Companies in the News

Amedisys may not continue as a going concern

Amedisys (Baton Rouge, LA) said in its recent 10-K filing with the Securities and Exchange Commission (Washington) that its debt repayment obligations and other matters raise substantial doubt regarding the company’s ability to continue as a going concern. As of Dec. 31, Amedisys had a working capital deficit of about $31.3 million and a stockholders’ equity deficit of $11.7 million. In addition, Amedisys has $22.1 million in debt repayment obligations, which will be due within a year. Amedisys said in the filing that current projections indicate operations will not produce sufficient cash flow to fund those operations.

Amedisys has undertaken a significant restructuring effort to reduce operating costs by closing unprofitable locations and reducing components of overhead expenses to minimize the deficit.

Amedisys said it is negotiating the restructuring of certain of its debt obligations and is considering the possible sale of certain operating assets to generate cash to fund its obligations. Amedisys had, as of Dec. 31, a one-year, $14 million note payable to Columbia/HCA Healthcare (Nashville, TN). The loan agreement with Columbia restricts Amedisys’ ability to incur additional indebtedness or sell or transfer any of its property unless the cash proceeds from such sale are applied to reduce the balance due on the note payable. Amedisys also has borrowings under bank lines of credit of about $3.5 million and $750,000.

In other news, Amedisys said that on Jan. 1, it sold all of the issued and outstanding stock of Amedisys Durable Medical Equipment, doing business as Care Medical and Mobility, to Ace Drug Medical Equipment for $672,385. The purchase price of $100,000 was paid at closing. Another $418,318 was payable pursuant to a two-year note, payable in eight equal quarterly payments of principal and interest at prime, plus 2% adjusted annually.

Apria expects $11M drop in FY99 revenues

Apria Healthcare Group (Costa Mesa, CA) estimated in its 10-K filing with the Securities and Exchange Commission (Washington) that the 5% Medicare reimbursement cut for home oxygen therapy that took effect Jan. 1 will reduce its FY99 revenues and operating income by $11 million. In November, Apria had estimated a drop in FY99 revenues of $9 million.

The Medicare rate cut, imposed by the Balanced Budget Act of 1997, also mandated a 25% reduction in reimbursement rates for oxygen therapy services, effective Jan. 1, 1998, which decreased Apria’s FY98 revenues and operating income by $57 million. Apria still recorded an FY98 profit, however, for the first time in more than a year.

Apria expects 1Q99 earnings of 25 cents per share, and the company said in the filing that it expects to meet those estimates if current gross profit margin trends continue, despite its continued exit from unprofitable business units and the absorption of the 5% cut in reimbursement for oxygen therapy.

In other news, a group including Relational Investors, Apria’s largest shareholder, reported a 15% investment stake in Apria. The group holds 7.8 million common shares of Apria.

Proposed acquisition of Centennial canceled

Welsh, Carson, Anderson & Stowe (New York) canceled its proposed acquisition of Centennial Healthcare Corp. (Atlanta), reported Dow Jones News Service. Centennial has declined Welsh Carson’s request to a mutual termination of the deal, and said the merger isn’t necessary for its success. Welsh Carson cited a federal investigation of Centennial as the reason for the cancellation. Centennial has been served with a subpoena for Medicare records from four of its nursing homes. Welsh Carson agreed in October to acquire Centennial for $190 million, and a shareholder vote had been scheduled for April 15. Centennial has announced its 4Q98 and FY98 results. In 4Q, revenues were $93.1 million – an 8% increase over $86.2 million in 4Q97. The company posted a net loss of $612,000, 5 cents per share, compared to the previous year’s net income of $3.9 million, 32 cents per share. In FY98, the company saw revenues of $357.6 million, compared to FY97 revenues of $304.3 million. It posted a net loss for the year of $315,000, 3 cents per share, compared to a net income in FY97 of $9.8 million, 48 cents per share.

Continucare sells rehab assets

Continucare Corp. (CNU; Miami) sold its assets of its rehabilitation subsidiaries to Kessler Rehabilitation of Florida for about $5.5 million cash. Continucare expects to recognize a loss of about $5.5 million to $6.5 million on the transaction. About $4 million of the net proceeds will reduce the outstanding balance of the company’s $5 million acquisition facility with First Union National Bank of Florida, reported Dow Jones News Service.

Invacare announces investment plan

Invacare Corp. (Elyria, OH) reported that capital investments for FY99 will be about $32 million, according to its 10-K filing with the Securities and Exchange Commission (Washington). The company expects to invest in capital projects "at a rate that equals or slightly exceeds depreciation and amortization in order to maintain and improve the company’s competitive position." In FY98, the company spent $29.3 million on capital expenditures. In other news, the company has upgraded its Action Arrow Storm Series power wheelchairs to include the Gearless Brushless GB Motor as the standard package. The motor offers efficiency and a quiet operation that features a 7.25 mph speed with a 300-pound capacity and a two-year warranty.

Olsten settlement "good news," says analyst

The $70 million charge that Olsten Corp. (Melville, NY) expects to take in 1Q99 is actually good news, Matthew Roswell, an analyst for Legg Mason Wood Walker, told Dow Jones Business News. The charge will cover a $61 million settlement of two Medicare fraud investigations, and it puts them to an end much sooner and much more cheaply than expected, Roswell said. Some of the $70 million charge will go toward a reorganization allowing Olsten’s new management to decide about the future of its home healthcare operations, he said.

Priority authorizes stock split

Priority Healthcare’s (Altamonte Springs, FL) board has authorized a three-for-two stock split of the company’s common stock to be effected as a stock dividend to all shareholders of record at the close of business on April 20. Holders of class A common stock will receive class A shares in the split, and holders of class B common stock will receive class B common shares. Shareholders as of April 20 will receive a stock dividend of one share for each two shares held. Cash will be paid in lieu of fractional shares on May 4.