-----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, SK0hw6dIqbeuDfKe8SOMnIwOay1yLuLnia/sY8ZdJMEfaq9zfV5FfTBayuVUT7FL jvntaiYnfosWesevBkddVA== /in/edgar/work/0000950152-00-007675/0000950152-00-007675.txt : 20001110 0000950152-00-007675.hdr.sgml : 20001110 ACCESSION NUMBER: 0000950152-00-007675 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MANOR CARE INC CENTRAL INDEX KEY: 0000878736 STANDARD INDUSTRIAL CLASSIFICATION: [8051 ] IRS NUMBER: 341687107 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10858 FILM NUMBER: 757204 BUSINESS ADDRESS: STREET 1: 333 N. SUMMIT STREET CITY: TOLEDO STATE: OH ZIP: 43604-2617 BUSINESS PHONE: 4192525500 MAIL ADDRESS: STREET 1: P.O. BOX 10086 CITY: TOLEDO STATE: OH ZIP: 43699-0086 FORMER COMPANY: FORMER CONFORMED NAME: HCR MANOR CARE INC DATE OF NAME CHANGE: 19981001 FORMER COMPANY: FORMER CONFORMED NAME: HEALTH CARE & RETIREMENT CORP / DE DATE OF NAME CHANGE: 19930328 10-Q 1 l84465ae10-q.txt MANOR CARE, INC. FORM 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, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-10858 MANOR CARE, INC. (Exact name of registrant as specified in its charter) DELAWARE 34-1687107 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 333 N. SUMMIT STREET, TOLEDO, OHIO 43604-2617 (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, 2000. Common stock, $0.01 par value -- 102,456,532 shares =============================================================================== 2 TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements (Unaudited) Number ------ Consolidated Balance Sheets - September 30, 2000 and December 31, 1999 3 Consolidated Statements of Income - Three months and nine months ended September 30, 2000 and 1999 4 Consolidated Statements of Cash Flows - Nine months ended September 30, 2000 and 1999 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 2. Changes in Securities 16 Item 3. Defaults Upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 17
2 3 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS. --------------------- MANOR CARE, INC. CONSOLIDATED BALANCE SHEETS
September 30, December 31, 2000 1999 ---- ---- (Unaudited) (Note 1) (In thousands, except per share data) ASSETS Current assets: Cash and cash equivalents $ 36,630 $ 12,287 Receivables, less allowances for doubtful accounts of $63,520 and $58,975, respectively 345,940 294,449 Receivable from sale of assets 8,102 44,467 Prepaid expenses and other assets 26,727 28,409 Deferred income taxes 54,363 51,539 --------- --------- Total current assets 471,762 431,151 Property and equipment, net of accumulated depreciation of $708,915 and $596,391, respectively 1,577,380 1,550,507 Intangible assets, net of amortization 98,526 88,286 Net investment in Genesis preferred stock 19,000 Other assets 166,848 191,922 ----------- ----------- Total assets $2,314,516 $2,280,866 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 99,155 $ 86,614 Employee compensation and benefits 63,127 52,376 Accrued insurance liabilities 59,635 35,870 Income tax payable 4,925 14,906 Other accrued liabilities 55,068 33,266 Revolving loans 139,000 179,000 Long-term debt due within one year 5,537 6,617 ---------- ---------- Total current liabilities 426,447 408,649 Long-term debt 661,089 687,502 Deferred income taxes 119,756 126,754 Other liabilities 109,303 76,608 Minority interest 4,266 1,316 Shareholders' equity: Preferred stock, $.01 par value, 5 million shares authorized Common stock, $.01 par value, 300 million shares authorized, 111.0 million shares issued 1,110 1,110 Capital in excess of par value 344,127 358,958 Retained earnings 814,229 798,068 ---------- ---------- 1,159,466 1,158,136 Less treasury stock, at cost (8.4 and 8.7 million shares, respectively) (165,811) (178,099) ----------- ---------- Total shareholders' equity 993,655 980,037 ----------- ----------- Total liabilities and shareholders' equity $2,314,516 $2,280,866 ========== ==========
See notes to consolidated financial statements. 3 4 MANOR CARE, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30 September 30 ------------ ------------ 2000 1999 2000 1999 ---- ---- ---- ---- (In thousands, except earnings per share) Revenues $ 604,531 $ 536,732 $ 1,755,696 $ 1,599,034 Expenses: Operating 501,144 424,244 1,501,646 1,252,041 General and administrative 26,835 23,210 77,042 67,735 Depreciation and amortization 30,683 29,361 90,381 86,376 Provision for restructuring charge, merger expenses, asset impairment and other related charges 4,080 14,787 ----------- ----------- ----------- ----------- 558,662 480,895 1,669,069 1,420,939 ----------- ----------- ----------- ----------- Income before other income (expenses), income taxes and minority interest 45,869 55,837 86,627 178,095 Other income (expenses): Interest expense (15,369) (14,264) (45,241) (40,510) Impairment of investments (20,000) Dividend income 4,951 14,853 Equity in earnings of affiliated companies 821 473 1,270 1,829 Interest income and other 780 1,376 2,081 2,365 ----------- ----------- ----------- ----------- Net other expenses (13,768) (7,464) (61,890) (21,463) ----------- ----------- ----------- ----------- Income before income taxes and minority interest 32,101 48,373 24,737 156,632 Income taxes 11,556 14,876 6,860 48,491 Minority interest income 172 1,716 ----------- ----------- ----------- ----------- Income before extraordinary item 20,373 33,497 16,161 108,141 Extraordinary item - gain on sale of assets (net of taxes of $3,866 and $8,271 respectively) 6,047 12,937 ----------- ----------- ----------- ----------- Net income $ 20,373 $ 39,544 $ 16,161 $ 121,078 =========== =========== =========== =========== Earnings per share - basic Income before extraordinary item $ 0.20 $ 0.32 $ 0.16 $ 0.99 Extraordinary item (net of taxes) 0.06 0.12 ----------- ----------- ----------- ----------- Net income $ 0.20 $ 0.37* $ 0.16 $ 1.11 =========== =========== =========== =========== Earnings per share - diluted Income before extraordinary item $ 0.20 $ 0.31 $ 0.16 $ 0.98 Extraordinary item (net of taxes) 0.06 0.12 ----------- ----------- ----------- ----------- Net income $ 0.20 $ 0.37 $ 0.16 $ 1.10 =========== =========== =========== =========== Weighted average shares: Basic 102,205 106,212 102,266 109,187 Diluted 103,276 107,253 103,015 110,379 *Doesn't add due to rounding
See notes to consolidated financial statements. 4 5 MANOR CARE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
NINE MONTHS ENDED SEPTEMBER 30 ------------------------------ 2000 1999 ---- ---- (In thousands) OPERATING ACTIVITIES Net income $16,161 $121,078 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 90,381 86,836 Asset impairment and other non-cash charges 12,240 Impairment of investments 20,000 Provision for bad debts 22,502 18,734 Minority interest 1,716 Deferred income taxes (9,822) Gain on sale of assets (361) (21,015) Equity in earnings of affiliated companies (1,270) (1,829) Changes in assets and liabilities, excluding sold facilities and acquisitions: Receivables (37,481) (63,268) Prepaid expenses and other assets 6,961 (15,103) Liabilities 74,869 (11,104) -------- -------- Total adjustments 167,495 5,491 ------- --------- Net cash provided by operating activities 183,656 126,569 ------- ------- INVESTING ACTIVITIES Investment in property and equipment (91,006) (126,589) Investment in systems development (8,402) (6,368) Acquisition of businesses (12,402) (8,594) Proceeds from sale of assets 5,235 263,603 Increase due to consolidation of subsidiary 15,701 -------- ------- Net cash provided by (used in) investing activities (90,874) 122,052 -------- ------- FINANCING ACTIVITIES Net repayments under bank credit agreements (61,500) (23,000) Principal payments of long-term debt (4,537) (5,132) Proceeds from stock options and common stock 267 1,325 Purchase of common stock for treasury (2,669) (163,756) -------- -------- Net cash used in financing activities (68,439) (190,563) ------- -------- Net increase in cash and cash equivalents 24,343 58,058 Cash and cash equivalents at beginning of period 12,287 33,718 ------- ------- Cash and cash equivalents at end of period $36,630 $91,776 ======= =======
See notes to consolidated financial statements. 5 6 MANOR CARE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - BASIS OF 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 Manor Care, Inc. (the Company), the interim data includes all adjustments necessary for a fair statement of the results of the interim periods and all such adjustments are of a normal recurring nature, except as discussed in Note 2 below and in Management's Discussion and Analysis regarding general and professional liability expense, impairment of investments and other reserves. Operating results for the nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. The balance sheet at December 31, 1999 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. For further information, refer to the consolidated financial statements and footnotes thereto included in Manor Care, Inc.'s annual report on Form 10-K for the year ended December 31, 1999. During the second quarter of 2000, the Company changed the accounting for its investment in In Home Health, Inc. (IHHI) from the equity method to consolidation due to an increase in ownership from 41 percent to 61 percent. Retroactive to January 1, 2000, the Company began consolidating 100 percent of the results of IHHI and deducting the minority interest share on an after-tax basis. IHHI's revenues were $24.7 million and $73.2 million for the three months and nine months ended September 30, 2000, respectively, and operating expenses were $21.6 million and $64.3 million for the same periods, respectively. The Company has reclassified IHHI's expense categories to more closely conform to the Company's presentation. At September 30, 2000, the Company operated 299 skilled nursing and 52 assisted living facilities, 88 outpatient therapy clinics, one acute care hospital and 38 home health offices. IHHI provided its services through 39 offices in 20 markets located in 15 states. NOTE 2 - RESTRUCTURING CHARGE, MERGER EXPENSES, ASSET IMPAIRMENT AND OTHER RELATED CHARGES During the first nine months of 1999, the Company recorded restructuring and other charges of $14.8 million in connection with the HCR-Manor Care transaction. The liability related to the restructuring and other charges decreased from $2.0 million at December 31, 1999 to $0.1 million at September 30, 2000. The payments during the first nine months of 2000 were attributable to employee benefit and exit costs. 6 7 NOTE 3 - EARNINGS PER SHARE The calculation of earnings per share (EPS) is as follows:
Three months ended Nine months ended September 30 September 30 ------------ ------------ 2000 1999 2000 1999 ---- ---- ---- ---- (In thousands, except earnings per share) Numerator: Income before extraordinary item (income available to common shareholders) $20,373 $33,497 $16,161 $108,141 ======= ======= ======= ======= Denominator: Denominator for basic EPS - weighted-average shares 102,205 106,212 102,266 109,187 Effect of dilutive securities: Stock options 934 1,041 703 1,192 Nonvested restricted stock 137 46 ------- ------- ------- ------- Denominator for diluted EPS - adjusted for weighted-average shares and assumed conversions 103,276 107,253 103,015 110,379 ======= ======= ======= ======= EPS - income before extraordinary item Basic $.20 $.32 $.16 $.99 Diluted $.20 $.31 $.16 $.98
NOTE 4 - SEGMENT INFORMATION The Company provides a range of health care services. The Company has one reportable operating segment, long-term care, which includes the operation of skilled nursing and assisted living facilities. The "Other" category includes the non-reportable segments and corporate items not considered to be an operating segment. The revenues in the "Other" category include services for rehabilitation, home health and hospital care. Asset information, including capital expenditures, is not reported by segment by the Company. Operating performance represents revenues less operating expenses and does not include general and administrative expense, depreciation and amortization, the provision for restructuring and other charges, other income and expense items, and income taxes. The "Other" category is not comparative as IHHI is included on a consolidated basis in 2000 and on the equity method in 1999. See Management's Discussion and Analysis for a discussion of unusual expenses recorded in the first half of 2000.
Long-term Care Other Total -------------- ----- ----- (In thousands) Three months ended September 30, 2000 Revenues from external customers $517,050 $87,481 $604,531 Intercompany revenues 7,138 7,138 Depreciation and amortization 28,017 2,666 30,683 Operating margin 92,605 10,782 103,387
7 8
Long-term Care Other Total -------------- ----- ----- (In thousands) Three months ended September 30, 1999 Revenues from external customers $480,450 $56,282 $536,732 Intercompany revenues 5,169 5,169 Depreciation and amortization 26,648 2,713 29,361 Operating margin 99,057 13,431 112,488 Nine months ended September 30, 2000 Revenues from external customers 1,501,922 253,774 1,755,696 Intercompany revenues 20,538 20,538 Depreciation and amortization 82,380 8,001 90,381 Operating margin 238,571 15,479 254,050 Nine months ended September 30, 1999 Revenues from external customers 1,428,313 170,721 1,599,034 Intercompany revenues 15,450 15,450 Depreciation and amortization 81,658 4,718 86,376 Operating margin 302,483 44,510 346,993
NOTE 5 - DEBT The Company's $200 million credit agreement (364 Day Agreement), which matured September 22, 2000, was amended and now matures September 21, 2001. NOTE 6 - NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133), which was postponed in Statement No. 137 and is now effective January 1, 2001. This Statement requires the Company to recognize all derivatives on the balance sheet at fair value. Because the Company currently does not use derivatives, management believes that the adoption of this Statement will have no effect on earnings or the financial position of the Company. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS During the second quarter of 2000, the Company changed the accounting for its investment in In Home Health, Inc. (IHHI) from the equity method to consolidation due to an increase in ownership from 41 percent to 61 percent. Retroactive to January 1, 2000, the Company began consolidating 100 percent of the results of IHHI and deducting the minority interest share on an after-tax basis. IHHI's revenues were $24.7 million and $73.2 million for the three months and nine months ended September 30, 2000, respectively, and operating expenses were $21.6 million and $64.3 million for the same periods, respectively. The Company formed a strategic alliance with Alterra Healthcare Corporation (Alterra) in 1998. Two of the key provisions of the alliance included the sale of 26 centers and lease of two centers to Alterra in 1999 and the creation of a joint venture in 1999 to develop and construct specialized assisted living residences in the Company's core markets. The Company, Alterra and a development joint venture have jointly and severally guaranteed a revolving line of credit. The line of credit was reduced from $200 million to $60 million on March 30, 2000. The reduction in the 8 9 revolving credit agreement reflects a modification in the joint development intentions of the partners due in part to lower development activity than originally planned. At September 30, 2000, there was $57 million of guaranteed debt outstanding under the $60 million revolving line of credit. As a result of a change in the credit agreement and its relationship with Alterra, the Company purchased six facilities in the second quarter of 2000 that were originally contributed by the Company in September 1999 to various project companies in which the joint venture had a 10 percent equity interest. The Company paid $2.7 million in cash for the six facilities and reclassified its receivable related to developing these assets of $21.6 million to property and equipment. Of this amount, $14.4 million was a receivable at December 31, 1999. During the second and third quarters of 1999, the Company sold 26 assisted living facilities to Alterra for $159 million realizing a $8.6 million extraordinary gain and contributed twenty properties to various project companies or partnerships for $74 million recognizing no gain or loss. RESULTS OF OPERATIONS As explained in the overview, the Company changed the accounting for its investment in IHHI retroactive to January 1, 2000. In the table below, IHHI's financial results have been removed from 2000 to be comparative with 1999.
Three Months Ended Sept. 30 Nine Months Ended Sept. 30 --------------------------- -------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (In thousands) Revenues $579,824 $536,732 $1,682,521 $1,599,034 Expenses: Operating 479,509 424,244 1,437,156 1,252,041 General and administrative 24,769 23,210 71,354 67,735 Depreciation and amortization 30,394 29,361 89,483 86,376
Revenues for the three months ended September 30, 2000 increased $43.1 million or 8 percent as compared to the same period in 1999. By excluding the facilities sold or leased in 1999, revenues increased $47.2 million or 9 percent. Revenues from skilled nursing and assisted living facilities that are included in operations in 2000 increased $40.7 million or 9 percent due to increases in rates ($37.0 million) and capacity/occupancy ($3.7 million). Revenues for the nine months ended September 30, 2000 increased $83.5 million or 5 percent as compared to the same period in 1999. By excluding the facilities sold or leased in 1999, revenues increased $104.0 million or 7 percent. Revenues from skilled nursing and assisted living facilities that are included in operations in 2000 increased $94.1 million or 7 percent due to increases in rates ($74.6 million) and capacity/occupancy ($19.5 million). The increase in rates was attributable to private, Medicaid and Medicare. The Medicare rate increase related to provisions in the Balanced Budget Refinement Act (BBRA 99) passed by Congress in November 1999 that included the temporary increase in payment for certain high cost nursing home patients and the benefit of early adoption to the new federal rates, which was completed in many of the Company's facilities in June. In the third quarter, the Health Care Financing Administration announced that it would delay implementation of its refinement proposal related to the Medicare changes in the BBRA 99 that would have eliminated the increase for certain high cost nursing home patients. 9 10 The growth in bed capacity between 1999 and 2000 was due to the opening of three skilled nursing facilities in 1999 and seven assisted living facilities in the second and third quarters of 2000, as well as other bed additions. The occupancy levels were 87 percent for the three months and nine months ended September 30, 1999 compared to 87 percent and 86 percent for the three months and nine months ended September 30, 2000, respectively. The quality mix of revenue from Medicare, private pay and insured patients related to skilled nursing and assisted living facilities and rehabilitation operations was 66 percent and 67 percent for the three months and nine months ended September 30, 1999, respectively, as well as for the same periods in 2000. Operating expenses for the three months ended September 30, 2000 increased $55.3 million or 13 percent from the comparable period in 1999. By excluding facilities sold or leased in 1999, operating expenses increased $59.8 million or 14 percent. Operating expenses from skilled nursing and assisted living facilities that are included in operations in 2000 increased $47.6 million. These increases primarily related to labor costs, including temporary staffing, of $23.4 million and general and professional liability costs of $9.7 million (see further explanation below), as well as increases in ancillary costs and other general expenses. Operating expenses from the Company's transcription business increased $3.9 million. Operating expenses for the nine months ended September 30, 2000 increased $185.1 million or 15 percent from the comparable period in 1999. By excluding facilities sold or leased in 1999, operating expenses increased $203.8 million or 17 percent. Operating expenses from skilled nursing and assisted living facilities that are included in operations in 2000 increased $156.2 million, as discussed below. Operating expenses from the Company's transcription business increased $10.6 million and there were $17.7 million of unusual expenses recorded in the second quarter that included $3.2 million for expenses related to the discontinued Manor Care buy-out transaction, $7.3 million reserve for amounts due from Genesis Health Ventures, Inc. (Genesis) as a result of Genesis' bankruptcy filing on June 22, 2000 and $7.2 million reserve for amounts due from Alterra or the related development joint venture. The major portion of the skilled nursing and assisted living operating expense increase was attributable to recording $33.6 million of general and professional liability expense in the first quarter of 2000 related to a change in estimate incorporating industry experience for claims originating in policy years 1994 through 1999, as well as an increase in current period expense of $23.7 million for the first nine months of 2000 compared to last year. The additional expense was determined as a result of independent evaluations of the Company's growing potential liability for patient-related litigation despite a continuing good quality record and generally low historical claims experience. The evaluations were prepared in response to the dramatic increases in the average cost per claim and volume of lawsuits filed against the Company and in the long-term care industry in general. The adjustment reflects the additional litigation and settlement costs the Company could incur if there is no change in the current environment, particularly in the state of Florida. Independent evaluations of the industry's experience indicate the need to increase ongoing expense accruals for renewing policy periods and claims that could arise out of this year's experience. General and professional liability claims for the long-term care industry, especially in the state of Florida, have become increasingly expensive. The average cost of a claim in Florida in 1999 was two and one-half times higher than the rest of the country and industry providers in the state are experiencing three times the number of claims compared to the national average. 10 11 The Company and other affected providers are actively pursuing legislative and regulatory changes that include tort reform. However, there can be no assurances that legislative changes will be made, or that any such change will have a positive impact on the current trend. The other operating expense increases for skilled nursing and assisted living facilities were attributable to labor costs, including temporary staffing, of $56.5 million, as well as increases in ancillary costs and other general expenses. General and administrative expense increased $1.6 million and $3.6 million for the three months and nine months ended September 30, 2000 as compared to the same periods in 1999 primarily as a result of employee benefit plans, legal expenses and general cost increases. Depreciation and amortization increased $1.0 million and $3.1 million for the three months and nine months ended September 30, 2000 compared to the same periods in 1999 primarily due to computer software amortization. The Company recorded restructuring and other charges of $4.1 million and $14.8 million for the three months and nine months ended September 30, 1999, respectively, in connection with the HCR-Manor Care transaction. The liability related to the restructuring and other charges decreased from $2.0 million at December 31, 1999 to $0.1 million at September 30, 2000. The payments during the first nine months of 2000 were attributable to employee benefit and exit costs. Interest expense increased $1.1 million and $4.7 million for the three months and nine months ended September 30, 2000 as compared to the same periods in 1999 due to an increase in interest rates, as the average debt outstanding has declined. The impairment of investments of $20 million was attributable to Genesis' bankruptcy filing on June 22, 2000, which represented the remaining book value of Genesis' Series G Cumulative Convertible Preferred Stock (Series G Preferred Stock) as well as another Genesis investment. Dividend income decreased in comparison to the prior year due to two items. First, no dividend income was recorded on the Series G Preferred Stock in 2000. In 1999, the Company recorded $4.4 million of dividend income each quarter and then fully reserved the dividends at the end of the year. As a result of the nonpayment of the cumulative dividends for four consecutive quarters, all future dividends beginning in 2000 are payable in additional shares of Series G Preferred Stock. Based on Genesis' inability to pay cash dividends and its current operating performance, the Company is fully reserving the dividends in 2000. Second, as a result of changing the accounting for the Company's investment in IHHI in 2000, the preferred stock dividend of $0.6 million per quarter was eliminated in consolidation and was fully reported in 1999 under the equity method of accounting. The income tax expense for the nine months ended September 30, 2000 included a $1.9 million tax benefit related to IHHI. IHHI's management concluded that the tax benefits related to net operating loss carryforwards are now more likely than not to be realized in the carryforward periods and therefore, changed the valuation allowance against the deferred tax assets associated with the net operating loss carryforwards established in 1997. The minority interest income for the three months and nine months ended September 30, 2000 represented the minority owners' share of IHHI's net income for those periods. In 1999, IHHI's financial results were not consolidated, instead the Company's share of IHHI's earnings were recorded on the line item, "equity in earnings of affiliated companies." In the first nine months of 1999, the Company recorded the gains on sale of assets as extraordinary 11 12 items as required after a business combination accounted for as a pooling of interests. In the second quarter, the Company exercised a purchase option on Manor Care's corporate headquarters in Gaithersburg, Maryland and sold the property realizing net proceeds of $25 million and a $10.3 million gain ($6.3 million after tax). In the second quarter, the Company closed on three of the twenty-six assisted living facilities sold to Alterra for $13 million realizing a $0.6 million gain ($0.3 million after tax) and in the third quarter closed on the remaining twenty-three facilities for $146 million realizing an $8.0 million gain ($4.9 million after tax). FINANCIAL CONDITION The September 30, 2000 balance sheet included the balances of IHHI. The most significant IHHI line items were current assets of $40.8 million, which included cash of $18.6 million and accounts receivable of $18.8 million, and current liabilities of $20.7 million. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133), which was postponed in Statement No. 137 and is now effective January 1, 2001. This Statement requires the Company to recognize all derivatives on the balance sheet at fair value. Because the Company currently does not use derivatives, management believes that the adoption of this Statement will have no effect on earnings or the financial position of the Company. LIQUIDITY AND CAPITAL RESOURCES During the first nine months of 2000, the Company satisfied its cash requirements from cash generated from operating activities. Cash flows from operating activities were $183.7 million for the first nine months of 2000, an increase of $57.1 million from the same period in 1999. The increase in liabilities was due to the additional accrual for general and professional liability claims discussed previously. The Company used the cash principally for capital expenditures, acquisition of businesses and repayment of debt. Expenditures for property and equipment for nine months ended September 30 were $91.0 million in 2000 and $126.6 million in 1999 that included amounts for the construction of new facilities of $44.9 million in 2000 and $67.1 million in 1999. The Company's $200 million credit agreement (364 Day Agreement), which matured September 22, 2000, was amended and now matures September 21, 2001. At September 30, 2000, outstanding borrowings aggregated $594.0 million under its bank credit agreements. After consideration of usage for letters of credit, the remaining credit availability under the agreements totaled $78.1 million. On May 4, 1999, the Board of Directors authorized the Company to purchase up to $200 million of its common stock through December 31, 2000, and on February 8, 2000, the Board authorized an additional $100 million through December 31, 2001. The Company purchased 215,000 shares for $2.7 million in the first nine months of 2000 and a total of 8.9 million shares for $183.0 million since May 1999. The shares may be used for internal stock option and 401(k) match programs and for other uses, such as possible future acquisitions. The Company believes that its cash flow from operations will be sufficient to cover debt payments, future capital expenditures and operating needs. It is likely that the Company will pursue growth from acquisitions, partnerships and other ventures that would be funded from excess cash from operations, credit available under the bank credit agreement and other financing arrangements that 12 13 are normally available in the marketplace. CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS Statements contained in this Form 10-Q which are not historical facts may be forward-looking statements within the meaning of federal law. Such forward-looking statements reflect management's beliefs and assumptions and are based on information currently available to management. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, both nationally and in the regions in which the Company operates; industry capacity; demographic changes; existing government regulations and changes in, or the failure to comply with, governmental regulations; legislative proposals for health care reform; the ability to enter into managed care provider arrangements on acceptable terms; changes in Medicare and Medicaid reimbursement levels; changes in current trends in the cost and volume of general and professional liability claims; competition; changes in business strategy or development plans; and the ability to attract and retain qualified personnel. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements set forth or referred to above in this paragraph. The Company disclaims any obligation to update such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no significant changes in the Company's long-term debt since December 31, 1999. PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS. Since May of 1999, the Company and certain related persons and entities have been parties to several actions by or against Genesis Health Ventures, Inc. ("Genesis") and its subsidiary, NeighborCare Pharmacy Services, Inc. ("NeighborCare"). On or about June 22, 2000, Genesis and NeighborCare filed voluntary petitions for bankruptcy under Chapter 11 of the Bankruptcy Code, which effectively stayed the actions to the extent they had not been stayed already. The status of the various Genesis/NeighborCare lawsuits is discussed below. On May 7, 1999, Genesis filed suit in federal district court in Delaware against the Company, its wholly owned subsidiary, Manor Care of America, Inc. (formerly known as Manor Care, Inc. ("Manor Care")), its Chief Executive Officer, Paul A. Ormond, and its Chairman, Stewart Bainum, Jr. The complaint alleges that the defendants fraudulently induced Genesis to acquire, in August 1998, all of the outstanding stock of Vitalink Pharmacy Services, Inc. ("Vitalink"), an approximately 50 percent owned subsidiary of Manor Care, and that such alleged conduct constituted violations of Section 10(b) of the Securities Exchange Act of 1934, common law fraudulent misrepresentation and negligent misrepresentation. The suit also alleges that the Company's ownership in a partnership known as Heartland Healthcare Services violates a non-compete provision signed by Manor Care. The suit seeks compensatory and 13 14 punitive damages in excess of $100 million and preliminary and permanent injunctive relief enforcing the covenant not to compete. On June 10, 1999, Genesis filed an amended complaint that was substantively identical to the original complaint. On June 29, 1999, the defendants moved to dismiss or, in the alternative, to stay the lawsuit in its entirety. On or about March 22, 2000, the court granted the defendants' motion to stay the action in its entirety pending the arbitration discussed below, but denied the motion with respect to the alternative request to dismiss the action. The Company intends to vigorously defend the lawsuit. Although the ultimate outcome of the case is uncertain, management believes that it is not likely to have a material adverse effect on the financial condition of the Company. On August 27, 1999, Manor Care filed a separate action in federal district court in Delaware against Genesis concerning its 1998 acquisition of Vitalink. Manor Care's lawsuit charges Genesis with violations of Section 11 and Section 12 of the Securities Act of 1933, based upon Genesis' misrepresentations and/or misleading omissions in connection with Genesis' issuance of approximately $293 million of Genesis Preferred Stock as consideration to Manor Care for its approximately 50 percent interest in Vitalink. Manor Care seeks, among other things, compensatory damages and recission voiding Manor Care's purchase of the Genesis Preferred Stock and requiring Genesis to return to Manor Care the consideration that it paid at the time of the Vitalink sale. On November 23, 1999, Genesis moved to dismiss the lawsuit in its entirety. On or about January 18, 2000, Genesis moved to consolidate Manor Care's lawsuit with the suit that Genesis had filed in Delaware district court on May 7, 1999. On or about September 29, 2000, the Court granted in part and denied in part Genesis' motion to dismiss and also denied Genesis' motion to consolidate the lawsuits. Additionally, on May 7, 1999, NeighborCare instituted a lawsuit in the Circuit Court for Baltimore City, Maryland (the "Maryland Action") against the Company, Manor Care and ManorCare Health Services, Inc. ("MHS") seeking damages, preliminary and permanent injunctive relief, and a declaratory judgment related to allegations that the defendants had improperly sought to terminate certain Master Service Agreements ("MSAs") between Vitalink (n/k/a NeighborCare) and MHS. NeighborCare also instituted arbitration proceedings (the "Arbitration") against the same defendants, seeking substantially the same relief as sought in the Maryland Action with respect to one of the MSAs at issue in the Maryland Action and also certain additional permanent relief with respect to that contract. On May 13, 1999, NeighborCare and the defendants agreed: (i) to consolidate the Maryland Action into the Arbitration; (ii) to dismiss the Maryland Action with prejudice as to jurisdiction and without prejudice as to the merits; and (iii) to stay termination of the agreements at issue until a decision can be reached in the Arbitration. NeighborCare has since dismissed the Maryland Action and consolidated certain of those claims into the Arbitration by filing an Amended Demand for Arbitration. On June 15, 1999, the defendants filed an answer and counterclaim, denying the material allegations in the Amended Demand, and they subsequently moved to dismiss three of the six claims alleged in the Amended Demand. On or about May 17, 2000, the Arbitrator granted in part the defendants' motion to dismiss, thereby dismissing two of NeighborCare's six claims. On or about May 23, 2000, based upon NeighborCare's representation that it would likely file for bankruptcy before it could complete the Arbitration hearing set for the weeks of June 12 and July 3, 2000, the Arbitrator vacated the hearing dates. The matter has been stayed since NeighborCare's June 22, 2000 bankruptcy filing. The Company intends to vigorously defend the Arbitration. Although the ultimate outcome of the Arbitration is uncertain, management believes that it is not likely to have a material adverse effect on the financial condition of the Company. 14 15 On July 26, 1999, NeighborCare filed an additional complaint in the Circuit Court for Baltimore County, Maryland against Omnicare, Inc. and Heartland Healthcare Services, Inc. (a partnership between subsidiaries of Omnicare, Inc. and the Company) seeking injunctive relief and compensatory and punitive damages. The complaint includes counts for tortious interference with Vitalink's purported contractual rights under the MSAs. On October 4, 1999, the defendants moved to dismiss or, in the alternative, to stay the lawsuit in its entirety. On November 12, 1999, the court stayed the matter pending the Arbitration. Although the ultimate outcome of the case is uncertain, management believes that it is not likely to have a material adverse effect on the financial condition of the Company. On December 22, 1999, Manor Care filed suit in federal court in Toledo, Ohio against Genesis; Cypress Group, L.L.C.; TPG Partners II, L.P.; and Nazem, Inc. The complaint alleges that the issuance by Genesis of its Series H and Series I Preferred Stock violated the terms of the Series G Preferred Stock and the terms of a rights agreement entered into between Genesis and Manor Care in connection with the Vitalink transaction. On February 29, 2000, the defendants moved to dismiss the case. That motion was pending before the court as of the time the matter was automatically stayed by Genesis' June 22, 2000 bankruptcy filing. One or more subsidiaries or affiliates of Manor Care have been identified as potentially responsible parties (PRPs) in a variety of actions (the Actions) relating to waste disposal sites which allegedly are subject to remedial action under the Comprehensive Environmental Response Compensation Liability Act, as amended, 42 U.S.C. Sections 9601 et seq. (CERCLA) and similar state laws. CERCLA imposes retroactive, strict joint and several liability on PRPs for the costs of hazardous waste clean-up. The Actions arise out of the alleged activities of Cenco, Incorporated and its subsidiary and affiliated companies (Cenco). Cenco was acquired in 1981 by a wholly owned subsidiary of Manor Care. The Actions allege that Cenco transported and/or generated hazardous substances that came to be located at the sites in question. Environmental proceedings such as the Actions may involve owners and/or operators of the hazardous waste site, multiple waste generators and multiple waste transportation disposal companies. Such proceedings involve efforts by governmental entities and/or private parties to allocate or recover site investigation and clean-up costs, which costs may be substantial. The potential liability exposure for currently pending environmental claims and litigation, without regard to insurance coverage, cannot be quantified with precision because of the inherent uncertainties of litigation in the Actions and the fact that the ultimate cost of the remedial actions for some of the waste disposal sites where Manor Care is alleged to be a potentially responsible party has not yet been quantified. Based upon its current assessment of the likely outcome of the Actions, the Company believes that the potential environmental liability exposure, after consideration of insurance coverage, is approximately $4.5 million. The Company is party to various other legal matters arising in the ordinary course of business including patient care-related claims and litigation. The Company believes that the resolution of such matters will not result in liability materially in excess of accounting accruals established with respect to such matters. 15 16 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. - -------- 4 Second Amendment to Five Year Credit Agreement dated as of September 22, 2000 among Manor Care, Inc. (formerly known as HCR Manor Care, Inc.), Manor Care of America, Inc. (formerly known as Manor Care, Inc.), various financial institutions, and Bank of America, N.A., as Administrative Agent. 4.1 Third Amendment to 364 Day Credit Agreement dated as of September 22, 2000 among Manor Care, Inc. (formerly known as HCR Manor Care, Inc.), Manor Care of America, Inc. (formerly known as Manor Care, Inc.), various financial institutions and Bank of America, N.A., as Administrative Agent. 27 Financial Data Schedule for the nine months ended September 30, 2000 (b) Reports on Form 8-K None 16 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Manor Care, Inc. (Registrant) Date November 9, 2000 by /s/ Geoffrey G. Meyers ------------------- ---------------------- Geoffrey G. Meyers, Executive Vice President and Chief Financial Officer 17 18 EXHIBIT INDEX EXHIBIT 4 Second Amendment to Five Year Credit Agreement dated as of September 22, 2000 among Manor Care, Inc. (formerly known as HCR Manor Care, Inc.), Manor Care of America, Inc. (formerly known as Manor Care, Inc.), various financial institutions, and Bank of America, N.A., as Administrative Agent. 4.1 Third Amendment to 364 Day Credit Agreement dated as of September 22, 2000 among Manor Care, Inc. (formerly known as HCR Manor Care, Inc.), Manor Care of America, Inc. (formerly known as Manor Care, Inc.), various financial institutions and Bank of America, N.A., as Administrative Agent. 27 Financial Data Schedule for the nine months ended September 30, 2000 18 EX-4 2 l84465aex4.txt EXHIBIT 4 1 Exhibit 4 SECOND AMENDMENT TO FIVE YEAR CREDIT AGREEMENT THIS SECOND AMENDMENT TO FIVE YEAR CREDIT AGREEMENT is made and dated as of September 22, 2000 (the "SECOND AMENDMENT") among MANOR CARE, INC., a Delaware corporation formerly known as HCR Manor Care, Inc. (the "COMPANY"), MANOR CARE OF AMERICA, INC., a Delaware corporation formerly known as Manor Care, Inc. ("MANOR CARE"; Manor Care and the Company are collectively called the "BORROWERS" and are each individually called a "Borrower"), the financial institution's party to the Credit Agreement referred to below, and BANK OF AMERICA, N.A., a national banking association, as Administrative Agent (the "AGENT"), and amends that certain Credit Agreement dated as of September 25, 1998, as amended by that certain First Amendment to Five Year Credit Agreement dated as of February 9, 2000 (as amended or modified from time to time, the "CREDIT AGREEMENT"). RECITALS WHEREAS, the Borrowers have requested that the Agent and the Banks amend certain provisions of the Credit Agreement, and the Agent and the Banks are willing to do so, on the terms and conditions specified herein; NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows: 1. TERMS. All terms used herein shall have the same meanings as in the Credit Agreement unless otherwise defined herein. 2. AMENDMENTS. The Credit Agreement is hereby amended as follows: (a) The definition of the term "Consolidated EBITDA" in Section 1.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "CONSOLIDATED EBITDA" means the Company's and its Subsidiaries' earnings BEFORE Consolidated Interest Expense, taxes, depreciation, amortization, extraordinary items of gain and all Specified Losses and BEFORE the $274,120,000 of charges taken by the Company in the quarter ending December 31, 1999 in connection with the write-down of its investment in Genesis Health Ventures, Inc. ("GENESIS"), the $17,404,000 charge taken by the Company in the quarter ending December 31, 1999 in connection with its write-off of accrued and unpaid dividends from Genesis and the $27,300,000 of charges taken by the Company in the quarter ending June 30, 2000 in connection with the write-down of its investment in Genesis and in a joint venture with Genesis and the write-down of certain receivables from Genesis, and AFTER deduction of $4,351,000 for each of the fiscal quarters ending on March 31, 1999, June 30, 1999, September 30, 1999 and December 31, 1999. 2 3. REPRESENTATIONS AND WARRANTIES. The Borrowers represent and warrant to the Agent and the Banks that, on and as of the date hereof, and after giving effect to this Second Amendment: 3.1 AUTHORIZATION. The execution, delivery and performance by the Borrowers of this Second Amendment have been duly authorized by all necessary corporate action, and this Second Amendment has been duly executed and delivered by the Borrowers. 3.2 BINDING OBLIGATION. This Second Amendment constitutes the legal, valid and binding obligation of the Borrowers, enforceable against the Borrowers in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 3.3 NO LEGAL OBSTACLE TO AMENDMENT. The execution, delivery and performance of this Second Amendment will not (a) contravene the Organization Documents of either Borrower; (b) constitute a breach or default under any material Contractual Obligation or violate or contravene any law or governmental regulation or court decree or order binding on or affecting either Borrower which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect; or (c) result in, or require the creation or imposition of, any Lien on any of either Borrower's properties. No approval or authorization of any governmental authority is required to permit the execution, delivery or performance by the Borrowers of this Second Amendment, or the transactions contemplated hereby. 3.4 INCORPORATION OF CERTAIN REPRESENTATIONS. After giving effect to the terms of this Second Amendment, the representations and warranties of the Company set forth in Article VI of the Credit Agreement are true and correct in all respects on and as of the date hereof as though made on and as of the date hereof, except as to such representations made as of an earlier specified date. 3.5 DEFAULT. No Default or Event of Default under the Credit Agreement has occurred and is continuing. 4. CONDITIONS, EFFECTIVENESS. The effectiveness of this Second Amendment shall be subject to the compliance by the Borrowers with their agreements herein contained, and to the delivery of the following to Agent in form and substance satisfactory to Agent: 4.1 GUARANTOR AFFIRMATION. An acknowledgment and reaffirmation letter in the form of EXHIBIT A hereto duly executed by each party to the Guaranty (a "Guarantor"). 4.2 OTHER EVIDENCE. Such other evidence with respect to the Borrowers or any other person as the Agent or any Bank may reasonably request to establish the consummation of the transactions contemplated hereby, the taking of all corporate action in connection with this 2 3 Second Amendment and the Credit Agreement and the compliance with the conditions set forth herein. 5. MISCELLANEOUS. 5.1 EFFECTIVENESS OF THE CREDIT AGREEMENT. Except as hereby expressly amended, the Credit Agreement shall each remain in full force and effect and is hereby ratified and confirmed in all respects on and as of the date hereof. 5.2 WAIVERS. This Second Amendment is limited solely to the matters expressly set forth herein and is specific in time and in intent and does not constitute, nor should it be construed as, a waiver or amendment of any other term or condition, right, power or privilege under the Credit Agreement or under any agreement, contract, indenture, document or instrument mentioned therein; nor does it preclude or prejudice any rights of the Agent or the Banks thereunder, or any exercise thereof or the exercise of any other right, power or privilege, nor shall it require the Majority Banks to agree to an amendment, waiver or consent for a similar transaction or on a future occasion, nor shall any future waiver of any right, power, privilege or default hereunder, or under any agreement, contract, indenture, document or instrument mentioned in the Credit Agreement, constitute a waiver of any other right, power, privilege or default of the same or of any other term or provision. 5.3 COUNTERPARTS. This Second Amendment may be executed in any number of counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument. This Second Amendment shall not become effective until the Borrowers, the Agent and the Majority Banks shall have signed a copy hereof and the same shall have been delivered to the Agent and the conditions set forth in Section 4 hereof have been satisfied. Upon satisfaction of the foregoing conditions, the effectiveness of this Second Amendment shall be retroactive to June 30, 2000. Delivery of an executed counterpart of a signature page to this Second Amendment should be effective as delivery of a manually executed counterpart of this Second Amendment. 5.4 GOVERNING LAW. This Second Amendment shall be governed by and construed in accordance with the laws of the State of New York. 5.5 SEVERABILITY. The illegality or unenforceability of any provision of this Second Amendment or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Second Amendment or any instrument or agreement required hereunder. 3 4 IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. MANOR CARE, INC. By: ----------------------------------- Title: -------------------------------- MANOR CARE OF AMERICA, INC. By: ----------------------------------- Title: -------------------------------- BANK OF AMERICA, N.A., as Agent By: ----------------------------------- Title: -------------------------------- BANK OF AMERICA, N.A., as a Bank By: ----------------------------------- Title: -------------------------------- THE CHASE MANHATTAN BANK By: ----------------------------------- Title: -------------------------------- THE TORONTO-DOMINION BANK By: ----------------------------------- Title: -------------------------------- 4 5 DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By: ----------------------------------- Title: -------------------------------- By: ----------------------------------- Title: -------------------------------- THE HUNTINGTON NATIONAL BANK By: ----------------------------------- Title: -------------------------------- BANK OF MONTREAL By: ----------------------------------- Title: -------------------------------- THE BANK OF NEW YORK By: ----------------------------------- Title: -------------------------------- BANK ONE, N.A. By: ----------------------------------- Title: -------------------------------- 5 6 ALLFIRST BANK By: ----------------------------------- Title: -------------------------------- NATIONAL CITY BANK By: ----------------------------------- Title: -------------------------------- SUNTRUST BANK By: ----------------------------------- Title: -------------------------------- WACHOVIA BANK, N.A. By: ----------------------------------- Title: -------------------------------- FLEET NATIONAL BANK By: ----------------------------------- Title: -------------------------------- THE FIFTH THIRD BANK By: ----------------------------------- Title: -------------------------------- 6 7 EXHIBIT A TO SECOND AMENDMENT TO CREDIT AGREEMENT September 22, 2000 The parties listed on the acknowledgment pages hereof: Re: Five Year Day Credit Agreement dated as of September 25, 1998 Ladies and Gentlemen: Please refer to (i) the Credit Agreement dated as of September 25, 1998, as amended (as so amended, the "CREDIT AGREEMENT") by and among Manor Care, Inc. and Manor Care of America, Inc., as the borrowers, the commercial lending institutions party thereto (the "BANKS") and Bank of America, N.A., as administrative agent (in such capacity, the "AGENT") and (ii) the Guaranty dated as of September 25, 1998 (the "GUARANTY"), which was executed by you on such date or to which you later became a party pursuant to a Guaranty Assumption Agreement. Pursuant to an amendment of even date herewith, certain terms of the Credit Agreement were amended. We hereby request that you (i) consent to the terms of the amendment, (ii) acknowledge and reaffirm all of your obligations and undertakings under the Guaranty and (iii) acknowledge and agree that the Guaranty is and shall remain in full force and effect in accordance with the terms thereof. Please indicate your agreement to the foregoing by signing in the space provided below, and returning the executed copy to the undersigned. Very truly yours, BANK OF AMERICA, N.A., as Agent By:__________________________________ Title:________________________________ A-1 8 Acknowledged and Agreed to: MANOR CARE, INC. By: ________________________________ Title: ______________________________ MANOR CARE OF AMERICA, INC. By: ________________________________ Title: ______________________________ ANCILLARY SERVICES MANAGEMENT, INC. BIRCHWOOD MANOR, INC. BLUE RIDGE REHABILITATION SERVICES, INC. CANTEBURY VILLAGE, INC. DIVERSIFIED REHABILITATION SERVICES, INC. DONAHOE MANOR, INC. EAST MICHIGAN CARE CORPORATION EYE-Q NETWORK, INC. GEORGIAN BLOOMFIELD, INC. GREENVIEW MANOR, INC. HCR ACQUISITION CORPORATION HCR HOME HEALTH CARE AND HOSPICE, INC. HCR INFORMATION CORPORATION HCR PHYSICIAN MANAGEMENT SERVICES, INC. HCR REHABILITATION CORP. HCR THERAPY SERVICES, INC. HCRA OF TEXAS, INC. HCRC INC. HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA HEARTLAND CAREPARTNERS, INC. HEARTLAND HOME CARE, INC. HEARTLAND HOME HEALTH CARE SERVICES, INC. HEARTLAND HOSPICE SERVICES, INC. HEARTLAND MANAGEMENT SERVICES, INC. HEARTLAND PAIN AND REHABILITATION CENTER, INC.
A-2 9 HEARTLAND REHABILITATION SERVICES OF NORTH FLORIDA, INC. HEARTLAND REHABILITATION SERVICES, INC. HEARTLAND SERVICES CORP. HERBERT LASKIN, RPT - JOHN MCKENZIE, RPT PHYSICAL THERAPY PROFESSIONAL ASSOCIATES, INC. HGCC OF ALLENTOWN, INC. IONIA MANOR, INC. KENSINGTON MANOR, INC. KNOLLVIEW MANOR, INC. LINCOLN HEALTH CARE, INC. MARINA VIEW MANOR, INC. MEDI-SPEECH SERVICE, INC. MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. MILESTONE HEALTH SYSTEMS, INC. MILESTONE HEALTHCARE, INC. MILESTONE REHABILITATIONS SERVICES, INC. MILESTONE THERAPY SERVICES, INC. MRC REHABILITATION, INC. NUVISTA REFRACTIVE SURGERY AND LASER CENTER, INC. PERRYSBURG PHYSICAL THERAPY, INC. PHYSICAL OCCUPATIONAL AND SPEECH THERAPY, INC. REHABILITATION ADMINISTRATIVE CORPORATION REHABILITATION ASSOCIATES, INC. REHABILITATION SERVICES OF ROANOKE, INC. REINBOLT AND BURKAM, INC. RICHARDS HEALTHCARE, INC. RIDGEVIEW MANOR, INC. RVA MANAGEMENT SERVICES, INC. SPRINGHILL MANOR, INC. SUN VALLEY MANOR, INC. THERAPY ASSOCIATES, INC. THREE RIVERS MANOR, INC. VISION MANAGEMENT SERVICES, INC. WASHTENAW HILLS MANOR, INC. WHITEHALL MANOR, INC. A-3 10 By:____________________________________ Name: _________________________________ Its:____________________________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 AMERICAN HOSPITAL BUILDING CORPORATION AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, INC. AMERICANA HEALTHCARE CORPORATION OF GEORGIA AMERICANA HEALTHCARE CORPORATION OF NAPLES ARCHIVE ACQUISITION, INC. ARCHIVE RETRIEVAL SYSTEMS, INC. BAILY NURSING HOME, INC. CHARLES MANOR, INC. CHESAPEAKE MANOR, INC. DEVON MANOR CORPORATION DISTCO, INC. EXECUTIVE ADVERTISING, INC. FOUR SEASONS NURSING CENTERS, INC. HEALTHCARE CONSTRUCTION CORP. INDUSTRIAL WASTES INC. JACKSONVILLE HEALTHCARE CORPORATION LEADER NURSING AND REHABILITATION CENTER OF BETHEL PARK, INC. LEADER NURSING AND REHABILITATION CENTER OF GLOUCESTER, INC. LEADER NURSING AND REHABILITATION CENTER OF SCOTT TOWNSHIP, INC. LEADER NURSING AND REHABILITATION CENTER OF VIRGINIA INC. MCHS OF NEW YORK, INC. MNR FINANCE CORP. MRS, INC. MANORCARE HEALTH SERVICES, INC. A-4 11 MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. MANORCARE HEALTH SERVICES OF GEORGIA, INC. MANOR CARE AVIATION, INC. MANOR CARE MANAGEMENT CORPORATION MANOR CARE OF AKRON, INC. MANOR CARE OF ARIZONA, INC. MANOR CARE OF ARLINGTON, INC. MANOR CARE OF BOCA RATON, INC. MANOR CARE OF BOYNTON BEACH, INC. MANOR CARE OF CANTON, INC. MANOR CARE OF CHARLESTON, INC. MANOR CARE OF CINCINNATI, INC. MANOR CARE OF COLUMBIA, INC. MANOR CARE OF DARIEN, INC. MANOR CARE OF DUNEDIN, INC. MANOR CARE OF FLORIDA, INC. MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, INC. MANORCARE HEALTH SERVICES OF VIRGINIA, INC. MANOR CARE OF HINSDALE, INC. MANOR CARE OF KANSAS, INC. MANOR CARE OF KINGSTON COURT, INC. MANOR CARE OF LARGO, INC. MANOR CARE OF LEXINGTON, INC. MANOR CARE OF MEADOW PARK, INC. MANOR CARE OF MESQUITE, INC. MANOR CARE OF NORTH OLMSTEAD, INC. MANOR CARE OF PINEHURST, INC. MANOR CARE OF PLANTATION, INC. MANOR CARE OF ROLLING MEADOWS, INC. MANOR CARE OF ROSSVILLE, INC. MANOR CARE OF SARASOTA, INC. MANOR CARE OF WILLOUGHBY, INC. MANOR CARE OF WILMINGTON, INC. MANOR OF YORK (NORTH), INC. MANOR OF YORK (SOUTH), INC. MANOR CARE PROPERTIES, INC. MANOR LIVING CENTERS, INC. MEDICAL AID TRAINING SCHOOLS, INC. NEW MANORCARE HEALTH SERVICES, INC. A-5 12 THE NIGHTINGALE NURSING HOME, INC. PEAK REHABILITATION, INC. PNEUMATIC CONCRETE, INC. PORTFOLIO ONE, INC. ROLAND PARK NURSING CENTER, INC. SILVER SPRING - WHEATON NURSING HOME, INC. STEWALL CORPORATION STRATFORD MANOR, INC. STUTEX CORP. TOTALCARE CLINICAL LABORATORIES, INC. By:____________________________________ Name: _________________________________ Title:__________________________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 ANNANDALE ARDEN, LLC BAINBRIDGE ARDEN, LLC BINGHAM FARMS ARDEN, LLC CRESTVIEW ARDEN, LLC FIRST LOUISVILLE ARDEN, LLC HANOVER ARDEN, LLC JEFFERSON ARDEN, LLC KENWOOD ARDEN, LLC LEXINGTON ARDEN, LLC LINWOOD ARDEN, LLC LIVONIA ARDEN, LLC MEMPHIS ARDEN, LLC NAPA ARDEN, LLC NASHVILLE ARDEN, LLC NISHAYUNA ARDEN, LLC ROANOKE ARDEN, LLC SAN ANTONIO ARDEN, LLC SECOND LOUISVILLE ARDEN, LLC SETAUKET ARDEN, LLC SILVER SPRING ARDEN, LLC A-6 13 TAMPA ARDEN, LLC TUSTIN ARDEN, LLC WALL ARDEN, LLC WEST WINDSOR ARDEN, LLC WILLIAMSVILLE ARDEN, LLC By: Manor Care of America, Inc., its sole member By:_______________________________ Name: ______________________ Title:_______________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 BATH ARDEN, LLC EMERSON SPRINGHOUSE, LLC FRESNO ARDEN, LLC LAKE ZURICH ARDEN, LLC METUCHEN ARDEN, LLC MIDDLETOWN ARDEN, LLC MONROE ARDEN, LLC MOORESTOWN ARDEN, LLC OVERLAND PARK ARDEN, LLC OVERLAND PARK SKILLED NURSING, LLC ROCKFORD ARDEN, LLC ROCKLEIGH ARDEN, LLC TOM'S RIVER ARDEN, LLC TUSCAWILLA ARDEN, LLC WAYNE ARDEN, LLC WAYNE SPRINGHOUSE, LLC WEST DEPTFORD ARDEN, LLC WEST ORANGE ARDEN, LLC WEST ORANGE SPRINGHOUSE, LLC By: Manor Care Health Services, Inc., its sole member A-7 14 By:_____________________________ Name: ______________________ Title:_______________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 BOOTH LIMITED PARTNERSHIP By: Jacksonville Healthcare Corporation, its general partner By:_____________________________ Name: _______________________ Title_________________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 COLEWOOD LIMITED PARTNERSHIP By: American Hospital Building Corporation, its general partner By:________________________________ Name: _______________________ Title:________________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 A-8 15 HEARTLAND EMPLOYMENT SERVICES, INC. By:________________________________ Name: _____________________________ Title:_____________________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 ANCILLARY SERVICES, LLC By: Heartland Rehabilitation Corporation By:__________________________________ Name: ____________________________ Title:____________________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 Alburquerque Arden, LLC Colonie Arden, LLC Geneva Arden, LLC Glen Ellyn Arden, LLC Kansas skilled Nursing, LLC Laureldaly Arden, LLC Susquehanna Arden, LLC Warminster Arden, LLC By: Manor Care of America, Inc. By:________________________________ Name: ___________________________ Title:____________________________ A-9 16 Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 A-10 EX-4.1 3 l84465aex4-1.txt EXHIBIT 4.1 1 Exhibit 4.1 THIRD AMENDMENT TO 364 DAY CREDIT AGREEMENT THIS THIRD AMENDMENT TO 364 DAY CREDIT AGREEMENT is made and dated as of September 22, 2000 (the "THIRD Amendment") among MANOR CARE, INC., a Delaware corporation formerly known as HCR Manor Care, Inc. (the "COMPANY"), MANOR CARE OF AMERICA, INC., a Delaware corporation formerly known as Manor Care, Inc. ("MANOR CARE"; Manor Care and the Company are collectively called the "BORROWERS" and are each individually called a "BORROWER"), the financial institution's party to the Credit Agreement referred to below, and BANK OF AMERICA, N.A., a national banking association, as Administrative Agent (the "AGENT"), and amends that certain 364 Day Credit Agreement dated as of September 25, 1998, as amended by that certain First Amendment to 364 Day Credit Agreement dated as of September 24, 1999 and that certain Second Amendment to 364 Day Credit Agreement dated as of February 9, 2000 (as amended or modified from time to time, the "CREDIT AGREEMENT"). RECITALS WHEREAS, the Borrowers have requested that the Agent and the Banks amend certain provisions of the Credit Agreement, and the Agent and the Banks are willing to do so, on the terms and conditions specified herein; NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows: 1. TERMS. All terms used herein shall have the same meanings as in the Credit Agreement unless otherwise defined herein. 2. AMENDMENTS. The Credit Agreement is hereby amended as follows: 2.1 AMENDMENTS TO COVER PAGE. The cover page of the Credit Agreement is hereby amended and restated in its entirety to read as set forth in Exhibit B hereof. 2.2 AMENDMENTS TO SECTION 1.1. (a) The definition of the term "Consolidated EBITDA" in Section 1.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "CONSOLIDATED EBITDA" means the Company's and its Subsidiaries' earnings BEFORE Consolidated Interest Expense, taxes, depreciation, amortization, extraordinary items of gain and all Specified Losses and BEFORE the $274,120,000 of charges taken by the Company in the quarter ending December 31, 1999 in connection with the write-down of its investment in Genesis Health Ventures, Inc. ("GENESIS"), the $17,404,000 charge taken by the Company in 2 the quarter ending December 31, 1999 in connection with its write-off of accrued and unpaid dividends from Genesis and the $27,300,000 of charges taken by the Company in the quarter ending June 30, 2000 in connection with the write-down of its investment in Genesis and in a joint venture with Genesis and the write-down of certain receivables from Genesis, and AFTER deduction of $4,351,000 for each of the fiscal quarters ending on March 31, 1999, June 30, 1999, September 30, 1999 and December 31, 1999. (b) The definition of the term "Revolving Termination Date" in Section 1.1 of the Credit Agreement is hereby amended by deleting the date "September 22, 2000" from clause (a) thereof and replacing it with the date "September 21, 2001." 2.3 AMENDMENTS TO SECTION 5.5. Section 5.5 of the Credit Agreement is hereby amended by deleting the date "December 31, 1998" from clause (a) thereof and replacing it with "December 31, 1999" and by deleting the date "June 30, 1999" from clause (b) thereof and replacing it with "June 30, 2000". 2.4 AMENDMENT TO SECTION 5.6. Section 5.6 of the Credit Agreement is hereby amended by deleting the date "December 31, 1998" and replacing it with "December 31, 1999." 2.5 AMENDMENT TO SCHEDULE 2.1. Schedule 2.1 to the Credit Agreement is hereby amended and restated to read as set forth on Schedule 2.1 hereof. 3. REPRESENTATIONS AND WARRANTIES. The Borrowers represent and warrant to the Agent and the Banks that, on and as of the date hereof, and after giving effect to this Third Amendment: 3.1 AUTHORIZATION. The execution, delivery and performance by the Borrowers of this Third Amendment have been duly authorized by all necessary corporate action, and this Third Amendment has been duly executed and delivered by the Borrowers. 3.2 BINDING OBLIGATION. This Third Amendment constitutes the legal, valid and binding obligation of the Borrowers, enforceable against the Borrowers in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 3.3 NO LEGAL OBSTACLE TO AMENDMENT. The execution, delivery and performance of this Third Amendment will not (a) contravene the Organization Documents of either Borrower; (b) constitute a breach or default under any material Contractual Obligation or violate or contravene any law or governmental regulation or court decree or order binding on or affecting either Borrower which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect; or (c) result in, or require the creation or imposition of, any Lien on any of either Borrower's properties. No approval or authorization of any governmental authority is required to permit the execution, delivery or performance by the Borrowers of this Third Amendment, or the transactions contemplated hereby. 2 3 3.4 INCORPORATION OF CERTAIN REPRESENTATIONS. After giving effect to the terms of this Third Amendment, the representations and warranties of the Company set forth in Article V of the Credit Agreement are true and correct in all respects on and as of the date hereof as though made on and as of the date hereof, except as to such representations made as of an earlier specified date. 3.5 DEFAULT. No Default or Event of Default under the Credit Agreement has occurred and is continuing. 4. CONDITIONS, EFFECTIVENESS. The effectiveness of this Third Amendment shall be subject to the compliance by the Borrowers with their agreements herein contained, and to the delivery of the following to Agent in form and substance satisfactory to Agent: 4.1 AMENDMENT FEE. An amendment fee (the "Amendment Fee"), for the ratable benefit of the Banks that have consented to the Third Amendment not later than 3:00 p.m., Eastern Standard Time, on September 21, 2000, in the amounts set forth in the presentation to the Banks on August 8, 2000. The Amendment Fee shall be paid to the Agent in immediately available funds and shall be non-refundable. The Amendment Fee is in addition to any fees, costs, expenses or other amounts otherwise payable pursuant to this Third Amendment or the Amended Agreement. 4.2 GUARANTOR AFFIRMATION. An acknowledgment and reaffirmation letter in the form of EXHIBIT A hereto duly executed by each party to the Guaranty (a "Guarantor"). 4.3 OTHER EVIDENCE. Such other evidence with respect to the Borrowers or any other person as the Agent or any Bank may reasonably request to establish the consummation of the transactions contemplated hereby, the taking of all corporate action in connection with this Third Amendment and the Credit Agreement and the compliance with the conditions set forth herein. 5. MISCELLANEOUS. 5.1 EFFECTIVENESS OF THE CREDIT AGREEMENT. Except as hereby expressly amended, the Credit Agreement shall each remain in full force and effect and is hereby ratified and confirmed in all respects on and as of the date hereof. 5.2 WAIVERS. This Third Amendment is limited solely to the matters expressly set forth herein and is specific in time and in intent and does not constitute, nor should it be construed as, a waiver or amendment of any other term or condition, right, power or privilege under the Credit Agreement or under any agreement, contract, indenture, document or instrument mentioned therein; nor does it preclude or prejudice any rights of the Agent or the Banks thereunder, or any exercise thereof or the exercise of any other right, power or privilege, nor shall it require the Majority Banks to agree to an amendment, waiver or consent for a similar transaction or on a future occasion, nor shall any future waiver of any right, power, privilege or default hereunder, or under any agreement, 3 4 contract, indenture, document or instrument mentioned in the Credit Agreement, constitute a waiver of any other right, power, privilege or default of the same or of any other term or provision. 5.3 COUNTERPARTS. This Third Amendment may be executed in any number of counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument. This Third Amendment shall not become effective until the Borrowers, the Agent and all Banks shall have signed a copy hereof and the same shall have been delivered to the Agent and the conditions set forth in Section 4 hereof have been satisfied. Delivery of an executed counterpart of a signature page to this Third Amendment should be effective as delivery of a manually executed counterpart of this Third Amendment. 5.4 GOVERNING LAW. This Third Amendment shall be governed by and construed in accordance with the laws of the State of New York. 5.5 SEVERABILITY. The illegality or unenforceability of any provision of this Third Amendment or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Third Amendment or any instrument or agreement required hereunder. IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. MANOR CARE, INC. By: ___________________________ Title: _________________________ MANOR CARE OF AMERICA, INC. By: ___________________________ Title: _________________________ BANK OF AMERICA, N.A., as Agent By: ___________________________ Title: _________________________ 4 5 BANK OF AMERICA, N.A., as a Bank By: ___________________________ Title: _________________________ THE CHASE MANHATTAN BANK By: ___________________________ Title: _________________________ THE HUNTINGTON NATIONAL BANK By: ___________________________ Title: _________________________ THE BANK OF NEW YORK By: ___________________________ Title: _________________________ 5 6 ALLFIRST BANK By: ___________________________ Title: _________________________ NATIONAL CITY BANK By: ___________________________ Title: _________________________ SUNTRUST BANK By: ___________________________ Title: _________________________ 6 7 EXHIBIT A TO THIRD AMENDMENT TO CREDIT AGREEMENT September 22, 2000 The parties listed on the acknowledgment pages hereof: Re: 364 Day Credit Agreement dated as of September 25, 1998 Ladies and Gentlemen: Please refer to (i) the 364 Day Credit Agreement dated as of September 25, 1998, as amended (as so amended, the "CREDIT AGREEMENT") by and among Manor Care, Inc. and Manor Care of America, Inc., as the borrowers, the commercial lending institutions party thereto (the "BANKS") and Bank of America, N.A., as administrative agent (in such capacity, the "AGENT") and (ii) the Guaranty dated as of September 25, 1998 (the "GUARANTY"), which was executed by you on such date or to which you later became a party pursuant to a Guaranty Assumption Agreement. Pursuant to an amendment of even date herewith, certain terms of the Credit Agreement were amended. We hereby request that you (i) consent to the terms of the amendment, (ii) acknowledge and reaffirm all of your obligations and undertakings under the Guaranty and (iii) acknowledge and agree that the Guaranty is and shall remain in full force and effect in accordance with the terms thereof. Please indicate your agreement to the foregoing by signing in the space provided below, and returning the executed copy to the undersigned. Very truly yours, BANK OF AMERICA, N.A., as Agent By:________________________________ Title:_____________________________ Acknowledged and Agreed to: A-1 8 MANOR CARE, INC. By:________________________________ Title:_____________________________ MANOR CARE OF AMERICA, INC. By:________________________________ Title:_____________________________ ANCILLARY SERVICES MANAGEMENT, INC. BIRCHWOOD MANOR, INC. BLUE RIDGE REHABILITATION SERVICES, INC. CANTEBURY VILLAGE, INC. DIVERSIFIED REHABILITATION SERVICES, INC. DONAHOE MANOR, INC. EAST MICHIGAN CARE CORPORATION EYE-Q NETWORK, INC. GEORGIAN BLOOMFIELD, INC. GREENVIEW MANOR, INC. HCR ACQUISITION CORPORATION HCR HOME HEALTH CARE AND HOSPICE, INC. HCR INFORMATION CORPORATION HCR PHYSICIAN MANAGEMENT SERVICES, INC. HCR REHABILITATION CORP. HCR THERAPY SERVICES, INC. HCRA OF TEXAS, INC. HCRC INC. HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA HEARTLAND CAREPARTNERS, INC. HEARTLAND HOME CARE, INC. HEARTLAND HOME HEALTH CARE SERVICES, INC. HEARTLAND HOSPICE SERVICES, INC. HEARTLAND MANAGEMENT SERVICES, INC. HEARTLAND PAIN AND REHABILITATION CENTER, INC. A-2 9 HEARTLAND REHABILITATION SERVICES OF NORTH FLORIDA, INC. HEARTLAND REHABILITATION SERVICES, INC. HEARTLAND SERVICES CORP. HERBERT LASKIN, RPT - JOHN MCKENZIE, RPT PHYSICAL THERAPY PROFESSIONAL ASSOCIATES, INC. HGCC OF ALLENTOWN, INC. IONIA MANOR, INC. KENSINGTON MANOR, INC. KNOLLVIEW MANOR, INC. LINCOLN HEALTH CARE, INC. MARINA VIEW MANOR, INC. MEDI-SPEECH SERVICE, INC. MID-SHORE PHYSICAL THERAPY ASSOCIATES, INC. MILESTONE HEALTH SYSTEMS, INC. MILESTONE HEALTHCARE, INC. MILESTONE REHABILITATIONS SERVICES, INC. MILESTONE THERAPY SERVICES, INC. MRC REHABILITATION, INC. NUVISTA REFRACTIVE SURGERY AND LASER CENTER, INC. PERRYSBURG PHYSICAL THERAPY, INC. PHYSICAL OCCUPATIONAL AND SPEECH THERAPY, INC. REHABILITATION ADMINISTRATIVE CORPORATION REHABILITATION ASSOCIATES, INC. REHABILITATION SERVICES OF ROANOKE, INC. REINBOLT AND BURKAM, INC. RICHARDS HEALTHCARE, INC. RIDGEVIEW MANOR, INC. RVA MANAGEMENT SERVICES, INC. SPRINGHILL MANOR, INC. SUN VALLEY MANOR, INC. THERAPY ASSOCIATES, INC. THREE RIVERS MANOR, INC. VISION MANAGEMENT SERVICES, INC. WASHTENAW HILLS MANOR, INC. WHITEHALL MANOR, INC. A-3 10 By:____________________________________ Name: _________________________________ Its:____________________________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 AMERICAN HOSPITAL BUILDING CORPORATION AMERICANA HEALTHCARE CENTER OF PALOS TOWNSHIP, INC. AMERICANA HEALTHCARE CORPORATION OF GEORGIA AMERICANA HEALTHCARE CORPORATION OF NAPLES ARCHIVE ACQUISITION, INC. ARCHIVE RETRIEVAL SYSTEMS, INC. BAILY NURSING HOME, INC. CHARLES MANOR, INC. CHESAPEAKE MANOR, INC. DEVON MANOR CORPORATION DISTCO, INC. EXECUTIVE ADVERTISING, INC. FOUR SEASONS NURSING CENTERS, INC. HEALTHCARE CONSTRUCTION CORP. INDUSTRIAL WASTES INC. JACKSONVILLE HEALTHCARE CORPORATION LEADER NURSING AND REHABILITATION CENTER OF BETHEL PARK, INC. LEADER NURSING AND REHABILITATION CENTER OF GLOUCESTER, INC. LEADER NURSING AND REHABILITATION CENTER OF SCOTT TOWNSHIP, INC. LEADER NURSING AND REHABILITATION CENTER OF VIRGINIA INC. MCHS OF NEW YORK, INC. MNR FINANCE CORP. MRS, INC. MANORCARE HEALTH SERVICES, INC. A-4 11 MANORCARE HEALTH SERVICES OF BOYNTON BEACH, INC. MANORCARE HEALTH SERVICES OF GEORGIA, INC. MANOR CARE AVIATION, INC. MANOR CARE MANAGEMENT CORPORATION MANOR CARE OF AKRON, INC. MANOR CARE OF ARIZONA, INC. MANOR CARE OF ARLINGTON, INC. MANOR CARE OF BOCA RATON, INC. MANOR CARE OF BOYNTON BEACH, INC. MANOR CARE OF CANTON, INC. MANOR CARE OF CHARLESTON, INC. MANOR CARE OF CINCINNATI, INC. MANOR CARE OF COLUMBIA, INC. MANOR CARE OF DARIEN, INC. MANOR CARE OF DUNEDIN, INC. MANOR CARE OF FLORIDA, INC. MANORCARE HEALTH SERVICES OF NORTHHAMPTON COUNTY, INC. MANORCARE HEALTH SERVICES OF VIRGINIA, INC. MANOR CARE OF HINSDALE, INC. MANOR CARE OF KANSAS, INC. MANOR CARE OF KINGSTON COURT, INC. MANOR CARE OF LARGO, INC. MANOR CARE OF LEXINGTON, INC. MANOR CARE OF MEADOW PARK, INC. MANOR CARE OF MESQUITE, INC. MANOR CARE OF NORTH OLMSTEAD, INC. MANOR CARE OF PINEHURST, INC. MANOR CARE OF PLANTATION, INC. MANOR CARE OF ROLLING MEADOWS, INC. MANOR CARE OF ROSSVILLE, INC. MANOR CARE OF SARASOTA, INC. MANOR CARE OF WILLOUGHBY, INC. MANOR CARE OF WILMINGTON, INC. MANOR OF YORK (NORTH), INC. MANOR OF YORK (SOUTH), INC. MANOR CARE PROPERTIES, INC. MANOR LIVING CENTERS, INC. MEDICAL AID TRAINING SCHOOLS, INC. NEW MANORCARE HEALTH SERVICES, INC. A-5 12 THE NIGHTINGALE NURSING HOME, INC. PEAK REHABILITATION, INC. PNEUMATIC CONCRETE, INC. PORTFOLIO ONE, INC. ROLAND PARK NURSING CENTER, INC. SILVER SPRING - WHEATON NURSING HOME, INC. STEWALL CORPORATION STRATFORD MANOR, INC. STUTEX CORP. TOTALCARE CLINICAL LABORATORIES, INC. By:____________________________________ Name: _________________________________ Its:____________________________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 ANNANDALE ARDEN, LLC BAINBRIDGE ARDEN, LLC BINGHAM FARMS ARDEN, LLC CRESTVIEW ARDEN, LLC FIRST LOUISVILLE ARDEN, LLC HANOVER ARDEN, LLC JEFFERSON ARDEN, LLC KENWOOD ARDEN, LLC LEXINGTON ARDEN, LLC LINWOOD ARDEN, LLC LIVONIA ARDEN, LLC MEMPHIS ARDEN, LLC NAPA ARDEN, LLC NASHVILLE ARDEN, LLC NISHAYUNA ARDEN, LLC ROANOKE ARDEN, LLC SAN ANTONIO ARDEN, LLC SECOND LOUISVILLE ARDEN, LLC SETAUKET ARDEN, LLC SILVER SPRING ARDEN, LLC A-6 13 TAMPA ARDEN, LLC TUSTIN ARDEN, LLC WALL ARDEN, LLC WEST WINDSOR ARDEN, LLC WILLIAMSVILLE ARDEN, LLC By: Manor Care of America, Inc., its sole member By:____________________________________ Name: _________________________________ Its:____________________________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 BATH ARDEN, LLC EMERSON SPRINGHOUSE, LLC FRESNO ARDEN, LLC LAKE ZURICH ARDEN, LLC METUCHEN ARDEN, LLC MIDDLETOWN ARDEN, LLC MONROE ARDEN, LLC MOORESTOWN ARDEN, LLC OVERLAND PARK ARDEN, LLC OVERLAND PARK SKILLED NURSING, LLC ROCKFORD ARDEN, LLC ROCKLEIGH ARDEN, LLC TOM'S RIVER ARDEN, LLC TUSCAWILLA ARDEN, LLC WAYNE ARDEN, LLC WAYNE SPRINGHOUSE, LLC WEST DEPTFORD ARDEN, LLC WEST ORANGE ARDEN, LLC WEST ORANGE SPRINGHOUSE, LLC By: Manor Care Health Services, Inc., its sole member A-7 14 By:____________________________________ Name: _________________________________ Its:____________________________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 BOOTH LIMITED PARTNERSHIP By: Jacksonville Healthcare Corporation, its general partner By:____________________________________ Name: _________________________________ Its:____________________________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 COLEWOOD LIMITED PARTNERSHIP By: American Hospital Building Corporation, its general partner By:____________________________________ Name: _________________________________ Its:____________________________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 A-8 15 Telephone: 419-252-5500 HEARTLAND EMPLOYMENT SERVICES, INC. By:____________________________________ Name: _________________________________ Its:____________________________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 ANCILLARY SERVICES, LLC By: Heartland Rehabilitation Corporation By:____________________________________ Name: _________________________________ Title___________________________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 Alburquerque Arden, LLC Colonie Arden, LLC Geneva Arden, LLC Glen Ellyn Arden, LLC Kansas skilled Nursing, LLC Laureldaly Arden, LLC Susquehanna Arden, LLC Warminster Arden, LLC By: Manor Care of America, Inc. By:____________________________________ A-9 16 Name: _________________________________ Title___________________________________ Address: One Seagate Toledo, Ohio 43604-2616 Fax No.: 419-252-5571 Telephone: 419-252-5500 A-10 17 EXHIBIT B TO THIRD AMENDMENT TO CREDIT AGREEMENT 364 DAY CREDIT AGREEMENT Dated as of September 25, 1998, as amended as of September 24, 1999, February 9, 2000 and September 22, 2000 among MANOR CARE OF AMERICA, INC., MANOR CARE, INC., BANK OF AMERICA, N.A., as Administrative Agent, THE CHASE MANHATTAN BANK, as Syndication Agent, and THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO Arranged by BANC OF AMERICA SECURITIES, LLC, as Lead Arranger and CHASE SECURITIES INC., as Co-Lead Arranger B-1 18 SCHEDULE 2.1 COMMITMENTS AND PRO RATA SHARES BANK COMMITMENT SHARE Bank of America, N.A. $ 68,125,000 34.06% The Chase Manhattan Bank $ 68,125,000 34.06% The Bank of New York $ 20,000,000 10.00% National City Bank $ 15,000,000 7.50% AllFirst Bank $ 11,250,000 5.63% The Huntington National Bank $ 10,000,000 5.00% SunTrust Bank $ 7,500,000 3.75% TOTAL $200,000,000 100% EX-27 4 l84465aex27.txt EXHIBIT 27
5 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 36,630 0 417,562 63,520 0 471,762 2,286,295 708,915 2,314,516 426,447 661,089 0 0 1,110 992,545 2,314,516 0 1,755,696 0 1,501,646 90,381 22,502 45,241 24,737 6,860 16,161 0 0 0 16,161 0.16 0.16
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