U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
- --------------------------------------------------------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 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 September 30, 1996: 2,583,864
shares
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PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 1996 and
December 31, 1995......................................................3
Consolidated Statements of Income for the Three and Nine Months
ended September 30, 1996, and 1995.....................................4
Consolidated Statements of Cash Flows for the Nine Months
ended September 30, 1996, and 1995.....................................5
Notes to Consolidated Financial Statements.............................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................................8
General................................................................8
Industry Overview......................................................8
Company Overview of Business Segments
Physician Services............................................9
Alternative Site Providers
Outpatient Surgery...........................................10
Nursing Services
Home Health Care.............................................10
Supplemental Staffing........................................11
New Development.......................................................12
Results of Operations.................................................12
Liquidity and Capital Resources.......................................14
Inflation.............................................................14
Seasonality...........................................................14
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.....................................................15
ITEM 2. CHANGES IN SECURITIES.................................................15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.......................................15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................15
ITEM 5. OTHER INFORMATION.....................................................15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................15
2
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Amedisys, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
as of September 30, 1996 and December 31, 1995
(Unaudited)
ASSETS September 30, December 31,
1996 1995
Current Assets:
Cash ............................................. $ 2,383,453 $ 870,004
Accounts Receivable, Net of Allowance
for Doubtful Accounts of $733,912 in
September 1996 and $258,670 in Dec 1995 ........ 7,414,761 6,124,269
Prepaid Expenses ................................. 363,187 432,930
Other Current Assets ............................. 460,233 219,610
----------- -----------
Total Current Assets ......................... 10,621,634 7,646,813
Notes Receivable:
Related Parties .................................. 270,758 402,736
Other ............................................ 1,444 0
Property, Plant and Equipment, Net ................. 3,348,140 2,449,468
Assets held for Sale, Net .......................... 64,174 76,456
Other Assets, Net .................................. 1,599,270 961,254
----------- -----------
Total Assets ................................. $15,905,420 $11,536,727
=========== ===========
LIABILITIES
Current Liabilities:
Notes Payable .................................... $ 3,933,814 $ 2,456,971
Current Portion of Long-Term Debt ................ 659,523 659,523
Accounts Payable ................................. 1,357,258 402,140
Accrued Expenses:
Payroll and Payroll Taxes ...................... 964,040 862,498
Income Taxes ................................... 50,724 287,987
Insurance ...................................... 827,037 483,155
Other .......................................... 1,141,126 616,869
----------- -----------
Total Current Liabilities .................. 8,933,522 5,769,143
Notes Payable to Related Parties ................... 1,047,227 987,924
Long-Term Debt ..................................... 1,110,014 502,469
----------- -----------
Total Liabilities .......................... 11,090,763 7,259,536
----------- -----------
Minority Interest .................................. 19,090 3,345
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock ..................................... 2,585 2,584
Additional paid-in capital ....................... 1,983,791 1,976,593
Stock Subscriptions Receivable ................... -71,719 -83,967
Retained Earnings ................................ 2,880,910 2,378,636
----------- -----------
Total Stockholders' Equity ................... 4,795,567 4,273,846
----------- -----------
Total Liabilities and Stockholders' Equity . $15,905,420 $11,536,727
=========== ===========
See accompanying notes to financial statements.
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AMEDISYS, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
for the three and nine months ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------------------------------------------------------------------------
September 96 September 95 September 96 September 95
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Service revenue $11,762,546 100.0% $9,822,546 100.0% $33,647,998 100.0% $27,747,776 100.0%
Cost of service revenue 6,841,997 58.2% 5,887,914 59.9% 19,168,820 57.0% 16,973,499 61.2%
-------------- ---------------- ----------------- -----------------
Gross margin 4,920,549 41.8% 3,934,632 40.1% 14,479,178 43.0% 10,774,277 38.8%
-------------- ---------------- ----------------- -----------------
General and administrative
expenses:
Salaries and benefits 2,619,508 22.3% 1,722,223 17.5% 7,567,966 22.5% 4,673,297 16.8%
Other 2,095,433 17.8% 1,931,953 19.7% 5,866,605 17.4% 5,028,129 18.1%
-------------- ---------------- ----------------- -----------------
Total general and
administrative expenses 4,714,941 40.1% 3,654,176 37.2% 13,434,571 39.9% 9,701,426 35.0%
-------------- ---------------- ----------------- -----------------
Operating income 205,608 1.7% 280,456 2.9% 1,044,607 3.1% 1,072,851 3.9%
-------------- ---------------- ----------------- -----------------
Other income and expense:
Interest income 4,687 0.0% 8,662 0.1% 37,026 0.1% 57,044 0.2%
Interest expense -157,506 -1.3% -103,343 -1.1% -399,354 -1.2% -292,468 -1.1%
Miscellaneous 19,307 0.2% 15,275 0.2% 103,189 0.3% 57,866 0.2%
-------------- ---------------- ----------------- -----------------
Total other income
and expenses -133,512 -1.1% -79,406 -0.8% -259,139 -0.8% -177,558 -0.6%
-------------- ---------------- ----------------- -----------------
Income before income taxes and
minority interest 72,096 0.6% 201,050 2.0% 785,468 2.3% 895,293 3.2%
Provision (Benefit) for
estimated income taxes 25,500 0.2% -43,045 -0.4% 267,450 0.8% 83,455 0.3%
-------------- ---------------- ----------------- -----------------
Income before minority
interest 46,596 0.4% 244,095 2.5% 518,018 1.5% 811,838 2.9%
Minority interest in
consolidated subsidiary 9,321 0.1% 13,366 0.1% -15,745 0.0% 18,053 0.1%
============== ================ ================= =================
Net income $55,917 0.5% $257,461 2.6% $502,273 1.5% $829,891 3.0%
============== ================ ================= =================
Earnings per common share $0.02 $0.10 $0.19 $0.32
============== ================ ================= =================
Proforma information (unaudited):
Net income (historical) $829,891
Proforma adjustments:
Income taxes on Surgicare results 190,760
=================
Proforma net income $639,131
=================
Proforma earnings per common share $0.25
=================
See accompanying notes to financial statements.
</TABLE>
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Amedisys, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Cash Flows from operating activities: September 96 September 95
<S> <C> <C>
Net Income .................................................. $ 502,273 $ 829,891
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization ........................... 566,628 481,038
Provision for bad debts ................................. 593,780 341,241
Minority interest in affiliated company ................. 15,745 -18,053
(Gain) loss on disposal of property and equipment ....... -3,711 7,088
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ............ -1,884,271 53,753
(Increase) decrease in prepaid expenses ............... 69,743 -77,949
(Increase) in other current assets .................... -240,623 -115,847
(Increase) in other assets ............................ -627,910 -36,198
Increase in accounts payable .......................... 955,119 129,538
Increase in accrued expenses .......................... 732,419 632,112
---------- ----------
Net cash provided by operating activities ........ 679,192 2,226,614
---------- ----------
Cash flow from investing activities:
Purchase of furniture, fixtures & equipment ................. -1,452,648 -340,074
Proceeds from sale of furniture, fixtures & equipment ....... 156,388 51,197
Decrease in notes receivable from related parties ........... 3,868 29,758
---------- ----------
Net cash (used in) investing activities ........... -1,292,392 -259,119
---------- ----------
Cash flow from financing activities:
Cash received in acquisition ................................ 0 10,890
Cash distributions to Surgicare members ..................... 0 -942,531
Net increase (decrease) in borrowings on line of credit ..... 1,476,843 -196,285
Payments on notes payable ................................... -653,059 -629,338
Proceeds from note payables ................................. 1,358,819 226,395
(Decrease) in note payable to related parties ............... -75,401 -21,673
Proceeds from common stock .................................. 7,199 0
Decrease in stock subscriptions ............................. 12,248 86,971
---------- ----------
Net cash provided by (used in) financing activities 2,126,649 -1,465,571
---------- ----------
Net increase in cash and cash equivalents ..................... 1,513,449 501,924
Cash and cash equivalents at December 31, 1995 and 1994 ....... 870,004 140,803
---------- ----------
Cash and cash equivalents at September 30, 1996 and 1995 ...... $2,383,453 $ 642,727
========== ==========
</TABLE>
See accompanying notes to financial statements.
5
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AMEDISYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. UNAUDITED FINANCIAL INFORMATION
The financial information as of September 30, 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. INCOME TAXES
The subsidiaries in which the Company owns interests greater than 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 were responsible for all income taxes. Therefore, no provision
has been made for income taxes on the income of SCC for the periods
prior to July 1, 1995. The primary care subsidiaries file individual
income tax returns.
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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 interests 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 FutureCare, Inc., an integrated delivery
system of health care. The differentiating feature of FutureCare 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.
FutureCare will be majority owned and controlled by physicians licensed and
practicing in the State of Louisiana and funded with a Louisiana securities
offering of $2.0 to $6.0 million. FutureCare Inc. is developing a Preferred
Provider Organization (PPO) and FutureCare Health Plans, Inc., a subsidiary and
licensed Health Maintenance Organization (HMO) in the State of Louisiana. At the
completion of the securities offering, FutureCare, Inc. will own 70% of
FutureCare Health Plan, Inc. and AMEDISYS will own 30%. AMEDISYS will manage the
system.
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 and Preferred Provider Organizations. 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
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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 incentive, the physician is motivated to
use the system's alternative site services which are cost effective, and reduce
health care expenditures. 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 if its costs are controlled to a level below
prospective 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 SERVICES
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
significant 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.
In February, 1996, the Company formed FutureCare, Inc., a Louisiana Corporation
(FutureCare), to establish an HMO and an integrated delivery system (IDS) with a
PPO. The Company has provided $1 million in financing to
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FutureCare Health Plans of Louisiana, Inc. to enable it to meet the capital
requirements for an HMO license in Louisiana. As of September 30, 1996, the
Company had committed to advance up to $300,000 in development expenses which
are expected to be reimbursed from the proceeds of a Louisiana securities
offering of FutureCare stock. The Company currently owns 100% of FutureCare
stock; however, upon completion of FutureCare's offering, the Company will
exchange its shares in FutureCare for a 30% interest in FutureCare Health Plans,
Inc.
AMEDISYS will manage the business operations of FutureCare, Inc. and FutureCare
Health Plans of Louisiana, Inc. The Company will derive management fees and
participate as a home care and ambulatory surgery center provider with other
alternate site providers in the system.
ALTERNATIVE SITE PROVIDERS
OUTPATIENT SURGERY
AMEDISYS entered the outpatient surgery industry in June 1995 through the
acquisition of Surgical Care Centers of Texas, L.C., which was a pioneer in
opening the first outpatient surgery center in Texas sixteen years ago. This
subsidiary operates two outpatient surgery centers in the Houston, Texas area
and recently changed its name to AMEDISYS Surgery Centers, L.C.
AMEDISYS recently opened St. Luke's Surgery Center, a new ambulatory surgery
center in Hammond, Louisiana. The center is a joint venture with area surgeons.
It has twenty-two participating physicians, state-of- the-art equipment, four
operating rooms and two procedure rooms. St. Luke's is the only outpatient
surgery facility in the community and offers easy access and convenience to
physicians and patients.
The Company is aggressively pursuing other locations for start-ups as well as
acquisitions to expand its outpatient surgery operations. The Company believes
that this industry will grow because outpatient surgery procedures cost 25-40%
less than hospital surgeries and advances in technology 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
flexibility 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.
NURSING SERVICES
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 further 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 costs $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.
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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 has expanded its product line to include private duty,
psychiatric home care and additional rehabilitation services. AMEDISYS received
JCAHO accreditation with commendation in 1995 which 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.
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 has 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.
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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
concentration in Louisiana and Texas.
NEW DEVELOPMENT
The Company signed a non-binding Letter of Intent on August 26, 1996 to purchase
the assets of Axar Fye Surgery Center, located in Lafayette, Louisiana,
following completion of the due diligence process.
The Company signed a letter of intent on October 17, 1996 to merge with Complete
Management, Inc. (CMI) following completion of the due diligence process and
shareholder approval. If the merger is completed, AMEDISYS, INC. would become a
wholly owned subsidiary of CMI.
CMI is a provider of physician practice management services in the State of New
York. It is a public company (AMEX:CMI) with $96.4 million in assets and $10.2
million in net revenue and $2.4 million in earnings for the six months ended
June 30, 1996.
RESULTS OF OPERATIONS
The Company experienced significant growth in revenues for the three and nine
months ended September 30, 1996 compared to the same period last year.
The Company's revenue increased by 19.8% and 21.3% for the three and nine months
ended September 30, 1996 compared to the same periods last year. The revenue
growth is attributable to an increase in both the nursing services and
outpatient surgery divisions. Gross margins increased 1.7% and 4.2% as a
percentage of revenue and general and administrative expenses increased 2.9% and
4.9% as a percentage of revenue for the same period. Home health revenues are
associated with higher general and administrative expenses proportional to
revenue than 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 in the outpatient surgery centers
and staff increases in physician services in corporate development and
operations. The Company also added several positions to senior mangement
including a Chief Operating Officer with fifteen years of health care management
experience with public and private companies.
Operating income as a percentage of revenue decreased 1.2% for the three months
ended September 30, 1996 and decreased .8% for the nine months ended September
30, 1996 as compared to the same periods ended September 30, 1995. The decrease
was attributable to the nursing services and physician services divisions. Net
income decreased as a percentage of revenue by 2.1% and 1.5% for the three and
nine months ended September 30, 1996 as compared to the same periods in 1995.
The decrease is due primarily to the write-off of approximately $450,000 in
loans to the primary care subsidiaries which were determined to be uncollectible
during the three months ended September 30, 1995, resulting in a tax benefit of
$130,000, and losses in nursing services and physician services divisions in
1996.
Physician services' revenues increased 14.3% and 15.9% for the three and nine
months ended September 30, 1996 compared to the same periods in 1995. Operating
loss of physician services increased to $108,000 for the three months ended
September 30, 1996 from a loss of $70,000 in 1995. The increase in revenue was
due to a three year, $10 million contract signed with the state of Louisiana to
provide physicians to a state run facility. The Company terminated several
physician practice contracts in the third quarter of 1996 which resulted in
losses. The Company intends to replace the previous physician practice contracts
with management agreements with physician networks and FutureCare, Inc.
Outpatient surgery revenues increased 39.0% and 21.6% for the three and nine
months ended September 30, 1996 as compared to the same periods in 1995. The
increases are attributable to aggressive marketing efforts to increase physician
participation and the volume of procedures being performed at the centers. The
case load increased 48.7% and 29.9% for the same comparative periods. Gross
margins, as a percentage of revenues, increased 10.8% and 9.0% in the three and
nine months ended September 30, 1996, as compared to the same periods in 1995
due to the increased revenues. General and administrative expenses, as a
percentage of revenues, increased 15.2% and 15.2% in the same periods due to a
decision made by management to improve the quality of operations by increasing
clinical personnel and upgrading equipment to attract more physicians to the
facility as
12
<PAGE>
well as meet accreditation standards. Operating income, as a percentage of
revenues, decreased 4.5% for the three months ended September 30, 1996 and
decreased 6.1% for the nine months ended September 30, 1996 as compared to the
same period in 1995 due to the previously discussed reasons.
Nursing services revenues increased 18.0% and 21.6% for the three and nine
months ended September 30, 1996 compared to the three and nine months ended
September 30, 1995. Increases in revenue are attributable to internal growth in
home health care. Home health care visits increased by 31.2% and 44.7% during
these periods. Despite the increased revenues, the nursing services segment
experienced a decrease in operating income as a percentage of revenue of 2.4%
and 1.9% for the three and nine months ended September 30, 1996 compared to the
same periods in 1995. This decrease was due to the expiration of three hospital
contracts in the Company supplemental staffing division. The Company also
operated above its cost limits as presribed by Medicare in three regional
locations.
PHYSICIAN SERVICES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------- -----------------------------------
SEPT. 96 SEPT. 95 SEPT. 96 SEPT. 95
--------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE $720 100.0% $630 100.0% $2,080 100.0% $1,795 100.0%
COST OF REVENUE 549 76.3% 369 58.6% 1,429 68.7% 1,182 65.8%
---- --- ------ -----
GROSS MARGIN 171 23.7% 261 41.4% 651 31.3% 613 34.2%
GEN. & ADMIN. 279 38.8% 331 52.5% 689 33.1% 38 52.3%
---- --- ------ -----
OPERATING INCOME $(108) (15.0%) $(70) (11.1%) $ (38) 1.8% $(325)(18.1%)
===== ==== ====== =====
OUTPATIENT SURGERY
(DOLLARS IN THOUSANDS)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------- -----------------------------------
SEPT. 96 SEPT. 95 SEPT. 96 SEPT. 95
--------------- ------------ ------------- ------------
REVENUE $1,261 100.0% $907 100.0% $3,214 100.0% $2,644 100.0%
COST OF REVENUE 361 28.6% 357 39.4% 896 27.9% 976 36.9%
------- ---- ------- -------
GROSS MARGIN 900 71.4% 550 60.6% 2,318 72.1% 1,668 63.1%
GEN. & ADMIN. 555 44.0% 261 28.8% 1,377 42.8% 731 27.6%
------ ---- ----- -------
OPERATING INCOME $ 345 27.4% $289 31.9% $ 941 29.3% $ 937 35.4%
======= ==== ====== ======
NURSING SERVICES
(DOLLARS IN THOUSANDS)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------- -----------------------------------
SEPT. 96 SEPT. 95 SEPT. 96 SEPT. 95
--------------- ------------ ------------- ------------
REVENUE $9,781 100.0% $8,286 100.0% $28,353 100.0% $23,310 100.0%
COST OF REVENUE 5,932 60.6% 5,162 62.3% 16,844 59.4% 14,815 63.6%
------ ----- ------ ------
GROSS MARGIN 3,849 39.4% 3,124 37.7% 11,509 40.6% 8,495 36.4%
GEN. & ADMIN. 4,008 41.0% 3,062 37.0% 11,625 41.0% 8,042 34.5%
----- ----- ------ ------
OPERATING INCOME $(159) (1.6%) $ 62 0.8% $ (116) 0.0% $ 453 1.9%
====== ====== ======= ========
</TABLE>
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had revolving bank lines of credit of
$4,500,000 bearing interest at the banks' prime rate plus 1%. As of September
30, 1996, $550,000 was available under those lines of credit. The lines of
credit are collateralized by 80% of eligible receivables from private payors and
75% from 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.
The Company's operating activities provided $679,192 during the first nine
months of 1996, whereas such activities provided $2,219,126 in cash during the
first nine months of 1995. This change is primarily attributable to increased
home health care revenue and receivables. Net cash used in investing activities
increased to $1,292,392 during the first nine months of 1996 from $251,361 in
the nine months ended June 30, 1995. This increase is attributable to fixed
asset acquisitions in the current period. These assets consist primarily of
equipment purchased for the Company's ambulatory surgical center. Financing
activities provided $2,126,649 during the first nine months of 1996, whereas
these activities used $1,465,571in the nine months ended 1995. The change is
primarily due to an increase in the Company's borrowings on its line of credit.
At September 30, 1996, the Company had working capital of $1,688,112 and
stockholder's equity of $4,795,567. The Company's ratio of total liabilities to
equity at September 30, 1996 was 2.31 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
results of operations. 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.
14
<PAGE>
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
15
<PAGE>
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: /s/ MITCHEL G. MOREL
Mitchel G. Morel, Chief Financial Officer
Principal Financial and Accounting Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,383,453
<SECURITIES> 0
<RECEIVABLES> 7,414,761
<ALLOWANCES> 733,912
<INVENTORY> 0
<CURRENT-ASSETS> 10,621,634
<PP&E> 3,348,140
<DEPRECIATION> 566,628
<TOTAL-ASSETS> 515,806,420
<CURRENT-LIABILITIES> 8,933,522
<BONDS> 0
0
0
<COMMON> 2,586
<OTHER-SE> 4,785,567
<TOTAL-LIABILITY-AND-EQUITY> 15,905,420
<SALES> 11,762,546
<TOTAL-REVENUES> 11,762,546
<CGS> 6,841,997
<TOTAL-COSTS> 6,841,997
<OTHER-EXPENSES> (133,512)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (157,506)
<INCOME-PRETAX> 72,096
<INCOME-TAX> 25,500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,917
<EPS-PRIMARY> .02
<EPS-DILUTED> .00
</TABLE>
