<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NO. 0-27640
RENAL CARE GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 62-1622383
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2100 WEST END AVENUE, SUITE 800, NASHVILLE, TENNESSEE 37203
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 345-5500
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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days).
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
CLASS OUTSTANDING AT NOVEMBER 10, 2000
----- --------------------------------
Common Stock, $.01 par value 46,437,126
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RENAL CARE GROUP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
December 31, 1999 and September 30, 2000 - (unaudited)...................................... 1
Consolidated Income Statements - (unaudited)
For the three months and nine months ended September 30, 1999 and 2000..................... 2
Consolidated Statements of Cash Flows - (unaudited)
For the nine months ended September 30, 1999 and 2000...................................... 3
Notes to the Consolidated Financial Statements - (unaudited)..................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition And
Results of Operations....................................................................... 8
Risk Factors...................................................................................................... 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................................................. 20
Note: Item 3 of Part I, and Items 1, 2, 3, 4, and 5 of Part II are omitted because they are not applicable.
</TABLE>
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RENAL CARE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................................... $ 15,608 $ 33,534
Accounts receivable, net .......................................... 103,230 111,759
Inventories ....................................................... 12,654 11,068
Prepaid expenses and other current assets ......................... 13,927 18,963
Income taxes receivable ........................................... 1,511 --
Deferred income taxes ............................................. 17,531 25,505
---------- ----------
Total current assets ................................................. 164,461 200,829
Property, plant and equipment, net ................................... 123,963 128,917
Goodwill and other intangibles, net .................................. 207,374 200,198
Other assets ......................................................... 5,528 5,745
---------- ----------
Total assets ......................................................... $ 501,326 $ 535,689
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................................. $ 22,451 $ 20,962
Income taxes payable .............................................. -- 1,325
Current portion of long-term debt ................................. 9,659 414
Other current liabilities ......................................... 58,700 68,902
---------- ----------
Total current liabilities ............................................ 90,810 91,603
Long-term debt, net of current portion ............................... 79,690 51,650
Deferred income taxes ................................................ 9,861 14,698
Minority interest .................................................... 8,706 11,656
---------- ----------
Total liabilities .................................................... 189,067 169,607
Stockholders' equity:
Preferred stock, $.01 par value, 10,000 shares
authorized, none issued ........................................ -- --
Common stock, $.01 par value, 90,000 shares authorized,
45,320 and 46,426 shares issued and outstanding at
December 31, 1999 and September 30, 2000, respectively ......... 453 464
Additional paid-in capital ........................................... 204,352 221,567
Retained earnings ................................................. 107,454 144,051
---------- ----------
Total stockholders' equity ........................................... 312,259 366,082
---------- ----------
Total liabilities and stockholders' equity ........................... $ 501,326 $ 535,689
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
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RENAL CARE GROUP, INC.
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1999 2000 1999 2000
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenue ........................................... $ 138,780 $ 156,505 $ 399,321 $ 460,314
Operating costs and expenses:
Patient care costs ................................. 89,611 101,068 258,761 295,922
General and administrative expenses ................ 13,064 13,984 37,673 42,679
Provision for doubtful accounts .................... 3,774 4,259 10,698 12,512
Depreciation and amortization ...................... 7,201 8,154 20,357 23,734
Restructuring charge .............................. -- 9,235 -- 9,235
Merger expenses .................................... -- -- 4,300 3,766
---------- ---------- ---------- ----------
Total operating costs and expenses .................... 113,650 136,700 331,789 387,848
---------- ---------- ---------- ----------
Income from operations ................................ 25,130 19,805 67,532 72,466
Interest expense, net ................................. 1,573 1,126 4,780 3,988
---------- ---------- ---------- ----------
Income before minority interest and income taxes ...... 23,557 18,679 62,752 68,478
Minority interest ..................................... 2,350 2,428 5,594 6,855
---------- ---------- ---------- ----------
Income before income taxes ............................ 21,207 16,251 57,158 61,623
Provision for income taxes ............................ 7,953 6,449 22,556 25,026
---------- ---------- ---------- ----------
Net income ............................................ $ 13,254 $ 9,802 $ 34,602 $ 36,597
========== ========== ========== ==========
Net income per share:
Basic .............................................. $ 0.29 $ 0.21 $ 0.77 $ 0.80
========== ========== ========== ==========
Diluted ............................................ $ 0.28 $ 0.20 $ 0.73 $ 0.77
========== ========== ========== ==========
Weighted average shares outstanding:
Basic .............................................. 45,070 46,470 44,910 45,760
========== ========== ========== ==========
Diluted ............................................ 47,000 48,100 47,100 47,600
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
2
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RENAL CARE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1999 2000
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<S> <C> <C>
OPERATING ACTIVITIES
Net income .......................................................................... $ 34,602 $ 36,597
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................................................. 20,357 23,734
Distributions to minority shareholders ........................................ (4,657) (3,905)
Income applicable to minority interest ........................................ 5,594 6,855
Deferred income taxes ......................................................... (122) (3,137)
Loss from restructuring ....................................................... -- 9,235
Changes in operating assets and liabilities net of effects from acquisitions .. (4,847) (3,592)
---------- ----------
Net cash provided by operating activities .................................. 50,927 65,787
INVESTING ACTIVITIES
Purchases of property and equipment ................................................. (36,088) (23,747)
Cash paid for acquisitions, net of cash acquired .................................... (10,502) (1,189)
Change in other assets .............................................................. 5,595 (2,866)
---------- ----------
Net cash used in investing activities ...................................... (40,995) (27,802)
FINANCING ACTIVITIES
Net repayments under line of credit ................................................. (7,312) (37,285)
Proceeds from exercise of stock options ............................................. 4,496 17,226
---------- ----------
Net cash used in financing activities ...................................... (2,816) (20,059)
---------- ----------
Increase in cash and cash equivalents ............................................... 7,116 17,926
Cash and cash equivalents, at beginning of period ................................... 21,086 15,608
---------- ----------
Cash and cash equivalents, at end of period ......................................... $ 28,202 $ 33,534
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ...................................................................... $ 4,948 $ 4,285
========== ==========
Income taxes .................................................................. $ 22,426 $ 22,190
========== ==========
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Issuance of common stock in acquisition .......................................... $ 2,000 $ --
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
3
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RENAL CARE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
OVERVIEW
Renal Care Group, Inc. ("Renal Care Group" or the "Company") provides
dialysis services to patients with chronic kidney failure, also known as
end-stage renal disease ("ESRD"). As of September 30, 2000, the Company provided
dialysis and ancillary services to approximately 15,900 patients through 194
outpatient dialysis centers in 23 states. In addition to its outpatient dialysis
center operations as of September 30, 2000, the Company provided acute dialysis
services through contractual relationships with 108 hospitals.
Renal Care Group's net revenue has been derived primarily from the
following sources:
- outpatient hemodialysis services;
- ancillary services associated with dialysis, primarily the
administration of erythropoietin (also known as Epogen(R) or
EPO);
- home dialysis services;
- inpatient hemodialysis services provided pursuant to contracts
with acute care hospitals and skilled nursing facilities;
- management contracts with hospital-based and medical
university dialysis programs; and
- laboratory services.
Patients with end-stage renal disease typically receive three dialysis
treatments each week, with reimbursement for services provided primarily by the
Medicare ESRD program based on rates established by the Health Care Financing
Administration ("HCFA"). For the nine months ended September 30, 2000,
approximately 58% of the Company's net revenue was derived from reimbursement
under the Medicare and Medicaid programs. Medicare reimbursement is subject to
rate and other legislative changes by Congress and periodic changes in
regulations, including changes that may reduce payments under the ESRD program.
Effective January 2000, Congress increased the Medicare composite rate by 1.2%.
An additional increase of 1.2% was approved by Congress in 1999 and is scheduled
to take effect in January 2001.
The Medicare composite rate applies to a designated group of
dialysis services, including the dialysis treatment, supplies used for such
treatment, certain laboratory tests and medications, and most of the home
dialysis services provided by Renal Care Group. Certain other services,
laboratory tests, and drugs are eligible for separate reimbursement under
Medicare and are not
4
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part of the composite rate, including specific drugs such as EPO and some
physician-ordered tests provided to dialysis patients.
For patients with private health insurance, dialysis is reimbursed at
rates higher than Medicare during the first 30 months of treatment, and after
that time Medicare becomes the primary payor. Prior to August 5, 1997, the
health insurance coordination period during which private insurance was required
to pay for dialysis was the first 18 months of treatment, and after that period
Medicare became the primary payor. Reimbursement for dialysis services provided
pursuant to a hospital contract is negotiated with the individual hospital and
generally is higher on a per treatment equivalent basis than the Medicare
composite rate. Because dialysis is a life-sustaining therapy used to treat a
chronic disease, utilization is predictable and is not subject to seasonal
fluctuations.
Renal Care Group derives a significant portion of its net revenue and
net income from the administration of EPO. EPO is manufactured by a single
company. In February 2000, this manufacturer announced a 3.9% increase in its
price for EPO. Renal Care Group estimates that this price increase will reduce
its earnings per share by up to $0.05 for the year ending December 31, 2000. The
Company does not know the precise effect of the increase, since Renal Care
Group's contract with the manufacturer may allow it to mitigate the price
increase to some extent.
INTERIM FINANCIAL STATEMENTS
In the opinion of management, the information contained in this
quarterly report on Form 10-Q reflects all adjustments necessary to make the
results of operations for the interim periods a fair representation of such
operations. All such adjustments are of a normal recurring nature. Operating
results for interim periods are not necessarily indicative of results that may
be expected for the year as a whole. The Company suggests that persons read
these financial statements in conjunction with the consolidated financial
statements and the related notes thereto included in the Company's Form 10-K, as
filed with the SEC on March 30, 2000, and the supplemental consolidated
financial statements and the related notes thereto included in the Company's
Form 8-K, as filed with the Securities and Exchange Commission on October 10,
2000.
NOTE 2 - SIGNIFICANT EVENTS (in thousands, except per share data)
RDM MERGER
In April 2000, RCG completed a merger with Renal Disease Management by
Physicians, Inc. ("RDM"), an operator of six dialysis facilities located in
Northeast Ohio and Western Pennsylvania. The facilities also provide acute,
in-patient dialysis treatment services to six area hospitals. Renal Care Group
issued approximately 556,000 shares of common stock in the merger. The RDM
merger was accounted for as a pooling-of-interests, and as such, the Company's
consolidated financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations included herein give retroactive
effect to the RDM merger for all periods presented. The results of operations
for the separate companies and the combined results presented in the
consolidated financial statements for the prior periods are as follows:
5
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<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS ENDED
ENDED SEPTEMBER 30, SEPTEMBER 30,
1999 1999
------------------- -----------------
<S> <C> <C>
Net revenue:
RCG $ 133,484 $ 382,841
RDM 5,296 16,480
---------- ----------
$ 138,780 $ 399,321
========== ==========
Net income (loss):
RCG $ 13,271 $ 34,274
RDM (17) 328
---------- ----------
$ 13,254 $ 34,602
========== ==========
</TABLE>
RESTRUCTURING CHARGE
For the quarter ended September 30, 2000, the Company recorded a
one-time restructuring charge of $9,235 as a result of plans to exit its wound
care business. The charge consisted of early contract termination costs of
$1,577, goodwill and property and equipment impairment charges of $5,973 and
severance and other administrative charges of $1,685.
NOTE 3 - EARNINGS PER SHARE (in thousands, except per share data)
The following table sets forth the computation of basic and diluted
income per share in accordance with SFAS 128.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 2000 1999 2000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic and diluted net income per share $ 13,254 $ 9,802 $ 34,602 $ 36,597
Denominator:
Denominator for basic net income per share -
weighted-average shares 45,070 46,470 44,910 45,760
Effect of dilutive securities:
Stock Options 1,511 1,232 1,702 1,438
Warrants 419 398 488 402
--------- --------- --------- ---------
Denominator for diluted net income per share -
adjusted weighted-average shares and assumed
conversions 47,000 48,100 47,100 47,600
========= ========= ========= =========
Net income per share:
Basic $ 0.29 $ 0.21 $ 0.77 $ 0.80
========= ========= ========= =========
Diluted $ 0.28 $ 0.20 $ 0.73 $ 0.77
========= ========= ========= =========
</TABLE>
6
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NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS
Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation - an Interpretation of APB 25" was issued by the Financial
Accounting Standards Board in March 2000. This Interpretation was effective July
1, 2000, and covers specific events that occur after either December 15, 1998 or
January 12, 2000. The Interpretation addresses and further clarifies certain
aspects of APB 25 such as: the definition of an employee, criteria for
determining whether a plan qualifies as noncompensatory, the accounting
consequences of various modifications to the terms of previously granted stock
options or awards, and the accounting for an exchange of stock compensation
awards in a business combination. After assessing this Interpretation, Renal
Care Group concluded there was not a material impact on its Consolidated
Financial Statements.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
As described in Note 2 to the Consolidated Financial Statements, Renal
Care Group merged with Renal Disease Management by Physicians, Inc. (RDM) in
April 2000 in a transaction accounted for as a pooling-of-interests.
Accordingly, the Consolidated Financial Statements and Management's Discussion
and Analysis of Financial Condition and Results of Operations have been restated
to include RDM for all periods.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
Net revenue. Net revenue increased from $138.8 million for the three
months ended September 30, 1999 to $156.5 million for the three months ended
September 30, 2000, an increase of $17.7 million, or 12.8%. This increase
resulted primarily from a 6.9% increase in the number of treatments from 564,966
performed in the 1999 period to 603,770 performed in the 2000 period. This
growth in treatments is the result of the acquisition and development of various
dialysis facilities and a 6.7% increase in same-center treatments for the 2000
period over the 1999 period. In addition, average net revenue per dialysis
treatment increased 5.9% from $239 in the 1999 period to $253 in the 2000
period. The increase in revenue per treatment was due to the 1.2% increase in
the Medicare composite rate, increases in the Company's prices to private
payors, an improvement in the Company's payor mix, increases in the utilization
of EPO and other drugs, and increases in acute hospital services.
Patient Care Costs. Patient care costs consist of costs directly
related to the care of patients, including direct labor, drugs and other medical
supplies, and operational costs of facilities. Patient care costs increased from
$89.6 million for the three months ended September 30, 1999 to $101.1 million
for the three months ended September 30, 2000, an increase of $11.5 million, or
12.8%. This increase was principally due to the increase in the number of
treatments performed during the period, which was reflected in corresponding
increases in the use of labor, drugs and supplies, as well as to the increase in
the price of EPO and wage inflation. Patient care costs as a percentage of net
revenue remained consistent at 64.6% for the 1999 and 2000 periods. Patient care
costs per treatment increased 5.0% from $159 in the 1999 period to $167 in the
2000 period. This increase was due to greater EPO and other drug utilization
costs, the cost of providing in-house laboratory services and normal health care
inflation.
General and Administrative Expenses. General and administrative
expenses include corporate office costs and facility costs not directly related
to the care of patients, including facility administration, accounting, billing
and information systems. General and administrative expenses increased from
$13.1 million for the three months ended September 30, 1999 to $14.0 million for
the three months ended September 30, 2000, an increase of $900,000, or 6.9%.
General and administrative expenses as a percentage of revenue decreased from
9.4% in the 1999 period to 8.9% in the 2000 period.
Provision for Doubtful Accounts. The provision for doubtful accounts is
determined as a function of payor mix, billing practices, and other factors.
Renal Care Group reserves for doubtful accounts in the period in which the
revenue is recognized based on management's estimate of the net collectibility
of the accounts receivable. Management estimates the net collectibility of
accounts receivable based upon a variety of factors. These factors include, but
are not limited to, analyzing revenues generated from payor sources, performing
subsequent collection testing and regularly reviewing detailed accounts
receivable
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agings. The provision for doubtful accounts increased from $3.8 million for the
three months ended September 30, 1999 to $4.3 million for the three months ended
September 30, 2000. The provision for doubtful accounts as a percentage of net
revenue remained consistent at 2.7% in the 1999 and 2000 periods.
Depreciation and Amortization. Depreciation and amortization increased
from $7.2 million for the three months ended September 30, 1999 to $8.2 million
for the three months ended September 30, 2000, an increase of $1.0 million, or
13.9%. This increase was due to the start-up of dialysis facilities, the normal
replacement costs of dialysis facilities and equipment, the purchase of
information systems, and the amortization of the goodwill and other intangible
assets associated with acquisitions accounted for as purchases.
Restructuring Charge. The Company recognized a restructuring charge of
$9.2 million for the three months ended September 30, 2000. This charge results
from the Company's decision to cease providing wound care services on or before
June 30, 2001, and to focus on its core dialysis business. The restructuring
charge represents principally impairment charges for goodwill and property and
equipment associated with the wound care business along with anticipated
severance costs, contract termination costs and other associated charges.
Income from Operations. Income from operations decreased from $25.1
million for the three months ended September 30, 1999 to $19.8 million for the
three months ended September 30, 2000, a decrease of $5.3 million, or 21.1%
primarily as a result of the wound care write-off. Income from operations as a
percentage of net revenue decreased from 18.1% in the 1999 period to 12.7% in
the 2000 period as a result of the factors discussed above.
Interest Expense. Interest expense decreased from $1.6 million for the
three months ended September 30, 1999 to $1.1 million for the three months ended
September 30, 2000, a decrease of $500,000 or 31.3%. The decrease was the result
of lower average borrowings partially offset by slightly higher effective
borrowing rates during the 2000 period.
Minority Interest. Minority interest represents the proportionate
equity interest of other partners in the Company's consolidated entities that
are not wholly-owned, whose financial results are included in the Company's
consolidated results. Minority interest as a percentage of net revenue decreased
to 1.6% in 2000 from 1.7% in 1999.
Income Tax Expense. Income tax expense decreased from $8.0 million for
the three months ended September 30, 1999 to $6.4 million for the three months
ended September 30, 2000, a decrease of $1.6 million or 20.0%. These decreases
are the result of pre-tax earnings decreasing to $16.3 million representing a
23.4% decrease over the 1999 period as a result of the items discussed above.
Net Income. Net income decreased from $13.3 million for the three
months ended September 30, 1999 to $9.8 million for the three months ended
September 30, 2000, a decrease of $3.5 million or 26.3%. The decrease is a
result of the items discussed above.
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RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
Net revenue. Net revenue increased from $399.3 million for the nine
months ended September 30, 1999 to $460.3 million for the nine months ended
September 30, 2000, an increase of $61.0 million, or 15.3%. This increase
resulted primarily from a 9.4% increase in the number of treatments from
1,637,781 performed in the 1999 period to 1,792,319 performed in the 2000
period. This growth in treatments is the result of the acquisition and
development of various dialysis facilities and a 7.5% increase in same-center
treatments for the 2000 period over the 1999 period. In addition, average net
revenue per dialysis treatment increased 5.5% from $236 in the 1999 period to
$249 in the 2000 period. The increase in revenue per treatment was due to an
improvement in the Company's payor mix, increases in the utilization of EPO and
other drugs, and increases in acute hospital services.
Patient Care Costs. Patient care costs increased from $258.8 million
for the nine months ended September 30, 1999 to $295.9 million for the nine
months ended September 30, 2000, an increase of $37.1 million, or 14.3%. This
increase was principally due to the increase in the number of treatments
performed during the period, which was reflected in corresponding increases in
the use of labor, drugs and supplies, as well as to the increase in the price of
EPO and wage inflation. Patient care costs as a percentage of net revenue
decreased from 64.8% in the 1999 period to 64.3% in the 2000 period. Patient
care costs per treatment increased 4.4% from $158 in the 1999 period to $165 in
the 2000 period. This increase is due to greater EPO and other drug utilization
costs, the cost of providing in-house laboratory services and normal healthcare
inflation.
General and Administrative Expenses. General and administrative
expenses increased from $37.7 million for the nine months ended September 30,
1999 to $42.7 million for the nine months ended September 30, 2000, an increase
of $5.0 million, or 13.3%. General and administrative expenses as a percentage
of net revenue decreased from 9.4% for the 1999 period to 9.3% for the 2000
period.
Provision for Doubtful Accounts. The provision for doubtful accounts
increased from $10.7 million for the nine months ended September 30, 1999 to
$12.5 million for the nine months ended September 30, 2000, an increase of $1.8
million, or 16.8%. The provision for doubtful accounts as a percentage of net
revenue remained consistent at 2.7% for the 1999 and 2000 periods.
Depreciation and Amortization. Depreciation and amortization increased
from $20.4 million for the nine months ended September 30, 1999 to $23.7 million
for the nine months ended September 30, 2000, an increase of $3.3 million, or
16.2%. This net increase was due to the start-up of dialysis facilities, the
normal replacement costs of dialysis facilities and equipment, the purchase of
information systems, and the amortization of the goodwill and other intangible
assets associated with the acquisitions accounted for as purchases.
Restructuring Charge. The Company recognized a restructuring charge of
$9.2 million for the nine months ended September 30, 2000. This charge results
from the Company's decision to cease providing wound care services on or before
June 30, 2001, and to focus on its core dialysis business. The restructuring
charge represents principally impairment charges for goodwill and property and
equipment associated with the wound care business along with anticipated
severance costs, contract termination costs and other associated charges.
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<PAGE> 13
Merger Expenses. Merger expenses of $3.8 million for the nine months
ended September 30, 2000 represent legal, accounting, employee severance costs
and related benefits and other costs associated with the assimilation and
transition of the merger with RDM.
Income from Operations. Income from operations increased from $67.5
million for the nine months ended September 30, 1999 to $72.5 million for the
nine months ended September 30, 2000, an increase of $5.0 million, or 7.4%.
Income from operations as a percentage of net revenue decreased from 16.9% in
the 1999 period to 15.7% in the 2000 period principally as a result of the
restructuring charge, partially offset by the other factors discussed above.
Interest Expense, Net. Interest expense decreased from $4.8 million for
the nine months ended September 30, 1999 to $4.0 million for the nine months
ended September 30, 2000. This decrease was the result of both lower average
borrowings and lower effective interest rates during the 2000 period. The lower
effective interest rates resulted from replacing debt assumed in the RDM
transaction with proceeds from Renal Care Group's credit facility.
Minority Interest. Minority interest represents the proportionate
equity interest of other partners in the Company's consolidated entities that
are not wholly-owned, whose financial results are included in the Company's
consolidated results. Minority interest as a percentage of net revenue increased
to 1.5% in 2000 from 1.4% in 1999. This increase was the result of continued
operational improvements in Renal Care Group's joint ventures, primarily those
in Ohio and Oregon.
Income Tax Expense. Income tax expense increased from $22.6 million for
the nine months ended September 30, 1999 to $25.0 million for the nine months
ended September 30, 2000, an increase of $2.4 million or 10.6%. The increase is
a result of pre-tax earnings increasing $4.5 million representing an increase of
7.9% over the 1999 period.
Net Income. Net income increased from $34.6 million for the nine months
ended September 30, 1999 to $36.6 million for the nine months ended September
30, 2000, an increase of $2.0 million or 5.8%. The increase is a result of the
items discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Renal Care Group requires capital primarily to acquire and develop
dialysis facilities, to purchase property and equipment for existing centers,
and to finance working capital needs. At September 30, 2000, the Company's
working capital was $109.2 million with a current ratio of 2.2 to 1.0. Cash and
cash equivalents at September 30, 2000, were $33.5 million.
Net cash provided by operating activities was $65.8 million for the
nine months ended September 30, 2000. Cash provided by operating activities
consists of net income before depreciation and amortization expense, adjusted
for changes in components of working capital, primarily accounts receivable, as
well as the restructuring charge. Net cash used in investing activities was
$27.8 million for the nine months ended September 30, 2000. Cash used in
investing activities consisted primarily of $1.2 million of cash paid for
acquisitions and $23.7 million of purchases of property and equipment. Cash used
in financing activities was $20.1 for the nine months ended September 30, 2000.
Cash used in financing activities primarily reflects $37.3 million in repayments
under Renal Care Group's line of credit facility partially offset by $17.2
million in proceeds from stock option exercises.
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<PAGE> 14
In September 2000, the Company executed a Third Amendment to its First
Amended and Restated Loan Agreement with a group of banks. This agreement
revised certain financial covenant definitions within the original agreement.
In 1999, the Company executed a Second Amendment to its First Amended
and Restated Loan Agreement with a group of banks. This agreement provided a
credit facility of $185.0 million which, in accordance with the agreement, was
reduced to $157.3 million on August 4, 2000. Borrowings under the credit
facility may be used for acquisitions, capital expenditures, working capital and
general corporate purposes. No more than $25.0 million of the credit facility
may be used for working capital purposes. Within the working capital sublimit,
the Company may borrow up to $5.0 million in swing line loans.
Renal Care Group has negotiated loan pricing based on a LIBO rate
margin pursuant to leverage tiers. These leverage tiers extend from 0.75 to 2.25
times and are priced at a LIBO rate margin of 0.60% to 1.35%. Commitment fees
are also priced pursuant to leverage ratio tiers. Commitment fees range from
0.20% to 0.30% pursuant to leverage ratios ranging between 0.75 and 2.25. Under
the loan agreement, commitments range in amounts and dates from the closing date
through August 2003. The $157.3 million is available through August 2001. Lender
commitments are then reduced to $129.5 million through August 2002 and $101.8
million through August 2003. All loans under the loan agreement are due and
payable on August 4, 2003. As of September 30, 2000, there was $49.8 million
outstanding under this agreement. These variable rate debt instruments of the
Company carry a degree of interest rate risk. Specifically, variable rate debt
may result in higher costs to the Company if interest rates rise.
Each of Renal Care Group's subsidiaries has guaranteed all of Renal
Care Group's obligations under the loan agreement. Further, Renal Care Group's
obligations under the loan agreement, and the obligations of each of its
subsidiaries under its guaranty, are secured by a pledge of the equity interests
held by Renal Care Group in each of the subsidiaries. Financial covenants are
customary based on the amount and duration of this commitment.
A significant component of Renal Care Group's growth strategy is the
acquisition and development of dialysis facilities. There can be no assurance
that Renal Care Group will be able to identify suitable acquisition candidates
or to close acquisition transactions with them on acceptable terms. Management
of Renal Care Group believes that existing cash and funds from operations,
together with funds available under the line of credit, will be sufficient to
meet Renal Care Group's acquisition, expansion, capital expenditure and working
capital needs for the foreseeable future. However, in order to finance certain
large strategic acquisition opportunities, Renal Care Group may from time to
time incur additional short and long-term bank indebtedness and may issue equity
or debt securities. The availability and terms of any future financing will
depend on market and other conditions. There can be no assurance that any
additional financing, if required, will be available on terms acceptable to
Renal Care Group.
Capital expenditures of approximately $30.0 million, primarily for
equipment replacement, expansion of existing dialysis facilities and
construction of de novo facilities are planned in 2000. The Company has made
capital expenditures of $23.7 million through September 30, 2000. The Company
expects that remaining capital expenditures in 2000 will be funded with cash
provided by operating activities and the Company's existing credit facility.
Management believes that capital resources available to Renal Care Group will be
sufficient to meet the needs of its business, both on a short- and long-term
basis.
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<PAGE> 15
IMPACT OF INFLATION
A substantial portion of Renal Care Group's net revenue is subject to
reimbursement rates that are regulated by the federal government and do not
automatically adjust for inflation. Renal Care Group is unable to increase the
amount it receives for services provided by its dialysis business that are
reimbursed under the Medicare composite rate. In addition, in response to rising
costs, managed care organizations may seek to reduce amounts paid for dialysis
services, and businesses and patients may shift from traditional private
insurance to managed care arrangements. Increased operating costs due to
inflation, such as labor and supply costs, without corresponding increases in
reimbursement rates, may adversely affect Renal Care Group's earnings and
business.
RISK FACTORS
You should carefully consider the risks described below before
investing in Renal Care Group. The risks and uncertainties described below ARE
NOT the only ones facing Renal Care Group. Other risks and uncertainties that we
have not predicted or assessed may also adversely affect our company.
If any of the following risks occur, our earnings, financial condition
or business could be materially harmed, and the trading price of our common
stock could decline, resulting in the loss of all or part of your investment.
IF WE FAIL TO INTEGRATE ACQUIRED COMPANIES, WE WILL BE LESS PROFITABLE
Renal Care Group has grown significantly by acquisitions of other
dialysis providers since its formation in February 1996. We have completed some
of our acquisitions as recently as April 2000, and we intend to acquire more
dialysis businesses in the future. After an acquisition, we face the challenge
of integrating the acquired company's management and other personnel, clinical
operations, and financial and operating systems with ours, often without the
benefit of continued services from key personnel of the acquired company. We may
be unable to integrate the businesses we acquire successfully or to achieve
anticipated benefits from an acquisition in a timely manner, which could lead to
substantial costs and delays or other operational, technical or financial
problems, including diverting management's attention from our existing business.
Any of these results could damage our profitability and our prospects for future
growth.
IF MEDICARE OR MEDICAID CHANGES ITS PROGRAMS FOR DIALYSIS, OUR REVENUE AND
EARNINGS COULD DECREASE
If the government changes the Medicare, Medicaid or similar government
programs or the rates paid by those programs for our services, then our revenue
and earnings may decline. We estimate that approximately 59% of our net revenue
for 1998, 57% of our net revenue for 1999 and 53% of our net revenue for the
nine months ended September 30, 2000 consisted of reimbursements from Medicare,
including the administration of EPO to treat anemia. EPO is the commonly used
name for the drug erythropoietin, which is sold under the brand name Epogen(R).
We also estimate that approximately 5% of our net revenue for 1998, 4% of our
net revenue for 1999 and 5% of our net revenue for the nine months ended
September 30, 2000 consisted of reimbursements from Medicaid or comparable state
programs. Any of the following actions in connection with government programs
could cause our revenue and earnings to decline:
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<PAGE> 16
- a reduction of the amount paid to us under government
programs;
- an increase in the costs associated with performing our
services that are subject to inflation, such as labor and
supply costs, without a corresponding increase in
reimbursement rates;
- the inclusion of some or all ancillary services, for which we
are now reimbursed separately, in the flat composite rate for
a standard dialysis treatment; or
- changes in laws, or the interpretations of laws, which could
cause us to modify our operations.
Specifically, Congress and the Health Care Financing Administration, or
HCFA, have proposed reviewing and potentially recalculating the average
wholesale prices of certain drugs, including some drugs that we bill for outside
of the flat composite rate. HCFA has indicated that it believes the average
wholesale prices on which it currently bases reimbursement are too high and that
Medicare reimbursement for these drugs is, therefore, too high. Because we are
unable to predict accurately whether reimbursement will be changed and, if so,
by how much, we are unable to quantify what the net effect of changes in
reimbursement for these drugs would have on our revenue and earnings.
IF REIMBURSEMENT FOR EPO DECREASES, THEN WE COULD BE LESS PROFITABLE
If government or private payors decrease reimbursement rates for EPO,
for which we are currently reimbursed separately outside of the flat composite
rate, our revenue and earnings may decline. EPO is a bio-engineered hormone that
is used to treat anemia. Our revenues from EPO were approximately 23% of net
revenue for 1998, 26% of net revenue for 1999 and 27% for the nine months ended
September 30, 2000. Most of our payments for EPO come from government programs.
President Clinton has included a proposal to decrease the reimbursement for EPO
by $1 per thousand units in his fiscal year 2001 budget, which would represent a
10% reduction from the current government reimbursement rate. For the nine
months ended September 30, 2000, government reimbursement represented
approximately 58% of the total revenue we derived from EPO. Because we are
unable to predict accurately the possible effect that the proposed reduction
would have on the cost of EPO or private reimbursement rates, we cannot quantify
what the net effect would be on our revenue and earnings.
IF AMGEN RAISES THE PRICE FOR EPO OR IF EPO BECOMES IN SHORT SUPPLY, THEN WE
COULD BE LESS PROFITABLE
EPO is produced by a single manufacturer, Amgen Inc., and there are no
substitute products available in the United States. Amgen announced a 3.9%
increase in the price of EPO in February 2000, its first price increase since
before Renal Care Group was formed in February 1996. If Amgen imposes additional
price increases or if Amgen or other factors interrupt the supply of EPO, then
our revenue and earnings may decline.
IF PAYMENTS BY PRIVATE INSURERS, HOSPITALS OR MANAGED CARE ORGANIZATIONS
DECREASE, THEN OUR REVENUE AND EARNINGS COULD DECREASE
If private insurers, hospitals or managed care organizations reduce
their rates or we experience a significant shift in our revenue mix toward
additional Medicare or Medicaid reimbursement, then our revenue and earnings may
decline. We estimate that approximately 36% of our net revenue for 1998, 39% of
our net revenue for 1999 and 42% of our net revenue for the nine months ended
September 30, 2000, were derived from sources other than Medicare and Medicaid.
In general, payments we receive from
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<PAGE> 17
private insurers and hospitals for our services are at rates significantly
higher than the Medicare or Medicaid rates. Additionally, payments we receive
from managed care organizations are at rates higher than Medicare and Medicaid
rates but lower than those paid by private insurers. As a result, any of the
following events could have a material adverse effect on our revenue and
earnings:
- an increase in dialysis procedures reimbursed by private
insurers, hospitals or managed care companies could cause
these payor organizations to reduce the rates they pay us;
- a portion of our business that is currently reimbursed by
private insurers or hospitals may become reimbursed by managed
care organizations, which currently have lower rates for our
services; or
- the scope of coverage by Medicare or Medicaid under the flat
composite rate could expand and, as a result, reduce the
extent of our services being reimbursed at the higher
private-insurance rates.
IF WE ARE UNABLE TO MAKE ACQUISITIONS IN THE FUTURE, OUR RATE OF GROWTH WILL
SLOW
Much of our historical growth has come from acquisitions. Although we
intend to continue to pursue growth through the acquisition and development of
dialysis centers, we may be unable to continue to identify and complete suitable
acquisitions at prices we are willing to pay or obtain the necessary financing.
Further, due to the increased size of our Company since its formation, the
amount that acquired businesses contribute to our revenue and profits will
likely be smaller on a percentage basis. We also compete with other companies to
identify and complete suitable acquisitions. We expect this competition to
intensify and make it more difficult to acquire suitable companies on favorable
terms. Further, the businesses we acquire may not perform well enough to justify
our investment. If we are unable to make additional acquisitions on suitable
terms, we may not meet our growth expectations.
IF WE COMPLETE FUTURE ACQUISITIONS, WE MAY DILUTE EXISTING STOCKHOLDERS BY
ISSUING MORE OF OUR COMMON STOCK OR WE MAY INCUR ADDITIONAL EXPENSES RELATED TO
DEBT AND GOODWILL, WHICH COULD REDUCE OUR EARNINGS
We may issue equity securities in future acquisitions that could be
dilutive to our shareholders. We also may incur additional debt and amortization
expense related to goodwill and other intangible assets in future acquisitions.
We have used the pooling-of-interests accounting method for many of our
acquisitions, and as a result we have not recorded goodwill (the excess of
acquisition cost over identifiable tangible assets) in these acquisitions. In
those instances where we have used the purchase accounting method in
acquisitions, we have recorded goodwill and other intangible assets, which are
then amortized yearly against our earnings at a blended average life of 35
years. We had approximately $200.2 million of goodwill and other intangibles,
net, as of September 30, 2000. The SEC and accounting policy makers have
announced that they are considering policy and rule changes that would likely
eliminate the pooling-of-interests method, which would result in more goodwill
and associated amortization expense for future and, possibly, prior
acquisitions. Further, the SEC and accounting policymakers have announced that
they may reduce the allowable life over which companies may amortize goodwill,
which would result in increased amortization expense in each year. Interest
expense on additional debt incurred to fund acquisitions and amortization
expense from acquisitions may significantly reduce our profitability.
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<PAGE> 18
IF ACQUIRED BUSINESSES HAVE UNKNOWN LIABILITIES, THEN WE COULD BE EXPOSED TO
LIABILITIES THAT COULD HARM OUR BUSINESS AND PROFITABILITY
Businesses we acquire may have unknown or contingent liabilities,
including liabilities for failure to comply with health care laws. Although we
generally attempt to identify practices that may give rise to unknown or
contingent liabilities and conform them to our standards after the acquisition,
private plaintiffs or governmental agencies may still assert claims. Even though
we generally seek to obtain indemnification from prospective sellers, unknown
and contingent liabilities may not be covered by indemnification or may exceed
contractual limits or the financial capacity of the indemnifying party.
IF OUR REFERRING PHYSICIANS WERE TO CEASE REFERRING TO OUR CENTERS OR WERE
PROHIBITED FROM REFERRING FOR REGULATORY REASONS, OUR REVENUE AND EARNINGS WOULD
DECLINE
Our dialysis centers depend on referrals from local nephrologists.
Typically, one or a few physicians account for all or a significant portion of
the patient base at each of our dialysis centers, and the loss of one or more
referring physicians could have a material adverse effect on the operations of
that center. The loss of a significant number of referring physicians could
cause our revenue and earnings to decline. In many instances, the primary
referral sources for our centers are physicians who are also stockholders and
serve as medical directors of our centers. If stock ownership or the medical
director relationship were deemed to violate applicable federal or state law,
including fraud and abuse laws and laws prohibiting self-referrals, the
physicians owning our stock or acting as medical directors may be forced to stop
referring patients to our centers. Further, we may not be able to renew or
renegotiate our medical director agreements successfully, which could result in
a loss of patients since dialysis patients are typically treated at a center
where their physician serves as a medical director.
IF OUR BUSINESS IS ALLEGED OR FOUND TO VIOLATE HEATH CARE OR OTHER APPLICABLE
LAWS, OUR REVENUE AND EARNINGS COULD DECREASE
We are subject to extensive federal, state and local regulation
regarding the following:
- fraud and abuse prohibitions under health care reimbursement
laws;
- prohibitions and limitations on patient referrals;
- false claims prohibitions under health care reimbursement
laws;
- facility licensure;
- health and safety requirements;
- environmental compliance; and
- medical and toxic waste disposal.
Much of this regulation, particularly in the areas of fraud and abuse
and patient referral, is complex and open to differing interpretations. Due to
the broad application of the statutory provisions and the absence in many
instances of regulations or court decisions addressing the specific arrangements
by which we conduct our business, including our arrangements with medical
directors, physician stockholders and physician joint venture partners,
governmental agencies could challenge some of our practices under these laws. If
any of our operations are found to violate these laws, we may be subject to
severe sanctions or be required to alter or discontinue the challenged conduct
or both. If we are required to alter our practices, we may not be able to do so
successfully. If any of these events occur, our revenue and earnings could
decline.
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CHANGES IN THE HEALTH CARE DELIVERY, FINANCING OR REIMBURSEMENT SYSTEMS COULD
ADVERSELY AFFECT OUR BUSINESS
The health care industry in the United States is in a period of rapid
change and uncertainty. Health care organizations, public or private, may
dramatically change the way they operate and pay for services. Our business is
designed to function within the current health care financing and reimbursement
system. During the past several years, the health care industry has been subject
to increasing levels of government regulation of, among other things,
reimbursement rates and capital expenditures. In addition, proposals to reform
the health care system have been considered by Congress. These proposals, if
enacted, may further increase government regulation of or other involvement in
health care, lower reimbursement rates and otherwise change the operating
environment for health care companies. We cannot predict the likelihood of those
events or what impact they may have on our business.
THE DIALYSIS BUSINESS IS HIGHLY COMPETITIVE, AND IF WE DO NOT COMPETE
EFFECTIVELY IN OUR MARKETS, WE COULD LOSE MARKET SHARE AND OUR RATE OF GROWTH
COULD SLOW
The dialysis industry is fragmented and rapidly consolidating. There
are several large dialysis companies that compete for the acquisition of
existing dialysis centers and the development of relationships with referring
physicians. Several of our competitors are part of larger companies that also
manufacture dialysis equipment, which allows them to lower equipment costs.
Several of our competitors, including these equipment manufacturers, are much
larger than we are and have substantially greater financial resources and more
established operations and infrastructure than us. We also experience
competition from referring physicians who open their own dialysis centers. There
can be no assurance that we will be able to compete effectively with any of our
competitors.
IF WE LOSE ANY OF OUR EXECUTIVE OFFICERS, OR ARE UNABLE TO ATTRACT AND RETAIN
QUALIFIED MANAGEMENT PERSONNEL AND MEDICAL DIRECTORS, OUR ABILITY TO RUN OUR
BUSINESS COULD BE ADVERSELY AFFECTED, AND OUR REVENUE AND EARNINGS COULD DECLINE
We are dependent upon the services of our executive officers Sam A.
Brooks, Jr., our Chairman, Chief Executive Officer and President, and Raymond
Hakim, M.D., Ph.D., R. Dirk Allison and Gary Brukhardt, each an Executive Vice
President. Mr. Brooks, Dr. Hakim and Mr. Brukhardt have each been with Renal
Care Group since its formation. We have entered into employment agreements with
Messrs. Brooks, Allison, and Brukardt and Dr. Hakim. The employment agreements
for each of these executive officers contain restrictive covenants prohibiting
the officer from competing with Renal Care Group for a period of one year
following the end of the officer's employment term. The services of these
individuals would be very difficult to replace. We do not carry key-man life
insurance on any of our officers. Further, our growth will depend in part upon
our ability to attract and retain skilled employees, for whom competition is
intense. We also believe that our future success will depend on our ability to
attract and retain qualified physicians to serve as medical directors of our
dialysis centers. We have entered into medical director agreements with the
physicians serving as medical directors of our dialysis centers, most of which
contain noncompetition covenants of varying durations.
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IF WE ARE LIABLE FOR DAMAGES IN POTENTIAL FUTURE LITIGATION, OUR INSURANCE MAY
NOT BE SUFFICIENT TO COVER SUCH POTENTIAL DAMAGES
On August 30, 2000, nineteen patients were hospitalized and one patient
died shortly after becoming ill while receiving treatment at one of our dialysis
centers. While no litigation is currently pending against us relating to these
illnesses, a claim could be brought in the future. While management believes
Renal Care Group's insurance should be adequate to cover these events, if we
become involved in litigation over these illnesses and are found liable for
damages, our present insurance coverage may not be sufficient to cover such
damages.
IF OUR BOARD OF DIRECTORS DOES NOT APPROVE AN ACQUISITION OR CHANGE IN CONTROL
OF RENAL CARE GROUP, OUR STOCKHOLDERS MAY NOT REALIZE THE FULL VALUE OF THEIR
STOCK
Our certificate of incorporation and bylaws contain a number of
provisions that may delay, deter or inhibit a future acquisition or change in
control of Renal Care Group that is not first approved by our board of
directors. This could occur even if our stockholders receive an attractive offer
for their shares or if a substantial number or even a majority of our
stockholders believe the takeover may be in their best interest. These
provisions are intended to encourage any person interested in acquiring Renal
Care Group to negotiate with and obtain approval from our board of directors
prior to pursuing the transaction. Provisions that could delay, deter or inhibit
a future acquisition or change in control of Renal Care Group include the
following:
- a staggered board of directors that would require two annual
meetings to replace a majority of the board of directors;
- restrictions on calling special meetings at which an
acquisition or change in control might be brought to a vote of
the stockholders;
- blank check preferred stock that may be issued by our board of
directors without stockholder approval and that may be
substantially dilutive or contain preferences or rights
objectionable to an acquiror; and
- a poison pill that would substantially dilute the interest
sought by an acquiror.
These provisions could also discourage bids for our common stock at a
premium and cause the market price of our common stock to decline.
OUR STOCK PRICE IS VOLATILE AND AS A RESULT, THE VALUE OF YOUR INVESTMENT MAY GO
DOWN FOR REASONS UNRELATED TO THE PERFORMANCE OF OUR BUSINESS
Our common stock is traded on the Nasdaq National Market. The market
price of our common stock has been volatile, ranging from a low of $14.625 per
share to a high of $28.25 per share during the nine months ended September 30,
2000. The market price for our common stock could fluctuate substantially based
on a variety of factors, including the following:
- future announcements concerning us, our competitors or the
health care market;
- the threat of litigation;
- changes in government regulations; and
- changes in earnings estimates by analysts.
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<PAGE> 21
Furthermore, stock prices for many companies fluctuate widely for
reasons that may be unrelated to their operating results. These fluctuations,
coupled with changes in demand or reimbursement levels for our services and
general economic, political and market conditions, could cause the market price
of our common stock to decline.
FORWARD LOOKING STATEMENTS
Some of the information in this quarterly report on Form 10-Q contains
forward-looking statements that involve substantial risks and uncertainties. You
can identify these statements by forward-looking words such as "may," "will,"
"expect," "anticipate," "believe," "intend," "estimate" and "continue" or
similar words. You should read statements that contain these words carefully for
the following reasons:
- the statements discuss our future expectations;
- the statements contain projections of our future earnings or
of our financial condition; and
- the statements state other "forward-looking" information.
We believe it is important to communicate our expectations to our
investors. There may be events in the future, however, that we are not
accurately able to predict or over which we have no control. The risk factors
listed above, as well as any cautionary language in or incorporated by reference
into this quarterly report on Form 10-Q, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. The SEC
allows us to "incorporate by reference" the information we file with them, which
means we can disclose important information to you by referring you to those
documents. Before you invest in our common stock, you should be aware that the
occurrence of any of the events described in the above risk factors, elsewhere
in or incorporated by reference into this quarterly report on Form 10-Q and
other events that we have not predicted or assessed could have a material
adverse effect on our earnings, financial condition and business. If the events
described above or other unpredicted events occur, then the trading price of our
common stock could decline and you may lose all or part of your investment.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 Employment Agreement dated July 13, 2000 between the Company
and Sam A. Brooks
10.3 Employment Agreement dated July 13, 2000 between the Company
and Raymond Hakim, M.D., Ph.D.
10.20 Employment Agreement dated July 13, 2000 between the Company
and Gary Brukardt
10.56 Third Amendment to First Amended and Restated Loan Agreement
dated September 29, 2000
27.1 Financial Data Schedule for the nine months ended September
30, 2000 (filed via Edgar on November 14, 2000)
27.2 Restated Financial Data Schedule for the nine months ended
September 30, 1999 (filed via Edgar on November 14, 2000)
(b) Reports on Form 8-K
Form 8-K filed September 29, 2000.
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SIGNATURE
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.
RENAL CARE GROUP, INC. (Registrant)
November 14, 2000 BY: /s/ R. DIRK ALLISON
-----------------------------------------
R. Dirk Allison
Executive Vice President,
Chief Financial Officer, and Principal
Financial Officer and Principal
Accounting Officer
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RENAL CARE GROUP, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER AND
DESCRIPTION OF EXHIBIT
----------------------
<S> <C>
10.1 Employment Agreement dated July 13, 2000 between the Company and Sam A.
Brooks
10.3 Employment Agreement dated July 13, 2000 between the Company and
Raymond Hakim, M.D., Ph.D.
10.20 Employment Agreement dated July 13, 2000 between the Company and Gary
Brukardt
10.56 Third Amendment to First Amended and Restated Loan Agreement dated
September 29, 2000
27.1 Financial Data Schedule for the nine months ended September 30, 2000
(filed via Edgar on November 14, 2000)
27.2 Restated Financial Data Schedule for the nine months ended September
30, 1999 (filed via Edgar on November 14, 2000)
</TABLE>
22
