SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended September 30, 1995 Commission File Number 0-6350
FORUM GROUP, INC.
(Exact name of registrant as specified in its charter)
Indiana 61-0703072
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11320 Random Hills Road, Suite 400
Fairfax, Virginia 22030
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 703-277-7000
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 has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d)
of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court:
Yes X No
----- -----
The number of shares outstanding of the registrant's common stock
as of November 6, 1995 was 22,514,209.
INDEX
FORUM GROUP, INC., AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION PAGE
- ----------------------------- ----
Item 1. Financial Statements (Without Audit)
Condensed consolidated balance sheets --
September 30 and March 31, 1995 3
Condensed consolidated statements of operations --
Three and six months ended September 30, 1995 and 1994 5
Condensed consolidated statements of cash flows --
Six months ended September 30, 1995 and 1994 7
Notes to condensed consolidated financial statements --
September 30, 1995 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings 26
Item 4. Submission Of Matters to a Vote of Security Holders 27
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURES 29
- ----------
EXHIBIT INDEX 30
- -------------
-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Without Audit)
September 30, March 31,
1995 1995
------------- ------------
(in thousands)
ASSETS
------
Current Assets:
Cash and cash equivalents $ 37,851 $ 30,228
Accounts receivable, less allowances for
doubtful accounts of $620 and $487, respectively 8,915 7,992
Notes and other receivables 6,160 4,603
Prepaids and other current assets 3,463 4,851
---------- ----------
Total Current Assets 56,389 47,674
---------- ----------
Restricted Cash 18,849 13,098
Property and equipment:
Land and improvements 51,860 49,737
Buildings and leasehold improvements 279,567 263,411
Furniture and equipment 20,943 18,780
Construction in progress 16,113 5,249
---------- ----------
368,483 337,177
Less accumulated depreciation and amortization 25,014 19,820
---------- ----------
Property and Equipment, net 343,469 317,357
Investments:
Greenville Retirement Community, L.P. 3,138 3,331
Other 1,808 1,531
---------- ----------
Net Investments 4,946 4,862
---------- ----------
Deferred costs, net of accumulated amortization
of $1,186 and $1,948, respectively 8,571 12,778
Other assets 28,668 2,577
Excess of cost over net assets of business
acquired, net of accumulated amortization of
$37 and $0, respectively 1,054 -0-
---------- ----------
Total Assets $ 461,946 $ 398,346
---------- ----------
-3-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Without Audit)
September 30, March 31,
1995 1995
------------- ------------
(in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current portion of long-term debt $ 56,710 $ 5,275
Accounts payable 4,471 3,846
Accrued expenses 18,238 15,295
Resident deposits and refundable resident fees 18,438 19,609
---------- ----------
Total Current Liabilities 97,857 44,025
Long-term debt, less current portion payable
within one year 260,319 264,761
Deferred income 7,627 7,294
---------- ----------
TOTAL LIABILITIES 365,803 316,080
Other partners' equity 17,649 16,600
Shareholders' equity:
Common stock, no par value - authorized 48,000
shares, issued 22,500 70,147 67,927
Accumulated earnings (deficit) 8,347 (2,261)
---------- ----------
Total Shareholders' Equity 78,494 65,666
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 461,946 $ 398,346
---------- ----------
See Notes to Condensed Consolidated Financial Statements.
-4-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Without Audit)
Three Months Ended Six Months Ended
September 30, September 30,
------------------- -------------------
1995 1994 1995 1994
------------------- -------------------
(in thousands except per share amounts)
Revenues:
Net operating revenues $ 47,635 $ 36,188 $ 92,917 $ 62,931
Management fees 350 508 703 1,603
Investment and other income 751 817 1,557 1,069
-------- -------- -------- --------
TOTAL REVENUES 48,736 37,513 95,177 65,603
-------- -------- -------- --------
Costs and expenses:
Operating expenses 33,192 23,998 64,312 42,188
General and administrative
expenses 2,971 1,739 5,861 3,321
Relocation costs 315 -0- 577 -0-
Litigation expense 19 -0- 48 -0-
Depreciation and amortization 2,906 2,052 5,695 3,579
-------- -------- -------- --------
TOTAL COSTS AND EXPENSES 39,403 27,789 76,493 49,088
-------- -------- -------- --------
9,333 9,724 18,684 16,515
Interest expense (7,632) (5,778) (14,630) (10,434)
Gains from sales of cooperative
memberships 10,798 4,197 10,798 4,197
-------- -------- -------- --------
Income before minority
interests, income taxes and
extraordinary charge 12,499 8,143 14,852 10,278
Minority interests (162) (138) (350) (197)
-------- -------- -------- --------
Income before income taxes
and extraordinary charge 12,337 8,005 14,502 10,081
Income taxes 2,287 2,000 2,587 2,000
-------- -------- -------- --------
Income before extraordinary charge 10,050 6,005 11,915 8,081
Extraordinary charge -
early extinguishment of debt, net
of income tax benefit (1,307) -0- (1,307) -0-
-------- -------- -------- --------
NET INCOME 8,743 6,005 10,608 8,081
-------- -------- -------- --------
ACCUMULATED DEFICIT AT BEGINNING
OF PERIOD (396) (12,413) (2,261) (14,489)
-------- -------- -------- --------
ACCUMULATED EARNINGS (DEFICIT)
AT END OF PERIOD $ 8,347 $ (6,408) $ 8,347 $ (6,408)
-------- -------- -------- --------
See Notes to Condensed Consolidated Financial Statements.
-5-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Without Audit)
Three Months Ended Six Months Ended
September 30, September 30,
------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
(in thousands except per share amounts)
Net Income $ 8,743 $ 6,005 $ 10,608 $ 8,081
-------- -------- -------- --------
Average number of common and
common equivalent shares
outstanding 23,562 22,920 23,561 22,846
-------- -------- -------- --------
Per common and common
equivalent share (primary
and fully diluted):
Income before
extraordinary charge $ 0.43 $ 0.26 $ 0.51 $ 0.35
Extraordinary charge (0.06) 0.00 (0.06) 0.00
-------- -------- -------- --------
Net income $ 0.37 $ 0.26 $ 0.45 $ 0.35
-------- -------- -------- --------
See Notes to Condensed Consolidated Financial Statements.
-6-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Without Audit)
Six Months Ended
September 30,
-------------------------
1995 1994
---------- ----------
(in thousands)
Cash flows from operating activities:
Net income $ 10,608 $ 8,081
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 5,695 3,579
Amortization of deferred costs 1,182 1,208
Other partners' and interest in losses
of consolidated companies 350 197
Net income of investments
on the equity method (196) (118)
Other accrued revenues and expenses, net (186) (129)
Tax benefit recorded as additional
shareholders' equity 2,100 -0-
Non-cash portion of extraordinary charge 1,509 -0-
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 21,062 12,818
---------- ----------
Cash flows from investing activities:
Purchases of retirement communities and businesses (18,618) (4,787)
Additions to property and equipment (14,403) (3,070)
Net proceeds from sales of investment in
Rancho San Antonio Retirement Housing Corporation -0- 8,713
Notes, investments and other receivables (15,702) 151
Other 1,024 331
---------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (47,699) 1,338
---------- ----------
Cash flows from financing activities:
Proceeds from long-term debt 154,705 407
Payments on long-term debt (107,721) (1,752)
Proceeds from issuance of common stock
and warrants, net -0- 5,155
Deferred financing and other costs (5,874) (1,386)
Distributions to other partners (155) (155)
Resident deposits and restricted cash (6,695) (486)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 34,260 1,783
---------- ----------
Net increase in cash and cash equivalents 7,623 15,939
Cash and cash equivalents at beginning of period 30,228 18,331
---------- ----------
Cash and cash equivalents at end of period $ 37,851 $ 34,270
---------- ----------
See Notes to Condensed Consolidated Financial Statements.
-7-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Without Audit)
September 30, 1995
Note A - Basis of Presentation
- ------------------------------
The balance sheet at March 31, 1995 has been derived from the audited
financial statements at that date included in the Annual Report on Form
10-K of Forum Group, Inc. ("Forum Group") filed with the Securities and
Exchange Commission for the fiscal year ended March 31, 1995 (the "1995
10-K").
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all the information and footnotes required by generally accepted
accounting principles for complete financial statements. The statements
have been prepared using the accounting policies described in the
consolidated financial statements of Forum Group included in the 1995
10-K. The unaudited condensed consolidated financial statements include
all adjustments which are necessary, in the opinion of management, to
present fairly, in all material respects, the Company's financial position
and results of operations for the applicable periods. Operating results
for the six-month period ended September 30, 1995 are not necessarily
indicative of the results that may be expected for the year ending March
31, 1996 and these financial statements should be read in conjunction with
the 1995 10-K.
Certain amounts in the fiscal year 1995 condensed consolidated financial
statements have been reclassified to conform to the fiscal year 1996
presentation.
-8-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Without Audit)
September 30, 1995
Note B - Changes In Consolidation
- ---------------------------------
Forum Retirement Partners, L.P. ("Forum Partners") is a publicly traded
limited partnership which owns nine retirement communities. Forum Group
is the parent company of Forum Retirement, Inc., Forum Partners' general
partner (the "General Partner"), and has a long-term management agreement
with Forum Partners. In addition, Forum Group has a substantial
beneficial interest in Forum Partners. Prior to August 1, 1994, this
beneficial interest was less than 50%, and Forum Group's investment in
Forum Partners was accounted for on the equity method. Through the
acquisition of additional partnership units, Forum Group's beneficial
interest in Forum Partners increased to 56.4% on August 1, 1994.
Accordingly, as of that date, the assets, liabilities and financial
results of Forum Partners were included in the consolidated financial
statements of Forum Group. During October, 1994 Forum Group increased its
beneficial interest to 62.1%. The following pro forma amounts summarize
the effect on the condensed consolidated statement of operations for the
six months ended September 30, 1994, as if Forum Group's beneficial
interest in Forum Partners was 62.1% on April 1, 1994:
Six Months Ended
September 30, 1994
--------------------
(in thousands except
per share amount)
Total revenues $79,895
-------
Net income $ 8,407
-------
Net income per
common and common
equivalent share $ .37
-------
In an effort to increase its equity interest in Forum Partners, Forum
Group has commenced a tender offer for any and all outstanding preferred
depositary units (the "Units") representing preferred limited partners'
interests in Forum Partners not already owned by it at $2.83 per Unit in
cash. The tender offer is presently scheduled to expire at 12:00
Midnight, New York City time, on December 1, 1995, unless extended.
-9-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Without Audit)
September 30, 1995
Note C - Other Investments
- --------------------------
Forum Group has a 50% beneficial interest in Greenville Retirement
Community, L.P. ("GRP"), a limited partnership which owns the Stonegates
retirement community in Wilmington, Delaware ("Stonegates"). Summary
financial information for GRP as of and for the six months ended
September 30, 1995 is as follows (in thousands):
Net property $ 19,912
Other assets 1,263
---------
21,175
Less liabilities 22,917
---------
Net deficit $ (1,742)
---------
Revenues $ 3,437
Costs and expenses 3,008
---------
Net income $ 429
---------
Forum Group has entered into a co-investment agreement with National Guest
Homes, L.L.C. ("NGH"), a developer of assisted living facilities targeted
toward middle-income senior citizens. Forum Group's investment in
projects under construction is included in the consolidated financial
statements of Forum Group. Forum Group's investment in Forum - NGH
Operations I, L.L.C. ("NGH Operations"), a manager of assisted living
facilities, is accounted for on the cost method.
Note D - Long Term Debt
- -----------------------
On September 1, 1995, FGI Financing I Corporation ("FFI") and Forum Ohio
Healthcare, Inc. (collectively with FFI, the "Forum Pool Borrowers"), both
wholly owned subsidiaries of Forum Group, obtained a non-recourse mortgage
loan totaling $124.7 million. The loan is secured by first and second
liens on eight Forum Group retirement centers (the "Forum Pool
Properties"). The loan has cross-default and cross-collateral provisions.
The proceeds were used to repay existing indebtedness of $106.0 million,
loan closing costs, funding of the initial capital reserve account and
general corporate purposes.
The loan requires monthly payments based on a 25-year term and bears
interest at a fixed rate of 10.008% until September 2003, at which time
the rate increases to the greater of 15.008% or the 10-year Treasury rate
plus 5%. The loan matures in September 2020 but is open to prepayment
without penalty on and after September 2003. Prior to that time, after
October 1997, the loan is pre-payable subject to a yield maintenance
-10-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Without Audit)
September 30, 1995
premium. Because the interest rate on the loan increases significantly in
September 2003, it is anticipated that the loan will be prepaid or
refinanced by September 2003.
As part of the original floating rate debt financing that was repaid with
the proceeds of the loan described in the preceding paragraph, FFI
entered into an interest rate cap agreement with a notional amount equal
to $93.3 million, which expires in March 2001. The agreement entitles FFI
to receive the amount, if any, by which one-month LIBOR exceeds 4.625% on
a notional amount of $93.3 million through expiration. The interest rate
cap agreement is included in other assets, and was amortized to interest
expense over the term of the agreement until September 1, 1995.
The interest rate cap agreement was not terminated upon refinancing
of the underlying debt on September 1, 1995. The market value and
unamortized cost of the interest rate cap agreement at that date was $7.3
million and $5.7 million, respectively. The difference between market
value and the unamortized cost of the interest rate cap was recorded as a
component of the extraordinary loss on extinquishment of debt, net of
deferred taxes of $0.3 million. As of September 30, 1995, the interest
rate cap is recorded in other assets at a market value of $7.4 million.
The change in market value subsequent to September 1, 1995 is recorded as
other income.
As noted above, Forum Group extinguished $106.0 million of debt prior to
its scheduled maturity. In connection with this transaction, Forum Group
incurred an extraordinary loss on extinguishment of debt of $2.6 million,
net of deferred income tax benefits of $0.6 million. Partially offsetting
this loss was the extraordinary gain of $1.2 million, net of deferred
income taxes of $0.3 million, as a result of recording the interest rate
cap agreement at market value upon extinguishment of the underlying debt.
Pursuant to a separate credit agreement, during the period from September
1, 1995 to September 1, 1999, Forum Group may borrow up to $50.0 million
to fund a portion of the expansions to the properties collaterallizing the
above-described mortgage loan.
Note E - Commitments and Contingencies
- --------------------------------------
For information concerning certain legal proceedings involving Forum
Group, see (i) Item 3 and Note 5 of the Notes to Consolidated Financial
Statements contained in Item 8 of Part I of the 1995 10-K, (ii) Item 1 of
Part II of the Quarterly Report on Form 10-Q of Forum Group for the
quarter ended June 30, 1995, and (iii) Item 1 of Part II of this report.
Such information is incorporated herein by reference.
Note F - Subsequent Event
- -------------------------
On October 31, 1995, Forum Group entered into a binding agreement to
acquire two assisted living and dementia-related senior housing
-11-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
FORUM GROUP, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Without Audit)
September 30, 1995
communities in the Northwestern United States in January, 1996 for
approximately $11.6 million. A third community in the Northwestern
United States currently under construction will also be acquired in
October, 1997, for an amount defined in the agreement once stabilized
occupancy has been established. Management of these assets will be
provided by the seller on a fee basis. The agreement also provides for
participation, on a joint venture basis, for the construction of
between 5 and 10 new communities in the Northwestern United States and
the right to develop the concept nationally.
-12-
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
The following discussion and analysis covers any material changes in
financial condition since March 31, 1995 and any material changes in the
results of operations for the three and six months ended September 30,
1995 as compared to the same periods in 1994. This discussion and
analysis should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in the
1995 10-K.
Results Of Operations
- ---------------------
Forum Group provides senior housing and healthcare services in 14 states
through the operation of 40 retirement communities ("RCs"). Forum Group
operates (i) fourteen RCs, including one nursing facility owned or leased
by Forum Group and one health center leased by Forum Group ("Owned
Communities"), (ii) four RCs owned by partnerships which are not wholly
owned by Forum Group but which are consolidated for financial reporting
purposes (the "Consolidated Partnership Communities"), (iii) nine RCs
owned by Forum Partners (discussed below) which are consolidated for
financial reporting purposes, (iv) five RCs pursuant to separate contracts
Forum Group acquired in May 1995 and one RC which opened in July, owned by
a partnership which is not wholly owned but which is consolidated for
financial reporting purposes, and (v) seven RCs owned by entities which
are not consolidated for financial reporting purposes (the "Unconsolidated
Communities"), one owned by GRP, one owned by Rancho San Antonio
Retirement Housing Corporation ("RSARHC") and five operated by Forum-NGH
Operations in which entity Forum Group has a majority non-voting interest.
In addition, Forum Group presently has two RCs under construction and two
non-performing first mortgage loans on RCs located in Florida which were
acquired in June, 1995.
Certain summary financial information for the Owned Communities, Forum
Partners, the Consolidated Partnership Communities, and other corporate
operations ("Corporate Operations") is presented below. The results of
Forum Partners' operations were not consolidated for financial reporting
purposes prior to August 1, 1994 (see Note B of Notes to Condensed
Consolidated Financial Statements). Accordingly, the periods in which the
financial results of Forum Partners are included in the Condensed
Consolidated Financial Statements of Forum Group are not comparable to
prior periods.
Effective August 1, 1994, Forum Group purchased additional Units in Forum
Partners to exceed a 50% equity ownership interest, and the operations of
Forum Partners are consolidated into Forum Group's consolidated financial
statements from that date. Forum Partners owns and operates nine RCs
which were 94% occupied as of September 30, 1995. Pro forma consolidated
operating results as if Forum Partners' results were consolidated from
April 1, 1994 based upon Forum Group's 62.1% equity ownership of Forum
Partners as of August 1, 1994 are as presented in the following table for
the three and six months ended September 30, 1994. The pro forma data are
presented for illustrative purposes only and are not necessarily
indicative of what Forum Group's actual results of operations would have
been had Forum Group owned 62.1% of the equity interest in Forum Partners
throughout the period presented. In an effort to increase its equity
-13-
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
interest in Forum Partners, Forum Group has commenced a tender offer for
any and all outstanding preferred depositary Units representing preferred
limited partners' interests in Forum Partners not already owned by it at
$2.83 per unit in cash. The tender offer is presently scheduled to expire
at 12:00 Midnight, New York City time, on December 1, 1995, unless
extended. See Note B of Notes to Condensed Consolidated Financial
Statements included elsewhere herein for additional information relating
to Forum Partners.
As presented in the following tables, EBITDA (defined as earnings before
interest, taxes, depreciation, amortization and extraordinary charges)
reflects Forum Group's ability to satisfy principal and interest
obligations with respect to its indebtedness and to provide cash for other
purposes. EBITDA does not represent and should not be considered as an
alternative to net income or cash flow as determined pursuant to generally
accepted accounting principles.
-14-
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Three Months Ended September 30, 1995
-------------------------------------
($ in millions)
---------------------------Actual----------------------------
(a) Consolidated
Owned Forum Partnership Corporate
Communities Partners Communities Operations Consolidated
----------- ----------- ------------ ---------- ------------
Total
Revenues $26.4 $12.5 $ 7.5 $2.3 $48.7
Operating
Expenses 17.8 9.2 4.3 1.9 33.2
General and
Administrative
Expenses - .1 - 2.9 3.0
Relocation
Costs - - - .3 .3
EBITDA (b) 8.6 3.2 3.2 (2.8) 12.2
Gains from Sales
of Cooperative
Memberships - - - 10.8 10.8
Depreciation and
Amortization (1.4) (.7) (.5) (.3) (2.9)
Interest
Expense (4.7) (1.2) (1.5) (.2) (7.6)
Minority
Interests - - - (.2) (.2)
Income
Taxes - - - (2.3) (2.3)
Extraordinary
loss, net of
income taxes - - - (1.3) (1.3)
Net Income 8.7
- ----------------
(a) Effective August 1, 1994, Forum Group purchased additional Units in
Forum Partners to exceed a 50% equity ownership interest, and its
operations are consolidated into Forum Group's consolidated financial
statements from that date.
(b) After $.3 million of non-recurring expenses. See "Relocation Costs"
at page 20 for a discussion of this item.
-15-
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Six Months Ended September 30, 1995
-----------------------------------
($ in millions)
---------------------------Actual----------------------------
(a) Consolidated
Owned Forum Partnership Corporate
Communities Partners Communities Operations Consolidated
----------- ----------- ------------ ---------- ------------
Total
Revenues $50.8 $24.9 $15.0 $4.5 $95.2
Operating
Expenses 34.3 18.1 8.7 3.2 64.3
General and
Administrative
Expenses - 0.3 - 5.6 5.9
Relocation
Costs - - - 0.6 0.6
EBITDA (b) 16.5 6.5 6.3 (4.9) 24.4
Gains from Sales
of Cooperative
Memberships - - - 10.8 10.8
Depreciation and
Amortization (2.7) (1.5) (1.0) (0.5) (5.7)
Interest
Expense (8.3) (2.5) (3.1) (0.7) (14.6)
Minority
Interests - - - (0.4) (0.4)
Income
Taxes - - - (2.6) (2.6)
Extraordinary
loss, net of
income taxes - - - (1.3) (1.3)
Net Income 10.6
- ----------------
(a) Effective August 1, 1994, Forum Group purchased additional Units in
Forum Partners to exceed a 50% equity ownership interest, and its
operations are consolidated into Forum Group's consolidated financial
statements from that date.
(b) After $.6 million of non-recurring expenses. See "Relocation Costs"
at page 20 for a discussion of this item.
-16-
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Three Months Ended September 30, 1994
-------------------------------------
($ in millions)
------------------------Actual---------------------------
(a) Consolidated (a)
Owned Forum Partnership Corporate Pro Forma
Communities Partners Communities Operations Consolidated Consolidated
----------- -------- ------------ ---------- ------------ ------------
Total
Revenues $21.3 $8.0 $7.0 $1.2 $37.5 $41.3
Operating
Expenses 14.1 5.8 3.9 0.2 24.0 27.0
General and
Administrative
Expense - - - 1.7 1.7 1.7
Relocation
Costs - - - - - -
EBITDA 7.2 2.2 3.1 (0.7) 11.8 12.6
Gains from Sales
of Cooperative
Memberships - - - 4.2 4.2 4.2
Depreciation and
Amortization(1.1) (0.5) (0.5) - (2.1) (2.2)
Interest
Expense (3.4) (0.8) (1.4) (0.2) (5.8) (6.2)
Minority
Interests - - - (0.1) (0.1) (0.2)
Income
Taxes - - - (2.0) (2.0) (2.1)
Extraordinary
loss, net of
income taxes - - - - - -
Net Income 6.0 6.1
- ----------------
(a) Effective August 1, 1994, Forum Group purchased additional Units in
Forum Partners to exceed a 50% equity ownership interest, and its
operations are consolidated into Forum Group's consolidated
financial statements from that date. Pro forma operating results
are shown as if Forum Partners' results of operations were
consolidated from April 1, 1994.
-17-
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Six Months Ended September 30, 1994
-----------------------------------
($ in millions)
------------------------Actual---------------------------
(a) Consolidated (a)
Owned Forum Partnership Corporate Pro Forma
Communities Partners Communities Operations Consolidated Consolidated
----------- -------- ------------ ---------- ------------ ------------
Total
Revenues $42.3 $8.0 $13.7 $1.6 $65.6 $79.9
Operating
Expenses 27.9 5.8 8.0 0.5 42.2 53.1
General and
Administrative
Expense - - - 3.3 3.3 3.5
Relocation
Costs - - - - - -
EBITDA 14.4 2.2 5.7 (2.2) 20.1 23.3
Gains from Sales
of Cooperative
Memberships - - - 4.2 4.2 4.2
Depreciation and
Amortization(2.1) (0.5) (1.0) - (3.6) (4.7)
Interest
Expense (6.6) (0.8) (2.6) (0.4) (10.4) (12.0)
Minority
Interests - - - (0.2) (0.2) (0.3)
Income
Taxes - - - (2.0) (2.0) (2.1)
Extraordinary
loss, net of
income taxes - - - - - -
Net Income 8.1 8.4
- ----------------
(a) Effective August 1, 1994, Forum Group purchased additional Units in
Forum Partners to exceed a 50% equity ownership interest, and its
operations are consolidated into Forum Group's consolidated
financial statements from that date. Pro forma operating results
are shown as if Forum Partners' results of operations were
consolidated from April 1, 1994.
-18-
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Owned Communities. Total revenues for the three and six months ended
September 30, 1995 increased by $5.1 million (24%) from $21.3 million to
$26.4 million, and by $8.5 million (20%) from $42.3 million to $50.8
million, respectively, as compared to the same period of the previous
year. This increase was primarily attributable to increases in rental
rates, additional ancillary services and the acquisition in August 1994,
January 1995 and May 1995 of three RCs, Tiffany House ("Tiffany"), The
Forum at Fountainview ("Fountainview") and The Forum at the Woodlands
("Woodlands"), respectively. Combined occupancy, excluding Tiffany,
Fountainview and Woodlands, averaged 94.7% at September 30, 1995 compared
to 93.9% at September 30, 1994. Operating expenses for the three and six
months ended September 30, 1995 at the Owned Communities increased by
$3.7 million (26%), from $14.1 million to $17.8 million, and by $6.4
million (23%) from $27.9 million to $34.3 million, respectively, as
compared to the three- and six-month periods ended September 30, 1994.
(General and Administrative expenses ("G&A") for the Owned Communities
were included in operating expenses.) This increase was primarily
attributable to additional ancillary services, normal inflationary
increases and the acquisition of Tiffany, Fountainview and Woodlands.
EBITDA for the three and six months ended September 30, 1995 from the
Owned Communities increased by $.5 million (19%), from $7.2 million to
$8.6 million, and by $1.9 million (15%) from $14.4 million to $16.5
million, respectively, as compared to the same periods ended September
30, 1994.
Consolidated Partnership Communities. Total revenues for the three and
six months ended September 30, 1995 increased by $.5 million (7%), from
$7.0 million to $7.5 million, and by $1.3 million (9%) from $13.7 million
to $15.0 million, respectively, as compared to the same period of the
previous year. This increase was primarily attributable to favorable
changes in occupancy, increased utilization of ancillary healthcare
services and increases in residency fees and charges. Combined occupancy
increased from 93.9% at September 30, 1994 to 94.4% at September 30,
1995. Operating expenses for the Consolidated Partnership Communities
for this three and six months ended September 30, 1995 increased by $.4
million (10%), from $3.9 million to $4.3 million, and by $.7 million (9%)
from $8.0 million to $8.7 million, respectively, as compared to the three
and six months ended September 30, 1994. (G&A for the Owned Communities
are included in operating expenses.) The increase in expenses was
primarily attributable to the increase in occupancy, increased
utilization of ancillary healthcare services and normal inflationary
increases. EBITDA for the Consolidated Partnership Communities for the
three and six months ended September 30, 1995 increased by $.1 million
(3%), from $3.1 million to $3.2 million, and by $.6 million (11%) from
$5.7 million to $6.3 million, respectively, as compared to the three
months ended September 30, 1994.
Pro Forma. On a pro forma basis, assuming that Forum Partners' results
of operations were consolidated for the three and six months ended
September 30, 1994 (rather than from August 1, 1994, the actual date of
consolidation), total revenues for the three and six months ended
September 30, 1995 increased by $7.4 million (17%), from $41.3 million to
$48.7 million, and by $15.3 million (19%) from $79.9 million to $95.2
-19-
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
million, respectively, as compared to the three and six months ended
September 30, 1994. This increase was primarily attributable to
increases in occupancy, rental rates, additional ancillary services and
the acquisition of Tiffany, Fountainview and Woodlands. Operating
expenses for the three and six months ended September 30, 1995 increased
by $6.2 million (23%), from $27.0 million to $33.2 million, and by $11.2
million (21%), from $53.1 million to $64.3 million, as compared to the
same periods of the previous year; G&A for the three and six months ended
September 30, 1995 increased by $1.3 million (76%), from $1.7 million to
$3.0 million and by $2.4 million (69%) from $3.5 million to $5.9 million,
respectively, as compared to the same periods of the previous year. The
increase in operating expenses was primarily attributable to additional
ancillary services, normal inflationary increases and the acquisition of
Tiffany, Fountainview and Woodlands. The increase in G&A was primarily
attributable to the factor described under the caption "General and
Administrative Expenses" below. EBITDA for the three and six months
ended September 30, 1995 decreased and increased by $.4 million (3%),
from $12.6 million to $12.2 million, and by $1.1 million (5%) from $23.3
million to $24.4 million, respectively, as compared to the same periods
of the previous year.
Unconsolidated Entities. Forum Group's equity in the earnings of
unconsolidated entities is reflected as Other income. Changes in Forum
Group's equity in the aggregate net earnings of Forum Partners and GRP
were not material to Forum Group's consolidated results of operations for
the three and six months ended September 30, 1995. Due to the changes in
financial statement presentation regarding Forum Partners (see Note B of
Notes to Condensed Consolidated Financial Statements), the equity
adjustment for that entity is not comparable between fiscal periods.
Consolidated Items. The following is a discussion of certain
consolidated items:
General and Administrative Expenses. For the three and six months ended
September 30, 1995, consolidated G&A increased by $1.3 million (76%),
from $1.7 million to $3.0 million, and by $2.6 million (79%) from $3.3
million to $5.9 million, respectively, compared to the same periods of
the previous year. This increase was primarily attributable to increased
home office staff costs to manage recent and projected growth through
acquisitions and development.
Relocation Costs. During the three and six months ended September 30,
1995, expenses of $.3 million and $.6 million, respectively, were
incurred in conjunction with the relocation of Forum Group's headquarters
from Indianapolis, Indiana to Fairfax, Virginia. Additional relocation
expenses are currently expected to be approximately $1.0 million. The
relocation is expected to benefit the Company as a result of future
growth and development targeted along the East Coast corridor, potential
acquisitions and the ability to attract exceptional talent necessary to
meet the Company's expected growth.
-20-
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Gains From Sale Of Cooperative Memberships. The operating results of
Rancho San Antonio Retirement Housing Corporation ("Rancho San Antonio"),
a cooperative corporation which owns an RC in Cupertino, California, were
included in the consolidated financial statements of Forum Group through
July 31, 1993 because Forum Group owned a majority of the cooperative
memberships. Effective August 1, 1993, due to continued sales of
cooperative memberships, Forum Group no longer owned in excess of 50%,
and accordingly, the financial statements of Rancho San Antonio were no
longer consolidated into Forum Group's financial statements from that
date. Sales of cooperative memberships have totaled $115 million through
September 30, 1995, and profits of these sales are recognized using the
cost recovery method. In August 1994, all of Forum Group's costs were
recovered through sale of memberships, and the investment was reduced to
zero. Remaining membership sales are recognized as gains from sales of
cooperative memberships. Proceeds from future sales of memberships are
estimated to approximate $4.0 million. For the three months ended
September 30, 1995, thirty-one memberships were sold and $10.8 million of
gains were recognized.
Litigation Expenses. Litigation expenses were not material to Forum
Group's results of operations for the three and six months ended
September 30, 1995 and 1994.
Depreciation. For the three and six months ended September 30, 1995,
consolidated depreciation expense increased by $.8 million and $2.1
million, compared to the previous fiscal period. This increase reflects
property additions, the August 1, 1994 consolidation of Forum Partners
for financial statement purposes and the acquisition of Tiffany,
Fountainview and Woodlands.
Interest Expense. Consolidated interest expense increased by $1.8
million, from $5.8 million to $7.6 million, and by $4.2 million from
$10.4 million to $14.6 million, respectively, during the three and six
months ended September 30, 1995, as compared to the same periods of the
previous year. This change was primarily attributable to changes in
average borrowing costs and increased indebtedness incurred to finance
acquisitions.
Minority Interests. There were no changes in the minority interests'
elimination for the three and six months ended September 30, 1995
compared to the same periods in the previous year.
Taxes. Due to the utilization of net operating loss carryforwards,
Forum Group had a $.2 million federal income tax liability at September
30, 1995 related to fiscal year 1996 estimated tax liability. Notes
and other receivables include federal income taxes receivable of $1.2
million at September 30, 1995 related to fiscal year 1995 tax return. As
of March 31, 1995, net operating loss carryforwards for tax purposes were
estimated to be approximately $158.0 million before the application of
certain net operating loss carryforward limitations. As a result of
these limitations, Forum Group expects the utilization of net operating
loss carryforwards will be limited to approximately $33.0 million. These
-21-
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
net operating loss carryforwards will expire in varying amounts through
fiscal year 2009. For financial reporting purposes, any future benefit
of net operating loss carryforwards and net deferred tax assets arising
prior to the reorganization plan (April 2, 1992) will be reported as
additional shareholders' equity. The maximum future tax benefit to be
recognized through shareholders' equity was estimated to be approximately
$30.0 million at March 31, 1995.
Extraordinary Loss. On September 1, 1995, the Company extinguished $106
million of debt prior to its scheduled maturity. In connection with this
transaction, the Company incurred an extraordinary loss of $2.6 million,
net of $.6 million of income tax benefit. The interest rate cap
agreement related to part of the underlying extinguished debt was not
terminated. The difference between the market value of $7.3 million and
the unamortized cost of $5.7 million, net of taxes of $.3 million, was
netted with the extraordinary loss.
Net Income/Loss Per Share. The three and six months ended September 30,
1995 produced net income of $8.7 million ($0.37 per Common Share) and
$10.6 million ($0.45 per Common Share) compared to net income of $6.0
million ($0.26 per Common Share) and $8.1 million ($0.35 per Common
Share) for the comparable periods in 1994.
All per share data are based upon the weighted average number of shares
outstanding for the relevant periods.
Financial Condition
- -------------------
Liquidity And Capital Resources. At September 30, 1995, Forum Group had
cash and cash equivalents of $37.9 million, accounts receivable of $8.9
million, notes and other receivables of $6.2 million, prepaid and other
current assets of $3.5 million, and current liabilities of $97.9 million
(including $56.7 million of indebtedness due within one year). Forum
Group believes that its liquidity and the capital resources available to
it are adequate to meet its foreseeable working capital and strategic
growth requirements. The negative working capital at September 30, 1995
includes approximately $50.3 of debt which is currently due or matures
during May, 1996. As discussed under "Capital Structure" on page 24,
Forum Group believes it has the available cash on hand to extinguish
amounts currently due and adequate debt capacity to extend the $50.3
million. Forum Group is currently evaluating available alternatives with
respect to extinguishing or extending maturing obligations.
Forum Group has adopted a growth-oriented strategic plan which
contemplates the acquisition of businesses and assets as well as
additional capital investment in its existing properties. Forum Group's
acquisition strategy is designed to add additional properties in
strategically located markets, to establish joint ventures to develop or
acquire properties or businesses in the senior housing sector and to
pursue other opportunities relating to senior service, including home
health care and other home or community-based services to the seniors'
market.
-22-
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Forum Group also intends to seek to expand its existing properties
through additional capital investment. Forum Group's expansion strategy
is intended to modify the use of, or add capacity to, existing facilities
without incurring substantial land acquisition and common area build-out
costs, and to take advantage of other existing infrastructure investment
and personnel in place.
There necessarily can be no assurance that additional material
acquisitions or expansions will be completed or, if so, as to the timing
or terms thereof.
On October 31, 1995, Forum Group entered into a binding agreement to
acquire two assisted living and dementia-related senior housing
communities in the Northwestern United States in January, 1996. A third
community in the Northwestern United States currently under construction
will also be acquired in October, 1997, for an amount defined in the
agreement once stabilized occupancy has been established. Management of
these assets will be provided by the seller on a fee basis. The
agreement also provides for participation, on a joint venture basis, for
the construction of between 5 and 10 new communities in the Northwestern
United States and the right to develop the concept nationally.
Management believes that satisfactory sources of capital are available to
meet all funding obligations with respect to this acquisition.
Forum Group has an interest rate cap agreement with a notional amount of
$93.3 million which was not terminated upon refinancing of the underlying
debt in September, 1995. The interest rate cap had a market value of
approximately $6.1 million as of November 1, 1995. Management is
currently evaluating alternatives with respect to this agreement. See
Note E of Notes to Condensed Consolidated Financial Statements included
elsewhere herein for additional information relating to this agreement.
Forum Group is currently a party to a loan facility providing for up to
$100 million of acquisition financing. The unutilized amount of this
facility at November 1, 1995 was $70.1 million. At the option of Forum
Group, each borrowing under the facility may be converted to a ten-year
term loan after 18 months from the date of the borrowing. During the 18-
month period, Forum Group may repay the indebtedness using proceeds from
other financing sources, if any such financing becomes available on more
favorable terms. Absent conversion or refinancing, interest on the
acquisition loan is payable monthly in arrears at LIBOR plus 5.425%
(including service costs and other fees of 2.075%). Forum Group has an
option permitting it to increase the borrowings against the properties
acquired if the debt service coverage computed on a trailing 12-month
basis exceeds certain thresholds, in which event the increased borrowings
could be used to fund Forum Group's growth or for other corporate
purposes. While Forum Group believes that the existing acquisition
facility, together with its other capital resources, are sufficient to
finance its acquisition and capital investment strategy over the
intermediate term, Forum Group is also exploring the possible
modification or replacement of, or supplements to, that facility and
other possible financings and refinancings in order to provide greater
financial flexibility.
-23-
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Capital Structure. Forum Group's total long-term debt was $317 million
as of September 30, 1995, including $123.8 million of debt of
Consolidated Partnership Communities which was non-recourse to Forum
Group, Inc. Of the remaining $193.2 million, $170.1 million was non-
recourse to Forum Group. The current portion of long-term due within one
year at September 30, 1995 was $56.7 million. Of this total,
indebtedness of up to $50.3 million is currently due or matures during
May, 1996. Forum believes it has available cash on hand to extinguish
amounts currently due and adequate debt capacity to extend the $50.3
million. Forum is presently evaluating available alternatives with
respect to extinguishing or extending maturing obligations. Total long-
term indebtedness excludes $4.2 million of GRP debt, $0.5 million of
which is recourse to Forum Group, Inc.
On September 1, 1995, the Forum Pool Borrowers obtained a non-recourse
mortgage loan totaling $124.7 million. The loan is secured by first and
second liens on the Forum Pool Properties. The loan has cross-default and
cross-collateral provisions. The proceeds were used to repay existing
indebtedness of $106.0 million, loan closing costs, funding of the initial
capital reserve account and general corporate purposes. See Note D to the
Notes to Condensed Consolidated Financial Statements.
Pursuant to a separate credit agreement, during the period from September
1, 1995 to September 1, 1999, Forum Group may borrow up to $50 million to
fund a portion of the expansions to the properties collaterallizing the
above-described mortgage loan. See Note D to the Notes to Condensed
Consolidated Financial Statements.
Forum Group will continue to monitor conditions in the bank lending and
capital markets and, if appropriate in light of then-current market
conditions, Forum Group's then-existing capital structure and
requirements, Forum Group's growth strategy and other factors determined
to be relevant, may enter into one or more capital arrangements. Such
arrangements could include one or more issuances of indebtedness or other
financings. Although Forum Group intends to actively consider the
financing alternatives that may be available to it, there can be no
assurance that any such transactions will be completed or, if so, as to
the timing or terms thereof.
Cash Flow. Operating activities for the six months ended September 30,
1995 provided $21.1 million of cash compared to $12.8 million of cash
provided by operating activities during the same period of the previous
year, due principally to improved operating results.
Investing activities used $47.7 million of cash during the six months
ended September 30, 1995, compared to $1.3 million of cash provided by
investing activities during the same period of the previous year, due
principally to the purchase of two non-performing first mortgage loans on
RCs, acquisition of an RC and other businesses and additions to property
and equipment, including construction in progress.
-24-
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
Financing activities provided $34.3 million of cash during the six months
ended September 30, 1995, compared to $1.8 million of cash provided by
financing activities during the same period of the previous year, due
principally to the proceeds from long-term debt used to finance
acquisition of an RC and the purchase of two non-performing first
mortgage loans.
-25-
PART II. OTHER INFORMATION
--------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
September 30, 1995
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
On May 7, 1992, Charles S. Maddock, a resident of Stonegates, a
condominium RC in Greenville, Delaware, instituted an action against
Greenville Retirement Community, L.P. ("GRP"), the developer and managing
agent of, and owner of the service units (i.e., nursing, kitchen and
dining facilities) at Stonegates, in the Court of Chancery of the State
of Delaware in and for New Castle County (the "State Court Action").
Forum Group is the sole general partner of, and the owner of a 50%
beneficial interest in, GRP. Forum Group is also the operator and
manager of Stonegates pursuant to an operation and management agreement
with GRP under which, among other things, GRP delegated to Forum Group
all of GRP's duties and responsibilities as managing agent of Stonegates.
Mr. Maddock alleges that certain of the organizational documents of
Stonegates violate state law and that GRP and Forum Group have breached
their responsibilities under such documents. Mr. Maddock sought various
forms of injunctive and declaratory relief and damages. On August 21,
1992, Forum Group instituted an action (the "Bankruptcy Court Action") in
the bankruptcy court (the "Bankruptcy Court") with jurisdiction over
Forum Group's reorganization plan (the "Reorganization Plan") alleging
that the relief requested in the State Court Action effectively asserts a
claim against Forum Group, the assertion of which is barred under the
terms of the Reorganization Plan, and requesting injunctive relief
preventing the further prosecution of the State Court Action. On
December 13, 1994, Mr. Maddock and Forum Group entered a stipulation in
the Bankruptcy Court providing that Mr. Maddock will be enjoined from
asserting claims based upon acts or omissions of Forum Group or GRP
occurring prior to April 2, 1992 (the effective date of the
Reorganization Plan). The stipulation does not bar the assertion of a
claim arising after April 2, 1992 from either a new cause of action or a
new breach of any continuing agreement. On August 9, 1995 Mr. Maddock
was granted a motion to amend his complaint in the State Court Action.
This amended complaint (i) asserts claims only with respect to matters
accruing after the effective date of the Reorganization Plan, (ii) adds
Forum Group as a defendant, and (iii) adds a new claim asserting that GRP
and Forum Group conspired to violate federal anti-trust laws. Forum
Group believes that there are substantial defenses to Mr. Maddock's
claims; however, there necessarily can be no assurance as to the outcome
of these proceedings.
-26-
PART II. OTHER INFORMATION
--------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
September 30, 1995
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
(a) The annual meeting of shareholders of Forum Group was held on
September 13, 1995.
(b) The shareholders voted on the following items at the meeting:
(i) The shareholders approved the election of directors to serve
until the 1996 annual meeting of shareholders of Forum Group,
with the votes for such election as follows:
Nominee Votes For Votes Withheld
Laurence M. Berg 21,022,190 13,710
Peter P. Copses 21,022,190 13,710
Daniel A. Decker 21,022,184 -0-
James E. Eden 21,022,191 13,709
Mark L. Pacala 21,022,184 13,716
Kurt C. Read 21,022,190 13,710
Antony P. Ressler 21,022,190 13,710
Robert A. Whitman 21,022,191 13,709
Margaret A. Wylde 21,022,191 13,709
(ii) The shareholders ratified the appointment of KPMG Peat Marwick
LLP as independent accountants to audit the consolidated
financial statements of Forum Group for the year ended March
31, 1996. The votes for ratification were 21,024,570, the
votes against ratification were 2,829, the votes abstained were
8,501 and there were no broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) Exhibits:
---------
10.1 Loan Agreement, dated as of September 1, 1995, by and among
FGI Financing I Corporation, Forum Ohio Healthcare, Inc. and
Nomura Asset Capital Corporation.
10.2 Credit Agreement, dated as of September 1, 1995, by and
between Forum Group, Inc. and Nomura Asset Capital
Corporation.
99.1 Item 3 and Note 5 of the Notes to Consolidated Financial
Statements contained in Item 8 of Part I of Forum Group,
Inc.'s Annual Report on Form 10-K for the year ended March
31, 1995 (incorporated by reference thereto).
99.2 Item 1 of Part II of Forum Group, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995 (incorporated by
reference thereto).
(b) Reports on Form 8-K: NONE
--------------------
-27-
PART II. OTHER INFORMATION
--------------------------
FORUM GROUP, INC. AND SUBSIDIARIES
September 30, 1995
Items 2, 3 and 5 have been omitted from this Part II as inapplicable or
not required under the applicable instructions.
-28-
SIGNATURE
---------
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.
FORUM GROUP, INC.
Date: November 14, 1995 By: /s/ Richard A. Huber
--------------------------------
Richard A. Huber
Vice President-Operations Finance
-29-
EXHIBIT INDEX
-------------
DESCRIPTION
Exhibit No.:
------------
10.1 Loan Agreement, dated as of September 1, 1995, by and among
FGI Financing I Corporation, Forum Ohio Healthcare, Inc. and
Nomura Asset Capital Corporation.
10.2 Credit Agreement, dated as of September 1, 1995, by and
between Forum Group, Inc. and Nomura Asset Capital
Corporation.
99.1 Item 3 and Note 5 of the Notes to Consolidated Financial
Statements contained in Item 8 of Part I of Forum Group,
Inc.'s Annual Report on Form 10-K for the year ended March
31, 1995 (incorporated by reference thereto).
99.2 Item 1 of Part II of Forum Group, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995 (incorporated by
reference thereto).
-30-