EXHIBIT 99.1
INDEX TO FINANCIAL STATEMENTS
PAGE
----
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Combined Balance Sheet................................. F-2
Notes to Unaudited Pro Forma Combined Balance Sheet........................ F-3
Unaudited Pro Forma Combined Statements of Income.......................... F-4
Notes to Unaudited Pro Forma Combined Statements of Income................. F-7
F-1
TOTAL RENAL CARE HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1996
(IN THOUSANDS)
OTHER
COMBINED
THE COMPANY ACQUISITIONS PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
------------ ------------ ----------- --------
Cash and cash equivalents.... $ 5,440 $ 435 $(1,045)(a) $ 4,395
(435)(b)
Accounts receivable, net..... 95,636 3,640 (445)(d) 98,831
Other current assets......... 14,855 155 (24)(d) 14,986
-------- ------ ------- --------
Total current assets....... 115,931 4,230 (1,949) 118,212
Property and equipment, net.. 49,443 3,522 (302)(b) 52,663
Intangible assets, net....... 151,279 820 25,506 (a) 177,605
Other assets................. 3,768 79 (79)(b) 3,768
-------- ------ ------- --------
$320,421 $8,651 $23,176 $352,248
======== ====== ======= ========
Current liabilities.......... $ 30,677 $1,996 $ (380)(d) $ 32,293
Long-term debt............... 78,225 2,644 (2,644)(b) 109,515
31,290 (a)
Other long-term liabilities.. 1,834 456 2,290
Minority interest............ 5,326 -- (1,535)(d) 3,791
Common stock................. 26 50 (50)(c) 26
Additional paid-in capital... 236,433 1,281 (1,281)(c) 236,433
Notes receivable from
stockholders................ (2,783) -- -- (2,783)
Retained earnings (deficit).. (29,317) 2,224 (2,224)(c) (29,317)
-------- ------ ------- --------
$320,421 $8,651 $23,176 $352,248
======== ====== ======= ========
F-2
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
1. BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Balance sheet of Total Renal Care Holdings,
Inc. as of September 30, 1996 gives effect to the acquisition of individually
insignificant acquisitions consummated during the period October 1, 1996 to
October 30, 1996 and individually insignificant acquisitions which were
probable as of October 30, 1996, in each case as if such acquisitions were
consummated on September 30, 1996. The pro forma adjustments are based on
consideration exchanged, including the estimated fair value of assets acquired
and liabilities assumed. The actual adjustments, which will be based on
valuations of fair value as of the date of acquisition, may differ from those
made herein.
2. PRO FORMA ADJUSTMENTS
(a) To record the combined acquisitions as follows (in thousands):
Purchase price...................................................... $32,335
Net book value of assets acquired................................... 6,009
-------
Purchase price allocated to intangible assets....................... $26,326
=======
The purchase prices of the consummated and probable combined acquisitions
will be paid with cash of $1,045,000 and borrowings of $31,290,000.
(b) To reflect assets and liabilities not acquired by the Company.
(c) To eliminate the equity of the acquired businesses.
(d) To eliminate the minority interest related to the acquisition of the
remaining interest in a facility. The facility balances are included in both
the Company historical totals and the Other Combined Acquisitions historical
totals and, therefore, are adjusted in the Pro Forma Adjustments column.
F-3
TOTAL RENAL CARE HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
SOUTH
CAREMARK CAROLINA
THE COMPANY FACILITIES FACILITIES
9 MONTHS 2 MONTHS 2 MONTHS
ENDED ENDED ENDED OTHER
SEPTEMBER 30, FEBRUARY 28, FEBRUARY 28, COMBINED
1996 DEBT 1996 1996 ACQUISITIONS PRO FORMA
(HISTORICAL) RETIREMENT(a) (HISTORICAL) (HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED
------------- ------------- ------------ ------------ ------------ ----------- --------
Net operating revenues.. $188,153 $7,805 $1,133 $37,236 $(1,425)(b) $231,753
(1,149)(p)
Operating expenses...... 153,921 8,250 1,055 31,408 3,326 (c) 196,892
(1,068)(p)
-------- ------ ------ ------- ------- --------
Operating income........ 34,232 (445) 78 5,828 (4,832) 34,861
Interest expense, net... 3,862 $(804) 127 (1) 244 (370)(d) 7,019
3,961 (e)
-------- ----- ------ ------ ------- ------- --------
Income before income
taxes, minority
interests and
extraordinary item..... 30,370 804 (572) 79 5,584 (8,423) 27,842
Income taxes............ 11,537 (232) 37 (736)(f) 10,606
-------- ----- ------ ------ ------- ------- --------
Income before minority
interest and
extraordinary item..... 18,833 804 (340) 79 5,547 (7,687) 17,236
Minority interest in
income of consolidated
subsidiaries........... 2,295 274 (g) 2,529
(40)(p)
-------- ----- ------ ------ ------- ------- --------
Income before
extraordinary item..... $ 16,538 $ 804 $ (340) $ 79 $ 5,547 $(7,921) $ 14,707
======== ===== ====== ====== ======= ======= ========
Income per share before
extraordinary item..... $ 0.65 $ 0.56
======== ========
Weighted average number
of common shares and
equivalents
outstanding............ 25,409 937 (h) 26,346
======== ======= ========
F-4
TOTAL RENAL CARE HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
SEVEN MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS)
SOUTH
MIAMI SOUTHWEST CAREMARK CAROLINA
THE COMPANY FACILITIES FACILITIES FACILITIES FACILITIES
7 MONTHS 1 MONTH 6 MONTHS 7 MONTHS 7 MONTHS
ENDED ENDED ENDED ENDED ENDED OTHER
DECEMBER 31, INITIAL JUNE 30, NOVEMBER 30, DECEMBER 31, DECEMBER 31, COMBINED
1995 PUBLIC DEBT 1995 1995 1995 1995 ACQUISITIONS
(HISTORICAL) OFFERING(i) RETIREMENT(j) (HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL)
------------ ----------- ------------- ------------ ------------ ------------ ------------ ------------
Net operating
revenues....... $89,711 $526 $2,224 $27,340 $3,957 $41,928
Operating
expenses....... 71,245 $ (64) 449 2,071 29,657 3,682 35,887
------- ------- ---- ------ ------- ------ -------
Operating
income......... 18,466 64 77 153 (2,317) 275 6,041
Interest
expense, net... 5,584 (2,505) $(587) -- 41 452 -- 311
------- ------- ----- ---- ------ ------- ------ -------
Income before
income taxes,
minority
interests and
extraordinary
item........... 12,882 2,569 587 77 112 (2,769) 275 5,730
Income taxes.... 4,631 1,028 -- -- -- (1,140) -- 87
------- ------- ----- ---- ------ ------- ------ -------
Income before
minority
interest and
extraordinary
item........... 8,251 1,541 587 77 112 (1,629) 275 5,643
Minority
interest in
income of
consolidated
subsidiaries... 1,784 -- -- -- -- -- -- --
------- ------- ----- ---- ------ ------- ------ -------
Income before
extraordinary
item........... $ 6,467 $ 1,541 $ 587 $ 77 $ 112 $(1,629) $ 275 $ 5,643
======= ======= ===== ==== ====== ======= ====== =======
Income per share
before
extraordinary
item........... $ 0.36
=======
Weighted average
number of
common shares
and equivalents
outstanding.... 17,824
=======
PRO FORMA
ADJUSTMENTS COMBINED
------------- --------
Net operating
revenues....... $ (351)(b) $164,444
(891)(p)
Operating
expenses....... 4,819 (c) 146,916
(830)(p)
------------- --------
Operating
income......... (5,231) 17,528
Interest
expense, net... (683)(d) 6,230
3,617 (e)
------------- --------
Income before
income taxes,
minority
interests and
extraordinary
item........... (8,165) 11,298
Income taxes.... (522)(f) 4,084
------------- --------
Income before
minority
interest and
extraordinary
item........... (7,643) 7,214
Minority
interest in
income of
consolidated
subsidiaries... 190 (g) 1,943
(31)(p)
------------- --------
Income before
extraordinary
item........... $(7,802) $ 5,271
============= ========
Income per share
before
extraordinary
item........... $ 0.19
========
Weighted average
number of
common shares
and equivalents
outstanding.... 9,654 (k) 27,478
============= ========
F-5
TOTAL RENAL CARE HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED MAY 31, 1995
(IN THOUSANDS)
SOUTH
CHICAGO MIAMI CAREMARK CAROLINA
FACILITIES FACILITIES FACILITIES FACILITIES
THE COMPANY 11 MONTHS 12 MONTHS 12 MONTHS 12 MONTHS
YEAR ENDED ENDED ENDED ENDED ENDED
MAY 31, AUGUST 1, INITIAL APRIL 30, MAY 31, MAY 31, MAY 31,
1995 1994 PUBLIC DEBT 1995 1995 1995 1995
(HISTORICAL) TRANSACTION(L) OFFERING(M) RETIREMENT(N) (HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL)
------------ -------------- ----------- ------------- ------------ ------------ ------------ ------------
Net operating
revenues....... $ 98,968 $ 9,691 $ 6,311 $ 45,599 $ 6,306
Operating
expenses....... 81,809 $ 772 $ (100) 8,587 5,385 45,456 5,746
-------- ------- ------- ------- ------- -------- -------
Operating
income......... 17,159 (772) 100 1,104 926 143 560
Interest
expense, net... 7,203 1,811 (3,141) $(1,116) 28 -- 866 --
-------- ------- ------- ------- ------- ------- -------- -------
Income before
income taxes,
minority
interests and
extraordinary
item........... 9,956 (2,583) 3,241 1,116 1,076 926 (723) 560
Income taxes.... 3,511 (1,032) 1,329 115 (298)
-------- ------- ------- ------- ------- ------- -------- -------
Income before
minority
interest and
extraordinary
item........... 6,445 (1,551) 1,912 1,116 961 926 (425) 560
Minority
interest in
income of
consolidated
subsidiaries... 1,593
-------- ------- ------- ------- ------- ------- -------- -------
Income before
extraordinary
item........... $ 4,852 $(1,551) $ 1,912 $ 1,116 $ 961 $ 926 $ (425) $ 560
======== ======= ======= ======= ======= ======= ======== =======
Income per share
before
extraordinary
item........... $ 0.22
========
Weighted average
number of
common shares
and equivalents
outstanding.... 15,316
========
OTHER
COMBINED
ACQUISITIONS PRO FORMA
(HISTORICAL) ADJUSTMENTS COMBINED
------------ -------------- ---------
Net operating
revenues....... $ 79,912 $ (209)(b) $ 245,045
(1,533)(p)
Operating
expenses....... 72,063 9,713 (c) 228,007
(1,424)(p)
------------ -------------- ---------
Operating
income......... 7,849 (10,031) 17,038
Interest
expense, net... 628 (1,253)(d) 10,481
5,455 (e)
------------ -------------- ---------
Income before
income taxes,
minority
interests and
extraordinary
item........... 7,221 (14,233) 6,557
Income taxes.... 120 (1,394)(f) 2,351
------------ -------------- ---------
Income before
minority
interest and
extraordinary
item........... 7,101 (12,839) 4,206
Minority
interest in
income of
consolidated
subsidiaries... 161 (g) 1,701
(53)(p)
------------ -------------- ---------
Income before
extraordinary
item........... $ 7,101 $ (12,947) $ 2,505
============ ============== =========
Income per share
before
extraordinary
item........... $ 0.09
=========
Weighted average
number of
common shares
and equivalents
outstanding.... 11,404 (o) 26,720
============== =========
F-6
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
1. BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Statement of Income for the nine months
ended September 30, 1996 gives effect to the acquisition by the Company of the
Nephrology Services Business of Caremark International Inc. on March 15, 1996
(the "Caremark Facilities"), two facilities located in South Carolina on March
15, 1996 (the "South Carolina Facilities") and individually insignificant
acquisitions consummated during the period January 1, 1996 through October 30,
1996, and individually insignificant acquisitions which were probable as of
October 30, 1996, in each case as if such acquisitions were consummated on
January 1, 1996. The Unaudited Pro Forma Combined Statement of Income for the
nine months ended September 30, 1996 also gives effect to the retirement of
all outstanding 12% Senior Subordinated Discount Notes in July and September
1996 (the "Debt Retirement") as if it occurred on January 1, 1996.
The Unaudited Pro Forma Combined Statement of Income for the seven months
ended December 31, 1995 gives effect to the acquisition by the Company of
three facilities located in the Miami area on July 17, 1995 (the "Miami
Facilities"), two facilities located in Texas on December 1, 1995 (the
"Southwest Facilities"), the Caremark Facilities, the South Carolina
Facilities and individually insignificant acquisitions consummated during the
period June 1, 1995 through October 30, 1996, and individually insignificant
acquisitions which were probable as of October 30, 1996, in each case as if
such acquisitions were consummated on June 1, 1995. The Unaudited Pro Forma
Combined Statement of Income for the seven months ended December 31, 1995 also
gives effect to the Company's initial public offering on October 30, 1995 (the
"Initial Public Offering"), the Company's secondary offering on April 3, 1996
(the "Secondary Offering") and the Debt Retirement as if such transactions
occurred on June 1, 1995.
The Unaudited Pro Forma Combined Statement of Income for the fiscal year
ended May 31, 1995 gives effect to the acquisition by the Company of five
facilities located in the Chicago area on May 1, 1995 (the "Chicago
Facilities"), the Miami Facilities, the Caremark Facilities, the South
Carolina Facilities and individually insignificant acquisitions consummated
during the period June 1, 1994 through October 30, 1996, and individually
insignificant acquisitions which were probable as of October 30, 1996, in each
case as if such acquisitions were consummated on June 1, 1994. The Southwest
Facilities, which commenced operations in April 1995, had de minimis
operations during the twelve months ended May 31, 1995 and, therefore, are not
included in the Unaudited Pro Forma Combined Statement of Income for the
fiscal year ended May 31, 1995. The Unaudited Pro Forma Combined Statement of
Income for the fiscal year ended May 31, 1995 also gives effect to the sale by
Tenet Healthcare Corporation of approximately 75% of its ownership interest in
the Company to DLJ Merchant Banking Partners, L.P. and certain of its
affiliates in August 1994 (the "August 1994 Transaction"), the Initial Public
Offering, the Secondary Offering and the Debt Retirement as if such
transactions occurred on June 1, 1994.
The pro forma adjustments are based on consideration exchanged, including
the estimated fair value of assets acquired, liabilities assumed and common
stock issued. The actual adjustments, which will be based on valuations of
fair value as of the date of acquisition, may differ from those made herein.
Net income per common share data and weighted average number of shares and
equivalents outstanding for the nine months ended September 30, 1996, for the
seven months ended December 31, 1995 and for the fiscal year ended May 31,
1995 assume that any shares issued in connection with the acquisitions were
outstanding from January 1, 1996 and June 1, 1995 and 1994, respectively.
2. PRO FORMA ADJUSTMENTS
(a) To reflect the redemption of 12% Senior Subordinated Discount Notes as
if it occurred on January 1, 1996. Specifically to reduce interest expense
assuming the redemption, offset by borrowings under the Senior Credit Facility
and further offset by interest income foregone.
During the quarter ended September 30, 1996, the Company repurchased $65
million, at maturity, of the 12% Senior Subordinated Discount Notes for $67.3
million resulting in an extraordinary loss, net of tax, of $7.7 million which
is not included in the Unaudited Pro Forma Combined Statement of Income.
F-7
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME--(CONTINUED)
(b) To eliminate management fees earned by the combined entities.
(c) To amortize goodwill, non-compete agreements and patient charts
resulting from the acquisitions on a straight-line basis over 25, 10 or 5
years, respectively.
(d) To eliminate interest expense on borrowings not assumed by the Company.
(e) To record interest expense resulting from acquisitions funded in whole
or in part by borrowings from the senior credit facility.
(f) To record income tax effects related to the pro forma adjustments.
(g) To record the minority interest income from five partnerships acquired.
(h) Income per share and weighted average number of common shares and
equivalents outstanding assume 62,000 shares and share equivalents issued to
purchase the individually insignificant acquisitions were outstanding for the
entire nine-month period ended September 30, 1996.
Income per share and weighted average number of common shares and
equivalents outstanding also assume that shares issued in the Secondary
Offering to the extent that cash generated from such shares were used to
purchase facilities and were outstanding from January 1, 1996 to the date of
the Secondary Offering as follows:
Caremark Facilities................................................ 1,741,000
All other acquisitions............................................. 926,000
(i) To reflect the Initial Public Offering and subsequent use of proceeds to
redeem 12% Senior Subordinated Discount Notes as if it occurred on June 1,
1995. Specifically, to reduce interest expense assuming paydown of a portion
of the 12% Senior Subordinated Discount Notes and amounts outstanding under
the line of credit. On December 7, 1995 the Company redeemed 35% of the
accreted value of the 12% Senior Subordinated Discount Notes equaling
$28,749,000 at a redemption premium of 111% for a redemption price of
$31,912,000. An extraordinary loss of $2,555,000 (net of income tax effect)
resulted from this transaction which is not included on the Unaudited Pro
Forma Combined Statement of Income. The additional reduction in interest
expense incurred under the line of credit assumes that cash generated by the
stock offering was used to purchase all facilities acquired and that the line
of credit was not drawn for these acquisitions.
(j) To reflect the Debt Retirement as if it occurred on June 1, 1995. See
note (a) above.
(k) Income per share and weighted average number of common shares and
equivalents outstanding assume the following shares and share equivalents
issued to purchase facilities were outstanding for the entire seven month
period ended December 31, 1995:
Miami Facilities..................................................... 333,000
Southwest Facilities................................................. 35,000
All other acquisitions............................................... 471,000
Income per share and weighted average number of common shares and
equivalents outstanding also assume that shares issued in the Initial Public
Offering and Secondary Offering to the extent that cash generated from
F-8
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME--(CONTINUED)
such shares (instead of the senior credit facility) would have been used to
purchase facilities were outstanding from June 1, 1995 to the date of the
Initial Public Offering or December 31, 1995, respectively, as follows:
Chicago Facilities................................................. 505,000
Miami Facilities................................................... 345,000
South Carolina Facilities.......................................... 803,000
Caremark Facilities................................................ 1,741,000
All other acquisitions............................................. 2,630,000
Income per share and weighted average number of common shares and
equivalents also assume that 2,233,000 shares issued in the Initial Public
Offering to redeem the 12% Senior Subordinated Discount Notes were outstanding
from June 1, 1995 to the date of the Initial Public Offering.
(l) To reflect the August 1994 Transaction as if it occurred on June 1,
1994. Specifically, to reflect an increase in general and administrative
expenses ($625,000) for estimated incremental costs of the Company as a stand-
alone entity, increases in interest expense ($1,811,000), amortization
expenses ($105,000) and bank fees ($42,000) related to the issuance of the 12%
Senior Subordinated Discount Notes and a corresponding decrease in income
taxes ($1,032,000) for the tax effect of the pro forma adjustments.
(m) To reflect the Initial Public Offering and subsequent use of proceeds to
redeem subordinated debt as if it occurred on June 1, 1994. See note (i)
above.
(n) To reflect the Debt Retirement as if it occurred on June 1, 1994. See
note (a) above.
(o) Income per share in the audited financial statements for the year ended
May 31, 1995 was computed as if the August 1994 Transaction had occurred on
June 1, 1994. Income per common share and weighted average numbered of common
shares and equivalents outstanding computed using such assumptions were $0.22
and 15,316,000, respectively.
Income per share and weighted average number of common shares and
equivalents outstanding assume the following shares and share equivalents
issued to purchase facilities were outstanding for the entire year:
Chicago Facilities................................................. 515,000
Miami Facilities................................................... 333,000
All other acquisitions............................................. 1,029,000
Income per share and weighted average number of common shares and
equivalents outstanding also assume that shares issued in the Initial Public
Offering and Secondary Offering to the extent that cash generated from such
shares (instead of the senior credit facility) would have been used to
purchase facilities were outstanding for the entire year as follows:
Chicago Facilities................................................. 707,000
Miami Facilities................................................... 483,000
South Carolina Facilities.......................................... 803,000
Caremark Facilities................................................ 1,741,000
All other acquisitions............................................. 2,991,000
Income per share and weighted average number of common shares and
equivalents also assume that 2,233,000 shares issued in the Initial Public
Offering to redeem the 12% Senior Subordinated Discount Notes were outstanding
for the entire period.
(p) To eliminate the minority interest related to the acquisition of the
remaining interest in a facility. The facility balances are included in both
the Company historical totals and the Other Combined Acquisitions historical
totals and, therefore, are adjusted in the Pro Forma Adjustments column.
F-9