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 June 30, 2001
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)
<Table>
Delaware 11-3131700
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
</Table>
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 June 30, 2001: 5,812,754
shares
1
2
<Table>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000......................... 3
Consolidated Statements of Operations for the Three and Six Months Ended
June 30, 2001 and 2000........................................................................ 4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000......... 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................................... 13
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS............................................................................. 13
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.............................................................. 14
</Table>
2
3
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of June 30, 2001 and December 31, 2000
(Dollar Amounts in 000's)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
-------------- --------------
CURRENT ASSETS:
Cash and Cash Equivalents $ 3,824 $ 6,967
Accounts Receivable, Net of Allowance for Doubtful Accounts
of $1,695 in June 2001 and $1,385 in December 2000 4,405 6,628
Prepaid Expenses 248 196
Inventory and Other Current Assets 1,113 414
Current Assets Held for Sale 870 715
-------------- --------------
Total Current Assets 10,460 14,920
Property and Equipment, net 4,223 2,935
Other Assets, net 23,136 20,426
Long-term Assets Held for Sale 533 689
-------------- --------------
Total Assets $ 38,352 $ 38,970
============== ==============
CURRENT LIABILITIES:
Accounts Payable $ 2,668 $ 1,590
Accrued Expenses:
Payroll and Payroll Taxes 5,559 6,203
Insurance 1,449 708
Income Taxes 462 638
Other 4,229 3,925
Notes Payable 7,159 2,952
Notes Payable to Related Parties 10 10
Current Portion of Long-term Debt 4,460 3,379
Current Portion of Obligations under Capital Leases 318 385
Deferred Revenue 2,119 2,119
Current Liabilities Held for Sale 408 480
-------------- --------------
Total Current Liabilities 28,841 22,389
Long-term Debt 7,255 9,343
Long-term Medicare Liabilities -- 6,053
Deferred Revenue 2,825 3,884
Obligations under Capital Leases 25 30
Other Long-term Liabilities 826 826
Long-term Liabilities Held for Sale 937 966
-------------- --------------
Total Liabilities 40,709 43,491
-------------- --------------
Minority Interest 33 --
-------------- --------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock 6 5
Preferred Stock (350,000 Shares in June 2001 and 390,000
Shares in December 2000) 0 1
Additional Paid-in Capital 15,586 14,096
Treasury Stock (4,667 Shares of Common Stock in
June 2001 and December 2000) (25) (25)
Retained Earnings (Deficit) (17,957) (18,598)
-------------- --------------
Total Stockholders' Equity (Deficit) (2,390) (4,521)
-------------- --------------
Total Liabilities and Stockholders' Equity $ 38,352 $ 38,970
============== ==============
</Table>
The accompanying notes are an integral part of these statements.
3
4
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the three and six months ended June 30, 2001 and 2000
(Unaudited, in 000's, except per share data)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2001 2000 2001 2000
------------ ------------ ------------ ------------
Income:
Service revenue $ 27,198 $ 23,271 $ 49,370 $ 46,688
Cost of service revenue 12,157 10,852 21,924 22,214
------------ ------------ ------------ ------------
Gross margin 15,041 12,419 27,446 24,474
General and administrative expenses:
Salaries and benefits 7,560 7,962 14,202 15,826
Other 5,671 5,278 11,313 10,286
------------ ------------ ------------ ------------
Total general and administrative expenses 13,231 13,240 25,515 26,112
Operating income (loss) 1,810 (821) 1,931 (1,638)
Other income and expense:
Interest income 99 61 254 87
Interest expense (809) (646) (1,511) (1,268)
Other income, net 79 34 96 84
------------ ------------ ------------ ------------
Total other expense, net (631) (551) (1,161) (1,097)
Net income (loss) before discontinued operations 1,179 (1,372) 770 (2,735)
Income (loss) from discontinued operations,
net of income taxes 78 (2,471) (129) (2,400)
Gain on sale of discontinued operations
net of income taxes -- 2,509 -- 2,509
------------ ------------ ------------ ------------
Total discontinued operations 78 38 (129) 109
Net income (loss) $ 1,257 $ (1,334) $ 641 $ (2,626)
============ ============ ============ ============
Basic weighted average common shares outstanding 5,777 3,852 5,636 3,526
Basic income (loss) per common share:
Net income (loss) before discontinued operations $ 0.20 $ (0.36) $ 0.13 $ (0.78)
Income (loss) from discontinued
operations, net of income taxes 0.01 (0.64) (0.02) (0.67)
Gain on sale of discontinued
operations, net of income taxes -- 0.65 -- 0.71
------------ ------------ ------------ ------------
Net income (loss) $ 0.21 $ (0.35) $ 0.11 $ (0.74)
============ ============ ============ ============
Diluted weighted average common shares outstanding 7,920 3,852 7,750 3,526
Diluted income (loss) per common share:
Net income (loss) before discontinued operations $ 0.15 $ (0.36) $ 0.10 $ (0.78)
Income (loss) from discontinued
operations, net of income taxes 0.01 (0.64) (0.02) (0.67)
Gain on sale of discontinued
operations, net of income taxes -- 0.65 -- 0.71
------------ ------------ ------------ ------------
Net income (loss) $ 0.16 $ (0.35) $ 0.08 $ (0.74)
============ ============ ============ ============
</Table>
The accompanying notes are an integral part of these statements.
4
5
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 2001 and 2000
(Unaudited, Dollar Amounts in 000's)
<Table>
<Caption>
FOR THE SIX MONTHS ENDED
JUNE 30, 2001 JUNE 30, 2000
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 641 $ (2,626)
Adjustments to reconcile net income (loss) to net cash provided (used)
by operating activities:
Depreciation and amortization 1,404 1,469
Provision for bad debts 949 1,398
Compensation expense 70 --
(Gain) on sale of Company operations -- (2,665)
Impairment of goodwill -- 1,771
Deferred revenue (1,059) (1,060)
Changes in assets and liabilities:
(Increase) decrease in cash included in assets held for sale (52) 85
Decrease in accounts receivable (1,846) 466
(Increase) in inventory and other current assets (704) (214)
(Increase) decrease in other assets (41) 189
Increase (decrease) in accounts payable 1,000 (512)
Increase in accrued expenses 1,270 1,322
----------------- -----------------
Net cash provided (used) by operating activities 1,632 (377)
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 11 107
Purchase of property, plant and equipment (1,704) (38)
Proceeds from sale of Company Operations -- 3,200
Cash used in purchase acquisitions (3,406) --
Minority interest investment in subsidiary 33 150
----------------- -----------------
Net cash provided (used) by investing activities (5,066) 3,419
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on line of credit agreements 4,207 (2,058)
Proceeds from issuance of notes payable and capital leases 73 1,000
Payments on notes payable and capital leases (1,195) (1,596)
Increase (decrease) in long-term Medicare liabilities (3,033) 2,299
Accrued interest expense -- 669
Proceeds from issuance of stock 239 --
----------------- -----------------
Net cash provided by financing activities 291 314
----------------- -----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,143) 3,356
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,967 1,425
----------------- -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,824 $ 4,781
================= =================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 1,556 $ 673
================= =================
Income taxes $ 282 $ --
================= =================
</Table>
The accompanying notes are an integral part of these statements.
5
6
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Amedisys, Inc., a Delaware corporation ("Amedisys" or "the Company"),
is a leading multi-state provider of home health care nursing services. The
Company operates fifty-six home care nursing offices, one ambulatory surgery
center, and one corporate office 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, 2001, the results of operations for the three and
six months ended June 30, 2001 and 2000, and cash flows for the six months ended
June 30, 2001 and 2000. 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. RESTATEMENT
The Company has restated the Consolidated Financial Statements for the
year ended December 31, 2000 and the quarter ended March 31, 2001 due to a net
revenue overstatement for the fourth quarter of 2000 and the first quarter of
2001. The Medicare reimbursement changes effective October 1, 2000 required
substantial changes to the Company's software application, both from an
operational and an accounting perspective, including the recording of revenue
related to patients receiving therapy services. Under the changed reimbursement
system, if a patient, upon initial assessment by the nurse, is expected to
require ten or more therapy visits in an episode, the expected reimbursement for
that episode is increased ("therapy add-on"). If, upon completion of the
episode, the expected therapy utilization of ten or more visits was not met, the
provider is not entitled to the therapy add-on. The Company's software did not
detect differences between the initial nurse's assessment that called for ten or
more visits and the therapist's subsequent evaluation which indicated that fewer
than ten visits were necessary.
The Company has modified its software and has changed certain processes
to detect any discrepancies in assessed therapy need and to more closely monitor
the patient's progress as it relates to scheduled therapy services.
3. REVENUE RECOGNITION
Prior to the 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. A standard episode payment has been established by
the Medicare Program at $2,115 per episode, to be adjusted by a case mix
adjuster consisting of eighty (80) home health resource groups ("HHRG") and the
applicable geographic wage index. The standard episode payment may be subject to
further individual adjustments due to 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 for visits during the earnings
period at the expected payment amount.
6
7
4. EARNINGS PER SHARE
Earnings per common share are based on the weighted average number of
shares outstanding during the period. For the three and six months ended June
30, 2000, there was no difference between basic and diluted weighted average
common shares outstanding as the effect of stock options (643,520 and 567,481
weighted average outstanding for the three and six months ended June 30, 2000,
respectively), warrants (210,000 and 193,929 weighted average outstanding for
the three and six months ended June 30, 2000, respectively) and preferred shares
(510,000 preferred shares convertible into 2,152,381 and 2,326,190 weighted
average common shares for the three and six months ended June 30, 2000,
respectively) were anti-dilutive. The following table sets forth the computation
of basic and diluted net income (loss) per common share for the three and six
month periods ended June 30, 2001 and 2000.
<Table>
<Caption>
In 000's, except per share data
Three months Three months Six months Six months
ended ended ended ended
June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000
------------- ------------- ------------- -------------
Basic Net Income (Loss) per Share:
Net Income (Loss) $ 1,257 $ (1,334) $ 641 $ (2,626)
============ ============ ============ ============
Weighted Average Number of
Shares Outstanding 5,777 3,852 5,636 3,526
============ ============ ============ ============
Net Income (Loss) per Common
Share - Basic $ 0.21 $ (0.35) $ 0.11 $ (0.74)
============ ============ ============ ============
Diluted Net Income (Loss) per Share:
Net Income (Loss) $ 1,257 $ (1,334) $ 641 $ (2,626)
============ ============ ============ ============
Weighted Average Number of
Shares Outstanding 5,777 3,852 5,636 3,526
Effect of Dilutive Securities:
Stock Options 709 -- 650 --
Warrants 260 -- 245 --
Convertible Preferred Shares
(350,000 convertible into
1,166,666 Common Shares at
June 30, 2001) 1,174 -- 1,219 --
------------ ------------ ------------ ------------
Average Shares - Diluted 7,920 3,852 7,750 3,526
============ ============ ============ ============
Net Income (Loss) per Common
Share - Diluted $ 0.16 $ (0.35) $ 0.08 $ (0.74)
============ ============ ============ ============
</Table>
5. MEDICARE REIMBURSEMENT AND REFORM
The Company derived approximately 88% of its revenues from continuing
operations from the Medicare system for the six months ended June 30, 2001 and
approximately 91% for the six months ended June 30, 2000.
As disclosed in Note 3, on June 28, 2000, HCFA issued the final rules
for PPS, 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 has been
established at $2,115 per episode for federal fiscal year 2001, to be adjusted
by a case mix adjuster consisting of eighty (80) home health resource groups
("HHRG") and the applicable geographic wage index. The standard episode payment
may be subject to further individual adjustments due to 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.
7
8
In December 2000, Congress passed the Benefits Improvement and
Protection Act ("BIPA"), which provides additional funding to healthcare
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 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").
6. ACQUISITIONS
Effective March 1, 2001, the Company acquired from Seton Health
Corporation of North Alabama certain assets and liabilities of Seton Home Health
Services, Inc. ("Seton") associated with their operations in Mobile and
Fairhope, Alabama. The assets acquired consisted primarily of all furniture,
fixtures, equipment (except computer equipment and printers) and leasehold
improvements; supplies; inventory; lists of present and former patients and
mailing lists; vendor lists; employee records; telephone numbers and listings;
intangibles and other rights and privileges; leasehold interest in the
locations; goodwill and going concern; rights under certain agreements; rights
under all contracts including capital leases and non-competition agreements;
licenses and permits relating to ownership, development and operations; and
rights under Medicare Provider Agreements. The liabilities assumed consisted of
accrued but unused vacation and obligations under capital and operating leases.
In consideration for the acquired assets and liabilities, the Company paid
$440,000 cash, which represents a purchase price of $475,000 less the value of
accrued vacation obligations. In connection with this acquisition, the Company
recorded $448,000 in goodwill which will be amortized over twenty years.
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 Home Health Services, Inc. ("Seton") from Seton Health
Corporation of North Alabama associated with their operations in Birmingham,
Tuscaloosa, Anniston, Greensboro, and Reform, Alabama. The assets acquired
consisted primarily of all furniture, fixtures, equipment (except computer
equipment and printers) and leasehold improvements; supplies; inventory; lists
of present and former patients and mailing lists; vendor lists; employee
records; telephone numbers and listings; intangibles and other rights and
privileges; leasehold interest in four of the five locations; goodwill and going
concern; rights under certain agreements; rights under all contracts including
capital leases and non-competition agreements; licenses and permits relating to
ownership, development and operations; and rights under Medicare Provider
Agreements. The liabilities assumed consisted of estimated accrued but unused
vacation and obligations under capital and operating leases. 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 estimated value of accrued
vacation obligations. In connection with this acquisition, the Company recorded
$2,235,000 in goodwill which will be amortized over twenty years.
Effective June 11, 2001, the Company acquired from East Cooper
Community Hospital, Inc. ("East Cooper") certain assets and liabilities of
HealthCalls Professional Home Health Services. The assets consisted primarily of
all furniture, fixtures, equipment, leasehold improvements and supplies;
inventory; current patient lists of present or former patients, mailing lists,
telephone numbers and intangibles and other rights and privileges; leasehold
interest in the premises located at the business address; goodwill and going
concern; benefits of all amounts previously paid by East Cooper for advertising,
design fees, rent services, or interest relating to the business or assets to
the extent they are to be performed after the closing; rights under certain
agreements; licenses and permits relating to ownership, development and
operations of the business, including the Medicare Provider Number, rights under
the Medicare Provider Agreement, the Medicaid Provider Number and rights under
the Medicaid Provider Agreement; technical outlines and records, and any and all
know-how and software and other technology, including all contracts, licenses,
authorizations and permits; trade secrets, inventions, patents, copyrights,
trade names, business names, trademarks, and other intangible assets; copies of
medical records of patients who received services from East Cooper to the extent
reasonably necessary to transfer the care of such patients; and copies of
business records related to the operation of the business. The liabilities
assumed consisted of liabilities related to the operation of the business for
services provided post-closing. 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 which will be amortized
over twenty years.
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 launched
8
9
a restructuring plan to divest its non-home health care nursing divisions. The
Company sold five of its six surgery centers and sold or closed its four
infusion locations during 1999 and 2000.
The Company has one remaining outpatient surgery center yet to sell.
Generally, a plan to dispose of discontinued operations must be carried out over
a period not to exceed one year in order to continue to qualify for discontinued
operation accounting treatment. This remaining surgery center has been involved
in litigation outside of the Company's control, which prevented the Company from
completing a timely disposition. For this reason, the Company has continued to
reflect the outpatient surgery division as discontinued operations. The Company
expects that the remaining surgery center will be sold in the third quarter of
2001.
Summarized financial information for the discontinued operations is as
follows (in 000's):
<Table>
<Caption>
For the three months For the six months
Ended June 30 ended June 30
----------------------------- ------------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Outpatient Surgery Division:
Service Revenue $ 744 $ 734 $ 1,282 $ 1,581
Income (Loss) from Discontinued
Operations before Provision for
Income Taxes 78 2,735 4 3,130
Income (Loss) from Discontinued
Operations Net of Income Taxes 78 2,579 4 2,974
Infusion Therapy Division:
Service Revenue $ -- $ 1,977 $ -- $ 4,006
(Loss) from Discontinued Operations
before Provision for Income Taxes -- (2,541) (133) (2,865)
(Loss) from Discontinued Operations
Net of Income Taxes -- (2,541) (133) (2,865)
Total Discontinued Operations:
Service Revenue $ 744 $ 2,711 $ 1,282 $ 5,588
Income (Loss) from Discontinued
Operations before Provision for
Income Taxes 78 194 (129) 265
Income (Loss) from Discontinued
Operations Net of Income Taxes 78 38 (129) 109
</Table>
9
10
Included in the accompanying Consolidated Balance Sheets as of June 30,
2001 and December 31, 2000 are the following assets and liabilities relating to
the discontinued operations (in 000's):
<Table>
<Caption>
June 30, December 31,
2001 2000
------------ ------------
Cash $ 72 $ 20
Accounts Receivable 610 510
Prepaid Expenses 9 13
Inventory and Other Current Assets 179 172
------------ ------------
Current Assets Held for Sale $ 870 $ 715
============ ============
Property $ 525 $ 681
Other Assets 8 8
------------ ------------
Long-term Assets Held for Sale $ 533 $ 689
============ ============
Accounts Payable $ 112 $ 190
Accrued Payroll 57 50
Accrued Other 46 34
Current Portion of Long-term Debt 192 192
Current Portion of Obligations under
Capital Leases 1 14
------------ ------------
Current Liabilities Held for Sale $ 408 $ 480
============ ============
Long-term Debt $ 937 $ 966
------------ ------------
Long-term Liabilities Held for Sale $ 937 $ 966
============ ============
</Table>
8. NOTES PAYABLE
Notes payable as of June 30, 2001 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 expires December, 2003, is collateralized by
eligible accounts receivable and as of June 30, 2001 and December 31, 2000, had
an outstanding balance of $6,942,000 and $2,952,000, respectively. 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 13.58% and 15.29% for the six months ended June 30, 2001 and
the year ended December 31, 2000, respectively. The revolving bank line of
credit of $2.5 million bears interest at the Bank One Prime Floating Rate, which
was 6.75% and 9.5% at June 30, 2001 and December 31, 2000, respectively. At June
30, 2001, there was $66,000 drawn on the line of credit. At December 31, 2000,
there were no amounts drawn on the line of credit.
9. LONG-TERM DEBT
Long-term debt consists primarily of a $9.7 million note payable to NPF
Capital, a $1.1 million note payable to Merrill Lynch, an $800,000 note payable
to CareSouth Home Health Services, Inc. ("CareSouth"), an $800,000 note payable
to Winter Haven Hospital, a $250,000 note payable to an individual, and various
other notes.
The $9.7 million note to NPF Capital is payable over a three year term
with interest only payments for a six month period ended June, 2001 and monthly
payments of principal and interest of $387,000 for the remainder of the term.
The Company makes monthly principal and interest payments of $25,000 on the
$800,000 note to CareSouth, which is due July, 2003 and monthly principal and
interest payments of $30,000 on the $800,000 note to Winter Haven Hospital. The
note payable to an individual of $250,000 bears interest, payable monthly at
13%, with one principal payment due and paid in July, 2001. In connection with
the issuance of the notes payable to the individual, 15,000 warrants were also
issued (exercise price of $4.00 per share). These warrants have not been
recorded in the financial statements as the value has been deemed by management
to be immaterial.
The Company makes monthly principal and interest payments of $27,000 on
the $1.1 million note to Merrill Lynch, which is secured by equipment located at
one surgery center and is due in April, 2002. Due to the anticipated divestiture
of the outpatient surgery division, this note is classified as Held for Sale in
the Consolidated Balance Sheets.
10. AMOUNTS DUE TO AND DUE FROM MEDICARE
Prior to the implementation of PPS, the Company recorded Medicare
revenues at the lower of actual costs, the per visit cost limit, or a per
beneficiary cost limit on an individual provider basis in accordance with
established guidelines. As of June 30, 2001, the Company estimates an aggregate
payable to Medicare of $18 million resulting from interim cash receipts in
excess of expected reimbursement. In the accompanying Consolidated Balance Sheet
as of June 30, 2001, the amounts due to Medicare within one year of $15.0
million are netted against accounts receivable.
10
11
The amount payable to Medicare in excess of one year of $3.0 million is shown as
Long-term Medicare Liabilities. Of the $15.0 million netted against accounts
receivable, $7.4 million is attributed to a provision in BIPA whereby a lump-sum
payment equal to two months of PIP was issued to providers. Upon completion of
the annual cost reports, the Company will request extended repayment plans for
these payments. There can be no assurances, however, that the extended repayment
plans will be accepted. Also included in the $15.0 million is a $3.2 million
overpayment relating to Alliance Home Health, a wholly-owned subsidiary of the
Company which filed for bankruptcy protection on September 29, 2000.
11. CAPITAL STOCK
In accordance with the terms of conversion of the Company's Series A
Preferred Stock as stated in the Series A Preferred Stock Conversion Agreement,
eight preferred shareholders converted a total of 360,000 preferred shares into
1,200,000 common shares during 2000. During the first quarter of 2001, two
additional preferred shareholders converted a total of 20,000 preferred shares
into 66,667 common shares and during the second quarter of 2001, one additional
preferred shareholder converted 20,000 preferred shares into 66,667 common
shares. The conversion rate for the preferred shares was $3.33.
12. 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
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 will continue to be amortized through the
remainder of 2001 at which time amortization will cease and a transitional
goodwill impairment test will be performed. Any impairment charges resulting
from the initial application of the new rules will be classified as a cumulative
change in accounting principle. The Company will adopt SFAS 142 effective
January 1, 2002. Management is currently evaluating the impact of the new
accounting standards on existing goodwill and other intangible assets. Included
in the accompanying Consolidated Statement of Operations is goodwill
amortization expense as follows (in 000's):
<Table>
<Caption>
3 months ended 6 months ended
June 30, June 30,
2001 2000 2001 2000
------ ------ ------ ------
Goodwill Amortization Expense $ 314 $ 244 $ 594 $ 488
</Table>
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 (the "Notes") appearing in Item 1 and the Consolidated Financial
Statements for 2000, Notes, and the related Management's Discussion and
Analysis as amended and restated in Form 10-K/A.
GENERAL
Amedisys is a leading multi-regional provider of home health care
nursing services. The Company operates fifty-six home care nursing offices, one
ambulatory surgery center, and one corporate office in the southern and
southeastern United States.
11
12
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 launched a
restructuring plan to divest its non-home health care nursing divisions. The
Company sold five of its six surgery centers and sold or closed its four
infusion locations during 1999 and 2000 and expects to divest the one remaining
surgery center during 2001.
The Company has systematically reduced its operating costs since 1998 in
preparation for PPS. Significant cost reduction measures undertaken by the
Company included the consolidation/closure of offices which overlapped service
areas, converting its method of nurse pay to a variable or per visit rate rather
than a fixed or salary system, utilizing economies of scale, and reducing
corporate overhead when possible. Business functions that are not considered
part of the core business have been outsourced and management levels have been
streamlined.
The Company has positioned its operations to be successful under PPS.
The Company has implemented Disease State Management programs and clinical
protocols as well as supporting technology to monitor and report outcome data,
to standardize care, and to ensure quality outcomes. Using clinical managers to
assess and track patient progress and highly skilled nurses to deliver care are
also important components of the overall strategy.
RESULTS OF OPERATIONS
The Company has restated the Consolidated Financial Statements for the
three months ended March 31, 2001 due to a net revenue overstatement for the
first quarter of 2001 as discussed in Note 2 of the Consolidated Financial
Statements. The results of operations for the six months ended June 30, 2001
include the revenue restatements as discussed in Note 2.
Service Revenues. Net revenues increased $3,927,000 or 17% and
$2,682,000 or 6% for the three and six months ended June 30, 2001, respectively,
as compared to the same periods in 2000. This increase was attributed to an
increase in patient admissions, the change in the Medicare reimbursement that
was effective October 1, 2000, and the price increase effective April 1, 2001 as
a result of BIPA. Patient admissions increased 3,372 or 55% from 6,175 for the
three months ended June 30, 2000 to 9,547 for the three months ended June 30,
2001 and increased 4,489 or 35% from 13,003 for the six months ended June 30,
2000 to 17,492 for the six months ended June 30, 2001. The increase in patient
admissions is attributable to both internal growth and agencies acquired in the
fourth quarter of 2000 and the first six months of 2001.
Cost of Revenues. Cost of revenues increased 12% for the three months
ended June 30, 2001 and decreased 1% for the six months ended June 30, 2001 as
compared to the same periods in 2000. The increase for the three months ended
June 30, 2001 is attributed to increased salaries for the clinical manager
positions of $1,411,000. The clinical manager position was implemented
company-wide in the latter part of 2000 to provide a greater level of patient
care oversight and coordination. The decrease for the six months ended June 30,
2001 is attributable to a decrease in patient visits from 606,012 for the six
month period ended June 30, 2001 to 467,100 for the same period of 2000, offset
by increased salaries for the clinical manager positions of $2,665,000.
General and Administrative Expenses ("G&A"). G&A decreased $9,000 for
the three months ended June 30, 2001 and $597,000 for the six months ended June
30, 2001 as compared to the same periods in 2000. The decrease for the six
months ended June 30, 2001 is primarily attributed to a decrease in incentive
compensation of $1,086,000, offset by a one-time write-off of accounts
receivable of $502,000.
Other Income and Expenses. Other expenses, net increased $80,000 or 15%
from $551,000 for the three months ended June 30, 2000 to $631,000 for the three
months ended June 30, 2001 and $64,000 or 6% from $1,097,000 to $1,161,000 for
the six months ended June 30, 2001. These increases are primarily due to an
increase in interest expense related to an increased balance on the line of
credit with NCFE.
Discontinued Operations. Total discontinued operations, net of income
taxes, was $78,000 for the three months ended June 30, 2001 as compared to
$38,000 for the three months ended June 30, 2000. Total discontinued operations,
net of income taxes, was ($129,000) for the six months ended June 30, 2001 as
compared to income of $109,000 (net of gain on sale) for the six months ended
June 30, 2000. As of June 30, 2001, the Company only has one remaining surgery
center to divest whereas at June 30, 2000, the Company had two surgery centers
and three infusion therapy locations reflected as discontinued operations.
12
13
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 January 1, 1998 for the Company. In the fourth quarter of 2000 and 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. In the second quarter of 2001, the Company reported profitability and
positive cash flow due to a price increase effective April 1, 2001 as a result
of BIPA. The Company expects positive cash flow from operations will continue
and the Company will be able to fund operations primarily from this source.
For a description of Notes Payable and Long-term Debt, see Notes 8 and
9. For a discussion of Amounts Due Medicare, see Note 10.
The Company's operating activities provided $1.6 million in cash during
the six months ended June 30, 2001, whereas such activities used $377,000 in
cash during the six months ended June 30, 2000. Cash provided by operating
activities in 2001 is primarily attributable to net income of $641,000 and net
non-cash items such as depreciation and amortization of $1.4 million offset by
changes in assets and liabilities of $373,000. Investing activities used $5.1
million for the six months ended June 30, 2001, whereas such activities provided
$3.4 million for the six months ended June 30, 2000. Cash used by investing
activities in 2001 is primarily attributed to the purchase of property, plant
and equipment of $1.7 million and cash used in purchase acquisitions of $3.4
million. Financing activities provided cash during the six months ended
June 30, 2001 of $291,000, whereas such activities provided $314,000 during
the same period in 2000. Cash provided by financing activities in 2001 is
primarily attributed to borrowings on line of credit agreements of
$4.2 million offset by payments on notes payable and capital leases of
$1.2 million and a decrease in long-term Medicare liabilities of $3.0 million.
As discussed in the Company's Annual Report on Form 10-K, the Company
began, in the first quarter of 2001, the installation of a company-wide
computer network infrastructure to connect all of its regional offices. This
wide area network ("WAN") will allow more immediate access to information by
all company personnel including senior management, which will increase
operational efficiencies. The original expected project cost was $1.5 million,
but has subsequently been revised to approximately $2.2 million due to the
incremental cost for acquired agencies and requested design enhancements.
Capital expenditures through June 30, 2001 relating to this project
approximated $875,000 and are included in purchase of property, plant, and
equipment in the Consolidated Statement of Cash Flows.
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,
2001.
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
No material developments have occurred on the legal proceedings last
reported in the Company's Annual Report on Form 10-K for the year ended December
31, 2000.
13
14
ITEM 2. CHANGES IN SECURITIES
In accordance with the terms of conversion of the Company's Series A
Preferred Stock as stated in the Series A Preferred Stock Conversion Agreement,
during the first quarter of 2001, two preferred shareholders converted a total
of 20,000 preferred shares into 66,667 common shares. During the second quarter
of 2001, one preferred shareholder converted 20,000 preferred shares into 66,667
common shares. The conversion was exempt under Section 3(a)(9) of the Securities
Act of 1933.
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 14,
2001 with the following three items voted on:
Item 1. 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, managing director of
Postlethwaite and Netterville, a public accounting firm; David R. Pitts,
President and CEO of Pitts Management Associates, Inc.; and Peter F. Ricchiuti,
Assistant Dean and Director of Research at Tulane University's A.B. Freeman
School of Business. These individuals were approved with the following votes:
<Table>
<Caption>
Director Votes in Favor Votes Against Votes Abstained
Mr. Borne 5,845,152 2,456 --
Mr. LaBorde 5,845,317 2,291 --
Mr. Netterville 5,845,317 2,291 --
Mr. Pitts 5,845,317 2,291 --
Mr. Ricchiuti 5,845,317 2,291 --
</Table>
Item 2. Reappointment of the Company's independent public accounting
firm of Arthur Andersen LLP. The reappointment of the independent public
accounting firm was approved by the shareholders, receiving 5,843,768 votes in
favor, 2,478 votes against and 1,362 votes abstained.
Item 3. To consider and act upon proposed amendments to the 1998
Directors' Stock Option Plan. This item was approved by the shareholders,
receiving 5,708,479 votes in favor, 107,453 votes against and 31,676 votes
abstained.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<Table>
<Caption>
Exhibit
No. Identification of Exhibit
- ------- -------------------------
3.1(1) - Certificate of Incorporation
3.2(5) - Bylaws
4.1(1) - Certificate of Designation for the Series A Preferred Stock
4.2(2) - Common Stock Specimen
4.3(2) - Preferred Stock Specimen
4.4(2) - Form of Placement Agent's Warrant Agreement
4.5(3) - Series A Preferred Stock Conversion Agreement Specimen
4.6(3) - Certificate of Amendment of Certificate of Designation Specimen
4.7(4) - Shareholder Rights Agreement
15.1(6) - Report of Independent Public Accountants for the quarter ended
June 30, 2001
21.1(2) - List of Subsidiaries
</Table>
14
15
- ----------
(1) Previously filed as an exhibit to the Annual Report on Form 10-KSB for
the year ended December 31, 1994.
(2) Previously filed as an exhibit to the Registration Statement on Form
S-3 dated March 11, 1998.
(3) Previously filed as an exhibit to the Quarterly Report on Form 10-Q/A
for the period ended June 30, 1999.
(4) 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.
(5) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for
the period ended March 31, 2001.
(6) Filed herewith.
----------
(b) Report on Form 8-K
On April 9, 2001, the Company filed a Current Report on Form 8-K with
the Securities and Exchange Commission ("SEC") attaching a press release that
announced the purchase of seven home health agencies in Alabama.
On April 18, 2001, 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 to make presentations
at investor conferences.
On April 25, 2001, the Company filed a Current Report on Form 8-K with
the SEC attaching a press release that announced that the Company would release
quarter ended March 31, 2001 operating results on May 1, 2001 and host a
conference call on that same day.
On April 30, 2001, the Company filed a Current Report on Form 8-K with
the SEC attaching a press release that announced that the Company signed managed
care contracts with both United Healthcare of Alabama and United Healthcare of
Georgia.
On May 1, 2001, the Company filed a Current Report on Form 8-K with the
SEC attaching a press release announcing quarter ended March 31, 2001 operating
results.
On June 14, 2001, the Company filed a Current Report on Form 8-K with
the SEC attaching a press release announcing that it had overstated net service
revenues for the quarters ended December 31, 2000 and March 31, 2001.
On June 19, 2001, the Company filed a Current Report on Form 8-K
attaching a press release announcing the purchase of HealthCalls Professional
Home Health Services of Charleston, South Carolina.
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
Senior Vice President of Finance
Principal Accounting and Financial Officer
DATE: August 20, 2001
17
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT
NUMBER IDENTIFICATION OF EXHIBIT
- ------- -------------------------
3.1(1) - Certificate of Incorporation
3.2(5) - Bylaws
4.1(1) - Certificate of Designation for the Series A Preferred Stock
4.2(2) - Common Stock Specimen
4.3(2) - Preferred Stock Specimen
4.4(2) - Form of Placement Agent's Warrant Agreement
4.5(3) - Series A Preferred Stock Conversion Agreement Specimen
4.6(3) - Certificate of Amendment of Certificate of Designation Specimen
4.7(4) - Shareholder Rights Agreement
15.1(6) - Report of Independent Public Accountants for the quarter ended
June 30, 2001
21.1(2) - List of Subsidiaries
</Table>
- ----------
(1) Previously filed as an exhibit to the Annual Report on Form 10-KSB for
the year ended December 31, 1994.
(2) Previously filed as an exhibit to the Registration Statement on Form
S-3 dated March 11, 1998.
(3) Previously filed as an exhibit to the Quarterly Report on Form 10-Q/A
for the period ended June 30, 1999.
(4) 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.
(5) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for
the period ended March 31, 2001.
(6) Filed herewith.