-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BcMLxzaseZZjNjeh6Jic6Q6DQ1KKDVjLKlkYqMp81yR82Is62Mc5Vf2xCk0FlCMX VIwSTf8J+zR/aeUOJ/xLbw== 0000898430-98-002040.txt : 19980519 0000898430-98-002040.hdr.sgml : 19980519 ACCESSION NUMBER: 0000898430-98-002040 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19980518 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RENAL TREATMENT CENTERS INC /DE/ CENTRAL INDEX KEY: 0000899169 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 232518331 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-21398 FILM NUMBER: 98627161 BUSINESS ADDRESS: STREET 1: 1180 WEST SWEDESFORD RD STREET 2: BLDG 2, STE 300 CITY: BERWYN STATE: PA ZIP: 19312 BUSINESS PHONE: 6106444796 MAIL ADDRESS: STREET 1: 1180 WEST SWEDESFORD ROAD BLDG 2 STREET 2: SUITE 300 CITY: BERWYN STATE: PA ZIP: 19312 10-Q/A 1 FORM 10-Q/A FORM 10-Q/A Amendment No. 1 SECURITIES AND EXCHANGE COMMISSION (Mark One) Washington, D.C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 1997 ----------------------------- ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ COMMISSION FILE NUMBER 1-14142 Renal Treatment Centers, Inc. - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 23-2518331 - -------------------------------------- ---------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1180 W. Swedesford Road Building 2, Suite 300 Berwyn, PA 19312 - -------------------------------------- ---------------------------------- (Address of principal executive offices) (Zip code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 610-644-4796 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 THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE: Class OUTSTANDING AT NOVEMBER 10, 1997 ----- ---------------------------------------- Common Stock, Par Value $.01 24,991,807 shares INTRODUCTORY STATEMENT Renal Treatment Centers, Inc. ("RTC") was acquired by Total Renal Care Holdings, Inc. ("TRCH") on February 27, 1998. On April 1, 1998, TRCH announced (i) that it had undertaken a detailed review of RTC's accounts receivable and other balance sheet accounts in connection with the completion of the audit of RTC's financial statements for the fiscal year ended December 31, 1997, and (ii) that as a result of such review, it expected to recognize between $25 million and $30 million of non-cash charges related to prior periods which would require a revision of RTC's previously announced results of operations. On April 30, 1998, TRCH announced that RTC might be required to correct previously audited financial statements. The analysis of RTC's financial statements was completed on May 15, 1998. In order to correct certain errors discovered through such analysis, TRCH has determined to (i) restate RTC's financial statements for the fiscal year ended December 31, 1996, (ii) revise RTC's financial statements for the quarterly periods ended March 31, 1997, June 30, 1997 and September 30, 1997 and (iii) revise RTC's previously announced results of operations for the fiscal quarters ended March 31, 1996 and 1997, June 30, 1996 and 1997, September 30, 1996 and 1997 and December 31, 1996 and 1997 and the fiscal years ended December 31, 1996 and 1997. This Form 10-Q/A is being filed to correct the financial statements included in the Form 10-Q for the quarterly period ended September 30, 1997 which was filed on November 13, 1997 (the "Third Quarter 10-Q"). RTC is concurrently filing (i) separate Form 10-Q/A's to correct the financial statements included in the Form 10-Q's previously filed for the quarterly periods ended March 31, 1997, and June 30, 1997 and (ii) a Form 10-K/A to correct the financial statements included in the Form 10-K for the year ended December 31, 1996 which was filed on March 29, 1997. The balance sheets included in the Third Quarter 10-Q are being amended hereby to reflect a reduction of accounts receivable at September 30, 1997 and at December 31, 1996 and to reflect the balance sheet impact of (i) the restatement of RTC's financial statements for the year ended December 31, 1996 and (ii) the revision of the statement of income for the nine months ended September 30, 1997. The statements of income included in the Third Quarter 10-Q are being amended hereby to reflect related reductions of net patient revenue, related increases in the provision for doubtful accounts and related reductions in the provision for income taxes. For the interim periods ended September 30, 1997, the reduction in the provision for income taxes was offset, in part, by an increase in the provision for income taxes primarily related to RTC's foreign operations. (See Note 2 of the financial statements filed herewith.) Approximately one half of the charges described above relate to untimely billing and subsequent requests for information by RTC with governmental payors (primarily state medicaid programs) and contracted private payors. The remainder relates primarily to improper contractual allowances related to revenue recognition at the time of billing and to uncollectible accounts. TRCH believes that the causes of such problems have been appropriately addressed and that systems and processes are now in place to ensure accurate contractual allowances related to revenue recognition and timely account resolution, including all appropriate collection efforts. Information included in Item 2 (Management's Discussion and Analysis of Financial Condition and Results of Operations) under the captions "Results of Operations," "Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30, 1996" and "Three Months Ended September 30, 1997 Compared to Three Months Ended September 30, 1996") of the Third Quarter 10-Q was based on RTC's unaudited consolidated financial statements prior to the amendments described above. Consequently, the information included in Item 2 under such captions overstates both net patient revenue and the provision for income taxes and understates the provision for doubtful accounts as described above. RTC believes that the amendment of Item 2 to reflect such changes would provide no material additional information not already presented in Item 2 of the Third Quarter 10-Q or in this Form 10-Q/A. Consequently, such Item 2 is not restated in this Form 10-Q/A. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Renal Treatment Centers, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, December 31, 1997 1996 - --------------------------------------------------------------------------------------------------------------------------------- Assets Current Assets: Cash $ 8,767,393 $ 1,445,798 Investments - 41,202,123 Accounts receivable, net of allowance for doubtful accounts of $12,141,277 in 1997 and $7,853,350 in 1996 86,406,470 65,198,524 Inventories 5,308,301 4,388,290 Deferred taxes 1,348,113 2,149,718 Prepaid expenses and other current assets 5,313,000 2,749,497 Income tax receivable 4,212,952 3,782,890 - --------------------------------------------------------------------------------------------------------------------------------- Total current assets 111,356,229 120,916,840 - --------------------------------------------------------------------------------------------------------------------------------- Property and equipment (net of accumulated depreciation of $27,214,548 in 1997 and $19,691,015 in 1996) 62,612,801 39,578,245 Intangibles (net of accumulated amortization of $45,607,487 in 1997 and $32,934,871 in 1996) 232,855,293 130,645,378 Deferred taxes, non-current 2,807,064 2,807,064 - --------------------------------------------------------------------------------------------------------------------------------- Total assets $409,631,387 $293,947,527 ================================================================================================================================= Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 1,295,640 $ 12,369,365 Accounts payable 12,880,222 11,341,983 Accrued compensation 8,169,851 3,838,502 Accrued expenses 8,779,150 4,051,614 Accrued interest 1,539,304 3,638,874 - --------------------------------------------------------------------------------------------------------------------------------- Total current liabilities 32,664,167 35,240,338 - --------------------------------------------------------------------------------------------------------------------------------- Long-term debt, net 229,227,781 130,573,685 Stockholders' equity: Preferred stock, $.01 par value, 5,000,000 shares authorized: none issued Common stock, $.01 par value, 45,000,000 shares authorized: issued and outstanding 25,028,405 and 24,430,256 shares in 1997 and 1996, respectively 250,284 244,303 Additional paid-in capital 94,152,899 87,890,138 Retained earnings 53,723,934 40,393,139 - --------------------------------------------------------------------------------------------------------------------------------- 148,127,117 128,527,580 - --------------------------------------------------------------------------------------------------------------------------------- Less treasury stock, 36,598 shares in 1997 and 37,202 shares in 1996, at cost (387,678) (394,076) - --------------------------------------------------------------------------------------------------------------------------------- 147,739,439 128,133,504 - --------------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $409,631,387 $293,947,527 =================================================================================================================================
See accompanying notes to consolidated financial statements. 2 Renal Treatment Centers, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended September 30, Nine Months Ended September 30, 1997 1996 1997 1996 - --------------------------------------------------------------------------------------------------------------------- Net patient revenue $84,082,021 $60,374,440 $227,952,722 $161,766,475 Patient care costs 40,486,983 30,942,641 111,485,541 82,425,019 - ---------------------------------------------------------------------------------------------------------------------- Operating profit 43,595,038 29,431,799 116,467,181 79,341,456 General and administrative expense 21,271,978 15,676,053 58,020,440 42,308,770 Provision for doubtful accounts 2,978,851 2,614,305 8,493,989 7,585,704 Depreciation and amortization expense 7,052,940 4,729,964 19,120,594 12,375,082 Merger expenses - 1,100,000 - 2,808,247 - ---------------------------------------------------------------------------------------------------------------------- Income from operations 12,291,269 5,311,477 30,832,158 14,263,653 - ---------------------------------------------------------------------------------------------------------------------- Interest expense, net 3,116,563 1,424,222 7,095,437 2,977,655 - ---------------------------------------------------------------------------------------------------------------------- Income before income taxes 9,174,706 3,887,255 23,736,721 11,285,998 Provision for income taxes 4,413,117 1,692,013 10,405,926 4,434,850 - ---------------------------------------------------------------------------------------------------------------------- Net income $ 4,761,589 $ 2,195,242 $ 13,330,795 $ 6,851,148 - ---------------------------------------------------------------------------------------------------------------------- Net income per common share $0.19 $0.09 $0.54 $0.28 Weighted average number of common shares outstanding 25,027,188 24,300,036 24,835,009 24,164,022 Net income per common share--assuming dilution $0.18 $0.09 $0.51 $0.27 Weighted average number of common shares and equivalents outstanding--assuming dilution 26,280,069 25,825,062 26,137,693 25,759,697
See accompanying notes to consolidated financial statements. 3 Renal Treatment Centers, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 1997 1996 ------------------------------------- Cash flows from operating activities: Net income $ 13,330,795 $ 6,851,148 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 19,401,844 12,423,835 Provision for doubtful accounts 8,493,989 7,585,704 Equity in (earnings) losses from affiliates 8,977 (1,792) Changes in operating assets and liabilities, net of effects of companies acquired: Accounts receivable (29,701,935) (13,111,041) Inventories (202,952) (637,006) Prepaid expenses and other current assets (2,693,450) 261,609 Accounts payable and accrued expenses 7,375,397 (174,228) Accrued income taxes 266,357 (5,652,629) - -------------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 16,279,022 7,545,600 - -------------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (17,169,904) (10,584,242) Purchase of businesses, net of cash acquired (122,018,384) (49,907,502) Purchase of investments - (40,593,199) Sale of investments 41,202,123 - Other (3,920,974) (1,987,420) - -------------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (101,907,139) (103,072,363) - -------------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from long-term debt borrowings 102,000,000 38,550,000 Repayments of debt (8,980,635) (71,365,886) Issuance of 5 5/8% convertible subordinated notes - 125,000,000 Proceeds from issuance of common stock 885,270 4,346,915 Payment of dividends - (658,500) Debt issuance costs - (3,750,000) Payments on capital lease obligations (954,923) (2,008,024) Cash portion of consideration received for common stock - 963,699 - -------------------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 92,949,712 91,078,204 - -------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 7,321,595 (4,448,559) Cash and cash equivalents at beginning of period 1,445,798 8,231,421 - -------------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 8,767,393 $ 3,782,862 ================================================================================================================================
See accompanying notes to consolidated financial statements. 4 RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION: The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's Form 10-K filed with the Securities and Exchange Commission on March 28, 1997. 2. EARNINGS PER SHARE. In February 1997, the Financial Accounting Standards Board issued the Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS 128 establishes standards for computing and presenting earnings per share. Basic earnings per share is calculated by dividing net income before extraordinary items and net income by the weighted average number of shares of common stock outstanding. Accordingly, earnings per common share--assuming dilution includes the dilutive effects of stock options and warrants using the treasury stock method, in determining the weighted average number of shares of common stock outstanding. Earnings per share for all periods presented have been restated following the provisions of SFAS 128. 3. SELECTED QUARTERLY FINANCIAL DATA The financial information as previously presented for the three months ended September 30, 1997 and 1996 and the nine months ended September 30, 1997 and 1996 in the Registrant's Form 10-Q as filed on November 13, 1997 and November 14, 1996 has been restated to correct net patient revenue and the provision for doubtful accounts receivable in 1997 and 1996 and to correct the 1997 provision for income taxes primarily related to the Company's foreign operations with the following effect (in thousands, except per share amounts):
For the three months ended September 30, 1997 1996 -------------------- ------------------ As As Originally As Originally As Reported Restated Reported Restated -------- -------- -------- -------- Net patient revenue 86,559 84,082 63,115 60,374 Operating expenses 71,089 71,791 54,102 55,063 Income from operations 15,470 12,291 9,013 5,311 Provision for income taxes 4,694 4,413 3,108 1,692 Net income 7,659 4,762 4,481 2,195 Net income per common share 0.31 0.19 0.18 0.09 Net income per common share-- assuming dilution 0.29 0.18 0.17 0.09 For the nine months ended September 30, 1997 1996 -------------------- ------------------ As As Originally As Originally As Reported Restated Reported Restated -------- -------- -------- -------- Net patient revenue 234,940 227,953 169,248 161,766 Operating expenses 195,143 197,121 144,879 147,502 Income from operations 39,797 30,832 24,369 14,264 Provision for income taxes 12,277 10,406 8,300 4,435 Net income 20,425 13,331 13,091 6,851 Net income per common share 0.82 0.54 0.54 0.28 Net income per common share-- assuming dilution 0.78 0.51 0.51 0.27
4. COMMITMENTS AND CONTINGENCIES: The Company is a party to certain legal actions arising in the ordinary course of business. The Company believes it has adequate legal defenses and/or insurance coverage for these actions and that the ultimate outcome of these actions will not have a material adverse effect on the Company's results of operations, financial condition or liquidity. 5. SIGNIFICANT EVENTS: BUSINESS ACQUISITIONS: During the third quarter of 1997, the Company acquired 18 dialysis centers. Twelve of the centers are located in the Republic of Argentina, four centers are located in Texas and one center each is located in Georgia and Illinois. Combined, these centers provide care to an effective patient base of approximately 1,100. During the second quarter of 1997, the Company acquired 13 dialysis centers. Ten of the centers are located in the Republic of Argentina, two centers are located in Texas and one center is located in Pennsylvania. Combined, these centers provide care to an effective patient base of approximately 800. During the first quarter of 1997, the Company acquired 12 dialysis centers, including one center operating under a management agreement. Eight of the centers are located in Texas, two centers are located in the Republic of Argentina and one center each is located in Nevada, Florida and Pennsylvania. Combined, these centers provide care to an effective patient base of approximately 830. OTHER EVENTS: On September 26, 1997, the Company amended and restated its revolving credit/term facility ("Credit Agreement") to increase the amount available under the Credit Agreement from $200,000,000 to $350,000,000 and to make certain other changes to the terms of the Credit Agreement, including amendments to certain covenants. 5 SUBSEQUENT EVENT: On October 7, 1997, the Company announced that it had entered into definitive agreements to acquire substantially all of the assets of twelve dialysis centers. Ten of the centers are located in California and the remaining two are located in Nevada. The transaction is expected to be completed in November 1997, subject to receipt of required regulatory approvals, including the approval of the Attorney General of the State of California, and certain other contingencies. 6 Part II. Other Information - ------- ----------------- Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits 10.11 Sixth Amended and Restated Loan Agreement dated as of September 26, 1997 between the Company and First Union National Bank of North Carolina and the other lenders set forth therein (previously filed under the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1997). 11.1 Computation of net income per common share and net income per common share--assuming dilution. 27.1 Amended Financial Data Schedule. 27.2 Amended Financial Data Schedule. (b) Reports on Form 8-K None. 7 SIGNATURES 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. RENAL TREATMENT CENTERS, INC. By: /s/ John E. King ------------------------------ John E. King Vice President, Finance and Chief Financial Officer Date: May 18, 1998 Renal Treatment Centers, Inc. and Subsidiaries Exhibit Index Exhibit No. Description - ----------- ----------- 10.11 Sixth Amended and Restated Loan Agreement dated as of September 26, 1997 between the Company and First Union National Bank of North Carolina and the other lenders set forth therein (previously filed under the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1997). 11.1 Computation of net income per common share and net income per common share--assuming dilution 27.1 Amended Financial Data Schedule 27.2 Amended Financial Data Schedule EX-11.1 2 COMPUTATION OF NET INCOME PER SHARE Exhibit 11.1 Renal Treatment Centers, Inc. and Subsidiaries COMPUTATION OF NET INCOME PER COMMON SHARE AND NET INCOME PER COMMON SHARE--ASSUMING DILUTION for the three and nine months ended September 30, 1997 and 1996
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Reconciliation of numerator: Net income for use in computing net income per common share $ 4,761,589 $ 2,195,242 $13,330,795 $ 6,851,148 Add back interest on note, tax effected ---- 53,206 34,122 183,580 - ------------------------------------------------------------------------------------------------------------------------------------ Adjusted net income for use in computing net income per common share--assuming dilution $ 4,761,589 $ 2,248,448 $13,364,917 $ 7,034,728 ==================================================================================================================================== Reconciliation of denominator Weighted average number of shares outstanding for use in computing net income per common share 25,027,188 24,300,036 24,835,009 24,164,022 Weighted average shares assumed issued upon conversion of note ---- 519,097 163,705 598,095 Dilutive effect of outstanding stock options 1,252,881 1,005,929 1,138,979 997,580 - ------------------------------------------------------------------------------------------------------------------------------------ Weighted average number of common shares and equivalents outstanding--assuming dilution 26,280,069 25,825,062 26,137,693 25,759,697 ==================================================================================================================================== Net income per common share $ 0.19 $ 0.09 $ 0.54 $ 0.28 ==================================================================================================================================== Net income per common share--assuming dilution $ 0.18 $ 0.09 $ 0.51 $ 0.27 ====================================================================================================================================
EX-27.1 3 AMENDED FINANCIAL DATA SCHEDULE
5 3-MOS 9-MOS DEC-31-1997 DEC-31-1997 JUL-01-1997 JAN-01-1997 SEP-30-1997 SEP-30-1997 8,767,393 8,767,393 0 0 98,547,747 98,547,747 12,141,277 12,141,277 5,308,301 5,308,301 111,356,229 111,356,229 89,827,349 89,827,349 27,214,548 27,214,548 409,631,387 409,631,387 32,664,167 32,664,167 229,227,781 229,227,781 0 0 0 0 250,284 250,284 147,489,155 147,489,155 409,631,387 409,631,387 0 0 84,082,021 227,952,722 0 0 40,486,983 111,485,541 28,324,918 77,141,034 2,978,851 8,493,989 3,116,563 7,095,437 9,174,706 23,736,721 4,413,117 10,405,926 4,761,589 13,330,795 0 0 0 0 0 0 4,761,589 13,330,795 0.19 0.54 0.18 0.51
EX-27.2 4 AMENDED FINANCIAL DATA SCHEDULE
5 3-MOS 9-MOS DEC-31-1996 DEC-31-1996 JUL-01-1996 JAN-01-1996 SEP-30-1996 SEP-30-1996 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 60,374,440 161,766,475 0 0 30,942,641 82,425,019 21,506,017 57,492,099 2,614,305 7,585,704 1,424,222 2,977,655 3,887,255 11,285,998 1,692,013 4,434,850 2,195,242 6,851,148 0 0 0 0 0 0 2,195,242 6,851,148 0.09 0.28 0.09 0.27
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