SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended November 30, 1995
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 jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
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 January 12, 1996, there were 15,416,683 shares of common stock,
$.10 par value, outstanding.
GERIATRIC & MEDICAL COMPANIES,
INC. AND SUBSIDIARIES
INDEX
Part I Financial Information Page
Item 1 Financial Statements
Consolidated Balance Sheets ---
November 30, 1995 (unaudited)
and May 31, 1995 3
Consolidated Statements of
Operations (unaudited) ---
Three and Six months ended November 30, 1995
and November 30, 1994 4
Consolidated Statements of
Cash Flows (unaudited) ---
Six months ended November 30, 1995
and November 30, 1994 5
Notes to Consolidated Financial Statements 6-9
Item 2 Management's Discussion and Analysis of Results of
Operations and Financial Condition 10-14
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K 15
Signature 16
Exhibit 27 - Article 5 FDS 17
2
PART I FINANCIAL INFORMATION
ITEM 1 GERIATRIC & MEDICAL COMPANIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PAR VALUES AND SHARES)
<TABLE>
<S> <C> <C>
November 30, May 31,
1995 1995 *
ASSETS (Unaudited)
Current Assets:
Cash $ 487 $ 3,368
Restricted cash 704 715
Patients' funds 1,401 1,388
Accounts receivable, net of allowance
of $8,858 at November 30, 1995 and
$7,733 at May 31, 1995 36,596 24,145
Other receivables, net of allowance
of $975 5,418 5,919
Prepaids and other assets 3,446 6,622
Inventories 4,180 5,154
Due from third-party payors, net of
allowance of $4,299 at November 30,
1995 and $3,391 at May 31, 1995 14,236 13,948
Total current assets 66,468 61,259
Property and equipment:
Land 3,614 3,702
Building and improvements 99,711 99,971
Equipment and fixtures 39,079 38,299
Construction-in-progress 10,184 5,259
152,588 147,231
Less accumulated depreciation 63,196 59,293
89,392 87,938
Other noncurrent assets:
Restricted cash 2,911 3,021
Investments in joint ventures 385 385
Goodwill net of accumulated amortization
of $430 at November 30, 1995 and
$359 at May 31, 1995 2,498 2,567
Notes and other receivables 9,504 11,132
Deferred charges and other, net of
accumulated amortization of $3,237
at November 30, 1995 and $2,891
at May 31, 1995 9,938 10,415
25,236 27,520
$ 181,096 $ 176,717
November May 31,
1995 1995 *
LIABILITIES (Unaudited)
Current Liabilities:
Current portion of long-term debt $ 3,077 $ 2,906
Accounts payable 20,739 23,770
Accrued expenses 11,570 10,151
Total current liabilities 35,386 36,827
Other long-term liabilities 2,949 3,090
Long-term debt 124,111 120,660
Subordinated debenture 1,000 1,000
Deferred gains 492 492
Commitments and contingencies
STOCKHOLDERS' EQUITY (DEFICIT)
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 15,416,183 as of
November 30, 1995 and 15,244,261
as of May 31, 1995 1,542 1,524
Capital in excess of par value 14,730 14,643
Accumulated earnings (deficit) 886 (1,519)
17,158 14,648
$ 181,096 $176,717
</TABLE>
* Reclassified for comparative purposes
See accompanying notes to consolidated financial statements.
GERIATRIC & MEDICAL COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per common share)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1995 1994 1995 1994
Operating Revenues, net $ 49,506 $ 47,782 $ 98,915 $ 93,757
Expenses:
Operating expenses 41,658 40,850 83,263 79,955
Depreciation and amortization 2,252 2,074 4,493 4,152
Interest expense, net 2,991 2,648 5,973 5,368
Provision for costs on sale
of accounts receivable 984 928 2,059 2,080
47,885 46,500 95,788 91,555
Income before income taxes 1,621 1,282 3,127 2,202
Income taxes 373 257 722 437
Net Income $ 1,248 $ 1,025 $ 2,405 $ 1,765
Earnings per common share $ 0.08 $ 0.07 $ 0.16 $ 0.12
Average common shares
outstanding 15,313 15,196 15,313 15,196
</TABLE>
See accompanying notes to consolidated financial statements.
GERIATRIC & MEDICAL COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED NOVEMBER 30, 1995 AND NOVEMBER 30, 1994
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<S> <C> <C>
1995 1994 *
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,405 $ 1,765
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Provision for uncollectible accounts 2,019 2,039
Depreciation and amortization 4,493 4,152
Other items 350 -
Changes in assets and liabilities,
net of effects from acquisitions:
Increase in patients' funds (13) (895)
Increase in accounts receivable (14,470) (3,110)
Decrease in other receivables 501 87
Decrease in prepaids and other assets
and inventories 4,150 228
(Increase) decrease in net amounts
due from third-party payors (288) 452
Decrease in accounts payable and
accrued expenses (1,612) (2,517)
Decrease in other long-term liabilities (141) (278)
Net cash (used in) provided by operating
activities (2,606) 1,923
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (640) (1,383)
Capital expenditures financed by construction
and property improvement funds (4,867) (1,535)
Decrease in notes and other receivables 1,628 351
Acquisitions of ambulance companies, net of
cash acquired - (364)
Other investing activities, net 530 234
Net cash used in investing activities (3,349) (2,697)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 4,867 2,535
Repayment of debt (1,569) (2,942)
Decrease in restricted cash 121 1,325
Expenditures for deferred charges (355) (682)
Proceeds from issuance of common stock 10 24
Net cash provided by financing 3,074 260
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,881) (514)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,368 927
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 487 $ 413
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 8,172 $ 8,073
Income taxes $ 313 $ 91
SUPPLEMENTAL SCHEDULE OF NONCASH ITEMS:
Assets acquired under capital leases $ 324 $ 607
Acquisitions of ambulance companies:
Fair value of assets acquired $ - $1,911
Cash paid and debt issued - (1,593)
Liabilities assumed $ - $ 318
</TABLE>
* Reclassified for comparative purposes
See accompanying notes to consolidated financial statements.
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 November 30,
1995 and May 31, 1995, and the results of operations for
the three and six months ended November 30, 1995 and
November 30, 1994 and changes in cash flows for the six
months ended November 30, 1995 and November 30, 1994.
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, 1995.
Results of operations for the three and six months ended
November 30, 1995 and November 30, 1994 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
submitted and sold. During the six month period ended
November 30, 1995 and 1994, the Company submitted and
sold approximately $55,612,000 and $54,298,000,
respectively, of certain qualifying accounts receivables.
As of November 30, 1995 and 1994, the balance of the
receivables submitted for sale was approximately
$15,958,000 and $16,852,000 of which approximately
$12,766,000 and $13,482,000 were funded. The unfunded
portion is included in other receivables on the balance
sheets.
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 submitted and sold. The maximum
amount of cash available under this agreement is
$5,000,000. The Company received, net of reserves 80% of
net third party receivables sold. During the six month
period ended November 30, 1995 and 1994, the Company
submitted and sold approximately $3,000,000 and
$3,103,000 of certain qualifying accounts receivables.
As of November 30, 1995 and 1994 the balance of the
receivables submitted for sale was approximately
$3,150,000 and $2,938,000, respectively.
For the six months ended November 30, 1995 and 1994, the
Company has recognized a provision for costs on sale of
accounts receivable of $2,059,000 and $2,080,000
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:
All of the following are updates of committments and
contingicies previously disclosed:
A. Geriatric & Medical Companies, Inc. (the "Company") was
named a defendant, together with GMS Management, Inc.,
and various current and former officers of the Company,
in a class action suit which was filed in September,
1992, in the United States District Court for the Eastern
District of Pennsylvania in Philadelphia. The plaintiff
class alleged that, among other things, various reports
and press releases issued by the Company misrepresented
or omitted adverse material facts concerning various
matters relating to the Company and its affairs. The
plaintiff class 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." The jury returned a verdict on Friday, June 9,
1995, resulting in no liability on five of the six
alleged misrepresentations or omissions set forth in the
plaintiff's complaint. The jury found in favor of the
plaintiff class with respect to the remaining alleged
omission relating to the criminal investigation conducted
by the Pennsylvania Attorney General. Based on the
findings of the jury, the court entered judgment of $.20
per share in damages for each share of the Company's
common stock purchased by a class member during the
period March 1, 1992 to September 2, 1992. The Company
believes that damages in the aggregate, calculated
pursuant to the judgment will not exceed $350,000,
exclusive of costs, pre and post judgment interest and
other charges which may apply.
As a result of the jury's findings, the primary
insurer of the individual defendants, which had
entered into a Funding Agreement under which the
insurer had promised to pay 60% of the legal fees
and other expenses associated with the defense of
this suit, after the retention amount of $250,000
had been paid, sent a letter stating that it was
terminating the Funding Agreement. Accordingly, the
insurer has declined to participate in the payment
of any part of the judgment or additional costs and
fees and expenses to be incurred in this matter and
could seek a repayment of advances already made.
The Company intends to pursue its rights under its
insurance policies and to enforce the Funding
Agreement previously entered into with the insurance
company. All parties have filed post trial motions
in connection with this judgment.
B. Life Support Ambulance, Inc. ("LSA"), a subsidiary of the
Company, received a notice of suspension of payments
relating to Medicare billings submitted by LSA to its
Medicare intermediary effective April 6, 1995. The
suspension was imposed because the intermediary had
received evidence that prior payments made to LSA may not
have been billed correctly. The intermediary has not yet
quantified the nature of the alleged deficiency in
billing procedures nor the amount for which LSA may have
improperly billed Medicare. In connection therewith, the
Office of the Inspector General issued a search warrant
and seized certain records of LSA. Subsequently, the
Company has responded to subpoenas issued by the federal
grand jury investigating this matter. LSA believes that
it has operated, at all times, in substantial compliance
with all provisions required by Medicare relating to
reimbursement for services. On August 11, 1995, LSA
reached an agreement with its Medicare intermediary
whereby Medicare will retain, until resolution of the
issues amounts it was then holding, approximately
$3,100,000 and 25% of future billings processed. In
connection with the agreement, Geriatric & Medical
Companies, Inc. has agreed to guarantee the payment by
LSA of up to $5,000,000 of any finally determined
overpayments. As of November 30, 1995, the amount being
held by the intermediary was approximately $3,800,000.
It is not possible to determine at the present time the
length of the suspension or whether such suspension will
have a material adverse effect on the operations or the
financial condition of the Company.
C. On May 19, 1995, the U.S. Attorney for the Eastern
District of Pennsylvania delivered a draft complaint to
the Company which alleges that Healthcare Hospitality
Services, Inc. ("HCHS"), a subsidiary of the Company,
failed to recommend adequate nutritional requirements to
three residents of a nursing home facility (the
"Facility") previously managed by another subsidiary of
the Company. The draft complaint contains a further
allegation that HCHS billed Medicare and state medical
assistance programs for reimbursement for nutritional
services which were not provided to such residents. The
U.S. Attorney has invited the Company to discuss a
possible resolution of this matter before the filing of
such complaint in federal district court. The Company
has had preliminary discussions with the U.S. Attorney
and believes that this matter may be settled prior to the
filing of such complaint by the payment of an as of yet
unspecified amount, with no admission of wrongdoing.
Although the outcome of this matter can not be predicted,
the Company denies any wrongdoing and is prepared to
vigorously defend this action should the complaint be
filed. The Company's management agreement with the
Facility provides that the Facility indemnify and hold
the Company harmless with respect to claims such as that
alleged by the U.S. Attorney. However, it is unclear
whether the Facility has or would have the funds
necessary to provide such indemnification.
On or about June 6, 1995, an officer of HCHS was
served with a subpoena issued by the Attorney
General of the Commonwealth of Pennsylvania,
relating to the nutritional care provided to
residents of the Facility. In addition, the
Attorney General has subpoenaed certain records of
the Company. It is the belief of counsel for the
Company that such subpoena results from the same
facts surrounding the operations of the Facility as
are alleged in the draft complaint delivered to the
Company by the U.S. Attorney, as discussed above.
At the present time, it is unclear as to what
action, if any, the State Attorney General intends
to take with respect to the Company's management of
and other involvement with this Facility.
The Company is involved in 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
outcome of all of these matters will not have a
material adverse effect on the Company's operations,
financial position and cash flows.
<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 Mid-Atlantic health care company providing
support services to hospitals, HMO's, physician groups and
nursing homes. It also is a major of long term care
services provider in Pennsylvania and New Jersey. The
Company operates through the following companies:
The Operating Companies
Life Support Ambulance (LSA), provides a full range of
ambulance transportation services to hospitals, nursing
homes, rehabilitation centers, and other health care
facilities throughout Pennsylvania and New Jersey. LSA
services include basic life support, advanced life
support, critical care transport and paratransit
transportation. LSA has in place a state of the art
vehicle tracking system enabling it to maximize
efficiencies. This satellite driven system allows LSA
to provide in excess of 8,000 transports monthly. LSA
is one of approximately 45 transportation companies in
the country fully accredited by the Commission on
Accreditation of Ambulance Services.
United Health Care Services (UHCS), provides a full range of
respiratory therapy, infusion therapy and enteral therapy
(delivery of nutrients through feeding tubes) to adult and
pediatric patients primarily in the home care setting and
distributes durable medical equipment and home medical
supplies. UHCS serves its patients through its branches
located in Philadelphia, Reading, Easton, and Pittsburgh,
Pennsylvania and Clifton, New Jersey. UHCS is accredited by
the Joint Commission on the Accreditation of Health Care
Organizations ("JCAHO").
Innovative Pharmacy Services (IPS) is a full service
institutional pharmacy which provides pharmaceutical
services and enteral nutrition products to health care
institutions through its full service pharmacies located in
Philadelphia, Pennsylvania and Blackwood, New Jersey. IPS
also operates a retail pharmacy in west Philadelphia,
Pennsylvania.
IPS currently fills approximately 45,000 prescriptions
each month and provides various products and services
to approximately 5,900 long term care and residential
beds.
Healthcare Hospitality Services (HCHS), provides
contract management services including dietary,
housekeeping, laundry, pest control, plant operations
and facilities management services to nursing homes,
personal care facilities, and retirement communities.
HCHS operates with full time, on site management which
are supported by a regional team of specialists. HCHS
provides such contract services to approximately 6,700
long term care and residential beds.
Diagnostic and Rehab Technologies (DRT) provides
diagnostic and rehabilitative management services
including portable x-ray, Holter monitoring, ultra
sound, echocardiograms, and physical, speech and
occupational therapy, primarily to skilled nursing
facilities. The Diagnostics division provides portable
x-ray, Holter monitoring, ultra sound and
echocardiograms to approximately 6,000 long term care
beds. The Rehab Tech Division provides comprehensive
rehabilitation programs to approximately 4,000 long
term care beds which include physical and occupational
therapists, speech pathologists and administrative
personnel. The division also manages five subacute
medical specialty units, known as Rehab Tech Units.
These units provide rehabilitation, non-acute cardiac
care, wound care, infusion therapy, neurological,
oncology, pulmonary and post surgical care at units
located within long term care facilities.
Geriatric and Medical Services (GMS), provides sub-
acute, rehab, long term skilled care, residential and
independent living services to approximately 4,000 beds
at 28 locations in Pennsylvania and New Jersey. GMS
operates 18 long term care, 8 residential and 2
independent living facilities. Services provided
include the prescribed type of nursing care, room and
board, special diets as needed, occupational, physical
and recreational therapy and other services as
specified by the patient's physician.
The Company is focused on the development of its sub-
acute and specialized care wings. GMS now operates 18
Medicare certified distinct part units with
approximately 350 beds. This includes 5 "Rehab Tech
Units" which provide lower cost alternatives as
compared to acute care settings for rehabilitative and
sub-acute services.
Results of Operations
Net operating revenues for the three months ended
November 30, 1995 were $49,506,000 as compared to
$47,782,000 for the corresponding period of fiscal
1995, an increase of $1,724,000 or 3.6%. Net operating
revenues for the six months ended November 30, 1995
were $98,915,000 as compared to $93,757,000 for the
corresponding period of fiscal, 1995, or an increase of
$5,158,000 or 5.5%
The increases for the three and six month periods ended
November 30, 1995 are primarily a result of bed
additions placed in service during fiscal, 1995, and
revenues generated rate increases resulting from its
Medicare units $1,251,000 and $4,777,000, respectively.
The remaining increases were generated from higher
volumes in certain of the Company's support service
businesses which includes the effect of ambulance
companies acquired during the second and third quarters
of fiscal, 1995.
Operating expenses increased $808,000 and $3,308,000
for both the three and six month periods ended November
30, 1995 as a result of increased volumes and the
effect of ambulance companies acquired during the
second and third quarters of fiscal, 1995. Operating
expenses decreased as a percentage of revenues due to
continued cost containments and efficiencies.
Depreciation and amortization increased $178,000 for
the three months ended November 30, 1995 and $341,000
for the six months ended November 30, 1995 as the
result of depreciation on new beds added and the
acquisition of ambulance equipment in connection with
acquisitions and amortization of goodwill.
Interest expense rose $343,000 for the three months
ended November 30, 1995 and $605,000 for the six months
ended November 30, 1995 when compared to the same
periods of the prior year. This increase is
principally attributed to the debt related to new beds
opened in fiscal, 1995 and interest incurred on the
$1,000,000 subordinated debenture.
Income tax expense increased 15% as a percentage of
pretax income as compared to the same period of the
prior year resulting primarily from the full
utilization of federal net operating loss carryforward
tax credits during fiscal, 1996.
Liquidity and Capital Resources
In November 1993, the Company entered into a $25
million accounts receivable sale agreement, with
recourse. This is a three year agreement with program
costs charged at 9.84% of the outstanding receivables
sold. In May 1994, the Company entered into an
additional agreement to sell certain receivables due
from third-party payors. The program cost charged is
9.75% of outstanding amounts sold. The maximum amount
to be sold under this agreement is $5,000,000. The
amount outstanding at November 30, 1995 under these
agreements was $19,108,000. These agreements expire in
November, 1997. The Company has accounted for these
transactions as a sale but may be treated as a
financing (borrowing) transaction for Medicare/Medicaid
purposes.
On December 28, 1995 the Company entered into a $5,000,000
line of credit agreement with a commercial bank. The line
of credit is secured by certain real estate and private
receivables not sold under the accounts receivable financing
agreement discussed above. Interest on the line is at the
Prime Rate plus 1%. The line is renewable annually and may,
at the Company's option, be converted to a three (3) year
term loan.
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. As
discussed in the next paragraph Pennsylvania is
implementing a new system effective January 1, 1996.
Pennsylvania has adopted regulations, effective January 1, 1996,
to implement a new case-mix payment system which the federal
government mandated in 1987 to replace its retrospective cost
reimbursement system. While the regulations were published in
December 1995, many details of the new system have not been
finalized and implementation of the new system is contingent on
federal review and approval of funding arrangements entered into
with counties (Intergovernment Transfer Agreements) and of the
new system's compliance with federal requirements. The Company
expects that its long term care Medicaid rates in Pennsylvania
under the new system will be lower than under the old system. It
is not possible at this time to determine the net impact of the
new system on the Company's results, since final rates have not
yet been established.
In expectation of the new system, the Company has commenced
steps to reduce costs and continues aggressive program to
reduce its concentration on Medicaid programs and shift to
other payor programs and opportunities. The Company has also
initiated discussions with Pennsylvania officials to qualify
some of its Pennsylvania nursing facilities for rate
exceptions. The Company is also exploring with other
Pennsylvania providers and provider associations possible
litigation to delay or preclude implementation of the new
case-mix payment system for failure to meet federal procedural
and substantive requirements for state Medicaid rates,
including lack of federal approval prior to implementation.
Management believes that the results of these activities will
be to mitigate what could otherwise be a substantial adverse
effect on the Company's results from the implementation of the
new system.
The Company's subsidiary, Life Support Ambulance, Inc. (LSA),
on April 6, 1995 received a notice of suspension of payment
pertaining to Medicare billings submitted to its Medicare
intermediary. The Company believes the suspension was imposed
because of evidence received by the intermediary that prior
payments may not have been billed correctly. LSA believes it
has operated, at all times, in substantial compliance with all
provisions required by Medicare for reimbursement of its
services. On August 11, 1995 LSA reached an agreement with
its Medicare intermediary whereby Medicare will retain, until
resolution of the issues, all amounts being held at the time
of agreement and 25% of future billings processed. (Total
being held at November 30, 1995 was approximately $3,800,000.)
In connection with the agreement, Geriatric & Medical
Companies, Inc. has agreed to guarantee the payment by LSA of
up to $5,000,000 of any finally determined overpayments. It
is not possible to determine at the present time the length of
suspension, or whether such suspension will have a material
adverse effect on the operations or financial condition of the
Company.
The Company reached a settlement in Fiscal 1994, 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 is required to pay $340,000 in
Fiscal, 1996 and $440,000 in Fiscal, 1997.
The Company's net trade receivables have increased
$12,451,000 for the six months ended November 30, 1995
primarily as a result of the suspension of payments to LSA,
discussed above, and a slow down in payment for services
provided to outside long term care facilities. The outside
long term care facilities are experiencing a temporary slow
down in cashflow as they await tentative payment for their
fiscal, 1995 cost reports.
As more fully discussed in Note 3, the Company is a party to
various legal and other matters asserted against the Company.
The ultimate liability resulting from the foregoing matters
cannot presently be determined. Accordingly, no provision for
any liability that may result has been made to the
accompanying consolidated financial statements.
The Company intends to meet its capital commitments and
working capital requirements in fiscal 1996 from operations,
existing financing arrangements, or the sale or refinancing of
other assets.<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.
<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.
January 16, 1996 By:
James J. O'Malley
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 487,000
<SECURITIES> 0
<RECEIVABLES> 70,832,000
<ALLOWANCES> 14,132,000
<INVENTORY> 4,180,000
<CURRENT-ASSETS> 66,468,000
<PP&E> 152,588,000
<DEPRECIATION> 63,196,000
<TOTAL-ASSETS> 181,096,000
<CURRENT-LIABILITIES> 35,386,000
<BONDS> 0
<COMMON> 1,542,000
0
0
<OTHER-SE> 15,616,000
<TOTAL-LIABILITY-AND-EQUITY> 181,096,000
<SALES> 98,915,000
<TOTAL-REVENUES> 98,915,000
<CGS> 0
<TOTAL-COSTS> 85,737,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,078,000
<INTEREST-EXPENSE> 5,973,000
<INCOME-PRETAX> 3,127,000
<INCOME-TAX> 722,000
<INCOME-CONTINUING> 2,405,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,405,000
<EPS-PRIMARY> .16
<EPS-DILUTED> 0
</TABLE>
