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Fresenius Medical Care AG & Co. KGaA Investor Relations Investor News Else-Kr ner-Str. 1 D-61352 Bad Homburg Contact: Oliver Maier Phone: + 49 6172 609 2601 Fax: + 49 6172 609 2301 E-mail: ir@fmc-ag.com North America: Te

Wednesday, May 2, 2007 8 min read
Key Takeaway: Fresenius Medical Care AG & Co. KGaA Investor Relations Investor News Else-Kr ner-Str. 1 D-61352 Bad Homburg Contact: Oliver Maier Phone: + 49 6172 609 2601 Fax: + 49 6172 609 2301 E-mail: ir@fmc-ag.com North America: Terry Proveaux Phone: + 1 800 948 2538 Fax: + 1 615

Full Press Release Details

Fresenius Medical Care AG & Co. KGaA
Investor Relations
Investor News Else-Kr ner-Str. 1
D-61352 Bad Homburg
Contact:
Oliver Maier
Phone: + 49 6172 609 2601
Fax: + 49 6172 609 2301
E-mail: ir@fmc-ag.com
North America:
Terry Proveaux
Phone: + 1 800 948 2538
Fax: + 1 615 345 5605
E-mail: ir@fmc-ag.com
Internet: www.fmc-ag.com
May 2, 2007
Fresenius Medical Care Reports Outstanding Start For 2007 and Confirms Outlook for Full Year
Summary First Quarter 2007:
Net revenue $ 2,321 million + 33 %
Operating income (EBIT) $ 365 million + 50 %
Net income $ 160 million + 38 %
Earnings per share $ 1.63 + 37 %
Bad Homburg, Germany Fresenius Medical Care AG & Co. KGaA ( the Company ), the world s largest provider of Dialysis Products and Services, today announced its results for the first quarter of 2007.
The operations of Renal Care Group (RCG) are included in the Company s consolidated statements of income and cash flows from April 1, 2006, therefore, the current quarter s results are not directly comparable with the first quarter s results for 2006.
Net revenue for the first quarter 2007 compared to the first quarter 2006 increased by 33% to $2,321 million (31% at constant currency). Organic revenue growth worldwide was 9%. Dialysis Services revenue grew by 38% to $1,760 million (37% at constant currency) in the first quarter of 2007. Dialysis Product revenue increased by 18% to $560 million (13% at constant currency) in the same period.
North America revenue increased by 37% to $1,637 million. Dialysis Services revenue increased by 40% to $1,483 million. Average revenue per treatment for the U.S. clinics increased by 6% to $329 in the first quarter 2007 compared to $310 for the same quarter in 2006. Dialysis Product revenue increased by 14% to $153 million led by strong sales of our 2008K hemodialysis machines and the phosphate binding drug PhosLo.
International revenue was $684 million, an increase of 24% (17% at constant currency) compared to the first quarter of 2006. Dialysis Services revenue reached $277 million, an increase of 30% (24% at constant currency). Dialysis Product revenue rose by 20% to $407 million (12% at constant currency), led by strong sales of dialyzers and peritoneal dialysis products.
Operating income (EBIT) increased by 50% to $365 million compared to $244 in the first quarter 2006. This translates into an operating margin of 15.7%. For the first quarter 2006, the operating margin was 14.0%.
Compared with the first quarter 2006, the operating margin in North America increased by 200 basis points to 15.8%, due to the consolidation of RCG, revenue rate improvements, the new PhosLo business and higher product sales. In the International segment, the operating margin increased by 30 basis points to 17.6%. The continued strong operational performance in the International segment was driven by increased product sales in all regions.
Net interest expense for the first quarter 2007 was $95 million compared to $56 million in the same quarter of 2006. This increase is entirely attributable to the debt financing for the RCG acquisition.
Income tax expense was $103 million for the first quarter of 2007 compared to $71 million in the first quarter of 2006, reflecting effective tax rates of 38.0% and 37.9%, respectively.
Net income for the first quarter 2007 was $160 million, an increase of 38%. Net income increased by 28% when compared to the first quarter 2006 excluding one-time effects in 2006.
Earnings per share (EPS) for the first quarter of 2007 rose by 37% to $1.63 per ordinary share ($0.54 per American Depositary Share (ADS)) compared to $1.19 ($0.40 per ADS) for the first quarter of 2006. The weighted average number of shares outstanding for the first quarter of 2007 was approximately 98.4 million shares compared to 97.8 million shares for the first quarter of 2006. The increase in shares outstanding results from stock option exercises in 2006 and in the first quarter 2007.
In the first quarter of 2007, the Company generated $283 million in cash from operations, representing 12% of revenue. The strong cash flow generation was primarily supported by increased earnings.
A total of $109 million was spent for capital expenditures, net of disposals. Free Cash Flow before acquisitions was $174 million compared to $97 million in the first quarter of 2006. A total of $90 million in cash was used for acquisitions. Free Cash Flow after acquisitions was $84 million compared to $87 million last year excluding the acquisition of Renal Care Group.
Please refer to the attachments for a complete overview on the first quarter of 2007 and the reconciliation of non-GAAP financial measures included in this release to the most comparable GAAP financial measures.
Patients Clinics Treatments
As of March 31, 2007, Fresenius Medical Care treated 169,216 patients worldwide, which represents a 27% increase in patients compared to last year. North America provided dialysis treatments for 118,732 patients, an increase of 32%. Including 32 clinics managed by Fresenius Medical Care North America, the number of patients in North America was 120,603. The International segment served 50,484 patients, an increase of 17% over last year.
As of March 31, 2007, the Company operated a total of 2,194 clinics worldwide. This is comprised of 1,574 clinics in North America, an increase of 35%, and 620 clinics in the International segment, an increase of 16%.
Fresenius Medical Care delivered approximately 6.41 million dialysis treatments worldwide, which represents an increase of 28% year over year. North America accounted for 4.48 million treatments, an increase of 33%, and the International segment delivered 1.93 million treatments, an increase of 17% over last year.
As of March 31, 2007, Fresenius Medical Care employed 59,076 people (full-time equivalents) worldwide compared to 56,803 employees at the end of 2006. The increase of 2,273 employees is primarily due to the acquisition of Jiate Excelsior Co. Ltd. in Taiwan (announced in January 2007) and continued organic growth in the U.S.
The ratio of debt to Earnings before Interest, Taxes and Amortization (EBITDA) decreased from 3.81 at the end of the first quarter of 2006 to 3.09 at the end of the first quarter 2007. At the end of 2006, the debt/EBITDA ratio was 3.23.
In the first quarter 2007, Standard & Poor s Ratings Services revised its outlook of the Company to stable from negative. At the same time, the BB long-term corporate credit ratings on Fresenius Medical Care were affirmed.
Moody s upgraded Fresenius Medical Care Senior Secured Credit Facility from Ba2 to Ba1.
Fresenius Medical Care Proposes Share Split of 1:3
On March 21, 2007, the Company announced that it will propose a share split for both classes of shares (ordinary and preference) in the ratio of 1:3 at the next Annual General Meeting being held on May 15, 2007. If approved by the Shareholders, the Company expects the split to become effective in the third quarter of 2007.
Outlook for 2007 Confirmed
For the full year 2007, the Company confirms its outlook and expects to achieve revenue of approximately $9.4 billion. This represents an increase of 11%.
Net income is projected to be in the range of $675 million and $695 million in 2007. This represents an increase of between 18% and 21% on an adjusted basis as compared to 2006
after one-time effects. On a reported basis, this translates into an increase in net income of between 26% and 29%.
In addition, the Company expects spending on capital expenditures and acquisitions to be approximately $650 million in 2007. The debt/EBITDA ratio is projected to be below 3.0 by the end of 2007.
Ben Lipps, Chief Executive Officer of Fresenius Medical Care, commented: We are pleased to again deliver exceptionally strong financial results for the first quarter of 2007. Our strong performance was driven by our continuous quality improvement initiatives at the local clinical level, by cost leadership at the regional level, and by our commitment to advance our strategic objectives at the corporate level. The advantages of being the world s only vertically-integrated dialysis provider are increasingly evident as we compete in the global marketplace.
Fresenius Medical Care will hold a conference call to discuss the results of the first quarter of 2007 on Wednesday, May 2, 2007, at 3.30pm CEDT / 9.30am EDT. The Company invites investors to view the live webcast of the conference call at the Company s website www.fmc-ag.com in the Investor Relations section. A replay will be available shortly after the call.
Fresenius Medical Care is the world s largest integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure, a condition that affects more than 1,500,000 individuals worldwide. Through its network of 2,194 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to 169,216 patients around the globe. Fresenius Medical Care is also the world s leading provider of dialysis products such as hemodialysis machines, dialyzers and related disposable products. Fresenius Medical Care is listed on the Frankfurt Stock Exchange (FME, FME3) and the New York Stock Exchange (FMS, FMS/P).
For more information about Fresenius Medical Care visit the Company s website at www.fmc-ag.com.
This release contains forward-looking statements that are subject to various risks and uncertainties. Actual results could differ materially from those described in these forward-looking statements due to certain factors, including changes in business, economic and competitive conditions, regulatory reforms, foreign exchange rate fluctuations, uncertainties in litigation or investigative proceedings, and the availability of financing. These and other risks and uncertainties are detailed in Fresenius Medical Care AG & Co. KGaA s reports filed with the U.S. Securities and Exchange Commission. Fresenius Medical Care AG & Co. KGaA does not undertake any responsibility to update the forward-looking statements in this release.
Three Months Ended March 31,
Fresenius Medical Care
Statements of Earnings 2007 2006 % Change
(in US-$ thousands, except share and per share data)
(unaudited)
Net revenue
Dialysis Care 1,760,354 1,272,533 38.3 %
Dialysis Products 560,317 474,397 18.1 %
Total net revenue 2,320,671 1,746,930 32.8 %
Cost of revenue 1,536,320 1,168,640 31.5 %
Gross profit 784,351 578,290 35.6 %
Selling, general and administrative 406,319 321,671 26.3 %
Research and development 13,342 12,774 4.4 %
Operating income (EBIT) 364,690 243,845 49.6 %
Interest income (3,582 ) (4,809 ) -25.5 %
Interest expense 98,493 61,004 61.5 %
Interest expense, net 94,911 56,195 68.9 %
Earnings before income taxes and minority interest 269,779 187,650 43.8 %
Income tax expense 102,566 71,133 44.2 %
Minority interest 6,935 480
Net income 160,278 116,037 38.1 %
Operating income (EBIT) 364,690 243,845 49.6 %
Depreciation and amortization 84,912 61,258 38.6 %
EBITDA 449,602 305,103 47.4 %
Total bad debt expenses 48,681 29,622
Earnings per ordinary share $ 1.63 $ 1.19 37.0 %
Earnings per ordinary ADS $ 0.54 $ 0.40 37.0 %
Weighted average number of shares
Ordinary shares 97,149,891 96,629,422
Preference shares 1,238,750 1,144,162
Percentages of revenue
Cost of revenue 66.2 % 66.9 %
Gross profit 33.8 % 33.1 %
Selling, general and administrative 17.5 % 18.4 %
Research and development 0.6 % 0.7 %
Operating income (EBIT) 15.7 % 14.0 %
Interest expense, net 4.1 % 3.2 %
Earnings before income taxes and minority interest 11.6 % 10.7 %
Income tax expense 4.4 % 4.1 %
Minority interest 0.3 % 0.0 %
Net income 6.9 % 6.6 %
EBITDA 19.4 % 17.5 %
Three Months Ended March 31,
Fresenius Medical Care
Segment and Other Information 2007 2006 % Change
(in US-$ million)
(unaudited)
Net revenue
North America 1,637 1,194 37.1 %
International 684 553 23.6 %
Total net revenue 2,321 1,747 32.8 %
Operating income (EBIT)
North America 258 164 57.4 %
International 121 96 26.0 %
Corporate (14 ) (16 ) -10.7 %
Total operating income (EBIT) 365 244 49.6 %
Operating income in percentage of revenue
North America 15.8 % 13.8 %
International 17.6 % 17.3 %
Total 15.7 % 14.0 %
Excluding one-time items 1)
Operating income (EBIT)
North America 258 164 57.4 %
International 121 96 26.0 %
Corporate (14 ) (16 ) -8.6 %
Total operating income (EBIT) 365 244 49.3 %
Operating income in percentage of revenue
North America 15.8 % 13.8 %
International 17.6 % 17.3 %
Total 15.7 % 14.0 %
Employees
Full-time equivalents
(March 31 compared to Dec. 31) 59,076 56,803
Three Months Ended March 31,
Fresenius Medical Care
Reconciliation of non US-GAAP financial measures to the most directly comparable US-GAAP financial measures
2007 2006 % Change
(in US-$ million)
(unaudited)
Operating performance excluding one-time items 1)
Operating income (EBIT) 365 244 50 %
One-time items 2)
Operating income (EBIT) excluding one-time items 1) 365 244 49 %
Percent of revenue 15.7 % 14.0 %
Net income 160 116 38 %
One-time items 2) 9
Net income excluding one-time items 1) 160 125 28 %
Segment information North America
Net revenue 1,637 1,194
Costs of revenue and research and development 1,114 839
Selling, general and administrative 264 190
Costs of revenue and operating expenses 1,378 1,029
Operating income (EBIT) 258 164
Percent of revenue 15.8 % 13.8 %
Dialysis Products revenue incl. and excl. internal sales
North America
Dialysis Products revenue incl. internal sales 281 225
less internal sales (128 ) (91 )
Dialysis Products external sales 153 134
International
Dialysis Products revenue incl. internal sales 459 377
less internal sales (52 ) (37 )
Dialysis Products external sales 407 340
Reconciliation of cash flow from operating activities to EBITDA 3)
Total EBITDA 450 305
Interest expense, net (95 ) (56 )
Income tax expense (103 ) (71 )
Change in working capital and other non cash items 31 (16 )
Net cash provided by operating activities 283 162
Annualized EBITDA 4)
Operating income (EBIT) last twelve months 1,436 1,256
Depreciation and amortization last twelve months 332 333
Non cash charges 36 17
Annualized EBITDA 1,804 1,606
1) These non US-GAAP financial measures are provided to assist readers in evaluation of Fresenius Medical Care s underlying operating performance.
2) One-time costs associated with the transformation of legal form of $0.4 million and the write-off of deferred financing costs of $9 million after tax related to the 2003 senior credit facility in 2006.
3) EBITDA is the basis for determing compliance with certain covenants in Fresenius Medical Care s long-term debt instruments.
4) EBITDA 2007: Pro forma numbers including RCG, after FTC mandated divestitures, excluding restructuring costs and in-process R&D and excluding the gain from the sale of dialysis clinics. EBITDA 2006: Pro forma numbers including RCG, before FTC mandated divestitures, excluding one-time costs for the acquisition.
Fresenius Medical Care Balance Sheet March 31, 2007 December 31, 2006
(in US-$ million) (unaudited) (audited)
Assets
Current assets 3,462 3,412
Intangible assets 7,632 7,554
Other non-current assets 2,156 2,079
Total assets 13,250 13,045
Shareholders equity and liabilities
Current liabilities 3,028 2,376
Long-term liabilities 5,169 5,799
Shareholders equity 5,053 4,870
Total shareholders equity and liabilities 13,250 13,045
Equity/assets ratio: 38 % 37 %
Debt
Short-term borrowings 380 331
Short-term borrowings from related parties 22 5
Current portion of long-term debt and capital lease obligations 154 160
Current portion of Trust Preferred Securities 648
Long-term debt and capital lease obligations, less current portion 3,744 3,829
Trust Preferred Securities, less current portion 621 1,254
Total debt 5,569 5,579
Fresenius Medical Care
Cash Flow Statement 2007 2006
Three Months Ended March 31,
(in US-$ million)
(unaudited)
Operating activities
Net income 160 116
Depreciation / amortization 85 61
Change in working capital and other non cash items 38 (15 )
Cash Flow from operating activities 283 162
Investing activities
Purchases of property, plant and equipment (117 ) (70 )
Proceeds from sale of property, plant and equipment 8 5
Capital expenditures, net (109 ) (65 )
Free Cash Flow 174 97
Acquisitions, net of cash acquired (90 ) (3,951 )
Free Cash Flow after investing activities 84 (3,854 )
Financing activities
Change in accounts receivable securitization program 35 296
Change in intercompany debt 17 221
Change in other debt (86 ) 3,288
Proceeds from exercise of stock options 4 14
Proceeds from conversion of preference shares into ordinary shares 309
Change in minority interests (6 )
Cash Flow from financing activities (36 ) 4,128
Effects of exchange rates on cash 1 5
Net increase in cash 49 279
Cash at beginning of period 159 85
Cash at end of period 208 364
Fresenius Medical Care
Quarterly Performance Scorecard - Revenue 2007 cc 2006 cc
Three months ended March 31,
(in US-$ thousands, except per treatment revenue)
North America
Net revenue 1,636,573 1,193,517
Growth year-over-year 37.1 % 9.7 %
Dialysis Care 1,483,255 1,059,244
Growth year-over-year 40.0 % 9.4 %
U.S. per treatment 329 310
Per treatment 325 307
Sequential growth -0.1 % 2.6 %
Growth year-over-year 5.9 % 5.4 %
Dialysis Products
incl. internal sales 280,825 224,713
Growth year-over-year 25.0 % 8.2 %
External sales 153,318 134,273
Growth year-over-year 14.2 % 12.2 %
International
Net revenue 684,098 553,413
Growth year-over-year 23.6 % 16.8 % 6.3 % 12.0 %
Dialysis Care 277,099 213,289
Growth year-over-year 29.9 % 24.1 % 10.0 % 15.2 %
Per treatment 144 137 130 136
Sequential growth 3.7 % 1.8 %
Growth year-over-year 10.8 % 5.8 % -2.0 % 2.6 %
Dialysis Products
incl. internal sales 459,116 377,277
Growth year-over-year 21.7 % 14.2 % 2.7 % 8.7 %
External sales 407,000 340,124
Growth year-over-year 19.7 % 12.2 % 4.0 % 10.1 %
Fresenius Medical Care
Quarterly Performance Scorecard - Dialysis Care Volume 2007 2006
Three months ended March 31,
North America
Number of treatments 4,481,077 3,375,906
Treatments per day 58,191 43,838
Per day sequential growth 1.2 % 0.8 %
Per day year-over-year growth 32.7 % 3.9 %
of which:
- Acquisition RCG 32.6 % 0.0 %
- FTC divestitures -3.2 % 0.0 %
- Other acquisitions 1.2 % 1.4 %
- Same market growth year-over-year 2.8 % 2.4 %
- Adjustments for closed/sold facilities, yield and other -0.7 % 0.1 %
International
Number of treatments 1,929,275 1,645,938
Same market growth year-over-year 6.3 % 10.4 %
Fresenius Medical Care
Quarterly Performance Scorecard - Expenses 2007 2006
Three months ended March 31,
North America
Costs of revenue and operating expenses
Percent of revenue 84.2 % 86.2 %
Selling, general and administrative
Percent of revenue 16.1 % 15.9 %
Bad debt expenses
Percent of revenue 2.9 % 2.9 %
Dialysis Care operating expenses/Treatment (in US-$) 272 263
Sequential growth 1.8 % 3.0 %
Growth year-over-year 3.3 % 4.1 %
Total Group
Costs of revenue and operating expenses
Percent of revenue 1) 84.3 % 86.0 %
Selling, general and administrative
Percent of revenue 1) 17.5 % 18.4 %
Effective tax rate 38.0 % 37.9 %
Fresenius Medical Care
Quarterly Performance Scorecard - Cash Flow/Investing Activities 2007 2006
Three months ended March 31,
(in US-$ thousands, except number of de novos)
Total Group
Operating Cash Flow 282,754 161,660
Percent of revenue 12.2 % 9.3 %
Free Cash Flow before acquisitions 174,111 96,788
Percent of revenue 7.5 % 5.5 %
Acquisitions, net 89,930 3,950,974
Capital expenditures, net 108,643 64,872
Percent of revenue 4.7 % 3.7 %
Maintenance 52,932 20,407
Percent of revenue 2.3 % 1.2 %
Growth 55,712 44,465
Percent of revenue 2.4 % 2.5 %
Number of de novos 18 16
North America 12 9
International 6 7
Fresenius Medical Care
Quarterly Performance Scorecard - Balance Sheet 2007 2006
Three months ended March 31,
Total Group
Debt (in US-$ million) 5,569 6,117
Debt/EBITDA 3.1 3.8
North America
Days sales outstanding 57 60
Sequential development -3.4 % -4.8 %
Year-over-year development -5.0 % -9.1 %
International
Days sales outstanding 114 117
Sequential development -4.2 % -2.5 %
Year-over-year development -2.6 % -4.9 %
Fresenius Medical Care
Quarterly Performance Scorecard 2007 2006 1)
Three months ended March 31,
Clinical Performance
North America (U.S.)
Single Pool Kt/v > 1.2 93 % 93 %
Hemoglobin >= 11g/dl 82 % 82 %
Albumin >= 3.5 g/dl 2) 79 % 79 %
Hospitalization days per patient 3) (12 months ending March 31) 11.3 11.6
Demographics
North America (U.S.)
Average age (yr) 62 61
Average time on dialysis (yr) 3.4 3.4
Average body weight (kg) 78 77
Prevalence of diabetes 52 % 52 %
1) Q1 2006 data: without former RCG facilities
2) International standard BCR CRM470
3) Hospitalization data without former RCG facilities
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Last updated: May 2, 2007