Manor Care Inc., a health care management firm, yesterday reported that net income for the quarter ended Aug. 31 dropped to $1.25 million (52 cents per share) from $3.94 million ($1.60) in the same quarter last year.

Manor Care attributed the decline to the fact that first quarter earnings in 1979 included an extraordinary gain of $3.02 million ($1.23) from Manor Care's sale of its investment in The Hillhaven Corp. on July 31, 1979.

Net operating income in the first quarter of 1980 included equity earnings since Aug. 25 of $36,000 (2 cents) from Manor Care's purchase of stock in Quality Inns International Inc. Net operating income for the same quarter in 1979 included $425,000 ($1.70) from equity earnings of The Hillhaven Corp.

Revenues for the first quarter increased 14 percent, climbing from $12.56 million last year to $14.31 million in the first quarter of 1980.

Manor Care President J. Calvin Kaylor said that record first quarter operating results reflected strong occupancy in the company's 23 nursing homes located in nine states, a 21 percent improvement in occupancy in a 120-bed hospital in Texas and improvement in the operating income from the company's Bowling Green Inns alcoholic treatment division.

Schwartz Brothers Inc., a wholesaler and retailer of music merchandise, reported a loss of $255,466 on sales of $6.58 million in the quarter ended July 31. The loss compares with a loss in the same quarter last year of $187,611 on sales of $6.72 million.

The Lanham-based company blamed the loss on continuing weakness in the economy and in the record industry. The company plans to open additional Harmony Hut stores in the third quarter, which will bring the total to 24 stores in operation from Virginia to New Jersey. The company also has opened new headquarters and a distribution center in Lanham.

The two events will position Schwartz Brothers to take advantage of expected improvements in business, company officials said.