<PAGE> 1
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, 1994
( ) 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 (l) 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_______
62,369,220 Common Shares were outstanding as of January 5, 1995.
This report contains 11 pages.
<PAGE> 2
PART I. FINANCIAL INFORMATION
FINANCIAL STATEMENTS
MANOR CARE, INC. AND SUBSIDIARIES
The consolidated balance sheet as of November 30, 1994, the consolidated
statements of income for the three and six month periods ended November 30,
1994 and 1993, and the consolidated statements of cash flows for the six
months ended November 30, 1994 and 1993, 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,
1994 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, 1994 annual
report to shareholders, previously filed with the Commission. The results of
operations for the three and six month periods ended November 30, 1994 and
1993, and cash flows for the six months ended November 30, 1994 and 1993, are
not necessarily indicative of the operating results or cash flows for the full
year.
2
<PAGE> 3
MANOR CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
November 30, 1994 May 31, 1994
----------------- ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 48,027 $ 60,487
Receivables (net of allowances
of $24,867 and $24,431) 84,544 84,766
Inventories 13,047 12,954
Current deferred income tax benefit 12,317 12,317
Prepaid expenses 22,440 10,588
Other current assets 2,058 2,240
--------- ---------
Total current assets 182,433 183,352
--------- ---------
Property and equipment, at cost
Land 100,973 92,838
Buildings and improvements 870,058 813,131
Capitalized leases 18,991 18,991
Furniture, fixtures and equipment 210,309 187,804
Facilities in progress 26,649 19,632
--------- ---------
1,226,980 1,132,396
Less accumulated depreciation (338,713) (308,046)
--------- ---------
Net property and equipment 888,267 824,350
--------- ---------
Lodging franchise rights 63,009 64,454
--------- ---------
Other assets 113,631 114,369
--------- ---------
$1,247,340 $1,186,525
========= =========
</TABLE>
NOTE: The balance sheet at May 31, 1994 has been taken from the audited
financial statements at that date.
3
<PAGE> 4
MANOR CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
November 30, 1994 May 31, 1994
----------------- ------------
(Unaudited) (Note)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 5,961 $ 5,869
Accounts payable 53,168 50,231
Accrued expenses 92,791 97,597
Income taxes 21,414 12,681
--------- ----------
Total current liabilities 173,334 166,378
--------- ----------
Mortgage and other long-term debt 112,246 119,333
--------- ----------
Subordinated long-term debt 157,694 157,602
--------- ----------
Deferred Income Taxes and other 222,916 209,397
--------- ----------
Stockholders' Equity
Capital stock 6,548 6,545
Contributed capital 167,718 167,316
Retained earnings 449,149 402,520
Cumulative translation adjustments 343 (31)
Treasury stock, at cost (42,608) (42,535)
--------- ---------
Total stockholders' equity 581,150 533,815
--------- ----------
$1,247,340 $1,186,525
========= =========
</TABLE>
NOTE: The balance sheet at May 31, 1994 has been taken from the audited
financial statements at that date.
4
<PAGE> 5
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,
--------------------- -------------------
1994 1993 1994 1993
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Healthcare, net $247,118 $224,102 $490,092 $445,375
Lodging 77,127 60,523 155,554 123,878
-------- -------- -------- --------
Total revenues 324,245 284,625 645,646 569,253
-------- -------- -------- --------
Expenses
Healthcare 187,332 170,036 372,060 338,177
Lodging 52,123 40,788 106,142 86,487
Depreciation & amortization 18,215 16,229 35,939 32,430
General corporate 18,750 15,989 36,216 31,544
-------- -------- -------- --------
Total expenses 276,420 243,042 550,357 488,638
-------- -------- -------- --------
Income from operations 47,825 41,583 95,289 80,615
-------- -------- -------- --------
Other income (expenses)
Interest income and other 615 532 969 1,062
Gain on sale of property - - - 7,978
Interest expense (6,233) (8,274) (12,888) (17,252)
-------- -------- ------- -------
Total other (expenses), net (5,618) (7,742) (11,919) (8,212)
-------- -------- ------- -------
Income before income taxes 42,207 33,841 83,370 72,403
Income taxes 17,200 13,600 34,000 32,400
-------- -------- -------- --------
Net income $ 25,007 $ 20,241 $ 49,370 $ 40,003
======== ======== ======== ========
Average shares outstanding 62,468 59,602 62,461 58,578
======== ======== ======== ========
Net income per share of common
stock $ .40 $ .34 $ .79 $ .68
======== ======== ======== ========
Dividends per share of common
stock $ .022 $ .022 $ .044 $ .044
======== ======== ======== ========
</TABLE>
5
<PAGE> 6
MANOR CARE, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
November 30,
---------------------
1994 1993
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 49,370 $ 40,003
Reconciliation of net income to net cash
provided by operating activities:
Depreciation and amortization 35,939 32,430
Amortization of debt discount 402 1,172
Provision for bad debt 6,320 5,942
Increase in deferred taxes (2,508) 5,823
Gain on sale of facilities - (7,978)
Changes in assets and liabilities
(excluding sold facilities):
Change in receivables (6,098) 9,394
Change in inventories and other current assets (11,700) (16,361)
Change in accounts payable and accrued expenses (1,869) (2,356)
Change in income taxes payable 8,733 8,436
Change in other liabilities 16,027 (591)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 94,616 75,914
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment (69,808) (33,641)
Acquisition of operating pharmacies - (4,846)
Acquisition of operating hotels (22,270) (16,367)
Acquisition of a nursing facility (3,000) -
Proceeds from sale of facilities - 15,630
Other items, net (2,260) 2,773
-------- --------
NET CASH UTILIZED BY INVESTING ACTIVITIES (97,338) (36,451)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt (7,245) (47,488)
Proceeds from exercise of stock options 248 422
Dividends paid (2,741) (2,526)
-------- --------
NET CASH UTILIZED BY FINANCING ACTIVITIES (9,738) (49,592)
-------- --------
CHANGE IN CASH AND CASH EQUIVALENTS (12,460) (10,129)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 60,487 80,844
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 48,027 $ 70,715
======== ========
</TABLE>
6
<PAGE> 7
MANOR CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1994
(unaudited)
Long-Term Debt
During the six months ended November 30, 1994, the Company repaid
approximately $7 million of debt. On November 30, 1994 the Company entered
into a $250 million Competitive Advance and Multi-Currency Revolving Credit
Facility provided by a group of eighteen banks. This loan facility replaces
the $100 million Revolving Credit Facility and the $65 million Multi-Currency
Revolving Credit Facility. Outstanding borrowings under the new facility at
November 30, 1994 totalled $43.7 million. The facility provides that up to
$75 million is available for borrowings in foreign currencies. Borrowings
under the facility are, at the option of the Company, one of several rates
including LIBOR plus 26.25 basis points. In addition, the Company has the
option to request participating banks to bid on loan participation at lower
rates than those contractually provided by the facility. The facility requires
the Company to pay fees of 3/16 of 1% on the entire loan commitment. The
facility will terminate on November 30, 1999.
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.
Acquisitions, Divestitures and Sales of Property
In August 1993, a pharmacy business in Oregon was purchased for approximately
$5.0 million. In January 1994, a pharmacy business in Colorado was acquired
for approximately $3.5 million.
During fiscal year 1994, the Company purchased thirteen operating hotels
containing a total of 1,900 rooms for approximately $44.2 million. In the
first six months of fiscal 1995, seven operating hotels were purchased
containing a total of 960 rooms for approximately $22.3 million.
In July 1993, three nursing facilities were sold for $15.6 million resulting
in a pre-tax gain of approximately $8.0 million. In February 1994, one hotel
was sold for $7.2 million.
7
<PAGE> 8
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 $48 million and unused lines of credit of $226
million are considered adequate to ensure sufficient liquidity and capital
resources for the foreseeable future.
Results of Operations
Net income for the three months ended November 30, 1994 was $25.0 million, or
$.40 per share, compared to $20.2 million, or $.34 per share, last year. Net
income for the six months ended November 30, 1994 was $49.4 million, or $.79
per share, compared to $40.0 million, or $.68 per share, last year. Income
from operations for the three and six month periods ended November 30, 1994
were $47.8 million and $95.3 million, respectively. This compares to income
from operations in the same periods last year of $41.6 million and $80.6
million.
Gross profit for the healthcare division for the three and six month periods
ended November 30, 1994 increased $5.7 and $10.8 million, respectively, when
compared with the same periods last year. For the three and six months ended
November 30, 1994, both healthcare revenues and operating expenses increased
10% in each period. 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, 1994 increased $5.3 million and $12.0 million, respectively, when
compared to the same periods last year. Lodging revenues increased 27% and
26% for the three and six months periods, respectively. 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 $2.0 and $3.5 million for the three
and six month periods ended November 30, 1994, respectively, due to new
construction and acquisitions in the past twelve months.
8
<PAGE> 9
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, 1994 increased $2.8 million and $4.7 million, respectively, when compared
to the same periods last year. General corporate expense represented 5.6% of
revenues during the six months ended November 30, 1994 as compared to 5.5%
during the same period in the prior year. General corporate expense includes
risk management, information systems, treasury, accounting, legal, human
resources and other administrative support functions.
Interest expense decreased $2.0 million and $4.4 million for the three and six
months ended November 30, 1994, 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 $.8 million and $.2 million in the
six months ended November 30, 1994 and 1993, respectively.
9
<PAGE> 10
MANOR CARE, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) There were no reports filed on Form 8-K for the three
months ended November 30, 1994
10
<PAGE> 11
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 5, 1995 By: James A. MacCutcheon
--------------- Senior Vice President,
Chief Financial Officer
and Treasurer
Date: January 5, 1995 By: James H. Rempe
--------------- Senior Vice President General
Counsel and Secretary
Date: January 5, 1995 By: Margarita Schoendorfer
--------------- Vice President and
Corporate Controller
11
<PAGE> 12
EXHIBIT INDEX
-------------
EXHIBIT
NO. DESCRIPTION
------- ------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
MANOR CARE, INC. AND SUBSIDIARIES
Financial Data Schedule For
Commercial and Industrial Companies (*)
(*) This schedule contains summary financial information extracted from the
Consolidated Balance Sheets, the Consolidated Statements of Income and the
Consolidated Statements of Cash Flows and is qualified in its entirety by
refernce to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> NOV-30-1994
<CASH> 48,027
<SECURITIES> 0
<RECEIVABLES> 109,411
<ALLOWANCES> 24,867
<INVENTORY> 13,047
<CURRENT-ASSETS> 182,433
<PP&E> 1,226,980
<DEPRECIATION> 338,713
<TOTAL-ASSETS> 1,247,340
<CURRENT-LIABILITIES> 173,334
<BONDS> 269,940
<COMMON> 6,548
0
0
<OTHER-SE> 574,602
<TOTAL-LIABILITY-AND-EQUITY> 1,247,340
<SALES> 0
<TOTAL-REVENUES> 645,646
<CGS> 0
<TOTAL-COSTS> 507,821
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,320
<INTEREST-EXPENSE> 12,888
<INCOME-PRETAX> 83,370
<INCOME-TAX> 34,000
<INCOME-CONTINUING> 49,370
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,370
<EPS-PRIMARY> .79<F1>
<EPS-DILUTED> .79<F1>
<FN>
<F1>The Company presents simple earnings per share (EPS) on the face of its
income statement as fully dilutive EPS is at least 97% of simple EPS. The
figures presented above are simple EPS.
</TABLE>
