Amedisys Inc (AMED) 2007 Q1 法說會逐字稿

Good morning, ladies and gentlemen. At this time I would like to welcome everyone to the Amedisys first-quarter 2007 investor conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to pose a question during this time (OPERATOR INSTRUCTIONS).

Thank you. It is now my pleasure to turn the floor over to your host, Tom Dolan. Sir, you may begin your conference.

Good morning, and thank you for joining us today for the Amedisys investor conference call to discuss recent corporate developments relative to this morning's first quarter 2007 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 on to the webcast, please contact me at 225-292-2031 and I will be happy to assist you.

Speaking today we have the Company's Chairman and Chief Executive Officer, Bill Borne; the Company's President and Chief Operating Officer, Larry Graham; and the Company's Chief Financial Officer, Dale Redman. Management will give you an overview of the quarter's highlights and then we will 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 2007, earnings per share in 2007, 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 and 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.

Thank you, Tom, and good morning. We want to welcome our stockholders and spend some time sharing the Amedisys spirit and vision with the investing public. Clearly, 2007 is starting out to be another exceptional year with record revenues of $154 million and record earnings of $0.51 per diluted share for the first quarter. In addition, we generated exceptional cash flows during the quarter with cash flows from operations totaling $35 million. As a result, we finished the quarter with total cash and cash equivalents of $113 million.

Our results for the first quarter continue to support our strategic position of pursuing the objective of being the leading provider of high-quality, low-cost home care services in each of our markets. With the increasing demographics of the aging American population, the future of home nursing is very bright. And we intend to take full advantage of the growth opportunities it will bring. And that is, we will continue to focus on caring with a more demanding portion of the Medicare patients who represent approximately 36% of the total Medicare population and who utilize 85% of the total Medicare resources. We believe our unique care delivery system well positions Amedisys to manage the escalating cost of caring for this fragile segment of the population.

Amedisys continues to be committed to this strategic objective while maintaining a full focus on generating appropriate returns for our investors. Internal growth is our primary focus to increase the returns for our investors, followed closely by expansion through our discipline acquisition strategy. Our internal growth in the first quarter included the opening of 12 new home health agencies and one hospice agency, thus expanding our operations to a total of 273 home health agencies and 17 hospice agencies as of March 31, 2007.

During the quarter, we acquired Horizons Hospice in Montgomery, Alabama, as well as Optimacare Home Health Admission Plus Hospice in San Antonio, Texas. This acquisition trend continues into our second quarter with the acquisition of a home health agency in Tallahassee, Florida, and the expected completion of our acquisition of Dyna Care later today, which includes 11 new locations in five states including our first entry into the states of Illinois and Michigan. As I do on each earnings call, I would like to welcome all the employees of these latest acquisitions to the Amedisys family.

During the quarter, we also continued the rollout of our Point of Care system with a total of over 200 agencies now converted. This investment is providing us with real-time management and monitoring capabilities and is allowing us to standardize the assessment and the delivery of care throughout our markets. We believe that our proprietary technologies inclusive of our Point of Care system coupled with our ONcore nurse call center and our evidence-based best practice clinical algorithms is the right prescription for providing complex care management to the chronic comorbid population.

This infrastructure uniquely positions us to continue our transition into being recognized as a successful disease management provider. Amedisys has a strong group of analyst tracking its stock, and I would like to welcome the newest member of that group, Don Hooker of UBS. As a result of this addition, our total number of analysts covering Amedisys is now 11.

Prior to concluding, I would like to comment on the proposed home health PPS refinement and rate update released by CMS last Friday. This proposed rule included changes to the base rate calculation, refinements to the payment system, and new quality of care data collection requirements among others. The proposed rule is open for public comment for a period of 60 days and is expected to be effective January 1 of 2008.

We are currently evaluating the impact this proposal could have on Amedisys, but are unable at this time to provide an estimate of any potential financial impact. The proposed changes from CMS are multicomponent changes and require complex modeling and testing. We expect our initial evaluation effort could take a number of weeks, at which point we may be in a position to understand a possible financial impact from the proposed rule. However, at that time we are not confident that we will have full clarity on the impact to Amedisys of the final rule.

In our review of the proposed ruling over the last couple of days, we have uncovered a number of data inconsistencies in the proposal that will need clarification. Additionally, the proposed rule as introduced may change after the 60 day comment period. At this time, we cannot predict when these potential refinements will provide clarity so a final rule can be modeled. When that time arises, which we believe will be closer to the date of the final rule, we will be prepared to communicate to our investing community an estimate of its potential impact on our financial results.

In conclusion, I am reminded that our greatest competitive strength lies in our employees who individually and collectively make it possible for us to carry out our mission of providing cost-effective quality health care services to the patients entrusted to our care. We believe our culture of hard work, [patient for] service and core values is intangible that truly differentiates us from our competition.

I would now like to pass this call to Dale for his financial overview. Thank you.

Thank you, Bill. As Bill stated, this was an outstanding quarter for Amedisys. We set a number of records. Our first quarter revenues grew 21% over the 2006 first quarter to a quarterly record of $154 million. Net income was also a record at $13.3 million or $0.51 per diluted share based on 26.04 million shares outstanding. Operating income surged 63% to $20.7 million or 13.5% of net service revenue in the quarter. And that's from $12.7 million or 10% of revenue in the first quarter of 2006.

About one-third of this increase resulted from a $26 million larger revenue base and about two-thirds from lower G&A expenses as a percent of revenue. Specifically, over the past year we have been able to stabilize our home office salaries while increasing revenue. In addition, we received a market basket increase effective January 1, 2007, which we expected to produce about a 1% net increase in margin. While the increase did flow through the first quarter, it was largely offset from a margin standpoint by higher than average LUPA and therapy adjustments, and higher contractual allowances for Medicare Advantage revenues.

EBITDA for the quarter was $23.6 million, 15.4% of revenue versus $15.2 million or 11.9% of revenue first quarter last year. Bad debt expense for the quarter was $2.6 million or 1.7% of revenue compared to $2 million or 1.6% of revenue first quarter last year.

Other income varied because the first quarter of 2006 we had average debt outstanding of $52 million, and in the first quarter of 2007 we had almost no debt and an average of approximately $100 million in short-term investments. Our cash generation for the quarter was very strong, with cash flow from operations totaling $35 million. Day sales outstanding at quarter end stood at 46 days down from 55 days at the end of the first quarter of last year and 53 at the end of 2006. In addition, the decrease in net patient receivable balances had a positive $5.9 million impact on cash flow, net income contributed about $6 million and last year's first quarter cash flow included payment of $18.8 million of payroll taxes from 2005, which were deferred because of Katrina.

Our cash uses for the quarter included approximately $7 million in capital expenditures and $4 million related to acquisitions. Capital expenditures included about $2.5 million related to Point of Care and $1.8 million related to our corporate headquarters. Our cash position at the end of the quarter totaled $113 million, including $6 million in restricted cash. We have very little debt on the balance sheet totaling about $6 million in the quarter end, mainly associated with notes payable related to acquisitions. With such a strong balance sheet, we believe we are very well-positioned to capitalize on consolidation opportunities in the home health sector.

This morning we are reaffirming our previous guidance for 2007 of net service revenues for the year and the $625 million to $650 million range and diluted earnings per share of $2.05 to $2.15 per diluted share excluding any future acquisitions. Capital expenditures should approximate about 2% of revenue plus about $3 million for the final stage of the rollout of our Point of Care technology, and $1 million for our corporate headquarters for the remainder of 2007.

Now, I'd like to turn it over to Larry for operational comments.

Thank you, Dale. Our operational strategic plan continues to fit around our internal and external growth strategies. This plan generated a first quarter internal growth rate over last year in episodic based admissions of 15%. Our total growth rate over the first quarter of last year in episodic admissions was 19%. As we are experiencing a growing trend of admits from Medicare Advantage plans that pay us episodically similar to rates paid by Medicare for patients with traditional Medicare coverage, we are now including these admits in our internal growth calculations. We believe that total episodic based admission growth is a better indicator of our base business than [would be] traditional Medicare admissions alone. We believe that longer-term, our internal growth of episodic based admissions will be in the 10 to 15% range.

We will continue to focus on growing our business through the implementation of a dual strategy, centered on internal growth initiatives via same-store sales and startups, as well as external growth opportunities via acquisitions that meet our strategic criteria.

As Dale mentioned, during the first quarter we opened 12 new home health locations and one new hospice location. Our plan is to continue with our strategic branch expansion based upon local market opportunities. Specifically, we are targeting approximately 40 home health and five hospice startups in 2007.

Regarding acquisitions, I would like to further expand on the Dyna Care acquisition scheduled to be completed today. This acquisition expands our presence in Arizona, Indiana, and Texas. Additionally, it introduces us into two new states with attractive demographics -- Illinois and Michigan. In particular, we were attracted to this opportunity because of the Company's strong presence in the Chicago metropolitan area. Upon completion, we will have locations in 21 states. We continue to evaluate potential acquisition candidates and continue to have a healthy pipeline of opportunities that fit our profile and strategic direction.

In an effort to allow investors to more easily gauge our progress and operational strength, we have built our quarterly revenue and contribution margin down as follows. Contribution margin is pretax and pre-corporate overhead; $132 million in home health revenue related to agencies we have owned longer than 12 months with a contribution margin of 31%; $4 million in home health acquisition revenue that we have acquired since the first quarter 2006 with a contribution margin of 8%; $2 million in hospice revenue with a contribution margin of 13%; $8 million in home health startup revenue related to startups opened since the first quarter of 2006 with a contribution margin of negative 2%. Also in the quarter, we incurred approximately $1 million in additional cost associated with agencies we plan to open in the future.

In the first quarter, we continue to rollout our Point of Care system to our agencies. As discussed previously, the system consists of tablet PCs that are used by our visiting staff to document visit information, which is then electronically uploaded into our proprietary operating system. We expect the system to improve the quality and documentation compliance of our visiting staff and eliminate numerous back office functions at the agency level.

We made the decision to roll the system after three years of strategic development and an extended test to five agencies early in 2006. In total, the system required [$92 million] in capital expenditures primarily associated with the cost of the tablets. We spent approximately $3 million in the first quarter of 2007 on our Point of Care system and expect to spend approximately $3 million during the remainder of 2007.

At quarter end, we had rolled out the system to approximately 175 locations representing about 60% of our total agencies. In April we completed another 30 agencies for a total of just over 200 agencies now on the Point of Care. We anticipate Point of Care to generate $1 million to $1.5 million in quarterly pretax savings by the fourth quarter largely associated with reduced overhead at our agencies.

I certainly want to thank all of the operational management and staff for the results to date and improving the performance of our operations and their commitment to meeting our strategic goals. In particular, the transition to Point of Care has required a lot of changes in our agencies, but is enhancing our compliance controls and resulting in a more efficient and productive Company and one requiring much less paperwork for our employees.

In summary, we are pleased with our first quarter 2007 operating performance. Total episodic based internal growth continued in the double-digit range and our significant investment in de novo startups has placed us in good position to continue this performance for the remainder of 2007. We continue to focus on being the premier low-cost, high-quality provider in home health. We believe that focus, execution and commitment to clinical outcomes will continue to separate us from our competition. I would like to express our appreciation for the support of our stockholders, customers, employees, and vendors.

At this time, we will open 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. Operator?

(OPERATOR INSTRUCTIONS) Darren Lehrich, Deutsche Bank.

I just wanted to go back to something in your prepared remarks with regard to the Medicare rate increase and the flowthrough to margin. Can you just go through in a little bit more detail the reasoning as to why (inaudible) has much margin flowthrough. Just wanted to clarify your comments on that point, please.

Margin flowthrough in the first quarter?

Yes, from the Medicare rate increase that you received January 1.

Yes, we can comment on that. As you may recall, there was a 3.3% increase and they took away the rural health of about .5 and we had 5%, we had about 20% rural health so that took it down to a number around we thought about 1.8. Larry had commented I think in previous discussions that we thought about 60% of that would actually flowthrough to operating revenue, which is where we got the number we've used, talked about, of about 1%.

In the first quarter we had, particularly in January, some [iron] LUPA and therapy issues that stabilized later in the quarter. But that had an impact on that flowthrough. In addition, we had more Medicare Advantage revenues in the quarter for which we assigned [our] contractual allowance. That also had an impact on the flowthrough of the revenue. So that's -- what we're trying to get to is that's basically the reason why we didn't see an increase in margin closer to the 1% that we would have expected.

Maybe just so I'm clear, the LUPA and therapy issues you're describing, when you're saying you had less therapy episodes and more LUPA episodes. Can you just clarify that for me? And I guess my follow-up would be just on Medicare Advantage, it sounds like you're having some success in getting MA plans to pay similar to the episodic rates that Medicare fee-for-service paid. So I guess just can you clarify where you stand in converting some of those MA plans to that (inaudible)?

Sure, Darren, this is Larry. The simple answer to your first part is yes. That's just case mix fluctuations that we talk about from quarter to quarter that are normal part of our business that affect revenue per episode. And the second segment is yes, we are pleased in the first quarter that there are Medicare Advantage plans that are paying similar to Medicare rates. Dale mentioned we have been putting a contractual allowance on some of those plans until we experience cash selections from a conservative standpoint. And you notice in my internal growth rate discussions, we talked about 15% internal growth rate, which is all in every payer that pays like Medicare.

In the future, I won't segment this out. But for those of you that are interested, our pure play Medicare growth rate was around 11% in the fourth quarter -- I mean in the first quarter, but all that was 15%. Thanks for your questions, Darren.

Thank you. Nice quarter.

Newton Juhng, BB&T Capital Markets.

A couple quick questions here. The first was from an MNA perspective, understanding that this proposed rule is still under the comment period, but it appears that it's hitting the south and the freestanding full profit operators the hardest. Could we be looking at some potential for changing your geographic targets for future expansion to areas that could receive maybe some better pricing?

This is Larry, that's a very good question. First, you know we're still going to target the areas from a Medicare demographic standpoint that makes strategic sense for us. And within those areas certainly we will look at the impact once we have a clear understanding of this refinement on those particular acquisition targets. So I don't know if it changed the areas we're looking at, but within those areas we'll certainly look at the impact of those acquisitions.

Great, Larry. Just on the development pace being considerably up compared to where your projected annual target is, should we expect that that pace might slow down a little bit over the course of the year or could there be a chance that the annual target might be primed for an upward move?

Would you clarify that question little bit? When you say the annual pace of --?

Yes, just from a perspective of if you were to do 40 home health startups in the year that would imply 10 a quarter; you did 12 this past quarter. Just wondering if we could expect that maybe 10 a quarter is still possible or whether or not you might see a little bit of a slowdown over the next three quarters?

That's going to vary from quarter to quarter. Because as I discussed previously, we don't have ultimate control over when a regulatory body will release an agency with all its paperwork. If you're modeling 10 per quarter it might be a good estimate but it's going to fluctuate up or down quarter to quarter.

Just one last question here. It was mentioned -- I think it was Bill that mentioned that it was about the -- with regard to the proposed rule that data collection is going to be a considerable important aspect of it. Just wanting to make sure that you guys feel that your new system will be capable of handling the type of data collection for the new standards that could be coming about.

Newton, that's an excellent question. And I'm going to take that opportunity to expand a little bit on the change and the complexity of it. Because not only are the base rates being readjusted, the 80 [HERBS] that we've talked about in the past have now exploded into 153. There are four new payment equation models that you would have to fall in based on which episode it's in; supplies have been taken out of the base rate and applied a new cost schedule. You have criteria that's called adjacent episode criteria that's been introduced but it's not clearly defined. You just have a lot of individual changes.

There used to be 23 questions on the [OAFES] dataset that would impact revenue. That's been expanded to 55, but specifically we are going to not only program those changes but go through a very detailed [SOX] testing of those changes, manually score out [SETH] then compare it. So we will feel confident when we get ready to implement from a program standpoint that it's been through a very extensive testing process.

Larry, you've got a lot of work ahead of you. Good luck.

John Ransom, Raymond James.

It sounds like Newton asked all the good questions, so I'm stuck with my little crumbs. It looks like you had about $0.03 of startup losses this quarter. Is that a reasonable proxy for future startup losses or was there something unusual about this quarter?

We think that, you know, it could fluctuate based on the number but [3%] from the $1 million --

Plus the [8.8] million of the negative 2%.

There you go. So that's probably if you're modeling a reasonable estimate at this point.

Secondly, reading through this gargantuan rule -- what I had a question about and I wondered if you had gotten a chance to understand this yet. It looks like the therapy exchanges S2, S3, S4, S5, you know, S2 is six therapy visits, S3, 7 and 9; S410, S511 to 13, and the rate goes from $500 at S2 to about $1,800 at S5. Are they saying that S5 that implies a level of therapy visits or do the level of therapy visits imply the severity? Have you look at that and tried to understand that?

It's talking about the gross number of therapy visits. Not to get too detailed but we have clinical and functional and service component to our scoring. Used to that would be 23 questions. The service section now is exclusive to just the number of therapy visits you do within an episode. And then you [explore it] beyond that to a four equation model, which is really five if you want to get sophisticated. First and second episode is one grouping, third and fourth -- third and higher is another. [0 - 13] falls in the first and second. Greater than 13 falls in the first and second. Same category in the third and fourth. And then there's a 20 plus visit category and that's kind of a general rule almost that explains your detailed question. I mean I would be ready to go into that level of detail but I just want to make clear on the call the complexity of the changes that are part of this 305 day document.

Right now, I mean we actually get around $2000 for 10 therapy visits. Is this saying now you're going to get about [1375] for those 10 to 11 to 13 therapy visits and then that money got shifted somewhere else into either case mix or these later episodes? Is that at least a simplistic starting point for understanding this as [to] how it affects your business or what are we missing there?

The short answer to your question is no, because your therapy now determines which of those categories you go into and then it's combined with the clinical condition of the patient that's receiving therapy which turns into a case mix scoring. So it's not as easy as just looking at therapy independently and throwing your dollars that you're talking about.

And then my last question is as you guys go back to CMS, what is the strategy look like? Are we going to lobby Congress to restore full market basket? Are we going to rail against the sheer complexity of this thing? Are we going to go after the case mix? Do we think they have full data on the case mix? What's kind of the early return on how you guys are looking at this thing?

I'm just thinking about your industry with all these mom and pops trying to absorb this monster, this Hydra headed monster, and I just wonder how they're going to do that?

John, this is Bill. The short answer is we're going to do all the above in reference to a push. You know, we want to demand clarity on some of the data inconsistencies to fully understand the impact of them. We certainly have a lot of communication that's been going on with Congress over the last month and I knew [Mac] is making the big push on that. We really want clarity on the whole reimbursement piece.

The good news is that the industry has been straddled with uncertainty for quite while. And we think when this is all over with, hopefully, with good communications with CMS we can resolve that. The ultimate impact, as we've said, we're not going to know until it's a final final. But we think that when it's all said and done hopefully a lot of the uncertainties will be eliminated.

As far as the consolidation, as you are aware in 1997 Amedisys was not even a home health contender. And today it's my belief that we're the market leader. So these type of changes are -- won't fare very well for the unsophisticated players that don't have the resources or the technology background or the automation that Amedisys has. So, the more brutal the changes that stay in places, the better off for a successful consolidator such as ourselves. The industry needs to pay attention to that because it's going to eliminate some of the potential service in the small markets.

And then I'm sorry, is this going to put your acquisition program on hold? Because how do you model out of acquisition without knowing how these rules affect the future EBITDA?

Well, certainly the big acquisitions we want to put on hold until we get clarity. The small acquisitions might not to be as relevant but you probably are not going to see a whole lot until we get a little better clarity, maybe a tuck in or two until that happens.

Don Hooker, UBS.

Thanks for taking my call. Just sort of a non-CMS question regarding the Dyna Care acquisition. Can you talk about the profitability of that company? As you seemed to indicate, there's a bunch of earnings coming out of there for 2007. Are there any unusual large integration costs or how is that coming along?

I will talk about it in general terms and I'll use -- in my script I kind of model out the acquisition revenue we have done in the last 12 months. Historically acquisitions in Dyna Care won't be materially different. They're ranging anywhere from 0 to a 10% contribution margin first and second quarter out of the gate. It usually takes us until the third, fourth and fifth quarter to increase that.

As a reminder, Housecall started out at 10% and in the fourth quarter of last year they finished at 26%. And I think they're right around 27% now. So you get that migration, which is an important point of why initially the first, second, third quarter we don't think they add material to earnings and we put that in our press releases and that's why you're hearing that about Dyna Care. Dyna Care is noted as a profitable entity so it's not starting out in the negative.

I guess one last little detailed question in terms of your sales force and labor pool. Where are you in terms of the number of salespeople and part-time labor?

This is a guesstimate but we've got around 490 salespeople in our organization across all of our locations, and full-time, part-time all in around 7,000 employees; full-time maybe around 4,500 to 5,000.

So no major hiring in the recent quarter?

Other than normal growth [startups], that type of thing.

David MacDonald, SunTrust.

A couple of questions. One just first on the Point of Care rollout. Can you just remind us when we should expect that to be completely done? And then, Larry, can you talk a little bit about are you seeing any of that $1 million to $1.5 million of cost savings or is the rollout kind of offsetting that at this point? And in addition to cost savings, do you also expect to see some retention benefit on [folks are] trained here and this kind of makes their life easier. And then just have one other follow-up.

Sure, on the Point of Care, specifically through the end of April, we're about a little over 200, I think 205 agencies, and we have 273, so you can do the math. We have about 70 agencies. But it's important to note that every time we do a startup and every time we do an acquisition, we convert those, the month we do the startup or the month we do the acquisition, to the Point of Care. So the completion date is a little hard to pinpoint to a precise month because of that variable.

If we had no more startups and no more acquisitions, we would complete this in the third quarter. It may run a little bit into the fourth quarter due to startups and acquisitions. On the specific question about savings, I have articulated that once we are done by the fourth quarter it would be $1 million to $1.5 million per quarter. In the first quarter, we recognize about $500,000 of net savings.

On the retention question, I think we're little too early for me to give you a precise number on how I think that's going to impact our retention. But clearly we think it's going to increase the satisfaction of the nurses once they've gotten over the learning curve.

And then just one quick follow-up on Dyna Care. You know, I think they've got six locations within 30 or 40 miles of Chicago. Can you talk about the Chicago market? Anything new, anything different with Chicago market relative to some of the traditional markets themselves?

They've got six locations in and around the Chicago market. Some very small, a few pretty good size. The market is similar to any other major metropolitan market we've serviced, whether that be in Atlanta or Houston. So there is no huge differences there. We are excited about the hospital partnership opportunity down the road in the Chicago metropolitan market. So that's clearly a good demographic market for us to be in.

(OPERATOR INSTRUCTIONS) Bill Bonello, Wachovia.

Yes, just a couple of questions. I guess the first one is, I'm a little confused by Larry's explanation of the home health rule. I guess we had been under the impression that clinical and functional components of the HHRG's were essentially unchanged and that the change was pretty much isolated the service component. Is that a misreading?

The short answer is yes, that would be a misreading. Specifically, there were 23 questions that had to determine revenue; now there's 55. They are linking primary and secondary diagnosis together. So that the questions are more interactive to determine your scoring than they have been in the past. They have eliminated -- I could give you a couple of pieces they've eliminated; six significant change of condition, that's no longer a part of this. They eliminated Rule 175, which you've heard talked about, which is where you come from, whether you come from a hospital or a nursing home. So there's been more changes than just the therapy component.

That makes sense. And then maybe in light of that your answer to this next question is going to be no, or maybe it would be no anyway. But, have you considered giving any more of the detailed breakout on your distribution of therapy visits than you did in the past? I know in the past you were -- I was willing to say what met the 10 threshold because that was sort of the relevant -- is there any way that you'd give more of a distribution than that?

Certainly not at this time because we're not going to release information in a vacuum. We're going to understand this thing in its entirety and have it tested out and understand a little bit more what the final rule is going to look like before we give any more detailed clarity. So the short answer is no. And Bill, I want to take this opportunity to [finish] on our acquisition comments. I think if you added up our acquisitions that we've done through the end of April, it comes in the neighborhood of $25 million, $26 million in revenue. We still will do acquisitions on a smaller scale. The larger acquisitions that potentially we could close later in the third quarter, early fourth quarter, possibility of that. While I can't predict when we'll close acquisitions, I still feel fairly comfortable in the thing we articulated here in the equity raise, is our plan was to do $30 million to $40 million in acquisitions in the first part of the year and $30 million to $40 million of acquisitions the second part of the year. Now I can't predict what acquisitions are going to occur and we're certainly going to take into consideration the reimbursement changes and when we're negotiating pricing, especially on the larger acquisitions. But we are not going to stop doing acquisitions. We will continue to take advantage of the markets that look attractive to us as we spot them out.

Okay, well, I asked my two questions so I'll hop back in the queue. Thank you.

Brian Tanquilut, Jefferies and Co.

Guys, just a couple of questions. Larry, last quarter you talked about sort of the margin expectation for the year. In the EBITDA line you mentioned something like 15.5% to about 16%. Q1 came out of 15.3. I know you've got the Point of Care going, starting to benefit Q2, Q3 and Q4. Are you maintaining this guidance on the margin side?

Yes, I think 15.5% to 16% is a reasonable estimate. Obviously, our goal is to be as efficient as we can be over time. But if you were modeling, that's a reasonable estimate.

My next question is as you go beyond your core southeastern focus or you're going up to Michigan and all these new states. How should we think about the margin profile of the new states that you're entering or the new states that you're looking at?

That's a good question. I haven't segmented the country out down to the margin level but I would think relatively similar at this point, without taking into consideration the new case mix refinements, relatively similar to what you've been seeing.

Balaji Ghanhi, Oppenheimer and Company.

I just had two questions. Firstly, Larry, if you could help me with something technical in the rule. The piece where they're changing the labor and non-labor percentages. I'm just trying to get a better handle, what do you guys submit claims for that's in the non-labor portion?

That's for the wage index. They come up with the labor and the non-labor portion. And on the labor portion it's just to calculate what percentage gets wage index adjusted. Non-labor might be [5] mileage, other costs associated items is the way they split that out of doing a visit.

Great, and then second question is more big picture. I don't know who can answer it, but you talked about the comments you made when you did the equity raise. Then you talked about what you're targeting for acquisitions. It would still leave you with, I don't know, I'm getting maybe $50 million, $60 million in cash on the balance sheet. Is that kind of a number that you feel you need to have in cash to run the business? Or is there some other use for that cash?

No other known use for that cash. And again, we can't predict what month or when we'll do an acquisition. I just want to articulate that we are still in an inquisitive mode and what we talked about in the raise of the number of acquisitions we would like to see happen. So there's no particular use of that $50 million to $60 million. I assume you're getting that by taking my $30 million to $40 million of acquisition number each of the first half and second half and coming back with that number. And you are correct. If that's what we did, we would have significant cash still left on the balance sheet for further acquisition opportunities.

So, I guess what I'm trying to get at is what kind of numbers are we thinking about that you'd like to kind of have on the balance sheet in cash? Going back historically it was obviously a lot less than 50 or 60.

Yes, well, we were a lot smaller then. And we have to come up with a precise number. We're more concerned about our overall liquidity. And given the fact that we have articulated in the past that internally, management is comfortable with a two-times leverage well into $150 million of leverage where we would be comfortable going forward. So we don't think liquidity is a near-term concern.

This is Dale. There's a capital management issue here too, and we don't need $50 million or $60 million from a pure liquidity standpoint. But our mission here is to manage the capital that the market has given us and employ that in a reasonable and prudent manner when we're going forward.

Your final question is coming from John Ransom of Raymond James.

You know what, I think my question was just answered because I couldn't think of the other one. I'll catch up with you after the call. Thanks.

John, that was the easiest question anybody has ever asked.

And it was probably the worst question on the call. Thank you.

Thank you, John.

Thank you. I would now like to turn the floor over to Mr. Borne for any closing remarks.

Thank you, operator. We certainly appreciate everybody calling in this morning. We look forward to moving forward and getting clarity on the new reimbursement and sharing it with the community as soon as we feel comfortable with doing that. And we look forward to our next quarterly conference call. You all have a great day.

Thank you. This concludes today's Amedisys first quarter 2007 investors conference call. You may now disconnect.