UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended June 30, 2004 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
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Commission File Number: 000-33217
NEIGHBORCARE, INC.
(Exact name of registrant as specified in its charter)
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Pennsylvania |
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06-1132947 |
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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601 East Pratt Street, 3rd Floor |
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21202 |
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(Address of principal executive offices) |
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(Zip code) |
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(410) 528-7300 |
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(Registrant’s telephone number, including area code) |
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N/A |
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(Former name, former address and former fiscal year, if changed since last report) |
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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 August 12, 2004, 43,964,464 shares of the registrant’s common stock were outstanding and 259,612 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
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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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; costs associated with an unsolicited offer to acquire the Company; estimates in our significant accounting policies, including our allowance for doubtful accounts and the anticipated impact of long-lived asset impairments;
• certain statements in “Quantitative and Qualitative Disclosures 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 impact of Omnicare, Inc.’s unsolicited tender offer to acquire all of our outstanding common stock;
• the effect of the expiration or termination of certain service and supply contracts;
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• an increase in insurance costs and potential liability for losses not covered by, or in excess of, our insurance;
• 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, as reclassified in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 3, 2004.
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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NEIGHBORCARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
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June 30, |
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September 30, |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
70,144 |
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132,726 |
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Restricted investments in marketable securities |
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29,320 |
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Accounts receivable, net of allowance of $12.8 million and $48.6 million, respectively |
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225,480 |
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366,886 |
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Inventories |
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66,170 |
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66,747 |
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Prepaid expenses and other current assets |
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36,355 |
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89,918 |
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Total current assets |
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398,149 |
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685,597 |
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Property, plant and equipment, net |
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80,251 |
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751,996 |
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Restricted investments in marketable securities |
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61,271 |
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Notes receivable and other investments |
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19,252 |
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Other long-term assets |
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21,272 |
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62,052 |
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Identifiable intangible assets, net |
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13,852 |
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20,866 |
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Goodwill |
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356,776 |
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337,695 |
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Total assets |
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$ |
870,300 |
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1,938,729 |
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LIABILITIES and SHAREHOLDERS’ EQUITY |
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Current liabilities |
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Current portion of long-term debt |
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$ |
4,275 |
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20,135 |
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Accounts payable and accrued expenses |
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106,430 |
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214,689 |
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Income taxes payable |
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4,116 |
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Total current liabilities |
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110,705 |
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238,940 |
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Long-term debt |
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258,921 |
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591,484 |
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Other long-term liabilities |
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31,742 |
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134,952 |
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Total liabilities |
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401,368 |
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965,376 |
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Minority interest |
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9,596 |
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10,359 |
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Redeemable preferred stock |
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46,831 |
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SHAREHOLDERS’ EQUITY |
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459,336 |
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916,163 |
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Total liabilities and shareholders’ equity |
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$ |
870,300 |
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1,938,729 |
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See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
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NEIGHBORCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands except per share amounts)
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Three Months Ended |
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2004 |
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2003 |
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Net revenues |
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$ |
371,094 |
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318,886 |
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Cost of revenues |
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294,061 |
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246,360 |
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Gross profit |
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77,033 |
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72,526 |
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Selling, general and administrative |
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48,807 |
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54,600 |
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