<PAGE>
As filed with the Securities and Exchange Commission on February 17, 1999
Registration No. 333-69227
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TOTAL RENAL CARE HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 51-0354549
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
</TABLE>
Suite 800
21250 Hawthorne Boulevard
Torrance, California 90503-5517
(310) 792-2600
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
JOHN E. KING
Chief Financial Officer
Total Renal Care Holdings, Inc.
Suite 800
21250 Hawthorne Boulevard
Torrance, California 90503-5517
(310) 792-2600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
CYNTHIA M. DUNNETT
RONN S. DAVIDS
Riordan & McKinzie
29th Floor
300 South Grand Avenue
Los Angeles, California 90071
(213) 629-4824
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Approximate date of commencement of proposed sale to the public: From time
to time after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities being offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Each Class of to be Offering Price Aggregate Registration
Securities to be Registered Registered Per Security Offering Price Fee
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<S> <C> <C> <C> <C>
7% Convertible Subordinated Notes due
2009................................... $345,000,000 100% $345,000,000 $95,915(1)
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Common Stock, par value $0.001 per
share.................................. 10,515,087 shares(2) N/A(2) $345,000,000(2) None(2)
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</TABLE>
(1) Calculated pursuant to Rule 457(i) under the Securities Act of 1933 and
paid with the initial filing of the Registration Statement on December 18,
1998.
(2) Based on a conversion price of $32.81 per share, but deemed to include any
additional shares of common stock that may be issuable pursuant to the
antidilution provisions of the notes. Pursuant to Rule 457(i), no
registration fee is required for these shares.
---------------
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section
8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+We will amend and complete the information in this prospectus. This +
+prospectus is not an offer to sell these securities or our solicitation of +
+your offer to buy these securities, nor will we sell them or accept your +
+offer to buy them, in any state or other jurisdiction where that would not be +
+permitted or legal prior to registration or qualification in that state or +
+other jurisdiction. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--February 17, 1999
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Prospectus
, 1999
[Logo of Total Renal Care Holdings, Inc.]
Total Renal Care Holdings, Inc.
$345,000,000 Principal Amount
7% Convertible Subordinated Notes due 2009
10,515,087 Shares of Common Stock
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. Maturity
The notes are due on May 15, 2009.
. Conversion
You may convert the notes into shares of our common stock at any time, in
whole or in part, at $32.81 per share, subject to adjustment (equal to an
initial conversion ratio of 30.4785 shares of common stock per $1,000
principal amount of notes).
. Redemption
We may redeem the notes on or after November 15, 2001.
. Mandatory Offer to Repurchase
If we sell all or substantially all of our assets or experience specific
kinds of changes in control, we must offer to repurchase the notes.
. Ranking
The notes are general, unsecured obligations, junior to all of our existing
and future senior debt and, effectively, all existing and future liabilities
of our subsidiaries.
. Interest
Interest on the notes is payable on May 15 and November 15 of each year at
the rate of 7% per year, commencing on May 15, 1999.
. Markets for Our Securities
The notes trade on the PORTAL market. The common stock trades on the New York
Stock Exchange under the symbol "TRL." On February , 1999, the last reported
sales price for the common stock was $ per share.
. Selling Securityholders
The notes and common stock are being offered for resale by the selling
securityholders listed on page 5. We will not receive any proceeds from these
resales.
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This investment involves risk. See "Risk Factors" beginning on page 1.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
----
<S> <C>
Risk Factors............................................................... 1
Our Business............................................................... 4
Use of Proceeds............................................................ 4
Ratio of Earnings to Fixed Charges......................................... 4
Selling Securityholders.................................................... 5
Description of Notes....................................................... 6
Description of Capital Stock............................................... 19
Description of Debt........................................................ 21
Certain U.S. Federal Tax Considerations.................................... 24
Plan of Distribution....................................................... 29
Disclosure Regarding Forward-Looking Statements............................ 30
Market Data................................................................ 30
Incorporation By Reference................................................. 30
Legal Matters.............................................................. 31
Experts.................................................................... 31
Where to Learn About Us.................................................... 31
</TABLE>
i
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RISK FACTORS
In addition to the other information set forth in this prospectus, you should
carefully consider the following factors, as well as the additional factors set
forth in the documents incorporated by reference into this prospectus,
especially those factors concerning the risks of our business included in our
filings under the Securities Exchange Act of 1934.
Subordination--Your right to receive payments on these notes is junior to our
existing and future senior debt and, effectively, all existing and future
liabilities of our subsidiaries.
The notes are general, unsecured obligations, junior to all of our existing
and future senior debt, including our credit facilities, and, effectively, all
existing and future liabilities (including trade payables) of our subsidiaries.
This means that if we become insolvent, file for bankruptcy, reorganize our
business or close it down, we will have to repay all of the debt senior to the
notes before we can pay the amounts we owe to you. If we default on payments
due on any of our debt, or if our debt under the notes is accelerated because
we have violated a covenant in the indenture governing the notes, we must repay
all of our senior debt before we repay you. If any of these things happen, our
assets may not be sufficient to repay all of the debt we owe to you. The
indenture permits us and our subsidiaries to incur additional senior or other
debt or liabilities.
As of December 31, 1998, the notes were subordinate to approximately $
million of senior debt, including our credit facilities. We had an aggregate of
$ million of liabilities as of December 31, 1998, $ of which is debt of
our subsidiaries. For more details, see the section "Description of Notes"
under the heading "Subordination."
Substantial leverage--Our substantial debt could adversely affect our financial
health and prevent us from fulfilling our obligations to you under the notes.
We are highly leveraged (which means that the amount of our outstanding debt
is large compared to the net book value of our assets). We also have
substantial repayment obligations under our outstanding debt, including
increased interest expense as a result of the issuance of the notes. As of
December 31, 1998, we had:
. Total debt of approximately $ ; and
. Stockholders' equity of approximately $ .
Our level of debt could have important consequences to you, including the
following:
. We may not be able to satisfy our obligations with respect to the notes;
. We will have to use a portion of our cash flow from operations for debt
service, rather than for our operations;
. We may not be able to obtain additional debt financing for future working
capital, capital expenditures, acquisitions or other corporate purposes;
and
. We may not be able to take advantage of significant business
opportunities, such as acquisitions, and react to changes in market or
industry conditions.
For more details, see the sections "Description of Notes" and "Description of
Debt."
Additional borrowings available--Despite our current level of debt, we and our
subsidiaries may still be able to incur substantially more debt.
We and our subsidiaries may be able to incur substantial additional debt in
the future, including debt that is senior to the notes. The notes do not
prohibit us or our subsidiaries from doing so. If new debt is added to our and
our subsidiaries' current debt levels, the related risks that we and they now
face could intensify.
1
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As of December 31, 1998, our credit facilities permitted additional
borrowings of up to $ million. For more details, see the sections
"Description of Notes" and "Description of Debt."
Restrictive debt covenants--Our credit facilities contain covenants that
restrict our actions.
Our credit facilities contain numerous financial and operating covenants that
limit our ability (and the ability of most of our subsidiaries) to undertake
certain transactions. These covenants require us to meet certain interest
coverage, net worth and leverage tests. These covenants may limit our:
. Flexibility in planning for, or reacting to, changes in our business and
the industry in which we operate;
. Capacity to borrow additional funds; and
. Ability to take advantage of significant business opportunities, such as
acquisitions.
For more details, see the section "Description of Debt" under the heading
"Credit facilities."
Holding company structure--We are a holding company and therefore depend upon
our subsidiaries for cash flow.
TRCH is a holding company, and our only material assets are the stock of our
subsidiaries. All of our operations are conducted by our subsidiaries which, in
turn, own almost all of our assets. Consequently, our operating cash flow and
our ability to service our debt, including the notes, depends upon the
operating cash flow of our subsidiaries and the payment of funds by them to us
in the form of loans, dividends or likewise. These payments may not be adequate
to pay interest and principal on the notes when due. In addition, the ability
of our subsidiaries to make payments to us depends on applicable law and
restrictions under our credit facilities and other present or future contracts
to which they are a party, which may include requirements to maintain minimum
levels of working capital and other assets. The notes do not limit the ability
of our subsidiaries to agree to these contractual restrictions in the future.
Each of our subsidiaries is a separate entity. Our right to the assets of any
subsidiary is subject to the prior claims of the creditors, including trade
creditors, of that subsidiary making the notes effectively junior to the claims
of those creditors. However, if our subsidiaries fail to make payments due
under their debt, or if their debt is accelerated, no default will occur on the
notes.
Financing change of control offer--We may not have the ability to raise the
funds necessary to finance the change of control offer required by the
indenture.
Under the indenture, upon the occurrence of certain specific kinds of change
of control events, a holder of the notes may require us to repurchase all or a
portion of its notes. If a change of control were to occur, we may not be able
to pay the repurchase price for all of the notes submitted for repurchase. In
addition, the terms of some of our existing debt agreements, including our
credit facilities, generally prohibit us from purchasing any notes until all
debt under these agreements is paid in full. Future credit agreements or other
agreements relating to debt may contain similar provisions. If a change of
control occurs while we are prohibited from repurchasing the notes, we could
seek the consent of our lenders to purchase the notes or attempt to refinance
the borrowings that contain the prohibition. If we do not obtain a consent or
repay the borrowings, we would remain prohibited from purchasing the notes. In
that case, our failure to repurchase submitted notes would constitute an event
of default under the indenture, which would, in turn, constitute a further
default under certain of our existing or future debt agreements, including our
credit facilities, permitting acceleration of this debt.
Our inability to pay all debt under our credit facilities would constitute an
event of default under the indenture, which could accelerate all debt under the
indenture. In the event of a change of control, we might not be able to
refinance our credit facilities, which would allow us to repay all notes, and
we might not have sufficient assets to satisfy all of our obligations under our
credit facilities and the notes. In addition, if we
2
<PAGE>
undergo a change of control (as defined in the particular debt instrument),
certain of our existing debt, such as our credit facilities, and future debt
may be accelerated or we may be required to repurchase such debt.
The change of control purchase feature of the notes may make a takeover of
TRCH more difficult and discourage the removal of incumbent management.
Conversely, the change of control purchase feature may not afford the holders
of the notes protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger, spin-off or similar transaction that may
adversely affect them, if such transaction does not constitute a change of
control under the indenture. Moreover, certain events with respect to TRCH
which may involve an actual change of control of TRCH may not constitute a
change of control for purposes of the indenture.
For more details, see the sections "Description of Debt" under the heading
"Credit facilities" and "Description of Notes" under the heading "Repurchase of
notes at the option of the holder upon a change of control. "
Lack of public market for the notes--You cannot be sure that an active public
market will develop for the notes.
There is currently no public market for the notes. You cannot be sure that an
active public market will develop for the notes. If a public market were to
exist, the notes might trade at prices higher or lower than their initial
offering price. The trading price would depend on many factors, such as
interest rates, the market for similar securities, general economic conditions
and our financial condition, performance and prospects. Historically, the
market for non-investment grade debt has been subject to disruptions that have
caused substantial fluctuation in the prices of these securities. The market
for the notes may be subject to these disruptions, which could have an adverse
effect on you. You should be aware that you may be required to bear the
financial risk of an investment in the notes for an indefinite period of time.
We do not intend to apply for listing or quotation of the notes; however, they
are eligible for trading in the PORTAL market.
We have been informed by the investment banking firms that originally
purchased the notes that they intend to make a market in the notes. However,
they are not obligated to do so, and they may discontinue this market-making
activity at any time without notice. In addition, market-making is subject to
limitations imposed by the Securities Act of 1933 and the Securities Exchange
Act of 1934, and may be limited during the pendency of this shelf registration
statement. For more details, see the sections "Description of Notes" and "Plan
of Distribution."
3
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OUR BUSINESS
We are the second largest domestic, and largest independent worldwide,
provider of integrated dialysis services for patients suffering from chronic
kidney failure, also known as end stage renal disease, or ESRD. We provide
dialysis and ancillary services to our patients through a network of outpatient
dialysis facilities. In addition, we provide inpatient dialysis services at
hospitals. We also offer ancillary services including ESRD laboratory and
pharmacy services, vascular access management (protection of the entry point to
a patient's bloodstream), physician practice management, pre- and post-
transplant services and ESRD clinical research programs.
Our principal executive offices are located at Suite 800, 21250 Hawthorne
Boulevard, Torrance, California 90503-5517 and our telephone number is (310)
792-2600.
USE OF PROCEEDS
As the notes and any shares of common stock issuable upon conversion of the
notes, sometimes referred to in this prospectus as conversion shares, are
offered by the selling securityholders and not by us, we will not receive any
proceeds from the resale of the notes or any conversion shares.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges is computed by dividing fixed charges
into earnings. Earnings is defined as pretax income from continuing operations
adjusted by adding fixed charges and excluding interest capitalized during the
period. Fixed charges means the total of interest expense and amortization of
financing costs, the estimated interest component of rental expense on
operating leases and preferred stock dividends. In 1995, we changed our fiscal
year end to December 31 from May 31.
The following table sets forth our ratio of earnings to fixed charges for
each of the periods indicated.
<TABLE>
<CAPTION>
Seven Months Nine Months
Year Ended May Ended Year Ended Ended
31, December 31, December 31, September 30,
-------------- ------------- -------------- -------------
1993 1994 1995 1994 1995 1995 1996 1997 1997 1998
---- ---- ---- ------ ------ ---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges.......... 4.11 6.06 2.97 3.17 3.48 3.22 3.96 3.47 3.82 1.35
</TABLE>
4
<PAGE>
SELLING SECURITYHOLDERS
The selling securityholders may, from time to time, offer and sell any or all
of the notes and the conversion shares under this prospectus. All of the notes
and the conversion shares offered pursuant to this prospectus are offered by
the selling securityholders. Any sales of the notes or the conversion shares
will be for the account of the selling securityholders and we will not receive
any of the proceeds from these sales.
The information in the following table is as of February , 1999 and assumes
that no selling securityholder beneficially owns any shares of our common stock
other than shares issuable pursuant to the conversion of the notes. In
addition, the information in the table assumes the conversion of all notes
owned by each selling securityholder at the initial conversion price of $32.81
per share. This initial conversion price may be adjusted under certain
circumstances. As a result, the number of shares issuable upon conversion of
the notes may increase or decrease. Under the terms of the indenture governing
the notes, cash will be paid instead of issuing fractional shares upon
conversion. The selling securityholders listed below provided us the
information contained in the following table with respect to themselves and the
respective principal amount of notes that may be sold by each of them under
this prospectus. We have not independently verified this information. For more
details, see the section "Description of Notes."
<TABLE>
<CAPTION>
Principal Amount of Shares of Common Percentage of
Notes Owned That Percentage Stock That May Common Stock
Name May Be Sold of Notes Be Sold Outstanding(1)
---- ------------------- ----------- ---------------- --------------
<S> <C> <C> <C> <C>
</TABLE>
- ---------------------
* Less than 1%.
(1) As of February , 1999, there were shares of our common stock
outstanding. In accordance with the rules of the Securities and Exchange
Commission, or SEC, the percentage of common stock outstanding owned by
each selling securityholder is computed as follows: (a) the numerator is
the number of shares of common stock held by that selling securityholder
upon conversion of all notes owned by that selling securityholder and (b)
the denominator includes the number of shares of common stock outstanding
and the number of shares of common stock held by that selling
securityholder upon conversion of all notes owned by that selling
securityholder.
5
<PAGE>
DESCRIPTION OF NOTES
Set forth below is a summary of certain provisions of the notes. The notes
were issued pursuant to an indenture dated as of November 18, 1998 between TRCH
and United States Trust Company of New York, as trustee. The following summary
of the notes, the indenture and the related registration rights agreement is
not complete and is subject to all of the provisions of the indenture and the
registration rights agreement, including the definitions in those agreements of
certain terms. Copies of the indenture and the registration rights agreement
may be obtained from us upon request. For more details, see the section "Where
to Learn About Us." Definitions of the following terms are included at the end
of this section: debt, designated senior debt, junior securities, senior debt,
significant subsidiary and subsidiary.
General
The notes:
. Are our general, unsecured obligations;
. Are limited in aggregate principal amount to $345.0 million;
. Are junior in right of payment to all our existing and future senior
debt;
. Mature on May 15, 2009;
. Bear interest at the rate of 7% per annum, payable semi-annually on May
15 and November 15 to record holders of the notes; and
. Accrue interest calculated on the basis of a 360-day year consisting of
twelve 30-day months.
Until otherwise designated by us, our office or agency will be the corporate
trust office of the trustee, presently located at 114 West 47th Street, New
York, New York 10036-1532, for the following purposes:
. Payment of principal of, premium on, interest on, and liquidated damages
with respect to the notes;
. Conversion of the notes; and
. Presentment of the notes for registration of transfer or exchange.
At our option, payment of interest and liquidated damages may be made by
check mailed to the holders of the notes at the addresses set forth upon our
registry books. No service charge will be made for any registration of transfer
or exchange of notes, but we may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
The indenture does not contain any financial covenants or any restrictions
with respect to our paying dividends, issuing or repurchasing securities, or
incurring debt, including senior debt. The indenture contains no covenants or
other provisions to afford protection to holders of notes in the event of a
highly leveraged transaction or a change of control of TRCH, except to the
limited extent described under "Repurchase of notes at the option of the holder
upon a change of control."
Conversion rights
Each holder of notes has the right at any time prior to the close of business
on May 15, 2009, unless previously redeemed or repurchased, at the holder's
option, to convert any portion of the principal amount of notes held that is
$1,000, or an integral multiple of $1,000, into conversion shares at the
conversion price of $32.81 per share (subject to adjustment as described
below). The right to convert a note called for redemption or delivered for
repurchase and not withdrawn will terminate at the close of business on the
business day immediately prior to the redemption date or repurchase date, as
applicable, for that note, unless we subsequently fail to pay the applicable
redemption price or repurchase price.
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<PAGE>
Interest due on any note that has been converted into conversion shares after
any record date, but on or before the next interest payment date, shall be
payable on that interest payment date, notwithstanding the conversion, to the
holder of that note on that record date. To convert a note during that time
period, unless the note is called for redemption, the holder must submit to us
payment of an amount equal to the interest payable on such interest payment
date on the principal amount of notes being surrendered for conversion;
provided, that no such payment shall be required with respect to interest
payable on November 15, 2001. No fractional conversion shares will be issued
upon conversion but, instead, an appropriate amount will be paid in cash by us
based on the market price of our common stock at the close of business on the
day of conversion. As a result, holders who surrender notes for conversion on a
date that is not an interest payment date will not receive any interest for the
period from the interest payment date immediately preceding the date of
conversion to the date of conversion or for any later period, except for notes
that are called for redemption on a redemption date between a record date and
the corresponding interest payment date as provided above.
The conversion price is subject to adjustment in certain events, including:
. Any payment of a dividend (or other distribution) payable in common stock
on any class of our capital stock;
. Any issuance to substantially all holders of common stock of rights,
options or warrants entitling them to subscribe for or purchase common
stock at less than the then current market price of common stock;
provided, that if these rights, options or warrants are only exercisable
upon the occurrence of certain triggering events, then the conversion
price will not be adjusted until such triggering events occur;
. Certain subdivisions, combinations or reclassifications of our
outstanding common stock;
. Any distribution to substantially all holders of our common stock of
evidences of debt, shares of capital stock (other than common stock),
cash or other assets (excluding distributions in connection with the
liquidation of TRCH and excluding dividends and distributions paid
exclusively in cash and in certain mergers and consolidations);
. Any distribution consisting exclusively of cash to all or substantially
all holders of our common stock that, combined with:
(1) All other such all-cash distributions made by us in the preceding 12
months in respect of which no adjustment has been made; and
(2) The fair market value of consideration paid or payable in respect of
any tender offer by us or any of our subsidiaries for common stock
concluded within the preceding 12 months in respect of which no
adjustment has been made,
exceeds 15% of the market value of our then-outstanding common stock on
the record date of such distribution; and
. The completion of a tender offer made by us or any of our subsidiaries
for common stock to the extent that the aggregate consideration, together
with:
(1) Any consideration payable in other such tender offers expiring within
the 12 months preceding the expiration of such tender offer in
respect of which no adjustment has been made; and
(2) The aggregate amount of any all-cash distributions referred to above
to all holders of our common stock within the 12 months preceding the
expiration of such tender offer in respect of which no adjustments
have been made,
exceeds 15% of the market value of our then-outstanding common stock on
the expiration of such tender offer.
In the event of a distribution to all or substantially all of the holders of
our common stock of rights, warrants or options to subscribe for or purchase
any securities (other than those referred to above), we may,
7
<PAGE>
instead of making an adjustment in the conversion price, provide that each
holder of a note who converts the note after the record date for such
distribution and prior to the expiration of such rights shall be entitled to
receive upon conversion of the note, in addition to shares of common stock, an
appropriate number of such rights, warrants or options. No adjustment of the
conversion price is required to be made until the cumulative adjustments amount
to one percent or more of the conversion price as last adjusted.
We may reduce the conversion price to the extent permitted by law for any
period of at least 20 business days, after giving at least 15 days notice of
the reduction to the trustee and the holders of the notes, if our board of
directors has made a determination that the reduction would be in the best
interests of TRCH. We may, at our option, make other reductions in the
conversion price as our board of directors deems advisable to diminish any
income tax to holders of our common stock resulting from any event treated as a
dividend or distribution of stock (or rights to acquire stock) for United
States federal income tax purposes.
In case of any:
. Reclassification or change of outstanding shares of our common stock
issuable upon conversion of the notes (other than certain changes in par
value);
. Consolidation or merger of TRCH with another entity (with certain
exceptions); or
. Sale, transfer or conveyance of all or substantially all of our assets,
each note then outstanding will, without the consent of any holder of notes,
become convertible only into the kind and amount of securities, cash and other
property receivable upon that event by a holder of the number of shares of
common stock into which that note was convertible immediately prior to that
event after giving effect to any adjustment required to be made. If the kind or
amount of securities, cash and other property is not the same for each share of
common stock held immediately prior to that event, any holder who fails to
exercise any right of election shall receive per share the kind and amount of
securities, cash or other property received per share by a plurality of those
shares.
We will use all reasonable efforts to cause all registrations to be made
with, and to obtain any approvals by, any governmental authority under any
federal or state law of the United States that may be required on our part in
connection with the conversion of the notes into conversion shares. If at any
time during the two-year period following the date of the original issuance of
the notes the registration statement containing this prospectus is not
effective or is otherwise unavailable for effecting resales, conversion shares
may not be sold or otherwise transferred except in accordance with, or pursuant
to an exemption from, the registration requirements of the Securities Act of
1933.
Subordination
The payment of principal, premium, interest and any other amounts on the
notes will be subordinated to the prior payment in full of all of our senior
debt. Any borrowings under our credit facilities will constitute senior debt.
The credit facilities provide for aggregate borrowings of $1.35 billion. The
notes also are effectively subordinated in right of payment to all existing and
future liabilities (including trade payables) of our subsidiaries. The
indenture does not restrict the incurrence of senior debt or other debt or
liabilities by us or our subsidiaries or our ability to transfer assets or
business operations to our subsidiaries, subject to the provisions described
below under the captions "Repurchase of notes at the option of the holder upon
a change of control" and "Limitation on merger, sale or consolidation."
The holders of our senior debt will be entitled to receive payment in full of
all obligations due in respect of our senior debt before the holders of notes
will be entitled to receive payment with respect to the notes upon the maturity
of that senior debt, by acceleration or otherwise, or in the event of any
distribution to our creditors:
. In a liquidation or dissolution of TRCH;
8
<PAGE>
. In a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to us or our property;
. In an assignment for the benefit of creditors; or
. In any marshaling of our assets and liabilities.
We also may not make payment in respect of the notes if:
. A payment default on designated senior debt occurs and is continuing
beyond any applicable grace period; or
. Any other default occurs and is continuing on designated senior debt that
permits holders of the designated senior debt to accelerate its maturity
and the trustee receives a payment blockage notice describing such
default from us or the holders of any designated senior debt.
The payment of cash, property or securities (other than junior securities)
upon conversion of a note will constitute payment on a note and therefore will
be subject to the subordination provisions in the indenture.
Payments on the notes may and shall be resumed:
. In the case of a payment default, upon the date on which such default is
cured or waived; and
. In case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which
notice of payment blockage is received, unless the maturity of any
designated senior debt has been accelerated.
At the end of the payment blockage period, we will be required to pay to the
holders of the notes all regularly scheduled payments on the notes that were
not paid during the payment blockage period.
No new payment blockage notice may be delivered unless and until 365 days
have elapsed since the effectiveness of the immediately prior payment blockage
notice.
We must promptly notify holders of our senior debt if payment of the notes is
accelerated because of an event of default.
In the event that any payment or distribution of our assets (other than
junior securities) or those of any subsidiary of ours shall be received by the
holders of the notes at a time when that payment or distribution is prohibited
by these subordination provisions, that payment or distribution shall be held
in trust for the benefit of the holders of senior debt, and shall be paid or
delivered by the holders of the notes to the holders of the senior debt
remaining unpaid or their representative.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of our creditors or the creditors
of our subsidiaries or a marshaling of our and our subsidiaries' assets or
liabilities, holders of notes may receive ratably less than other creditors.
Redemption at our option
The notes will be redeemable after November 14, 2001 at our option, in whole
or in part, upon not less than 30 nor more than 60 days' notice to each holder,
at the following redemption prices (expressed as percentages of the principal
amount) if redeemed during the 12-month period commencing November 15 of the
years indicated below. Except as noted under "Conversion rights" above, accrued
and unpaid interest and liquidated damages due, if any, will be paid to holders
upon redemption in addition to the redemption price.
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2001.................... 104.90%
2002.................... 104.20%
2003.................... 103.50%
2004.................... 102.80%
</TABLE>
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2005.................... 102.10%
2006.................... 101.40%
2007.................... 100.70%
2008 and thereafter..... 100.00%
</TABLE>
9
<PAGE>
In the case of a partial redemption, the trustee shall select the notes or
portions thereof for redemption on a pro rata basis, by lot or in another
manner it deems appropriate and fair. The notes may be redeemed in part in
multiples of $1,000 only.
Notice of any redemption will be sent, by first-class mail, to the holder of
each note to be redeemed to the holder's last address as shown upon the
registry books of the registrar. The notice of redemption must state the
redemption date, the redemption price and the amount of accrued interest and
liquidated damages to be paid. Any notice that relates to a note to be redeemed
in part only must state the portion of the principal amount to be redeemed and
must state that on and after the redemption date, upon surrender of the note, a
new note or notes in principal amount equal to the unredeemed portion of that
note will be issued. On and after the redemption date, interest will cease to
accrue on the notes or portions thereof called for redemption, unless we
default in our redemption obligations. The notes do not have the benefit of any
sinking fund.
Repurchase of notes at the option of the holder upon a change of control
Upon a change of control we are required to make an irrevocable and
unconditional (except as described below) offer to purchase all notes. The
repurchase date will be no later than 45 business days (except as described
below) after the occurrence of the change of control at a cash price equal to
100% of the principal amount of the notes, together with accrued and unpaid
interest and liquidated damages due. A holder of notes may accept the
repurchase offer with respect to all or a portion of its notes. The repurchase
offer will be made within 25 business days following a change of control and
will remain open for 20 business days following its commencement except to the
extent that a longer period is required by applicable law. Upon expiration of
the repurchase offer period, we must purchase all notes tendered in response to
the repurchase offer.
The indenture provides that a "change of control" means:
. The acquisition by any entity, or a group or syndicate of entities, other
than TRCH or its wholly owned subsidiaries of beneficial ownership,
directly or indirectly, through a purchase, merger, or other acquisition
transaction or series of transactions, of more than 50% of the total
voting power of all shares of our capital stock; or
. Any consolidation of TRCH with, or merger of TRCH into, any other entity,
any merger of another entity into TRCH, or any sale or transfer of all or
substantially all of the assets of TRCH to another entity, unless that
merger or sale of assets:
(1) Does not result in a material reclassification, conversion,
exchange, or cancellation of outstanding shares of our capital
stock;
(2) Is effected solely to change our jurisdiction of incorporation
and results in a reclassification, conversion, or exchange of
outstanding shares of common stock solely into shares of common
stock;
(3) Does not have the result that our stockholders immediately before
such transaction own, directly or indirectly, immediately
following such transaction, less than 50% of the combined total
voting power of all shares of capital stock of the entity that is
the survivor in the transaction; or
(4) Does not trigger prepayment rights for lenders under the change
of control provisions of our credit facilities.
A change of control does not, however, include a transaction in which at
least 90% of the consideration to be received by the holders of our common
stock in the transaction consists of shares of equity securities traded on a
national securities exchange or quoted on the Nasdaq National Market, and, as a
result of such transaction, the notes become convertible into such equity
securities.
The phrase "all or substantially all" of our assets, as included in the
definition of change of control, is likely to be interpreted by reference to
applicable state law, and will depend on facts and circumstances. As a result,
there may be a degree of uncertainty in determining whether a sale or transfer
of "all or substantially all" of our assets has occurred.
10
<PAGE>
If we are required to make a repurchase offer because a change of control has
occurred on or before the repurchase date, we will:
. Accept for payment notes or portions of notes properly surrendered
pursuant to the repurchase offer;
. Deposit with the paying agent cash sufficient to pay the repurchase price
(together with accrued and unpaid interest and other amounts due) of all
notes so surrendered; and
. Deliver to the trustee the notes accepted, together with an officers'
certificate listing the notes or portions of the notes being purchased by
us.
The paying agent will promptly mail to the holders of those notes that have
been properly surrendered the payment owed, and the trustee will promptly
authenticate and mail or deliver to those holders a new note or notes equal in
principal amount to any unpurchased portion of the notes surrendered. Any notes
not accepted will be promptly mailed or delivered by us to the holder. We will
announce publicly the results of the repurchase offer on or as soon as
practicable after the repurchase date.
Except as follows, no modification of the indenture regarding the provisions
on repurchase upon a change of control that adversely affects a holder of notes
is permissible without the consent of that holder. Holders of in excess of two-
thirds of the outstanding aggregate principal amount of the notes may choose,
at any time following the occurrence of a change of control and before the
close of business on the business day immediately preceding the repurchase
date, to not treat an otherwise qualifying transaction as a change of control
for purposes of the indenture. In that event:
. We will not be required to make the repurchase offer;
. To the extent the repurchase offer has already been made, it will be
deemed revoked; and
. To the extent any notes have been surrendered in response to any revoked
repurchase offer, the surrender shall be rescinded and the notes
surrendered will be promptly returned to the holders.
To the extent applicable, we will comply with the tender offer rules under
any securities laws, and will file any schedule required under those rules, in
connection with any offer by us to repurchase notes at the option of the
holders upon a change of control.
Limitation on merger, sale or consolidation
The indenture provides that we may not, directly or indirectly, consolidate
with or merge with or into, or sell, lease or otherwise dispose of all or
substantially all of our assets (on a consolidated basis), whether in a single
transaction or a series of related transactions, to another entity or group of
affiliated entities (other than to our wholly owned subsidiaries), unless:
. Either:
(1) In the case of a merger or consolidation, we are the surviving
entity; or
(2) The resulting, surviving or transferee entity is a corporation
organized under the laws of any state in the United States or the
District of Columbia and expressly assumes by supplemental indenture
all of our obligations in connection with the notes and the
indenture; and
. No event of default shall exist immediately before or after giving effect
to the merger or consolidation.
Upon any consolidation or merger or any transfer of all or substantially all
of our assets, the successor corporation shall be substituted for us, and may
exercise all of our rights and powers under the indenture and we will be
released from our obligations under the indenture and the notes, except as to
any obligations that arise from or as a result of such transaction.
The transfer (by lease, assignment, sale or otherwise) of all or
substantially all of the properties and assets of one or more of our
subsidiaries, which properties and assets, if held by us instead of those
subsidiaries,
11
<PAGE>
would constitute all or substantially all of our properties and assets, shall
be considered the transfer of all or substantially all of our properties and
assets.
Reports
Whether or not required by the SEC, we will deliver to the trustee, within 15
days after we are or would have been required to file such with the SEC:
. Annual and quarterly consolidated financial statements substantially
equivalent to financial statements that are required to be included in
Forms 10-K and 10-Q, including, with respect to annual information only,
a report thereon by certified independent public accountants and, in each
case, a management's discussion and analysis of financial condition and
results of operations; and
. For so long as the notes or conversion shares are not freely tradeable
under federal securities laws, if we cease to be subject to the reporting
requirements of the Exchange Act, we will continue to provide to holders
the information specified by Rule 144A(d)(4).
Events of default and remedies
The indenture defines an event of default as:
. Our failure to pay any installment of interest on the notes as and when
due and payable for 30 days;
. Our failure to pay all or any part of the principal of, or premium, if
any, on the notes when and as the same become due and payable;
. Our failure to perform our covenants and agreements regarding any
conversion of notes required under the indenture for 30 days;
. Our failure to observe or perform any other covenant or agreement
contained in the notes or the indenture, subject to certain exceptions,
for a period of 60 days after written notice is given to us by the
trustee or to us and the trustee by the holders of at least 25% in
aggregate principal amount of the notes outstanding;
. Certain events of bankruptcy, insolvency or reorganization in respect of
us or any of our significant subsidiaries;
. Our failure to make any payment at final stated maturity, including any
applicable grace period, in respect of our debt (other than non-recourse
obligations) in an amount in excess of $10 million for 30 days after
written notice is given to us by the trustee or to us and the trustee by
the holders of at least 25% in aggregate principal amount of notes
outstanding;
. Any default with respect to any of our debt (other than non-recourse
obligations) which results in the acceleration of debt in an amount in
excess of $10 million without that debt having been discharged or the
acceleration having been rescinded or annulled for 30 days after written
notice is given to us by the trustee or to us and the trustee by the
holders of at least 25% in aggregate principal amount of notes
outstanding; and
. Any final unsatisfied judgments not covered by insurance in excess of $10
million at any one time rendered against us or any of our significant
subsidiaries and not stayed, bonded or discharged within 60 days.
If a default occurs and is continuing, the trustee must, within 90 days after
receiving actual notice of occurrence of the default, give to the holders
notice of that default, but the trustee shall be protected in withholding
notice if it in good faith determines that the withholding of notice is in the
interest of the holders, except in the case of a default regarding any payment
due on the notes.
If an event of default arising from certain events of bankruptcy, insolvency
or reorganization in respect of us or any of our significant subsidiaries
occurs, all amounts due will be immediately due and payable on all
12
<PAGE>
outstanding notes without any declaration or other act on the part of the
trustee or the holders. If any other event of default occurs and is continuing
then, unless the principal of all of the notes shall have already become due
and payable, either the trustee or the holders of at least 25% in aggregate
principal amount of the notes then outstanding, by notice in writing to us (and
to the trustee if given by holders), may declare all principal, premium, if
any, accrued interest and liquidated damages on or with respect to the notes to
be due and payable immediately. The holders of no less than a majority in
aggregate principal amount of notes generally are authorized to rescind the
acceleration if all existing events of default, other than with respect to any
payment due on the notes that has become due solely by that acceleration, have
been cured or waived.
Prior to the declaration of acceleration of the maturity of the notes, the
holders of a majority in aggregate principal amount of the notes at the time
outstanding may waive on behalf of all the holders:
. Any default, except a default regarding any payment due on the notes
which is not yet cured; or
. A default with respect to any covenant or provision that cannot be
modified or amended without the consent of the holder of each outstanding
note affected.
Subject to the provisions of the indenture:
. The trustee will be under no obligation to exercise any of its rights or
powers under the indenture at the request, order or direction of any of
the holders, unless those holders have offered to the trustee reasonable
security or indemnity; and
. The holders of a majority in aggregate principal amount of the notes at
the time outstanding will have the right to:
(1) Direct the time, method and place of conducting any proceeding for
any remedy available to the trustee; or
(2) Exercise any trust or power conferred on the trustee.
No holder may pursue any remedy under the indenture, except for a default in
any payment due on the notes, unless:
. The holder gives to the trustee written notice of a continuing event of
default;
. The holders of at least 25% in principal amount of the outstanding notes
make a written request to the trustee to pursue the remedy;
. The holders offer to the trustee indemnity satisfactory to the trustee
against any loss, liability or expense;
. The trustee does not comply with the request within 60 days after the
receipt of the request and the offer of indemnity; and
. The trustee shall not have received a contrary direction from the holders
of a majority in principal amount of the outstanding notes.
Amendments and supplements
We and the trustee may enter into a supplemental indenture for certain
purposes without the consent of the holders of notes. With the consent of the
holders of a majority in aggregate principal amount of the notes at the time
outstanding, we and the trustee are permitted to amend or supplement the
indenture or any supplemental indenture or modify or waive the rights of the
holders; provided, that no modification may, without the consent of each holder
affected:
. Change the stated maturity of any note or reduce the principal amount or
the rate (or extend the time for payment) of interest or any premium
payable upon the redemption;
13
<PAGE>
. Change the place of payment where, or the coin or currency in which, any
note or any premium or the interest thereon is payable;
. Impair the right to institute suit for the conversion of any note or the
enforcement of any such payment on or after the due date thereof
(including, in the case of redemption, on or after the redemption date),
or reduce the repurchase price;
. Alter the repurchase offer (other than as set forth herein) or redemption
provisions in a manner adverse to the holders;
. Reduce the percentage in principal amount of the outstanding notes held
by holders whose consent is required for any such amendment, supplemental
indenture or waiver provided for in the indenture; or
. Adversely affect the right of that holder to convert notes or alter, in a
manner that adversely affects the right of that holder, the provisions
relating to anti-dilution protection in respect thereof. A supplemental
indenture entered into in compliance with the "Limitation on merger, sale
or consolidation" covenant would not require the consent of the holders
of the notes.
No personal liability of shareholders, officers, directors and employees
None of our shareholders, employees, officers, directors or partners or those
of any successor corporation shall have any personal liability in respect of
our obligations under the indenture or the notes by reason of their status as a
shareholder, employee, officer, director or partner.
Transfer and exchange
A holder may transfer or exchange the notes in accordance with the indenture.
We or the trustee may require a holder, among other things, to furnish
appropriate endorsements, legal opinions and transfer documents, and to pay any
taxes and fees required by law or permitted by the indenture. We are not
required to transfer or exchange any notes selected for redemption. Also, we
are not required to transfer or exchange any notes for a period of 15 days
before the mailing of a repurchase offer or notice of redemption.
The registered holder of a note may be treated as the owner of it for all
purposes.
Book entry, delivery and form
All notes are evidenced by one or more global notes which have been deposited
with, or on behalf of, The Depository Trust Company, as the depositary, and
registered in the name of Cede & Co. as the depositary's nominee. Except as set
forth below, the global notes may be transferred, in whole or in part, only to
another nominee of the depositary or to a successor of the depositary or its
nominee.
Qualified institutional buyers, or QIBs, as defined in Rule 144A under the
Securities Act of 1933, may hold their interests in the global notes directly
through the depositary if those holders are participants in the depositary, or
indirectly through organizations which are participants in the depositary.
Transfers between these participants will be effected in accordance with the
depositary's rules and will be settled in same-day funds.
The depositary has advised us that it is a limited-purpose trust company that
was created to hold securities for its participants and to facilitate the
clearance and settlement of transactions in those securities between
participants through electronic book-entry changes in accounts of its
participants. The depositary's participants include securities brokers and
dealers (including the initial purchasers of the notes), banks and trust
companies, clearing corporations and certain other organizations. Access to the
depositary's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. QIBs may elect
to hold notes purchased by them through the depositary. QIBs who are not
participants may beneficially own securities held by or on behalf of the
depositary only through participants or indirect participants.
14
<PAGE>
Ownership of the notes evidenced by the global notes will be shown on, and
the transfer of ownership thereof will be effected only through, records
maintained by the depositary (with respect to the interests of participants),
the participants and the indirect participants. The laws of some states require
that certain persons take physical delivery in definitive form of securities
that they own and that security interests in negotiable instruments can only be
perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer notes evidenced by the global notes will
be limited to such extent.
So long as the depositary or its nominee is the registered owner of a note,
the depositary or that nominee, as the case may be, will be considered the sole
owner or holder of the notes represented by the global notes for all purposes
under the indenture. Except as provided below, owners of beneficial interests
in a global note will not:
. Be entitled to have notes represented by such global note registered in
their names;
. Receive or be entitled to receive physical delivery of certificated
notes; and
. Be considered the owners or holders thereof under the indenture for any
purpose, including with respect to the giving of any directions,
instructions or approvals to the trustee thereunder.
As a result, the ability of a person having a beneficial interest in notes
represented by a global note to pledge that interest to persons that do not
participate in the depositary's system, or to otherwise take actions with
respect to such interest, may be affected by the lack of a physical certificate
evidencing that interest.
Neither we nor the trustee have any responsibility or liability for any
aspect of the records relating to or payments made on account of notes by the
depositary, or for maintaining, supervising or reviewing any records of the
depositary relating to those notes.
Payments with respect to any note represented by a global note on the
applicable record date will be payable by the trustee to or at the direction of
the depositary or its nominee in its capacity as the registered holder of the
global notes representing such notes under the indenture. Under the terms of
the indenture, we and the trustee may treat the persons in whose names the
global notes are registered as the owners thereof for all purposes.
Consequently, neither we nor the trustee has or will have any responsibility or
liability for any payment to beneficial owners of notes or the crediting of the
accounts of the relevant participants with any payment, in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in the global notes as shown on the records of the depositary.
Payments by the participants and the indirect participants to the beneficial
owners of notes will be governed by standing instructions and customary
practice and will be the responsibility of the participants or the indirect
participants.
Holders who desire to convert their notes into conversion shares pursuant to
the terms of the notes should contact their brokers or other participants or
indirect participants to obtain information on procedures, including proper
forms and cut-off times, for submitting requests.
If we notify the trustee in writing that (1) the depositary is no longer
willing or able to act as a depositary and we are unable to locate a qualified
successor within 90 days or (2) that we elect to cause the issuance of notes in
definitive form under the indenture, then, upon surrender by the depositary of
the global notes, certificated notes will be issued to each person that the
depositary identifies as the beneficial owner of the notes represented by the
global notes. In addition, subject to certain conditions, any person having a
beneficial interest in a global note may, upon request to the trustee, exchange
that beneficial interest for notes in the form of certificated notes. Upon any
such issuance, the trustee is required to register such certificated notes in
the name of such person or persons (or the nominee of any thereof), and cause
them to be delivered thereto. All such certificated notes shall bear
appropriate legends restricting their transferability.
Neither we nor the trustee shall be liable for any delay by the depositary or
any participant or indirect participant in identifying the beneficial owners of
the notes. We and the trustee shall also be protected in relying on
instructions from the depositary for all purposes.
15
<PAGE>
Registration rights; Liquidated damages
Pursuant to the registration rights agreement, we agreed to file with the SEC
on or prior to 90 days after the closing date a shelf registration statement
under the Securities Act of 1933 to cover resales of notes and conversion
shares by the holders thereof who satisfy certain conditions relating to the
provision of information in connection with the shelf registration statement.
Accordingly, we have filed the registration statement of which this prospectus
is a part. We will use our reasonable best efforts to keep the shelf
registration statement effective until the earlier of such date that is two
years after the latest date of initial issuance of the notes or the date all
notes and conversion shares covered by the shelf registration statement have
been sold or there are no longer any notes and conversion shares outstanding.
If the shelf registration statement containing this prospectus ceases to be
effective or this prospectus ceases to be usable for more than 90 days during
any 365-day period we will accrue liquidated damages in favor of each holder of
notes and conversion shares. During the first 90-day period immediately
following such a default, these damages will accrue at a rate of $0.05 per week
per $1,000 principal amount of notes or, if applicable, on an equivalent basis
per share (subject to adjustment in the event of stock splits, stock
recombinations, stock dividends and the like) of conversion shares held by that
holder. The rate of accrual will increase by an additional $0.05 per week per
$1,000 principal amount of notes or, if applicable, by an equivalent amount per
week per share (subject to adjustment as set forth above) of conversion shares
for each subsequent 90-day period until all defaults have been cured. A maximum
amount of $0.25 per week per $1,000 principal amount of notes or, if
applicable, an equivalent amount per week per share (subject to adjustment as
set forth above) of conversion shares may be accrued. All accrued liquidated
damages shall be paid to the holders of notes or conversion shares in the same
manner as interest payments on the notes on semi-annual payment dates which
correspond to interest payment dates for the notes.
The use of the shelf registration statement for effecting resales of notes
and conversion shares may be suspended in certain circumstances described in
the registration rights agreement upon notice by us to the holders of the notes
and conversion shares, subject to the rights of the holders of notes and
conversion shares to receive liquidated damages if the aggregate number of days
of such suspensions in any 365-day period exceeds the period described above.
We will provide to each holder of notes and conversion shares included in the
shelf registration statement copies of this prospectus, notify each such holder
when the shelf registration statement has become effective and take certain
other actions as are required to permit resales of the notes and conversion
shares. A holder who sells notes and conversion shares pursuant to the shelf
registration statement generally will be required to be named as a selling
securityholder in this prospectus and to deliver this prospectus to purchasers
and will be bound by the provisions of the registration rights agreement which
are applicable to that holder (including certain indemnification provisions).
Governing law
The indenture and the notes and the registration rights agreement provide
that they are governed in accordance with the laws of the State of New York,
without regard to choice of laws provisions.
The trustee
United States Trust Company of New York is the trustee under the indenture. A
successor trustee may be appointed in accordance with the terms of the
indenture.
The indenture contains certain limitations on the rights of the trustee, in
the event it becomes our creditor, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any claim as
security or otherwise. The trustee is permitted to engage in other transactions
with us and our subsidiaries; provided, however, that if it acquires a
conflicting interest, it must eliminate such conflict or resign.
16
<PAGE>
In case an event of default shall occur under the indenture (and shall not be
cured or waived), the trustee will be required to use the degree of care of a
prudent person in the conduct of its own affairs in the exercise of its powers.
Subject to such provisions, the trustee will be under no obligation to exercise
any of its rights or powers under the indenture at the request of any of the
holders of notes, unless they shall have offered to the trustee reasonable
security or indemnity.
Certain definitions
"Debt" of any entity means:
. All liabilities and obligations, contingent or otherwise, of that entity:
(1) In respect of borrowed money;
(2) Evidenced by credit or loan agreements, bonds, notes, debentures or
similar instruments;
(3) Evidenced by bankers' acceptances or similar instruments issued or
accepted by banks;
(4) For the payment of money relating to a capitalized lease obligation
to the extent it would be treated as debt under generally accepted
accounting principles; or
(5) Evidenced by a letter of credit, bank guarantee or a reimbursement
obligation with respect to any letter of credit.
. All obligations issued or assumed as the deferred purchase price of
property or services (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business);
. All net obligations of such entity under interest swap and hedging
obligations; and
. All liabilities of other entities of the kind described above that the
entity has guaranteed or that is otherwise its legal liability, or which
is secured by a lien on property of that entity (other than carriers',
warehousemens', mechanics', repairmens' or other like non-consensual
statutory liens arising in the ordinary course of business).
"Designated senior debt" means:
. Any debt outstanding under any of the credit facilities; and
. Any other senior debt, the principal amount of which is, or under which
the lenders party thereto are committed to lend or advance, $10 million
or more, provided, that we have designated that other senior debt as
"designated senior debt."
"Junior securities" means our capital stock and any of our debt that:
. Is authorized and issued pursuant to a plan of reorganization of TRCH
(which authorization states that it gives effect to the subordination of
such junior securities to all senior debt);
. Is subordinated to all senior debt (and any debt securities issued in
exchange for senior debt) to substantially the same extent as, or to a
greater extent than, the notes are subordinated to senior debt pursuant
to the indenture; and
. Contains terms, provisions, covenants and default provisions not more
beneficial to the holders of the notes as compared to the holders of the
senior debt on the issue date of the notes.
17
<PAGE>
"Senior debt" means all our obligations to pay amounts and liabilities
accrued or due on or in connection with: the credit facilities, interest swap
and hedging obligations issued by parties to and secured with the credit
facilities and any of our other debt, whether outstanding on the date of the
indenture or thereafter created, incurred, assumed, guaranteed or in effect
guaranteed by us, unless:
. The instrument creating or evidencing such debt expressly provides that
such debt is not senior or superior in right of payment to the notes or
is pari passu with, or subordinated to, the notes;
.The debt is owed to any of our subsidiaries;
. The debt represents any trade account payable incurred in the ordinary
course of business;
. The debt relates to any liability for taxes owed or owing by us or any of
our subsidiaries; or
. The debt is the notes.
"Significant subsidiary" means as of any date of determination:
. Any subsidiary of ours that has aggregate total assets in an amount in
excess of 10% of our consolidated total assets at such date of
determination; or
. Any subsidiary of ours for which the net income of such subsidiary and
its subsidiaries, determined on a consolidated basis in accordance with
generally accepted accounting principals, during the four fiscal quarters
most recently ended preceding the date of determination, exceeded 10% of
our consolidated net income during such period.
"Subsidiary" means any entity in which another entity, directly or
indirectly, has a majority:
. Ownership interest and is the general partner of that entity, if the
entity is a partnership;
. Voting interest, if the entity is a corporation; or
. Ownership interest, if that entity is not a partnership or corporation.
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DESCRIPTION OF CAPITAL STOCK
This summary highlights certain provisions of our certificate of
incorporation and our bylaws.
Our authorized capital stock is 200 million shares, consisting of 195
million shares of common stock and five million shares of preferred stock.
Common stock
As of February , 1999, we had shares of common stock issued and
outstanding. We do not anticipate paying any cash dividends on our common
stock in the foreseeable future and we are subject to certain restrictions on
our ability to pay dividends on the common stock under our credit facilities.
Holders of our common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. There are no
cumulative voting rights applicable to the common stock.
The rights, preferences and privileges of holders of our common stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of any series of preferred stock which we may designate and issue in
the future. Subject to the preferences applicable to shares of preferred stock
outstanding at any time, holders of shares of common stock are entitled to
receive dividends ratably, if, when and as declared by our board of directors,
from funds legally available. These holders are also entitled, in the event of
liquidation, to share ratably in all assets remaining after payment of
liabilities and preferred stock preferences, if any. Holders of common stock
have no preemptive, subscription, redemption or conversion rights and there
are no sinking fund provisions relating to these shares.
The authorized but unissued shares of common stock are available for
issuance by us without further action by our stockholders, unless such action
is required by applicable law or the rules of any stock exchange on which the
common stock may be listed.
The outstanding shares of our common stock are, and the conversion shares
will be, when issued and paid for, fully paid and non-assessable.
Preferred stock
Our certificate of incorporation authorizes our board of directors to
establish series of preferred stock and to determine, with respect to any
series of preferred stock, the voting powers, or no voting powers, and
designations, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions thereof, as are
stated in the resolutions of our board of directors providing for a series.
As of February , 1999, we had no shares of preferred stock issued and
outstanding. The authorized but unissued shares of preferred stock are
available for issuance by us without further action by our stockholders. This
allows us to issue shares of preferred stock without the expense and delay of
a special stockholders' meeting, unless such action is required by applicable
law or the rules of any stock exchange on which our securities may be listed.
We believe that the preferred stock will provide flexibility in structuring
possible future financings and acquisitions, and in meeting other corporate
needs.
Although our board of directors has no intention at the present time of
doing so, it could issue a series of preferred stock, the terms of which,
subject to certain limitations imposed by the securities laws, could impede
the completion of a merger, tender offer or other takeover attempt. Our board
of directors will make any determination to issue such shares based on its
judgment as to our best interests and the best interests of our stockholders
at the time of issuance. Our board of directors, in so acting, could issue
preferred stock having terms that could discourage an acquisition attempt or
other transaction that some, or a majority, of the stockholders might believe
to be in their best interests or in which stockholders might receive a premium
for their stock over the then market price of that stock.
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Certain charter and bylaw provisions
Pursuant to the provisions of the Delaware General Corporation Law, or the
DGCL, we have adopted provisions in our certificate of incorporation and bylaws
which require us to indemnify our officers and directors to the fullest extent
permitted by law, and eliminate the personal liability of our directors to us
or our stockholders for monetary damages for breach of their duty of due care
except for;
. Any breach of the duty of loyalty;
. Acts or omissions not in good faith or which involve intentional
misconduct or knowing violations of law;
. Liability under Section 174 of the DGCL (relating to certain unlawful
dividends, stock repurchases or stock redemptions); or
. Any transaction from which the director derived any improper personal
benefit.
These provisions do not eliminate a director's duty of care. Moreover, these
provisions do not apply to claims against a director for violation of certain
laws, including federal securities laws. We believe that these provisions will
assist us in attracting or retaining qualified individuals to serve as
directors and officers.
Our certificate of incorporation includes a provision which allows our board
of directors to issue up to five million shares of preferred stock with voting,
liquidation and conversion rights that could be superior to and adversely
affect the voting power of holders of our common stock. We have no present
plans to issue any shares of preferred stock.
Delaware anti-takeover law
We are a Delaware corporation that is subject to Section 203 of the DGCL.
Under Section 203 certain "business combinations" between a Delaware
corporation, whose stock generally is publicly traded or held of record by more
than 2,000 stockholders, and an "interested stockholder" are prohibited for a
three-year period following the date that stockholder became an interested
stockholder, unless:
. The corporation has elected in its certificate of incorporation not to be
governed by Section 203 (we have not made this election);
. The business combination was approved by the board of directors of the
corporation before the other party to the business combination became an
interested stockholder;
. Upon consummation of the transaction that made it an interested
stockholder, the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are also
officers or held in employee benefit plans in which the employees do not
have a confidential right to tender or vote stock held by the plan); or
. The business combination is approved by the board of directors of the
corporation and ratified by two-thirds of the voting stock which the
interested stockholder did not own.
The three-year prohibition also does not apply to certain business
combinations proposed by an interested stockholder following the announcement
or notification of certain extraordinary transactions involving the corporation
and a person who had not been an interested stockholder during the previous
three years or who became an interested stockholder with the approval of a
majority of the corporation's directors. The term "business combination" is
defined generally to include mergers or consolidations between a Delaware
corporation and an interested stockholder, transactions with an interested
stockholder involving the assets or stock of the corporation or its majority-
owned subsidiaries, and transactions which increase an interested stockholder's
percentage ownership of stock. The term "interested stockholder" is defined
generally as those stockholders who become beneficial owners of 15% or more of
a Delaware corporation's voting stock, together with the affiliates or
associates of that stockholder.
Transfer agent
The registrar and transfer agent for our common stock is The Bank of New
York.
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DESCRIPTION OF DEBT
This summary highlights certain provisions of our debt instruments.
Credit facilities
We may borrow an aggregate of $1.35 billion under our credit facilities. Our
credit facilities are with DLJ Capital Funding, Inc. (an affiliate of the lead
initial purchaser), as syndication agent, The Bank of New York (an affiliate of
an initial purchaser), as administrative agent and various banks, as lenders.
The following is a summary description of the principal terms of our credit
facilities.
Structure
Our credit facilities provide for a ten-year $400 million senior term
facility and a seven-year $950 million revolving senior credit facility. Under
the revolving facility, up to $100 million may be used in connection with
letters of credit, and up to $15 million in short-term funds may be borrowed
the same day that notice is given to the banks under a "swing line" facility.
Security; Guarantees
The obligations under our credit facilities are guaranteed by each of our
existing direct and indirect material subsidiaries and future direct and
indirect material domestic subsidiaries. Our credit facilities and the
guarantees are, subject to certain exceptions, secured by all of the capital
stock (or similar equity interests) of our existing direct and indirect
material subsidiaries and future direct and indirect material domestic
subsidiaries.
Interest rate
In general, borrowings under our credit facilities bear interest at one of
two floating rates selected by us:
. The alternate base rate (defined as the higher of The Bank of New York's
prime rate or the federal funds rate plus 0.5%) plus, for borrowings
under the term facility only, a margin that ranges from 0.5% to 0.75%
depending on our leverage ratio; or
. The rate at which The Bank of New York is offering dollar deposits in the
interbank eurodollar market, adjusted for statutory reserves, plus a
margin that ranges from 0.45% to 1.75% in the case of the revolving
facility and 1.75% to 2.00% in the case of the term facility depending on
our leverage ratio.
Swing line borrowings bear interest at either a rate negotiated by us and The
Bank of New York, as the swing line lender, at the time of borrowing or, if no
rate is negotiated and agreed upon, the alternate base rate.
Maturity
We are required to repay the amount borrowed under the term facility in
yearly installments of $4 million beginning on September 30, 1998 and
continuing through September 30, 2007. The remaining balance of $360 million is
due when the term facility matures on March 31, 2008. The term facility may be
prepaid at any time upon proper notice, but the redemption price will be 101.5%
of the outstanding balance if prepayment is made on or prior to April 30, 1999
and 100.75% of the outstanding balance if prepayment is made from May 1, 1999
to April 30, 2000. The revolving facility terminates on March 31, 2005.
Fees
We are required to pay the banks which are party to our credit facilities a
commitment fee based on the daily average unused portion of the revolving
facility which accrues from the closing date of our credit facilities. We are
also obligated to pay letter of credit fees on the aggregate stated amount of
outstanding letters of credit.
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Covenants
Our credit facilities contain a number of covenants (in addition to the
financial covenants) that, among other things, restrict our ability and that of
our subsidiaries to:
. Dispose of assets;
. Incur additional debt;
. Prepay other debt (including the notes, subject to certain exceptions) or
amend certain debt instruments (including the indenture);
. Pay dividends;
. Create liens on assets;
. Amend our certificate of incorporation or bylaws;
. Make investments, loans or advances;
. Make acquisitions;
. Engage in mergers or consolidations;
. Change the business conducted by us or our subsidiaries;
. Make capital expenditures or engage in certain transactions with
affiliates; and
. Otherwise restrict certain corporate activities.
In addition, our credit facilities contain financial covenants that require
us to maintain, on a consolidated basis, specified financial tests including a
minimum interest coverage ratio, a minimum net worth test, a minimum cash flow
ratio and a maximum leverage ratio.
Events of default
Our credit facilities contain customary events of default, including:
. Nonpayment of principal, interest or fees;
. Material inaccuracy of representations and warranties;
. Violation of covenants;
. Cross-defaults to certain other debt;
. Certain events of bankruptcy and insolvency;
. Certain Employee Retirement Income Security Act of 1974 matters;
. Material judgments;
. Invalidity of any guaranty or security interest; and
. A change of control of us in certain circumstances.
In addition, if we or any of our subsidiaries become ineligible for
participation in, or are suspended from receiving reimbursement under, Medicare
or Medicaid programs resulting in a material decrease in our consolidated net
operating revenues, we will be in default under the credit facilities.
Swap agreements
During the quarter ended June 30, 1998, we entered into forward interest rate
cancelable swap agreements with various financial institutions with a combined
notional amount of $800 million. The lengths of the agreements are between
three and ten years with cancelation clauses at the financial institutions'
option from one to seven years. The underlying blended interest rate is fixed
at approximately 5.65% plus an applicable margin based upon our current
leverage ratio. Currently, the effective interest rate for these swaps is
7.15%.
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5 5/8% convertible notes and related guaranty
We have guaranteed the $125 million outstanding 5 5/8% Convertible
Subordinated Notes due 2006 of Renal Treatment Centers, Inc., our wholly-owned
subsidiary. These notes are convertible into shares of our common stock at an
effective conversion price of $25.62 per share. Although these notes do not
mature until 2006, Renal Treatment Centers, Inc. may redeem them at its option
subsequent to July 16, 1999. The redemption price, expressed as a percentage of
the principal amount of the notes, is shown below for 12-month periods
beginning July 15:
<TABLE>
<CAPTION>
Year Percentage Year Percentage
---- ---------- ---- ----------
<S> <C> <C> <C>
1999.................... 103.94% 2003.................... 101.69%
2000.................... 103.38% 2004.................... 101.13%
2001.................... 102.81% 2005.................... 100.56%
2002.................... 102.25% 2006.................... 100.00%
</TABLE>
Our guaranty of these notes is pari passu with trade payables and is
subordinate to our credit facilities and any future debt which we may incur
(unless it otherwise states). The notes offered by this prospectus are
effectively subordinate to these notes.
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CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
The following discussion summarizes certain of the material U.S. federal tax
considerations of the acquisition, ownership, conversion and disposition of the
notes by beneficial owners of the notes and the ownership and disposition of
conversion shares. This discussion does not consider all aspects of U.S.
federal income taxation that may be relevant to a prospective investor in light
of that investor's personal circumstances. This discussion does not address the
U.S. federal income tax consequences of ownership of the notes or conversion
shares not held as capital assets within the meaning of Section 1221 of the
current U.S. Internal Revenue Code, or the IRC, or the U.S. federal income tax
consequences to investors subject to special treatment under the U.S. federal
income tax laws, such as:
. Dealers in securities or foreign currency;
. Tax-exempt entities, financial institutions, insurance companies;
. Persons that hold the notes or conversion shares as part of a straddle,
hedge, conversion or synthetic security transaction;
. Persons that have a functional currency other than the U.S. dollar; and
. Investors in pass-through entities.
Moreover, the effect of any applicable state, local or foreign tax laws is not
discussed. This discussion is based upon the IRC, existing regulations under
the IRC, and current administrative rulings and judicial decisions. All of the
foregoing is subject to change, possibly on a retroactive basis, and that could
affect the continuing validity of this discussion. Prospective investors should
consult their tax advisors concerning the application of U.S. federal income
tax laws, as well as the laws of any state, local or foreign taxing
jurisdiction, to the acquisition, ownership, conversion and disposition of the
notes and the ownership and disposition of the conversion shares.
U.S. Holders
A "U.S. holder" means a beneficial owner of a note or conversion shares that
is, for U.S. federal income tax purposes:
. A citizen or resident (as defined in Section 7701(b)(1) of the IRC) of
the United States;
. A corporation or other entity taxable as a corporation organized under
the laws of the United States or any of its political subdivisions;
.An estate the income of which is subject to U.S. federal income tax
regardless of its source;
. A trust, with respect to which a court within the U.S. is able to
exercise primary supervision over its administration and one or more U.S.
persons have the authority to control all its substantial decisions; or
. A person whose worldwide income or gain is subject to U.S. federal income
tax on a net income basis.
A "non-U.S. holder" means a holder of a note or conversion shares that is not a
U.S. holder.
Conversion of the notes
In general, no gain or loss will be recognized on a conversion of the notes
into conversion shares except to the extent of cash paid in lieu of a
fractional share of common stock, as discussed below under the heading
"Disposition of notes and conversion shares." The adjusted basis of the
conversion shares received upon conversion will equal the adjusted basis of the
note converted, reduced by the portion of adjusted basis allocated to any
fractional share of common stock exchanged for cash. The holding period of a
U.S. holder in the conversion shares will include the period during which the
converted notes were held.
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Dividends on conversion shares
The amount of any distribution by us in respect of conversion shares will be
equal to the amount of cash and the fair market value, on the date of
distribution, of any property distributed. Generally, distributions will be
treated as a dividend, subject to tax as ordinary income, to the extent of our
current and accumulated earnings and profits, then as a tax-free return of
capital to the extent of the U.S. holder's adjusted tax basis in the conversion
shares and thereafter as capital gain. Dividends paid to holders that are U.S.
corporations may qualify for the dividends-received deduction.
Adjustment of conversion price
If at any time we make a distribution of property to our stockholders that
would be taxable to those stockholders as a dividend for U.S. federal income
tax purposes and, in accordance with the antidilution provisions of the notes,
the conversion price of the notes is decreased, the amount of that decrease may
be deemed to be the payment of a taxable dividend to holders of the notes. For
example, a decrease in the conversion price in the event of distributions of
our debt or assets generally will result in deemed dividend treatment to
holders of the notes, but generally a decrease in the event of stock dividends
or the distribution of rights to subscribe for our common stock will not. See
the section "Description of Notes" under the heading "Conversion rights."
Amortizable bond premium
If a U.S. holder of a note acquires the note at a cost that is in excess of
the amount payable at maturity (after reducing that cost by an amount equal to
the value of the conversion option), the U.S. holder may elect under Section
171 of the IRC to amortize the excess cost (as an offset to interest income) on
a constant interest rate basis over the term of the note. However, because the
notes may be redeemed at our option at a price in excess of their principal
amount, a U.S. holder may be required to amortize any bond premium based on the
earlier call date and the call price payable at that time. If the U.S. holder
makes an election to amortize bond premium, the tax basis of all the U.S.
holder's notes will be reduced by the allowable bond premium amortization. The
amortization election would apply to all debt instruments held or subsequently
acquired by the electing purchaser and cannot be revoked without permission
from the Internal Revenue Service. On conversion of a note into conversion
shares, no additional amortization of any bond premium would be allowed, and
any remaining premium would be added to the U.S. holder's tax basis in the
common stock received.
Market discount
Investors acquiring notes after their original issuance should consider that
the resale of those notes may be adversely affected by the market discount
provisions of Sections 1276 through 1278 of the IRC. Except as described below,
gain recognized on the disposition of a note that has accrued market discount
will be treated as ordinary income, and not capital gain, to the extent of the
accrued market discount. "Market discount" is defined generally as the excess
of the principal amount of the note over the tax basis of the note in the hands
of the U.S. holder immediately after its acquisition.
Under a de minimis exception, there is no market discount if the excess of
the principal amount of the obligation over the U.S. holder's tax basis in the
obligation is less than 0.25% of the principal amount multiplied by the number
of complete years after the acquisition date to the obligation's date of
maturity. Unless the U.S. holder elects to accrue market discount on a constant
yield basis, the accrued market discount generally would be the amount
calculated by multiplying the market discount by a fraction, the numerator of
which is the number of days the obligation has been held by the U.S. holder and
the denominator of which is the number of days after the U.S. holder's
acquisition of the obligation up to and including its maturity date.
If a U.S. holder of a note acquired with market discount disposes of that
note in any transaction other than a sale, exchange or involuntary conversion,
the U.S. holder will be deemed to have realized an amount equal to the fair
market value of the note and will be required to recognize as ordinary income
any accrued market
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<PAGE>
discount. See the discussion below under the subheading "Disposition of notes
and conversion shares" for the tax consequences of a sale or exchange. A
partial principal payment on a note will be includable as ordinary income upon
receipt to the extent of any applicable accrued market discount on that note.
Although it is not free from doubt, any accrued market discount not previously
taken into income prior to a conversion of a note into conversion shares should
carry over to the conversion shares received on conversion and be treated as
ordinary income upon a subsequent disposition of those conversion shares, to
the extent of any gain recognized on that disposition. Unless the election
described below is in effect, a U.S. holder of a note acquired at a market
discount also may be required to defer the deduction of all or a portion of the
interest on any debt incurred or maintained to purchase or carry the note until
the maturity of the note or the earlier disposition of the note in a taxable
transaction.
A U.S. holder of a note acquired at a market discount may elect to include
the market discount in income as it accrues (on either a straight-line basis or
a constant yield basis). This election would apply to all market discount
obligations acquired by the electing U.S. holder on or after the first day of
the first year to which the election applies. The election may be revoked only
with the consent of the Internal Revenue Service. If a U.S. holder of a note
elects to include market discount in income currently, the rules discussed
above regarding ordinary income recognition resulting from a sale and certain
other disposition transactions and deferral of interest deductions would not
apply.
Disposition of notes and conversion shares
Generally, upon the disposition of a note or conversion shares (including
cash received in lieu of a fractional share of common stock) by sale, exchange
or redemption, a U.S. holder will recognize capital gain or loss equal to the
difference between:
. The amount realized on the disposition (other than, in the case of a
disposition of a note, amounts attributable to accrued but unpaid stated
interest not previously included in income); and
. The U.S. holder's adjusted tax basis in the note or conversion shares.
A U.S. holder's adjusted tax basis in a note generally will equal the cost of
the note to that holder, less any principal payments received by that holder
and increased by any market discount previously included in income by that
holder. Special rules may apply to redemptions of common stock which may result
in dividend, rather than sale or exchange, treatment in respect of the proceeds
received pursuant to that redemption. Net capital gain (i.e., capital gain in
excess of capital loss) recognized by an individual upon a disposition of notes
or conversion shares that have been held for more than 12 months generally will
be subject to a maximum tax rate of 20% or, in the case of notes or conversion
shares that have been held for 12 months or less, will be subject to tax at
ordinary income tax rates.
Non-U.S. Holders
Interest on the notes, dividends on conversion shares and gain on the sale,
exchange or other disposition of the notes and conversion shares will be
considered "U.S. trade or business income" if that interest, dividend or gain
is:
. Effectively connected with the conduct of a U.S. trade or business; or
. In the case of a treaty resident, attributable to a U.S. permanent
establishment (or to a fixed base) in the U.S.
Stated interest
Generally, interest received by a non-U.S. holder of a note that is not U.S.
trade or business income will not be subject to U.S. federal income or
withholding tax if:
. The non-U.S. holder does not actually or constructively own 10% or more
of the total voting power of all our voting stock and is not a
"controlled foreign corporation" with respect to which we are a "related
person" within the meaning of the IRC; and
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<PAGE>
. The non-U.S. holder, under penalties of perjury, certifies that the non-
U.S. holder is not a U.S. person and the certificate provides the non-
U.S. holder's name and address.
Interest received on the notes that constitutes U.S. trade or business income
will be subject to tax on a net income basis at regular U.S. federal income tax
rates and, if the non-U.S. holder is a foreign corporation, it may be subject
to a branch profits tax equal to 30% (or a lower rate if specified by an
applicable income tax treaty) of its U.S. effectively connected earnings and
profits that are actually or deemed to have been repatriated. The Treasury
Department has issued final regulations relating to withholding, information
reporting and backup withholding that unify current certification procedures
and forms and clarify reliance standards. These final regulations generally
will be effective with respect to payments made after December 31, 1999. Under
these final regulations, a non-U.S. holder who is claiming the benefits of a
tax treaty or exemption from withholding from U.S. trade or business income may
be required to obtain a U.S. taxpayer identification number and to provide
certain documentary evidence issued by foreign governmental authorities to
prove residence in the foreign country. Moreover, certain special procedures
are provided in these final regulations for payments through qualified
intermediaries.
Conversion of the notes
In general, no U.S. federal income tax or withholding tax will be imposed on
the conversion of the notes into conversion shares by a non-U.S. holder, except
in the case of the receipt of cash in lieu of a fractional share of common
stock as discussed below under the heading "Disposition of notes and conversion
shares." The adjusted basis of the common stock received on conversion will
equal the adjusted basis of the note converted, reduced by the portion of
adjusted basis allocated to any fractional share of common stock exchanged for
cash.
Dividends on conversion shares
Dividends paid (including dividends deemed to have been paid as described
above under the heading "Adjustment of conversion price") to a non-U.S. holder
of conversion shares will be subject to a U.S. withholding tax at a rate of 30%
(or a lower rate if specified by an applicable income tax treaty) of the gross
amount of the dividend, unless the dividends constitute U.S. trade or business
income. Currently, for purposes of determining whether tax is to be withheld at
the 30% rate or at a reduced treaty rate, we ordinarily will presume that
dividends paid to an address in a foreign country are paid to a resident of
such country, absent knowledge that such presumption is not warranted. Under
the final regulations for withholding effective for payments after December 31,
1999, holders will be required to satisfy certain applicable certification
requirements to claim treaty benefits.
Except to the extent otherwise provided under an applicable treaty, dividends
that constitute U.S. trade or business income are subject to U.S. federal
income tax on a net income basis at regular U.S. federal income tax rates, and
are not generally subject to withholding if the holder complies with certain
certification and disclosure requirements. In the case of any dividends
received by a foreign corporation that are effectively connected with the
conduct by such corporation of a U.S. trade or business, such dividends may
also be subject to the 30% branch profits tax as described above under the
heading "Stated interest."
Disposition of notes and conversion shares
Except as described below, and subject to the discussion concerning backup
withholding, any gain realized by a non-U.S. holder on the sale, exchange or
redemption of a note or conversion shares (including cash received in lieu of a
fractional share) generally will not be subject to U.S. federal income or
withholding tax, unless:
. Such gain is U.S. trade or business income; or
. The non-U.S. holder is an individual who holds the notes as a capital
asset, is present in the United States for 183 days or more in the
taxable year of the disposition and meets certain other requirements.
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<PAGE>
Special rules may apply to redemptions of conversion shares which may result in
dividend, rather than sale or exchange, treatment in respect of the proceeds
received.
Federal estate tax
Notes or conversion shares held, or treated as held, by an individual who is
a non-U.S. holder at the time of his or her death will not be subject to U.S.
federal estate tax, provided that:
. In the case of notes, the individual did not actually or constructively
own 10% or more of the total voting power of all classes of voting stock;
and
. Income on the notes or conversion shares was not U.S. trade or business
income.
Information reporting and backup withholding
We must report annually to the Internal Revenue Service and to each non-U.S.
holder any interest and dividends that are subject to federal withholding tax,
regardless of whether any tax was actually withheld. Copies of these
information returns may also be made available under the provisions of a
specific treaty or agreement to the tax authorities of the country in which the
non-U.S. holder resides.
Backup withholding and information reporting generally will not apply to
payments of principal or interest on the notes and dividends on the conversion
shares to a non-U.S. holder, if the holder certifies as to its non-U.S. status
under penalties of perjury or otherwise establishes an exemption, provided that
neither we nor our paying agent has actual knowledge that the holder is a U.S.
holder or that the conditions of any other exemption are not, in fact,
satisfied.
The payment of the proceeds from the disposition of notes or conversion
shares to or through the U.S. office of any broker, U.S. or foreign, will be
subject to information reporting and possible backup withholding unless the
non-U.S. holder certifies as to its non-U.S. status under penalties of perjury
or otherwise establishes an exemption, provided that the broker does not have
actual knowledge that the holder is a U.S. holder or that the conditions of any
other exemption are not, in fact, satisfied.
The payment of proceeds from the disposition of notes or conversion shares to
or through a non-U.S. office of a broker that is:
. A U.S. person;
. A "controlled foreign corporation" for U.S. federal income tax purposes;
. A foreign person 50% or more of whose gross income from all sources for a
specified three-year period is derived from activities that are
effectively connected with the conduct of a U.S. trade or business; or
. After December 31, 1999, a foreign partnership if either more than 50% of
the income or capital interest of such partnership is owned by U.S.
holders or such partnership has certain connections to the United States,
will be subject to information reporting, unless the broker has documentary
evidence in its files that the non-U.S. holder is a non-U.S. person and the
broker has no actual knowledge to the contrary.
Before January 1, 2000, the payment of the proceeds from the disposition of
notes or conversion shares to or through a non-U.S. office of a broker
generally will not be subject to backup withholding. After December 31, 1999,
such payment will be subject to backup withholding if information reporting is
required. After December 31, 1999, payments through a non-U.S. intermediary
satisfying certain requirements will not be subject to either backup
withholding or information reporting.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a non-U.S. holder may be allowed as
a refund or a credit against such non-U.S. holder's U.S. federal income tax
liability, provided the required information is furnished to the Internal
Revenue Service.
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<PAGE>
PLAN OF DISTRIBUTION
This prospectus relates to the resale of $345 million of notes issued in a
private placement on November 13, 1998 and the resale of 10,515,087 conversion
shares (plus any additional conversion shares that may be issuable pursuant to
the antidilution provisions of the notes). The registration statement (of which
this prospectus is a part) does not cover the issuance of shares of common
stock upon conversion of the notes into the conversion shares.
The sale or distribution of the notes and the conversion shares may be
effected directly to purchasers by the selling securityholders as principals or
through one or more underwriters, brokers, dealers or agents from time to time
in one or more transactions (which may involve crosses or block transactions):
. On any exchange or in the over-the-counter market;
. In transactions otherwise than in the over-the-counter market; or
. Through the writing of options (whether such options are listed on an
options exchange or otherwise) on, or in settlement of short sale of the
notes or the conversion shares.
The selling securityholders may also loan or pledge the notes or the conversion
shares to broker-dealers that in turn may sell such securities.
Any of these transactions may be effected at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at varying
prices determined at the time of sale or at negotiated or fixed prices, in each
case as determined by the selling securityholder or by agreement between the
selling securityholder and underwriters, brokers, dealers or agents, or
purchasers. If the selling securityholders sell the notes or the conversion
shares to or through underwriters, brokers, dealers or agents, those
underwriters, brokers, dealers or agents may receive compensation in the form
of discounts, concessions or commissions from the selling securityholders or
commissions from purchasers of the notes or the conversion shares for whom they
may act as agent. These discounts, concessions or commissions may be in excess
of those customary in the types of transactions involved. The selling
securityholders and any brokers, dealers or agents that participate in the
distribution of the notes or the conversion shares may be considered
underwriters, and any profit on the sale of the notes or the conversion shares
by them and any discounts, concessions or commissions received by any
underwriters, brokers, dealers or agents may be considered underwriting
discounts and commissions under the Securities Act of 1933.
To the extent required, the aggregate principal amount of notes and number of
conversion shares, the names of the selling securityholders, the purchase
price, the name of any agent, dealer or underwriter and any applicable
commissions, discounts or other terms constituting compensation with respect to
a particular offer will be set forth in an accompanying prospectus supplement.
The aggregate proceeds to the selling securityholders from the sale of the
notes or conversion shares will be the purchase price of such notes or
conversion shares less any discounts and commissions.
Our common stock is listed on the New York Stock Exchange, and the conversion
shares have been authorized for listing on the New York Stock Exchange. There
is no assurance that any trading market will develop for the notes.
In order to comply with the securities laws of certain states, if applicable,
the notes and the conversion shares will be sold in those jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states the notes and the conversion shares may not be sold unless they have
been registered or qualified for sale or exempted from registration or
qualification.
29
<PAGE>
We will not receive any of the proceeds from the offering of notes and the
conversion shares by the selling securityholders that are sold pursuant to the
registration statement (of which this prospectus is a part). The selling
securityholders and we have agreed to indemnify each other against certain
liabilities arising under the Securities Act of 1933. We have agreed to pay all
expenses related to the offer and sale of the notes and the conversion shares
by the selling securityholders to the public, other than selling commissions
and fees.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains statements that are forward-looking statements
within the meaning of the federal securities laws. These include statements
about our expectations, beliefs, intentions or strategies for the future, which
we indicate by words or phrases such as "anticipate," "expect," "intend,"
"plan," "will," "believe" and similar language. These statements involve known
and unknown risks, including risks resulting from economic and market
conditions, the regulatory environment in which we operate, competitive
activities and other business conditions, and are subject to uncertainties and
assumptions set forth elsewhere in this prospectus. Our actual results may
differ materially from results anticipated in these forward-looking statements.
We base our forward-looking statements on information currently available to
us, and we assume no obligation to update these statements.
MARKET DATA
Market data used throughout this prospectus, including information relating
to our relative position in the dialysis industry, is based on the good-faith
estimate of our management based upon their review of internal surveys,
independent industry publications and other publicly available information.
Although we believe that these sources are reliable, the accuracy and
completeness of this information is not guaranteed and has not been
independently verified.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus the
documents we file with them, which means that we can disclose important
information to you by referring you to these documents. The information that we
incorporate by reference into this prospectus is considered to be part of this
prospectus, and information that we file later with the SEC automatically
updates and supersedes any information in this prospectus. We incorporate by
reference into this prospectus the documents listed below:
. Our annual report on Form 10-K for the year ended December 31, 1997;
. Items 6, 7, 8, 9 and 14 of Amendment No. 1 to our annual report on Form
10-K/A for the year ended December 31, 1997;
. Amendment No. 2 to our annual report on Form 10-K/A for the year ended
December 31, 1997;
. Our quarterly report on Form 10-Q for the quarterly period ended March
31, 1998;
. Our quarterly report on Form 10-Q for the quarterly period ended June 30,
1998;
. Our quarterly report on Form 10-Q for the quarterly period ended
September 30, 1998;
. Our current reports on Form 8-K dated January 22, 1998, February 18,
1998, February 27, 1998, April 1, 1998, April 30, 1998 and November 3,
1998; and
. All documents subsequently filed by us pursuant to sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934 prior to the
termination of this offering.
30
<PAGE>
We will provide without charge to each person, including any prospective
investor to whom this prospectus has been delivered, upon written or oral
request, a copy of any and all of the documents referred to above that are or
may be incorporated by reference into this prospectus, other than exhibits,
unless these exhibits are specifically incorporated by reference into this
prospectus. Requests should be directed to Total Renal Care Holdings, Inc.,
attention John E. King, Suite 800, 21250 Hawthorne Boulevard, Torrance,
California 90503-5517, telephone number (310) 792-2600.
LEGAL MATTERS
Certain legal matters with respect to the legality of the notes will be
passed upon for us by Barry C. Cosgrove, our General Counsel. Mr. Cosgrove
holds stock and options to purchase stock granted under our employee stock
plans which in the aggregate represent less than 1% of our common stock.
EXPERTS
The financial statements incorporated in this prospectus by reference to the
TRCH Annual Report on Form 10-K/A Amendment No. 2 for the years ended December
31, 1997 and 1996 and May 31, 1995 and the seven months ended December 31, 1995
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
WHERE TO LEARN ABOUT US
We are subject to the informational requirements of the Securities Exchange
Act of 1934, and we file reports, proxy statements and other information with
the SEC. You may inspect and copy these reports, proxy statements and other
information at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or on the SEC's Web Site located at http://www.sec.gov.
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. You may also inspect these reports, proxy
statements and other information at the office of the New York Stock Exchange,
20 Broad Street, New York, New York 10005.
31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
[LOGO OF TOTAL RENAL CARE HOLDINGS, INC.]
Total Renal Care Holdings, Inc.
$345,000,000 Principal Amount
7% Convertible Subordinated Notes due 2009
10,515,087 Shares of Common Stock
-----------------------------------------------
PROSPECTUS
-----------------------------------------------
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor
any sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or our affairs have not
changed since the date hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.*
<TABLE>
<S> <C>
SEC registration fee............................................... $ 95,915
Printing fees...................................................... 100,000
Trustee's and transfer agent's fees................................ 5,000
Accounting fees and expenses....................................... 100,000
Legal fees and expenses............................................ 150,000
Miscellaneous...................................................... 10,000
--------
Total.............................................................. $460,915
========
</TABLE>
None of the above expenses will be borne by the selling securityholders.
- ---------------------
* Estimated.
Item 15. Indemnification of Directors and Officers.
Section 145 of the DGCL provides that a Delaware corporation may indemnify
any person against expenses, judgments, fines and settlements actually and
reasonably incurred by any such person in connection with a threatened, pending
or completed action, suit or proceeding in which he or she is involved by
reason of the fact that he or she is or was director, officer, employee or
agent of such corporation, provided that (1) such person acted in good faith
and in a manner such person reasonably believed to be in or not opposed to the
best interests of the corporation and (2) with respect to any criminal action
or proceeding, such person had no reasonable cause to believe his or her
conduct was unlawful. If the action or suit is by or in the name of the
corporation, the corporation may indemnify any such person against expense
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made in
respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation, unless and only to the extent that
the Delaware Court of Chancery or the court in which the action or suit is
brought determines upon application that, despite the adjudication of liability
but in view of all of the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expense as the court deems proper.
Article XI, Section I of our bylaws provides for indemnification of our
directors and officers to the fullest extent permitted by the DGCL. In
accordance with the DGCL, our certificate of incorporation limits the personal
liability of our directors for violations of their fiduciary duty. The
certificate of incorporation eliminates each director's liability to us or our
stockholders for monetary damages or breach of fiduciary duty as a director
except:
. For any breach of the director's duty of loyalty to us or our
stockholders;
. For acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. Under the section of the Delaware law providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases
or redemptions; or
. For any transaction from which a director derived any improper personal
benefit.
The effect of this provision is to eliminate the personal liability of
directors for monetary damages for actions involving a breach of their
fiduciary duty of care, including any such actions involving gross negligence.
This provision will not, however, limit in any way the liability of directors
for violations of the federal securities laws. We have entered into
indemnification agreements with each of our directors and officers to indemnify
them to the maximum extent permitted by Delaware law.
II-1
<PAGE>
The purchase agreement and the registration rights agreement executed in
connection with the private placement of the notes and filed as Exhibit 4.4 and
Exhibit 4.5, respectively, hereto provide for the indemnification of our
directors and certain of our officers by the initial purchasers and the selling
securityholders, respectively, against certain liabilities, including
liabilities under the Securities Act of 1933.
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.1 Shareholders Agreement, dated August 11, 1994, between DLJ Merchant
Banking Partners, L.P., DLJ International Partners, C.V., DLJ
Offshore Partners, C.V., DLJ Merchant Banking Funding, Inc., NME
Properties Corp., Continental Bank, as voting trustee, and TRCH.+++
4.2 Agreement and Amendment, dated as of June 30, 1995, between DLJMBP,
DLJIP, DLJOP, DLJMBF, DLJ First Esc, LLC, Tenet Healthcare
Corporation, TRCH, Victor M.G. Chaltiel, the Putnam Purchasers, the
Crescent Purchasers and the Harvard Purchasers, relating to the
Shareholders Agreement dated as of August 11, 1994 between DLJMB,
DLJIP, DLJOP, DLJMBF, NME Properties, Continental Bank, as voting
trustee, and TRCH.+++
4.3 Indenture, dated as of November 18, 1998, between TRCH and the trustee
and Form of Note.++
4.4 Registration Rights Agreement, dated as of November 18, 1998, between
TRCH and the initial purchasers.++
4.5 Purchase Agreement, dated as of November 12, 1998, between TRCH and
the initial purchasers.++
5.1 Opinion of Barry C. Cosgrove.++
12.1 Computation of Ratio of Earnings to Fixed Charges.+
23.1 Consent of PricewaterhouseCoopers LLP.+
23.2 Consent of Barry C. Cosgrove (included in Exhibit 5.1).++
24.1 Power of Attorney with respect to TRCH.++
Statement of Eligibility of Trustee under the Trust Indenture Act of
25.1 1939 on Form T-1.++
</TABLE>
- ---------------------
+ Filed herewith.
++ Previously filed as an exhibit to this Registration Statement.
+++ Filed on August 29, 1995 as an exhibit to our Form 10-K for the year ended
May 31, 1995.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the registration statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) That for purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, we have duly
caused this Amendment No. 1 to the Registration Statement to be signed on our
behalf by the undersigned, thereunto duly authorized, in the City of Torrance,
State of California, on February 16, 1999.
TOTAL RENAL CARE HOLDINGS, INC.
/s/ John E. King
By: _________________________________
John E. King
Senior Vice President, Finance
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
* Chairman of the Board, February 16, 1999
____________________________________ Chief Executive
Victor M.G. Chaltiel Officer, President
and Director
(Principal Executive
Officer)
/s/ John E. King Senior Vice President, February 16, 1999
____________________________________ Finance and Chief
John E. King Financial Officer
(Principal Financial
Officer and Principal
Accounting Officer)
* Director February 16, 1999
____________________________________
Maris Andersons
* Director February 16, 1999
____________________________________
Peter T. Grauer
* Director February 16, 1999
____________________________________
Regina E. Herzlinger
* Director February 16, 1999
____________________________________
Shaul G. Massry
/s/ John E. King
*By: _______________________________
John E. King
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.1 Shareholders Agreement, dated August 11, 1994, between DLJ Merchant
Banking Partners, L.P., DLJ International Partners, C.V., DLJ
Offshore Partners, C.V., DLJ Merchant Banking Funding, Inc., NME
Properties Corp., Continental Bank, as voting trustee, and TRCH.+++
4.2 Agreement and Amendment, dated as of June 30, 1995, between DLJMBP,
DLJIP, DLJOP, DLJMBF, DLJ First Esc, LLC, Tenet Healthcare
Corporation, TRCH, Victor M.G. Chaltiel, the Putnam Purchasers, the
Crescent Purchasers and the Harvard Purchasers, relating to the
Shareholders Agreement dated as of August 11, 1994 between DLJMB,
DLJIP, DLJOP, DLJMBF, NME Properties, Continental Bank, as voting
trustee, and TRCH.+++
4.3 Indenture, dated as of November 18, 1998, between TRCH and the Trustee
and Form of Note.++
4.4 Registration Rights Agreement, dated as of November 18, 1998, between
TRCH and the initial purchasers.++
4.5 Purchase Agreement, dated as of November 12, 1998, between TRCH and
the initial purchasers.++
5.1 Opinion of Barry C. Cosgrove.++
12.1 Computation of Ratio of Earnings to Fixed Charges.+
23.1 Consent of PricewaterhouseCoopers LLP.+
23.2 Consent of Barry C. Cosgrove (included in Exhibit 5.1).++
24.1 Power of Attorney with respect to TRCH.++
Statement of Eligibility of Trustee under the Trust Indenture Act of
25.1 1939 on Form T-1.++
</TABLE>
- ---------------------
+ Filed herewith.
++ Previously filed as an exhibit to this Registration Statement.
+++ Filed on August 29, 1995 as an exhibit to our Form 10-K for the year ended
May 31, 1995.
<PAGE>
TOTAL RENAL CARE HOLDINGS, INC.
Exhibit 12.1
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges is computed by dividing fixed charges
into earnings. Earnings is defined as pretax income from continuing operations
adjusted by adding fixed charges and excluding interest capitalized during the
period. Fixed charges means the total of interest expense and amortization of
financing costs, the estimated interest component of rental expense on
operating leases and preferred stock dividends. In 1995, we changed our fiscal
year end to December 31 from May 31.
<TABLE>
<CAPTION>
Seven months Nine months
ended ended
Years ended May 31, December 31, Years ended December 31, September 30,
----------------------- --------------- ------------------------ ---------------
1993 1994 1995 1994 1995 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------- ------- -------- ------- -------
(in thousands, except for ratio
data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income before income
taxes, minority
interest, extraordinary
items and cumulative
effect of a charge in
accounting principle.... $15,932 $18,753 $24,323 $14,174 $26,436 $39,685 $60,945 $ 99,741 $71,744 $29,641
Minority Interest....... 775 1,046 1,593 878 1,784 2,544 3,578 4,502 3,193 4,817
------- ------- ------- ------- ------- ------- ------- -------- ------- -------
15,157 17,707 22,730 13,296 24,652 37,141 57,367 95,239 68,551 24,824
------- ------- ------- ------- ------- ------- ------- -------- ------- -------
Fixed Charges:
Interest expense and
amortization of debt
issuance costs and
discounts on all
indebtedness............ 1,442 1,575 9,087 4,676 8,007 13,375 14,075 30,289 18,512 61,869
Preferred dividends..... 2,075
Interest portion of
rental expense.......... 1,352 1,926 2,475 1,438 1,950 3,347 5,301 8,196 5,761 9,531
------- ------- ------- ------- ------- ------- ------- -------- ------- -------
Total fixed charges..... 4,869 3,501 11,562 6,114 9,957 16,722 19,376 38,485 24,273 71,400
------- ------- ------- ------- ------- ------- ------- -------- ------- -------
Earnings before income
taxes, minority
interest, extraordinary
items, cumulative effect
of a change in
accounting principle and
fixed charges........... $20,026 $21,208 $34,292 $19,410 $34,609 $53,863 $76,743 $133,202 $92,824 $96,224
======= ======= ======= ======= ======= ======= ======= ======== ======= =======
Ratio of earnings to
fixed charges........... 4.11 6.06 2.97 3.17 3.48 3.22 3.96 3.47 3.82 1.35
======= ======= ======= ======= ======= ======= ======= ======== ======= =======
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the prospectus
constituting part of this Registration Statement on Form S-3 Amendment No. 1 of
our report dated February 16, 1998, except as to the pooling of interest with
Renal Treatment Centers, Inc. which is as of May 14, 1998, appearing on page F-
2 of the Total Renal Care Holdings, Inc. Annual Report on Form 10K/A Amendment
No. 2 for the year ended December 31, 1997. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page S-1 of that Form 10K/A Amendment No. 2. We also consent
to the reference to us under the heading "Experts" in this prospectus.
PricewaterhouseCoopers LLP
Seattle, Washington
February 10, 1999
