Quarterly Report • May 4, 2018
Quarterly Report
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applying International Financial Reporting Standards (IFRS)
1st Quarter 2018
5 Fresenius share
49 Financial Calendar
Fresenius is a global health care group providing products and services for dialysis, hospitals, and outpatient medical care. In addition, Fresenius focuses on hospital operations. We also manage projects and provide services for hospitals and other health care facilities. In 2017, Group sales were € 33.9 billion. As of March 31, 2018, more than 275,000 employees have dedicated themselves to the service of health in about 100 countries worldwide.
| € in millions | Q1 / 2018 | Q1 / 2017 | Change | Change in constant currency |
|---|---|---|---|---|
| Sales | 8,121 | 8,362 | - 1% 7 | 7% 7 |
| EBIT 1 | 1,054 | 1,216 | - 13% | - 5% |
| Net income 1, 2 | 450 | 457 | - 2% | 7% |
| Net income 1, 2, 3 excluding biosimilars | 476 | 457 | 4% | 12% |
| Earnings per share in € 1, 2 | 0.81 | 0.83 | - 2% | |
| Earnings per share in € 1, 2, 3 excluding biosimilars | 0.86 | 0.83 | 4% | |
| Operating cash fl ow | 236 | 476 | - 50% | |
| BALANCE SHEET AND INVESTMENTS |
| € in millions | March 31, 2018 | Dec. 31, 2017 | Change |
|---|---|---|---|
| Total assets | 53,502 | 53,133 | 1% |
| Non-current assets | 40,093 | 40,529 | - 1% |
| Equity 4 | 22,020 | 21,720 | 1% |
| Net debt | 17,716 | 17,406 | 2% |
| Investments 5 | 572 | 6,411 | - 91% |
| Q1 / 2018 | Q1 / 2017 | |
|---|---|---|
| EBITDA margin 1 | 17.3% | 18.7% |
| EBIT margin 1 | 13.0% | 14.5% |
| Depreciation and amortization in % of sales | 4.3% | 4.1% |
| Operating cash fl ow in % of sales | 2.9% | 5.7% |
| Equity ratio (March 31/ December 31) |
41.2% | 40.9% |
| Net debt / EBITDA (March 31 / December 31) 1, 6 |
2.98 | 2.84 |
Before special items
Net income attributable to shareholders of Fresenius SE & Co. KGaA Before expenditures for further development of biosimilars business
Equity including noncontrolling interest
6 At LTM average exchange rates for both net debt and EBITDA, pro forma acquisitions, excluding effects of the Akorn, NxStage and Sound Physicians transactions
Growth rates adjusted for IFRS 15 adoption (Q1 / 17 base: € 8,223 million)
Investments in property, plant and equipment, and intangible assets, acquisitions (three months)
| € in millions | Q1 / 2018 | Q1 / 2017 | Change | Change in constant currency |
|---|---|---|---|---|
| Sales | 3,976 | 4,548 | - 10% 1 | 2%1, 2 |
| EBIT | 497 | 651 | - 24% | -15%3 |
| Net income 4 | 279 | 308 | - 10% | 0%5 |
| Operating cash fl ow | - 45 | 170 | - 126% | |
| Investments / Acquisitions | 405 | 348 | 16% | |
| R & D expenses | 32 | 32 | 0% | |
| Employees (March 31 / December 31) | 122,193 | 121,245 | 1% |
FRESENIUS KABI – IV drugs, Biosimilars, Clinical nutrition, Infusion therapy, Medical devices / Transfusion technology
| € in millions | Q1 / 2018 | Q1 / 2017 | Change | Change in constant currency |
|---|---|---|---|---|
| Sales | 1,603 | 1,604 | 0% | 9% |
| EBIT 6 | 268 | 313 | - 14% | - 2%7 |
| Net income 6, 8 | 170 | 191 | - 11% | 3%9 |
| Operating cash fl ow | 226 | 192 | 18% | |
| Investments / Acquisitions | 78 | 67 | 16% | |
| R & D expenses | 127 | 89 | 43% | |
| Employees (March 31 / December 31) | 36,880 | 36,380 | 1% |
| € in millions | Q1 / 2018 | Q1 / 2017 | Change |
|---|---|---|---|
| Sales | 2,331 | 2,018 | 16% |
| EBIT | 278 | 255 | 9% |
| Net income 8 | 191 | 181 | 6% |
| Operating cash fl ow | 97 | 184 | - 47% |
| Investments / Acquisitions | 73 | 5,989 | - 99% |
| Employees (March 31 / December 31) | 106,809 | 105,927 | 1% |
| € in millions | Q1 / 2018 | Q1 / 2017 | Change |
|---|---|---|---|
| Sales | 249 | 223 | 12% |
| EBIT | 6 | 6 | 0% |
| Net income 10 | 4 | 4 | 0% |
| Operating cash fl ow | - 42 | - 44 | - 5% |
| Investments / Acquisitions | 8 | 3 | -- |
| Order intake | 260 | 220 | 18% |
| Employees (March 31 / December 31) | 8,760 | 8,667 | 1% |
1 Growth rate adjusted for IFRS 15 adoption (Q1 / 17 base: € 4,409 million)
2 Excluding VA agreement: 4%
3 Adjusted for re-valuation of Sound Physicians' share-based payment program and excluding VA agreement: 3% 4 Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
5 Adjusted for re-valuation of Sound Physicians' share-based payment program, the effect of the U.S. Tax Reform and excluding VA agreement: 8%
6 Before special items
7 Before expenditures for further development of biosimilars business: 10%
8 Net income attributable to shareholders of Fresenius SE & Co. KGaA 9 Before expenditures for further development of biosimilars business: 16%
10 Net income attributable to shareholders of VAMED AG
The DAX index declined by 6% in the fi rst quarter 2018, while the Fresenius share decreased by 5% over the same period.
The global economy continued to show robust growth in the fi rst three months of 2018. The economic growth is driven by domestic demand in most regions of the euro zone. The economy in the euro zone is expected to grow by 2.4% this year, according to the latest ECB forecast. The ECB left its monetary policy unchanged during its March meeting.
The Federal Reserve's latest forecast projects the U.S. economy to grow by 2.7% in 2018. As expected, the U.S. Federal Reserve, did not change the existing interest rates corridor of 1.50% to 1.75% at its May meeting.
Within this economic environment, the DAX increased by 6% in the fi rst three months of 2018 to 12,097 points. The Fresenius share closed at € 62.06 on March 31, 2018. This represents a decline of 5% over the closing price of 2017.
| Q1 / 2018 | 2017 | Change | |
|---|---|---|---|
| Number of shares (March 31 / December 31) | 554,875,179 | 554,710,473 | 0% |
| Quarter-end quotation in € | 62.06 | 65.07 | - 5% |
| High in € | 70.48 | 79.65 | - 12% |
| Low in € | 59.32 | 60.58 | - 2% |
| Ø Trading volume (number of shares per trading day) | 1,576,869 | 1,164,824 | 35% |
| Market capitalization, € in millions (March 31 / December 31) | 34,436 | 36,095 | - 5% |
We have started into the year with great momentum. All four Fresenius business segments and all regions showed healthy organic growth in the first quarter. The prospects for our businesses remain excellent. We are therefore confirming our guidance for the remainder of the year.
| Q1 / 2018 | at actual rates |
in constant currency |
|
|---|---|---|---|
| Sales | € 8.1 bn | - 1% 1 | + 7% 1 |
| EBIT 2 | € 1,054 m | - 13% | - 5% |
| Net income 2, 3 | € 450 m | - 2% | + 7% |
| Net income 2, 3, 4 (excluding Biosimilars) |
€ 476 m | + 4% | + 12% |
The health care sector is one of the world's largest industries. It is relatively insensitive to economic fl uctuations compared to other sectors and has posted above-average growth over the past years.
The main growth factors are rising medical needs deriving from aging populations, the growing number of chronically ill and multimorbid patients, stronger demand for innovative products and therapies, advances in medical technology and the growing health consciousness, which increases the demand for health care services and facilities.
In the emerging countries, drivers are the expanding availability and correspondingly greater demand for basic health care and increasing national incomes and hence higher spending on health care.
Health care structures are being reviewed and cost-cutting potential identifi ed in order to contain the steadily rising health care expenditures. However, such measures cannot compensate for the cost pressure. Market-based elements are increasingly being introduced into the health care system to create incentives for cost- and quality-conscious behavior. Overall treatment costs shall be reduced through improved quality standards. In addition, ever-greater importance is being placed on disease prevention and innovative reimbursement models linked to treatment quality standards.
Group sales decreased by 1% 1 (increased by 7% 1 in constant currency) to € 8,121 million (Q1 / 2017: € 8,362 million). Organic sales growth was 4%. Acquisitions / divestitures contributed net 3 % to growth. Sales growth was impacted by the anticipated decline in the pharmacy business within Care Coordination at Fresenius Medical Care North America. Also at Fresenius Medical Care, the prior-year quarter saw the
1 Growth rates adjusted for IFRS 15 adoption (Q1 / 17 base: € 8,223 million) Before transaction-related effects
Net income attributable to shareholders of Fresenius SE & Co. KGaA
Before expenditures for further development of biosimilars business
compensation for treatments of U.S. war veterans in previous years ("VA agreement"), contributing € 100 million as a onetime effect. Negative currency translation effects (8%) were mainly driven by the devaluation of the U.S. dollar and the Chinese yuan against the euro.
Group EBITDA 1 decreased by 10% (- 2% in constant currency) to € 1,403 million (Q1 / 2017: € 1,560 million). Group EBIT 1 decreased by 13% (- 5% in constant currency) to € 1,054 million (Q1 / 2017: € 1,216 million). The prior-year quarter was strongly infl uenced by a positive one-time effect: the VA agreement contributed € 99 million, or 10%, to EBIT 1 growth in constant currency in Q1 / 17. The EBIT margin 1 was 13.0% (12.7% before IFRS 15; Q1 / 2017: 14.5%). Group EBIT 1 before expenses for the further development of the biosimilars business decreased by 10% (- 2% in constant currency) to € 1,089 million. Group EBIT 1 before VA agreement and excluding the expenses for the biosimilars busi-
| € in millions | Q1 / 2018 | Q1 / 2017 |
|---|---|---|
| EBIT 1 | 1,054 | 1,216 |
| Net income 2 | 440 | 457 |
| Net income 1, 2 (before special items) | 450 | 457 |
| Earnings per share 2 | 0.79 | 0.83 |
| Earnings per share 1, 2 (before special items) | 0.81 | 0.83 |
ness increased by 6% in constant currency.
Group net interest 1 was - € 146 million (Q1 / 2017: - € 157 million). The decrease is mainly driven by currency effects and positive refi nancing activities.
The decrease of the Group tax rate before special items to 21.0% (Q1 / 2017: 29.1%) was mainly due to the U.S. tax reform and a one-time tax effect at Fresenius Medical Care.
Noncontrolling interest 1 was € 267 million (Q1 / 2017: € 294 million), of which 95% was attributable to the noncontrolling interest in Fresenius Medical Care.
| € in millions | Q1 / 2018 | Q1 / 2017 | Change at actual rates |
Currency trans lations effects |
Change at constant rates |
Organic growth |
Acquisitions / divestitures |
% of total sales |
|---|---|---|---|---|---|---|---|---|
| North America | 3,347 | 3,838 3 | - 13% | - 14% | 1% | 2% | - 1% | 41% |
| Europe | 3,589 | 3,242 | 11% | 0% | 11% | 3% | 8% | 44% |
| Asia-Pacifi c | 743 | 719 | 3% | - 9% | 12% | 8% | 4% | 9% |
| Latin America | 329 | 337 | - 2% | - 18% | 16% | 13% | 3% | 4% |
| Africa | 113 | 87 | 30% | - 3% | 33% | 33% | 0% | 2% |
| Total | 8,121 | 8,223 3 | - 1% | - 8% | 7% | 4% | 3% | 100% |
| € in millions | Q1 / 2018 | Q1 / 2017 | Change at actual rates |
Currency trans lations effects |
Change at constant rates |
Organic growth |
Acquisitions / divestitures |
% of total sales |
|---|---|---|---|---|---|---|---|---|
| Fresenius Medical Care | 3,976 | 4,409 3 | - 10% | - 12% | 2% | 3% | - 1% | 49% |
| Fresenius Kabi | 1,603 | 1,604 | 0% | - 9% | 9% | 9% | 0% | 19% |
| Fresenius Helios | 2,331 | 2,018 | 16% | 0% | 16% | 3% | 13% | 29% |
| Fresenius Vamed | 249 | 223 | 12% | 0% | 12% | 9% | 3% | 3% |
| Total | 8,121 | 8,223 3 | - 1% | - 8% | 7% | 4% | 3% | 100% |
Before transaction-related effects
Net income attributable to shareholders of Fresenius SE & Co. KGaA Growth rate adjusted for IFRS 15 adoption (Q1 / 17: deduction of € 139 million) Group net income 1, 2 decreased by 2% (increased by 7% in constant currency) to € 450 million (Q1 / 2017: € 457 million). Earnings per share1, 2 decreased by 2% (increased by 6% in constant currency) to € 0.81 (Q1 / 2017: € 0.83).
Group net income1, 2 before expenses for the further development of the biosimilars business increased by 4% (12% in constant currency) to € 476 million (Q1 / 2017: € 457 million). Earnings per share 1, 2 before expenses for the further development of the biosimilars business increased by 4% (11% in constant currency) to € 0.86 (Q1 / 2017: € 0.83).
Group net income 2 after special items decreased by 4% (increased by 4% in constant currency) to € 440 million (Q1 / 2017: € 457 million). Earnings per share 2 after special items decreased by 5% (increased by 4% in constant currency) to € 0.79 (Q1 / 2017: € 0.83).
Consolidated results for Q1 / 2018 include special items related to the Akorn transaction. These are mainly transaction costs in the form of legal and consulting fees as well as costs of the fi nancing commitment for the Akorn transaction. Moreover
special items arose from the announced divestiture of Sound Physicians due to the initial increase in valuation of the Sound Physicians' share based payment program. The following presentation shows the corresponding reconciliation to the IFRS values. There were no special items in Q1 / 2017.
Spending on property, plant and equipment was € 380 million (Q1 / 2017: € 328 million), primarily for the modernization and expansion of dialysis clinics, production facilities as well as hospitals and day clinics. This corresponds to 4.7% of sales.
Total acquisition spending was € 192 million (Q1 / 2017: € 6,083 million). The prior-year quarter included the acquisition of Quirónsalud.
Operating cash fl ow decreased by 50% to € 236 million (Q1 / 2017: € 476 million) with a margin of 2.9% (Q1 / 2017: 5.7%). The decrease is mainly attributable to prior years' received payment under the VA agreement of ~€ 200 million as well as to the seasonality in invoicing at Fresenius Medical
| Q1 / 2018 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| € in millions | Before special items and before expenditures for further development of biosimilars business |
Expenditures for further development of biosimilars business |
Before special items |
Transaction-related effects Akorn |
Transaction-related effects Sound Physicians |
IFRS reported |
||||
| Sales | 8,121 | 8,121 | 8,121 | |||||||
| EBIT | 1,089 | - 35 | 1,054 | - 5 | - 13 | 1,036 | ||||
| Net interest | - 144 | - 2 | - 146 | - 3 | - 149 | |||||
| Net income before taxes | 945 | - 37 | 908 | - 8 | - 13 | 887 | ||||
| Income taxes | - 202 | 11 | - 191 | 2 | - 189 | |||||
| Net income | 743 | - 26 | 717 | - 6 | - 13 | 698 | ||||
| Less noncontrolling interest | - 267 | - 267 | 9 | - 258 | ||||||
| Net income attributable to sharehold ers of Fresenius SE & Co. KGaA |
476 | - 26 | 450 | - 6 | - 4 | 440 |
Transaction-related effects are reported in the Group Corporate / Other segment.
| € in millions | Q1 / 2018 | Q1 / 2017 | thereof property, plant and equipment |
thereof acquisitions |
Change | % of total |
|---|---|---|---|---|---|---|
| Fresenius Medical Care | 405 | 348 | 221 | 184 | 16% | 71% |
| Fresenius Kabi | 78 | 67 | 78 | 0 | 16% | 14% |
| Fresenius Helios | 73 | 5,989 | 70 | 3 | -99% | 13% |
| Fresenius Vamed | 8 | 3 | 3 | 5 | 167% | 1% |
| Corporate / Other | 8 | 4 | 8 | 0 | 100% | 1% |
| Total | 572 | 6,411 | 380 | 192 | - 91% | 100% |
Care North America, which is not expected to impact full year 2018 cash fl ow.
Free cash fl ow before acquisitions and dividends decreased to - € 155 million (Q1 / 2017: € 148 million). Free cash fl ow after acquisitions and dividends was - € 389 million (Q1 / 2017: - € 5,393 million).
The Group's total assets increased by 1% (2% in constant currency) to € 53,502 million (Dec. 31, 2017: € 53,133 million). Current assets grew by 6% (8% in constant currency) to € 13,409 million (Dec. 31, 2017: € 12,604 million). Noncurrent assets decreased by 1% (0% in constant currency) to € 40,093 million (Dec. 31, 2017: € 40,529 million).
Total shareholders' equity increased by 1% (3% in constant currency) to € 22,020 million (Dec. 31, 2017: € 21,720 million). The equity ratio increased to 41.2% (Dec. 31, 2017: 40.9%).
Group debt increased by 1% (2% in constant currency) to € 19,200 million (Dec. 31, 2017: € 19,042 million). Group net debt increased by 2% (3% in constant currency) to € 17,716 million (Dec. 31, 2017: € 17,406 million).
As of March 31, 2018, the net debt / EBITDA ratio was 2.98 1, 2 (December 31, 2017: 2.84 1, 2).
| € in millions | Q1 / 2018 | Q1 / 2017 | Change |
|---|---|---|---|
| Net income | 698 | 751 | - 7% |
| Depreciation and amortization | 349 | 344 | 1% |
| Change in accruals for pensions | 16 | 18 | - 11% |
| Cash fl ow | 1,063 | 1,113 | - 4% |
| Change in working capital | - 811 | - 619 | - 31% |
| Operating cash fl ow | 236 | 476 | - 50% |
| Property, plant and equipment, investments net | - 391 | - 328 | - 19% |
| Cash fl ow before acquisitions and dividends | - 155 | 148 | -- |
| Cash used for acquisitions, net | - 189 | - 5,468 | 97% |
| Dividends paid | - 45 | - 73 | 38% |
| Free cash fl ow after acquisitions and dividends | - 389 | - 5,393 | 93% |
| Cash provided by / used for fi nancing activities | 254 | 5,293 | - 95% |
| Effect of exchange rates on change in cash and cash equivalents | - 17 | 1 | -- |
| Net change in cash and cash equivalents | - 152 | - 99 | - 54% |
pro forma closed acquisitions, excluding Akorn, NxStage and Sound Physicians transactions Before special items
Fresenius Medical Care is the world's largest provider of products and services for individuals with renal diseases. As of March 31, 2018, Fresenius Medical Care was treating 322,253 patients in 3,790 dialysis clinics. Along with its core business, the company provides related medical services in the fi eld of Care Coordination.
| € in millions | Q1 / 2018 | Q1 / 2017 | Change | Change in constant currency |
|---|---|---|---|---|
| Sales | 3,976 | 4,548 | - 10% 1 | 2% 1, 2 |
| EBIT | 497 | 651 | - 24% | - 15% 3 |
| Net income 4 | 279 | 308 | - 10% | 0% 5 |
| Net income adjusted 4, 6 | 292 | 308 | - 5% | 5% |
| Employees (March 31 / Dec. 31) | 122,193 | 121,245 | 1% |
Reported sales were strongly impacted by headwinds from foreign exchange rates and by the anticipated decline in the pharmacy business within Care Coordination at Fresenius Medical Care North America. Sales decreased by 10% 1 (increased by 2% 1 in constant currency) to € 3,976 million (Q1 / 2017: € 4,548 million). Organic sales growth was 3%. Acquisitions / divestitures and the VA agreement in the prioryear quarter decreased sales by 1%. Currency translation effects reduced sales by 12%. Excluding the VA agreement in the prior-year quarter, sales growth 1 was 4% in constant currency.
Health Care services sales (dialysis services and care coordination) decreased by 12% 9 (increased by 1% 9 in constant currency) to € 3,209 million (Q1 / 2017: € 3,769 million). Health Care product sales decreased by 2% (increased by 6% in constant currency) to € 767 million (Q1 / 2017: € 779 million).
In North America, sales decreased by 14% 9 (-1% 9 in constant currency) to € 2,774 million (Q1 / 2017: € 3,375 million). Health Care services sales decreased by 14% 9 (- 1% 9 in constant currency) to € 2,590 million (Q1 / 2017: € 3,165 million) mainly due to the prior-year VA agreement (€ 100 million). Excluding the 2017 effect from the VA Agreement Health Care services sales increased by 2% 9 in constant currency. Health Care product sales decreased by 12% (increased by 1% in constant currency) to € 184 million (Q1 / 2017: € 210 million).
Sales outside North America increased by 2% (10% in constant currency) to € 1,198 million (Q1 / 2017: € 1,169 million). Health Care services sales increased by 2% (12% in
Growth rate adjusted for IFRS 15 adoption (Q1 / 17 base: € 4,409 million)
Excluding VA agreement: 4%
Adjusted for re-valuation of Sound Physicians' share-based payment program and excluding VA agreement: 3%
Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
9 Growth rate adjusted for IFRS 15 adoption (Q1 / 17: deduction of € 139 million) constant currency) to € 619 million (Q1 / 2017: € 604 million). Health Care product sales increased by 3% (8% in constant currency) to € 579 million (Q1 / 2017: € 564 million).
Fresenius Medical Care's EBIT decreased by 24% (- 15% in constant currency) to € 497 million (Q1 / 2017: € 651 million). The EBIT margin was 12.5% (Q1 / 2017: 14.3%). Adjusted for the effect of the implementation of IFRS 15, the re-valuation of Sound Physicians' share-based payment program in connection with the announced divestiture of Sound Physicians and for the positive effect of the VA Agreement in Q1 / 2017, EBIT was up by 3% in constant currency and EBIT margin was stable at 12.8%.
Net income 1 of Fresenius Medical Care decreased by 10% (0% in constant currency) to € 279 million (Q1 / 2017: € 308 million). Consistent with guidance, i.e. adjusted for the re-valuation of Sound Physicians' share-based payment program, net income growth 1 was 5% in constant currency. Adjusted for the re-valuation of Sound Physicians' share-based payment program and the effect of the U.S. Tax Reform in 2018 and for the positive effect of the VA agreement, net income growth 1 was 8% in constant currency.
Operating cash fl ow was - € 45 million (Q1 / 2017: € 170 million). The cash fl ow margin was - 1.1% (Q1 / 2017: 3.7%). The decrease is mainly attributable to prior years' payment under the VA agreement of ~ € 200 million as well as to the seasonality in invoicing at Fresenius Medical Care North America, which is not expected to impact full year 2018 cash fl ow.
Mainly driven by the change in dosing of calcimimetic drugs, Fresenius Medical Care expects sales to grow by 5 to 7% 2 (previously: ~8% 2) in constant currency. Fresenius Medical Care expects net income 1 growth of 13% to 15% 3 in constant currency and excluding special items of 7% to 9% 4.
The 2018 targets are based on 2017 fi gures adjusted for the adoption of IFRS 15 implementation and exclude effects from the planned acquisition of NxStage Medical and the announced divestiture of Sound Physicians.
For further information, please see Fresenius Medical Care's Investor News at www.freseniusmedicalcare.com.
Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
2017 reported sales: € 17,784 million, adjusted for IFRS 15 adoption (deduction of € 486 million)
2017 base: € 1,280 million; 2018 including benefi ts from U.S. tax reform and adjusted for the Sound valuation impact VA Agreement, Natural Disaster Costs, FCPA related charge, U.S. Tax Reform
Fresenius Kabi offers intravenously administered generic drugs, clinical nutrition and infusion therapies for seriously and chronically ill patients in the hospital and outpatient environments. The company is also a leading supplier of medical devices and transfusion technology products. In the biosimilars business, we are developing products with a focus on oncology and autoimmune diseases.
| € in millions | Q1 / 2018 | Q1 / 2017 | Change | Change in constant currency |
|---|---|---|---|---|
| Sales | 1,603 | 1,604 | 0% | 9% |
| EBITDA 1 | 338 | 382 | - 12% | 1% |
| EBIT 1 | 268 | 313 | - 14% | - 2% 2 |
| Net income 1, 3 | 170 | 191 | - 11% | 3% 4 |
| Employees (March 31 / Dec. 31) | 36,880 | 36,380 | 1% |
With € 1,603 million (Q1 / 2017: € 1,604 million), sales of Fresenius Kabi were on prior years level (increased by 9% in constant currency). Organic sales growth was 9%. Strong negative currency translation effects (- 9%) were mainly related to the devaluation of the U.S. dollar and the Chinese yuan against the euro.
Sales in Europe grew by 2% (organic growth: 3%) to € 557 million (Q1 / 2017: € 544 million).
Sales in North America decreased by 5% (organic growth: 10%) to € 591 million (Q1 / 2017: € 619 million).
Sales in Asia-Pacifi c increased by 8% (organic growth: 15%) to € 301 million (Q1 / 2017: € 280 million). Sales in Latin America / Africa decreased by 4% (organic growth: 10%) to € 154 million (Q1 / 2017: € 161 million).
EBIT 1 decreased by 14% (- 2% in constant currency) to € 268 million (Q1 / 2017: € 313 million). The EBIT margin 1 was 16.7% (Q1 / 2017: 19.5%).
EBIT 1 before expenses for the further development of the biosimilars business decreased by 3% (increased by 10% in constant currency) to € 303 million (Q1 / 2017: € 313 million). The EBIT margin 1 before expenses for the further development of the biosimilars business was 18.9% (Q1 / 2017: 19.5%).
Net income 1, 3 decreased by 11% (increased by 3% in constant currency) to € 170 million (Q1 / 2017: € 191 million).
Operating cash fl ow increased by 18% to € 226 million (Q1 / 2017: € 192 million). The cash fl ow margin was 14.1% (Q1 / 2017: 12.0%).
Fresenius Kabi confi rms its outlook for 2018 and expects organic sales growth of 4% to 7% and EBIT growth in constant currency of - 3% to - 6% 5. Excluding expenditures for the further development of the biosimilars business, EBIT is expected to grow by ~ 2% to 5% 6 in constant currency.
Before special items
2017 base: € 1,177 million; 2018 before special items (i.e., transaction-related expenses), including expenditures for the further development of the
Before expenses for the further development of the biosimilars business: 10% Net income attributable to shareholders of Fresenius SE & Co. KGaA
Before expenses for the further development of the biosimilars business: 16%
biosimilars business (€ 60 million in FY / 17 and expected expenditures of ~ € 160 million in FY / 18) 6 2017 base: € 1,237 million; 2018 before special items (i.e., transaction-related expenses)
Fresenius Helios is Europe's leading private hospital operator. The company comprises Helios Germany and Helios Spain (Quirónsalud). Helios Germany operates 111 hospitals, thereof 88 acute care clinics and 23 post-acute care clinics, and treats more than 5.3 million patients annually. Quirónsalud operates 45 hospitals, 55 outpatient centers and around 300 occupational risk prevention centers, and treats approximately 11.6 million patients per year.
| € in millions | Q1 / 2018 | Q1 / 2017 | Change |
|---|---|---|---|
| Sales | 2,331 | 2,018 | 16% |
| EBITDA | 376 | 334 | 13% |
| EBIT | 278 | 255 | 9% |
| Net income 1 | 191 | 181 | 6% |
| Employees (March 31 / Dec. 31) | 106,809 | 105,927 | 1% |
Fresenius Helios increased sales by 16% to € 2,331 million (Q1 / 2017: € 2,018 million). Organic sales growth was 3%. The acquisition of Quirónsalud contributed 13% to sales growth. Helios Spain (Quirónsalud) has been consolidated since February 1, 2017.
Sales of Helios Germany increased by 3% (organic growth: 3%) to € 1,574 million (Q1 / 2017: € 1,528 million). Helios Spain increased sales by 54% (organic growth: 1%) to € 757 million (Q1 / 2017: € 490 million), mainly due to the additional month of consolidation compared to the prior-year quarter.
Fresenius Helios grew EBIT by 9% to € 278 million (Q1 / 2017: € 255 million). The EBIT margin was 11.9% (Q1 / 2017: 12.6%).
EBIT of Helios Germany decreased by 2% to € 177 million (Q1 / 2017: € 181 million) with a margin of 11.2% (Q1 / 2017: 11.8%). The decline is due to preparatory measures for anticipated regulatory structural requirements for minimum
staffi ng as well as catalogue effects. The anticipated regulatory requirements will be countered by clustering.
EBIT of Helios Spain increased by 39% to € 103 million (Q1 / 2017: € 74 million), mainly due to the additional month of consolidation compared to prior-year quarter. The EBIT margin was 13.6% (Q1 / 2017: 15.1%).
Net income 1 of Fresenius Helios increased by 6% to € 191 million (Q1 / 2017: € 181 million).
Operating cash fl ow was € 97 million (Q1 / 2017: € 184 million). The margin was 4.2% (Q1 / 2017: 9.1%).
Fresenius Helios confi rms its outlook for 2018 and expects organic sales growth of 3% to 6% and EBIT growth of 7% to 10%.
Fresenius Vamed manages projects and provides services for hospitals and other health care facilities worldwide. The portfolio ranges along the entire value chain: from project development, planning, and turnkey construction, via maintenance and technical management, to total operational management.
| € in millions | Q1 / 2018 | Q1 / 2017 | Change |
|---|---|---|---|
| Sales | 249 | 223 | 12% |
| EBITDA | 9 | 8 | 13% |
| EBIT | 6 | 6 | 0% |
| Net income 1 | 4 | 4 | 0% |
| Employees (March 31 / Dec. 31) | 8,760 | 8,667 | 1% |
Sales increased by 12% (12% in constant currency) to € 249 million (Q1 / 2017: € 223 million). Organic sales growth was 9%. Sales in the project business increased by 19% to € 92 million (Q1 / 2017: € 77 million). Sales in the service business grew by 8% to € 157 million (Q1 / 2017: € 146 million).
EBIT of € 6 million was unchanged from the prior-year level.
Net income 1 of € 4 million was also unchanged from prior-year level.
Order intake was € 260 million (Q1 / 2017: € 220 million). As of March 31, 2018, order backlog was € 2,391 million (December 31, 2017: € 2,147 million).
For 2018, Fresenius Vamed expects organic sales growth in the range of 5% to 10% and EBIT growth of 5% to 10%.
As of March 31, 2018, the number of employees increased by 1% to 275,674 (Dec. 31, 2017: 273,249).
| Number of employees | March 31, 2018 |
Dec. 31, 2017 |
Change |
|---|---|---|---|
| Fresenius Medical Care | 122,193 | 121,245 | 1% |
| Fresenius Kabi | 36,880 | 36,380 | 1% |
| Fresenius Helios | 106,809 | 105,927 | 1% |
| Fresenius Vamed | 8,760 | 8,667 | 1% |
| Corporate / Other | 1,032 | 1,030 | 0% |
| Total | 275,674 | 273,249 | 1% |
Product and process development as well as the improvement of therapies are at the core of our growth strategy. Fresenius focuses its R & D efforts on its core competencies in the following areas:
Apart from new products, we are concentrating on developing optimized or completely new therapies, treatment methods, and services.
Since September 1, 2017 research and development activities include the biosimilars business of Fresenius Kabi.
| € in millions | Q1 / 2018 | Q1 – 3 / 2017 | Change |
|---|---|---|---|
| Fresenius Medical Care | 32 | 32 | 0% |
| Fresenius Kabi | 127 | 89 | 43% |
| Fresenius Helios | – | – | -- |
| Fresenius Vamed | 0 | 0 | |
| Corporate / Other | 0 | 0 | |
| Total | 159 | 121 | 31% |
Compared to the presentation in the consolidated fi nancial statements and the management report as of December 31, 2017 applying Section 315e HGB in accordance with IFRS, there have been the following important developments in Fresenius' overall opportunities and risk situation until May 4, 2018.
Fresenius has decided on April 22, 2018 to terminate the company's merger agreement with Akorn, due to Akorn's failure to fulfi ll several closing conditions.
Fresenius' decision is based on, among other factors, material breaches of FDA data integrity requirements relating to Akorn's operations found during Fresenius' independent investigation. Fresenius offered to delay its decision in order to allow Akorn additional opportunity to complete its own investigation and present any information it wished Fresenius to consider, but Akorn has declined that offer. Akorn has stated that they disagree with Fresenius's position and intend to enforce the rights under the merger agreement. A corresponding complaint was fi led in court. Fresenius in turn has fi led a counterclaim on April 30, 2018. The court has set a trial commencing on July 9, 2018.
If Akorn were able to prevail in court, Fresenius could be forced to purchase Akorn at the original price. This could result in signifi cant reputational and fi nancial costs.
In April 2018 the Standing Committee of the European Commission did not decide according to the European Medicines Agency's (EMA) proposal to suspend the marketing authorizations for products containing hydroxyethyl starch (HES) and referred the matter back to the Pharmacovigilance Risk Assessment Advisory Committee (PRAC) at the EMA.
In the ordinary course of Fresenius Group's operations, the Fresenius Group is subject to litigation, arbitration and investigations relating to various aspects of its business. The Fresenius Group regularly analyzes current information about such claims for probable losses and provides accruals for such matters, including estimated expenses for legal services, as appropriate.
In addition, we report on legal proceedings, currency and interest risks on pages 43 to 48 in the Notes of this report.
Fresenius is covered by the rating agencies Moody's, Standard & Poor's and Fitch.
The following table shows the company rating of Fresenius SE & Co. KGaA:
| Standard & Poor's |
Moody's | Fitch 1 | |
|---|---|---|---|
| Company rating | BBB - | Baa3 | BBB - |
| Outlook | positive | stable | stable |
On April 24, 2017, Fresenius announced that Fresenius Kabi has agreed to acquire Akorn, Inc. (Akorn), a U.S.-based manufacturer and marketer of prescription and over-the-counter pharmaceutical products, and offered approximately US\$ 4.3 billion, or US\$ 34 per share, plus the prevailing net debt at closing of the transaction.
Fresenius has been conducting an independent investigation, using external experts, into alleged breaches of FDA data integrity requirements relating to product development at Akorn.
Fresenius has decided on April 22, 2018 to terminate the company's merger agreement with Akorn, due to Akorn's failure to fulfi ll several closing conditions.
Fresenius' decision is based on, among other factors, material breaches of FDA data integrity requirements relating to Akorn's operations found during Fresenius' independent investigation. Fresenius offered to delay its decision in order to allow Akorn additional opportunity to complete its own investigation and present any information it wished Fresenius to consider, but Akorn has declined that offer.
Akorn has stated that they disagree with Fresenius's position and intend to enforce the rights under the merger agreement. A corresponding complaint was fi led in court. Fresenius in turn has fi led a counterclaim on April 30, 2018. The court has set a trial commencing on July 9, 2018.
Fresenius confi rms its guidance for 2018. Group sales are expected to increase by 5% to 8% 2 in constant currency. Net income 3, 4 is expected to grow by 6% to 9% in constant currency. Excluding expenditures for the further development of the biosimilars business, net income 3, 5 is expected to grow by ~10% to 13% in constant currency.
Fresenius expects to further reduce its net debt/EBITDA 6 ratio by year-end 2018.
Mainly driven by the change in dosing of calcimimetic drugs, Fresenius Medical Care expects sales to grow by 5% to 7% 7 (previously: ~8% 7) in constant currency. Fresenius Medical Care expects net income 8 growth of 13% to 15% 9 in constant currency and excluding special items of 7% to 9% 10.
The 2018 targets are based on 2017 fi gures adjusted for the adoption of IFRS 15 implementation and exclude effects from the planned acquisition of NxStage Medical and the announced divestiture of Sound Physicians.
1 Excluding effects of the Akorn, NxStage and Sound Physicians transactions
2 2017 base adjusted for IFRS 15 adoption (deduction of € 486 million at Fresenius Medical Care)
3 Net income attributable to shareholders of Fresenius SE & Co. KGaA
4 2017 base: € 1,816 million (before special items (before transaction-related effects, before book gain from U.S. tax reform, before FCPA provision)); 2018 before special items (i.e.,
transaction-related effects); including expenditures for further development of biosimilars business (€ 43 million after tax in FY / 17 and ~€ 120 million after tax in FY / 18) 5 2017 base: € 1,859 million (adjusted net income: before transaction-related effects, before expenditures for further development of biosimilars business, before book gain from U.S. tax
reform, before FCPA provision); 2018 before special items (i.e., transaction-related effects), excluding expenditures for further development of biosimilars business (€ 43 million after tax in FY / 17 and ~€ 120 million after tax in FY / 18)
6 Calculated at expected annual average exchange rates, for both net debt and EBITDA; excluding effects of the Akorn, NxStage and Sound Physicians transactions; excluding further
potential acquisitions; at current IFRS rules
7 2017 reported sales: € 17,784 million, adjusted for IFRS 15 adoption (deduction of € 486 million)
8 Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
9 2017 base: € 1,280 million; 2018 including benefi ts from U.S. tax reform and adjusted for the Sound valuation impact 10 VA Agreement, Natural Disaster Costs, FCPA related charge, U.S. Tax Reform
| 5% – 8% | € 33.400 m 2 | confi rmed |
|---|---|---|
| 6% – 9% 4 | € 1.816 m 5 | confi rmed |
| ~10% – 13% 6 | € 1.859 m 7 | confi rmed |
Excluding effects of the Akorn, NxStage and Sound Physicians transactions
Adjusted for IFRS 15 adoption (deduction of € 486 million at Fresenius Medical Care) Net income attributable to shareholders of Fresenius SE & Co. KGaA
Before special items (i.e., transaction-related effects); including expenditures for further development of biosimilars business (€ 43 million after tax in FY / 17 and ~€ 120 million after tax in FY / 18)
Before special items (before transaction-related effects, before book gain from U.S. tax reform, before FCPA provision)
6 Before special items (before transaction-related effects); excluding expenditures for further development of biosimilars business (€ 43 million after tax in FY / 17 and ~€ 120 million after tax in FY / 18) Adjusted net income: before transaction-related effects, before expenditures for further development of biosimilars business, before book gain from U.S. tax reform, before FCPA provision
| Targets 2018 1 | Fiscal year 2017 | New guidance | |
|---|---|---|---|
| Fresenius Medical Care | |||
| Sales growth (in constant currency) | ~8% 2 | € 17,298 m 2 | 5% – 7% 2 |
| Net income 3 growth (in constant currency) | 13% – 15%4 | € 1,280 m | confi rmed |
| Fresenius Kabi | |||
| Sales growth (organic) | 4% – 7% | € 6,358 m | confi rmed |
| EBIT growth (in constant currency) 5 | - 3% – - 6% | € 1,177 m | confi rmed |
| EBIT growth (in constant currency) 6 excluding Biosimilars | ~2% – 5% | € 1,237 m | confi rmed |
| Fresenius Helios | |||
| Sales growth (organic) | 3% – 6% 7 | € 8,668 m 8 | confi rmed |
| EBIT, growth | 7% – 10 % | € 1,052 m 8 | confi rmed |
| Fresenius Vamed | |||
| Sales growth (organic) | 5% – 10% | € 1,228 m | confi rmed |
| EBIT, growth | 5% – 10% | € 76 m | confi rmed |
Excluding effects of the Akorn, NxStage and Sound Physicians transactions
2017 reported sales: € 17,784 million, adjusted for IFRS 15 adoption (deduction of € 486 million)
Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
2018 including benefi ts from U.S. tax reform and adjusted for the Sound valuation impact Before special items (i.e., transaction-related effects), including expenditures for the further development of the biosimilars business (€ 60 million
in FY / 17 and expected expenditures of ~€ 160 million in FY / 18)
6 Before special items (i.e., transaction-related effects), before expenditures for the further development of the biosimilars business (€ 60 million in
FY / 17 and expected expenditures of ~€ 160 million in FY / 18) Organic growth refl ects 11 months contribution of Helios Spain in 2018
8 Helios Spain consolidated for 11 months
Fresenius Kabi confi rms its outlook for 2018 and expects organic sales growth of 4% to 7% and EBIT growth in constant currency of - 3% to - 6% 1. Excluding expenditures for the further development of the biosimilars business, EBIT is expected to grow by ~ 2% to 5% 2 in constant currency.
Fresenius Helios confi rms its outlook for 2018 and expects organic sales growth of 3% to 6% and EBIT growth of 7% to 10%.
For 2018, Fresenius Vamed expects organic sales growth in the range of 5% to 10% and EBIT growth of 5% to 10%
The Group plans to invest around 6% of sales in property, plant and equipment.
| € in millions | Q1 / 2018 | Q1 / 2017 |
|---|---|---|
| Sales | 8,121 | 8,362 |
| Cost of sales | - 5,783 | - 5,669 |
| Gross profi t | 2,338 | 2,693 |
| Selling, general and administrative expenses | - 1,143 | - 1,356 |
| Research and development expenses | - 159 | - 121 |
| Operating income (EBIT) | 1,036 | 1,216 |
| Net interest | - 149 | - 157 |
| Income before income taxes | 887 | 1,059 |
| Income taxes | - 189 | - 308 |
| Net income | 698 | 751 |
| Noncontrolling interest | 258 | 294 |
| Net income attributable to shareholders of Fresenius SE & Co. KGaA | 440 | 457 |
| Earnings per share in € | 0.79 | 0.83 |
| Fully diluted earnings per share in € | 0.79 | 0.82 |
The following notes are an integral part of the unaudited condensed interim fi nancial statements.
| € in millions | Q1 / 2018 | Q1 / 2017 |
|---|---|---|
| Net income | 698 | 751 |
| Other comprehensive income (loss) | ||
| Positions which will be reclassified into net income in subsequent years | ||
| Foreign currency translation | - 427 | - 67 |
| Cash flow hedges | 8 | 11 |
| Change of fair value of available for sale financial assets | 0 | – |
| Income taxes on positions which will be reclassified | 4 | 1 |
| Positions which will not be reclassified into net income in subsequent years | ||
| Actuarial gains on defined benefit pension plans | 1 | 2 |
| Income taxes on positions which will not be reclassified | – | - 1 |
| Other comprehensive loss, net | - 414 | - 54 |
| Total comprehensive income | 284 | 697 |
| Comprehensive income attributable to noncontrolling interest | 69 | 243 |
| Comprehensive income attributable to shareholders of Fresenius SE & Co. KGaA |
215 | 454 |
| € in millions | March 31, 2018 | December 31, 2017 |
|---|---|---|
| Cash and cash equivalents | 1,484 | 1,636 |
| Trade accounts and other receivables, less allowance for doubtful accounts | 6,856 | 6,260 |
| Accounts receivable from and loans to related parties | 19 | 17 |
| Inventories | 2,934 | 3,252 |
| Other current assets | 2,116 | 1,439 |
| I. Total current assets | 13,409 | 12,604 |
| Property. plant and equipment | 9,496 | 9,555 |
| Goodwill | 24,949 | 25,285 |
| Other intangible assets | 3,143 | 3,172 |
| Other non-current assets | 1,706 | 1,773 |
| Deferred taxes | 799 | 744 |
| II. Total non-current assets | 40,093 | 40,529 |
| Total assets | 53,502 | 53,133 |
| € in millions | March 31, 2018 | December 31, 2017 |
|---|---|---|
| Trade accounts payable | 1,479 | 1,688 |
| Short-term accounts payable to related parties | 124 | 42 |
| Short-term provisions and other short-term liabilities | 5,926 | 5,854 |
| Short-term debt | 1,792 | 1,550 |
| Short-term debt from related parties | 4 | – |
| Current portion of long-term debt and capital lease obligations | 615 | 618 |
| Current portion of bonds | 1,023 | 731 |
| Short-term accruals for income taxes | 285 | 182 |
| A. Total short-term liabilities | 11,248 | 10,665 |
| Long-term debt and capital lease obligations, less current portion | 6,481 | 6,487 |
| Bonds, less current portion | 7,961 | 8,338 |
| Convertible bonds | 1,324 | 1,318 |
| Long-term provisions and other long-term liabilities | 1,927 | 2,094 |
| Pension liabilities | 1,175 | 1,163 |
| Long-term accruals for income taxes | 236 | 238 |
| Deferred taxes | 1,130 | 1,110 |
| B. Total long-term liabilities | 20,234 | 20,748 |
| I. Total liabilities | 31,482 | 31,413 |
| A. Noncontrolling interest | 8,136 | 8,059 |
| Subscribed capital | 555 | 555 |
| Capital reserve | 3,859 | 3,848 |
| Other reserves | 10,093 | 9,656 |
| Accumulated other comprehensive loss | - 623 | - 398 |
| B. Total Fresenius SE & Co. KGaA shareholders' equity | 13,884 | 13,661 |
| II. Total shareholders' equity | 22,020 | 21,720 |
| Total liabilities and shareholders' equity | 53,502 | 53,133 |
| € in millions | Q1 / 2018 | Q1 / 2017 |
|---|---|---|
| Operating activities | ||
| Net income | 698 | 751 |
| Adjustments to reconcile net income to cash and cash equivalents provided by operating activities |
||
| Depreciation and amortization | 349 | 344 |
| Loss on sale of investments and divestitures | 2 | 1 |
| Change in deferred taxes | - 18 | - 25 |
| Gain / Loss on sale of fixed assets | – | - 7 |
| Changes in assets and liabilities, net of amounts from businesses acquired or disposed of |
||
| Trade accounts and other receivables, net | - 695 | - 483 |
| Inventories | - 70 | - 48 |
| Other current and non-current assets | - 94 | - 59 |
| Accounts receivable from / payable to related parties | 87 | - 4 |
| Trade accounts payable, provisions and other short-term and long-term liabilities | - 123 | - 121 |
| Accruals for income taxes | 100 | 127 |
| Net cash provided by operating activities | 236 | 476 |
| Investing activities | ||
| Purchase of property, plant and equipment | - 399 | - 346 |
| Proceeds from sales of property, plant and equipment | 8 | 18 |
| Acquisitions and investments, net of cash acquired and net purchases of intangible assets | - 189 | - 5,473 |
| Proceeds from sale of investments and divestitures | – | 5 |
| Net cash used in investing activities | - 580 | - 5,796 |
| Financing activities | ||
| Proceeds from short-term debt | 404 | 113 |
| Repayments of short-term debt | - 161 | - 28 |
| Proceeds from long-term debt and capital lease obligations | 108 | 2,212 |
| Repayments of long-term debt and capital lease obligations | - 112 | - 110 |
| Proceeds from the issuance of bonds | 0 | 2,600 |
| Proceeds from the issuance of convertible bonds | 0 | 500 |
| Proceeds from / Payments of the accounts receivable securitization program | 9 | - 5 |
| Proceeds from the exercise of stock options | 5 | 8 |
| Dividends paid | - 45 | - 73 |
| Change in noncontrolling interest | 1 | 3 |
| Exchange rate effect due to corporate financing | – | – |
| Net cash provided by fi nancing activities | 209 | 5,220 |
| Effect of exchange rate changes on cash and cash equivalents | - 17 | 1 |
| Net decrease in cash and cash equivalents | - 152 | - 99 |
| Cash and cash equivalents at the beginning of the reporting period | 1,636 | 1,579 |
| Cash and cash equivalents at the end of the reporting period | 1,484 | 1,480 |
THAT ARE INCLUDED IN NET CASH PROVIDED BY OPERATING ACTIVITIES
| Q1 / 2018 | Q1 / 2017 | |
|---|---|---|
| Received interest | 12 | 18 |
| Paid interest | - 163 | - 201 |
| Income taxes paid | - 116 | - 189 |
| Subscribed Capital | Reserves | ||||||
|---|---|---|---|---|---|---|---|
| Number of ordinary shares in thousand |
Amount € in thousands |
Amount € in millions |
Capital reserve € in millions |
Other reserves € in millions |
|||
| As of December 31, 2016 | 547,208 | 547,208 | 547 | 3,379 | 8,165 | ||
| Issuance of bearer ordinary shares | 6,108 | 6,108 | 6 | 394 | |||
| Proceeds from the exercise of stock options | 181 | 181 | – | 5 | |||
| Compensation expense related to stock options | 7 | ||||||
| Dividends paid | |||||||
| Purchase of noncontrolling interest | |||||||
| Noncontrolling interest subject to put provisions | - 5 | ||||||
| Comprehensive income (loss) | |||||||
| Net income | 457 | ||||||
| Other comprehensive income (loss) | |||||||
| Cash flow hedges | |||||||
| Change of fair value of available for sale financial assets |
|||||||
| Foreign currency translation | |||||||
| Actuarial gains on defined benefit pension plans |
|||||||
| Comprehensive income (loss) | 457 | ||||||
| As of March 31, 2017 | 553,497 | 553,497 | 553 | 3,785 | 8,617 | ||
| As of December 31, 2017 | 554,710 | 554,710 | 555 | 3,848 | 9,656 | ||
| Adjustment due to the initial application of IFRS 9 and IFRS 15 |
0 | 0 | 0 | 0 | - 24 | ||
| As of January 1, 2018, adjusted | 554,710 | 554,710 | 555 | 3,848 | 9,632 | ||
| Proceeds from the exercise of stock options | 165 | 165 | – | 4 | |||
| Compensation expense related to stock options Dividends paid |
7 | ||||||
| Purchase of noncontrolling interest | |||||||
| Noncontrolling interest subject to put provisions | 21 | ||||||
| Comprehensive income (loss) | |||||||
| Net income | 440 | ||||||
| Other comprehensive income (loss) | |||||||
| Cash flow hedges | |||||||
| Foreign currency translation | |||||||
| Actuarial gains on defined benefit pension plans |
|||||||
| Comprehensive income (loss) | 440 | ||||||
| As of March 31, 2018 | 554,875 | 554,875 | 555 | 3,859 | 10,093 |
| Accumulated other com prehensive income (loss) € in millions |
Total Fresenius SE & Co. KGaA shareholders' equity € in millions |
Non controlling interest € in millions |
Total shareholders' equity € in millions |
|
|---|---|---|---|---|
| As of December 31, 2016 | 573 | 12,664 | 8,185 | 20,849 |
| Issuance of bearer ordinary shares | 400 | 0 | 400 | |
| Proceeds from the exercise of stock options | 5 | 3 | 8 | |
| Compensation expense related to stock options | 7 | 2 | 9 | |
| Dividends paid | 0 | - 73 | - 73 | |
| Purchase of noncontrolling interest | 0 | 46 | 46 | |
| Noncontrolling interest subject to put provisions | - 5 | - 10 | - 15 | |
| Comprehensive income (loss) | ||||
| Net income | 457 | 294 | 751 | |
| Other comprehensive income (loss) | ||||
| Cash flow hedges | 4 | 4 | 4 | 8 |
| Change of fair value of available for sale financial assets |
– | – | – | – |
| Foreign currency translation | - 7 | - 7 | - 56 | - 63 |
| Actuarial gains on defined benefit pension plans |
– | – | 1 | 1 |
| Comprehensive income (loss) | - 3 | 454 | 243 | 697 |
| As of March 31, 2017 | 570 | 13,525 | 8,396 | 21,921 |
| As of December 31, 2017 | - 398 | 13,661 | 8,059 | 21,720 |
| Adjustment due to the initial application of IFRS 9 and IFRS 15 |
- 24 | - 2 | - 26 | |
| As of January 1, 2018, adjusted | - 398 | 13,637 | 8,057 | 21,694 |
| Proceeds from the exercise of stock options | 4 | 1 | 5 | |
| Compensation expense related to stock options | 7 | 1 | 8 | |
| Dividends paid | 0 | - 45 | - 45 | |
| Purchase of noncontrolling interest | 0 | 7 | 7 | |
| Noncontrolling interest subject to put provisions | 21 | 46 | 67 | |
| Comprehensive income (loss) | ||||
| Net income | 440 | 258 | 698 | |
| Other comprehensive income (loss) | ||||
| Cash flow hedges | 1 | 1 | 4 | 5 |
| Foreign currency translation | - 227 | - 227 | - 193 | - 420 |
| Actuarial gains on defined benefit pension plans |
1 | 1 | 0 | 1 |
| Comprehensive income (loss) | - 225 | 215 | 69 | 284 |
| As of March 31, 2018 | - 623 | 13,884 | 8,136 | 22,020 |
| Fresenius Medical Care | Fresenius Kabi | Fresenius Helios | Fresenius Vamed | Corporate / Other | Fresenius Group | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| by business segment, € in millions | 2018 2 | 2017 | Change | 2018 2 | 2017 | Change | 2018 | 2017 | Change | 2018 | 2017 | Change | 2018 3 | 2017 | Change | 2018 | 2017 | Change |
| Sales | 3,976 | 4,548 | - 13% | 1,603 | 1,604 | 0% | 2,331 | 2,018 | 16% | 249 | 223 | 12% | - 38 | - 31 | - 23% | 8,121 | 8,362 | - 3% |
| thereof contribution to consolidated sales |
3,968 | 4,541 | - 13% | 1,589 | 1,591 | 0% | 2,331 | 2,018 | 16% | 233 | 212 | 10% | 0 | 0 | 8,121 | 8,362 | - 3% | |
| thereof intercompany sales | 8 | 7 | 14% | 14 | 13 | 8% | 0 | 0 | 16 | 11 | 45% | - 38 | - 31 | - 23% | 0 | 0 | ||
| contribution to consolidated sales | 49% | 54% | 19% | 19% | 29% | 24% | 3% | 3% | 0% | 0% | 100% | 100% | ||||||
| EBITDA | 685 | 841 | - 19% | 338 | 382 | - 12% | 376 | 334 | 13% | 9 | 8 | 13% | - 23 | - 5 | -- | 1,385 | 1,560 | - 11% |
| Depreciation and amortization | 175 | 190 | - 8% | 70 | 69 | 1% | 98 | 79 | 24% | 3 | 2 | 50% | 3 | 4 | - 25% | 349 | 344 | 1% |
| EBIT | 510 | 651 | - 22% | 268 | 313 | - 14% | 278 | 255 | 9% | 6 | 6 | 0% | - 26 | - 9 | - 189% | 1,036 | 1,216 | - 15% |
| Net interest | - 80 | - 92 | 14% | - 29 | - 28 | - 4% | - 40 | - 29 | - 38% | 0 | 0 | 0 | - 8 | 100% | - 149 | - 157 | 5% | |
| Income taxes | - 87 | - 182 | 52% | - 60 | - 85 | 29% | - 45 | - 42 | - 7% | - 2 | - 2 | 0% | 5 | 3 | 67% | - 189 | - 308 | 39% |
| shareholders of Fresenius SE & Co. KGaA Net income attributable to |
292 | 308 | - 5% | 170 | 191 | - 11% | 191 | 181 | 6% | 4 | 4 | 0% | - 217 | - 227 | 4% | 440 | 457 | - 4% |
| Operating cash fl ow | - 45 | 170 | - 126% | 226 | 192 | 18% | 97 | 184 | - 47% | - 42 | - 44 | 5% | 0 | - 26 | 100% | 236 | 476 | - 50% |
| Cash fl ow before acquisitions and dividends | - 263 | - 25 | -- | 130 | 108 | 20% | 32 | 139 | - 77% | - 44 | - 45 | 2% | - 10 | - 29 | 66% | - 155 | 148 | -- |
| Total assets 1 | 24,157 | 24,025 | 1% | 11,754 | 11,792 | 0% | 16,788 | 16,583 | 1% | 1,321 | 1,282 | 3% | - 518 | - 549 | 6% | 53,502 | 53,133 | 1% |
| Debt 1 | 7,721 | 7,448 | 4% | 4,631 | 4,806 | - 4% | 6,523 | 6,665 | - 2% | 295 | 245 | 20% | 30 | - 122 | 125% | 19,200 | 19,042 | 1% |
| Other operating liabilities 1 | 5,067 | 5,282 | - 4% | 2,925 | 2,879 | 2% | 2,243 | 2,027 | 11% | 581 | 621 | - 6% | 336 | 452 | - 26% | 11,152 | 11,261 | - 1% |
| Capital expenditure, gross | 221 | 198 | 12% | 78 | 66 | 18% | 70 | 57 | 23% | 3 | 3 | 0% | 8 | 4 | 100% | 380 | 328 | 16% |
| Acquisitions, gross / investments | 184 | 150 | 23% | 0 | 1 | - 100% | 3 | 5,932 | - 100 | 5 | – | -- | 0 | 0 | 192 | 6,083 | - 97 | |
| Research and development expenses | 32 | 32 | 1% | 127 | 89 | 43% | – | – | -- | 0 | 0 | 0 | 0 | 159 | 121 | 31% | ||
| (per capita on balance sheet date) 1 Employees |
122,193 | 121,245 | 1% | 36,880 | 36,380 | 1% | 106,809 | 105,927 | 1% | 8,760 | 8,667 | 1% | 1,032 | 1,030 | 0% | 275,674 | 273,249 | 1% |
| Key fi gures | ||||||||||||||||||
| EBITDA margin | 17.2% | 18.5% | 21.1% | 23.8% | 16.1% | 16.6% | 3.6% | 3.6% | 17.3%2 | 18.7% | ||||||||
| EBIT margin | 12.8% | 14.3% | 16.7% | 19.5% | 11.9% | 12.6% | 2.4% | 2.7% | 13.0%2 | 14.5% | ||||||||
| Depreciation and amortization in % of sales |
4.4% | 4.2% | 4.4% | 4.3% | 4.2% | 3.9% | 1.2% | 0.9% | 4.3% | 4.1% | ||||||||
| Operating cash flow in % of sales | - 1.1% | 3.7% | 14.1% | 12.0% | 4.2% | 9.1% | - 16.9% | - 19.7% | 2.9% | 5.7% | ||||||||
| ROOA 1 | 10.2% | 10.9% | 10.6% | 10.8% | 6.9% | 6.9% | 8.7% | 9.8% | 9.0%4 | 9.4%5 | ||||||||
| 1 2017: December 31 | The consolidated segment reporting is an integral part of the notes. |
CONSOLIDATED SEGMENT REPORTING FIRST QUARTER (UNAUDITED)
FRESENIUS SE & CO. KGAA
1 2017: December 31 2 Before transaction-related effects
3 After transaction-related effects
4 The underlying pro forma EBIT does not include transaction-related effects.
The following notes are an integral part of the unaudited condensed interim fi nancial statements.
5 The underlying pro forma EBIT does not include transaction-related effects and FCPA provision.
At a Glance Fresenius Share Management Report Financial Statements Notes 23
Fresenius is a global health care group with products and services for dialysis, hospitals and outpatient medical care. In addition, the Fresenius Group focuses on hospi tal operations and also manages projects and provides services for hospitals and other health care facilities worldwide. Besides the activities of the parent company Fresenius SE & Co. KGaA, Bad Homburg v. d. H., the operating activities were split into the following legally independent business segments as of March 31, 2018:
The reporting currency in the Fresenius Group is the euro. In order to make the presentation clearer, amounts are mostly shown in million euros. Amounts under € 1 million after rounding are marked with "–".
Fresenius SE & Co. KGaA, as a stock exchange listed company with a domicile in a member state of the European Union, fulfi lls its obligation to prepare and publish the consolidated fi nancial statements in accordance with the International Financial Reporting Standards (IFRS) applying Section 315e of the German Commercial Code (HGB).
The accompanying condensed interim fi nancial statements comply with the International Accounting Standard (IAS) 34. They have been prepared in accordance with the IFRS in force on the reporting date and adopted by the European Union.
The Fresenius Group has applied IFRS 15, Revenue from Contracts with Customers, and IFRS 9, Financial Instruments, since January 1, 2018. As a result of the implementation, the Fresenius Group has updated its accounting policies accordingly. Changes in the accounting policies due to the implementation of IFRS 15 and IFRS 9 are described in note 1.IV, Recent pronouncements, applied. For all other issues, the accounting policies applied in the accompanying consolidated fi nancial statements are the same as those applied in the consolidated fi nancial statements as of December 31, 2017.
The condensed consolidated fi nancial statements and management report for the fi rst quarter ended March 31, 2018 have not been audited nor reviewed and should be read in conjunction with the notes included and published in the consolidated fi nancial statements as of December 31, 2017 applying Section 315e HGB in accordance with IFRS.
Except for the reported acquisitions (see note 2, Acquisitions, divestitures and investments), there have been no other major changes in the entities consolidated.
The consolidated fi nancial statements for the fi rst quarter ended March 31, 2018 include all adjustments that, in the opinion of the Management Board, are of a normal and recurring nature and are necessary to provide an appropriate view of the assets and liabilities, fi nancial position and results of operations of the Fresenius Group.
The results of operations for the fi rst quarter ended March 31, 2018 are not necessarily indicative of the results of operations for the fi scal year 2018.
In the prior year's comparative consolidated fi nancial statements, fi nance lease receivables in the amount of € 58 million have been reclassifi ed from other currents assets to trade accounts and other receivables to conform to the current year's presentation.
The preparation of consolidated fi nancial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated fi nancial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The Fresenius Group has prepared its consolidated fi nancial statements at March 31, 2018 in conformity with IFRS in force for the interim periods on January 1, 2018.
In the fi rst quarter of 2018, the Fresenius Group applied the following new standards relevant for its business for the fi rst time:
In May 2014, the International Accounting Standards Board (IASB) issued IFRS 15, Revenue from Contracts with Customers. This new standard specifi es how and when companies reporting under IFRS will recognize revenue as well as providing users of fi nancial statements with more informative and relevant disclosures. IFRS 15 supersedes IAS 18, Revenue, IAS 11, Construction Contracts, and a number of revenue-related interpretations. This standard applies to nearly all contracts with customers, the main exceptions are leases, fi nancial instruments and insurance con tracts. In September 2015, the IASB issued the amendment Effective Date of IFRS 15, which defers the effective date of IFRS 15 by one year to fi scal years beginning on or after January 1, 2018. The Fresenius Group adopted this standard as of January 1, 2018. In accordance with the transition provisions in IFRS 15, the new rules have been adopted only to those contracts that were not completed contracts as of January 1, 2018 following the cumulative effect method with no restatement of the comparative periods presented.
IFRS 15 requires the consideration of implicit price concessions when determining the transaction price which, upon adoption, resulted in the implicit price concessions in the business segment Fresenius Medical Care directly reducing revenue in the amount of € 157 million for the fi rst quarter of 2018. Prior to the adoption of IFRS 15, these price concessions were included in the general and administrative expenses as an allowance for doubtful accounts in the amount of € 139 million for the fi rst quarter of 2017. Consequently, there is no effect on net income as the implicit price concessions are merely presented in different lines within the consolidated statement of income.
In the business segment Fresenius Vamed, sales from long-term production contracts are no longer recognized using the percentage of completion method (PoC method) but according to the IFRS 15 guidance for performance obligations satisfi ed over time, which did not result in any changes
to the consolidated statement of income. In the consolidated statement of fi nancial position the amounts that were included in inventory under the PoC method will generally be recognized as contract assets according to IFRS 15. Contract assets are included in other current and other non-current assets in the consolidated statement of fi nancial position. At the end of the reporting period, € 327 million were included in other current assets that would have been included in inventories according to the former rule.
Other contract assets relate to medical treatments that have been started but not completed at the respective reporting date. They were previously recognized as trade accounts receivable.
The Fresenius Group applies the following policies for recognizing revenue:
Revenues from services and products are billed according to the usual contract arrangements with customers, patients and related third parties. For services performed for patients, the transaction price is estimated based on either Fresenius Group's standard rates, rates determined under reimbursement arrangements or by government regulations. These arrangements are generally with third party payors, such as U.S. Medicare, U.S. Medicaid, German health insurance funds or commercial insurers. Deductions from rebates and discounts that are contractually agreed are taken into account to determine the expected recoverable amount which is calculated on the basis of historical data.
If the collection of the billed amount or a portion of the billed amount for services performed for patients is considered to be uncertain at the time services are performed, the Fresenius Group concludes that the consideration is variable (implicit price concession) and records the difference between the billed amount and the amount estimated to be collectible as a reduction to health care services revenue. Prior to the adoption of IFRS 15, it was recorded as an allowance for accounts receivable. Implicit price concessions include such items as amounts due from patients without adequate insurance coverage and patient co-payment and deductible amounts due from patients with health care coverage. The Fresenius Group determines implicit price concessions primarily upon past collection history.
Revenue from services is generally recognized on the date the service is performed. At this point of time the payor is obliged to pay for the performed services.
Revenue from product sales is recognized when the customer obtains control of the product, either after possession is transferred or upon installation and provision of the necessary technical instructions or at another point in time that better defi nes transfer of control.
A portion of revenues is generated from contracts which on the one hand give the customer the right to use dialysis machines and on the other hand provide the customer with disposables and services. In this case, the transaction price is allocated in accordance with IFRS 15, and revenue is recognized separately for the lease and the non-lease components of the contract in accordance with IAS 17 and IFRS 15, respectively.
Fresenius Vamed has performance obligations from longterm production contracts that are satisfi ed over time. Revenue is recognized according to progress towards completion. This progress towards completion of the performance obligation is measured based on the costs incurred in relation to expected total costs of fulfi lling the contract, contractually defi ned milestones or performance completed to date whichever better refl ects the progress towards completion of the performance obligation.
IFRS 15 does not apply to lease and insurance contracts. Revenue from leasing components and insurance contracts is determined according to IAS 17 and IFRS 4, respectively.
In July 2014, the IASB issued a new version of IFRS 9, Financial Instruments. This IFRS 9 version is considered the fi nal and complete version, thus, mainly replacing IAS 39 as soon as IFRS 9 is applied. It includes all prior guidance on the classifi cation and measurement of fi nancial assets and fi nancial liabilities as well as hedge accounting and introduces requirements for impairment of fi nancial instruments as well as modifi ed requirements for the measurement categories of fi nancial assets. The impairment provisions refl ect a model that relies on expected losses (expected loss model). This model comprises a three stage approach: Upon recognition, an entity shall recognize losses that are expected within the
next 12 months. If credit risk deteriorates signifi cantly, from that point in time impairment losses shall amount to lifetime expected losses. In case of objective evidence of impairment, there is an assignment to stage 3. The provisions for classifi cation and measurement are amended by introducing an additional third measurement category for certain debt instruments. Such instruments shall be measured at fair value with changes recognized in other comprehensive income (loss) (fair value through other comprehensive income). The standard is accompanied by additional disclosure requirements and is effective for fi scal years beginning on or after January 1, 2018.
In accordance with IAS 39 and IFRS 9, the majority of the non-derivative fi nancial assets are measured at amortized costs. The impact on the measurement of non-derivative fi nancial assets under IFRS 9 has not been signifi cant. For individual equity instruments, the Fresenius Group has opted to present changes in fair value in other comprehensive income (loss). The requirements for the classifi cation and measurement of non-derivative fi nancial liabilities have not changed signifi cantly. Thus, IFRS 9 has a limited impact on the consolidated fi nancial statements. Derivatives not designated as hedging instruments will continue to be classifi ed and measured at fair value through profi t and loss.
The Fresenius Group follows the modifi ed retrospective method without restatement of previous periods for adopting IFRS 9.
Differences in the carrying amounts of fi nancial assets and fi nancial liabilities as of December 31, 2017, according to IAS 39 and as of January 1, 2018, according to IFRS 9 are recognized in other reserves in the amount of - € 17 million.
IFRS 9 has an impact on the accounting policies for classifying fi nancial instruments, on the methodology to assess the impairment of fi nancial instruments and on the hedge accounting requirements. The Fresenius Group applies the following policies after implementing IFRS 9:
Financial instruments are allocated to categories following the analysis of the business model and cash fl ow characteristics as required by IFRS 9. The following categories are relevant for the Fresenius Group: fi nancial assets and liabilities measured at amortized cost, fi nancial assets and liabilities
measured at fair value through profi t and loss and fi nancial assets measured at fair value through other comprehensive income. In the fi rst quarter of 2018, no reclassifi cations between categories were necessary.
According to IFRS 9, impairments are recognized on the basis of expected credit losses (expected credit loss model).
The Fresenius Group recognizes a loss allowance for expected credit losses on fi nancial assets measured at amortized cost, contract assets and lease receivables as well as in investments in debt instruments measured at fair value through other comprehensive income. The fi nancial assets mainly comprise trade accounts receivable and cash and cash equivalents. The amount of expected credit losses is updated at each reporting date to refl ect changes in credit risk since initial recognition of the respective instrument.
For trade accounts receivable, the Fresenius Group uses the simplifi ed method which requires recognizing lifetime expected credit losses.
Expected credit losses on cash and cash equivalents are measured according to the general method which is based on 12-month expected credit losses. Due to the short maturity term of the fi nancial instruments, this corresponds with the lifetime expected loss. A signifi cant increase in credit risk is calculated on the basis of available quantitative and qualitative information. Based on external credit ratings of the counterparties, the Fresenius Group considers that its cash and cash equivalents have a low credit risk.
The allowances are estimates comprised of customer and fi nancial asset specifi c evaluations regarding payment history, current fi nancial stability, and applicable future economic conditions.
Financial assets whose expected credit loss is not assessed individually are allocated to geographical regions. The impairment is generally assessed on the basis of macroeconomic indicators such as credit default swaps or scoring models.
In case of objective evidence of a detrimental impact on the estimated future cash fl ows of a fi nancial asset, the asset is considered to be credit impaired.
When a counterpart defaults, all fi nancial assets against this counterpart are considered impaired. The defi nition of default is mainly based on payment practices specifi c to individual regions and businesses.
The Fresenius Group applies the new IFRS 9 hedge accounting requirements. Therefor, the Fresenius Group makes sure that hedge accounting relationships are aligned with its risk management objectives and strategy and that a qualitative and forward-looking approach is used for assessing hedge effectiveness.
The Fresenius Group uses foreign exchange forward contracts to hedge the variability in cash fl ows arising from changes in foreign exchange rates relating to foreign currency sales, purchases, projects and services as well as inventory purchases and borrowings in foreign currency. The Fresenius Group solely designates the spot element of the foreign exchange forward contract as hedging instrument in cash fl ow hedges. The effective portion of changes in fair value of the spot element of the hedging instruments is accumulated in a cash fl ow hedge reserve as a separate component within other comprehensive income (loss). The forward element of the foreign exchange forward contract is separately accounted for as cost of hedging reserve within other comprehensive income (loss).
For all cash fl ow hedges, except for foreign currency risk associated with forecast purchases of non-fi nancial assets, the amounts accumulated in the cash fl ow hedge reserve are reclassifi ed to profi t or loss as a reclassifi cation adjustment in the same period as the hedged forecasted
cash fl ows affect profi t or loss. For cash fl ow hedges of foreign currency risk associated with forecast purchases of non-fi nancial assets, the amounts accumulated in the cash fl ow hedge reserve are instead included directly in the initial cost of the asset when it is recognized. The same approach applies to the amounts accumulated in the costs of hedging reserve.
The International Accounting Standards Board (IASB) issued the following for the Fresenius Group relevant new standards:
In May 2017, the IASB issued IFRS 17, Insurance Contracts. IFRS 17 establishes principles for the recognition, measurement, presentation and disclosure related to the issuance of insurance contracts. IFRS 17 replaces IFRS 4, Insurance Contracts, which was brought in as an interim standard in 2004. IFRS 4 permitted the use of national accounting standards for the accounting of insurance contracts under IFRS. As a result of the varied application for insurance contracts, there was a lack of comparability among peer groups. IFRS 17 eliminates this diversity in practice by requiring all insurance contracts to be accounted for using current values. The frequent updates to the insurance values are expected to provide more useful information to users of fi nancial statements. IFRS 17 is effective for fi scal years beginning on or after January 1, 2021. Earlier adoption is permitted for entities that have also adopted IFRS 9, Financial Instruments, and IFRS 15, Revenue from Contracts with Customers. The Fresenius Group is currently evaluating the impact of IFRS 17 on the consolidated fi nancial statements.
In January 2016, the IASB issued IFRS 16, Leases, which supersedes the current standard on lease accounting, IAS 17, as well as the interpretations IFRIC 4, SIC-15 and SIC-27. IFRS 16 signifi cantly changes lessee accounting. For all leases, a lessee is required to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Depreciation of the right-of-use asset and interest on the lease liability must be recognized in the income statement for every lease contract. Therefore, straight-line rental expenses will no longer be shown. The lessor accounting requirements in IAS 17 are substantially carried forward. The standard is effective for fi scal years beginning on or after January 1, 2019. Earlier application is permitted for entities that have also adopted IFRS 15, Revenue from Contracts with Cus tomers. The Fresenius Group decided that IFRS 16 will not be adopted early. The Fresenius Group expects a balance sheet extension due to the on balance sheet recognition of right-of-use assets and liabilities for agreed lease payment obligations, currently classifi ed as operating leases, resulting in particular from leased clinics and buildings. Based on an impact analysis, using certain assumptions and simplifi cations, the Fresenius Group expects a fi nancial debt increase of approximately € 5 billion. Referring to the consolidated statement of income, the Fresenius Group expects an EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) as well as an operating income improvement due to the split of rent expenses in depreciation and interest expenses, by having unchanged cash outfl ows. The Fresenius Group also expects that its Leverage Ratio will increase by about 0.3 to 0.4. The impact on the Fresenius Group will depend on the contract portfolio at the effective date as well as on the transition method. Based on a previous impact analysis, the Fresenius Group will apply the modifi ed retrospective method. Except for the transition method, the Fresenius Group is currently evaluating the accounting policy options of IFRS 16.
The EU Commission's endorsement of IFRS 17 is still outstanding.
In the Fresenius Group's view, all other pronouncements issued by the IASB do not have a material impact on the consolidated fi nancial statements, as expected.
The Fresenius Group made acquisitions, investments and purchases of intangible assets of € 192 million and € 6,083 million in the fi rst quarter of 2018 and 2017, respectively. Of this amount, € 189 million was paid in cash and € 3 million was assumed obligations in the fi rst quarter of 2018.
In the fi rst quarter of 2018, Fresenius Medical Care spent € 184 million on acquisitions, mainly on investments in fi nancial assets and the purchase of dialysis clinics.
On April 20, 2018, Fresenius Medical Care signed a defi nitive agreement to divest its controlling interest in Sound Inpatient Physicians Holdings, LLC to an investment consortium led by Summit Partners, L.P. for total transaction proceeds of US\$ 2,150 million (€ 1,760 million). Closing of the transaction is subject to regulatory approvals and anticipated to occur late in 2018.
On August 7, 2017, Fresenius Medical Care announced the acquisition of NxStage Medical, Inc. (NxStage), a U.S.-based medical technology and services company, for a total transaction value of approximately US\$ 2.0 billion (€ 1.7 billion). On October 27, 2017, the shareholders of NxStage approved the acquisition. The transaction remains subject to regulatory approvals and other customary closing conditions. Fresenius Medical Care expects the closing of the transaction to occur in 2018.
Termination of the merger agreement with Akorn, Inc.
On April 24, 2017, Fresenius announced that Fresenius Kabi has agreed to acquire Akorn, Inc. (Akorn), a U.S.-based manufacturer and marketer of prescription and over-the-counter pharmaceutical products, for approximately US\$ 4.3 billion, or US\$ 34 per share, plus the prevailing net debt at closing of the transaction.
Fresenius has been conducting an independent investigation, using external experts, into alleged breaches of FDA data integrity requirements relating to product development at Akorn.
Fresenius decided on April 22, 2018 to terminate the merger agreement with Akorn, due to Akorn's failure to fulfi ll several closing conditions.
Fresenius' decision is based on, among other factors, material breaches of FDA data integrity requirements relating to Akorn's operations found during Fresenius' independent investigation. Fresenius offered to delay its decision in order to allow Akorn additional opportunity to complete its own investigation and present any information it wished Fresenius to consider, but Akorn declined that offer.
Akorn stated that they disagree with Fresenius's position and intend to enforce the rights under the merger agreement. A corresponding complaint was fi led in court. Fresenius in turn has fi led a counterclaim on April 30, 2018. The court has set a trial commencing on July 9, 2018.
On August 31, 2017, Fresenius Kabi has successfully closed the acquisition of Merck KGaA's biosimilars business. The transaction comprises a development pipeline and about 70 employees located in Aubonne and Vevey, Switzerland. The product pipeline has a focus on oncology and autoimmune diseases. The biosimilars business has been consolidated as of September 1, 2017.
The consideration transferred of € 735 million is composed of € 156 million, which were paid in cash upon closing, and risk-adjusted discounted success-related payments expected for the coming years with a current fair value of € 579 million, which are strictly tied to achievements of agreed development and sales targets.
The transaction was accounted for as a business combination. The following table summarizes the current estimated fair values of assets acquired and liabilities assumed at the
date of the acquisition. This allocation of the purchase price is based upon the best information available to management at present. Due to the relatively short interval between the closing date of the acquisition and the date of the statement of fi nancial position, this information may be incomplete. Any adjustments to acquisition accounting, net of related income tax effects, will be recorded with a corresponding adjustment to goodwill.
| Consideration transferred | 735 |
|---|---|
| Goodwill | 387 |
| Liabilities | - 7 |
| Intangible assets | 352 |
| Property, plant and equipment and other non-current assets | 2 |
| Working capital and other assets | 1 |
The goodwill in the amount of € 387 million that was acquired as part of the acquisition will be deductible for tax purposes.
Goodwill mainly represents the value of future opportunities due to the acquisition of biosimilars products and their platform. The platform with highly qualifi ed biosimilars experts will enable Fresenius to develop further products in this market segment and bring them on the market in the future. Furthermore, Fresenius acquired the opportunity to sell biosimilars products in other markets.
In the fi rst quarter of 2018, Fresenius Helios spent € 3 million on acquisitions, mainly for the purchase of outpatient clinics in Germany.
On January 31, 2017, Fresenius Helios closed the acquisition of 100% of the share capital in IDCSalud Holding S.L.U. (Quirónsalud), Spain's largest private hospital operator. Quirónsalud has been consolidated as of February 1, 2017.
Quirónsalud's network is comprised of 45 hospitals, 55 outpatient centers and about 300 Occupational Risk Preven tion centers located in every metropolitan region of Spain. The company offers the full spectrum of inpatient and outpatient care. With the acquisition, Fresenius Helios strengthens its position as Europe's largest private hospital operator.
€ 5.36 billion of the total purchase price in the amount of € 5.76 billion had already been fi nanced by means of different debt instruments and paid in cash on January 31, 2017. The balance of € 400 million was paid in the form of 6,108,176 new shares of Fresenius SE & Co. KGaA issued on January 31, 2017 from Authorized Capital excluding sub scription rights. In April 2017, a compensation payment in the amount of € 174 million was made for working capital taken over.
The transaction was accounted for as a business combination. The following table comprises the fi nal fair values of assets acquired and liabilities assumed at the date of the acquisition. Any adjustments to acquisition accounting until fi nalization on January 31, 2018 was recorded with a corresponding adjustment to goodwill, net of related income tax effects.
| € in millions | |
|---|---|
| Trade accounts receivable | 776 |
| Working capital and other assets | 74 |
| Property, plant and equipment and other non-current assets | 1,775 |
| Intangible assets | 1,306 |
| Liabilities | - 1,315 |
| Goodwill | 3,336 |
| Noncontrolling interest | - 21 |
| Consideration transferred | 5,931 |
The goodwill in the amount of € 3,336 million that was acquired as part of the acquisition is not deductible for tax purposes.
Goodwill mainly represents the market position of the acquired hospitals, health centers and health care facilities, the economies of scale of the signifi cantly grown largest private European hospital operator and the know-how of the employees.
The noncontrolling interests acquired as part of the acquisition are stated at fair value.
In the fi rst quarter of 2018, the acquired hospitals and outpatient facilities have contributed € 757 million to sales and € 103 million to the operating income (EBIT) of the Fresenius Group.
In the fi rst quarter of 2018, Fresenius Vamed spent € 5 million on acquisitions, mainly for an investment in an acute and post-acute care clinic in China.
Net income attributable to shareholders of Fresenius SE & Co. KGaA for the fi rst quarter of 2018 in the amount of € 440 million includes special items relating to the terminated merger agreement with Akorn, Inc. These mainly comprise transaction costs in the form of legal and consulting expenses as well as fi nancing commitment expenses for the Akorn transaction. Furthermore, expenses from the share-based payment program of Sound Inpatient Physicians Holdings, LLC due to their announced divestment are included.
The special items had the following impact on the consolidated statement of income:
| to IFRS | 1,036 | - 149 | 440 |
|---|---|---|---|
| Earnings Q1 / 2018 according | |||
| Transaction-related effects of Sound Physicians |
- 13 | 0 | - 4 |
| Transaction-related effects of Akorn |
- 5 | - 3 | - 6 |
| Earnings Q1 / 2018, adjusted | 1,054 | - 146 | 450 |
| € in millions | EBIT | Interest expenses |
Net income attributable to share holders of Fresenius SE & Co. KGaA |
Net income attributable to shareholders of Fresenius SE & Co. KGaA for the fi rst quarter of 2017 did not include any special items.
In the fi rst quarter of 2018, sales by activity according due to the IFRS 15 categorization were as follows:
| € in millions | Q1 / 2018 |
|---|---|
| Sales from contracts with customers | 8,049 |
| thereof sales of services | 5,638 |
| thereof sales of products and related services | 2,318 |
| thereof sales from long-term production contracts | 92 |
| thereof further sales from contracts with customers | 1 |
| Other sales | 72 |
| Sales | 8,121 |
Other sales include sales from insurance and lease contracts.
In the fi rst quarter of 2017, sales by activity according due to the categorization used until year end 2017 were as follows:
| € in millions Sales of services Sales of products and related goods Sales from long-term production contracts |
2 8,362 |
|---|---|
| 78 | |
| 2,350 | |
| 5,932 | |
| Q1 / 2017 |
The changes in activity classifi cation are due to the fi rst time use of the new IFRS 15 classifi cation in the fi rst quarter of 2018.
Research and development expenses of € 159 million (Q1 / 2017: € 121 million) included expenditures for research and non- capitalizable development costs as well as regular depreciation and amortization expenses relating to capitalized development costs of € 4 million (Q1 / 2017: € 4 million).
During the fi rst quarter of 2018, there were no material changes relating to accruals for income taxes as well as recognized and accrued payments for interest and penalties. Further information can be found in the consolidated fi nancial statements as of December 31, 2017 applying Section 315e HGB in accordance with IFRS.
The decrease of the group tax rate before special items to 21.0% (Q1 / 2017: 29.1%) was mainly due to the U.S. tax reform.
The following table shows the earnings per share including and excluding the dilutive effect from stock options issued:
| Q1 / 2018 | Q1 / 2017 | |
|---|---|---|
| Numerators, € in millions | ||
| Net income attributable to | ||
| shareholders of | ||
| Fresenius SE & Co. KGaA | 440 | 457 |
| less effect from dilution due to Fresenius Medical Care shares |
– | – |
| Income available to | ||
| all ordinary shares | 440 | 457 |
| Denominators in number of shares | ||
| Weighted-average number of | ||
| ordinary shares outstanding | 554,817,933 | 553,465,548 |
| Potentially dilutive | ||
| ordinary shares | 2,616,099 | 4,407,980 |
| Weighted-average number | ||
| of ordinary shares outstanding | ||
| assuming dilution | 557,434,032 | 557,873,528 |
| Basic earnings per share in € | 0.79 | 0.83 |
| Fully diluted earnings per share in € | 0.79 | 0.82 |
As of March 31, 2018 and December 31, 2017, cash and cash equivalents were as follows:
| € in millions | March 31, 2018 | Dec. 31, 2017 |
|---|---|---|
| Cash | 1,106 | 1,139 |
| Time deposits and securities | ||
| (with a maturity of up to 90 days) | 378 | 497 |
| Total cash and cash equivalents | 1,484 | 1,636 |
As of March 31, 2018 and December 31, 2017, earmarked funds of € 119 million and € 183 million, respectively, were included in cash and cash equivalents.
As of March 31, 2018, January 1, 2018 and December 31, 2017, trade accounts and other receivables were as follows:
| March 31, 2018 | January 1, 2018 | Dec. 31, 2017 | ||||
|---|---|---|---|---|---|---|
| € in millions | thereof credit impaired |
Book value according to IFRS 9 and IFRS 15 |
Adjustment on initial application of IFRS 9 |
Adjustment on initial application of IFRS 1 |
||
| Trade accounts and other receivables | 7,168 | 590 | 6,553 | - 7 | - 441 | 7,001 |
| less allowance for doubtful accounts | 312 | 149 | 318 | 36 | - 459 | 741 |
| Trade accounts and other receivables, net | 6,856 | 441 | 6,235 | - 43 | 18 | 6,260 |
Within trade accounts and other receivables, net, as of March 31, 2018, € 6,784 million relate to revenue from contracts with customers as defi ned by IFRS 15. This amount includes € 310 million of allowance for doubtful accounts. Further trade accounts and other receivables, net, relate to lease contracts.
As of March 31, 2018 and December 31, 2017, inventories consisted of the following:
| € in millions | March 31, 2018 | Dec. 31, 2017 |
|---|---|---|
| Raw materials and purchased components |
680 | 653 |
| Work in process | 339 | 715 |
| Finished goods | 2,040 | 2,024 |
| less reserves | 125 | 140 |
| Inventories, net | 2,934 | 3,252 |
Upon implementation of IFRS 15, € 335 million relating to long-term production contracts from Fresenius Vamed have been reclassifi ed from work in process within inventory to contract assets within other current and non-current assets.
At equity investments as of March 31, 2018 in the amount of € 620 million (December 31, 2017: € 647 million) mainly related to the joint venture named Vifor Fresenius Medical Care Renal Pharma Ltd. between Fresenius Medical Care and Galenica Ltd. In the fi rst quarter of 2018, income of € 18 million (Q1 / 2017: € 15 million) resulting from this valuation was included in selling, general and administrative expenses in the consolidated statement of income.
Since the implementation of IFRS 15 on January 1, 2018, other current and non-current assets include contract assets within non-fi nancial assets. As of March 31, 2018, they amount to € 437 million. Thereof, € 335 million relating to long-term production contracts from Fresenius Vamed have been reclassifi ed from inventory (work in process) upon the initial application of IFRS 15.
Contract assets mainly relate to long-term production contracts for which revenue is recognized over time.
As of March 31, 2018, contract assets from revenue from contracts with customers as defi ned by IFRS 15 include € 1 million of allowance for doubtful accounts.
As of March 31, 2018 and December 31, 2017, intangible assets, split into amortizable and non-amortizable intangible assets, consisted of the following:
| March 31, 2018 | December 31, 2017 | |||||
|---|---|---|---|---|---|---|
| € in millions | Acquisition cost |
Accumulated amortization |
Carrying amount |
Acquisition cost |
Accumulated amortization |
Carrying amount |
| Customer relationships | 835 | 135 | 700 | 840 | 123 | 717 |
| Tradenames | 702 | 62 | 640 | 699 | 48 | 651 |
| Capitalized development costs | 732 | 159 | 573 | 828 | 229 | 599 |
| Software | 647 | 361 | 286 | 599 | 337 | 262 |
| Patents, product and distribution rights | 659 | 386 | 273 | 674 | 386 | 288 |
| Technology | 407 | 157 | 250 | 415 | 154 | 261 |
| Non-compete agreements | 307 | 258 | 49 | 314 | 262 | 52 |
| Other | 522 | 340 | 182 | 418 | 271 | 147 |
| Total | 4,811 | 1,858 | 2,953 | 4,787 | 1,810 | 2,977 |
| March 31, 2018 | December 31, 2017 | ||||||
|---|---|---|---|---|---|---|---|
| € in millions | Acquisition cost |
Accumulated amortization |
Carrying amount |
Acquisition cost |
Accumulated amortization |
Carrying amount |
|
| Goodwill | 24,949 | 0 | 24,949 | 25,285 | 0 | 25,285 | |
| Tradenames | 187 | 0 | 187 | 192 | 0 | 192 | |
| Management contracts | 3 | 0 | 3 | 3 | 0 | 3 | |
| Total | 25,139 | 0 | 25,139 | 25,480 | 0 | 25,480 |
The carrying amount of goodwill has developed as follows:
| € in millions | Fresenius Medical Care |
Fresenius Kabi |
Fresenius Helios |
Fresenius Vamed |
Corporate / Other |
Fresenius Group |
|---|---|---|---|---|---|---|
| Carrying amount as of January 1, 2017 | 12,956 | 5,302 | 4,538 | 99 | 6 | 22,901 |
| Additions | 596 | 394 | 3,365 | 19 | 0 | 4,374 |
| Disposals | 0 | - 1 | - 1 | 0 | 0 | - 2 |
| Foreign currency translation | - 1,448 | - 540 | 0 | 0 | 0 | - 1,988 |
| Carrying amount as of December 31, 2017 | 12,104 | 5,155 | 7,902 | 118 | 6 | 25,285 |
| Additions | 24 | 0 | 48 | 1 | 0 | 73 |
| Reclassifi cations | 0 | - 7 | 0 | 0 | 0 | - 7 |
| Foreign currency translation | - 294 | - 108 | 0 | 0 | 0 | - 402 |
| Carrying amount as of March 31, 2018 | 11,834 | 5,040 | 7,950 | 119 | 6 | 24,949 |
As of March 31, 2018 and December 31, 2017, the carrying amounts of the other non-amortizable intangible assets were € 173 million and € 178 million, for Fresenius Medical Care as well as € 17 million, respectively, for Fresenius Kabi.
As of March 31, 2018 and December 31, 2017, short-term debt consisted of the following:
| Book value | ||||
|---|---|---|---|---|
| € in millions | March 31, 2018 | December 31, 2017 | ||
| Fresenius SE & Co. KGaA Commercial Paper | 670 | 715 | ||
| Fresenius Medical Care AG & Co. KGaA Commercial Paper | 945 | 680 | ||
| Other short-term debt | 177 | 155 | ||
| Short-term debt | 1,792 | 1,550 |
As of March 31, 2018 and December 31, 2017, long-term debt and capital lease obligations net of debt issuance costs consisted of the following:
| Book value | |||
|---|---|---|---|
| € in millions | March 31, 2018 | December 31, 2017 | |
| Fresenius Medical Care 2012 Credit Agreement | 2,079 | 2,018 | |
| 2013 Credit Agreement | 2,188 | 2,238 | |
| Schuldschein Loans | 1,864 | 1,873 | |
| Accounts Receivable Facility of Fresenius Medical Care | 295 | 294 | |
| Capital lease obligations | 229 | 234 | |
| Other | 441 | 448 | |
| Subtotal | 7,096 | 7,105 | |
| less current portion | 615 | 618 | |
| Long-term debt and capital lease obligations, less current portion | 6,481 | 6,487 |
Fresenius Medical Care 2012 Credit Agreement Fresenius Medical Care AG & Co. KGaA (FMC-AG & Co. KGaA) originally entered into a syndicated credit facility ( Fresenius Medical Care 2012 Credit Agreement) of US\$ 3,850 million and a 5-year tenor on October 30, 2012.
On November 26, 2014, the Fresenius Medical Care 2012 Credit Agreement was amended to increase the total credit facility to approximately US\$ 4,400 million and extend the term for an additional two years until October 30, 2019.
On July 11, 2017, FMC-AG & Co. KGaA further amended and extended its syndicated credit agreement resulting in a total credit facility of approximately US\$ 3,900 million with maturities in 2020 and 2022. Consistent with the investment grade rating of Fresenius Medical Care, the amended Fresenius Medical Care 2012 Credit Agreement is now unsecured and has lower tiered pricing.
The following tables show the available and outstanding amounts under the Fresenius Medical Care 2012 Credit Agreement at March 31, 2018 and at December 31, 2017:
| March 31, 2018 | ||||
|---|---|---|---|---|
| € in millions | € in millions | |||
| US\$ 900 million | 730 | US\$225 million | 182 | |
| € 600 million | 600 | € 0 million | 0 | |
| US\$ 1,440 million | 1,169 | US\$1,440 million | 1,169 | |
| € 400 million | 400 | € 400 million | 400 | |
| € 336 million | 336 | € 336 million | 336 | |
| 3,235 | 2,087 | |||
| 8 | ||||
| 2,079 | ||||
| Maximum amount available | Balance outstanding |
| December 31, 2017 | ||||||
|---|---|---|---|---|---|---|
| Maximum amount available | Balance outstanding | |||||
| € in millions | € in millions | |||||
| Revolving Credit Facility (in US\$) | US\$ 900 million | 750 | US\$70 million | 58 | ||
| Revolving Credit Facility (in €) | € 600 million | 600 | € 0 million | 0 | ||
| Term Loan 5 years (in US\$) | US\$ 1,470 million | 1,226 | US\$1,470 million | 1,226 | ||
| Term Loan 3 years (in €) | € 400 million | 400 | € 400 million | 400 | ||
| Term Loan 5 years (in €) | € 343 million | 343 | € 343 million | 343 | ||
| Total | 3,319 | 2,027 | ||||
| less fi nancing cost | 9 | |||||
| Total | 2,018 |
In addition, at March 31, 2018 and December 31, 2017, Fresenius Medical Care had letters of credit outstanding in the amount of approximately US\$ 2 million (€ 1 million), respectively, under the U.S. dollar revolving credit facility. The letters of credit were not included in the above mentioned outstanding balances at those dates but reduce available borrowings under the applicable revolving credit facility.
As of March 31, 2018, FMC-AG & Co. KGaA and its subsidiaries were in compliance with all covenants under the Fresenius Medical Care 2012 Credit Agreement.
On December 20, 2012, Fresenius SE & Co. KGaA and various subsidiaries entered into a delayed draw syndicated credit agreement (2013 Credit Agreement) in the original amount of US\$ 1,300 million and € 1,250 million. Since the initial funding of the 2013 Credit Agreement in June 2013, additional
tranches were added. Furthermore, scheduled amortization payments as well as voluntary repayments have been made.
On October 14, 2016, the 2013 Credit Agreement has been increased by an incremental term loan of € 900 million and an incremental revolving facility of € 300 million. The incremental facilities were used to fund the acquisition of IDCSalud Holding S.L.U. (Quirónsalud) by Fresenius Helios. The incremental facilities were funded on January 31, 2017.
On August 22, 2017, the 2013 Credit Agreement was refi nanced. The existing senior secured facilities were replaced with unsecured facilities resulting in a total credit facility of approximately € 3,800 million with maturities in 2021 and 2022. Concurrently, the guarantor structure was aligned, with Fresenius SE & Co. KGaA now being sole guarantor.
The following tables show the available and outstanding amounts under the 2013 Credit Agreement at March 31, 2018 and at December 31, 2017:
| Maximum amount available | Balance outstanding | |||
|---|---|---|---|---|
| € in millions | € in millions | |||
| Revolving Credit Facility (in €) | € 1,000 million | 1,000 | € 0 million | 0 |
| Revolving Credit Facility (in US\$) | US\$ 500 million | 406 | US\$ 0 million | 0 |
| Term Loan 4 years (in €) | € 750 million | 750 | € 750 million | 750 |
| Term Loan 5 years (in €) | € 950 million | 950 | € 950million | 950 |
| Term Loan 5 years (in US\$) | US\$ 620 million | 503 | US\$ 620 million | 503 |
| Total | 3,609 | 2,203 | ||
| less fi nancing cost | 15 | |||
| Total | 2,188 |
| December 31, 2017 | ||||||
|---|---|---|---|---|---|---|
| Maximum amount available | Balance outstanding | |||||
| € in millions | € in millions | |||||
| Revolving Credit Facility (in €) | € 1,000 million | 1,000 | € 0 million | 0 | ||
| Revolving Credit Facility (in US\$) | US\$ 500 million | 417 | US\$ 0 million | 0 | ||
| Term Loan 4 years (in €) | € 750 million | 750 | € 750 million | 750 | ||
| Term Loan 5 years (in €) | € 975 million | 975 | € 975 million | 975 | ||
| Term Loan 5 years (in US\$) | US\$ 635 million | 529 | US\$ 635 million | 529 | ||
| Total | 3,671 | 2,254 | ||||
| less fi nancing cost | 16 | |||||
| Total | 2,238 |
As of March 31, 2018, the Fresenius Group was in compliance with all covenants under the 2013 Credit Agreement.
As of March 31, 2018 and December 31, 2017, Schuldschein Loans of the Fresenius Group net of debt issuance costs consisted of the following:
| Book value € in millions |
|||||||
|---|---|---|---|---|---|---|---|
| Notional amount | Maturity | Interest rate fi xed / variable |
March 31, 2018 | Dec 31, 2017 | |||
| Fresenius SE & Co. KGaA 2014 / 2018 | € 97 million | April 2, 2018 | 2.09% | 97 | 97 | ||
| Fresenius SE & Co. KGaA 2012 / 2018 | € 72 million | April 4, 2018 | 4.09% | 72 | 72 | ||
| Fresenius SE & Co. KGaA 2015 / 2018 | € 91 million | October 8, 2018 | 1.07% / variable | 91 | 91 | ||
| Fresenius SE & Co. KGaA 2014 / 2020 | € 262 million | April 2, 2020 | 2.67% / variable | 262 | 262 | ||
| Fresenius SE & Co. KGaA 2017 / 2022 | € 372 million | Jan. 31, 2022 | 0.93% / variable | 371 | 371 | ||
| Fresenius SE & Co. KGaA 2015 / 2022 | € 21 million | April 7, 2022 | 1.61% | 21 | 21 | ||
| Fresenius SE & Co. KGaA 2017 / 2024 | € 421 million | Jan. 31, 2024 | 1.40% / variable | 420 | 420 | ||
| Fresenius SE & Co. KGaA 2017 / 2027 | € 207 million | Jan. 29, 2027 | 1.96% / variable | 206 | 206 | ||
| Fresenius US Finance II, Inc. 2016 / 2021 | US\$ 342 million | March 10, 2021 | 2.66% / variable | 277 | 284 | ||
| Fresenius US Finance II, Inc. 2016 / 2023 | US\$ 58 million | March 10, 2023 | 3.12% / variable | 47 | 49 | ||
| Schuldschein Loans | 1,864 | 1,873 |
The Schuldschein Loans issued by Fresenius SE & Co. KGaA in the amount of € 97 million and € 72 million which were due on April 2, 2018 and April 4, 2018 as well as the Schuldschein Loans issued by Fresenius SE & Co. KGaA in the amount of € 91 million which are due on October 8, 2018 are shown as current portion of long-term debt and capital lease obligations in the consolidated statement of fi nancial position.
As of March 31, 2018, the Fresenius Group was in compliance with all of its covenants under the Schuldschein Loans.
In addition to the fi nancial liabilities described before, the Fresenius Group maintains additional credit facilities which have not been utilized, or have only been utilized in part, as of the reporting date. At March 31, 2018, the additional fi nancial cushion resulting from unutilized credit facilities was approximately € 3.5 billion. Thereof approximately € 2.6 billion accounted for syndicated credit facilities.
On April 25, 2017, Fresenius SE & Co. KGaA entered into a Bridge Financing Facility in the amount of US\$ 4,200 million with a tenor of 18 months for the purpose of the acquisition of Akorn, Inc. which has not been utilized at March 31, 2018.
As of March 31, 2018 and December 31, 2017, bonds of the Fresenius Group net of debt issuance costs consisted of the following:
| Book value € in millions |
||||||
|---|---|---|---|---|---|---|
| Notional amount | Maturity | Interest rate | March 31, 2018 | Dec. 31, 2017 | ||
| Fresenius Finance Ireland PLC 2017 / 2022 | € 700 million | Jan. 31, 2022 | 0.875% | 695 | 695 | |
| Fresenius Finance Ireland PLC 2017 / 2024 | € 700 million | Jan. 30, 2024 | 1.50% | 696 | 696 | |
| Fresenius Finance Ireland PLC 2017 / 2027 | € 700 million | Feb. 1, 2027 | 2.125% | 692 | 692 | |
| Fresenius Finance Ireland PLC 2017 / 2032 | € 500 million | Jan. 30, 2032 | 3.00% | 494 | 494 | |
| Fresenius SE & Co. KGaA 2014 / 2019 | € 300 million | Feb. 1, 2019 | 2.375% | 300 | 299 | |
| Fresenius SE & Co. KGaA 2012 / 2019 | € 500 million | Apr. 15, 2019 | 4.25% | 499 | 499 | |
| Fresenius SE & Co. KGaA 2013 / 2020 | € 500 million | July 15, 2020 | 2.875% | 498 | 498 | |
| Fresenius SE & Co. KGaA 2014 / 2021 | € 450 million | Feb. 1, 2021 | 3.00% | 446 | 446 | |
| Fresenius SE & Co. KGaA 2014 / 2024 | € 450 million | Feb. 1, 2024 | 4.00% | 450 | 449 | |
| Fresenius US Finance II, Inc. 2014 / 2021 | US\$ 300 million | Feb. 1, 2021 | 4.25% | 242 | 249 | |
| Fresenius US Finance II, Inc. 2015 / 2023 | US\$ 300 million | Jan. 15, 2023 | 4.50% | 242 | 248 | |
| FMC Finance VII S.A. 2011 / 2021 | € 300 million | Feb. 15, 2021 | 5.25% | 297 | 297 | |
| FMC Finance VIII S.A. 2011 / 2018 | € 400 million | Sept. 15, 2018 | 6.50% | 399 | 399 | |
| FMC Finance VIII S.A. 2012 / 2019 | € 250 million | July 31, 2019 | 5.25% | 245 | 245 | |
| Fresenius Medical Care US Finance, Inc. 2011 / 2021 | US\$ 650 million | Feb. 15, 2021 | 5.75% | 524 | 538 | |
| Fresenius Medical Care US Finance II, Inc. 2011 / 2018 | US\$ 400 million | Sept. 15, 2018 | 6.50% | 324 | 332 | |
| Fresenius Medical Care US Finance II, Inc. 2012 / 2019 | US\$ 800 million | July 31, 2019 | 5.625% | 648 | 666 | |
| Fresenius Medical Care US Finance II, Inc. 2014 / 2020 | US\$ 500 million | Oct. 15, 2020 | 4.125% | 404 | 415 | |
| Fresenius Medical Care US Finance II, Inc. 2012 / 2022 | US\$ 700 million | Jan. 31, 2022 | 5.875% | 566 | 581 | |
| Fresenius Medical Care US Finance II, Inc. 2014 / 2024 | US\$ 400 million | Oct. 15, 2024 | 4.75% | 323 | 331 | |
| Bonds | 8,984 | 9,069 |
As of March 31, 2018, the bonds issued by FMC Finance VIII S.A. in the amount of € 400 million and by Fresenius Medical Care US Finance II, Inc. in the amount of US\$ 400 million due on September 15, 2018 as well as the bonds
issued by Fresenius SE & Co. KGaA in the amount of € 300 million due on February 1, 2019 are shown as current portion of bonds in the consolidated statement of fi nancial position.
As of March 31, 2018, the Fresenius Group was in compliance with all of its covenants under the bonds.
As of March 31, 2018 and December 31, 2017, the convertible bonds of the Fresenius Group net of debt issuance costs consisted of the following:
| Book value € in millions |
||||||
|---|---|---|---|---|---|---|
| Notional amount | Maturity | Coupon | Current conversion price |
March 31, 2018 | Dec. 31, 2017 | |
| Fresenius SE & Co. KGaA 2014 / 2019 | € 500 million | Sept. 24, 2019 | 0.000% | € 49.3599 | 485 | 483 |
| Fresenius SE & Co. KGaA 2017 / 2024 | € 500 million | Jan. 31, 2024 | 0.000% | € 107.0979 | 450 | 448 |
| Fresenius Medical Care AG & Co. KGaA 2014 / 2020 | € 400 million | Jan. 31, 2020 | 1.125% | € 73.4408 | 389 | 387 |
| Convertible bonds | 1,324 | 1,318 |
The fair value of the derivatives embedded in the convertible bonds of Fresenius SE & Co. KGaA was € 166 million at March 31, 2018. The derivative embedded in the convertible bonds of Fresenius Medical Care AG & Co. KGaA (FMC-AG & Co. KGaA) was recognized with a fair value of € 85 million at March 31, 2018. Fresenius SE & Co. KGaA and FMC-AG & Co. KGaA have purchased stock options (call options) to hedge future fair value fl uctuations of these derivatives. As of March 31, 2018, the call options had a corresponding aggregate fair value of € 166 million and € 85 million, respectively.
The conversions will be cash-settled. Any increase of Fresenius' share price and of Fresenius Medical Care's share price above the conversion price would be offset by a corresponding value increase of the call options.
The derivatives embedded in the convertible bonds and the call options are recognized in other non-current liabilities / assets in the consolidated statement of fi nancial position.
At March 31, 2018, the pension liability of the Fresenius Group was € 1,195 million. The current portion of the pension liability of € 20 million is recognized in the consolidated statement of fi nancial position within short-term provisions and other short-term liabilities. The non-current portion of € 1,175 million is recorded as pension liability.
Contributions to Fresenius Group's pension fund were € 3 million in the fi rst quarter of 2018. The Fresenius Group expects approximately € 13 million contributions to the pension fund during 2018.
Defi ned benefi t pension plans' net periodic benefi t costs of € 20 million (Q1 / 2017: € 21 million) were comprised of the following components:
| € in millions | Q1 / 2018 | Q1 / 2017 |
|---|---|---|
| Service cost | 14 | 15 |
| Net interest cost | 6 | 6 |
| Net periodic benefi t cost | 20 | 21 |
As of March 31, 2018 and December 31, 2017, noncontrolling interest in the Fresenius Group was as follows:
| € in millions | March 31, 2018 | Dec. 31, 2017 |
|---|---|---|
| Noncontrolling interest in Fresenius Medical Care AG & Co. KGaA Noncontrolling interest in VAMED AG |
6,873 71 |
6,796 66 |
| Noncontrolling interest in the business segments |
||
| Fresenius Medical Care | 979 | 1,008 |
| Fresenius Kabi | 99 | 89 |
| Fresenius Helios | 105 | 92 |
| Fresenius Vamed | 9 | 8 |
| Total noncontrolling interest | 8,136 | 8,059 |
Noncontrolling interest changed as follows:
| € in millions | Q1 / 2018 |
|---|---|
| Noncontrolling interest as of January 1, 2018 | 8,059 |
| Noncontrolling interest in profi t | 258 |
| Purchase of noncontrolling interest | 7 |
| Stock options | 2 |
| Dividend payments | - 45 |
| Currency effects and other changes | - 145 |
| Noncontrolling interest as of March 31, 2018 | 8,136 |
As of January 1, 2018, the subscribed capital of Fresenius SE & Co. KGaA consisted of 554,710,473 bearer ordinary shares.
During the fi rst quarter of 2018, 164,706 stock options were exercised. Consequently, as of March 31, 2018, the subscribed capital of Fresenius SE & Co. KGaA consisted of 554,875,179 bearer ordinary shares. The shares are issued as non-par value shares. The proportionate amount of the subscribed capital is € 1.00 per share.
The following Conditional Capitals exist in order to fulfi ll the subscription rights under the stock option plans of Fresenius SE & Co. KGaA: Conditional Capital II (Stock Option Plan 2008) and Conditional Capital IV (Stock Option Plan 2013) (see note 24, Share-based compensation plans). Another Conditional Capital III exists for the authorization to issue option bearer bonds and / or convertible bonds.
The following table shows the development of the Conditional Capital:
| in € | Ordinary shares |
|---|---|
| Conditional Capital I Fresenius AG Stock Option Plan 2003 | |
| Conditional Capital II Fresenius SE Stock Option Plan 2008 | 5,141,264 |
| Conditional Capital III option bearer bonds and / or convertible bonds | 48,971,202 |
| Conditional Capital IV Fresenius SE & Co. KGaA Stock Option Plan 2013 | 24,928,200 |
| Total Conditional Capital as of January 1, 2018 | |
| Fresenius SE Stock Option Plan 2008 – options exercised | - 121,100 |
| Fresenius SE & Co. KGaA Stock Option Plan 2013 – options exercised | - 43,606 |
| Total Conditional Capital as of March 31, 2018 | 83,611,043 |
As of March 31, 2018, the Conditional Capital was composed as follows:
| in € | Ordinary shares |
|---|---|
| Conditional Capital I Fresenius AG Stock Option Plan 2003 | 4,735,083 |
| Conditional Capital II Fresenius SE Stock Option Plan 2008 | 5,020,164 |
| Conditional Capital III option bearer bonds and / or convertible bonds | 48,971,202 |
| Conditional Capital IV Fresenius SE & Co. KGaA Stock Option Plan 2013 | 24,884,594 |
| Total Conditional Capital as of March 31, 2018 | 83,611,043 |
Under the German Stock Corporation Act (AktG), the amount of dividends available for distribution to shareholders is based upon the unconsolidated retained earnings of Fresenius SE & Co. KGaA as reported in its statement of fi nancial position determined in accordance with the German Commercial Code (HGB).
In May 2018, the general partner and the Supervisory Board of Fresenius SE & Co. KGaA's will propose a dividend of € 0.75 per bearer ordinary share to the Annual General Meeting, i.e. a total dividend payment of € 416 million.
The Fresenius Group is routinely involved in claims, lawsuits, regulatory and tax audits, investigations and other legal matters arising, for the most part, in the ordinary course of its business of providing health care services and products. Legal matters that the Fresenius Group currently deems to be material or noteworthy are described below. For the matters described below in which the Fresenius Group believes a loss is both reasonably possible and estimable, an estimate of the loss or range of loss exposure is provided. For the other matters described below, the Fresenius Group believes that the loss probability is remote and / or the loss or range of possible losses cannot be reasonably estimated at this time. The outcome of litigation and other legal matters is always diffi cult to predict accurately and outcomes that are not consistent with Fresenius Group's view of the merits can occur. The Fresenius Group believes that it has valid defenses to the legal matters pending against it and is defending itself vigorously. Nevertheless, it is possible that the resolution of one or more of the legal matters currently pending or threatened could have a material adverse effect on its business, results of operations and fi nancial condition.
Further information regarding legal disputes, court proceedings and investigations can be found in detail in the consolidated fi nancial statements as of December 31, 2017 applying Section 315e HGB in accordance with IFRS. In the following, only changes as far as content or wording are concerned during the fi rst quarter ended March 31, 2018 compared to the information provided in the consolidated fi nancial statements are described. These changes should be read in conjunction with the overall information in the consolidated fi nancial statements as of December 31, 2017 applying Section 315e HGB in accordance with IFRS; defi ned terms or abbreviations having the same meaning as in the consolidated fi nancial statements as of December 31, 2017 applying Section 315e HGB in accordance with IFRS.
On April 24, 2017, Fresenius announced that Fresenius Kabi has agreed to acquire Akorn, Inc. (Akorn), a U.S.-based manufacturer and marketer of prescription and over-the-counter pharmaceutical products, for approximately US\$ 4.3 billion, or US\$ 34 per share, plus the prevailing net debt at closing of the transaction.
Fresenius has been conducting an independent investigation, using external experts, into alleged breaches of FDA data integrity requirements relating to product development at Akorn.
Fresenius decided on April 22, 2018 to terminate the merger agreement with Akorn, due to Akorn's failure to fulfi ll several closing conditions.
Fresenius' decision is based on, among other factors, material breaches of FDA data integrity requirements relating to Akorn's operations found during Fresenius' independent investigation. Fresenius offered to delay its decision in order to allow Akorn additional opportunity to complete its own investigation and present any information it wished Fresenius to consider, but Akorn declined that offer.
Akorn stated that they disagree with Fresenius's position and intend to enforce the rights under the merger agreement. A corresponding complaint was fi led in court. Fresenius in turn has fi led a counterclaim on April 30, 2018. The court has set a trial commencing on July 9, 2018.
The court has subsequently rejected government requests to conduct new discovery and to add counts to its complaint-inintervention that would expand upon the relator's complaint, but has allowed Fresenius Medical Care Holdings, Inc. (FMCH) to take discovery against the government as if the government had intervened at the outset.
Fewer than 50 plaintiffs with cases pending in the U.S. District Court for Massachusetts (Boston); Los Angeles, California county court; Birmingham, Alabama county court; or Staten
Island, New York county court declined to participate in the settlement and have expressed intent to continue litigation. These remaining cases represent less than 0.5% of the total cases fi led. There are no trial dates set in the remaining cases and dispositive motions by FMC-AG & Co. KGaA are either pending or will be pursued in all of them. The remaining personal injury and wrongful death cases, collectively or individual, are not signifi cant to FMC-AG & Co. KGaA's fi nancial statements and reporting on them will be discontinued.
FMC-AG & Co. KGaA's affected insurers funded US\$ 220 million of the settlement fund, with a reservation of rights regarding certain coverage issues between and among FMC-AG & Co. KGaA and its insurers. FMC-AG & Co. KGaA accrued a net expense of US\$ 60 million for consummation of the settlement, including legal fees and other anticipated costs.
Following entry of the agreement in principle, FMC-AG & Co. KGaA's insurers in the AIG group and FMC-AG & Co. KGaA each initiated litigation against the other relating to the AIG group's coverage obligations under applicable policies. In the coverage litigation, the AIG group seeks to be indemnifi ed by FMC-AG & Co. KGaA for a portion of its US\$ 220 million outlay; FMC-AG & Co. KGaA seeks to confi rm the AIG group's US\$ 220 million funding obligation, to recover defense costs already incurred by FMC-AG & Co. KGaA, and to compel the AIG group to honor defense and indemnifi cation obligations, if any, required for resolution of cases not participating in the settlement. As a result of decisions on issues of venue, the coverage litigation is proceeding in the New York state trial court for Manhattan. (National Union Fire Insurance v. Fresenius Medical Care, 2016 Index No. 653108 (Supreme Court of New York for New York County)).
The amount of the overpayment claimed by the State is approximately US\$ 8 million, but the State seeks civil remedies, interest, fi nes, and penalties against Liberty and FMCH under the Hawaii False Claims Act substantially in excess of the overpayment. After prevailing on motions by Xerox to preclude it from doing so, FMCH is pursuing third-party claims for contribution and indemnifi cation against Xerox.
Beginning October 6, 2015, the United States Attorney for the Eastern District of New York and the Offi ce of Inspector General of the United States Department of Health and Human Services have investigated, through subpoenas issued under the False Claims Act, utilization and invoicing by FMC-AG & Co. KGaA's subsidiary Azura Vascular Care, for a period beginning after FMC-AG & Co. KGaA's acquisition of American Access Care, LLC in October 2011.
On February 21, 2017, FMCH terminated the employee and notifi ed the United States Attorney of the termination and its circumstances. The terminated employee's conduct is expected to result in demands for FMC-AG & Co. KGaA to refund overpayments and to pay related penalties under applicable laws, but the monetary value of such payment demands cannot yet be reasonably estimated.
On January 3, 2017, FMC-AG & Co. KGaA received a subpoena from the United States Attorney for the District of Massachusetts under the False Claims Act inquiring into FMC-AG & Co. KGaA's interactions and relationships with the AKF, including FMC-AG & Co. KGaA's charitable contributions to the Fund and the Fund's fi nancial assistance to patients for insurance premiums. FMCH is cooperating in the investigation, which is part of a broader investigation into charitable contributions in the medical industry. FMC-AG & Co. KGaA believes that the investigation revolves around conduct alleged to be unlawful in United Healthcare v. American Renal Associates, 2018 Civ. 10622 (D. Mass.), but believes that such unlawful conduct was not undertaken by FMCH.
The matter is no longer relevant.
The impact on the measurement categories and the measurement of fi nancial assets and liabilities according to IFRS 9 has not been signifi cant. The original measurement categories under IAS 39 as of December 31, 2017 and the new measurement categories according to IFRS 9 upon implementation on January 1, 2018 as well as their respective carrying amounts were as follows:
| Dec. 31, 2017 | Jan. 1, 2018 | |||
|---|---|---|---|---|
| € in millions | Category according to IAS 39 | Category according to IFRS 9 | Carrying amount according to IAS 39 |
Carrying amount according to IFRS 9 |
| Financial assets | ||||
| Cash and cash equivalents | Relating to no category | Amortized cost | 1,152 | 1,152 |
| Relating to no category | Fair value through profi t and loss | 484 | 484 3 | |
| Loans and receivables | Amortized cost | 6,157 | 6,114 1 | |
| Trade accounts and other receivables, less allowance for doubtful accounts |
Loans and receivables | Fair value through other comprehensive income |
45 | 45 2 |
| Relating to no category | Relating to no category | 58 | 58 | |
| Receivables from and loans to related parties |
Loans and receivables | Amortized cost | 17 | 17 |
| Other fi nancial assets | ||||
| Securities | Available for sale fi nancial assets | Fair value through other comprehensive income |
19 | 19 4 |
| Derivatives designated as cash flow hedging instruments |
Relating to no category | Relating to no category | 14 | 14 |
| Derivatives not designated as hedging instruments |
Financial assets measured at fair value though profi t and loss |
Fair value through profi t and loss | 321 | 321 |
| Leasing receivables | Relating to no category | Relating to no category | 79 | 79 |
| Other investments | Loans and receivables | Fair value through other comprehensive income |
54 | 89 1,2,4 |
| Loans and receivables | Fair value through profi t and loss | 18 | 18 2 | |
| All other financial assets | Loans and receivables | Amortized cost | 622 | 620 1 |
| Financial assets | 9,040 | 9,030 |
Changes in the carrying amounts from remeasurements of - € 10 million are included in the items of the consolidated statement of fi nancial position as follows:
Reclassifi cation
The option to measure debt instruments at fair value through profi t and loss was not used.
4 The option to measure equity instruments at fair value through other comprehensive income upon implementation of IFRS 9 has been exercised. The option has been used for € 16 million securities and € 89 million other investments (included in other fi nancial assets).
| Dec. 31, 2017 | Jan. 1, 2018 | |||
|---|---|---|---|---|
| € in millions | Category according to IAS 39 | Category according to IFRS 9 | Carrying amount according to IAS 39 |
Carrying amount according to IFRS 9 |
| Financial liabilities | ||||
| Trade accounts payable | Financial liabilities measured at amortized cost |
Amortized cost | 1,688 | 1,688 |
| Short-term accounts payable to related parties |
Financial liabilities measured at amortized cost |
Amortized cost | 42 | 42 |
| Short-term debt | Financial liabilities measured at amortized cost |
Amortized cost | 1,550 | 1,550 |
| Short-term debt from related parties | Financial liabilities measured at amortized cost |
Amortized cost | – | – |
| Long-term debt and capital | Financial liabilities measured at amortized cost |
Amortized cost | 6,871 | 6,871 |
| lease obligations | Relating to no category | Relating to no category | 234 | 234 |
| Bonds | Financial liabilities measured at amortized cost |
Amortized cost | 9,069 | 9,069 |
| Convertible bonds | Financial liabilities measured at amortized cost |
Amortized cost | 1,318 | 1,318 |
| Other fi nancial liabilities | ||||
| Noncontrolling interest subject to put provisions |
Relating to no category | Relating to no category | 854 | 854 |
| Derivatives in cash flow hedging relationships |
Relating to no category | Relating to no category | 9 | 9 |
| Derivatives not designated as hedging instruments |
Liabilities measured at fair value through profi t and loss |
Fair value through profi t and loss | 325 | 325 |
| Accrued contingent payments outstanding for acquisitions |
Liabilities measured at fair value through profi t and loss |
Fair value through profi t and loss | 793 | 793 |
| All other fi nancial liabilities | Financial liabilities measured at amortized cost |
Amortized cost | 2,965 | 2,965 |
| Financial liabilities | 25,718 | 25,718 |
As of January 1, 2018, the adjustments due to the initial application of IFRS 9 on the components of shareholders' equity were as follows:
| € in millions | Other reserves | Noncontrolling interest |
Total |
|---|---|---|---|
| Remeasurement of other investments due to reclassifi cation | 27 | 8 | 35 |
| Remeasurement of the allowance for bad debt for trade accounts and other receivables and other fi nancial assets |
- 39 | - 6 | - 45 |
| Deferred tax on adjustments | - 5 | - 2 | - 7 |
| Total | - 17 | – | - 17 |
Carrying amounts of fi nancial instruments
As of March 31, 2018, the carrying amounts of fi nancial instruments by item of the statement of fi nancial position and structured according to IFRS 9 categories were as follows:
| Relating to no category | |||||||
|---|---|---|---|---|---|---|---|
| € in millions | Carrying amount | Amortized cost | Fair value through profi t and loss 1 |
Fair value through other comprehensive income 2 |
Derivatives designated as cash fl ow hedg ing instruments at fair value |
Noncontrolling interest subject to put provi sions measured at fair value |
Valuation according to IAS 17 for leas ing receivables and liabilities |
| Financial assets | |||||||
| Cash and cash equivalents | 1,484 | 1,123 | 361 | ||||
| Trade accounts and other receivables, less allowance for doubtful accounts |
6,856 | 6,731 | – | 53 | 72 | ||
| Accounts receivable from and loans to related parties |
19 | 19 | |||||
| Other fi nancial assets 3 | 1,230 | 606 | 431 | 105 | 14 | 74 | |
| Financial assets | 9,589 | 8,479 | 792 | 158 | 14 | 0 | 146 |
| Financial liabilities | |||||||
| Trade accounts payable | 1,479 | 1,479 | |||||
| Short-term accounts payable to related parties |
124 | 124 | |||||
| Short-term debt | 1,792 | 1,792 | |||||
| Short-term debt from related parties | 4 | 4 | |||||
| Long-term debt and capital lease obligations |
7,096 | 6,867 | 229 | ||||
| Bonds | 8,984 | 8,984 | |||||
| Convertible bonds | 1,324 | 1,324 | |||||
| Other fi nancial liabilities 4 | 4,641 | 2,802 | 1,063 | 10 | 766 | ||
| Financial liabilities | 25,444 | 23,376 | 1,063 | 0 | 10 | 766 | 229 |
All included fi nancial assets and liabilities are mandatorily measured at fair value through profi t and loss according to IFRS 9.
The option to measure equity instruments at fair value through other comprehensive income upon implementation of IFRS 9 has been exercised. The option has been used for € 103 million other investments (included in other fi nancial assets).
Other fi nancial assets are included in the item other current and non-current assets in the consolidated statement of fi nancial position.
4 Other fi nancial liabilities are included in the items short-term provisions and other short-term liabilities and long-term provisions and other long-term liabilities in the consolidated statement of fi nancial position.
The following table shows the carrying amounts and the fair value hierarchy levels according to IFRS 13 as of March 31, 2018 and as of January 1, 2018:
| March 31, 2018 | January 1, 2018 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Fair value | Fair value | ||||||||
| € in millions | Carrying amount |
Level 1 | Level 2 | Level 3 | Carrying amount |
Level 1 | Level 2 | Level 3 | |
| Financial assets | |||||||||
| Cash and cash equivalents measured at fair value |
361 | 361 | 484 | 484 | |||||
| Trade accounts and other receivables, less allowance for doubtful accounts measured at fair value |
53 | 53 | 45 | 45 | |||||
| Other fi nancial assets measured at fair value |
|||||||||
| Securities | 148 | 148 | 19 | 19 | |||||
| Derivatives designated as cash flow hedging instruments |
14 | 14 | 14 | 14 | |||||
| Derivatives not designated as hedging instruments |
272 | 272 | 321 | 321 | |||||
| Other investments | 116 | 116 | 107 | 107 | |||||
| Financial liabilities | |||||||||
| Long-term debt and capital lease obligations |
7,096 | 7,144 | 7,105 | 7,154 | |||||
| Bonds | 8,984 | 9,510 | 9,069 | 9,707 | |||||
| Convertible bonds | 1,324 | 1,660 | 1,318 | 1,716 | |||||
| Other fi nancial liabilities measured at fair value |
|||||||||
| Noncontrolling interest subject to put provisions |
766 | 766 | 854 | 854 | |||||
| Derivatives designated as cash flow hedging instruments |
10 | 10 | 9 | 9 | |||||
| Derivatives not designated as hedging instruments |
272 | 272 | 325 | 325 | |||||
| Accrued contingent payments outstanding for acquisitions |
791 | 791 | 793 | 793 |
The following table shows the changes of the fair values of fi nancial instruments classifi ed as level 3 in the fi rst quarter of 2018:
| € in millions | Accrued contingent payments outstand ing for acquisitions |
Noncontrolling interest subject to put provisions |
|---|---|---|
| As of January 1, 2018 | 793 | 854 |
| Additions | – | 2 |
| Disposals | - 2 | - 1 |
| Gain / loss recognized in profi t or loss | 1 | 33 |
| Gain / loss recognized in equity | 0 | - 68 |
| Dividend payments | 0 | - 33 |
| Currency effects and other changes | - 1 | - 21 |
| As of March 31, 2018 | 791 | 766 |
The Fresenius Group has a solid fi nancial profi le. As of March 31, 2018, the equity ratio was 41.2% and the debt ratio (debt / total assets) was 35.9%. As of March 31, 2018, the leverage ratio (before special items) on the basis of net debt / EBITDA was 2.9.
The aims of the capital management and further information can be found in the consolidated fi nancial statements as of December 31, 2017 applying Section 315e HGB in accordance with IFRS.
The Fresenius Group is covered by the rating agencies Moody's, Standard & Poor's and Fitch.
The following table shows the company rating of Fresenius SE & Co. KGaA:
| March 31, 2018 | Dec. 31, 2017 | |
|---|---|---|
| Standard & Poor's | ||
| Corporate Credit Rating | BBB - | BBB - |
| Outlook | positive | positive |
| Moody's | ||
| Corporate Credit Rating | Baa3 | Baa3 |
| Outlook | stable | stable |
| Fitch | ||
| Corporate Credit Rating | BBB - | BBB - |
| Outlook | stable | stable |
Cash paid for acquisitions (without investments in licenses) consisted of the following:
| € in millions | Q1 / 2018 | Q1 / 2017 |
|---|---|---|
| Assets acquired | 44 | 7,411 |
| Liabilities assumed | - 3 | - 1,483 |
| Noncontrolling interest | 0 | - 32 |
| Notes assumed in connection | ||
| with acquisitions | - 3 | - 31 |
| Issuance of shares | 0 | - 400 |
| Cash paid | 38 | 5,465 |
| Cash paid for acquisitions, net | 38 | 5,465 |
| Cash paid for investments, | ||
| net of cash acquired | 147 | 4 |
| Cash paid for intangible assets, net | 4 | 4 |
| Total cash paid for acquisitions and | ||
| investments, net of cash acquired, | ||
| and net purchases of intangible assets | 189 | 5,473 |
The consolidated segment reporting shown on page 23 of this interim report is an integral part of the notes.
The Fresenius Group has identifi ed the business segments Fresenius Medical Care, Fresenius Kabi, Fresenius Helios and Fresenius Vamed, which corresponds to the internal organi za tional and reporting structures (Management Approach) at March 31, 2018.
The business segments were identifi ed in accordance with IFRS 8, Operating Segments, which defi nes the segment reporting requirements in the annual fi nancial statements and interim reports with regard to the operating business, product and service businesses and regions. Further explanations with regard to the business segments can be found in the consolidated fi nancial statements as of December 31, 2017 applying Section 315e HGB in accordance with IFRS.
Explanations regarding the notes on the business segments can be found in the consolidated fi nancial statements as of December 31, 2017 applying Section 315e HGB in accordance with IFRS.
| € in millions | Q1 / 2018 | Q1 / 2017 |
|---|---|---|
| Total EBIT of reporting segments | 1,062 | 1,225 |
| Special items | - 18 | 0 |
| General corporate expenses Corporate / Other (EBIT) |
- 8 | - 9 |
| Group EBIT | 1,036 | 1,216 |
| Net interest | - 149 | - 157 |
| Income before income taxes | 887 | 1,059 |
| € in millions | March 31, 2018 | Dec. 31, 2017 |
|---|---|---|
| Short-term debt | 1,792 | 1,550 |
| Short-term debt from related parties | 4 | – |
| Current portion of long-term debt and capital lease obligations |
615 | 618 |
| Current portion of Bonds | 1,023 | 731 |
| Long-term debt and capital lease obligations, less current portion |
6,481 | 6,487 |
| Bonds, less current portion | 7,961 | 8,338 |
| Convertible bonds | 1,324 | 1,318 |
| Debt | 19,200 | 19,042 |
| less cash and cash equivalents | 1,484 | 1,636 |
| Net debt | 17,716 | 17,406 |
As of March 31, 2018, Fresenius SE & Co. KGaA had two share-based compensation plans in place: the stock option based Fresenius SE Stock Option Plan 2008 (2008 Plan) and the Fresenius SE & Co. KGaA Long Term Incentive Program 2013 (2013 LTIP) which is based on stock options and phantom stocks. On June 30, 2017, the term of the options granted under the Fresenius AG Stock Option Plan 2003 expired. On April 12, 2018 and March 15, 2018, respectively, the Management Board and Supervisory Board of the general partner, Fresenius Management SE, resolved the Long Term Incentive Plan 2018 which is solely based on performance shares.
Transactions during the fi rst quarter of 2018 During the fi rst quarter of 2018, Fresenius SE & Co. KGaA received cash of € 4 million from the exercise of 164,706 stock options.
At March 31, 2018, out of 1,576,227 outstanding and exercisable stock options issued under the 2008 Plan, 133,140 were held by the members of the Fresenius Management SE Management Board. Out of 9,943,841 outstanding stock options issued under the 2013 LTIP 1,433,306 were exercisable at March 31, 2018. The members of the Fresenius Management SE Management Board held 1,479,375 stock options. 957,513 phantom stocks issued under the 2013 LTIP were outstanding at March 31, 2018. The members of the Fresenius Management SE Management Board held 173,052 phantom stocks. As of March 31, 2018, 3,009,533 options for ordinary shares were outstanding and exercisable.
On March 31, 2018, total unrecognized compensation cost related to non-vested options granted under the 2013 LTIP was € 52 million. This cost is expected to be recognized over a weighted-average period of 2.5 years.
During the fi rst quarter of 2018, 10,322 stock options were exercised. Fresenius Medical Care AG & Co. KGaA received cash of € 0.5 million upon exercise of these stock options.
There have been no signifi cant changes in the Fresenius Group's operating environment following the end of the fi rst quarter of 2018. Other events of material importance on the assets and liabilities, fi nancial position, and results of operations of the Group following the end of the fi rst quarter of 2018 are described in note 2, Acqui sitions, divestitures and investments (termination of the merger agreement with Akorn, Inc. and announced divestment of Sound Inpatient Physicians Holdings, LLC). Further events of material importance on the assets and liabilities, fi nancial position, and results of operations of the Group have not occurred.
For each consolidated stock exchange listed entity, the declaration pursuant to Section 161 of the German Stock Corporation Act (Aktiengesetz) has been issued and made available to shareholders on the website of Fresenius SE & Co. KGaA (www.fresenius.com / corporate-governance), and of Fresenius Medical Care AG & Co. KGaA (www.freseniusmedicalcare.com).
| Annual General Meeting, Frankfurt am Main | |
|---|---|
| Live webcast of the speech of the Chairman of the Management Board | May 18, 2018 |
| Payment of dividend 1 | May 24, 2018 |
| Report on 1st half 2018 | |
| Conference call, Live webcast | July 31, 2018 |
| Report on 1st – 3rd quarter 2018 | |
| Conference call, Live webcast | October 30, 2018 |
Subject to prior approval by the Annual General Meeting Subject to change
| Ordinary share | ADR | ||
|---|---|---|---|
| Securities identifi cation no. | 578 560 | CUSIP | 35804M105 |
| Ticker symbol | FRE | Ticker symbol | FSNUY |
| ISIN | DE0005785604 | ISIN | US35804M1053 |
| Bloomberg symbol | FRE GR | Structure | Sponsored Level 1 ADR |
| Reuters symbol | FREG.de | Ratio | 4 ADR = 1 Share |
| Main trading location | Frankfurt / Xetra | Trading platform | OTCQX |
Else-Kröner-Straße 1 Bad Homburg v. d. H. Germany
Investor Relations Telephone: + 49 61 72 6 08-24 85 Telefax: + 49 61 72 6 08-24 88 E-mail: [email protected]
Corporate Communications Telefon: + 49 61 72 6 08-23 02 Telefax: + 49 61 72 6 08-22 94 E-mail: [email protected]
Commercial Register: Bad Homburg v. d. H.; HRB 11852 Chairman of the Supervisory Board: Dr. Gerd Krick
General Partner: Fresenius Management SE
Registered Offi ce and Commercial Register: Bad Homburg v. d. H.; HRB 11673
Management Board: Stephan Sturm (President and CEO), Dr. Francesco De Meo, Rachel Empey, Dr. Jürgen Götz, Mats Henriksson, Rice Powell, Dr. Ernst Wastler Chairman of the Supervisory Board: Dr. Gerd Krick
For additional information on the performance indicators used please refer to our website https://www.fresenius.com/alternative-performance-measures.
Forward-looking statements:
This Quarterly Financial Report contains forward-looking statements. These statements represent assessments which we have made on the basis of the information available to us at the time. Should the assumptions on which the statements are based on not occur, or if risks should arise – as mentioned in the consolidated fi nancial statements and the management report as of December 31, 2017 applying Section 315e HBG in accordance with IFRS and the SEC fi lings of Fresenius Medical Care AG & Co. KGaA – the actual results could differ materially from the results currently expected.
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