================================================================================
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 June 30, 2003
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule12b-2 of the Exchange Act). 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 July 31, 2003.
Common stock, $0.01 par value - 89,077,702 shares
================================================================================
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -
June 30, 2003 and December 31, 2002................................. 3
Consolidated Statements of Income -
Three months and six months ended June 30, 2003 and 2002............ 4
Consolidated Statements of Cash Flows -
Six months ended June 30, 2003 and 2002............................. 5
Notes to Consolidated Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....................... 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......... 22
Item 4. Controls and Procedures............................................. 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................... 24
Item 2. Changes in Securities and Use of Proceeds........................... 24
Item 3. Defaults Upon Senior Securities..................................... 24
Item 4. Submission of Matters to a Vote of Security Holders................. 24
Item 5. Other Information................................................... 25
Item 6. Exhibits and Reports on Form 8-K.................................... 25
SIGNATURES...................................................................... 26
EXHIBIT INDEX................................................................... 27
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MANOR CARE, INC.
Consolidated Balance Sheets
June 30, December 31,
2003 2002
---- ----
(Unaudited) (Note 1)
(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents $ 76,503 $ 30,554
Receivables, less allowances for doubtful
accounts of $56,853 and $60,093, respectively 372,374 385,960
Prepaid expenses and other assets 38,570 23,974
Deferred income taxes 58,341 70,329
------------ ------------
Total current assets 545,788 510,817
Property and equipment, net of accumulated
depreciation of $758,882 and $704,348, respectively 1,524,586 1,534,339
Goodwill 87,752 85,814
Intangible assets, net of amortization of $3,325 and $9,234, respectively 10,074 10,457
Other assets 168,807 165,505
------------ ------------
Total assets $ 2,337,007 $ 2,306,932
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 95,227 $ 95,347
Employee compensation and benefits 144,255 109,628
Accrued insurance liabilities 98,049 109,385
Income tax payable 9,931 11,657
Other accrued liabilities 58,725 48,424
Long-term debt due within one year 9,091 267,423
------------ ------------
Total current liabilities 415,278 641,864
Long-term debt 664,493 373,112
Deferred income taxes 105,144 79,073
Other liabilities 210,663 196,836
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 347,253 349,304
Retained earnings 1,055,957 1,006,295
Accumulated other comprehensive loss (740) (11)
------------ ------------
1,403,580 1,356,698
Less treasury stock, at cost (22.0 and 16.0 million shares, respectively) (462,151) (340,651)
------------ ------------
Total shareholders' equity 941,429 1,016,047
------------ ------------
Total liabilities and shareholders' equity $ 2,337,007 $ 2,306,932
============ ============
See notes to consolidated financial statements.
3
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 earnings per share)
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
See notes to consolidated financial statements.
4
MANOR CARE, INC.
Consolidated Statements Of Cash Flows
(Unaudited)
Six Months Ended June 30
-----------------------------
2003 2002
---------- ---------
(In thousands)
OPERATING ACTIVITIES
Net income $ 50,047 $ 70,433
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 63,537 63,356
Asset impairment and other non-cash charges 26,190
Provision for bad debts 15,630 21,618
Deferred income taxes 38,059
Net gain on sale of assets (2,323) (30,253)
Equity in earnings of affiliated companies (3,140) (1,873)
Changes in assets and liabilities, excluding sold facilities and
acquisitions:
Receivables (1,814) (39,170)
Prepaid expenses and other assets (13,185) 21,939
Liabilities 46,971 (7,240)
---------- ---------
Total adjustments 143,735 54,567
---------- ---------
Net cash provided by operating activities 193,782 125,000
---------- ---------
INVESTING ACTIVITIES
Investment in property and equipment (46,297) (44,321)
Investment in systems development (2,175) (1,851)
Acquisitions (12,436) (35,430)
Proceeds from sale of assets 12,705 84,174
Adjustment of acquisition of assets from development joint venture 1,183
---------- ---------
Net cash provided by (used in) investing activities (48,203) 3,755
---------- ---------
FINANCING ACTIVITIES
Net repayments under bank credit agreements (259,300) (54,000)
Principal payments of long-term debt (7,023) (4,432)
Proceeds from issuance of senior notes 299,372
Payment of deferred financing costs (7,109)
Proceeds from exercise of stock options 471 56
Purchase of common stock for treasury (126,041) (83,088)
---------- ---------
Net cash used in financing activities (99,630) (141,464)
---------- ---------
Net increase (decrease) in cash and cash equivalents 45,949 (12,709)
Cash and cash equivalents at beginning of period 30,554 26,691
---------- ---------
Cash and cash equivalents at end of period $ 76,503 $ 13,982
========== =========
See notes to consolidated financial statements.
5
MANOR CARE, INC.
Notes To Consolidated Financial Statements
(Unaudited)
NOTE 1 - ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
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 accounting principles generally accepted
in the United States 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. Operating results for
the six months ended June 30, 2003 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2003.
The balance sheet at December 31, 2002 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States 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, 2002.
At June 30, 2003, the Company operated 293 skilled nursing facilities, 70
assisted living facilities, 91 outpatient therapy clinics and 88 home health and
hospice offices.
COMPREHENSIVE INCOME
Comprehensive income represents the sum of net income plus other comprehensive
income (loss). Comprehensive income totaled $18.0 million and $49.3 million for
the three and six months ended June 30, 2003, respectively, and $37.6 million
and $70.2 million for the three and six months ended June 30, 2002,
respectively. The other comprehensive loss in 2003 primarily represents the
reversal of the unrealized gain on investments due to the sale of the securities
underlying the investments. The other comprehensive loss in 2002 primarily
relates to the unrealized loss on investments.
INSURANCE LIABILITIES
At June 30, 2003 and December 31, 2002, the workers' compensation liability
consisted of short-term reserves of $27.1 million and $26.3 million,
respectively, which were included in accrued insurance liabilities, and
long-term reserves of $41.5 million and $32.5 million, respectively, which were
included in other long-term liabilities. The expense for workers'
6
compensation was $12.2 million and $24.5 million for the three and six months
ended June 30, 2003, respectively, and $14.3 million and $25.4 million for the
three and six months ended June 30, 2002, respectively. Although management
believes that the Company's liability reserves are adequate, there can be no
assurance that these reserves will not require material adjustment in future
periods. See Note 7 for discussion of the Company's general and professional
liability.
STOCK-BASED COMPENSATION
Stock options are granted for a fixed number of shares to employees with an
exercise price equal to the fair market value of the shares at the date of
grant. The Company accounts for the stock option grants in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations. Accordingly, the Company recognizes no compensation expense for
the stock options.
The following table illustrates the effect on net income and earnings per share
as if the Company had applied the fair value recognition provisions of Financial
Accounting Standards Board (FASB) Statement No. 123, "Accounting for Stock-Based
Compensation," to stock-based employee compensation for options granted since
1995.
Three months ended Six months ended
June 30 June 30
------------------------- -----------------------------
2003 2002 2003 2002
--------- --------- ---------- ---------
(In thousands, except earnings per share)
Net income - as reported $ 18,919 $ 38,008 $ 50,047 $ 70,433
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax effects (2,110) (2,138) (3,911) (3,645)
--------- --------- ---------- ---------
Net income - pro forma $ 16,809 $ 35,870 $ 46,136 $ 66,788
========= ========= ========== =========
Earnings per share - as reported:
Basic $ .21 $ .38 $ .55 $ .70
Diluted $ .21 $ .38 $ .54 $ .69
Earnings per share - pro forma:
Basic $ .19 $ .36 $ .50 $ .67
Diluted $ .19 $ .36 $ .50 $ .66
7
INTEREST RATE SWAP AGREEMENTS
Interest rate swap agreements are considered to be derivative financial
instruments that must be recognized on the balance sheet at fair value. The
Company's interest rate swap agreements have been formally designated to hedge
certain fixed-rate senior notes and are considered to be effective fair value
hedges based on meeting certain hedge criteria. The fair value of the interest
rate swap agreements affects only the balance sheet and is recorded as a
non-current asset or liability with an offsetting adjustment to the underlying
senior note. The net interest amounts paid or received and net amounts accrued
through the end of the accounting period are included in interest expense.
NEW ACCOUNTING STANDARD
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of Accounting Research Bulletin
No. 51" (the Interpretation). The Interpretation requires the consolidation of
variable interest entities in which an enterprise absorbs a majority of the
entity's expected losses, receives a majority of the entity's expected residual
returns, or both, as a result of ownership, contractual or other financial
interests in the entity. Currently, entities are generally consolidated by an
enterprise that has a controlling financial interest through ownership of a
majority voting interest in the entity. The Interpretation provides specific
guidance on determining whether an entity is considered a variable interest
entity (VIE).
A subsidiary of the Company leases the Company's corporate headquarters from an
unconsolidated entity (the lessor) under an operating lease, which expires in
January 2009. The lessor has invested capital at risk exceeding 3 percent of the
assets of the transaction with the remainder being financed through a debt
obligation. In the Company's March 2003 Form 10-Q, the Company stated that it
expected to consolidate its headquarters under this Interpretation. After
additional research, the Company determined that it is prohibited from
consolidating its headquarters based on the legal entity that owns the building.
The building is currently owned by a legal entity that includes other operations
of the lessor, and, accordingly is not a VIE. If the lessor had created a
separate legal entity to acquire the building, then this entity would be a VIE.
Because of the difference in legal form, different accounting may result when
the substance of the transaction is similar. As a result, the Company will
continue to account for the arrangement as an operating lease. Accordingly,
neither the leased corporate headquarters nor the related debt will be reported
in the Company's balance sheet.
8
NOTE 2 - REVENUES
Revenues for certain health care services are as follows:
Three Months Ended Six Months Ended
June 30 June 30
----------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
(In thousands)
Skilled nursing and assisted living services $ 640,515 $ 625,821 $1,270,484 $1,234,118
Home health and hospice services 83,744 72,898 156,632 139,624
Rehabilitation services
(excludes intercompany revenues) 21,574 22,477 42,498 43,361
Hospital care 5,383 21,344
Other services 4,753 1,856 11,492 5,975
---------- ---------- ---------- ----------
$ 750,586 $ 728,435 $1,481,106 $1,444,422
========== ========== ========== ==========
NOTE 3 - DEBT
Debt consists of the following:
June 30, December 31,
2003 2002
-------- --------
(In thousands)
Five Year Agreement $259,300
7.5% Senior Notes, net of discount $149,731 149,795
8% Senior Notes 199,689 200,000
6.25% Senior Notes, net of discount 199,385
2.125% Convertible Senior Notes 100,000
Mortgages and other notes 19,748 26,325
Capital lease obligations 5,031 5,115
-------- --------
673,584 640,535
Less:
Amounts due within one year 9,091 267,423
-------- --------
Long-term debt $664,493 $373,112
======== ========
In April 2003, the Company refinanced its five-year , $500 million revolving
credit facility that was scheduled to mature September 24, 2003. The financing
package included a new three-year $200 million revolving credit facility, $200
million of 6.25% Senior Notes due in 2013 and $100 million of 2.125% Convertible
Senior Notes due in 2023. The Company plans to voluntarily increase the interest
rate on the Convertible Senior Notes to 2.625% effective August 20, 2003 as
these investors will not otherwise participate in the common stock dividend. See
Note 9 for a discussion of the cash dividend.
9
Manor Care, Inc.'s three-year $200 million revolving credit facility was
established with a group of banks. As of June 30, 2003, there were no loans
outstanding under this agreement and after consideration of usage for letters of
credit, there was $161.4 million available for future borrowing. Loans under the
three-year credit facility are guaranteed by substantially all of the Company's
subsidiaries. This credit agreement contains various covenants, restrictions and
events of default. Among other things, these provisions require the Company to
maintain certain financial ratios and impose certain limits on its ability to
incur indebtedness, create liens, pay dividends, repurchase stock, dispose of
assets and make acquisitions.
Loans under the three-year credit facility bear interest at variable rates that
reflect, at the election of the Company, the agent bank's base lending rate or
an increment over Eurodollar indices, depending on the quarterly performance of
a key ratio. The three-year credit facility also provides for a fee on the total
amount of the facility, depending on the performance of the same key ratio. In
addition to direct borrowings, the three-year credit facility may be used to
support the issuance of up to $100 million of letters of credit.
The Company issued $200 million principal amount of 6.25% Senior Notes due in
2013, priced at 99.686 percent to yield 6.29 percent. Interest is payable each
May 1 and November 1, beginning November 1, 2003. The Company also issued $100
million principal amount of 2.125% Convertible Senior Notes due in 2023, priced
at 100 percent. Interest is payable each April 15 and October 15, beginning
October 15, 2003. The Company may not redeem the Convertible Senior Notes before
April 15, 2010. Starting with the six-month period beginning April 15, 2010, the
Company may be obligated to pay contingent interest to the holders of the
Convertible Senior Notes under certain circumstances. The Company's obligation
to pay contingent interest is considered to be an embedded derivative and the
initial value is not material. The initial conversion price is $31.12 per share
of common stock, equivalent to 32.1337 shares of the Company's common stock per
$1,000 principal amount of notes. The conversion price is subject to adjustment
in certain events. The holders of the Convertible Senior Notes may convert their
notes into shares of the Company's common stock prior to the stated maturity at
their option only under the following circumstances: (1) if the average of the
last reported sales price of the Company's common stock for the 20 trading days
immediately prior to the conversion date is greater than or equal to 120% of the
conversion price per share of common stock on such conversion date; (2) if the
notes have been called for redemption; (3) upon the occurrence of specified
corporate transactions; and (4) if the credit ratings assigned to the notes
decline to certain levels. The holders of the Convertible Senior Notes may
require the Company to purchase all or a portion of their notes at any of five
specified dates during the life of the notes, with the first such date being
April 15, 2005. Except for the initial repurchase date, the Company may elect to
satisfy the repurchase in whole or in part with common stock rather than cash.
10
The net proceeds of approximately $292.3 million from the closing of the
three-year credit facility, Senior Notes and Convertible Senior Notes were used
to repay borrowings outstanding under the Company's five-year revolving credit
facility and to purchase $25.0 million of the Company's common stock concurrent
with the refinancing transactions. The Company is in the process of registering
the Senior Notes and Convertible Senior Notes with the Securities and Exchange
Commission. The Senior Notes and Convertible Senior Notes are guaranteed by
substantially all of the Company's subsidiaries.
NOTE 4 - INTEREST RATE SWAP AGREEMENTS
In May 2003 the Company entered into interest rate swap agreements on a notional
amount of $200 million in order to provide a better balance of fixed and
variable rate debt. These fair value hedge agreements effectively convert the
interest rate on $100 million each of the Company's 7.5% and 8% Senior Notes to
variable rates equal to six-month LIBOR plus a spread. The fair value of these
agreements was immaterial at June 30, 2003. The adjustment to interest expense
related to these agreements for the second quarter of 2003 was immaterial.
NOTE 5 - STOCK REPURCHASE
In April 2003, the Company's board of directors authorized management to spend
an additional $100 million to purchase common stock through December 31, 2004.
The Company purchased 6,282,147 shares in the first half of 2003 for $126.0
million, including the $25 million repurchased concurrently with the Convertible
Senior Notes offering, and an additional 65,900 shares in July 2003 for $1.7
million. At July 31, 2003, the Company had remaining unused repurchase authority
of $110.2 million.
11
NOTE 6 - EARNINGS PER SHARE
The calculation of earnings per share (EPS) is as follows:
Three Months Ended Six Months Ended
June 30 June 30
------------------- -------------------
2003 2002 2003 2002
-------- -------- -------- --------
(In thousands, except earnings per share)
Numerator:
Income before cumulative effect $ 18,919 $ 38,008 $ 50,047 $ 71,747
======== ======== ======== ========
Denominator:
Denominator for basic EPS -
weighted-average shares 89,158 99,109 91,396 100,096
Effect of dilutive securities:
Stock options 926 1,147 738 964
Non-vested restricted stock 349 305 322 288
-------- -------- -------- --------
Denominator for diluted EPS -
adjusted for weighted-average
shares and assumed conversions 90,433 100,561 92,456 101,348
======== ======== ======== ========
EPS - Income before cumulative effect:
Basic $ .21 $ .38 $ .55 $ .72
Diluted $ .21 $ .38 $ .54 $ .71
Options to purchase shares of the Company's common stock that were not included
in the computation of diluted EPS because the options' exercise prices were
greater than the average market price of the common shares were: 3.6 million
shares with an average exercise price of $26 for the first half of 2003 and 2.1
million shares with an average exercise price of $32 for the first half of 2002.
NOTE 7 - CONTINGENCIES
One or more subsidiaries or affiliates of Manor Care of America, Inc. (MCA) 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 MCA. The Actions allege that Cenco transported and/or generated
hazardous substances that came to be located at the sites in
12
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 MCA 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 its future environmental liabilities
will be about $4.5 million. The Company has received insurance proceeds that
will offset amounts due as a result of these exposures, depending upon the
ultimate liabilities.
The Company is party to various other legal matters arising in the ordinary
course of business including patient care-related claims and litigation. At June
30, 2003 and December 31, 2002, the general and professional liability consisted
of short-term reserves of $55.3 million and $50.3 million, respectively, which
were included in accrued insurance liabilities, and long-term reserves of $117.5
million, which were included in other long-term liabilities. The expense for
general and professional liability claims, premiums and administrative fees was
$21.9 million and $42.7 million for the three and six months ended June 30,
2003, respectively, and $23.7 million and $41.3 million for the three and six
months ended June 30, 2002, respectively, which was included in operating
expenses. Although management believes that the Company's liability reserves are
adequate, there can be no assurance that such provision and liability will not
require material adjustment in future periods.
NOTE 8 - SEGMENT INFORMATION
The Company provides a range of health care services. The Company now has two
reportable operating segments, long-term care, which includes the operation of
skilled nursing and assisted living facilities, and home health and hospice. The
home health and hospice segment met the 10 percent disclosure threshold
requirement in the second quarter of 2003 and the Company restated its 2002
corresponding information. The "Other" category includes the non-reportable
segments and corporate items. The revenues in the "Other" category include
services for rehabilitation, hospital care and other services. The Company's
hospital was sold on April 30, 2002. 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, asset impairment, other
income and expense items, income taxes and cumulative effect. The other category
is not comparative as the Company sold its hospital on April 30, 2002 and
recorded $8.4 million of operating expenses in the second quarter of 2003
related to a proposed settlement of a review of certain Medicare cost reports
filed by facilities of the former Manor Care, Inc. for the period 1992-1998. See
Management's Discussion and Analysis for additional discussion of this expense.
13
Long-Term Home Heath
Care and Hospice Other Total
---------- ----------- ---------- ----------
(In thousands)
Three months ended June 30, 2003
Revenues from external customers $ 640,515 $ 83,744 $ 26,327 $ 750,586
Intercompany revenues 15,234 15,234
Depreciation and amortization 29,709 987 1,167 31,863
Operating margin 106,536 18,018 (6,993) 117,561
Three months ended June 30, 2002
Revenues from external customers 625,821 72,898 29,716 728,435
Intercompany revenues 14,197 14,197
Depreciation and amortization 29,703 876 1,008 31,587
Operating margin 116,178 13,280 (4,490) 124,968
Six months ended June 30, 2003
Revenues from external customers 1,270,484 156,632 53,990 1,481,106
Intercompany revenues 29,720 29,720
Depreciation and amortization 59,231 1,953 2,353 63,537
Operating margin 210,971 28,951 (3,327) 236,595
Six months ended June 30, 2002
Revenues from external customers 1,234,118 139,624 70,680 1,444,422
Intercompany revenues 27,734 27,734
Depreciation and amortization 58,383 1,341 3,632 63,356
Operating margin 231,770 23,125 (4,270) 250,625
NOTE 9 - SUBSEQUENT EVENT
On July 25, 2003 the Company declared 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 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.
14
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS - OVERVIEW
Federal Medicare Payment Legislation. The Centers for Medicare &
Medicaid Services, or CMS, made several announcements during the quarter that
should increase Medicare reimbursement. CMS indicated that it would not
implement case-mix refinements at least until fiscal 2005 and recommended a 3.0
percent market basket adjustment increase in Medicare payment rates for fiscal
2004. In June, CMS announced a proposal to increase nursing center Medicare
reimbursement by an additional 3.26 percent beginning October 1, 2003. With the
annual market basket adjustment and the correction proposed by CMS, we expect
our fourth quarter Medicare revenues to increase by approximately $20 per
patient day.
CRITICAL ACCOUNTING POLICIES
General and Professional Liability. Our general and professional
reserves include amounts for patient care-related claims and incurred but not
reported claims. We evaluated the adequacy of our general and professional
liability reserves with our independent actuary during the second quarter of
2003 for all policy periods through May 31, 2003. The amount of our reserves is
determined based on an estimation process that uses information obtained from
both company-specific and industry data. The estimation process requires us to
continuously monitor and evaluate the life cycle of the claims. Using data
obtained from this monitoring and our assumptions about emerging trends, we
along with our independent actuary develop information about the size of
ultimate claims based on our historical experience and other available industry
information. The most significant assumptions used in the estimation process
include determining the trend in costs, the expected cost of claims incurred but
not reported and the expected costs to settle unpaid claims. Our assumptions
take into consideration our internal efforts to contain our costs by reviewing
our risk management programs, our operational and clinical initiatives, and
other industry changes affecting the long-term care market. In comparing the
first half of 2003 with the first half of 2002, the number of new claims is
flat. We expect the average settlement costs per claim for the year 2003 to
approximate 2002. Our accrual for current claims per month is $6.9 million.
Although we believe our reserves are adequate, we can give you no assurance that
this liability will not require material adjustment in future periods.
15
RESULTS OF OPERATIONS -
QUARTER AND YEAR-TO-DATE JUNE 30, 2003 COMPARED WITH JUNE 30, 2002
Revenues. Our revenues increased $22.2 million, or 3 percent, from the
second quarter of 2002 to 2003. Excluding the results of our hospital that we
sold in April 2002, our revenues increased $27.5 million, or 4 percent. Revenues
from our long-term care segment (skilled nursing and assisted living facilities)
increased $14.7 million, or 2 percent, due to increases in rates/patient
mix--$11.8 million and occupancy--$9.5 million that were partially offset by a
decrease in capacity--$6.6 million. Our revenues from the home health and
hospice segment increased $10.8 million, or 15 percent, primarily because of an
increase in hospice patient days.
Our revenues in the first half of 2003 increased $36.7 million, or 3 percent,
compared with the first half of 2002. Excluding the results of our hospital that
we sold in April 2002, our revenues increased $58.0 million, or 4 percent.
Revenues from our long-term care segment increased $36.4 million, or 3 percent,
due to increases in rates/patient mix--$29.8 million and occupancy--$15.2
million that were partially offset by a decrease in capacity--$8.6 million. Our
revenues from the home health care and hospice segment increased $17.0 million,
or 12 percent, primarily because of an increase in hospice patient days.
Our average rates per day for the long-term care segment were as follows:
Second Quarter First Half
------------------- Increase ------------------ Increase
2003 2002 (Decrease) 2003 2002 (Decrease)
------- ------- ---------- ------- ------ ----------
Medicaid $131.29 $122.99 7% $129.78 $122.23 6%
Private and other (skilled only) $188.66 $180.60 4% $188.78 $180.49 5%
Medicare $311.19 $334.41 (7)% $310.75 $333.70 (7)%
We expect our Medicaid rates to increase only 2 percent in the third quarter
compared to the prior year because of the difficult budgeting situations in most
states. The increase in overall rates was also a result of a shift in the mix of
our patients to a higher percentage of Medicare patients, even though the
Medicare rate decreased. The rate decreased because certain of the increases in
Medicare reimbursement for skilled nursing facilities provided for under the
Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999, or BBRA 99,
and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of
2000, or BIPA 2000, expired on September 30, 2002, the so-called Medicare Cliff.
16
Our occupancy levels were as follows:
Second Quarter First Half
-------------- ----------------
2003 2002 2003 2002
---- ---- ---- ----
Total 88% 87% 88% 87%
Excluding start-up facilities 88% 88% 88% 88%
Skilled nursing facilities 89% 88% 89% 88%
The quality mix of revenues from Medicare, private pay and insured patients that
related to skilled nursing and assisted living facilities and rehabilitation
operations was 67 percent for the second quarter and first half of 2003 and 68
percent for the second quarter and first half of 2002.
Our bed capacity declined between the second quarter and first half of 2002 and
2003 primarily because we sold three skilled nursing facilities in May 2003 with
374 beds and closed or sold three skilled nursing facilities in 2002 with 498
beds, which was partially offset by opening three assisted living facilities in
2002 with 188 beds.
Operating Expenses. Our operating expenses in the second quarter of
2003 increased $29.6 million, or 5 percent, compared with the second quarter of
2002. Excluding the results of our hospital that was sold on April 30, 2002,
operating expenses increased $35.4 million, or 6 percent. During the second
quarter of 2003, we recorded an expense of $8.4 million for a proposed
settlement of 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. We believe 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. We have 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.
We expect the settlement to be completed in the third quarter.
Operating expenses from our long-term care segment increased $24.3 million, or 5
percent between the second quarters of 2002 and 2003. We attribute the largest
portion ($15.8 million) of the long-term care operating expense increase to
wages, temporary staffing and payroll overhead. Our other operating expense
increase for this segment included ancillary costs, excluding internal labor, of
$2.8 million. Ancillary costs, which include various types of therapies, medical
supplies and prescription drugs, increased as a result of our more medically
complex patients. Our general and professional liability expense decreased $1.2
million because
17
we recorded expense of $4.9 million in the second quarter of 2002 due to
a court-ordered liquidation of one of our insurers. Excluding the $4.9 million
charge, the expense increased as a result of an increase in the claims accrual
and insurance premiums. Also, during the second quarter of 2002, we reversed
$2.1 million of a 2001 charge that related to the damage award from an
arbitration decision with NeighborCare Pharmacy Services, or NeighborCare, based
on an amendment to the decision and award in June 2002.
Our operating expenses from our home health and hospice segment increased $6.1
million, or 10 percent between the second quarters of 2002 and 2003. The
increase related to labor costs of $2.9 million, ancillary costs including
pharmaceuticals of $1.4 million and other direct nursing care costs, including
medical equipment and supplies, of $1.6 million.
Our operating expenses in the first half of 2003 increased $50.7 million, or 4
percent, compared with the first half of 2002. Excluding the results of our
hospital that was sold on April 30, 2002, operating expenses increased $70.6
million, or 6 percent. See our discussion above for the $8.4 million expense
recorded in the second quarter of 2003 related to Medicare cost reports.
Operating expenses from our long-term care segment increased $57.2 million, or 6
percent, between the first half of 2002 and 2003. The largest portion of the
long-term care operating expense increase of $36.1 million related to wages,
temporary staffing and payroll overhead. Our other operating expense increases
for this segment included ancillary costs, excluding internal labor, of $5.0
million and general and professional liability expense of $2.3 million.
Excluding the $4.9 million charge mentioned above in 2002, our general and
professional liability expense increased because of an increase in the claims
accrual and insurance premiums. See our discussion above for the reversal of the
$2.1 million charge in the second quarter of 2002 related to the NeighborCare
arbitration.
Our operating expenses from our home health and hospice segment increased $11.2
million, or 10 percent. The increase related to labor costs of $5.9 million,
ancillary costs including pharmaceuticals of $2.8 million and other direct
nursing care costs, including medical equipment and supplies, of $2.7 million.
General and Administrative Expenses. Our general and administrative
expenses increased $16.2 million and $17.0 million from the second quarters and
first half of 2002 to 2003, respectively. An increase of $6.2 million related to
restructuring split-dollar life insurance policies for officers and key
employees as a result of the Sarbanes-Oxley Act of 2002 which prohibits employee
loans in the form of prepaid premiums and recent tax law changes that make the
internal buildup of cash surrender value taxable. The restructuring requires
transferring a portion of the Company's share of the split-dollar life insurance
polices to the employees. The other significant expense related to the increase
in costs associated with our stock appreciation
18
rights and deferred compensation plans of $10.0 million, primarily from the 30
percent increase in our stock price this quarter. The major portion of this
increase ($8.1 million) was included in general and administrative expenses and
the remainder was an operating expense increase divided between our operating
segments.
Asset Impairment. During our quarterly reviews of long-lived assets in
2002, management determined that certain assets were impaired by $24.9 million.
The impairment consisted of $19.9 million for certain long-lived assets and $5.0
million of our vision business' intangible assets. Refer to our Form 10-Q for
the quarter ended June 30, 2002 for additional discussion.
Interest Expense. Interest expense increased from the second quarter of
2002 to 2003 because of the higher interest rates associated with our fixed-rate
senior notes issued in April 2003 compared with our variable-rate credit
agreement debt that was paid off. The increase in interest expense also related
to additional amortization of finance fees from the new senior notes. We
expected our interest expense to increase by approximately $1.0 million per
month as a result of the refinancing. See Note 3 to the consolidated financial
statements for discussion of our debt refinancing.
We entered into interest rate swap agreements in May 2003 on a notional amount
of $200 million to hedge certain fixed-rate senior notes. These agreements
effectively converted the interest rates of these notes to variable rates in
order to provide a better balance of fixed and variable rate debt. The effect
was not material for the second quarter of 2003. See Note 4 to the consolidated
financial statements for discussion of our interest rate swap agreements.
Gain on Sale of Assets. Our gain on sale of assets in the first half of
2002 primarily related to the gain of $31.1 million recognized on the sale of
our hospital on April 30, 2002.
Equity in Earnings of Affiliated Companies. Our equity earnings
increased in the second quarter and first half of 2003 compared with 2002
primarily because of our ownership interests in two hospitals acquired on April
30, 2002.
Income Taxes. Our effective tax rate increased to 40.7 percent in the
second quarter of 2003 compared with 38.0 percent for the year 2002 as a result
of non-deductible expense from restructuring the split-dollar life insurance
policies.
Cumulative Effect of Change in Accounting Principle. In July 2001, the
Financial Accounting Standards Board issued Statement No. 142, "Goodwill and
Other Intangible Assets," that we adopted January 1, 2002. Under this Statement,
goodwill and indefinite-lived intangible assets are no longer amortized but are
reviewed annually for impairment, or more frequently if impairment indicators
arise. We completed our initial impairment test in the second quarter of
19
2002 and determined that $1.3 million of our goodwill related to our vision
business was impaired. The impairment loss, with no tax effect, was recorded
retroactive to January 1, 2002 as a cumulative effect of a change in accounting
principle.
FINANCIAL CONDITION - JUNE 30, 2003 AND DECEMBER 31, 2002
Prepaid expenses and other assets increased $14.6 million due to $7.6 million of
restricted cash placed in an escrow account to prepay miscellaneous debt in the
third quarter and $5.4 million for prepaid general liability insurance due to
payment of premiums for the policy year beginning June 1, 2003.
Property and equipment decreased $9.8 million primarily due to depreciation of
$59.3 million and disposal of assets of $8.6 million. These decreases were
partially offset by $46.3 million in new construction and renovations to
existing facilities and a $10.1 million cash payment to exercise a purchase
option on a leased facility.
Accrued insurance liabilities decreased $11.3 million primarily due to an $18.6
million payment of an environmental liability. We also received insurance
proceeds of $9.5 million in January 2003 to offset half of this payment, which
reduced our receivables.
Other accrued liabilities increased $10.3 million as a result of the $8.4
million reserve for a proposed settlement of a review of certain Medicare cost
reports related to the former Manor Care, Inc.
Our debt classification between current and long-term changed during the first
half of 2003 as a result of the new financing package completed in April 2003.
We issued $300.0 million of senior notes. With the proceeds, we paid off our
expiring revolving credit facility that had a balance of $259.3 million at
December 31, 2002 and was classified as a current liability. See Note 3 to the
consolidated financial statements for additional discussion of the financing
package.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows. During the first half of 2003, we satisfied our cash
requirements from cash generated from operating activities. We used the cash
principally for capital expenditures, acquisitions, to purchase our common stock
and in the first quarter to pay down debt. Cash flows from operating activities
were $193.8 million for the first half of 2003, an increase of $68.8 million
from the first half of 2002. We have not paid any estimated federal tax payments
in 2003 compared with $33.0 million in the first half of 2002 due to changes in
tax laws and accounting methods for tax return purposes. During the first half
of 2002, we paid $22.0 million to NeighborCare related to the arbitration
decision and $35.3 million to the Internal Revenue Service related to the
settlement agreement for company owned life insurance.
20
Investing Activities. Our expenditures for property and equipment of
$46.3 million in the first half of 2003 included $8.1 million to construct new
facilities and expand existing facilities. In the first quarter of 2003, we
exercised a purchase option for $10.1 million on a facility that was previously
leased.
Debt Agreement. During April 2003, we refinanced our five-year, $500
million revolving credit agreement that was scheduled to mature September 24,
2003. The financing package included a new three-year $200 million revolving
credit facility, $200 million of 6.25% Senior Notes due in 2013 and $100 million
of 2.125% Convertible Senior Notes due in 2023. The net proceeds of
approximately $292.3 million from the closing of these transactions were used to
repay borrowings outstanding under our five-year revolving credit facility and
to purchase $25.0 million of our common stock concurrent with the refinancing
transactions. As of June 30, 2003, there were no loans outstanding under the new
three-year revolving credit facility and after consideration of usage for
letters of credit, there was $161.4 million available for future borrowing.
Stock Purchase. During 2001 and 2002, our board of directors authorized
us to spend up to $300 million to purchase our common stock with $200 million of
the authorization expiring on December 31, 2003 and the remaining $100 million
on December 31, 2004. In April 2003, our board authorized an additional $100
million through December 31, 2004. With these authorizations, we purchased
6,282,147 shares in the first half of 2003 for $126.0 million, which includes
the $25.0 million repurchased concurrently with the Convertible Senior Notes
offering, and an additional 65,900 shares in July 2003 for $1.7 million. We have
$110.2 million remaining authority to repurchase our shares as of July 31. We
may use the shares for internal stock option and 401(k) match programs and for
other uses, such as possible future acquisitions.
Cash Dividend. On July 25, 2003, the Company declared that it will pay
a quarterly cash dividend of 12.5 cents per share of common stock to
shareholders of record on August 7, 2003. This is the first dividend payment in
the Company's history and will approximate $11.0 million payable on August 20,
2003. We intend 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.
We believe that a certain amount of debt has an appropriate place in our overall
capital structure and it is not our strategy to eliminate all debt financing.
Because of our significant annual cash flow, we believe that we will be able to
refinance the major pieces of our debt as they mature. We believe that our cash
flow from operations will be sufficient to cover operating needs, future capital
expenditure requirements, scheduled debt payments of miscellaneous small
borrowing arrangements and capitalized leases, cash dividends and some share
repurchase. It is likely that we will pursue growth from acquisitions,
partnerships and other ventures that we
21
would fund from excess cash from operations, credit available under our bank
credit agreement and other financing arrangements that are normally available in
the marketplace.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This report may include forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. We identify forward-looking statements in this report by using
words or phrases such as "anticipate," "believe," "estimate," "expect,"
"intend," "may be," "objective," "plan," "predict," "project," and "will be" and
similar words or phrases, or the negative thereof.
These forward-looking statements are subject to numerous assumptions, risks and
uncertainties. Factors which may cause our actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by us in those statements include, among
others: changes in the health care industry because of political and economic
influences; changes in Medicare, Medicaid and certain private payors'
reimbursement levels; existing government regulations, including applicable
health care, tax and health and safety regulations, and changes in, or the
failure to comply with, governmental regulations or the interpretations thereof;
legislative proposals for health care reform; competition and general economic
and business conditions; the ability to attract and retain qualified personnel;
changes in current trends in the cost and volume of patient-care related claims
and workers' compensation claims and in insurance costs related to such claims;
other litigation and our ability to complete the settlement with the Department
of Justice.
Although we believe the expectations reflected in our forward-looking statements
are based upon reasonable assumptions, we can give no assurance that we will
attain these expectations or that any deviations will not be material. Except as
otherwise required by the federal securities laws, we disclaim any obligations
or undertaking to publicly release any updates or revisions to any
forward-looking statement contained in this report to reflect any change in our
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Changes in U.S. interest rates expose us to market risks inherent with
derivatives and other financial instruments. Our interest expense is most
sensitive to changes in the general level of U.S. interest rates applicable to
our U.S. dollar indebtedness. In the second quarter of 2003, we refinanced our
five-year credit agreement prior to its scheduled maturity in September 2003
with a new three-year $200 million credit facility, $200 million of 6.25% Senior
Notes due in 2013 and $100 million of 2.125% Convertible Senior Notes due in
2023. There are no loans
22
outstanding under our new credit facility at June 30, 2003. The Company plans to
voluntarily increase the interest rate on the Convertible Senior Notes to 2.625%
effective August 20, 2003 as these investors will not otherwise participate in
the common stock dividend.
We entered into interest rate swap agreements on a notional amount of $200
million in May 2003 in order to provide a better balance of fixed and variable
rate debt. The agreements effectively convert the interest rate on $100 million
each of our 7.5% and 8% Senior Notes to variable rates equal to six-month LIBOR
plus a spread.
The following table provides information about our significant interest rate
risk at June 30, 2003 compared with December 31, 2002:
June 30, 2003 December 31, 2002
--------------------- ----------------------
Principal
(Notional) Fair Principal Fair
Amount Value Amount Value
------ ----- ------ -----
(In thousands)
Variable rate debt:
Five-year credit agreement, matures
September 2003, interest at a
Eurodollar-based rate plus .40% $ 259,300 $ 259,300
Fixed rate debt:
Senior Notes:
7.5%, due June 2006 $ 150,000 $163,810 150,000 157,362
8%, due March 2008 200,000 223,440 200,000 217,072
6.25%, due April 2013 200,000 206,386
Convertible Senior Notes:
2.125%, due April 2023 100,000 113,250
Interest rate swaps - liability:
Pay variable rate (6.24%) and receive
fixed (7.5%), due June 2006 100,000 94
Pay variable rate (6.13%) and receive
fixed (8%), due March 2008 100,000 311
23
Item 4. Controls and Procedures
An evaluation was performed under the supervision and with the participation of
our management, including the chief executive officer, or CEO, and chief
financial officer, or CFO, of the effectiveness of the design and operation of
our disclosure procedures. Based on that evaluation, our management, including
the CEO and CFO, concluded that our disclosure controls and procedures were
effective as of June 30, 2003. There have been no significant changes in our
internal control over financial reporting in the second quarter of 2003 that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
See Note 7 - Contingencies in the notes to the consolidated financial statements
for a discussion of litigation related to environmental matters and patient-care
related claims.
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's Annual Meeting of Stockholders held on May 6, 2003 the
stockholders voted on the following items: a) elect Frederick V. Malek as a
director, b) elect Robert G. Siefers as a director, c) elect M. Keith Weikel as
a director, d) elect Thomas L. Young as a director, e) ratify the selection of
Ernst & Young LLP as independent public accountants for the year ending December
31, 2003, f) approve the stockholder proposal to declassify the board and g)
approve the stockholder proposal to index stock options. Items a-f were approved
and Item g was not approved. The votes were as follows:
Item For Against Withheld Abstain
---- --- ------- -------- -------
a 80,986,463 1,547,070
b 80,614,931 1,918,602
c 81,174,922 1,358,611
d 80,726,364 1,807,169
e 77,294,288 4,710,038 529,207
f 49,729,577 18,703,518 840,022
g 8,158,218 60,058,954 1,055,925
24
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
S-K Item
601 No.
--------
31.1 Chief Executive Officer Certification
31.2 Chief Financial Officer Certification
32.1 Chief Executive Officer Certification Pursuant To 18 U.S.C. Section
1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
32.2 Chief Financial Officer Certification Pursuant To 18 U.S.C. Section
1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
(b) Reports on Form 8-K
On April 10, 2003, Manor Care, Inc. filed a Form 8-K and under Item 9
included the April 9, 2003 press release announcing the Company's intention
to refinance its existing credit facility and to issue $200 million of
Senior Notes and $90 million of Senior Convertible Notes. The risk factors
that were included in the preliminary Offering Memorandum in connection with
the Senior Convertible Notes were included in the Form 8-K.
On April 25, 2003, Manor Care, Inc. filed a Form 8-K and under Item 9 (the
information was provided under Item 12 - Results of Operations and Financial
Condition) furnished the April 25, 2003 press release reporting the
Company's financial results for the first quarter of 2003.
25
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 August 8, 2003 By /s/ Geoffrey G. Meyers
--------------------------------------------
Geoffrey G. Meyers, Executive Vice President
and Chief Financial Officer
26
EXHIBIT INDEX
Exhibit
-------
31.1 Chief Executive Officer Certification
31.2 Chief Financial Officer Certification
32.1 Chief Executive Officer Certification Pursuant To 18 U.S.C. Section
1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act
Of 2002
32.2 Chief Financial Officer Certification Pursuant To 18 U.S.C. Section
1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act
Of 2002
27