-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QHLnXwytcsD/I7KuKWdxaJIPEcUXqzicQr3Rd+9Oy53rvhPjJFXmons9YZ0dVxNV bKCSfDv4L8LI4m9hqRFQmg== /in/edgar/work/0000950135-00-004988/0000950135-00-004988.txt : 20001114 0000950135-00-004988.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950135-00-004988 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRESENIUS MEDICAL CARE HOLDINGS INC /NY/ CENTRAL INDEX KEY: 0000042872 STANDARD INDUSTRIAL CLASSIFICATION: [3841 ] IRS NUMBER: 133461988 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03720 FILM NUMBER: 761192 BUSINESS ADDRESS: STREET 1: TWO LEDGEMONT CENTER STREET 2: 95 HAYDEN AVE CITY: LEXINGTON STATE: MA ZIP: 02420 BUSINESS PHONE: 6174029000 FORMER COMPANY: FORMER CONFORMED NAME: FRESENIUS NATIONAL MEDICAL CARE HOLDINGS INC DATE OF NAME CHANGE: 19961015 FORMER COMPANY: FORMER CONFORMED NAME: GRACE W R & CO /NY/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: GRACE W R & CO /CT/ DATE OF NAME CHANGE: 19900423 10-Q 1 b37213fme10-q.txt FRESENIUS MEDICAL CARE HOLDINGS, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 2000 ------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM ____________________TO__________________ COMMISSION FILE NUMBER: 1-3720 FRESENIUS MEDICAL CARE HOLDINGS, INC. ------------------------------------------------------ (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW YORK 13-3461988 - ---------------------------------------------- ------------------------ (State or Other Jurisdiction of Incorporation) (I.R.S. Employer ID No.) 95 HAYDEN AVENUE, LEXINGTON, MA 02420 --------------------------------------- ---------- (Address of Principal Executive Office) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 781-402-9000 ---------------------------------------------------------------- - -------------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicated by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- 1 2 APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of the date hereof, 90,000,000 shares of common stock, par value $1.00 per share, are outstanding, all of which are held by Fresenius Medical Care AG. 2 3 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES TABLE OF CONTENTS PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS PAGE Unaudited Consolidated Statements of Operations................ 4 Unaudited Consolidated Statements of Comprehensive Income...... 5 Unaudited Consolidated Balance Sheets......................... 6 Unaudited Consolidated Statements of Cash Flows............... 7 Notes to Unaudited Consolidated Financial Statements.......... 9 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................... 17 ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................................................... 22 PART II: OTHER INFORMATION ITEM 1: Legal Proceedings............................................. 23 ITEM 6: Exhibits and Reports on Form 8-K.............................. 26 3 4 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES UNAUDITED, CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- ------------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- NET REVENUES Health care services................................ $ 669,614 $ 587,314 $ 1,940,284 $ 1,714,051 Medical supplies.................................... 125,080 124,536 360,249 368,405 ----------- ----------- ----------- ----------- 794,694 711,850 2,300,533 2,082,456 ----------- ----------- ----------- ----------- EXPENSES Cost of health care services........................ 457,381 392,763 1,306,030 1,145,943 Cost of medical supplies............................ 86,630 84,963 257,333 253,763 General and administrative expenses................. 67,066 71,328 208,503 204,880 Provision for doubtful accounts..................... 17,301 5,669 44,608 25,398 Depreciation and amortization....................... 55,576 53,931 165,732 162,019 Research and development............................ 1,001 1,067 3,199 3,104 Interest expense, net and related financing cost including $28,459 and $23,250 for the three months and $82,444 and $64,795 for the nine months ended, respectively of interest with affiliates........................................ 46,892 49,524 143,279 152,154 Interest expense on settlement of investigation, net............................................... 7,951 -- 21,802 -- Special charge for settlement of investigation and related costs..................................... -- 590,000 -- 590,000 ----------- ---------- ---------- ----------- 739,798 1,249,245 2,150,486 2,537,261 ----------- ---------- ---------- ----------- INCOME (LOSS) BEFORE INCOME TAXES ..................... 54,896 (537,395) 150,047 (454,805) PROVISION BENEFIT FOR INCOME TAXES..................... 27,227 (150,190) 74,114 (106,631) ----------- ----------- ----------- ----------- NET INCOME (LOSS)...................................... $ 27,669 $ (387,205) $ 75,933 $ (348,174) =========== =========== =========== =========== Basic and fully dilutive earnings per share Net Income (loss)................................... $ 0.31 $ (4.30) $ 0.84 $ (3.87)
See accompanying Notes to Unaudited, Consolidated Financial Statements. 4 5 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES UNAUDITED, CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------- ------------------------- 2000 1999 2000 1999 ------- -------- ------- -------- NET INCOME (LOSS)................................ $ 27,669 $(387,205) $ 75,933 $(348,174) Other comprehensive income Foreign currency translation adjustments...... (115) (138) 26 (611) -------- --------- -------- --------- Total other comprehensive income.............. (115) (138) 26 (611) -------- --------- -------- --------- COMPREHENSIVE INCOME (LOSS)...................... $ 27,554 $(387,343) $ 75,959 $(348,785) -------- --------- -------- ---------
5 6 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31, 2000 1999 ----------- ----------- ASSETS (UNAUDITED) ------ Current Assets: Cash and cash equivalents...................... $ 8,881 $ 12,563 Accounts receivable, less allowances of $75,176 and $63,012................................. 381,639 295,235 Inventories.................................... 181,261 183,112 Deferred income taxes.......................... 151,819 219,454 Other current assets........................... 163,727 130,771 IDPN accounts receivable....................... 10,378 53,962 ----------- ----------- Total Current Assets........................ 897,705 895,097 ----------- ----------- Properties and equipment, net..................... 438,892 428,793 ----------- ----------- Other Assets: Excess of cost over the fair value of net assets acquired and other intangible assets, net of accumulated amortization of $529,073 and $424,704................................ 3,244,737 3,265,491 Other assets and deferred charges.............. 53,573 49,998 Non-current IDPN accounts receivable........... -- 5,189 ----------- ----------- Total Other Assets.......................... 3,298,310 3,320,678 ----------- ----------- Total Assets...................................... $ 4,634,907 $ 4,644,568 =========== =========== LIABILITIES AND EQUITY ---------------------- Current Liabilities: Note payable for settlement of investigation... $ 120,014 $ -- Current portion of long-term debt and capitalized lease obligations............... 151,505 142,110 Current portion of borrowing from affiliates... 634,146 372,949 Accounts payable............................... 116,141 133,337 Accrued settlement............................. -- 386,815 Accrued liabilities............................ 240,929 291,358 Net accounts payable to affiliates............. 17,989 12,361 Accrued income taxes........................... 21,692 12,433 ----------- ----------- Total Current Liabilities................... 1,302,416 1,351,363 Long-term debt.................................... 671,153 615,065 Non-current borrowings from affiliates............ 786,865 788,506 Capitalized lease obligations..................... 969 1,190 Deferred income taxes............................. 122,636 134,310 Accrued settlement................................ -- 85,920 Other liabilities................................. 53,885 46,153 ----------- ----------- Total Liabilities.............................. 2,937,924 3,022,507 ----------- ----------- Equity: Preferred stock, $100 par value................ 7,412 7,412 Preferred stock, $.10 par value ............... 8,906 8,906 Common stock, $1 par value; 300,000,000 shares authorized; outstanding 90,000,000............. 90,000 90,000 Paid in capital................................... 1,942,387 1,943,034 Retained deficit.................................. (352,160) (427,703) Accumulated comprehensive income.................. 438 412 ----------- ----------- Total Equity................................... 1,696,983 1,622,061 ----------- ----------- Total Liabilities and Equity....................... $ 4,634,907 $ 4,644,568 =========== ===========
See accompanying Notes to Unaudited, Consolidated Financial Statements. 6 7 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES UNAUDITED, CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, ----------------------------- 2000 1999 ----------- ----------- Cash Flows from Operating Activities: Net Income (loss)............................................ $ 75,933 $ (348,174) Adjustments to reconcile net income (loss) to net cash from operating activities: Depreciation and amortization............................. 165,732 162,019 Provision for doubtful accounts........................... 44,608 25,398 Deferred income taxes..................................... 55,961 (151,208) Loss on disposal of properties and equipment.............. 512 363 Changes in operating assets and liabilities, net of effects of purchase acquisitions and foreign exchange: Increase in accounts receivable.............................. (147,976) (81,110) Decrease (increase) in inventories........................... 2,847 (1,739) Increase in other current assets............................. (30,944) (28,322) Decease in IDPN accounts receivable.......................... 48,773 -- Decrease in other assets and deferred charges................ 6,403 1,832 (Decrease) increase in accounts payable...................... (17,271) 12,407 Increase in accrued income taxes............................. 9,259 37,505 (Decrease) increase in accrued liabilities................... (50,973) 545,397 Increase in other long-term liabilities...................... 7,732 14,602 Net changes due to/from affiliates........................... 5,628 3,038 Other, net................................................... 1,016 (7,261) ----------- ----------- Net cash provided by operating activities....................... 177,240 184,747 ----------- ----------- Cash Flows from Investing Activities: Capital expenditures......................................... (64,739) (54,096) Payments for acquisitions, net of cash acquired.............. (105,125) (64,744) ----------- ----------- Net cash used in investing activities........................... (169,864) (118,840) ----------- ----------- Cash flows from Financing Activities: Payments on settlement of investigation...................... (352,721) -- Net increase in borrowings from affiliates................... 259,556 131,907 Cash dividends paid.......................................... (390) (390) Proceeds on issuance of debt................................. -- 37 Proceeds from receivable financing facility.................. 17,800 29,400 Net increase (decrease) on debt and capitalized leases....... 65,262 (205,682) Other net.................................................... (647) (94) ----------- ----------- Net cash used in financing activities........................... (11,140) (44,822) ----------- ----------- Effects of changes in foreign exchange rates.................... 82 (544) ----------- ----------- Change in cash and cash equivalents............................. (3,682) 20,541 ----------- ----------- Cash and cash equivalents at beginning of period................ 12,563 6,579 ----------- ----------- Cash and cash equivalents at end of period...................... $ 8,881 $ 27,120 =========== ===========
See accompanying Notes to Unaudited, Consolidated Financial Statements 7 8 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES UNAUDITED, CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) NINE MONTHS ENDED SEPTEMBER 30, ------------------------ 2000 1999 --------- --------- Supplemental disclosures of cash flow information: Cash paid during the period for: Interest........................................... $ 159,968 $ 152,281 Income taxes paid, net............................. 9,356 7,968 Details for Acquisitions: Assets acquired.................................... 105,745 64,765 Liabilities assumed................................ 620 21 --------- --------- Net cash paid for acquisitions..................... $ 105,125 $ 64,744 ========= ========= See accompanying Notes to Unaudited Consolidated Financial Statements 8 9 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO UNAUDITED, CONSOLIDATED INTERIM FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE 1. THE COMPANY Fresenius Medical Care Holdings, Inc., a New York corporation ("the Company") is a subsidiary of Fresenius Medical Care AG, a German corporation ("FMC" or "Fresenius Medical Care"). The Company conducts its operations through five principal subsidiaries, National Medical Care, Inc., a Delaware corporation ("NMC"); Fresenius USA Marketing Inc., and Fresenius USA Manufacturing Inc., Delaware corporations and Fresenius USA Inc., a Massachusetts corporation (collectively, "Fresenius USA" or "FUSA") and SRC Holding Company, Inc., a Delaware corporation ("SRC"). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, NMC, FUSA, and SRC and those financial statements where the Company controls professional corporations in accordance with Emerging Issues Task Force Issue 97-2. The Company is primarily engaged in (i) providing kidney dialysis services, clinical laboratory testing and renal diagnostic services, and (ii) manufacturing and distributing products and equipment for dialysis treatment. BASIS OF PRESENTATION BASIS OF CONSOLIDATION The consolidated financial statements in this report at September 30, 2000 and 1999 and for the three and nine month periods then ended are unaudited and should be read in conjunction with the consolidated financial statements in the Company's 1999 report on Form 10-K. Such interim financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of the interim periods presented. Certain amounts in the prior periods' consolidated financial statements have been reclassified to conform to the current periods' basis of presentation. The results of operations for the three and nine month periods ended September 30, 2000 are not necessarily indicative of the results of operations for the fiscal year ending December 31, 2000. All intercompany transactions and balances have been eliminated in consolidation. EARNINGS PER SHARE SFAS No. 128, Earnings per Share, requires the presentation of basic earnings per share and diluted earnings per share. Basic earnings per share are computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the year. Diluted earnings per share includes the effect of all dilutive potential common shares that were outstanding during the year. The number of shares used to compute basic and diluted earnings per share was 90,000 in all periods as there were no potential common shares and no adjustments to income to be considered for purposes of the diluted earnings per shares calculation. THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------- ----------------- 2000 1999 2000 1999 ------ ------ ------ ------ The weighted average number of shares of Common Stock were as follows........... 90,000 90,000 90,000 90,000 ====== ====== ====== ====== 9 10 Income (loss) used in the computation of earnings per share is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------- -------------------- 2000 1999 2000 1999 -------- --------- ------- --------- CONSOLIDATED Net Income (loss)........................ $ 27,669 $(387,205) $75,933 $(348,174) Dividends paid on preferred stocks....... (130) (130) (390) (390) -------- --------- ------- --------- Income (loss) used in per share computation of earnings................ $ 27,539 $(387,335) $75,543 $(348,564) ======== ========= ======= ========= Basic and fully dilutive earnings per share.................................. $ 0.31 $ (4.30) $ 0.84 $ (3.87) ======== ========= ======= =========
NEW PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as "derivatives") and for hedging activities. This statement requires that an entity recognizes all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The statement also sets forth the criteria for determining whether a derivative may be specifically designated as a hedge of a particular exposure with the intent of measuring the effectiveness of that hedge in the statement of operations. In June 1999, the Financial Accounting Standards Board issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities, which amended the effective date of SFAS No. 133. The amended SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The Company is currently reviewing the impact of SFAS No. 137 on its results of operations. In December 1999, the United States Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements ("SAB 101"). SAB 101 provides the staff's views in applying generally accepted accounting principles to selected revenue recognition issues, as well as examples of how the staff applies revenue recognition guidance to specific circumstances. In June 2000, SAB 101B was issued by the SEC further delaying the date of SAB 101 until the fourth quarter of the fiscal year beginning after December 15, 1999. The Company believes that SAB 101 will not have a material impact on the Company's financial position and results of operations. In May 2000, the Emerging Issues Task Force ("EITF") issued EITF 00-014, Accounting for Certain Sales Incentives, which establishes accounting for point of sales coupons, rebates, and free merchandise. This EITF requires that an entity report these sales incentives that reduce the price paid to be netted directly against revenues. EITF 00-014 is effective no later than the fourth quarter of fiscal year beginning after December 15, 1999. The Company is currently reviewing the impact of EITF 00-014 on its results of operations. In September 2000, the Financial Accounting Standards Board issued SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, which replaces SFAS No. 125. SFAS No. 140 provides the accounting and reporting standards for securitizations and other transfers of financial assets and collateral. These standards are based on consistent application of a financial-components approach that focuses on control. This Statement also provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. SFAS No. 140 is effective for transfers after March 31, 2001 and is effective for disclosures about securitizations and collateral for fiscal years ending after December 15, 2000. The Company is currently reviewing the impact of SFAS No. 140 on its results of operations. 10 11 NOTE 2. INVENTORIES SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------ Inventories: Raw materials.................................... $ 44,098 $ 41,045 Manufactured goods in process.................... 11,488 8,748 Manufactured and purchased inventory available for sale....................................... 80,725 90,748 -------- -------- 136,311 140,541 Health care supplies............................. 44,950 42,571 -------- -------- Total....................................... $181,261 $183,112 ======== ======== NOTE 3. DEBT SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------ Notes payable and long-term debt to outside parties consists of: NMC Credit Facility ............................... $807,900 $738,150 Note payable for settlement of investigation....... 120,014 -- Third-party debt, primarily bank borrowings at various interest rates with various maturities.. 14,467 17,454 -------- -------- 942,381 755,604 Less amounts classified as current ................ 271,228 140,539 -------- -------- $671,153 $615,065 ======== ======== SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------ Non current borrowings from affiliates consists of: Fresenius Medical Care AG non-current borrowings primarily at interest rates approximating 7.42 - 7.75%................................... $ 209,000 $ 42,949 Fresenius AG non-current borrowing at interest rates approximating 7.42 - 7.46%.............. 209,850 330,000 Fresenius Medical Care Trust Finance S.a.r.l. at interest rates of 8.43% and 9.25% ............. 786,524 786,524 Franconia Acquisition, LLC at interest rates approximating 6.89 - 6.91%..................... 214,624 -- Other.............................................. 1,013 1,982 ---------- ---------- 1,421,011 1,161,455 Less amounts classified as current ................ 634,146 372,949 ---------- ---------- Total.............................................. $ 786,865 $ 788,506 ========== ========== Franconia Acquisition, LLC is a wholly owned subsidiary of Fresenius Medical Care AG. In March 2000, the Company entered into demand notes payable to Franconia Acquisition, LLC totaling $344.2 million. The balance due at September 30, 2000 is $214.6 million and bears interest at rates approximating 6.89% to 6.91%. 11 12 NOTE 4. SPECIAL CHARGE FOR SETTLEMENT OF INVESTIGATION AND RELATED COSTS On January 18, 2000, the Company, NMC and certain affiliated companies executed definitive agreements (the "Settlement Agreements") with the United States Government (the "Government") to settle (i) matters concerning violations of federal laws and (ii) NMC's claims with respect to outstanding Medicare receivables for nutrition therapy (collectively, the "Settlement"). Under the Settlement with the Government, the Company entered into a note payable for the settlement payment obligations to the Government. Interest on installment payments to the Government will accrue at 6.3% on $51.2 million of the obligation and at 7.5% annually on the balance, until paid in full. In February 2000, the Company made initial payments to the Government totaling $286.4 million. The remaining obligations will be paid in six quarterly installments which began in April 2000 and will end in July 2001. The first four quarterly installments will be made in the amount of $35.4 million including interest at 7.5%. The first two of these four payments were made in April and July 2000 to the Government totaling $70.8 million including interest. The remaining two installments of $27.8 million including interest at 6.3% will be made in April and July 2001, respectively. In addition, the Company will receive approximately $59.2 million from the Government related to the Company's claims for outstanding Medicare receivables. In March 2000, the Company received an initial payment from the Government of $38.4 million. The remaining balance will be received by the Company in four quarterly payments which began in May 2000 and will end February 2001. Each quarterly payment from the Government will be for principal of $5.2 million plus interest at 7.5%. The first two quarterly payments from the Government were received in May and August 2000 totaling $10.4 million plus interest. NOTE 5. COMMITMENTS AND CONTINGENCIES LEGAL PROCEEDINGS COMMERCIAL INSURER LITIGATION In 1997, the Company, NMC, and certain named NMC subsidiaries, were served with a civil complaint filed by Aetna Life Insurance Company in the U.S. District Court for the Southern District of New York. Based in large part on information contained in prior reports filed by the Company with the Securities and Exchange Commission, the lawsuit alleges inappropriate billing practices for nutritional therapy, diagnostic and clinical laboratory tests and misrepresentations. In April 1999, Aetna amended its complaint to include its affiliate, Aetna U.S. Healthcare, Inc., as an additional plaintiff, and to make certain other limited changes in its pleading. The amended complaint seeks unspecified damages and costs. In February 2000, the Company was served with a similar complaint filed by Connecticut General Life Insurance Company, Equitable Life Assurance Society for the United States, Cigna Employee Benefits Services, Inc. and Guardian Life Insurance Company of America, Inc. (Connecticut General Life Insurance Company et al v. National Medical Care et al, 00-Civ-0932) seeking unspecified damages and costs. However, the Company, NMC and its subsidiaries believe that there are substantial defenses to the claims asserted, and intend to vigorously defend both lawsuits. Other private payors have contacted the Company and may assert that NMC received excess payment and, similarly, may join either lawsuit or file their own lawsuit seeking reimbursement and other damages. The Company has filed counterclaims against the plaintiffs in these matters based on inappropriate claim denials and delays in claim payments. Although the ultimate outcome on the Company of these proceedings cannot be predicted at this time, an adverse result could have a material adverse effect on the Company's business, financial condition and result of operations. 12 13 OBRA 93 The Omnibus Budget Reconciliation Act of 1993 affected the payment of benefits under Medicare and employer health plans for dual-eligible ESRD patients. In July 1994, the Health Care Financing Administration issued an instruction to Medicare claims processors to the effect that Medicare benefits for the patients affected by that act would be subject to a new 18-month "coordination of benefits" period. This instruction had a positive impact on NMC's dialysis revenues because, during the 18-month coordination of benefits period, patients' employer health plans were responsible for payment, which was generally at rates higher than those provided under Medicare. In April 1995, the Health Care Financing Administration issued a new instruction, reversing its original instruction in a manner that would substantially diminish the positive effect of the original instruction on NMC's dialysis business. The Health Care Financing Administration further proposed that its new instruction be effective retroactive to August 1993, the effective date of the Omnibus Budget Reconciliation Act of 1993. NMC ceased to recognize the incremental revenue realized under the original instruction as of July 1, 1995, but it continued to bill employer health plans as primary payors for patients affected by the Omnibus Budget Reconciliation Act of 1993 through December 31, 1995. As of January 1, 1996, NMC commenced billing Medicare as primary payor for dual eligible ESRD patients affected by the act, and then began to re-bill in compliance with the revised policy for services rendered between April 24 and December 31, 1995. On May 5, 1995, NMC filed a complaint in the U.S. District Court for the District of Columbia (National Medical Care, Inc. and Bio-Medical Applications of Colorado, Inc. d/b/a Northern Colorado Kidney Center v. Shalala, C.A. No.95-0860 (WBB) seeking to preclude the Health Care Financing Administration from retroactively enforcing its April 24, 1995 implementation of the Omnibus Budget Reconciliation Act of 1993 provision relating to the coordination of benefits for dual eligible ESRD patients. On May 9, 1995, NMC moved for a preliminary injunction to preclude the Health Care Financing Administration from enforcing its new policy retroactively, that is, to billing for services provided between August 10, 1993 and April 23, 1995. On June 6, 1995, the court granted NMC's request for a preliminary injunction and in December of 1996, NMC moved for partial summary judgment seeking a declaration from the Court that the Health Care Financing Administration's retroactive application of the April 1995 rule was legally invalid. The Health Care Financing Administration cross-moved for summary judgment on the grounds that April 1995 rule was validly applied prospectively. In January 1998, the court granted NMC's motion for partial summary judgment and entered a declaratory judgment in favor of NMC, holding the Health Care Financing Administration's retroactive application of the April 1995 rule legally invalid. Based on its finding, the Court also permanently enjoined the Health Care Financing Administration from enforcing and applying the April 1995 rule retroactively against NMC. The Court took no action on the Health Care Financing Administration's motion for summary judgment pending completion of the outstanding discovery. On October 5, 1998, NMC filed its own motion for summary judgment requesting that the Court declare the Health Care Financing Administration's prospective application of the April 1995 rule invalid and permanently enjoin Health Care Financing Administration from prospectively enforcing and applying the April 1995 rule. The Court has not yet ruled on the parties' motions. The Health Care Financing Administration elected not to appeal the Court's June 1995 and January 1998 orders. The Health Care Financing Administration may, however, appeal all rulings at the conclusion of the litigation. If the Health Care Financing Administration should successfully appeal so that the revised interpretation would be applied retroactively, NMC may be required to refund the payment received from employer health plans for services provided after August 10, 1993 under the Health Care Financing Administration's original implementation, and to re-bill Medicare for the same services, which would result in a loss to NMC of approximately $120 million attributable to all periods prior to December 31, 1995. Also, in this event, the Company's business, financial condition and results of operations would be materially adversely affected. 13 14 OTHER LITIGATION AND POTENTIAL EXPOSURES From time to time, the Company is a party to or may be threatened with other litigation arising in the ordinary course of its business. Management regularly analyzes current information including, as applicable, the Company's defenses and insurance coverage and, as necessary, provides accruals for probable liabilities for the eventual disposition of these matters. The ultimate outcome of these matters is not expected to materially affect the Company's financial position, results of operations or cash flows. The Company, like other health care providers, conducts its operations under intense government regulation and scrutiny. The Company must comply with regulations which relate to or govern the safety and efficacy of medical products and supplies, the operation of manufacturing facilities, laboratories and dialysis clinics, and environmental and occupational health and safety. The Company must also comply with the U.S. anti-kickback statute, the False Claims Act, the Stark Law, and other federal and state fraud and abuse laws. Applicable laws or regulations may be amended, or enforcement agencies or courts may make interpretations that differ from the Company's or the manner in which the Company conduct its business. In the U.S., enforcement has become a high priority for the federal government and some states. In addition, the provisions of the False Claims Act authorizing payment of a portion of any recovery to the party bringing the suit encourage private plaintiffs to commence "whistle blower" actions. By virtue of this regulatory environment, as well as our corporate integrity agreement with the government, the Company expects that its business activities and practices will continue to be subject to extensive review by regulatory authorities and private parties, and continuing inquiries, claims and litigation relating to its compliance with applicable laws and regulations. The Company may not always be aware that an inquiry or action has begun, particularly in the case of "whistle blower" actions, which are initially filed under court seal. The Company operates a large number facilities throughout the U.S. In such a decentralized system, it is often difficult to maintain the desired level of oversight and control over the thousands of individuals employed by many affiliate companies. The Company relies upon its management structure, regulatory and legal resources, and the effective operation of its compliance program to direct, manage and monitor the activities of these employees. On occasion, the Company may identify instances where employees, deliberately or inadvertently, have submitted inadequate or false billings. The actions of such persons may subject the Company and its subsidiaries to liability under the False Claims Act, among other laws, and the Company cannot predict whether law enforcement authorities may use such information to initiate further investigations of the business practices disclosed or any of its other business activities. Physicians, hospitals and other participants in the health care industry are also subject to a large number of lawsuits alleging professional negligence, malpractice, product liability, worker's compensation or related claims, many of which involve large claims and significant defense costs. The Company has been subject to these suits due to the nature of its business and the Company expects that those types of lawsuits may continue. Although the Company maintains insurance at a level which it believes to be prudent, the Company cannot assure that the coverage limits will be adequate or that insurance will cover all asserted claims. A successful claim against the Company or any of its subsidiaries in excess of insurance coverage could have a material adverse effect upon the Company and the results of its operations. Any claims, regardless of their merit or eventual outcome, also may have a material adverse effect on the Company's reputation and business. The Company has also had claims asserted against it and has had lawsuits filed against it relating to businesses that it has acquired or divested. These claims and suits relate both to operation of the businesses and to the acquisition and divestiture transactions. The Company has asserted its own claims, and claims for indemnification. Although the ultimate outcome on the Company cannot be predicted at this time, an adverse result could have a material adverse effect upon the Company's business, financial condition, and results of operations. CONTINGENT NON-NMC LIABILITIES OF W. R. GRACE & CO. (NOW KNOWN AS FRESENIUS MEDICAL CARE HOLDINGS, INC.) The Company was formed as a result of a series of transactions pursuant to the Agreement and Plan of Reorganization (the "Merger") dated as of February 4, 1996 by and between W.R. Grace & Co. ("Grace") and Fresenius AG. In connection with the Merger, W.R. Grace & Co.-Conn. ("Grace Chemicals") agreed to indemnify the Company and NMC against all liabilities of the Company and its successors, whether relating to events occurring before or after the Merger, other than liabilities arising from or relating to NMC operations. The Company remains contingently liable for certain liabilities with respect to pre-Merger matters that are not related to NMC operations. The Company believes that in view of the nature of the non-NMC liabilities and Grace Chemicals' current financial position, the risk of significant loss from non-NMC liabilities is remote. 14 15 On September 28, 2000, MESQUITA, ET AL. V. W.R. GRACE & COMPANY, ET AL. (Sup. Court of Calif., S.F. County, #315465) was filed as class action against Grace Chemicals, the Company, and other defendants, alleging that the Merger was a fraudulent conveyance, violated the uniform fraudulent transfer act, denuded the assets of Grace, and constituted a conspiracy to denude the assets of Grace from plaintiffs in asbestos litigation. The Company believes that the Merger did not violate any of these provisions. The Company has requested indemnification from Grace Chemicals pursuant to the Merger agreement. If the Company were to be found liable, and if the Company was not able to collect on the indemnity, it would have a material adverse effect on the Company's business, the financial condition of the Company and the results of operations. Were events to violate the tax-free nature of the Merger, the resulting tax liability would be the obligation of the Company. Subject to representations by Grace Chemicals, the Company and Fresenius AG, Grace Chemicals has agreed to indemnify the Company for such a tax liability. If the Company was not able to collect on the indemnity, the tax liability would have a material adverse effect on the Company's business, the financial condition of the Company and the results of operations. 15 16 NOTE 6. INDUSTRY SEGMENTS INFORMATION The Company's reportable segments are Dialysis Services and Dialysis Products. For purposes of segment reporting, the Dialysis Services Division and Spectra Renal Management are combined and reported as Dialysis Services. These divisions are aggregated because of their similar economic classifications. These include the fact that they are both health care service providers whose services are provided to a common patient population, and both receive a significant portion of their net revenue from Medicare and other government and non-government third party payors. The Dialysis Products segment reflects the activity of the Dialysis Products Division only. The table below provides information for the three and nine months ended September 30, 2000 and 1999 pertaining to the Company's two industry segments.
LESS DIALYSIS DIALYSIS INTERSEGMENT SERVICES PRODUCTS SALES TOTAL ----------- ----------- ------------ ----------- NET REVENUES Three Months Ended 9/30/00 $ 673,536 $ 183,431 $ 62,273 $ 794,694 Three Months Ended 9/30/99 590,778 180,176 59,104 711,850 Nine Months Ended 9/30/00 $ 1,951,863 $ 536,788 $ 188,118 $ 2,300,533 Nine Months Ended 9/30/99 1,724,749 526,017 168,310 2,082,456 OPERATING EARNINGS Three Months Ended 9/30/00 $ 104,975 $ 31,997 -- $ 136,972 Three Months Ended 9/30/99 100,684 31,176 -- 131,860 Nine Months Ended 9/30/00 $ 307,671 $ 88,342 -- $ 396,013 Nine Months Ended 9/30/99 284,150 90,851 -- 375,001 TOTAL ASSETS 9/30/00 $ 2,131,009 $ 634,992 -- $ 2,766,001 12/31/99 1,817,751 644,112 -- 2,461,863
The table below provides the reconciliations of reportable segment operating earnings to the Company's consolidated totals.
THREE MONTHS ENDED NINE MONTHS ENDED SEGMENT RECONCILIATION SEPTEMBER 30, SEPTEMBER 30, ---------------------- ---------------------------- ----------------------------- 2000 1999 2000 1999 ----------- ---------- ---------- ----------- INCOME BEFORE INCOME TAXES: Total operating earnings for reportable segments $ 136,972 $ 131,860 $ 396,013 $ 375,001 Corporate G&A (including foreign exchange)...... (26,232) (28,664) (77,686) (84,548) Research and development expense................ (1,001) (1,067) (3,199) (3,104) Net interest expense............................ (54,843) (49,524) (165,081) (152,154) Special charge for settlement of investigation and related costs........................... -- (590,000) -- (590,000) ---------- ---------- ----------- ---------- Income (loss) before income taxes............... $ 54,896 $ (537,395) $ 150,047 $ (454,805) ========== ========== =========== ==========
16 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion of the financial condition and results of operations of the Company. The discussion should be read in conjunction with the financial statements included elsewhere in this document. This section contains certain forward-looking statements that are subject to various risks and uncertainties. Such statements include, without limitation, discussions concerning the outlook of the Company, government reimbursement, future plans and management's expectations regarding future performance. Actual results could differ materially from those contained in these forward-looking statements due to certain factors including, without limitation, changes in business, economic and competitive conditions, regulatory reforms, foreign exchange rate fluctuations, uncertainties in litigation or investigative proceedings, the realization of anticipated tax deductions, and the availability of financing. These and other risks and uncertainties, which are more fully described elsewhere in this Item 2 and in the Company's reports filed from time to time with the Commission, could cause the Company's results to differ materially from the results that have been or may be projected by or on behalf of the Company. RESULTS OF OPERATIONS The following table summarizes certain operating results of the Company by principal business unit for the periods indicated. Intercompany eliminations primarily reflect sales of medical supplies by Dialysis Products to Dialysis Services.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- ------------------------- 2000 1999 2000 1999 -------- ------- ------- -------- NET REVENUES Dialysis Services............................ $ 674 $ 591 $ 1,952 $ 1,725 Dialysis Products............................ 183 180 537 526 Intercompany Eliminations.................... (62) (59) (188) (169) --------- --------- --------- --------- Total Net Revenues.............................. $ 795 $ 712 $ 2,301 $ 2,082 ========= ========= ========= ========= Operating Earnings: Dialysis Services............................ $ 105 $ 101 $ 308 $ 284 Dialysis Products............................ 32 31 88 91 --------- --------- --------- --------- Total Operating Earnings........................ 137 132 396 375 --------- --------- --------- --------- Other Expenses: General Corporate............................ $ 26 $ 28 $ 78 $ 85 Research & Development....................... 1 1 3 3 Interest Expense, Net........................ 47 50 143 152 Interest Expense on Settlement, Net.......... 8 -- 22 -- Special Charge for Settlement of Investigation and Related Costs............ -- 590 -- 590 --------- --------- --------- --------- Total Other Expenses............................ 82 669 246 830 --------- --------- --------- --------- Earnings Before Income Taxes.................... 55 (537) 150 (455) Provision (benefit) for Income Taxes............ 27 (150) 74 (107) --------- --------- --------- --------- Net Income (loss)............................... $ 28 $ (387) $ 76 $ (348) ========= ========= ========= =========
17 18 THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1999 Net revenues from operations for the third quarter of 2000 increased by 12% ($83 million) over the comparable period in 1999. Net earnings from operations for the third quarter of 2000 increased by $415 million over the comparable period in 1999 as a result of increased operating earnings ($5 million), reduced corporate expense, and reduced expense relating to the special charge for settlement of investigation and related costs ($412 million, after income tax) recorded in 1999, partially offset by increased interest expense. Excluding the effect of the special charge for settlement of investigation and related costs, net earnings from operations increased by 12% over the comparable period in 1999. DIALYSIS SERVICES Dialysis Services net revenues for the third quarter of 2000 increased by 14% ($83 million) over the comparable period in 1999, primarily as a result of a 10% increase in the number of treatments provided, the impact of increased Medicare reimbursement rates, improved anemia management (higher EPO utilization), consolidation of previously managed locations, higher revenues in other ancillary services and increased laboratory testing revenues. The treatment increase was a result of base business growth and the impact of 1999 and 2000 acquisitions. The laboratory testing revenues increased as a result of higher patient volume. Dialysis Services operating earnings for the third quarter of 2000 increased by 4% ($4 million) over the comparable period of 1999 primarily due to increases in treatment volume, the impact of increased Medicare reimbursement rates, higher earnings in other ancillary services, and increased earnings from laboratory testing. These increases were partially offset by higher personnel costs, increased provisions for doubtful accounts, and higher equipment lease expenses. DIALYSIS PRODUCTS Dialysis Products net revenues for the third quarter of 2000 increased by 2% ($3 million) over the comparable period of 1999. This is primarily due to increased sales of machines ($10 million) partially offset by decreased sales of bloodlines ($2 million), peritoneal products ($4 million), and other products ($1 million). Dialysis Products operating earnings for the third quarter of 2000 increased by 3% ($1 million) over the comparable period of 1999. This is primarily the result of improvements in gross margin. SPECIAL CHARGE FOR SETTLEMENT OF INVESTIGATION AND RELATED COSTS On January 18, 2000, the Company, NMC and certain affiliated companies executed definitive agreements (the "Settlement Agreements") with the United States Government ("the Government") to settle (i) matters concerning violations of federal laws and (ii) NMC's claims with respect to outstanding Medicare receivables for nutrition therapy (collectively, the "Settlement"). As a result of the Settlement, the Company recorded in September 1999, a special pre-tax charge of $590 million ($412 million net of income taxes ) which included (i) a charge of approximately $485 million for settlement payment obligations to the government; (ii) a reserve of approximately $80 million for the resolution of the Company's IDPN accounts receivable; and (iii) a reserve for other related costs of $25 million. (See Note 4 - "Special Charge for Settlement of Investigation and Related Costs"). OTHER EXPENSES The Company's other expenses for the third quarter of 2000 increased by 4% ($3 million) over the comparable period of 1999. General corporate expenses decreased by $2 million and operating interest expense decreased by $3 million primarily due to the change in the mix of debt instruments at September 30, 2000 versus September 30, 1999. The decreases in general corporate and operating interest expenses for the third quarter of 2000 were offset by the $8 million of interest expense related to the settlement of the OIG investigation in February 2000. INCOME TAX RATE The Company has recorded an income tax provision of $27 million in the third quarter of 2000 as compared to an income tax benefit of $150 million in the third quarter of 1999. The income tax provision in 2000 is higher than the statutory tax rate primarily due to the non-deductible merger goodwill. The income tax benefit in 1999 is lower than the statutory tax rate primarily due to the tax effect of the special charge for the Settlement and related costs. 18 19 NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1999 Net revenues from operations for the first nine months of 2000 increased by 10% ($219 million) over the comparable period in 1999. Net earnings from operations for the first nine months of 2000 increased by $424 million over the comparable period in 1999 as a result of increased operating earnings ($21 million), reduced corporate expenses and reduced expense related to the special charge for settlement of investigation and related costs ($412 million, after income tax ) recorded in the third quarter 1999 and partially offset by increases to interest expense. Excluding the effect of the special charge for the settlement of investigation and related costs, net earnings from operations increased by 19% over the comparable period in 1999. DIALYSIS SERVICES Dialysis Services net revenues for the first nine months of 2000 increased by 13% ($227 million) over the comparable period in 1999, primarily as a result of a 9% increase in the number of treatments provided, the impact of increased Medicare reimbursement rates, improved anemia management (higher EPO utilization), consolidation of previously managed locations, higher revenues in other ancillary services, and increased laboratory testing revenues. The treatment increase was a result of base business growth and the impact of 1999 and 2000 acquisitions. The laboratory testing revenues increased as a result of higher patient volume. Dialysis Services operating earnings for the first nine months of 2000 increased by 9% ($24 million) over the comparable period of 1999 primarily due to the increase in treatment volume, the impact of increased Medicare reimbursement rates, higher earnings in other ancillary services, and increased earnings from laboratory testing offset by higher personnel costs, increased provisions for doubtful accounts, and higher equipment lease expense. DIALYSIS PRODUCTS Dialysis Products net revenues for the first nine months of 2000 increased by 2% ($11 million) over the comparable period of 1999. This is primarily due to increased sales of dialyzers ($4 million), machines ($8 million), concentrates ($3 million) and other products ($4 million), partially offset by decreased sales of peritoneal products ($9 million). Dialysis Products operating earnings for the first nine months of 2000 decreased by 3% ($3 million) over the comparable period of 1999. This is a result of higher freight and distribution expenses as well as higher sales and marketing costs partially offset by improvements in gross margin. SPECIAL CHARGE FOR SETTLEMENT OF INVESTIGATION AND RELATED COSTS On January 18, 2000, the Company, NMC and certain affiliated companies executed definitive agreements (the "Settlement Agreements") with the United States Government ("the Government") to settle (i) matters concerning violations of federal laws and (ii) NMC's claims with respect to outstanding Medicare receivables for nutrition therapy (collectively, the "Settlement"). As a result of the Settlement, the Company recorded in September 1999, a special pre-tax charge of $590 million ($412 million net of income taxes ) which included (i) a charge of approximately $485 million for settlement payment obligations to the government; (ii) a reserve of approximately $80 million for the resolution of the Company's IDPN accounts receivable; and (iii) a reserve for other related costs of $25 million. (See Note 4 - "Special Charge for Settlement of Investigation and Related Costs"). OTHER EXPENSES The Company's other expenses for the first nine months of 2000 increased by 3% ($6 million) over the comparable period of 1999. General corporate expenses decreased by $7 million and operating interest expense decreased by $9 million primarily due to the change in the mix of debt instruments at September 30, 2000 versus September 30, 1999. The decreases in general corporate and operating interest expenses for the first nine months of 2000 were offset by the $22 million of interest expense related to the settlement of the OIG investigation in February 2000. INCOME TAX RATE The Company has recorded an income tax provision of $74 million for the nine months ended September 30, 2000 as compared to an income tax benefit of $107 million for the nine months ended September 30, 1999. The income tax provision in 2000 is higher than the statutory tax rate primarily due to the non-deductible merger goodwill. The income tax benefit in 1999 is lower than the statutory tax rate primarily due to the tax effect of the special charge for the Settlement and related costs. 19 20 LIQUIDITY AND CAPITAL RESOURCES For 1999 and 2000, the Company's cash requirements, including acquisitions, have been funded by cash generated from operations. Net cash flows provided by operating activities during the first nine months of 2000 totaled $178 million compared to $185 million in the first nine months of 1999. This net decrease is due primarily to a $12 million increase in earnings, (before the effect of the special charge), $51 million add back of non-cash items, and the collection of $49 million for the IDPN accounts receivable. These increases in cash from net income adjusted for non-cash items and the collection of IDPN receivable were offset by a $120 million change in other working capital primarily related to increases in accounts receivable and decreases in accounts payable, accrued income taxes, and accrued liabilities. The increase in accounts receivable balances is primarily due to the increase in days sales outstanding resulting from slower payment patterns from third parties, specifically from managed care plans as well as the impact of new acquisitions. The decrease in accounts payable is primarily due to timing of disbursements and the decrease in accrued liabilities is primarily due to timing of payments for physician compensation, unreconciled payments, and compliance and legal reserve costs. Cash on hand was $9 million at September 30, 2000 compared to $27 million at September 30, 1999. Under the final settlement with the government, the Company is required to make net settlement payments totaling approximately $427 million, of which $14 million had previously been paid prior to 2000. This net amount includes approximately $59.2 million for Medicare receivables from the Government. During the first nine months of 2000, the Company has made initial payments to the Government totaling $353 million and has received $49 million from the Government for the Company's outstanding Medicare receivables for the intradialytic parenteral nutrition therapy relating to the Settlement. Under the definitive agreements with the Government, the Company entered into a note payable for the settlement payment obligations to the Government. Interest on installment payments to the Government will accrue at 6.3% on $51.2 million of the obligation and at 7.5% annually on the balance, until paid in full. Under the terms of the note payable, the remaining obligations will be paid in six quarterly installments which began April 2000 and will end July 2001. The first and second quarterly installments of $35.4 million including interest of 7.5% were made in April and July 2000 respectively. The next two quarterly installments will also be made in the amount of $35.4 million including interest at 7.5%. The remaining two installments of $27.8 million including interest at 6.3% will be made in April and July 2001, respectively. The Government will remit the balance of the Company's outstanding Medicare receivables in four quarterly payments of $5.2 million plus interest at 7.5%. The first and second quarterly receipts from the Government was received in May and August 2000, respectively, totaling $10.4 million plus interest. Net cash flows used in investing activities of operations during the first nine months of 2000 totaled $170 million compared to $119 million in the first nine months of 1999. The Company funded its acquisitions and capital expenditures primarily through cash flows from operations and intercompany borrowings. Acquisitions totaled $105 million and $65 million in 2000 and 1999, respectively, net of cash acquired. Capital expenditures of $65 million and $54 million were made for internal expansion, improvements, new furnishings and equipment in 2000 and 1999, respectively. The Company intends to continue to enhance its presence in the U.S. by focusing its expansion on the acquisition of clinics, expansion of existing clinics, and opening of new clinics. Net cash flows used in financing activities of operations during the first nine months of 2000 totaled $11 million compared to net cash flows used of $45 million in the first nine months of 1999. During the first nine months of 2000, the Company made payments to the government totaling $353 million for the Settlement. Additionally, the net increase in borrowings from affiliates of $260 million is due primarily to an intercompany note payable entered into with Franconia Acquisition, LLC ($214 million), a wholly-owned subsidiary of FMC, and additional increases on other intercompany borrowings. The net increase in notes payable to outside parties of $65 million is primarily a result of the increase in the Company's credit facility of $70 million a portion of which was used to finance future acquisitions during the third quarter of 2000. CONTINGENCIES The Company is a plaintiff in litigation against the federal government with respect to the implementation of OBRA 93 and is a defendant in significant commercial insurance litigation. An adverse outcome in any of these matters, could have a material adverse effect on the Company's business, financial condition and results of operations. Because of the significant complexities and 20 21 uncertainties associated with these proceedings, neither an estimate of the possible loss or range of loss the Company may incur in respect of such matters nor a reserve based on any such estimate can be reasonably made. See - Note 5, "Commitments and Contingencies". The Company believes that its existing credit facilities, cash generated from operations and other current sources of financing are sufficient to meet its foreseeable needs. If cash flows from operations or availability under existing banking arrangements fall below expectations, the Company may be required to consider other alternatives to maintain sufficient liquidity. There can be no assurance that the Company will be able to do so on satisfactory terms, if at all. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." IMPACT OF INFLATION A substantial portion of the Company's net revenue is subject to reimbursement rates which are regulated by the federal government and do not automatically adjust for inflation. Non-governmental payors also are exerting downward pressure on reimbursement levels. Increased operating costs that are subject to inflation, such as labor and supply costs, without a compensating increase in reimbursement rates, may adversely affect the Company's business and results of operations. 21 22 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risks due to changes in interest rates and foreign currency rates. As part of its market risk management strategy, the Company enters into transactions involving derivative financial instruments with investment grade financial institutions as authorized by the management board. These instruments, primarily interest rate swaps and foreign exchange contracts, are used as a means of hedging exposure to interest rate and foreign currency fluctuations in connection with debt obligations and purchase commitments. The execution of these transactions is coordinated with the Company's parent company, Fresenius Medical Care AG, which has established guidelines for risk assessment procedures and controls. The Company does not hold or issue derivative instruments for trading or speculative purposes. Hedge accounting is applied if the derivative reduces the risk of the underlying hedged item and is designated at inception as a hedge. Additionally, changes in the value of the derivative must result in payoffs that are highly correlated to the changes in value of the hedged item. Derivatives are measured for effectiveness both at inception and on an ongoing basis. The Company enters into foreign exchange contracts that are designated as, and effective as, hedges for product purchases. Also, since the Company carries a substantial amount of floating rate debt, the Company uses interest rate swaps to synthetically change certain variable-rate debt obligations to fixed-rate obligations, as well as options to mitigate the impact of interest rate fluctuations. At September 30, 2000, the fair value of the Company's interest rate agreements, which consisted of three swaps and one collar, is approximately $2.9 million. The agreements are for a total notional amount of $750 million, with maturity dates ranging from December 2003 through January 2005. In September 2000, the Company terminated a number of its foreign exchange contracts and recorded a net loss of approximately $1.2 million in operations. At September 30, 2000, the fair value of the Company's foreign exchange contracts, which consisted entirely of forward agreements, is approximately $0.1 million. The Company had outstanding contracts covering the purchase of approximately 27.0 million Euros ("EUR") at an average contract price of $0.8862 per EUR, for delivery between October 2000 and October 2001. In addition, the Company's Canadian subsidiary, whose functional currency is the Canadian Dollar ("CAD"), had outstanding contracts covering the purchase of 7.0 million United States Dollars ("USD") at an average contract price of 1.4677 CAD per USD, for delivery between October 2000 and April 2001. 22 23 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS COMMERCIAL INSURER LITIGATION In 1997, the Company, NMC, and certain named NMC subsidiaries, were served with a civil complaint filed by Aetna Life Insurance Company in the U.S. District Court for the Southern District of New York. Based in large part on information contained in prior reports filed by the Company with the Securities and Exchange Commission, the lawsuit alleges inappropriate billing practices for nutritional therapy, diagnostic and clinical laboratory tests and misrepresentations. In April 1999, Aetna amended its complaint to include its affiliate, Aetna U.S. Healthcare, Inc., as an additional plaintiff, and to make certain other limited changes in its pleading. The amended complaint seeks unspecified damages and costs. In February 2000, the Company was served with a similar complaint filed by Connecticut General Life Insurance Company, Equitable Life Assurance Society for the United States, Cigna Employee Benefits Services, Inc. and Guardian Life Insurance Company of America, Inc. (Connecticut General Life Insurance Company et al v. National Medical Care et al, 00-Civ-0932) seeking unspecified damages and costs. However, the Company, NMC and its subsidiaries believe that there are substantial defenses to the claims asserted, and intend to vigorously defend both lawsuits. Other private payors have contacted the Company and may assert that NMC received excess payment and, similarly, may join either lawsuit or file their own lawsuit seeking reimbursement and other damages. The Company has filed counterclaims against the plaintiffs in these matters based on inappropriate claim denials and delays in claim payments. Although the ultimate outcome on the Company of these proceedings cannot be predicted at this time, an adverse result could have a material adverse effect on the Company's business, financial condition and result of operations. OBRA 93 The Omnibus Budget Reconciliation Act of 1993 affected the payment of benefits under Medicare and employer health plans for dual-eligible ESRD patients. In July 1994, the Health Care Financing Administration issued an instruction to Medicare claims processors to the effect that Medicare benefits for the patients affected by that act would be subject to a new 18-month "coordination of benefits" period. This instruction had a positive impact on NMC's dialysis revenues because, during the 18-month coordination of benefits period, patients' employer health plans were responsible for payment, which was generally at rates higher than those provided under Medicare. In April 1995, the Health Care Financing Administration issued a new instruction, reversing its original instruction in a manner that would substantially diminish the positive effect of the original instruction on NMC's dialysis business. The Health Care Financing Administration further proposed that its new instruction be effective retroactive to August 1993, the effective date of the Omnibus Budget Reconciliation Act of 1993. NMC ceased to recognize the incremental revenue realized under the original instruction as of July 1, 1995, but it continued to bill employer health plans as primary payors for patients affected by the Omnibus Budget Reconciliation Act of 1993 through December 31, 1995. As of January 1, 1996, NMC commenced billing Medicare as primary payor for dual eligible ESRD patients affected by the act, and then began to re-bill in compliance with the revised policy for services rendered between April 24 and December 31, 1995. On May 5, 1995, NMC filed a complaint in the U.S. District Court for the District of Columbia (National Medical Care, Inc. 23 24 and Bio-Medical Applications of Colorado, Inc. d/b/a Northern Colorado Kidney Center v. Shalala, C.A. No.95-0860 (WBB) seeking to preclude the Health Care Financing Administration from retroactively enforcing its April 24, 1995 implementation of the Omnibus Budget Reconciliation Act of 1993 provision relating to the coordination of benefits for dual eligible ESRD patients. On May 9, 1995, NMC moved for a preliminary injunction to preclude the Health Care Financing Administration from enforcing its new policy retroactively, that is, to billing for services provided between August 10, 1993 and April 23, 1995. On June 6, 1995, the court granted NMC's request for a preliminary injunction and in December of 1996, NMC moved for partial summary judgment seeking a declaration from the Court that the Health Care Financing Administration's retroactive application of the April 1995 rule was legally invalid. The Health Care Financing Administration cross-moved for summary judgment on the grounds that April 1995 rule was validly applied prospectively. In January 1998, the court granted NMC's motion for partial summary judgment and entered a declaratory judgment in favor of NMC, holding the Health Care Financing Administration's retroactive application of the April 1995 rule legally invalid. Based on its finding, the Court also permanently enjoined the Health Care Financing Administration from enforcing and applying the April 1995 rule retroactively against NMC. The Court took no action on the Health Care Financing Administration's motion for summary judgment pending completion of the outstanding discovery. On October 5, 1998, NMC filed its own motion for summary judgment requesting that the Court declare the Health Care Financing Administration's prospective application of the April 1995 rule invalid and permanently enjoin Health Care Financing Administration from prospectively enforcing and applying the April 1995 rule. The Court has not yet ruled on the parties' motions. The Health Care Financing Administration elected not to appeal the Court's June 1995 and January 1998 orders. The Health Care Financing Administration may, however, appeal all rulings at the conclusion of the litigation. If the Health Care Financing Administration should successfully appeal so that the revised interpretation would be applied retroactively, NMC may be required to refund the payment received from employer health plans for services provided after August 10, 1993 under the Health Care Financing Administration's original implementation, and to re-bill Medicare for the same services, which would result in a loss to NMC of approximately $120 million attributable to all periods prior to December 31, 1995. Also, in this event, the Company's business, financial condition and results of operations would be materially adversely affected. OTHER LITIGATION AND POTENTIAL EXPOSURES From time to time, the Company is a party to or may be threatened with other arising in the ordinary course of its business. Management regularly analyzes current information including, as applicable, the Company's defenses and insurance coverage and, as necessary, provides accruals for probable liabilities for the eventual disposition of these matters. The ultimate outcome of these matters is not expected to materially affect the Company's financial position, results of operations or cash flows. The Company, like other health care providers, conducts its operations under intense government regulation and scrutiny. The Company must comply with regulations which relate to or govern the safety and efficacy of medical products and supplies, the operation of manufacturing facilities, laboratories and dialysis clinics, and environmental and occupational health and safety. The Company must also comply with the U.S. anti-kickback statute, the False Claims Act, the Stark Law, and other federal and state fraud and abuse laws. Applicable laws or regulations may be amended, or enforcement agencies or courts may make interpretations that differ from the Company's or the manner in which the Company conduct its business. In the U.S., enforcement has become a high priority for the federal government and some states. In addition, the provisions of the False Claims Act authorizing payment of a portion of any recovery to the party bringing the suit encourage private plaintiffs to commence "whistle blower" actions. By virtue of this regulatory environment, as well as our corporate integrity agreement with the government, the Company expects that its business activities and practices will continue to be subject to extensive review by regulatory authorities and private parties, continuing inquiries, claims and litigation relating to its compliance with applicable laws and regulations. The Company may not always be aware that an inquiry or action has begun, particularly in the case of "whistle blower" actions, which are initially filed under court seal. 24 25 The Company operates a large number of facilities throughout the U.S. In such a decentralized system, it is often difficult to maintain the desired level of oversight and control over the thousands of individuals employed by many affiliate companies. The Company relies upon its management structure, regulatory and legal resources, and the effective operation of its compliance program to direct, manage and monitor the activities of these employees. On occasion, the Company may identify instances where employees, deliberately or inadvertently, have submitted inadequate or false billings. The actions of such persons may subject the Company and its subsidiaries to liability under the False Claims Act, among other laws, and the Company cannot predict whether law enforcement authorities may use such information to initiate further investigations of the business practices disclosed or any of its other business activities. Physicians, hospitals and other participants in the health care industry are also subject to a large number of lawsuits alleging professional negligence, malpractice, product liability, worker's compensation or related claims, many of which involve large claims and significant defense costs. The Company has been subject to these suits due to the nature of its business and the Company expects that those types of lawsuits may continue. Although the Company maintains insurance at a level which it believes to be prudent, the Company cannot assure that the coverage limits will be adequate or that insurance will cover all asserted claims. A successful claim against the Company or any of its subsidiaries in excess of insurance coverage could have a material adverse effect upon the Company and the results of its operations. Any claims, regardless of their merit or eventual outcome, also may have a material adverse effect on the Company's reputation and business. The Company has also had claims asserted against it and has had lawsuits filed against it relating to businesses that it has acquired or divested. These claims and suits relate both to operation of the businesses and to the acquisition and divestiture transactions. The Company has asserted its own claims, and claims for indemnification. Although the ultimate outcome on the Company cannot be predicted at this time, an adverse result could have a material adverse effect upon the Company's business, financial condition, and results of operations. On September 28, 2000, MESQUITA, ET AL. V. W. R. GRACE & COMPANY, ET AL. (Sup. Court of Calif., S.F. County, #315465) was filed as class action against Grace Chemicals, the Company, and other defendants, alleging that the Merger was a fraudulent conveyance, violated the uniform fraudulent transfer act, denuded the assets of Grace, and constituted a conspiracy to denude the assets of Grace from plaintiffs in asbestos litigation. The Company believes that the Merger did not violate any of these provisions. The Company has requested indemnification from Grace Chemicals pursuant to the Merger agreement. If the Company were to be found liable, and if the Company was not able to collect on the indemnity, it would have a material adverse effect on the Company's business, the financial condition of the Company and the results of operations. 25 26 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 2.1 Agreement and Plan of Reorganization dated as of February 4, 1996 between W.R. Grace & Co. and Fresenius AG (incorporated herein by reference to Appendix A to the Joint Proxy Statement-Prospectus of Fresenius Medical Care AG, W.R. Grace & Co. and Fresenius USA, Inc. dated August 2, 1996 and filed with the Commission on August 5, 1996). Exhibit 2.2 Distribution Agreement by and among W.R. Grace & Co., W.R. Grace & Co.-Conn. and Fresenius AG dated as of February 4, 1996 (incorporated herein by reference to Exhibit A to Appendix A to the Joint Proxy Statement-Prospectus of Fresenius Medical Care AG, W.R. Grace & Co. and Fresenius USA, Inc. dated August 2, 1996 and filed with the Commission on August 5, 1996). Exhibit 2.3 Contribution Agreement by and among Fresenius AG, Sterilpharma GmbH and W.R. Grace & Co.-Conn. dated February 4, 1996 (incorporated herein by reference to Exhibit E to Appendix A to the Joint Proxy-Statement Prospectus of Fresenius Medical Care AG, W.R. Grace & Co. and Fresenius USA, Inc. dated August 2, 1996 and filed with the Commission on August 5, 1996). Exhibit 3.1 Certificate of Incorporation of Fresenius Medical Care Holdings, Inc. (f/k/a W.R. Grace & Co.) under Section 402 of the New York Business Corporation Law dated March 23, 1988 (incorporated herein by reference to the Form 8-K of the Company filed on May 9, 1988). Exhibit 3.2 Certificate of Amendment of the Certificate of Incorporation of Fresenius Medical Care Holdings, Inc. (f/k/a W.R. Grace & Co.) under Section 805 of the New York Business Corporation Law dated May 25, 1988 (changing the name to W.R. Grace & Co., incorporated herein by reference to the Form 8-K of the Company filed on May 9, 1988). Exhibit 3.3 Certificate of Amendment of the Certificate of Incorporation of Fresenius Medical Care Holdings, Inc. (f/k/a W.R. Grace & Co.) under Section 805 of the New York Business Corporation Law dated September 27, 1996 (incorporated herein by reference to the Form 8-K of the Company filed with the Commission on October 15, 1996). Exhibit 3.4 Certificate of Amendment of the Certificate of Incorporation of Fresenius Medical Care Holdings, Inc. (f/k/a W.R. Grace & Co.) under Section 805 of the New York Business Corporation Law dated September 27, 1996 (changing the name to Fresenius National Medical Care Holdings, Inc., incorporated herein by reference to the Form 8-K of the Company filed with the Commission on October 15, 1996). Exhibit 3.5 Certificate of Amendment of the Certificate of Incorporation of Fresenius Medical Care Holdings, Inc. under Section 805 of the New York Business Corporation Law dated June 12, 1997 (changing name to Fresenius Medical Care Holdings, Inc., incorporated herein by reference to the Form 10-Q of the Company filed with the Commission on August 14, 1997). Exhibit 3.6 Amended and Restated By-laws of Fresenius Medical Care Holdings, Inc. (incorporated herein by reference to the Form 10-Q of the Company filed with the Commission on August 14, 1997). Exhibit 4.1 Credit Agreement dated as of September 27, 1996 among National Medical Care, Inc. and Certain Subsidiaries and Affiliates, as Borrowers, Certain Subsidiaries and Affiliates, as Guarantors, the Lenders named therein, NationsBank, N.A., as paying agent and The Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner Bank AG and Bank of America, N.A. (formerly known as NationsBank, N.A.), as Managing Agents (incorporated herein by reference to the Form 6-K of Fresenius Medical Care AG filed with the Commission on October 15, 1996). 26 27 Exhibit 4.2 Amendment dated as of November 26, 1996 (amendment to the Credit Agreement dated as of September 27, 1996, incorporated herein by reference to the Form 8-K of Registrant filed with the Commission on December 16, 1996). Exhibit 4.3 Amendment No. 2 dated December 12, 1996 (second amendment to the Credit Agreement dated as of September 27, 1996, incorporated herein by reference to the Form 10-K of Registrant filed with the Commission on March 31, 1997). Exhibit 4.4 Amendment No. 3 dated June 13, 1997 to the Credit Agreement dated as of September 27, 1996, among National Medical Care, Inc. and Certain Subsidiaries and Affiliates, as Borrowers, Certain Subsidiaries and Affiliates, as Guarantors, the Lenders named therein, NationsBank, N.A., as paying agent and The Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner Bank AG and Bank of America, N.A. (formerly known as NationsBank, N.A.), as Managing Agents, as previously amended (incorporated herein by reference to the Form 10-Q of the Registrant filed with the Commission on November 14, 1997). Exhibit 4.5 Amendment No. 4, dated August 26, 1997 to the Credit Agreement dated as of September 27, 1996, among National Medical Care, Inc. and Certain Subsidiaries and Affiliates, as Borrowers, Certain Subsidiaries and Affiliates, as Guarantors, the Lenders named therein, NationsBank, N.A., as paying agent and The Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner Bank AG and Bank of America, N.A. (formerly known as NationsBank, N.A.), as Managing Agents, as previously amended (incorporated herein by reference to the Form 10-Q of Registrant filed with Commission on November 14, 1997). Exhibit 4.6 Amendment No. 5 dated December 12, 1997 to the Credit Agreement dated as of September 27, 1996, among National Medical Care, Inc. and Certain Subsidiaries and Affiliates, as Borrowers, Certain Subsidiaries and Affiliates, as Guarantors, the Lenders named therein, NationsBank, N.A., as paying agent and The Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner Bank AG and Bank of America, N.A. (formerly known as NationsBank, N.A.), as Managing Agents, as previously amended (incorporated herein by reference to the Form 10-K of Registrant filed with Commission on March 23, 1998). Exhibit 4.7 Form of Consent to Modification of Amendment No. 5 dated December 12, 1997 to the Credit Agreement dated as of September 27, 1996 among National Medical Care, Inc. and Certain Subsidiaries and Affiliates, as Borrowers, Certain Subsidiaries and Affiliates, as Guarantors, the Lenders named therein, NationsBank, N.A., as paying agent and The Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner Bank AG and Bank of America, N.A. (formerly known as NationsBank, N.A.), as Managing Agents (incorporated herein by reference to the Form 10-K of Registrant filed with Commission on March 23, 1998). Exhibit 4.8 Amendment No. 6 dated effective September 30, 1998 to the Credit Agreement dated as of September 27, 1996, among National Medical Care, Inc. and Certain Subsidiaries and Affiliates, as Borrowers, Certain Subsidiaries and Affiliates, as Guarantors, the Lenders named therein, NationsBank, as paying agent and The Bank of Nova Scotia, The Chase Manhattan Bank, N.A., Dresdner Bank AG and Bank of America, N.A. (formerly known as NationsBank, N.A.), as Managing Agents, as previously amended (incorporated herein by reference to the Form 10-Q of Registrant filed with Commission on November 12, 1998). Exhibit 4.9 Amendment No. 7 dated as of December 31, 1998 to the Credit Agreement dated as of September 27, 1996 among National Medical Care, Inc. and Certain Subsidiaries and Affiliates, as Borrowers, Certain Subsidiaries and Affiliates Guarantors , the Lenders named therein, Nations Bank, N.A. as paying agent and The Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner Bank A. G. and Bank of America, N.A. (formerly known as NationsBank, N.A.). as Managing Agents, (incorporated herein by reference to the Form 10-K of registrant filed with Commission on March 9, 1999). Exhibit 4.10 Amendment No. 8 dated as of June 30, 1999 to the Credit Agreement dated as of September 27, 1996 among National Medical Care, Inc. and Certain Subsidiaries and Affiliates, as Borrowers, Certain Subsidiaries and Affiliates Guarantors, the Lenders named therein, NationsBank, N.A. as paying agent and The Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner Bank A.G. and Bank of America, N.A. (formerly known as NationsBank, N.A.), as Managing Agent (incorporated herein by reference to the Form 10-K of registrant filed with Commission on March 30, 2000). 27 28 Exhibit 4.11 Amendment No. 9 dated as of December 15, 1999 to the Credit Agreement dated as of September 27, 1996 among National Medical Care, Inc. and Certain Subsidiaries and Affiliates, as Borrowers, Certain Subsidiaries and Affiliates Guarantors, the Lenders named therein, NationsBank, N.A. as paying agent and The Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner Bank A.G. and Bank of America, N.A. (formerly known as NationsBank, N.A.), as Managing Agent (incorporated herein by reference to the Form 10-K of registrant filed with Commission on March 30, 2000). Exhibit 4.12 Amendment No. 10 dated as of September 21, 2000 to the Credit Agreement dated as of September 27, 1996 among National Medical Care, Inc. and Certain Subsidiaries and Affiliates, as Borrowers, Certain Subsidiaries and Affiliates Guarantors, the Lenders named therein, NationsBank, N.A. as paying agent and The Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner Bank A.G. and Bank of America, N.A. (formerly known as NationsBank, N.A.), as Managing Agent, filed herewith. Exhibit 4.13 Fresenius Medical Care AG 1998 Stock Incentive Plan as amended effective as of August 3, 1998 (incorporated herein by reference to the Form 10-Q of Registrant filed with Commission on May 14, 1998). Exhibit 4.14 Senior Subordinated Indenture dated November 27, 1996, among Fresenius Medical Care AG, State Street Bank and Trust Company, as successor to Fleet National Bank, as Trustee and the Subsidiary Guarantors named therein (incorporated herein by reference to the Form 10-K of Registrant filed with the Commission on March 31, 1997). Exhibit 4.15 Senior Subordinated Indenture dated as of February 19, 1998, among Fresenius Medical Care AG, State Street Bank and Trust Company as Trustee and Fresenius Medical Care Holdings, Inc., and Fresenius Medical Care AG, as Guarantors with respect to the issuance of 7 7/8% Senior Subordinated Notes due 2008 (incorporated herein by reference to the Form 10-K of Registrant filed with Commission on March 23, 1998). Exhibit 4.16 Senior Subordinated Indenture dated as of February 19, 1998 among FMC Trust Finance S.a.r.l. Luxemborg, as Insurer, State Street Bank and Trust Company as Trustee and Fresenius Medical Care Holdings, Inc., and Fresenius Medical Care AG, as Guarantors with respect to the issuance of 7 3/8% Senior Subordinated Notes due 2008 (incorporated herein by reference to the Form 10-K of Registrant filed with Commission on March 23, 1998). Exhibit 10.1 Employee Benefits and Compensation Agreement dated September 27, 1996 by and among W.R. Grace & Co., National Medical Care, Inc., and W.R. Grace & Co.-- Conn. (incorporated herein by reference to the Registration Statement on Form F-1 of Fresenius Medical Care AG, as amended (Registration No. 333-05922), dated November 22, 1996 and the exhibits thereto). Exhibit 10.2 Purchase Agreement, effective January 1, 1995, between Baxter Health Care Corporation and National Medical Care, Inc., including the addendum thereto (incorporated by reference to the Form SE of Fresenius Medical Care dated July 29, 1996 and the exhibits thereto). Exhibit 10.3* Product Purchase Agreement effective January 1, 2000 between Amgen, Inc. and National Medical Care, Inc. (incorporated herein by reference to the Form 10-Q of Registrant filed with Commission on May 12, 2000). Exhibit 10.4* Amendment to Product Purchase Agreement between Amgen, Inc. and National Medical Care, Inc. (amending Appendix A), (incorporated herein by reference to the Form 10-Q of Registrant filed with Commission on August 9, 2000). Exhibit 10.5 Primary Guarantee dated July 31, 1996 (incorporated by reference to the Registrant's Registration Statement on Form S-4 (Registration No. 333-09497) dated August 2, 1996 and the exhibits thereto). Exhibit 10.6 Secondary Guarantee dated July 31, 1996 (incorporated by reference to the Registrant's Registration Statement on Form S-4 (Registration No. 333-09497) dated August 2, 1996 and the exhibits thereto). Exhibit 10.7 Receivables Purchase Agreement dated August 28, 1997 between National Medical Care, Inc. and NMC Funding Corporation (incorporated herein by reference to the Form 10-Q of the Registrant filed with the Commission on November 14, 1997). 28 29 Exhibit 10.8 Amendment dated as of September 28, 1998 to the Receivables Purchase Agreement dated as of August 28, 1997, by and between NMC Funding Corporation, as Purchaser and National Medical Care, Inc., as Seller (incorporated herein by reference to the Form 10-Q of Registrant filed with Commission on November 12, 1998). Exhibit 10.9 Amended and Restated Transfer and Administration Agreement dated as September 27, 1999 among Compass US Acquisition, LLC, NMC Funding Corporation, National Medical Care, Inc., Enterprise Funding Corporation, the Bank Investors listed therein, Westdeutsche Landesbank Girozentrale, New York Branch, as an administrative agent and Bank of America, N.A., as an administrative agent (incorporated herein by reference to the Form 10-K of registrant filed with Commission on March 30, 2000). Exhibit 10.10 Employment Agreement dated January 1, 1992 by and between Ben J. Lipps and Fresenius USA, Inc. (incorporated herein by reference to the Annual Report on Form 10-K of Fresenius USA, Inc., for the year ended December 31, 1992). Exhibit 10.11 Modification to FUSA Employment Agreement effective as of January 1, 1998 by and between Ben J. Lipps and Fresenius Medical Care AG (incorporated herein by reference to the Form 10-Q of Registrant filed with Commission on May 14, 1998). Exhibit 10.12 Employment Agreement dated October 23, 1998 by and between Roger G. Stoll and National Medical Care, Inc. (incorporated herein by reference to the Form 10-K of Registrant filed with Commission on March 9, 1999). Exhibit 10.13 Employment Agreement dated March 15, 2000 by and between Jerry A. Schneider and National Medical Care, Inc (incorporated herein by reference to the Form 10-Q of Registrant filed with Commission on May 12, 2000). Exhibit 10.14 Employment Agreement dated March 15, 2000 by and between Ronald J. Kuerbitz and National Medical Care, Inc. (incorporated herein by reference to the Form 10-Q of Registrant filed with Commission on May 12, 2000). Exhibit 10.15 Employment Agreement dated March 15, 2000 by and between J. Michael Lazarus and National Medical Care, Inc. (incorporated herein by reference to the Form 10-Q of Registrant filed with Commission on May 12, 2000). Exhibit 10.16 Subordinated Loan Note dated as of May 18, 1999, among National Medical Care, Inc. and certain Subsidiaries with Fresenius AG as lender (incorporated herein by reference to the Form 10-Q of Registrant filed with Commission on November 22, 1999). Exhibit 11 Statement re: Computation of Per Share Earnings. Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K The Company filed no current reports on 8-K during the quarter for which this report is filed. * Confidential treatment has been requested as to certain portions of this Exhibit. 29 30 SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Fresenius Medical Care Holdings, Inc. DATE: NOVEMBER 13, 2000 /s/ Ben J. Lipps ------------------ ------------------------------------- NAME: Ben J. Lipps TITLE: President (Chief Executive Officer) DATE: NOVEMBER 13, 2000 /s/ Jerry A. Schneider ------------------ ------------------------------------- NAME: Jerry A. Schneider TITLE: Chief Financial Officer 30 EX-4.12 2 b37213fmex4-12.txt AMENDMENT NO. 10, DATED 9/21/2000 1 EXHIBIT 4.12 AMENDMENT NO. 10 THIS AMENDMENT NO. 10, dated as of September 21, 2000 (the "AMENDMENT") relating to the Credit Agreement referenced below, by and among NATIONAL MEDICAL CARE, INC., a Delaware corporation, certain subsidiaries and affiliates party to the Credit Agreement and identified on the signature pages hereto, and BANK OF AMERICA, N.A., (formerly known as NationsBank, N.A), as Paying Agent for and on behalf of the Lenders. Terms used but not otherwise defined shall have the meanings provided in the Credit Agreement. W I T N E S S E T H WHEREAS, a $2.5 billion credit facility has been extended to National Medical Care, Inc. and certain subsidiaries and affiliates pursuant to the terms of that Credit Agreement dated as of September 27, 1996 (as amended and modified, the "CREDIT AGREEMENT") among National Medical Care, Inc., the other Borrowers, Guarantors and the Lenders identified therein, and NationsBank, N.A., as Paying Agent. WHEREAS, on March 2, 2000, Holdings issued 8,974,359 of its non-voting preference shares to a limited number of institutional and other accredited investors in exchange for the contribution by those investors of all of the membership interests in Franconia Acquisition LLC, a Delaware limited liability company, ("FRANCONIA") dedicated to acquiring dialysis centers and related businesses and having a cash balance of $350 million (the "FRANCONIA TRANSACTION"). WHEREAS, on July 26, 2000, Holdings issued 5,000,000 of its non-voting preference shares in a global offering to fund acquisitions and capital expenditures (together with the 750,000 shares issued in connection with the overallotment option granted in connection herewith, the "2000 OFFERING"); WHEREAS, the Company has requested the modification of certain covenants and certain other changes to the Credit Agreement more fully set forth herein; WHEREAS, the requested consents and modifications described herein require the consent of the Required Lenders; and WHEREAS, the Required Lenders have consented to the requested modifications on the terms and conditions set forth herein and have authorized the Paying Agent to enter into this Amendment on their behalf to give effect to this Amendment. NOW, THEREFORE, IN CONSIDERATION of these premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. The Credit Agreement is amended and modified in the following respects: 1.1 The following definitions in Section 1.1 are amended and modified as hereafter provided: (i) The definition of "Material Subsidiary" is amended by inserting at the end of the first proviso thereto the following: "nor any member of the Consolidated Group party to any Acquired Subdebt that would be prohibited from entering into the Guarantor Joinder 2 Agreement or whose Parent would be prohibited from pledging its stock pursuant to the Pledge Agreement, in either case, pursuant to the provisions of such Acquired Subdebt as in effect on the date that it became a member of the Consolidated Group or pursuant to the documents relating to the Subordinated Debt or the Additional Subdebt." (ii) The definition of "Permitted Investments" is amended in the following respects: (A) Clause (xiv) thereof is hereby amended by deleting the reference to "$100,000,000" and replacing it with a reference to "$200,000,000". (B) A new subsection (xxi) is hereby added thereunder and subsection (xxi) thereof is renumbered to be subsection (xxii), as follows: (xxi) Investments by Holdings or any Foreign Subsidiary of Holdings in preferred stock issued by WRG-NY or any Subsidiary of WRG-NY that is not a Credit Party in connection with the RIPSS/REPO structures described on ANNEX A to Amendment No. 10 to this Agreement or substantially similar transactions; (iii) The definition of "Excluded Securitization Transaction" is hereby amended by deleting the reference to "$400,000,000" in the eighth line thereof and inserting a reference to "$600,000,000" in its place. (iv) The definition of "Permitted Receivables Financing" is hereby amended by deleting the references to "$15 million" and "$75 million" in clause (B) of the proviso thereto and inserting references to "$20 million" and "$100 million", respectively, in place thereof. 1.2 Clause (b) of Section 7.11 is amended in its entirety to read as follows: (b) If a Foreign Subsidiary which is a Material Subsidiary has not either (i) become a Credit Party hereunder, or (ii) had its capital stock or the capital stock of its Parent pledged to secure the Obligations (or, if such Foreign Subsidiary is a direct or indirect Subsidiary of WRG-NY or other Domestic Credit Party, had 66% of its capital stock or 66% of the capital stock of its Parent pledged to secure the Obligations hereunder) if such Foreign Subsidiary is a direct or indirect Subsidiary of WRG-NY or other Domestic Credit Party, then the Company will promptly notify the Paying Agent thereof and WRG-NY will pledge, or if the Parent or such Foreign Subsidiary is a Subsidiary of WRG-NY, will cause the Parent to pledge, 66% of the capital stock of such Foreign Subsidiary or 66% of the capital stock of such Parent and, in connection therewith deliver a related pledge agreement and such supporting resolutions, incumbency certificates, corporate formation and organizational documentation and opinions of counsel as the Paying Agent may reasonably request. 1.3 Section 8.1 (Indebtedness) is amended in the following respects: (i) Clause (e) is hereby amended by deleting the reference to "$400,000,000" in clause (i) of the proviso thereto and inserting a reference to "$600,000,000" in its place; 2 3 (ii) Clause (m) is hereby amended by deleting the reference to "$500 million" in the first line thereof (which was increased to $650 million by consent of the Lenders in February, 1998) and replacing it with a reference to "$950 million" and inserting the following additional proviso at the end thereof: "PROVIDED, FURTHER that, up to $300 million of such amount may be subordinated debt of any member of the Consolidated Group and Guaranty Obligations relating thereto, in either case existing at the time such Person becomes a Subsidiary of Holdings so long as such debt and obligations were not incurred by such Person in connection with, or in anticipation or contemplation of the acquisition, merger or consolidation pursuant to which such Person became a member of the Consolidated Group ("ACQUIRED SUBDEBT") and shall not be subject to the requirements of clause (ii) of the first proviso hereto (and clauses (i) and (iii) thereof shall not be applicable to such Acquired Subdebt except that such Acquired Subdebt may not be guaranteed by Holdings or any other Subsidiary of Holdings not created in contemplation of the acquisition without the prior written consent of the Required Lenders)." 1.4 Section 8.4(c) is hereby amended by renumbering clause (vi) thereof as clause (vii) and inserting a new clause (vi) thereto as follows: (vi) the transfer of an interest in any accounts receivable from any Subsidiary of WRG-NY that is a special purpose accounts receivable financing vehicle to WRG-NY or any other Subsidiary of WRG-NY in connection with the RIPSS/REPO structure described on ANNEX A to Amendment No. 10 to this Agreement or any other substantially similar transaction. 1.5 Clause (b) of Section 8.9 is hereby amended by inserting the words "(other than as required by the terms of the Acquired Subdebt, within six months of the related acquisition or on other terms reasonably acceptable to the Paying Agent and the Required Lenders)" immediately before the words "other than regularly scheduled interest payments" in line 4 thereof. 1.6 Section 8.12 is hereby amended by deleting the word "or" before the words "requiring the grant" in line 7 thereof and replacing it with a comma "," and inserting the words "or existing pursuant to the provisions of any Acquired Subdebt as in effect on the date that the Person obligated on such debt became a member of the Consolidated Group" at the end thereof. 2. ACKNOWLEDGMENTS AND CONSENTS WITH RESPECT TO THE RIPSS/REPO SECURITIES. 2.1 The obligations of any member of the Consolidated Group under any Option Agreement entered into with any other member of the Consolidated Group to buy or sell equity interests in any Subsidiary of WRG-NY or any Subsidiary of WRG-NY shall not be considered "Guaranty Obligations" as such term is used and defined in the Credit Agreement. 2.2 Any Material Subsidiary that is a special purpose entity created for the purpose of entering into any Option Agreement for the purchase or sale of any equity interests described in the foregoing clause 2.1 shall not be required to enter into the Guarantor Joinder Agreement, nor shall its Parent be required to pledge its stock under the Pledge Agreement. 2.3 For the purposes of clarification, it is hereby understood and agreed that the segregation of a pool of assets for the purposes of making an election to treat those assets as a "Financial Asset Securitization Investment Trust" or "FASIT" under the Internal Revenue Code 3 4 or any successor statute or the transfer of any ownership interest therein as contemplated by the RIPSS/REPO structure described on ANNEX A to Amendment No. 10 to the Credit Agreement or substantially similar transactions shall not constitute a "Lien" as such term is used and defined in the Credit Agreement. 3. ACKNOWLEDGMENTS AND CONSENTS WITH RESPECT TO THE FRANCONIA TRANSACTION AND PUBLIC OFFERING. 3.1 It is hereby understood and agreed that (i) no portion of the Net Proceeds of the Franconia Transaction shall be required to be applied to the prepayment of the Loans and the reduction of the Commitments as provided in Section 3.3(b), even if the acquisitions to which the cash held by Franconia is applied do not occur within the time periods contemplated by Section 8.4(d) and (ii) no portion of the Net Proceeds of the 2000 Offering shall be required to be applied to the prepayment of the Loans and the reduction of the Commitments as provided in Section 3.3(b), and the provisions of Section 3.3(b) of the Credit Agreement are hereby waived with respect to the Net Proceeds of the Franconia Transaction and the 2000 Offering; PROVIDED that the cash held by Franconia on the date of the consummation of the Franconia Transaction and the Net Proceeds of the 2000 Offering shall continue to be treated as Net Proceeds of an Equity Transaction for all other purposes under the Credit Agreement. 3.2 It is hereby agreed that neither Franconia Acquisition LLC nor any Domestic Subsidiary of Franconia Acquisition LLC shall be considered to be a Material Subsidiary and Holdings shall not be required to cause the stock of such entities to be pledged to secure the Obligations nor shall such entities be required to execute the Guarantor Joinder Agreement, and the provisions of Section 7.11 are hereby waived to such extent. 4. The Lenders hereby waive compliance with the provisions of the Credit Agreement as in effect before the execution and delivery of this Amendment No. 10 to the extent, and only to the extent, that any transaction or action of any member of the Consolidated Group would have been permitted by the provisions of the Credit Agreement as amended hereby. 5. The effectiveness of this Amendment is subject to receipt by the Paying Agent of the following: (i) copies of this Amendment executed by the Company and the other members of the Consolidated Group identified on the signature pages hereto, (ii) the consent of the Required Lenders, and (iii) an Amendment Fee equal to five basis points (0.05%) of the aggregate amount of the Commitments held by the Lenders consenting to this Amendment for the ratable benefit of such consenting Lenders. 6. Except as modified hereby, all of the terms and provisions of the Credit Agreement (and Exhibits and Schedules) remain in full force and effect. 7. The Credit Parties hereby affirm (i) the representations and warranties set out in Section 6 of the Credit Agreement are true and correct as of the date hereof (except those which expressly relate to an earlier period) and (ii) no Default or Event of Default presently exists. 8. The Company agrees to pay all reasonable costs and expenses of the Paying Agent in connection with the preparation, execution and delivery of this Amendment, including without limitation the reasonable fees and expenses of Moore & Van Allen, PLLC. 4 5 9. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and its shall not be necessary in making proof of this Amendment to produce or account for more than one such counterpart. 10. This Amendment, and the Credit Agreement as amended hereby, shall be governed by and construed and interpreted in accordance with the laws of the State of New York. [Remainder of Page Intentionally Left Blank] 5 6 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written. BORROWERS: NATIONAL MEDICAL CARE, INC., a Delaware corporation By: /s/ Ramon Yi ----------------------------------------------- Name: Ramon Yi Title: Treasurer FRESENIUS MEDICAL CARE AG By: /s/ Dr. Emanuele Gotti ----------------------------------------------- Name: Dr. Emanuele Gotti Title: Member of the Board of Management By: /s/ Dr. Werner Brandt ----------------------------------------------- Name: Dr. Werner Brandt Title: Member of the Board of Management NMC DO BRASIL LTDA., a Brazil corporation By: /s/ Joao Pedrinelli ----------------------------------------------- Name: Joao Pedrinelli Title: Member of the Board of Management NATIONAL MEDICAL CARE OF SPAIN, S.A., a Spanish corporation By: /s/ Dr. Emanuele Gotti /s/ Dr. Andrea Stopper ----------------------------------------------- Name: Dr. Emanuele Gotti Dr. Andrea Stopper Title: Board Member Board Member NATIONAL MEDICAL CARE OF TAIWAN, INC., a Delaware corporation By: /s/ Roberto Fuste /s/ Betty Na ----------------------------------------------- Name: Roberto Fuste Betty Na Title: Members of the Board of Directors NMC CENTRO MEDICO NACIONAL, LDA., a Portuguese corporation By: /s/ Ricardo Da Silva /s/ John Allen ----------------------------------------------- Name: Ricardo Da Silva John Allen Title: Board Members FRESENIUS MEDICAL CARE ARGENTINA, S.A., as successor by merger to 6 7 NMC DE ARGENTINA, S.A., an Argentine corporation By: /s/ Dr. Guido Yagupsky /s/ Horst Radthe ----------------------------------------------- Name: Dr. Guido Yagupsky Horst Radthe Title: Board Members FRESENIUS USA, INC., a Massachusetts corporation By: /s/ Ramon Yi ----------------------------------------------- Name: Ramon Yi Title: Treasurer FRESENIUS MEDICAL CARE DEUTSCHLAND GmbH, a German corporation By: /s/ Dr. Emanuele Gotti ----------------------------------------------- Name: Dr. Emanuele Gotti Title: Board Member By: /s/ Dr. Werner Brandt ----------------------------------------------- Name: Dr. Werner Brandt Title: Board Member FRESENIUS MEDICAL CARE GROUPE FRANCE (formerly known as Fresenius Groupe France S.A.), a French corporation By: /s/ Udo Werle /s/ Dr. Emanuele Gotti ----------------------------------------------- Name: Udo Werle Dr. Emanuele Gotti Title: Board Members FRESENIUS MEDICAL CARE HOLDING, S.p.A., an Italian corporation By: /s/ Dr. Emanuele Gotti /s/ Andrea Stopper ----------------------------------------------- Name: Dr. Emanuele Gotti Andrea Stopper Title: Board Members FRESENIUS MEDICAL CARE ESPANA S.A., a Spanish corporation By: /s/ Ricardo Davel /s/ Manuel Gluete ----------------------------------------------- Name: Ricardo Davel Manuel Gluete Title: Board Members FRESENIUS MEDICAL CARE MAGYAROSZA KfG, a Hungarian corporation 7 8 By: /s/ Norman Erhard ------------------------------------------------ Name: Norman Erhard Title: Board Member BIO-MEDICAL APPLICATIONS OF ALABAMA, INC. By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer BIO-MEDICAL APPLICATIONS OF FLORIDA, INC. By: /s/ Ramon Yi ----------------------------------------------- Name: Ramon Yi Title: Treasurer BIO-MEDICAL APPLICATIONS OF GEORGIA, INC. By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer BIO-MEDICAL APPLICATIONS OF INDIANA, INC. By: /s/ Ramon Yi ----------------------------------------------- Name: Ramon Yi Title: Treasurer BIO-MEDICAL APPLICATIONS OF KENTUCKY, INC. By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer BIO-MEDICAL APPLICATIONS OF LOUISIANA, INC. By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer 8 9 BIO-MEDICAL APPLICATIONS OF MARYLAND, INC. By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer BIO-MEDICAL APPLICATIONS OF MASSACHUSETTS, INC. By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA, INC. By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer BIO-MEDICAL APPLICATIONS OF OHIO, INC. By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer BIO-MEDICAL APPLICATIONS OF SOUTH CAROLINA, INC. By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer BIO-MEDICAL APPLICATIONS OF TEXAS, INC. By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer 9 10 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer LIFECHEM, INC., a Delaware corporation By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer GUARANTORS: FRESENIUS MEDICAL CARE HOLDINGS, INC., a New York corporation formerly known as WRG-NY By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer NATIONAL MEDICAL CARE, INC., a Delaware corporation By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer BIO-MEDICAL APPLICATIONS MANAGEMENT CO., INC., a Delaware corporation By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer FRESENIUS MEDICAL CARE AG, a German corporation By: /s/ Dr. Emanuele Gotti ------------------------------------------------ Name: Dr. Emanuele Gotti Title: Board Member By: /s/ Dr. Werner Brandt ------------------------------------------------ Name: Dr. Werner Brandt Title: Board Member 10 11 FRESENIUS USA, INC., a Massachusetts corporation By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer FRESENIUS MEDICAL CARE DEUTSCHLAND GmbH, a German corporation By: /s/ Dr. Emanuele Gotti ------------------------------------------------ Name: Dr. Emanuele Gotti Title: Board Member By: /s/ Dr. Werner Brandt ------------------------------------------------ Name: Dr. Werner Brandt Title: Board Member FRESENIUS MEDICAL CARE GROUPE FRANCE, a French corporation (formerly known as Fresenius Groupe France S.A.) By: /s/ Dr. Udo Werle /s/ Dr. Emanuele Gotti ------------------------------------------------ Name: Dr. Udo Werle Dr. Emanuele Gotti Title: Board Members FRESENIUS SECURITIES, INC., a California corporation By: /s/ Ramon Yi ------------------------------------------------ Name: Ramon Yi Title: Treasurer NEOMEDICA, INC., a Delaware corporation By: /s/ Doug Kott ------------------------------------------------ Name: Doug Kott Title: Secretary FMC FINANCE S.A., a Luxembourg corporation By: /s/ John Allen ------------------------------------------------ Name: John Allen Title: Board Member 11 12 FMC TRUST FINANCE S.a.r.l. LUXEMBOURG, a Luxembourg corporation By: /s/ Andrea Stopper ------------------------------------------------ Name: Andrea Stopper Title: Board Member PAYING AGENT: BANK OF AMERICA, N.A. (formerly known as NationsBank, N.A.), as Paying Agent for and on behalf of the Lenders By: /s/ Ashley M. Crabtree ------------------------------------------------ Name: Ashley M. Crabtree Title: Senior Vice President 12 13 CONSENT TO AMENDMENT NO. 10 Bank of America, N.A. (formerly known as NationsBank, N.A.), as Paying Agent 101 N. Tryon Street, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attn: James D. Young, Agency Services Re: Credit Agreement dated as of September 27, 1996 (as amended and modified, the "CREDIT AGREEMENT") among National Medical Care, Inc., the other Borrowers, Guarantors and Lenders identified therein and NationsBank, N.A. (now known as Bank of America, N.A.), as Paying Agent. Terms used but not otherwise defined shall have the meanings provided in the Credit Agreement. Amendment No. 10 dated September 21, 2000 (the "SUBJECT AMENDMENT") relating to the Credit Agreement Ladies and Gentlemen: This should serve to confirm our receipt of, and consent to, the Subject Amendment. We hereby authorize and direct you, as Paying Agent for the Lenders, to enter into the Subject Amendment on our behalf in accordance with the terms of the Credit Agreement upon your receipt of such consent and direction from the Required Lenders, and agree that Company and the other Credit Parties may rely on such authorization. Sincerely, --------------------------------------- [Name of Lender] By:____________________________________ Name: Title: 13 EX-11 3 b37213fmex11.txt STATEMENT REGARDING COMPUTATION OF SHARE EARNINGS 1 EXHIBIT 11 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES WEIGHTED AVERAGE NUMBER OF SHARES AND EARNINGS USED IN PER SHARE COMPUTATION (DOLLARS AND SHARES IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------- ---------------------- 2000 1999 2000 1999 --------- --------- --------- ---------- The weighted average number of shares of Common Stock were as follows ................. 90,000 90,000 90,000 90,000 ========= ========= ========= =========
Income used in the computation of earnings per share were as follows:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------- ----------------------- CONSOLIDATED 2000 1999 2000 1999 --------- --------- --------- ---------- Net income (loss)............................... $ 27,669 $(387,205) $ 75,933 $(348,174) Dividends paid on preferred stocks ............. (130) (130) (390) (390) --------- --------- --------- --------- Income (loss) used in per share computation of earnings....................... $ 27,539 $(387,335) $ 75,543 $(348,564) ========= ========= ========= ========= Basic and fully dilutive earnings per share .... $ 0.31 $ (4.30) $ 0.84 $ (3.87) ========= ========= ========= =========
EX-27.1 4 b37213fmex27-1.txt FINANCIAL DATA SCHEDULE (3 MONTHS)
5 1,000 3-MOS DEC-31-2000 JUL-01-2000 SEP-30-2000 8,881 0 456,815 75,176 181,261 897,705 722,434 283,542 4,634,907 1,302,416 0 0 16,318 90,000 1,590,665 4,634,907 125,080 794,694 86,630 544,011 123,643 17,301 54,843 54,896 27,227 27,669 0 0 0 27,669 0.31 0.31
EX-27.2 5 b37213fmex27-2.txt FINANCIAL DATA SCHEDULE (YEAR)
5 1,000 U.S. DOLLARS YEAR DEC-31-2000 JAN-01-2000 SEP-30-2000 1 8,881 0 456,815 75,176 181,261 897,705 722,434 283,542 4,634,907 1,302,416 0 0 16,318 90,000 1,590,665 4,634,907 360,249 2,300,533 257,333 1,563,363 377,434 44,608 165,081 150,047 74,114 75,933 0 0 0 75,933 0.84 0.84
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