<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported)
May 7, 1996
MANOR CARE, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-8195 52-1200376
(Commission File Number) (IRS Employer Identification No.)
10750 Columbia Pike, Silver Spring, Maryland 20901
(Address of principal executive offices) (Zip code)
Registrant's telephone number,
including area code (301) 681-9400
<PAGE> 2
Item 5. Other Events.
Manor Care, Inc. (the "Company") intends to separate its lodging
business from its health care business (the "Spinoff"). On March 4, 1996, the
Company's Board of Directors voted to approve, in principle, the Spinoff,
subject to the receipt of regulatory and other approvals and consents and
satisfactory implementation of the arrangements for the Spinoff. The Company
anticipates that the Spinoff will be completed in approximately five to seven
months.
On May 7, 1996, the Company completed the restatement of its annual
audited financial statements to reflect the lodging business as a discontinued
operation. These statements are filed herewith.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements
Management's Review of Operating Results
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Management's Review of Financial Position and Cash Flows
Report of Independent Public Accountants
Notes to Consolidated Financial Statements
(b) Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
(c) Exhibits
99.1 Press Release, dated March 7, 1996, announcing the intention to separate
the lodging business and healthcare business.
2
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
MANOR CARE, INC.
(Registrant)
By: /s/ James H. Rempe
-----------------------------
Name: James H. Rempe
Title: Senior V.P. and Secretary
Date: May 7, 1996
3
<PAGE> 4
MANAGEMENT'S REVIEW OF OPERATING RESULTS
The following review of operating results includes the historical results of
operations of the Company for the years ended May 31, 1995, 1994, and 1993
reflecting the Company's lodging business as discontinued operations. The
results of operations for the years ended May 31, 1995, 1994 and 1993 filed in
Form 10K-Annual Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the year ended May 31, 1995, have been restated herein
to reflect the Company's lodging business as discontinued operations. On March
7, 1996 the Company announced its intention to proceed with the separation of
its lodging business from its health care business via a spin-off of the lodging
division. The Board of Directors voted to approve, in principle, the transaction
subject to receipt of regulatory and other approvals and consents and
satisfactory implementation of the arrangements for the separation. The Company
anticipates that the transaction will be completed in the next five to seven
months. The Company has received a ruling from the Internal Revenue Service that
such a spin-off will be tax-free.
COMPARISON OF FISCAL YEAR RESULTS
Income from continuing operations increased $9.0 million in fiscal year 1995.
This compares to an increase of $14.0 million for fiscal year 1994. Fiscal year
1994 includes a gain on sale of property of $8.0 million pretax or $4.8 net of
tax. Excluding gain on sale of property increases in income from continuing
operations for fiscal 1995 and 1994 were 22% and 17%, respectively.
Revenues increased $96.2 million or 10% to $1.0 billion in fiscal year 1995,
while operating expenses increased $73.8 million or 11% to $770.0 million,
resulting in a $22.4 million increase in operating profits. This compares to an
increase of 11% in both revenue and expense for fiscal year 1994. The increased
fiscal year 1995 revenue was predominantly due to increased rates, $57.4
million, and additional capacity, $33.6 million. The increase of $92.3 million
in revenue for fiscal year 1994 reflected a 28% increase in beds served for the
82%-owned institutional pharmacy and approximately $56.3 million related to
value added services in the nursing and assisted living facilities.
The Company actively controls costs and has generally been successful at
maintaining overall cost increases at rates consistent with the applicable rates
of inflation. Increases in labor costs reflect additional services provided for
special needs and higher levels of acuity. Labor costs account for approximately
62% of the increase in operating expenses for fiscal year 1995 and 65% for
fiscal year 1994.
Depreciation and amortization expense increased by 11% in fiscal year 1995 to
$54.4 million. In fiscal year 1994 depreciation and amortization expense
increased by 6%. Increases were due to acquisitions and construction of
additional facilities.
General corporate expenses represented 6% of revenue in fiscal years 1995, 1994
and 1993. General corporate expenses include all indirect operating expenses as
well as risk management, information systems, treasury, accounting, legal and
other administrative support for the Company and its various subsidiaries.
Interest expense decreased 17% in fiscal year 1995 and 22% in fiscal year 1994.
The decrease in both years was primarily due to the redemption of $99.0 million
in 6 3/8% debentures in October 1993.
Included in discontinued operations is interest expense charged by the
continuing healthcare segment to the discontinued lodging segment relating to
cash advances provided to the lodging segment for the acquisition and renovation
of lodging assets for the years ended May 31, 1995, 1994 and 1993 of $15.5
million, $10.7 million and $7.1 million, respectively. Interest is charged at an
annual rate of 9% on the indebtedness.
4
<PAGE> 5
Manor Care, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended May 31 (in thousands of dollars, except per share data)
1995 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES $ 1,019,458 $ 923,308 $ 830,968
----------- --------- ---------
EXPENSES
Operating expenses 769,998 696,199 627,733
Depreciation and amortization 54,374 49,019 46,394
General corporate 63,197 53,644 46,371
----------- --------- ---------
Total expenses 887,569 798,862 720,498
----------- --------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE
OTHER INCOME AND (EXPENSES) AND
INCOME TAXES 131,889 124,446 110,470
----------- --------- ---------
OTHER INCOME AND (EXPENSES)
Interest income from advances to
discontinued lodging subsidiary 15,492 10,665 7,083
Interest income and other 7,348 5,288 6,292
Minority interest expense (2,129) (1,752) (1,408)
Gain on sale of property -- 7,978 --
Interest expense (22,769) (27,441) (34,988)
----------- --------- ---------
Total other expenses, net (2,058) (5,262) (23,021)
----------- --------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 129,831 119,184 87,449
INCOME TAXES 52,156 50,481 32,720
----------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 77,675 68,703 54,729
DISCONTINUED OPERATIONS
Income from discontinued operations (net
of income taxes of $13,144, $8,019
and $5,780, respectively) 16,811 9,659 7,654
----------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM 94,486 78,362 62,383
EXTRAORDINARY ITEM (DEBT REDEMPTION, NET OF
INCOME TAXES OF $1,851) -- -- (3,019)
----------- --------- ---------
NET INCOME $ 94,486 $ 78,362 $ 59,364
=========== ========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING 62,480 60,524 57,316
=========== ========= =========
INCOME PER SHARE OF COMMON STOCK
Income from continuing operations $ 1.24 $ 1.13 $ 0.96
Discontinued operations (net of income taxes) 0.27 0.16 0.13
Extraordinary item (debt redemption) -- -- (.05)
----------- --------- ---------
Net income per share of common stock $ 1.51 $ 1.29 $ 1.04
=========== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE> 6
Manor Care, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31 (in thousands of dollars) 1995 1994
- -----------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 72,972 $ 57,698
Receivables (net of allowances of $18,797 and $15,481) 74,203 66,443
Inventories 16,849 12,685
Current deferred income tax benefit 28,005 10,967
Other 10,895 5,298
----------- -----------
Total current assets 202,924 153,091
----------- -----------
PROPERTY AND EQUIPMENT, AT COST, NET
OF DEPRECIATION 736,635 645,239
----------- -----------
ADVANCES TO DISCONTINUED LODGING SEGMENT 198,522 147,061
----------- -----------
NET INVESTMENT IN DISCONTINUED OPERATIONS 65,829 55,208
----------- -----------
OTHER ASSETS 85,907 85,037
----------- -----------
$ 1,289,817 $ 1,085,636
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------
CURRENT LIABILITIES
Current portion of long-term debt $ 4,829 $ 5,098
Accounts payable 48,172 35,586
Accrued expenses 86,366 83,031
Income taxes payable -- 12,681
----------- -----------
Total current liabilities 139,367 136,396
----------- -----------
MORTGAGES AND OTHER LONG-TERM DEBT 157,600 66,290
----------- -----------
SUBORDINATED LONG-TERM DEBT 157,671 157,602
----------- -----------
DEFERRED INCOME TAXES ($139,075 AND $126,123) AND OTHER 210,306 191,533
----------- -----------
SHAREHOLDERS' EQUITY
Common stock $.10 par, 160,000,000 and 80,000,000 shares
authorized; 65,513,734 and 65,436,734 shares issued 6,553 6,545
Contributed capital 168,699 167,316
Retained earnings 491,520 402,520
Cumulative translation adjustment 709 (31)
Treasury stock, 2,989,264 and 2,986,492 shares, at cost (42,608) (42,535)
----------- -----------
Total shareholders' equity 624,873 533,815
----------- -----------
$ 1,289,817 $ 1,085,636
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
6
<PAGE> 7
Manor Care, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cumulative
Common Stock Contributed Retained Translation
(in thousands of dollars) Shares Amount Capital Earnings Adjustment
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, May 31, 1992 60,363,588 $6,036 $ 66,852 $275,264 $(640)
Net income - - - 59,364 -
Exercise of stock options 107,244 11 1,457 - -
Cash dividends - - - (5,096) -
Other - - 162 - 992
---------- ------ -------- -------- -----
Balance, May 31, 1993 60,470,832 6,047 68,471 329,532 352
Net income - - - 78,362 -
Exercise of stock options 222,380 23 2,186 - -
Cash dividends - - - (5,374) -
Debenture Conversion 4,743,522 475 96,432 - -
Other - - 227 - (383)
--------- ------ -------- -------- -----
Balance, May 31, 1994 65,436,734 6,545 167,316 402,520 (31)
Net income - - - 94,486 -
Exercise of stock options 77,000 8 833 - -
Cash dividends - - - (5,489) -
Other - - 550 3 740
---------- ------ -------- -------- -----
Balance, May 31, 1995 65,513,734 $6,553 $168,699 $491,520 $ 709
========== ====== ======== ======== =====
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
7
<PAGE> 8
Manor Care, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended May 31 (in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 94,486 $ 78,362 $ 59,364
Reconciliation of net income to net cash
provided by operating activities:
Income from discontinued operation (16,811) (9,659) (7,654)
Depreciation and amortization 54,374 (49,019 46,394
Amortization of debt discount 499 940 899
Provision for bad debts 12,587 10,563 6,853
(Decrease) increase in deferred taxes (4,086) 3,005 9,673
Gain on sale of facilities -- (7,978) --
Changes in assets and liabilities (excluding
sold facilities and acquisitions):
Change in receivables (20,128) (16,269) (13,454)
Change in inventories and other current assets (9,115) (587) 111
Change in current liabilities 15,839 7,374 (6,609)
Change in income taxes payable (12,681) 7,427 719
Change in other liabilities 5,796 8,624 6,147
--------- --------- ---------
NET CASH PROVIDED BY CONTINUING OPERATIONS 120,760 130,821 102,443
NET CASH PROVIDED BY DISCONTINUED OPERATIONS 48,604 42,878 21,866
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 169,364 173,699 124,309
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment (83,900) (72,932) (45,227)
Acquisition of healthcare facilities (56,745) -- --
Acquisition of pharmacies (2,451) (7,217) (29,188)
Proceeds from the sale of property -- 15,630 --
Sale of (investment in) healthcare business 13,334 (10,000) --
Investment in systems development (8,000) -- --
Other items, net (2,563) 450 6,006
--------- --------- ---------
NET CASH UTILIZED BY INVESTING
ACTIVITIES FROM CONTINUING OPERATIONS (140,325) (74,069) (68,409)
NET CASH UTILIZED BY INVESTING
ACTIVITIES FROM DISCONTINUED OPERATIONS (92,422) (69,127) (69,962)
--------- --------- ---------
NET CASH UTILIZED BY INVESTING ACTIVITIES (232,747) (143,196) (138,371)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing of long-term debt 207,254 -- 150,000
Principal payments of debt (122,496) (52,479) (165,356)
Advances to discontinued operations (51,461) (68,361) (78,700)
Proceeds from exercise of stock options 841 2,209 1,468
Dividends paid (5,489) (5,374) (5,096)
--------- --------- ---------
NET CASH PROVIDED (UTILIZED) BY
FINANCING ACTIVITIES FROM CONTINUING OPERATIONS 28,649 (124,005) (97,684)
NET CASH PROVIDED BY FINANCING
ACTIVITIES FROM DISCONTINUED OPERATIONS 50,008 71,447 108,768
--------- --------- ---------
NET CASH PROVIDED (UTILIZED) BY FINANCING
ACTIVITIES 78,657 (52,558) 11,084
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 15,274 (22,055) (2,978)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 57,698 79,753 82,731
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 72,972 $ 57,698 $ 79,753
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
8
<PAGE> 9
MANAGEMENT'S REVIEW OF FINANCIAL POSITION AND CASH FLOWS
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains adequate capital resources, including strong operating
cash flows and committed lines of credit, to support ongoing operations and
fulfill projected capital requirements for both the upcoming year and the
foreseeable future.
On March 7, 1996, the Company announced its intention to proceed with a
separation of its lodging business from its health care business via a spin-off
of the lodging division. The Board of Directors voted to approve, in principle,
the transaction subject to receipt of regulatory and other approvals and
consents and satisfactory implementation of the arrangements for the separation.
The Company anticipates that the transaction will be completed in the next five
to seven months. The Company has received a ruling from the Internal Revenue
Service that such a spin-off will be tax-free. Management believes the ability
to raise both debt and equity capital will be enhanced upon completion of the
transaction. As of May 31, 1995, the Company had cash advances totalling $198.5
million outstanding from the lodging segment. The cash advances are to be repaid
over a three year period from the date of the proposed spin-off. Interest is
charged at an annual rate of 9% on the indebtedness.
In November 1994, the Company entered into a revolving credit facility provided
by a group of eighteen banks. This facility replaced the $100.0 million
revolving credit facility agreement, as amended, dated June 1993, and the $65.0
million multi-currency revolving credit facility agreement, as amended, dated
December 1992. The new facility expires in November 1999. At May 31, 1995, bank
lines totaled $270.0 million of which $141.7 million remained unused.
The Company maintains adequate debt capacity as evidenced by Standard & Poor's
assignment of an investment grade BBB to the Company's senior debt. The
Company's ratio of senior debt to equity plus subordinated debt is .2 to 1.
Furthermore, a significant portion of the Company's property and equipment
remains unencumbered.
The Company's working capital ratio at May 31, 1995 was 1.5. The Company
attempts to minimize its investment in net current assets, and believes that the
maintenance of minimal working capital is an appropriate objective given the
stability of the Company's operating cash flows and the depth of its financial
resources.
PROPERTY
Investment in property and equipment includes routine capital expenditures and
specialty product conversions. During fiscal 1995, investment in property and
equipment utilized in continuing operations amounted to $84.0 million.
Additionally, during fiscal 1995, $56.7 million was spent to acquire 9
additional nursing centers and assisted living facilities.
LONG-TERM DEBT
Long term debt was $315.3 million at May 31, 1995 compared to $223.9 million at
May 31, 1994. The amounts exclude debt related to discontinued operations of
$52.1 million at May 31, 1995 and $53.0 at May 31, 1994. The increase in
long-term debt is mainly attributable to the Company's acquisition of 9
additional nursing centers and assisted living facilities.
SHAREHOLDERS' EQUITY
Shareholders' equity increased to $624.9 million at May 31, 1995 from $533.8
million at May 31, 1994. This increase was primarily due to net income of $94.5
million, reduced by dividend payments amounting to $5.5 million.
9
<PAGE> 10
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Manor Care, Inc.:
We have audited the accompanying consolidated balance sheets of Manor Care,
Inc. (a Delaware Corporation) and subsidiaries as of May 31, 1995 and 1994, and
the related consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended May 31, 1995. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above (appearing on pages
5-8 and 11-19) present fairly, in all material respects, the financial position
of Manor Care, Inc. and subsidiaries as of May 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended May 31, 1995, in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for the purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
WASHINGTON, D.C.,
MAY 3, 1996
10
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Manor Care,
Inc. and its subsidiaries (the "Company"). The accompanying financial statements
have been restated to reflect the lodging segment as a discontinued operation.
All significant intercompany transactions have been eliminated.
Cash
The Company considers all highly liquid securities purchased with a maturity
of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
The components of property and equipment at May 31, were:
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994
- ------------------------- ---------- ---------
<S> <C> <C>
Land $ 78,092 $ 69,232
Building and improvements 746,961 665,078
Capitalized leases 12,747 12,747
Furniture, fixtures and equipment 163,278 139,606
Facilities in progress 23,956 15,653
---------- ---------
1,025,034 902,316
Less: Accumulated depreciation (288,399) (257,077)
---------- ---------
$ 736,635 $ 645,239
========== =========
</TABLE>
Depreciation has been computed for financial reporting purposes using the
straight-line method. A summary of the ranges of estimated useful lives upon
which depreciation rates have been based follows:
<TABLE>
<S> <C>
Building and improvements 10-40 years
Furniture, fixtures and equipment 3-20 years
</TABLE>
Accumulated depreciation includes $5.6 million at May 31, 1995 and $5.2
million at May 31, 1994 relating to capitalized leases. Capitalized leases are
amortized on a straight-line basis over the lesser of the lease term or the
remaining useful lives of the leased properties.
11
<PAGE> 12
CAPITALIZATION POLICIES
Major renovations and replacements are capitalized to appropriate property
and equipment accounts. Upon sale or retirement of property, the cost and
related accumulated depreciation are eliminated from the accounts and the
related gain or loss is taken into income. Maintenance, repairs and minor
replacements are charged to expense.
Construction overhead and costs incurred to ready a project for its
intended use are capitalized for major development projects and are amortized
over the lives of the related assets. Pre-opening marketing, personnel
recruitment and training costs related to facilities under construction are
deferred until construction is completed and then amortized over two years.
The Company capitalizes interest on borrowings applicable to facilities in
progress. Interest has been capitalized as follows: 1995, $1.8 million; 1994,
$0.6 million; 1993, $1.0 million.
SELF-INSURANCE PROGRAMS
The Company self-insures for certain levels of general and professional
liability, automobile liability and workers' compensation coverage. The
estimated costs of these programs are accrued at present values based on
actuarial projections for known and anticipated claims.
NET INCOME PER COMMON SHARE
Net income per common share has been computed based on the weighted average
number of shares of common stock outstanding. The effect of outstanding and
unexercised stock options on the computation is insignificant.
12
<PAGE> 13
INCOME TAXES
Included in the 1994 tax provision was a charge of $3.4 million due to the
impact on prior periods of a change in the rates. In fiscal year 1993, the
Company adopted Statement of Financial Accounting Standards No. 109. This
adoption did not have a material effect on the Company's financial statements.
Income tax provisions for continuing operations were as follows:
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994 1993
- ------------------------- -------- -------- --------
<S> <C> <C> <C>
Current tax expense
Federal $ 41,432 $ 40,292 $ 18,417
State 9,145 9,882 6,352
Deferred tax expense
Federal 1,296 1,594 7,946
State 283 (1,287) 5
-------- -------- --------
$ 52,156 $ 50,481 $ 32,720
======== ======== ========
</TABLE>
Deferred tax assets (liabilities) are comprised of the following at May 31:
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994 1993
- ------------------------- --------- --------- ---------
<S> <C> <C> <C>
Depreciation and
amortization $ (80,554) $ (74,849) $ (64,377)
Purchased tax benefits (46,212) (47,506) (47,689)
Gain on stock issuance (11,895) (11,895) (11,616)
Other (17,957) (815) (4,444)
--------- --------- ---------
Gross deferred tax
liabilities (156,618) (135,065) (128,126)
--------- --------- ---------
Tax deposit 12,000 -- --
Other 30,879 20,113 15,676
--------- --------- ---------
Gross deferred tax assets 42,879 20,113 15,676
--------- --------- ---------
Net deferred tax $(113,739) $(114,952) $(112,450)
========= ========= =========
</TABLE>
The Company expects the deferred tax assets to be realized through future
taxable income.
A reconciliation of income tax expense at the statutory rate to income tax
expense included in the consolidated statements of income follows:
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994 1993
- ------------------------- -------- -------- --------
<S> <C> <C> <C>
Federal income tax rate 35% 35% 34%
=== === ===
Federal taxes at statutory rate $ 45,441 $ 41,715 $ 29,732
State income taxes, net of
Federal tax benefit 6,128 5,587 4,196
Effect of tax rate changes -- 3,444 --
Tax credits (910) (910) (726)
Other 1,497 645 (482)
-------- -------- --------
Effective income tax expense $ 52,156 $ 50,481 $ 32,720
======== ======== ========
</TABLE>
Income taxes paid on a consolidated basis for the years ended May 31, 1995,
1994 and 1993 were $69,725, $48,005 and $27,746, respectively.
13
<PAGE> 14
ACCRUED EXPENSES
Accrued expenses at May 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994
- ------------------------- ------- -------
<S> <C> <C>
Payroll $51,711 $46,329
Taxes, other than income 10,406 9,054
Insurance 8,209 8,681
Interest 1,456 1,207
Other 14,584 17,760
------- -------
$86,366 $83,031
======= =======
</TABLE>
LONG-TERM DEBT
Maturities of long-term debt at May 31, 1995 were as follows:
<TABLE>
<CAPTION>
Fiscal Year (in thousands of dollars)
- -------------------------------------
<S> <C>
1996 $ 4,829
1997 7,984
1998 13,318
1999 5,722
2000 114,556
2001 to 2024 173,691
-------
$320,100
========
</TABLE>
Long-term debt, consisting of mortgages, capital leases and subordinated
debt, was net of discount of $1.5 million and $2.0 million at May 31, 1995 and
1994, respectively. Amortization of discount was $.5 million in 1995, $.9
million in 1994 and $.8 million in 1993, including the write-off associated with
debt redemptions.
During fiscal year 1995, interest rates on subordinated debt ranged from
4.75% to 9.5%; interest rates on mortgages and other long-term debt ranged from
4.0% to 15.3%. The weighted average interest rate in fiscal year 1995 was 9.2%.
In October 1993, the Company redeemed the $99.0 million of 6 3/8%
Convertible Subordinated Debentures due 2011. Approximately $3.0 million were
redeemed for cash, at a premium, while the remaining debentures were converted
into common stock at $20.31 per share which resulted in 4,743,522 shares being
issued.
On November 30, 1994, the Company entered into a $250.0 million competitive
advance and multi-currency revolving credit facility provided by a group of
eighteen banks. This credit facility replaces the $100.0 million revolving
credit facility and the $65.0 million multi-currency revolving credit facility.
The new facility provides that up to $75.0 million is available for borrowings
in foreign currencies. Borrowings under the facility are, at the option of the
Company, at 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 presently requires the Company to pay fees of 3/16 of 1%
on the entire loan commitment. The facility will terminate on November 30, 1999.
At May 31, 1995, outstanding revolving borrowings amounted to $95.0 million.
Additionally, at May 31, 1995 $33.3 million borrowed under the foreign currency
portion of the multi-currency credit facility has been included in net
investment in discontinued operations as borrowings are directly attributable to
the lodging segment.
14
<PAGE> 15
Compensating balances of $.8 million are required by certain debt
agreements. In addition, various debt agreements impose certain restrictions
regarding financial ratios and payment of dividends. At May 31, 1995,
approximately $132.0 million of retained earnings were not available for cash
dividends and owned property with a net book value of $128.7 million was pledged
or mortgaged.
LEASES
The Company operates certain property and equipment under leases, some with
purchase options that expire at various dates through 2023. Future minimum lease
payments are as follows:
<TABLE>
Operating Capitalized
(in thousands of dollars) Leases Leases
- ------------------------- --------- -----------
<C> <C> <C>
1996 $ 3,988 $ 690
1997 4,025 698
1998 3,437 698
1999 3,106 698
2000 2,922 583
Thereafter 8,772 2,487
------- ------
Total minimum
lease payments $26,250 $5,854
=======
Less: Amount representing
interest 2,124
------
Present value of lease payments 3,730
Less: Current portion 341
------
Lease obligations included in
long-term debt $3,389
======
</TABLE>
Rental expense under noncancellable operating leases was $4.9 million in
1995, $4.4 million in 1994 and $4.0 million in 1993.
CAPITAL STOCK
There are 5,000,000 shares of authorized but unissued preferred stock with
a par value of $1.00 per share. The rights of the preferred shares will be
determined by the Board of Directors when the shares are issued. There are
160,000,000 authorized shares of $.10 par value common stock.
During fiscal year 1995, the Company acquired 2,772 shares of its common
stock for a total cost of $73,000.
In September 1994, the shareholders approved the Company's Non-Employee
Director Stock Option and Deferred Compensation Stock Purchase Plan - Plan A,
and authorized a total 150,000 shares of common stock to be granted to
non-employee directors. Pursuant to the plan, each eligible non-employee
director was granted 5,000 shares on September 9, 1994 and each non-employee
director subsequently elected to the Board of Directors will receive an option
to purchase 5,000 shares of common stock on the date of his or her initial
election. In addition, each eligible non-employee director will be automatically
granted an option to purchase an additional 1,000 shares on the anniversary date
of election. Options on 30,000 shares at $27.94 were granted on September 9,
1994 and will become exercisable between September 1996 and September 1998. All
30,000 shares remained outstanding at May 31, 1995. The plan will expire in
September 2004.
15
<PAGE> 16
In September 1993, the shareholders approved the Company's Key Executive
Stock Option Plan of 1993 and authorized 2,000,000 shares of common stock to be
granted to key executive officers and key employees until August 31, 2003, at
which date the plan will expire. During the current period, 80,000 options were
granted and will become exercisable from 1996 to 2001 and expire in December
2003. At May 31, 1995, options for the purchase of an aggregate of 516,500
shares were outstanding at prices equal to the market value of the stock at date
of grant.
Under the Company's 1969 stock option plan, as amended and extended,
stockholders authorized 5,223,437 shares of common stock to be granted to key
executive employees until September 30, 1993. At May 31, 1995, options for the
purchase of an aggregate of 2,991,750 shares were outstanding at prices equal to
the market value of the stock at date of grant. During the current period, no
options were granted to executive officers and key employees. Options totaling
1,260,986 are presently exercisable and 1,730,764 will become exercisable from
1996 to 2002 and will expire at various dates to September 2003.
Option activity under the above plans, adjusted for prior stock splits,
dividends and previously granted non-qualified options, was as follows:
<TABLE>
<CAPTION>
Number of Shares Average Option Price
-------------------------------------------------- --------------------------------------
Options 1995 1994 1993 1995 1994 1993
- ------- --------- --------- --------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Granted 110,000 476,500 444,000 $27.50 $22.42 $20.97
Exercised 77,000 222,380 107,244 $10.92 $ 9.93 $10.14
Cancelled - 149,700 206,700 $ - $ 7.38 $12.66
Outstanding
At May 31 3,538,250 3,505,250 3,400,830 $14.36 $14.26 $12.27
Available
for grant
at May 31 1,603,500 1,563,500 52,696
</TABLE>
In connection with the spin-off, the outstanding options held by current
and former employees of the Company will be redenominated in both Company and
lodging company stock and the number and exercise prices of the options will be
adjusted based on the relative trading prices of shares of the common stock of
the two companies to retain the intrinsic value of the options.
ACQUISITIONS AND DIVESTITURES
During fiscal year 1995, the Company purchased nine nursing centers and
assisted living facilities for $56.7 million. The Company's 82%-owned pharmacy
subsidiary, Vitalink Pharmacy Services, Inc., purchased a pharmacy in Texas
servicing 1,300 institutional beds for $2.5 million. In March 1995, the Company
sold its investment in a physicians practice management business for $13.3
million.
During fiscal year 1994, the Company invested $10.0 million in a minority
interest in a physicians practice management business. The Company also sold
three nursing homes for $15.6 million. The after tax gain recognized from this
sale was $4.8 million. Also, during fiscal year 1994, Vitalink Pharmacy
Services, Inc. purchased two pharmacies based in Oregon and Colorado which
service over 7,400 institutional beds for a total of $7.2 million.
During fiscal year 1993, the Company sold two nursing facilities for $5.2
million. The realized gain from the sale was immaterial. Also during fiscal year
1993, Vitalink Pharmacy Services, Inc. purchased a pharmacy located in Maryland,
servicing 2,600 institutional beds and a pharmacy business in New Jersey,
servicing over 9,100 institutional beds, for approximately $29.2 million.
16
<PAGE> 17
Unless otherwise noted, acquisitions are accounted for as a purchase.
Approximately 70% of the total costs for nursing home acquisitions are allocated
to buildings, approximately 20% to land and the remainder to furniture, fixtures
and equipment. Acquisition costs in excess of fair market value of the assets
acquired are allocated to goodwill.
DISCONTINUED OPERATIONS
On March 7, 1996, the Company announced its intention to proceed with a
separation of its lodging business from its health care business. The spin-off
of the lodging division will be effected by a distribution to the Company's
shareholders of all of the common stock of Choice Hotels International, Inc., a
majority owned subsidiary of the Company, which as of the date of the spin-off,
will own and operate all of the Company's lodging operations. The Board of
Directors voted to approve in principle the transaction subject to receipt of
regulatory and other approvals and consents and satisfactory implementation of
the arrangements for the separation. The Company anticipates that the
transaction will be completed in the next five to seven months. The Company has
received a ruling from the Internal Revenue Service that such a spin-off will be
tax-free.
The revenues, income from discontinued operations before income taxes and
net income from discontinued operations for the years ended May 31, 1995, 1994
and 1993 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenues $302,535 $239,764 $178,707
======== ======== ========
Income from discontinued
operations before taxes $ 29,955 $ 17,678 $ 13,434
======== ======== ========
Net income from discontinued
operations $ 16,811 $ 9,659 $ 7,654
======== ======== ========
</TABLE>
Included in discontinued operations is interest expense charged by the
continuing healthcare segment to the discontinued lodging segment relating to
cash advances provided to the lodging segment for the acquisition and renovation
of lodging assets. For the years ended May 31, 1995, 1994 and 1993, interest so
allocated amounted to $15.5 million, $10.7 million and $7.1 million,
respectively. The indebtedness related to lodging acquisitions and renovations
are reflected as advances to discontinued lodging segment in the consolidated
balance sheets. Such advances amounted to $198.5 million and $147.1 million at
May 31, 1995 and 1994, respectively. The indebtedness is to be repaid over a
three year period from the date of the proposed spin-off. Interest is charged at
an annual rate of 9% on the indebtedness.
General corporate expenses of $6.3 million, $5.5 million and $5.0 million,
respectively, were charged to discontinued operations for the years ended May
31, 1995, 1994 and 1993. General corporate charges were principally determined
on a time allocation basis.
SUBSEQUENT EVENTS
In November, 1995 the Company acquired six assisted living facilities, with
five attached skilled nursing units, for a total purchase price of $74.3
million, of which $19 million was cash and the remainder was assumed
liabilities.
17
<PAGE> 18
In October, 1995, the Company purchased approximately 43% of the common
stock of In-Home Health, Inc. (IHHI), a provider of home health services, for
$22.9 million. The Company paid an additional $20 million to IHHI for 100% of
its outstanding voting convertible preferred stock and for warrants to purchase
an additional six million shares of common stock. As a result of this
transaction the Company effectively controls approximately 63% of the voting
stock of IHHI. This transaction was accounted for as purchase.
COMMITMENTS AND CONTINGENCIES
The Company is a defendant in a number of lawsuits arising in the ordinary
course of business. In the opinion of management and counsel to the Company, the
ultimate outcome of such litigation will not have a material adverse effect on
the Company's financial position or results of operations.
Revenues recorded under Federal and state medical assistance programs are
subject to adjustment upon audit by appropriate government agencies. For fiscal
years 1995, 1994 and 1993 these revenues amounted to $431.0 million, $377.3
million and $337.0 million, respectively. In the opinion of management, any
difference between revenues recorded and final determination will not be
significant.
As of May 31, 1995, the Company had contractual commitments of $38.2
million relating to its internal construction program.
PENSION, PROFIT SHARING AND INCENTIVE PLANS
The Company has various pension and profit sharing plans including a
supplemental executive retirement plan, and contributes to certain union welfare
plans. The provision for these plans amounted to $11.0 million in 1995, $9.3
million in 1994, and $7.7 million in 1993. All vested benefits under retirement
plans are funded or accrued.
The Company sponsors a defined contribution profit sharing plan covering
substantially all of its employees. Contributions of up to 6% of each covered
employee's salary are determined based on years of service. The cost of the plan
totaled $4.8 million in 1995, $4.1 million in 1994 and $4.2 million in 1993.
Also included in the Company's retirement plans is a defined benefit
pension plan covering substantially all of its employees. The benefits are based
on service credit for each year of participation after January 1, 1992. In
addition, there is a prior benefit equal to the accrued benefit at December 31,
1991 for a predecessor plan.
Service cost benefits earned during fiscal years 1995, 1994 and 1993
approximated the Plan's annual costs of $2.7 million, $2.8 million and $2.3
million, respectively. As of February 28, 1995, 1994 and 1993, Plan assets of
approximately $11.0 million, $7.5 million and $6.1 million compared to vested
benefit obligations of $8.7 million, $8.1 million and $6.4 million,
respectively.
Projected benefit obligations were not significantly different from
accumulated benefit obligations of $11.0 million, $10.0 million and $7.9 million
as of the same dates. Liabilities recorded on the Company's balance sheets as of
May 31, 1995, 1994 and 1993, were $.5 million, $2.6 million and $1.7 million,
respectively. Projected benefit obligations were determined using an assumed
discount rate of 8.5% for 1995 and 8% for 1994 and 1993, an assumed rate of
return on plan assets of 8.25% and an assumed compensation increase of 4.5%.
The Company also has various incentive compensation plans for certain
personnel. Incentive compensation accrued was $4.1 million in 1995, $3.7 million
in 1994 and $2.5 million in 1993.
18
<PAGE> 19
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose the fair value of its financial
instruments in accordance with Statement of Financial Accounting Standards No.
107 "Disclosures about Fair Value of Financial Instruments". Fair values of
material balances were determined by using market rates currently available.
The balance sheet carrying amount of cash, cash equivalents and receivables
approximate fair value due to the short-term nature of these items. Management
believes that the fair value of the advances to discontinued lodging segment
approximate the carrying value. Mortgages and other long-term debt consist of
bank loans, mortgages and capital leases. Interest rates on bank loans adjust
frequently based on current market rates; accordingly, the carrying amount of
bank loans is equivalent to fair value. Fair values for mortgages and capital
leases were determined by discounting future cash flows using the Company's
current market rate for secured debt. Fair value of subordinated debt was
determined by pricing the debt at quoted market prices.
<TABLE>
<CAPTION>
Carrying Estimated
Balances at May 31, 1995 Amount Value
- ------------------------ -------- ---------
(in thousands)
<S> <C> <C>
Assets
Cash & cash equivalents $ 72,972 $ 72,972
Receivables, net 74,203 74,203
Advances to discontinued lodging
segment 198,522 198,522
Liabilities (including current portion)
Mortgages and other long-term debt 162,429 163,568
Subordinated long-term debt 157,671 169,601
</TABLE>
19
<PAGE> 20
SUMMARY OF QUARTERLY RESULTS
(Unaudited)
<TABLE>
<CAPTION>
Revenues Income
from from
Quarters Continuing Continuing Net Per
Ended Operations Operations Income Share
- ----------- ---------- ---------- ---------- -----
<S> <C> <C> <C> <C>
FISCAL 1994
August $ 221,273 $ 28,642 $ 19,762 $ .34
November 224,102 29,126 20,241 .34
February 231,503 30,683 15,651 .25
May 246,430 35,995 22,708 .36
---------- ---------- ---------- -----
$ 923,308 $ 124,446 $ 78,362 $1.29
========== ========== ========== =====
FISCAL 1995
August $ 242,974 $ 31,527 $ 24,363 $ .39
November 247,118 31,787 25,007 .40
February 258,255 32,434 18,741 .30
May 271,111 36,141 26,375 .42
---------- ---------- ---------- -----
$1,019,458 $ 131,889 $ 94,486 $1.51
========== ========== ========== =====
</TABLE>
QUARTERLY MARKET PRICE RANGE
OF COMMON STOCK AND DIVIDENDS PAID
(Unaudited)
<TABLE>
<CAPTION>
Cash Dividends
Market Price Per Share Paid Per Share
Quarters ---------------------- --------------
Ended High Low Amount Date
--------- ---- --- ------ ----
<S> <C> <C> <C> <C>
FISCAL 1993
August $21.25 $15.63 $.022 8/27/92
November $24.50 $17.75 $.022 11/27/92
February $26.63 $19.00 $.022 2/26/93
May $22.38 $18.63 $.022 5/27/93
FISCAL 1994
August $24.00 $17.50 $.022 8/27/93
November $23.25 $19.38 $.022 11/26/93
February $28.00 $20.88 $.022 2/25/94
May $29.25 $23.25 $.022 5/27/94
FISCAL 1995
August $27.88 $24.25 $.022 8/26/94
November $29.63 $25.25 $.022 11/25/94
February $31.25 $27.00 $.022 2/27/95
May $32.25 $27.50 $.022 5/26/95
</TABLE>
20
<PAGE> 21
Schedule II
MANOR CARE, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(in thousands of dollars)
<TABLE>
<CAPTION>
Balance at Charges to Balance at
Beginning Profit End
Description of Period and Loss Other Write-Offs of Period
- ----------- --------- -------- ----- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended May 31, 1995
Allowance for doubtful accounts $15,481 $12,587 $ -- $(9,271) $18,797
======= ======= ====== ======= =======
Allowance for doubtful long-
term notes receivable $ -- $ -- $ -- $ -- $ --
======= ======= ====== ======= =======
Year ended May 31, 1994
Allowance for doubtful accounts $ 9,519 $10,563 $3,434(A) $(8,035) $15,481
======= ======= ====== ======= =======
Allowance for doubtful long-
term notes receivable $ -- $ -- $ -- $ -- $ --
======= ======= ====== ======= =======
Year ended May 31, 1993
Allowance for doubtful accounts $11,236 $ 6,853 $ -- $(8,570) $ 9,519
======= ======= ====== ======= =======
Allowance for doubtful long-
term notes receivable $ -- $ -- $ -- $ -- $ --
======= ======= ====== ======= =======
</TABLE>
(A)Represents reserves of acquired companies.
21
<PAGE> 22
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
99.1 Press Release, dated March 7, 1996, announcing the intention
to seperate the lodging business and health care business.
27 Financial Data Schedule.
<PAGE> 1
EXHIBIT 99.1
NEWS RELEASE MANOR CARE, INC.
10750 Columbia Pike
Silver Spring, MD 20901
(301) 681-9400
CONTACT: James A. MacCutcheon, Senior Vice President, CFO & Treasurer
Leigh C. Comas, Vice President, Finance and Assistant Treasurer
FOR IMMEDIATE RELEASE
MANOR CARE TO SEPARATE LODGING AND HEALTH CARE BUSINESSES
Silver Spring, Maryland, March 7, 1996. Manor Care, Inc. (NYSE symbol
MNR), a national health care and international lodging firm, today announced its
intention to proceed with a separation of its lodging business from its health
care business via a spin-off of the lodging division. The Board of Directors
voted to approve in principle the transaction subject to receipt of regulatory
and other approvals and consents and satisfactory implementation of the
arrangements for the separation. The company anticipates that the transaction
will be completed in the next six to eight months. Manor Care also announced
receipt of a ruling from the Internal Revenue Service that such a spin-off will
be tax-free.
The Board of Directors of the new lodging entity is expected to include
Stewart Bainum, Jr., Chairman and CEO of Manor Care, Inc; Stewart Bainum, Vice
Chairman of Manor Care, Inc; Jerry Robertson, retired Executive Vice President,
3M Life Sciences Sector and Corporate Services, and Manor Care, Inc. board
member; Frederic Malek, Chairman, Thayer Capital Partners, and Manor Care, Inc.
board member; Robert C. Hazard, Jr., Co-Chairman of the Board of Choice Hotels
International, Inc. and Gerald W. Petitt, Co-Chairman of the Board of Choice
Hotels International, Inc. The Company anticipates announcing a seventh Board
member prior to the completion of the spin-off. The new lodging entity's
Chairman and CEO will be Stewart Bainum, Jr. and its President and Chief
Operating Officer will be Don Landry.
Stewart Bainum, Jr., commented, "There are several key benefits to be
realized through the separation of our lodging and health care businesses.
First, we anticipate that the spin-off will increase capital-raising efficiency
as both debt and equity investors will be better able to asses the different
risk profiles and operating characteristics of both businesses. In addition, we
believe that the separation will improve strategic freedom and focus at both
entities. Finally, a focus of Manor Care in recent years has been to move
corporate resources as close to the end customer as possible. This transaction
is a logical last step in the Company's push towards decentralization."
Manor Care's lodging division, totalling $342 million in revenues for
the twelve months ended November 30, 1995, includes both franchising and
ownership/management operations. Choice Hotels International, the Company's
franchise lodging subsidiary, markets hotels in more that 30 countries under the
brand names Quality, Comfort, Clarion, Sleep, Rodeway, Econo Lodge and MainStay
Suites. It is the second largest hotel franchisor in the world with
approximately 3,600 hotels open or under development, containing in excess of
310,000 guest rooms. The division's hotel ownership and management business
consists of 77 lodging properties worldwide.
Manor Care, through its health care segment, operates 197 health care
facilities containing 26,152 beds in 28 states. Manor Care also owns 82% of
Vitalink Pharmacy Services (NASDAQ symbol VTLK) and holds a controlling interest
in In Home Health, Inc. (NASDAQ symbol IHHI).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
MANCOR CARE, INC. AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE FOR
COMMERCIAL AND INDUSTRIAL COMPANIES<F1>
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> MAY-31-1995
<CASH> 72,972
<SECURITIES> 0
<RECEIVABLES> 93,000
<ALLOWANCES> 18,797
<INVENTORY> 16,849
<CURRENT-ASSETS> 202,924
<PP&E> 1,025,034
<DEPRECIATION> 288,399
<TOTAL-ASSETS> 1,289,817
<CURRENT-LIABILITIES> 139,367
<BONDS> 315,271
0
0
<COMMON> 6,553
<OTHER-SE> 618,320
<TOTAL-LIABILITY-AND-EQUITY> 1,289,817
<SALES> 0
<TOTAL-REVENUES> 1,019,458
<CGS> 0
<TOTAL-COSTS> 887,569
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12,587
<INTEREST-EXPENSE> 22,769
<INCOME-PRETAX> 129,831
<INCOME-TAX> 52,156
<INCOME-CONTINUING> 77,675
<DISCONTINUED> 16,811
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94,486
<EPS-PRIMARY> 1.51<F2>
<EPS-DILUTED> 1.51<F2>
<FN>
<F1>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
reference to such financial statements.
<F2>The Company presents simple earnings per share (EPS) on the face of its income
statement as fully dilutive EPS is within 97% of simple EPS. The figures
presented above are simple EPS.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
MANOR CARE, INC. AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE FOR
COMMERCIAL AND INDUSTRIAL COMPANIES<F1>
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1994
<PERIOD-END> MAY-31-1994
<CASH> 57,698
<SECURITIES> 0
<RECEIVABLES> 81,924
<ALLOWANCES> 15,481
<INVENTORY> 12,685
<CURRENT-ASSETS> 153,091
<PP&E> 902,316
<DEPRECIATION> 257,077
<TOTAL-ASSETS> 1,085,636
<CURRENT-LIABILITIES> 136,396
<BONDS> 223,892
0
0
<COMMON> 6,545
<OTHER-SE> 527,270
<TOTAL-LIABILITY-AND-EQUITY> 1,085,636
<SALES> 0
<TOTAL-REVENUES> 923,308
<CGS> 0
<TOTAL-COSTS> 798,862
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,563
<INTEREST-EXPENSE> 27,441
<INCOME-PRETAX> 119,184
<INCOME-TAX> 50,481
<INCOME-CONTINUING> 68,703
<DISCONTINUED> 9,659
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,362
<EPS-PRIMARY> 1.29<F2>
<EPS-DILUTED> 1.29<F2>
<FN>
<F1>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
reference to such financial statements.
<F2>The Company presents simple earnings per share (EPS) on the face of its income
statement as fully dilutive EPS is within 97% of simple EPS. The figures
presented above are simple EPS.
</FN>
</TABLE>
