-----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, Dw7Bdd4jr1jfh2m/sbL5Z2XHKsr75C4JB/nuIJ8A0v19EYVZDjuUcvj71avpw19r RWNY5pQqslns2YU5CIf2Zg== 0000950134-02-010036.txt : 20020814 0000950134-02-010036.hdr.sgml : 20020814 20020814151026 ACCESSION NUMBER: 0000950134-02-010036 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 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: 02735463 BUSINESS ADDRESS: STREET 1: 11100 MEAD ROAD STE 300 CITY: BATON ROUGE STATE: LA ZIP: 70816 BUSINESS PHONE: 2252922031 MAIL ADDRESS: STREET 1: 11100 MEAD ROAD STE 300 CITY: BATON ROUGE STATE: LA ZIP: 70816 FORMER COMPANY: FORMER CONFORMED NAME: M&N CAPITAL CORP DATE OF NAME CHANGE: 19930125 FORMER COMPANY: FORMER CONFORMED NAME: ANALYTICAL NURSING MANAGEMENT CORP DATE OF NAME CHANGE: 19940819 10-Q 1 d98962e10vq.txt FORM 10-Q FOR QUARTER ENDED JUNE 30, 2002 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 June 30, 2002 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) 11100 Mead Road, Suite 300, Baton Rouge, LA 70816 ----------------------------------------------------------- (Address of principal executive offices including zip code) (225) 292-2031 -------------- (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 August 13, 2002: 9,051,033 shares 1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001........................... 3 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2002 and 2001.......................................................................... 4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001........... 5 Notes to Consolidated Financial Statements...................................................... 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........... 14 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS..................................... 18 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS............................................................................... 19 ITEM 2. CHANGES IN SECURITIES........................................................................... 19 ITEM 3. DEFAULTS UPON SENIOR SECURITIES................................................................. 19 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................. 19 ITEM 5. OTHER INFORMATION............................................................................... 19 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................................ 19
2 ITEM 1. FINANCIAL STATEMENTS AMEDISYS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2002 AND DECEMBER 31, 2001 (UNAUDITED, DOLLAR AMOUNTS IN 000'S)
June 30, 2002 December 31, 2001 ----------------- ----------------- CURRENT ASSETS: Cash and Cash Equivalents $ 9,921 $ 3,515 Patient Accounts Receivable, Net of Allowance for Doubtful Accounts of $2,312 in June 2002 and $3,125 in December 2001 15,111 23,682 Prepaid Expenses 2,088 244 Deferred Income Taxes 1,965 -- Inventory and Other Current Assets 1,014 822 ----------------- ----------------- Total Current Assets 30,099 28,263 Property and Equipment, net 9,363 10,290 Other Assets, net 24,169 22,301 ----------------- ----------------- Total Assets $ 63,631 $ 60,854 ================= ================= CURRENT LIABILITIES: Accounts Payable $ 1,793 $ 2,440 Accrued Expenses: Payroll and Payroll Taxes 6,330 6,798 Insurance 1,862 1,881 Income Taxes 1,034 930 Legal Settlements 974 1,227 Other 2,352 3,082 Notes Payable 457 9,305 Current Portion of Long-term Debt 3,798 5,355 Current Portion of Obligations under Capital Leases 2,358 2,391 Current Portion of Medicare Liabilities 6,146 13,214 ----------------- ----------------- Total Current Liabilities 27,104 46,623 Long-term Debt 6,062 5,591 Obligations under Capital Leases 2,080 3,208 Long-term Medicare Liabilities 5,615 958 Deferred Income Taxes 1,134 -- Other Long-term Liabilities 1,016 1,099 ----------------- ----------------- Total Liabilities 43,011 57,479 ----------------- ----------------- Minority Interest in Consolidated Subsidiaries 66 66 ----------------- ----------------- STOCKHOLDER'S EQUITY: Common Stock (9,007,458 Shares in June 2002 and 7,178,152 Shares in December 2001) 9 7 Additional Paid-in Capital 28,120 16,539 Treasury Stock (4,167 Shares of Common Stock in June 2002 and December 2001) (25) (25) Retained Earnings (Deficit) (7,550) (13,212) ----------------- ----------------- Total Stockholder's Equity 20,554 3,309 ----------------- ----------------- Total Liabilities and Stockholder's Equity $ 63,631 $ 60,854 ================= =================
The accompanying notes are an integral part of these consolidated financial statements. 3 AMEDISYS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (UNAUDITED, DOLLAR AMOUNTS IN 000'S, EXCEPT PER SHARE DATA)
Three months ended Six months ended June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001 ------------- ------------- ------------- ------------- Income: Service revenue $ 32,854 $ 27,198 $ 64,704 $ 49,370 Cost of service revenue 14,573 12,157 28,442 21,924 ------------- ------------- ------------- ------------- Gross Margin 18,281 15,041 36,262 27,446 ------------- ------------- ------------- ------------- General and administrative expenses: Salaries and benefits 9,637 7,560 19,068 14,202 Other 5,679 5,671 11,236 11,313 ------------- ------------- ------------- ------------- Total general and administrative expenses 15,316 13,231 30,304 25,515 ------------- ------------- ------------- ------------- Operating income 2,965 1,810 5,958 1,931 Other income and expense: Interest income 24 99 42 254 Interest expense (420) (809) (998) (1,511) Other income, net 77 79 208 96 ------------- ------------- ------------- ------------- Total other expense, net (319) (631) (748) (1,161) ------------- ------------- ------------- ------------- Income before income taxes and discontinued operations 2,646 1,179 5,210 770 Income tax expense (benefit) 986 -- (452) -- ------------- ------------- ------------- ------------- Income before discontinued operations 1,660 1,179 5,662 770 Income (loss) from discontinued operations, net of income taxes -- 78 -- (129) ------------- ------------- ------------- ------------- Net income $ 1,660 $ 1,257 $ 5,662 $ 641 ============= ============= ============= ============= BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,531 5,777 7,890 5,636 Basic income per common share: Income before discontinued operations $ 0.19 $ 0.20 $ 0.72 $ 0.13 Income (loss) from discontinued operations, net of income taxes -- 0.01 -- (0.02) ------------- ------------- ------------- ------------- Net income $ 0.19 $ 0.21 $ 0.72 $ 0.11 ============= ============= ============= ============= DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 9,112 7,920 8,493 7,750 Diluted income per common share: Income before discontinued operations $ 0.18 $ 0.15 $ 0.67 $ 0.10 Income (loss) from discontinued operations, net of income taxes -- 0.01 -- (0.02) ------------- ------------- ------------- ------------- Net income $ 0.18 $ 0.16 $ 0.67 $ 0.08 ============= ============= ============= =============
The accompanying notes are an integral part of these consolidated financial statements. 4 AMEDISYS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (UNAUDITED, DOLLAR AMOUNTS IN 000'S)
Six months ended June 30, 2002 June 30, 2001 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 5,662 $ 641 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 1,553 1,404 Provision for bad debts 1,384 949 Compensation expense -- 70 Deferred income taxes (831) -- Deferred revenue -- (1,059) Other (94) -- Changes in assets and liabilities: (Increase) in cash included in assets held for sale -- (52) Decrease (increase) in accounts receivable 7,188 (9,529) (Increase) in inventory and other current assets (1,967) (704) (Increase) in other assets (38) (41) (Decrease) increase in accounts payable (648) 1,000 Increase in accrued expenses 257 1,270 (Decrease) increase in Medicare liabilities (2,411) 4,650 (Decrease) in long-term liabilities (82) -- ------------- ------------- Net cash provided (used) by operating activities 9,973 (1,401) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property and equipment 13 11 Purchase of property and equipment (569) (1,704) Cash used in purchase acquisitions (875) (3,406) Minority interest investment in subsidiary -- 33 ------------- ------------- Net cash (used) by investing activities (1,431) (5,066) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net (repayments) borrowings on line of credit agreements (8,848) 4,207 Proceeds from issuance of notes payable and capital leases 446 73 Payments on notes payable and capital leases (3,652) (1,195) Proceeds from private placement of stock, net 9,531 -- Proceeds from issuance of stock 387 239 ------------- ------------- Net cash (used) provided by financing activities (2,136) 3,324 ------------- ------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,406 (3,143) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,515 6,967 ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,921 $ 3,824 ============= ============= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for: Interest $ 925 $ 1,556 ============= ============= Income taxes $ 354 $ 282 ============= =============
The accompanying notes are an integral part of these consolidated financial statements. 5 AMEDISYS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION Amedisys, Inc. ("Amedisys" or "the Company") is a multi-state provider of home health care nursing services. At June 30, 2002, the Company operated fifty-seven home care nursing offices and two corporate offices in the southern and southeastern United States. In the opinion of management of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the Company's financial position at June 30, 2002, the results of operations for the three and six months ended June 30, 2002 and 2001, and cash flows for the six months ended June 30, 2002 and 2001. The results of operations for the interim periods are not necessarily indicative of results of operations for the entire year. These interim consolidated financial statements should be read in conjunction with the Company's annual financial statements and related notes in the Company's Form 10-K. 2. RECLASSIFICATION The Company has reclassified Medicare liabilities due within one year from a contra-asset account to a liability account in the accompanying Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001. Previously, Medicare liabilities due within one year were netted against accounts receivable. In the accompanying balance sheets, these liabilities are reflected as Current Portion of Medicare Liabilities. 3. REVENUE RECOGNITION Before implementation of the Medicare Prospective Payment System ("PPS") on October 1, 2000, reimbursement for home health care services to patients covered by the Medicare program was based on reimbursement of allowable costs subject to certain limits. Final reimbursement was determined after submission of annual cost reports and audits thereof by the fiscal intermediaries. Under PPS, the Company is paid by Medicare based on episodes of care. An episode of care is defined as a length of care up to sixty days with multiple continuous episodes allowed. The standard episode payment beginning October 1, 2000 was established by the Medicare Program at $2,115 per episode, increased to $2,274 per episode on October 1, 2001, to be adjusted by applicable regulations including, but not limited to, the following: a case mix adjuster consisting of eighty (80) home health resource groups ("HHRG"), the applicable geographic wage index, low utilization, intervening events and other factors. The episode payment will be made to providers regardless of the cost to provide care. The services covered by the episode payment include all disciplines of care, in addition to medical supplies, within the scope of the home health benefit. Revenue is recognized as services are provided based on the number of patient visits performed during the reporting period and a historical weighted average revenue per visit, calculated as the estimated historical average final episode payment divided by the historical average number of visits per episode. 6 4. EARNINGS PER SHARE Earnings per common share are based on the weighted average number of shares outstanding during the period. The following table sets forth the computation of basic and diluted net income per common share for the three and six month periods ended June 30, 2002 and 2001 including the results of discontinued operations:
In 000's, except per share amounts ------------------------------------------------------------- Three months Three months Six months Six months ended ended ended ended June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001 ------------- ------------- ------------- ------------- Basic Net Income per Share: Net Income $ 1,660 $ 1,257 $ 5,662 $ 641 ============= ============= ============= ============= Weighted Average Number of Shares Outstanding 8,531 5,777 7,890 5,636 ============= ============= ============= ============= Net Income per Common Share - Basic $ 0.19 $ 0.21 $ 0.72 $ 0.11 ============= ============= ============= ============= Diluted Net Income per Share: Net Income $ 1,660 $ 1,257 $ 5,662 $ 641 ============= ============= ============= ============= Weighted Average Number of Shares Outstanding 8,531 5,777 7,890 5,636 Effect of Dilutive Securities: Stock Options 436 709 454 650 Warrants 145 260 149 245 Convertible Preferred Shares -- 1,174 -- 1,219 ------------- ------------- ------------- ------------- Average Shares - Diluted 9,112 7,920 8,493 7,750 ============= ============= ============= ============= Net Income per Common Share - Diluted $ 0.18 $ 0.16 $ 0.67 $ 0.08 ============= ============= ============= =============
5. MEDICARE REIMBURSEMENT AND REFORM The Company derived approximately 89% of its revenues from continuing operations from the Medicare system for the six months ended June 30, 2002 and 88% for the six months ended June 30, 2001. On June 28, 2000, the Centers for Medicare & Medicaid Services ("CMS") issued the final rules for PPS (as discussed in Note 3), which were effective for all Medicare-certified home health agencies on October 1, 2000. The final regulations establish payments based on episodes of care. An episode is defined as a length of care up to sixty days with multiple continuous episodes allowed under the rule. A standard episode payment was established at $2,115 per episode, beginning October 1, 2000, to be adjusted by applicable regulations including, but not limited to, the following: a case mix adjuster consisting of eighty (80) home health resource groups ("HHRG"), the applicable geographic wage index, low utilization, intervening events and other factors. Providers are allowed to make a request for anticipated payment at the start of care equal to 60% of the expected payment for the initial episode and 50% for each subsequent episode. The remaining balance due to the provider is paid following the submission of the final claim at the end of the episode. In contrast to the cost-based reimbursement system whereby providers' reimbursement was limited, among other things, to their actual costs, episode payments are made to providers regardless of the cost to provide care, except with regard to certain outlier provisions. As a result, home health agencies have the opportunity to be profitable under this system. In December 2000, Congress passed the Benefits Improvement and Protection Act ("BIPA"), which provides additional funding to health care providers. BIPA provided for the following: (i) a one-year delay in applying the budgeted 15% reduction on payment limits, (ii) the restoration of a full home health market basket update for episodes ended on or after April 1, 2001, and before October 1, 2001 resulting in an expected increase in revenues of 2.2%, (iii) a 7 10% increase, effective April 1, 2001 and extending for a period of twenty four months, for home health services provided in a rural area, and (iv) a one-time payment equal to two months of periodic interim payments ("PIP"). Effective October 1, 2001, the standard episode payment for federal fiscal year 2002 was increased to $2,274 per episode. Currently, there is a budgeted 15% reduction in payment limits that will be effective for patients on service or admitted beginning October 1, 2002. Based on the complicated reimbursement formula and taking these reductions into account, offset by an anticipated inflationary update with the beginning of the new federal fiscal year, the anticipated annual reduction to service revenues should approximate 5%. This budgeted reduction has been delayed for the past three years and there is ongoing debate and discussion at the congressional level concerning a further delay of the scheduled reduction, but there can be no assurance that the scheduled reduction will not be implemented. In addition to this scheduled reduction that will be effective October 1, 2002, the provision in BIPA whereby home health providers received a 10% increase that began April, 2001 in reimbursement for serving patients in rural areas, which accounts for approximately 30% of the Company's patient population, is scheduled to expire March 31, 2003. In June 2002, the House of Representatives passed HR 4954, the Medicare Modernization and Prescription Drug Act of 2002, which, among other things, called for i) the elimination of the 15% reduction scheduled for October 1, 2002, ii) the extension through January 1, 2005 of the 10% rural payment increase currently scheduled to expire in April 2003, and iii) setting the home health market basket update for calendar year 2003 at 2%, for calendar year 2004 at 1.1%, and for calendar year 2005 at 2.7%. If any payment reductions take place, the Company would reflect a decrease to service revenues which could be material. The Company is currently evaluating its operations to increase efficiencies and reduce costs in an effort to mitigate these impending reductions. 6. ACQUISITIONS Effective March 1, 2001, the Company acquired, through its wholly owned subsidiary Amedisys Home Health, Inc. of Alabama, certain assets and liabilities of Seton Home Health Services, Inc. ("Seton") from Seton Health Corporation of North Alabama associated with its operations in Mobile and Fairhope, Alabama. In consideration for the acquired assets and liabilities, the Company paid $440,000 cash, which represents a purchase price of $475,000 less the estimated value of accrued vacation obligations. In connection with this acquisition, the Company recorded $448,000 of goodwill. Effective April 6, 2001, the Company acquired, through its wholly-owned subsidiary Amedisys Home Health, Inc. of Alabama, certain additional assets and liabilities of Seton from Seton Health Corporation of North Alabama associated with its operations in Birmingham, Tuscaloosa, Anniston, Greensboro, and Reform, Alabama. In consideration for the acquired assets and liabilities, the Company paid $2,216,000 cash, which represents a purchase price of $2,325,000 less the value of accrued vacation obligations. In connection with this acquisition, the Company recorded $2,235,000 of goodwill. Effective June 11, 2001, the Company acquired from East Cooper Community Hospital, Inc. certain assets and liabilities of HealthCalls Professional Home Health Services. In consideration for the acquired assets and liabilities, the Company paid $750,000 cash. In connection with this acquisition, the Company recorded $726,000 in goodwill. Effective April 1, 2002, the Company, through its wholly-owned subsidiary Amedisys Texas, Ltd., acquired certain assets and liabilities of Christus Spohn Home Health Services from Christus Spohn Health System Corporation ("Christus Spohn") associated with its operations in Corpus Christi, Texas. The assets acquired consisted primarily of all furniture, fixtures, equipment, leasehold improvements and supplies; inventory; all state home health licenses and permits; the Medicare provider agreement; and the Medicaid provider agreement. The liabilities assumed consisted of the accrued, but unused, paid time off of the employees as well as the obligations accruing after April 1, 2002 relating to the conveyed contracts and agreements. Of the $1,875,000 purchase price given in consideration for the acquired assets and liabilities, the Company paid $875,000 cash at closing and executed a promissory note in the amount of $1,000,000 bearing interest at 7% annually and payable over a three-year term in quarterly principal and interest installments of $93,000 beginning July 1, 2002. In connection with this acquisition, the Company recorded $1,893,000 of goodwill in the second quarter of 2002. 8 7. DISCONTINUED OPERATIONS During 1999, the Company changed its strategy from providing a variety of alternate site provider health care services to becoming a leader in home health care nursing services. Pursuant to this strategy, the Company divested its non-home health care nursing divisions. The Company sold its six surgery centers and sold or closed its four infusion locations with the final sale taking place (as described below) in September, 2001. Effective September 7, 2001, the Company, its wholly-owned subsidiary Amedisys Surgery Centers, L.C., its 56% owned subsidiary Hammond Surgical Care Center, L.C. d/b/a St. Luke's SurgiCenter ("St. Luke's"), and Surgery Center of Hammond, L.L.C. ("Surgery Center") entered into an agreement for the purchase and sale of the operations and assets of St. Luke's, an outpatient surgery center located in Hammond, Louisiana, to Surgery Center. The sales price of $2,850,000 was paid at closing and distributed in the following manner: $1,066,000 paid directly to creditors of St. Luke's relating to existing debt obligations, $1,684,000 paid to St. Luke's, and $100,000 in cash to be released upon the determination of the value of working capital transferred. Summarized financial information for the discontinued operations is as follows (in 000's):
Three Months Six Months ended ended June 30, 2001 June 30, 2001 ------------- ------------- Outpatient Surgery Division: Service Revenue $ 744 1,282 Income from Discontinued Operations Net of Income Taxes 78 4 Infusion Therapy Division: Service Revenue $ -- -- (Loss) from Discontinued Operations Net of Income Taxes -- (133) Total Discontinued Operations: Service Revenue $ 744 1,282 Income (Loss) from Discontinued Operations Net of Income Taxes 78 (129)
8. NOTES PAYABLE Notes payable as of June 30, 2002 consists primarily of an asset-based line of credit with availability, depending on collateral, of up to $25 million with National Century Financial Enterprises, Inc. ("NCFE") and borrowings under a revolving bank line of credit of up to $2.5 million. The $25 million asset-based line of credit, which matures June, 2005, is collateralized by eligible accounts receivable and as of June 30, 2002 and December 31, 2001, had an outstanding balance of $457,000 and $8,593,000, respectively. There was $6.5 million available under this line as of June 30, 2002 and no amounts available as of December 31, 2001. Eligible receivables are defined as receivables, exclusive of workers' compensation and self-pay, that are aged less than 181 days. The effective interest rate on this line of credit was 8.91% and 11.00% for the six months ended June 30, 2002 and the year ended December 31, 2001, respectively. The revolving bank line of credit of $2.5 million bears interest at the Bank One Prime Floating Rate, which was 4.75% at June 30, 2002 and December 31, 2001. At June 30, 2002, there were no amounts drawn on the bank line of credit with $2,500,000 available. At December 31, 2001, there was $712,000 drawn on the line of credit with $1,788,000 available. 9 9. LONG-TERM DEBT Long-term debt as of June 30, 2002 consists primarily of a $7.1 million note payable to NPF Capital, a $547,000 note payable to CareSouth Home Health Services, Inc. ("CareSouth"), a $486,000 note payable to Winter Haven Hospital, and a $1.0 million note payable to Christus Spohn (See note 6). The $7.1 million note to NPF Capital was restructured during June 2002 to extend the maturity to June 2005 with revised monthly principal and interest payments of $211,000 at an interest rate equal to the prime rate, 4.75% at June 30, plus 3.25%. The Company makes monthly principal and interest payments of $25,000 on the $547,000 note to CareSouth, which is due May 2004, monthly principal and interest payments of $30,000 on the $486,000 note to Winter Haven Hospital, which is due November 2003 and quarterly principal and interest payments of $93,000 on the $1.0 million note to Christus Spohn, which is due April 2005. 10. CAPITAL LEASES Capital leases consist primarily of a Software License Agreement with CareSouth and an equipment lease agreement with Cisco Systems Capital Corporation ("Cisco"). The CareSouth lease requires monthly payments of $178,000 and had an outstanding balance of $3,727,000 at June 30, 2002. This agreement contains a bargain purchase option that the Company intends to exercise upon expiration of the agreement in May 2004. The Cisco capital lease, secured by equipment used currently in connection with the Company's wide-area network, requires monthly payments of $21,000 and had a balance of $464,000 at June 30, 2002. This lease expires July 2004. 11. AMOUNTS DUE TO MEDICARE As of June 30, 2002, the Company estimates an aggregate payable to Medicare of $11.8 million resulting from interim cash receipts in excess of expected reimbursement. Included in this figure is $7.4 million attributed to a provision in BIPA whereby a lump-sum payment equal to two months of PIP was advanced to providers. The fiscal year ending December 31, 2000 cost reports, which reflected the BIPA payments, were filed in June 2002 and July 2002. In June 2002, CMS issued a Program Memorandum granting automatic thirty-six month repayment plans for providers who received the BIPA payment if five specific criteria are met. The Company believes that it meets the criteria and has begun receiving formal notification of thirty-six month repayment plans for some agencies, the remainder of which we believe will commence no later than October 2002. Accordingly, in the accompanying Consolidated Balance Sheet as of June 30, 2002, the Company has classified the BIPA overpayments appropriately between Current Portion of Medicare Liabilities and Long-term Medicare Liabilities. The amounts due to Medicare within one year of $6.2 million are shown as Current Portion of Medicare Liabilities and the amount payable to Medicare in excess of one year of $5.6 million is shown as Long-term Medicare Liabilities. Included in the Current Portion of Medicare Liabilities figure of $6.2 million is a $3.1 million overpayment relating to Alliance Home Health, a wholly owned subsidiary of the Company which filed for bankruptcy protection on September 29, 2000 and for which no payments are currently being made. 12. INCOME TAXES The Company files a consolidated federal income tax return that includes all subsidiaries that are more than 80% owned. State income tax returns are filed individually by the subsidiaries in accordance with state statutes. The Company uses the asset and liability approach to measuring deferred tax assets and liabilities based on temporary differences existing at each balance sheet date using currently enacted tax rates in accordance with Statement of Financial Accounting Standards No. 109 ("SFAS 109"), Accounting for Income Taxes. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. As of December 31, 2001, the Company had a recorded valuation allowance of $2,587,000. Management of the Company determined, based on the first quarter 2002 operating results and projections for fiscal year 2002, that it was more likely than not that the Company would be able to use all of the previously unrecognized tax benefits. Accordingly, in the quarter ended March 31, 2002, the Company recorded a tax benefit of $1,438,000 resulting primarily from elimination of all of the valuation allowance. For the quarter ended June 30, 2002, the Company recorded income tax expense of $986,000, an effective rate of 37%. 10 Total income tax expense included in the accompanying Consolidated Statements of Operations is as follows (in 000's):
Three Months ended Six Months ended June 30, June 30, ------------------- -------------------- 2002 2001 2002 2001 -------- -------- -------- -------- Current income tax expense $ 299 $ -- $ 379 $ -- Deferred income tax benefit 687 -- (831) -- -------- -------- -------- -------- Total income tax $ 986 $ -- $ (452) $ -- ======== ======== ======== ========
Total tax expense on income before taxes resulted in effective tax rates that differed from the federal statutory income tax rate. A reconciliation of these rates is as follows as of June 30, 2002:
Three Months Six Months ended ended June 30, 2002 June 30, 2002 ------------- ------------- Income taxes computed on federal statutory rate 35% 35% State income taxes and other 2 5 Removal of valuation allowance -- (50) Nondeductible expenses and other -- 1 ------------- ------------- Total 37% (9)% ============= =============
Net deferred tax assets consist of the following components as of June 30, 2002 and December 31, 2001 (in 000's):
June 30, December 31, 2002 2001 ------------- ------------- Deferred tax assets: NOL carryforward $ -- $ 1,066 Allowance for doubtful accounts 595 847 Property and equipment 422 371 Self-insurance reserves 654 618 Losses of consolidated subsidiaries not consolidated for tax purposes, expiring beginning in 2010 144 144 Expenses not currently deductible for tax purposes 466 606 Other 106 100 Deferred tax liabilities: Amortization of intangible assets (1,556) (1,165) Less: Valuation allowance -- (2,587) ------------- ------------- $ 831 $ -- ============= =============
13. EFFECT OF NEW FINANCIAL ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board ("FASB") issued Financial Accounting Standards Statement No. 141, Business Combinations ("SFAS 141") and Financial Accounting Standards Statement No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). SFAS 141 eliminates the pooling-of-interests method of accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. The purchase method of accounting is required to be used for all business combinations initiated after June 30, 2001. SFAS 141 also requires separate recognition of intangible assets that meet certain criteria. Under SFAS 142, goodwill and indefinite-lived intangible assets are no longer amortized but are reviewed for impairment annually, or more frequently if circumstances indicate potential impairment. Separable intangible assets that 11 are not deemed to have an indefinite life will continue to be amortized over their useful lives. For goodwill and indefinite-lived intangible assets acquired prior to July 1, 2001, goodwill was amortized through 2001, at which time amortization ceased and a transitional goodwill impairment test was performed. The Company adopted SFAS 142 effective January 1, 2002. Management has evaluated the impact of the new accounting standards on existing goodwill and other intangible assets and has concluded that no impairment exists as of June 30, 2002. Included in general and administrative expenses in the accompanying Consolidated Statements of Operations is goodwill amortization expense as follows (in 000's):
Three Months ended Six Months ended June 30, June 30, --------------------- --------------------- 2002 2001 2002 2001 --------- --------- --------- --------- Goodwill Amortization Expense $ -- $ 314 $ -- $ 594
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which requires recording the fair value of a liability for an asset retirement obligation in the period incurred. The standard is effective for fiscal years beginning after June 15, 2002, with earlier application permitted. Upon adoption of the standard, the Company will be required to use a cumulative effect approach to recognize transition amounts for any existing retirement obligation liabilities, asset retirement costs and accumulated depreciation. The Company does not have any asset retirement obligations; therefore, adoption of this statement will not have an effect on the Company's financial statements. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". This new statement also supersedes certain aspects of APB 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", with regard to reporting the effects of a disposal of a segment of a business and will require expected future operating losses from discontinued operations to be reported in discontinued operations in the period incurred rather than as of the measurement date as presently required by APB 40. Additionally, certain dispositions may now qualify for discontinued operations treatment. The provisions of this statement are required to be applied for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. The Company adopted SFAS 144 effective January 1, 2002. The adoption of SFAS 144 did not have any effect on the Company's financial statements. In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statements No. 13 and Technical Corrections" ("SFAS 145"). SFAS 145 provides guidance for income statement classification of gains and losses on extinguishments of debt and accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS 145 is effective for the Company in January 2003. The Company is evaluating the impact of SFAS 145 and believes it will not have a material effect on the Company's financial statements. In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal Activities" ("SFAS 146"). SFAS 146 addresses significant issues regarding the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant the guidance set forth in EITF Issue No. 94-3, "Liability Recognition of Certain Employee Termination Benefits and Other Costs to Exit an Activity". SFAS 146 is effective for the Company in January 2003. The Company is evaluating the impact of SFAS No. 146 and believes it will not have a material effect on the Company's financial statements. 12 14. GOODWILL AND OTHER INTANGIBLE ASSETS In accordance with SFAS 142, the Company discontinued the amortization of goodwill effective January 1, 2002. A reconciliation of previously reported net income and earnings per share to the amounts adjusted for the exclusion of goodwill amortization, net of tax, follows (in 000s, except per share data):
Three Months ended Six Months ended June 30, June 30, ------------------------- ------------------------- 2002 2001 2002 2001 ----------- ----------- ----------- ----------- Net income, as reported $ 1,660 $ 1,257 $ 5,662 $ 641 Add: Goodwill amortization, net of tax -- 314 -- 594 ----------- ----------- ----------- ----------- Adjusted net income $ 1,660 $ 1,571 $ 5,662 $ 1,235 =========== =========== =========== =========== Basic income per share: Reported net income $ 0.19 $ 0.21 $ 0.72 $ 0.11 Goodwill amortization -- 0.06 -- 0.11 ----------- ----------- ----------- ----------- Adjusted net income $ 0.19 $ 0.27 $ 0.72 $ 0.22 =========== =========== =========== =========== Diluted income per share: Reported net income $ 0.18 $ 0.16 $ 0.67 $ 0.08 Goodwill amortization -- 0.04 -- 0.08 ----------- ----------- ----------- ----------- Adjusted net income $ 0.18 $ 0.20 $ 0.67 $ 0.16 =========== =========== =========== ===========
Changes in the carrying amount of goodwill for the six month period ended June 30, 2002 are as follows (in 000s): Balance as of December 31, 2001 $ 22,216 Goodwill acquired in the six months ended June 30, 2002 (See Note 6) 1,893 ------------- Balance as of June 30, 2002 $ 24,109 =============
15. PRIVATE PLACEMENT OF COMMON STOCK On April 26, 2002, the Company completed a private placement of 1,460,000 shares of Common Stock with private investors at a price of $6.94 per share. This placement provided net proceeds to the Company of approximately $9.5 million. The Company intends to use the proceeds for both debt reduction and general corporate purposes, including possible acquisitions. The Company engaged Belle Haven Investments, L.P. ("BHI") and Sanders Morris Harris ("Sanders") as placement agents for this transaction pursuant to which BHI received $544,300 in cash and BHI and its principals received warrants to purchase up to 64,500 shares of common stock exercisable at $8.12 per share and Sanders received $15,615 in cash and warrants to purchase up to 4,500 shares of common stock exercisable at $8.12 per share. 13 16. STOCKHOLDERS' EQUITY The following table summarizes the activity in Stockholders' Equity for the six months ended June 30, 2002 (in 000's, except share information):
Common Common Additional Retained Total Stock Stock Paid-in Treasury Earnings Stockholders' Shares Amount Capital Stock (Deficit) Equity ------------- ------------- ------------- ------------- ------------- ------------- Balance, December 31, 2001 7,178,152 $ 7 $ 16,539 $ (25) $ (13,212) $ 3,309 Issuance of stock for Employee Stock Purchase Plan 67,423 -- 368 -- -- 368 Issuance of stock for 401k match 191,713 1 1,295 -- -- 1,296 Exercise of stock options 110,170 -- 387 -- -- 387 Issuance of stock relating to private placement 1,460,000 1 9,531 -- -- 9,532 Net income -- -- -- -- 5,662 5,662 ------------- ------------- ------------- ------------- ------------- ------------- Balance, June 30, 2002 9,007,458 $ 9 $ 28,120 $ (25) $ (7,550) $ 20,554 ============= ============= ============= ============= ============= =============
17. CHANGE IN INDEPENDENT AUDITORS On April 30, 2002, the Board of Directors of the Company, upon recommendation of the Audit Committee, dismissed Arthur Andersen LLP ("Andersen") as the Company's independent auditors. A Form 8-K was filed with the SEC on May 3, 2002 and a Form 8-K/A was filed with the SEC on May 13, 2002 relating to this matter. Also effective April 30, 2002, the Board of Directors, upon recommendation of the Audit Committee, selected KPMG LLP ("KPMG") to serve as the Company's independent auditors for 2002. At that time, the definitive engagement of KPMG was contingent upon the completion of KPMG's standard client evaluation procedures. These procedures were completed on May 24, 2002 and a Form 8-K/A was filed with the SEC on May 24, 2002 detailing such. 18. SUBSEQUENT EVENTS Effective August 1, 2002, the Company, through its wholly-owned subsidiary Amedisys Texas, Ltd., acquired certain assets and liabilities of Baylor All Saints Medical Center and All Care, Inc. associated with their home health care operations in Fort Worth, Texas. The assets acquired consisted of furniture, fixtures, and equipment; inventory; licenses and permits, to the extent assignable, including the Medicare and Medicaid provider numbers; and goodwill. The liabilities assigned consisted of the accrued, but unused, paid time off of the employees as well as the obligations accruing on or after August 1, 2002 relating to the assumed contracts and agreements. In consideration for the acquired assets and liabilities, the Company paid $1,000,000 cash at closing and executed a promissory note in the amount of $200,000 for a total purchase price of $1,200,000. The promissory note, bearing interest at 7% per annum, is payable in quarterly principal and interest installments beginning November 2002. In connection with this acquisition, the Company will record approximately $1,190,000 of goodwill in the third quarter of 2002. 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 and Notes thereto and the related Management's Discussion and Analysis in the Company's Form 10-K for the year ended December 31, 2001. 14 RESULTS OF OPERATIONS Service Revenues. Net revenues increased $5,656,000 or 21% for the three months ended June 30, 2002 and $15,334,000 or 31% for the six months ended June 30, 2002, as compared to the same periods in 2001. For the three months ended June 30, 2002 as compared to the same period in 2001, this increase was attributed to an increase in patient admissions and the per episode Medicare reimbursement increase effective October 1, 2001. Patient admissions increased 971 or 10% from 9,575 for the three months ended June 30, 2001 to 10,546 for the comparable period of 2002. This quarter to quarter increase in admissions is attributable to both internal growth and acquisitions with full operations during the quarter ended June 30, 2002. For the six months ended June 30, 2002 as compared to the same period in 2001, the increase in service revenues was attributed, as well, to an increase in patients admissions and the per episode Medicare reimbursement increase effective October 1, 2001 and April 1, 2001. For the comparable six month periods, patient admissions increased by 3,652 or 21% from 17,520 for the six months ended June 30, 2001 to 21,172 for the same period of 2002. This increase in patient admissions was derived from both internal growth and acquisitions completed during the 2nd quarter of 2001 and 2002. Cost of Revenues. Cost of revenues increased 20% and 30% for the three and six months ended June 30, 2002 as compared to the same periods in 2001. These increases are attributed to an increase in patient visits and increased salaries for the clinical manager positions. Patient visits increased 16,985 or 7%, from 258,855 for the three months ended June 30, 2001 to 275,840 for the three months ended June 30, 2002. For the six month period comparison, patient visits increased 79,544 or 17% from 467,100 for the six months ended June 30, 2001 to 546,644 for the six months ended June 30, 2002. Salaries for the clinical manager positions increased $558,000 and $1,304,683 for the three and six months ended June 30, 2002 as compared to the same periods in 2001. The clinical manager position was implemented company-wide in the latter part of 2000, with full staffing completed during 2001, to provide a greater level of patient care oversight and coordination. General and Administrative Expenses ("G&A"). G&A increased $2,085,000, or 16%, for the three months ended June 30, 2002 and $4,789,000, or 19%, for the six months ended June 30, 2002 as compared to the same periods in 2001. As a percentage of net revenues, G&A decreased 2% and 5% for the three and six months ended June 30, 2002, respectively, as compared to the same periods in 2001. This dollar increase from the three month period ended June 30, 2001 as compared to the same period of 2002 is primarily attributed to increased G & A for acquisitions of $462,000, increased health insurance costs of $613,000, increased depreciation expense in connection with the installation of the wide-area network during the latter part of 2001, and additional personnel costs in several corporate departments including billing and information services, offset by a decrease in goodwill amortization expense. For the six month period ended June 30, 2001 as compared to the same period of 2002, the increase is primarily attributed to increased G & A for acquisitions of $1.3 million, increased health insurance costs of $1,260,000, and the similar increases in depreciation expense and personnel costs as noted above, offset by a decrease in goodwill amortization expense. Other Income and Expense. Other income and expense decreased $312,000 or 49% and $413,000 or 35% for the three and six months ended June 30, 2002 as compared to the same periods in 2001. This decrease is primarily attributed to lower interest expense incurred during both respective periods of 2002 as result of the Company's improved cash collections and corresponding decrease in funding through the lines of credit. Income Tax Expense. Income tax expense (benefit) of $986,000 and ($452,000) was recorded for the three months and six months ended June 30, 2002. An effective income tax rate of 37% was recorded on income before taxes during both the three and six month periods ended June 30, 2002. Additionally, an income tax benefit of $2,587,000 was recorded primarily from elimination of all of the valuation allowance for net deferred tax assets at March 31, 2002. CRITICAL ACCOUNTING POLICIES The financial statements are prepared in accordance with generally accepted accounting principles and include amounts based on management's judgements and estimates. These judgements and estimates are based on, among other things, historical experience and information available from outside sources. The critical accounting policies presented below have been discussed with the Audit Committee as to the development and selection of the accounting estimates used as well as the disclosures provided herein. Actual results could differ materially from these estimates. MEDICARE REVENUE RECOGNITION The Company derived approximately 89% of net service revenue from the Medicare system for the six months ended June 30, 2002. Under PPS, the Company is paid by Medicare based on episodes of care. An episode of care is defined as a length of care up to sixty days with multiple continuous episodes allowed. The standard episode payment beginning October 1, 2000 was established by the Medicare Program at $2,115 per episode, to be adjusted by applicable regulations including, but not limited to, the following: a case mix adjuster consisting of eighty (80) home health resource groups ("HHRG"), the applicable geographic wage index, low utilization, intervening events and other factors. 15 Effective October 1, 2001, the standard episode payment was increased, through federal legislation, to $2,274 per episode. Revenue is recognized as services are provided based on the number of patient visits performed during the reporting period and a historical weighted average revenue per visit, calculated as the estimated historical average final episode payment divided by the historical average number of visits per episode. Any significant change in the current case mix of patients, geographic distribution of patients, or utilization of services could produce a variance to service revenue that differs materially from the revenue recorded based on historical information. Prior to the implementation of PPS on October 1, 2000, Medicare revenue was based on allowable costs subject to certain limits. Final reimbursement was determined after submission of annual cost reports and audits thereof by the fiscal intermediaries. In 1997, Congress approved the Balanced Budget Act of 1997 (the "Budget Act"). The Budget Act established an interim payment system (the "IPS") that provided for the lowering of reimbursement limits for home health visits until PPS was implemented. For cost reporting periods beginning on or after October 1, 1997, Medicare-reimbursed home health agencies cost limits were determined as the lesser of (i) their actual costs, (ii) per visit cost limits based on 105% of median costs of freestanding home health agencies, or (iii) a per beneficiary limit determined for each specific agency. The IPS cost limits applied to the Company for the cost reporting period beginning January 1, 1998 and remained in effect until October 1, 2000. NON-MEDICARE REVENUE RECOGNITION The Company derived approximately 11% of net service revenue from non-Medicare payor sources for the six months ended June 30, 2002. Non-Medicare payor sources reimburse the Company for services provided under both fee-for-service arrangements and capitated arrangements. Under fee-for-service arrangements, net service revenues are recorded at the expected realizable amount in the reporting period in which the service is provided. The expected realizable amount is determined using the contractual reimbursement rates on a per payor, per discipline basis if available, or historical experience. Under capitated arrangements, net service revenues are recorded at the predetermined monthly per member per month rate irrespective of the services performed. COLLECTIBILITY OF ACCOUNTS RECEIVABLE The process for estimating the ultimate collectibility of accounts receivable involves judgement, primarily relating to non-Medicare accounts receivable. The Company currently records an allowance for uncollectible accounts on a percentage of revenues basis unless a specific issue is noted, at which time an additional allowance may be recorded. FINANCIAL CONDITION The Company recorded operating losses and had negative cash flow for the year ended December 31, 1999 and the first three quarters of 2000, during which time its operations were primarily funded by the divestiture of certain non-core assets. The significant losses and negative cash flow from operations were largely attributable to the prior Medicare reimbursement system which was effective from January 1, 1998 through October 1, 2000 for the Company. Beginning in October 2000 through the end of the first quarter of 2001, the Company reported positive cash flow and a decrease in operating losses primarily as a result of the implementation of PPS on October 1, 2000. Beginning in the second quarter of 2001 and through this quarter ending June 30, 2002, the Company has reported profitability and positive cash flow due, in part, to per episode Medicare reimbursement increases effective April 1, 2001 and October 1, 2001. Absent any material acquisition, the Company anticipates positive cash flow from operations will continue throughout 2002. As described in Note 15 to the Consolidated Financial Statements, the Company completed a private placement of common stock during April 2002 resulting in net proceeds to the Company of approximately $9.5 million for which the Company intends to use for both debt reduction and general corporate purposes, including possible acquisitions. The Company also has certain contingencies recorded as current liabilities in the accompanying Consolidated Balance Sheets (in accordance with SFAS No. 5) that management does not believe will currently impact cash flow. Also, as discussed in Note 8, the Company has available $9.0 million under the NCFE and bank lines of credit which would be available to fund working capital needs. The following table summarizes the Company's current contractual obligations (in 000's): 16
Payments Due by Period ---------------------------------------------------------- Contractual Obligations Total Less than 1 year 1-3 years 4-5 years - ----------- ----------- ---------------- ----------- ----------- Notes Payable (Note 8) $ 457 $ 457 $ -- $ -- Long-Term Debt (Note 9) 9,860 3,798 6,062 -- Capital Lease Obligations (Note 10) 4,438 2,358 2,079 1 Medicare Liabilities (Note 11) 11,761 6,146 5,615 -- ----------- ----------- ----------- ----------- Total Contractual Cash Obligations $ 26,516 $ 12,759 $ 13,756 $ 1 =========== =========== =========== ===========
The Company's operating activities provided $9,973,000 in cash during the six months ended June 30, 2002, whereas such activities used $1,401,000 in cash during the six months ended June 30, 2001. Cash provided by operating activities in 2002 is primarily attributable to net income of $5,662,000, net non-cash items such as depreciation and amortization of $1,553,000, provision for bad debts of $1,384,000, an increase in deferred tax assets of ($831,000), other of ($94,000), and changes in assets and liabilities of $2,299,000. Investing activities used $1,431,000 for the six months ended June 30, 2002, whereas such activities used $5,066,000 for the six months ended June 30, 2001. Cash used by investing activities in 2002 is attributed to the purchase of property and equipment of $569,000 and cash used in acquisitions of $875,000, offset by proceeds from the sale of property and equipment of $13,000. Financing activities used cash during the six months ended June 30, 2002 of $2,136,000, whereas such activities provided $3,324,000 during the same period in 2001. Cash used by financing activities in 2002 is primarily attributed to proceeds from a private placement of stock of $9,531,000, issuance of notes payable and capital leases of $446,000, and proceeds from the issuance of stock of $387,000, offset by repayments on line of credit agreements of $8,848,000 and payments on notes payable and capital leases of $3,652,000. The Company derived approximately 89% of its service revenues from the Medicare system for the six months ended June 30, 2002. Currently, there is a budgeted 15% reduction in payment limits that will be effective for patients on service or admitted beginning October 1, 2002. Based on the complicated reimbursement formula and taking these reductions into account, offset by an anticipated inflationary update with the beginning of the new federal fiscal year, the anticipated reduction to service revenues should approximate 5%. This budgeted reduction has been delayed for the past three years and there is ongoing debate and discussion at the congressional level concerning scheduled reduction, but there can be no assurance that the scheduled reduction will not be implemented. In addition to this scheduled reduction that will be effective October 1, 2002, the provision in BIPA whereby home health providers received a 10% increase in reimbursement for serving patients in rural areas, which accounts for approximately 30% of the Company's patient population, is scheduled to expire March 31, 2003. In June 2002, the House of Representatives passed HR 4954, the Medicare Modernization and Prescription Drug Act of 2002, which, among other things, called for i) the elimination of the 15% reduction scheduled for October 1, 2002, ii) the extension through January 1, 2005 of the 10% rural payment increase currently scheduled to expire in April 2003, and iii) setting the home health market basket update for calendar year 2003 at 2%, for calendar year 2004 at 1.1%, and for calendar year 2005 at 2.7%. In the event that any payment reductions take place, the Company would reflect a decrease to service revenues which could be material. The Company is currently evaluating its operations to increase efficiencies and reduce costs in an effort to mitigate these impending reductions. In 1999, the Company discovered questionable conduct involving the former owner of its Monroe, Louisiana, agency. The Company conducted an initial audit (using an independent auditor) and voluntarily disclosed the irregularities to the Department of Health and Human Services' Office of the Inspector General. Since that time, the government has been examining the disclosed activities and during the second quarter of 2002, a further audit of relevant claims was initiated at the request of the government, which is currently ongoing. Management believes the Company has adequately reserved for the estimated liability associated therewith; but no assurances can be provided that the ultimate resolution will not be materially different than the current estimate. From December 31, 1998 to November 9, 2000, the Company was covered by Reliance 17 Insurance Company of Illinois ("Reliance") for risks associated with professional and general liability. The Company became aware of the deteriorating stability and rating of Reliance during the latter part of 2000 and thus, secured coverage with another insurer on November 9, 2000 for occurrences after that date. Reliance is currently in liquidation and may not be in a position to pay or defend claims incurred by the Company during the period stated above. The Company has several open claims relating to this period above for which it is now defending and does not believe that the ultimate resolution of these claims will be materially different from reserves established for those claims. The Company is unaware of, and does not expect, any material claims that may be made based on occurrences during the period, but there is no assurance that additional claims will not be brought against the Company relating to incidents which occurred during the time period stated above or that any such claims will not be material. Towards the end of our second quarter and continuing through July, the Company has experienced a slowdown in admission growth in certain markets. In response to this issue, management has completed a realignment of the sales organization, which we believe will address this slowdown and contribute to the ongoing growth and vitality of Amedisys, Inc. However, should this trend continue, it would have an impact on the internal growth rate and on future operating results. The Company does not believe that inflation has had a material effect on its results of operations for the three and six month periods ended June 30, 2002. ARTHUR ANDERSEN LLP Our financial statements for the year ended December 31, 2001 were audited by Arthur Andersen LLP ("Andersen"), our former independent accountants. On June 15, 2002, a jury convicted Andersen on obstruction of justice charges, and Andersen has announced that unless the jury verdict is set aside, a judgement of conviction could be entered as early as August 31, 2002, which will effectively end the firm's audit practice. Should we seek access to the public capital markets in the future, SEC rules will require us to include or incorporate by reference in any prospectus three years of audited financial statements. Until our audited financial statements for the fiscal year ending December 31, 2004 become available in the first quarter of 2005, the SEC's current rules would require us to present audited financial statements for one or more fiscal years audited by Andersen. Before then, the SEC may cease accepting financial statements audited by Andersen, in which case we would be unable to access the public capital market unless KPMG LLP, our current independent accounting firm, or another independent accounting firm, is able to audit the financial statements originally audited by Andersen. Following the conviction of Andersen, the SEC issued a release stating that Andersen has informed the SEC that it will cease practicing before the SEC by August 31, 2002, unless the SEC determines another date is appropriate. Although the SEC has indicated that in the interim it will continue to accept financial statements audited by Andersen, there is no assurance that the SEC will continue to do so in the future. FORWARD LOOKING STATEMENTS When included in the Quarterly Report on Form 10-Q or in documents incorporated herein by reference, the words "expects", "intends", "anticipates", "believes", "estimates", and analogous expressions are intended to identify forward-looking statements. Such statements inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, among others, general economic and business conditions, current cash flows and operating deficits, debt service needs, adverse changes in federal and state laws relating to the health care industry, competition, regulatory initiatives and compliance with governmental regulations, customer preferences and various other matters, many of which are beyond the Company's control. These forward-looking statements speak only as of the date of the Quarterly Report on Form 10-Q. The Company expressly disclaims any obligation or undertaking to release publicly any updates or any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any statement is based. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company does not engage in derivative financial instruments, other financial instruments, or derivative commodity instruments for speculative or trading/non-trading purposes. 18 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES On April 26, 2002, the Company completed a private placement of 1,460,000 shares of Common Stock. The Common Stock was sold to accredited investors at a cash price of $6.94 per share for gross proceeds of $10,132,400. This placement provided net proceeds to the Company of approximately $9.5 million. The Company engaged Belle Haven Investments, L.P. ("BHI") and Sanders Morris Harris ("Sanders") as placement agents for this transaction. BHI received $544,300 in cash commissions and BHI and its principals received warrants to purchase up to 64,500 shares of common stock exercisable at $8.12 per share. Sanders received $15,615 in cash commissions and warrants to purchase up to 4,500 shares of common stock exercisable at $8.12 per share. All the warrants issued to the placement agents pursuant to this transaction have an exercise price of $8.12 per share and are exercisable beginning on the six-month anniversary of the transaction and until the five-year anniversary of the transaction. The Company relied primarily on the exemption from federal registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D by privately offering the securities to accredited investors. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual shareholders' meeting of the Company was held on June 13, 2002 for election of five directors to serve until the next annual meeting of the shareholders of the Company. The nominated individuals were William F. Borne, CEO of Amedisys, Inc.; Ronald A. LaBorde, President and CEO of Piccadilly Cafeterias, Inc.; Jake L. Netterville, Chairman of the Board of Directors of Postlethwaite and Netterville, a professional accounting firm; David R. Pitts, President and CEO of Pitts Management Associates, Inc.; and Peter F. Ricchiuti, Assistant Dean and Director of Research of BURKENROAD Reports at Tulane University's A.B. Freeman School of Business. These individuals were elected with the following votes:
Director Votes in Favor Votes Withheld --------- -------------- -------------- Mr. Borne 6,664,596 6,910 Mr. LaBorde 6,664,596 6,910 Mr. Netterville 6,664,596 6,910 Mr. Pitts 6,664,596 6,910 Mr. Ricchiuti 6,664,596 6,910
ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Identification of Exhibit - ------- ------------------------- 3.1(4) - Certificate of Incorporation 3.2(3) - Bylaws 4.2(1) - Common Stock Specimen 4.7(2) - Shareholder Rights Agreement 10.1(5) - Employment Agreement between Amedisys, Inc. and Greg Browne 21.1(1) - List of Subsidiaries 99.1(5) - Certification of William F. Borne, Chief Executive Officer 99.2(5) - Certification of Gregory H. Browne, Chief Financial Officer (1) Previously filed as an exhibit to the Registration Statement on Form S-3 dated March 11, 1998. 19 (2) Previously filed as an exhibit to the Current Report on Form 8-K dated June 16, 2000 and the Registration Statement on Form 8-A dated June 16, 2000. (3) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended March 31, 2001. (4) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended March 31, 2002. (5) Filed herewith. (b) Reports on Form 8-K On April 29, 2002, the Company filed a Current Report on Form 8-K with the SEC attaching a press release announcing the completion of a $9.5 million private placement of common stock and announcing that results for the quarter ended March 31, 2002 will be released on May 6, 2002 with a conference call to be held the same day. On May 3, 2002, the Company filed a Current Report on Form 8-K with the SEC due to the decision, by the Board of Directors, to dismiss Arthur Andersen LLP as the independent auditors of the Company. On May 13, 2002, the Company filed a Current Report on Form 8-K/A with the SEC in connection with the dismissal of Arthur Andersen LLP as the independent auditors of the Company. On May 24, 2002, the Company filed a Current Report on Form 8-K/A with the SEC to announce that the Company has engaged KPMG LLP as the Company's independent auditors for fiscal year 2002. On May 28, 2002, the Company filed a Current Report on Form 8-K with the SEC attaching a press release announcing the appointment of KPMG LLP as the Company's independent auditors for fiscal year 2002. On June 5, 2002, the Company filed a Current Report on Form 8-K with the SEC attaching a press release announcing the appointment of Gregory H. Browne as Chief Financial Officer. On June 25, 2002, the Company filed a Current Report on Form 8-K with the SEC pursuant to Section 18 under the Securities Act of 1934 to furnish the text of slides which the Company's management began using in presentations at investor conferences. 20 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 hereunto duly authorized. AMEDISYS, INC. By: /s/ GREGORY H. BROWNE ------------------------------ Gregory H. Browne Chief Financial Officer DATE: August 14, 2002 21 INDEX TO EXHIBITS
Exhibit No. Identification of Exhibit - ------- ------------------------- 3.1(4) - Certificate of Incorporation 3.2(3) - Bylaws 4.2(1) - Common Stock Specimen 4.7(2) - Shareholder Rights Agreement 10.1(5) - Employment Agreement between Amedisys, Inc. and Greg Browne 21.1(1) - List of Subsidiaries 99.1(5) - Certification of William F. Borne, Chief Executive Officer 99.2(5) - Certification of Gregory H. Browne, Chief Financial Officer
(1) Previously filed as an exhibit to the Registration Statement on Form S-3 dated March 11, 1998. (2) Previously filed as an exhibit to the Current Report on Form 8-K dated June 16, 2000 and the Registration Statement on Form 8-A dated June 16, 2000. (3) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended March 31, 2001. (4) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended March 31, 2002. (5) Filed herewith. 22 EX-10.1 3 d98962exv10w1.txt EMPLOYMENT AGREEMENT - GREG BROWNE EXHIBIT 10.1 EMPLOYMENT AGREEMENT BETWEEN AMEDISYS, INC. AND GREG BROWNE May 29, 2002 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") entered into as of the 29th day of May, 2002, and continuing for an indefinite duration, by and between AMEDISYS, INC., a Delaware corporation (the "Company") and GREG BROWNE ("BROWNE"), an individual of the full age of majority residing at 1220 Octavia St., New Orleans, LA 70115. RECITALS: A. The Company owns, manages and/or operates agencies and facilities for the provision of home health nursing services (the "Business"). B. BROWNE is employed by the Company as its Chief Financial Officer; NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement, the parties agree as follows: 1. RECITATIONS. The above recitations are incorporated herein by this reference. 2. PERFORMANCE OF DUTIES. BROWNE shall perform such duties as are usually performed by the Chief Financial Officer of health care companies of a business similar in size and scope as the Company and such other reasonable additional duties as may be prescribed from time to time by the Company's Chief Executive Officer which are reasonable and consistent with the expectations of the Company and the Company's operations, taking into account BROWNE's expertise and job responsibilities, including but not limited to, adherence to internal compliance and governmental and regulatory rules, regulations and applicable laws. BROWNE shall report directly to the Chief Executive Officer of the Company or his designee. 2.1 Devotion of Time. BROWNE agrees to devote full time and attention to the business and affairs of the Company to the extent necessary to discharge the responsibilities assigned to BROWNE and to use reasonable best efforts to perform faithfully and efficiently such responsibilities. 3. TERMINATION OF EMPLOYMENT. 3.1 Termination of Employment by the Company for Cause. The Company may terminate BROWNE's employment for Cause, as defined herein, without any obligation of severance payments to BROWNE. Cause shall be defined as follows: (a) a material default or breach by BROWNE of any of the provisions of this Agreement materially detrimental to the Company which is not cured within thirty (30) days following written notice thereof; (b) actions by BROWNE constituting fraud, embezzlement or dishonesty which result in a conviction of a criminal offense not overturned on appeal; (c) intentionally furnishing materially false, misleading, or omissive information to the Company's Chief Executive Officer, Board of Directors or any committee of the Board of Directors, that is materially detrimental to the Company; -2- (d) actions constituting a breach of the confidentiality of the Business and/or trade secrets of the Company which is materially detrimental to the Company; (e) willful failure to follow reasonable and lawful directives of the Company's Chief Executive Officer or Board of Directors, which are consistent with BROWNE's job responsibilities and performance which is not cured within thirty (30) days following written notice thereof; and 3.2 Termination Without Cause. The Company shall have the right to terminate BROWNE's employment without Cause, at any time and subject to the sole discretion of the Company. In such event, BROWNE will cease to have any power of his position as of the effective date of the termination. 3.3 Termination by BROWNE. BROWNE may terminate his employment upon thirty (30) days written notice to the Company. Such notice shall set forth in sufficient detail for the Company to understand the nature of the facts underlying said termination. 3.4 Change of Control. Upon the occurrence of a "Change of Control," if such occurs prior to BROWNE's receiving a notice of termination by the Company for Cause, BROWNE shall be entitled to the Severance described herein. "Change of Control" is defined as the following: (a) The acquisition by any person, entity or "group" within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty-one (51%) percent or more of either the then outstanding shares of the Company's common stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors; provided however, purchase by underwriters in a firm commitment public offering of the Company's securities or any securities purchased for investment only by professional investors shall not constitute a Change of Control; and (b) The individuals who serve on the Company's Board of Directors as of the effective date of this Agreement (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors of the Company; provided, however, any person who becomes a director subsequent to the effective date of this Agreement, whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then compiling the Incumbent Board, shall for purposes of this Agreement be considered as if such person was a member of the Incumbent Board. 4. COMPENSATION. 4.1 Salary. Company shall pay to BROWNE a base salary at the annual rate of $165,000.00 (the "Base Salary"). Notwithstanding anything herein to the contrary, the Company shall have the sole discretion at any time and from time to time to increase Base Salary, which increase shall be reflected in a written amendment to this contract. Base Salary shall be payable in installments consistent with the Company's normal payroll schedule, in effect from time to time, subject to applicable withholding and other taxes. 4.2 Base Salary Increases. Commencing on the anniversary hereof, BROWNE's Base Salary shall be automatically increased on each anniversary hereof during the term hereof by an amount equal to at least 6% of BROWNE's then effective salary. Notwithstanding anything herein to the contrary, -3- the Chief Executive Officer may grant a Base Salary Increase in excess of the amount stipulated to within this Section 4.2. 4.3 Bonus. At the end of each fiscal year of employment, the Company shall pay BROWNE a bonus of an amount up to 50% of BROWNE's Base Salary related to the year for which the bonus is being paid, payable in terms which shall be at the Company's discretion, and only if the Company reaches certain performance based criteria which shall, from time to time, be determined by the Company and made known to BROWNE. 4.4 Stock Options. Upon execution of this document, the Company shall grant BROWNE 50,000 options to purchase Amedisys, Inc. common stock, which shall be pursuant to the terms of a Stock Option Agreement. On the anniversary hereof, the Company shall grant BROWNE 25,000 options to purchase Amedisys, Inc. common stock, which shall be pursuant to the terms of a Stock Option Agreement issued at the time of said grant. On the second anniversary hereof, the Company shall grant BROWNE 25,000 options to purchase Amedisys, Inc. common stock, which shall be pursuant to the terms of a Stock Option Agreement issued at the time of said grant. On each anniversary date subsequent to the second anniversary hereof, and so long as BROWNE is employed by the Company in the capacity of Chief Financial Officer, the Company shall grant BROWNE 12,500 options to purchase Amedisys, Inc. common stock, which shall be pursuant to the terms of a Stock Option Agreement issued at the time of said grant. 4.5 Severance. (a) Change of Control. Should a Change of Control, as defined herein, occur during BROWNE's employment with Company, BROWNE shall be entitled to severance compensation in an amount equal to twelve (12) months of BROWNE's salary at the time of such Change of Control, payable at the discretion of the Company, but at a minimum, payable by the Company via regularly scheduled payroll distributions until the entire severance amount due BROWNE is paid in full. Additionally, upon the occurrence of a Change of Control, all outstanding non-vested options held by BROWNE shall immediately vest. (b) Termination Without Cause. Should BROWNE be terminated without Cause, as defined herein, BROWNE shall be entitled to severance compensation in an amount equal to six (6) months of BROWNE's salary at the time of such termination, payable at the discretion of the Company, but at a minimum, payable by the Company via regularly scheduled payroll distributions until the entire severance amount due BROWNE is paid in full. 4.6 Additional Benefits. (a) Vacation. BROWNE shall be entitled to the maximum amount of paid time off for Company employees stipulated by the Company PTO policy during each calender year of his employment with the Company. In addition, BROWNE shall be entitled to paid time off for the same holidays as other employees of the Company as established by the Company's Board of Directors. (b) Reimbursement of Expenses. BROWNE is authorized to incur reasonable traveling and other expenses in connection with the Business and in performance of his duties under this Agreement. BROWNE shall be reimbursed by the Company for all Business expenses which are reasonably incurred by BROWNE. All reimbursable travel expenses shall be in accordance with mutually agreeable and reasonable policy. -4- (c) Participation in Employee Benefit Plans. BROWNE shall be entitled to participate, subject to eligibility and other terms generally established by the Company's Board of Directors, in any employee benefit plan (including but not limited to life insurance plans, long-and short-term disability, stock option plans, group hospitalization, health, dental care plans, (which health insurance plans shall also cover BROWNE's dependents) profit sharing and pension, and other benefit plans), as may be adopted or amended by the Company from time to time. 5. REPRESENTATION BY BROWNE. BROWNE hereby represents to the Company that he is physically and mentally capable of performing his duties hereunder and he has no knowledge of present or past physical or mental conditions which would cause him not to be able to perform his duties hereunder. 6. CONFIDENTIALITY AND NON-DISCLOSURE OF INFORMATION. 6.1 Confidentiality. BROWNE shall not, during his employment with the Company or at any time thereafter, divulge, furnish or make accessible to anyone, without the Company's prior written consent, any knowledge or information with respect to any confidential or secret aspect of the Business which is disclosed could reasonably be expected to have a material adverse effect on the Business ("Confidential Information"). 6.2 Ownership of Information. BROWNE recognizes that all Confidential Information and copies or reproductions thereof, relating to the Company's operations and activities made or received by BROWNE in the course of his employment are the exclusive property of the Company, as the case may be, and BROWNE holds and uses same as trustee for the Company and subject to the Company's sole control and will deliver same to the Company at the termination of his employment, or earlier if so requested by the Company in writing. All of such Confidential Information, which if lost or used by BROWNE outside the scope of his employment, could cause irreparable and continuing injury to the Company's Business for which there may not be an adequate remedy at law. BROWNE acknowledges that compliance with the provisions of this Section 6 is necessary to protect the goodwill and other proprietary interests of the Company and is a material condition of employment. 7. RESTRICTIVE COVENANT. As an inducement to cause the Company to enter into this Agreement, and in consideration of the Severance obligation of Company herein, BROWNE covenants and agrees that during his employment and, for a period of twelve (12) months after he ceases to be employed by Company, regardless of the manner or cause of termination: 7.1 Solicitation of Business. He will not initiate any contact with, call upon, solicit Business from, sell or render services to any client or patient of the Company or any Company affiliate, within any area which the Company conducts business, a list of which is included in Schedule 7.1, which is attached hereto and incorporated herein ("Restricted Area"), for or on behalf of himself or any business, firm, proprietorship, corporation, partnership, association, entity or venture primarily engaged in the business of providing home health, alternate site infusion therapy or ambulatory surgery services, which is a similar business as the Business ("Competing Business"), and BROWNE shall not directly or indirectly aid or assist any other person, firm or corporation to do any of the aforesaid acts. 7.2 Solicitation of Employees. He will not directly or indirectly, as principal, agent, owner, partner, stockholder, officer, director, employee, independent contractor or consultant of any competing Business, or in any individual or representative capacity hire, solicit, directly or indirectly cause others to hire, or solicit the employment of, any officer, sales person, agent, or other employee of the Company or any Company affiliate, for the purpose of causing said officer, sales person, agent or other -5- person to terminate employment with the Company or any Company affiliate and be employed by such competing Business. 7.3 Material Violation. A proven material violation of this Section 7 shall constitute a material and substantial breach of this Agreement and shall result in the imposition of the Company's remedies contained in Section 8 herein. BROWNE acknowledges and agrees that proof of such personal solicitation by BROWNE of an employee shall constitute absolute and conclusive evidence that BROWNE has substantially and materially breached the provisions of this Agreement. 7.4 Covenants. It is understood by and between the parties that the foregoing covenants set forth in Sections 6 and 7 are essential elements of this Agreement, and that but for the Agreement of BROWNE to comply with such covenants, the Company would not have entered into this Agreement. Such covenants by BROWNE shall be construed as agreements independent of any other provision of this Agreement and the existence of any claim or cause of action BROWNE may have against the Company whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Company of these covenants. 7.5 Defaults and Deferred Compensation. (a) BROWNE Breach. If BROWNE breaches any requirement of Section 7 herein, in addition to any other remedy to which the Company may be entitled, BROWNE shall return to the Company any Severance already paid to BROWNE at the time of said breach, and all of BROWNE's rights to receive any portion of his Severance not already paid to him shall terminate. The right to receive unpaid Severance will not be reinstated notwithstanding any cessation by BROWNE of his breach of Section 7. 7.6 Discontinued Operations. Notwithstanding anything in this Section 7 to the contrary, this Section 7 shall not apply to any of the Company's product or service divisions which at the time of BROWNE's employment termination was considered by the Company to be a discontinued operation. 8. REMEDIES. BROWNE hereby acknowledges, covenants and agrees that in the event of a material default or breach under this Agreement, in addition to any other remedy set forth herein: 8.1 Company may suffer irreparable and continuing damages as a result of such breach and its remedy at law will be inadequate. BROWNE agrees that in the event of a violation or breach of this Agreement, in addition to any other remedies available to it, Company shall be entitled to an injunction restraining any such default or any other appropriate decree of specific performance, with the requirement to prove actual damages or to post any bond or any other security and to any other equitable relief the court deems proper; and 8.2 Any and all of Company's remedies described in this Agreement shall not be exclusive and shall be in addition to any other remedies which Company may have at law or in equity including, but not limited to, the right to monetary damages. 9. SEVERABILITY. The invalidity of any one or more of the words, phrases, sentences, clauses, sections, subdivisions, or subparagraphs contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part thereof, all of which are inserted conditionally on their being legally valid. -6- 10. SUCCESSORS AND ASSIGNS. 10.1 Successors. This Agreement shall be binding upon the parties hereto and their successors and assigns. For purposes of this Agreement, the term "successor" of Company shall include any person or entity, whether direct or indirect, whether by purchase, merger, consolidation, operation of law, assignment, or otherwise acquires or controls: (i) all or substantially all of the assets of Company (ii) fifty-one percent (51%) or more of the total voting capital stock, and was not affiliated with or in common control of Company as of the date of this Agreement; or (iii) any other Business combination with or without the consent of Company's shareholders. 10.2 Assignment. This Agreement shall be non-assignable by either Company or BROWNE without the written consent of the other party, it being understood that the obligations and performance of this Agreement are personal in nature. 11. MISCELLANEOUS. 11.1 Amendment. No amendment, waiver or modification of this Agreement or any provisions of this Agreement shall be valid unless in writing and duly executed by both parties. 11.2 Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, legal representatives, successors and assigns. 11.3 Waiver. Any waiver by any party of any breach of any provision of this Agreement shall not be considered as or constitute a continuing waiver or waiver of any other breach of any provision of this Agreement. 11.4 Captions. Captions contained in this Agreement are inserted only as a matter of convenience or for reference and in no way define, limit, extend, or describe the scope of this Agreement or the intent of any provisions of this Agreement. 11.5 Attorneys' Fees. In the event of any litigation arising out of this Agreement the prevailing party shall be entitled to recover from the other party its attorneys' fees and costs, including attorneys' fees and costs incurred on appeal. 11.6 Prior Agreements. This Agreement supersedes and replaces all prior agreements between the parties hereto dealing with the subject matter hereof. 11.7 Governing Law. This Agreement shall be governed by the laws of Louisiana. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. AMEDISYS, INC. By: /s/ William F. Borne ----------------------------------- WILLIAM F. BORNE, CEO /s/ Gregory H. Browne ----------------------------------- GREG BROWNE SCHEDULE 7.1
ALABAMA COUNTIES GEORGIA COUNTIES TENNESSEE COUNTIES NORTH CAROLINA COUNTIES OKLAHOMA COUNTIES - ---------------- ---------------- ---------------------------- ----------------------- ----------------- Lowndes Bibb Anderson Humphrey Johnston Creek Perry Crawford Bledsoe Clay Franklin Lincoln Monroe Jones Blount Jackson Caswell Okmulgee Wilcox Monroe Bradley Overton Alamance Pawnee Chilton Butts Cumberland Pickett Tulsa Payne Autauga Jasper Fentress Putnam Chatam Durham Washington Choctaw Walton Grundy White Orange Kay Clarke Newton Hamilton Person Noble Hale Bartow Loudon Wake Ofuskee Marengo Carroll Marion Harnett Hughes Sumter Cherokee Meigs Randolph Osage Madison Clayton Monroe Nash Rogers Marshall Cobb Morgan Mayes Morgan Coweta McMinn Wagoner Jackson Dekalb Polk LOUISIANA PARISHES Muskogee Limestone Douglas Rhea ------------------ Cherokee Montgomery Fayette Roane St. John Franklin Craig Bibb Fulton Scott Ascension Richland Adair Coosa Gwinnett Sequatchie Jefferson Ouachita Delaware Elmore Henry Van Buren Plaquemine Morehouse Ottawa Dallas Paulding Warren Livingston Claiborne Nowata Pike Rockdale Bedford Caldwell Orleans Sequoyah Macon Spalding Cannon St. Martin Jackson Leflore Crenshaw Barrow Coffee Lafayette St. Bernhard McIntosh Green Dawson Franklin Vermillion St. Charles Haskell Bullock Forsyth Giles Iberia Bienville Tallapoosa Hall Lincoln Acadia Tensas FLORIDA COUNTIES Mobile Jackson Marshall St. Landry Catahoula ---------------- Washington Lumpkin Moore Evangeline Madison Escambia Banks Rutherford St. Mary East Carroll Blount Baldwin Elbert Cheatum Jefferson Davis West Carroll Chilton Calhoon Franklin Davidson Allen Union Jefferson Cherokee Habersham Macon Pointe Coupee Lincoln Shelby Clay Hart Maury Terrebonne Concordia St. Clair Cleburne Madison Montgomery Assumption St. Tammany Talladega Etowah Rabun Robertson Beauregard Bossier Walker Randolph Stephens Rutherford Rapides Caddo Bibb Talledega Catoosa Smith Avoyelles Calcasieu St. Clair Chatooga Sumner Winn Cameron VIRGINIA COUNTIES Tuscaloosa Dade Trousdale Vernon St. Helena ----------------- Pickens Gordon Wilson Grant Red River Lee Fayette Murray Williamson Tangipahoa Webster Scott Marion Walker Washington Natchitoches Wise Whitfield Carter LaSalle Dickinson Floyd Johnson East Baton Rouge Russell Polk Unicoi West Baton Rouge Tazewell TEXAS COUNTIES Hawkins East Feliciana Smyth - ----------------------------------- Greene West Feliciana Washington Bee Refugio Sullivan St. James Nueces Duval Dickson Iberville SOUTH CAROLINA COUNTIES Aransas Jim Wells Hickman Lafourche ----------------------- San Patrico Karnes Houston Berkley Kleberg Goliad Charleston Kennedy Live Oak Dorchester Jim Hogg
EX-99.1 4 d98962exv99w1.txt CERTIFICATION OF WILLIAM F. BORNE, CEO EXHIBIT 99.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Amedisys, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2002 (the "Report"), I, William F. Borne, Chief Executive Officer of the Company, certify that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ WILLIAM F. BORNE - -------------------------- William F. Borne Chief Executive Officer August 14, 2002 EX-99.2 5 d98962exv99w2.txt CERTIFICATION OF GREGORY H. BROWNE, CFO EXHIBIT 99.2 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Amedisys, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2002 (the "Report"), I, Gregory H. Browne, Chief Financial Officer of the Company, certify that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ GREGORY H. BROWNE - ------------------------ Gregory H. Browne Chief Financial Officer August 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----