As filed with the Securities and Exchange Commission on November 5, 2002
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GENESIS HEALTH VENTURES, INC.
(Exact name of Registrant as specified in its charter)
Pennsylvania 06-1132947
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, PA 19348
(610) 444-6350
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Robert H. Fish
Chief Executive Officer
Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, PA 19348
(610) 444-6350
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Richard J. McMahon, Esquire
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, Pennsylvania 19103
(215) 569-5500
Approximate Date of Commencement of Proposed Sale to the Public: From
time to time after the effective date of the Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box. [ ]
If any of the securities being registered on this Form are being
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
=====================================================================================================================
Proposed
maximum Proposed
aggregate maximum
offering aggregate Amount of
Title of each class of Amount to be price per offering price registration
Securities to be registered registered(1) security (2) fee
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Common Stock, par value $0.02 per share .............. 750,000 $14.38 $10,785,000.00 $992.22
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(1) In the event of a stock split, stock dividend, or similar transaction
involving Genesis Health Ventures, Inc.'s Common Stock, in order to
prevent dilution, the number of shares registered shall automatically be
increased to cover the additional shares in accordance with Rule 416(a)
under the Securities Act of 1933.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of the Securities Act of 1933 and based upon the
average of the high and low sale prices of the common stock as reported on
the Nasdaq National Market on November 1, 2002.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated November 5, 2002
PROSPECTUS
UP TO 750,000 SHARES
GENESIS HEALTH VENTURES, INC.
COMMON STOCK
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This prospectus relates to the sale, from time to time, of up to
750,000 shares of our common stock, $.02 par value per share, by First Union,
N.A., as trustee of the rabbi trust created in connection with the Genesis
Health Ventures, Inc. Deferred Compensation Plan, referred to as the deferred
compensation plan. The shares of our common stock have been and will be from
time to time contributed and issued by us to the rabbi trust to fund our
obligations under the deferred compensation plan. The common stock will be sold
by the trustee for the account of the rabbi trust to fund, when due, our
obligations under the deferred compensation plan. See "The Plan." The shares of
our common stock offered by this prospectus are sometimes referred to as the
securities.
The common stock may be offered and sold by the trustee from time to
time directly or through broker-dealers. The common stock may be sold in one or
more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to the prevailing
market prices or at prices determined on a negotiated or competitive bid basis.
See "Plan of Distribution." We will not directly receive any portion of the
proceeds of the sale of the common stock offered by this prospectus and will
bear all expenses incident to registration of the common stock. The proceeds
will, however, be used to fund our obligations under the deferred compensation
plan.
Our common stock is traded on the Nasdaq National Market under the
symbol "GHVI." On November 4, 2002, the last reported sales price for our common
stock as reported on the Nasdaq National Market was $14.55 per share.
Our principal executive offices are located at 101 East State Street,
Kennett Square, Pennsylvania and our telephone number is (610) 444-6350.
--------------------------
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 3 to read about risks you should consider before
buying our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This prospectus may be used to offer and sell securities only if
accompanied by the prospectus supplement for those securities.
These securities are not deposits or savings accounts. These securities
are not insured by the Federal Deposit Insurance Corporation or any other
governmental agency or instrumentality.
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The date of this prospectus is , 2002.
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. The trustee is not making
an offer to sell these securities in any jurisdiction where the offer or sale is
not permitted. You should assume that the information appearing in this
prospectus is accurate as of the date on the front of this prospectus only. Our
business, financial condition, results of operations and prospects may have
changed since that date.
Table of Contents
About This Prospectus........................................................1
Forward-Looking Statements and Cautionary Factors............................1
Risk Factors.................................................................4
Our Company.................................................................16
The Plan....................................................................18
Use of Proceeds.............................................................18
Plan of Distribution........................................................18
Where You Can Find More Information.........................................19
Legal Matters...............................................................20
Experts.....................................................................20
About This Prospectus
In this prospectus unless the context otherwise requires, "Genesis,"
the "company," "we," "our" or "us" refers to Genesis Health Ventures, Inc. In
this prospectus, the "trustee" refers to First Union, N.A., as trustee of the
rabbi trust created in connection with the deferred compensation plan.
This prospectus is part of a registration statement that we filed with
the SEC utilizing a "shelf" registration process. Under this shelf process, the
trustee may sell to the public the securities described in this prospectus in
one or more offerings up to a total of 750,000 shares of our common stock.
This prospectus provides you with only a general description of the
common stock that the trustee may sell. Each time the trustee sells the common
stock, a prospectus supplement will be provided that will contain specific
information about the common stock and terms of that offering. It may also add
to, update or change information contained in this prospectus. You should read
both this prospectus and the prospectus supplement together with the additional
information described under the heading "Where You Can Find More Information."
If the terms of your securities vary between the prospectus supplement
and the accompanying prospectus, you should rely on the information in the
following order of priority:
o the prospectus supplement; and
o the prospectus.
Unless indicated in a prospectus supplement, neither we nor the trustee
has taken any action that would permit the trustee to publicly sell our common
stock in any jurisdiction outside the United States. If you are an investor
outside the United States, you should inform yourself about and comply with any
restrictions as to the offering of the securities and the distribution of this
prospectus.
Forward-Looking Statements and Cautionary Factors
Statements made in this prospectus, and in our other public filings and
releases, which are not historical facts are "forward-looking" statements. The
Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for
forward-looking statements to encourage companies to provide prospective
information about themselves without fear of litigation so long as that
information is identified as forward looking and is accompanied by meaningful
cautionary statements identifying important factors that could cause actual
results to differ materially from those projected in the information.
Forward-looking statements are included in this prospectus and are incorporated
by reference from other documents filed by us with the SEC. You will be able to
recognize a forward-looking statement because it contains the words
"anticipate," "believe," "estimate," "expect," "project," "objective" or a
similar expression to identify it as a forward-looking statement. These
forward-looking statements may include, but are not limited to:
o statements included in the discussions under the heading "Risk
Factors";
o statements included herein and in the discussions under the
heading "Management's Discussion and Analysis of Financial
Condition and Results Of Operations" in our annual report on
Form 10-K and quarterly reports on Form 10-Q filed with the
SEC, such as our ability to meet our liquidity needs,
scheduled debt and interest payments, expected future capital
expenditure requirements, our ability to effect repayment of
trade payables due to our primary supplier of pharmacy
products, to control costs and sell assets, the expected
effects of government regulation on reimbursement for services
provided and our ability to successfully implement our
strategic objectives in "Liquidity and Capital Resources -
Strategic Objectives;"
1
o statements included herein and in the discussions under the
heading "Business" in our annual reports on Form 10-K as filed
with the SEC concerning strategy, corporate integrity
programs, government regulations, the Medicare and Medicaid
programs;
o statements included in the notes to our consolidated financial
statements concerning pro forma adjustments in our annual
reports on Form 10-K and quarterly reports on Form 10-Q as
filed with the SEC; and
o statements included in our "Legal Proceedings" in our annual
report on Form 10-K and quarterly reports on Form 10-Q filed
with the SEC 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, some of which are discussed more fully
under the caption "Risk Factors":
o 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;
o the expiration of enactments providing for additional
governmental funding;
o changes in pharmacy legislation and payment formulas;
o the impact of federal and state regulations;
o changes in payor mix and payment methodologies;
o further consolidation of managed care organizations and other
third party payors;
o competition in our business;
o an increase in insurance costs and potential liability for
losses not covered by, or in excess of, our insurance;
o competition for qualified staff in the healthcare industry;
o our ability to control operating costs and generate sufficient
cash flow to meet operational and financial requirements;
o the effects of strategic pharmacy acquisitions, including the
proposed merger with NCS HealthCare, Inc.;
o the effects of our increased leverage if the proposed merger
with NCS is completed;
o an economic downturn or changes in the laws affecting our
business in those markets in which we operate;
o the effect of the expiration of certain service and supply
contracts;
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o the impact of our reliance on one pharmacy supplier to provide
a significant portion of our pharmacy products;
o the impact of acquisitions;
o the liquidity of our common stock; and
o acts of God or public authorities, war, civil unrest, fire,
floods, earthquakes and other matters beyond our control.
In addition to these factors and any risks and uncertainties
specifically identified in the text surrounding forward-looking statements, any
statements in this prospectus 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 prospectus or to reflect the occurrence of unanticipated events, except as
may be required under applicable securities law.
3
Risk Factors
Before you invest in these securities, you should be aware that there
are various risks, including those described below. You should consider
carefully these risk factors together with all of the other information included
in this prospectus or incorporated by reference in this prospectus before you
decide to invest in these securities.
Changes in the reimbursement rates or methods of payment from Medicare and
Medicaid have adversely affected our revenues and operating margins and
additional changes in Medicare and Medicaid or the implementation of other
measures to reduce the reimbursement for our services may further negatively
impact us.
We currently receive over 60% of our revenues from Medicare and
Medicaid. The healthcare industry is experiencing a strong trend toward cost
containment, as the government seeks to impose lower reimbursement and
utilization rates and negotiate reduced payment schedules with providers. These
cost containment measures generally have resulted in reduced rates of
reimbursement for services that we provide, including skilled nursing facility
services, pharmacy services and therapy services.
Legislative and regulatory action has resulted in continuing changes in the
Medicare and Medicaid reimbursement programs, which changes have negatively
affected us, including the following:
o the adoption of the Medicare prospective payment system
pursuant to the Balanced Budget Act of 1997, as modified by
the Medicare Balanced Budget Refinement Act;
o adoption of the Benefits Improvement Protection Act of 2000;
and
o the repeal of the Boren Amendment federal payment standard for
Medicaid payments to nursing facilities.
The changes have limited, and are expected to continue to limit,
payment increases under these programs. Also, the timing of payments made under
the Medicare and Medicaid programs is subject to regulatory action and
governmental budgetary constraints. In recent years, the time period between
submission of claims and payment has increased. Further, within the statutory
framework of the Medicare and Medicaid programs, there are a substantial number
of areas subject to administrative rulings and interpretations that may further
affect payments made under those programs. Further, the federal and state
governments may reduce the funds available under those programs in the future or
require more stringent utilization and quality reviews of eldercare centers or
other providers. There can be no assurances that adjustments from Medicare or
Medicaid audits will not have a material adverse effect on us.
The Benefits Improvement and Protection Act enactment mandates a phase
out of intergovernmental transfer transactions by states whereby states inflate
the payments to certain public facilities to increase federal matching funds.
This action may reduce federal support for a number of state Medicaid plans. The
reduced federal payments may adversely affect aggregate available funds, thereby
requiring states to reduce payments to all providers. We operate in several of
the states that will experience a contraction of federal matching funds.
With the repeal of the federal payment standards, there can be no
assurances that budget constraints or other factors will not cause states to
reduce Medicaid reimbursement to nursing facilities and pharmacies or that
payments to nursing facilities and pharmacies will be made on a timely basis.
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Additionally, the recent economic downturn may reduce state spending on
Medicaid programs. Recent data compiled by the National Conference of State
Legislatures indicates that the recent economic downturn has had a detrimental
effect on state revenues. Historically, these budget pressures have translated
into reductions in state spending. Given that Medicaid outlays are a significant
component of state budgets, we expect continuing cost containment pressures on
Medicaid outlays for nursing homes and pharmacy services in the states in which
it operates.
Effective October 1, 2002, our revenues are adversely affected by expiring
Medicare provisions; although Congress may restore a portion of lost Medicare
revenues.
A number of provisions of the Balanced Budget Refinement Act and the
Benefits Improvement and Protection Act enactments providing additional funding
for Medicare participating skilled nursing facilities expired on September 30,
2002. The expiration of these provisions is estimated to reduce our Medicare per
diems per beneficiary, on average, by $34.
On April 23, 2002, the Centers for Medicare and Medicaid Services
issued a press statement announcing that the agency would not proceed with its
previously announced changes in the skilled nursing facility case-mix
classification system. In its announcement, the Centers for Medicare and
Medicaid Services clarified that case-mix refinements would be postponed for a
full year. It issued notice of fiscal year 2003 rates in the Federal Register,
July 31, 2002. Effective October 1, 2002, rates will be increased by a 2.6%
annual market basket adjustment. The Centers for Medicare and Medicaid Services
estimate that, even with this upward adjustment, average Medicare rates will be
8.8% lower than the current year because of the reduced payment caused by the
expiring statutory add-ons.
The House of Representatives passed a package of Medicare amendments in
late June 2002. Under the House-passed measure, portions of the expiring
provisions would be retained. The Balanced Budget Refinement Act increase of 4%
would expire, and the 16.6% add-on of the Benefits Improvement and Protection
Act to the nursing portion of the skilled nursing facility prospective payment
system rates would be reduced to 12% in 2003, 10% in 2004, and 8% in 2005. Under
this proposal, fiscal year 2003 rates would be 5.2% lower than those of the
current year.
On October 1, 2002, key leaders of the Senate Finance Committee
introduced a bipartisan measure known as the "Beneficiary Access to Care and
Medicare Equity Act of 2002." This measure offers moderately more rate
assistance than the House-passed measure altering the nursing portion of the
skilled nursing facility prospective payment system to 15% in 2003, 13% in 2004,
and 11% in 2005. Under this proposal, fiscal year 2003 rates would be 4.3% lower
than those of the current year, and the Balanced Budget Refinement Act 4% market
basket adjustment would expire. A Medicare provider relief package is expected
to be considered before the current session of Congress adjourns. It is
premature to forecast the outcome of Congressional action.
We estimate that the "Skilled Nursing Facilities Medicare
Cliff," factoring in the administrative decision not to proceed with changes in
the case-mix refinements at this time and without factoring in any additional
Congressional action, will expose the skilled nursing facility sector to a 10%
reduction. For us, this reduction could have an adverse revenue impact exceeding
$35 million annually.
There may be additional provisions in the Medicare legislation
affecting our other businesses. Congress is expected to consider changes
affecting pharmacy, rehabilitation therapy, diagnostic services and the payment
for services in other health settings.
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It is not possible to quantify fully the effect of recent legislation,
the interpretation or administration of such legislation or any other
governmental initiatives on our business. Accordingly, there can be no assurance
that the impact of these changes or any future healthcare legislation will not
further adversely affect our business. There can be no assurance that payments
under governmental and private third-party payor programs will be timely, will
remain at levels comparable to present levels or will, in the future, be
sufficient to cover the costs allocable to patients eligible for reimbursement
pursuant to such programs. Our financial condition and results of operations may
be affected by the reimbursement process, which in the healthcare industry is
complex and can involve lengthy delays between the time that revenue is
recognized and the time that reimbursement amounts are settled.
Changes in pharmacy legislation and payment formulas could adversely affect our
NeighborCare(R) pharmacy operations.
Pharmacy coverage and cost containment are important policy debates at
both the federal and state levels. The federal government has considered
proposals to expand Medicare coverage for outpatient pharmacy services.
Enactment of such legislation could affect institutional pharmacy services.
Likewise, a number of states have proposed cost containment
initiatives. Changes in payment formulas and delivery requirements could
adversely affect our NeighborCare pharmacy operations.
We conduct business in a heavily regulated industry, and changes in regulations
and violations of regulations may result in increased costs or sanctions.
Our business is subject to extensive federal, state and, in some cases,
local regulation with respect to, among other things, licensure and
certification of eldercare centers and pharmacy operations, controlled
substances and health planning in addition to reimbursement. For our eldercare
centers, this regulation relates, among other things, to the adequacy of
physical plant and equipment, qualifications of personnel, standards of care and
operational requirements. For pharmacy and medical supply products and services,
this regulation relates, among other things, to operational requirements,
documentation, licensure, certification and regulation of controlled substances.
Compliance with these regulatory requirements, as interpreted and amended from
time to time, can increase operating costs and thereby adversely affect the
financial viability of our business. Because these laws are amended from time to
time and are subject to interpretation, we cannot predict when and to what
extent liability may arise. Failure to comply with current or future regulatory
requirements could also result in the imposition of various remedies including
(with respect to inpatient care) fines, restrictions on admission, the
revocation of licensure, decertification, imposition of temporary management or
the closure of a facility or site of service.
We are subject to periodic audits by the Medicare and Medicaid
programs, which have various rights and remedies against us if they assert that
we have overcharged the programs or failed to comply with program requirements.
Rights and remedies available to these programs include repayment of any amounts
alleged to be overpayments or in violation of program requirements, or making
deductions from future amounts due to us. These programs may also impose fines,
criminal penalties or program exclusions. Other third-party payor sources also
reserve rights to conduct audits and make monetary adjustments.
We believe that our eldercare centers and other sites of service are in
substantial compliance with the various Medicare, Medicaid and state regulatory
requirements applicable to us. However, in the ordinary course of our business,
we receive notices of deficiencies for failure to comply with various regulatory
requirements. We review such notices and take appropriate corrective action. In
most cases, we and the reviewing agency will agree upon the measures that will
bring the center or service site into compliance with regulatory requirements.
In some cases or upon repeat violations, the reviewing agency may take various
adverse actions against a provider, including but not limited to:
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o the imposition of fines;
o suspension of payments for new admissions to the center; and
o in extreme circumstances, decertification from participation
in the Medicare or Medicaid programs and revocation of a
center's license.
These actions may adversely affect a provider's ability to continue to
operate, the ability to provide certain services and/or eligibility to
participate in the Medicare or Medicaid programs or to receive payments from
other payors. Additionally, actions taken against one center or service site may
subject other centers or service sites under common control or ownership to
adverse remedies.
We are also subject to federal and state laws that govern financial and
other arrangements between healthcare providers. These laws often prohibit
certain direct and indirect payments or fee-splitting arrangements between
healthcare providers that are designed to encourage the referral of patients to
a particular provider for medical products and services. Furthermore, some
states restrict certain business relationships between physicians and other
providers of healthcare services. Many states prohibit business corporations
from providing, or holding themselves out as a provider of, medical care.
Possible sanctions for violation of any of these restrictions or prohibitions
include loss of licensure or eligibility to participate in reimbursement
programs and civil and criminal penalties. These laws vary from state to state,
are often vague and have seldom been interpreted by the courts or regulatory
agencies. From time to time, we have sought guidance as to the interpretation of
these laws; however, there can be no assurance that such laws will ultimately be
interpreted in a manner consistent with our practices.
In July 1998, the federal government issued a new initiative to promote
the quality of care in nursing homes. Following this pronouncement, it has
become more difficult for nursing facilities to maintain licensure and
certification. We have experienced and expect to continue to experience
increased costs in connection with maintaining our licenses and certifications
as well as increased enforcement actions.
We face additional federal requirements that mandate major changes in
the transmission and retention of health information. The Health Insurance
Portability and Accountability Act of 1996 was enacted to ensure, first, that
employees can retain and at times transfer their health insurance when they
change jobs, and second, to simplify health care administrative processes. This
simplification includes expanded protection of the privacy and security of
personal medical data and requires the adoption of standards for the exchange of
electronic health information. Among the standards that the Secretary of Health
and Human Services will adopt pursuant to the Health Insurance Portability and
Accountability Act are standards for electronic transactions and code sets,
unique identifiers for providers, employers, health plans and individuals,
security and electronic signatures, privacy and enforcement. Although the Health
Insurance Portability and Accountability Act was intended to ultimately reduce
administrative expenses and burdens faced within the healthcare industry, we
believe that implementation of this law will result in additional costs. Failure
to comply with the Health Insurance Portability and Accountability Act could
result in fines and penalties that could have a material adverse effect on
Genesis.
The operation of our eldercare centers is subject to federal and state
laws prohibiting fraud by healthcare providers, including criminal provisions,
which prohibit filing false claims or making false statements to receive payment
or certification under Medicaid, or failing to refund overpayments or improper
payments. Violation of these criminal provisions is a felony punishable by
imprisonment and/or fines. We may be subject to fines and treble damage claims
if we violate the civil provisions that prohibit the knowing filing of a false
claim or the knowing use of false statements to obtain payment.
7
State and federal governments are devoting increased attention and
resources to anti-fraud initiatives against healthcare providers. The Health
Insurance Portability and Accountability Act and the Balanced Budget Act of 1997
expanded the penalties for health care fraud, including broader provisions for
the exclusion of providers from the Medicaid program. We have established
policies and procedures that we believe are sufficient to ensure that our
facilities will operate in substantial compliance with these anti-fraud and
abuse requirements. While we believe that our business practices are consistent
with Medicaid criteria, those criteria are often vague and subject to change and
interpretation. Aggressive anti-fraud actions, however, could have an adverse
effect on our financial position, results of operations and cash flows.
We are subject to federal and state laws that impose repackaging,
labeling and package insert requirements on pharmacies that repackage drugs for
distribution beyond the regular practice of dispensing or selling drugs directly
to patients at retail outlets. A drug repackager must register with the Food and
Drug Administration, referred to as the "FDA," as a manufacturing establishment
and is subject to FDA inspection for compliance with relevant good manufacturing
practices. We hold all the required registrations and licenses and believe that
we are in compliance with all related regulations. In addition, we believe that
we comply with all relevant requirements of the Prescription Drug Marketing Act
for the transfer and shipment of pharmaceuticals. Failure to comply with FDA
regulations could result in fines and other penalties, including loss of
licensure and could have a material adverse effect on our business.
State laws and regulations could affect our ability to grow.
Many states in which we operate our business have adopted Certificate
of Need, referred to as "CON," or similar laws that generally require that a
state agency approve certain acquisitions and determine that the need for
certain bed additions, new services and capital expenditures or other changes
exist prior to the acquisition or addition of beds or services, the
implementation of other changes or the expenditure of capital. State approvals
are generally issued for a specified maximum expenditure and require
implementation of the proposal within a specified period of time. Failure to
obtain the necessary state approval can result in the inability to provide the
service, to operate the centers, to complete the acquisition, addition or other
change, and can also result in the imposition of sanctions or adverse action on
the center's license and adverse reimbursement action. There can be no assurance
that we will be able to obtain CON approval for all future projects requiring
such approval.
Possible changes in the case mix of patients as well as payor mix and payment
methodologies may significantly affect our profitability.
The sources and amounts of our patient revenues will be determined by a
number of factors, including licensed bed capacity and occupancy rates of its
centers, the mix of patients and the rates of reimbursement among payors.
Likewise, payment for pharmacy and medical supply services, including the
institutional pharmacy services of our NeighborCare(R) pharmacy operations and
therapy services provided by our rehabilitation therapy services business, will
vary based upon payor and payment methodologies. Changes in the case mix of the
patients as well as payor mix among private pay, Medicare and Medicaid will
significantly affect our profitability. Particularly, any significant increase
in our Medicaid population could have a material adverse effect on our financial
position, results of operations and cash flow, especially if states operating
these programs continue to limit, or more aggressively seek limits on,
reimbursement rates.
Further consolidation of managed care organizations and other third-party payors
may adversely affect our profits.
Managed care organizations and other third-party payors have continued
to consolidate in order to enhance their ability to influence the delivery of
healthcare services. Consequently, the healthcare needs of a large percentage of
the United States population are increasingly served by a small number of
managed care organizations. These organizations generally enter into service
agreements with a limited number of providers for needed services. To the extent
that such organizations terminate us as a preferred provider and/or engage our
competitors as a preferred or exclusive provider, our business could be
materially adversely affected. In addition, private payors, including managed
care payors, increasingly are demanding discounted fee structures or the
assumption by healthcare providers of all or a portion of the financial risk
through prepaid capitation arrangements.
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We face intense competition in our business.
The healthcare industry is highly competitive. We compete with a
variety of other companies in providing eldercare services, many of which have
greater financial and other resources and may be more established in their
respective communities than us. Competing companies may offer newer or different
centers or services than we do and may thereby attract customers who are either
presently customers of our eldercare centers or are otherwise receiving our
eldercare services.
We compete in providing pharmacy and other specialty medical services
with a variety of different companies. Generally, this competition is national,
regional and local in nature. The primary competitive factors in the specialty
medical services business are similar to those in the eldercare center business
and include reputation, the cost of services, the quality of clinical services,
responsiveness to customer needs, and the ability to provide support in other
areas such as third-party reimbursement, information management and patient
record-keeping.
An increase in insurance costs may adversely affect our operating cash flow, and
we may be liable for losses not covered by or in excess of our insurance.
We have experienced an adverse effect on our operating cash flow due to
an increase in the cost of certain of our insurance programs and the timing of
funding new policies. Rising costs of eldercare malpractice litigation, and
losses stemming from these malpractice lawsuits and a constriction of insurers
have caused many insurance carriers to raise the cost of insurance premiums or
refuse to write insurance policies for nursing homes. Also, a tightening of the
reinsurance market has affected property, auto and excess liability insurance
carriers. Accordingly, the costs of all insurance premiums have increased. These
problems are particularly acute in the State of Florida where, because of a
greater number and higher amount of claims, general liability and professional
liability costs have become increasingly expensive. We own or lease
approximately 1,500 skilled nursing beds in the State of Florida.
We carry property, workers' compensation insurance, general and
professional liability coverage on our behalf and the behalf of our subsidiaries
in amounts deemed adequate by management. However, there can be no assurance
that any current or future claims will not exceed applicable insurance coverage.
In addition, for certain of our workers' compensation insurance,
professional liability coverage and health insurance provided to our employees,
we are self-insured. Accordingly, we are liable for payments to be made under
those plans. To the extent claims are greater than estimated, they could
adversely affect our financial position, results of operations and cash flows.
9
We could experience significant increases in our operating costs due to intense
competition for qualified staff and minimum staffing laws in the healthcare
industry.
We and the healthcare industry continue to experience shortages in
qualified professional clinical staff, including pharmacies. We compete with
other healthcare providers and with non-healthcare providers for both
professional and non-professional employees. As the demand for these services
continually exceeds the supply of available and qualified staff, we and our
competitors have been forced to offer more attractive wage and benefit packages
to these professionals and to utilize outside contractors for these services at
premium rates. Furthermore, the competitive arena for this shrinking labor
market has created high turnover among clinical professional staff as many seek
to take advantage of the supply of available positions, each offering new and
more attractive wage and benefit packages. In addition to the wage pressures
inherent in this environment, the cost of training new employees amid the high
turnover rates has caused added pressure on our operating margins. Lastly,
increased attention to the quality of care provided in skilled nursing
facilities has caused several states to consider minimum staffing laws that
could further increase the gap between demand for and supply of qualified
individuals and lead to higher labor costs. While we have been able to retain
the services of an adequate number of qualified personnel to staff our
facilities appropriately and maintain our standards of quality care, there can
be no assurance that continued shortages will not in the future affect our
ability to attract and maintain an adequate staff of qualified healthcare
personnel. A lack of qualified personnel at a facility could result in
significant increases in labor costs at such facility or otherwise adversely
affect operations at such facility. Any of these developments could adversely
affect our operating results or expansion plans.
If we are unable to control operating costs and generate sufficient cash flow to
meet operational and financial requirements, including servicing our
indebtedness, our business operations may be adversely affected.
Cost containment and lower reimbursement levels by third-party payors,
including the federal and state governments, have had a significant impact on
the healthcare industry as a whole and on our cash flows. Our operating margins
continue to be under pressure because of continuing regulatory scrutiny and
growth in operating expenses, such as labor costs and insurance premiums. In
addition, as a result of competitive pressures, our ability to maintain
operating margins through price increases to private patients is limited.
Further, in connection with our reorganization, we entered into our senior
secured credit facility. If we are unable to service our indebtedness, our
business operations will be adversely affected. Therefore, we will have to
generate sufficient cash flow to meet operational and financing requirements,
which includes servicing our indebtedness. If we are unable to do so, our
business operations and revenues may be materially adversely affected.
Our ability to successfully consummate strategic pharmacy acquisitions,
including the proposed merger with NCS HealthCare, Inc., and realize the
anticipated benefits of these acquisitions may not occur in a timely fashion, or
at all, and our operations may be adversely affected if the integration of the
targeted company's business or future pharmacy acquisitions divert too much
attention away from our existing business.
We plan on consummating strategic pharmacy acquisitions in the future.
These acquisitions, including the proposed merger with NCS, involve risks
related to the integration of two companies that have previously operated
independently. The integration of these companies will be a complex,
time-consuming and potentially expensive process and may disrupt our business if
not completed in a timely and efficient manner. Some of the difficulties that
may be encountered by the combined company include:
o the diversion of management's attention from other ongoing
business concerns;
o the inability to effectively integrate and manage the target
company's pharmacies; and
o potential conflicts between business cultures.
If our management focuses too much time, money or effort on the
integration of the target company's operations and assets, we may not be able to
execute our overall business strategy. The diversion of management's attention
and any difficulties associated with integrating the two companies could have a
material adverse effect on the revenues, the level of expenses and the operating
and financial results of the combined company and the value of our common stock.
10
If the proposed merger with NCS is completed, we will reduce our working capital
and increase our leverage. In addition, we may further increase our leverage in
the future.
If the merger is completed, we will repay in full or cause NCS to repay
in full the outstanding debt of NCS, which includes $206 million of senior debt,
and, subject to NCS' compliance with specified provisions of the merger
agreement, will cause NCS to redeem $102 million of the NCS notes, including any
accrued and unpaid interest and redemption premium. We intend to finance the
cash portion required to be paid in connection with the merger from existing
cash on hand of $142 million, borrowings under our revolving credit facility of
$100 million and an expansion of our senior credit facility of $100 million. As
a result, we will have significantly less working capital to meet our needs in
the future. In addition, we may be required, or may elect, to obtain financing
on terms different than currently anticipated.
As of June 30, 2002, after giving effect to the anticipated additional
borrowings under our senior secured credit facility to finance the merger and
the issuance of our common stock as a result of the merger, we would have had
(1) consolidated total debt of approximately $888 million, and (2) total debt
expressed as a percentage of total capitalization of approximately 48.6%.
We may further increase our leverage in the future. Our increased
leverage could have important consequences. For example, it could:
o require us to dedicate a substantial portion of our cash flow
from operations and other capital resources to debt service,
thereby reducing our ability to fund working capital, capital
expenditures and other cash requirements;
o limit our flexibility in planning for, or reacting to, changes
and opportunities in the healthcare industry that may place us
at a competitive disadvantage compared to our competitors with
less indebtedness or lower fixed-costs;
o limit our ability to incur additional debt on commercially
reasonable terms, if at all; and
o increase our vulnerability to adverse economic and industry
conditions.
Subject to the terms of our debt, we may be able to incur additional
debt in the future. If we incur additional debt, however, the related risks that
it now faces could increase. In this regard, we may make acquisitions in the
future financed through the incurrence of additional debt.
If we fail to generate significant cash flow to service our debt, we may have to
refinance all or a portion of our debt to obtain additional financing.
Our ability to make payments on our existing and future debt and to pay
our expenses will depend on our ability to generate cash in the future. Our
ability to generate cash is subject to various risks and uncertainties,
including those disclosed in this section and prevailing economic, regulatory
and other conditions beyond our control. Based on our current level of
operations, we believe that our cash flow from operations and other capital
resources will be sufficient to meet our liquidity needs for the foreseeable
future. However, we cannot assure you that these capital resources will be
sufficient to enable us to repay our debt and to pay our expenses. If we do not
have enough cash to make these payments, we may be required to refinance all or
part of our debt, sell assets, curtail discretionary capital expenditures or
borrow more money. We cannot assure you that we will be able to do these things
on commercially reasonable terms, if at all. In addition, the terms of our
existing or future debt agreements may restrict us from pursuing any of these
alternatives.
11
The agreements governing our existing debt and preferred stock contain, and the
agreements and instruments governing our future debt may contain, various
covenants that limit our discretion in the operation of our business.
The agreements and instruments governing our existing debt contain, and
the agreements and instruments governing our future debt may contain, various
restrictive covenants that, among other things, require us to comply with or
maintain certain financial tests and ratios and restrict its ability to:
o incur more debt;
o pay dividends, redeem stock or make other distributions;
o make certain investments;
o create liens;
o enter into transactions with affiliates;
o merge or consolidate; and
o transfer or sell assets.
Our ability to comply with these covenants is subject to various risks
and uncertainties. In addition, events beyond our control could affect our
ability to comply with and maintain the financial tests and ratios. Any failure
by us to comply with and maintain all applicable financial tests and ratios and
to comply with all applicable covenants could result in an event of default with
respect to, and the acceleration of the maturity of, and the termination of the
commitments to make further extension of credit under a substantial portion of
our debt. If we were unable to repay debt to our senior lenders, these lenders
could proceed against the collateral securing that debt. Even if we are able to
comply with all applicable covenants, the restrictions on our ability to operate
our business in our sole discretion could harm our business by, among other
things, limiting our ability to take advantage of financings, mergers,
acquisitions and other corporate opportunities.
The terms of our outstanding preferred stock also contain restrictions
on our ability to complete certain types of transactions without the consent of
the holders of our preferred stock.
A significant portion of our business is concentrated in certain markets and the
recent economic downturn or changes in the laws affecting our business in those
markets could have a material adverse effect on our operating results.
We receive approximately 57% of our revenue from operations in
Pennsylvania, New Jersey, Massachusetts and Maryland. The economic condition of
these markets could affect the ability of our customers and third-party payors
to reimburse us for our services through a reduction of disposable household
income or the ultimate reduction of the tax base used to generate state funding
of their respective Medicaid programs. An economic downturn, or changes in the
laws affecting our business in these markets and in surrounding markets, could
have a material adverse effect on our financial position, results of operations
and cash flows.
Our NeighborCare(R) pharmacy operations derive a significant portion of its
revenue from customers pursuant to contracts that expire in April 2003.
Our NeighborCare pharmacy operations provide services to 58 centers
operated by Mariner Post-Acute Network, Inc., referred to as "Mariner," which
represent four percent and two percent of net revenues of NeighborCare and us,
respectively. On January 18, 2000, Mariner filed voluntary petitions under
Chapter 11 with the Bankruptcy Court, giving Mariner certain rights under the
protection of the Bankruptcy Court to reject the service contracts for those
centers.
12
Effective November 1, 2001, the Mariner Bankruptcy Court approved a
settlement agreement between NeighborCare and Mariner relating to these Mariner
service contracts, whereby, among other things:
o the form of the contracts was restated and new pricing was
implemented; and
o the term of the contracts was extended for eighteen months
through April 30, 2003, except that Mariner has the right to
terminate a limited number of service contracts in the event
of the disposition or closure of the subject facility.
There can be no assurance that these services will continue to be
provided after the contracts' current terms expire.
Our NeighborCare(R) pharmacy operations purchase a significant portion of its
product from one supplier.
Our NeighborCare pharmacy operations obtain approximately 90% of its
product from one supplier pursuant to contracts that are terminable by either
party on 90 days' notice. If these contracts are terminated, there can be no
assurance that NeighborCare's operations would not be disrupted or that we could
obtain the products at similar cost.
We may make additional acquisitions that could subject us to a number of
operating risks.
We anticipate that we may continue to make acquisitions of, investments
in and strategic alliances with complementary businesses to enable us to add
services for our core customer base and for adjacent markets, and to expand each
of our businesses geographically. However, implementation of this strategy
entails a number of risks, including:
o inaccurate assessment of undisclosed liabilities;
o entry into markets in which we may have limited or no
experience;
o diversion of management's attention from our core business;
o difficulties in assimilating the operations of an acquired
business or in realizing projected efficiencies and cost
savings;
o increase in our indebtedness and a limitation in our ability
to access additional capital when needed; and
o obtaining anticipated revenue synergies or cost reductions are
also a risk in many acquisitions.
Certain changes may be necessary to integrate the acquired businesses
into our operations to assimilate many new employees and to implement reporting,
monitoring, compliance and forecasting procedures.
13
We are exploring strategic business alternatives, including the sale or spinoff
of our ElderCare business.
On October 2, 2002, we announced that we have retained UBS Warburg LLC
and Goldman Sachs & Co. to assist us in exploring various strategic business
alternatives, including, but not limited to, the potential sale or spinoff of
our ElderCare networks of skilled nursing and assisted living centers. There can
be no assurance that we will successfully complete any potential sale or spinoff
of the ElderCare business or that any such transaction, if completed, will
increase shareholder value.
Financial information related to our post-emergence operations is limited, and,
therefore, it is difficult to compare post-emergence financial information with
that of prior periods.
Since we emerged from bankruptcy on October 2, 2001, there is limited
operating and financial data available from which to analyze our operating
results and cash flows. As a result of fresh-start reporting, it is difficult to
compare information reflecting our results of operations and financial condition
after our emergence from bankruptcy to the results of prior periods.
Shareholders of our common stock may face a lack of liquidity, and the market
price of our common stock may be volatile.
There is limited trading activity in our common stock. Our common stock
traded on the OTC Bulletin Board from October 15, 2001 to February 7, 2002,
under the symbol "GHVE." Our common stock has been trading on the Nasdaq
National Market since February 8, 2002 under the symbol "GHVI." From February 8,
2002 until October 31, 2002, there were only 37 trading days in which the
trading exceeded 200,000. Therefore, it may be difficult for NCS stockholders to
sell our common stock received in the merger promptly without adversely
affecting the market price of our common stock.
The market price of our common stock could fluctuate for many reasons,
including in response to the risk factors listed in this prospectus or for
reasons unrelated to our performance.
We do not expect to pay dividends on our common stock.
We are restricted on our ability to pay dividends under our senior
credit facility and senior secured note. We do not anticipate paying cash
dividends on our common stock for the foreseeable future.
Provisions in Pennsylvania law and our corporate charter documents could delay
or prevent a change in control.
As a Pennsylvania corporation, we are governed by the Pennsylvania
Business Corporation Law of 1988, as amended, referred to as "Pennsylvania
corporation law." Pennsylvania corporation law provides that the board of
directors of a corporation in discharging its duties, including its response to
a potential merger or takeover, may consider the effect of any action upon
employees, shareholders, suppliers, customers and creditors of the corporation
as well as upon, communities in which offices or other establishments of the
corporation are located and all other pertinent factors. In addition, under
Pennsylvania corporation law, subject to certain exceptions, a business
combination between us and a beneficial owner of more than 20% of our stock may
be accomplished only if certain conditions are met.
Our articles of incorporation contain certain provisions that may
affect a person's decision to implement a takeover of us, including the
following provisions:
o a classified board of directors beginning at the first
shareholder meeting for the election of directors after
October 2, 2002, with each director having a three-year term;
o a provision providing that certain business combinations
involving us, unless approved by at least 75% of the board of
directors, will require the affirmative vote of at least 80%
of our voting stock;
o a provision permitting the board of directors to oppose a
tender or other offer for our constituents and to consider any
pertinent issue in connection with such offer including, but
not limited to, the reputation of the offeror, the value of
the offered securities and any applicable legal or regulatory
issues raised by the offer; and
o the authority to issue preferred stock with rights to be
designated by the board of directors.
14
The overall effect of the foregoing provisions may be to deter a future
tender offer or other offers to acquire us or our shares. Shareholders might
view such an offer to be in their best interest if the offer includes a
substantial premium over the market price of the common stock at that time. In
addition, these provisions may assist our management in retaining its position
and place it in a better position to resist changes that the shareholders may
want to make if dissatisfied with the conduct of our business.
The forward-looking statements contained in this prospectus are based on our
predictions of future performance. As a result, you should not place undue
reliance on these forward-looking statements.
This prospectus, any prospectus supplement or information incorporated
by reference contains or will contain certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 including, in particular, the statements
about our plans, strategies and prospects. Although we believe that our plans,
intentions and expectations reflected in such forward-looking statements are
reasonable, we cannot assure you that such plans, intentions or expectations
will be achieved. Important factors that could cause actual results to differ
materially from our forward-looking statements are set forth above in this "Risk
Factors" section. All forward-looking statements attributable to us or persons
acting on our behalf are expressly qualified in their entirety by the cautionary
statements.
15
Our Company
General
We are a leading provider of healthcare and support services to the
elderly. Our operations are comprised of two primary business segments: pharmacy
services and inpatient care in skilled nursing and assisted living centers. In
addition, we capitalize on our industry leadership position in these businesses
by offering an array of other complementary healthcare services.
Service-Related Businesses
Pharmacy Services
Our NeighborCare(R) integrated pharmacy business is the third largest
institutional pharmacy in the United States with over $1.1 billion of annual
revenue. We have 64 institutional pharmacies, of which eight are jointly owned,
that service approximately 250,000 beds in long-term care settings in 41 states.
Our institutional pharmacy business provides prescription and
non-prescription pharmaceuticals, infusion therapy, and medical supplies and
equipment to the elderly, chronically ill and disabled in long-term care and
alternate sites, including skilled nursing facilities, assisted living
facilities, residential and independent living communities. Approximately 91% of
NeighborCare revenues are generated from sales to independent healthcare
providers. The pharmacy services provided in these settings are tailored to meet
the needs of the institutional customer. These services include highly
specialized packaging and dispensing systems, computerized medical records
processing and 24-hour emergency services. We also provide pharmacy consulting
services to assure proper and effective drug therapy.
Our professional pharmacies are retail operations located in or near
medical centers, hospitals and physician office complexes and provide
prescription and over-the-counter medications and certain medical supplies as
well as personal service and consultation by licensed registered pharmacists.
Other Service-Related Businesses
We also provide rehabilitation therapy services, management and
consulting services, hospitality services, group purchasing services,
respiratory health services, physician services, diagnostic services, staffing
services and other healthcare related services.
Rehabilitation Therapy. We provide an extensive range of rehabilitation
therapy services, including speech pathology, physical therapy and occupational
therapy, through 14 certified rehabilitation agencies in all five of our
regional market concentrations. These services are provided by approximately
3,400 licensed rehabilitation therapists and assistants employed or contracted
by us to substantially all of the eldercare centers we operate, as well as by
contract to healthcare facilities operated by others.
Management Services. We provide management services to 70 eldercare
centers with approximately 7,200 beds pursuant to management agreements that
provide generally for the day-to-day responsibility for the operation and
management of the centers. In turn, we receive management fees, depending on the
agreement, computed as either an overall fixed fee, a fixed fee per customer, a
percentage of net revenues of the center plus an incentive fee, or a percentage
of gross revenues of the center with some incentive clauses. The various
management agreements, including renewal option periods, are scheduled to
terminate between 2002 and 2011.
16
Tidewater Group Purchasing. We own and operate The Tidewater Healthcare
Shared Services Group, Inc., also referred to as "Tidewater," one of the largest
long-term care group purchasing companies in the country. We have negotiated
contracts with 54 national vendors, 92 regional vendors and 107 manufacturers.
Tidewater provides purchasing and shared service programs specially designed to
meet the needs of eldercare centers and other long-term care facilities.
Tidewater's services are contracted to approximately 4,000 members with over
390,000 beds in 46 states and the District of Columbia.
Other Services. We employ or have consulting arrangements with over 80
physicians, physician assistants and nurse practitioners who are primarily
involved in designing and administering clinical programs and directing patient
care. We also provide an array of other specialty medical services in certain
parts of our eldercare network, including portable x-ray and other diagnostic
services; home healthcare services; consulting services; respiratory health
services, and hospitality services such as dietary, housekeeping, laundry, plant
operations and facilities management services.
Our service-related businesses, which are comprised of pharmacy and
medical supplies services and other service-related businesses, generate
approximately 48% of our revenues.
Inpatient Care
We are a leading regional provider of inpatient care through our
Genesis ElderCare(R) networks of skilled nursing and assisted living centers
primarily located in the eastern United States. The networks include 189
eldercare centers with approximately 24,000 beds concentrated in five regional
markets in order to achieve operating efficiencies, economies of scale and
significant market share. The five regional markets are the following: New
England Region (Massachusetts / Connecticut / New Hampshire / Vermont / Rhode
Island); Midatlantic Region (Greater Philadelphia / Delaware Valley / New
Jersey); Chesapeake Region (Southern Delaware / Eastern Shore of Maryland /
Baltimore, Maryland / Washington, D.C. / Virginia); Southern Region (Central
Florida); and Allegheny / Midwest Region (West Virginia / Western Pennsylvania /
Illinois / Wisconsin). We have established and actively market programs for
elderly and other customers who are medically complex and require higher levels
of post-acute care. These programs include intravenous therapy, post-surgical
recovery, respiratory management, orthopedic or neurological rehabilitation,
terminal care and various forms of coma, pain and wound management. Private
insurance companies and other third party payors, including certain state
Medicaid programs, have recognized that treating customers requiring medical
care in centers such as those we operate is a cost-effective alternative to
treatment in an acute care hospital. We have achieved consistently high
occupancy and Medicare census by integrating the talents of employed physicians,
a central intake function, case management and comprehensive discharge planning
in coordination with key referring hospitals. We believe that our approach
provides cost-effective care management to achieve superior customer outcomes.
Our skilled nursing centers offer three levels of care for their
customers: skilled, intermediate and personal. Skilled care provides 24-hour per
day professional services of a registered nurse; intermediate care provides less
intensive nursing care; and personal care provides for the needs of customers
requiring minimal supervision and assistance. Each eldercare center is
supervised by a licensed healthcare administrator and engages the services of a
medical director to supervise the delivery of healthcare services to residents
and a director of nursing to supervise the nursing staff. We maintain a
corporate quality assurance program to monitor regulatory compliance and to
enhance the standard of care provided in each center.
17
Recent Developments
On August 15, 2002, we announced that we and Manor Care, Inc. have
agreed to withdraw all outstanding legal actions against each other stemming
from the acquisition by our subsidiary, NeighborCare(R), of Manor Care's
pharmacy subsidiary, Vitalink. Both companies have also agreed to withdraw the
prior pharmacy service agreement and have entered into a new pharmacy service
agreement. The new agreement will run through January 2006 and covers
approximately 200 of Manor Care's facilities. The new agreement replaces the
current agreement between the two companies that was set to expire in 2004.
The pricing of the new agreement has been reduced by approximately $8.5
million annually based upon current sales volumes. The agreement is retroactive
to June 1, 2002. We believe that the revenue reduction resulting from the new
agreement will be offset by cost reductions relating to some of our previously
announced strategic objectives.
On October 2, 2002, we announced that we have retained UBS Warburg LLC
and Goldman Sachs & Co. to assist in exploring certain strategic business
alternatives, including, but not limited to, the potential sale of spin-off of
our ElderCare assets.
We were incorporated in May 1985 as a Pennsylvania corporation. Our
principal executive offices are located at 101 East State Street, Kennett
Square, Pennsylvania 19348 and our telephone number is (610) 444-6350.
The Plan
The common stock is offered by this prospectus for the account of the
rabbi trust to fund our obligations under the deferred compensation plan. We
authorized the issuance of up to 750,000 shares of our common stock to be
contributed to the rabbi trust from time to time. The deferred compensation
plan, which was originally established in April 2001, was amended and restated
in October 2001, to allow all highly compensated employees, as defined in the
Internal Revenue Code of 1986, as amended, to participate in the deferred
compensation plan. We currently administer the deferred compensation plan. The
rabbi trust was formed on October 1, 2001, to allow us to fund our obligations
under the deferred compensation plan.
Use of Proceeds
We will not directly receive the proceeds from the sale of our common
stock offered pursuant to this prospectus. The proceeds will be used to fund our
obligations under the deferred compensation plan.
Plan of Distribution
The common stock may be sold pursuant to the methods described below
from time to time by or for the account of the rabbi trust on the Nasdaq
National Market or otherwise in one or more transactions at a fixed price or
prices, which may be changed, at market prices prevailing at the time of sale,
at prices related to the prevailing market prices or at prices determined on a
negotiated or competitive bid basis. The common stock may be sold by any one or
more of the following methods: (a) a block trade (which may involve crosses) in
which the broker or dealer so engaged will attempt to sell the securities as
agent but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as principal;
(c) ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and (d) privately negotiated transactions. The trustee may
effect transactions by selling the common stock through broker-dealers, and such
broker-dealers may receive compensation in the form of commissions from the
trustee (which commissions will not exceed those customary in the types of
transactions involved). The trustee and any broker-dealers that participate in
the distribution of the common stock may be deemed to be "underwriters" within
the meaning of the Securities Act in connection with such sales, and any profit
on the sale of the common stock by it and any fees and commissions received by
the broker-dealers may be deemed to be underwriting discounts and commissions.
18
At the time a particular offering of common stock is made pursuant to
this prospectus, to the extent required by law, a prospectus supplement will be
distributed that will set forth the amount of common stock being offered and the
terms of the offering, including the purchase price, the name or names of any
dealers or agents, the purchase price paid for the common stock purchased from
the rabbi trust and any items constituting compensation from the rabbi trust.
We will indemnify the trustee against any and all claims, loss, damage,
expense or liability arising from any action or failure to act in connection
with the administration of the deferred compensation plan, except when due to
gross negligence or willful misconduct.
We will not directly receive any portion of the proceeds of the sale of
the common stock offered by this prospectus and will bear all expenses in
connection with the registration and qualification of the common stock. The
proceeds will, however, be used to fund our obligations under the deferred
compensation plan.
Where You Can Find More Information
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements
and other information we file with the SEC at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C., 20549. You may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Our SEC filings are also available on the SEC's Internet site as part of the
EDGAR database (http://www.sec.gov).
We have filed a registration statement on Form S-3 to register the
common stock. This prospectus is a part of the registration statement on Form
S-3. As allowed by SEC rules, this prospectus does not contain all the
information you can find in the registration statement on Form S-3 or the
exhibits to the registration statement on Form S-3.
The SEC also allows us to "incorporate by reference" the information we
file with the SEC, which means we can disclose information to you by referring
you to another document filed separately with the SEC. Information incorporated
by reference is deemed to be part of this prospectus. Later information filed by
us with the SEC updates and supersedes this prospectus.
The following documents previously filed by us with the SEC are
incorporated in this prospectus by this reference:
o Annual Report on Form 10-K for the year ended September 30,
2001;
o Quarterly Report on Form 10-Q for the quarter ended December
31, 2001;
o Quarterly Report on Form 10-Q for the quarter ended March 30,
2002;
o Quarterly Report on Form 10-Q for the quarter ended June 30,
2002;
o Current Report on Form 8-K filed on July 1, 2002;
19
o Current Report on Form 8-K filed on July 29, 2002;
o Current Report on Form 8-K filed on August 16, 2002;
o Current Report on Form 8-K filed on October 4, 2002; and
o the description of our common stock, par value $0.02 per
share, contained in our Form 8-A, File No. 000-33217, filed on
October 2, 2001 pursuant to Section 12(g) of the Securities
Exchange Act of 1934, and all amendments or reports filed for
the purpose of updating the description.
All documents filed by us under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this prospectus and until we sell all
of the securities covered by this prospectus (other than current reports
furnished under Item 9 of Form 8-K) will be deemed to be incorporated by
reference in this prospectus and to be a part of this prospectus from the date
any document is filed.
You may request a copy of these documents at no cost, excluding any
exhibits to those documents, unless the exhibit is specifically incorporated by
reference as an exhibit in this prospectus. You can obtain documents
incorporated by reference in this prospectus by requesting them in writing or by
telephone from us at the following address/telephone number:
Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, PA 19348
Attn: Investor Relations
Telephone: (610) 444-6350
You should rely only on the information provided in or incorporated by
reference (and not later changed) in this prospectus or any prospectus
supplement. We have not authorized anyone else to provide you with additional or
different information. We are not making an offer of any securities in any state
where the offer is not permitted. You should not assume that the information in
this prospectus or any prospectus supplement is accurate as of any date other
than the date on the front of those documents.
Legal Matters
Matters relating to the validity of the securities will be passed upon
for us by Blank Rome Comisky & McCauley LLP, Philadelphia, PA.
Experts
The consolidated financial statements and schedule of Genesis and
subsidiaries as of September 30, 2001 and 2000, and for each of the years in the
three-year period ended September 30, 2001, have been incorporated by reference
herein in reliance upon the reports of KPMG LLP, independent accountants, also
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The audit report covering the September 30, 2001 consolidated financial
statements contains an explanatory paragraph that states that, on October 2,
2001, Genesis completed a Joint Plan of Reorganization, referred to as the
"Plan," which had been confirmed by the United States Bankruptcy Court. The Plan
resulted in change in ownership of the Predecessor Company and accordingly,
effective September 30, 2001 Genesis accounted for the change in ownership
through "fresh-start" reporting. As a result, the consolidated information prior
to September 30, 2001 is presented on a different cost basis than that as of
September 30, 2001 and, therefore, is not comparable. The audit report also
refers to a change in accounting for the costs of start-up activities effective
October 1, 1999.
Future audited financial statements incorporated in this prospectus by
reference to future filings under the Exchange Act, as provided under "Where You
Can Find More Information," will be so incorporated in reliance on the related
report or reports of the firm of independent accountants auditing those
financial statements, given on the authority of the firm, if and to the extent
the filings include the consent of the firm to the incorporation of the report
or reports herein.
20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with the issuance and distribution
of the Securities covered by this Registration Statement, are as follows:
Securities and Exchange Commission registration fee (actual)..................... $ 1,334
Printing fees and expenses....................................................... 2,000
Legal fees and expenses.......................................................... 15,000
Accounting fees and expenses..................................................... 2,000
Blue Sky fees and expenses....................................................... -
Nasdaq National Market listing fees.............................................. -
Other .......................................................................... 5,000
-------
Total....................................................................... $25,306
=======
Item 15. Indemnification of Directors and Officers.
As permitted by Pennsylvania corporation law, Genesis' bylaws provide
that a director will not be personally liable for monetary damages for any
action taken, or any failure to take any action, unless the director breaches or
fails to perform the duties of his or her office under Pennsylvania corporation
law, and the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness. These provisions of Genesis' bylaws, however, do not
apply to the responsibility or liability of a director pursuant to any criminal
statute, or to the liability of a director for the payment of taxes pursuant to
local, Pennsylvania or federal law.
Genesis' bylaws provide that Genesis must indemnify its directors and
officers to the fullest extent permitted by law against expenses reasonably
incurred by them in connection with any threatened, pending or completed action,
suit or proceeding to which they are or were a party, or are threatened to be
made a party, by reason of being or having been a director or officer of
Genesis, or serving or having served any other business enterprise or trust as a
director, officer, employee, general partner, agent or fiduciary at Genesis'
request. Genesis' bylaws also permit Genesis to indemnify any person in any
situation not covered by Genesis' bylaws to the extent permitted by applicable
law. However, under Genesis' bylaws, no indemnification will be provided to any
of Genesis' directors or officers (i) for liabilities arising under Section
16(b) of the Exchange Act; (ii) if a final unappealable judgment or award
establishes that such director or officer engaged in self-dealing, willful
misconduct or recklessness; (iii) for expenses or liabilities which have been
paid directly to such person by an insurance carrier and (iv) for amounts paid
in settlement of any action, suit, or proceeding without the written consent of
Genesis.
Sections 1741 through 1750 of Subchapter 17D of Pennsylvania
corporation law contain provisions for mandatory and discretionary
indemnification of a representative of the corporation, including, but not
limited to, its directors and officers. Under Section 1741, subject to certain
limitations, a corporation has the power to indemnify directors and officers
under certain prescribed circumstances against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with an action or proceeding, whether civil, criminal,
administrative or investigative (excluding derivative actions) to which any of
them is a party by reason of his or her being a representative of the
corporation or serving at the request of the corporation as a representative of
another corporation, partnership, joint venture, trust or other enterprise, if
he or she acted in good faith and in a manner he or she reasonably believed to
be in, or not opposed to, the best interests of the corporation and, with
respect to any criminal proceeding, had no reasonable cause to believe his or
her conduct was unlawful.
II-1
Section 1742 provides for indemnification in derivative actions except
in respect of any claim, issue or matter as to which an officer or director has
been adjudged to be liable to the corporation unless and only to the extent that
the proper court determines upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the person is fairly
and reasonably entitled to indemnity for the expenses that the court deems
proper.
Under Section 1743, indemnification is mandatory to the extent that an
officer or director has been successful on the merits or otherwise in defense of
any action or proceeding referred to in Section 1741 or 1742 above if the
appropriate standards of conduct are met.
Section 1744 provides that, unless ordered by a court, any
indemnification under Section 1741 or 1742 will be made by the corporation only
as authorized in the specific case upon a determination that an officer or
director met the applicable standard of conduct set forth in those sections, and
such determination will be made by (i) the board of directors by a majority vote
of a quorum of directors not parties to the action or proceeding; (ii) if a
quorum is not obtainable, or if obtainable and a majority of disinterested
directors so directs, by independent legal counsel; or (iii) by the
shareholders.
Section 1745 provides that expenses incurred by an officer or director
in defending any action or proceeding referred to in Subchapter 17D of
Pennsylvania corporation law may be paid by a corporation in advance of the
final disposition of such action or proceeding upon receipt of an undertaking by
or on behalf of such person to repay such amount if it is ultimately determined
that he or she is not entitled to be indemnified by the corporation.
Section 1746 provides generally that, except in any case where the act
or failure to act giving rise to the claim for indemnification is determined by
a court to have constituted willful misconduct or recklessness, the
indemnification and advancement of expenses provided by Subchapter 17D of
Pennsylvania corporation law will not be deemed exclusive of any other rights to
which a person seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding that office.
Section 1747 grants to a corporation the power to purchase and maintain
insurance on behalf of its directors and officers against any liability incurred
by them in their capacity as such directors or officers, whether or not the
corporation would have the power to indemnify such person against that liability
under the provisions of Subchapter 17D of Pennsylvania corporation law.
Sections 1748 and 1749 extend the indemnification and advancement of
expenses provisions of Subchapter 17D to successor corporations in fundamental
changes and to representatives serving as fiduciaries of employee benefit plans.
Section 1750 provides that the indemnification and advancement of
expenses provided by, or granted pursuant to, Subchapter 17D will, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be an officer or director of the corporation and will inure to the
benefit of the heirs and personal representative of such person.
Genesis provides insurance coverage to its directors and officers for
up to $50.0 million.
II-2
Item 16. Exhibits.
Exhibit No. Description
---------- -----------
2.1(1) Agreement and Plan of Merger, dated as of July 28, 2002, by and
among Genesis Health Ventures, Inc., Geneva Sub, Inc. and NCS
HealthCare, Inc.
4.1(2) Amended and Restated Articles of Incorporation of Genesis
Health Ventures, Inc.
4.2(3) Amended and Restated Bylaws, as amended, of Genesis Health
Ventures, Inc.
4.3(4) Specimen of Common Stock Certificate of Genesis Health
Ventures, Inc.
5.1 Opinion of Blank Rome Comisky & McCauley LLP.
23.1 Consent of KPMG LLP.
23.2 Consent of Blank Rome Comisky McCauley LLP (included in
Exhibit 5.1).
24.1 Power of Attorney (included on the signature page to this
registration statement).
--------------------
(1) Incorporated by reference to Genesis' Current Report on Form 8-K filed
on July 29, 2002.
(2) Incorporated by reference to Genesis' Annual Report on Form 10-K for
the fiscal year ended September 30, 2001.
(3) Incorporated by reference to Genesis' Quarterly Report on Form 10-Q for
the quarter ended December 31, 2001.
(4) Incorporated by reference to Genesis' Form 8-A filed on October 2,
2001.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
II-3
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions set forth in Item 15 hereof, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission ("Commission") such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person in connection with the securities being registered
and the Commission remains of the same opinion, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Genesis
Health Ventures, Inc. certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Kennett Square, Pennsylvania on October 31, 2002.
GENESIS HEALTH VENTURES, INC.
By: /s/George V. Hager, Jr.
----------------------------
George V. Hager, Jr.
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on October 28,
2002 in the capacities and on the date indicated. Each person below hereby
constitutes and appoints each of Robert H. Fish or George V. Hager, Jr., his
true and lawful attorney and agent, to do any and all acts and execute any and
all instruments for him and in his name in the capacity indicated below, which
said attorneys and agents, or any of them, may deem necessary or advisable to
enable Genesis Health Ventures, Inc. to comply with the Securities Act of 1933,
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign amendments
(including post effective amendments) and any related Registration Statement, or
amendment thereto, filed pursuant to Rule 462(b) promulgated under the
Securities Act of 1933.
Signature Title(s) Date
------------------------------- -------------------------------------------- ----------------
/s/Robert H. Fish Director and Interim Chief Executive Officer October 31, 2002
------------------------------- (Principal Executive Officer)
Robert H. Fish
Chairman of the Board October __, 2002
-------------------------------
Michael R. Walker
/s/George V. Hager, Jr. Executive Vice President and Chief Financial October 31, 2002
------------------------------- Officer (Principal Financial and Accounting
George V. Hager, Jr. Officer)
/s/James H. Bloem Director October 31, 2002
-------------------------------
James H. Bloem
Director October __, 2002
-------------------------------
James E. Dalton, Jr.
/s/James D. Dondero Director October 31, 2002
-------------------------------
James D. Dondero
/s/Dr. Philip P. Gerbino Director October 31, 2002
-------------------------------
Dr. Philip P. Gerbino
/s/Joseph A. LaNasa Director October 31, 2002
-------------------------------
Joseph A. LaNasa, III
EXHIBIT INDEX
Exhibit No. Description
---------- -----------
2.1(1) Agreement and Plan of Merger, dated as of July 28, 2002, by
and among Genesis Health Ventures, Inc., Geneva Sub, Inc.
and NCS HealthCare, Inc.
4.1(2) Amended and Restated Articles of Incorporation of Genesis
Health Ventures, Inc.
4.2(3) Amended and Restated Bylaws, as amended, of Genesis Health
Ventures, Inc.
4.3(4) Specimen of Common Stock Certificate of Genesis Health
Ventures, Inc.
5.1 Opinion of Blank Rome Comisky & McCauley LLP
23.1 Consent of KPMG LLP
23.2 Consent of Blank Rome Comisky McCauley LLP (included in
Exhibit 5.1).
24.1 Power of Attorney (included on the signature page to this
registration statement).
--------------------
(1) Incorporated by reference to Genesis' Current Report on Form 8-K filed
on July 29, 2002.
(2) Incorporated by reference to Genesis' Annual Report on Form 10-K for
the fiscal year ended September 30, 2001.
(3) Incorporated by reference to Genesis' Quarterly Report on Form 10-Q for
the quarter ended December 31, 2001.
(4) Incorporated by reference to Genesis' Form 8-A filed on October 2,
2001.