UNITED STATES
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):July 29, 2014 (July 22, 2014)
21ST CENTURY ONCOLOGY
HOLDINGS, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
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333-170812 |
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26-1747745 |
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(Commission File Number) |
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(I.R.S. Employer Identification No.) |
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2270 Colonial Boulevard
Fort Myers, Florida |
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33907 |
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(Address of Principal Executive Offices) |
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(Zip Code) |
(239) 931-7275
(Registrant’s Telephone Number, including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 Entry into a Material Definitive Agreement.
The description of the MDLLC Credit Agreement (as defined below), the Recapitalization Support Agreement (as defined below), the Amendment (as defined below) and the transactions contemplated thereby as included in Item 7.01 of this Current Report on Form 8-K is incorporated by reference into this Item 1.01 of this Current Report on Form 8-K.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The description of the MDLLC Credit Agreement, the Amendment and transactions contemplated thereby as included in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03 of this Current Report on Form 8-K.
Item 7.01 Regulation FD Disclosure.
As 21st Century Oncology Holdings, Inc. (the “Company”) began to experience some liquidity issues after terminating its previously planned initial public offering, the Company began to have discussions with an ad hoc group of holders of its outstanding notes (the “Noteholder Group”). On July 29, 2014, the Company announced that it entered into two agreements with the Noteholder Group that provide the Company additional liquidity as well as a framework for reducing the Company’s outstanding debt and increasing cash flow in the coming months. During the past month, the Company has been working with a number of its noteholders and lenders to recapitalize its balance sheet in a manner that, upon completion of a proposed transaction, will provide it the financial flexibility to continue to grow its business in the future as it has done in the recent past. This has resulted in the Company, the Company’s principal stockholder, affiliates of Vestar Capital Partners (“Vestar”), and the Noteholder Group entering into a recapitalization support agreement (as more fully described below), that outlines the potential terms of a deleveraging transaction that is expected to occur in October or November 2014. In order to provide adequate liquidity to negotiate the terms of the recapitalization such that it may be executed in October or November 2014, certain members of the Noteholder Group lent subsidiaries of the Company $17.5 million under a new credit facility (as more fully described below). Although it remains highly leveraged, the Company believes that these related agreements provide it time to pursue a beneficial recapitalization that will facilitate continued investment to grow its business.
Millstein & Co., Kirkland & Ellis LLP and FTI Consulting are advising the Company in connection with these capital structure and strategic initiatives.
In spite of its recent liquidity issues, the Company continues to make progress in its growth strategy. Although fiscal second quarter 2014 financial information is not yet available, the Company’s quarterly operating statistics show year-over-year improvements. Total treatments were up nearly 54% year-over-year driven by the transformational acquisitions the Company made. Revenues on a same market, freestanding basis were up nearly 9%. For the fiscal quarter ended June 30, 2014, the Company expects to report total revenues in the range of $260-270 million and Pro-forma Adjusted EBITDA in the range of $41-44 million.
Pro-forma Adjusted EBITDA is defined as income (loss) before interest expense (net of interest income), income taxes, depreciation and amortization, gain on the sale of an interest in a joint venture, loss on sale leaseback transaction, early extinguishment of debt, fair value adjustment of earn-out liability, impairment loss, foreign currency derivative contract loss (gain), management fees accrued to the Company’s sponsor, non-cash expenses including costs relating to stock compensation, amortization of straight-line rent and amortization of capital expenditures relating to repairs and maintenance, non-cash equipment rent, sale-lease back adjustments, acquisition-related costs, other expenses including loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums on termed physicians, franchise taxes, costs relating to consulting services on Medicare reimbursement, litigation settlements with physicians, expenses associated with the provision for income taxes, costs associated with tradename and rebranding initiatives, expenses associated with idle / closed radiation therapy treatment facilities and pro-forma full period effect of acquisition EBITDA. The unaudited estimates above are the opinion of management and represent estimates and expectations based on the most current information available. While the Company believes that the assumptions are reasonable, it cautions that it is very difficult to predict the impact of known factors and it is impossible to anticipate all factors that could affect actual results. The Company’s actual results may differ materially from these estimates due to the completion of its financial closing procedures, final adjustments and other developments that may arise between now and the time the financial results for the second quarter are finalized.
The Company believe the Pro-forma Adjusted EBITDA provides useful information about its financial performance to investors, lenders, financial analysts and rating agencies since these groups have historically used EBITDA-related measures in the healthcare industry, along with other measures, to estimate the value of a company, to make informed investment decisions, to evaluate a company’s leverage capacity and its ability to meet its debt service requirements. Pro-forma Adjusted EBITDA eliminates the uneven effect of non-cash depreciation of tangibles assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting. Pro-forma Adjusted EBITDA is also used by the Company to measure individual performance for incentive compensation purposes and as an analytical indicator for purposes of allocating resources to its operating business and assessing their performance, both internally and relative to its peers, as well as to evaluate the performance of its operating management teams, and for purposes in the calculation of debt covenants and related disclosures. The unaudited estimates and statements above are the opinion of management and represent estimates and expectations based on the most current information available. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors and it is impossible for us to anticipate all factors that could affect our actual results. Our actual results may differ materially from these estimates due to the completion of our financial closing procedures, final adjustments and other developments that may arise between now and the time the financial results for our second quarter are finalized.
In connection with the transactions described below, the Company has made certain information about the Company available to potential investors. A copy of such information is attached hereto as Exhibit 99.1 and incorporated herein by reference. In addition, the Company has made fiscal year 2012 and 2013 audited financial statements of certain of its foreign subsidiaries publicly available under the “News” heading on the Company’s website at www.21co.com.
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The information contained in this Item 7.01, and Exhibit 99.1 attached hereto, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of, or otherwise regarded as filed under, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or in the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
MDLLC Credit and Guaranty Agreement
On July 28, 2014, Medical Developers, LLC (the “Borrower”), a Florida limited liability company and indirect wholly owned subsidiary of the Company, certain of its subsidiaries and affiliates, including the Company, the various lenders parties thereto and Cortland as administrative agent and collateral agent entered into a credit and guaranty agreement (the “MDLLC Credit Agreement”).
The MDLLC Credit Agreement provides for Tranche A term loans (the “Tranche A Term Loans”) in the aggregate principal amount of $8.5 million and Tranche B term loans (the “Tranche B Term Loans” together with the Tranche A Term Loans, the “Term Loans”) in the aggregate principal amount of $9.0 million, for an aggregate principal amount of Term Loans of $17.5 million, in favor of the Borrower. The Tranche A Term Loans are issued for working capital and general corporate purposes in accordance with a budget and the Tranche B Term Loans are issued to fund purchases of assets used or useful in the Borrower’ business.
The Borrowers each are required to pay certain recurring administration fees with respect to the MDLLC Credit Agreement. The MDLLC Credit Agreement contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting the ability (subject to various exceptions) of the Borrowers and certain of their subsidiaries to incur additional indebtedness or any other obligations.
The MDLLC Credit Agreement contains customary events of default, including with respect to nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty when made; failure to perform or observe covenants; cross default to other indebtedness; bankruptcy and insolvency events; inability to pay debts; monetary judgment defaults; actual or asserted invalidity or impairment of any definitive loan documentation and a change of control.
The Term Loans are subject to interest rates, for any interest period, at a rate equal to 14.0% per annum.
The obligations of the Borrower under the MDLLC Credit Agreement are guaranteed by the Company, 21C and certain direct and indirect wholly owned domestic subsidiaries and are secured by substantially all of the assets of the Borrower, including a pledge of 65% of the voting stock and 100% of the non-voting stock of each of its direct foreign subsidiaries.
Recapitalization Support Agreement
On July 29, 2014, the Company, 21C and each of their direct and indirect wholly-owned subsidiaries entered into a Recapitalization Support Agreement (the “Recapitalization Support Agreement”) with Vestar and the holders or managers of 72% of the aggregate principal amount of the indebtedness the Company incurred under that certain Indenture (as amended from time to time, the “Subordinated Notes Indenture” and the notes thereunder, the “Subordinated Notes”), dated as of April 20, 2010, among 21C, the guarantors party thereto and Wells Fargo Bank, National Association (the “Consenting Subordinated Noteholders”).
The Recapitalization Support Agreement sets forth the terms through which the Company expects to either (a) obtain additional liquidity through an equity contribution or subordinated debt incurred in a minimum amount of $150 million on or before October 1, 2014 (the “Capital Contribution”) or (b) consummate a recapitalization (the “Recapitalization”) consistent with the material terms and conditions described in the term sheet (the “Recapitalization Term Sheet”) attached to the Recapitalization Support Agreement. Pursuant to the Recapitalization Support Agreement, if the Company and Vestar fail to obtain a signed letter of intent for a Capital Contribution reasonably acceptable to the Required Consenting Subordinated Noteholders (as defined in the Recapitalization Support Agreement) on or before August 31, 2014, the Company must refrain from pursuing the Capital Contribution and must pursue the Recapitalization. Absent the Company obtaining the Capital Contribution and upon the effectiveness of the Recapitalization, the Subordinated Noteholder Claims (as defined in the Recapitalization Support Agreement) would be exchanged for 95% of the new equity interests in the reorganized Company, subject to dilution pursuant to a management incentive plan and new warrants as set forth in the Recapitalization Term Sheet, with existing equity holders receiving 5% of the new equity interests. Pursuant to the Recapitalization, existing equity holders of the Company will also receive warrants providing the right to acquire 10% of the equity in the reorganized Company at an exercise price corresponding to the principal amount of the Subordinated Notes outstanding plus accrued and unpaid interest as of the effective date of the Recapitalization. Further adjustments to the Recapitalization may be
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required to reflect any additional debt-to-equity conversion, new equity investments or senior debt that may be raised in connection with the consummation of the Recapitalization and the parties will work in good faith to further adjust the terms set forth in the Term Sheet to reflect the change in the value of each party’s recovery resulting from such required changes.
The Recapitalization Support Agreement may be terminated upon the occurrence of certain events, including: (a) certain breaches by the Company, Vestar, or the Consenting Subordinated Noteholders under the Recapitalization Support Agreement; (b) the failure to meet certain milestones related to implementing the Recapitalization and (c) a determination by the Company’s board of directors that continued performance under the Recapitalization Support Agreement would be inconsistent with the exercise of its fiduciary duties under applicable law.
Amendment to SFRO Credit Agreement
On July 22, 2014, 21C East Florida, LLC (“21C East Florida”), a Delaware limited liability company and South Florida Radiation Oncology Coconut Creek, LLC (“Coconut Creek”), each an indirect subsidiary of the Company, the several lenders and other financial institutions or entities from time to time parties thereto and Cortland Capital Market Services LLC as administrative agent and collateral agent (“Cortland”) entered into a first amendment (the “Amendment”) to the credit agreement among 21C East Florida, Coconut Creek, Cortland and the several lenders and other financial institutions or entities from time to time parties thereto, dated as of February 10, 2014 (the “Original Credit Agreement” and, as amended and restated by the Amendment, the “Credit Agreement”).
The Credit Agreement provides for an incremental $10.35 million term loan (the “Term A-1 Loan”) in favor of Coconut Creek issued for purposes of (i) refinancing approximately $5.64 million in existing capitalized lease obligations owing to First Financial Corporate Leasing, including a prepayment premium, (ii) repaying the approximately $2.55 million intercompany loan made by 21st Century Oncology, Inc., a Florida corporation (“21C”) and direct subsidiary of the Company, to pay the capitalized lease obligations owing to First Financial Corporate Leasing and (iii) pay fees, costs and expenses of the transactions related to the Amendment. In addition, the Amendment provides for the waiver of certain existing events of default under the Original Credit Agreement.
The Term A-1 Loan is subject to interest rates, for any interest period, at a rate per annum equal to a floating index rate per annum equal to LIBOR (provided that such rate shall not be less than 1.25% per annum), plus an applicable margin equal to 9.75% per annum.
The obligations of Coconut Creek under the Amendment are guaranteed (the “Guarantee”) by SFRO Holdings, LLC (“SFRO”), a Florida limited liability company of which Coconut Creek is a wholly owned subsidiary and certain of SFRO’s direct and indirect wholly owned subsidiaries. The obligations of Coconut Creek under the Amendment are secured by certain assets of Coconut Creek.
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements preceded by, followed by or that otherwise include the words “believes”, “expects”, “anticipates”, “intends”, “projects”, “estimates”, “plans”, “may increase”, “forecast” and similar expressions or future or conditional verbs such as “will”, “should”, “would”, “may” and “could” are generally forward-looking in nature and not historical facts. Forward-looking statements are based on management’s current expectations or beliefs about the Company’s future plans, expectations and objectives. These forward-looking statements are not historical facts and are subject to risks and uncertainties that could cause the actual results to differ materially from those projected in these forward-looking statements including, but not limited to reductions in Medicare reimbursement, healthcare reform, decreases in payments by managed care organizations and other commercial payers and other risk factors that may be described from time to time in the Company’s filings with the Securities and Exchange Commission. Readers of this release are cautioned not to place undue reliance on forward-looking statements contained herein, which speak only as of the date stated, or if no date is stated, as of the date of this Current Report. The Company
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undertakes no obligation to publicly update or revise the forward-looking statements contained herein to reflect changed events or circumstances after the date of this release, unless required by law.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Description |
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99.1 |
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Financing Information Disclosure. |
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SIGNATURES
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.
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21st CENTURY ONCOLOGY HOLDINGS, INC. |
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Date: July 29, 2014 |
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/s/ Daniel E. Dosoretz, M.D. |
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Name: |
Daniel E. Dosoretz, M.D. |
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Title: |
Chief Executive Officer |
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EXHIBIT INDEX
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Exhibit
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99.1 |
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Financing Information Disclosure. |
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Exhibit 99.1
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Financing
Information Disclosure July 2014
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This
presentation contains forward-looking statements. Such forward-looking
statements reflect, among other things, our current expectations and
anticipated results of operations, all of which are subject to known and
unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements, market trends, or industry results to
differ materially from those expressed or implied by such forward-looking
statements. Therefore, any statements contained herein that are not
statements of historical fact may be forward-looking statements and should be
evaluated as such. Without limiting the foregoing, the words “anticipates,”
“believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,”
“should,” “targets,” “will” and the negative thereof and similar words and
expressions are intended to identify forward-looking statements. These
forward-looking statements are subject to a number of risks, uncertainties and
assumptions, including those described in “Risk Factors” in our financial
statements filed with the SEC. Unless legally required, we assume no
obligation to update any such forward-looking information to reflect actual
results or changes in the factors affecting such forward-looking information.
This presentation includes certain non-GAAP financial measures, including Pro
Forma Adjusted EBITDA. These non-GAAP financial measures should be considered
only as supplemental to, and not as superior to, financial measures prepared
in accordance with GAAP. Before you invest, you should read the Company’s
financial reports, including any registration statement and other documents
it has filed with the SEC for more complete information about us and this
offering. You may obtain these documents for free by visiting EDGAR on the
SEC web site at www.sec.gov. The trademarks included herein are the property
of the owners thereof and are used for reference purposes only. Such use
should not be construed as an endorsement of the products or services of 21st
Century Oncology Holdings, Inc. The financial measures set forth in this
presentation are not necessarily comparable to those contained in the
Company’s financial statements filed with the SEC. These internal financial measures
have served a special use in conjunction with the activities described in the
8-K, for which this presentation is an exhibit. The Company does not intend
to provide this information to the public in the future. Disclaimer
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Monthly
Financial Results – 21C Consolidated ($ in millions) 21C Consolidated Monthly
Financial Results(1) (1) Includes results for SFRO starting post-acquisition
on 2/11/14. Includes consolidating financials for all MDLLC entities. (2)
Addback detail included in appendix. (3) Additional adjustment detail
included in the appendix. (4) Refers to 8-K filed on May 29, 2014. 3 21C Consolidated Monthly Financial Results(1) Jan. ‘14
Feb. ‘14 Mar. ‘14 Apr. ‘14 May. ‘14 Total Revenues Net
Patient Service Revenue $72.5 $75.4 $84.2 $89.6 $86.5 $408.1 Mgmt Fees 0.2
0.2 0.2 0.2 0.2 1.0 Other Revenue 1.8 1.5 2.5 1.4 1.8 9.0 Total Revenue $74.5 $77.1 $86.9 $91.2 $88.5
$418.1 Bad Debt 1.7 1.7 0.9 1.7 1.0 6.9 Net Revenue $72.8 $75.4 $86.0 $89.5 $87.5 $411.2 Expenses Salaries
and Benefits 43.7 41.5 45.8 49.2 47.8 228.0 Medical Supplies 6.1 6.8 8.8 8.6
8.1 38.4 Facility Rent Expense 4.6 5.3 5.6 5.8 5.8 27.1 Other Operating
Expenses 4.1 5.0 5.2 5.0 5.4 24.8 General and Administrative Expenses 8.5 9.3
12.6 9.5 11.3 51.3 Depreciation and Amortization 6.8 6.1 7.8 7.4 7.4 35.5 Total Expenses $73.8 $74.2 $85.8 $85.6
$85.7 $405.0 Operating Profit ($1.0) $1.2 $0.2 $3.9 $1.8 $6.2 Plus:
Depreciation and Amortization 6.8 6.1 7.8 7.4 7.4 35.5 Plus: Addbacks(2) 3.3
3.2 5.1 3.3 4.4 19.2 Pro Forma Adj.
EBITDA $9.1 $10.5 $13.0 $14.6 $13.6 $60.8 Memo: Q1 Pro Forma Adj.
EBITDA $32.6 Less: Additional Adjustments(3) (2.2) Reported Q1 Pro Forma Adj. EBITDA(4) $30.5
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Monthly
Financial Results – 21C Domestic Only ($ in millions) 21C Domestic Only
Monthly Financial Results (1) Addback detail included in appendix. 4 Jan. ‘14 Feb. ‘14 Mar. ‘14 Apr. ‘14 May. ‘14 Total
Revenues Net Patient Service Revenue $56.2 $53.2 $57.5 $59.8 $57.4
$284.1 Mgmt Fees 0.2 0.2 0.2 0.2 0.2 1.0 Other Revenue 0.9 0.8 1.3 0.7 0.7
4.3 Total Revenue $57.3 $54.1 $59.1
$60.6 $58.3 $289.4 Bad Debt 1.7 1.5 0.4 1.0 0.6 5.2 Net Revenue $55.6 $52.6 $58.7 $59.6 $57.7
$284.2 Expenses Salaries and Benefits 35.8 31.0 32.3 33.7 33.3 166.2
Medical Supplies 5.7 5.5 7.0 6.6 6.8 31.5 Facility Rent Expense 3.6 3.7 3.4
3.7 3.7 18.1 Other Operating Expenses 2.9 3.1 3.1 2.9 3.0 15.0 General and
Administrative Expenses 6.8 7.3 10.5 7.3 9.2 41.0 Depreciation and
Amortization 5.3 4.6 5.1 4.9 5.0 25.0 Total
Expenses $60.2 $55.3 $61.4 $59.1 $60.9 $296.9 Operating Profit ($4.6) ($2.7)
($2.7) $0.5 ($3.2) ($12.7) Plus: Depreciation and Amortization 5.3 4.6
5.1 4.9 5.0 25.0 Plus: Addbacks(1) 2.6 2.7 4.8 2.4 4.1 16.7 Pro Forma Adj. EBITDA $3.3 $4.7 $7.2 $7.9
$5.9 $29.1
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Monthly
Financial Results – OnCure ($ in millions) OnCure Monthly Financial Results
(1) Addback detail included in appendix. Jan. ‘14 Feb. ‘14 Mar. ‘14 Apr. ‘14 May. ‘14 Total
Revenues Net Patient Service Revenue $8.6 $8.5 $8.6 $9.3 $9.0 $44.0
Mgmt Fees — — — — — — Other Revenue 0.9 0.2 0.5 (0.1) 0.4 1.9 Total Revenue $9.6 $8.7 $9.1 $9.2 $9.4
$45.9 Bad Debt (0.1) 0.0 0.2 0.3 0.1 0.6 Net Revenue $9.6 $8.7 $8.9 $8.8 $9.3 $45.3 Expenses Salaries and
Benefits 4.9 4.3 4.2 5.2 4.0 22.5 Medical Supplies 0.1 0.1 0.1 0.1 0.1 0.6
Facility Rent Expense 0.6 0.6 0.6 0.6 0.6 3.1 Other Operating Expenses 0.4
0.5 0.7 0.7 0.7 3.1 General and Administrative Expenses 0.8 0.8 0.9 0.7 0.9
4.1 Depreciation and Amortization 1.2 1.2 1.2 1.4 1.4 6.2 Total Expenses $8.0 $7.6 $7.7 $8.7 $7.7
$39.7 Operating Profit $1.6 $1.2 $1.2 $0.1 $1.6 $5.6 Plus:
Depreciation and Amortization 1.2 1.2 1.2 1.4 1.4 6.2 Plus: Addbacks(1) 0.4
0.3 0.1 0.7 0.1 1.6 Pro Forma Adj.
EBITDA $3.2 $2.7 $2.5 $2.2 $3.0 $13.5
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Monthly
Financial Results – International Segment ($ in millions) International Segment
Monthly Financial Results(1) Approximately 80% of the Company’s fiscal year
2013 and YTD May 2014 International segment revenue, as well as approximate
Adjusted EBITDA, was generated from entities domiciled in Argentina. .
Unlevered and net cash flow year-to-date is ($4.4) million and ($0.1)
million, respectively (1) Represents consolidating financials for all
operating and non-operating entities of MDLLC. (2) Addback detail included in
appendix. International
Segment Monthly Financial Results(1) Jan. ‘14 Feb. ‘14
Mar. ‘14 Apr. ‘14 May. ‘14 Total Revenues Net Patient Service Revenue $7.6 $6.2 $7.4 $7.7 $8.0 $36.9 Mgmt
Fees — — — — — — Other Revenue 0.0 0.0 (0.0) 0.0 0.1 0.2 Total Revenue $7.6 $6.2 $7.3 $7.8 $8.1
$37.1 Bad Debt 0.0 0.0 0.1 0.0 0.1 0.2 Net Revenue $7.6 $6.2 $7.3 $7.7 $8.1 $36.8 Expenses Salaries and
Benefits 3.0 2.8 3.2 3.3 3.5 15.8 Medical Supplies 0.3 0.2 0.2 0.2 0.2 1.1
Facility Rent Expense 0.3 0.4 0.4 0.4 0.4 1.8 Other Operating Expenses 0.7
0.7 0.8 0.7 0.8 3.6 General and Administrative Expenses 0.9 0.8 0.9 0.9 0.8
4.2 Depreciation and Amortization 0.3 0.3 0.4 0.3 0.4 1.8 Total Expenses $5.5 $5.2 $5.8 $5.9 $5.9
$28.3 Operating Profit $2.0 $1.0 $1.5 $1.9 $2.2 $8.5 Plus:
Depreciation and Amortization 0.3 0.3 0.4 0.3 0.4 1.8 Plus: Addbacks(2) 0.3
0.1 0.1 0.1 0.1 0.7 Pro Forma Adj.
EBITDA $2.6 $1.5 $2.0 $2.3 $2.6 $11.0
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21C – Cash Flow
by Segment (January – May 2014) ($ in millions) 21C Cash Flow by Segment –
January-May 2014 (1) Reflects all adjustments associated with the SFRO
acquisition which closed in February 2014 (2) Represents consolidating
financials for all operating and non-operating entities of MDLLC. MDLLC
beginning cash balance includes $0.2m of restricted cash 21C Domestic OnCure SFRO(1) MDLLC(2)
Total Pro Forma Adjusted EBITDA $29.1 $13.5 $7.3 $11.0 $60.8 Less: Cash EBITDA Addbacks - One-Time (3.3) (1.1) — (0.0) (4.4)
Less: Cash EBITDA Addbacks - Transaction (5.4) — — (0.7) (6.1) Less: Cash
EBITDA Addbacks - Recurring (3.4) (0.2) — — (3.6) Less: Incr. in Working
Capital 7.2 (2.0) 0.7 (0.4) 5.6 Less: Capex (22.2) (4.9) (2.1) (5.9) (35.2)
Less: Practice Acquisitions (5.2) — (74.3) (3.5) (83.0) Less: NCI from
practice acquisition — — (28.4) (0.6) (29.1) Less: Intercompany/JV Activity
5.3 (4.8) (1.9) 4.1 2.6 Less: Other 1.8 (1.6) 5.5 (8.3) (2.6) Unlevered Cash Flows $3.8 ($1.1) ($93.3)
($4.4) ($95.0) Cash Flow from Financing Activities (Including Interest
Expense) Less: Cash Interest on Debt and Capital Leases (40.9) (0.1)
(0.8) (0.4) (42.1) Less: Other Debt Changes Net Capital Lease Changes 4.9
(0.9) 32.7 (0.2) 36.5 Obligation Under Sr Credit Facility 29.5 — — — 29.5
Purchase Money Indebtedness 7.4 — — — 7.4 SFRO Term A / Term B — — 65.2 —
65.2 Net Finance Obligations (0.4) — — 4.9 4.5 Subtotal 41.3 (0.9) 98.0 4.7
143.1 Total Cash Flow from Financing
Activities $0.4 ($1.0) $97.2 $4.4 $101.1 Net Cash Flow $4.3 ($2.1) $3.9
($0.1) $6.1 Beginning Cash Balance $8.9 $4.9 — $3.7 $17.5 Net Cash
Flow 4.3 (2.1) 3.9 (0.1) 6.1 Ending
Cash Balance $13.1 $2.9 $3.9 $3.6 $23.5
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Historical and
Forecasted 21C U.S. Combined Liquidity ($ in millions) Historical and
Forecasted 21C U.S. Combined Liquidity The liquidity summary below represents
21C Domestic and OnCure only (SFRO and International segment are excluded).
Included in the cash flow information are payments associated with one-time,
other non-recurring or additional payments due to weekly timing that make the
cash flows over the period lower than expected “run-rate” net cash flows;
these amounts on a net basis during the full period impact the cash flows
below negatively by approximately $11 million (as outlined in the
non-recurring operating adjustments line) Historical and Forecasted 21C U.S.
Combined Liquidity 3-Weeks 4-Weeks Ended Ended Total 27-Jun 25-Jul 22-Aug
19-Sep 10-Oct Beginning Book Cash $15.6 $17.1 $37.9 $25.7 $21.5 $15.6 Total Receipts 63.3 63.2 60.6 58.3 45.2 290.6 Total Operating
Expenses (32.2) (17.3) (25.7) (27.0) (19.3) (121.6) Total Employee Costs
(26.7) (31.5) (37.7) (29.4) (24.9) (150.3) Operating Cash Flows 4.4 14.3 (2.8) 1.8 1.0 $18.8 Non-Recurring
Operating Adjustments - (0.9) (2.1) (3.5) (4.7) (11.2) Adjusted Operating Cash Flows 4.4 13.5
(4.9) (1.7) (3.7) $7.6 Total Non-Operating Disbursements (and Other)
(3.0) (10.2) (7.3) (2.5) (5.3) (28.2) Total
Net Cash Flows $1.5 $3.3 ($12.2) ($4.1) ($9.0) ($20.5) Financing
Activity - 17.5 - - - 17.5 Ending
Book Cash $17.1 $37.9 $25.7 $21.5 $12.6 $12.6
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Appendix 9
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Addback Detail
– 21C Consolidated ($ in millions) 21C Consolidated(1) (1) Includes results
for SFRO starting post-acquisition on 2/11/14. Includes consolidating
financials for all of MDLLC entities. (2) Includes Stock Compensation,
Amortization of Straight-Line Rent, Non-Cash Equipment Rent. (3) Includes
Severance Payments Related to Termination of Employee Staff Reductions and
Tail Premiums Paid on Terminated Physicians. (4) Management fees for 2014
have not yet been paid in cash. (3) (2) (4) 21C Consolidated(1) Jan. ‘14
Feb. ‘14 Mar. ‘14 Apr. ‘14 May. ‘14 Total Non-Cash Addbacks (One-Time): Loss on Sale Leaseback Transaction
0.1 - - - - 0.1 Fair Value Adjustment of Earn-Out Liability 0.1 0.1 0.1 0.1
0.1 0.3 (Gain) Loss on Foreign Currency Derivative Contracts - - (0.0) - -
(0.0) Total Non-Cash Addbacks
(One-Time) $0.2 $0.1 $0.1 $0.1 $0.1 $0.5 Non-Cash Addbacks
(Recurring): Sale-Lease Back Adjustments - - (0.3) - - (0.3) Non-Cash
Expenses(2) 0.4 0.4 0.0 0.5 0.4 1.6 Loss on Sale of Assets (0.0) 0.1 (0.0)
0.0 0.0 0.0 Unconsolidated JV Income 0.0 0.0 (0.0) 0.0 0.1 0.1 Total Non-Cash Addbacks (Recurring) $0.3 $0.5
($0.3) $0.5 $0.5 $1.4 Non-Cash Physician Incentive Accrual $0.6 $0.6 $0.6
$0.6 $0.6 $3.1 Cash Addbacks (One-Time): Litigation Settlement 0.0 0.0
0.7 0.1 0.9 1.7 Tradename / Rebranding Initiative 0.0 0.1 0.2 0.1 0.1 0.5
Donation - - - 0.2 - 0.2 Other Expenses(3) 0.6 0.3 0.2 0.9 0.1 2.0 Total Cash Addbacks (One-Time) $0.6 $0.5
$1.1 $1.2 $1.1 $4.4 Acquisition-Related Costs $0.8 $0.9 $2.8 $0.5 $1.2 $6.1 Cash
Addbacks (Recurring): Management Fees(4) 0.1 0.1 0.1 0.1 0.1 0.3 Expenses
Associated with Idle / Closed Treatment Facilities 0.4 0.4 0.4 0.2 0.7 2.1
Other G&A Expense 0.2 0.2 0.3 0.2 0.2 1.2 Distribution from
unconsolidated JV - - 0.1 0.0 - 0.1 Total
Cash Addbacks (Recurring) $0.7 $0.7 $0.8 $0.5 $1.0 $3.6 Total Addbacks $3.3
$3.2 $5.1 $3.3 $4.4 $19.2 Q1 Reconciliation to 8-K Filed on May 29,
2014: Total (Q1) Deduction for Non-Controlling Interest ($0.9) Pro Forma Full Period Effect
of Acquisition EBITDA 0.7 Unconsolidated JV Income (0.0) Distribution from
Unconsolidated JV (0.1) Non-Cash Physician Incentive Accrual (1.9) Other
(0.0) Total Additional Adjustments
($2.2)
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Addback Detail
– 21C Domestic Only ($ in millions) 21C Domestic Only (1) Includes Stock
Compensation, Amortization of Straight-Line Rent, Non-Cash Equipment Rent.
(2) Includes Severance Payments Related to Termination of Employee Staff
Reductions and Tail Premiums Paid on Terminated Physicians. (3) Management
fees for 2014 have not yet been paid in cash. (1) (2) (3) (4) 21C Domestic Only Jan. ‘14
Feb. ‘14 Mar. ‘14 Apr. ‘14 May. ‘14 Total Non-Cash Addbacks (One-Time): Loss on Sale Leaseback Transaction
0.1 - - - - 0.1 Fair Value Adjustment of Earn-Out Liability - - - - - -
(Gain) Loss on Foreign Currency Derivative Contracts - - (0.0) - - (0.0) Total Non-Cash Addbacks (One-Time) $0.1 -
($0.0) - - $0.1 Non-Cash Addbacks (Recurring): Sale-Lease Back
Adjustments - - (0.3) - - (0.3) Non-Cash Expenses (1) 0.3 0.4 (0.0) 0.4 0.3
1.4 Loss on Sale of Assets (0.0) 0.1 0.0 0.0 0.0 0.1 Unconsolidated JV Income
0.0 0.0 (0.0) 0.0 0.1 0.1 Total
Non-Cash Addbacks (Recurring) $0.3 $0.5 ($0.3) $0.4 $0.5 $1.3 Non-Cash
Physician Incentive Accrual $0.6 $0.6 $0.6 $0.6 $0.6 $3.1 Cash
Addbacks (One-Time): Litigation Settlement 0.0 0.0 0.7 0.1 0.9 1.7 (4)
Tradename / Rebranding Initiative 0.0 0.1 0.2 0.1 0.1 0.5 Donation - - - 0.2
- 0.2 Other Expenses(2) 0.4 0.1 0.1 0.2 0.1 0.9 Total Cash Addbacks (One-Time) $0.4 $0.3 $1.1 $0.5 $1.1 $3.3
Acquisition-Related Costs $0.6 $0.7 $2.7 $0.4 $1.0 $5.4 Cash Addbacks
(Recurring): Management Fees(3) 0.1 0.1 0.1 0.1 0.1 0.3 Expenses Associated
with Idle / Closed Treatment Facilities 0.3 0.3 0.4 0.2 0.7 1.9 Other G&A
Expense 0.2 0.2 0.3 0.2 0.2 1.2 Distribution from unconsolidated JV - - 0.1
0.0 - 0.1 Total Cash Addbacks
(Recurring) $0.6 $0.6 $0.8 $0.5 $0.9 $3.4 Total Addbacks $2.6 $2.7 $4.8 $2.4
$4.1 $16.7
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Addback Detail
– OnCure ($ in millions) OnCure Monthly (1) Includes Stock Compensation,
Amortization of Straight-Line Rent, Non-Cash Equipment Rent. (2) Includes
Severance Payments Related to Termination of Employee Staff Reductions and
Tail Premiums Paid on Terminated Physicians. (3) Management fees for 2014
have not yet been paid in cash. Jan. ‘14 Feb. ‘14 Mar. ‘14 Apr. ‘14 May. ‘14 Total Non-Cash Addbacks (One-Time): Loss on Sale Leaseback Transaction
- - - - - - Fair Value Adjustment of Earn-Out Liability 0.1 0.1 0.1 0.1 0.1
0.3 (Gain) Loss on Foreign Currency Derivative Contracts - - - - - - Total Non-Cash Addbacks (One-Time) $0.1 0.1
$0.1 0.1 0.1 $0.3 Non-Cash Addbacks (Recurring): Sale-Lease Back
Adjustments - - - - - - Non-Cash Expenses (1) 0.0 0.0 0.0 0.0 0.0 0.0 Loss on
Sale of Assets - - (0.0) - - (0.0) Unconsolidated JV Income - - - - - - Total Non-Cash Addbacks (Recurring) $0.0
$0.0 ($0.0) $0.0 $0.0 $0.0 Cash Addbacks (One-Time): Litigation
Settlement - - - - - - Tradename / Rebranding Initiative - - 0.0 0.0 0.0 0.0
Donation - - - - - - Other Expenses(2) 0.2 0.2 0.0 0.6 0.0 1.1 Total Cash Addbacks (One-Time) $0.2 $0.2
$0.0 $0.6 $0.0 $1.1 Acquisition-Related Costs $0.0 $0.0 $0.0 $0.0 $0.0 - Cash
Addbacks (Recurring): Management Fees(3) - - - - - Expenses Associated with
Idle / Closed Treatment Facilities 0.1 0.1 0.0 0.0 0.0 0.2 Other G&A
Expense - - - - - - Distribution from unconsolidated JV - - - - - - Total Cash Addbacks (Recurring) $0.1 $0.1
$0.0 $0.0 $0.0 $0.2 Total Addbacks $0.4 $0.3 $0.1 $0.7 $0.1 $1.6
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Addback Detail
– International Segment ($ in millions) International Segment(1) (1) Includes
consolidating financials for all of MDLLC entities. (2) Includes Stock
Compensation, Amortization of Straight-Line Rent, Non-Cash Equipment Rent.
(3) Includes Severance Payments Related to Termination of Employee Staff
Reductions and Tail Premiums Paid on Terminated Physicians. Jan. ‘14 Feb. ‘14
Mar. ‘14 Apr. ‘14 May. ‘14 Total Non-Cash Addbacks (One-Time): Loss on Sale Leaseback Transaction
- - - - - - Fair Value Adjustment of Earn-Out Liability - - - - - - (Gain)
Loss on Foreign Currency Derivative Contracts - - - - - - Total Non-Cash Addbacks (One-Time) - - - -
- - Non-Cash Addbacks (Recurring): Sale-Lease Back Adjustments - - - -
- - Non-Cash Expenses(2) - - - - - - Loss on Sale of Assets - - - - (0.0)
(0.0) Unconsolidated JV Income - - - - - - Total Non-Cash Addbacks (Recurring) - - - - ($0.0) ($0.0) Cash
Addbacks (One-Time): Litigation Settlement - - - - - - Tradename / Rebranding
Initiative - - - - - - Donation - - - - - - Other Expenses (3) 0.0 - 0.0 -
0.0 0.0 Total Cash Addbacks
(One-Time) $0.0 - $0.0 - $0.0 $0.0 Acquisition-Related Costs $0.2 $0.1 $0.1
$0.1 $0.1 $0.7 Cash Addbacks (Recurring): Expenses Associated with
Idle / Closed Treatment Facilities - - - - - - Other G&A Expense - - - -
- - Distribution from unconsolidated JV - - - - - - Total Cash Addbacks (Recurring) - - - - - - Total Addbacks $0.3 $0.1
$0.1 $0.1 $0.1 $0.7
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