Business Context and Reporting Period
This Form 8-K is filed by Total Renal Care Holdings, Inc. (TRCH) on August 17, 2000. The report discloses a change in the company's independent certifying accountant. The registrant is incorporated in Delaware and maintains its principal executive offices in Torrance, California.
Key Financial Metrics
The filing does not provide specific revenue, profit, cash flow, or margin figures for the current period. However, it references historical financial conditions:
- Debt Covenants: As of December 31, 1999, TRCH was not in compliance with certain debt covenants, leading to a "going concern" explanatory paragraph in the audit report.
- Liquidity Status: A restructuring of credit facilities was completed on July 14, 2000, bringing the company into compliance with its credit facility covenants.
- Restatements: The 1998 consolidated financial statements were restated, and the 1998 audit report was updated to reference non-compliance with debt covenants as of December 31, 1999.
Material Changes
The primary material change reported is the dismissal of PricewaterhouseCoopers LLP (PWC) as the independent audit firm on August 17, 2000, and the engagement of KPMG LLP as the new certifying accountant effective August 22, 2000. Additionally, the company has resolved its previous non-compliance with debt covenants following a credit facility restructuring in July 2000.
Management Commentary, Risks, and Contingencies
Accountant Change Rationale: The decision to change auditors was recommended by the Audit Committee and approved by the Board of Directors. There were no disagreements with PWC regarding accounting principles, financial statement disclosure, or auditing scope during the two fiscal years ended December 31, 1999, or the interim period through August 17, 2000.
Reportable Conditions: PWC informed the Audit Committee on May 20, 2000, of a reportable condition existing during fiscal year 1999 (but not at year-end closing) relating to the reconciliation of general ledger control accounts. This did not result in a disagreement between the company and the auditor.
Risks: The filing highlights the historical risk of default due to debt covenant non-compliance, which has since been mitigated by the July 2000 restructuring.
Investor Verification Checklist
- Verify the details of the credit facility restructuring completed on July 14, 2000, to ensure ongoing compliance.
- Review the attached letter from PricewaterhouseCoopers LLP (Exhibit 16) for any dissenting opinions regarding the change.
- Confirm the status of the general ledger control account reconciliation issue identified by PWC in May 2000.
- Monitor the transition of audit responsibilities from PWC to KPMG LLP effective August 22, 2000.