-----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, PP+iQ3ij3+F8MZk+psAQbaTqnm4KMznrpNQsAPrsIvfk6TtDXS7AfuwzXQ1qh8Ip yJ9HRhCqCURDpEe8B5qYPA== 0000950109-96-004425.txt : 19960717 0000950109-96-004425.hdr.sgml : 19960717 ACCESSION NUMBER: 0000950109-96-004425 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960529 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960716 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: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-14142 FILM NUMBER: 96595120 BUSINESS ADDRESS: STREET 1: 1180 WEST SWEDESFORD RD STREET 2: BLDG 2, STE 300 CITY: BERWYN STATE: PA ZIP: 19312 BUSINESS PHONE: 2156444796 MAIL ADDRESS: STREET 1: 1180 WEST SWEDESFORD ROAD BLDG 2 STREET 2: SUITE 300 CITY: BERWYN STATE: PA ZIP: 19312 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT Amendment No. 1 Pursuant to Section 13 or 15 (d) of the Securities and Exchange Act of 1934 May 29, 1996 ---------------------------------------------------------------- Date of Report (Date of earliest event reported) Renal Treatment Centers, Inc. ----------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 1-14142 23-2518331 - ---------------------------- ------------ -------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification Number) 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 ------------ The Current Report on Form 8-K of Renal Treatment Centers, Inc. (the "Company"), dated May 29, 1996 and filed on June 13, 1996, reported the acquisition of certain assets of Kidney Center of Delaware County, Ltd. ("KCDC") and Kidney Center of Chester County, Ltd. ("KCCC"). Items 7(a) and 7(b) of the report stated that the historical financial statements of KCDC and KCCC required under Rule 3-05 of Regulation S-X and the pro forma financial information required under Article 11 of Regulation S-X would be filed as soon as practicable, but not later than August 13, 1996. The purpose of this amendment is to file such financial statements and information. Item 7. Financial Statements and Exhibits. ---------------------------------- (a) Financial Statements of Businesses Acquired. -------------------------------------------- The following lists the historical financial statements of KCDC and KCCC filed herewith: Page ---- Report of Independent Accountants 4 Combined Balance Sheets as of December 31, 1995 and as of March 31, 1996 (unaudited) 5 Combined Statements of Operations for the year ended December 31, 1995 and for the three months ended March 31, 1995 (unaudited) and 1996 (unaudited) 6 Combined Statements of Stockholders' Equity for the year ended December 31, 1995 and for the three months ended March 31, 1996 (unaudited) 7 Combined Statements of Cash Flows for the year ended December 31, 1995 and for the three months ended March 31, 1995 (unaudited) and 1996 (unaudited) 8 Notes to Financial Statements 9-13 (b) Pro Forma Financial Information. -------------------------------- The following lists the pro forma financial information filed herewith: Pro forma Consolidated Balance Sheets as of March 31, 1996 14 Pro forma Consolidated Statements of Operations for the year ended December 31, 1995 and the three months ended March 31, 1996 15 Notes to Pro Forma Consolidated Financial Statements 16-17 (c) Exhibits. -------- The following exhibits are filed herewith: 18 Exhibit No. Document ----------- -------- 2.1 Asset Purchase Agreement, Dated as of May 29, 1996, with an effective time of May 31, 1996 at 11:59 PM, between Renal Treatment Centers Pennsylvania, Inc. and KCCC Liquidating Trust (the exhibits and schedules to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be provided supplementally to the Commission upon its request). (previously filed with the Company's current report on Form 8-K dated May 29, 1996). (c) Exhibits (continued) 2.2 Asset Purchase Agreement, Dated as of May 29, 1996, with an effective time of May 31, 1996 at 11:59 PM, between Renal Treatment Centers- Pennsylvania, Inc. and KCDC Liquidating Trust (the exhibits and schedules to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be provided supplementally to the Commission upon its request). (previously filed with the Company's current report on Form 8-K dated May 29, 1996). 23.1 Consent of Coopers & Lybrand. 99.1 Fourth Amended and Restated Loan Agreement dated as of June 5, 1996 between Renal Treatment Centers, Inc. and the various lenders set forth therein. (previously filed with the Company's current report on Form 8-K dated May 29, 1996). 99.2 Press release dated June 10, 1996 issued by Renal Treatment Centers, Inc. (previously filed with the Company's current report on Form 8-K dated May 29, 1996). Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned hereunto duly authorized. RENAL TREATMENT CENTERS, INC. /s/Ronald H. Rodgers, Jr. ---------------------------------- By: Ronald H. Rodgers, Jr. Vice President -Finance Date: REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders of KCDC/KCCC Group: We have audited the accompanying combined balance sheet of KCDC/KCCC Group (the "Group") as of December 31, 1995, and the related combined statements of operations, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of the Group as of December 31, 1995 and the combined results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. /s/COOPERS & LYBRAND, L.L.P. Wayne, Pennsylvania June 26,1996
KCDC/KCCC GROUP COMBINED BALANCE SHEET December 31, 1995 and March 31, 1996 (unaudited) December 31, March 31, 1995 1996 (Unaudited) - ------------------------------------------------------------------------------------- Assets Current assets: Cash $ 518,323 $ 395,319 Accounts receivable, net of allowance for doubtful accounts of $623,392 and $754,980 (unaudited) at December 31, 1995 and at March 31, 1996, respectively 3,538,720 3,686,084 Prepaid expenses 10,716 5,674 - ------------------------------------------------------------------------------------- Total current assets 4,067,759 4,087,077 ===================================================================================== Property and equipment (net of accumulated depreciation of $1,138,345 and $1,208,233 (unaudited) at December 31, 1995 and March 31, 1996, respectively) 1,776,129 1,729,033 - ------------------------------------------------------------------------------------- Total assets $5,843,888 $5,816,110 ===================================================================================== Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 307,319 $ 309,402 Accounts payable 532,251 472,466 Pension liability 2,119,639 2,119,639 Accrued compensation 364,426 599,432 Accrued expenses 61,725 7,232 - ------------------------------------------------------------------------------------- Total current liabilities 3,385,360 3,508,171 ===================================================================================== Long-term debt, net 1,550,800 1,471,888 Stockholders' equity: Common stock, $1 par value, 2000 shares authorized: issued and outstanding 600 shares at December 31, 1995 and March 31, 1996 (unaudited), respectively 600 600 Additional paid-in capital 32,677 32,677 Retained earnings 874,451 802,774 - ------------------------------------------------------------------------------------- Total stockholders' equity 907,728 836,051 ===================================================================================== Total liabilities and stockholders' equity $5,843,888 $5,816,110 =====================================================================================
See accompanying notes to combined financial statements.
KCDC/KCCC GROUP COMBINED STATEMENT OF OPERATIONS for the year ended December 31, 1995 and the Unaudited three months ended March 31, 1995 and 1996 December 31, March 31, March 31, 1995 1995 1996 (Unaudited) (Unaudited) - ------------------------------------------------------------------------------------ Net patient revenue $13,391,407 $3,477,419 $3,270,606 Patient care costs 10,362,247 2,141,548 2,384,816 - ------------------------------------------------------------------------------------ Operating profit 3,029,160 1,335,871 885,790 General and administrative 1,973,516 548,180 584,405 Provision for doubtful accounts 1,393,595 361,774 131,588 Depreciation 148,754 38,085 69,871 - ------------------------------------------------------------------------------------ Income (loss) from operations (486,705) 387,832 99,926 Interest expense, net of interest income of $19,767 for the year ended December 31, 1995 26,720 19,000 32,803 - ------------------------------------------------------------------------------------ Net income (loss) $(513,425) $368,832 $67,123 ====================================================================================
See accompanying notes to combined financial statements.
KCDC/KCCC GROUP Combined Statements of Stockholders' Equity for the year ended December 31, 1995 and the Unaudited three months ended March 31, 1996 COMMON STOCK Additional ------------ Paid-in Retained Shares Amount Capital Earnings Total - ---------------------------------------------------------------------------------------------------------- Balance, December 31, 1994 600 $600 $32,677 $2,792,676 $2,825,953 Net loss (513,425) (513,425) S Corporation distribution (1,404,800) (1,404,800) - ---------------------------------------------------------------------------------------------------------- Balance at December 31, 1995 600 $600 $32,677 $874,451 $907,728 Net income 67,123 67,123 S Corporation distribution (138,800) (138,800) - ---------------------------------------------------------------------------------------------------------- Balance at March 31, 1996 600 $600 $32,677 $802,774 $836,051 ==========================================================================================================
See accompanying notes to combined financial statements.
KCDC/KCCC GROUP COMBINED STATEMENTS OF CASH FLOWS for the year ended December 31, 1995 and the unaudited three months ended March 31, 1995 and 1996 December 31, March 31, March 31, 1995 1995 1996 (Unaudited) (Unaudited) - ------------------------------------------------------------------------------------------- Cash flows from operating activities: Net (loss) income $ (513,425) $ 368,832 $ 67,123 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 148,754 38,085 69,871 Provision for doubtful accounts 1,393,595 361,774 131,588 Changes in operating assets and liabilities: Accounts receivable (426,252) 112,854 (278,935) Prepaid expenses (4,385) (9,834) 5,042 Accounts payable and accrued expenses 903,443 524,261 120,728 - ------------------------------------------------------------------------------------------- Net cash provided by operating activities 1,501,730 1,395,972 115,417 - ------------------------------------------------------------------------------------------- Cash flows from investing activities: (978,417) (241,207) (22,792) Capital expenditures - ------------------------------------------------------------------------------------------- Net cash used in investing (978,417) (241,207) (22,792) activities - ------------------------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from long-term debt borrowings 1,060,521 Repayments of debt (71,731) (53,025) Payment of S corporation distribution (1,404,800) (308,800) (138,800) Repayments of capital lease obligations (87,554) (21,889) (23,804) - ------------------------------------------------------------------------------------------- Net cash used by financing activities (503,564) (330,689) (215,629) - ------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 19,749 824,076 (123,004) Cash and cash equivalents at beginning of period 498,574 498,574 518,323 - ------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 518,323 $1,322,650 $ 395,319 ===========================================================================================
See accompanying notes to combined financial statements. NOTES TO COMBINED FINANCIAL STATEMENTS 1. Description of Business KCDC/KCCC Group (the "Group") consists of Kidney Center of Delaware County, Ltd. ("KCDC") and Kidney Center of Chester County, Ltd. ("KCCC"). The Group provides dialysis treatments for End Stage Renal Disease ("ESRD") patients in an outpatient environment or in the patient's home. Additionally, the Group has entered into inpatient dialysis service agreements with hospitals to provide dialysis treatments on an inpatient basis. For the year ended December 31, 1995, approximately 53% of the Company's net patient revenue was received from Medicare. Accordingly, the Company's operations and cash flows are dependent upon the rate and manner of payment for patient services from third party payors and, in particular, federal and state administered programs. 2. Summary of Significant Accounting Policies Basis of Presentation: The combined financial statements of the Group include the accounts and results of operations of KCDC and KCCC. KCDC is owned by James Clark, M.D. and Richard R. Soricelli, M.D. and KCCC is owned by James Clark, M.D., Richard R. Soricelli, M.D., Hardy Sorkin, M.D. and George Randolph Westby, M.D. Certain amounts included in the accompanying combined financial statements and related footnotes reflect the use of estimates based on assumptions made by management. Actual amounts could differ from these estimates. Principles of Combination: The combined financial statements have been prepared in accordance with generally accepted accounting principles and include the accounts of KCDC and KCCC. All significant intercompany accounts and transactions have been eliminated in combination. Patient Revenue and Allowances: Patient revenue is recorded at established rates on the accrual basis in the period during which the service is provided. Appropriate allowances to give recognition to third-party arrangements are also recorded on the accrual basis. Payments to the Group under Medicare and Medicaid and other state administered programs are based upon a predetermined specific fee per treatment. The Group does not believe there are any significant credit risks associated with receivables from Medicare and Medicaid and other state administered programs. The allowance for doubtful accounts consists of management's estimate of amounts that may prove uncollectible from secondary insurers or patients. Patient Care Costs: Patient care costs include medical supplies, including Erythropoietin ("EPO") supplies, and direct patient care salaries and benefits. Dialysis Supplies: Dialysis supplies, including EPO, are expensed at the time of purchase. Property and Equipment and Depreciation and Amortization: Property and equipment are stated at cost or respective fair market value at the time of acquisition. Equipment under capital lease is stated at the lower of the fair market value or net present value of the minimum lease payments at inception of the lease. Depreciation and amortization are provided by the straight-line method over the estimated useful lives of the related assets or lease terms for leasehold improvements and equipment under capital lease. The estimated useful life is five to seven years for furniture, fixtures and equipment. Costs of maintenance and repairs are charged to expense as incurred. Sales and retirements of depreciable assets are recorded by removing the related cost and accumulated depreciation from the accounts. Gains and losses on sales and retirements of assets are reflected in results of operations. Income Taxes: KCDC and KCCC have elected to have their income taxed as S Corporations under the provisions of the Internal Revenue Code. Therefore, taxable income or loss is reported for all of the Group's entities to the individual stockholders for inclusion in their respective tax returns, and no provision for federal or state income taxes is included in these statements. Prepaid Expenses: Prepaid expenses consist of prepaid insurance and real estate taxes. 2. Summary of Significant Accounting Policies (continued) Estimated Medical Professional Liability Claims: The Company is insured for medical professional liability claims through a commercial insurance policy. It is the Group's policy that provision for estimated premium adjustments to medical professional liability costs be made for asserted and unasserted claims and based upon the Group's experience. Provision for such professional liability claims includes estimates of the ultimate costs of such claims. To date, the Group's experience with such claims has not been significant. Accordingly, no such provision has been made. Cash Equivalents: For the purpose of reporting cash flows, the Group considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The cash of the Group is principally held by one financial institution. Interim Financial Information: The financial statements and accompanying financial information in the notes to the combined financial statements as of March 31, 1996 and for the three months ended March 31, 1995 and 1996 are unaudited but, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments and accruals) which the Group considers necessary for a fair presentation of the financial position of the Group at such dates and the operating results and cash flows for those periods. Results for interim periods are not necessarily indicative of results for the entire year. 3. Property and Equipment: A summary of property and equipment and related accumulated depreciation as of December 31, 1995 is as follows:
December 31, 1995 - -------------------------------------------------------------------------------- Furniture, fixtures and equipment $1,513,215 Capital leases 1,401,259 - -------------------------------------------------------------------------------- 2,914,474 - -------------------------------------------------------------------------------- Less accumulated depreciation 1,138,345 - -------------------------------------------------------------------------------- $1,776,129 ================================================================================
Depreciation expense was $148,754 for the year ended December 31, 1995.
4. Long-Term Debt: December 31, 1995 - -------------------------------------------------------------------------------- Long-term debt as of December 31, 1995 consists of: Term loan payable in monthly principal installments of $6,830 through August 1, 2000 at an interest rate equal to prime, 8.5% at December 31, 1995 $ 375,705 Term loan payable in monthly principal installments of $7,511 through August 1, 2000 at an interest rate equal to prime, 8.5% at December 31, 1995 413,105 Term loan payable in monthly principal installments of $3,333 through January 1, 2001 at an interest rate equal to prime, 8.5% at December 31, 1995 199,980 Capital lease obligation 869,329 Less current portion (307,319) ---------- $1,550,800 ==========
4. Long-Term Debt (continued) Maturities of long-term debt outstanding, excluding capital leases, as of December 31, 1995 for each of the next five years, is as follows:
Year ------------------------ 1996 $212,100 1997 212,100 1998 212,100 1999 212,100 2000 140,390
The loans are collateralized by a lien on all of the Group's assets. The agreements require the Group to comply with certain covenants and maintain certain financial ratios. There was a covenant violation during the year ended December 31, 1995. The loans are not classified as a current liability since the debt was subsequently paid off. The carrying amount of the long-term debt is a reasonable estimate of its fair value utilizing interest rates based on the prevailing market rates. 5. Leasing Arrangements: The Group leases certain of its operating facilities, corporate office and furniture and equipment under non-cancelable leases for terms ranging from three to fifteen years with certain renewal options. Certain facilities and equipment are leased by the Group from stockholders. Future minimum lease payments are as follows:
Third-party Operating Leases Capital Operating with Lease Leases Stockholders - -------------------------------------------------------------------------------- 1996 $ 157,500 $23,170 $286,572 1997 157,500 4,678 286,572 1998 157,500 1,548 1999 157,500 2000 and thereafter 472,500 - -------------------------------------------------------------------------------- Total minimum lease payments 1,102,500 $29,396 $573,144 - ------------------------------------------------- ============================= Less amount representing interest 233,171 Present value of net minimum payments under capital lease 869,329 Less current portion 95,219 - ------------------------------------------------- $ 774,110 =================================================
The capital lease represents a lease for a dialysis facility with companies owned in whole by the Group's stockholders. Rent expense paid to stockholders under operating leases was $286,572 for the year ended December 31, 1995. 6. Benefit Plans: KCDC and KCCC each maintain a defined benefit pension plan covering substantially all employees. KCDC and KCCC failed to timely amend the plan for the Tax Reform Act of 1986 in 1995, which subjects the plan to disqualification by the Internal Revenue Service. The plan has been amended to cure the disqualification prospectively and KCDC and KCCC each filed an application with the IRS under the Voluntary Closing Agreement Program to cure the disqualification for the years 1989 through 1994. This program can impose a sanction between $1,000 and 40% of the maximum payment amount (which equals approximately $140,000). At the current time management cannot predict the ultimate outcome. KCDC's and KCCC's funding policy, consistent with statutory requirements, is based on actuarial computations. The pension cost for the year ended December 31, 1995 included the following components:
1995 -------- Service cost - benefits earning during the year $395,334 Interest cost on projected benefit obligation 300,208 Return on assets (627,197) Net amortization and deferral 381,346 -------- Total pension cost $449,691 ========
The funded status of the pension plan at December 31, 1995, using a valuation date of January 1, 1995, for the plan assets and liabilities was: Actuarial present value of benefit obligations: Accumulated benefit obligations: Vested $4,087,273 Effect of projected future increases in compensation 1,435,875 ---------- Projected benefit obligation 5,523,148 Plan assets at fair value 4,808,529 Deficiency of plan assets over projected benefit obligation ---------- Unrecognized net gain 714,619 Unrecognized transition asset 338,408 Pension liability 1,066,612 ---------- Major Assumptions: $2,119,639 ========== Discount rate Average rate of increase in compensation Expected long-term rate of return on plan assets 6% 3% 7%
The accumulated benefit obligation represents the actuarial present value (including the discount rate noted above) of accumulated plan benefits, while the projected benefit obligation assumes future increases in compensation. 7. Commitment and Contingencies: KCDC has an employment agreement with an officer which provides for total annual compensation of approximately $150,000. In the event of a merger or an acquisition, the agreement entitles the officer to a payout of approximately $150,000. KCCC has been named in an action related to a medical malpractice claim. While the ultimate disposition of this contingency cannot be determined at this time, management believes that their insurance is adequate to cover the claim. 8. Supplemental Cash Flow Information: Supplemental disclosure of cash flow information for the year ended December 31,1995 and for the three months ended March 31, 1995 and March 31, 1996 is as follows:
December 31, March 31, March 31, 1995 1995 1996 (Unaudited) (Unaudited) - --------------------------------------------------------------------------- Cash paid for: Interest $40,155 $16,000 $36,207 ===========================================================================
9. Subsequent Event: On May 29, 1996 the Group sold substantially all assets except accounts receivable and cash to Renal Treatment Centers, Inc. for $26,622,396, effective 11:59 PM May 31, 1996. As part of this transaction the Group retained all liabilities. RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS MARCH 31, 1996
Historical Renal Historical Treatment Acquired Pro forma Centers, Inc. company adjustments (1) Pro forma (unaudited) (unaudited) (unaudited) (unaudited) -------------- ----------- --------------- ------------- ASSETS Current assets: Cash $ 2,657,638 $ 395,319 $ (595,319) $ 2,457,638 Accounts receivable, net 56,090,971 3,686,084 (3,686,084) 56,090,971 Inventories 3,522,878 198,491 3,721,369 Deferred taxes 1,412,519 1,412,519 Prepaid expenses and other current assets 1,023,065 5,674 (5,674) 1,023,065 ------------ ---------- ----------- ------------ Total current assets 64,707,071 4,087,077 (4,088,586) 64,705,562 Property and equipment, net 24,952,573 1,729,033 (525,780) 26,155,826 Intangibles, net 86,055,057 25,420,652 111,475,709 Deferred taxes, non-current 1,749,754 1,749,754 ------------ ---------- ----------- ------------ Total assets $177,464,455 $5,816,110 $20,806,286 $204,086,851 ============ ========== =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 4,742,845 $ 309,402 $ (309,402) $ 4,742,845 Accounts payable 5,416,174 472,466 (472,466) 5,416,174 Pension liability 2,119,639 (2,119,639) Accrued compensation 3,300,300 599,432 (599,432) 3,300,300 Accrued expenses 4,469,349 7,232 (7,232) 4,469,349 Accrued income taxes 2,320,777 2,320,777 Accrued interest 745,647 745,647 ------------ ---------- ------------- ------------ Total current liabilities 20,995,092 3,508,171 (3,508,171) 20,995,092 Long term debt, net 40,503,340 1,471,888 25,150,508 (2) 67,125,736 Stockholders' equity: Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued Common stock, $.01 par value, 45,000,000 shares authorized; 23,619,076 shares issued and outstanding 236,191 600 (600)(3) 236,191 Additional paid-in capital 83,619,838 32,677 (32,677)(3) 83,619,838 Retained earnings 32,504,070 802,774 (802,774)(3) 32,504,070 ------------ ---------- ------------- ------------ Less treasury stock, 37,202 shares at cost (394,076) (394,076) ------------ ---------- ------------- ------------ Total liabilities and stockholders' equity $177,464,455 $5,816,110 $20,806,286 $204,086,851 ============ ========== ============= ============
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS For the year ended December 31, 1995 and the three months ended March 31, 1996
Historical Historical ---------- ---------- For the year ended December 31, 1995 For the three months ended March 31, 1996 Renal Renal Treatment Acquired Pro forma Treatment Acquired Pro forma Centers, Inc. company adjustments Pro forma Centers, Inc. company adjustments ------------- ----------- ------------ ----------- ------------- --------- ------------ Net patient revenue $158,697,471 $13,391,407 $172,088,878 $49,204,164 $3,270,606 Patient care costs 76,261,775 10,362,247 86,624,022 23,706,233 2,384,816 ----------- ------------ ----------- ------------ ----------- ---------- -------- Operating profit 82,435,696 3,029,160 85,464,856 25,497,931 885,790 General and administrative 40,579,084 1,973,516 42,552,600 12,903,283 584,405 Provision for doubtful accounts 4,324,541 1,393,595 5,718,136 1,535,944 131,588 Depreciation and amortization 11,924,117 148,754 $1,866,187(A) 13,939,058 3,536,388 69,871 $ 433,863(A) Merger expenses 2,087,542 $ 2,087,542 1,708,247 ----------- ---------- ---------- ----------- ---------- ----------- -------- Income (loss) from operations 23,520,412 (486,705) (1,866,187) 21,167,520 5,814,069 99,926 (433,863) ----------- ---------- ---------- ----------- ---------- ----------- -------- Interest expense, net 2,486,954 26,720 2,513,674 665,808 32,803 ----------- ---------- ---------- ----------- ---------- ----------- -------- Income (loss) before income taxes 21,033,458 (513,425) (1,866,187) 18,653,846 5,148,261 67,123 (433,863) Income taxes 7,632,069 (690,489)(B) 6,941,580 1,990,207 (160,529)(B) ----------- ---------- ---------- ----------- ---------- ----------- -------- Net income $13,401,389 $(513,425) $(1,175,698) $11,712,266 $3,158,054 $67,123 $(273,334) =========== ========== ========== =========== ========== =========== ======== Pro forma net income per common and common stock equivalent (C) $0.53 =========== Pro forma weighted average common shares used in computing earnings per share 21,930,356 =========== Pro forma --------- Net patient revenue $52,474,770 Patient care costs 26,091,049 ----------- Operating profit 26,383,721 General and administrative 13,487,688 Provision for doubtful accounts 1,667,532 Depreciation and amortization 4,040,122 Merger expenses 1,708,247 ----------- Income (loss) from operations 5,480,132 ----------- Interest expense, net 698,611 ----------- Income (loss) before income taxes 4,781,521 Income taxes 1,829,678 ----------- Net income $2,951,843 =========== Pro forma net income per common and common stock equivalent (C) $0.12 =========== Pro forma weighted average common shares used in computing earnings per share 24,278,435 ===========
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS On May 29, 1996, Renal Treatment Centers, Inc. (the "Company") acquired substantially all of the non-current and certain other assets of two affiliated corporations, Kidney Center of Delaware County, Ltd. ("KCDC") and Kidney Center of Chester County, Ltd. ("KCCC"), each of which operates a Medicare-certified end-stage renal dialysis facility (collectively "the Seller") in the suburban Philadelphia, Pennsylvania area. KCDC is owned by James Clark, M.D. and Richard R. Soricelli, M.D. and KCCC is owned by James Clark, M.D., Richard R. Soricelli, M.D., Hardy Sorkin, M.D. and George Randolph Westby, M.D. The parties made the purchase and sale pursuant to two separate asset purchase agreements ("the Agreements") dated May 29, 1996, with an effective time of May 31, 1996 at 11:59 PM, between a subsidiary of the Company and liquidating trusts into which KCDC and KCCC, respectively, had transferred their assets. As part of the transaction, the Company entered into covenants not to compete with each of the selling physicians and concurrently entered into new agreements and received assignments of existing agreements to provide acute dialysis services at an aggregate of nine area hospitals. In addition, the Company entered into a physician director agreement with a physician group affiliated with the selling physicians to act as Physician Director of the Facilities. The Company paid total cash consideration of $26,622,396 and determined the consideration based on negotiations with KCDC and KCCC and the fair market value of the assets used in the facilities as a going concern. The cash consideration was funded entirely through borrowings under the Company's credit agreement with a consortium of banks. Except as arising out of the acquisition, there is no material relationship between KCDC or KCCC, on the one hand, and the Company or any of its directors, officers, affiliates or by their associates, on the other hand. The transaction has been accounted for as a business combination in accordance with the purchase method of accounting. Basis of Presentation - --------------------- The unaudited pro forma financial statements are presented to illustrate (i) the pro forma effects on the Company's balance sheet as of March 31, 1996 and (ii) the pro forma effects on the Company's results of operations for the year ended December 31, 1995 and for the three month period ended March 31, 1996 as if the transaction had occurred on January 1, 1995. The unaudited pro forma financial statements include adjustments resulting from the purchase accounting and bank financing and are not necessarily indicative of what the combined financial position or results of operations would have been had the transaction occurred on January 1, 1995, nor are they necessarily indicative of future results of the combined entities. Certain pro forma adjustments are based on preliminary estimates of the fair values of assets acquired and are thus subject to change. Adjustments to Pro Forma Consolidated Balance Sheets - ---------------------------------------------------- (1) Adjusts assets to fair market value and eliminates certain assets not assumed by the Company in connection with the acquisition. (2) Reflects increase in liability to finance the acquisition. (3) Eliminates ownership interest in the company whose assets were acquired in the acquisition. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED Adjustments to Pro forma Consolidated Statements of Operations - -------------------------------------------------------------- (A) Reflects depreciation and amortization expense resulting from the revaluation in purchase accounting of fixed assets and intangible assets of $1,356,889 and $339,221 offset by historical Seller depreciation and amortization of $148,754 and $69,871 for the year ended December 31, 1995 and for the three months ended March 31, 1996, respectively. Also reflects additional amortization over a 25 year period of the excess cost over net assets acquired of $658,052 and $164,513 for the year ended December 31, 1995 and for the three months ended March 31, 1996, respectively, as if the Seller were acquired as of January 1, 1995. (B) Reflects the adjustments to income taxes which would have been provided on pro forma income before taxes. (C) Pro forma net income per common and common stock equivalents is computed by dividing net income by the weighted average number of common and common stock equivalents outstanding during the period. Exhibit Index
Exhibit Document Page - ------- -------- ---- 2.1 Asset Purchase Agreement, Dated as of May 29, 1996, with an effective time of May 31, 1996 at 11:59 PM, between Renal Treatment Centers-Pennsylvania, Inc. and KCCC Liquidating Trust (the exhibits and schedules to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be provided supplementally to the Commission upon its request). (previously filed with the Company's current report on Form 8-K dated May 29, 1996). 2.2 Asset Purchase Agreement, Dated as of May 29, 1996, with an effective time of May 31, 1996 at 11:59 PM, between Renal Treatment Centers-Pennsylvania, Inc. and KCDC Liquidating Trust (the exhibits and schedules to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be provided supplementally to the Commission upon its request). (previously filed with the Company's current report on Form 8-K dated May 29, 1996). 23.1 Consent of Coopers & Lybrand. 19 99.1 Fourth Amended and Restated Loan Agreement dated as of June 5, 1996 between Renal Treatment Centers, Inc. and the various lenders set forth therein. (previously filed with the Company's current report on Form 8-K dated May 29, 1996). 99.2 Press release dated June 10, 1996 issued by Renal Treatment Centers, Inc. (previously filed with the Company's current report on Form 8-K dated May 29, 1996).
EX-23.1 2 CONSENT OF COOPERS & LYBRAND CONSENT TO INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Renal Treatment Centers, Inc. on Form S-3 (File No. 33-88418, 33-93060, 33-96828, 333-3716) and S-8 (File No. 33-95750 and 33-94262) of our report dated June 26, 1996 on our audit of the combined financial statements of the KCDC/KCCC Group as of December 31, 995 and for the year then ended, which report is included in this Form 8-K/A. /s/Coopers & Lybrand, L.L.P. - ----------------------------- Coopers & Lybrand, L.L.P. Wayne, Pennsylvania July 2, 1996 -----END PRIVACY-ENHANCED MESSAGE-----