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, 1997
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 9, 1998: 35,135,220 shares of common stock
TABLE OF CONTENTS
Page
----
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS....................1
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements.......................................2
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................... 9
Part II OTHER INFORMATION
Item 1. Legal Proceedings.........................................15
Item 2. Changes in Securities.....................................15
Item 3. Defaults Upon Senior Securities...........................15
Item 4 Submission of Matters to a Vote of Security Holders.......15
Item 5. Other Information.........................................15
Item 6. Exhibits and Reports on Form 8-K..........................15
SIGNATURES .................................................................17
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Certain oral statements made by management from time to time and certain
statements contained herein, including certain statements in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" such
as statements concerning Medicaid and Medicare programs and the Company's
ability to meet its liquidity needs and control costs, certain statements in
Notes to Condensed Consolidated Financial Statements, such as certain Pro Forma
Financial Information; and other statements contained herein regarding matters
which are not historical facts are forward looking statements (as such term is
defined in the Securities Act of 1933) and because such statements involve risks
and uncertainties, actual results may differ materially from those expressed or
implied by such forward looking statements. Factors that could cause actual
results to differ materially include, but are not limited to those discussed
below:
1. The Company's substantial indebtedness and significant debt service
obligations.
2. The Company's ability to secure the capital and the related cost of such
capital necessary to fund its future growth through acquisition and
development, as well as internal growth.
3. Changes in the United States healthcare system, including changes in
reimbursement levels under Medicaid and Medicare, and other changes in
applicable government regulations that might affect the profitability of
the Company.
4. The Company's continued ability to operate in a heavily regulated
environment and to satisfy regulatory authorities, thereby avoiding a
number of potentially adverse consequences, such as the imposition of
fines, temporary suspension of admission of patients, restrictions on the
ability to acquire new facilities, suspension or decertification from
Medicaid or Medicare programs, and, in extreme cases, revocation of a
facility's license or the closure of a facility, including as a result of
unauthorized activities by employees.
5. The occurrence of changes in the mix of payment sources utilized by the
Company's customers to pay for the Company's services.
6. The adoption of cost containment measures by private pay sources such as
commercial insurers and managed care organizations, as well as efforts by
governmental reimbursement sources to impose cost containment measures.
7. The level of competition in the Company's industry, including without
limitation, increased competition from acute care hospitals, providers of
assisted and independent living and providers of home health care and
changes in the regulatory system, such as changes in certificate of need
laws in the states in which the Company operates or anticipates operating
in the future that facilitate such competition.
8. The Company's ability to identify suitable acquisition candidates, to
consummate or complete development projects, or to profitably operate or
successfully integrate enterprises into the Company's other operations.
These and other factors have been discussed in more detail in the Company's
periodic reports including its Annual Report on Form 10-K/A for the fiscal
year ended September 30, 1997.
1
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Genesis Health Ventures, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share data)
December 31, September 30,
- -------------------------------------------------------------------------------------------------------------------------------
1997 1997
- -------------------------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and equivalents $ 13,528 $ 11,651
Investments in marketable securities 15,327 14,729
Assets held for sale 89,920 -
Accounts receivable, net of allowance for doubtful accounts of
$43,396 at December 31, 1997 and $39,418 at September 30, 1997 225,121 205,129
Cost report receivables 62,144 60,865
Income tax receivable 2,560 7,820
Inventory 28,505 25,568
Prepaid expenses and other current assets 29,823 26,675
- -------------------------------------------------------------------------------------------------------------------------------
Total current assets 466,928 352,437
- -------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 544,702 578,397
Notes receivable and other investments 104,098 108,714
Other long-term assets 58,225 31,722
Investments in unconsolidated affiliates 330,149 2,887
Goodwill and other intangibles, net 388,146 359,956
- -------------------------------------------------------------------------------------------------------------------------------
Total assets $ 1,892,248 1,434,113
===============================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 109,711 $ 117,234
Current installments of long-term debt 29,259 8,273
- -------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 138,970 125,507
- -------------------------------------------------------------------------------------------------------------------------------
Long-term debt 1,086,457 651,667
Deferred income taxes 38,513 37,745
Deferred gain and other long-term liabilities 13,519 11,173
Shareholders' equity:
Common stock, par $.02, authorized 60,000,000 shares, issued and
outstanding 35,125,027 and 35,079,426 at December 31, 1997;
35,117,075 and 35,071,474 at September 30, 1997 719 702
Additional paid-in capital 453,085 457,232
Retained earnings 161,228 150,330
Treasury stock, at cost (243) (243)
- -------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 614,789 608,021
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 1,892,248 $ 1,434,113
===============================================================================================================================
See accompanying notes to condensed consolidated financial statements
2
Genesis Health Ventures, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
Three months
ended December 31,
- -------------------------------------------------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------------------------------------------------
Net revenues:
Basic healthcare services $ 138,016 $ 134,092
Specialty medical services 142,665 114,179
Management services and other, net 21,884 10,273
- -------------------------------------------------------------------------------------------------------------------------
Total net revenues 302,565 258,544
- -------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Salaries, wages and benefits 140,354 125,055
Other operating expenses 92,988 80,132
General corporate expense 12,037 9,622
Depreciation and amortization 11,686 9,481
Lease expense 6,643 6,938
Interest expense, net 19,643 9,195
- -------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 19,214 18,121
Income taxes 7,013 6,613
- -------------------------------------------------------------------------------------------------------------------------
Earnings before equity of unconsolidated affiliates
and extraordinary item 12,201 11,508
Earnings in equity of unconsolidated affiliates 621 -
- -------------------------------------------------------------------------------------------------------------------------
Earnings before extraordinary item 12,822 11,508
Extraordinary item, net of tax (1,924) (553)
- -------------------------------------------------------------------------------------------------------------------------
Net income $ 10,898 $ 10,955
=========================================================================================================================
Per common share data:
Basic:
Earnings before extraordinary item $ 0.37 $ 0.35
Extraordinary item (0.05) (0.02)
Net income $ 0.31 $ 0.33
Weighted average shares of common stock 35,079,426 33,096,946
- -------------------------------------------------------------------------------------------------------------------------
Diluted:
Earnings before extraordinary item $ 0.36 $ 0.33
Extraordinary item (0.05) (0.01)
Net income $ 0.31 $ 0.32
Weighted average shares of common stock and equivalents 35,594,481 35,378,703
=========================================================================================================================
See accompanying notes to condensed consolidated financial statements
3
Genesis Health Ventures, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Three months ended
December 31,
1997 1996
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 10,898 $ 10,955
Adjustments to reconcile net income to
net cash provided by operating activities:
Charges (credits) included in operations not requiring funds:
Provision for deferred taxes 1,753 1,653
Depreciation and amortization 11,686 9,481
Amortization of deferred gain - (115)
Amortization of debt premium (98) -
Equity in earnings of unconsolidated affiliates (621) -
Extraordinary loss 1,924 553
Changes in assets and liabilities excluding the effects of acquisitions
Accounts receivable (12,312) (15,543)
Cost reports receivable (1,357) (7,012)
Inventory (2,812) (3,344)
Prepaid expenses and other current assets (1,618) (962)
Accounts payable and accrued expenses (8,622) (6,132)
Income taxes receivable and payable 5,260 3,863
- --------------------------------------------------------------------------------------------------------------------------
Total adjustments (6,817) (17,558)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations 4,081 (6,603)
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Capital expenditures (10,925) (13,949)
Payments for acquisitions, net of cash acquired (41,174) (222,170)
Investments in unconsolidated affiliates (326,641) -
Cash paid for assets held for sale (20,109) -
Notes receivable and other investment and asset additions, net (12,805) 369
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (411,654) (235,750)
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net borrowings (repayments) under working capital revolving credit (164,800) 118,113
Repayment of long term debt (1,973) (1,780)
Proceeds from issuance of long-term debt 600,000 125,000
Debt issuance costs (19,648) (3,750)
Purchase of common stock call options (4,442) -
Common stock options exercised 313 147
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 409,450 237,730
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents 1,877 (4,623)
Cash and equivalents
Beginning of period 11,651 12,763
End of period $ 13,528 $ 8,140
==========================================================================================================================
Supplemental disclosure of cash flow information
Interest paid $ 22,550 $ 7,198
Income taxes paid $ - $ 1,774
==========================================================================================================================
See accompanying notes to condensed consolidated financial statements
4
GENESIS HEATLH VENTURES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED 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, 1997. 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. Certain prior
period balances have been reclassified to conform with the current period
presentation.
2. Earnings Per Share
In the first quarter of 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" (Statement 128).
Statement 128, which makes the standards for computing earnings per share more
comparable to international standards, replaces the presentation of primary and
fully diluted earnings per share with a presentation of basic and diluted
earnings per share. Statement 128 requires dual presentation of basic and
diluted earnings per share on the face of the income statement of all entities
with complex capital structures. The Company has restated its earnings per share
data for the three months ended December 31, 1996 to conform to the provisions
of Statement 128.
3. Long-Term Debt
In October 1997, in connection with the Multicare Transaction (defined below),
Genesis entered into a new credit facility with Mellon Bank, N.A., Citicorp
Securities, Inc., Citibank N.A., First Union Capital Markets Corp., First Union
National Bank and NationsBank, N.A. (the "Lenders") pursuant to which the
Lenders provided Genesis and its subsidiaries with loan facilities totaling
$850,000,000 (the "Genesis Bank Financing") for the purpose of refinancing
certain existing indebtedness of Genesis; funding interest and principal
payments on the facilities and certain remaining indebtedness; funding permitted
acquisitions; funding Genesis' commitments in connection with the Merger
(defined below); and funding Genesis' and its subsidiaries' working capital for
general corporate purposes, including fees and expenses of the transactions. The
Genesis Bank Financing facilities consist of three $200,000,000 term loans
(collectively, the "Term Loans"), a $250,000,000 revolving credit loan (the
"Revolving Credit Facility") and one or more Swing Loans (collectively, the
"Swing Loan Facility") in integral principal multiples of $500,000 up to an
aggregate unpaid principal amount of $15,000,000. The Term Loans amortize in
quarterly installments beginning in fiscal 1998 through 2005, of which
$19,000,000 is payable in fiscal 1998. The Term Loans consist of (1) a
$200,000,000 six year term loan (the "Tranche A Term Facility"); (2) a
$200,000,000 seven year term loan (the "Tranche B Term Facility"); and (3) a
$200,000,000 eight year term loan (the "Tranche C Term Facility"). The Revolving
Credit Facility becomes payable in full on September 30, 2003.
The Genesis Bank Financing facilities are secured by a first priority security
interest in all of the stock, partnership interests and other equity of all of
Genesis' present and future subsidiaries (including the Multicare Parent)
other than stock of Multicare and its subsidiaries. Loans under the Genesis
Bank Financing bear, at Genesis' option, interest at the per annum Prime Rate
as announced by the administrative agent, or the applicable Adjusted LIBOR.
Loans under the Tranche A Term Facility bear interest at an annual rate equal
to LIBOR plus a margin up to 2.5%, loans under the Tranche B Term Facility
bear interest at an annual rate equal to LIBOR plus a margin up to 2.75%;
loans under the Tranche C Term Facility bear interest at an annual rate equal
to LIBOR plus a margin up to 3.0%; loans under the Revolving Credit Facility
bear interest at a rate equal to LIBOR plus a margin up to 2.5%, and loans
under the Swing Loan Facility bear interest at the Prime Rate unless otherwise
agreed to by the parties. Subject to meeting certain financial covenants, the
above referenced interest rates will be reduced.
5
4. Proforma Financial Information
On October 9, 1997 Genesis ElderCare Acquisition Corp. ("Acquisition Corp."), a
wholly-owned subsidiary of Genesis ElderCare Corp., a Delaware corporation
formed by Genesis, The Cypress Group L.L.C. (together with its affiliates,
"Cypress"), TPG Partners II, L.P., (together with its affiliates, "TPG") and
Nazem, Inc. (together with its affiliates "Nazem"), acquired 99.65% of the
shares of common stock of the Multicare Companies, Inc. ("Multicare"), pursuant
to a tender offer commenced on June 20, 1997 (the "Tender Offer"). On October
10, 1997, Genesis ElderCare Corp. completed the merger (the "Merger" or the
"Multicare Transaction") of Acquisition Corp. with and into Multicare in
accordance with the Agreement and Plan of Merger (the "Merger Agreement") dated
as of June 16, 1997, by and among Genesis ElderCare Corp., Acquisition Corp.,
Genesis and Multicare. Upon consummation of the Merger, Multicare became a
wholly-owned subsidiary of Genesis ElderCare Corp. Multicare is in the business
of providing eldercare and specialty medical services in selected geographic
regions. Included among the operations acquired by Genesis ElderCare Corp. are
operations relating to the provision of ( i ) eldercare services including
skilled nursing care, assisted living, Alzheimer's care and related support
activities traditionally provided in eldercare facilities, (ii) specialty
medical services consisting of (1) sub-acute care such as ventilator care,
intravenous therapy and various forms of coma, pain and wound management and (2)
rehabilitation therapies such as occupational, physical and speech therapy and
stroke and orthopedic rehabilitation and (iii) management services and
consulting services to eldercare centers.
In connection with the Merger, Multicare and Genesis entered into a management
agreement (the "Management Agreement") pursuant to which Genesis manages
Multicare's operations. The Management Agreement has a term of five years with
automatic renewals for two years unless either party terminates the Management
Agreement. Genesis is paid a fee of six percent of Multicare's net revenues
for its services under the Management Agreement provided that payment of such
fee in respect of any month in excess of the greater of ( i ) $1,992,000 or
(ii) four percent of Multicare's consolidated net revenues for such month,
shall be subordinate to the satisfaction of Multicare's senior and subordinate
debt covenants; and provided, further, that payment of such fee shall be no
less than $23,900,000 in any given year. Under the Management Agreement,
Genesis is responsible for Multicare's non-extraordinary sales, general and
administrative expenses (other than certain specified third-party expenses),
and all other expenses of Multicare are paid by Multicare. Genesis also
entered into an asset purchase agreement (the "Therapy Purchase Agreement")
with Multicare and certain of its subsidiaries pursuant to which Genesis
acquired all of the assets used in Multicare's outpatient and inpatient
rehabilitation therapy business for $24,000,000 subject to adjustment (the
"Therapy Purchase") and a stock purchase agreement (the "Pharmacy Purchase
Agreement") with Multicare and certain subsidiaries pursuant to which Genesis
will acquire all of the outstanding capital stock and limited partnership
interest of certain subsidiaries of Multicare that are engaged in the business
of providing institutional pharmacy services to third parties for $50,000,000
subject to adjustment. The Company expects to complete the pharmacy sale in
the second fiscal quarter of 1998.
Genesis ElderCare Corp. (the "Multicare Parent") paid approximately
$1,492,000,000 to (i) purchase the Shares pursuant to the Tender Offer and the
Merger, (ii) pay fees and expenses to be incurred in connection with the
completion of the Tender Offer, Merger and the financing transactions in
connection therewith, (iii) refinance certain indebtedness of Multicare and
(iv) make certain cash payments to employees. Of the funds required to finance
the foregoing, approximately $745,000,000 were furnished to Acquisition Corp.
as capital contributions by the Multicare Parent from the sale by Genesis
ElderCare Corp. of its Common Stock ("Genesis ElderCare Corp. Common Stock")
to Cypress, TPG, Nazem and Genesis. Cypress, TPG and Nazem purchased shares of
Genesis ElderCare Corp. Common Stock for a purchase price of $210,000,000,
$199,500,000 and $10,500,000, respectively, and Genesis purchased shares of
Genesis ElderCare Corp. Common Stock for a purchase price of $325,000,000 in
consideration for approximately 44% of the Common Stock of the Multicare
Parent. The balance of the funds necessary to finance the foregoing came from
(i) the proceeds of loans from a syndicate of lenders in the aggregate amount
of $525,000,000 and (ii) $246,800,000 of financing upon the completion of the
sale of 9% Senior Subordinated Notes due 2007 (the "9% Notes") sold by
Acquisition Corp. on August 11, 1997.
6
In connection with the Multicare Transaction, Genesis, Cypress, TPG and Nazem
entered into an agreement (the "Put/Call Agreement") pursuant to which, among
other things, Genesis will have the option, on the terms and conditions set
forth in the Put/Call Agreement, to purchase (the "Call") Genesis ElderCare
Corp. Common Stock held by Cypress, TPG and Nazem commencing on October 9,
2001 and for a period of 270 days thereafter, at a price determined pursuant
to the terms of the Put/Call Agreement. Cypress, TPG and Nazem will have the
option, on the terms and conditions set forth in the Put/Call Agreement, to
require Genesis to purchase (the "Put") such Genesis ElderCare Corp. Common
Stock commencing on October 9, 2002 and for a period of one year thereafter,
at a price determined pursuant to the Put/Call Agreement.
The prices determined for the Put and Call are based on a formula that
calculates the equity value attributable to Cypress', TPG's and Nazem's
Genesis ElderCare Corp. Common Stock, plus a portion of the Genesis Pharmacy
business (the "Calculated Equity Value"). The Calculated Equity Value will be
determined based upon a multiple of Genesis ElderCare Corp.'s earnings before
interest, taxes, depreciation, amortization and rental expenses, as adjusted
("EBITDAR") after deduction of certain liabilities, plus a portion of the
EBITDAR related to the Genesis pharmacy business. The multiple to be applied
to EBITDAR will depend on whether the Put or the Call is being exercised. Any
payment to Cypress, TPG or Nazem under the Call or the Put may be in the form
of cash or Genesis common stock at Genesis' option.
Upon exercise of the Call, Cypress, TPG and Nazem will receive at a minimum
their original investment plus a 25% compound annual return thereon regardless
of the Calculated Equity Value. Any additional Calculated Equity Value
attributable to Cypress', TPG's or Nazem's Genesis ElderCare Corp. Common
Stock will be determined on the basis set forth in the Put/Call Agreement
which provides generally for additional Calculated Equity Value of Genesis
ElderCare Corp. to be divided based upon the proportionate share of the
capital contributions of the stockholders to Genesis ElderCare Corp. Upon
exercise of the Put by Cypress, TPG or Nazem, there will be no minimum return
to Cypress, or TPG or Nazem; any payment to Cypress, TPG or Nazem will be
limited to Cypress', TPG's or Nazem's share of the Calculated Equity Value
based upon a formula set forth in the terms of the Put/Call Agreement which
provides generally for the preferential return of the stockholders' capital
contributions (subject to certain priorities), a 25% compound annual return on
Cypress', TPG's or Nazem's capital contributions and the remaining Calculated
Equity Value to be divided based upon the proportionate share of the capital
contributions of the stockholders to Genesis ElderCare Corp.
Cypress', TPG's and Nazem's rights to exercise the Put will be accelerated
upon an event of bankruptcy of Genesis, a change of control of Genesis or an
extraordinary dividend or distribution or the occurrence of the leverage
recapitalization of Genesis. Upon an event of acceleration or the failure by
Genesis to satisfy its obligations upon exercise of the Put, Cypress, TPG and
Nazem will have the right to terminate the Stockholders' Agreement and
Management Agreement and to control the sale or liquidation of Genesis
ElderCare Corp. In the event of such sale, the proceeds from such sale will be
distributed among the parties as contemplated by the formula for the Put
option exercise price and Cypress, TPG and Nazem will retain a claim against
Genesis for the difference, if any, between the proceeds of such sale and the
put option exercise price. In the event of a bankruptcy or change of control
of Genesis, the option price shall be payable solely in cash provided any such
payment will be subordinated to the payment of principal and interest under
the Genesis Bank Financing.
The following unaudited pro forma statement of operations information gives
effect to the Multicare Transaction, which was accounted for using the equity
method of accounting and the Therapy Purchase and Pharmacy Purchase, using the
purchase method of accounting as though they had occurred on October 1, 1996,
after giving effect to certain adjustments, including recognition of management
fee income, amortization of goodwill, additional depreciation expense and
increased interest expense on debt related to the transactions. The pro forma
financial information, which includes preliminary allocations of purchase price
to goodwill and property, plant and equipment that are subject to change, does
not necessarily reflect the results of operations that would have occurred had
the transactions occurred at the beginning of periods presented.
7
(In thousands, except per share data)
Three Months Ended Three Months Ended
Pro Forma Statement of Operations Information: December 31, 1996 December 31, 1997
------------------- ------------------
Total net revenues $283,900 $318,586
Earnings before extraordinary item 7,006 12,787
Net income 6,453 10,863
Earnings per share, before extraordinary item, diluted 0.20 0.36
Earnings per share, net income, diluted $ 0.19 $ 0.31
5. Summary Financial Information Of Unconsolidated Affiliate
The following unaudited summary financial data for the Multicare Companies is
as of and for the three months ended December 31, 1997. Multicare is the
Company's only significant unconsolidated affiliate.
(in thousands)
Total assets $ 1,721,848
Long-term debt 751,187
Total liabilities 975,490
Revenues 185,778
Net income $ 1,358
6. Subsequent Event
On January 30, 1998, Genesis successfully completed deleveraging transactions
with ElderTrust, a newly formed Maryland healthcare real estate investment
trust. Genesis, a co-registrant on the ElderTrust initial public offering,
received approximately $78,000,000 in proceeds from the sale of 13 properties
to ElderTrust, including four properties it had purchased from Crozer-Keystone
Health System in anticipation of resale to ElderTrust. Genesis anticipates
receiving an additional $14,000,000 from the sale of a loan and two additional
assisted living facilities and the recoupment of amounts advanced and expenses
incurred in connection with the formation of ElderTrust. Additionally,
ElderTrust has funded approximately $13,200,000 of a commitment to finance the
development and expansion of four additional assisted living facilities.
Genesis intends to repay a portion of the revolving credit component of its
bank credit facility with the proceeds from these transactions.
The Company has reflected $89,920,000 of assets held for sale in its December
31, 1997 balance sheet representing assets subsequently sold or expected to be
sold to ElderTrust.
8
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 services to geriatric
patients. 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 109 owned and
leased eldercare centers. Specialty medical services include all revenues from
providing rehabilitation therapies, institutional pharmacy and medical supply
services, professional pharmacy services, subacute care programs, home health
care, physician services, and other specialized services to all centers owned,
leased or managed by Genesis, as well as to over 800 independent healthcare
providers. Management services and other include fees earned for management of
eldercare centers, other service related businesses and transactional
revenues. Genesis ElderCare Network Services manages 210 eldercare centers,
116 of which are jointly-owned (including the impact of the Multicare
Transaction defined in Certain Transactions).
Certain Transactions
On October 9, 1997, Genesis ElderCare Acquisition Corp. ("Acquisition Corp."),
a wholly-owned subsidiary of Genesis ElderCare Corp., a Delaware corporation
formed by Genesis, The Cypress Group L.L.C. (together with its affiliates,
"Cypress"), TPG Partners II, L.P., (together with its affiliates, "TPG") and
Nazem, Inc. (together with its affiliates, "Nazem"), acquired 99.65% of the
shares of common stock of the Multicare Companies, Inc. ("Multicare"),
pursuant to a tender offer commenced on June 20, 1997 (the "Tender Offer"). On
October 10, 1997, Genesis ElderCare Corp. completed the merger (the "Merger or
the Multicare Transaction") of Acquisition Corp. with and into Multicare in
accordance with the Agreement and Plan of Merger (the "Merger Agreement")
dated as of June 16, 1997 by and among Genesis ElderCare Corp., Acquisition
Corp., Genesis and Multicare. Upon consummation of the Merger, Multicare
became a wholly-owned subsidiary of Genesis ElderCare Corp. Multicare is in
the business of providing eldercare and specialty medical services in selected
geographic regions. Included among the operations acquired by Genesis
ElderCare Corp. are operations relating to the provision of ( i ) eldercare
services including skilled nursing care, assisted living, Alzheimer's care and
related support activities traditionally provided in eldercare facilities,
(ii) specialty medical services consisting of (1) sub-acute care such as
ventilator care, intravenous therapy and various forms of coma, pain and wound
management and (2) rehabilitation therapies such as occupational, physical and
speech therapy and stroke and orthopedic rehabilitation and (iii) management
services and consulting services to eldercare centers.
In connection with the Merger, Multicare and Genesis entered into a management
agreement (the "Management Agreement") pursuant to which Genesis manages
Multicare's operations. The Management Agreement has a term of five years with
automatic renewals for two years unless either party terminates the Management
Agreement. Genesis is paid a fee of six percent of Multicare's net revenues for
its services under the Management Agreement provided that payment of such fee in
respect of any month in excess of the greater of ( i ) $1,992,000 or (ii) four
percent of Multicare's consolidated net revenues for such month, shall be
subordinate to the satisfaction of Multicare's senior and subordinate debt
covenants; and provided, further, that payment of such fee shall be no less than
$23,900,000 in any given year. Under the Management Agreement, Genesis is
responsible for Multicare's non-extraordinary sales, general and administrative
expenses (other than certain specified third-party expenses), and all other
expenses of Multicare are paid by Multicare. Genesis also entered into an asset
purchase agreement (the "Therapy Purchase Agreement") with Multicare and certain
of its subsidiaries pursuant to which Genesis acquired
9
all of the assets used in Multicare's outpatient and inpatient rehabilitation
therapy business for $24,000,000 subject to adjustment (the "Therapy Purchase")
and a stock purchase agreement (the "Pharmacy Purchase Agreement") with
Multicare and certain subsidiaries pursuant to which Genesis will acquire all of
the outstanding capital stock and limited partnership intersest of certain
subsidiaries of Multicare that are engaged in the business of providing
institutional pharmacy services to third parties for $50,000,000, subject to
adjustment. The Company expects to complete the pharmacy sale in the first
calendar quarter of 1998.
Genesis Eldercare Corp. (the "Multicare Parent") paid approximately
$1,492,000,000 to (i) purchase the Shares pursuant to the Tender Offer and the
Merger, (ii) pay fees and expenses to be incurred in connection with the
completion of the Tender Offer, Merger and the financing transactions in
connection therewith, (iii) refinance certain indebtedness of Multicare and
(iv) make certain cash payments to employees. Of the funds required to finance
the foregoing, approximately $745,000,000 were furnished to Acquisition Corp.
as capital contributions by the Multicare Parent from the sale by Genesis
ElderCare Corp. of its Common Stock ("Genesis ElderCare Corp. Common Stock")
to Cypress, TPG, Nazem and Genesis. Cypress, TPG and Nazem purchased shares of
Genesis ElderCare Corp. Common Stock for a purchase price of $210,000,000,
$199,500,000 and $10,500,000, respectively, and Genesis purchased shares of
Genesis ElderCare Corp. Common Stock for a purchase price of $325,000,000 in
consideration for approximately 44% of the Common Stock of the Multicare
Parent. The balance of the funds necessary to finance the foregoing came from
(i) the proceeds of loans from a syndicate of lenders in the aggregate amount
of $525,000,000 and (ii) $246,800,000 of financing upon completion of the sale
of 9% Senior Subordinated Notes due 2007 (the "9% Notes") sold by Acquisition
Corp. on August 11, 1997.
Results of Operations
Three months ended December 31, 1997 compared to three months ended December
31, 1996.
The Company's total net revenues for the quarter ended December 31, 1997 were
$302,565,000 compared to $258,544,000 for the quarter ended December 31, 1996,
an increase of $44,021,000 or 17%. Basic healthcare services increased
$3,924,000 or 3% due to providing care to higher acuity patients and to rate
increases. Specialty medical services revenue increased $28,486,000 or 25% of
which approximately $5,100,000 is attributed to the purchase of the Multicare
rehabilitation therapy business and the remaining increase of approximately
$23,386,000 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 eldercare centers increased 22% to $34.75 in the quarter ended December
31, 1997 compared to $28.43 in the quarter ended December 31, 1996 primarily
due to treatment of higher acuity patients. Management services and other
income increased $11,611,000 or 113%. This increase is primarily due to
management fee revenue earned from the management of the operations of the
Multicare business.
The Company's operating expenses before depreciation, amortization, lease
expense and interest expense were $245,379,000 for the quarter ended December
31, 1997 compared to $214,809,000 for quarter ended December 31, 1996, an
increase of $30,570,000 or 14%, of which approximately $4,300,000 is due to
additional operating costs incurred to service the Multicare management
contract, approximately $4,300,000 is due to the acquisition of the Multicare
therapy business and the remaining increase of approximately $22,000,000 is
attributed to growth in the institutional pharmacy, medical supply and
contract therapy divisions.
Interest expense increased $10,448,000 or 114% in the quarter ended December
31, 1997 compared to the quarter ended December 31, 1996. This increase in
interest expense was primarily due to additional borrowings used to finance
the Company's investment in Multicare, the purchase of the Multicare therapy
business, and the acquisition and development of eldercare centers, assisted
living facilities and ancillary businesses.
10
In connection with the early repayment of debt in the quarters ended December
31, 1997 and 1996, the Company recorded an extraordinary loss net of tax of
approximately $1,924,000 ($3,030,000 before tax) and $553,000 ($871,000 before
tax), respectively, to write off unamortized deferred financing fees.
Liquidity and Capital Resources
Working capital increased $101,028,000 to $327,958,000 at December 31, 1997 from
$226,930,000 at September 30, 1997. Approximately rehabilitation $90,000,000 of
this increase is due to the recognition of current assets held for sale to
ElderTrust. Accounts receivable increased to $225,121,000 at December 31, 1997
from $205,129,000 at September 30, 1997. Approximately $6,500,000 of this
increase relates to balances acquired in the Multicare rehabilitation therapy
business while the remaining increase of $13,492,000 relates primarily to the
continuing shift in business mix to specialty medical services, which typically
have a longer collection period. Days revenue in accounts receivable increased
to 68 days during this period from 65 days for the quarter ended September 30,
1997. The Company's cash flow from operations for the three months ended
December 31, 1997 resulted in a source of cash of approximately $4,081,000
compared to a use of cash of approximately $6,600,000 for the three months ended
December 31, 1996. The improvement in operating cash flow is primarily due to
growth in operations.
Investing activities for the quarter ended December 31, 1997 include
approximately $10,925,000 of capital expenditures primarily related to
betterments and expansion of eldercare centers and investment in data
processing hardware and software. In addition, the Company purchased three
skilled nursing facilities for total consideration of approximately
$30,500,000, including approximately $12,500,000 of assumed indebtedness.
These properties are included in assets held for resale to ElderTrust.
During the three months ended December 31, 1997, other long term assets
increased approximately $26,503,000, principally due to approximately
$20,000,000 of financing and other transaction costs incurred in connection with
the Multicare Transaction and the purchase of the Multicare rehabilitation
therapy business, and approximately $5,700,000 of subordinated management fees
due from Multicare.
In October 1997, in connection with the Multicare Transaction, Genesis entered
into a new credit facility with Mellon Bank, N.A., Citicorp Securities, Inc.,
Citibank N.A., First Union Capital Markets Corp., First Union National Bank
and NationsBank, N.A. (the "Lenders") pursuant to which the Lenders provided
Genesis and its subsidiaries with loan facilities totaling $850,000,000 (the
"Genesis Bank Financing") for the purpose of refinancing certain existing
indebtedness of Genesis; funding interest and principal payments on the
facilities and certain remaining indebtedness; funding permitted acquisitions;
funding Genesis' commitments in connection with the Merger; and funding
Genesis' and its subsidiaries' working capital for general corporate purposes,
including fees and expenses of the transactions. . The Genesis Bank Financing
facilities consist of three $200,000,000 term loans (collectively, the "Term
Loans"),a $250,000,000 revolving credit loan (the "Revolving Credit Facility")
and one or more Swing Loans (collectively, the "Swing Loan Facility") in
integral principal multiples of $500,000 up to an aggregate unpaid principal
amount of $15,000,000. The Term Loans amortize in quarterly installments
beginning in fiscal 1998 through 2005, of which $19,000,000 is payable in
fiscal 1998. The Term Loans consist of (1) a $200,000,000 six year term loan
(the "Tranche A Term Facility"); (2) a $200,000,000 seven year term loan (the
"Tranche B Term Facility"); and (3) a $200,000,000 eight year term loan (the
"Tranche C Term Facility"). The Revolving Credit Facility becomes payable in
full on September 30, 2003.
The Genesis Bank Financing facilities are secured by a first priority security
interest in all of the stock, partnership interests and other equity of all of
Genesis' present and future subsidiaries (including the Multicare Parent)
other than stock of Multicare and its subsidiaries. Loans under the Genesis
Bank Financing bear, at Genesis' option, interest at the per annum Prime Rate
as announced by the administrative agent, or the applicable Adjusted LIBOR.
Loans under the Tranche A Term Facility bear interest at an annual rate equal
to LIBOR plus a margin up to 2.5%, loans under the Tranche B Term Facility
bear interest at an annual rate equal to LIBOR plus a margin up to 2.75%;
loans under the Tranche C Term Facility bear interest at an annual rate equal
to LIBOR plus a margin up to 3.0%; loans under the Revolving Credit Facility
bear interest at a rate equal to LIBOR plus a margin up to 2.5%, and loans
under the Swing Loan Facility bear interest at the Prime Rate unless otherwise
agreed to by the parties. Subject to meeting certain financial covenants, the
above referenced interest rates will be reduced.
11
The Genesis Bank Financing contains a number of covenants that, among other
things, restrict the ability of Genesis and its subsidiaries to dispose of
assets, incur additional indebtedness, make loans and investments, pay
dividends, engage in mergers or consolidations, engage in certain transactions
with affiliates and change control of capital stock, and to make capital
expenditures; prohibit the ability of Genesis and its subsidiaries to prepay
debt to other persons, make material changes in accounting and reporting
practices, create liens on assets, give a negative pledge on assets, make
acquisitions and amend or modify documents; causes Genesis and its affiliates
to maintain the Management Agreement, the Put/Call Agreement, as defined
below, and corporate separateness; and will cause Genesis to comply with the
terms of other material agreements as well as comply with usual and customary
covenants for transactions of this nature.
In connection with the Multicare Transaction, Genesis, Cypress, TPG and Nazem
entered into an agreement (the "Put/Call Agreement") pursuant to which, among
other things, Genesis will have the option, on the terms and conditions set
forth in the Put/Call Agreement to purchase (the "Call") Genesis ElderCare
Corp. Common Stock held by Cypress, TPG and Nazem commencing on October 9,
2001 and for a period of 270 days thereafter, at a price determined pursuant
to the terms of the Put/Call Agreement. Cypress, TPG and Nazem will have the
option, on the terms and conditions set forth in the Put/Call Agreement, to
require Genesis to purchase (the "Put") such Genesis ElderCare Corp. Common
Stock commencing on October 9, 2002 and for a period of one year thereafter,
at a price determined pursuant to the Put/Call Agreement.
The prices determined for the Put and Call are based on a formula that
calculates the equity value attributable to Cypress', TPG's and Nazem's
Genesis ElderCare Corp. Common Stock, plus a portion of the Genesis pharmacy
business (the "Calculated Equity Value"). The Calculated Equity Value will be
determined based upon a multiple of Genesis ElderCare Corp.'s earnings before
interest, taxes, depreciation, amortization and rental expenses, as adjusted
("EBITDAR") after deduction of certain liabilities, plus a portion of the
EBITDAR related to the Genesis pharmacy business. The multiple to be applied
to EBITDAR will depend on whether the Put or the Call is being exercised. Any
payment to Cypress, TPG or Nazem under the Call or the Put maybe in the form
of cash or Genesis common stock at Genesis' option.
Upon exercise of the Call, Cypress, TPG and Nazem will receive at a minimum
their original investment plus a 25% compound annual return thereon regardless
of the Calculated Equity Value. Any additional Calculated Equity Value
attributable to Cypress', TPG's or Nazem's Genesis ElderCare Corp. Common
Stock will be determined on the basis set forth in the Put/Call Agreement
which provides generally for additional Calculated Equity Value of Genesis
ElderCare Corp. to be divided based upon the proportionate share of the
capital contributions of the stockholders to Genesis ElderCare Corp. Upon
exercise of the Put by Cypress, TPG or Nazem, there will be no minimum return
to Cypress, TPG or Nazem; any payment to Cypress, TPG or Nazem will be limited
to Cypress' TPG's or Nazem's share of the Calculated Equity Value based upon a
formula set forth in the terms of the Put/Call Agreement which provides
generally for the preferential return of the stockholders' capital
contributions (subject to certain priorities), a 25% compound annual return on
Cypress', TPG's and Nazem capital contributions and the remaining Calculated
Equity Value to be divided based upon the proportionate share of the capital
contributions of the stockholders to Genesis ElderCare Corp.
Cypress', TPG's and Nazem's rights to exercise the Put will be accelerated
upon an event of bankruptcy of Genesis, a change of control of Genesis or an
extraordinary dividend or distribution or the occurrence of the leverage
recapitalization of Genesis. Upon an event of acceleration or the failure by
Genesis to satisfy its obligations upon exercise of the Put, Cypress, TPG and
Nazem will have the right to terminate the Stockholders' Agreement and
Management Agreement and to control the sale or liquidation of Genesis
12
ElderCare Corp. In the event of such sale, the proceeds from such sale will be
distributed among the parties as contemplated by the formula for the Put
option exercise price and Cypress, TPG and Nazem will retain a claim against
Genesis for the difference, if any, between the proceeds of such sale and the
put option exercise price. In the event of a bankruptcy or change of control
of Genesis, the option price shall be payable solely in cash provided any such
payment will be subordinated to the payment of principal and interest under
the Genesis Bank Financing.
On January 30, 1998, Genesis successfully completed deleveraging transactions
with ElderTrust, a newly formed Maryland healthcare real estate investment
trust. Genesis, a co-registrant on the ElderTrust initial public offering,
received approximately $78,000,000 in proceeds from the sale of 13 properties
to ElderTrust, including four properties it had purchased from Crozer-Keystone
Health System in anticipation of resale to ElderTrust. Genesis anticipates
receiving an additional $14,000,000 from the sale of a loan and two additional
assisted living facilities and the recoupment of amounts advanced and expenses
incurred in connection with the formation of ElderTrust. Additionally,
ElderTrust has funded approximately $13,200,000 of a commitment to finance the
development and expansion of four additional assisted living facilities.
Genesis intends to repay a portion of the revolving credit component of its
bank credit facility with the proceeds from these transactions. The Company
has reflected $89,920,000 of assets held for sale in its December 31, 1997
balance sheet representing assets subsequently sold or expected to be sold to
ElderTrust.
In December 1997, the Company announced that its Board of Directors approved
the purchase of long-term call options on up to 1,500,000 shares of the
Company's Common Stock. The call options will be purchased by the Company from
time to time in privately negotiated transactions designated to take advantage
of attractive share price levels, as determined by the Company's management,
in compliance with covenants governing existing financing arrangements. The
timing and the terms of the transactions, including maturities, will depend on
market conditions, the Company's liquidity and covenant requirements under its
financing arrangements, and other considerations. The Board of Directors also
approved a Senior Executive Stock Ownership Program. Under the terms of the
program, certain of the Company's current senior executive employees will be
required to own shares of the Company's Common Stock having a market value
based upon a multiple of the executive's salary. Each executive is required to
own the shares within three years of the date of the adoption of the program.
Subject to applicable laws, the Company may lend funds to one or more of the
senior executive employees for his or her purchase of the Company's Common
Stock.
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 Geriatric and Medical
Companies (GMC) Transaction, to repay certain debt assumed as a result of the
GMC Transaction and to repurchase GMC accounts receivable which were
previously financed.
Certain of the Company's other 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. 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
13
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 10, 1998, approximately $100,000,000 was outstanding under the
Revolving Credit Facility, and approximately $131,300,000 was available under
the Revolving Credit Facility after giving effect to approximately $18,700,000
in outstanding letters of credit issued under the Revolving Credit Facility.
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.
14
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 Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
10.1 Assignment and Assumption Agreement among Genesis
Health Ventures, Inc., ET Capital Corp. and Age
Institute of Florida.
10.2 Amended and Restated Promissory Note among Genesis
Health Ventures, Inc. and, ET Capital Corp. and
Age Institute of Florida.
10.3(1) Form of Asset Transfer Agreement between the
Operating Partnership and Genesis (Heritage Woods,
Willowbrook, Riverview Ridge, Pleasant View,
Rittenhouse, Lopatcong, Phillipsburg, Wayne, POB
1, Lacey Bank Building, Belvedere, Chapel Manor and
Pennsburg Manor).
10.4(1) Form of Right of First Refusal Agreement between
the Operating Partnership and Genesis.
10.5(1) Form of Minimum Rent Lease between the Operating
Partnership and Genesis (Heritage Woods, Highgate
at Paoli Pointe, Rittenhouse, Lopatcong, Phillipsburg
and Wayne).
11 Statement re computation of per share earnings
27 Financial Data Schedule
(1) Incorporated by reference to the Company's
Registration Statement on Form S-3 (Registration No.
333-3745)
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K,
dated October 9, 1997 reporting a wholly-owned
subsidiary of Genesis ElderCare Corp., a Delaware
corporation formed by Genesis Health Ventures,
Inc., the Cypress Group L.L.C., TPG Partners II,
L.P. and Nazem, Inc., acquired 32,790,495 shares of
The Multicare Companies, Inc., which represented
approximately 99.65% of Multicare's outstanding
shares of common stock, part value $.01 per share,
for a cash price of $28.00 per share, pursuant to a
tender offer commenced on June 20, 1997.
The Company filed a current report on Form 8-K/A,
dated October 10, 1997 amending the current report
dated October 9, 1997 to include or incorporate by
reference the following financial information:
15
Financial Statements of businesses acquired:
The Multicare Companies, Inc.
(1) Independent Auditors' Report
(2) Consolidated Balance Sheets as of
December 31, 1995 and 1996
(3) Consolidated Statements of Operations
for the years ended December 31, 1994,
1995 and 1996.
(4) Consolidated Statements of
Stockholders' Equity for the years
ended December 31, 1994, 1995 and 1996.
(5) Consolidated Statements of Cash Flows
for the years ended December 31, 1994,
1995 and 1996.
(6) Notes to Consolidated Financial
Statements
(7) Unaudited Consolidated Balance Sheet as
of September 30, 1997
(8) Unaudited Consolidated Statement of
Operations for the three and nine
months ended September 30, 1997
(9) Unaudited Consolidated Statement of
Cash Flows for the nine months ended
September 30, 1997.
(10) Unaudited Notes to Consolidated
Financial Statements
Genesis Health Ventures, Inc. and Subsidiaries
Pro Forma Financial Statements
(1) Unaudited Pro Forma Condensed
Consolidated Balance Sheet as of
September 30, 1997 and Notes Thereto
(2) Unaudited Pro Forma Condensed
Consolidated Statement of Operations
for the Twelve Months Ended September
30, 1997 and Notes Thereto
16
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 13, 1998 _________________________________________________
George V. Hager, Jr.
Senior Vice President and Chief Financial Officer
17