1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 8, 1996
SEAFIELD CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
MISSOURI
(State or other jurisdiction of incorporation)
0-16946 43-1039532
(Commission File Number) (I.R.S. Employer Identification No.)
2600 Grand Blvd., Suite 500, P.O. Box 410949, Kansas City, MO 64141
(Address of principal executive offices, including Zip Code)
(816) 842-7000
(Registrant's telephone number, including Area Code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
2
ITEM 5. OTHER EVENTS
On July 3, 1996, the Registrant's 54% owned subsidiary, Response
Oncology, Inc. ("Response"), acquired (the "Transaction") from the
stockholders of Rymer, Zaravinos & Faig, M.D., P.A. (the "Sellers") 100% of the
outstanding common stock (the "Acquired Stock") of Rymer, Zaravinos & Faig,
M.D., P.A. (the "Acquired Business"). The total consideration (the "Purchase
Price") paid for the Acquired Stock was approximately $5.9 million in cash,
with the balance being paid by delivery of 117,600 restricted shares of common
stock of Response ("Response Common Stock"), valued at approximately
$1.2 million. The delivery of Response Common Stock as partial
consideration for the Acquired Stock has not been registered under the
Securities Act of 1933 in reliance upon an exemption from such registration.
The Acquired Stock was purchased by Response directly from the
Sellers. At the time of the Transaction, the Sellers had no material
relationship with Response. The assets of the Acquired Business include
medical equipment, accounts receivable, office furnishings and fixtures, rights
under a certain lease for certain office space, employee base and expertise,
know-how in respect of management of a medical practice in the oncology and
hematology specialty, computer systems, accounting books and records and other
intangible assets. Such assets were historically used in the conduct by the
Acquired Business of a group medical practice in the oncology and hematology
specialty.
Simultaneous with the consummation of the Transaction, a newly-formed
professional association wholly owned by the Sellers and formed to continue the
group medical practice theretofore conducted by the Seller (the "New PA")
entered into a long-term management services agreement (the "Service
Agreement") with the Acquired Business providing for the management by the
Acquired Business of the non-medical aspects of the practice thereafter
conducted by the New PA. Pursuant to the Service Agreement, the Acquired
Business will manage the non-medical aspects of the New PA's business and will
permit the New PA to use office space, equipment and other assets owned or
leased by the Acquired Business in exchange for an agreed-upon management fee.
The cash portion of the Purchase Price was provided from the proceeds
of a draw on Response's unsecured acquisition credit facility provided
through a syndicate of commercial banks led by NationsBank of Tennessee, N.A.
Borrowings under such facility bear interest at a rate equal to LIBOR plus
2 5/8%, and are payable on or before May 31, 1998.
Pro Forma financial information and audited financial statements are as
follows:
1. Pro Forma Balance Sheet and Statement of Operations for Response
and Acquired Business as of March 31, 1996 and for the year
ended December 31, 1995 and the three months ended March 31, 1996.
2. Audited Balance Sheet, Statement of Income, Statement of
Shareholders' Equity, and the Statement of Cash Flows, including
footnotes as of and for the year ended December 31, 1995 for Rymer,
Zaravinos and Faig, M.D., P.A.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits: Form of the following agreements filed with
Response's current report on Form 8-K:
99.1 Stock Puchase Agreement by and among Response
Oncology, Inc. and Stockholders of Rymer, Zaravinos &
Faig, M.D., P.A. dated July 1, 1996.
99.2 Service Agreement between Response Oncology of Fort
Lauderdale, Inc., Southeast Florida Hematology
Oncology Group, P.A. and Stockholders of Southeast
Florida Hematology Oncology Group, P.A. dated July 1,
1996.
3
RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
BASIS OF PRESENTATION
The accompanying pro forma consolidated balance sheet as of March 31, 1996 and
the related pro forma consolidated statements of operations for the year ended
December 31, 1995 and the three months ended March 31, 1996 give effect to the
acquisitions of Southeast Florida Hematology Oncology Group, P.A. ("the Fort
Lauderdale Practice") Jeffrey L. Paonessa, M.D., P.A. ("Paonessa"), Knoxville
Hematology Oncology Associates ("KHOA") and Oncology Hematology Group of South
Florida, P.A. ("OHG"), (collectively referred to as the "Groups") as if the
acquisitions of the Groups had occurred on January 1, 1995. The pro forma
information is based on the historical audited financial statements of Response
Oncology, Inc. and subsidiaries (the "Company") and the Groups, giving effect
to the acquisitions under the purchase method of accounting, and the
assumptions and adjustments in the accompanying notes to the pro forma
consolidated financial information.
The pro forma statements have been prepared by the Company's management based
on the audited financial statements of the acquired entities. These pro forma
statements may not be indicative of the results that would have occurred if the
acquisitions had been in effect on the dates indicated or which may be obtained
in the future. The pro forma statements do not reflect the effect of expense
reductions and other operational changes, which, in the opinion of the Company,
is likely to result in profitable operations for the Groups. The pro forma
financial statements should be read in conjunction with the consolidated
financial statements and notes of Response Oncology, Inc. and subsidiaries.
4
Response Oncology, Inc. and Subsidiaries
Pro Forma Consolidated Balance Sheet
March 31, 1996
(Unaudited)
Previous
Acquisition
Historical Subsequent to Pro Forma Pro Forma
Company March 31, 1996 Adjustments Results
--------------------------------------------------------
Cash $ 483,191 $ 176,360 $(7,900,565) $(7,241,014)
Short-term investments 361,718 361,718
Accounts receivable, net 15,100,543 2,177,305 (198,657) 17,079,191
Supplies 1,090,643 248,981 (139,631) 1,199,993
Prepaids 525,882 3,875 (3,875) 525,882
Advances to affiliated physician groups 3,112,552 3,112,552
Other current assets 2,089,590 277,313 113,685 2,480,588
--------------------------------------------------------
Total current assets 22,764,119 2,883,834 (8,129,043) 17,518,910
Property and equipment, net 3,695,637 1,945,971 (395,971) 5,245,637
Deferred charges, net 325,733 325,733
Intangible assets 11,656,558 11,656,558
Management Service Agreement 22,413,662 22,413,662
Other assets 176,805 176,805
--------------------------------------------------------
Total assets $38,618,852 $ 4,829,805 $13,888,648 $57,337,305
Accounts payable $ 5,696,496 $ 559,759 $ 318,294 $ 6,574,549
Accrued expenses 1,891,482 1,891,482
Notes payable 3,607,711 5,100,000 8,707,711
Capital lease obligations 57,622 46,947 (46,947) 57,622
Current portion of long term note 396,997 1,713,757 (1,713,757) 396,997
--------------------------------------------------------
Total current liabilities 11,650,308 2,320,463 3,657,590 17,628,361
Capital lease obligations 0 48,865 (48,865) 0
Notes Payable 6,265,369 23,131 10,126,869 16,415,369
Deferred tax liability, noncurrent
Minority Interest 261,425 261,425
Stockholders' equity 0
Preferred stock 27,833 27,833
Common stock 73,782 1,000 962 75,744
Paid-in capital 60,137,024 2,588,438 62,725,462
Retained earnings (accumulated deficit) (39,796,889) 2,436,346 (2,436,346) (39,796,889)
--------------------------------------------------------
Total liabities and stockholders equity $38,618,852 $ 4,829,805 $13,888,648 $57,337,305
========================================================
Fort Lauderdale Pro Forma Total
Practice Adjustments Pro Forma Proforma
-------------------------------------------- ------------
Cash $111,737 $(6,270,425) $(6,158,688) $(13,399,702)
Short-term investments 0 361,718
Accounts receivable, net 664,966 664,966 17,744,157
Supplies 128,836 (128,836) 0 1,199,993
Prepaids 37,390 (37,390) 0 525,882
Advances to affiliated physician groups 0 3,112,552
Other current assets 166,226 166,226 2,646,814
---------------------------------------- ------------
Total current assets 942,929 (6,270,425) (5,327,496) 12,191,414
Property and equipment, net 21,217 21,217 5,266,854
Deferred charges, net 0 325,733
Intangible assets 0 11,656,558
Management Service Agreement 11,147,704 11,147,704 33,561,366
Other assets 0 176,805
---------------------------------------- ------------
Total assets $964,146 $ 4,877,279 $ 5,841,425 $ 63,178,730
Accounts payable $394,008 ($7,730) $ 386,278 $ 6,960,827
Accrued expenses 0 1,891,482
Notes payable 250,000 (250,000) 0 8,707,711
Capital lease obligations 0 57,622
Current portion of long term note 0 396,997
Deferred income taxes 69,386 69,386 69,386
---------------------------------------- ------------
Total current liabilities 713,394 (257,730) 455,664 18,084,025
Capital lease obligations 0 0
Notes Payable 0 16,415,369
Deferred tax liability, noncurrent 4,209,761 4,209,761 4,209,761
Minority Interest 0 261,425
Stockholders' equity 0 0
Preferred stock 0 27,833
Common stock 501 675 1,176 76,920
Paid-in capital 1,174,824 1,174,824 63,900,286
Retained earnings (accumulated deficit) 250,251 (250,251) 0 (39,796,889)
--------------------------------------- ------------
Total liabities and stockholders equity $964,146 $ 4,877,279 $ 5,841,425 $ 63,178,730
======================================= ============
See accompanying notes to pro forma consolidated financial information.
5
Response Oncology, Inc. and Subsididaries
Pro Forma Consolidated Statement of Operations
Period Ended March 31, 1996
(Unaudited)
Previous
Acquisitions
Historical Subsequent to Pro Forma Pro Forma
Company March 31, 1996 Adjustments Results
-------------------------------------------------------------
Revenue:
Net revenue $13,340,885 $ 2,830,230 (b) $16,171,115
Other Income 16,729 $ 80,255 (80,255) 16,729
Net patient service revenue 4,037,206 (4,037,206)(a) 0
-------------------------------------------------------------
Total Revenue 13,357,614 4,117,461 (1,287,231) 16,187,844
Expenses:
Operating expenses 10,344,781 2,070,214 (296,990)(a) 12,118,005
General and administrative 1,266,840 150,868 95,766 1,513,474
Depreciation and amortization 570,965 72,889 95,319 (d) 739,173
Interest 192,281 23,328 216,047 (c) 431,656
Provision for doubtful accounts 372,100 0 372,100
-------------------------------------------------------------
Total Expenses 12,746,967 2,317,299 110,142 15,174,408
Earnings before minority interest 610,647 1,800,162 (1,397,373) 1,013,436
Minority interest 94,369 94,369
-------------------------------------------------------------
Net Earnings to common stockholders $ 516,278 $1,800,162 $(1,397,373) $ 919,067
=============================================================
Fort Lauderdale Pro Forma Total
Practice Adjustments Pro Forma Pro Forma
----------------------------------------------------------
Revenue:
Net revenue $ 768,667 $768,667 $16,939,782
Other Income 16,729
Net patient service revenue $1,184,387 (1,184,387)
----------------------------------------------------------
Total Revenue 1,184,387 (415,720) 768,667 16,956,511
Expenses:
Operating expenses 1,147,885 (445,995) 701,890 12,819,895
General and administrative 1,513,474
Depreciation and amortization 3,516 69,239 72,755 811,928
Interest 0 431,656
Provision for doubtful accounts 0 372,100
----------------------------------------------------------
Total Expenses 1,151,401 (376,756) 774,645 15,949,053
Earnings before minority interest 32,986 (38,964) (5,978) 1,007,458
Minority interest 5,575 (5,575) 0 94,369
----------------------------------------------------------
Net Earnings to common stockholders $ 27,411 $ (33,389) $(5,978) $ 913,089
==========================================================
See accompanying notes to pro forma consolidated financial information.
6
Response Oncology, Inc. and Subsididaries
Pro Forma Consolidated Statement of Operations
Year Ended December 31, 1995
(Unaudited)
Previous
Acquisition
Historical Subsequent to Pro Forma Pro Forma
Company December 31, 1995 Adjustments Results
--------------------------------------------------------------
Revenue:
Net revenue $44,297,798 $ 15,174,143 (b) $59,471,941
Other Income 282,011 $ 352,353 (352,353) 282,011
Net patient service revenue 22,619,206 (22,619,206)(a) 0
--------------------------------------------------------------
Total Revenue 44,579,809 22,971,559 (7,797,416) 59,753,952
Expenses:
Operating expenses 32,892,728 16,253,432 (3,946,018)(a) 45,200,142
General and administrative 5,512,306 5,512,306
Depreciation and amortization 1,736,055 382,515 835,502 (d) 2,954,072
Interest 16,860 269,114 1,507,268 (c) 1,793,242
Provision for doubtful accounts 2,105,696 77,066 2,182,762
--------------------------------------------------------------
Total Expenses 42,263,645 16,982,127 (1,603,248) 57,642,524
Earnings before minority interest 2,316,164 5,989,432 (6,194,168) 2,111,428
Minority interest 1,806 1,806
--------------------------------------------------------------
Earnings before income taxes 2,314,358 5,989,432 (6,194,168) 2,109,622
Income tax expense 210,000 (210,000)(e) 0
--------------------------------------------------------------
Net earnings 2,314,358 5,779,432 (5,984,168) 2,109,622
Common stock dividend to
preferred stockholders 3,825 3,825
--------------------------------------------------------------
Net earnings to common stockholders $ 2,310,533 $ 5,779,432 $ (5,984,168) $ 2,105,797
==============================================================
Fort Lauderdale Pro Forma Total
Practice Adjustments Pro Forma Pro Forma
------------------------------------------------ -----------
Revenue:
Net revenue $ 3,074,667 (b) $ 3,074,667 $62,546,608
Other Income 0 0 282,011
Net patient service revenue 4,737,546 (4,737,546)(a) 0 0
------------------------------------------------ -----------
Total Revenue 4,737,546 (1,662,879) 3,074,667 62,828,619
Expenses:
Operating expenses 4,591,540 (1,783,981)(a) 2,807,559 48,007,701
General and administrative 0 5,512,306
Depreciation and amortization 14,065 276,958 (d) 291,023 3,245,095
Interest 0 1,793,242
Provision for doubtful accounts 0 2,182,762
------------------------------------------------ -----------
Total Expenses 4,605,605 (1,507,023) 3,098,582 60,741,106
Earnings before minority interest 131,941 (155,856) (23,915) 2,087,513
Minority interest 0 1,806
------------------------------------------------ -----------
Earnings before income taxes 131,941 (155,856) (23,915) 2,085,707
Income tax expense 22,298 (22,298) 0 0
------------------------------------------------ -----------
Net earnings 109,643 (133,558) (23,915) 2,085,707
Common stock dividend to
preferred stockholders 0 3,825
------------------------------------------------ -----------
Net earnings to common stockholders $ 109,643 $ (133,558) $ (23,915) $ 2,081,882
================================================ ===========
See accompanying notes to pro forma consolidated financial information.
7
RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The accompanying pro forma consolidated financial information presents the pro
forma financial condition of Response Oncology, Inc. and subsidiaries (the
"Company") as of March 31, 1996 and the results of their operations for the
year ended December 31, 1995 and the three months ended March 31, 1996.
On July 3, 1996, the Company acquired from unaffiliated individual sellers
100% of the issued and outstanding general partnership interest ("the Acquired
Interests") of Southeast Florida Hematology Oncology Group, P.A. ("the Fort
Lauderdale Practice")
The accompanying pro forma consolidated balance sheet includes the acquired
assets, assumed liabilities and effects of financing, as if the Fort Lauderdale
Practice had been acquired on March 31, 1996. The accompanying pro forma
consolidated statements of operations reflect the pro forma results of
operations, as adjusted, as if all acqusition practices held by the Company had
been acquired on January 1, 1995.
PRO FORMA CONSOLIDATED BALANCE SHEET
The adjustments reflected in the pro forma consolidated balance sheet are to
reflect the values of assets acquired and liabilities assumed in connection
with the acquisition of the Fort Lauderdale Practice to reflect the issuance of
long-term debt and cash payment to complete the acquisition; and to reflect the
recording of management service agreements acquired.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
The adjustments reflected in the pro forma consolidated statements of operations
are as follows:
(a) To eliminate certain revenues and expenses of Paonessa that would not
constitute revenue to the Company or be the responsibility of the
Company pursuant to the Service Agreement.
(b) To accrue net revenue resulting from service agreements related to the
acquisition of the Group. Amounts were calculated based upon actual
operating results for the period, as adjusted, under the terms of the
related service agreement.
(c) To reflect interest on the long-term debt issued. Interest was
calculated at the annual rates ranging from 5% to 9.5%.
(d) To record amortization of the intangible asset related to the service
agreements. The assets are amortized over the service agreement
period, or 40 years.
8
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Rymer, Zaravinos and Faig, M.D., P.A.:
(d/b/a Southeast Florida Hematology -- Oncology Group)
We have audited the accompanying balance sheet of Rymer, Zaravinos and
Faig, M.D., P.A. (d/b/a Southeast Florida Hematology Oncology Group) as of
January 31, 1996, and the related statements of operating, stockholders' equity,
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 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 financial position of Rymer, Zaravinos and Faig,
M.D., P.A. (d/b/a Southeast Florida Hematology Oncology Group) as of January
31, 1996, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
June 14, 1996
9
RYMER, ZARAVINOS AND FAIG, M.D., P.A.
(D/B/A SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP)
BALANCE SHEETS
JANUARY 31, APRIL 30,
1996 1996
----------- -----------
(UNAUDITED)
ASSETS
Current assets:
Cash................................................................. $ 111,737 $ 138,658
Accounts receivable, net of allowance for contractual adjustments and
uncollectible amounts of $932,000 at January 31, 1996, and
$913,000 (unaudited) at April 30, 1996............................ 664,966 770,345
Supplies............................................................. 128,836 60,817
Prepaid expenses..................................................... 19,960 26,557
Deposits............................................................. 17,430 17,430
----------- -----------
Total current assets......................................... 942,929 1,013,807
----------- -----------
Furniture and equipment:
Furniture and fixtures............................................... 154,724 156,414
Medical equipment.................................................... 96,026 96,026
Transportation equipment............................................. 38,546 38,546
----------- -----------
289,296 290,986
Less accumulated depreciation........................................ 268,079 270,588
----------- -----------
Net furniture and equipment.................................. 21,217 20,398
----------- -----------
$ 964,146 $ 1,034,205
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses................................ $ 326,089 $ 474,646
Accrued employee compensation........................................ 60,189 4,362
Notes payable........................................................ 250,000 184,065
Due to officers...................................................... 7,730 499
Income taxes payable................................................. 58,574
Deferred income taxes................................................ 69,386 30,117
----------- -----------
Total current liabilities.................................... 713,394 752,263
----------- -----------
Stockholders' equity:
Common stock, $1 par value per share; Class A, 1 share authorized
and issued........................................................ 1 1
Common stock, $1 par value per share; Class B, 500 shares authorized
and issued........................................................ 500 500
Retained earnings.................................................... 250,251 281,441
----------- -----------
Total stockholders' equity................................... 250,752 281,942
Commitments and contingencies
----------- -----------
$ 964,146 $ 1,034,205
======== =========
See accompanying notes to financial statements.
10
RYMER, ZARAVINOS AND FAIG, M.D., P.A.
(D/B/A SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP)
STATEMENTS OF OPERATIONS
FOR THE THREE-
YEAR ENDED MONTH PERIOD
JANUARY 31, ENDED APRIL
1996 30, 1996
----------- --------------
(UNAUDITED)
Net patient revenue.................................................. $ 4,737,546 $1,122,266
Expenses:
Supplies........................................................... 1,327,112 406,517
Operating.......................................................... 613,355 215,826
Physicians' compensation........................................... 1,783,981 302,969
Salaries and benefits.............................................. 867,092 143,950
Depreciation....................................................... 14,065 2,509
----------- --------------
4,605,605 1,071,771
----------- --------------
Income before income taxes................................. 131,941 50,495
Provision for income taxes........................................... 52,237 19,305
----------- --------------
Net income................................................. $ 79,704 $ 31,190
========= ==========
See accompanying notes to financial statements.
11
RYMER, ZARAVINOS AND FAIG, M.D., P.A.
(D/B/A SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP)
STATEMENT OF STOCKHOLDERS' EQUITY
TOTAL
COMMON RETAINED STOCKHOLDERS'
STOCK EARNINGS EQUITY
------ -------- -------------
Balances, January 31, 1995..................................... $501 $170,547 $ 171,048
Net income........................................... -- 79,704 79,704
------ -------- -------------
Balances, January 31, 1996..................................... 501 250,251 250,752
Net income (unaudited)............................... -- 31,190 31,190
------ -------- -------------
Balances, April 30, 1996 (unaudited)........................... $501 $281,441 $ 281,942
====== ======== =========
See accompanying notes to financial statements.
12
RYMER, ZARAVINOS AND FAIG, M.D., P.A.
(D/B/A SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP)
STATEMENTS OF CASH FLOWS
FOR THE THREE-
YEAR ENDED MONTH PERIOD
JANUARY 31, ENDED APRIL
1996 30, 1996
----------- --------------
(UNAUDITED)
Cash flows from operating activities:
Net income.......................................................... $ 79,704 $ 31,190
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation..................................................... 14,065 2,509
Changes in operating assets and liabilities:
Accounts receivables, net...................................... 136,587 (105,379)
Supplies....................................................... 13,234 68,019
Deferred income taxes.......................................... 29,939 (39,269)
Prepaid expenses............................................... 1,056 (6,597)
Accounts payable and accrued expenses.......................... (361,065) 148,557
Income taxes payable........................................... -- 58,574
Accrued employee compensation.................................. (48,830) (55,827)
----------- --------------
Net cash used in operating activities....................... (135,310) 101,777
----------- --------------
Cash flows from investing activity:
Expenditures for furniture and equipment............................ (1,063) (1,690)
----------- --------------
Net cash used in investing activity......................... (1,063) (1,690)
----------- --------------
Cash flows from financing activities:
Repayment of notes payable.......................................... (60,000) (65,935)
Proceeds from notes payable......................................... 250,000 --
Repayment of debt -- officers....................................... (19,837) (7,231)
----------- --------------
Net cash provided by financing activities................... 170,163 (73,166)
----------- --------------
Net increase in cash........................................ 33,790 26,921
Cash, beginning....................................................... 77,947 111,737
----------- --------------
Cash, end............................................................. $ 111,737 $ 138,658
========= ==========
Supplemental disclosure of cash flow information:
Cash payments for interest.......................................... $ 2,550 $ 4,430
========= ==========
Cash payments for taxes............................................. $ 22,298 $ --
========= ==========
See accompanying notes to financial statements.
13
RYMER, ZARAVINOS AND FAIG, M.D., P.A.
(D/B/A SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP)
NOTES TO FINANCIAL STATEMENTS
UNAUDITED INTERIM FINANCIAL INFORMATION
The balance sheet as of April 30, 1996 and the related statements of
operations, shareholders' equity and cash flows for the three-month period ended
April 30, 1996 (1996 interim financial information) have been prepared by Rymer,
Zaravinos and Faig, M.D., P.A. (d/b/a Southeast Florida Hematology -- Oncology
Group) (the "Company") and are unaudited. In the opinion of the Company, the
1996 interim financial information includes all adjustments, consisting of only
normal recurring adjustments, necessary for a fair statement of the results of
the 1996 interim period.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from the 1996 interim financial information. The
1996 interim financial information should be read in conjunction with the
Company's January 31, 1996 audited financial statements appearing herein. The
results for the three months ended April 30, 1996 may not be indicative of
operating results for the full year.
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(a) Description of Business
The Company was incorporated on May 21, 1979 in the state of Florida. The
Company is a medical group practice whose physicians specialize in providing
services to patients with cancer.
(b) Net Revenue
Net revenue primarily consists of charges for patient services rendered by
the physicians based on established billing rates less allowance and discounts
for patients covered by contractual programs. Payments received under these
programs, which are generally based on predetermined rates, are generally less
than the established billing rates, and the differences are recorded as
contractual allowance or policy discounts. Net patient service revenue is net of
contractual adjustments and policy discounts of approximately $2,000,000 for the
year ended January 31, 1996 and $632,000 for the three-month period ended April
30, 1996 (unaudited).
(c) Accounts Receivable
Accounts receivable consists primarily of receivables from patients and
third-party payors. In the normal course of providing healthcare services, the
Company grants credit to patients, substantially all of whom are resident in the
south Florida area. The Company does not generally require collateral or other
security in extending credit to patients; however, it routinely obtains
assignments of (or is otherwise entitled to receive) patients' benefits payable
under their health insurance programs, plans or policies (for example, Medicare,
Medicaid, health maintenance organizations, preferred provider organizations and
commercial insurance policies).
The majority of the Company's net revenue and receivables is from
third-party payment programs. At January 31, 1995, approximately 97 percent of
total revenue and receivables consists of amounts from Medicare (26 percent),
various commercial plans (37 percent) and private pay patients (34 percent).
(d) Supplies
Supplies consists of pharmaceuticals and medications which are stated at
the lower of cost or market on a first-in, first-out basis.
14
RYMER, ZARAVINOS AND FAIG, M.D., P.A.
(D/B/A SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(e) Property and Equipment
Property and equipment are stated at cost. Depreciation for equipment is
calculated using the straight-line method over the estimated useful lives of the
assets, as follows:
ESTIMATED
USEFUL LIVES
------------
Furniture and fixtures........................................ 7 years
Medical equipment............................................. 5-7 years
Transportation equipment...................................... 5 years
(f) Income Taxes
The Company accounts for income taxes under the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("Statement 109"). Statement 109 requires the
asset and liability method of accounting for income taxes. Under the asset and
liability method of Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying accounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.
(g) 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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(2) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of patients' accounts receivable, investments,
accounts payable, notes payable, accrued expenses and accrued employee
compensation approximate fair value because of the short maturity of these
instruments.
(3) EMPLOYEE BENEFIT PLANS
The Company has a Qualified Defined Contribution Pension and A Profit
Sharing Plan, which covers substantially all employees. Employees become
eligible to participate in the plans after one year of full service and have
attained the age of 21 years. Under the Defined Contribution Plan, the Company,
for each plan year, contributes an amount equal to 8 percent of each
participants annual compensation, and 5.7 percent of the participants excess
compensation as defined by the plan agreement. Total company contributions for
year ended January 31, 1996 and the three-month period ended April 30, 1996
(unaudited) were $88,000 and $-0-, respectively.
The contributions to the Profit Sharing Plan are discretionary, which are
established by the board of directors. For the year ended January 31, 1996 and
the three-month period ended April 30, 1996 (unaudited) the Company did not make
any contributions to the Plan.
15
RYMER, ZARAVINOS AND FAIG, M.D., P.A.
(D/B/A SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(4) NOTE PAYABLE
The note payable to bank bears interest at a rate of prime plus 1.650
percent and becomes due in January of 1997. The note is secured by the Company's
deposits and bank accounts serviced by the lender.
(5) INCOME TAXES
Income tax expense for the year ended January 31, 1996 and the three-month
period ended April 30, 1996 is summarized as follows:
JANUARY 31, APRIL 30,
1996 1996
----------- -----------
(UNAUDITED)
Current:
Federal...................................................... $19,585 $ 50,472
State........................................................ 2,713 8,102
----------- -----------
22,298 58,574
----------- -----------
Deferred:
Federal...................................................... 25,577 (35,634)
State........................................................ 4,362 3,635
----------- -----------
29,939 (39,269)
----------- -----------
$52,237 $ 19,305
======== =========
A reconciliation of the effective income tax rate for the year ended
January 31, 1996 and the three-month period ended April 30, 1996 is as follows:
JANUARY 31, APRIL 30,
1996 1996
----------- -----------
(UNAUDITED)
Computed "expected" tax expense (benefit)...................... 35.00 35.00
State income tax, net of federal benefit....................... 3.44 3.23
Change in valuation allowance.................................. -- --
----------- -----------
Total................................................ 38.44 38.23
======== =========
The tax effects of temporary differences that give rise to a significant
portion of the deferred tax assets and deferred tax liabilities for the year
ended January 31, 1996 and the three-month period ended April 30, 1996 are as
follows:
JANUARY 31, APRIL 30,
1996 1996
----------- -----------
(UNAUDITED)
Deferred tax liabilities:
Revenue and expenses recognized for financial reporting
purposes in a different period than for income tax
purposes.................................................. $69,386 $30,117
----------- -----------
Net deferred tax liabilities......................... $69,386 $30,117
======== =========
Revenue and expenses recognized for financial reporting purposes in a
different period than for income tax purposes.
16
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 hereunto duly authorized.
SEAFIELD CAPITAL CORPORATION
Dated: July 19, 1996 By: /s/ Steven K. Fitzwater
-----------------------------------------
Steven K. Fitzwater
Vice President, Chief
Accounting Officer
and Secretary