<PAGE> 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): September 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)
<PAGE> 2
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 Rosenberg & Kalman,
M.D., P.A. (the "Acquired Business"). The total consideration (the "Purchase
Price") paid for the Acquired Stock was approximately $8.1 million in cash,
and $1.9 million in an unsecured, subordinated promissory note payable due on or
before August 30, 2001. The Note may, at the election of the holder, be paid in
Shares of Registrant Common Stock based on a price of 110% of the lessor of
$12.50 per share or the average closing price per share on The Nasdaq Stock
Markets National Market for the ten trading days immediately preceding the
Closing Date. The issuance and delivery of Registrant Common Stock in full or
partial payment of the Note have 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 Sellers (the "New PA")
entered into a long-term management services agreement (the "Service
Agreement") with the Registrant providing for the management by the Registrant
of the non-medical aspects of the practice thereafter conducted by the New PA.
Pursuant to the Service Agreement, the Registrant 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 Registrant 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
Rosenberg and Kalman, M.D., P.A.+
3. Exhibit 10(v) Stock Purchase Agreement by and among Response
Oncology, Inc. and Stockholders of Rosenberg and Kalman, M.D.,
P.A. dated September 1, 1996.+
4. Exhibit 10(x) Service Agreement between Response Oncology Inc.,
Rosenberg & Kalman, M.D., P.A., R&K, M.D., P.A. and Stockholders
of R&K, M.D., P.A. dated as of September 1, 1996.+ ++
- ----------
+ Previously filed on September 18, 1996
++ Portions of Exhibit 10(x) have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment.
<PAGE> 3
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: September 18, 1996 By: /s/ Debbie Elliott
-----------------------------------------
Debbie Elliott, Executive Vice President
of Finance
<PAGE> 4
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 Rosenberg & Kalman, M.D., P.A. ("the Tamarac Practice"),
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.
<PAGE> 5
Response Oncology, Inc. and Subsidaries
Pro Forma Consolidated Balance Sheet
June 30, 1996
(Unaudited)
<TABLE>
Caption>
Previous
Acquisition
Historical Subsequent to Pro Forma Pro Forma Tamarac Pro Forma Total
Company June 30, 1996 Adjustments Results Practice Adjustments Proforma Pro Forma
----------- ------------- ------------ ----------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash $ 156,021 $ 35,563 $ (35,563) $ 156,021 $ 41,149 $ (41,149) $ 156,021
Short-term 100,000 100,000 100,000
Accounts receivable, net 19,513,233 625,077 134,923 20,273,233 722,159 227,841 $ 950,000 21,223,233
Supplies 1,396,416 178,836 (118,019) 1,457,233 122,701 (4,201) 118,500 1,575,733
Prepaids 789,185 43,987 833,172 833,172
Advances to affiliated
physician groups 2,269,400 2,269,400 2,269,400
Other current assets 1,144,360 1,144,360 26,534 (19,486) 7,048 1,151,408
----------- ----------- ----------- ----------- ---------- ----------- ----------- ------------
Total current assets 25,368,615 839,476 25,328 26,233,419 912,543 163,005 1,075,548 27,308,967
Property and equipment, net 5,492,805 265 18,460 5,511,530 81,964 (33,292) 48,672 5,560,202
Deferred charges, net 608,344 608,344 608,344
Management Services Agreements 43,839,012 11,233,774 55,072,786 15,685,484 15,685,484 70,758,270
Other asseets 94,839 94,839 19,536 (19,536) 94,839
----------- ----------- ----------- ----------- ---------- ----------- ----------- ------------
Total assets $75,403,615 $ 839,741 $11,277,562 $87,520,918 $1,014,043 $15,795,661 $16,809,704 $104,330,622
=========== =========== =========== =========== ========== =========== =========== ============
Accounts payable $ 4,690,291 $ 394,232 $ (197,204) $ 4,887,319 $ 366,000 $ 3,991 $ 369,991 $ 5,257,310
Accrued expenses 3,045,881 3,045,881 10,276 468,953 479,229 3,525,110
Notes payable 636,451 250,000 (250,000) 636,451 9,586 (9,586) 636,451
Current portion of deferred
tax liability 69,386 (69,386)
Capital lease obligations 46,181 46,181 46,181
----------- ----------- ----------- ----------- ---------- ----------- ----------- ------------
Total current liabilities 8,418,804 713,618 (516,590) 8,615,832 385,862 463,358 849,220 9,465,052
Notes payable 33,378,362 6,442,972 39,821,334 16,674 9,983,326 10,000,000 49,821,334
Deferred tax liability 9,615,942 4,298,951 13,914,893 5,960,484 5,960,484 19,875,377
Minority interest 322,166 322,166 322,166
Stockholders' equity
Preferred stock 27,833 27,833 27,833
Common stock 75,818 501 675 76,994 76,994
Paid-in capital 62,817,203 1,177,176 63,994,379 63,994,379
Retained earnings
(accumulated deficit) (39,252,513) 125,622 (125,622) (39,252,513) 611,209 (611,209) (39,252,513)
----------- ----------- ----------- ----------- ---------- ----------- ----------- ------------
Total liabilities and
stockholders equity $75,403,615 $ 839,741 $11,277,562 $87,520,918 $1,013,745 $15,795,959 $16,809,704 $104,330,622
=========== =========== =========== =========== ========== =========== =========== ============
</TABLE>
See accompanying notes to pro forma consolidated financial information.
<PAGE> 6
Response Oncology, Inc. and Subsidiaries
Pro Forma Consolidated Statement of Operations
Six Months Ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Prior to
Acquisition
Historical By The Pro Forma Pro Forma
Company Company Adjustments Results
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Net revenue $28,439,467 $5,573,980 (b) $34,013,447
Other Income 73,946 $ 79,311 (79,311) 73,946
Net patient service revenue 8,740,673 (8,740,673)(a)
----------------------------------------------------------------
Total Revenue 28,513,413 8,819,984 (3,246,004) 34,087,393
Expenses:
Operating expenses 21,774,512 5,991,454 (1,934,909)(a) 25,831,057
General and administrative 2,718,852 2,718,852
Depreciation and amortization 1,325,161 84,492 389,401 (d) 1,799,054
Interest 656,783 32,796 628,605 (c) 1,318,184
Provision for doubtful accounts 822,341 822,341
----------------------------------------------------------------
Total Expenses 27,297,649 6,108,742 (916,903) 32,489,488
Earnings before minority interest 1,215,764 2,711,242 (2,329,101) 1,597,905
Minority interest 155,110 155,110
----------------------------------------------------------------
Net earnings to common
stockholders $ 1,060,654 $2,711,242 $(2,329,101) $1,442,795
================================================================
</TABLE>
<TABLE>
<CAPTION>
Tamarac Pro Forma Total
Practice Adjustments Pro Forma Pro Forma
----------- ------------- ---------- -----------
<C> <C> <C> <C> <C>
Revenue:
Net revenue $1,544,769 (b) $1,544,769 $35,558,216
Other Income 73,946
Net patient service revenue $2,191,161 (2,191,161)(a)
----------- ------------- ---------- -----------
Total Revenue 2,191,161 (646,392) 1,544,769 35,632,162
Expenses:
Operating expenses 1,639,447 (712,609)(a) 926,838 26,757,895
General and administrative 2,718,852
Depreciation and amortization 10,523 197,019 (d) 207,542 2,006,596
Interest 332,500 (e) 332,500 1,650,684
Provision for doubtful accounts 822,341
----------- ------------- ---------- ----------
Total Expenses 1,649,970 (183,090) 1,466,880 33,956,368
Earnings before minority interest 541,191 (463,302) 77,889 1,675,794
Minority interest 155,110
----------- ------------- ---------- -----------
Net earnings to common
stockholders $ 541,191 $ (463,302) $ 77,889 $ 1,520,684
=========== ============= ========== ===========
</TABLE>
See accompanying notes to pro forma consolidated financial information
<PAGE> 7
Response Oncology, Inc. and Subsidiaries
Pro Forma Consolidated Statement of Operations
Year Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Previous
Acquisitions
Historical - Subsequent to Pro Forma Pro Forma
Company December 31, 1995 Adjustments Results
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Net revenue $44,297,798 $18,243,674 (b) $62,541,472
Other Income 282,011 $ 352,353 (352,353) 282,011
Net patient service revenue 27,549,686 (27,549,686)(a)
---------------------------------------------------------------------
Total Revenue 44,579,809 27,902,039 (9,658,365) 62,823,483
Expenses:
Operating expenses 32,892,728 20,844,972 (6,245,867)(a) 47,491,833
General and administrative 5,512,306 5,512,306
Depreciation and amortization 1,736,055 396,580 1,385,692 (d) 3,518,327
Interest 16,860 269,114 2,641,818 (c) 2,927,792
Provision for doubtful accounts 2,105,696 2,105,696
---------------------------------------------------------------------
Total Expenses 42,263,645 21,510,666 (2,218,357) 61,555,954
Earnings before minority interest 2,316,164 6,391,373 (7,440,008) 1,267,529
Minority interest 1,806 1,806
---------------------------------------------------------------------
Earnings before income taxes 2,314,358 6,391,373 (7,440,008) 1,265,723
Income tax expense 262,237 (262,237)(e)
---------------------------------------------------------------------
Net earnings 2,314,358 6,129,136 (7,177,771) 1,265,723
Common stock dividend to
preferred stockholders 3,825 3,825
---------------------------------------------------------------------
Net earnings to common stockholders $ 2,310,533 $6,129,136 $(7,177,771) $ 1,261,898
=====================================================================
<CAPTION>
Tamarac Pro Forma Total
Practice Adjustments Pro Forma Pro Forma
------------------------------------------------- -----------
<S> <C> <C> <C> <C>
Revenue:
Net revenue $2,958,745 (b) $2,958,745 $65,500,217
Other Income 282,011
Net patient service revenue $4,196,802 (4,196,802)(a)
------------------------------------------------- -----------
Total Revenue 4,196,802 (1,238,057) 2,958,745 65,782,228
Expenses:
Operating expenses 4,491,377 (2,294,210)(a) 2,197,167 49,689,000
General and administrative 5,512,306
Depreciation and amortization 22,807 364,751 (d) 387,558 3,905,885
Interest 665,000 (c) 665,000 3,592,792
Provision for doubtful accounts 2,105,696
------------------------------------------------- -----------
Total Expenses 4,514,184 (1,264,459) 3,249,725 64,805,679
Earnings before minority interest (317,382) 26,402 (290,980) 976,549
Minority interest 1,806
------------------------------------------------- -----------
Earnings before income taxes (317,382) 26,402 (290,980) 974,743
Income tax expense (113,092) 113,092
------------------------------------------------- -----------
Net earnings (204,290) (86,690) (290,980) 974,743
Common stock dividend to
preferred stockholders 3,825
------------------------------------------------- -----------
Net earnings to common stockholders $ (204,290) $ (86,690) $ (290,980) $ 970,918
================================================= ===========
</TABLE>
See accompanying notes to pro forma consolidated financial information.
<PAGE> 8
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 September 1, 1996, the Company acquired from unaffiliated individual sellers
100% of the issued and outstanding general partnership interest ("the Acquired
Interests") of Rosenberg & Kalman, M.D., P.A. ("the Tamarac Practice")
The accompanying pro forma consolidated balance sheet includes the acquired
assets, assumed liabilities and effects of financing, as if the Tamarac
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 Tamarac 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.
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<S> <C>
10(v) Stock Purchase Agreement by and among Response Oncology,
Inc., Alfred M. Kalman, M.D. and Abraham Rosenberg, M.D.,
dated as of September 1, 1996+
10(x) Service Agreement between Response Oncology, Inc.,
Rosenberg & Kalman, M.D., P.A., R&K, M.D., P.A. and
Stockholders of R&K, M.D., P.A. dated as of September 1,
1996+ ++
</TABLE>
- -------------
+ Previously filed on September 18, 1996
++ Portions of Exhibit 10(x) have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment.
