Manor Care profits up 31% in 1st period

September 20, 1994|By John E. Woodruff | John E. Woodruff,Sun Staff Writer

Manor Care Inc., the Silver Spring-based nursing home and hotel-motel company, said yesterday that its net income in its first quarter increased 31 percent due to stronger occupancy rates and rapid expansion of its Vitalink Pharmacy Services.

Revenues for the quarter ended Aug. 31 were $321.4 million, up 12.9 percent from $284.6 million in the same quarter a year ago.

Net income was $24.4 million, up from $18.6 million in the comparable period last year, before gains in the first quarter of 1993 on facility sales and the impact of changes in the tax rate.

The company declared a dividend of 22 cent a share, the same as a year ago.

The firm's stock closed at $27.50 yesterday, down 12.5 cents from Friday.

"Manor Care stock had run up 13 percent since Aug. 15 in anticipation of this strong report, and some people may have been taking profits today when the quarter turned out just as expected," said Scott Mackesy, an analyst for Dean Witter Reynolds.

The stock has appreciated more than 35 percent in the past 12 months. Some Wall Street analysts said yesterday they rate it a ** "hold" or an "accumulate" rather than a "buy," because they expect it to go on growing strongly but feel its consistent recent growth has made it popular and fully valued.

"This is a company that has generated most of its growth internally rather than through mergers and acquisitions, and we look for continued strong growth for the foreseeable future," Mr. Mackesy said.

The company "is concentrated in locations that give it a very high percentage of private-pay patients, who pay much higher rates than Medicare and Medicaid, and a very low percentage of Medicaid, who pay the lowest rates, and that strategy gives it a powerful revenue base for its moves into newer fields, such as rehabilitation, Alzheimer's care, and home care, as well as to expand its drug business," said Kathleen F. Lamb, a bond analyst who follows the firm for BT Securities.

Vitalink, in which Manor has an 82 percent stake and which a few years ago served mainly Manor Care patients, has aggressively expanded beyond company-owned facilities and now does 63 percent of its business in places outside Manor Care's own system, Mr. Mackesy said.

The company's hotel and motel operations, Choice Hotels International (formerly Quality Inns), contribute about 20 percent revenues and are growing mainly by buying distressed properties and turning them around with rigorous management, Mr. Mackesy said.

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