FORM 10-Q

 

(Mark One)

 

 

 

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  ý          NO  o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Act).

 

YES  ý          NO  o

 

As of February 12, 2004, 43,672,252 shares of the registrant’s common stock were outstanding and 260,231 shares are to be issued in connection with the registrant’s joint plan of reorganization confirmed by the Bankruptcy Court on September 20, 2001.

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS.

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

 

YES  ý          NO  o

 

 

TABLE OF CONTENTS

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Part I:   FINANCIAL INFORMATION
	Item 1.	Financial Statements
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk
	Item 4.	Controls and Procedures
Part II:  OTHER INFORMATION
	Item 1.	Legal Proceedings
	Item 2.	Changes in Securities and Use of Proceeds
	Item 3.	Defaults Upon Senior Securities
	Item 4.	Submission of Matters to a Vote of Security Holders
	Item 5.	Other Information
	Item 6.	Exhibits and Reports on Form 8-K
SIGNATURES

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

As used herein, unless the context otherwise requires, “NeighborCare,” the “Company,” “we,” “our” or “us” refers to NeighborCare, Inc. and our subsidiaries.

 

Statements made in this report 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:

 

•                  certain statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the notes to our unaudited condensed consolidated financial statements, such as our ability to meet our liquidity needs, scheduled debt and interest payments, and expected future capital expenditure requirements; the expected effects of government regulation on our business including the Medicare Prescription Drug, Improvement and Modernization Act of 2003; our ability to successfully implement our strategic objectives, including the effects of the spin-off of Genesis Healthcare Corporation (“GHC”) and the achievement of certain performance improvement initiatives within our institutional pharmacy segment, in order to improve current pharmacy profitability; the expected strategic planning, severance and other operating items for the remainder of fiscal 2004 and the foreseeable future; the anticipated overhead costs of being a stand-alone company; estimates in our significant accounting policies, including our allowance for doubtful accounts and any anticipated impact of long-lived asset impairments; and the expected repayment of our senior subordinated notes due 2013 and related interest payments;

 

•                  certain statements in “Quantitative and Qualitative Disclosure About Market Risk;” and

 

•                  certain statements in “Legal Proceedings” regarding the effects of litigation.

 

The forward-looking statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control. You are cautioned that these statements are not guarantees of future performance, and that actual results and trends in the future may differ materially.

 

Factors that could cause actual results to differ materially include, but are not limited to the following:

 

•                  our ability, and the ability of our customers, to comply with Medicare or Medicaid reimbursement regulations or other applicable laws;

 

•                  changes in the reimbursement rates or methods of payment from Medicare and Medicaid, or the implementation of other measures to reduce the reimbursement for our services;

 

•                  changes in pharmacy legislation and payment formulas;

 

•                  the impact of federal and state regulations;

 

•                  the impact of investigations and audits relating to alleged violations of federal and/or state regulations;

 

•                  changes in the acuity of patients,  payor mix and payment methodologies;

 

•                  our ability, and the ability of our subsidiary guarantors, to fulfill debt obligations;

 

•                  the ability of GHC, as our largest customer, to operate as a separate entity;

 

•                  further consolidation of managed care organizations and other third party payors;

 

•                  competition in our businesses;

 

•                  the effect of the expiration or termination of certain service and supply contracts;

 

•                  an increase in insurance costs and potential liability for losses not covered by, or in excess of, our insurance;

 

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•                  competition for qualified management and pharmacy professionals;

 

•                  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 impact of our reliance on one supplier to provide a significant portion of our pharmacy products;

 

•                  the impact of future acquisitions on our operations;

 

•                  availability of financial and other resources to us after the spin-off of GHC;

 

•                  federal income tax liabilities and indemnification obligations related to the spin-off of GHC;

 

•                  conflicts of interest as a result of our continuing relationship with GHC after the spin-off;

 

•                  the ability to implement and achieve certain strategic objectives; and

 

•                  acts of God or public authorities, war, civil unrest, terrorism, fire, floods, earthquakes and other matters beyond our control.

 

Certain of these risks are described in more detail in our Annual Report on Form 10-K for the fiscal year ended September 30, 2003.

 

In addition to these factors and any risks and uncertainties specifically identified in the text surrounding forward-looking statements, any statements in this report or the reports and other documents filed by us with the SEC that warn of risks or uncertainties associated with future results, events or circumstances also identify factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements.

 

All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.  We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as may be required under applicable securities law.

 

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PART I:                                                   FINANCIAL INFORMATION

 

Item 1.                                                           Financial Statements

 

NEIGHBORCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

		December 31, 2003			September 30, 2003
		(unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	92,761		$	115,364
Accounts receivable, net of allowance of $16.2 million and $16.5 million, respectively		206,686			200,103
Inventory		67,176			61,221
Prepaid expenses and other current assets		40,726			53,739
Current assets held for distribution		—			255,170
Total current assets		407,349			685,597
Property, plant and equipment, net		74,085			95,143
Other long-term assets		18,632			37,150
Identifiable intangible assets, net		12,813			16,755
Goodwill		334,742			334,742
Non-current assets held for distribution		—			769,341
Total assets		$	847,621		$	1,938,728
LIABILITIES
Current liabilities
Current portion of long-term debt		$	4,300		$	18,224
Accounts payable and accrued expenses		104,577			105,397
Current liabilities held for distribution		—			113,067
Total current liabilities		108,877			236,688
Long-term debt		254,332			547,108
Deferred income taxes		12,084			50,022
Other long-term liabilities		10,684			20,858
Non-current liabilities held for distribution		—			110,805
Total liabilities		385,977			965,481
Minority interest		9,267			10,253
Redeemable preferred stock		—			46,831
SHAREHOLDERS’ EQUITY
Common stock		916			842
Additional paid-in capital		495,998			853,540
Retained earnings (deficit)		(8,329		)	101,290
Accumulated other comprehensive loss		—			(3,301		)
Treasury stock		(36,208		)	(36,208		)
Total shareholders’ equity		452,377			916,163
Total liabilities and shareholders’ equity		$	847,621		$	1,938,728

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

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NEIGHBORCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(in thousands except per share amounts)

 

		Three Months Ended December 31,
		2003			2002
		(unaudited)			(unaudited)
Net revenues		$	351,406