Quarterly Report • May 6, 2015
Quarterly Report
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applying United States Generally Accepted Accounting Principles (U.S. GAAP)
1st Quarter 2015
5 Fresenius share
47 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 2014, Group sales were € 23.2 billion. As of March 31, 2015, more than 217,000 employees have dedicated themselves to the service of health in about 100 countries worldwide.
| € in millions | Q1 / 2015 | Q1 / 2014 | Change |
|---|---|---|---|
| Sales | 6,483 | 5,212 | 24% |
| EBIT 1 | 851 | 643 | 32% |
| Net income 2 | 292 | 228 | 28% |
| Earnings per share in € 2 | 0.54 | 0.42 | 28% |
| Operating cash fl ow | 531 | 140 | -- |
| € in millions | March 31, 2014 | December 31, 2014 | Change |
|---|---|---|---|
| Total assets | 43,032 | 39,897 | 8% |
| Non-current assets | 32,344 | 29,869 | 8% |
| Equity 3 | 17,271 | 15,483 | 12% |
| Net debt | 14,948 | 14,279 | 5% |
| Investments 4 | 377 | 1,158 | - 67% |
| € in millions | Q1 / 2015 | Q1 / 2014 |
|---|---|---|
| EBITDA margin 1 | 17.2% | 16.6% |
| EBIT margin 1 | 13.1% | 12.3% |
| Depreciation and amortization in % of sales | 4.1% | 4.3% |
| Operating cash fl ow in % of sales | 8.2% | 2.7% |
| Equity ratio (March 31 / December 31) |
40.1% | 38.8% |
| Net debt / EBITDA (March 31 / December 31) 5 |
3.40 | 3.41 |
Before special items
Net income attributable to shareholders of Fresenius SE & Co. KGaA; before special items
Equity including noncontrolling interest
Investments in property, plant and equipment, and intangible assets, acquisitions (Q1) Pro forma acquisitions; before special items, 3.12 at LTM average exchange rates for both net debt and EBITDA
For a detailed overview of special items please see the reconciliation table on page 8.
| US\$ in millions | Q1 / 2015 | Q1 / 2014 | Change |
|---|---|---|---|
| Sales | 3,960 | 3,564 | 11% |
| EBIT | 504 | 445 | 13% |
| Net income 1 | 210 | 205 | 2% |
| Operating cash fl ow | 447 | 112 | -- |
| Investments / Acquisitions | 270 | 401 | - 33% |
| R & D expenses | 31 | 30 | 3% |
| Employees, per capita on balance sheet date (March 31 / December 31) | 107,593 | 105,917 | 2% |
Medical devices / Transfusion technology
| € in millions | Q1 / 2015 | Q1 / 2014 | Change |
|---|---|---|---|
| Sales | 1,394 | 1,213 | 15% |
| EBIT 2 | 257 | 201 | 28% |
| Net income 3 | 140 | 106 | 32% |
| Operating cash fl ow | 83 | 42 | 98% |
| Investments / Acquisitions | 92 | 71 | 30% |
| R & D expenses 2 | 78 | 59 | 32% |
| Employees, per capita on balance sheet date (March 31 / December 31) | 32,899 | 32,899 | 0% |
| € in millions | Q1 / 2015 | Q1 / 2015 | Change |
|---|---|---|---|
| Sales | 1,391 | 1,227 | 13% |
| EBIT 2 | 147 | 114 | 29% |
| Net income 4 | 107 | 77 | 39% |
| Operating cash fl ow | 114 | 77 | 48% |
| Investments / Acquisitions | 49 | 792 | - 94% |
| Employees, per capita on balance sheet date (March 31 / December 31) | 68,669 | 68,852 | 0% |
FRESENIUS VAMED – Projects and services for hospitals and other health care facilities
| € in millions | Q1 / 2015 | Q1 / 2014 | Change |
|---|---|---|---|
| Sales | 208 | 191 | 9% |
| EBIT | 7 | 6 | 17% |
| Net income 5 | 4 | 4 | 0% |
| Operating cash fl ow | - 37 | - 54 | 31% |
| Investments / Acquisitions | 1 | 3 | - 67% |
| Order intake | 192 | 115 | 67% |
| Employees, per capita on balance sheet date (March 31 / December 31) | 7,819 | 7,746 | 1% |
Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
Before special items
Net income attributable to shareholders of Fresenius Kabi AG; before special items
Net income attributable to shareholders of HELIOS Kliniken GmbH; before special items Net income attributable to shareholders of VAMED AG
For a detailed overview of special items please see the reconciliation table on page 8.
The Fresenius share started the year strongly and reached a new all-time high of € 56.15 on March 16. The share price has risen 29% since the beginning of 2015. The European Central Bank's (ECB) bond buying program had an overall positive effect on European stock markets in the first quarter as did the accelerating economic recovery in the Euro zone.
Following the announcement of the bond purchase program by the ECB, stock prices in the Euro area increased signifi cantly in the fi rst quarter. At the same time, the Euro zone economy continued to recover and, according to current ECB estimates, will grow by 1.5% this year. Low oil prices and the weak Euro had a positive infl uence on the economic recovery of the Euro area. Growth of 2.3% to 2.7% is forecast by the US Federal Reserve (FED) for the US. The FED is
not ruling out an interest rate increase, even though it is not expected before the end of the second quarter of 2015.
In this economic environment, the DAX reached an all-time high of 12,168 on March 16. The Fresenius share also continued its long-term upward trend, reaching a record high of € 56.15 on March 16. The Fresenius share ended the fi rst quarter of 2015 at € 55.59, an increase of 29% compared with the 2014 closing price. At 11,966 points, the DAX increased 22% in the same period.
| Q1 / 2015 | 2014 | Change | |
|---|---|---|---|
| Number of shares (March 31 / December 31) | 542,815,402 | 541,532,600 | |
| Quarter-end quotation in € | 55.59 | 43.16 | 29% |
| High in € | 56.15 | 44.12 | 27% |
| Low in € | 42.41 | 35.00 | 21% |
| Ø Trading volume (number of shares per trading day) | 1,340,872 | 1,153,022 | 16% |
| Market capitalization, € in millions (March 31 / December 31) | 30,175 | 23,373 | 29% |
Fresenius had an excellent start into the year, even before taking into account very favorable exchange rate effects. All four business segments contributed to the strong financial results, with Fresenius Kabi's performance in particular standing out. Fresenius expects continued momentum in sales and profit growth in the coming quarters and raises its Group earnings guidance for 2015.
| Q 1 / 2015 | at actual rates |
in constant currency |
|
|---|---|---|---|
| Sales | € 6.5 bn | + 24% | + 13% |
| EBIT 1 | € 0.9 bn | + 32% | + 18% |
| Net income 2 | € 292 m | + 28% | + 16% |
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 in the fi rst quarter increased by 24% (13% in constant currency) to € 6,483 million (Q1 / 2014: € 5,212 million). Organic sales growth was 6%. Acquisitions contributed 8%, while divestitures reduced sales by 1%.
Before special items Net income attributable to shareholders of Fresenius SE & Co. KGaA; before special items
For a detailed overview of special items please see the reconciliation table on page 8.
Group EBITDA1 increased by 29% (15% in constant currency) to € 1,115 million (Q1 / 2014: € 867 million). Group EBIT 1 increased by 32% (18% in constant currency) to € 851 million (Q1 / 2014: € 643 million). The EBIT margin was 13.1% (Q1 / 2014: 12.3%).
Group net interest increased to - € 165 million (Q1 / 2014: - € 138 million). Interest rate savings were more than offset by interest on incremental debt for acquisitions completed in 2014 and by currency translation effects.
The Group tax rate 1 increased to 30.2% (Q1 / 2014: 26.3%). In the fi rst quarter of 2014, a one-time item at Fresenius Medical Care had positively infl uenced the Group tax rate.
Noncontrolling interest was € 187 million (Q1 / 2014: € 144 million), of which 95% was attributable to the noncontrolling interest in Fresenius Medical Care.
| € in millions | Q1 / 2015 | Q1 / 2014 |
|---|---|---|
| EBIT 1 | 851 | 643 |
| Net income 3 | 292 | 228 |
| Net income 2 | 317 | 248 |
| Earnings per share in € 3 | 0.54 | 0.42 |
| Earnings per share in € 2 | 0.58 | 0.46 |
Group net income 2 before special items increased by 28% (16% in constant currency) to € 292 million (Q1 / 2014: € 228 million). Earnings per share 3 increased by 28% (16% in constant currency) to € 0.54 (Q1 / 2014: € 0.42).
Group net income 2 including special items increased by 28% (17% in constant currency) to € 317 million (Q1 / 2014: € 248 million). Earnings per share 2 increased by 26% (17% in constant currency) to € 0.58 (Q1 / 2014: € 0.46).
| € in millions | Q1 / 2015 | Q1 / 2014 | Change at actual rates |
Currency trans lations effects |
Change at constant rates |
Organic growth |
Acquisitions / divestitures |
% of total sales |
|---|---|---|---|---|---|---|---|---|
| North America | 2,901 | 2,100 | 38% | 24% | 14% | 6% | 8% | 45% |
| Europe | 2,559 | 2,358 | 9% | 0% | 9% | 4% | 5% | 39% |
| Asia-Pacifi c | 619 | 439 | 41% | 18% | 23% | 8% | 15% | 10% |
| Latin America | 327 | 247 | 32% | 7% | 25% | 18% | 7% | 5% |
| Africa | 77 | 68 | 13% | 4% | 9% | 9% | 0% | 1% |
| Total | 6,483 | 5,212 | 24% | 11% | 13% | 6% | 7% | 100% |
| € in millions | Q1 / 2015 | Q1 / 2014 | Change at actual rates |
Currency trans lations effects |
Change at constant rates |
Organic growth |
Acquisitions / divestitures |
% of total sales 4 |
|---|---|---|---|---|---|---|---|---|
| Fresenius Medical Care | 3,516 | 2,602 | 35% | 18% | 17% | 7% | 10% | 54% |
| Fresenius Kabi | 1,394 | 1,213 | 15% | 10% | 5% | 5% | 0% | 21% |
| Fresenius Helios | 1,391 | 1,227 | 13% | 0% | 13% | 4% | 9% | 22% |
| Fresenius Vamed | 208 | 191 | 9% | 1% | 8% | 6% | 2% | 3% |
Before special items
Net income attributable to shareholders of Fresenius SE & Co. KGaA
Net income attributable to shareholders of Fresenius SE & Co. KGaA; before special items Calculated on the basis of contribution to consolidated sales
For a detailed overview of special items please see the reconciliation table on page 8.
The Group's U.S. GAAP fi nancial results as of March 31, 2015 and March 31, 2014 comprise special items. Net income attributable to shareholders of Fresenius SE & Co. KGaA was adjusted for these special items. The table below shows the special items and the reconciliation from net income (before special items) to earnings according to U.S. GAAP.
Spending on property, plant and equipment was € 273 million (Q1 / 2014: € 234 million), primarily for the modernization and expansion of dialysis clinics, production facilities and hospitals.
Total acquisition spending was € 104 million (Q1 / 2014: € 924 million).
Operating cash fl ow increased to € 531 million (Q1 / 2014: € 140 million). The cash fl ow margin increased to 8.2% (Q1 / 2014: 2.7%). Operating cash fl ow in the fi rst quarter of 2014 was affected by the payment for the W.R. Grace bankruptcy settlement of US\$ 115 million 1 .
Net capital expenditure increased to € 273 million (Q1 / 2014: € 243 million). Free cash fl ow before acquisitions and dividends improved to € 258 million (Q1 / 2014: - € 103 million). Free cash fl ow after acquisitions and dividends increased to € 256 million (Q1 / 2014: - € 1,006 million).
| € in millions | Q1 / 2015 (before special items) |
Effi ciency program |
integration costs for acquired Rhön hospitals |
disposal gains from two HELIOS hospitals |
Q1 / 2015 according to U.S. GAAP (incl. spe cial items) |
Q1 / 2014 (before special items) |
Fenwal integration costs |
disposal gains from two HELIOS hospitals |
Q1 / 2014 according to U.S. GAAP (incl. spe cial items) |
|---|---|---|---|---|---|---|---|---|---|
| Sales | 6,483 | 6,483 | 5,212 | 5,212 | |||||
| EBIT | 851 | - 10 | - 2 | 34 | 873 | 643 | - 1 | 22 | 664 |
| Interest result | - 165 | - 165 | - 138 | - 138 | |||||
| Net income before taxes | 686 | - 10 | - 2 | 34 | 708 | 505 | - 1 | 22 | 526 |
| Income taxes | - 207 | 3 | - 204 | - 133 | - 1 | - 134 | |||
| Net income | 479 | - 7 | - 2 | 34 | 504 | 372 | - 1 | 21 | 392 |
| Less noncontrolling interest | - 187 | - 187 | - 144 | - 144 | |||||
| Net income attributable to shareholders of Fresenius SE & Co. KGaA |
292 | - 7 | - 2 | 34 | 317 | 228 | - 1 | 21 | 248 |
| € in millions | Q1 / 2015 | Q1 / 2014 | thereof property, plant and equipment |
thereof acquisitions |
Change | % of total |
|---|---|---|---|---|---|---|
| Fresenius Medical Care | 240 | 293 | 179 | 61 | - 18% | 64% |
| Fresenius Kabi | 92 | 71 | 58 | 34 | 30% | 24% |
| Fresenius Helios | 49 | 792 | 32 | 17 | - 94% | 13% |
| Fresenius Vamed | 1 | 3 | 1 | 0 | - 67% | 0% |
| Corporate / Other | -5 | -1 | 3 | - 8 | -- | -1% |
| Total | 377 | 1,158 | 273 | 104 | - 67% | 100% |
The Group's total assets increased by 8% (0% in constant currency) to € 43,032 million (Dec. 31, 2014: € 39,897 million). Current assets grew by 7% (0% in constant currency) to € 10,688 million (Dec. 31, 2014: € 10,028 million). Noncurrent assets increased by 8% (1% in constant currency) to € 32,344 million (Dec. 31, 2014: € 29,869 million).
Total shareholders' equity increased by 12% (3% in constant currency) to € 17,271 million (Dec. 31, 2014: € 15,483
million). The equity ratio increased to 40.1% (Dec. 31, 2014: 38.8%).
Group debt grew by 3% (decreased by 3% in constant currency) to € 15,940 million (Dec. 31, 2014: € 15,454 million).
As of March 31, 2015, the net debt / EBITDA ratio was 3.40 1 (at LTM average exchange rates for both net debt and EBITDA: 3.12 1 ).
| € in millions | Q1 / 2015 | Q1 / 2014 | Change |
|---|---|---|---|
| Net income | 504 | 392 | 29% |
| Depreciation and amortization | 264 | 224 | 18% |
| Change in accruals for pensions | 21 | - 3 | -- |
| Cash fl ow | 789 | 613 | 29% |
| Change in working capital | - 258 | - 473 | 45% |
| Operating cash fl ow | 531 | 140 | -- |
| Property, plant and equipment | - 279 | - 246 | 13% |
| Proceeds from the sale of property, plant and equipment | 6 | 3 | 100% |
| Cash fl ow before acquisitions and dividends | 258 | - 103 | -- |
| Cash used for acquisitions, net | 45 | - 875 | 105% |
| Dividends paid | - 47 | - 28 | -68% |
| Free cash fl ow paid after acquisitions and dividends | 256 | - 1,006 | 125% |
| Cash provided by / used for fi nancing activities | -515 | 976 | -153% |
| Effect of exchange rates on change in cash and cash equivalents | 76 | - 5 | -- |
| Net change in cash and cash equivalents | -183 | - 35 | -- |
Fresenius Medical Care is the world's largest integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure. As of March 31, 2015, Fresenius Medical Care was treating 286,768 patients in 3,396 dialysis clinics.
| US\$ in millions | Q1 / 2015 | Q1 / 2014 | Change |
|---|---|---|---|
| Sales | 3,960 | 3,564 | 11% |
| EBITDA | 680 | 612 | 11% |
| EBIT | 504 | 445 | 13% |
| Net income 1 | 210 | 205 | 2% |
| Employees (March 31 / Dec. 31) | 107,593 | 105,917 | 2% |
Sales increased by 11% (17% in constant currency) to US\$ 3,960 million (Q1 / 2014: US\$ 3,564 million). Organic sales growth was 7%. Acquisitions contributed 10%. Adverse currency effects reduced sales by 6%.
Health Care services sales (dialysis services and care coordination) increased by 14% (18% in constant currency) to US\$ 3,182 million (Q1 / 2014: US\$ 2,782 million). Dialysis product sales were US\$ 778 million (Q1 / 2014: US\$ 782 million), an increase by 11% in constant currency.
In North America, sales increased by 16% to US\$ 2,771 million (Q1 / 2014: US\$ 2,393 million). Health Care services sales grew by 17% to US\$ 2,571 million (Q1 / 2014: US\$ 2,201 million). Dialysis product sales increased by 4% to US\$ 200 million (Q1 / 2014: US\$ 192 million).
Sales outside North America grew by 2% (18% in constant currency) to US\$ 1,180 million (Q1 / 2014: US\$ 1,161 million). Health Care services sales increased by 5% (24% in
constant currency) to US\$ 611 million (Q1 / 2014: US\$ 581 million). Dialysis product sales decreased by 2% (increased by 13% in constant currency) to US\$ 569 million (Q1 / 2014: US\$ 580 million).
EBIT increased by 13% (21% in constant currency) to US\$ 504 million (Q1 / 2014: US\$ 445 million) due to improvements in the operating business across all regions. The EBIT margin increased to 12.7% (Q1 / 2014: 12.5%).
Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA increased by 2% (10% in constant currency) to US\$ 210 million (Q1 / 2014: US\$ 205 million).
Operating cash fl ow increased to US\$ 447 million (Q1 / 2014: US\$ 112 million, affected by the payment for the W.R. Grace bankruptcy settlement of US\$ 115 million 2 ). The cash fl ow margin increased to 11.3% (Q1 / 2014: 3.2%).
Please see page 15 of the Management Report for the 2015 outlook of Fresenius Medical Care.
For further information, please see Fresenius Medical Care's Investor News at www.freseniusmedicalcare.com.
Fresenius Kabi offers infusion therapies, intravenously administered generic drugs and clinical nutrition 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 millions | Q1 / 2015 | Q1 / 2014 | Change |
|---|---|---|---|
| Sales | 1,394 | 1,213 | 15% |
| EBITDA 1 | 315 | 253 | 25% |
| EBIT 1 | 257 | 201 | 28% |
| Net income 2 | 140 | 106 | 32% |
| Employees (March 31 / Dec. 31) | 32,899 | 32,899 | 0% |
Sales increased by 15% (5% in constant currency) to € 1,394 million (Q1 / 2014: € 1,213 million). Organic sales growth was 5%. Acquisitions contributed 1% while divestitures reduced sales by 1%. Positive currency translation effects (10%) were mainly related to the Euro's depreciation against the U.S. dollar and the Chinese yuan.
Sales in Europe grew by 4% (organic growth: 5%) to € 518 million (Q1 / 2014: € 500 million). Sales in North America increased by 24% (organic growth: 3%) to € 473 million (Q1 / 2014: € 382 million). Sales growth was boosted by IV drug shortages easing more slowly than expected. Asia-Pacifi c sales increased by 20% (organic growth: 4%) to € 268 million (Q1 / 2014: € 222 million). Sales in Latin America / Africa grew by 24% (organic growth: 8%) to € 135 million (Q1 / 2014: € 109 million).
EBIT 1 increased by 28% (10% in constant currency) to € 257 million (Q1 / 2014: € 201 million). The EBIT margin was 18.5% (Q1 / 2014: 16.6%).
Net income 2 increased by 32% (14% in constant currency) to € 140 million (Q1 / 2014: € 106 million).
Operating cash fl ow increased by 98% to € 83 million (Q1 / 2014: € 42 million) with a margin of 6.0% (Q1 / 2014: 3.5%).
Fresenius Kabi's initiative to increase production effi ciency and streamline administrative structures is well on track. Costs of € 10 million before tax were incurred in the fi rst quarter of 2015. These costs are reported in the Group segment Corporate / Other.
Please see page 15 of the Management Report for the 2015 outlook of Fresenius Kabi.
Before special items Net income attributable to shareholders of Fresenius Kabi AG; before special items
For a detailed overview of special items please see the reconciliation table on page 8.
Fresenius Helios is Germany's largest hospital operator. HELIOS operates 111 hospitals, thereof 87 acute care clinics (including seven maximum care hospitals in Berlin-Buch, Duisburg, Erfurt, Krefeld, Schwerin, Wiesbaden and Wuppertal) and 24 post-acute care clinics. HELIOS treats approximately 4.5 million patients per year, thereof 1.2 million inpatients, and operates more than 34,000 beds.
| € in millions | Q1 / 2015 | Q1 / 2014 | Change |
|---|---|---|---|
| Sales | 1,391 | 1,227 | 13% |
| EBITDA 1 | 192 | 158 | 22% |
| EBIT 1 | 147 | 114 | 29% |
| Net income 2 | 107 | 77 | 39% |
| Employees (March 31 / Dec. 31) | 68,669 | 68,852 | 0% |
Sales increased by 13% to € 1,391 million (Q1 / 2014: € 1,227 million). Organic sales growth was 4% (Q1 / 2014: 4%). Acquisitions contributed 10% while divestitures reduced sales by 1%.
EBIT 1 grew by 29% to € 147 million (Q1 / 2014: € 114 million). The EBIT margin increased to 10.6% (Q1 / 2014: 9.3%).
Net income 2 increased by 39% to € 107 million (Q1 / 2014: € 77 million).
Sales of the established hospitals, including the former Rhön-Klinikum facilities consolidated for more than one year, grew by 4% to € 1,263 million (Q1 / 2014: € 1,214 million). EBIT 1 increased by 27% to € 143 million (Q1 / 2014: € 113 million).
The EBIT margin of the established hospitals increased to 11.3% (Q1 / 2014: 9.3%). Sales of the acquired hospitals 3 consolidated for less than one year were € 128 million. EBIT 1 was € 4 million with a margin of 3.1%.
The integration of the hospitals acquired from Rhön-Klinikum AG is fully on track. Total integration costs for 2014 and 2015 are confi rmed at approximately € 60 million. Integration costs were € 2 million in Q1/2015 taking the total to date to € 53 million. Amount and timing of projected nearterm cost synergies (€ 85 million p.a.) are also confi rmed.
Please see page 15 of the Management Report for the 2015 outlook of Fresenius Helios.
Before special items
Net income attributable to shareholders of HELIOS Kliniken GmbH; before special items Hospitals acquired from Rhön-Klinikum AG
For a detailed overview of special items please see the reconciliation table on page 8.
Fresenius Vamed manages projects and provides services for hospitals and other health care facilities worldwide.
| € in millions | Q1 / 2015 | Q1 / 2014 | Change |
|---|---|---|---|
| Sales | 208 | 191 | 9% |
| EBITDA | 9 | 8 | 13% |
| EBIT | 7 | 6 | 17% |
| Net income 1 | 4 | 4 | 0% |
| Employees (March 31 / Dec. 31) | 7,819 | 7,746 | 1% |
Sales increased by 9% (8% in constant currency) to € 208 million (Q1 / 2014: € 191 million). Organic sales growth was 6%. Acquisitions contributed 2%. Sales in the project business were unchanged at € 80 million (Q1 / 2014: € 80 million). Sales in the service business grew by 15% to € 128 million (Q1 / 2014: € 111 million).
EBIT grew by 17% to € 7 million (Q1 / 2014: € 6 million) with a margin of 3.4% (Q1 / 2014: 3.1%).
Net income 1 was unchanged at € 4 million (Q1 / 2014: € 4 million).
Order intake increased by 67% to € 192 million
(Q1 / 2014: € 115 million). As of March 31, 2015, order backlog reached a new all-time high of € 1,510 million (Dec. 31, 2014: € 1,398 million).
Please see page 15 of the Management Report for the 2014 outlook of Fresenius Vamed.
As of March 31, 2015, the number of employees increased by 1% to 217,836 (Dec. 31, 2014: 216,275).
| Number of employees | March 31, 2015 |
Dec 31, 2014 |
Change |
|---|---|---|---|
| Fresenius Medical Care | 107,593 | 105,917 | 2% |
| Fresenius Kabi | 32,899 | 32,899 | 0% |
| Fresenius Helios | 68,669 | 68,852 | 0% |
| Fresenius Vamed | 7,819 | 7,746 | 1% |
| Corporate / Other | 856 | 861 | - 1% |
| Total | 217,836 | 216,275 | 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.
| € in millions | Q1 / 2015 | Q1 / 2014 | Change |
|---|---|---|---|
| Fresenius Medical Care | 27 | 22 | 23% |
| Fresenius Kabi | 78 | 59 | 32% |
| Fresenius Helios | – | – | -- |
| Fresenius Vamed | 0 | 0 | |
| Corporate / Other | 1 | 0 | |
| Total | 106 | 81 | 31% |
The complex interactions and side effects that lead to kidney failure are better explored today than ever before. Technological advances develop in parallel with medical insights to improve the possibilities for treating patients. Our R & D
activities at Fresenius Medical Care aim to translate new insights into novel or improved developments and to bring them to market as quickly as possible, and thus make an important contribution towards rendering the treatment of patients increasingly comfortable, safe, and individualized.
Fresenius Kabi's research and development activities concentrate on products for the therapy and care of critically and chronically ill patients. Our focus is on areas with high medical needs, such as in the treatment of oncology patients. Our products help to support medical advancements in acute and post-acute care and improve the patients' quality of life. We develop new products in areas such as clinical nutrition. In addition, we develop generic drug formulations ready to launch at the time of market formation as well as new formulations for non-patented drugs. Our medical devices signifi cantly contribute to a safe and effective application of infusion solutions and clinical nutrition. In transfusion technology our R & D focus is on medical devices and disposables to support the secure, user-friendly, and effi cient production of blood products.
Compared to the presentation in the 2014 annual report, there have been no material changes in Fresenius' overall opportunities and risk situation in the fi rst quarter of 2015.
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 38 to 44 in the Notes of this report.
There were no signifi cant changes in the Fresenius Group's operating environment following the end of the fi rst quarter of 2015. No other events of material importance on the assets and liabilities, fi nancial position, and result of operations of the Group have occured after the close of the fi rst quarter of 2015.
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 | |
|---|---|---|---|
| Company rating | BBB - | Ba1 | BB + |
| Outlook | stable | stable | stable |
Based on the Group's excellent fi nancial results in the fi rst quarter of 2015 and positive prospects for the remainder of the year, Fresenius raises its 2015 earnings guidance. For 2015, Fresenius now expects net income 1 growth of 13% to 16% in constant currency. Previously, the company expected net income 1 growth of 9% to 12% in constant currency. The company fully confi rms its Group sales guidance. Sales are expected to increase by 7% to 10% in constant currency.
The net debt / EBITDA2 ratio is expected to be approximately 3.0 at the end of 2015.
Fresenius Medical Care confi rms its outlook for 2015. The company expects sales to grow at 5% to 7%, which at constant currency is a growth rate of 10% to 12%. Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA is expected to increase 0% to 5% in 2015.
Savings from the global effi ciency program are included, while potential acquisitions are not. The outlook refl ects further operating cost investments within the Care Coordination segment. The outlook is based on exchange rates prevailing at the beginning of 2015.
Fresenius Kabi raises its outlook for 2015 and now expects organic sales growth of 4% to 7% and EBIT growth in constant currency in the range of 11% to 14%. The implied EBIT margin is 18.5% to 19.5%. Previously, Fresenius Kabi projected organic sales growth of 3% to 5% and an EBIT growth in constant currency in the range of 4% to 6% with an implied EBIT margin in the range of 17.5% to 18.5%.
Fresenius Helios fully confi rms its outlook for 2015. Fresenius Helios projects organic sales growth of 3% to 5% and reported sales growth of 6% to 9%. EBIT is expected to increase to € 630 to € 650 million.
Fresenius Vamed confi rms its outlook for 2015 and expects to achieve single-digit organic sales growth and EBIT growth of 5% to 10%.
The Group plans to invest around 6% of sales in property, plant and equipment.
The number of employees in the Group will continue to rise in the future as a result of the expected expansion. We expect the number of employees to be above 220,000 in 2015 (December 31, 2014: 216,275). The number of employees is expected to increase in all business segments.
Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2015 before integration costs (~ € 10 million before tax for hospitals acquired from Rhön-Klinikum AG), before costs for the effi ciency program at Fresenius Kabi (~ € 100 million before tax), and before the disposal gains from the divestment of two HELIOS hospitals (€ 34 million before tax); 2014 before special items
At annual average exchange rates for both net debt and EBITDA; without major acquisitions; before special items
Fresenius Kabi's outlook excludes ~ € 100 million costs before tax for the effi ciency program
Fresenius Helios' outlook excludes integration costs for the hospitals acquired from Rhön-Klinikum AG (~ € 10 million before tax) and the disposal gains from the divestment of two HELIOS hospitals (€ 34 million before tax)
Our R & D activities will continue to play a key role in securing the Group's long-term growth through innovations and new therapies. We plan to increase the Group's R & D spending in 2015. About 4% to 5% of our product sales will be reinvested in research and development.
Market-oriented research and development with strict time-to-market management processes is crucial for the
success of new products. We continually review our R & D results using clearly defi ned milestones. Innovative ideas, product development, and therapies with a high level of quality will continue to be the basis for future market-leading positions. Given the continued cost-containment efforts in the health care sector, cost effi ciency combined with a strong quality focus is acquiring ever-greater importance in product development, and in the improvement of treatment concepts.
| Previous guidance | New guidance | |
|---|---|---|
| Sales, growth (constant currency) | 7% – 10% | confi rmed |
| Net income 1 , growth (in constant currency) |
9% – 12% | 13% – 16% |
Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2015 before integration costs (~ € 10 million before tax for hospitals acquired from Rhön-Klinikum AG), before costs for the effi ciency program at Fresenius Kabi (~ € 100 million before tax), and before the disposal gains from the divestment of two HELIOS hospitals (€ 34 million before tax); 2014 before special items
| Previous guidance | New guidance | ||
|---|---|---|---|
| Fresenius Medical Care 1 | Sales growth | 5% – 7% | confi rmed |
| Net income 2 growth | 0% – 5% | confi rmed | |
| Fresenius Kabi 3 | Sales growth (organic) | 3% – 5% | 4% – 7% |
| EBIT growth (in constant currency) | 4% – 6% | 11% – 14% | |
| Fresenius Helios 4 | Sales growth (organic) | 3% – 5% | confi rmed |
| EBIT | € 630 – 650 m | confi rmed | |
| Fresenius Vamed | Sales growth (organic) | Single-digit % | confi rmed |
| EBIT, growth | 5% – 10% | confi rmed |
Savings from the global effi ciency program and further operating cost investments within the Care Coordination business are included, while potential acquisitions
are not taken into account. The outlook is based on exchange rates prevailing at the beginning of 2015.
Net income attributable to the shareholders of Fresenius Medical Care AG & Co. KGaA
Fresenius Kabi's outlook excludes ~ € 100 million costs before tax for the effi ciency program
Fresenius Helios' outlook excludes integration costs for the hospitals acquired from Rhön-Klinikum AG (~ € 10 million before tax) and disposal gains from the
divestment of two HELIOS hospitals (€ 34 million before tax)
| € in millions | Q1 / 2015 | Q1 / 2014 |
|---|---|---|
| Sales | 6,483 | 5,212 |
| Cost of sales | - 4,557 | - 3,694 |
| Gross profi t | 1,926 | 1,518 |
| Selling, general and administrative expenses | - 947 | - 773 |
| Research and development expenses | - 106 | - 81 |
| Operating income (EBIT) | 873 | 664 |
| Net interest | - 165 | - 138 |
| Income before income taxes | 708 | 526 |
| Income taxes | - 204 | - 134 |
| Net income | 504 | 392 |
| Less noncontrolling interest | 187 | 144 |
| Net income attributable to shareholders of Fresenius SE & Co. KGaA | 317 | 248 |
| Earnings per ordinary share in € (after stock split 1 : 3) | 0.58 | 0.46 |
| Fully diluted earnings per ordinary share in € (after stock split 1 : 3) | 0.58 | 0.46 |
The following notes are an integral part of the unaudited condensed interim fi nancial statements.
| € in millions | Q1 / 2015 | Q1 / 2014 |
|---|---|---|
| Net income | 504 | 392 |
| Other comprehensive income (loss) | ||
| Foreign currency translation | 1,454 | - 62 |
| Cash flow hedges | - 30 | 4 |
| Change of fair value of available for sale financial assets | – | 14 |
| Actuarial gains / losses on defined benefit pension plans | - 40 | 3 |
| Income taxes related to components of other comprehensive income (loss) | - 11 | - 6 |
| Other comprehensive income (loss), net | 1,373 | - 47 |
| Total comprehensive income | 1,877 | 345 |
| Comprehensive income attributable to noncontrolling interest subject to put provisions |
111 | 19 |
| Comprehensive income attributable to noncontrolling interest not subject to put provisions |
845 | 100 |
| Comprehensive income attributable to | ||
| shareholders of Fresenius SE & Co. KGaA | 921 | 226 |
| € in millions | March 31, 2015 | December 31, 2014 |
|---|---|---|
| Cash and cash equivalents | 992 | 1,175 |
| Trade accounts receivable, less allowance for doubtful accounts | 4,713 | 4,235 |
| Accounts receivable from and loans to related parties | 39 | 36 |
| Inventories | 2,648 | 2,333 |
| Other current assets | 1,824 | 1,843 |
| Deferred taxes | 472 | 406 |
| I. Total current assets | 10,688 | 10,028 |
| Property, plant and equipment | 7,133 | 6,776 |
| Goodwill | 21,693 | 19,868 |
| Other intangible assets | 1,594 | 1,446 |
| Other non-current assets | 1,564 | 1,458 |
| Deferred taxes | 360 | 321 |
| II. Total non-current assets | 32,344 | 29,869 |
| Total assets | 43,032 | 39,897 |
| € in millions | March 31, 2015 | December 31, 2014 |
|---|---|---|
| Trade accounts payable | 1,136 | 1,052 |
| Short-term accounts payable to related parties | 4 | 5 |
| Short-term accrued expenses and other short-term liabilities | 4,499 | 4,164 |
| Short-term debt | 233 | 230 |
| Short-term loans from related parties | 6 | 3 |
| Current portion of long-term debt and capital lease obligations | 766 | 753 |
| Current portion of Senior Notes | 737 | 682 |
| Short-term accruals for income taxes | 197 | 161 |
| Deferred taxes | 72 | 54 |
| A. Total short-term liabilities | 7,650 | 7,104 |
| Long-term debt and capital lease obligations, less current portion | 5,933 | 5,977 |
| Senior Notes, less current portion | 7,429 | 6,977 |
| Convertible bonds | 836 | 832 |
| Long-term accrued expenses and other long-term liabilities | 791 | 661 |
| Pension liabilities | 1,140 | 1,099 |
| Long-term accruals for income taxes | 195 | 216 |
| Deferred taxes | 1,016 | 867 |
| B. Total long-term liabilities | 17,340 | 16,629 |
| I. Total liabilities | 24,990 | 23,733 |
| II. Noncontrolling interest subject to put provisions | 771 | 681 |
| A. Noncontrolling interest not subject to put provisions | 6,984 | 6,148 |
| Subscribed capital | 543 | 542 |
| Capital reserve | 3,048 | 3,018 |
| Other reserves | 6,211 | 5,894 |
| Accumulated other comprehensive income (loss) | 485 | - 119 |
| B. Total Fresenius SE & Co. KGaA shareholders' equity | 10,287 | 9,335 |
| III. Total shareholders' equity | 17,271 | 15,483 |
| Total liabilities and shareholders' equity | 43,032 | 39,897 |
| € in millions | Q1 / 2015 | Q1 / 2014 |
|---|---|---|
| Operating activities | ||
| Net income | 504 | 392 |
| Adjustments to reconcile net income to cash and cash equivalents provided by operating activities |
||
| Depreciation and amortization | 264 | 224 |
| Gain on sale of investments and divestitures | - 36 | - 21 |
| Change in deferred taxes | - 41 | - 14 |
| Gain on sale of fixed assets | – | – |
| Changes in assets and liabilities, net of amounts from businesses acquired or disposed of |
||
| Trade accounts receivable, net | - 229 | - 80 |
| Inventories | - 146 | - 121 |
| Other current and non-current assets | 54 | - 30 |
| Accounts receivable from / payable to related parties | – | 7 |
| Trade accounts payable, accrued expenses | ||
| and other short-term and long-term liabilities | 159 | - 268 |
| Accruals for income taxes | 2 | 51 |
| Net cash provided by operating activities | 531 | 140 |
| Investing activities | ||
| Purchase of property, plant and equipment | - 279 | - 246 |
| Proceeds from sales of property, plant and equipment | 6 | 3 |
| Acquisitions and investments, net of cash acquired and net purchases of intangible assets |
- 90 | - 872 |
| Proceeds from sale of investments and divestitures | 135 | - 3 |
| Net cash used in investing activities | - 228 | - 1,118 |
| Financing activities | ||
| Proceeds from short-term loans | 140 | 97 |
| Repayments of short-term loans | - 117 | - 810 |
| Proceeds from short-term loans from related parties | – | – |
| Repayments of short-term loans from related parties | – | – |
| Proceeds from long-term debt and capital lease obligations | 51 | 1,357 |
| Repayments of long-term debt and capital lease obligations | - 487 | - 1,648 |
| Proceeds from the issuance of Senior Notes | 0 | 1,420 |
| Proceeds from the issuance of convertible bonds | 0 | 500 |
| Changes of accounts receivable securitization program | - 139 | 50 |
| Proceeds from the exercise of stock options | 39 | 10 |
| Dividends paid | - 47 | - 28 |
| Change in noncontrolling interest | – | – |
| Exchange rate effect due to corporate financing | - 2 | – |
| Net cash provided by / used in fi nancing activities | - 562 | 948 |
| Effect of exchange rate changes on cash and cash equivalents | 76 | - 5 |
| Net decrease in cash and cash equivalents | - 183 | - 35 |
| Cash and cash equivalents at the beginning of the reporting period | 1,175 | 864 |
| Cash and cash equivalents at the end of the reporting period | 992 | 829 |
| Subscribed Capital | Reserves | ||||
|---|---|---|---|---|---|
| Number of ordinary shares in thousand 1 |
Amount € in thousands |
Amount € in millions |
Capital reserve € in millions |
Other reserves € in millions |
|
| As of December 31, 2013 | 539,085 | 539,085 | 539 | 2,955 | 5,052 |
| Proceeds from the exercise of stock options | 387 | 387 | – | 7 | |
| Compensation expense related to stock options |
6 | ||||
| Dividends paid | |||||
| Purchase of noncontrolling interest not subject to put provisions |
|||||
| Change in fair value of noncontrolling interest subject to put provisions |
3 | ||||
| Comprehensive income (loss) | |||||
| Net income | 248 | ||||
| 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) | 248 | ||||
| As of March 31, 2014 | 539,472 | 539,472 | 539 | 2,971 | 5,300 |
| As of December 31, 2014 | 541,533 | 541,533 | 542 | 3,018 | 5,894 |
| Proceeds from the exercise of stock options | 1,283 | 1,283 | 1 | 28 | |
| Compensation expense related to stock options |
5 | ||||
| Dividends paid | |||||
| Sale of noncontrolling interest not subject to put provisions |
|||||
| Change in fair value of noncontrolling interest subject to put provisions |
- 3 | ||||
| Comprehensive income (loss) | |||||
| Net income | 317 | ||||
| Other comprehensive income (loss) | |||||
| Cash flow hedges | |||||
| Change of fair value of available for sale financial assets |
|||||
| Foreign currency translation | |||||
| Actuarial losses on defined benefit pension plans |
|||||
| Comprehensive income | 317 | ||||
| As of March 31, 2015 | 542,816 | 542,816 | 543 | 3,048 | 6,211 |
Prior year fi gures were adjusted due to the stock split in 2014.
| Accumulated other com prehensive income (loss) € in millions |
Total Fresenius SE & Co. KGaA shareholders' equity € in millions |
Non controlling interest not subject to put provisions € in millions |
Total shareholders' equity € in millions |
|
|---|---|---|---|---|
| As of December 31, 2013 | - 351 | 8,195 | 5,065 | 13,260 |
| Proceeds from the exercise of stock options | 7 | 3 | 10 | |
| Compensation expense related to | ||||
| stock options | 6 | 3 | 9 | |
| Dividends paid | 0 | - 7 | - 7 | |
| Purchase of noncontrolling interest | ||||
| not subject to put provisions | 0 | 11 | 11 | |
| Change in fair value of noncontrolling | ||||
| interest subject to put provisions | 3 | 7 | 10 | |
| Comprehensive income (loss) | ||||
| Net income | 248 | 125 | 373 | |
| Other comprehensive income (loss) | ||||
| Cash flow hedges | 1 | 1 | 2 | 3 |
| Change of fair value of available for sale financial assets |
10 | 10 | – | 10 |
| Foreign currency translation | - 34 | - 34 | - 28 | - 62 |
| Actuarial gains on defined | ||||
| benefit pension plans | 1 | 1 | 1 | 2 |
| Comprehensive income (loss) | - 22 | 226 | 100 | 326 |
| As of March 31, 2014 | - 373 | 8,437 | 5,182 | 13,619 |
| As of December 31, 2014 | - 119 | 9,335 | 6,148 | 15,483 |
| Proceeds from the exercise of stock options | 29 | 10 | 39 | |
| Compensation expense related to stock options |
5 | 3 | 8 | |
| Dividends paid | 0 | - 6 | - 6 | |
| Sale of noncontrolling interest | ||||
| not subject to put provisions | 0 | - 8 | - 8 | |
| Change in fair value of noncontrolling | ||||
| interest subject to put provisions | - 3 | - 8 | - 11 | |
| Comprehensive income (loss) | ||||
| Net income | 317 | 160 | 477 | |
| Other comprehensive income (loss) | ||||
| Cash flow hedges | - 17 | - 17 | - 5 | - 22 |
| Change of fair value of available for sale financial assets |
– | – | – | – |
| Foreign currency translation | 630 | 630 | 707 | 1,337 |
| Actuarial losses on defined benefit pension plans |
- 9 | - 9 | - 17 | - 26 |
| Comprehensive income | 604 | 921 | 845 | 1,766 |
| As of March 31, 2015 | 485 | 10,287 | 6,984 | 17,271 |
| ME G D SE ATE D OLI NS CO |
T REP N |
RTI O |
G FI N |
RST Q | U | R (U ARTE |
N | TE DI AU |
D) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Fresenius Medical Care | Fresenius Kabi | Fresenius Helios | Fresenius Vamed | Corporate / Other | Fresenius Group | |||||||||||||
| by business segment, € in millions | 2015 | 2014 | Change | 2015 2 | 2014 3 | Change | 2015 4 | 2014 5 | Change | 2015 | 2014 | Change | 2015 6 | 2014 7 | Change | 2015 | 2014 | Change |
| Sales | 3,516 | 2,602 | 35% | 1,394 | 1,213 | 15% | 1,391 | 1,227 | 13% | 208 | 191 | 9% | - 26 | - 21 | - 24% | 6,483 | 5,212 | 24% |
| thereof contribution to consolidated sales |
3,511 | 2,596 | 35% | 1,382 | 1,205 | 15% | 1,391 | 1,227 | 13% | 198 | 183 | 8% | 1 | 1 | 0% | 6,483 | 5,212 | 24% |
| contribution to consolidated sales thereof intercompany sales |
5 54% |
6 50% |
- 17% | 12 21% |
8 23% |
50% | 0 22% |
0 23% |
10 3% |
8 4% |
25% | - 27 0% |
- 22 0% |
- 23% | 0 100% |
0 100% |
||
| EBITDA | 604 | 447 | 35% | 315 | 253 | 25% | 192 | 158 | 22% | 9 | 8 | 13% | 17 | 22 | - 23% | 1,137 | 888 | 28% |
| Depreciation and amortization | 156 | 122 | 28% | 58 | 52 | 12% | 45 | 44 | 2% | 2 | 2 | 0% | 3 | 4 | - 25% | 264 | 224 | 18% |
| EBIT | 448 | 325 | 38% | 257 | 201 | 28% | 147 | 114 | 29% | 7 | 6 | 17% | 14 | 18 | - 22% | 873 | 664 | 31% |
| Net interest | - 91 | - 70 | - 30% | - 50 | - 48 | - 4% | - 13 | - 16 | 19% | - 1 | - 1 | 0% | - 10 | - 3 | -- | - 165 | - 138 | - 20% |
| Income taxes | - 122 | - 74 | - 65% | - 62 | - 42 | - 48% | - 25 | - 18 | - 39% | - 2 | - 1 | - 100% | 7 | 1 | -- | - 204 | - 134 | - 52% |
| shareholders of Fresenius SE & Co. KGaA Net income attributable to |
186 | 150 | 24% | 140 | 106 | 32% | 107 | 77 | 39% | 4 | 4 | 0% | - 120 | - 89 | - 35% | 317 | 248 | 28% |
| Operating cash fl ow | 397 | 82 | -- | 83 | 42 | 98% | 114 | 77 | 48% | - 37 | - 54 | 31% | - 26 | - 7 | -- | 531 | 140 | -- |
| Cash fl ow before acquisitions | ||||||||||||||||||
| and dividends | 222 | - 62 | -- | 18 | - 23 | 178% | 84 | 46 | 83% | - 38 | - 55 | 31% | - 28 | - 9 | -- | 258 | - 103 | -- |
| Total assets 1 | 23,336 | 20,960 | 11% | 10,560 | 9,655 | 9% | 8,369 | 8,352 | 0% | 879 | 891 | - 1% | - 112 | 39 | -- | 43,032 | 39,897 | 8% |
| Debt 1 | 8,413 | 7,851 | 7% | 5,601 | 5,205 | 8% | 1,311 | 1,394 | - 6% | 161 | 159 | 1% | 454 | 845 | - 46% | 15,940 | 15,454 | 3% |
| Capital expenditure, gross | 179 | 146 | 23% | 58 | 54 | 7% | 32 | 32 | 0% | 1 | 2 | - 50% | 3 | 0 | 273 | 234 | 17% | |
| Acquisitions, gross / investments | 61 | 147 | - 59% | 34 | 17 | 100% | 17 | 760 | - 98% | 0 | 1 | - 100% | - 8 | - 1 | -- | 104 | 924 | - 89% |
| Research and development expenses | 27 | 22 | 23% | 78 | 59 | 32% | – | – | -- | 0 | 0 | 1 | 0 | 106 | 81 | 31% | ||
| (per capita on balance sheet date) 1 Employees |
107,593 | 105,917 | 2% | 32,899 | 32,899 | 0% | 68,669 | 68,852 | 0% | 7,819 | 7,746 | 1% | 856 | 861 | - 1% | 217,836 | 216,275 | 1% |
| Key fi gures | ||||||||||||||||||
| EBITDA margin | 17.2% | 17.2% | 22.6% | 20.9% | 13.8% | 12.9% | 4.3% | 4.2% | 17.2% 2,4 | 16.6%3,5 | ||||||||
| EBIT margin | 12.7% | 12.5% | 18.5% | 16.6% | 10.6% | 9.3% | 3.4% | 3.1% | 13.1% 2,4 | 12.3%3,5 | ||||||||
| Depreciation and amortization in % of sales |
4.4% | 4.7% | 4.2% | 4.3% | 3.2% | 3.6% | 1.0% | 1.0% | 4.1% | 4.3% | ||||||||
| Operating cash flow in % of sales | 11.3% | 3.2% | 6.0% | 3.5% | 8.2% | 6.3% | - 17.8% | - 28.3% | 8.2% | 2.7% | ||||||||
| ROOA 1 | 9.8% | 9.7% | 10.6% | 10.5% | 7.4% | 7.4% | 10.8% | 11.2% | 9.1% 8 | 9.1% 9 |
FRESENIUS SE & CO. KGAA
1 2014: December 31
2 Before costs for the effi ciency program 3 Before integration costs
4 Before integration costs and disposal gains (two HELIOS hospitals)
5 Before disposal gains (two HELIOS hospitals)
6 After costs for the effi ciency program, integration costs and disposal gains (two HELIOS hospitals)
7 After integration costs and disposal gains (two HELIOS hospitals)
8 The underlying pro forma EBIT does not include costs for the effi ciency program, integration costs and disposal gains (two HELIOS hospitals).
9 The underlying pro forma EBIT does not include integration costs and disposal gains (two HELIOS hospitals, Rhön stake).
The consolidated segment reporting is an integral part of the notes. The following notes are an integral part of the unaudited condensed interim fi nancial statements.
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, 2015:
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 "–".
The accompanying condensed consolidated fi nancial statements have been prepared in accordance with the United States Generally Accepted Accounting Principles (U.S. GAAP).
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 315a of the German Commercial Code (HGB). Simultaneously, the Fresenius Group voluntarily prepares and publishes the consolidated fi nancial statements in accordance with U.S. GAAP.
The accounting policies underlying these interim fi nancial statements are mainly the same as those applied in the consolidated fi nancial statements as of December 31, 2014.
The condensed consolidated fi nancial statements and management report for the fi rst quarter ended March 31, 2015 have not been audited nor reviewed and should be read in conjunction with the notes included in the consolidated fi nancial statements as of December 31, 2014, published in the 2014 Annual Report.
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, 2015 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, 2015 are not necessarily indicative of the results of operations for the fi scal year 2015.
Certain items in the consolidated fi nancial statements for the fi rst quarter of 2014 and for the year 2014 have been reclassifi ed to conform with the current year's presentation.
The preparation of consolidated fi nancial statements in conformity with U.S. GAAP 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, 2015 in conformity with U.S. GAAP in force for interim periods on January 1, 2015.
The Fresenius Group applied the following standards, as far as they are relevant for Fresenius Group's business, for the fi rst time:
In June 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2014-11 (ASU 2014-11), FASB Accounting Standards Codifi cation (ASC) Topic 860, Transfers and Servicing – Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures, which aligns the accounting for repurchase-to-maturity transactions and repurchase fi nancing arrangements with the accounting for other typical repurchase agreements, i. e. these transactions will be accounted for as secured borrowings. ASU 2014-11 also requires additional disclosures about repurchase agreements and other similar transactions. The update is effective for fi scal years and interim periods within those years beginning on or after December 15, 2014. The Fresenius Group adopted ASU 2014-11 as of January 1, 2015. ASU 2014-11 does not have a material impact on the consolidated fi nancial statements of the Fresenius Group.
In April 2014, the FASB issued Accounting Standards Update 2014-08 (ASU 2014-08), FASB ASC Topic 205, Presentation of Financial Statements and FASB ASC Topic 360, Property, Plant, and Equipment – Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08's objective is to reduce the complexity and diffi culty in applying guidance for discontinued operations. ASU 2014-08's main focus is to limit the presentation to disposals representing a strategic shift that has a major effect on operations or fi nancial results. The update is effective for fi scal years and interim periods within those years beginning on or after December 15, 2014. The Fresenius Group adopted ASU 2014-08 as of January 1, 2015. ASU 2014-08 does not have a material impact on the consolidated fi nancial statements of the Fresenius Group.
In January 2014, the FASB issued Accounting Standards Update 2014-05 (ASU 2014-05), FASB ASC Topic 853, Service Concession Arrangements. ASU 2014-05's objective is to specify that an operating entity should not account for a service concession arrangement that is within the scope of ASU 2014-05 as a lease. The update is effective for fi scal years and interim periods within those years beginning on or after December 15, 2014. The Fresenius Group adopted ASU 2014-05 as of January 1, 2015. ASU 2014-05 does not have a material impact on the consolidated fi nancial statements of the Fresenius Group.
V. RECENT PRONOUNCEMENTS, NOT YET APPLIED The FASB issued the following relevant new standards for the Fresenius Group:
In April 2015, the FASB issued Accounting Standards Update 2015-05 (ASU 2015-05), FASB ASC Subtopic 350-40, Intangibles – Goodwill and Other – Internal-Use Software: Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, which assists entities in evaluating the accounting for fees paid by a customer in a cloud computing arrangement, depending upon the inclusion or exclusion of software licenses. This update is effective for fi scal years and interim periods within those years beginning after December 15, 2015. The Fresenius Group is currently evaluating the impact of ASU 2015-05 on its consolidated fi nancial statements.
In April 2015, the FASB issued Accounting Standards Update 2015-03 (ASU 2015-03), FASB ASC Subtopic 835-30, Interest – Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that liability, consistent with debt discounts. This update is effective for fi scal years and interim periods within those years beginning after December 15, 2015. The Fresenius Group will adopt this ASU beginning in the fi scal year 2016.
In February 2015, the FASB issued Accounting Standards Update 2015-02 (ASU 2015-02), FASB ASC Topic 810, Consolidation – Amendments to the Consolidation Analysis, which focuses on clarifying guidance related to the evaluation of various types of legal entities such as limited partnerships, limited liability corporations and certain security transactions for consolidation. The update is effective for fi scal years beginning after December 15, 2015, and for interim periods within fi scal years beginning after December 15, 2015. The Fresenius Group is currently evaluating the impact of ASU 2015-02 on its consolidated fi nancial statements.
In May 2014, the FASB issued Accounting Standards Update 2014-09 (ASU 2014-09), FASB ASC Topic 606, Revenue from Contracts with Customers. Simultaneously, the Inter national Accounting Standards Board (IASB) published its equivalent revenue standard, IFRS 15, Revenue from Contracts with Customers. The standards are the result of a convergence project between FASB and the IASB. This update specifi es how and when companies reporting under U.S. GAAP will recognize revenue as well as providing users of fi nancial statements with more informative and relevant disclosures. ASU 2014-09 supersedes some guidance included in Topic 605, Revenue Recognition, some guidance within the scope of Topic 360, Property, Plant, and Equipment, and some guidance within the scope of Topic 350, Intangibles – Goodwill and Other. This ASU applies to nearly all contracts with customers, unless those contracts are within the scope of other standards (for example, lease contracts or insurance contracts). This update is effective for fi scal years and interim periods within those years beginning on or after December 15, 2016. Earlier adoption is not permitted. The Fresenius Group is currently evaluating the impact of ASU 2014-09 on its consolidated fi nancial statements.
The Fresenius Group made acquisitions, investments and purchases of intangible assets of € 104 million and € 924 million in the fi rst quarter of 2015 and 2014, respectively. Of this amount, € 90 million was paid in cash and € 14 million was assumed obligations in the fi rst quarter of 2015.
In the fi rst quarter of 2015, Fresenius Medical Care spent € 61 million on acquisitions, mainly for dialysis care services.
In the fi rst quarter of 2015, Fresenius Kabi spent € 34 million on acquisitions, which mainly related to the purchase of 100% of the shares in medi1one medical gmbh, Germany, and the purchase of further shares in Fresenius Kabi Bidiphar JSC, Vietnam. Furthermore, on February 16, 2015, Fresenius Kabi sold its German subsidiary CFL GmbH to NewCo Pharma GmbH. The transaction did not result in a material book gain or loss.
In the fi rst quarter of 2015, Fresenius Helios spent € 17 million on acquisitions, mainly for subsequent purchase price payments and the acquisition of outpatient facilities.
The segment Corporate / Other includes the consolidation of an intercompany transaction in the amount of € 8 million.
Net income attributable to shareholders of Fresenius SE & Co. KGaA for the fi rst quarter of 2015 in the amount of € 317 million includes special items relating to Fresenius Kabi's effi ciency program and the integration of the acquired Rhön hospitals. The divestment of two HELIOS hospitals in the fi scal year 2014 led to an additional disposal gain in the fi rst quarter of 2015.
The special items had the following impact on the consolidated statement of income:
| € in millions | EBIT | Net income attributable to share holders of Fresenius SE & Co. KGaA |
|---|---|---|
| Earnings Q1 / 2015, adjusted | 851 | 292 |
| Costs for Fresenius Kabi's effi ciency program |
- 10 | - 7 |
| Integration costs for the acquired Rhön hospitals |
- 2 | - 2 |
| Disposal gains from the divestment of two HELIOS hospitals |
34 | 34 |
| Earnings Q1 / 2015 according to U.S. GAAP |
873 | 317 |
Sales by activity were as follows:
| Sales | 6,483 | 5,212 |
|---|---|---|
| Other sales | 3 | 2 |
| Sales from long-term production contracts |
81 | 81 |
| Sales of products and related goods | 2,057 | 1,761 |
| less patient service bad debt provision | - 95 | - 46 |
| Sales of services | 4,437 | 3,414 |
| € in millions | Q1 / 2015 | Q1 / 2014 |
During the fi rst quarter of 2015, there were no further material changes relating to tax audits, accruals for income taxes, unrecognized tax benefi ts as well as recognized and accrued payments for interest and penalties. Explanations regarding the tax audits and further information can be found in the consolidated fi nancial statements in the 2014 Annual Report.
The following table shows the earnings per share including and excluding the dilutive effect from stock options issued after registration of the capital increase from company's funds (stock split 1 : 3) with the commercial register on August 1, 2014:
| Q1 / 2015 | Q1 / 2014 1 | |
|---|---|---|
| Numerators, € in millions | ||
| Net income attributable to | ||
| shareholders of | ||
| Fresenius SE & Co. KGaA | 317 | 248 |
| less effect from dilution due to | ||
| Fresenius Medical Care shares | – | – |
| Income available to | ||
| all ordinary shares | 317 | 248 |
| Denominators in number of shares | ||
| Weighted-average number of | ||
| ordinary shares outstanding | 542,247,910 | 539,410,536 |
| Potentially dilutive | ||
| ordinary shares | 4,704,407 | 5,001,822 |
| Weighted-average number | ||
| of ordinary shares outstanding | ||
| assuming dilution | 546,952,317 | 544,412,358 |
| Basic earnings per | ||
| ordinary share in € | 0.58 | 0.46 |
| Fully diluted earnings | ||
| per ordinary share in € | 0.58 | 0.46 |
Prior year fi gures were adjusted accordingly.
As of March 31, 2015 and December 31, 2014, cash and cash equivalents were as follows:
| € in millions | March 31, 2015 | Dec. 31, 2014 |
|---|---|---|
| Cash | 984 | 1,127 |
| Time deposits and securities (with a maturity of up to 90 days) |
8 | 48 |
| Total cash and cash equivalents | 992 | 1,175 |
As of March 31, 2015 and December 31, 2014, earmarked funds of € 44 million and € 52 million, respectively, were included in cash and cash equivalents.
As of March 31, 2015 and December 31, 2014, trade accounts receivable were as follows:
| € in millions | March 31, 2015 | Dec. 31, 2014 |
|---|---|---|
| Trade accounts receivable | 5,327 | 4,780 |
| less allowance for doubtful accounts | 614 | 545 |
| Trade accounts receivable, net | 4,713 | 4,235 |
As of March 31, 2015 and December 31, 2014, inventories consisted of the following:
| € in millions | March 31, 2015 | Dec. 31, 2014 |
|---|---|---|
| Raw materials and purchased components |
582 | 527 |
| Work in process | 473 | 451 |
| Finished goods | 1,686 | 1,440 |
| less reserves | 93 | 85 |
| Inventories, net | 2,648 | 2,333 |
As of March 31, 2015, investments were comprised of investments of € 570 million (December 31, 2014: € 558 million), mainly regarding the joint venture between Fresenius Medical Care and Galenica Ltd., that were accounted for under the equity method. In the fi rst quarter of 2015, income of € 6 million (Q1 / 2014: € 9 million) resulting from this valuation was included in selling, general and administrative expenses in the consolidated statement of income. Securities and longterm loans included € 169 million fi nancial assets available for sale as of March 31, 2015 (December 31, 2014: € 148 million) mainly relating to shares in funds. Furthermore, securities and long-term loans included € 168 million as of March 31, 2015 that Fresenius Medical Care loaned to a middle-market dialysis provider.
As of March 31, 2015 and December 31, 2014, intangible assets, split into amortizable and non-amortizable intangible assets, consisted of the following:
| March 31, 2015 | December 31, 2014 | |||||
|---|---|---|---|---|---|---|
| € in millions | Acquisition cost |
Accumulated amortization |
Carrying amount |
Acquisition cost |
Accumulated amortization |
Carrying amount |
| Patents, product and distribution rights | 704 | 327 | 377 | 633 | 288 | 345 |
| Technology | 388 | 92 | 296 | 349 | 77 | 272 |
| Non-compete agreements | 319 | 240 | 79 | 281 | 212 | 69 |
| Other | 1,112 | 502 | 610 | 1,000 | 448 | 552 |
| Total | 2,523 | 1,161 | 1,362 | 2,263 | 1,025 | 1,238 |
Estimated regular amortization expenses of intangible assets for the next fi ve years are shown in the following table:
| € in millions | Q2 –4 / 2015 | 2016 | 2017 | 2018 | 2019 | Q1 / 2020 |
|---|---|---|---|---|---|---|
| Estimated amortization expenses | 135 | 170 | 164 | 159 | 156 | 40 |
| March 31, 2015 | December 31, 2014 | |||||
|---|---|---|---|---|---|---|
| € in millions | Acquisition cost |
Accumulated amortization |
Carrying amount |
Acquisition cost |
Accumulated amortization |
Carrying amount |
| Tradenames | 225 | 0 | 225 | 202 | 0 | 202 |
| Management contracts | 7 | 0 | 7 | 6 | 0 | 6 |
| Goodwill | 21,693 | 0 | 21,693 | 19,868 | 0 | 19,868 |
| Total | 21,925 | 0 | 21,925 | 20,076 | 0 | 20,076 |
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, 2014 | 8,454 | 4,116 | 2,165 | 85 | 6 | 14,826 |
| Additions | 1,287 | 99 | 2,250 | 14 | 0 | 3,650 |
| Disposals | 0 | - 3 | - 28 | 0 | 0 | - 31 |
| Reclassifi cations | 0 | – | 0 | 0 | 0 | – |
| Foreign currency translation | 1,034 | 389 | 0 | 0 | 0 | 1,423 |
| Carrying amount as of December 31, 2014 | 10,775 | 4,601 | 4,387 | 99 | 6 | 19,868 |
| Additions | 35 | 16 | 9 | 0 | 0 | 60 |
| Foreign currency translation | 1,291 | 474 | 0 | 0 | 0 | 1,765 |
| Carrying amount as of March 31, 2015 | 12,101 | 5,091 | 4,396 | 99 | 6 | 21,693 |
As of March 31, 2015 and December 31, 2014, the carrying amounts of the other non-amortizable intangible assets were € 202 million and € 179 million, respectively, for Fresenius Medical Care as well as € 30 million and € 29 million, respectively, for Fresenius Kabi.
The Fresenius Group had short-term debt of € 233 million and € 230 million at March 31, 2015 and December 31, 2014, respectively. This debt consisted of borrowings by certain entities of the Fresenius Group under lines of credit with commercial banks.
As of March 31, 2015 and December 31, 2014, long-term debt and capital lease obligations consisted of the following:
| € in millions | March 31, 2015 | Dec. 31, 2014 |
|---|---|---|
| Fresenius Medical Care 2012 Credit Agreement | 2,615 | 2,389 |
| 2013 Senior Credit Agreement | 2,398 | 2,561 |
| Euro Notes | 1,025 | 1,025 |
| Accounts receivable facility of Fresenius Medical Care | 172 | 281 |
| Capital lease obligations | 154 | 151 |
| Other | 335 | 323 |
| Subtotal | 6,699 | 6,730 |
| less current portion | 766 | 753 |
| Long-term debt and capital lease obligations, less current portion | 5,933 | 5,977 |
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 period with a large group of banks and institutional investors 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.
The following tables show the available and outstanding amounts under the Fresenius Medical Care 2012 Credit Agreement after scheduled amortization payments at March 31, 2015 and at December 31, 2014:
| March 31, 2015 | ||||||
|---|---|---|---|---|---|---|
| Maximum amount available | Balance outstanding | |||||
| € in millions | € in millions | |||||
| Revolving Credit (in US\$) | US\$ 1,000 million | 930 | US\$47 million | 44 | ||
| Revolving Credit (in €) | € 400 million | 400 | € 0 million | 0 | ||
| US\$ Term Loan | US\$ 2,450 million | 2,277 | US\$2,450 million | 2,277 | ||
| € Term Loan | € 294 million | 294 | € 294 million | 294 | ||
| Total | 3,901 | 2,615 |
| December 31, 2014 | ||||||
|---|---|---|---|---|---|---|
| Maximum amount available | Balance outstanding | |||||
| € in millions | € in millions | |||||
| Revolving Credit (in US\$) | US\$ 1,000 million | 824 | US\$36 million | 30 | ||
| Revolving Credit (in €) | € 400 million | 400 | € 0 million | 0 | ||
| US\$ Term Loan | US\$ 2,500 million | 2,059 | US\$2,500 million | 2,059 | ||
| € Term Loan | € 300 million | 300 | € 300 million | 300 | ||
| Total | 3,583 | 2,389 |
In addition, at March 31, 2015 and December 31, 2014, Fresenius Medical Care had letters of credit outstanding in the amount of US\$ 7 million, which were not included above as part of the balance outstanding at those dates but which reduce available borrowings under the Revolving Credit Facility.
As of March 31, 2015, 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 Senior Credit Agreement) in the original amount of US\$ 1,300 million and € 1,250 million. Since the initial funding of the 2013 Senior Credit Agreement in June 2013, additional tranches were added and scheduled amortization payments have been made. Furthermore, on January 29, 2015, a term loan B tranche of € 297 million was voluntarily prepaid.
On February 12, 2015, the revolving credit facilities and the term loan A tranches were extended ahead of time by two years to a new maturity date on June 28, 2020. These tranches would have otherwise matured in June 2018.
The maturities of the 2013 Senior Credit Agreement shown in the consolidated statement of fi nancial position as of December 31, 2014, already take into account the amendments made in February 2015.
The following tables show the available and outstanding amounts under the 2013 Senior Credit Agreement at March 31, 2015 and at December 31, 2014:
| March 31, 2015 | ||||||
|---|---|---|---|---|---|---|
| Maximum amount available | Balance outstanding | |||||
| € in millions | € in millions | |||||
| Revolving Credit Facilities (in €) | € 900 million | 900 | € 0 million | 0 | ||
| Revolving Credit Facilities (in US\$) | US\$ 300 million | 279 | US\$ 0 million | 0 | ||
| Term Loan A (in €) | € 1,150 million | 1,150 | € 1,150 million | 1,150 | ||
| Term Loan A (in US\$) | US\$ 850 million | 790 | US\$ 850 million | 790 | ||
| Term Loan B (in US\$) | US\$ 493 million | 458 | US\$ 493 million | 458 | ||
| Total | 3,577 | 2,398 |
December 31, 2014 Maximum amount available Balance outstanding € in millions € in millions Revolving Credit Facilities (in €) € 900 million 900 € 0 million 0 Revolving Credit Facilities (in US\$) US\$ 300 million 247 US\$ 0 million 0 Term Loan A (in €) € 1,125 million 1,125 € 1,125 million 1,125 Term Loan A (in US\$) US\$ 890 million 733 US\$ 890 million 733 Term Loan B (in €) € 297 million 297 € 297 million 297 Term Loan B (in US\$) US\$ 494 million 406 US\$ 494 million 406 Total 3,708 2,561
As of March 31, 2015, the Fresenius Group was in compliance with all covenants under the 2013 Senior Credit Agreement.
Euro Notes
As of March 31, 2015 and December 31, 2014, Euro Notes (Schuldscheindarlehen) of the Fresenius Group consisted of the following:
| Book value / nominal value € in millions |
|||||
|---|---|---|---|---|---|
| Maturity | Interest rate | March 31, 2015 | Dec. 31, 2014 | ||
| Fresenius SE & Co. KGaA 2012 / 2016 | April 4, 2016 | 3.36% | 156 | 156 | |
| Fresenius SE & Co. KGaA 2012 / 2016 | April 4, 2016 | variable | 129 | 129 | |
| Fresenius SE & Co. KGaA 2013 / 2017 | Aug. 22, 2017 | 2.65% | 51 | 51 | |
| Fresenius SE & Co. KGaA 2013 / 2017 | Aug. 22, 2017 | variable | 74 | 74 | |
| Fresenius SE & Co. KGaA 2014 / 2018 | April 2, 2018 | 2.09% | 97 | 97 | |
| Fresenius SE & Co. KGaA 2014 / 2018 | April 2, 2018 | variable | 76 | 76 | |
| Fresenius SE & Co. KGaA 2014 / 2018 | April 2, 2018 | variable | 65 | 65 | |
| Fresenius SE & Co. KGaA 2012 / 2018 | April 4, 2018 | 4.09% | 72 | 72 | |
| Fresenius SE & Co. KGaA 2012 / 2018 | April 4, 2018 | variable | 43 | 43 | |
| Fresenius SE & Co. KGaA 2014 / 2020 | April 2, 2020 | 2.67% | 106 | 106 | |
| Fresenius SE & Co. KGaA 2014 / 2020 | April 2, 2020 | variable | 55 | 55 | |
| Fresenius SE & Co. KGaA 2014 / 2020 | April 2, 2020 | variable | 101 | 101 | |
| Euro Notes | 1,025 | 1,025 |
In March 2015, Fresenius SE & Co. KGaA voluntarily terminated fl oating rate tranches of Euro Notes due in 2016 and 2018 in the amount of € 172 million ahead of time. Furthermore, the Company made a termination offer to investors of its fi xed rate € 156 million Euro Notes maturing in April 2016 which was accepted for € 48 million. These Euro Notes were shown as current portion of long- term debt and capital lease obligations in the consolidated statement of fi nancial position. The respective repayments were made on April 7,
As of March 31, 2015, the Fresenius Group was in compliance with all of its covenants under the Euro Notes.
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, 2015, the additional fi nancial cushion resulting from unutilized credit facilities was approximately € 3.4 billion. Thereof € 2.4 billion accounted for syndicated credit facilities.
As of March 31, 2015 and December 31, 2014, Senior Notes of the Fresenius Group consisted of the following:
| Book value € in millions |
||||||
|---|---|---|---|---|---|---|
| Notional amount | Maturity | Interest rate | March 31, 2015 | Dec. 31, 2014 | ||
| Fresenius Finance B.V. 2014 / 2019 | € 300 million | Feb. 1, 2019 | 2.375% | 299 | 299 | |
| Fresenius Finance B.V. 2012 / 2019 | € 500 million | Apr. 15, 2019 | 4.25% | 500 | 500 | |
| Fresenius Finance B.V. 2013 / 2020 | € 500 million | July 15, 2020 | 2.875% | 500 | 500 | |
| Fresenius Finance B.V. 2014 / 2021 | € 450 million | Feb. 1, 2021 | 3.00% | 445 | 445 | |
| Fresenius Finance B.V. 2014 / 2024 | € 450 million | Feb. 1, 2024 | 4.00% | 453 | 453 | |
| Fresenius US Finance II, Inc. 2009 / 2015 | € 275 million | July 15, 2015 | 8.75% | 274 | 273 | |
| Fresenius US Finance II, Inc. 2009 / 2015 | US\$ 500 million | July 15, 2015 | 9.00% | 463 | 409 | |
| Fresenius US Finance II, Inc. 2014 / 2021 | US\$ 300 million | Feb. 1, 2021 | 4.25% | 279 | 247 | |
| FMC Finance VI S.A. 2010 / 2016 | € 250 million | July 15, 2016 | 5.50% | 249 | 249 | |
| FMC Finance VII S.A. 2011 / 2021 | € 300 million | Feb. 15, 2021 | 5.25% | 297 | 297 | |
| FMC Finance VIII S.A. 2011 / 2016 | € 100 million | Oct. 15, 2016 | variable | 100 | 100 | |
| FMC Finance VIII S.A. 2011 / 2018 | € 400 million | Sept. 15, 2018 | 6.50% | 397 | 397 | |
| FMC Finance VIII S.A. 2012 / 2019 | € 250 million | July 31, 2019 | 5.25% | 245 | 245 | |
| Fresenius Medical Care US Finance, Inc. 2007 / 2017 | US\$ 500 million | July 15, 2017 | 6.875% | 463 | 410 | |
| Fresenius Medical Care US Finance, Inc. 2011 / 2021 | US\$ 650 million | Feb. 15, 2021 | 5.75% | 601 | 532 | |
| Fresenius Medical Care US Finance II, Inc. 2011 / 2018 | US\$ 400 million | Sept. 15, 2018 | 6.50% | 369 | 327 | |
| Fresenius Medical Care US Finance II, Inc. 2012 / 2019 | US\$ 800 million | July 31, 2019 | 5.625% | 744 | 659 | |
| Fresenius Medical Care US Finance II, Inc. 2014 / 2020 | US\$ 500 million | Oct. 15, 2020 | 4.125% | 465 | 411 | |
| Fresenius Medical Care US Finance II, Inc. 2012 / 2022 | US\$ 700 million | Jan. 31, 2022 | 5.875% | 651 | 577 | |
| Fresenius Medical Care US Finance II, Inc. 2014 / 2024 | US\$ 400 million | Oct. 15, 2024 | 4.75% | 372 | 329 | |
| Senior Notes | 8,166 | 7,659 |
All Senior Notes included in the table are unsecured.
The Senior Notes issued by Fresenius US Finance II, Inc. which are due on July 15, 2015 are shown as current portion of Senior Notes in the consolidated statement of fi nancial position.
As of March 31, 2015 and December 31, 2014, the convertible bonds of the Fresenius Group consisted of the following:
| Book value € in millions |
||||||
|---|---|---|---|---|---|---|
| Notional amount | Maturity | Coupon | Current conversion price |
March 31, 2015 | Dec. 31, 2014 | |
| Fresenius SE & Co. KGaA 2014 / 2019 | € 500 million | Sept. 24, 2019 | 0.000% | € 49.7249 | 463 | 460 |
| Fresenius Medical Care AG & Co. KGaA 2014 / 2020 | € 400 million | Jan. 31, 2020 | 1.125% | € 73.6448 | 373 | 372 |
| Convertible bonds | 836 | 832 |
The fair value of the derivative embedded in the convertible bonds of Fresenius SE & Co. KGaA was € 123 million at March 31, 2015. The derivative embedded in the convertible bonds of FMC-AG & Co. KGaA was recognized with a fair value of € 96 million at March 31, 2015. Fresenius SE & Co. KGaA
and FMC-AG & Co. KGaA have purchased stock options (call options) to secure against future fair value fl uctuations of these derivatives. The call options also had an aggregate fair value of € 123 million and € 96 million, respectively at March 31, 2015.
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 stock options are recognized in other non-current liabilities / assets in the consolidated statement of fi nancial position.
At March 31, 2015, the pension liability of the Fresenius Group was € 1,158 million. The current portion of the pension liability of € 18 million is recognized in the consolidated statement of fi nancial position within short-term accrued expenses and other short-term liabilities. The non-current portion of € 1,140 million is recorded as pension liability.
Contributions to Fresenius Group's pension fund were € 5 million in the fi rst quarter of 2015. The Fresenius Group expects approximately € 26 million contributions to the pension fund during 2015.
Defi ned benefi t pension plans' net periodic benefi t costs of € 28 million (Q1 / 2014: € 18 million) were comprised of the following components:
| € in millions | Q1 / 2015 | Q1 / 2014 |
|---|---|---|
| Service cost | 11 | 8 |
| Interest cost | 11 | 10 |
| Expected return on plan assets | - 5 | - 4 |
| Amortization of unrealized | ||
| actuarial losses, net | 11 | 4 |
| Amortization of prior service costs | – | – |
| Amortization of transition obligations | – | – |
| Settlement loss | – | – |
| Net periodic benefi t cost | 28 | 18 |
Noncontrolling interest subject to put provisions changed as follows:
| € in millions | Q1 / 2015 |
|---|---|
| Noncontrolling interest subject to put provisions as of January 1, 2015 |
681 |
| Noncontrolling interest subject to put provisions in profi t |
27 |
| Purchase of noncontrolling interest subject to put provisions |
9 |
| Dividend payments | - 41 |
| Currency effects and other changes | 95 |
| Noncontrolling interest subject to put provisions as of March 31, 2015 |
771 |
99.7% of noncontrolling interest subject to put provisions applied to Fresenius Medical Care at March 31, 2015.
As of March 31, 2015 and December 31, 2014, put options with an aggregate purchase obligation of € 122 million and € 102 million, respectively, were exercisable. No put options were exercised in the fi rst quarter of 2015 and 2014.
As of March 31, 2015 and December 31, 2014, noncontrolling interest not subject to put provisions in the Fresenius Group was as follows:
| € in millions | March 31, 2015 | Dec. 31, 2014 |
|---|---|---|
| Noncontrolling interest not subject to put provisions in Fresenius Medical Care AG & Co. KGaA |
6,120 | 5,360 |
| Noncontrolling interest not subject to put provisions in VAMED AG |
41 | 43 |
| Noncontrolling interest not subject to put provisions in the business segments |
||
| Fresenius Medical Care | 546 | 482 |
| Fresenius Kabi | 133 | 123 |
| Fresenius Helios | 137 | 134 |
| Fresenius Vamed | 7 | 6 |
| Total noncontrolling interest not subject to put provisions |
6,984 | 6,148 |
Noncontrolling interest not subject to put provisions changed as follows:
| € in millions | Q1 / 2015 |
|---|---|
| Noncontrolling interest not subject to put provisions as of January 1, 2015 |
6,148 |
| Noncontrolling interest not subject to put provisions in profi t |
160 |
| Stock options | 13 |
| Dividend payments | - 6 |
| Sale of noncontrolling interest not subject to put provisions |
- 8 |
| Currency effects and other changes | 677 |
| Noncontrolling interest not subject to put provisions as of March 31, 2015 |
6,984 |
During the fi rst quarter of 2015, 1,282,802 stock options were exercised. Consequently, as of March 31, 2015, the subscribed capital of Fresenius SE & Co. KGaA consisted of 542,815,402 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 I (Stock Option Plan 2003), Conditional Capital II (Stock Option Plan 2008) and Conditional Capital IV (Stock Option Plan 2013) (see note 24, Stock options). 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 | 5,773,056 |
| Conditional Capital II Fresenius SE Stock Option Plan 2008 | 10,901,188 |
| Conditional Capital III, approved on May 16, 2014 | 48,971,202 |
| Conditional Capital IV Fresenius SE & Co. KGaA Stock Option Plan 2013 | 25,200,000 |
| Total Conditional Capital as of January 1, 2015 | 90,845,446 |
| Fresenius AG Stock Option Plan 2003 – options exercised | - 239,550 |
| Fresenius SE Stock Option Plan 2008 – options exercised | - 1,043,252 |
| Total Conditional Capital as of March 31, 2015 | 89,562,644 |
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 2015, the general partner and the Supervisory Board of Fresenius SE & Co. KGaA propose a dividend of € 0.44 per bearer ordinary share to the Annual General Meeting, i. e. a total dividend payment of € 238 million.
Other comprehensive income (loss) is comprised of all amounts recognized directly in equity (net of tax) resulting from the currency translation of foreign subsidiaries' fi nancial statements and the effects of measuring fi nancial instruments at their fair value as well as the change in benefi t obligation.
Changes in accumulated other comprehensive income (loss) net of tax by component were as follows:
| € in millions | Cash fl ow hedges |
Change of fair value of available for sale fi nancial assets |
Foreign currency translation |
Actuarial gains / losses on defi ned benefi t pension plans |
Total, before non controlling interest |
Non controlling interest |
Total, after non controlling interest |
|---|---|---|---|---|---|---|---|
| Balance as of December 31, 2013 | - 107 | 17 | - 99 | - 162 | - 351 | - 255 | - 606 |
| Other comprehensive income (loss) before reclassifi cations | - 3 | 10 | - 34 | - 1 | - 28 | - 29 | - 57 |
| Amounts reclassifi ed from accumulated | |||||||
| other comprehensive income (loss) | 4 | 0 | – | 2 | 6 | 4 | 10 |
| Other comprehensive income (loss), net | 1 | 10 | - 34 | 1 | - 22 | - 25 | - 47 |
| Balance as of March 31, 2014 | - 106 | 27 | - 133 | - 161 | - 373 | - 280 | - 653 |
| Balance as of December 31, 2014 | - 109 | 1 | 294 | - 305 | - 119 | 189 | 70 |
| Other comprehensive income (loss) before reclassifi cations | - 21 | – | 630 | - 13 | 596 | 676 | 1,272 |
| Amounts reclassifi ed from accumulated | |||||||
| other comprehensive income (loss) | 4 | 0 | – | 4 | 8 | 9 | 17 |
| Other comprehensive income (loss), net | - 17 | – | 630 | - 9 | 604 | 685 | 1,289 |
| Balance as of March 31, 2015 | - 126 | 1 | 924 | - 314 | 485 | 874 | 1,359 |
| Amount of gain or loss reclassifi ed from accumulated other comprehensive (income) loss |
|||
|---|---|---|---|
| € in millions | Q1 / 2015 | Q1 / 2014 | Affected line item in the consolidated statement of income |
| Details about accumulated other comprehensive (income) loss components | |||
| Cash fl ow hedges | |||
| Interest rate contracts | 9 | 8 | Interest income / expense |
| Foreign exchange contracts | 5 | 1 | Cost of sales |
| Foreign exchange contracts | - 1 | – | Selling, general and administrative expenses |
| Foreign exchange contracts | 0 | 0 | Interest income / expense |
| Other comprehensive income (loss) | 13 | 9 | |
| Tax expense or benefi t | - 3 | - 2 | |
| Other comprehensive income (loss), net | 10 | 7 | |
| Amortization of defi ned benefi t pension items | |||
| Prior service costs | – | – | 1 |
| Transition obligations | – | – | 1 |
| Actuarial gains / losses on defined benefit pension plans | 11 | 4 | 1 |
| Other comprehensive income (loss) | 11 | 4 | |
| Tax expense or benefi t | - 4 | - 1 | |
| Other comprehensive income (loss), net | 7 | 3 | |
| Total reclassifi cations for the period | 17 | 10 |
Net periodic benefi t cost is allocated as personnel expense within cost of sales or selling, general and administrative expenses as well as research and development expenses.
The Fresenius Group is routinely involved in numerous claims, lawsuits, regulatory and tax audits, investigations and other legal matters arising, for the most part, in the ordinary course of its business of providing health care services and products. Legal matters that the 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 in the 2014 Annual Report. In the following, only the changes during the fi rst quarter ended March 31, 2015 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 in the 2014 Annual Report; defi ned terms or abbreviations having the same meaning as in the 2014 Annual Report.
The parties have resolved this patent dispute and will jointly fi le a motion to dismiss and irrevocably terminate this litigation.
In December 2012, Fresenius Medical Care Holdings, Inc. (FMCH) received a subpoena from the United States Attorney for the District of Massachusetts requesting production of a broad range of documents related to two products manufactured by FMCH, electron-beam sterilization of dialyzers and the Liberty peritoneal dialysis cycler. FMCH has cooperated fully in the government's investigation. In December 2014, FMCH was advised that the government's investigation was precipitated by a whistleblower, who fi rst fi led a complaint under seal in June 2013. In September 2014, the government declined to intervene in the whistleblower's actions. On March 31, 2015, the relator served his complaint styled Reihanifam v. Fresenius USA, Inc., 2013 Civ. 11486 (D. Mass.). FMCH will vigorously defend against the relator's action.
In January 2013 and April 2015, respectively, FMCH received subpoenas from the United States Attorney for the Western District of Louisiana and the Attorney General for the Commonwealth of Massachusetts requesting discovery responses relating to the Granufl o ® and Naturalyte ® acid concentrate products that are also the subject of personal injury litigation described above. FMCH has cooperated fully in the government's investigations.
The Fresenius Group regularly analyzes current information including, as applicable, the Fresenius Group's defenses and insurance coverage and, as necessary, provides accruals for probable liabilities for the eventual disposition of these matters.
The Fresenius Group, like other health care providers, conducts its operations under intense government regulation and scrutiny. It must comply with regulations which relate to or govern the safety and effi cacy of medical products and supplies, the marketing and distribution of such products, the operation of manufacturing facilities, laboratories and dialysis clinics, and environmental and occupational health and safety. With respect to its development, manufacture, marketing and distribution of medical products, if such compliance is not
maintained, the Fresenius Group could be subject to significant adverse regulatory actions by the U.S. Food and Drug Administration (FDA) and comparable regulatory authorities outside the United States. These regulatory actions could include warning letters or other enforcement notices from the FDA and / or comparable foreign regulatory authority, which may require the Fresenius Group to expend signifi cant time and resources in order to implement appropriate corrective actions. If the Fresenius Group does not address matters raised in warning letters or other enforcement notices to the satisfaction of the FDA and / or comparable regulatory authorities outside the United States, these regulatory authorities could take additional actions, including product recalls, injunctions against the distribution of products or operation of manufacturing plants, civil penalties, seizures of Fresenius Group's products and / or criminal prosecution. FMCH is currently engaged in remediation efforts with respect to three pending FDA warning letters, Fresenius Kabi with respect to two pending FDA warning letters. The Fresenius Group must also comply with the laws of the United States, including the federal Anti-Kickback Statute, the federal False Claims Act, the federal Stark Law and the federal Foreign Corrupt Practices Act as well as other federal and state fraud and abuse laws.
Applicable laws or regulations may be amended, or enforcement agencies or courts may make interpretations that differ from Fresenius Group's interpretations or the manner in which it conducts its business. Enforcement has become a high priority for the federal government and some states. In addition, the provisions of the False Claims Act authorizing payment of a portion of any recovery to the party bringing the suit encourage private plaintiffs to commence whistleblower actions. By virtue of this regulatory environment, Fresenius Group's business activities and practices are subject to extensive review by regulatory authorities and private parties, and continuing audits, subpoenas, other inquiries, claims and litigation relating to Fresenius Group's compliance with applicable laws and regulations. The Fresenius Group may not always be aware that an inquiry or action has begun, particularly in the case of "whistleblower" actions, which are initially fi led under court seal.
The following table presents the carrying amounts and fair values as well as the fair value hierarchy levels of Fresenius Group's fi nancial instruments as of March 31, 2015 and December 31, 2014, classifi ed into classes:
| March 31, 2015 | December 31, 2014 | ||||
|---|---|---|---|---|---|
| € in millions | Fair value hierarchy level |
Carrying amount |
Fair value | Carrying amount |
Fair value |
| Cash and cash equivalents | 1 | 992 | 992 | 1,175 | 1,175 |
| Assets recognized at carrying amount | 3 | 4,920 | 4,924 | 4,419 | 4,420 |
| Assets recognized at fair value | 1 | 169 | 169 | 148 | 148 |
| Liabilities recognized at carrying amount | 2 | 17,080 | 18,113 | 16,511 | 17,356 |
| Liabilities recognized at fair value | 2 | 235 | 235 | 161 | 161 |
| Noncontrolling interest subject to put provisions recognized at fair value |
3 | 771 | 771 | 681 | 681 |
| Derivatives for hedging purposes | 2 | 77 | 77 | 90 | 90 |
The signifi cant methods and assumptions used to estimate the fair values of fi nancial instruments as well as classifi cation of fair value measurements according to the three-tier fair value hierarchy are as follows:
Cash and cash equivalents are stated at nominal value, which equals the fair value.
The nominal value of short-term fi nancial instruments such as accounts receivable and payable and short-term debt represents its carrying amount, which is a reasonable estimate of the fair value due to the relatively short period to maturity for these instruments.
The fair values of major long-term fi nancial instruments are calculated on the basis of market information. Financial instruments for which market quotes are available are measured with the market quotes at the reporting date. The fair values of the other long-term fi nancial liabilities are calculated at the present value of respective future cash fl ows. To determine these present values, the prevailing interest rates and credit spreads for the Fresenius Group as of the date of the statement of fi nancial position are used.
The class assets recognized at carrying amount consists of trade accounts receivable and a loan which Fresenius Medical Care granted to a middle-market dialysis provider. The fair value of the loan is based on signifi cant unobservable inputs of comparable instruments and thus the class is classifi ed as fair value hierarchy Level 3.
The class assets recognized at fair value was comprised of shares in funds. The fair values of these assets are calculated on the basis of market information. The fair value of available for sale fi nancial assets quoted in an active market is based on price quotations at the period-end date (Level 1). Therefore, this class is classifi ed as Level 1.
The class liabilities recognized at carrying amount is classifi ed as hierarchy Level 2.
The derivatives embedded in the convertible bonds are included in the class liabilities recognized at fair value. The fair value of the embedded derivatives is calculated using the difference between the market value of the convertible bond and the market value of an adequate straight bond discounted with the market interest rates as of the reporting date. The class was classifi ed as Level 2.
The valuation of the class noncontrolling interest subject to put provisions recognized at fair value is determined using signifi cant unobservable inputs. It is therefore classifi ed as Level 3.
Derivatives, mainly consisting of interest rate swaps and foreign exchange forward contracts, are valued as follows: The fair value of interest rate swaps is calculated by discounting the future cash fl ows on the basis of the market interest rates applicable for the remaining term of the contract as of the date of the statement of fi nancial position. To determine the fair value of foreign exchange forward contracts, the contracted forward rate is compared to the current forward rate for the remaining term of the contract as of the date of the statement of fi nancial position. The result is then discounted on the basis of the market interest rates prevailing at the date of the statement of fi nancial position for the respective currency.
Fresenius Group's own credit risk is incorporated in the fair value estimation of derivatives that are liabilities. Counterparty credit risk adjustments are factored into the valuation of derivatives that are assets. The Fresenius Group monitors and analyses the credit risk from derivative fi nancial instruments on a regular basis. For the valuation of derivative fi nancial instruments, the credit risk is considered in the fair value of every individual instrument. The basis for the default probability are Credit Default Swap Spreads of each counterparty appropriate for the duration. The calculation of the credit risk considered in the valuation is done by multiplying the default probability appropriate for the duration with the expected discounted cash fl ows of the derivative fi nancial instrument.
The class of derivatives for hedging purposes includes the call options which have been purchased to hedge the convertible bonds. The fair values of these call options are derived from market quotes. For the fair value measurement of the class deriv atives for hedging purposes, signifi cant other observable
inputs are used. Therefore, the class is classifi ed as Level 2 in accordance with the defi ned fair value hierarchy levels.
Currently, there is no indication that a decrease in the value of Fresenius Group's fi nancing receivables is probable. Therefore, the allowances on credit losses of fi nancing receivables are immaterial.
| March 31, 2015 | December 31, 2014 | ||||
|---|---|---|---|---|---|
| € in millions | Assets | Liabilities | Assets | Liabilities | |
| Interest rate contracts (non-current) | 0 | 13 | 1 | 6 | |
| Foreign exchange contracts (current) | 6 | 88 | 9 | 43 | |
| Foreign exchange contracts (non-current) | – | – | 0 | – | |
| Derivatives designated as hedging instruments 1 | 6 | 101 | 10 | 49 | |
| Interest rate contracts (non-current) | 0 | 1 | 0 | 1 | |
| Foreign exchange contracts (current) 1 | 27 | 74 | 21 | 37 | |
| Foreign exchange contracts (non-current) 1 | – | 0 | – | – | |
| Derivatives embedded in the convertible bonds | 0 | 219 | 0 | 145 | |
| Stock options to secure the convertible bonds 1 | 219 | 0 | 145 | 0 | |
| Derivatives not designated as hedging instruments | 246 | 294 | 166 | 183 |
1 Derivatives designated as hedging instruments, foreign exchange contracts not designated as hedging instruments
and stock options to secure the convertible bonds are classifi ed as derivatives for hedging purposes.
Derivative fi nancial instruments are marked to market each reporting period, resulting in carrying amounts equal to fair values at the reporting date.
Derivatives not designated as hedging instruments, which are derivatives that do not qualify for hedge accounting, are also solely entered into to hedge economic business transactions and not for speculative purposes.
Derivatives for hedging purposes as well as the derivatives embedded in the convertible bonds were recognized at gross value within other assets in an amount of € 252 million and other liabilities in an amount of € 394 million.
The current portion of interest rate contracts and foreign exchange contracts indicated as assets in the preceding table is recognized within other current assets in the consolidated statement of fi nancial position, while the current portion of those indicated as liabilities is included in short-term accrued expenses and other short-term liabilities. The non-current portions indicated as assets or liabilities are recognized in other non-current assets or in long-term accrued expenses and other long-term liabilities, respectively. The derivatives embedded in the convertible bonds and the call options to secure the convertible bonds are recognized in other noncurrent liabilities / assets in the consolidated statement of fi nancial position.
| Q1 / 2015 | |||
|---|---|---|---|
| € in millions | Gain or loss recognized in other comprehensive income (loss) (effective portion) |
Gain or loss reclassifi ed from accumulated other comprehensive income (loss) (effective portion) |
Gain or loss recognized in the consolidated statement of income |
| Interest rate contracts | - 8 | 9 | 0 |
| Foreign exchange contracts | - 35 | 4 | 0 |
| Derivatives in cash fl ow hedging relationships 1 | - 43 | 13 | 0 |
| Foreign exchange contracts | - 14 | ||
| Derivatives in fair value hedging relationships | - 14 | ||
| Derivatives designated as hedging instruments | - 43 | 13 | - 14 |
| Q1 / 2014 | |||
|---|---|---|---|
| € in millions | Gain or loss recognized in other comprehensive income (loss) (effective portion) |
Gain or loss reclassifi ed from accumulated other comprehensive income (loss) (effective portion) |
Gain or loss recognized in the consolidated statement of income |
| Interest rate contracts | 1 | 8 | 1 |
| Foreign exchange contracts | - 6 | 1 | – |
| Derivatives in cash fl ow hedging relationships 1 | - 5 | 9 | 1 |
| Foreign exchange contracts | – | ||
| Derivatives in fair value hedging relationships | – | ||
| Derivatives designated as hedging instruments | - 5 | 9 | 1 |
The amount of gain or loss recognized in the consolidated statement of income solely relates to the ineffective portion.
| Gain or loss recognized in the consolidated statement of income |
||
|---|---|---|
| € in millions | Q1 / 2015 | Q1 / 2014 |
| Interest rate contracts | – | – |
| Foreign exchange contracts | 5 | 6 |
| Derivatives not designated as hedging instruments | 5 | 6 |
Losses from derivatives in fair value hedging relationships and from foreign exchange contracts not designated as hedging instruments recognized in the consolidated statement of income are faced by gains from the underlying transactions in the corresponding amount.
The Fresenius Group expects to recognize a net amount of € 20 million of the existing losses for foreign exchange contracts deferred in accumulated other comprehensive income (loss) in the consolidated statement of income within the next 12 months. For interest rate contracts, the Fresenius Group expects to recognize € 34 million of losses in the course of normal business during the next 12 months in interest expense.
Gains and losses from foreign exchange contracts and the corresponding underlying transactions are accounted for as cost of sales, selling, general and administrative expenses and net interest. Gains and losses resulting from interest rate contracts are recognized as net interest in the consolidated statement of income.
In the fi rst quarter of 2015, no gains (Q1 / 2014: € 10 million) for available for sale fi nancial assets were recognized in other comprehensive income (loss).
The Fresenius Group is exposed to effects related to foreign exchange fl uctuations in connection with its international business activities that are denominated in various currencies. In order to fi nance its business operations, the Fresenius
Group issues senior notes and commercial papers and enters into mainly long-term credit agreements and euro notes (Schuld scheindarlehen) with banks. Due to these fi nancing activities, the Fresenius Group is exposed to interest risk caused by changes in variable interest rates and the risk of changes in the fair value of statement of fi nancial position items bearing fi xed interest rates.
In order to manage the risk of interest rate and foreign exchange rate fl uctuations, the Fresenius Group enters into certain hedging transactions with highly rated fi nancial insti tutions as authorized by the Management Board. Derivative fi nancial instruments are not entered into for trading purposes.
The Fresenius Group defi nes benchmarks for individual exposures in order to quantify interest and foreign exchange risks. The benchmarks are derived from achievable and sustainable market rates. Depending on the individual benchmarks, hedging strategies are determined and generally implemented by means of micro hedges.
To reduce the credit risk arising from derivatives, the Fresenius Group concluded master netting agreements with banks. Through such agreements, positive and negative fair values of the derivative contracts could be offset against one another if a partner becomes insolvent. This offsetting is valid for transactions where the aggregate amount of obligations owed to and receivable from are not equal. If insolvency occurs, the party which owes the larger amount is obliged to pay the other party the difference between the amounts owed in the form of one net payment.
Fresenius elects not to offset the fair values of derivative fi nancial instruments subject to master netting agreements in the consolidated statement of fi nancial position.
At March 31, 2015 and December 31, 2014, the Fresenius Group had € 32 million and € 30 million of derivative fi nancial assets subject to netting arrangements and € 161 million and € 77 million of derivative fi nancial liabilities subject to netting arrangements. Offsetting these derivative fi nancial instruments would have resulted in net assets of € 8 million and € 15 million as well as net liabilities of € 137 million and € 62 million at March 31, 2015 and December 31, 2014, respectively.
Solely for the purpose of hedging existing and foreseeable foreign exchange transaction exposures, the Fresenius Group enters into foreign exchange forward contracts and, on a small scale, foreign exchange options. To ensure that no foreign exchange risks result from loans in foreign currencies, the Fresenius Group enters into foreign exchange swap contracts.
As of March 31, 2015, the notional amounts of foreign exchange contracts totaled € 2,071 million. These foreign exchange contracts have been entered into to hedge risks from operational business and in connection with loans in foreign currency. The predominant part of the foreign exchange forward contracts to hedge risks from operational business was recognized as cash fl ow hedge, while foreign exchange contracts in connection with loans in foreign currencies are partly recognized as fair value hedges. The fair values of cash fl ow hedges and fair value hedges were - € 79 million and - € 3 million, respectively.
As of March 31, 2015, the Fresenius Group was party to foreign exchange contracts with a maximum maturity of 15 months.
The Fresenius Group enters into interest rate swaps and, on a small scale, into interest rate options in order to protect against the risk of rising interest rates. These interest rate derivatives are mainly designated as cash fl ow hedges and have been entered into in order to convert payments based on variable interest rates into payments at a fi xed interest rate and in anticipation of future debt issuances (pre-hedges).
As of March 31, 2015, the U.S. dollar interest rate swaps had a notional volume of US\$ 500 million (€ 465 million) as well as a fair value of - US\$ 7 million (- € 6 million) and expire in 2022. The euro interest rate swaps had a notional volume of € 607 million and a fair value of - € 8 million. The euro interest rate swaps expire in the years 2016 to 2022.
The pre-hedges are used to hedge interest rate exposures with regard to interest rates which are relevant for the future debt issuance and which could rise until the respective debt is actually issued. These pre-hedges are settled at the issuance date of the corresponding debt with the settlement amount recorded in accumulated other comprehensive income (loss) amortized to interest expense over the life of the pre-hedges.
At March 31, 2015 and December 31, 2014, the Fresenius Group had € 86 million and € 89 million, respectively, related to such settlements of pre-hedges deferred in accumulated other comprehensive income (loss), net of tax.
The Fresenius Group has a solid fi nancial profi le. As of March 31, 2015, the equity ratio was 40.1% and the debt ratio (debt / total assets) was 37.0%. As of March 31, 2015, the leverage ratio (pro forma, before special items) on the basis of net debt / EBITDA was 3.4.
The aims of the capital management and further information can be found in the consolidated fi nancial statements in the 2014 Annual Report.
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, 2015 | Dec. 31, 2014 | |
|---|---|---|
| Standard & Poor's | ||
| Corporate Credit Rating | BBB - | BB + |
| Outlook | stable | positive |
| Moody's | ||
| Corporate Credit Rating | Ba1 | Ba1 |
| Outlook | stable | negative |
| Fitch | ||
| Corporate Credit Rating | BB + | BB + |
| Outlook | stable | positive |
The following table provides additional information with regard to the consolidated statement of cash fl ows:
| € in millions | Q1 / 2015 | Q1 / 2014 |
|---|---|---|
| Interest paid | 209 | 197 |
| Income taxes paid | 117 | 94 |
Cash paid for acquisitions (without investments in licenses) consisted of the following:
| € in millions | Q1 / 2015 | Q1 / 2014 |
|---|---|---|
| Assets acquired | 103 | 1,244 |
| Liabilities assumed | - 6 | - 362 |
| Noncontrolling interest | 2 | - 14 |
| Notes assumed in connection with acquisitions |
- 15 | - 11 |
| Cash paid | 84 | 857 |
| Cash acquired | - 1 | - 69 |
| Cash paid for acquisitions, net | 83 | 788 |
| Cash paid for investments, net of cash acquired Cash paid for intangible assets, net |
4 3 |
82 2 |
| Total cash paid for acquisitions and investments, net of cash acquired, and net purchases of intangible assets |
90 | 872 |
The consolidated segment reporting shown on page 22 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, 2015.
The business segments were identifi ed in accordance with FASB ASC Topic 280, Segment Reporting, 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. The business segments of the Fresenius Group are as follows:
Fresenius Medical Care is the world's largest integrated provider of products and services for individuals with chronic kidney failure. As of March 31, 2015, Fresenius Medical Care was treating 286,768 patients in 3,396 dialysis clinics.
Fresenius Kabi offers infusion therapies, intravenously administered generic drugs and clinical nutrition 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.
Fresenius Helios is Germany's largest hospital operator. On March 31, 2015, the HELIOS Group operated 110 hospitals: 86 acute care hospitals, including 7 maximum care clinics in Berlin-Buch, Duisburg, Erfurt, Krefeld, Schwerin, Wiesbaden and Wuppertal as well as 24 post-acute care hospitals. Fresenius Helios has more than 34,000 beds and treats approximately 4.5 million patients – including more than 1.2 million inpatients – each year.
Fresenius Vamed manages projects and provides services for hospitals and other health care facilities worldwide.
The segment Corporate / Other is mainly comprised of the holding functions of Fresenius SE & Co. KGaA as well as Fresenius Netcare GmbH, which provides services in the fi eld of information technology. In addition, the segment Corporate / Other includes inter segment consolidation adjustments as well as special items (see note 3, Special items).
Explanations regarding the notes on the business segments can be found in the consolidated fi nancial statements in the 2014 Annual Report.
| € in millions | Q1 / 2015 | Q1 / 2014 |
|---|---|---|
| Total EBIT of reporting segments | 859 | 646 |
| General corporate expenses Corporate / Other (EBIT) |
14 | 18 |
| Group EBIT | 873 | 664 |
| Net interest | - 165 | - 138 |
| Income before income taxes | 708 | 526 |
| € in millions | March 31, 2015 | Dec. 31, 2014 |
|---|---|---|
| Short-term debt | 233 | 230 |
| Short-term loans from related parties | 6 | 3 |
| Current portion of long-term debt and capital lease obligations |
766 | 753 |
| Current portion of Senior Notes | 737 | 682 |
| Long-term debt and capital lease obligations, less current portion |
5,933 | 5,977 |
| Senior Notes, less current portion | 7,429 | 6,977 |
| Convertible bonds | 836 | 832 |
| Debt | 15,940 | 15,454 |
| less cash and cash equivalents | 992 | 1,175 |
| Net debt | 14,948 | 14,279 |
As of March 31, 2015, Fresenius SE & Co. KGaA had three stock option plans in place: the Fresenius AG Stock Option Plan 2003 (2003 Plan) which is based on convertible bonds, 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. The 2013 LTIP is the only program under which stock options can be granted.
Transactions during the fi rst quarter of 2015
During the fi rst quarter of 2015, Fresenius SE & Co. KGaA received cash of € 24 million from the exercise of 1,282,802 stock options.
808,863 convertible bonds were outstanding and exercisable under the 2003 Plan at March 31, 2015. The members of the Fresenius Management SE Management Board held 40,434 convertible bonds. At March 31, 2015, out of 6,503,099 outstanding stock options issued under the 2008 Plan, 3,233,339 were exercisable and 1,144,820 were held
by the members of the Fresenius Management SE Management Board. 4,224,627 stock options issued under the 2013 LTIP were outstanding at March 31, 2015. The members of the Fresenius Management SE Management Board held 630,000 stock options. 641,466 phantom stocks issued under the 2013 LTIP were outstanding at March 31, 2015. The members of the Fresenius Management SE Management Board held 163,422 phantom stocks.
As of March 31, 2015, 4,042,202 options for ordinary shares were outstanding and exercisable. On March 31, 2015, total unrecognized compensation cost related to nonvested options granted under the 2008 Plan and the 2013 LTIP was € 26 million. This cost is expected to be recognized over a weighted-average period of 2.7 years.
During the fi rst quarter of 2015, 333,941 stock options were exercised. Fresenius Medical Care AG & Co. KGaA received cash of € 12.0 million upon exercise of these stock options and € 2.6 million from a related tax benefi t.
Prof. Dr. med. D. Michael Albrecht, a member of the Supervisory Board of Fresenius SE & Co. KGaA, is medical director and spokesman of the management board of the University Hospital Carl Gustav Carus Dresden and a member of the supervisory board of the University Hospital Aachen. The Fresenius Group maintains business relations with these hospitals in the ordinary course and under customary conditions.
Prof. Dr. h. c. Roland Berger, a member of the Supervisory Board of Fresenius Management SE and of Fresenius SE & Co. KGaA, is a partner of Roland Berger Strategy Consultants Holding GmbH. In the fi rst quarter of 2015, after discussion and approval by the Supervisory Board of Fresenius Management SE and the Supervisory Board of Fresenius SE & Co. KGaA, the Fresenius Group paid € 0.05 million to affi liated companies of the Roland Berger group for consulting serv ices rendered.
Klaus-Peter Müller, a member of the Supervisory Board of Fresenius Management SE and of Fresenius SE & Co. KGaA, is the chairman of the supervisory board of Commerzbank AG. The Fresenius Group maintains business relations with Commerzbank under customary conditions.
On May 20, 2015, at the Annual General Meeting of Fresenius SE & Co. KGaA, Michael Diekmann, chairman of the management board of Allianz SE until May 6, 2015, will be proposed for election to the Supervisory Board. In the fi rst quarter of 2015, the Fresenius Group paid € 1.4 million for insurance premiums to the Allianz group under customary conditions.
Dr. Dieter Schenk, deputy chairman of the Supervisory Board of Fresenius Management SE, is a partner in the international law fi rm Noerr LLP, which provides legal serv ices to the Fresenius Group. In the fi rst quarter of 2015, after discussion and approval of each mandate by the Supervisory Board of Fresenius Management SE, the Fresenius Group paid € 0.6 million to this law fi rm for legal services rendered.
The payments mentioned in this note are net amounts. In addition, VAT and insurance tax were paid.
There have been no signifi cant changes in the Fresenius Group's operating environment following the end of the fi rst quarter of 2015. No other events of material importance on the assets and liabilities, fi nancial position, and results of operations of the Group have occurred following the end of the fi rst quarter of 2015.
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), 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 20, 2015 |
| Payment of dividend 1 | May 21, 2015 |
| Report on 1st half 2015 | |
| Conference call, Live webcast | July 30, 2015 |
| Report on 1st – 3rd quarter 2015 | |
| Conference call, Live webcast | October 29, 2015 |
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 |
| Ordinary share | ADR |
|---|---|
Fresenius SE & Co. KGaA 61346 Bad Homburg v. d. H. Germany
Investor Relations Telephone: ++ 49 61 72 6 08-24 64 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: Dr. Ulf M. Schneider (President and CEO), Dr. Francesco De Meo, Dr. Jürgen Götz, Mats Henriksson, Rice Powell, Stephan Sturm, Dr. Ernst Wastler Chairman of the Supervisory Board: Dr. Gerd Krick
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 risk report in the 2014 Annual Report 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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