<PAGE>
***Conformed***
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended August 31, 1994
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from _________ to _________
Commission File Number 0-3997
GERIATRIC & MEDICAL COMPANIES, INC.
(Exact name of registrant as specified in the charter)
Delaware 23-1713341
(State or other (IRS Employer Identification
jurisdiction of Number)
incorporation or organization)
5601 Chestnut Street, Philadelphia, Pennsylvania 19139
(Address of principal executive offices) (zip code)
(215) 476-2250
Registrant's telephone number, including area code
N/A
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
On October 14, 1994, there were 15,202,629 shares of common stock, $.10 par
value, outstanding.
<PAGE>
GERIATRIC & MEDICAL COMPANIES,
INC. AND SUBSIDIARIES
INDEX
Part I Financial Information Page
Item 1 Financial Statements
Consolidated Balance Sheets ---
August 31, 1994 (unaudited)
and May 31, 1994 3
Consolidated Statements of
Operations (unaudited) ---
Three months ended August 31, 1994
and August 31, 1993 4
Consolidated Statements of
Cash Flows (unaudited) ---
Three months ended August 31, 1994
and August 31, 1993 5
Notes to Consolidated Financial Statements 6-7
Item 2 Management's Discussion and Analysis of Results
of Operations and Financial Condition 8-11
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K 12
Signature 13-14
Exhibit 27 - Article 5 FDS 15
2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1 GERIATRIC & MEDICAL COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PAR VALUES AND SHARES)
<TABLE>
<CAPTION>
AUGUST 31,
1994 MAY 31,
(UNAUDITED) 1994
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 291 $ 927
Restricted cash 378 837
Patients' funds 312 311
Accounts receivable, net of allowance of $6,485 at August 31, 1994 and $6,776 at May
31, 1994 20,917 20,716
Other receivables, net of allowance of $975 5,123 5,555
Prepaids and other assets 4,385 4,039
Inventories 4,102 4,204
Due from third-party payors, net of allowance of $3,998 at August 31, 1994 and $3,877
at May 31, 1994 9,325 9,314
----------- -----------
Total current assets 44,833 45,903
----------- -----------
Property and equipment:
Land 3,702 3,702
Building and improvements 89,702 89,471
Equipment and fixtures 36,629 36,248
Construction-in-progress 11,699 10,591
----------- -----------
141,732 140,012
Less accumulated depreciation 55,474 53,688
----------- -----------
86,258 86,324
----------- -----------
Other noncurrent assets:
Restricted cash 5,881 7,090
Investments in joint ventures 582 582
Goodwill net of accumulated amortization of $258 at August 31, 1994 and $245 at May
31, 1994 2,174 2,236
Notes and other receivables 10,274 10,432
Deferred charges and other, net of amortization of $2,573 at August 31, 1994 and
$4,130 at May 31, 1994 10,285 10,157
----------- -----------
29,196 30,497
----------- -----------
$ 160,287 $ 162,724
=========== ===========
LIABILITIES
Current Liabilities:
Current portion of long-term debt and subordinated debentures $ 2,017 $ 2,026
Accounts payable 16,518 16,943
Accrued expenses 7,847 9,937
----------- -----------
Total current liabilities 26,382 28,906
Other long-term liabilities 3,438 3,438
----------- -----------
Long-term debt 118,692 119,343
----------- -----------
Deferred income 492 492
----------- -----------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $.10 par, authorized 15,000,000 shares; none were issued or
outstanding -- --
Common stock, $.10 par, authorized 30,000,000 shares in 1995 and 1994; issued and
outstanding 15,202,629 and 15,159,661 at August 31, 1994 and May 31, 1994,
respectively 1,520 1,516
Capital in excess of par value 14,595 14,601
Accumulated deficit (4,832) (5,572)
----------- -----------
11,283 10,545
----------- -----------
$ 160,287 $ 162,724
=========== ===========
</TABLE>
3
<PAGE>
GERIATRIC & MEDICAL COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per common share)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31,
--------------------
1994 1993*
--------- ---------
<S> <C> <C>
Operating revenues, net $ 45,975 $ 43,053
--------- ---------
Expenses:
Operating expenses 39,105 36,293
Depreciation and amortization 2,078 2,167
Interest expense, net 2,720 2,899
Provision for costs on sale of accounts receivable 1,152 731
--------- ---------
45,055 42,090
--------- ---------
Income before income taxes 920 963
Income taxes 180 241
--------- ---------
Net Income $ 740 $ 722
--------- ---------
--------- ---------
Earnings per common share: $ 0.05 $ 0.05
--------- ---------
--------- ---------
Average common shares outstanding 15,179 15,290
--------- ---------
--------- ---------
</TABLE>
*Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
4
<PAGE>
GERIATRIC & MEDICAL COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED AUGUST 31, 1994 AND AUGUST 31, 1993
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 740 $ 722
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Provision for uncollectible accounts 1,085 531
Depreciation and amortization 2,093 2,167
(Increase) decrease in patients' funds and other, net (1) 3
Increase in accounts receivable (1,286) (3,779)
(Increase) decrease in other receivables 432 (1,014)
(Increase) decrease in prepaids and other assets and inventories (244) 235
Increase in net amounts due from third party payors (11) (1,613)
Increase (decrease) in accounts payable and accrued expenses (2,515) 2,508
--------- ---------
Net cash provided by (used in) operating activities 293 (240)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (942) (647)
Capital expenditures financed by construction
and property improvement funds (806) (971)
Increase in joint ventures, net -- (68)
Decrease in notes and other receivables 158 34
Other investing activities, net 183 (423)
--------- ---------
Net cash used in investing activities (1,407) (2,075)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 1,275 3,431
Repayment of debt and subordinated debentures (1,935) (3,010)
Decrease in restricted cash 1,668 3,054
Expenditures for deferred charges (546) (192)
Proceeds from issuance of common stock 16 --
--------- ---------
Net cash provided by financing activities 478 3,283
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (636) 968
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 927 2,845
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 291 $ 3,813
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 3,891 $ 4,188
Income taxes $ 37 $ 15
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
GERIATRIC & MEDICAL COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Principles of Consolidation and Presentation:
In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of normal recurring
accruals) necessary to present fairly the financial position as of August 31,
1994 and May 31, 1994, and the results of operations for the three months ended
August 31, 1994 and August 31, 1993 and changes in cash flows for the three
months ended August 31, 1994 and August 31, 1993. These financial statements
should be read in conjunction with Geriatric & Medical Companies, Inc's (the
'Company') annual report filed with the Securities and Exchange Commission for
the year ended May 31, 1994. Results of operations for the three months ended
August 31, 1994 and August 31, 1993 are not necessarily indicative of results of
operations expected for the full year.
2. Accounts Receivable:
Effective November 4, 1993, the Company entered
into a three year $25,000,000 accounts receivable sale agreement with recourse
with a financial institution, retiring its previous arrangement. The Company
may sell, on a continuing basis, up to $25,000,000 of certain qualifying
accounts receivable. The Company initially receives, net of reserves,
approximately 80% of accounts receivable submitted. This transaction has been
accounted for as a sale under Financial Accounting Standards Board Statement No.
77 guidelines but may be treated as a financing (borrowing) transaction for
Medicare/Medicaid purposes.
Under the terms of the agreement, the Company will pay program costs at 9.84%
on the outstanding receivables sold. During the three month period ended August
31, 1994 and 1993, the Company sold approximately $26,777,000 and $23,251,000,
respectively, of certain qualifying accounts receivables. As of August 31, 1994
and 1993, the balance of the receivables submitted for sale was approximately
$17,591,000 and $19,994,000 of which approximately $14,073,000 and $15,907,000
were funded. The unfunded portion is included in other receivables on the
balance sheet.
In May 1994, the Company entered into an agreement to sell certain long-term
receivables due from third-party payors. The program costs charged are 9.75% of
the outstanding receivables sold. The maximum amount of cash available under
this agreement is $5,000,000. During the three month period ended August 31,
1994, the Company sold approximately $928,000 of certain qualifying accounts
receivables. The Company receives, net of reserves, approximately 80% of the
long-term third-party payor receivables sold. As of August 31, 1994 the balance
of the receivables submitted for sale was approximately $1,555,000. The
unfunded portion is included in other receivables on the balance sheet.
6
<PAGE>
For the three months ended August 31, 1994 and 1993, the Company has
recognized a provision for costs on sale of accounts receivable of $1,152,000
and $731,000 respectively. The provision for costs on sale of accounts
receivable consists of : (A) program and other costs incurred on receivables
sold and (B) servicing costs relating to the collection of receivables
sold. Under the sale agreement, the Company continues and is required to
service the accounts receivable sold.
3. Commitments and Contingencies:
In September, 1992 a class action law suit was commenced against the Company,
GMS Management, Inc., and various current or former officers of the Company in
the United States District Court for the Eastern District of Pennsylvania. The
Complaint alleges that, among other things, various reports and press releases
issued by the Company misrepresented and omitted to state adverse material facts
concerning the quality of care given at two of the Company's nursing homes. The
plaintiff did not seek a specified sum other than 'to pay to plaintiff and to
all members of the class damages in an amount to be proven at trial, with
interest thereon.' Although the outcome cannot be predicted, the Company and
the individual defendants deny any wrong doing and are vigorously defending this
action. Trial in this law suit is scheduled to commence in October, 1994 and
has been postponed by the court pending its rulings on various motions.
The Company is involved in various routine government inquiries, audit surveys
and administrative proceedings concerning its activities and operations.
The Company is also involved in various claims and legal actions arising in
the ordinary course of business. The Company believes that the ultimate
disposition of all of these matters will not have a material adverse effect on
the Company's Consolidated Financial Statements.
7
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
INTRODUCTION
Geriatric & Medical Companies, Inc., Inc., (hereinafter, together
with its subsidiaries, referred to as the 'Company') is a holding company which
effective June 1, 1994 conducts its business through Life Support Medical,
(LSM). LSM provides a broad line of healthcare support services through various
subsidiaries of the Company as follows:
o Life Support Ambulance a transportation company, Accredited by the Commission
on Accreditation of Ambulance Services provides a full range of services,
including basic life support, advanced life support, critical care transport
and coach transportation.
o United Health Care Services is a joint commission accredited and FDA approved
company providing infusion therapy, hi-tech respiratory therapy, durable
medical equipment and home medical supplies.
o Innovative Pharmacy Services provides prescription services, Medicare Part B
Billing, enteral Nutrition products, infusion therapy and services
approximately 6,200 beds with various products and services.
o Healthcare Hospitality Services is a provider of contract management services,
including dietary, housekeeping, laundry, pest control, and plant operations
to approximately 6,600 beds.
o Rehab Technologies provides portable x-ray, holter monitoring, ultra sound,
and echocardiograms through its Diversified Diagnostic Division and manages
rehab departments and provides physical, speech and occupational therapy to
approximately 42 long term care facilities. For fiscal 1995, this company is
developing a specialized care concept to provide their management capability
and resources to market and develop units for subacute care.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Continued)
o Geriatric & Medical Services, Inc. is a provider of long-term skilled care
residential and independent living and sub-acute specialized services in
Pennsylvania and New Jersey. Through approximately 4,000 beds it currently
operates, it provides an important product line to the entire spectrum of
services marketed to HMO's and other managed care providers.
Results of Operations
Consolidated net operating revenues for the three months ended August 31, 1994
are $45,975,000 as compared to $43,053,000 for the three months ended August 31,
1993, an increase of $2,922,000 or 6.8%. The Company estimates its
consolidated operating revenues from various payor sources as follows:
Medicare 15%
Medicaid 58%
Private insurance and institutions 27%
The increased operating revenue is the result of $1,452,000 related to rate
increases, $116,000 from improved census and added revenue of $1,354,000 from
subsidiaries of LSM.
Operating expenses for the first quarter of fiscal 1994 are $39,105,000
compared to $36,293,000 for the same period last year an increase of $2,812,000
or 7.7%. The increase principally relates to the effects of inflation and
increased expenses related to higher revenues in the first quarter of fiscal,
1995.
Depreciation and amortization decreased $89,000 as a result of a decrease in
amortization of financing costs for debt.
Interest expense decreased $179,000 principally as a result of the early
repayment of $2,868,000 of 16% debentures during fiscal, 1994.
The increase in the provision for costs on sale of accounts receivable is a
result of utilization under receivable funding agreements resulting in
additional program charges.
Income tax decreased $61,000 or 5% of pretax income resulting from the effect
of net operating losses being realized and recorded in the first quarter of
fiscal, 1995.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Continued)
Liquidity and Capital Resources
During the first quarter of fiscal 1994, the Company refinanced approximately
$1,315,000 of industrial development bonds, which allowed the Company to replace
cash collateralized letters of credit with other property. This resulted in
additional working capital of $1,197,000 during the first quarter of fiscal
1994.
In November, 1993, the Company entered into a $25,000,000 accounts
receivables sale agreement, with recourse. This is a three year agreement with
program costs charged at 9.84% of the outstanding receivables sold. The Company
accounts for this as a sale of receivables. On May 19, 1994 the Company entered
into an additional agreement to sell certain long-term receivables due from
third party payors. The program cost charged is 9.75% of outstanding amounts
sold. The maximum amount of cash available under this agreement is
$5,000,000. The agreement expires in November, 1997. The Company has accounted
for these transactions as a sale of receivables (See Note 2 to the Notes to
Consolidated Financial Statements.)
The Company redeemed $2,868,000 of 16% subordinated debentures due December
31, 1994 on February 1, 1994 at par plus accrued interest. The Company funded
this redemption through the collection of outstanding accounts receivables.
A substantial part of the Company's revenues consists of reimbursements under
the Pennsylvania Medicaid Program, a retrospective cost based program that
typically results in the generation of large receivables which are periodically
settled. Pennsylvania had planned to switch to a prospective Medicaid
reimbursement system effective January, 1994 which did not occur. It is not
known whether Pennsylvania will institute a prospective system during fiscal
1995 and the effects of the final plan on the cash flow or operations of the
Company are not known. The Company anticipates the Commonwealth of Pennsylvania
increasing its rates as of July, 1994 and also anticipates Pennsylvania will pay
tentative settlements on its fiscal 1994 cost reports during fiscal 1995.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Continued)
At August 31, 1994, the Company has restricted cash of approximately $467,000
to be used for capital improvements and construction projects. In addition to
the capitalized improvements which will be funded from the restricted cash
account the Company anticipates commencing construction on two facilities in
fiscal 1995 for a total cost of $13,188,000. The Company has tentative
commitments for $11,240,000 to finance construction. Of the remaining amount,
approximately $1,250,000 has been funded and approximately $700,000 will need to
be funded by the Company.
The Company reached a tentative settlement with the Office of the United
States Attorney for the Eastern District of Pennsylvania regarding the joint
venture and management arrangements of its subsidiary United Health Care
Services, Inc. whereby the Company will pay $320,000 by September 30, 1994,
$340,000 by September 30, 1995 and $440,000 by September 30, 1996.
The Company intends to meet its capital commitments and working capital
requirements in fiscal 1995 from operations, existing financing arrangements
including the $25 million and $5.00 million receivable sale agreement, or the
sale or refinancing of other assets.
11
<PAGE>
PART II OTHER INFORMATION
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 -- Article 5 FDS.
(b) Reports on Form 8-K
None.
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GERIATRIC & MEDICAL COMPANIES, INC.
October 17, 1994 By: /s/ James J. O'Malley
------------------------------------------
James J. O'Malley
Vice President and Chief Financial Officer
13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GERIATRIC & MEDICAL COMPANIES, INC.
December 8, 1994 By: /s/ James J. O'Malley
------------------------------------------
James J. O'Malley
Vice President and Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> AUG-31-1994
<CASH> 291,000
<SECURITIES> 0
<RECEIVABLES> 46,823,000
<ALLOWANCES> 11,458,000
<INVENTORY> 4,102,000
<CURRENT-ASSETS> 44,833,000
<PP&E> 141,732,000
<DEPRECIATION> 55,474,000
<TOTAL-ASSETS> 160,287,000
<CURRENT-LIABILITIES> 26,382,000
<BONDS> 0
<COMMON> 1,520,000
0
0
<OTHER-SE> 9,763,000
<TOTAL-LIABILITY-AND-EQUITY> 160,287,000
<SALES> 45,975,000
<TOTAL-REVENUES> 45,975,000
<CGS> 0
<TOTAL-COSTS> 40,098,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,237,000
<INTEREST-EXPENSE> 2,720,000
<INCOME-PRETAX> 920,000
<INCOME-TAX> 180,000
<INCOME-CONTINUING> 740,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 740,000
<EPS-PRIMARY> .05
<EPS-DILUTED> 0
</TABLE>
