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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
- -------------------------------------------------------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _______________
Commission file number: 0-24260
AMEDISYS, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 11-3131700
- ------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
3029 S. Sherwood Forest Blvd., Ste. 300 Baton Rouge, LA 70816
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(Address of principal executive offices including zip code)
(225) 292-2031
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(Registrant's telephone number, including area code)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares of Common Stock outstanding as of September 30, 1999:
3,147,514 shares
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<TABLE>
<S> <C> <C>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998....................... 3
Consolidated Statements of Operations for the Three and Nine Months
ended September 30, 1999 and 1998....................................................... 4
Consolidated Statements of Cash Flows for the Nine Months ended September 30, 1999 and 1998 ..... 5
Notes to Consolidated Financial Statements....................................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............ 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS...................................... 14
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS................................................................................ 14
ITEM 2. CHANGES IN SECURITIES............................................................................ 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................................................. 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................................. 14
ITEM 5. OTHER INFORMATION................................................................................ 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................................. 15
</TABLE>
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AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED, DOLLAR AMOUNTS IN 000's)
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, 1999 DECEMBER 31, 1998
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<S> <C> <C>
Current Assets:
Cash $ 3,486 $ 572
Accounts Receivable, Net of Allowance for Doubtful
Accounts of $3,133 in September 1999 and
$3,095 in December 1998 15,562 7,456
Prepaid Expenses 258 604
Inventory 1,520 1,440
Other Current Assets 631 263
------------- -------------
Total Current Assets 21,457 10,335
Notes Receivable from Related Parties 0 89
Property, Plant and Equipment, Net 5,993 8,574
Other Assets, Net 22,251 25,430
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Total Assets $ 49,701 $ 44,428
============= =============
LIABILITIES
Current Liabilities:
Notes Payable $ 11,026 $ 18,979
Current Portion of Long-Term Debt 3,141 3,141
Deferred Revenue 2,119 2,119
Accounts Payable 7,167 7,295
Accrued Expenses:
Payroll and Payroll Taxes 5,594 5,257
Insurance 0 368
Other 2,938 4,456
------------- -------------
Total Current Liabilities 31,985 41,615
Long-Term Debt 19,525 5,447
Deferred Revenue 6,532 8,121
Other Long-Term Liabilities 826 826
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Total Liabilities 58,868 56,009
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Minority Interest 103 103
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock 3 3
Preferred Stock (750,000 Shares) 1 1
Additional paid-in capital 12,204 12,006
Treasury Stock (4,667 Shares) (25) (25)
Retained Earnings (Deficit) (21,453) (23,669)
------------- -------------
Total Stockholders' Equity (Deficit) (9,270) (11,684)
------------- -------------
Total Liabilities and Stockholders' Equity $ 49,701 $ 44,428
============= =============
</TABLE>
See accompanying notes to financial statements.
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AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED, DOLLAR AMOUNTS IN 000's)
<TABLE>
<CAPTION>
3 MONTHS ENDED 9 MONTHS ENDED
------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(RESTATED) (RESTATED)
<S> <C> <C> <C> <C>
Income:
Service revenue $ 24,170 $ 2,282 $ 73,869 $ 12,359
Cost of service revenue 11,154 2,643 35,257 8,696
---------- ---------- ---------- ----------
Gross margin 13,016 (361) 38,612 3,663
General and administrative expenses:
Salaries and benefits 7,543 2,774 23,185 8,888
Other 6,694 5,918 19,459 9,817
---------- ---------- ---------- ----------
Total general and administrative expenses 14,237 8,692 42,644 18,705
---------- ---------- ---------- ----------
Operating (loss) (1,221) (9,053) (4,032) (15,042)
---------- ---------- ---------- ----------
Other income and expense:
Interest income 3 16 44 37
Interest expense (257) (208) (1,187) (385)
Other income/(expense) net (1,541) 11 (1,458) 24
---------- ---------- ---------- ----------
Total other income and expenses (1,795) (181) (2,601) (324)
---------- ---------- ---------- ----------
Net (loss) before income taxes, minority
interest and discontinued operations (3,016) (9,234) (6,633) (15,366)
(Benefit) for estimated income taxes (3,123) (1,906) (3,008) (3,990)
---------- ---------- ---------- ----------
Net income (loss) before discontinued operations 107 (7,328) (3,625) (11,376)
Discontinued operations:
(Loss) from discontinued operations, net of income taxes (102) (44) (325) (422)
Gain on dispositions, net of income taxes 6,165 3,327 6,165 3,327
---------- ---------- ---------- ----------
Total discontinued operations 6,063 3,283 5,840 2,905
---------- ---------- ---------- ----------
Net income (loss) $ 6,110 $ (4,045) $ 2,215 $ (8,471)
========== ========== ========== ==========
Weighted average common shares outstanding 3,117 3,065 3,075 3,057
Basic earnings (loss) per common share:
Net income (loss) before discontinued operations $ 0.03 $ (2.39) $ (1.18) $ (3.72)
Loss from discontinued operations, net of income tax (0.03) (0.01) (0.11) (0.14)
Gain on disposition, net of income tax 1.98 1.09 2.00 1.09
---------- ---------- ---------- ----------
Net income (loss) $ 1.98 $ (1.31) $ 0.71 $ (2.77)
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
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AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED, DOLLAR AMOUNTS IN 000s)
<TABLE>
<CAPTION>
Nine months ended
-----------------------------
September 99 September 98
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<S> <C> <C>
Cash flow from operating activities:
Net income (loss) $ 2,215 $ (8,470)
Adjustments to reconcile net loss to net
cash (used in) operating activities:
Depreciation and amortization 2,347 4,806
Provision for bad debts 1,108 660
Loss on disposal of property and equipment 0 2
(Gain) on sale of Outpatient Surgery division (9,417) 0
(Gain) on sale of Staffing division 0 (5,041)
Loss on sale of company assets 1,640 0
Loss on disposal of Durable Medical Equipment company 538 0
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (10,928) 3,494
(Increase) decrease in prepaid expenses 320 (708)
(Increase) in other current assets (682) (3,600)
(Increase) in other assets (118) (804)
Increase in accounts payable 1,228 185
Increase (decrease) in accrued expenses (1,511) 343
(Decrease) in deferred revenue (1,589) 0
------------ ------------
Net cash (used in) operating activities (14,849) (9,133)
------------ ------------
Cash flow from investing activities:
Purchase of furniture, fixtures & equipment (793) (2,549)
Proceeds from sale of furniture, fixtures & equipment 24 0
Proceeds from sale of company assets 537 0
Cash paid for acquisitions 0 (2,005)
Proceeds from sale of Durable Medical Equipment company 100 0
Proceeds from sale of Outpatient Surgery division 10,561 0
Decrease in notes receivable from related parties 89 54
------------ ------------
Net cash provided by (used in) investing activities 10,518 (4,500)
------------ ------------
Cash flow from financing activities:
Proceeds from sale of Staffing division 0 6,480
Cash received in acquisitions 0 317
Net increase (decrease) in borrowings on line of credit 7,314 (3,349)
Payments on notes payable (1,317) (1,837)
Proceeds from notes payable 1,248 1,643
Increase in outstanding checks in excess of bank balance 0 3,056
Proceeds from preferred stock 0 3,253
------------ ------------
Net cash provided by financing activities 7,245 9,563
------------ ------------
Net increase (decrease) in cash and cash equivalents 2,914 (4,070)
Cash and cash equivalents, beginning of period 572 4,070
------------ ------------
Cash and cash equivalents, end of period $ 3,486 $ 0
============ ============
Supplemental disclosures of cash flow information:
Cash payments for:
Interest $ 339 $ 772
============ ============
Income taxes $ 0 $ 160
============ ============
Supplemental schedule of non-cash investing activity (See note 8 to financial statements):
Value of stock issued in exchange $ 894
Value of note payable issued in exchange 1,575
Cash acquired in exchange (317)
Working capital acquired net of cash and cash equivalents 3,553
Fair value of property, plant and equipment acquired (385)
Fair value of other assets acquired (27)
Long term debt assumed 3,069
Fair value of other liabilities assumed 54
------------
Non-cash portion of acquisitions 8,416
Cash payment for acquisitions 2,005
------------
Goodwill recorded in exchange $ 10,421
============
</TABLE>
See accompanying notes to financial statements.
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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Amedisys, Inc. (the "Company") is a leading multi-regional provider of
home health nursing services, alternate-site infusion therapy, and ambulatory
surgery centers. The Company operates 62 offices within a network of
subsidiaries in the south and southeastern United States.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. Although the Company recognized
net income during the third quarter as a result of the gain on the sale of two
Outpatient Surgery Centers, it experienced losses from continuing operations
thus far in 1999, as well as in 1998 and 1997 and has a deficit in
stockholders' equity of $9,270,000 at September 30, 1999. The Company has
undertaken a significant restructuring effort to reduce operating costs by
closing unprofitable locations and reducing components of overhead expenses to
minimize this deficit. In August 1999, the Company adopted a formal plan to
sell all of its interests in its Outpatient Surgery and Infusion Therapy
divisions. The Company's strategic plan is to become a pure play home health
nursing company. The Company has successfully renegotiated a major debt
obligation (see Note 10) and has sold certain operating assets to generate cash
to fund remaining current obligations. Management believes that the strategies
it has undertaken will enable the Company to satisfy its obligations as they
become due; however, there can be no assurance that these strategies will
succeed. The financial statements do not include any adjustments relating to
the recoverability or classification of asset carrying amounts or the amount
and classification of liabilities that might result should the Company be
unable to continue as a going concern.
In the opinion of management of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting solely of
normal recurring adjustments) necessary to present fairly the financial position
at September 30, 1999 and the results of operations for the three and nine
months and cash flows for the nine months ended September 30, 1999 and 1998. The
results of operations for the interim periods are not necessarily indicative of
results of operations for the entire year. These interim consolidated financial
statements should be read in conjunction with the Company's annual financial
statements and related notes in the Company's Form 10-K.
Certain amounts previously reported in the 1999 and 1998 interim
unaudited financial statements have been reclassified due to the implementation
of a formal plan by the Company in the third quarter of 1999 to sell all of its
interests in its Outpatient Surgery and Infusion Therapy divisions.
2. EARNINGS PER SHARE
Basic net income (loss) per share of common stock is calculated by
dividing net income (loss) applicable to common stock by the weighted-average
number of common shares outstanding during the period. Diluted net income
(loss) per share is not presented as stock options and convertible securities
outstanding (total 3,609,471 shares) during the periods presented were not
dilutive.
3. MEDICARE REIMBURSEMENT REDUCTIONS AND RELATED RESTRUCTURING
The Company derived approximately 90% of its revenues from continuing
operations from the Medicare system for the nine months ended September 30,
1999. In 1997, Congress approved the Balanced Budget Act of 1997 (the "Budget
Act"). The Budget Act established an interim payment system (the "IPS") that
provided for the lowering of reimbursement limits for home health visits until
the Prospective Payment System ("PPS") was
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implemented. For cost reporting periods beginning on or after October 1, 1997,
Medicare-reimbursed home health agencies' cost limits were determined as the
lesser of (i) their actual costs, (ii) per visit cost limits based on 105% of
median costs of freestanding home health agencies, or (iii) a per beneficiary
limit determined for each specific agency based on whether the agency was an
"old" or "new" provider. An old provider was defined as an agency which filed a
twelve month cost report in Federal FY 1994 and a new agency as one that did
not. An old provider per beneficiary limit was based on 75% of 98% of the 1994
agency cost adjusted for inflation, plus 25% of a regional average as
determined by Health Care Financing Administration ("HCFA"). A new provider per
beneficiary limit was based on a national average, as determined by HCFA,
adjusted for regional labor costs. The schedule of per visit limits for cost
reporting periods ended on or after October 1, 1997 was published by HCFA in
January, 1998 and the schedule of per-beneficiary limits for cost reporting
periods beginning on or after October 1, 1997 was published in March, 1998, by
HCFA. The new IPS cost limits apply to the Company for the cost reporting
period beginning January 1, 1998 and will remain in effect until the
implementation of PPS, on October 1, 2000.
As a result of these reimbursement changes, a significant
restructuring effort by the Company was completed during 1998, resulting in
office reorganizations, consolidations, and closures as it transitioned to IPS.
After the acquisition of certain home health care agencies from Columbia/HCA in
November and December, 1998, a similar restructuring effort was implemented in
an overall effort to reduce costs and improve efficiencies, while maintaining
the same high-quality of patient care.
In October 1999, HCFA issued proposed regulations for PPS which will
be effective for all Medicare-certified home health agencies on October 1,
2000. The proposed regulations establish payments based on episodes of care. An
episode is defined as a length of care up to sixty days with multiple
continuous episodes allowed under the rule. A standard episode payment has been
established at $2,037 per episode, to be adjusted by a case mix adjuster and
the applicable geographic wage index. Episode payments will be made to
providers regardless of the cost to provide care. Consequently, the Company
expects that home health agencies will have the opportunity to become
profitable under this system.
As the home care industry faces continued changes in reimbursement
structure, Amedisys is committed to improving and streamlining systems and take
appropriate actions to offset these changes, creating a company focused on
long-term growth.
4. DISPOSITIONS
On January 1, 1999, the Company sold all of the issued and outstanding
stock of Amedisys Durable Medical Equipment, Inc. d/b/a Care Medical and
Mobility ("ADME") to Ace Drug Medical Equipment, Inc. ("ACE"), a Texas
Corporation. ACE acquired substantially all of the assets and liabilities of
ADME. The sales price was $672,385 of which $100,000 was paid at closing;
$418,318 is payable pursuant to a two year note in eight equal quarterly
payments of principal and interest at prime plus 2%, adjusted annually; and
$154,067 is payable pursuant to a one year note, payable in four quarterly
payments of principal plus accrued interest at prime plus 2%. The Company
expects that this disposition will not have a material effect on net revenues or
income of the Company. In accordance with the payment terms of both notes, the
first, second, and third quarterly payments due to the Company as of October 15,
1999 totaled $256,000. As of November 12, 1999, these payments have not been
received by the Company. As a result, the Company has fully reserved for these
past due payments.
5. DISCONTINUED OPERATIONS
In the accompanying statements of operations, the Company has
reflected its Staffing, Outpatient Surgery, and Infusion Therapy divisions as
discontinued operations.
In September, 1998, the Company sold certain assets, subject to the
assumption of certain liabilities, of its
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Staffing division. This sale qualified as a discontinued operation, and has
been reflected as such in the consolidated statements of operations.
In August 1999, the Company adopted a formal plan to sell all of its
interests in its Outpatient Surgery and Infusion Therapy divisions. The
Company's strategic plan is to become a pure play home health nursing company.
The sale of these divisions will also provide the Company the necessary
operating capital to sustain its operations until the implementation of PPS.
Effective September 1, 1999, the Company, by an Asset Purchase
Agreement, sold certain assets, subject to the assumption of certain
liabilities, of its wholly-owned subsidiary, Amedisys Surgery Centers, L.C.
("ASC"), to United Surgical Partners International, Inc. ("USP"). The assets
and liabilities sold related to two free-standing outpatient surgery centers
operated by ASC, Amedisys Surgery Center of Pasadena and Amedisys Surgery
Center of South Houston (the "Surgery Centers"). The assets of the Surgery
Centers were acquired by two Texas Limited Partnerships organized by USP and
its wholly-owned subsidiaries. The Company and its affiliates had no material
relationship with USP prior to this transaction. In consideration for the
assets of the Surgery Centers, ASC received $11,000,000, calculated using a
multiple of earnings before interest, taxes, depreciation, and amortization
(EBITDA). At closing, $10,562,000 was paid immediately to ASC with a
three-month $300,000 note receivable due to ASC payable in monthly installments
of $100,000 plus interest at an effective interest rate of 10%. In addition to
cash considerations, USP agreed to pay off certain creditors of ASC for debts
related to the Surgery Centers of $1,101,083. Subject to certain exceptions,
the assets sold consisted primarily of $60,000 cash; all accounts and notes
receivable; inventory; prepaid items; land; equipment, surgical instruments,
furniture, fixtures, and leasehold improvements; office supplies; records and
files; transferable governmental licenses, permits, and authorizations; trade
names, goodwill, computer software, and operating rights; and rights in, to and
under specified licenses, contracts, leases, and agreements. The liabilities
assumed by USP include, subject to certain exclusions, the current liabilities
of ASC and the obligations and liabilities under certain leases and contracts
arising on or after September 1, 1999. The Company filed a Current Report on
Form 8-K with the Securities and Exchange Commission ("SEC") on September 30,
1999 with regard to this transaction.
Effective September 1, 1999, the Company sold 19.02 units of its 42
unit (each unit represents a 1% interest) investment in East Houston Surgery
Center Ltd. and EHSC Management Company, LLC to thirteen physician investors for
$180,000 cash. The Company recorded a loss of $77,000 relating to the sale.
Summarized financial information for the discontinued operations is as
follows (in 000's):
<TABLE>
<CAPTION>
3 months ended 9 months ended 3 months ended 9 months ended
September 30, 1999 September 30, 1999 September 30, 1998 September 30, 1998
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Staffing Division
Service Revenue -- -- $ 3,812 $ 12,607
Income from discontinued
operations before
provision for income
taxes -- -- $ 6,013 $ 7,131
Income from discontinued
operations, net of
income taxes -- -- $ 3,969 $ 4,706
Outpatient Surgery Division
Service Revenue $ 1,956 $ 6,113 $ 1,586 $ 4,613
Income from discontinued
operations before
provision for income
taxes $ 635 $ 1,385 $ 233 $ 252
Income from discontinued
operations, net of
income taxes $ 419 $ 914 $ 154 $ 166
</TABLE>
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<TABLE>
<CAPTION>
3 months ended 9 months ended 3 months ended 9 months ended
September 30, 1999 September 30, 1999 September 30, 1998 September 30, 1998
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Infusion Therapy Division
Service Revenue $ 1,649 $ 5,556 $ 2,290 $ 4,923
(Loss) from discontinued
operations before
income tax benefit $ (790) $ (1,877) $ (1,020) $ (2,661)
(Loss) from discontinued
operations, net of
income tax benefit $ (521) $ (1,239) $ (673) $ (1,756)
Total Discontinued Operations
Service Revenue $ 3,605 $ 11,669 $ 7,688 $ 22,143
(Loss) from discontinued
operations before
income tax benefit $ (155) $ (492) $ (67) $ (639)
(Loss) from discontinued
operations, net of
income tax benefit $ (102) $ (325) $ (44) $ (422)
</TABLE>
Included in the accompanying consolidated balance sheets are the
following assets and liabilities relating to the discontinued operations (in
000's):
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
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<S> <C> <C>
Assets held for sale, short-term $ 1,182 $ 2,105
Assets held for sale, long-term $ 5,311 $ 7,808
Liabilities related to discontinued operations,
short-term $ 994 $ 1,269
Liabilities related to discontinued operations,
long-term $ 2,131 $ 3,511
</TABLE>
6. ACQUISITIONS
On November 2, 1998, the Company signed a definitive agreement to
purchase certain assets, subject to the assumption of certain liabilities, of
83 home care offices including 35 provider numbers of Columbia/HCA Healthcare
Corporation located in Alabama, Georgia, Louisiana, North Carolina, Oklahoma
and Tennessee. Assets located in Louisiana and Oklahoma were acquired November
16, 1998, and the remaining assets were acquired December 1, 1998. Assuming the
Columbia/HCA acquisition occurred on January 1, 1998, unaudited pro forma
information for the nine months ended September 30, 1998, which is not
necessarily indicative of future operating results, is as follows (in 000's,
except per share information). Pro forma data for the three months ended
September 30, 1998 is not presented as it is impracticable for the Company to
obtain the information necessary to calculate the data.
<TABLE>
<CAPTION>
Nine months ended
September 30, 1998
------------------
<S> <C>
Service Revenue $ 115,608
Operating (Loss) $ (35,693)
(Loss) before Discontinued Operations $ (23,767)
Net (Loss) $ (20,862)
Net (Loss) per Common Share $ (6.78)
</TABLE>
7. INCOME TAXES
Due to the combined loss between the year ended 1998 and the nine
months ended September 30, 1999, the Company has not established a deferred tax
asset or liability for the three and nine month periods ended September 30,
1999. For the three and nine month periods ended September 30, 1999, the
Company has reflected an income tax benefit of $3,123,000 and $3,008,000,
respectively, which is exactly offset by an income tax expense reflected in the
accompanying consolidated statement of operations as a component of loss from
discontinued operations, resulting in a net income tax expense/(benefit) of $0.
For the three and nine month periods ended September 30, 1998, the Company
established a deferred tax asset by recording an estimated net income tax
benefit of $214,000 and $2,493,000, respectively. These amounts are comprised
of a $1,906,000 and a $3,990,000 income tax benefit for the three and nine
month period ended September 30, 1998 which is reflected in the accompanying
consolidated statements of operations as a benefit for income taxes. These
benefits are offset by a $1,692,000 and a $1,497,000 income tax expense for the
three and nine month periods ended September 30, 1998 which are reflected in
the accompanying consolidated statements of operations as a component of loss
from discontinued operations. In December, 1998, a valuation allowance was
recorded against this deferred tax asset, effectively writing-off the deferred
tax asset due to the significant losses incurred by the Company for the year
ended December 31, 1998.
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8. SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITY
The following unaudited table presents (in 000's) a summary of the
acquisitions completed during each quarter of 1998 as presented in the
supplemental schedule to the consolidated statement of cash flows. No
acquisitions were completed in 1999.
<TABLE>
<CAPTION>
1stQtr 2ndQtr 3rdQtr
1998 1998 1998
Total Total Total Total
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Supplemental schedule of non-cash investing activity:
Value of stock issued in exchange $ 874 $ 20 $ 0 $ 894
Value of note payable issued in exchange 375 1,200 0 1,575
Cash acquired in exchange (123) (194) 0 (317)
Working capital deficit acquired net of cash and cash equivalents 3,272 281 0 3,553
Fair value of property, plant and equipment acquired (279) (106) 0 (385)
Fair value of other assets acquired (25) (2) 0 (27)
Long term debt assumed 2,998 71 0 3,069
Fair value of other liabilities assumed 54 0 0 54
---------- ---------- ---------- ----------
Non-cash portion of acquisitions 7,146 1,270 0 8,416
Cash payment for acquisition 1,905 100 0 2,005
---------- ---------- ---------- ----------
Goodwill recorded in exchange $ 9,051 $ 1,381 $ 0 $ 10,421
---------- ---------- ---------- ----------
</TABLE>
9. NOTES PAYABLE
Notes payable consists primarily of an asset-based line of credit with
availability, depending on collateral, up to $25 million with National Century
Financial Enterprises, Inc. ("NCFE"), an estimated $2.6 million unsecured
liability payable to Columbia/HCA, and borrowings under a revolving bank line of
credit of $750,000. The $25 million asset-based line of credit is collateralized
by eligible accounts receivable of the home health care nursing division and as
of September 30, 1999, had an outstanding balance of $7,913,000. Eligible
receivables are defined as receivables, exclusive of workers' compensation and
self-pay, that are aged less than 181 days. The ongoing fees associated with
this line of credit equate to 1% of eligible billed receivables generated during
each billing period. This line of credit expires on December 31, 2001. The
estimated $2.6 million unsecured net liability payable to Columbia/HCA resulted
from Periodic Interim Payments ("PIP") of $6.6 million directed to Columbia/HCA
and subsequently forwarded to the Company which have been determined by the
fiscal intermediary as funds belonging to Columbia/HCA. During the third quarter
of 1999, the Company made a payment of $4 million toward this unsecured
liability. The remaining balance is payable on the earlier of three business
days from receipt of the funds from Medicare or March 31, 2000. The revolving
bank line of credit of $750,000 bears interest at bank prime plus 1%. At
September 30,1999, $412,775 was outstanding on the line of credit. This line of
credit has scheduled monthly principal payments of $25,000 plus accrued
interest, with the balance due in March, 2000. The line of credit is
collateralized by 80% of eligible receivables in outpatient surgery and 80% of
physician notes receivable. Eligible receivables are defined principally as
accounts that are aged less than 90 days.
10. LONG-TERM DEBT
Long-term debt consists primarily of a $14 million note payable to
Columbia/HCA, a $2.9 million note payable to NPX, Inc., an affiliate of NCFE, a
$1.5 million note payable to Merrill Lynch, and various other capital leases and
notes. The $14 million note payable to Columbia/HCA is a result of the
acquisition of home health agencies consummated in November 1998. Effective
September 30, 1999, the Company and Columbia signed an agreement to modify the
terms of this note. The Company will make quarterly principal and interest
payments beginning April 30, 2001, with the balance of the note being due on
July 31, 2004. As a result of this modification, the note plus approximately
$1,036,000 of accrued interest was reclassified from short term to long term
debt.
11. AMOUNTS DUE TO AND DUE FROM MEDICARE
The Company is continuing to reconcile the amounts due to and due from
the Medicare program for the cost report year ended 1999. The integration and
change of ownership process of the acquired home health agencies of Columbia/HCA
have delayed the rate review process with Medicare. Rate reviews and
reconciliations have been forwarded to Medicare and responses are being
evaluated as received. Based on the information currently available to the
Company, the Company has a total estimated aggregate payable due to Medicare of
$10
10
<PAGE> 11
million which is netted against accounts receivable. For the cost report years
ended November 30 and December 31, 1999, the Company has estimated a net cost
report payable of $5.8 million for which twelve month repayment plans have been
arranged with Medicare. For the cost report year ended December 31, 1998,
year-end cost reports have been compiled with an estimated aggregate payable due
to Medicare of $4.2 million which the Company is awaiting notification from
Medicare of an extended payment plan approval. The Medicare program has
committed to the automatic approval of a thirty-six month extended repayment
schedule for any Medicare-certified home health agency which submits such a
request and has a payment due to Medicare as a result of IPS, subject to certain
exceptions. There can be no assurance that any or all of the Company's locations
will meet the conditions for automatic approval.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. This discussion should
be read in conjunction with the Consolidated Financial Statements appearing in
Item 1.
GENERAL
Amedisys, Inc. is a leading multi-regional provider of fully integrated
alternate-site health care services. The Company offers the following services:
home health nursing services; infusion therapy; and ambulatory surgery centers.
The Company operates 62 offices within a network of subsidiaries in the south
and southeastern United States.
RESULTS OF OPERATIONS
Revenues. Net revenues increased $21,888,000 or 959% and $61,510,000
or 498% for the three and nine months ended September 30, 1999, respectively,
as compared to the same periods in 1998. This increase was attributed to the
acquisition of certain Columbia/HCA home health care agencies in the latter
part of 1998. Visits for the three month period ended September 30 increased
245,718 or 339% from 72,411 in 1998 to 318,129 in 1999. For the nine month
period ended September 30, visits increased 723,670 or 301% from 240,053 in
1998 to 963,723 in 1999.
Cost of Revenues. Cost of revenues increased by 322% and 305% for the
three and nine months ended September 30, 1999 as compared to the same periods
in 1998. This increase is primarily attributed to the acquisition of certain
Columbia/HCA home health care agencies. As a percentage of net revenues, cost
of revenues decreased to 46% from 116% for the three months ended September 30,
1999 and 1998, respectively, and to 48% from 70% for the nine months ended
September 30, 1999 and 1998, respectively. This decrease is attributed to cost
reduction efforts implemented during 1998 and 1999 for all operating locations.
In the home health care nursing division, all nursing employees were converted
to a per-visit payment basis, thereby increasing overall productivity.
General and Administrative Expenses ("G&A"). General and
administrative expenses increased by 64% and 128% for the three and nine months
ended September 30, 1999 as compared to the same periods in 1998. This increase
is primarily attributed to the acquisition of certain Columbia/HCA home health
care agencies. As a percentage of net revenues, general and administrative
expenses decreased to 59% from 381% for the three months ended September 30,
1999 and 1998, respectively, and to 58% from 151% for the nine months ended
September 30, 1999 and 1998, respectively. This decrease is attributed to the
cost reduction efforts implemented for all operating locations and corporate
departments in addition to improvements in operating efficiencies. The
operating efficiencies that were gained through these efforts helped to offset
the additional resources needed following the Columbia/HCA acquisition,
resulting in a minimal increase in administrative personnel and resources to
appropriately manage and support the new home health care agencies.
Operating (Loss). The Company had an operating loss of $1,221,000 for
the three months ended September 30, 1999 as compared to an operating loss of
$9,053,000 for the same period in 1998 and an operating
11
<PAGE> 12
loss of $4,032,000 for the nine months ended September 30, 1999 as compared to
an operating loss of $15,042,000 for the same period in 1998. The reduction in
operating losses of $7,833,000 or 87% for the three month period ended
September 30, 1999 and $11,010,000 or 73% for the nine month period ended
September 30, 1999 is mainly attributed to the restructuring efforts
implemented during 1998 and 1999 and the economies of scale achieved with the
acquisition of certain Columbia/HCA home health care agencies.
Other Income and Expenses. Other income and expenses changed $1,614,000
and $2,277,000 for the three and nine month periods ended September 30, 1999,
respectively, due to a one-time write-off of goodwill of approximately $1.8
million related to the sale of certain home health care agencies acquired from
Columbia/HCA in the later part of 1998.
(Benefit) for Estimated Income Taxes. Due to the combined loss between
the year ended 1998 and the nine months ended September 30, 1999, the Company
has not established a deferred tax asset or liability for the three and nine
month periods ended September 30, 1999. For the three and nine month periods
ended September 30, 1999, the Company has reflected an income tax benefit of
$3,123,000 and $3,008,000, respectively, which is exactly offset by an income
tax expense reflected in the accompanying consolidated statement of operations
as a component of loss from discontinued operations, resulting in a net income
tax expense/(benefit) of $0. For the three and nine month periods ended
September 30, 1998, the Company established a deferred tax asset by recording an
estimated net income tax benefit of $214,000 and $2,493,000, respectively. These
amounts are comprised of a $1,906,000 and a $3,990,000 income tax benefit for
the three and nine month period ended September 30, 1998 which is reflected in
the accompanying consolidated statements of operations as a benefit for income
taxes. These benefits are offset by a $1,692,000 and a $1,497,000 income tax
expense for the three and nine month periods ended September 30, 1998 which are
reflected in the accompanying consolidated statements of operations as a
component of loss from discontinued operations. In December, 1998, a valuation
allowance was recorded against this deferred tax asset, effectively writing-off
the deferred tax asset due to the significant losses incurred by the Company for
the year ended December 31, 1998.
Discontinued Operations. Losses from discontinued operations, net of
income taxes, are $102,000 and $325,000 for the three and nine month periods
ended September 30, 1999, respectively, as compared to losses of $44,000 and
$422,000 for the three and nine months ended September 30, 1998. The gain on
disposition of $6,165,000 for 1999 is attributed to the sale of two surgery
centers while the gain on disposition of $3,327,000 for 1998 is attributed to
the sale of the Staffing division.
Net Income/(Loss). The Company had net income of $6,170,000 and
$2,215,000 for the three and nine months ended September 30, 1999,
respectively, compared with a net loss of $4,045,000 and $8,471,000 for the
three and nine months ended September 30, 1998, respectively.
FINANCIAL CONDITION
The Company's principal capital requirements are for additional
working capital to fund current cash requirements of the Company. The Company
recorded an operating loss for the year ended December 31, 1998 and the three
and nine months ended September 30, 1999 and had negative cash flow from
operations. The negative cash flow from operations is largely attributable to
the changes in Medicare reimbursement which were effective January 1, 1998 for
the Company. The Company has undertaken significant restructuring efforts to
reduce operating costs but expects to record a loss from operations for the
remainder of 1999. The operating losses and negative cash flow from operations
have impacted the availability of the Company's current financing sources and
have decreased the Company's overall liquidity position. The Company expects the
negative cash flow from operations to continue on a short-term basis and has
implemented a plan to divest of all non-home health care nursing assets to
generate cash to fund remaining obligations until the implementation of PPS.
Notes payable consists primarily of an asset-based line of credit with
availability, depending on collateral, up to $25 million with National Century
Financial Enterprises, Inc. ("NCFE"), an estimated $2.6 million unsecured
liability payable to Columbia/HCA, and borrowings under a revolving bank line of
credit of $750,000. The $25 million asset-based line of credit is collateralized
by eligible accounts receivable of the home health care nursing division and as
of September 30, 1999, had an outstanding balance of $7,913,000. Eligible
receivables are defined as receivables, exclusive of workers' compensation and
self-pay, that are aged less than 181 days. The ongoing fees associated with
this line of credit equate to 1% of eligible billed receivables generated during
each billing period. This line of credit expires on December 31, 2001. The
estimated $2.6 million unsecured net liability payable to Columbia/HCA resulted
from Periodic Interim Payments ("PIP") of $6.6 million directed to Columbia/HCA
and subsequently forwarded to the Company which have been determined by the
fiscal intermediary as funds belonging to Columbia/HCA. During the third quarter
of 1999, the Company made a payment of $4 million toward this unsecured
liability. The remaining
12
<PAGE> 13
balance is payable on the earlier of three business days from receipt of the
funds from Medicare or March 31, 2000. The revolving bank line of credit of
$750,000 bears interest at bank prime plus 1%. At September 30,1999, $412,775
was outstanding on the line of credit. This line of credit has scheduled monthly
principal payments of $25,000 plus accrued interest, with the balance due in
March, 2000. The line of credit is collateralized by 80% of eligible receivables
in outpatient surgery and 80% of physician notes receivable. Eligible
receivables are defined principally as accounts that are aged less than 90 days.
Long-term debt consists primarily of a $14 million note payable to
Columbia/HCA, a $2.9 million note payable to NPX, Inc., an affiliate of NCFE, a
$1.5 million note payable to Merrill Lynch, and various other capital leases and
notes. The $14 million note payable to Columbia/HCA is a result of the
acquisition of home health agencies consummated in November 1998. Effective
September 30, 1999, the Company and Columbia signed an agreement to modify the
terms of this note. The Company will make quarterly principal and interest
payments beginning April 30, 2001, with the balance of the note being due on
July 31, 2004. As a result of this modification, the note plus approximately
$1,036,000 of accrued interest was reclassified from short term to long term
debt.
The Company's operating activities used $14,849,000 in cash during the
nine months ended September 30, 1999, whereas such activities used $9,133,000 in
cash during the same period in 1998. This change in cash used in operating
activities is primarily attributable to an increase in accounts receivable of
$14,722,000, a decrease in accrued expenses of $1,854,000 and deferred revenue
of $1,589,000, and a gain on the sale of two Outpatient Surgery centers of
$9,417,000, offset by an increase in the Company's net income of $10,686,000, a
gain on the Staffing sale in 1998 of $5,041,000, and a decrease in depreciation
and amortization of $2,459,000. The Company's investing activities provided
$10,518,000 for the nine months ended September 30, 1999, whereas investing
activities used $4,500,000 for the nine months ending June 30, 1998. Cash
provided by investing activities for 1999 is primarily attributable to the
proceeds from the sale of two Outpatient Surgery centers of $10,561,000, whereas
cash used in investing activities for 1998 was primarily attributable to cash
paid for acquisitions of $2,005,000, and increased purchases of furniture,
fixtures, and equipment of $1,756,000. Net cash provided by financing activities
decreased to $7,245,000 from $9,563,000 for the nine months ended September 30,
1999 and 1998, respectively. This change is primarily due to the proceeds of
$6,480,000 received from the sale of the Staffing division in 1998, a decrease
in outstanding checks in excess of bank balance of $3,056,000, and proceeds of
$3,253,000 received in 1998 from preferred stock, offset by an increase in
borrowings on lines of credit of $10,663,000.
At September 30, 1999, the Company had negative working capital of
$10,528,000 and a stockholders' equity deficit of $9,270,000.
YEAR 2000 COMPLIANCE ISSUES
The Company continues to evaluate its entire operation in preparation
for potential problems associated with Year 2000 ("Y2K"). Some internal areas
and processes being evaluated include initial charge entry through billing and
collections; accounts payable invoice receipt through processing and payment;
bank processing of receipts and disbursements; computer hardware and software
functionality; and time and/or date-sensitive office and medical equipment
functionality. In preparation for Y2K, the Company has replaced, or is in the
process of replacing, all of its mission critical computer systems that are not
Y2K compliant. The general accounting system was replaced and has been in use
since October, 1998. Management believes that the Company's home health care
nursing, outpatient surgery center, and infusion division software systems are
Y2K compliant. At present, the Company does not anticipate any material
disruption in its operations or significant costs to be incurred to attain
compliance. The primary payer source for the Company is the Medicare program
which accounts for 90% of its revenue. The Medicare program has issued
statements that indicate it is prepared for Y2K. There can be no assurance,
however, that the Company will identify or adequately assess all aspects of the
business that may be affected. Due to this uncertainty, a contingency plan is
being developed as each area is evaluated to minimize any negative impact to
the Company. In the event that any of the Company's significant payers,
suppliers, or customers do not successfully and in a timely manner achieve Year
2000 compliance, the Company's business and/or operations could be adversely
affected.
13
<PAGE> 14
FORWARD LOOKING STATEMENTS
When included in the Quarterly Report on Form 10-Q or in documents
incorporated herein by reference, the words "expects", "intends",
"anticipates", "believes", "estimates", and analogous expressions are intended
to identify forward-looking statements. Such statements inherently are subject
to a variety of risks and uncertainties that could cause actual results to
differ materially from those projected. Such risks and uncertainties include,
among others, general economic and business conditions, current cash flows and
operating deficits, debt service needs, adverse changes in federal and state
laws relating to the health care industry, competition, regulatory initiatives
and compliance with governmental regulations, customer preferences and various
other matters, many of which are beyond the Company's control. These
forward-looking statements speak only as of the date of the Quarterly Report on
Form 10-Q. The Company expressly disclaims any obligation or undertaking to
release publicly any updates or any changes in the Company's expectations with
regard thereto or any changes in events, conditions or circumstances on which
any statement is based.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company does not engage in derivative financial instruments, other
financial instruments, or derivative commodity instruments for speculative or
trading/non-trading purposes.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
14
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Identification of Exhibit Page Number
- ------- ------------------------- -----------
<S> <C> <C>
2.1(iv) --- Asset Purchase Agreement among Amedisys, Inc., Amedisys Surgery
Centers, L.C. and United Surgical Partners International, Inc. --
2.2(iv) --- Promissory Note from United Surgical Partners International, Inc. --
3.1(ii) --- Certificate of Incorporation --
3.2(ii) --- Bylaws --
4.1(ii) --- Certificate of Designation for Series A Preferred Stock --
4.2(v) --- Specimen of Certificate of Amendment of Certificate of
Designation
4.3(v) --- Specimen of Series A Preferred Stock Conversion
Agreement
4.4(iii) --- Specimen of Common Stock Certificate --
4.5(iii) --- Specimen of Preferred Stock Certificate --
4.6(iii) --- Form of Placement Agent's Warrant Certificate --
10.1(i) --- Loan Modification Agreement by and between Amedisys, Inc. and
Columbia/HCA Healthcare Corporation 18
27.1(i) --- Financial Data Schedule 28
</TABLE>
(i) Filed herewith.
(ii) Previously filed as an exhibit to the Annual Report on Form
10-KSB for the year ended December 31, 1994 which is
incorporated herein by reference.
(iii) Previously filed as an exhibit to the Registration
Statement on Form S-3 dated March 1, 1998 which is
incorporated herein by reference.
(iv) Previously filed as an exhibit to the Current Report on
Form 8-K dated September 15, 1999 which is incorporated
herein by reference.
(v) Previously filed as an exhibit to the Quarterly Report on
Form 10-Q/A for the period ended June 30, 1999 which is
incorporated herein by reference.
(b) Report on Form 8-K
The Company filed a Current Report on Form 8-K with the SEC on
September 15, 1999 in connection with the sale of Amedisys Surgery Center of
Pasadena and Amedisys Surgery Center of South Houston to United Surgical
Partners International, Inc. effective September 1, 1999. Pro forma financial
information, required pursuant to Article 11 of Regulation S-X, was included in
the filing. The pro forma financial information was comprised of a pro forma
consolidated balance sheet as of June 30, 1999, a pro forma consolidated
statement of operations for the six months ended June 30, 1999 and the year
ended December 31, 1998, and explanatory notes.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMEDISYS, INC.
By: /s/ JOHN M. JOFFRION
---------------------------
John M. Joffrion
Principal Financial and Accounting Officer
and duly authorized officer
DATE: November 15, 1999
16
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Identification of Exhibit
- ------- -------------------------
<S> <C>
2.1(iv) --- Asset Purchase Agreement among Amedisys, Inc., Amedisys Surgery
Centers, L.C. and United Surgical Partners International, Inc.
2.2(iv) --- Promissory Note from United Surgical Partners International, Inc.
3.1(ii) --- Certificate of Incorporation
3.2(ii) --- Bylaws
4.1(ii) --- Certificate of Designation for Series A Preferred Stock
4.2(v) --- Specimen of Certificate of Amendment of Certificate of
Designation
4.3(v) --- Specimen of Series A Preferred Stock Conversion
Agreement
4.4(iii) --- Specimen of Common Stock Certificate
4.5(iii) --- Specimen of Preferred Stock Certificate
4.6(iii) --- Form of Placement Agent's Warrant Certificate
10.1(i) --- Loan Modification Agreement by and between Amedisys, Inc. and
Columbia/HCA Healthcare Corporation
27.1(i) --- Financial Data Schedule
</TABLE>
(i) Filed herewith.
(ii) Previously filed as an exhibit to the Annual Report on Form
10-KSB for the year ended December 31, 1994 which is
incorporated herein by reference.
(iii) Previously filed as an exhibit to the Registration
Statement on Form S-3 dated March 1, 1998 which is
incorporated herein by reference.
(iv) Previously filed as an exhibit to the Current Report on
Form 8-K dated September 15, 1999 which is incorporated
herein by reference.
(v) Previously filed as an exhibit to the Quarterly Report on
Form 10-Q/A for the period ended June 30, 1999 which is
incorporated herein by reference.
<PAGE> 1
EXHIBIT 10.1
LOAN MODIFICATION AGREEMENT
BY AND BETWEEN
AMEDISYS, INC.
AND
COLUMBIA/HCA HEALTHCARE CORPORATION
This LOAN MODIFICATION AGREEMENT (this "Agreement") is effective as of
September 30, 1999 by and between AMEDISYS, INC., a Delaware corporation
("Borrower"), and COLUMBIA/HCA HEALTHCARE CORPORATION, a Delaware corporation
("Lender").
W I T N E S S E T H:
WHEREAS, Borrower and Lender are parties to that certain Asset Purchase
Agreement dated November 2, 1998 (the "Asset Purchase Agreement"), pursuant to
which Borrower purchased certain assets of certain affiliates of Lender;
WHEREAS, Borrower and Lender are parties to that certain Credit
Agreement dated November 16, 1998 (the "Credit Agreement"), pursuant to which
Lender agreed to accept a promissory note as payment of a portion of the
purchase price under the Asset Purchase Agreement;
WHEREAS, pursuant to that certain Note dated December 1, 1998 (the
"Note"), Borrower promised to pay to the order of Lender the principal sum of
Fourteen Million Five Thousand Nine Hundred Eighty-Three and 27/100 Dollars,
plus interest, on the dates, at the rates per annum, and in the amounts provided
in the Credit Agreement;
WHEREAS, pursuant to that certain Consent and Waiver Agreement entered
into by Borrower and Lender on August 26, 1999, Lender consented to the sale of
certain assets of certain subsidiaries of Borrower and granted Borrower a
limited waiver of certain provisions of the Credit Agreement that were
applicable to such proposed sales; and
WHEREAS, Borrower is willing to agree to repay to Lender certain
payments that were misdirected to Borrower and to grant Lender a full and
complete release of claims Borrower may have under the Asset Purchase Agreement
or the transactions or documents contemplated therein or related thereto, as
more fully described in this Agreement, and Lender is willing to agree to amend
certain provisions of the Credit Agreement.
NOW, THEREFORE, for and in consideration of the premises and agreements
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby forever acknowledged and confessed, the parties
agree as follows:
I. DEFINED TERMS. Unless otherwise defined herein, all terms used
herein that are defined in the Credit Agreement shall have the same meaning
herein as therein defined.
<PAGE> 2
II. COVENANTS OF BORROWER.
2.1 REPAYMENT OF MISDIRECTED FUNDS. Borrower acknowledges that, since
the closing of the transaction described in the Asset Purchase Agreement, funds
which were due and payable to Lender, have been misdirected and paid to
Borrower. The current balance of such funds is $4,700,000.00 (the "Misdirected
Funds"). As of the effective date hereof, Borrower shall deliver to Lender a
promissory note, substantially in the form attached hereto as Exhibit A,
pursuant to which Borrower shall repay all the Misdirected Funds that remain due
and payable to Lender. Any unpaid balance under such note shall be due and
payable to Lender on the earlier of: (i) three (3) business days after
Borrower's receipt of payment from the Medicare program in an amount equal to
the Misdirected Funds, or (ii) March 31, 2000.
2.2 DELIVERY OF STOCK CERTIFICATES. Borrower acknowledges that certain
stock certificates that were pledged to Lender to secure payment of the Note
have not been delivered to Lender, and Borrower agrees to deliver possession of
such certificates to Lender at the time of execution of this Agreement.
2.3 COMPLETE AND GENERAL RELEASE. In consideration of Lender's
agreement to amend the Credit Agreement as set forth in this Agreement, Borrower
hereby presently, generally, fully, finally, and forever, releases, acquits, and
discharges Lender and its affiliates from any and all theories of recovery of
whatsoever nature, whether known or now unknown, or recognized by the law of any
jurisdiction, including, but not limited to, actions, causes of action, demands,
liabilities, suits, and judgments, whether arising in equity or under the common
law or any contract or any statute, and from any and all elements of relief or
recovery of whatsoever nature, whether known or now unknown, recognized by the
law of any jurisdiction, including, but not limited to, actual damages of every
description, such as economic loss, any other item of loss or injury, statutory
or any other type of damages whatsoever, attorney's fees, prejudgment or post
judgment or other interest, equitable relief, and lost income, directly or
indirectly arising from or in connection with the Asset Purchase Agreement and
the transactions and agreements contemplated therein or related thereto,
including, but not limited to, claims arising from representations and
warranties in the Asset Purchase Agreement and claims relating to the Allocation
of Purchase Price or the Final Purchase Price Adjustment. Notwithstanding the
foregoing, this release does not apply to (i) any action, cause of action,
demand, liability, suit or judgment brought by a third party against Borrower
that is based in whole or in part upon the acts or omissions of Lender or its
affiliates, or (ii) any claim that Borrower may have against Lender for breach
of Section 2.10 or 12.7(d) of the Asset Purchase Agreement.
2.4 Acknowledgment of Default. The parties hereby acknowledge that as
of the date of this Agreement, certain accounts payable of Borrower are greater
than 90 days past the invoice or billing date and are not being contested by
Borrower ("Execution Date AP Delinquency"). Consequently, Borrower is not in
compliance with the terms of Section 8.01(b) of the Credit Agreement and
Borrower's noncompliance with such terms constitutes an Event of Default as set
forth in Section 9.01(c) of the Credit Agreement. Lender hereby agrees to waive
such Event of
-2-
<PAGE> 3
Default based on the Execution Date AP Delinquency and Lender shall not exercise
the remedies available to it as a result of such Event of Default based on the
Execution Date AP Delinquency under the provisions of Section 9.02 of the Credit
Agreement. Lender's acknowledgment of default and agreement not to exercise
certain remedies is limited specifically to the nature and scope described
herein. Nothing contained herein shall constitute a waiver or release of any
other rights or remedies available to Lender.
III. AMENDMENTS TO THE CREDIT AGREEMENT.
3.1 Section 1.02 of the Credit Agreement is hereby amended as follows:
(x) by deleting the definition of the term "Final Maturity Date" and replacing
such definition with the following: "shall mean the earlier to occur of (i) July
31, 2004, and (ii) the date that the Note is mandatorily prepayable in full
pursuant to Section 3.03(b)"; (y) by deleting the definition of the term "Loan"
and replacing such definition with the following: "shall mean the loan made by
Lender as provided for in Section 2.01 and any subsequent loan made by Lender to
Borrower."; and (z) by deleting the words "the Closing Date" in the third and
fourth lines of the definition of "Material Adverse Effect" and replacing such
words with "June 30, 1999".
3.2 Section 3.01(c) of the Credit Agreement is hereby deleted in its
entirety and replaced with the following provision:
(c) Interest Accrual. From the date the Loan is made through
January 31, 2001, the Loan shall accrue daily interest at the rate
provided in Section 3.01(a) of this Agreement, which shall compound
and, without further action or documentation, be added to the principal
of the Note and be due and payable quarterly on each January 31, April
30, July 31, and October 31. Commencing on February 1, 2001, interest
shall accrue daily on the unpaid principal of the Loan, as increased
pursuant to the preceding sentence, up to and including the Final
Maturity Date. As more fully described in Section 3.02 of this
Agreement, payments of interest shall commence April 30, 2001.
3.3 Section 3.02 of the Credit Agreement is hereby deleted in its
entirety and replaced with the following provision:
Section 3.02 Repayment of Loan. Borrower shall make quarterly
payments of principal as set forth below, together with accrued
interest, on each January 31, April 30, July 31 and October 31,
commencing April 30, 2001, and continuing until the Final Maturity Date
-3-
<PAGE> 4
when all unpaid principal and accrued interest shall be due in a single
payment. The quarterly payments of principal shall be in the following
amounts:
<TABLE>
<CAPTION>
Date Amount
<S> <C>
April 30, 2001 $ 700,000
July 31, 2001 710,000
October 31,2001 730,000
January 31, 2002 740,000
April 30, 2002 760,000
July 31, 2002 780,000
October 31, 2002 790,000
January 31, 2003 810,000
April 30, 2003 830,000
July 31, 2003 850,000
October 31, 2003 860,000
January 31, 2004 880,000
April 30, 2004 900,000
July 31, 2004 all principal remaining unpaid.
</TABLE>
3.4 Section 3.03(b) of the Credit Agreement is hereby amended by
numbering the text of the existing subsection as 3.03(b)(i) and adding the
following as subsection 3.03(b)(ii);
(ii) Within thirty (30) days after the end of each fiscal year
which ends after October 1, 1999, and prior to July 30, 2004, Borrower
shall calculate "Excess Cash Flow" in accordance with Schedule 8.01 of
this Agreement and shall, within forty-five (45) days after the end of
such fiscal year, pay Fifty Percent (50%) of the amount of the Excess
Cash Flow so calculated to Lender as payment on the Note, to be applied
to the principal in inverse order of maturity. If, however, the Excess
Cash Flow for any fiscal year exceeds $10,000,000, then Borrower shall
pay Eighty Percent (80%) of the amount by which it exceeds $10,000,000
to Lender as such a prepayment.
3.5 Section 8.01 (c) of the Credit Agreement is hereby deleted in its
entirety and replaced with the following provision:
(c) Debt to finance working capital of the Agencies or to refinance
the existing National Century Financial Enterprises accounts receivable
financing, provided that such debt is secured solely by the accounts
receivable of the Agencies, and there is no further recourse to
Borrower or any of its Subsidiaries (either direct or indirect by
virtue of any guarantee, general partnership participation, or any
commitment which constitutes Debt), that the term of such debt exceeds
the term of the Indebtedness, and that the terms, covenants and
conditions of such debt shall not place the Borrower or its
Subsidiaries in violation of any term or covenant contained herein;
3.6 Section 8.01(d) of the Credit Agreement is hereby deleted in its
entirety and replaced with the following provision:
-4-
<PAGE> 5
(d) Debt, in an aggregate amount of not more than $500,000, to
complete capital expenditures, including capital leases, permitted by
Section 8.03(f) hereof;
3.7 Section 8.01(e) of the Credit Agreement is hereby amended by
replacing the "." at the end of such Section with a ";".
3.8 The following provisions are hereby added to the Credit Agreement
as Sections 8.01(f) and 8.01(g):
(f) Debt, which is issued prior to January 1, 2001, so long as (i)
such Debt is unsecured, is fully subordinated to the Indebtedness, and
requires no principal payments prior to the repayment in full of the
Indebtedness; and (ii) the proceeds of such Debt are used solely for
(x) operating and working capital needs or (y) acquisitions of other
businesses or business opportunities or capital expenditures permitted
by Section 8.03(g) of this Agreement; and
(g) Debt, which is issued on or after January 1, 2001, so long as
(i) such Debt is unsecured, is fully subordinated to the Indebtedness,
and requires no principal payments prior to the repayment in full of
the Indebtedness; and (ii) the proceeds of such Debt are used solely
for repayment of the Indebtedness.
3.9 Section 8.03(e) is hereby amended by replacing the "." at the end
of such Section with a ";".
3.10 Section 8.03(f) is hereby deleted in its entirety and replaced
with the following provision:
(f) capital expenditures, including capital leases, for routine
replacement of equipment in an aggregate amount not to exceed $500,000;
and
3.11 Section 8.03(g) is hereby deleted in its entirety and the
following provisions are hereby added as Sections 8.03(g) and 8.03(h):
(g) capital expenditures or the acquisition of other businesses and
business opportunities after October 1, 1999, and prior to April 1,
2001, in an aggregate maximum amount of $5,000,000.00, but in any
fiscal year not more than the "Cash Available for Acquisitions" as
calculated by the method shown in the example set forth on Schedule
8.03 attached hereto; and
(h) capital expenditures or the acquisition of other businesses or
business opportunities after March 31, 2001, in an aggregate amount not
to exceed the aggregate Excess Cash Flow calculated in accordance with
Schedule 8.01 to this Agreement, less amounts required to be prepaid on
the Note pursuant to Section
-5-
<PAGE> 6
3.03(b)(ii) of this Agreement, which expenditure or acquisition may be
made only after the payments required by Section 3.03(b)(ii) are made.
IV. MISCELLANEOUS.
4.1 EFFECT OF THIS AGREEMENT. Except as expressly stated herein, (a)
the Credit Agreement, the Note, and the Asset Purchase Agreement are and shall
be unchanged and remain in full force and effect, and (b) this Agreement shall
not constitute a waiver of any Default or Events of Default or a waiver of the
right of Lender to insist upon compliance with any term, covenant, condition, or
provision of the Credit Agreement (as amended hereby), the Note, or the Asset
Purchase Agreement. Except as specifically stated herein, the execution and
delivery of this Agreement shall in no way release, diminish, impair, reduce or
otherwise affect the respective obligations and liabilities of the parties under
the Credit Agreement, the Note, or the Asset Purchase Agreement, all of which
shall continue in full force and effect.
4.2 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original document and all of
which shall constitute one instrument.
4.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed in multiple originals, effective as of the date and year first above
written.
BORROWER: AMEDISYS, INC.
/s/ WILLIAM F. BORNE
---------------------------------------------
William F. Borne, Chief Executive Officer
Date: November 15, 1999
----------------------------------------
LENDER: COLUMBIA/HCA HEALTHCARE CORPORATION
By: /s/ GREGG GERKEN
------------------------------------------
Name: Gregg Gerken
----------------------------------------
Title: Vice President
---------------------------------------
Date: November 15, 1999
----------------------------------------
-7-
<PAGE> 8
EXHIBIT A
NOTE
$4,700,000.00 November 12, 1999
FOR VALUE RECEIVED, AMEDISYS, INC., a Delaware corporation (the
"Borrower") hereby promises to pay to the order of COLUMBIA/HCA HEALTHCARE
CORPORATION (the "Lender"), the principal sum of Four Million Seven Hundred
Thousand Dollars ($4,700,000.00) in lawful money of the United States of America
and in immediately available funds, on the dates and in the principal amounts
provided in the Loan Modification Agreement dated November 12, 1999, between the
Borrower and Lender ("Loan Modification Agreement").
This Note is the Note referred to in the Loan Modification Agreement
and evidences the Loan made by the Lender thereunder and under the Credit
Agreement dated November 16, 1998, between the Borrower and Lender ("Credit
Agreement"). Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.
This Note is issued pursuant to the Loan Modification Agreement and is
entitled to the benefits provided for therein and in the Credit Agreement. This
note is subject to the terms and conditions specified in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF DELAWARE.
AMEDISYS, INC.
/s/ WILLIAM F. BORNE
-----------------------------
William F. Borne
Chief Executive Officer
<PAGE> 9
SCHEDULE 8.01
Calculation of Excess Cash Flow
Net Income
Plus non-cash amortization of goodwill
Plus loss on sale or disposition of assets
Less non-cash amortization of deferred revenue
Less mandatory repayments of principal
Less gain on sale or disposition of assets
Equals: Excess Cash Flow
Note: All amounts to be calculated in accordance with Generally Accepted
Accounting Principals
<PAGE> 10
SCHEDULE 8.03
Capital Expenditure Limitation of Section 8.03(g)
1) Acquisitions or capital expenditures shall be permitted up to $5,000,000
through March 31, 2001, subject to meeting two tests: A) Current Ratio
Test, and B) Minimum Cash Test
A) Current Ratio Test: Subject to the provisions of 8.03 (f), no acquisitions
shall be made unless the last quarter's current ratio and the pro-forma
current ratio to reflect the acquisition is greater than 1.0. Current Ratio
shall be defined as Current Assets less Current Liabilities as determined
in accordance with Generally Accepted Accounting Principals.
B) Minimum Cash Test: Borrower shall measure quarterly its level of cash and
cash equivalents (as determined in accordance with Generally Accepted
Accounting Principals ("Cash). The Minimum Cash Test shall measure Cash,
less a) $5,000,000 minus b) the cumulative amount of capital expenditures
and acquisitions made pursuant to section 8.03(g), with the result of such
calculation being "Available Operating Cash." To the extent that Available
Operating Cash for the most recent quarter ended and proforma for a
proposed acquisition or capital expenditure is greater than the Cash
Threshold set forth for such quarter below, then Amedisys shall be
permitted to make such acquisition or capital expenditure (subject to the
$5,000,000 aggregate limitation).
<TABLE>
<CAPTION>
Cash Threshold Amounts:
For the quarter ended -> 12/31/99 3/31/00 6/30/00 9/30/00 12/31/00 3/31/01
-------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
The Cash Threshold Amount shall be -> 21,350 19,050 16,750 14,450 12,150 12,150
</TABLE>
Example:
<TABLE>
<CAPTION>
12/31/99 3/31/00 6/30/00 9/30/00 12/31/00 Total
-------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Cash at beginning of quarter na 23,850 20,273 18,273 16,773
Acquisitions during quarter na (1,000) (1,000) (1,000) (2,000) (5,000)
Other changes in cash (hypothetical
operating losses) na (2,577) (1,000) (500) (500) (4,577)
-------- ------- ------- ------- --------
Ending Cash 28,850 20,273 18,273 16,773 14,273
</TABLE>
Calculation of Minimum Cash Test for
this Example:
<TABLE>
<CAPTION>
12/31/99 3/31/00 6/30/00 9/30/00 12/31/00 3/31/01
-------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Cash (A) 23,850 20,273 18,273 16,773 14,273
Less Unused Acquisition Basket (5,000) (4,000) (3,000) (2,000) --
-------- ------- ------- ------- -------
Available Operating Cash (B) 18,850 16,273 15,273 14,773 14,273
CASH THRESHOLD (C) (DEFINED NUMBER) 21,350 19,050 16,750 14,450 12,150 12,150
Difference between Cash and Cash
Threshold (A) - (C) 2,500 1,223 1,523 2,323 2,123
* Availability for Acquisitions -> 2,500 1,223 1,523 2,000 --
</TABLE>
* Explanation of Availability for Acquisitions
a) If B > C, then acquisitions up to the Unused Acquisition Basket may be made
b) If B < C, then acquisitions up to the Difference between Cash and the Cash
Threshold may be made
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET, INCOME STATEMENT & STATEMENT OF CASH FLOWS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,486,000
<SECURITIES> 0
<RECEIVABLES> 18,695,000
<ALLOWANCES> 3,133,000
<INVENTORY> 1,521,000
<CURRENT-ASSETS> 631,000
<PP&E> 5,993,000
<DEPRECIATION> 386,000
<TOTAL-ASSETS> 49,701,000
<CURRENT-LIABILITIES> 31,985,000
<BONDS> 19,526,000
0
1,000
<COMMON> 3,000
<OTHER-SE> (9,270,000)
<TOTAL-LIABILITY-AND-EQUITY> 49,701,000
<SALES> 73,869,000
<TOTAL-REVENUES> 73,869,000
<CGS> 35,257,000
<TOTAL-COSTS> 35,257,000
<OTHER-EXPENSES> 41,230,000
<LOSS-PROVISION> 1,108,000
<INTEREST-EXPENSE> 1,187,000
<INCOME-PRETAX> (6,633,000)
<INCOME-TAX> 3,008,000
<INCOME-CONTINUING> (3,624,000)
<DISCONTINUED> 5,840,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,215,000
<EPS-BASIC> 0.72
<EPS-DILUTED> 0.72
</TABLE>
