-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Eddd1ZlyqYSzLOoRor765UAv0hR30HqXBZHLn7GucNssoXXPDdj/fTZBWcSWU5qP x9ZsjRtr4fdoE6X+01Pbmw== 0000950152-96-005780.txt : 19961111 0000950152-96-005780.hdr.sgml : 19961111 ACCESSION NUMBER: 0000950152-96-005780 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961108 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTH CARE & RETIREMENT CORP / DE CENTRAL INDEX KEY: 0000878736 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 341687107 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10858 FILM NUMBER: 96656819 BUSINESS ADDRESS: STREET 1: ONE SEAGATE CITY: TOLEDO STATE: OH ZIP: 43604-2616 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: ONE SEAGATE CITY: TOLEDO STATE: OH ZIP: 43604-2616 10-Q 1 HEALTHCARE & RETIREMENT CORPORATION 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-10858 HEALTH CARE AND RETIREMENT CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 34-1687107 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) ONE SEAGATE, TOLEDO, OHIO 43604-2616 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (419) 252-5500 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 close of business on October 31, 1996. Common stock, $0.01 par value -- 44,968,635 shares 2 TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements (Unaudited) Number ------ Consolidated Balance Sheets - September 30, 1996 and December 31, 1995 3 Consolidated Statements of Income - Three months and nine months ended September 30, 1996 and 1995 4 Consolidated Statements of Cash Flows - Nine months ended September 30, 1996 and 1995 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 1. Legal Proceedings 9 Item 2. Changes in Securities 9 Item 3. Defaults Upon Senior Securities 9 Item 4. Submission of Matters to a Vote of Security Holders 9 Item 5. Other Information 9 Item 6. Exhibits and Reports on Form 8-K 9 SIGNATURES 10
2 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. --------------------- HEALTH CARE AND RETIREMENT CORPORATION CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1996 1995 ------------- ------------ (Unaudited) (Note) (Dollars in thousands) ASSETS Current assets: Cash and cash equivalents $ 3,430 $ 7,742 Receivables, less allowances for doubtful accounts of $12,920 and $11,485 110,930 95,956 Prepaid expenses 5,232 9,862 Deferred income taxes 20,096 20,096 -------- -------- Total current assets 139,688 133,656 Property and equipment, net of accumulated depreciation of $99,804 and $79,333 515,614 505,167 Intangible assets, net of amortization of $6,791 and $4,863 71,787 44,774 Other assets 65,396 45,594 -------- -------- Total assets $792,485 $729,191 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 33,772 $ 33,330 Employee compensation and benefits 34,466 29,393 Accrued insurance liabilities 26,041 24,797 Other accrued liabilities 50,422 30,470 Long-term debt due within one year 1,383 1,275 -------- -------- Total current liabilities 146,084 119,265 Long-term debt 186,471 159,082 Deferred income taxes 63,825 63,825 Other liabilities 14,367 12,589 Stockholders' equity: Preferred stock, $.01 par value, 5,000,000 shares authorized Common stock, $.01 par value, 80,000,000 shares authorized, 48,860,406 and 32,573,627 shares issued 489 326 Capital in excess of par 263,993 264,156 Retained earnings 195,801 154,533 -------- -------- 460,283 419,015 Less treasury stock, at cost (3,750,700 and 1,620,720 shares) (78,545) (44,585) -------- -------- Total stockholders' equity 381,738 374,430 -------- -------- Total liabilities and stockholders' equity $792,485 $729,191 ======== ========
Note: The balance sheet at December 31, 1995 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to consolidated financial statements. 3 4 HEALTH CARE AND RETIREMENT CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30 September 30 ----------------------- ------------------------ 1996 1995 1996 1995 ---- ---- ---- ---- (In thousands, except earnings per share) Revenues $199,205 $181,825 $581,117 $530,046 Expenses: Operating 159,331 146,776 465,684 428,214 General and administrative 7,717 7,685 23,359 22,324 Depreciation and amortization 7,965 6,674 22,752 19,032 -------- -------- -------- -------- 175,013 161,135 511,795 469,570 ------- ------- ------- ------- Income from operations 24,192 20,690 69,322 60,476 Interest expense, net (2,793) (2,457) (7,734) (7,229) Equity in earnings of partnership 361 104 973 244 -------- -------- -------- -------- Income before income taxes 21,760 18,337 62,561 53,491 Income taxes 6,528 5,501 18,768 16,221 -------- -------- -------- -------- Net income $ 15,232 $ 12,836 $ 43,793 $ 37,270 ======== ======== ======== ======== Earnings per share - primary and fully diluted $ .32 $ .26 $ .91 $ .76 ======== ======== ======== ======== Weighted average common and common equivalent shares outstanding: Primary 47,372 48,656 48,074 49,125 Fully diluted 47,373 48,715 48,074 49,211
See notes to consolidated financial statements. 4 5 HEALTH CARE AND RETIREMENT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30 ------------------------------ 1996 1995 ---- ---- (In thousands) OPERATING ACTIVITIES Net income $43,793 $37,270 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 23,917 20,299 Provision for bad debts 4,328 3,244 Equity in earnings of partnership (973) (244) Gain from sale of property and equipment (1,534) Changes in assets and liabilities, excluding businesses acquired: Receivables (14,237) (7,628) Prepaid expenses and other assets (11,760) (21,265) Accounts payable (129) 42 Employee compensation and benefits 3,333 2,256 Accrued insurance and other liabilities 20,957 24,178 ------ ------ Total adjustments 25,436 19,348 ------ ------ Net cash provided by operating activities 69,229 56,618 INVESTING ACTIVITIES Purchases and construction of property and equipment (29,085) (22,844) Proceeds from sale of property and equipment 5,472 Investment in partnership (2,955) (1,250) Cash paid to acquire businesses (31,527) (31,273) ------- ------- Net cash used in investing activities (63,567) (49,895) ------- ------- FINANCING ACTIVITIES Net borrowings under bank credit agreement 27,900 3,000 Principal payments of long-term debt (1,353) (4,515) Proceeds from exercise of stock options 1,748 1,671 Purchase of common stock for treasury (38,269) (22,429) ------- ------- Net cash used in financing activities (9,974) (22,273) -------- ------- Net decrease in cash (4,312) (15,550) Cash and cash equivalents at beginning of year 7,742 29,852 ------- ------- Cash and cash equivalents at end of period $ 3,430 $14,302 ======= =======
See notes to consolidated financial statements. 5 6 HEALTH CARE AND RETIREMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - Principles of Consolidation and Presentation - ----------------------------------------------------- The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management of HCR, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results of the interim periods. Operating results for the three months and nine months ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in HCR's annual report on Form 10-K for the year ended December 31, 1995. On May 7, 1996 the Board of Directors authorized a three-for-two stock split, effected in the form of a 50% stock dividend, payable on June 5, 1996 to stockholders of record on May 21, 1996. Accordingly, all per share data have been restated to reflect the stock split. NOTE 2 - Acquisitions - --------------------- During 1996, HCR paid $31,527,000 for the acquisition of various businesses and contingent consideration related to prior year acquisitions. The businesses acquired include home health care, rehabilitation therapy services and management contracts. The acquisitions were accounted for under the purchase method of accounting and generated approximately $28,900,000 of intangible assets. At September 30, 1996, HCR operated 127 long term care facilities, 55 outpatient rehabilitation clinics and 33 home health care offices. In addition, Heartland Healthcare Services, Inc., HCR's 50% owned partnership, operated 4 institutional pharmacies. NOTE 3 - Long-Term Debt - ----------------------- Effective September 30, 1996, the bank credit agreement permits HCR to borrow up to $225 million through August 2, 2001. 6 7 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations --------------------- FINANCIAL CONDITION During 1996, HCR paid $31,527,000 for the acquisition of various businesses and contingent consideration related to prior year acquisitions. The businesses acquired include home health care, rehabilitation therapy services and management contracts. The acquisitions were accounted for under the purchase method of accounting and generated approximately $28,900,000 of intangible assets. RESULTS OF OPERATIONS Revenues for the three months ended September 30, 1996 increased $17,380,000 or 10% to $199,205,000 as compared to the same period in 1995. Revenues for the nine months ended September 30, 1996 increased $51,071,000 or 10% to $581,117,000 as compared to the same period in 1995. Of the increases, 72% and 62% for the three months and nine months ended September 30, 1996, respectively, related to the acquisition of various businesses in 1996 and 1995. The remaining increases were due to mix changes and improved per diem rates, resulting from more specialized care, such as subacute medical care and rehabilitation services for more acutely ill patients. The occupancy levels were 91%and 90% for the three months and nine months ended September 30, 1995, and 89% for the same periods in 1996, respectively. The mix of revenue from Medicare, private pay and insured patients increased from 66% for the three months and nine months ended September 30, 1995 to 68% for the same periods in 1996, primarily due to the growth in revenue from rehabilitation services. At September 30, 1996, HCR operated 56 medical specialty units with 1,700 beds. Operating expenses for the three months ended September 30, 1996 increased $12,555,000 or 9% to $159,331,000 from the comparable period in 1995. Operating expenses for the nine months ended September 30, 1996 increased $37,470,000 or 9% to $465,684,000 from the same period in 1995. Of the increases, 86% and 70% for the three months and nine months ended September 30, 1996, respectively, related to the acquisition of various businesses in 1996 and 1995. The remaining increases were attributable to labor costs offset by decreases in other general expenses. Labor costs, excluding those related to the acquisitions, represented 32% and 37% of the increases for the three months and nine months ended September 30, 1996 as compared to the same periods in 1995, respectively. The increase in labor costs was attributable to average wage rate increases as well as growth in the staffing levels attributable to the higher acuity patients in the medical specialty units. General and administrative expense increased $1,035,000 for the nine months ended September 30, 1996 as compared to the same period in 1995. However, the expense as a percentage of revenue has remained at 4% for the nine months ended September 30, 1996 and 1995. The increase in depreciation and amortization of $1,291,000 and $3,720,000, for the three months and nine months ended September 30, 1996 as compared to the same periods in the prior year, relates primarily to additional depreciation for prior year capital expenditures. The increase in net interest expense of $505,000 for the nine months ended September 30, 1996 as compared to the same period in 1995 was attributable to an increase in debt levels partially offset by lower interest rates and additional interest income earned on cash equivalents. 7 8 LIQUIDITY AND CAPITAL RESOURCES During the first nine months of 1996, HCR satisfied its cash requirements from a combination of cash generated from operating activities and borrowings under a bank credit agreement. HCR used the cash principally for capital expenditures, the acquisition of businesses and the purchase of HCR common stock. At September 30, 1996, the Company maintained $3,430,000 in cash and cash equivalents, of which $26,000 was invested in short-term investments. Cash used in investing activities amounted to $63,567,000. Expenditures for property and equipment of $29,085,000 related to renovations, capital improvements, development of medical specialty units and construction of a new facility. As part of the diversification into other health care services, HCR acquired various businesses and paid contingent consideration for prior year acquisitions for a total of $31,527,000 in the first nine months of 1996. Net cash used in financing activities during the first nine months of 1996 amounted to $9,974,000. The cash was used to purchase HCR common stock for $38,269,000 and repay long-term debt of $1,353,000. This use was partially offset by a $27,900,000 increase in debt under the bank credit agreement and $1,748,000 from the exercise of stock options. The bank credit agreement permits HCR to borrow up to $225,000,000 through August 2, 2001. At September 30, 1996, HCR had borrowed $177,900,000 and issued letters of credit totalling $12,689,000 which left a remaining unused borrowing capacity of $34,411,000. HCR believes that its cash flow from operations will be sufficient to cover debt payments, future capital expenditures and operating needs. It is likely that HCR will pursue growth from acquisitions, partnerships and other ventures which would be funded from excess cash from operations, credit available under the bank credit agreement and other financing arrangements that are normally available in the marketplace. 8 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings. ------------------ There are no material pending legal proceedings other than litigation arising in the ordinary course of business for which the Company has insurance coverage. The Company does not believe the results of such litigation, even if the outcome were unfavorable to the Company, would have a material adverse effect on its financial position. Item 2. Changes in Securities. ---------------------- None Item 3. Defaults Upon Senior Securities. -------------------------------- None Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- None Item 5. Other Information. ------------------ None Item 6. Exhibits and Reports on Form 8-K. --------------------------------- (a)Exhibits S-K Item 601 No. ------- 27 Financial Data Schedule for the nine months ended September 30, 1996 (b) Reports on Form 8-K None 9 10 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. HEALTH CARE AND RETIREMENT CORPORATION (Registrant) Date November 5, 1996 By /s/ Geoffrey G. Meyers -------------------- ---------------------- Geoffrey G. Meyers, Executive Vice-President, Chief Financial Officer and Treasurer 10 11 EXHIBIT INDEX Exhibit - ------- 27 Financial Data Schedule for the nine months ended September 30, 1996 11 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HEALTH CARE AND RETIREMENT CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 3,430 0 123,850 12,920 0 139,688 615,418 99,804 792,485 146,084 186,471 489 0 0 381,249 792,485 0 581,117 0 465,684 22,752 4,328 0 62,561 18,768 43,793 0 0 0 43,793 0.91 0.91
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