-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VWNxzjO5e0V5FP2TM5PIefRjqC87JzZpCYigTnOCM/lvTDUwSX25riXVtqMG9qJi JGz+vz6eRZbdr1RBJsQa7w== 0000950116-03-002435.txt : 20030501 0000950116-03-002435.hdr.sgml : 20030501 20030501080752 ACCESSION NUMBER: 0000950116-03-002435 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030501 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENESIS HEALTH VENTURES INC /PA CENTRAL INDEX KEY: 0000874265 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 061132947 STATE OF INCORPORATION: PA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-33217 FILM NUMBER: 03674789 BUSINESS ADDRESS: STREET 1: 101 EAST STATE STREET CITY: KENNETT SQUARE STATE: PA ZIP: 19348 BUSINESS PHONE: 6104446350 MAIL ADDRESS: STREET 1: 101 EAST STATE STREET CITY: KENNETT SQUARE STATE: PA ZIP: 19348 8-K 1 eight-k.txt 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): May 1, 2003 GENESIS HEALTH VENTURES, INC. ---------------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 0-33217 06-1132947 - ------------------------------- ------------------------ ------------------- (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation) Identification No.) 101 East State Street, Kennett Square, Pennsylvania 19348 ------------------------------------------ -------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (610) 444-6350 ------------------------- Not Applicable ------------------------------------------------------------- (Former name or former address, if changed since last report) Item 7. Exhibits -------- (c) Exhibits: 99.1 Earnings release issued by Genesis Health Ventures, Inc. on May 1, 2003. Item 9. Regulation FD Disclosure ------------------------ In accordance with SEC Release No. 33-8216, the following information is being provided under Items 9 and 12 of Form 8-K. On May 1, 2003, Genesis Health Ventures, Inc. and subsidiaries (Genesis) reported its results for the three and six months ended March 31, 2003. The earnings release is attached hereto as Exhibit 99.1. The earnings release contains non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of operations, balance sheets or statement of cash flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Pursuant to the requirements of Regulation G, Genesis has provided reconciliations within the earnings release of the non-GAAP financial measures to the most directly comparable GAAP financial measures. EBITDA is a non-GAAP financial measure that is presented in the earnings release. Management believes that the presentation of EBITDA provides useful information to investors regarding Genesis' financial condition and results of operations because EBITDA is useful for evaluating Genesis' capacity to incur and service debt, to fund capital expenditures, to expand Genesis' business and to determine the value of the business. Management also uses EBITDA in Genesis' annual budget process. Management believes EBITDA facilitates internal comparisons to historical operating performance of prior periods and external comparisons to competitors' historical operating performance. Genesis defines EBITDA as earnings before interest, taxes, depreciation, amortization of Genesis' continuing operations. Other companies may define EBITDA differently and, as a result, Genesis' measure of EBITDA may not be comparable to EBITDA of other companies. EBITDA does not represent income from continuing operations or cash flow from operations, as defined by generally accepted accounting principles in the United States. EBITDA should not be considered as a substitute for these GAAP financial measures, or as an indicator of operating performance or whether cash flows will be sufficient to fund cash needs, including the servicing of Genesis' debt. The other non-GAAP financial measures presented in the earnings release and labeled "as adjusted" or "adjusted" exclude certain gains related to one time transactional events or settlements, and exclude costs incurred in connection with certain strategic planning initiatives associated with Genesis' transformation to a pharmacy based business. Specifically, in the three and six month periods ended March 31, 2003, Genesis excluded a net gain recognized in connection with a break-up fee that was earned when a proposed acquisition of a pharmacy services business was not completed. In addition, in the three and six months ended March 31, 2003, Genesis excluded strategic planning, severance and other related costs incurred that are directly attributable to Genesis' shift in strategic focus toward its pharmacy business and away from its eldercare business which is expected to be spun-off. In the three and six months ended March 31, 2002, Genesis excluded a net gain recognized in connection with an arbitration award, and excluded certain debt restructuring and reorganization costs incurred in connection with Genesis' Chapter 11 bankruptcy proceedings. These non-GAAP measures are presented because management uses this information which excludes certain expenses and gains in evaluating the run-rate results of the continuing operations of Genesis and believes that this information provides investors a valuable insight into Genesis' operating results. Management believes that excluding such gains and expenses properly reflect the run-rate operations of Genesis and provide better comparability to prior year results. 3 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 hereunto duly authorized. GENESIS HEALTH VENTURES, INC. Date: May 1, 2003 By: /s/ George V. Hager, Jr. ---------------------------- George V. Hager, Jr. Executive Vice President and Chief Financial Officer 4 Exhibit Index Exhibit No. Description - ----------- ----------- 99.1 Earnings release issued by Genesis Health Ventures, Inc. on May 1, 2003. 5 EX-99 3 ex99-1.txt EXHIBIT 99.1 Contact: George V. Hager, Jr. Exhibit 99.1 Executive Vice President & Chief Financial Officer (610) 444-6350 GENESIS HEALTH VENTURES REPORTS SECOND QUARTER FISCAL 2003 RESULTS o Strong Cash Flow Provides for $20 Million Debt Repayment and $17 Million Share Repurchase o Sale of All Florida Assets Complete o ElderCare Spin-Off Plan on Schedule o NeighborCare Reports Strong Growth in Revenues and Earnings KENNETT SQUARE, PA -- (May 1, 2003) -- Genesis Health Ventures, Inc. (NASDAQ: GHVI) today announced income from continuing operations of $9.7 million ($0.23 per share) for the quarter ended March 31, 2003 compared to $28.3 million ($0.67 per share) in the same quarter in the prior year. Income from continuing operations for the six months ended March 31, 2003 was $25.2 million ($0.61 per share) compared to $44.8 million ($1.07 per share) in the same period in the prior year. During the quarter ended March 31, 2003, Genesis recognized costs of $3.6 million ($2.2 million after tax) related to its strategic planning initiatives and transaction related expenses. During the prior year quarter ended March 31, 2002, Genesis recognized a $21.7 million ($13.2 million after tax) gain on an arbitration award and $1.7 million ($1.0 million after tax) of debt restructuring and reorganization costs. Excluding the effect of these items, income from continuing operations was $11.8 million ($0.28 per share) in the quarter ended March 31, 2003 compared to $16.1 million ($0.39 per share) in the same period in the prior year. See attached reconciliation on page 7. The decline in earnings is due to the impact of the Medicare "Cliff", which had the impact of reducing income from continuing operations by $5.4 million ($0.13 per share) and $10.5 million ($0.25 per share) for the second quarter and year-to-date periods, respectively. "NeighborCare, which generates approximately half of Genesis' consolidated revenues, had an outstanding quarter," said Robert H. Fish, Chairman and Chief Executive Officer. "NeighborCare's performance was fueled by strong top line growth, improved customer mix and continued realization of operating efficiencies gained through our best practices initiatives." "The quality of our earnings is demonstrated by the substantial cash generated during the quarter, which included $51 million of operating cash flow and $28 million from the sale of assets," noted Fish. "Our ability to generate significant cash flow has allowed us to repay $20 million of debt in the second quarter and $63 million in the current fiscal year, to repurchase approximately $17 million of our common stock, and to increase our liquidity position, ending the second quarter with over $133 million in cash." Continued Solid Revenue Growth Driven by NeighborCare Consolidated revenues for the second quarter ended March 31, 2003 grew 4.4% to $647.6 million versus $620.4 million in the comparable period in the prior year. For the six months ended March 31, 2003, revenues were $1,288.6 million versus $1,229.9 million in the comparable period in the prior year. Pharmacy revenues for the second quarter ended March 31, 2003 grew 8.5% to $302.8 million versus $279.2 million in the comparable period in the prior year. For the six months ended March 31, 2003, pharmacy revenues grew 8.4% to $597.9 million versus $551.8 million in the comparable period in the prior year. NeighborCare's strong revenue growth was driven by drug inflation and an increase in the acuity level of patients served. Inpatient revenues for the second quarter ended March 31, 2003 remained relatively flat at $298.6 million versus $299.1 million in the comparable period in the prior year. For the six months ended March 31, 2003, inpatient revenues were $601.5 million compared to $596.6 million in the same period in the prior year. The impact of the Medicare Cliff on revenues, for the second quarter and year to date of $8.9 million and $17.2 million, respectively, was partially offset by growth in Medicaid and other payor rates. Medicaid rates, on average, increased by approximately 6% in the second quarter versus the same period in the prior year. Occupancy averaged 91% in the second quarter versus 92% in the year ago quarter and Medicare mix, as a percentage of patient days, grew from 15.4% to 16.3%. Pharmacy Margin Expansion Offsets Impact of Cliff Consolidated EBITDA, as adjusted, for the second quarter ended March 31, 2003, was $47.5 million compared to $54.2 million for the same period in the prior year. The decline in EBITDA was caused by the impact of the Medicare Cliff, as described above, and the impact of harsh weather experienced in the Northeast, which increased year over year utility and snow removal costs by approximately $1.5 million. These amounts were offset by improvements in operating performance, notably in NeighborCare. NeighborCare's EBITDA for the second quarter ended March 31, 2003 was $31.0 million compared to $26.9 million in the same period in the prior year. For the six months ended March 31, 2003, NeighborCare's EBITDA was $59.2 million compared to $53.1 million in the same period in the prior year. Pharmacy EBITDA margins increased to 9.6% this quarter versus 8.8% in the comparable quarter in the prior year primarily driven by NeighborCare's margin expansion initiatives. These initiatives, which began during the latter half of fiscal 2002, are now being realized in NeighborCare profitability. NeighborCare's EBITDA grew 15% in this year's second quarter versus the same quarter in the prior year, as compared to a 7% growth rate in the first quarter of 2003 versus the same quarter in the prior year. Inpatient EBITDA for the second quarter ended March 31, 2003 was $26.6 million compared to $35.4 million in the same period in the prior year. For the six months ended March 31, 2003, inpatient EBITDA was $56.6 million compared to $72.2 million in the same period in the prior year. The decline in EBITDA was primarily driven by the Medicare Cliff and the impact of harsh weather. Expense growth in the quarter moderated, principally due to slower nursing labor costs, including both employed and agency labor, which declined to 6% year over year as agency utilization was substantially reduced. 2 Progress on Strategic Initiatives Exit from ElderCare Operations in Florida Complete On April 30, 2003, Genesis completed the sale of its nine skilled nursing facilities and the transfer of leasehold rights in one skilled nursing facility and one assisted living facility in Florida for $26.3 million, of which $6 million is represented by a note receivable. In a separate transaction, on March 31, 2003, Genesis completed the sale of its remaining four Florida assisted living facilities for $8.5 million in cash. The Florida properties would have contributed approximately $25.2 million to revenues and a loss of $0.4 million ($0.01 per share) in income from continuing operations in the second quarter of 2003 if they had not been classified as discontinued. With the completion of these transactions, Genesis has significantly reduced its exposure to patient liability costs, which appear to be stabilizing due to tort reform efforts, but which remain extraordinarily high in the state of Florida. Spin-Off On February 12, 2003, Genesis announced that its Board of Directors had approved a plan to spin-off its eldercare business in what is expected to be a tax-free transaction to shareholders by the end of the calendar year. In the second quarter of 2003, Genesis submitted a private letter ruling request to the Internal Revenue Service regarding the tax-free nature of the distribution of shares of the independent eldercare company. The process is expected to be completed in the fiscal fourth quarter of 2003. Genesis expects to file with the Securities and Exchange Commission a registration statement relating to the independent eldercare company's securities during the Company's third fiscal quarter. The securities registration process is expected to be completed in the fiscal fourth quarter of 2003. NeighborCare Operational Best Practices NeighborCare continues implementation of its margin expansion initiatives. These initiatives specifically address operating costs related to packaging, labor and quality assurance through enhanced automation and process re-engineering. This program has been rolled out in all seven pharmacy regions. Share Repurchase Program On March 20, 2003, Genesis announced that its Board of Directors had authorized the Company to repurchase up to $50 million of the Company's common stock. As of March 31, 2003, Genesis had repurchased approximately $17 million of the Company's common stock or 1.1 million common shares, through privately negotiated transactions and in the open market, representing 2.6% of the common shares outstanding. Since the end of the quarter, Genesis has repurchased an additional $4 million of common stock. 3 Discontinued Operations On October 1, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards, No. 144 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 144"). Under SFAS 144, discontinued businesses or assets held for sale are removed from the results of continuing operations and presented as a separate line on the statement of operations. During the second quarter of fiscal 2003, the Company classified as discontinued operations all of its Florida skilled nursing facilities and its one remaining assisted living facility in Florida (as discussed above), and two skilled nursing and four assisted living facilities located in other states. Other Considerations Strategic Planning, Severance and Other Related Costs In the second quarter of fiscal 2003, the Company recorded expenses of $2.6 million principally associated with consulting expenses related to NeighborCare's margin expansion initiatives and the evaluation of strategic alternatives. Transaction Related Expenses During the second quarter of fiscal 2003, the Company recognized an additional $1.0 million of costs associated with the proposed NCS Healthcare transaction. For the six months ended March 31, 2003, the Company realized a net gain of approximately $10.2 million on the NCS Healthcare break-up fee. Financial Summary Excluding the impact of strategic planning, severance and other related costs and transaction related expenses in the quarter ended March 31, 2003, and a $21.7 million gain on an arbitration award and $1.7 million of debt restructuring and reorganization costs in the quarter ended March 31, 2002, results for the quarter ended March 31, 2003 as compared to the same quarter in the prior year are presented below and have been labeled `as adjusted'.
As reported As adjusted Quarter ended Quarter ended March 31, March 31, 2003 2002 2003 2002 ---- ---- ---- ---- EBITDA (in millions) $44.0 $74.2 $47.5 $54.2 Income from Continuing Operations (in millions) $9.7 $28.3 $11.8 $16.8 Income from Continuing Operations Per Share - Diluted $0.23 $0.67 $0.28 $0.39 See attached reconciliation on page 7
4 Outlook The Company is reaffirming its guidance for the fiscal year 2003. Income from continuing operations on a GAAP basis is projected to be between $50.3 million ($1.23 per share) and $52.5 million ($1.28 per share). As adjusted for our projected strategic planning, severance and other related costs and transaction related net gains in the fiscal year 2003, income from continuing operations on a non-GAAP basis is projected to be between $56.6 million ($1.38 per share) and $58.7 million ($1.43 per share). See attached reconciliation on page 12. Conference Call Genesis Health Ventures will host a conference call and webcast at 9:30 a.m. EDT on May 1, 2003 to discuss its financial results for the second quarter. Investors can access the conference call by phone at (888) 428-4480 or live via webcast through the home page of the Genesis web site at http://www.ghv.com. A replay of the call will also be posted on the home page of the Genesis web site at http://www.ghv.com. About Genesis Health Ventures Genesis Health Ventures (NASDAQ: GHVI) provides healthcare services to America's elders through a network of NeighborCare pharmacies and Genesis ElderCare skilled nursing and assisted living facilities. Other Genesis healthcare services include rehabilitation and respiratory therapy, group purchasing, and diagnostics. Visit our website at http://www.ghv.com ------------------ Statements made in this release, and in our other public filings and releases, which are not historical facts contain "forward-looking" statements (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties and are subject to change at any time. These forward-looking statements may include, but are not limited to, statements containing words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "may" and similar expressions. Such forward looking statements include, without limitation, statements contained under the heading "Outlook" and statements regarding the effect of the exit from eldercare operations in Florida, the effect and timing of the spin-off of our eldercare operations and the effect of the NeighborCare operational best practices. Factors that could cause actual results to differ materially include, but are not limited to, the following: costs, delays and other difficulties related to the spin-off, changes in the reimbursement rates or methods of payment from Medicare or Medicaid, or the implementation of other measures to reduce reimbursement for our services; changes in pharmacy legislation and payment formulas; the expiration of enactments providing for additional government funding; efforts of third party payors to control costs; the impact of federal and state regulations; changes in payor mix and payment methodologies; further consolidation of managed care organizations and other third party payors; competition in our business; an increase in insurance costs and potential liability for losses not covered by, or in excess of, our insurance; competition for qualified staff in the healthcare industry; our ability to control operating costs, and generate sufficient cash flow to meet operational and financial requirements; an economic downturn or changes in the laws affecting our business in those markets in which we operate; the terms of any share repurchase; and that there can be no assurance that any spin-off transaction will be completed and if completed will increase shareholder value. The forward-looking statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control. We caution investors that any forward-looking statements made by us are not guarantees of future performance. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments. # # # 5 GENESIS HEALTH VENTURES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2003 AND 2002 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three Months Ended Three Months Ended March 31, 2003 March 31, 2002 ----------- ----------- Net revenues: Inpatient services $ 298,638 $ 299,139 Pharmacy services 302,844 279,179 Other revenue 46,070 42,101 ----------- ----------- Total net revenues 647,552 620,419 ----------- ----------- Operating expenses: Salaries, wages and benefits 281,707 258,743 Cost of sales 190,017 178,425 Other operating expenses 121,346 122,664 Strategic planning, severance and other related costs 2,593 - Net expense (gain) from break-up fee and other settlements 969 (21,678) Depreciation and amortization expense 16,083 14,686 Lease expense 6,957 6,368 Interest expense 9,889 10,862 ----------- ----------- Income before debt restructuring and reorganization costs, income tax expense, equity in net income (loss) of unconsolidated affiliates and minority interests 17,991 50,349 Debt restructuring and reorganization costs - 1,700 ----------- ----------- Income before income tax expense, equity in net income (loss) of unconsolidated affiliates and minority interests 17,991 48,649 Income tax expense 7,018 18,974 ----------- ----------- Income before equity in net income (loss) of unconsolidated affiliates and minority interests 10,973 29,675 Equity in net income (loss) of unconsolidated affiliates 541 (141) Minority interests (1,180) (595) ----------- ----------- Income from continuing operations before preferred stock dividends 10,334 28,939 Preferred stock dividends 666 630 ----------- ----------- Income from continuing operations 9,668 28,309 Loss from discontinued operations, net of taxes (5,004) (3,367) ----------- ----------- Net income attributed to common shareholders $ 4,664 $ 24,942 =========== =========== Per Common Share Data: Basic: Income from continuing operations $ 0.23 $ 0.69 Loss from discontinued operations (0.12) (0.08) Net income $ 0.11 $ 0.61 Weighted average shares 41,641,179 41,168,498 Diluted: Income from continuing operations $ 0.23 $ 0.67 Loss from discontinued operations (0.12) (0.08) Net income $ 0.11 $ 0.59 Weighted average shares 41,641,179 43,300,745
6 GENESIS HEALTH VENTURES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS SIX MONTHS ENDED MARCH 31, 2003 AND 2002 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Six Months Ended Six Months Ended March 31, 2003 March 31, 2002 -------------- -------------- Net revenues: Inpatient services $ 601,533 $ 596,634 Pharmacy services 597,911 551,784 Other revenue 89,119 81,447 ----------- ----------- Total net revenues 1,288,563 1,229,865 ----------- ----------- Operating expenses: Salaries, wages and benefits 556,160 512,907 Cost of sales 376,769 350,524 Other operating expenses 243,831 246,020 Strategic planning, severance and other related costs 9,838 - Net gain from break-up fee and other settlements (11,337) (21,678) Depreciation and amortization expense 32,195 29,309 Lease expense 13,903 13,084 Interest expense 20,809 21,928 ----------- ----------- Income before debt restructuring and reorganization costs, income tax expense, equity in net income of unconsolidated affiliates and minority interests 46,395 77,771 Debt restructuring and reorganization costs - 1,700 ----------- ----------- Income before income tax expense, equity in net income of unconsolidated affiliates and minority interests 46,395 76,071 Income tax expense 18,095 29,668 ----------- ----------- Income before equity in net income of unconsolidated affiliates and minority interests 28,300 46,403 Equity in net income of unconsolidated affiliates 592 391 Minority interests (2,295) (752) ----------- ----------- Income from continuing operations before preferred stock dividends 26,597 46,042 Preferred stock dividends 1,349 1,260 ----------- ----------- Income from continuing operations 25,248 44,782 Loss from discontinued operations, net of taxes (8,647) (4,241) ----------- ----------- Net income attributed to common shareholders $ 16,601 $ 40,541 =========== =========== Per Common Share Data: Basic: Income from continuing operations $ 0.61 $ 1.09 Loss from discontinued operations (0.21) (0.10) Net income $ 0.40 $ 0.99 Weighted average shares 41,594,523 41,102,279 Diluted: Income from continuing operations $ 0.61 $ 1.07 Loss from discontinued operations (0.21) (0.10) Net income $ 0.40 $ 0.97 Weighted average shares - income from continuing operations 43,829,594 43,230,208 Weighted average shares - net income 41,594,523 43,230,208
7 GENESIS HEALTH VENTURES, INC. FINANCIAL HIGHLIGHTS (UNAUDITED)
Reconciliation of as reported to as adjusted income from continuing operations (in thousands, except Three Months Ended Three Months Ended share and per share amounts) March 31, 2003 March 31, 2002 -------------- -------------- Income from continuing operations - as reported $ 9,668 $ 28,309 Add back: Strategic planning, severance and other related costs 2,593 - Net expense (gain) from break-up fee and other settlements 969 (21,678) Debt restructuring and reorganization costs - 1,700 Tax impact of items added back above (1,389) 7,791 ----------- ----------- Income from continuing operations as adjusted $ 11,841 $ 16,122 Assumed conversion of preferred stock - 630 ----------- ----------- Income from continuing operations as adjusted to calculate diluted per share results $ 11,841 $ 16,752 ----------- ----------- Income per share from continuing operations - diluted $ 0.28 $ 0.39 ----------- ----------- Weighted average shares - diluted 41,641,179 43,300,745 =========== =========== - ------------------------------------------------------------------------------------------------------------------- Reconciliation of income from continuing operations to EBITDA as reported and as adjusted Three Months Ended Three Months Ended (in thousands) March 31, 2003 March 31, 2002 ------------ -------------- Income from continuing operations - as reported $ 9,668 $ 28,309 Add back: Preferred stock dividends 666 630 Equity in net income or loss of unconsolidated affiliates (541) 141 Minority interests 1,180 595 Income tax expense 7,018 18,974 Interest expense 9,889 10,862 Depreciation and amortization expense 16,083 14,686 ----------- ----------- EBITDA as reported $ 43,963 $ 74,197 Net expense (gain) from break-up fee and other settlements 969 (21,678) Strategic planning, severance and other related costs 2,593 - Debt restructuring and reorganization costs - 1,700 ----------- ----------- EBITDA as adjusted $ 47,525 $ 54,219 =========== =========== - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- Reconciliation of as reported to as adjusted income from continuing operations (in thousands, except Six Months Ended Six Months Ended share and per share amounts) March 31, 2003 March 31, 2002 -------------- ------------- Income from continuing operations - as reported $ 25,248 $ 44,782 Add back: Strategic planning, severance and other related costs 9,838 - Net gain from break-up fee and other settlements (11,337) (21,678) NCS financing cost with pharmacy supplier (included in cost of sales) 601 - Debt restructuring and reorganization costs - 1,700 Tax impact of items added back above 350 7,791 ------------ ----------- Income from continuing operations as adjusted $ 24,700 $ 32,595 Assumed conversion of preferred stock - 1,260 ------------ ----------- Income from continuing operations as adjusted to calculate diluted per share results $ 24,700 $ 33,855 ------------ ----------- Income per share from continuing operations - diluted $ 0.59 $ 0.78 ------------ ----------- Weighted average shares - diluted 41,594,523 43,230,208 ============ =========== - ------------------------------------------------------------------------------------------------------------------- Reconciliation of income from continuing operations to EBITDA as reported and as adjusted Six Months Ended Six Months Ended (in thousands) March 31, 2003 March 31, 2002 ------------- -------------- Income from continuing operations - as reported $ 25,248 $ 44,782 Add back: Preferred stock dividends 1,349 1,260 Equity in net income of unconsolidated affiliates (592) (391) Minority interests 2,295 752 Income tax expense 18,095 29,668 Interest expense 20,809 21,928 Depreciation and amortization expense 32,195 29,309 ------------ ----------- EBITDA as reported $ 99,399 $ 127,308 Net gain from break-up fee and other settlements (11,337) (21,678) Strategic planning, severance and other related costs 9,838 - NCS financing cost with pharmacy supplier (included in cost of sales) 601 - Debt restructuring and reorganization costs - 1,700 ------------ ----------- EBITDA as adjusted $ 98,501 $ 107,330 ============ ===========
8 GENESIS HEALTH VENTURES, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, 2003 AND SEPTEMBER 30, 2002 (IN THOUSANDS)
March 31, 2003 September 30, 2002 -------------- ------------------ Assets: Current assets: Cash and equivalents $ 133,481 $ 148,030 Restricted investments in marketable securities 15,850 15,074 Accounts receivable, net 370,243 369,969 Inventory 68,003 64,734 Prepaid expenses and other current assets 46,586 47,850 Assets held for sale 40,314 46,134 ---------- ---------- Total current assets 674,477 691,791 ---------- ---------- Property, plant and equipment, net 743,241 795,928 Assets held for sale 21,551 - Restricted investments in marketable securities 71,769 71,073 Other long-term assets 39,823 51,042 Investments in unconsolidated affiliates 12,084 14,143 Identifiable intangible assets, net 24,726 25,795 Goodwill 341,854 339,723 ---------- ---------- Total assets $1,929,525 $1,989,495 ========== ========== Liabilities and Shareholders' Equity: Current liabilities: Current installments of long-term debt $ 53,606 $ 40,744 Accounts payable and accrued expenses 181,100 202,041 ---------- ---------- Total current liabilities 234,706 242,785 ---------- ---------- Long-term debt 571,616 648,939 Deferred income taxes 50,089 37,191 Self-insurance liability reserves 52,347 42,019 Other long-term liabilities 48,787 48,989 Minority interests 10,901 10,684 Redeemable preferred stock, including accrued dividends 46,114 44,765 Shareholders' equity 914,965 914,123 ---------- ---------- Total liabilities and shareholders' equity $1,929,525 $1,989,495 ========== ========== - ------------------------------------------------------------------------------------------------------------------------------------
Rollforward of book value per share
(in thousands) (in thousands) ---------------------------- ----------------------- --------------------------- Shareholders' equity Common shares Book value per share (1) ---------------------------- ----------------------- --------------------------- Balance at September 30, 2002 $ 914,123 41,501 $ 22.03 Net income attributed to common shareholders 16,601 - Accumulated other comprehensive loss (1,589) - Issuance of common stock 2,745 206 Repurchase of common stock (16,915) (1,103) ---------------------------- ----------------------- --------------------------- Balance at March 31, 2003 $ 914,965 40,604 $ 22.53 ============================ ======================= ===========================
(1) Excluding redeemable preferred stock. 9 GENESIS HEALTH VENTURES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE AND SIX MONTHS ENDED MARCH 31, 2003 AND 2002 (IN THOUSANDS)
Three Months Ended Three Months Ended Six Months Ended Six Months Ended March 31, 2003 March 31, 2002 March 31, 2003 March 31, 2002 -------------- -------------- -------------- -------------- Cash flows from operating activities: Net income attributed to common shareholders $ 4,664 $ 24,942 $ 16,601 $ 40,541 Net charges included in operations not requiring funds 32,647 24,886 63,019 59,896 Changes in assets and liabilities: Accounts receivable (5,917) (9,918) (22,742) (16,247) Accounts payable and accrued expenses 3,497 (3,518) (7,622) 24,585 Refinancing of pharmacy supplier credit terms - (42,000) - (42,000) Receipt of break-up fee, net of costs 10,580 - 10,580 - Other, net 5,786 (1,170) 4,761 125 --------- -------- --------- -------- Net cash provided by (used in) operating activities before debt restructuring and reorganization costs 51,257 (6,778) 64,597 66,900 --------- -------- --------- -------- Cash paid for debt restructuring and reorganization costs (662) (6,208) (993) (32,182) --------- -------- --------- -------- Net cash provided by (used in) operating activities 50,595 (12,986) 63,604 34,718 --------- -------- --------- -------- Cash flows from investing activities: Capital expenditures (14,123) (9,152) (26,952) (19,973) Net sales (purchases) of restricted marketable securities 8,184 (7,370) (909) (13,039) Acquisition of rehabilitation services business - - (5,436) - Sale (purchase) of eldercare assets 28,198 - 29,556 (10,453) Other 5,518 7,599 6,022 5,245 --------- -------- --------- -------- Net cash provided by (used in) investing activities 27,777 (8,923) 2,281 (38,220) --------- -------- --------- -------- Cash flows from financing activities: Repayment of long-term debt and payment of sinking fund requirements (20,127) (10,880) (63,496) (34,349) Proceeds from issuance of long-term debt - 47,000 - 80,000 Repurchase of common stock (16,938) - (16,938) - Other (2,000) - - - --------- -------- --------- -------- Net cash (used in) provided by financing activities (39,065) 36,120 (80,434) 45,651 --------- -------- --------- -------- Net increase (decrease) in cash and equivalents $ 39,307 $ 14,211 $ (14,549) $ 42,149 Cash and equivalents: Beginning of period 94,174 60,077 148,030 32,139 --------- -------- --------- -------- End of period $ 133,481 $ 74,288 $ 133,481 $ 74,288 ========= ======== ========= ========
10 GENESIS HEALTH VENTURES, INC. FINANCIAL HIGHLIGHTS (UNAUDITED)
Three Months Ended Three Months Ended Six Months Ended Six Months Ended Segment Data (dollars in thousands) March 31, 2003 March 31, 2002 March 31, 2003 March 31, 2002 -------------- -------------- -------------- -------------- Inpatient services Revenue $ 298,638 $ 299,139 $ 601,533 $ 596,634 EBITDA - $ 26,612 35,351 56,564 72,180 EBITDA - % 8.9% 11.8% 9.4% 12.1% Pharmacy services (including intersegment amounts) Revenue $ 322,455 $ 305,808 $ 637,573 $ 604,660 EBITDA - $ 31,003 26,867 59,204 53,132 EBITDA - % 9.6% 8.8% 9.3% 8.8%
Three Months Ended Three Months Ended Six Months Ended Six Months Ended Selected Operating Statistics March 31, 2003 March 31, 2002 March 31, 2003 March 31, 2002 -------------- -------------- -------------- -------------- Occupancy 91.0% 92.1% 91.2% 92.2% Patient Days: Private and other 315,445 342,623 653,279 701,871 Medicare 261,567 250,412 506,756 475,996 Medicaid 1,026,632 1,028,549 2,088,947 2,107,175 ---------- ---------- ---------- ---------- Total Days 1,603,644 1,621,584 3,248,982 3,285,042 ========== ========== ========== ========== Per Diems: Private and other $ 201.98 $ 197.69 $ 201.93 $ 196.04 Medicare $ 312.76 $ 342.42 $ 311.24 $ 343.07 Medicaid $ 144.25 $ 136.06 $ 144.45 $ 135.03 Nursing labor costs per patient day: Employed labor $ 72.62 $ 65.02 $ 71.27 $ 63.70 Agency labor $ 5.96 $ 8.90 $ 6.49 $ 9.23 ---------- ---------- ---------- ---------- Total $ 78.58 $ 73.92 $ 77.76 $ 72.93 ========== ========== ========== ========== Pharmacy beds served 250,207 250,046 249,480 250,375 Institutional pharmacy revenue per bed $ 1,124 $ 1,065 $ 2,234 $ 2,108
11 GENESIS HEALTH VENTURES, INC. EARNINGS GUIDANCE (UNAUDITED)
Reconciliation of GAAP to non-GAAP Low end High end projected earnings guidance of range of range -------------------------- -------------------------- $ $ per share * $ $ per share * -------------------------- --------- ---------------- Projected income from continuing operations (GAAP) $ 50,332 $ 1.23 $ 52,480 $ 1.28 Add back: Strategic planning, severance and other related costs 20,988 20,988 Net expense (gain) from break-up fee and other settlements (11,337) (11,337) NCS financing cost with pharmacy supplier (included in cost of sales) 601 601 Tax impact of items added back above (3,998) (3,998) -------------------------- --------------------------- Projected income from continuing operations - as adjusted (non-GAAP) $ 56,586 $ 1.38 $ 58,734 $ 1.43 ========================== ========= ================
* - $ per common share on a diluted basis, assuming the conversion of redeemable preferred stock to common stock. 12 -----END PRIVACY-ENHANCED MESSAGE-----