UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
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: 001-13807
ElderTrust
(Exact name of registrant as specified in its charter)
Maryland 23-2932973
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
101 East State Street, Suite 100, Kennett Square, PA 19348
(Address of principal executive offices) (Zip Code)
(610) 925-4200
(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 the latest practicable date:
Class Outstanding at August 15, 2001
- ------------------------------ --------------------------------
Common shares of beneficial 7,119,000
interest $0.01 par value per share
EXPLANATORY NOTE
This Form 10-Q/A is being filed solely for the purpose of amending
Part I, Item I in our Quarterly Report on Form 10-Q for the quarter
ended June 30, 2001, which was filed with the commission on August 14,
2001, to correct an error on the Condensed Consolidated Statement of
Operations for the loss reported on the impairment of long-lived assets
for the three and six months ended June 30, 2001. Item I of our Form
10-Q for the quarter ended June 30, 2001 is hereby revised and restated
in its entirety as follows.
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
ELDERTRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
June 30, December 31,
2001 2000
(unaudited)
--------------------------------
ASSETS
Assets:
Real estate properties, at cost $160,216 $148,939
Less - accumulated depreciation (16,867) (14,085)
Land 16,358 14,950
------------ ------------
Net real estate properties 159,707 149,804
Properties held for sale, net of impairment
allowance of $1,467 and $1,433, respectively 9,695 11,365
Real estate loans receivable, net of allowance
of $39 and $7,087, respectively 21,659 41,559
Cash and cash equivalents 3,936 3,105
Restricted cash 9,309 8,409
Accounts receivable, net of allowance of $399
and $1,247, respectively 834 1,466
Accounts receivable from unconsolidated entities 1,809 1,905
Prepaid expenses 542 483
Investment in and advances to unconsolidated
entities, net of allowance of $1,617 and
$1,466, respectively 25,281 18,137
Other assets, net of accumulated amortization
and depreciation of $3,159 and $2,840,
respectively 813 1,454
------------ ------------
$233,585 $237,687
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank credit facility $36,015 $38,720
Accounts payable and accrued expenses 1,246 1,613
Accounts payable to unconsolidated entities 11 12
Mortgages and bonds payable 107,338 107,932
Notes payable to unconsolidated entities 980 1,015
Other liabilities 3,732 3,639
------------ ------------
Total liabilities 149,322 152,931
------------ ------------
Minority interest 4,573 4,657
Shareholders' equity:
Preferred shares, $.01 par value; 20,000,000
shares authorized; none outstanding - -
Common shares, $.01 par value; 100,000,000
shares authorized; 7,119,000 shares issued
and outstanding 71 71
Capital in excess of par value 120,580 120,377
Deficit (40,961) (40,349)
------------ ------------
Total shareholders' equity 79,690 80,099
------------ ------------
Total liabilities and shareholders' equity $233,585 $237,687
============ ============
See accompanying notes to unaudited condensed
consolidated financial statements.
1
ELDERTRUST
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
For the three months For the six months
ended June 30, ended June 30,
2001 2000 2001 2000
-------------------- ------------------
Revenues:
Rental revenues $4,668 $4,686 $9,354 $9,366
Interest, net of amortization
of deferred loan origination
costs 730 991 1,531 2,310
Interest from unconsolidated
equity investees 930 764 1,796 1,711
Other income 64 60 115 118
-------- -------- -------- --------
Total revenues 6,392 6,501 12,796 13,505
Expenses:
Property operating expenses 298 314 590 608
Interest expense, including
amortization of deferred
finance costs 3,038 3,500 6,405 6,887
Depreciation 1,412 1,487 2,792 2,941
General and administrative 555 1,365 1,930 2,012
Loss on impairment of long-
lived assets - - 450 -
Bad debt expense 14 20,267 28 20,267
-------- -------- -------- --------
Total expenses 5,317 26,933 12,195 32,715
-------- -------- -------- --------
Net income (loss) before equity
in losses of unconsolidated
entities and minority interest 1,075 (20,432) 601 (19,210)
Equity in losses of unconsolidated
entities, net (735) (8,216) (1,240) (8,882)
Minority interest (21) 1,926 27 1,886
-------- --------- -------- --------
Net income (loss) $319 ($26,722) ($612)($26,206)
======== ========= ======== ========
Basic weighted average number of
common shares outstanding 7,119 7,119 7,119 7,119
======== ========= ======== ========
Net income (loss) per share - basic $0.04 ($3.75) ($0.09) ($3.68)
======== ========= ======== ========
Diluted weighted average number
of common shares outstanding 7,537 7,119 7,119 7,119
======== ========= ======== ========
Net income (loss) per share
- diluted $0.04 ($3.75) ($0.09) ($3.68)
======== ========= ======== ========
See accompanying notes to unaudited condensed
consolidated financial statements.
2
ELDERTRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six months ended
June 30,
-----------------
2001 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($612) ($26,206)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 3,224 3,377
Bad debt expense 28 20,267
Loss on impairment of long-lived assets 450 -
Minority interest and equity in losses from
unconsolidated entities 1,213 6,996
Net changes in assets and liabilities:
Accounts receivable and prepaid expenses 669 (241)
Accounts payable and accrued expenses (368) (69)
Other 114 476
-------- --------
Net cash provided by operating activities 4,718 4,600
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (37) (93)
Proceeds from collection on advances to
unconsolidated entities 88 620
Net increase in reserve funds and deposits -
restricted cash (900) (479)
Other (30) -
-------- --------
Net cash provided (used) in investing
activities (879) 48
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of deferred financing fees - (488)
Principal payments under Bank Credit Facility (2,362) (521)
Principal payments on mortgages and bonds payable (593) (545)
Purchase of partnership units (18) -
Distributions to shareholders - (4,272)
Distributions to minority interests - (327)
Other (35) (31)
-------- --------
Net cash used in financing activities (3,008) (6,184)
Net increase (decrease) in cash and cash equivalents 831 (1,536)
Cash and cash equivalents, beginning of period 3,105 3,605
-------- --------
Cash and cash equivalents, end of period $3,936 $2,069
======== ========
Supplemental cash flow information:
Cash paid for interest $6,080 $6,738
======== ========
See accompanying notes to unaudited condensed
consolidated financial statements.
3
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying interim unaudited condensed consolidated financial
statements of ElderTrust and its consolidated subsidiaries ("ElderTrust"
or the "Company") do not include all of the footnote disclosures required
for a complete presentation of the financial statements in accordance
with accounting principles generally accepted in the United States of
America. The December 31, 2000 condensed consolidated balance sheet
was derived from audited financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation
of the financial statements for the interim periods presented have been
included. Operating results for the six months ended June 30, 2001 are
not necessarily indicative of the results that may be expected for the
full fiscal year ending December 31, 2001.
The accompanying unaudited condensed consolidated financial statements
should be read together with the consolidated financial statements and
notes thereto for the year ended December 31, 2000 included in the
Company's annual report on Form 10-K filed with the Securities and
Exchange Commission.
2. Certain Significant Risks and Uncertainties
Genesis and Multicare Chapter 11 Bankruptcy Filings; Lease and Loan
Restructurings
Approximately 71% of the Company's consolidated assets at June 30,
2001 consisted of real estate properties leased to or managed by and
loans on real estate properties made to Genesis Health Ventures, Inc.
("Genesis") or its consolidated subsidiaries or entities in which Genesis
accounts for its investment using the equity method of accounting
("Genesis Equity Investees"), under agreements as manager, tenant or
borrower. Revenues recorded by the Company in connection with these
leases and borrowings aggregated $4.0 million in the second quarter of
2001 and $8.1 million for the six months ended June 30, 2001. In addition,
the Company's equity investees have also leased properties to Genesis or
Genesis Equity Investees. As a result of these relationships, the
Company's revenues and ability to meet its obligations depends, in
significant part, upon the ability of Genesis and Genesis Equity Investees
to meet their lease and loan obligations. As well as revenues
derived from, and the successful operation of, the facilities leased to
or managed by Genesis or Genesis Equity Investees.
On June 22, 2000, Genesis, the Company's principal tenant, and The
Multicare Companies, Inc., a 43.6% owned consolidated subsidiary of
Genesis ("Multicare"), filed for protection under Chapter 11 of the
United States Bankruptcy Code. Both companies are currently operating
as debtors-in-possession subject to the jurisdiction of the U.S.
Bankruptcy Court. On January 4, 2001, agreements negotiated in the
prior year between the Company, Genesis and Multicare and Genesis and
Multicare's major creditors were approved by the U.S. Bankruptcy Court
and were consummated on January 31, 2001. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" for a
description of the principal terms of these agreements.
4
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (consolidated)
On June 5, 2001, Genesis and Multicare filed a joint plan of
reorganization with the U.S. Bankruptcy Court. This plan was revised
and re-filed on July 3, 2001. The revised plan calls for Multicare to
become a wholly-owned subsidiary of Genesis. Additionally, the revised
plan provides for the issuance of notes and common and preferred stock.
The revised plan has been endorsed by both Genesis and Multicare's senior
bank lenders and the official statutory committees of unsecured creditors.
Approval of the revised reorganization plan by the U.S. Bankruptcy Court
will be necessary for Genesis and Multicare to be able to emerge from
bankruptcy.
The independent auditors' report on Genesis' 2000 financial statements,
included in Genesis' Form 10-K for the year ended September 30, 2000,
indicated that there is substantial doubt regarding the ability of Genesis
and Multicare to continue as going concerns. Each company's ability to
continue as a going concern is dependent upon, among other things,
approval of the plan of reorganization, future profitable operations,
the ability to comply with the terms of their debtor-in-possession
financing arrangements and the ability to generate sufficient cash from
operations and financing agreements to meet their obligations. Although
we are hopeful Genesis and Multicare will emerge from bankruptcy and
continue to make lease and loan payments to us, there can be no assurance
that this will occur. Any failure of Genesis and Multicare to continue
their operations and/or to continue to make lease and loan payments to
us could have a significant adverse impact on our operations and cash
flows due to the significant portion of our properties leased to and
loans made to Genesis and Multicare.
Liquidity
The Company has a working capital deficit of $26.2 million at June
30, 2001, resulting primarily from the classification of approximately
$25.5 million of long-term debt as current due to the Company's default
on mortgages for failure to meet certain technical requirements,
including property information requirements and the bankruptcy filing
by Genesis. If the Company is unable to obtain waivers of the failed
covenants, the lenders could exercise their rights to accelerate the
related indebtedness or foreclose on the underlying collateral
immediately. Based, in part, on the Company's favorable payment
history, the Company believes that the lenders will take no action in
regard to these technical defaults.
5
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (consolidated)
3. Real Estate Loans Receivable
The following is a summary of real estate loans receivable (dollars
in thousands):
Stated Scheduled Balance at Balance at
Type of Interest Maturity June 30, December 31,
Property Loan Rate Date 2001 2000
- -------------------------------- --------- -----------------------------------------------
Harbor Place Melbourne, FL Term 10.0% 5/2002 $ 4,828 $ 4,828
Mifflin Shillington, PA Term 9.5% 6/2002 2,474 5,164 (1)
Coquina Place Ormond Beach, FL Term 9.5% 6/2002 1,400 4,577 (1)
Lehigh Macungie, PA Term 10.5% 6/2000 - 6,665 (2)
Berkshire Reading, PA Term 10.5% 6/2000 - 6,167 (2)
Oaks Wyncote, PA Construction 9.0% 6/2002 3,500 5,033 (1)
Montchanin Wilmington, DE Construction 10.5% 8/2000 9,496 9,496
Sanatoga Pottstown, PA Construction 10.5% 1/2001 - 6,716 (2)
--------- ------------
21,698 48,646
Allowance for credit losses (39) (7,087)
--------- ------------
$ 21,659 $ 41,559
========= ============
<FN>
<F1>
(1) Under the terms of the restructuring agreement with Genesis, these loans receivable
have been reduced.
<F2>
(2) Title of property passed to company affiliates at January 31, 2001 under the
restructuring with Genesis.
</FN>
The Company had one term loan in the amount of $4.8 million, with
an original annual interest rate of 9.5%, secured by the Harbor Place
facility. On January 31, 2001, under the restructuring of the
relationships between ElderTrust and Genesis, the Company extended the
term of the loan until May 31, 2002, for a fee of $24,000 which was paid
on January 31, 2001. The Company also increased the interest rate to
10.0% per annum. Principal payments will be made monthly to the extent
of one half of excess cash flow of the property, if any, after payment
of operating expenses, management fee, interest and an amount to be
agreed upon by the parties for capital expenditures.
The loan secured by the Montchanin facility is in default. The
Company is charging the borrower the default interest rate of 3% above
the stated interest rate of 10.5%. This loan matured in August 2000
and has not been re-paid. The Company has begun collection proceedings.
The Company has the option to purchase this facility for $13.0 million.
In July 2001, the Company was notified that the primary debtor of
the Montchanin property, Senior Life Choice of Wilmington, LLC ("SLC"),
entered into a purchase and sale agreement, with a third-party, to sell
the Montchanin property for approximately $10.0 million. If the sale
of the Montchanin property is completed by SLC, the proceeds to the
Company from the repayment of the SLC mortgage loan will be used to pay
down the Company's Bank Credit Facility. The sale is expected to close
during the third quarter of 2001.
6
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (consolidated)
4. Properties Held for Sale
In April 2001, the Company executed a letter of intent to sell the
Woodbridge assisted living facility. The Company owns through ElderTrust
Operating Limited Partnership 100% of the partnership interests in ET
Sub-Woodbridge, L.P., whose sole asset consists of the Woodbridge assisted
living facility, located in Kimberton, Pennsylvania. During the second
quarter of 2001, the letter of intent was terminated due to the contractual
differences between the Company and the purchaser. This property is
classified as held for sale. After adjusting for impairment losses of
$1.5 million, the property has a net carrying value of $9.7 million as
of June 30, 2001. The Company is currently actively marketing the
Woodbridge assisted living facility for sale.
5. Investments in Unconsolidated Entities
The Company's equity investees represent entities in which the
controlling interests are owned by Mr. D. Lee McCreary, Jr., the
Company's President, Chief Executive Officer and Chief Financial
Officer. As a result, the Company records its investments in, and
results of operations from, these entities using the equity method of
accounting.
Summary unaudited combined financial information as of and for the
six month period ended June 30, 2001 for these unconsolidated entities
is as follows (dollars in thousands):
ET Sub- ET ET Sub- ET Sub-
Meridian, Capital Cabot Cleveland
LLP Corp. Park, LLC Circle, LLC Total
-----------------------------------------------
Current assets $1,113 $185 $92 $141 $1,531
Real estate properties (1) 101,278 - 16,275 13,436 130,989
Notes receivable - 4,239 - - 4,239
Other assets - - 548 519 1,067
Total assets 102,391 4,694 16,916 14,096 138,097
Current liabilities 2,418 385 592 651 4,046
Long-term debt (2) 104,840 9,144 16,606 13,365 143,955
Total deficit (6,575) (4,835) (552) (146) (12,108)
Rental revenue 4,900 - 833 738 6,471
Interest income 58 962 14 14 1,048
Interest expense 4,121 260 676 516 5,573
Depreciation/amortization 1,756 - 280 231 2,267
Bad debt expense 47 743 - - 790
Net income (loss) (1,000) (120) (125) (12) (1,257)
Percent ownership 99% 95% 99% 99%
_______________
(1) Includes properties under capital lease.
(2) Includes capital lease obligations.
7
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (consolidated)
6. Bank Credit Facility
Effective January 31, 2001, the Bank Credit Facility was extended
to August 31, 2002 and the covenants amended to cure the then existing
covenant violations. As a result of this extension the Company is (i)
prohibited from further borrowings under the facility, (ii) required to
make monthly principal payments equal to the cash flow generated by the
Company for the month and (iii) is prevented from paying distributions
to shareholders in excess of 110% of that amount required to maintain
the Company's REIT status under the tax laws.
The amounts outstanding under the Bank Credit Facility bear interest
at a floating rate 3.25% over one-month LIBOR, or 7.31% at June 30, 2001.
The Bank Credit Facility contains various financial and other covenants,
including, but not limited to, minimum net asset value, minimum tangible
net worth, a total leverage ratio and minimum interest coverage ratio.
The Company's owned properties and properties underlying loans receivable
with an aggregate cost basis of $63.1 million are included in the Bank
Credit Facility borrowing base and pledged as collateral at June 30, 2001.
7. Income (Loss) Per Share
The following table sets forth the computation of basic and diluted net
income (loss) per share for the periods indicated (in thousands, except
per share data):
For the three months For the six months
ended June 30, ended June 30,
-------------------- --------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Basic income (loss) per share:
- ------------------------------
Net income (loss) $319 ($26,722) ($612) ($26,206)
Weighted average common
shares outstanding 7,119 7,119 7,119 7,119
========= ========= ========= =========
Basic net income (loss)
per share $0.04 ($3.75) ($0.09) ($3.68)
========= ========= ========= =========
Diluted loss per share:
- ------------------------------
Net income (loss) $319 ($26,722) ($612) ($26,206)
Weighted average common
shares outstanding 7,119 7,119 7,119 7,119
Common stock equivalents -
stock options & warrants 418 - - -
--------- --------- --------- ---------
Total weighted average
number of diluted shares 7,537 7,119 7,119 7,119
========= ========= ========= =========
Diluted net income (loss)
per share $0.04 ($3.75) ($0.09) ($3.68)
========= ========= ========= =========
8
ELDERTRUST
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (consolidated)
Units of ElderTrust Operating Limited Partnership are not included
in the determination of weighted average common shares outstanding for
purposes of computing diluted income per share since they are redeemable
for cash at the Company's discretion.
8. New York Stock Exchange Listing
On August 8, 2000, the Company was notified by the New York Stock
Exchange ("NYSE") that it had fallen below the continued listing criteria
relating to total market capitalization and minimum share value. Under
the market capitalization requirement, the Company's market capitalization
must, on average over the preceding thirty-trading day period, equal or
exceed $15 million. Under the minimum share value requirement, the
Company's shares must trade at a value exceeding $1 for thirty consecutive
trading days. Under the NYSE rules, the Company submitted a plan
demonstrating that these criteria could be attained within 18 months.
On January 12, 2001, the NYSE notified the Company that, based upon
plan accomplishments to date and short-term stock price and market
capitalization improvement through January 11, 2001, the Company met the
continued listing criteria and that the NYSE was prepared to continue
the Company's listing subject to review and continued compliance with
the continued listing criteria and plan performance over an eighteen-
month period ending February 10, 2002. The Company is in compliance
with the NYSE continued listing criteria as of June 30, 2001.
9
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 on August 15, 2001.
ELDERTRUST
/s/ D. Lee McCreary, Jr.
-------------------------
D. Lee McCreary, Jr.
President, Chief Executive Officer,
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
10