SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/A No. 1
AMENDMENT TO APPLICATION OR REPORT
Filed pursuant to Section 12, 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
FORUM GROUP, INC.
..........................
(Exact name of registrant as specified in charter)
The undersigned registrant hereby amends the following statements,
exhibits or other portions of its Quarterly Report on Forum 10-Q for the
quarterly period ended December 31, 1993 as set forth in the pages attached
hereto:
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Forum Group, Inc.
---------------------------------
Date: March 2, 1994 \s\ Paul A. Shively
--------------------- ---------------------------------
Paul A. Shively
Senior Vice President & Treasurer
(Chief Financial Officer)
<PAGE>
INDEX
FORUM GROUP, INC., AND SUBSIDIARIES
PAGE
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 3
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AS OF AND FOR THE THREE AND NINE MONTHS ENDING
December 31, 1993
Results Of Operations
- ---------------------
Forum Group operates (i) 10 retirement communities and one nursing home
owned directly by Forum Group, or wholly owned subsidiaries of Forum
Group, including one community owned by a nonprofit corporation
controlled by Forum Group (the "Owned Communities") , (ii) four
retirement communities owned by partnerships which are not wholly owned
by Forum Group but which are consolidated for financial reporting
purposes (the "Consolidated Partnership Communities"), (iii) 11
retirement communities owned by entities which are not consolidated for
financial reporting purposes (the "Unconsolidated Communities"),
including nine communities owned by FRP, one owned by GRP, and one owned
by RSARHC (which was consolidated for financial reporting purposes prior
to July 31, 1993) (see Note C to accompanying Condensed Consolidated
Financial Statements). The periods in which the financial results of the
consolidated components of Rancho San Antonio are included in the
financial statements of Forum Group are not comparable. Consequently,
Rancho San Antonio is presented separately below in order to present a
comparable disclosure of the other entities' financial results.
Certain summary financial information for the Owned Communities, Rancho
San Antonio, the Consolidated Partnership Communities, and other
corporate operations ("Corporate Operations") is presented below:
Nine Months Ended December 31, 1993
-----------------------------------
Consolidated
Owned Rancho Partnership Corporate
Communities San Antonio Communities Operations Totals
----------- ----------- ----------- ---------- ------
Net
Operating
Revenues $55,291 $ 4,106 $19,343 $ 880 $79,620
Operating
Expenses 38,542 4,009 12,027 2,872 57,450
General and
Administra-
tive Expense 0 0 (3) 2,473 2,470
Litigation
Expense 0 0 0 1,317 1,317
Depreciation 2,920 878 1,504 539 5,841
Interest
Expense 2,103 707 3,145 7,286 13,241
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Nine Months Ended December 31, 1992
-----------------------------------
Consolidated
Owned Rancho Partnership Corporate
Communities San Antonio Communities Operations Totals
----------- ----------- ----------- ---------- ------
Net
Operating
Revenues $45,586 $ 2,565 $17,067 $ 815 $66,033
Operating
Expenses 35,129 2,348 11,507 2,916 51,900
General and
Administra-
tive Expense 0 0 120 3,671 3,791
Litigation
Expense 0 0 0 0 0
Depreciation 2,844 2,186 1,481 87 6,598
Interest
Expense 1,865 1,637 3,339 6,867 13,708
Owned Communities. Net operating revenues for the three and nine months
ended December 31, 1993 increased by $3,318,000 (20%), from $16,240,000
to $19,558,000, and by $9,705,000 (21%), from $45,586,000 to $55,291,000,
respectively, as compared to the same periods of the previous year. A
change in the estimate of amounts reimbursable to third party payors from
prior years resulted in the recognition of $945,000 of operating revenue
in the nine month period ended December 31, 1993. The remaining portions
of the increases were primarily attributable to favorable changes in
occupancy, increased utilization of ancillary healthcare services and
increases in residency fees and charges. Combined occupancy increased
from 88% at December 31, 1992 to 93% at December 31, 1993. Operating
expenses, including general and administrative expenses and depreciation,
for the three and nine months ended December 31, 1993 at the Owned
Communities increased by $1,054,000 (8%), from $13,081,000 to
$14,135,000, and by $3,489,000 (9%), from $37,973,000 to $41,462,000,
respectively, as compared to the same periods of the previous year. The
remaining portions of the increases were primarily attributable to the
increase in occupancy, increased utilization of ancillary healthcare
services and normal inflationary increases. Net operating income,
comprised of operating revenue less operating expenses (including general
and administrative expenses and depreciation), for the three and nine
months ended December 31, 1993 at the Owned Communities increased by
$2,264,000, from $3,159,000 to $5,423,000, and by $6,216,000, from
$7,613,000 to $13,829,000, respectively, as compared to the same periods
of the previous year. Exclusive of the impact of the change in estimate
of reimbursable amounts discussed above, these increases constitute 68%
and 60%, respectively, of the increases in net operating revenues for the
three and nine month periods, which are indicative of the degree of
incremental operating income that results from increased occupancy.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Rancho San Antonio. Due to the change in financial statement
presentation discussed above in Note C to the Condensed Consolidated
Financial Statements, the financial results of Rancho San Antonio are not
comparable between fiscal periods. Therefore, no discussion of
comparative variances regarding the consolidated portions of Rancho San
Antonio is presented. Net operating revenues for the consolidated
components of Rancho San Antonio for the three and nine months ended
December 31, 1993 increased by $404,000, from $954,000 to $1,358,000, and
by $1,541,000, from $2,565,000 to $4,106,000, respectively, as compared
to the same periods of the previous year. Occupancy of the consolidated
components of Rancho San Antonio increased from 49% at December 31, 1992
to 91% at December 31, 1993. Operating expenses, including general and
administrative expenses and depreciation, for the consolidated components
of Rancho San Antonio for the three and nine month periods decreased by
$1,119,000, from $2,112,000 to $993,000, and increased by $353,000, from
$4,534,000 to $4,887,000, respectively, as compared to the same periods
of the previous year. Net operating income, comprised of operating
revenue less operating expenses (including general and administrative
expenses and depreciation), for the consolidated components of Rancho San
Antonio for the three month period ended December 31, 1993 increased by
$1,523,000, from a loss of $1,158,000 to income of $365,000, as compared
to the same period of the previous year. Net operating losses, comprised
of operating revenue and operating expenses (including general and
administrative expenses and depreciation), for the consolidated
components of Rancho San Antonio for the nine month period ended December
31, 1993 decreased by $1,188,000, from $1,969,000 to $781,000, as
compared to the same period of the previous year.
Consolidated Partnership Communities. Net operating revenues for the
three and nine months ended December 31, 1993 increased by $760,000
(13%), from $5,960,000 to $6,720,000, and by $2,276,000 (13%), from
$17,067,000 to $19,343,000, respectively, as compared to the same periods
of the previous year. A change in the estimate of amounts reimbursable
to third party payors from prior years resulted in the recognition of
$142,000 of operating revenue in September, 1993. The remaining portions
of the increases were primarily attributable to favorable changes in
occupancy, increased utilization of ancillary healthcare services, and
increases in residency fees and charges. Combined occupancy increased
from 86% at December 31, 1992 to 90% at December 31, 1993. Operating
expenses, including general and administrative expenses and depreciation,
for the Consolidated Partnership Communities for the three and nine
months ended December 31, 1993 increased by $74,000 (2%), from $4,433,000
to $4,507,000, and by $420,000 (3%), from $13,108,000 to $13,528,000,
respectively, as compared to the same periods of the previous year. The
remaining portions of the increases were primarily attributable to the
increase in occupancy, increased utilization of ancillary healthcare
services and to normal inflationary increases. Net Operating Income,
comprised of operating revenue less operating expenses (including general
and administrative expenses and depreciation), for the Consolidated
Partnership Communities for the three and nine months ended December 31,
1993 increased by $686,000, from $1,527,000 to $2,213,000, and by
$1,856,000, from $3,959,000 to $5,815,000, respectively, as compared to
the same periods of the previous year. Exclusive of the impact of the
change in estimate of reimbursable amounts discussed above, these
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
increases constitute 90% and 80% of the increases in net operating
revenues for the three and nine months ended December 31, 1993, which are
indicative of the degree of incremental profits that result from
increased occupancy.
Corporate Operations. Revenues for the three and nine months ended
December 31, 1993 decreased $72,000, from $291,000 to $219,000, and
increased $65,000, from $815,000 to $880,000, respectively, compared to
the same periods of the previous year. Revenues are comprised of
management fees from GRP and RSARHC, a change in the estimate of amounts
reimbursable to third party payors from prior years for sold operations,
and rental income from certain residential units of Rancho San Antonio.
Operating expenses, including general and administrative expenses and
depreciation, for the three and nine months ended December 31, 1993
increased by $140,000 and decreased by $790,000, respectively, as
compared to the same periods of the previous year. These changes reflect
reductions in the headquarters staff and certain allocations of revenues
and expenses related to Rancho San Antonio. Corporate Operations
includes the unallocated interest expense of corporate debt.
Unconsolidated Communities. Forum Group's equity in the earnings of FRP,
which is reflected as other revenues, improved from losses of $51,000 and
$515,000 for the three and nine months ended December 31, 1992,
respectively, to revenue of $582,000 and $638,000 for the three and nine
months ended December 31, 1993, respectively. These increases primarily
reflect improved occupancy at the nine retirement communities owned by
FRP and managed by Forum Group. In December, 1993 FRP completed the
refinancing of its long-term debt and, as a result, recognized an
extraordinary charge of $2,917,000 for early extinguishment of debt.
Forum Group's share of this charge is presented as an extraordinary
charge in the accompanying condensed consolidated statement of
operations. Forum Group's equity in the earnings of GRP, which
is also reported as other revenues, increased from $98,000 and $215,000
for the three and nine months ended December 31, 1992, respectively, to
$88,000 and $232,000 for the three and nine months ended December 31,
1993, respectively. Forum Group's equity in the losses of the
unconsolidated component of Rancho San Antonio for the three and nine
months ended December 31, 1993 was $511,000 and $785,000, respectively.
Consolidated General and Administrative Expenses. For the three and nine
months ended December 31, 1993, consolidated general and administrative
expenses decreased by $742,000, from $1,474,000 to $732,000, and by
$1,321,000, from $3,791,000 to $2,470,000, respectively, compared to the
comparable periods in fiscal 1993. These decreases are primarily
attributable to decreases in salaries and wages of $384,000 and $935,000,
respectively, due to reductions in the headquarters staff. Those
decreases were partially offset by increases, in the amounts of $328,000
and $513,000, respectively, in Forum Group's directors' fees relating to
periods prior to, and expenses related to, the FGI Recapitalization.
Litigation Expenses. During the three and nine months ended December 31,
1993, expenses of $55,000 and $1,317,000, respectively, were incurred in
conjunction with certain litigation related to the FGI Recapitalization.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Depreciation. For the three and nine months ended December 31, 1993,
consolidated depreciation expense decreased by $610,000 and by $757,000,
respectively, compared to the comparable periods in fiscal 1993. The
changes reflect the opening of the healthcare facility at Rancho San
Antonio, additional fixed asset additions over the past twelve months and
increases in other intangible assets.
Interest Expense. Interest expense attributable to the Owned Communities
and Corporate Operations increased by $196,000, from $3,021,000 to
$3,217,000, and by $657,000, from $8,732,000 to $9,389,000, during the
three and nine months ended December 31, 1993, respectively. These
changes are primarily attributable to changes in average borrowing costs.
Minority Interests. The decrease of $378,000 (28%) in the minority
interests' elimination for the nine months ended December 31, 1993
compared to the same period of the prior fiscal year, resulted from (i) a
decrease of $589,000 due to improved operating results, offset by (ii) an
increase of $211,000 due to an increase in minority ownership of RSARHC
(see Note B of the Notes to Condensed Consolidated Financial Statements).
Extraordinary Charge. During the three and nine months ended December
31, 1993 an extraordinary charge of $1,360,000 was recorded to reflect
Forum Group's share of FRP's extraordinary charge on the early
extinguishment of its debt. Additionally, during the nine months ended
December 31, 1993, expenses of $412,000 related to the early
extinguishment of debt in conjunction with the FGI Recapitalizaiton
were recorded.
Net Income/Loss Per Share. The three and nine months ended December 31,
1993 produced net income of $272,000 ($0.01 per Common Share) and net
loss of $483,000 ($0.03 per Common Share), respectively, compared to net
losses of $1,815,000 ($0.24 per Common Share) and $7,081,000 ($0.95 per
Common Share) for the three and nine months ended December 31, 1992. The
current nine month period was adversely affected by $1,317,000 ($0.08 per
Common Share) of expenses related to certain litigation related to the
FGI Recapitalization and extraordinary charges totalling $1,772,000
($0.11 per Common Share) related to the early extinguishment of Forum
Group's and FRP's debt.
All per share data are based upon the weighted average number of shares
outstanding for the relevant periods.
Financial Condition
- -------------------
Recapitalization. In June, 1993 Forum Group consummated the FGI
Recapitalization. As a result of the FGI Recapitalization, including the
Investors' Tender Offer, the Investors acquired approximately 71.7% of
the outstanding Common Shares. On February 1, 1994 the New Term Loan and
$30,000,000 aggregate principal amount of the New Senior Subordinated
Notes were retired with the proceeds of the Refinancing Loan. For a
discussion of the FGI Recapitalization and the Refinancing Loan, see Note
B of the Notes to Condensed Consolidated Financial Statements.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
As a result of the FGI Recapitalization, Forum Group's long term debt as
of December 31, 1993 was as set forth below (in thousands):
Forum Group, Inc. (Owned Communities and Corporate Operations):
Citibank Term Loan $ 49,000
Senior Subordinated Notes 40,000
Mortgages and Capitalized Leases 23,378
Other 3,158
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Total Owned Communities and Corporate Operations (1) 115,536
Consolidated Partnership Communities (2) 76,381
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Total $191,917
========
(1) Excludes (i) indebtedness aggregating $4,535,000 of GRP, $569,000
of which is recourse to Forum Group and (ii) indebtedness aggregating
$9,645,000 of RSARHC which is non-recourse to Forum Group.
(2) These obligations are non-recourse to Forum Group.
Liquidity And Capital Resources. Following the FGI Recapitalization,
Forum Group's principal sources of funds are cash generated from
operating activities and asset sales. Forum Group's liquidity
requirements relate primarily to the funding of working capital needs,
and principal and interest payments on indebtedness (and, for the current
fiscal year, included approximately $5.9 million of expenses associated
with the FGI Recapitalization and $1.3 million of litigation expenses
relating to the FGI Recapitalization and will include additional expenses
relating to the Refinancing Loan presently estimated at approximately
$10.7 million). At December 31, 1993, Forum Group had cash and cash
equivalents of $14,334,000, accounts receivable of $4,587,000 and notes,
investments and other receivables of $4,830,000.
Forum Group believes that (i) cash from operations, (ii) cash and cash
equivalents, (iii) accounts receivable, and (iv) notes, investments and
other receivables, will provide adequate liquidity to meet its
foreseeable working capital requirements.
The term of Forum Group's prior bank debt required that a substantial
portion of excess cash flow be applied by Forum Group to reduce
indebtedness thereunder whereas the terms of the Refinancing Loan do not
require such prepayments and have an amortization period of 25 years (but
with a stated maturity of February 1, 2001). As a result, Forum Group
may use any excess cash flow to pursue its growth strategy. In addition,
the Refinancing Loan is generally on terms more favorable than the terms
applicable under Forum Group's prior long-term debt. The Refinancing
Loan also includes an option that, subject to certain conditions, enables
Forum Group to increase the amount of borrowings if the operating cash
flows from the assets pledged to secure the Refinancing Loan continue to
improve during the 24-month period ending February 1, 1996, in which
event the increased borrowing proceeds could be used to fund Forum
Group's growth through acquisitions of additional properties, to expand
or upgrade Forum Group's existing RCs or for other corporate purposes.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
In addition, the Refinancing Loan permits Forum Group to convert the
initial floating interest rate structure (generally 4.1% over the LIBOR,
which at the closing of the Refinancing Loan was 3.125%, plus servicing
costs, presently estimated to be 0.2% per year) under the Refinancing
Loan to a fixed interest rate structure.
Forum Group intends to seek to grow through the acquisition of additional
properties and other assets. In connection with the FGI
Recapitalization, the Investors stated their intention to make up to $30
million of additional equity capital available to Forum Group for this
purpose. Although the Investors already invested an additional $13
million in Forum Group since the completion of the FGI Recapitalization,
such amount was contributed to the capital of FRP and used by FRP to pay
bank debt. Any additional equity investment by the Investors would be
subject to the negotiation of mutually acceptable terms. Accordingly,
there can be no assurance that any such additional investment will be
made or as to the timing and terms thereof. Forum Group has also entered
into a commitment letter agreement (the "Acquisition Commitment") with
Nomura Asset Capital Corporation ("Nomura") providing for up to $100
million in new debt financing (the "Acquisition Loan"), the proceeds of
which would be used, together with equity to be provided by Forum Group,
to fund the purchase price for acquisitions of skilled nursing home,
assisted living and other senior housing properties. Under the
acquisition facility, Nomura would advance $2.00 of debt financing for
each $1.00 of equity capital invested by Forum Group, which equity is
presently expected to be obtained from future offering of additional
Common Shares to shareholders (including the Investors), cash from
operations (including cash from sales of units in existing RCs, primarily
Rancho San Antonio), or a combination of the foregoing. During the 24-
month period in which amounts could be drawn to finance acquisitions
under the Acquisition Loan, Forum Group would have the right, subject to
the satisfaction of certain conditions, to convert the indebtedness
thereunder to seven-year debt under either a fixed or floating interest
rate structure. During such period, Forum Group could also repay such
indebtedness using proceeds from other financing sources, if any such
financing becomes available on more favorable terms. Forum Group would
have an option that would permit it to increase the borrowings against
the properties acquired if, at the end of 24 months after the initial
closing of the Acquisition Loan, the debt service coverage computed on a
trailing 12-month basis exceeded certain thresholds, in which event the
increased borrowings, like any increased borrowings under the Refinancing
Loan, could be used to fund Forum Group's growth or for other corporate
purposes.
There can be no assurance that any acquisitions will be completed or, if
so, as to the timing or terms thereof. The Acquisition Commitment is
subject to the negotiation of definitive documentation and certain
conditions. Moreover, Nomura's obligation to provide financing under the
acquisition facility, if completed, will be subject to a number of
conditions, and there can be no assurance that such conditions will be
satisfied.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Participation in Recapitalization of FRP. In October 1993 Forum Group
entered into the FRP Recapitalization Agreement. Forum Group has a
substantial equity investment in FRP, is the parent company of FRP's
general partner and has a long-term management contract with FRP. For a
discussion of FRP's recapitalization, see Note B of the Notes to
Condensed Consolidate Financial Statements.
Cash Flow. Operating activities for the nine months ended December 31,
1993 provided $2,850,000 of cash compared to $4,952,000 of cash used by
operating activities during the nine months ended December 31, 1992, due
principally to significantly improved operating results in 1993.
Investing activities used $14,487,000 of cash during the nine months
ended December 31, 1993, compared $27,226,000 of cash provided by
investing activities during the nine months ended December 31, 1992, due
principally to Forum Group's participation in the FRP Refinancing and the
April, 1992 sale of two retirement communities.
Financing activities provided $20,154,000 of cash during the nine months
ended December 31, 1993, compared to $23,614,000 of cash used by
financing activities during the comparable period of 1992, due
principally to the impact of the FGI Recapitalization and the April, 1992
sale of two retirement communities.
