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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2000
COMMISSION FILE NUMBER: 0-24260
AMEDISYS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-3131700
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
11100 MEAD ROAD, SUITE 300
BATON ROUGE, LOUISIANA 70816
(Address of principal executive offices, including zip code)
(225) 292-2031 or (800) 467-2662
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act: NONE
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.001 per share
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-K in this form, and if no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based on the last sale price as quoted by the OTC Bulletin Board
on March 12, 2001 was $26,522,000. As of March 12, 2001 registrant has 5,644,181
shares of Common Stock outstanding.
Documents incorporated by reference: Registrant's definitive Proxy
Statement for its 2001 Annual Meeting of Stockholders to be filed pursuant to
the Securities Exchange Act of 1934 is incorporated herein by reference into
Part III hereof.
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TABLE OF CONTENTS
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PART I.................................................................. 1
ITEM 1. BUSINESS.................................................... 1
ITEM 2. PROPERTIES.................................................. 14
ITEM 3. LEGAL PROCEEDINGS........................................... 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 15
PART II................................................................. 16
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS..................................................... 16
ITEM 6. SELECTED FINANCIAL DATA..................................... 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 18
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISKS....................................................... 23
ITEM 8. FINANCIAL STATEMENTS........................................ 23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.................................... 23
PART III................................................................ 23
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 23
ITEM 11. EXECUTIVE COMPENSATION...................................... 23
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................. 23
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 23
PART IV................................................................. 24
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K............................ 24
SIGNATURES.............................................................. 27
FINANCIAL STATEMENTS.................................................... 28
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PART I
FORWARD LOOKING STATEMENTS
When included in the Annual Report on Form 10-K 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 Annual Report on Form 10-K. 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 1. BUSINESS
GENERAL
Amedisys, Inc., a Delaware corporation ("Amedisys" or "the Company"), is a
leading multi-regional provider of home health care nursing services. The
Company operates fifty home care nursing offices, one ambulatory surgery center,
and one corporate office in the southern and southeastern United States.
Amedisys was incorporated in Louisiana in 1982. In 1993, the Company became
public through a merger with M & N Capital, a New York corporation. In 1994, it
moved its state of incorporation from New York to Delaware. Amedisys currently
trades on the OTC Bulletin Board under the symbol "AMED.OB".
During 1999, the Company changed its strategy from providing a variety of
alternate site provider health care services to becoming a leader in home health
care nursing services. The Company's change of focus was largely attributed to
its significant investment in this segment as a result of its acquisition of 83
home care offices from Columbia/HCA Healthcare Corporation a/k/a The Healthcare
Company ("Columbia/HCA") in late 1998. A second major factor was the
governmental reimbursement changes in the Medicare system that will now allow
home care the opportunity to be profitable since the Prospective Payment System
("PPS") was implemented in October 2000. A third significant factor was the
Company's established reputation and expertise in the field. Amedisys has over a
decade of experience in home care nursing and was an early innovator in bringing
technology, previously used only in acute care settings, to the home, as well as
providing traditional home care services.
Pursuant to this strategy, the Company launched a restructuring plan to
divest its non-home health care nursing divisions. During the period from
September, 1999 through December, 2000, the Company sold five of its six surgery
centers and three infusion locations. The Company plans to achieve market
dominance in the southern and southeastern United States by expanding its
referral base by utilizing a highly trained sales force, offering specialized
programs such as wound care, and completing selective acquisitions.
The Company is continuing to systematically reduce operating costs.
Converting its method of nurse pay to a variable or per visit rate rather than
fixed or salary system, utilizing economies of scale, and reducing corporate
overhead are significant cost reduction measures undertaken by the Company.
Business functions which are not considered part of the core business have been
outsourced and management layers have been streamlined.
The Company's business model has been developed to be successful under PPS.
The Company has implemented disease state management programs and clinical
protocols as well as supporting technology to monitor and report outcome data,
to standardize care, and to ensure quality outcomes. Using clinical managers to
assess and track patient progress and highly skilled nurses to deliver care are
also important components of the overall plan.
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DEVELOPMENTS
Acquisitions
In November, 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, located in Alabama,
Georgia, Louisiana, North Carolina, Oklahoma, and Tennessee. Assets located in
Louisiana and Oklahoma were acquired on November 16, 1998, and the remaining
assets were acquired on December 1, 1998. Assuming the Columbia/HCA acquisition
occurred on January 1, 1998, unaudited pro forma information for the year ended
December 31, 1998, which is not necessarily indicative of future operating
results, is as follows (in 000's, except per share information).
TWELVE MONTHS ENDED
DECEMBER 31, 1998
-------------------
Net Service Revenue......................................... $150,645
Operating (Loss)............................................ (50,456)
(Loss) before Discontinued Operations....................... (43,292)
Net (Loss).................................................. (41,453)
Net (Loss) per Common Share................................. (13.48)
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 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.
Effective November 17, 2000, the Company acquired through its wholly-owned
subsidiary Amedisys Home Health, Inc. of Florida certain assets and liabilities
of Mid-Florida Home Health Services from Winter Haven Hospital, Inc. The assets
acquired consisted primarily of all furniture, fixtures, equipment and leasehold
improvements; supplies; inventory; lists of current patients, mailing lists,
business records, and telephone numbers; goodwill and going concern; benefits of
all maintenance agreements, association dues, advertising, design, fees, rent
services, or interest; all rights, to the extent assignable, to the ownership,
development and operations of the Agencies including the Medicare and Medicaid
Provider Numbers; technical outlines, records, and software and other technology
including contracts, licenses, authorizations and permits; and all trade
secrets, inventions, patents, copyrights, trademarks and other intangible assets
including the right to use the trade name "Mid-Florida Home Health Services" for
a period of ninety days after the effective date. The liabilities assumed
consisted of employees' paid time-off balances ("PTO") and obligations under
capital and operating leases. In consideration for the acquired assets and
liabilities, the Company paid $975,000 cash, less PTO, at the time of closing
and executed a promissory note in the amount of $975,000 bearing an annual
interest rate of 7% and payable in 36 monthly principal and interest
installments of $30,105.
Effective March 1, 2001, the Company acquired through its wholly owned
subsidiary Amedisys Home Health, Inc. of Alabama, certain assets and liabilities
of Seton Home Health Services, Inc. ("Seton") from Seton Health Corporation of
North Alabama. The assets acquired consisted primarily of all furniture,
fixtures, equipment (except computer equipment and printers) and leasehold
improvements; supplies; inventory; lists of present and former patients and
mailing lists; vendor lists; employee records; telephone numbers and listings;
intangibles and other rights and privileges; leasehold interest in the
locations; goodwill and going
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concern; rights under certain agreements; rights under all contracts including
capital leases and non-competition agreements; licenses and permits relating to
ownership, development and operations; and rights under Medicare and Medicaid
Provider Agreements. The liabilities assumed consisted of accrued, but unused
employee vacation and obligations under operating leases. In consideration for
the acquired assets and liabilities, the Company paid $440,000 cash, which
represents a purchase price of $475,000 less the estimated value of accrued
vacation time.
Dispositions and Discontinued Operations
In the accompanying Statements of Operations for each of the three years
ended December 31, 2000, the Company has reflected its staffing, management
services, outpatient surgery, and infusion therapy divisions as discontinued
operations.
On September 21, 1998, the Company sold certain assets, subject to the
assumption of certain liabilities, of its wholly-owned subsidiaries of Amedisys
Staffing Services, Inc., Amedisys Nursing Services, Inc., and Amedisys Home
Health, Inc. to Nursefinders, Inc. The Company had no material relationship with
Nursefinders, Inc. prior to this transaction. The purchase price was $7,200,000.
The Company has agreed to a five year non-competition covenant. At closing,
$6,480,000 was paid with the balance of $720,000 placed in an escrow account for
a ninety day period. The escrow balance plus approximately $19,000 of interest
was distributed to the Company (approximately $365,000) and Nursefinders
(approximately $374,000) at December 31, 1999. Of the amount distributed to
Nursefinders, approximately $174,000 represented amounts applied to principal
and interest payments due Nursefinders by the Company pursuant to a note
payable. The Company recorded a pre-tax gain of $5,041,000 on the sale. The
Company filed a Current Report on Form 8-K with the SEC on October 5, 1998 with
regard to this transaction.
On November 3, 1998, the Company and CPII Acquisition Corp. ("CPII")
entered into an Asset Purchase Agreement whereby the Company sold certain of the
assets, subject to the assumption of certain liabilities, of its proprietary
software system (Analytical Medical Systems) and home health care management
division (Amedisys Resource Management) to CPII in exchange for $11,000,000
cash. The assets sold consisted primarily of proprietary rights with respect to
the home health information system developed and used by the Company and its
subsidiaries; deposits, prepayments or prepaid expenses relating to the
business; contracts; fixtures and equipment; books and records; rights under
warranties and claims, causes of action, choses in action, rights of recovery
and rights to set-off. The liabilities assumed were those associated with the
assumed contracts. The Company provided limited support services to CPII for a
period of one year from the date of the agreement. The Company has retained a
licensing agreement with CPII for the software for a period of five years. An
affiliate of CPII will utilize the assets to provide certain management services
to the Company's home health agencies. Due to the Company's continuing
involvement with the assets sold, the pre-tax gain on the sale of the software
system totaling $10,593,000 was deferred and is being amortized over the term of
the management services agreement referred to above. The Company filed a Current
Report on Form 8-K with the SEC on November 10, 1998 with regard to this
transaction.
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 was 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 was payable pursuant to a one year note, payable in four quarterly
payments of principal plus accrued interest at prime plus 2%. Total principal
and interest payments due to the Company as of March 15, 2001 totaled $572,000.
As of March 16, 2001, these payments have not been received by the Company. As a
result, the Company has fully reserved for these notes as of December 31, 2000.
This disposition did not have a material effect on net revenues or income of the
Company.
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 was to become a focused home health nursing company. As
of December 31, 2000, the Company has divested of its entire infusion therapy
division and all of
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its outpatient surgery centers with the exception of one surgery center in
Hammond, Louisiana. A discussion of the sales that have occurred since the
adoption of the plan is as follows.
Effective September 1, 1999, by an Asset Purchase Agreement, the Company
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. At closing, $10,562,000 was paid immediately to the
Company with a three-month $300,000 note receivable due in monthly installments
of $100,000 plus interest at an effective interest rate of 10%. The Company has
received payments of $205,000 on this note receivable and, as a result of the
final sale adjustments, has offset the remaining balance against the gain
recorded. In addition to cash consideration, USP agreed to pay off certain
creditors of ASC for debts related to the Surgery Centers of $1,101,083. The
Company recorded a pre-tax gain of $9,417,000 as a result of this transaction.
The Company filed a Current Report on Form 8-K with the 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 represents 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.
Effective December 1, 1999, ASC, by a Membership Interest Purchase
Agreement, sold all of its 67% membership interest in West Texas Ambulatory
Surgery Center, L.L.C. to U.S. Orthopedics Texas, L.L.C. 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.
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 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 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, paid immediately to the Company at closing. Subject to certain
exceptions, the assets sold consisted primarily of furniture, fixtures and
equipment; inventory and supplies on hand or in transit; service
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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.
On December 1, 2000, the Company's wholly-owned subsidiary, ASC, East
Houston Physician Surgical Services, Ltd. ("Surgical Services"), and East
Houston Surgery Center, Ltd. ("East Houston") entered into an agreement for the
purchase and sale of the Company's 22.98% membership interest in East Houston,
an outpatient surgery center in Houston, Texas, to Surgical Services. The
purchase price of $1,650,000 cash was paid to the Company at closing. The
Company and Surgical Services had no material relationship prior to the
transaction, except by virtue of their membership interest in East Houston and
that the Company and some of the member physicians served on the Board of
Directors of East Houston. At the closing, the management agreement existing
between the Company and East Houston was also terminated. The Company recorded a
pre-tax gain of $1,307,000 as a result of this transaction in the quarter ended
December 31, 2000.
Summarized financial information for the discontinued operations is as
follows (in 000's):
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
Staffing Division:
Service Revenue............................ $ -- $ -- $12,607 $17,292 $12,538
Income from Discontinued Operations before
Provision for Income Taxes.............. $ -- $ -- $ 1,723 $ 4,139 $ 2,488
Income from Discontinued Operations Net of
Income Taxes............................ $ -- $ -- $ 1,137 $ 2,732 $ 1,642
Gain on Sale of Discontinued Operations
before Provision for Income Taxes....... $ -- $ -- $ 5,041 $ -- $ --
Gain on Sale of Discontinued Operations Net
of Income Taxes......................... $ -- $ -- $ 3,177 $ -- $ --
DME/Management Services Division:
Service Revenue............................ $ -- $ -- $ 1,203 $ 5,100 $ 3,396
Income (Loss) from Discontinued Operations
before Provision for Income Taxes....... $ -- $ (633) $ (616) $ 1,428 $ 549
Income (Loss) from Discontinued Operations
Net of Income Taxes..................... $ -- $ (612) $ (407) $ 943 $ 362
Outpatient Surgery Division:
Service Revenue............................ $ 3,030 $ 7,075 $ 6,224 $ 6,287 $ 4,626
Income (Loss) from Discontinued Operations
before Provision for Income Taxes....... $ 754 $ 1,311 $ 330 $(1,757) $ 983
Income (Loss) from Discontinued Operations
Net of Income Taxes..................... $ 754 $ 865 $ 218 $(1,160) $ 649
Gain on Sale of Discontinued Operations
before Provision for Income Taxes....... $ 3,972 $ 9,341 $ -- $ -- $ --
Gain on Sale of Discontinued Operations Net
of Income Taxes......................... $ 3,800 $ 6,165 $ -- $ -- $ --
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2000 1999 1998 1997 1996
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Infusion Therapy Division:
Service Revenue............................ $ 4,580 $ 7,616 $ 5,193 $ 7 $ --
Income (Loss) from Discontinued Operations
before Provision for Income Taxes....... $(4,035) $(1,572) $(3,464) $ (307) $ --
Income (Loss) from Discontinued Operations
Net of Income Taxes..................... $(4,035) $(1,037) $(2,286) $ (203) $ --
Gain on Sale of Discontinued Operations
before Provision for Income Taxes....... $ 1,114 $ -- $ -- $ -- $ --
Gain on Sale of Discontinued Operations Net
of Income Taxes......................... $ 1,114 $ -- $ -- $ -- $ --
Total Discontinued Operations:
Service Revenue............................ $ 7,610 $14,691 $25,227 $28,686 $20,560
Income (Loss) from Discontinued Operations
before Provision for Income Taxes....... $(3,281) $ (894) $(2,027) $ 3,503 $ 4,020
Income (Loss) from Discontinued Operations
Net of Income Taxes..................... $(3,281) $ (784) $(1,338) $ 2,312 $ 2,653
Gain on Sale of Discontinued Operations
before Provision for Income Taxes....... $ 5,086 $ 9,341 $ 5,041 $ -- $ --
Gain on Sale of Discontinued Operations Net
of Income Taxes......................... $ 4,914 $ 6,165 $ 3,177 $ -- $ --
The Company has one remaining outpatient surgery center yet to sell in
accordance with the divestiture plan adopted during 1999. Generally, a plan to
dispose of discontinued operations must be carried out over a period not to
exceed one year in order to continue to qualify for discontinued operation
accounting treatment. This remaining surgery center has been involved in
litigation outside of the Company's control which prevented the Company from
completing a timely disposition. For this reason, the Company has continued to
reflect the outpatient surgery division as discontinued operations. The Company
intends to sell the remaining surgery center in 2001.
Included in the accompanying Consolidated Balance Sheets as of December 31,
2000 and 1999 are the following assets and liabilities Held for Sale (in 000's):
DECEMBER 31, 2000 DECEMBER 31, 1999
----------------- -----------------
Cash................................................ $ 20 $ 221
Accounts Receivable................................. 510 555
Prepaid Expenses.................................... 13 41
Inventory and Other Current Assets.................. 172 365
---- ------
Current Assets Held for Sale........................ $715 $1,182
==== ======
Property............................................ $681 $1,711
Other Assets........................................ 8 1,813
Investments......................................... -- 738
---- ------
Long-term Assets Held for Sale...................... $689 $4,262
==== ======
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DECEMBER 31, 2000 DECEMBER 31, 1999
----------------- -----------------
Accounts Payable.................................... $190 $ 138
Accrued Payroll..................................... 50 44
Accrued Other....................................... 34 38
Notes Payable....................................... -- 288
Current Portion of Long-term Debt................... 192 209
Current Portion of Obligations Under Capital
Leases............................................ 14 89
---- ------
Current Liabilities Held for Sale................... $480 $ 806
==== ======
Long-term Debt...................................... $966 $1,252
Obligations under Capital Leases.................... -- 23
---- ------
Long-term Liabilities Held for Sale................. $966 $1,275
==== ======
Recent Remodification of Loan
Effective September 30, 1999, the Company and Columbia/HCA signed an
agreement to modify the terms of a $14 million note payable to Columbia/HCA
which was a result of the acquisition of home health agencies consummated in
November 1998. The Company was to make quarterly principal and accrued interest
payments beginning April 30, 2001, with the balance of the note being due,
subject to certain prepayment provisions in the agreement, on July 31, 2004.
Under the loan modification agreement, the Company may have been required to
pre-pay certain amounts depending upon the Company having excess cash flows in
the fiscal year, as defined in the agreement. These amounts, if due, were
payable within 45 days after the end of each fiscal year ending after October 1,
1999 and prior to July 30, 2004. The balance on this note was presented in the
financial statements as of December 31, 1999 as long-term debt classified as
current due to a material adverse effect clause in the note agreement which
provided Columbia/HCA the ability to require immediate payment of outstanding
principal and accrued interest if the Company experienced 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.
On December 28, 2000, the Company entered into a loan agreement with NPF
Capital, Inc. ("NPF") for a principal sum of up to $11,725,000. At execution,
NPF paid $9,000,000 directly to Columbia/HCA for the benefit of the Company. The
Company also financed $725,000 of debt issue costs under this agreement, with
the remaining unfunded portion of $2,000,000 available for future acquisitions.
Simultaneously, Amedisys entered into a Termination Agreement with Columbia/HCA
relating to the note payable ("HCA Note"). The Termination Agreement with
Columbia/HCA was effective October 1, 2000. The Termination Agreement related to
that certain Credit Agreement dated November 16, 1998 and that certain
promissory note dated December 1, 1998 as modified by that certain Loan
Modification Agreement dated September 30, 1999. As part of this agreement, the
HCA Note, which carried a balance (including accrued interest) of $16.6 million
at September 30, 2000, was terminated effective October 1, 2000 for a cash
payment of $9,000,000 and the execution of a warrant agreement that allows
Columbia/HCA to purchase up to 200,000 shares of Amedisys' Common Stock, subject
to certain conditions. These warrants have an estimated value of $344,000. As of
result of these transactions, the Company has recorded an extraordinary gain of
$5.8 million, net of taxes, in the fourth quarter of 2000.
The loan agreement with NPF Capital, Inc. ("NPF Note"), an affiliate of
National Century Financial Enterprises, Inc., is for a principal sum not to
exceed $11,725,000 at an annual interest rate of 13.95%, adjustable in
accordance with the loan agreement. At loan execution, the Company borrowed an
amount ("Initial Loan Amount") equal to $9,000,000 which was paid directly to
Columbia/HCA. The Initial Loan Amount is payable over a three year term with
interest only payments for the first six months and monthly payments of
principal and interest for the remainder of the term. The Company has available
an amount not to exceed $2,000,000 ("Supplemental Loan Amount") for the
acquisition of businesses, companies and/or their assets. Any Supplemental Loan
Amounts received will be payable over a three year term commencing upon receipt
of the Supplemental Loan Amount with thirty-six monthly principal and interest
payments. The fees charged by NPF relating to the NPF Note totaled $725,000 and
are payable in accordance with the payment
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terms of the Initial Loan Amount. The security for this note consists of all
credits, deposits, account, securities or moneys, and all other property rights
belonging to or in which the Company has any interest, now or hereafter, as well
as every other liability now or hereafter existing of the Company, absolute or
contingent, due or to become due. In addition, the net cash proceeds received
from the divestiture of the Company's one remaining surgery center are payable
to NPF.
Segment Information
The Company's principal source of revenue is derived from home health care
services. The Company's Statements of Operations for the Years Ended December
31, 2000, 1999, and 1998, attached hereto and referenced in Item 8 herein and
the "Dispositions and Discontinued Operations" section above, contains financial
information on this segment. The financial information for the years ended
December 31, 1999, 1998, 1997 and 1996 have been reflected as continuing and
discontinued operations as a result of the Company's decision to reflect its
staffing, management services, outpatient surgery, and infusion therapy
divisions as discontinued operations. Financial information on the segments is
treated as discontinued operations as stated above.
INDUSTRY OVERVIEW
As national health care spending continues to outpace the rate of inflation
and the population of older Americans increases at a faster rate, alternatives
to costly hospital stays will be in even greater demand. Managed care, Medicare,
Medicaid and other payor pressures continue to drive patients through the
continuum of care until they reach a setting where the appropriate level of care
can be provided most cost effectively. Over the past several years, home health
care has evolved as an acceptable and often preferred alternative in this
continuum. In addition to patient comfort and convenience, substantial cost
savings can usually be realized through treatment at home as an alternative to
traditional institutional settings. The continuing economic pressures within the
health care industry and the reimbursement changes dictated by the Balanced
Budget Act of 1997 ("BBA"), have forced providers of home health care services
to closely examine and often modify the manner in which they provide patient
care and services. To survive under the Interim Payment System ("IPS"),
companies were challenged with streamlining operations and modifying staffing
models to manage costs and operate successfully. As we have now moved into PPS,
effective October 1, 2000, those pressures continue to exist. However, those
companies who successfully operate with effective business models can provide
patient care and manage costs under this reimbursement system.
Traditionally, the home health care industry has been highly fragmented,
comprised primarily of "mom and pop" local home health agencies offering limited
services. These local providers often do not have the capital necessary to
expand their operations or services and are often not able to achieve the
efficiencies to compete effectively. With the implementation of IPS and other
provisions of the BBA, the home health care industry has experienced major
consolidation for the first time in its history. Further, with PPS recently
implemented, we continue to experience closures/consolidations in the home
nursing sector.
STRATEGY
The Company's business objective is to enhance its position in its
geographic market areas as a leading provider of high quality, low cost home
health nursing services. To accomplish this, it will do the following:
Internal Growth Strategy
Focus on Its Employees. Because the Company is engaged in a service
business, the essence of the Company is its people. The Company's emphasis
on communication, education, empowerment, and competitive benefits allows
it to attract and retain highly skilled and experienced people in its
markets.
Expand Its Service Base. The Company has targeted selected markets in
the southern and southeastern United States. Through the expansion of its
services and development of niche programs, it plans to dominate these
markets, to increase utilization of its services by payors and referral
sources, and to enhance its overall market position.
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Expand Its Referral Base. It is anticipated that revenue growth will
be spurred by the Company's strategy to employ sales account executives
whose sole focus will be to expand its referral base, so the Company is not
dependent on relatively few physician groups in any given market.
Capitalize on the Closure of Competitive Agencies. Keeping a pulse on
agency closures (as a result of BBA) and understanding referral patterns in
each of its markets allows the Company the opportunity to gain market share
with no acquisition costs.
Manage Costs Through Disease State Management. Payors are focusing on
the management of patients who suffer from chronic diseases which correlate
with substantial long-term costs. In 1999, the Company introduced Disease
State Management programs for wound care, cardiac, and diabetics. In 2000,
the Company introduced other Disease State Management programs, such as
ortho/rehab, pain management, pulmonary/respiratory, pneumonia, cardio
vascular accident ("CVA"), and cancer. The Company's Disease State
Management programs include patient and family education and empowerment,
frequent monitoring and coordinated care with other medical professionals
involved in the care of the patient.
Manage Costs Through Technology. The Company utilizes a software
system that was developed internally which reduces its cost to operate its
business and integrates a number of financial and operating functions into
a single entry system. The software system was sold to CPII in 1998. The
Company is currently utilizing the software pursuant to a licensing
agreement with CPII which expires in 2004. By enhancing its operations
through the use of information technology and expanded computer
applications, the Company is positioned to not only operate more
efficiently, but to compete in an environment increasingly influenced by
cost containment.
External Growth Strategy
The Company's external growth strategy is to continue expansion through
selected acquisitions. The Company believes that home health nursing
companies are currently undervalued and provide excellent opportunities to
gain additional market share. The Company's acquisition strategy is to:
Focus on Large Hospital Systems with Internal Home Health
Agencies. PPS, which was implemented in October 2000, eliminates the
opportunities for cost-shifting by hospitals. Many hospitals are no longer
interested in participating in the home health business. As a result, many
have made the decision or are in the process of deciding, to sell their
agencies or partner with a reputable company to provide these services.
This not only provides the Company with the opportunity to acquire quality
agencies, but to acquire agencies with strong physician referral bases.
Target Large, Multi-Site Agencies. By acquiring multi-site agencies
and eliminating their corporate structure, the Company hopes to rapidly
dominate a market by either layering the new business into their current
agencies, enhancing current market share or expanding its coverage to
contiguous markets.
Concentrate on Metropolitan Areas. Metropolitan-based agencies are
principal targets due to the synergies created by large patient populations
located close together.
HOME HEALTH CARE SERVICES
Services provided in home health care include four broad categories: (1)
nursing and allied health services, (2) infusion therapy, (3) respiratory
therapy and, (4) home medical equipment. The National Association of Home Care
("NAHC") estimates that total spending for home care was $36 billion in 1999. Of
this total, the U.S. Department of Health and Human Services estimates that
approximately 85% of patients requiring home care services use nursing services
(Health, United States, 1999 Health and Aging Chartbook).
Accounting for $36 billion in expenditures in 1999, nursing and allied
services represent the largest sector, or 70%, of all home health care services.
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The Company currently operates 50 home health care nursing offices
consisting of 30 parent offices with Medicare provider numbers, and 20 branch
offices. Serving this market for the past 9 years, the Company has built an
excellent reputation based on quality care and specialty nursing services.
Because its services are comprehensive, cost-effective and can be accessed 24
hours a day, seven days a week, the Company's home health care nursing services
are attractive to payors and physicians. All of its offices are accredited or in
the process of seeking accreditation by the Joint Commission on Accreditation of
Health Care Organizations ("JCAHO"). The Company provides a wide variety of home
health care services including:
Registered nurses who provide specialty services such as infusion
therapy, skilled monitoring, assessments, and patient education. Many of
the Company's nurses have advanced certifications.
Licensed practical (vocational) nurses who perform technical procedures,
administer medications and change surgical and medical dressings.
Physical and occupational therapists who work to strengthen muscles,
restore range of motion and help patients perform the activities of
daily living.
Speech pathologists/therapists who work to restore communication and
oral skills.
Social workers who help families address the problems associated with
acute and chronic illnesses.
Home health aides who perform personal care such as bathing or
assistance in walking.
Private duty services such as continuous hourly nursing care and sitter
services.
BILLING AND REIMBURSEMENT
Revenues generated from the Company's home health care services are paid by
Medicare, Medicaid, private insurance carriers, managed care organizations,
individuals, and other local health insurance programs. Medicare is a federally
funded program available to persons with certain disabilities and persons aged
65 or older. Medicaid, a program jointly funded by federal, state, and local
governmental health care programs, is designed to pay for certain health care
and medical services provided to low income individuals without regard to age.
The Company has several contracts for negotiated fees with insurers and managed
care organizations. The Company submits all home health Medicare claims to a
single insurance company acting as a fiscal intermediary for the federal
government.
MEDICARE REIMBURSEMENT REDUCTIONS AND RELATED RESTRUCTURING
The Company derived approximately 90% of its revenues from continuing
operations from the Medicare system for the year ended December 31, 2000. In
1997, Congress approved BBA, which established IPS that provided for the
lowering of reimbursement limits for home health visits until 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 was 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 IPS cost
limits applied to the Company for the cost reporting periods beginning January
1, 1998 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
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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.
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 is paid following the submission of the final claim at the end of the
episode. In contrast to the cost-based reimbursement system whereby providers'
reimbursement was limited, among other things, to their actual costs, episode
payments are to 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 have the opportunity to be profitable under
this system.
In December 2000, Congress passed the Benefits Improvement and Protection
Act ("BIPA"), which provides additional funding to healthcare providers. BIPA
provided for the following: (i) a one-year delay in applying the budgeted 15%
reduction on payment limits, (ii) the restoration of a full home health market
basket update for episodes ending on or after April 1, 2001, and before October
1, 2001 resulting in an increase to revenues of 2.2%, and (iii) a 10% increase,
beginning April 1, 2001 and extending for a period of twenty four months, for
home health services provided in a rural area.
DATA PROCESSING
In connection with the acquisition of the home health care agencies from
Columbia/HCA in November 1998, the Company decided to out-source its home health
care billing and payroll processing functions to create greater operating and
financial efficiencies. On November 2, 1998, the Company and CareSouth Home
Health Services, Inc. ("CareSouth") entered into a Master Corporate Guaranty of
Service Agreement, which was amended and restated as of September 1, 1999,
whereby the Company agreed to act as guarantor for each Agency Service Agreement
between CareSouth and all home health agencies which are owned or managed by the
Company. Under the Agency Service Agreements, CareSouth has agreed to provide
payroll processing, billing services, and collection services for the home
health agencies.
The Company continues to use its internally-developed home health care
software program which was sold in November 1998, in accordance with a license
agreement with CPII, which expires in 2004. This software system features a
single entry system that allows data to flow through accounting, general ledger,
payroll and billing and meet the extensive cost reporting requirements for
Medicare reimbursement of home health care nursing services. It also provides
clinical documentation for tracking clinical outcome results.
QUALITY CONTROL AND IMPROVEMENT
As a medical service business, the quality and reputation of the Company's
personnel and operations are critical to its success. The Company has
implemented quality management and improvement programs, a corporate compliance
program, and policies and procedures in each of its divisions at both the
corporate and field levels. The Company strives to meet regulations set forth by
state licensure, federal guidelines for Medicare and Medicaid, and JCAHO
standards.
The Company maintains an active quality management team who makes periodic
on-site inspections of field offices to review systems, operations, and clinical
procedures. An educational division is also part of quality management
operations and conducts educational and training sessions at field offices, as
well as, disseminating continuing education materials to the Company's
employees. Additionally, the quality manage-
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ment team works in association with the Company's corporate compliance officer
to perform audits and conduct education to ensure the knowledge of the field
staff and compliance with state and federal laws and regulations.
RECRUITING AND TRAINING
The Company's Human Resources Department coordinates recruiting efforts for
corporate and field personnel. Employees are recruited through newspaper
advertising, professional recruiters, the Company's web page, networking,
participation in job fairs, and word-of-mouth referrals. The Company believes it
is competitive in the industry and offers its employees upward mobility, health
insurance, an Employee Stock Purchase Plan, a 401(k) plan with company matching
contributions, and a cafeteria plan.
Uniform procedures for screening, testing, and verifying references,
including criminal background checks where appropriate, have been established.
All employees receive a formalized orientation program, including
familiarization with the Company's policies and procedures.
The Company believes that it is in compliance with all Department of Labor
regulations.
GOVERNMENT REGULATION
The Company's home health care business is highly regulated by federal,
state and local authorities. Regulations and policies frequently change and the
Company monitors changes through trade and governmental publications and
associations. The Company's home health care subsidiaries are certified by HCFA
and are therefore eligible to receive reimbursement for services through the
Medicare system. As a provider under the Medicare and Medicaid systems, the
Company is subject to the various "anti-fraud and abuse" laws, including the
federal health care programs' anti-kickback statute. This law prohibits any
offer, payment, solicitation or receipt of any form of remuneration to induce
the referral of business reimbursable under a federal health care program or in
return for the purchase, lease, order, arranging for, or recommendation of items
or services covered by any federal health care programs or any health care plans
or programs that are funded by the United States (other than certain federal
employee health insurance benefits) and certain state health care programs that
receive federal funds under various programs, such as Medicaid. A related law
forbids the offer or transfer of any item or service for less than fair market
value, or certain waivers of copayment obligations, to a beneficiary of Medicare
or a state health care program that is likely to influence the beneficiary's
selection of health care providers. Violations of the anti-fraud and abuse laws
can result in the imposition of substantial civil and criminal penalties and,
potentially, exclusion from furnishing services under any federal health care
programs. In addition, the states in which the Company operates generally have
laws that prohibit certain direct or indirect payments or fee-splitting
arrangements between health care providers where they are designed to obtain the
referral of patients to a particular provider.
Congress adopted legislation in 1989, known as the "Stark" Law, that
generally prohibits a physician from ordering clinical laboratory services for a
Medicare beneficiary where the entity providing that service has a financial
relationship (including direct or indirect ownership or compensation
relationships) with the physician (or a member of his immediate family), and
prohibits such entity from billing for or receiving reimbursement for such
services, unless a specified exception is available. Additional legislation
became effective as of January 1, 1993 known as "Stark II," that extends the
Stark law prohibitions to services under state Medicaid programs, and beyond
clinical laboratory services to all "designated health services," including but
not limited to home health services, durable medical equipment and supplies, and
parenteral and enteral nutrients, equipment, and supplies. Violations of the
Stark Law may also trigger civil monetary penalties and program exclusion.
Pursuant to Stark II, physicians who are compensated by the Company will be
prohibited from seeking reimbursement for designated health services rendered to
such patients unless an exception applies. Several of the states in which the
Company conducts business have also enacted statutes similar in scope and
purpose to the federal fraud and abuse laws and the Stark laws.
Various federal and state laws impose criminal and civil penalties for
making false claims for Medicare, Medicaid or other health care reimbursements.
The Company believes that it bills for its services under such programs
accurately. However, the rules governing coverage of, and reimbursements for,
the Company's
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services are complex. There can be no assurance that these rules will be
interpreted in a manner consistent with the Company's billing practices.
Congress adopted additional legislation in 1996 known as the Health
Insurance Portability and Accountability Act ("HIPAA") which requires health
care providers to assure the confidentiality and security of individually
identifiable health care information. The final rule was issued on December 28,
2000 with an effective date of April 14, 2001 and a compliance date of April 14,
2003. Compliance with this law will require significant time and resources of
the Company, of which the Company has begun to devote. Violations of the law
will trigger civil monetary penalties, criminal fines and/or imprisonment.
Home health care offices have licenses granted by the health authorities of
their respective states. Additionally, some state health authorities require a
Certificate of Need ("CON"). Tennessee, Georgia, Alabama, and North Carolina do
require a CON to establish and operate a home health care agency, while
Louisiana, Oklahoma, Virginia and Florida currently do not. In every state, each
location license and/or CON issued by the state health authority determines the
service areas for the home health care agency. Currently, JCAHO accreditation of
home health care agencies is voluntary. However, Managed Care Organizations
("MCOs") use JCAHO accreditation as a minimum standard for regional and state
contracts.
The Company strives to comply with all federal, state and local regulations
and has satisfactorily passed all federal and state inspections and surveys. The
ability of the Company to operate properly and fulfill its business objective
will depend on the Company's ability to comply with all applicable healthcare
regulations.
COMPETITION
The services provided by the Company are also provided by competitors at
the local, regional and national levels. Home health care providers compete for
referrals based primarily on scope and quality of services, geographic coverage,
pricing, and outcomes data. The impact of competitors is best determined on a
market-by-market basis.
The Company believes its favorable competitive position is attributable to
its reputation for over a decade of consistent, high quality care; its
comprehensive range of services; its state-of-the-art information management
systems; and its widespread service network.
SEASONALITY
The demand for the Company's home health care nursing and outpatient
surgery are not typically influenced by seasonal factors.
EMPLOYEES
As of December 31, 2000, the Company had 1,100 full-time employees,
excluding part time field nurses and other professionals in the field. The
Company currently employs the following classifications of personnel:
administrative level employees which consist of a senior management team (CEO,
COO, CIO, Chief Compliance Officer, General Counsel, senior vice presidents and
vice presidents); office administrators; nursing directors; controllers;
accountants; sales executives; licensed and certified professional staff (RNs,
LPNs, therapists and therapy assistants); and non-licensed care givers (aides).
The Company complies with the Fair Labor Standards Act in establishing
compensation methods for its employees. Select positions within the Company are
eligible for bonuses based on the achievement of pre-determined budget criteria.
The Company sponsors and contributes toward the cost of a group health insurance
program for its eligible employees and their dependents. The group health
insurance program is self-funded by the Company; however, there is a
re-insurance policy in place to limit the liability for the Company. In
addition, the Company provides a group term life insurance policy and a long
term disability policy for eligible employees. The Company also offers a 401(k)
retirement plan, a Cafeteria 125 plan, an Employee Stock Purchase Plan,
supplemental benefit programs, and paid time-off benefits.
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The Company believes its employee relations are good. It successfully
recruits employees and most of its employees are shareholders.
INSURANCE
The Company maintains casualty coverages for all of its operations,
including professional and general liability, workers' compensation, automobile,
property, fiduciary liability, and directors and officers. The insurance program
is reviewed periodically throughout the year and thoroughly on an annual basis
to insure adequate coverage is in place. For the years ended December 31, 1995
through December 31, 1998, the Company was approved through the State of
Louisiana to self-insure its workers' compensation program. All other states
were covered on a fully insured basis through "A+" rated insurers. In January
1999, the Company changed from the self-insured workers' compensation plan to a
fully-insured, guaranteed cost plan. All of the Company's employees are bonded.
The Company is self-insured for its employee health benefits. In 2001, the
Company elected to change its workers' compensation program to a high-deductible
program underwritten by The Hartford.
ITEM 2. PROPERTIES
The Company operates fifty home care nursing offices, one ambulatory
surgery center, and one corporate office in the southern and southeastern United
States. The Company presently leases approximately 17,981 square feet located at
11100 Mead Road, Baton Rouge, Louisiana, representing the corporate office. This
lease provides for a basic annual rental rate of approximately $14.50 per square
foot through the expiration date on September 30, 2002. The Company has an
aggregate of 278,270 square feet of leased space for regional offices pursuant
to leases which expire between March, 2001 and October, 2011. Rental rates for
these regional offices range from $1.92 per square foot to $26.42 per square
foot with an average of $10.77 per square foot. During 1999 and 2000, the
Company consolidated offices that covered the same patient service area in an
overall effort to decrease costs and gain operating efficiencies, while still
providing quality and accessible home health services.
The following is a list of the Company's offices. Unless otherwise
indicated, the Company has one office in each city.
Georgia (21) Louisiana (7) Virginia (1)
Atlanta Alexandria Weber City
Blue Ridge Baton Rouge (2)
Cartersville Hammond North Carolina (1)
Cedartown Lafayette Chapel Hill
Clayton Metairie
Covington Monroe Oklahoma (4)
Dalton Claremore
Decatur Tennessee (11) Gore
Douglasville Athens Stilwell
Fayetteville Bristol Tulsa
Forest Park Chattanooga
Ft. Oglethorpe Gordonsville Alabama (6)
Gainesville Johnson City Demopolis
Jasper Kingsport Fairhope
Kennesaw Livingston Huntsville
Lavonia McMinnville Mobile
Lawrenceville Nashville Montgomery
Macon Pikeville Selma
Rome Winchester
Summerville Florida (1)
Toccoa Winter Haven
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ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company and its subsidiaries are defendants in
lawsuits arising in the ordinary course of the Company's business. While the
outcome of these lawsuits cannot be predicted with certainty, management
believes that the resolution of these matters will not have a material adverse
effect on the Company's financial condition or results of operations.
The Company filed a lawsuit against Mr. James P. Cefaratti, the Company's
former President and Chief Operations Officer, alleging various negligent
actions which constituted breaches of fiduciary duty owed to the Company and its
stockholders. The lawsuit was initially filed in the 19th Judicial District
Court of the Parish of East Baton Rouge, State of Louisiana on November 24,
1998. The lawsuit was then removed to the United States District Court for the
Middle District of Louisiana. The Company is seeking unspecified damages
incurred as a result of the alleged negligent actions and all other appropriate
relief.
On December 7, 1998, Mr. Cefaratti filed a lawsuit naming the Company as a
defendant and claimed that he was terminated in violation of an alleged
employment contract. Other ex-employees of the Company which have lawsuits
pending against the Company claiming breaches of alleged employment contracts
include Ms. Judi M. McQueary, the former President of the Company's managed care
division (filed on December 11, 1998) and Mr. William G. Hardee, the former Vice
President of the Company's southeastern alternate site infusion division (filed
on December 11, 1998).
All of the above mentioned lawsuits filed by the ex-employees of the
Company were initially filed in the United States District Court for the Eastern
District of Louisiana and were consolidated together as one lawsuit. All the
said lawsuits were then transferred to the United States District Court for the
Middle District of Louisiana and severed to be tried separately. The Chief
Executive Officer of the Company, and its directors and officers liability
insurer were named as defendants in all the abovementioned lawsuits. The relief
sought in all these cases are contract damages, penalty wages, costs, and
attorney fees.
The Company filed a lawsuit against Mr. Stephen L. Taglianetti, the former
President of the Company's alternate site infusion division alleging various
negligent actions which constituted breaches of fiduciary duty owed to the
Company and its stockholders. The lawsuit against Mr. Taglianetti was initially
filed in the 19th Judicial District Court of the Parish of East Baton Rouge,
State of Louisiana on November 19, 1998. The lawsuit was then removed to the
United States District Court for the Middle District of Louisiana. The Company
sought damages incurred as a result of the negligent actions and all other
appropriate relief. Mr. Taglianetti, on December 11, 1998, sued the Company
claiming that he was terminated in violation of an alleged employment contract
and for reporting alleged illegal billing practices. The Chief Executive Officer
of the Company and its directors and officers liability insurer were named as
defendants in this suit. Mr. Taglianetti's lawsuit has been settled out of court
and is no longer pending. All claims for damages by all parties thereto have
been released and otherwise waived.
Mr. Charles M. McCall, the former President of the supplemental staffing
division of the Company filed a lawsuit against the Company in the 19th Judicial
District Court of the Parish of East Baton Rouge, State of Louisiana on December
29, 1998. Said lawsuit claimed breaches of an alleged employment contract. Mr.
McCall's lawsuit has been settled out of court and is no longer pending. All
claims for damages by all parties thereto have been released and otherwise
waived.
Alliance Home Health, Inc. ("Alliance"), a wholly-owned subsidiary of the
Company, filed for Chapter 7 Federal bankruptcy protection with the United
States Bankruptcy Court in the Northern District of Oklahoma on September 29,
2000. Alliance was acquired by the Company in January, 1998 and ceased
operations in January, 1999 (see Note 2 in the Notes to the Consolidated
Financial Statements).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders during
the fourth quarter of 2000.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
From August 1997, through September 1998, the Company's common stock traded
on the Nasdaq National Market. Since September 1998, the Company has been
trading on the OTC Bulletin Board. As of March 12, 2001, there were
approximately 167 holders of record of the Company's Common Stock and the
Company believes there are approximately 2,136 beneficial holders. The Company
has not paid any dividends on its Common Stock since inception and expects to
retain any future earnings for use in its business development for the
foreseeable future. The following table provides the high and low prices of the
Company's Common Stock during 1999, 2000, and the first quarter of 2001 through
March 12 as quoted by Nasdaq and the OTC Bulletin Board.
HIGH LOW
----- -----
1st Quarter 1999............................................ $2.50 $2.00
2nd Quarter 1999............................................ 2.31 1.50
3rd Quarter 1999............................................ 1.94 1.13
4th Quarter 1999............................................ 1.60 1.31
1st Quarter 2000............................................ $3.13 $1.31
2nd Quarter 2000............................................ 3.06 1.06
3rd Quarter 2000............................................ 5.16 2.75
4th Quarter 2000............................................ 4.88 3.13
1st Quarter 2001 (through March 12)......................... $6.94 $3.69
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ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data presented below are derived from
audited financial statements for each of the years ended December 31, 1996
through December 31, 2000. Selected financial data for the years ended December
31, 1996 through December 31, 1999 have been restated for discontinued
operations (see "Dispositions and Discontinued Operations" section discussed in
Item 1). The financial data for the years ended December 31, 2000 and 1999
should be read in conjunction with the consolidated financial statements and
related notes attached hereto, the information set forth under "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
other financial information included herein.
SELECTED HISTORICAL STATEMENT OF INCOME DATA
2000 1999(1) 1998(1) 1997(1) 1996(1)
------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net Service Revenue......................... $90,755 $97,411 $ 25,466 $25,810 $25,500
Cost of Service Revenue..................... 41,468 46,890 17,569 14,567 14,509
Operating Revenues................ 49,287 50,521 7,897 11,243 10,991
General/Administrative Expenses............. 49,251 53,146 33,510 15,125 12,959
Operating Income (Loss)........... 36 (2,625) (25,613) (3,882) (1,968)
Other Income and Expense.................... (1,769) (4,719) (1,196) (720) (1,309)
Income Tax Expense (Benefit)................ (659) (3,263) (99) (1,148) (642)
Income (Loss) before Discontinued
Operations, Extraordinary Item and
Cumulative Effect of Change in Accounting
Principle................................. (1,074) (4,081) (26,710) (3,454) (2,635)
Discontinued Operations:
Income (Loss) from Discontinued
Operations, Net of Income Tax.......... (3,281) (784) (1,338) 2,312 2,653
Gain on Dispositions, Net of Income Tax... 4,914 6,165 3,177 -- --
Extraordinary Item, Net of Income Tax..... 5,811 -- -- -- --
Cumulative Effect of Change in Accounting
Principle.............................. -- -- -- (52) --
Net Income (Loss)......................... $ 6,370 $ 1,300 $(24,871) $(1,194) $ 18
Weighted Avg. Common Shares Outstanding... 4,336 3,093 3,061 2,735 2,575
Basic Earnings (Loss) per Common Share
Outstanding
Net (Loss) before Discontinued
Operations............................. $ (0.25) $ (1.32) $ (8.72) $ (1.26) $ (1.02)
Income (Loss) from Discontinued
Operations, Net of Income Tax.......... (0.76) (0.25) (0.44) 0.85 1.03
Gain on Dispositions, Net of Income Tax... 1.13 1.99 1.04 -- --
Extraordinary Item, Net of Income Tax..... 1.34 -- -- -- --
Cumulative Effect of Change in Accounting
Principle.............................. -- -- -- (0.02) --
Net Income (Loss)......................... 1.46 0.42 (8.12) (0.43) 0.01
Balance Sheet Data:
Total Assets.............................. $41,570 $44,602 $ 44,428 $22,870 $16,858
Total Long-term Obligations............... $21,102 $13,039 $ 14,394 $ 3,129 $ 3,223
Total Convertible Preferred Stock......... $ 1 $ 1 $ 1 $ 1 $ --
- ---------------
(1) Selected Financial Data for the years ended December 31, 1996 through
December 31, 1999 have been restated for discontinued operations. See
"Dispositions and Discontinued Operations" section discussed in Item 1.
17
20
ITEM 7. 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
referenced in Item 8.
GENERAL
Amedisys is a leading multi-regional provider of home health care nursing
services. The Company operates fifty home care nursing offices, one ambulatory
surgery center, and one corporate office in the southern and southeastern United
States.
During 1999, the Company changed its strategy from providing a variety of
alternate site provider health care services to becoming a leader in home health
care nursing services. The Company's change of focus was largely attributed to
its significant investment in this segment as a result of its acquisition of 83
home care offices from Columbia/HCA in late 1998. A second major factor was the
changes in Medicare reimbursement for home health services implemented on
October 1, 2000. A third significant factor was the Company's established
reputation and expertise in the field. Amedisys has over a decade of experience
in home care nursing and was an early innovator in bringing technology,
previously used only in acute care settings, to the home as well as providing
traditional home care services. Pursuant to this strategy, the Company launched
a restructuring plan to divest its non-home health care nursing divisions. The
Company sold five of its six surgery centers and sold or closed its four
infusion locations during 1999 and 2000 and expects to divest the one remaining
surgery center during 2001.
The Company has systematically reduced its operating costs since 1998 in
preparation for PPS. Significant cost reduction measures undertaken by the
Company included the consolidation/closure of offices which overlapped service
areas, converting its method of nurse pay to a variable or per visit rate rather
than a fixed or salary system, utilizing economies of scale, and reducing
corporate overhead when possible. Business functions which are not considered
part of the core business have been outsourced and management layers have been
streamlined.
The Company has positioned its offices to be successful under PPS. The
Company has implemented Disease State Management programs and clinical protocols
as well as supporting technology to monitor and report outcome data, to
standardize care, and to ensure quality outcomes. Using clinical managers to
assess and track patient progress and highly skilled nurses to deliver care are
also important components of the overall strategy.
The Company experienced recurring operational losses and negative cash flow
from operations for the periods ended December 31, 1999 and 1998. The
divestiture of the Company's non-core assets generated sufficient cash to offset
the operating cash deficits that were created during those years. Following the
change in the Medicare reimbursement system, the Company generated operating
profits of $2,532,000 in the fourth quarter of 2000 which offset operating
losses from the first three quarters. This allowed the Company to experience
operating income and positive cash flow from operations for the year ended
December 31, 2000. See the "Liquidity and Capital Resources" section of this
Item for further discussion.
18
21
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
included in the Company's consolidated statements of operations as a percentage
of net revenues:
YEARS ENDED DECEMBER 31,
-------------------------
2000 1999 1998
------ ------ -------
Net services revenues..................................... 100.00% 100.00% 100.00%
Cost of service revenues.................................. 45.69 48.14 68.99
------ ------ -------
Operating revenues........................................ 54.31 51.86 31.01
General and administrative expenses:
Salaries and benefits................................... 32.00 30.89 61.89
Other................................................... 22.27 23.67 69.70
------ ------ -------
Total general and administrative expenses............... 54.27 54.56 131.59
------ ------ -------
Operating income (loss)................................... 0.04 (2.70) (100.58)
Other income (expense).................................... (1.95) (4.84) (4.70)
------ ------ -------
Net (loss) before taxes, discontinued operations and
extraordinary item...................................... (1.91) (7.54) (105.28)
Income tax benefit........................................ (0.73) (3.35) (0.39)
------ ------ -------
Net (loss) before discontinued operations and
extraordinary item...................................... (1.18) (4.19) (104.89)
Discontinued operations:
(Loss) from discontinued operations, net of income
tax.................................................. (3.62) (0.80) (5.25)
Gain on dispositions, net of income tax................. 5.41 6.33 12.48
Extraordinary Item, net of income tax..................... 6.40 -- --
------ ------ -------
Net income (loss)......................................... 7.02% 1.33% (97.66)%
====== ====== =======
Years Ended December 31, 2000 and 1999
NET SERVICE REVENUES
For the year ended December 31, 2000 as compared to the year ended December
31, 1999, net revenues decreased $6,656,000 or 7%. This decrease was attributed
to a decrease in visits of 249,708 from 1,283,738 to 1,034,030 which 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 SERVICE REVENUES
Cost of revenues decreased by 12% in 2000 as compared to 1999. This
decrease is primarily attributed to a reduction in visit volume as noted above.
As a percentage of net revenues, cost of revenues decreased to 46% in 2000 from
48% in 1999. This decrease is attributed to cost reduction efforts implemented
during 1999 and 2000 for all operating locations in preparation for PPS.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased by 7% in 2000 as compared to
1999. This decrease is primarily attributed to the restructuring efforts during
1999 and 2000 following the acquisition of certain Columbia/HCA home health care
agencies in the latter part of 1998 in preparation for PPS. As a percentage of
net revenues, general and administrative expenses decreased to 54.3% in 2000
from 54.6% in 1999.
19
22
OPERATING INCOME (LOSS)
The Company had operating income of $36,000 in 2000 as compared to an
operating loss of $2,625,000 in 1999. The reduction in operating losses of
$2,661,000 or 101% is attributed to the restructuring efforts implemented during
1999 and 2000 and the implementation of PPS on October 1, 2000.
OTHER INCOME (EXPENSE)
Other income and expenses decreased by $2,950,000 primarily due to a
write-off of goodwill in 1999 of approximately $1.8 million related to the sale
of certain home health care agencies previously acquired from Columbia/HCA in
the latter part of 1998 and a decrease in interest expense of $1.5 million due
to lower net borrowings on line of credit agreements.
INCOME TAX BENEFIT
For the year ended December 31, 2000 as compared to December 31, 1999,
income tax expense decreased from $383,000 in 1999 to $200,000 in 2000 (see Note
10 in the Notes to the Consolidated Financial Statements). Total income tax
expense for 2000 of $200,000 is comprised of income tax benefit from continuing
operations of $659,000, offset by income tax expense from discontinued
operations of $172,000 and income tax expense related to an extraordinary item
of $687,000. For 1999, total income tax expense of $383,000 is comprised of
income tax benefit from continuing operations of $3,263,000, offset by income
tax expense from discontinued operations of $3,646,000.
DISCONTINUED OPERATIONS
Losses from discontinued operations, net of income taxes, amounted to
$3,281,000 for 2000 as compared to losses of $784,000 for 1999 primarily due to
a write-off of goodwill related to the infusion division of approximately $1,770
000. The gain on disposition of $4,914,000, net of taxes of $172,000, for 2000
is attributed to the sale of two surgery centers and the Company's Infusion
Division, while the gain on disposition of $6,165,000, net of taxes, for 1999 is
attributed to the sale of three surgery centers.
EXTRAORDINARY ITEM
The extraordinary item in 2000 of $5,811,000, net of income taxes of
$687,000, relates to the prepayment of a note payable to Columbia/HCA of $14
million plus accrued interest of $2.6 million for a cash payment of $9,000,000
and the execution of a warrant agreement that allows Columbia/HCA to purchase up
to 200,000 shares of Amedisys' Common Stock, subject to certain conditions (see
"Recent Remodification of Loan" in Item 1).
NET INCOME (LOSS)
The Company recorded net income of $6,370,000, or $1.47 per common share,
for 2000 compared with net income of $1,300,000, or $0.42 per common share, for
1999.
Years Ended December 31, 1999 and 1998
NET SERVICE REVENUES
For the year ended December 31, 1999 as compared to the year ended December
31, 1998, net revenues increased $71,945,000 or 283%. This increase was
attributed to the acquisition of certain Columbia/HCA home health care agencies
in the latter part of 1998.
COST OF SERVICE REVENUES
Cost of revenues increased by 167% in 1999 as compared to 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 48% in 1999 from 69% in 1998. This decrease is attributed to cost
reduction efforts
20
23
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 productivity.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by 59% in 1999 as compared to
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 55% in 1999 from 132% in 1998. This
decrease is a result of cost reduction efforts implemented during 1999 in
addition to a non-recurring write-down of goodwill in 1998 of $9,522,000 for
acquisitions completed during that year. The cost reduction efforts were 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 $2,625,000 in 1999 as compared to an
operating loss of $25,613,000 in 1998. The reduction in operating losses of
$22,988,000 or 90% is attributed to the restructuring efforts implemented during
1998 and 1999, the economies of scale achieved with the acquisition of certain
Columbia/HCA home health care agencies, and the non-recurring write-down of
goodwill in 1998.
OTHER INCOME (EXPENSE)
Other income and expenses increased by $3,523,000 due to increased interest
expense of $2.7 million in 1999 related to the Company's borrowings and a
write-off of goodwill of approximately $1.8 million in 1999 related to the sale
of certain home health care agencies previously acquired from Columbia/HCA in
the latter part of 1998.
INCOME TAX BENEFIT
For the year ended December 31, 1999 as compared to December 31, 1998,
income tax expense decreased from $926,000 in 1998 to $383,000 in 1999 (see Note
10 in the Notes to the Consolidated Financial Statements attached hereto). Total
income tax expense for 1999 of $383,000 is comprised of income tax benefit from
continuing operations of $3,263,000, offset by income tax expense from
discontinued operations of $3,646,000. For 1998, total income tax expense of
$926,000 is comprised of income tax benefit from continuing operations of
$99,000, offset by income tax expense from discontinued operations of
$1,025,000.
DISCONTINUED OPERATIONS
Losses from discontinued operations, net of income taxes, amounted to
$784,000 for 1999 as compared to losses of $1,338,000 for 1998. The gain on
disposition of $6,165,000, net of taxes, for 1999 is attributed to the sale of
three surgery centers while the gain on disposition of $3,177,000 for 1998 is
attributed to the sale of the staffing division.
NET INCOME (LOSS)
The Company recorded net income of $1,300,000, or $0.42 per common share,
for 1999 compared with a net loss of $24,871,000, or $8.12 per common share, for
1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company recorded operating losses and had negative cash flow for the
year ended December 31, 1999 and the first three quarters of 2000, during which
its operations were primarily funded by the divestiture of certain non-core
assets. The losses and negative cash flow from operations are largely
attributable to the changes in Medicare reimbursement which were effective
January 1, 1998 for the Company. In the fourth
21
24
quarter of 2000, the Company returned to profitability and positive cash flow,
primarily as a result of the implementation of PPS on October 1, 2000. The
Company expects positive cash flow from operations will continue in subsequent
periods and to be able to fund operations primarily from this source.
At December 31, 2000, the Company was indebted under various promissory
notes for $12.7 million, including amounts due to NPF Capital, an affiliate of
National Century Financial Enterprises, Inc. ("NCFE") of $9.7 million, to
Merrill Lynch of $1.2 million (included in Held for Sale), to CareSouth Home
Health Services, Inc. ("CareSouth") of $934,000, to Winter Haven Hospital of
$951,000, to individuals of $1 million, and various other notes. The Company's
principal and interest requirements due under all promissory notes is
approximately $4.9 million in 2001 and $6.3 million in 2002. The fair value of
long-term debt as of December 31, 2000 and 1999, estimated based on the
Company's current borrowing rate of 15% at December 31, 2000 and 1999, was
approximately $12.3 million and $6.1 million, respectively.
The Company has an asset-based line of credit with availability, depending
on collateral, of up to $25 million with NCFE, which expires December 31, 2001.
The line of credit is collateralized by eligible accounts receivable of the home
health care nursing division and as of December 31, 2000, had an outstanding
balance of $2,953,000. The effective interest rate on this line of credit was
15.29% for the year ended December 31, 2000. The Company also has a $2.5 million
line of credit, which bears interest at Bank One Prime Floating, on which no
amounts were outstanding as of December 31, 2000.
Prior to the implementation of PPS, the Company recorded Medicare revenues
at the lower of actual costs, the per visit cost limit, or a per beneficiary
cost limit on a individual provider basis. Ultimate reimbursement under the
Medicare program was determined upon review of the annual cost reports. As of
December 31, 2000, the Company estimates an aggregate payable to Medicare of
$13.3 million, netted against accounts receivable, resulting from interim cash
receipts in excess of expected reimbursement. For the cost report year ended
December 31, 2000, the Company has an estimated payable of $2.3 million of which
$2.4 million is due to Medicare in excess of one year and $0.1 million is due
from Medicare to the Company within the next year. For the cost report year
ended 1999, the Company has an estimated payable of $6.4 million of which $3.4
million is due within one year and $3.0 million is due in excess of one year.
For the cost report years ended 1998 and prior, the Company has an estimated
payable of $4.6 million of which $4.0 million is due within one year and $0.6
million is due in excess of one year.
The Company's operating activities provided $6,914,000 in cash during the
year ended December 31, 2000, whereas such activities used $12,222,000 in cash
during the year ended December 31, 1999. Cash provided by operating activities
in 2000 is primarily attributable to net income of $6.4 million, non-cash items
such as depreciation and amortization of $5.2 million and changes in assets and
liabilities of $1.1 million, offset by gains on the sale of discontinued
operations of $5.1 million and deferred revenue of $2.1 million. Investing
activities provided $6.8 million for the year ended December 31, 2000, whereas
such activities provided $11.5 million for the year ended December 31, 1999.
Cash provided by investing activities in 2000 is primarily attributed to
proceeds from the sale of discontinued operations of $6.6 million. Financing
activities used cash during 2000 of $8.2 million, whereas such activities
provided $1.8 million during 1999. Cash used in financing activities in 2000 is
primarily attributed to payments on notes payable and capital leases of $20.7
million and payments on lines of credit of $2.4 million offset by proceeds from
the issuance of notes payable of $10.7 million and an increase in long-term
Medicare liabilities of $3.5 million.
The Company has begun the installation of a company-wide computer network
infrastructure to connect all of its regional offices. This wide area network
("WAN") will allow more immediate access to all company personnel including
senior management, which will increase operational efficiencies. This project is
expected to be completed in the third quarter of 2001 at an estimated cost of
$1.5 million.
INFLATION
The Company does not believe that inflation has had a material effect on
its results of operations for the twelve months ended December 31, 2000.
22
25
ITEM 7A. 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.
ITEM 8. FINANCIAL STATEMENTS
See Consolidated Financial Statements on Page 28.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Certain information required by Part III is omitted from this Report in
that the Registrant will file its definitive Proxy Statement for its 2001 Annual
Meeting of Shareholders to be held June 14, 2001 pursuant to Regulation 14A of
the Securities Exchange Act of 1934 (the "Proxy Statement") no later than 120
days after the end of the fiscal year covered by this Report, and certain
information included in the Proxy Statement is incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors -- The information required by this Item is incorporated by
reference to the section entitled "Election of Directors" in the Proxy
Statement.
(b) Executive Officers -- The information required by this Item is
incorporated by reference to the section entitled "Executive Officers" in the
Proxy Statement.
(c) Section 16(a) Beneficial Ownership Reporting Compliance -- The
information required by this Item pursuant to Item 405 of Regulation S-K is
incorporated herein by reference to the section entitled "Election of Directors,
Compliance with Section 16(a) of the Exchange Act" in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
sections entitled "Compensation of Executive Officers" and "Compensation of
Directors" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
sections entitled "Record Date and Principal Ownership" and "Security Ownership
of Management" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
section entitled "Certain Transactions" in the Proxy Statement.
23
26
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
Documents to be filed with Form 10-K:
Report of Independent Public Accountants.................... 29
Consolidated Balance Sheets as of December 31, 2000 and
1999...................................................... 30
Consolidated Statements of Operations for the Years Ended
December 31, 2000, 1999, and 1998......................... 31
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 2000, 1999, and 1998............. 32
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 1999, and 1998......................... 33
Notes to Consolidated Financial Statements as of December
31, 2000, 1999, and 1998.................................. 34
(a) Exhibits.
EXHIBIT
NO. IDENTIFICATION OF EXHIBIT
------- -------------------------
2.1(1) -- Acquisition Agreement dated December 20, 1993 between the
Company and M & N Capital Corp.
2.2(3) -- Plan of Merger dated August 3, 1994 between M & N Capital
Corp. and the Company
2.3(4) -- Certificate of Merger dated August 3, 1994 between M & N
Capital Corp. and the Company
2.4(7) -- Acquisition Agreement dated August 1,1997 between the
Company and Allgood Medical Services, Inc.
2.5(7) -- Exchange Agreement dated January 1, 1998 between the
Company and Alliance Home Health, Inc. and University
Capital Corp. dated December 10, 1997
2.6(7) -- Stock Purchase Agreement by and among Amedisys,
Alternate-Site Infusion Therapy Services, Inc., PRN, Inc.
d/b/a Home IV Therapy, Joseph W. Stephens, and Terry I.
Stevens dated February 23, 1998
2.7(7) -- Agreement to Purchase by and between Amedisys,
Alternate-Site Infusion Therapy Services, Inc. and
Precision Health Systems, L.L.C. dated February 27, 1998
2.8(7) -- Promissory note in the amount of $250,000 to Precision
Health Solutions, L.L.C. in connection with the purchase
of the company
2.9(7) -- Stock Purchase Agreement by and among Amedisys
Alternate-Site Infusion Therapy Services, Inc., Infusion
Care Solutions, Inc. and Daniel D. Brown dated February
27, 1998
2.10(7) -- Promissory note in the amount of $125,000 to Daniel D.
Brown in connection with the purchase of the company
2.11(8) -- Stock Purchase Agreement by and among Amedisys
Specialized Medical Services, Inc., Quality Home Health
Care, Inc., Frances Unger, and James Unger dated May 1,
1998
2.12(8) -- Asset Purchase Agreement by and among Amedisys
Specialized Medical Services, Inc., and Precision Home
Health Care, Inc. dated May 1, 1998
2.13(8) -- Promissory note in the amount of $800,000 to Precision
Home Health Care, Inc. in connection with the purchase of
the company
2.14(8) -- Promissory note in the amount of $400,000 to Precision
Home Health Care, Inc. in connection with the purchase of
the company
24
27
EXHIBIT
NO. IDENTIFICATION OF EXHIBIT
------- -------------------------
2.15(9) -- Asset Purchase agreement among Nursefinders, Inc.,
Amedisys Staffing Services, Inc., Amedisys Nursing
Services, Inc., and Amedisys Home Health, Inc. and
Amedisys, Inc.
2.16(10) -- Asset Purchase Agreement by and between CPII Acquisition
Corp. and Amedisys, Inc.
2.17(10) -- Asset Purchase Agreement by and between Columbia/HCA
Healthcare Corporation and Amedisys, Inc.
2.18(13) -- Asset Purchase Agreement among Amedisys Surgery Centers,
L.C. and Permian Surgical Care Center, Inc. d/b/a
Tanglewood Surgery Center
2.19(15) -- Asset Purchase Agreement among Amedisys, Inc., Amedisys
Surgery Centers, L.C. and United Surgical Partners
International, Inc.
2.20(15) -- Promissory Note from United Surgical Partners
International, Inc.
2.21(17) -- Membership Interest Purchase Agreement by and among U.S.
Orthopedics, Texas, L.L.C., Amedisys Surgery Centers,
L.C., Ambulatory Systems Development of Texas, Inc.,
Ambulatory Systems Development Corporation, and U.S.
Orthopedics, Inc.
2.22(18) -- Agreement for Purchase and Sale of LLC Membership
Interest among Amedisys, Inc., Park Place Surgery Center,
LLC, and the Members of Park Place Surgery Center, LLC
2.23(19) -- Bill of Sale and Asset Purchase Agreement by and among
Park Infusion Services, LP, Amedisys Alternate-Site
Infusion Therapy Services, Inc., PRN, Inc., and Amedisys,
Inc.
3.1(4) -- Certificate of Incorporation
3.2(4) -- Bylaws
4.1(4) -- Certificate of Designation for the Series A Preferred
Stock
4.2(7) -- Common Stock Specimen
4.3(7) -- Preferred Stock Specimen
4.4(7) -- Form of Placement Agent's Warrant Agreement
4.5(14) -- Certificate of Amendment of Certificate of Designation
Specimen
4.6(14) -- Series A Preferred Stock Conversion Agreement Specimen
10.1(4) -- Master Note with Union Planter's Bank of Louisiana
10.2(4) -- Merrill Lynch Term Working Capital Management Account
10.3(5) -- Promissory Note with Deposit Guaranty National Bank
10.4(7) -- Amended and Restated Stock Option Plan
10.5(7) -- Registration Rights Agreement
10.6(11) -- Master Corporate Guaranty of Service Agreements between
CareSouth Home Health Services, Inc. and Amedisys, Inc.
dated November 2, 1998
10.7(16) -- Loan Modification Agreement by and between Amedisys, Inc.
and Columbia/HCA Healthcare Corporation
10.8(20) -- Employment Agreement between Amedisys, Inc. and William
F. Borne
10.9(20) -- Employment Agreement between Amedisys, Inc. and Larry
Graham
10.10(20) -- Amendment to Employee Agreement by and between Amedisys,
Inc. and Larry Graham
10.11(20) -- Employee Agreement between Amedisys, Inc. and John
Joffrion
25
28
EXHIBIT
NO. IDENTIFICATION OF EXHIBIT
------- -------------------------
18.1(12) -- Letter regarding Change in Accounting Principles
21.1(7) -- List of Subsidiaries
23.1(20) -- Consent of Arthur Andersen, LLP, Independent Public
Accountants
- ---------------
(1) Previously filed as an exhibit to the Current Report on Form 8-K dated
December 20, 1993.
(2) Previously filed as an exhibit to the Current Report on Form 8-K dated
February 14, 1994.
(3) Previously filed as an exhibit to the Current Report on Form 8-K dated
August 11, 1994.
(4) Previously filed as an exhibit to the Annual Report on Form 10-KSB for the
year ended December 31, 1994.
(5) Previously filed as an exhibit to the Current Report on Form 8-K dated June
30, 1995.
(6) Previously filed as an exhibit to the Registration Statement on Form S-1
(333-8329) dated July 18, 1996.
(7) Previously filed as an exhibit to the Registration Statement on Form S-3
dated March 11, 1998.
(8) Previously filed as an exhibit to the Quarterly Report on Form 10-Q dated
August 14, 1998.
(9) Previously filed as an exhibit to the Current Report on Form 8-K dated
October 5, 1998.
(10) Previously filed as an exhibit to the Current Report on Form 8-K dated
November 10, 1998.
(11) Previously filed as an exhibit to the Quarterly Report on Form 10-Q dated
December 30, 1998.
(12) Previously filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1997.
(13) Previously filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1998.
(14) Previously filed as an exhibit to the Quarterly Report on Form 10-Q/A for
the period ended June 30, 1999.
(15) Previously filed as an exhibit to the Current Report on Form 8-K dated
September 15, 1999.
(16) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the
period ended September 30, 1999.
(17) Previously filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1999.
(18) Previously filed as an exhibit to the Current Report on Form 8-K dated May
11, 2000.
(19) Previously filed as an exhibit to the Current Report on Form 8-K dated
August 23, 2000.
(20) Filed herewith.
(b) Report on Form 8-K
None.
26
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, there unto duly authorized, on the 16th day of
March, 2001.
AMEDISYS, INC.
By: /s/ WILLIAM F. BORNE
----------------------------------
WILLIAM F. BORNE,
Chief Executive Officer
and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ WILLIAM F. BORNE Chief Executive Officer and March 16, 2001
- ----------------------------------------------------- Chairman of the Board
William F. Borne
/s/ JOHN M. JOFFRION Principal Financial and Accounting March 16, 2001
- ----------------------------------------------------- Officer
John M. Joffrion
/s/ JAKE L. NETTERVILLE Director March 16, 2001
- -----------------------------------------------------
Jake L. Netterville
Director March 16, 2001
- -----------------------------------------------------
David R. Pitts
Director March 16, 2001
- -----------------------------------------------------
Peter F. Ricchiuti
/s/ RONALD A. LABORDE Director March 16, 2001
- -----------------------------------------------------
Ronald A. Laborde
27
30
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2000 AND 1999
TOGETHER WITH AUDITORS' REPORT
28
31
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Amedisys, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Amedisys,
Inc. (a Delaware Corporation) and Subsidiaries (the Company) as of December 31,
2000 and 1999, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Amedisys, Inc.
and Subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
February 23, 2001
29
32
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 AND 1999
(IN 000'S EXCEPT SHARE DATA)
2000 1999
-------- --------
CURRENT ASSETS:
Cash and cash equivalents................................. $ 6,967 $ 1,425
Accounts receivable, net of allowance for doubtful
accounts of $1,385 in 2000 and $2,199 in 1999........... 9,228 13,944
Prepaid expenses.......................................... 196 319
Inventory and other current assets........................ 414 487
Current assets held for sale.............................. 715 1,182
-------- --------
Total current assets............................... 17,520 17,357
PROPERTY AND EQUIPMENT, NET (Notes 3 and 9)................. 2,935 3,439
OTHER ASSETS, NET (Note 5).................................. 20,426 19,544
LONG-TERM ASSETS HELD FOR SALE (Notes 3, 4, 5 and 9)........ 689 4,262
-------- --------
Total assets....................................... $ 41,570 $ 44,602
======== ========
CURRENT LIABILITIES:
Accounts payable.......................................... $ 1,590 $ 4,739
Accrued expenses --
Payroll and payroll taxes............................... 6,203 6,240
Insurance (Note 13)..................................... 708 660
Income taxes............................................ 638 437
Legal Settlements....................................... 1,469 1,323
Other................................................... 2,456 2,229
Notes payable (Note 6).................................... 2,952 4,917
Long-term debt classified as current (Note 7)............. -- 15,461
Notes payable to related parties (Note 11)................ 10 10
Current portion of long-term debt (Note 8)................ 3,379 2,325
Current portion of obligations under capital leases (Note
9)...................................................... 385 402
Deferred revenue, current portion (Note 2)................ 2,119 2,119
Current liabilities held for sale......................... 480 806
-------- --------
Total current liabilities.......................... 22,389 41,668
LONG-TERM DEBT (Note 8)..................................... 9,343 2,206
LONG-TERM MEDICARE LIABILITIES (Note 15).................... 6,053 2,518
DEFERRED REVENUE (Note 2)................................... 3,884 6,003
OBLIGATIONS UNDER CAPITAL LEASES (Note 9)................... 30 211
OTHER LONG-TERM LIABILITIES................................. 826 826
LONG-TERM LIABILITIES HELD FOR SALE (Notes 8 and 9)......... 966 1,275
-------- --------
Total liabilities.................................. 43,491 54,707
-------- --------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES.............. -- 81
-------- --------
STOCKHOLDERS' EQUITY (DEFICIT) (Note 12):
Preferred stock -- $.001 par value; 5,000,000 shares
authorized; 390,000 and 750,000 shares outstanding in
2000 and 1999, respectively............................. 1 1
Common stock -- $.001 par value; 30,000,000 shares
authorized; 5,326,126 and 3,147,514 shares outstanding
in 2000 and 1999, respectively.......................... 5 3
Additional paid-in capital................................ 14,096 12,203
Treasury stock -- 4,167 shares at $6.00 per share......... (25) (25)
Retained deficit.......................................... (15,998) (22,368)
-------- --------
Total stockholders' deficit........................ (1,921) (10,186)
-------- --------
Total liabilities and stockholders' equity
(deficit)......................................... $ 41,570 $ 44,602
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
30
33
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN 000'S EXCEPT SHARE DATA)
2000 1999 1998
--------- --------- ---------
INCOME:
Net service revenues...................................... $ 90,755 $ 97,411 $ 25,466
Cost of service revenues.................................. 41,468 46,890 17,569
--------- --------- ---------
Operating revenues................................ 49,287 50,521 7,897
--------- --------- ---------
GENERAL AND ADMINISTRATIVE EXPENSES:
Salaries and benefits..................................... 29,038 30,089 15,760
Other..................................................... 20,213 23,057 17,750
--------- --------- ---------
Total general and administrative expenses......... 49,251 53,146 33,510
--------- --------- ---------
Operating income (loss)........................... 36 (2,625) (25,613)
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense.......................................... (2,159) (3,625) (887)
Interest income........................................... 249 66 37
Miscellaneous............................................. 141 (1,160) (346)
--------- --------- ---------
Total other expense............................... (1,769) (4,719) (1,196)
--------- --------- ---------
LOSS BEFORE INCOME TAXES, DISCONTINUED OPERATIONS, AND
EXTRAORDINARY ITEM........................................ (1,733) (7,344) (26,809)
INCOME TAX BENEFIT (Note 10)................................ 659 3,263 99
--------- --------- ---------
Net (loss) before discontinued operations and
extraordinary item..................................... (1,074) (4,081) (26,710)
DISCONTINUED OPERATIONS:
Loss from discontinued operations, net of income tax...... (3,281) (784) (1,338)
Gain on dispositions, net of income tax................... 4,914 6,165 3,177
EXTRAORDINARY ITEM, NET OF INCOME TAX....................... 5,811 -- --
--------- --------- ---------
Net income (loss)................................. $ 6,370 $ 1,300 $ (24,871)
========= ========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -- BASIC AND
DILUTED (Note 1).......................................... 4,336,000 3,093,000 3,061,000
--------- --------- ---------
BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE (Notes 1
and 2):
Loss before discontinued operations and extraordinary
item................................................... $ (0.25) $ (1.32) $ (8.72)
Loss from discontinued operations, net of income tax...... (0.76) (0.25) (0.44)
Gain on dispositions of discontinued operations, net of
income tax............................................. 1.13 1.99 1.04
Extraordinary item, net of income tax..................... 1.34 -- --
--------- --------- ---------
Net income (loss)................................. $ 1.47 $ 0.42 $ (8.12)
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
31
34
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN 000'S, EXCEPT SHARE DATA)
COMMON STOCK PREFERRED STOCK ADDITIONAL RETAINED TOTAL
------------------ ----------------- PAID-IN TREASURY EARNINGS STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK (DEFICIT) EQUITY
--------- ------ -------- ------ ---------- -------- --------- -------------
BALANCE, December 31, 1997....... 2,850,067 $3 400,000 $1 $ 7,092 $(25) $ 1,203 $ 8,274
Issuance of stock in connection
with acquisitions and 401(k)
Plan (Notes 2, 12, and 14)... 214,851 -- -- -- 964 -- -- 964
Issuance of preferred stock.... -- -- 350,000 -- 3,500 -- -- 3,500
Costs of preferred stock
issuance..................... -- -- -- -- (256) -- -- (256)
Issuance of stock for ESOP..... -- -- -- -- 705 -- -- 705
Net (loss)..................... -- -- -- -- -- -- (24,871) (24,871)
--------- -- -------- -- ------- ---- -------- --------
BALANCE, December 31, 1998....... 3,064,918 $3 750,000 $1 $12,005 $(25) $(23,668) $(11,684)
Issuance of stock for Employee
Stock Purchase Plan.......... 37,701 -- -- -- 69 -- -- 69
Issuance of stock in connection
with 401(k) Plan (Notes 2,
12, and 14).................. 44,895 -- -- -- 129 -- -- 129
Net income..................... -- -- -- -- -- -- 1,300 1,300
--------- -- -------- -- ------- ---- -------- --------
BALANCE, December 31, 1999....... 3,147,514 $3 750,000 $1 $12,203 $(25) $(22,368) $(10,186)
Issuance of stock for Employee
Stock Purchase Plan.......... 317,494 -- -- -- 625 -- -- 625
Issuance of stock in connection
with 401(k) Plan (Notes 2,
12, and 14).................. 448,830 1 -- -- 617 -- -- 618
Issuance of stock for
bonuses...................... 212,288 -- -- -- 306 -- -- 306
Preferred stock conversion..... 1,200,000 1 (360,000) -- 1 -- -- 2
Issuance of warrants........... -- -- -- -- 344 -- -- 344
Net income..................... -- -- -- -- -- -- 6,370 6,370
--------- -- -------- -- ------- ---- -------- --------
BALANCE, December 31, 2000....... 5,326,126 $5 390,000 $1 $14,096 $(25) $(15,998) $ (1,921)
========= == ======== == ======= ==== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
32
35
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN 000'S)
2000 1999 1998
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ 6,370 $ 1,300 $(24,871)
Adjustments to reconcile net income (loss) to net cash
(used) provided
by operating activities --
Depreciation and amortization........................... 2,872 3,068 1,707
Provision for bad debts................................. 2,361 1,827 1,642
Deferred revenue........................................ (2,119) (2,119) (353)
(Gain) loss on disposal of assets....................... -- (4) 208
Gain on sale of discontinued operations................. (5,086) (7,764) (3,177)
Impairment of goodwill (Note 2)......................... 1,771 -- 9,522
Other, net.............................................. -- -- 13
Deferred income tax expense............................. -- -- 926
Minority interest....................................... (339) 3 (9)
Changes in assets and liabilities --
Increase (decrease) in cash included in assets held
for sale........................................... 201 (36) (185)
(Increase) decrease in accounts receivable........... 2,492 (9,981) 931
(Increase) decrease in inventory and other current
assets............................................. 235 546 (1,043)
(Increase) decrease in other assets.................. 545 (422) 891
Increase (decrease) in accounts payable.............. (3,148) (981) 5,003
Increase in accrued expenses......................... 759 2,341 4,890
-------- -------- --------
Net cash provided by (used in) operating
activities....................................... 6,914 (12,222) (3,905)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment....... 290 118 430
Purchase of property and equipment........................ (338) (947) (3,321)
Proceeds from sale of discontinued operations............. 6,599 12,223 10,593
Increase in notes receivable.............................. -- -- (290)
Minority interest investment in subsidiary................ 259 81 109
-------- -------- --------
Net cash provided by investing activities.......... 6,810 11,475 7,521
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on line of credit agreements.... (2,418) 231 (92)
Cash received in purchases of acquisitions................ -- -- 125
Cash used in purchase acquisitions........................ (787) -- (11,647)
Proceeds from issuance of notes payable and capital
leases.................................................. 10,725 1,152 4,000
Payments on notes payable and capital leases.............. (20,687) (2,732) (3,845)
Increase in long-term Medicare liabilities................ 3,535 1,689 753
Capitalized interest expense.............................. 1,106 1,356 --
Proceeds from issuance of stock........................... -- -- 3,244
Issuance of warrants for extinguishment of debt........... 344 -- --
(Increase) decrease in notes receivable -- related
parties................................................. -- 89 163
-------- -------- --------
Net cash provided by (used in) financing
activities....................................... (8,182) 1,785 (7,299)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 5,542 1,038 (3,683)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 1,425 387 4,070
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 6,967 $ 1,425 $ 387
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (See also
Note 2):
Cash payments for --
Interest................................................ $ 1,194 $ 2,573 $ 914
======== ======== ========
Income taxes............................................ $ 44 $ -- $ --
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
33
36
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Organization and Operations
Amedisys, Inc. and subsidiaries (the Company) is incorporated in the state
of Delaware and operates in eight states including Louisiana, Tennessee, North
Carolina, Georgia, Oklahoma, Alabama, Florida and Virginia. The Company provides
a variety of home health care and outpatient surgery services. During 1998, the
Company disposed of its supplemental staffing, home care management and primary
care services operations. During 1999 and 2000, the Company disposed of five
ambulatory surgery centers and its infusion therapy division (see Note 2).
Use of Estimates
The accounting and reporting policies of the Company conform with
accounting principles generally accepted in the United States. In preparing the
consolidated financial statements, the Company is required to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly and majority-owned subsidiaries. All material intercompany
accounts and transactions have been eliminated in these consolidated financial
statements. Business combinations accounted for as purchases are included in the
consolidated financial statements from the respective dates of acquisition.
Revenue Recognition
The Company has agreements with third party payors that provide for
payments to the Company at amounts different from its established rates. Gross
revenue is recorded on an accrual basis based upon the date of service at
amounts equal to the Company's established rates or estimated cost reimbursement
rates, as applicable. Allowances and contractual adjustments are recorded for
the difference between the established rates and the amounts estimated to be
payable by third parties and are deducted from gross revenues to determine net
service revenues. Net service revenues are the estimated net amounts realizable
from patients, third party payors and others for services rendered, including
estimated retroactive adjustments under reimbursement agreements.
Prior to the implementation of the Medicare Prospective Payment System
("PPS") on October 1, 2000 reimbursement for home health care services to
patients covered by the Medicare program was based on reimbursement of allowable
costs subject to certain limits. Final reimbursement was determined after
submission of annual cost reports and audits thereof by the fiscal
intermediaries. Retroactive adjustments have been accrued on an estimated basis
in the period the related services were rendered and will be adjusted in future
periods as final settlements are determined. Settlements for cost report years
ended 1998 and subsequent years, which are still subject to audit by the
intermediary and the Department of Health and Human Services, are recorded in
accounts receivable and long-term Medicare liabilities.
Under PPS, the Company is reimbursed from Medicare based on episodes of
care. An episode of care is defined as a length of care up to sixty days with
multiple continuous episodes allowed. A standard episode payment has been
established at $2,115 per episode, to be adjusted by a case mix adjuster
consisting of eighty (80) home health resource groups ("HHRG") and the
applicable geographic wage index. 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. The standard episode payment may be subject to
further individual adjustments due to low or high utilization, intervening
events and other factors. Providers are allowed to make
34
37
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 is paid following the submission of
the final claim at the end of the episode. In contrast to the cost-based
reimbursement system whereby providers' reimbursement was limited, among other
things, to their actual costs, episode payments are to be made to providers
regardless of the cost to provide care, except with regard to certain outlier
provisions. Revenue is recognized when services are provided based on the number
of days of service rendered in the episode. Revenue is recorded based on
diagnostics at the net amount realizable based on the calculated episode payment
adjusted for the case mix and geographical wage index, as described above. Costs
are recognized as services are rendered.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash includes certificates of deposit
and all highly liquid debt instruments with maturities of three months or less
when purchased.
Inventory
Inventories consist of medical supplies that are utilized in the treatment
and care of home health patients. Inventories are stated at the lower of cost
(first-in, first-out method) or market.
Property and Equipment
Property and equipment is generally carried at cost. Additions and
improvements are capitalized, but ordinary maintenance and repair expenses are
charged to income as incurred. The cost of property sold or otherwise disposed
of and the accumulated depreciation thereon are eliminated from the property and
related accumulated depreciation accounts, and any gain or loss is credited or
charged to income.
Capitalized leases, primarily consisting of computer equipment and phone
systems, are included in property and equipment. Capital leases are recorded at
the present value of the future rentals at lease inception and are amortized
over the lesser of the applicable lease term or the useful life of the
equipment.
For financial reporting purposes, depreciation and amortization of property
and equipment including those subject to capital leases ($1,569,000 in 2000,
$1,718,000 in 1999, and $1,376,000 in 1998) is included in other general and
administrative expenses and is provided utilizing the straight-line method based
upon the following estimated useful service lives:
Buildings................................................... 40 years
Leasehold improvements...................................... 5 years
Equipment and furniture..................................... 5-7 years
Vehicles.................................................... 5 years
Computer software........................................... 5 years
Goodwill
Goodwill reflects the excess of cost over the estimated fair value of the
net assets acquired. Goodwill is being amortized on a straight-line basis over
its estimated useful life of twenty years. Realization of goodwill is
periodically assessed by management based on the expected future profitability
and undiscounted future cash flows of acquired entities and their contribution
to the overall operations of the Company.
Deferred Revenue
On November 3, 1998, the Company and CPII Acquisition Corp. ("CPII")
entered into an Asset Purchase Agreement whereby the Company sold certain of the
assets, subject to the assumption of certain
35
38
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
liabilities, of its proprietary software system and home health care management
division to CPII in exchange for $11,000,000 cash. An affiliate of CPII will
utilize the assets to provide certain management services to the Company's home
health agencies. Due to the Company's continuing involvement with the assets
sold, the gain on the sale of the software system totaling $10,593,000 was
deferred and is being amortized over the five-year term of the management
services agreement referred to above. The $6,003,000 and $8,122,000 unamortized
gain at December 31, 2000 and 1999, respectively, is reflected as deferred
revenue in the accompanying consolidated balance sheets.
Accounting for the Impairment of Long-lived Assets and Long-lived Assets to be
Disposed of
Whenever recognized events or changes in circumstances indicate the
carrying amount of an asset, including intangible assets, may not be
recoverable, management reviews the asset for possible impairment. In accordance
with Statement of Financial Accounting Standards No. 121 ("SFAS 121"),
"Accounting for the Impairment of Long-lived Assets to be Disposed," management
uses undiscounted estimated expected future cash flows to assess the
recoverability of the asset. If the expected future net cash flows are less than
the carrying amount of the asset, an impairment loss, measured as the amount by
which the carrying amount of the asset exceeds the fair value of the asset,
would be recognized.
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities," which was amended by Statement of Financial
Accounting Standards No. 137 ("SFAS 137"), "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of FASB
133." The Statement establishes accounting and reporting standards requiring
that every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the consolidated balance sheet as
either an asset or liability measured at its fair value. The adoption of this
accounting pronouncement did not have a material effect on the Company's
financial position or results of operations at December 31, 2000 and 1999 as the
Company does not engage in derivative financial instruments.
Net Income (Loss) Per Common Share
Earnings per common share are based on the weighted average number of
shares outstanding during the period. The weighted average number of common
shares outstanding was 4,336,000, 3,093,000 and 3,061,000 for the years ended
December 31, 2000, 1999 and 1998, respectively. There was no difference between
basic and diluted weighted average common shares outstanding in any of these
years. The effect of stock options (732,521, 468,521 and 273,421 common shares
for the years ended December 31, 2000, 1999 and 1998, respectively) and
preferred shares (390,000 preferred shares convertible into 1.3 million common
shares, 750,000 preferred shares convertible into 2.5 million common shares and
750,000 preferred shares convertible into 1.6 million common shares for the
years ended December 31, 2000, 1999 and 1998, respectively) were anti-dilutive
(see Note 12).
Reclassifications
Certain amounts previously reported in the 1999 and 1998 consolidated
financial statements have been reclassified to conform to the 2000 presentation.
36
39
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS AND DISPOSITIONS:
Acquisitions:
ALLIANCE HOME HEALTH
On January 1, 1998, the Company acquired all of the issued and outstanding
capital stock of Alliance Home Health, Inc. (Alliance), a home health business
with locations throughout Oklahoma in exchange for $300,000 and 194,286 shares
of common stock. Of the 194,286 shares of Company common stock issued to the
former owners of Alliance, 122,857 shares were placed in escrow as consideration
for certain contingent liabilities which may be asserted against the former
stockholder of Alliance to the extent such claims exceed $500,000 (singularly or
in aggregate). The escrow period expires December 31, 2003. The Company
performed management services for Alliance during 1997 and recognized revenues
totaling approximately $1.3 million. During 1998, management decided to close
substantially all of the home health agencies acquired from Alliance based on
estimates of certain reimbursement reductions, and, accordingly, goodwill
totaling $7,228,000 recorded in connection with this acquisition was written-off
as other general and administrative expense. Alliance filed bankruptcy in
September, 2000 (see Note 13).
PRN, INC.
On February 23, 1998, the Company acquired all of the issued and
outstanding capital stock of PRN, Inc. ("PRN"), a home infusion pharmacy
business, in exchange for $430,000 and assumption of $71,000 debt. The Company
has agreed to pay additional consideration of up to $150,000 upon PRN reaching
certain revenue goals ("Additional Consideration"). The Company has retained the
right to offset certain indemnifiable liabilities against the Additional
Consideration. As of December 31, 1999, this amount was completely paid. The
Company sold PRN in August, 2000 (see "Dispositions").
INFUSIONCARE SOLUTIONS, INC.
On February 27, 1998, the Company acquired all of the issued and
outstanding capital stock of Infusioncare Solutions, Inc. ("ICS"), a home health
care and infusion business, based in Baton Rouge, Louisiana, in exchange for
aggregate consideration of $500,000, of which $375,000 was payable in cash at
closing and $125,000 was payable pursuant to a two-year promissory note. The
Company has retained the right to offset certain indemnifiable liabilities
against the sums payable pursuant to the promissory note. As of December 31,
2000 and 1999, the balance outstanding on the promissory note was $0 and
$11,000, respectively. The Company closed ICS in May, 2000 (see "Dispositions").
PRECISION HEALTH SOLUTIONS, LLC
On February 27, 1998, the Company acquired substantially all of the assets
of Precision Health Solutions, LLC ("PHS"), a home health care and infusion
business, based in Baton Rouge, Louisiana, in exchange for aggregate
consideration of $1,000,000, of which $750,000 was payable in cash at closing
and $250,000 was payable pursuant to a two-year promissory note. The Company has
retained the right to offset certain indemnifiable liabilities against the sums
payable pursuant to the promissory note. As of December 31, 2000 and 1999, the
balance outstanding on the promissory note was $0 and $23,000, respectively. The
Company sold PHS in August, 2000 (see "Dispositions").
PRECISION HOME HEALTH CARE, INC.
On April 1, 1998, the Company acquired certain assets of Precision Home
Health Care, Inc., ("Precision"), a home health care business based in Baton
Rouge, Louisiana, in exchange for $1,250,000. The purchase price consisted of an
$800,000 note payable at 9.5% paid on July 1, 1998, a $400,000 note payable at
9.5% payable monthly for a period of two years, and $50,000 in liabilities for
capital improvements. As of
37
40
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2000 and 1999, the balance outstanding on the $400,000 note payable
was $0 and $90,000, respectively.
TANGLEWOOD SURGERY CENTER
On November 1, 1998, the Company acquired certain assets of Tanglewood
Surgery Center in Odessa, Texas in exchange for $500,000, including a $50,000
note payable at 8.5% payable monthly over a one-year period and a $450,000 note
payable at 10% payable monthly over a five-year period. The Company contributed
this facility to West Texas Ambulatory Surgery Center, LLC in exchange for a 67%
interest in the venture. The collateral for the note was the Company's interest
in West Texas Ambulatory Surgery Center, LLC, which was sold in December 1999.
As a result, the outstanding note was repaid.
COLUMBIA/HCA
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 a/k/a The Healthcare Company ("Columbia/HCA") located in Alabama,
Georgia, Louisiana, North Carolina, Oklahoma and Tennessee. The Company had no
material relationship with Columbia/HCA Healthcare Corporation prior to this
transaction. A portion of the $24,000,000 purchase price, $9,994,000 less
certain liabilities, was paid November 3, 1998 with the balance of $14,006,000
payable pursuant to a one-year promissory note with interest calculated at the
prime rate of Union Planters Bank of Louisiana plus 0.75%.
The cash portion of the consideration paid to Columbia/HCA was provided by
the Company's sale of certain assets (see below) in 1998. The assets purchased
from Columbia/HCA consisted primarily of furniture, fixtures, and equipment;
prepaid expenses; advances and deposits; inventory; office supplies; records and
files; transferable governmental licenses, permits, and authorizations; and
rights in, to and under specified licenses, contracts, leases, and agreements.
The liabilities assumed consisted of the paid-time-off balances of the
Columbia/HCA employees and obligations arising on or subsequent to the closing
dates under the assumed contracts. Assets located in Louisiana and Oklahoma were
acquired November 16, 1998, and the remaining assets were acquired November 30,
1998. Columbia/HCA agreed that for a period of two years from the date of
closing, it would not compete with the Company in the business of providing
skilled intermittent home care services in the counties/parishes currently
served by the acquired Columbia/HCA offices. This covenant did not apply to a
home health agency that is acquired by Columbia/HCA as part of an acquisition of
a general acute care hospital, skilled nursing facility, ambulatory surgical
facility, physician practice management company or assisted living facility.
Effective September 30, 1999, the Company and Columbia/HCA signed an
agreement to modify the terms of the note. As a result, the Company was required
to make quarterly principal and interest payments, subject to certain prepayment
provisions in the agreement, beginning April 30, 2001, with the balance of the
note being due on July 31, 2004.
The note was terminated effective October 1, 2000 for a cash payment of
$9,000,000 (see "Recent Remodification of Loan" in Item 1) and the execution of
a warrant agreement that allows Columbia/HCA to purchase up to 200,000 shares of
Amedisys' Common Stock, subject to certain conditions. The estimated value of
these warrants is $344,000. As of result of this transaction, the Company has
recorded an extraordinary gain of $5.8 million, net of income taxes, in the
fourth quarter of 2000.
38
41
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Assuming the Columbia/HCA acquisition occurred on January 1, 1998,
unaudited pro forma information for the Company for the year ended December 31,
1998, which is not necessarily indicative of future operating results, is as
follows (in 000's, except per share information).
TWELVE MONTHS ENDED
DECEMBER 31, 1998
-------------------
Net service revenue......................................... $150,645
Operating loss.............................................. (50,456)
Loss before discontinued operations......................... (43,292)
Net loss.................................................... (41,453)
Net loss per common share................................... (13.48)
Subsequent to the acquisition, several of the home health agencies acquired
were closed or sold and accordingly, goodwill totaling approximately $1.8
million and $2.3 million which had been recorded for these locations, was
written off in 1999 and 1998, respectively. In addition, lease abandonment costs
of $307,000 were recorded in 1998 as other general and administrative expense,
representing the Company's estimated cost of remaining lease obligations at
these locations.
NORTHWEST HOME HEALTH, INC.
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 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 amounted to the assumption of the above-mentioned liabilities.
MID-FLORIDA HOME HEALTH SERVICES
Effective November 17, 2000, the Company acquired through its wholly-owned
subsidiary Amedisys Home Health of Florida, Inc. certain assets and liabilities
of Mid-Florida Home Health Services from Winter Haven Hospital, Inc. The assets
acquired consisted primarily of all furniture, fixtures, equipment and leasehold
improvements; supplies; inventory; lists of current patients, mailing lists,
business records, and telephone numbers; goodwill and going concern; benefits of
all maintenance agreements, association dues, advertising, design, fees, rent
services, or interest; all rights, to the extent assignable, to the ownership,
development and operations of the Agencies including the Medicare and Medicaid
Provider Numbers; technical outlines, records, and software and other technology
including contracts, licenses, authorizations and permits; and all trade
secrets, inventions, patents, copyrights, trademarks and other intangible assets
including the right to use the trade name "Mid-Florida Home Health Services" for
a period of ninety days after the effective date. The liabilities assumed
consisted of employees' paid time-off balances ("PTO") and obligations under
capital and operating leases. In consideration for the acquired assets and
liabilities, the Company paid $975,000 cash (less PTO) at the time of closing
and executed a promissory note in the amount of $975,000 bearing interest of 7%,
payable in 36 monthly principal and interest installments.
Each of the above acquisitions was accounted for as a purchase.
39
42
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Dispositions:
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 was to become a focused home health nursing company. As
of December 31, 2000, the Company has divested of its entire infusion therapy
division and all of its outpatient surgery centers with the exception of one
surgery center in Hammond, Louisiana. A discussion of the sales that have
occurred since the adoption of the plan is as follows.
STAFFING DIVISION
Effective September 21, 1998, the Company sold certain assets, subject to
the assumption of certain liabilities, of its staffing division to Nursefinders,
Inc. The sale price of $7,200,000 consisted of cash of $6,480,000 payable
immediately upon closing with the balance of $720,000 placed in an escrow
account for a ninety-day period. The escrow balance plus approximately $16,000
of interest was distributed to the Company (approximately $365,000) and
Nursefinders (approximately $374,000) at December 31, 1999. Of the amount
distributed to Nursefinders, approximately $174,000 represented amounts applied
to principal and interest payments due Nursefinders by the Company pursuant to a
note payable. The assets sold consist primarily of all accounts and notes
receivable; prepaid expenses; advances and deposits; on-site hardware and
software; furniture, fixtures, and leasehold improvements; office supplies;
records and files; transferable governmental licenses, permits, and
authorizations; and rights in, to and under specified licenses, contracts,
leases, and agreements. The liabilities assumed were the trade accounts payable,
accrued expenses, and other liabilities as of the closing date. Amedisys has
agreed to a five-year non-competition covenant. The sale of the staffing
division resulted in a pre-tax gain of $5,041,000 in 1998.
ANALYTICAL MEDICAL SYSTEMS
On November 3, 1998, the Company and CPII Acquisition Corp. ("CPII")
entered into an Asset Purchase Agreement whereby the Company sold certain
assets, subject to the assumption of certain liabilities, of its proprietary
software system (Analytical Medical Systems) and home health care management
division (Amedisys Resource Management) to CPII in exchange for $11,000,000
cash. The assets sold consist primarily of proprietary rights with respect to
the home health information system developed and used by the Company and its
subsidiaries; deposits, prepayments or prepaid expenses relating to the
business; contracts; fixtures and equipment; books and records; rights under
warranties; and claims, causes of action, rights of recovery and rights to
set-off. The liabilities assumed are associated with the assumed contracts. The
Company also agreed to provide limited support services to CPII for the period
of one year from the date of the agreement. An affiliate of CPII will utilize
the assets to provide certain management services to the Company's home health
agencies (see Note 13). Due to the Company's continuing involvement with the
assets sold, the gain on the sale of the software system totaling $10,593,000
was deferred and is being amortized over the five-year term of the management
services agreement referred to above. The $6,003,000 and $8,122,000 unamortized
gain at December 31, 2000 and 1999, respectively, is reflected as deferred
revenue in the accompanying consolidated balance sheets.
AMEDISYS DURABLE MEDICAL EQUIPMENT, INC
On January 1, 1999, the Company sold all of the issued and outstanding
capital 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 sale price was $672,385 of which $100,000 was paid at closing;
$418,318 was 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 was payable pursuant to a one-year note, payable in four quarterly
payments of principal plus
40
43
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accrued interest at prime plus 2%. As of December 31, 2000 and 1999, the Company
had not received these payments. As a result, the Company has fully reserved for
these notes as of December 31, 2000 and 1999.
AMEDISYS SURGERY CENTERS, LC
Effective September 1, 1999, by an Asset Purchase Agreement, the Company
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. At closing, $10,562,000 was paid in cash 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%. The Company has
received payments of $205,000 on this note receivable and, as a result of the
final sale adjustments, has offset the remaining balance against the gain
recorded. 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 recorded a pre-tax gain of $9,417,000 in 1999 as a result of this
transaction.
WEST TEXAS AMBULATORY SURGERY CENTER, LLC
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 in cash 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 in 1999 as a result of this transaction.
PARK PLACE SURGERY CENTER, LLC
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 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.
41
44
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INFUSION THERAPY DIVISION
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. 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.
EAST HOUSTON SURGERY CENTER, LLC
On December 1, 2000, the Company's wholly-owned subsidiary, Amedisys
Surgery Centers, LC ("ASC"), East Houston Physician Surgical Services, Ltd.
("Surgical Services"), and East Houston Surgery Center, Ltd. ("East Houston")
entered into an agreement for the purchase and sale of the Company's 22.98%
membership interest in East Houston, an outpatient surgery center in Houston,
Texas, to Surgical Services. The purchase price of $1,650,000 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 and Surgical Services had no material relationship prior to the
transaction, except by virtue of their membership interest in Park Place and
that the Company and some of the member physicians served on the Board of
Directors of East Houston. At the closing, the management agreement existing
between the Company and East Houston was also terminated. The Company recorded a
pre-tax gain of $1,307,000 as a result of this transaction in the quarter ended
December 31, 2000.
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 focused home health nursing company. As
of December 31, 2000, the Company has divested its entire infusion therapy
division and all of its outpatient surgery centers with the exception of one
surgery center in Hammond, Louisiana. Generally, a plan to dispose of
discontinued operations must be carried out over a period not to exceed one year
in order to continue to qualify for discontinued operation accounting treatment.
This remaining surgery center has been involved in litigation outside of the
Company's control which prevented the Company from completing a timely
disposition. For this reason, the Company has continued to reflect the
outpatient surgery division as discontinued operations. The Company intends to
sell the remaining surgery center in 2001.
42
45
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following as of December 31, 2000
and 1999 (in 000's):
2000 1999
------- -------
Land........................................................ $ 58 $ 58
Buildings and leasehold improvements........................ 195 359
Equipment, furniture and vehicles........................... 7,840 7,961
Computer software........................................... 205 226
------- -------
8,298 8,604
Accumulated depreciation.................................... (4,682) (3,454)
------- -------
3,616 5,150
Net Property and equipment included in Long-term Assets Held
for Sale.................................................. (681) (1,711)
------- -------
Total property and equipment................................ $ 2,935 $ 3,439
======= =======
4. OTHER INVESTMENTS:
The Company had a 22.98% interest in a surgery center in Houston, Texas,
which as of December 31, 1999 had a carrying value of $282,000. The surgery
center opened in May 1998 and was managed by the Company under a long-term
management contract. Effective September 1, 1999, the Company sold 19.02 units
of its original 42 unit investment (each unit represents a 1% interest) to
thirteen physician investors for $180,000 cash. The Company recorded a loss of
$77,000 relating to the sale. On December 1, 2000, the Company sold its
remaining interest in the surgery center (see Note 2).
The Company developed a surgery center in Lafayette, Louisiana with a group
of physician investors which began operations in March 1999. The Company managed
the center under a management contract for a fee based on 4% of collections. As
of December 31, 1999, the Company's investment in the surgery center totaled
$457,000. This investment represented a 20% interest for the year ended December
31, 1999. The Company sold its interest in the surgery center on April 28, 2000
(see Note 2).
The Company accounted for these investments using the equity method.
These investment balances are included in the accompanying consolidated
balance sheets as of December 31, 1999 as Long-term Assets Held for Sale.
5. OTHER ASSETS:
Other assets include the following as of December 31, 2000 and 1999 (in
000's):
2000 1999
------- -------
Notes Receivable............................................ $ 221 $ 599
Goodwill, net of accumulated amortization of $3,080 and
$1,777.................................................... 20,159 20,530
Deposits and Other.......................................... 155 228
------- -------
20,535 21,357
Included in Long-term Assets Held for Sale.................. (109) (1,813)
------- -------
Total Other Assets................................ $20,426 $19,544
======= =======
Notes receivable at December 31, 2000 and 1999 consist primarily of
advances on operating expenses and management fees for non-consolidated
entities. These reimbursements are typically received within two months.
43
46
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. NOTES PAYABLE:
Notes payable as of December 31, 2000 consists primarily of an asset-based
line of credit with availability, depending on collateral, of up to $25 million
with National Century Financial Enterprises, Inc. ("NCFE") and borrowings under
a revolving bank line of credit of up to $2,500,000. The $25 million asset-
based line of credit, which expires December, 2001, is collateralized by
eligible accounts receivable of the home health care nursing division and as of
December 31, 2000, had an outstanding balance of $2,953,000. 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 which had outstanding balances at December 31, 2000 and 1999 of
$2,952,000 and $4,917,000, respectively, was 15.29% and 15.88% for the years
ended December 31, 2000 and 1999, respectively. The revolving bank line of
credit of $2,500,000 bears interest at the Bank One Prime Floating Rate, which
was 9.5% at December 31, 2000. At December 31, 2000, there were no amounts drawn
on the line of credit.
7. LONG-TERM DEBT CLASSIFIED AS CURRENT:
Long-term debt classified as current at December 31, 1999 consists of a
$14,006,000 note plus accrued interest of $1,455,000 payable to Columbia/HCA at
Union Planters of Louisiana prime plus 0.75% (8.5% at December 31, 1999) as a
result of the acquisition of home health agencies consummated in November 1998
(see Note 2).
On December 28, 2000, the Company entered into a loan agreement with NPF
Capital, Inc. ("NPF") for a principal sum of up to $11,725,000. At execution,
NPF paid $9,000,000 directly to Columbia/HCA for the benefit of the Company. The
Company also financed $725,000 of debt issue costs under this agreement, with
the remaining unfunded portion of $2,000,000 available for future acquisitions.
Simultaneously, Amedisys entered into a Termination Agreement with Columbia/HCA
relating to the note payable ("HCA Note"). The Termination Agreement with
Columbia/HCA was effective October 1, 2000. The Termination Agreement related to
that certain Credit Agreement dated November 16, 1998 and that certain
promissory note dated December 1, 1998 as modified by that certain Loan
Modification Agreement dated September 30, 1999. As part of this agreement, the
HCA Note, which carried a balance (including accrued interest) of $16.6 million
at September 30, 2000, was terminated effective October 1, 2000 for a cash
payment of $9,000,000 and the execution of a warrant agreement that allows
Columbia/HCA to purchase up to 200,000 shares of Amedisys' Common Stock, subject
to certain conditions. These warrants have an estimated value of $344,000. As of
result of these transactions, the Company has recorded an extraordinary gain of
$5.8 million, net of taxes, in the fourth quarter of 2000.
44
47
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. LONG-TERM DEBT:
Long-term debt consists primarily of notes payable to banks and other
financial institutions that are due in monthly installments through 2004.
Long-term debt includes the following as of December 31, 2000 and 1999 (in
000's):
LENDER: 2000 1999
- ------- ------- -------
Notes payable to finance and equipment companies -- interest
ranging from 5.50-20.00%.................................. $13,880 $ 5,916
Notes payable to banks -- interest at 9.00%................. -- 76
------- -------
13,880 5,992
Less current portion:
Current portion of long-term debt......................... (3,379) (2,325)
Included in current liabilities held for sale............. (192) (209)
Included in long-term liabilities held for sale........... (966) (1,252)
------- -------
Long-term debt.............................................. $ 9,343 $ 2,206
======= =======
These borrowings are secured by furniture, fixtures, computer equipment and
medical equipment. Maturities of debt as of December 31, 2000 are as follows (in
000's):
YEAR ENDED
- ----------
December 31, 2001........................................... $3,571
December 31, 2002........................................... 5,316
December 31, 2003........................................... 4,884
December 31, 2004........................................... 109
Thereafter.................................................. --
The fair value of long-term debt as of December 31, 2000 and 1999,
estimated based on the Company's current borrowing rate of 15% at December 31,
2000 and 1999, was approximately $12,296,000 and $6,110,000, respectively.
9. CAPITAL LEASES:
The Company acquired certain equipment under capital leases for which the
related liabilities have been recorded at the present value of future minimum
lease payments due under the leases. The present minimum lease payments under
the capital leases and the net present value of future minimum lease payments
are as follows (in 000's):
YEAR ENDED
- ----------
December 31, 2001........................................... $ 399
December 31, 2002........................................... 30
Thereafter.................................................. --
-----
Total future minimum lease payments......................... 429
Amount representing interest................................ (52)
-----
Present value of future minimum lease payments............ 377
-----
Current portion:
Included in current portion of obligations under capital
leases................................................. (333)
Included in current liabilities held for sale............. (14)
-----
Obligations under capital leases............................ $ 30
=====
45
48
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. INCOME TAXES:
The Company files a consolidated federal income tax return which includes
all subsidiaries that are more than 80% owned. State income tax returns are
filed individually by the subsidiaries in accordance with state statutes.
The Company utilizes the liability approach to measuring deferred tax
assets and liabilities based on temporary differences existing at each balance
sheet date using currently enacted tax rates in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), Accounting for Income
Taxes. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
The total provision (benefit) for income taxes consists of the following
for the years ended December 31, 2000, 1999 and 1998 (in 000's):
2000 1999 1998
---- ---- ----
Current portion............................................. $200 $383 $ --
Deferred portion............................................ -- -- 926
---- ---- ----
$200 $383 $926
==== ==== ====
Total income tax expense (benefit) is included in the following financial
statement captions for the years ended December 31, 2000, 1999 and 1998 (in
000's):
2000 1999 1998
----- ------- ------
Continuing operations...................................... $(659) $(3,263) $ (99)
Discontinued operations:
Income from discontinued operations...................... -- 88 (839)
Gain on disposition of discontinued operations........... 172 3,558 1,864
Extraordinary item......................................... 687 -- --
----- ------- ------
$ 200 $ 383 $ 926
===== ======= ======
Net deferred tax assets consist of the following components as of December
31, 2000 and 1999 (in 000's):
2000 1999
------- -------
Deferred tax assets:
NOL carryforward.......................................... $ 1,561 $ --
Allowance for doubtful accounts........................... 538 199
Self-insurance reserves................................... 618 262
Deferred revenue.......................................... 2,281 2,842
Losses of consolidated subsidiaries not consolidated for
tax purposes, expiring beginning in 2010............... 208 297
Amortization of intangible assets......................... -- 1,356
Expenses not currently deductible for tax purposes........ 746 535
Other..................................................... 65 --
Deferred tax liabilities:
Amortization of intangible assets......................... (1,005) --
Property and equipment.................................... (999) (346)
Net liability for cash basis partnership for tax reporting
purposes............................................... (249) (227)
Less: Valuation allowance................................... (3,764) (4,918)
------- -------
$ -- $ --
======= =======
The valuation allowance was recorded against net deferred tax assets due to
the significant operating losses incurred by the Company during 2000 and 1999.
The NOL Carryforward expires in 2020.
46
49
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total tax expense on income before taxes resulted in effective tax rates
that differed from the federal statutory income tax rate. A reconciliation of
these rates is as follows for 2000, 1999 and 1998:
2000 1999 1998
---- ---- ----
Income taxes computed on federal statutory rate............. 38% 35% 34%
State income taxes.......................................... 3 23 --
Nondeductible goodwill...................................... -- -- (10)
Valuation allowance......................................... (39) (40) (28)
Nondeductible expenses and other............................ 1 5 --
--- --- ---
Total............................................. 3% 23% (4%)
=== === ===
11. RELATED PARTY TRANSACTIONS:
Notes Payable
Notes payable to related parties at December 31, 2000 and 1999 consists of
unsecured notes to certain stockholders of the Company amounting to $10,000 that
are due on demand and bear interest at rates from 0%-12%. The fair value of
these notes approximates the recorded balance due to the short-term nature of
the notes.
Other
The Company paid consulting fees to stockholders of $63,000 and $125,000
for the years ended December 31, 2000 and 1999 and medical directors fees to
stockholders of $0 and $77,000 in 2000 and 1999, respectively.
ASC paid fees to a medical foundation on behalf of a stockholder of $4,000
in 1999. In 1999, ASC paid $10,800 to a stockholder of the Company for equipment
rental.
12. CAPITAL STOCK:
Preferred Stock
In December 1997, the Company completed a private placement of 400,000
shares of $.001 par value convertible preferred stock pursuant to Regulation D
of the Securities Act of 1933 at $10 per share for gross proceeds of $4 million.
The Company used the proceeds of this placement to fund acquisitions and
accelerate the growth of its network of outpatient health care services,
including home health care offices, infusion therapy sites and outpatient
surgery centers. Under the original placement agreement, these shares were
initially convertible into 864,865 shares of common stock which is equivalent to
$4.625 per share. On March 3, 1998, the Company completed a secondary phase of
its private placement of preferred stock and issued an additional 350,000 shares
for gross proceeds of $3.5 million. These shares were initially convertible into
756,757 shares of common stock which is equivalent to $4.625 per share. Warrants
to purchase 52,500 shares of preferred stock at $10 per share, convertible into
113,514 shares of common stock, were issued to the placement agent, Hudson
Capital Partners, L.P., in connection with the offering. Effective February 16,
1999, the Company amended the conversion terms through Preferred Stock
Conversion Agreements. The conversion rate was reduced to $3.00 per common share
in exchange for an agreement by these shareholders not to sell, transfer or
otherwise dispose of any Company securities until December 31, 1999. Under this
conversion agreement, the 750,000 preferred shares are convertible into
2,500,000 common shares. During 2000, eight preferred shareholders converted a
total of 360,000 preferred shares into 1,200,000 common shares.
47
50
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock Options and Warrants
The Company's Statutory Stock Option Plan ("the Plan") provides incentive
stock options to key employees. The Plan is administered by a Compensation
Committee (appointed by the Board of Directors) which determines, within the
provisions of the Plan, those eligible employees to whom, and the times at
which, options shall be granted. Each option granted under the Plan is to be
convertible into one share of common stock, unless adjusted in accordance with
the provisions of the Plan. Options may be granted for a number of shares not to
exceed, in the aggregate, 1,425,000 shares of common stock at an option price
per share of no less than the greater of (a) 100% of the fair market value of a
share of common stock on the date the option is granted or (b) the aggregate par
value of the shares of common stock on the date the option is granted. If the
option is granted to any owner of 10% or more of the total combined voting power
of the Company and its subsidiaries, the option price is to be at least 110% of
the fair market value of a share of common stock on the date the option is
granted. Each option vests ratably over a two to three year period and may be
exercised during a period as determined by the Compensation Committee, not to
exceed ten years from the date such option is granted. The aggregate fair market
value of common stock subject to an option granted to a participant by the
Compensation Committee in any calendar year shall not exceed $100,000.
The Company's Directors' Stock Option Plan ("the Directors' Plan") provides
stock options to directors. The Directors' Plan is administered by the Board of
Directors in accordance with the provisions of the Directors' Plan. Each option
granted under the Directors' Plan is to be convertible into one share of common
stock, unless adjusted in accordance with the provisions of the Directors' Plan.
Options may be granted for a number of shares not to exceed, in the aggregate,
75,000 shares of common stock. The option price is to be the fair market value,
which is the closing price of a share of common stock on the last preceding
business day prior to the date as to which fair market value is being
determined, or on the next preceding business day on which such common stock is
traded, if no shares of common stock were traded on such date. Each option vests
ratably over a two to three year period and may be exercised during a period not
to exceed five years from the date such option is granted.
A summary of the Company's stock options as of December 31, 2000, 1999 and
1998 and changes during each of the years then ended is as follows:
2000 1999 1998
---------------------- ---------------------- ----------------------
WGTD. AVG. WGTD. AVG. WGTD. AVG.
SHARES EXER. PRICE SHARES EXER. PRICE SHARES EXER. PRICE
-------- ----------- -------- ----------- -------- -----------
Outstanding at beginning of
year............................ 897,771 $3.84 462,051 $ 6.11 957,065 $ 6.14
Granted........................... 105,000 4.05 866,772 3.43 105,000 5.63
Exercised......................... -- -- -- -- -- --
Cancelled, forfeited or
expired......................... (156,500) 4.09 (431,052) (5.50) (600,014) (6.08)
-------- ----- -------- ------ -------- ------
Outstanding at end of year........ 846,271 $3.72 897,771 $ 3.84 462,051 $ 6.11
======== ===== ======== ====== ======== ======
Exercisable at end of year........ 732,521 $3.68 468,521 $ 4.34 273,421 $ 6.34
======== ===== ======== ====== ======== ======
Weighted average fair value of
options granted during the
year............................ $3.74 $ 1.34 $ 1.85
===== ====== ======
Of the 113,750 options outstanding but not exercisable at December 31,
2000, 91,250 become exercisable in 2001 and 22,500 in 2002.
48
51
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------- ---------------------------
NUMBER WGTD. AVG. WGTD. AVG. NUMBER WGTD. AVG.
OUTSTANDING REMAINING EXERCISE EXERCISABLE AT EXERCISE
RANGE OF EXERCISE PRICES AT 12/31/00 CONTRACTUAL LIFE PRICE 12/31/00 PRICE
- ------------------------ ----------- ---------------- ---------- -------------- ----------
$3.00 - $7.00............... 846,271 6.29 $3.72 732,521 $3.68
The Company applies Accounting Principles Board Opinion No. 25 ("APB 25"),
Accounting for Stock Issued to Employees, and related interpretations in
accounting for its stock option plans. Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), Accounting for Stock-Based Compensation, was
issued in 1995 and changes the methods for recognition of cost on plans similar
to those of the Company. Pro forma disclosures, as if the Company had adopted
the cost recognition requirements under SFAS 123 are presented below.
At December 31, 2000, the Company had the following warrants outstanding:
WARRANTS OUTSTANDING PRICE
- -------------------- -----
174,826...................................................... $3.00
35,000...................................................... 4.00
50,000...................................................... 5.00
-------
259,826
The fair value of each option and warrant granted during the periods
presented is estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions: (i) dividend yield of 0%, (ii)
expected volatility of a range of 112.62% to 130.87% for options issued in 2000,
a range of 99.8% to 114.4% for options issued in 1999, and 53.0% for options
issued in 1998, (iii) risk-free interest rate of a range of 5.31% to 7.03% in
2000, a range of 5.80% to 6.21% in 1999, and 5.70% in 1998, and (iv) expected
life of three to nine years.
Had compensation cost for the Company's options awarded in 1995 or later
been determined consistent with SFAS 123, the Company's net income (loss), net
income (loss) applicable to common stockholders and net income (loss) per common
share for 2000, 1999 and 1998 would approximate the pro forma amounts below (in
000's, except share amounts):
2000 1999 1998
-------------------- ----------------------- --------------------
AS AS AS
REPORTED PRO FORMA REPORTED PRO FORMA REPORTED PRO FORMA
-------- --------- ---------- ---------- -------- ---------
Net income (loss)...... $6,370 $5,614 $1,300 $ 882 $(24,871) $(25,565)
====== ====== ====== ===== ======== ========
Net income (loss)
applicable to common
stockholders......... $6,370 $5,614 $1,300 $ 882 $(24,871) $(25,565)
====== ====== ====== ===== ======== ========
Net income (loss) per
Common share......... $ 1.47 $ 1.29 $ 0.42 $0.29 $ (8.12) $ (8.35)
====== ====== ====== ===== ======== ========
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards made prior to
1995. Additional awards in future years are anticipated.
49
52
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Amedisys Specialized Medical Services, Inc. (ASM) Employee Stock Ownership
Plan
ASM, a wholly owned subsidiary, developed an Employee Stock Ownership Plan
("ESOP") effective January 1, 1997 to enable participating employees of ASM to
share in the ownership of ASM. Under the ESOP, the Company may make annual
contributions to a trust for the benefit of eligible employees, in the form of
either cash or common stock of ASM. The amount of the annual contribution is
discretionary. No contributions were made for the years ended December 31, 2000,
1999 and 1998.
Employee Stock Purchase Plan
The Company has a plan whereby eligible employees may purchase the
Company's common stock at 85% of the lower of the market price at the time of
grant or the time of purchase. There are 1,000,000 shares reserved for this
plan. At December 31, 2000, there were 604,397 shares available for future
offerings. A summary of the shares issued since the inception of the plan is as
follows:
EMPLOYEE STOCK PURCHASE PLAN PERIOD SHARES ISSUED PRICE
- ----------------------------------- ------------- -----
August 1, 1998 to December 31, 1998......................... 4,489 $2.44
January 1, 1999 to June 30, 1999............................ 30,822 1.70
July 1, 1999 to December 31, 1999........................... 53,524 1.69
January 1, 2000 to June 30, 2000............................ 70,899 1.17
July 1, 2000 to September 30, 2000.......................... 192,671 2.50
October 1, 2000 to December 31, 2000........................ 43,198 3.61
-------
395,603
=======
13. COMMITMENTS AND CONTINGENCIES:
Legal Proceedings
From time to time, the Company and its subsidiaries are defendants in
lawsuits arising in the ordinary course of the Company's business. While the
outcome of these lawsuits cannot be predicted with certainty, management
believes that the resolution of these matters will not have a material adverse
effect on the Company's financial condition or results of operations.
The Company filed a lawsuit against Mr. James P. Cefaratti, the Company's
former President and Chief Operations Officer, alleging various negligent
actions which constituted breaches of fiduciary duty owed to the Company and its
stockholders. The lawsuit was initially filed in the 19th Judicial District
Court of the Parish of East Baton Rouge, State of Louisiana on November 24,
1998. The lawsuit was then removed to the United States District Court for the
Middle District of Louisiana. The Company is seeking unspecified damages
incurred as a result of the alleged negligent actions and all other appropriate
relief.
On December 7, 1998, Mr. Cefaratti filed a lawsuit naming the Company as a
defendant and claimed that he was terminated in violation of an alleged
employment contract. Other ex-employees of the Company which have lawsuits
pending against the Company claiming breaches of alleged employment contracts
include Ms. Judi M. McQueary, the former President of the Company's managed care
division (filed on December 11, 1998) and Mr. William G. Hardee, the former Vice
President of the Company's southeastern alternate site infusion division (filed
on December 11, 1998).
All of the above mentioned lawsuits filed by the ex-employees of the
Company were initially filed in the United States District Court for the Eastern
District of Louisiana and were consolidated together as one lawsuit. All the
said lawsuits were then transferred to the United States District Court for the
Middle District of Louisiana and severed to be tried separately. The Chief
Executive Officer of the Company, and its directors
50
53
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and officers liability insurer were named as defendants in all the above
mentioned lawsuits. The relief sought in all these cases are contract damages,
penalty wages, costs, and attorney fees.
The Company filed a lawsuit against Mr. Stephen L. Taglianetti, the former
President of the Company's alternate site infusion division, alleging various
negligent actions which constituted breaches of fiduciary duty owed to the
Company and its stockholders. The lawsuit against Mr. Taglianetti was initially
filed in the 19th Judicial District Court of the Parish of East Baton Rouge,
State of Louisiana on November 19, 1998. The lawsuit was then removed to the
United States District Court for the Middle District of Louisiana. The Company
sought damages incurred as a result of the negligent actions and all other
appropriate relief. Mr. Taglianetti, on December 11, 1998, sued the Company
claiming that he was terminated in violation of an alleged employment contract
and for reporting alleged illegal billing practices. The Chief Executive Officer
of the Company and its directors and officers liability insurer were named as
defendants in this suit. Mr. Taglianetti's lawsuit has been settled out of court
and is no longer pending. All claims for damages by all parties thereto have
been released and otherwise waived.
Mr. Charles M. McCall, the former President of the supplemental staffing
division of the Company, filed a lawsuit against the Company in the 19th
Judicial District Court of the Parish of East Baton Rouge, Louisiana on December
29, 1998. Said lawsuit claimed breaches of an alleged employment contract. Mr.
McCall's lawsuit has been settled out of court and is no longer pending. All
claims for damages by all parties thereto have been released and otherwise
waived.
Alliance, a wholly-owned subsidiary of the Company, filed for Chapter 7
Federal bankruptcy protection with the United States Bankruptcy Court in the
Northern District of Oklahoma on September 29, 2000. Alliance was acquired by
the Company in January, 1998 and ceased operations in January, 1999 (see Note
2).
Leases
The Company and its subsidiaries have leased office space at various
locations under noncancelable agreements which expire between March 31, 2001 and
October 31, 2011, and require various minimum annual rentals. Total minimum
rental commitments at December 31, 2000 are due as follows (in 000's):
2001........................................................ $3,182
2002........................................................ 2,211
2003........................................................ 1,411
2004........................................................ 790
2005........................................................ 616
Thereafter.................................................. 1,855
Rent expense for all non-cancelable operating leases was $4,040,000,
$4,860,000, and $3,255,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.
Management Agreement
On November 2, 1998, the Company and CareSouth Home Health Services, Inc.
("CareSouth"), an affiliate of CPII Acquisition Corp., entered into agreements
under which CareSouth agreed to provide payroll processing, billing services,
collection services, cost reporting services and software maintenance and
support for the Company's home health agencies with a consolidated fee
structure. Under the consolidated fee structure, fees are collected for services
provided on a per visit basis, which may be adjusted depending on the cumulative
number of annual visits. Effective September 1, 1999, the management agreement
was amended to exclude cost reporting services and software maintenance and
support for a corresponding decrease in professional fees. The Company pays
CareSouth $475,000 per month up to 1,760,000 visits per year after
51
54
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
which the Company will pay CareSouth $3.50 per visit in excess of 1,760,000 per
year for management fees under this agreement, which expires on November 2,
2004.
Self-Funded Insurance Plans
During 1995, the Company became self-insured for workers' compensation
claims in the State of Louisiana up to certain policy limits. Claims in excess
of $200,000 per incident and $1,300,000 in the aggregate over a two-year policy
period were insured by third party reinsurers. In connection with the self-
insurance plan and as required by the State of Louisiana, the Company issued a
$175,000 letter of credit in favor of the Louisiana Department of Labor, which
expired February 17, 1998, and was renewed to February, 1999. In January 1999,
the Company changed from a self-insured workers' compensation plan to a fully
insured, guaranteed cost plan.
The Company is self-insured for health claims up to certain policy limits.
Claims in excess of $100,000 per incident are insured by third party reinsurers.
The Company has accrued a liability of approximately $708,000 and $644,000 at
December 31, 2000 and 1999, respectively, for both outstanding and incurred, but
not reported claims based on historical experience.
Employment Contracts
The Company has commitments related to employment contracts with a number
of its senior executives. Such contracts generally commit the Company to pay
bonuses upon the attainment of certain operating goals and severance benefits
under certain circumstances.
Other
The Company is subject to various other types of claims and disputes
arising in the course of its business. While the resolution of such issues is
not presently determinable with certainty, management believes that the ultimate
resolution of such matters will not have a significant effect on the Company's
financial position or results of operations.
14. BENEFIT PLAN:
The Company adopted a plan qualified under Section 401(k) of the Internal
Revenue Code for all employees who are 21 years of age and have at least 90 days
of service. Under the plan, eligible employees may elect to defer a portion of
their compensation, subject to Internal Revenue Service limits. The Company may
make matching contributions equal to a discretionary percentage of the
employee's salary deductions. A matching contribution of $129,000 was made for
1998 in 1999, a matching contribution of $617,000 was made for 1999 in 2000, and
a matching contribution of approximately $873,164 will be made in 2001 for 2000.
Such contributions were made in the form of common stock of the Company, valued
based upon the fair market value of the stock as of December 31 of the
applicable year.
15. AMOUNTS DUE TO AND DUE FROM MEDICARE:
Prior to the implementation of PPS, the Company recorded Medicare revenues
at the lower of actual costs, the per visit cost limit, or a per beneficiary
cost limit on a individual provider basis. Ultimate reimbursement under the
Medicare program was determined upon review of the annual cost reports. As of
December 31, 2000, the Company estimates an aggregate payable to Medicare of
$13.3 million, netted against accounts receivable, resulting from interim cash
receipts in excess of expected reimbursement. For the cost report year ended
December 31, 2000, the Company has an estimated payable of $2.3 million of which
$2.4 million is due in excess of one year and $0.1 million is due to the Company
within the next year. For the cost report year ended 1999, the Company has an
estimated payable of $6.4 million of which $3.4 million is
52
55
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
due within one year and $3.0 million is due in excess of one year. For the cost
report years ended 1998 and prior, the Company has an estimated payable of $4.6
million of which $4.0 million is due within one year and $0.6 million is due in
excess of one year. The Company derived 90%, 90%, and 73% of its revenues from
continuing operations from the Medicare system for the years ended December 31,
2000, 1999, and 1998, respectively.
16. UNAUDITED FINANCIAL INFORMATION:
The following table reflects the restatement of the Company's quarterly
results of operations for 1999. During the fourth quarter of 1999, the Company
reclassified program fees related to the NCFE line of credit from other general
and administrative expenses to interest expense (in 000's):
QUARTER ENDED (UNAUDITED)
---------------------------------------------------------------------------------------
MARCH 31, 1999 JUNE 30, 1999 SEPTEMBER 30, 1999
---------------------- ---------------------- ---------------------- DECEMBER 31,
AS REPORTED RESTATED AS REPORTED RESTATED AS REPORTED RESTATED 1999
----------- -------- ----------- -------- ----------- -------- ------------
Interest Expense.......... $ (580) $ (777) $ (1,147) $ (1,916) $ (1,187) $ (2,562) $ (3,625)
Other General and
Administrative
Expense................. $(7,522) $(7,325) $(15,682) $(14,913) $(19,459) $(18,084) $(23,056)
17. UNAUDITED SUMMARIZED QUARTERLY FINANCIAL INFORMATION
NET INCOME
OPERATING (LOSS) PER SHARE
INCOME NET INCOME -----------------
REVENUES (LOSS) (LOSS) BASIC DILUTED
-------- --------- ---------- ------ --------
2000:
1st Quarter...................................... 23,418 (1,362) (1,292) (0.40) (0.40)
2nd Quarter...................................... 23,270 (1,372) (1,334) (0.35) (0.35)
3rd Quarter...................................... 22,091 (1,469) (760) (0.15) (0.15)
4th Quarter...................................... 21,976 3,129 9,756 1.83 1.83
------ ------ ------
90,755 (1,074) 6,370 1.47 1.47
====== ====== ======
1999:
1st Quarter...................................... 25,057 (1,621) (2,498) (0.81) (0.81)
2nd Quarter...................................... 24,642 (1,444) (1,455) (0.47) (0.47)
3rd Quarter...................................... 24,170 58 6,168 1.98 1.98
4th Quarter...................................... 23,542 (1,074) (915) (0.29) (0.29)
------ ------ ------
97,411 (4,081) 1,300 0.42 0.42
====== ====== ======
18. SUBSEQUENT EVENT:
Effective March 1, 2001, the Company acquired through its wholly-owned
subsidiary, Amedisys Home Health, Inc. of Alabama, certain assets and
liabilities of Seton Home Health Services, Inc. ("Seton") from Seton Health
Corporation of North Alabama. The assets acquired consisted primarily of all
furniture, fixtures, equipment (except computer equipment and printers) and
leasehold improvements; supplies; inventory; lists of present and former
patients and mailing lists; vendor lists; employee records; telephone numbers
and listings; intangibles and other rights and privileges; leasehold interest in
the locations; goodwill and going concern; rights under certain agreements;
rights under all contracts including capital leases and non-competition
agreements; licenses and permits relating to ownership, development and
operations; and rights under Medicare and Medicaid Provider Agreements. The
liabilities assumed consisted of estimated PTO and obligations under capital and
operating leases. In consideration for the acquired assets and liabilities, the
Company paid $440,000 cash, which represents a purchase price of $475,000 less
the estimated value of accrued vacation time.
53
56
INDEX TO EXHIBITS
EXHIBIT
NO. IDENTIFICATION OF EXHIBIT
------- -------------------------
2.1(1) -- Acquisition Agreement dated December 20, 1993 between the
Company and M & N Capital Corp.
2.2(3) -- Plan of Merger dated August 3, 1994 between M & N Capital
Corp. and the Company
2.3(4) -- Certificate of Merger dated August 3, 1994 between M & N
Capital Corp. and the Company
2.4(7) -- Acquisition Agreement dated August 1,1997 between the
Company and Allgood Medical Services, Inc.
2.5(7) -- Exchange Agreement dated January 1, 1998 between the
Company and Alliance Home Health, Inc. and University
Capital Corp. dated December 10, 1997
2.6(7) -- Stock Purchase Agreement by and among Amedisys,
Alternate-Site Infusion Therapy Services, Inc., PRN, Inc.
d/b/a Home IV Therapy, Joseph W. Stephens, and Terry I.
Stevens dated February 23, 1998
2.7(7) -- Agreement to Purchase by and between Amedisys,
Alternate-Site Infusion Therapy Services, Inc. and
Precision Health Systems, L.L.C. dated February 27, 1998
2.8(7) -- Promissory note in the amount of $250,000 to Precision
Health Solutions, L.L.C. in connection with the purchase
of the company
2.9(7) -- Stock Purchase Agreement by and among Amedisys
Alternate-Site Infusion Therapy Services, Inc., Infusion
Care Solutions, Inc. and Daniel D. Brown dated February
27, 1998
2.10(7) -- Promissory note in the amount of $125,000 to Daniel D.
Brown in connection with the purchase of the company
2.11(8) -- Stock Purchase Agreement by and among Amedisys
Specialized Medical Services, Inc., Quality Home Health
Care, Inc., Frances Unger, and James Unger dated May 1,
1998
2.12(8) -- Asset Purchase Agreement by and among Amedisys
Specialized Medical Services, Inc., and Precision Home
Health Care, Inc. dated May 1, 1998
2.13(8) -- Promissory note in the amount of $800,000 to Precision
Home Health Care, Inc. in connection with the purchase of
the company
2.14(8) -- Promissory note in the amount of $400,000 to Precision
Home Health Care, Inc. in connection with the purchase of
the company
2.15(9) -- Asset Purchase agreement among Nursefinders, Inc.,
Amedisys Staffing Services, Inc., Amedisys Nursing
Services, Inc., and Amedisys Home Health, Inc. and
Amedisys, Inc.
2.16(10) -- Asset Purchase Agreement by and between CPII Acquisition
Corp. and Amedisys, Inc.
2.17(10) -- Asset Purchase Agreement by and between Columbia/HCA
Healthcare Corporation and Amedisys, Inc.
2.18(13) -- Asset Purchase Agreement among Amedisys Surgery Centers,
L.C. and Permian Surgical Care Center, Inc. d/b/a
Tanglewood Surgery Center
2.19(15) -- Asset Purchase Agreement among Amedisys, Inc., Amedisys
Surgery Centers, L.C. and United Surgical Partners
International, Inc.
2.20(15) -- Promissory Note from United Surgical Partners
International, Inc.
57
EXHIBIT
NO. IDENTIFICATION OF EXHIBIT
------- -------------------------
2.21(17) -- Membership Interest Purchase Agreement by and among U.S.
Orthopedics, Texas, L.L.C., Amedisys Surgery Centers,
L.C., Ambulatory Systems Development of Texas, Inc.,
Ambulatory Systems Development Corporation, and U.S.
Orthopedics, Inc.
2.22(18) -- Agreement for Purchase and Sale of LLC Membership
Interest among Amedisys, Inc., Park Place Surgery Center,
LLC, and the Members of Park Place Surgery Center, LLC
2.23(19) -- Bill of Sale and Asset Purchase Agreement by and among
Park Infusion Services, LP, Amedisys Alternate-Site
Infusion Therapy Services, Inc., PRN, Inc., and Amedisys,
Inc.
3.1(4) -- Certificate of Incorporation
3.2(4) -- Bylaws
4.1(4) -- Certificate of Designation for the Series A Preferred
Stock
4.2(7) -- Common Stock Specimen
4.3(7) -- Preferred Stock Specimen
4.4(7) -- Form of Placement Agent's Warrant Agreement
4.5(14) -- Certificate of Amendment of Certificate of Designation
Specimen
4.6(14) -- Series A Preferred Stock Conversion Agreement Specimen
10.1(4) -- Master Note with Union Planter's Bank of Louisiana
10.2(4) -- Merrill Lynch Term Working Capital Management Account
10.3(5) -- Promissory Note with Deposit Guaranty National Bank
10.4(7) -- Amended and Restated Stock Option Plan
10.5(7) -- Registration Rights Agreement
10.6(11) -- Master Corporate Guaranty of Service Agreements between
CareSouth Home Health Services, Inc. and Amedisys, Inc.
dated November 2, 1998
10.7(16) -- Loan Modification Agreement by and between Amedisys, Inc.
and Columbia/HCA Healthcare Corporation
10.8(20) -- Employment Agreement between Amedisys, Inc. and William
F. Borne
10.9(20) -- Employment Agreement between Amedisys, Inc. and Larry
Graham
10.10(20) -- Amendment to Employee Agreement by and between Amedisys,
Inc. and Larry Graham
10.11(20) -- Employee Agreement between Amedisys, Inc. and John
Joffrion
18.1(12) -- Letter regarding Change in Accounting Principles
21.1(7) -- List of Subsidiaries
23.1(20) -- Consent of Arthur Andersen, LLP, Independent Public
Accountants
- ---------------
(1) Previously filed as an exhibit to the Current Report on Form 8-K dated
December 20, 1993.
(2) Previously filed as an exhibit to the Current Report on Form 8-K dated
February 14, 1994.
(3) Previously filed as an exhibit to the Current Report on Form 8-K dated
August 11, 1994.
(4) Previously filed as an exhibit to the Annual Report on Form 10-KSB for the
year ended December 31, 1994.
(5) Previously filed as an exhibit to the Current Report on Form 8-K dated June
30, 1995.
(6) Previously filed as an exhibit to the Registration Statement on Form S-1
(333-8329) dated July 18, 1996.
58
(7) Previously filed as an exhibit to the Registration Statement on Form S-3
dated March 11, 1998.
(8) Previously filed as an exhibit to the Quarterly Report on Form 10-Q dated
August 14, 1998.
(9) Previously filed as an exhibit to the Current Report on Form 8-K dated
October 5, 1998.
(10) Previously filed as an exhibit to the Current Report on Form 8-K dated
November 10, 1998.
(11) Previously filed as an exhibit to the Quarterly Report on Form 10-Q dated
December 30, 1998.
(12) Previously filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1997.
(13) Previously filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1998.
(14) Previously filed as an exhibit to the Quarterly Report on Form 10-Q/A for
the period ended June 30, 1999.
(15) Previously filed as an exhibit to the Current Report on Form 8-K dated
September 15, 1999.
(16) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the
period ended September 30, 1999.
(17) Previously filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1999.
(18) Previously filed as an exhibit to the Current Report on Form 8-K dated May
11, 2000.
(19) Previously filed as an exhibit to the Current Report on Form 8-K dated
August 23, 2000.
(20) Filed herewith.