<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington , D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to ___________________
Commission file number 1-4034
TOTAL RENAL CARE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
FOR THE QUARTER ENDED MARCH 31, 1996
Delaware 51-0354549
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21250 Hawthorne Blvd.
Suite 800
Torrance, CA 90503-5517
(Address of principal executive offices) (Zip Code)
(310) 792-2600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes (X) No (_)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes (_) No (_)
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as the latest practicable date.
Class Outstanding as of May 14, 1996
Common Stock, par value $0.001 25,881,186 shares
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
Index
Part I. Financial Information
<TABLE>
<CAPTION> Page No.
--------
Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets as of March 31, 1996 and
December 31, 1995 1
Condensed Consolidated Statements of Income for the Three Months
Ended March 31, 1996 and March 31, 1995 3
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1996 and March 31, 1995 4
Notes to Condensed Consolidated Financial Statements 5
Management's Discussion and Analysis of Financial Condition and Results
of Operations 12
Risk Factors 14
Part II. Other Information
Exhibits and Reports on Form 8-K 18
Signature 19
Note: Items 1, 2, 3, 4 and 5 of Part II are omitted because they are not applicable.
</TABLE>
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995
<TABLE>
<CAPTION>
ASSETS March 31, 1996 December 31, 1995
(unaudited)
-------------- -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents........................... $10,555,000 $30,181,000
Accounts receivable, less allowance for
doubtful accounts of $7,972,000
and $5,668,000, respectively...................... 69,304,000 40,014,000
Receivable from Tenet, a related company............ 346,000 432,000
Other current assets................................ 8,708,000 4,867,000
------------ ------------
Total current assets................... 88,913,000 75,494,000
Property and equipment, net.............................. 39,651,000 25,505,000
Note receivable from a related party..................... 1,407,000 1,379,000
Other long term assets................................... 1,929,000 1,857,000
Intangible assets, net of accumulated amortization
of $8,561,000 and $7,353,000, respectively............. 96,267,000 59,763,000
------------ ------------
$228,167,000 $163,998,000
============= =============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results
of Operations.
1
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995
<TABLE>
<CAPTION>
LIABILITIES & STOCKHOLDERS' EQUITY March 31, 1996 December 31, 1995
(unaudited)
-------------- -----------------
<S> <C> <C>
Total current liabilities....................................... $27,809,000 $20,803,000
Other long-term liabilities..................................... 1,226,000 1,724,000
Long term debt and other........................................ 107,806,000 55,324,000
Minority interests.............................................. 4,276,000 3,343,000
Stockholders' equity:
Common stock, voting, ($0.001 par value;
55,000,000 shares authorized; 22,357,606 and
22,308,207 issued and outstanding, respectively)......... 22,000 22,000
Additional paid-in capital................................. 123,676,000 123,710,000
Notes receivable from stockholders......................... (2,769,000) (2,773,000)
Retained earnings (deficit)................................ (33,879,000) (38,155,000)
------------ ------------
Total stockholders' equity........................... 87,050,000 82,804,000
------------- ------------
$228,167,000 $163,998,000
============ ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
2
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Net operating revenues........................... $50,237,000 $25,469,000
Operating expenses:
Facilities................................. 33,329,000 16,922,000
General and administrative................. 3,901,000 2,423,000
Provision for doubtful accounts............ 996,000 579,000
Depreciation and amortization.............. 2,460,000 1,259,000
----------- -----------
Total operating expenses............. 40,686,000 21,183,000
----------- -----------
Operating income................................. 9,551,000 4,286,000
Interest expense................................. (1,912,000) (2,219,000)
Interest income.................................. 431,000 57,000
----------- -----------
Income before income taxes and minority
interests.................................. 8,070,000 2,124,000
Income taxes..................................... 3,041,000 726,000
----------- -----------
Income before minority interests................. 5,029,000 1,398,000
Minority interests in income of consolidated
subsidiaries............................... 753,000 397,000
----------- -----------
Net income....................................... $4,276,000 $1,001,000
========== ==========
Net income per common share...................... $0.19 $0.07
========== ==========
Weighted average number of common shares and
equivalents outstanding...................... 23,035,000 15,353,000
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
3
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................$ 4,276,000 $ 1,001,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization.................... 2,460,000 1,259,000
Noncash interest................................. 1,591,000 2,178,000
Provision for doubtful accounts.................. 996,000 579,000
Other............................................ (11,825,000) (4,369,000)
------------ ------------
Total adjustments.............................. (6,778,000) (353,000)
------------ ------------
Net cash (used) provided by operating
activities................................ (2,502,000) 648,000
Cash flows from investing activities:
Purchases of property and equipment.................. (5,772,000) (956,000)
Cash paid for acquisitions, net of cash acquired..... (60,424,000) (2,216,000)
Other................................................ (1,116,000) (78,000)
------------ ------------
Net cash used by investing activities...... (67,312,000) (3,250,000)
Cash flows from financing activities:
Borrowings from bank credit facility................. 51,000,000 0
Other................................................ (812,000) (453,000)
------------ ------------
Net cash provided (used) by financing
activities................................ 50,188,000 (453,000)
Net decrease in cash...................................... (19,626,000) (3,055,000)
Cash at beginning of period............................... 30,181,000 6,931,000
------------ ------------
Cash at end of period..................................... $ 10,555,000 $ 3,876,000
============ ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
4
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The unaudited financial information furnished herein, in the opinion of
management, reflects all adjustments which are necessary to state fairly the
consolidated financial position, results of operations, and cash flows of
Total Renal Care Holdings, Inc., ("TRCH" or the "Company") as of and for the
periods indicated. TRCH presumes that users of the interim financial
information herein have read or have access to the Company's audited
consolidated financial statements and Management's Discussion and Analysis
of Financial Condition and Results of Operations for the preceding fiscal
year and that the adequacy of additional disclosure needed for a fair
presentation, except in regard to material contingencies or recent
significant events, may be determined in that context. Accordingly, footnote
and other disclosures which would substantially duplicate the disclosures
contained in Form 10-K for the transitional fiscal year ended December 31,
1995 filed on March 18, 1996 by the Company have been omitted. Certain other
reclassifications of prior period amounts have been made to conform to
current period classifications. The financial information herein is not
necessarily representative of a full year's operations.
2. On November 3, 1995, the Company completed an equity offering of 6.9 million
shares of its common stock, par value $0.001 (the "Common Stock"). In
connection with this offering the Company's directors redesignated the Class
A Common Stock as "Common Stock", authorized an increase in the number of
shares of Common Stock to 55,000,000, par value $0.001, authorized 5,000,000
new shares of preferred stock, par value $0.001, and approved a three-into-
two reverse stock split of the Company's Class A and Class B Common Stock.
Additionally, as of December 4, 1995, all Class B Common Stock was converted
to Common Stock. All information in these condensed consolidated financial
statements pertaining to shares of Common Stock and per share amounts have
been adjusted to give retroactive effect to these actions.
3. During the period from October 1, 1994 to November 2, 1995 the Company
issued approximately 2,594,000 shares of Common Stock and options at prices
significantly below the offering price of the Common Stock in the Company's
initial public offering. Such shares and common stock equivalents have been
included in the number of shares outstanding from June 1, 1994 (including
the quarter ended March 31, 1995) until November 2, 1995 using the Treasury
Stock method with an offering price of $15.50 per share.
4. Effective March 1, 1996, Company purchased substantially all of the assets
and assumed certain specified liabilities of the Nephrology Services
Business of Caremark International, Inc. (the "Caremark Acquisition") and
one center located in South Carolina for cash consideration of $49 million
and $8.2 million, respectively. The transactions were recorded under the
purchase method of accounting and the results of operations from March 1,
1996 have been recognized in the accompanying financial statements. Goodwill
of $15.5 million and $5.9 million were recorded in connection with these
transactions and will be amortized over their estimated lives in accordance
with the Company's existing accounting policies.
The Company also purchased selected net assets of two existing dialysis
companies for $2.6 million and contributed those assets during the formation
of two unrelated general partnerships. Aggregate goodwill associated with
these transactions was $1.9 million.
The Company entered into one unaffiliated center management agreement with
an additional center.
5
<PAGE>
The results of operations on a pro forma basis as though the above
acquisitions had been combined with the Company at the beginning of each
period presented for the three months ended are as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Pro forma net operating revenues $58,880,000 $39,210,000
=========== ===========
Pro forma net income $ 3,413,000 $ 334,000
=========== ===========
Pro forma earnings per share $ 0.15 $ 0.02
=========== ===========
</TABLE>
5. On April 3, 1996 the Company completed an equity offering of 8,050,000
shares, 3,500,000 of which were sold for the Company's account and 4,550,000
of which were sold by certain of the Company's stockholders. The net
proceeds to the Company of $110.1 million from the offering were used to
repay borrowings incurred under the Company's senior credit facility (the
"Senior Credit Facility") in connection with the Caremark Acquisition. The
remaining proceeds are invested in short-term, investment grade instruments
and will be used for future acquisitions, de novo developments, routine
capital expenditures and other general corporate purposes.
6. Effective January 1, 1996, the Company changed its year-end to December 31
from May 31. The consolidated statements of income and cash flows for the
quarter ended March 31, 1995 have been restated from the Company's previous
filings on Form 10-Q to reflect the new calendar quarter format.
7. The Company's sole direct wholly-owned subsidiary, Total Renal Care, Inc., a
California corporation ("TRC"), and TRC's wholly-owned subsidiaries have
guaranteed the Company's obligations under the Company's senior subordinated
discount notes (the "Discount Notes"). TRC's ability to pay dividends or
otherwise distribute funds to the Company is limited pursuant to the terms
of the Company's Senior Credit Facility with the exception of providing
funds for: the payment of taxes by the Company on a consolidated basis,
interest and principal on the Discount Notes as required, certain Company
stock repurchases and providing for general corporate overhead expenses of
the Company. In addition, under California law, TRC may pay dividends and
make distributions only from legally available sources of funds.
Separate financial statements and other disclosures concerning TRC's
subsidiaries are not presented as management has determined that they are
not material to investors.
Summary unaudited condensed consolidating financial information for the
Company, segregating guarantor and non-guarantor subsidiaries, follows:
6
<PAGE>
Supplemental Condensed Consolidating Balance Sheets
<TABLE>
<CAPTION>
December 31, 1995
-------------------------------------------------------------------------------
Total Renal Non-
Care Guarantor Guarantor Consolidating Consolidated
Holdings, Inc. Subsidiaries Subsidiaries Adjustments Total
------------- ------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Current Assets:
Accounts receivable......................... $ 212,000 $ 33,974,000 $ 5,828,000 $ 40,014,000
Receivable from Tenet....................... ------- 432,000 ------- 432,000
Other current assets........................ 30,235,000 2,587,000 2,226,000 35,048,000
------------ ------------ ----------- ------------- ------------
Total current assets..................... 30,447,000 36,993,000 8,054,000 75,494,000
Property and equipment, net..................... 625,000 19,882,000 4,998,000 25,505,000
Deposits and other.............................. 5,000 868,000 12,000 885,000
Investments in subsidiaries..................... 43,151,000 3,429,000 ------- ($46,580,000)(a) -------
Advances to subsidiaries........................ 59,429,000 ------- ------- (59,429,000)(b) -------
Other assets, net............................... 3,486,000 56,809,000 1,819,000 62,114,000
------------ ------------ ----------- ------------- ------------
$137,143,000 $117,981,000 $14,883,000 ($106,009,000) $163,998,000
============ ============ =========== ============= ============
Current liabilities............................. $519,000 $16,848,000 $3,436,000 $20,803,000
Payable to parent............................... ------- 54,886,000 4,543,000 ($59,429,000)(b) -------
Long-term obligations........................... 53,820,000 3,096,000 132,000 57,048,000
Minority interests.............................. ------- ------- ------- 3,343,000 (a) 3,343,000
Stockholders' equity............................ 82,804,000 43,151,000 6,772,000 (49,923,000)(a) 82,804,000
------------ ------------ ------------ ------------- ------------
$137,143,000 $117,981,000 $14,883,000 ($106,009,000) $163,998,000
============ ============ =========== ============= ============
</TABLE>
<TABLE>
<CAPTION>
March 31, 1996
-------------------------------------------------------------------------------
Total Renal Non-
Care Guarantor Guarantor Consolidating Consolidated
Holdings, Inc. Subsidiaries Subsidiaries Adjustments Total
------------- ------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Current Assets:
Accounts receivable.......................... $ 445,000 $ 60,673,000 $ 8,186,000 $ 69,304,000
Receivable from Tenet........................ ------- 346,000 ------ 346,000
Other current assets......................... 8,306,000 7,724,000 3,233,000 19,263,000
----------- ------------ ----------- --------------- -------------
Total current assets...................... 8,751,000 68,743,000 11,419,000 88,913,000
Property and equipment, net...................... 726,000 31,982,000 6,943,000 39,651,000
Deposits and other............................... 5,000 914,000 18,000 937,000
Investments in subsidiaries...................... 49,169,000 6,832,000 ------- ($56,001,000)(a) -------
Advances to subsidiaries......................... 82,755,000 ------- ------- (82,755,000)(b) -------
Other assets, net................................ 3,738,000 93,108,000 1,820,000 98,666,000
------------ ------------ ----------- -------------- ------------
$145,144,000 $201,579,000 $20,200,000 ($138,756,000) $228,167,000
============ ============ =========== ============== ============
Current liabilities.............................. $ 683,000 $ 20,295,000 $ 6,831,000 $ 27,809,000
Payable to parent................................ ------- 80,859,000 1,896,000 ($82,755,000)(b) -------
Long-term obligations............................ 57,411,000 51,256,000 365,000 109,032,000
Minority interests............................... ------- ------- ------- 4,276,000 (a) 4,276,000
Stockholders' equity............................. 87,050,000 49,169,000 11,108,000 (60,277,000)(a) 87,050,000
------------ ------------ ----------- --------------- ------------
$145,144,000 $201,579,000 $20,200,000 ($138,756,000) $228,167,000
============ ============ =========== ============== ============
</TABLE>
7
<PAGE>
Supplemental Condensed Consolidating Statements of Income
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1995
-------------------------------------------------------------------------------
Total Renal Non-
Care Guarantor Guarantor Consolidating Consolidated
Holdings, Inc. Subsidiaries Subsidiaries Adjustments Total
------------- ------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Net operating revenues.............................. $ ------- $20,095,000 $5,374,000 $25,469,000
Operating expenses.................................. 122,000 16,905,000 4,156,000 21,183,000
--------- ----------- ------------ ---------- -----------
Operating Income................................ (122,000) 3,190,000 1,218,000 4,286,000
Interest expense, net............................... 2,178,000 ------- (16,000) 2,162,000
Income taxes........................................ (919,000) 1,313,000 332,000 726,000
Equity in income of subsidiaries.................... 2,382,000 505,000 ------- ($2,887,000)(a) -------
Minority interests.................................. ------- ------- ------- (397,000)(b) 397,000
---------- ---------- ----------- ----------- -----------
Net Income...................................... $1,001,000 $2,382,000 $ 902,000 ($3,295,000) $ 1,001,000
========== ========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996
------------------------------ -------------- -------------------------------
Total Renal Non-
Care Guarantor Guarantor Consolidating Consolidated
Holdings, Inc. Subsidiaries Subsidiaries Adjustments Total
------------- ------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Net operating revenues............................. $ 380,000 $39,227,000 $10,630,000 $50,237,000
Operating expenses................................. (1,695,000) 33,794,000 8,587,000 40,686,000
----------- ----------- ------------ ------------ -----------
Operating Income............................... 2,075,000 5,433,000 2,043,000 9,551,000
Interest expense, net.............................. 1,188,000 275,000 18,000 1,481,000
Income taxes....................................... 355,000 2,146,000 540,000 3,041,000
Equity in income of subsidiaries................... 3,744,000 732,000 ------- ($4,476,000)(a) -------
Minority interests................................. ------- ------- ------- (753,000)(b) 753,000
---------- ------------ ------------ ------------- -----------
Net Income..................................... $4,276,000 $ 3,744,000 $ 1,485,000 ($5,229,000) $ 4,276,000
========== =========== =========== ============ ===========
</TABLE>
8
<PAGE>
Supplemental Condensed Consolidating Statements of Cash Flow
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1995
-------------------------------------------------------------------------------
Total Renal Non-
Care Guarantor Guarantor Consolidating Consolidated
Holdings, Inc. Subsidiaries Subsidiaries Adjustments Total
------------- ------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $1,002,000 $2,392,000 $902,000 ($3,295,000)(a) $1,001,000
Adjustments to net income:
Depreciation and amortization................ 85,000 933,000 241,000 1,259,000
Noncash interest............................. 2,178,000 ------- ------- 2,178,000
Provision for doubtful accounts.............. ------- 472,000 107,000 579,000
Equity in earnings of subsidiaries........... (2,383,000) (515,000) ------- 2,898,000 (a) -------
Other........................................ 2,798,000 (3,747,000) (3,817,000) 397,000 (a) (4,369,000)
---------- ---------- ---------- ----------- ----------
Net cash provided (used) by operating activities. 3,680,000 (465,000) (2,567,000) ------- 648,000
Cash flows from investing activities:
Purchases of property and equipment.............. ------- (899,000) (57,000) (956,000)
Cash paid for acquisitions, net of cash acquired. ------- (2,216,000) ------- (2,216,000)
Other............................................ 1,000 (81,000) 2,000 (78,000)
---------- ---------- ---------- ----------- ----------
Net cash provided (used) by investing activities. 1,000 (3,196,000) (55,000) (3,250,000)
---------- ---------- ---------- ----------- ----------
Cash flows from financing activities:
Intercompany advances............................ (3,603,000) 1,230,000 2,373,000 -------
Capital related costs............................ (85,000) ------- ------- (85,000)
Net proceeds from sale of common stock........... 7,000 ------- ------- 7,000
Distributions to minority interests.............. ------- 644,000 (942,000) (298,000)
Other............................................ ------- (77,000) ------- (77,000)
---------- ---------- ---------- ----------- ----------
Net cash (used) provided by financing activities. (3,681,000) 1,797,000 1,431,000 (453,000)
Net decrease in cash............................. ------- (1,864,000) (1,191,000) (3,055,000)
Cash at beginning of period...................... ------- 3,852,000 3,079,000 6,931,000
---------- ---------- ---------- ----------- ----------
Cash at end of period............................ ------- $1,988,000 $1,888,000 $3,876,000
========== ========== ========== =========== ==========
</TABLE>
9
<PAGE>
Supplemental Condensed Consolidating Statements of Cash Flow (Continued)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996
-------------------------------------------------------------------------------
Total Renal Non-
Care Guarantor Guarantor Consolidating Consolidated
Holdings, Inc. Subsidiaries Subsidiaries Adjustments Total
------------- ------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................................$ 4,276,000 $ 3,744,000 $1,485,000 ($5,229,000)(a) $ 4,276,000
Adjustments to net income:
Depreciation and amortization................. 81,000 2,146,000 233,000 2,460,000
Noncash interest.............................. 1,591,000 ------- ------- 1,591,000
Provision for doubtful accounts............... ------- 789,000 207,000 996,000
Equity in earnings of subsidiaries............ (3,744,000) (732,000 ------- 4,476,000 (a) -------
Other......................................... (143,000) (12,640,000) 205,000 753,000 (a) (11,825,000)
----------- ----------- ---------- ----------- -----------
Net cash provided (used) by operating
activities................................. 2,061,000 (6,693,000) 2,130,000 ------- (2,502,000)
Cash flows from investing activities:
Purchases of property and equipment............... (124,000) (3,639,000) (2,009,000) (5,772,000)
Cash paid for acquisitions, net of cash acquired.. ------- (57,741,000) (2,683,000) (60,424,000)
Other............................................. (702,000) (742,000) 328,000 (1,116,000)
----------- ----------- ---------- ----------- -----------
Net cash used by investing activities...... (826,000) (62,122,000) (4,364,000) (67,312,000)
----------- ----------- ---------- ----------- -----------
Cash flows from financing activities:
Intercompany advances.............................(25,126,000) 22,346,000 2,780,000 -------
Proceeds from bank credit facility................ 2,000,000 49,000,000 ------- 51,000,000
Other............................................. (111,000) (140,000) (561,000) (812,000)
----------- ----------- ---------- ----------- -----------
Net cash (used) provided by financing activities..(23,237,000) 71,206,000 2,219,000 50,188,000
----------- ----------- ---------- ----------- -----------
Net increase (decrease) in cash...................(22,002,000) 2,391,000 (15,000) (19,626,000)
Cash at beginning of period....................... 30,117,000 (1,683,000) 1,747,000 30,181,000
----------- ----------- ---------- ----------- -----------
Cash at end of period............................ $ 8,115,000 $ 708,000 $1,732,000 $10,555,000
=========== =========== ========== =========== ===========
</TABLE>
10
<PAGE>
Investments in subsidiaries in the foregoing condensed consolidating financial
statements are accounted for under the equity method of accounting.
Consolidating adjustments to the condensed consolidating balance sheets
include the following:
(a) Elimination of investments in subsidiaries and recording of minority
interests, and
(b) Elimination of intercompany accounts.
Consolidating adjustments to the condensed consolidating statements of
income include the following:
(a) Elimination of equity in earnings of subsidiaries, and
(b) Recognition of minority interests in income of consolidated
subsidiaries.
Consolidating adjustments to the condensed consolidating statements of cash
flows include the following:
(a) Elimination of equity in income of subsidiaries and recognition of
minority interests in income of consolidated subsidiaries.
11
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Operating Revenues. Net operating revenues for the first quarter
ended March 31, 1996 increased $24,768,000 to $50,237,000 from $25,469,000 for
the first quarter ended March 31, 1995 representing a 97.2% increase. Of this
increase $19,519,000 was due to increased treatments from acquisitions, existing
facility growth and from de novo developments. The remainder was due to an
increase in net operating revenues per treatment, $231.03 in the first quarter
of 1996 compared to $206.89 in the first quarter of 1995, and an increase in
affiliated and unaffiliated facility management fees. The increase in operating
revenues per treatment was due to the addition of Total Renal Care, Inc.'s
("TRC") end stage renal disease ("ESRD") laboratory, an overall increase in
average reimbursement rates, increased ancillary utilization primarily in the
administration of erythropoietin ("EPO"), and the opening of IV and oral
pharmaceutical programs.
Facility Operating Expenses. Facility operating expenses consist of
costs and expenses specifically attributable to the operation of dialysis
facilities, including operating and maintenance costs of such facilities,
equipment and direct labor, and supplies and service costs relating to patient
care. Facility operating expenses increased $16,407,000 to $33,329,000 in the
first quarter of 1996 from $16,922,000 in the first quarter of 1995. As a
percentage of net operating revenues, facility operating expenses declined to
66.3% in the first quarter of 1996 from 66.4% in the first quarter of 1995 due
to reductions achieved in the costs of providing services.
General and Administrative Expenses. General and administrative
expenses include headquarters expense and administrative, legal, quality
assurance, information systems and centralized accounting support functions.
General and administrative expenses increased $1,478,000 to $3,901,000 in the
first quarter of 1996 from $2,423,000 in the first quarter of 1995. As a
percentage of net operating revenues, general and administrative expenses
declined to 7.8% in the first quarter of 1996 from 9.5% in the first quarter of
1995. This significant decline as a percentage of net revenue is a result of
revenue growth and economies of scale achieved through the leveraging of
corporate staff across a higher revenue base.
Provision for Doubtful Accounts. The provision for doubtful accounts
increased $417,000 to $996,000 in the first quarter of 1996 from $579,000 in the
first quarter of 1995. As a percentage of net operating revenues, the provision
for doubtful accounts decreased to 2.0% in the first quarter of 1996 from 2.3%
in the first quarter of 1995. The provision for doubtful accounts is
influenced by the amount of net operating revenues generated from non-
governmental payor sources in addition to the relative percentage of accounts
receivable by aging category. Due to the significant acquisition activity since
the first quarter of 1995, the percentage of accounts receivable in the more
recent aging categories is higher, causing a corresponding decrease in the
provision as a percentage of revenues.
Depreciation and Amortization. Depreciation and amortization increased
$1,201,000 to $2,460,000 in the first quarter of 1996 from $1,259,000 in the
first quarter of 1995. As a percentage of net operating revenues, depreciation
and amortization remained at 4.9% for both periods. The increase of $1,201,000
was attributable to increased amortization due to acquisition activity and
increased depreciation from new center leaseholds and routine capital
expenditures.
Operating Income. Operating income increased $5,265,000 to $9,551,000
in the first quarter of 1996 from $4,286,000 in the first quarter of 1995. As
a percentage of net operating revenues, operating income increased to 19.0% in
the first quarter of 1996 from 16.8% in the first quarter of 1995. This increase
in operating income is primarily due to a decrease in general and administrative
expenses as a percentage of net operating revenue.
12
<PAGE>
Interest Expense/Interest Income. In connection with the Total Renal
Care Holdings, Inc.'s ("TRCH" or the "Company") reorganization in 1994 and the
implementation of the Company's growth strategy, the Company incurred
substantial debt, some of which requires interest to be paid in cash and most of
which is recognized as non-cash interest expense. Interest expense decreased
$307,000 in the first quarter of 1996 from $2,219,000 in the first quarter of
1995. As a percentage of net operating revenues, interest expense decreased to
3.8% in the first quarter of 1996 from 8.7% in the first quarter of 1995. Cash
interest during the first quarter of 1996 was $321,000 and non-cash interest
during the same period was $1,591,000 versus $41,000 and $2,178,000 in the first
quarter of 1995, respectively. The decrease in the first quarter of 1996 non-
cash interest was due primarily to scheduled accretion offset by the redemption
of 35% of the accreted value of the Company's senior subordinated discount notes
(the "Discount Notes") equaling $28,749,000 at a redemption premium of 111% for
a total redemption price of $31,911,000 in December 1995. The increase in cash
interest was due primarily to borrowings made under the Company's senior credit
facility (the "Senior Credit Facility") to fund the Company's acquisition of the
Nephrology Services Business of Caremark International, Inc. (the "Caremark
Acquisition"). The increase in interest income was due to investments of excess
cash generated from the Company's initial public offering placed in short-term
high-grade instruments.
Provision for Income Taxes. Provision for income taxes increased
$2,315,000 to $3,041,000 in the first quarter of 1996 from $726,000 in the first
quarter of 1995. As a percentage of net operating revenues, provision for income
taxes increased to 6.1% in the first quarter of 1996 from 2.9% in the first
quarter of 1995 and the effective tax rate decreased to 41.4% from 42.1% over
the same period. The effective tax rate is influenced by the mix of operations
in states with varying tax rates and the taxable income earned by minority
interests recognized in two subsidiary corporations. The increase as a
percentage of net operating revenues was primarily due to the increased
profitability of the Company in the first quarter of 1996 versus the same period
in the prior year.
Minority Interests. Minority interests represent the pretax net
income earned by physicians who directly or indirectly own minority interests in
all of the Company's partnership affiliates and the net income in two of the
Company's corporate subsidiaries. Minority interests increased $356,000 to
$753,000 in the first quarter of 1996 from $397,000 in the first quarter of
1995. As a percentage of net operating revenues, minority interest decreased
to 1.5% in the first quarter of 1996 from 1.6% in the first quarter of 1995.
This slight decrease in minority interest as a percentage of net operating
revenues is a result of a relative proportionate decrease in the formation
of partnership affiliates and subsidiaries as a percentage of total
new acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had working capital of $61,104,000,
including cash of $10,555,000. The Company intends to finance its working
capital needs, as well as purchases of additional property and equipment for the
operation of its existing facilities, from cash generated by operations and
borrowings under the Senior Credit Facility.
Net cash used by operating activities was $2,501,000 for the first
quarter of 1996. Net cash used by operating activities consists of the Company's
net income, increased by non-cash expenses such as depreciation, amortization,
non-cash interest, and the provision for doubtful accounts, and adjusted by
changes in components of working capital, primarily accounts receivable, in the
first quarter of 1996. Net cash used in investing activities was $67,312,000 for
the first quarter of 1996. The Company's principal uses of cash in investing
activities have been related to acquisitions, purchases of new equipment and
leasehold improvements for the Company's outpatient facilities, as well as the
development of new outpatient facilities. Net cash provided by financing
activities was $50,187,000 of which the primary source of financing were
borrowings under the Company's Senior Credit Facility used to finance the
Caremark Acquisition and the development of new facilities. The remaining cash
required for the other acquisitions, de novo developments and working capital
needs were funded by the Company's available cash. As a result, cash decreased
by $19,626,000 in the first quarter of 1996.
On November 3, 1995, the Company completed its initial public offering
which generated net proceeds of $98.6 million. On April 3, 1996 the Company
completed an equity offering providing $110.1 million of net proceeds to the
Company. On March 5, 1995 the Company renegotiated and increased its Senior
Credit Facility to $100 million which is currently unused. On December 7, 1995
the Company redeemed 35% of the then accreted value of its Discount Notes. Such
Discount Notes will accrete to $65 million on August 5, 1997 at which point cash
interest will begin to accrue. The Discount Notes are due August 15, 2004 with
the next redemption available on August 15, 1999.
The Company believes that it will be able to fund all capital
requirements, including interest on the remaining Discount Notes and the Senior
Credit Facility, with cash generated from operations and other current sources
of financing. To continue its growth strategy, however, the Company may need to
issue additional debt or equity securities. There can be no assurance that
additional financing and capital, if and when required, will be available on
terms acceptable to the Company or at all.
13
<PAGE>
RISK FACTORS
In evaluating the Company, its business and its financial position the
following risk factors should be carefully considered in addition to the other
information contained herein.
DEPENDENCE ON MEDICARE, MEDICAID AND OTHER SOURCES OF REIMBURSEMENT
The Company is reimbursed for dialysis services primarily at fixed rates
established in advance under the Medicare End Stage Renal Disease program. Under
this program, once a patient becomes eligible for Medicare reimbursement,
Medicare is responsible for payment of 80% of the composite rates determined by
the Health Care Financing Administration ("HCFA") for dialysis treatments. Since
1972, qualified patients suffering from chronic kidney failure, also known as
ESRD, have been entitled to Medicare benefits regardless of age or financial
circumstances. The Company estimates that approximately 62% of its net patient
revenues during its fiscal year ended May 31, 1995 and approximately 60% during
the seven months ended December 31, 1995 were funded by Medicare. Since 1983,
numerous Congressional actions have resulted in changes in the Medicare
composite reimbursement rate from a national average of $138 per treatment in
1983 to a low of $125 per treatment on average in 1986 and to approximately $126
per treatment on average at present. The Company is not able to predict whether
future rate changes will be made. Reductions in composite rates could have a
material adverse effect on the Company's revenues and net earnings. Furthermore,
increases in operating costs that are subject to inflation, such as labor and
supply costs, without a compensating increase in prescribed rates, may adversely
affect the Company's earnings in the future. The Company is also unable to
predict whether certain services, as to which the Company is currently
separately reimbursed, may in the future be included in the Medicare composite
rate.
Since June 1, 1989, the Medicare ESRD program has provided reimbursement for
the administration to dialysis patients of EPO. EPO is beneficial in the
treatment of anemia, a medical complication frequently experienced by dialysis
patients. Many of the Company's dialysis patients receive EPO. Revenues from EPO
(the substantial majority of which are reimbursed through Medicare and Medicaid
programs) were approximately $18.2 million, or 18% of net patient revenues, in
its fiscal year ended May 31, 1995 and were $18.0 million, or 20% of net patient
revenues, during the seven months ended December 31, 1995. EPO reimbursement
significantly affects the Company's net income. Medicare reimbursement for EPO
was reduced from $11 to $10 per 1,000 units for services rendered after December
31, 1993. EPO is produced by a single manufacturer, and any interruption of
supply or product cost increases could adversely affect the Company's
operations.
The Company provides certain of its patients with intradialytic parenteral
nutrition ("IDPN"), a nutritional supplement administered during dialysis to
patients suffering from nutritional deficiencies. The Company has historically
been reimbursed by the Medicare program for the administration of IDPN
therapy. Beginning in 1993, HCFA designated four durable medical equipment
regional carriers ("DMERCs") to process reimbursement claims for IDPN therapy.
The DMERCs recently established new, more stringent medical policies for
reimbursement of IDPN therapy, and many dialysis providers' claims have
subsequently been denied or delayed. Where appropriate, the Company has
appealed and continues to appeal such denials. In addition, the DMERCs are
reportedly reviewing the existing IDPN medical policies. The final outcome of
appeals and the anticipated review is uncertain and may ultimately reduce the
number of patients eligible to receive reimbursement for IDPN therapy. The
Company's allowance for doubtful accounts reflects a reserve that the Company
believes is adequate against the possibility of an adverse outcome. The
Company has continued to provide IDPN therapy to its patients pending
clarification of this policy. A significant reduction in the number of
patients eligible to receive reimbursement for IDPN therapy or the amount of
Medicare reimbursement therefor would have an adverse effect on the Company's
net operating revenues and net income.
All of the states in which the Company currently operates dialysis
facilities provide Medicaid (or comparable) benefits to qualified recipients
to supplement their Medicare entitlement. The Company estimates
14
<PAGE>
that approximately 8% of its net patient revenues during the fiscal year ended
May 31, 1995 and 7% of its net patient revenues during the seven months ended
December 31, 1995 were funded by Medicaid or comparable state programs. The
Medicaid programs are subject to statutory and regulatory changes,
administrative rulings, interpretations of policy and governmental funding
restrictions, all of which may have the effect of decreasing program payments,
increasing costs or modifying the way the Company operates its dialysis
business.
Approximately 30% of the Company's net patient revenues during the fiscal
year ended May 31, 1995 and 33% during the seven month period ended December
31, 1995 were from sources other than Medicare and Medicaid. These sources
include payments from third-party, non-government payors, at rates that
generally exceed the Medicare and Medicaid rates, and payments from hospitals
with which the Company has contracts for the provision of acute dialysis
treatments. Any restriction or reduction of the Company's ability to charge for
such services at rates in excess of those paid by Medicare would adversely
affect the Company's net operating revenues and net income. The Company is
unable to quantify or predict the degree, if any, of the risk of reductions in
payments under these various payment plans. The Company is a party to non-
exclusive agreements with certain third-party payors and termination of such
third-party agreements could have an adverse effect on the Company.
OPERATIONS SUBJECT TO GOVERNMENT REGULATION
The Company is subject to extensive regulation by both the federal government
and the states in which the Company conducts its business. The Company is
subject to the illegal remuneration provisions of the Social Security Act and
similar state laws, which impose civil and criminal sanctions on persons who
solicit, offer, receive or pay any remuneration, directly or indirectly, for
referring a patient for treatment that is paid for in whole or in part by
Medicare, Medicaid or similar state programs. In July 1991 and November 1992,
the federal government published regulations that provide exceptions or "safe
harbors" for certain business transactions. Transactions that are structured
within the safe harbors are deemed not to violate the illegal remuneration
provisions. Transactions that do not satisfy all elements of a relevant safe
harbor do not necessarily violate the illegal remuneration statute, but may be
subject to greater scrutiny by enforcement agencies. Neither the arrangements
between the Company and the physician directors of its facilities ("Medical
Directors") nor the minority ownership interests of referring physicians in
certain of the Company's dialysis facilities fall within the protection
afforded by these safe harbors. Although the Company has never been challenged
under these statutes and believes it complies in all material respects with
these and all other applicable laws and regulations, there can be no assurance
that the Company will not be required to change its practices or relationships
with its Medical Directors or with referring physicians holding minority
ownership interests or that the Company will not experience material adverse
effects as a result of any such challenge.
The Omnibus Budget Reconciliation Act of 1989 includes certain provisions
("Stark I") that restrict physician referrals for clinical laboratory services
to entities with which a physician or an immediate family member has a
"financial relationship." In August 1995, HCFA published regulations
interpreting Stark I. The regulations specifically provide that services
furnished in an ESRD facility that are included in the composite billing rate
are excluded from the coverage of Stark I. The Company believes that the
language and legislative history of Stark I indicate that Congress did not
intend to include laboratory services provided incidental to dialysis services
within the Stark I prohibition; however, laboratory services not included in
the Medicare composite rate could be included within the coverage of Stark I.
Violations of Stark I are punishable by civil penalties which may include
exclusion or suspension of a provider from future participation in Medicare and
Medicaid programs and substantial fines. Due to the breadth of the statutory
provisions, it is possible that the Company's practices might be challenged
under this law. Any such interpretation of Stark I would apply to the Company's
competitors as well.
The Omnibus Budget Reconciliation Act of 1993 includes certain provisions
("Stark II") that restrict physician referrals for certain "designated health
services" to entities with which a physician or an immediate family member has
a "financial relationship." The Company believes that the language and
legislative history
15
<PAGE>
of Stark II indicate that Congress did not intend to include dialysis services
and the services and items provided incident to dialysis services within the
Stark II prohibitions; however, certain services, including the provision of,
or arrangement and assumption of financial responsibility for, outpatient
prescription drugs, including EPO, and clinical laboratory services, could be
construed as designated health services within the meaning of Stark II.
Violations of Stark II are punishable by civil penalties, which may include
exclusion or suspension of the provider from future participation in Medicare
and Medicaid programs and substantial fines. Due to the breadth of the
statutory provisions and the absence of regulations or court decisions
addressing the specific arrangements by which the Company conducts its
business, it is possible that the Company's practices might be challenged under
these laws. A broad interpretation of Stark II to include dialysis services and
items provided incident to dialysis services would apply to the Company's
competitors as well.
A number of proposals for health care reform have been made in recent years,
some of which have included radical changes in the health care system. Health
care reform could result in material changes in the financing and regulation of
the health care business, and the Company is unable to predict the effect of
such changes on its future operations. It is uncertain what legislation on
health care reform, if any, will ultimately be implemented or whether other
changes in the administration or interpretation of governmental health care
programs will occur. There can be no assurance that future health care
legislation or other changes in the administration or interpretation of
governmental health care programs will not have a material adverse effect on
the results of operations of the Company.
RISKS INHERENT IN GROWTH STRATEGY
Following the Company's reorganization in August 1994, the Company began an
aggressive growth strategy. This growth strategy is dependent on the continued
availability of suitable acquisition candidates and subjects the Company to the
risks inherent in assessing the value, strengths and weaknesses of acquisition
candidates, integrating and managing the operations of acquired companies and
identifying suitable locations for additional facilities. The Company's growth
is expected to place significant demands on the Company's financial and
management resources. There can be no assurance that the Company will be able
to continue its growth strategy or that this strategy will ultimately prove
successful. A failure to successfully continue its growth strategy could have
an adverse effect on the Company's results of operations.
16
<PAGE>
COMPETITION
The dialysis industry is fragmented and highly competitive, particularly in
terms of acquisitions of existing dialysis facilities and developing
relationships with referring physicians. Certain of the Company's competitors
have substantially greater financial resources than the Company and may compete
with the Company for acquisitions of facilities in markets targeted by the
Company. Competition for acquisitions has increased the cost of acquiring
existing dialysis facilities. The Company has from time to time experienced
competition from referring physicians who have opened their own dialysis
facilities. A portion of the Company's business consists of monitoring and
providing supplies for ESRD treatments in patients' homes. Certain physicians
also provide similar services and, if the number of such physicians were to
increase, the Company could be adversely affected.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon the services and management experience of the
Company's executive officers, and accordingly has entered into employment
agreements with, and provided a variety of equity incentives to, each of these
executives. The Company's continued growth depends upon its ability to attract
and retain skilled employees, in particular highly skilled nurses, for whom
competition is intense. The Company believes that its future success also will
be significantly dependent on its ability to attract and retain qualified
physicians to serve as Medical Directors of its dialysis facilities. The
Company does not carry key-man life insurance on any of its officers.
DEPENDENCE ON PHYSICIAN REFERRALS
The Company's facilities are dependent upon referrals of ESRD patients for
treatment by physicians specializing in nephrology and practicing in the
communities served by the Company's dialysis facilities. As is generally true
in the dialysis industry, at each facility one or a few physicians account for
all or a significant portion of the patient referral base. The loss of one or
more key referring physicians at a particular facility could have a material
adverse effect on the operations of that facility and could adversely affect
the Company's overall operations. Referring physicians own minority interests
in 12 of the Company's dialysis facilities. If such interests are deemed to
violate applicable federal or state law, such physicians may be forced to
dispose of their ownership interests. The Company cannot predict the effect
such dispositions would have on its business.
SIGNIFICANT INFLUENCE BY DLJMB
DLJ Merchant Banking Partners, L.P. and certain of its affiliates ("DLJMB")
own approximately 10% of the outstanding Common Stock of the Company. In
addition, pursuant to a Shareholders Agreement, DLJMB has the right to nominate
four of the five members of the Company's Board of Directors. As a result of
its significant stock ownership and its rights under such Shareholders
Agreement, DLJMB will be able to influence significantly the outcome of certain
corporate transactions, including any "going private" transaction, merger,
consolidation or sale of all or substantially all of the Company's assets.
17
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1, 2, 3, 4 AND 5 ARE NOT APPLICABLE.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11. Computation of per share earnings for the three months
ended March 31, 1996 and March 31, 1995.
27. Financial Data Schedule (filed via EDGAR on May 15, 1996).
(b) Reports on Form 8-K
1. Form 8-K/A-1 filed on February 13, 1996.
2. Form 8-K filed on March 18, 1996.
18
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
TOTAL RENAL CARE HOLDINGS, INC.
(REGISTRANT)
/s/ John E. King
------------------------------------------
John E. King
Vice President and Chief Financial Officer
Date: May 15, 1996
John E. King is signing in the dual capacities as (i) Chief Financial Officer,
and (ii) a duly authorized officer of the Company.
19
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
During the period from October 1, 1994 to November 2, 1995 the Company issued
approximately 2,594,000 shares of Common Stock and options at prices
significantly below the offering price of the Company's initial public offering.
Such shares and common stock equivalents have been included in the number of
shares outstanding from June 1, 1994 (including the quarter ended March 31,
1995) until November 2, 1995 using the Treasury Stock method with an
offering price of $15.50 per share.
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1995
------------------ ------------------
<S> <C> <C>
Applicable Common Shares:
Average outstanding during the period $22,351,000 $13,847,000
Outstanding stock options 773,000 1,554,000
Reduction in shares in connection with notes
receivable from employeess (89,000) (48,000)
----------- -----------
Weighted average number of shares outstanding 23,035,000 15,353,000
=========== ===========
Net income $ 4,276,000 $ 1,001,000
=========== ===========
Net earnings per share $ 0.19 $ 0.07
=========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 MAR-31-1995
<CASH> 10,555,000 30,181,000
<SECURITIES> 0 0
<RECEIVABLES> 69,304,000 40,014,000
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 89,913,000 75,494,000
<PP&E> 39,651,000 25,505,000
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 228,167,000 163,998,000
<CURRENT-LIABILITIES> 27,809,000 20,803,000
<BONDS> 0 0
0 0
0 0
<COMMON> 22,000 22,000
<OTHER-SE> 87,028,000 82,782,000
<TOTAL-LIABILITY-AND-EQUITY> 228,167,000 163,998,000
<SALES> 0 0
<TOTAL-REVENUES> 50,237,000 25,469,000
<CGS> 0 0
<TOTAL-COSTS> 40,686,000 21,183,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 996,000 579,000
<INTEREST-EXPENSE> 1,912,000 2,219,000
<INCOME-PRETAX> 8,070,000 2,124,000
<INCOME-TAX> 3,041,000 726,000
<INCOME-CONTINUING> 5,029,000 1,398,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,276,000 1,001,000
<EPS-PRIMARY> 0.19 0.07
<EPS-DILUTED> 0.19 0.07
</TABLE>
