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GENESIS HEALTHCARE ANNOUNCES DELAY IN FORM 10-Q FILING
5/15/2006Kennett Square, PA -- 05/15/2006--
Genesis HealthCare Corporation (GHC or the Company) (NASDAQ:GHCI) announced today that it will delay the filing of its Form 10-Q for the quarter ended March 31, 2006 in order to reflect the consolidation of certain joint-venture arrangements in which it has an ownership interest and provides management services. This accounting treatment is in accordance with Financial Accounting Standards Board Interpretation No. 46 (R), “Consolidation of Variable Interest Entities” (FIN 46R).
On April 27, 2006, the Company announced that it would restate its historical consolidated financial statements for the fiscal years ended September 30, 2003, 2004 and 2005 to properly account for insurance losses on an undiscounted basis and to correct previously disclosed errors.
In connection with the Company’s restatement, an in-depth review was conducted which identified the consolidation issues under FIN 46R. In this regard, the Company was recently advised by KPMG LLP, the Company’s independent registered public accounting firm, that the Company’s interpretation of FIN 46R was not in accordance with generally accepted accounting principles. Upon re-examination of the joint-venture arrangements, the Company concluded that certain joint-ventures should be consolidated and has resolved to restate its previously issued consolidated financial statements to consolidate the financial statements of these entities while addressing the matters previously announced. Though the structures of these joint-ventures are virtually unchanged since the date of the Company’s spin-off and the prevailing accounting literature became effective for GHC January 1, 2003, the Company became aware of this matter in a time frame which did not permit for the timely filing of its Form 10-Q.
“The overall impact of consolidating these entities, for which GHC does not have a controlling voting interest, does not in any significant manner impact the financial condition, liquidity or underlying profitability of GHC. Furthermore, the consolidation of these entities has no impact on our previously provided earnings per share guidance,” stated Genesis Chief Financial Officer James V. McKeon. The Company expects that five entities, having approximately 300 skilled nursing facility beds and 300 assisted living units, will be consolidated. The following tables illustrate the estimated combined financial results and position of the entities subject to consolidation under FIN 46R:
Estimated Financial Impact to GHC from Entities Subject to Consolidation Table
It should be noted that the debt of these entities is non-recourse to GHC and the primary obligor, in all instances, is the respective joint-venture entity.
The impact of consolidating these entities is not significant to GHC as demonstrated by the following table, which reflects GHC’s previously announced results through March 31, 2006 compared to the estimated results for the same periods assuming consolidation of the subject entities under FIN 46R:
GHC is working diligently to consolidate the entities with its wholly-owned subsidiaries in order to file its Form 10-Q for the quarter ended March 31, 2006 within the next two weeks and to amend and restate its Form 10-K for the year ended September 30, 2005 as soon as possible.
About Genesis HealthCare Corporation
GHC is one of the nation's largest long-term care providers with over 200 skilled nursing centers and assisted living residences in 12 eastern states. GHC also supplies contract rehabilitation therapy to over 650 healthcare providers in 18 states and the District of Columbia.
Visit the Genesis website at www.genesishcc.com.
Statements made in this release, our website and in our other public filings and releases, which are not historical facts contain “forward-looking” statements (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties and are subject to change at any time. These forward-looking statements may include, but are not limited to, statements containing words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may,” “target,” “appears” and similar expressions. Such forward looking statements include, without limitation the closure or timing of proposed transactions, expected reimbursement rates, including RUGs changes, our net operating loss carryforwards, our 2006 effective tax rate, agency labor utilization, wage rates, debt repayments, share repurchases, provider tax assessments, changes in state Medicaid rates, our plans to improve the operating performance of our Rehabilitation services segment and progress to date, the extent and effectiveness of our facilities renovation program, levels of lease expense, interest expense, depreciation expense, capital spending, our anticipated results of operations for fiscal 2006 and the anticipated impact of the restatement of our historical financial statements. Factors that could cause actual results to differ materially include, but are not limited to, the following: changes in our estimates of the impact of the restatement, costs, changes in the reimbursement rates or methods of payment from Medicare or Medicaid, or the implementation of other measures to reduce reimbursement for our services; efforts of third party payors to control costs; the impact of federal and state regulations; changes in payor mix and payment methodologies; competition in our business; an increase in insurance costs and potential liability for losses not covered by, or in excess of, our insurance; competition for and availability of qualified staff in the healthcare industry; our ability to control operating costs, and generate sufficient cash flow to meet operational and financial requirements; and an economic downturn or changes in the laws affecting our business in those markets in which we operate. The forward-looking statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control. We caution investors that any forward-looking statements made by us are not guarantees of future performance. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.
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Reconciliation of Net Income to EBITDA Table