1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
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 3, 1996
RESPONSE ONCOLOGY, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE
(State or other jurisdiction of incorporation)
0-15416 62-1212264
(Commission File Number) (I.R.S. Employer Identification No.)
1775 MORIAH WOODS BLVD., MEMPHIS TENNESSEE 38117
(Address of principal executive offices, including Zip Code)
(901) 761-7000
(Registrant's telephone number, including Area Code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 3, 1996, the Registrant 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 the Registrant ("Registrant Common Stock"), valued at approximately
$1.2 million. The delivery of the Registrant 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 the Registrant directly from the
Sellers. At the time of the Transaction, the Sellers had no material
relationship with the Registrant. 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 the Registrant'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.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
1. Pro Forma Balance Sheet and Statement of Operations for Registrant
and Acquired Business as of June 30, 1996 and for the year
ended December 31, 1995 and the six months ended June 30, 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.+
3. Exhibit 2(d) Stock Purchase Agreement by and among Response
Oncology, Inc. and Stockholders of Rymer, Zaravinos & Faig, M.D.,
P.A. dated July 1, 1996.+
4. Exhibit 10(u) 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.+ ++
- ----------
+ Previously filed on July 12, 1996
++ Portions of Exhibit 10(u) have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment.
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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.
RESPONSE ONCOLOGY, INC.
Dated: July 12, 1996 By: /s/ Debbie Elliott
-----------------------------------------
Debbie Elliott, Executive Vice President
of Finance
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RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
BASIS OF PRESENTATION
The accompanying pro forma consolidated balance sheet as of June 30, 1996 and
the related pro forma consolidated statements of operations for the year ended
December 31, 1995 and the six months ended June 30, 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.
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Response Oncology, Inc. and Subsidiaries
Pro Forma Consolidated Balance Sheet
June 30, 1996
(Unaudited)
Historical Fort Lauderdale Pro Forma Total
Company Practice Adjustments Proforma
--------------------------------------------------------
Cash $ 156,021 $ 35,563 $ (35,563) $ 156,021
Short-term investments 100,000 100,000
Accounts receivable, net 19,513,233 625,077 134,923 20,273,233
Supplies 1,396,416 178,836 (118,019) 1,457,233
Prepaids 789,185 43,987 833,172
Advances to affiliated physician groups 2,269,400 2,269,400
Other current assets 1,144,360 1,144,360
--------------------------------------------------------
Total current assets 25,368,615 839,476 25,328 26,233,419
Property and equipment, net 5,492,805 265 18,460 5,511,530
Deferred charges, net 608,344 608,344
Management Service Agreement 43,839,012 11,233,774 55,072,786
Other assets 94,839 94,839
--------------------------------------------------------
Total assets $75,403,615 $ 839,741 $11,277,562 $87,520,918
Accounts payable $ 4,690,291 $ 394,232 $ (197,204) $ 4,887,319
Accrued expenses 3,045,881 3,045,881
Notes payable 636,451 250,000 (250,000) 636,451
Capital lease obligations 46,181 46,181
Deferred income taxes 69,386 (69,386)
--------------------------------------------------------
Total current liabilities 8,418,804 713,618 (516,590) 8,615,832
Notes Payable 33,378,362 6,442,972 39,821,334
Deferred tax liability, noncurrent 9,615,942 4,298,951 13,914,893
Minority Interest 322,166 322,166
Stockholders' equity
Preferred stock 27,833 27,833
Common stock 75,818 501 675 76,994
Paid-in capital 62,817,203 1,177,176 63,994,379
Retained earnings (accumulated deficit) (39,252,513) 125,622 (125,622) (39,252,513)
--------------------------------------------------------
Total liabities and stockholders equity $75,403,615 $ 839,741 $11,277,562 $87,520,918
========================================================
See accompanying notes to pro forma consolidated financial information.
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Response Oncology, Inc. and Subsididaries
Pro Forma Consolidated Statement of Operations
Period Ended June 30, 1996
(Unaudited)
Previous
Acquisitions
Historical Subsequent to Pro Forma Pro Forma
Company June 30, 1996 Adjustments Results
Prior to
Acquisition
By The Company
-------------------------------------------------------------
Revenue:
Net revenue $28,439,467 $ 4,059,758 (b) $32,499,225
Other Income 73,946 $ 79,311 (79,311) 73,946
Net patient service revenue 6,324,799 (6,324,799)(a)
-------------------------------------------------------------
Total Revenue 28,513,413 6,404,110 (2,344,352) 32,573,171
Expenses:
Operating expenses 21,774,512 3,439,814 (622,405)(a) 24,591,921
General and administrative 2,718,852 2,718,852
Depreciation and amortization 1,325,161 79,573 248,979 (d) 1,653,713
Interest 656,783 23,328 396,461 (c) 1,076,572
Provision for doubtful accounts 822,341 822,341
-------------------------------------------------------------
Total Expenses 27,297,649 3,542,715 23,035 30,863,399
Earnings before minority interest 1,215,764 2,861,395 (2,367,387) 1,709,772
Minority interest 155,110 155,110
-------------------------------------------------------------
Net Earnings to common stockholders $ 1,060,654 $2,861,395 $(2,367,387) $ 1,554,662
=============================================================
Fort Lauderdale Pro Forma Total
Practice Adjustments Pro Forma Pro Forma
----------------------------------------------------------
Revenue:
Net revenue $ 1,514,222(b) $1,514,222 $34,013,447
Other Income 73,946
Net patient service revenue $2,415,874 (2,415,874)(a)
----------------------------------------------------------
Total Revenue 2,415,874 (901,652) 1,514,222 34,087,393
Expenses:
Operating expenses 2,551,640 (1,312,504)(a) 1,239,136 25,831,057
General and administrative 2,718,852
Depreciation and amortization 4,919 140,422(d) 145,341 1,799,054
Interest 9,468 232,143(c) 241,611 1,318,183
Provision for doubtful accounts 822,341
----------------------------------------------------------
Total Expenses 2,566,027 (939,939) 1,626,088 32,489,487
Earnings before income taxes (150,153) 38,287 (111,866) 1,597,906
Income taxes 155,110
----------------------------------------------------------
Net Earnings to common stockholders $ (150,153) $ 38,287 $ (111,866) $ 1,442,796
==========================================================
See accompanying notes to pro forma consolidated financial information.
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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 $ 15,128,507 (b) $59,426,305
Other Income 282,011 $ 352,353 (352,353) 282,011
Net patient service revenue 22,542,140 (22,542,140)(a)
--------------------------------------------------------------
Total Revenue 44,579,809 22,894,493 (7,765,986) 59,708,316
Expenses:
Operating expenses 32,892,728 16,253,432 (3,987,659)(a) 45,158,501
General and administrative 5,512,306 5,512,306
Depreciation and amortization 1,736,055 382,515 1,104,944 (d) 3,223,514
Interest 16,860 269,114 2,158,596 (c) 2,444,570
Provision for doubtful accounts 2,105,696 2,105,696
--------------------------------------------------------------
Total Expenses 42,263,645 16,905,061 (724,119) 58,444,587
Earnings before minority interest 2,316,164 5,989,432 (7,041,867) 1,263,729
Minority interest 1,806 1,806
--------------------------------------------------------------
Earnings before income taxes 2,314,358 5,989,432 (7,041,867) 1,261,923
Income tax expense 210,000 (210,000)
--------------------------------------------------------------
Net earnings 2,314,358 5,779,432 (6,831,867) 1,261,923
Common stock dividend to
preferred stockholders 3,825 3,825
--------------------------------------------------------------
Net earnings to common stockholders $ 2,310,533 $ 5,779,432 $ (6,831,867) $ 1,258,098
==============================================================
Fort Lauderdale Pro Forma Total
Practice Adjustments Pro Forma Pro Forma
------------------------------------------------ -----------
Revenue:
Net revenue $ 3,115,167 (b) $ 3,115,167 $62,541,472
Other Income 282,011
Net patient service revenue $5,007,546 (5,007,546)(a)
------------------------------------------------ -----------
Total Revenue 5,007,546 (1,892,379) 3,115,167 62,823,483
Expenses:
Operating expenses 4,591,540 (2,258,208)(a) 2,333,332 47,491,833
General and administrative 5,512,306
Depreciation and amortization 14,065 280,748 (d) 294,813 3,518,327
Interest 483,223 (c) 483,223 2,927,793
Provision for doubtful accounts 2,105,696
------------------------------------------------ -----------
Total Expenses 4,605,605 (1,494,237) 3,111,368 61,555,955
Earnings before minority interest 401,941 (398,142) 3,799 1,267,528
Minority interest 0 1,806
------------------------------------------------ -----------
Earnings before income taxes 401,941 (398,142) 3,799 1,265,722
Income tax expense 52,237 (52,237) 0
------------------------------------------------ -----------
Net earnings 349,704 (345,905) 3,799 1,265,722
Common stock dividend to
preferred stockholders 0 3,825
------------------------------------------------ -----------
Net earnings to common stockholders $ 349,704 $ (345,905) $ 3,799 $ 1,261,897
================================================ ===========
See accompanying notes to pro forma consolidated financial information.
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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 June 30, 1996 and the results of their operations for the
year ended December 31, 1995 and the six months ended June 30, 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 June 30, 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 the Groups' 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.
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
2(d) Stock Purchase Agreement by and among Response Oncology,
Inc., and Stockholders of Rymer, Zaravinos & Faig, M.D.,
P.A. dated July 1, 1996+
10(u) 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+ ++
- -------------
+ Previously filed on July 12, 1996
++ Portions of Exhibit 10(u) have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment.