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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
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PART I.............................................................................................. 2
ITEM 1. BUSINESS............................................................................ 2
ITEM 2. PROPERTIES.......................................................................... 16
ITEM 3. LEGAL PROCEEDINGS................................................................... 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................. 17
PART II........................................................................................... 17
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS................ 17
ITEM 6. SELECTED FINANCIAL DATA............................................................. 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................................................... 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.......................................... 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 22
PART III.......................................................................................... 23
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................................. 23
ITEM 11. EXECUTIVE COMPENSATION.............................................................. 26
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................... 28
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................... 29
PART IV........................................................................................... 31
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K..................... 31
SIGNATURES........................................................................................ 32
FINANCIAL STATEMENTS.............................................................................. F-1
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PART I
ITEM 1. BUSINESS
General
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 aides, 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. 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. ("SCC") on June
30, 1995 in exchange for one million shares of AMEDISYS Common Stock. The
closing sales price for the Company's Common Stock on the date of closing was
$9.625, giving the one million shares of Company Common Stock issued to Surgical
Care Centers of Texas a value of $9,625,000. The net book value of SCC's assets
on June 30, 1995 was approximately $3,000,000 per the records of SCC. Upon the
closing of the transaction, the former members of SCC owned approximately 40% of
the issued and outstanding Common Stock of the Company. 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 health 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. The
Company currently does not have any capitated fee arrangements.
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., to start and develop the HMO, and a
Company-sponsored Preferred Provider Organization ("PPO"), FutureCare, Inc.
("FutureCare"). When FutureCare was developed, physician sponsored networks
needed an HMO license to offer services to employer groups and purchasers of
health plans. However, the proposed Balance Budget Act of 1997 was disseminated
shortly after FutureCare developed, and provided for the formation and operation
of provider sponsored organizations. Until that time, only HMOs and a limited
number of health care prepayment plans were available to Medicare beneficiaries.
The proposed Balance Budget Act of 1997 contemplated enabling Medicare patients
to select from a much broader category of health care providers. In view of this
change, the Company discontinued its efforts to open FutureCare, the offering
was never funded and all costs were written off in the December 31, 1996
financial statements.
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.
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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:
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/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. The average cost of a skilled nursing visit for the
Company is $85. 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.
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Medicare reimbursement for the Company's home health care accounted for
80.51% of total home health care revenue in 1996. Medicare remains a large
payor of home health care services. The Company's home health care services
payor mix (according to net revenues) was as follows for 1996:
Medicare 80.51%
Medicaid 5.10%
Private/Other 14.39%
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 capitated 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 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 provides comprehensive home health nursing services including
skilled nursing, certified nursing assistants, and assisted living services. In
the skilled nursing area, the Company offers specialized services including
intravenous antibiotic therapy, pain management therapy, total parenteral
nutrition, enteral nutritional therapy, hydration therapy, burn and wound
management, pre- and post-operative services, chemotherapy, and respiratory
therapy services. In addition, the Company offers patients ancillary services
such as physical, occupational, and speech therapy as well as counseling with
qualified medical social workers.
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 health 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.
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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. In 1995, home health care
management services were provided to 6 home health care agencies with a combined
16 locations. In 1996, home health care management services were provided to 21
clients with a combined 36 locations.
All home health care management clients have pre-determined fee
arrangements. These fee arrangements may encompass a contractual per-visit fee,
hourly fee, or monthly fee depending on the services requested by the
client.
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 health 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 believes
that strong staffing companies will continue to serve needs in high census
periods and in markets where hospital consolidation has peaked and core staffing
levels have been reduced. The Company currently operates twelve offices which
provide supplemental staffing. In eight of the twelve offices, the registered
nurses and licensed practical nurses are independent contractors. All other
medical personnel are employees of the Company. The supplemental staff are paid
hourly and are placed on an as-needed basis in accordance with the Company's
contract with the client.
A new development in the Company's temporary staffing business is the
addition of office and clerical staffing which will encompass not only health
care related operations, but general office and clerical operations as well.
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
(Louisiana, Texas, Minnesota, Kansas, Tennessee, North Carolina, Mississippi and
Missouri) 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.
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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 SurgiCenter in November 1996. It is a joint
venture with area physicians in which the Company currently owns a 60% interest
and provides management services under a long-term management contract. As of
December 31, 1996, the remaining 40% interest is comprised of 16 investors. The
center, a limited corporation in the state of Louisiana, was initially organized
at a value of $16,000 per 1% interest. The $16,000 was comprised of $6,000 cash
and a $10,000 note payable on demand which accrues interest at a rate of 10% per
annum. The Company receives a fee of 5% of net revenue to provide day-to-day
supervision, financial planning and management, and general facility
administration services. 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. The Company currently utilizes YAG and CO2 lasers in its centers.
Increased usage of these 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
Department ("HHS") 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. In Texas, the Company has two outpatient centers
which are all allowed by state licensure to keep patients up to 23 hours
following surgery. However, the Company does not currently have any surgery
recovery centers.
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
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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 the Texas outpatient surgery centers, a focused
effort has been made to increase the appeal of the surgery centers. The Company
has purchased new equipment and expanded hours of operation.
The Company has enforced high quality standards and recently the AMEDISYS
Surgery Center of South Houston was granted accreditation from the Accreditation
Association for Ambulatory Health Care, Inc. Additionally, the Company has a
managed care team including both corporate and regional personnel which has
negotiated additional managed care agreements with selected MCOs. These
agreements are between the Company's surgery centers and the MCO and allow the
surgery centers to be network providers, and consequently, obtain access to the
MCOs enrolled population. In exchange for this network access, the surgery
centers provide services at a discounted fee. Currently, the Company has
approximately forty managed care contracts with various payors.
The Company derives revenue from its surgery centers by the surgeries
performed, which are paid by Medicare, Medicaid, private insurance or the
patient depending on the responsible party. The Company's outpatient surgery
centers payor mix (according to net revenues) for 1996 is as follows:
Medicare 8.73%
Medicaid 3.02%
Private/Other 88.25%
The Company's outpatient surgery centers performed a combined 3,153 cases
in 1996. The cases by specialty are as follows:
GASTROENTEROLOGY 873
PODIATRY 829
PAIN MANAGEMENT 625
ORTHOPEDICS 246
EAR, NOSE, THROAT 185
OPHTHALMOLOGY 158
GENERAL SURGERY 128
OB/GYNECOLOGY 100
PLASTIC SURGERY 8
ORAL SURGERY 1
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TOTAL 3,153
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.
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PHYSICIAN SERVICES
The Physician Services division consists of Physician Practice Management
services and management of Independent Practice Associations ("IPA"). In the
AMEDISYS system, the physician remains independent but has 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 IPA
managed by the Company. The Company currently retains no ownership in physician
practices or IPAs.
During 1996, the Company provided physician practice management services to
8 physician practices, 4 of which were majority-owned by the Company. The range
of services provided includes the following: financial services (billing,
accounting, accounts receivables, accounts payables, payroll, budgeting),
consulting services relative to quality assurance, community relations, and
planning and development services. The Company has no contractual obligation to
ensure profitability of the physician practices. The total revenues and
expenses related to the four majority-owned physician practices are included in
the consolidated financial statements of the Company. The four physician
practices the Company manages with no ownership interest are on a contract
basis, with the Company's revenue for providing these services calculated as 10%
of net revenue of the practice or a flat monthly fee ranging from $83 to $1,000
per month.
As of December 31, 1996, the Company no longer has an ownership interest in
physician practices. The Company divested its ownership by selling 1 practice
to a participating physician and by divesting ownership in 3 practices.
The Company provided management services during 1996 to 3 IPAs, of which
the Company has no ownership interest. An IPA is an organization that allows
physicians to remain independent while obtaining the benefits usually derived
from large physician practices. AMEDISYS' managed 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.
Physicians in IPAs contract with MCOs to perform services at discounted fees for
the MCO's 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. Under capitated arrangements, the IPA bears the risk of
managing the medical services provided to the patients of the MCO. Providers,
including physicians and hospitals, form integrated networks to achieve a
critical mass of patients which are attractive to large managed care groups. The
physicians participating in IPAs are individual practitioners or a member of a
group practice and are not employees of the Company.
The IPAs managed by AMEDISYS pay the Company a flat fee per month ranging
from $83 to $1,000 according to a written contract to provide a range of
services which may include the following: claims and utilization data reporting,
committee development, office site development, staff recruitment, membership
development, managed care contracting, administrative services, accounting
services, and business development. Contracts may be terminated by a 30 to 60
day written notice from either party.
Revenues for the Company's physician services division for the year ended
December 31, 1996, 1995, and 1994 were approximately $2,839,145 or 6% or
revenues, $2,322,433 or 6% of revenues, and $1,001,000 or 4% of revenue,
respectively.
VIRTUALLY INTEGRATED SYSTEM
In the future, AMEDISYS plans to position its affiliated IPAs for a
capitated payment system by developing a continuum of care which includes IPAs
and alternate site providers such as home health agencies, infusion and durable
medical equipment companies, and outpatient surgery centers. The total
continuum of care services could then be "bundled" into a single fee in a
capitated system. These services would form a virtually integrated system since
they would be linked with information systems and common standards but not
housed in a hospital or a single physical structure. Many of the medical
services previously performed in hospital settings can be done in the home or
outpatient surgery center because of advances in technology. Providing these
services outside of the hospital reduces the cost of a patient's care since
hospital overhead in not included in the fees.
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MCOs, which include HMOs and PPOs, currently have a low rate of penetration
in the Company's traditional markets in the South. In 1994, HMOs had a 10.9%
market share in the South Central states in which the Company does the majority
of its business. As a comparison, HMO penetration in the Pacific states was
35.8% in 1994, according to the SMG Marketing Group. However, as HMOs gain
market share, the Company believes that a network that could reduce patient
hospital days would be attractive to this payor group as indicated by national
statistics. Average hospital days per 1000 enrollees have continually declined
over the past decade for commercial HMOs using member group practices of the
Unified Medical Group Association, dropping 44% to 151 days in 1994 from 269
days in 1984, indicating the HMOs desire to reduce costs by reducing
hospitalization.
Since this virtually integrated system is comprised of providers who are
linked not purchased by the system, the system is flexible and can be changed
with less capital investment that with traditional hospital-based systems.
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.
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.
For 1996, the percentage of net revenue by payor source is as follows:
Medicare 49.43%
Medicaid 3.38%
Private/Other 47.19%
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
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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 JCAHO 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 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.
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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.
As a provider of services under the Medicare and Medicaid programs, the
Company is subject to the various "anti-fraud and abuse" laws, including the
federal health care programs anti-kickback statute. This law prohibits any
offer, payment, solicitation or receipt of any form of remuneration to induce
the referral of business reimbursable under a federal health care program or in
return for the purchase, lease, order, arranging for, or recommendation of items
or services covered by any such program. Federal health care programs or any
health care plans or programs that are funded by the Untied States (other than
certain federal employee health insurance benefits) and certain state health
care programs that receive federal funds under various programs, such as
Medicaid. A related law forbids the offer or transfer of any item or service
for less than fair market value, or certain waivers of copayment obligations, to
a beneficiary of Medicare or a state health care program that is likely to
influence the beneficiary's selection of health care providers. Violations of
the anti-fraud and abuse laws can result in the imposition of substantial civil
and criminal penalties and, potentially, exclusion from furnishing services
under any federal health care programs. In addition, the states in which the
Company operates generally have laws that prohibit certain direct or indirect
payments or fee-splitting arrangements between health care providers where they
are designed to obtain the referral of patients to a particular provider.
Congress adopted legislation in 1989, known as the "Stark" Law, that
generally prohibits a physician ordering clinical laboratory services for
Medicare beneficiary where the entity providing that services has a financial
relationship (including direct or indirect ownership or compensation
relationships) with the physician (or a member of his immediate family), and
prohibits such entity from billing for or receiving reimbursement for such
services, unless a specified exemption is available. Additional legislation
became effective as of January 1, 1993 know as "Stark II," that extends the
Stark Law prohibitions to services under state Medicaid programs, and beyond
clinical laboratory services to all "designated health services," including home
health services, durable medical equipment and supplies, and parenteral and
enteral nutrients, equipment, and supplies. Violations of the Stark Law may
also trigger civil monetary penalties and program exclusion. Pursuant to Stark
II, physicians who are compensated by the Company are prohibited from making
referrals to the Company, and the Company will be prohibited from seeking
reimbursement for services rendered to such patients unless an exception
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applies. Several of the states in which the Company conducts business have also
enacted statutes similar in scope and purpose to the federal fraud and abuse
laws and the Stark Laws.
Various federal and state laws impose criminal and civil penalties for
making false claims for Medicare, Medicaid or other health care reimbursements.
The Company believes that it bills for its services under such programs
accurately. However, the rules governing coverage of, and reimbursements for,
the Company's services are complex. There can be no assurance that these rules
will be interpreted in a manner consistent with the Company's billing practices.
In May 1995, the federal government instituted Operation Restore Trust, a
health care fraud and abuse initiative focusing on nursing homes, home health
care agencies and durable medical equipment companies located in New York,
Florida, Illinois, Texas and California, the five states with the largest
Medicare populations. The purpose of this initiative is to identify fraudulent
and abusive practices such as billing for services not provided, providing
unnecessary services and making prohibited referral payments to health care
professionals. Operation Restore Trust has been responsible for significant
fines, penalties and settlements. Operation Restore Trust was recently expanded
to cover twelve additional states for the next two years. The program was also
expanded to include reviews of psychiatric hospitals, certain independent
laboratories and partial hospitalization benefits. Further, there are plans
eventually to apply the program's investigation techniques in all fifty states
and throughout the Medicare and Medicaid programs. One of the results of the
program has been increased auditing and inspection of the records governing
reimbursement and other issues. Specifically, the government plans to double the
number of comprehensive home health agency audits it performs each year (from
900 to 1800) and also to increase the number of claims reviewed by 25.0% (from
200,000 to 250,000). In general, the application of these anti-fraud and abuse
laws is evolving.
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.
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.
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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
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 relations directors and client service
coordinators as well as staffing coordinators.
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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.
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
Company believes the terms and lease rates 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.
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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
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.
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<TABLE>
<CAPTION>
SELECTED HISTORICAL
STATEMENT OF
INCOME DATA (UNAUDITED) 1996 1995(1) 1994(1) 1993(1) 1992(1)
(In thousands, except per
share amounts)
<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 19,655 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 Tax 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 AVG 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/Common
Share $ 0.01 $ 0.29 $ 0.50 $ 0.15 $ 0.13
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>
- - --------------
(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.
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.
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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 IPAs, 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.
YEAR 2000 COMPLIANCE ISSUES
The Company is currently evaluating its information system for the Year
2000 compliance. The Company does not anticipate any material disruption in its
operations resulting from any failure by the Company to achieve compliance. At
present, the Company does not have, but expects to solicit, information
concerning the Year 2000 compliance status of its suppliers, customers and
payors. In the event that any of the Company's significant suppliers, customers
or payors does not successfully and timely achieve Year 2000 compliance, the
Company's business or operations could be adversely affected.
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 staffing pools were utilized.
Some markets such as Houston and Dallas had an increased demand for staffing
services after hospital
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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 divesting ownership in physician practices but continuing MSO agreements with
unrelated parties. 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 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 FutureCare, Inc., a proposed managed care organization, of
$391,000, certain non-operating
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equipment of $132,000 believed to be unrealizable through future operations, and
$100,000 in notes receivable from a related party. The $391,000 advance to
FutureCare, Inc. was to be reimbursed upon completion of a securities offering
of its stock. Due to the uncertainty of a successful offering, the Company chose
to expense these amounts. The $132,000 was comprised of ophthalmology and
processing kitchen equipment that the Company was trying to sell. None of these
assets were producing, or expected to produce, a benefit in current or future
years. The $100,000 was written off because of a dispute between the Company and
Internal Medicine Clinic of Tangipahoa, Inc. ("IMC"). The discussions with CMI
began with a signed letter of intent on October 17, 1996 and were terminated 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 CMI.
RESULTS FOR THE FISCAL YEAR 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. The line of credit is subject to certain
covenants, including a monthly borrowing base, a debt service coverage ratio,
and a leverage ratio. The Company was in default of the leverage ratio
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requirement at December 31, 1996, which default was waived by the bank.
Eligible receivables are defined principally as trade accounts that are aged
less than 90 days for staffing and 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 $(1,936,841) of net cash used in the year ended
December 31, 1996. The change was primarily due to increased accounts
receivable which is a direct result of increased revenues, as well as, certain
cash amounts related to the statutory requirements of FutureCare being
restricted. 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 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. The Company obtained debt financing in the amount of $1,835,000
from Merrill Lynch in August 1996 in connection with an outpatient surgery
center development in Hammond, Louisiana. The loan has a 5-year term with a 10
year amortization period at an annual interest rate equal to 2.75% + the "30-Day
Commercial Paper Rate." The loan proceeds were used to purchase all the
necessary medical equipment, furniture, and fixtures for the surgery
center.
At December 31, 1996, the Company had working capital of $21,568 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.
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
The single jointly signed auditors' report is considered to be the
equivalent of two separately signed auditors' reports. Thus, each firm
represents that it has complied with generally accepted auditing standards and
is in a position that would justify being the only signatory of the report.
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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, Mr. Borne also founded and served
as president and chief executive officer of AMEDISYS Specialized Medical
Services, Inc. until June 1993. Mr. Borne 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. Mr. Morel
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, Mr. Morel was senior accountant at
the certified public accounting firm of Ellis-Apple and Company. Mr. Morel 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, Mr. McCall is responsible for all operations
of the Company's temporary staffing and home health care businesses. From
November 1995 to January 1997, Mr. McCall was vice president of operations of
that division and 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, Mr. McCall was regional vice president of ATC Nursing
Services, Inc. and from 1990 to 1991 was president
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of AMERINURSE, a wholly owned subsidiary of AMEDISYS, Inc. which has since been
incorporated into AMEDISYS Nursing Services, Inc. From 1988 to 1991, Mr. McCall
was vice president of operations and research and development of AMEDISYS
Staffing Services, Inc. From 1986 to 1988 Mr. McCall was president of Analytical
Nursing Management Corporation of Texas, Inc., a subsidiary of AMEDISYS Staffing
Services, Inc. From 1984 to 1986, Mr. McCall was administrator of Immediate
Medical Care in Lake Charles, Louisiana and from 1981 to 1983, Mr. McCall held
various administrative and clinical positions in emergency room, critical care
and family practice nursing. From 1978 to 1981, Mr. McCall was director of
nursing at Cameron Medical Center and deputy coroner of Cameron Parish. Mr.
McCall has a Bachelor of Science 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 Ms. Bernhard is responsible for the operations of
the management services organization which specializes in home health care
management and consulting. Ms. Bernhard served as president of Nursing Services
from January 1995 to March 1996 and from March 1993 to February 1996, was
president of AMEDISYS Specialized Medical Services, Inc., the Company's home
health care subsidiary. Ms. Bernhard 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. Ms. Bernhard 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. Ms. Bernhard 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. Mr. Gregory 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 Bachelor of Science 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. Mrs. Carey also writes the annual and quarterly Company
reports with the corporate attorney which are filed with the Securities and
Exchange Commission. As corporate secretary, Mrs. Carey is responsible for the
Company's shareholder records, stock transactions and operations of the Board of
Directors and its committees. Mrs. Carey was vice president of operations of
AMEDISYS Staffing Services from October 1991 to October 1993. From July 1989 to
September 1991, Mrs. Carey was the administrator of a subsidiary company. From
1977 to 1989, Mrs. Carey was a founding partner and owner of a speech and
hearing clinic. From 1975 to 1977, Mrs. Carey was the clinic supervisor at the
LSU speech and hearing clinic. From 1970 to 1975, Mrs. Carey was a speech
pathologist with East Baton Rouge Parish Schools. Mrs. Carey 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. Mrs. Carey
is the 1996-1997 president of Quota International, Inc., an international
classified service organization of professional, executive and business people.
Mrs. Carey 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. Mr. Hession founded and served as president of Key
Nursing corporation, a supplemental staffing company, from 1982 to 1994. Mr.
Hession served as consulting director of Nursing Services in Metairie, Louisiana
from
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1979 to 1982. Mr. Hession was director of nursing at Assumption General Hospital
in Napoleonville, Louisiana from 1977 to 1978. Mr. Hession 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. Mr. Hession holds
an Associate degree of Nursing from Nicholls State University, and also attended
the University of Southwestern Louisiana. Mr. Hession served in the United
States Marine Corps from 1971 to 1973.
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. Dr. LeBlanc 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. Dr. LeBlanc 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. Dr. LcBlanc 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. Dr. LeBlanc was
certified by the American Board of Surgery in 1974. Dr. LeBlanc earned a
Master's degree in business administration from Louisiana State University in
Baton Rouge, Louisiana in 1992. Dr. LeBlanc has published fifteen professional
articles in his specialty.
Dr. Alan J. Ostrowe has served as a director of the Company since July
1994. Dr. Ostrowe previously served as president of General Anesthesia
Services, Inc., an affiliated company. Dr. Ostrowe is a Baton Rouge physician
specializing in anesthesiology since 1971 and pain management since 1991. Dr.
Ostrowe received his medical degree from New York Medical College in 1966. Dr.
Ostrowe is a fellow of the American College of Anesthesiologists, a Diplomat of
the American Board of Anesthesiology and a Diplomat of the American Academy of
Pain Management. Dr. Ostrowe 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. Dr. Ostrowe 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. Dr. Payan 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. Dr. Payan did his residency at St. Luke's
Hospital, St. Joseph's Hospital and at Baylor College of Medicine in Houston.
Dr. Payan is on staff at Southern Medical Center and 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. Dr. Payan 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 Morel 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.
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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>
LONG-TERM
ANNUAL COMPENSATION 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 1995 130,350 $20,000 - 3,250 -
Officer 1994 101,000 35,000 - - -
Lynne S. Bernhard, 1996 $ 90,645 - 18,500 -
President, AMEDISYS 1995 78,958 $17,500 - 3,250 -
Resource Management 1994 75,000 30,000 - - -
Irvin T. Gregory, 1996 $127,300 - - 28,500 -
President,
Outpatient Surgery
</TABLE>
EMPLOYMENT AGREEMENTS
Mr. William F. Borne, chief executive officer, has an employment agreement
with the Company.
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.
1995 STOCK OPTION GRANTS
OPTIONS PERCENT OF
GRANTED TOTAL OPTIONS EXERCISE PRICE EXPIRATION
NAME (SHARES) GRANTED (PER SHARE) DATE
---- -------- -------------- -------------- ----------
William F. Borne 3,250 11.75 $7.00 April 1998
Lynne S. Bernhard 3,250 11.75 $7.00 April 1998
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<PAGE>
1996 STOCK OPTION GRANTS
OPTIONS PERCENT OF
GRANTED TOTAL OPTIONS EXERCISE PRICE EXPIRATION
NAME (SHARES) GRANTED (PER SHARE) DATE
---- -------- -------------- -------------- ----------
William F. Borne 35,000 14.67 $6.61 August 2001
Lynne S. Bernhard 18,500 7.75 $6.61 August 2001
Irvin T. Gregory 28,500 11.95 $6.61 August 2001
*1997 STOCK OPTION GRANTS
OPTIONS PERCENT OF
GRANTED TOTAL OPTIONS EXERCISE PRICE EXPIRATION
NAME (SHARES) GRANTED (PER SHARE) DATE
---- -------- -------------- -------------- ----------
William F. Borne 34,525 13.39 $6.20 February 2007
Lynne S. Bernhard 14,644 5.68 $6.20 February 2007
Irvin T. Gregory 29,365 11.39 $6.20 February 2007
* 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.
AGGREGATED OPTION EXERCISES IN 1996
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES
ACQUIRED NUMBER OF SECURITIES VALUE OF UNEXERCISED
ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
NAME EXERCISE REALIZED OPTIONS OPTIONS(1)
---- -------- -------- ----------------------------- -----------------------------
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.
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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.
<TABLE>
<CAPTION>
SHARES OF PERCENT OF
NAME AND ADDRESS COMMON STOCK VOTING POWER
------------------ ------------ ------------
<S> <C> <C>
William F. Borne
3029 S. Sherwood Forest Blvd., Suite 300
Baton Rouge, LA 70816 478,709 (1)(4) 18.5%
Lynne S. Bernhard
3029 S. Sherwood Forest Blvd., Suite 300
Baton Rouge, LA 70816 78,702(5) 3.1%
Karl A. LeBlanc, M.D.
7777 Hennessy Boulevard, Suite 612
Baton Rouge, LA 70808 23,153(6) *
Key Nursing Corporation(2)
627 Fairway Drive
Thibodaux, LA 70301 82,947 3.2%
William M. Hession, Jr.(2)
627 Fairway Drive
Thibodaux, LA 70301 19,968(7) *
Alan J. Ostrowe, M.D.
3029 S. Sherwood Forest Blvd., Suite 300
Baton Rouge, LA 70816 60,759(7) 2.4%
Irvin T. Gregory
12700 N. Featherwood, Suite 240
Houston, TX 77034 84,503(8) 3.3%
Boris L. Payan, M.D.(4)
3534 Vista
Pasadena, TX 77504 249,226(7) 16.7%
Jose R. Reyes, M.D.
3534 Vista
Pasadena, TX 77504 184,007(9) 12.3%
ALL OFFICERS AND DIRECTORS AS A GROUP (9
PERSONS) 1,491,457(10) 57.7%
</TABLE>
____________
* Less than 1%
(1) Does not include 38,500 shares held in trust for Mr. Borne's minor
children, as Mr. Borne is not the trustee and does not have voting or
disposition power over the shares.
(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.
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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 the Internal Medicine Clinic of Tangipahoa, Inc. ("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 agreements with IMC to form Rural
Health Provider Network, Inc. ("RHPN") of which the Company owns 60% (the
"Agreements"). Revenues of APS, if any, are to be split 60% to the Company and
40% to IMC. The name of RHPN has subsequently been changed to Amedisys
Physician Services, Inc. ("APS"). APS operated a lab, walk-in-clinic in
Hammond, Louisiana, and managed the physician practice of IMC. APS also
invested in an ophthalmology clinic in Hammond, Louisiana. Pursuant to the
Agreements, the Company loaned APS $312,000. This amount was comprised of
$112,000 for the purchase of the fixed assets of IMC and a working capital loan
of $200,000, collateralized by IMC's accounts receivable. The Company was
responsible for funding the operations of APS, including loaning additional
funds to APS if APS did not have adequate cashflow to meet its current
obligations. The balance owed to the Company by IMC for working capital
requirements at December 31, 1995 was $256,000. Two notes were issued on
January 1, 1996 to the Company by IMC in the combined amount of $256,000. These
notes bear interest at 9%, require monthly principal and interest payments of
$4,706 with the balance due on maturity of January 1, 1999 and are secured by
the accounts receivable of IMC. Because of a dispute between the owners of IMC
and the Company over the amounts outstanding, the Company determined that the
probability of collecting $100,000 of the payable was uncertain and therefore,
elected to expense that amount in December 1996, resulting in a remaining
balance owed at December 31, 1996 of $150,000. In addition to the outstanding
notes payable due from IMC, APS recorded management fees of $28,097 in 1996 and
$541,441 in 1995 from IMC. The Company and IMC terminated their management
relationship in August 1996, and have no other relationship with respect to
management of physician practices or independent practice associations.
In accordance with the terms of the Agreements, IMC has the right and
option to sell its shares of APS 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 became exercisable in March 1997, and does not have an expiration date.
In the Agreements, the Company agreed to loan the funds to repurchase the stock
to APS, if necessary. In addition, the Agreements provide that in the event
the management agreement between IMC and APS is terminated, IMC shall be
required to repurchase all of the assets of IMC acquired by APS at fair market
value within 45 days of such termination. At this time, the option has not been
exercised by IMC.
Notes payable to related parties in 1996 consisted primarily of a note
issued in 1994 in the original amount of $1,080,000, bearing interest at 9% with
a fifteen year amortization, to Vista Maple, Ltd. During 1994, prior to its
acquisition by the Company, Amedisys Surgery Centers, L.C. ("ASC") purchased a
building and land from Vista Maple, Ltd., a real estate partnership, whose
owners were also owners of ASC, and are now stockholders of the Company. The
Company currently has a 15% interest in Vista Maple, Ltd. The Company assumed
the note when it acquired ASC. The Vista Maple note is secured by all real
estate and personal property of ASC. 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
========
Page 29
<PAGE>
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.
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., for
anesthesia services. The primary owners of RPH, Inc. were also controlling
owners of ASC. During 1994, the Company purchased the interest of two owners
(totaling 7.6%) for $35,000 per percentage point, $252,000 in aggregate. This
purchase was effected through the issuance of notes payable which accrued
interest at 9% per annum and were payable upon demand. 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 general legal fees to Philip Caire,
a stockholder and director (through July, 1995) of the Company.
Medical director fees are comprised of fees paid to a medical professional
for administrative oversight of clinical and/or operational aspects of a medical
establishment.
In 1995, APS paid medical director fees of $24,000 to Dr. Alan Ostrowe, a
stockholder of the Company and a total of $24,000 in medical director fees 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.
Page 30
<PAGE>
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit No. Identification of Exhibit
2.1(1) - Acquisition Agreement dated December 20, 1993 between the Company
and M & N Capital Corp.
2.2(3) - Plan of Merger dated August 3, 1994 between M & N Capital Corp.
and the Company
2.3(4) - Certificate of Merger dated August 3, 1994 between M & N Capital
Corp. and the Company
3.1(4) - Certificate of Incorporation
3.2(4) - Bylaws
4.1(4) - Common Stock Specimen
10.1(4) - Master Note with Union Planter's Bank of Louisiana
10.2(4) - Merrill Lynch Term Working Capital Management Account
10.3(5) - Promissory Note with Deposit Guaranty National Bank
21.1(7) - List of Subsidiaries
23.1(7) - Consent of Counsel (contained in Exhibit 5.1)
23.2(7) - Consents of Arthur Andersen, LLP and Hannis T. Bourgeois & Co.,
L.L.P., independent public accountants
27.1(7) - Financial Data Schedule
______________________
(1) Previously filed as an exhibit to the Current Report on Form 8-K dated
December 20, 1993.
(2) Previously filed as an exhibit to the Current Report on Form 8-K dated
February 14, 1994.
(3) Previously filed as an exhibit to the Current Report on Form 8-K dated
August 11, 1994.
(4) Previously filed as an exhibit to the Annual Report on Form 10-KSB for the
year ended December 31, 1994.
(5) Previously filed as an exhibit to the Current Report on Form 8-K dated June
30, 1995.
(6) Previously filed as an exhibit to the Registration Statement on Form S-1
(333-8329) dated July 18, 1996.
(7) Previously filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1996.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the fourth quarter of 1996.
Page 31
<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 17th day of
June, 1998.
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:
SIGNATURE TITLE DATE
- - --------- ----- ----
/s/ WILLIAM F. BORNE Chief Executive Officer and Director June 17, 1998
WILLIAM F. BORNE (Principal Executive Officer)
/s/ MITCHEL G. MOREL Chief Financial Officer (Principal June 17, 1998
MITCHEL G. MOREL Financial and Accounting Officer)
/s/ RONALD A. LABORDE Director June 17, 1998
RONALD A. LABORDE
/s/ JAKE L. NETTERVILLE Director June 17, 1998
JAKE L. NETTERVILLE
DAVID R. PITTS DIRECTOR
PETER F. RICCHIUTI DIRECTOR
Page 32
<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
NEW ORLEANS, LOUISIANA BATON ROUGE, LOUISIANA
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)........... $ 103,165 $ 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.................... 9,154,265 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).................... 2,000,722 703,080
------------ ------------
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......................................... (1,734,219) (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................. (1,935,841) 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....................................... (766,839) 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.............................. $ 103,165 $ 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.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED
ASSETS TO BE DISPOSED OF
Whenever there are recognized events or changes in circumstances that indicate
the carrying amount of an asset may not be recoverable, management reviews the
asset for possible impairment. In accordance with SFAS No. 121, management uses
undiscounted estimated expected future cash flows to assess the recoverability
of the asset. If the expected future net cash flows are less than the carrying
amount of the asset, an impairment loss, measured as the amount by which the
carrying amount of the asset exceeds the fair value of the asset, would be
recognized.
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 $312,000 excess of the total acquisition cost over the fair value of the
net liabilities assumed was recorded as goodwill and 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:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Net service revenues...................... $38,108,293 $31,625,839
Net income................................ $ 850,874 $ 1,750,446
Earnings per common share................. $ 0.33 $0.68
</TABLE>
The above amounts reflect adjustments for amortization of goodwill.
F-9
<PAGE>
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of:
<TABLE>
<CAPTION>
<S> <C> <C>
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
=========== ===========
</TABLE>
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:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
GOODWILL, net of accumulated amortization of
$123,687 and $59,554.......................... $ 329,223 $ 397,022
RESTRICTED CASH................................ 1,001,000 --
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
---------- ---------
$2,000,722 $ 703,080
========== =========
</TABLE>
Restricted cash at December 31, 1996, represents a minimum cash reserve required
by and pledged to the Louisiana Department of Insurance to guarantee group
member benefits associated with a proposed Health Maintenance Organization
project.
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. Start-up costs consist primarily of incremental salaries and wages
directly related to the new operation, consulting fees and financing and legal
fees.
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 not in compliance with the
leverage ratio covenant at December 31, 1996, which default has been waived by
the bank. The loan agreement was subsequently amended to increase the leverage
ratio requirement from 2.5 to 1 to 3.0 to 1, which the Company complied with as
of December 31, 1996. 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:
<TABLE>
<CAPTION>
PAYEE 1996 1995
---------- --------
<S> <C> <C>
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
========== ========
</TABLE>
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:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Current portion.......................... $ 242,139 $ 361,136 $ 51,893
Deferred portion......................... (239,672) (161,500) (38,500)
--------- --------- ---------
$ 2,467 $ 199,636 $ 13,393
========= ========= =========
</TABLE>
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:
<TABLE>
<CAPTION>
1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
Income taxes computed at federal
statutory rate......................... (34.00%) 34.00% 34.00%
State income taxes....................... 5.00 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......... 4.00 4.60 1.96
------ --------- ---------
Total........................... (25.00%) 17.66% 0.69%
====== ========= =========
</TABLE>
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:
<TABLE>
<CAPTION>
DATE OF GRANT Shares Price Exercisable
- - ------------- ------ ----- --------------------------
<S> <C> <C> <C>
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
</TABLE>
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
through notes receivable from certain employees of the Company with a term of
two years at 8% interest per annum; 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 of $59,000 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) believed to be unrealizable through future operations.
These investments were primarily comprised of advances made to develop
FutureCare, Inc., a proposed managed care organization, of $391,000, certain
non-operating equipment of $132,000 believed to be unrealizable through future
operations, and $100,000 in notes receivable due from a related party. The
$391,000 advance to FutureCare, Inc. was to be reimbursed upon completion of a
securities offering of its stock. Due to the uncertainty of a successful
offering, the Company chose to expense these amounts. The $132,000 was comprised
of opthamology and processing kitchen equipment that the Company was attempting
to sell. None of these assets were producing, or expected to produce, a benefit
in current or future years. The $100,000 was written off because of a dispute
between the Company and Internal Medicine Clinic of Tanglpahoa, Inc.
("IMC").
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):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
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
======= =======
</TABLE>
F-19
<PAGE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES
--------------------
1996 1995
-------- --------
<S> <C> <C>
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
======= =======
</TABLE>
F-20
