<PAGE> 1
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, 2000
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
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AMEDISYS, INC.
--------------
(Exact Name of Registrant as Specified in Charter)
Delaware 11-3131700
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
11100 Mead Road, Suite 300, Baton Rouge, LA 70816
-------------------------------------------------
(Address of principal executive offices including zip code)
(225) 292-2031
--------------
(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, 2000: 5,133,055
shares
<PAGE> 2
<TABLE>
PART I.
FINANCIAL INFORMATION
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999..................... 3
Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 2000 and 1999.................................................................... 4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2000 and 1999.... 5
Notes to Consolidated Financial Statements..................................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......... 13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.................................... 15
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.............................................................................. 15
ITEM 2. CHANGES IN SECURITIES.......................................................................... 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................................................................ 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................ 15
ITEM 5. OTHER INFORMATION.............................................................................. 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................................... 16
</TABLE>
<PAGE> 3
Amedisys, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
as of September 30, 2000 and December 31, 1999
(Dollar Amounts in 000's)
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
(Unaudited) (Restated)
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 4,629 $ 1,425
Accounts Receivable, Net of Allowance for Doubtful
Accounts of $3,137 in September 2000 and $2,199 in
December 1999 11,874 13,944
Prepaid Expenses 168 319
Inventory and Other Current Assets 343 487
Current Assets Held for Sale 663 1,182
-------- --------
Total Current Assets 17,677 17,357
Property and Equipment, net 3,138 3,439
Other Assets, net 18,464 19,544
Long-term Assets Held for Sale 1,087 4,262
-------- --------
Total Assets $ 40,366 $ 44,602
======== ========
CURRENT LIABILITIES:
Accounts Payable $ 4,080 $ 4,739
Accrued Expenses:
Payroll and Payroll Taxes 6,506 6,240
Insurance 769 660
Income Taxes 558 437
Other 3,755 3,552
Notes Payable 1,287 4,917
Long-term Debt Classified as Current -- 15,461
Notes Payable to Related Parties 10 10
Current Portion of Long-term Debt 3,881 2,325
Current Portion of Obligations under Capital Leases 391 402
Deferred Revenue 2,119 2,119
Current Liabilities Held for Sale 443 806
-------- --------
Total Current Liabilities 23,799 41,668
Long-term Debt 15,045 2,206
Long-term Medicare Liabilities 7,413 2,518
Deferred Revenue 4,414 6,003
Obligations under Capital Leases 82 211
Other Long-term Liabilities 826 826
Long-term Liabilities Held for Sale 995 1,275
-------- --------
Total Liabilities 52,574 54,707
-------- --------
Minority Interest 294 81
-------- --------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock 5 3
Preferred Stock (390,000 Shares) 1 1
Additional Paid-in Capital 13,271 12,203
Treasury Stock (4,667 Shares of Common Stock) (25) (25)
Retained Earnings (Deficit) (25,754) (22,368)
-------- --------
Total Stockholders' Equity (Deficit) (12,502) (10,186)
-------- --------
Total Liabilities and Stockholders' Equity $ 40,366 $ 44,602
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
Amedisys, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
for the three and nine months ended September 30, 2000 and 1999
(Unaudited, Dollar Amounts in 000's)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
-------------------------------------- --------------------------------------
September 30, 2000 September 30, 1999 September 30, 2000 September 30, 1999
(Restated) (Restated)
<S> <C> <C> <C> <C>
Income:
Service revenue $ 22,091 $ 24,170 $ 68,779 $ 73,869
Cost of service revenue 10,366 11,154 32,580 35,257
-------- -------- -------- --------
Gross margin 11,725 13,016 36,199 38,612
General and administrative expenses:
Salaries and benefits 7,462 7,543 23,288 23,177
Other 5,122 6,088 15,407 18,063
-------- -------- -------- --------
Total general and administrative expenses 12,584 13,631 13,631 41,246
Operating (loss) (859) (1,221) (2,496) (4,003)
Other income and expense:
Interest income 88 3 175 44
Interest expense (690) (863) (1,957) (2,560)
Other income (expenses), net (8) (1,252) 75 (871)
-------- -------- -------- --------
Total other income and expense (610) (2,112) (1,707) (3,387)
Net (loss) before income taxes and
discontinued operations (1,469) (2,727) (4,203) (6,015)
(Benefit) for estimated income taxes -- (3,123) -- (3,008)
-------- -------- -------- --------
Net income (loss) before discontinued operations (1,469) 396 (4,203) (3,007)
Discontinued operations:
(Loss) from discontinued operations,
net of income taxes (407) (391) (2,806) (943)
Gain on sale of discontinued operations,
net of income taxes 1,114 6,165 3,623 6,165
-------- -------- -------- --------
Total discontinued operations 707 5,774 817 5,222
Net income (loss) $ (721) $ 6,170 $ (3,386) $ 2,215
======== ======== ======== ========
Weighted average common shares outstanding 4,955 3,117 4,006 3,075
Basic income (loss) per common share:
Net income(loss) before discontinued operations $ (0.29) $ 0.13 $ (1.05) $ (0.98)
(Loss) from discontinued
operations, net of income taxes (0.08) (0.13) (0.69) (0.30)
Gain on sale of discontinued operations,
net of income taxes 0.22 1.98 0.90 2.00
-------- -------- -------- --------
Net (loss) $ (0.15) $ 1.98 $ (0.84) $ 0.72
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 2000 and 1999
(Unaudited, Dollar Amounts in 000's)
<TABLE>
<CAPTION>
For the nine months ended
--------------------------------------
September 30, 2000 September 30, 1999
(Restated)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (3,386) $ 2,215
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and Amortization 2,101 2,347
Provision for bad debts 1,622 1,108
Deferred revenue (1,589) (1,589)
Loss on disposal of Company assets -- 1,640
(Gain) on sale of Company's discontinued operations (3,779) (8,879)
Impairment of goodwill 1,771 --
Minority interest -- --
Changes in assets and liabilities:
Decrease in cash included in assets held for sale 261 185
(Increase) decrease in accounts receivable 468 (10,928)
(Increase) decrease in inventory and other current assets 331 (362)
(Increase) decrease in other assets 96 (118)
Increase (decrease) in accounts payable (727) 1,228
Increase (decrease) in accrued expenses 1,479 (4,713)
-------- --------
Net cash (used) by operating activities (1,352) (17,866)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 114 24
Purchase of property, plant and equipment (244) (793)
Proceeds from sale of Company assets -- 537
Proceeds from sale of Company's discontinued operations 4,949 10,661
Minority interest investment in subsidiary 214 --
-------- --------
Net cash provided by investing activities 5,033 10,429
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit agreements (3,856) 7,314
Proceeds from issuance of notes payable 1,000 1,248
Payments on notes payable and capital leases (3,623) (1,317)
Increase in long-term Medicare liabilities 4,895 2,270
Deferred interest expense 1,106 932
Decrease in notes receivable - related parties -- 89
-------- --------
Net cash provided (used) by financing activities (478) 10,536
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,203 3,099
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,425 387
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,628 $ 3,486
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 971 $ 1,714
======== ========
Income taxes $ 56 $ --
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Amedisys, Inc., a Delaware corporation ("Amedisys" or "the Company"),
is a leading multi-state provider of home health care nursing services. The
Company operates fifty home care nursing offices, two ambulatory surgery
centers, and one corporate office in the southern and southeastern United
States.
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 Company's
financial position at September 30, 2000, the results of operations for the
three and nine months ended September 30, 2000 and 1999, and cash flows for the
nine months ended September 30, 2000 and 1999. 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/A.
The Company has reclassified program fees for 1999 related to the
National Century Financial Enterprises, Inc. ("NCFE") line of credit from other
general and administrative expenses to interest expense to conform with the 1999
Form 10-K presentation.
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, stock warrants and convertible
securities outstanding (equivalent to 2,819,457 and 3,609,471 shares of common
stock at September 30, 2000 and 1999, respectively) during the periods presented
were not dilutive.
3. MEDICARE REIMBURSEMENT REDUCTIONS AND RELATED RESTRUCTURING
The Company derived approximately 91% of its revenues from continuing
operations from the Medicare system for the three and nine months ended
September 30, 2000. In 1997, Congress approved the Balanced Budget Act ("BBA"),
which established an Interim Payment System ("IPS") that provided for the
lowering of reimbursement limits for home health visits until the Prospective
Payment System ("PPS") was implemented on October 1, 2000. 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 national 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 existed for a twelve
month cost report period ending in Federal FY 1994. The Company currently has
agencies that qualify as "old" providers and agencies that qualify as "new"
providers under the guidelines. An old provider per beneficiary limit is based
on 75% of 98% of the 1994 agency cost adjusted for inflation, plus 25% of 98% 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 periods beginning January 1, 1998 and remained 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
during 1999 and 2000 in an overall effort to reduce costs and improve
efficiencies, while maintaining the same high quality of patient care.
6
<PAGE> 7
In October 1999, HCFA issued proposed regulations for PPS. On June 28,
2000, HCFA issued the final rules for PPS which were effective for all
Medicare-certified home health agencies on October 1, 2000. The final
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. The services covered by the episode payment include all
disciplines of care, in addition to medical supplies, within the scope of the
home health benefit. A standard episode payment has been established at $2,115
per episode for federal fiscal year 2001, to be adjusted by a case mix adjuster
consisting of eighty (80) home health resource groups ("HHRG") and the
applicable geographic wage index. The standard episode payment may be subject to
further individual adjustments due to low utilization, intervening events and
other factors. Providers are allowed to make a request for anticipated payment
at the start of care equal to 60% of the expected payment for the initial
episode and 50% for each subsequent episode. The remaining balance due to the
provider will be paid following the submission of the final claim at the end of
the episode. In contrast to the cost-based reimbursement system currently in
place whereby providers' reimbursement is limited, among other things, to their
actual costs, episode payments will be made to providers regardless of the cost
to provide care, except with regard to certain outlier provisions. As a result,
the Company expects that home health agencies will have the opportunity to be
profitable under this system; however, there can be no assurance to what degree
the Company will be profitable or that Medicare reimbursement laws, rules and
regulations will not be interpreted or modified through future legislation in a
manner adverse to the Company's business and future plans.
4. DISCONTINUED OPERATIONS
In August 1999, the Company adopted a formal plan to sell all of its
interests in its six outpatient surgery and four infusion therapy divisions. The
Company's strategic plan is to become a focused home health nursing company.
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, LC
("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, determined using a multiple of earnings
before interest, taxes, depreciation, and amortization (EBITDA). The Company
recorded a pre-tax gain of $9,417,000 as a result of this transaction in the
quarter ended September 30, 1999. The Company filed a Current Report on Form 8-K
with the Securities and Exchange Commission ("SEC") on September 15, 1999 with
regard to this transaction.
Effective September 1, 1999, the Company sold 19.02 units of its 42
units (each unit represented a 1% interest) in East Houston Surgery Center, Ltd.
and EHSC Management Company, LLC to thirteen physician investors for $180,000
cash. The Company recorded a pre-tax loss of $77,000 relating to the sale in the
quarter ended September 30, 1999.
Effective December 1, 1999, ASC, by a Membership Interest Purchase
Agreement, sold all of its 67% membership interest in West Texas Ambulatory
Surgery Center, LLC to U.S. Orthopedics Texas, LLC. ASC also assigned all of its
rights under a certain management agreement to U.S. Orthopedics, Inc. At
closing, ASC received $783,333 representing the purchase price for the
membership interest and ASC's share of the assignment of the management
agreement. ASC has agreed to a five-year non-compete covenant. The Company
recorded a pre-tax gain of $324,000 as a result of this transaction in the
quarter ended December 31, 1999.
On April 28, 2000, the Company, Park Place Surgery Center, LLC ("Park
Place"), and the remaining Members of Park Place Surgery Center ("Physician
Members") entered into an agreement for the purchase and sale of the Company's
20% membership interest in Park Place, an outpatient surgery center in
Lafayette, Louisiana, to the Physician Members. The purchase price of $3,200,000
cash was paid to the Company at closing. The purchase price was determined based
on an independent valuation analysis using the discounted economic income
method. The Company received a final partnership distribution of $165,000 in
May, 2000. The Company and the Physician Members had no material relationship
prior to the transaction, except by virtue of their membership interest in Park
Place and that
7
<PAGE> 8
the Company and some Physician Members served on the Board of Directors of Park
Place. At the closing, the management agreement existing between the Company and
Park Place was also terminated. The Company recorded a pre-tax gain of
$2,665,000 as a result of this transaction in the quarter ended June 30, 2000.
The Company filed a Current Report on Form 8-K with the SEC on May 11, 2000 with
regard to this transaction.
In May 2000, the Company decided, after a thorough evaluation of
historical financial results and available divestiture opportunities, to close
one infusion therapy location. In connection with this closure, the Company
recorded a goodwill impairment of $1,252,000 in the quarter ended June 30,
2000. Concurrently, the Company re-evaluated the goodwill recorded for the
remaining infusion therapy locations, resulting in an additional goodwill
impairment of $519,000.
On August 9, 2000, the Company through its wholly-owned subsidiaries,
Amedisys Alternate-Site Infusion Therapy Services, Inc. ("AASI") and PRN, Inc.
("PRN"), sold, by a Bill of Sale and Asset Purchase Agreement, certain assets,
subject to the assumption of certain liabilities, of AASI and PRN, to Park
Infusion Services, LP ("Park Infusion"). The transaction had an effective date
of August 1, 2000. Neither the Company, its affiliates nor its directors and
officers had any material relationship with Park Infusion prior to this
transaction. Subject to certain post-closing adjustments, the Company received
$1,750,000, calculated using a multiple of EBITDA, paid immediately to the
Company at closing. Subject to certain exceptions, the assets sold consisted
primarily of all furniture, fixtures and equipment; inventory and supplies on
hand or in transit; service and provider contracts; business contracts;
intellectual and intangible assets; transferable licenses, permits and
approvals; capital and operating leases; telephone and facsimile numbers;
customer and supplier lists; books and records; goodwill; deposits; prepaid
expenses; claims and rights associated with all purchased assets; and other
privileges, rights, interests, properties and assets. Park Infusion assumed
certain liabilities arising from operations from and after the closing date. The
Company recorded a pre-tax gain of $1,114,000 as a result of this transaction in
the quarter ended September 30, 2000. The Company filed a Current Report on Form
8-K with the SEC on August 23, 2000 with regard to this transaction.
8
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Summarized financial information for the discontinued operations is as
follows (in 000's):
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30 ended September 30
--------------------------- ---------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Outpatient Surgery Division:
Service Revenue $ 815 $ 1,956 $ 2,396 $ 6,113
Income (Loss) from Discontinued
Operations before Provision for
Income Taxes $ (4) $ 635 $ 371 $ 1,385
Income (Loss) from Discontinued
Operations Net of Income Taxes $ (4) $ 419 $ 371 $ 914
Gain on Sale of Discontinued
Operations before Provision for
Income Taxes $ -- $ 6,165 $ 2,665 $ 6,165
Gain on Sale of Discontinued
Operations Net of Income Taxes $ -- $ 6,165 $ 2,509 $ 6,165
Infusion Therapy Division:
Service Revenue $ 478 $ 1,649 $ 4,485 $ 5,556
(Loss) from Discontinued Operations
before Provision for Income Taxes $ (404) $ (790) $ (3,178) $ (1,877)
(Loss) from Discontinued Operations
Net of Income Taxes $ (404) $ (521) $ (3,178) $ (1,239)
Gain on Sale of Discontinued
Operations before Provision for
Income Taxes $ 1,114 $ -- $ 1,114 $ --
Gain on Sale of Discontinued
Operations Net of Income Taxes $ 1,114 $ -- $ 1,114 $ --
Staffing Division:
Service Revenue $ -- $ -- $ -- $ --
(Loss) from Discontinued Operations
before Provision for Income Taxes $ -- $ -- $ -- $ (232)
(Loss) from Discontinued Operations
Net of Income Taxes $ -- $ -- $ -- $ (232)
DME / Management Services Divisions:
Service Revenue $ -- $ -- $ -- $ --
(Loss) from Discontinued Operations
before Provision for Income Taxes $ 1 $ (289) $ 1 $ (386)
(Loss) from Discontinued Operations
Net of Income Taxes $ 1 $ (289) $ 1 $ (386)
Total Discontinued Operations:
Service Revenue $ 1,293 $ 3,605 $ 6,881 $ 11,669
Income (Loss) from Discontinued
Operations before Provision for
Income Taxes $ (407) $ (444) $ (2,806) $ (1,110)
Income (Loss) from Discontinued
Operations Net of Income Taxes $ (407) $ (391) $ (2,806) $ (943)
Gain on Sale of Discontinued
Operations before Provision for
Income Taxes $ 1,114 $ 6,165 $ 3,779 $ 6,165
Gain on Sale of Discontinued
Operations Net of Income Taxes $ 1,114 $ 6,165 $ 3,623 $ 6,165
</TABLE>
9
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Included in the accompanying Consolidated Balance Sheets as of
September 30, 2000 and December 31, 1999 are the following assets and
liabilities relating to the discontinued operations (in 000's):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Cash $ (39) $ 221
Accounts Receivable 535 555
Prepaid Expenses 18 41
Inventory and Other Current Assets 149 365
------- -------
Current Assets Held for Sale $ 663 $ 1,182
======= =======
Property $ 759 $ 1,711
Other Assets 8 1,813
Investments 320 738
------- -------
Long-term Assets Held for Sale $ 1,087 $ 4,262
======= =======
Accounts Payable $ 68 $ 138
Accrued Payroll 46 44
Accrued Other 49 38
Notes Payable 63 288
Current Portion of Long-term Debt 192 209
Current Portion of Obligations under
Capital Leases 25 89
------- -------
Current Liabilities Held for Sale $ 443 $ 806
======= =======
Long-term Debt $ 995 $ 1,252
Obligations under Capital Leases -- 23
------- -------
Long-term Liabilities Held for Sale $ 995 $ 1,275
======= =======
</TABLE>
10
<PAGE> 11
5. NOTES PAYABLE
Notes payable consists primarily of an asset-based line of credit with
availability, depending on collateral, of up to $25 million with NCFE and
borrowings under a revolving bank line of credit of $750,000. The $25 million
asset-based line of credit, which expires December 31, 2001, is collateralized
by eligible accounts receivable of the home health care nursing division and as
of September 30, 2000, had an outstanding balance of $1,287,000 with no amounts
available under this line of credit. Eligible receivables are defined as
receivables, exclusive of workers' compensation and self-pay, that are aged less
than 181 days. The effective interest rate on this line of credit was 17.19% for
the nine months ended September 30, 2000.
The revolving bank line of credit of $750,000 bears interest at 10.5%.
At September 30, 2000, $63,000 was outstanding on the line of credit and no
amounts were available. This line of credit has scheduled monthly principal
payments of $25,000 plus accrued interest, with the balance due December 5,
2000. The line of credit is collateralized by eligible receivables in outpatient
surgery and physician notes receivable. Eligible receivables are defined
principally as accounts aged less than 90 days. Due to the anticipated
divestiture of the outpatient surgery division, this line of credit is included
in Current Liabilities Held for Sale in the Consolidated Balance Sheets.
6. LONG-TERM DEBT CLASSIFIED AS CURRENT
Long-term debt classified as current of $15,461,000 at December 31,
1999 consisted of a note payable to Columbia/HCA as a result of the acquisition
of home health agencies consummated in November 1998. Effective September 30,
1999, the Company and Columbia/HCA executed an agreement to modify the terms of
this note. Quarterly principal and accrued interest payments are due beginning
April 30, 2001, with the balance of the note due, subject to certain prepayment
provisions in the agreement, on July 31, 2004. Under the loan modification
agreement, the Company may be required to pre-pay certain amounts depending upon
the Company's excess cash flows as defined in the agreement. These amounts, if
due, are payable 45 days after the end of each fiscal year ending after October
1, 1999 and prior to July 30, 2004. The agreement also restricts, among other
things, the Company's ability, subject to certain exceptions, to incur
additional indebtedness, to acquire other businesses, or to sell or transfer any
of the Company's property unless the net cash proceeds is applied to repay the
outstanding principal and accrued interest on the note. In addition, the note
contains a material adverse effect clause which provides Columbia/HCA the
ability to require immediate payment of the outstanding principal and accrued
interest should the Company experience a material adverse change. A material
adverse change includes, but is not limited to, a material and adverse change in
the Company's financial condition, business operations, or the value of the
secured collateral.
Due to the significant operating losses incurred during both 1999 and
1998, the various prepayment provisions within the note agreement itself, and
the subjectivity of the material adverse effect clause, the Company reflected
the amount due Columbia/HCA as a current liability in the Consolidated Balance
Sheets as of December 31, 1999 and March 31, 2000.
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<PAGE> 12
In the accompanying Consolidated Balance Sheet as of September 30,
2000, this note payable is reflected as Long-term Debt in accordance with the
repayment terms of the note agreement. This note was reclassified during the
second quarter of 2000 due to the overall stabilization of the Company's
operating losses during the first two quarters of 2000, the receipt of waivers
from Columbia/HCA from application of the net proceeds from the divestitures
completed to date as payment towards the balance on the note, and discussions
with representatives of Columbia/HCA at which time Columbia/HCA verbally
indicated that they had no intention of invoking the material adverse effect
clause through December 31, 2000.
7. LONG-TERM DEBT
Long-term debt consists primarily of a $14 million note plus accrued
interest of $2.6 million payable to Columbia/HCA, a $1.2 million note payable to
Merrill Lynch, a $1 million note payable to CareSouth Home Health Services, Inc.
("CareSouth"), $1 million in notes payable to individuals, and various other
notes.
See Note 6 for a discussion of the $14 million note payable to
Columbia/HCA.
The Company makes monthly principal and interest payments of $25,000 on
the $1 million note to CareSouth which is due July, 2003. The notes payable to
individuals of $1 million bear interest, payable monthly at 13%, with four equal
monthly principal payments beginning in April, 2001. In connection with the
issuance of the notes payable to the individuals, 20,000 warrants were also
issued (exercise price of $4.00 per share). These warrants have not been
recorded in the financial statements as the value has been deemed by management
to be immaterial, if any.
The Company makes monthly principal and interest payments of $27,000 on
the $1.2 million note to Merrill Lynch, which is secured by equipment located at
one surgery center and is due in April, 2002. Due to the anticipated divestiture
of the outpatient surgery division, this note is classified as Held for Sale in
the Consolidated Balance Sheets.
8. AMOUNTS DUE TO AND DUE FROM MEDICARE
The Company records Medicare revenues at the lower of actual costs, the
per visit cost limit, or a per beneficiary cost limit on an individual provider
basis. Ultimate reimbursement under the Medicare program is determined upon
review of the annual cost reports. As of September 30, 2000, the Company has an
aggregate payable to Medicare of $16.6 million, resulting from interim cash
receipts in excess of expected reimbursement. In the accompanying Consolidated
Balance Sheets as of September 30, 2000, the amounts due to Medicare within one
year of $9.2 million is netted against accounts receivable. The amount payable
to Medicare in excess of one year of $7.4 million is shown as Long-term Medicare
Liabilities. The Medicare program has committed to the automatic approval of a
36 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.
9. CAPITAL STOCK
In accordance with the terms of conversion of the Company's Series A
Preferred Stock as stated in the Series A Preferred Stock Conversion Agreement,
two unrelated preferred shareholders converted a total of 120,000 preferred
shares into 400,000 shares of Company Common Stock during the three months ended
September 30, 2000. The conversion rate for the preferred shares was $3.33.
10. SUBSEQUENT EVENTS
Effective October 1, 2000, the Company acquired through its
wholly-owned subsidiary Amedisys Northwest Home Health, Inc. certain assets and
liabilities of Northwest Home Health Agency, Inc. and Georgia Mountains Homecare
Services, Inc. (collectively, "Northwest"). The assets acquired consisted
primarily of cash and cash equivalents; accounts receivable; benefits of any
prepaid items; inventory; furniture, fixtures, and equipment; computer software;
telephone and facsimile numbers; all rights, title, and interests in third party
agreements, services agreements, or other contracts; all assignable permits,
provider numbers, certificates, licenses, franchises, and authorizations; trade
name used; all patents, copyrights, trade secrets, service marks, and any other
intellectual property; and the goodwill
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<PAGE> 13
and going concern of Northwest. The liabilities assumed consisted of Northwest's
actual and contingent liabilities and obligations relating to Northwest's
business or any of the acquired assets, excluding all actual and contingent
liabilities and obligations of Northwest arising from or related to Northwest's
403(a) and 403(b) retirement plans. The purchase price was the assumption of the
above-mentioned liabilities.
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 and Notes
thereto (the "Notes") appearing in Item 1 and the Consolidated Financial
Statements for 1999, Notes, and the related Management's Discussion and
Analysis.
GENERAL
Amedisys, Inc. is a leading multi-state provider of home health care
nursing services. The Company operates fifty home care nursing offices, two
ambulatory surgery centers, and one corporate office in the southern and
southeastern United States. In August 1999, the Company adopted a formal plan to
sell all of its interests in its ambulatory surgery and infusion therapy
divisions, and it has sold all of such interests other than two ambulatory
surgery centers. See Note 4, Discontinued Operations, for a discussion of the
sales. The Company's strategic plan is to become a focused home health
nursing company.
RESULTS OF OPERATIONS
Revenues. Net revenues decreased $2,079,000 or 9% and $5,090,000 or 7%
for the three and nine months ended September 30, 2000, respectively, as
compared to the same periods in 1999. This decrease was attributed to a decrease
in visits of 84,443 or 26.5% from 318,129 for the three months ended September
30, 1999 to 233,686 for the three months ended September 30, 2000 and a decrease
in visits of 124,025 or 12.9% from 963,723 for the nine months ended September
30, 1999 to 839,698 for the nine months ended September 30, 2000. The decrease
in visits is primarily attributable to the implementation of Disease State
Management Programs which are diagnosis-specific treatment protocols implemented
by each agency. These protocols implement standardized treatment plans for
patients to reach a quality outcome in the most efficient manner possible.
Cost of Revenues. Cost of revenues decreased 7% and 8% for the three
and nine months ended September 30, 2000, respectively, as compared to the same
periods in 1999. This decrease is primarily attributed to a reduction in visit
volume as noted above. As a percentage of net revenues, cost of revenues
increased 1% to 47% for the three month period ended September 30, 2000 as
compared to the same period in 1999 and decreased 1% to 47% for the nine month
period ended September 30, 2000 as compared to the same period in 1999.
General and Administrative Expenses ("G&A"). G&A decreased by 8% and
6% for the three and nine months ended September 30, 2000 as compared to the
same periods in 1999. This decrease is primarily attributed to the restructuring
efforts implemented during the latter part of 1999 following the acquisition of
certain Columbia/HCA home health care agencies in the latter part of 1998, as
described in Note 2 (the "Restructuring").
Operating (Loss). The Company had an operating loss of $859,000 for the
three months ended September 30, 2000 as compared to a loss of $615,000 for
the three months ended September 30, 1999. This increase in operating loss of
$244,000 or 40% is primarily due to a decrease in service revenue as described
above offset by a decrease in G&A as described above. The Company had a loss of
$2,496,000 for the nine months ended September 30, 2000 as compared to a loss
of $2,628,000 for the nine months ended September 30, 1999. The reduction in
operating losses of $132,000 or 5% is mainly attributed to the Restructuring.
Other Income and Expenses. Other expenses, net decreased $1,502,000
from $2,112,000 for the three months ended September 30, 1999 to $610,000 for
the three months ended September 30, 2000 and $1,680,000 from $3,387,000 for the
nine months ended September 30, 1999 to $1,707,000 for the nine months ended
September 30, 2000 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 latter part of 1998.
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Discontinued Operations. Discontinued operations, net of income taxes,
is $707,000 for the three months ended September 30, 2000 which consists of a
loss from operations of $407,000 offset by a gain on the sale of the Infusion
Division of $1,114,000 as compared to income of $5,774,000 for the three months
ended September 30, 1999 which consists of a loss from operations of $391,000
offset by a gain on the sale of two ambulatory surgery centers of $6,165,000.
Discontinued operations, net of income taxes, is $817,000 for the nine months
ended September 30, 2000 which consists of a loss from operations of $2,806,000
offset by a gain on the sale of the Infusion Division of $1,114,000 and a gain
on the sale of Park Place Surgery Center of $2,509,000 as compared to income of
$5,222,000 for the nine months ended September 30, 1999 which consists of a loss
from operations of $943,000 offset by a gain on the sale of two outpatient
surgery centers of $6,165,000.
FINANCIAL CONDITION
The Company's principal capital requirements are for additional working
capital to fund current cash requirements of the Company. The Company recorded
operating losses thus far in 2000 and for the years ended December 31, 1999 and
1998 and has had negative cash flow from operations. The negative cash flow from
operations is largely attributable to the changes in Medicare reimbursement as a
result of IPS which were effective January 1, 1998 for the Company. 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. With the implementation of PPS on October
1, 2000, the Company believes it will generate a positive cash flow from
operations beginning in the fourth quarter of 2000 sufficient to meet its
current and anticipated cash needs. See Note 2 for a discussion of IPS and PPS.
In addition, the Company has two ambulatory surgery centers remaining to divest
in accordance with the strategy adopted during 1999 (see Note 6 for certain
restrictions on disposition of assets under the Columbia/HCA note agreement).
For a description of Notes Payable and Long-term Debt, see Notes 5, 6,
and 7. For a discussion of Amounts Due Medicare, see Note 8.
The Company's operating activities used $1,352,000 in cash during the
nine month period ended September 30, 2000, whereas such activities used
$17,866,000 in cash during the same period in 1999. Cash used by operating
activities for 2000 is attributed to an increase in accrued expenses of
$1,479,000, a decrease in accounts receivable of $468,000, the write off of
goodwill of $1,771,000, depreciation and amortization expense of $2,101,000 and
provision for bad debts of $1,622,000 offset by a net loss of $3,386,000, a gain
on the sale of Company operations of $3,779,000, a decrease in accounts payable
of $727,000 and a change in deferred revenue of $1,589,000.
The Company's investing activities provided $5,033,000 for the nine
month period ended September 30, 2000, whereas investing activities provided
$10,429,000 for the nine month period ended September 30, 1999. Cash provided by
investing activities in 2000 is attributed to proceeds from the sale of the
Company's discontinued operations of $4,949,000, proceeds from the sale of
property, plant and equipment of $114,000 and an increase in minority interest
in subsidiary of $214,000, offset by purchases of property, plant and equipment
of $244,000.
Financing activities used cash during the nine month period ended
September 30, 2000 of $478,000, whereas such activities provided $10,536,000
during the same period in 1999. Cash used by financing activities in 2000 is
attributable to net borrowings on line of credit agreements of $3,856,000 and
payments on notes payable and capital leases of $3,623,000 offset by an increase
in long-term Medicare liabilities of $4,895,000, proceeds from issuance of notes
payable of $1,000,000 and deferred interest expense of $1,106,000.
At September 30, 2000, the Company had negative working capital of
$6,122,000 and a stockholders' equity deficit of $12,502,000. With the
implementation of PPS on October 1, 2000, the Company believes that it will
generate positive cash flow from operations in the fourth quarter of 2000. In
addition, the Company has two remaining ambulatory surgery centers to divest in
accordance with the strategy adopted during 1999. The Company is currently in
various stages of divesting these assets and anticipates, based on estimates of
current market values for these assets and the purchase price of transactions
completed (see Note 4), to generate in excess of $3.1 million cash (subject to
the release of certain restrictions on indebtedness and dispositions of assets
imposed under the note agreement executed between the Company and Columbia/HCA)
in the fourth quarter of 2000. For the divestitures
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<PAGE> 15
completed in 1999 and thus far in 2000, Columbia/HCA allowed sales to occur
without requiring the net cash proceeds from the sales to be applied toward the
note payable, however, there can be no assurances that it will do so in the
future (see Long-term Debt footnote).
The Company does not believe that inflation has had a material effect
on its results of operations for the three and nine month periods ended
September 30, 2000.
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
No material developments have occurred on the legal proceedings last
reported in the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1999.
ITEM 2. CHANGES IN SECURITIES
In accordance with the terms of conversion of the Company's Series A
Preferred Stock as stated in the Series A Preferred Stock Conversion Agreement,
two unrelated preferred shareholders converted a total of 120,000 preferred
shares into 400,000 shares of Company Common Stock during the three months ended
September 30, 2000. The conversion rate for the preferred shares was $3.33.
Issuance of the Common Stock was exempt from registration under Section 3(a)(9)
of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
The independent auditors' report dated March 15, 2000, included as an
exhibit to the Company's Annual Report on Form 10-K for the year ended December
31, 1999, expressed a qualified opinion with an explanatory paragraph due to the
substantial doubt about the Company's ability to continue as a going concern as
a result of significant recurring losses from operations and a deficit in
stockholders' equity of $10,186,000 at December 31, 1999. In addition,
management's projections indicated that continuing operations would generate
negative cash flow and certain assets sales would have to take place in order to
sustain operations through December 31, 2000. Subsequent to March 15, 2000, the
Company completed the sale of several non-core assets (see Discontinued
Operations footnote) along with other events. As a result of these transactions,
the auditors' opinion on the 1999 financial statements is no longer qualified.
The Company filed an Annual Report on Form 10-K/A for the year ended December
31, 1999 with the SEC on September 1, 2000 as a result of this change.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
No. Identification of Exhibit
3.1(1) - Certificate of Incorporation
3.2(1) - Bylaws
4.1(1) - Certificate of Designation for the Series A Preferred Stock
4.2(2) - Common Stock Specimen
4.3(2) - Preferred Stock Specimen
4.4(2) - Form of Placement Agent's Warrant Agreement
4.5(3) - Series A Preferred Stock Conversion Agreement Specimen
4.6(3) - Certificate of Amendment of Certificate of Designation
Specimen
4.7(4) - Shareholder Rights Agreement
21.1(2) - List of Subsidiaries
27.1(5) - Financial Data Schedule
(1) Previously filed as an exhibit to the Annual Report on Form 10-KSB for
the year ended December 31, 1994.
(2) Previously filed as an exhibit to the Registration Statement on Form
S-3 dated March 11, 1998.
(3) Previously filed as an exhibit to the Quarterly Report on Form 10-Q/A
for the period ended June 30, 1999.
(4) Previously filed as an exhibit to the Current Report on Form 8-K dated
June 16, 2000 and the Registration Statement on Form 8-A dated June 16,
2000.
(5) Filed herewith.
(b) Report on Form 8-K
The Company filed a Current Report on Form 8-K with the SEC on August
23, 2000 in connection with the sale of the Infusion division effective August
1, 2000. 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, 2000, a
pro forma consolidated statement of operations for the periods ended June 30,
2000 and December 31, 1999, and explanatory notes.
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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
Senior Vice President of Finance
Principal Accounting and Financial Officer
DATE: November 14, 2000
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1(1) - Certificate of Incorporation
3.2(1) - Bylaws
4.1(1) - Certificate of Designation for the Series A Preferred Stock
4.2(2) - Common Stock Specimen
4.3(2) - Preferred Stock Specimen
4.4(2) - Form of Placement Agent's Warrant Agreement
4.5(3) - Series A Preferred Stock Conversion Agreement Specimen
4.6(3) - Certificate of Amendment of Certificate of Designation
Specimen
4.7(4) - Shareholder Rights Agreement
21.1(2) - List of Subsidiaries
27.1(5) - Financial Data Schedule
</TABLE>
(1) Previously filed as an exhibit to the Annual Report on Form 10-KSB for
the year ended December 31, 1994.
(2) Previously filed as an exhibit to the Registration Statement on Form
S-3 dated March 11, 1998.
(3) Previously filed as an exhibit to the Quarterly Report on Form 10-Q/A
for the period ended June 30, 1999.
(4) Previously filed as an exhibit to the Current Report on Form 8-K dated
June 16, 2000 and the Registration Statement on Form 8-A dated June 16,
2000.
(5) Filed herewith.
