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) October 31, 1997
DIALYSIS CORPORATION OF AMERICA
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(Exact name of registrant as specified in its charter)
Florida 0-8527 59-1757642
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2337 West 76th Street, Hialeah, Florida 33016
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 364-1308
Item 2. Acquisition or Disposition of Assets
On October 31, 1997, Dialysis Corporation of America (the "Company")
concluded a sale of substantially all of the assets of two of its 80%
owned subsidiaries, Dialysis Services of Florida, Inc.- Fort Walton Beach
("DSF") (dialysis operations) and Dialysis Medical, Inc. ("DMI") (Florida
Method 2 home patient operations), and an In-Patient Hospital Service
Agreement with Columbia Fort Walton Beach Medical Center for in-hospital
dialysis services and related assets ("In-Patient Agreement") of its 100%
owned subsidiary, DCA Medical Services, Inc. ("DCAMS") (collectively the
assets sold will be referred to as the "Acquired Assets" and collectively
DSF, DMI and DCAMS will be referred to as the "Subsidiaries") to Renal
Care Group of the Southeast, Inc. ("RCGSE"), pursuant to an Asset Purchase
Agreement ("Agreement") by and among the Company, the Subsidiaries, Henry M.
Haire, M.D. ("Dr. Haire"), who owns the balance of the 20% interest in DSF
and DMI, and Renal Care Group, Inc. ("RCG"), the parent of RCGSE.
Dr. Haire was, until the closing of the Agreement, the medical
director of DSF. He is now medical director of RCGSE, which company
purchased the Acquired Assets and is operating DSF's dialysis facility
in Fort Walton Beach, Florida.
The Acquired Assets were exclusive of cash, prepaid expenses, claims
for medicare reimbursement, intercompany indebtedness, tax refunds, if any,
and vendor volume discounts of the Company and its Subsidiaries. Much of
the liabilities, except for obligations and liabilities arising from and
after the closing of the Agreement under leases, contracts, commitments
and agreements included in the Acquired Assets, were assumed by the
Company. The Company operates three other dialysis facilities in
Pennsylvania with several others being completed, one of which is in New
Jersey. The Company also has several other in-patient hospital management
agreements.
The consideration for the sale of the Acquired Assets aggregated
$5,065,000, consisting of $480,000 worth of RCG common stock (the "RCG
Shares"), which at the closing of the Agreement on October 31, 1997, based
upon the fair market valuation formula, amounted to 13,873 RCG Shares, and
the balance of $4,585,000 was cash. RCG has agreed to register the RCG
Shares prior to October 31, 1998. In the event the aggregate sales
proceeds of the RCG Shares is less than $480,000, provided the sale occurs
within 30 days of their registration (if not registered then the sale is
effected pursuant to an exemption from the registration requirements of
the federal and state securities laws), then RCGSE has agreed to make up
the difference in cash or additional registered RCG Shares, at its dis-
cretion. The consideration for the transaction was determined by negotia-
tions between and among the parties to the Agreement based primarily on
the patient base and the going rate per patient.
The Company and its Subsidiaries made various representations and
warranties as to themselves and the operations of the Subsidiaries and has
agreed to indemnify RCGSE and RCG for any material breaches of such
warranties and representations.
The Agreement also provided for non-competition provisions by the
Company, its Subsidiaries and Dr. Haire within the Fort Walton Beach,
Florida area where DSF and its operations were located, for a period of
seven years, and assignment of certain leases relating to real property
and equipment.
The Company plans to use the revenues of the asset sale to establish
additional dialysis centers and acute management services, initially in
New Jersey and Pennsylvania, and in other areas of the country.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
Not Applicable
(b) Pro forma financial information
The following unaudited pro forma condensed consolidated financial
statements are filed with this report:
Pro Forma Condensed Consolidated Balance
Sheet as of June 30, 1997 . . . . . . . . . . . . F-1
Pro Forma Condensed Consolidated Statements
of Operations:
Year ended December 31, 1996 . . . . . . . . . F-2
Six Months Ended June 30, 1997 . . . . . . . . F-3
Notes to Pro Forma Consolidated Condensed
Financial Statements at June 30, 1997 and
for the six months ended June 30, 1997 and
the year ended December 31, 1996. . . . . . . . . F-4
(c) Exhibits
2.1 - Asset Purchase Agreement by and among the Company, Dialysis
Services of Florida, Inc. - Fort Walton Beach, DCA Medical
Services, Inc., Dialysis Medical, Inc., Renal Care Group, Inc.,
Renal Care Group of the Southeast, Inc. and Henry M. Haire, M.D.
2.2 - Assignment and Assumption of Lease and Release by and
among Dialysis Services of Florida, Inc. - Fort Walton Beach,
Renal Care Group of the Southeast, Inc., Renal Care Group, Inc.
and JACO, L.C. dated October 31, 1997.
2.3 - Assignment and Assumption of In-Patient Hospital Agreement
between DCA Medical Services, Inc., Columbia Fort Walton Beach
Medical Center and Renal Care Group of the Southeast, Inc.
dated October 31, 1997.
2.4 - Assignment and Assumption of Lease and Release by and among
Dialysis Corporation of America, Renal Care Group of the South-
east, Inc., Renal Care Group, Inc. and B. Braun Medical, Inc.
dated October 31, 1997.
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.
DIALYSIS CORPORATION OF AMERICA
By: /s/ Daniel R. Ouzts
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DANIEL R. OUZTS, Vice President,
Treasurer, Principal Financial
Officer and Controller
Dated: November 12, 1997
DIALYSIS CORPORATION OF AMERICA
PRO FORMA FINANCIAL INFORMATION
(Unaudited)
On October 31, 1997, the Company sold (the "Sale") substantially
all of the assets of Dialysis Services of Florida, Inc. - Fort Walton
Beach and related operations to Renal Care Group of the Southeast, Inc.
("RCGSE") for a price of $5,065,000, including $4,585,000 in cash and
13,873 shares of the common stock of Renal Care Group ("RCG") of which
RCGSE is a wholly-owned subsidiary.
The following pro forma unaudited consolidated condensed financial
statements for Dialysis Corporation of America (the "Company") present
the pro forma financial position at June 30, 1997 and the pro forma
results of operations for the six months then ended, along with the pro
forma results of operations for the year ended December 31, 1996.
These pro forma unaudited consolidated condensed financial statements
give effect to the Sale as if it had occurred at the beginning of each
period for purposes of the condensed consolidated statements of operations
and as if it had occurred at the end of the period for purposes of the
condensed consolidated balance sheet.
The pro forma unaudited consolidated condensed financial statements do
not purport to represent what the Company's actual results of operations
would have been had the Sale occurred at the beginning of the periods and
may not be indicative of the Company's financial position or operating
results for any future periods.
No assumption has been included in the pro forma unaudited consolidated
condensed financial statements as to investment income to be realized from
investments of the proceeds of the sale or other use of the proceeds. See
Notes to Pro Forma Consolidated Condensed Financial Statements.
The pro forma adjustments are based on currently available information.
The assumptions underlying the calculation of the pro forma adjustments
are considered appropriate under the circumstances. The pro forma
unaudited consolidated condensed financial statements should be read in
conjunction with the Company's Consolidated Financial Statements and the
Notes thereto for the year ended December 31, 1996, along with Management's
Discussion and Analysis of Financial Condition and Results of Operations,
which are included in the Company's Annual Report on Form 10-K covering
such year, and the Company's Condensed Consolidated Financial Statements
and the Notes thereto for the six months ended June 30, 1997, along with
Management's Discussion and Analysis of Financial Condition and Results
of Operations, which are included in the Company's Quarterly Report on
Form 10-Q Covering such period.
DIALYSIS CORPORATION OF AMERICA
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
June 30, 1997
(Unaudited)
Pro Forma Adjusted
As Reported Adjustments Pro Forma
----------- ----------- ---------
Assets
Current Assets:
Cash and cash equivalents $ 3,826,028 $4,585,000 (A) $ 8,411,028
Restricted cash 141,035 141,035
Accounts receivable, net 552,976 (328,000)(B) 224,976
Inventories 136,693 (60,000)(B) 76,693
Prepaid expenses and other
current assets 68,997 68,997
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Total current assets 4,725,729 4,197,000 8,922,729
Property and Equipment:
Land 168,358 168,358
Buildings and improvements 1,372,397 1,372,397
Machinery and equipment 1,254,321 (508,000)(B) 746,321
Leasehold improvements 463,361 (134,000)(B) 329,361
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3,258,437 (642,000) 2,616,437
Less accumulated
depreciation 826,562 (275,000)(B) 551,562
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2,431,875 (367,000) 2,064,875
480,000 (A)
Deferred expenses and
other assets 39,205 (22,000)(B) 497,205
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$ 7,196,809 $4,288,000 $11,484,809
=========== ========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 205,691 $ 205,691
Accrued expenses 167,922 $ 50,000 (C) 217,922
Current portion of
long-term debt 543,586 (24,000)(B) 519,586
Income taxes payable 14,000 1,700,000 (D) 1,714,000
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Total current liabilities 931,199 1,726,000 2,657,199
Long-term debt, less current
portion 236,032 (96,000)(B) 140,032
Advances from parent 117,310 117,310
Minority interest in
subsidiaries 76,095 528,000 (E) 604,095
Commitments and Contingencies
Stockholder's Equity: 35,888 35,888
Common stock 3,748,595 (42,000)(E) 3,706,595
Capital in excess of par
value 2,257,940 2,172,000 (F) 4,429,940
Retained earnings (206,250) (206,250)
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Treasury stock at cost 5,836,173 2,130,000 7,966,173
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Total stockholders' equity $ 7,196,809 $4,288,000 $11,484,809
=========== ========== ===========
See notes to pro forma consolidated condensed financial statements.
DIALYSIS CORPORATION OF AMERICA
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
Six Months Ended June 30, 1997
(Unaudited)
Revenues:
Medical service revenue $2,080,454 $(992,189) $1,088,265
Interest and other income 167,521 (2,463) 165,058
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2,247,975 (994,652) 1,253,323
Cost and expenses:
Cost of medical services 1,288,698 (610,201) 678,497
Selling, general and
administrative expenses 857,192 (180,680) 676,512
Interest expense 42,079 (6,741) 35,338
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2,187,969 (797,622) 1,390,347
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Income (loss) before income
taxes and minority interest 60,006 (197,030) (137,024)
Income tax provision 14,000 (14,000)
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Income (loss) before minority
interest 46,006 (183,030) (137,024)
Minority interest in earnings
(loss) of consolidated
subsidiaries 3,621 (3,621)
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Net income (loss) $ 42,385 $(179,409) $(137,024)
========== ========= ==========
Income (loss) per common share $.01 $(.04)
==== ======
Average common and dilutive
equivalent shares outstanding 3,682,171 3,682,171
========== ==========
See notes to pro forma consolidated condensed financial statements.
DIALYSIS CORPORATION OF AMERICA
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1996
(Unaudited)
Pro Forma Adjusted
As Reported Adjustments Pro Forma
----------- ----------- ---------
Revenues:
Medical service revenue $3,830,809 $(2,007,563) $1,823,246
Interest and other income 305,706 (27,168) 278,538
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4,136,515 (2,034,731) 2,101,784
Cost and expenses:
Cost of medical services 2,508,323 (1,195,820) 1,312,503
Selling, general and
administrative expenses 1,577,487 (451,468) 1,126,019
Interest expense 86,694 (1,096) 85,598
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4,172,504 (1,648,384) 2,524,120
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Loss before minority
interest (35,989) (386,347) (422,336)
Minority interest in loss
of consolidated
subsidiaries (13,028) 13,028
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Net loss $ (22,961) $ (399,375) $ (422,336)
========== =========== ==========
Loss per common share $(.01) $(.13)
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Weighted average shares 3,237,243 3,237,243
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See notes to pro forma consolidated condensed financial statements.
DIALYSIS CORPORATION OF AMERICA
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The pro forma unaudited consolidated condensed financial statements of
operations reflect the pro forma results of operations of the Company as
though the Sale had occurred at the beginning of each period presented
and reflects the removal of results of operations related to the business
operations sold. For purposes of the pro forma statements of operations,
no assumption has been made that expenses have been eliminated which were
included in corporate expense allocations by the Company and the Company's
parent, Medicore, Inc., to the business operations sold and which were
included in the actual results of operations of these businesses. Such
expenses which amounted to approximately $70,000 for the six months ended
June 30, 1997 and $253,000 for the year ended December 31, 1996 have
accordingly not been removed by the pro forma adjustments eliminating
the results of operations of the businesses sold.
The pro forma consolidated condensed balance sheet reflects the pro
forma financial position of the Company at June 30, 1997 as if the Sale
occurred on June 30, 1997 and includes adjustments for the following items:
(A) Proceeds of the Sale.
(B) Elimination of assets sold and related liabilities assumed and
intangibles related to the operations sold.
(C) Accrual of estimated costs of the transaction.
(D) Estimated income tax liabilities resulting from the Sale.
(E) Minority interest of approximately $528,000 in the net after tax gain
from the Sale and related adjustments.
(F) Net effect of estimated after tax gain of approximately $2,700,000
based on pre-tax gain of approximately $4,400,000, related estimated
income taxes of approximately $1,700,000 and minority interest of
approximately $528,000 in the net after tax gain.
The actual gain to be recorded as of October 31, 1997 may differ from
the estimated gain reflected in the June 30, 1997 pro forma consolidated
condensed balance sheet.
No assumption has been included in the pro forma unaudited consolidated
condensed financial statements as to investment income to be realized from
investment of the proceeds of the sale or other use of the proceeds. If
the estimated after tax proceeds of $2,885,000, based on $4,585,000 cash
proceeds at closing and estimated income taxes of $1,700,000, were assumed
to have been invested in short-term treasury bills at the current estimated
yield of 5.15% for the entire periods presented pending decision as to
other investment of the funds, estimated interest income of $74,000
for the six months ended June 30, 1997, and $148,000 for the year ended
December 31, 1996, would have been earned and pro forma results of opera-
tions would have been as follows, assuming no income tax applicable to the
periods presented since the Company would have been in a loss position.
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
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Interest and other income $ 239,058 $ 426,538
========== ==========
Total revenues $1,327,323 $2,249,784
========== ==========
Loss before minority interest $ (63,024) $ (274,336)
========== ==========
Net loss $ (78,024) $ (304,336)
========== ==========
Loss per common share $(.02) $(.09)
====== ======