<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 December 31, 1996
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: 1-11666
GENESIS HEALTH VENTURES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 06-1132947
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
148 West State Street
Kennett Square, Pennsylvania 19348
(Address, including zip code, of principal executive offices)
(610) 444-6350
(Registrant's telephone number including area code)
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 February 7, 1997, 34,921,063 shares of common stock
outstanding
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TABLE OF CONTENTS
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Page
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Part I: FINANCIAL INFORMATION
Item 1. Financial Statements.............................................................1
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations .......................................................6
Part II OTHER INFORMATION
Item 1. Legal Proceedings...............................................................10
Item 2. Changes in Securities...........................................................10
Item 3. Defaults Upon Senior Securities.................................................10
Item 4 Submission of Matters to a Vote of Security Holders.............................10
Item 5. Other Information...............................................................10
Item 6 Exhibits and Reports on Form 8-K................................................10
SIGNATURES .......................................................................................11
</TABLE>
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Genesis Health Ventures, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31, September 30,
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1996 1996
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Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents $ 8,140 $ 12,763
Accounts receivable, net of allowance for doubtful accounts of
$34,977 at December 31, 1996 and $11,131 at September 30, 1996 185,168 141,716
Cost report receivables 55,465 41,575
Inventory 22,974 17,051
Prepaid expenses and other current assets 25,829 19,616
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Total current assets 297,576 232,721
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Property, plant, and equipment 604,705 416,766
Accumulated depreciation (72,662) (65,837)
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532,043 350,929
Notes receivable and other investments 97,982 92,574
Other long-term assets 48,169 24,595
Goodwill and other intangibles, net 306,287 249,850
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Total assets $1,282,057 $950,669
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses $97,378 $ 73,084
Current installments of long-term debt 6,582 3,720
Income taxes payable 5,265 426
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Total current liabilities 109,225 77,230
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Long-term debt 578,836 338,933
Deferred income taxes 15,465 13,812
Deferred gain and other long-term liabilities 10,077 6,086
Shareholders' equity:
Common stock, par $.02, authorized 60,000,000 shares, issued and
outstanding 35,180,512 and 35,134,911 at December 31, 1996;
31,981,393 and 31,935,792 at September 30, 1996 698 640
Additional paid-in capital 454,305 411,472
Retained earnings 113,694 102,739
Treasury stock, at cost (243) (243)
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Total shareholders' equity 568,454 514,608
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Total liabilities and shareholders' equity $1,282,057 $950,669
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</TABLE>
See accompanying notes to condensed consolidated financial statements
1
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Genesis Health Ventures, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
(Unaudited)
Three months
ended December 31,
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1996 1995
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Net revenues:
Basic healthcare services $ 134,092 $ 72,194
Specialty medical services 114,179 53,190
Management services and other, net 10,273 7,394
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Total net revenues 258,544 132,778
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Operating expenses:
Salaries, wages and benefits 125,055 65,042
Other operating expenses 80,132 37,596
General corporate expense 9,622 4,839
Depreciation and amortization 9,481 5,148
Lease expense 6,938 3,793
Interest expense, net 9,195 6,040
Debenture conversion expense - 1,090
- -------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and extraordinary item 18,121 9,230
Income taxes 6,613 3,372
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Earnings before extraordinary item 11,508 5,858
Extraordinary item, net of tax (553) -
- -------------------------------------------------------------------------------------------------------------------------
Net income $ 10,955 5,858
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Per common share data:
Primary:
Earnings before extraordinary item $ 0.34 0.25
Extraordinary item (0.02) -
Net income $ 0.32 0.25
Weighted average shares of common stock and equivalents 34,219,921 23,801,866
- -------------------------------------------------------------------------------------------------------------------------
Fully diluted:
Earnings before extraordinary item $ 0.33 0.23
Extraordinary item (0.02) -
Net income $ 0.31 0.23
Weighted average shares of common stock and equivalents 36,110,603 28,668,828
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</TABLE>
See accompanying notes to condensed consolidated financial statements
2
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Genesis Health Ventures, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Three months ended
December 31,
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,955 $ 5,858
Adjustments to reconcile net income to
net cash provided by operating activities:
Charges (credits) included in operations not requiring funds:
Provision for deferred taxes 1,653 843
Depreciation and amortization 9,481 5,148
Amortization of deferred gain (115) (115)
Debenture conversion expense - 1,090
Extraordinary loss 553 -
Changes in assets and liabilities excluding the effects of acquisitions
Accounts receivable (15,543) (7,062)
Cost reports receivable (7,012) (5,005)
Inventory (3,344) 632
Prepaid expenses and other current assets (962) 15,916
Accounts payable and accrued expenses (6,132) (12,938)
Income taxes payable 3,863 (1,230)
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Total adjustments (17,558) (2,721)
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Net cash (used in) provided by operations (6,603) 3,137
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Cash flows from investing activities
Capital expenditures (13,949) (7,979)
Payments for acquisitions, net of cash acquired (222,170) (70,034)
Notes receivable and other investment and asset additions, net 369 (2,895)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (235,750) (80,908)
Cash flows from financing activities
Net borrowings under working capital revolving credit 118,113 75,300
Repayment of long term debt (1,780) (104)
Proceeds from issuance of long-term debt 125,000 -
Debt issuance costs (3,750) -
Debenture conversion expense - (1,090)
Common stock options exercised 147 161
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Net cash provided by financing activities 237,730 74,267
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Net decrease in cash and equivalents (4,623) (3,504)
Cash and equivalents
Beginning of period 12,763 10,387
End of period $ 8,140 $ 6,883
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Supplemental disclosure of cash flow information
Interest paid $ 7,198 $ 8,095
Income taxes paid $ 1,774 $ 4,553
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</TABLE>
See accompanying notes to condensed consolidated financial statements
3
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GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and the
notes thereto included in the Company's annual report for the fiscal year ended
September 30, 1996. The information furnished is unaudited but reflects all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial information for the periods shown. Such
adjustments are of a normal recurring nature. Interim results are not
necessarily indicative of results expected for the full year.
2. Earnings Per Share
Primary and fully-diluted earnings per share are based on the weighted
average number of common shares outstanding and the dilutive effect of stock
options, convertible debentures and other common stock equivalents.
3. Long-Term Debt
In October 1996, the Company entered into an agreement with the lenders
of the credit facility to increase the revolving credit facility from
$200,000,000 to $300,000,000 (the "Revolving Credit Facility") and the lease
financing facility from $85,000,000 to $150,000,000 (the "Lease Financing
Facility") and to release liens on accounts receivable, inventory and personal
property. The Revolving Credit Facility bears interest at a floating rate equal,
at the Company's option, to prime rate or LIBOR up to 1.5%. The Lease Financing
Facility bears interest at a floating rate equal, at the Company's option, to
prime rate or LIBOR plus a margin up to 1.5%.
In October 1996, the Company completed an offering of $125,000,000
9 1/4% Senior Subordinated Notes due 2006 (the "1996 Note Offering"). The
Company used the net proceeds of approximately $121,250,000 together with
borrowings under the Revolving Credit Facility, to pay the cash portion of the
purchase price of the GMC Transaction, to repay certain debt assumed as a result
of the GMC Transaction and to repurchase GMC accounts receivable which were
previously financed.
4. Proforma Financial Information
Effective October 1, 1996, Geriatric & Medical Companies, Inc. ("GMC")
merged with a wholly-owned subsidiary of Genesis (The "GMC Transaction"). Under
the terms of the merger agreement, GMC shareholders received $5.75 per share in
cash for each share of GMC common stock. The total consideration paid, including
assumed indebtedness of approximately $132,000,000, was approximately
$223,000,000. The merger was financed in part with approximately $121,250,000 in
net proceeds from the 1996 Note Offering. The remaining consideration was
financed through borrowings under the Company's Revolving Credit Facility. The
GMC Transaction added to Genesis 24 owned eldercare centers with approximately
3,300 beds. GMC also operated businesses which provided a number of ancillary
healthcare services including ambulance services; respiratory therapy, infusion
therapy and enteral therapy; distribution of durable medical equipment and home
medical supplies; and information management services. In connection with the
GMC Transaction, the Company has preliminarily recorded approximately
$56,000,000 of goodwill, which is being amortized on a straight-line basis over
lives ranging from 20 to 40 years, and approximately $20,000,000 of deferred tax
assets which are included in other long term assets.
4
<PAGE>
In July 1996, the Company acquired the outstanding stock of National
Health Care Affiliates, Inc., Oak Hill Center, Inc., Derby Nursing Center
Corporation, Eidos, Inc. and Versalink, Inc. (collectively, "National Health").
Prior to the closing of the stock acquisitions, an affiliate of a financial
institution purchased nine of the eldercare centers for $67,700,000 and
subsequently leased the centers to a subsidiary of Genesis under the Lease
Financing Facility. The balance of the total consideration paid to National
Health was funded with available cash of $51,800,000 and assumed indebtedness of
$7,900,000. National Health added 16 eldercare centers in Florida, Virginia and
Connecticut with approximately 2,200 beds to Genesis. National Health also
provided enteral nutrition and rehabilitation therapy services to the eldercare
centers which it owned and leased.
In June 1996, the Company acquired the outstanding stock of
NeighborCare Pharmacies, Inc. and its related entities (collectively,
"NeighborCare"), a privately held institutional pharmacy, infusion therapy and
retail professional pharmacy business based in Baltimore, Maryland. Total
consideration was approximately $57,250,000, comprised of approximately
$47,250,000 in cash and 312,744 shares of Genesis common stock.
On November 30, 1995, the Company acquired McKerley Health Care
Centers, Inc. and its related entities (collectively, "McKerley") for total
consideration of approximately $68,700,000. The transaction also provided for up
to an additional $6,000,000 of contingent consideration payable upon the
achievement of certain financial objectives through October 1997. McKerley added
15 geriatric care facilities in New Hampshire and Vermont with a total of 1,535
beds to Genesis. McKerley also provided a home healthcare company. The
acquisition was financed with borrowings under the Revolving Credit Facility and
assumed indebtedness.
The following unaudited proforma statement of operations information
gives effect to the GMC, National Health, NeighborCare and McKerley transactions
described above as though they had occurred at the beginning of the period
presented, after giving effect to certain adjustments, including amortization of
goodwill, additional depreciation expense, increased interest expense on debt
related to the acquisitions and related income tax effects. The proforma
financial information does not necessarily reflect results of operations that
would have occurred had the acquisitions occurred at the beginning of the period
presented.
<TABLE>
<CAPTION>
(In thousands, except per share data)
Three Months Ended
Pro Forma Statement of Operations Information: December 31, 1995
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<S> <C>
Total net revenues $ 230,660
Net income 9,616
Primary earnings per share 0.31
Fully diluted earnings per share $ 0.29
</TABLE>
5
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
Since the Company began operations in July 1985, it has focused its
efforts on providing an expanding array of specialty medical and community-based
services to the elderly. The delivery of these services was originally
concentrated in the eldercare centers owned and leased by the Company, but now
also includes managed eldercare centers, independent healthcare facilities,
outpatient clinics and home health care.
The Company generates revenues from three sources: basic healthcare
services, specialty medical services and management services and other. The
Company includes in basic healthcare services revenues all room and board
charges for its eldercare customers at its owned and leased eldercare centers.
Specialty medical services include all revenues from providing rehabilitation
therapies, institutional pharmacy and medical supply services, community-based
pharmacy, subacute care programs, home health care, physician services, and
other specialized services. Management services and other include fees earned
for management of eldercare centers, development of life care communities and
revenues from the group purchasing, staff replacement and vending businesses and
transactional revenues.
Certain Transactions
Effective October 1, 1996, Geriatric & Medical Companies, Inc. ("GMC")
merged with a wholly-owned subsidiary of Genesis (The "GMC Transaction"). Under
the terms of the merger agreement, GMC shareholders received $5.75 per share in
cash for each share of GMC common stock. The total consideration paid, including
assumed indebtedness of approximately $132,000,000, was approximately
$223,000,000. The merger was financed in part with approximately $121,250,000 in
net proceeds from an offering of 9 1/4% Senior Subordinated Notes issued in
October 1996 (the "1996 Note Offering"). The remaining consideration was
financed through borrowings under the Company's $300,000,000 revolving credit
facility (the "Revolving Credit Facility"). The GMC Transaction added to Genesis
24 owned eldercare centers with approximately 3,300 beds. GMC also operated
businesses which provided a number of ancillary healthcare services including
ambulance services; respiratory therapy, infusion therapy and enteral therapy;
distribution of durable medical equipment and home medical supplies; and
information management services.
In July 1996, the Company acquired the outstanding stock of National
Health Care Affiliates, Inc., Oak Hill Center, Inc., Derby Nursing Center
Corporation, Eidos, Inc. and Versalink, Inc. (collectively, "National Health").
Prior to the closing of the stock acquisitions, an affiliate of a financial
institution purchased nine of the eldercare centers for $67,700,000 and
subsequently leased the centers to a subsidiary of Genesis under a $150,000,000
lease financing facility (the "Lease Financing Facility"). The balance of the
total consideration paid to National Health was funded with available cash of
$51,800,000 and assumed indebtedness of $7,900,000. National Health added 16
eldercare centers in Florida, Virginia and Connecticut with approximately 2,200
beds to Genesis. National Health also provided enteral nutrition and
rehabilitation therapy services to the eldercare centers which it owned and
leased.
In June 1996, the Company acquired the outstanding stock of
NeighborCare Pharmacies, Inc. and its related entities (collectively,
"NeighborCare"), a privately held institutional pharmacy, infusion therapy and
retail pharmacy business based in Baltimore, Maryland. Total consideration was
approximately $57,250,000, comprised of approximately $47,250,000 in cash and
312,744 shares of Genesis common stock.
6
<PAGE>
On November 30, 1995, the Company acquired McKerley Health Care
Centers, Inc. and its related entities (collectively, "McKerley") for total
consideration of approximately $68,700,000. The transaction (the "McKerley
Transaction") also provided for up to an additional $6,000,000 of contingent
consideration payable upon the achievement of certain financial objectives
through October 1997. McKerley added 15 geriatric care facilities in New
Hampshire and Vermont with a total of 1,535 beds to Genesis and operated a home
healthcare company. The acquisition was financed with borrowings under the
Revolving Credit Facility and assumed indebtedness.
Results of Operations
Three months ended December 31, 1996 compared to three months ended December 31,
1995.
The Company's total net revenues for the quarter ended December 31,
1996 were $258,544,000 compared to $132,778,000 for the quarter ended December
31, 1995, an increase of $125,766,000 or 95%. Basic healthcare services
increased $61,898,000 or 86% of which approximately $32,900,000 is attributed to
the GMC Transaction, approximately $15,000,000 is attributed to the National
Health transaction, approximately $9,900,000 is due to the inclusion of
eldercare centers acquired in the McKerley Transaction for the full quarter in
1996 versus one month in the prior year quarter and the remaining increase of
approximately $4,100,000 is due to providing care to higher acuity patients and
to rate increases. Specialty medical services revenue increased $60,989,000 or
115% of which approximately $13,800,000 is attributed to the GMC Transaction,
approximately $21,700,000 is due to the NeighborCare transaction, approximately
$5,000,000 is attributed to the National Health transaction, approximately
$1,500,000 is due to the inclusion of the eldercare centers acquired in the
McKerley Transaction for the full quarter in 1996 versus one month in the prior
year quarter and the remaining increase of approximately $19,000,000 is due to
other volume growth in the institutional pharmacy, medical supply and contract
therapy divisions and increased acuity in the health centers division. Specialty
medical service revenue per patient day in the health centers division increased
34% to $28.43 in the quarter ended December 31, 1996 compared to $21.18 in the
quarter ended December 31, 1995 primarily due to treatment of higher acuity
patients. Management services and other income increased $2,879,000 or 39%. This
increase is primarily due to other service related business acquired in the GMC
Transaction.
The Company's operating expenses before depreciation, amortization,
lease expense, interest expense and excluding debenture conversion expense were
$214,809,000 for the quarter ended December 31, 1996 compared to $107,477,000
for quarter ended December 31, 1995, an increase of $107,332,000 or 100%, of
which approximately $84,900,000 is due to the impact of acquisitions and the
remaining increase of approximately $22,400,000 is attributed to growth in the
institutional pharmacy, medical supply and contract therapy divisions.
Interest expense increased $3,155,000 or 52%. This increase in interest
expense was primarily due to additional borrowings used to finance recent
acquisitions, including the 1996 Note Offering used to finance the GMC
Transaction, offset by the repayment of debt with proceeds of $202,280,000 from
the May 1996 equity offering. Increased depreciation and amortization, and lease
expense are attributed to the GMC Transaction, the National Health transaction,
the NeighborCare transaction and the McKerley Transaction.
In the quarter ended December 31, 1995 the Company converted
approximately $33,500,000 of its 6% Convertible Senior Subordinated Debentures
(the "Debentures") due 2003. In connection with the early conversion of the
Debentures, the Company paid approximately $1,090,000 representing the
prepayment of interest to converting debenture holders. The non-recurring cash
payment is presented as debenture conversion expense in the results of
operations for the quarter ended December 31, 1995.
In connection with the early repayment of debt and the restructuring
and amendment of its bank credit facility in the quarter ended December 31,
1996, the Company recorded an extraordinary loss, net of tax, of approximately
$553,000 to write off unamortized deferred financing fees.
7
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Liquidity and Capital Resources
Working capital increased to $188,351,000 at December 31, 1996 from
$155,491,000 at September 30, 1996. Accounts receivable increased to
$185,168,000 at December 31, 1996 from $141,716,000 at September 30, 1996.
Approximately $29,800,000 of this increase relates to the GMC transaction, while
the remaining $13,652,000 relates primarily to the continuing shift in business
mix to specialty medical services including the acquisition of NeighborCare in
June 1996. The allowance for doubtful accounts increased approximately
$23,846,000, primarily as a result of reserves provided in connection with the
GMC Transaction. Days revenue in accounts receivable increased to 68 days during
this period from 62 days for the quarter ended September 30, 1996, primarily
attributed to the timing of payments from fiscal intermediaries. Cost report
receivables increased $13,900,000, of which approximately $9,200,000 is
attributed to the GMC Transaction. All remaining balance sheet changes were
primarily due to the GMC Transaction and normal growth in operations. The
Company's cash flow from operations for the three months ended December 31, 1996
resulted in a use of cash of approximately $6,600,000 compared to a source of
cash of approximately $3,137,000 for the three months ended December 31, 1995.
Of the $6,600,000 use of operating cash for the three months ended December 31,
1996, approximately $4,100,000 is attributed to the GMC operations, with the
remaining approximately $2,500,000 due to accelerated payments to vendors and
the timing of receivable collections.
Investing activities for the quarter ended December 31, 1996 include
approximately $13,949,000 of capital expenditures primarily related to
betterments and expansion of eldercare centers and investment in data processing
hardware and software.
In connection with the GMC Transaction, the Company has preliminarily
recorded approximately $56,000,000 of goodwill, which is being amortized on a
straight-line basis over lives ranging from 20 to 40 years, and approximately
$20,000,000 of deferred tax assets which are included in other long term assets.
In February 1997, the Company expects to make a payment of
approximately $4,000,000 for contingent consideration in connection with the
McKerley Transaction. In January 1997, the Company acquired $2,500,000 of
convertible preferred stock of Doctors Health System, Inc. ("Doctors Health"),
an independent physician owned and controlled integrated delivery system and
practice management company. The convertible preferred stock carries an 8%
cumulative dividend and is convertible into common stock. To date, the Company
has purchased $10,000,000 of Doctors Health convertible preferred stock that, if
converted, would represent an approximate 10% ownership interest in Doctors
Health. Also, the Company is committed to purchase an additional $10,000,000 of
convertible preferred stock upon Doctors Health's achievement of certain
operational and financial benchmarks. In February 1997, the Company advanced to
Doctors Health a loan of approximately $2,800,000.
In November 1996, the Company called for redemption the then
outstanding Debentures at a redemption price equal to 104.2% of the principal
amount. The Debenture holders had the option to tender Debentures at the
redemption price or to convert the Debentures at a conversion price of $15.104
per share. All of the approximately $43,800,000 of Debentures outstanding were
converted to Common Stock in the quarter ended December 31, 1996. In the quarter
ended December 31, 1995, the Company converted approximately $33,500,000 of
Debentures. The conversions improved the Company's ratio of debt to equity and
provides the Company with the ability to borrow under its revolving credit
facilities at lower rates.
In October 1996, the Company completed an offering of $125,000,000
9 1/4% Senior Subordinated Notes due 2006. The Company used the net proceeds of
approximately $121,250,000 together with borrowings under the Credit Facility,
to pay the cash portion of the purchase price of the GMC Transaction, to repay
certain debt assumed as a result of the GMC Transaction and to repurchase GMC
accounts receivable which were previously financed.
In October 1996, the Company entered into an agreement with the lenders
of the credit facility to increase the revolving credit facility to $300,000,000
and the lease financing facility to $150,000,000 and to release liens on
accounts receivable, inventory and personal property. The revolving credit
facility bears interest at a floating rate equal, at the Company's option, to
prime rate or LIBOR plus 1.5%. The lease financing facility bears interest at a
floating rate equal, at the Company's option, to prime rate or LIBOR plus a
margin up to 1.5%.
Certain of the Company's outstanding loans contain covenants which,
without the prior consent of the lenders, limit certain activities of the
Company. Such covenants contain limitations relating to the merger or
consolidation of the Company and the Company's ability to secure indebtedness,
make guarantees, grant security interests and declare dividends. In addition,
the Company must maintain certain minimum levels of cash flow and debt service
coverage, and must maintain certain liabilities to net worth.
8
<PAGE>
Under these loans, the Company is restricted from paying cash dividends on the
Common Stock, unless certain conditions are met. The Company has not declared or
paid any cash dividends on its Common Stock since its inception.
Legislative and regulatory action has resulted in continuing change in
the Medicare and Medicaid reimbursement programs which has adversely impacted
the Company. The changes have limited, and are expected to continue to limit,
payment increases under these programs. Also, the timing of payments made under
the Medicare and Medicaid programs is subject to regulatory action and
governmental budgetary constraints; in recent years, the time period between
submission of claims and payment has increased. Implementation of the Company's
strategy to expand specialty medical services to independent providers should
reduce the impact of changes in the Medicare and Medicaid reimbursement programs
on the Company as a whole. Within the statutory framework of the Medicare and
Medicaid programs, there are substantial areas subject to administrative rulings
and interpretations which may further affect payments made under those programs.
Further, the federal and state governments may reduce the funds available under
those programs in the future or require more stringent utilization and quality
reviews of eldercare centers.
The Company believes that its liquidity needs can be met by expected
operating cash flow and availability of borrowings under its credit facilities.
At February 11, 1997, approximately $327,000,000 was outstanding under the
revolving credit facility and lease financing facility, and approximately
$105,300,000 was available under the credit facilities after giving effect to
approximately $17,700,000 in outstanding letters of credit issued under the
credit facilities.
Seasonality
The Company's earnings generally fluctuate from quarter to quarter.
This seasonality is related to a combination of factors which include the timing
of Medicaid rate increases, seasonal census cycles and the number of calendar
days in a given quarter.
Impact of Inflation
The healthcare industry is labor intensive. Wages and other labor costs
are especially sensitive to inflation and marketplace labor shortages. To date,
the Company has offset its increased operating costs by increasing charges for
its services and expanding its services. Genesis has also implemented cost
control measures to limit increases in operating costs and expenses but cannot
predict its ability to control such operating cost increases in the future.
9
<PAGE>
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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Number Description
------ -----------
11 Statement re computation of per share earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
The Company filed a Report on Form 8-K/A dated July 11, 1996
reporting the agreement to acquire Geriatric and Medical
Companies which did not include financial statements.
10
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SIGNATURES
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 thereto duly authorized.
GENESIS HEALTH VENTURES, INC.
Date: February 14, 1997 /s/ George V. Hager Jr.
--------------------------
George V. Hager, Jr.
Senior Vice President and Chief Financial Officer
11
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Exhibit 11
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
QUARTERS ENDED DECEMBER 31, 1996 AND 1995
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
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<S> <C> <C>
Primary Earnings Per Share:
Reported earnings before debenture conversion
expense and extraordinary item $ 11,508 $ 6,556
Debenture conversion expense, net of tax - (698)
Extraordinary item, net of tax (553) -
------------------ -----------------
Reported net income $ 10,955 $ 5,858
------------------ -----------------
Weighted average shares & CSE's: 34,219,921 23,801,866
Primary EPS before debenture conversion
expense and extraordinary item $ 0.34 $ 0.27
Primary EPS - debenture conversion expense - (0.02)
Primary EPS - extraordinary item, net of tax (0.02) -
------------------ -----------------
Primary EPS - Net income $ 0.32 $ 0.25
================== =================
Fully Diluted Earnings Per Share:
Reported earnings before debenture conversion
expense and extraordinary item $ 11,508 $ 6,556
Debenture conversion expense, net of tax - (698)
Extraordinary item, net of tax (553) -
------------------ -----------------
Reported net income $ 10,955 $ 5,858
------------------ -----------------
Adjustments to net income
Interest expense, amortization and other costs
related to the assumed conversion of the
convertible debentures, net of tax 304 788
------------------ -----------------
Adjusted net income $ 11,259 $ 6,646
------------------ -----------------
Weighted average shares & CSE's:
Common shares 34,219,921 23,801,866
Additional option shares 144,477 167,544
Convertible debenture shares 1,746,205 4,699,418
------------------ -----------------
Total 36,110,603 28,668,828
------------------ -----------------
Fully diluted EPS before debenture conversion
expense and extraordinary item $ 0.33 $ 0.25
Fully diluted EPS - debenture conversion expense - (0.02)
Fully diluted EPS - extraordinary item, net of tax (0.02) -
------------------ -----------------
Fully diluted EPS - Net income $ 0.31 $ 0.23
================== =================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-1-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 8,140,000
<SECURITIES> 5,517,000
<RECEIVABLES> 220,145,000
<ALLOWANCES> (34,977,000)
<INVENTORY> 22,974,000
<CURRENT-ASSETS> 297,576,000
<PP&E> 604,705,000
<DEPRECIATION> (72,662,000)
<TOTAL-ASSETS> 1,282,057,000
<CURRENT-LIABILITIES> 109,225,000
<BONDS> 0
0
0
<COMMON> 698,000
<OTHER-SE> 567,756,000
<TOTAL-LIABILITY-AND-EQUITY> 1,282,057,000
<SALES> 258,544,000
<TOTAL-REVENUES> 258,544,000
<CGS> 214,809,000
<TOTAL-COSTS> 231,228,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,195,000
<INCOME-PRETAX> 18,121,000
<INCOME-TAX> 6,613,000
<INCOME-CONTINUING> 11,508,000
<DISCONTINUED> 0
<EXTRAORDINARY> (553,000)
<CHANGES> 0
<NET-INCOME> 10,955,000
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.31
</TABLE>
