Total Renal Care slates secondary offering: it will issue 8 million shares for $237 million (Total Renal Care Holdings Inc.)

TORRANCE - Total Renal Care Holdings Inc., a provider of kidney dialysis services, plans a secondary offering of $237.5 million to help finance aggressive growth plans, according to papers filed with the Securities and Exchange Commission.

The company will issue 8.05 million shares, slated at $29.50 a share. Net proceeds of the offering will be used to pay down debt and to finance acquisitions and expansion, according to the filing.

Total Renal, already traded on the Big Board, operates 108 outpatient dialysis centers, and inpatient services at 72 hospitals. It has acquired or started 71 outpatient clinics since 1994.

Victor M.G. Chaltiel, well-known in Southland health care circles for his stints as CEO at Abbey Healthcare Group Inc. (1993-1994), and as chairman and CEO at Total Pharmaceutical Care Inc. (1989-1993), is chairman and chief executive of Total Renal.

Chaltiel was also chief operating officer at Salick Health Care Inc. from 1985 to 1988.

In the fiscal year ended May 31, 1995, Total Renal posted net income of $4.85 million on revenues of $99 million. (The company changed its fiscal year in 1995 to end at Dec. 31 instead of May 31.)

Simple procedure

For the quarter ended Dec. 31, 1995, the company posted net income of $3.29 million on revenues of $41.3 million.

Conceptually, Total Renal's business is fairly simple. In a nutshell, when a patient's kidneys fail, he or she must regularly visit a hospital or outpatient center to be hooked up to a dialysis machine, which cleans the patient's blood, imitating the action of kidneys.

Total Renal owns and operates renal dialysis machines in outpatient clinics or hospitals, and charges an average of roughly $230 per visit. In the quarter ended Dec. 31, Total Renal recorded 179,807 patient visits.

The market for renal dialysis is growing, according to the filing. From 1982 to 1994, the number of dialysis patients increased by 9 percent a year, annually compounded, to reach a total 187,000 patients nationwide.

The aging U.S. population, and longer survival of patients with such diseases as hypertension, diabetes and other chronic illnesses, should spur market size in years ahead, according to the filing.

The 2,000-employee Total Renal went public in October 1995 with a $107 million initial public offering. It was formed in 1994, to acquire the renal dialysis operations of the former, Santa Monica-based National Medical Enterprises health care empire.

Total Renal issued $100 million in discounted bonds in 1994 to finance the acquisition of NME renal care operations, and gained further financing from the 1995 IPO.

(In the wake of federal investigations, charges and settlements, the old National Medical Enterprises has disappeared, with the headquarters shifted to Dallas, under the banner of Tenet Healthcare Corp.)

Total Renal is essentially a heavy government contractor. In the fiscal year ended May 31, 1995, ity received 67 percent of its revenues from the federal Medicare (health program for the aged) and Medicaid (program for the poor) reimbursements.