U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 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 June 30, 1996:
2,583,864 shares
<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet as of June 30, 1996.......................3
Consolidated Statements of Income for the Three and Six Months
ended June 30, 1996, and 1995........................................4
Consolidated Statements of Cash Flows for the Six Months
ended June 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.....................................................10
Home Health Care..................................................10
Supplemental Staffing.............................................11
Results of Operations................................................12
Liquidity and Capital Resources......................................15
Inflation............................................................15
Seasonality..........................................................15
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS....................................................16
ITEM 2. CHANGES IN SECURITIES................................................16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES......................................16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................16
ITEM 5. OTHER INFORMATION....................................................16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................16
2
Amedisys, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
as of June 30, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
ASSETS June 30, 1996 December 31, 1995
------------ ------------
<S> <C> <C>
Current Assets:
Cash ........................................................................... $ 401,915 $ 870,004
Acounts Receivable, Net of Allowance for Doubtful
Accounts of $624,743 in June 1996 and $258,670 in Dec 1995 ................... 8,763,098 6,124,269
Prepaid Expenses ............................................................... 487,062 432,930
Other Current Assets ........................................................... 428,493 219,610
------------ ------------
Total Current Assets ....................................................... 10,080,569 7,646,813
Notes Receivable:
Related Parties ................................................................ 277,010 402,736
Other .......................................................................... 1,444 0
Property, Plant and Equipment, Net ............................................... 2,994,644 2,449,468
Assets held for Sale, Net ........................................................ 68,268 76,456
Other Assets, Net ................................................................ 1,149,621 961,254
------------ ------------
Total Assets ............................................................... $ 14,571,554 $ 11,536,727
============ ============
LIABILITIES
Current Liabilities:
Notes Payable .................................................................. $ 4,091,471 $ 2,456,971
Current Portion of Long-Term Debt .............................................. 659,523 659,523
Accounts Payable ............................................................... 749,467 402,140
Accrued Expenses:
Payroll and Payroll Taxes .................................................... 887,339 862,498
Income Taxes ................................................................. 102,937 287,987
Insurance .................................................................... 566,481 483,155
Other ........................................................................ 834,185 616,869
------------ ------------
Total Current Liabilities ................................................ 7,891,403 5,769,143
Notes Payable to Related Parties ................................................. 1,057,548 987,924
Long-Term Debt ................................................................... 856,576 502,469
------------ ------------
Total Liabilities ........................................................ 9,805,526 7,259,536
------------ ------------
Minority Interest ................................................................ 28,411 3,345
------------ ------------
STOCKHOLDERS' EQUITY
Common Stock ................................................................... 2,656 2,584
Additional paid-in capital ..................................................... 1,983,721 1,976,593
Stock Subscriptions Receivable ................................................. (73,754) (83,967)
Retained Earnings .............................................................. 2,824,993 2,378,636
------------ ------------
Total Stockholders' Equity ................................................. 4,737,617 4,273,846
------------ ------------
Total Liabilities and Stockholders' Equity ............................... $ 14,571,554 $ 11,536,727
============ ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
AMEDISYS, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
for the three and six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------------- ---------------------------------------
June 96 June 95 June 96 June 95
------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Service revenue $11,769,253 100.0% $9,321,237 100.0% $21,885,452 100.0% $17,925,230 100.0%
Cost of service revenue 6,709,723 57.0% 5,800,415 62.2% 12,326,823 56.3% 11,085,585 61.8%
------------ ---------- ------------ ------------
Gross margin 5,059,530 43.0% 3,520,822 37.8% 9,558,629 43.7% 6,839,645 38.2%
------------ ---------- ------------ ------------
General and administrative expenses:
Salaries and benefits 2,583,100 21.9% 1,559,617 16.7% 4,628,737 21.1% 2,951,074 16.5%
Other 1,997,704 17.0% 1,686,323 18.1% 4,090,893 18.7% 3,096,176 17.3%
------------ ---------- ------------ ------------
Total general and administrative expenses 4,580,804 38.9% 3,245,940 34.8% 8,719,630 39.8% 6,047,250 33.7%
------------ ---------- ------------ ------------
Operating income 478,727 4.1% 274,882 2.9% 839,000 3.8% 792,395 4.4%
------------ ---------- ------------ ------------
Other income and expense:
Interest income 10,356 0.1% 25,051 0.3% 32,339 0.1% 48,382 0.3%
Interest expense (127,185) (1.1%) (90,870) (1.0)% (241,848) (1.1)% (189,125) (1.1)%
Miscellaneous 34,501 0.3% 22,046 0.2% 83,882 0.4% 42,591 0.2%
------------ ---------- ------------ ------------
Total other income and expenses (82,329) (0.7%) (43,773) (0.5%) (125,628) (0.6)% (98,152) (0.5)%
------------ ---------- ------------ ------------
Income before income taxes and minority interest 396,398 3.4% 231,108 2.5% 713,372 3.3% 694,243 3.9%
Provision (Benefit) for estimated income taxes 134,250 1.1% 37,000 0.4% 241,950 1.1% 126,500 0.7%
------------ ---------- ------------ ------------
Income before minority interest 262,148 2.2% 194,108 2.1% 471,422 2.2% 567,743 3.2%
Minority interest in consolidated subsidiary (9,961) (0.1%) 10,679 0.1% (25,066) (0.1)% 4,687 0.0%
============ ========== ============ ============
Net income $252,187 2.1% $204,787 2.2% $446,356 2.0% $572,430 3.2%
============ ========== ============ ============
Earnings per common share $0.10 $0.08 $0.17 $0.22
============ ========== ============ ============
Proforma information (unaudited):
Net income (historical) $204,787 $572,430
Proforma adjustments:
Income taxes on Surgicare results 96,145 190,760
========== ============
Proforma net income $108,642 $381,670
========== ============
Proforma earnings per common share $0.04 $0.15
========== ============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
Amedisys, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Cash Flows from operating activities: June 96 June 95
---------- --------
<S> <C> <C>
Net Income ..................................................................... $ 446,356 $572,430
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization .............................................. 369,947 277,540
Provision for bad debts .................................................... 347,973 197,476
Minority interest in affiliated company .................................... 25,066 (4,687)
(Gain) on disposal of property and equipment ............................... (3,711) (1,899)
Changes in assets and liabilities:
(Increase) in accounts receivable ........................................ (2,986,802) (503,554)
(Increase) in prepaid expenses ........................................... (54,132) (63,344)
(Increase) in other current assets ....................................... (208,883) (70,284)
(Increase) decrease in other assets ...................................... (138,787) 21,231
Increase in accounts payable ............................................. 347,327 36,205
Increase in accrued expenses ............................................. 140,434 494,270
---------- --------
Net cash provided by (used in) operating activities ................. (1,715,211) 955,384
---------- --------
Cash flow from investing activities:
Purchase of furniture, fixtures & equipment .................................... (946,036) (238,203)
Proceeds from sale of furniture, fixtures & equipment .......................... 156,388 51,197
(Increase) in notes receivable from related parties ............................ (2,384) (5,613)
Decrease in note receivable - other ............................................ 0 10,484
---------- --------
Net cash (used in) investing activities .............................. (792,032 (182,135)
---------- --------
Cash flow from financing activities:
Cash received in acquisition ................................................... 0 10,890
Cash distributions to Surgicare members ........................................ 0 (948,531)
Net increase in borrowings on line of credit ................................... 1,634,501 464,432
Payments on notes payable ...................................................... (421,821) (469,702)
Proceeds from note payables .................................................... 874,143 197,262
Increase (decrease) in note payable to related parties ......................... (65,081) 8,639
Proceeds from common stock ..................................................... 7,199 0
Decrease in stock subscriptions ................................................ 10,213 11,556
---------- --------
Net cash provided by (used in) financing activities .................. 2,039,154 (725,454)
---------- --------
Net increase (decrease) in cash and cash equivalents ............................. (468,089) 47,795
Cash and cash equivalents at December 31, 1995 and 1994 .......................... 870,004 140,803
---------- --------
Cash and cash equivalents at June 30, 1996 and 1995 .............................. $ 401,915 $188,598
========== ========
</TABLE>
See accompanying notes to financial statements.
5
Amedisys, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Supplemental disclosures of cash flow information: June 96 June 95
<S> <C> <C>
Cash payments for:
Interest ................................................ $ 92,044 $181,823
======== ========
Income taxes ............................................ $122,000 $ 82,155
======== ========
Supplemental schedule of non-cash investing activity:
Acquistion of Health Care 24 Inc.: ........................ $100,000
========
Value of stock issued in exchange ....................... 50,000
Value of note payable issued in exchange ................ 50,000
Working capital acquired net of cash and cash equivalents 0
Fair value of property and equipment acquired ........... 15,000
========
Goodwill recorded in exchange ........................... $ 85,000
========
Acquistion of Home Care Plus, Inc.: ....................... $240,000
========
Value of stock issued in exchange ....................... 240,000
Cash acquired in exchange ............................... 10,890
Working capital acquired net of cash and cash equivalents 150,659
Fair value of property and equipment acquired ........... 30,245
Long-term debt assumed .................................. 229,993
========
Goodwill recorded in exchange ........................... $278,199
========
</TABLE>
See accompanying notes to financial statements.
6
AMEDISYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. UNAUDITED FINANCIAL INFORMATION
The financial information as of June 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. 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 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 are
responsible for all income taxes. Therefore, no provision has been made
for income taxes recorded on the income statements of SCC for the periods
prior to July 1, 1995. The primary care subsidiaries file individual
income tax returns.
7
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 consisting 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 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 is 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 seeking
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
8
can be reduced. The Company believes its integrated delivery system can provide
that structure for 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
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.
In February, 1996, the Company formed FutureCare, Inc., a Nevada Corporation
(FutureCare"), to establish a health maintenance organization (HMO). The Company
has provided $1 million in financing to FutureCare to enable it to meet the
capital requirements for an HMO license in Louisiana. As of June 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 private placement offering
of FutureCare stock. The Company currently owns 51% of FutureCare stock;
however, upon completion of FutureCare's offering and the licensing of the HMO,
the Company will exchange its shares in FutureCare for a 19% interest in an HMO
subsidiary of FutureCare.
9
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 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.
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.
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
10
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 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, MCO 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 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.
In February, 1996, the Company formed FutureCare, Inc., a Nevada corporation, to
organize and operate a preferred provider network ("PPO"); provide health care
services to independent health care providers, including IPAs; and to merge with
and capitalize FutureCare Health Plans of Louisiana, Inc. ("Health Plans") which
is expected to be licensed as a health maintenance organization ("HMO") in the
state of Louisiana. Upon licensing of the HMO, Health Plans will merge with and
become a 70% owned subsidiary of FutureCare.
The Company currently owns 51% of FutureCare. Upon completion of an offering to
capitalize FutureCare and licensing of the HMO and the merger with Health Plans,
the Company's ownership will be reduced to 19% of Health Plans. The Company owns
approximately 33% of Health Plans and has provided $1 million in cash to Health
Plans in order to enable it to meet the capital requirements for licensing as an
HMO in the state of Louisiana. In addition, the Company has committed to advance
up to $300,000 in start-up expenses which are expected to be reimbursed upon
completion of a private placement of FutureCare stock.
11
FutureCare plans to enter into a management agreement with the Company whereby
the Company will become the exclusive manager and administrator of non-medical
services relating to the operation of the network and the network HMO. Pursuant
to the management agreement, the Company will manage and administer the
network's day-to-day business functions, which include, but are not limited to,
assuming the responsibility for the administrative, accounting, payroll and
personnel functions relating to the provision of health services by its
participants on behalf of the network. Under the management agreement, the
Company will also bill and collect the fees for medical services provided by
network participants, maintain all files and records, negotiate and administer
all contracts, and provide consulting services to network participants in
connection with the procurement and administration of professional liability
insurance and the employment of personnel. The Company will also assist in the
implementation of appropriate marketing programs on behalf of the network.
FutureCare intends to develop an integrated network comprised of health care
service providers such as IPAs, physicians, home care companies, ambulatory
medical centers, durable medical equipment companies and other health services
organizations. The network will coordinate the delivery of health care services
by such providers to employees and other persons eligible to receive covered
services under the health care plans of certain employers, unions, governmental
agencies, associations and other entities in consideration of the payment of a
service fee. The network will, where appropriate, also enter into agreements
with certain self-insured groups and various health maintenance organizations,
preferred provider organizations, insurance companies and other third parties
and entities to provide a full range of health services through the network PPO
and network HMO. Once the network HMO is properly capitalized and approved for
operation in the state of Louisiana, network participants will be integrated
into the HMO for purposes of providing multi-provider capitation to IPAs and
managed care organizations and, where appropriate, prepaid health services to
various purchasers of health care services.
The extensive managed health care provider network to be developed by FutureCare
should enable it to offer a comprehensive array of managed health care plans
throughout Louisiana. The network will include the network HMO, the network PPO
and specialty managed care and ancillary networks, as appropriate. In
establishing the network, FutureCare plans to enter into contracts with a
sufficient number of qualified providers in each geographic area to serve its
members. These contracts are intended to control the cost of health-care. As a
result, the Company expects to reduce or eliminate the need to utilize out-of
network providers that are not subject to the Company's cost controls.
The FutureCare network, including the network PPO and network HMO and their
planned broad service offering, should enable it to pursue growth opportunities
throughout Louisiana. The Company believes that in the present health care
environment there is greater opportunity for growth of managed health care
services in the individual and small employer group segment than in the large
employer group marketplace, due to the lower market penetration of managed
health care and the greater fragmentation in the individual and small employer
group market.
RESULTS OF OPERATIONS
The Company experienced significant growth in both net income and revenues for
the three and six months ended June 30, 1996 compared to the same period last
year.
The Company's revenue increased by 26.3% and 22.1% for the three and six months
ended June 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 5.2% and 5.5% as a percentage of
revenue and general and administrative expenses increased 4.1% and 6.1% 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 hired a Chief Operating Officer with extensive experience in health
care to oversee the Company's development in physician practice management and
continued growth in nursing services and outpatient surgery.
12
Operating income as a percentage of revenue increased 1.2% for the three months
ended June 30, 1996 and decreased .6% for the six months ended June 30, 1996 as
compared to the same periods ended June 30, 1995. The increase was attributable
to the outpatient surgery division for the three months ended June 30, 1996 and
the decrease for the six months ended was due to increased home health care
revenues as a percentage of the business mix. Home health care is primarily a
cost reimbursed payment system. Net income decreased by .1% and 1.2% for the
three and six months ended June 30, 1996 as compared to the same period in 1995.
These decreases are due to the outpatient surgery center being a limited
liability company and the members being taxed at the individual level prior to
the merger with AMEDISYS on June 30, 1995. Therefore, no income taxes were
recorded on outpatient surgery income in the 1995 financial statements. With
income taxes recorded in the 1995 proforma financial statements, the Company's
net income increased 132.1% and 16.9% for the three and six months ended June
30, 1996 compared to the same period in 1995.
Physician services' revenues increased 43.8% and 16.7% for the three and six
months ended June 30, 1996 compared to the same periods in 1995. 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. Operating income of physician services increased to $8,000 and $70,000
for the three and six months ended June 30, 1996 from a loss of $177,000 and
$255,000 for the same periods of 1995. The increase was due to a three year, $10
million contract signed with the state of Louisiana to provide physicians to a
state run facility and the Company's change from an equity to a more efficient
management model for physician services. The Company divested ownership in its
physician practices in the third quarter of 1995 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.
Outpatient surgery revenues increased 32.4% and 12.4% for the three and six
months ended June 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 35.2% and 19.6% for the same comparative periods. Gross
margins, as a percentage of revenues, increased 8.0% and 8.2% in the three and
six months ended June 10, 1996, as compared to the same periods in 1995 due to
the increased revenues. General and administrative expenses, as a percentage of
revenues, increased 2.4% and 15.0% 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 well as
meet accreditation standards. Operating income, as a percentage of revenues,
increased 5.6% for the three months ended June 30, 1996 and decreased 6.8% for
the six months ended June 30, 1996 as compared to the same period in 1995 due to
the previously discussed reasons.
Nursing services revenues increased 24.3% and 23.6% in the three and six months
ended June 30, 1996 compared to the three and six months ended June 30, 1995.
Increases in revenue are attributable to internal growth in home health care.
Home health care visits increased by 39.8% and 48.5% during these periods.
Despite the increased revenues, the nursing services segment experienced a
decrease in operating income as a percentage of revenue of 1.7% and 2.6% for the
three and six months ended June 30, 1996 compared to the same periods in 1995.
This decrease was due to a change in Louisiana Medicaid from a cost reimbursed
system to a fee for service system. The change in the fee structure caused
losses on services provided to Louisiana Medicaid patients, which comprise
approximately 3% of total home health care visits. The Company is currently
reducing the cost of services to eliminate losses caused by the new fee for
service payment schedule for Louisiana Medicaid patients. 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. Net income was also affected by a reduction in
staffing services due to the expiration of three hospital contracts in
metropolitan areas.
13
PHYSICIAN SERVICES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 96 June 95 June 96 June 95
-------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue ............. $844 100.0% $ 587 100.0% $1,360 100.0% $ 1,165 100.0%
Cost of Revenue ..... 615 72.9% 417 71.0% 880 64.7% 813 69.8%
---- ----- ------ -------
Gross Margin ... 229 27.1% 170 29.1% 480 35.3% 352 30.2%
Gen. & Admin ........ 221 26.2% 347 59.1% 410 30.1% 607 52.1%
---- ----- ------ -------
Operating Income $ 8 1.0% $(177) (30.0%) $ 70 5.1% $ (255) (21.9%)
==== ===== ====== =======
</TABLE>
OUTPATIENT SURGERY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 96 June 95 June 96 June 95
--------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue ............. $1,178 100.0% $890 100.0% $1,953 100.0% $1,737 100.0%
Cost of Revenue ..... 312 26.5% 307 34.5% 535 27.4% 619 35.6%
------ ---- ------ ------
Gross Margin ... 866 73.5% 583 65.5% 1,418 72.6% 1,118 64.4%
Gen. & Admin ........ 425 36.1 300 33.7% 822 42.1% 470 27.1%
------ ---- ------ ------
Operating Income $ 441 37.4% $283 31.8% $ 596 30.5% $ 648 37.3%
====== ==== ====== ======
</TABLE>
14
NURSING SERVICES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 96 June 95 June 96 June 95
-------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue ............. $ 9,748 100.0% $7,844 100.0% $18,572 100.0% $15,024 100.0%
Cost of Revenue ..... 5,784 59.3% 5,077 64.7% 10,912 58.8% 9,653 64.3%
----- ----- ------ -----
Gross Margin ... 3,964 40.7% 2,767 35.3% 7,660 41.2% 5,371 35.7%
Gen. & Admin ........ 4,054 41.6% 2,640 33.7% 7,617 41.0% 4,980 33.1%
----- ----- ------ -----
Operating Income $ (90) (0.1%) $ 127 1.6% $ 43 0.0% $ 391 2.6%
======= ====== ======= =======
</TABLE>
Liquidity and Capital Resources
At June 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 June 30, 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 75% 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.
The Company's operating activities used $1,715,211 during the first six
months of 1996, whereas such activities provided $956,384 in cash during the
first half of 1995. This change is primarily attributable to increased home
health care revenue and receivables. Net cash used in investing activities
increased to $792,032 during the first half of 1996 from $182,135 in the six
months ended June 30, 1995. This increase is attributable to fixed asset
acquisitions in the current period. Financing activities provided $2,039,154
during the first half of 1996, whereas these activities used $725,454 during the
first half of 1995. The change is primarily due to an increase in the Company's
borrowings on its line of credit.
At June 30, 1996, the Company had working capital of $2,189,166 and
stockholder's equity of $4,737,617. The Company's ratio of total liabilities to
equity at June 30, 1996 was 2.07 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.
15
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
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMEDISYS, INC.
By: /s/ MITCHEL G. MOREL
Mitchel G. Morel, Chief Financial Officer
Principal Financial and Accounting Officer
August 12, 1996
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 401,915
<SECURITIES> 0
<RECEIVABLES> 8,763,098
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,080,569
<PP&E> 2,994,644
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,571,554
<CURRENT-LIABILITIES> 7,891,403
<BONDS> 0
0
0
<COMMON> 2,656
<OTHER-SE> 4,737,617
<TOTAL-LIABILITY-AND-EQUITY> 14,571,554
<SALES> 11,769,253
<TOTAL-REVENUES> 11,769,253
<CGS> 6,709,723
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,580,804
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 127,185
<INCOME-PRETAX> 396,398
<INCOME-TAX> 134,250
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 252,187
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
