Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
(Mark One) Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number 1-14142
Renal Treatment Centers, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 23-2518331
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1180 W. Swedesford Road
Building 2, Suite 300
Berwyn, PA 19312
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 610-644-4796
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at August 1, 1996
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Common Stock, Par Value $.01 24,218,767 shares
THE EXHIBIT INDEX IS LOCATED ON PAGE 13
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income--
Three and Six months ended June 30, 1996 and 1995............... 3
Consolidated Balance Sheets--
June 30, 1996 and December 31, 1995............................. 4
Consolidated Statements of Cash Flows--
Six months ended June 30, 1996 and 1995......................... 5
Notes to Consolidated Financial Statements...................... 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 7-10
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders............. 11
Item 6. Exhibits and Reports on Form 8-K................................ 11
SIGNATURES ................................................................ 12
EXHIBITS ............................................................... 14-15
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Renal Treatment Centers, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
1996 1995 1996 1995
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Net patient revenue $54,130,060 $38,698,124 $103,334,224 $75,012,464
Patient care costs 26,181,091 18,976,948 49,887,324 36,775,150
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Operating profit 27,948,969 19,721,176 53,446,900 38,237,314
General and administrative
expense 13,259,805 9,874,701 26,163,088 19,915,645
Provision for doubtful
accounts 1,677,793 900,589 3,213,737 1,860,101
Depreciation and
amortization 4,035,477 2,873,849 7,571,865 5,573,202
Merger expenses - - 1,708,247 1,587,542
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Income from operations 8,975,894 6,072,037 14,789,963 9,300,824
Interest expense, net 842,572 636,060 1,508,380 1,266,714
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Income before income taxes 8,133,322 5,435,977 13,281,583 8,034,110
Provision for income taxes 3,009,329 1,767,248 4,999,536 2,332,211
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Net income $ 5,123,993 $ 3,668,729 $ 8,282,047 $ 5,701,899
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Net income per common and
common stock equivalent $0.21 $0.17 $0.34 $0.26
===== ===== ===== =====
Weighted average number of
common and common stock
equivalents outstanding 25,346,357 21,622,682 24,801,972 21,575,276
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
Renal Treatment Centers, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1996 1995
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Assets
Current assets:
Cash $ 81,124 $ 7,624,259
Investments 45,963,081 -
Accounts receivable, net of allowance for
doubtful accounts of $5,450,000 in 1996
and $3,200,000 in 1995 62,961,636 51,351,999
Inventories 3,673,966 2,683,234
Deferred taxes 1,412,519 819,835
Prepaid expenses and other current assets 1,215,549 1,391,775
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Total current assets 115,307,875 63,871,102
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Property and equipment (net of accumulated
depreciation of $15,812,617 in 1996
and $10,378,141 in 1995.) 30,386,994 20,087,284
Intangibles (net of accumulated amortization
of $26,925,574 in 1996 and $22,263,385 in 1995.) 121,718,883 86,341,433
Deferred taxes, non-current 1,749,754 1,749,754
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Total assets $269,163,506 $172,049,573
================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 3,161,543 $ 4,539,635
Accounts payable 6,076,037 4,222,147
Accrued compensation 2,604,415 2,670,384
Accrued expenses 3,170,103 6,576,600
Accrued income taxes 320,024 2,218,692
Accrued interest 399,015 1,087,415
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Total current liabilities 15,731,137 21,314,873
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Long-term debt, net 130,729,923 41,654,966
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized: none issued
Common stock, $.01 par value, 45,000,000
shares authorized: issued and
outstanding 23,773,592 and 21,727,312
shares in 1996 and 1995, respectively. 237,736 217,273
Additional paid-in capital 85,230,723 83,006,891
Retained earnings 37,628,063 26,249,646
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123,096,522 109,473,810
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Less treasury stock, 37,202 shares in
1996 and 1995, at cost (394,076) (394,076)
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122,702,446 109,079,734
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Total liabilities and stockholders' equity $269,163,506 $172,049,573
================================================================================
See accompanying notes to consolidated financial statements.
Renal Treatment Centers, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months ended
June 30,
1996 1995
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Cash flows from operating activities:
Net income $ 8,282,047 $ 5,701,899
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 7,592,831 5,599,687
Provision for doubtful accounts 3,213,737 1,860,101
Changes in operating assets and
liabilities, net of effects of
companies acquired:
Accounts receivable (11,480,413) (8,317,266)
Inventories (694,687) 475,615
Prepaid expenses and other current assets 238,597 175,595
Accounts payable and accrued expenses (5,649,012) (350,580)
Accrued income taxes (1,898,668) (298,908)
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Net cash (used in) provided by operating activities (395,568) 4,846,143
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Cash flows from investing activities:
Capital expenditures (6,128,693) (3,496,979)
Purchase of businesses, net of cash acquired (37,030,623) (5,144,291)
Sale of investments 9,347,962 2,661,944
Purchase of investments (55,311,043) -
Other (979,804) (1,356,734)
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Net cash used in investing activities (90,102,201) (7,336,060)
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Cash flows from financing activities:
Issuance of 5 5/8% convertible subordinated notes $125,000,000 -
Proceeds from long-term debt borrowings 30,500,000 9,000,000
Repayments of debt (70,360,293) (6,305,811)
Proceeds from issuance of common stock 2,137,012 623,329
Payment of dividends - (222,331)
Debt issuance costs (3,750,000) -
Payments on capital lease obligations (1,535,784) (313,312)
Cash portion of consideration received for
common stock 963,699 -
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Net cash provided by financing activities 82,954,634 2,781,875
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Net increase (decrease) in cash and cash
equivalents (7,543,135) 291,958
Cash and cash equivalents at beginning of period 7,624,259 2,152,322
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Cash and cash equivalents at end of period $ 81,124 $ 2,444,280
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Supplemental disclosures of cash flow
information:
Noncash financing activities:
Reduction of note issued in connection with
purchase of business - $ 135,900
Acquisition of treasury stock in connection
with payroll taxes resulting from exercise
of stock options - $ 346,857
Capital lease obligations entered into $ 2,370,838 $ 388,200
Issuance of common stock in connection with
purchase of business $ 89,137 -
Noncash investing activities:
Net assets relating to pooling transaction $ 3,096,370 -
See accompanying notes to consolidated financial statements.
Renal Treatment Centers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements have been prepared
by the Company in accordance with generally accepted accounting principles for
interim financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended June
30, 1996 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996. The interim consolidated financial statements
should be read in conjunction with the consolidated financial statements and
footnotes thereto included in the Company's Form 10-K filed with the Securities
and Exchange Commission on April 1, 1996.
2. COMMITMENTS AND CONTINGENCIES:
The Company is a party to certain legal actions arising in the ordinary course
of business. The Company believes it has adequate legal defenses and/or
insurance coverage for these actions and that the ultimate outcome of these
actions will not have a material adverse impact on the Company's results of
operations, financial condition or liquidity.
3. SIGNIFICANT EVENTS:
On February 20, 1996, the Company acquired Intercontinental Medical Services,
Inc. ("IMS"), which operated four dialysis facilities in Hawaii. The
transaction was accounted for as a pooling of interests. Accordingly, the
Company's financial statements include the results of IMS as of January 1, 1996.
In total, 1,047,464 shares of the Company's common stock were exchanged for all
outstanding shares of IMS.
On February 29, 1996, the Company acquired Midwest Dialysis Units and its
affiliates (collectively "MDU"), which operated 11 dialysis facilities in
Oklahoma. The transaction was accounted for as a pooling of interests.
Accordingly, the Company's financial statements include the results of MDU as of
January 1, 1996. In total 767,168 shares of the Company's common stock were
exchanged for all outstanding shares of MDU.
Prior year financial statements have not been restated to reflect these
transactions because the impact on the Company's financial statements of such
transactions is not material.
On May 29, 1996, with an effective date of May 31, 1996, the Company acquired
substantially all of the assets of Kidney Center of Delaware County, Ltd.
("KCDC") and Kidney Center of Chester County, Ltd. ("KCCC"). These two
outpatient dialysis centers, located in the Philadelphia, Pennsylvania area,
provide care to approximately 400 patients and perform acute treatments at nine
area hospitals.
On June 5, 1996 the Company amended its Credit Agreement with a consortium of
banks to increase the amount available under the line of credit from $68,125,000
to $100,000,000 and to make certain other changes to the terms of the Credit
Agreement, including amendments to certain covenants, the amortization schedule,
the interest rates and the events of default.
On June 12, 1996 the Company issued $125,000,000 of 5 5/8% Convertible
Subordinated Notes due 2006. The Company is using the proceeds of the offering
for the repayment of indebtedness, acquisitions, development of additional
dialysis centers, capital expenditures and general corporate purposes.
Item 2. Renal Treatment Centers, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Overview
Renal Treatment Centers, Inc. (the "Company") provides dialysis treatments and
ancillary services to patients suffering from chronic kidney failure, primarily
in its freestanding outpatient dialysis treatment centers or in the patient's
home. The Company also provides acute inpatient dialysis services to hospitals.
As of August 1, 1996, the Company operated 102 outpatient dialysis centers in 21
states, the District of Columbia and the Republic of Argentina and provided
dialysis services for approximately 7,000 patients. In addition, the Company
provided inpatient dialysis services at 79 hospitals.
Results of Operations
The following table sets forth, for the periods indicated, selected financial
information expressed as a percentage of net patient revenue and the period-to-
period percentage changes in such information.
Percentage of Percentage of
Net Patient Revenue Net Patient Revenue
Three Months Ended Period-to-Period Six Months Ended Period-to-Period
June 30, Percentage Change June 30, Percentage Change
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1996 1995 1996 vs. 1995 1996 1995 1996 vs. 1995
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Net patient revenue 100.0% 100.0% 39.9% 100.0% 100.0% 37.8%
Patient care costs 48.4% 49.0% 38.0% 48.3% 49.0% 35.7%
General and administrative
expense 24.5% 25.5% 34.3% 25.3% 26.5% 31.4%
Provision for doubtful accounts 3.1% 2.3% 86.3% 3.1% 2.5% 72.8%
Depreciation and amortization expense 7.5% 7.4% 40.4% 7.3% 7.4% 35.9%
Merger expenses ---- ---- ---- 1.7% 2.1% 7.6%
Income from operations 16.6% 15.7% 47.8% 14.3% 12.4% 59.0%
Interest expense, net 1.6% 1.6% 32.5% 1.5% 1.7% 19.1%
Provision for income taxes 5.6% 4.6% 70.3% 4.8% 3.1% 114.4%
Net income 9.5% 9.5% 39.7% 8.0% 7.6% 45.3%
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Net Patient Revenue. Net patient revenue for the six months ended June 30, 1996
was $103,334,224 as compared to $75,012,464 for the same period in 1995,
representing an increase of 37.8%. Of this increase, $4,363,505 was
attributable to the revenue generated from the operations of nine centers and
certain acute care agreements acquired in four separate purchase transactions
from March through December 1995, and $14,175,080 was attributable to the
acquisition of various facilities and the development of new dialysis centers
("de novo" developments) during the first six months of 1996. Of the $9,783,175
remaining, $5,475,121 was attributable to an increase in same-center treatments
and $4,308,054 was attributable to an increase in the average same-center
revenue per treatment, which, in turn, was due to an increase in the
administration of EPO and an improvement in the Company's payor mix.
Patient Care Costs. Patient care costs increased 35.7% to $49,887,324 for the
six months ended June 30, 1996 from $36,775,150 for the same period in 1995.
The increase was principally the result of acquisitions that occurred subsequent
to the second quarter of 1995. However, as a percentage of net patient revenue,
patient care costs decreased to 48.3% for the six months ended June 30, 1996
from 49.0% for the same period in 1995. This percentage decrease was primarily
related to the increase in net revenue per treatment. The increase in net
revenue per treatment was offset in part by the additional costs related to the
increased administration of EPO.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
General and Administrative Expense. General and administrative expense
increased $6,247,443, or 31.4%, to $26,163,088 for the six months ended June 30,
1996, as compared to $19,915,645 for the six months ended June 30, 1995. This
increase was primarily the result of additional facility operating costs as well
as additional corporate and facility personnel required to support the centers
acquired and opened during 1995 and 1996. As a percentage of net patient
revenue, these expenses were approximately 25.3% for the six months ended June
30, 1996, as compared to 26.5% for the six months ended June 30, 1995. The
decrease as a percentage of net patient revenue was attributable to the
Company's ability to maintain certain support costs, while increasing net
revenues through acquisitions, internal growth and de novo developments.
Provision for doubtful accounts. Provision for doubtful accounts increased
$1,353,636, or 72.8%, to $3,213,737 for the six months ended June 30, 1996, as
compared to $1,860,101 for the six months ended June 30, 1995. This increase
was principally a result of the additional net patient revenue generated from
acquisitions that occurred subsequent to the second quarter of 1995. As a
percentage of net patient revenue, the provision for doubtful accounts was 3.1%
for the six months ended June 30, 1996 as compared to 2.5% for the same period
in 1995.
Depreciation and Amortization Expense. Depreciation and amortization expense
increased $1,998,663, or 35.9%, for the six months ended June 30, 1996, when
compared to the six months ended June 30, 1995. The increase was due to the
acquisition and start-up of various facilities since July 1995. As a percentage
of net patient revenue, depreciation and amortization expense was 7.3% for the
six months ended June 30, 1996, as compared to 7.4% for the six months ended
June 30, 1995.
Merger Expenses. Merger expenses increased to $1,708,247 for the six months
ended June 30, 1996 from $1,587,542 for the same period in 1995. For the six
months ended June 30, 1995, the merger expenses represent expenses incurred in
connection with the mergers with (i) Healthcare Corporation and its affiliates
and (ii) Wichita Dialysis Center, P.A., Southeast Kansas Dialysis Center, P.A.,
Garden City Dialysis, P.A., and Wichita Dialysis Center, East, P.A.,
(collectively "the Wichita Companies") which were completed on March 6, 1995 and
August 1, 1995, respectively, and were accounted for under the pooling-of-
interests method of accounting. For the six months ended June 30, 1996, merger
expenses were incurred as a result of the mergers between the Company and IMS in
a pooling-of-interests transaction that was completed on February 20, 1996, and
between the Company and MDU that was completed on February 29, 1996. Merger
expenses include fees for the investment banker, attorneys, accountants and
various other expenses incurred as a result of combining the companies.
Income from Operations. Income from operations increased to $14,789,963 for the
six months ended June 30, 1996 from $9,300,824 for the same period in 1995.
This increase was due to the increase in net revenues from acquired businesses
and same-center growth, which was greater than the increases in patient care
costs, general and administrative expense and depreciation and amortization
expense related to such acquired businesses.
Interest Expense, net. Interest expense (net) was $1,508,380 for the six months
ended June 30, 1996 as compared to interest expense (net) of $1,266,714 for the
same period in 1995. The increase in interest expense (net) was attributable to
the additional borrowings for the funding of acquisitions that were completed in
1995 and 1996 that remained outstanding through June 12, 1996, as well as the
additional interest expense (net) incurred as a result of the issuance of
$125,000,000 principal amount of 5 5/8% in Convertible Subordinated Notes due
2006 ("the Notes") by the Company on June 12, 1996.
Provision for Income Taxes. Provision for income taxes increased to $4,999,536
from $2,332,211 for the six months ended June 30, 1996 and 1995, respectively.
For the six months ended June 30, 1996, the Company's effective tax rate was
37.6%, compared to an effective tax rate of 29.0% during the same period in
1995. The increase in the effective tax rate was primarily attributable to the
one-time tax benefit of $325,000 recorded in the first quarter of 1995 as a
result of the merger with Healthcare Corporation and its affiliates. In
addition, the Company incurred a one-time tax charge of $85,350 related to the
merger with MDU recorded in the first quarter of 1996.
Net Income. Net income increased to $8,282,047 for the six months ended June
30, 1996 from $5,701,899 for the same period in 1995. The increase was due to
each of the items discussed above.
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
Net Patient Revenue. Net patient revenue for the three months ended June 30,
1996 was $54,130,060 as compared to $38,698,124 for the same period in 1995,
representing an increase of 39.9%. Of this increase, $1,917,560 was
attributable to the revenue generated from the operations of four centers and
certain acute care agreements acquired in three separate purchase transactions
from July through December 1995, and $8,031,423 was attributable to the
acquisition of various facilities and de novo developments during the first six
months of 1996. Of the $5,482,953 remaining, $2,705,004 was attributable to an
increase in same-center treatments and
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
$2,777,949 was attributable to an increase in the average same-center revenue
per treatment, which, in turn, was due to an increase in the administration of
EPO and an improvement in the Company's payor mix.
Patient Care Costs. Patient care costs increased 38.0% to $26,181,091 for the
three months ended June 30, 1996 from $18,976,948 for the same period in 1995.
The increase was principally the result of acquisitions that occurred subsequent
to the second quarter of 1995. However, as a percentage of net patient revenue,
patient care costs decreased to 48.4% for the three months ended June 30, 1996
from 49.0% for the same period in 1995. This decrease was primarily related to
the increase in net revenue per treatment. The increase in net revenue per
treatment was offset in part by the additional costs related to the increased
administration of EPO.
General and Administrative Expense. General and administrative expense increased
$3,385,104, or 34.3%, to $13,259,805 for the three months ended June 30, 1996,
as compared to $9,874,701 for the three months ended June 30, 1995. This
increase was primarily the result of additional facility operating costs as well
as additional corporate and facility personnel required to support the centers
acquired and opened during 1995 and 1996. As a percentage of net patient
revenue, these expenses were approximately 24.5% for the three months ended June
30, 1996, as compared to 25.5% for the three months ended June 30, 1995. The
decrease as a percentage of net patient revenue was attributable to the
Company's ability to maintain certain support costs, while increasing net
revenues through acquisitions, internal growth and de novo developments.
Provision for doubtful accounts. Provision for doubtful accounts increased
$777,204, or 86.3%, to $1,677,793 for the three months ended June 30, 1996, as
compared to $900,589 for the three months ended June 30, 1995. This increase
was principally a result of the additional net patient revenue generated from
acquisitions that occurred subsequent to the second quarter of 1995. As a
percentage of net patient revenue the provision for doubtful accounts was 3.1%
for the three months ended June 30, 1996 as compared to 2.3% for the same period
in 1995.
Depreciation and Amortization Expense. Depreciation and amortization expense
increased $1,161,628, or 40.4%, for the three months ended June 30, 1996, when
compared to the three months ended June 30, 1995. The increase was due to the
acquisition and startup of various facilities since October 1995. As a
percentage of net patient revenue, depreciation and amortization expense was
7.5% for the three months ended June 30, 1996, as compared to 7.4% for the three
months ended June 30, 1995.
Income from Operations. Income from operations increased to $8,975,894 for the
three months ended June 30, 1996 from $6,072,037 for the same period in 1995.
This increase was due to the increase in net revenues from acquired businesses
and same-center growth, which was greater than the increases in patient care
costs, general and administrative expense and depreciation and amortization
expense related to such acquired businesses.
Interest Expense, net. Interest expense (net) was $842,572 for the three
months ended June 30, 1996 as compared to interest expense (net) of $636,060 for
the same period in 1995. The increase in interest expense (net) was
attributable to the additional borrowings for the funding of acquisitions that
were completed in 1995 and 1996 that remained outstanding through June 12, 1996,
as well as the additional interest expense (net) incurred as a result of the
issuance of the Notes by the Company on June 12, 1996.
Provision for Income Taxes. Provision for income taxes increased to $3,009,329
from $1,767,248 for the three months ended June 30, 1996 and 1995, respectively.
For the three months ended June 30, 1996, the Company's effective tax rate was
37.0% compared to an effective tax rate of 32.5% during the same period last
year. The increase in the effective tax rate was attributable to the state and
federal income tax benefit related to the S corporation status of the Wichita
Companies during the three months ended June 30, 1995.
Net Income. Net income increased to $5,123,993 for the three months ended June
30, 1996 from $3,668,729 for the same period in 1995. The increase was due to
each of the items discussed above.
Liquidity and Capital Resources
The Company requires capital for the acquisition of dialysis centers, for the
expansion of operations of its existing dialysis centers, including the
replacement of equipment and addition of leasehold improvements, for the
integration of new centers into its network of existing dialysis services and
for meeting working capital requirements.
During the six months ended June 30,1996, expenditures for acquisitions totalled
$37,030,623, compared to $5,144,291 for acquisitions for the six months ended
June 30, 1995. The expenditures in 1996 resulted from the acquisition of one
center in March 1996, one center in April 1996, three centers in May 1996 and
one center in June 1996, as compared to the expenditures in 1995, which resulted
from the acquisition of five centers in March 1995. For the six months ended
June 30, 1996 and 1995, capital
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
expenditures were $6,128,693 and $3,496,979, respectively. Cash from operations
before investing and financing activities was ($395,568) and $4,846,145 for the
six months ended June 30, 1996 and 1995, respectively. The principal sources of
the Company's liquidity during the first six months of 1996 were earnings,
additional borrowings under the Company's loan and revolving credit agreement
with a consortium of banks (the "Credit Agreement") and the issuance of
$125,000,000 of convertible subordinated notes on June 12, 1996. The Company
had cash and cash equivalents of $81,124 at June 30, 1996.
The Company Credit Agreement provides for a $100,000,000 revolving credit term
facility available to fund acquisitions and general working capital
requirements, of which $0 and $33,675,000 were outstanding as of June 30, 1996
and December 31, 1995, respectively. Prior to the amendment of the Credit
Agreement on June 5, 1996, the Credit Agreement also provided for a term loan
payable in quarterly installments, of which $0 and $3,750,000 were outstanding
as of June 30, 1996 and December 31, 1995, respectively. On June 5, 1996, the
Company's Credit Agreement was amended to increase the amount available under
the line of credit from $68,125,000 to $100,000,000 and to make certain other
changes to the terms of the Credit Agreement, including amendments to certain
covenants, the amortization schedule, the interest rates and the events of
default. In connection with this amendment, the $3,125,000 principal amount
outstanding under the term loan as of June 5, 1996 was repaid through borrowings
under the line of credit under the Credit Agreement. The line of credit
converts into a term loan in September 1999 that is payable in 16 equal
quarterly installments commencing December 1999 through September 2003.
Borrowings under the Credit Agreement bear interest, at the Company's option, at
either (i) the agent bank's base rate plus 0.25% if the Applicable Margin, which
is determined by the Company's ratio of senior debt to annualized cash flow, is
not less than 2.25 to 1, payable on a quarterly basis or (ii) a one-, two-,
three-, or six-month period LIBOR rate plus 0.75% to 1.75% depending upon the
Applicable Margin, payable at maturity. The weighted average interest rate of
all loans outstanding at December 31, 1995 was 7.4%. Loans under the Credit
Agreement are collateralized by the pledge of all stock of the Company's
subsidiaries and the assignment of all intercompany notes.
The Company has historically expended the majority of its capital resources to
implement its growth strategy and the Company intends to pursue a strategy of
growth through the acquisition and development of dialysis centers. Management
estimates that the development of a new center, depending on its size, requires
approximately $500,000 to $1,000,000 for construction costs and the purchase of
certain furniture and equipment and approximately $75,000 to $150,000 in working
capital. Acquisition of a dialysis center with an existing patient base
typically requires more capital investment, but each investment varies based on
relative size and other factors. No assurance can be given that the Company
will be successful in implementing its growth strategy or that adequate sources
of capital will be available on terms acceptable to the Company to pursue its
growth strategy in the future.
The Company believes that capital resources available to it will be sufficient
to meet the needs of its business, both on a short- and long-term basis.
Part II. Other Information
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Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Company's Annual Meeting of Stockholders was held on May 2, 1996.
(c) 1. The stockholders elected the following persons as Class III
directors of the Company:
Name For Withheld
---- --- --------
Robert L. Mayer, Jr. 17,081,526 59,580
Frederick C. Jansen 17,081,526 59,580
There were no broker non-votes with respect to the election of
directors.
2. The stockholders approved an amendment to the Company's Amended
and Restated 1990 Stock Plan to increase the number of shares of
Common Stock covered thereby from 2,437,000 shares to 3,237,000
shares.
For: 15,103,696 Against: 1,671,552 Abstain: 187,816
----------- ---------- --------
There were 178,042 broker non-votes in connection with the
---------
approval of the amendment to the Company's Amended and Restated
1990 Stock Plan.
3. The stockholders ratified the appointment of Coopers & Lybrand,
L.L.P. as independent public accountants for the Company for its
1996 fiscal year.
For: 16,957,080 Against: 1,610 Abstain: 182,416
----------- ------ --------
There were no broker non-votes in connection with the
ratification of the appointment of the Company's independent
public accountants.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
4.1 Specimen Certificate of Common Stock of the Company
(incorporated herein by reference to Exhibit No. 4.1 filed
under the Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
4.2 Indenture dated June 12, 1996 by the Company to PNC Bank,
National Association, Trustee, including form of the
Company's 5 5/8% Convertible Subordinated Note due 2006
issued under the Indenture.
4.3 Registration Rights Agreement dated as of June 12, 1996 by
and among the Company, Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, UBS Securities LLC, J.C.
Bradford & Co. and Wessels, Arnold & Henderson.
10.2.2* Amendment No. 1 to the Company's Equity Incentive Plan for
Outside Directors dated May 2, 1996.
10.3.1* First Amendment to Employment Agreement dated as of May 2,
1996 between the Company and Robert L. Mayer, Jr.
10.4.1* First Amendment to Employment Agreement dated as of May 2,
1996 between the Company and Frederick C. Jansen.
10.5* Employment Agreement dated as of May 2, 1996 between the
Company and Barbara A. Bednar.
10.6.1* First Amendment to Employment Agreement dated as of May 2,
1996 between the Company and John A. Chambers.
Part II. Item 6(a) continued:
10.8.1* First Amendment to Executive Severance Agreement dated as of
May 2, 1996 between the Company and Barbara A. Bednar.
10.9.1* First Amendment to Executive Severance Agreement dated as of
May 2, 1996 between the Company and Ronald H. Rodgers, Jr.
10.10.1* First Amendment to Executive Severance Agreement dated as of
May 2, 1996 between the Company and John A. Chambers.
10.11 Fourth Amended and Restated Loan Agreement dated as of
June 5, 1996 between the Company and First Union National
Bank of North Carolina and the other lenders set forth
therein (incorporated herein by reference to Exhibit No. 99.1
filed under the Company's Current Report on Form 8-K dated
May 29, 1996).
10.12.5 Fourth Amendment to Lease dated May 30, 1996.
10.25* Employment Agreement dated as of May 2, 1996 between the
Company and Ronald H. Rodgers, Jr.
10.26* Employment Agreement dated as of March 11, 1996 between the
Company and Thomas J. Karl.
10.27* Executive Severance Agreement dated as of March 11, 1996
between the Company and Thomas J. Karl.
10.28 Asset Purchase Agreement dated as of May 29, 1996 between
Renal Treatment Centers - Pennsylvania, Inc. and KCCC
Liquidating Trust (incorporated herein by reference to
Exhibit No. 2.1 filed under the Company's Current Report on
Form 8-K dated May 29, 1996).
10.29 Asset Purchase Agreement dated as of May 29, 1996 between
Renal Treatment Centers - Pennsylvania, Inc. and KCDC
Liquidating Trust (incorporated herein by reference to
Exhibit No. 2.2 filed under the Company's Current Report on
Form 8-K dated May 29, 1996).
11.1 Computation of Primary and Fully Diluted Earnings Per Share.
27 Financial Date Schedule.
--------------------------
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
Form 8-K dated May 28, 1996 filed to report under Item 5 the press
release announcing the Company's offering of the Notes.
Form 8-K dated May 29, 1996 filed to report under Item 2 the
acquisition of substantially all of the assets of KCCC and KCDC and
under Item 5 to report the amended and restated Credit Agreement.
Form 8-K/A Amendment No. 1 to Current Report dated May 29, 1996 filed
on July 15, 1996 to file pursuant to Item 7(1) historical financial
information for the year ended December 31, 1995 and the three months
ended March 31, 1996 and (2) pro forma financial information for the
Company for the year ended December 31, 1995 and the three months
ended March 31, 1996 related to the acquisition of KCDC and KCCC as
reported on Form 8-K dated May 29, 1996.
4.1 Specimen Certificate of Common Stock of the Company (incorporated
herein by reference to Exhibit No. 4.1 filed under the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).
4.2 Indenture dated June 12, 1996 by the Company to PNC Bank, National
Association, Trustee, including form of the Company's 5 5/8%
Convertible Subordinated Note due 2006 issued under the Indenture.
4.3 Registration Rights Agreement dated as of June 12, 1996 by and among
the Company, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, UBS Securities LLC, J.C. Bradford & Co. and Wessels,
Arnold & Henderson.
10.2.2* Amendment No. 1 to the Company's Equity Incentive Plan for Outside
Directors dated May 2, 1996.
10.3.1* First Amendment to Employment Agreement dated as of May 2, 1996
between the Company and Robert L. Mayer, Jr.
10.4.1* First Amendment to Employment Agreement dated as of May 2, 1996
between the Company and Frederick C. Jansen.
10.5* Employment Agreement dated as of May 2, 1996 between the Company and
Barbara A. Bednar.
10.6.1* First Amendment to Employment Agreement dated as of May 2, 1996 between
the Company and John A. Chambers.
10.8.1* First Amendment to Executive Severance Agreement dated as of
May 2, 1996 between the Company and Barbara A. Bednar.
10.9.1* First Amendment to Executive Severance Agreement dated as of
May 2, 1996 between the Company and Ronald H. Rodgers, Jr.
10.10.1* First Amendment to Executive Severance Agreement dated as of
May 2, 1996 between the Company and John A. Chambers.
10.11 Fourth Amended and Restated Loan Agreement dated as of June 5, 1996
between the Company and First Union National Bank of North Carolina
and the other lenders set forth therein (incorporated herein by
reference to Exhibit No. 99.1 filed under the Company's Current Report
on Form 8-K dated May 29, 1996).
10.12.5 Fourth Amendment to Lease dated May 30, 1996.
10.25* Employment Agreement dated as of May 2, 1996 between the Company and
Ronald H. Rodgers, Jr.
10.26* Employment Agreement dated as of March 11, 1996 between the Company
and Thomas J. Karl.
10.27* Executive Severance Agreement dated as of March 11, 1996 between the
Company and Thomas J. Karl.
10.28 Asset Purchase Agreement dated as of May 29, 1996 between Renal
Treatment Centers - Pennsylvania, Inc. and KCCC Liquidating Trust
(incorporated herein by reference to Exhibit No. 2.1 filed under the
Company's Current Report on Form 8-K dated May 29, 1996.)
10.29 Asset Purchase Agreement dated as of May 29, 1996 between Renal
Treatment Centers - Pennsylvania, Inc. and KCDC Liquidating Trust
(incorporated herein by reference to Exhibit No. 2.2 filed under the
Company's Current Report on Form 8-K dated May 29, 1996).
11.1 Computation of Primary and Fully Diluted Earnings Per Share.
27 Financial Data Schedule.
* Management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RENAL TREATMENT CENTERS, INC.
Date: August 5, 1996 By: /s/ Frederick C. Jansen
- -------------------------- ---------------------------
Frederick C. Jansen
Executive Vice President and
Chief Financial Officer
Date: August 5, 1996 By: /s/ Ronald H. Rodgers, Jr.
- -------------------------- ---------------------------
Ronald H. Rodgers, Jr.
Vice President - Finance and
Chief Accounting Officer