-----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, QsWuM1xVwYjoMmC9Likw2GT9WXzeaD7dfDYSg1Gwfs2S7lJGuuij8z1hg7Er5BL7 XZwfVWHlL0Bx7vpYuJjjZQ== 0000950152-03-007057.txt : 20030725 0000950152-03-007057.hdr.sgml : 20030725 20030725083340 ACCESSION NUMBER: 0000950152-03-007057 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030725 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030725 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MANOR CARE INC 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10858 FILM NUMBER: 03802025 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 8-K 1 l02289ae8vk.txt MANOR CARE 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 25, 2003 MANOR CARE, INC. (Exact name of registrant as specified in its charter) Delaware 1-10858 34-1687107 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) 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 ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE On July 25, 2003, Manor Care, Inc. issued a news release to report its financial results for the second quarter of 2003. A copy of this press release is filed herewith as Exhibit 99.1. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibit. 99.1 Press Release dated July 25, 2003 issued by Manor Care, Inc. 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 hereunto duly authorized. Manor Care, Inc. (Registrant) Date: July 25, 2003 By: /s/ Geoffrey G. Meyers ------------------------------------- Geoffrey G. Meyers Executive Vice President and Chief Financial Officer EXHIBIT INDEX Exhibit Number Description - ------ ----------- 99.1 Press Release dated July 25, 2003 issued by Manor Care, Inc. EX-99.1 3 l02289aexv99w1.txt EXHIBIT 99.1 Exhibit 99.1 MANORCARE News Release FOR IMMEDIATE RELEASE CONTACT: Geoffrey G. Meyers, Chief Financial Officer 419/252-5545 e-mail: gmeyers@hcr-manorcare.com MANOR CARE DECLARES ITS FIRST QUARTERLY CASH DIVIDEND; REPORTS SECOND-QUARTER EARNINGS TOLEDO, Ohio, July 25, 2003 -- Manor Care, Inc. (NYSE:HCR) declared today that it will pay a quarterly cash dividend of 12.5 cents per share of common stock. The dividend is payable August 20, 2003 to shareholders of record on August 7, 2003. The cash dividend payment is the first in the company's history. Related to this announcement, the company plans to voluntarily increase the cash coupon on its 20-year Convertible Senior Notes. Manor Care also announced that 2003 second-quarter net income was $18.9 million, or 21 cents per share. These results include three significant items and expenses which are described below. Revenues in the 2003 second quarter were $751 million, an increase of $22 million compared to the prior-year quarter. Earnings per share in the 2003 second quarter were affected by a $5.2 million after-tax reserve for a proposed settlement of a review of certain Medicare cost reports related to the former Manor Care, Inc. dating to 1992 amounting to 6 cents per share, and a largely non-cash adjustment of $4.7 million after-tax related to employee split-dollar insurance changes resulting in a charge of 5 cents per share. In addition, second-quarter results include unusually high costs related to the expense of stock appreciation rights (SARs) that resulted from the 30 percent increase in the market price of the company's stock during the quarter. The expense related to -More- Manor Care Reports Earnings, Page 2 this stock-related compensation was 4 cents per share higher than in any quarter in the past two years. For the six months, revenues were $1.48 billion, compared to $1.44 billion for the first six months of 2002. Net income was $50 million, or 54 cents per share, compared with $70 million, or 69 cents per share, a year ago. Paul A. Ormond, Manor Care chairman, president and CEO, said, "We are pleased with our accelerating normalized run rate driven by our continued substantial cash generation and our operational strengths during the 2003 second quarter. Occupancy in our skilled nursing centers is at a three-year high, with our Medicare, private pay and managed care revenues moving up sequentially. Revenues and earnings from our home health care and hospice business remained on a double-digit growth path. "During the quarter, we generated $113 million of cash flow from operations. Our ability to generate significant operating cash flow enabled us to reinvest in our business units and repurchase shares of our stock. During the first six months of this year, we repurchased $126 million or nearly 7 percent of our shares outstanding, at an average price of $20 per share, and this followed our having repurchased 7 percent of our shares in 2002. Approximately $110 million of board authority remains for repurchasing shares. During the quarter, we completed four nursing center expansions, started five more, and now have 16 expansions under way. In addition, we began construction of a new 120-bed nursing center, acquired a rehabilitation therapy clinic and three home health/hospice businesses, and sold three nursing centers. "The change in the tax law this year increased the attractiveness of dividend payouts in providing investment return to shareholders similar to stock repurchases. The strength of our operating cash flow enables us to now provide value to shareholders both through a dividend payout and share repurchase, while also continuing to provide us with cash to finance reinvestment in our operations and to make acquisitions. The company currently intends to declare and pay regular quarterly cash dividends; however, there can be no assurance that any dividends will be declared or paid in the future. "Cost trends continued to be favorable," Mr. Ormond said. "Wage rate increases remained below 5 percent, and agency usage in the first six months of 2003 had a run rate of less than -More- Manor Care Reports Earnings, Page 3 half of what it was last year. General liability claims activity continued essentially stable with the activity of the past two years, but like other health care providers, we experienced a sizable increase in insurance rates with our second-quarter renewals. This, combined with assumptions from our semiannual independent actuarial review of claims experience, resulted in our increasing our future liability and insurance accruals about 20 percent above what they were the past year, the same rate of increase we had in 2002. On the plus side are the serious efforts under way to enact tort reform. Texas passed landmark legislation that will more appropriately address patient liability issues, and Florida legislators are clearly focused on implementing meaningful tort reform, as well. Several other state legislatures are also showing they recognize the seriousness of this issue. In addition, efforts are ongoing to enact national tort reform." The 2003 second quarter also was marked by Standard & Poor's reaffirming Manor Care's investment grade debt rating and the company putting in place a new financing package to replace its expiring credit facility. A three-year $200 million bank credit facility was negotiated with a group of banks. In addition, Manor Care completed the sale of $200 million of 10-year Senior Notes with a 6.25% coupon and the sale of $100 million of 2.125% 20-year Convertible Senior Notes. The company plans to provide holders of its Convertible Senior Notes with a value adjustment to address the fact that these investors will not otherwise participate in the common stock dividend. Manor Care plans to increase the cash coupon on its 20-year Convertible Senior Notes by 50 basis points per annum through 2008, from 2.125 percent to 2.625 percent, effective August 20, 2003. Three significant items had an impact on earnings for the quarter. Manor Care agreed in principle to resolve a review of certain Medicare cost reports filed by facilities of the former Manor Care, Inc. prior to the implementation of the prospective payment system. This review, which was conducted by the Department of Justice and the Office of Inspector General of the Department of Health and Human Services, focused primarily on nursing cost allocations made in reliance upon instructions from the facilities' Medicare fiscal intermediary for the period 1992-1998. While the company believes the former Manor Care facilities were fully entitled to the reimbursement they received for these allocations, the agreement in principle, if ultimately approved and executed by all parties, will resolve any uncertainty over potential liability to the Medicare program. Manor Care has established an $8.4 million reserve to cover the amount the company has agreed to pay in the settlement. Manor -More- Manor Care Reports Earnings, Page 4 Care has fully cooperated with the Department of Justice throughout the review. No complaint has been filed, nor has any subpoena been issued to the company related to this matter. This agreement in principle is subject to final approvals within the Department of Justice and to negotiation of a definitive settlement agreement. Manor Care expects the settlement to be completed in the third quarter. Also during the quarter, Manor Care determined that an additional charge needed to be taken based on the restructuring of employee split-dollar insurance arrangements as a result of the impact of the Sarbanes-Oxley Act and recent tax law changes on the funding requirements of these arrangements. There was no change in the associated employee benefits. In addition, the results for the second quarter include unusually high costs related to the expensing of stock-related compensation. During the past three years, Manor Care has awarded stock appreciation rights (SARs) to more than 1,500 non-executive employees annually based on the company's performance. Each month the change in value of the SARs to employees, based on stock price appreciation, is expensed on the income statement. During the second quarter, the expense for these SARs was more than three times as high as any previous quarter, approximating $7 million, or 5 cents per share, due to the more than 30 percent increase in the market price of the company's stock. The Centers for Medicare & Medicaid Services (CMS) made several announcements during the quarter, which should bode well for Medicare reimbursement going forward. First, CMS said it would not implement case-mix refinements at least until fiscal 2005, which extends about $1 billion in reimbursement add-ons. At the same time, CMS recommended a 2.9 percent market basket adjustment increase in Medicare payment rates for fiscal year 2004. The increase will result in nearly $400 million more in Medicare payments to skilled nursing centers. Then in June, CMS announced a proposal to increase nursing center Medicare reimbursement by an additional 3.26 percent, or $450 million, beginning on October 1. The 2003 second-quarter impact of the reduction in Medicare reimbursement that -More- Manor Care Reports Earnings, Page 5 was effective October 1, 2002 was approximately $15 million. The corrections proposed by CMS should add back about one-third of what was lost by most providers last year when the new PPS rates went into effect. Medicaid rates were up approximately 6 percent during the second quarter compared with the 2002 second quarter, but Manor Care expects that Medicaid rates in the third quarter are likely to be up only 2 percent compared with the prior year because of the difficult budgeting situations in most states across the country. "The environment we work in is a challenging one, but we continue to show that we can succeed in spite of these challenges," Mr. Ormond said. "We are encouraged by the proposals to increase Medicare reimbursement and that there is a growing understanding that Medicaid funding needs to be similarly addressed. Focus needs to be maintained on enacting sensible tort reform, and the recent actions in several key states recognize the seriousness of this issue. A wide variety of actions are constantly at work within our company to improve quality; hire, train and retain qualified employees; grow census; and manage costs. It is this daily commitment by our employees in support of our growth strategies that will keep us moving forward." At 9:00 a.m. Eastern Time today, Manor Care will hold a conference call to discuss the company's results and performance for the 2003 second quarter. The toll-free number for the call is 1-888-634-8435. Callers to this number will be able to listen to the company's discussion and have the opportunity to ask questions. The call will also be webcast live in the Investor Information section of Manor Care's website www.hcr-manorcare.com. For those unable to listen to the call live, a taped rebroadcast will be available beginning two hours after completion of the live call. To access the rebroadcast, dial 1-800-642-1687. The conference ID number is 1527233. A recording of the call will also be available on Manor Care's website. Manor Care, Inc., through its operating group HCR Manor Care, is the leading owner and operator of long-term care centers in the United States. The company's 61,000 employees provide high-quality care for patients, residents and clients through a network of more than 500 long-term care centers, assisted living facilities, outpatient -More- Manor Care Reports Earnings, Page 6 rehabilitation clinics, and home health care and hospice offices. Alliances and other ventures supply high-quality pharmaceutical products and management services for professional organizations. The company operates primarily under the respected Heartland, ManorCare and Arden Courts names. Manor Care is committed to being the preeminent care provider in the industry. Shares are traded on the New York Stock Exchange under the ticker symbol HCR. Statements contained in this press release that 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. The forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the company to differ materially from those expressed or implied in such statements. Such factors are identified in the public filings made by the company with the Securities and Exchange Commission and include changes in the health care industry because of political and economic influences, changes in regulations governing the industry, changes in reimbursement levels including those under the Medicare and Medicaid programs, changes in the competitive marketplace, changes in current trends in the cost and volume of general and professional liability claims, and our ability to complete the settlement with the Department of Justice. There can be no assurance that such factors or other factors will not affect the accuracy of such forward-looking statements. -More- Manor Care Reports Earnings, page 7 Manor Care, Inc. Consolidated Statements of Income (unaudited)
- ------------------------------------------------------------------------------------------------------------------------------ Three months ended June 30, Six months ended June 30, 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------------------------------ (In thousands, except per share data) Revenues $ 750,586 $ 728,435 $1,481,106 $1,444,422 Expenses Operating 633,024 603,467 1,244,511 1,193,797 General and administrative 46,637 30,421 77,346 60,348 Depreciation and amortization 31,863 31,587 63,537 63,356 Asset impairment 24,876 24,876 -------------- -------------- --------------- --------------- 711,524 690,351 1,385,394 1,342,377 -------------- -------------- --------------- --------------- Income before other income (expenses) and income taxes 39,062 38,084 95,712 102,045 Other income (expenses): Interest expense (11,317) (9,388) (20,192) (19,332) Gain on sale of assets 2,134 31,197 2,323 30,253 Equity in earnings of affiliated companies 1,599 1,137 3,140 1,873 Interest income and other 431 273 1,132 882 -------------- -------------- --------------- --------------- Total other income (expenses), net (7,153) 23,219 (13,597) 13,676 -------------- -------------- --------------- --------------- Income before income taxes 31,909 61,303 82,115 115,721 Income taxes 12,990 23,295 32,068 43,974 -------------- -------------- --------------- --------------- Income before cumulative effect 18,919 38,008 50,047 71,747 Cumulative effect of change in accounting for goodwill (1,314) -------------- -------------- --------------- --------------- Net income $ 18,919 $ 38,008 $ 50,047 $ 70,433 ============== ============== =============== =============== Earnings per share -basic: Income before cumulative effect $ .21 $ .38 $ .55 $ .72 Cumulative effect (.01) -------------- -------------- --------------- --------------- Net income $ .21 $ .38 $ .55 $ .70 (a) ============== ============== =============== =============== Earnings per share - diluted: Income before cumulative effect $ .21 $ .38 $ .54 $ .71 Cumulative effect (.01) -------------- -------------- --------------- --------------- Net income $ .21 $ .38 $ .54 $ .69 (a) ============== ============== =============== =============== Weighted average shares: Basic 89,158 99,109 91,396 100,096 Diluted 90,433 100,561 92,456 101,348
(a) Doesn't add due to rounding -More- Manor Care Reports Earnings, page 8 Manor Care, Inc. Condensed Consolidated Balance Sheets (unaudited)
- ---------------------------------------------------------------------------------------------------------- June 30, December 31, 2003 2002 - ---------------------------------------------------------------------------------------------------------- (In thousands) Cash $ 76,503 $ 30,554 Other current assets 469,285 480,263 Property and equipment 1,524,586 1,534,339 Other 266,633 261,776 ---------------- ----------------- Total assets $ 2,337,007 $ 2,306,932 ================ ================= Current liabilities $ 415,278 $ 641,864 Long-term debt 664,493 373,112 Other long-term liabilities 315,807 275,909 Shareholders' equity 941,429 1,016,047 ---------------- ----------------- Total liabilities and shareholders' equity $ 2,337,007 $ 2,306,932 ================ ================= Shares outstanding 88,991 95,052 YTD shares repurchased $126.0 million 6,282
Selected Statistics (unaudited) - ---------------------------------------------------------------------------------------------------------- Quarter ended June 30, 2003 2002 - ---------------------------------------------------------------------------------------------------------- Occupancy 88% 88% Revenue allocation: Private and other 35% 36% Medicare 32% 32% Medicaid 33% 32% Quality Mix 67% 68% Per Diems: Private and other (excluding assisted living) $188.66 $180.60 Private and other (assisted living) $104.30 $99.97 Medicare $311.19 $334.41 Medicaid $131.29 $122.99 Number of Facilities: Skilled nursing facilities 293 297 Assisted living facilities: Springhouses 16 16 Arden Courts 54 54 -- -- Total 70 70 == == Number of Beds: Skilled nursing facilities 40,840 41,223 Assisted living facilities 5,459 5,494 Outpatient therapy clinics 91 94 Home health offices 88 88 Skilled nursing facility wage rate increases second quarter 2003 to 2002 4% Cash flow from operations (in millions): $113 $29 Capital Expenditures (in millions): Maintenance and renovations $19 $18 New construction $5 $5
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