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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1993
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
MANOR CARE, INC.
COMMISSION FILE NUMBER 1-8195
Incorporated in Delaware E.I.#52-1200376
10750 Columbia Pike, Silver Spring, Maryland 20901
Telephone: (301) 681-9400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No_______
62,285,442 Common Shares were outstanding as of January 12, 1994.
This report contains 11 pages.
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PART I. FINANCIAL INFORMATION
FINANCIAL STATEMENTS
MANOR CARE, INC. AND SUBSIDIARIES
The consolidated balance sheet as of November 30, 1993, the consolidated
statements of income for the three and six month periods ended November 30,
1993 and 1992, and the consolidated statements of cash flows for the six months
ended November 30, 1993 and 1992, have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
position, results of operations and cash flows at November 30, 1993 and for all
periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's May 31, 1993 annual report to
shareholders, previously filed with the Commission. The results of operations
for the three and six month periods ended November 30, 1993 and 1992, and cash
flows for the six months ended November 30, 1993 and 1992, are not necessarily
indicative of the operating results or cash flows for the full year.
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MANOR CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
November 30, 1993 May 31, 1993
----------------- ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 70,715 $ 80,844
Receivables (net of allowances
of $20,562 and $16,501) 68,618 82,820
Inventories 13,536 13,489
Current deferred income tax benefit 6,381 6,381
Prepaid expenses 25,978 9,374
Other current assets 1,557 1,351
---------- ----------
Total current assets 186,785 194,259
---------- ----------
Property and equipment, at cost
Land 85,526 80,944
Buildings and improvements 769,917 749,261
Capitalized leases 18,991 18,991
Furniture, fixtures and equipment 182,398 168,321
Facilities in progress 13,541 11,762
---------- ----------
1,070,373 1,029,279
Less accumulated depreciation (299,778) (275,533)
---------- ----------
Net property and equipment 770,595 753,746
---------- ----------
Lodging franchise rights 65,898 67,343
Other assets 87,994 91,158
---------- ----------
$1,111,272 $1,106,506
========== ==========
</TABLE>
NOTE: The balance sheet at May 31, 1993 has been taken from the audited
financial statements at that date.
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MANOR CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
November 30, 1993 May 31, 1993
----------------- -------------
(Unaudited) (Note)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 5,915 $ 45,338
Accounts payable 41,968 44,504
Accrued expenses 85,193 85,377
Income taxes 13,690 5,254
---------- ----------
Total current liabilities 146,766 180,473
---------- ----------
Mortgage and other long-term debt 120,567 124,838
---------- ----------
Subordinated long-term debt 157,510 255,600
---------- ----------
Deferred Income Taxes and other 189,489 183,601
---------- ----------
Stockholders' Equity
Capital stock 6,532 6,047
Contributed capital 165,197 68,471
Retained earnings 366,903 329,532
Cumulative translation adjustments 789 352
Treasury stock, at cost (42,481) (42,408)
---------- ----------
Total stockholders' equity 496,940 361,994
---------- ----------
$1,111,272 $1,106,506
========== ==========
</TABLE>
NOTE: The balance sheet at May 31, 1993 has been taken from the audited
financial statements at that date.
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MANOR CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per-share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
---------------------- ----------------------
1993 1992 1993 1992
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Healthcare, net $ 224,102 $ 205,952 $ 445,375 $ 401,375
Lodging 60,523 47,728 123,878 97,732
--------- ---------- --------- ----------
Total revenues 284,625 253,680 569,253 499,107
--------- --------- --------- ----------
Expenses
Healthcare 170,036 156,127 338,177 305,109
Lodging 40,788 32,620 86,487 66,981
Depreciation & amortization 16,229 14,861 32,430 29,609
General corporate 15,989 14,080 31,544 26,946
--------- ---------- --------- ----------
Total expenses 243,042 217,688 488,638 428,645
--------- ---------- --------- ----------
Income from operations 41,583 35,992 80,615 70,462
--------- ---------- --------- ----------
Other income (expenses)
Interest income and other 532 1,117 1,062 1,434
Gain on sale of property - - 7,978 -
Interest expense (8,274) (8,933) (17,252) (17,862)
--------- ---------- --------- ----------
Total other (expenses), net (7,742) (7,816) (8,212) (16,428)
--------- ---------- --------- ----------
Income before income taxes 33,841 28,176 72,403 54,034
Income taxes 13,600 10,900 32,400 20,800
--------- ---------- --------- ----------
Net income $ 20,241 $ 17,276 $ 40,003 $ 33,234
========= ========== ========= ==========
Average shares outstanding 59,602 57,409 58,578 57,389
========= ========== ========= ==========
Net income per share of common
stock $ .34 $ .30 $ .68 $ .58
========= ========== ========= ==========
Dividends per share of common
stock $ .022 $ .022 $ .044 $ .044
========= ========== ========= ==========
</TABLE>
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MANOR CARE, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
November 30,
--------------------
1993 1992
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 40,003 $ 33,234
Reconciliation of net income to net cash
provided by operating activities:
Depreciation and amortization 32,430 29,609
Amortization of debt discount 1,172 487
Provision for bad debts 5,942 4,307
Increase in deferred taxes 5,823 1,935
Gain on sale of facilities (7,978) -
Changes in assets and liabilities
(excluding sold facilities):
Change in accounts receivable 9,394 (9,618)
Change in inventory and other current assets (16,361) (15,040)
Change in accounts payable and accrued expenses (2,356) (9,557)
Change in income taxes payable 8,436 4,216
Change in other liabilities (591) 1,877
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 75,914 41,450
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment (33,641) (47,490)
Acquisition of operating pharmacies (4,846) (3,492)
Acquisition of operating hotels (16,367) (5,409)
Proceeds from sale of facilities 15,630 -
Other items, net 2,773 3,910
-------- --------
NET CASH UTILIZED BY INVESTING ACTIVITIES (36,451) (52,481)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of ten year notes - 150,000
Principal payments of debt (47,488) (43,351)
Proceeds from exercise of stock options 422 931
Purchases of common stock for treasury - (145)
Dividends paid (2,526) (2,520)
-------- --------
NET CASH UTILIZED BY FINANCING ACTIVITIES (49,592) 104,915
-------- --------
CHANGE IN CASH AND CASH EQUIVALENTS (10,129) 93,884
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 80,844 83,101
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 70,715 $176,985
======== ========
</TABLE>
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MANOR CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1993
(unaudited)
Long-Term Debt
During the six months ended November 30, 1993, the Company repaid approximately
$47 million of debt. Included in this amount was approximately $3 million due
to the Company's redemption of the $99 million of 6 3/8% Convertible
Subordinated Debentures due 2011 on October 25, 1993. The remaining $96
million were converted, at the election of the bondholders, into common stock
at a conversion price per share of $20.31. Pursuant to these conversions,
4,743,522 shares of stock were issued.
During the six months ended November 30, 1992, the Company repaid $42 million
of debt. Most of the debt repaid was bank lines of credit. On November 20,
1992 the Company issued $150 million of 9 1/2% Senior Subordinated Notes due
2002. Most of the proceeds of this offering was used to redeem in January 1993
the $125 million of 11 3/8% Senior Subordinated Notes due 1998.
Acquisitions, Divestitures and Sales of Property
In August 1992, the Company's 82% owned institutional pharmacy subsidiary,
Vitalink Pharmacy Services, Inc., purchased a pharmacy located in Baltimore,
Maryland, servicing 2,600 institutional beds for approximately $3.5 million.
In December 1992, Vitalink also purchased a pharmacy business in New Jersey,
servicing over 9,000 institutional beds, for approximately $25 million. In
August 1993, a pharmacy business in Oregon was purchased for approximately $5.0
million.
In April, 1993 two nursing facilities were sold for $5.2 million. The realized
gain from this sale was immaterial. In July 1993, three nursing facilities
were sold for $15.6 million with a pre-tax gain of approximately $8.0 million.
During fiscal year 1993, the Company purchased seven operating hotels
containing a total of 1,306 rooms for approximately $25 million. In the first
six months of fiscal 1994, five hotels were purchased containing a total of 784
rooms for approximately $16 million.
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MANOR CARE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Available cash balances of $71 million and unused lines of credit of $142
million are considered adequate to ensure sufficient liquidity and capital
resources for the foreseeable future. In addition, the Company has filed a
shelf registration statement for the potential offer of up to $150 million in
senior notes.
Results of Operations
Net income for the three months ended November 30, 1993 was $20.2 million, or
$.34 per share, compared to $17.3 million, or $.30 per share, last year. Net
income for the six months ended November 30, 1993 was $40.0 million, or $.68
per share, compared to $33.2 million, or $.58 per share, last year. Income
from operations for the three and six month periods ended November 30, 1993
were $41.6 million and $80.6 million, respectively. This compares to income
from operations in the same periods last year of $36.0 million and $70.5
million.
Gross profit for the healthcare division for the three and six month periods
ended November 30, 1993 increased $4.2 and $10.9 million, respectively, when
compared with the same periods last year. For the three and six months ended
November 30, 1993, both healthcare revenues and operating expenses increased
9% and 11% in each period, respectively. The improvement in gross profit was
primarily due to higher occupancies in the Company's nursing facilities and
added capacity in Vitalink, the Company's institutional pharmacy subsidiary.
Gross profit of the lodging division for the three and six month periods ended
November 30, 1993 increased $4.6 million and $6.6 million, respectively, when
compared to the same periods last year. Lodging revenues increased 27% for the
three and six months periods. The improved operating performance is
attributable to improved conditions in the overall travel industry as well as
added capacity in our hotel division.
Depreciation and amortization increased $1.4 and $2.8 million for the three and
six month periods ended November 30, 1993, respectively, due to new
construction and acquisitions in the past twelve months.
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MANOR CARE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations (Continued)
General Corporate expenses for the three and six month periods ended November
30, 1993 increased $1.9 million and $4.6 million, respectively, when compared
to the same periods last year. General corporate expense represented 5.5% of
revenues during the six months ended November 30, 1993 as compared to 5.4%
during the same period in the prior year. General corporate expense includes
risk management, treasury, accounting, legal, human resources and other
administrative support functions.
Interest expense decreased $.7 million and $.6 million for the three and six
months ended November 30, 1993, respectively, primarily due to the early
redemption and conversion of the $99 million of 6 3/8% debentures on October
25, 1993. Interest capitalized amounted to $.2 and $1.4 million in the six
months ended November 30, 1993 and 1992, respectively.
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MANOR CARE, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
There were no reports filed on Form 8-K for the three months ended
November 30, 1993.
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MANOR CARE, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MANOR CARE, INC.
(Registrant)
Date: January 12, 1994 By: James A. MacCutcheon
Senior Vice President
and Chief Financial Officer
Date: January 12, 1994 By: James H. Rempe
Senior Vice President
General Counsel and Secretary
Date: January 12, 1994 By: Margarita Schoendorfer
Vice President and
Corporate Controller
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