SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K-A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Fiscal Year Ended: December 31, 1996
Commission File Number: 0-24260
AMEDISYS, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-3131700
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
3029 S. Sherwood Forest Boulevard, Suite 300
Baton Rouge, Louisiana 70816
(Address of principal executive offices, including zip code)
(504) 292-2031 or (800) 467-2662
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.001 per share
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulations S-K in this form, and if no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
Issuer's revenues for the year ended December 31, 1996 were
$46,060,226.
The aggregate market value of the voting stock held by nonaffiliates of
the registrant, based on the last sale price as quoted by the NASDAQ Small Cap
Market on April 10,1997 was $11,122,913. As of April 10, 1997 registrant has
2,584,549 shares of Common Stock outstanding.
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TABLE OF CONTENTS
PAGE
PART I ............................................................... 3
ITEM 1. BUSINESS .................................................. 3
ITEM 2. PROPERTIES ................................................ 15
ITEM 3. LEGAL PROCEEDINGS ......................................... 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ....... 15
PART II .............................................................. 15
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS ....................................... 15
ITEM 6. SELECTED FINANCIAL DATA ................................... 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ....................... 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA ................ 21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE ....................... 21
PART III ............................................................. 21
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ....... 21
ITEM 11. EXECUTIVE COMPENSATION ................................... 23
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT ........................................... 25
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ........... 26
PART IV .............................................................. 27
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K ...................................... 27
SIGNATURES ........................................................... 28
FINANCIAL STATEMENTS ................................................. F-1
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PART I
ITEM 1. BUSINESS
GENERAL
On December 21, 1993, M & N Capital Corp. ("M & N"), a New York
corporation, completed a reverse acquisition with Analytical Nursing Management
Corporation ("ANMC" and/or "Company"), a Louisiana corporation which provides
health care through alternative site and management services. M & N had no
business operations. It was established as a "blind pool" of investors and
registered as a public corporation with the Securities and Exchange Commission.
Through the acquisition, ANMC became a wholly-owned subsidiary of M & N and
received a capital injection of $1.265 million. In July 1994, M & N moved its
state of incorporation from New York to Delaware and changed its name to
Analytical Nursing Management Corporation. The Company's Common Stock began
trading on the NASDAQ Small Cap Market on August 17, 1994. In August 1995, the
Company changed its name to AMEDISYS, Inc., (hereinafter "AMEDISYS" or "the
Company"). The Company subsequently changed the names of its subsidiaries to
incorporate the new name of the parent company.
AMEDISYS was initially incorporated in Louisiana in December 1982 and
reorganized in Louisiana in December 1992. The Company consolidated the holdings
of its subsidiaries through stock transfers pursuant to Section 351 of the
Internal Revenue Code such that these subsidiaries are 100% owned by AMEDISYS.
The Company provides services through a network of subsidiaries, which
consist of the following:
AMEDISYS STAFFING SERVICES, INC. ("ASS") supplies highly trained
critical care registered nurses and licensed practical nurses to all types of
health care facilities. Independent contract nurses are utilized to meet the
staffing needs of client health care facilities.
AMEDISYS NURSING SERVICES, INC. ("ANS") is an employee-based staffing
agency that provides a variety of relief personnel such as registered and
licensed practical nurses, and certified nurses' aides for staff relief in all
types of health care facilities.
AMERINURSE, INC. provides highly trained nurses who travel to client
health care facilities and work on a contract basis. Effective January 1, 1996,
Amerinurse, Inc. was merged into ANS.
AMEDISYS SPECIALIZED MEDICAL SERVICES, INC. ("ASM"), AMEDISYS HOME
HEALTH, INC. and AMEDISYS HOME HEALTH, INC. OF TEXAS provide skilled nursing
care, home health aid, physical therapy, occupational therapy, speech therapy
and medical social workers to homebound patients.
AMEDISYS SURGERY CENTERS, L. C. ("ASC") operates two outpatient surgery
centers in Houston, Texas, and one surgery center in Hammond, Louisiana, which
commenced operation in November, 1996.
AMEDISYS PHYSICIAN SERVICES, INC. ("APS") provides management of
physician practices and networks including Independent Practice Associations, as
well as management of home health agencies. APS also operates a laboratory.
The Rural Health Provider Network, Inc. ("network") was organized on
March 1, 1994 as a corporation jointly owned by a group of physicians and
AMEDISYS to manage an Internal Medicine Clinic, as well as Rural Health Clinics.
The Network changed its name in October, 1995 to AMEDISYS Physician Services.
The Company now focuses on management services to physician practices and
networks through its Physician Services division. On May 1,1996, the Company
signed an agreement with the Louisiana Health Care Authority, the Louisiana
state agency which controls the public hospital system in Louisiana, to manage
physician services at a state hospital in Lake Charles, Louisiana. Under the
agreement the Company will integrate the services of the inpatient staff with
community physicians working in outpatient clinics. The arrangement is a unique
public-private partnership which opens access to a full range of medical
services in the community.
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The Company acquired Surgical Care Centers of Texas, L.C. on June 30,
1995 in exchange for one million shares of AMEDISYS Common Stock. The acquired
company changed its name in March 1996 to AMEDISYS Surgery Centers, L.C. This
subsidiary operates two outpatient surgery centers in the greater Houston, Texas
area and manages the surgery centers in which the Company has ownership.
AMEDISYS Surgery Centers entered into a joint venture agreement with individual
physicians in Hammond, Louisiana to develop St. Luke's SurgiCenter, an
outpatient surgery center. The center opened in November, 1996.
With the addition of outpatient surgery centers the Company began
building a network of alternative site providers which will support networks of
physicians organized in Independent Practice Associations. Affiliations of
physicians and alternative providers, including home care networks and
outpatient surgery centers offer comprehensive and cost effective services to
Managed Care Organizations ("MCOs"). These networks can provide a panel of
established physicians, alternative services to hospitalization, and an existing
management system which is designed to function efficiently in a discounted fee
arrangement or capitated ("pre-paid") arrangement with an MCO or government
agency.
In 1996, the Company was granted a license to start and operate a
Health Maintenance Organization ("HMO") in the state of Louisiana by the
Louisiana State Department of Insurance. The Company subsequently initiated on
November 1,1996 a securities offering to residents of Louisiana to fund the new
company ("FutureCare Health Plans of La., Inc.") which would start and develop
the HMO, and a Company-sponsored Preferred Provider Organization ("PPO"),
FutureCare, Inc. The new company would be majority owned by physician investors
and AMEDISYS, Inc. would retain 30% ownership and would be the managing
organization. FutureCare, Inc. would allow physicians in its network to accept
multi-provider capitation arrangements with health plans operating in the state
of Louisiana since only licensed HMOs can accept risk arrangements with
commercial insurers. FutureCare, Inc. could qualify to operate as a health plan
for Medicare and Medicaid covered individuals who want a managed care plan,
especially in the small and/or rural markets, and to serve as a provider network
for other HMOs. From a physician perspective, this arrangement allows physicians
in small and rural communities to retain those patients who want the benefits of
a managed care plan. The FutureCare, Inc. network linked with alternative site
providers will comprise an integrated delivery system in markets where
alternative site provider services are available.
HOME HEALTH CARE ACQUISITIONS
On May 31, 1995, the Company acquired all of the outstanding stock of
Home Care Plus, Inc. in exchange for 30,000 shares of its common stock valued at
$274,000. The excess of the total acquisition cost over the fair value of the
net assets acquired of $312,197 is being amortized over seven years using the
straight-line method.
On March 19, 1995, the Company acquired all of the outstanding stock of
Health Care Services 24, Inc. in exchange for 7,143 shares of its common stock
valued at $50,000 and notes payable in the amount of $50,000, payable in monthly
installments through March, 1996. The Company acquired client lists (See Note 5
in the audited financial statements) and property and equipment with a fair
value of $85,000 and $15,000, respectively.
On April 28, 1994, the Company acquired all of the outstanding stock of
Priority Home Care, Inc. in exchange for 15,800 shares of its common stock
valued at $150,000. The excess of the total acquisition cost over the fair value
of the net assets acquired of $144,348 is being amortized over seven years using
the straight-line method.
The acquisitions of Home Care Plus, Inc., Health Care Services 24, Inc.
and Priority Home Care, Inc. were accounted for using the purchase method and as
a result, operations of these entities subsequent to the date of acquisition
have been included in the consolidated financial statements. Unaudited pro forma
consolidated results of operations for the years ended December 31, 1995 and
1994 as though these companies had been acquired as of January 1, 1994 are as
follows:
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1995 1994
----------- -----------
Net service revenues ................... $38,108,293 $31,625,839
Net income ............................. $ 850,874 $ 1,750,446
Earnings per common share .............. $ 0.33 $ 0.68
The above amounts reflect adjustments for amortization of goodwill.
RECENT DEVELOPMENTS
On October 24,1996, AMEDISYS, INC. signed a letter of intent to merge
with Complete Management, Inc. ("CMI"), a public company listed on the American
Stock Exchange (ASE:CMI). CMI is a physician practice management company
offering a broad range of management and support services for medical practice
groups and hospitals in the greater New York metropolitan area. Negotiations on
the terms of the merger were terminated on March 17, 1997 because the companies
could not reach an agreement.
NURSING SERVICES
HOME HEALTH CARE
Home health care is one of the fastest growing segments of the
Company's business mix. Home health care visits for the Company increased 40%
from 1995 to 1996 compared to a 70% increase from 1994 to 1995. The home health
care industry is continuing to grow. According to Hoechst Marion Roussel's 1996
MANAGED CARE DIGEST SERIES/INSTITUTIONAL DIGEST (HMR Digest), the home health
care industry has increased nearly threefold since 1986, when 5,250 agencies
were in operation. The number of U.S. home health care agencies rose to 15,037
in 1995, a 13.1% increase from 1994. Total patient revenues for the industry
were estimated at $72.2 billion in 1995, up 23.6% from $58.4 billion in 1994.
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 health 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 health care to be an attractive
alternative to hospital care.
Due to the pressure from MCOs to contract with a limited number of home
health 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 health care agencies through
internal and external growth. The Company had two acquisitions of independent
agencies in 1995. The Company's home health care growth in 1996 was internal
from expanding market share in existing offices, opening branch offices and
increasing the scope of services.
According to HMR Digest, Medicare reimbursements accounted for 64.4% of
a typical home health care agency's revenues in 1995, up from 59.7% and 60.9% in
1994 and 1993. Medicare remains a large payor of home care services. The federal
government has proposed changes in Medicare reimbursement which would convert
the system from cost reimbursement to prospective pay. The prospective pay
system allows agencies who control costs to become profitable entities. Other
changes such as allowing MCOs to enroll Medicare and Medicaid patients in their
networks and capitate contracts with providers, including home health care
agencies, will impact the business. In the latter case, revenues are determined
by the number of patients in a network or contract rather than by services
rendered.
AMEDISYS has positioned itself to handle changes in the home health
care business by establishing systems that are necessary to succeed in the new
health care environment. The Company has a proprietary software system which
features a single entry system, clinical outcome measures, and integration of
payroll and general ledger
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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 in a stand
alone arrangement or as part of a management agreement.
The Company currently has a well established network of eleven home
health care offices in Louisiana, five offices in Texas, and one in North
Carolina. The Louisiana and Texas offices are Medicare certified. The North
Carolina payor mix is private pay and commercial insurance. AMEDISYS is
distinguished by its specialty home health 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 health care
and additional rehabilitation services. AMEDISYS received accreditation with
commendation in 1995 from the Joint Commission on Accreditation of Healthcare
Organizations ("JCAHO") 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.
Revenues from the Company's home care operations for the years ended
December 31, 1996, 1995 and 1994 were approximately $26,056,767 or 57% of total
revenues, $17,891,744 or 48% of total revenues and $10,377,000 or 36% of total
revenues, respectively.
HOME HEALTH CARE MANAGEMENT SERVICES
The Company offers management services to independent home health care
agencies through its AMEDISYS Resource Management division. Management services
include home health care licensing, regulatory compliance, administrative
support services, clinical support services, billing and reimbursement systems
and proposal and bid development. Services also include a complete program which
enables a home health care agency to become accredited by the Joint Commission
of Accreditation of Health Care and Hospital systems. AMEDISYS home health care
software system provides the basis for its management systems. Agencies can
contract with the Company for the software system and/or a more complete
management package.
The target market for the Company's services are independently owned
home health care agencies that operate locally and want to become competitive
for managed care business and/or desire to grow to a regional level or prepare
for prospective pay. The Company's services have been developed and tested in
the AMEDISYS home health care offices. The Company is concentrating its
management services marketing efforts in Texas and Louisiana.
Revenues from the Company's home health care management services for
the years ended December 31, 1996 and 1995 were approximately $530,642 or 1.2%
of total revenues and $260,503 or .7%, respectively. These revenues are included
in home care operations. The division began operations in 1995.
SUPPLEMENTAL STAFFING
AMEDISYS has successfully provided supplemental staffing services for
13 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) the ability
to recruit and staff specialty nurses in all of its markets; (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 a 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 staffed to other home health 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 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
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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.
A new development in the Company's temporary staffing business is the
addition of office and clerical staffing. With minimal incremental costs, the
Company added these services in three selected test market regions to determine
the risk and benefits of offering these services in all staffing offices. The
natural fit of the service with medical temporary staffing and the low start-up
costs makes this strategy attractive for the Company.
The Company currently operates twelve offices which provide
supplemental staffing. Many of these offices share resources and costs with home
health care services. The Company services 300 medical facilities in eight
states with the largest segment in Louisiana and Texas.
Revenues from the Company's supplemental staffing operations for the
years ended December 31, 1996, 1995 and 1994 were approximately $12,538,216 or
27% of total revenues, $13,774,234 or 37% of total revenues and $13,104,000 or
45% of total revenues, respectively.
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., renamed AMEDISYS Surgery
Centers, L.C. This subsidiary operates two outpatient surgery centers in the
Houston, Texas area and St. Luke's SurgiCenter in Hammond, Louisiana.
The Company opened St. Luke's in November, 1996. It is a joint venture
with area physicians. AMEDISYS plans to strategically buy or build surgery
centers where they complement a network of physicians or other Company owned
alternative services. The Company's model includes an equity position for
participating physicians and an opportunity to add other services such as
diagnostics and pain management if market conditions are favorable. 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. Increased usage of the YAG, argon and CO2 lasers in surgery has allowed
many former inpatient procedures to be performed on an outpatient basis. For
example, advances in uterine surgery to eliminate invasive hysterectomies to
control dysfunctional bleeding could allow more than 200,000 inpatient surgical
procedures to be performed on an outpatient basis each year.
Medicare and commercial insurers are also recognizing outpatient
surgery centers as a cost effective delivery system and the number of approved
and reimbursed outpatient procedures have increased. According to SMG
Healthcare's MARKET DATA REPORT, in January 1992, the federal Health and Human
Services ("HHS") Department added an additional 900 surgical procedures to the
previous list of about 1,500 procedures covered by Medicare when they are
performed at an outpatient surgical center. As of May, 1994 there were 2,240
procedural codes that were covered by Medicare in an ambulatory surgery setting.
During 1995, industry sources estimate that nearly four million procedures were
performed in surgery centers nationwide. Third party payors are following the
federal government's lead by requiring the use of outpatient surgery for more
procedures. Many insurance plans are using financial pressure to encourage
physicians to use outpatient procedures whenever possible. Managed care plans
are also offering incentives to physicians and patients to choose outpatient
centers for surgery. Over seventy-five percent of the nation's surgery centers
have contracts with HMOs, PPOs or both, according to the SMG Healthcare Market
Data Report.
Extended stays are also allowed in outpatient centers which make them
more competitive with inpatient surgery facilities. Surgery Recovery Centers
which can be combined with outpatient surgery centers enable patients to stay up
to 23 hours following surgery and six states allow for greater than 24 hour care
in the surgery center setting. Some centers, such as those in Texas, possess
licenses as "specialty surgical hospitals" and these licenses enable the center
to function as a hospital and keep patients for indefinite periods of time.
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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. Physicians can also own surgery centers if they
are a participating physician in the centers. According to SMG, independent
outpatient surgery centers, have gained market share from hospital centers in
that hospital centers were projected to perform only 67% of all outpatient
surgeries in 1995, compared with 89% in 1984--a loss of over 20% in eleven
years.
Outpatient surgery centers have a higher margin than nursing services
and expansion into this business segment offers physicians participating in
Company-affiliated Independent Practice Associations an opportunity to provide
services within the AMEDISYS network and have an alternative to costly hospital
services. This feature, the Company estimates, will have a high value to
physicians who want to assume some risks with capitated fees, a developing
national trend.
Since AMEDISYS has owned and managed the Texas outpatient surgery
centers, additional managed care agreements were negotiated and the Company has
increased the number and variety of surgeons utilizing the centers. The Company
has also purchased new equipment and expanded hours of operation. The Company
has enforced high quality standards and recently the AMEDISYS Surgery Center of
South Houston, LC was granted accreditation from the Accreditation Association
for Ambulatory Health Care, Inc.
Revenues from the Company's outpatient surgery operations for the years
ended December 31, 1996, 1995 and 1994 were approximately $4,626,109 or 10% of
total revenues, $3,600,677 or 9% of total revenues, and $4,420,000, or 15% of
revenues, respectively.
PHYSICIAN SERVICES
The Physician Services division 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, 55.1% of all group practices derived revenue from
at risk HMO/PPO contracts in 1994 -- up from 53% in 1993. Group practices
derived 15% of total medical revenue from at-risk managed care contracts in
1994, up slightly from 13.8% in 1993. AMEDISYS believes this trend will
accelerate in the next three years.
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 the continuing trend of integration and
consolidation by developing Physician Practice Management and IPA network
services. These services allow physicians to remain independent but aligned with
a larger entity.
Revenues for the Company's physician services division for the years
ended December 31, 1996, 1995 and 1994 were approximately $2,839,134 or 6% of
revenue, $2,322,433 or 6% of revenue and $1,001,000 or 4% of revenue,
respectively.
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VIRTUALLY INTEGRATED SYSTEM
The differentiating feature of the AMEDISYS system is that the IPAs are
linked with alternative site providers and outpatient surgery so that a
strategic alliance of cost effective services can be "bundled" in the future to
accept multi-provider capitation. Such a system could deliver quality health
care at a significantly lower cost. Hospital services could be included or
excluded from such an arrangement. If hospital services are included it would be
on a "per diem" arrangement with a hospital. Bed days would be "rented" or
"contracted" rather than "owned." Since the hospital is the most expensive
provider in a health care delivery system, eliminating a portion of hospital
overhead would reduce costs of the total system. Specialty home health care can
deliver many services previously requiring hospitalization. Outpatient surgery
has also expanded to provide laser and endoscopic procedures to achieve the same
outcomes produced by more invasive, hospital based techniques.
AMEDISYS believes that MCOs want to continue to reduce hospital costs.
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. This utilization measure fluctuated during the last 10 years for HMO
plans covering seniors, though it fell 27% to 1,020 in 1994 from 1,405, in 1992,
remaining at decade-low levels during 1993 and 1994.
[LINE GRAPH PLOTTED FROM DATA IN TABLE BELOW]
<TABLE>
<CAPTION>
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE HOSPITAL DAYS PER 1,000 MEMBERS ... 269 258 243 240 238 237 229 215 202 157 151
</TABLE>
Source: UMGA, HMO Summary Utilization Data 1994
By creating networks of alternate site providers and linking them with
physician networks a "Virtually Integrated" health care delivery system is
achieved. As the system grows and requires more technology in data collection,
information systems and accounting and financial systems, these services can be
developed and "owned" or "contracted" depending on cost analyses and quality
control variables. A "Virtually Integrated System" can be therefore expanded
with speed and less capital than those required by traditional hospital based
systems. As networks are developed locally but concentrated in strategic
regions, the possibility of linking a wider geographic area is created.
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FUTURECARE
In February, 1996 the Company formed FutureCare, Inc. ("FutureCare"), a
Nevada corporation, to organize and operate a preferred provider network (PPO),
provide health care services to independent health care providers, and to merge
with and capitalize FutureCare Health Plans of Louisiana, Inc. (Health Plans)
which is licensed as a health maintenance organization (HMO) in the state of
Louisiana.
The Company currently owns 51% of FutureCare. Upon completion of a
planned offering to capitalize FutureCare, it would merge with Health Plans and
the Company's ownership would be reduced to 19% of Health Plans. The Company
owns approximately 33% of Health Plans and has provided $1 million to Health
Plans in order to enable it to meet the capital requirements for licensing as a
HMO in the state of Louisiana. The Company also loaned Health Plans
approximately $400,000 for development costs, which may be reimbursed upon
completion of a securities offering of FutureCare stock, although the completion
of such an offering is not assured.
FutureCare and Health Plans plan 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 PPO and
HMO network. Pursuant to the management agreement, the Company will manage and
administer FutureCare'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 health 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 to provide a full range of health services through the network PPO
and network HMO. Once the network is developed, 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.
HEALTH CARE REFORM
The federal government's previous initiatives to reform the American
health care delivery system have not succeeded. However, the need to reduce the
escalation of costs of the Medicare and Medicaid programs still exists. The
outlook is uncertain about the method that will evolve to meet the need. Some
states have established waiver programs which allow innovations in the
administration of Medicaid programs. These programs such as TenCare in the state
of Tennessee are using managed care approaches to reduce costs. Private
insurance programs have also attracted Medicare enrollees in customized managed
care programs. The Company anticipates that these trends will continue.
The escalating cost of home health care has attracted national
attention. Legislation changing the cost reimbursement system of Medicare
payments to home health care agencies to a prospective pay system will be
introduced in the upcoming Congressional session. Prospective pay legislation
has not been adopted in the past but a change to this type of system would allow
agencies who reduce and manage their costs to be profitable. This change would
have a significant impact on the industry. The increasing trend of Medicare
enrollees utilizing managed care plans will also encourage a reduction in home
health care costs through a reduction in per visit fees. Case management systems
may also limit the number of visits approved for a particular diagnosis. The
Company cannot predict with certainty what impact, if any, these changes may
have on the Company's business.
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BILLING AND REIMBURSEMENT
Revenues generated from the Company's home health care services are
paid by private insurance carriers, HMOs, PPOs, individuals, Medicare, Medicaid
and other local health insurance programs. Medicare is a federally funded
program available to persons with certain disabilities and persons aged 65 or
older. Medicaid, a program jointly funded by federal and state governments, and
other local governmental health care programs, is designed to pay for certain
health care and medical services provided to low income individuals without
regard to age. Home health care management services are paid through a
contractual agreement between the Company and the client home health care
agency. The Company has several statewide contracts for negotiated fees with
insurers and managed care organizations.
The Company has seventeen offices which are licensed to provide home
health care services and sixteen offices accept Medicare payments. Medicare
reimburses the Company for covered items and services at the lower of the
Company's costs, as determined by Medicare regulations, and cost limits
established by the Health Care Financing Administration. The Company submits all
Medicare claims to a single insurance company acting as a fiscal intermediary
for the federal government. The Medicaid system in Texas follows similar
reimbursement guidelines. The state of Louisiana adopted a fee-for-service
payment method in 1995. Supplemental staffing services are billed directly to
health care facilities. Physician management fees are collected directly from
managed practices and networks. Outpatient surgery fees are collected from
commercial insurance systems, HMOs, PPOs, Medicare and Medicaid programs and
individuals.
DATA PROCESSING
The Company maintains central computerized management information
systems including payroll, billing and other administrative functions at its
corporate headquarters. The information systems department has devised programs
for computerized scheduling, as well as a personnel system which monitors
personnel recruitment, evaluations and benefits. The information system also
monitors client utilization data.
The Company has a proprietary home health care software program which
features a single entry system that allows data to flow through accounting,
general ledger, payroll and billing and meet the extensive cost reporting
requirements for Medicare reimbursement of home health care services. It also
provides clinical documentation for prospective pay and tracking of clinical
outcome results.
Each regional office site is linked electronically to the corporate
accounting and information systems. This feature allows management to monitor
daily business activities and produce management reports. The system promotes
accuracy in payroll and business systems and controls the daily pay system for
field nurses in staffing.
QUALITY CONTROL AND IMPROVEMENT
As a medical service business, the quality and reputation of the
Company's personnel and operations are critical to the Company's success. The
Company has implemented quality assurance programs and policies and procedures
in its subsidiaries at the corporate and regional levels. The Company strives to
meet guidelines set forth by the Joint Commission on Accreditation of Health
Care Organizations on an ongoing basis as well as state and federal guidelines
for Medicare and Medicaid licensure. AMEDISYS Surgery Center of South Houston,
L.C. was recently granted accreditation from the Accreditation Association for
Ambulatory Healthcare, Inc. and the other centers are in the accreditation
process.
The Company maintains an active quality assurance staff who make
periodic on-site inspections of regional offices to review systems and
operations. An education division is also part of quality assurance operations
and conducts educational and training sessions at regional sites, as well as
disseminating continuing education materials to regional offices.
RECRUITING AND TRAINING
The Company's human resources department works with corporate and
regional personnel to maintain active recruiting efforts for all levels of
personnel. AMEDISYS recruits health care personnel by offering competitive
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compensation, variety and stability in work settings and a close communication
network which includes frequent contacts by staffing personnel, administrators
and directors. The Company offers daily pay to nurses who provide staffing
services. The daily pay system allows immediate payment for services performed
on a particular day or any day in the payment period. This system is a
competitive recruiting and retention feature. The Company is available to nurses
and ancillary personnel through a 24 hour direct communication system
encompassing regional staffers and central call personnel. Most nurses are
recruited by referral from active nurses within the network. The Company also
places advertisements in local newspapers and in direct mail solicitations. Each
office has registered nurses who act as clinical directors and many of these
nurses are active in professional associations. Administrators are also active
in professional and business associations.
The Company has uniform procedures for screening, testing and verifying
references on field personnel, as well as utilizing criminal checks where
appropriate. All nurses must have one year of experience and active RN or LPN
licenses from their respective state boards of nursing. Therapists are licensed
through the appropriate authorities. Unlicensed health care personnel must
present documentation of certification through a state approved program or, if
acceptable to health care authorities, have evidence of prior experience in
patient care in hospitals, nursing homes or home health care agencies. Medical
field personnel are assigned to patient care after credentials and references
are verified. Employees are oriented to the Company's policies and procedures.
AMEDISYS has an in-service training program for home health aides which
the Company believes is in compliance with government regulations.
Managers and support personnel are recruited through newspaper
advertising, association networking and referral. The Company offers upward
mobility, good benefits including a health coverage program, 401k plan, a
cafeteria plan and the challenge of working in a growth oriented company. The
Company also offers a stock option plan which is administered by the
Compensation Committee of the AMEDISYS Board of Directors.
Education and training programs are offered through the Company's
education department. Educational meetings are held for specific groups within
the Company at which various trends and operational procedures are discussed.
GOVERNMENT REGULATION
AMEDISYS' home health care business is highly regulated by federal,
state and local authorities. Regulations and policies frequently change and the
Company monitors changes through trade and governmental publications and
associations. Managers participate on various licensing and association boards.
The Company's home health care subsidiaries are certified by the Health Care
Financing Administration ("HCFA") and are therefore eligible to receive
reimbursement for services through the Medicare system.
Home health care offices have licenses granted by the health
authorities of respective states. Texas and Louisiana do not currently require a
Certificate of Need which some states require to establish a home health care
agency. Texas requires licensure and currently new licenses are being issued. In
both states, each location must be licensed and service areas are determined by
the state legislatures. Currently JCAHO accreditation of home health care
agencies is voluntary. However, MCOs use JCAHO accreditation as a minimum
standard for regional and state contracts.
The Company's regional offices work with client hospitals to follow
their protocol for supplemental staffing to meet the standards for JCAHO, which
includes verification of licensure and/or certification.
Outpatient Surgery centers require a Certificate of Need in some states
and are regulated by state and federal guidelines, as well as Medicare
standards.
The Company strives to comply with all federal, state and local
regulations and has satisfactorily passed all federal and state inspections and
surveys. The ability of the Company to operate properly will depend on the
Company's ability to comply with all applicable healthcare regulations.
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COMPETITION
The competition for the Company's nursing services consists of national
and local providers. According to Hoechst Marion Roussel 1996 Institutional
Digest, the number of home health care agencies in the U.S. rose 13% in 1995 to
15,037 agencies from 13,296 agencies in 1994. Home health care agency chains
accounted for 30.5% of all home health care agencies in 1995, compared with
31.6% in 1994. The Company believes it can compete and increase market share by
establishing strong statewide networks of offices, aligning with other
independent home health care agencies in networks to increase service areas,
offering comprehensive services with central intake features and continuing to
meet quality standards defined by JCAHO. Another key component in attracting
market share is loyalty in referring physicians. The Company currently has 1,500
physicians in its referral base. AMEDISYS has also invested in software
development which can produce utilization and data reports desired by government
and commercial insurance companies. These steps will put the Company in a
position to secure primary or preferred provider contracts with statewide MCOs
and maintain a strong Medicare patient population.
The Company's market niche of providing the latest technology and
pharmacology at home attracts a large referral network of primary care and
specialist physicians. Patients are referred by physicians and/or insurers. The
Company provides skilled nursing care that includes antibiotic therapy through
intravenous infusion, administration of oncology medication, care of children
with congenital anomalies and care of HIV and AIDS patients. Physicians
recognize that the skill of the Company's nurses and technology allow the
Company to provide alternative services to hospital care. These services are
reimbursed at a higher rate by payor sources than general home health care of a
maintenance or custodial nature.
The Company has been in the supplemental staffing market for thirteen
years and established a reputation for quality of personnel, reliability and
responsiveness. Attention to reducing and monitoring costs of operations while
maintaining competitive pay for nurses, therapists and other field staff
personnel have enabled the Company to maintain and/or grow market share. A
profit based incentive system for regional administrators and managers also
spurs growth in revenue and encourages personnel to closely monitor costs.
The staffing regional offices compete with local and regional firms, as
well as hospital internal staffing pools. However, moderate pricing, a
reputation for quality, 24 hour access and strong recruiting efforts make the
Company's services competitive.
The outpatient surgery segment of the Company's business competes with
hospital facilities in its geographical areas. The Company believes its centers
have well established physician referral sources and operating physicians. The
centers offer flexibility in scheduling, good turnaround times in surgical
suites, personalized service and access to technology. The Company has been
aggressive in seeking contracts with managed care organizations. Since MCOs can
replace traditional referral patterns with their own provider networks, the
Company's outpatient surgery centers can protect and build market share by being
a provider in the MCO networks The centers have also recruited a wider variety
of specialists to perform procedures to increase surgery cases to compensate for
some reductions in per case reimbursements by MCOs.
In the Physician Practice Management and IPA industry, AMEDISYS
competes with regional and national companies. The industry is new and growing
rapidly as physicians position their practices for the changes in health care.
The Company believes that it can effectively develop market share because it is
building its networks on alternative site provider services and networks. The
system is "physician friendly" and keeps the physician in control of their
practice while offering a network of services which are alternatives to hospital
procedures. The physician also gains negotiating leverage and is relieved of
some of the cumbersome business operations required in the current medical
business environment.
BUSINESS DEVELOPMENT
The Company is committed to growth in each of its service segments.
AMEDISYS has a development team which seeks acquisitions and start-up
opportunities in home health care, staffing, physician management, network
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services, and outpatient surgery. Members of the team consist of product line
presidents, a director of community relations and consultants.
The business development department has driven internal growth by
developing a comprehensive program to support business development of ongoing
business operations. A consistent corporate identity is maintained and has been
facilitated by the Company adopting the AMEDISYS name in the parent company and
its subsidiaries. All sales and educational materials are created in the home
office. Business development personnel assist regional personnel in developing
marketing plans which are linked with company and region specific budget
targets. Professionals in the corporate office provide advertising and
educational campaigns. Business development tools are utilized, including
specialized marketing materials and customer service programs. Client
satisfaction surveys are also developed in the home office to provide monitoring
of patient satisfaction and quality issues.
The results of development efforts are monitored on a daily and weekly
basis with a computerized information system and the information is accessible
to regional and corporate managers.
Identifying new market niches by working with corporate and regional
operational managers is an ongoing process. Regional efforts of administrators
and managers are supported by community relation directors and client service
coordinators as well as staffing coordinators.
EMPLOYEES
As of December 31, 1996, the Company had 456 full time employees,
excluding part time field nurses and other professionals in the field. Full time
employees include 9 in administration, 63 with operational responsibilities
including regional administrators and directors, 198 full time clinical field
staff ( including clinical coordinators, RNs, LPNs/LVNs, home health aides and
other allied health professionals), 29 staffing coordinators, 13 MIS and
business development personnel and 144 clerical support staff.
Administrators and corporate managers are salaried. Regional
administrators and managers receive a salary and are entitled to an incentive
program based on budgeted revenue and earnings of the region. Staffing
coordinators and clerical staff are paid hourly wages. Employees are paid
semi-monthly. The Company contributes to a group health insurance program for
each eligible employee and offers a 401K plan as well as a Cafeteria 125 plan.
The Company has a stock option plan in place and stock options are granted by
the Compensation committee of the Board of Directors.
Supplemental staffing nurses are paid on a contractual shift basis.
Home health care employees who are field staff may be paid on salary or
per-visit basis.
The Company believes that its employee relations are good. It
successfully recruits employees and many employees are shareholders.
None of the Company's employees are represented by labor organizations.
INSURANCE
The Company maintains casualty coverages on its corporate and regional
operations, including general and professional liability and automobile
insurance. Management believes that the limits of coverages carried by the
Company are adequate for its operations. The Company maintains a self funded
workers' compensation fund in Louisiana. In all other states where it conducts
business, the Company maintains workers' compensation coverage with "A" rated
insurers. All of the Company's employees are bonded.
The Company is operating a self-insured health insurance program in
1997 for its employees who qualify for insurance benefits.
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ITEM 2. PROPERTIES
The Company presently leases approximately 23,850 square feet for its
corporate office located at 3029 South Sherwood Forest Boulevard, Baton Rouge,
Louisiana. The lease provides for a basic monthly rental rate of approximately
$10 per square foot through 1997 and increases to $11 through the expiration
date on September 30, 2002. The Company has an aggregate of 51,638 square feet
of leased space for regional offices pursuant to leases which expire between
March, 1996 and September, 2006. Rental rates for these regional offices range
from $9 per square foot to $22 per square foot with an average of $13 per square
foot, which terms and rates the Company believes to reflect market values. Some
lease rates include utilities. The Company believes its facilities to be
adequate for its current needs.
The Company acquired two outpatient surgery centers in the Houston,
Texas area in connection with the acquisition of Surgical Care Centers of Texas,
L.C. on June 30,1995 and the Company is operating St. Luke's SurgiCenter in
Hammond, Louisiana These centers have an aggregate of 33,504 square feet. Of the
total square footage, 21,504 square feet are leased and the rest is owned. The
terms and lease rates the Company believes to reflect current market values.
Space in the surgery centers encompasses eleven surgery suites, pre-op and
post-op areas, business offices and consultation and waiting areas. The
outpatient surgery centers are equipped with modern technology and equipment for
surgery, lab and limited diagnostic testing equipment.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company and its subsidiaries are defendants to
lawsuits arising in the ordinary course of the Company's business. While the
outcome of these lawsuits cannot be predicted with certainty, management
believes that the resolution of these matters will not have a material adverse
effect on the Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders
during the fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's stock initially traded on the OTC Electronic Bulletin
Board in January 1994 and in August, 1994, the Company began trading its Common
Stock on the NASDAQ Small Cap Market. As of March 11, 1997, there were
approximately 173 holders of record of the Company's Common Stock and the
Company believes there are approximately 623 beneficial holders. The Company has
not paid any dividends on its Common Stock and expects to retain any future
earnings for use in its business development. The following table provides the
high and low prices of the Company's Common Stock during 1995 and 1996 as quoted
by NASDAQ. Such quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.
HIGH LOW
1st Quarter 1995 $ 7 1/2 $ 6 3/4
2nd Quarter 1995 11 1/4 6 3/4
3rd Quarter 1995 12 9
4th Quarter 1995 10 7 1/2
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1st Quarter 1996 $ 9 5/8 $ 7 1/2
2nd Quarter 1996 9 1/4 6 3/4
3rd Quarter 1996 8 5 3/4
4th Quarter 1996 8 1/2 4 1/2
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain historical data relating to the
Company. For the years of 1994, 1995 and 1996, the data was derived from audited
consolidated financial statements. Data for the years 1992 and 1993 are
unaudited, but in the opinion of management, present fairly the financial
conditions and results of operations for these periods.
SELECTED HISTORICAL STATEMENT OF INCOME DATA (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995(1) 1994(1) 1993(1) 1992(1)
----------- ----------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Net Service Revenue ........................ $ 46,060 $ 37,589 $ 28,902 $ 22,445 $18,132
Cost of Service Revenue .................... 26,405 22,424 16,996 14,674 11,503
----------- ----------- ----------- ----------- -------
Gross Margin .......................... 18,511 15,165 11,906 7,771 6,629
General/Administrative Expenses ............ 18,511 13,785 9,740 7,204 6,323
----------- ----------- ----------- ----------- -------
Operating Income ..................... 1,144 1,380 2,166 567 306
Other Income and Expense ................... (1,124) (238) (248) (33) 112
----------- ----------- ----------- ----------- -------
Income for Expense.................... (2) (200) (13) (39) (29)
Net Income ................................. $ 18 $ 942 $ 1,905 $ 495 $ 389
=========== =========== =========== =========== =======
EARNINGS PER COMMON SHARE ..................... $ 0.01 $ 0.37 $ 0.75 $ 0.22 $ --
=========== =========== =========== =========== =======
WEIGHTED AVERAGE SHARES OUTSTANDING ........... 2,575,000 2,570,000 2,525,000 2,285,000 N/A(2)
=========== =========== =========== =========== =======
PROFORMA INFORMATION (UNAUDITED)(1)
Net Income (Historical) .................... $ 18 $ 942 $ 1,905 $ 495 $ 389
Proforma adjustments:
Income Taxes on SCC Results ............. -- 191 646 155 103
----------- ----------- ----------- ----------- -------
Proforma Net Income ........................ $ 18 $ 751 $ 1,259 $ 340 $ 286
=========== =========== =========== =========== =======
Proforma Earnings Per Common Share ......... $ 0.01 $ 0.29 $ 0.50 $ 0.15 $ --
=========== =========== =========== =========== =======
BALANCE SHEET DATA
Total Assets .................................. $ 16,859 $ 11,537 $ 9,160 $ 7,190 $ 5,253
Total Long-term Obligations ................... $ 3,223 $ 1,490 $ 1,537 $ 642 $ 403
</TABLE>
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(1) Surgical Care Centers of Texas, LC ("SCC") is a limited liability company
which was acquired on June 30, 1995. Prior to the transaction with AMEDISYS,
the individual owners were responsible for all income taxes and no income
tax expense was recorded on SCC through June, 30, 1995.
(2) AMEDISYS, INC. became a public company on December 21, 1993. Therefore, no
earnings per share outstanding or weighted average shares outstanding
information is available for years ending prior to 1993.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
financial statements and notes thereto included elsewhere herein.
GENERAL
M&N was formed in October 1992 as a New York corporation as a vehicle
to effect a business combination with an operating business. In December 1993,
the Company acquired all of the issued and outstanding shares of Common Stock of
Analytical Nursing Management Corporation, a Louisiana corporation ("ANMC"). In
1994, the Company reincorporated in the state of Delaware and in 1995, the
Company changed its name to AMEDISYS, INC. AMEDISYS, INC. is a provider of
alternative site services as well as a management services organization. The
Company offers a variety of nursing services including home health care and
supplemental staffing. In the alternative delivery sector, the Company also
operates outpatient surgery centers. AMEDISYS also manages physician practices
and Independent Practice Associations as well as home health agencies. The
Company offers these services through its wholly owned subsidiaries. These
subsidiaries include: (i) AMEDISYS Staffing Services, Inc.; (ii) AMEDISYS
Nursing Services, Inc.; (iii) AMEDISYS Specialized Medical Services, Inc.; (iv)
AMEDISYS Home Health, Inc.; (v) AMEDISYS Home Health Inc. of Texas; and (vi)
AMEDISYS Surgery Centers, L.C. The financial statements included herein are for
the years ended December 31, 1994, December 31, 1995, and December 31, 1996.
The acquisition of Surgical Care Centers of Texas, L. C. ("SCC") in
June 1995 was recorded 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. SCC is a limited liability company and through June 30, 1995,
the individual owners were responsible for all income taxes and no expense was
recorded on the financial statements in that period. If income taxes were
recorded, the 1995 and the 1994 SCC net income would have been reduced by
approximately $191,000 and $646,000 respectively.
Gross revenue is recorded on an accrual basis based upon the date of
service at amounts equal to the Company's established rates or estimated cost
reimbursement rates, as applicable. Allowances and contractual adjustments
representing the difference between the established rates and the amounts
estimated to be payable by third parties are also recorded on an accrual basis
and deducted from gross revenue to determine net service revenues.
Reimbursement for home health care services to patients covered by the
Medicare program is based on cost reimbursement rates. Final reimbursement is
determined after submission of annual cost reports and audits thereof by the
fiscal intermediaries. Proposed legislation by the U. S. Congress may change the
payment methodology for home health care services to Medicare patients from a
cost based reimbursement system to a prospective payment system.
RESULTS OF OPERATIONS
RESULTS FOR THE FISCAL YEARS ENDED DECEMBER 31, 1996 AND 1995
For the year ended December 31,1996 and the year ended December
31,1995, the Company's revenues increased to $46,060,226 from $37,589,088, a 23%
increase. The change is primarily attributable to an increase in revenues
generated by the Company's nursing services and outpatient surgery divisions.
Nursing services increased to $38,594,983 in 1996 from $31,665,978 in
1995, an increase of 22%. Nursing services revenues are comprised of
supplemental staffing and home health care business segments. Supplemental
staffing revenues were $12,538,216 in 1996 compared to $13,774,234 in 1995, a 9%
decrease. The decrease is attributable to hospital consolidations in some
markets in which nursing staffs were combined and hospital internal
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staffing pools were utilized. Some markets such as Houston and Dallas had an
increased demand for staffing services after hospital consolidations and
subsequent restructuring was stabilized. Home health care grew to $26,056,767 in
1996 from $17,891,744 in 1995, or 46%. Home health care revenue growth in 1996
was internal and resulted from expanding market share in existing offices,
opening branch offices and increasing the scope of services and the physician
referral base. Improvements in internal monitoring and tracking systems also
reinforced expansion efforts.
Outpatient surgery revenues increased by 28% to $4,626,109 from
$3,600,677 in 1996 and 1995, respectively. The increase resulted from a total
restructuring program that the Company initiated after it acquired the Centers
in 1995. State of the art clinical technology and equipment were added as well
as upgraded information systems. Business operations were streamlined and
centralized and a market analysis formed the basis of a new business development
program. The Centers were renamed AMEDISYS Surgery Centers to reflect new
ownership and the interior decor was brought to contemporary standards.
Management and staff were added and responsibilities were changed to meet new
operational guidelines. As a result of business development activities and
internal improvements, the Centers' participating physicians increased and
subsequently the center's procedures and revenues also increased. The Company
implemented the new business plan upon the completion of the acquisition in 1995
and expenses increased without additional revenue in the first year, however,
revenue exceeded the budget for 1996. The Company also gained a model which was
replicable in the recently completed St. Luke's SurgiCenter in Louisiana.
Physician services revenues increased by 22% to $2,839,134 from
$2,322,433 in 1996 and 1995, respectively. The Company's home health care
management services' revenues increased to $530,642 in 1996 from $260,503 in
1995. These business segments are both in early phases of development.
Gross margin increased to $19,655,440 or 43% of revenue in 1996 from
$15,164,896, or 40% of revenues in 1995. The improvement was primarily due to
changes in the nursing services division. Pay for home health care field nurses
was restructured and flat fees replaced mileage reimbursements for travel for
home health care visits. A standardized operations model for home health care
offices was instituted with staffing guidelines based on business volume. Gross
margins were also positively affected by increased billing rates in the staffing
business. Rates were increased according to market conditions which included the
supply and demand ratios of nursing personnel and the intensity of competition.
The Company also instituted a self-insured workers compensation fund which
reduced costs.
The Company's physician services division also increased its gross
margin by converting ownership arrangements in physician practices to MSO
agreements. The Company divested itself of ownership agreements beginning in
1995 and completed the process in 1996.
General and administrative expenses increased to $18,511,698 or 40% of
revenue in 1996 compared to $13,784,966 or 37% of revenue in 1995. The increase
was attributable to the expansion in the outpatient surgery division and
increased revenues in home health care. As revenues increased in home health
care, expenses also increased due to the cost reimbursement method of home
health care payments from the Medicare system. General and administrative
expenses also increased due to the addition of three senior managers and
additional personnel in the MIS department.
Operating income declined to $1,143,742 or 2% of revenue for 1996
compared to $1,379,930 or 4% of revenue for 1995. The decrease in operating
income resulted from the increase in general and administrative expenses in the
outpatient surgery and physician practice management divisions. The Company has
implemented its new budgeting system in all of its business units and this
system will closely monitor costs and assist managers to make cost adjustments
on an ongoing basis.
The Company's decrease in net income to $18,321 or $.01 per share for
1996 from $941,783 or $.37 per share in 1995 is mainly attributable to a
one-time charge to earnings of $622,809. The charge was taken as a result of
merger discussions with Complete Management, Inc. ("CMI"), a New York based
provider of physician practice management services. In connection with
discussions with the management of CMI regarding the proposed future strategic
direction of the Company, AMEDISYS' management concluded in December, 1996 that
the realization of certain previously recorded assets might not be assured.
AMEDISYS' management accordingly decided to write off a portion of these
investments which were primarily comprised of advances made to develop a
proposed managed care organization and certain non-operating equipment believed
to be unrealizable through future operations. The discussions began with a
signed letter of intent on October 17, 1996 and were terminated
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on March 17, 1997 because the companies could not mutually agree on terms. If
the merger had been completed, AMEDISYS would have become a wholly-owned
subsidiary of Complete Management, Inc.
RESULTS FOR THE FISCAL YEARS ENDED DECEMBER 31, 1995 AND 1994
For the year ended December 31, 1995 and the year ended December 31,
1994, the Company's revenues increased to $37,589,088 from $28,902,219, a 30%
increase. The change is primarily attributable to an increase in revenues
generated by the Company's nursing services division. Increased nursing revenues
were a result of expansion of home health care locations, acquisitions and
internal growth in existing operations. The Company acquired two independent
home health care agencies in 1995. Home health care visits increased 70% from
1994 to 1995.
The gross margin of $15,164,896 as a percentage of revenue decreased
slightly to 40% for the year ended December 31, 1995, from $11,906,208, or 41%
for the year ended December 31, 1994. General and administrative expenses
increased to $13,784,966 from $9,739,755, an increase of 3% as a percentage of
revenue for the year ended December 31, 1995 compared to the year ended December
31, 1994. The reasons for these changes in gross margin and general and
administrative expense are the following: (1) an increase in home health visits
by the nature of the cost reimbursement system of Medicare is accompanied by an
increase in the cost of revenue, (2) decline in the outpatient surgery revenue
because of changes in the payor mix which reduced revenues for individual cases,
and (3) the expansion in physician services which required some start-up
expenses before revenues were generated.
Operating income decreased by $786,523 or 36% for the year ended
December 31, 1995 compared to the year ended in December 1994. Operating income
was affected by an operating loss in two physician clinics of $260,000, reduced
margins in outpatient surgery, and increased expenses in outpatient surgery to
improve the quality of care.
The Company's net income of $941,783 in 1995 represented a decrease of
$963,252, compared to net income in the year ended December 31, 1994. The
reduction was due partially to a loss of $349,000 in three of the Company's
physician practices in which the Company maintained an ownership interest. Most
ownership interests were divested in the fourth quarter of 1995 and were
replaced with management arrangements. The Company's net income was also
affected by lower net revenues in the outpatient surgery segment of the business
in 1995 compared to 1994. The decrease was due to changes in the payor mix with
a larger percentage of fees from Medicare, Medicaid, and managed care
organizations.
Through the acquisition of SCC, the Company gained an entry into the
outpatient surgery market which expanded the Company's service delivery network.
In addition, outpatient surgery centers have a higher earning potential than
nursing services. The expansion also provided physicians participating in
Company affiliated Independent Practice Associations an opportunity to provide
services within the AMEDISYS network and have an alternative to costly hospital
services. This feature, the Company estimates, will have a high value to
physicians who want to assume some risks with capitated fees, a developing
national trend.
LIQUIDITY AND CAPITAL RESOURCES
At December 31,1996, the Company had a revolving bank line of credit of
$4,500,000 bearing interest at the lender's prime rate. Subsequent to year end,
the line of credit was increased to $5,500,000. As of December 31, 1996 $121,312
was available under the line of credit. The line of credit is collateralized by
80% of eligible receivables in staffing and outpatient surgery and 75% in home
health care. Eligible receivables are defined principally as trade accounts that
are aged less than 90 days for staffing and
Page 19
<PAGE>
outpatient surgery and 120 days for home health care. To date, the Company has
no other source of external financing.
Net cash provided by operating activities decreased from $1,552,186 in
the year ended December 31,1995 to $(934,841) in the year ended December 31,
1996. Net cash used in investing activities increased from $(393,326) in the
year ended December 31,1995 to $(2,712,961) in the year ended December 31, 1996.
This increase is attributable to an increase in the fixed asset acquisitions in
the current period.
Net cash used by in financing activities increased from $(429,660) for
1995 to $3,881,963 of net cash provided for the year ended December 31, 1996.
This change is primarily due to the debt financing provided by Merrill Lynch for
the purchase of equipment for St. Luke's SurgiCenter which began operations in
November, 1996.
At December 31, 1996, the Company had working capital of $1,022,568 and
stockholders equity of $4,314,781. The company's ratio of total liabilities to
equity at December 31, 1996 was 2.86 to 1.0. The Company expects to have
sufficient resources from its current financing structure and sources of
additional financing to achieve its goals for 1997. However, the Company's
sources of external and internal financing are limited. Therefore, 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 for the twelve months ended December 31, 1996. 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, physician management services
and outpatient surgery are not typically influenced by seasonal factors.
However, the demand for supplemental staffing services typically decreases in
the last quarter of the fiscal year due to the year-end cost reduction
strategies utilized by many hospitals and a decreased patient census. The demand
for supplemental staffing services typically increases during the first and
second quarter of the year.
NEW DEVELOPMENTS
During 1995 and 1996 the Company began a process to develop a Health
Maintenance Organization (HMO) in the state of Louisiana. The HMO, to be called
FutureCare Health Plans of LA, may be operated by the Company at some future
date, but will be majority owned by a group of investors. The Company does not
expect any significant impact to its liquidity or financial obligations from
this new development. The shareholders of FutureCare Health Plans of LA., Inc.
have agreed that if FutureCare ceases operations for any reason or is liquidated
or dissolved for any reason, that the capital and/or assets of FutureCare will
be distributed to AMEDISYS first, up to its initial investment of $1,000,000.
On October 24, 1996, AMEDISYS, INC. signed a letter of intent to merge
with Complete Management, Inc. ("CMI"), a public company listed on the American
Stock Exchange (ASE:CMI). CMI is a physician practice management company
offering a broad range of management and support services for medical practice
groups and hospitals in the greater New York metropolitan area. Negotiations on
the terms of the merger were terminated om March 17, 1997 because the companies
could not reach an agreement.
ITEM 8. FINANCIAL STATEMENTS
See Index to Financial Statements on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
Page 20
<PAGE>
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
NAME AGE POSITION
- ---------------- --- -------------------------------------------
William F. Borne 39 Chief Executive Officer and Director
Mitchel G. Morel 36 Chief Financial Officer
Charles M. McCall 44 President, Nursing Services
Lynne S. Bernhard 40 President, AMEDISYS Resource
Management
Irvin T. Gregory 59 President, Outpatient Surgery and Director
Barbara C. Carey 50 Vice President, Corporate
Communications/Corporate Secretary
William M. Hession 45 Director
Dr. Karl A. LeBlanc 43 Director
Dr. Alan J. Ostrowe 55 Director
Dr. Boris L. Payan 63 Director
WILLIAM F. BORNE founded the Company in 1982 and has served as Chief
Executive Officer since that time. In 1988, he also founded and served as
President and Chief Executive Officer of AMEDISYS Specialized Medical Services,
Inc. until June 1993. He also founded and served as Chief Executive Officer of
AMEDISYS Staffing Services, Inc. and AMEDISYS Nursing Services, Inc. Prior to
these positions, Mr. Borne was an intensive care supervisor for Key Nursing
Corporation from June 1982 to July 1983 and director of nursing at West St.
James Hospital in Vacherie, Louisiana from 1980 to 1983. Mr. Borne is a
registered nurse who worked clinically in specialty and medical-surgical areas
with supplemental staffing agencies in New Orleans from 1979 to 1980. Mr. Borne
graduated from the Charity Hospital School of Nursing and completed his
undergraduate courses at the University of New Orleans and at Nicholls State
University.
MITCHEL G. MOREL was named Chief Financial Officer of the Company in
June 1994 and also served as vice president of finance from February 1991. He is
responsible for directing financial activities and financial reporting systems
of the organization. From October 1989 to January 1991, Mr. Morel served as
comptroller of Amedisys Staffing Services, Inc., a subsidiary of the Company.
From March 1988 to October 1989, he was senior accountant at the certified
public accounting firm of Ellis-Apple and Company. He was senior accountant with
the certified public accounting firm of Barrett and Company from December 1984
to March 1988 and supervisor of cost accounting at AMI, Inc. in Baton Rouge,
Louisiana from October 1983 to November 1984. Mr. Morel has a Bachelor of
Science degree in business administration with a major in accounting from
Louisiana State University and he is licensed as a Certified Public Accountant
in the state of Louisiana. Mr. Morel is a member of various national and state
accounting associations.
CHARLES M. MCCALL has served as President of Nursing Services since
February, 1997 . In that position he is responsible for all operations of the
Company's temporary staffing and home health care businesses. From November,
1995 to January, 1997, he was Vice President of Operations of that division and
he was Vice President of Operations of AMEDISYS Staffing Services, Inc. and
AMEDISYS Nursing Services, Inc. from May 1994 to November 1995. From 1991 to
1994 he was Regional Vice President of ATC Nursing Services, Inc. and from 1990
to 1991 he was President of AMERINURSE, a wholly owned subsidiary of AMEDISYS,
Inc. which has since been incorporated into AMEDISYS Nursing Services, Inc. From
1988 to 1991 he was Vice President of Operations and Research and Development of
AMEDISYS Staffing Services, Inc. From 1986 to 1988 Mr. McCall was President
Page 21
<PAGE>
of Analytical Nursing Management Corporation of Texas, Inc. , a subsidiary of
AMEDISYS Staffing Services, Inc. From 1984 to 1986 , he was administrator of
Immediate Medical Care in Lake Charles, La. and from 1983 to 1987 Mr. McCall
held various administrative and clinical positions in emergency room, critical
care and family practice nursing. From 1978 to 1981 , he was Director of Nursing
at Cameron Medical Center and Deputy Coroner of Cameron Parish. He has a B.S. in
Allied Health from Our Lady of Holy Cross College and he is a graduate of the
Charity Hospital School of Nursing.
LYNNE S. BERNHARD was named President of AMEDISYS Resource Management
in April, 1996. In that position she is responsible for the operations of the
management services organization which specializes in home health care
management and consulting. She served as President of Nursing Services from
January 1995 to March 1996 and from March 1993 to February 1996, she was
President of AMEDISYS Specialized Medical Services, Inc., the Company's home
health care subsidiary. She served as executive director of clinical operations
and the administrator of home health services from October 1988 to March 1993.
Prior to her affiliation with the Company, Ms. Bernhard was director of home
health care services for Medical Personnel Pool in Baton Rouge from August 1985
to September 1988. She was a professional recruiter at Our Lady of the Lake
Regional Medical Center in Baton Rouge from September 1983 to August 1985; a
nurse recruiter for Qualicare Corporation from April 1981 to September 1983,
sales representative for Marnel Pharmaceuticals from March 1981 to April 1982; a
staff nurse at Our Lady of the Lake Regional Medical Center from July 1977 to
March 1981; and a staff nurse at Magnolia City Hospital in Magnolia, Arkansas
from June 1976 to July 1977. Ms. Bernhard has an Associate's degree in nursing
from Southern Arkansas University and she attended the College of St. Frances in
Tollier, Illinois. She is a member of various professional associations
including the American Nurses Association.
IRVIN T. GREGORY has served as a Director of the Company and as
President of AMEDISYS Surgery Centers, L.C. since August 1995. He served as the
Vice President of development and as a Director of AMEDISYS Surgery Centers
since January 1995. Mr. Gregory has thirty years of management experience in the
health care field that includes services as regional Vice President for Surgical
Partners of America, Inc., a Vivra, Inc. New York Stock Exchange subsidiary,
Executive Vice President of Medical Care International (now Med America), and
Vice President of development for the Lifemark Hospital Division of Lifemark
Corporation. Mr. Gregory has a B.S.Degree in Management from the University of
Southwestern Louisiana.
BARBARA C. CAREY has served as Vice President of Corporate
Communications of the Company since October 1993 and Corporate Secretary since
March, 1994. As Vice President of Corporate Communications, Mrs. Carey is
responsible for the external and internal communications of the Company,
including media relations and presentations. She also writes the annual and
quarterly Company reports with the corporate attorney which are filed with the
SEC. As Corporate Secretary, she is responsible for the Company's shareholder
records, stock transactions and operations of the Board of Directors and its
committees. She was Vice President of Operations of AMEDISYS Staffing Services
from October 1991 to October 1993. From July 1989 to September 1991, she was the
administrator of a subsidiary company. From 1977 to 1989, she was a founding
partner and owner of a speech and hearing clinic. From 1975 to 1977 she was the
clinic supervisor at the LSU speech and hearing clinic. From 1970 to 1975 she
was a speech pathologist with East Baton Rouge Parish Schools. She has a
Bachelor of Arts and Master's degree in speech from Louisiana State University
and a Master's degree in Business Administration from Tulane University. She is
the 1996-1997 President of Quota International, Inc., an international
classified service organization of professional, executive and business people.
She is also a director on three charitable and educational foundation boards.
WILLIAM M. HESSION, JR. was a co-founder of the Company and has served
as a director of the Company since July 1983. Mr. Hession is founder and
President of Key Medical Supply, Inc., a provider of durable medical equipment
and specialty wheel chairs. He founded and served as President of Key Nursing
Corporation, a supplemental staffing company, from 1982 to 1994. He served as
Consulting Director of Nursing Services in Metairie, Louisiana from 1979 to
1982. Mr. Hession was Director of Nursing at Assumption General Hospital in
Napoleonville, Louisiana from 1977 to 1978. He worked as a Staff Nurse in the
Intensive Care Unit at West Jefferson Hospital in New Orleans, and at Thibodaux
General Hospital in Thibodaux, Louisiana in 1976. He holds an Associate Degree
of Nursing from Nicholls State University, and he also attended the University
of Southwestern Louisiana. He served in the United States Marine Corps from 1971
to 1973.
Page 22
<PAGE>
DR. KARL LEBLANC has served as a director of the Company since June
1993. Dr. LeBlanc is a physician who has practiced in his specialty of General
Surgery since 1983. He is on staff at Our Lady of the Lake Regional Medical
Center, Baton Rouge General Medical Center and Woman's Hospital in Baton Rouge,
Louisiana. He has held teaching appointments at Louisiana State University
Medical Center, Department of Surgery, the CMC Medical Training Center in
Nashville, Tennessee and the Ethicon Endo-Surgery Training Center in Cincinnati,
Ohio. He received his medical degree from Louisiana State University Medical
Center in Shreveport, Louisiana in 1978 and a Bachelor of Science degree from
the University of Southwestern Louisiana. He was certified by the American Board
of Surgery in 1974. He earned a Master's degree in Business Administration from
Louisiana State University in Baton Rouge, Louisiana in 1992. He has published
fifteen professional articles in his specialty.
DR. ALAN J. OSTROWE has served as a director of the Company since July
1994. He previously served as President of General Anesthesia Services, Inc., an
affiliated company. He is a Baton Rouge physician specializing in anesthesiology
since 1971 and pain management since 1991. He received his medical degree from
New York Medical College in 1966. He is a Fellow of the American College of
Anesthesiologists, a Diplomate of the American Board of Anesthesiology and a
Diplomate of the American Academy of Pain Management. He is on the medical
staffs of Our Lady of the Lake Regional Medical Center, Baton Rouge General
Medical Center, Medical Center of Baton Rouge and the Woman's Hospital of Baton
Rouge. He is on the board of directors of GulfWest Oil Company and is the
medical director of AMEDISYS.
DR. BORIS L. PAYAN was elected to the Board of Directors in February,
1996. Dr. Payan is a Houston physician specializing in anesthesia and has
maintained a private practice since 1962. Dr. Payan was one of the founding
members of Surgical Care Centers of Texas, L.C. for whom he has served as a
director since 1978. He received his medical degree from the University of
Havana, Cuba and completed a year of internship at Curie Hospital in Cuba and a
second year at Methodist Hospital in Houston. He did his residency at St. Luke's
Hospital, St. Joseph's Hospital and at Baylor College of Medicine in Houston. He
is on staff at Southern Medical Center and he holds memberships in the Harris
County Medical Society, Texas Medical Association, Texas Society of
Anesthesiologists, Texas Gulf Coast Anesthesia Society, the American Society of
Anesthesia and the American Medical Association. He is a director on the board
of First Bank of Houston.
Directors serve until the expiration of their term at the annual
meeting of stockholders. All officers serve at the discretion of the Board of
Directors. In January 1997, Promod Seth ceased his role as Chief Operating
Officer of the Company, a position he held since December 1995. Directors
receive hourly compensation of $100 for board meetings and reimbursements for
reasonable out-of-pocket expenses to attend Board Meetings.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10 percent of the Company's
common stock, to file reports of ownership and changes of ownership with the
securities and Exchange Commission. Copies of all filed reports are required to
be furnished to the Company pursuant to Section 16(a). Based solely on the
reports received by the Company, the Company believes that the directors,
executive officers, and greater than ten percent beneficial owners complied with
all applicable filing requirements during the fiscal year ended December 13,
1996, except as follows. In August 1996, the following officers were issued
five-year options to purchase shares of common stock at $6.61 per share and
failed to timely report the transaction on a Form 4 and Form 5: (1) William
Borne was issued an option to purchase 35,000 shares; (ii) Irv Gregory was
issued an option to purchase 28,500 shares; (iii) Mitch Morrel was issued an
option to purchase 18,500 shares; (iv) Barbara Carey was issued an option to
purchase 9,500 shares; and (v) Lynne Bernhard was issued an option to purchase
18,500 shares.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation paid by the Company to the Chief Executive Officer and for all
other executive officers whose total annual salary and bonus exceeded $100,000
during 1995. The Company maintains a disability insurance policy and life
insurance policy on Mr. Borne under which the Company is a beneficiary. These
policies are pledged as collateral for a bank loan of the Company. The named
executive officers receive perquisites and other personal benefits in amounts
less than 10% of their total annual salary and bonus.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------ ---------------------
OTHER
ANNUAL ALL OTHER
YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
---- -------- ------- ------------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
William F. Borne ................... 1996 $153,771 -- -- 35,000 --
Chief Executive Officer ............ 1995 130,350 $20,000 -- 3,250 --
1994 101,000 35,000 -- -- --
Lynne S. Bernhard, ................. 1996 $ 90,645 -- 18,500 --
President, Nursing ................. 1995 78,958 $17,500 -- 3,250 --
Services ........................... 1994 75,000 30,000 -- -- --
Irvin T. Gregory, .................. 1996 $127,300 $ -- -- 28,500 --
President, Outpatient 1995 -- -- -- -- --
Surgery 1994 -- -- -- -- --
</TABLE>
Page 23
<PAGE>
EMPLOYMENT AGREEMENTS
None of the officers of the Company is subject to an employment
agreement, except for Mr. Borne. Effective October 1996, Mr. Borne entered into
an employment agreement expiring in December 1997 providing for the payment of
$15,000 pe month, with an annual bonus equal to the greater of (i) 25% of the
base salary for the applicable year if the Common Stock price achieves a 20%
increase during such relevant period or (ii) 100% of the base salary for the
applicable year if certain earning projections are met or if the Common Stock
achieves a 50% increase during such relevant period.
STOCK OPTION
The Company's Amended and Restated Stock Option Plan ("Plan") provides
for the issuance of an aggregate of 500,000 shares of Common Stock upon exercise
of options granted pursuant to such Plan. As of December 31, 1996, options to
purchase an aggregate of 288,723 shares were outstanding under the Plan.
The following table shows, as to the named executive officer, certain
information concerning stock options.
1996 STOCK OPTION GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
OPTIONS PERCENT OF FOR OPTION TERM
GRANTED TOTAL OPTIONS EXERCISE PRICE ---------------------------
(SHARES) GRANTED (PER SHARE) EXPIRATION DATE 5% 10%
-------- ------------- ------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William F. Borne 35,000 14.67 $6.61 August 2001 $87,066.00 $164,210.68
Lynne S. Bernhard 18,500 7.75 $6.61 August 2001 $46,020.60 $ 86,797.07
Irvin T. Gregory 28,500 11.95 $6.61 August 2001 $70,896.60 $133,714.41
</TABLE>
*1997 STOCK OPTION GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
OPTIONS PERCENT OF FOR OPTION TERM
GRANTED TOTAL OPTIONS EXERCISE PRICE ---------------------------
(SHARES) GRANTED (PER SHARE) EXPIRATION DATE 5% 10%
-------- ------------- ------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William F. Borne 34,525 13.39 $6.20 February 2007 $193,930.29 $436,280.77
Lynne S. Bernhard 14,644 5.68 $6.20 February 2007 $ 82,256.77 $185,051.28
Irvin T. Gregory 29,365 11.39 $6.20 February 2007 $164,946.06 $371,075.59
</TABLE>
- ----------------
* SUBSEQUENT TO DECEMBER 31, 1996, THE COMPANY'S BOARD OF DIRECTORS APPROVED THE
GRANT OF OPTIONS COVERING THE PURCHASE OF 282,000 SHARES OF STOCK AT $6.20 PER
SHARE. THE STOCK PURCHASE OPTIONS BECAME EXERCISABLE RATABLY OVER A THREE YEAR
PERIOD BEGINNING FEBRUARY 11, 1997 AND TERMINATE FEBRUARY, 2007.
Page 24
<PAGE>
Aggregated Option Exercises in 1996
and Year-End Option Values
<TABLE>
<CAPTION>
Shares Number of Value of
Name Acquired on Value Securities Unexercised
Exercise Realized Underlying in-the-money
Unexercised Options(1)
Options
Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William F. Borne -- -- 26,425 46,330 $20,363 $39,101
Lynne S. Bernhard -- -- 14,298 22,096 $ 9,885 $18,144
Irvin T. Gregory -- -- 19,288 38,577 $16,357 $32,716
</TABLE>
(1) Computed based on the differences between the fair market value and
aggregate exercise prices.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes thereto set forth certain information
regarding beneficial ownership of the Company's Common Stock as of April 10,
1997 for: (i) each person known by the Company to beneficially own more than
five percent of the Company's Common Stock; (ii) each of the Company's
directors; (iii) each named executive officer; and (iv) all directors and
officers of the Company as a group.
SHARES OF PERCENT OF
NAME AND ADDRESS COMMON STOCK VOTING POWER
William F. Borne
3029 S. Sherwood Forest Blvd., Suite 300 478,709 18.0%
Baton Rouge, LA 70816
Lynne S. Bernhard
3029 S. Sherwood Forest Blvd., Suite 300 78,702(5) 3.0%
Baton Rouge, LA 70816
Karl A. LeBlanc, M.D
7777 Hennessy Boulevard, Suite 612 23,153(6) *
Baton Rouge, LA 70808
Key Nursing Corporation(2)
627 Fairway Drive 82,947 3.2%
Thibodaux, LA 70301
William M. Hession, Jr.(2)
627 Fairway Drive 102,915(7) 4.0%
Thibodaux, LA 70301
Alan J. Ostrowe, M.D
3029 S. Sherwood Forest Blvd., Suite 300 60,759(7) 2.3%
Baton Rouge, LA 70816
Irvin T. Gregory
12700 N. Featherwood, Suite 240 84,503(8) 3.2%
Houston, TX 77034
Boris L. Payan, M.D.(4)
3534 Vista 249,226(7) 9.6%
Pasadena, TX 77504
Jose R. Reyes, M.D
3534 Vista 184,007(9) 7.1%
Pasadena, TX 77504
ALL OFFICERS AND DIRECTORS AS A GROUP (11
PERSONS) 1,207,265(10) 41.4%
- --------------
* Less than 1%
(1) Does not include 38,500 shares held in trust for Mr. Borne's minor children.
(2) Mr. Hession is an affiliate of Key Nursing Corporation, the record holder of
these shares of Company Common Stock.
(3) Includes 30,000 shares owned of record by R.P. & H., Inc., an affiliate of
the shareholder.
(4) Includes warrants and options to purchase 72,775 shares of common stock.
(5) Includes warrants and options to purchase 36,394 shares of common stock.
(6) Includes warrants and options to purchase 19,533 shares of common stock.
(7) Includes warrants and options to purchase 18,333 shares of common stock.
(8) Includes warrants and options to purchase 57,865 shares of common stock.
(9) Includes warrants and options to purchase 10,000 shares of common stock.
(10) Includes warrants and options to purchase 330,918 shares of common stock.
Page 25
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Notes receivable from related parties consist of unsecured and
non-interest bearing notes from the President and certain stockholders of the
Company totaling approximately $40,000 and $18,000 at December 31, 1996 and
1995, and receivables from an internal medicine clinic ("IMC") totaling
approximately $150,000 and $256,000 at December 31, 1996 and 1995. The fair
value of the notes receivable from related parties is equal to the recorded
value due to the short term nature of the notes.
In March, 1994, the Company entered into an agreement with IMC, an
unrelated party, to form a new corporation (APS) which is 60% owned by the
Company and 40% owned by the owners of IMC. APS acquired equipment and personal
property from IMC for approximately $340,000 and managed through mid 1996, the
continuing operations of IMC. The Company loaned funds to APS to acquire the
assets of IMC and meet working capital requirements. This loan to APS, which is
to be repaid solely from the revenues of APS over a five-year period, bears
interest at a rate of prime plus 2% and is eliminated in consolidation. APS
recorded management fees of $28,097 in 1996 and $541,441 in 1995 from IMC. As
discussed above, the unpaid management fees are included in notes receivable
from related parties. Effective January 1, 1996, IMC issued new notes to APS for
the unpaid balance on this date. These notes bear interest at 9%, require
monthly principal and interest payments of $4,076 with the balance due on
maturity of January 1, 1999 and are secured by the accounts receivable of IMC.
In accordance with the terms of the agreements with IMC, IMC has the
right and option to sell its stock back to APS at a price equal to 3.5 times the
earnings per share of APS attributable to each share of APS stock, to be
calculated based on the largest annual earnings per share amount during the
three-year period prior to the time such repurchase is requested by IMC. This
option is not exercisable until March 1, 1997, and based on operations of APS
through December 31, 1996, would not have a material effect on the Company's
financial statements if exercised.
Notes payable to Vista Maple, a related party, consist primarily of a
note issued in 1994 in the original amount of $1,080,000 bearing interest at 9%
(see Note 3 in audited financial statements). The note is secured by all real
estate and personal property of one of the surgical care centers. Maturities of
this debt as of December 31, 1996 are as follows:
1997 .................................................. $ 44,335
1998 .................................................. 48,494
1999 .................................................. 53,043
2000 .................................................. 58,019
2001 .................................................. 63,461
Thereafter ............................................ 720,575
--------
$987,927
========
The fair value of this note at December 31, 1996, estimated based on
the Company's current borrowing rate of 9.75%, was approximately $950,929.
Page 26
<PAGE>
Prior to acquisition by the Company, ASC engaged in the following
transactions with related parties during 1995 and 1994. Payments totaling
approximately $108,000 in 1995 and $229,000 in 1994 were made to RPH, Inc., a
corporation owned by Drs. Jose Reyes, Boris Payan, and R.E. Hearn, for
anesthesia services. The primary owners of RPH, Inc. were also controlling
owners of ASC.
During 1994, the Company purchased the interest of two members
(totaling 7.6%) for $35,000 per percentage point, $252,000 in aggregate. This
purchase was effected through the issuance of notes payable. Of the purchase
interest, 3% was sold in 1994 for $35,000 per percentage point, $105,000. The
remaining repurchased interest of 4.6% has been reflected as a reduction of
retained earnings in the accompanying financial statements.
In 1995, the Companies paid $18,935 for legal fees to a stockholder and
director (through July, 1995) of the Company.
In 1995, APS paid medical director fees of $24,000 to a stockholder of
the Company and a total of $24,000 to two of the owners of IMC.
The Company had an investment in Network Wellness Systems, Inc. (NWS),
the corporate general partner of Sports/Spa and Clinic, a Louisiana Partnership
in Commendam ("SSC"), which operated a health club, spa, salon and wellness
facility within the Sandestin Resort (the Resort) in Destin, Florida. SSC began
business in November, 1991 and subsequently was placed in Chapter 11
Reorganization on April 23, 1993. The bankruptcy proceeding was thereafter
converted to a Chapter 7 liquidation. The Company determined the unpaid balance
due from NWS ($99,487) to be uncollectible and charged it against income in
1994. Two of the owners of IMC are also affiliated with NWS and SSC.
PART IV.
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
None
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the fourth quarter of 1996.
Page 27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 16th day of
April, 1997.
AMEDISYS, INC.
By /s/ WILLIAM F. BORNE
WILLIAM F. BORNE,
Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------- ------------------------------------ --------------
<S> <C> <C>
/s/ WILLIAM F. BORNE Chief Executive Officer and Director April 16, 1996
WILLIAM F. BORNE (Principal Executive Officer)
/s/ MITCHEL G. MOREL Chief Financial Officer (Principal April 16, 1996
MITCHEL G. MOREL Financial and Accounting Officer)
/s/ WILLIAM M. HESSION, JR. Director April 16, 1996
WILLIAM M. HESSION, JR.
/s/ KARL A. LEBLANC Director April 16, 1996
KARL A. LeBLANC, M.D.
/s/ ALAN J. OSTROWE Director April 16, 1996
ALAN J. OSTROWE, M.D.
/s/ BORIS L. PAYAN Director April 16, 1996
BORIS L. PAYAN, M.D.
/s/ IRVIN T. GREGORY Director April 16, 1996
IRVIN T. GREGORY
</TABLE>
Page 28
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Amedisys, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Amedisys, Inc.
(a Delaware Corporation) and Subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Amedisys, Inc. and
Subsidiaries as of December 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP HANNIS T. BOURGEOIS & CO., LLP
March 18, 1997
F-1
<PAGE>
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 1) ................................................. $ 1,104,165 $ 870,004
Accounts receivable, net of allowance for doubtful accounts
of $732,166 in 1996 and $258,670 in 1995 ......................................... 8,270,982 6,124,269
Prepaid expenses ................................................................... 264,125 432,930
Income tax receivable (Note 9) ..................................................... 73,891 --
Inventory and other current assets ................................................. 442,102 219,610
------------ ------------
Total current assets ........................................................ 10,155,265 7,646,813
NOTES RECEIVABLE FROM RELATED PARTIES (Note 10) ...................................... 190,208 275,450
OTHER INVESTMENTS (Note 4) ........................................................... 456,202 177,460
PROPERTY, PLANT AND EQUIPMENT, NET (Notes 3 and 8) ................................... 4,609,718 2,449,468
ASSETS HELD FOR SALE, NET (Note 14) .................................................. -- 76,456
DEFERRED TAX ASSET (Note 9) .......................................................... 447,672 208,000
OTHER ASSETS, NET (Note 5) ........................................................... 999,722 703,080
------------ ------------
Total assets ................................................................ $ 16,858,787 $ 11,536,727
============ ============
CURRENT LIABILITIES:
Accounts payable ................................................................... $ 1,416,259 $ 402,140
Accrued expenses-
Payroll and payroll taxes ........................................................ 1,033,250 862,498
Insurance (Note 12) ............................................................. 642,607 483,155
Income taxes (Note 9) ............................................................ -- 287,987
Other ............................................................................ 882,627 616,869
Notes payable (Note 6) ............................................................. 4,378,688 2,456,971
Current portion of notes payable to related parties (Note 10) ...................... 90,575 90,711
Current portion of long-term debt (Note 7) ......................................... 457,786 386,848
Current portion of obligations under capital leases (Note 8) ....................... 230,905 181,964
------------ ------------
Total current liabilities ................................................... 9,132,697 5,769,143
LONG-TERM DEBT (Note 7) .............................................................. 1,936,795 211,187
NOTES PAYABLE TO RELATED PARTIES (Note 10) ........................................... 943,592 987,924
OBLIGATIONS UNDER CAPITAL LEASES (Note 8) ............................................ 342,653 291,282
------------ ------------
Total liabilities ........................................................... 12,355,737 7,259,536
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 8, 12 and 14) ................................... -- --
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES ....................................... 188,269 3,345
------------ ------------
STOCKHOLDERS' EQUITY (Note 11):
Common stock ....................................................................... 2,576 2,584
Additional paid-in capital ......................................................... 1,915,514 1,976,593
Retained earnings .................................................................. 2,396,957 2,378,636
Stock subscriptions receivable ..................................................... (266) (83,967)
------------ ------------
Total stockholders' equity .................................................. 4,314,781 4,273,846
------------ ------------
Total liabilities and stockholders' equity .................................. $ 16,858,787 $ 11,536,727
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
INCOME:
Net service revenues ................................................. $ 46,060,226 $ 37,589,088 $ 28,902,219
Cost of service revenues ............................................. 26,404,786 22,424,192 16,996,011
------------ ------------ ------------
Operating revenues ............................................. 19,655,440 15,164,896 11,906,208
------------ ------------ ------------
GENERAL AND ADMINISTRATIVE EXPENSES:
Salaries and benefits ................................................ 10,326,957 6,732,356 4,863,770
Other ................................................................ 8,184,741 7,052,610 4,875,985
------------ ------------ ------------
Total general and administrative expenses ...................... 18,511,698 13,784,966 9,739,755
------------ ------------ ------------
Operating income ............................................... 1,143,742 1,379,930 2,166,453
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense ..................................................... (579,497) (409,763) (270,764)
Interest income ...................................................... 43,175 71,969 66,510
Loss on investment in unconsolidated subsidiary (note 10) ............ -- -- (122,699)
Writeoff of investments (note 14) .................................... (622,809) -- --
Miscellaneous ........................................................ (18,898) 87,686 93,870
------------ ------------ ------------
Total other expense ............................................ (1,178,029) (250,108) (233,083)
------------ ------------ ------------
INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST ............................................................. (34,287) 1,129,822 1,933,370
INCOME TAX EXPENSE (NOTE 9) ............................................ 2,467 199,636 13,393
------------ ------------ ------------
Income before minority interest in net income of
consolidated subsidiary ..................................... (36,754) 930,186 1,919,977
MINORITY INTEREST IN (INCOME) LOSS OF
CONSOLIDATED SUBSIDIARIES ............................................ 55,075 11,597 (14,942)
------------ ------------ ------------
Net income .................................................... $ 18,321 $ 941,783 $ 1,905,035
============ ============ ============
EARNINGS PER COMMON SHARE (NOTES 1 AND 2) .............................. $ 0.01 $ 0.37 $ 0.75
============ ============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING .......................................................... 2,575,000 2,570,000 2,525,000
------------ ------------ ------------
PRO FORMA INFORMATION (UNAUDITED): (NOTE 2)
Historical net income ................................................ $ 18,321 $ 941,783 $ 1,905,035
Pro forma adjustments-
Income taxes on surgicare results .................................. -- 190,760 645,682
------------ ------------ ------------
Pro forma net income ................................................. $ 18,321 $ 751,023 $ 1,259,353
============ ============ ============
PRO FORMA EARNINGS PER COMMON SHARE .................................... $ .01 $ .29 $ .50
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL STOCK TOTAL
-------------------- PAID-IN RETAINED SUBSCRIPTIONS STOCKHOLDERS
SHARES AMOUNT CAPITAL EARNINGS RECEIVABLE EQUITY
---------- ------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 ............................ 2,500,000 $ 2,500 $ 1,263,070 $ 2,805,229 $ -- $ 4,070,799
Private placement stock offering (Note 11) .......... 29,721 30 233,577 -- (122,015) 111,592
Payments received on and write-off of stock
subscriptions (Note 11) ........................... -- -- -- -- 14,881 14,881
Issuance of stock for acquisitions (Note 2) ......... 15,800 16 149,984 -- -- 150,000
Issuance of stock in connection with stock
option (Note 11) .................................. 1,200 1 5,999 -- -- 6,000
Pooled acquisition (Note 2)-
Distributions to owners ........................... -- -- -- (2,068,883) -- (2,068,883)
Purchase of owners' interests ..................... -- -- -- (147,000) -- (147,000)
Net income ........................................ -- -- -- 1,905,035 -- 1,905,035
---------- ------- ----------- ----------- --------- -----------
BALANCE, December 31, 1994 ............................ 2,546,721 2,547 1,652,630 2,494,381 (107,134) 4,042,424
Issuance of stock for acquisitions (Note 2) ......... 37,143 37 323,963 -- -- 324,000
Pooled acquisition - distributions to owners
(Note 2) .......................................... -- -- -- (1,057,528) -- (1,057,528)
Payments received on stock subscriptions ............ -- -- -- -- 23,167 23,167
Net income .......................................... -- -- -- 941,783 -- 941,783
---------- ------- ----------- ----------- --------- -----------
BALANCE, December 31, 1995 ............................ 2,583,864 2,584 1,976,593 2,378,636 (83,967) 4,273,846
Issuance of stock in connection with warrants
(Note 11) ......................................... 1,190 1 8,576 -- -- 8,577
Payments received on and write-off of stock
subscriptions (Note 11) ........................... (8,863) (9) (69,655) -- 83,701 14,037
Net income .......................................... -- -- -- 18,321 -- 18,321
---------- ------- ----------- ----------- --------- -----------
BALANCE, December 31, 1996 ............................ 2,576,191 $ 2,576 $ 1,915,514 $ 2,396,957 $ (266) $ 4,314,781
========== ======= =========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................................... $ 18,321 $ 941,783 $ 1,905,035
Adjustments to reconcile net income to net cash (used) provided by
operating activities-
Depreciation and amortization ............................................. 944,676 646,810 459,234
Provision for bad debts ................................................... 877,912 482,706 342,722
Loss on disposal of property and equipment ................................ 8,434 7,088 --
Deferred income tax benefit ............................................... (239,672) (161,500) (38,500)
Loss from unconsolidated subsidiaries ..................................... -- -- 122,699
Minority interest ......................................................... (55,075) (11,597) 14,942
Changes in assets and liabilities-
Increase in accounts receivable ......................................... (3,024,625) (1,012,343) (1,713,397)
Increase in inventory and other current assets .......................... (53,687) (330,347) (60,364)
Increase in other assets ................................................ (733,219) (114,409) (194,699)
Increase (decrease) in accounts payable ................................. 1,014,119 (188,251) 54,433
Increase in accrued expenses ............................................ 307,975 1,292,246 246,995
----------- ----------- -----------
Net cash (used) provided by operating activities ....................... (934,841) 1,552,186 1,139,100
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in notes receivable ....................................... -- 10,483 (321,022)
Proceeds from sale of property, plant and equipment ........................... 12,458 42,000 --
Purchase of property, plant and equipment ..................................... (2,965,419) (445,809) (1,573,525)
Investment in unconsolidated subsidiaries ..................................... -- -- (34,446)
Minority interest investment in subsidiary .................................... 240,000 -- --
----------- ----------- -----------
Net cash used by investing activities .................................. (2,712,961) (393,326) (1,928,993)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received in purchase acquisitions ........................................ -- 10,890 --
Net borrowings on line of credit agreement .................................... 1,921,717 782,503 299,359
Proceeds from issuance of notes payable and capital leases .................... 2,596,061 661,389 647,009
Payments on notes payable and capital leases .................................. (699,203) (573,923) (824,887)
Increase (decrease) in notes payable - related parties ........................ (44,468) (236,043) 1,265,964
(Increase) decrease in notes receivable - related parties ..................... 85,242 (40,115) 160,000
Proceeds from issuance of stock ............................................... 8,575 -- 132,577
Payments received on stock subscriptions receivable ........................... 14,039 23,167 --
Distributions to members (note 2) ............................................. -- (1,057,528) (2,068,883)
Purchase of members' interest ................................................. -- -- (147,000)
----------- ----------- -----------
Net cash provided (used) by financing activities ....................... 3,881,963 (429,660) (535,861)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH ................................................. 234,161 729,200 (1,325,754)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .................................. 870,004 140,804 1,466,558
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR ........................................ $ 1,104,165 $ 870,004 $ 140,804
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for-
Interest .................................................................... $ 495,094 $ 365,934 $ 204,424
=========== =========== ===========
Income taxes (refunds) ...................................................... $ 586,017 $ 36,000 $ (24,393)
=========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-5
<PAGE>
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF ORGANIZATION
Amedisys, Inc. (the Company) is incorporated in the state of Delaware and
operates in eight states including Louisiana, Texas, Tennessee, Missouri,
Kansas, Mississippi, North Carolina and Minnesota with a concentration of
business in Louisiana and Texas. During 1996, the Company opened a new
ambulatory surgery center in Louisiana in which it has a 60% ownership interest;
in 1995, the Company acquired an outpatient surgery center company in Texas and
two home care companies (see Note 2) in Louisiana. The Company provides a
variety of supplemental staffing, home health care, home care management,
outpatient surgery and primary care clinical services. The Company's home care
division serves all major metropolitan areas in the state of Louisiana as well
as the areas of Houston, Dallas and Beaumont in Texas. The outpatient surgery
centers are located in Houston, Texas, and Hammond, Louisiana.
NATURE OF OPERATIONS
The Company provides services through a network of subsidiaries which include:
AMEDISYS STAFFING SERVICES, INC. (ASS) supplies highly trained critical care
registered nurses and licensed practical nurses to all types of health care
facilities. Independent contract nurses are utilized to meet the staffing needs
of client health care facilities.
AMEDISYS NURSING SERVICES, INC. (ANS) is an employee-based staffing agency that
provides a variety of relief personnel such as registered and licensed practical
nurses, and certified nurses' aides for staff relief in all types of health care
facilities.
AMERINURSE, INC. provides highly trained nurses who travel to client heath care
facilities and work on a contract basis. Effective January 1, 1996, Amerinurse,
Inc. was merged into ANS.
AMEDISYS SPECIALIZED MEDICAL SERVICES, INC. (ASM), Amedisys Home Health, Inc.
and Amedisys Home Health, Inc. of Texas provide skilled nursing care, home
health aid, physical therapy, occupational therapy, speech therapy and medical
social workers to homebound patients.
AMEDISYS SURGERY CENTERS, L. C. (ASC) operates two outpatient surgery centers in
Houston, Texas, and one surgery center in Hammond, Louisiana, which commenced
operation in November, 1996.
AMEDISYS PHYSICIAN SERVICES, INC. (APS) provides management of physician
practices and networks including Independent Practice Associations, as well as
management of home health agencies. APS also operates a laboratory.
F-6
<PAGE>
During 1995, the Company began a process to develop a managed care organization
(MCO) including a health maintenance organization (HMO) component. In early
1996, the Company deposited $1,000,000 (included in cash in the accompanying
financial statements) in connection with the HMO licensing process. The
Company's president acquired a 67% interest in the MCO in exchange for arranging
a $1,000,000 letter of credit for the HMO, secured by shares in the Company
owned by the president. Neither the Company nor the Company's president have any
further formal commitment in connection with the MCO and the future development
of the MCO is undeterminable at this time. See Note 14 also.
USE OF ESTIMATES
The accounting and reporting policies of the Company and its subsidiaries
conform with generally accepted accounting principles. In preparing the
consolidated financial statements, the Company is required to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company, and
its wholly-owned subsidiaries (ASS, ANS, ASM and ASC) and its 60%-owned
subsidiary (APS) and their wholly-owned and partially-owned subsidiaries
Analytical Nursing Management Corporation of Texas, a wholly-owned subsidiary of
ASS; MedAmerica, Inc. of Texas and MedAmerica, Inc., 80%-owned subsidiaries of
ASS; Amedisys Home Health, Inc. and Amedisys Home Health, Inc. of Texas, both
wholly-owned subsidiaries of ASM; Jackson Rural Health Clinic, Inc. (clinic
closed February, 1996), Kentwood Rural Health Clinic, Inc. (clinic closed
August, 1995), and Bastrop Rural Health Clinic, Inc. (clinic sold in September,
1996), all 60%-owned subsidiaries of ASM. All material intercompany accounts and
transactions have been eliminated in these financial statements.
Prior year financial statements have been restated to include the accounts of a
business combination accounted for as a pooling-of-interests (See Note 2).
Business combinations accounted for as purchases are included from the
respective dates of acquisition.
REVENUE RECOGNITION POLICY
Gross revenue is recorded on an accrual basis based upon the date of service at
amounts equal to the Company's established rates or estimated cost reimbursement
rates, as applicable. Allowances and contractual adjustments representing the
difference between the established rates and the amounts estimated to be payable
by third parties are also recorded on an accrual basis and deducted from gross
revenue to determine net service revenues.
Reimbursement for home health care services to patients covered by the Medicare
program is based on cost reimbursement rates. Final reimbursement is determined
after submission of annual cost reports and audits thereof by the fiscal
intermediaries. Proposed legislation by the U. S. Congress may change the
payment methodology for home health care services to Medicare patients from a
cost based reimbursement system to a prospective payment system.
F-7
<PAGE>
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash includes certificates of deposit and
all highly liquid debt instruments with maturities of three months or less when
purchased. The carrying amount approximates fair value because of the short
maturity of those instruments.
INVENTORY
Inventories consist of medical supplies which are utilized in the treatment and
care of home health and outpatient surgery patients. Inventories are stated at
the lower of cost (first-in, first-out method) or market.
PROPERTY AND EQUIPMENT
Property and equipment is generally carried at cost except for certain property
purchased from related parties (see Note 3). Additions and improvements are
capitalized, but ordinary maintenance and repair expenses are charged to income
as incurred. The cost of property sold or otherwise disposed of and the
accumulated depreciation thereon are eliminated from the property and related
accumulated depreciation accounts, and any gain or loss is credited or charged
to income.
Capitalized leases, primarily of computer equipment, phone systems, and vans
used by the home care divisions, are included in property and equipment. Capital
leases are recorded at the present value of the future rentals at lease
inception and are amortized over the lesser of the applicable lease term or the
useful life of the equipment.
For financial reporting purposes, depreciation and amortization of property
subject to capital leases ($788,000 in 1996, $468,000 in 1995 and $351,000 in
1994) is included in other general and administrative expenses and is provided
utilizing the straight-line method based upon the following estimated useful
service lives:
Buildings 40 years
Leasehold Improvements 5 years
Equipment and furniture 5-7 years
Vehicles 5 years
Computer software 5 years
On January 1, 1996, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
The impact on the Company's financial position and results of operations for the
year ended December 31, 1996 was not material.
EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing net income (loss) by the
weighted average number of shares of common stock outstanding during the year;
common stock equivalents are excluded from this computation because they are not
material to the calculation.
F-8
<PAGE>
RECLASSIFICATIONS
Certain amounts previously reported in the 1995 financial statements have been
reclassified to conform to the 1996 presentation.
2. ACQUISITIONS:
On June 30, 1995, the Company acquired all issued and outstanding membership
interests in ASC in exchange for 1,000,000 shares of Company common stock. ASC's
assets on June 30, 1995 were approximately $3,000,000. Upon closing of the
transaction, the former members of ASC owned approximately 40% of the issued and
outstanding stock of the Company. This transaction has been accounted for as a
pooling of interests. ASC was a limited liability company and, accordingly, had
no income tax liabilities. The effect of providing for income taxes on results
of ASC operations prior to the 1995 acquisition is shown under "Pro forma
Information" in the accompanying statement of income.
On May 31, 1995, the Company acquired all of the outstanding stock of Home Care
Plus, Inc. in exchange for 30,000 shares of its common stock valued at $274,000.
The excess of the total acquisition cost over the fair value of the net assets
acquired of $312,197 is being amortized over seven years using the straight-line
method.
On March 19, 1995, the Company acquired all of the outstanding stock of Health
Care Services 24, Inc. in exchange for 7,143 shares of its common stock valued
at $50,000 and notes payable in the amount of $50,000, payable in monthly
installments through March, 1996. The Company acquired client lists (See Note 5)
and property and equipment with a fair value of $85,000 and $15,000,
respectively.
On April 28, 1994, the Company acquired all of the outstanding stock of Priority
Home Care, Inc. in exchange for 15,800 shares of its common stock valued at
$150,000. The excess of the total acquisition cost over the fair value of the
net assets acquired of $144,348 is being amortized over seven years using the
straight-line method.
The acquisitions of Home Care Plus, Inc., Health Care Services 24, Inc. and
Priority Home Care, Inc. were accounted for as purchases and as a result,
operations of these entities subsequent to the date of acquisition have been
included in the consolidated financial statements. Unaudited pro forma
consolidated results of operations for the years ended December 31, 1995 and
1994 as though these companies had been acquired as of January 1, 1994 are as
follows:
1995 1994
----------- -----------
Net service revenues ..................... $38,108,293 $31,625,839
Net income ............................... $ 850,874 $ 1,750,446
Earnings per common share ................ $ 0.33 $ 0.68
The above amounts reflect adjustments for amortization of goodwill.
F-9
<PAGE>
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of:
1996 1995
----------- -----------
Land ......................................... $ 219,843 $ 162,246
Buildings and leasehold improvements ......... 607,255 509,619
Equipment, furniture and vehicles ............ 5,585,340 2,910,087
Computer software ............................ 94,881 37,581
----------- -----------
Total ............................... 6,507,319 3,619,533
Accumulated depreciation ..................... (1,897,601) (1,170,065)
----------- -----------
Net ................................. $ 4,609,718 $ 2,449,468
=========== ===========
During 1994, prior to its acquisition by the Company, ASC purchased a building,
land and equipment from a real estate partnership whose owners were also owners
of ASC, and are now owners of the Company. The purchase price of this property
was $1.2 million and resulted in a gain to the seller of approximately $475,000,
which was offset against the allocated purchase price of the property and
treated as a distribution in the accompanying financial statements. Lease
payments on this property, prior to purchase, were approximately $104,000 and
are included in other expenses.
ASC also purchased certain other equipment from owners of ASC prior to its
acquisition by the Company. The sellers' basis in the equipment was
undeterminable and thus the entire purchase price of $115,000 was offset against
the recorded equipment balance and treated as a distribution in the accompanying
financial statements. Rental payments on this equipment were approximately
$75,000 in 1994 and are included in other expenses. No rental payments were made
on this equipment in 1995.
4. OTHER INVESTMENTS
The Company has made advances totaling $295,120 at December 31, 1996 in
connection with the acquisition of a 34% interest in a surgery center being
developed in Houston, Texas. The surgery center is expected to open in late 1997
and is to be managed by the Company under a long-term management contract. At
December 31, 1995, the Company had made advances of $127,286 in connection with
the development of a surgery center in Hammond, Louisiana which was completed
and leased by the Company in 1996.
The Company acquired an investment in a real estate partnership in connection
with the purchase of ASC (see Note 2), which has certain partners who are also
owners of the Company. This investment is accounted for by the equity method.
Other investments at December 31, 1996 also include advances of $83,000 made in
connection with the development of a managed care organization (See Notes 1 and
14).
F-10
<PAGE>
5. OTHER ASSETS:
Other assets include the following for the years ended December 31, 1996 and
1995:
1996 1995
-------- --------
GOODWILL, net of accumulated amortization of
$123,687 and $59,554 ............................... $329,223 $397,022
START-UP COSTS, net of accumulated
amortization of $172,579 and $129,241 .............. 326,439 104,608
CLIENT LISTS ACQUIRED, net of accumulated
amortization of $158,271 and $115,343 ........... 10,321 49,582
OTHER ................................................ 333,739 151,868
-------- --------
$999,722 $703,080
======== ========
Costs incurred to establish regional offices of ASM and ASC prior to beginning
services are capitalized as Other Assets and amortized over a five-year period
in accordance with Medicare reimbursement regulations and accepted industry
practice.
In connection with the acquisition of various home health companies, ASM
purchased client lists which are being amortized over a two-year period.
Other assets also include deferred organizational costs, which are being
amortized over a five-year period, deposits on leased properties and advances
made in connection with various other business development projects.
6. NOTES PAYABLE:
Notes payable as of December 31, 1996 and 1995, consist primarily of borrowings
under a $4,500,000 line of credit which matures on June 12, 1997, bears interest
at bank prime (9.75% at December 31, 1996), and is secured by accounts
receivable, life insurance on the major stockholder and personal guarantees of
several stockholders. Borrowing rates range from 8% to 14.39% in 1996 and 8% to
10.25% in 1995. As of December 31, 1996, approximately $121,312 was unused under
this line of credit. The weighted average monthly interest on short-term
borrowings was 9.78% and 10.67% in 1996 and 1995 respectively. Subsequent to
year-end, the line of credit was increased to $5,500,000 with a maturity date of
April 7, 1997.
The revolving line of credit is subject to certain covenants, including a
monthly borrowing base or margin requirement calculation, a debt service
coverage ratio and a leverage ratio. The Company was in default on one of the
covenants at December 31, 1996, which default has been waived by the bank. No
events of default existed at December 31, 1995.
F-11
<PAGE>
7. LONG-TERM DEBT:
Long-term debt consists of notes payable to banks and other financial
institutions which are due in monthly installments through 2000:
PAYEE 1996 1995
---------- --------
Notes payable to finance and equipment
companies including interest at 8.00-11.25% ........ $1,501,559 $286,397
Notes payable to banks including interest
at 9.00-14.39% ..................................... 893,022 311,638
---------- --------
Total ........................................ 2,394,581 598,035
Current portion ...................................... 457,786 386,848
---------- --------
Long-Term ............................................ $1,936,795 $211,187
========== ========
The fair value of long-term debt as of December 31, 1996, estimated based on the
Company's current borrowing rate of 9.75%, is approximately $1,917,004.
These borrowings are secured by equipment, vehicles and the personal guarantee
of a stockholder. Maturities of debt as of December 31, 1996, are as follows:
December 31 ,1997 $ 457,786
December 31, 1998 431,514
December 31, 1999 257,180
December 31, 2000 238,968
December 31, 2001 181,791
Thereafter 827,342
----------
$2,394,581
==========
8. CAPITAL LEASES:
The Company acquired certain equipment under capital leases for which related
liabilities have been recorded at the present value of future minimum lease
payments due under the leases. The present minimum lease payments under the
capital leases and the net present value of future minimum lease payments are as
follows:
December 31, 1997 ..................................... $ 277,462
December 31, 1998 ..................................... 232,903
December 31, 1999 ..................................... 123,723
December 31, 2000 ..................................... 28,072
December 31, 2001 ..................................... 8,023
---------
Total future minimum payments ......................... 670,183
Amount representing interest .......................... (96,625)
---------
Present value of future minimum lease payments .... 573,558
Current portion ....................................... 230,905
---------
Long-term portion ..................................... $ 342,653
=========
F-12
<PAGE>
9. INCOME TAXES:
The Companies file consolidated federal income tax returns, including all
subsidiaries which are owned more than 80%. State income tax returns are filed
individually by the subsidiaries in accordance with state statutes.
The Company utilizes the liability approach to measuring deferred tax assets and
liabilities based on temporary differences existing at each balance sheet date
using currently enacted tax rates in accordance with FASB Statement No. 109.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.
The provision (benefit) for income taxes consists of the following:
1996 1995 1994
--------- --------- --------
Current portion .............. $ 242,139 $ 361,136 $ 51,893
Deferred portion ............. (239,672) (161,500) (38,500)
--------- --------- --------
$ 2,467 $ 199,636 $ 13,393
========= ========= ========
Net deferred tax assets consist of the following components:
1996 1995
--------- ---------
Deferred tax assets:
Receivable allowance .................. $ 285,000 $ 97,000
Self-insurance reserves ............... 202,000 106,000
Losses of consolidated subsidiaries
(not consolidated for tax purposes) . 42,000 54,000
Other ................................. 47,672 --
Deferred tax liabilities:
Property and equipment ................ (129,000) (49,000)
--------- ---------
$ 447,672 $ 208,000
========= =========
Total tax expense (benefit) on income before taxes resulted in effective tax
rates that differed from the federal statutory income tax rate due solely to
state income taxes and nondeductible expenses in 1996. A reconciliation follows
for 1995 and 1994:
1995 1994
------- -------
Income taxes computed at federal
statutory rate ........................ 34.00% 34.00%
State income taxes ...................... 2.00 .39
ASC income prior to merger (Note 2) ..... (16.88) (33.40)
Losses of unconsolidated subsidiaries ... 8.33 (0.65)
Write-off of notes receivable from
unconsolidated subsidiaries ........... (14.39) --
Net operating losses utilized ........... -- (1.61)
Nondeductible expenses and other ........ 4.60 1.96
------- -------
Total .......................... 17.66% 0.69%
======= =======
F-13
<PAGE>
10. RELATED PARTY TRANSACTIONS:
NOTES RECEIVABLE
Notes receivable from related parties consist of unsecured and noninterest
bearing notes from the President and certain stockholders of the Company
totaling approximately $40,000 and $18,000 at December 31, 1996 and 1995, and
receivables from an internal medicine clinic (IMC) totaling approximately
$150,000 and $256,000 at December 31, 1996 and 1995. The fair value of the notes
receivable from related parties is equal to the recorded value due to the short
term nature of the notes.
In March, 1994, the Company entered into an agreement with IMC, an unrelated
party, to form a new corporation (APS) which is 60% owned by the Company and 40%
owned by the owners of IMC. APS acquired equipment and personal property from
IMC for approximately $340,000 and managed, through mid 1996, the continuing
operations of IMC. The Company loaned funds to APS to acquire the assets of IMC
and meet working capital requirements. This loan to APS, which is to be repaid
solely from the revenues of APS over a five-year period, bears interest at a
rate of prime plus 2% and is eliminated in consolidation. APS recorded
management fees of $28,097 in 1996 and $541,441 in 1995 from IMC. As discussed
above, the unpaid management fees are included in notes receivable from related
parties. Effective January 1, 1996, IMC issued new notes to APS for the unpaid
balance on this date. These notes bear interest at 9%, require monthly principal
and interest payments of $4,076 with the balance due on maturity of January 1,
1999 and are secured by the accounts receivable of IMC.
In accordance with the terms of the agreements with IMC, IMC has the right and
option to sell its stock back to APS at a price equal to 3.5 times the earnings
per share of APS attributable to each share of APS stock, to be calculated based
on the largest annual earnings per share amount during the three-year period
prior to the time such repurchase is requested by IMC. This option is not
exercisable until March 1, 1997 and, based on operations of APS through December
31, 1996, would not have a material effect on the Company's financial statements
if exercised.
NOTES PAYABLE
Notes payable to related parties consist primarily of a note issued in 1994 in
the original amount of $1,080,000, bearing interest at 9% (see Note 3). The note
is secured by all real estate and personal property of one of the surgical care
centers. Maturities of this debt as of December 31, 1996 are as follows:
1997 $ 44,335
1998 48,494
1999 53,043
2000 58,019
2001 63,461
Thereafter 720,575
--------
$987,927
========
The fair value of this note at December 31, 1996, estimated based on the
Company's current borrowing rate of 9.75%, was approximately $950,929.
The remaining balance of notes payable to related parties ($46,240) consists of
unsecured notes to certain stockholders of the Company that are due on demand
and bear interest at rates from 0% - 12%. The fair value of these notes
approximates the recorded balance due to the short-term nature of the notes.
F-14
<PAGE>
OTHER
Prior to acquisition by the Company, ASC engaged in the following transactions
with related parties during 1995 and 1994.
Payments totalling approximately $108,000 in 1995 and $229,000 in 1994 were
made to RPH, Inc. for anesthesia services. The primary owners of RPH, Inc.
were also controlling owners of ASC.
During 1994, the Company purchased the interest of two members (totaling
7.6%) for $35,000 per percentage point, $252,000 in aggregate. This
purchase was effected through the issuance of notes payable. Of the
purchased interest, 3% was sold in 1994 for $35,000 per percentage point,
$105,000. The remaining repurchased interest of 4.6% has been reflected as
a reduction of retained earnings in the accompanying financial statements.
In 1995, the Companies paid $18,935 for legal fees to a stockholder and director
(through July, 1995) of the Company.
In 1995, APS paid medical director fees of $24,000 to a stockholder of the
Company and a total of $24,000 to two of the owners of IMC.
The Company had an investment in Network Wellness Systems, Inc. (NWS), the
corporate general partner of Sports/Spa and Clinic, a Louisiana Partnership In
Commendam ("SSC"), which operated a health club, spa, salon and wellness
facility within the Sandestin Resort (the Resort) in Destin, Florida. SSC began
business in November, 1991, and subsequently was placed in Chapter 11
Reorganization on April 23, 1993. The bankruptcy proceeding was thereafter
converted to a Chapter 7 liquidation. The Company determined the unpaid balance
due from NWS ($99,487) to be uncollectible and charged it against income in
1994. Two of the owners of IMC are also affiliated with NWS and SSC.
11. CAPITAL STOCK:
A predecessor entity to the Company, M & N, completed its initial public
offering of 250,000 common shares for gross proceeds of $1,500,000 on August 26,
1993. In connection with the offering, M & N issued 25,000 warrants to the
Underwriter (the Underwriter's Warrants), which are exercisable at $7.20 per
common share for a period of four years commencing April 28, 1994.
As of December 31, 1996 and 1995, 10,000,000 shares of $.001 par value per share
common stock and 2,500,000 shares of $.001 per share preferred stock were
authorized.
STOCK OPTIONS
The Company's Board of Directors has approved a Statutory Stock Option Plan
providing incentive stock options to key employees. The Plan is to be
administered by a Compensation Committee (appointed by the Board) which is to
determine, within the provisions of the Plan, those eligible employees to whom,
and the times at which, options shall be granted. Each option granted under the
Plan is to be convertible into one (1) share of common stock, unless adjusted in
accordance with the provisions of the Plan. Options may be granted for a number
of shares not to exceed, in the aggregate, 500,000 shares of common stock at an
option price per share of no less than 85% of the fair market value of a share
of common stock on the date the option is granted. If the option is granted to
any owner of 10% or more of the total combined voting power of the Company and
its subsidiaries, the option price is to be at least 110% of the fair market
value of a share of common stock on the date the option is granted. Each option
is to be fully exercisable when granted and may
F-15
<PAGE>
be exercised during a period as determined by the Compensation Committee, not to
exceed 10 years from the date such option is granted. The aggregate fair market
value of common stock subject to an option granted to a participant by the
Committee in any calendar year shall not exceed $100,000. The following options
are outstanding at December 31, 1996:
DATE OF GRANT Shares Price Exercisable
- ------------- -------- ------ ---------------------------
April, 1995 27,650 $ 7.00 1/3 Annually beginning May,
1996 expiring April, 1998
May, 1996 22,500 $ 6.75 1/3 Annually beginning May,
1997 expiring May 2001
August, 1996 238,573 $ 6.61 1/3 Annually beginning August,
1996 expiring August 2001
The Company applies APB Opinion No. 25 and related interpretations in accounting
for its plans. FASB Statement No. 123 "Accounting for Stock-Based Compensation"
("SFAS 123") was issued by the FASB in 1995 and changes the methods for
recognition of cost on plans similar to those of the Company. Adoption of SFAS
123 is optional; however, pro forma disclosures, as if the Company had adopted
the cost recognition requirements under SFAS 123 in 1996, are presented below.
A summary of the Company's stock options as of December 31, 1996 and 1995, and
changes during the year ended on those dates follows:
<TABLE>
<CAPTION>
1996 1995
------------------- -------------------
WGTD. AVG. WGTD. AVG.
SHARES EXER. PRICE SHARES EXER. PRICE
------- ----- ------- -----
<S> <C> <C> <C> <C>
Outstanding at beginning of year ........... 27,650 $7.00 -- $--
Granted .................................... 261,073 6.62 27,650 7.00
Exercised .................................. -- -- -- --
Cancelled/forfeited/expired ................ -- -- -- --
------- ----- ------- -----
Outstanding at end of year ................. 288,723 $6.66 27,650 $7.00
======= ===== ======= =====
Exercisable at end of year ................. 88,741 $6.65 -- $--
======= ===== ======= =====
Weighted average fair value of options
granted during the year .................. $ 3.11 $ 2.56
======= =======
</TABLE>
The fair value of each option granted during the periods presented is estimated
on the date of grant using the Black-Scholes option pricing model with the
following assumptions: (i) dividend yield of 0%, (ii) expected volatility of
40.02% and 45.44% for two options issued in 1996 and 27.63% for the option
issued in 1995, (iii) risk-free interest rate of 6.22% and 5.23% in the years
1996 and 1995, respectively, and (iv) expected life of 3 to 5 years.
F-16
<PAGE>
The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------ ----------------------------------------------
RANGE OF NUMBER WGTD. AVG. WGTD. AVG. NUMBER WGTD. AVG.
EXERCISE OUTSTANDING REMAINING EXERCISE EXERCISABLE EXERCISE
PRICES AT 12/31/96 CONTRACTUAL LIFE PRICE AT 12/31/96 PRICE
----------- ------------- ----------------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
$6.61 - $7.00 288,723 4 years $6.66 88,741 $6.65
</TABLE>
Had compensation cost for the Company's 1996 options been determined consistent
with SFAS 123, the Company's net income, net income applicable to common
stockholders' and net income per common share for 1996 would approximate the pro
forma amounts below:
<TABLE>
<CAPTION>
1996 1995
--------------------------- ---------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income ..................................................... $18,321 $(59,326) $941,783 $932,836
======= ======== ======== ========
Net income applicable to common stockholders ................... $18,321 $(59,326) $941,783 $932,836
======= ======== ======== ========
Net income per common share .................................... $ 0.01 $ (.02) $ 0.37 $ 0.36
======= ======== ======== ========
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of future amounts. SFAS 123 does not apply to awards prior to 1995, and
additional awards in future years are anticipated.
Subsequent to December 31, 1996, the Company's Board of Directors approved the
grant of options covering the purchase of 282,000 shares of stock at $6.20 per
share. The stock purchase options become exercisable ratably over a three year
period beginning February 11, 1997 and terminate February, 2007.
STOCK PURCHASE AGREEMENTS
On March 21, 1994, the Company had a private placement stock offering of 45,000
units, consisting of one share of common stock and one common stock purchase
warrant (unit) for $7.86 per share based on 85% of the average of the high and
low bid price per share on the first day of the offering which was March 21,
1994. The warrant included in the unit entitles the holder thereof to purchase
one share of common stock at a purchase price of $9.25 per share for a
three-year period. The private placement resulted in a total of 29,721 shares
being sold for $233,607. A portion of the sale was financed by the Company;
actual cash received as of December 31, 1994, was $126,473. The total amount of
$233,607 was recorded as common stock and additional paid-in capital and equity
has been reduced for these sales for which cash has not been received as of
December 31, 1994 and 1995. During 1996, the Company determined that certain
receivables ($69,449) recorded under this plan were not collectible.
F-17
<PAGE>
12. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company and its subsidiaries have leased office space at various locations
under noncancelable agreements which expire between January 1, 1997, and August
31, 2005, and require various minimum annual rentals. Total minimum rental
commitments at December 31, 1996, are due as follows:
1997 $1,441,373
1998 1,272,979
1999 1,134,334
2000 948,141
2001 836,746
Due thereafter 842,713
----------
$6,476,286
==========
SELF-FUNDED INSURANCE PLANS
During 1995, the Company became self-insured for workers' compensation claims in
the State of Louisiana up to certain policy limits. Claims in excess of $200,000
per incident and $756,000 in the aggregate are insured by third party
reinsurers. The Company has accrued a liability for outstanding and incurred,
but not reported claims based on historical experience. Such reserves totaled
approximately $519,000 and $389,000 at December 31, 1996 and 1995, respectively,
and are included in accrued insurance in the accompanying financial statements.
In connection with the self insurance and as required by the State of Louisiana,
the Company issued a $175,000 letter of credit in favor of the Louisiana
Department of Labor, which expired February 17, 1997, and was renewed to
February 17, 1998.
PLANNED SURGICAL CARE CENTER PROJECTS
The Company is pursuing a number of planned surgical center projects to be
developed or purchased. While negotiations are being conducted in connection
with a number of possible projects, the Company has made no formal commitments
in this area beyond the investment discussed in Note 4.
OTHER
The Companies are subject to various types of claims and disputes arising in the
course of their businesses. While the resolution of such issues is not presently
determinable with certainty, management believes that the ultimate resolution of
such matters will not have a significant effect on the Companies' financial
position or results of operations.
13. PENSION PLAN:
The Company adopted a pension plan qualified under Internal Revenue Code 401(k)
for all employees who are 21 years of age and have at least one year of service.
Under the plan, eligible employees may elect to defer a portion of their
compensation, subject to internal revenue service limits. The Company may make
matching contributions equal to a discretionary percentage of the employee's
salary reductions. No matching contribution was made for the year ended December
31, 1995. A matching contribution for the year ended December 31, 1996 was made
in 1997.
F-18
<PAGE>
14. PROPOSED BUSINESS COMBINATION:
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 were completed, AMEDISYS, INC. would become
a wholly owned subsidiary of CMI, a provider of physician practice management
services in the State of New York.
In connection with discussions with management of CMI regarding the proposed
future strategic direction of the Company, management concluded in December,
1996, that the realization of certain previously recorded assets might not be
assured and, accordingly, wrote off the portion of these investments
(approximately $623,000 consisting primarily of advances made to develop a
proposed managed care organization and certain nonoperating equipment) believed
to be unrealizable through future operations.
On March 17, 1997, the Company and CMI announced that they had mutually
determined not to proceed with the proposed merger. This decision is not
expected to materially alter the Company's strategic direction.
15. SEGMENT INFORMATION:
The Company operates principally in three business segments: Outpatient Surgery,
Physician Services and Nursing Services. The following shows industry segment
information for the fiscal years ended December 31, 1996 and 1995 (in
thousands):
1996 1995
-------- --------
Net Service Revenues:
Outpatient Surgery ................. $ 4,626 $ 3,601
Physician Services ................. 2,839 2,322
Nursing Services ................... 38,595 31,666
-------- --------
Total ....................... 46,060 37,589
-------- --------
Operating Income:
Outpatient Surgery ................. 753 853
Physician Services ................. (370) (54)
Nursing Services ................... 761 581
-------- --------
Total ....................... 1,144 1,380
-------- --------
Other Expenses ....................... (1,178) (250)
-------- --------
Income before income taxes and minority
interest ........................... $ (34) $ 1,130
======== ========
F-19
<PAGE>
CAPITAL EXPENDITURES
----------------------
1996 1995
------ ----
Outpatient Surgery ........................... $2,284 $289
Physician Services ........................... 119 5
Nursing Services ............................. 562 152
------ ----
Total ............................... $2,965 $446
====== ====
DEPRECIATION AND AMORTIZATION
-----------------------------
1996 1995
---- ----
Outpatient Surgery .......................... $281 $153
Physician Services .......................... 207 126
Nursing Services ............................ 457 368
---- ----
Total .............................. $945 $647
==== ====
IDENTIFIABLE ASSETS
-------------------------
1996 1995
------- -------
Outpatient Surgery ......................... $ 6,781 $ 3,412
Physician Services ......................... 1,347 1,221
Nursing Services ........................... 8,731 6,904
------- -------
$16,859 $11,537
======= =======
F-20
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,104,165
<SECURITIES> 0
<RECEIVABLES> 8,270,982
<ALLOWANCES> 732,166
<INVENTORY> 442,102
<CURRENT-ASSETS> 10,155,265
<PP&E> 4,609,718
<DEPRECIATION> 1,897,601
<TOTAL-ASSETS> 16,858,781
<CURRENT-LIABILITIES> 9,132,697
<BONDS> 0
0
0
<COMMON> 2,576
<OTHER-SE> 4,312,205
<TOTAL-LIABILITY-AND-EQUITY> 16,858,787
<SALES> 96,060,226
<TOTAL-REVENUES> 46,060,226
<CGS> 26,404,786
<TOTAL-COSTS> 18,511,698
<OTHER-EXPENSES> (1,178,029)
<LOSS-PROVISION> 877,912
<INTEREST-EXPENSE> 944,676
<INCOME-PRETAX> (34,287)
<INCOME-TAX> 2,467
<INCOME-CONTINUING> 18,321
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,321
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
