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 June 30, 1993 as set forth in the pages attached
hereto:
Item 1. Financial Information
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: February 15, 1994 \s\ Paul A. Shively
----------------------- ---------------------------------
Paul A. Shively
Senior Vice President & Treasurer
(Chief Financial Officer)
<PAGE>
INDEX
FORUM GROUP, INC., AND SUBSIDIARIES
PAGE
----
Item 1. Financial Statements (Without Audit)
Condensed consolidated balance sheets --
June 30 and March 31, 1993 3
Condensed consolidated statements of operations --
Three months ended June 30, 1993 and 1992 4
Condensed consolidated statements of cash flows --
Three months ended June 30, 1993 and 1992 5
Notes to condensed consolidated financial statements --
June 30, 1993 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Without Audit)
June 30, March 31,
1993 1993
------------- ------------
(in thousands)
ASSETS
------
Property and Equipment:
Land and improvements $ 43,042 $ 43,042
Buildings and leasehold improvements 262,272 262,042
Furniture and equipment 14,406 14,246
----------- -----------
319,720 319,330
Less accumulated depreciation and amortization 10,996 8,793
----------- -----------
308,724 310,537
Investments:
Forum Retirement Partners, L.P. 3,850 3,795
Greenville Retirement Community, L.P. 3,759 3,763
----------- -----------
7,609 7,558
----------- -----------
Cash and cash equivalents 15,705 5,723
Accounts receivable, less allowance for doubtful
accounts (June 30, $277; March 31, $219) 2,870 2,925
Notes, investments and other receivables 2,862 3,225
Land held for resale 1,638 1,638
Restricted cash 14,257 12,803
Deferred costs and other assets 8,101 4,232
----------- -----------
$ 361,975 $ 348,641
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Long-term debt, including $26,783 due
within one year $ 219,301 $ 226,540
Trade accounts payable 1,698 2,064
Accrued interest 1,321 866
Other accrued expenses 18,726 18,346
Resident deposits 21,179 20,178
Deferred income 4,999 4,585
----------- -----------
Total Liabilities 267,224 272,579
Cooperative memberships 57,533 55,910
Other partners' equity 1,627 1,707
Shareholders' equity:
Preferred stock - Series B, no par value -
authorized 2,000 shares, issued 25 shares
at March 31, 1993 -0- 4,870
Common stock, no par value - authorized 48,000
shares, issued 17,276 and 7,493 shares at
June 30 and March 31, 1993, respectively 44,035 20,934
Accumulated deficit (8,975) (7,359)
----------- -----------
Total Shareholders' Equity 35,591 18,445
----------- -----------
$ 361,975 $ 348,641
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Without Audit)
Three Months Ended
June 30,
-------------------------
1993 1992
----------- -----------
(in thousands except
per share amounts)
Revenues:
Net operating revenues $ 24,776 $ 20,453
Facility sales, net 27 366
Other 147 (178)
----------- -----------
TOTAL REVENUES 24,950 20,641
----------- -----------
Costs and expenses:
Operating expenses (18,565) (17,196)
General and administrative expenses (967) (1,111)
Litigation expense (1,080) -0-
Depreciation (2,233) (1,916)
----------- -----------
TOTAL COSTS AND EXPENSES (22,845) (20,223)
----------- -----------
2,105 418
Other:
Investment income 151 454
Interest expense (4,413) (4,198)
----------- -----------
Loss before other partners' interest
in losses of consolidated partnerships
and extraordinary item (2,157) (3,326)
Other partners' interest in losses of
consolidated partnerships 956 176
----------- -----------
Loss before extraordinary item (1,201) (3,326)
Extraordinary item - early extinguishment of debt (415) -0-
----------- -----------
NET LOSS (1,616) (3,150)
ACCUMULATED DEFICIT AT BEGINNING OF PERIOD (7,359) -0-
----------- -----------
ACCUMULATED DEFICIT AT END OF PERIOD $ (8,975) $ (3,150)
=========== ===========
Average number of common shares outstanding 9,320 7,493
=========== ===========
Net loss per common share:
Loss before extraordinary item $ (0.13) $ (0.42)
Extraordinary item (0.04) (0.00)
----------- -----------
Net loss $ (0.17) $ (0.42)
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Without Audit)
Three Months Ended
June 30,
-------------------------
1993 1992
------------ ----------
(in thousands)
Cash flows from operating activities:
Net loss $ (1,616) $ (3,150)
Items which do not use (provide) cash:
Depreciation and amortization 2,362 1,947
Facility sales, net -0- (366)
Accrued revenues and expenses, net 1,493 (2,049)
Accrued interest 454 662
Other partners' interest in losses of
consolidated partnerships (2) (98)
Equity pick-up in unconsolidated partnerships (95) 216
Non-cash portion of extraordinary item 270 -0-
---------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 2,866 (2,838)
---------- -----------
Cash flows from investing activities:
Additions to property and equipment (391) (942)
Disposals of property and equipment -0- 36,723
Collections on notes receivable 355 112
Other -0- 100
---------- -----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (36) 35,993
---------- -----------
Cash flows from financing activities:
Proceeds from long-term debt 90,282 1,672
Payments on long-term debt (97,521) (21,258)
Restructuring payments:
Interest -0- (13,050)
Proceeds from issuance of common stock 20,000 -0-
Recapitalization costs (5,729) -0-
Proceeds from cooperative memberships 1,623 7,120
Net increase in restricted cash (1,454) (7,503)
Net contribution by other partners (40) 76
Deferred financing and other costs (9) (19)
---------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 7,152 (32,962)
---------- -----------
Net increase in cash and
cash equivalents 9,982 193
Cash and cash equivalents at beginning of period 5,723 7,542
---------- -----------
Cash and cash equivalents at end of period $ 15,705 $ 7,735
========== ===========
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Without Audit)
June 30, 1993
Note A - Basis of Presentation
- ------------------------------
The balance sheet at March 31, 1993 has been derived from the audited
financial statements at that date included in Forum Group, Inc.'s ("Forum
Group") Annual Report on Form 10-K for the fiscal year ended March 31, 1993
filed with the Securities and Exchange Commission (the "1993 10-K").
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three-month period ended June 30, 1993 are not necessarily indicative of
the results that may be expected for the fiscal year ending March 31, 1994.
For further information, refer to Forum Group's consolidated financial
statements as of and for the year ended March 31, 1993, and the footnotes
thereto, included in the 1993 10-K.
Note B - Refinancing Agreements
- -------------------------------
Recapitalization. As previously disclosed, in June 1993, Forum Group
consummated a substantial recapitalization (the "Recapitalization") pursuant
to the transactions contemplated by a series of agreements and modifications
thereto (collectively, the "Acquisition Agreement") with a group of investors
(together with their affiliates and assignees, the "Investors"). As a result
of the Recapitalization, the Investors own approximately 66% of the
outstanding shares of common stock of Forum Group (the "Common Shares"),
excluding 513,993 Common Shares owned by a wholly owned subsidiary of Forum
Group. The principal components of the Recapitalization included (i) the
issuance and sale by Forum Group on February 1, 1993 of 25,000 shares of
preferred stock (which ultimately were exchanged for 2,500,000 newly issued
Common Shares on June 14, 1993) for an aggregate purchase price of
$5,000,000, (ii) the issuance and sale by Forum Group on June 14, 1993 of
7,098,200 Common Shares, together with warrants exercisable to purchase at a
nominal price an aggregate of 1.1555 Common Shares for each Common Share
reserved in accordance with Forum Group's Plan of Reorganization for the
payment of disputed general unsecured claims (each a "Reserved Share") issued
on or after June 14, 1993 for an aggregate purchase price of $20,000,000,
(iii) the borrowing by Forum Group on June 14, 1993, of $50,000,000 pursuant
to a new bank credit facility through a consortium of lenders for which
Citicorp USA, Inc. serves as agent (the "New Term Loan"), (iv) the issuance
and sale by Forum Group on June 14, 1993 of $40,000,000 aggregate principal
amount of senior subordinated notes (the "New Senior Subordinated Notes"),
and (v) the prepayment by Forum Group on June 14, 1993 of all amounts
outstanding under the Senior Secured Term Loan Agreement which had been
entered into on April 2, 1992 with a consortium of banks for which Chemical
Bank served as agent. Of the 441,071 Reserved Shares reserved for possible
issuance pursuant to the Plan of Reorganization as of March 31, 1993, 170,806
were issued prior to June 14, 1993 and 270,265 continued to be so reserved as
of August 13, 1993.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Without Audit)
June 30, 1993 (continued)
The New Term Loan requires that interest be paid quarterly at either the
prime rate plus 2% or the Eurodollar rate plus 3.5%, and requires quarterly
principal payments of $1,000,000 on December 31, 1993, and March 31, 1994;
$1,500,000 through March 31, 1995; $2,250,000 through March 31, 1996; and
$2,750,000 thereafter to maturity on March 31, 1999. The New Senior
Subordinated Notes require that interest be paid semi-annually at 12.5% to
maturity in 2003 (at which time the entire principal amount becomes due).
Note C - Investments
- --------------------
Summary financial information for Forum Retirement Partners, L.P. as of and
for the three months ended June 30, 1993, is as follows (in thousands):
Net property $ 99,171
Other assets 7,907
--------
107,078
Less liabilities 78,032
--------
Net assets $ 29,046
========
Revenues 10,743
Costs and expenses 11,444
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Net loss $ 701
========
Summary financial information for Greenville Retirement Community, L.P. as of
and for the three months ended June 30, 1993, is as follows (in thousands):
Net property $ 20,913
Other assets 618
--------
21,531
Less liabilities 22,076
--------
Net deficit $ 548
========
Revenues 1,548
Costs and expenses 1,386
--------
Net income $ 162
========
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1993
Results Of Operations
- ---------------------
Forum Group operates (i) 10 retirement communities directly or through
wholly owned subsidiaries and a nursing home (the "Owned Communities") ,
(ii) four retirement communities through partnerships which are not wholly
owned but are consolidated for financial reporting purposes (the
"Consolidated Partnership Communities"), (iii) 10 retirement communities
through entities which are not consolidated for financial reporting
purposes (the "Unconsolidated Communities"), including nine retirement
communities which are owned by Forum Retirement Partners, L.P. and one
owned by Greenville Retirement Community, L.P., and (iv) a lifecare
community in Cupertino, California ("Rancho San Antonio") which is
consolidated for financial reporting purposes.
Certain summary financial information for the Owned Communities, Rancho San
Antonio and Consolidated Partnership Communities is presented below:
Quarter Ended June 30, 1993
---------------------------
Consolidated
Owned Rancho Partnership Corporate
Communities San Antonio Communities Operations Totals
----------- ----------- ------------ ---------- ------
Net
Operating
Revenues $16,870 $ 1,500 $ 6,123 $ 283 $24,776
Operating
Expenses 12,306 1,720 3,921 618 18,565
General and
Administrative
Expenses --- --- 6 961 967
Depreciation 963 763 500 7 2,233
Interest
Expense 652 533 999 2,229 4,413
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Quarter Ended June 30, 1992
---------------------------
Consolidated
Owned Rancho Partnership Corporate
Communities San Antonio Communities Operations Totals
----------- ----------- ------------ ---------- ------
Net
Operating
Revenues $14,063 $ 859 $ 5,464 $ 67 $20,453
Operating
Expenses 11,310 1,372 3,748 766 17,196
General and
Administrative
Expenses --- --- 100 1,011 1,111
Depreciation 945 579 372 20 1,916
Interest
Expense 650 510 1,143 1,895 4,198
Owned Communities. Operating revenues for the three months ended June 30,
1993 increased by $2,807,000 or by 20% from $14,063,000 to $16,870,000.
This increase was primarily attributable to favorable changes in occupancy
with increases in residency fees and charges. Combined occupancy increased
from 78% at June 30, 1992 to 91% at June 30, 1993. Operating expenses at
the Owned Communities increased by $996,000 or by 9% from $11,310,000 to
$12,306,000. This increase was primarily attributable to the increase in
occupancy and to normal inflationary increases. Net operating income
(defined as operating revenues less operating expenses, depreciation and
general and administrative expenses) at the Owned Communities increased by
$1,794,000 from $1,808,000 to $3,602,000. This increase constitutes 64% of
the increase in net operating revenues for the quarter, which is indicative
of the high degree of incremental profits that results from increased
occupancy.
Rancho San Antonio. Operating revenues for the three months ended June 30,
1993 increased by $641,000 or by 75% from $859,000 to $1,500,000. This
increase is primarily due to the opening of the healthcenter in August 1992
and favorable changes in occupancy. Occupancy increased from 46%, which is
retirement only, at June 30, 1992 to a combined retirement and healthcenter
occupancy of 61% at June 30, 1993. Operating expenses for Rancho San
Antonio increased by $831,000 or by 61% from $1,372,000 to $2,203,000.
This increase reflects the healthcenter expenses and improved occupancy in
the retirement phase. Net operating loss decreased by $109,000 or by 10%
from $1,092,000 to $983,000.
The construction debt associated with Rancho San Antonio is non-recourse to
Forum Group. The maturity date of the first mortgage financing (which, at
June 30, 1993, had an outstanding balance of $20,239,000) on Rancho San
Antonio has been extended to January 1994, and agreement has been reached
to extend the maturity of the second mortgage financing thereon (which, at
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
June 30, 1993, had an outstanding balance of $3,711,000) to April 1994.
Rancho San Antonio comprises a total of 319 independent lifecare RC living
units, of which 110 are included in the second phase of the project. As of
August 13, (i) contracts for sales of memberships relating to approximately
62% of the available units in the second phase of the project had been
entered into, (ii) refundable deposits in amounts equal to 20% of the sale
price of each such membership had been placed in escrow pending the sale
thereof, and (iii) all approvals required for the sale of such memberships
had been obtained. It is expected (although there can be no assurance
with respect thereto) that the sale of memberships relating to
approximately 49 units in the second phase will be consummated by September
30, 1993 and that Forum Group will apply the estimated $16,000,000, or an
average $326,000 per unit, of the net proceeds therefrom to the repayment
of construction financing on the project. Memberships relating to 154
units in the first phase of the project had been sold as of August 13,
1993, and, after giving effect to the expected sale of the memberships
relating to 49 units in the second phase referred to above, memberships
relating to a total of 116 independent living units will remain available
for sale. Proceeds from sales of such remaining memberships will be first
applied to the repayment of construction financing until such financing is
fully retired, and will thereafter be available to Forum Group for general
corporate purposes. While the effect of such sales on Forum Group's
results of operations is not expected to be significant in light of Forum
Group's currently unrecovered investment in excess of $20,000,000, the
effect thereof on Forum Group's cash flow and financial position may be
significant (although there can be no assurance with respect thereto).
Consolidated Partnership Communities. Operating revenues for the three
months ended June 30, 1993 increased by $659,000 or by 12% from $5,464,000
to $6,123,000. This increase was also primarily attributable to favorable
changes in occupancy combined with increases in residency fees and charges.
Combined occupancy increased from 81% at June 30, 1992 to 89% at June 30,
1993. Operating expenses for the Consolidated Partnership Communities
increased by $173,000 or by 5% from $3,748,000 to $3,921,000. This
increase was primarily attributable to the increase in occupancy and to
normal inflationary increases. Net Operating Income for the Consolidated
Partnership Communities increased by $452,000 from $1,244,000 to
$1,696,000. This increase constitutes 69% of the increase in net operating
revenues for the quarter, which is indicative of the high degree of
incremental profits that results from increased occupancy.
Corporate Operations. Revenues for the three months ended June 30, 1993
increased $216,000 from $67,000 to $283,000. Revenues are principally
comprised of management fees from Greenville Retirement Community, L.P. and
sold operations. Operating expenses for the three months ended June 30,
1993, decreased by $631,000 due primarily to reductions in the home office
staff. Corporate operations includes the unallocated interest expense of
corporate debt.
Unconsolidated Communities. Forum Group's equity in the earnings of Forum
Retirement Partners, L.P., which is reflected as other revenues, improved
from a loss of $260,000 for the quarter ended June 30, 1992 to a gain of
$30,000 for the quarter ended June 30, 1993. This increase primarily
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
reflects improved occupancy at the nine retirement communities owned by
Forum Retirement Partners, L.P. and managed by Forum Group. Forum Group's
equity in the earnings of Greenville Retirement Community, L.P., a 50%-
owned joint venture which operates the Stonegates Retirement Community in
Wilmington, Delaware, also reported as other revenues, increased from
$44,000 for the quarter ended June 30, 1992 to $65,000 for the quarter
ended June 30, 1993.
Depreciation. The increase of $317,000 over the comparable period in
fiscal 1992 reflects the opening of the healthcenter at Rancho San Antonio,
additional fixed asset additions over the past twelve months.
Consolidated General and Administrative Expenses. Consolidated general and
administrative expenses decreased by $144,000 or by 13% from $1,111,000 in
the quarter ended June 30, 1992 to $967,000 in the quarter ended June 30,
1993. This decrease is primarily attributable to a decrease in salary and
wages of $256,000 due to reductions in the home office staff, partially
offset by an increase in Directors' fees and expenses of $142,000 due to
the Recapitalization.
Interest Expense. Interest expense attributable to the Owned Communities
and corporate operations increased by $336,000 from $2,545,000 to
$2,881,000 during the quarter ended June 30, 1993, which increase is
primarily attributable to an increase in average borrowing costs and the
amortization of loan costs. As discussed more fully below (see "Financial
Condition --Recapitalization"), Forum Group refinanced the Senior Secured
Loan dated April 2, 1992 as part of the Recapitalization. If the
Recapitalization had been completed as of April 1, 1993, proforma interest
expense related to the corporate operations would have been $2,348,000
compared to an actual amount of $2,150,000.
Litigation Expenses. During the three months ended June 30, 1993, expenses
of $1,080,000 incurred in conjuction with certain litigation related to the
Recapitalization, described below, were recorded.
Extraordinary Item. During the three months ended June 30, 1993, expenses
of $415,000 related to the early extinguishment of debt in conjunction with
the Recapitalization were recorded.
Loss Per Share. The three months ended June 30, 1993, produced a net loss
of $1,616,000 ($0.17 per Common Share) compared to a net loss of $3,150,000
($0.42 per Common Share) for the three months ended June 30, 1992. The
current quarter was adversely affected by $1,080,000 ($0.12 per Common
Share) of expenses related to certain litigation related to the
Recapitalization and an extraordinary charge, related to the early
extinguishment of debt, of $415,000 ($0.04 per Common Share).
All per share data are based upon the weighted average number of shares
outstanding for the relevant periods. However, on June 14, 1993, 7,098,200
new Common Shares were issued as part of the Recapitalization and 25,000
shares of preferred stock were exchanged for 2,500,000 of new Common
Shares, increasing the number of Common Shares outstanding to 17,275,982.
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Financial Condition
Recapitalization. As previously disclosed, in June 1993, Forum Group
consummated a substantial recapitalization pursuant to the transactions
contemplated by a series of agreements and modifications thereto with a
group of investors. As a result of the Recapitalization, the Investors own
approximately 66% of the outstanding shares of common stock of Forum Group
(excluding 513,993 Common Shares owned by a wholly owned subsidiary of
Forum Group). The principal components of the Recapitalization included
(i) the issuance and sale by Forum Group on February 1, 1993 of 25,000
shares of preferred stock (which ultimately were exchanged for 2,500,000
newly issued Common Shares on June 14, 1993) for an aggregate purchase
price of $5,000,000, (ii) the issuance and sale by Forum Group on June 14,
1993 of 7,098,200 Common Shares, together with warrants exercisable to
purchase at a nominal price an aggregate of 1.1555 Common Shares for each
Common Share reserved in accordance with Forum Group's Plan of
Reorganization for the payment of disputed general unsecured claims issued
on or after June 14, 1993 for an aggregate purchase price of $20,000,000,
(iii) the borrowing by Forum Group on June 14, 1993 of $50,000,000 pursuant
to a new bank credit facility through a consortium of lenders for which
Citicorp USA, Inc. serves as agent, (iv) the issuance and sale by Forum
Group on June 14, 1993 of $40,000,000 aggregate principal amount of senior
subordinated notes, and (v) the prepayment by Forum Group on June 14, 1993
of all amounts outstanding under the Senior Secured Term Loan Agreement
which had been entered into on April 2, 1992 with a consortium of banks for
which Chemical Bank served as agent. Of the 441,071 Reserved Shares
reserved for possible issuance pursuant to the Plan of Reorganization as of
March 31, 1993, 170,806 were issued prior to June 14, 1993 and 270,265
continued to be so reserved as of August 13, 1993.
The New Term Loan requires that interest be paid quarterly at either the
prime rate plus 2% or the Eurodollar rate plus 3.5%, and requires quarterly
principal payments of $1,000,000 on December 31, 1993, and March 31, 1994;
$1,500,000 through March 31, 1995; $2,250,000 through March 31, 1996; and
$2,750,000 thereafter to maturity on March 31, 1999. The New Senior
Subordinated Notes require that interest be paid semi-annually at 12.5% to
maturity in 2003 (at which time the entire principal amount becomes due).
As a result of the Recapitalization, the Company's long term debt as of
June 30, 1993 relates to the retirement communities as set forth below:
Forum Group, Inc. (Owned Communities and Corporate Operations):
Bank Credit Agreement $ 50,000
Senior Subordinated Notes 40,000
Mortgages and Capitalized Leases 25,283
Other 2,896
Total Owned Communities and Corporate Operations (1) 118,179
Consolidated Partnership Communities (2) 76,969
Unconsolidated Communities -0-
Rancho San Antonio (2) 24,153
Total $219,301
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
(1) Excludes indebtedness aggregating $4,473,000 of Greenville Retirement
Community, L.P. which may be recourse to Forum Group.
(2) These obligations are non-recourse to Forum Group.
Liquidity And Capital Resources. Following the 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 fiscal year 1994, includes
substantial expenses associated with the Recapitalization and related
transactions described above). At June 30, 1993, Forum Group had cash and
cash equivalents of $15,705,000, accounts receivable of $3,071,000 and
notes, investments and other receivables of $2,870,000.
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, Forum Group will continue to monitor
conditions in the capital markets and, if appropriate in light of then-
current market conditions, Forum Group's then-existing capital structure
and requirements and other factors determined to be relevant, may seek to
refinance all or a portion of its or its subsidiaries' or affiliates'
existing indebtedness and, in addition, may seek to raise equity capital to
fund ongoing capital requirements, possible acquisitions of businesses and
assets or for other corporate purposes. Whether or not Forum Group seeks
to refinance any such indebtedness or to raise equity capital will depend
on various factors, including conditions in the capital markets, Forum
Group's and its subsidiaries' and affiliates' respective financial
condition, results of operations and future prospects, whether the stated
maturity dates of certain indebtedness are extended and other factors that
may be relevant in the circumstances. There can be no assurance as to
whether any such transaction will be effected or, if so, as to the timing
and terms thereof.
Pursuant to the Acquisition Agreement, the Investors agreed to effect a
transaction pursuant to which shareholders of Forum Group would have the
option either to retain their equity interest in Forum Group or receive, in
cash, $3.62 per share. Consequently, on July 27, 1993 the Investors
commenced a tender offer for any and all Common Shares for $3.62 per share,
net to the seller in cash (the "Investors' Tender Offer"). The Investors'
Tender Offer (and withdrawal rights) will expire at 12:00 midnight, New
York City time, on August 23, 1993, unless the offer is extended.
In connection with the Recapitalization, Forum Group has paid or reimbursed
fees, costs and expenses aggregating approximately $6,194,000 through June
30, 1993, consisting of litigation expenses of approximately $320,000,
reimbursement of fees and expenses incurred by the Investors of
approximately $1,798,000, payment or reimbursement of fees and expenses of
the lenders under the new bank credit facility of approximately $3,518,000
and various other costs and expenses aggregating approximately $558,000.
In addition, Forum Group is required under the Acquisition Agreement to
reimburse the Investors upon request for all fees, costs and expenses
<PAGE>
FORUM GROUP, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
incurred in connection with the Investors' Tender Offer. According to the
Investors' tender offer materials, such fees, costs and expenses are
expected to be approximately $550,000.
Cash Flow. Operating activities for the three months ended June 30, 1992
used $2,838,000 of cash compared to the three months ended June 30, 1993
operating activities provided $2,866,000 of cash, due principally to the
payment of accrued expenses in 1992 and significantly improved operating
results in 1993.
Investing activities provided $35,993,000 of cash during the three months
ended June 30, 1992, compared to $36,000 of cash used by investing
activities during the three months ended June 30, 1993, due principally to
the April, 1992 sale of two RCs.
Financing activities provided $7,152,000 of cash during the three months
ended June 30, 1993, compared to $32,962,000 of cash used by financing
activities during the comparable period of 1992, due principally to the
impact of the Recapitalization and the April, 1992 sale of two RCs.
