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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, 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of business on October 31, 2003.
Common stock, $0.01 par value -- 89,138,022 shares
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TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -
September 30, 2003 and December 31, 2002 ........................................ 3
Consolidated Statements of Income -
Three months and nine months ended September 30, 2003 and 2002 .................. 4
Consolidated Statements of Cash Flows -
Nine months ended September 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 ................................... 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk ...................... 24
Item 4. Controls and Procedures ......................................................... 25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ............................................................... 25
Item 2. Changes in Securities and Use of Proceeds ....................................... 25
Item 3. Defaults Upon Senior Securities ................................................. 25
Item 4. Submission of Matters to a Vote of Security Holders ............................. 25
Item 5. Other Information ............................................................... 26
Item 6. Exhibits and Reports on Form 8-K ................................................ 26
SIGNATURES ................................................................................... 27
EXHIBIT INDEX ................................................................................ 28
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MANOR CARE, INC.
Consolidated Balance Sheets
September 30, December 31,
2003 2002
---- ----
(Unaudited) (Note 1)
(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents $ 83,631 $ 30,554
Receivables, less allowances for doubtful
accounts of $57,459 and $60,093, respectively 383,789 385,960
Prepaid expenses and other assets 26,945 23,974
Deferred income taxes 63,685 70,329
------------- ------------
Total current assets 558,050 510,817
Property and equipment, net of accumulated
depreciation of $789,052 and $704,348, respectively 1,519,345 1,534,339
Goodwill 87,752 85,814
Intangible assets, net of amortization of $3,439 and $9,234, respectively 10,010 10,457
Other assets 171,613 165,505
------------- ------------
Total assets $ 2,346,770 $ 2,306,932
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 98,685 $ 95,347
Employee compensation and benefits 145,506 109,628
Accrued insurance liabilities 105,753 109,385
Income tax payable 11,657
Other accrued liabilities 46,877 48,424
Long-term debt due within one year 1,921 267,423
------------- ------------
Total current liabilities 398,742 641,864
Long-term debt 661,808 373,112
Deferred income taxes 118,767 79,073
Other liabilities 216,184 196,836
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 354,044 349,304
Retained earnings 1,065,581 1,006,295
Accumulated other comprehensive loss (274) (11)
------------- ------------
1,420,461 1,356,698
Less treasury stock, at cost (22.1 and 16.0 million shares, respectively) (469,192) (340,651)
------------- ------------
Total shareholders' equity 951,269 1,016,047
------------- ------------
Total liabilities and shareholders' equity $ 2,346,770 $ 2,306,932
============= ============
See notes to consolidated financial statements.
3
MANOR CARE, INC.
Consolidated Statements Of Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
2003 2002 2003 2002
---- ---- ---- ----
(In thousands, except earnings per share)
Revenues $ 761,279 $ 732,920 $ 2,242,385 $ 2,177,342
Expenses
Operating 638,235 603,025 1,882,746 1,796,822
General and administrative 36,649 29,227 113,995 89,575
Depreciation and amortization 32,058 30,826 95,595 94,182
Asset impairment 2,745 27,621
----------- ----------- ----------- -----------
706,942 665,823 2,092,336 2,008,200
----------- ----------- ----------- -----------
Income before other income (expenses)
and income taxes 54,337 67,097 150,049 169,142
Other income (expenses):
Interest expense (10,842) (9,436) (31,034) (28,768)
Gain on sale of assets 1,731 150 4,054 30,403
Equity in earnings of affiliated companies 2,090 1,741 5,230 3,614
Interest income and other 307 228 1,439 1,110
----------- ----------- ----------- -----------
Total other income (expenses), net (6,714) (7,317) (20,311) 6,359
----------- ----------- ----------- -----------
Income before income taxes 47,623 59,780 129,738 175,501
Income taxes 16,584 22,717 48,652 66,691
----------- ----------- ----------- -----------
Income before cumulative effect 31,039 37,063 81,086 108,810
Cumulative effect of change in
accounting for goodwill (1,314)
----------- ----------- ----------- -----------
Net income $ 31,039 $ 37,063 $ 81,086 $ 107,496
=========== =========== =========== ===========
Earnings per share-basic:
Income before cumulative effect $ .35 $ .38 $ .90 $ 1.10
Cumulative effect (.01)
----------- ----------- ----------- -----------
Net income $ .35 $ .38 $ .90 $ 1.08(a)
=========== =========== =========== ===========
Earnings per share - diluted:
Income before cumulative effect $ .35 $ .38 $ .89 $ 1.08
Cumulative effect (.01)
----------- ----------- ----------- -----------
Net income $ .35 $ .38 $ .89 $ 1.07
=========== =========== =========== ===========
Weighted-average shares:
Basic 88,060 97,239 90,272 99,133
Diluted 89,720 98,429 91,532 100,365
Cash dividends declared per common share $ .125 $ .125
(a) Doesn't add due to rounding
See notes to consolidated financial statements.
4
MANOR CARE, INC.
Consolidated Statements Of Cash Flows
(Unaudited)
Nine Months Ended September 30
------------------------------
2003 2002
---- ----
(In thousands)
OPERATING ACTIVITIES
Net income $ 81,086 $ 107,496
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 95,595 94,182
Asset impairment and other non-cash charges 28,935
Provision for bad debts 23,930 30,486
Deferred income taxes 46,338
Net gain on sale of assets (4,054) (30,403)
Equity in earnings of affiliated companies (5,230) (3,614)
Changes in assets and liabilities, excluding sold facilities and acquisitions:
Receivables (21,564) (40,525)
Prepaid expenses and other assets (1,633) 24,772
Liabilities 40,081 7,173
--------- ---------
Total adjustments 173,463 111,006
--------- ---------
Net cash provided by operating activities 254,549 218,502
--------- ---------
INVESTING ACTIVITIES
Investment in property and equipment (74,059) (68,773)
Investment in systems development (2,728) (2,333)
Acquisitions (12,556) (35,514)
Acquisition of assets from development joint venture 1,183
Proceeds from sale of assets 16,748 88,645
--------- ---------
Net cash used in investing activities (72,595) (16,792)
--------- ---------
FINANCING ACTIVITIES
Net repayments under bank credit agreements (259,300) (84,600)
Principal payments of long-term debt (13,896) (4,670)
Proceeds from issuance of senior notes 299,372
Payment of deferred financing costs (7,320)
Dividends paid (11,150)
Proceeds from exercise of stock options 2,694 147
Purchase of common stock for treasury (139,277) (119,212)
--------- ---------
Net cash used in financing activities (128,877) (208,335)
--------- ---------
Net increase (decrease) in cash and cash equivalents 53,077 (6,625)
Cash and cash equivalents at beginning of period 30,554 26,691
--------- ---------
Cash and cash equivalents at end of period $ 83,631 $ 20,066
========= =========
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 nine months ended September 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 September 30, 2003, the Company operated 293 skilled nursing facilities, 70
assisted living facilities, 94 outpatient therapy clinics and 89 home health
offices.
COMPREHENSIVE INCOME
Comprehensive income represents the sum of net income plus other comprehensive
income (loss). Comprehensive income totaled $31.5 million and $80.8 million for
the three and nine months ended September 30, 2003, respectively, and $37.0
million and $107.2 million for the three and nine months ended September 30,
2002, respectively. The other comprehensive loss in the nine months ended
September 30, 2003 represents the reversal of the unrealized gain on investments
sold in 2003 partially offset by the unrealized gain on other securities held by
the Company. The other comprehensive loss in 2002 primarily relates to the
unrealized loss on investments.
6
INSURANCE LIABILITIES
At September 30, 2003 and December 31, 2002, the workers' compensation liability
consisted of short-term reserves of $29.5 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' compensation
was $10.2 million and $34.7 million for the three and nine months ended
September 30, 2003, respectively, and $14.9 million and $40.3 million for the
three and nine months ended September 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. During the third quarter of 2003, employees delivered shares
to the Company to cover the payment of the option price and related tax
withholdings on the option exercises. These shares had a value of $13.6 million.
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.
7
Three months ended Nine months ended
September 30 September 30
------------ ------------
2003 2002 2003 2002
---- ---- ---- ----
(In thousands, except earnings per share)
Net income - as reported $ 31,039 $ 37,063 $ 81,086 $ 107,496
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax effects (3,569) (1,667) (7,480) (5,312)
--------- --------- --------- ---------
Net income - pro forma $ 27,470 $ 35,396 $ 73,606 $ 102,184
========= ========= ========= =========
Earnings per share - as reported:
Basic $ .35 $ .38 $ .90 $ 1.08
Diluted $ .35 $ .38 $ .89 $ 1.07
Earnings per share - pro forma:
Basic $ .31 $ .36 $ .82 $ 1.03
Diluted $ .31 $ .36 $ .80 $ 1.02
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).
8
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.
NOTE 2 - REVENUES
Revenues for certain health care services are as follows:
Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
2003 2002 2003 2002
---- ---- ---- ----
(In thousands)
Skilled nursing and assisted living services $ 648,705 $ 633,634 $1,919,189 $1,867,752
Home health and hospice services 83,168 71,647 239,800 211,271
Rehabilitation services
(excludes intercompany revenues) 22,969 21,050 65,467 64,411
Hospital care 21,344
Other services 6,437 6,589 17,929 12,564
---------- ---------- ---------- ----------
$ 761,279 $ 732,920 $2,242,385 $2,177,342
========== ========== ========== ==========
9
NOTE 3 - DEBT
Debt consists of the following:
September 30, December 31,
2003 2002
------------- ------------
(In thousands)
Five Year Agreement $ 259,300
7.5% Senior Notes, net of discount (1) $ 149,078 149,795
8% Senior Notes (1) 197,780 200,000
6.25% Senior Notes, net of discount 199,401
2.625% Convertible Senior Notes 100,000
Mortgages and other notes 12,486 26,325
Capital lease obligations 4,984 5,115
------------- ------------
663,729 640,535
Less:
Amounts due within one year 1,921 267,423
------------- ------------
Long-term debt $ 661,808 $ 373,112
============= ============
(1) See the interest rate swap agreement discussion on page 8.
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 voluntarily increased the interest rate on
the Convertible Senior Notes to 2.625% on August 20, 2003 as these investors
would not otherwise participate in the common stock dividend paid in August
2003.
Manor Care, Inc.'s three-year $200 million revolving credit facility was
established with a group of banks. As of September 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
10
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 2.625% (originally issued at 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.
The net proceeds of approximately $292.1 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. In the third quarter, the Company registered
identical Senior Notes and Convertible Senior Notes with the Securities and
Exchange Commission, which were exchanged for the Senior Notes issued in April.
The Senior Notes and Convertible Senior Notes are guaranteed by substantially
all of the Company's subsidiaries.
11
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 a $3.0 million liability at September 30, 2003. Interest expense
was reduced by $0.9 million related to these agreements in 2003.
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 6,765,647 shares in the first nine months of 2003 for
$139.3 million, including the $25 million repurchased concurrently with the
Convertible Senior Notes offering. At September 30, 2003, the Company had
remaining unused repurchase authority of $98.7 million.
NOTE 6 - EARNINGS PER SHARE
The calculation of earnings per share (EPS) is as follows:
Three Months Ended Nine Months Ended
September 30 September 30
------------------- ------------------
2003 2002 2003 2002
---- ---- ---- ----
(In thousands, except earnings per share)
Numerator:
Income before cumulative effect $ 31,039 $ 37,063 $ 81,086 $108,810
======== ======== ======== ========
Denominator:
Denominator for basic EPS -
weighted-average shares 88,060 97,239 90,272 99,133
Effect of dilutive securities:
Stock options 1,253 895 910 941
Non-vested restricted stock 407 295 350 291
-------- -------- -------- --------
Denominator for diluted EPS -
adjusted for weighted-average
shares and assumed conversions 89,720 98,429 91,532 100,365
======== ======== ======== ========
EPS - Income before cumulative effect:
Basic $ .35 $ .38 $ .90 $ 1.10
Diluted $ .35 $ .38 $ .89 $ 1.08
12
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: 3.0 million
shares with an average exercise price of $28 for the nine months of 2003 and 2.1
million shares with an average exercise price of $32 for the nine months 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 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. At September 30, 2003, the Company had $4.5 million accrued
based upon the current assessment of the likely outcome of the Actions by its
outside advisors.
The Company is party to various other legal matters arising in the ordinary
course of business including patient care-related claims and litigation. At
September 30, 2003 and December 31, 2002, the general and professional liability
consisted of short-term reserves of $60.5 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 $25.0 million and $67.7 million for the three and
nine months ended September 30, 2003, respectively, and $20.5 million and $61.8
million for the three and nine months ended September 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.
13
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.
14
Long-Term Home Health
Care and Hospice Other Total
---- ----------- ----- -----
(In thousands)
Three months ended September 30, 2003
Revenues from external customers $ 648,705 $ 83,168 $ 29,406 $ 761,279
Intercompany revenues 14,392 14,392
Depreciation and amortization 30,116 988 954 32,058
Operating margin 102,996 14,869 5,179 123,044
Three months ended September 30, 2002
Revenues from external customers 633,634 71,647 27,639 732,920
Intercompany revenues 15,469 15,469
Depreciation and amortization 28,550 914 1,362 30,826
Operating margin 113,386 11,273 5,236 129,895
Nine months ended September 30, 2003
Revenues from external customers 1,919,189 239,800 83,396 2,242,385
Intercompany revenues 44,112 44,112
Depreciation and amortization 89,347 2,941 3,307 95,595
Operating margin 313,967 43,820 1,852 359,639
Nine months ended September 30, 2002
Revenues from external customers 1,867,752 211,271 98,319 2,177,342
Intercompany revenues 43,203 43,203
Depreciation and amortization 86,933 2,255 4,994 94,182
Operating margin 345,156 34,398 966 380,520
NOTE 9 - SUBSEQUENT EVENT
On October 24, 2003, the Company announced that it will pay a quarterly cash
dividend of 12.5 cents per share of common stock. The dividend is payable
November 20, 2003 to shareholders of record on November 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.
15
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 second 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 correct prior period market basket
forecast errors which increased 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. In addition,
beginning October 1 our hospice business received a 3.4 percent market basket
adjustment and our home health business received a 3.3 percent increase.
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. The number of new
claims in the first nine months of 2003 is similar to the same period in 2002,
despite some acceleration around the tort legislative activity in Texas and to
some degree Florida. We expect the average settlement costs per claim for the
year 2003 to approximate 2002. Although we believe our reserves are adequate, we
can give you no assurance that this liability will not require material
adjustment in future periods.
16
RESULTS OF OPERATIONS -
QUARTER AND YEAR-TO-DATE SEPTEMBER 30, 2003 COMPARED WITH SEPTEMBER 30, 2002
Revenues. Our revenues increased $28.4 million, or 4 percent, from the
third quarter of 2002 to 2003. Revenues from our long-term care segment (skilled
nursing and assisted living facilities) increased $15.1 million, or 2 percent,
due to increases in rates/patient mix--$13.5 million and occupancy--$10.0
million that were partially offset by a decrease in capacity--$8.4 million. Our
revenues from the home health and hospice segment increased $11.5 million, or 16
percent, primarily because of an increase in hospice patient days.
Our revenues in the first nine months of 2003 increased $65.0 million, or 3
percent, compared with the first nine months of 2002. Excluding the results of
our hospital that we sold in April 2002, our revenues increased $86.4 million,
or 4 percent. Revenues from our long-term care segment increased $51.4 million,
or 3 percent, due to increases in rates/patient mix--$43.2 million and
occupancy--$25.2 million that were partially offset by a decrease in
capacity--$17.0 million. Our revenues from the home health care and hospice
segment increased $28.5 million, or 14 percent, primarily because of an increase
in hospice patient days.
Our average rates per day for the long-term care segment were as follows:
Third Quarter First Nine Months
------------------- -------------------
Increase Increase
2003 2002 (Decrease) 2003 2002 (Decrease)
---- ---- ---------- ---- ---- ----------
Medicaid $131.04 $125.93 4% $130.21 $123.48 5%
Private and other (skilled only) $190.34 $182.16 4% $189.30 $181.05 5%
Medicare $311.98 $335.42 (7)% $311.17 $334.27 (7)%
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.
17
Our occupancy levels were as follows:
Third Quarter First Nine Months
------------- -----------------
2003 2002 2003 2002
---- ---- ---- ----
Total 88% 87% 88% 87%
Excluding start-up facilities 89% 88% 88% 88%
Skilled nursing facilities 89% 89% 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 third quarter and first nine months of 2003
compared to 67 percent for the third quarter and 68 percent for the first nine
months of 2002.
Our bed capacity declined between the third quarter and first nine months 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 third quarter of 2003
increased $35.2 million, or 6 percent, compared with the third quarter of 2002.
Operating expenses from our long-term care segment increased $25.5 million, or 5
percent between the third quarters of 2002 and 2003. We attribute the largest
portion ($7.6 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
$4.4 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 increased $4.2
million as a result of an increase in the claims accrual and insurance premiums.
The expense related to our stock appreciation rights for operating participants
increased $2.6 million because of the 20 percent increase in our stock price
this quarter. See general and administrative expenses for additional discussion
of the increase in costs related to stock appreciation rights.
Our operating expenses from our home health and hospice segment increased $7.9
million, or 13 percent between the third quarters of 2002 and 2003. The increase
related to labor costs of $3.6 million, ancillary costs including
pharmaceuticals of $1.5 million and other direct nursing care costs, including
medical equipment and supplies, of $1.1 million.
Our operating expenses in the first nine months of 2003 increased $85.9 million,
or 5 percent, compared with the first nine months of 2002. Excluding the results
of our hospital that was sold on April 30, 2002, operating expenses increased
$105.8 million, or 6 percent. During the second quarter of 2003, we recorded an
expense of $8.4 million for a proposed settlement of a
18
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 near future.
Operating expenses from our long-term care segment increased $82.6 million, or 5
percent, between the first nine months of 2002 and 2003. The largest portion of
the long-term care operating expense increase of $43.7 million related to wages,
temporary staffing and payroll overhead. Our other operating expense increase
for this segment included ancillary costs, excluding internal labor, of $9.4
million and general and professional liability expense of $6.5 million.
Excluding the $4.9 million charge recorded in the second quarter of 2002 due to
a court-ordered liquidation of one of our insurers, our general and professional
liability expense increased $11.4 million because of an increase in the claims
accrual and insurance premiums. The expense related to our stock appreciation
rights increased $4.0 million because of a 20 percent increase in our stock
price this quarter that was in addition to the 30 percent increase in the second
quarter.
Our operating expenses from our home health and hospice segment increased $19.1
million, or 11 percent. The increase related to labor costs of $9.9 million,
ancillary costs including pharmaceuticals of $4.2 million and other direct
nursing care costs, including medical equipment and supplies, of $3.8 million.
General and Administrative Expenses. Our general and administrative
expenses increased $7.4 million and $24.4 million from the third quarters and
first nine months of 2002 to 2003, respectively. An increase of $6.2 million in
the second quarter of 2003 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 for the third quarter and first nine months of 2003 related to the
increase in costs associated with our stock appreciation rights and deferred
compensation plans. The increase in these costs included in general and
administrative expenses was $5.7 million from the third quarters of 2002 to 2003
and $13.8
19
million from the first nine months of 2002 to 2003, primarily from the increase
in our stock price in the second and third quarters. The increase in costs
related to stock appreciation rights and deferred compensation plans were
recorded in both general and administrative expenses and operating expenses. The
total increase for these expenses was $9.2 million for the quarter and $19.3
million for the first nine months when compared to the prior year period.
Asset Impairment. During our quarterly reviews of long-lived assets in
2002, management determined that certain assets were impaired by $27.6 million
for the first nine months of 2002. The impairment consisted of $22.2 million for
certain long-lived assets and $5.4 million of our vision business' intangible
assets. Refer to our Form 10-Q for the quarter ended September 30, 2002 for
additional discussion.
Interest Expense. Interest expense increased from the third quarters
and first nine months 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. These
agreements reduced interest expense by $0.7 million for the third 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 nine
months of 2003 primarily resulted from the sale of non-strategic land parcels
and sale of securities. Our gain on sale of assets in the first nine months 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 third quarter and first nine months 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 decreased to 34.8 percent in the
third quarter of 2003 compared with 38.0 percent for the year 2002 primarily as
a result of a decrease in our deferred tax rate in the third quarter of 2003. We
expect our annualized effective tax rate to be approximately 37.5%.
20
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 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 - SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
Property and equipment decreased $15.0 million primarily due to depreciation of
$89.5 million and disposal of assets of $11.5 million. These decreases were
partially offset by $74.1 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 $3.6 million primarily due to an $18.6
million payment of an environmental liability partially offset by increases in
our other insurance accruals. We also received insurance proceeds of $9.5
million in January 2003 which reduced our receivables and offset half of the
environmental payment.
Income tax payable decreased $11.7 million primarily due to state tax payments
and tax benefits related to the exercise of stock options.
Our debt classification between current and long-term changed during the first
nine months 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 nine months of 2003, we satisfied our cash
requirements with cash generated from operating activities. We used the cash
principally for capital expenditures, acquisitions, to purchase our common
stock, to pay dividends and in the first quarter to pay down debt. Cash flows
from operating activities were $254.5 million for the first nine months of 2003,
an increase of $36.0 million from the first nine months of 2002. It has not been
necessary to pay any estimated federal tax payments in 2003 compared with $53.5
million in the first nine months of 2002 due to changes in tax laws and tax
accounting methods for return purposes.
21
Investing Activities. Our expenditures for property and equipment of
$74.1 million in the first nine months of 2003 included $14.6 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 2.625% (originally issued at 2.125%) Convertible Senior Notes due in 2023.
The net proceeds of approximately $292.1 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 September 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
6,765,647 shares in the first nine months of 2003 for $139.3 million, which
includes the $25.0 million repurchased concurrently with the Convertible Senior
Notes offering. We have $98.7 million remaining authority to repurchase our
shares as of September 30. 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. The Company paid its first quarterly dividend of 12.5
cents per common share, or $11.2 million, in the third quarter of 2003. On
October 24, 2003, the Company announced that it will pay a quarterly cash
dividend of 12.5 cents per share of common stock to shareholders of record on
November 7, 2003. This dividend payment will approximate $11.0 million payable
on November 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 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. 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. It is likely that we will pursue growth from acquisitions,
partnerships and other ventures that we would fund from excess cash from
operations, credit available under our
22
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.
23
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. The Company voluntarily increased the interest rate on the Convertible
Senior Notes to 2.625% effective August 20, 2003. There are no loans outstanding
under our new credit facility at September 30, 2003.
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 tables below provide information about our derivative financial instruments
that are sensitive to changes in interest rates, including interest rate swaps
and debt obligations. For debt obligations, the tables present principal cash
flows and weighted-average interest rates by expected maturity dates. For
interest rate swaps, the table presents notional amounts by expected
(contractual) maturity date. Notional amounts are used to calculate the
contractual payments to be exchanged under the contract.
The following table provides information about our significant interest rate
risk at September 30, 2003:
Fair
Expected Maturity Dates Value
------------------------------------------------------------- Sept. 30,
2004 2005 2006 2007 2008 Thereafter Total 2003
---- ---- ---- ---- ---- ---------- ----- ----
(Dollars in thousands)
Long-term debt:
Fixed rate debt $150,000 $200,000 $ 300,000 $650,000 $707,798
Average interest rate 7.5% 8.0% 5.0% 6.5%
Interest rate swaps -
fixed to variable:
Notional amount $100,000 $100,000 $200,000 $ 2,982
Pay variable rate L+ 5.1% L+ 5.0% L+ 5.1%
Receive fixed rate 7.5% 8.0% 7.8%
L= six-month LIBOR
24
The following table provides information about our significant interest rate
risk at December 31, 2002:
Fair
Expected Maturity Dates Value
------------------------------------------------------------- Dec. 31,
2003 2004 2005 2006 2007 Thereafter Total 2002
---- ---- ---- ---- ---- ---------- ----- ----
(Dollars in thousands)
Long-term debt:
Variable rate debt $259,300 $259,300 $259,300
Floating index rate (1)
Fixed rate debt $150,000 $ 200,000 $350,000 $374,434
Average interest rate 7.5% 8.0% 7.8%
(1) Eurodollar-based rate plus .4%
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 September 30, 2003. There have been no significant changes in
our internal control over financial reporting in the third 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.
None
25
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
S-K Item
601 No.
4.1 Indenture for 6.25% Senior Notes due 2013, dated as of April
15, 2003, among Manor Care, Inc., the subsidiary guarantors as
named therein and National City Bank, as trustee (filed as
Exhibit 4.1 to Manor Care, Inc.'s Registration Statement on
Form S-4, File No. 333-107399 and incorporated herein by
reference)
4.2 Indenture for 2.125% Convertible Senior Notes due 2023, dated
as of April 15, 2003, among Manor Care, Inc., the subsidiary
guarantors as named therein and National City Bank, as trustee
(filed as Exhibit 4.1 to Manor Care, Inc.'s Registration
Statement on Form S-3, File No. 333-107481 and incorporated
herein by reference)
4.3 Amendment to Indenture for 2.125% Convertible Senior Notes due
2023, dated as of August 7, 2003, among Manor Care, Inc., the
subsidiary guarantors as named therein and National City Bank,
as trustee (filed as Exhibit 4.4 to Manor Care, Inc.'s
Registration Statement for Amendment No. 1 to Form S-3, File
No. 333-107481 and incorporated herein by reference)
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 July 25, 2003, Manor Care, Inc. filed a Form 8-K and under Item 5 filed
the July 25, 2003 press release reporting the Company's financial results
for the second quarter of 2003.
26
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 October 31, 2003 By /s/ Geoffrey G. Meyers
-------------------------------------
Geoffrey G. Meyers, Executive Vice
President and Chief Financial Officer
27
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
28