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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 23, 1997
AMERICAN HOMEPATIENT, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19532 62-1474680
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification
incorporation) Number)
5200 Maryland Way, Suite 400 Brentwood, Tennessee 37027
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(Address of principal executive offices)
(615) 221-8884
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(Registrant's telephone number, including area code)
Not applicable
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(Former name, former address and former fiscal year,
if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 23, 1997, the Board of Directors (the "Board") of American
HomePatient, Inc. approved initiatives to respond to recently enacted
legislation which calls for reductions to Medicare oxygen reimbursement
beginning January 1, 1998. More than 100 of the Company's total operating and
billing locations will be affected by the Board approved activities. The
specific actions will result in the redefining of the Company's strategic
imperatives; pre-tax accounting charges in the third quarter of 1997 of
approximately $66-68 million; the closure or consolidation of approximately 15
percent of the Company's total operating and billing centers; and the reduction
or elimination of marginally profitable products and services for an additional
12 percent of locations.
As a result of American HomePatient, Inc.'s fundamental reshaping, the Company
will take pre-tax accounting charges of $66-68 million in the third quarter of
1997. These charges include approximately $8 million for the write-down of
goodwill and other long-term assets due to the oxygen reimbursement cuts.
Approximately $46-48 million of the charges represent the costs and goodwill
associated with the closure, consolidation, scaling back, or elimination of
services at selected locations as a part of the Company's restructuring of its
branch network and field support operations. Due to the comprehensive nature of
this restructuring, a related charge of $12 million will be recorded to account
for the negative impact anticipated on the remaining operating business.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
99.1 Press Release dated September 25, 1997 issued by the
Company in connection with the events described in
this Report.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN HOMEPATIENT, INC.
By: /s/ Edward K. Wissing
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Name: Edward K. Wissing
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Title: President and Chief Executive Officer
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Date: September 25, 1997
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AMERICAN HOMEPATIENT NEWS RELEASE
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Contacts: Edward K. Wissing or Kathey S. Palmer or Dana Coleman
President and CEO Sr. Vice President Comms. Mngr.
(615) 221-8884 (615) 221-8884 (615) 221-8135
AMERICAN HOMEPATIENT ANNOUNCES RESHAPING OF THE COMPANY FOR
SUSTAINABLE GROWTH
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COMPANY COMPREHENSIVELY RESPONDS TO MEDICARE REIMBURSEMENT CUTS
BRENTWOOD, Tenn., Sept. 25, 1997 - American HomePatient, Inc., (Nasdaq: AHOM),
one of the nation's largest providers of home health care services and
equipment, has announced initiatives to aggressively respond to planned Medicare
reimbursement cuts by fundamentally reshaping the company for long-term growth
and value creation. More than 100 of the company's total operating and billing
locations will be impacted by the activities announced today. The specific
actions will result in the redefining of the company's strategic imperatives;
pre-tax accounting charges in the third quarter of 1997 of approximately $66-68
million; the closure or consolidation of approximately 15 percent of the
company's total operating and billing centers; and, the scaling back or
elimination of marginal products and services for an additional 12 percent of
locations.
The company believes that the combination of all these activities will permit it
to exceed the current consensus of analyst 1998 estimates which include Medicare
oxygen reimbursement cuts of 25 percent. The company's target for 1998 earnings
per share (EPS) is $1.36.
In August, Congress enacted and President Clinton signed the balanced budget
package which will cut the Medicare reimbursement rate for oxygen by 25 percent
on Jan. 1, 1998, and by another five percent in 1999. With 359 operating and
billing centers across the U.S., American HomePatient is one of the nation's
largest providers of home oxygen to patients, many of whom are Medicare
recipients, and is therefore significantly affected by Congress' decision.
Medicare oxygen reimbursements account for approximately 23.5 percent of the
company's revenues.
The company has long relied on its five "strategic imperatives" to guide its
successful growth. These imperatives have included: (i) growth by acquisition in
small to mid-size markets; (ii) building regional density; (iii) development of
joint ventures and strategic alliances with major integrated health care
delivery systems; (iv) same store revenue growth, and (v) cost containment.
Consequently, American HomePatient has become one of the industry's leading and
most successful consolidators, having acquired 97 companies since 1992 and
attained a compound annual growth rate of 63 percent in both net revenue and
income.
In response to the Medicare oxygen cuts, American HomePatient has chosen to
redefine its strategic imperatives to better position the company for continued
growth in a dynamic home health care environment. The new imperatives announced
today, while building upon the strengths of the
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American HomePatient, Inc.
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September 25, 1997
company's successful strategy over the past five years, also represent
fundamental changes in commitment and focus in certain facets of the company's
business. The new imperatives include:
o Continuing role as an active consolidator in home health care market to
take advantage of the increased acquisition opportunities presented by
current market conditions.
o Maximizing operating leverage by (i) achieving cost-efficiencies, (ii)
initiating process and structure improvements at all levels of the
company's operations, and (iii) optimizing regional density. These
initiatives are intended to produce and sustain double digit EBIT
(earnings before interest and taxes) margins in 1998.
o Accelerating the development of joint ventures and strategic alliances
with prestigious hospitals and integrated health care delivery systems.
o Increasing local market share by focusing on the company's core product
categories of respiratory and infusion services.
o Continuing the company's commitment to provide Personal Caring Service,
its value system, which keeps quality patient care at the forefront of
all activities.
"The reduction in Medicare oxygen reimbursement has forced us to make some very
difficult decisions but we also believe it is an event which signals the
beginning of a new era in home health care," said Edward K. Wissing, president
and chief executive officer of American HomePatient. "To thrive in this
environment and be a long-term player, our response is to create a stronger
American HomePatient with redefined strategies and goals to carry us into the
21st Century. We are announcing today several decisive steps the company is
undertaking to reposition itself for continued and profitable growth."
Approximately 27 percent of the company's operating and billing centers will be
affected by the activities announced today, resulting in the loss of employment
for a number of its 4,800 employees. Specifically, the company is closing or
consolidating 15 percent of its operating centers, closing or scaling back nine
billing centers, eliminating four operating regions, and eliminating marginal
products and services at numerous other centers. Employees affected by these
actions will be offered severance packages and will be provided with
outplacement resources.
As a result of American HomePatient's fundamental reshaping, the company will
take pre-tax accounting charges of approximately $66-68 million in the third
quarter of 1997. These charges include approximately $8 million for the
write-down of goodwill and other long-term assets due to the oxygen
reimbursement cuts. Approximately $46-48 million of the charges represent the
costs and goodwill associated with the closure, consolidation, scaling back, or
elimination of services at selected locations as a part of the company's
restructuring of its branch network and field support
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American HomePatient, Inc.
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September 25, 1997
operations. Due to the comprehensive nature of this restructuring, related
charges of $12 million will be recorded to account for the negative impact
anticipated on the remaining operating businesses.
After the charges are taken in the third quarter, the company expects EPS for
the quarter ending September 30, 1997 to be approximately $(2.63) to $(2.68) and
1997 full year EPS to be approximately $(1.62) to $(1.67).
"We are committed to continuous process improvement and in making significant
changes in the way we do business going forward. In doing so, we believe we are
taking the necessary steps to create a strengthened American HomePatient - a
company that is more efficient, more profitable and more capable of achieving
long-term growth. Since the announcement of the magnitude of the Medicare cuts,
we have wrestled with having to make some difficult decisions - especially those
affecting our employees - but we believe these decisions will make us stronger
and more successful as a company. Moreover, we believe these decisions will
enable us to better meet the challenges of a changing market," said Wissing.
The company believes the home health care industry will continue to grow due to
a number of factors including the aging population, the availability of new
technologies that bring new opportunities to provide services to acutely ill
patients in their homes, greater acceptance of the availability of home care by
the medical community and payors, and patients' preference to be treated at
home.
"We view this as a new era for American HomePatient. We have the financial
stability and resources, and more importantly, we believe we have the resolve to
make the necessary changes to take advantage of the tremendous opportunities
presented in this industry and to move us to the next phase of the company's
growth," concluded Wissing.
American HomePatient is recognized as one of the leading home care companies in
the country. Its current product and service offerings include respiratory
services, infusion therapy, parenteral and enteral nutrition, and medical
equipment for patients in the home.
American HomePatient's common stock is traded in the Nasdaq Stock Market
(National Market) under the symbol AHOM.
Forward looking statements made in this release involve a number of risks and
uncertainties, including, but not limited to the company's ability to achieve
significant expected cost savings or synergy's from the closing or consolidation
of centers and other reshaping efforts described in this release, the impact of
further changes in government reimbursement, government regulation and health
care reforms, ability to execute on the company's strategic imperatives,
therefor, changing the economic and market conditions and other risk factors
detailed in the company's Securities and Exchange Commission filings.
