced by seasonal factors. However, demand for supplemental staffing services is affected by variations in the hospital census at various times of the year. 14 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At a special meeting of Shareholders held on February 8, 1996, the Shareholders approved and ratified the Amended and Restated Stock Option Plan. Of the 1,722,966 shares of common stock present in person or by proxy and entitled to be voted at the meeting, 1,698,341 votes were cast in favor of ratifying the Amended and Restated Stock Option Plan of the Company. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27.1 - Financial Data Schedule (b) Reports on Form 8-K None 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMEDISYS, INC. By: /s/ MITCHEL G. MOREL Mitchel G. Morel, Chief Financial Officer Principal Financial and Accounting Officer 16 EX-27 2
5 9-MOS DEC-31-1996 SEP-30-1996 2,383,453 0 7,414,761 733,912 0 10,621,634 3,348,140 566,628 515,806,420 8,933,522 0 0 0 2,586 4,785,567 15,905,420 11,762,546 11,762,546 6,841,997 6,841,997 (133,512) 0 (157,506) 72,096 25,500 0 0 0 0 55,917 .02 .00
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