SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2001
Commission File No. 1-15669
Gentiva Health Services, Inc.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-433-5801
-------- -----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Huntington Quadrangle 2S, Melville, NY 11747-8943
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (631) 501-7000
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
The number of shares outstanding of the Registrant's Common Stock,
as of May 11, 2001 was 22,052,228.
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - April 1, 2001
(Unaudited) and December 31, 2000 2
Consolidated Statements of Operations (Unaudited) -
Three Months Ended April 1, 2001 and April 2, 2000 3
Consolidated Statements of Cash Flows (Unaudited) -
Three Months Ended April 1, 2001 and April 2, 2000 4
Notes to Consolidated Financial Statements (Unaudited) 5-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-17
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18-20
Item 2. Change in Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20-21
Item 6. Exhibits and Reports on Form 8-K 21-23
SIGNATURES 24
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Gentiva Health Services, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share amounts)
April 1, 2001 December 31, 2000
------------------- ------------------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 49,553 $ 452
Receivables, less allowance for doubtful accounts
of $93,907 and $105,962, respectively 407,366 419,178
Inventories 51,261 51,111
Prepaid expenses and other current
assets 48,917 50,333
-------------- -----------------
Total current assets 557,097 521,074
Fixed assets, net 33,734 36,961
Intangible assets, net 228,055 230,702
Other assets 15,956 16,747
-------------- -----------------
Total assets $ 834,842 $ 805,484
============== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 85,520 $ 74,083
Accrued expenses 56,596 50,682
Payroll and related taxes 20,067 17,305
Insurance costs 29,339 30,320
-------------- -----------------
Total current liabilities 191,522 172,390
Other liabilities 46,055 46,945
Gentiva - obligated mandatorily redeemable
convertible securities of a subsidiary holding solely
Gentiva debentures 20,000 20,000
Shareholders' equity:
Common stock, $.10 par value; authorized 100,000,000
shares; issued and outstanding 21,974,582 and
21,196,693 shares, respectively 2,197 2,120
Additional paid-in capital 694,728 689,163
Accumulated deficit (118,458) (124,570)
Accumulated other comprehensive loss (1,202) (564)
-------------- -----------------
Total shareholders' equity 577,265 566,149
-------------- -----------------
Total liabilities and
shareholders' equity $ 834,842 $ 805,484
============== =================
See notes to consolidated financial statements.
-2-
Gentiva Health Services, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
---------------------------------------
April 1, 2001 April 2, 2000
---------------------------------------
Net revenues $ 357,178 $ 384,607
Cost of services sold 240,748 256,105
-------------------- ------------------
Gross profit 116,430 128,502
Selling, general and administrative expenses 109,385 127,532
Interest expense, net 433 4,236
-------------------- ------------------
Income (loss) before income taxes 6,612 (3,266)
Income tax expense (benefit) 500 (1,360)
-------------------- ------------------
Net income (loss) $ 6,112 $ (1,906)
==================== ==================
Net income (loss) per share:
Basic $ 0.28 $ (0.09)
==================== ==================
Diluted $ 0.26 $ (0.09)
==================== ==================
Average shares outstanding:
Basic 21,448 20,345
==================== ==================
Diluted 25,701 20,345
==================== ==================
See notes to consolidated financial statements.
-3-
Gentiva Health Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
------------------------------------
April 1, 2001 April 2, 2000
------------------------------------
OPERATING ACTIVITIES:
Net income (loss) $ 6,112 $ (1,906)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,990 8,487
Provision for doubtful accounts 9,200 7,545
Changes in assets and liabilities:
Accounts receivable 2,612 (36,589)
Inventories (150) 10,235
Prepaid expenses and other current assets 1,416 1,631
Current liabilities 8,633 (30,596)
Other, net (737) (732)
-------------- -------------------
Net cash provided by (used in) operating
activities 34,076 (41,925)
-------------- -------------------
INVESTING ACTIVITIES:
Purchase of fixed assets (1,116) (2,186)
-------------- -------------------
Net cash used in investing
activities (1,116) (2,186)
-------------- -------------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 5,642 -
Issuance of mandatorily redeemable and other
securities - 20,100
Net transactions with Olsten - 5,226
Proceeds from revolving credit
facility - 25,477
Debt issuance costs - (2,564)
Decrease in book overdrafts (10,379) (2,684)
Advances from Medicare program 20,878 -
------------- --------------------
Net cash provided by financing activities 16,141 45,555
------------- --------------------
Net increase in cash and cash equivalents 49,101 1,444
Cash and cash equivalents at beginning of
period 452 2,942
------------- --------------------
Cash and cash equivalents at end of period $ 49,553 $ 4,386
============= ====================
See notes to consolidated financial statements.
-4-
Gentiva Health Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. Accounting Policies
The accompanying interim consolidated financial statements are unaudited,
but have been prepared by Gentiva Health Services, Inc. (the "Company") pursuant
to the rules and regulations of the Securities and Exchange Commission and, in
the opinion of management, include all adjustments necessary for a fair
presentation of results of operations, financial position and cash flows for
each period presented. Results for interim periods are not necessarily
indicative of results for a full year. The year-end balance sheet data was
derived from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles.
2. Background and Basis of Presentation
On March 15, 2000, the Company and its subsidiaries were split-off (the
"Split-off") from Olsten Corporation ("Olsten") through the issuance of all of
the Company's shares of common stock to Olsten's shareholders and the Company
became an independent, publicly-owned company. Prior to the Split-off, the
Company operated Olsten's health services business as a wholly-owned subsidiary
of Olsten.
The accompanying interim consolidated financial statements reflect the
results of operations, financial position and cash flows of the Company as if it
were a separate entity for all periods presented. The consolidated financial
statements have been prepared using the historical basis in the assets and
liabilities and historical results of operations related to the Company.
The Company's selling, general and administrative expenses included a
management fee of approximately $1.0 million for the first quarter of fiscal
2000. This fee represented an allocation of certain general corporate overhead
expenses related to Olsten's corporate headquarters. Management believes the
allocations related to general corporate overhead expenses were reasonable;
however, the costs charged to the Company were not necessarily indicative of the
costs that would have been incurred if the Company had been a stand-alone entity
during the period for which such expenses were allocated. Subsequent to the
Split-off, the Company began to perform these functions using its own resources
or purchased services and, additionally, the Company has been responsible for
the costs and expenses associated with the management of a public corporation.
Net interest expense as presented in the consolidated statement of
operations included net interest expense of approximately $2.7 million for the
first quarter of fiscal 2000 relating to the intercompany balances with Olsten.
Such intercompany balances have been reflected as a contribution to capital as
of the Split-off date.
-5-
3. Earnings per Share
Basic net income per share for the first quarter of fiscal 2001 has been
computed using the weighted average number of shares outstanding (21,448,000).
Diluted earnings per share for the fiscal 2001 period has been computed using
the weighted average number of common and dilutive common equivalent shares
outstanding. Dilutive common equivalent shares represented (i) 2,107,000 shares
that would be issued upon the assumed exercise of approximately 3.8 million
stock options under the treasury stock method and (ii) 2,146,000 shares that
would be issued upon the assumed conversion of the 10 percent convertible
preferred trust securities at a conversion price of $9.32 per share.
Basic and diluted net loss per share for the first quarter of fiscal 2000
have been computed based solely on the shares of the Company's stock issued on
the Split-off date. The computation of dilutive net loss per share for the first
quarter of fiscal 2000 excluded the effect of shares issuable upon the
conversion of the 4 3/4 percent convertible subordinated debentures, which
matured and were retired in October 2000, and the 10 percent convertible
preferred trust securities and the exercise of stock options since their
inclusion would have an antidilutive effect on earnings.
4. Restructuring and Special Charges
During the first quarter of fiscal 2000, the Company recorded special
charges aggregating $5.6 million which were reflected in selling, general and
administrative expenses in the accompanying consolidated statement of
operations. Of this amount, charges of $4.1 million were incurred to reflect
obligations resulting from the Company's Split-off from Olsten and transition
costs associated with the establishment of the Company as an independent,
publicly-owned entity. These special charges included change of control and
compensation and benefit payments of $3.6 million made to certain former
employees of the Company and Olsten and a current executive officer of the
Company, and transition costs of $0.5 million relating to registration costs,
professional fees and other items.
In addition, special charges of approximately $1.5 million were incurred
during the first quarter of fiscal 2000 in connection with the change of the
Company's name to Gentiva Health Services, Inc. These special charges primarily
consisted of costs incurred and paid for consulting fees, promotional items and
advertising.
The Company recorded charges of $5.5 million in the fourth quarter of
fiscal 2000 in connection with a restructuring of certain business operations.
As of December 31, 2000 and April 1, 2001, the unpaid portion of these
restructuring charges aggregated $3.4 million and $2.3 million, respectively, as
a result of cash payments made during the quarter. The Company expects the
restructuring plan to be fully executed by mid-2001.
5. Current Liabilities
-6-
In early 2001, the Health Care Financing Administration issued cash
advances to certain Medicare providers in connection with the transition from
the Interim Payment System to the Prospective Payment System for Medicare
reimbursement. Such advances are expected to be repaid during the fourth quarter
of fiscal 2001. In this connection, the Company received a cash advance, net of
payments for estimated settlements relating to cost report filings, of
approximately $20.9 million which was reflected in accrued expenses in the
accompanying consolidated balance sheet as of April 1, 2001.
6. Revolving Credit Facility
As of April 1, 2001, there were no outstanding borrowings and total
outstanding letters of credit approximated $25.5 million under the Company's
$150 million revolving credit facility which expires in 2004. The Company was in
compliance with the financial covenants of the credit facility as of April 1,
2001.
7. Shareholders' Equity
Changes in shareholders' equity during the three months ended April 1, 2001
were as follows (in thousands):
Additional Accumulated
Common Paid-in Accumulated Other
Stock Capital Deficit Comprehensive Total
Loss
--------------------------------------------------------- -----------
Balance at December 31, 2000 $ 2,120 $ 689,163 $ (124,570) $ (564) $ 566,149
Comprehensive income:
Net income 6,112 6,112
Unrealized loss on investments (638) (638)
Issuance of stock upon exercise of stock options 77 5,565 5,642
---------- ------------ ------------ ------------- -------------
Balance at April 1, 2001 $ 2,197 $ 694,728 $ (118,458) $ (1,202) $ 577,265
========== ============ ============ ============= =============
Total comprehensive income amounted to $5.5 million during the first
quarter of fiscal 2001 and total comprehensive loss amounted to $1.8 million for
the first quarter of fiscal 2000.
-7-
8. Legal Matters
Litigation
In addition to the matters referenced below, the Company is party to
certain legal actions arising in the ordinary course of business including legal
actions arising out of services rendered by its various operations, personal
injury and employment disputes.
In late 2000, after engaging in a mediation conducted by a third-party
mediator, the parties to the previously disclosed Class Action (In re Olsten
Corporation Securities Litigation, No. 97-CV-5056 (DRH), U.S. District Court for
the Eastern District of New York) and Derivative Lawsuit (Rubin v. May, No.
17135-NC, Delaware Chancery Court) reached an agreement in principle to settle
both lawsuits for the aggregate sum of $25 million. The proposed settlement is
subject to final approval of the respective courts before which the Class Action
and the Derivative Lawsuit are pending. By order dated April 30, 2001, the
District Court preliminarily approved the settlement and scheduled a settlement
fairness hearing date for August 31, 2001. The Company's insurers have funded
$18 million of the proposed settlement sum. The Company funded the $7 million
balance and recorded a special charge for that amount during fiscal 2000. The
funds are subject to return if the settlement is not approved.
In July 1999, the Indiana Attorney General's Office filed a lawsuit against
Olsten in Indiana Superior Court, captioned State of Indiana v. Quantum Health
Resources, Inc. and Olsten Health Services, Inc., No. 49D029907CP001011,
alleging that Olsten was overpaid by Medicaid, failed to properly disclose
information to Medicaid and engaged in improper billing. The alleged violations
predate Olsten's acquisition of Quantum Health Resources in June 1996. The
lawsuit seeks unspecified monetary damages, double or treble damages, penalties
and investigative costs. The parties are engaging in discussions in an attempt
to resolve this matter.
On January 14, 1999, Kimberly Home Health Care, Inc. ("Kimberly"), one of
the Company's subsidiaries, initiated three arbitration proceedings against
hospitals owned by Columbia/HCA Healthcare Corp. ("Columbia/HCA") with which
Kimberly had management services agreements to provide services to the
hospitals' home health agencies. The basis for each of the arbitrations is that
Columbia/ HCA sold the home health agencies without assigning the management
services agreements and, as a result, Columbia/HCA has breached the management
services agreements. In response to the arbitrations, Columbia/HCA has asserted
that the arbitrations be consolidated and stayed, in part based upon its alleged
claims against Kimberly for breach of contract, and requested indemnity and
possibly return of management fees. Columbia/HCA has not yet formally presented
these claims in the arbitrations or other legal proceedings and has not yet
quantified the claims. Currently pending before one of the arbitrators is
Columbia/HCA's request to consolidate the proceedings, which Kimberly has
opposed. There has been no new development in this matter.
-8-
On June 23, 2000, the Company was served with a Complaint in a purported
class action lawsuit filed by Ultimate Home Health Care Inc. in the U.S.
District Court for the Middle District of Tennessee, captioned Ultimate Home
Health Care, Inc. v. Columbia/HCA Healthcare Corp., No. 3-00-0560, (the
"Tennessee Lawsuit"). The Company was served with an Amended Complaint in the
Tennessee Lawsuit on July 21, 2000, which names as defendants Columbia/HCA,
Columbia Homecare Group, Olsten Health Management a/k/a Hospital Contract
Management Services (one of the Company's subsidiaries) and Olsten Corporation.
The Amended Complaint alleges, among other things, that the defendants' business
practices in connection with home health care patient referrals between 1994 and
1996 violated provisions of Federal antitrust laws, the Racketeer Influenced and
Corrupt Organizations Act (RICO), the Tennessee Consumer Protection Act (TCPA),
and state common law. The Amended Complaint seeks unspecified compensatory
damages, punitive damages, treble damages and attorneys' fees on behalf of a
proposed class of home healthcare companies and/or agencies which conducted
business in Tennessee, Texas, Florida and/or Georgia. In September 2000, the
defendants filed a motion to dismiss the Amended Complaint, and by an order
dated January 21, 2001, the Court dismissed plaintiffs' RICO and state common
law tort claims. The Court also held that the plaintiffs had properly pleaded
the antitrust, TCPA and civil conspiracy claims and allowed those claims to
proceed to discovery. Because the Tennessee Lawsuit is in a relatively
preliminary stage, the Company is unable at this time to assess the probable
outcome of or potential liability arising from such lawsuit.
On November 22, 2000, the jury in an age-discrimination lawsuit commenced
in 1998, captioned Fredrickson v. Olsten Health Services Corp. and Olsten
Corporation, Case No. 98 CV 1937, Court of Common Pleas, Mahoning County, Ohio
(the "Fredrickson Lawsuit"), returned a verdict in favor of the plaintiff
against Olsten consisting of $675,000 in compensatory damages, $30 million in
punitive damages and an undetermined amount of attorneys' fees. The jury found
that, although Olsten had lawfully terminated the plaintiff's employment, its
failure to transfer or rehire the plaintiff rendered Olsten liable to the
plaintiff. In vigorously contesting the verdict and judgment, the defendants
posted a bond ordered by the trial court in the amount of $675,000 and filed
with that court several post-trial motions, including a motion seeking the entry
of judgment in the defendants' favor notwithstanding the verdict or, in the
alternative, a new trial or a remittitur of the punitive damages award. The
plaintiff has filed post-trial motions in connection with the entry of the
judgment and the amount of the bond posted by defendants. A hearing before the
trial court on the parties' respective post-trial motions was held on March 23,
2001. The decision on the hearing is pending.
In Gile v. Olsten Corporation, et al, U.S. District Court for the Central
District of California, No. 97-9363-NM, plaintiff filed an age discrimination
suit against Olsten Corporation ("Olsten"), Olsten Health Services, and a
certain individual in December 1997. The complaint seeks an unspecified amount
of compensatory and punitive damages. The defendants denied the allegations of
discrimination on the basis that plaintiff's termination was part of a reduction
in force. The individual defendant was dismissed from the action, and the
remaining corporate defendants filed a motion for summary judgment that was
granted by the District Court in February 1999. The plaintiff appealed the
District Court's order to the Ninth Circuit Court of Appeals and in December,
2000, the Court of Appeals issued its ruling which
-9-
reversed the District Court and remanded the case for trial. Under the
Separation Agreement of August 17, 1999 by and among Olsten, Adecco SA, and the
Company (the "Separation Agreement"), the Company is obligated to indemnify
Olsten with respect to this matter. The District Court scheduled the trial for
October 2001 and ordered mediation between the parties. The court-ordered
mediation took place on May 10, 2001 but no settlement was reached. The Company
continues to defend this matter, but is continuing settlement discussions with
the plaintiff.
Furthermore, in connection with the Split-Off, the Company agreed to
assume, to the extent permitted by law, the liabilities, if any, arising out of
(and to indemnify Olsten for) the above lawsuits and arbitration proceedings and
other liabilities arising out of the health services business, including any
such liabilities arising after the Split-Off in connection with the government
investigations described below.
Government Investigations
In early December 1999, Olsten received a document subpoena from the
Department of Health and Human Services, Office of Inspector General, and Office
of Investigations. After preliminary discussions with the Office of Inspector
General, the Company believes the subpoena relates to an investigation of
possible overpayments to it by the Medicare program. In early February 2000, the
Company received a document subpoena from the Department of Health and Human
Services, Office of Inspector General, and Office of Investigations. The Company
believes the subpoena relates to its agencies' cost reporting procedures
concerning contracted nursing and home health aide costs. The Company has
provided and continues to provide the Office of Inspector General with the
requested documents and continues to cooperate fully with its investigations. At
this time, the Company is unable to assess the probable outcome or potential
liability, if any, arising from these subpoenas. The Company believes that it is
possible that one or both of these investigations may have been triggered by
lawsuits under federal or state whistle blower statutes against Olsten or the
Company.
9. Business Segment Information
The Company operates in the United States and operated in Canada during the
fiscal 2000 period, servicing patients and customers through the following
business segments: Specialty Pharmaceutical Services, Home Health Services and,
for the fiscal 2000 period, Staffing Services. These segments are briefly
described below.
Specialty Pharmaceutical Services includes (i) the distribution of drugs
and other biological and pharmaceutical products and professional support
services for individuals with chronic diseases, such as hemophilia, primary
pulmonary hypertension, autoimmune deficiencies and growth disorders, (ii) the
administration of antibiotics, chemotherapy, nutrients and other medications for
patients with acute or episodic disease states, (iii) distribution services for
pharmaceutical, biotechnology and medical service firms and (iv) clinical
support services for pharmaceutical and biotechnology firms.
-10-
Home Health Services includes (i) professional and paraprofessional
services, including skilled nursing, rehabilitation and other therapies, home
health aide and personal care services, to individuals with acute illnesses,
long-term chronic health conditions, permanent disabilities, terminal illnesses
or post-procedural needs and (ii) care management and coordination for managed
care organizations and self-insured employees.
Staffing Services included services to institutional, occupational and
alternate site health care organizations by providing health care professionals
to meet supplemental staffing needs. Canada included professional and
paraprofessional services to individuals in home and institutional settings.
Both Staffing Services and Canada constituted less than 10 percent of the net
revenues, operating contribution and the total assets of the Company and, as
such, were combined for segment reporting purposes.
The Company and its chief decision makers evaluate performance and allocate
resources based on operating contributions of the reportable segments, which
exclude corporate expenses, depreciation, amortization and interest expense, but
include revenues and all other costs directly attributable to the specific
segment. Intersegment revenues represent Specialty Pharmaceutical Services
segment revenues generated from services provided to the Home Health Services
segment. Identifiable assets of the segments reflect net accounts receivable and
inventories associated with segment activities. All other assets are assigned to
the Company for the benefit of all segments.
During fiscal 2001, the Company changed its evaluation performance
methodology, as described below, which resulted in a change in reportable
segments. In the fiscal 2000 period, clinical support services for the
pharmaceutical and biotechnology firms and staffing services provided under a
state contract were included in the Staffing Services segment. The Company now
considers these services to be part of the Specialty Pharmaceutical Services
segment and Home Health Services segment, respectively. In addition, services
relating to care management and coordination for managed care organizations and
self-insured employees were allocated between Specialty Pharmaceutical Services
and Home Care Nursing Services segments in the fiscal 2000 periods based on the
nature of services rendered; the Company now considers these services to be part
of the Home Health Services segment. Furthermore, Canadian operating results
were included in the Home Care Nursing Services segment in the prior year period
and are now reflected in the Staffing and Canada results for presentation
purposes. Prior period segment data has been reclassified to conform with the
current year presentation.
-11-
Information about the Company's operations is as follows (in thousands):
Specialty Home Health Staffing and
Pharmaceutical Services Canada Total
Services
--------------------- ---------------- --------------- ----------------
Three months ended April 1, 2001
Net revenues - segments $ 195,887 $ 185,617 $ - $ 381,504
===================== ================ ===============
Intersegment revenues (24,326)
-----------------
Net revenues $ 357,178
=================
Operating contribution $ 16,847 $ 14,780 $ - $ 31,627
===================== ================ ===============
Corporate expenses (17,592)
-----------------
Earnings before interest expense, taxes,
depreciation and amortization 14,035
Depreciation and amortization (6,990)
Interest expense, net (433)
-----------------
Income before income taxes $ 6,612
=================
Segment assets $ 284,750 $ 173,877 $ - $ 458,627
===================== ================ ===============
Corporate assets 376,215
-----------------
Total assets $ 834,842
=================
Three months ended April 2, 2000
Net revenues - segments $ 168,995 $ 189,544 $ 41,679 $ 400,218
===================== ================ ===============
Intersegment revenues (15,611)
-----------------
Net revenues $ 384,607
=================
Operating contribution $ 22,573 $ 11,033 $ 2,499 $ 36,105
===================== =============== ================
Corporate expenses (21,048)
Special charges - corporate (5,600)
-----------------
Earnings before interest expense, taxes,
depreciation and amortization 9,457
Depreciation and amortization (8,487)
Interest expense, net (4,236)
-----------------
Loss before income taxes $ (3,266)
=================
Segment assets $ 447,504 $ 216,701 $ 23,282 $ 687,487
===================== =============== ================
Corporate assets 344,176
-----------------
Total assets $ 1,031,663
=================
-12-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
The comparability of the Company's results of operations between the first
quarter of fiscal 2001 and 2000 was impacted by several items which are briefly
described below.
o On March 15, 2000, the Company was Split-off from Olsten
Corporation("Olsten") through the issuance of all of the Company's
common stock to Olsten's shareholders and the Company became an
independent, publicly-owned company. Prior thereto, the Company
operated Olsten's health services business as a wholly-owned
subsidiary of Olsten. The accompanying consolidated financial
statements reflect the financial position, results of operations and
cash flows of the Company as if it were a separate entity for all
periods presented. The consolidated financial statements have been
prepared using historical basis of assets and liabilities and
historical results of operations related to the Company.
o During the first quarter of fiscal 2000, the Company recorded special
charges aggregating $5.6 million which were reflected in selling,
general and administrative expenses in the accompanying consolidated
statement of operations. Of this amount, charges of $4.1 million were
incurred to reflect obligations resulting from the Company's Split-off
from Olsten and transition costs associated with the establishment of
the Company as an independent, publicly-owned entity. These special
charges included change of control and compensation and benefit
payments of $3.6 million made to certain former employees of the
Company and Olsten and a current executive officer of the Company, and
transition costs of $0.5 million relating to registration costs,
professional fees and other items. In addition, special charges of
approximately $1.5 million were incurred during the first quarter of
fiscal 2000 in connection with the change of the Company's name to
Gentiva Health Services, Inc. These special charges primarily
consisted of costs incurred and paid for consulting fees, promotional
items and advertising.
o Prior to October 1, 2000, reimbursement of Medicare home care nursing
services was based on reasonable, allowable costs incurred in
providing services to eligible beneficiaries subject to both per visit
and per beneficiary limits in accordance with the Interim Payment
System (the "IPS") established through the Balanced Budget Act of
1997. These costs are reported in annual cost reports which are filed
with the Medicare fiscal intermediary and are subject to audit.
Effective October 1,
-13-
2000, the IPS was replaced by a Prospective Payment System ("PPS") for
Medicare home care reimbursement. Under PPS, the Company is eligible
to receive a fixed reimbursement which covers a specified treatment
period for each patient. The reimbursement rate is established based
on a clinical assessment of the severity of the patient's condition,
service needs and certain other factors. The rate is subject to
adjustment if there are significant changes in the patient's condition
during the specified treatment period. Net revenues attributable to
the Medicare program as a percentage of total consolidated net
revenues were 17 percent in the first quarter of both fiscal 2001 and
2000.
o During the fourth quarter of fiscal 2000, the Company sold its health
care staffing services business and its Canadian operations. Revenues,
gross profit and selling, general and administrative expenses recorded
in the first quarter of fiscal 2000 relating to the businesses that
were sold amounted to approximately $42 million, $11 million and $8
million, respectively.
The Company's results of operations are impacted by various regulations and
other matters that are implemented from time to time in its industry, some of
which are described in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2000.
Results of Operations
Revenues
Net revenues decreased by $27 million or 7.0 percent to $357 million during
the first quarter of fiscal 2001 as compared to the first quarter of fiscal
2000. This decrease related primarily to $42 million in revenue for the first
quarter of fiscal 2000 associated with the Staffing and Canadian operations
which were sold during the fourth quarter of fiscal 2000. After adjusting for
these sales, net revenues increased by $14 million or 4.1% driven by growth in
Specialty Pharmaceutical Services of $27 million or 15.9%, which included an
increase of $9 million in intersegment revenues generated from services provided
to the Home Health Services segment which is eliminated in consolidation. This
increase was partially offset by a $4 million or 2.1% decrease in the Home
Health Services segment.
In the Specialty Pharmaceutical Services business, revenue growth in the
first quarter was attributable to volume increases in Flolan, IVIG, Synagis and
several wholesale pharmaceutical therapies. The revenue growth in these
therapies, however, was negatively impacted by some product shortages of
recombinant coagulation therapy, which is used in the treatment of hemophilia.
The decline in Home Health Services revenue during the first quarter of fiscal
2001 was attributable primarily to the continuing transition to new clinical
protocols as part of the new Medicare reimbursement system and the impact of the
closing of certain home care nursing branches during the fourth fiscal quarter
at 2000 as well as the continued shortage of nursing and caregiver personnel in
certain parts of the country.
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Gross Profit
Gross profit margins, as a percentage of net revenues, decreased from 33.4
percent in the first quarter of fiscal 2000 to 32.6 percent in the first quarter
of fiscal 2001 The decrease in margins was primarily attributable to a change in
business mix reflecting growth in the lower margin Specialty Pharmaceutical
Services business and higher costs attributable to certain biological and
pharmaceutical products due to product shortages, partly offset by productivity
enhancements and rate increases in Home Health Services.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased to $109 million
during the first quarter of fiscal 2001 as compared to $128 million during the
first quarter of fiscal 2000 due to (i) the reduction in costs associated with
the sale of the Staffing and Canadian operations, (ii) efficiency improvement
efforts in Home Health Services and corporate administrative support
departments, (iii) the closing of certain home care nursing branches during the
fourth quarter of fiscal 2000 and (iv) the absence of special charges which were
recorded in the first quarter of fiscal 2000 as discussed above. These decreases
were offset by increased investments in sales, billing and collection personnel
in the Specialty Pharmaceutical Services business.
Interest Expense, Net
Interest expense, net was approximately $.4 million and $4.2 million in the
first quarters of fiscal 2001 and 2000, respectively. Interest expense, net for
the first quarter of fiscal 2001 represented primarily interest on the
mandatorily redeemable securities and fees relating to the revolving credit
facility offset by interest income. During the first quarter of fiscal 2000,
interest expense, net also included interest on intercompany borrowings with
Olsten for the period from January 3, 2000 to March 15, 2000 (the Split-off
date) and interest on the outstanding 4 3/4 percent convertible subordinated
debentures which matured and were retired in October 2000.
Income Taxes
For the first quarter of fiscal 2000, the effective tax rate was 41.6
percent which differed from the statutory rate primarily due to non-deductible
goodwill amortization and other non-deductible items. Income tax expense for the
fiscal 2001 period consisted primarily of taxes relating to certain state
jurisdictions. The Company had estimated net operating loss carryforwards (NOLs)
of approximately $76 million as of December 31, 2000. Because of the uncertainty
of ultimate realization of the net deferred tax asset, the Company has
established a valuation allowance for the deferred tax asset that is not
otherwise used to offset deferred tax liabilities. The Company expects its
effective tax rate to be below 10 percent until such time as the NOLs are
utilized.
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Liquidity and Capital Resources
The Company maintains a credit facility, which provides for up to $150
million in borrowings, including up to $30 million which is available for
letters of credit. The Company may borrow up to a maximum of 80 percent of
eligible accounts receivable, as defined. At the Company's option, the interest
rate on borrowings under the credit facility is based on the London Interbank
Offered Rate (LIBOR) plus 2.5 percent or the lender's prime rate plus 0.25
percent. As of April 1, 2001, there were no borrowings outstanding under the
credit facility and total outstanding letters of credit approximated $25.5
million. The Company is subject to an unused line fee equal to 0.375 percent per
annum of the average daily difference between $150 million and the total
outstanding borrowings and letters of credit. In addition, the Company must pay
a fee equal to 2.25 percent per annum of the aggregate face amount of
outstanding standby letters of credit.
The credit facility, which expires in 2004, includes certain covenants
requiring the Company to maintain a minimum tangible net worth and minimum
earnings before interest, taxes, depreciation and amortization. Other covenants
in the credit facility include limitation on mergers, consolidations,
acquisitions, indebtedness, liens, capital expenditures and dispositions of
assets and other limitations with respect to the Company's operations. The
Company's obligations under the credit facility are collateralized by all of the
Company's tangible and intangible personal property, and other equipment. As of
April 1, 2001, the Company was in compliance with its financial covenants and
had borrowing capacity under the credit facility of approximately $124 million.
Working capital at April 1, 2001, was $366 million, an increase of $17
million as compared to $349 million at December 31, 2000. Net receivables
decreased by $12 million in the first quarter of fiscal 2001 as a result of
improved cash collections driven by enhancements in the billing system and
management reporting for Specialty Pharmaceutical Services as well as increases
in billings through electronic data interchange. After adjusting for the sale of
the Company's staffing services business and Canadian operations, adjusted Days
Sales Outstanding ("DSO") was 111 days at December 31, 2000. DSO was reduced by
7 days to 104 days at April 1, 2001 as a result of improved cash collections.
Cash and cash equivalents increased by approximately $49 million as of
April 1, 2001 as compared to December 31, 2000 as a result of (i) cash flow from
operations, net of decreases in book overdrafts which were included in accounts
payable at December 31, 2000, of approximately $24 million, (ii) Medicare
advances, net of payments for estimated settlements, of approximately $21
million, and (iii) proceeds from the exercise of stock options of approximately
$5 million, offset somewhat by capital expenditures of $1 million. In early
2001, the Health Care Financing Administration issued cash advances to certain
Medicare providers in connection with the transition from the Interim Payment
System to the Prospective Payment System for Medicare reimbursement. Such
advances are expected to be repaid during the fourth quarter of fiscal 2001. In
this connection, the Company received a cash advance, net of payments for
estimated settlements relating to cost report filings, of approximately $21
mil-
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lion which is reflected in accrued expenses in the accompanying consolidated
balance sheet as of April 1, 2001.
Inventory was essentially unchanged with a balance of $51 million at both
April 1, 2001 and December 31, 2000.
Management believes cash flows from operations, borrowings available under
the credit facility and other financing options, including issuance of debt or
equity securities under an effective shelf registration statement, will be
adequate to support the ongoing operations and to meet debt service requirements
for the foreseeable future. The Company intends to make investments and other
expenditures to, among other things, upgrade its computer technology and system
infrastructure and comply with regulatory changes in the industry. If cash flows
from operations or availability under the credit facility fall below
expectations, the Company may be forced to delay planned capital expenditures,
reduce operating expenses, seek additional financing or consider alternatives
designed to enhance liquidity.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to the market risk for changes in the interest rates
related to the fair value of its fixed rate Quantum debentures until their
repayment in October 2000. Generally, the fair market value of fixed rate debt
will increase as interest rates fall and decrease as interest rates rise. The
Company had no interest rate exposure on fixed rate debt at April 1, 2001.
OTHER:
INFORMATION CONTAINED HEREIN, OTHER THAN HISTORICAL INFORMATION, SHOULD BE
CONSIDERED FORWARD-LOOKING AND IS SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES.
FOR INSTANCE, THE COMPANY'S STRATEGIES AND OPERATIONS INVOLVE RISKS OF
COMPETITION, CHANGING MARKET CONDITIONS, CHANGES IN LAWS AND REGULATIONS
AFFECTING THE COMPANY'S INDUSTRIES AND NUMEROUS OTHER FACTORS DISCUSSED IN THIS
DOCUMENT AND IN OTHER COMPANY FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION. ACCORDINGLY, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In addition to the matters referenced below, the Company is party to
certain legal actions arising in the ordinary course of business including legal
actions arising out of services rendered by its various operations, personal
injury and employment disputes.
In late 2000, after engaging in a mediation conducted by a third-party
mediator, the parties to the previously disclosed Class Action (In re Olsten
Corporation Securities Litigation, No. 97-CV-5056 (DRH), U.S. District Court for
the Eastern District of New York) and Derivative Lawsuit (Rubin v. May, No.
17135-NC, Delaware Chancery Court) reached an agreement in principle to settle
both lawsuits for the aggregate sum of $25 million. The proposed settlement is
subject to final approval of the respective courts before which the Class Action
and the Derivative Lawsuit are pending. By order dated April 30, 2001, the
District Court preliminarily approved the settlement and scheduled a settlement
fairness hearing date for August 31, 2001. The Company funded the $7 million
balance and recorded a special charge for that amount during fiscal 2000. The
funds are subject to return if the settlement is not approved.
In July 1999, the Indiana Attorney General's Office filed a lawsuit against
Olsten in Indiana Superior Court, captioned State of Indiana v. Quantum Health
Resources, Inc. and Olsten Health Services, Inc., No. 49D029907CP001011,
alleging that Olsten was overpaid by Medicaid, failed to properly disclose
information to Medicaid and engaged in improper billing. The alleged violations
predate Olsten's acquisition of Quantum Health Resources in June 1996. The
lawsuit seeks unspecified monetary damages, double or treble damages, penalties
and investigative costs. The parties are engaging in discussions in an attempt
to resolve this matter.
On January 14, 1999, Kimberly Home Health Care, Inc. ("Kimberly"), one of
the Company's subsidiaries, initiated three arbitration proceedings against
hospitals owned by Columbia/HCA Healthcare Corp. ("Columbia/HCA") with which
Kimberly had management services agreements to provide services to the
hospitals' home health agencies. The basis for each of the arbitrations is that
Columbia/ HCA sold the home health agencies without assigning the management
services agreements and, as a result, Columbia/HCA has breached the management
services agreements. In response to the arbitrations, Columbia/HCA has asserted
that the arbitrations be consolidated and stayed, in part based upon its alleged
claims against Kimberly for breach of contract, and requested indemnity and
possibly return of management fees. Columbia/HCA has not yet formally presented
these claims in the arbitrations or other legal proceedings and has not yet
quantified the claims. Currently pending before one of the arbitrators is
Columbia/HCA's request to consolidate the proceedings, which Kimberly has
opposed. There has been no new development in this matter.
On June 23, 2000, the Company was served with a Complaint in a purported
class ac-
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tion lawsuit filed by Ultimate Home Health Care Inc. in the U.S. District Court
for the Middle District of Tennessee, captioned Ultimate Home Health Care, Inc.
v. Columbia/HCA Healthcare Corp., No. 3-00-0560, (the "Tennessee Lawsuit"). The
Company was served with an Amended Complaint in the Tennessee Lawsuit on July
21, 2000, which names as defendants Columbia/HCA, Columbia Homecare Group,
Olsten Health Management a/k/a Hospital Contract Management Services (one of the
Company's subsidiaries) and Olsten Corporation. The Amended Complaint alleges,
among other things, that the defendants' business practices in connection with
home health care patient referrals between 1994 and 1996 violated provisions of
Federal antitrust laws, the Racketeer Influenced and Corrupt Organizations Act
(RICO), the Tennessee Consumer Protection Act (TCPA), and state common law. The
Amended Complaint seeks unspecified compensatory damages, punitive damages,
treble damages and attorneys' fees on behalf of a proposed class of home
healthcare companies and/or agencies which conducted business in Tennessee,
Texas, Florida and/or Georgia. In September 2000, the defendants filed a motion
to dismiss the Amended Complaint, and by an order dated January 21, 2001, the
Court dismissed plaintiffs' RICO and state common law tort claims. The Court
also held that the plaintiffs had properly pleaded the antitrust, TCPA and civil
conspiracy claims and allowed those claims to proceed to discovery. Because the
Tennessee Lawsuit is in a relatively preliminary stage, the Company is unable at
this time to assess the probable outcome of or potential liability arising from
such lawsuit.
On November 22, 2000, the jury in an age-discrimination lawsuit commenced
in 1998, captioned Fredrickson v. Olsten Health Services Corp. and Olsten
Corporation, Case No. 98 CV 1937, Court of Common Pleas, Mahoning County, Ohio
(the "Fredrickson Lawsuit"), returned a verdict in favor of the plaintiff
against Olsten consisting of $675,000 in compensatory damages, $30 million in
punitive damages and an undetermined amount of attorneys' fees. The jury found
that, although Olsten had lawfully terminated the plaintiff's employment, its
failure to transfer or rehire the plaintiff rendered Olsten liable to the
plaintiff. In vigorously contesting the verdict and judgment, the defendants
posted a bond ordered by the trial court in the amount of $675,000 and filed
with that court several post-trial motions, including a motion seeking the entry
of judgment in the defendants' favor notwithstanding the verdict or, in the
alternative, a new trial or a remittitur of the punitive damages award. The
plaintiff has filed post-trial motions in connection with the entry of the
judgment and the amount of the bond posted by defendants. A hearing before the
trial court on the parties' respective post-trial motions was held on March 23,
2001. The decision on the hearing is pending.
In Gile v. Olsten Corporation, et al, U.S. District Court for the Central
District of California, No. 97-9363-NM, plaintiff filed an age discrimination
suit against Olsten Corporation ("Olsten"), Olsten Health Services, and a
certain individual in December 1997. The complaint seeks an unspecified amount
of compensatory and punitive damages. The defendants denied the allegations of
discrimination on the basis that plaintiff's termination was part of a reduction
in force. The individual defendant was dismissed from the action, and the
remaining corporate defendants filed a motion for summary judgment that was
granted by the District Court in February 1999. The plaintiff appealed the
District Court's order to the Ninth Circuit Court of Appeals and in December,
2000, the Court of Appeals issued its ruling which reversed the District Court
and remanded the case for trial. Under the Separation Agreement of August 17,
1999 by and among Olsten, Adecco SA, and the Company (the "Separation
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Agreement"), the Company is obligated to indemnify Olsten with respect to this
matter. The District Court scheduled the trial for October 2001 and ordered
mediation between the parties. The court-ordered mediation took place on May 10,
2001 but no settlement was reached. The Company continues to defend this matter,
but is continuing settlement discussions with the plaintiff.
Furthermore, in connection with the Split-Off, the Company agreed to
assume, to the extent permitted by law, the liabilities, if any, arising out of
(and to indemnify Olsten for) the above lawsuits and arbitration proceedings and
other liabilities arising out of the health services business, including any
such liabilities arising after the Split-Off in connection with the government
investigations described below in Item 5. Other Information.
Item 2. Change in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
(a) None.
Item 5. Other Information
In early December 1999, Olsten received a document subpoena from the
Department of Health and Human Services, Office of Inspector General, and Office
of Investigations. After preliminary discussions with the Office of Inspector
General, the Company believes the subpoena relates to an investigation of
possible overpayments to it by the Medicare program. In early February 2000, the
Company received a document subpoena from the Department of Health and Human
Services, Office of Inspector General, and Office of Investigations. The Company
believes the subpoena relates to its agencies' cost reporting procedures
concerning contracted nursing and home health aide costs. The Company has
provided and continues to provide the Office of Inspector General with the
requested documents and continues to cooperate fully with its investigations. At
this time, the Company is unable to assess the probable outcome or potential
liability, if any, arising from these subpoenas. The Company believes that it is
possible that one or both of these investigations may have been triggered by
lawsuits under federal or state whistle blower statutes against Olsten or the
Company.
In connection with the July 19, 1999 settlement with various government
agencies, Olsten executed a separate corporate integrity agreement with the
Office of Inspector General of the Department of Health and Human Services which
will remain in effect until August 18, 2004. The July 1999 corporate integrity
agreement applies to the Company's businesses that bill the federal government
health programs directly for services, such as its home care nursing business
(but excluding the specialty pharmaceutical services business). This corporate
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integrity agreement focuses on issues and training related to cost report
preparation, contracting, medical necessity and billing of claims.
Under each of the corporate integrity agreements, the Company is required,
for example, to maintain a corporate compliance officer to develop and implement
compliance programs, to retain an independent review organization to perform
annual reviews and to maintain an compliance program and reporting systems, as
well as provide certain training to employees.
The Company's compliance program will be implemented for all newly
established or acquired business units if their type of business is covered by
the corporate integrity agreements. Reports under each integrity agreement are
to be filed annually with the Department of Health and Human Services, Office of
Inspector General. After each corporate integrity agreement expires, the Company
is to file a final annual report with the government. The Company is in
compliance with both corporate integrity agreements and has timely filed all
required reports. If the Company fails to comply with the terms of either of its
corporate integrity agreements, the Company will be subject to penalties.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Number Description
3.1 Restated Certificate of Incorporation of Company. (1)
3.2 Restated By-Laws of Company. (1)
4.1 Specimen of common stock. (3)
4.2 Form of Certificate of Designation of Series A Junior
Participating Preferred Stock. (1)
4.3 Form of Certificate of Designation of Series A Cumulative
Non-Voting Redeemable Preferred Stock. (2)
4.4 Trust Agreement among the Company, Wilmington Trust Company, the
Administrative Trustees named therein and the holders from time
to time of the convertible trust preferred securities dated March
9, 2000. (4)
4.5 Indenture between the Company and Wilmington Trust Company dated
March 15, 2000. (4)
10.1 Separation Agreement dated August 17, 1999, among Olsten
Corporation, Aaronco Corp. and Adecco SA. (1)*
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10.2 Omnibus Amendment No. 1 dated October 7, 1999, by and among
Olsten Corporation, Aaronco Corp., Adecco SA and Olsten Health
Services Holding Corp. (1)
10.3 Form of Rights Agreement dated March 2, 2000 between the
Registrant and Equiserve Limited Partnership, as rights agent.
(1)
10.4 Company's Executive Officers Bonus Plan. (1)*
10.5 Company's 1999 Stock Incentive Plan. (4)*
10.6 Company's Stock & Deferred Compensation Plan for Non-Employee
Directors. (4)*
10.7 Company's Employee Stock Purchase Plan. (1)*
10.8 Omnibus Amendment No. 2 dated January 18, 2000, by and among
Olsten Corporation, Adecco SA, Olsten Health Services Holding
Corp., the Company and Staffing Acquisition Corporation. (1)
10.9 Loan and Security Agreement by and between Fleet Capital Corp.,
on behalf of the lenders named therein, the Company, Olsten
Health Services Holding Corp. and the subsidiaries named therein,
dated March 13, 2000. (4)
10.10 Form of Employment Agreement with Edward A. Blechschmidt. (2)*
10.11 Form of Change of Control Agreement with Executive Officers of
Company. (4)*
10.12 Form of Change in Control Agreement with Edward A. Blechschmidt.
(4)*
10.13 Form of Severance Agreement with Executive Officers of Company.
(2)*
10.14 Amendment No. 1 dated June 30, 2000 to Trust Agreement among the
Company, Wilmington Trust Company, the Administrative Trustees
named therein and the holders from time to time of the
convertible trust preferred securities. (5)
10.15 Amendment No. 1 dated June 30, 2000 to Indenture between
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the Company and Wilmington Trust Company. (5)
10.16 First Amendment and Consent Agreement dated September 15, 2000
to the Loan Agreement by and among the lending institutions named
therein, Fleet Capital Corporation, the Company, Olsten Health
Services Holding Corp. and the subsidiaries named therein. (6)
10.17 Purchase and Sale Agreement dated August 25, 2000 by and between
the Company and Intelistaf Group, Inc. (formerly known as GS
Acquisition Co.) (6)
10.18 Second Amendment and Consent Agreement dated as of November 20,
2000 to the Loan Agreement by and among the lending institutions
named therein, Fleet Capital Corporation, the Company, Olsten
Health Services Holding Corp. and the subsidiaries named therein
(7)
21.1 List of Subsidiaries of Company. (2)
----------------------------------------------------------------------
(1) Incorporated herein by reference to Amendment No. 2 to the
Registration Statement on Form S-4, dated January 20, 2000
(File No. 333-88663).
(2) Incorporated herein by reference to Amendment No. 3 to the
Registration Statement on Form S-4, dated February 4, 2000
(File No. 333-88663).
(3) Incorporated herein by reference to Amendment No. 4 to the
Registration Statement on Form S-4, dated February 9, 2000
(File No. 333-88663).
(4) Incorporated herein by reference to Form 10-K for the
Registrant for the fiscal year ended January 2, 2000.
(5) Incorporated herein by reference to Form 10-Q for the
Registrant for the period ended July 2, 2000.
(6) Incorporated herein by reference to Form 10-Q for the
Registrant for the period ended October 1, 2000.
(7) Incorporated herein by reference to Form 10-K for the
Registrant for the fiscal year ended December 31, 2000.
* Management contract or compensatory plan or arrangement.
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(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the period covered by this
report.
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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 thereunto duly authorized.
Date: May 16, 2001 /s/ Edward A. Blechschmidt
--------------------------------------
Edward A. Blechschmidt
President and Chief Executive
Officer
Date: May 16, 2001 /s/ John J. Collura
--------------------------------------
John J. Collura
Executive Vice President,
Chief Financial Officer and
Treasurer
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