«Fresenius Medical Care AG & Co. KGaA Hof an der Saale Germany FRESENIUS MEDICAL CARE AG & Co. KGaA Page FINANCIAL INFORMATION Management’s ...»
4. Other Assets and Notes Receivables On August 12, 2013, FMCH made an investment-type transaction by providing a credit facility to a middle-market dialysis provider in the amount of up to $200,000 to fund general corporate purposes.
The transaction is in the form of subordinated notes with a maturity date of July 4, 2020 (unless prepaid) and a payment-in-kind (“PIK”) feature that will allow interest payments in the form of cash (at 10.75%) or PIK (at 11.75%). The PIK feature, if used, allows for the addition of the accrued interest to the then outstanding principal. The collateral for this loan is 100% of the equity interest in this middlemarket dialysis provider. The availability period for drawdowns on this loan was 18 months and ended on February 12, 2015. The Company assesses the recoverability of this investment based on quarterly financial statements and other information obtained, used for an assessment of profitability and business plan objectives, as well as by analyzing general economic and market conditions in which the provider operates. On April 30, 2014, the Payee exercised the PIK feature and converted $10,137 of accrued interest then due to outstanding principal. Consequently, at March 31, 2015, $180,137 is effectively drawn down with $8,260 of interest income accrued. Interest is payable on a semi-annual basis. On April 30, 2015, the payee paid interest of $9,836.
5. Short-Term Borrowings, Other Financial Liabilities and Short-Term Borrowings from Related Parties At March 31, 2015 and December 31, 2014, short-term borrowings, other financial liabilities and
short-term borrowings from related parties consisted of the following:
Short-term Borrowings from related parties The Company is party to an unsecured loan agreement with Fresenius SE under which the Company or its subsidiaries may request and receive one or more short-term advances up to an aggregate amount of $400,000 until maturity on October 30, 2017. The interest on the advance(s) will be at a fluctuating rate per annum equal to LIBOR or EURIBOR as applicable plus an applicable margin. Advances can be repaid and reborrowed. On March 31, 2015, the Company received an advance of €19,700 ($21,195) at an interest rate of 1.16%. Subsequent to March 31, 2015, the Company received an additional advance from Fresenius SE increasing the amount borrowed to €41,200 ($44,327) and is due on April 30, 2015. For further information on short-term borrowings from related party outstanding at March 31, 2015, see Note 2 b.
6. Long-term Debt and Capital Lease Obligations At March 31, 2015 and December 31, 2014, long-term debt and capital lease obligations consisted
of the following:
Amended 2012 Credit Agreement The following table shows the available and outstanding amounts under the Amended 2012 Credit
Agreement at March 31, 2015 and at December 31, 2014:
At March 31, 2015 and December 31, 2014, the Company had letters of credit outstanding in the amount of $6,893 and $6,893, respectively, under the USD revolving credit facility, which are not included above as part of the balance outstanding at those dates, but which reduce available borrowings under the respective revolving credit facility.
Accounts Receivable Facility The following table shows the available and outstanding amounts under the accounts receivable
facility at March 31, 2015 and at December 31, 2014:
(1) Subject to availability of sufficient accounts receivable meeting funding criteria.
The Company also had letters of credit outstanding under the accounts receivable facility in the amount of $66,622 as of March 31, 2015 and $66,622 at December 31, 2014. These letters of credit are not included above as part of the balance outstanding at March 31, 2015 and December 31, 2014;
however, they reduce available borrowings under the accounts receivable facility.
7. Earnings Per Share The following table contains reconciliations of the numerator and denominators of the basic and
diluted earnings per share computations for the three months ended March 31, 2015 and 2014:
8. Employee Benefit Plans The Company currently has two principal pension plans, one for German employees, the other covering employees in the United States, the latter of which was curtailed in 2002. Plan benefits are generally based on years of service and final salary. As there is no legal requirement in Germany to fund defined benefit plans, the Company's pension obligations in Germany are unfunded. Each year FMCH contributes to the plan covering United States employees at least the minimum required by the Employee Retirement Income Security Act of 1974, as amended.
The following table provides the calculations of net periodic benefit cost for the three months ended March 31, 2015 and 2014, respectively.
9. Noncontrolling Interests Subject to Put Provisions The Company has potential obligations to purchase the noncontrolling interests held by third parties in certain of its consolidated subsidiaries. These obligations are in the form of put provisions and are exercisable at the third-party owners’ discretion within specified periods as outlined in each specific put provision. If these put provisions were exercised, the Company would be required to purchase all or part of third-party owners’ noncontrolling interests at the appraised fair value at the time of exercise. The methodology the Company uses to estimate the fair values of the noncontrolling interest subject to put provisions assumes the greater of net book value or a multiple of earnings, based on historical earnings, development stage of the underlying business and other factors. The estimated fair values of the noncontrolling interests subject to these put prov isions can also fluctuate and the implicit multiple of earnings at which these noncontrolling interest obligations may ultimately be settled could vary significantly from our current estimates depending upon market conditions.
At March 31, 2015 and December 31, 2014, the Company’s potential obligations under these put options were $827,094 and $824,658. At March 31, 2015 and December 31, 2014, put options with an aggregate purchase obligation of $130,927 and $123,846, respectively, were exercisable. No put options were exercised during the first three months of 2015.
The following is a roll forward of noncontrolling interests subject to put provisions for the three
months ended March 31, 2015 and the year ended December 31, 2014 :
10. Sources of Revenue Outside of the U.S., the Company does not recognize patient service revenue at the time the services are rendered without assessing the patient’s ability to pay. Accordingly, the additional disclosure requirements introduced with ASU 2011-07 only apply to U.S. patient service revenue.
Below is a table showing the sources of our U.S. patient service revenue (net of contractual allowance and discounts but before patient service bad debt provision), included in the Company’s Health Care revenue, for the three months ended March 31, 2015 and 2014.
The Company is routinely involved in numerous claims, lawsuits, regulatory and tax audits, investigations and other legal matters arising, for the most part, in the ordinary course of its business of providing health care services and products. Legal matters that the Company currently deems to be material or noteworthy are described below. For the matters described below in which the Company believes a loss is both reasonably possible and estimable, an estimate of the loss or range of loss exposure is provided. For the other matters described below, the Company believes that the loss probability is remote and/or the loss or range of possible losses cannot be reasonably estimated at this time. The outcome of litigation and other legal matters is always difficult to predict accurately and outcomes that are not consistent with the Company’s view of the merits can occur. The Company believes that it has valid defenses to the legal matters pending against it and is defending itself vigorously. Nevertheless, it is possible that the resolution of one or more of the legal matters currently pending or threatened could have a material adverse effect on its business, results of operations and financial condition.
Commercial Litigation On August 27, 2012, Baxter Health International Inc. (“Baxter”) filed suit in the U.S. District Court for the Northern District of Illinois, styled Baxter International Inc., et al., v. Fresenius Medical Care ® Holdings, Inc., Case No. 12-cv-06890, alleging that the Company’s Liberty cycler infringes certain U.S. patents that were issued to Baxter between October 2010 and June 2012. The parties have resolved this patent dispute and will jointly file a motion to dismiss and irrevocably terminate this litigation.
On April 5, 2013, the U.S. Judicial Panel on Multidistrict Litigation ordered that the numerous lawsuits filed and anticipated to be filed in various federal courts alleging wrongful death and personal injury claims against FMCH and certain of its affiliates relating to FMCH’s acid concentrate products ® ® NaturaLyte and Granuflo be transferred and consolidated for pretrial management purposes into a consolidated multidistrict litigation in the United States District Court for the District of Massachusetts, styled In Re: Fresenius Granuflo/Naturalyte Dialysate Products Liability Litigation, Case No. 2013-mdThe Massachusetts state courts subsequently established a similar consolidated litigation for such cases filed in Massachusetts county courts, styled In Re: Consolidated Fresenius Cases, Case No. MICV 2013-03400-O (Massachusetts Superior Court, Middlesex County). These lawsuits allege generally that inadequate labeling and warnings for these products caused harm to patients. In addition, similar cases have been filed in several state courts outside Massachusetts, in some of which the judicial authorities have established consolidated proceedings for their disposition. The attorneys general of Louisiana and Mississippi have also filed complaints under their state deceptive practice statutes and in their state courts based on allegations similar to those advanced in the personal injury litigation. FMCH believes that these lawsuits are without merit, and will defend them vigorously.
Other Litigation and Potential Exposures
On February 15, 2011, a whistleblower (relator) action under the False Claims Act against FMCH was unsealed by order of the United States District Court for the District of Massachusetts and served by the relator. The United States has not intervened in the case United States ex rel. Chris Drennen v.
Fresenius Medical Care Holdings, Inc., 2009 Civ. 10179 (D. Mass.). The relator’s complaint, which was first filed under seal in February 2009, alleges that the Company seeks and receives reimbursement from government payors for serum ferritin and hepatitis B laboratory tests that are medically unnecessary or not properly ordered by a physician. On March 6, 2011, the United States Attorney for the District of Massachusetts issued a subpoena seeking the production of documents related to the same laboratory tests that are the subject of the relator’s complaint. FMCH has cooperated fully in responding to the subpoena, and will vigorously contest the relator’s complaint.