NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016
1. NATURE OF OPERATIONS, CONSOLIDATION AND PRESENTATION OF
FINANCIAL STATEMENTS
Amedisys, Inc., a Delaware corporation, and its consolidated subsidiaries (Amedisys,
we, us, or our) are a multi-state provider of home health, hospice and personal care services with approximately 78%, 80% and 82% of our revenue derived from Medicare for 2016, 2015 and 2014, respectively. As of
December 31, 2016, we owned and operated 327 Medicare-certified home health care centers, 79 Medicare-certified hospice care centers and 14 personal-care care centers in 34 states within the United States and the District of Columbia.
Use of Estimates
Our accounting and reporting policies conform with U.S. Generally Accepted Accounting Principles (U.S. GAAP). In preparing the consolidated financial statements, we are required to make
estimates and assumptions that impact the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.
Reclassifications and Comparability
Certain reclassifications have been made to prior periods financial statements in order to conform to the current periods presentation. In compliance with Accounting Standards Update
(ASU)
2015-03,
Interest Imputation of Interest (Subtopic
835-30):
Simplifying the Presentation of Debt Issuance Costs,
we have reclassified
2015 amounts related to unamortized debt issuance costs from other assets, net to long-term obligations, less current portion.
Principles of Consolidation
These consolidated financial statements include the accounts of Amedisys, Inc., and our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in our
accompanying consolidated financial statements, and business combinations accounted for as purchases have been included in our consolidated financial statements from their respective dates of acquisition. In addition to our wholly owned
subsidiaries, we also have certain equity investments that are accounted for as set forth below.
Equity Investments
We consolidate investments when the entity is a variable interest entity and we are the primary beneficiary or if we
have controlling interests in the entity, which is generally ownership in excess of 50%. Third party equity interests in our consolidated joint ventures are reflected as noncontrolling interests in our consolidated financial statements. During the
three-month period ended September 30, 2016, we sold a 30% interest in one of our care centers while maintaining controlling interest in the newly formed joint venture.
We account for investments in entities in which we have the ability to exercise significant influence under the equity method if we hold 50% or less of the voting stock and the entity is not a variable
interest entity in which we are the primary beneficiary. The book value of investments that we accounted for under the equity method of accounting was $27.8 million as of December 31, 2016 and $25.7 million as of December 31,
2015. We account for investments in entities in which we have less than a 20% ownership interest under the cost method of accounting if we do not have the ability to exercise significant influence over the investee.
65
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
We earn net service revenue through our home health, hospice and personal-care care centers by providing a variety of services almost exclusively in the homes of our patients. This net service revenue is
earned and billed either on an episode of care basis, on a per visit basis or on a daily basis depending upon the payment terms and conditions established with each payor for services provided. We refer to home health revenue earned and billed on a
60-day
episode of care as episodic-based revenue.
When we record our service revenue, we
record it net of estimated revenue adjustments and contractual adjustments to reflect amounts we estimate to be realizable for services provided, as discussed below. We believe, based on information currently available to us and based on our
judgment, that changes to one or more factors that impact the accounting estimates (such as our estimates related to revenue adjustments, contractual adjustments and episodes in progress) we make in determining net service revenue, which changes are
likely to occur from period to period, will not materially impact our reported consolidated financial condition, results of operations, cash flows or our future financial results.
Home Health Revenue Recognition
Medicare Revenue
Net service revenue is recorded under the Medicare prospective payment system (PPS) based on a
60-day
episode payment rate that is subject to adjustment based on certain variables including, but not limited to: (a) an outlier payment if our patients care was unusually costly (capped at 10% of
total reimbursement per provider number); (b) a low utilization payment adjustment (LUPA) if the number of visits was fewer than five; (c) a partial payment if our patient transferred to another provider or we received a
patient from another provider before completing the episode; (d) a payment adjustment based upon the level of therapy services required (with various incremental adjustments made for additional visits, with larger payment increases associated
with the sixth, fourteenth and twentieth visit thresholds); (e) adjustments to payments if we are unable to perform periodic therapy assessments; (f) the number of episodes of care provided to a patient, regardless of whether the same home
health provider provided care for the entire series of episodes; (g) changes in the base episode payments established by the Medicare Program; (h) adjustments to the base episode payments for case mix and geographic wages; and
(i) recoveries of overpayments. In addition, we make adjustments to Medicare revenue if we find that we are unable to produce appropriate documentation of a face to face encounter between the patient and physician.
We make adjustments to Medicare revenue to reflect differences between estimated and actual payment amounts, our discovered inability to
obtain appropriate billing documentation or authorizations and other reasons unrelated to credit risk. We estimate the impact of such adjustments based on our historical experience, which primarily includes a historical collection rate of over 99%
on Medicare claims, and record this estimate during the period in which services are rendered as an estimated revenue adjustment and a corresponding reduction to patient accounts receivable. Therefore, we believe that our reported net service
revenue and patient accounts receivable will be the net amounts to be realized from Medicare for services rendered.
In
addition to revenue recognized on completed episodes, we also recognize a portion of revenue associated with episodes in progress. Episodes in progress are
60-day
episodes of care that begin during the
reporting period, but were not completed as of the end of the period. We estimate this revenue on a monthly basis based upon historical trends. The primary factors underlying this estimate are the number of episodes in progress at the end
66
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
of the reporting period, expected Medicare revenue per episode and our estimate of the average percentage complete based on the number of days elapsed during an episodes of care. As of
December 31, 2016 and 2015, the difference between the cash received from Medicare for a request for anticipated payment (RAP) on episodes in progress and the associated estimated revenue was immaterial and, therefore, the resulting
credits were recorded as a reduction to our outstanding patient accounts receivable in our consolidated balance sheets for such periods.
Non-Medicare
Revenue
Episodic-based Revenue.
We recognize revenue in a similar
manner as we recognize Medicare revenue for episodic-based rates that are paid by other insurance carriers, including Medicare Advantage programs; however, these rates can vary based upon the negotiated terms.
Non-episodic
based Revenue.
Gross revenue is recorded on an accrual basis based upon the
date of service at amounts equal to our established or estimated
per-visit
rates, as applicable. Contractual adjustments are recorded for the difference between our standard rates and the contracted rates to
be realized from patients, third parties and others for services provided and are deducted from gross revenue to determine net service revenue and are also recorded as a reduction to our outstanding patient accounts receivable. In addition, we
receive a minimal amount of our net service revenue from patients who are either self-insured or are obligated for an insurance
co-payment.
Hospice Revenue Recognition
Hospice Medicare Revenue
Gross revenue is recorded on an accrual basis based upon the date of service at amounts equal to the estimated payment rates. The
estimated payment rates are daily or hourly rates for each of the four levels of care we deliver. The four levels of care are routine care, general inpatient care, continuous home care and respite care. Routine care accounts for 99%, 99%, and 98% of
our total net Medicare hospice service revenue for 2016, 2015 and 2014, respectively. Beginning January 1, 2016, CMS has provided for two separate payment rates for routine care: payments for the first 60 days of care and care beyond 60 days.
In addition to the two routine rates, beginning January 1, 2016, Medicare is also reimbursing for a service intensity
add-on
(SIA). The SIA is based on visits made in the last seven days of
life by a registered nurse (RN) or medical social worker (MSW) for patients in a routine level of care.
We make adjustments to Medicare revenue for an inability to obtain appropriate billing documentation or acceptable authorizations and
other reasons unrelated to credit risk. We estimate the impact of these adjustments based on our historical experience, which primarily includes our historical collection rate on Medicare claims, and record it during the period services are rendered
as an estimated revenue adjustment and as a reduction to our outstanding patient accounts receivable.
Additionally, as Medicare hospice revenue is subject to an inpatient cap limit and an overall payment cap for each
provider number, we monitor these caps and estimate amounts due back to Medicare if we estimate a cap has been exceeded. We record these adjustments as a reduction to revenue and an increase in other accrued liabilities. Beginning for the cap
year ending October 31, 2014, providers are required to self-report and pay their estimated cap liability by March
31
st
of the following year. As of December 31, 2016,
we have settled our Medicare hospice reimbursements for all fiscal years through October 31, 2012 and we have recorded $0.8 million for estimated amounts due back to Medicare in other accrued liabilities for the Federal cap years
67
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
ended October 31, 2013 through October 31, 2016. As of December 31, 2015, we had recorded $1.4 million for estimated amounts due back to Medicare in other accrued liabilities
for the Federal cap years ended October 31, 2013 through October 31, 2016.
Hospice
Non-Medicare
Revenue
We record gross revenue on an accrual basis based upon the
date of service at amounts equal to our established rates or estimated per day rates, as applicable. Contractual adjustments are recorded for the difference between our established rates and the amounts estimated to be realizable from patients,
third parties and others for services provided and are deducted from gross revenue to determine our net service revenue and patient accounts receivable.
Personal Care Revenue Recognition
Personal Care
Non-Medicare
Revenue
We generate net service revenues by providing our services
directly to patients primarily on a per hour, visit or unit basis. We receive payment for providing such services from our payor clients, including state and local governmental agencies, managed care organizations, commercial insurers and private
consumers. Net service revenues are principally provided based on authorized hours, visits or units determined by the relevant agency, at a rate that is either contractual or fixed by legislation, which are recognized as net service revenue at the
time services are rendered.
Cash and Cash Equivalents
Cash and cash equivalents include certificates of deposit and all highly liquid debt instruments with maturities of three months or less
when purchased.
Patient Accounts Receivable
Our patient accounts receivable are uncollateralized and consist of amounts due from Medicare, Medicaid, other third-party payors and
patients. As of December 31, 2016, there is one single payor, other than Medicare, that accounts for more than 10% of our total outstanding patient receivables (approximately 10.1%). Thus, we believe there are no other significant
concentrations of receivables that would subject us to any significant credit risk in the collection of our patient accounts receivable. We fully reserve for accounts which are aged at 365 days or greater. We write off accounts on a monthly basis
once we have exhausted our collection efforts and deem an account to be uncollectible.
We believe the credit risk associated
with our Medicare accounts, which represent 61% and 64% of our net patient accounts receivable at December 31, 2016 and December 31, 2015, respectively, is limited due to our historical collection rate of over 99% from Medicare and the
fact that Medicare is a U.S. government payor. Accordingly, we do not record an allowance for doubtful accounts for our Medicare patient accounts receivable, which are recorded at their net realizable value after recording estimated revenue
adjustments as discussed above. During 2016, 2015 and 2014, we recorded $7.9 million, $6.1 million and $5.1 million, respectively, in estimated revenue adjustments to Medicare revenue.
We believe there is a certain level of credit risk associated with
non-Medicare
payors. To
provide for our
non-Medicare
patient accounts receivable that could become uncollectible in the future, we establish an allowance for doubtful accounts to reduce the carrying amount to its estimated net
realizable value.
68
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
Medicare Home Health
For our home health patients, our
pre-billing
process includes verifying that we are eligible for payment from Medicare for the services that we provide to our
patients. Our Medicare billing begins with a process to ensure that our billings are accurate through the utilization of an electronic Medicare claim review. We submit a RAP for 60% of our estimated payment for the initial episode at the start of
care or 50% of the estimated payment for any subsequent episodes of care contiguous with the first episode for a particular patient. The full amount of the episode is billed after the episode has been completed (final billed). The RAP
received for that particular episode is then deducted from our final payment. If a final bill is not submitted within the greater of 120 days from the start of the episode, or 60 days from the date the RAP was paid, any RAPs received for that
episode will be recouped by Medicare from any other claims in process for that particular provider number. The RAP and final claim must then be resubmitted.
Medicare Hospice
For our hospice patients, our
pre-billing
process includes verifying that we are eligible for payment from Medicare for the services that we provide to our patients. Our Medicare billing begins with a process to ensure that our billings are
accurate through the utilization of an electronic Medicare claim review. Once each patient has been confirmed for eligibility, we will bill Medicare on a monthly basis for the services provided to the patient.
Non-Medicare
Home Health, Hospice, and Personal Care
For our
non-Medicare
patients, our
pre-billing
process
primarily begins with verifying a patients eligibility for services with the applicable payor. Once the patient has been confirmed for eligibility, we will provide services to the patient and bill the applicable payor. Our review and
evaluation of
non-Medicare
accounts receivable includes a detailed review of outstanding balances and special consideration to concentrations of receivables from particular payors or groups of payors with
similar characteristics that would subject us to any significant credit risk. We estimate an allowance for doubtful accounts based upon our assessment of historical and expected net collections, business and economic conditions, trends in payment
and an evaluation of collectability based upon the date that the service was provided. Based upon our best judgment, we believe the allowance for doubtful accounts adequately provides for accounts that will not be collected due to credit risk.
Property and Equipment
Property and equipment is stated at cost and we depreciate it on a straight-line basis over the estimated useful lives of the assets. Additionally, we have internally developed computer software for our
own use. Additions and improvements (including interest costs for construction of qualifying long-lived assets) are capitalized. Maintenance and repair expenses are charged to expense as incurred. The cost of property and equipment sold or disposed
of and the related accumulated depreciation are eliminated from the property and related accumulated depreciation accounts, and any gain or loss is credited or charged to other general and administrative expenses.
We consider our reporting units to represent asset groups for purposes of testing long-lived assets for impairment. We assess the
impairment of a long-lived asset group whenever events or changes in circumstances indicate that the assets carrying value may not be recoverable. Factors we consider important that could trigger an impairment review include but are not
limited to the following:
|
|
|
A significant change in the extent or manner in which the long-lived asset group is being used.
|
69
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
|
|
|
A significant change in the business climate that could affect the value of the long-lived asset group.
|
|
|
|
A significant change in the market value of the assets included in the asset group.
|
If we determine that the carrying value of long-lived assets may not be recoverable, we compare the carrying value of the asset group to
the undiscounted cash flows expected to be generated by the asset group. If the carrying value exceeds the undiscounted cash flows, an impairment charge is indicated. An impairment charge is recognized to the extent that the carrying value of the
asset group exceeds its fair value.
We generally provide for depreciation over the following estimated useful service lives.
|
|
|
|
|
Years
|
Building
|
|
39
|
Leasehold improvements
|
|
Lesser of life or lease or expected useful life
|
Equipment and furniture
|
|
3 to 7
|
Vehicles
|
|
5
|
Computer software
|
|
3 to 5
|
As of December 31, 2014, we had $75.8 million of internally developed software costs related to
the development of AMS3 Home Health and Hospice (AMS3). Expanded beta testing to additional sites in February of 2015 demonstrated that AMS3 was disruptive to operations. Additional analysis of the system determined that the system was
not ready to be fully implemented and would require significant time and investment to redesign. Therefore, during the three-month period ended March 31, 2015, we made the decision to discontinue AMS3 and recorded a
non-cash
asset impairment charge of $75.2 million to
write-off
the software costs incurred related to the development of AMS3.
During 2015, we began the transition of all our care centers from our proprietary operating system to Homecare Homebase
(HCHB), a leading home health and hospice platform, with all of our care centers operating on HCHB as of December 31, 2016. As part of our conversion process, we determined that a number of assets (primarily laptops) were not
compatible with HCHB and had no other alternative or secondary use. As a result, we recorded a
non-cash
asset impairment charge of $4.4 million to
write-off
these
assets during the three-month period ended December 31, 2016.
During the three-month period ended September 30,
2015, we commenced an active program to sell our corporate headquarters located in Baton Rouge, Louisiana. In accordance with U.S. GAAP, we classified this asset as held for sale and reduced the carrying value of the asset to its estimated fair
value less estimated costs to sell the asset; no further depreciation expense for the asset was recorded. As a result, we recorded a
non-cash
asset impairment charge of $2.1 million during the three-month
period ended September 30, 2015. The asset was sold during the three-month period ended December 31, 2015 and the Company now leases equivalent office space.
70
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
The following table summarizes the balances related to our property and equipment for
2016 and 2015 (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Building and leasehold improvements
|
|
|
6.9
|
|
|
|
2.3
|
|
Equipment and furniture
|
|
|
71.9
|
|
|
|
89.6
|
|
Computer software
|
|
|
96.8
|
|
|
|
92.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175.6
|
|
|
|
184.5
|
|
Less: accumulated depreciation
|
|
|
(138.6
|
)
|
|
|
(141.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37.0
|
|
|
$
|
42.7
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for 2016, 2015 and 2014 was $17.2 million, $20.0 million and
$28.0 million, respectively.
Goodwill and Other Intangible Assets
Goodwill represents the amount of the purchase price in excess of the fair values assigned to the underlying identifiable net assets of
acquired businesses. Goodwill is not amortized, but is subject to an annual impairment test. Tests are performed more frequently if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit
below its carrying amount. These events or circumstances include but are not limited to, a significant adverse change in the business environment; regulatory environment or legal factors; or a substantial decline in market capitalization of our
stock. To determine whether goodwill is impaired, we perform a
two-step
impairment test. In the first step of the test, the fair values of the reporting units are compared to their aggregate carrying values,
including goodwill. If the fair value of the reporting unit is greater than its carrying amount, goodwill is not considered impaired and no further testing is required. If the fair value of the reporting unit is less than its carrying amount, we
would proceed to step two of the test. In step two of the test, the implied fair value of the goodwill of the reporting unit is determined by a hypothetical allocation of the fair value calculated in step one to all of the assets and liabilities of
that reporting unit (including any recognized and unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value was reflective of the price paid to acquire the reporting unit. The implied
fair value of goodwill is the excess, if any, of the calculated fair value after hypothetical allocation to the reporting units assets and liabilities. If the implied fair value of the goodwill is greater than the carrying amount of the
goodwill at the analysis date, goodwill is not impaired and the analysis is complete. If the implied fair value of the goodwill is less than the carrying value of goodwill at the analysis date, goodwill is deemed impaired by the amount of that
variance.
We calculate the estimated fair value of our reporting units using discounted cash flows as well as a market
approach that compares our reporting units earnings and revenue multiples to those of comparable public companies. To determine fair value we must make assumptions about a wide variety of internal and external factors. Significant assumptions
used in the impairment analysis include financial projections of free cash flow (including significant assumptions about operations, in particular expected organic growth rates, future Medicare reimbursement rates, capital requirements and income
taxes), long-term growth rates for determining terminal value, and discount rates. Our estimates of discounted cash flows may differ from actual cash flows due to, among other things, economic conditions, changes to our business model or changes in
operating performance. These factors increase the risk of differences between projected and actual performance that could impact future estimates of fair value of all reporting units. Significant differences between these estimates and actual cash
flows could result in additional impairment in future periods.
71
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
Each of our operating segments described in Note 15 Segment Information is
considered to represent an individual reporting unit for goodwill impairment testing purposes. We consider each of our home health care centers to constitute an individual business for which discrete financial information is available. However,
since these care centers have substantially similar operating and economic characteristics and resource allocation and significant investment decisions concerning these businesses are centralized and the benefits broadly distributed, we have
aggregated these care centers and deemed them to constitute a single reporting unit. We have applied this same aggregation principle to our hospice care centers and personal-care care centers and have also deemed them to be a single reporting unit.
During 2016, we did not record any goodwill impairment charges as a result of our annual impairment test and none of the
goodwill associated with our various reporting units was considered at risk of impairment as of October 31, 2016. Since the date of our last annual goodwill impairment test, there have been no material developments, events, changes in operating
performance or other circumstances that would cause management to believe it is more likely than not that the fair value of any of our reporting units would be less than its carrying amount.
Intangible assets consist of Certificates of Need, licenses, acquired names and
non-compete
agreements. We amortize
non-compete
agreements and acquired names that we do not intend to use in the future on a straight-line basis over their estimated useful lives, which is generally three years for
non-compete
agreements and up to five years for acquired names.
Debt Issuance Costs
We amortize deferred debt issuance costs related to our long-term obligations over its term through interest expense,
unless the debt is extinguished, in which case unamortized balances are immediately expensed. We amortized $0.7 million, $0.8 million and $0.7 million in deferred debt issuance costs in 2016, 2015 and 2014, respectively. As of
December 31, 2016 and 2015, we had unamortized debt issuance costs of $2.7 million and $3.4 million, respectively, recorded as long-term obligations, less current portion in our accompanying consolidated balance sheets. The
unamortized debt issuance costs of $2.7 million at December 31, 2016, will be amortized over a weighted-average amortization period of 3.7 years.
Fair Value of Financial Instruments
The following details our
financial instruments where the carrying value and the fair value differ (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at Reporting Date Using
|
|
Financial Instrument
|
|
As of
December 31, 2016
|
|
|
Quoted Prices in Active
Markets for Identical
Items
(Level
1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable Inputs
(Level 3)
|
|
Long-term obligations
|
|
$
|
95.7
|
|
|
$
|
|
|
|
$
|
97.8
|
|
|
$
|
|
|
The fair value hierarchy is based on three levels of inputs, of which the first two are considered
observable and the last unobservable, that may be used to measure fair value. The three levels of inputs are as follows:
|
|
|
Level 1 Quoted prices in active markets for identical assets and liabilities.
|
72
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
|
|
|
Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
|
|
Level 3 Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or
liabilities.
|
Our deferred compensation plan assets are recorded at fair value and are considered a level 2
measurement. For our other financial instruments, including our cash and cash equivalents, patient accounts receivable, accounts payable, payroll and employee benefits and accrued expenses, we estimate the carrying amounts approximate fair
value.
Income Taxes
We use the asset and liability approach for measuring deferred tax assets and liabilities based on temporary differences existing at each balance sheet date using currently enacted tax rates. Our deferred
tax calculation requires us to make certain estimates about future operations. Deferred tax assets are reduced by a valuation allowance when we believe it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The effect of a change in tax rate is recognized as income or expense in the period that includes the enactment date. As of December 31, 2016 and 2015 our net deferred tax assets were $107.9 million and $125.2 million,
respectively.
Management regularly assesses the ability to realize deferred tax assets recorded in the Companys
entities based upon the weight of available evidence, including such factors as the recent earnings history and expected future taxable income. In the event future taxable income is below managements estimates or is generated in tax
jurisdictions different than projected, we could be required to increase the valuation allowance for deferred tax assets. This would result in an increase in our effective tax rate.
Share-Based Compensation
We record all share-based compensation as expense in the financial statements measured at the fair value of the award. We recognize compensation cost on a straight-line basis over the requisite service
period for each separately vesting portion of the award. We reflect the excess tax benefits related to stock option exercises as financing cash flows. Share-based compensation expense for 2016, 2015 and 2014 was $16.4 million,
$11.8 million and $5.6 million, respectively, and the total income tax benefit recognized for these expenses was $6.4 million, $4.7 million and $2.0 million, respectively.
73
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
Weighted-Average Shares Outstanding
Net income (loss) per share attributable to Amedisys, Inc. common stockholders, calculated on the treasury stock method, is based on the
weighted average number of shares outstanding during the period. The following table sets forth, for the periods indicated, shares used in our computation of the weighted-average shares outstanding, which are used to calculate our basic and diluted
net income (loss) attributable to Amedisys, Inc. common stockholders (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Weighted average number of shares outstanding basic
|
|
|
33,198
|
|
|
|
33,018
|
|
|
|
32,301
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
162
|
|
|
|
|
|
|
|
1
|
|
Non-vested
stock and stock units
|
|
|
381
|
|
|
|
|
|
|
|
521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding diluted
|
|
|
33,741
|
|
|
|
33,018
|
|
|
|
32,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive securities
|
|
|
221
|
|
|
|
922
|
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising Costs
We expense advertising costs as incurred. Advertising expense for 2016, 2015 and 2014 was $7.8 million, $6.9 million and $4.7 million, respectively.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
2014-09,
Revenue from Contracts
with Customers (Topic 606)
, which requires an entity to recognize the amount of revenue for which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition
guidance in U.S. GAAP. In August 2015, the FASB issued ASU
2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date
, to defer the effective date of the standard from
January 1, 2017, to January 1, 2018, with an option that permits companies to adopt the standard as early as the original effective date. The new ASU reflects the decisions reached by the FASB at its meeting in July 2015. Early application
prior to the original effective date is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company does not expect an impact on its consolidated financial statements upon
implementation of ASU
2014-09
and ASU
2015-14
on January 1, 2018, but is still evaluating the effect the standard will have on its related disclosures.
In April 2015, the FASB issued ASU
2015-03,
InterestImputation of Interest
(Subtopic
835-30):
Simplifying the Presentation of Debt Issuance Costs
. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the
balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. ASU
2015-03
is effective for annual and interim periods beginning on or after December 15, 2015. We adopted this ASU during the three-month period ended March 31, 2016, and applied the change retrospectively
for prior period balances of unamortized debt issuance costs, resulting in a $3.4 million reduction in other assets, net and long-term obligations, less current portion, on our consolidated balance sheet as of December 31, 2015.
74
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
In February 2016, the FASB issued ASU
2016-02,
Leases (Topic 842),
which will require lessees to recognize a lease liability and
right-of-use
asset for all leases (with the exception of short-term leases) at
the commencement date. The ASU is effective for annual and interim periods beginning on or after December 15, 2018. Early adoption is permitted. The standard requires a modified retrospective transition method which requires application of the
new guidance for all periods presented. While the Company expects adoption of this standard to lead to a material increase in the assets and liabilities recorded on our balance sheet, we are still evaluating the overall impact on our consolidated
financial statements and related disclosures and the effect of the standard on our ongoing financial reporting.
In March
2016, the FASB issued ASU
2016-09,
Compensation Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting
, which will simplify the accounting for share-based payment
award transactions, including income tax consequences, classification of awards as either equity or liability, and classification on the statement of cash flows. The ASU is effective for annual and interim periods beginning after December 15,
2016. Early adoption is permitted. The element of the new standard that will have the most impact on our consolidated financial statements will be income tax consequences. Excess tax benefits and tax deficiencies on share-based compensation awards
will now be included in our tax provision within our consolidated statement of operations as discrete items in the reporting period in which they occur, rather than our current accounting of recording in additional
paid-in
capital on our consolidated balance sheets.
In August 2016, the FASB issued
ASU
2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
, which provides specific guidance on eight cash flow classification issues not specifically
addressed by U.S. GAAP. The ASU is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. The standard should be applied using a retrospective transition method unless it is impractical to do so
for some of the issues. In such case, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is evaluating the effect that ASU
2016-15
will have on its
consolidated financial statements and related disclosures and the effect of the standard on its ongoing financial reporting.
3.
ACQUISITIONS
We complete acquisitions from time to time in order to pursue our strategy of increasing our market presence
by expanding our service base and enhancing our position in certain geographic areas as a leading provider of home health, hospice and personal care services. The purchase price paid for acquisitions is negotiated through arms length
transactions, with consideration based on our analysis of, among other things, comparable acquisitions and expected cash flows. Acquisitions are accounted for as purchases and are included in our consolidated financial statements from their
respective acquisition dates. Goodwill generated from acquisitions is recognized for the excess of the purchase price over tangible and identifiable intangible assets because of the expected contributions of the acquisitions to our overall corporate
strategy. We typically engage outside appraisal firms to assist in the fair value determination of identifiable intangible assets. Preliminary purchase price allocation is adjusted, as necessary, up to one year after the acquisition closing date if
management obtains more information regarding asset valuation and liabilities assumed.
2016 Acquisitions
Personal Care Division
On March 1, 2016, we acquired Associated Home Care which owns and operates 9 personal-care care centers servicing the state of Massachusetts for a total purchase price of $27.7 million, net of
cash acquired (subject to
75
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
certain adjustments), of which $0.5 million was placed in escrow for indemnification purposes and working capital price adjustments. The purchase price was paid with cash on hand on the date
of the transaction. Based on our preliminary purchase price allocation, in connection with the acquisition, we recorded goodwill ($23.5 million) and other assets and liabilities, net ($4.2 million) during the three-month period ended March 31,
2016. During the three-month period ended June 30, 2016, we received the final report from our outside appraisal firm. As a result, we reduced our preliminary goodwill by $5.0 million and recorded corresponding increases in the fair value
of assets acquired ($0.2 million), other intangibles acquired names of business ($3.5 million) and other intangibles
non-compete
agreements ($1.3 million). We expect the entire amount of goodwill
recorded for this acquisition to be deductible for income tax purposes over approximately 15 years.
On September 1,
2016, we acquired the assets of Professional Profiles, Inc. which owns and operates 4 personal-care care centers servicing the state of Massachusetts for a total purchase price of $4.4 million, (subject to certain adjustments), of which
$0.7 million was placed in a promissory note to be paid over 24 months, subject to any offsets or withholds for indemnification purposes. The purchase price was paid with cash on hand on the date of the transaction. During the three-month
period ended September 30, 2016, we recorded goodwill ($4.2 million) and other intangibles
non-compete
agreements ($0.2 million) in connection with the acquisition. We expect the entire amount
of goodwill recorded for this acquisition to be deductible for income tax purposes over approximately 15 years.
Home Health Division
On October 20, 2016, we acquired the assets of a former nonprofit organization in New York for a purchase price of
$4.6 million. During the three-month period ended December 31, 2016, we recorded goodwill ($4.4 million) and other intangibles certificate of need ($0.2 million) in connection with the acquisition. We expect the entire amount
of goodwill recorded for this acquisition to be deductible for income tax purposes over approximately 15 years.
The following
table contains unaudited pro forma condensed consolidated statement of operations information assuming that our 2016 acquisitions closed on January 1, 2015, for the years ended December 31, 2016 and 2015 (amounts in millions, except per
share data):
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
Net service revenue
|
|
$
|
1,449.7
|
|
|
$
|
1,322.2
|
|
Operating income (loss)
|
|
|
53.9
|
|
|
|
(7.8
|
)
|
Net income
|
|
|
35.0
|
|
|
|
0.4
|
|
Basic earnings (loss) per share
|
|
$
|
1.04
|
|
|
$
|
(0.01
|
)
|
Diluted earnings (loss) per share
|
|
$
|
1.03
|
|
|
$
|
(0.01
|
)
|
The pro forma information presented above includes adjustments for (i) amortization of identifiable
intangible assets and (ii) income tax provision using the Companys statutory tax rate. This pro forma information is presented for illustrative purposes only and may not be indicative of the results of operations that would have actually
occurred. In addition, future results may vary significantly from the results reflected in the pro forma information.
76
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
2015 Acquisitions
Hospice Division
On July 24, 2015, we acquired one hospice care
center in Tennessee for a total purchase price of $5.8 million. The purchase price was paid with cash on hand on the date of the transaction. In connection with the acquisition, we recorded goodwill ($5.5 million) and other intangibles ($0.3
million).
Home Health Division
On October 2, 2015, we acquired the assets of a home health care center in Georgia for a total purchase price of $0.3 million. The purchase price was paid with cash on hand on the date of the
transaction. In connection with the acquisition, we recorded goodwill ($0.3 million).
On December 31, 2015, we acquired
Infinity HomeCare (Infinity) for a total purchase price of $63 million, net of cash acquired (subject to certain adjustments), of which $3.2 million was placed in escrow for indemnification purposes and working capital price
adjustments. The purchase price was paid with cash on hand on the date of the transaction. Infinity owned and operated 15 home health care centers servicing the state of Florida. In connection with the acquisition, we recorded goodwill ($50.2
million), other intangibles ($10.9 million) and other assets and liabilities, net ($1.9 million). Approximately $47.6 million of the $50.2 recorded as goodwill is expected to be deductible for income tax purposes over approximately 15 years.
4. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
As of December 31, 2013, we had three care centers classified as held for sale. During 2014, we sold assets associated with two of these care centers and consolidated one of these care centers with a
care center servicing the same market. There were no care centers classified as held for sale as of December 31, 2014.
As we exited certain geographical areas and in accordance with applicable accounting guidance, the care centers which were classified as
held for sale as of December 31, 2013 and subsequently sold in 2014 are presented as discontinued operations in our consolidated financial statements. The care center consolidated with a care center servicing the same markets is presented in
continuing operations as we expect continuing cash flows from these markets. For additional information on the care centers consolidated with care centers servicing the same markets and the care centers sold, see Note 13 Exit Activities and
Restructuring Activities.
Operating results for the twelve-month period ended December 31, 2014 for those care centers
classified as discontinued operations are as follows: loss before income taxes of $0.3 million, income tax benefit of $0.1 million and net loss from discontinued operations of $0.2 million.
5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
During 2016, we did not record any goodwill impairment charges as a result of our annual impairment test and none of the goodwill associated with our various reporting units were considered at risk of
impairment as of October 31, 2016. Since the date of our last annual goodwill impairment test, there have been no material developments, events, changes in operating performance or other circumstances that would cause management to believe it
is more likely than not that the fair value of any of our reporting units would be less than its carrying amount.
During the
fiscal year 2015, we did not record any goodwill impairment charges as a result of our annual impairment test and none of the goodwill associated with our various reporting units were considered at risk of impairment.
77
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
During the fiscal year 2014, we recognized a
non-cash
other intangible impairment charge of $0.9 million during step one of our 2014 annual goodwill impairment test. In addition, we recorded
non-cash
impairment charges of $2.2 million related to those care centers that were closed or consolidated during 2014 as discussed in Note 13 Exit and Restructuring Activities.
The following table summarizes the activity related to our goodwill for 2016, 2015 and 2014 (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
Home Health
|
|
|
Hospice
|
|
|
Personal Care
|
|
|
Total
|
|
Balances at December 31, 2013
|
|
$
|
16.6
|
|
|
$
|
192.3
|
|
|
$
|
|
|
|
$
|
208.9
|
|
Write-off
(1)
|
|
|
(0.1
|
)
|
|
|
(3.2
|
)
|
|
|
|
|
|
|
(3.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2014
|
|
|
16.5
|
|
|
|
189.1
|
|
|
|
|
|
|
|
205.6
|
|
Additions
|
|
|
50.6
|
|
|
|
5.5
|
|
|
|
|
|
|
|
56.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2015
|
|
|
67.1
|
|
|
|
194.6
|
|
|
|
|
|
|
|
261.7
|
|
Additions
|
|
|
4.4
|
|
|
|
|
|
|
|
22.7
|
|
|
|
27.1
|
|
Adjustments related to acquisitions
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2016
|
|
$
|
71.6
|
|
|
$
|
194.6
|
|
|
$
|
22.7
|
|
|
$
|
288.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Write-off
of goodwill related to the sale of care centers as discussed in Note 13 Exit and
Restructuring Activities.
|
During 2016, we adjusted goodwill by $0.1 million as a result of our
completion of the purchase price accounting for our 2015 acquisition of Infinity.
The following table summarizes the activity
related to our other intangible assets, net for 2016, 2015 and 2014 (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Intangible Assets, Net
|
|
|
|
Certificates of
Need and
Licenses
|
|
|
Acquired
Names of
Business
|
|
|
Non-Compete
Agreements (2)
|
|
|
Total
|
|
Balances at December 31, 2013
|
|
$
|
25.4
|
|
|
$
|
11.1
|
|
|
$
|
0.2
|
|
|
$
|
36.7
|
|
Write-off
(1)
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
(0.2
|
)
|
Impairment
|
|
|
(2.1
|
)
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
(3.1
|
)
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
(0.2
|
)
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2014
|
|
|
23.1
|
|
|
|
10.1
|
|
|
|
|
|
|
|
33.2
|
|
Additions
|
|
|
1.1
|
|
|
|
4.1
|
|
|
|
5.9
|
|
|
|
11.1
|
|
Write-off
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2015
|
|
|
23.9
|
|
|
|
14.2
|
|
|
|
5.9
|
|
|
|
44.0
|
|
Additions
|
|
|
0.2
|
|
|
|
3.5
|
|
|
|
1.5
|
|
|
|
5.2
|
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
(2.5
|
)
|
|
|
(2.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2016
|
|
$
|
24.1
|
|
|
$
|
17.7
|
|
|
$
|
4.9
|
|
|
$
|
46.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Write-off
of intangible assets related to the sale of care centers as discussed in Note 13 Exit and
Restructuring Activities.
|
(2)
|
The weighted average amortization period of our
non-compete
agreements is 1.9 years.
|
See Note 3 Acquisitions for further details on additions to goodwill and other intangible assets,
net.
78
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
The estimated aggregate amortization expense related to intangible assets for each of
the five succeeding years is as follows (amounts in millions):
|
|
|
|
|
2017
|
|
$
|
2.7
|
|
2018
|
|
|
2.2
|
|
2019
|
|
|
|
|
2020
|
|
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4.9
|
|
|
|
|
|
|
6. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS
Additional information regarding certain balance sheet accounts is presented below (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Other current assets:
|
|
|
|
|
|
|
|
|
Payroll tax escrow
|
|
$
|
6.7
|
|
|
$
|
6.2
|
|
Income tax receivable
|
|
|
1.3
|
|
|
|
0.5
|
|
Due from joint ventures
|
|
|
1.7
|
|
|
|
1.8
|
|
Other
|
|
|
1.6
|
|
|
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11.3
|
|
|
$
|
14.6
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Workers compensation deposits
|
|
$
|
0.4
|
|
|
$
|
0.3
|
|
Health insurance deposits
|
|
|
0.5
|
|
|
|
1.2
|
|
Other miscellaneous deposits
|
|
|
0.9
|
|
|
|
1.5
|
|
Investments
|
|
|
27.8
|
|
|
|
25.7
|
|
Other
|
|
|
8.9
|
|
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
38.5
|
|
|
$
|
32.8
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
Health insurance
|
|
$
|
10.6
|
|
|
$
|
11.7
|
|
Workers compensation
|
|
|
26.8
|
|
|
|
23.9
|
|
Legal and other settlements
|
|
|
5.7
|
|
|
|
10.5
|
|
Lease liability
|
|
|
0.4
|
|
|
|
0.6
|
|
Charity care
|
|
|
1.4
|
|
|
|
0.7
|
|
Estimated Medicare cap liability
|
|
|
0.8
|
|
|
|
1.4
|
|
Hospice cost of revenue
|
|
|
7.2
|
|
|
|
6.8
|
|
OIG self-disclosure accrual
|
|
|
|
|
|
|
4.7
|
|
Patient liability
|
|
|
4.3
|
|
|
|
5.1
|
|
Other
|
|
|
6.1
|
|
|
|
6.6
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
63.3
|
|
|
$
|
72.0
|
|
|
|
|
|
|
|
|
|
|
Other long-term obligations:
|
|
|
|
|
|
|
|
|
Reserve for uncertain tax positions
|
|
$
|
0.3
|
|
|
$
|
0.7
|
|
Deferred compensation plan liability
|
|
|
1.8
|
|
|
|
2.8
|
|
Other
|
|
|
1.6
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3.7
|
|
|
$
|
4.4
|
|
|
|
|
|
|
|
|
|
|
79
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
7. LONG-TERM OBLIGATIONS
Long-term debt consisted of the following for the periods indicated (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2016
|
|
|
2015
|
|
$100.0 million Term Loan; principal payments plus accrued interest payable quarterly; interest rate at ABR Rate plus
applicable percentage or Eurodollar Rate plus the applicable percentage (2.77% at December 31, 2016); due August 28, 2020
|
|
$
|
95.0
|
|
|
$
|
100.0
|
|
$200.0 million Revolving Credit Facility; interest only quarterly payments; interest rate at ABR Rate plus applicable
percentage or Eurodollar Rate plus the applicable percentage; due August 28, 2020
|
|
|
|
|
|
|
|
|
Promissory notes
|
|
|
0.7
|
|
|
|
|
|
Deferred debt issuance costs
|
|
|
(2.7
|
)
|
|
|
(3.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
93.0
|
|
|
|
96.6
|
|
Current portion of long-term obligations
|
|
|
(5.2
|
)
|
|
|
(5.0
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
87.8
|
|
|
$
|
91.6
|
|
|
|
|
|
|
|
|
|
|
Maturities of debt as of December 31, 2016 are as follows (amounts in millions):
|
|
|
|
|
|
|
Long-term
obligations
|
|
2017
|
|
$
|
5.2
|
|
2018
|
|
|
10.5
|
|
2019
|
|
|
10.0
|
|
2020
|
|
|
70.0
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
$
|
95.7
|
|
|
|
|
|
|
Credit Agreement
On August 28, 2015, we entered into a Credit Agreement that provides for senior secured facilities in an initial aggregate principal amount of up to $300 million (the Credit
Facilities).
The Credit Facilities are comprised of (a) a term loan facility in an initial aggregate principal
amount of $100 million (the Term Loan); and (b) a revolving credit facility in an initial aggregate principal amount of up to $200 million (the Revolving Credit Facility). The Revolving Credit Facility provides
for and includes within its $200 million limit a $25 million swingline facility and commitments for up to $50 million in letters of credit. Upon lender approval, we may increase the aggregate loan amount under the Credit Facilities by
a maximum amount of $150 million.
The net proceeds of the Term Loan and existing cash on hand were used to pay off
(i) our existing term loan under our prior Credit Agreement, dated as of October 22, 2012, as amended (the Prior Credit Agreement) with a principal balance of $27 million and (ii) our existing term loan under our
prior Second Lien Credit Agreement dated July 28, 2014 (the Second Lien Credit Agreement), with a principal balance of $70 million. The final maturity of the Term Loan is August 28, 2020. The Term Loan began amortizing on
March 31, 2016 and will
80
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
continue amortizing over 14 quarterly installments (four remaining quarterly installments of $1.25 million followed by eight quarterly installments of $2.5 million, followed by two
quarterly installments of $3.1 million, subject to adjustment for prepayments), with the remaining balance due upon maturity.
The Revolving Credit Facility may be used to provide ongoing working capital and for general corporate purposes of the Company and our subsidiaries, including permitted acquisitions, as defined in the
Credit Agreement. The final maturity of the Revolving Credit Facility is August 28, 2020 and will be payable in full at that time.
The interest rate in connection with the Credit Facilities shall be selected from the following by us: (i) the Base Rate plus the Applicable Rate or (ii) the Eurodollar Rate plus the Applicable
Rate. The Base Rate means a fluctuating rate per annum equal to the highest of (a) the federal funds rate plus 0.50% per annum, (b) the prime rate of interest established by the Administrative Agent, and (c) the Eurodollar
Rate for an interest period of one month plus 1% per annum. The Eurodollar Rate means the rate at which Eurodollar deposits in the London interbank market for an interest period of one, two, three or six months (as selected by us) are
quoted. The Applicable Rate is based on the consolidated leverage ratio and is presented in the table below. As of December 31, 2016, the Applicable Rate is 1.00% per annum for Base Rate Loans and 2.00% per annum for Eurodollar Rate
Loans. We are also subject to a commitment fee and letter of credit fee under the terms of the Credit Facilities, as presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Leverage Ratio
|
|
Margin for ABR
Loans
|
|
|
Margin for Eurodollar
Loans
|
|
|
Commitment
Fee
|
|
|
Letter of
Credit Fee
|
|
³
2.75 to 1.0
|
|
|
2.00
|
%
|
|
|
3.00
|
%
|
|
|
0.40
|
%
|
|
|
3.00
|
%
|
< 2.75 to 1.0 but
³
1.75 to
1.0
|
|
|
1.50
|
%
|
|
|
2.50
|
%
|
|
|
0.35
|
%
|
|
|
2.50
|
%
|
< 1.75 to 1.0 but
³
0.75 to
1.0
|
|
|
1.00
|
%
|
|
|
2.00
|
%
|
|
|
0.30
|
%
|
|
|
2.00
|
%
|
< 0.75 to 1.0
|
|
|
0.50
|
%
|
|
|
1.50
|
%
|
|
|
0.25
|
%
|
|
|
1.50
|
%
|
Our weighted average interest rate for our $100.0 million Term Loan, under our Credit Agreement, was
2.5% for 2016 and 2.7% for the period August 28, 2015 to December 31, 2015. Our weighted average interest rate for our $200.0 million Revolving Credit Facility was 3.5% for 2016.
As of December 31, 2016, our availability under our $200.0 million Revolving Credit Facility was $173.3 million as we had
$26.7 million outstanding in letters of credit.
The Credit Agreement requires maintenance of two financial covenants:
(i) a consolidated leverage ratio of funded indebtedness to EBITDA, as defined in the Credit Agreement, and (ii) a consolidated fixed charge coverage ratio of EBITDA plus rent expense (less cash taxes less capital expenditures) to
scheduled debt repayments plus interest expense plus rent expense, all as defined in the Credit Agreement. Each of these covenants is calculated over rolling four-quarter periods and also is subject to certain exceptions and baskets. As of
December 31, 2016, our consolidated leverage ratio was 1.0 and our consolidated fixed charge coverage ratio was 3.8 and we are in compliance with the Credit Agreement. The Credit Agreement also contains customary covenants, including, but not
limited to, restrictions on: incurrence of liens; incurrence of additional debt; sales of assets and other fundamental corporate changes; investments; and declarations of dividends. These covenants contain customary exclusions and baskets.
The Credit Facilities are guaranteed by substantially all of our wholly-owned direct and indirect subsidiaries. The Credit
Agreement requires at all times that we (i) provide guarantees from wholly-owned subsidiaries that in the aggregate represent not less than 95% of our consolidated net revenues and adjusted EBITDA from all
81
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
wholly-owned
subsidiaries and (ii) provide guarantees from subsidiaries that in the aggregate represent not less than 70% of consolidated adjusted
EBITDA, subject to certain exceptions.
In connection with entering into the Credit Agreement, we entered into (i) a
Security Agreement with the Administrative Agent dated August 28, 2015 and (ii) a Pledge Agreement with the Administrative Agent dated as of August 28, 2015 for the purpose of securing the payment of our obligations under the Credit
Agreement. Pursuant to the Security Agreement and the Pledge Agreement, as of the effective date of the Credit Agreement, our obligations under the Credit Agreement are secured by (i) the grant of a first lien security interest in the
non-real
estate assets of substantially all of our direct and indirect, wholly-owned subsidiaries (subject to exceptions) and (ii) the pledge of the equity interests in (a) substantially all of our direct
and indirect, wholly-owned corporate, limited liability company and limited partnership subsidiaries and (b) those joint ventures which constitute subsidiaries under the Credit Agreement (subject, in the case of the Pledge Agreement, to
exceptions).
In connection with our entry into the Credit Agreement, on August 28, 2015, each of the Prior Credit
Agreement and the Second Lien Credit Agreement were terminated. The Company paid a call premium of $700,000 associated with the termination of the Second Lien Credit Agreement and the voluntary prepayment of the amounts owed thereunder as of
August 28, 2015, and expensed $2.5 million in deferred debt issuance costs during the three-month period ended September 30, 2015. Also in connection with our entry into the Credit Agreement, we recorded $2.4 million in deferred
debt issuance costs as other assets in our consolidated balance sheet during 2015 which was reclassified to long-term obligations, less current portion during 2016 in accordance with ASU
2015-03.
Promissory Notes
Our promissory note outstanding of $0.7 million, issued in conjunction with an acquisition, bears an interest rate of 2.6%.
8. INCOME TAXES
Income taxes attributable to continuing operations consist
of the following (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Current income tax expense/(benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(0.5
|
)
|
|
$
|
2.2
|
|
|
$
|
(13.9
|
)
|
State and local
|
|
|
(0.1
|
)
|
|
|
0.5
|
|
|
|
(1.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.6
|
)
|
|
|
2.7
|
|
|
|
(15.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax expense/(benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
22.1
|
|
|
|
(0.5
|
)
|
|
|
21.0
|
|
State and local
|
|
|
2.4
|
|
|
|
(0.1
|
)
|
|
|
1.6
|
|
Foreign
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24.5
|
|
|
|
(0.7
|
)
|
|
|
22.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense/(benefit) from continuing operations
|
|
$
|
23.9
|
|
|
$
|
2.0
|
|
|
$
|
7.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
Total income tax expense for the years ended December 31, 2016, 2015 and 2014 was
allocated as follows (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Income from continuing operations
|
|
$
|
23.9
|
|
|
$
|
2.0
|
|
|
$
|
7.7
|
|
Income from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
Interest expense
|
|
|
(0.1
|
)
|
|
|
0.2
|
|
|
|
(0.1
|
)
|
Goodwill
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
Stockholders equity
|
|
|
(7.2
|
)
|
|
|
(2.1
|
)
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16.6
|
|
|
$
|
|
|
|
$
|
8.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of significant differences between the reported amount of income tax expense and the
expected amount of income tax expense that would result from applying the U.S. federal statutory income tax rate of 35 percent to income before taxes from continuing operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2016
|
|
|
2015 (1)
|
|
|
2014
|
|
Income tax expense at U.S. federal statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State and local income taxes, net of federal income tax benefit
|
|
|
4.8
|
|
|
|
(7.1
|
)
|
|
|
5.8
|
|
Valuation allowance
|
|
|
0.1
|
|
|
|
79.1
|
|
|
|
1.5
|
|
Tax credits
|
|
|
(0.6
|
)
|
|
|
136.0
|
|
|
|
(8.4
|
)
|
Uncertain tax positions
|
|
|
(1.0
|
)
|
|
|
(230.3
|
)
|
|
|
0.6
|
|
Other items, net (2)
|
|
|
0.6
|
|
|
|
(663.3
|
)
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense/(benefit)
|
|
|
38.9
|
%
|
|
|
(650.6
|
)%
|
|
|
36.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The information provided for the year ended December 31, 2015 does not provide a meaningful reconciliation of the effective tax rate or
comparable to other periods. The effective tax rate for the year is influenced by the relationship of the amount of effective tax rate drivers (i.e.
non-deductible
expenses,
non-taxable
income, tax credits, valuation allowance, uncertain tax positions, etc.) to income or loss before taxes. A significant asset impairment was recorded in the first quarter, resulting in a scenario where
the companys loss before tax for the year was near zero. Consequently, for 2015, the relationship between the effective tax rate drivers and loss before taxes is distorted.
|
(2)
|
Includes various items such as,
non-deductible
expenses,
non-taxable
income,
return-to-accrual
adjustments, and foreign tax rate differential.
|
As of December 31, 2016 and 2015, the Company had income taxes receivable of $1.3 million and $0.5 million, respectively, included in other current assets.
83
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
Deferred tax assets (liabilities) consist of the following components (amounts in
millions):
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
6.9
|
|
|
$
|
6.4
|
|
Accrued payroll & employee benefits
|
|
|
11.4
|
|
|
|
5.1
|
|
Workers compensation
|
|
|
10.9
|
|
|
|
9.8
|
|
Amortization of intangible assets
|
|
|
56.3
|
|
|
|
72.2
|
|
Share-based compensation
|
|
|
7.8
|
|
|
|
5.0
|
|
Net operating loss carryforwards (1)
|
|
|
44.2
|
|
|
|
48.5
|
|
Tax credit carryforwards (2)
|
|
|
4.8
|
|
|
|
4.7
|
|
Other
|
|
|
1.1
|
|
|
|
4.0
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax assets
|
|
|
143.4
|
|
|
|
155.7
|
|
Less: valuation allowance
|
|
|
(0.4
|
)
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
143.0
|
|
|
|
155.4
|
|
|
|
|
Deferred tax (liabilities):
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
(7.8
|
)
|
|
|
(9.5
|
)
|
Deferred revenue
|
|
|
(23.2
|
)
|
|
|
(18.5
|
)
|
Investment in partnerships
|
|
|
(3.2
|
)
|
|
|
(0.2
|
)
|
Other liabilities
|
|
|
(0.9
|
)
|
|
|
(2.0
|
)
|
|
|
|
|
|
|
|
|
|
Gross deferred tax (liabilities)
|
|
|
(35.1
|
)
|
|
|
(30.2
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
$
|
107.9
|
|
|
$
|
125.2
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The net operating loss (NOL) carry forwards in the income tax returns include unrecognized tax benefits resulting from uncertain tax
positions. Accordingly, the deferred tax assets recognized for the NOL carry forwards, as of December 31, 2016 and 2015, are presented net of unrecognized tax benefits of $3.1 million.
|
(2)
|
The tax credit carry forwards in the income tax returns include unrecognized tax benefits resulting from uncertain tax positions. Accordingly, the
deferred tax assets recognized for the tax credit carry forwards are presented net of unrecognized tax benefits of $0.7 million for each of the years ended December 31, 2016 and 2015.
|
As of December 31, 2016, we have U.S. net operating loss (NOL) carry forwards of $102.1 million that are available
to reduce future taxable income and begin to expire in 2034. In addition, we have research and development tax credits, employment tax credits, and alternative minimum tax credits of $1.9 million, $0.2 million and $1.4 million,
respectively, available to reduce future U.S. federal income taxes. The research and development tax credits and employment tax credits begin to expire in 2032, and the alternative minimum tax credits are available indefinitely.
As of December 31, 2016, we have state NOL carry forwards of $268.4 million that are available to reduce future taxable income.
In addition, we have $3.1 million of various state tax credits available to reduce future taxable income. The state NOL and tax credit carry forwards begin to expire at various times.
The valuation allowance for deferred tax assets as of December 31, 2016 and 2015 was $0.4 million and $0.3 million,
respectively. The net change in the total valuation allowance for the year ended December 31, 2016 and December 31, 2015 was an increase of $0.1 million and a decrease of $0.3 million, respectively. The valuation allowance during
2016 and 2015 was primarily related to certain state NOL and state tax credit carry forwards.
84
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
In assessing the realizability of deferred tax assets, management considers whether it
is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those jurisdictions during the periods in
which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carry back and carry forward periods), projected future taxable income, and
tax-planning
strategies in making this assessment. In order to fully realize the deferred tax assets, the Company will need to generate future taxable income before the expiration of the carry forwards governed by
the tax code. Based on the current level of pretax earnings, the Company will generate the minimum amount of future taxable income to support the realization of the deferred tax assets. As a result, management believes that it is more likely than
not that we will realize the benefits of these deferred tax assets, net of the existing valuation allowances at December 31, 2016. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carry forward period are reduced.
Uncertain Tax Positions
We account for uncertain tax positions in accordance with the authoritative guidance for uncertain tax positions. A
reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Balance at beginning of period
|
|
$
|
4.7
|
|
|
$
|
4.0
|
|
Additions for tax positions related to current year
|
|
|
|
|
|
|
|
|
Additions for tax positions related to prior year
|
|
|
|
|
|
|
1.0
|
|
Reductions for tax positions related to prior years
|
|
|
|
|
|
|
|
|
Lapse of statute of limitations
|
|
|
(0.6
|
)
|
|
|
(0.3
|
)
|
Settlements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
4.1
|
|
|
$
|
4.7
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016, there are $0.3 million and $3.8 million of unrecognized tax
benefits recorded in accrued other long-term obligations and deferred income taxes, respectively, within the consolidated balance sheet.
Included in the balance of unrecognized tax benefits at December 31, 2016 is $4.1 million of tax benefits that, if recognized in future periods, would impact our effective tax rate.
During the years ended December 31, 2016 and 2015, we recognized interest and penalties of $(0.1) million and $0.2 million,
respectively, as components of penalties or interest expense in connection with our reserve for uncertain tax positions. Interest and penalties, related to uncertain tax positions, included in the consolidated balance sheet at December 31, 2016
and 2015 were less than $0.1 and $0.2 million, respectively.
We are subject to income taxes in the U.S. and in many of
the 50 individual states, with significant operations in Louisiana, Alabama, Georgia, and Tennessee. We are open to examination in the U.S. and in various individual states for tax years ended December 31, 2013 through December 31, 2016.
We are also open to examination in various states for the years ended 2001 2016 resulting from net operating losses generated and available for carry forward from those years.
85
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
We believe that it is reasonably possible that decreases of up to $0.3 million in
unrecognized tax benefits, each of which are individually insignificant, may be recognized by the end of December 31, 2017 as a result of an anticipated settlement and lapse of the statute of limitations.
9. CAPITAL STOCK AND SHARE-BASED COMPENSATION
We are authorized by our Certificate of Incorporation to issue 60,000,000 shares of common stock, $0.001 par value and 5,000,000 shares of preferred stock, $0.001 par value. As of December 31, 2016,
there were 35,253,577 and 33,597,215 shares of common stock issued and outstanding, respectively, and no shares of preferred stock issued or outstanding. Our Board of Directors is authorized to fix the dividend rights and terms, conversion and
voting rights, redemption rights and other privileges and restrictions applicable to our preferred stock.
Share-Based
Awards
Our 2008 Omnibus Incentive Compensation Plan (the Plan) authorizes the grant of various types of
equity-based awards, such as stock awards, restricted stock units, stock appreciation rights and stock options to eligible participants, which include all of our employees and all employees of our 50% or more owned subsidiaries, our
non-employee
directors and certain consultants. The vesting terms of the awards may be tied to continued employment (or, for our
non-employee
directors, continued service on
the Board of Directors) and/or achievement of certain
pre-determined
performance goals. We refer to stock awards subject to service-based vesting conditions as
non-vested
stock and restricted stock units subject to service-based and performance-based or market-based vesting conditions as
non-vested
stock
units. The Plan is administered by the Compensation Committee of our Board of Directors, which determines, within the provisions of the Plan, those eligible employees to whom, and the times at which, awards shall be granted. The Compensation
Committee, in its discretion, may delegate its authority and duties under the Plan to specified officers; however, only the Compensation Committee may approve the terms of awards to our executive officers.
Equity-based awards may be granted for a number of shares not to exceed, in the aggregate, approximately 5.5 million shares of
common stock, and we had approximately 1.2 million shares available at December 31, 2016. The price per share for stock options shall be of no less than the greater of (a) 100% of the fair value of a share of common stock on the date the
option is granted or (b) the aggregate par value of the shares of our common stock on the date the option is granted. If a stock option is granted to any owner of 10% or more of our total combined voting power of us and our subsidiaries, the
price is to be at least 110% of the fair value of a share of our common stock on the date the award is granted. Each equity-based award vests ratably over a 12 month to six year period, with the exception of those issued under contractual
arrangements that specify otherwise, that may be exercised during a period as determined by our Compensation Committee or as otherwise approved by our Compensation Committee. The contractual terms of stock options exercised shall not exceed ten
years from the date such option is granted.
Employee Stock Purchase Plan (ESPP)
We have a plan whereby our eligible employees may purchase our common stock at 85% of the market price at the time of purchase. On
June 7, 2012, our stockholders ratified an amendment adopted by our Board of Directors to increase the total number of shares of our common stock authorized for the issuance under our ESPP
86
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
from 2,500,000 shares to 4,500,000 shares, and as of December 31, 2016, there were 1,460,800 shares available for future issuance. The following is a detail of the purchases that were made
or pending Board of Director approval under the plan:
|
|
|
|
|
|
|
|
|
Employee Stock Purchase Plan Period
|
|
Shares Issued
|
|
|
Price
|
|
2014 and Prior
|
|
|
2,899,528
|
|
|
$
|
13.78
|
|
January 1, 2015 to March 31, 2015
|
|
|
24,368
|
|
|
|
22.76
|
|
April 1, 2015 to June 30, 2015
|
|
|
15,750
|
|
|
|
33.77
|
|
July 1, 2015 to September 30, 2015
|
|
|
18,984
|
|
|
|
32.27
|
|
October 1, 2015 to December 31, 2015
|
|
|
19,082
|
|
|
|
33.42
|
|
January 1, 2016 to March 31, 2016
|
|
|
13,850
|
|
|
|
41.09
|
|
April 1, 2016 to June 30, 2016
|
|
|
14,236
|
|
|
|
42.91
|
|
July 1, 2016 to September 30, 2016
|
|
|
16,520
|
|
|
|
40.32
|
|
October 1, 2016 to December 31, 2016
|
|
|
16,882
|
|
|
|
36.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,039,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESPP expense included in general and administrative expense in our accompanying consolidated statements
of operations was $0.4 million for each of 2016, 2015 and 2014, respectively.
Stock Options
We use the Black-Scholes option pricing model to estimate the fair value of our stock options. There were 268,538, 590,647 and 250,000
options granted during 2016, 2015 and 2014, respectively. Stock option compensation expense included in general and administrative expense in our accompanying consolidated statements of operations was $6.3 million, $3.8 million and
$0.1 million for 2016, 2015 and 2014, respectively.
The fair value of the 2016 awards were estimated using the following
assumptions:
|
|
|
Risk Free Rate
|
|
1.19% 1.58%
|
Expected Volatility
|
|
53.44% 54.89%
|
Expected Term
|
|
5.86 6.25 years
|
Weighted Average Fair Value
|
|
$25.99
|
We used the simplified method to estimate the expected term for the stock options granted during 2016.
The following table presents our stock option activity for 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted
Average Exercise
Price
|
|
|
Weighted
Average Contractual
Life (Years)
|
|
Outstanding options at January 1, 2016
|
|
|
838,494
|
|
|
$
|
30.18
|
|
|
|
9.31
|
|
Granted
|
|
|
268,538
|
|
|
|
37.21
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled, forfeited or expired
|
|
|
(98,875
|
)
|
|
|
35.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding options at December 31, 2016
|
|
|
1,008,157
|
|
|
$
|
31.54
|
|
|
|
8.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable options at December 31, 2016
|
|
|
281,458
|
|
|
$
|
28.86
|
|
|
|
8.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
The aggregate intrinsic value of our outstanding options and exercisable options at
December 31, 2016 was $11.9 million and $3.9 million, respectively. There were no options exercised during 2016. Total intrinsic value of options exercised was $0.2 million and $0.1 million for 2015 and 2014, respectively.
The following table presents our
non-vested
stock option award activity for 2016:
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted Average
Grant Date Fair
Value
|
|
Non-vested
stock options at January 1, 2016
|
|
|
775,994
|
|
|
$
|
30.47
|
|
Granted
|
|
|
268,538
|
|
|
|
37.21
|
|
Vested
|
|
|
(219,872
|
)
|
|
|
29.55
|
|
Forfeited
|
|
|
(97,961
|
)
|
|
|
35.38
|
|
|
|
|
|
|
|
|
|
|
Non-vested
stock options at December 31, 2016
|
|
|
726,699
|
|
|
$
|
32.58
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016, there was $7.2 million of unrecognized compensation cost related to stock
options that we expect to be recognized over a weighted-average period of 2.1 years.
Non-Vested
Stock
We issue shares of
non-vested
stock with vesting terms ranging from one to six years. The
compensation expense is determined based on the market price of our common stock at the date of grant applied to the total number of shares that are anticipated to fully vest.
Non-vested
stock compensation
expense included in general and administrative expenses in our accompanying consolidated statements of operations was $2.3 million, $5.0 million and $4.6 million for 2016, 2015 and 2014, respectively.
The following table presents our
non-vested
stock award activity for 2016:
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted Average
Grant Date Fair
Value
|
|
Non-vested
stock at January 1, 2016
|
|
|
500,888
|
|
|
$
|
18.24
|
|
Granted
|
|
|
21,202
|
|
|
|
50.55
|
|
Vested
|
|
|
(222,783
|
)
|
|
|
18.00
|
|
Canceled, forfeited or expired
|
|
|
(89,929
|
)
|
|
|
17.26
|
|
|
|
|
|
|
|
|
|
|
Non-vested
stock at December 31, 2016
|
|
|
209,378
|
|
|
$
|
22.20
|
|
|
|
|
|
|
|
|
|
|
The weighted average grant date fair value of
non-vested
stock
granted was $50.55, $28.48 and $16.38 in 2016, 2015, and 2014, respectively.
At December 31, 2016, there was
$1.4 million of unrecognized compensation cost related to
non-vested
stock award payments that we expect to be recognized over a weighted average period of 0.9 years.
Non-Vested
Stock Units
We issue
non-vested
stock unit awards that are service-based, performance-based or a combination
of both with vesting terms ranging from one to six years. Based on the terms and conditions of these awards, we determine if
88
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
the awards should be recorded as either equity or liability instruments. The compensation expense is determined based on the market price of our common stock at the date of grant, applied to the
total number of units that are anticipated to vest, unless the award specifies differently. We account for such awards similar to our
non-vested
stock awards; however, no shares of stock are issued to the
recipient until the stock unit awards have vested and after the
pre-determined
delivery date has occurred.
Non-Vested Stock Units Service-Based
Service-based
non-vested
stock unit compensation expense included in general and administrative expenses in our accompanying consolidated statements of operations was $3.6 million and $1.0 million for 2016 and 2015,
respectively.
The following table presents our service-based
non-vested
stock units
activity for 2016:
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Weighted Average
Grant Date Fair
Value
|
|
Non-vested
stock units at January 1, 2016
|
|
|
183,332
|
|
|
$
|
37.89
|
|
Granted
|
|
|
147,896
|
|
|
|
45.60
|
|
Vested
|
|
|
(32,607
|
)
|
|
|
38.81
|
|
Canceled, forfeited or expired
|
|
|
(49,192
|
)
|
|
|
39.38
|
|
|
|
|
|
|
|
|
|
|
Non-vested
stock units at December 31, 2016
|
|
|
249,429
|
|
|
$
|
42.05
|
|
|
|
|
|
|
|
|
|
|
The weighted average grant date fair value of service-based
non-vested
stock units granted was $45.60 and $37.98 in 2016 and 2015, respectively.
At December 31, 2016, there was $6.7 million of unrecognized compensation cost related to our service-based
non-vested
stock units that we expect to be recognized over a weighted average period of 2.2 years.
Non-Vested
Stock Units Service-Based and Performance-Based Awards
During 2016, we awarded performance-based awards to certain employees. The target level established by the award, which is based on the Companys 2016 adjusted earnings before interest, taxes and
depreciation (EBITDA), provided for the recipients to receive 182,796
non-vested
stock units if the target was achieved. The target number of shares to be potentially awarded has been reduced by
forfeitures as indicated in the table below. Performance-based
non-vested
stock units compensation expense included in general and administrative expenses in our consolidated statements of operations was
$3.7 million and $1.3 million for 2016 and 2015, respectively.
The following table presents our performance-based
non-vested
stock units activity for 2016:
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Weighted Average
Grant Date Fair
Value
|
|
Non-vested
stock units at January 1, 2016
|
|
|
151,063
|
|
|
$
|
39.44
|
|
Granted
|
|
|
182,796
|
|
|
|
46.29
|
|
Vested
|
|
|
(44,729
|
)
|
|
|
34.83
|
|
Canceled, forfeited or expired
|
|
|
(64,273
|
)
|
|
|
42.41
|
|
|
|
|
|
|
|
|
|
|
Non-vested
stock units at December 31, 2016
|
|
|
224,857
|
|
|
$
|
45.08
|
|
|
|
|
|
|
|
|
|
|
89
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016(Continued)
The weighted average grant date fair value of performance-based
non-vested
stock units granted was $46.29 and $39.54 in 2016 and 2015, respectively.
At
December 31, 2016, there were $6.4 million in unrecognized compensation costs related to our performance-based
non-vested
stock units that we expect to be recognized over a weighted average period of
2.0 years.
Non-Vested
Stock Units Service-Based and Market-Based Awards
During 2013, we awarded market-based awards to certain employees. The target level established by the award, which was
based on our average December 2015 stock price, provided for the recipients to receive 417,330
non-vested
stock units if the target is achieved. If the target objective was surpassed to the point of achieving
the projected maximum payout, the recipients would receive 667,728
non-vested
stock units. The target number of shares to be potentially awarded was reduced by forfeitures as indicated in the table below. As
of March 3, 2016, it was determined that the market-based objective established by the award was satisfied at maximum payout and as a result, 248,654 stock units were awarded to the recipients on April 1, 2016.
For market-based awards, the effect of the market condition is reflected in the fair value of the awards at the date of grant using a
Monte-Carlo simulation model. A Monte-Carlo simulation model estimates the fair value of the market-based award based upon the expected term, risk-free interest rate and expected volatility. Compensation expense for market-based awards is recognized
over the vesting period regardless of whether the market conditions are expected to be achieved. Market-based
non-vested
stock units compensation expense included in general and administrative expenses in our
accompanying consolidated statements of operations was $0.1 million, $0.3 million and $0.5 million for 2016, 2015 and 2014, respectively. The fair value of the 2013 award was estimated using the following assumptions:
|
|
|
Forward Interest Rate
|
|
0.327 % 1.460%
|
Expected Volatility
|
|
54.38%
|
Requisite Service Period
|
|
3 years
|
Fair Value
|
|
$10.51
|
The following table presents our market-based
non-vested
stock
units activity for 2016:
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Weighted Average
Grant Date Fair
Value
|
|
Non-vested
stock units at January 1, 2016
|
|
|
164,534
|
|
|
$
|
10.51
|
|
Granted (1)
|
|
|
93,257
|
|
|
|
10.51
|
|
Vested
|
|
|
(248,654
|
)
|
|
|
10.51
|
|
Canceled, forfeited or expired
|
|
|
(9,137
|
)
|
|
|
10.51
|
|
|
|
|
|
|
|
|
|
|
Non-vested
stock units at December 31, 2016
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents shares awarded upon achievement of maximum payout.
|
The weighted average grant date fair value of market-based
non-vested
stock units granted was
$10.51 in 2013. All of our outstanding market-based
non-vested
stock units were fully vested as of April 1, 2016.
90
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
10. COMMITMENTS AND CONTINGENCIES
Legal Proceedings Ongoing
We are involved in the following legal actions:
Securities Class Action Lawsuits
On June 10, 2010, a putative securities class action complaint was filed in the United States District Court for the
Middle District of Louisiana (the District Court) against the Company and certain of our current and former senior executives. Additional putative securities class actions were filed in the District Court on
July 14, July 16, and July 28, 2010.
On January 18, 2011, the
Co-Lead
Plaintiffs filed an amended, consolidated class action complaint (the Securities Complaint) which supersedes the earlier-filed securities class action complaints. The Securities
Complaint alleges that the defendants made false and/or misleading statements and failed to disclose material facts about our business, financial condition, operations and prospects, particularly relating to our policies and practices regarding home
therapy visits under the Medicare home health prospective payment system and the related alleged impact on our business, financial condition, operations and prospects. The Securities Complaint seeks a determination that the action may be maintained
as a class action on behalf of all persons who purchased the Companys securities between August 2, 2005 and September 28, 2010 and an unspecified amount of damages.
All defendants moved to dismiss the Securities Complaint. On June 28, 2012, the District Court granted the defendants motion
to dismiss the Securities Complaint. On July 26, 2012, the
Co-Lead
Plaintiffs filed a motion for reconsideration, which the District Court denied on April 9, 2013.
On May 3, 2013, the
Co-Lead
Plaintiffs appealed the dismissal of the Securities Complaint to
the United States Court of Appeals for the Fifth Circuit (the Fifth Circuit). On October 2, 2014, a three-judge panel of the Fifth Circuit issued a decision reversing the District Courts dismissal of the Securities Complaint.
On October 16, 2014, all defendants filed a petition with the Fifth Circuit to review the three-judge panels decision
en banc
, or as a whole court. On December 29, 2014, the Fifth Circuit denied the defendants motion for
en banc
review of the Fifth Circuit panels decision reversing the District Courts dismissal of the Securities Complaint. The case then returned to the District Court for further proceedings. On March 30, 2015, the
defendants filed a Petition for Writ of Certiorari (the Petition) with the United States Supreme Court asking the Supreme Court to consider whether the Fifth Circuit erred in reversing the District Courts dismissal of the
Securities Complaint. The Supreme Court denied the Petition on June 29, 2015, which did not affect the ongoing proceedings before the District Court, including the District Courts consideration of a motion filed on April 3, 2015, by
the
Co-Lead
Plaintiffs for leave to amend the Securities Complaint, which motion was granted by the District Court. On December 15, 2015, the defendants filed a motion to dismiss the
Co-Lead
Plaintiffs First Amended Consolidated Complaint. All discovery in the case is currently stayed pursuant to federal law. The parties agreed to explore the possibility of a mediated settlement of this
matter, and a mediation was held on June 21, 2016. The parties were unable to resolve this matter during the mediation. On August 19, 2016, the District Court denied the defendants motion to dismiss the
Co-Lead
Plantiffs First Amended Consolidated Complaint. The Defendants filed an Answer to the Complaint on October 20, 2016. The case is currently in discovery.
We are unable to assess the probable outcome or reasonably estimate the potential liability, if any, arising from the securities
litigation described above. The Company intends to continue to vigorously defend itself in the securities litigation matter but, if decided adverse to the Company, its impact could be material. No assurances
91
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
can be given as to the timing or outcome of the securities matter described above or the impact of any of the inquiry or litigation matters on the Company, its consolidated financial condition,
results of operations or cash flows, which could be material, individually or in the aggregate.
Subpoena Duces Tecum Issued by the U.S.
Department of Justice
On May 21, 2015, we received a Subpoena Duces Tecum (Subpoena) issued by the U.S.
Department of Justice. The Subpoena requests the delivery of information regarding 53 identified hospice patients to the United States Attorneys Office for the District of Massachusetts. It also requests the delivery of documents relating to
our hospice clinical and business operations and related compliance activities. The Subpoena generally covers the period from January 1, 2011, through the present. We are fully cooperating with the U.S. Department of Justice with respect to
this investigation. Based on the information currently available to us, we cannot predict the timing or outcome of this investigation or reasonably estimate the amount or range of potential losses, if any, which may arise from this matter.
Civil Investigative Demand Issued by the U.S. Department of Justice
On November 3, 2015, we received a civil investigative demand (CID) issued by the U.S. Department of Justice pursuant to
the federal False Claims Act relating to claims submitted to Medicare and/or Medicaid for hospice services provided through designated facilities in the Morgantown, West Virginia area. The CID requests the delivery of information to the United
States Attorneys Office for the Northern District of West Virginia regarding 66 identified hospice patients, as well as documents relating to our hospice clinical and business operations in the Morgantown area. The CID generally covers the
period from January 1, 2009 through August 31, 2015. We are fully cooperating with the U.S. Department of Justice with respect to this investigation. Based on the information currently available to us, we cannot predict the timing or
outcome of this investigation or reasonably estimate the amount or range of potential losses, if any, which may arise from this matter.
On June 27, 2016, we received a CID issued by the U.S. Department of Justice pursuant to the federal False Claims Act relating to claims submitted to Medicare and/or Medicaid for hospice services
provided through designated facilities in the Parkersburg, West Virginia area. The CID requests the delivery of information to the United States Attorneys Office for the Southern District of West Virginia regarding 68 identified hospice
patients, as well as documents relating to our hospice clinical and business operations in the Parkersburg area. The CID generally covers the period from January 1, 2011 through June 20, 2016. We are fully cooperating with the U.S.
Department of Justice with respect to this investigation. Based on the information currently available to us, we cannot predict the timing or outcome of this investigation or reasonably estimate the amount or range of potential losses, if any, which
may arise from this matter.
In addition to the matters referenced in this note, we are involved in legal actions in the
normal course of business, some of which seek monetary damages, including claims for punitive damages. We do not believe that these normal course actions, when finally concluded and determined, will have a material impact on our consolidated
financial condition, results of operations or cash flows.
Legal Proceedings Settled
Wage and Hour Litigation
On July 25, 2012, a putative collective and class action complaint was filed in the United States District Court for the District of
Connecticut against us in which three former employees allege wage and hour law violations. The
92
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016
former employees claim that they were not paid overtime for all hours worked over 40 hours in violation of the Federal Fair Labor Standards Act (FLSA), as well as the Pennsylvania
Minimum Wage Act. More specifically, they allege they were paid on both a
per-visit
and an hourly basis, and that such a pay scheme resulted in their misclassification as exempt employees, thereby denying them
overtime pay. Moreover, in response to a Company motion arguing that plaintiffs complaint was deficient in that it was ambiguous and failed to provide fair notice of the claims asserted and plaintiffs opposition thereto, the Court, on
April 8, 2013, held that the complaint adequately raises general allegations that the plaintiffs were not paid overtime for all hours worked in a week over 40, which may include claims for unpaid overtime under other theories of liability, such
as alleged
off-the-clock
work, in addition to plaintiffs more clearly stated allegations based on misclassification. On behalf of themselves and a class of current
and former employees they allege are similarly situated, plaintiffs seek attorneys fees, back wages and liquidated damages going back three years under the FLSA and three years under the Pennsylvania statute. On October 8, 2013, the Court
granted plaintiffs motion for equitable tolling requesting that the statute of limitations for claims under the FLSA for plaintiffs who
opt-in
to the lawsuit be tolled from September 24, 2012, the
date upon which plaintiffs filed their original motion for conditional certification, until 90 days after any notice of this lawsuit is issued following conditional certification. Following a motion for reconsideration filed by the Company, on
December 3, 2013, the Court modified this order, holding that putative class members FLSA claims are tolled from October 29, 2012 through the date of the Courts order on plaintiffs motion for conditional certification. On
January 13, 2014, the Court granted plaintiffs July 10, 2013 motion for conditional certification of their FLSA claims and authorized issuance of notice to putative class members to provide them an opportunity to opt in to the
action. On April 17, 2014, that notice was mailed to putative class members. The period within which putative class members were permitted to opt into the action expired on July 16, 2014.
On September 10, 2014, the plaintiffs in the Connecticut case filed a motion for leave to amend their complaint to add a new claim
under the Kentucky Wage and Hour Act (KWHA) alleging that the Company did not pay certain home health clinicians working in the Commonwealth of Kentucky all of the overtime wages they were owed, either because the Company misclassified
them as exempt from overtime or, while treating them as overtime eligible, did not properly pay them overtime for all hours worked over 40 in a week. On behalf of themselves and a class of current and former employees they allege are similarly
situated, plaintiffs seek attorneys fees, back wages and liquidated damages going back five years before the filing of their original complaint under the KWHA. On October 1, 2014, the Company filed an opposition to the plaintiffs
motion to amend. On October 15, 2014, plaintiffs filed a reply brief in support of their motion. On December 12, 2014, the Court granted the plaintiffs motion to amend the complaint to add the claims under the KWHA. The Company and
the plaintiffs agreed to explore the possibility of a mediated settlement of the Connecticut case, and on February 23, 2015 filed a joint motion to stay proceedings for six months to pursue that process, which was granted by the Court on
February 24, 2015.
On June 10, 2015, the Company and plaintiffs participated in a mediation whereby they agreed to
fully resolve all of plaintiffs claims in the lawsuit for $8.0 million, subject to approval by the Court. The settlement agreement was submitted to the Court for preliminary approval and plaintiffs requested certification of
Pennsylvania and Kentucky classes for the sole purpose of this proposed settlement. The Court granted preliminary approval, notice was issued to members of the settlement classes to provide them with an opportunity to object to the settlement
and, in the case of members of the Pennsylvania and Kentucky classes, opt out of the settlement. Following this notice period, the Court held a final fairness hearing for the purpose of considering objections and deciding whether to grant
final approval of the settlement. As of September 30, 2015, we had an accrual of $8.0 million for this matter. On January 29, 2016, the Court approved the final settlement of this case. The settlement became effective on
February 26, 2016. As a result of the final amount calculated by the settlement administrator based on claims timely submitted, we reduced our accrual to $5.3 million as of December 31, 2015; this amount was paid during the
three-month period ended March 31, 2016.
93
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016(Continued)
On September 13, 2012, a putative collective and class action complaint was filed
in the United States District Court for the Northern District of Illinois against us in which a former employee alleges wage and hour law violations. The former employee claims she was paid on both a
per-visit
and an hourly basis, and that such a pay scheme resulted in her misclassification as an exempt employee, thereby denying her overtime. The plaintiff alleges violations of federal and state law and
seeks damages under the FLSA and the Illinois Minimum Wage Law. Plaintiff seeks class certification of similar employees who were or are employed in Illinois and seeks attorneys fees, back wages and liquidated damages going back three years
under the FLSA and three years under the Illinois statute. On May 28, 2013, the Court granted the Companys motion to stay the case pending resolution of class certification issues and dispositive motions in the earlier-filed Connecticut
case. On December 23, 2015, the parties agreed to explore the possibility of a mediated settlement of the Illinois case, and a mediation occurred on April 18, 2016. The parties agreed to settle the case for $0.8 million, subject to
court approval, which the Company had accrued as of September 30, 2016. On August 4, 2016, the Court approved the final settlement of this case. The final payment of $0.6 million was paid on November 21, 2016.
Frontier Litigation
On
April 2, 2015, Frontier Home Health and Hospice, L.L.C. (Frontier) filed a complaint against the Company in the United States District Court for the District of Connecticut alleging breach of contract, negligent misrepresentation
and unfair and deceptive trade practices under Conn. Gen. Stat.
§42-110b. Frontier
acquired our interest in five home health and four hospice care centers in Wyoming and Idaho in April 2014. The
complaint alleges that certain of the hospice patients on service at the time of the acquisition did not meet Medicare eligibility requirements and that we breached certain of the representations and warranties under the purchase agreement and
therefore, the businesses were worth less than the purchase price. Under the complaint, Frontier seeks declaratory judgment from the District Court that, under the terms of the purchase agreement with Frontier, we are obligated to determine the
amount of the alleged Medicare overpayments and reimburse the government for the same in a timely manner, as well as unspecified compensatory and punitive damages, attorneys fees and
pre-
and
post-judgment interest. The Company resolved the Frontier litigation for $2.9 million during the three-month period ended December 31, 2016.
Other Investigative Matters Ongoing
Corporate Integrity Agreement
On April 23, 2014, with no admissions of liability on our part, we entered into a settlement agreement with the U.S.
Department of Justice relating to certain of our clinical and business operations. Concurrently with our entry into this agreement, we entered into a corporate integrity agreement (CIA) with the Office of Inspector
General-HHS
(OIG). The CIA formalizes various aspects of our already existing ethics and compliance programs and contains other requirements designed to help ensure our ongoing compliance with federal
health care program requirements. Among other things, the CIA requires us to maintain our existing compliance program, executive compliance committee and compliance committee of the Board of Directors; provide certain compliance training; continue
screening new and current employees to ensure they are eligible to participate in federal health care programs; engage an independent review organization to perform certain auditing and reviews and prepare certain reports regarding our compliance
with federal health care programs, our billing submissions to federal health care programs and our compliance and risk mitigation programs; and provide certain reports and management certifications to the OIG. Additionally, the CIA specifically
requires that we report substantial overpayments that we discover we have received from federal health care programs, as well as probable violations of federal health care laws. Upon breach of the CIA, we could become liable for payment of certain
stipulated penalties, or could be excluded from participation in federal health care programs. The corporate integrity agreement has a term of five years.
94
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016(Continued)
Computer Inventory and Data Security Reporting
On March 1 and March 2, 2015, we provided official notice under federal and state data privacy laws concerning the outcome of an
extensive risk management process to locate and verify our large computer inventory. The process identified approximately 142 encrypted computers and laptops for which reports were required under federal and state data privacy laws. The devices at
issue were originally assigned to Company clinicians and other team members who left the Company between 2011 and 2014. We reported these devices to the U.S. Department of Health and Human Services, state agencies, and individuals whose information
may be involved, as required under applicable law because we could not rule out unauthorized access to patient data on the devices. The Office of Civil Rights, U.S. Department of Health and Human Services (OCR) is reviewing our
compliance with applicable laws, as is typical for any data breach involving more than 500 individuals. We are cooperating with OCR in its review and if any other regulatory reviews are formally commenced, will cooperate with applicable regulatory
authorities. In accordance with our CIA, we have notified the OIG of this matter.
Frontier Litigation
Separate from the Frontier litigation described above under Legal Proceedings Settled, the Company engaged an
independent auditing firm to perform a clinical audit of the hospice care centers acquired by Frontier. No assurances can be given as to the timing or outcome of the audit on the Company, its consolidated financial condition, results of operations
or cash flows, which could be material, individually or in the aggregate.
Other Investigative Matters Settled
Corporate Integrity Agreement
During the course of our compliance with the CIA, the Company identified several reportable events and notified the OIG as required. As of December 31, 2015, the Company had an accrual of
$4.7 million for these matters. On May 5, 2016, the company entered into a settlement agreement with the OIG and the matters were fully resolved for $4.7 million; this amount was paid during the three-month period ended June 30,
2016.
Third Party Audits Ongoing
From time to time, in the ordinary course of business, we are subject to audits under various governmental programs in which third party
firms engaged by the Centers for Medicare and Medicaid Services (CMS) conduct extensive review of claims data to identify potential improper payments under the Medicare program.
In July 2010, our subsidiary that provides hospice services in Florence, South Carolina received from a Zone Program Integrity Contractor
(ZPIC) a request for records regarding a sample of 30 beneficiaries who received services from the subsidiary during the period of January 1, 2008 through March 31, 2010 (the Review Period) to determine whether the
underlying services met pertinent Medicare payment requirements. We acquired the hospice operations subject to this review on August 1, 2009; the Review Period covers time periods both before and after our ownership of these hospice
operations. Based on the ZPICs findings for 16 beneficiaries, which were extrapolated to all claims for hospice services provided by the Florence subsidiary billed during the Review Period, on June 6, 2011, the MAC for the subsidiary
issued a notice of overpayment seeking recovery from our subsidiary of an alleged overpayment. We dispute these findings, and our Florence subsidiary has filed appeals through the Original Medicare Standard Appeals Process, in which we are seeking
to have those findings overturned. An ALJ hearing was held in early January 2015. On January 18, 2016 we received a letter dated January 6, 2016 referencing the ALJ hearing decision for the overpayment issued on June 6, 2011. The
decision was partially favorable with a new overpayment amount of $3.7 million with a balance owed of $5.6 million
95
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016(Continued)
including interest based on 9 disputed claims (originally 16). We filed an appeal to the Medicare Appeals Council on the remaining 9 disputed claims and also argued that the statistical method
used to select the sample was not valid. No assurances can be given as to the timing or outcome of the Medicare Appeals Council decision. As of June 30, 2016, Medicare has withheld payments of $5.7 million (including additional
interest) as part of their standard procedures once this level of the appeal process has been reached. In the event we are not able to recoup this alleged overpayment, we are indemnified by the prior owners of the hospice operations for amounts
relating to the period prior to August 1, 2009. As of December 31, 2016, we have an indemnity receivable for the amount withheld related to the period prior to August 1, 2009.
In July 2016, the Company received a request for medical records from SafeGuard Services, L.L.C. (SafeGuard), a ZPIC, related
to services provided by some of the care centers that the Company acquired from Infinity Home Care, L.L.C. The review period covers time periods both before and after our ownership of the care centers, which were acquired on December 31, 2015.
Subsequent to the initial ZPIC letter, on September 16, 2016, the Company received a letter from SafeGuard notifying the Company that the Winterhaven, Bradenton, and Tampa care centers were on a prepayment review. On October 28, 2016, the
company received a Notice of Suspension of Medicare Payments for up to 180 days for these three care centers. On January 10, 2017, the Company received a letter from SafeGuard notifying the Company that the Clearwater care
center was on a prepayment review. Subsequently, on February 2, 2017, the Company received a Notice of Suspension of Medicare Payments for up to 180 days for the Clearwater care center. Based on the information currently
available to the Company, the Company cannot predict the timing or outcome of this audit or reasonably estimate the amount or range of potential losses, which may arise from this matter.
Third Party Audits Settled
In January 2010, our subsidiary that provides home health services in Dayton, Ohio received from a Medicare Program Safeguard Contractor (PSC) a request for records regarding 137 claims
submitted by the subsidiary paid from January 2, 2008 through November 10, 2009 (the Claim Period) to determine whether the underlying services met pertinent Medicare payment requirements. Based on the PSCs findings for
114 of the claims, which were extrapolated to all claims for home health services provided by the Dayton subsidiary paid during the Claim Period, on March 9, 2011, the Medicare Administrative Contractor (MAC) for the subsidiary
issued a notice of overpayment seeking recovery from our subsidiary of an alleged overpayment of approximately $5.6 million. We disputed these findings, and our Dayton subsidiary filed appeals through the Original Medicare Standard Appeals
Process, in which we were seeking to have those findings overturned. A consolidated administrative law judge (ALJ) hearing was held in late March 2013. In January 2014, the ALJ found fully in favor of our Dayton subsidiary on 74 appeals
and partially in favor of our Dayton subsidiary on eight appeals. Taking into account the ALJs decision, certain determinations that our Dayton subsidiary decided not to appeal as well as certain determinations made by the MAC, of the 114
claims that were originally extrapolated by the MAC, 76 claims were decided in favor of our Dayton subsidiary in full, 10 claims were decided in favor of our Dayton subsidiary in part, and 28 claims were decided against or not appealed by our Dayton
subsidiary. The ALJ ordered the MAC to recalculate the extrapolation amount based on the ALJs decision. The Medicare Appeals Council could decide on its own motion to review the ALJs decisions. As of July 13, 2016, we were notified
that the PSC elected not to
re-extrapolate
the overpayment and instead issued a new calculated overpayment in the amount of $0.2 million. The overpayment has been paid in full and the matter is fully
resolved.
Operating Leases
We have leased office space at various locations under
non-cancelable
agreements that expire between 2017 and 2026, and require various minimum annual rentals. Our
typical operating leases are for lease terms of one to seven
96
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
December 31, 2016(Continued)
years and may include, in addition to base rental amounts, certain landlord pass-through costs for our
pro-rata
share of the lessors real estate
taxes, utilities and common area maintenance costs. Some of our operating leases contain escalation clauses, in which annual minimum base rentals increase over the term of the lease.
Total minimum rental commitments as of December 31, 2016 are as follows (amounts in millions):
|
|
|
|
|
2017
|
|
$
|
23.5
|
|
2018
|
|
|
17.5
|
|
2019
|
|
|
13.0
|
|
2020
|
|
|
9.1
|
|
2021
|
|
|
4.3
|
|
Future years
|
|
|
4.6
|
|
|
|
|
|
|
Total
|
|
$
|
72.0
|
|
|
|
|
|
|
Rent expense for
non-cancelable
operating leases was
$27.5 million, $23.7 million and $26.5 million for 2016, 2015 and 2014.
Insurance
We are obligated for certain costs associated with our insurance programs, including employee health, workers compensation and
professional liability. While we maintain various insurance programs to cover these risks, we are self-insured for a substantial portion of our potential claims. We recognize our obligations associated with these costs, up to specified deductible
limits in the period in which a claim is incurred, including with respect to both reported claims and claims incurred but not reported. These costs have generally been estimated based on historical data of our claims experience. Such estimates, and
the resulting reserves, are reviewed and updated by us on a quarterly basis.
The following table presents details of our
insurance programs, including amounts accrued for the periods indicated (amounts in millions) in accrued expenses in our accompanying balance sheets. The amounts accrued below represent our total estimated liability for individual claims that are
less than our noted insurance coverage amounts, which can include outstanding claims and claims incurred but not reported.
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
Type of Insurance
|
|
2016
|
|
|
2015
|
|
Health insurance
|
|
$
|
10.6
|
|
|
$
|
11.7
|
|
Workers compensation
|
|
|
26.8
|
|
|
|
23.9
|
|
Professional liability
|
|
|
4.7
|
|
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42.1
|
|
|
|
39.7
|
|
Less: long-term portion
|
|
|
(0.8
|
)
|
|
|
(0.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
41.3
|
|
|
$
|
38.8
|
|
|
|
|
|
|
|
|
|
|
The retention limit per claim for our health insurance, workers compensation and professional
liability is $0.9 million, $0.5 million and $0.3 million, respectively.
Employment Contracts
We have commitments related to employment contracts with a number of our senior executives. These contracts generally
commit us to pay severance benefits under certain circumstances.
97
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016(Continued)
Other
We are subject to various other types of claims and disputes arising in the ordinary course of our business. While the resolution of such
issues is not presently determinable, we believe that the ultimate resolution of such matters will not have a significant effect on our consolidated financial condition, results of operations and cash flows.
11. EMPLOYEE BENEFIT PLANS
401(K) Benefit Plan
We maintain a plan qualified under Section
401(k) of the Internal Revenue Code for all employees who have reached 21 years of age, effective the first month after hire date. Under the plan, eligible employees may elect to defer a portion of their compensation, subject to Internal Revenue
Service limits.
During 2016, 2015 and 2014, our match of contributions to be made to each eligible employee contribution was
$0.375 for every $1.00 of contribution made up to the first 6% of their salary. Effective January 1, 2017, our match of contributions to be made to each eligible employee contribution is $0.44 for every $1.00 of contribution made up to the
first 6% of their salary. The match is discretionary and thus is subject to change at the discretion of management. These contributions are made in the form of our common stock, valued based upon the fair value of the stock as of the end of each
calendar quarter end. We expensed approximately $6.9 million, $6.1 million and $6.2 million for 2016, 2015 and 2014, respectively.
Deferred Compensation Plan
We had a Deferred Compensation Plan for
additional
tax-deferred
savings to a select group of management or highly compensated employees. Amounts credited under the Deferred Compensation Plan were funded into a rabbi trust, which is managed by a
trustee. The trustee has the discretion to manage the assets of the Deferred Compensation Plan as deemed fit, thus the assets are not necessarily reflective of the same investment choices made by the participants.
Effective January 1, 2015, all prospective salary deferrals ceased. Participants will be allowed to make transactions with any
remaining account balances as they wish per plan guidelines.
12. STOCK REPURCHASE PROGRAM
On September 9, 2015, we announced that our Board of Directors authorized a stock repurchase program, under which we may repurchase
up to $75 million of our outstanding common stock on or before September 6, 2016.
Under the terms of the program,
we could repurchase shares from time to time in open market transactions, block purchases or in private transactions in accordance with applicable federal securities laws and other legal requirements. We could enter into Rule
10b5-1
plans to effect some or all of the repurchases. The timing and the amount of the repurchases, if any, was determined by management based on a number of factors, including but not limited to share price,
trading volume and general market conditions, as well as on working capital requirements, general business conditions and other factors.
Pursuant to this program, we repurchased 324,141 shares of our common stock at a weighted average price of $37.96 per share and a total cost of approximately $12.3 million during 2016 and 116,859
shares of our common stock at a weighted average price of $39.20 per share and a total cost of approximately $4.6 million. The repurchased shares are classified as treasury shares. The stock repurchase program expired on September 6, 2016.
98
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016(Continued)
13. EXIT AND RESTRUCTURING ACTIVITIES
As of December 31, 2013, we reported three home health care centers as held for sale. During 2014, we sold assets associated with two
of these care centers for cash consideration of approximately $0.8 million and recognized a gain of approximately $0.8 million which is included in discontinued operations. The remaining care center classified as held for sale was
consolidated with a care center servicing the same market during 2014.
During 2014, the Company sold its interest in five
home health and four hospice care centers in Wyoming and Idaho for approximately $5.0 million and recognized a gain of $2.1 million. We also exited our hospice inpatient unit in New Hampshire and recognized a loss of $0.5 million.
In addition to the exit activity related to the care centers mentioned above, we consolidated 21 operating home health care
centers and four operating hospice care centers with care centers servicing the same markets and closed 22 home health care centers and four hospice care centers during 2014. In connection with these care centers, we recorded
non-cash
charges of $2.2 million in other intangibles impairment expense related to the
write-off
of intangible assets, $2.1 million in other general and
administrative expenses related to lease termination costs and $2.1 million in salaries and benefits related to severance costs. These care centers were not concentrated in certain selected geographical areas and did not meet the criteria to be
classified as discontinued operations in accordance with applicable accounting guidance.
Restructuring Activity
During 2014, we restructured our regional leadership and corporate support functions. As such, we recorded charges of
$3.4 million in salaries and benefits related to severance costs. In addition, during 2014, William F. Borne stepped down from his positions as Chief Executive Officer, Chairman and a member of our Board of Directors and we recorded charges of
$2.3 million in salaries and benefits related to severance costs.
Our reserve activity for our 2014 exit and
restructuring activity is as follows (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
2014 Exit Activity
|
|
|
|
Lease
Termination
|
|
|
Severance
|
|
Balances at December 31, 2013
|
|
$
|
|
|
|
$
|
|
|
Charge in 2014
|
|
|
2.1
|
|
|
|
7.8
|
|
Cash expenditures in 2014
|
|
|
(1.6
|
)
|
|
|
(5.5
|
)
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2014
|
|
|
0.5
|
|
|
|
2.3
|
|
Charge in 2015
|
|
|
|
|
|
|
|
|
Cash expenditures in 2015
|
|
|
(0.4
|
)
|
|
|
(1.9
|
)
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2015
|
|
|
0.1
|
|
|
|
0.4
|
|
Charge in 2016
|
|
|
|
|
|
|
|
|
Cash expenditures in 2016
|
|
|
(0.1
|
)
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2016
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
99
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016(Continued)
14. VALUATION AND QUALIFYING ACCOUNTS
The following table summarizes the activity and ending balances in our allowance for doubtful accounts and estimated revenue adjustments
(amounts in millions):
Allowance for Doubtful Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year End
|
|
Balance at
Beginning of Year
|
|
|
Provision for
Doubtful
Accounts (1)
|
|
|
Write-Offs
|
|
|
Balance at End
of Year
|
|
2016
|
|
$
|
16.5
|
|
|
$
|
19.5
|
|
|
$
|
(18.3
|
)
|
|
$
|
17.7
|
|
2015
|
|
|
14.3
|
|
|
|
14.1
|
|
|
|
(11.9
|
)
|
|
|
16.5
|
|
2014
|
|
|
14.2
|
|
|
|
16.4
|
|
|
|
(16.3
|
)
|
|
|
14.3
|
|
(1)
|
Includes $0.1 million from discontinued operations for the year ended December 31, 2014.
|
Estimated Revenue Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year End
|
|
Balance at
Beginning of Year
|
|
|
Provision for
Estimated
Revenue
Adjustments (1)
|
|
|
Write-Offs
|
|
|
Balance at End
of Year
|
|
2016
|
|
$
|
4.0
|
|
|
$
|
7.9
|
|
|
$
|
(7.8
|
)
|
|
$
|
4.1
|
|
2015
|
|
|
3.1
|
|
|
|
6.1
|
|
|
|
(5.2
|
)
|
|
|
4.0
|
|
2014
|
|
|
3.9
|
|
|
|
5.1
|
|
|
|
(5.9
|
)
|
|
|
3.1
|
|
(1)
|
Includes $0.1 million from discontinued operations for the year ended December 31, 2014.
|
15. SEGMENT INFORMATION
Our operations involve servicing patients through our three reportable business segments: home health, hospice and personal care. Our home
health segment delivers a wide range of services in the homes of individuals who may be recovering from surgery, have a chronic disability or terminal illness or need assistance with the essential activities of daily living. Our hospice segment
provides palliative care and comfort to terminally ill patients and their families. Our personal care segment, which was established with the acquisition of Associated Home Care during the three-month period ended March 31, 2016, provides
patients with assistance with the essential activities of daily living. The other column in the following tables consists of costs relating to executive management and administrative support functions, primarily information services,
accounting, finance, billing and collections, legal, compliance, risk management, procurement, marketing, clinical administration, training, human resources and administration.
100
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016(Continued)
Management evaluates performance and allocates resources based on the operating income
of the reportable segments, which includes an allocation of corporate expenses directly attributable to the specific segment and includes revenues and all other costs directly attributable to the specific segment. Segment assets are not reviewed by
the companys chief operating decision maker and therefore are not disclosed below (amounts in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2016
|
|
|
|
Home Health
|
|
|
Hospice
|
|
|
Personal Care
|
|
|
Other
|
|
|
Total
|
|
Net service revenue
|
|
$
|
1,085.5
|
|
|
$
|
316.0
|
|
|
$
|
35.9
|
|
|
$
|
|
|
|
$
|
1,437.4
|
|
Cost of service, excluding depreciation and amortization
|
|
|
643.7
|
|
|
|
163.1
|
|
|
|
26.3
|
|
|
|
|
|
|
|
833.1
|
|
General and administrative expenses
|
|
|
283.4
|
|
|
|
70.2
|
|
|
|
7.9
|
|
|
|
141.9
|
|
|
|
503.4
|
|
Provision for doubtful accounts
|
|
|
13.8
|
|
|
|
5.5
|
|
|
|
0.2
|
|
|
|
|
|
|
|
19.5
|
|
Depreciation and amortization
|
|
|
6.0
|
|
|
|
1.3
|
|
|
|
|
|
|
|
12.4
|
|
|
|
19.7
|
|
Asset impairment charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.4
|
|
|
|
4.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
946.9
|
|
|
|
240.1
|
|
|
|
34.4
|
|
|
|
158.7
|
|
|
|
1,380.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
138.6
|
|
|
$
|
75.9
|
|
|
$
|
1.5
|
|
|
$
|
(158.7
|
)
|
|
$
|
57.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2015
|
|
|
|
Home Health
|
|
|
Hospice
|
|
|
Personal Care
|
|
|
Other
|
|
|
Total
|
|
Net service revenue
|
|
$
|
1,005.1
|
|
|
$
|
275.4
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,280.5
|
|
Cost of service, excluding depreciation and amortization
|
|
|
584.2
|
|
|
|
141.7
|
|
|
|
|
|
|
|
|
|
|
|
725.9
|
|
General and administrative expenses
|
|
|
263.2
|
|
|
|
62.7
|
|
|
|
|
|
|
|
126.5
|
|
|
|
452.4
|
|
Provision for doubtful accounts
|
|
|
12.2
|
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
14.1
|
|
Depreciation and amortization
|
|
|
5.2
|
|
|
|
1.4
|
|
|
|
|
|
|
|
13.4
|
|
|
|
20.0
|
|
Asset impairment charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77.3
|
|
|
|
77.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
864.8
|
|
|
|
207.7
|
|
|
|
|
|
|
|
217.2
|
|
|
|
1,289.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
140.3
|
|
|
$
|
67.7
|
|
|
$
|
|
|
|
$
|
(217.2
|
)
|
|
$
|
(9.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2014
|
|
|
|
Home Health
|
|
|
Hospice
|
|
|
Personal Care
|
|
|
Other
|
|
|
Total
|
|
Net service revenue
|
|
$
|
956.9
|
|
|
$
|
247.6
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,204.5
|
|
Cost of service, excluding depreciation and amortization
|
|
|
559.4
|
|
|
|
131.7
|
|
|
|
|
|
|
|
|
|
|
|
691.1
|
|
General and administrative expenses
|
|
|
269.0
|
|
|
|
58.3
|
|
|
|
|
|
|
|
114.4
|
|
|
|
441.7
|
|
Provision for doubtful accounts
|
|
|
14.8
|
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
16.3
|
|
Depreciation and amortization
|
|
|
9.0
|
|
|
|
2.1
|
|
|
|
|
|
|
|
17.2
|
|
|
|
28.3
|
|
Asset impairment charge
|
|
|
1.6
|
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
853.8
|
|
|
|
195.1
|
|
|
|
|
|
|
|
131.6
|
|
|
|
1,180.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
103.1
|
|
|
$
|
52.5
|
|
|
$
|
|
|
|
$
|
(131.6
|
)
|
|
$
|
24.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016(Continued)
16. UNAUDITED SUMMARIZED QUARTERLY FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
Attributable to
Amedisys,
Inc.
Common
Stockholders (1)
|
|
|
|
Revenue
|
|
|
Net Income (Loss)
Attributable to
Amedisys, Inc.
|
|
|
Basic
|
|
|
Diluted
|
|
2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st Quarter (2)(3)(4)
|
|
$
|
348.8
|
|
|
$
|
6.2
|
|
|
$
|
0.19
|
|
|
$
|
0.19
|
|
2nd Quarter (2)(3)(4)
|
|
|
360.7
|
|
|
|
10.7
|
|
|
|
0.32
|
|
|
|
0.32
|
|
3rd Quarter (2)(3)(4)
|
|
|
361.6
|
|
|
|
11.4
|
|
|
|
0.34
|
|
|
|
0.34
|
|
4th Quarter (2)(3)(4)(5)
|
|
|
366.3
|
|
|
|
8.9
|
|
|
|
0.27
|
|
|
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,437.4
|
|
|
$
|
37.3
|
|
|
$
|
1.12
|
|
|
$
|
1.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st Quarter (6)(7)
|
|
$
|
301.6
|
|
|
$
|
(35.0
|
)
|
|
$
|
(1.07
|
)
|
|
$
|
(1.07
|
)
|
2nd Quarter (7)
|
|
|
314.1
|
|
|
|
10.6
|
|
|
|
0.32
|
|
|
|
0.32
|
|
3rd Quarter (6)(7)(9)
|
|
|
326.4
|
|
|
|
8.4
|
|
|
|
0.25
|
|
|
|
0.25
|
|
4th Quarter (7)(8)(9)
|
|
|
338.4
|
|
|
|
12.9
|
|
|
|
0.39
|
|
|
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,280.5
|
|
|
$
|
3.0
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Because of the method used in calculating per share data, the quarterly per share data may not necessarily total to the per share data as computed
for the entire year.
|
(2)
|
During each of the four quarters of 2016, we incurred certain costs associated with the implementation of Homecare Homebase. Net of income taxes,
these costs amounted to $1.5 million, $1.6 million, $1.2 million and $0.8 million for the three-month periods ended March 31, 2016, June 30, 2016, September 30, 2016 and December 31, 2016, respectively.
|
(3)
|
During each of the four quarters of 2016, we incurred certain costs associated with various legal matters. Net of income taxes, these costs amounted
to $0.9 million, $0.3 million, $0.2 million and $1.8 million for the three-month periods ended March 31, 2016, June 30, 2016, September 30, 2016 and December 31, 2016, respectively.
|
(4)
|
During each of the four quarters of 2016, we incurred certain costs associated with various acquisition costs. Net of income taxes, these costs
amounted to $1.0 million, $0.2 million, $0.3 million and $0.5 million for the three-month periods ended March 31, 2016, June 30, 2016, September 30, 2016 and December 31, 2016, respectively.
|
(5)
|
During the fourth quarter of 2016, we recorded a
non-cash
asset impairment charge to
write-off
assets as a result of our conversion from our proprietary operating system to Homecare Homebase in the amount of $2.7 million, net of income taxes.
|
(6)
|
During the first quarter of 2015, we recorded a
non-cash
asset impairment charge to
write-off
the software costs incurred related to the development of AMS3 Home Health and Hospice in the amount of $45.5 million, net of income taxes. During the third quarter of 2015, we recorded a
non-cash
asset impairment charge related to our corporate headquarters in the amount of $1.2 million, net of income taxes.
|
(7)
|
During each of the four quarters of 2015, we incurred certain costs associated with various legal matters. Net of income taxes, these costs amounted
to $1.3 million, $4.8 million, $0.2 million and $(1.1) million for the three-month periods ended March 31, 2015, June 30, 2015, September 30, 2015 and December 31, 2015, respectively.
|
102
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016(Continued)
(8)
|
During the fourth quarter of 2015, we recorded an accrual related to an OIG Self-Disclosure matter. Net of income taxes, this charge amounted to
$3.4 million.
|
(9)
|
During the third and fourth quarters of 2015, we incurred certain costs associated with the implementation of Homecare Homebase. Net of income
taxes, these costs amounted to $1.2 million and $1.4 million for the three-month periods ended September 30, 2015 and December 31, 2015, respectively.
|
17. RELATED PARTY TRANSACTIONS
On November 20, 2015, we engaged
KKR Consulting, LLC (KKR Capstone), a consulting company of operational professionals that works exclusively with portfolio companies of Kohlberg Kravis Roberts & Co. Nathaniel M. Zilkha, a member of our Board of Directors, is a
member of KKR Management, LLC, which is an affiliate of KKR Asset Management LLC (KAM), a substantial stockholder of our Company, and an affiliate of Kohlberg Kravis Roberts & Co. KKR Capstone will receive a fee in connection
with providing consulting services to the Company in the ordinary course of business. Mr. Zilkha will not receive any direct compensation or direct financial benefit from the engagement of KKR Capstone. During 2016, we incurred costs of
approximately $1.6 million related to this related party engagement.
Effective October 22, 2015, we entered into a
contract for telemonitoring services with Care Innovations, LLC (Care Innovations). Paul Kusserow, our President and Chief Executive Officer, is a member of the Advisory Board to Care Innovations. Care Innovations will receive an annual
fee of approximately $1.8 million in connection with our contract for telemonitoring services for the Company. Care Innovations has confirmed to us that Mr. Kusserow will not receive any direct compensation or direct financial benefit from
the engagement of Care Innovations as our telemonitoring partner. During 2016 we incurred costs of approximately $1.5 million related to this related party engagement.
18. SUBSEQUENT EVENTS
On February 1, 2017, we acquired Home
Staff, LLC, a personal care provider with three care centers for a purchase price of $4.0 million.
Unaudited On
February 28, 2017, we signed a definitive agreement to acquire Tenet Healthcares home health and hospice operations in Arizona, Illinois, Massachusetts and Texas. We do not believe that the closing of this acquisition will have a material
impact on our 2017 results of operations.
103