<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 1-10989
VENCOR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 61-1055020
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3300 PROVIDIAN CENTER
400 WEST MARKET STREET
LOUISVILLE, KY 40202
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
(502) 596-7300
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class of Common Stock Outstanding at April 30, 1996
---------------------------- -----------------------------
Common stock, $.25 par value 70,346,623 shares
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<PAGE>
VENCOR, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Statement of Income --
for the three months ended March 31, 1996 and 1995.......... 3
Condensed Consolidated Balance Sheet --
March 31, 1996 and December 31, 1995........................ 4
Condensed Consolidated Statement of Cash Flows --
for the three months ended March 31, 1996 and 1995.......... 5
Notes to Condensed Consolidated Financial Statements........... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................... 13
</TABLE>
2
<PAGE>
VENCOR, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Revenues.................................................. $626,337 $552,178
-------- --------
Salaries, wages and benefits.............................. 372,318 321,806
Supplies.................................................. 51,762 43,516
Rent...................................................... 19,167 19,579
Other operating expenses.................................. 104,501 99,247
Depreciation and amortization............................. 24,793 21,170
Interest expense.......................................... 12,480 15,458
Investment income......................................... (3,578) (3,180)
-------- --------
581,443 517,596
-------- --------
Income from operations before income taxes................ 44,894 34,582
Provision for income taxes................................ 17,284 13,410
-------- --------
Income from operations.................................... 27,610 21,172
Extraordinary loss on extinguishment of debt, net of
income tax benefit....................................... - (66)
-------- --------
Net income............................................. 27,610 21,106
Preferred stock dividend requirements..................... - (1,793)
-------- --------
Income available to common stockholders................ $ 27,610 $ 19,313
======== ========
Earnings per common and common equivalent share:
Primary:
Income from operations.................................. $ .39 $ .33
Extraordinary loss on extinguishment of debt............ - -
-------- --------
Net income............................................. $ .39 $ .33
======== ========
Fully diluted:
Income from operations.................................. $ .39 $ .31
Extraordinary loss on extinguishment of debt............ - -
-------- --------
Net income............................................. $ .39 $ .31
======== ========
Shares used in computing earnings per common and common
equivalent share:
Primary................................................. 71,455 58,981
Fully diluted........................................... 71,455 70,826
</TABLE>
See accompanying notes.
3
<PAGE>
VENCOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 41,319 $ 35,182
Accounts and notes receivable less allowance for loss
of $17,685 -- March 31 and $16,785 -- December 31... 396,742 360,147
Inventories.......................................... 24,828 24,862
Income taxes......................................... 64,513 77,997
Other................................................ 26,670 26,491
---------- ----------
554,072 524,679
Property and equipment, at cost....................... 1,581,663 1,552,293
Accumulated depreciation.............................. (385,208) (362,199)
---------- ----------
1,196,455 1,190,094
Notes receivable less allowance for loss of $15,523 --
March 31 and $15,305 -- December 31................. 76,291 78,090
Intangible assets less accumulated amortization of
$24,307 -- March 31 and $22,149 -- December 31 ...... 46,936 42,580
Other................................................. 77,124 77,011
---------- ----------
$1,950,878 $1,912,454
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 114,735 $ 99,887
Salaries, wages and other compensation............... 104,893 99,937
Other accrued liabilities............................ 63,357 75,617
Long-term debt due within one year................... 18,723 9,572
---------- ----------
301,708 285,013
Long-term debt........................................ 769,062 778,100
Deferred credits and other liabilities................ 75,206 77,277
Stockholders' equity:
Common stock, $.25 par value; authorized 180,000
shares; issued 72,298 shares -- March 31 and
72,158 shares -- December 31........................ 18,075 18,040
Capital in excess of par value....................... 688,895 684,377
Retained earnings.................................... 130,475 102,865
---------- ----------
837,445 805,282
Common treasury stock; 1,970 shares -- March 31
and 2,025 shares -- December 31..................... (32,543) (33,218)
---------- ----------
804,902 772,064
---------- ----------
$1,950,878 $1,912,454
========== ==========
</TABLE>
See accompanying notes.
4
<PAGE>
VENCOR, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................. $27,610 $21,106
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 24,793 21,170
Deferred income taxes...................................... 885 2,579
Extraordinary loss on extinguishment of debt............... - 99
Other...................................................... 5,752 533
Changes in operating assets and liabilities:
Accounts and notes receivable............................. (38,827) (14,097)
Inventories and other assets.............................. 554 (1,189)
Accounts payable.......................................... 15,112 (4,534)
Other accrued liabilities................................. 2,101 12,981
------- -------
Net cash provided by operating activities................ 37,980 38,648
------- -------
Cash flows from investing activities:
Purchase of property and equipment.......................... (27,052) (38,874)
Acquisition of healthcare businesses and previously leased
facilities................................................. - (17,290)
Sale of assets.............................................. 396 185
Collection of notes receivable.............................. 1,875 1,832
Net change in investments................................... (314) (26,086)
Other....................................................... (7,019) (4,105)
------- -------
Net cash used in investing activities.................... (32,114) (84,338)
------- -------
Cash flows from financing activities:
Net change in borrowings under revolving lines of credit.... 4,100 (12,000)
Issuance of long-term debt.................................. 1,363 22,670
Repayment of long-term debt................................. (6,019) (17,039)
Public offering of common stock............................. - 66,494
Other issuances of common stock............................. 900 404
Payment of dividends........................................ - (767)
Other....................................................... (73) (98)
------- -------
Net cash provided by financing activities................ 271 59,664
------- -------
Change in cash and cash equivalents.......................... 6,137 13,974
Cash and cash equivalents at beginning of period............. 35,182 39,018
------- -------
Cash and cash equivalents at end of period................... $41,319 $52,992
======= =======
Supplemental information:
Interest payments........................................... $12,466 $16,627
Income tax payments......................................... 6,529 6,506
</TABLE>
See accompanying notes.
5
<PAGE>
VENCOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- REPORTING ENTITY
Vencor, Inc. ("Vencor") operates an integrated network of healthcare services
primarily focused on the needs of the elderly. At March 31, 1996, Vencor
operated 36 hospitals, 311 nursing centers, a contract services business
("Vencare") which provides respiratory therapy, rehabilitation therapy and
subacute medical services primarily to nursing centers, 54 retail and
institutional pharmacy outlets and 23 retirement communities with 3,090
apartments.
On September 28, 1995, Vencor consummated a merger with The Hillhaven
Corporation ("Hillhaven") in a tax-free, stock-for-stock transaction (the
"Hillhaven Merger"). See Note 5.
Prior to its merger with Vencor, Hillhaven consummated a merger with
Nationwide Care, Inc. ("Nationwide") on June 30, 1995 in a tax-free, stock-for-
stock transaction (the "Nationwide Merger"). See Note 6.
NOTE 2 -- BASIS OF PRESENTATION
The Hillhaven and Nationwide Mergers have been accounted for by the pooling-
of-interests method. Accordingly, the accompanying condensed consolidated
financial statements give retroactive effect to these transactions and include
the combined operations of Vencor, Hillhaven and Nationwide for all periods
presented.
The accompanying condensed consolidated financial statements do not include
all of the disclosures normally required by generally accepted accounting
principles or those normally required in annual reports on Form 10-K.
Accordingly, these statements should be read in conjunction with the audited
consolidated financial statements of Vencor for the year ended December 31,
1995 filed on Form 10-K with the Securities and Exchange Commission.
The accompanying condensed consolidated financial statements have been
prepared in accordance with Vencor's customary accounting practices and have
not been audited. Management believes that the financial information included
herein reflects all adjustments necessary for a fair presentation of interim
results and that all such adjustments are of a normal and recurring nature.
NOTE 3 -- REVENUES
Revenues are recorded based upon estimated amounts due from patients and
third-party payors for healthcare services provided, including anticipated
settlements under reimbursement agreements with Medicare, Medicaid and other
third-party payors.
A summary of first quarter revenues by payor type follows (dollars in
thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Medicare................................................. $196,728 $165,964
Medicaid................................................. 199,835 184,994
Private and other........................................ 238,015 201,565
-------- --------
634,578 552,523
Elimination.............................................. (8,241) (345)
-------- --------
$626,337 $552,178
======== ========
</TABLE>
6
<PAGE>
VENCOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 4 -- EARNINGS PER SHARE
The computation of earnings per common and common equivalent share gives
retroactive effect to the Hillhaven and Nationwide Mergers and is based upon
the weighted average number of common shares outstanding adjusted for the
dilutive effect of common stock equivalents (consisting primarily of stock
options) and, in 1995, convertible debt securities.
NOTE 5 -- HILLHAVEN MERGER
On September 27, 1995, the stockholders of both Vencor and Hillhaven
approved the Hillhaven Merger, effective September 28, 1995. In connection
with the Hillhaven Merger, each share of Hillhaven common stock was converted
on a tax-free basis into 0.935 of a share of Vencor common stock, resulting in
the issuance of approximately 31,651,000 Vencor common shares.
The Hillhaven Merger has been accounted for as a pooling of interests, and
accordingly, the condensed consolidated financial statements give retroactive
effect to the Hillhaven Merger and include the combined operations of Vencor
and Hillhaven for all periods presented. A summary of the results of
operations of the separate entities for the first quarter of 1995 follows
(dollars in thousands):
<TABLE>
<CAPTION>
Vencor Hillhaven Elimination Consolidated
-------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues......................... $120,431 $432,092 $(345) $552,178
Income from operations........... 9,148 12,024 - 21,172
Net income....................... 9,148 11,958 - 21,106
</TABLE>
NOTE 6 -- NATIONWIDE MERGER
Prior to its merger with Vencor, Hillhaven completed the Nationwide Merger
on June 30, 1995. In connection therewith, 4,675,000 shares of common stock
(effected for the Hillhaven Merger exchange ratio) were issued in exchange for
all of the outstanding shares of Nationwide.
The Nationwide Merger has been accounted for as a pooling of interests, and
accordingly, the condensed consolidated financial statements give retroactive
effect to the Nationwide Merger and include the combined operations of
Hillhaven and Nationwide for all periods presented. A summary of the results
of operations of the separate entities for the first quarter of 1995 follows
(dollars in thousands):
<TABLE>
<CAPTION>
Hillhaven Nationwide Consolidated
--------- ---------- ------------
<S> <C> <C> <C>
Revenues................................... $398,660 $33,432 $432,092
Income from operations..................... 10,724 1,300 12,024
Net income................................. 10,658 1,300 11,958
</TABLE>
NOTE 7 -- SUBSEQUENT EVENT
On May 15, 1996, the Board of Directors authorized the establishment of a
newly formed corporation, Atria Assisted Living Communities, Inc. ("Atria"),
to operate Vencor's retirement housing business. As part of the transaction,
Vencor intends to conduct an initial public offering of a minority share of
Atria common stock.
A registration statement detailing the proposed transaction will be filed as
soon as practicable. Management expects that this transaction will be
completed by the end of the summer.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
HILLHAVEN AND NATIONWIDE MERGERS
The Hillhaven Merger was consummated on September 28, 1995. At the time of
the Hillhaven Merger, Hillhaven operated 311 nursing centers, 56 retail and
institutional pharmacies and 23 retirement communities with 3,122 apartments.
Annualized revenues approximated $1.7 billion.
Prior to its merger with Vencor, Hillhaven completed the Nationwide Merger
on June 30, 1995. At the time of the Nationwide Merger, Nationwide operated 23
nursing centers containing 3,257 licensed beds and four retirement communities
with 442 apartments. Annualized revenues approximated $125 million.
As discussed in the Notes to Condensed Consolidated Financial Statements,
the Hillhaven and Nationwide Mergers have been accounted for by the pooling-
of-interests method. Accordingly, the accompanying condensed consolidated
financial statements and financial and operating data included herein give
retroactive effect to these transactions and include the combined operations
of Vencor, Hillhaven and Nationwide for all periods presented.
ANTICIPATED MERGER SYNERGIES AND IMPLEMENTATION OF NETWORK STRATEGY
As a result of the Hillhaven Merger, Vencor has become one of the nation's
largest diversified healthcare providers, offering a broad continuum of
specialized respiratory, rehabilitation and pharmacy services through its
network of hospitals, nursing centers, Vencare contract services,
institutional and retail pharmacies, and retirement communities.
Management believes that Vencor will achieve significant operational
synergies in connection with the Hillhaven Merger through (i) growth in
revenues from increased patient referrals and expansion of ancillary services
within the integrated continuum of healthcare services and (ii) reductions in
operating costs from the elimination of duplicative services, improved
purchasing power of the combined entity, and refinancing of higher rate long-
term debt. The estimated effect of these synergies could increase pretax
income approximately $100 million per year by 1997.
There can be no assurances, however, that Vencor will successfully develop
and expand its long-term care networks. The Hillhaven Merger substantially
changed the nature, scope and size of Vencor's business, and significant
efforts required to integrate the operations and management of the combined
entity could have an adverse effect on Vencor's ability to realize the
operating synergies described above.
PROPOSED RETIREMENT HOUSING TRANSACTION
As discussed in Note 7, Vencor intends to conduct an initial public stock
offering of a minority share of its retirement housing business. Although a
registration statement detailing the proposed transaction is not yet
available, management believes that this transaction will not have a material
effect on Vencor's liquidity, financial position or results of operations.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
Vencor operates an integrated network of healthcare services focused
primarily on the needs of the elderly through the operations of hospitals,
nursing centers and ancillary services businesses which include Vencare,
pharmacies and retirement communities. A summary of revenues follows (dollars
in thousands):
<TABLE>
<CAPTION>
FIRST QUARTER
------------------ %
1996 1995 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Hospitals......................................... $130,047 $101,145 28.6
-------- --------
Nursing centers:
Long-term care................................... 263,130 261,145 0.8
Subacute medical and rehabilitation care......... 138,324 114,668 20.6
-------- --------
401,454 375,813 6.8
-------- --------
Ancillary services:
Vencare.......................................... 45,615 20,789 119.4
Pharmacies....................................... 45,372 43,620 4.0
Retirement communities........................... 12,090 11,156 8.4
-------- --------
103,077 75,565 36.4
-------- --------
Elimination....................................... (8,241) (345)
-------- --------
$626,337 $552,178 13.4
======== ========
</TABLE>
Hospital revenue increases in the first quarter of 1996 resulted from the
acquisition of facilities and growth in same-store patient days. Hospital
patient days rose 29% to 146,015 from 113,165 in the same period last year.
As part of its integrated growth strategy, Vencor intends to expand its
subacute medical and rehabilitation services provided in its nursing centers
and reduce the percentage of patient days attributable to custodial patient
care. Patient days related to subacute medical and rehabilitation services
grew 25% to 503,507 from 402,261 last year, while patient days related to
custodial care declined 3% to 2,624,013 from 2,700,250 during the same period
last year. First quarter 1996 revenues related to custodial care were
adversely impacted by a decline in private pay patient days.
Growth in ancillary services revenues in the first quarter of 1996 was
primarily attributable to the expansion of the Vencare contract services
business, which provides respiratory and rehabilitation therapy services and
subacute care primarily to nursing centers. The number of Vencare contracts
grew from 1,093 at March 31, 1995 to 2,133 at March 31, 1996.
Net income for the first quarter of 1996 totaled $27.6 million, up 31% from
$21.1 million in the first quarter of 1995. The improvement resulted primarily
from growth in (i) hospital patient days, (ii) Vencare contracts and (iii)
higher margin subacute and rehabilitation therapy services in the nursing
center business.
Upon consummation of the Hillhaven Merger, Vencor recorded certain pre-tax
charges aggregating $128.4 million related primarily to merger transaction
costs, employee benefit plans, consolidation and restructuring activities, and
changes in nursing center accounting estimates. Management expects that
consolidation of duplicative corporate and operational functions will be
substantially completed during the third quarter of 1996, and that
dispositions of certain nursing center properties will be concluded in 1997.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY
Cash provided by operations totaled $38 million for the first quarter of
1996 compared to $38.6 million for the same period of 1995. Despite growth in
net income, cash flows from operations were adversely impacted by growth in
accounts receivable aggregating $38.8 million since December 31, 1995. The
increase in outstanding days of revenues in accounts receivable has resulted
primarily from consolidation of nursing center corporate and operational
functions in connection with the Hillhaven Merger. Management believes that
nursing center accounts receivable days will improve from current levels by
the end of the year.
Since the consummation of the Hillhaven Merger, Vencor has maintained a $1
billion credit facility (the "Credit Facility"). At March 31, 1996, available
borrowings under the Credit Facility approximated $300 million.
Working capital totaled $252.4 million at March 31, 1996 compared to $239.7
million at December 31, 1995. Management believes that cash flows from
operations and amounts available under the Credit Facility are sufficient to
meet future expected liquidity needs.
CAPITAL RESOURCES
Excluding acquisitions, capital expenditures totaled $27.1 million for the
first quarter of 1996 compared to $38.9 million for the same period of 1995.
Planned capital expenditures in 1996 (excluding acquisitions) are expected to
approximate $175 million and include significant expenditures related to the
expansion of Vencor's retirement community and assisted living operations.
Management believes that its capital expenditure program is adequate to
expand, improve and equip existing facilities. At March 31, 1996, the
estimated cost to complete and equip construction in progress approximated $32
million.
Vencor also expended $17.3 million for acquisitions of new facilities (and
related healthcare businesses) and previously leased nursing centers during
the first quarter of 1995. Management intends to acquire additional hospitals,
nursing centers and related healthcare businesses in the future.
Capital expenditures were financed primarily through internally generated
funds and, in 1995, from the public offering of 2.2 million shares of common
stock, the proceeds from which aggregated $66.5 million. Vencor intends to
finance a substantial portion of its capital expenditures with internally
generated and borrowed funds. Sources of capital include available borrowings
under the Credit Facility, public or private debt and equity.
HEALTH CARE LEGISLATION
Congress is currently considering various proposals which could reduce
expenditures under certain government health and welfare programs, including
Medicare and Medicaid. Management cannot predict whether such proposals will
be adopted, or if adopted, what effect, if any, such proposals would have on
its business.
Medicare revenues as a percentage of total revenues were 31% and 30% for the
three months ended March 31, 1996 and March 31, 1995, respectively, while
Medicaid percentages of revenues approximated 31% and 33% for the respective
periods.
OTHER INFORMATION
Various lawsuits and claims arising in the ordinary course of business are
pending against Vencor. Resolution of such litigation and other loss
contingencies is not expected to have a material adverse effect on Vencor's
liquidity, financial position or results of operations.
The Credit Facility contains covenants which require maintenance of certain
financial ratios and limit amounts of additional debt and purchases of common
stock. Vencor was in compliance with all such convenants at March 31, 1996.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 QUARTERS FIRST
-------------------------------------- QUARTER
FIRST SECOND THIRD FOURTH YEAR 1996
-------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $552,178 $578,314 $575,339 $618,125 $2,323,956 $626,337
-------- -------- -------- -------- ---------- --------
Salaries, wages and
benefits............... 321,806 330,455 347,251 360,506 1,360,018 372,318
Supplies................ 43,516 46,882 47,868 50,488 188,754 51,762
Rent.................... 19,579 19,771 20,225 19,901 79,476 19,167
Other operating
expenses............... 99,247 104,635 105,335 107,752 416,969 104,501
Depreciation and
amortization........... 21,170 22,507 23,263 22,538 89,478 24,793
Interest expense........ 15,458 17,171 15,169 13,120 60,918 12,480
Investment income....... (3,180) (3,548) (3,304) (3,412) (13,444) (3,578)
Non-recurring
transactions........... - 5,555 103,868 - 109,423 -
-------- -------- -------- -------- ---------- --------
517,596 543,428 659,675 570,893 2,291,592 581,443
-------- -------- -------- -------- ---------- --------
Income (loss) from
operations before
income taxes........... 34,582 34,886 (84,336) 47,232 32,364 44,894
Provision for income
taxes.................. 13,410 13,799 (21,449) 18,241 24,001 17,284
-------- -------- -------- -------- ---------- --------
Income (loss) from
operations............. 21,172 21,087 (62,887) 28,991 8,363 27,610
Extraordinary loss on
extinguishment of debt,
net of income taxes.... (66) (2,725) (19,196) (1,265) (23,252) -
-------- -------- -------- -------- ---------- --------
Net income (loss).... 21,106 18,362 (82,083) 27,726 (14,889) 27,610
Preferred stock dividend
requirements........... (1,793) (1,795) (1,692) - (5,280) -
Gain on redemption of
preferred stock........ - - 10,176 - 10,176 -
-------- -------- -------- -------- ---------- --------
Income (loss)
available to common
stockholders........ $ 19,313 $ 16,567 $(73,599) $ 27,726 $ (9,993) $ 27,610
======== ======== ======== ======== ========== ========
Earnings (loss) per
common and common
equivalent share:
Primary:
Income (loss) from
operations........... $ .33 $ .32 $ (.91) $ .43 $ .21 $ .39
Extraordinary loss on
extinguishment of
debt................. - (.05) (.32) (.02) (.37) -
-------- -------- -------- -------- ---------- --------
Net income (loss).... $ .33 $ .27 $ (1.23) $ .41 $ (.16) $ .39
======== ======== ======== ======== ========== ========
Fully diluted:
Income (loss) from
operations........... $ .31 $ .30 $ (.91) $ .41 $ .29 $ .39
Extraordinary loss on
extinguishment of
debt................. - (.04) (.32) (.02) (.32) -
-------- -------- -------- -------- ---------- --------
Net income (loss).... $ .31 $ .26 $ (1.23) $ .39 $ (.03) $ .39
======== ======== ======== ======== ========== ========
Shares used in computing
earnings (loss) per
common and common
equivalent share:
Primary............... 58,981 60,673 60,011 68,270 62,318 71,455
Fully diluted......... 70,826 72,454 60,011 71,547 71,967 71,455
</TABLE>
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
OPERATING DATA
(UNAUDITED)
<TABLE>
<CAPTION>
1995 QUARTERS FIRST
------------------------------------------ QUARTER
FIRST SECOND THIRD FOURTH YEAR 1996
--------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES (IN THOUSANDS):
Hospitals............... $ 101,145 $ 116,186 $ 119,705 $ 119,450 $ 456,486 $ 130,047
--------- --------- --------- --------- ---------- ---------
Nursing centers:
Long-term care......... 261,145 261,370 271,274 279,624 1,073,413 263,130
Subacute medical and
rehabilitation care... 114,668 120,504 125,952 131,788 492,912 138,324
Non-recurring
transactions.......... - - (24,500) - (24,500) -
--------- --------- --------- --------- ---------- ---------
375,813 381,874 372,726 411,412 1,541,825 401,454
--------- --------- --------- --------- ---------- ---------
Ancillary services:
Vencare (a)............ 20,789 27,015 33,067 39,075 119,946 45,615
Pharmacies (a)......... 43,620 42,674 40,773 41,700 168,767 45,372
Retirement communities. 11,156 11,415 11,648 12,152 46,371 12,090
--------- --------- --------- --------- ---------- ---------
75,565 81,104 85,488 92,927 335,084 103,077
--------- --------- --------- --------- ---------- ---------
Elimination............. (345) (850) (2,580) (5,664) (9,439) (8,241)
--------- --------- --------- --------- ---------- ---------
$ 552,178 $ 578,314 $ 575,339 $ 618,125 $2,323,956 $ 626,337
========= ========= ========= ========= ========== =========
HOSPITAL DATA:
End of period data:
Number of hospitals.... 34 36 35 36 36
Number of licensed
beds.................. 2,859 3,275 3,214 3,263 3,225
Revenue mix %:
Medicare............... 58 57 57 58 57 57
Medicaid............... 11 11 11 13 12 13
Private and other...... 31 32 32 29 31 30
Patient days:
Medicare............... 74,742 80,236 79,282 79,749 314,009 94,087
Medicaid............... 14,609 19,330 21,014 21,828 76,781 24,152
Private and other...... 23,814 25,120 24,179 25,709 98,822 27,776
--------- --------- --------- --------- ---------- ---------
113,165 124,686 124,475 127,286 489,612 146,015
========= ========= ========= ========= ========== =========
NURSING CENTER DATA:
End of period data:
Number of nursing
centers............... 310 311 311 311 311
Number of licensed
beds.................. 39,418 39,509 39,513 39,480 39,510
Revenue mix %:
Medicare............... 28 28 24 28 27 30
Medicaid............... 44 44 47 44 45 43
Private and other...... 28 28 29 28 28 27
Patient days:
Long-term care......... 2,700,250 2,710,176 2,758,760 2,700,914 10,870,100 2,624,013
Subacute medical and
rehabilitation care... 402,261 412,250 419,499 465,490 1,699,500 503,507
--------- --------- --------- --------- ---------- ---------
3,102,511 3,122,426 3,178,259 3,166,404 12,569,600 3,127,520
========= ========= ========= ========= ========== =========
ANCILLARY SERVICES DATA:
End of period data:
Number of Vencare
contracts............. 1,093 1,703 1,917 2,008 2,133
Number of pharmacy
outlets............... 57 55 56 55 54
Number of retirement
communities........... 23 23 23 23 23
Number of retirement
community apartments.. 3,122 3,122 3,122 3,122 3,090
</TABLE>
(a) Prior year rehabilitation therapy revenues have been reclassified to
conform with the current year presentation.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)EXHIBITS:
11 Statement Re: Computation of earnings per common and common
equivalent share for the three months ended March 31, 1996 and
1995.
27 Financial Data Schedule (included only in filings submitted under
the Electronic Data Gathering Retrieval and Analysis ("EDGAR")
system).
(b)REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the three months ended March
31, 1996.
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.
VENCOR, INC.
Date: May 15, 1996 /s/ W. Bruce Lunsford
- ------------------ ----------------------------------
W. Bruce Lunsford
Chairman of the Board, President
and Chief Executive Officer
Date: May 15, 1996 /s/ W. Earl Reed, III
- ------------------ ----------------------------------
W. Earl Reed, III
Executive Vice President and Chief
Financial Officer (Principal
Financial Officer)
13
<PAGE>
EXHIBIT 11
VENCOR, INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
PRIMARY EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:
Earnings:
Income from operations...................................... $27,610 $21,172
Preferred stock dividend requirements....................... - (1,793)
------- -------
Income available to common stockholders..................... 27,610 19,379
Extraordinary loss on extinguishment of debt, net of income
tax benefit................................................ - (66)
------- -------
Net income................................................ $27,610 $19,313
======= =======
Shares used in the computation:
Weighted average common shares outstanding.................. 70,258 57,928
Dilutive effect of common stock equivalents................. 1,197 1,053
------- -------
Shares used in computing earnings per common and common
equivalent share......................................... 71,455 58,981
======= =======
Primary earnings per common and common equivalent share:
Income from operations...................................... $ .39 $ .33
Extraordinary loss on extinguishment of debt................ - -
------- -------
Net income................................................ $ .39 $ .33
======= =======
FULLY DILUTED EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:
Earnings:
Income available to common stockholders..................... $27,610 $19,379
Interest addback on convertible securities, net of income
taxes...................................................... - 2,465
------- -------
Adjusted income available to common stockholders............ 27,610 21,844
Extraordinary loss on extinguishment of debt, net of income
tax benefit................................................ - (66)
------- -------
Net income................................................ $27,610 $21,778
======= =======
Shares used in the computation:
Weighted average common shares outstanding.................. 70,258 57,928
Dilutive effect of common stock equivalents and other
dilutive securities........................................ 1,197 12,898
------- -------
Shares used in computing earnings per common and common
equivalent share......................................... 71,455 70,826
======= =======
Fully diluted earnings per common and common equivalent share:
Income from operations...................................... $ .39 $ .31
Extraordinary loss on extinguishment of debt................ - -
------- -------
Net income................................................ $ .39 $ .31
======= =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Vencor's
condensed consolidated financial statements for the Quarter ended March 31,
1996 and is qualified in its entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 41,319
<SECURITIES> 0
<RECEIVABLES> 396,742
<ALLOWANCES> (17,685)
<INVENTORY> 24,828
<CURRENT-ASSETS> 554,072
<PP&E> 1,581,663
<DEPRECIATION> (385,208)
<TOTAL-ASSETS> 1,950,878
<CURRENT-LIABILITIES> 301,708
<BONDS> 769,062
0
0
<COMMON> 18,075
<OTHER-SE> 786,827
<TOTAL-LIABILITY-AND-EQUITY> 1,950,878
<SALES> 0
<TOTAL-REVENUES> 626,337
<CGS> 0
<TOTAL-COSTS> 443,247
<OTHER-EXPENSES> 101,959
<LOSS-PROVISION> 2,542
<INTEREST-EXPENSE> 12,480
<INCOME-PRETAX> 44,894
<INCOME-TAX> 17,284
<INCOME-CONTINUING> 27,610
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,610
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
