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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 March 31, 2002

OR

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | 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
incorporation or organization) |  | (I.R.S. Employer Identification No.)

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   
o

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 May 10, 2002
|                             |  |                            
|Common Stock, $.01 par value |  | 49,974,735                 





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TABLE OF CONTENTS



|                                                                                               |                                           |  |  |  |  |  |  | 
|---------------------------------------------------------------------------------------------- | ----------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                                                                
|ITEM 1. FINANCIAL STATEMENTS                                                                  
|Condensed Consolidated Balance Sheets                                                         
|Condensed Consolidated Income Statements                                                      
|Condensed Consolidated Statements of Cash Flows                                               
|Notes to Condensed Consolidated Financial Statements                                          
|ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|                                                                                               | RISK FACTORS                             
|PART II  OTHER INFORMATION                                                                   
|ITEM 1. LEGAL PROCEEDINGS.                                                                    
|                                                                                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
|SIGNATURE                                                                                     
|RESTRICTED STOCK AWARD AGREEMENT                                                              



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RENAL CARE GROUP, INC.

INDEX

|                               |  |                                                                                                                  |  |          |    | 
|------------------------------ |  | ---------------------------------------------------------------------------------------------------------------- |  | -------- | -- | 
|                               |  |                                                                                                                  |  | Page No.
|                               |  |                                                                                                                  |  |         
|PART I 
FINANCIAL INFORMATION |  |                                                                                                                  |  |         
|Item 1.                        |  | Financial Statements                                                                                             |  |          |    | 
|                               |  | Condensed Consolidated Balance Sheets
December 31, 2001 and March 31, 2002 (unaudited)                           |  |          | 1  | 
|                               |  | Condensed Consolidated Income Statements  (unaudited)
For the three months ended March 31, 2001 and 2002        |  |          | 2  | 
|                               |  | Condensed Consolidated Statements of Cash Flows  (unaudited)
For the three months ended March 31, 2001 and 2002 |  |          | 3  | 
|                               |  | Notes to Condensed Consolidated Financial Statements  (unaudited)                                               |  |          | 4  | 
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition And
Results of Operations                            |  |          | 9  | 
|                               |  | Risk Factors                                                                                                     |  |          | 12 | 
|PART
II  OTHER INFORMATION    |  |                                                                                                                  |  |         
|Item 1.                        |  | Legal Proceedings                                                                                                |  |          | 19 | 
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                                                 |  |          | 19 | 

Note: Item 3 of Part I, and Items 2, 3, 4, and 5 of Part II are omitted because
they are not applicable





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PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

RENAL CARE GROUP, INC.




Condensed Consolidated Balance Sheets
(in thousands, except per share data)


|                                           |                                                                                                                                                |   |         |         |              |   |           |         |             |  | 
|------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------- | - | ------- | ------- | ------------ | - | --------- | ------- | ----------- |  | 
|                                           |                                                                                                                                                |   |         |         | December 31, |   | March 31,
|                                           |                                                                                                                                                |   |         |         | 2001         |   | 2002     
|                                           |                                                                                                                                                |   |         |         |              |   |          
|                                           |                                                                                                                                                |   |         |         |              |   |           |         | (unaudited)
|ASSETS                                     |                                                                                                                                                |   |         |         |              |   |           |        
|Current assets:                            |                                                                                                                                                |   |         |         |              |   |           |        
|                                           | Cash and cash equivalents                                                                                                                      |   | $       | 27,423  |              |   | $         | 55,520  |            
|                                           | Accounts receivable, net                                                                                                                       |   |         | 127,056 |              |   |           | 133,913 |            
|                                           | Inventories                                                                                                                                    |   |         | 16,292  |              |   |           | 16,408  |            
|                                           | Prepaid expenses and other current assets                                                                                                      |   |         | 18,584  |              |   |           | 11,889  |            
|                                           | Income taxes receivable                                                                                                                        |   |         | 7,058   |              |   |           |        |            
|                                           | Deferred income taxes                                                                                                                          |   |         | 16,894  |              |   |           | 16,894  |            
|                                           |                                                                                                                                                |   |         |         |              |   |           |        
|Total current assets                       |                                                                                                                                                |   | 213,307 |         |              |   | 234,624   |        
|Property, plant and equipment, net         |                                                                                                                                                |   | 175,925 |         |              |   | 180,507   |        
|Goodwill                                   |                                                                                                                                                |   | 244,738 |         |              |   | 246,282   |        
|Intangible
assets, net                     |                                                                                                                                                |   | 10,365  |         |              |   | 11,045    |        
|
|Other assets                               |                                                                                                                                                |   | 7,922   |         |              |   | 8,479     |        
|                                           |                                                                                                                                                |   |         |         |              |   |           |        
|Total assets                               |                                                                                                                                                | $ | 652,257 |         |              | $ | 680,937   |        
|                                           |                                                                                                                                                |   |         |         |              |   |           |        
|LIABILITIES AND STOCKHOLDERS EQUITY       |                                                                                                                                                |   |         |         |              |   |           |        
|Current liabilities:                       |                                                                                                                                                |   |         |         |              |   |           |        
|                                           | Accounts payable                                                                                                                               |   | $       | 28,198  |              |   | $         | 27,761  |            
|                                           | Income taxes payable                                                                                                                           |   |         |        |              |   |           | 3,624   |            
|                                           | Current portion of long-term debt                                                                                                              |   |         | 726     |              |   |           | 692     |            
|                                           | Other current liabilities                                                                                                                      |   |         | 81,544  |              |   |           | 82,686  |            
|                                           |                                                                                                                                                |   |         |         |              |   |           |        
|Total current liabilities                  |                                                                                                                                                |   | 110,468 |         |              |   | 114,763   |        
|Long-term debt, net of current portion     |                                                                                                                                                |   | 3,776   |         |              |   | 3,658     |        
|Deferred income taxes                      |                                                                                                                                                |   | 12,728  |         |              |   | 12,728    |        
|Minority interest                          |                                                                                                                                                |   | 15,034  |         |              |   | 19,822    |        
|                                           |                                                                                                                                                |   |         |         |              |   |           |        
|Total liabilities                          |                                                                                                                                                |   | 142,006 |         |              |   | 150,971   |        
|                                           |                                                                                                                                                |   |         |         |              |   |           |        
|Commitments and contingencies              |                                                                                                                                                |   |         |         |              |   |           |        
|Stockholders equity:                      |                                                                                                                                                |   |         |         |              |   |           |        
|                                           | Preferred stock, $0.01 par value, 10,000 shares authorized,
none issued                                                                        |   |         |        |              |   |           |        |            
|                                           | Common stock, $0.01 par value, 90,000 shares authorized,
49,597 and 49,847 shares issued at December 31, 2001
and March 31, 2002, respectively |   |         | 496     |              |   |           | 499     |            
|                                           | Treasury stock, 100 and 380 shares of common stock at
December 31, 2001 and March 31, 2002, respectively                                       |   |         | (3,059  | )            |   |           | (11,368 | )          
|                                           | Additional paid-in capital                                                                                                                     |   |         | 277,300 |              |   |           | 283,828 |            
|                                           | Retained earnings                                                                                                                              |   |         | 235,514 |              |   |           | 257,007 |            
|                                           |                                                                                                                                                |   |         |         |              |   |           |        
|Total stockholders equity                 |                                                                                                                                                |   | 510,251 |         |              |   | 529,966   |        
|                                           |                                                                                                                                                |   |         |         |              |   |           |        
|Total liabilities and stockholders equity |                                                                                                                                                | $ | 652,257 |         |              | $ | 680,937   |        
|                                           |                                                                                                                                                |   |         |         |              |   |           |        

See accompanying notes to condensed consolidated financial statements

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RENAL CARE GROUP, INC.




Condensed Consolidated Income Statements(in thousands, except per share data)(unaudited)


|                                                 |                                     |   |                    |         |      |   |         |         | 
|------------------------------------------------ | ----------------------------------- | - | ------------------ | ------- | ---- | - | ------- | ------- | 
|                                                 |                                     |   | Three Months Ended
|                                                 |                                     |   | March 31,         
|                                                 |                                     |   |                   
|                                                 |                                     |   | 2001               |         | 2002
|                                                 |                                     |   |                    |         |     
|Net revenue                                      |                                     | $ | 174,778            |         |      | $ | 206,678 |        
|Operating costs and expenses:                    |                                     |   |                    |         |      |   |         |        
|                                                 | Patient care costs                  |   |                    | 113,328 |      |   |         | 134,712 | 
|                                                 | General and administrative expenses |   |                    | 15,003  |      |   |         | 17,560  | 
|                                                 | Provision for doubtful accounts     |   |                    | 4,800   |      |   |         | 5,484   | 
|                                                 | Depreciation and amortization       |   |                    | 8,852   |      |   |         | 9,362   | 
|                                                 |                                     |   |                    |         |      |   |         |        
|Total operating costs and expenses               |                                     |   | 141,983            |         |      |   | 167,118 |        
|                                                 |                                     |   |                    |         |      |   |         |        
|Income from operations                           |                                     |   | 32,795             |         |      |   | 39,560  |        
|Interest expense, net                            |                                     |   | 999                |         |      |   | 173     |        
|                                                 |                                     |   |                    |         |      |   |         |        
|Income before minority interest and income taxes |                                     |   | 31,796             |         |      |   | 39,387  |        
|Minority interest                                |                                     |   | 3,130              |         |      |   | 4,710   |        
|                                                 |                                     |   |                    |         |      |   |         |        
|Income before income taxes                       |                                     |   | 28,666             |         |      |   | 34,677  |        
|Provision for income taxes                       |                                     |   | 10,952             |         |      |   | 13,184  |        
|                                                 |                                     |   |                    |         |      |   |         |        
|Net income                                       |                                     | $ | 17,714             |         |      | $ | 21,493  |        
|                                                 |                                     |   |                    |         |      |   |         |        
|Net income per share:                            |                                     |   |                    |         |      |   |         |        
|                                                 | Basic                               |   | $                  | 0.37    |      |   | $       | 0.43    | 
|                                                 |                                     |   |                    |         |      |   |         |        
|                                                 | Diluted                             |   | $                  | 0.36    |      |   | $       | 0.42    | 
|                                                 |                                     |   |                    |         |      |   |         |        
|Weighted average shares outstanding:             |                                     |   |                    |         |      |   |         |        
|                                                 | Basic                               |   |                    | 47,259  |      |   |         | 49,426  | 
|                                                 |                                     |   |                    |         |      |   |         |        
|                                                 | Diluted                             |   |                    | 49,611  |      |   |         | 51,222  | 
|                                                 |                                     |   |                    |         |      |   |         |        

See accompanying notes to condensed consolidated financial statements

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RENAL CARE GROUP, INC.




Condensed Consolidated Statements of Cash Flows(in thousands)(unaudited)


|                                                                                  |                                                                              |                                           |         |                    |         |      |         |        |         |  
|--------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ----------------------------------------- | ------- | ------------------ | ------- | ---- | ------- | ------ | ------- | -
|                                                                                  |                                                                              |                                           |         | Three Months Ended
|                                                                                  |                                                                              |                                           |         | March 31,         
|                                                                                  |                                                                              |                                           |         |                   
|                                                                                  |                                                                              |                                           |         | 2001               |         | 2002
|                                                                                  |                                                                              |                                           |         |                    |         |     
|OPERATING ACTIVITIES                                                              |                                                                              |                                           |         |                    |         |      |         |       
|Net income                                                                        |                                                                              | $                                         | 17,714  |                    |         |      | 21,493  |       
|Adjustments to reconcile net income to net cash
provided by operating activities: |                                                                              |                                           |         |                    |         |      |         |       
|                                                                                  | Depreciation and amortization                                                |                                           |         | 8,852              |         |      |         | 9,362  |        
|                                                                                  | Distributions to minority shareholders                                       |                                           |         | (1,469             | )       |      |         | (2,818 | )      
|                                                                                  | Income applicable to minority interest                                       |                                           |         | 3,130              |         |      |         | 4,710  |        
|                                                                                  | Changes in operating assets and liabilities net of effects from acquisitions |                                           |         | (6,637             | )       |      |         | 12,459 |        
|                                                                                  |                                                                              |                                           |         |                    |         |      |         |       
|                                                                                  |                                                                              | Net cash provided by operating activities |         |                    | 21,590  |      |         |        | 45,206  |  
|INVESTING ACTIVITIES                                                              |                                                                              |                                           |         |                    |         |      |         |       
|Purchases of property and equipment                                               |                                                                              |                                           | (10,540 | )                  |         |      | (13,001 | )     
|Cash paid for acquisitions, net of cash acquired                                  |                                                                              |                                           | (4,972  | )                  |         |      | (2,676  | )     
|Change in other assets                                                            |                                                                              |                                           | (3,266  | )                  |         |      | (1,048  | )     
|                                                                                  |                                                                              |                                           |         |                    |         |      |         |       
|                                                                                  |                                                                              | Net cash used in investing activities     |         |                    | (18,778 | )    |         |        | (16,725 | )
|FINANCING ACTIVITIES                                                              |                                                                              |                                           |         |                    |         |      |         |       
|Net payments of debt                                                              |                                                                              |                                           | (9,105  | )                  |         |      | (152    | )     
|Net proceeds from issuance of common stock                                        |                                                                              |                                           | 4,176   |                    |         |      | 5,181   |       
|Investment by joint venture partner                                               |                                                                              |                                           |        |                    |         |      | 2,896   |       
|Repurchase of treasury shares                                                     |                                                                              |                                           |        |                    |         |      | (8,309  | )     
|                                                                                  |                                                                              |                                           |         |                    |         |      |         |       
|                                                                                  |                                                                              | Net cash used in financing activities     |         |                    | (4,929  | )    |         |        | (384    | )
|                                                                                  |                                                                              |                                           |         |                    |         |      |         |       
|(Decrease) increase in cash and cash equivalents                                  |                                                                              |                                           | (2,117  | )                  |         |      | 28,097  |       
|Cash and cash equivalents at beginning of period                                  |                                                                              |                                           | 29,902  |                    |         |      | 27,423  |       
|                                                                                  |                                                                              |                                           |         |                    |         |      |         |       
|Cash and cash equivalents at end of period                                        |                                                                              | $                                         | 27,785  |                    |         | $    | 55,520  |       
|                                                                                  |                                                                              |                                           |         |                    |         |      |         |       

See accompanying notes to condensed consolidated financial statements

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RENAL CARE GROUP, INC.




Notes to Condensed Consolidated Financial StatementsFor the Three Months Ended
March 31, 2002(unaudited)


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 March 31, 2002, the Company provided
dialysis and ancillary services to approximately 19,200 patients through more
than 240 outpatient dialysis centers in 26 states, in addition to providing
acute dialysis services in more than 120 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® or
EPO);
|
| |  |  | home dialysis services;                                                                                                    
|
| |  |  | inpatient hemodialysis services provided to acute care hospitals and skilled nursing facilities;                           
|
| |  |  | laboratory services; and                                                                                                   
|
| |  |  | management contracts with hospital-based and medical university dialysis programs.                                         

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 Centers for Medicare &
Medicaid Services (CMS). For the three months ended March 31, 2002,
approximately 57% 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 1, 2001, Congress increased the Medicare composite rate by
1.2%. An additional increase of 1.2% took effect April 1, 2001. The April 1,
2001 increase included an adjustment factor that made that 1.2% increase
effective for all of 2001. Accordingly, the net result of the 1.2% increases
on January 1, 2001 and April 1, 2001, plus the April adjustment factor, was an
effective increase of 2.4% for calendar year 2001. Neither Congress nor CMS
approved an increase in the composite rate for 2002.

The Medicare composite rate applies to a designated group of outpatient
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 part of the composite rate, including specific drugs such
as EPO and some physician-ordered tests provided to dialysis patients.

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For patients with private health insurance, dialysis is typically
reimbursed at rates higher than Medicare during the first 30 months of
treatment. After that period Medicare becomes 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 significant 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,
Amgen. In April 2002, Amgen implemented its third increase of 3.9% in as many
years. This increase will not affect Renal Care Groups results of operations
in 2002 because Renal Care Groups contract with Amgen included price
protection for all of 2002. The Company is currently engaged in negotiations
with Amgen concerning its contract for 2003. Renal Care Group and Amgen have
agreed in principle that the Companys current pricing formula will remain in
effect for 2003. As a result, the Company believes, although it can give no
assurances, that it will be able to mitigate a substantial portion of the 2002 price increase in 2003.
This agreement in principle is conditioned on negotiating and signing a final
written amendment to the contract between the Company and Amgen.

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 29, 2002.

2.   Reclassifications

Certain prior year
balances have been reclassified to conform to the current period
presentation. Such reclassifications had no effect on the net results
of operations as previously reported.

3.   Goodwill and
Intangible Assets (in thousands, except per share data)

On January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other
Intangible Assets, which addresses the financial accounting and reporting
standards for the acquisition of intangible assets and for goodwill and other intangible assets subsequent to the
acquisition. This accounting standard requires that goodwill be
disclosed separately from other intangible assets in the balance
sheet and that goodwill no longer be
amortized; instead, goodwill will be tested for impairment on a periodic basis. The provisions of this
accounting standard also require that the Company complete a transitional
impairment test within six months of the Companys adoption of this standard,
with any impairments identified treated as a cumulative effect of a change in
accounting principle.

In accordance with SFAS No. 142, the Company discontinued the amortization
of goodwill effective January 1, 2002. A reconciliation of previously reported
net income and earnings per share to the pro forma amounts adjusted for the
exclusion of goodwill amortization net of the related income tax effect
follows:

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|                                              |  |                              |        |      |  |   |        | 
|--------------------------------------------- |  | ---------------------------- | ------ | ---- |  | - | ------ | 
|                                              |  | Three Months Ended March 31,
|                                              |  |                             
|                                              |  | 2001                         |        | 2002
|                                              |  |                              |        |     
|Reported net income                           |  | $                            | 17,714 |      |  | $ | 21,493 | 
|Add: goodwill amortization, net of tax        |  |                              | 863    |      |  |   |       | 
|                                              |  |                              |        |      |  |   |        | 
|Pro forma adjusted net income                 |  | $                            | 18,577 |      |  | $ | 21,493 | 
|                                              |  |                              |        |      |  |   |        | 
|Reported basic earnings per share             |  | $                            | 0.37   |      |  | $ | 0.43   | 
|Add: goodwill amortization, net of tax        |  |                              | .02    |      |  |   |       | 
|                                              |  |                              |        |      |  |   |        | 
|Pro forma adjusted basic earnings per share   |  | $                            | 0.39   |      |  | $ | 0.43   | 
|                                              |  |                              |        |      |  |   |        | 
|Reported diluted earnings per share           |  | $                            | 0.36   |      |  | $ | 0.42   | 
|Add: goodwill amortization, net of tax        |  |                              | .01    |      |  |   |       | 
|                                              |  |                              |        |      |  |   |        | 
|Pro forma adjusted diluted earnings per share |  | $                            | 0.37   |      |  | $ | 0.42   | 
|                                              |  |                              |        |      |  |   |        | 

Changes in the carrying amount of goodwill for the quarter ended March 31,
2002, are as follows:

|                                    |  |   |         |      
|----------------------------------- |  | - | ------- | -----
|Balance as of December 31, 2001     |  | $ | 244,738
|Goodwill acquired during the period |  |   |         | 1,544
|                                    |  |  
|Balance as of March 31, 2002        |  | $ | 246,282
|                                    |  |  

Information regarding
the Companys separately identifiable intangible assets are as follows:

|                                                                          |  |                 |        |              |   |             |  |   |        |  |  | 
|------------------------------------------------------------------------- |  | --------------- | ------ | ------------ | - | ----------- |  | - | ------ |  |  | 
|                                                                          |  |                 |        |              |   | Accumulated |  |   |        | 
|                                                                          |  | Carrying Amount |        | Amortization |   | Net        
|                                                                          |  |                 |        |              |   |            
|Noncompete
and acute dialysis services agreements as of December 31, 2001 |  | $               | 16,090 |              | $ | 5,725       |  | $ | 10,365
|                                                                          |  |                 |        |              |   |             |  |   |       

|                                                                       |  |                 |        |              |   |             |  |   |        |  |  | 
|---------------------------------------------------------------------- |  | --------------- | ------ | ------------ | - | ----------- |  | - | ------ |  |  | 
|                                                                       |  |                 |        |              |   | Accumulated |  |   |        | 
|                                                                       |  | Carrying Amount |        | Amortization |   | Net        
|                                                                       |  |                 |        |              |   |            
|Noncompete
and acute dialysis services agreements as of March 31, 2002 |  | $               | 17,222 |              | $ | 6,177       |  | $ | 11,045
|                                                                       |  |                 |        |              |   |             |  |   |       

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The intangible assets
are being amortized over their original useful lives, ranging from
four to ten years. Amortization expense for the three months ended March 31, 2002 was
approximately $452.
Estimated amortization expense for each of the five succeeding fiscal years is
as follows:



|                         |  |        |       | 
|------------------------ |  | ------ | ----- | 
|Year ending December 31, |  | Amount
|                         |  |       
|2002                     |  | $      | 1,943 | 
|2003                     |  |        | 1,986 | 
|2004                     |  |        | 1,986 | 
|2005                     |  |        | 1,969 | 
|2006                     |  |        | 1,914 | 

4.   Earnings Per Share (in thousands, except per share data)

The following table sets forth the computation of basic and diluted income
per share:

|                      |                                                                                                         |                         |   |                              |        |      |   |        |        | 
|--------------------- | ------------------------------------------------------------------------------------------------------- | ----------------------- | - | ---------------------------- | ------ | ---- | - | ------ | ------ | 
|                      |                                                                                                         |                         |   | Three Months Ended March 31,
|                      |                                                                                                         |                         |   |                             
|                      |                                                                                                         |                         |   | 2001                         |        | 2002
|                      |                                                                                                         |                         |   |                              |        |     
|Numerator:            |                                                                                                         |                         |   |                              |        |      |   |       
|                      | Numerator for basic and diluted income per share                                                        |                         | $ | 17,714                       |        |      | $ | 21,493 |       
|Denominator:          |                                                                                                         |                         |   |                              |        |      |   |       
|                      | Denominator for basic net income per share                                                             |                         |   |                              |        |      |   |        |       
|                      |                                                                                                         | Weighted-average shares |   |                              | 47,259 |      |   |        | 49,426 | 
|                      | Effect of dilutive securities:                                                                          |                         |   |                              |        |      |   |        |       
|                      |                                                                                                         | Stock options           |   |                              | 1,940  |      |   |        | 1,700  | 
|                      |                                                                                                         | Warrants                |   |                              | 412    |      |   |        | 96     | 
|                      |                                                                                                         |                         |   |                              |        |      |   |       
|                      | Denominator for diluted net income per share 
Adjusted weighted-average shares and assumed
conversions |                         |   | 49,611                       |        |      |   | 51,222 |       
|                      |                                                                                                         |                         |   |                              |        |      |   |       
|Net income per share: |                                                                                                         |                         |   |                              |        |      |   |       
|                      | Basic                                                                                                   |                         | $ | 0.37                         |        |      | $ | 0.43   |       
|                      |                                                                                                         |                         |   |                              |        |      |   |       
|                      | Diluted                                                                                                 |                         | $ | 0.36                         |        |      | $ | 0.42   |       
|                      |                                                                                                         |                         |   |                              |        |      |   |       

5.   Contingencies (in thousands)

On August 30, 2000, 19 patients were hospitalized and one patient died
shortly after becoming ill while receiving treatment at one of the Companys
dialysis centers in Youngstown, Ohio. One of the 19 hospitalized patients also
died some time later. As of March 31, 2002, 11 lawsuits related to this matter
were pending, and other suits could be brought in the future. Management
believes Renal Care Groups insurance should be adequate to cover these events
and does not anticipate a material adverse effect on the Companys consolidated
financial position or results of operations.

In March 2001, the Company was sued in Mahoning County, Ohio by one of the
affected patients for injuries related to the August 30, 2000 illnesses.
Additional suits have been filed, and as of March 31, 2002, a total of 11 suits
were pending. The suits allege negligence, medical malpractice and product
liability. Additional defendants are named in each of the suits. Additional
defendants in some of the suits include the water system vendors who installed
and maintained the water system in the dialysis center. Renal Care Group has
denied the allegations and has filed cross-claims against the water system
vendors. Renal Care Group intends to pursue these

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cross-claims vigorously. Additional suits arising out of these illnesses may be
filed in the future. Management believes that Renal Care Groups insurance
should be adequate to cover these illnesses and does not anticipate a material
adverse effect on the Companys consolidated financial position or results of
operation.

On December 12, 2000, the Company reached an agreement in principle with
the U.S. Attorney for the Southern District of Mississippi to settle claims
arising out of alleged inadequacies in physician documentation related to lab
tests performed by its laboratory subsidiary, RenaLab, Inc. The terms of such
agreement provided that the Company pay $1,980 to the Medicare program. This
amount was recorded during the fourth quarter of 2000 and was paid in January
2002, when the Company and the government finalized the terms of a corporate
integrity agreement.

The Company is involved in other litigation and regulatory investigations
arising in the ordinary course of business. In the opinion of management, after
consultation with legal counsel, these matters will be resolved without
material adverse effect on the Companys consolidated financial position or
results of operations.

The Company generally engages practicing board-certified or board-eligible
nephrologists to serve as medical directors for its centers. Medical directors
are responsible for the administration and monitoring of the Companys patient
care policies, including patient education, administration of dialysis
treatment, development programs and assessment of all patients. The Company
pays medical director fees that are consistent with the fair market value of
the required supervisory services. Such medical director agreements typically
have a term of seven years with a three-year renewal option.

6.   Recent Accounting Pronouncements

On June 30, 2001, the Company adopted SFAS No. 141, Business Combinations,
which eliminated the pooling of interests method of accounting for all business
combinations initiated after June 30, 2001 and addressed the initial recognition
and measurement of goodwill and other intangible assets acquired in a business
combination.

As discussed in
detail in Note 3, the Company adopted SFAS No. 142 on
January 1, 2002.

Effective January 1, 2002, the Company adopted SFAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets, which addresses the
accounting and reporting for the impairment or disposal of long-lived assets.
SFAS No. 144 did not have an effect on the Companys results of operations.

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ITEM 2.   MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Results of Operations

Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001

Net Revenue.Net revenue increased from $174.8 million for the three
months ended March 31, 2001 to $206.7 million for the three months ended March
31, 2002, an increase of $31.9 million, or 18.3%. This increase resulted
primarily from a 9.8% increase in the number of treatments from 644,146
performed in the 2001 period to 707,483 performed in the 2002 period. This
growth in treatments is the result of the acquisition of various dialysis
facilities and a 5.8% increase in same-center treatments for 2002 over 2001. In
addition, average net revenue per dialysis treatment increased 8.6% from $267
in 2001 to $290 in 2002. The increase in revenue per treatment was due in part
to the implementation of the 2001 Medicare composite rate increase that was
phased in with the additional 1.2% increase effective April 1, 2002. We also
implemented a rate increase to private payors in the fourth quarter of 2001.

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 $113.3 million for the three months ended March 31, 2001 to $134.7 million
for the three months ended March 31, 2002, an increase of 18.9%. This increase
was due principally 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, and the 3.9% increase in the cost of EPO. Patient
care costs as a percentage of net revenue increased from 64.8% in 2001 to 65.2%
in 2002. Patient care costs per treatment increased 8.0% from $176 in 2001 to
$190 in 2002. These increases were due to the EPO price increase, increased
labor costs to address wage pressures in many of the Companys markets and the
increase in utilization of certain drugs.

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 $15.0
million for the three months ended March 31, 2001 to $17.6 million for the
three months ended March 31, 2002, an increase of 17.0%. General and
administrative expenses as a percentage of net revenue decreased slightly from
8.6% to 8.5% in 2001 and 2002, respectively.

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 agings. The provision for doubtful accounts increased from $4.8
million for the three months ended March 31, 2001 to $5.5 million for the three
months ended March 31, 2002, an increase of $0.7 million, or 14.3%. The
provision for doubtful accounts as a percentage of net revenue remained
consistent at 2.7% in 2001 and 2002.

Depreciation and Amortization.Depreciation and amortization increased
from $8.9 million for the three months ended March 31, 2001 to $9.4 million for
the three months ended March 31, 2002, an increase of 5.8%. 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 intangible assets associated with

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acquisitions. Depreciation and amortization as a percentage of net revenue
decreased from 5.1% in 2001 to 4.5% in 2002, primarily as a result of the
implementation of SFAS No. 142.

Income from Operations.Income from operations increased from $32.8
million for the three months ended March 31, 2001 to $39.6 million for the
three months ended March 31, 2002, an increase of 20.6%. Income from operations
as a percentage of net revenue increased from 18.8% in the 2001 period to 19.1%
in the 2002 period as a result of the factors discussed above.

Interest Expense, Net.Interest expense decreased from $1.0 million for
the three months ended March 31, 2001 to $200,000 for the three months ended
March 31, 2002, a decrease of 82.7%. The decrease was the result of lower
average borrowings in 2002, as the Company had retired all debt outstanding
under its line of credit and recognized interest expense only on equipment
notes payable, commitment fees and amortization of debt issuance costs.

Minority Interest.Minority interest represents the proportionate equity
interest of other partners in the Companys consolidated entities that are not
wholly-owned, the financial results of which entities are included in the
Companys consolidated results. Minority interest as a percentage of net
revenue increased to 2.3% in 2002 from 1.8% in 2001. This increase was the
result of continued expansion of the operations of Renal Care Groups joint
ventures, primarily those in Ohio, Oregon and Washington, as well as an
increase in the number of facilities operated as joint ventures.

Provision for Income Taxes. Income tax expense increased from $11.0
million for the three months ended March 31, 2001 to $13.2 million for the
three months ended March 31, 2002, an increase of $2.2 million or 20.4%. The
increase is a result of pre-tax earnings increasing by approximately 21.0%.
The effective tax rate of the Company decreased slightly from 38.2% in 2001 to
38.0% in 2002. This decrease is primarily the result of the implementation of
SFAS No. 142.

Net Income. Net income increased from $17.7 million for the three months
ended March 31, 2001 to $21.5 million for the three months ended March 31,
2002, an increase of $3.8 million or 21.3%. 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 centers, to purchase property and equipment for existing centers, and
to finance working capital needs. At March 31, 2002, the Companys working
capital was $119.9 million, cash and cash equivalents were $55.5 million, and
the Companys current ratio was approximately 2.0 to 1.

Net cash provided by
operating activities was $45.2 million for the three
months ended March 31, 2002. Cash provided by operating activities consists of
net income before depreciation and amortization expense, adjusted for changes
in components of working capital. Net cash used in investing activities was
$16.7 million for the three months ended March 31, 2002. Cash used in investing
activities consisted primarily of $13.0 million of purchases of property and
equipment and $2.7 million of cash paid for acquisitions, net of cash acquired.
Net cash used in financing activities was approximately $400,000 for the three months ended
March 31, 2002. Cash used in financing activities primarily reflects
repurchases of Renal Care Group common stock of $8.3 million
offset by a $2.9
million investment by a joint venture partner and $5.2 million in net proceeds
from the issuance of common stock.

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The Company is a party to a Second Amendment to its First Amended and
Restated Loan Agreement with a group of banks. Lender commitments under the
amended loan agreement were reduced to $129.5 million in
August 2001. 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, Renal Care Group may borrow up
to $5.0 million in swing line loans. Lender commitments will remain at $129.5
million through August 2002, and will then be reduced to $101.8 million through
August 2003. To the extent any amounts are outstanding under this line of
credit, these amounts will be due and payable in full on August 4, 2003. As of
March 31, 2002, there was no amount outstanding under this agreement. This
variable rate debt instrument carries 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 wholly-owned 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 between $50.0 million to $55.0 million, primarily
for equipment replacement, expansion of existing dialysis facilities and
construction of de novo facilities are planned in 2002. The Company has made
capital expenditures of approximately $13.0 million through March 31, 2002. The
Company expects that remaining capital expenditures in 2002 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.

Management, from time to time, determines the appropriateness of
repurchasing its common stock in accordance with a repurchase plan authorized
by the Board of Directors in October 2000. In the fourth quarter of 2001,
Renal Care Group began its process for repurchasing shares of its common stock
by purchasing 100,000 shares of common stock for approximately $3.1 million.
In the first quarter of 2002, Renal Care Group repurchased 280,000 shares of
common stock for approximately $8.3 million. Management expects to repurchase
additional shares of common stock during 2002.

Critical Accounting Policies

On December 12, 2001, the Securities and Exchange Commission issued a
financial reporting release, FR-60, Cautionary Advice Regarding Disclosure
About Critical Accounting Policies. In accordance with FR-60, management has
identified accounting policies that it considers critical to the business of
Renal Care Group. Those policies include net revenue and contractual
provisions, provision for doubtful accounts, self-insurance accruals, and
impairment of long-lived assets and long-lived assets to be disposed of. These
policies were

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identified as critical based on their importance to the
consolidated financial statements as well as on the degrees of subjectivity and
complexity involved in these policies. There have been no changes in
Renal Care Groups critical accounting policies or in the
application of those policies from those described in the annual report on Form
10-K as filed with the SEC on March 29, 2002.




RISK FACTORS

You should carefully consider the risks described below before investing
in Renal Care Group. The risks and uncertainties described beloware notthe
only ones facing Renal Care Group. Other risks and uncertainties that we have
not predicted or assessed may also adversely affect us.

If any of the following risks occurs, 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 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 53% of our net
revenue for 2000, 49% of our net revenue for 2001 and 50% of our net revenue
for the three months ended March 31, 2002 consisted of reimbursements from
Medicare, including the administration of EPO to treat anemia. We also estimate
that approximately 5% of our net revenue for 2000, 6% of our net revenue for
2001 and 7% of our net revenue for the three months ended March 31, 2002
consisted of reimbursements from Medicaid or comparable state programs. Some of
the states Medicaid programs reimburse us at rates higher than
those paid by Medicare. Some
of these programs have proposed reductions or have announced that they are
considering reductions. Any action to reduce those higher Medicaid
reimbursement rates would adversely affect our revenue and earnings. Any of
the following actions in connection with government programs could cause our
revenue and earnings to decline:



| |  |  | 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 Centers for Medicare & Medicaid Services,
or CMS (formerly known as Health Care Financing Administration), 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. CMS 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.

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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 will decline. EPO is a bio-engineered hormone
that is used to treat anemia. Revenues from the administration of EPO were
approximately 26% of our net revenue for 2000 and 25% of our net revenue for
2001 and 23% of our net revenue for the three months ended March 31, 2002.
Most of our payments for EPO come from government programs. For the three
months ended March 31, 2002, Medicare and Medicaid reimbursement represented
approximately 57% of the total revenue we derived from EPO. A reduction in the
reimbursement rate for EPO could materially and adversely affect 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 currently marketed to dialysis providers in the United
States. In April 2002, Amgen announced a 3.9% increase in the price of EPO.
This price increase will not affect our earnings in 2002 because our contract
with Amgen has pricing protection through 2002. In addition, Amgen implemented
a 3.9% increase in the price of EPO in May 2001. That price increase will
adversely affect our earnings in 2002. If Amgen imposes additional EPO price
increases or if Amgen or other factors interrupt the supply of EPO, then our
revenue and earnings will decline.

If Amgen Markets Aranesp® for ESRD Patients, then We Could Be Less Profitable

Amgen has developed and obtained FDA approval for a new drug to treat
anemia marketed as Aranesp® (darbepoetin alfa). Aranesp® is a longer acting
form of bio-engineered protein that, like EPO, can be used to treat anemia.
EPO is usually administered in conjunction with each dialysis treatment.
Aranesp® can remain effective for between two and three weeks. As of this date
Amgen has not announced its plans for marketing Aranesp®. If Amgen markets
Aranesp® for the treatment of dialysis patients, then our earnings could be
materially and adversely affected by either of the following factors:



| |  |  | Our margins realized from the administration of
Aranesp® could be lower than the margins realized on the
administration of EPO; or                        
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Physicians could decide to administer Aranesp® in
their offices, and we would not recognize revenue or profit
from the administration of EPO or Aranesp® .

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 if we experience a significant shift in our revenue mix toward
additional Medicare or Medicaid reimbursement, then our revenue and earnings
will decline. We estimate that approximately 42% of our net revenue for 2000,
45% of our net revenue for 2001 and 43% of our net revenue for the three months
ended March 31, 2002, were derived from sources other than Medicare and
Medicaid. In general, payments we receive from 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:

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| |  |  | any number of economic or demographic factors could
cause private insurers, hospitals or managed care companies
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 of dialysis
centers, we may be unable to continue to identify and complete suitable
acquisitions at prices we are willing to pay or we may be unable to 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. Also, as a result of
consolidation in the dialysis industry, the four largest providers of
outpatient dialysis services own approximately 65% of the total number of
outpatient dialysis facilities in the United States. We compete with these
other companies to identify and complete suitable acquisitions. We expect this
competition to intensify in light of the smaller pool of available acquisition
candidates and other market forces. As a result, we believe it will be more
difficult for us 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, then we may not meet our growth expectations.

If We Fail to Integrate Acquired Companies, We Will Be Less Profitable

We have grown significantly by acquisitions of other dialysis providers
since our formation in February 1996. We have completed some of our
acquisitions as recently as April 2002. We intend to pursue acquisitions of
more dialysis businesses in the future. We are unable to predict the number
and size of any future acquisitions. We face significant challenges in
integrating an 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 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 in future
acquisitions. On June 29, 2001, the Financial Accounting Standards Board
approved rules that eliminate the pooling-of-interests accounting method. The
elimination of the pooling-of-interests method results in the recording of
goodwill for all acquisitions after June 30, 2001. Under these new rules
goodwill and other intangible assets with indefinite lives will not be
amortized to expense; however, we

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will be required to review all of these
assets at regular intervals and to charge an appropriate amount to expense when
impairment is identified. If we are required under these new rules to write
off a significant portion of our intangible assets at one time, then there
could be a material adverse impact on our stock price. Interest expense on
additional debt incurred to fund our acquisitions may significantly reduce our
profitability.

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 Stop 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 patients make up all or a significant
portion of the patient base at each of our dialysis centers, and the loss of
the patient base of one or more referring physicians could have a material
adverse effect on the operations of that center. The loss of the patient base
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, then the physicians owning our stock
or acting as medical directors could 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;                                                                                                                                                                 
|
| |  |  | billing and reimbursement, including false claims
prohibitions under health care reimbursement laws;                                                                                                               
|
| |  |  | collection, use, storage and disclosure of patient
health information, including the federal Health Insurance
Portability and Accountability Act of 1996, referred to as
HIPAA, and state law equivalents of HIPAA;
|
| |  |  | facility licensure;                                                                                                                                                                                                
|
| |  |  | health and safety requirements;                                                                                                                                                                                    

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| |  |  | 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.

New regulations governing electronic transactions and the collection, use,
storage, and disclosure of health information impose significant administrative
and financial obligations on our business. If, after the required compliance
date, we are found to have violated these restrictions, we could be subject to:



| |  |  | criminal or civil penalties;                                                                     
| | - |  | -------------------------------------------------------------------------------------------------
|
| |  |  | claims by persons who believe their health information
has been improperly used or disclosed; and
|
| |  |  | administrative penalties by payors.                                                              

Government investigations of health care providers, including dialysis
providers, have continued to increase. We have been the subject of
investigations in the past, and the government may investigate our business in
the future. One of our competitors, DaVita, Inc., has announced that it is the
subject of an investigation by the U.S. Attorney for the Eastern District of
Pennsylvania, and another competitor, Gambro Healthcare, Inc., has announced
that it is the subject of an investigation by the U.S. Attorneys Office in St.
Louis, Missouri. If any of our operations are found to violate applicable
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
occurs, our revenue and earnings could decline.

Changes In the Health Care Delivery, Financing or Reimbursement Systems Could
Adversely Affect Our Business

The health care industry in the United States remains in a period of
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, could 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.

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The Dialysis Business Is Highly Competitive. 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 rapidly consolidating. There is a small number
of large dialysis companies that compete for the acquisition of outpatient
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 benefit from lower
equipment costs. Several of our competitors, including these equipment
manufacturers, are significantly larger than we are and have greater financial
resources and more established operations. We cannot assure you 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, Raymond
Hakim, M.D., Ph.D., R. Dirk Allison and Gary Brukardt, each an Executive Vice
President. Mr. Brooks, Dr. Hakim and Mr. Brukardt have each been with Renal
Care Group since its formation. The services of Mr. Brooks and these three
Executive Vice Presidents 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.

If We Are Liable for Damages in Litigation, Our Insurance May Not be Sufficient
to Cover Such Potential Damages

On August 30, 2000, 19 patients were hospitalized and one patient died
shortly after becoming ill while receiving treatment at one of our dialysis
centers in Youngstown, Ohio. One of the 19 hospitalized patients also died
some time later. Eleven lawsuits had been filed against us as of March 31,
2002, and other suits could be brought in the future. While management
believes Renal Care Groups insurance should be adequate to cover these events,
if we are found liable for damages in litigation stemming from these illnesses,
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 Shareholders 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 shareholders receive an attractive offer for their
shares or if a substantial number or even a majority of our shareholders
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:

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| |  |  | 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 shareholders;                                                                          
|
| |  |  | blank check preferred stock that may be issued by
our board of directors without shareholder 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 New York Stock Exchange. The market
price of our common stock has been volatile, ranging from a low of $28.05 per
share to a high of $34.00 per share during the three months ended March 31,
2002. 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 or government investigation;                         
|
| |  |  | changes in government regulations; and                                        
|
| |  |  | changes in earnings estimates by analysts.                                    

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.                                   

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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.




PART II  OTHER INFORMATION




ITEM 1.   LEGAL PROCEEDINGS.

As disclosed in Renal Care Groups annual report on Form 10-K filed with
the SEC on March 29, 2002, we are subject to a number of lawsuits arising out
of events on August 30, 2000. On that day 19 patients were hospitalized and
one patient died shortly after becoming ill while receiving treatment at one of
Renal Care Groups dialysis centers in Youngstown, Ohio. One of the 19
hospitalized patients also died some time later. There have been no material
developments in these lawsuits in the quarter ended March 31, 2002.

Additional suits arising out of these illnesses may be filed in the
future. Management believes that Renal Care Groups insurance should be
adequate to cover these illnesses and does not anticipate a material adverse
effect on the Companys consolidated financial position




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits:

|      |  |                                                                                            
|----- |  | -------------------------------------------------------------------------------------------
|10.60 |  | Restricted Stock Award Agreement dated August 2, 2001 between the Company and Sam A. Brooks

(b)  Reports on Form 8-K



| |                                 
| | --------------------------------
| | Form 8-K filed January 22, 2002.

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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)                                                                                            
|            
|May 15, 2002 |  | 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

|                                 |  |                                                                                            
|-------------------------------- |  | -------------------------------------------------------------------------------------------
|Number andDescription of Exhibit
|                                
|10.60                            |  | Restricted Stock Award Agreement dated August 2, 2001 between the Company and Sam A. Brooks

21