<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K-A
AMENDMENT TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: June 10, 1997
RENAL CARE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-27640 62-1622383
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
2100 West End Ave., Suite 800, Nashville, Tennessee 37203
(Address, including zip code, of principal executive offices)
(615) 321-2333
(Registrant's telephone number, including area code)
<PAGE> 2
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K dated
March 27, 1997, as set forth in the pages attached hereto:
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
(i) Audited Financial Statements of Indiana Dialysis
Services, P.C., et al at December 31, 1996 and for the
year then ended.
(b) Pro Forma financial information
(i) Unaudited Pro Forma Combined Balance Sheet and related
notes of Renal Care Group, Inc. as of December 31, 1996
(ii) Unaudited Pro Forma Combined Income Statement and related
notes of Renal Care Group, Inc. for the year ended
December 31, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on behalf of the
undersigned, thereunto duly authorized.
RENAL CARE GROUP, INC.
(Registrant)
By: /s/ Ronald Hinds
--------------------------------------
Title: Executive Vice President and Chief
Financial Officer
Dated: June 10, 1997
<PAGE> 3
RENAL CARE GROUP, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
Number Description of Exhibit Number
- ------- ---------------------- ------
<S> <C> <C>
99.1 Audited Financial Statements of Indiana Dialysis Services, P.C. et al. F-1
Unaudited Pro Forma Combined Balance Sheet and related notes of Renal
Care Group, Inc. F-13
Unaudited Pro Forma Combined Income Statement and related notes of
Renal Care Group, Inc. F-15
</TABLE>
<PAGE> 1
INDEPENDENT AUDITOR'S REPORT
The Boards of Directors
INDIANA DIALYSIS SERVICES, P.C. ET AL
Indianapolis, Indiana
We have audited the accompanying combined balance sheet of INDIANA
DIALYSIS SERVICES, P.C. ET AL as of December 31, 1996, and the related combined
statements of income and retained earnings, and cash flows for the year then
ended. These combined financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We conducted our audit 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 combined
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
audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the combined financial position of
INDIANA DIALYSIS SERVICES, P.C. ET AL at December 31, 1996, and the combined
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the
combined financial statements taken as a whole. The supplementary information
in the Table of Contents, as of and for the year ended December 31, 1996, has
been subjected to the auditing procedures applied in the audit of the basic
combined financial statments and is presented for purposes of additional
analysis rather than to present financial position and results of operations of
the individual companies. Accordingly, we do not express an opinion on the
financial position and results of operations of the individual companies.
However, in our opinion, the supplementary information is fairly stated in all
material respects in relation to the combined financial statements taken as a
whole.
Blue & Co.
Indianapolis, Indiana
May 16, 1997
F-1
<PAGE> 2
INDIANA DIALYSIS SERVICES, P.C. ET AL
COMBINED BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $2,343,629
Patient accounts receivable, net of allowance for
doubtful accounts of $384,000 2,732,821
Other accounts receivable 45,240
Inventories 291,882
Prepaid expenses and other assets 38,037
----------
Total current assets 5,451,609
PROPERTY AND EQUIPMENT, NET 2,712,993
ORGANIZATIONAL COSTS 43,110
----------
$8,207,712
==========
</TABLE>
LIABILITIES AND OWNERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Accounts payable $ 487,311
Accrued payroll and withholdings 316,454
Accrued pension expense 304,927
Refunds payable 194,383
Due to third party payors 427,874
Other accured expenses 33,288
----------
Total current liabilities 1,764,237
----------
OWNERS' EQUITY:
Common stock 658,484
Partners' contribution 659,500
Members' contribution 372,500
Additional paid-in capital 177,471
Retained earnings 4,575,520
----------
Total owners' equity 6,443,475
----------
$8,207,712
==========
</TABLE>
See accompanying notes to Combined financial statements.
F-2
<PAGE> 3
INDIANA DIALYSIS SERVICES, P.C. ET AL
COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
NET PATIENT SERVICE REVENUE $16,941,830
-----------
OPERATING EXPENSES:
Patient care costs 10,689,964
General and administrative 1,946,631
Provision for bad debts 294,501
Depreciation and amortization 525,518
----------
Total operating expenses 13,456,614
-----------
Income from operations 3,485,216
-----------
OTHER INCOME (EXPENSE):
Interest income 108,324
Other income (expense) (5,012)
-----------
Other income (expense), net 103,312
-----------
Net income 3,588,528
RETAINED EARNINGS, BEGINNING OF YEAR 3,434,492
DIVIDENDS AND DRAWS (2,447,500)
-----------
RETAINED EARNINGS, END OF YEAR $ 4,575,520
===========
</TABLE>
See accompanying notes to Combined financial statements.
F-3
<PAGE> 4
INDIANA DIALYSIS SERVICES, P.C. ET AL
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,588,528
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 510,971
Amortization 14,547
Gain on sale of equipment (2,306)
Changes in assets and liabilities:
Patient accounts receivable (608,907)
Other accounts receivable (45,240)
Inventories (33,455)
Prepaid expenses and other assets (11,461)
Accounts payable 241,044
Accrued payroll and withholdings 61,645
Accrued pension expense 24,831
Refunds payable (47,100)
Due to third party payors 427,874
Other accrued expenses (35,319)
-----------
Net cash provided by operating activities 4,085,652
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,002,130)
Proceeds from sale of equipment 11,420
-----------
Net cash used in investing activities (990,710)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends/draws paid (2,447,500)
Principal payments under note payable (26,500)
-----------
Net cash used in financing activities (2,474,000)
-----------
Net increase 620,942
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,722,687
-----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,343,629
===========
</TABLE>
See accompanying notes to Combined financial statements.
F-4
<PAGE> 5
INDIANA DIALYSIS SERVICES, P.C. ET AL
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination
The accompanying combined financial statements include the accounts of
INDIANA DIALYSIS SERVICES P.C. (d/b/a SOUTHEASTERN INDIANA KIDNEY
CENTER LLC) ("IDS"), INDIANA KIDNEY CENTER ("IKC"), ST. VINCENT DIALYSES
CENTER ("SVDC"), ST. JOSEPH DIALYSIS CENTER ("SJDC"), INDIANA KIDNEY CENTER
SOUTH, LLC ("IKCS"), and EASTERN INDIANA KIDNEY CENTER ("EIKC"),
collectively referred to as the "Companies". The Companies operate seven
(7) freestanding dialysis centers throughout the State of Indiana. The
Companies provide nephrology services to patients with kidney disease,
including patients suffering from chronic kidney failure, also known as
end-stage renal disease. The financial statements are presented on a
combined basis because IDS owns a financial interest in the other entities
and because of commonality of administration and operations.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash Equivalents
The Companies consider all highly-liquid investments with a maturity of
three months or less to be cash equivalents.
Inventories
Inventories consist of drugs, supplies, and parts consumed in dialysis
treatments and are stated at the lower of cost or market with cost
being determined using the first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using the straight-line method. The estimated
useful lives for the principal depreciable asset classifications are as
follows:
<TABLE>
<CAPTION>
Ranges of
Description Useful Lives
----------- ------------
<S> <C>
Leasehold improvements 5-31 years
Dialysis equipment 5-10 years
Furniture and fixtures 5-7 years
Computer equipment 5 years
</TABLE>
Major repairs to equipment are capitalized while minor repairs are
expensed as incurred.
F-5
<PAGE> 6
INDIANA DIALYSIS SERVICES, P.C. ET AL
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
Federal and State Income Taxes
The stockholders of IDS have elected, under the applicable provisions of the
Internal Revenue Code, to be taxed as an "S" Corporation. Under these
provisions, net taxable income is taxed directly to the stockholders. IKC,
SVDC, SJDC and EIKC are partnerships and IKCS is a limited liability company in
which taxable income is taxed directly to the partners and members.
Accordingly, the accompanying combined financial statements do not include any
provision for Federal or state taxes on the income of the Companies.
Organizational Costs
Organizational costs are amortized ratably over a period of 60 months.
Current year amortization expense was $14,547.
Patient Accounts Receivable and Net Patient Service Revenue
Patient accounts receivable and net patient service revenue are recorded at
the estimated net realizable amount from Medicare, Medicaid, patients,
commercial insurers and other third-party payors for services rendered. The
Medicare and Medicaid programs reimburse the Companies at amounts that are
different than the Companies' established rates. Contractual adjustments under
these agreements represent the difference between the amounts billed for these
services and the amounts that are reimbursable by third-party payors. A summary
of the basis for reimbursement with these payors follows:
Medicare
The Companies are paid by the Medicare program on a prospective payment
system for dialysis services. Each facility receives a composite rate
that is adjusted to account for geographic differences in the cost of
labor.
Medicaid
Medicaid is a state administered program which reimburses the Companies
for dialysis services rendered.
Other
Other repayments from patients, commercial insurers and other
third-party payors are received pursuant to a variety of reimbursement
arrangements, which are generally higher than those payments received from
the Medicare and Medicaid programs.
Allowance for Doubtful Accounts
The allowance for doubtful accounts represents management's estimate of
potential credit losses associated with amounts due from patients,
commercial insurers and other third-party payors. Management does not
believe that receivables from the Medicare and Medicaid programs represent
any credit risk.
F-6
<PAGE> 7
INDIANA DIALYSIS SERVICES, P.C. ET AL
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<S> <C>
Leasehold improvements $ 1,089,459
Dialysis equipment 2,738,257
Furniture and fixtures 171,773
Computer equipment 162,871
-----------
4,162,360
Accumulated depreciation (1,449,367)
-----------
$ 2,712,993
===========
</TABLE>
3. COMMON STOCK, PARTNERS' CONTRIBUTED CAPITAL, MEMBERS'
CONTRIBUTED CAPITAL AND DIVIDENDS/DRAWS PAID
The common stock of IDS consists of 20,000 shares of authorized no par
value stock of which 10,000 shares were issued and outstanding at December
31, 1996. Dividends paid for the year ended December 31, 1996 were
$1,135,500.
The members' contributed capital of IKCS consists of the initial capital
contribution provided by the members of $500,000. There were no distributions
to members for the year ended December 31, 1996.
The partners' contributed capital consists of the initial capital
contribution provided by the partners. The partners' contributed capital and
withdrawals by entity are as follows:
<TABLE>
<CAPTION>
Partners'
Entity Contributed Capital Withdrawals
------ ------------------- -----------
<S> <C> <C>
IKC $250,000 $900,000
SVDC $290,000 $550,000
SJDC $460,000 $690,000
EIKC $220,000 $360,000
</TABLE>
4. PENSION PLANS
The Companies have a 401(k) Profit Sharing Plan and a Money Purchase
Pension Plan available for eligible employees.
The 401(k) Profit Sharing Plan requires employer matching contributions
equal to 33.33% of each participant's compensation reduction up to 9%
of the participants's total compensation. In addition, the plan allows for a
special contribution to non-key employees equal to a percentage of each
participant's compensation, determined each year by the employer, and a
discretionary profit sharing contribution determined by the Board of
Directors of the Companies. The Companies matching and discretionary
contributions to the 401(k) Profit Sharing Plan were $37,780 and $138,234,
respectively, in 1996.
F-7
<PAGE> 8
INDIANA DIALYSIS SERVICES, P.C. ET AL
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
The Money Purchase Pension Plan requires employer contributions equal to
5.7% of each participant's compensation plus 5.7% the amount of
compensation in excess of the Social Security Wage Base ($62,700 in 1996).
The Companies contribution to the Money Purchase Pension Plan was $128,913
in 1996.
5. OPERATING LEASES
The Companies lease certain office and patient service facilities with
terms ranging from 3 to 15 years and monthly payments ranging from
$1,200 to $8,200. Future minimum lease payments required under the terms of
noncancelable operating lease agreements with initial terms of one year or
more at December 31, 1996, are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
1997 $ 456,933
1998 472,381
1999 459,049
2000 269,989
2001 224,542
Thereafter 1,232,232
----------
$3,115,126
==========
</TABLE>
Total operating lease expense charged to operations in 1996 was
approximately $498,000.
6. CONCENTRATION OF CREDIT RISK
The Companies grant credit without collateral to their patients, most of
whom are insured under third-party payor agreements. The mix of net patient
service revenue for year ended December 31, 1996 is as follows:
<TABLE>
<S> <C>
Medicare and Medicaid 62%
Blue Cross 14%
Other commercial carriers 16%
Patients and self-pay 6%
Other 2%
----
100%
====
</TABLE>
The Companies maintain a significant portion of their cash balances in
one institution. At times, these balances exceed the $100,000 Federal
Deposit Insurance Corporation insurance limitation.
F-8
<PAGE> 9
INDIANA DIALYSIS SERVICES, P.C. ET AL
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
7. RELATED PARTY TRANSACTIONS
Physician and medical director services are provided to the Companies
by shareholders, members, partners or legal entities owned by the owners of
the Companies. Physician and medical director fees were $244,500 in 1996.
Management fees, which comprise administrative expenses and general
overhead expenses were $771,795 in 1996.
Certain hospitals which have an ownership in the Companies provide
consulting services. These costs aggregated $21,536 in 1996. In addition,
the Companies provide treatment services to these hospitals, revenues from
which were $783,407 in 1996.
8. CONTINGENCY
In April 1995, the Health Care Financing Administration ("HCFA")
revised previous interpretations of Medicare Secondary Payor provisions
regarding Medicare and employer group health plans, HCFA's revised
interpretation required Medicare to serve as the primary payor rather than
the employer group health plan if certain beneficiary eligibility
conditions were present.
HCFA also attempted to apply this revision retroactively to August
1993. Retroactive application would require the Companies to refund
amounts collected as primary payors from employer group health plans if the
employer group health plans were not already serving as primary payors.
In June of 1995, a U.S. District Court issued preliminary injuction
prohibiting HCFA from applying its revised interpretations retroactively. A
final ruling on the retroactive application has not been issued by the
Court.
The Companies believe the reimbursement from the employer group health
plans was higher than Medicare reimbursement for this retroactive period.
An unfavorable ruling would result in a maximum liability of $984,000. The
Companies believe an adverse ruling is unlikely. Therefore, no provision
has been made in the combined financial statements at December 31, 1996.
9. SUBSEQUENT EVENT
Effective February 1, 1997, the Companies were acquired by Renal Care
Group, Inc. ("RCG"). The aggregate purchase price for the assets acquired
and the assumption of certain liabilities was $36,300,000, including
$7,200,000 of RCG's common stock. The acquisition was accounted for by the
purchase method.
F-9
<PAGE> 10
SUPPLEMENTARY INFORMATION
F-10
<PAGE> 11
INDIANA DIALYSIS SERVICES, P.C. ET AL
COMBINING BALANCE SHEETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
EIKC IDS IKC IKCS SVDC SJDC Eliminations Total
-------- ---------- ---------- -------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $295,079 $ 281,336 $ 444,329 $ 27,063 $ 970,321 $ 325,501 $ $2,343,629
Patient accounts receivable, net 249,351 86,116 569,826 102,340 1,206,946 518,242 2,732,821
Other accounts receivable 790 40,009 1,083 363 5,058 574 (2,637) 45,240
Inventories 50,953 14,950 67,138 24,035 111,596 23,210 291,882
Prepaid expenses and other assets 15,084 775 10,092 7,412 3,211 1,463 38,037
-------- ---------- ---------- -------- ---------- ---------- ------------ ----------
Total current assets 611,257 423,186 1,092,468 161,213 2,297,132 868,990 (2,637) 5,451,609
INVESTMENT IN SUBSIDIARY -0- 2,738,533 -0- -0- -0- -0- (2,738,533) -0-
PROPERTY AND EQUIPMENT, NET 316,329 135,687 541,798 315,048 935,411 468,720 2,712,993
ORGANIZATIONAL COSTS -0- 32,683 -0- 7,843 1,355 1,229 43,110
-------- ---------- ---------- -------- ---------- ---------- ------------ ----------
$927,586 $3,330,089 $1,634,266 $484,104 $3,233,898 $1,338,939 $ (2,741,170) $8,207,712
======== ========== ========== ======== ========== ========== ============ ==========
LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 64,176 $ 19,154 $ 115,879 $ 21,166 $ 174,446 $ 95,127 $ (2,637) $ 487,311
Accrued payroll and withholdings 47,386 10,492 65,982 18,139 133,767 40,688 316,454
Accrued pension expense 34,110 8,668 67,429 14,238 125,536 54,946 304,927
Refunds payable 2,515 143,763 4,052 -0- 40,892 3,161 194,383
Due to third party payors 10,722 36,617 62,450 12,032 225,136 80,917 427,874
Other accrued expenses 3,708 2,974 3,667 483 18,548 3,908 33,288
-------- ---------- ---------- -------- ---------- ---------- ------------ ----------
Total current liabilities 162,617 221,668 319,459 66,058 718,325 278,747 (2,637) 1,764,237
-------- ---------- ---------- -------- ---------- ---------- ------------ ----------
OWNERS' EQUITY:
Common stock -0- 658,484 -0- -0- -0- -0- 658,484
Partners' contribution 220,000 -0- 250,000 -0- 290,000 460,000 (560,500) 659,500
Members' contribution -0- -0- -0- 500,000 -0- -0- (127,500) 372,500
Additional paid-in capital -0- 177,471 -0- -0- -0- -0- 177,471
Retained earnings 544,969 2,272,466 1,064,807 (81,954) 2,225,573 600,192 (2,050,533) 4,575,520
-------- ---------- ---------- -------- ---------- ---------- ------------ ----------
Total owners' equity 764,969 3,108,421 1,314,807 418,046 2,515,573 1,060,192 (2,738,533) 6,443,475
-------- ---------- ---------- -------- ---------- ---------- ------------ ----------
$927,586 $3,330,089 $1,634,266 $484,104 $3,233,898 $1,338,939 $ (2,741,170) $8,207,712
======== ========== ========== ======== ========== ========== ============ ==========
</TABLE>
See Independent Auditor's Report on Page 1.
F-11
<PAGE> 12
INDIANA DIALYSIS SERVICES, P.C. ET AL
COMBINING STATEMENTS OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
EIKC IDS IKC IKCS SVDC SJDC Eliminations Total
---- --- --- ---- ---- ---- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET PATIENT SERVICE REVENUE $2,047,533 $ 2,293,982 $4,136,938 $649,074 $6,442,862 $3,062,537 $(1,691,096) $16,941,830
---------- ----------- ---------- -------- ---------- ---------- ----------- -----------
OPERATING EXPENSES:
Patient care costs 1,420,531 414,120 2,502,343 453,808 4,048,037 1,851,125 10,689,964
General and administrative 300,159 111,058 520,033 173,343 533,252 308,786 1,946,631
Provision for bad debts 48,772 14,742 42,492 14,906 116,252 57,337 294,501
Depreciation and amortization 73,141 41,457 112,679 65,670 131,946 100,625 525,518
---------- ----------- ---------- -------- ---------- ---------- ----------- -----------
Total operating expenses 1,842,603 581,377 3,177,547 707,727 4,829,487 2,317,873 -0- 13,456,614
---------- ----------- ---------- -------- ---------- ---------- ----------- -----------
Income from operations 204,930 1,712,605 959,391 (58,653) 1,613,375 744,664 (1,691,096) 3,485,216
---------- ----------- ---------- -------- ---------- ---------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income 9,635 15,282 25,707 (1,396) 38,380 20,716 108,324
Other income (expense) (3) (6,329) 3,465 (42) (1,595) (508) (5,012)
---------- ----------- ---------- -------- ---------- ---------- ----------- -----------
Other income (expense),
net 9,632 8,953 29,172 (1,438) 36,785 20,208 -0- 103,312
---------- ----------- ---------- --------- ---------- ---------- ----------- -----------
Net income 214,562 1,721,558 988,563 (60,091) 1,650,160 764,872 (1,691,096) 3,588,528
RETAINED EARNINGS, BEGINNING
OF YEAR 690,407 1,686,408 976,244 (21,863) 1,125,413 525,320 (1,547,437) 3,434,492
DIVIDENDS AND DRAWS (360,000) (1,135,500) (900,000) -0- (550,000) (690,000) 1,188,000 (2,447,500)
---------- ----------- ---------- -------- ---------- ---------- ---------- ------------
RETAINED EARNINGS, END OF
YEAR $ 544,969 $ 2,272,466 $1,064,807 $(81,954) $2,225,573 $ 600,192 $(2,050,533) $ 4,575,520
========== =========== ========== ======== ========== ========== =========== ===========
</TABLE>
See Independent Auditor's Report on Page 1.
F-12
<PAGE> 13
RENAL CARE GROUP, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
The Company Acquisition Pro Forma
(Historical) (Historical) Adjustments Combined
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 47,624 $ 2,344 $ (2,344) a $ 18,524
$(29,100) c
Investments, held to maturity 5,814 - 5,814
Accounts receivable, net 28,842 2,778 (2,778) a 28,842
Inventories 2,658 292 2,950
Prepaid Expenses and other current assets 1,540 38 1,578
---------- -------- -------- ----------
Total current assets 86,478 5,452 (34,222) 57,708
Property and equipment, net 30,739 2,713 33,452
Goodwill, net 11,066 - 31,817 c 42,883
Intangible assets, net 2,749 43 (43) a 2,749
Other long term assets 780 - 780
---------- -------- -------- ----------
Total assets $ 131,812 $ 8,208 $ (2,448) $ 137,572
========== ======== ======== ==========
Liabilities and stockholders' equity Current liabilities:
Accounts payable $ 7,984 $ 487 $ (487) a $ 7,984
Accrued wages and benefits 6,263 622 (622) a 6,263
Due to third party payors 6,593 622 (622) a 6,593
Due to related parties 7,000 - 7,000
Accrued expenses and other current liabilities 6,588 33 (33) a 6,588
Income taxes payable 2,588 - 2,588
---------- -------- -------- ----------
Total current liabilities 37,016 1,764 (1,764) 37,016
Deferred income taxes 1,471 - 1,471
---------- -------- -------- ----------
Total liabilities 38,487 1,764 (1,764) 38,487
Stockholders' equity
Common stock 142 658 (658) b 142
Additional paid-in capital 89,399 1,210 (1,210) b 95,159
5,760 c
Retained earnings 3,784 4,576 (4,576) b 3,784
Total stockholders' equity 93,325 6,444 (684) 99,085
---------- -------- -------- ----------
Total liabilities and stockholders' equity $ 131,812 $ 8,208 $ (2,448) $ 137,572
========== ======== ======== ==========
</TABLE>
F-13
<PAGE> 14
RENAL CARE GROUP, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
1. Basis of Presentation
The Unaudited Pro Forma Combined Balance Sheet of Renal Care Group,
Inc. as of December 31, 1996 gives effect to the acquisition of Indiana Dialysis
Services, P.C., Indiana Kidney Center, St. Vincent Dialysis Center, St. Joseph
Dialysis Center, Indiana Kidney Center South, LLC and Eastern Indiana Kidney
Center (the "Indiana Facilities") as if such acquisition was consummated on
December 31, 1996. The Pro Forma adjustments are based on consideration
exchanged, including the estimated fair value of assets acquired and liabilities
assumed. The actual adjustments, which will be based on valuations of fair value
as of the date of acquisition, may differ from those made herein.
2. Pro Forma Adjustments
(a) To reflect assets and liabilities not acquired by the Company
(b) To eliminate the equity of the acquired business
(c) To record the acquisition as follows:
Purchase Price 34,860
Net Book Value of Assets Acquired 3,043
------
Purchase Price allocated to intangible assets 31,817
======
The purchase price of the acquisition, including working capital
acquired, will be paid with cash of $29,100 and stock of $5,760.
F-14
<PAGE> 15
RENAL CARE GROUP, INC.
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
The Company Acquisition Pro Forma
(Historical) (Historical) Adjustments Combined
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net Revenue $ 129,518 $ 16,942 $ 146,460
Operating costs and expenses:
Patient care costs 90,122 10,690 100,812
General and administrative expenses 13,364 1,951 15,315
Provision for doubtful accounts 2,446 295 2,741
Depreciation and amortization 4,541 526 833 a 5,900
Merger expenses 1,960 - 1,960
--------- --------- ---------
Total operating costs and expenses 112,433 13,462 126,728
--------- --------- ---------
Income from operations 17,085 3,480 19,732
Interest, net 619 108 (1,467) b (740)
--------- --------- ---------
Income before taxes 17,704 3,588 18,992
Provision for income taxes 6,958 - 1,410 c 7,464
(904) d
--------- --------- ---------
Net Income $ 10,746 $ 3,588 $ 11,528
========= ========= =========
Earnings per Share $ 0.84 $ 0.89
========= =========
Weighted average shares outstanding 12,739 216 e 12,955
========= ====== =========
</TABLE>
F-15
<PAGE> 16
RENAL CARE GROUP, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
1. Basis of Presentation
The Unaudited Pro Forma Combined Income Statement for the year ended
December 31, 1996 gives effect to the acquisition by the Company of the Indiana
Facilities as if the acquisition was consummated on February 6, 1996.
The pro forma adjustments are based on consideration exchanged,
including the estimated fair value of assets acquired, liabilities assumed and
common stock issued. The actual adjustments, which will be based on valuations
of fair value as of the date of acquisition, may differ from those made herein.
Earnings per share and weighted average shares outstanding for the year
ended December 31, 1996 assume that any shares issued in connection with the
acquisition were outstanding for the period presented.
2. Pro Forma Adjustments
(a) To record amortization of goodwill from the acquisition on a
straight-line basis over 35 years.
(b) To record a reduction in interest income resulting from the
acquisition funded in whole through working capital of the
Company.
(c) To record income taxes as a result of the acquisition. The
stockholders of the Indiana Facilities had elected to be taxed as
an "S" Corporation with income taxes being paid directly by the
stockholders.
(d) To record income tax effects related to the pro forma
adjustments.
(e) Earnings per share and weighted average shares outstanding assume
that all shares issued in connection with the acquisition were
outstanding for the period presented.
F-16
