Free Appendix - District Court of Delaware - Delaware

SEC

Info

Coram Healthcare Case 1:04-cv-01565-SLR Corp 10-Q

For 9/30/99

Document 124-5

Filed 04/17/2007

Page 1 of 30
Bottom

Page

of 55

1O-Q

2nd

Page

of
PART FINANCIAL

Previous

Just

2nd

INFORMATION

ITEM

FINANCIAL

STATEMENTS CORAM CONDENSED HEALTHCARE CONSOLIDATED CORPORATION BALANCE SHEETS

IN

THOUSANDS
ASSETS Enlarge/Download
SEPTEMBER 1999

Table

30

DECEMBER 1998

31

UNA
Current Cash Cash

UDI

TED

assets
and cash equivalents as to use net of allowance of

8466
544

53

limited

1557 113697 27203
705

Accounts

receivable

$21377

and

$18128
Inventories Deferred Other income

126232 18973 taxes
net 290 assets current assets net net

current Total

6094 160599 25373

4963
148178 26563 4365 17574 5243 235696 437619

Property Deferred Other Other

equipment income taxes
and costs of

2287
17394

assets deferred net accumulated amortization of

3155
$75401
and

Goodwill $67247

227868
Total assets

436676

LIABILITIES Current Accrued Interest Current Income Deferred Reserve Accrued Other

2RD

STOCKHOLDERS

EQUITY

Liabilities
payable compensation payable maturities taxes for payable taxes and litigation restructuring liabilities income of debt

Accounts

55628 11163

52930 11205

5707
longterm
414 472 300

4671
260 300

1060
2987 3935 6271 83619 242162

merger current Total

1420 6673 8699
90476 289265 1427 13674

current in taxes

liabilities ventures

Longterm

debt consolidated joint

interest Minority Other liabilities Deferred income and Tolal

2024
12947 4010

2277

Commitments

contingencies liabilities

397119

344762

Stockholders
Preferred

equity stock par

value

$001

authorized

10000 shares
1999 and 50
49

issued shares none Common stock par value issued amd at outstanding December deficit

$.00l authorized 100000 49598 at September 30
1998

49201
Additional Accumulated

31

paidin

capital

427377

427133

387870
equity and

334325
92857 437619

Total

stockholders
liabilities

39557
equity

Total

stockholders

436676

See

accompanying

notes

to

unaudited

condensed

consolidated

financial

statements

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4/15/2007

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SEC

Info

Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q

For 9/30/99

Document 124-5

Filed 04/17/2007

Page 2 of 30

Page

of 55

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4/15/2007

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SEC

Info

Coram Healthcare Case 1:04-cv-01565-SLR Corp 10-Q

For 9/30/99

Document 124-5

Filed 04/17/2007
INext

Page 3 of 30

Page

of 55

1O-Q

3rdPageof2
CORM
CONDENSED HEALTHCARE

Previous
CORPORATION OF

Just

3rd

CONSOLIDATED EXCEPT

STATEMENTS COMMON

OPERATIONS

UNAtJDITED

IN

THOUSA11DS

PER

SHARE

DATA
Enlarge/Download Table

THREE

MONTHS

ENDED

NINE MONTHS
SEPTEMBER 1999

ENDED

SEPTE14BER 1999

30
1998

30
1998

Net Cost

revenue of service

$143232 110299 32933

$143607 108317 35290 25030 3897

$456983 379960 77023 80799 12781

$368469 275402 93067 69025 11140 8337
--

Gross

profit

Operating

expenses
and administrative general uncollectible for estimated of goodwill costs expenses

Selling
Provision

accounts

28290 4168

Amortization Restructuring Total

2711 5100
expenses

2794
--

8159
6050 107789

operating

40269

31721

88502 4565

income loss Operating income Other expenses Interest Other Loss Income Minority joint Net Loss Loss loss common common share share dilution expense net taxes in net and

7336 8110
580 minority of

3569

30766 22193
971

6114
407

26372
2130

income

before tax

income

interests
consolidated

14866
125 176

2138
450 261

51988
375

19677
1850
974

expense interests

income

ventures

1182

$15l67
0.30
assuming

2849
0.06 0.06

$53545
1.08 1.08

$22501
0.46 0.46

per per

0.30

See

accompanying

notes

to

unaudited

condensed

consolidated

financial

statements

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SEC

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Case 1:04-cv-01565-SLR Coram Healthcare Corp 10-Q
4th Page of

For 9/30/99

Document 124-5

Filed 04/17/2007

Page 4 of 30
pttom

Page

of 55

Previous
CORAN HEALTHCARE CORPORATION OF CASH FLOWS

Just

4th

CONDENSED

CONSOLIDATED

STATEMENTS

UNAUDITED IN THOUSANDS
Download Table

NINE

MONTHS ENDED

SEPTEMBER 1999

30
1998

Net Cash

cash

used

in

operating investing and

activities

$21259

8876 7576 3084
10660
17250

flows

from

activities
equipment

Purchases Other Net Cash

of property

6782
481

cash

used on

in

investing

activities

7263
43000

flows

from of on

Borrowings Repayment Proceeds Other Net cash

financing line of credit debt

activities

.6065
of promissory notes warrant cancellation

94380
6000

issuance for

Consideration

4300
846
activities...

provided

by

used

in
in

financing and

36935

76276 $95812
statements

Net

increase

decrease

cash

cash

equivalents

8413

See

accompanying

notes

to

unaudited

condensed

consolidated

financial

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4/15/2007

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SEC

Info

Coram Healthcare Case 1:04-cv-01565-SLR 10-Q Corp

For 9/30/99

Document 124-5

Filed 04/17/2007

Page 5 of 30
Bottom

Page

of 55

5th Page

of 29
CORAM NOTES TO HEALTHCARE

Previous
CORPORATION CONSOLIDATED

Just

5th

UNAtJDITED FINANCIAL

CONDENSED STATEMENTS

SEPTEMBER BASIS OF PRESENTATION

30

1999

Business

Activity
the

Coram are the

Healthcare engaged in

of business infusion and related hospital therapy services and specialty benefit network services pharmacy ancillary management management and mailorder pharmacy services and centralized administrative management clinical for clinical research informatics services trials and medical support home health Other services offered nonintravenous by Coram include products such durable medical and respiratory services See Note as therapy equipment Condensed Consolidated Financial Statements and Note to the Unaudited
or

Coram

Company

and Corporation four principal

its

subsidiaries

lines

alternate

site

outside

Coram

delivers
88

its

alternate offices the

site located

infusion in
43

approximately Infusion therapy

branch involves

services therapy through states and Ontario Canada of

intravenous

administration

therapy
nutrition

intravenous and other

immunoglobulin

fVIG

antiinfective
pain

chemotherapy

management

therapies presented
through home health its the care Company provided ancillary Network division providers on behalf of network which maintenance

For all

periods of

management networks managed organizations physician customers and Note The

services

Resource

R-NeL
health

HMOs
and

groups

through to the

atrisk preferred provider organizations other managed R-Net served its care organizations and three satellite offices See two primary call centers
Unaudited Condensed Consolidated Financial

PPOs

Note

Statements

and specialty delivers benefit pharmacy management pharmacy its Coram Prescription Services division The division through services and service centralized mail order pharmacy center provides through in Plainview mail order pharmacies in Orlando Florida five regional New York Las Vegas Texas and one Omaha Nebraska Nevada Hayward California Houston Company services

CPS

retail

pharmacy

in

Baltimore

Maryland

The

pharmacy

benefit

online claims provides administration formulary nationwide utilization review services through

management network of to

service management and certain drug retail pharmacies adherence

CPSs
high of

specialty risk

pharmacy

services

provide

centralized support

distribution

programs

patient

education and clinical conditions See Part Item
Condition its and Results Trials of

with high cost patients Discussion and Analysis Managements

Financial

Operations
Informatics

Business
division

Strategy

Through the

Clinical

and

CTI

Network

Inc

Company provides trials This division well
as

centralized

pharmaceconomic of

and support for clinical research management and integration services also offers data collection as outcomes and utilization analyses The accompanying prepared by unaudited the Company condensed pursuant consolidated to the rules
and-

Basis financial

Presentation
have

statements

been

of the Securities and Exchange Commission regulations the Commission Certain information and footnote disclosures included in financial normally in accordance with statements accepted accounting principles prepared generally

have

been

condensed that All for

or

omitted financial in the

condensed disclosures

consolidated

to pursuant statements

such

regulations
all

The

unaudited and fair The not further results

reflect

are
such the

opinion

presentation
of operations necessarily

adjustments interim period of the

of management are of normal ended of September full the

adjustments for necessary recurring

nature
are For

30

indicative

results

fiscal

1999 year

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SEC

Info

Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q information
thereto the refer in to the

For 9/30/99

Document 124-5
consolidated Annual and Report

Filed 04/17/2007
financial on Form

Page 6 of 30
and notes for 8-K

Page

of 55

audited

statements

included

year ended filed with the Provision carrying made adequate amount

Commission

Dcemb
the in for Estimated of accounts

Companys 1999

10K
on

as

amended
10-Q and

subsequent

filings

Forms

Uncollectible receivable
is

Accounts
fairly

anagement
and that

believes the

the

net has

stated

Company

provision

for uncollectible

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4/15/2007

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SEC

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Coram Healthcare Case 1:04-cv-01565-SLR 10-Q Corp 6th

For 9/30/99

Document 124-5

Filed 04/17/2007

Page 7 of 30 Page
Just

10

of 55

1O-Q

Page

off
NOTES TO

ITQ-cI-I
CORAM HEALTHCARE
UNAtJDITED

Previous
CORPORATION CONSOLIDATED

6th

CONDENSED
--

FINANCIAL accounts
as

STATEMENTS

CONTINUED
no assurance or can be given

based level to

on

to

the

will

compare Loss

available information However future provisions for uncoilectible the levels in.the experienced past
all of

accounts

ho

they

FASB
accordance effects sets nine

In per Share issued Statement with of the Statement

1997

the

Financial

No

128
and

128
of

Earnings basic earnings convertible and and 1999

Accounting per Share per

Standards

Board

Statement
exclude The share

128

the
In

share

options
ended

warrants

securities
loss per

any dilutive table following for the three and

forth months

computation September

basic

diluted

30

1998
Enlarge/Download
THREE

Table

MONTHS

ENDED

NINE MONTHS
SEPTEMBER 1999

ENDED

SEPTEMBER 1999

30
1998

30
1998

Numerator share

for

basic

and

diluted

loss

per

$15l67
average earnings of other shares
--

$2849
48888

$53545
49483

$2250l
48731

Weighted basic Effect Stbck

denominator

for

per share dilutive securities

49550

options Warrants Denominator adjusted assumed for diluted

earnings shares

weighted conversion

average

per and

share
49550 48888 49483 48731

Loss Loss

per

common

share share

0.30
assuming

0.06

1.08

0.46

per common dilution

0.30

0.06

1.08

0.46

Diluted warrants to

loss per share purchase common and

do not give effect to stock or computations options stock their effect as would have been antidilutive the FASB issued all Statement

Derivatives of Financial and Hedging derivative Statement FASB

Accounting Activities instruments

Activities In June 1998 Hedging Standards No 133 Accounting

for Derivative

Instruments

Statement
as

assets for the

133

issued

was effective in June 1999

which requires recording at fair or liabilities measured fiscal years beginning after June of Financial and Hedging Accounting Activities

133

value 15 1999
Standards amends

The

Statement

No
of

137
the

for Derivative Instruments Accounting Effective of FASB Statement Date 133

Deferral

Statement

137

which

Statement 133 Statement 137 will apply to all fiscal quarters of all fiscal after June As of September 15 2000 had years beginning 30 1999 the Compgpy into any derivative not entered and hedging and as transactions such the does not believe that adoption of the new requirement will have an Company effect on future financial results or operating pmganys position Start-up of Start-Up

Costs

In

1998
which

the

AICPA issued
that of SOP The did

SOP

98-5 was

Reporting
of

on

the

Costs be

Activities

requires adoption

the

costs

as incurred expensed cumulative effect of

Initial

985

activities start-up accounted for as 98-5 effect

effective the

Janggy
of

an accounting 1999 and such
or

change

results

operations AND

adoption financial position

the SOP adopted Company not have significant

on

ACQUISITIONS

RESTRUCTURING 4/15/2007

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SEC

Info

Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q

For 9/30/99

Document 124-5

Filed 04/17/2007

Page 8 of 30 Page
businesses to be paid

11

of 55

Acquisitions
or interests by based

Certain provide

therein

related to previously agreements acquired for additionalcontingent consideration

amount of additional if any is generally Cpm any The consideration on the financial levels of the acquired performance companies As of

September

30

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4/15/2007

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SEC

Info

Coram Healthcare Case 1:04-cv-01565-SLR Corp 10-Q

For 9/30/99

Document 124-5

Filed 04/17/2007
IN---I

Page 9 of 30 Page
Just

12

of 55

1O-Q

7thPageof29

I-c-cI--I
CORAN HEALTHCARE
CORPORATION

7th

NOTES

TO

tJNAtJDITED

CONDENSED
--

CONSOLIDATED

FINANCIAL

STATEMENTS

CONTINUED
$2.0 approximately on the Comppy or its changes in the have obligations elections by the

the Company to pay minimum of 1999 may be required to increase in certain million subject based cases subsidiaries market been value or recorded the

certain revenue or income and exceeding targets of the Companys stock These minimum contingent
as

additional

goodwill

Subject

to

certain

maximum of approximately $1.1 million of these sellers to increase with the contingent obligations subject may be paid in cash to be paid in common stock of the Company If these remaining contingent exceed the minimum contingent as payments amounts they will be recorded Company becomes in the period in which the payment goodwill probable the three months ended Payments during 30 1999 and 1998 totaled September million each period additional Merger acquisition business of Carernark plan and of $0.1

Restructuring
substantially

As all

result of the

of

the

formation

of

Coram site

and

the

assets

of the

alternate

infusion

Caremark

Inc

subsidiary

of Caremark Company

International
initiated charged

Inc

the
to

Business
Caremark
as

the

during Business

the May 1995 Consolidation

Plan
incurred

and and

restructuring $25.8 million costs
as In

operations totaling

restructuring $11.4 approximately

cost
million

Certain were

additional

restructuring accounted for in

to the purchase adjustments the Company evaluated 1998 Plan Business Consolidation reversal benefit the of $0.7

Business price of the Caremark the estimated costs to complete and other accruals and

1995

December

the

Caremark restructure

recognized

million
Business reversals Consolidation
as

Under

Caremark and

payments

disposals

follows

plan the Company in thousands

has

made

total

Enlarge/Download
R2LANCE THROUGH CASH EXPENDITURES SEPTEMBER

Table
AT

30

1999

SEPTEMBER

30

1999 TOTAL CHARGES

NON-CASH
ChARGES TOTAL

RESTRUCTURE REVERSAL

FUTURE

CASH

EXPENDITURES

Caremark Personnel Costs Facility

Business

Consolidation

Plan $11300 9547 $11300 13447 $11300 16700

Reduction Reduction Total

Costs

3900

714

2539

Restructuring

Costs

$20847

$3900

$24747

$714

$2539

$28000

the During January 1999 initiated in the first quarter restructure in which $0.9 the the

Company adopted restructuring of 1999 The plan resulted in of expense was recognized

plan
an for

which

was

million

organizational severance costs

During the

July

1999
of

reorganization which operations which was

Company adopted R-Net divisions third

Whippany

plan

was responsible initiated in the Report The plan of on

for managing

Companys

Quarterly

event subsequent and consisted quarter costs
and Condensed

lO-Q resulted in million

Form

quarter for the charge for

with restructuring plan associated New Jersey call center the Aetna Master The Agreement of 1999 and was described in the ended June 30 1999 period of $5.1 million during the $3.4 Note See to the
as

$0.8

severance

million for facility
Unaudited

of assets $0.9 million for impairment Consolidated Financial Statements

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4/15/2007

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SEC

Info

Coram Healthcare Case 1:04-cv-01565-SLR Corp 10-Q

For 9/30/99

Document 124-5
Merger
future $2.5 and cash

Filed 04/17/2007

Page 10 of 30Page

13

of 55

Th
September Business of of $0.1 $0.2

balance

in

the

Accrued
of of Plan

30

1999

consists R-Net

Consolidation

at Restructuring liability related to the Caremark expenditures 1999 restructure million the January plan plan of $3.9

million million

the

restructure

million and

other

accruals

http//www.secinfo.com/dsvrp.69Te.htm

4/15/2007

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SEC

Info

Coram Healthcare Case 1:04-cv-01565-SLR 10-Q Corp

For 9/30/99

Document 124-5

Filed 04/17/2007
INexti

Page 11 of 30Page
Just

14 of 55

SthPageof29

IcI--I
CORAM HEALTHCARE
TO UNAUDITED

Previous
CORPORATION

8th

NOTES

CONDENSED
--

CONSOLIDATED

FINANCIAL The Caremark quarter Company Business
of

STATEMENTS the future the

CONTINUED
to the the the first

estimates the call

that third center

Consolidation

Plan
quarter

Whippany periods
through

and 1999 New Jersey through

related expenditures restructure plan from associated with restructuring 1999 made in the September

cash

RNet

36%

September

30

September and 2002

will be operations 17% through 30 2000 30% through September

following

30
and

30

2003

17% 2001 thereafter

LONG-TERM DEBT
Long-term debt
is as

follows

in thousands
Enlarge/Download
SEPTEfrER 1999

Table

30

DEcEMBER 1998

31

Series Series New Other rates

Senior Senior Credit

Subordinated Subordinated Facility including from 6% to

Unsecured Convertible

Notes Notes at interest by certain

Senior

$162162 89681 37000

$153785 87922
--

obligations
ranging and

capital leases 16% collateralized

property

equipment

836

715

289679
Less current scheduled maturities

242422

414
$289265

260
$242162

As

of

agreements

September included

30

1999
J4ay

_qm

anys

principal

credit

and

debt

Securities and the

Exchange Agreemen dated Sachs Credit Partners L.P
as

Exchange 1998 with

the Securities Agreement Cerberus Goldman Partners

L.P

Foothill Series Series

Holders and the Series Notes the Series Notes
the

the and

related

Capital Corporation Senior Subordinated Senior Subordinated

collectively
Unsecured Convertible credit and

known Notes

Notes Goldman

with Foothill facility Sachs Credit Partners Capital Credit
is

and contemplated thereby Income Cerberus Trust

ii
the

new

senior

L.P

Partners

L.P

L.P
as

Corporation

collectively dated as of August Agent
the outstanding cash dividends On the credit during May Holders

known

as

Lenders
1998 of

and

Foothill Senior the Company

20

the
the

New
debt

Facility

Under

and the

debt term the

agreements

precluded

from paying Exchange

agreement
into the

Securities Securities subordinated was 20%
of

Agreement
with

1998
of As

Company

entered

Exchange

Agreement rollover note the the Holders shares diluted the

Rollover
the the

outstanding
the

had
of

Warrants
for the and the the

outstanding on fully of in $4.3

previously outstanding Note long as the Rollover warrants to purchase right to receive up to stock of the Comppy the common

its

Note

basis

The Note

Securities

cancellation Warrants of

Rollover

including
issuance

Exchange deferred

Agreement interest

payment Holders of

an exchange million in million original to in in

the
cash in

Exchange
and the principal amount of the

effective

pril 13
to In

provided fees for 1998
and the and Series

$150.0 million Securities given to and the

ii
under one in

original

by the Company amount Series Series of the

Notes and

$87.9 the

principal

Notes
Series

addition

Notes June On

were 1998

Exchange the right

Agreement

Holders

director

Companys

certain new debt and the right to name approve Board of Directors who was elected to the board August

re-elected

1999
into l\mendment with the

April
to

1999
the

the

Copany

entered

No

the

Note
to 4/15/2007

Amendment

Securities

Exchange

Agreement

Holders

Pursuant

http//www.secinfo.com/dsvrp.69Te.htm

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SEC

Info

Coram Healthcare Corp 10-Q Case 1:04-cv-01565-SLR
the Note

For 9/30/99

Document 124-5

Filed 04/17/2007

Page 12 of 30Page
Notes $.001
is

15

of 55

Amendment
into

the

convertible

shares

the Common antidilution
Series

Stock
were to the

amount of Series principal outstanding of the Companys common stock par value of $2.00 at share price per subject to Prior to entering Common each into Stock of the
at

per

share

adjustments
downward Common

Note

Notes

convertible

into

Amendment of $3.00 price
based 1999

customary the which

price was subject market for prices 1999 Based on

but
Stock

not on

upward

adjustment April

13

on prevailing and October 13

http//www

secinfo.comldsvrp

69Te.htm

4/15/2007

Al 32

SEC

Info

Coram Healthcare Case 1:04-cv-01565-SLR Corp 10-Q

For 9/30/99

Document 124-5

Filed 04/17/2007
INexti

Page 13 of 30Page
Just

16

of 55

1O-Q

9thPaqeof29

ITOCistI
CORAM HEALTHCARE

Previous
CORPORATION

9th

NOTES

TO

UNAUDITED

CONDENSED
--

CONSOLIDATED

FINANCIAL for

STATEMENTS

CONTINUED
Stock below Pursuant to prior $2.00 to the to April 13 on such date the Note Series

reported closing this conversion the the from Company parties 9.875% the not also to

prices

price would have entered into the increased per Notes the 11.5%

in the Common trading been to adjusted Note The

1999
had

Imendment
rate

Pinendment Notes

interest Series of

applicable

annum
and and the

Securities

which other Company

Series

to Exchange Agreement pursuant certain Notes were issued contains

customary in was to

covenants

events

default

At

September other

30
than

1999
and

the Coram parties

relating

with all of compliance certain its relationships

these Coram

covenants
Resource to with

covenants

Network
have the with

Inc

Practice Independent contracted that were effective May

Association
to provide

Inc
services

subsidiaries pursuant covenants The Company

certain

Master

1998
or of its

the

Master
to

Agreement

Aetna

U.S
to

Agreement Healthcare
the

Inc

Aetna
of the

USHC

Aetna
certain lenders

and

certain such

relating

capitalization waivers from and

subsidiaries
regarding

noncompliance

11 chapter bankruptcy petitions voluntary Coram Independent Practice Inc could have caused defaults Association had such under the Exchange defaults not been waived In connection Agreement

received however the filing addition Inc Network by Coram Resource In

has

with

such

waivers

and

the

waivers

with certain covenants compliance as described below the Company understanding Series and through Nay outside the pursuant Series earlier of to which Notes final would certain

for provided set forth in and the be the due Holders for

certain the New have

matters Senior reached no

of

non
Facility the

Credit

Holders would the of

resolution

agree that from period the litigation the sale of

preliminary interest on

November with any to

15

1999 or

Aetna

ii

15

2000

Furthermore

of the ordinary course would be applied partial of the Series and the Series Notes at par in such amounts as the redemption of the proceeds Holders that such derived from designate provided application such sale is waived under the New Senior Credit by the lenders Facility The no

proceeds of business

from

Company

asset

terms of such understanding have not been finalized and there can be precise that such will be finalized under such terms or any assurance understanding similar terms There can be no assurance as to whether further covenant violations waivers Condensed Condensed will will occur in future and periods at that time See Note to forthcoming Consolidated Financial Statements See Note
or

defaults

whether the to the

any

be

Companys

necessary Unaudited

Unaudited

Consolidated

Financial The of the Series

Statements
Notes mature in May 2001 in the The and bore in of can interest cash the rate the on or
at

Series an initial the

Notes
rate
of

9.875% to

through

issuance

payable per annum additional Series Note
1-\mendment

quarterly Notes at parties

arrears election

Company

Pursuant

the per

increased Holders

the

Lnterest

to the Series applicable in to pay interest Company ratio During the coverage the lieu Series of As under earlier Notes Series cash was additional Notes of

Notes cash

to if

11.5% the

annum
exceeds

Comppy

certain

require interest expense in

quarter totaling interest

ended
$4.6

September

30
On

1999
October

interest

approximately

million

15
were

1999
issued

payment

$4.7 million approximately due through such date will be due with on the

described Series of

above
Notes

no for of of

interest the the such

the

period

from

November Aetna

15

balance outstanding 1999 through the

resolution

the expiration Following the Series Notes shall Series
at

litigation period of to the Notes

or

ii

May

15

2000
to

return Series

time the interest rate applicable 11.5% per annum prior rate
mature in April in 2008 in and cash bear or interest through

Notes
of
8%

The

the

rate

per

annum

payable

quarterly

arrears

the

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4/15/2007

Al 33

SEC

Info

Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q
issuance to the convertible share of Note additional

For 9/30/99

Document 124-5
Notes at the

Filed 04/17/2007
election Stock of
at

Page 14 of 30Page
Pursuant are per for Notes of $2.00

17

of 55

Series the of

the of

Company

mendment
into shares

principal outstanding the Companys Common

amount

Series price

antidilution to customary including adjustments subject adjustments of common stock other than to existing or employee sale pursuant obligations below the conversion at the time of prevailing benefit at plans price price of the such sale Cash will be paid in lieu of fractional shares upon conversion
Series the

Notes

Series

During Notes was

the

quarter

ended $1.8

ptember 30
million
On

1999
October

interest

expense

on

approximately

15

http//www.secinfo.com/dsvrp.69Te.htm

4/15/2007

Al 34

SEC

Info

Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q

For 9/30/99

Document 124-5

Filed 04/17/2007

Page 15 of 30Page
Bottom
Just

18

of 55

10-Q

10th Page

of
CORAM HEALTHCARE
NOTES TO
TJNATJDITED

Previous
CORPORATION CONSOLIDATED

10th

CONDENSED
--

FINANCIAL

STATEMENTS

CONTINUED
$1.8 million were issued

1999
in

additional of cash

Series payment

Notes of no of of

lieu As

totaling approximately interest due through such will be due on the

date
balance outstanding 1999 through the

described Series the of

above
Notes

interest the such

under

the

for the

period

from November

15

earlier

resolution expiration Notes shall and in the the

Following the Series The option Company to hold the In of

return

with Aetna or litigation of time the interest rate period to the prior rate 8.0% per annum are

ii jyi5

2000
to

applicable

Series the

Series thereof the

Notes

redeemable
with any

in whole change of

or

in

part

at

the

Holders

in connection

control

of the

as
and

defined control

Securities
or

certain

interests
and

of acquisition such instances outstanding redeemable
at

Company Series

if the Company ceases Exchange Agreement in its significant subsidiaries o-r upon certain of its subsidiaries third party by Series Notes are redeemable
at

103%

of

the

then also

Notes

the the

amount accrued interest The Series Notes are principal plus of the Series the option of the Holders at thereof upon maturity amount thereof accrued interest In principal outstanding plus Notes amount are plus callable accrued any time interest at
at

addition
outstanding

Series

at the

103%

of

the of

then the

principal New the

option

Company

Exchange
contingent Securities with the upon

Senior

Credit

Facility
of certain

The

consummation

satisfaction

conditions

on June 30 1998 All Exchange Agreement of the condition exception requirin.g the Company credit for new senior agreement facility Accordingly entered into the First Amendment and Waiver the Company Securities waived Company June Series secured definitive Company providing working the to Exchange condition execute In an

of the Exchange was of the prior to closing conditions were satisfied to on execute June an

30 Amendment
The

1998
to

the the

Agreement
under the

and

the

Exchange

was

consummated

Amendment
to

Securities

301998
Notes debt

addition
to on

for agreement under the extend Senior or Credit

agreed

the

New

ppy
to Credit

the Exchange Agreement requiring new senior credit facility on or prior the Holders of the Series Amendment up to $60.0 subject million to On the of senior
of

and

Facility
for

completion

agreements entered into for the
is

prior

September_301998

definitive agreement

th

New

August Senior C-redit

20

1998

the

Facility

capital

availability underlying and bears an

of the $60.0 million facility for acquisitions availability letters of credit and other The purposes corporate to certain base calculations as defined in the subject borrowing The rate New Senior Facility matures

agreement
interest

February26_2001

in arrears on the first payable business rate was 9.75% at September day of each month 30 1999 The New Senior Credit stock of the Compys Facility is secured by the capital receivable and certain other assets held subsidiaries as well as the accounts

of prime plus The interest

1.5%

by the Company other nominal $0.6 1.0% million

and

its the

subsidiaries
was

Under

the

New

Senior

Credit

Facility
1.0% of
3/8

among
or

fees
and
is

Company liable for

fee of to pay an upfront required commitment fees on the unused facility

of

1999

per interest

annum

due and $1.1

in arrears During the quarter ended quarterly September related fees on the New Senior Credit Facility were New up Senior to 1.9 to
at

30

approximately

Facility provide shares of common adjustments value at the amortized $0.4 related to million

the terms of the millioii In addition for the issuance of warrants to purchase stock of at $0.01 per share

Credit
million customary their fair to be

the
date

1998
of life

pn
and

Warrants
of the

The were

1998

Warrants for

were
as

subject valued deferred

issuance

accounted Credit the the of

costs

over to the

the 1998

New

Senior

interest

Warrants

expense during The terms

Facility The Company charged 1999 quarter ended September30
New Senior Credit Facility also

http

//www

secinfo.comldsvrp.69Te.htm

4/15/2007

Al 35

SEC

Info

Coram Healthcare Case 1:04-cv-01565-SLR Corp 10-Q
for the issuance of provide that available credit would Holders reducing had the The issued letters of the

For 9/30/99 letters not of

Document 124-5
of credit fall below

Filed 04/17/2007
of up As to of $25.0 September

Page 16 of 30Page
30
provided the 1999

19

of 55

million

zero

credit

Companys
terms on

amount
1.0% on

availability the New Senior outstanding of each to the

totaling under the Credit of The and

$2.5 million thereby approximately New Senior Credit Facility by that for fee of Facility also provide credit terms

per the first

annum

letter

obligations
of the New

due

in

arrears letter
of

business provide pursuant

day

month
fees

Senior

Credit

Facility also credit issuer

for

additional

to be

application

to any paid on demand related documentation

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4/15/2007

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SEC

Info

Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q

For 9/30/99

Document 124-5

Filed 04/17/2007
Next

Page 17 of 30Page
Just

20 of 55

1O-Q

11th Page

of
CORAN NOTES TO HEALTHCARE

Previous
CORPORATION

11th

UNAUDITED

CONDENSED
--

CONSOLIDATED

FINANCIAL under fees which were such The letters per New all

STATEMENTS

CONTINUED

0.825% and the

obligations
covenants compliance regarding

events waivers

As of September30 such of credit are issued 1999 of credit on the amount of outstanding letter annum Senior Credit certain other customary Facility contains was not in of default At September 30 1999 the Company these

understanding to the applicable the Company and the Series and Series Sectrities Exchange Notes Agreement from its lenders such noncompliance for the period received waivers regarding such covenants for ended of noncompliance with 30 1999 and waivers September and interest concession described above the and December ending period further covenant violations whether At borrowing including delivered deducting necessary

with

of

covenants

In

connection

with

the

31

1999
will New be

There

can

be

no

assurance

as

to whether

will

occur

in periods forthcoming Credit $37.0 letters

waivers

after December ending that time at had had an available been drawn had In been

31

1999

October15
base $14.5 in from of

1999
$60.0

the

Senior
of

million
the

which
the

Facility million of credit

million relating
the

to

that

accordance

$2.5 totaling of November as LITIGATION

with Aetna with Master Agreement base the other letters of credit borrowing under the facility million the total available

addition

after

obligations is $20.5 million

15
AND

1999
CONTINGENCIES

Litigation
Form 1O-Q for the the dispute with

As

described

more June to

fully

in the

Companys
Company

period ended
Internal by the IRS

30
the

1999
prior

Revenue received

Service

IRS
tax

the

Quarterly Report in is involved

on

adjustments

proposed

certain regarding of the liabilities of

substantial

Company
and the

On

Nyl4
alleged penalties through ability

1999

omapy

statutory $12.7
is

notice million

deficiency

totaled deficiency approximately to be determined The Compay administrative The most of the proceedings and

contesting and litigation

interest and plus the noticq of deficiency its will vigorously defend

position
liability previously

to the significant adjustment proposed by the IRS relates losses to categorize certain net operating as Company specified has losses and offset income in prior years for which the Company refunds in the amount of approximately $12.7million On received

gust 11
contesting petition

1999
the

the notice

Compy
of the

filed On

defiency
petition financial assurance

petition October

with Due

the to

United the the IRS

States

Tax

Court

1999
include

and

requested

be

denied

to the responded of final uncertainty for these

resolution the Companys liabilities No potential

statements

reserve

the early phase of this given with the IRS or in litigation If proceeding material to the proposed respect adjustments be materially of the Company could liquidity the

that the can be given and the uncertainties matter the the

Company financial

will prevail Company inherent in any does not prevail with position and Note to

Companys
As

Unaudited more

Condensed

affected See adversely Consolidated Financial Statements Companys

described

fully

in the the

ended June 30 1999 period known as PricewaterhouseCoopers the regarding and Caremark certain claims and

LLP

Company for damages of action causes in to

on-Form lO-Q for Quarterly Report Price Waterhouse is suing LLP now in excess of $165.0 million of Caremark

causes

International
Waterhouse assigned by the to

Inc
of

collectively
These the The case LLP their claims
is

Caremark
and that

Caremarks
Company against
as

auditors
part

Price against of action were case filed in state court

Inc LLP
the

settlement now filed motion

resolved

Company

Caremark

PricewaterhouseCoopers but several grounds

pending motion was

dismiss on March

the

denied

Illinois lawsuit Companys on 1999 In May 15 1999

http//www.secinfo.com/dsvrp.69Te.htm

4/15/2007

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SEC

Info

Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q
PricewaterhouseCoopers LLP October hearing

For 9/30/99 filed

Document 124-5
another but motion motion the for

Filed 04/17/2007
to

Page 18 of 30Page
on hearing rule and The lawsuit the has of any

21

of 55

dismiss
declined to no

motion occurred
scheduled otherwise recovery As the another from

on

29
on the

1999

Court

the

progressed into

discovery

stage

January There

28
can

2000
be

assuraoce

PricewaterhouseCoopers more fully in the the The

LLP
Companys
Company
is

described ended

period

U.S Healthcare Inc Aetna Complaint against Aetna in the

June30

1999

Quarterly involved

on Form l0-Q for Report in lawsuit with Aetna

filed complaint the Coram Company United States District Court for the Eastern
10

http//www.secinfo.com/dsvrp.69Te.htm

4/15/2007

Al 38

SEC

Info

Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q

For 9/30/99

Document 124-5

Filed 04/17/2007
Next

Page 19 of 30Page
Just

22 of 55

10-Q

12th Page

of
CORAN NOTES TO HEALTHCARE

Previous
CORPORATION

12th

tJNAUDITED

CONDENSED
--

CONSOLIDATED

FINANCIAL District Coram

STATEMENTS

CONTINUED

of Pennsylvania The Civil Action No 99-CV-3330 on June 30 1999 sets forth claims Aetna for fraud misrepresentation Complaint against between and rescission the breach of contract to the Master relating Agreement parties Network Master for ancillary Division for network

R-Net
five

Agreement to last expected services fee on per for over

effective

Corams Resource management-services through Coram provided its notice of termination of the Under that was 1999 the arrangement June30 Coram managed and provided home health care years
Aetna states under for the stated Master monthly copy
of

2000000
Corarn

enrollee

began

approximately

July

in eight enrollees Aetna enrollees serving 1998 On June the 30 1999 that had been and Pleas of Montgomery

Agreement

complaint 1999 in the

the
Court The to

Aetna
of

Complaint
seeks

received Company filed by Aetna on

June29

Common

Complaint perform under the to the healthcare that have compensation providers render services to Aetnas health As plan members the Company

9911025

Aetna

Pennsylvania Case No relief to- compel equitable declaratory the payment of Agreement including

County

rendered stated in

and the

continue Aetna

to

Complaint
removed pending the in

Aetna the

Aetna

the Agreement Coram Companys right to terminate to federal court and the Aetna Complaint is also Complaint United District Court for the Eastern District of States disputes Action

the

Pennsylvania On court dismiss Master its Master intended July lawsuit the

Civil

No

99-CV-3378
counterclaim against Coram and to in the federal
of

20

1999

Aetna Coram has has

filed

brought claims of

by Coram

Civil Action No 99-CV-3330 for fraud and misrepresentation
filed sued opposition Coram for among an to the other motion

motion to
the In the

rescission breach

Agreement

Coram
Aetna

dismiss.
of

counterclaim

things

and fraudulent Agreement to perform the Master relations relations Aetna seeks with with in

Coram never misrepresentation contending interference with defamation Agreement with bid prospective for the Master plus punitive

contractual contractual

and for interference providers other that allegedly companies excess of $100.0 million in the

Agreement damages

lawsuit

Various

motions

have

been

filed filed an relief

the motion to including for sanctions and Aetna

dismiss other Aetna and for

the parties and others in by Aetna referenced aboveunder Rule 11 of the Federal by

the

lawsuit
of by Civil

motion Rules

Procedure
on in the assets that entities

motion were with

by of Coram

motion

connection To

in the providers the Master Agreement

and constructive trust equitable accounting to intervene filed by approximately eight network of providers assembled by the R-Net Coram has
11

the Court has denied Aetnas Rule date motion to intervene In addition the Court issued trial in April 2000 contemplates The put forth Coram and Company

Aetna

all motions filed by opposed motion and the providers scheduling order that

intends to pursue its claims against Aetna vigorously and to defense all of the claims brought vigorous against by Aetna against the other Coram parties Due to the uncertainties inherent in the ultimate

litigation
preceding recorded loss that adverse financial On
11

of the Aetna described in the litigation disposition cannot be determined and no provision has been paragraphs presently in the Companys Consolidated Financial Statements for any recovery or

of the Aetna described may result upon resolution litigation in such outcome could have material adverse effect litigation

above
on the

An

position
August

results

of

operations

and

liquidity

of

the

Company
chapter the

19

1999
Coram

small

proceeding

against

group of providers Resource Network Inc

filed

an-involuntary

the

Resource

Network

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4/15/2007

Al 39

SEC

Info

Coram Healthcare Corp Case 1:04-cv-01565-SLR 1O-Q

For 9/30/99

Document 124-5

Filed 04/17/2007

Page 20 of 30Page

23 of 55

that operates the R-Net division On November principal subsidiary 12 Company the Resource Network and Coram Independent Practice Inc Association the other involved in the operation of the R-Net Company subsidiary division with the United voluntary petitions District of Delaware under 11 of chapter to the uncertainty of proceedings in the predict what filed States the Bankruptcy United States Court for the Bankruptcy the Company its financial

CIPA
Due cannot

Code

position

such proceedings impact may results of operations or liquidity
11

court bankruptcy have on Coram or

http//www.secinfo.com/dsvrp.69Te.htm

4/15/2007

Al 40

SEC

Info

Case 1:04-cv-01565-SLR Coram Healthcare Corp 10-Q l3thPageof29

For 9/30/99

Document 124-5

Filed 04/17/2007
Next

Page 21 of 30Page
Bottom
Just

24 of 55

110-Q

ITOClisti
CORAM HEALTHCARE

Previous
CORPORATION

13th

NOTES

TO

UNAtJDITED

CONDENSED
--

CONSOLIDATED

FINANCIAL

STATEMENTS

CONTINUED

collectively Apria and one of its affiliates the Comppy the Resource Network and CIPA against
California Orange County York State Inc Coram

Apria
in the

have

also

filed of

suit

Superior

Court

Inc and Apria Healthcare of New Healthcare Healthcare Inc. Network Corporation Coram Resource and Coram Independent Practice Case No 813264 Association Inc regarding claims Aprias complaint other alleges things Aprias specific provider among
Apria
that the Resource Coram that the Network be Resource and CIPA operated
as

the

alter

ego

of The

Coram

and
of

as

result
contracts includes $1.4

should

declared

responsible Network and CIPA

for had

the with and

alleged

breaches

the of

Apria
notifying

for declaratory -compensatory requests million notice had been filed with the bankruptcy

other

relief
it

complaint in excess of the and

Court

involuntary matter has

Code

been

the Resource filed against proceeding of certain of the United by operation provisions with respect to the Resource Network The stayed

Network States

the

voluntary

against will pursue the matter

bankruptcy CIPA Coram all Due

filing similar effect on the claims petition by CIPA will have defenses The Company filed an answer raising applicable available for dismissal and defend itself in vigorously grounds to the uncertainties inherent in

Bank-ruptcy of the

litigation

tIe

ultimate has provision for any loss

of this matter cannot be determined and no presently disposition in the Companys Consolidated Financial Statements been recorded of the litigation with Apria that may result upon resolution The Company is also normal course of its of such other party to

the

business
actions of

resolution financial

various other actions out legal arising believes that the ultimate Management effect will not have material adverse on of

of

position due to the Nevertheless
disposition of these

results

operations or liquidity uncertainties inherent in litigation cannot presently be

gpppy
the Aetna home

the

ultimate

actions The

determined
Coram based and that provides health services The Master would such
--

Contingencies
Coram would to be rendered Agreement reimburse

Master

Agreement

between

for certain financially responsible covered enrollees in certain Aetna HMO contemplates for services amounts certain for the are that the Company under paid for directly referred to in the from each of

covered certain

plans

also Aetna These

circumstances
of the

services
Aetna
as

to providers by Aetna Master -as Agreement payment made the to

leakage
Company of the for payment

withheld reserve

amounts

capitation

reimbursement

Master of

Agreement leakage

approximately

$5.3

claims During leakage million was withheld by

term

Aetna

the Company The Master Agreement Aetna to provide with monthly required for leakage but Aetna failed to do so The most showing its claims reports that Aetna recent did provide to show $19.7 approximately purported report million in leakage claims incurred March with 1999 through approximately more potentially revealed reports Company claims to follow The Companys review of the leakage that the reports were inaccurate in various respects these inaccuracies but received to Aetna no response cannot determine whether to the the
it

initial The At for and
in

time

reported the Company

this the

will

be

held

claims asserted leakage by Aetna due how much if any of cannot estimate responsibility the litigation INCOME TAXES the nine months ended of the described

uncertainties claims among the

responsible of litigation properly issues in

Company above

These

leakage matters are

are

the dispute

During

September

30

1999

and

1998

the

Company

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4/15/2007

A141

SEC

Info

Case 1:04-cv-01565-SLR Coram Healthcare Corp 10-Q
recorded The 1999 income Company As valuation and an income income differ tax effective 1998 tax

For 9/30/99 of for

Document 124-5
$0.4 the from million nine the

Filed 04/17/2007
and $1.9

Page 22 of 30Page
respectively

25 of 55

expense tax rates

million

month

rates

substantially calculated using full valuation

ended periods September combined federal and expected rates
as

30
state of the

applicable reserve tax

providing
of

statutory its against assets tax are

result tax

deferred net
is

assets
million the taxes

ember
allowance

30

1999

deferred of

of

$149.9

Realization

deferred

assets the
in

dependent of

tO generate taxable income in ability of the Company differences relate to temporary primarily consisting the costs restructuring
12

future

upon Deferred accrued

part

http//www.secinfo.conildsvrp

69Te.htm

4/15/2007

Al 42

SEC

Info

Coram Healthcare Case 1:04-cv-01565-SLR Corp 10-Q

For 9/30/99

Document 124-5
TOC
1st
HEALTHCARE

Filed 04/17/2007
Next

Page 23 of 30Page
Bottom
Just

26 of 55

1O-Q

14th

Page

of

Previous
CORPORATION

14th

CORAM NOTES TO

UNAUDITED

CONDENSED
--

CONSOLIDATED

FINANCIAL for goodwill and other and other

STATEMENTS

CONTINUED
allowances not loss for doubtful for income tax are that

charge accounts

longlived

assets
that are

accrued

liabilities

deductible

until paid or realized and to net purposes future taxable income deductible against

operating

carryforwards

In January the Internal Revenue Service the 1999 completed of the Comp1y for the year ended examination of the federal income tax return to the prior tax September 30 1995 and proposed substantial adjustments million the Company The Company has agreed to adjustments of $24.4 the net operating loss carryforwards available The only affect the does not agree with the other proposed Company adjustments regarding deduction of warrants write-off of goodwill and the specified liability portion if the IRS prevails of the 1995 loss which would affect the prior years tax that liabilities of

IRS

On My 14 the Company received notice of 1999 statutory with respect to the proposed The alleged deficiency adjustments deficiency totaled $12.7 million plus interest and penalties to be approximately the notice determined The Company is contesting of deficiency through

liabilities

administrative

proceedings most

and

litigation

and

will

vigorously defend
IRS relates
as

its to the

position
ability of liability previously contesting petition potential the given

The the

significant adjustment proposed by the to categorize certain net operating Company and the offset refunds income in the

losses

losses

received the and

in prior years for which the amount of approximately $12.7 petition On October be with Due the to United the the IRS

specified has Company

million
Tax

On Court to the final

August_111999

Cornply filed notice of defiency

States

1999
include

resolution liabilities
early with

the petition requested the Companys financial No of phase the IRS or

denied

statements

uncertainty for reserve Company inherent

responded of will in

these prevail any with

that the assurance can be given this matter and the uncertainties in

proceeding to respect liquidity INDUSTRY

If the Company does not prevail litigation the proposed material the financial and adjustments position of the Company could be materially affected adversely SEGMENT AND GEOGRAPHIC

AREA

OPERATIONS performance basis The
of-

Management reviewing reportable

results

the operating regularly-evaluates on product or service provided

the

Company

by

Companys

are Infusion RNet and CPS Infusion is base segments which derives its revenue from alternate site infusion business primarily RNets revenue is derived primarily from management services offered therapy to HMO5 and other managed care for PPO5 atrisk physician organizations groups and home health services CPS primarily mailorder pharmacy provides specialty benefit services The other pharmacy management nonreportable segment represents

ppns

301998
months

services for the three and nine months lithotripsy and clinical trials and informatics services for the

ended three

September and nine

ended

ptember 30
Financial

Consolidated Coram

1999 See Statements

Note

to

the

Unaudited

Condensed

before interest income and expense taxes depreciation for purposes of performance measurement The measurement basis for segment assets includes receivable net net accounts inventory and equipment and other current assets property uses earnings amortization

EBITDA

13

http//www.secinfo.com/dsvrp.69Te.htm

4/15/2007

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SEC

Info

Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q

For 9/30/99

Document 124-5

Filed 04/17/2007
Next

Page 24 of 30Page
Bottom Just

27 of 55

10-Q

15th

Page

of

29
CORAM HEALTHCARE CORPORATION

15th

NOTES

TO

UNAUDITED

CONDENSED
--

CONSOLIDATED

FINANCIAL information

STATEMENTS
is as

CONTINUED in thousands
Enlarge/Download Table

Summary

by

segment

follows

THREE

AS OF AND FOR THE MONTHS ENDED
SEPTEMBER 1999

AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER

30
1998

30
1998

1999

INFUSION Revenue from external customers

$109434

revenue Interseginent income Interest Equity joint Segment Segment Segment k-NET Revenue Interest Equity joint Segment Segment Segment cps Revenue Interest Equity joint Segment Segment in from external revenue net income of unconsolidated customers in in net income of unconsolidated ventures

4260
15 193

$100751 4960
19

$323469 19665
60 194

$284275 12275
51

55

102

EITDA
assets asset

profit expenditures

14783 146693
835

15792 122305

38038 146693

1194
29674

3291
70125
25

43813 122305 3487 51067
10

from

external revenue

customers

10293

Intersegment net

income income loss of unconsolidated ventures EBITDA assets asset expenditures

3613
17879
67

893

28lli
17879
880

814
9618 1494 32469
927

9618
893

22644
966

13169
427

62310

Intersegment

1582

income ventures EBITDA assets expenditures external revenue income in net income of unconsolidated customers profit 502 723

1908
20283

20283
628 861

9148
25

1561 9148
177 658

asset Segment OTHER

LL

1450 1079

Revenue Interest Equity joint Segment Segment Segment

from

13

Intersegment

ventures EBITDA assets asset expenditures profit

ioss

124 178

79
178

294
--

14

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Case 1:04-cv-01565-SLR Coram Healthcare 10-Q Corp
16th Page of 29

For 9/30/99

Document 124-5

Filed 04/17/2007
INext

Page 25 of 30Page
Just

28 of 55

1O-Q

TOClisti
CORAM HEALTHCARE

Previous
CORPORATION

16th

NOTES

TO

UNAUDITED

CONDENSED
---

CONSOLIDATED

FINANCIAL reconciliation

STATEMENTS

CONTINUED
profit amounts

loss
in the

of the Companys EBITDA segment revenue segment items to the corresponding assets and other segment significant Consolidated Financial Statements are as follows in thousands

Enlarge/Download
AS
TEREE

Table

OF AND FOR THE MONTHS ENDED

AS OF AND EtR THE NINE MONTHS ENDED
SEPTEMBER 1999

SEPTEMBER

30
1998

30
1998

1999

NET Total Other

REVENUES for reportable of Total segments revenue revenue MINORITY

$147597
861

$148981
13

$477151

$38l013
658

revenue intersegment consolidated TAXES for AND

1079

Elimination

5226
$143232

5387
$143607

21247
$456983

13202
$368469

LOSS Total Other

BEFORE EBITDA EBITDA

INCOME

INTERESTS profit profit and reportable

segments

11672

17408

11835

44560
294

loss

124

Goodwill

amortization

Depreciation expense Interest All other Loss

expense amortization other

2711 2763 8110

2794 2851 6114 7789 2139
$141071 293628 $434699

79 8159 8515
22193 24877 $5l988

8337 8788
26372 21034 $19677

expgm
income before

expense
income

net and

13078
minority

taxes

interests ASSETS Total Other assets assets Consolidated total assets for reportable segments

$l4866

$184855 251821 $436676

$184855 251821 $436676

$141071 293628 $434699

For assets

each

of

the

were are

within not

years presented the United States

the The

Compjys
Comppy
and revenue

primary maintains

and operations an infusion from this

operation business Net

in Canada

however
to

the the

assets

generated

material from one

Companys
for

operations

revenue

customer
8%

represented consolidated and
15%

approximately net revenue

and the

19%
three the

the Companys reportable segments of the Companys total respectively months nine ended months September ended

for

30
the

1999

and 1999

1998
and

and and

11%
CPS

respectively
from the

for

pmber
for

30

1998
of the

Net

revenue

Medicare

and

Medicaid

Infusion

Companys

segments represented approximately for total consolidated net revenue and

programs 19% and the

18%
for

Companys respectively
ended nine months

three

months the

September ending

30

1999

1998
and

and

18%

and

21%

respectively

ptember_301999
EVENTS

1998

SUBSEQUENT

On October 29 1999 lmara1 the pmay announced that Donald Chairman of the Board and former Chief Executive would return Officer Companys Chief Executive Officer on an interim basis as the Company as the Companys searches for new Chief Executive Officer following the departure of Richard

Smith
On

November12

1999

two

Company

subsidiaries

that

comprised

the

R-Net

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Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q
division States filed voluntary

For 9/30/99

Document 124-5
to

Filed 04/17/2007

Page 26 of 30Page
of the United Consolidated

29 of 55

Code Bankruptcy Financial Statements

bankruptcy See Note

under Chapter 11 petitions these Unaudited Condensed

15

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Coram Healthcare Case 1:04-cv-01565-SLR 10-Q Corp

For 9/30/99

Document 124-5

Filed 04/17/2007
Next

Page 27 of 30Page
Just
AND RESULTS

30 of 55

17th
ITEM OF

Page

of 29
DISCUSSION
AND ANALYSIS OF

17th

M1NAGEMENTS

FINANCIAL

CONDITION

OPERATIONS This on Form Report term is defined

statements Act of

Quarterly as such and

l0Q
in

contains Private

certain that made made

forward-looking
based on Reform Litigation the beliefs of currently

the

Securities are by and actual in this and

1995

information

the rnanagement of Coram as available to the management materially important associated from the factors such

to Coram relating well as assumptions of

information results

Coram
of

The

Companys

may vary

forwardlooking

statements operating

as

history

losses

due to report uncertainties

with future operating results indebtedness significant outstanding conversion debt holders limited liquidity equity rights held by existing reimbursement related that pay for the risks shifts in the mix of parties with third parties services on Companys dependence relationships concentration complete the of outcome stock of of large

payors

industry

competition
of the

acquisitions
certain New recruitment

government

regulation

of timing home health

or

ability

to

care

industry

personnel
impacts the

price
from the of

on key with Aetna and the IRS litigation dependence and retention of trained personnel potential volatility York Stock Exchange and unanticipated status listing 2000

AnalyJs
December to

Fii
Year Annual

Issue
on

See and

Item of
as

Managements
Operations for amended the and words similar on
--

Discussion Risk year

and in

Results

Factors
ended are

Companys

31

1998

on Form Report When used in this

10K

the

report
Such events and to

estimate project
expressions reflect the intended current available currently that could actual cause

believe anticipate
information results to and are

intend expect
statements
to to future risks not

forwardlooking identify views of Coram with respect
subject differ materially

statements based

uncertainties contemplated undue place

from

those

in

such

Coram does speak only as of the date hereof to release to these any obligatiOn publicly any revisions after the date statements to reflect events or circumstances forwardlooking hereof or to reflect the occurrence of unanticipated events not undertake Background

statements Readers are cautioned which forwardlooking statements

reliance

forward-looking on these

General
alternate ancillary site

The

Company

has the

outside

management mailorder pharmacy services and centralized management for clinical clinical research trials and medical support Other such services
as

network

in four principal lines engaged infusion and related hospital therapy benefit services pharmacy management

been

of and

business
specialty and

services

achninis-trative

informatics home health

services
products

offered medical

by

Coram

include and

nonintravenous
respiratory overall therapy

durable

equipment The could

services

Business the basic

Strategy
that

Companys
lead to

business

factors

profitability

cost reduction and control quality programs The Companys revenue include generation programs relationships where In

strategic and improvement focus

is focused on strategy revenue generation

cash

collections
operating the its

profitably
Company therapy continued
is

ppn gmaAys
to patients

on business

can provide alternate site marketing

while high quality of care infusion therapy business efforts aimed
at

continuing physician

emphasize

improving

mix

requiring with HIV/AIDS deficiencies established developing hemophilia clinicians focus

and payor relationships relationships It also has aimed at serving the development of its specialty patients programs intravenous nutrition pre and posttransplant patients patients and and the with chronic disorders such To
as

hemophilia

immune has

alphaone
Coram

service through to serve for

focus to provide model geared toward the needs of persons with meeting distribution center staffed with experienced specialized the divisions is developing similar customers The Company nutrition and transplant

antitrypsin deficiency Services division Hemophilia

that

end

the

Company on

programs

its

services

Meanwhile

the

CPS

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Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q
division companies has focused

For 9/30/99

Document 124-5
efforts on self-funded

Filed 04/17/2007
smaller

Page 28 of 30Page

31

of 55

with and

its marketing self-insured plans payors

unions
as

managed care

pre

conditions the its the reach

post-transplant such diabetes as the CPS division

health plans including health labor employer plans with and patient needs such populations specialized with HIV/AIDS and chronic patients patients and by

asthma

The

of
at

specialty internet

mailorder
beginning marketing that can in

pharmacy

developing services and CPS The

is pursuing plan to expand Company to accept the capability orders for

over

the

internet

The

site

is

now over
is

accessable

www.corampharmacy.com

2000

anticipates Clinical Trials and pharmaceutical the centralized
16

generating Informatics medical

revenues division device

its directing manufacturers

efforts benefit

toward from

and

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4/15/2007

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Info

Case 1:04-cv-01565-SLR Coram Healthcare Corp 10-Q

For 9/30/99

Document 124-5

Filed 04/17/2007

Page 29 of 30Page
Just
the that Company some of the

32 of 55

1O-Q

18thPageof9
management
can most provide data these collection of

Iic-cIi-I
services offered integration by with the opportunity to complete their clinical trials more quickly and

18th

manufacturers aspects

challenging

the of

The Company has implemented cost reduction and control reduction and control of cost of services and operating poorly

programs

focused

on

branches and review of branch performing service in the Companys infusion division in particular is quality therapy an internal task force more rigorous being closely monitored through reporting and the independent Company
is

assessment expenses efficiencies of Delivery

patient

satisfaction to collections for

surveys
on methods

Furthermore
reimbursement and continued

management by

throughout

improved systems

continuing billing and cash and the

concentrate

emphasizing assessment of

support

support filing

reimbursement
bankruptcy petitions by its Coram and Coram Independent Practice

Following Resource

of voluntary

Network Inc Association
anticipates that and the of

Inc
R-Net

Resource
will cease

Network
offering by

CIPA
services

collectively
performed

R-Net

subsidiaries

pmay
to the

services
payor

network ancillary management back RNet will be transitioned

customers

RNet

The Company has engaged Deutsche Bank Alex Brown to assess strategic the possible sale of CPS to for CPS including third party If alternatives sale of CPS could assist the Company in paying down its debt and consummated improving its financial

position

considered alternatives in being Strategic by the Company currently Servides addition and the Coram Hemophilia to the CPS strategic analysis division include the continued investment into and development of services Trials and Informatics division There can be no provided by the Clinical assurance that alternatives commercially will capital Factors in any growth will be effected its local or be or will regional available be no business to the or other on any investment strategic Company assurance that

terms and there can acceptable be available to the Company Recent Operating Results

Affecting

with Aetna U.S Dispute notified Aetna that effective

Healthcare

Agreement
presently Condensed The period

The Company is-now for trial scheduled Consolidated

Inc On June 30 1999 the Company Coram had terminated the Master immediately in litigation with Aetna and the -case is
in April

2000

See

Note

to

the

Unaudited

Financial

Statements
under the Master Agreement during the nine month

Comppys

performance

ended

September

approximately

approximately the Company 1999 under claims

resulted in losses under the agreement of 1999 of costs of services $24.0 million including paid and accrued $55.4 million During the three month ended period 30 September recorded no its losses or costs do of not service take related account to

30

he
of

Master Aetna in

Agreement
including the

These

figures

into

performance the various

litigation recognized claims and alleged in

calculating only

revenue included the

claims Also due to the uncertainties of leakage of the these losses Coram did not include as part retained amounts for alleged previously by Aetna leakage
the the actual Company received capitation payments believes that termination of
as

revenue
Master

As

lawsuit

the

was proper Agreement toward terminating burdensome financial in the on the of statements

and was by Aetna necessary upon nonpayments induced contract that was fraudulently financially took in its third quarter Company The Company charge based for costs associated Note with to

step

amount

Consolidated

$5.1 Financial

million See St