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 March 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to ________________
Commission file number: 0-24260
AMEDISYS, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 11-3131700
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
3029 S. SHERWOOD FOREST BLVD., STE. 300 BATON ROUGE, LA 70816
(Address of principal executive offices including zip code)
(504) 292-2031; (800) 467-2662
(Registrant's telephone number, including area code)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Number of shares of Common Stock outstanding as of March 31, 1996:
2,583,864 shares
1
<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet as of March 31, 1996 and December 31, 1995 ...... 3
Consolidated Statements of Income for the Three Months
ended March 31, 1996, and 1995 ............................................. 4
Consolidated Statements of Cash Flows for the Three Months
ended March 31, 1996, and 1995 ............................................. 5
Notes to Consolidated Financial Statements ................................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ................................ 7
General .................................................................... 7
Industry Overview .......................................................... 7
Company Overview of Business Segments
Physician Practice Management ............................................ 8
Alternative Site Providers
Outpatient Surgery ....................................................... 8
Home Health Care ......................................................... 9
Home Health Care Management Services ..................................... 10
Supplemental Staffing .................................................... 10
Results of Operations ...................................................... 10
Liquidity and Capital Resources ............................................ 12
Inflation .................................................................. 13
Seasonality ................................................................ 13
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 ................................... 14
2
<PAGE>
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
CASH ............................................................................... $ 444,955 $ 870,004
ACOUNTS RECEIVABLE, NET OF ALLOWANCE FOR DOUBTFUL
ACCOUNTS OF $376,485 IN MARCH 1996 AND $258,670 IN DEC 1995 ...................... 7,272,656 6,124,269
PREPAID EXPENSES ................................................................... 337,150 432,930
OTHER CURRENT ASSETS ............................................................... 286,911 219,610
------------ ------------
TOTAL CURRENT ASSETS ........................................................... 8,341,672 7,646,813
NOTES RECEIVABLE:
RELATED PARTIES .................................................................... 274,626 402,736
OTHER .............................................................................. 1,444 0
INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT, NET ................................................... 3,000,535 2,449,468
ASSETS HELD FOR SALE, NET ............................................................ 95,568 76,456
OTHER ASSETS, NET .................................................................... 1,172,110 961,254
------------ ------------
TOTAL ASSETS ................................................................... $ 12,885,955 $ 11,536,727
============ ============
LIABILITIES
CURRENT LIABILITIES:
NOTES PAYABLE ...................................................................... $ 3,185,281 $ 2,456,971
CURRENT PORTION OF LONG-TERM DEBT .................................................. 659,523 659,523
ACCOUNTS PAYABLE ................................................................... 943,867 402,140
ACCRUED EXPENSES:
PAYROLL AND PAYROLL TAXES ........................................................ 766,062 862,498
INCOME TAXES ..................................................................... 120,684 287,987
INSURANCE ........................................................................ 460,894 483,155
OTHER ............................................................................ 607,212 616,869
------------ ------------
TOTAL CURRENT LIABILITIES .................................................... 6,743,523 5,769,143
NOTES PAYABLE TO RELATED PARTIES ..................................................... 1,020,901 987,924
LONG-TERM DEBT ....................................................................... 629,994 502,469
------------ ------------
TOTAL LIABILITIES ............................................................ 8,394,418 7,259,536
------------ ------------
MINORITY INTEREST .................................................................... 18,450 3,345
------------ ------------
STOCKHOLDER'S EQUITY
COMMON STOCK ....................................................................... 2,584 2,584
ADDITIONAL PAID-IN CAPITAL ......................................................... 1,976,593 1,976,593
STOCK SUBSCRIPTIONS RECEIVABLE ..................................................... (78,896) (83,967)
RETAINED EARNINGS .................................................................. 2,572,806 2,378,636
------------ ------------
TOTAL STOCKHOLDERS' EQUITY ..................................................... 4,473,087 4,273,846
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................... $ 12,885,955 $ 11,536,727
============ ============
$ 12,885,955 $ 11,536,727
============ ============
</TABLE>
3
<PAGE>
AMEDYSIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 96 AND MARCH 95
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 96 MARCH 95
------------ -----------
<S> <C> <C> <C> <C>
INCOME:
SERVICE REVENUE .................................. $ 10,116,199 100.0% $ 8,603,993 100.0%
COST OF SERVICE REVENUE .......................... 5,617,100 55.5% 5,176,808 60.2%
------------ -----------
GROSS MARGIN .................................... 4,499,099 44.5% 3,427,185 39.8%
------------ -----------
GENERAL AND ADMINISTRATIVE EXPENSES:
SALARIES AND BENEFITS ............................ 2,045,637 20.2% 1,468,343 17.1%
OTHER ............................................ 2,093,189 20.7% 1,441,330 16.8%
------------ -----------
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES ....... 4,138,826 40.9% 2,909,673 33.8%
------------ -----------
OPERATING INCOME ................................ 360,273 3.6% 517,512 6.0%
------------ -----------
OTHER INCOME AND EXPENSE:
INTEREST INCOME .................................. 21,983 0.2% 23,331 0.3%
INTEREST EXPENSE ................................. (114,663) -1.1% (98,254) -1.1%
MISCELLANEOUS .................................... 49,381 0.5% 20,544 0.2%
------------ -----------
TOTAL OTHER INCOME AND EXPENSE .................. (43,299) -0.4% (54,379) -0.6%
------------ -----------
INCOME BEFORE MINORITY INTEREST .................... 316,974 3.1% 463,133 5.4%
PROVISION FOR ESTIMATED INCOME TAXES ............... 107,700 1.1% 89,500 1.0%
------------ -----------
INCOME BEFORE MINORITY INTEREST .................... 209,274 2.1% 373,633 4.3%
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY ....... (15,105) -0.1% (5,992) -0.1%
------------ -----------
NET INCOME ....................................... $ 194,169 1.9% $ 367,641 4.3%
============ ===========
EARNINGS PER COMMON SHARE .......................... $ 0.08 $ 0.14
============ ===========
PROFORMA INFORMATION (UNAUDITED):
NET INCOME HISTORICAL .............................. $ 367,641
PROFORMA ADJUSTMENTS:
INCOME TAXES ON SURGICARE RESULTS ................. 94,600
===========
PROFORMA NET INCOME ................................ $ 273,041
===========
PROFORMA EARNINGS PER COMMON SHARE ................. $ 0.11
===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
ANALYTICAL NURSING MANAGEMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: MARCH 96 MARCH 95
----------- ---------
<S> <C> <C>
NET INCOME (LOSS) .......................................................................... $ 194,170 $ 367,642
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION .......................................................... 178,258 131,523
PROVISION FOR BAD DEBTS ................................................................ 146,852 88,943
MINORITY INTEREST IN AFFILIATED COMPANY ................................................ 15,105 5,992
(GAIN) LOSS ON DISPOSAL OF PROPERTY AND EQUIPMENT ...................................... (3,556) (666)
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ACCOUNTS RECEIVABLE ........................................... (1,295,239) (352,369)
(INCREASE) DECREASE IN PREPAID EXPENSES .............................................. 95,780 (33,287)
(INCREASE) DECREASE IN INVENTORY ..................................................... 209,911 0
(INCREASE) DECREASE IN OTHER CURRENT ASSETS .......................................... (277,212) (23,996)
(INCREASE) DECREASE IN OTHER ASSETS .................................................. (121,093) (137,248)
INCREASE (DECREASE) IN ACCOUNTS PAYABLE .............................................. 541,727 64,671
INCREASE (DECREASE) IN ACCRUED EXPENSES .............................................. (295,654) 372,463
----------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ............................. (610,951) 483,668
----------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
PURCHASE OF FURNITURE, FIXTURES & EQUIPMENT ................................................ (712,429) (179,673)
PROCEEDS FROM SALE OF FURNITURE, FIXTURES & EQUIPMENT ...................................... 4,451 36,184
(INCREASE) DECREASE IN INVESTMENT - UNCONSOLIDATED SUBSIDIARIES ............................ 0 42,622
(INCREASE) DECREASE IN NOTES RECEIVABLE FROM RELATED PARTIES ............................... 0 11,710
(INCREASE) DECREASE IN NOTE RECEIVABLE - OTHER ............................................. 0 10,483
----------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES .............................. (707,978) (78,674)
----------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
CASH DISTRIBUTIONS TO SURGICARE MEMBERS .................................................... 0 (372,533)
NET INCREASE (DECREASE) IN CHECKS WRITTEN IN EXCESS OF CASH BALANCES ....................... 0 (437,312)
NET INCREASE (DECREASE) IN BORROWINGS ON LINE OF CREDIT .................................... 728,310 162,254
PAYMENTS ON NOTES PAYABLE .................................................................. (177,992) (148,022)
PROCEEDS FROM NOTE PAYABLES ................................................................ 440,222 183,578
INCREASE (DECREASE) IN NOTE PAYABLE TO RELATED PARTIES ..................................... (101,731) 0
PROCEEDS FROM ISSUANCE OF COMMON STOCK ..................................................... 0 50,000
(INCREASE) DECREASE IN STOCK SUBSCRIPTIONS ................................................. 5,071 5,107
----------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES .............................. 893,880 (556,928)
----------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......................................... (425,049) (151,934)
CASH AND CASH EQUIVALENTS AT DECEMBER 31,1996 AND 1995 ....................................... 870,004 678,853
----------- ---------
CASH AND CASH EQUIVALENTS AT MARCH 31, 1996 AND 1995 ......................................... $ 444,955 $ 526,919
=========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAYMENTS FOR:
INTEREST ............................................................................... $ 127,965 $ 71,598
=========== =========
INCOME TAXES ........................................................................... $ 275,000 $ 55,125
=========== =========
</TABLE>
5
AMEDISYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. UNAUDITED FINANCIAL INFORMATION
The financial information as of March 31, 1996 and 1995, included herein is
unaudited; however, such information reflects, in the opinion of
management, all adjustments (consisting solely of normal recurring
adjustments) that are necessary to present fairly the results of operations
for such periods. Results of operations for the interim periods are not
necessarily indicative of results of operations which will be realized for
the year ending December 31, 1996.
2. BUSINESS COMBINATION
As of June 30, 1995, the Company acquired a 100% membership interest in
Surgical Care Centers of Texas, L.C. ("SCC"). SCC provides outpatient
surgery facilities to physicians in Houston, Texas. SCC operates two
facilities totaling seven operating rooms.
The Company acquired all the issued and outstanding membership interest in
SCC in exchange for 1,000,000 shares of Company common stock. Upon the
closing of the transaction, the former members of SCC owned approximately
40% of the issued and outstanding capital stock of the Company. This
transaction has been accounted for as a pooling of interest and accordingly
the Company's financial statements have been restated to include the
results of SCC for all periods presented.
3. CASH
Cash balance includes $500,000 held by an entity, 33% owned by the Company,
developing an HMO. The cash in the subsidiary is available to the Company
at any time.
4. INCOME TAXES
The subsidiaries in which the Company owns greater that 80% file a
consolidated federal income tax return. These subsidiaries include all
nursing services and SCC beginning on July 1, 1995. SCC is a limited
liability company and through June 30, 1995, the individual owners are
responsible for all income taxes. Therefore, there have been no provisions
for income taxes recorded on the financial statements of SCC for the
periods prior to July 1, 1995. The primary care subsidiaries file
individual income tax returns.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's results
of operations and financial condition. This discussion should be read in
conjunction with the Consolidated Financial Statements appearing in Item 1.
GENERAL
AMEDISYS, INC., ("Company"), provides physician practice management services and
alternate site provider services of outpatient surgery, home health care and
supplemental staffing. As of June 30, 1995 the Company merged with Surgical Care
Centers of Texas, L.C. ("SCC") by acquiring all of the members' interests for
1,000,000 shares of Company common stock. Upon the closing of the transaction,
the former members of Surgical Care Centers of Texas, L.C. owned approximately
40% of the issued and outstanding capital stock of the Company. This transaction
has been accounted for as a pooling of interest and accordingly, the Company's
financial statements have been restated to include the results of SCC for all
periods presented. The financial statements of the Company include all
subsidiaries which are wholly owned by the Company.
AMEDISYS, INC. operates in eight states including Louisiana, Texas, Tennessee,
Missouri, Kansas, Mississippi, North Carolina, and Minnesota. The Company has a
concentration of business operations in Louisiana and Texas.
The Company is currently developing an integrated delivery system of health
care. The differentiating feature of the AMEDISYS system is that Independent
Practice Associations (IPAs) of physicians will be linked with alternative site
providers such as outpatient surgery and home health care so that a strategic
alliance of cost effective services are formed. Such a system could deliver
quality health care at a significantly lower cost. As payors move toward global
fee arrangements, the Company will be in a competitive negotiating position.
INDUSTRY OVERVIEW
The Company believes that the health care industry is in a period of rapid
change being driven by employers who want to reduce the cost of providing health
care benefits to their employees and by federal and state governments who want
to decrease spending on Medicare and Medicaid programs. Managed care is emerging
as a possible solution. Managed Care Organizations (MCOs) include Health
Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs).
MCOs negotiate with providers for discounted fees, in exchange for an increase
in the volume of patients and reduced premiums to the employers for health care
coverage.
One of the strategies used by MCOs to reduce the cost of medical services is to
rely on primary care physicians to provide services, while acting as a "gate
keeper" of referrals to specialists. A second strategy is to contract with
selected providers who can offer comprehensive and cost effective services to
large service or geographical areas. Providers can achieve these features
through alliances, mergers or acquisitions. They can also develop "economies of
scale" in purchasing supplies and consolidating business functions, as well as
using medical personnel efficiently. A third strategy is to prepay for medical
services to providers based on the number of patients who choose to use their
services and who are in the payor network. These fee arrangements may be based
on a single medical service line such as physicians' services or they may cover
several "bundled" services.
One of the key factors to reducing the overall costs of health care is reducing
hospital utilization. Using alternative services such as home health care and
outpatient surgery can achieve that outcome. Average hospital days per 1,000
enrollees have continually declined over the past decade for commercial HMOs
using member group practices of the Unified Medical Group Association (UMGA),
dropping 44% to 151 days in 1994 from 269 days in 1984.
The physician is the key health care provider who controls the utilization of
the health care system. By providing a system in which the physician is
incentivized to use alternative services to be cost effective, health care
expenditures
7
can be reduced. The Company believes its integrated delivery system can provide
that structure for the individual physicians, group practices and physician
networks.
Another key industry factor which may affect the Company's business operations
is the proposed change of the Medicare home health care payment system from
reimbursement of costs to the prospective pay system. The proposed change would
pay on a predetermined per visit rate and allow the home health care provider to
earn a profit on Medicare fees. Its costs are controlled to level below
perspective pay reimbursement caps. The Company has been positioning for this
change by monitoring costs and developing efficiencies which could reduce costs
under a new system.
COMPANY OVERVIEW OF BUSINESS SEGMENTS
PHYSICIAN PRACTICE MANAGEMENT
AMEDISYS Physician Services consists of Physician Practice Management services
and development of Independent Practice Associations. The Company believes that
Physician Practice Management ("PPM") Companies are positioned to consolidate a
huge untapped market. According to the Medical Group Management Association
(MGMA), there are approximately 600,000 physicians in the U. S., and 16,500
medical groups to which 185,000 physicians belong. Less than 5% of all group
practices have been acquired or are affiliated with investor owned PPM
companies.
In the AMEDISYS system, the physician can remain independent but have access to
information and business systems which allow the practice to remain competitive.
The physician can choose to use the Company's management services or to join an
Independent Practice Association developed and/or managed by the Company.
Leverage in negotiating contracts with managed care organizations is a key
reason physicians belong to Independent Practice Associations. Negotiating
strength is particularly attractive in capitated (prepaid) managed care
contracts. According to MGMA, 53% of all group practices derived revenue from
at-risk managed care contracts in 1994. Capitated managed care revenue rose from
13% in 1992 to an average of 20% of total medical revenues for all group
practices in 1993, while at-risk discounted fee-for-service revenues held steady
at 10% of total revenue. The percentage of groups that derived revenue from
at-risk HMO / PPO contracts rose with group size in 1994. For large groups with
76 to 150 full-time physicians, this percentage has increased steadily since
1992. In 1994, 85% of such groups derived revenue from at-risk contracts.
AMEDISYS' affiliated Independent Physician Associations (IPAs) have a higher
percentage of primary care physicians than traditional IPAs. Primary care
physicians are the first access point to the managed care system. Managed care
emphasizes primary care, and efficiently delivered services at an affordable
cost. Providers give MCOs discounted fees for a volume of patients. In capitated
arrangements MCOs pre-pay physicians for their services with a negotiated flat
fee per patient in the plan regardless of the services performed. Providers,
including physicians and hospitals, form integrated networks to achieve a
critical mass of patients which are attractive to large managed care groups. The
Company is positioning itself for continuing integration and consolidation by
developing Physician Practice Management and IPA network services to assist
physicians in remaining independent but aligned in a larger entity.
ALTERNATIVE SITE PROVIDERS
OUTPATIENT SURGERY
Outpatient Surgery is the newest element in the AMEDISYS business mix. AMEDISYS
entered the outpatient surgery industry in June 1995 through the acquisition of
Surgical Care Centers of Texas, L.C. This subsidiary
8
operates two outpatient surgery centers in the Houston, Texas area and recently
changed its name to AMEDISYS Surgery Centers, L.C.
AMEDISYS is currently developing a new facility to be leased in Hammond,
Louisiana by a joint venture with area surgeons and other physicians. AMEDISYS
plans to strategically buy, build or manage surgery centers where they
complement a network of physicians or other Company owned alternative services.
The Company believes that this industry will grow due to advances in technology
which allow more procedures to be performed in the outpatient setting.
Specifically endoscopic and laser technologies are reducing the invasive nature
of certain procedures and lowering the amount of time required in surgery and
post-surgical care. Pain management techniques are also a rising trend in
outpatient surgery procedures.
Outpatient surgery centers have a strong appeal to physicians because of
flexible operating schedules, shorter turnaround times of operating suites and a
willingness to provide specialized equipment and personalized services for the
physicians and the patients. According to SMG Marketing Group, independent
surgery centers represented approximately 66% of all outpatient operating rooms
in 1994.
HOME HEALTH CARE
Home health care is one of the fastest growing industries in the U.S. The annual
industry growth rate in home health care spending was 24% from 1986 to 1991 and
32% from 1992 to 1994. According to the Health Care Financing Administration,
U.S. home health care spending was $26 billion in 1995 with $17 billion spent in
home health care nursing services.
Home health care has growth potential as payors strive to reduce hospital stays.
According to the SOCIAL SECURITY BULLETIN ANNUAL STATISTICAL SUPPLEMENT, an
average day in a hospital costs $1,756 and an average skilled nursing visit in
home care is $83. Even with pharmacy and home medical equipment added to service
charges, the savings potential is significant. With cost containment and
reduction strategies at a premium in Medicare, Medicaid and private health
plans, the Company expects home care to be an attractive alternative to hospital
care.
Due to the pressure from MCOs to contract with a limited number of home care
agencies and to select agencies with geographic coverage, central intake systems
of information, comprehensive services and moderate fees, consolidation and
affiliation trends are emerging. These trends present acquisition and management
opportunities for the Company. The Company is continuing to build a critical
mass of home care agencies through internal and external growth. The Company had
two acquisitions of local agencies in 1995.
AMEDISYS also developed the Home Care Alliance of Louisiana in 1995. This
alliance is a consortium of independent home care agencies who are Medicare
certified and accredited by the Joint Commission on Accreditation of Healthcare
Organizations. The alliance is positioned to negotiate with MCOs for discounted
fee for service and capitated contracts. AMEDISYS is the network manager and
provides central intake and business systems to the affiliated agencies.
AMEDISYS has positioned itself to handle changes in the home care business by
establishing systems that are necessary in the new health care environment. The
Company has a proprietary software system which features a single entry system,
integration of payroll and general ledger requirements with accounting measures.
The software package also has detailed multifaceted reporting systems which meet
Medicare and private insurance guidelines. AMEDISYS currently leases its system
to other agencies.
The Company currently has a well established network of twenty home health care
offices. AMEDISYS is distinguished by its specialty home care services and a
staff dominated by RNs and professional therapists. In addition to these
services, AMEDISYS expanded its product line to include private duty,
psychiatric home care and additional rehabilitation services. AMEDISYS received
JCAHO accreditation with commendation in 1995 which
9
assures MCOs, Medicare and Medicaid, as well as physicians and patients that the
agency has met national quality standards and places the Company in a
competitive position for state-wide and regional insurance, MCOs and
governmental contracts.
HOME HEALTH CARE MANAGEMENT SERVICES
The Company offers management services to independent home care agencies through
its AMEDISYS Resource Management division. Management services include home
health licensing, regulatory compliance, administrative support services,
clinical support services, billing and reimbursement systems and proposal and
bid development.
SUPPLEMENTAL STAFFING
AMEDISYS has successfully provided supplemental staffing services for 11 years.
The industry has undergone many changes and the Company has remained competitive
by being reliable and responsive to the needs of clients. AMEDISYS distinguishes
itself from its competitors in the following ways: (1) clinical managers at each
office recruit nurses and manage client services, (2) 24-hour access to staffing
coordinators using computerized scheduling and information systems, (3) rigorous
orientation and screening procedures, and (4) a proprietary software scheduling
program which generates faster scheduling response time than traditional
methods.
AMEDISYS diversified its services and client base to meet a changing health care
delivery system. Ancillary personnel such as physical and occupational
therapists are assigned to home care agencies and registered nurses are placed
in subacute care units of long term care facilities. These units require a
higher level of nursing skill than the facility typically must provide to meet
government requirements.
The Company also offers management of "pools" of nurses employed by hospitals to
fill temporary needs. Hospitals can gain greater efficiency and lower costs by
sharing nurse resources across a hospital system or among cooperating
facilities. AMEDISYS has systems which facilitate this process.
The continuing trend of downsizing hospital staffs and the nurses' desire to
achieve flexibility and independence offer continuing opportunities for
recruiting qualified nurses for supplemental staffing. The Company believes that
strong staffing companies will continue to serve needs in high census periods
and in markets where hospital consolidation has peaked and core staffing levels
have been reduced.
The Company currently operates 12 offices which provide supplemental staffing.
Many of these offices share resources and costs with home care services. The
Company services 300 medical facilities in eight states with the largest segment
in Louisiana and Texas.
RESULTS OF OPERATIONS
The Company continues to show growth in revenue for the three months ended March
31, 1996 compared to the same period last year. The Company derives revenues
from physician practice management and alternate site provider services
including outpatient surgical services and nursing services. Its nursing
services are based on home health care and supplemental staffing.
The Company's revenue increased by 17.5% from the first quarter ending March 31,
1996 compared to the first quarter ending March 31, 1995. This revenue growth is
primarily attributable to an increase in the nursing services division which
offsets decreases in revenues in the physician services and outpatient surgery
center operations.. Gross margins increased 6.0% and general and administrative
expenses increased 8.3% as a percentage of revenue due to the increase of home
health care in the business mix. Home health care revenues are associated with
higher general and administrative expenses proportional to revenue than
supplemental staffing and the Company's other business segments because of the
Medicare cost reimbursement payment system. General and administrative expenses
also increased because of the addition of clinical personnel to the outpatient
surgery centers and staff increases in physician services in corporate
development and operations. Physician services was redesigned to a physician
practice management model in the fourth quarter of 1995.
10
Operating income as a percentage of revenue decreased by 2.6% in the first
quarter of 1996 compared to that period in 1995 and net income followed the same
trend. All business segments were profitable in the first quarter with physician
services showing the most improvement in operating income.
Physician services' revenues declined 10.7% for the three months ended March 31,
1996 compared to the same period in 1996 due to the Company's change from an
equity or ownership structure to a management model. The Company divested
ownership in its existing physician practices and replaced these arrangements
with management services agreements. The current contracts allow physicians to
maintain control of their practices and to benefit from corporate business
systems and the negotiating strength of a physician network. The Company's
management agreements are also more profitable than the previous ownership
model. Decrease in cost of revenue and general and administrative expenses were
a result of restructuring of the physicians' agreements from an equity to a
management model and this resulted in higher operating income. Operating income
of physician services increased to $62,000 in the first quarter of 1996 from a
loss of ($73,000) in the same period of 1995.
Outpatient surgery revenue declined 8.48% for the first quarter of 1996 compared
to the first quarter of 1995. This segment also experienced a 14.1% decline in
operating income proportional to revenues in the first quarter of 1996 compared
to that period in 1995 because revenue decreased. Reduced revenues and operating
income are due to lower fees for individual cases because of discounting to
managed care organizations and a greater number of Medicare and Medicaid
procedures. However, the Company's strategy is to increase volume by increasing
the number of participating physicians. In the first quarter of 1996, the
surgery centers in the Houston area had 55 participating surgeons compared to 51
in the first quarter of 1995 and the center received 22 new applicants for
privileges. Net income decreased due to lower revenue and increased expenses
related to a decision to improve the quality of operations by increasing
clinical personnel and upgrading medical equipment. The Company believes this
strategy will result in higher revenues, high quality patient care and improved
services to participating physicians resulting in increased numbers of
physicians utilizing the centers.
Nursing services increased revenues 22.9% in the three months ended March 31,
1996 compared to the three months ended March 31, 1995 due to increases in home
health revenue. Increases in revenue are attributable to internal and external
growth. Home health care visits increased 60% from 54,000 visits in the first
quarter of 1995 to 86,000 in the first quarter of 1996. The Company acquired two
local home care agencies and expanded its existing operations. Despite the
increased revenues, the nursing services segment experienced a decrease in
operating income from $289,000 in the first quarter of 1995 to $155,000 in the
first quarter of 1996. This decrease is due to increased expenses since home
health care is cost reimbursed by Medicare. Another factor in nursing services
was a change in Louisiana Medicaid from a cost reimbursed system to a fee for
service system. The change in the fee structure caused some losses prior to the
necessary cost adjustments. The revenue mix in nursing services was also greater
in home health care than supplemental staffing which affected overall income for
the division due to the nature of the Medicare cost reimbursement system.
PHYSICIAN SERVICES
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
------------------------------------------
MARCH 96 MARCH 95
------------------ --------------------
Revenue ..................... $516 100.0% $ 578 100.0%
Cost of Revenue ............. 265 51.5% 397 68.7%
---- -----
Gross Margin ........... 251 48.5% 181 31.3%
Gen. & Admin ................ 179 35.0% 254 44.0%
---- -----
Operating Income ....... $ 62 14.0% $ (73) .0%
==== =====
11
OUTPATIENT SURGERY
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
----------------------------------------
MARCH 96 MARCH 95
------------------ ------------------
Revenue ...................... $775 100.0% $847 100.0%
Cost of Revenue .............. 223 28.8% 312 36.8%
---- ----
Gross Margin ............ 552 71.2% 535 63.2%
Gen. & Admin ................. 397 51.2% 246 29.0%
---- ----
Operating Income ........ $155 20.0% $289 34.1%
==== ====
NURSING SERVICES
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
----------------------------------------------
MARCH 96 MARCH 95
-------------------- ----------------------
Revenue .................. $8,824 100.0% $ 7,179 100.0%
Cost of Revenue .......... 5,129 58.0% 4,576 63.7%
------ -------
Gross Margin ........ 3,696 41.9% 2,603 36.3%
Gen. & Admin ............. 3,563 40.5% 2,302 32.1%
------ -------
Operating Income .... $ 133 1.5% $ 301 .04%
====== =======
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had revolving bank lines of credit of $3,500,000
bearing interest at the banks' prime rate plus 1%. As of March 31, 1996,
$400,000 was available under those lines of credit. The lines of credit are
collateralized by 80% of eligible receivables from private payors and 65% in
government entities. Eligible receivables are defined principally as trade
accounts that are aged less than 90 days for private payors and 120 days for
government entities. To date, the Company has no other source of external
financing.
Net cash provided (used in) by operating activities changed from $483,668 in the
three months ended March 31, 1995 to $(610,951) in the three months ended March
31, 1996. This change is primarily attributable to increased home health care
revenue and receivables. Net cash used in investing activities was $786,674 in
the three months ended March 31, 1995 compared to $707,978 in the three months
ended March 31, 1996. This decrease is attributable to fixed asset acquisitions
in the current period. Net cash provided or used in financing activities
decreased from $(556,928) to $893,880 for the three months ended March 31, 1995
and 1996, respectively. The
12
change is primarily due to an increase in the Company's borrowings on its line
of credit.
At March 31, 1996, the Company had working capital of $1,598,149 and
stockholder's equity of $4,473,987. The Company's ratio of total liabilities to
equity at march 31, 1996 was 1.88 to 1.0. The Company's sources of external and
internal financing are limited. The Company may need to obtain additional
financing, either through public or private securities offerings or borrowing,
in order to meet future capital requirements.
INFLATION
The Company does not believe that inflation has had a material effect on its
result of operation. The Company expects that any increase in costs attributable
to inflation in the future would be offset by an increase in fees charged for
services.
SEASONALITY
The demand for the Company's home health care services is not typically
influenced by seasonal factors. However, demand for supplemental staffing
services is affected by variations in the hospital census at various times of
the year.
13
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a special meeting of Shareholders held on February 8, 1996, the
Shareholders approved and ratified the Amended and Restated Stock
Option Plan. Of the 1,722,966 shares of common stock present in person
or by proxy and entitled to be voted at the meeting, 1,698,341 votes
were cast in favor of ratifying the Amended and Restated Stock Option
Plan of the Company.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 - Financial Data Schedule
(b) Reports on Form 8-K
None
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMEDISYS, INC.
By: Mitchel G. Morel
Chief Financial Officer
Principal Financial and Accounting Officer
May 17, 1996
15
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<PERIOD-END> MAR-31-1996
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