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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q/A
 Amendment No. 1 to Form 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2005
 OR
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 Commission file number: 1-10858
 Manor Care, Inc.
  Delaware
    
    34-1687107(State or other jurisdiction of
    
    (IRS Employerincorporation 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
 þ o
 þ o
 o þ




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Manor Care, Inc.
 Form 10-Q/A
Explanatory Note
       2




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Manor Care, Inc.
  
 Form 10-Q/A
Table of Contents
 PageNumberPart I. Financial InformationItem 1. Financial Statements (Restated)Consolidated Balance Sheets -
March 31, 2005 and December 31, 2004
    
    
    4Consolidated Statements of Income -
Three months ended March 31, 2005 and 2004
    
    
    5Consolidated Statements of Cash Flows -
Three months ended March 31, 2005 and 2004
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of
Financial Condition
and Results of Operations (Restated)
    
    
    15Item 4. Controls and Procedures
    
    
    19Part II. Other InformationItem 6. Exhibits
    
    
    19Signatures
    
    
    20Exhibit Index
    
    
    21EX-31.1 Chief Executive Officer CertificationEX-31.2 Chief Financial Officer CertificationEX-32.1 CEO Certification Pursuant to 18 U.S.C. Section 13EX-32.2 CFO Certification Pursuant to 18 U.S.C. Section 13
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Part I. Financial Information
 
 Financial Statements.
 Manor Care, Inc.
 
  March 31,2005
    
    
    December 31,Restated
    
    
    2004(Unaudited)
    
    
    (Note 1)(In thousands, except per share data)AssetsCurrent assets:Cash and cash equivalents
    
    $
    43,521
    
    
    $
    32,915Receivables, less allowances for doubtful
accounts of $56,057 and $54,532, respectively
    
    
    522,509
    
    
    
    425,278Prepaid expenses and other assets
    
    
    24,777
    
    
    
    24,762Deferred income taxes
    
    
    59,804
    
    
    
    57,412Total current assets
    
    
    650,611
    
    
    
    540,367Property and equipment, net of accumulated
depreciation of $792,542 and $768,915, respectively
    
    
    1,492,593
    
    
    
    1,495,152Goodwill
    
    
    93,007
    
    
    
    92,672Intangible assets, net of amortization of $4,665 and $4,499, respectively
    
    
    11,111
    
    
    
    9,099Other assets
    
    
    198,094
    
    
    
    203,408Total assets
    
    $
    2,445,416
    
    
    $
    2,340,698Liabilities And Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    106,735
    
    
    $
    102,178Employee compensation and benefits
    
    
    136,413
    
    
    
    139,900Accrued insurance liabilities
    
    
    100,534
    
    
    
    102,973Income tax payable
    
    
    15,342
    
    
    
    4,710Other accrued liabilities
    
    
    110,892
    
    
    
    49,992Long-term debt due within one year
    
    
    2,467
    
    
    
    2,501Total current liabilities
    
    
    472,383
    
    
    
    402,254Long-term debt
    
    
    552,193
    
    
    
    555,275Deferred income taxes
    
    
    136,474
    
    
    
    134,518Other liabilities
    
    
    267,382
    
    
    
    264,492Shareholders equity:Preferred stock, $.01 par value, 5 million shares authorizedCommon stock, $.01 par value, 300 million shares authorized,
111.0 million shares issued
    
    
    1,110
    
    
    
    1,110Capital in excess of par value
    
    
    365,887
    
    
    
    366,649Retained earnings
    
    
    1,235,929
    
    
    
    1,208,493Accumulated other comprehensive loss
    
    
    (1,218
    )
    
    
    (1,227
    )1,601,708
    
    
    
    1,575,025Less treasury stock, at cost (24.6 and 25.0 million shares, respectively)
    
    
    (584,724
    )
    
    
    (590,866
    )Total shareholders equity
    
    
    1,016,984
    
    
    
    984,159Total liabilities and shareholders equity
    
    $
    2,445,416
    
    
    $
    2,340,698
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Manor Care, Inc.
 
 
 Three Months Ended March 31,2005Restated
    
    
    2004(In thousands, except per share amounts)Revenues
    
    $
    879,202
    
    
    $
    797,338Expenses:Operating
    
    
    734,150
    
    
    
    659,358General and administrative
    
    
    36,266
    
    
    
    34,791Depreciation and amortization
    
    
    33,447
    
    
    
    31,747803,863
    
    
    
    725,896Income before other income (expenses)
and income taxes
    
    
    75,339
    
    
    
    71,442Other income (expenses):Interest expense
    
    
    (10,116
    )
    
    
    (10,719
    )Gain (loss) on sale of assets
    
    
    (454
    )
    
    
    2,405Equity in earnings of affiliated companies
    
    
    1,368
    
    
    
    2,053Interest income and other
    
    
    359
    
    
    
    563Total other expenses, net
    
    
    (8,843
    )
    
    
    (5,698
    )Income before income taxes
    
    
    66,496
    
    
    
    65,744Income taxes
    
    
    26,133
    
    
    
    24,654Net income
    
    $
    40,363
    
    
    $
    41,090Earnings per share:Basic
    
    $
    .47
    
    
    $
    .47Diluted
    
    $
    .46
    
    
    $
    .45Weighted-average shares:Basic
    
    
    86,169
    
    
    
    88,195Diluted
    
    
    87,720
    
    
    
    90,533Cash dividends declared per common share
    
    $
    .15
    
    
    $
    .14
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Manor Care, Inc.
 
 
 Three Months Ended March 31,2005Restated
    
    
    2004(In thousands)Operating ActivitiesNet income
    
    $
    40,363
    
    
    $
    41,090Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    33,447
    
    
    
    31,747Restricted stock compensation
    
    
    745
    
    
    
    391Provision for bad debts
    
    
    8,515
    
    
    
    6,634Deferred income taxes
    
    
    (436
    )
    
    
    (1,302
    )Net (gain) loss on sale of assets
    
    
    454
    
    
    
    (2,405
    )Equity in earnings of affiliated companies
    
    
    (1,368
    )
    
    
    (2,053
    )Changes in assets and liabilities, excluding sold facilities and acquisitions:Receivables
    
    
    (105,813
    )
    
    
    (14,890
    )Prepaid expenses and other assets
    
    
    3,283
    
    
    
    6,628Liabilities
    
    
    71,424
    
    
    
    43,617Total adjustments
    
    
    10,251
    
    
    
    68,367Net cash provided by operating activities
    
    
    50,614
    
    
    
    109,457Investing ActivitiesInvestment in property and equipment
    
    
    (29,320
    )
    
    
    (61,454
    )Investment in systems development
    
    
    (748
    )
    
    
    (980
    )Proceeds from sale of assets
    
    
    
    
    
    
    17,107Net cash used in investing activities
    
    
    (30,068
    )
    
    
    (45,327
    )Financing ActivitiesPrincipal payments of long-term debt
    
    
    (487
    )
    
    
    (77
    )Purchase of common stock for treasury
    
    
    (1,755
    )
    
    
    (24,121
    )Dividends paid
    
    
    (12,927
    )
    
    
    (12,517
    )Proceeds from exercise of stock options
    
    
    5,229
    
    
    
    12,853Net cash used in financing activities
    
    
    (9,940
    )
    
    
    (23,862
    )Net increase in cash and cash equivalents
    
    
    10,606
    
    
    
    40,268Cash and cash equivalents at beginning of period
    
    
    32,915
    
    
    
    86,251Cash and cash equivalents at end of period
    
    $
    43,521
    
    
    $
    126,519
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Manor Care, Inc.
 
 
 Note 1  Accounting Policies
 Basis of Presentation
    Comprehensive Income
  Insurance Liabilities
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Restricted Stock Accounting
  Stock-Based Compensation
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Three months ended March 31,2005
    
    
    2004(In thousands, except earnings per share)Net income  as reported
    
    $
    40,363
    
    
    $
    41,090Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards, net of
related tax effects
    
    
    (8,001
    )
    
    
    (1,623
    )Net income  pro forma
    
    $
    32,362
    
    
    $
    39,467Earnings per share  as reported:Basic
    
    $
    .47
    
    
    $
    .47Diluted
    
    $
    .46
    
    
    $
    .45Earnings per share  pro forma:Basic
    
    $
    .38
    
    
    $
    .45Diluted
    
    $
    .37
    
    
    $
    .43
 New Accounting Standard
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Note 2  Revenues
  Three months ended March 31,2005
    
    
    2004(In thousands)Skilled nursing and assisted living services
    
    $
    749,468
    
    
    $
    676,562Hospice and home health services
    
    
    95,331
    
    
    
    92,093Rehabilitation
services

(excludes intercompany revenues)
    
    
    24,796
    
    
    
    21,824Other services
    
    
    9,607
    
    
    
    6,859$
    879,202
    
    
    $
    797,338
 Note 3  Contingencies
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Note 4  Earnings Per Share
  Three months ended March 31,2005
    
    
    2004(In thousands, except earnings per share)Numerator:Numerator for basic EPS  net income
    
    $
    40,363
    
    
    $
    41,090After-tax amount of interest expense on
Convertible Senior Notes (Old Notes)
    
    
    26
    
    
    
    27Numerator for diluted EPS
    
    $
    40,389
    
    
    $
    41,117Denominator:Denominator for basic EPS  weighted-average shares
    
    
    86,169
    
    
    
    88,195Effect of dilutive securities:Stock options
    
    
    1,045
    
    
    
    1,337Non-vested restricted stock
    
    
    
    
    
    
    459Convertible Senior Notes
    
    
    506
    
    
    
    542Denominator for diluted EPS 
adjusted for weighted-average
shares and assumed conversions
    
    
    87,720
    
    
    
    90,533EPS:Basic
    
    $
    .47
    
    
    $
    .47Diluted
    
    $
    .46
    
    
    $
    .45
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Note 5  Employee Benefit Plans
  Three months ended March 31,2005
    
    
    2004(In thousands)Service cost
    
    $
    429
    
    
    $
    413Interest cost
    
    
    990
    
    
    
    1,039Expected return on plan assets
    
    
    (1,183
    )
    
    
    (1,226
    )Amortization of unrecognized transition asset
    
    
    (12
    )
    
    
    (12
    )Amortization of prior service cost
    
    
    490
    
    
    
    490Amortization of net loss
    
    
    235
    
    
    
    211Net pension cost
    
    $
    949
    
    
    $
    915
 Note 6  Shareholder Rights Plan
  Note 7  Segment Information
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Long-Term
    
    
    Hospice andCare
    
    
    Home Health
    
    
    Other
    
    
    Total(In thousands)Three months ended March 31, 2005Revenues from external customers
    
    $
    749,468
    
    
    $
    95,331
    
    
    $
    34,403
    
    
    $
    879,202Intercompany revenues
    
    
    
    
    
    
    
    
    
    
    19,649
    
    
    
    19,649Depreciation and amortization
    
    
    31,709
    
    
    
    773
    
    
    
    965
    
    
    
    33,447Operating margin
    
    
    129,513
    
    
    
    12,451
    
    
    
    3,088
    
    
    
    145,052Three months ended March 31, 2004Revenues from external customers
    
    $
    676,562
    
    
    $
    92,093
    
    
    $
    28,683
    
    
    $
    797,338Intercompany revenues
    
    
    
    
    
    
    
    
    
    
    16,996
    
    
    
    16,996Depreciation and amortization
    
    
    30,039
    
    
    
    771
    
    
    
    937
    
    
    
    31,747Operating margin
    
    
    117,443
    
    
    
    16,040
    
    
    
    4,497
    
    
    
    137,980
 Note 8  Restatement of Previously Issued Financial Statements
   March 31, 2005PreviouslyReported
    
    
    Restated(In thousands)Current liabilities:Income tax payable
    
    $
    15,405
    
    
    $
    15,342Long-term liabilities:Deferred income taxes
    
    
    127,840
    
    
    
    136,474Shareholders Equity:Capital in excess of par value
    
    
    383,600
    
    
    
    365,887Retained earnings
    
    
    1,226,787
    
    
    
    1,235,929Total shareholders equity
    
    
    1,025,555
    
    
    
    1,016,984
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Three months endedMarch 31, 2005PreviouslyReported
    
    
    Restated(In thousands, except per share amounts)Expenses:General and administrative
    
    $
    53,979
    
    
    $
    36,266Income before other income (expenses) and
income taxes
    
    
    57,626
    
    
    
    75,339Income before income taxes
    
    
    48,783
    
    
    
    66,496Income taxes
    
    
    17,562
    
    
    
    26,133Net income
    
    
    31,221
    
    
    
    40,363Earnings per share:Basic
    
    $
    .36
    
    
    $
    .47Diluted
    
    $
    .36
    
    
    $
    .46
  Three months endedMarch 31, 2005PreviouslyReported
    
    
    Restated(In thousands)Operating activities:Net income
    
    $
    31,221
    
    
    $
    40,363Restricted stock compensation
    
    
    18,458
    
    
    
    745Deferred income taxes
    
    
    (9,070
    )
    
    
    (436
    )Liabilities
    
    
    71,487
    
    
    
    71,424Total adjustments
    
    
    19,393
    
    
    
    10,251
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Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Critical Accounting Policies
 General and Professional Liability.
 Workers Compensation Liability.
 Results of Operations 
 Quarter Ended March 31, 2005 Compared with Quarter Ended March 31, 2004
 Revenues.
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First Quarter2005
    
    
    2004
    
    
    IncreaseMedicare
    
    $
    352.50
    
    
    $
    333.37
    
    
    
    6
    %Medicaid
    
    $
    146.10
    
    
    $
    133.22
    
    
    
    10
    %Private and other (skilled only)
    
    $
    211.59
    
    
    $
    197.07
    
    
    
    7
    %
    Operating Expenses.
  16




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Depreciation and Amortization.
 Interest Expense.
 Gain on Sale of Assets.
 Income Taxes.
 Financial Condition  March 31, 2005 and December 31, 2004
  Liquidity and Capital Resources
 Cash Flows.
 Investing Activities.
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Debt Agreement.
 Stock Purchase.
 Cash Dividends.
  Cautionary Statement Concerning Forward-Looking Statements
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Controls and Procedures
  
 Part II. Other Information
 
 Exhibits.
 S-K Item601 No.31.1
    
    Chief Executive Officer Certification31.2
    
    Chief Financial Officer Certification32.1
    
    Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    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
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Signatures
  Manor Care, Inc.(Registrant)Date September 27, 2005
    
    By
    
    /s/ Geoffrey G. MeyersGeoffrey G. Meyers, Executive Vice President
and Chief Financial Officer
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Exhibit Index
 Exhibit31.1
    
    Chief Executive Officer Certification31.2
    
    Chief Financial Officer Certification32.1
    
    Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    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
 21