SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                    FORM 8-K
 
                                 CURRENT REPORT
                       PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
 
       Date of Report (Date of earliest event reported): October 30, 1996
                                                         ----------------
 
                        TOTAL RENAL CARE HOLDINGS, INC.
- -------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)
 
                                                                    
           DELAWARE                         1-4034                        51-0354549
- ------------------------------------------------------------------------------------------
       (State or other                   (Commission                   (I.R.S. Employer
jurisdiction of incorporation)            File Number)                 Identification No.)


21250 HAWTHORNE BOULEVARD, SUITE 800, TORRANCE, CALIFORNIA                   90503-5517
- ------------------------------------------------------------------------------------------
            (Address of principal executive offices)                         (Zip Code)
Registrant's telephone number, including area code: (310) 792-2600 -------------- NOT APPLICABLE - ------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) ITEM 5. OTHER EVENTS. The Company is filing unaudited pro forma financial statements to reflect as of September 30, 1996 certain insignificant acquisitions consummated since October 1, 1996 and probable acquisitions as of October 30, 1996 and the retirement of the Registrant's 12% Senior Subordinated Discount Notes. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a)(i) Unaudited Pro Forma Combined Balance Sheet of Total Renal Care Holdings, Inc. as of September 30, 1996; (ii) Unaudited Pro Forma Combined Statement of Income of Total Renal Care Holdings, Inc. for the nine months ended September 30, 1996; (iii) Unaudited Pro Forma Combined Statement of Income of Total Renal Care Holdings, Inc. for the seven months ended December 31, 1995; and (iv) Unaudited Pro Forma Combined Statement of Income of Total Renal Care Holdings, Inc. for the year ended May 31, 1995. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TOTAL RENAL CARE HOLDINGS, INC. (Registrant) /s/ John E. King Dated: October 30, 1996 By: _________________________________ John E. King Vice President and Chief Financial Officer 2 TOTAL RENAL CARE HOLDINGS, INC. INDEX TO EXHIBITS
EXHIBIT PAGE NUMBER DESCRIPTION OF EXHIBIT NUMBER ------- ---------------------- ------ 99.1 Unaudited Pro Forma Financial Information Unaudited Pro Forma Combined Balance Sheet..................... F-2 Notes to Unaudited Pro Forma Combined Balance Sheet............ F-3 Unaudited Pro Forma Combined Statements of Income.............. F-4 Notes to Unaudited Pro Forma Combined Statements of Income..... F-7
3

 
                                                                    EXHIBIT 99.1
 
                         INDEX TO FINANCIAL STATEMENTS
 
PAGE ---- UNAUDITED PRO FORMA FINANCIAL INFORMATION Unaudited Pro Forma Combined Balance Sheet................................. F-2 Notes to Unaudited Pro Forma Combined Balance Sheet........................ F-3 Unaudited Pro Forma Combined Statements of Income.......................... F-4 Notes to Unaudited Pro Forma Combined Statements of Income................. F-7
F-1 TOTAL RENAL CARE HOLDINGS, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET SEPTEMBER 30, 1996 (IN THOUSANDS)
OTHER COMBINED THE COMPANY ACQUISITIONS PRO FORMA (HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED ------------ ------------ ----------- -------- Cash and cash equivalents.... $ 5,440 $ 435 $(1,045)(a) $ 4,395 (435)(b) Accounts receivable, net..... 95,636 3,640 (445)(d) 98,831 Other current assets......... 14,855 155 (24)(d) 14,986 -------- ------ ------- -------- Total current assets....... 115,931 4,230 (1,949) 118,212 Property and equipment, net.. 49,443 3,522 (302)(b) 52,663 Intangible assets, net....... 151,279 820 25,506 (a) 177,605 Other assets................. 3,768 79 (79)(b) 3,768 -------- ------ ------- -------- $320,421 $8,651 $23,176 $352,248 ======== ====== ======= ======== Current liabilities.......... $ 30,677 $1,996 $ (380)(d) $ 32,293 Long-term debt............... 78,225 2,644 (2,644)(b) 109,515 31,290 (a) Other long-term liabilities.. 1,834 456 2,290 Minority interest............ 5,326 -- (1,535)(d) 3,791 Common stock................. 26 50 (50)(c) 26 Additional paid-in capital... 236,433 1,281 (1,281)(c) 236,433 Notes receivable from stockholders................ (2,783) -- -- (2,783) Retained earnings (deficit).. (29,317) 2,224 (2,224)(c) (29,317) -------- ------ ------- -------- $320,421 $8,651 $23,176 $352,248 ======== ====== ======= ========
F-2 TOTAL RENAL CARE HOLDINGS, INC. NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET 1. BASIS OF PRESENTATION The Unaudited Pro Forma Combined Balance sheet of Total Renal Care Holdings, Inc. as of September 30, 1996 gives effect to the acquisition of individually insignificant acquisitions consummated during the period October 1, 1996 to October 30, 1996 and individually insignificant acquisitions which were probable as of October 30, 1996, in each case as if such acquisitions were consummated on September 30, 1996. The pro forma adjustments are based on consideration exchanged, including the estimated fair value of assets acquired and liabilities assumed. The actual adjustments, which will be based on valuations of fair value as of the date of acquisition, may differ from those made herein. 2. PRO FORMA ADJUSTMENTS (a) To record the combined acquisitions as follows (in thousands): Purchase price...................................................... $32,335 Net book value of assets acquired................................... 6,009 ------- Purchase price allocated to intangible assets....................... $26,326 =======
The purchase prices of the consummated and probable combined acquisitions will be paid with cash of $1,045,000 and borrowings of $31,290,000. (b) To reflect assets and liabilities not acquired by the Company. (c) To eliminate the equity of the acquired businesses. (d) To eliminate the minority interest related to the acquisition of the remaining interest in a facility. The facility balances are included in both the Company historical totals and the Other Combined Acquisitions historical totals and, therefore, are adjusted in the Pro Forma Adjustments column. F-3 TOTAL RENAL CARE HOLDINGS, INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME NINE MONTHS ENDED SEPTEMBER 30, 1996 (IN THOUSANDS)
SOUTH CAREMARK CAROLINA THE COMPANY FACILITIES FACILITIES 9 MONTHS 2 MONTHS 2 MONTHS ENDED ENDED ENDED OTHER SEPTEMBER 30, FEBRUARY 28, FEBRUARY 28, COMBINED 1996 DEBT 1996 1996 ACQUISITIONS PRO FORMA (HISTORICAL) RETIREMENT(a) (HISTORICAL) (HISTORICAL) (HISTORICAL) ADJUSTMENTS COMBINED ------------- ------------- ------------ ------------ ------------ ----------- -------- Net operating revenues.. $188,153 $7,805 $1,133 $37,236 $(1,425)(b) $231,753 (1,149)(p) Operating expenses...... 153,921 8,250 1,055 31,408 3,326 (c) 196,892 (1,068)(p) -------- ------ ------ ------- ------- -------- Operating income........ 34,232 (445) 78 5,828 (4,832) 34,861 Interest expense, net... 3,862 $(804) 127 (1) 244 (370)(d) 7,019 3,961 (e) -------- ----- ------ ------ ------- ------- -------- Income before income taxes, minority interests and extraordinary item..... 30,370 804 (572) 79 5,584 (8,423) 27,842 Income taxes............ 11,537 (232) 37 (736)(f) 10,606 -------- ----- ------ ------ ------- ------- -------- Income before minority interest and extraordinary item..... 18,833 804 (340) 79 5,547 (7,687) 17,236 Minority interest in income of consolidated subsidiaries........... 2,295 274 (g) 2,529 (40)(p) -------- ----- ------ ------ ------- ------- -------- Income before extraordinary item..... $ 16,538 $ 804 $ (340) $ 79 $ 5,547 $(7,921) $ 14,707 ======== ===== ====== ====== ======= ======= ======== Income per share before extraordinary item..... $ 0.65 $ 0.56 ======== ======== Weighted average number of common shares and equivalents outstanding............ 25,409 937 (h) 26,346 ======== ======= ========
F-4 TOTAL RENAL CARE HOLDINGS, INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME SEVEN MONTHS ENDED DECEMBER 31, 1995 (IN THOUSANDS)
SOUTH MIAMI SOUTHWEST CAREMARK CAROLINA THE COMPANY FACILITIES FACILITIES FACILITIES FACILITIES 7 MONTHS 1 MONTH 6 MONTHS 7 MONTHS 7 MONTHS ENDED ENDED ENDED ENDED ENDED OTHER DECEMBER 31, INITIAL JUNE 30, NOVEMBER 30, DECEMBER 31, DECEMBER 31, COMBINED 1995 PUBLIC DEBT 1995 1995 1995 1995 ACQUISITIONS (HISTORICAL) OFFERING(i) RETIREMENT(j) (HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL) ------------ ----------- ------------- ------------ ------------ ------------ ------------ ------------ Net operating revenues....... $89,711 $526 $2,224 $27,340 $3,957 $41,928 Operating expenses....... 71,245 $ (64) 449 2,071 29,657 3,682 35,887 ------- ------- ---- ------ ------- ------ ------- Operating income......... 18,466 64 77 153 (2,317) 275 6,041 Interest expense, net... 5,584 (2,505) $(587) -- 41 452 -- 311 ------- ------- ----- ---- ------ ------- ------ ------- Income before income taxes, minority interests and extraordinary item........... 12,882 2,569 587 77 112 (2,769) 275 5,730 Income taxes.... 4,631 1,028 -- -- -- (1,140) -- 87 ------- ------- ----- ---- ------ ------- ------ ------- Income before minority interest and extraordinary item........... 8,251 1,541 587 77 112 (1,629) 275 5,643 Minority interest in income of consolidated subsidiaries... 1,784 -- -- -- -- -- -- -- ------- ------- ----- ---- ------ ------- ------ ------- Income before extraordinary item........... $ 6,467 $ 1,541 $ 587 $ 77 $ 112 $(1,629) $ 275 $ 5,643 ======= ======= ===== ==== ====== ======= ====== ======= Income per share before extraordinary item........... $ 0.36 ======= Weighted average number of common shares and equivalents outstanding.... 17,824 ======= PRO FORMA ADJUSTMENTS COMBINED ------------- -------- Net operating revenues....... $ (351)(b) $164,444 (891)(p) Operating expenses....... 4,819 (c) 146,916 (830)(p) ------------- -------- Operating income......... (5,231) 17,528 Interest expense, net... (683)(d) 6,230 3,617 (e) ------------- -------- Income before income taxes, minority interests and extraordinary item........... (8,165) 11,298 Income taxes.... (522)(f) 4,084 ------------- -------- Income before minority interest and extraordinary item........... (7,643) 7,214 Minority interest in income of consolidated subsidiaries... 190 (g) 1,943 (31)(p) ------------- -------- Income before extraordinary item........... $(7,802) $ 5,271 ============= ======== Income per share before extraordinary item........... $ 0.19 ======== Weighted average number of common shares and equivalents outstanding.... 9,654 (k) 27,478 ============= ========
F-5 TOTAL RENAL CARE HOLDINGS, INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME YEAR ENDED MAY 31, 1995 (IN THOUSANDS)
SOUTH CHICAGO MIAMI CAREMARK CAROLINA FACILITIES FACILITIES FACILITIES FACILITIES THE COMPANY 11 MONTHS 12 MONTHS 12 MONTHS 12 MONTHS YEAR ENDED ENDED ENDED ENDED ENDED MAY 31, AUGUST 1, INITIAL APRIL 30, MAY 31, MAY 31, MAY 31, 1995 1994 PUBLIC DEBT 1995 1995 1995 1995 (HISTORICAL) TRANSACTION(L) OFFERING(M) RETIREMENT(N) (HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL) ------------ -------------- ----------- ------------- ------------ ------------ ------------ ------------ Net operating revenues....... $ 98,968 $ 9,691 $ 6,311 $ 45,599 $ 6,306 Operating expenses....... 81,809 $ 772 $ (100) 8,587 5,385 45,456 5,746 -------- ------- ------- ------- ------- -------- ------- Operating income......... 17,159 (772) 100 1,104 926 143 560 Interest expense, net... 7,203 1,811 (3,141) $(1,116) 28 -- 866 -- -------- ------- ------- ------- ------- ------- -------- ------- Income before income taxes, minority interests and extraordinary item........... 9,956 (2,583) 3,241 1,116 1,076 926 (723) 560 Income taxes.... 3,511 (1,032) 1,329 115 (298) -------- ------- ------- ------- ------- ------- -------- ------- Income before minority interest and extraordinary item........... 6,445 (1,551) 1,912 1,116 961 926 (425) 560 Minority interest in income of consolidated subsidiaries... 1,593 -------- ------- ------- ------- ------- ------- -------- ------- Income before extraordinary item........... $ 4,852 $(1,551) $ 1,912 $ 1,116 $ 961 $ 926 $ (425) $ 560 ======== ======= ======= ======= ======= ======= ======== ======= Income per share before extraordinary item........... $ 0.22 ======== Weighted average number of common shares and equivalents outstanding.... 15,316 ======== OTHER COMBINED ACQUISITIONS PRO FORMA (HISTORICAL) ADJUSTMENTS COMBINED ------------ -------------- --------- Net operating revenues....... $ 79,912 $ (209)(b) $ 245,045 (1,533)(p) Operating expenses....... 72,063 9,713 (c) 228,007 (1,424)(p) ------------ -------------- --------- Operating income......... 7,849 (10,031) 17,038 Interest expense, net... 628 (1,253)(d) 10,481 5,455 (e) ------------ -------------- --------- Income before income taxes, minority interests and extraordinary item........... 7,221 (14,233) 6,557 Income taxes.... 120 (1,394)(f) 2,351 ------------ -------------- --------- Income before minority interest and extraordinary item........... 7,101 (12,839) 4,206 Minority interest in income of consolidated subsidiaries... 161 (g) 1,701 (53)(p) ------------ -------------- --------- Income before extraordinary item........... $ 7,101 $ (12,947) $ 2,505 ============ ============== ========= Income per share before extraordinary item........... $ 0.09 ========= Weighted average number of common shares and equivalents outstanding.... 11,404 (o) 26,720 ============== =========
F-6 TOTAL RENAL CARE HOLDINGS, INC. NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME 1. BASIS OF PRESENTATION The Unaudited Pro Forma Combined Statement of Income for the nine months ended September 30, 1996 gives effect to the acquisition by the Company of the Nephrology Services Business of Caremark International Inc. on March 15, 1996 (the "Caremark Facilities"), two facilities located in South Carolina on March 15, 1996 (the "South Carolina Facilities") and individually insignificant acquisitions consummated during the period January 1, 1996 through October 30, 1996, and individually insignificant acquisitions which were probable as of October 30, 1996, in each case as if such acquisitions were consummated on January 1, 1996. The Unaudited Pro Forma Combined Statement of Income for the nine months ended September 30, 1996 also gives effect to the retirement of all outstanding 12% Senior Subordinated Discount Notes in July and September 1996 (the "Debt Retirement") as if it occurred on January 1, 1996. The Unaudited Pro Forma Combined Statement of Income for the seven months ended December 31, 1995 gives effect to the acquisition by the Company of three facilities located in the Miami area on July 17, 1995 (the "Miami Facilities"), two facilities located in Texas on December 1, 1995 (the "Southwest Facilities"), the Caremark Facilities, the South Carolina Facilities and individually insignificant acquisitions consummated during the period June 1, 1995 through October 30, 1996, and individually insignificant acquisitions which were probable as of October 30, 1996, in each case as if such acquisitions were consummated on June 1, 1995. The Unaudited Pro Forma Combined Statement of Income for the seven months ended December 31, 1995 also gives effect to the Company's initial public offering on October 30, 1995 (the "Initial Public Offering"), the Company's secondary offering on April 3, 1996 (the "Secondary Offering") and the Debt Retirement as if such transactions occurred on June 1, 1995. The Unaudited Pro Forma Combined Statement of Income for the fiscal year ended May 31, 1995 gives effect to the acquisition by the Company of five facilities located in the Chicago area on May 1, 1995 (the "Chicago Facilities"), the Miami Facilities, the Caremark Facilities, the South Carolina Facilities and individually insignificant acquisitions consummated during the period June 1, 1994 through October 30, 1996, and individually insignificant acquisitions which were probable as of October 30, 1996, in each case as if such acquisitions were consummated on June 1, 1994. The Southwest Facilities, which commenced operations in April 1995, had de minimis operations during the twelve months ended May 31, 1995 and, therefore, are not included in the Unaudited Pro Forma Combined Statement of Income for the fiscal year ended May 31, 1995. The Unaudited Pro Forma Combined Statement of Income for the fiscal year ended May 31, 1995 also gives effect to the sale by Tenet Healthcare Corporation of approximately 75% of its ownership interest in the Company to DLJ Merchant Banking Partners, L.P. and certain of its affiliates in August 1994 (the "August 1994 Transaction"), the Initial Public Offering, the Secondary Offering and the Debt Retirement as if such transactions occurred on June 1, 1994. The pro forma adjustments are based on consideration exchanged, including the estimated fair value of assets acquired, liabilities assumed and common stock issued. The actual adjustments, which will be based on valuations of fair value as of the date of acquisition, may differ from those made herein. Net income per common share data and weighted average number of shares and equivalents outstanding for the nine months ended September 30, 1996, for the seven months ended December 31, 1995 and for the fiscal year ended May 31, 1995 assume that any shares issued in connection with the acquisitions were outstanding from January 1, 1996 and June 1, 1995 and 1994, respectively. 2. PRO FORMA ADJUSTMENTS (a) To reflect the redemption of 12% Senior Subordinated Discount Notes as if it occurred on January 1, 1996. Specifically to reduce interest expense assuming the redemption, offset by borrowings under the Senior Credit Facility and further offset by interest income foregone. During the quarter ended September 30, 1996, the Company repurchased $65 million, at maturity, of the 12% Senior Subordinated Discount Notes for $67.3 million resulting in an extraordinary loss, net of tax, of $7.7 million which is not included in the Unaudited Pro Forma Combined Statement of Income. F-7 TOTAL RENAL CARE HOLDINGS, INC. NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME--(CONTINUED) (b) To eliminate management fees earned by the combined entities. (c) To amortize goodwill, non-compete agreements and patient charts resulting from the acquisitions on a straight-line basis over 25, 10 or 5 years, respectively. (d) To eliminate interest expense on borrowings not assumed by the Company. (e) To record interest expense resulting from acquisitions funded in whole or in part by borrowings from the senior credit facility. (f) To record income tax effects related to the pro forma adjustments. (g) To record the minority interest income from five partnerships acquired. (h) Income per share and weighted average number of common shares and equivalents outstanding assume 62,000 shares and share equivalents issued to purchase the individually insignificant acquisitions were outstanding for the entire nine-month period ended September 30, 1996. Income per share and weighted average number of common shares and equivalents outstanding also assume that shares issued in the Secondary Offering to the extent that cash generated from such shares were used to purchase facilities and were outstanding from January 1, 1996 to the date of the Secondary Offering as follows: Caremark Facilities................................................ 1,741,000 All other acquisitions............................................. 926,000
(i) To reflect the Initial Public Offering and subsequent use of proceeds to redeem 12% Senior Subordinated Discount Notes as if it occurred on June 1, 1995. Specifically, to reduce interest expense assuming paydown of a portion of the 12% Senior Subordinated Discount Notes and amounts outstanding under the line of credit. On December 7, 1995 the Company redeemed 35% of the accreted value of the 12% Senior Subordinated Discount Notes equaling $28,749,000 at a redemption premium of 111% for a redemption price of $31,912,000. An extraordinary loss of $2,555,000 (net of income tax effect) resulted from this transaction which is not included on the Unaudited Pro Forma Combined Statement of Income. The additional reduction in interest expense incurred under the line of credit assumes that cash generated by the stock offering was used to purchase all facilities acquired and that the line of credit was not drawn for these acquisitions. (j) To reflect the Debt Retirement as if it occurred on June 1, 1995. See note (a) above. (k) Income per share and weighted average number of common shares and equivalents outstanding assume the following shares and share equivalents issued to purchase facilities were outstanding for the entire seven month period ended December 31, 1995: Miami Facilities..................................................... 333,000 Southwest Facilities................................................. 35,000 All other acquisitions............................................... 471,000
Income per share and weighted average number of common shares and equivalents outstanding also assume that shares issued in the Initial Public Offering and Secondary Offering to the extent that cash generated from F-8 TOTAL RENAL CARE HOLDINGS, INC. NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME--(CONTINUED) such shares (instead of the senior credit facility) would have been used to purchase facilities were outstanding from June 1, 1995 to the date of the Initial Public Offering or December 31, 1995, respectively, as follows: Chicago Facilities................................................. 505,000 Miami Facilities................................................... 345,000 South Carolina Facilities.......................................... 803,000 Caremark Facilities................................................ 1,741,000 All other acquisitions............................................. 2,630,000
Income per share and weighted average number of common shares and equivalents also assume that 2,233,000 shares issued in the Initial Public Offering to redeem the 12% Senior Subordinated Discount Notes were outstanding from June 1, 1995 to the date of the Initial Public Offering. (l) To reflect the August 1994 Transaction as if it occurred on June 1, 1994. Specifically, to reflect an increase in general and administrative expenses ($625,000) for estimated incremental costs of the Company as a stand- alone entity, increases in interest expense ($1,811,000), amortization expenses ($105,000) and bank fees ($42,000) related to the issuance of the 12% Senior Subordinated Discount Notes and a corresponding decrease in income taxes ($1,032,000) for the tax effect of the pro forma adjustments. (m) To reflect the Initial Public Offering and subsequent use of proceeds to redeem subordinated debt as if it occurred on June 1, 1994. See note (i) above. (n) To reflect the Debt Retirement as if it occurred on June 1, 1994. See note (a) above. (o) Income per share in the audited financial statements for the year ended May 31, 1995 was computed as if the August 1994 Transaction had occurred on June 1, 1994. Income per common share and weighted average numbered of common shares and equivalents outstanding computed using such assumptions were $0.22 and 15,316,000, respectively. Income per share and weighted average number of common shares and equivalents outstanding assume the following shares and share equivalents issued to purchase facilities were outstanding for the entire year: Chicago Facilities................................................. 515,000 Miami Facilities................................................... 333,000 All other acquisitions............................................. 1,029,000
Income per share and weighted average number of common shares and equivalents outstanding also assume that shares issued in the Initial Public Offering and Secondary Offering to the extent that cash generated from such shares (instead of the senior credit facility) would have been used to purchase facilities were outstanding for the entire year as follows: Chicago Facilities................................................. 707,000 Miami Facilities................................................... 483,000 South Carolina Facilities.......................................... 803,000 Caremark Facilities................................................ 1,741,000 All other acquisitions............................................. 2,991,000
Income per share and weighted average number of common shares and equivalents also assume that 2,233,000 shares issued in the Initial Public Offering to redeem the 12% Senior Subordinated Discount Notes were outstanding for the entire period. (p) To eliminate the minority interest related to the acquisition of the remaining interest in a facility. The facility balances are included in both the Company historical totals and the Other Combined Acquisitions historical totals and, therefore, are adjusted in the Pro Forma Adjustments column. F-9