-----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, ORJsr28p0WeJqmBJRtdyXg+fV0HIHC1S85Tje6YuYmRqOEMZCNgoThfSVlPEDyrZ /vGk5ivzz6flpn7X5OThmQ== 0000950109-96-007940.txt : 19961202 0000950109-96-007940.hdr.sgml : 19961202 ACCESSION NUMBER: 0000950109-96-007940 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960916 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961127 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: 96673842 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 Exchange Act of 1934 September 16, 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 September 16, 1996 and filed on September 30, 1996, reported the acquisition of certain assets of Columbus Regional Dialysis Center, Inc. and Phenix City Nephrology Referral Center, Inc. Items 7(a) and 7(b) of the report stated that the historical financial statements 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 November 30, 1996. The purpose of this amendment is to file such financial statements and information. The historical financial statements of Panama City Artificial Kidney Center, P.A. ("PCAKC") and North Florida Artificial Kidney Center, P.A. ("NFAKC") are filed herewith since the Company is required to file financial statements covering at least a substantial majority of the businesses acquired for the most recent fiscal year and the most recent interim period for which a balance sheet was filed. Item 7. Financial Statements and Exhibits. ---------------------------------- (a) Financial Statements of Businesses Acquired. -------------------------------------------- The following lists the historical financial statements of Columbus Regional Dialysis Center, Inc. filed herewith: Report of Independent Accountants Balance Sheet as of December 31, 1995 Statement of Retained Earnings for the year ended December 31, 1995 Statement of Income for the year ended December 31, 1995 Statement of Cash Flows for the year ended December 31, 1995 Notes to Financial Statements Report of Independent Accountants Balance Sheet as of June 30, 1996 (unaudited) Statement of Retained Earnings for the six months ended June 30, 1996 (unaudited) Statement of Income for the six months ended June 30, 1996 (unaudited) Statement of Cash Flows for the six months ended June 30, 1996 (unaudited) Report of Independent Accountants Balance Sheet as of June 30, 1995 (unaudited) Statement of Retained Earnings for the six months ended June 30, 1995 (unaudited) Statement of Income for the six months ended June 30, 1995 (unaudited) Statement of Cash Flows for the six months ended June 30, 1995 (unaudited) The following lists the historical financial statements of Phenix City Nephrology Referral Center, Inc. filed herewith: (a) Financial Statements of Businesses Acquired (continued) Report of Independent Accountants Balance Sheet as of December 31, 1995 Statement of Retained Earnings for the year ended December 31, 1995 Statement of Income for the year ended December 31, 1995 Statement of Cash Flows for the year ended December 31, 1995 Notes to Financial Statements Report of Independent Accountants Balance Sheet as of June 30, 1996 (unaudited) Statement of Retained Earnings for the six months ended June 30, 1996 (unaudited) Statement of Income for the six months ended June 30, 1996 (unaudited) Statement of Cash Flows for the six months ended June 30, 1996 (unaudited) Report of Independent Accountants Balance Sheet as of June 30, 1995 (unaudited) Statement of Retained Earnings for the six months ended June 30, 1995 (unaudited) Statement of Income for the six months ended June 30, 1995 (unaudited) Statement of Cash Flows for the six months ended June 30, 1995 (unaudited) The following lists the historical financial statements of Panama City Artificial Kidney Center, P.A. ("PCAKC") and North Florida Artificial Kidney Center, P.A. ("NFAKC") filed herewith: Report of Independent Accountants Combined Balance Sheets at December 31, 1995 and June 30, 1996 (unaudited) Combined Statements of Operations for the year ended December 31, 1995 and for the three and six months ended June 30, 1995 (unaudited) and 1996 (unaudited) Combined Statements of Stockholders' Equity for the year ended December 31, 1995 (a) Financial Statements of Businesses Acquired (continued) Combined Statements of Cash Flows for the year ended December 31, 1995 and for the six months ended June 30, 1995 (unaudited) and 1996 (unaudited) Notes to Financial Statements (b) Pro Forma Financial Information. -------------------------------- The following lists the pro forma financial information filed herewith: Pro forma Consolidated Balance Sheets as of June 30, 1996 Pro forma Consolidated Statements of Operations for the year ended December 31, 1995 and the six months ended June 30, 1996 Notes to Pro Forma Consolidated Financial Statements (c) Exhibits. -------- The following exhibits are filed herewith: Exhibit No. Document ----------- -------- 23.1 Consent of Coopers & Lybrand, L.L.P. 23.1 Consent of Aronhalt, Stringer & Company, CPA's 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: November 27, 1996 INDEPENDENT AUDITOR'S REPORT Board of Directors Columbus Regional Dialysis Center, Inc. Columbus, Georgia We have audited the balance sheet of Columbus Regional Dialysis Center, Inc. as of December 31, 1995 and the related statements of income, retained earnings and cash flows for the year then ended. These financial statements are the responsibility of the Company'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 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 used 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, based on our audit, the financial statements referred to above present fairly, in all material respects, the financial position of Columbus Regional Dialysis Center, Inc. as of December 31, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. ARONHALT, STRINGER & COMPANY /s/Aronhalt, Stringer & Company, ------------------------------- Certified Public Accountants October 31, 1996 COLUMBUS REGIONAL DIALYSIS CENTER, INC. --------------------------------------- Balance Sheet ------------- December 31, 1995 ----------------- ASSETS ------
CURRENT ASSETS: - -------------- Cash $ 91,494 Accounts Receivable: Trade (net of allowance for doubtful accounts of $196,000) $433,707 Employee Advances 30 433,737 -------- Inventories 81,060 Prepaid Expenses: Insurance $ 20,969 Rent 875 21,844 -------- --------- Total Current Assets $628,135 EQUIPMENT AND LEASEHOLD IMPROVEMENTS: - -------------------------------------- Depreciation Taken Cost To Date Balance ---- ------- ------- Medical Equipment $366,045 $210,334 $155,711 Office Furniture and Equipment 58,308 24,519 33,789 Automotive Equipment 17,319 6,106 11,213 Leasehold Improvements 16,116 5,099 11,017 -------- -------- --------- Total $457,788 $246,058 $211,730 211,730 ======== ======== ========= ------- TOTAL ASSETS $839,865 - ------------ ========
LIABILITIES AND STOCKHOLDER'S EQUITY ------------------------------------
CURRENT LIABILITIES: ------------------- Accounts Payable: Trade $139,952 Stockholder 10,000 Other 1,086 $151,038 -------- Note Payable - Stockholder: Amount Due Within One Year 32,535 Employees Payroll Taxes Withheld 1,952 Accrued Expenses: Salaries and Wages $ 12,549 Profit Sharing Contribution 14,608 27,157 -------- --------- Total Current Liabilities $212,682 LONG-TERM LIABILITIES: - ---------------------- Note Payable - Stockholder: Amount Due After One Year 83,421 ------ Total Liabilities $296,103 STOCKHOLDER'S EQUITY: - --------------------- Common Stock, $1 Par Value, 500,000 Shares Authorized, 500 Shares Issued and Outstanding $ 500 Retained Earnings 543,262 -------- Total Stockholder's Equity 543,762 -------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $839,865 - ------------------------------------------ ========
See auditor's report and accompanying notes to financial statements. COLUMBUS REGIONAL DIALYSIS CENTER, INC. --------------------------------------- Statement of Retained Earnings ------------------------------ For the Year Ended December 31, 1995 ------------------------------------
BALANCE - JANUARY 1, 1995 $ 391,155 ------------------------- Add: Net Income for the Year Ended December 31, 1995 429,509 Deduct: Distributions to Stockholders (277,402) --------- BALANCE - DECEMBER 31, 1995 $ 543,262 --------------------------- =========
See auditor's report and accompanying notes to financial statements. COLUMBUS REGIONAL DIALYSIS CENTER, INC. --------------------------------------- Statement of Income ------------------- For the Year Ended December 31, 1995 ------------------------------------
PATIENT REVENUE: - ---------------- Inpatient Dialysis Fees $2,021,126 Epotin 358,694 Other 138,973 ---------- Total Patient Revenue $2,518,793 PATIENT CARE COSTS: - ------------------- Salaries and Wages $ 547,144 Medical Supplies 727,925 Center Rental 104,528 Professional Fees 125,145 Depreciation 51,308 Repairs and Maintenance 47,096 Insurance 95,607 Taxes 43,764 Housekeeping 23,692 Utilities 25,038 Other 6,158 ---------- Total Patient Care Costs 1,797,405 ---------- Operating Profit $ 721,388 ADMINISTRATIVE EXPENSES: - ---------------------------------------------- Salaries and Wages $ 40,969 Profit Sharing Plan Contribution 14,608 Office Supplies and Expense 18,823 Insurance 10,711 Professional Fees 43,685 Office Rental 18,097 Equipment Rental 6,000 Telephone 10,063 Interest 10,734 Taxes 18,983 Depreciation and Amortization 14,255 Repairs and Maintenance 8,056 Utilities 2,782 Provision for Doubtful Accounts 72,011 Other 3,141 ---------- Total Administrative Expenses 292,918 -------- Income From Operations $428,470 NON-OPERATING INCOME: --------------------- Interest 1,039 ---------- NET INCOME $ 429,509 ---------- ==========
See auditor's report and accompanying notes to financial statements. COLUMBUS REGIONAL DIALYSIS CENTER, INC. --------------------------------------- Statement of Cash Flows ----------------------- For the Year Ended December 31, 1995 ------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: ------------------------------------- Net Income $ 429,509 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 65,563 Provision for Doubtful Accounts 72,011 Changes in Operating Assets and Liabilities: - ---------------------------------------------------------- (Increase) Decrease in Accounts Receivable (139,272) (Increase) Decrease in Inventories (24,098) (Increase) Decrease in Prepaid Expenses (1,110) Increase (Decrease) in Accounts Payable (3,128) Increase (Decrease) in Accrued Expenses 6,858 Increase (Decrease) in Other Liabilities (1,758) --------- Net Cash Provided by Operating Activities $ 404,575 CASH FLOWS FROM INVESTING ACTIVITIES: ------------------------------------- Purchase of Equipment $ (66,728) --------- Net Cash Used by Investing Activities (66,728) CASH FLOWS FROM FINANCING ACTIVITIES: ------------------------------------- Principal Payments on Long-Term Debt $(32,439) Distributions to Stockholders (277,402) --------- Net Cash Used by Financing Activities (309,841) --------- Net Increase in Cash $28,006 Cash at Beginning of Year 63,488 ------- Cash at End of Year $91,494 =======
See auditor's report and accompanying notes to financial statements. COLUMBUS REGIONAL DIALYSIS CENTER, INC. --------------------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- 1. Summary of Significant Accounting Policies ------------------------------------------ a) Nature of Business - The Company provides dialysis treatments, within the State of Georgia, for End Stage Renal Disease (ESRD) patients on an outpatient basis. During 1995 approximately 78% of the Company's revenue was received from Medicare and Medicaid and other state administered programs. Consequently, the Company's ability to collect amounts due for services to patients is dependent on third party payors. b) Method of Revenue Recognition - The Company uses the accrual method in recognizing income. Patient revenue is recorded in the period in which the service is provided using established rates. The allowance for doubtful accounts is management's estimate of amounts that may prove to be uncollectible. c) Inventory - Inventories consist of medical supplies and are stated at the lower of cost (first-in, first-out) or market value. d) Equipment and Leasehold Improvements - Equipment and Leasehold Improvements are recorded at cost. Depreciation and Amortization is provided using the straight-line method for financial reporting purposes at rates based on the following estimated useful lives:
Years ----- Medical Equipment 5 Office Furniture and Equipment 5 - 7 Automotive Equipment 5 Leasehold Improvements 10 - 15
For federal income tax purposes, depreciation is computed using the Accelerated Cost Recovery System and the Modified Accelerated Cost Recovery System. Expenditures for major renewals and betterments that extend the useful lives of equipment and leasehold improvements are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. e) Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. f) Income Taxes - The Shareholders of the Company have, effective January 1, 1990, elected to be taxed under IRC Section 1362 (S Corporation). All corporate income will be taxed at the shareholder level. Therefore, no current year provision for corporate income taxes is required. 2. Long-Term Debt -------------- At December 31, 1995 long-term debt consists of the following: Note Payable to Ashok Kumar, M.D. Payable $3,386.34 per month including interest at 8% (Unsecured). $115,956 Less amount due within one year (32,535) --------- $ 83,421 =========
Maturities of long-term debt are as follows: Year Ending December 31, Amount ------------------------ --------- 1996 $ 32,535 1997 35,236 1998 38,160 1999 10,025 --------- $ 115,956 =========
3. Leasing Arrangements -------------------- The Company conducts its operations from facilities leased under non- cancelable leases with initial terms ranging from three to ten years with certain renewal options, expiring on various dates through December, 1999. The Company is subleasing a portion of its building located in Columbus, GA on a year-to-year basis. Minimum future rental payments under non-cancelable operating leases having remaining terms in excess of one year as of December 31, 1995, and for each of the next five years and in aggregate are:
Year Ending December 31, Amount ------------------------ --------- 1996 $ 206,027 1997 190,527 1998 180,012 1999 177,300 2000 -0- --------- Total Future Rental Payments $ 753,866 =========
4. Transactions With Related Parties --------------------------------- The Company is leasing a building in Columbus, GA from The Ashok and Mary Kumar Family Limited Partnership, a partnership controlled by an officer of the Company, Ashok Kumar, M.D. This lease will expire on December 31, 1999. During the year ended December 31, 1995, the Company paid $145,860 to The Ashok and Mary Kumar Family Limited Partnership under this lease. The Company receives computer related services from Renal Associates, P.C., a corporation controlled by an officer of the Company. During the year ended December 31, 1995, the Company paid $6,000 to Renal Associates, P.C. for these services. The Company has a sublease of its facilities in Columbus, Ga to Renal Associates, P.C., a corporation controlled by an officer of the Company. During the year ended December 31, 1995, the Company received $58,344 under this lease. The Company has entered into an agreement with Ashok Kumar, M.D., an officer of the Company, to act as Medical Director. This contract is renewable on a year-to-year basis. During the year ended December 31, 1995, the Company paid $48,000 for this service. The Company has entered into an agreement with Joyce A. Dozier, a stockholder of the Company, to act as Medical Administrator. This contract is renewable on a year-to-year basis. During the year ended December 31, 1995, the Company paid $48,000 for this service. 5. Benefit Plans ------------- The Company has a defined contribution savings plan (401(k) Profit Sharing Plan) which covers substantially all employees. For the year ended December 31, 1995, the Board of Directors has determined that the plan contribution shall be $14,608. 6. Concentrations of Credit Risk ----------------------------- The Company does not believe there are any significant credit risks associated with accounts receivable from Medicare and Medicaid and other state administered programs. 7. Subsequent Events ----------------- On September 1, 1996 the Company sold substantially all of its assets, with the exception of accounts receivable to Renal Treatment Centers, Inc. The Company received cash of $1,616,102 and a 5.5% $3,622,500 note, payable January 3, 1997. 8. Supplemental Disclosure of Cash Flow Information ------------------------------------------------ The Company considers all short term investments with an original maturity of three months or less to be cash equivalents. Cash paid during the year ended December 31, 1995 for Interest and Income taxes was as follows: Interest $ 11,723 ======== Income Taxes $ -0- ======== INDEPENDENT AUDITOR'S REPORT Board of Directors Columbus Regional Dialysis Center, Inc. Columbus, GA We have compiled the accompanying balance sheet of Columbus Regional Dialysis Center, Inc. as of June 30, 1996 and the related statements of income and retained earnings and cash flows for the six months then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them. Management has elected to omit substantially all of the disclosures required by generally accepted accounting principles. If the omitted disclosures were included in the financial statements, they might influence the user's conclusions about the Company's financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters. ARONHALT, STRINGER & COMPANY /s/ Aronhalt, Stinger & Company ------------------------------------ Certified Public Accountants November 8, 1996 COLUMBUS REGIONAL DIALYSIS CENTER, INC. --------------------------------------- Balance Sheet ------------- June 30, 1996 ------------- ASSETS ------
CURRENT ASSETS: - --------------- Cash $ 32,610 Accounts Receivable: Trade (net of allowance for doubtful accounts of $166,000) 540,380 Inventories 85,558 Prepaid Expenses: Insurance $ 11,573 Rent 875 12,448 --------- --------- Total Current Assets $670,996 EQUIPMENT AND LEASEHOLD IMPROVEMENTS: - ------------------------------------- Depreciation Taken Cost To Date Balance ------ ---------- --------- Medical Equipment $370,106 $233,837 $136,269 Office Furniture and Equipment 79,183 30,279 48,904 Automotive Equipment 17,319 7,852 9,467 Leasehold Improvements 31,207 7,253 23,954 -------- --------- --------- Total $497,815 $279,221 $218,594 218,594 ======== ========= ========= ------- TOTAL ASSETS $889,590 ------------ ========
LIABILITIES AND STOCKHOLDER'S EQUITY ------------------------------------
CURRENT LIABILITIES: -------------------- Accounts Payable: Trade $ 99,705 Stockholder 10,000 Other 929 $ 110,634 ------- Note Payable - Stockholder: Amount Due Within One Year 33,859 Employees Payroll Taxes Withheld 2,505 Accrued Expenses: Salaries and Wages $ 13,270 Payroll Taxes 1,558 14,828 ------- --------- Total Current Liabilities $ 161,826 LONG-TERM LIABILITIES: ---------------------- Note Payable - Stockholder: Amount Due After One Year 66,154 ------ Total Liabilities $ 227,980 STOCKHOLDER'S EQUITY: --------------------- Common Stock, $1 Par Value, 500,000 Shares Authorized, 500 Shares Issued and Outstanding $ 500 Retained Earnings 661,110 ------- Total Stockholder's Equity 661,610 ------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 889,590 ------------------------------------------ ========
See accountant's compilation report. COLUMBUS REGIONAL DIALYSIS CENTER, INC. --------------------------------------- Statement of Retained Earnings ------------------------------ For the Six Months Ended June 30, 1996 --------------------------------------
BALANCE - JANUARY 1, 1996 $ 543,262 ------------------------- Add: Net Income for the Six Months Ended June 30, 1996 242,848 Deduct: Distributions to Stockholders (125,000) -------- BALANCE - JUNE 30, 1996 $ 661,110 ----------------------- ========
See accountant's compilation report. COLUMBUS REGIONAL DIALYSIS CENTER, INC. --------------------------------------- Statement of Income ------------------- For the Six Months Ended June 30, 1996 --------------------------------------
PATIENT REVENUE: ---------------- Inpatient Dialysis Fees $ 1,089,229 Epotin 163,874 Other 143,945 ----------- Total Patient Revenue $ 1,397,048 PATIENT CARE COSTS: ------------------- Salaries and Wages $ 289,975 Medical Supplies 443,595 Center Rental 65,016 Professional Fees 59,308 Depreciation 23,513 Repairs and Maintenance 25,265 Insurance 44,626 Taxes 25,040 Housekeeping 13,814 Utilities 12,373 Other 4,156 ---------- Total Patient Care Costs 1,006,681 ---------- Operating Profit $ 390,367 ADMINISTRATIVE EXPENSES: ------------------------ Salaries and Wages $ 23,413 Office Supplies and Expense 9,578 Insurance 6,269 Professional Fees 26,168 Office Rental 5,094 Equipment Rental 3,000 Telephone 6,701 Interest 4,512 Taxes 4,755 Depreciation and Amortization 9,650 Repairs and Maintenance 2,805 Utilities 235 Provision for Doubtful Accounts 43,117 Other 2,958 ----------- Total Administrative Expenses 148,255 --------- Income From Operations $ 242,112 NON-OPERATING INCOME: --------------------- Interest 736 --------- NET INCOME $ 242,848 ---------- =========
See accountant's compilation report. COLUMBUS REGIONAL DIALYSIS CENTER, INC. --------------------------------------- Statement of Cash Flows ----------------------- For the Six Months Ended June 30, 1996 --------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: ------------------------------------- Net Income $ 242,848 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 33,163 Provision for Doubtful Accounts 43,117 Changes in Operating Assets and Liabilities: -------------------------------------------- (Increase) Decrease in Accounts Receivable (149,763) (Increase) Decrease in Inventories (4,498) (Increase) Decrease in Prepaid Expenses 9,396 Increase (Decrease) in Accounts Payable (40,404) Increase (Decrease) in Accrued Expenses (12,329) Increase (Decrease) in Other Liabilities 556 --------- Net Cash Provided by Operating Activities $ 122,086 CASH FLOWS FROM INVESTING ACTIVITIES: ------------------------------------- Purchase of Equipment $ (24,936) Purchase of Leasehold Improvements (15,091) --------- Net Cash Used by Investing Activities (40,027) CASH FLOWS FROM FINANCING ACTIVITIES: ------------------------------------- Principal Payments on Long-Term Debt $ (15,943) Distributions to Stockholders (125,000) --------- Net Cash Used by Financing Activities (140,943) -------- Net (Decrease) in Cash $ (58,884) Cash at Beginning of Year 91,494 -------- Cash at June 30, 1996 $ 32,610 ========
See accountant's compilation report. INDEPENDENT AUDITOR'S REPORT Board of Directors Columbus Regional Dialysis Center, Inc. Columbus, GA We have compiled the accompanying balance sheet of Columbus Regional Dialysis Center, Inc. as of June 30, 1995 and the related statements of income and retained earnings and cash flows for the six months then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them. Management has elected to omit substantially all of the disclosures required by generally accepted accounting principles. If the omitted disclosures were included in the financial statements, they might influence the user's conclusions about the Company's financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters. ARONHALT, STRINGER & COMPANY /s/Aronhalt, Stringer & Company ----------------------------------- Certified Public Accountants November 7, 1996 COLUMBUS REGIONAL DIALYSIS CENTER, INC. --------------------------------------- Balance Sheet ------------- June 30, 1995 ------------- ASSETS ------
CURRENT ASSETS: - --------------- Cash $ 99,416 Accounts Receivable: Trade (net of allowance for doubtful accounts of $164,000) $299,773 Employee Advances 30 299,803 ------ Inventories 59,939 Prepaid Expenses: Insurance 10,161 ------- Total Current Assets $ 469,319 EQUIPMENT AND LEASEHOLD IMPROVEMENTS: ------------------------------------- Depreciation Taken Cost To Date Balance --------- --------- ------- Medical Equipment $305,125 $184,677 $120,448 Office Furniture and Equipment 55,637 19,676 35,961 Automotive Equipment 17,319 4,362 12,957 Leasehold Improvements 16,116 4,458 11,658 -------- --------- --------- Total $394,197 $213,173 $181,024 181,024 ======== ========= ========= ------- TOTAL ASSETS $650,343 ------------ ========
LIABILITIES AND STOCKHOLDER'S EQUITY ------------------------------------
CURRENT LIABILITIES: - -------------------- Accounts Payable: Trade $64,114 Stockholder 10,000 Other 598 $ 74,712 ------- Note Payable - Stockholder: Amount Due Within One Year 31,264 Employees Payroll Taxes Withheld 3,206 Accrued Expenses: Salaries and Wages $11,085 Payroll Taxes 693 11,778 ------- --------- Total Current Liabilities $120,960 LONG-TERM LIABILITIES: ---------------------- Note Payable - Stockholder: Amount Due After One Year 100,013 ------- Total Liabilities $220,973 STOCKHOLDER'S EQUITY: --------------------- Common Stock, $1 Par Value, 500,000 Shares Authorized, 500 Shares Issued and Outstanding $ 500 Retained Earnings 428,870 -------- Total Stockholder's Equity 429,370 ------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $650,343 ------------------------------------------ ========
See accountant's compilation report. COLUMBUS REGIONAL DIALYSIS CENTER, INC. --------------------------------------- Statement of Retained Earnings ------------------------------ For the Six Months Ended June 30, 1995 --------------------------------------
BALANCE - JANUARY 1, 1995 $ 391,155 ------------------------- Add: Net Income for the Six Months Ended June 30, 1995 240,117 Deduct: Distributions to Stockholders (202,402) ------- BALANCE - JUNE 30, 1995 $ 428,870 ----------------------- =========
See accountant's compilation report. COLUMBUS REGIONAL DIALYSIS CENTER, INC. --------------------------------------- Statement of Income ------------------- For the Six Months Ended June 30, 1995 --------------------------------------
PATIENT REVENUE: ---------------- Inpatient Dialysis Fees $ 950,250 Epotin 148,224 Other 51,871 ---------- Total Patient Revenue $ 1,150,345 PATIENT CARE COSTS: ------------------- Salaries and Wages $ 256,159 Medical Supplies 276,600 Center Rental 50,902 Professional Fees 61,688 Depreciation 25,651 Repairs and Maintenance 13,037 Insurance 46,544 Taxes 21,366 Housekeeping 11,037 Utilities 12,491 Other 2,316 ---------- Total Patient Care Costs 777,791 ---------- Operating Profit $ 372,554 ADMINISTRATIVE EXPENSES: ------------------------ Salaries and Wages $ 21,477 Office Supplies and Expense 9,511 Insurance 5,099 Professional Fees 23,285 Office Rental 8,897 Equipment Rental 3,000 Telephone 5,293 Interest 5,648 Taxes 4,532 Depreciation and Amortization 7,027 Repairs and Maintenance 3,453 Utilities 1,388 Provision for Doubtful Accounts 32,693 Other 1,270 ---------- Total Administrative Expenses 132,573 ---------- Income From Operations $ 239,981 NON-OPERATING INCOME: --------------------- Interest 136 ---------- NET INCOME $ 240,117 ---------- ==========
See accountant's compilation report. COLUMBUS REGIONAL DIALYSIS CENTER, INC. --------------------------------------- Statement of Cash Flows ----------------------- For the Six Months Ended June 30, 1995 --------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: ------------------------------------- Net Income $240,117 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 32,678 Provision for Doubtful Accounts 32,693 Changes in Operating Assets and Liabilities: -------------------------------------------- (Increase) Decrease in Accounts Receivable 33,980 (Increase) Decrease in Inventories (2,977) (Increase) Decrease in Prepaid Expenses 10,573 Increase (Decrease) in Accounts Payable (79,454) Increase (Decrease) in Accrued Expenses (8,521) Increase (Decrease) in Other Liabilities (504) -------- Net Cash Provided by Operating Activities $258,585 CASH FLOWS FROM INVESTING ACTIVITIES: ------------------------------------- Purchase of Equipment $ (3,137) -------- Net Cash Used by Investing Activities (3,137) CASH FLOWS FROM FINANCING ACTIVITIES: ------------------------------------- Principal Payments on Long-Term Debt $ (17,118) Distributions to Stockholders (202,402) --------- Net Cash Used by Financing Activities (219,520) ------- Net Increase in Cash $ 35,928 Cash at Beginning of Year 63,488 -------- Cash at June 30, 1995 $ 99,416 ========
See accountant's compilation report. INDEPENDENT AUDITOR'S REPORT Board of Directors Phenix City Nephrology Referral Center, Inc. Phenix City, Alabama We have audited the balance sheet of Phenix City Nephrology Referral Center, Inc. as of December 31, 1995 and the related statements of income, retained earnings and cash flows for the year then ended. These financial statements are the responsibility of the Company'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 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 used 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, based on our audit, the financial statements referred to above present fairly, in all material respects, the financial position of Phenix City Nephrology Referral Center, Inc. as of December 31, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. ARONHALT, STRINGER & COMPANY /s/Aronhalt, Stinger & Company -------------------------------- Certified Public Accountants October 31, 1996 PHENIX CITY NEPHROLOGY REFERRAL CENTER, INC. -------------------------------------------- Balance Sheet ------------- December 31, 1995 ----------------- ASSETS ------
CURRENT ASSETS: --------------- Cash $ 58,597 Accounts Receivable: Trade (net of allowance for doubtful accounts of $105,000) $ 335,585 Employee Advances 7 335,592 -------- Inventories 33,198 Prepaid Expenses: Insurance 29,015 -------- Total Current Assets $ 456,402 EQUIPMENT AND LEASEHOLD IMPROVEMENTS: ------------------------------------- Depreciation Taken Cost To Date Balance ------------ --------- --------- Medical Equipment $ 360,286 $ 298,471 $ 61,815 Office Furniture and Equipment 54,480 42,347 12,133 Automotive Equipment 16,749 6,655 10,094 Leasehold Improvements 15,340 5,084 10,256 -------- --------- --------- Totals $ 446,855 $ 352,557 $ 94,298 94,298 ======== ========= ========= --------- TOTAL ASSETS $ 550,700 ------------ =========
LIABILITIES AND STOCKHOLDER'S EQUITY ------------------------------------
CURRENT LIABILITIES: -------------------- Accounts Payable: Trade $ 23,915 Other 1,293 $ 25,208 ------- Note Payable: Amount Due Within One Year 5,309 Employees Payroll Taxes Withheld 1,797 Accrued Expenses: Salaries and Wages $ 12,538 Profit Sharing Contribution 18,571 Payroll Taxes 164 31,273 ------- -------- Total Current Liabilities $ 63,587 LONG-TERM LIABILITIES: ---------------------- Note Payable: Amount Due After One Year 8,686 ----- Total Liabilities $ 72,273 STOCKHOLDER'S EQUITY: --------------------- Common Stock, $1 Par Value, 10,000 Shares Authorized, Issued and Outstanding $ 10,000 Capital in Excess of Par Value 10,000 Retained Earnings 458,427 -------- Total Stockholder's Equity 478,427 -------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 550,700 ------------------------------------------ =========
See auditor's report and accompanying notes to financial statements. PHENIX CITY NEPHROLOGY REFERRAL CENTER, INC. -------------------------------------------- Statement of Retained Earnings ------------------------------ For the Year Ended December 31, 1995 ------------------------------------
BALANCE - JANUARY 1, 1995 $391,155 ------------------------- Add: Net Income for the Year Ended December 31, 1995 429,509 Deduct: Distributions to Stockholders (277,402) -------- BALANCE - DECEMBER 31, 1995 $543,262 --------------------------- ========
See auditor's report and accompanying notes to financial statements. PHENIX CITY NEPHROLOGY REFERRAL CENTER, INC. -------------------------------------------- Statement of Income ------------------- For the Year Ended December 31, 1995 ------------------------------------ PATIENT REVENUE: ---------------- Inpatient Dialysis Fees $1,839,470 Home Training and Support 614,552 Epotin 234,308 Other 103,096 ---------- Total Patient Revenue $2,791,426 PATIENT CARE COSTS: ------------------- Salaries and Wages $ 573,359 Medical Supplies 714,418 Center Rental 100,332 Professional Fees 123,573 Depreciation 20,404 Repairs and Maintenance 33,842 Insurance 81,015 Taxes 46,607 Housekeeping 17,284 Utilities 13,976 Other 6,689 ---------- Total Patient Care Costs 1,731,499 ---------- Operating Profit $1,059,927 ADMINISTRATIVE EXPENSES: ------------------------ Salaries and Wages $ 79,426 Profit Sharing Plan 18,571 Office Supplies and Expense 15,169 Insurance 25,434 Professional Fees 60,187 Office Rental 11,461 Equipment Rental 6,000 Telephone 13,204 Interest 2,743 Taxes 15,719 Depreciation and Amortization 9,681 Repairs and Maintenance 6,888 Utilities 1,529 Provision for Doubtful Accounts 116,816 Other 2,241 ---------- Total Administrative Expenses 385,069 ---------- Income From Operations $ 674,858 NON-OPERATING INCOME: --------------------- Interest $ 4,080 Gain on Sale of Equipment 200 ---------- Total Non-operating Income 4,280 ---------- NET INCOME $ 679,138 ---------- ==========
See auditor's report and accompanying notes to financial statements. PHENIX CITY NEPHROLOGY REFERRAL CENTER, INC. -------------------------------------------- Statement of Cash Flows ----------------------- For the Year Ended December 31, 1995 ------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: ------------------------------------- Net Income $ 679,138 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 30,085 Provision for Doubtful Accounts 116,816 Gain on Sale of Equipment (200) Changes in Operating Assets and Liabilities: -------------------------------------------- (Increase) Decrease in Accounts Receivable (176,558) (Increase) Decrease in Inventories 22,163 (Increase) Decrease in Prepaid Expenses (2,474) Increase (Decrease) in Accounts Payable (63,720) Increase (Decrease) in Accrued Expenses 7,113 Increase (Decrease) in Other Liabilities (1,213) --------- Net Cash Provided by Operating Activities $ 611,150 CASH FLOWS FROM INVESTING ACTIVITIES: ------------------------------------- Purchase of Equipment $ (28,472) Proceeds from Sale of Equipment 200 --------- Net Cash Used by Investing Activities (28,272) CASH FLOWS FROM FINANCING ACTIVITIES: ------------------------------------- Principal Payments on Long-Term Debt $ (4,802) Distributions to Stockholders (559,782) --------- Net Cash Used by Financing Activities (564,584) -------- Net Increase in Cash $ 18,294 Cash at Beginning of Year 40,303 -------- Cash at End of Year $ 58,597 ========
See auditor's report and accompanying notes to financial statements. PHENIX CITY NEPHROLOGY REFERRAL CENTER, INC. -------------------------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- 1. Summary of Significant Accounting Policies ------------------------------------------ a) Nature of Business - The Company provides dialysis treatments, within the State of Alabama, for End Stage Renal Disease (ESRD) patients on an outpatient basis or in the patient's home. The Company has also entered into service agreements with hospitals to provide dialysis treatments on an inpatient basis. During 1995 approximately 55% of the Company's revenue was received from Medicare and Medicaid and other state administered programs. Consequently, the Company's ability to collect amounts due for services to patients is dependent on third party payors. b) Method of Revenue Recognition - The Company uses the accrual method in recognizing income. Patient revenue is recorded in the period in which the service is provided using established rates. The allowance for doubtful accounts is management's estimate of amounts that may prove to be uncollectible. c) Inventory -Inventories consist of medical supplies and are stated at the lower of cost (first-in, first-out) or market value. d) Equipment and Leasehold Improvements- Equipment and Leasehold Improvements are recorded at cost. Depreciation and Amortization is provided using the straight-line method for financial reporting purposes at rates based on the following estimated useful lives: Years ----- Medical Equipment 5 Office Furniture and Equipment 5 - 7 Automotive Equipment 5 Leasehold Improvements 10 - 15 For federal income tax purposes, depreciation is computed using the Accelerated Cost Recovery System and the Modified Accelerated Cost Recovery System. Expenditures for major renewals and betterments that extend the useful lives of equipment and leasehold improvements are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. e) Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. f) Income Taxes - The Shareholders of the Company have, effective November 5, 1984, elected to be taxed under IRC Section 1362 (S Corporation). All corporate income will be taxed at the shareholder level. Therefore, no current year provision for corporate income taxes is required. 2. Long-Term Debt -------------- At December 31, 1995 long-term debt consists of the following: Note Payable to First Alabama Bank, Payable $535.73 per month including interest at prime plus 1% (Unsecured). $ 13,995 Less amount due within one year (5,309) -------- $ 8,686 ======== Maturities of long-term debt are as follows: Year Ending December 31, Amount ------------------------ ------- 1996 $ 5,309 1997 5,845 1998 2,841 ------- $13,995 ======= 3. Leasing Arrangements -------------------- The Company conducts its operations from facilities leased under a non- cancelable ten year lease expiring in December, 1999. There is an option to renew the lease for five consecutive periods of one year. The Company is subleasing a portion of the building on a year-to-year basis. Minimum future rental payments under non-cancelable operating leases having remaining terms in excess of one year as of December 31, 1995, and for each of the next five years and in aggregate are: Year Ending December 31, Amount ------------------------ -------- 1996 $120,336 1997 126,353 1998 132,671 1999 139,305 2000 -0- -------- Total Minimum Future Rental Payments $518,665 ======== 4. Transactions With Related Parties --------------------------------- The Company has leased its facilities from The Ashok and Mary Kumar Family Limited Partnership, a partnership controlled by an officer of the Company, Ashok Kumar, M.D. This lease will expire on December 31, 1999. During the year ended December 31, 1995, the Company paid $114,600 to The Ashok and Mary Kumar Family Limited Partnership under this lease. The Company receives a number of services from Renal Associates, P.C., a corporation controlled by an officer of the Company. During the year ended December 31, 1995, the Company paid $37,200 to Renal Associates, P.C. for medical administrator and computer related services. The Company has a sublease of its facilities to Renal Associates, P.C., a corporation controlled by an officer of the Company. During the year ended December 31, 1995, the Company received $3,060 under this lease. The Company has entered into various agreements with Ashok Kumar, M.D., an officer of the Company, to act as Medical Director and Administrative Manager. These contracts are renewable on a year-to-year basis. During the year ended December 31, 1995, the Company paid $90,000 for these services. 5. Benefit Plans ------------- The Company has a defined contribution savings plan (401(k) Profit Sharing Plan) which covers substantially all employees. For the year ended December 31, 1995, the Board of Directors has determined that the plan contribution shall be $18,571. 6. Commitments and Contingencies ----------------------------- The Company is a co-maker of a loan from the First Alabama Bank to Ashok Kumar, M.D. and Phenix City Nephrology Referral Center, Inc. (jointly). At December 31, 1995 the Company's share of the outstanding loan was $13,995, the remaining $248,204 is owed by Ashok Kumar, M.D. 7. Concentrations of Credit Risk ----------------------------- The Company does not believe there are any significant credit risks associated with accounts receivable from Medicare and Medicaid and other state administered programs. 8. Subsequent Events ----------------- On September 1, 1996 the Company sold substantially all of its assets, with the exception of accounts receivable to Renal Treatment Centers, Inc. The Company received cash of $1,956,959 and a 5.5% $4,427,500 note, payable January 3, 1997. 9. Supplemental Disclosure of Cash Flow Information ------------------------------------------------ The Company considers all short term investments with an original maturity of three months or less to be cash equivalents. Cash paid during the year ended December 31, 1995 for Interest and Income taxes was as follows: Interest $ 2,743 ======= Income Taxes $ -0- ======= INDEPENDENT AUDITOR'S REPORT Board of Directors Phenix City Nephrology Referral Center, Inc. Phenix City, AL We have compiled the accompanying balance sheet of Phenix City Nephrology Referral Center, Inc. as of June 30, 1996 and the related statements of income and retained earnings and cash flows for the six months then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them. Management has elected to omit substantially all of the disclosures required by generally accepted accounting principles. If the omitted disclosures were included in the financial statements, they might influence the user's conclusions about the Company's financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters. ARONHALT, STRINGER & COMPANY /s/ Aronhalt, Stringer & Company ------------------------------------- Certified Public Accountants November 6, 1996 PHENIX CITY NEPHROLOGY REFERRAL CENTER, INC. -------------------------------------------- Balance Sheet ------------- June 30, 1996 ------------- ASSETS ------ CURRENT ASSETS: - --------------- Cash $ 51,485 Accounts Receivable: Trade (net of allowance for doubtful accounts of $148,000) 539,552 Inventories 36,680 Prepaid Expenses: Insurance 12,944 --------- Total Current Assets $640,661 EQUIPMENT AND LEASEHOLD IMPROVEMENTS: - ------------------------------------ Depreciation Taken Cost To Date Balance --------- --------- --------- Medical Equipment $361,965 $311,113 $50,852 Office Furniture and Equipment 54,480 44,315 10,165 Automotive Equipment 16,749 8,557 8,192 Leasehold Improvements 15,340 5,690 9,650 -------- --------- --------- Totals $448,534 $369,675 $ 78,859 78,859 ======== ========= ========= --------- TOTAL ASSETS $ 719,520 ------------ ========= LIABILITIES AND STOCKHOLDER'S EQUITY ------------------------------------ CURRENT LIABILITIES: - -------------------- Accounts Payable: Trade $29,911 Other 1,409 $31,320 ------- Note Payable: First Alabama Bank 5,620 Employees Payroll Taxes Withheld 1,817 Accrued Expenses: Salaries and Wages $12,320 Payroll Taxes 1,573 13,893 ------- -------- Total Current Liabilities $ 52,650 LONG-TERM LIABILITIES: - ---------------------- Note Payable: First Alabama Bank 5,757 -------- Total Liabilities $ 58,407 STOCKHOLDER'S EQUITY: - --------------------- Common Stock, $1 Par Value, 10,000 Shares Authorized, Issued and Outstanding $ 10,000 Capital in Excess of Par Value 10,000 Retained Earnings 641,113 -------- Total Stockholder's Equity 661,113 -------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $719,520 - ------------------------------------------ ========
See accountant's compilation report. PHENIX CITY NEPHROLOGY REFERRAL CENTER, INC. -------------------------------------------- Statement of Retained Earnings ------------------------------ For the Six Months Ended June 30, 1996 -------------------------------------- BALANCE - JANUARY 1, 1996 $458,427 ------------------------- Add: Net Income for the Six Months Ended June 30, 1996 427,725 Deduct: Distributions to Stockholders (245,039) -------- BALANCE - JUNE 30, 1996 $641,113 ----------------------- ======= See accountant's compilation report. PHENIX CITY NEPHROLOGY REFERRAL CENTER, INC. -------------------------------------------- Statement of Income ------------------- For the Six Months Ended June 30, 1996 --------------------------------------
PATIENT REVENUE: - ---------------- Inpatient Dialysis Fees $1,006,374 Home Training and Support 268,051 Epotin 180,600 Other 95,088 ---------- Total Patient Revenue $1,550,113 PATIENT CARE COSTS: - ------------------- Salaries and Wages $ 296,037 Medical Supplies 418,057 Center Rental 58,547 Professional Fees 60,607 Depreciation 12,642 Repairs and Maintenance 7,351 Insurance 47,110 Taxes 25,750 Housekeeping 12,950 Utilities 8,726 Other 2,191 ---------- Total Patient Care Costs 949,968 ---------- Operating Profit $ 600,145 ADMINISTRATIVE EXPENSES: - ------------------------ Salaries and Wages $ 33,667 Office Supplies and Expense 5,005 Insurance 13,548 Professional Fees 34,364 Equipment Rental 3,000 Telephone 6,551 Interest 596 Taxes 2,881 Depreciation and Amortization 4,476 Repairs and Maintenance 3,295 Provision for Doubtful Accounts 64,623 Other 800 ---------- Total Administrative Expenses 172,806 ---------- Income From Operations $ 427,339 NON-OPERATING INCOME: - --------------------- Interest 386 ---------- NET INCOME $ 427,725 - ---------- ==========
See accountant's compilation report. PHENIX CITY NEPHROLOGY REFERRAL CENTER, INC. -------------------------------------------- Statement of Cash Flows ----------------------- For the Six Months Ended June 30, 1996 --------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: - ------------------------------------- Net Income $ 427,725 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 17,118 Provision for Doubtful Accounts 64,623 Changes in Operating Assets and Liabilities: -------------------------------------------- (Increase) Decrease in Accounts Receivable (268,583) (Increase) Decrease in Inventories (3,482) (Increase) Decrease in Prepaid Expenses 16,071 Increase (Decrease) in Accounts Payable 6,112 Increase (Decrease) in Accrued Expenses (17,380) Increase (Decrease) in Other Liabilities 20 --------- Net Cash Provided by Operating Activities $ 242,224 CASH FLOWS FROM INVESTING ACTIVITIES: - ------------------------------------- Purchase of Equipment $ (1,679) --------- Net Cash Used by Investing Activities (1,679) CASH FLOWS FROM FINANCING ACTIVITIES: - ------------------------------------- Principal Payments on Long-Term Debt $ (2,618) Distributions to Stockholders (245,039) --------- Net Cash Used by Financing Activities (247,657) -------- Net (Decrease) in Cash $ (7,112) Cash at Beginning of Year 58,597 -------- Cash at June 30, 1996 $ 51,485 ========
See accountant's compilation report. INDEPENDENT AUDITOR'S REPORT Board of Directors Phenix City Nephrology Referral Center, Inc. Phenix City, AL We have compiled the accompanying balance sheet of Phenix City Nephrology Referral Center, Inc. as of June 30, 1995 and the related statements of income and retained earnings and cash flows for the six months then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them. Management has elected to omit substantially all of the disclosures required by generally accepted accounting principles. If the omitted disclosures were included in the financial statements, they might influence the user's conclusions about the Company's financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters. ARONHALT, STRINGER & COMPANY /s/ Aronhalt, Stringer & Company ----------------------------------------- Certified Public Accountants November 6, 1996 PHENIX CITY NEPHROLOGY REFERRAL CENTER, INC. -------------------------------------------- Balance Sheet ------------- June 30, 1995 ------------- ASSETS ------ CURRENT ASSETS: - ---------------------------- Cash $170,669 Accounts Receivable: Trade (net of allowance for doubtful accounts of $84,000) 264,760 Inventories 48,574 Prepaid Expenses: Insurance 12,865 --------- Total Current Assets $496,868
EQUIPMENT AND LEASEHOLD IMPROVEMENTS: - ------------------------------------- Depreciation Taken Cost To Date Balance --------- --------- --------- Medical Equipment $343,391 $299,064 $ 44,327 Office Furniture and Equipment 55,564 41,095 14,469 Automotive Equipment 16,749 4,754 11,995 Leasehold Improvements 15,340 4,471 10,869 -------- -------- -------- Totals $431,044 $349,384 $ 81,660 81,660 ======== ======== ======== -------
TOTAL ASSETS $578,528 - ------------ ======== LIABILITIES AND STOCKHOLDER'S EQUITY ------------------------------------
CURRENT LIABILITIES: - -------------------- Accounts Payable: Trade $59,895 Other 1,164 $61,059 ------- Note Payable: First Alabama Bank 5,024 Employees Payroll Taxes Withheld 2,979 Accrued Expenses: Salaries and Wages $12,951 Payroll Taxes 875 13,826 ------- -------- Total Current Liabilities $ 82,888 LONG-TERM LIABILITIES: - ---------------------- Note Payable: First Alabama Bank 11,426 -------- Total Liabilities $ 94,314 STOCKHOLDER'S EQUITY: - --------------------- Common Stock, $1 Par Value, 10,000 Shares Authorized, Issued and Outstanding $ 10,000 Capital in Excess of Par Value 10,000 Retained Earnings 464,214 -------- Total Stockholder's Equity 484,214 -------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $578,528 - ------------------------------------------ ========
See accountant's compilation report. PHENIX CITY NEPHROLOGY REFERRAL CENTER, INC. -------------------------------------------- Statement of Retained Earnings ------------------------------ For the Six Months Ended June 30, 1995 -------------------------------------- BALANCE - JANUARY 1, 1995 $ 339,071 ------------------------- Add: Net Income for the Six Months Ended June 30, 1995 375,542 Deduct: Distributions to Stockholders (250,399) --------- BALANCE - JUNE 30, 1995 $ 464,214 ----------------------- ========= See accountant's compilation report. PHENIX CITY NEPHROLOGY REFERRAL CENTER, INC. -------------------------------------------- Statement of Income ------------------- For the Six Months Ended June 30, 1995 --------------------------------------
PATIENT REVENUE: - ---------------- Inpatient Dialysis Fees $ 888,137 Home Training and Support 317,360 Epotin 93,292 Other 39,937 ---------- Total Patient Revenue $1,338,726 PATIENT CARE COSTS: - ------------------- Salaries and Wages $ 268,272 Medical Supplies 309,256 Center Rental 50,276 Professional Fees 61,815 Depreciation 9,917 Repairs and Maintenance 14,675 Insurance 38,569 Taxes 22,651 Housekeeping 8,651 Utilities 5,877 Other 3,943 ---------- Total Patient Care Costs 793,902 ---------- Operating Profit $ 544,824 ADMINISTRATIVE EXPENSES: - ------------------------ Salaries and Wages $ 38,454 Office Supplies and Expense 11,073 Insurance 6,946 Professional Fees 29,885 Office Rental 5,731 Equipment Rental 3,500 Telephone 6,008 Interest 869 Taxes 3,473 Depreciation and Amortization 4,831 Repairs and Maintenance 3,242 Utilities 653 Provision for Doubtful Accounts 56,108 Other 605 ---------- Total Administrative Expenses 171,378 ---------- Income From Operations $ 373,446 NON-OPERATING INCOME: - --------------------- Interest $ 1,896 Gain on Sale of Equipment 200 ---------- Total Non-operating Income 2,096 ---------- NET INCOME $ 375,542 - ---------- ==========
See accountant's compilation report. PHENIX CITY NEPHROLOGY REFERRAL CENTER, INC. -------------------------------------------- Statement of Cash Flows ----------------------- For the Six Months Ended June 30, 1995 --------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: - ------------------------------------- Net Income $375,542 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 14,748 Provision for Doubtful Accounts 56,108 Gain on Sale of Equipment (200) Changes in Operating Assets and Liabilities: ------------------------------------------- (Increase) Decrease in Accounts Receivable (45,017) (Increase) Decrease in Inventories 6,787 (Increase) Decrease in Prepaid Expenses (13,676) Increase (Decrease) in Accounts Payable (27,869) Increase (Decrease) in Accrued Expenses (10,334) Increase (Decrease) in Other Liabilities (32) -------- Net Cash Provided by Operating Activities $383,409 CASH FLOWS FROM INVESTING ACTIVITIES: - ------------------------------------- Purchase of Equipment $ (497) Proceeds from Sale of Equipment 200 -------- Net Cash Used by Investing Activities (297) CASH FLOWS FROM FINANCING ACTIVITIES: - ------------------------------------- Principal Payments on Long-Term Debt $ (2,347) Distributions to Stockholders (250,399) --------- Net Cash Used by Financing Activities (252,746) -------- Net Increase in Cash $130,366 Cash at Beginning of Year 40,303 -------- Cash at June 30, 1995 $170,669 ========
See accountant's compilation report. PCAKC/NFAKC Group Index to Combined Financial Statements Page Report of Independent Accountants.................................. F-1 Financial Statements: Combined Balance Sheets at December 31, 1995 and June 30, 1996 (Unaudited)............................. F-2 Combined Statements of Operations for the year ended December 31, 1995, the Unaudited three months ended June 30, 1995 and 1996 and the Unaudited six months ended June 30, 1995 and 1996.......................... F-3 Combined Statement of Stockholders' Equity for the year ended December 31, 1995.......................... F-4 Combined Statements of Cash Flows for the years ended December 31, 1995 and the Unaudited six months ended June 30, 1995 and 1996................................ F-5 Notes to Combined Financial Statements..................... F-6 - F-8 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders of PCAKC/NFAKC Group: We have audited the accompanying combined balance sheet of PCAKC/NFAKC 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. ---------------------------- Coopers & Lybrand, L.L.P. Wayne, Pennsylvania August 7, 1996 PCAKC/NFAKC GROUP COMBINED BALANCE SHEET December 31, 1995 and June 30, 1996 (Unaudited)
December 31, June 30, 1995 1996 (Unaudited) - -------------------------------------------------------------------------------- Assets Current assets: Cash $607,162 $540,320 Accounts receivable, net of allowance for doubtful accounts of $303,744 and $293,830 (unaudited) at December 31, 1995 and at June 30, 1996, respectively 644,619 424,995 Inventories 185,785 165,014 Prepaid expenses 5,118 4,159 - -------------------------------------------------------------------------------- Total current assets 1,442,684 1,134,488 - -------------------------------------------------------------------------------- Property and equipment (net of accumulated depreciation of $368,416 and $436,477 (unaudited) at December 31, 1995 and June 30, 1996, respectively). 1,355,137 1,346,876 Other assets 20,841 15,649 - -------------------------------------------------------------------------------- Total assets $2,818,662 $2,497,013 ================================================================================ Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $120,442 $118,723 Line of credit 106,185 56,185 Accounts payable 272,940 229,108 Accrued compensation 119,737 89,964 - -------------------------------------------------------------------------------- Total current liabilities 619,304 493,980 - -------------------------------------------------------------------------------- Long-term debt, net 921,134 862,342 Stockholders' equity: Common stock, $1 par value, 16,000 shares authorized: issued and outstanding 5,000 shares at December 31, 1995 and June 30, 1996 (unaudited), respectively 5,000 5,000 Additional paid-in capital 250,000 250,000 Retained earnings 1,023,224 885,691 - -------------------------------------------------------------------------------- Total stockholders' equity 1,278,224 1,140,691 - -------------------------------------------------------------------------------- Total liabilities and stockholders' equity $2,818,662 $2,497,013 ================================================================================
See accompanying notes to combined financial statements. PCAKC/NFAKC GROUP COMBINED STATEMENTS OF OPERATIONS for the year ended December 31, 1995, the Unaudited three months ended June 30, 1995 and 1996 and the Unaudited six months ended June 30, 1995 and 1996
Three Months Ended Six Months Ended December 31, June 30, June 30, 1995 1995 1996 1995 1996 (Unaudited) (Unaudited) (Unaudited) (Unaudited) - ------------------------------------------------------------------------------------------------------------------ Net patient revenue $5,870,921 $1,368,661 $1,453,063 $2,803,575 $2,798,726 Patient care costs 3,189,715 668,469 816,060 1,441,791 1,595,054 - ------------------------------------------------------------------------------------------------------------------ Operating profit 2,681,206 700,192 637,003 1,361,784 1,203,672 General and administrative 802,815 195,170 219,561 415,202 469,629 Provision for doubtful accounts 436,137 86,330 59,528 159,987 94,770 Depreciation and amortization 142,344 34,687 37,440 68,322 73,253 - ------------------------------------------------------------------------------------------------------------------ Income from operations 1,299,910 384,005 320,474 718,273 566,020 Interest expense, net of interest income of $15,669 for the year ended December 31, 1995 70,495 15,561 13,741 43,611 45,053 - ------------------------------------------------------------------------------------------------------------------ Net income $1,229,415 $ 368,444 $ 306,733 $ 674,662 $ 520,967 ==================================================================================================================
See accompanying notes to combined financial statements. PCAKC/NFAKC GROUP COMBINED STATEMENT OF STOCKHOLDERS' EQUITY for the year ended December 31, 1995
Additional COMMON STOCK Paid-in Retained Shares Amount Capital Earnings Total - ------------------------------------------------------------------------------- Balance, December 31, 1994 5,000 $5,000 $250,000 $1,070,809 $1,325,809 Net income 1,229,415 1,229,415 S Corporation distribution (1,277,000) (1,277,000) - -------------------------------------------------------------------------------- Balance at December 31, 1995 5,000 $5,000 $250,000 $1,023,224 $1,278,224 ================================================================================
See accompanying notes to combined financial statements. PCAKC/NFAKC GROUP COMBINED STATEMENTS OF CASH FLOWS for the year ended December 31, 1995, and the Unaudited six months ended June 30, 1995 and 1996
Six Months Ended December 31, June 30, 1995 1995 1996 (Unaudited) (Unaudited) - ---------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $1,229,415 $674,662 $520,967 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 142,344 68,322 73,253 Provision for doubtful accounts 436,137 159,987 94,770 Changes in operating assets and liabilities: Accounts receivable (253,258) 53,580 124,854 Inventories (41,932) (769) 20,771 Prepaid assets 1,919 960 959 Accounts payable and accrued expenses 52,246 (88,726) (73,605) - ---------------------------------------------------------------------------------------------- Net cash provided by operating activities 1,566,871 868,016 761,969 - ---------------------------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (122,661) (56,345) (59,800) - ---------------------------------------------------------------------------------------------- Net cash used in investing activities (122,661) (56,345) (59,800) - ---------------------------------------------------------------------------------------------- Cash flows from financing activities: Net borrowings under line of credit (79,000) (19,001) (50,000) Repayments of debt (111,507) (64,083) (60,511) Payment of S corporation distribution: (1,277,000) (860,000) (658,500) - ---------------------------------------------------------------------------------------------- Net cash used in financing activities (1,467,507) (943,084) (769,011) - ---------------------------------------------------------------------------------------------- Net (decrease) in cash and cash equivalents (23,297) (131,413) (66,842) Cash and cash equivalents at beginning of period 630,459 630,459 607,162 - ---------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $607,162 $499,046 $540,320 ============================================================================================== Supplemental disclosure of cash flow information: - ---------------------------------------------------------------------------------------------- Cash paid for: Interest:: $ 86,164 $ 51,872 $ 52,053 ==============================================================================================
See accompanying notes to combined financial statements. NOTES TO COMBINED FINANCIAL STATEMENTS 1. Description of Business PCAKC/NFAKC Group (the "Group") consists of Panama City Artificial Kidney Center, P.A. ("PCAKC") and North Florida Artificial Kidney Center, P.A. ("NFAKC"). The Group provides dialysis treatments for End Stage Renal Disease ("ESRD") patients in an outpatient environment or in the patient's home. For the year ended December 31, 1995, approximately 87% 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 Principles of Combination: The combined financial statements have been prepared in accordance with generally accepted accounting principles and include the accounts of PCAKC and NFAKC. 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 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 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. Property and Equipment and Depreciation and Amortization: Property and equipment are stated at cost. 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 seven years for furniture, fixtures and equipment and 39 years for building and improvements. 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: PCAKC and NFAKC 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 maintenance agreements. Inventories: Inventories are stated at the lower of cost (determined using the first-in, first-out method) or market and consists of dialysis supplies. Use of Estimates: 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. Estimated Medical Professional Liability Claims: The Group 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. 2. Summary of Significant Accounting Policies (continued) 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 June 30, 1996 and for the three months and six months ended June 30, 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 - -------------------------------------------------------------------------------- Building $ 655,393 Leasehold improvements 246,091 Equipment, furniture and fixtures 752,069 Land 70,000 - -------------------------------------------------------------------------------- 1,723,553 - -------------------------------------------------------------------------------- Less accumulated depreciation (368,416) - -------------------------------------------------------------------------------- $1,355,137 ================================================================================
Depreciation expense was $131,960 for the year ended December 31, 1995. 4. Long-Term Debt Long-term debt as of December 31, 1995 consists of:
December 31, 1995 - --------------------------------------------------------------------------------------------- Term loan payable in monthly installments of principal and interest of $5,028, through January 2, 1999 at an interest rate of 8.25% at December 31, 1995 $160,396 Term loan payable in monthly installments of principal and interest of $5,627, through December 1, 1998 at an interest rate of 8.25% at December 31, 1995. The remaining principal balance of $394,474 will become due on January 2, 1999. 481,016 Term loan payable in monthly installments of principal and interest of $2,925, through May 1, 1999 at an interest rate of 7.0 % at December 31, 1995. The remaining principal payments of $117,614 will become due June 1, 1999. 222,030 Term loan payable in monthly installments of principal and interest of $2,341, through May 1, 1999 at an interest rate of 7.0% at December 31, 1995. The remaining principal balance of $147,017 will become due June 1, 1999. 178,134 1,041,576 - --------------------------------------------------------------------------------------------- Less current portion (120,442) - --------------------------------------------------------------------------------------------- $ 921,134 =============================================================================================
Maturities of long-term debt outstanding, as of December 31, 1995 for each of the next five years and thereafter, is as follows: 4. Long-Term Debt (continued)
Year ------------------------------------- 1996 120,442 1997 122,956 1998 132,971 1999 665,207 2000 and thereafter 0
The loans are collateralized by a lien on all of the Group's assets. The agreements require the Group to comply with certain covenants. 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. In addition to the long-term notes, the Group has a revolving line of credit with a bank which permits borrowing up to a maximum of $350,000 through April 1, 1996. Interest is charged at a fixed rate of 9%. Total borrowings under this agreement are collateralized by the Group's assets. 5. Leasing Arrangements The Group leases its NFAKC facility under a non-cancelable lease for a term of five years with certain renewal options. Future minimum lease payments are as follows:
Operating Leases ---------------- 1996 $32,100 1997 32,100 1998 32,100 1999 8,025 2000 and thereafter 0 -------- Total minimum lease payments $104,325 ========
Rent expense for the year ended December 31, 1995 was $32,100. 6. Employment Benefit Plans The Group sponsors a Profit Sharing Plan under section 401(k) of the Internal Revenue Code. This plan covers all employees who have been with the Group three months and work a minimum of 1,000 hours. For the year ended December 31, 1995, the Group matched 100% of employee deferral with the Group contributions not to exceed 5% of the employees' salaries, subject to the limitations imposed by the Internal Revenue Service. The Group's contribution to the Plan totaled $26,671 for the year ended December 31, 1995. 7. Subsequent Event On July 23, 1996, the stockholders of the Group agreed to the terms and conditions of a merger with Renal Treatment Centers-Florida, Inc., a Delaware corporation, pursuant to which all of the outstanding stock of PCAKC and NFAKC was converted into common stock of Renal Treatment Centers, Inc., a Delaware corporation and the parent of Renal Treatment Centers-Florida, Inc., in a transaction accounted for as a pooling of interests. The stockholders of the Group received 482,377 shares of Renal Treatment Centers, Inc. common stock in the transaction. RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS June 30, 1996
Historical Renal Historical Treatment Acquired Pro forma Centers, Inc. companies adjustments (1) Pro forma (unaudited) (unaudited) (unaudited) (unaudited) ----------- ----------- --------------- ----------- ASSETS Current assets: Cash $ 621,444 $ 84,593 $(12,207,663) (2) $(11,501,626) Investments 45,963,081 45,963,081 Accounts receivable, net 63,386,631 1,079,932 (1,079,932) 63,386,631 Inventories 3,838,980 122,238 26,168 3,987,386 Deferred taxes 1,412,519 1,412,519 Prepaid expenses and other current assets 1,219,708 25,392 97,679 1,342,779 ------------ ---------- ------------ ------------ Total current assets 116,442,363 1,312,155 (13,163,748) 104,590,770 Property and equipment, net 31,733,870 297,726 507,273 32,538,869 Intangibles, net 121,718,883 11,046,594 132,765,477 Deferred taxes, non-current 1,749,754 1,749,754 Other assets 15,649 15,649 ------------ ---------- ------------ ------------ Total assets $271,660,519 $1,609,881 $ (1,609,881) $271,660,519 ============ ========== ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 3,336,451 $ 39,479 $ (39,479) $ 3,336,451 Accounts payable 6,305,145 141,954 (141,954) 6,305,145 Accrued compensation 2,694,379 25,590 (25,590) 2,694,379 Accrued expenses 3,170,103 7,453 (7,453) 3,170,103 Accrued income taxes 320,024 320,024 Accrued interest 399,015 399,015 ------------ ---------- ---------- ------------ Total current liabilities 16,225,117 214,476 (214,476) 16,225,117 Long term debt, net 131,592,265 71,911 (71,911) 131,592,265 Stockholders' equity: Common stock, $.01 par value, 45,000,000 shares authorized; 24,255,969 shares issued and outstanding 242,559 10,500 (10,500) (3) 242,559 Additional paid-in capital 85,480,900 11,500 (11,500) (3) 85,480,900 Retained earnings 38,513,754 1,301,494 (1,301,494) (3) 38,513,754 ------------ ---------- ------------ ------------ Less treasury stock, 37,202 shares at cost (394,076) (394,076) ------------ ---------- ------------ ------------ Total liabilities and stockholders' equity $271,660,519 $1,609,881 $ (1,609,881) $271,660,519 ============ ========== ============ ============
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS For the year ended December 31, 1995 and the six months ended June 30, 1996
Historical Historical ---------- ---------- For the year ended December 31, 1995 For the six months ended June 30, 1996 Renal Renal Treatment Acquired Pro forma Treatment Acquired Pro forma Centers, Inc. companies adjustments Pro forma Centers, Inc. companies adjustments Pro forma ------------- --------- ----------- --------- ------------- --------- ----------- --------- Net patient revenue $164,568,392 $48,738,135 $213,306,527 $106,132,950 $11,403,121 $117,536,071 Patient care costs 79,451,490 34,876,467 114,327,957 51,482,378 7,665,239 59,147,617 ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------ Operating profit 85,116,902 13,861,668 98,978,570 54,650,572 3,737,882 58,388,454 General and administrative 41,381,899 8,611,419 49,993,318 26,632,717 1,644,060 28,276,777 Provision for doubtful accounts 4,760,678 2,532,445 7,293,123 3,308,507 727,272 4,035,779 Depreciation and amortization 12,066,461 495,881 3,395,894 (A) 15,958,236 7,645,118 115,705 1,495,141 (A) 9,255,964 Merger expenses 2,087,542 2,087,542 1,708,247 1,708,247 ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------ Income (loss) from operations 24,820,322 2,221,923 (3,395,894) 23,646,351 15,355,983 1,250,845 (1,495,141) 15,111,687 ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------ Interest expense, net 2,557,449 254,176 2,811,625 1,553,433 11,822 1,565,255 ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------ Income (loss) before income taxes 22,262,873 1,967,747 (3,395,894) 20,834,726 13,802,550 1,239,023 (1,495,141) 13,546,432 ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------ Income taxes 7,632,069 120,676 (1,256,481) (B) 6,496,264 4,999,536 25,044 (553,202) (B) 4,471,378 ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------ Net income $ 14,630,804 $ 1,847,071 $(2,139,413) $ 14,338,462 $ 8,803,014 $ 1,213,979 $ (941,939) $ 9,075,054 ============ =========== =========== ============ ============ =========== =========== ============ Pro forma net income per common and common stock equivalent (C) $.64 $.36 ============ ============ Pro forma weighted average common shares used in computing earnings per share 22,412,733 25,284,349 ============ ============
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS On September 16, 1996, Renal Treatment Centers, Inc. (the "Company") completed the acquisition of substantially all of the non-current and certain other assets of Columbus Regional Dialysis Center, Inc., and Phenix City Nephrology Referral Center, Inc. (collectively "the Sellers") which operated, respectively, two and one Medicare- certified end-stage renal dialysis facilities (collectively "the Facilities"). Two of the Facilities are located in Georgia and the remaining Facility is located in Alabama. The shareholders of the Sellers are Ashok Kumar, M.D. and Joyce Dozier. The acquisition was completed pursuant to two separate asset purchase agreements ("the Agreements") dated September 7, 1996, with an effective time of August 31, 1996 at 11:59 PM, between subsidiaries of the Company and the respective Sellers. The Company acquired all of the Facilities' inventory, equipment, patient lists, goodwill and other non-current assets used in the operation of the Facilities. As part of the transaction, the Company entered into covenants not to compete with Dr. Kumar, Ms. Dozier and the Sellers and concurrently entered into new agreements or received assignments of existing agreements to provide acute dialysis services at three area hospitals. In addition, the Company entered into a physician director agreement with Dr. Kumar to act as physician director of the Facilities. The Company paid total cash consideration of $11,500,000, and determined the consideration based on negotiations with the Sellers and the Company's determination of the fair market value of the assets used in the Facilities as a going concern. The cash consideration was funded entirely by a portion of the proceeds received from the Company's issuance of convertible subordinated notes in June 1996. Although the above transaction does not individually qualify as an acquisition of a significant subsidiary, when it is combined with all of the businesses acquired by the Company that did not individually reach the significant subsidiary threshold, the transactions in the aggregate are considered significant. As a result, the Company must furnish financial statements covering at least a substantial majority of the businesses acquired for the most recent fiscal year and the most recent interim period for which a balance sheet was filed. 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 June 30, 1996 and (ii) the pro forma effects on the Company's results of operations for the year ended December 31, 1995 and for the six month period ended June 30, 1996 as if the foregoing transaction had occurred on January 1, 1995. The unaudited pro forma financial statements include adjustments resulting from the use of the purchase method of accounting 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. The non-audited pro-forma financial statements include the above acquisitions of the non-current and certain other assets for Columbus Regional Dialysis Center, Inc. and Phenix City Nephrology Referral Center, Inc., as well as the acquisition of substantially all the assets of Kidney Center of Delaware County, Ltd. ("KCDC") and Kidney Center of Chester County, Ltd. ("KCCC") which occurred on May 29, 1996. The Company paid total cash consideration of approximately $26.6 million for the KCDC/KCCC acquisition. In addition to these acquisitions, the proforma financial statements include five individually insignificant acquisitions, which had a cumulative purchase price of approximately $11,000,000. 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 and liabilities not assumed by the Company in connection with the acquisition. (2) Reflects decrease in cash to reflect 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 $2,484,227 and $1,084,038 offset by historical Seller depreciation and amortization of $266,841 and $104,169 for the year ended December 31, 1995 and for the six months ended June 30, 1996, respectively. Also reflects additional amortization over a 25 year period of the excess cost over net assets acquired of $1,178,508 and $515,272 for the year ended December 31, 1995 and for the six months ended June 30, 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 ------- -------- 23.1 Consent of Coopers & Lybrand, L.L.P. 23.1(a) Consent of Aronhalt, Stringer & Company, CPA's EX-23.1 2 CONSENT OF COOPERS & LYBRAND, L.L.P. Exhibit 23.1 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, 333-10839 and 333-10841) and S-8 (File No. 33-85750, and 33-94262) of our report dated June 26, 1996 on our audit of the combined financial statements of "PCAKC and NFAKC" as of December 31, 1995 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 November 27, 1996 EX-23.1(A) 3 CONSENT OF ARONHALT, STRINGER & COMPANY, CPA'S Exhibit 23.1(a) 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, 333-10839 and 333-10841) and S-8 (File No. 33-85750, and 33-94262) of our reports dated October 31, 1996 on our audits of the financial statements of Phenix City Nephrology Referral Center, Inc. and Columbus Regional Dialysis Center, Inc. as of December 31, 1995 and for the year then ended, which reports are included in this Form 8-K/A. /s/ Aronhalt Stringer and Company, CPA's ---------------------------------------- Aronhalt, Stringer and Company, CPA's Upper Marlboro, Maryland November 27, 1996 -----END PRIVACY-ENHANCED MESSAGE-----