<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
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 1-11239
COLUMBIA/HCA HEALTHCARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-2497104
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE PARK PLAZA 37203
NASHVILLE, TENNESSEE (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(615) 344-9551
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark 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, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock of the latest practical date.
<TABLE>
<CAPTION>
OUTSTANDING AT OCTOBER
CLASS OF COMMON STOCK 31, 1997
--------------------- ----------------------
<S> <C>
Voting common stock, $.01 par value 626,553,000 shares
Nonvoting common stock, $.01 par value 21,000,000 shares
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1 of 26
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
FORM 10-Q
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PAGE OF
PART I: FINANCIAL INFORMATION FORM 10-Q
- ----------------------------- ---------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of Income--for the quarters and
nine months ended September 30, 1997 and 1996...................... 3
Condensed Consolidated Balance Sheets--September 30, 1997 and Decem-
ber 31, 1996....................................................... 4
Condensed Consolidated Statements of Cash Flows--for the nine months
ended September 30, 1997 and 1996.................................. 5
Notes to Condensed Consolidated Financial Statements................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 10
<CAPTION>
PART II: OTHER INFORMATION
- --------------------------
<S> <C>
Items 1 to 6............................................................ 22
</TABLE>
2
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
UNAUDITED
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER NINE MONTHS
---------------- ----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues................................... $ 4,612 $ 4,605 $14,445 $13,969
Salaries and benefits...................... 1,895 1,792 5,621 5,412
Supplies................................... 653 649 2,010 1,992
Other operating expenses................... 1,023 939 2,928 2,738
Provision for doubtful accounts............ 369 311 976 865
Depreciation and amortization.............. 319 300 923 842
Interest expense........................... 125 119 361 371
Equity in earnings of affiliates........... (19) (39) (116) (127)
Restructuring of operations and investiga-
tion related costs........................ 64 -- 64 --
------- ------- ------- -------
4,429 4,071 12,767 12,093
------- ------- ------- -------
Income from continuing operations before
minority interests and income taxes....... 183 534 1,678 1,876
Minority interests in earnings of consoli-
dated entities............................ 33 36 125 102
------- ------- ------- -------
Income from continuing operations before
income taxes.............................. 150 498 1,553 1,774
Provision for income taxes................. 59 199 622 711
------- ------- ------- -------
Income from continuing operations.......... 91 299 931 1,063
Income from discontinued operations, net of
income taxes.............................. 6 12 57 28
------- ------- ------- -------
Net income............................. $ 97 $ 311 $ 988 $ 1,091
======= ======= ======= =======
Earnings per share:
Income from continuing operations........ $ .15 $ .44 $ 1.39 $ 1.57
Income from discontinued operations...... .01 .02 .09 .04
------- ------- ------- -------
Net income............................. $ .16 $ .46 $ 1.48 $ 1.61
======= ======= ======= =======
Cash dividends per share................... $ .01 $ .02 $ .05 $ .06
Redemption of preferred stock purchase
rights.................................... $ .01 -- $ .01 --
Shares used in computing earnings per share
(in thousands)............................ 657,807 677,417 668,136 677,814
</TABLE>
See accompanying notes.
3
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 28 $ 113
Accounts receivable, less allowances for doubtful
accounts of $1,569 and $1,380.................... 2,889 2,842
Inventories....................................... 458 438
Other............................................. 984 806
------- -------
4,359 4,199
Property and equipment, at cost..................... 16,500 15,687
Accumulated depreciation............................ (5,894) (5,314)
------- -------
10,606 10,373
Investments of insurance subsidiary................. 1,359 1,119
Investments in and advances to affiliates........... 1,425 1,293
Intangible assets, net.............................. 3,744 3,582
Net assets of discontinued operations............... 1,349 212
Other............................................... 281 338
------- -------
$23,123 $21,116
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 790 $ 790
Accrued salaries.................................. 404 430
Other accrued expenses............................ 1,317 1,292
Income taxes...................................... -- 97
Long-term debt due within one year................ 132 201
------- -------
2,643 2,810
Long-term debt...................................... 8,693 6,781
Deferred taxes and other liabilities................ 2,016 2,080
Minority interests in equity of consolidated enti-
ties............................................... 900 836
Stockholders' equity:
Common stock, $.01 par; authorized 1,600,000,000
voting shares and 50,000,000 nonvoting shares;
issued and outstanding 630,848,900 voting shares
and 21,000,000 nonvoting shares--September 30,
1997 and 650,499,400 voting shares and 21,000,000
nonvoting shares December 31, 1996............... 7 7
Capital in excess of par value.................... 3,789 4,519
Other............................................. 110 66
Retained earnings................................. 4,965 4,017
------- -------
8,871 8,609
------- -------
$23,123 $21,116
======= =======
</TABLE>
See accompanying notes.
4
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
UNAUDITED
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Cash flows from continuing operating activities:
Net income .................................................. $ 988 $1,091
Adjustments to reconcile net income to net cash provided by
continuing operating activities:
Depreciation and amortization.............................. 923 842
Income from discontinued operations........................ (57) (28)
Changes in operating assets and liabilities................ (355) (79)
Other...................................................... 78 77
------ ------
Net cash provided by continuing operating activities..... 1,577 1,903
------ ------
Cash flows from investing activities:
Purchase of property and equipment........................... (1,107) (1,057)
Acquisition of hospitals and health care entities............ (398) (638)
Investments in and advances to affiliates.................... (29) (37)
Disposition of property and equipment........................ 194 142
Change in other investments.................................. (145) (112)
Change in net assets of discontinued operations.............. (1,079) (24)
Other........................................................ (115) (1)
------ ------
Net cash used in investing activities.................... (2,679) (1,727)
------ ------
Cash flows from financing activities:
Issuance of long-term debt................................... 251 435
Net changes in commercial paper borrowings and lines of cred-
it.......................................................... 1,878 (506)
Repayment of long-term debt.................................. (310) (291)
Repurchases of common stock, net............................. (765) (3)
Payment of cash dividends and redemption of preferred stock
purchase rights............................................. (40) (40)
Other........................................................ 3 7
------ ------
Net cash provided by (used in) used in financing activi-
ties.................................................... 1,017 (398)
------ ------
Change in cash and cash equivalents............................ (85) (222)
Cash and cash equivalents at beginning of period............... 113 232
------ ------
Cash and cash equivalents at end of period..................... $ 28 $ 10
====== ======
Interest payments.............................................. $ 308 $ 337
Income tax payments, net of refunds............................ $1,014 $ 602
</TABLE>
See accompanying notes.
5
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1--BASIS OF PRESENTATION
Columbia/HCA Healthcare Corporation ("Columbia" or the "Company") is a
Delaware corporation that owns and operates hospitals and related health care
entities through (i) affiliated subsidiaries, (ii) joint ventures or (iii)
ownership of interests in various partnerships in which subsidiaries of the
Company serve as the managing general partner. At September 30, 1997, Columbia
owned and operated 314 hospitals, 143 freestanding surgery centers, more than
500 home health locations (see Note 7) and numerous other facilities providing
a variety of health care services. Columbia is also a partner in several 50/50
joint ventures that own and operate 27 hospitals and five freestanding surgery
centers which are accounted for using the equity method. Columbia's facilities
are located in 35 states, England, Switzerland and Spain.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the quarter and
nine months ended September 30, 1997, are not necessarily indicative of the
results that may be expected for the year ending December 31, 1997. For
further information, refer to the consolidated financial statements and
footnotes thereto included in Columbia's annual report on Form 10-K/A for the
year ended December 31, 1996.
Certain prior year amounts have been reclassified to conform to the current
year presentation (see Note 7).
NOTE 2--EARNINGS PER SHARE
Earnings per share is based upon the weighted average number of common
shares outstanding adjusted for the dilutive effect of common stock
equivalents, consisting primarily of stock options. Fully diluted earnings per
share is not presented because such amounts approximate earnings per share.
NOTE 3--VALUE HEALTH MERGER
On August 6, 1997, Columbia completed a merger transaction with Value
Health, Inc. ("Value Health") (the "Value Health Merger"). Value Health is a
provider of specialty managed care benefit programs. In connection with the
Value Health Merger, Value Health stockholders received $20.50 in cash for
each Value Health share. The total purchase price, including transaction costs
and the assumption of $165 million of Value Health debt, was approximately
$1.4 billion.
The Value Health Merger has been accounted for by the purchase method, and
accordingly, the results of operations of Value Health have been included with
those of Columbia since August 1997. The excess of aggregate purchase price
over the estimated fair value of net assets acquired was approximately $916
million and is being amortized over a 30 year period.
On August 28, 1997, Columbia announced plans to divest three of the four
business units acquired in the Value Health Merger. The Value Health
businesses to be divested include the managed behavioral health care unit, the
information technology unit (which develops disease management programs) and
the pharmacy benefit management unit. The results of operations and net assets
of these entities are included in discontinued operations (see Note 7).
NOTE 4--INVESTIGATIONS
In March 1997, various facilities of the Company's El Paso, Texas operations
were searched by federal authorities pursuant to search warrants and the
government removed various records and documents. The Company is cooperating
in this investigation and has met with the Assistant United States Attorney
(the "Assistant U.S. Attorney") responsible for conducting this investigation.
The Company believes it may be a target in this investigation.
6
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
UNAUDITED
NOTE 4--INVESTIGATIONS (CONTINUED)
In July 1997, various Columbia affiliated facilities and offices were
searched pursuant to search warrants issued by the United States District
Court in various states. During July and September 1997, the Company was also
served with subpoenas requesting various records and documents related to
laboratory billing, Diagnostic Related Group ("DRG") coding and home health
operations in various states. The Company is cooperating in these
investigations and has met with Department of Justice attorneys responsible
for conducting these investigations. The Company believes that it may be a
target in these investigations.
Also, in July 1997, the United States District Court for the Middle District
of Florida, in Ft. Myers, issued an indictment against three Columbia
employees. The indictment relates to the alleged false characterization of
interest payments on certain debt resulting in Medicare and CHAMPUS
overpayments since 1986 to Columbia Fawcett Memorial Hospital, a Port
Charlotte, Florida hospital that was acquired by Columbia in 1992. The Company
has been served with subpoenas for various records and documents. The Company
is cooperating in this investigation and has met with the Assistant U.S.
Attorney responsible for conducting this investigation. The Company has been
informed that it is a target in this investigation.
While it is too early to predict the outcome of any of the ongoing
investigations or the initiation of any additional investigations, were the
Company to be found in violation of federal or state laws relating to
Medicare, Medicaid or similar programs, the Company could be subject to
substantial monetary fines, civil and criminal penalties and exclusion from
participation in the Medicare and Medicaid programs. Any such sanctions could
have a material adverse effect on the Company's financial position and results
of operations.
Management believes the ongoing investigations and related media coverage
are having a negative effect on the Company's financial position and results
of operations. However, the Company is unable to measure the effect or predict
the magnitude that these investigations and related media coverage could have
on the Company's future results of operations and financial position.
NOTE 5--CHANGE IN MANAGEMENT AND BUSINESS STRATEGY
On July 25, 1997, Columbia announced the resignations of Richard L. Scott,
Chairman and Chief Executive Officer and David T. Vandewater, President and
Chief Operating Officer. Thomas F. Frist, Jr., M.D., Vice Chairman of the
Company's Board of Directors, was named Chairman and Chief Executive Officer.
On August 4, 1997, the Company named Jack O. Bovender, Jr. as President and
Chief Operating Officer.
On August 7, 1997, in an effort to address some areas of concern that may
have led to the investigations by certain government agencies (as described in
Note 4), management announced several significant steps that it will take to
redefine the Company's approach to a number of business practices. Some of the
steps include: elimination of annual cash incentive compensation for the
Company's employees, divestiture of the home health care business,
discontinued sales of interests in hospitals to physicians and the unwinding
of existing physician interests in hospitals, continued compliance program
efforts, increased disclosures in Medicare cost reports, changes in laboratory
billing procedures, increased reviews of Medicare coding and further
guidelines on any transactions with physicians. These changes are currently
being developed and implemented in consideration of laws, regulations and
existing contractual agreements. Management is not currently able to predict
what effects such actions might have on the Company's financial position or
results of operations.
The Company is currently considering a Company wide internal operating
reorganization. In addition, the Company is evaluating various restructuring
alternatives which include asset divestitures to third parties, spin-offs of
certain assets to the Company's shareholders and the reorganization of the
Company's businesses into distinct operating units. Each of the restructuring
alternatives may be subject to various legal and regulatory approvals. There
can be no assurance, which, if any of these alternatives may be adopted or
implemented.
7
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
UNAUDITED
NOTE 6--RESTRUCTURING OF OPERATIONS AND INVESTIGATION RELATED COSTS
In the third quarter of 1997, Columbia recorded the following charges in
connection with the investigations and the changes in management and business
strategy discussed in NOTES 4 and 5 (in millions):
<TABLE>
<S> <C>
Severance costs (approximately 120 employees)....................... $40
Professional fees related to investigations......................... 11
Cancelled projects.................................................. 10
Other............................................................... 3
---
$64
===
</TABLE>
NOTE 7--DISCONTINUED OPERATIONS
As part of the Company's change in business strategy (as described in NOTE
5), Columbia has implemented a plan to sell its home health care business and
divest three of the four business units acquired in the Value Health Merger.
As a result of the plan to divest these businesses, the Company's condensed
consolidated financial statements and related notes have been adjusted and
restated to reflect the results of operations and net assets of the home
health care and Value Health businesses to be disposed of as discontinued
operations.
Revenues of the home health care and Value Health businesses to be disposed
of totaled $585 million and $282 million for the three months ended September
30, 1997 and 1996, respectively, and $1.3 billion and $802 million for the
nine months ended September 30, 1997 and 1996, respectively. Results of
operations for these businesses are included in "Income from discontinued
operations" in the condensed consolidated statements of income. Management is
not able at this time to reasonably estimate the timing, structure or expected
gain or loss that will result from the disposition of these businesses.
NOTE 8--INCOME TAXES
The Company is currently contesting before the United States Tax Court (the
"Tax Court"), the United States Court of Federal Claims (the "Court of Federal
Claims") and the Appeals Division of the Internal Revenue Service (the "IRS")
certain claimed deficiencies and adjustments proposed by the IRS in
conjunction with its examination of HCA-Hospital Corporation of America's
("HCA") federal income tax returns for 1981 through 1992 and of Healthtrust,
Inc.--The Hospital Company's ("Healthtrust") federal income tax returns for
1990 through 1992. The disputed items include the disallowance of certain
stock option compensation which HCA deducted in calculating taxable income for
1992 and the disallowance of certain executive compensation which Healthtrust
deducted in calculating taxable income for 1991.
In September 1997, the IRS issued statutory notices of deficiency in
connection with its examination of the 1993 and 1994 federal income tax
returns for HCA, Columbia Healthcare Corporation ("CHC") and the Company. The
disputed items include: the disallowance of certain acquisition-related costs,
executive compensation, systems conversion costs and insurance premiums which
were deducted in calculating taxable income in 1993 and 1994; the method of
accounting used by certain subsidiaries for calculating taxable income related
to vendor rebates and governmental receivables in 1993 and 1994; and certain
carryover issues related to the 1981 through 1992 IRS examinations of HCA. The
Company intends to file petitions with the Tax Court in December 1997
contesting the claimed deficiencies.
The IRS is claiming an additional $551 million in income taxes and interest
through September 30, 1997. Management believes that adequate provisions have
been recorded to satisfy final resolution of these issues.
8
<PAGE>
COLUMBIA/HCA HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
UNAUDITED
NOTE 8--INCOME TAXES (CONTINUED)
In October 1997, the Tax Court ruled in HCA's favor with respect to its
claim that insurance premiums paid to its wholly-owned insurance subsidiary
from 1981 through 1988 were deductible. Through September 30, 1997, the
Company was seeking a refund of income tax and interest of $204 million. The
Tax Court decision may be appealed by the IRS to the United States Court of
Appeals, Sixth Circuit. This ruling will not have any material effect on the
results of operations.
Management believes that Columbia, CHC, HCA and Healthtrust properly
reported income and paid taxes in accordance with applicable laws and
agreements established with the IRS during previous examinations, and that
final resolution of these disputes (excluding any possible refunds) will not
have a material adverse effect on the results of operations or financial
position of the Company.
NOTE 9--STOCK REPURCHASE PROGRAM AND REDEMPTION OF PREFERRED STOCK PURCHASE
RIGHTS
The Company announced on April 14, 1997 that the Company's board of
directors authorized the repurchase of up to $1 billion of Columbia common
stock. As of September 30, 1997, the Company had repurchased approximately
20.4 million shares for a total cost of approximately $737 million.
Repurchased shares are available for reissuance for general corporate
purposes.
On May 15, 1997, the board of directors of the Company authorized the
redemption of all outstanding preferred stock purchase rights. The redemption
price of $.01 per share was paid on September 1, 1997 and was distributed to
stockholders along with a quarterly dividend of $.01 per share.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following is a summary of certain information from continuing operations
for the quarters and nine months ended September 30, 1997 and 1996 (dollars in
millions, except per share amounts):
<TABLE>
<CAPTION>
QUARTER
----------------------------
1997 1996
------------- -------------
AMOUNT RATIO AMOUNT RATIO
------ ----- ------ -----
<S> <C> <C> <C> <C>
Revenues......................................... $4,612 100.0 $4,605 100.0
Salaries and benefits............................ 1,895 41.1 1,792 38.9
Supplies......................................... 653 14.2 649 14.1
Other operating expenses......................... 1,023 22.1 939 20.4
Provision for doubtful accounts.................. 369 8.0 311 6.8
Depreciation and amortization.................... 319 6.9 300 6.5
Interest expense................................. 125 2.7 119 2.6
Equity in earnings of affiliates................. (19) (0.4) (39) (0.9)
Restructuring of operations and investigation re-
lated costs..................................... 64 1.4 -- --
------ ----- ------ -----
4,429 96.0 4,071 88.4
------ ----- ------ -----
Income from continuing operations before minority
interests and income taxes...................... 183 4.0 534 11.6
Minority interests in earnings of consolidated
entities........................................ 33 0.7 36 0.8
------ ----- ------ -----
Income from continuing operations before income
taxes........................................... 150 3.3 498 10.8
Provision for income taxes....................... 59 1.3 199 4.3
------ ----- ------ -----
Income from continuing operations................ $ 91 2.0 $ 299 6.5
====== ===== ====== =====
Earnings per share from continuing operations.... $ .15 $ .44
====== ======
% changes from prior year:
Revenues....................................... 0.2%
Income from continuing operations before income
taxes......................................... (69.8)
Income from continuing operations.............. (69.7)
Earnings per share from continuing operations.. (65.9)
Admissions (a)................................. (0.2)
Equivalent admissions (b)...................... 1.3
Revenues per equivalent admission.............. (1.1)
Same--hospital % changes from prior year (c):
Revenues....................................... 0.7%
Admissions (a)................................. 1.0
Equivalent admissions (b)...................... 2.6
Revenues per equivalent admission.............. (1.9)
</TABLE>
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS
------------------------------
1997 1996
-------------- --------------
AMOUNT RATIO AMOUNT RATIO
------- ----- ------- -----
<S> <C> <C> <C> <C>
Revenues....................................... $14,445 100.0 $13,969 100.0
Salaries and benefits.......................... 5,621 38.9 5,412 38.7
Supplies....................................... 2,010 13.9 1,992 14.3
Other operating expenses....................... 2,928 20.2 2,738 19.6
Provision for doubtful accounts................ 976 6.8 865 6.2
Depreciation and amortization.................. 923 6.5 842 6.0
Interest expense............................... 361 2.5 371 2.7
Equity in earnings of affiliates............... (116) (0.8) (127) (0.9)
Restructuring of operations and investigation
related costs................................. 64 0.4 -- --
------- ----- ------- -----
12,767 88.4 12,093 86.6
------- ----- ------- -----
Income from continuing operations before
minority interests and income taxes........... 1,678 11.6 1,876 13.4
Minority interests in earnings of consolidated
entities...................................... 125 0.8 102 0.7
------- ----- ------- -----
Income from continuing operations before income
taxes......................................... 1,553 10.8 1,774 12.7
Provision for income taxes..................... 622 4.4 711 5.1
------- ----- ------- -----
Income from continuing operations.............. $ 931 6.4 $ 1,063 7.6
======= ===== ======= =====
Earnings per share from continuing operations.. $ 1.39 $ 1.57
======= =======
% changes from prior year:
Revenues..................................... 3.4%
Income from continuing operations before in-
come taxes.................................. (12.5)
Income from continuing operations............ (12.4)
Earnings per share from continuing opera-
tions....................................... (11.5)
Admissions (a)............................... 1.4
Equivalent admissions (b).................... 3.1
Revenues per equivalent admission............ 0.3
Same--hospital % changes from prior year (c):
Revenues..................................... 4.1%
Admissions(a)................................ 2.0
Equivalent admissions (b).................... 3.9
Revenues per equivalent admission............ 0.2
</TABLE>
- --------
(a) Admissions represent the total number of patients admitted (in the
facility for a period in excess of 23 hours) to the Company's hospitals.
(b) Equivalent admissions is used by management and certain investors as a
general measure of combined inpatient and outpatient volume. Equivalent
admissions are computed by multiplying admissions (inpatient volume) by
the sum of gross inpatient revenue and gross outpatient revenue and then
dividing the resulting amount by gross inpatient revenue. The equivalent
admissions computation "equates" outpatient revenue to the volume measure
(admissions) used to measure inpatient volume resulting in a general
measure of combined inpatient and outpatient volume.
(c) Excludes the operations of hospitals and their related facilities which
were either acquired or divested during the current and prior year.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
General
The Company is currently the subject of a government investigation into the
Company's business practices in several states. The Company has also
experienced a change in management and business strategy during the current
period. The uncertainties surrounding these factors along with the unfavorable
media coverage related to the investigations may have contributed to a
slowdown in the Company's revenue growth and a decline in results of
operations. Management is unable to predict if or when the Company can return
to its historical revenue growth rates, historical operating margins or
historical net income growth rates.
Investigations
In March 1997, various facilities of the Company's El Paso, Texas operations
were searched by federal authorities pursuant to search warrants and the
government removed various records and documents. The Company is cooperating
in this investigation and has met with the Assistant U.S. Attorney responsible
for conducting this investigation. The Company believes it may be a target in
this investigation.
In July 1997, various Columbia affiliated facilities and offices were
searched pursuant to search warrants issued by the United States District
Court in various states. During July and September 1997, the Company was also
served with subpoenas requesting various records and documents related to
laboratory billing, DRG coding and home health operations in various states.
The Company is cooperating in these investigations and has met with Department
of Justice attorneys responsible for conducting these investigations. The
Company believes that it may be a target in these investigations.
Also, in July 1997, the United States District Court for the Middle District
of Florida, in Ft. Myers, issued an indictment against three Columbia
employees. The indictment relates to the alleged false characterization of
interest payments on certain debt resulting in Medicare and CHAMPUS
overpayments since 1986 to Columbia Fawcett Memorial Hospital, a Port
Charlotte, Florida hospital that was acquired by Columbia in 1992. The Company
has been served with subpoenas for various records and documents. The Company
is cooperating in this investigation and has met with the Assistant U.S.
Attorney responsible for conducting this investigation. The Company has been
informed that it is a target in this investigation.
While it is too early to predict the outcome of any of the ongoing
investigations or the initiation of any additional investigations, were the
Company to be found in violation of federal or state laws relating to
Medicare, Medicaid or similar programs, the Company could be subject to
substantial monetary fines, civil and criminal penalties and exclusion from
participation in the Medicare and Medicaid programs. Any such sanctions could
have a material adverse effect on the Company's financial position and results
of operations.
Management believes the ongoing investigations and related media coverage
are having a negative effect on the Company's financial position and results
of operations. However, the Company is unable to measure the effect or predict
the magnitude that these investigations and related media coverage could have
on the Company's future results of operations and financial position.
Change in Management and Business Strategy
On July 25, 1997, Columbia announced the resignations of Richard L. Scott,
Chairman and Chief Executive Officer and David T. Vandewater, President and
Chief Operating Officer. Thomas F. Frist, Jr., M.D., Vice Chairman of the
Company's Board of Directors, was named Chairman and Chief Executive Officer.
On August 4, 1997, the Company named Jack O. Bovender, Jr. as President and
Chief Operating Officer.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Change in Management and Business Strategy (continued)
On August 7, 1997, in an effort to address some areas of concern that may
have led to the investigations by certain government agencies, management
announced several significant steps that it will take to redefine the
Company's approach to a number of business practices. Some of the steps
include: elimination of annual cash incentive compensation for the Company's
employees, divestiture of the home health care business, discontinued sales of
interests in hospitals to physicians and the unwinding of existing physician
interests in hospitals, continued compliance program efforts, increased
disclosures in Medicare cost reports, changes in laboratory billing
procedures, increased reviews of Medicare coding and further guidelines on any
transactions with physicians. These changes are currently being developed and
implemented in consideration of laws, regulations and existing contractual
agreements. Management is not currently able to predict what effect such
actions might have on the Company's financial position or results of
operations.
The Company is currently considering a Company wide internal operating
reorganization. In addition, the Company is evaluating various restructuring
alternatives which include asset divestitures to third parties, spin-offs of
certain assets to the Company's shareholders and the reorganization of the
Company's businesses into distinct operating units. Each of the restructuring
alternatives may be subject to various legal and regulatory approvals. There
can be no assurance, which, if any of these alternatives may be adopted or
implemented.
Revenue/Volume Trends
In addition to the impact of the ongoing government investigations and
related media coverage, the Company's revenues continue to be affected by the
trend toward certain services being performed more frequently on an outpatient
basis and an increasing proportion of revenue being derived from fixed payment
sources, including Medicare, Medicaid and managed care plans (87.9% of
admissions for the nine months ended September 30, 1997 and 85.7% in the same
period last year relate to Medicare, Medicaid and managed care plan patients).
Insurance companies, government programs (other than Medicare) and employers
purchasing health care services for their employees are negotiating discounted
amounts they will pay health care providers rather than paying standard
prices. This leads to these purchasers of health care services becoming
discounted payors, similar to HMO's and PPO's, in virtually all markets and
making it increasingly difficult for providers to maintain their historical
revenue growth trends. Revenues from capitation arrangements (prepaid health
service agreements) are less than 1% of consolidated revenues.
The growth in outpatient services is expected to continue in the health care
industry as procedures performed on an inpatient basis are converted to
outpatient procedures through continuing advances in pharmaceutical and
medical technologies. The redirection of certain procedures to an outpatient
basis is also influenced by pressures from payors to direct certain procedures
from inpatient care to outpatient care.
The Company expects patient volumes from Medicare and Medicaid to continue
to increase due to the general aging of the population and the expansion of
state Medicaid programs. The Medicare program reimburses the Company's
inpatient services primarily based on established rates that are dependent on
each patient's diagnosis, regardless of the provider's cost to treat the
patient or the length of time the patient stays in the hospital. Medicare
reimbursement for outpatient services is based primarily upon the provider's
cost to treat the patient and certain government fee schedules and blended
rates. The Medicare program's established rates are indexed for inflation
annually, but these increases have historically been less than the actual
inflation rate and the Company's increases to its standard charges. The
Balanced Budget Act of 1997 (the "97 Budget Act"), enacted in August 1997,
will have the effect of reducing reimbursements from the Medicare program as
well as various states' Medicaid programs effective over various periods
beginning October 1, 1997. Management believes the reduction in payments could
be significant, but cannot at this time, predict the ultimate effect of such
reductions on the Company's results of operations.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Year 2000 Computer Issues
The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The year 2000 problem
is pervasive and complex as virtually every computer operation will be
affected in some way by the rollover of the two digit year value to 00. The
issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
Columbia has initiated a company-wide program to prepare its computer
systems and applications for the year 2000. The Company expects to incur
internal staff costs as well as external consulting and other expenses related
to infrastructure and facility enhancements necessary to prepare the systems
for the year 2000. The Company expects its year 2000 project to be completed
during 1999 with a total estimated minimum cost of $60 million (these costs
will be expensed as incurred). However, there can be no assurance that the
systems of other companies, on which the Company's systems rely, will be
converted on a timely basis or that any such failure to convert by another
company (such as third party payors) would not have an adverse effect on the
Company's systems.
Quarters Ended September 30, 1997 and 1996
Revenues increased 0.2% to $4,612 million in 1997 compared to $4,605 million
in 1996, primarily as a result of growth in outpatient volumes. Inpatient
admissions declined 0.2% from a year ago. On a same-hospital basis, revenues
increased 0.7%, admissions increased 1.0% and equivalent admissions (adjusted
to reflect outpatient activity) increased 2.6% from a year ago. The growth
rates experienced this quarter are less than the rates experienced in prior
quarters which management believes were due in part to the reactions of
certain physicians and patients to the negative media coverage related to the
ongoing government investigations, changes in patient mix (increase in managed
care volumes as a percentage in total volumes), changes in management and
increased competition. The increase in outpatient activity is primarily a
result of increases in outpatient services (average daily outpatient visits
increased 7.0 % in 1997). The consolidated revenue growth rate was less than
the same hospital revenue growth rate due to a net decrease of consolidated
hospitals since September 30, 1996. The decrease in consolidated hospitals was
primarily due to contributions of facilities to joint ventures accounted for
using the equity method.
Income from continuing operations before income taxes declined 69.8% to $150
million in 1997 from $498 million in 1996 and pretax margins decreased to 3.3%
in 1997 from 10.8% in 1996. The decrease in pretax income was attributable to
a decline in revenue growth, as described above and declines in the margin.
Several factors contributed to declines in the margin including increases as a
percentage of revenues in every expense category except minority interest. The
increases are attributable to both external and internal factors. The external
factors relate primarily to the ongoing government investigations and related
media coverage. The internal factors relate to the Company's inability to
respond timely to adjust expenses in line with the decreases in volume trends
associated with the investigation and other internal factors as described
below.
Salaries and benefits, as a percentage of revenues, increased to 41.1% in
1997 from 38.9% in 1996. This increase was due, in part, to declines in labor
productivity (man hours per equivalent admission increased 2.5%) as the
Company has been unable to make staffing level changes on a timely basis in
response to the changing patient volume and patient mix trends.
Supply costs increased as a percentage of revenues to 14.2% in 1997 from
14.1% in 1996.
Other operating expenses, as a percentage of revenues, increased to 22.1% in
1997 from 20.4% in 1996. The increase was due, in part, to an increase in
contract services as a percentage of revenues to 9.2% in 1997 from 8.0% in
1996 which resulted from payments to third parties on a fee basis for both new
services and services previously performed by Company employees. Also included
in other operating expenses are professional fees, repairs and maintenance,
rents and leases, utilities, insurance and non-income taxes. There were no
significant changes in any of these expenses as a percentage of revenues.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Quarters Ended September 30, 1997 and 1996 (continued)
Provision for doubtful accounts, as a percentage of revenues, increased to
8.0% in 1997 from 6.8% in 1996 due to internal factors such as computer
information system conversions (including patient accounting systems) at
various facilities and external factors such as payor mix shifts from Medicare
to managed care and payor remittance slowdowns. The information system
conversions hampered the business office billing functions and collection
efforts in those facilities as some resources were directed to installing and
converting systems and building new data files, rather than devoting full
effort to billing and collecting receivables. The Company experienced an
increased occurrence of charge audits from certain payors due to the negative
publicity surrounding the investigations which resulted in delays in the
collection of receivables. The delays in collections resulted in an increase
in receivables reserved under the Company's bad debt allowance policy.
Equity in earnings of affiliates decreased as a percentage of revenues to
0.4% in 1997 from 0.9% in 1996 primarily due to decreased profitability at
certain facilities acquired through joint ventures during 1995 and 1996. As of
September 30, 1997, there were 27 hospitals and five freestanding surgery
centers compared to 18 hospitals and three freestanding surgery centers at
September 30, 1996, which are being accounted for using the equity method.
Depreciation and amortization increased as a percentage of revenues to 6.9%
in 1997 from 6.5% in 1996, primarily due to the slowdown in revenue growth and
increased capital expenditures related to ancillary services (such as
outpatient services) and information systems. Capital expenditures in these
areas generally result in shorter depreciation and amortization lives for the
assets acquired than typical hospital acquisitions.
Interest expense increased to $125 million or 2.7 % of revenues in 1997
compared to $119 million or 2.6% of revenues last year primarily as a result
of an increase in the average outstanding debt during the third quarter of
1997 compared to last year. This was due, in part, to the additional debt
incurred related to the share repurchase program. The interest expense
associated with the increase in debt related to the Value Health Merger has
been allocated to "Discontinued operations" and is therefore not included in
interest expense from continuing operations.
The Company incurred $64 million of costs during 1997 in connection with the
investigations and changes in management and business strategy. These costs
included $40 million in severance costs, $11 million in professional fees
related to the investigations, $10 million related to certain cancelled
projects and $3 million in other costs.
Minority interests declined to $33 million in 1997 compared to $36 million
in 1996 primarily due to decreased profitability in entities with minority
ownerships as compared to last year. As a percentage of revenues, minority
interests declined to 0.7% in 1997 compared to 0.8% in 1996.
Income from continuing operations decreased 69.7% to $91 million ($.15 per
share) during 1997 compared to $299 million ($.44 per share) in 1996.
Income from discontinued operations totaled $6 million ($.01 per share) in
1997 compared to $12 million ($.02 per share) in 1996. The decline was
primarily due to a decrease in the profitability of the home health care
operations. Home health care operations is one of the focus areas of the
government investigations. Management believes these operations have been
negatively impacted in response to the investigations and the announced
intention to divest the home health care business.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Nine Months Ended September 30, 1997 and 1996
Revenues increased 3.4% to $14.4 billion in 1997 compared to $14.0 billion
in 1996, primarily as a result of growth in inpatient and outpatient volumes.
On a same-hospital basis, revenues increased 4.1%, admissions increased 2.0%
and equivalent admissions (adjusted to reflect outpatient activity) increased
3.9% from a year ago. Management believes the growth rates experienced during
1997 were negatively impacted by the decline in revenue and volume growth in
the third quarter ended September 30, 1997. The increase in outpatient
activity is primarily a result of increases in outpatient services (average
daily outpatient visits increased 8.8% in 1997). The consolidated revenue
growth rate was less than the same hospital revenue growth rate because of a
net decrease of consolidated hospitals since September 30, 1996. The decrease
in consolidated hospitals was primarily due to contributions of facilities to
joint ventures accounted for using the equity method.
Income from continuing operations before income taxes decreased 12.5% to
$1.6 billion in 1997 from $1.8 billion in 1996 and pretax margins decreased to
10.8% in 1997 from 12.7% in 1996. The decrease in pretax income was
attributable to a decline in revenue growth described above and declines in
the margin. Several factors contributed to declines in the margin including
increases as a percentage of revenues in most expense categories. The
increases are attributable to both external and internal factors. The external
factors relate primarily to the ongoing government investigations and related
media coverage. The internal factors relate to the Company's inability to
respond timely to adjust expenses in line with decreases in volume trends
associated with the investigation and other internal factors as described
below.
Salaries and benefits, as a percentage of revenues, increased slightly to
38.9 % in 1997 from 38.7% in 1996.
Supply costs declined as a percentage of revenues to 13.9% in 1997 from
14.3% in 1996 due to enhanced levels of participation in the Company's
standard purchasing contracts for medical supplies (which provide for
progressive discounts based upon the volume of purchases made by Columbia).
While the Company expects to continue to benefit from its volume purchasing
power, there can be no assurance that such benefits will continue to be
realized in the relative amounts realized to date.
Other operating expenses, as a percentage of revenues, increased to 20.2% in
1997 from 19.6% in 1996. The increase was primarily due to an increase in
contract services as a percentage of revenues to 8.5% in 1997 from 7.4% in
1996 which resulted from payments to third parties on a fee basis for both new
services and services previously performed by Company employees. Also included
in other operating expenses are professional fees, repairs and maintenance,
rents and leases, utilities, insurance and non-income taxes. There were no
significant changes in any of these expenses as a percentage of revenues.
Provision for doubtful accounts, as a percentage of revenues, increased to
6.8% in 1997 from 6.2% in 1996 due to internal factors such as computer
information system conversions (including patient accounting systems) at
various facilities and external factors such as payor mix shifts from Medicare
to managed care and payor remittance slowdowns. The information system
conversions hampered the business office billing functions and collection
efforts in those facilities as some resources were directed to installing and
converting systems and building new data files, rather than devoting full
effort to billing and collecting receivables. The Company experienced an
increased occurrence of charge audits from certain payors due to the negative
publicity surrounding the investigations which resulted in delays in the
collection of receivables. The delays in collections resulted in an increase
in receivables reserved under the Company's bad debt allowance policy.
Equity in earnings of affiliates, as a percentage of revenues, decreased
slightly to 0.8% in 1997 from 0.9% in 1996.
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Nine Months Ended September 30, 1997 and 1996 (continued)
Depreciation and amortization increased as a percentage of revenues to 6.5%
in 1997 from 6.0% in 1996, primarily due to the slowdown in revenue growth and
increased capital expenditures related to ancillary services (such as
outpatient services) and information systems. Capital expenditures in these
areas generally result in shorter depreciation and amortization lives for the
assets acquired than typical hospital acquisitions.
Interest expense declined to $361 million or 2.5% of revenues in 1997
compared to $371 million or 2.7% of revenues last year primarily as a result
of a decrease in the average outstanding debt during the nine months ended
1997 compared to the same period last year.
The Company incurred $64 million of costs during 1997 in connection with the
investigations and changes in management and business strategy.
Minority interests increased to $125 million or 0.8% in 1997 compared to
$102 million or 0.7% in 1996 primarily due to both increased profitability and
minority ownership in equity of additional consolidated entities compared to
last year.
Income from continuing operations decreased 12.4% to $931 million ($1.39 per
share) during 1997 compared to $1.1 billion ($1.57 per share) in 1996.
Income from discontinued operations totaled $57 million ($.09 per share) in
1997 compared to $28 million ($.04 per share) in 1996. The increase was
primarily due to an increase in home health care income resulting from
acquisitions and start-up of new agencies. Management believes the increase in
income was partially offset by the government investigations and related media
coverage and the Company's announcement during the quarter ended September 30,
1997 of its intention to divest the home health care business.
Liquidity
Cash provided by operating activities totaled $1.6 billion for the nine
months ended September 30, 1997 compared to $1.9 billion in the same period
last year. The decrease in 1997 from 1996 is primarily due to decreases in
accrued expenses, income taxes payable and net income.
Cash used in investing activities in the first nine months of 1997 exceeded
cash provided by operating activities by $1.1 billion and was funded by the
issuance of long-term debt, commercial paper and bank borrowings. Included in
investing activities for 1997 is the cash required to acquire Value Health,
Inc. (approximately $1.2 billion). During 1996, cash flows from operating
activities exceeded cash used in investing activities by $176 million. The
excess funds generated from operations were used to pay down long-term debt
and commercial paper borrowings.
During the first nine months of 1997, the Company repurchased approximately
20.4 million shares of its common stock for a total cost of approximately $737
million and was funded by the issuance of long-term debt, commercial paper and
bank borrowings.
Working capital totaled $1.7 billion at September 30, 1997 and $1.4 billion
at December 31, 1996. Management believes that cash flows from operations and
amounts available under Columbia's revolving credit facilities and related
commercial paper programs are sufficient to meet expected future liquidity
needs.
Investments of Columbia's professional liability insurance subsidiary to
maintain statutory equity and pay claims totaled $1.5 billion and $1.3 billion
at September 30, 1997 and December 31, 1996, respectively.
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Liquidity (continued)
The Company has entered into various agreements with joint venture partners
whereby the partners have an option to sell or "put" their interest in the
joint venture back to the Company within specified periods at fixed prices or
prices based on certain formulas. The combined put price under all such
agreements was approximately $1.1 billion at September 30, 1997. While the
Company cannot predict if, or when, their joint venture partners will exercise
such options (no put options have been exercised through September 30, 1997),
it is not expected that the majority of the puts would be exercised in any one
period.
Capital Resources
Excluding acquisitions, capital expenditures totaled $1.1 billion for the
nine months ended September 30, 1997, and 1996. Planned capital expenditures
in 1997 are expected to approximate $1.5 billion. Management believes that its
capital expenditure program is adequate to expand, improve and equip its
existing health care facilities.
Columbia also expended $398 million and $638 million for acquisitions during
the nine months ended September 30, 1997 and 1996, respectively. The decline
in acquisitions can be partially attributed to increased regulatory review
procedures in certain states that have extended the timing between the
initiation and consummation of certain transactions. Also, as part of its new
business strategy, the Company announced a slowdown in its current acquisition
program. Columbia also made investments in and advances to affiliates
(generally 50% interests in joint ventures that are accounted for using the
equity method) of $29 million in the nine months ended September 30, 1997
compared to $37 million for the same period in 1996.
Columbia expects to finance all capital expenditures with internally
generated and borrowed funds. Available sources of capital include public or
private debt, commercial paper, unused bank revolving credit facilities and
equity. At September 30, 1997, there were projects under construction which
had an estimated additional cost to complete and equip of approximately $ 1.1
billion.
The Company's revolving credit agreements (the "Credit Facilities") are
comprised of a $2.0 billion five-year revolving credit facility expiring
February 2002 and a $3.0 billion 364-day revolving credit facility expiring
June 1998. Borrowings under the 364-day revolving credit facility do not
mature until one year subsequent to the end of the 364-day period. The Credit
Facilities support Columbia's commercial paper programs. As of October 31,
1997, Columbia had approximately $850 million of credit available (net of
outstanding commercial paper) under the Credit Facilities.
Columbia's revolving credit agreements contain customary covenants which
include (i) limitations on additional debt, (ii) limitations on sales of
assets, mergers and changes of ownership, and (iii) maintenance of certain
interest coverage ratios. Columbia was in compliance with all such covenants
at September 30, 1997.
HEALTH CARE REFORM
In recent years, an increasing number of legislative proposals have been
introduced or proposed to Congress and in some state legislatures that would
significantly affect health care systems in Columbia's markets. The cost of
certain proposals would be funded in significant part by reductions in
payments by government programs, including Medicare and Medicaid, to health
care providers (similar to the reductions to be incurred as part of the 97
Budget Act as previously discussed). While the Company is unable to predict
which, if any, proposals for health care reform will be adopted, there can be
no assurance that proposals adverse to the business of Columbia will not be
adopted.
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
VALUE HEALTH MERGER AND DISCONTINUED OPERATIONS
On August 6, 1997, Columbia completed a merger transaction with Value
Health. (See Note 3 of the Notes to Condensed Consolidated Financial
Statements for a description of the merger transaction.)
As part of the Company's change in business strategy, Columbia implemented a
plan to sell its home health care business and divest three of the four
business units acquired through the Value Health Merger. As a result of the
plan to divest these businesses, the Company's condensed consolidated
financial statements and related notes have been adjusted and restated to
reflect the results of operations and net assets of the home health care and
Value Health businesses to be disposed of as discontinued operations.
OTHER INFORMATION
Columbia is contesting income taxes and related interest proposed by the IRS
for prior years aggregating approximately $551 million as of September 30,
1997. Management believes that final resolution of these disputes will not
have a material adverse effect on the financial position, results of
operations or liquidity of Columbia.
See Note 8 of the Notes to Condensed Consolidated Financial Statements for a
description of the pending IRS disputes.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q,
including, without limitation, statements containing the words "believes,"
"anticipates," "expects," and words of similar import, constitute "forward-
looking" statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of the Company or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: (i) the outcome of the known and unknown
governmental investigations of the Company's business practices; (ii) the
recently enacted changes in the Medicare and Medicaid programs affecting
reimbursement to healthcare providers and insurers; (iii) legislative
proposals for healthcare reform; (iv) the ability to enter into managed care
provider arrangements on acceptable terms; (v) liability and other claims
asserted against the Company; (vi) changes in business strategy or development
plans; (vii) the departure of key executive officers from the Company; and
(viii) the availability and terms of capital to fund the expansion of the
Company's business, including the acquisition of additional facilities. Given
these uncertainties, prospective investors are cautioned not to place undue
reliance on such forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly announce the results of
any revisions to any of the forward-looking statements contained herein to
reflect future events or developments.
19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
OPERATING DATA
<TABLE>
<CAPTION>
1997 1996
------- ---------
CONSOLIDATED
<S> <C> <C>
Number of hospitals in operation at:
March 31.................................................. 314 320
June 30................................................... 315 326
September 30.............................................. 314 325
December 31............................................... 319
Number of freestanding outpatient surgical centers in opera-
tion at:
March 31.................................................. 143 127
June 30................................................... 145 130
September 30.............................................. 143 130
December 31............................................... 132
Licensed hospital beds at:
March 31.................................................. 60,993 62,197
June 30................................................... 61,275 63,217
September 30.............................................. 61,071 63,063
December 31............................................... 61,931
Weighted average licensed beds (a):
Quarter:
First..................................................... 61,222 62,330
Second.................................................... 61,203 62,937
Third..................................................... 60,981 63,179
Fourth.................................................... 62,385
Year....................................................... 62,708
Average daily census (b):
Quarter:
First..................................................... 28,401 28,428
Second.................................................... 25,921 26,193
Third..................................................... 24,343 25,111
Fourth.................................................... 26,437
Year....................................................... 26,538
Admissions:
Quarter:
First..................................................... 497,200 490,800
Second.................................................... 477,200 463,100
Third..................................................... 461,700 462,400
Fourth.................................................... 479,100
Year....................................................... 1,895,400
Average length of stay (days) (c):
Quarter:
First..................................................... 5.1 5.3
Second.................................................... 4.9 5.1
Third..................................................... 4.9 5.0
Fourth.................................................... 5.1
Year....................................................... 5.1
</TABLE>
20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
OPERATING DATA (CONTINUED)
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
NON-CONSOLIDATED(D)
Number of hospitals in op-
eration at:
March 31................ 27 17
June 30................. 27 17
September 30............ 27 18
December 31............. 22
Number of freestanding
outpatient surgical cen-
ters in operation at:
March 31................ 5 3
June 30................. 5 3
September 30............ 5 3
December 31............. 4
Licensed hospital beds at:
March 31................ 6,537 4,393
June 30................. 6,641 4,393
September 30............ 6,455 4,768
December 31............. 5,451
</TABLE>
- --------
(a) Represents the average number of licensed beds weighted based on periods
owned. Licensed beds are those beds for which a facility has been granted
approval to operate from the applicable state licensing agency.
(b) Represents the average number of patients in hospital beds each day.
(c) Represents the average number of days admitted patients stay in Columbia's
hospitals.
(d) The non-consolidated facilities include facilities operated through 50/50
joint ventures which are not controlled by Columbia. They are accounted
for using the equity method of accounting and are, therefore, not included
on a fully consolidated basis in the condensed consolidated financial
statements.
21
<PAGE>
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS.
Shareholder Derivative and Class Action Complaints filed in the U.S. District
Court
Beginning in April 1997, several shareholder class action complaints and
derivative complaints were filed by certain purported current and former
shareholders of the Company against the Company and certain of its current and
former directors and officers in the United States District Court for the
Middle District of Tennessee. The allegations and requested relief are
generally described in the Company's prior Form 10-Q. On October 9, 1997,
Judge Higgins of the United States District Court for the Middle District of
Tennessee ordered that (i) all the shareholder class action claims before the
U.S. District Court for the Middle District of Tennessee be consolidated under
the caption Sidney Morse, et al. v. R. Clayton McWhorter, et al. (Civil Action
No. 3-97-0370) (Higgins, J.) and (ii) all the derivative claims before the
United States District Court for the Middle District of Tennessee be
consolidated under the caption McCall, et al. v. Richard L. Scott, et al.
(Civil Action No. 3-97-0038) (Higgins, J.).
The Company intends to pursue the defense of these actions vigorously.
Shareholder Derivative Actions filed in State Courts
As previously reported in the Company's prior Form 10-Q, two purported
derivative actions entitled Evelyn Barron, et al. v. Magdalena Averhoff, et
al. (Civil Action No. 15822NC) and John Kovalchick v. Magdalena Averhoff, et
al. (Civil Action No. 15829NC) were filed in the Court of Chancery of the
State of Delaware in and for New Castle County. The actions were brought on
behalf of the Company by certain purported shareholders of the Company against
certain of the Company's current and former officers and directors. On
approximately August 14, 1997, a similar purported derivative action entitled
State Board of Administration of Florida v. Magdalena Averhoff, et al. (No.
97-2729) was filed in the Circuit Court in Davidson County, Tennessee on
behalf of the Company by certain purported shareholders of the Company against
certain of the Company's current and former directors and officers.
The Company intends to pursue the defense of these actions vigorously.
Patient/Payor Actions
In addition, several purported class action lawsuits were filed by patients
and/or payors against the Company and/or certain of its current and former
officers and directors alleging, in general, improper and fraudulent billing,
coding and physician referrals as well as other violations of law.
The Company intends to pursue the defense of these actions vigorously.
Qui Tam Action
As previously reported in the Company's Form 10-K, a qui tam action entitled
United States, ex rel. James M. Thompson v. Columbia/HCA Healthcare
Corporation, et al. (No. 96-40868) had been dismissed by the District Court.
On October 23, 1997, the U.S. Court of Appeals for the Fifth Circuit affirmed
the dismissal in part, vacated it in part and remanded for further proceedings
issues that will require the District Court to further consider certain
elements of the Complaint.
Other
On November 7, 1997, a purported class action entitled Landgraff, et al. v.
Columbia/HCA Healthcare Corporation of America and the Columbia/HCA Retirement
Plan Committee (No. 97-CV-3381) was filed in the U.S. District Court for the
Northern District of Georgia by purported former employees of the Company on
behalf of members of the Company's Stock Bonus Plan (the "Plan"). In general,
it is alleged that the defendants breached their fiduciary duties in
administering the Plan.
The Company intends to pursue the defense of this action vigorously.
22
<PAGE>
PART II: OTHER INFORMATION (CONTINUED)
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits:
Exhibit 10(a)--Separation Agreement--Richard L. Scott.*
Exhibit 10(b)--Separation Agreement--David T. Vandewater.*
Exhibit 10(c)--Agreement and Amendment to the 364-day Agreement and
Amendment dated as of June 17, 1997.*
Exhibit 10(d)--First Amendment to the Five-Year Agreement and Amendment
dated as of June 17, 1997.*
Exhibit 11--Statement re Computation of Earnings Per Share.
Exhibit 12--Statement re Computation of Ratio of Earnings to Fixed Charges.
Exhibit 27--Financial Data Schedule*
- --------
*Included only in filings under the Electronic Data, Gathering, Analysis, and
Retrieval system
(b) Reports on Form 8-K filed during the quarter ended September 30, 1997:
On July 24, 1997, Columbia filed a report of Form 8-K related to government
investigations and the issuance of search warrants at various Columbia
affiliated locations.
On July 25, 1997, Columbia filed a report of Form 8-K related to the
resignations of Richard L. Scott, Chairman and Chief Executive Officer and
David T. Vandewater, President and Chief Operating Officer. Thomas F. Frist,
Jr., M.D., Vice Chairman of the Company's board, was named Chairman and Chief
Executive Officer. A copy of the press release issued by Columbia was attached
to the filing.
On August 8, 1997, Columbia filed a report on Form 8-K related to the
completion of the acquisition of Value Health, Inc. and the announced planned
changes in the Company's business approach. Copies of both press releases
issued by Columbia were attached to the filing.
On September 3, 1997, Columbia filed a report on Form 8-K related to the
redemption of the all outstanding preferred stock purchase rights and the
declaration of a quarterly dividend. A copy of the letter to Stockholders was
attached to the filing.
On September 12, 1997, Columbia filed a report on Form 8-K related to the
announcement of weaker than expected financial results for the third quarter
ended September 30, 1997. A copy of the press release issued by Columbia was
attached to the filing.
23
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
Columbia/HCA Healthcare Corporation
/s/ Kenneth C. Donahey
-------------------------------------
KENNETH C. DONAHEY
Date: November 13, 1997 SENIOR VICE PRESIDENT AND CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
24
<PAGE>
EXHIBIT 10(a)
SEPARATION AGREEMENT
This is an agreement by and between Columbia/HCA Healthcare Corporation, a
Delaware corporation ("Columbia/HCA" or the "Company"), and Richard L. Scott
(the "Executive"), entered into this 25th day of July, 1997 ("Separation
Agreement").
WHEREAS, Richard L. Scott has served as Chairman of the Board and Chief
Executive Officer of the Company;
WHEREAS, the Company and the Executive wish to provide for an orderly and
immediate transition of duties, offices and responsibilities from the Executive
to a successor;
WHEREAS, the Company and Executive desire to settle and compromise fully
and finally any and all disputes, controversies, entitlements, and claims that
the Executive may have to compensation, benefits and other payments arising out
of the Executive's employment and relationship with the Company on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the promises, covenants, and agreements
contained herein, the parties agree as follows:
1. The Executive's employment shall terminate, effective at the close of
business, July 25, 1997 (the "Separation Date"), as of which date Executive
shall cease to be an officer, director and employee of the Company and an
officer, director and employee of its subsidiaries and affiliates and shall
resign from his positions as a director, officer and employee of the Company and
resign from his positions as an officer, director and employee of its
subsidiaries and affiliates.
2. The Executive agrees with the Company that, notwithstanding any other
agreement, oral or written, the following, together with amounts payable
pursuant to paragraph 3 hereof, accurately reflects all of the compensation,
benefits and perquisites payable or otherwise to be provided by the Company to
the Executive after the Separation Date and that the Executive is not entitled
to any compensation, benefits or perquisites except as set forth in this
Agreement; provided that all compensation, benefits and perquisites payable
hereunder shall be paid after withholding for taxes required to be withheld by
the Company, including income taxes, at the then current published federal and
state rate (which, in the aggregate, is, as of the date hereof, 26%), unless
Executive elects in writing to the Company to use a higher rate; provided,
further, that all personal income and related taxes applicable to any and all
compensation, benefits and perquisites due or payable hereunder shall be paid
by Executive:
(a) On the Separation Date, Executive will receive a one-time payment in
the amount of $5,130,000.
1
<PAGE>
(b) Executive shall have the right to exercise the Executive's vested stock
options at any time within ninety (90) days after the Separation Date.
(c) The Company will pay relocation costs should the Executive move more
than 90 miles from Nashville, Tennessee within two years from the Separation
Date. Relocation costs will include all reasonable moving expenses. In addition,
contemporaneously, the Executive shall have the option to have the Company
purchase the Executive's primary residence at the price of the Executive's net
cumulative investment costs and assume any mortgage indebtedness on this
residence.
(d) For a period of two (2) years from the Separation Date, the Company
will reimburse the Executive for reasonable office expenses including office
rent and secretarial staff for use in performing the services contemplated under
paragraph 3 hereof. The Company will not be required to pay for such office
expenses if the Executive is employed by or working for any company of which he
is less than a 50% owner or partner.
(e) Executive acknowledges that he has been notified by the Company of his
right to pay premiums to continue his coverage under certain of the life and
accident insurance coverage previously provided to him by the Company for as
long as the Company maintains such policies in effect. Executive understands
that if he fails to or chooses not to pay any insurance premium after the
Separation Date, his insurance coverage will lapse under the terms of any
applicable insurance policy. Except as provided in paragraph 3 below, the
Company shall have no obligation to provide Executive other insurance.
(f) Executive retains all rights under the Columbia/HCA Healthcare
Corporation 1995 Management Stock Purchase Plan.
(g) The Executive shall be reimbursed for all accrued, but unused vacation
time, and accrued bonus for the time period January 1, 1997 through the
Separation Date.
3. Executive hereby agrees to make himself available at the request of
the Company, at reasonable times and upon reasonable notice, for a period of
five (5) years from the Separation Date, to serve as a consultant to the Company
on matters the Company shall designate as set forth later in this paragraph.
Executive agrees to provide advice and consulting services (collectively, the
"Consulting Services") upon a request therefor communicated to him by any senior
executive officer of the Company. In consideration thereof and for so long as he
provides the Consulting Services in accordance with the terms hereof, Executive
shall receive a consulting fee of $950,000 per annum, payable in equal monthly
installments beginning on the Separation Date. The Executive will be eligible to
be reimbursed for his reasonable business expenses incurred in providing the
Consulting Services. Withholding will apply to consulting payments received by
Executive unless an acceptable legal opinion is received from Executive's legal
counsel indicating that withholding is not applicable. Executive agrees that the
Consulting Services will be consultation with and assistance to the Company in
connection with issues involving litigation, compliance and/or any governmental
or other investigations involving the
2
<PAGE>
Executive's tenure as employee. During the five (5) year period that Executive
provides Consulting Services, the Company shall, at its own expense, provide
Executive with Executive's existing or comparable health benefits.
Nothing contained in this paragraph shall require the Executive to act
contrary to the advice of counsel.
4. Executive agrees that, for a period of two years from the Separation
Date, he shall not, directly or indirectly, for his own benefit or as agent for
another, carry on or participate in the ownership, management or control of, or
be employed by, or serve as a director of, or consult for, or license or provide
know how to, or otherwise render services to, or allow his name or reputation
to be used in or by, any healthcare provider which owns and operates more than
50 acute care hospitals in the United States as a healthcare provider; provided
that nothing contained herein shall limit the right of Executive, as an
investor, to hold and make investments in securities of any corporation or other
entity that competes in the lines of business in which the Company, its
subsidiaries or its affiliates are engaged that is registered on a national
securities exchange or admitted to trading privileges thereon or actively traded
in a generally recognized over-the-counter market, provided that the aggregate
of all of Executive's equity interests therein does not exceed at any time 5% of
the outstanding equity interests in such corporation or other entity. On the
first two anniversaries of the Separation Date, the Executive shall report to
the Company any employment by or investment in a healthcare provider which owns
and operates more than 50 acute care hospitals.
Executive acknowledges that he considers the restrictions set forth in this
paragraph to be reasonable both individually and in the aggregate and that the
duration, geographic scope, extent and application of each of such restrictions
are no greater than is necessary for the protection of the legitimate interests
of the Company. It is the desire and intent of the parties hereto that the
provisions of this paragraph shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. If any particular provision or portion of this paragraph
shall be adjudicated to be invalid or unenforceable, such adjudication shall
apply only with respect to the operation of such provision in the particular
jurisdiction in which such adjudication is made. Further, in the event that any
restriction herein shall be found to be void or unenforceable but would be valid
or enforceable if some part or parts thereof were deleted or the period or area
of application reduced, each of the parties hereby agrees that such restriction
shall apply with such modification as may be necessary to make it valid in the
jurisdiction as to which the determination is made.
5. Executive acknowledges that, subject to the payments to be made under
this Agreement, he has been paid all amounts to which he is entitled or may make
claim as a result of his employment with the Company, including all salary and
incentives and payment for any and all accrued but unused vacation benefits.
6. In further consideration of the foregoing, except as provided in the
last paragraph of this paragraph and the obligations undertaken by the Company
pursuant to this Agreement, Executive and his descendants, ancestors, heirs,
executors, successors, and assigns hereby
3
<PAGE>
release, remise, acquit, forever discharge, covenant not to sue or make claim,
and agree to indemnify and hold harmless the Company and each of its
subsidiaries and assigns from and against any and all claims, demands,
obligations, causes of action, debts, expenses, damages, judgments, orders and
liabilities of whatever kind or nature, in law, equity or otherwise, whether now
known or unknown, suspected or unsuspected, matured or unmatured and whether or
not concealed or hidden, which Executive now owns or holds or has at any time
heretofore owned or held or had, or at any time own or hold or have, against the
Company, and also releases and discharges, without limiting the generality of
the foregoing, any and all of the foregoing which arise out of or are in any way
connected with any transactions, occurrences, acts or omissions regarding or
relating to his employment with the Company, or the termination of his
employment, including any claims arising from any alleged violation by the
Company of any federal, state or local statutes, ordinances or common laws.
Subject to Paragraph 16 herein, the release set forth in this paragraph is
intended as a release of all claims against the Company, whether now known or
unknown. In furtherance thereof, Executive expressly waives any right or claim
of right to assert hereafter that any claim, demand, obligation and/or cause of
action has, through ignorance, oversight, error or otherwise, been omitted from
the terms of this Agreement. Executive makes this waiver with full knowledge of
his rights, after consulting with legal counsel, and with specific intent to
release both his known and unknown claims.
Notwithstanding the foregoing, nothing in the release set forth in this
paragraph nor anything else in this Agreement shall be deemed a waiver or
release by Executive of any right that Executive now has, under this Agreement,
to claim indemnity for liabilities in connection with his activities as a
director, officer or employee of the Company pursuant to paragraph 8 herein, any
applicable statute, under any insurance policy, or pursuant to the Restated
Certificate of Incorporation or Bylaws of the Company.
7. (a) Executive acknowledges that he has held a sensitive management
position with the Company and that, by virtue of having held such position, he
has had access to and has learned the Company's and its subsidiaries' and
affiliates' confidential and proprietary information and trade secrets
pertaining to its operations, officers and directors. Executive agrees that he
shall keep all such information confidential and that he shall not disclose any
such information to any other person, except as may be required by law and then
only upon as much prior written notice of an intention to disclose as may be
practicable to provide the Company an opportunity to protect its information.
Without limiting the generality of the foregoing, Executive agrees that he will
not respond to or in any way participate in or contribute to any public
discussion, notice or other publicity concerning or in any way related to
proprietary or confidential information concerning the Company, its
subsidiaries, affiliates, operations, or any matters concerning his employment
with the Company. Executive further agrees that he will not talk to or provide
any documents to any private, nongovernmental party concerning any allegation of
unlawful activity or conduct, except as required by law. Executive agrees that
he will not solicit any employee of the Company, its subsidiaries or affiliates
for employment for a period of two (2) years from the Separation Date.
4
<PAGE>
(b) The Company agrees that it shall keep all information pertaining to the
Executive confidential and that it shall not disclose any such information to
any other person, except as may be required by law and then only upon as much
prior written notice of an intention to disclose as may be practicable to
provide the Executive an opportunity to protect his information. Without
limiting the generality of the foregoing, the Company agrees that it will not
respond to or in any way participate in or contribute to any public discussion,
notice or other publicity concerning or in any way related to proprietary or
confidential information concerning the Executive, or any matters concerning his
employment with the Company. The Company further agrees that it will not talk to
or provide any documents to any private, nongovernmental party concerning any
allegation of unlawful activity or conduct, except as required by law.
(c) The parties agree that no provision of this paragraph 7 or any other
provision of this Agreement shall be construed or interpreted in any way to
limit, restrict or preclude either party hereto from cooperating with any
governmental agency in the performance of its investigatory or other lawful
duties or producing materials or giving testimony pursuant to lawful process or
in a court or administrative proceeding.
(d) Executive agrees that if he receives a subpoena or is otherwise
required by law to provide information to a governmental entity or other person
concerning the activities of the Company or his activities in connection with
the Company's business, he will immediately notify the Company of such subpoena
or requirement and deliver forthwith to the Company a copy of such subpoena and
any attachments and nonprivileged correspondence related thereto.
(e) The parties agree to issue the public statement set out in Appendix 1
attached hereto. Executive and the Company agree to make no public statements to
the newspapers, television, magazines or any other media or otherwise
inconsistent with the public statement in Appendix 1.
(f) The Company will not make any statements that will disparage
Executive's character or reputation, unless the statement is required to be
disclosed by law. Executive will not make any statements that will disparage the
Company, unless the statement is required to be disclosed by law.
8. The Company is currently advancing to the Executive expenses and fees
for retention of legal counsel in connection with matters relating to his
actions as an officer, director, or employee of the Company. In accordance with,
and to the fullest extent allowed by, the provisions of Delaware law and Article
Sixteenth of the Restated Certificate of Incorporation of the Company, filed
February 10, 1994, Executive will be provided prompt advancement and
indemnification of any and all legal fees and costs relating to, in any way, all
such civil, criminal and administrative investigations or proceedings, and
Executive will retain control of the selection and retention of his personal
counsel in all such matters. Further, Executive will be provided prompt and
complete indemnification, in accordance with, and to the fullest extent allowed
by, the provisions of Delaware law and Article Sixteenth of the Restated
Certificate of Incorporation of the Company, filed February 10, 1994, for any
payments of any kind, including,
5
<PAGE>
but not limited to, judgments, penalties, fines, costs, forfeiture, and/or
restitution relating to, in any manner, all such civil, criminal and
administrative investigations or proceedings. Finally, the Company acknowledges
Executive is entitled to the limitations of liability available to a Director
under Section Twelfth of the Restated Certificate of Incorporation of Columbia
Healthcare Corporation dated the 10th day of February 1994.
The Company will continue to insure Executive under all Directors and
Officers liability insurance policies that it will maintain from time to time
for a period of not less than 5 years following his separation.
9. This Separation Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the
Conflicts of Laws rules thereof.
10. Except for the public statement set out in Appendix 1 hereto, the
parties agree that they will keep the terms, amounts and facts of this Agreement
completely confidential, and that they will not hereafter disclose any
information concerning this Agreement to anyone except their respective
attorneys or accountants, including, but not limited to, any past, present, or
prospective employees of the Company or any of its parent, subsidiary or related
companies or entities, except, in each case, as may be requested by governmental
entities or required by law, including, without limitation, filings with the
Securities and Exchange Commission.
11. The Executive represents and warrants that he has acted in good faith
and in what he reasonably believed to be in the best interest of the Company,
and that he had no reasonable cause to believe that any of his conduct was
unlawful.
12. This Separation Agreement constitutes the entire agreement among the
parties with respect to the subject matter thereof, and supersedes any other
agreement with respect thereto, and there are no other agreements or
understandings related to those matters, except as expressly recited therein.
13. This Separation Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall constitute an
original, but such counterparts together shall constitute but one and the same
Separation Agreement.
14. Executive acknowledges that he has had the advice of independent
counsel selected by him in connection with the terms of this Separation
Agreement, and that no offer, promise, inducement or consideration of any kind
or degree, except as expressly stated in this Separation Agreement, has been
provided or promised to Executive by the Company or any other person in
connection with Executive's entry into this Separation Agreement.
15. Should any provision of this Agreement be declared and/or be
determined by any court to be illegal or invalid, the validity of the remaining
parts, terms or provisions shall not be affected thereby.
6
<PAGE>
16. In the event of any dispute under this Separation Agreement, the
propriety of any position regarding such dispute shall be determined exclusively
in an arbitration proceeding at the American Arbitration Association under its
Commercial Arbitration Rules, which the Company or the Executive may commence in
Nashville, Tennessee. If either party believes that the other has violated the
provisions of this Agreement, notice in writing shall be provided to the other
party. If no resolution is reached within fourteen days of such notice, either
party may request binding arbitration of the issue by the American Arbitration
Association. This paragraph shall provide the sole method for resolution of
disputes under this Agreement. Any disputes as to whether any dispute,
controversy or claim is subject to arbitration also shall be settled by binding
arbitration.
17. The rights of the Company hereunder shall inure to the benefit of any
and all of its successors and assigns. The rights of the Executive hereunder
shall inure to the benefit of any and all heirs and assigns. A modification or
waiver of any of the provisions of the Agreement shall be effective only if made
in writing and signed by each of the parties. The failure of any party to insist
upon the strict performance of any of the provisions of this Agreement shall not
be construed as a waiver of any subsequent default of the same or any other
provision.
18. Any notices required to be given pursuant to the provisions hereof
shall be given in writing to the designees below by certified mail, return
receipt requested, and facsimile transmission as follows:
If to the Company:
General Counsel
Columbia/HCA Healthcare Corporation
One Park Plaza
P.O.Box 55O
Nashville, Tennessee
37202-0550
615-434-5029 (fax)
If to the Executive:
Gerald A. Feffer, Esq.
Williams & Connolly
725 Twelfth Street, N.W.
Washington, DC 20005
202-434-5029 (fax)
7
<PAGE>
IN WITNESS WHEREOF, Columbia/HCA and Executive have caused this Separation
Agreement to be executed and entered into as of the day and year first above
written.
COLUMBIA/HCA HEALTHCARE CORPORATION
By: /s/ THOMAS F. FRIST, JR.
--------------------------------
Name:
Title:
EXECUTIVE
/s/ RICHARD L. SCOTT
-------------------------------------
/s/ GERALD A. FEFFER
-------------------------------------
Counsel for Richard L. Scott
8
<PAGE>
[LOGO FOR COLUMBIA/HCA APPEARS HERE] NEWS
===============================================================================
FOR IMMEDIATE RELEASE
INVESTOR CONTACT: MEDIA CONTACTS:
Victor L. Campbell Eve Hutcherson Sue Atkinson
Columbia Columbia Atkinson Public Relations
615/344-2053 615/344-2737 615/320-7532
CONTACTS FOR SCOTT & VANDEWATER:
Edward Nebb/Eric Starkman
Morgan-Walke Associates
212/850-5600
SCOTT, VANDEWATER RESIGN AT COLUMBIA;
FRIST NAMED CHAIRMAN AND CEO
NASHVILLE, TENN - JULY 25, 1997 -- Columbia/HCA Healthcare Corporation (NYSE:
COL) today announced the resignations of Richard L. Scott, chairman, chief
executive officer, and a director; and David T. Vandewater, president and chief
operating officer, effective immediately.
Thomas F. Frist, Jr., M.D., vice chairman of the company's board, has
been named chairman and chief executive officer. Frist has been a leader in the
healthcare industry for 30 years.
The resignations were offered by the two executives, and accepted by the
board. Both executives emphasized that throughout their tenure they have acted
honorably and in the best interests of the company.
Scott said, "Since founding Columbia, we have been dedicated to
improving healthcare through a focus on quality care. At the same time, we have
had a strong emphasis on creating value for shareholders. Though the decision to
resign was an extremely difficult one, we consider it to be the ultimate
demonstration of our commitment to Columbia's mission."
"Rick and David have been catalysts in addressing the growing healthcare
challenges in this country. We are grateful for their tireless efforts and
contributions to improving the quality of healthcare in this county," Frist
said.
"Our board and management will be focusing on providing full cooperation
with all governmental agencies. We will also ensure that all Columbia facilities
and employees are in full compliance with the law," Frist said.
###
- ------------------- -------------------- ---------------------------
Thomas F. Frist Richard L. Scott David T. Vandewater
<PAGE>
EXHIBIT 10(b)
SEPARATION AGREEMENT
This is an agreement by and between Columbia/HCA Healthcare Corporation, a
Delaware corporation ("Columbia/HCA" or the "Company"), and David T. Vandewater
(the "Executive"), entered into this 25th day of July, 1997 ("Separation
Agreement").
WHEREAS, David T. Vandewater has served as President and Chief Operating
Officer of the Company;
WHEREAS, the Company and the Executive wish to provide for an orderly and
immediate transition of duties, offices and responsibilities from the Executive
to a successor;
WHEREAS, the Company and Executive desire to settle and compromise fully
and finally any and all disputes, controversies, entitlements, and claims that
the Executive may have to compensation, benefits and other payments arising out
of the Executive's employment and relationship with the Company on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the promises, covenants, and agreements
contained herein, the parties agree as follows:
1. The Executive's employment shall terminate, effective at the close of
business, July 25, 1997 (the "Separation Date"), as of which date Executive
shall cease to be an officer and employee of the Company and an officer,
director and employee of its subsidiaries and affiliates and shall resign from
his positions as an officer and employee of the Company and resign from his
positions as an officer, director and employee of its subsidiaries and
affiliates.
2. The Executive agrees with the Company that, notwithstanding any other
agreement, oral or written, the following, together with amounts payable
pursuant to paragraph 3 hereof, accurately reflects all of the compensation,
benefits and perquisites payable or otherwise to be provided by the Company to
the Executive after the Separation Date and that the Executive is not entitled
to any compensation, benefits or perquisites except as set forth in this
Agreement; provided that all compensation, benefits and perquisites payable
hereunder shall be paid after withholding for taxes required to be withheld by
the Company, including income taxes, at the then current published federal and
state rate (which, in the aggregate, is, as of the date hereof, 26%), unless
Executive elects in writing to the Company to use a higher rate; provided,
further, that all personal income and related taxes applicable to any and all
compensation, benefits and perquisites due or payable hereunder shall be paid by
Executive:
(a) On the Separation Date, Executive will receive a one-time payment in
the amount of $3,240,000.
1
<PAGE>
(b) Executive shall have the right to exercise the Executive's vested
stock options at any time within ninety (90) days after the Separation Date.
(c) The Company will pay relocation costs should the Executive move more
than 90 miles from Nashville, Tennessee within two years from the Separation
Date. Relocation costs will include all reasonable moving expenses. In addition,
contemporaneously, the Executive shall have the option to have the Company
purchase the Executive's primary residence at the price of the Executive's net
cumulative investment costs and assume any mortgage indebtedness on this
residence.
(d) For a period of two (2) years from the Separation Date, the Company
will reimburse the Executive for reasonable office expenses, including office
rent and secretarial staff for use in performing the services contemplated under
paragraph 3 hereof. The Company will not be required to pay for such office
expenses if the Executive is employed by or working for any company of which he
is less than a 50% owner or partner.
(e) Executive acknowledges that he has been notified by the Company of his
right to pay premiums to continue his coverage under certain of the life and
accident insurance coverage previously provided to him by the Company for as
long as the Company maintains such policies in effect. Executive understands
that if he fails to or chooses not to pay any insurance premium after the
Separation Date, his insurance coverage will lapse under the terms of any
applicable insurance policy. Except as provided in paragraph 3 below, the
Company shall have no obligation to provide Executive other insurance.
(f) Executive retains all rights under the Columbia/HCA Healthcare
Corporation 1995 Management Stock Purchase Plan.
(g) The Executive shall be reimbursed for all accrued, but unused vacation
time, and accrued bonus for the time period January 1, 1997 through the
Separation Date.
3. Executive hereby agrees to make himself available at the request of the
Company, at reasonable times and upon reasonable notice, for a period of five
(5) years from the Separation Date, to serve as a consultant to the Company on
matters the Company shall designate as set forth later in this paragraph.
Executive agrees to provide advice and consulting services (collectively, the
"Consulting Services") upon a request therefor communicated to him by any senior
executive officer of the Company. In consideration thereof and for so long as he
provides the Consulting Services in accordance with the terms hereof, Executive
shall receive a consulting fee of $600,000 per annum, payable in equal monthly
installments beginning on the Separation Date. The Executive will be eligible to
be reimbursed for his reasonable business expenses incurred in providing the
Consulting Services. Withholding will apply to consulting payments received by
Executive unless an acceptable legal opinion is received from Executive's legal
counsel indicating that withholding is not applicable. Executive agrees that the
Consulting Services will be consultation with and assistance to the Company in
connection with issues involving litigation, compliance and/or any governmental
or other investigations involving the Company, its existing and former
employees, or any of its affiliated or associated entities during
2
<PAGE>
Executive's tenure as employee. During the five (5) year period that Executive
provides Consulting Services, the Company shall, at its own expense, provide
Executive with Executive's existing or comparable health benefits.
Nothing contained in this paragraph shall require the Executive to act
contrary to the advice of counsel.
4. Executive agrees that, for a period of two years from the Separation
Date, he shall not, directly or indirectly, for his own benefit or as agent for
another, carry on or participate in the ownership, management or control of, or
be employed by, or serve as a director of, or consult for, or license or provide
know how to, or otherwise render services to, or allow his name or reputation to
be used in or by, any healthcare provider which owns and operates more than 50
acute care hospitals in the United States as a healthcare provider; provided
that nothing contained herein shall limit the right of Executive, as an
investor, to hold and make investments in securities of any corporation or other
entity that competes in the lines of business in which the Company, its
subsidiaries or its affiliates are engaged that is registered on a national
securities exchange or admitted to trading privileges thereon or actively traded
in a generally recognized over-the-counter market, provided that the aggregate
of all of Executive's equity interests therein does not exceed at any time 5% of
the outstanding equity interests in such corporation or other entity. On the
first two anniversaries of the Separation Date, the Executive shall report to
the Company any employment by or investment in a healthcare provider which owns
and operates more than 50 acute care hospitals.
Executive acknowledges that he considers the restrictions set forth in this
paragraph to be reasonable both individually and in the aggregate and that the
duration, geographic scope, extent and application of each of such restrictions
are no greater than is necessary for the protection of the legitimate interests
of the Company. It is the desire and intent of the parties hereto that the
provisions of this paragraph shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. If any particular provision or portion of this paragraph
shall be adjudicated to be invalid or unenforceable, such adjudication shall
apply only with respect to the operation of such provision in the particular
jurisdiction in which such adjudication is made. Further, in the event that any
restriction herein shall be found to be void or unenforceable but would be valid
or enforceable if some part or parts thereof were deleted or the period or area
of application reduced, each of the parties hereby agrees that such restriction
shall apply with such modification as may be necessary to make it valid in the
jurisdiction as to which the determination is made.
5. Executive acknowledges that, subject to the payments to be made under
this Agreement, he has been paid all amounts to which he is entitled or may make
claim as a result of his employment with the Company, including all salary and
incentives and payment for any and all accrued but unused vacation benefits.
6. In further consideration of the foregoing, except as provided in the
last paragraph of this paragraph and the obligations undertaken by the Company
pursuant to this Agreement,
3
<PAGE>
Executive and his descendants, ancestors, heirs, executors, successors, and
assigns hereby release, remise, acquit, forever discharge, covenant not to sue
or make claim, and agree to indemnify and hold harmless the Company and each of
its subsidiaries and assigns from and against any and all claims, demands,
obligations, causes of action, debts, expenses, damages, judgments, orders and
liabilities of whatever kind or nature, in law, equity or otherwise, whether now
known or unknown, suspected or unsuspected, matured or unmatured and whether or
not concealed or hidden, which Executive now owns or holds or has at any time
heretofore owned or held or had, or at any time own or hold or have, against the
Company, and also releases and discharges, without limiting the generality of
the foregoing, any and all of the foregoing which arise out of or are in any way
connected with any transactions, occurrences, acts or omissions regarding or
relating to his employment with the Company, or the termination of his
employment, including any claims arising from any alleged violation by the
Company of any federal, state or local statutes, ordinances or common laws.
Subject to Paragraph 16 herein, the release set forth in this paragraph is
intended as a release of all claims against the Company, whether now known or
unknown. In furtherance thereof, Executive expressly waives any right or claim
of right to assert hereafter that any claim, demand, obligation and/or cause of
action has, through ignorance, oversight, error or otherwise, been omitted from
the terms of this Agreement. Executive makes this waiver with full knowledge of
his rights, after consulting with legal counsel, and with specific intent to
release both his known and unknown claims.
Notwithstanding the foregoing, nothing in the release set forth in this
paragraph nor anything else in this Agreement shall be deemed a waiver or
release by Executive of any right that Executive now has, under this Agreement,
to claim indemnity for liabilities in connection with his activities as a
director, officer or employee of the Company pursuant to paragraph 8 herein, any
applicable statute, under any insurance policy, or pursuant to the Restated
Certificate of Incorporation or Bylaws of the Company.
7. (a) Executive acknowledges that he has held a sensitive management
position with the Company and that, by virtue of having held such position, he
has had access to and has learned the Company's and its subsidiaries' and
affiliates' confidential and proprietary information and trade secrets
pertaining to its operations, officers and directors. Executive agrees that he
shall keep all such information confidential and that he shall not disclose any
such information to any other person, except as may be required by law and then
only upon as much prior written notice of an intention to disclose as may be
practicable to provide the Company an opportunity to protect its information.
Without limiting the generality of the foregoing, Executive agrees that he will
not respond to or in any way participate in or contribute to any public
discussion, notice or other publicity concerning or in any way related to
proprietary or confidential information concerning the Company, its
subsidiaries, affiliates, operations, or any matters concerning his employment
with the Company. Executive further agrees that he will not talk to or provide
any documents to any private, nongovernmental party concerning any allegation of
unlawful activity or conduct, except as required by law. Executive agrees that
he will not solicit any employee of the Company, its subsidiaries or affiliates
for employment for a period of two (2) years from the Separation Date.
4
<PAGE>
(b) The Company agrees that it shall keep all information pertaining to
the Executive confidential and that it shall not disclose any such information
to any other person, except as may be required by law and then only upon as much
prior written notice of an intention to disclose as may be practicable to
provide the Executive an opportunity to protect his information. Without
limiting the generality of the foregoing, the Company agrees that it will not
respond to or in any way participate in or contribute to any public discussion,
notice or other publicity concerning or in any way related to proprietary or
confidential information concerning the Executive, or any matters concerning his
employment with the Company. The Company further agrees that it will not talk to
or provide any documents to any private, nongovernmental party concerning any
allegation of unlawful activity or conduct, except as required by law.
(c) The parties agree that no provision of this paragraph 7 or any
other provision of this Agreement shall be construed or interpreted in any way
to limit, restrict or preclude either party hereto from cooperating with any
governmental agency in the performance of its investigatory or other lawful
duties or producing materials or giving testimony pursuant to lawful process or
in a court or administrative proceeding.
(d) Executive agrees that if he receives a subpoena or is otherwise
required by law to provide information to a governmental entity or other person
concerning the activities of the Company or his activities in connection with
the Company's business, he will immediately notify the Company of such subpoena
or requirement and deliver forthwith to the Company a copy of such subpoena and
any attachments and nonprivileged correspondence related thereto.
(e) The parties agree to issue the public statement set out in Appendix
1 attached hereto. Executive and the Company agree to make no public statements
to the newspapers, television, magazines or any other media or otherwise
inconsistent with the public statement in Appendix 1.
(f) The Company will not make any statements that will disparage
Executive's character or reputation, unless the statement is required to be
disclosed by law. Executive will not make any statements that will disparage the
Company, unless the statement is required to be disclosed by law.
8. The Company is currently advancing to the Executive expenses and fees
for retention of legal counsel in connection with matters relating to his
actions as an officer, director, or employee of the Company. In accordance with,
and to the fullest extent allowed by, the provisions of Delaware law and Article
Sixteenth of the Restated Certificate of Incorporation of the Company, filed
February 10, 1994, Executive will be provided prompt advancement and
indemnification of any and all legal fees and costs relating to, in any way, all
such civil, criminal and administrative investigations or proceedings, and
Executive will retain control of the selection and retention of his personal
counsel in all such matters. Further, Executive will be provided prompt and
complete indemnification, in accordance with, and to the fullest extent allowed
by, the provisions of Delaware law and Article Sixteenth of the Restated
Certificate of Incorporation of the Company, filed February 10, 1994, for any
payments of any kind, including,
5
<PAGE>
but not limited to, judgments, penalties, fines, costs, forfeiture, and/or
restitution relating to, in any manner, all such civil, criminal and
administrative investigations or proceedings. Finally, the Company will grant to
Executive the limitations of liability available to a Director under Section
Twelfth of the Restated Certificate of Incorporation of Columbia Healthcare
Corporation dated the 10th day of February 1994.
The Company will continue to insure Executive under all Directors and
Officers liability insurance policies that it will maintain from time to time
for a period of not less than 5 years following his separation
9. This Separation Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the
Conflicts of Laws rules thereof.
10. Except for the public statement set out in Appendix 1 hereto, the
parties agree that they will keep the terms, amounts and facts of this Agreement
completely confidential, and that they will not hereafter disclose any
information concerning this Agreement to anyone except their respective
attorneys or accountants, including, but not limited to, any past, present, or
prospective employees of the Company or any of its parent, subsidiary or related
companies or entities, except, in each case, as may be requested by governmental
entities or required by law, including, without limitation, filings with the
Securities and Exchange Commission.
11. The Executive represents and warrants that he has acted in good faith
and in what he reasonably believed to be in the best interest of the Company,
and that he had no reasonable cause to believe that any of his conduct was
unlawful.
12. This Separation Agreement constitutes the entire agreement among the
parties with respect to the subject matter thereof, and supersedes any other
agreement with respect thereto, and there are no other agreements or
understandings related to those matters, except as expressly recited therein.
13. This Separation Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall constitute an
original, but such counterparts together shall constitute but one and the same
Separation Agreement.
14. Executive acknowledges that he has had the advice of independent
counsel selected by him in connection with the terms of this Separation
Agreement, and that no offer, promise, inducement or consideration of any kind
or degree, except as expressly stated in this Separation Agreement, has been
provided or promised to Executive by the Company or any other person in
connection with Executive's entry into this Separation Agreement.
15. Should any provision of this Agreement be declared and/or be determined
by any court to be illegal or invalid, the validity of the remaining parts,
terms or provisions shall not be affected thereby.
6
<PAGE>
16. In the event of any dispute under this Separation Agreement, the
propriety of any position regarding such dispute shall be determined exclusively
in an arbitration proceeding at the American Arbitration Association under its
Commercial Arbitration Rules, which the Company or the Executive may commence in
Nashville, Tennessee. If either party believes that the other has violated the
provisions of this Agreement, notice in writing shall be provided to the other
party. If no resolution is reached within fourteen days of such notice, either
party may request binding arbitration of the issue by the American Arbitration
Association. This paragraph shall provide the sole method for resolution of
disputes under this Agreement. Any disputes as to whether any dispute,
controversy or claim is subject to arbitration also shall be settled by binding
arbitration.
17. The rights of the Company hereunder shall inure to the benefit of any
and all of its successors and assigns. The rights of the Executive hereunder
shall inure to the benefit of any and all heirs and assigns. A modification or
waiver of any of the provisions of the Agreement shall be effective only if made
in writing and signed by each of the parties. The failure of any party to insist
upon the strict performance of any of the provisions of this Agreement shall not
be construed as a waiver of any subsequent default of the same or any other
provision.
18. Any notices required to be given pursuant to the provisions hereof
shall be given in writing to the designees below by certified mail, return
receipt requested, and facsimile transmission as follows:
If to the Company:
General Counsel
Columbia/HCA Healthcare Corporation
One Park Plaza
P.0. Box 550
Nashville, Tennessee
37202-0550
615-434-5029(fax)
If to the Executive:
James F. Neal
William T. Ramsey
Neal & Harwell
Suite 2000
First Union Tower
Nashville, Tennessee
37219
615-726-0573 (fax)
7
<PAGE>
IN WITNESS WHEREOF, Columbia/HCA and Executive have caused this Separation
Agreement to be executed and entered into as of the day and year first above
written.
COLUMBIA/HCA HEALTHCARE CORPORATION
By: /s/ THOMAS F. FRIST, JR.
--------------------------------
Name:
Title:
EXECUTIVE
/s/ DAVID T. VANDEWATER
-----------------------------------
/s/ JAMES F. NEAL
-----------------------------------
Counsel for David T. Vandewater
8
<PAGE>
[LOGO OF COLUMBIA/HCA APPEARS HERE]
NEWS
FOR IMMEDIATE RELEASE
INVESTOR CONTACT: MEDIA CONTACTS:
Victor L. Campbell Eve Hutcherson Sue Atkinson
Columbia Columbia Atkinson Public Relations
615/344-2053 615/344-2737 615/320-7532
CONTACTS FOR SCOTT & VANDEWATER:
Edward Nebb/Eric Starkman
Morgan-Walke Associates
212/850-5600
SCOTT, VANDEWATER RESIGN AT COLUMBIA;
FRIST NAMED CHAIRMAN AND CEO
NASHVILLE, TENN - JULY 25, 1997 -- Columbia/HCA Healthcare Corporation
(NYSE:COL) today announced the resignations of Richard L. Scott, chairman, chief
executive officer, and a director; and David T. Vandewater, president and chief
operating officer, effective immediately.
Thomas F. Frist, Jr., M.D., vice chairman of the company's board, has been
named chairman and chief executive officer. Frist has been a leader in the
healthcare industry for 30 years.
The resignations were offered by the two executives, and accepted by the
board. Both executives emphasized that throughout their tenure they have acted
honorably and in the best interests of the company.
Scott said, "Since founding Columbia, we have been dedicated to improving
healthcare through a focus on quality care. At the same time, we have had a
strong emphasis on creating value for shareholders. Though the decision to
resign was an extremely difficult one, we consider it to be the ultimate
demonstration of our commitment to Columbia's mission."
"Rick and David have been catalysts in addressing the growing healthcare
challenges in this country. We are grateful for their tireless efforts and
contributions to improving the quality of healthcare in this country," Frist
said.
"Our board and management will be focusing on providing full cooperation
with all governmental agencies. We will also ensure that all Columbia facilities
and employees are in full compliance with the law," Frist said.
# # #
- -------------------- -------------------- ---------------------
Thomas F. Frist, Jr. Richard L. Scott David T. Vandewater
<PAGE>
EXHIBIT 10(c)
AGREEMENT AND AMENDMENT
AGREEMENT AND AMENDMENT, dated as of June 17, 1997 (the "June 1997
---------
364-Day Agreement and Amendment"), among COLUMBIA/HCA HEALTHCARE CORPORATION, a
- -------------------------------
Delaware corporation formerly known as Columbia Healthcare Corporation (the
"Company"), the several banks and other financial institutions from time to time
-------
parties hereto (the "Banks"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
-----
ASSOCIATION, BANK OF NEW YORK, CITIBANK, N.A., DEUTSCHE BANK AG, FLEET NATIONAL
BANK, FUJI BANK LIMITED, INDUSTRIAL BANK OF JAPAN, LIMITED, MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, NATIONSBANK, N.A., PNC BANK, KENTUCKY, INC., UNION
BANK OF SWITZERLAND and WACHOVIA BANK OF GEORGIA, N.A., as Co-Agents
(collectively, the "Co-Agents"), SAKURA BANK LIMITED, SUMITOMO BANK LIMITED,
---------
SUNTRUST BANK, NASHVILLE, N.A. and WELLS FARGO BANK, N.A. as Lead Managers
(collectively, the "Lead Managers") and THE CHASE MANHATTAN BANK, a New York
-------------
banking corporation formerly known as Chemical Bank, as agent for the Banks
hereunder (in such capacity, the "Agent") and as CAF Loan agent (in such
-----
capacity, the "CAF Loan Agent").
--------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, for the convenience of the parties to the agreement and
amendment dated as of February 28, 1996 (the "February 1996 Agreement and
---------------------------
Amendment"), among the Company, the several banks and other financial
- ---------
institutions from time to time parties thereto and Chase, as agent for the Banks
hereunder and as CAF Loan agent, a composite conformed copy (the "364-Day
-------
Composite Conformed Credit Agreement") of the Credit Agreement, dated as of
- ------------------------------------
February 10, 1994 as incorporated by reference into and amended by the September
1994 Agreement and Amendment, the February 1995 Agreement and Amendment and the
February 1996 Agreement and Amendment (the "Original Credit Agreement") was
-------------------------
prepared and delivered to such parties;
WHEREAS, the Company, the Co-Agents, the Lead Managers, the Agent, the
CAF Loan Agent and certain banks and other financial institutions (the "Original
--------
Banks") are parties to the Agreement and Amendment, dated as of February 26,
- -----
1997 (the "February 1997 364-Day Agreement and Amendment") which adopts and
---------------------------------------------
incorporates by reference all of the terms and provisions of the 364-Day
Composite Conformed Credit Agreement, subject to the amendment thereto provided
for in the February 1997 364-Day Agreement and Amendment;
WHEREAS, effective as of the Closing Date (as defined below), the
Company intends to terminate the Commitments (as defined in the 364-Day
Composite Conformed Credit Agreement) of the Original Banks under the 364-Day
Composite Conformed Credit
<PAGE>
2
Agreement pursuant to subsection 2.4(a) of the 364-Day Composite Conformed
Credit Agreement;
WHEREAS, the Company has requested that the Co-Agents, the Lead
Managers, the Agent, the CAF Loan Agent and the Banks enter into a new agreement
adopting and incorporating by reference all of the terms and provisions of the
364-Day Composite Conformed Credit Agreement with certain amendments and
modifications thereto;
WHEREAS, the Available Commitments under the February 1997 364-Day
Agreement and Amendment are being increased from $2,000,000,000 up to
$3,000,000,000;
WHEREAS, the Co-Agents, the Lead Managers, the Agent, the CAF Loan
Agent and the Banks are willing to so enter into a new agreement, but only upon
the terms and subject to the conditions set forth below; and
NOW THEREFORE, in consideration of the promises and mutual agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each of the parties hereto, the
parties hereto hereby agree as follows:
SECTION 1. Adoption and Incorporation of 364-Day Composite Conformed
---------------------------------------------------------
Credit Agreement. Subject to the amendments and modifications set forth in
- ----------------
Sections 3 through 13 of this Agreement, all of the terms and provisions of the
364-Day Composite Conformed Credit Agreement are hereby adopted and incorporated
by reference into this Agreement, with the same force and effect as if fully set
forth herein.
SECTION 2. Definitions. As used in this Agreement, terms defined
-----------
herein are used as so defined and, unless otherwise defined herein, terms
defined in the 364-Day Composite Conformed Credit Agreement are used herein as
therein defined.
SECTION 3. Defined Terms. For purposes of this Agreement, subsection
-------------
1.1 of the 364-Day Composite Conformed Credit Agreement as adopted and
incorporated by reference into this Agreement is hereby amended as follows:
(a) by deleting the defined terms "Agreement", "Applicable Margin",
"Closing Date", "Original Banks", "Original Credit Agreement" and
"Termination Date" in their entirety and substituting in lieu thereof in
proper alphabetical order the following:
"`Agreement': the 364-Day Composite Conformed Credit Agreement
---------
as adopted and incorporated by
<PAGE>
3
reference into, and as amended by, the February 1997 364-Day Agreement
and Amendment and the June 1997 364-Day Agreement and Amendment and as
further amended, supplemented or otherwise modified from time to
time.";
"`Applicable Margin': (i) with respect to Alternate Base Rate
-----------------
Loans, 0% per annum and (ii) with respect to Eurodollar Loans, 0.20%
per annum.";
"`Closing Date': the date on which all of the conditions
------------
precedent for the Closing Date set forth in Section 14 of the June
1997 364-Day Agreement and Amendment shall have been fulfilled.
"`Original Banks': as defined in the recitals to the June 1997
--------------
364-Day Agreement and Amendment.";
"`Original Credit Agreement': as defined in the Recitals to the
-------------------------
June 1997 364-Day Agreement and Amendment."; and
"`Termination Date': the date upon which the Commitments shall
----------------
terminate, which shall be one day before the first anniversary of the
Closing Date (or, if such date is not a Business Day, the next
preceding Business Day), or such other Business Day to which the
Termination Date may be changed pursuant to subsection 2.4 of the 364-
Day Composite Conformed Credit Agreement."
(b) by deleting paragraph (4) in the definition of "Interest Period"
in its entirety and substituting in lieu thereof the following:
"(4) any Interest Period pertaining to a Eurodollar Loan that
would otherwise end after the Maturity Date shall end on the Maturity
Date; and"
(c) by inserting in said subsection 1.1 of the 364-Day Composite
Conformed Credit Agreement in the appropriate alphabetical order the
following defined terms:
"`364-Day Composite Conformed Credit Agreement': as defined in
--------------------------------------------
the recitals to the June 1997 364-Day Agreement and Amendment.";
"`June 1997 364-Day Agreement and Amendment': the Agreement and
-----------------------------------------
Amendment, dated as of June 17, 1997, among the Company, the Banks,
the Co-Agents, the Lead Managers, the Agent and the CAF Loan Agent";
and
<PAGE>
4
"`Maturity Date'": the date upon which any outstanding Revolving
-------------
Credit Loan, evidenced by a Revolving Credit Note pursuant to Section
2.1(b) of the 364-Day Composite Conformed Credit Agreement, shall
mature, which date shall be the first anniversary of the Termination
Date as in effect at such time."
SECTION 4. Revolving Credit Loans and Revolving Credit Notes. For
-------------------------------------------------
purposes of this Agreement, subsection 2.1(b) of the 364-Day Composite Conformed
Credit Agreement as adopted and incorporated by reference into this Agreement is
hereby amended by deleting the phrase "Termination Date" in subsection (y) of
the last sentence thereof and substituting in lieu thereof the phrase "Maturity
Date".
SECTION 5. Facility Fee. For purposes of this Agreement, subsection
------------
2.3(a) of the 364-Day Composite Conformed Credit Agreement as adopted and
incorporated by reference into this Agreement is hereby amended by deleting the
word "0.070%" therein and substituting in lieu thereof the word "0.050%". The
facility fee shall be payable after the Termination Date on the average
aggregate principal amount of the outstanding Revolving Credit Loans for the
period for which payment is made, payable quarterly on the last day of each
March, June, September and December and on any earlier date on which the
Commitments are repaid in full.
SECTION 6. Extension of Commitments. For purposes of this Agreement,
------------------------
subsection 2.4(b) of the 364-Day Composite Conformed Credit Agreement as adopted
and incorporated by reference into this Agreement is hereby amended by deleting
such subsection in its entirety and substituting in lieu thereof the following:
"(b) The Company may request, in a notice given as herein provided to
the Agent and each of the Banks not less than 60 days and not more than 90
days prior to the Termination Date, that the Termination Date be extended,
which notice shall specify that the requested extension is to be effective
(the "Effective Date") on the Termination Date, and that the new
--------------
Termination Date to be in effect following such extension (the "Requested
---------
Termination Date") is to be the date which is one day before the first
----------------
anniversary of the Termination Date (or, if such date is not a Business
Day, the next preceding Business Day). Each Bank shall, not later than 30
days following such notice, notify the Company and the Agent of its
election to extend or not to extend the Termination Date with respect to
its Commitment. The Company may, not later than 15 days following such
notice from the Banks, revoke its request to extend the Termination Date.
If the Required Banks elect to
<PAGE>
5
extend the Termination Date with respect to their Commitments and the
Company has not revoked its request to extend the Termination Date, then,
subject to the provisions of this subsection 2.4, the Termination Date
shall be extended for an additional 364-day period. Notwithstanding any
provision of this Agreement to the contrary, any notice by any Bank of its
willingness to extend the Termination Date with respect to its Commitment
shall be revocable by such Bank in its sole and absolute discretion at any
time prior to the date which is 15 days following such notice from the
Banks. Any Bank which shall not notify the Company and the Agent of its
election to extend the Termination Date within 30 days following such
notice shall be deemed to have elected not to extend the Termination Date
with respect to its Commitment."
SECTION 7. Financial Information. For purposes of this Agreement,
---------------------
subsection 3.3 of the 364-Day Composite Conformed Credit Agreement as adopted
and incorporated by reference into this Agreement is hereby amended by deleting
such subsection in its entirety and substituting in lieu thereof the following:
"3.3 Financial Information. The Company has furnished to the Agent
---------------------
and each Bank copies of the following:
(a) the Annual Report of the Company for the fiscal year ended
December 31, 1996, containing the consolidated balance sheet of the Company
and its Subsidiaries as at said date and the related consolidated
statements of income, common stockholders' equity and changes in financial
position for the fiscal year then ended, accompanied by the opinion of an
Auditor;
(b) the Annual Report of the Company on Form 10-K for the fiscal year
ended December 31, 1996;
(c) quarterly financial statements of the Company, including balance
sheets, for the fiscal period ended March 31, 1997; and
(d) Current Reports on Form 8-K filed with the Securities and
Exchange Commission on April 14, 1997.
Such financial statements (including any notes thereto) have been prepared
in accordance with GAAP and fairly present the financial conditions of the
corporations covered thereby at the dates thereof and the results of their
operations for the periods covered thereby, subject to normal year-end
adjustments in the case of interim statements. As of the date hereof,
neither the Company nor any of its Subsidiaries has any known contingent
liabilities of any significant
<PAGE>
6
amount which are not referred to in said financial statements or in the
notes thereto which could reasonably be expected to have a material adverse
effect on the business or assets or on the condition, financial or
otherwise, of the Company and its Subsidiaries, on a consolidated basis.".
SECTION 8. Litigation. For purposes of this Agreement, subsection
----------
3.6 of the 364-Day Composite Conformed Credit Agreement as adopted and
incorporated by reference into this Agreement is hereby amended by deleting such
subsection in its entirety and substituting in lieu thereof the following:
"3.6 Litigation. Except as disclosed in the Company's Annual Report
----------
on Form 10-K for its fiscal year ended December 31, 1996 and its Quarterly
Report on Form 10-Q for its fiscal quarter ended March 31, 1997, in each
case as filed with the Securities and Exchange Commission and previously
distributed to the Banks, and except as set forth on Schedule V hereto,
there is no litigation, at law or in equity, or any proceeding before any
federal, state, provincial or municipal board or other governmental or
administrative agency pending or to the knowledge of the Company threatened
which, after giving effect to any applicable insurance, may involve any
material risk of a material adverse effect on the business or assets or on
the condition, financial or otherwise, of the Company and its Subsidiaries
on a consolidated basis or which seeks to enjoin the consummation of any of
the transactions contemplated by this Agreement or any other Loan Document
and involves any material risk that any such injunction will be issued, and
no judgment, decree, or order of any federal, state, provincial or
municipal court, board or other governmental or administrative agency has
been issued against the Company or any Subsidiary which has, or may
involve, a material risk of a material adverse effect on the business or
assets or on the condition, financial or otherwise, of the Company and its
Subsidiaries on a consolidated basis. The Company does not believe that
the final resolution of the matters disclosed in its Annual Report on Form
10-K for its fiscal year ended December 31, 1996 and its Quarterly Report
on Form 10-Q for its fiscal quarter ended March 31, 1997, in each case as
filed with the Securities and Exchange Commission and previously
distributed to the Banks, and of the matters set forth on Schedule V hereto
will have a material adverse effect on the business or assets or condition,
financial or otherwise, of the Company and its Subsidiaries on a
consolidated basis."
SECTION 9. Ratio of Total Debt to Tangible Net Worth. For purposes
-----------------------------------------
of this Agreement, subsection 5.6 of the 364-Day Composite Conformed Credit
Agreement as adopted and incorporated
<PAGE>
7
by reference into this Agreement is hereby amended by deleting such subsection
in its entirety and substituting in lieu thereof the following:
"5.6 Ratio of Total Debt to Tangible Net Worth. At any time after
-----------------------------------------
March 31, 1997 the Company and its Subsidiaries will not at any such time
have outstanding Consolidated Total Debt in an amount in excess of 300% of
Consolidated Tangible Net Worth.
SECTION 10. Commitment Amounts and Percentages; Lending Offices;
----------------------------------------------------
Addresses for Notice. For purposes of this Agreement, Schedule I to the 364-Day
- --------------------
Composite Conformed Credit Agreement as adopted and incorporated by reference
into this Agreement is hereby amended by deleting such Schedule in its entirety
and substituting in lieu thereof Schedule I to this Agreement.
SECTION 11. Subsidiaries of the Company. For purposes of this
---------------------------
Agreement, Schedule II to the 364-Day Composite Conformed Credit Agreement as
adopted and incorporated by reference into this Agreement is hereby amended by
deleting such Schedule in its entirety and substituting in lieu thereof Schedule
II to this Agreement.
SECTION 12. Indebtedness. For purposes of this Agreement, Schedule
------------
III to the 364-Day Composite Conformed Credit Agreement as adopted and
incorporated by reference into this Agreement is hereby amended by deleting such
Schedule in its entirety and substituting in lieu thereof Schedule III to this
Agreement.
SECTION 13. Litigation. For purposes of this Agreement, the 364-Day
----------
Composite Conformed Credit Agreement as adopted and incorporated by reference
into this Agreement is hereby amended by adding thereto Schedule V to this
Agreement.
SECTION 14. Conditions Precedent. The obligations of each Bank to
--------------------
make the Loans contemplated by subsections 2.1 and 2.2 of the 364-Day Composite
Conformed Credit Agreement as adopted and incorporated by reference into this
Agreement shall be subject to the compliance by the Company with its agreements
herein contained (including its agreements contained in the 364-Day Composite
Conformed Credit Agreement as adopted and incorporated by reference into this
Agreement) and to the satisfaction on or before the Closing Date of the
following further conditions:
(a) Loan Documents. The Agent shall have received (i) this
--------------
Agreement, executed and delivered by a duly authorized officer of the
Company, with a counterpart for each Bank,
<PAGE>
8
and (ii) for the account of each Bank requesting the same, a Revolving
Credit Note and a Grid CAF Loan Note conforming to the requirements hereof
and executed by a duly authorized officer of the Company.
(b) Legal Opinions. On the Closing Date each Bank shall have
--------------
received from any general, associate, or assistant general counsel to the
Company or any other counsel to the Company satisfactory to the Agent, such
opinions as the Agent shall have reasonably requested with respect to the
transactions contemplated by this Agreement.
(c) Company Officers' Certificate. The representations and
-----------------------------
warranties contained in Section 3 of the 364-Day Composite Conformed Credit
Agreement as adopted and incorporated by reference into, and as amended by,
this Agreement shall be true and correct on the Closing Date with the same
force and effect as though made on and as of such date; on and as of the
Closing Date and after giving effect to this Agreement, no Default shall
have occurred (except a Default which shall have been waived in writing or
which shall have been cured) and no Default shall exist after giving effect
to the Loan to be made; and the Agent shall have received a certificate
containing a representation to these effects dated the Closing Date and
signed by a Responsible Officer.
(d) General. All instruments and legal and corporate proceedings in
-------
connection with the Loans contemplated by this Agreement shall be
satisfactory in form and substance to the Agent, and the Agent shall have
received copies of all documents, and favorable legal opinions and records
of corporate proceedings, which the Agent may have reasonably requested in
connection with the Loans and other transactions contemplated by this
Agreement.
(e) Termination of Commitments of the Original Banks. On the Closing
------------------------------------------------
Date, the Commitments (as defined in the 364-Day Composite Conformed Credit
Agreement) of the Original Banks under the February 1997 364-Day Agreement
and Amendment shall have been terminated.
SECTION 15. Expenses. The Company agrees to pay or reimburse the
--------
Agent for all of its reasonable out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Agreement and the Notes and any
other documents prepared in connection herewith, and the consummation of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Agent.
<PAGE>
9
SECTION 16. GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE
-------------
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
SECTION 17. Counterparts. This Agreement may be executed by one or
------------
more of the parties to this Agreement on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Company and the Agent.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
COLUMBIA/HCA HEALTHCARE CORPORATION
By: /s/ David G. Anderson
-------------------------------------
Name: David G. Anderson
Title: Vice President - Finance and
Treasurer
THE CHASE MANHATTAN BANK, as Agent, as CAF
Loan Agent and as a Bank
By: /s/ Dawn Lee Lum
--------------------------------------
Name: Dawn Lee Lum
Title: Vice President
<PAGE>
ABN AMRO BANK N.V., as a Bank
By: /s/ Larry Kelley
------------------------------
Name: Larry Kelley
Title: Group Vice President
By: /s/ Steven Hipsman
------------------------------
Name: Steven Hipsman
Title: Vice President
ARAB BANK PLC, GRAND CAYMAN BRANCH, as a Bank
By: /s/ Nofal S. Barbar
------------------------------
Name: Nofal S. Barbar
Title: EVP & Regional Manager
BANCA MONTE DEI PASCHI DI SIENA SpA, as a Bank
By: /s/ G. Natalicchi
------------------------------
Name: G. Natalicchi
Title: S.V.P. & General Manager
By: /s/ S.M. Sondak
-------------------------------
Name: S.M. Sondak
Title: F.V.P. & Dep. General Manager
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as a Co-Agent and as a Bank
By: /s/ Anthony L. Trunzo
------------------------------
Name: Anthony Trunzo
Title: Vice President
THE BANK OF NEW YORK, as a Co-Agent and as a
Bank
By: /s/ Ann Marie Hughes
------------------------------
Name: Ann Marie Hughes
Title: Assistant Vice President
<PAGE>
THE BANK OF NOVA SCOTIA, as a Bank
By: /s/ W.J. Brown
-------------------------------
Name: W.J. Brown
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY, as
a Bank
By: /s/ Douglas J. Weir
------------------------------
Name: Douglas J. Weir
Title: Vice President
BANK ONE, TEXAS, N.A., as a Bank
By: /s/ C.L. Turner III
------------------------------
Name: C.L. Turner III
Title: Vice President
BANQUE NATIONALE DE PARIS - Houston Agency,
as a Bank
By: /s/ David P. Camp
------------------------------
Name: David P. Camp
Title: Banking Officer
BARNETT BANK, N.A., as a Bank
By: /s/ Bradley M. Harrell
------------------------------
Name: Bradley M. Harrell
Title: Senior Vice President
CITIBANK, N.A., as a Co-Agent and as a Bank
By: /s/ Margaret Au Brown
------------------------------
Name: Margaret Au Brown
Title: Managing Director
<PAGE>
COMERICA BANK, as a Bank
By: /s/ Charles A. Viane
------------------------------
Name: Charles A. Viane
Title: Vice President
CORESTATES BANK, N.A., as a Bank
By: /s/ Elizabeth D. Morris
------------------------------
Name: Elizabeth D. Morris
Title: Vice President
CRESTAR BANK, as a Bank
By: /s/ C. Gray Key
------------------------------
Name: C. Gray Key
Title: Vice President
THE DAI-ICHI KANGYO BANK, LIMITED, ATLANTA
AGENCY, as a Bank
By: /s/ Tatsuji Noguchi
------------------------------
Name: Tatsuji Noguchi
Title: Joint General Manager
DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS
BRANCH(ES), as a Co-Agent and as a Bank
By: /s/ Alka Jain Goyal
------------------------------
Name: Alka Jain Goyal
Title: Assistant Vice President
By: /s/ Iain Stewart
-------------------------------
Name: Iain Stewart
Title: Vice President
FIRST AMERICAN NATIONAL BANK, as a Bank
By: /s/ Sandy Hamrick
------------------------------
Name: Sandy Hamrick
Title: Vice President
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
as a Bank
By: /s/ Jay G. Sepanski, as Authorized Agent
----------------------------------------
Name: Jay G. Sepanski
Title: Assistant Vice President
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as
a Bank
By: /s/ Joseph H. Towell
-----------------------------------------
Name: Joseph H. Towell
Title: Senior Vice President
FLEET NATIONAL BANK, as a Co-Agent and as a Bank
By: /s/ Amy E. Fredericks
-----------------------------------------
Name: Amy E. Fredericks
Title: Senior Vice President
THE FUJI BANK LIMITED, as a Co-Agent and as a
Bank
By: /s/ Toshihiro Mitsui
-----------------------------------------
Name: Toshihiro Mitsui
Title: Vice President and Manager
THE INDUSTRIAL BANK OF JAPAN, LIMITED, ATLANTA
AGENCY, as a Co-Agent and as a Bank
By: /s/ Kazuo Iida
-----------------------------------------
Name: Kazuo Iida
Title: General Manager
KEYBANK NATIONAL ASSOCIATION, as a Bank
By: /s/ Tom Purcell
-----------------------------------------
Name: Tom Purcell
Title: Vice President
<PAGE>
THE MITSUBISHI TRUST AND BANKING CORPORATION, as
a Bank
By: /s/ Patricia Loret de Mola
-----------------------------------------
Name: Patricia Loret de Mola
Title: Senior Vice President
THE MITSUI TRUST AND BANKING COMPANY, LIMITED,
NEW YORK BRANCH, as a Bank
By: /s/ Margaret Holloway
-----------------------------------------
Name: Margaret Holloway
Title: Vice President & Manager
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a
Co-Agent and as a Bank
By: /s/ Penelope J.B. Cox
-----------------------------------------
Name: Penelope J.B. Cox
Title: Vice President
NATIONAL CITY BANK OF KENTUCKY, as a Bank
By: /s/ Deroy Scott
-----------------------------------------
Name: Deroy Scott
Title: Vice President
NATIONSBANK, N.A. as a Co-Agent and as a Bank
By: /s/ Kevin Wagley
-----------------------------------------
Name: Kevin Wagley
Title: Vice President
THE NORINCHUKIN BANK, NEW YORK BRANCH, as a Bank
By: /s/ Takeshi Akimoto
-----------------------------------------
Name: Takeshi Akimoto
Title: General Manager
<PAGE>
THE NORTHERN TRUST COMPANY, as a Bank
By: /s/ James F.T. Monhart
-----------------------------------------
Name: James F.T. Monhart
Title: Vice President
PNC BANK, KENTUCKY, INC. as a Co-Agent and as a
Bank
By: /s/ Kathryn M. Bohr
-----------------------------------------
Name: Kathryn M. Bohr
Title: Vice President
THE SAKURA BANK, LTD. NEW YORK BRANCH, as a Lead
Manager and as a Bank
By: /s/ Yasumasa Kikuchi
-----------------------------------------
Name: Yasumasa Kikuchi
Title: Senior Vice President
THE SUMITOMO BANK, LIMITED, as a Lead Manager
and as a Bank
By: /s/ Masayuki Fukushima
-----------------------------------------
Name: Masayuki Fukushima
Title: Joint General Manager
THE SUMITOMO TRUST & BANKING CO., LTD., NEW YORK
BRANCH, as a Bank
By: /s/ Suraj P. Bhatia
-----------------------------------------
Name: Suraj P. Bhatia
Title: Senior Vice President
Manager, Corporate Finance Dept.
SUNTRUST BANK, NASHVILLE, N.A., as a Lead
Manager and as a Bank
By: /s/ Mark D. Mattson
-----------------------------------------
Name: Mark D. Mattson
Title: Vice President
<PAGE>
THE TOKAI BANK, LIMITED, NEW YORK BRANCH, as a
Bank
By: /s/ Stuart Schulman
-----------------------------------------
Name: Stuart Schulman
Title: Deputy General Manager
TORONTO DOMINION (TEXAS), INC., as a Bank
By: /s/ Lisa Allison
-----------------------------------------
Name: Lisa Allison
Title: Vice President
THE TOYO TRUST & BANKING CO., LTD., as a Bank
By: /s/ K. Yamauchi
-----------------------------------------
Name: K. Yamauchi
Title: Vice President
UNION BANK OF SWITZERLAND, NEW YORK BRANCH, as a
Co-Agent and as a Bank
By: /s/ Steven A. Cayer
-----------------------------------------
Name: Steven A. Cayer
Title: Assistant Vice President
By: /s/ Eduardo Salazar
-----------------------------------------
Name: Eduardo Salazar
Title: Vice President
UNION PLANTERS BANK OF MIDDLE TENNESSEE, N.A.
By: /s/ Steven A. Koenig
-----------------------------------------
Name: Steven A. Koenig
Title: Senior Vice President
WACHOVIA BANK OF GEORGIA, N.A., as a Co-Agent
and as a Bank
By: /s/ Charles Dee O'Dell II
-----------------------------------------
Name: Charles Dee O'Dell II
Title: Vice President
<PAGE>
WELLS FARGO BANK, N.A., as a Lead Manager and as
a Bank
By: /s/ David B. Hollingsworth
-----------------------------------------
Name: David B. Hollingsworth
Title: Vice President
By: /s/ Rachel T. Uyama
-----------------------------------------
Name: Rachel T. Uyama
Title: Assistant Vice President
<PAGE>
SCHEDULE I
----------
Commitment Amounts and Percentages;
Lending Offices; Addresses for Notice
-------------------------------------
A. COMMITMENT AMOUNTS AND PERCENTAGES.
<TABLE>
<CAPTION>
COMMITMENT COMMITMENT
NAME OF BANK AMOUNT PERCENTAGE
- ------------ ------------ -----------
<S> <C> <C>
THE CHASE MANHATTAN BANK $156,250,000 5.208%
CITIBANK, N.A. 130,000,000 4.333
BANK OF AMERICA NATIONAL TRUST 130,000,000 4.333
AND SAVINGS ASSOCIATION
THE BANK OF NEW YORK 130,000,000 4.333
DEUTSCHE BANK AG, 130,000,000 4.333
NEW YORK AND/OR CAYMAN ISLANDS BRANCH
FLEET NATIONAL BANK 130,000,000 4.333
THE FUJI BANK LIMITED 130,000,000 4.333
THE INDUSTRIAL BANK OF JAPAN, 130,000,000 4.333
LIMITED, ATLANTA AGENCY
MORGAN GUARANTY TRUST COMPANY 130,000,000 4.333
OF NEW YORK
NATIONSBANK, N.A. 130,000,000 4.333
PNC BANK, KENTUCKY, INC. 130,000,000 4.333
UNION BANK OF SWITZERLAND, 130,000,000 4.333
NEW YORK BRANCH
WACHOVIA BANK OF GEORGIA, N.A. 130,000,000 4.333
THE SAKURA BANK, LTD. 101,250,000 3.375
NEW YORK BRANCH
THE SUMITOMO BANK, LIMITED 101,250,000 3.375
SUNTRUST BANK, NASHVILLE, N.A. 101,250,000 3.375
WELLS FARGO BANK, N.A. 101,250,000 3.375
TORONTO DOMINION (TEXAS), INC. 75,000,000 2.500
BANK OF TOKYO-MITSUBISHI TRUST COMPANY 62,500,000 2.083
THE DAI-ICHI KANGYO BANK, LIMITED, 56,250,000 1.875
ATLANTA AGENCY
THE NORTHERN TRUST COMPANY 56,250,000 1.875
ABN AMRO BANK N.V. 40,000,000 1.333
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
FIRST UNION NATIONAL BANK OF 37,500,000 1.250
NORTH CAROLINA
ARAB BANK PLC, GRAND CAYMAN BRANCH 37,500,000 1.250
BANK ONE TEXAS, N.A. 37,500,000 1.250
BANQUE NATIONALE DE PARIS 37,500,000 1.250
THE FIRST NATIONAL BANK OF CHICAGO 37,500,000 1.250
THE NORINCHUKIN BANK, NEW YORK BRANCH 37,500,000 1.250
THE MITSUI TRUST & BANKING CO., LTD., 37,500,000 1.250
NEW YORK BRANCH
THE TOKAI BANK, LIMITED, NEW YORK BRANCH 37,500,000 1.250
BANCA MONTE DEI PASCHI DI SIENNA, SpA 37,500,000 1.250
BARNETT BANK, N.A. 30,000,000 1.000
THE BANK OF NOVA SCOTIA 25,000,000 0.833
COMERICA BANK 25,000,000 0.833
CORESTATES BANK, N.A. 25,000,000 0.833
FIRST AMERICAN NATIONAL BANK 25,000,000 0.833
THE MITSUBISHI TRUST AND BANKING 25,000,000 0.833
CORPORATION
NATIONAL CITY BANK OF KENTUCKY 25,000,000 0.833
THE SUMITOMO TRUST & BANKING CO., 22,500,000 0.750
LTD., NEW YORK BRANCH
KEYBANK NATIONAL ASSOCIATION 18,750,000 0.625
THE TOYO TRUST & BANKING CO., LTD. 12,500,000 0.417
CRESTAR BANK 10,000,000 0.333
UNION PLANTERS BANK OF MIDDLE 7,500,000 0.250
---------- ------
TENNESSEE, N.A.
TOTAL $3,000,000,000 100.00%
============== ======
</TABLE>
<PAGE>
B. LENDING OFFICES; ADDRESSES FOR NOTICE.
THE CHASE MANHATTAN BANK
------------------------
Domestic Lending Office: Chase Manhattan
270 Park Avenue
New York, NY 10017
Eurodollar Lending Office: Chase Manhattan
270 Park Avenue
New York, NY 10017
Address for Notices: Chase Manhattan
One Chase Manhattan Plaza
8th floor
New York, NY 10081
Attention: Hilma Gabbiden
Telecopy: (212) 552-7500
Confirmation: (212) 552-4560
The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Attention: Dawn Lee Lum
Telecopy: (212) 270-3279
Confirmation: (212) 270-2472
ABN AMRO BANK N.V.
------------------
Domestic Lending Office: ABN AMRO Bank N.V.
One Ravinia Dr. Suite 1200
Atlanta, GA 30346
Eurodollar Lending Office: ABN AMRO Bank N.V.
One Ravinia Dr. Suite 1200
Atlanta, GA 30346
Address for Notices: ABN AMRO Bank N.V.
One Ravinia Dr. Suite 1200
Atlanta, GA 30346
Attention: Reenie Williamson
Telecopy: (770) 395-9188
Confirmation: (770) 395-7990
<PAGE>
ARAB BANK PLC, GRAND CAYMAN BRANCH
----------------------------------
Domestic Lending Office: Arab Bank Plc, Grand Cayman
Branch
520 Madison Avenue
New York, NY 10022
Eurodollar Lending Office: Arab Bank Plc, Grand Cayman
Branch
520 Madison Avenue
New York, NY 10022
Address for Notices: Arab Bank Plc, Grand Cayman
Branch
520 Madison Avenue
New York, NY 10022
Attention: Justo Huapaya
Telecopy: (212) 593-4632
Confirmation: (212) 715-9713
BANCA MONTE DEI PASCHI DI SIENA SPA
-----------------------------------
Domestic Lending Office: Banca Monte Dei Paschi di Siena SpA
245 Park Avenue-26th floor
New York, NY 10167
Eurodollar Lending Office: Banca Monte Dei Paschi di Siena SpA
245 Park Avenue-26th floor
New York, NY 10167
Address for Notices: Banca Monte Dei Paschi di Siena SpA
245 Park Avenue-26th floor
New York, NY 10167
Attention: Mei Tam
Telecopy:
Confirmation:
Attention: Janet Leung
Telecopy:
Confirmation:
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
------------------------------------------------------
Domestic Lending Office: Bank of America National Trust
and Savings Association
555 S. Flower Street
Mail Code 5618
Los Angeles, CA 90071
Eurodollar Lending Office: Bank of America National Trust
and Savings Association
1850 Gateway Blvd., 4th Floor
Concord, CA 94520
Address for Notices: Bank of America National Trust
and Savings Association
333 South Beaudry, 19th floor
Los Angeles, CA 90071
Attention: Pat Castro
Telecopy: (213) 345-6550
Confirmation: (213) 345-7028
THE BANK OF NEW YORK
--------------------
Domestic Lending Office: The Bank of New York
One Wall Street, 22nd Floor
New York, NY 10286
Eurodollar Lending Office: The Bank of New York
One Wall Street, 22nd Floor
New York, NY 10286
Address for Notices: The Bank of New York
One Wall Street
New York, NY 10286
Attention: Annette Megargel
Telecopy: (212) 635-6877
Confirmation: (212) 635-6780
<PAGE>
THE BANK OF NOVA SCOTIA
-----------------------
Domestic Lending Office: The Bank of Nova Scotia
600 Peachtree Street NE
Suite 2700
Atlanta, GA 30808
Eurodollar Lending Office: The Bank of Nova Scotia
600 Peachtree Street NE
Suite 2700
Atlanta, GA 30808
Address for Notices: The Bank of Nova Scotia
(Atlanta)
600 Peachtree Street
Suite 2700
Atlanta, GA 30308
Attention: Jeffrey Jones
Telecopy: (404) 888-8998
Confirmation: (408) 877-1549
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
--------------------------------------
Address for Notices: Bank of Tokyo-Mitsubishi Trust Company
1251 Avenue of the Americas
12th Floor
New York, NY 10020-1104
Attention: Rolando Uy
Telecopy: (212) 766-3127
Confirmation: (212) 766-3157
BANK ONE, TEXAS, N.A.
---------------------
Domestic Lending Office: Bank One, Texas, N.A.
500 Throckmorton
Fort Worth, TX 76102
Eurodollar Lending Office: Bank One, Texas, N.A.
500 Throckmorton
Fort Worth, TX 76102
Address for Notices: Bank One, Texas, N.A. (Dallas)
PO Box 901008
Fort Worth, TX 76101
Attention: Cheryl Bradford
Telecopy: (817) 884-4651
Confirmation: (817) 884-4358
<PAGE>
BANQUE NATIONALE DE PARIS-HOUSTON AGENCY
- ----------------------------------------
Domestic Lending Office: Banque Nationale de Paris-Houston Agency
333 Clay Street, Suite 3400
Houston, TX 77002
Eurodollar Lending Office: Banque Nationale de Paris-Houston Agency
333 Clay Street, Suite 3400
Houston, TX 77002
Address for Notices: Banque Nationale de Paris-Houston Agency
333 Clay Street, Suite 3400
Houston, TX 77002
Attention: Donna Rose
Telecopy: (713) 659-1414
Confirmation: (314) 951-1240
BARNETT BANK, N.A.
- ------------------
Domestic Lending Office: Barnett Bank, N.A.
50 North Laura Street
Jacksonville, AZ 32202
Eurodollar Lending Office: Barnett Bank, N.A.
50 North Laura Street
Jacksonville, AZ 32202
Address for Notices: Barnett Bank, N.A.
50 North Laura Street
Jacksonville, AZ 32202
Attn: Stacy Flye
Telecopy: (904) 464-5552
Confirmation: (904) 464-5050
<PAGE>
CITIBANK, N.A.
--------------
Domestic Lending Office: Citibank, N.A.
399 Park Avenue
8th Floor Zone 6
New York, NY 10043
Eurodollar Lending Office: Citibank, N.A.
399 Park Avneue
8th Floor Zone 6
New York, NY 10043
Address for Notices: Citicorp
399 Park Avenue
8th Floor Zone 6
New York, NY 10043
Attention: Margaret Au Brown
Telecopy: (212) 793-3053
Confirmation: (212) 559-0501
COMERICA BANK
-------------
Domestic Lending Office: Comerica Bank
PO Box 75000
Detroit, MI 48275-3266
Eurodollar Lending Office: Comerica Bank
PO Box 75000
Detroit, MI 48275-3266
Address for Notices: Comerica Bank
PO Box 75000
Detroit, MI 48275-3266
Attention: Regina C. McGuire
Telecopy: (313) 222-3420
Confirmation: (313) 222-7805
<PAGE>
CORESTATES BANK, N.A.
---------------------
Domestic Lending Office: CoreStates Bank, N.A.
1339 Chestnut Street
P.O. 1-8-3-22
Philadelphia, PA 19101
Eurodollar Lending Office: CoreStates Bank, N.A.
1339 Chestnut Street
P.O. 1-8-3-22
Philadelphia, PA 19101
Address for Notices: CoreStates Bank, N.A.
Centre Square Building
1500 Market Street
Philadelphia, PA 19101
Attention: Rosemary Hart
Telecopy: (215) 973-2045
Confirmation: (215) 786-8606
CRESTAR BANK
------------
Domestic Lending Office: Crestar Bank
919 East Main Street
Richmond, VA 23219
Eurodollar Lending Office: Crestar Bank
919 East Main Street
Richmond, VA 23219
Address for Notices: Crestar Bank
919 East Main Street
Richmond, VA 23219
Attention: Shirley P. Elliot
Telecopy: (804) 782-5413
Confirmation: (804) 782-5239
<PAGE>
THE DAI-ICHI KANGYO BANK, LIMITED, ATLANTA AGENCY
-------------------------------------------------
Domestic Lending Office: Dai Ichi Kangyo Bank (Atlanta)
285 Peachtree St., Suite 2400
Atlanta, GA 30303
Eurodollar Lending Office Dai Ichi Kangyo Bank (Atlanta)
285 Peachtree St., Suite 2400
Atlanta, GA 30303
Address for Notices: Dai Ichi Kangyo Bank (Atlanta)
285 Peachtree Center Ave
Suite 2400
Atlanta, GA 30303
Attention: Percy Lee
Telecopy: (404) 222-9556
Confirmation: (404) 581-0200
DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES
---------------------------------------------------------
Domestic Lending Office: Deutsche Bank AG,
New York Branch
31 West 52nd Street
New York, NY 10019
Eurodollar Lending Office: Deutsche Bank, AG,
Cayman Islands Branch
31 West 52nd Street
New York, NY 10019
Address for Notices: Deutsche Bank AG,
New York Branch
31 West 52nd Street
New York, NY 10019
Attention: Richard Agnolet
Telecopy: (212) 469-4139
Confirmation: (212) 469-4113
<PAGE>
FIRST AMERICAN NATIONAL BANK
----------------------------
Domestic lending Office: First American National Bank
327 Union Street
Nashville, TN 37237
Eurodollar Lending Office: First American National Bank
327 Union Street
Nashville, TN 37237
Address for Notices: First American National Bank
(Nashville)
First American Center, 2nd Floor
Nashville, TN 37237
Attention: Frenisa Joy
Telecopy: (615) 748-6098
Confirmation: (615) 748-6747
THE FIRST NATIONAL BANK OF CHICAGO
----------------------------------
Domestic Lending Office: The First National Bank of Chicago
First National Plaza
Mail Suite 0091
Chicago, IL 60670-0091
Eurodollar Lending Office: The First National Bank of Chicago
First National Plaza
Mail Suite 0091
Chicago, IL 60670-0091
Address for Notices: The First National Bank of Chicago
First National Plaza
Mail Suite 0091
Chicago, IL 60670-0091
Attention: Cathy Blomquist
Telecopy: (312) 732-2016
Confirmation: (312) 732-4967
<PAGE>
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
-------------------------------------------
Domestic Lending Office: First Union National
Bank of North Carolina
One First Union Center
301 S. College Street
Charlotte, NC 28288
Eurodollar Lending Office: First Union National
Bank of North Carolina
One First Union Center
301 S. College Street
Charlotte, NC 28288
Address for Notices: First Union National Bank
150 4th Ave. North, 2nd Floor
Nashville, TN 37219
Attention: Carolyn Hannon
Telecopy: (615) 251-9247
Confirmation: (615) 251-9374
FLEET NATIONAL BANK
-------------------
Domestic Lending Office: Fleet Bank (Boston)
75 State Street
Mail Stop MABOF04A
Boston, MA 02109
Eurodollar Lending Office: Fleet Bank (Boston)
75 State Street
Mail Stop MABOF04A
Boston, MA 02109
Address for Notices: Fleet National Bank
75 State Street
Mail Stop MABOF04A
Boston, MA 02109
Attention: Paula M. St Amand
Telecopy: (617) 346-1637
Confirmation: (617) 346-0610
<PAGE>
THE FUJI BANK LIMITED
---------------------
Domestic Lending Office: The Fuji Bank, Limited
245 Peachtree Center Avenue, NE,
Suite 2100
Atlanta GA 30303-1208
Eurodollar Lending Office: The Fuji Bank, Limited
245 Peachtree Center Avenue, NE,
Suite 2100
Atlanta GA 30303-1208
Address for Notices: The Fuji Bank, Limited
245 Peachtree Center Avenue, NE,
Suite 2100
Atlanta GA 30303-1208
Attention: Connie Fowls
Telecopy: (404) 653-2119
Confirmation: (404) 215-3304
Credit Contact:
The Fuji Bank, Limited
245 Peachtree Center Avenue, NE,
Suite 2100
Atlanta GA 30303-1208
Attention: David Hart
THE INDUSTRIAL BANK OF JAPAN, LIMITED, ATLANTA AGENCY
-----------------------------------------------------
Domestic Lending Office: The Industrial Bank of Japan,
Limited, Atlanta Agency
191 Peachtree Street, N.E.,
Suite 3600
Atlanta, GA 30303
Eurodollar Lending Office: The Industrial Bank of Japan,
Limited, Atlanta Agency
191 Peachtree Street, N.E.,
Suite 3600
Atlanta, GA 30303
Address for Notices: The Industrial Bank of Japan,
Limited, Atlanta Agency
191 Peachtree Street, N.E.,
Suite 3600
Atlanta, GA 30303
Attention: Takahiro Hoshino
Telecopy: (404) 577-6818
Confirmation: (404) 420-3306
<PAGE>
KEYBANK NATIONAL ASSOCIATION
----------------------------
Domestic Lending Office: Keybank National Association
127 Public Square
Cleveland, OH 44114
Eurodollar Lending Office: Keybank National Association
127 Public Square
Cleveland, OH 44114
Address for Notices: Keybank National Association
127 Public Square
Cleveland, OH 44114
Attention: Kathy Koenig
Telecopy: (216) 689-4981
Confirmation: (216) 689-4228
THE MITSUBISHI TRUST AND BANKING CORPORATION
--------------------------------------------
Domestic Lending Office: The Mitsubishi Trust and
Banking Corporation
520 Madison Avenue
25th Floor
New York, NY 10022
Eurodollar Lending Office: The Mitsubishi Trust and
Banking Corporation
520 Madison Avenue
25th Floor
New York, NY 10022
Address for Notices: The Mitsubishi Trust and
Banking Corporation
520 Madison Avenue, 25th floor
New York, NY 10022
Attention: Kathy Han
Telecopy: (212) 755-2349
Confirmation: (212) 891-8262
<PAGE>
THE MITSUI TRUST AND BANKING COMPANY, LIMITED, NEW YORK BRANCH
--------------------------------------------------------------
Domestic Lending Office: The Mitsui Trust & Banking Co.,
Ltd., New York Branch
1251 Avenue of the Americas,
39th floor
New York, NY 10020
Eurodollar Lending Office: The Mitsui Trust & Banking Co.,
Ltd., New York Branch
1251 Avenue of the Americas,
39th floor
New York, NY 10020
Address for Notices: The Mitsui Trust & Banking Co.,
Ltd., New York Branch
1251 Avenue of the Americas,
39th floor
New York, NY 10020
Attention:
Telecopy:
Confirmation:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
-----------------------------------------
Domestic Lending Office: Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, NY 10260
Eurodollar Lending Office: Morgan Guaranty Trust Company
of New York
c/o J.P. Morgan Services Inc.
Loan Operations, 3rd Floor
500 Stanton Christiana Road
Newark, DE 19713
Address for Notices: Multi-Option Unit - Loan Department
c/o J.P. Morgan Services, Inc.
500 Stanton Christiana Road
Newark, DE 19713
Attention: Mark Connor
Telecopy: (302) 634-4218
Confirmation: (302) 634-1852
<PAGE>
NATIONAL CITY BANK OF KENTUCKY
------------------------------
Domestic Lending Office: National City Bank of Kentucky
101 South Fifth Street
Louisville, KY 40202
Eurodollar Lending Office: National City Bank of Kentucky
101 South Fifth Street
Louisville, KY 40202
Address for Notices: National City Bank of Kentucky
101 South Fifth Street
Louisville, KY 40202
Attention: Deroy Scott
Telecopy: (502) 581-4424
Confirmation: (502) 581-7821
National City Bank of Kentucky
101 South Fifth Street
Louisville, KY 40202
Attention: Debbie Wilkerson
Telecopy: (502) 581-4079
Confirmation: (502) 581-6431
NATIONSBANK, N.A.
-----------------
Domestic Lending Office: NationsBank, N.A.
Corporate Credit Services
101 N. Tryon
Charlotte, NC 28255
Eurodollar Lending Office: NationsBank, N.A.
Corporate Credit Services
101 N. Tryon
Charlotte, NC 28255
Address for Notices: NationsBank, N.A.
Corporate Credit Services
101 N. Tryon
Charlotte, NC 28255
Attention: Jacquetta Banks
Telecopy: (704) 386-8694
Confirmation: (704) 388-1111
NationsBank, N.A.
1 NationsBank Plaza, 5th floor
Nashville, TN 37239
Attention: Kevin Wagley
Telecopy: (615) 749-4640
Confirmation: (615) 749-3802
<PAGE>
THE NORINCHUKIN BANK NEW YORK
-----------------------------
Domestic Lending Office: The Norinchukin Bank, New York
245 Park Avenue, 29th floor
New York, NY 10167-0104
Eurodollar Lending Office: The Norinchukin Bank, New York
245 Park Avenue, 29th floor
New York, NY 10167-0104
Address for Notices: The Norinchukin Bank, New York
245 Park Avenue, 29th floor
New York, NY 10167-0104
Attention: Kelly Shi
Telecopy:
Confirmation:
THE NORTHERN TRUST COMPANY
--------------------------
Domestic Lending Office: The Northern Trust Company
50 South La Salle Street
Chicago, IL 60675
Eurodollar Lending Office: The Northern Trust Company
50 South La Salle Street
Chicago, IL 60675
Address for Notices: The Northern Trust Company
50 South La Salle Street, B-11
Chicago, IL 60675
Attention: Linda Honda
Telecopy: (312) 630-1566
Confirmation: (312) 444-3532
PNC BANK, KENTUCKY, INC.
------------------------
Domestic Lending Office: PNC Bank, Kentucky, Inc.
Citizens Plaza
Louisville, KY 40296
Eurodollar Lending Office: PNC Bank, Kentucky, Inc.
Citizens Plaza
Louisville, KY 40296
Address for Notices: PNC Bank
500 W. Jefferson Street
Louisville, KY 40296
Attention: Karen Carter
Telecopy: (502) 581-2302
Confirmation: (502) 581-3248
<PAGE>
THE SAKURA BANK, LTD. NEW YORK BRANCH
-------------------------------------
Domestic Lending Office: The Sakura Bank, Ltd.
New York Branch
277 Park Avenue
New York, NY 10172
Eurodollar Lending Office: The Sakura Bank, Ltd.
New York Branch
277 Park Avenue
New York, NY 10172
Address for Notices: The Sakura Bank, Ltd.
New York Branch
277 Park Avenue, 45th Floor
New York, NY 10172
Attention: Patricia Walsh
Telecopy: (212) 756-6781
Confirmation: (212) 756-6788
THE SUMITOMO BANK, LIMITED
--------------------------
Domestic Lending Office: The Sumitomo Bank Limited,
New York Branch
One World Trade Center
Suite 9651
New York, NY 10048
Eurodollar Lending Office: The Sumitomo Bank Limited,
New York Branch
One World Trade Center
Suite 9651
New York, NY 10048
Address for Notices: The Sumitomo Bank Limited,
New York Branch
One World Trade Center
New York, NY 10048
Attention: Jessica Farfan
Telecopy: (212) 224-5197
Confirmation: (212) 224-4132
<PAGE>
THE SUMITOMO TRUST & BANKING CO., LTD., NEW YORK BRANCH
-------------------------------------------------------
Domestic Lending Office: Sumitomo Trust & Banking (New York)
527 Madison Avenue, 8th Floor
New York, NY 10022
Eurodollar Lending Office: Sumitomo Trust & Banking (New York)
527 Madison Avenue, 8th Floor
New York, NY 10022
Address for Notices: Sumitomo Trust & Banking (New York)
527 Madison Avenue, 8th Floor
New York, NY 10022
Attention: Charlotte Young
Telecopy: (212) 373-5797
Confirmation: (212) 326-0631
SUNTRUST BANK, NASHVILLE, N.A.
-------------------------------
Domestic Lending Office: Suntrust Bank, Nashville, N.A.
201 Fourth Avenue North
Nashville, TN 37244
Eurodollar Lending Office: Suntrust Bank, Nashville, N.A.
201 Fourth Avenue North
Nashville, TN 37244
Address for Notices: Suntrust Bank, Nashville, N.A.
201 Fourth Avenue North
Nashville, TN 37244
Attention: Mark Mattson
Telecopy: (615) 748-5161
Confirmation: (615) 748-4831
THE TOKAI BANK, LIMITED, NEW YORK BRANCH
----------------------------------------
Domestic Lending Office: The Tokai Bank, Ltd.
New York Branch
55 East 52nd Street
New York, NY 10055
Eurodollar Lending Office: The Tokai Bank, Ltd.
New York Branch
55 East 52nd Street
New York, NY 10055
Address for Notices: The Tokai Bank, Ltd.
New York Branch
55 East 52nd Street
New York, NY 10055
Attention: Eva Cordova
Telecopy: (212) 754-2171
Confirmation: (212) 339-1145
<PAGE>
TORONTO DOMINION (TEXAS), INC.
------------------------------
Domestic Lending Office: The Toronto-Dominion Bank,
Houston Agency
909 Fannin Street, Suite 1700
Houston, TX 77010
Eurodollar Lending Office: The Toronto-Dominion Bank,
Houston Agency
909 Fannin Street, Suite 1700
Houston, TX 77010
Address for Notices: The Toronto-Dominion Bank
909 Fannin Street, Suite 1700
Houston, TX 77010
Attention: Lisa Allison
Telecopy: (713) 951-9921
Confirmation: (713) 653-8244
THE TOYO TRUST & BANKING CO., LTD.
----------------------------------
Domestic Lending Office: The Toyo Trust & Banking Co., Ltd.
666 Fifth Avenue, 33rd floor
New York, NY 10103
Eurodollar Lending Office: The Toyo Trust & Banking Co., Ltd.
666 Fifth Avenue, 33rd floor
New York, NY 10103
Address for Notices: The Toyo Trust & Banking Co., Ltd.
666 Fifth Avenue, 33rd floor
New York, NY 10103
Attention: Deborah Wylie
Telecopy: (212) 977-5611
Confirmation: (212) 307-3400
<PAGE>
UNION BANK OF SWITZERLAND, NEW YORK BRANCH
------------------------------------------
Domestic Lending Office: Union Bank of Switzerland, New York
Branch
299 Park Avenue
New York, NY 10171
Eurodollar Lending Office: Union Bank of Switzerland, New York
Branch
299 Park Avenue
New York, NY 10171
Address for Notices: Union Bank of Switzerland, New York
Branch
299 Park Avenue
New York, NY 10171
Attention: Leo L. Baltz
Telecopy: (212) 821-3914
Confirmation: (212) 821-5372
Attention: Stephen A. Cayer
Telecopy: (212) 821-3914
Confirmation: (212) 821-6265
UNION PLANTERS BANK OF MIDDLE TENNESSEE, N.A.
---------------------------------------------
Domestic Lending Office: Union Planters National Bank
401 Union Street, Second Floor
Nashville, TN 37219
Eurodollar Lending Office: Union Planters National Bank
401 Union Street, Second Floor
Nashville, TN 37219
Address for Notices: Union Planters Bank of Middle
Tennessee, N.A.
401 Union Street
Nashville, TN 37219
Attention: Steve Koenig
Telecopy: (615) 726-4274
Confirmation: (615) 726-4257
<PAGE>
WACHOVIA BANK OF GEORGIA, N.A.
------------------------------
Domestic Lending Office: Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, GA 30303
Eurodollar Lending Office: Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, GA 30303
Address for Notices: Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, GA 30303
Attention: Cheryl Hawks
Telecopy: (404) 332-5016
Confirmation: (404) 332-
WELLS FARGO BANK, N.A.
----------------------
Address for Notices: Wells Fargo Bank, N.A.
201 Third Street, MAC 0187-081
San Francisco, CA 94103
Attention: Terrie Melgar
Telecopy: (415) 979-0675
Confirmation: (415) 477-5421
<PAGE>
SCHEDULE V
----------
LITIGATION
Cain, Marilyn, Leonard Womack, Mary Quimby, Patti Passman, Kathie Evans and
Bobbi R. Fitzpatrick,
Plaintiffs
v.
Healthtrust, Inc. - The Hospital Company, Kenneth George, Thomas Schleck and Leo
Contois
Defendant
Case No. 2:96CV149 (Fed. Ct., E.D. of Texas, Marshall Division)
<PAGE>
EXHIBIT 10(d)
FIRST AMENDMENT
FIRST AMENDMENT, dated as of June 17, 1997 (this "First Amendment") to
---------------
the Agreement and Amendment dated as of February 26, 1997, (the "February 1997
-------------
Five-Year Agreement and Amendment") among COLUMBIA/HCA HEALTHCARE CORPORATION, a
- ---------------------------------
Delaware corporation formerly known as Columbia Healthcare Corporation (the
"Company"), the several banks and other financial institutions from time to time
- --------
parties hereto (the "Banks"), BANK OF AMERICA NATIONAL TRUST & SAVINGS
-----
ASSOCIATION, THE BANK OF NEW YORK, DEUTSCHE BANK AG, FLEET NATIONAL BANK, THE
FUJI BANK LIMITED, THE INDUSTRIAL BANK OF JAPAN, LIMITED, ATLANTA AGENCY, MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, NATIONSBANK, N.A., PNC BANK, KENTUCKY, INC.,
TORONTO DOMINION (TEXAS), INC., UNION BANK OF SWITZERLAND, NEW YORK BRANCH AND
WACHOVIA BANK OF GEORGIA, N.A., as Co-Agents (collectively, the "Co-Agents"),
---------
THE SAKURA BANK, LTD. NEW YORK BRANCH, THE SUMITOMO BANK LIMITED, SUNTRUST BANK,
NASHVILLE, N.A., WELLS FARGO BANK, N.A., as Lead Managers (collectively, the
"Lead Managers") and THE CHASE MANHATTAN BANK, a New York banking corporation
- --------------
formerly known as Chemical Bank, as agent for the Banks hereunder (in such
capacity, the "Agent") and as CAF Loan agent (in such capacity, the "CAF Loan
----- --------
Agent").
- -----
W I T N E S S E T H :
--------------------
WHEREAS, for the convenience of the parties to the agreement and
amendment dated as of February 28, 1996 (the "February 1996 Agreement and
---------------------------
Amendment"), among the Company, the several banks and other financial
- ---------
institutions from time to time parties thereto and Chase, as agent for the Banks
hereunder and as CAF Loan Agent, a composite conformed copy (the "Five-Year
---------
Composite Conformed Credit Agreement") of the Credit Agreement, dated as of
- ------------------------------------
February 10, 1994 as incorporated by reference into and amended by the September
1994 Agreement and Amendment, the February 1995 Agreement and Amendment and the
February 1996 Agreement and Amendment was prepared and delivered to such
parties;
WHEREAS, the February 1997 Five-Year Agreement and Amendment adopts
and incorporates by reference all of the terms and provisions of the Five-Year
Composite Conformed Credit Agreement, subject to the amendment thereto provided
for in the February 1997 Five-Year Agreement and Amendment.
WHEREAS, the parties hereto wish to amend certain provisions of the
February 1997 Five-Year Agreement and Amendment on the terms set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, terms defined in
-----------
the February 1997 Five-Year Agreement and Amendment shall be used as so defined.
<PAGE>
2
2. Amendments to the February 1997 Five-Year Agreement and Amendment.
-----------------------------------------------------------------
(a) SECTION 3 of the February 1997 Five-Year Agreement and Amendment
is hereby amended by deleting the defined term "Agreement" in its entirety and
substituting in lieu thereof the following new defined term:
"`Agreement': the Five-Year Composite Conformed Credit Agreement
---------
as adopted and incorporated by reference into, and as amended by, the
February 1997 Five-Year Agreement and Amendment and as further
amended, supplemented or otherwise modified from time to time."
(b) The February 1997 Five-Year Agreement and Amendment is hereby
amended by deleting Section 7 thereof in its entirety and substituting in lieu
thereof the following new Section 7:
"SECTION 7. Litigation. For purposes of this Agreement, subsection
----------
3.6 of the Composite Conformed Credit Agreement as adopted and incorporated
by reference into this Agreement is hereby amended by deleting such
subsection in its entirety and substituting in lieu thereof the following:
`3.6 Litigation. Except as disclosed in the Company's Annual Report
----------
on Form 10-K for its fiscal year ended December 31, 1996 and its Quarterly
Report on Form 10-Q for its fiscal quarter ended March 31, 1997, in each
case as filed with the Securities and Exchange Commission and previously
distributed to the Banks, and except as set forth on Schedule VI hereto,
there is no litigation, at law or in equity, or any proceeding before any
federal, state, provincial or municipal board or other governmental or
administrative agency pending or to the knowledge of the Company threatened
which, after giving effect to any applicable insurance, may involve any
material risk of a material adverse effect on the business or assets or on
the condition, financial or otherwise, of the Company and its Subsidiaries
on a consolidated basis or which seeks to enjoin the consummation of any of
the transactions contemplated by this Agreement or any other Loan Document
and involves any material risk that any such injunction will be issued, and
no judgment, decree, or order of any federal, state, provincial or
municipal court, board or other governmental or administrative agency has
been issued against the Company or any Subsidiary which has, or may
involve, a material risk of a material adverse effect on the business or
assets or on the condition, financial or otherwise, of the Company and its
Subsidiaries on a consolidated basis. The Company does not believe that
the final resolution of the matters disclosed in its Annual Report on Form
10-K for its fiscal year ended December 31, 1996 and its Quarterly Report
on Form 10-Q for its fiscal quarter ended March 31, 1997, in each case as
filed with the Securities and Exchange Commission and previously
distributed to the Banks, and of the matters set forth on Schedule VI
hereto will have a material adverse effect on the business or assets or
condition, financial or otherwise, of the Company and its Subsidiaries on a
consolidated basis.'".
<PAGE>
3
(c) The February 1997 Five-Year Agreement and Amendment is hereby
amended by adding the following new paragraph after Section 8 reading as
follows:
"SECTION 8A. Ratio of Total Debt to Tangible Net Worth. Subsection
-----------------------------------------
5.6 of the Five-Year Composite Conformed Credit Agreement as adopted and
incorporated by reference into this February 1997 Five-Year Agreement and
Amendment is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following:
`5.6 Ratio of Total Debt to Tangible Net Worth. At any time after
-----------------------------------------
March 31, 1997 the Company and its Subsidiaries will not at any such time
have outstanding Consolidated Total Debt in an amount in excess of 300% of
Consolidated Tangible Net Worth.'"
(d) Schedules II and III to the February 1997 Five-Year Agreement and
Amendment are hereby amended by deleting Schedules II and III in their entirety
and substituting in lieu thereof Schedules II and III attached hereto as
Schedule II and III, respectively.
3. Effective Date; Conditions Precedent. This First Amendment will
------------------------------------
become effective on June 17, 1997 (the "Effective Date") subject to the
--------------
compliance by the Company with its agreements herein contained and to the
satisfaction on or before the Effective Date of the following further
conditions:
(a) Loan Documents. The Agent shall have received copies of this
--------------
First Amendment, executed and delivered by a duly authorized officer of the
Company, with a counterpart for each Bank, and executed and delivered by
the Required Lenders.
(b) Company Officers' Certificate. The representations and
-----------------------------
warranties contained in Section 3 of the Five-Year Composite Conformed
Credit Agreement as adopted and incorporated by reference into, and as
amended by, the February 1997 Five-Year Agreement and Amendment shall be
true and correct on the Effective Date with the same force and effect as
though made on and as of such date; on and as of the Effective Date and
after giving effect to this First Amendment, no Default shall have occurred
(except a Default which shall have been waived in writing or which shall
have been cured); and the Agent shall have received a certificate
containing a representation to these effects dated the Effective Date and
signed by a Responsible Officer.
4. Legal Obligation. The Company represents and warrants to each
----------------
Bank that this First Amendment constitutes the legal, valid and binding
obligation of the Company, enforceable against it in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyances,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
<PAGE>
4
5. Continuing Effect. Except as expressly amended hereby, the
-----------------
February 1997 Five-Year Agreement and Amendment shall continue to be and shall
remain in full force and effect in accordance with its terms.
6. Expenses. The Company agrees to pay or reimburse the Agent for
--------
all of its reasonable out-of-pocket costs and expenses incurred in connection
with the development, preparation and execution of, and any amendment,
supplement or modification to, this First Amendment and any other documents
prepared in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Agent.
7. GOVERNING LAW. THIS FIRST AMENDMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8. Counterparts. This First Amendment may be executed by one or
------------
more of the parties to this First Amendment on any number of separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this First
Amendment signed by all the parties shall be lodged with the Company and the
Agent.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
COLUMBIA/HCA HEALTHCARE CORPORATION
By: /s/ David G. Anderson
----------------------
Name: David G. Anderson
Title: Vice President - Finance and
Treasurer
THE CHASE MANHATTAN BANK, as Agent, as CAF
Loan Agent and as a Bank
By: /s/ Dawn Lee Lum
----------------
Name: Dawn Lee Lum
Title: Vice President
<PAGE>
ABN AMRO BANK N.V., as a Bank
By: /s/ Larry Kelley
----------------
Name: Larry Kelley
Title: Group Vice President
By: /s/ Steven Hipsman
------------------
Name: Steven Hipsman
Title: Vice President
ARAB BANK PLC, GRAND CAYMAN BRANCH,
as a Bank
By: /s/ Nofal S. Barbar
-------------------
Name: Nofal S. Barbar
Title: EVP & Regional Manager
BANCA MONTE DEI PASCHI DI SIENA SpA,
as a Bank
By: /s/ G. Natalicchi
-----------------
Name: G. Natalicchi
Title: S.V.P. & General Manager
By: /s/ S.M. Sondak
---------------
Name: S.M. Sondak
Title: F.V.P. & Dep. General Manager
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as a Co-Agent and as a Bank
By: /s/ Anthony L. Trunzo
---------------------
Name: Anthony L. Trunzo
Title:
<PAGE>
THE BANK OF NEW YORK, as a Co-Agent
and as a Bank
By: /s/ Ann Marie Hughes
--------------------
Name: Ann Marie Hughes
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA, as a Bank
By: /s/ W.J. Brown
--------------
Name: W.J. Brown
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY,
as a Bank
By: /s/ Douglas J. Weir
-------------------
Name: Douglas J. Weir
Title: Vice President
BANQUE NATIONALE DE PARIS -
Houston Agency, as a Bank
By: /s/ David P. Camp
-----------------
Name: David P. Camp
Title: Banking Officer
BARNETT BANK, N.A., as a Bank
By: /s/ Bradley M. Harrell
----------------------
Name: Bradley M. Harrell
Title: Senior Vice President
<PAGE>
CITIBANK, N.A., as a Bank
By: /s/ Margaret Au Brown
---------------------
Name: Margaret Au Brown
Title: Managing Director
CORESTATES BANK, N.A., as a Bank
By: /s/ Elizabeth D. Morris
-------------------------
Name: ELizabeth D. Morris
Title: Vice President
CRESTAR BANK, as a Bank
By: /s/ C. Gray Key
---------------
Name: C. Gray Key
Title: Vice President
THE DAI-ICHI KANGYO BANK, LIMITED,
ATLANTA AGENCY, as a Bank
By: /s/ Tatsuji Noguchi
-------------------
Name: Tatsuji Noguchi
Title: Joint General Manager
DEN DANSKE BANK AKTIESELSKAB, as a Bank
CAYMAN ISLANDS BRANCH c/o New York Branch
By: /s/ Mogens Sondergaard
----------------------
Name: Mogens Sondergaard
Title: Vice President
By: /s/ George B. Wendell
---------------------
Name: George B. Wendell
Title: Vice President
<PAGE>
DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN
ISLANDS BRANCH, as a Co-Agent and as
a Bank
By: /s/ Alka Jain Goyal
-------------------
Name: Alka Jain Goyal
Title: Assistant Vice President
By: /s/ Iain Stewart
----------------
Name: Iain Stewart
Title: Vice President
FIRST AMERICAN NATIONAL BANK, as a Bank
By: /s/ Sandy Hamrick
-----------------
Name: Sandy Hamrick
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
as a Bank
By: /s/ Jay G. Sepanski, as Authorized Agent
----------------------------------------
Name: Jay G. Sepanski
Title: Assistant Vice President
FLEET NATIONAL BANK, as a Co-Agent and
as a Bank
By: /s/ Amy E. Fredericks
---------------------
Name: Amy E. Fredericks
Title: Senior Vice President
THE FUJI BANK LIMITED, as a Co-Agent and
as a Bank
By: /s/ Toshihiro Mitsui
--------------------
Name: Toshihiro Mitsui
Title: Vice President and Manager
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
ATLANTA AGENCY, as a Co-Agent and as a Bank
By: /s/ Kazuo Iida
--------------
Name: Kazuo Iida
Title: General Manager
KEYBANK NATIONAL ASSOCIATION, as a Bank
By: /s/ Thomas Purcell
------------------
Name: Thomas Purcell
Title: Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION, as a Bank
By: /s/ Patricia Loret de Mola
--------------------------
Name: Patricia Loret de Mola
Title: Senior Vice President
THE MITSUI TRUST AND BANKING COMPANY,
LIMITED, NEW YORK BRANCH, as a Bank
By: /s/ Margaret Holloway
---------------------
Name: Margaret Holloway
Title: Vice President & Manager
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as a Co-Agent and as a Bank
By: /s/ Penelope J.B. Cox
---------------------
Name: Penelope J.B. Cox
Title: Vice President
<PAGE>
NATIONAL CITY BANK OF KENTUCKY, as a Bank
By: /s/ Deroy Scott
---------------
Name: Deroy Scott
Title: Vice President
NATIONSBANK, N.A. as a Co-Agent and as
a Bank
By: /s/ Kevin Wagley
----------------
Name: Kevin Wagley
Title: Vice President
THE NORINCHUKIN BANK, NEW YORK BRANCH, as
a Bank
By: /s/ Takeshi Akimoto
-------------------
Name: Takeshi Akimoto
Title: General Manager
THE NORTHERN TRUST COMPANY, as a Bank
By: /s/ James F.T. Monhart
----------------------
Name: James F.T. Monhart
Title: Vice President
PNC BANK, KENTUCKY, INC. as a Co-Agent and
as a Bank
By: /s/ Kathryn M. Bohr
-------------------
Name: Kathryn M. Bohr
Title: Vice President
<PAGE>
THE SAKURA BANK, LTD. NEW YORK BRANCH,
as a Lead Manager and as a Bank
By: /s/ Yasumasa Kikuchi
--------------------
Name: Yasumasa Kikuchi
Title: Senior Vice President
THE SUMITOMO BANK, LIMITED, as a
Lead Manager and as a Bank
By: /s/ Masayuki Fukushima
----------------------
Name: Masayuki Fukushima
Title: Joint General Manager
THE SUMITOMO TRUST & BANKING CO., LTD.,
NEW YORK BRANCH, as a Bank
By: /s/ Suraj P. Bhatia
-------------------
Name: Suraj P. Bhatia
Title: Senior Vice President
Manager, Corporate Finance Dept.
SUNTRUST BANK, NASHVILLE, N.A., as a
Lead Manager and as a Bank
By: /s/ Mark D. Mattson
-------------------
Name: Mark D. Mattson
Title: Vice President
THE TOKAI BANK, LIMITED, NEW YORK BRANCH,
as a Bank
By: /s/ Stuart Schulman
-------------------
Name: Stuart Schulman
Title: Deputy General Manager
<PAGE>
TORONTO DOMINION (TEXAS), INC., as a
Co-Agent and as a Bank
By: /s/ Lisa Allison
----------------
Name: Lisa Allison
Title: Vice President
THE TOYO TRUST & BANKING CO., LTD.,
as a Bank
By: /s/ K. Yamauchi
---------------
Name: K. Yamauchi
Title: Vice President
UNION BANK OF SWITZERLAND, NEW YORK BRANCH,
as a Co-Agent and as a Bank
By: /s/ Stephen A. Cayer
--------------------
Name: Stephen A. Cayer
Title: Assistant Vice President
By: /s/ Eduardo Salazar
-------------------
Name: Eduardo Salazar
Title: Vice President
UNION PLANTERS BANK OF MIDDLE
TENNESSEE, N.A.
By: /s/ Steven A. Koenig
--------------------
Name: Steven A. Koenig
Title: Vice President
WACHOVIA BANK OF GEORGIA, N.A., as a
Co-Agent and as a Bank
By: /s/ Charles Dee O'Dell II
-------------------------
Name: Charles Dee O'Dell II
Title: Vice President
<PAGE>
WELLS FARGO BANK, N.A., as a Lead Manager
and as a Bank
By: /s/ David B. Hollingsworth
--------------------------
Name: David B. Hollingsworth
Title: Vice President
By: /s/ Rachel T. Uyama
-------------------
Name: Rachel T. Uyama
Title: Assistant Vice President
YASUDA TRUST AND BANKING, as a Bank
By: /s/ Price Chenault
------------------
Name: Price Chenault
Title: First Vice President
<PAGE>
EXHIBIT 11
COLUMBIA/HCA HEALTHCARE CORPORATION
COMPUTATION OF EARNINGS PER SHARE
FOR THE QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER NINE MONTHS
--------------- ---------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Earnings:
Income from continuing operations............ $ 91 $ 299 $ 931 $ 1,063
Income from discontinued operations, net of
income taxes................................ 6 12 57 28
------- ------- ------- -------
Net income................................. $ 97 $ 311 $ 988 $ 1,091
======= ======= ======= =======
Shares used in the computation (in thousands):
Weighted average shares outstanding.......... 653,559 670,938 662,679 670,892
Dilutive effect of common stock equivalents.. 4,248 6,479 5,457 6,922
------- ------- ------- -------
Shares used in computing earnings per
share..................................... 657,807 677,417 668,136 677,814
======= ======= ======= =======
Earnings per share:
Income from continuing operations............ $ .15 $ .44 $ 1.39 $ 1.57
Income from discontinued operations.......... .01 .02 .09 .04
------- ------- ------- -------
Net income................................. $ .16 $ .46 $ 1.48 $ 1.61
======= ======= ======= =======
FULLY DILUTED EARNINGS PER SHARE:
Earnings:
Income from continuing operations............ $ 91 $ 299 $ 931 $ 1,063
Income from discontinued operations, net of
income taxes................................ 6 12 57 28
------- ------- ------- -------
Net income................................. $ 97 $ 311 $ 988 $ 1,091
======= ======= ======= =======
Shares used in the computation (in thousands):
Weighted average common shares outstanding... 653,559 670,938 662,679 670,892
Dilutive effect of common stock equivalents.. 4,248 6,831 5,733 7,222
------- ------- ------- -------
Shares used in computing earnings per
share..................................... 657,807 677,769 668,412 678,114
======= ======= ======= =======
Earnings per share:
Income from continuing operations............ $ .15 $ .44 $ 1.39 $ 1.57
Income from discontinued operations.......... .01 .02 .09 .04
------- ------- ------- -------
Net income................................. $ .16 $ .46 $ 1.48 $ 1.61
======= ======= ======= =======
</TABLE>
25
<PAGE>
EXHIBIT 12
COLUMBIA/HCA HEALTHCARE CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
QUARTER NINE MONTHS
--------- -------------
1997 1996 1997 1996
---- ---- ------ ------
<S> <C> <C> <C> <C>
EARNINGS:
Income from continuing operations before minority
interests and income taxes............................ $183 $534 $1,678 $1,876
Fixed charges, excluding capitalized interest.......... 159 152 461 468
---- ---- ------ ------
$342 $686 $2,139 $2,344
==== ==== ====== ======
FIXED CHARGES:
Interest charged to expense............................ $125 $119 $361 $371
Interest portion of rental expense and amortization of
deferred loan costs................................... 34 33 100 96
---- ---- ------ ------
Fixed charges, excluding capitalized interest.......... 159 152 461 467
Capitalized interest................................... 3 7 12 21
---- ---- ------ ------
$162 $159 $ 473 $ 488
==== ==== ====== ======
Ratio of earnings to fixed charges..................... 2.12 4.32 4.52 4.80
==== ==== ====== ======
</TABLE>
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 28
<SECURITIES> 0
<RECEIVABLES> 4,458
<ALLOWANCES> 1,569
<INVENTORY> 458
<CURRENT-ASSETS> 4,359
<PP&E> 16,500
<DEPRECIATION> 5,894
<TOTAL-ASSETS> 23,123
<CURRENT-LIABILITIES> 2,643
<BONDS> 8,693
0
0
<COMMON> 7
<OTHER-SE> 8,864
<TOTAL-LIABILITY-AND-EQUITY> 23,123
<SALES> 0
<TOTAL-REVENUES> 14,445
<CGS> 0
<TOTAL-COSTS> 7,634
<OTHER-EXPENSES> 2,928
<LOSS-PROVISION> 976
<INTEREST-EXPENSE> 361
<INCOME-PRETAX> 1,553
<INCOME-TAX> 622
<INCOME-CONTINUING> 931
<DISCONTINUED> 57
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 988
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.48
</TABLE>
