RENAL TREATMENT CENTERS INC /DE/
8-K, 1996-08-26
SPECIALTY OUTPATIENT FACILITIES, NEC
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<PAGE>
 
                      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

                                        
                                August 23, 1996
          ----------------------------------------------------------
               Date of Report (Date of earliest event reported)


                         Renal Treatment Centers, Inc.
     --------------------------------------------------------------------
            (Exact name of Registrant as specified in its charter)

 
        Delaware                      1-14142                 23-2518331
- ----------------------------       -------------             --------------
(State or other jurisdiction       (Commission               (IRS Employer
 of incorporation)                  File Number)              Identification
                                                              Number)
 
1180 W. Swedesford Road, Building 2, Suite 300, Berwyn, PA         19312
- --------------------------------------------------------------------------------
       (Address of principal executive offices)                    (zip code)


Registrant's telephone number, including area code: 610-644-4796
                                                    ------------
<PAGE>
 
ITEM 5.  OTHER EVENTS



On July 23, 1996, Renal Treatment Centers, Inc. (the "Company") consummated its
acquisition of two dialysis centers from Panama City Artificial Kidney Center,
Inc. and North Florida Artificial Kidney Center, Inc. (collectively the
"Group"). Both of the dialysis centers are located in Florida. The acquisition
was structured as a merger of the acquired companies with and into a wholly-
owned subsidiary of the Company. For accounting purposes, the acquisition of the
Group has been treated as a pooling-of-interests. Accordingly, the accompanying
supplemental consolidated selected financial data, management's discussion and
analysis and supplemental consolidated financial statements and financial
statement schedule as of December 31, 1993, 1994 and 1995 and for each of the
three years in the period ended December 31, 1995 have been restated to give
retroactive effect to the merger with the Group and include the combined
operations of the Company and the Group for all periods presented.

                                      -2-
<PAGE>
 
                Renal Treatment Centers, Inc. and Subsidiaries
               Selected Supplemental Consolidated Financial Data

The selected supplemental consolidated financial data presented below as of
December 31, 1994 and 1995, and for the years ended December 31, 1993, 1994 and
1995, have been derived  from the Company's audited supplemental consolidated
financial statements and should be read in conjunction with such audited
supplemental consolidated financial statements and notes thereto, which are
included herein.  The selected supplemental consolidated financial data
presented below as of December 31, 1991, 1992 and 1993, and for the years ended
December 31, 1991 and 1992 have been derived from the Company's audited
consolidated financial statements not included herein.

<TABLE>
<CAPTION>
                                                                                     Year Ended December 31,
                                                                                     -----------------------
                                                               1991            1992            1993            1994            1995
                                                               ----            ----            ----            ----            ----
<S>                                                            <C>            <C>              <C>             <C>             <C>
(dollars in thousands, except for per share data)
Statement of Income Data:
Net patient revenue                                         $36,651         $54,041         $73,043        $115,457        $164,568
Operating costs and expenses:                                                                                       
 Patient care costs                                          15,233          27,854          37,172          57,096          79,451
 General and administrative                                  14,574          17,050          22,307          35,743          46,143
 Depreciation and amortization                                2,488           3,123           4,145           7,603          12,066
 Merger expenses                                                  0               0               0               0           2,088
Income from operations                                        4,356           6,014           9,419          15,015          24,820
Interest, net                                                 1,796           1,433           1,536             648           2,557
Income before income taxes                                    2,560           4,581           7,883          14,367          22,263
Provision for income taxes                                      542           1,052           2,102           4,316           7,632
Net income                                                   $2,018          $3,529          $5,781         $10,051         $14,631
                                
Pro forma net income per common                         
 and common stock equivalent (1)                                                              $0.36

Pro forma weighted average shares used in                 
 computing net income per common and common       
 stock equivalents (1)                                                                   16,063,639
Primary net income per common and                     
 common stock equivalent                                                                                      $0.47           $0.65
Weighted average common and common stock               
 equivalents outstanding                                                                                 21,161,243      22,412,733


(dollars in thousands)          
Balance Sheet Data:             
Working capital                                              $2,844          $3,960          $13,709        $27,947         $43,380
Intangible assets, net                                        1,043          16,892           28,934         79,238          86,341
Total assets                                                 32,348          37,035           60,007        140,523         174,868
Total long-term debt, excluding current portion              13,639          12,389           18,070         28,744          42,576
Total liabilities                                            23,334          25,028           29,349         47,894          64,510
Cumulative redeemable preferred stock                         8,545           9,528                0              0               0
Total stockholders' equity                                     $469          $2,478          $30,658        $92,628        $110,358
                                
Other Data:
Ratio of earnings to fixed charges (2)                        1.82x           2.16x            4.19x          6.59x           5.74x
                                                              
</TABLE>

(1)    Pro forma net income is computed by adjusting net income to reflect the
       reduction in interest expense (net of tax effect) related to the payment
       of certain indebtedness with initial public offering proceeds. Pro forma
       net income per common share is computed based upon the weighted average
       number of shares of common stock and common stock equivalents and
       including the number of shares of common stock issued upon the conversion
       of preferred stock and exercise of common stock warrants, and 3,700,000
       shares issued in connection with the Company's initial public offering as
       if such shares were issued or converted as of January 1, 1993. The
       proceeds from the issuance of 3,700,000 shares were utilized to redeem
       Series A preferred stock, pay Series B preferred stock dividends, and to
       pay down certain indebtedness.

(2)    The ratios of earnings to fixed charges were calculated by dividing the
       sum of income before taxes and fixed charges by fixed charges. Fixed
       charges consist of interest expense, amortization of deferred debt
       issuance costs and the portion of rent expense deemed to be
       representative of an interest factor. Fixed charges for the years ended
       December 31, 1991 and 1992 also include the amount of pre-tax earnings
       required to cover preferred stock dividends.

                                      -3-
<PAGE>
 
                Renal Treatment Centers, Inc. and Subsidiaries
        Management's Discussion and Analysis of Financial Condition and
                             Results of Operations


                                        
General
The Group.
On July 23, 1996, Renal Treatment Centers, Inc. (the "Company") consummated its
acquisition of two dialysis centers from Panama City Artificial Kidney Center,
Inc. and North Florida Artificial Kidney Center, Inc. (collectively "the
Group").  Both of the dialysis centers are located in Florida.  The acquisition
was structured as a merger of the acquired companies with and into a wholly-
owned subsidiary of the Company.  For accounting purposes, the acquisition of
the Group has been treated as a pooling-of-interests. Accordingly, the
accompanying supplemental consolidated financial statements, management's
discussion and analysis, selected supplemental consolidated financial and
operating data and supplemental consolidated quarterly data included in this
discussion and analysis give retroactive effect to the merger with the Group and
include the combined operations of the Company and the Group for all periods
presented.

The Wichita Companies.
On July 25, 1995, with an effective date of August 1, 1995, the Company
completed the merger of Wichita Dialysis Center, P.A., Southeast Kansas Dialysis
Center, P.A., Garden City Dialysis Center, P.A. and Wichita Dialysis Center,
East, P.A. (collectively "the Wichita Companies") with and into a wholly-owned
subsidiary of the Company.  The Wichita Companies operated four dialysis
facilities in Kansas and owned a 50% interest in another dialysis facility in
Kansas.  For accounting purposes, the acquisition was treated as a pooling-of-
interests.  Accordingly, the accompanying supplemental consolidated financial
statements, selected supplemental consolidated financial  data and supplemental
consolidated quarterly data included in this discussion and analysis give
retroactive effect to the merger and include the combined operations of the
Company and the Wichita Companies for all periods presented.

HCC Merger.
On March 6, 1995, the Company completed a series of merger transactions with
Healthcare Corporation and its affiliates (collectively "HCC").  At the time of
the mergers, HCC operated 13 dialysis facilities located in four states and the
District of Columbia.  For accounting purposes, the acquisition was treated as a
pooling-of-interests.  Accordingly, the accompanying supplemental consolidated
financial statements, selected supplemental consolidated financial data and
supplemental consolidated quarterly data included in this discussion and
analysis give retroactive effect to the merger and include the combined
operations of the Company and HCC for all periods presented.

Net Patient Revenue.
Net patient revenue is derived from two sources:  (1) in-center dialysis and
home dialysis services and supplies and (2) dialysis services provided to
hospitalized patients pursuant to agreements with hospitals.  The Company's in-
center and home dialysis services are primarily paid for under the Medicare End
Stage Renal Disease ("ESRD") program in accordance with rates established by the
Healthcare Financing Administration ("HCFA").  Additional payments are provided
by other third party payors, particularly during the first 18 months of
treatment, generally at higher rates than the rates reimbursed by Medicare.
Rates paid for services provided to hospitalized patients are negotiated with
individual hospitals and are generally higher than the rates reimbursed by
Medicare.  Because dialysis is an ongoing, life-sustaining therapy used to treat
a chronic condition, utilization of the Company's services is generally
predictable.  For the year ended December 31, 1995, each of the Company's
chronic dialysis patients received an average of approximately 156 non-
discretionary treatments.  Average net revenue per treatment for the Company's
in-center and home patients was approximately $204.16 for the year ended
December 31, 1995, including ancillary items such as Erythropoietin ("EPO")  and
other drugs, as compared to $191.02 for the year ended December 31, 1994, an
increase of 6.9%.  For the year ended December 31, 1995, the Company's average
net revenue per treatment for all patients, including patients treated pursuant
to acute care agreements with hospitals, was approximately $206.69, as compared
to $194.15 for the year ended December 31, 1994, an increase of 6.5%. Unless the
patient moves to another dialysis facility, receives a kidney transplant or
dies, the revenue generated per patient per year can be estimated with
reasonable accuracy.

Medicare and Medicaid Reimbursement.
The Company derived approximately  73.0%, 73.0% and 69.0% of its net patient
revenue from the Medicare and Medicaid programs in 1993, 1994 and 1995,
respectively.  The Company anticipates that it will continue to be substantially
dependent upon revenue derived from Medicare.  The reimbursement rate for ESRD
services and ancillary items such as EPO are subject to change from time to
time, and the Company's operations are subject to substantial governmental
regulation.

                                      -4-
<PAGE>
 
Results of Operations
The following table sets forth, for the periods indicated, selected financial
information expressed as a percentage of net patient revenue and the period-to-
period percentage changes in such information.

<TABLE>
<CAPTION>
                                                                Percentage of                             Period-to-Period
                                                             Net Patient Revenue                         Percentage Change
                                                                                                         -----------------
                                                           Year ended December 31,                     Year ended December 31,
                                                           -----------------------                     -----------------------
                                                     1993            1994            1995           1994 v 1993       1995 v 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>             <C>             <C>             <C>               <C>
Net patient revenue                                 100.0%          100.0%          100.0%             58.1%             42.5%
Patient care costs                                   50.9%           49.5%           48.3%             53.6%             39.2%
General and administrative expense                   28.4%           28.3%           25.1%             57.2%             26.9%
Provision for doubtful accounts                       2.1%            2.7%            2.9%            101.3%             52.5%
Depreciation and amortization expense                 5.7%            6.6%            7.3%             83.4%             58.7%
Merger expenses                                         -               -             1.3%                -                 -
Income from operations                               12.9%           13.0%           15.1%             59.4%             65.3%
Interest expense, net                                 2.1%             .6%            1.6%            (57.8)%            294.6%
Provision for income taxes                            2.9%            3.7%            4.6%            105.3%             76.8%
Net income                                            7.9%            8.7%            8.9%             73.9%             45.6%

</TABLE>

Year ended December 31, 1995 Compared to Year Ended December 31, 1994
Net Patient Revenue.
Net patient revenue for the year ended December 31, 1995 was $164,568,392 as
compared to $115,456,744 for the same period in 1994, representing an increase
of 42.5%. Of this increase, $6,178,946, or 12.6%, was attributable to the
revenue generated from the operations of eight centers and certain acute care
agreements acquired in three separate purchase transactions from March through
December 1995; and $25,442,934, or 51.8%, was attributable to the revenue
generated from the operations of various centers and acute care agreements
acquired in six separate purchase transactions from June 1994 through December
1994. Of the approximately $17,490,000 remaining, approximately $13,016,000 was
attributable to an increase in same-center treatments and approximately
$4,474,000 was attributable to an increase in the average same-center revenue
per treatment, which, in turn, was due to an increase in the administration of
EPO and other ancillary revenue items and an improvement in the Company's payor
mix.

Patient Care Costs.
Patient care costs increased 39.2% to $79,451,490 for the year ended December
31, 1995 from $57,095,740 for the same period in 1994.  This increase was
primarily attributable to the various centers acquired from June 1994 through
October 1995.  However, as a percentage of net patient revenue, patient care
costs decreased to 48.3% for the year ended December 31, 1995 from 49.5% for the
same period in 1994.  This decrease was primarily related to the increase in net
revenue per treatment while costs remained relatively constant on a per
treatment basis.

General and Administrative Expense.
General and administrative expense for the year ended December 31, 1995
increased 26.9% to $41,381,899 from $32,621,992 for the same period in 1994.
This increase was due to the acquisitions completed from June 1994 through
October 1995. General and administrative expense as a percentage of net patient
revenue decreased to 25.1% for the year ended December 31, 1995 as compared to
28.3% for the same period in 1994. This decrease was primarily due to the
Company's ability to maintain certain costs by improved utilization of the
Company's corporate office to support acquired facilities. In addition, this
decrease was attributable to the increase in net revenue per treatment in 1995.

Provision for Doubtful Accounts.
Provision for doubtful accounts increased $1,639,661, or 52.5%, to $4,760,678
for the year ended December 31, 1995 from $3,121,017 for the same period in
1994.  This increase was principally a result of the additional net patient
revenue generated from acquisitions that occurred in 1995.  As a percentage of
net patient revenue, the provision for doubtful accounts increased to 2.9% for
the year ended December 31, 1995 from 2.7% for the same period in 1994.

Depreciation and Amortization Expense.
Depreciation and amortization expense increased 58.7% to $12,066,461 for the
year ended December 31, 1995 from $7,602,959 for the same period in 1994.  As a
percentage of net patient revenue, depreciation and amortization expense
increased to 7.3% for the year ended December 31, 1995 from 6.6% for the same
period in 1994.  The increases were due to the acquisitions noted from June 1994
through December 1995 and $7.9 million of capital expenditures completed during
1995.

                                      -5-
<PAGE>
 
Merger Expenses.
Merger expenses represent expenses incurred in connection with the mergers with
(i) HCC and (ii) the Wichita Companies which were completed on March 6, 1995 and
August 1, 1995, respectively, and were accounted for under the pooling-of-
interests method of accounting.  These expenses included investment banking,
legal, accounting and other fees and expenses.

Income from Operations.
Income from operations increased 65.3% to $24,820,322 for the year ended
December 31, 1995 from $15,015,036 for the same period in 1994.  The increase
was due to the increase in net revenues from acquired businesses and same-center
growth, which was greater than the increases in patient care costs, general and
administrative expense and depreciation and amortization expense related to such
acquired businesses.

Interest Expense, Net.
Interest expense (net) increased 294.6% to $2,557,449 for the year ended
December 31, 1995 from $648,102 for the same period in 1994.  The increase in
interest expense (net) was attributable to the additional borrowings for the
funding of acquisitions that were completed in 1994 and 1995 that remained
outstanding throughout 1995.  Interest expense (net) also increased as a result
of the reduction in interest income from investments during 1995 as compared to
1994.  This decrease in interest income from investments resulted from the
decrease in the average value of investments held by the Company during 1995
when compared to 1994, as the Company used its investments to fund certain
acquisitions in 1994.  Interest expense in 1995 and 1994 is net of $156,150 and
$555,515 of interest income, respectively.

Provision for Income Taxes.
Provision for income taxes increased to $7,632,069 for the year ended December
31, 1995 from $4,316,014 for the same period in 1994.  For the year ended
December 31, 1995, the Company's effective tax rate was 34.3% compared to an
effective tax rate of 30.0% in the same period in 1994.  The increase in the
effective rate represents an overall increase in items not deductible for tax
purposes and a decrease in income derived from S corporations in 1995 as
compared to 1994.  Refer to notes 2, 3, and 7 to the supplemental consolidated
financial statements included herein.

Net Income.
Net income increased 45.6% to $14,630,804 for the year ended December 31, 1995
from $10,050,920 for the same period in 1994. The increase was due to each of
the items discussed above.

Year Ended December 31, 1994 Compared to Year End December 31, 1993
Net Patient Revenue.
Net patient revenue for the year ended December 31, 1994 was $115,456,744 as
compared to $73,043,034 for the same period in 1993, representing an increase of
58.1%. Of this increase, approximately $9,275,300, or 21.9%, was attributable to
the revenue generated from the operations of eight centers and certain acute
care agreements acquired in four separate purchase transactions from July
through September, 1994; approximately $8,199,600, or 19.3%, was attributable to
the revenue generated from the operations of four centers and certain acute care
agreements acquired in June 1994; approximately $4,916,000, or 11.6%, was
attributable to the revenue generated from the operations of four centers
acquired in January 1994; and approximately $9,465,000, or 22.3%, was
attributable to the revenue generated from the operations of various centers and
acute care agreements acquired in three separate transactions from October 1993
through December 1993. Of the approximately $10,558,000 remaining, approximately
$6,586,000 was attributable to an increase in same-center treatments and
approximately $1,682,000 was attributable to an increase in the average same-
center revenue per treatment which, in turn, was due to an increase in the
administration of EPO and other ancillary revenue items. The remaining
$2,290,000 related to revenue generated from certain de novo developments and
additional acute care and management contracts entered into during 1994.

Patient Care Costs.
Patient care costs increased 53.6% to $57,095,740 for the year ended December
31, 1994 from $37,171,556 for the same period in 1993.  This increase was
primarily attributable to the various centers acquired from October 1993 through
September 1994.  However, as a percentage of net patient revenue, patient care
costs decreased to 49.5% for the year ended December 31, 1994 from 50.9% for the
same period in 1993.

General and Administrative Expense.
General and administrative expense increased 57.2% to $32,621,992 for the year
ended December 31, 1994 from $20,756,081 for the same period in 1993.  This
increase was due to the acquisitions completed from October 1993 through
September 1994.  General and administrative expense decreased as a percentage of
net patient revenue to 28.3% for the year ended December 31, 1994 as compared to
28.4% in 1993.

                                      -6-
<PAGE>
 
Provision for Doubtful Accounts.
Provision for doubtful accounts increased 101.3% to $3,121,017 the year ended
December 31, 1994 from $1,550,691 for the same period in 1993.  This increase
was a result of the additional net patient revenue generated from the
acquisitions that occurred in 1994.

Depreciation and Amortization Expense.
Depreciation and amortization expense increased 83.4% to $7,602,959 for the year
ended December 31, 1994 from $4,145,390 for the same period in 1993.  As a
percentage of net patient revenue, depreciation and amortization expense
increased to 6.6% for the year ended December 31, 1994 from 5.7% for the same
period in 1993.  The increases were due to the acquisitions noted from October
1993 through September 1994.

Income from Operations.
Income from operations increased 59.4% to $15,015,036 for the year ended
December 31, 1994 from $9,419,316 for the same period in 1993.  The increase was
due to the increase in net revenues from acquired businesses and same-center
growth, which was greater than the increases in patient care costs, general and
administrative expense and depreciation and amortization expense related to such
acquired businesses.

Interest Expense, Net
Interest expense (net) decreased 57.8% to $648,102 for the year ended December
31, 1994 from $1,536,176 for the same period in 1993.  The decrease in interest
expense (net) was due to the Company's repayment of amounts outstanding under
its acquisition revolving credit agreement after its completion of a stock
offering in March 1994, from a reduced average amount outstanding under the term
loan agreement, from a lower average interest rate when compared to 1993 and
from interest income earned on funds invested as a result of the March 1994
stock offering.  Interest expense in 1994 is net of approximately $555,515 of
interest income from funds invested as a result of the March 1994 stock
offering.

Provision for Income Taxes.
Provision for income taxes increased to $4,316,014 for the years ended December
31, 1994 from $2,102,198 for the same period in 1993.  For the year ended
December 31, 1994, the Company's effective tax rate was 30.0% compared to an
effective tax rate of 26.7% in the same period in 1993.  The increase in the
effective rate represents an overall increase in items not deductible for tax
purposes and a decrease in income derived from S corporation companies in 1994.
Refer to Notes 2, 3 and 7 to the supplemental consolidated financial statements
included herein.

Net Income.
Net income increased 73.9% to $10,050,920 for the year ended December 31, 1994
from $5,780,942 for the same period in 1993. The increase was due to each of the
items discussed above.

Quarterly Results
The following table presents selected unaudited quarterly operating results for
the Company for the eight quarters in the years ended December 31, 1994 and
1995. The Company believes that the following information includes all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation. Although the Company's revenues are not seasonal in nature,
quarterly revenues and profitability may be affected by other factors, including
quarterly variations in treatments performed, due to varying of operating days
by quarter.

                                      -7-
<PAGE>
 
<TABLE>
<CAPTION>
                                                  1994                                               1995

- ------------------------------------------------------------------------------------------------------------------------------------

                                 Q1           Q2           Q3           Q4           Q1           Q2           Q3           Q4
- ------------------------------------------------------------------------------------------------------------------------------------

                                         (dollars in thousands, except for per share data)
<S>                            <C>          <C>          <C>          <C>          <C>          <C>          <C>           <C>
Net patient revenue            $22,138      $24,842      $32,315      $36,162      $37,749      $40,067      $41,996       $44,756
Operating costs                                                                                                            
  and expenses                  18,032       20,317       25,537       28,953       31,290       30,865       32,090        33,436
Depreciation and                                                                                                           
  amortization expense           1,427        1,639        2,394        2,142        2,733        2,909        3,033         3,392
Income from operations           2,679        2,885        4,383        5,068        3,726        6,293        6,874         7,927
Net income                       1,802        2,186        2,948        3,115        2,503        3,874        3,546         4,708
Net income available to                                                                                                    
  common stockholders            1,802        2,186        2,948        3,115        2,578        3,946        3,614         4,776
Primary:                                                                                                                   
  Weighted average common                                                                                                  
  and common stock                                                                                                         
  equivalents outstanding       18,934       21,865       21,802       21,861       22,014       22,105       22,865        22,836
Net income per share             $0.10        $0.10        $0.14        $0.14        $0.11        $0.18        $0.16         $0.21
Fully diluted:                                                                                                             
  Weighted average common                                                                                                  
  and common stock                                                                                                         
  equivalents outstanding       18,934       21,860       21,828       21,919       22,809       22,805       23,361        23,438
Net income per share             $0.10        $0.10        $0.14        $0.14        $0.11        $0.17        $0.15         $0.20

</TABLE> 

Liquidity and Capital Resources
The Company requires capital for the acquisition of dialysis centers, for the
expansion of operations of its existing dialysis centers including the
replacement of equipment and addition of leasehold improvements, for the
integration of new centers into its system of existing dialysis services and for
meeting working capital requirements. Expenditures for acquisitions were
approximately $16.9 million, $50.3 million and $11.6 million for the years ended
December 31, 1993, 1994 and 1995, respectively. Capital expenditures were
approximately $1,110,000, $5,198,000 and $7,899,000 for the years ended December
31, 1993, 1994 and 1995, respectively. The increase in capital expenditures
during 1995 resulted from the expansion of various existing dialysis centers to
support internal growth as well as the normal replacement of equipment. Cash
from operations before investing and financing activities was approximately $2.8
million, $4.3 million and $12.6 million for the years ended December 31, 1993,
1994 and 1995, respectively. The principal sources of the Company's liquidity
have been public sales of equity securities, bank lines of credit and operating
cash flow.
 
Capital expenditures of approximately $14.0 million, primarily for equipment
replacement and expansion of existing dialysis facilities, are planned in 1996.
The Company expects that such capital expenditures will be funded with cash
provided by operating activities and available lines of credit. The Company
believes that capital resources available to it will be sufficient to meet the
needs of its business, both on a short and long-term basis.
 
At December 31, 1995, the Company's loan and revolving credit agreement with a
consortium of banks (the "Credit Agreement") provided for a total facility of
approximately $75 million, of which $68.125 million was a revolving credit/term
facility available to fund acquisitions and general working capital requirements
of which $13.975 million and $33.675 million were outstanding at December 31,
1994 and 1995, respectively, and the remainder was a term loan payable in
quarterly installments of which $6.875 million and $3.75 million were
outstanding as of December 31, 1994 and 1995, respectively. The revolving
credit/term facility converts into a term loan in September 1997 that is payable
in 16 equal quarterly installments commencing December 1997 through September
2001. Borrowings under the Credit Agreement bore interest, at the Company's
option, at either (1) the Agent bank's base rate, adjusted by the applicable
margin, determined by the Company's ratio of senior debt to annualized cash
flow, 8.5% at December 31, 1995, or (2) a one, two, three, or six-month period
LIBOR rate, adjusted by the applicable margin for LIBOR-based loans. The
weighted average interest rate of all loans outstanding at December 31, 1994 and
1995 was 7.36% and 7.32%, respectively. The loans were collateralized by the
pledge of all stock of the Company's subsidiaries, a lien on all of the
Company's assets and the assignment of various acquisition, acute care,
physician director and other agreements. Refer to Note 6 to supplemental
consolidated financial statements.

                                      -8-
<PAGE>
 
The Company has historically expended the majority of its capital resources to
implement its growth strategy and the Company intends to pursue a strategy of
growth through the acquisition and development of dialysis facilities.
Management estimates that the development of a new center, depending on its
size, requires approximately $500,000 to $1,000,000 in construction costs and to
purchase certain furniture and equipment (leasing certain of the assets can
decrease costs) and approximately $75,000 to $150,000 in working capital.
Acquisition of a dialysis center with an existing patient base typically
requires more capital investment, but each investment varies based on relative
size and other factors. No assurance can be given that the Company will be
successful in implementing its growth strategy or that adequate sources of
capital will be available on terms acceptable to the Company to pursue its
growth strategy in the future.

Impact of Inflation
A substantial portion of the Company's revenue is subject to reimbursement rates
which are regulated by the federal government and do not automatically adjust
for inflation. These reimbursement rates are adjusted periodically based on
certain factors, including legislation, executive and congressional budget
reduction and control processes, inflation and costs incurred in rendering the
services, but in the past have had little relationship to the actual cost of
doing business.

The Company can increase the amounts it bills only for those services provided
by its dialysis business that are not subject to the Medicare composite rate.
Increased operating costs that are subject to inflation, such as labor and
supply costs, without a compensating increase in reimbursement rates, may
adversely affect the Company's earnings in the future.

New Accounting Pronouncements
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-lived
Assets and for Long-lived Assets to Be Disposed of" ("SFAS 121"). SFAS 121 will
be effective for the year ending December 31, 1996 and establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles and goodwill related to those assets to be held and used and for
long-lived assets and certain identifiable intangibles to be disposed of. SFAS
121 requires that such assets and intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Management does not expect the adoption of SFAS
121 to have a significant impact on the Company's results of operations,
financial condition or liquidity.

In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation
("SFAS 123"). SFAS 123 encourages, but does not require, an alternative method
of accounting for employee stock compensation plans from the method currently
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB No. 25"). The new accounting standard will have no
impact on the Company's net income or financial position, as the Company intends
to continue to utilize the accounting guidance set forth in APB No. 25.

                                      -9-
<PAGE>
 
ITEM 7. (A)  FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE:


                Renal Treatment Centers, Inc. and Subsidiaries
            Index to Supplemental Consolidated Financial Statements
                       and Financial Statement Schedule

<TABLE>
<CAPTION>
                                                                                                                      Page
                                                                                                                      ----
<S>                                                                                                                   <C>  
Report of Independent Accountants...............................................................................       F-1
Reports of Other Independent Accountants........................................................................    F-2 - F-3
Financial Statements:
         Supplemental Consolidated Balance Sheets at December 31, 1994 and 1995.................................       F-4
         Supplemental Consolidated Statements of Income for the years ended
               December 31, 1993, 1994 and 1995.................................................................       F-5
         Supplemental Consolidated Statements of Stockholders' Equity for the
               years ended December 31, 1993, 1994 and 1995.....................................................       F-6
         Supplemental Consolidated Statements of Cash Flows for the years ended
               December 31, 1993, 1994 and 1995.................................................................       F-7
         Notes to Supplemental Consolidated Financial Statements................................................    F-8 - F-17
         Condensed Supplemental Consolidated Balance Sheet at December 31, 1995
               and June 30, 1996 (Unaudited)....................................................................      F-18
         Condensed Supplemental Consolidated Statements of Income for the three months ended
               June 30, 1995 and 1996 and six months ended June 30, 1995 and 1996 (Unaudited)...................      F-19
         Condensed Supplemental Consolidated Statements of Cash Flows for the six months ended
               June 30, 1995 and 1996 (Unaudited)...............................................................      F-20
         Notes to Condensed Supplemental Consolidated Financial Statements......................................      F-22

Financial Statement Schedule:

II.      Valuation and Qualifying Accounts,
         for the years ended December 31, 1995,
         1994 and 1993..........................................................................................      F-22

</TABLE>

                                      -10-
<PAGE>
 
INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholder
Healthcare Corporation and Affiliates
Nashville, Tennessee

We have audited the combined balance sheet of Healthcare Corporation and 
Affiliates (the "Company") as of December 31, 1994, and the related combined 
statements of income, stockholder's equity and cash flows for the years ended 
December 31, 1993 and 1994.  These combined financial statements are the 
responsibility of the Company's management.  Our responsibility is to express an
opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined 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 audits provide a reasonable basis for our
opinion.

In our opinion, such combined financial statements (not presented separately 
herein) present fairly, in all material respects, the financial position of the 
Company as of December 31, 1994, and the results of its operations and its cash 
flows for each of the years ended December 31, 1993 and 1994 in conformity with 
generally accepted accounting principles.


/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Nashville, Tennessee
March 31, 1995



                                      F-2
<PAGE>
 


                        Independent Accountants' Report
                        -------------------------------





The Shareholders 
Wichita Dialysis Group
Wichita, Kansas



   We have audited the accompanying combined balance sheets of WICHITA DIALYSIS
GROUP as of December 31, 1993 and 1994, and the related combined statements of
operations, changes in stockholders' equity and cash flows for each of the two
years in the period ended December 31, 1994. 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 audits.

   We conducted our audits 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 audits provide a reasonable basis for our opinion.

   In our opinion, the combined financial statements referred to above present 
fairly, in all material respects, the financial position of WICHITA DIALYSIS 
GROUP as of December 31, 1993 and 1994 and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 1994, in 
conformity with generally accepted accounting principles.

                                              /s/ Baird, Kurtz & Dobson

July 14, 1995, except for Note 9 as to which the date is July 24, 1995 Wichita, 
Kansas





                                      F-3
<PAGE>
 
                 Renal Treatment Centers, Inc. and Subsidiaries
                    SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
                           December 31, 1994 and 1995
<TABLE> 
<CAPTION> 
                                                                                                         1994           1995
- ----------------------------------------------------------------------------------------------------------------------------------- 
<S>                                                                                                  <C>            <C>
Assets
Current assets:
   Cash                                                                                              $  2,782,781   $  8,231,421   
   Investments                                                                                          2,661,944              0 
   Accounts receivable, net of allowance for                                                                                     
      doubtful accounts of $2,306,556 in 1994 and $3,503,744 in 1995                                   37,072,319     51,996,618  
   Inventories                                                                                          2,581,992      2,869,019  
   Deferred taxes                                                                                         569,153        819,835  
   Prepaid expenses and other current assets                                                            1,430,081      1,396,893  
- ----------------------------------------------------------------------------------------------------------------------------------- 
      Total current assets                                                                             47,098,270     65,313,786  
- ----------------------------------------------------------------------------------------------------------------------------------- 
Property and equipment (net of accumulated depreciation of $6,910,646 in 1994
 and $10,746,557 in 1995)                                                                              13,660,938     21,442,421 
Intangibles (net of accumulated amortization of $14,171,384 in 1994 and
 $22,263,385 in 1995)                                                                                  79,238,387     86,341,433   
Deferred taxes, non-current                                                                               493,793      1,749,754  
Other assets                                                                                               31,227         20,842  
- ----------------------------------------------------------------------------------------------------------------------------------- 
      Total assets                                                                                   $140,522,615   $174,868,236  
=================================================================================================================================== 

Liabilities and Stockholders' Equity                                                                                              
Current liabilities:                                                                                                              
   Current portion of long-term debt                                                                 $  4,781,230   $  4,766,262  
   Accounts payable                                                                                     6,687,797      4,495,087  
   Accrued compensation                                                                                 2,645,175      2,790,121  
   Accrued expenses                                                                                     4,362,716      6,576,600  
   Accrued income taxes                                                                                   471,692      2,218,692  
   Accrued interest                                                                                       202,103      1,087,415  
- ----------------------------------------------------------------------------------------------------------------------------------- 
      Total current liabilities                                                                        19,150,713     21,934,177 
- ----------------------------------------------------------------------------------------------------------------------------------- 
Long-term debt, net                                                                                    28,743,609     42,576,100  
Stockholders' equity:                                                                                                            
   Preferred stock, $.01 par value, 5,000,000 shares authorized: none issued                         
   Common stock, $.01 par value, 45,000,000 shares authorized:  issued and                                   
      outstanding 21,449,029 and 22,209,689 shares in 1994 and 1995, respectively                          214,490        222,097 
Additional paid-in capital                                                                              78,319,626     83,257,068
Retained earnings                                                                                       14,141,396     27,272,870
- ----------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                        92,675,512    110,752,035 
     Less treasury stock, 4,342 shares in 1994 and 37,202 shares in 1995, at cost                          (47,219)      (394,076)
- ----------------------------------------------------------------------------------------------------------------------------------- 
     Total stockholders' equity                                                                         92,628,293    110,357,959 
- ----------------------------------------------------------------------------------------------------------------------------------- 
     Total liabilities and stockholders' equity                                                       $140,522,615   $174,868,236  
=================================================================================================================================== 

</TABLE>



   See accompanying notes to supplemental consolidated financial statements.
                                        

                                      F-4
<PAGE>
 
                 Renal Treatment Centers, Inc. and Subsidiaries
                 SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
              for the years ended December 31, 1993, 1994 and 1995

<TABLE> 
<CAPTION> 
                                            1993          1994          1995
- --------------------------------------------------------------------------------
<S>                                      <C>          <C>           <C>
Net patient revenue                      $73,043,034  $115,456,744  $164,568,392
Patient care costs                        37,171,556    57,095,740    79,451,490

- --------------------------------------------------------------------------------
Operating profit                          35,871,478    58,361,004    85,116,902
General and administrative                20,756,081    32,621,992    41,381,899
Provision for doubtful accounts            1,550,691     3,121,017     4,760,678
Depreciation and amortization              4,145,390     7,602,959    12,066,461
Merger expenses                                    -             -     2,087,542
- --------------------------------------------------------------------------------
Income from operations                     9,419,316    15,015,036    24,820,322
 
Interest expense, net of interest income
      of $12,892, $555,515 and
      $156,150 in 1993                  
      1994 and 1995, respectively          1,536,176       648,102     2,557,449
- --------------------------------------------------------------------------------
Income before income taxes                 7,883,140    14,366,934    22,262,873
                                                                                
Provision for income taxes                 2,102,198     4,316,014     7,632,069
- --------------------------------------------------------------------------------
 Net income                              $ 5,780,942  $ 10,050,920  $ 14,630,804
================================================================================
 
Pro forma per share data (unaudited):     
     Pro forma net income per common      
      and common stock equivalent              $0.36                            
                                                                                
     Pro forma weighted average shares                                          
      used in computing net income per    
      common and common stock equivalent  16,063,639                            
                                                                                
                                                                                
Primary per share data:                   
     Net income per common and common     
      stock equivalent                                       $0.47         $0.65
                                                                            
     Weighted average common and                                   
      common stock equivalents                          21,161,243    22,412,733
</TABLE>

 
   See accompanying notes to supplemental consolidated financial statements.

                                      F-5
<PAGE>
 
                 Renal Treatment Centers, Inc. and Subsidiaries
               SUPPLEMENTAL CONSOLIDATED OF STOCKHOLDERS' EQUITY
              for the years ended December 31, 1993, 1994 and 1995
<TABLE> 
<CAPTION> 
                                                                    Additional
                                                   COMMON STOCK       Paid-in       Retained             TREASURY STOCK
                                                   ------------                                          -------------  
                                                 Shares     Amount    Capital       Earnings       Shares    Amount        Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>         <C>       <C>           <C>           <C>        <C>       <C>
Balance, December 31, 1992                       5,470,519  $ 54,705  $   466,081   $ 2,167,284      -          -      $  2,688,070
    Mandatory redeemable
      Series B and mandatory redeemable
      Series A preferred stock dividends
      for the year ended December 31, 1993                                             (335,939)                           (335,939)
   Issuance of common stock in Initial
      Public Offering                            5,251,500    52,515   24,703,996                                        24,756,511
   Exercise of common stock warrants
      and subsequent retirement of shares
      delivered as payment of exercise price
      of common stock warrants                     556,750     5,568       (2,783)       (2,784)                             -
   Conversion of mandatory redeemable
      Series B preferred stock and warrants
      to common stock                            4,849,284    48,493      (24,247)                                           24,246
   Dividend distribution                                                             (2,045,927)                         (2,045,927)
   Net income                                                                         5,780,942                           5,780,942
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993                      16,128,053   161,281   25,143,047     5,563,576      -          -        30,867,904
   Issuance of common stock in                
      Stock Offering                             4,789,000    47,890   51,053,601                                        51,101,491
   Exercise of common stock options                356,760     3,568      312,230                                           315,798
   Issuance of common stock in                
      connection with purchase of businesses       175,216     1,752    1,810,748                                         1,812,500
   Acquisition of treasury stock                                                                    (4,342) $ (47,219)      (47,219)
   Dividend distribution                                                             (1,473,100)                         (1,473,100)
   Net income                                                                        10,050,920                          10,050,920
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994                      21,449,029   214,491   78,319,626    14,141,396     (4,342)   (47,219)   92,628,294
   Exercise of common stock options                458,016     4,580    1,297,692                                         1,302,272
   Issuance of common stock in connection     
      with purchase of businesses                  302,644     3,026    3,639,750                                         3,642,776
   Acquisition of treasury stock                                                                   (32,860)  (346,857)     (346,857)
   Dividend distribution                                                             (1,499,331)                         (1,499,331)
   Net income                                                                        14,630,805                          14,630,805
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995                    22,209,689  $222,097  $83,257,068   $27,272,870    (37,202) $(394,076) $110,357,959
====================================================================================================================================

</TABLE>


   See accompanying notes to supplemental consolidated financial statements.

                                      F-6
<PAGE>
 
                 Renal Treatment Centers, Inc. and Subsidiaries
               SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
              for the years ended December 31, 1993, 1994 and 1995
<TABLE> 
<CAPTION> 

                                                                    1993           1994           1995     
- ------------------------------------------------------------------------------------------------------------------------------------

<S>                                                           <C>             <C>            <C>           
Cash flows from operating activities:                                                                       
   Net income                                                  $  5,780,942   $ 10,050,920   $ 14,630,804   
   Adjustments to reconcile net income to                                                                  
       net cash provided by operating activities:                                                          
           Depreciation and amortization                          4,195,523      7,701,587     12,131,465  
           Deferred income taxes                                   (565,695)      (497,251)    (1,506,643) 
           Provision for doubtful accounts                        1,550,691      3,121,017      4,760,678  
           Loss (gain) on sale of equipment                          19,435         (2,974)             -  
           Equity in (earnings) losses from affiliate                43,162        (96,312)      (266,592)  
           Changes in operating assets and liabilities,                                                       
           net of effects of companies acquired:                                                           
           Accounts receivable                                   (8,910,472)   (19,065,267)   (19,444,635) 
           Inventories                                             (382,316)      (260,546)      (117,157) 
           Prepaid expenses and other current assets                (32,030)      (506,876)        99,673  
           Accounts payable and accrued expenses                    940,771      4,365,037        585,345  
           Accrued income taxes                                     175,333       (475,071)     1,747,000  
- -----------------------------------------------------------------------------------------------------------------------------------
      Net cash provided by operating activities                   2,815,344      4,334,264     12,619,938   
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:                                                                       
   Capital expenditures                                          (1,110,478)    (5,198,350)    (7,899,143)  
   Purchase of businesses, net of cash acquired                 (16,883,773)   (50,323,267)   (11,646,992)  
   Purchase of investments                                       (6,315,000)   (38,500,000)             -    
   Sale of investments                                            3,564,360     38,588,696      2,661,944   
   Other                                                           (291,082)    (1,214,875)    (1,904,962)  
- -----------------------------------------------------------------------------------------------------------------------------------
      Net cash used in investing activities                     (21,035,973)   (56,647,796)   (18,789,153)  
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:                                                                       
   Proceeds from long-term debt borrowings                       17,931,004     18,045,175     19,621,000   
   Repayments of debt                                           (13,378,542)   (14,032,771)    (7,355,102)  
   Redemption of preferred stock                                 (9,114,020)             -              -   
   Payment of Series A and Series B mandatory                                                               
      redeemable preferred stock dividends                         (476,249)             -              -   
   Proceeds from issuance of common stock                        24,506,760     51,612,289      1,302,272   
   Payment of S Corporation dividend                                      -              -     (1,277,000)  
   Payment of dividend distribution                              (2,045,927)    (1,473,295)      (222,331)  
   Increase in financing fees                                      (163,732)      (282,609)             -   
   Payments on capital lease obligations                           (162,718)       (13,846)      (450,984)  
   Other                                                              6,521        581,195              -   
- -----------------------------------------------------------------------------------------------------------------------------------
      Net cash provided by financing activities                  17,103,097     54,436,138     11,617,855   
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents             (1,117,532)     2,122,606      5,448,640   
Cash and cash equivalents at beginning of period                  1,777,707        660,175      2,782,781 
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                     $    660,175   $  2,782,781   $  8,231,421    
===================================================================================================================================
</TABLE>



   See accompanying notes to supplemental consolidated financial statements.

                                      F-7
<PAGE>
 
                 Renal Treatment Centers, Inc. and Subsidiaries
            NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS


1.    Description of Business
Renal Treatment Centers, Inc. (the "Company") was incorporated in Delaware on
August 11, 1988 for the purpose of providing dialysis treatments for End Stage
Renal Disease ("ESRD") patients in an outpatient environment or in the patient's
home. Additionally, the Company has acquired or entered into inpatient dialysis
service agreements with hospitals to provide dialysis treatments on an inpatient
basis.

For the years ended December 31, 1993, 1994 and 1995, approximately 73%, 73% and
69%, respectively,  of the Company's net patient revenue was received from
Medicare and Medicaid and other state administered programs.  Accordingly, the
Company's operations and cash flows are dependent upon the rate and manner of
payment for patient services from third party payors and, in particular, federal
and state administered programs.

2.    Summary of Significant Accounting Policies
Basis of Presentation:
The supplemental consolidated financial statements of the Company have been
prepared to give retroactive effect to the acquisition of Panama City Artificial
Kidney Center, Inc. and North Florida Artificial Kidney Center, Inc.
(collectively "The Group") on July 23, 1996, which has been accounted for using
the pooling-of-interests method of accounting.

Certain amounts included in the accompanying supplemental consolidated financial
statements and related footnotes reflect the use of estimates based on
assumptions made by management.  Actual amounts could differ from these
estimates.

Certain amounts in the 1994 financial statements have been reclassified to
conform to the current year presentation.

Principles of Consolidation:
The supplemental consolidated financial statements have been prepared in
accordance with generally accepted accounting principles and include the
accounts of the Company and its wholly-owned subsidiaries.  All significant
intercompany accounts and transactions have been eliminated in consolidation.

Patient Revenue and Allowances:
Patient revenue is recorded at established rates on the accrual basis in the
period during which the service is provided.  Appropriate allowances to give
recognition to third-party arrangements are also recorded on the accrual basis.
Payments to the Company under Medicare and Medicaid and other state administered
programs are based upon a predetermined specific fee per treatment.

The Company does not believe there are any significant credit risks associated
with receivables from Medicare and Medicaid and other state administered
programs.  The allowance for doubtful accounts consists of management's estimate
of amounts that may prove uncollectible from secondary insurers or patients.

Patient Care Costs:
Patient care costs include medical supplies, including Erythropoietin ("EPO")
supplies, and direct patient salaries and benefits.

Inventories:
Inventories are stated at the lower of cost (determined using the first-in,
first-out method) or market and consist of dialysis supplies.

Property and Equipment and Depreciation and Amortization:
Property and equipment are stated at cost or respective fair market value at the
time of acquisition.  Equipment under capital lease is stated at the lower of
the fair market value or net present value of the minimum lease payments at
inception of the lease.  Depreciation and amortization are provided by the
straight-line method over the estimated useful lives of the related assets or
lease terms for leasehold improvements and equipment under capital lease.  The
estimated useful life is five to seven years for furniture, fixtures and
equipment, 39 years for the buildings, and five to ten years for leasehold
improvements. Costs of maintenance and repairs are charged to expense as
incurred.  Sales and retirements of depreciable assets are recorded by removing
the related cost and accumulated depreciation from the accounts.  Gains and
losses on sales and retirements of assets are reflected in results of
operations.

                                      F-8
<PAGE>
 
2.    Summary of Significant Accounting Policies (continued):
Intangibles:
Goodwill:
Goodwill arising from acquisitions is being amortized on a straight-line basis
principally over 25 years.

Patient Lists:
Patient lists, arising from the purchase of renal dialysis facilities, are
stated at cost.  Amortization is provided by the straight-line method over eight
years.

Non-compete Agreements:
Non-compete agreements, arising from acquisitions, are being amortized on a
straight-line basis over periods from three to 11 years.

Other Intangibles:
Other intangibles consist of inpatient dialysis service agreements, deferred
financing costs and organization costs and are stated at cost.  Amortization is
provided on a straight-line basis over five to 11 years.

Management evaluates the recoverability of intangible assets using certain
financial indicators, such as historical and future ability to generate income
from operations.  The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
lived Assets and for Long-lived Assets to Be Disposed of" ("SFAS 121").  SFAS
121 will be effective for the year ending December 31, 1996 and establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those assets to be held and
used and for long-lived assets and certain identifiable intangibles to be
disposed of.  SFAS 121 requires that such assets and intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.  Management does not expect
the adoption of SFAS 121 to have a significant impact on the Company's results
of operations, financial condition or liquidity.

Income Taxes:
The Company and its subsidiaries file a consolidated federal tax return and
separate company state tax returns.  Income taxes are provided under the
liability method in accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (SFAS No. 109).  Under the liability
method, deferred income taxes are recognized for the tax consequences of
differences between amounts reported for financial reporting and income tax
purposes by applying enacted statutory tax rates applicable to future years to
such differences.  Deferred taxes result from temporary differences in the
market value of assets acquired in business combinations accounted for as
purchases and their tax bases.  Under SFAS No. 109, the effect on deferred taxes
of a change in tax rates is recognized in income in the period that includes the
enactment date.

Federal (and state, where applicable) income taxes for the Group prior to their
acquisition by the Company were payable personally by the stockholders of the
Group pursuant to S corporation elections under the Internal Revenue Code.

Prepaid Expenses and Other Current Assets:
Prepaid expenses consist of prepaid insurance, rent, real estate taxes and other
current assets.

Accrued Expenses:
Accrued expenses consist principally of uninvoiced inventory and other
miscellaneous accruals.

Estimated Medical Professional Liability Claims:
The Company is insured for medical professional liability claims through a
commercial insurance policy.  It is the Company's policy that provision for
estimated premium adjustments to medical professional liability costs be made
for asserted and unasserted claims and based upon the Company's experience.
Provision for such professional liability claims includes estimates of the
ultimate costs of such claims.  To date, the Company's experience with such
claims has not been significant.  Accordingly, no such provision has been made.

Cash Equivalents:
For the purpose of reporting cash flows, the Company considers all highly liquid
investments with original maturities of three months or less to be cash
equivalents.  The cash of the Company is principally held by one financial
institution.

                                      F-9
<PAGE>
 
2.    Summary of Significant Accounting Policies (continued):
Investments:
Investments were comprised of investments in municipal bonds and a fixed income
mutual fund which primarily invests in short-term bank deposits and U.S.
government and government agency securities.  Investment income is recognized
when earned and realized gains and losses are recognized on a trade date basis,
computed based on original cost.  The fair market value of these investments
approximates cost.  All investments were held by one financial institution.

Historical Net Income Per Common and Common Stock Equivalent:
Net income per common and common stock equivalent on a historical basis, both
primary and fully diluted, are as follows:

<TABLE> 
<CAPTION> 
                                                    1993           1994           1995
- ---------------------------------------------------------------------------------------------------
<S>                                              <C>            <C>            <C>
Primary:
    Net income per common and common stock            $0.49          $0.47          $0.65
     equivalent
    Weighted average common and common                                                
     stock equivalents outstanding               11,072,783     21,161,243     22,412,733 
Fully diluted:                                                    
    Net income per common and common stock                           
     equivalent                                       $0.39          $0.47          $0.64             
    Weighted average common and common           
     stock equivalents outstanding               13,921,957     21,215,273     23,401,085 
</TABLE>


Primary earnings per share for 1993 are computed by dividing net income, reduced
by preferred dividends, by the weighted average number of shares of common stock
and common stock equivalents outstanding during the period.  Primary earnings
per share for 1994 and 1995  are computed by dividing net income by the weighted
average number of shares of common stock and common stock equivalents
outstanding during the period.

Fully diluted earnings per share for 1993 assumes the conversion of Series B
preferred stock and the exercise and conversion of Series B preferred stock
warrants into common stock as of January 1, 1993.  Fully diluted earnings per
share for 1994 are computed by dividing net income by the weighted average
number of shares of common stock and common stock equivalents outstanding during
the period.  Fully diluted earnings per share for 1995 are computed by dividing
net income, increased by the tax effected interest on an earn-out note, by the
weighted average number of shares of common stock and common stock equivalents
outstanding during the period.  Fully diluted earnings per share also reflect
additional dilution related to stock options due to the use of the market price
at the end of the period, when higher than the average price for the period.

3.    Business Acquisitions:
Merger with the Group:
On July 23, 1996, the Company acquired the Group.  The facilities acquired are
located in Florida and serviced a total of approximately 200 patients as of the
acquisition date.  The transaction was accounted for under the pooling-of-
interests method of accounting.  In the transaction, the Company issued 482,377
shares of its common stock in exchange for all the outstanding stock of the
Group.  The acquisition was structured as a merger of the Group into a
subsidiary of the Company.

Merger with The Wichita Companies:
On July 25, 1995, with an effective date of August 1, 1995, the Company acquired
Wichita Dialysis Center, P.A., Southeast Kansas Dialysis Center, P.E., Garden
City Dialysis Center, P.A. and Wichita Dialysis Center, East, P.A. (the "Wichita
Companies").  All of the facilities acquired are located in Kansas and serviced
approximately 355 patients as of the acquisition date.  The transaction was
accounted for under the pooling-of-interests method of accounting.  In the
transaction, the Company issued 1,558,920 shares of its common stock in exchange
for all the outstanding stock of the Wichita Companies.  The acquisition was
structured as a merger of the Wichita Companies into a subsidiary of the
Company.

Merger with HCC:
On March 6, 1995, the Company completed its acquisition of Healthcare
Corporation and its affiliates (collectively, "HCC").  The facilities acquired
from HCC are located in Missouri, Illinois, North Carolina, Florida and
Washington, D.C. and serviced approximately 720 patients as of the acquisition
date.  The transaction was accounted for under the pooling-of-interests method
of accounting.  In the transaction, the Company issued 2,292,222 shares of its
common stock in exchange for all the outstanding stock of HCC.  The acquisition
was structured as a merger of HCC into several subsidiaries of the Company.

                                      F-10
<PAGE>
 
3.    Business Acquisitions (continued):

The supplemental consolidated financial statements give retroactive effect to
the mergers with the Group, the Wichita Companies and HCC and include the
combined operations of the Company, the Group, the Wichita Companies, and HCC
for all periods presented. The following is a summary of the separate and
combined results of operations for periods prior to the mergers (dollars in
thousands):

<TABLE> 
<CAPTION> 

                                                              Renal Treatment                                  
                                                              Centers, Inc.            Acquired                
                                                              (Prior to Mergers)       Companies       Combined   
                                                              ------------------       ---------       -------- 


<S>                                                           <C>                      <C>             <C> 
For the year ended December 31,      

1995
  Net patient revenue                                             $150,467              $14,101        $164,568
  Income from operations                                            23,319                1,501          24,820
  Net income                                                        13,238                1,392          14,630
                         
*Includes HCC for the two months ended February 28, 1995,
the Wichita Companies for the seven months ended                                         
July 31, 1995 and the Group for the year ended                                                   
December 31, 1995.                                                                             
                                                                 
1994                                                                                            
  Net patient revenue                                              $86,520              $28,937        $115,457                   
  Income from operations                                            12,343                2,672          15,015 
  Net income                                                         7,558                2,493          10,051                  
1993                                                                                                     
  Net patient revenue                                              $46,956              $26,087         $73,043 
  Income from operations                                             7,050                2,369           9,419 
  Net income                                                         3,738                2,043           5,781
</TABLE> 
                            

The acquisitions described below have been accounted for under the purchase
method. The results of these acquisitions have been included in the results of
operations from the applicable acquisition dates. The purchase price of the
acquisitions has been principally allocated to fixed assets, patient lists, non-
compete agreements and goodwill. The excess of the purchase price over the fair
value of net assets was approximately $49,347,454 and is being amortized on a
straight-line basis over 25 years.
 
1993 Acquisitions:
During 1993, the Company acquired nine dialysis centers, one dialysis service
agreement and certain acute care contracts in Pennsylvania, New Jersey, Delaware
and California for approximately $16,794,000 in cash and the assumption of
certain liabilities of approximately $231,000. The acquisitions included
substantially all of the non-current assets and the assumption of certain
liabilities and capital leases of the centers.
 
1994 and 1995 Acquisitions:
During 1994, the Company acquired seventeen dialysis centers, including several
acute care contracts, in Oklahoma, Colorado, Wyoming, New Jersey, Virginia,
Pennsylvania and Texas for approximately $50,300,000 in cash, 175,216 shares of
unregistered common stock, valued at approximately $1,812,500 at the respective
dates of acquisition, and the assumption of approximately $1,200,000 of
liabilities. The acquisitions included substantially all of the non-current
assets, certain current assets and the assumption of various liabilities and
capital lease obligations of the centers. Additionally, certain purchase
agreements included provisions whereby additional purchase price may be required
if the centers attain certain financial results during a specified period. Refer
to note 6 to supplemental consolidated financial statements for discussion of a
note issued in connection with an acquisition.
 
During 1995, the Company acquired nine dialysis centers, including several acute
care contracts, in Indiana, Ohio, Texas, Florida and Nebraska for approximately
$11,600,000 in cash, 302,644 shares of unregistered common stock, valued at
approximately $3,639,750 at the respective dates of acquisition, and the
assumption of approximately $118,000 of liabilities. The acquisitions included
substantially all of the non-current assets, certain current assets and the
assumption of certain liabilities and capital leases of the centers.
 

                                      F-11
<PAGE>
 
3.    Business Acquisitions (continued):
The following unaudited pro forma information combines the supplemental
consolidated results of operations of the Company and the companies acquired in
the acquisitions that were accounted for under the purchase method during 1994
and 1995 as if they had occurred on January 1, 1994:

<TABLE> 
<CAPTION> 
                                                           (Unaudited)
                                                      1994             1995
- --------------------------------------------------------------------------------
<S>                                               <C>              <C> 
 Net patient revenue                             $122,431,000     $167,761,000
 Income from operations                            15,683,000       25,239,000
 Net income                                        10,686,000       15,038,000
 Net income per share                                   $0.50            $0.67
</TABLE> 

The pro forma results do not necessarily represent results which would have
occurred if these acquisitions had taken place at the beginning of each period,
nor are they indicative of the results of future combined operations.

4.    Property and Equipment:
A summary of property and equipment and related accumulated depreciation as of
December 31, 1994 and 1995 is as follows:

<TABLE> 
<CAPTION> 

                                                      1994             1995
- --------------------------------------------------------------------------------
 <S>                                              <C>              <C> 
 Furniture, fixtures and equipment                $14,662,983      $20,775,057
 Leasehold improvements                             4,102,011        7,427,458 
 Capital leases                                     1,013,752        3,161,693
 Building                                             692,772          724,704
 Land                                                 100,066          100,066
- --------------------------------------------------------------------------------
                                                   20,571,584       32,188,978
 Less accumulated depreciation                      6,910,646       10,746,557 
- --------------------------------------------------------------------------------
                                                  $13,660,938      $21,442,421 
================================================================================
</TABLE> 
 
Capital leases primarily consist of dialysis equipment. Depreciation expense was
$1,395,230, $2,152,110 and $3,846,294 for the years ended December 31, 1993,
1994 and 1995, respectively.

5.    Intangible Assets:

Intangible assets consists of goodwill and other identifiable intangibles. A
summary of intangible assets and related accumulated amortization as of 
December 31, 1994 and 1995 is as follows:

<TABLE> 
<CAPTION> 

                                                     1994             1995
- --------------------------------------------------------------------------------
<S>                                              <C>              <C> 
 Goodwill                                        $49,734,578      $59,605,978
 Patient lists                                    30,714,917       33,572,193
 Non-compete agreements                            8,825,483       10,048,195
 Other intangibles                                 4,134,793        5,111,860
- --------------------------------------------------------------------------------
                                                  93,409,771      108,338,226
 Less accumulated amortization                    14,171,384       22,263,385
- --------------------------------------------------------------------------------
                                                 $79,238,387      $86,074,841
================================================================================
</TABLE>

Intangible assets principally arose from acquisitions. Amortization expense was
$2,750,160, $5,450,849 and $8,220,167 for the years ended December 31, 1993,
1994 and 1995, respectively.

                                     F-12
<PAGE>
 
6.    Long-Term Debt:
<TABLE> 
<CAPTION> 
 
Long-term debt as of December 31, 1994 and 1995 consists of:                     1994               1995   
- -----------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                <C> 

 Term loan payable in quarterly installments of $625,000                 
  through June 1997                                                            $6,875,000         $3,750,000  
 Revolving credit/term facility payable in 16 equal quarterly                  
  installments from December 1997 through September 2001                       13,975,000         33,675,000 
 Note, 6 1/2% payable to The Dialysis Centers Limited      
  Liability Company in four annual installments of 
  variable amounts commencing on June 1, 1995                                  7,500,000           6,627,690 
 Bank term loan payable in quarterly installments of $25,000                     325,000                   - 
 Bank revolving line of credit payable in 20 equal quarterly    
  installments commencing in May 1995                                          2,899,685                   -   
 Term loans payable in monthly installments of $15,912                         1,338,270           1,041,576 
 Other                                                                           157,500                   -                  
 Capital lease obligations                                                       562,712           2,185,233 
 Unamortized debt discount                                                      (108,326)            (43,322)
- ----------------------------------------------------------------------------------------------------------------------- 
                                                                              33,524,841          47,236,177
 Less current portion                                                         (4,781,232)         (4,660,077)
- -----------------------------------------------------------------------------------------------------------------------
                                                                             $28,743,609         $42,576,100
=======================================================================================================================     
</TABLE> 
 
On April 21, 1994, the Company amended its term loan and revolving credit
agreement (the "Credit Agreement") to add a LIBOR interest rate option, change
the note rate, extend the revolving loan conversion date and make certain other
modifications.
 
On November 3, 1994, the Company amended and restated its Credit Agreement and
increased the amount the Company can borrow under the Credit Agreement to
$75,000,000. The Company must pay an annual commitment fee on the average daily
unutilized commitment in the amount of .25% - .35%, determined by the Company's
ratio of senior debt to annualized cash flow (the "Applicable Margin").
Borrowings under the Credit Agreement are subject to interest at the Company's
option, at either (1) the Agent bank's base rate, adjusted by the Applicable
Margin, payable quarterly, or (2) one, two, three, or six-month period LIBOR
rate, adjusted by the Applicable Margin, payable at contract termination. The
weighted average interest rate was 7.36% and 7.32% at December 31, 1994 and
1995, respectively.
 
The Credit Agreement also provides for the issuance of letters of credit up to
$5,000,000 provided that the aggregate of all outstanding letters of credit plus
the outstanding aggregate principal amount of all revolving credit/term loans
does not exceed the lesser of the total revolving credit/term commitment or the
patient borrowing base, as defined in the Credit Agreement, at such time. As of
December 31, 1994 and 1995, there were $1,062,500 face amount and no letters of
credit outstanding, respectively.
 
The loans are collateralized by all stock of the Company's subsidiaries, a lien
on all of the Company's assets and the assignment of certain agreements. The
Credit Agreement limits additional indebtedness, acquisitions, investments and
dividends and requires the Company to comply with certain other covenants and
maintain certain financial ratios. The dividend distributions presented in the
Supplemental Consolidated Statement of Stockholders' Equity (Deficit) in 1993,
1994 and 1995 were paid to the former stockholders of HCC, the Wichita Companies
and the Group and were not subject to the Credit Agreement limitation on
dividend payments.
 
In June 1994, pursuant to a business acquisition, the Company entered into an
agreement to pay the Seller $7,500,000 in annual installments commencing June
1995 through June 1998. Interest on the unpaid principal amount of the note
accrues at an annual rate of 6.50%, payable in arrears each June 1 from 1995
through 1998. The note allows the Seller to convert the note into that number of
shares of common stock of the Company which shall be equal to the quotient of
the outstanding unpaid principal amount of the note divided by the average daily
closing sale price of the stock during December, 1994 ($20.685 per share,
convertible into 362,582 shares of common stock at December 31, 1994). The fair
value of the Company's 6.50% Note was approximately $5,966,400 at December 31,
1995. The carrying amount of all other long-term debt approximates its fair
value.
 
The bank term loan and bank revolving line of credit are the result of an
agreement entered into by the Company with a bank (the "HCC Agreement"). The HCC
Agreement provided for a $500,000 term loan, a $2,900,000 revolving line of
credit available for working capital and a $2,100,000 converting line of credit
available to the Company for future expansion. Subsequent to the consummation of
the merger with HCC as described in Notes 2 and 3 to the supplemental
consolidated financial statements, the Company refinanced through the Credit
Agreement all of the indebtedness related to the HCC Agreement.
 
                                     F-13
<PAGE>
 
6.   Long-Term Debt (continued):
The term loans are the result of four separate agreements (the "Group
Agreements") entered into by the Company with two banks. The Group Agreements
provided for a total of $1,350,000 in term loans and a $350,000 revolving line
of credit. Subsequent to the consummation of the merger with the Group as
described in Notes 2 and 3 to the supplemental consolidated financial
statements, the Company paid off all of the indebtedness related to the Group
Agreements.
 
Maturities of long-term debt outstanding, excluding capital leases, as of
December 31, 1995 for each of the next five years, is as follows:
 
<TABLE> 
<CAPTION> 
                              Year
                              ------------------------------
                              <S>               <C> 
                              1996              $4,093,262
                              1997               5,686,874
                              1998              11,497,361
                              1999               9,083,957
                              2000               8,418,750
</TABLE>

7.   Income Taxes:
The provision for income taxes for the years December 31, 1993, 1994 and 1995
consists of the following:

<TABLE>
<CAPTION>
 
                                           1993         1994          1995

- --------------------------------------------------------------------------------
<S>                                     <C>          <C>          <C>
Current:
    Federal                             $2,294,388   $4,327,339    $ 8,330,951
    State and local                        373,505      485,926        807,761
- --------------------------------------------------------------------------------
                                         2,667,893    4,813,265      9,138,712
- --------------------------------------------------------------------------------
 
Deferred:
    Federal                               (486,498)    (447,584)    (1,372,961)
    State and local                        (79,197)     (49,667)      (133,682)
- --------------------------------------------------------------------------------
                                          (565,695)    (497,251)    (1,506,643)
- --------------------------------------------------------------------------------
                                        $2,102,198   $4,316,014    $ 7,632,069
================================================================================
</TABLE> 

The tax effects of temporary differences which comprise the net deferred tax
asset are as follows:

<TABLE> 
<CAPTION> 
                                                   December 31,
                                                   -----------
                                                1994           1995
   <S>                                      <C>           <C> 
   Deferred tax debits:
   Allowance for doubtful accounts            $535,341       $780,978
   Intangibles, principally patient lists      609,674      2,926,430
   Property and equipment                      189,959        178,417
   Other                                        33,811         38,857
- --------------------------------------------------------------------------------
                                             1,368,785      3,924,682
- --------------------------------------------------------------------------------
 
Deferred tax credits:
   Goodwill                                   (305,839)    (1,355,093)
- --------------------------------------------------------------------------------
                                              (305,839)    (1,355,093)
- --------------------------------------------------------------------------------
Net deferred tax asset                      $1,062,946     $2,569,589
================================================================================
</TABLE> 

                                      F-14
<PAGE>
 
7.   Income Taxes (continued):
The following is a reconciliation of the statutory federal income tax rates to
the effective rates as a percentage of income before provision for income taxes
as reported in the financial statements for the years ended December 31, 1993,
1994 and 1995:

<TABLE>
<CAPTION>
                                              1993    1994    1995
- --------------------------------------------------------------------------------
<S>                                          <C>     <C>     <C>
U.S. federal income tax rate                 34.0%   34.2%   35.0%
State income taxes, net of federal
   income tax benefit                         2.2%    2.4%    2.4%
Non-tax effected items,
   principally intangibles                    1.2%    0.8%    1.8%
Federal and state income tax
   benefit from S corporation status of HCC,
   the Wichita Companies and the Group       (9.3%)  (6.4%)  (3.5%)
Other                                        (1.4%)  (1.0%)  (1.4%)
- --------------------------------------------------------------------------------
Effective income tax rate                    26.7%   30.0%   34.3%
================================================================================
</TABLE>

8.   Benefit and Compensation Plans:
The Company has a defined contribution savings plan covering substantially all
employees. The Company's contributions under the plan were approximately
$209,064, $388,497, and $462,004 for the years ended 1993, 1994 and 1995,
respectively.

In September 1990, the Company established a stock plan, pursuant to which
incentive stock options and non-qualified stock options may be issued to
employees and others through the year 2000. Incentive stock options may be
granted at an exercise price not less than the fair market value of the
Company's common stock. Non-qualified stock options may be granted at an
exercise price not less than the lower of the book value of the Company's common
stock or 50% of the fair market value per share of common stock. Accordingly,
compensation expense for the difference between the fair market value and the
exercise price for non-qualified stock options issued is recorded over the
vesting period of such options.

In 1993 and 1995, the stock plan was amended to increase the number of shares
available for grant to 1,837,000 and 2,437,000 shares, respectively. In
addition, the Company established an option plan for outside directors pursuant
to which non-qualified stock options to purchase up to 60,000 shares may be
issued to non-employee directors of the Company. These options may be granted at
an exercise price not less than the fair market value of the Company's common
stock.

On February 3, 1994, the Company granted 170,000 incentive stock options to
certain officers and employees of the Company. These options were granted at an
exercise price not less than fair market value of the Company's common stock on
the date of grant. These options vest over the next one to three years.

On May 17, 1995, the Company granted 416,000 incentive stock options to certain
officers and employees of the Company. These options were granted at an exercise
price not less than fair market value of the Company's common stock on the date
of the grant. These options vest over the next one to four years. Certain
options totalling 305,000 vest upon the earlier of attainment of predetermined
earnings per share targets or nine to ten years.

Approximately $80,000, $50,000, and $50,000 was recorded as compensation expense
during 1993, 1994, and 1995, respectively, in connection with incentive and non-
qualified options to officers of the Company, which have been amortized over the
remaining vesting period. Certain options outstanding at December 31, 1995,
which are issued to certain officers of the Company, become fully vested upon
certain sales of assets, mergers and consolidations involving the Company, as
set forth in the respective stock option agreements. The remaining options
outstanding at December 31, 1995, which are issued to certain officers and
employees of the Company, become fully vested upon certain sales of assets,
mergers and consolidations involving the Company, at the option of the Stock
Plan Committee.

                                      F-15
<PAGE>
 
8.   Benefit and Compensation Plans (continued):
The following is a summary of option transactions and exercise prices:

<TABLE> 
<CAPTION> 
                                          Number of        Price Per
                                           Shares            Share   


- --------------------------------------------------------------------------------
<S>                                       <C>              <C>            
Outstanding at December 31, 1993          1,490,032        $0.005 - $9.625
Granted                                     188,000                 $11.25
Exercised                                  (356,762)        $0.005 - $5.25
Cancelled                                   (20,000)                $11.25
Outstanding at December 31, 1994          1,301,270        $0.055 - $11.25 
- --------------------------------------------------------------------------------
Granted                                     416,000                 $11.50
Exercised                                  (458,016)       $0.005 - $11.25
Outstanding at December 31, 1995          1,259,254         $5.25 - $11.50 
- --------------------------------------------------------------------------------
Exercisable at December 31, 1995            338,824 
================================================================================
</TABLE>

9.   Capital Stock:
On January 30, 1996, the Board of Directors of the Company declared a dividend
on the Company's common stock of one share of common stock for each share
outstanding, thereby effecting a 2-for-1 stock split. The dividend shares were
issued on March 14, 1996 to stockholders of record as of February 29, 1996.
Additionally, on February 29, 1996, the Company amended its capital structure to
increase the Company's authorized capital to 45,000,000 shares of $0.01 par
value common stock and 5,000,000 shares of $.01 par value Series Preferred
Stock. All references in the financial statements to outstanding and authorized
common shares, average number of shares outstanding and related prices, per
share amounts and stock plan data have been restated to reflect the split
effected by the stock dividend.

10.  Leasing Arrangements:

The Company leases certain of its operating facilities, corporate office and
furniture and equipment under non-cancelable leases for terms ranging from four
to ten years with certain renewal options. Certain of these facilities are
leased by the Company from medical directors.

Future minimum lease payments are as follows:

<TABLE>
<CAPTION>
                                                      Third-party   Operating Leases 
                                        Capital        Operating      with Medical   
                                        Leases          Leases         Directors      
- ------------------------------------------------------------------------------------
   <S>                                <C>             <C>               <C>        
   1996                                 $868,765       $4,230,897     $1,015,613 
   1997                                  609,862        3,433,229      1,015,613 
   1998                                  608,653        2,890,264        766,303 
   1999                                  421,666        2,591,912        722,874 
   2000 and thereafter                         -        8,100,724      3,117,466  
- ------------------------------------------------------------------------------------
   Total minimum lease payments       $2,508,946      $21,247,026     $6,637,869              
   Less amount representing interest     323,714  ==================================             
- ------------------------------------------------                                            
   Present value of net minimum                                                             
    payments under capital leases      2,185,232                                            
   Less current portion                  566,815                                            
- ------------------------------------------------
                                      $1,618,417
================================================
</TABLE>

Rent expense paid to third parties under operating leases was $2,216,260,
$3,270,066 and $4,921,026 for the years ended December 31, 1993, 1994 and 1995,
respectively. Rent expense paid to medical directors under facility operating
leases was $545,608, $832,454 and $1,030,208 for the years ended December 31,
1993, 1994 and 1995 respectively.

11.  Mandatory Redeemable Preferred Stock:
On July 29, 1993, the Company redeemed all the Series A preferred stock
outstanding at a redemption price of $1,000 per share. In addition, on July 29,
1993, the holders of 257 shares of Series B preferred stock converted their
shares into 4,545,932 shares of Common stock. The Company paid in full all
accrued and unpaid dividends of $476,249 on the Series A and B preferred stock
on the redemption and conversion date.

                                      F-16
<PAGE>
 
11.  Mandatory Redeemable Preferred Stock (continued):
Dividends on preferred stock were set aside from funds legally available for
payment quarterly on the last day of each November, February, May and August
which commenced November 30, 1989. Dividends on preferred stock were payable at
an annual dividend rate per share of 6% for the period October 1, 1992 through
September 30, 1995.

On July 29, 1993, the holders of Series B preferred stock warrants also
exercised their rights to purchase 17.1466 shares of the Company's Series B
preferred stock, exercisable at $1,000 per share. Each share was then converted
into 17,689.72 shares of common stock.

12.  Commitments and Contingencies:
The Company has entered into long-term compensation agreements with the
physician directors of each dialysis facility. The agreements range from one to
ten years with certain agreements containing one to ten year options to renew.
The agreements provide for a total annual base compensation as follows:

<TABLE> 
<CAPTION> 
                                                   Physician Director
   Year                                            Base Compensation
- --------------------------------------------------------------------------------
<S>                                                <C>
 1995                                                  $6,270,287
 1996                                                   5,462,190
 1997                                                   5,204,504
 1998                                                   4,066,557
 1999 and thereafter                                   12,958,132
- --------------------------------------------------------------------------------
 Total minimum payments                               $33,961,670
================================================================================
</TABLE>
                                                                               
Certain of these agreements provide for incentive compensation based on pre-tax
operating profit.

The Company has employment agreements with four officers. These agreements
provide for total annual compensation of $756,000 and provide that in the event
any payment or benefit received by any of them in connection with a change of
control is deemed an "excess parachute payment" under the Internal Revenue Code,
the Company shall pay the officer a cash bonus equal to any additional tax
liability imposed upon him as a result.

The Company is a party to certain legal actions arising in the ordinary course
of business. The Company believes it has adequate legal defenses and/or
insurance coverage for these actions and that the ultimate outcome of these
actions will not have a material adverse impact on the Company's results of
operations, financial condition or liquidity.
 
13.  Supplemental Cash Flow Information:
Supplemental disclosure of cash flow information for the years ended 
December 31, 1993, 1994 and 1995 is as follows:

<TABLE>
<CAPTION>
                                   1993         1994        1995
- --------------------------------------------------------------------------------
<S>                             <C>          <C>         <C>   
Cash paid for:
 Interest                       $1,473,220   $1,090,192  $2,177,255
================================================================================
 Income taxes                   $2,012,701   $4,857,551  $5,680,430
================================================================================
Non-cash investing and
 financing activities:
 Capital lease obligations
  entered into                  $  326,863   $  542,032  $2,081,699
================================================================================
 Conversion of Series B
  preferred stock and Series B
  warrants to common stock      $  274,147   $        -  $        -
================================================================================
 Issuance of common stock in
  connection with purchases
  of businesses                 $        -   $1,812,500  $3,639,750
================================================================================
 Earnout note issued in
  connection with purchase of
  business                      $        -   $7,364,100  $        -
================================================================================
 Acquisition of treasury
  stock in connection with
  payroll taxes resulting
  from exercise of stock
  options.                      $        -   $   47,219  $  346,857
================================================================================
</TABLE>

                                      F-17
<PAGE>
 
                Renal Treatment Centers, Inc. and Subsidiaries
               CONDENSED SUPPLEMENTAL CONSOLIDATED BALANCE SHEET

<TABLE> 
<CAPTION> 
                                                                   (Unaudited)
                                                   December 31,      June 30,
                                                       1995            1996
- --------------------------------------------------------------------------------
<S>                                                <C>            <C>
Assets
Current assets:
  Cash                                             $  8,231,421   $    621,444
  Investments                                                 -     45,963,081
  Accounts receivable, less allowance for doubtful 
    accounts of $3,503,744 in 1995 and $5,743,830 
    in 1996                                          51,996,618     63,386,631
  Inventories                                         2,869,019      3,838,980
  Deferred taxes                                        819,835      1,412,519
  Prepaid expenses and other current assets           1,396,893      1,219,708
- --------------------------------------------------------------------------------
     Total current assets                            65,313,786    116,442,363 
- --------------------------------------------------------------------------------
Property and equipment, net of accumulated           
 depreciation of $10,746,557 in 1995 and             
 $16,249,094 in 1996                                 21,442,421     31,733,870 
Intangibles, net of accumulated amortization of                                
 $22,263,385 in 1995 and $26,925,574 in 1996         86,341,433    121,718,883 
Deferred taxes, non-current                           1,749,754      1,749,754  
Other assets                                             20,842         15,649 
- --------------------------------------------------------------------------------
     Total assets                                  $174,868,236   $271,660,519  
================================================================================
                                                                              
Liabilities and Stockholders' Equity                                          
Current liabilities:                                                          
  Current portion of long-term debt                  $4,766,262     $3,336,451
  Accounts payable                                    4,495,087      6,305,145
  Accrued compensation                                2,790,121      2,694,379
  Accrued expenses                                    6,576,600      3,170,103
  Accrued income taxes                                2,218,692        320,024
  Accrued interest                                    1,087,415        399,015
- --------------------------------------------------------------------------------
     Total current liabilities                       21,934,177     16,225,117
- --------------------------------------------------------------------------------
Long-term debt, net                                  42,576,100    131,592,265
Stockholders' equity:
  Preferred stock, $.01 par value, 5,000,000                                    
   shares authorized; none issued                       
  Common stock, $.01 par value, 45,000,000          
   shares authorized; issued and outstanding 
   22,209,689 and 24,255,969 shares in 1995 and 
   1996, respectively                                   222,097        242,559  
  Additional paid-in capital                         83,257,068     85,480,900
- --------------------------------------------------------------------------------
  Retained earnings                                  27,272,870     38,513,754
- --------------------------------------------------------------------------------
                                                    110,752,035    124,237,213 
Less treasury stock, 37,202 shares in 1995 and 1996    (394,076)      (394,076)
- --------------------------------------------------------------------------------
                                                  
Total stockholders' equity                          110,357,959    123,843,137
- --------------------------------------------------------------------------------
                                                                              
Total liabilities and stockholders' equity         $174,868,236   $271,660,519 
================================================================================
</TABLE>

See accompanying notes to condensed supplemental consolidated financial 
statements

                                      F-18
<PAGE>
 
                Renal Treatment Centers, Inc. and Subsidiaries
           CONDENSED SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
                                  (Unaudited)

<TABLE> 
<CAPTION> 
                           Three Months Ended June 30,     Six Months Ended June 30,
                                1996          1995            1996          1995   
- ------------------------------------------------------------------------------------
<S>                          <C>          <C>             <C>           <C>        
Net patient revenue          $55,583,123  $40,066,785     $106,132,950  $77,816,039
Patient care costs            26,997,151   19,645,417       51,482,378   38,216,941

- ------------------------------------------------------------------------------------ 
Operating profit              28,585,972   20,421,368       54,650,572   39,599,098
General and administrative    
 expense                      13,479,366   10,069,871       26,632,717   20,330,847 
Provision for doubtful        
 accounts                      1,737,321      986,919        3,308,507    2,020,088  
Depreciation and              
 amortization                  4,072,917    2,908,536        7,645,118    5,641,524   
Merger expenses                        -            -        1,708,247    1,587,542   
- ------------------------------------------------------------------------------------ 
Income from operations         9,296,368    6,456,042       15,355,983   10,019,097   
                                                                                      
Interest expense, net            856,313      651,621        1,553,433    1,310,325 
- ------------------------------------------------------------------------------------   
Income before income taxes     8,440,055    5,804,421       13,802,550    8,708,772   

Provision for income taxes     3,009,329    1,767,248        4,999,536    2,332,211   
- ------------------------------------------------------------------------------------ 
Net income                   $ 5,430,726  $ 4,037,173      $ 8,803,014  $ 6,376,561    
==================================================================================== 
Net income per common and 
 common stock equivalent     $      0.22  $      0.18      $      0.36  $      0.29
==================================================================================== 
Weighted average number of
 common and common stock
 equivalents outstanding      25,828,734   22,105,059       15,284,349   22,057,653 

</TABLE>

See accompanying notes to condensed supplemental consolidated financial 
 statements

                                      F-19
<PAGE>
 
                Renal Treatment Centers, Inc. and Subsidiaries
         CONDENSED SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
                for the six months ended June 30, 1995 and 1996
                                  (Unaudited)

<TABLE> 
<CAPTION> 
                                                               June 30,      June 30,
                                                                1996          1995             
- --------------------------------------------------------------------------------------- 
<S>                                                        <C>            <C>           
                                                                                        
Cash flows from operating activities:                                                   
 Net income                                                  $8,803,014    $6,376,561   
 Adjustments to reconcile net income to                                                 
  net cash provided by operating activities:                                            
    Depreciation and amortization                             7,666,084     5,668,009   
    Provision for doubtful accounts                           3,308,507     2,020,088   
    Changes in operating assets and liabilities,                                                                       
     net of effects of companies acquired:                  
    Accounts receivable                                     (11,355,559)   (8,263,686)  
    Inventories                                                (673,916)      474,846   
    Prepaid expenses and other current assets                   239,556       176,555   
    Accounts payable and accrued expenses                    (5,722,617)     (439,306)  
    Accrued income taxes                                     (1,898,668)     (298,908)   
- ---------------------------------------------------------------------------------------  
 Net cash (used in) provided by operating activities            366,401     5,714,159                               
- ---------------------------------------------------------------------------------------
Cash flows from investing activities:                                                  
 Capital expenditures                                        (6,188,493)   (3,553,324) 
 Purchase of businesses, net of cash acquired               (37,030,623)   (5,144,291) 
 Sale of investments                                          9,347,962     2,661,944  
 Purchase of investments                                    (55,311,043)            -  
 Other                                                         (979,804)   (1,356,734) 
- ---------------------------------------------------------------------------------------
 Net cash used in investing activities                      (90,162,001)   (7,392,405) 
- ---------------------------------------------------------------------------------------
Cash flows from financing activities:                                                  
 Issuance of 5 5/8% convertible subordinated notes          125,000,000             -   
 Proceeds from long-term debt borrowings                     30,500,000     9,000,000   
 Repayments of debt                                         (70,420,804)   (6,369,894)  
 Net borrowings under line of credit                            (50,000)      (19,001)  
 Proceeds from issuance of common stock                       2,137,012       623,329   
 Payment of dividends                                          (658,500)   (1,082,331)  
 Debt issuance costs                                         (3,750,000)            -   
 Payments on capital lease obligations                       (1,535,784)     (313,312)  
 Cash portion of consideration received for                                              
  common stock                                                 $963,699             -    
- ---------------------------------------------------------------------------------------   
 Net cash provided by financing activities                   82,185,623     1,838,791  
- ---------------------------------------------------------------------------------------   
Net increase (decrease) in cash and cash equivalents         (7,609,977)      160,545    
Cash and cash equivalents at beginning of period              8,231,421     2,782,781    
- ---------------------------------------------------------------------------------------   
Cash and cash equivalents at end of period                      621,444   $ 2,943,326    
=======================================================================================  
</TABLE>

   See accompanying notes to supplemental consolidated financial statements

                                      F-20
<PAGE>
 
                Renal Treatment Centers, Inc. and Subsidiaries

Notes to Condensed Supplemental Consolidated Financial Statements
(Unaudited)

1. BASIS OF PRESENTATION:

The accompanying unaudited condensed supplemental consolidated financial
statements have been prepared by the Company in accordance with generally
accepted accounting principles for interim financial information and pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the six months ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996. The interim supplemental consolidated financial statements
should be read in conjunction with the supplemental consolidated financial
statements and footnotes thereto included herein. 

The condensed supplemental consolidated financial statements of Renal Treatment
Centers, Inc. ("the Company") have been prepared to give retroactive effect to
the acquisition of Panama City Artificial Kidney Center, Inc. and North Florida
Artificial Kidney Center, Inc. (collectively "the Group") on July 23, 1996 which
has been accounted for using the pooling-of-interests method of accounting.

2. COMMITMENTS AND CONTINGENCIES:

The Company is a party to certain legal actions arising in the ordinary course
of business. The Company believes it has adequate legal defenses and/or
insurance coverage for these actions and that the ultimate outcome of these
actions will not have a material adverse impact on the Company's results of
operations, financial condition or liquidity.

3. SIGNIFICANT EVENTS:

On February 20, 1996, the Company acquired Intercontinental Medical Services,
Inc. ("IMS"), which operated four dialysis facilities in Hawaii. The transaction
was accounted for as a pooling of interests. Accordingly, the Company's
financial statements include the results of IMS as of January 1, 1996. In total,
1,047,464 shares of the Company's common stock were exchanged for all
outstanding shares of IMS.

On February 29, 1996, the Company acquired Midwest Dialysis Units and its
affiliates (collectively "MDU"), which operated 11 dialysis facilities in
Oklahoma. The transaction was accounted for as a pooling of interests.
Accordingly, the Company's financial statements include the results of MDU as of
January 1, 1996. In total 767,168 shares of the Company's common stock were
exchanged for all outstanding shares of MDU.

Prior year financial statements have not been restated to reflect these
transactions because the impact on the Company's financial statements of such
transactions is not material.

On May 29, 1996, with an effective date of May 31, 1996, the Company acquired
substantially all of the assets of Kidney Center of Delaware County, Ltd.
("KCDC") and Kidney Center of Chester County, Ltd. ("KCCC"). These two
outpatient dialysis centers, located in the Philadelphia, Pennsylvania area,
provide care to approximately 400 patients and perform acute treatments at nine
area hospitals.

On June 5, 1996 the Company amended its Credit Agreement with a consortium of
banks to increase the amount available under the line of credit from $68,125,000
to $100,000,000 and to make certain other changes to the terms of the Credit
Agreement, including amendments to certain covenants, the amortization schedule,
the interest rates and the events of default.

On June 12, 1996 the Company issued $125,000,000 of 5 5/8% Convertible
Subordinated Notes due 2006. The Company is using the proceeds of the offering
for the repayment of indebtedness, acquisitions, development of additional
dialysis centers, capital expenditures and general corporate purposes.

                                      F-21
<PAGE>
 
                Renal Treatment Centers, Inc. and Subsidiaries

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
for the years ended December 31, 1995, 1994 and 1993

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
                                           Additions                            
                             Balance at   Charged to                               
                             Beginning       Costs                     Balance at  
        Description           of Year    and Expenses   Deductions     End of Year 
- ------------------------------------------------------------------------------------
<S>                          <C>         <C>            <C>            <C>        
Year ended December 31,                                                             
 1995:                                                                            
                                                                                  
 Allowance for doubtful                                                           
  receivables                $2,306,556     $4,760,678  $3,563,490/(1)/ $3,503,744
                                                                                  
- ----------------------------------------------------------------------------------
Year ended December 31,                                                           
 1994:                                                                            
                                                                                  
 Allowance for doubtful                                                           
  receivables                $1,123,211     $3,121,017  $1,937,672/(1)/ $2,306,556
                                                                                  
- ----------------------------------------------------------------------------------
Year ended December 31,                                                           
 1993:                                                                            
                                                                                  
 Allowance for doubtful                                                           
  receivables                  $803,204     $1,550,691  $1,230,684/(1)/ $1,123,211
                                                                                  
- ----------------------------------------------------------------------------------
</TABLE>                                                             
                                                                     
(1) Amounts represent writeoffs of uncollectible receivables, of net recoveries.
                                                                     
                                      F-22
<PAGE>
 
ITEM 7.   FINANCIAL STATEMENTS AND EXHIBITS.

<TABLE> 
<CAPTION> 

(c)  Exhibits        Description
     --------        -----------
     <S>             <C> 
      11.1           Computation of Primary and Fully Diluted Earnings Per Share
      23.1           Consent of Coopers & Lybrand, L.L.P.
      23.2           Consent of Deloitte & Touche, L.L.P.
      23.3           Consent of Baird, Kurtz & Dobson
      27             Financial Data Schedule
 
</TABLE> 

                                      -11-
<PAGE>
 
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                      RENAL TREATMENT CENTERS, INC.


Date: August 23, 1996
      -------------------------       By:/s/Frederick C. Jansen
                                         ------------------------------------
                                         Frederick C. Jansen
                                         Executive Vice President and
                                         Chief Financial Officer
         
       
         
Date: August 23, 1996
      -------------------------       By:/s/Ronald H. Rodgers, Jr.
                                         ------------------------------------
                                         Ronald H. Rodgers, Jr.
                                         Vice President - Finance
                                         (Principal Accounting Officer)

                                      -12-
<PAGE>
 
                                 Exhibit Index

<TABLE>
<CAPTION>
 
Exhibits    Description                                                  Pages
- --------    -----------                                                  -----
<S>         <C>                                                          <C>
 
11.1        Computation of Primary and Fully Diluted Earnings Per Share  14-15
23.1        Consent of Coopers & Lybrand, L.L.P.                         16
23.2        Consent of Deloitte & Touche, L.L.P.                         17
23.3        Consent of Baird, Kurtz & Dobson                             18
27          Financial Data Schedule                                      19
 
</TABLE>

                                     -13-

<PAGE>
 
                                                                Exhibit 11.1 (a)


                Renal Treatment Centers, Inc. and Subsidiaries
          COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
                     for the year ended December 31, 1994

<TABLE> 
<CAPTION> 
                                                                                          Primary              Fully Diluted
                                                                                           1994                    1994
                                                                                           ----                    ----
<S>                                                                                     <C>                     <C>
Net income                                                                              $10,050,920             $10,050,920
- ------------------------------------------------------------------------------------------------------------------------------------


Weighted average number of shares outstanding during year                                20,589,003              20,589,003
                                                                                                            
Weighted average number of maximum shares subject                                                                           
  to exercise under outstanding stock options                                             1,396,022               1,396,022 
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                         21,985,025              21,985,025  
                                                                                                                             
Less treasury shares assumed purchased with proceeds                                                                        
  from assumed exercise of outstanding common stock options                                 823,782                 769,752 
- ------------------------------------------------------------------------------------------------------------------------------------

                                                                                                            
Weighted average number of common and common stock                                                                          
  equivalents outstanding                                                                21,161,243              21,215,273 
- ------------------------------------------------------------------------------------------------------------------------------------

 
Net income per common and common stock equivalent                                             $0.47                   $0.47 
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

                                     -14-
                                                                               

<PAGE>
 
                                                                Exhibit 11.1 (b)


                Renal Treatment Centers, Inc. and Subsidiaries
          COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
                     for the year ended December 31, 1995



<TABLE>
<CAPTION> 
                                                                                     Primary             Fully Diluted
                                                                                       1995                   1995
                                                                                       ----                   ----
<S>                                                                                 <C>                   <C>
Net income                                                                          $14,630,804             $14,630,804
Add back interest on note, tax effected                                                                     $   283,136
- -----------------------------------------------------------------------------------------------------------------------------------
Net income available to common stockholders                                         $14,630,804             $14,913,940
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding                                        21,868,067              21,868,067
                                                                 
Weighted average number of maximum shares subject                
  to exercise under outstanding stock options                                         1,444,812               1,444,812
                                                                 
Weighted average shares assumed issued upon conversion of note                                -                 682,402
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                     23,312,879              23,995,281
Less treasury shares assumed purchased with proceeds                                    
  from assumed exercise of outstanding common stock options                             900,146                 594,196
- ------------------------------------------------------------------------------------------------------------------------------------

Weighted average number of common and common stock                                                                      
  equivalents outstanding                                                            22,412,733              23,401,085 
- ------------------------------------------------------------------------------------------------------------------------------------

 
Net income per common and common stock equivalent                                         $0.65                   $0.64 
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                     -15-

<PAGE>
 
                                                                    Exhibit 23.1


                      CONSENT OF INDEPENDENT ACCOUNTANTS



We consent to the incorporation by reference in the registration statements of
Renal Treatment Centers, Inc. and Subsidiaries (the "Company") on Forms S-8
(File Nos. 33-85750 and 33-94262) and Forms S-3 (File Nos. 33-88418, 33-93060,
33-96828 and 333-3716) of our report dated March 20, 1996 except for the
combination described in Note 2, for which the date is August 19, 1996, on our
audits of the consolidated financial statements and the financial statement
schedule of the Company as of December 31, 1995 and 1994 and for the years ended
December 31, 1995, 1994 and 1993, which includes reference to information
audited by other auditors for which the dates of their reports are July 14, 1995
and March 31, 1995, respectively, which reports are included in this Form 8-K



/s/Coopers & Lybrand, L.L.P.
- ----------------------------
Coopers & Lybrand L.L.P.


600 Lee Road
Wayne, Pennsylvania
August 22, 1996

                                     -16-

<PAGE>
 
                                                                    Exhibit 23.2


                         INDEPENDENT AUDITORS' CONSENT


We consent to the incorporation by reference in the Registration Statements of
Renal Treatment Centers, Inc. and subsidiaries on Form S-8 (Nos. 33-85750 and
33-94262) and Form S-3 (Nos. 33-88418, 33-93060, 33-96828 and 333-3716) of our
report dated March 31, 1995, on our audits of the combined financial statements
of Healthcare Corporation and Affiliates as of December 31, 1994, and for the
two years in the period ended December 31, 1994, appearing in the Annual Report 
on Form 10-K of Renal Treatment Centers, Inc. and subsidiaries for the year 
ended December 31, 1995.


/s/Deloitte & Touche LLP
- ------------------------
Deloitte & Touche LLP

Nashville, Tennessee
August 20, 1996

                                     -17-

<PAGE>
 
                                                                    Exhibit 23.3


                         INDEPENDENT AUDITORS' CONSENT


We consent to the incorporation by reference in the registration statements of
Renal Treatment Centers, Inc. on Form S-3 (File Nos. 33-88418, 33-93060, 33-
96828, 333-3716) and S-8 (File Nos. 33-85750, 33-94262) of our report dated July
14, 1995, except for Note 9 as to which the date is July 24, 1995, relating to
the financial statements of the Wichita Dialysis Group, which report is included
in the Form 8-K.



/s/Baird, Kurtz & Dobson
- ------------------------
Baird, Kurtz & Dobson

Wichita, Kansas
August 23, 1996

                                     -18-

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 5
       
<S>                             <C>                       <C>         
<PERIOD-TYPE>                   12-MOS                    6-MOS                
<FISCAL-YEAR-END>                          DEC-31-1995               DEC-31-1996
<PERIOD-START>                             JAN-01-1995               JAN-01-1996
<PERIOD-END>                               DEC-31-1995               JUN-30-1996
<CASH>                                       8,231,421                   621,444
<SECURITIES>                                         0                         0
<RECEIVABLES>                               55,500,362                69,130,461
<ALLOWANCES>                                 3,503,744                 5,743,830
<INVENTORY>                                  2,869,019                 3,838,960
<CURRENT-ASSETS>                            65,313,786               116,442,363
<PP&E>                                      32,188,978                42,982,964
<DEPRECIATION>                              10,746,557                16,249,094
<TOTAL-ASSETS>                             174,868,236               271,660,519
<CURRENT-LIABILITIES>                       21,934,177                16,225,117
<BONDS>                                     42,576,100               131,592,265
                                0                         0
                                          0                         0
<COMMON>                                       222,097                   242,559
<OTHER-SE>                                 110,135,862               123,600,578
<TOTAL-LIABILITY-AND-EQUITY>               174,868,236               271,160,519
<SALES>                                              0                         0
<TOTAL-REVENUES>                           164,568,392               106,132,950
<CGS>                                                0                         0
<TOTAL-COSTS>                               79,451,490                51,482,375
<OTHER-EXPENSES>                                     0                         0
<LOSS-PROVISION>                             4,760,678                 3,308,507
<INTEREST-EXPENSE>                           2,557,449                 1,553,433
<INCOME-PRETAX>                             22,262,873                13,802,550
<INCOME-TAX>                                 7,632,069                 4,999,536
<INCOME-CONTINUING>                         14,630,804                 8,803,104
<DISCONTINUED>                                       0                         0
<EXTRAORDINARY>                                      0                         0
<CHANGES>                                            0                         0
<NET-INCOME>                                14,630,804                 8,803,104
<EPS-PRIMARY>                                      .65                       .36
<EPS-DILUTED>                                      .64                       .35
        

</TABLE>


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