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