Amedisys Inc (AMED) 2005 Q2 法說會逐字稿

Good morning, and welcome to the Amedisys second-quarter earnings 2005 conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions following the presentation.

It is now my pleasure to turn the floor over to your host, Brian Ritchie with Noonan Russo. Sir, you may begin.

Good morning, and thank you for joining us today for Amedisys' investor conference call to discuss recent corporate developments relative to this morning's second quarter of 2005 earnings announcement.

By now, you should have received the press release. If for some reason you have not received the press release or are unable to log onto the webcast, please call me, Brian Ritchie of Noonan Russo at 212-845-4269, and I will be happy to assist you.

On the call today, we have the Company's President and Chief Executive Officer, Bill Borne; the Company's President and Chief Operating Officer, Larry Graham; and the Company's Chief Financial Officer, Greg Browne. Management will give you an overview of the quarter highlights and then open the call for questions and answers.

Before we get started, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the Company, including without limitation -- statements regarding operating results in calendar 2005 and 2006; earnings per share in 2005 and 2006; growth opportunities and other statements that refer to Amedisys' plans, prospects, expectations, strategies, intentions and beliefs.

These forward-looking statements are based on the information available to Amedisys today, and the Company assumes no obligation to update these statements as circumstances change. For additional information, please see the cautionary statements included in Amedisys' most recent Form 10-Q or other public filings filed with the Securities and Exchange Commission.

At this time, I will turn the conference call over to Bill Borne. Please go ahead, Mr. Borne.

Thanks, Brian. Good morning, everyone. I want to thank everybody for calling in this morning. We certainly want to welcome our shareholders, and we appreciate the opportunity to share the Amedisys vision with a continually expanding group of investors. Management is committed to ensuring and maintaining its strategic direction and generating appropriate returns for all of our investors.

This call will be reflective of the best operations and earnings growth quarter in the history of Amedisys. The future of home nursing is very bright, and Amedisys intends to take full advantage of future growth opportunities. The Company continues to focus on our core strategic initiatives, of which we have outlined over the previous year. Primarily, our efforts are focused on internal growth, supplemented with acquisitions that meet our stated criteria.

Our success has been and will continue to be driven by our internal growth rate. Our 2005 internal growth rate of Medicare admissions is 19% over the second quarter of 2004. And we are confident in our long-term abilities to deliver 15 to 20% growth in Medicare admissions.

Larry will comment in greater detail on the strong rate of internal growth, but I would like to give my thanks to the hard work of our entire staff that have made this growth possible.

We are pleased to welcome our new employees from the acquisitions of St. Thomas Health Services in Tennessee and Covington Hospital in Collins, Mississippi. These acquisitions represent Amedisys' continued expansion in the Certificate of Need states of Mississippi and Tennessee respectively.

In addition, I am pleased to welcome the employees from NCARE in Newport News, Virginia, which represent our latest acquisition that was announced yesterday. This transaction further expands our presence in Virginia.

I'd like to end my comments regarding acquisitions by discussing Housecall Medical Resources, which represents our Company's largest acquisition to date. First, let me step by saying how pleased we are to have Housecall's dedicated staff join us. I would like to extend my thanks to everyone at Amedisys and Housecall for their hard work and dedication in completing this transaction. Amedisys and Housecall share common operating philosophies, including the same strong commitment to providing cost-effective, high-quality patient care.

In addition, we are excited to acquire a significant hospice business, which we may seek to expand over the next few years. I would also like to thank all the participants with Wachovia Bank and GE credit facilities with their help in financing this transaction.

We are pleased with the ongoing process of our infrastructure enhancements that we have made and are in progress of completing that will allow Amedisys to continue to its business, while maintaining proper oversight and controls. These enhancements include upgrades to our overall database, purchasing model, table of programs, spreadsheet applications, as well as various network upgrades.

We are focused on growing our Company. Amedisys is always committed to maintaining a small company presence. Along these lines, as you know, our employee orientation initiatives that have allowed senior management, including myself, the opportunity to meet and greet each and every new Amedisys employee. I am pleased to report that despite the recent growth our Company has experienced, this is a program that we intend to keep as an integral part of Amedisys's engaging culture, which we feel is second to none in our industry. As I have said before, the enthusiasm and commitment of our Amedisys' employees is by far our most strategic weapon, ensuring the competitive advantage in the markets we serve.

With that said, I would like to extend my heartfelt thanks to all of our Amedisys' staff whose dedicated efforts have helped us everyday to carry out our continuing mission. Going forward, you can continue to expect Amedisys to deliver high-quality patient care; expand the Company's presence, both through startups and acquisitions; and deliver solid financial results for our shareholders.

I will now pass this call to Larry, so he can provide Greg's financial overview, which you will then follow with a brief operational update. Greg is currently on the end stage of a bout of laryngitis, and we want to protect his voice, so he can provide answers in the Q&A session. Following Larry's update, we'll open the call to the Q&A session. Thank you.

Thanks, Bill. I will now discuss financial highlights for the 3 and 6 months ended June 30, most with respect to the income statement and balance sheet, as well as comment on reimbursement to the Housecall transaction and guidance. I also intend to address the sequential improvement in revenue.

Our revenues of 80.1 million represent an increase of 41% on 2004 and reflected the strong internal growth mentioned in the press release, as well as the acquisitions of Tenant (ph); Freedom in Virginia; Winyah, South Carolina; and some smaller transactions. These acquisitions accounted for approximately 10.6 million of the 23.2 million increase in revenue over 2004. Revenues of 150.5 million for the 6 months represented an increase of 46.3 million or 44.4% on the previous year -- with the increase also accounted for both by acquisitions and internal growth.

For the quarter, our reported gross margin of 47 million reflected a percentage of approximately 58.7 of revenue, which was slightly below the quarter 1 number of 59.6% and consistent with the quarter 2 number from 2004 of 58.5%. This number exceeded our expectations, given the elimination of the rule add-on effective March 31st. It should be noted that gross margin is likely to decline on a go-forward basis due to the Housecall acquisition, particularly the increased proportion of hospice revenue.

General administrative expenses of 34.3 million were higher by 3.8 million in quarter 1 of 2005. Of this increase, approximately 1 million is directly attributable to the recent acquisition, with the balance of 2.8 million due to additions for new locations, as well as that the corporate office to deal with the strong growth, including significant amounts of training activity. G&A expenses were somewhat lower than quarter 1 on a percentage of revenue basis at 42.8% and lower than the 44.3% reported for quarter 2 2004.

It should be noted that two significant items impacted the quarter -- one positive to earnings and one negative -- and which approximately offset each other. First, we had made a change to our policy for recording medical supplies, resulting in an additional one-off expense of approximately $1 million for the quarter. Second, our actual health insurance claims have been significantly lower than expected, and therefore, we were able to make an appropriate adjustment to our reserves of approximately the same amount.

Operating income of 12.7 million, substantially above the 8.1 million reported in the second quarter of 2004. And for the 6 months, operating income totaled 24.2 million, which was 62% higher than the 15 million reported for the comparable period of 2004.

For the quarter, net income of 7.9 million or $0.50 per diluted share is after a tax provision of 39.4% and compares with 5 million or $0.39 per share in the second quarter of 2004. For the 6 months, net income was 15 million or $0.95 per diluted share when compared with 9.2 million or $0.72 per share in the comparable period of 2004. The sequential increase in revenues from quarter 1 of approximately 9.6 million is attributable approximately to the following factors -- 7 million due to internal growth in Medicare completed episodes and census of over 9% for quarter 1; 3.2 million due to the recent acquisitions, particularly Winyah; a net decrease of approximately 600,000 from the loss of the rule add-on effective March 31st.

The Company recorded an overall decrease in total revenue per episode in quarter 2, taking the total to approximately $2,579, which represents a decrease of 30 basis points over quarter 1. This is despite the impact of a full quarter of Winyah, where the revenue per episode was higher than the Amedisys average and is due both to the impact of reimbursement changes, which went into effect March 31st, and small improvements in the overall case mix.

Amedisys completes over 26,000 episodes of care each quarter, and relatively small variations in revenue per episode can cause significant changes to revenue. These numbers will therefore vary from quarter-to-quarter.

With respect to the balance sheet, cash balances totaled 72.1 million after making all payments with respect to the (technical difficulty) Thomas acquisition of 3 million and the Collins, Mississippi acquisition of 900,000 and over $6 million cash for estimated tax payments.

The Company makes scheduled debt payments of approximately 650,000 during the quarter, and we expect to pay down principal of approximately 3.4 million for the balance of 2005, including quarterly payments of 1,250,000 on the new term loan. Total debt including Medicare liability totaled 15 million at June 30th. Day sales outstanding increased to 47 days from 37 days at March, partly as a result of the Winyah and other acquisitions.

The necessary change of ownership paperwork on these acquisitions is now substantially complete. In addition, some system issues affecting billing arose from system upgrade undertaking by Medicare during May. These are now largely resolved, and we would expect the day sales outstanding to improve over the balance of the year.

I would like to add that the Company now expects to be paying cash taxes that would approximate the tax expense on an ongoing basis. Capital expenditure for the quarter totaled 6.2 million. Of this amount, approximately 4.3 million related to the purchase of land and building designed to be eventually used to house our corporate offices in a single location. Some of the balance was expenditure in preparation for the Housecall acquisition. Also, we would now expect a number of approximately $8 million for routine capital expenditures for fiscal 2005.

Cash flow was strong with EBITDA of 14.7 million and cash flow from operations for the quarter at 2.8 million. The difference here can be attributed to the increase of receivables discussed earlier.

To recap the current reimbursement environment, on March 31st, the additional episode payment of 5% for patients in rural areas expired. And although there has been discussion on reinstating it, our guidance does not reflect any future rural add-on. Effective January 1, 2006, Amedisys will receive the market vast (ph) to increase, currently estimated by CMS to be approximately 2.5%. Final numbers are expected in late September or early October. Further, CMS is planning to revise the basis for calculating the geographic component next January. And our estimate of this impact, while preliminary, is that it would add to the above number. However, we have not yet calculated the impact on the Housecall book of business.

As you are aware, on July 11th, Amedisys purchased all the outstanding shares in Housecall Medical Resources for approximately $106 million in cash. Of which, 10% was placed into escrow to cover any unanticipated liabilities and which amortizes over 3 years. Networking capital at the time of the transaction was approximately $5 million, and there will be a settling up within 60 days with respect to this. Further, tax benefits accruing to Amedisys should be approximately $8 million. Of which, 4.6 million would be available for use over the next 12 months.

Trailing 12 months revenue for Housecall is approximately 103 million. This hospice accounting for 25 million, almost all in the state of Tennessee, and home health nursing accounting for the balance of 78 million. The home health revenue is earned in Florida of approximately 43 million, Tennessee of approximate 27 million, and the balance in Kentucky, Indiana and Virginia. Adjusted EBITDA for the period was approximately 11.5 million, including corporate overhead of 13 million. Our transition plans call for most of the corporate function of Housecall to be relocated to Baton Rouge prior to December, saving approximately 0.5 of the 13 million referred to above. We expect that amortization of intangibles and appreciation expense for the Housecall asset would approximate $3.5 million on an annual basis.

The transaction was financed in part by credit facilities made available by Wachovia Bank and GE Healthcare Financial Services. They include a $50 million term loan. Of which, 10% will amortize in the first year, 20% in the second year and so on -- and a $25 million revolving credit facility. Both of these variances at a margin of over either prime or LIBOR and can be pre-paid without out penalty and carry normal covenants. The current interest rate is 5.8% to which should be added approximately $400,000 per year for amortization of the fees and costs associated with the facility.

As of today, we have drawn down approximately $15 million of the revolver, leaving $10 million available for future use. And we have cash and investments available of approximately $31 million, making a total of $41 million for available resources.

We are raising our earnings per share guidance for 2005 to $1.95 to $2.01 per share on revenues of approximately 370 million. Our guidance is that diluted shares will total approximately 16 million for the full 2005 year. We expect that our operating margin will lower as a result of the Housecall acquisition at approximately 13% for the remainder of 2005 and between 14 and 15% for 2006. This compares with 16% in the first half of 2005.

While it is somewhat early to be providing 2006 guidance, the significant acquisition of Housecall and the reason reimbursement announcement from CMS provides some visibility. Our preliminary guidance is that EPS will be between $2.47 and $2.57 per share on revenue between 490 and 500 million. This number includes an estimate of $0.04 related to the anticipated expensing of stock options currently projected to commence for 2006. Diluted shares will total approximately 16.3 million for the full of 2006.

Now, I will comment on operations. Our operational strategic plan continues to center around our internal and external growth strategies. Due in part to our strict adherence to these strategies, our second-quarter internal growth rate over last year in Medicare admissions is 19%. We're certainly pleased with this number. And based on a market growing at least 7 to 9% annually, we are confident in our long-term abilities to deliver 15 to 20% growth in Medicare admissions. We see this industry growth trend continuing, as CMS recently published home health expenditure projections estimate that the Medicare home health expenditures are expected to double in 9 years.

Our total growth rate over the second quarter of last year in Medicare admissions is 38%. We continue to focus on growing our business through the implementation of a dual strategy centered on internal growth initiatives via same-store sales, startup, and external growth initiatives via acquisitions that meet our strategic criteria.

Year to date, we have opened 11 new locations. For 2005, we plan an opening at least 20 new offices. Our plan is to continue with our strategic branch expansion based upon local market opportunities. On the acquisition front, in the second quarter, we acquired one location in Mississippi from Covington Hospital and two locations in Tennessee from St. Thomas Health Services. These acquisitions were key for us in that both were in Certificate of Need states, which limit other providers' abilities to compete in these markets.

Beyond the second quarter, we announced the close of the Housecall acquisition on July 12th. This acquisition is a strategic addition to our organization. With 57 home health and 9 hospice locations, this purchase enables Amedisys to cover completely the states of Tennessee and Florida with the exception of just a few counties. It also opens up new markets for us in the states of Kentucky and Indiana and expand our presence in Virginia.

We would like to take this opportunity to complement the Housecall leadership on both their professionalism and their work in establishing a positive culture within their organization. Based upon site visits made by Amedisys' management, we know the cultures of both companies are very aligned and that both companies share the strong commitment to providing cost-efficient, high-quality patient care. This synergy has enabled us to make significant progress in a relatively short period of time related to the integration of the IT platform and our core business system.

Although it has only been 21 days since the acquisition, we are approximately 75 days into a defined system integration plan. None of that would have been possible without a true professional commitment on both sides. To date, the payroll historical conversion and system links have been completed. We successfully processed the first Housecall payroll from our system on July 15th.

The GL conversion and system links have been completed. This linking will be utilized this month as we close out July financials. We're pleased with the Housecall management team. We have each Housecall manager over operations reporting to our existing sales and operations executive management team. This process has gone very well at both Housecall and at Amedisys management -- see the opportunity to further develop our combined operations.

We are utilizing the Housecall hospice information system. We have stabilized this platform, and we will transition our existing hospice location to the Housecall system. I am pleased with the management that Housecall hospice brings to our existing resources.

All other core business functions will transition at sites converted onto our platform. The act of bringing these agencies live onto our system automatically converts the billing, collection, and revenue accounting processes. So it is obviously critical for all locations to have post-acquisition follow up. We recently began this agency transition and will convert approximately 20 locations on a monthly basis. This 20 agency per month schedule enabled our acquisition transition teams to spend 30 days in each location post-conversion. We feel that this type of post-conversion follow up is critical to operational pull through.

I would also like to thank our core function division heads that have spent untotaled hours during this period establishing and implementing the technical integration plan. It is evident to me that our substantial history of acquisition integration, especially larger ones like Tenant, has well-prepared our organization for assimilating this acquisition.

Aside from the Housecall acquisition, yesterday, we announced the purchase of the assets of NCARE home health of Virginia. NCARE is a two location acquisition in the state of Virginia. These locations will be fully converted to our system during the month of September. As previously stated, we will continue to evaluate new acquisitions that meet our strategic goals on a go-forward basis.

In summary, we are pleased with our second-quarter results. We continue to focus on being the premiere low-cost, high-quality provider in home health. We believe that focus, execution, and commitment to clinical outcomes will separate us from our competition. I would like to express our appreciation for the continued support of our shareholders, customer, employees, and vendors.

At this time, we will open up the call to your questions. Please limit yourself to two questions so that we may allow question time for everyone. Time permitting, we will allow for follow-up questions. Thank you.

Thank you. The floor is now open for questions. (OPERATOR INSTRUCTIONS). Art Henderson, Jefferies & Company.

Just a couple of quick questions for you. What is your debt balance right now after having done the Housecall acquisition? Where does it stand today?

We have 50 million outstanding on the term loan. We have 15 million outstanding on the revolver. And I mentioned in the notes that Larry read for me about 15 million in other debt outstanding at June 30th, including 9 million of Medicare liability.

Okay. Got you. And then back real quick on the DSOs. You talked about that the acquisitions of some -- Winyah and a couple of others contributed to the bump in DSOs. How should we expect that progression to come down? Are we talking about something that will return to historical levels like in the next quarter? Or is this going to happen over a several quarter period?

Well, I do believe that we will show substantial improvement over the next quarter. We might not get down entirely to the 37 day number by the end of September, but we should make substantial improvement on that, as we've now received most of the paperwork involved. One of the slowdowns was that in North -- the acquisition in Maryland -- we had to do some programming in order to bill to a new fiscal intermediary at Pearl Harbor, and that is near done. So we do expect to catch up at -- during this quarter and continue to improve.

And then one question -- I'll jump back in the queue. Now that you've gotten Housecall done, you have obviously got a lot of effort focused on getting that integrated. Should we expect to see you just do kind of small little acquisitions here and there? Do you guys have the capacity to do something bigger -- certainly not the Housecall level but something bigger than what you sort of announced last night?

Between now and year end, you should see smaller type transactions, nothing of a larger scale until 2006.

Sheryl Skolnick, Fulcrum Global.

If we could go to some operating metrics that you been kind enough to share with us in the past -- can you tell us what's happening -- particularly on a unit -- on a percent of episodes or admissions -- however you choose to do it -- with your rehab mix and whether or not you think you are continuing to benefit from the 75% rule implementation -- number one.

And number two, on your rural mix, what that is currently running? And then if you could discuss where you are in terms of second episodes or recertifications? And give us some color, if you would, on that question as to whether -- how these second episodes arise. Because I understand there can be some diagnoses for which it's really quite common. Thanks.

Thank you for your questions; I will try to take them in order. The rehab mix, about 60% of our total episodes have some form of therapy -- that we do all types of therapy -- speech therapy, occupational therapy and physical therapy. About 32% of our total episodes exceed the 10 visit threshold, and that gives you some flavor. So that means of all the patients that have therapy, half exceed the 10 visit threshold; the other half are doing less than 10.

On the rural mix, approximately 28% of our episodes fall into the rural areas.

On the recertification question, the average episode per patient for Amedisys is about 1.6 pock (ph). And clinically, when you do an episode of care with our system, we look at the patient during a weekly taped conference and determine -- based on the clinicians in the field as well as our director of operations -- whether or not we should recertify a patient. Some factors that go into that -- if a patient has had a change in medication, if the doctor has changed an order, or there has been a variance on our clinical track, then there is a high probability you need to keep that patient on a second episode.

In our clinical mix, our case mix is higher than the national average and the synchronicity or the sickness of our patients is higher than the national average. So that gives you some flavor on the recertification.

Eric Gommel, Legg Mason.

Can you give us a little -- you said you are interested in still making some tuck-in acquisitions. I am curious as to the multiples for acquisitions. Is the market heating up? Are there more players looking at acquisitions? Are you finding more competition for them?

The multiples are heating up a tad. However, with our operational efficiencies, they still could be great deal spun. There is a lot of enthusiasm about the potential acquisitions in the market, and there a few more players that are out there. So we think that we will continue to get all the acquisitions that are appropriate for the Company throughout this year and for the remainder of next year.

And just one follow-up on that -- would you be interested now in making pure play hospice acquisitions at this point?

We are going to leave all of our options open. Operationally, we need to integrate the hospice we have; we need to learn from them. Housecall has a great hospice division. And once we get our arms fully around that, if there are opportunities that present themselves -- next year, we certainly will take a look at it. And we want to leave all of our options open.

Balaji Gandhi, Pacific Growth Equities.

I just had a couple of data points I was looking for. I an not sure if I missed it but number of visits in the quarter?

The number of visits for the quarter was approximately 450,000 -- 495 -- I apologize.

495?

Yes.

Great. What about the Medicare revenues for the quarter?

The Medicare revenues for the quarter were just under 75 million.

75 million. And then lastly, number of episodes?

The total number of episodes for the quarter -- just hang on 1 second, and I will get it for you -- was 26,700.

Van Brady, Presidio Management.

Great quarter, gentlemen. I think I just got an answer I wanted to get -- business per episode, and you just gave me the details that would allow me to compete that. But Greg, I am lazy. Can you give me the actual figure -- business per episode?

The visits per episode were very similar to the first quarter, and they were approximately 16 visits per episode on the completed episodes.

Blake Goodner (ph), Bridger Capital.

Just wanted to get a little more clarity on the two items in the SG&A line. I guess you mentioned a change in the way you are accounting for medical supplies. And then also, $1 million reserve reduction because of better healthcare claims. Could you just review the mechanics there? And if those are both sustainable changes going forward?

Yes, I would be happy to Blake. We had to look at our medical supplies inventory. Most of the items are very small in terms of unit cost. And we elected after appropriate review with the audit committee and our auditors to expense the full amount of the inventory, which approximated $1 million. That's a one-off expense. And on a go-forward basis, we will expense those medical supplies as we buy them. It comprises gloves and dressing and bandages and so on. I look at mostly weigh in at cost.

With respect to our health insurance, health insurance claims -- they have been running lower than we expected for the first 6 months of this year. We had as part of their process outside actuary review of our reserves, and it seems appropriate to reduce those reserves at June 30th. And the amount was also approximately $1 million, so those two amounts offset each other.

The write-off of the inventory is clearly a one-off item. These supplies will be expensing on a go-forward basis just what we buy.

As far as the health insurance is concerned, that remains to be seen whether the claims experienced that we've seen in the first half of the year would continue on. It's always possible, of course, that it might revert to a more normal number. In which case, it would not be sustainable, but it's possible.

Okay, and then my second question was just back to the DSO question. I know you mentioned it was in a sense due to some of these acquisitions. But then you also said that there were some billing issues in May, was that also related to an acquisition? Could you just give a little more color there?

Yes, I would be happy to. In the month of May, Medicare completed two system upgrades. One in the early part of the month and one towards the end of the month. As a result of that, we were required to make some system changes. We do electronic billing, as you would be aware, to Medicare. And as a result of that system changes, we needed to upgrade our trollo (ph) codes on the electronic submission of the claims. That took some time. It caused some delays during the month of June. That has now been fixed, and we should expect that those will revert to a more normal pattern on a go-forward basis.

Could you just tell us what the revenue per episode for Winyah is versus corporate and Amedisys? Thanks.

Yes. The Winyah revenue per episode I believe is running about $26,050, so it is somewhat higher than the Amedisys average. In the normal course of business, we expect those acquisitions' revenue per episode to revert to the Amedisys average over a period of time. But that is where they're running up today.

(OPERATOR INSTRUCTIONS). Art Henderson, Jefferies & Company.

Just a couple of quick follow-ups. On the Housecall acquisition, you guys talked about -- and Larry, correct me if I am wrong or Greg -- you said that the contributions sort of an EBITDA level was around 11, 12 million?

The trailing 12 months' adjusted EBITDA is about 11.5 million for Housecall.

Can you give me a sense as to how much corporate overhead is part of that number?

That includes about third near corporate overhead, which was running at about a $13 million rate. As was mentioned in the comments earlier, we expect that once that is fully transitioned to Baton Rouge, we would expect to save about half of that corporate overhead number. Expect that adjusted EBITDA would be assuming everything else was equal, approximately 18 million after that transition is complete.

In your guidance for '06, how much have you factored in -- have you assumed that amount that you could get back or no?

We've assumed that we would stop with about 18 million of adjusted EBITDA, and we have deducted from that the amortization of intangibles and other depreciation, as well as an assumed interest expense for the amount borrowed and interest for Vanamu (ph). On the cash that we have used, we've also factored in some minor operational improvements to the business when we put together the guidance of $0.25 to $0.30 that we announced a month or so ago.

Now on the potential Medicare market basket update, which was proposed I guess about a month ago, that's not factored in your guidance or '06, is it?

We have put in our guidance for '06, at least for years. We have used a slightly lower number than the 2.5% -- about 2% at this stage until it's final. But we have put that in the number.

Okay. Well that seems to me, the guidance seems -- if that's the case -- seems extraordinarily conservative. Is that a safe assumption? If you've got both -- that much synergies in there and that much -- 2% on the market basket update embedded that number, then that is implying that -- either you are going to have a slowdown in your growth somehow, or you have low-balled the '06 estimate.

Arthur, first of all, as you know, it's rather early to be providing '06 guidance at all. And had we not done the Housecall acquisition, we would not have done that.

Secondly, the Housecall acquisition itself is only 3 weeks old. We think that once we get a feel for how the operations are performing over the next 3 months, we will be able to update our guidance on the next quarterly results and conference call. And we'll give some further color then.

Bob Stafford, Stafford Capital Management.

Here is a tough one. What is the definition of an episode?

Bob, this is Larry; I will answer that for you. An episode of care can be up to 60 days at link. Obviously, you can discharge it sooner. And at the end of 60 days, if they're still on service, they can be what we call recertified for another episode of care.

Unfortunately, we do not have time for anymore questions. I would like to turn the floor back over to management for any closing remarks.

Thanks, Operator. Again, we had a great quarter. We're looking forward obviously to reporting of our third quarter of 2005. Last night, I was made aware of a report that was put out on Amedisys by OCS, which is Outcome Concept Systems. And it was reflective of the quality review of Amedisys. It's actually on their website; it is ocsys.com. And you can pull up that website and see a real reflective overview of our quality indicator that are benchmarked against many other companies that are out there that use their services.

We tend to use OCS because it gives us a look into the future -- about 18 months or 2 years ahead of CMS. So it really is a quick way for us to look at current trends. And we are excited about the report.

With that being said, we look forward to getting together on our third quarterly conference call. And I hope everybody has a great day. Thank you all for calling in this morning.

Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day.