As filed with the Securities and Exchange Commission on July 6, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 1-4034
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Total Renal Care, Inc.
Retirement Savings Plan
B. Name of issuer of the securities held pursuant to the Plan and the
address of its principal executive office:
Total Renal Care, Inc.
21250 Hawthorne Boulevard, Suite 800
Torrance, California 90503-5517
REQUIRED INFORMATION
1. Financial statements filed as a part of this annual report: Report
of Price Waterhouse LLP, independent auditors, Audited Statements of Net
Assets Available for Benefits, With Fund Information as of December 31,
1997 and 1996, Audited Statements of Changes in Net Assets Available for
Benefits, With Fund Information for the Years Ended December 31, 1997 and
1996, and Notes to Financial Statements for the Years Ended December 31,
1997 and 1996, and Notes to Financial Statements for the Years Ended
December 31, 1997 and 1996.
2. Exhibit filed as a part of this annual report: Exhibit 23- Consent
of PricewaterhouseCoopers LLP, independent accountants.
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
TOTAL RENAL CARE, INC.
RETIREMENT SAVINGS PLAN
Date: July 6, 1998 By: /s/ Marie Ficarella
------------------------
Marie Ficarella, Director
of Human Resources and Designated
Representative of the Plan
Administrator
2
TOTAL RENAL CARE, INC.
RETIREMENT SAVINGS PLAN
Financial Statements and
Additional Information
December 31, 1997 and 1996
TOTAL RENAL CARE, INC.
RETIREMENT SAVINGS PLAN
INDEX
- --------------------------------------------------------------------------------
Page
Financial Statements:
Report of Independent Accountants 1
Statement of Net Assets Available for Benefits, with Fund Information 2-3
Statement of Changes in Net Assets Available for Benefits,
with Fund Information 4-5
Notes to Financial Statements 6-10
Additional Information:
Schedule I - Schedule of Assets Held for Investment Purposes 11
Schedule II - Schedule of Reportable Transactions 12
Report of Independent Accountants
June 12, 1998
To the Participants and Administrator
of the Total Renal Care, Inc. Retirement Savings Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Total Renal Care, Inc. Retirement Savings Plan at December 31, 1997 and
1996, and the changes in net assets available for benefits for the years then
ended, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Plan's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
the schedule of assets held for investment purposes and the schedule of
reportable transactions is presented for the purpose of additional analysis and
is not a required part of the basic financial statements but is additional
information required by the Employee Retirement Income Security Act of 1974. The
Fund Information in the statements of net assets available for benefits and the
statements of changes in net assets available for benefits is presented for
purposes of additional analysis rather than to present the net assets available
for benefits and changes in net assets available for benefits of each fund. The
schedule of assets held for investment purposes, the schedule of reportable
transactions and the Fund Information have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
The schedule of assets held for investment purposes and the schedule of
reportable transactions that accompany the Plan's financial statements do not
disclose the historical cost of certain plan assets. Disclosure of this
information is required by the Department of Labor Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974.
PRICE WATERHOUSE LLP
TOTAL RENAL CARE, INC.
RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
- --------------------------------------------------------------------------------
December 31, 1997
Fund Information
----------------
American Warburg
Century - Pincus Total
Charter Fidelity Twentieth Advisor Renal Care
Guaranteed Advisor Century International Holdings, Inc. Participant
Long-Term Balanced Ultra Equity Common Notes
Fund Fund Fund Fund Stock Receivable Total
Assets
Investments, at fair value
CIGNA Charter Guaranteed
Long-Term Account $5,920,950 $5,920,950
CIGNA Fidelity Advisor
Balanced Fund $3,109,971 3,109,971
CIGNA American Century -
Twentieth Century Ultra Fund $3,698,292 3,698,292
CIGNA Warburg Pincus Advisor
International Equity Fund $1,557,626 1,557,626
Total Renal Care Holdings, Inc.
Common Stock $1,176,959 1,176,959
Participant notes receivable $752,284 752,284
-----------
Net assets available
for benefits $5,920,950 $3,109,971 $3,698,292 $1,557,626 $1,176,959 $752,284 $16,216,082
===========
The accompanying notes are an integral part of these financial statements.
2
TOTAL RENAL CARE, INC.
RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
- --------------------------------------------------------------------------------
December 31, 1996
Fund Information
----------------
American Warburg
Century - Pincus Total
Charter Fidelity Twentieth Advisor Renal Care
Guaranteed Advisor Century International Holdings, Inc. Participant
Long-Term Balanced Ultra Equity Common Notes
Fund Fund Fund Fund Stock Receivable Total
Assets
Investments, at fair value
CIGNA Charter Guaranteed
Long-Term Account $4,975,398 $4,975,398
CIGNA Fidelity Advisor
Balanced Fund $1,833,288 1,833,288
CIGNA American Century -
Twentieth Century Ultra Fund $2,051,947 2,051,947
CIGNA Warburg Pincus Advisor
International Equity Fund $1,217,795 1,217,795
Total Renal Care Holdings, Inc.
Common Stock $528,113 528,113
Participant notes receivable $527,999 527,999
Cash equivalents 3,298 2,659 3,472 3,342 2,322 15,093
-----------
Net assets available
for benefits $4,978,696 $1,835,947 $2,055,419 $1,221,137 $530,435 $527,999 $11,149,633
===========
The accompanying notes are an integral part of these financial statements.
3
TOTAL RENAL CARE, INC.
RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS, WITH FUND INFORMATION
- --------------------------------------------------------------------------------
Year Ended December 31, 1997
Fund Information
----------------
American Warburg
Century - Pincus Total
Charter Fidelity Twentieth Advisor Renal Care
Guaranteed Advisor Century International Holdings, Inc. Participant
Long-Term Balanced Ultra Equity Common Notes
Fund Fund Fund Fund Stock Receivable Total
Additions to net assets
attributed to:
Investment income
Interest $ 321,696 $ 56,982 $ 378,678
Net appreciation
(depreciation) in
fair value of
investments $ 478,059 $ 526,222 $ (108,519) $161,202 1,056,964
-----------
321,696 478,059 526,222 (108,519) 161,202 56,982 1,435,642
-----------
Contributions
Employer 1,340,319 877,934 1,191,372 559,279 329,650 4,298,554
Employee 1,340,319 877,934 1,191,372 559,279 329,650 4,298,554
-----------
Total additions 1,662,015 1,355,993 1,717,594 450,760 490,852 56,982 5,734,196
Deductions from net assets
attributed to:
Benefit payments 333,366 107,760 129,067 61,113 7,320 638,626
Transaction charge 6,847 1,105 1,459 736 2,076 12,223
Participant notes receivable
terminated due to with-
drawal of participant 17,766 17,766
-----------
Total deductions 340,213 108,865 130,526 61,849 9,396 17,766 668,615
Change in forfeiture reserve, net 868 868
-----------
Net increase prior to
interfund transfers 1,322,670 1,247,128 1,587,068 388,911 481,456 39,216 5,066,449
Interfund transfers, net (380,416) 26,896 55,805 (52,422) 165,068 185,069 --
-----------
Net increase 942,254 1,274,024 1,642,873 336,489 646,524 224,285 5,066,449
Net assets available for benefits
at beginning of year 4,978,696 1,835,947 2,055,419 1,221,137 530,435 527,999 11,149,633
-----------
Net assets available for benefits
at end of year $5,920,950 $3,109,971 $3,698,292 $1,557,626 $1,176,959 $752,284 $16,216,082
===========
The accompanying notes are an integral part of these financial statements.
4
TOTAL RENAL CARE, INC.
RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
- --------------------------------------------------------------------------------
Year Ended December 31, 1996
Fund Information
----------------
American Warburg
Century - Pincus Total
Charter Fidelity Twentieth Advisor Renal Care
Guaranteed Advisor Century International Holdings, Inc. Participant
Long-Term Balanced Ultra Equity Common Notes
Fund Fund Fund Fund Stock Receivable Total
Additions to net assets
attributed to:
Investment income
Interest $ 217,379 $ 41,860 $ 259,239
Net appreciation
(depreciation) in
fair value of
investments $ 134,608 $ 202,639 $ 87,975 $(13,314) 411,908
-----------
217,379 134,608 202,639 87,975 (13,314) 41,860 671,147
-----------
Contributions
Employer 1,165,083 653,862 891,961 421,955 132,367 3,265,228
-----------
Employee 1,165,083 653,862 891,961 421,955 132,367 -- 3,265,228
Transfer from affiliated plan 664,476 664,476
-----------
Total additions 2,046,938 788,470 1,094,600 509,930 119,053 41,860 4,600,851
Deductions from net assets
attributed to:
Benefit payments 259,750 92,742 101,214 81,386 10 535,102
Transaction charge 6,793 1,144 954 653 401 9,945
Participant notes receivable
terminated due to with-
drawal of participant 29,644 29,644
-----------
Total deductions 266,543 93,886 102,168 82,039 411 29,644 574,691
Change in forfeiture reserve, net 773 773
-----------
Net increase prior to
interfund transfers 1,781,168 694,584 992,432 427,891 118,642 12,216 4,026,933
Interfund transfers, net (169,045) (168,509) (224,618) (37,700) 411,793 188,079 --
-----------
Net increase 1,612,123 526,075 767,814 390,191 530,435 200,295 4,026,933
Net assets available for benefits
at beginning of year 3,366,573 1,309,872 1,287,605 830,946 -- 327,704 7,122,700
-----------
Net assets available for benefits
at end of year $4,978,696 $1,835,947 $2,055,419 $1,221,137 $ 530,435 $527,999 $11,149,633
===========
The accompanying notes are an integral part of these financial statements.
5
TOTAL RENAL CARE, INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. Description of Plan
The following description of the Total Renal Care, Inc. Retirement Savings
Plan (the "Plan") sponsored by Total Renal Care Holdings, Inc. (the
"Company") provides only general information. Participants should refer to
the Plan agreement for a more complete description of the Plan's provisions.
General
The Plan is a defined contribution plan established effective October 1, 1994
and most recently amended August 23, 1996, retroactively effective March 1,
1996. Employees become eligible to participate upon completing one year of
service with 1,000 hours. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
Contributions
Participants may contribute an amount equal to not less than 1 percent nor
more than 15 percent of their compensation for the contribution period. The
Company may make a discretionary contribution in an amount to be determined
by a resolution of the Company's Board of Directors.
Participant Accounts
Each participant's account is credited with the participant's contribution
and allocation of the Company's contribution and Plan earnings. Earnings are
allocated by fund based on the ratio of a participant's account invested in a
particular fund to all participants' investments in that fund. The benefit
to which a participant is entitled is the benefit that can be provided from
the participant's account.
Vesting
Participants are immediately vested in their voluntary contributions plus
actual earnings thereon. The balance of vesting in the participants'
accounts is based on years of service. A participant becomes 20 percent
vested after one year of service, 40 percent vested after two years of
service, 60 percent vested after three years of service, 80 percent vested
after four years of service and 100 percent vested after five years of
service. However, if an active participant dies prior to attaining the
normal retirement age, the participant's account becomes 100 percent vested.
6
TOTAL RENAL CARE, INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Investment Options
Upon enrollment in the Plan, a participant may currently direct
contributions among any of the following investment options:
. Charter Guaranteed Long-Term Fund (formerly "Guaranteed Long-Term Fund")-
Funds are invested in the CIGNA Charter Guaranteed Long-Term Account,
which provides a guaranteed rate of return reset semiannually.
. Fidelity Advisor Balanced Fund (formerly "Fidelity Advisor Income &
Growth Fund") - Funds are invested solely in units of the CIGNA Fidelity
Advisor Balanced Fund, which in turn invests solely in shares of the
Fidelity Advisor Balanced Fund.
. American Century - Twentieth Century Ultra Fund (formerly "Twentieth
Century Ultra Investors Fund") - Funds are invested solely in units of
the CIGNA American Century - Twentieth Century Ultra Fund, which in turn
invests solely in shares of the American Century - Twentieth Century
Ultra Fund.
. Warburg Pincus Advisor International Equity Fund - Funds are invested
solely in units of the CIGNA Warburg Pincus Advisor International Equity
Fund, which in turn invests solely in shares of the Warburg Pincus
Advisor International Equity Fund.
. Total Renal Care Holdings, Inc. Common Stock - Funds are invested solely
in shares of Total Renal Care Holdings, Inc. common stock.
Participants may change their investment options at any time.
Payment of Benefits
On termination of service, a participant may elect to receive either a lump-
sum amount equal to the value of his or her account, a distribution in the
form of an annuity, or a combination of both. Distributions are subject to
the applicable provisions of the Plan agreement.
Participant Notes Receivable
Participants may borrow up to the lesser of $50,000 or 50 percent of the
vested portion of their account balance, subject to certain restrictions, in
accordance with interest rates and collateral requirements established by
the Company.
Cash Equivalents
Contributions received prior to year end awaiting investment in the
appropriate investment option at December 31, 1996 are invested in the CIGNA
Charter Guaranteed Short-Term Account, which is recorded at fair value, and
are included as cash equivalents within the fund in which units are
subsequently purchased.
7
TOTAL RENAL CARE, INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
2. Summary of Accounting Policies
Method of Accounting
The Plan's financial statements are prepared on the accrual basis of
accounting, and reflect management's estimates and assumptions, such as
those regarding fair value, that affect the recorded amounts. Significant
estimates used are discussed throughout the notes to financial statements.
Investments
Investments in pooled separate accounts (CIGNA Fidelity Advisor Balanced
Fund, CIGNA American Century - Twentieth Century Ultra Fund and CIGNA
Warburg Pincus Advisor International Equity Fund) are recorded at fair
value, as determined by the unit value as reported by the Connecticut
General Life Insurance Company ("CG Life"). The investment in the CIGNA
Charter Guaranteed Long-Term Account is non-fully benefit responsive and is
recorded at fair value. Participant notes receivable are valued at cost
which approximates fair value. The Company stock is valued at its quoted
market price.
Contributions
Employee contributions are recorded in the period during which the Company
makes payroll deductions from the participants' earnings. Company
contributions are recorded annually.
Benefits
Benefit claims are recorded as expenses when they have been approved for
payment and paid by the Plan.
3. Deposit With Insurance Company
The Plan participates in a contract with CG Life via an investment in the
CIGNA Charter Guaranteed Long-Term Account. CG Life commingles the assets of
this investment with other assets. For the Plan's investment in the CIGNA
Charter Guaranteed Long-Term Account, the Plan is credited with interest at
the rate specified in the contract which was 6.05% for the years ended
December 31, 1997 and 1996, net of asset charges. CG Life prospectively
guaranteed the interest rates credited for the CIGNA Charter Guaranteed
Long-Term Account for six months. As discussed in Note 2, the Charter
Guaranteed Long-Term Account is included in the financial statements at fair
value which, principally because of the periodic rate reset process,
approximates contract value.
8
TOTAL RENAL CARE, INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. Investments
Investments that represent 5 percent or more of the Plan's net assets are
separately identified below.
December 31,
1997 1996
CIGNA Charter Guaranteed Long-Term Account $5,920,950 $4,975,398
interest rates, 6.05%; 6.05%
CIGNA Fidelity Advisor Balanced Fund 3,109,971 1,833,288
units, 113,752; 81,734
CIGNA American Century - Twentieth Century
Ultra Fund 3,698,292 2,051,947
units, 95,415; 64,669
CIGNA Warburg Pincus Advisor International
Equity Fund 1,557,626 1,217,795
units, 70,163; 51,998
Total Renal Care Holdings, Inc. Common Stock 1,176,959 N/A
shares, 42,799; N/A
5. Participant Notes Receivable
Under the terms of the Plan, participants may borrow from their accounts up
to the lesser of $50,000 or 50% of their vested account balance. Loan
transactions are treated as a transfer to/from the investment fund from/to
Participant Notes Receivable. A loan is secured by the balance in the
participant's account and bears interest at a rate commensurate with market
rates for similar loans, as defined (10.00% and 10.00% to 11.00% for the
years ended December 31, 1997 and 1996, respectively).
6. Plan Termination
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate
the Plan subject to the provisions of ERISA. In the event of Plan
termination, participants will become 100 percent vested in their accounts.
7. Income Taxes
The Internal Revenue Service has determined and informed the Company by a
letter dated November 25, 1996, that the Plan and related trust are designed
in accordance with applicable sections of the Internal Revenue Code ("IRC").
The Plan's administrator believes that the Plan is designed and is currently
being operated in compliance with the applicable requirements of the IRC.
Therefore, no provision for income taxes has been included in the Plan's
financial statements.
9
TOTAL RENAL CARE, INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
8. Reconciliation of Plan Financial Statements to the Form 5500
Certain balances included on lines 31 and 32 of the Annual Return/Report of
Employee Benefit Plan (the "Form 5500") have been reclassified for purposes
of presentation in these financial statements to provide additional
disclosure.
9. Transfer from Affiliated Plan and Plan Mergers
Certain assets were transferred to the Plan from Valley Dialysis Associates,
formerly part of Valley Internal Medicine and from the NME Retirement
Savings Plan during 1996.
10. Forfeitures
The net change in forfeiture reserve represents the net change in the
available forfeiture reserve balance from the prior year plus the current
year forfeitures generated. Forfeitures result from nonvested benefit
payments remaining in the Plan for all terminated employees. Upon reaching
the break-in-service, as defined in the Plan agreement, forfeitures
generated are added to the forfeiture reserve balance. The forfeiture
reserve of $15,271 and $13,922 at December 31, 1997 and 1996, respectively,
is included in the CIGNA Charter Guaranteed Long-Term Account and is
available to offset contributions or to pay Plan expenses, which would be
otherwise payable by the Company, in accordance with the Plan agreement.
10
TOTAL RENAL CARE, INC. ADDITIONAL INFORMATION
RETIREMENT SAVINGS PLAN SCHEDULE I
LINE 27a FORM 5500 - SCHEDULE OF ASSETS
HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Identity of issue, borrower, Description of investment Cost Current
lessor, or similar party including maturity date, value
rate of interest, collateral,
par or maturity value
* Connecticut General Life CIGNA Charter Guaranteed $5,920,950 $5,920,950
Insurance Company Long-Term Account 6.05%
* Connecticut General Life CIGNA Fidelity Advisor 2,512,872 3,109,971
Insurance Company Balanced Fund $27.34/unit
* Connecticut General Life CIGNA American Century - 2,979,738 3,698,292
Insurance Company Twentieth Century Ultra
Fund $38.76/unit
* Connecticut General Life CIGNA Warburg Pincus Advisor 1,549,305 1,557,626
Insurance Company International Equity Fund
$22.20/unit
* National Financial Total Renal Care ** 1,176,959
Services Corporation Holdings, Inc.
Common Stock
$27.50/share
* Participant Notes Receivable 10.00% 752,284 752,284
* Indicates an identified person known to be a party-in-interest to the Plan.
** Cost information is not currently available from the insurance company.
11
Total Renal Care, Inc. Additional Information
Retirement Savings Plan Schedule II
Line 27d Form 5500 - Schedule of Reportable Transactions
Year Ended December 31, 1997
- --------------------------------------------------------------------------------
(b) (f) (h) (i)
Description of asset Expense Current value Net
(a) (include interest rate (c) (d) (e) incurred (g) of asset on gain
Identity of party and maturity in case Purchase Selling Lease with Cost of transaction or
involved of a loan price price rental transaction asset date (loss)
Connecticut General Purchases into CIGNA
Life Insurance Charter Guaranteed $1,819,808 N/A N/A N/A $1,819,808 $1,819,808 -
Company Long-Term Account
Connecticut General Sales from CIGNA
Life Insurance Charter Guaranteed N/A $1,196,820 N/A N/A 1,196,820 1,196,820 -
Company Long-Term Account
Connecticut General Purchases into CIGNA
Life Insurance Fidelity Advisor 1,100,243 N/A N/A N/A 1,100,243 1,100,243 -
Company Balanced Fund
Connecticut General Sales from CIGNA
Life Insurance Fidelity Advisor N/A 301,619 N/A N/A 255,555 301,619 $46,064
Company Balanced Fund
Connecticut General Purchases into CIGNA
Life Insurance American Century- 1,512,136 N/A N/A N/A 1,512,136 1,512,136 -
Company Twentieth Century
Ultra Fund
Connecticut General Sales from CIGNA
Life Insurance American Century- N/A 392,013 N/A N/A 320,827 392,013 71,186
Company Twentieth Century
Ultra Fund
Connecticut General Purchases into CIGNA
Life Insurance Warburg Pincus 643,020 N/A N/A N/A 643,020 643,020 -
Company Advisor
International Equity
Fund
Connecticut General Sales from CIGNA
Life Insurance Warburg Pincus N/A 194,670 N/A N/A 191,151 194,670 3,519
Company Advisor
International Equity
Fund
National Financial Purchases into
Services Total Renal Care 738,672 N/A N/A N/A 738,672 738,672 -
Corporation Holdings, Inc.
Common Stock
National Financial Sales from CIGNA
Services Total Renal Care N/A 251,028 N/A N/A ** 251,028 **
Corporation Holdings, Inc.
Common Stock
** Cost information is not currently available from the insurance company.
12