Exhibit 99.1
MANORCARE
News Release
FOR IMMEDIATE RELEASE
CONTACT:
Geoffrey G. Meyers, Chief Financial Officer
419/252-5545
e-mail: gmeyers@hcr-manorcare.com
MANOR CARE REPORTS THIRD-QUARTER
EARNINGS PER SHARE OF 35 CENTS
BOARD DECLARES QUARTERLY DIVIDEND
TOLEDO, Ohio, October 24, 2003 -- Manor Care, Inc. (NYSE:HCR) today
announced third-quarter net income of $31.0 million, or 35 cents per fully
diluted share. Revenues in the 2003 third quarter were $761 million, an increase
of $28 million from the 2002 third quarter. For the nine months, revenues were
$2.24 billion, compared with $2.18 billion for the first nine months of 2002.
Also, Manor Care's Board of Directors declared 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.
Earnings during the quarter and first nine months were affected by
unusually high costs related to the expense of stock appreciation rights, which
have been awarded annually the past three years to more than 1,500 non-executive
employees based on the company's performance. Each month the change in value of
these rights, based on stock price appreciation, is expensed on the income
statement. During the third quarter, this expense was about 3 cents per share
higher than what has been usual prior to this year. In the third quarter, this
resulted from a 20 percent increase in the market price of the company's stock,
which followed a 30 percent increase in the market price in the 2003 second
quarter.
Paul A. Ormond, Manor Care chairman, president and CEO, said, "Increasing
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Manor Care Reports Earnings, Page 2
revenues by improving census has been one of our primary strategies for growth.
We have developed and implemented a wide variety of unique programs to build
occupancy and improve quality in our skilled nursing centers, with particular
emphasis on our intensive rehabilitation capabilities to serve the more complex
needs of Medicare and managed care patients. During the 2003 third quarter, this
led to our highest percentage of occupancy in our skilled centers in five years,
and a record number of skilled nursing and Medicare patients. Complementing this
growth was the continued strength in our home health care and hospice business
which grew 16 percent from the 2002 third quarter, with hospice accounting for
the majority of this growth.
"Our operating performance once again led to substantial cash generation.
We have now generated $255 million of cash from operations in 2003 for
reinvesting in our businesses, repurchasing shares and paying out our first
dividend. Stock repurchases during the quarter took our total for the year to
$139 million, which amounts to more than 7 percent of our shares outstanding.
Dividend payments in August totaled $11 million. We completed three nursing
center expansions during the quarter, started another, and now have 14
expansions under way. In addition, we broke ground for a new 120-bed nursing
center, the second currently under construction. We also opened a new home
health care and hospice office and three rehabilitation therapy clinics.
"Moderating cost trends and increasing productivity have contributed to
the strong results," Mr. Ormond continued. "Wage rate increases remain below 5
percent, while the growth we have achieved in our skilled centers and home
health care and hospice business is leading to economies that fuel productivity
gains. A key part of managing costs and enhancing productivity is recruiting,
training and retaining quality staff, and we have made this a central focus for
each of our locations."
General liability is still a serious industry-wide cost issue, but the
company's claims activity remains similar with the past couple of years. The
health care industry is making progress in state legislatures and at the
national level to enact tort reform by raising awareness of the severe problems
that have been created by abuses in the
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legal system. On September 1, strong tort reform legislation capping medical
malpractice awards became effective in Texas and later in the month was affirmed
by an amendment to the Texas state constitution. Florida passed legislation that
is another step toward more equitably addressing patient liability issues in
that state. Other states and the Bush Administration nationally are working
along similar paths to help ensure that access to quality health care is not
jeopardized and that costs are more in line with appropriate compensation.
On October 1, the company began to benefit from adjustments to its
Medicare reimbursement rates. For skilled nursing centers, there was a 3 percent
market basket adjustment increase and a 3.26 percent increase to correct prior
years' inflation errors. This correction offsets approximately one-third of the
loss incurred when PPS rates were reduced about 10 percent in October 2002. In
addition, this month our hospice business received a 3.4 percent market basket
adjustment increase, while home health received a 3.3 percent increase. Medicaid
rates in the third quarter were 4 percent higher than in the prior year, despite
the budgetary pressures that most states are still experiencing.
"We have three quarters of operational strength under our belts, and are
expecting our fourth quarter to expand on these successes," Mr. Ormond said. "A
cornerstone of this success is improving on what we do every day. We are a
`24/7' service organization, and we are committed to ensuring our patients,
residents and clients receive the care they need and deserve every day. Meeting
this commitment will continue to drive our revenue and earnings growth.
Challenges remain in our environment, but we believe our operational strengths,
the continued focus on our proven growth strategies, the boost in Medicare
reimbursement and the headway being made on tort reform will all lead to
improved results in the fourth quarter and beyond."
At 9:00 a.m. Eastern Time today, Manor Care will hold a conference call to
discuss the company's results and performance for the 2003 third quarter. The
toll-free number for the call is 1-888-634-8435. Callers to this number will be
able to listen to the company's discussion and have the opportunity to ask
questions. The call will also be webcast live in the Investor Information
section of Manor Care's website
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www.hcr-manorcare.com. For those unable to listen to the call live, a taped
rebroadcast will be available beginning two hours after completion of the live
call. To access the rebroadcast, dial 1-800-642-1687. The conference ID number
is 3067599. A recording of the call will also be available on Manor Care's
website.
Manor Care, Inc., through its operating group HCR Manor Care, is the
leading owner and operator of long-term care centers in the United States. The
company's 61,000 employees provide high-quality care for patients, residents and
clients through a network of more than 500 long-term care centers, assisted
living facilities, outpatient rehabilitation clinics, and home health care and
hospice offices. Alliances and other ventures supply high-quality pharmaceutical
products and management services for professional organizations. The company
operates primarily under the respected Heartland, ManorCare and Arden Courts
names. Manor Care is committed to being the preeminent care provider in the
industry. Shares are traded on the New York Stock Exchange under the ticker
symbol HCR.
Statements contained in this press release that are not historical
facts may be forward-looking statements within the meaning of federal law. Such
forward-looking statements reflect management's beliefs and assumptions and are
based on information currently available to management. The forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause actual results, performance or achievements of the company to differ
materially from those expressed or implied in such statements. Such factors are
identified in the public filings made by the company with the Securities and
Exchange Commission and include changes in the health care industry because of
political and economic influences, changes in regulations governing the
industry, changes in reimbursement levels including those under the Medicare and
Medicaid programs, changes in the competitive marketplace, changes in current
trends in the cost and volume of general and professional liability claims, and
our ability to complete the previously announced settlement with the Department
of Justice. There can be no assurance that such factors or other factors will
not affect the accuracy of such forward-looking statements.
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Manor Care Reports Earnings, page 5
Manor Care, Inc.
Consolidated Statements of Income (unaudited)
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Three months ended September 30, Nine months ended September 30,
2003 2002 2003 2002
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(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
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706,942 665,823 2,092,336 2,008,200
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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
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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
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Income before cumulative effect 31,039 37,063 81,086 108,810
Cumulative effect of change in accounting for goodwill (1,314)
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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)
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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
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Manor Care, Inc.
Condensed Consolidated Balance Sheets (unaudited)
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September 30, December 31,
2003 2002
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(In thousands)
Cash $ 83,631 $ 30,554
Other current assets 474,419 480,263
Property and equipment 1,519,345 1,534,339
Other 269,375 261,776
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Total assets $2,346,770 $2,306,932
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Current liabilities $ 398,742 $ 641,864
Long-term debt 661,808 373,112
Other long-term liabilities 334,951 275,909
Shareholders' equity 951,269 1,016,047
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Total liabilities and shareholders' equity $2,346,770 $2,306,932
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Shares outstanding 88,972 95,052
YTD shares repurchased $139.3 million 6,766
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Selected Statistics (unaudited)
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Quarter ended September 30,
2003 2002
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Occupancy 88% 87%
Revenue allocation:
Private and other 35% 36%
Medicare 32% 31%
Medicaid 33% 33%
Quality Mix 67% 67%
Per Diems:
Private and other (excluding assisted living) $190.34 $182.16
Private and other (assisted living) $104.72 $100.39
Medicare $311.98 $335.42
Medicaid $131.04 $125.93
Number of Facilities:
Skilled nursing facilities 293 296
Assisted living facilities:
Springhouses 16 16
Arden Courts 54 54
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Total 70 70
== ==
Number of Beds:
Skilled nursing facilities 40,815 41,115
Assisted living facilities 5,459 5,494
Outpatient therapy clinics 94 93
Home health offices 89 88
Skilled nursing facility wage rate increases
third quarter 2003 to 2002 4%
Cash flow from operations (in millions): $ 61 $ 94
Capital Expenditures (in millions):
Maintenance and renovations $ 22 $ 22
New construction $ 6 $ 3
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