-----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, RBxTpbGO2QiKOMynpLw1E+323JwQ0DDsRWyDf6jZzB2PV+oEMge5xo4Km5FC0iEV Zr+xZP450gmlPVpFdjWvvw== 0000950134-99-010170.txt : 19991117 0000950134-99-010170.hdr.sgml : 19991117 ACCESSION NUMBER: 0000950134-99-010170 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: SEC FILE NUMBER: 000-24260 FILM NUMBER: 99754943 BUSINESS ADDRESS: STREET 1: 3029 S SHERWOOD FOREST BLVD STE 300 CITY: BATON ROUGE STATE: LA ZIP: 70816 BUSINESS PHONE: 2252922031 MAIL ADDRESS: STREET 1: 3029 SOUTH SHERWOOD FOREST BLVD STREET 2: SUITE 300 CITY: BATON ROUGE STATE: LA ZIP: 70816 FORMER COMPANY: FORMER CONFORMED NAME: ANALYTICAL NURSING MANAGEMENT CORP DATE OF NAME CHANGE: 19940819 FORMER COMPANY: FORMER CONFORMED NAME: M&N CAPITAL CORP DATE OF NAME CHANGE: 19930125 10-Q 1 FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1999 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q - ------------------------------------------------------------------------------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to _______________ Commission file number: 0-24260 AMEDISYS, INC. -------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 11-3131700 - ------------------------------- ------------------------------------ (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 3029 S. Sherwood Forest Blvd., Ste. 300 Baton Rouge, LA 70816 ------------------------------------------------------------- (Address of principal executive offices including zip code) (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 September 30, 1999: 3,147,514 shares 1 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998....................... 3 Consolidated Statements of Operations for the Three and Nine Months ended September 30, 1999 and 1998....................................................... 4 Consolidated Statements of Cash Flows for the Nine Months ended September 30, 1999 and 1998 ..... 5 Notes to Consolidated Financial Statements....................................................... 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............ 11 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS...................................... 14 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS................................................................................ 14 ITEM 2. CHANGES IN SECURITIES............................................................................ 14 ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................................................. 14 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................................. 14 ITEM 5. OTHER INFORMATION................................................................................ 14 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................................. 15
2 3 AMEDISYS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998 (UNAUDITED, DOLLAR AMOUNTS IN 000's)
ASSETS SEPTEMBER 30, 1999 DECEMBER 31, 1998 ------------------ ----------------- Current Assets: Cash $ 3,486 $ 572 Accounts Receivable, Net of Allowance for Doubtful Accounts of $3,133 in September 1999 and $3,095 in December 1998 15,562 7,456 Prepaid Expenses 258 604 Inventory 1,520 1,440 Other Current Assets 631 263 ------------- ------------- Total Current Assets 21,457 10,335 Notes Receivable from Related Parties 0 89 Property, Plant and Equipment, Net 5,993 8,574 Other Assets, Net 22,251 25,430 ------------- ------------- Total Assets $ 49,701 $ 44,428 ============= ============= LIABILITIES Current Liabilities: Notes Payable $ 11,026 $ 18,979 Current Portion of Long-Term Debt 3,141 3,141 Deferred Revenue 2,119 2,119 Accounts Payable 7,167 7,295 Accrued Expenses: Payroll and Payroll Taxes 5,594 5,257 Insurance 0 368 Other 2,938 4,456 ------------- ------------- Total Current Liabilities 31,985 41,615 Long-Term Debt 19,525 5,447 Deferred Revenue 6,532 8,121 Other Long-Term Liabilities 826 826 ------------- ------------- Total Liabilities 58,868 56,009 ------------- ------------- Minority Interest 103 103 STOCKHOLDERS' EQUITY (DEFICIT) Common Stock 3 3 Preferred Stock (750,000 Shares) 1 1 Additional paid-in capital 12,204 12,006 Treasury Stock (4,667 Shares) (25) (25) Retained Earnings (Deficit) (21,453) (23,669) ------------- ------------- Total Stockholders' Equity (Deficit) (9,270) (11,684) ------------- ------------- Total Liabilities and Stockholders' Equity $ 49,701 $ 44,428 ============= =============
See accompanying notes to financial statements. 3 4 AMEDISYS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED, DOLLAR AMOUNTS IN 000's)
3 MONTHS ENDED 9 MONTHS ENDED ------------------------- ------------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- (RESTATED) (RESTATED) Income: Service revenue $ 24,170 $ 2,282 $ 73,869 $ 12,359 Cost of service revenue 11,154 2,643 35,257 8,696 ---------- ---------- ---------- ---------- Gross margin 13,016 (361) 38,612 3,663 General and administrative expenses: Salaries and benefits 7,543 2,774 23,185 8,888 Other 6,694 5,918 19,459 9,817 ---------- ---------- ---------- ---------- Total general and administrative expenses 14,237 8,692 42,644 18,705 ---------- ---------- ---------- ---------- Operating (loss) (1,221) (9,053) (4,032) (15,042) ---------- ---------- ---------- ---------- Other income and expense: Interest income 3 16 44 37 Interest expense (257) (208) (1,187) (385) Other income/(expense) net (1,541) 11 (1,458) 24 ---------- ---------- ---------- ---------- Total other income and expenses (1,795) (181) (2,601) (324) ---------- ---------- ---------- ---------- Net (loss) before income taxes, minority interest and discontinued operations (3,016) (9,234) (6,633) (15,366) (Benefit) for estimated income taxes (3,123) (1,906) (3,008) (3,990) ---------- ---------- ---------- ---------- Net income (loss) before discontinued operations 107 (7,328) (3,625) (11,376) Discontinued operations: (Loss) from discontinued operations, net of income taxes (102) (44) (325) (422) Gain on dispositions, net of income taxes 6,165 3,327 6,165 3,327 ---------- ---------- ---------- ---------- Total discontinued operations 6,063 3,283 5,840 2,905 ---------- ---------- ---------- ---------- Net income (loss) $ 6,110 $ (4,045) $ 2,215 $ (8,471) ========== ========== ========== ========== Weighted average common shares outstanding 3,117 3,065 3,075 3,057 Basic earnings (loss) per common share: Net income (loss) before discontinued operations $ 0.03 $ (2.39) $ (1.18) $ (3.72) Loss from discontinued operations, net of income tax (0.03) (0.01) (0.11) (0.14) Gain on disposition, net of income tax 1.98 1.09 2.00 1.09 ---------- ---------- ---------- ---------- Net income (loss) $ 1.98 $ (1.31) $ 0.71 $ (2.77) ========== ========== ========== ==========
See accompanying notes to financial statements. 4 5 AMEDISYS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED, DOLLAR AMOUNTS IN 000s)
Nine months ended ----------------------------- September 99 September 98 ------------ ------------ Cash flow from operating activities: Net income (loss) $ 2,215 $ (8,470) Adjustments to reconcile net loss to net cash (used in) operating activities: Depreciation and amortization 2,347 4,806 Provision for bad debts 1,108 660 Loss on disposal of property and equipment 0 2 (Gain) on sale of Outpatient Surgery division (9,417) 0 (Gain) on sale of Staffing division 0 (5,041) Loss on sale of company assets 1,640 0 Loss on disposal of Durable Medical Equipment company 538 0 Changes in assets and liabilities: (Increase) decrease in accounts receivable (10,928) 3,494 (Increase) decrease in prepaid expenses 320 (708) (Increase) in other current assets (682) (3,600) (Increase) in other assets (118) (804) Increase in accounts payable 1,228 185 Increase (decrease) in accrued expenses (1,511) 343 (Decrease) in deferred revenue (1,589) 0 ------------ ------------ Net cash (used in) operating activities (14,849) (9,133) ------------ ------------ Cash flow from investing activities: Purchase of furniture, fixtures & equipment (793) (2,549) Proceeds from sale of furniture, fixtures & equipment 24 0 Proceeds from sale of company assets 537 0 Cash paid for acquisitions 0 (2,005) Proceeds from sale of Durable Medical Equipment company 100 0 Proceeds from sale of Outpatient Surgery division 10,561 0 Decrease in notes receivable from related parties 89 54 ------------ ------------ Net cash provided by (used in) investing activities 10,518 (4,500) ------------ ------------ Cash flow from financing activities: Proceeds from sale of Staffing division 0 6,480 Cash received in acquisitions 0 317 Net increase (decrease) in borrowings on line of credit 7,314 (3,349) Payments on notes payable (1,317) (1,837) Proceeds from notes payable 1,248 1,643 Increase in outstanding checks in excess of bank balance 0 3,056 Proceeds from preferred stock 0 3,253 ------------ ------------ Net cash provided by financing activities 7,245 9,563 ------------ ------------ Net increase (decrease) in cash and cash equivalents 2,914 (4,070) Cash and cash equivalents, beginning of period 572 4,070 ------------ ------------ Cash and cash equivalents, end of period $ 3,486 $ 0 ============ ============ Supplemental disclosures of cash flow information: Cash payments for: Interest $ 339 $ 772 ============ ============ Income taxes $ 0 $ 160 ============ ============ Supplemental schedule of non-cash investing activity (See note 8 to financial statements): Value of stock issued in exchange $ 894 Value of note payable issued in exchange 1,575 Cash acquired in exchange (317) Working capital acquired net of cash and cash equivalents 3,553 Fair value of property, plant and equipment acquired (385) Fair value of other assets acquired (27) Long term debt assumed 3,069 Fair value of other liabilities assumed 54 ------------ Non-cash portion of acquisitions 8,416 Cash payment for acquisitions 2,005 ------------ Goodwill recorded in exchange $ 10,421 ============
See accompanying notes to financial statements. 5 6 AMEDISYS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION Amedisys, Inc. (the "Company") is a leading multi-regional provider of home health nursing services, alternate-site infusion therapy, and ambulatory surgery centers. The Company operates 62 offices within a network of subsidiaries in the south and southeastern United States. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Although the Company recognized net income during the third quarter as a result of the gain on the sale of two Outpatient Surgery Centers, it experienced losses from continuing operations thus far in 1999, as well as in 1998 and 1997 and has a deficit in stockholders' equity of $9,270,000 at September 30, 1999. The Company has undertaken a significant restructuring effort to reduce operating costs by closing unprofitable locations and reducing components of overhead expenses to minimize this deficit. In August 1999, the Company adopted a formal plan to sell all of its interests in its Outpatient Surgery and Infusion Therapy divisions. The Company's strategic plan is to become a pure play home health nursing company. The Company has successfully renegotiated a major debt obligation (see Note 10) and has sold certain operating assets to generate cash to fund remaining current obligations. Management believes that the strategies it has undertaken will enable the Company to satisfy its obligations as they become due; however, there can be no assurance that these strategies will succeed. The financial statements do not include any adjustments relating to the recoverability or classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. 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 financial position at September 30, 1999 and the results of operations for the three and nine months and cash flows for the nine months ended September 30, 1999 and 1998. 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. Certain amounts previously reported in the 1999 and 1998 interim unaudited financial statements have been reclassified due to the implementation of a formal plan by the Company in the third quarter of 1999 to sell all of its interests in its Outpatient Surgery and Infusion Therapy divisions. 2. EARNINGS PER SHARE Basic net income (loss) per share of common stock is calculated by dividing net income (loss) applicable to common stock by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is not presented as stock options and convertible securities outstanding (total 3,609,471 shares) during the periods presented were not dilutive. 3. MEDICARE REIMBURSEMENT REDUCTIONS AND RELATED RESTRUCTURING The Company derived approximately 90% of its revenues from continuing operations from the Medicare system for the nine months ended September 30, 1999. 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 the Prospective Payment System ("PPS") was 6 7 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 based on whether the agency was an "old" or "new" provider. An old provider was defined as an agency which filed a twelve month cost report in Federal FY 1994 and a new agency as one that did not. An old provider per beneficiary limit was based on 75% of 98% of the 1994 agency cost adjusted for inflation, plus 25% of a regional average as determined by Health Care Financing Administration ("HCFA"). A new provider per beneficiary limit was based on a national average, as determined by HCFA, adjusted for regional labor costs. The schedule of per visit limits for cost reporting periods ended on or after October 1, 1997 was published by HCFA in January, 1998 and the schedule of per-beneficiary limits for cost reporting periods beginning on or after October 1, 1997 was published in March, 1998, by HCFA. The new IPS cost limits apply to the Company for the cost reporting period beginning January 1, 1998 and will remain in effect until the implementation of PPS, on October 1, 2000. As a result of these reimbursement changes, a significant restructuring effort by the Company was completed during 1998, resulting in office reorganizations, consolidations, and closures as it transitioned to IPS. After the acquisition of certain home health care agencies from Columbia/HCA in November and December, 1998, a similar restructuring effort was implemented in an overall effort to reduce costs and improve efficiencies, while maintaining the same high-quality of patient care. In October 1999, HCFA issued proposed regulations for PPS which will be effective for all Medicare-certified home health agencies on October 1, 2000. The proposed 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 has been established at $2,037 per episode, to be adjusted by a case mix adjuster and the applicable geographic wage index. Episode payments will be made to providers regardless of the cost to provide care. Consequently, the Company expects that home health agencies will have the opportunity to become profitable under this system. As the home care industry faces continued changes in reimbursement structure, Amedisys is committed to improving and streamlining systems and take appropriate actions to offset these changes, creating a company focused on long-term growth. 4. DISPOSITIONS On January 1, 1999, the Company sold all of the issued and outstanding stock of Amedisys Durable Medical Equipment, Inc. d/b/a Care Medical and Mobility ("ADME") to Ace Drug Medical Equipment, Inc. ("ACE"), a Texas Corporation. ACE acquired substantially all of the assets and liabilities of ADME. The sales price was $672,385 of which $100,000 was paid at closing; $418,318 is payable pursuant to a two year note in eight equal quarterly payments of principal and interest at prime plus 2%, adjusted annually; and $154,067 is payable pursuant to a one year note, payable in four quarterly payments of principal plus accrued interest at prime plus 2%. The Company expects that this disposition will not have a material effect on net revenues or income of the Company. In accordance with the payment terms of both notes, the first, second, and third quarterly payments due to the Company as of October 15, 1999 totaled $256,000. As of November 12, 1999, these payments have not been received by the Company. As a result, the Company has fully reserved for these past due payments. 5. DISCONTINUED OPERATIONS In the accompanying statements of operations, the Company has reflected its Staffing, Outpatient Surgery, and Infusion Therapy divisions as discontinued operations. In September, 1998, the Company sold certain assets, subject to the assumption of certain liabilities, of its 7 8 Staffing division. This sale qualified as a discontinued operation, and has been reflected as such in the consolidated statements of operations. In August 1999, the Company adopted a formal plan to sell all of its interests in its Outpatient Surgery and Infusion Therapy divisions. The Company's strategic plan is to become a pure play home health nursing company. The sale of these divisions will also provide the Company the necessary operating capital to sustain its operations until the implementation of PPS. Effective September 1, 1999, the Company, by an Asset Purchase Agreement, sold certain assets, subject to the assumption of certain liabilities, of its wholly-owned subsidiary, Amedisys Surgery Centers, L.C. ("ASC"), to United Surgical Partners International, Inc. ("USP"). The assets and liabilities sold related to two free-standing outpatient surgery centers operated by ASC, Amedisys Surgery Center of Pasadena and Amedisys Surgery Center of South Houston (the "Surgery Centers"). The assets of the Surgery Centers were acquired by two Texas Limited Partnerships organized by USP and its wholly-owned subsidiaries. The Company and its affiliates had no material relationship with USP prior to this transaction. In consideration for the assets of the Surgery Centers, ASC received $11,000,000, calculated using a multiple of earnings before interest, taxes, depreciation, and amortization (EBITDA). At closing, $10,562,000 was paid immediately to ASC with a three-month $300,000 note receivable due to ASC payable in monthly installments of $100,000 plus interest at an effective interest rate of 10%. In addition to cash considerations, USP agreed to pay off certain creditors of ASC for debts related to the Surgery Centers of $1,101,083. Subject to certain exceptions, the assets sold consisted primarily of $60,000 cash; all accounts and notes receivable; inventory; prepaid items; land; equipment, surgical instruments, furniture, fixtures, and leasehold improvements; office supplies; records and files; transferable governmental licenses, permits, and authorizations; trade names, goodwill, computer software, and operating rights; and rights in, to and under specified licenses, contracts, leases, and agreements. The liabilities assumed by USP include, subject to certain exclusions, the current liabilities of ASC and the obligations and liabilities under certain leases and contracts arising on or after September 1, 1999. The Company filed a Current Report on Form 8-K with the Securities and Exchange Commission ("SEC") on September 30, 1999 with regard to this transaction. Effective September 1, 1999, the Company sold 19.02 units of its 42 unit (each unit represents a 1% interest) investment in East Houston Surgery Center Ltd. and EHSC Management Company, LLC to thirteen physician investors for $180,000 cash. The Company recorded a loss of $77,000 relating to the sale. Summarized financial information for the discontinued operations is as follows (in 000's):
3 months ended 9 months ended 3 months ended 9 months ended September 30, 1999 September 30, 1999 September 30, 1998 September 30, 1998 -------------------- -------------------- -------------------- -------------------- Staffing Division Service Revenue -- -- $ 3,812 $ 12,607 Income from discontinued operations before provision for income taxes -- -- $ 6,013 $ 7,131 Income from discontinued operations, net of income taxes -- -- $ 3,969 $ 4,706 Outpatient Surgery Division Service Revenue $ 1,956 $ 6,113 $ 1,586 $ 4,613 Income from discontinued operations before provision for income taxes $ 635 $ 1,385 $ 233 $ 252 Income from discontinued operations, net of income taxes $ 419 $ 914 $ 154 $ 166
8 9
3 months ended 9 months ended 3 months ended 9 months ended September 30, 1999 September 30, 1999 September 30, 1998 September 30, 1998 -------------------- -------------------- -------------------- -------------------- Infusion Therapy Division Service Revenue $ 1,649 $ 5,556 $ 2,290 $ 4,923 (Loss) from discontinued operations before income tax benefit $ (790) $ (1,877) $ (1,020) $ (2,661) (Loss) from discontinued operations, net of income tax benefit $ (521) $ (1,239) $ (673) $ (1,756) Total Discontinued Operations Service Revenue $ 3,605 $ 11,669 $ 7,688 $ 22,143 (Loss) from discontinued operations before income tax benefit $ (155) $ (492) $ (67) $ (639) (Loss) from discontinued operations, net of income tax benefit $ (102) $ (325) $ (44) $ (422)
Included in the accompanying consolidated balance sheets are the following assets and liabilities relating to the discontinued operations (in 000's):
September 30, 1999 December 31, 1998 ------------------ ----------------- Assets held for sale, short-term $ 1,182 $ 2,105 Assets held for sale, long-term $ 5,311 $ 7,808 Liabilities related to discontinued operations, short-term $ 994 $ 1,269 Liabilities related to discontinued operations, long-term $ 2,131 $ 3,511
6. ACQUISITIONS On November 2, 1998, the Company signed a definitive agreement to purchase certain assets, subject to the assumption of certain liabilities, of 83 home care offices including 35 provider numbers of Columbia/HCA Healthcare Corporation located in Alabama, Georgia, Louisiana, North Carolina, Oklahoma and Tennessee. Assets located in Louisiana and Oklahoma were acquired November 16, 1998, and the remaining assets were acquired December 1, 1998. Assuming the Columbia/HCA acquisition occurred on January 1, 1998, unaudited pro forma information for the nine months ended September 30, 1998, which is not necessarily indicative of future operating results, is as follows (in 000's, except per share information). Pro forma data for the three months ended September 30, 1998 is not presented as it is impracticable for the Company to obtain the information necessary to calculate the data.
Nine months ended September 30, 1998 ------------------ Service Revenue $ 115,608 Operating (Loss) $ (35,693) (Loss) before Discontinued Operations $ (23,767) Net (Loss) $ (20,862) Net (Loss) per Common Share $ (6.78)
7. INCOME TAXES Due to the combined loss between the year ended 1998 and the nine months ended September 30, 1999, the Company has not established a deferred tax asset or liability for the three and nine month periods ended September 30, 1999. For the three and nine month periods ended September 30, 1999, the Company has reflected an income tax benefit of $3,123,000 and $3,008,000, respectively, which is exactly offset by an income tax expense reflected in the accompanying consolidated statement of operations as a component of loss from discontinued operations, resulting in a net income tax expense/(benefit) of $0. For the three and nine month periods ended September 30, 1998, the Company established a deferred tax asset by recording an estimated net income tax benefit of $214,000 and $2,493,000, respectively. These amounts are comprised of a $1,906,000 and a $3,990,000 income tax benefit for the three and nine month period ended September 30, 1998 which is reflected in the accompanying consolidated statements of operations as a benefit for income taxes. These benefits are offset by a $1,692,000 and a $1,497,000 income tax expense for the three and nine month periods ended September 30, 1998 which are reflected in the accompanying consolidated statements of operations as a component of loss from discontinued operations. In December, 1998, a valuation allowance was recorded against this deferred tax asset, effectively writing-off the deferred tax asset due to the significant losses incurred by the Company for the year ended December 31, 1998. 9 10 8. SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITY The following unaudited table presents (in 000's) a summary of the acquisitions completed during each quarter of 1998 as presented in the supplemental schedule to the consolidated statement of cash flows. No acquisitions were completed in 1999.
1stQtr 2ndQtr 3rdQtr 1998 1998 1998 Total Total Total Total ---------- ---------- ---------- ---------- Supplemental schedule of non-cash investing activity: Value of stock issued in exchange $ 874 $ 20 $ 0 $ 894 Value of note payable issued in exchange 375 1,200 0 1,575 Cash acquired in exchange (123) (194) 0 (317) Working capital deficit acquired net of cash and cash equivalents 3,272 281 0 3,553 Fair value of property, plant and equipment acquired (279) (106) 0 (385) Fair value of other assets acquired (25) (2) 0 (27) Long term debt assumed 2,998 71 0 3,069 Fair value of other liabilities assumed 54 0 0 54 ---------- ---------- ---------- ---------- Non-cash portion of acquisitions 7,146 1,270 0 8,416 Cash payment for acquisition 1,905 100 0 2,005 ---------- ---------- ---------- ---------- Goodwill recorded in exchange $ 9,051 $ 1,381 $ 0 $ 10,421 ---------- ---------- ---------- ----------
9. NOTES PAYABLE Notes payable consists primarily of an asset-based line of credit with availability, depending on collateral, up to $25 million with National Century Financial Enterprises, Inc. ("NCFE"), an estimated $2.6 million unsecured liability payable to Columbia/HCA, and borrowings under a revolving bank line of credit of $750,000. The $25 million asset-based line of credit is collateralized by eligible accounts receivable of the home health care nursing division and as of September 30, 1999, had an outstanding balance of $7,913,000. Eligible receivables are defined as receivables, exclusive of workers' compensation and self-pay, that are aged less than 181 days. The ongoing fees associated with this line of credit equate to 1% of eligible billed receivables generated during each billing period. This line of credit expires on December 31, 2001. The estimated $2.6 million unsecured net liability payable to Columbia/HCA resulted from Periodic Interim Payments ("PIP") of $6.6 million directed to Columbia/HCA and subsequently forwarded to the Company which have been determined by the fiscal intermediary as funds belonging to Columbia/HCA. During the third quarter of 1999, the Company made a payment of $4 million toward this unsecured liability. The remaining balance is payable on the earlier of three business days from receipt of the funds from Medicare or March 31, 2000. The revolving bank line of credit of $750,000 bears interest at bank prime plus 1%. At September 30,1999, $412,775 was outstanding on the line of credit. This line of credit has scheduled monthly principal payments of $25,000 plus accrued interest, with the balance due in March, 2000. The line of credit is collateralized by 80% of eligible receivables in outpatient surgery and 80% of physician notes receivable. Eligible receivables are defined principally as accounts that are aged less than 90 days. 10. LONG-TERM DEBT Long-term debt consists primarily of a $14 million note payable to Columbia/HCA, a $2.9 million note payable to NPX, Inc., an affiliate of NCFE, a $1.5 million note payable to Merrill Lynch, and various other capital leases and notes. The $14 million note payable to Columbia/HCA is a result of the acquisition of home health agencies consummated in November 1998. Effective September 30, 1999, the Company and Columbia signed an agreement to modify the terms of this note. The Company will make quarterly principal and interest payments beginning April 30, 2001, with the balance of the note being due on July 31, 2004. As a result of this modification, the note plus approximately $1,036,000 of accrued interest was reclassified from short term to long term debt. 11. AMOUNTS DUE TO AND DUE FROM MEDICARE The Company is continuing to reconcile the amounts due to and due from the Medicare program for the cost report year ended 1999. The integration and change of ownership process of the acquired home health agencies of Columbia/HCA have delayed the rate review process with Medicare. Rate reviews and reconciliations have been forwarded to Medicare and responses are being evaluated as received. Based on the information currently available to the Company, the Company has a total estimated aggregate payable due to Medicare of $10 10 11 million which is netted against accounts receivable. For the cost report years ended November 30 and December 31, 1999, the Company has estimated a net cost report payable of $5.8 million for which twelve month repayment plans have been arranged with Medicare. For the cost report year ended December 31, 1998, year-end cost reports have been compiled with an estimated aggregate payable due to Medicare of $4.2 million which the Company is awaiting notification from Medicare of an extended payment plan approval. The Medicare program has committed to the automatic approval of a thirty-six month extended repayment schedule for any Medicare-certified home health agency which submits such a request and has a payment due to Medicare as a result of IPS, subject to certain exceptions. There can be no assurance that any or all of the Company's locations will meet the conditions for automatic approval. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company's results of operations and financial condition. This discussion should be read in conjunction with the Consolidated Financial Statements appearing in Item 1. GENERAL Amedisys, Inc. is a leading multi-regional provider of fully integrated alternate-site health care services. The Company offers the following services: home health nursing services; infusion therapy; and ambulatory surgery centers. The Company operates 62 offices within a network of subsidiaries in the south and southeastern United States. RESULTS OF OPERATIONS Revenues. Net revenues increased $21,888,000 or 959% and $61,510,000 or 498% for the three and nine months ended September 30, 1999, respectively, as compared to the same periods in 1998. This increase was attributed to the acquisition of certain Columbia/HCA home health care agencies in the latter part of 1998. Visits for the three month period ended September 30 increased 245,718 or 339% from 72,411 in 1998 to 318,129 in 1999. For the nine month period ended September 30, visits increased 723,670 or 301% from 240,053 in 1998 to 963,723 in 1999. Cost of Revenues. Cost of revenues increased by 322% and 305% for the three and nine months ended September 30, 1999 as compared to the same periods in 1998. This increase is primarily attributed to the acquisition of certain Columbia/HCA home health care agencies. As a percentage of net revenues, cost of revenues decreased to 46% from 116% for the three months ended September 30, 1999 and 1998, respectively, and to 48% from 70% for the nine months ended September 30, 1999 and 1998, respectively. This decrease is attributed to cost reduction efforts implemented during 1998 and 1999 for all operating locations. In the home health care nursing division, all nursing employees were converted to a per-visit payment basis, thereby increasing overall productivity. General and Administrative Expenses ("G&A"). General and administrative expenses increased by 64% and 128% for the three and nine months ended September 30, 1999 as compared to the same periods in 1998. This increase is primarily attributed to the acquisition of certain Columbia/HCA home health care agencies. As a percentage of net revenues, general and administrative expenses decreased to 59% from 381% for the three months ended September 30, 1999 and 1998, respectively, and to 58% from 151% for the nine months ended September 30, 1999 and 1998, respectively. This decrease is attributed to the cost reduction efforts implemented for all operating locations and corporate departments in addition to improvements in operating efficiencies. The operating efficiencies that were gained through these efforts helped to offset the additional resources needed following the Columbia/HCA acquisition, resulting in a minimal increase in administrative personnel and resources to appropriately manage and support the new home health care agencies. Operating (Loss). The Company had an operating loss of $1,221,000 for the three months ended September 30, 1999 as compared to an operating loss of $9,053,000 for the same period in 1998 and an operating 11 12 loss of $4,032,000 for the nine months ended September 30, 1999 as compared to an operating loss of $15,042,000 for the same period in 1998. The reduction in operating losses of $7,833,000 or 87% for the three month period ended September 30, 1999 and $11,010,000 or 73% for the nine month period ended September 30, 1999 is mainly attributed to the restructuring efforts implemented during 1998 and 1999 and the economies of scale achieved with the acquisition of certain Columbia/HCA home health care agencies. Other Income and Expenses. Other income and expenses changed $1,614,000 and $2,277,000 for the three and nine month periods ended September 30, 1999, respectively, due to a one-time write-off of goodwill of approximately $1.8 million related to the sale of certain home health care agencies acquired from Columbia/HCA in the later part of 1998. (Benefit) for Estimated Income Taxes. Due to the combined loss between the year ended 1998 and the nine months ended September 30, 1999, the Company has not established a deferred tax asset or liability for the three and nine month periods ended September 30, 1999. For the three and nine month periods ended September 30, 1999, the Company has reflected an income tax benefit of $3,123,000 and $3,008,000, respectively, which is exactly offset by an income tax expense reflected in the accompanying consolidated statement of operations as a component of loss from discontinued operations, resulting in a net income tax expense/(benefit) of $0. For the three and nine month periods ended September 30, 1998, the Company established a deferred tax asset by recording an estimated net income tax benefit of $214,000 and $2,493,000, respectively. These amounts are comprised of a $1,906,000 and a $3,990,000 income tax benefit for the three and nine month period ended September 30, 1998 which is reflected in the accompanying consolidated statements of operations as a benefit for income taxes. These benefits are offset by a $1,692,000 and a $1,497,000 income tax expense for the three and nine month periods ended September 30, 1998 which are reflected in the accompanying consolidated statements of operations as a component of loss from discontinued operations. In December, 1998, a valuation allowance was recorded against this deferred tax asset, effectively writing-off the deferred tax asset due to the significant losses incurred by the Company for the year ended December 31, 1998. Discontinued Operations. Losses from discontinued operations, net of income taxes, are $102,000 and $325,000 for the three and nine month periods ended September 30, 1999, respectively, as compared to losses of $44,000 and $422,000 for the three and nine months ended September 30, 1998. The gain on disposition of $6,165,000 for 1999 is attributed to the sale of two surgery centers while the gain on disposition of $3,327,000 for 1998 is attributed to the sale of the Staffing division. Net Income/(Loss). The Company had net income of $6,170,000 and $2,215,000 for the three and nine months ended September 30, 1999, respectively, compared with a net loss of $4,045,000 and $8,471,000 for the three and nine months ended September 30, 1998, respectively. FINANCIAL CONDITION The Company's principal capital requirements are for additional working capital to fund current cash requirements of the Company. The Company recorded an operating loss for the year ended December 31, 1998 and the three and nine months ended September 30, 1999 and had negative cash flow from operations. The negative cash flow from operations is largely attributable to the changes in Medicare reimbursement which were effective January 1, 1998 for the Company. The Company has undertaken significant restructuring efforts to reduce operating costs but expects to record a loss from operations for the remainder of 1999. The operating losses and negative cash flow from operations have impacted the availability of the Company's current financing sources and have decreased the Company's overall liquidity position. The Company expects the negative cash flow from operations to continue on a short-term basis and has implemented a plan to divest of all non-home health care nursing assets to generate cash to fund remaining obligations until the implementation of PPS. Notes payable consists primarily of an asset-based line of credit with availability, depending on collateral, up to $25 million with National Century Financial Enterprises, Inc. ("NCFE"), an estimated $2.6 million unsecured liability payable to Columbia/HCA, and borrowings under a revolving bank line of credit of $750,000. The $25 million asset-based line of credit is collateralized by eligible accounts receivable of the home health care nursing division and as of September 30, 1999, had an outstanding balance of $7,913,000. Eligible receivables are defined as receivables, exclusive of workers' compensation and self-pay, that are aged less than 181 days. The ongoing fees associated with this line of credit equate to 1% of eligible billed receivables generated during each billing period. This line of credit expires on December 31, 2001. The estimated $2.6 million unsecured net liability payable to Columbia/HCA resulted from Periodic Interim Payments ("PIP") of $6.6 million directed to Columbia/HCA and subsequently forwarded to the Company which have been determined by the fiscal intermediary as funds belonging to Columbia/HCA. During the third quarter of 1999, the Company made a payment of $4 million toward this unsecured liability. The remaining 12 13 balance is payable on the earlier of three business days from receipt of the funds from Medicare or March 31, 2000. The revolving bank line of credit of $750,000 bears interest at bank prime plus 1%. At September 30,1999, $412,775 was outstanding on the line of credit. This line of credit has scheduled monthly principal payments of $25,000 plus accrued interest, with the balance due in March, 2000. The line of credit is collateralized by 80% of eligible receivables in outpatient surgery and 80% of physician notes receivable. Eligible receivables are defined principally as accounts that are aged less than 90 days. Long-term debt consists primarily of a $14 million note payable to Columbia/HCA, a $2.9 million note payable to NPX, Inc., an affiliate of NCFE, a $1.5 million note payable to Merrill Lynch, and various other capital leases and notes. The $14 million note payable to Columbia/HCA is a result of the acquisition of home health agencies consummated in November 1998. Effective September 30, 1999, the Company and Columbia signed an agreement to modify the terms of this note. The Company will make quarterly principal and interest payments beginning April 30, 2001, with the balance of the note being due on July 31, 2004. As a result of this modification, the note plus approximately $1,036,000 of accrued interest was reclassified from short term to long term debt. The Company's operating activities used $14,849,000 in cash during the nine months ended September 30, 1999, whereas such activities used $9,133,000 in cash during the same period in 1998. This change in cash used in operating activities is primarily attributable to an increase in accounts receivable of $14,722,000, a decrease in accrued expenses of $1,854,000 and deferred revenue of $1,589,000, and a gain on the sale of two Outpatient Surgery centers of $9,417,000, offset by an increase in the Company's net income of $10,686,000, a gain on the Staffing sale in 1998 of $5,041,000, and a decrease in depreciation and amortization of $2,459,000. The Company's investing activities provided $10,518,000 for the nine months ended September 30, 1999, whereas investing activities used $4,500,000 for the nine months ending June 30, 1998. Cash provided by investing activities for 1999 is primarily attributable to the proceeds from the sale of two Outpatient Surgery centers of $10,561,000, whereas cash used in investing activities for 1998 was primarily attributable to cash paid for acquisitions of $2,005,000, and increased purchases of furniture, fixtures, and equipment of $1,756,000. Net cash provided by financing activities decreased to $7,245,000 from $9,563,000 for the nine months ended September 30, 1999 and 1998, respectively. This change is primarily due to the proceeds of $6,480,000 received from the sale of the Staffing division in 1998, a decrease in outstanding checks in excess of bank balance of $3,056,000, and proceeds of $3,253,000 received in 1998 from preferred stock, offset by an increase in borrowings on lines of credit of $10,663,000. At September 30, 1999, the Company had negative working capital of $10,528,000 and a stockholders' equity deficit of $9,270,000. YEAR 2000 COMPLIANCE ISSUES The Company continues to evaluate its entire operation in preparation for potential problems associated with Year 2000 ("Y2K"). Some internal areas and processes being evaluated include initial charge entry through billing and collections; accounts payable invoice receipt through processing and payment; bank processing of receipts and disbursements; computer hardware and software functionality; and time and/or date-sensitive office and medical equipment functionality. In preparation for Y2K, the Company has replaced, or is in the process of replacing, all of its mission critical computer systems that are not Y2K compliant. The general accounting system was replaced and has been in use since October, 1998. Management believes that the Company's home health care nursing, outpatient surgery center, and infusion division software systems are Y2K compliant. At present, the Company does not anticipate any material disruption in its operations or significant costs to be incurred to attain compliance. The primary payer source for the Company is the Medicare program which accounts for 90% of its revenue. The Medicare program has issued statements that indicate it is prepared for Y2K. There can be no assurance, however, that the Company will identify or adequately assess all aspects of the business that may be affected. Due to this uncertainty, a contingency plan is being developed as each area is evaluated to minimize any negative impact to the Company. In the event that any of the Company's significant payers, suppliers, or customers do not successfully and in a timely manner achieve Year 2000 compliance, the Company's business and/or operations could be adversely affected. 13 14 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. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. 14 15 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
Exhibit No. Identification of Exhibit Page Number - ------- ------------------------- ----------- 2.1(iv) --- Asset Purchase Agreement among Amedisys, Inc., Amedisys Surgery Centers, L.C. and United Surgical Partners International, Inc. -- 2.2(iv) --- Promissory Note from United Surgical Partners International, Inc. -- 3.1(ii) --- Certificate of Incorporation -- 3.2(ii) --- Bylaws -- 4.1(ii) --- Certificate of Designation for Series A Preferred Stock -- 4.2(v) --- Specimen of Certificate of Amendment of Certificate of Designation 4.3(v) --- Specimen of Series A Preferred Stock Conversion Agreement 4.4(iii) --- Specimen of Common Stock Certificate -- 4.5(iii) --- Specimen of Preferred Stock Certificate -- 4.6(iii) --- Form of Placement Agent's Warrant Certificate -- 10.1(i) --- Loan Modification Agreement by and between Amedisys, Inc. and Columbia/HCA Healthcare Corporation 18 27.1(i) --- Financial Data Schedule 28
(i) Filed herewith. (ii) Previously filed as an exhibit to the Annual Report on Form 10-KSB for the year ended December 31, 1994 which is incorporated herein by reference. (iii) Previously filed as an exhibit to the Registration Statement on Form S-3 dated March 1, 1998 which is incorporated herein by reference. (iv) Previously filed as an exhibit to the Current Report on Form 8-K dated September 15, 1999 which is incorporated herein by reference. (v) Previously filed as an exhibit to the Quarterly Report on Form 10-Q/A for the period ended June 30, 1999 which is incorporated herein by reference. (b) Report on Form 8-K The Company filed a Current Report on Form 8-K with the SEC on September 15, 1999 in connection with the sale of Amedisys Surgery Center of Pasadena and Amedisys Surgery Center of South Houston to United Surgical Partners International, Inc. effective September 1, 1999. Pro forma financial information, required pursuant to Article 11 of Regulation S-X, was included in the filing. The pro forma financial information was comprised of a pro forma consolidated balance sheet as of June 30, 1999, a pro forma consolidated statement of operations for the six months ended June 30, 1999 and the year ended December 31, 1998, and explanatory notes. 15 16 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/ JOHN M. JOFFRION --------------------------- John M. Joffrion Principal Financial and Accounting Officer and duly authorized officer DATE: November 15, 1999 16 17 INDEX TO EXHIBITS
Exhibit No. Identification of Exhibit - ------- ------------------------- 2.1(iv) --- Asset Purchase Agreement among Amedisys, Inc., Amedisys Surgery Centers, L.C. and United Surgical Partners International, Inc. 2.2(iv) --- Promissory Note from United Surgical Partners International, Inc. 3.1(ii) --- Certificate of Incorporation 3.2(ii) --- Bylaws 4.1(ii) --- Certificate of Designation for Series A Preferred Stock 4.2(v) --- Specimen of Certificate of Amendment of Certificate of Designation 4.3(v) --- Specimen of Series A Preferred Stock Conversion Agreement 4.4(iii) --- Specimen of Common Stock Certificate 4.5(iii) --- Specimen of Preferred Stock Certificate 4.6(iii) --- Form of Placement Agent's Warrant Certificate 10.1(i) --- Loan Modification Agreement by and between Amedisys, Inc. and Columbia/HCA Healthcare Corporation 27.1(i) --- Financial Data Schedule
(i) Filed herewith. (ii) Previously filed as an exhibit to the Annual Report on Form 10-KSB for the year ended December 31, 1994 which is incorporated herein by reference. (iii) Previously filed as an exhibit to the Registration Statement on Form S-3 dated March 1, 1998 which is incorporated herein by reference. (iv) Previously filed as an exhibit to the Current Report on Form 8-K dated September 15, 1999 which is incorporated herein by reference. (v) Previously filed as an exhibit to the Quarterly Report on Form 10-Q/A for the period ended June 30, 1999 which is incorporated herein by reference. EX-10.1 2 PROMISSORY NOTE FROM UNITED SURGICAL PARTNERS INTL 1 EXHIBIT 10.1 LOAN MODIFICATION AGREEMENT BY AND BETWEEN AMEDISYS, INC. AND COLUMBIA/HCA HEALTHCARE CORPORATION This LOAN MODIFICATION AGREEMENT (this "Agreement") is effective as of September 30, 1999 by and between AMEDISYS, INC., a Delaware corporation ("Borrower"), and COLUMBIA/HCA HEALTHCARE CORPORATION, a Delaware corporation ("Lender"). W I T N E S S E T H: WHEREAS, Borrower and Lender are parties to that certain Asset Purchase Agreement dated November 2, 1998 (the "Asset Purchase Agreement"), pursuant to which Borrower purchased certain assets of certain affiliates of Lender; WHEREAS, Borrower and Lender are parties to that certain Credit Agreement dated November 16, 1998 (the "Credit Agreement"), pursuant to which Lender agreed to accept a promissory note as payment of a portion of the purchase price under the Asset Purchase Agreement; WHEREAS, pursuant to that certain Note dated December 1, 1998 (the "Note"), Borrower promised to pay to the order of Lender the principal sum of Fourteen Million Five Thousand Nine Hundred Eighty-Three and 27/100 Dollars, plus interest, on the dates, at the rates per annum, and in the amounts provided in the Credit Agreement; WHEREAS, pursuant to that certain Consent and Waiver Agreement entered into by Borrower and Lender on August 26, 1999, Lender consented to the sale of certain assets of certain subsidiaries of Borrower and granted Borrower a limited waiver of certain provisions of the Credit Agreement that were applicable to such proposed sales; and WHEREAS, Borrower is willing to agree to repay to Lender certain payments that were misdirected to Borrower and to grant Lender a full and complete release of claims Borrower may have under the Asset Purchase Agreement or the transactions or documents contemplated therein or related thereto, as more fully described in this Agreement, and Lender is willing to agree to amend certain provisions of the Credit Agreement. NOW, THEREFORE, for and in consideration of the premises and agreements contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby forever acknowledged and confessed, the parties agree as follows: I. DEFINED TERMS. Unless otherwise defined herein, all terms used herein that are defined in the Credit Agreement shall have the same meaning herein as therein defined. 2 II. COVENANTS OF BORROWER. 2.1 REPAYMENT OF MISDIRECTED FUNDS. Borrower acknowledges that, since the closing of the transaction described in the Asset Purchase Agreement, funds which were due and payable to Lender, have been misdirected and paid to Borrower. The current balance of such funds is $4,700,000.00 (the "Misdirected Funds"). As of the effective date hereof, Borrower shall deliver to Lender a promissory note, substantially in the form attached hereto as Exhibit A, pursuant to which Borrower shall repay all the Misdirected Funds that remain due and payable to Lender. Any unpaid balance under such note shall be due and payable to Lender on the earlier of: (i) three (3) business days after Borrower's receipt of payment from the Medicare program in an amount equal to the Misdirected Funds, or (ii) March 31, 2000. 2.2 DELIVERY OF STOCK CERTIFICATES. Borrower acknowledges that certain stock certificates that were pledged to Lender to secure payment of the Note have not been delivered to Lender, and Borrower agrees to deliver possession of such certificates to Lender at the time of execution of this Agreement. 2.3 COMPLETE AND GENERAL RELEASE. In consideration of Lender's agreement to amend the Credit Agreement as set forth in this Agreement, Borrower hereby presently, generally, fully, finally, and forever, releases, acquits, and discharges Lender and its affiliates from any and all theories of recovery of whatsoever nature, whether known or now unknown, or recognized by the law of any jurisdiction, including, but not limited to, actions, causes of action, demands, liabilities, suits, and judgments, whether arising in equity or under the common law or any contract or any statute, and from any and all elements of relief or recovery of whatsoever nature, whether known or now unknown, recognized by the law of any jurisdiction, including, but not limited to, actual damages of every description, such as economic loss, any other item of loss or injury, statutory or any other type of damages whatsoever, attorney's fees, prejudgment or post judgment or other interest, equitable relief, and lost income, directly or indirectly arising from or in connection with the Asset Purchase Agreement and the transactions and agreements contemplated therein or related thereto, including, but not limited to, claims arising from representations and warranties in the Asset Purchase Agreement and claims relating to the Allocation of Purchase Price or the Final Purchase Price Adjustment. Notwithstanding the foregoing, this release does not apply to (i) any action, cause of action, demand, liability, suit or judgment brought by a third party against Borrower that is based in whole or in part upon the acts or omissions of Lender or its affiliates, or (ii) any claim that Borrower may have against Lender for breach of Section 2.10 or 12.7(d) of the Asset Purchase Agreement. 2.4 Acknowledgment of Default. The parties hereby acknowledge that as of the date of this Agreement, certain accounts payable of Borrower are greater than 90 days past the invoice or billing date and are not being contested by Borrower ("Execution Date AP Delinquency"). Consequently, Borrower is not in compliance with the terms of Section 8.01(b) of the Credit Agreement and Borrower's noncompliance with such terms constitutes an Event of Default as set forth in Section 9.01(c) of the Credit Agreement. Lender hereby agrees to waive such Event of -2- 3 Default based on the Execution Date AP Delinquency and Lender shall not exercise the remedies available to it as a result of such Event of Default based on the Execution Date AP Delinquency under the provisions of Section 9.02 of the Credit Agreement. Lender's acknowledgment of default and agreement not to exercise certain remedies is limited specifically to the nature and scope described herein. Nothing contained herein shall constitute a waiver or release of any other rights or remedies available to Lender. III. AMENDMENTS TO THE CREDIT AGREEMENT. 3.1 Section 1.02 of the Credit Agreement is hereby amended as follows: (x) by deleting the definition of the term "Final Maturity Date" and replacing such definition with the following: "shall mean the earlier to occur of (i) July 31, 2004, and (ii) the date that the Note is mandatorily prepayable in full pursuant to Section 3.03(b)"; (y) by deleting the definition of the term "Loan" and replacing such definition with the following: "shall mean the loan made by Lender as provided for in Section 2.01 and any subsequent loan made by Lender to Borrower."; and (z) by deleting the words "the Closing Date" in the third and fourth lines of the definition of "Material Adverse Effect" and replacing such words with "June 30, 1999". 3.2 Section 3.01(c) of the Credit Agreement is hereby deleted in its entirety and replaced with the following provision: (c) Interest Accrual. From the date the Loan is made through January 31, 2001, the Loan shall accrue daily interest at the rate provided in Section 3.01(a) of this Agreement, which shall compound and, without further action or documentation, be added to the principal of the Note and be due and payable quarterly on each January 31, April 30, July 31, and October 31. Commencing on February 1, 2001, interest shall accrue daily on the unpaid principal of the Loan, as increased pursuant to the preceding sentence, up to and including the Final Maturity Date. As more fully described in Section 3.02 of this Agreement, payments of interest shall commence April 30, 2001. 3.3 Section 3.02 of the Credit Agreement is hereby deleted in its entirety and replaced with the following provision: Section 3.02 Repayment of Loan. Borrower shall make quarterly payments of principal as set forth below, together with accrued interest, on each January 31, April 30, July 31 and October 31, commencing April 30, 2001, and continuing until the Final Maturity Date -3- 4 when all unpaid principal and accrued interest shall be due in a single payment. The quarterly payments of principal shall be in the following amounts:
Date Amount April 30, 2001 $ 700,000 July 31, 2001 710,000 October 31,2001 730,000 January 31, 2002 740,000 April 30, 2002 760,000 July 31, 2002 780,000 October 31, 2002 790,000 January 31, 2003 810,000 April 30, 2003 830,000 July 31, 2003 850,000 October 31, 2003 860,000 January 31, 2004 880,000 April 30, 2004 900,000 July 31, 2004 all principal remaining unpaid.
3.4 Section 3.03(b) of the Credit Agreement is hereby amended by numbering the text of the existing subsection as 3.03(b)(i) and adding the following as subsection 3.03(b)(ii); (ii) Within thirty (30) days after the end of each fiscal year which ends after October 1, 1999, and prior to July 30, 2004, Borrower shall calculate "Excess Cash Flow" in accordance with Schedule 8.01 of this Agreement and shall, within forty-five (45) days after the end of such fiscal year, pay Fifty Percent (50%) of the amount of the Excess Cash Flow so calculated to Lender as payment on the Note, to be applied to the principal in inverse order of maturity. If, however, the Excess Cash Flow for any fiscal year exceeds $10,000,000, then Borrower shall pay Eighty Percent (80%) of the amount by which it exceeds $10,000,000 to Lender as such a prepayment. 3.5 Section 8.01 (c) of the Credit Agreement is hereby deleted in its entirety and replaced with the following provision: (c) Debt to finance working capital of the Agencies or to refinance the existing National Century Financial Enterprises accounts receivable financing, provided that such debt is secured solely by the accounts receivable of the Agencies, and there is no further recourse to Borrower or any of its Subsidiaries (either direct or indirect by virtue of any guarantee, general partnership participation, or any commitment which constitutes Debt), that the term of such debt exceeds the term of the Indebtedness, and that the terms, covenants and conditions of such debt shall not place the Borrower or its Subsidiaries in violation of any term or covenant contained herein; 3.6 Section 8.01(d) of the Credit Agreement is hereby deleted in its entirety and replaced with the following provision: -4- 5 (d) Debt, in an aggregate amount of not more than $500,000, to complete capital expenditures, including capital leases, permitted by Section 8.03(f) hereof; 3.7 Section 8.01(e) of the Credit Agreement is hereby amended by replacing the "." at the end of such Section with a ";". 3.8 The following provisions are hereby added to the Credit Agreement as Sections 8.01(f) and 8.01(g): (f) Debt, which is issued prior to January 1, 2001, so long as (i) such Debt is unsecured, is fully subordinated to the Indebtedness, and requires no principal payments prior to the repayment in full of the Indebtedness; and (ii) the proceeds of such Debt are used solely for (x) operating and working capital needs or (y) acquisitions of other businesses or business opportunities or capital expenditures permitted by Section 8.03(g) of this Agreement; and (g) Debt, which is issued on or after January 1, 2001, so long as (i) such Debt is unsecured, is fully subordinated to the Indebtedness, and requires no principal payments prior to the repayment in full of the Indebtedness; and (ii) the proceeds of such Debt are used solely for repayment of the Indebtedness. 3.9 Section 8.03(e) is hereby amended by replacing the "." at the end of such Section with a ";". 3.10 Section 8.03(f) is hereby deleted in its entirety and replaced with the following provision: (f) capital expenditures, including capital leases, for routine replacement of equipment in an aggregate amount not to exceed $500,000; and 3.11 Section 8.03(g) is hereby deleted in its entirety and the following provisions are hereby added as Sections 8.03(g) and 8.03(h): (g) capital expenditures or the acquisition of other businesses and business opportunities after October 1, 1999, and prior to April 1, 2001, in an aggregate maximum amount of $5,000,000.00, but in any fiscal year not more than the "Cash Available for Acquisitions" as calculated by the method shown in the example set forth on Schedule 8.03 attached hereto; and (h) capital expenditures or the acquisition of other businesses or business opportunities after March 31, 2001, in an aggregate amount not to exceed the aggregate Excess Cash Flow calculated in accordance with Schedule 8.01 to this Agreement, less amounts required to be prepaid on the Note pursuant to Section -5- 6 3.03(b)(ii) of this Agreement, which expenditure or acquisition may be made only after the payments required by Section 3.03(b)(ii) are made. IV. MISCELLANEOUS. 4.1 EFFECT OF THIS AGREEMENT. Except as expressly stated herein, (a) the Credit Agreement, the Note, and the Asset Purchase Agreement are and shall be unchanged and remain in full force and effect, and (b) this Agreement shall not constitute a waiver of any Default or Events of Default or a waiver of the right of Lender to insist upon compliance with any term, covenant, condition, or provision of the Credit Agreement (as amended hereby), the Note, or the Asset Purchase Agreement. Except as specifically stated herein, the execution and delivery of this Agreement shall in no way release, diminish, impair, reduce or otherwise affect the respective obligations and liabilities of the parties under the Credit Agreement, the Note, or the Asset Purchase Agreement, all of which shall continue in full force and effect. 4.2 COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original document and all of which shall constitute one instrument. 4.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. -6- 7 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed in multiple originals, effective as of the date and year first above written. BORROWER: AMEDISYS, INC. /s/ WILLIAM F. BORNE --------------------------------------------- William F. Borne, Chief Executive Officer Date: November 15, 1999 ---------------------------------------- LENDER: COLUMBIA/HCA HEALTHCARE CORPORATION By: /s/ GREGG GERKEN ------------------------------------------ Name: Gregg Gerken ---------------------------------------- Title: Vice President --------------------------------------- Date: November 15, 1999 ---------------------------------------- -7- 8 EXHIBIT A NOTE $4,700,000.00 November 12, 1999 FOR VALUE RECEIVED, AMEDISYS, INC., a Delaware corporation (the "Borrower") hereby promises to pay to the order of COLUMBIA/HCA HEALTHCARE CORPORATION (the "Lender"), the principal sum of Four Million Seven Hundred Thousand Dollars ($4,700,000.00) in lawful money of the United States of America and in immediately available funds, on the dates and in the principal amounts provided in the Loan Modification Agreement dated November 12, 1999, between the Borrower and Lender ("Loan Modification Agreement"). This Note is the Note referred to in the Loan Modification Agreement and evidences the Loan made by the Lender thereunder and under the Credit Agreement dated November 16, 1998, between the Borrower and Lender ("Credit Agreement"). Capitalized terms used in this Note have the respective meanings assigned to them in the Credit Agreement. This Note is issued pursuant to the Loan Modification Agreement and is entitled to the benefits provided for therein and in the Credit Agreement. This note is subject to the terms and conditions specified in the Credit Agreement. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE. AMEDISYS, INC. /s/ WILLIAM F. BORNE ----------------------------- William F. Borne Chief Executive Officer 9 SCHEDULE 8.01 Calculation of Excess Cash Flow Net Income Plus non-cash amortization of goodwill Plus loss on sale or disposition of assets Less non-cash amortization of deferred revenue Less mandatory repayments of principal Less gain on sale or disposition of assets Equals: Excess Cash Flow Note: All amounts to be calculated in accordance with Generally Accepted Accounting Principals 10 SCHEDULE 8.03 Capital Expenditure Limitation of Section 8.03(g) 1) Acquisitions or capital expenditures shall be permitted up to $5,000,000 through March 31, 2001, subject to meeting two tests: A) Current Ratio Test, and B) Minimum Cash Test A) Current Ratio Test: Subject to the provisions of 8.03 (f), no acquisitions shall be made unless the last quarter's current ratio and the pro-forma current ratio to reflect the acquisition is greater than 1.0. Current Ratio shall be defined as Current Assets less Current Liabilities as determined in accordance with Generally Accepted Accounting Principals. B) Minimum Cash Test: Borrower shall measure quarterly its level of cash and cash equivalents (as determined in accordance with Generally Accepted Accounting Principals ("Cash). The Minimum Cash Test shall measure Cash, less a) $5,000,000 minus b) the cumulative amount of capital expenditures and acquisitions made pursuant to section 8.03(g), with the result of such calculation being "Available Operating Cash." To the extent that Available Operating Cash for the most recent quarter ended and proforma for a proposed acquisition or capital expenditure is greater than the Cash Threshold set forth for such quarter below, then Amedisys shall be permitted to make such acquisition or capital expenditure (subject to the $5,000,000 aggregate limitation).
Cash Threshold Amounts: For the quarter ended -> 12/31/99 3/31/00 6/30/00 9/30/00 12/31/00 3/31/01 -------- ------- ------- ------- -------- ------- The Cash Threshold Amount shall be -> 21,350 19,050 16,750 14,450 12,150 12,150
Example:
12/31/99 3/31/00 6/30/00 9/30/00 12/31/00 Total -------- ------- ------- ------- -------- ------- Cash at beginning of quarter na 23,850 20,273 18,273 16,773 Acquisitions during quarter na (1,000) (1,000) (1,000) (2,000) (5,000) Other changes in cash (hypothetical operating losses) na (2,577) (1,000) (500) (500) (4,577) -------- ------- ------- ------- -------- Ending Cash 28,850 20,273 18,273 16,773 14,273
Calculation of Minimum Cash Test for this Example:
12/31/99 3/31/00 6/30/00 9/30/00 12/31/00 3/31/01 -------- ------- ------- ------- -------- ------- Cash (A) 23,850 20,273 18,273 16,773 14,273 Less Unused Acquisition Basket (5,000) (4,000) (3,000) (2,000) -- -------- ------- ------- ------- ------- Available Operating Cash (B) 18,850 16,273 15,273 14,773 14,273 CASH THRESHOLD (C) (DEFINED NUMBER) 21,350 19,050 16,750 14,450 12,150 12,150 Difference between Cash and Cash Threshold (A) - (C) 2,500 1,223 1,523 2,323 2,123 * Availability for Acquisitions -> 2,500 1,223 1,523 2,000 --
* Explanation of Availability for Acquisitions a) If B > C, then acquisitions up to the Unused Acquisition Basket may be made b) If B < C, then acquisitions up to the Difference between Cash and the Cash Threshold may be made EX-27.1 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED BALANCE SHEET, INCOME STATEMENT & STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 3,486,000 0 18,695,000 3,133,000 1,521,000 631,000 5,993,000 386,000 49,701,000 31,985,000 19,526,000 0 1,000 3,000 (9,270,000) 49,701,000 73,869,000 73,869,000 35,257,000 35,257,000 41,230,000 1,108,000 1,187,000 (6,633,000) 3,008,000 (3,624,000) 5,840,000 0 0 2,215,000 0.72 0.72
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