Quarterly Report • May 7, 2012
Quarterly Report
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applying United States Generally Accepted Accounting Principles (U.S. GAAP)
1st Quarter 2012
5 Fresenius share
47 Financial Calendar
Fresenius is a health care group providing products and services for dialysis, hospitals and the medical care of patients at home. In addition, Fresenius focuses on hospital operation, as well as on engineering and services for hospitals and other health care facilities. In 2011, group sales were € 16.5 billion. On March 31, 2012, approximately 160,000 employees have dedicated themselves to the service of health in about 100 countries worldwide.
| € in millions | Q1 / 2012 | Q1 / 2011 | Change |
|---|---|---|---|
| Sales 1 | 4,419 | 3,923 | 13% |
| EBIT | 661 | 575 | 15% |
| Net income 2 | 200 | 170 | 18% |
| Earnings per share in € 2 | 1.23 | 1.05 | 17% |
| Operating cash fl ow | 538 | 278 | 94% |
| € in millions | March 31, 2012 | Dec. 31, 2011 | Change |
|---|---|---|---|
| Total assets | 28,542 | 26,321 | 8% |
| Non-current assets | 20,860 | 19,170 | 9% |
| Equity 3 | 10,829 | 10,577 | 2% |
| Net debt | 10,604 | 9,164 | 16% |
| Investments 4 | 2,078 | 447 | -- |
| € in millions | Q1 / 2012 | Q1 / 2011 |
|---|---|---|
| EBITDA margin | 19.0% | 18.8% |
| EBIT margin | 15.0% | 14.7% |
| Depreciation and amortization in % of sales | 4.0 | 4.1 |
| Operating cash fl ow in % of sales | 12.2 | 7.1 |
| Equity ratio (March 31 / December 31) |
37.9% | 40.2% |
| Net debt / EBITDA (March 31 / December 31) |
3.01 5 | 2.83 |
Previous year's sales were adjusted according to a U.S. GAAP accounting change. The sales adjustment of - € 39 million in Q1 2011 and of - € 161 million for the full year 2011
solely relate to Fresenius Medical Care North America.
| US\$ in millions | Q1 / 2012 | Q1 / 2011 | Change |
|---|---|---|---|
| Sales 1 | 3,249 | 2,984 | 9% |
| EBIT | 503 | 445 | 13% |
| Net income 2 | 244 | 221 | 10% |
| Operating cash fl ow | 481 | 175 | 174% |
| Investments / Acquisitions | 1,827 | 463 | -- |
| R & D expenses | 29 | 26 | 9% |
| Employees, per capita on balance sheet date (March 31 / December 31) | 87,582 | 83,476 | 5% |
Medical devices / Transfusion technology
| € in millions | Q1 / 2012 | Q1 / 2011 | Change |
|---|---|---|---|
| Sales | 1,092 | 960 | 14% |
| EBIT | 215 | 197 | 9% |
| Net income 3 | 98 | 87 | 13% |
| Operating cash fl ow | 93 | 67 | 39% |
| Investments / Acquisitions | 37 | 32 | 16% |
| R & D expenses | 45 | 38 | 18% |
| Employees, per capita on balance sheet date (March 31 / December 31) | 24,632 | 24,106 | 2% |
| € in millions | Q1 / 2012 | Q1 / 2011 | Change |
|---|---|---|---|
| Sales | 717 | 648 | 11% |
| EBIT | 68 | 58 | 17% |
| Net income 4 | 41 | 33 | 24% |
| Operating cash fl ow | 34 | 68 | - 50% |
| Investments / Acquisitions | 563 | 21 | -- |
| Employees, per capita on balance sheet date (March 31 / December 31) | 43,430 | 37,198 | 17% |
| € in millions | Q1 / 2012 | Q1 / 2011 | Change |
|---|---|---|---|
| Sales | 142 | 140 | 1% |
| EBIT | 5 | 5 | 0% |
| Net income 5 | 4 | 4 | 0% |
| Operating cash fl ow | 45 | 26 | 73% |
| Investments / Acquisitions | 1 | 1 | 0% |
| Order intake | 104 | 127 | - 18% |
| Employees, per capita on balance sheet date (March 31 / December 31) | 3,760 | 3,724 | 1% |
Previous year's sales were adjusted according to a U.S. GAAP accounting change. The sales adjustment amounts to - US\$ 52 million in Q1 2011; the 2011 sales adjustment
amounts to -US\$ 224 million. Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA – adjusted for a non-taxable investment gain of US\$ 127 million in the fi rst quarter 2012.
Net income attributable to shareholders of Fresenius Kabi AG
Net income attributable to shareholders of HELIOS Kliniken GmbH
Net income attributable to shareholders of VAMED AG
In the first quarter of 2012, the Fresenius share reached a new all-time high and continued last year's upward trend. By the end of the first quarter the Fresenius share price had increased 8% compared to the 2011 year-end quotation.
Following the turbulences in the fi nancial markets 2011, the fi rst quarter 2012 constituted signifi cant stock price increases. The stabilization of the European fi nancial crisis, encouraging economic data in the U.S. and from German companies as well as historically low interest rates lead to a positive development at the German stock market.
By the end of the fi rst quarter the DAX posted an increase of over 18% to 6,946 points.
The Fresenius share price increased in the fi rst quarter 2012 as well. On February 15, 2012 it reached a new all-time high of € 79.71.
Supported by 2011's excellent operating results and the positive outlook for 2012 the Fresenius share closed near the all-time high at € 76.89 on March 31, 2012. At the same time Fresenius market capitalization reached € 12.6 billion; an increase of 8% compared to the 2011 year-end quotation.
DAX Fresenius share
| Q1 / 2012 | 2011 | Change | |
|---|---|---|---|
| Number of shares (March 31 / December 31) | 163,334,670 | 163,237,336 | |
| Quarter-end quotation in € | 76.89 | 71.48 | 8% |
| High in € | 79.71 | 75.62 | 5% |
| Low in € | 72.51 | 59.90 | 21% |
| Ø Trading volume (number of shares per trading day) | 422,276 | 502,241 | -9% |
| Market capitalization, € in millions (March 31 / December 31) | 12,559 | 11,668 | 8% |
Fresenius had an excellent start into the year with double-digit growth in sales and earnings. In particular our three largest business segments showed strong organic growth. In addition Fresenius Medical Care and Fresenius Helios completed significant acquisitions in the first quarter of 2012. Based on the strong quaterly results we raise our sales and earnings guidance for the full year 2012.
| Q1 / 2012 | at actual rates |
in constant currency |
|
|---|---|---|---|
| Sales 2 | € 4.4 bn | + 13% | + 10% |
| EBIT | € 661 m | + 15% | + 12% |
| Net income 3 | € 200 m | + 18% | + 15% |
The health care sector is one of the world's largest industries. It is relatively in-sensitive to economic fl uctuations compared to other sectors and has posted above-average growth over the past years.
The main growth factors are: the rising medical needs, stronger demand for innovative products and therapies, advances in medical technology as well as growing health consciousness, which increases the demand for health care services and facilities.
In the emerging countries additional drivers are: expanding availability and correspondingly greater demand for primary health care and the increasing national incomes and hence higher spending on health care.
At the same time, the cost of health care is rising and claiming an ever-increasing share of national income.
Health care structures are being reviewed and possible cost-cutting potential identifi ed in order to contain the steadily rising health care expenditures. However, such measures cannot compensate for the cost pressures arising from medical advances and demographic change. Market-based elements are being introduced increasingly in the health care system to create incentives for cost and quality-conscious behaviour. Overall treatment cost shall be reduced through improved quality standards and optimized medical processes.
In addition, ever greater importance is being placed on disease prevention and innovative reimbursement models linked to treatment quality standards.
Before effects of the announced Rhön-Klinikum AG acquisition
Previous year's sales were adjusted according to a U.S. GAAP accounting change. The sales adjustment of - € 39 million in Q1 2011 and of - € 161 million for the full year 2011 solely relate to Fresenius Medical Care North America.
Net income attributable to shareholders of Fresenius SE & Co. KGaA – adjusted for a non-taxable investment gain of € 30 million at Fresenius Medical Care;
2011 adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds and the Contingent Value Rights.
Group sales increased by 13% (10% in constant currency) to € 4,419 million (Q1 20111 : € 3,923 million). Organic sales growth was 5%. Acquisitions contributed a further 5%. Currency translation had a positive effect of 3%. This is mainly attributable to the strengthening of the U.S. dollar against the euro by 4% in the fi rst quarter of 2012 compared to the fi rst quarter of 2011.
Organic sales growth in North America was 2%, in Europe 5%. Organic sales growth was again strong in Asia-Pacifi c with 11% and in Latin America with 18%. Sales in Africa were impacted by the political unrest in the Middle East and North Africa.
Group EBITDA increased by 14% (11% in constant currency) to € 838 million (Q1 2011: € 737 million). Group EBIT grew by 15% (12% in constant currency) to € 661 million (Q1 2011: € 575 million). The EBIT margin improved by 30 basis points to 15.0% (Q1 2011: 14.7%).
Group net interest was - € 147 million (Q1 2011: - € 135 million). Lower average interest rates were more than offset by incremental debt due to acquisition fi nancing and currency translation effects.
The Group tax rate 2 slightly decreased to 30.4% (Q1 2011: 30.7%).
Noncontrolling interest increased to € 158 million (Q1 2011: € 135 million), of which 93% was attributable to the non controlling interest in Fresenius Medical Care.
Group net income 3 increased by 18% (15% in constant currency) to € 200 million (Q1 2011: € 170 million). Earnings per share increased by 17% to € 1.23 (Q1 2011: € 1.05).
| € in millions | Q1 / 2012 | Q1 / 2011 | Change at actual rates |
Currency trans lations effects |
Change at constant rates |
Organic growth |
Acquisitions / Divestitures |
Total sales |
|---|---|---|---|---|---|---|---|---|
| North America | 1,870 | 1,637 | 14% | 5% | 9% | 2% | 7% | 42% |
| Europe | 1,801 | 1,640 | 10% | 0% | 10% | 5% | 5% | 41% |
| Asia-Pacifi c | 423 | 362 | 17% | 6% | 11% | 11% | 0% | 9% |
| Latin America | 254 | 208 | 22% | 0% | 22% | 18% | 4% | 6% |
| Africa | 71 | 76 | - 7% | - 3% | - 4% | - 4% | 0% | 2% |
| Total | 4,419 | 3,923 | 13% | 3% | 10% | 5% | 5% | 100% |
| € in millions | Q1 / 2012 | Q1 / 2011 | Change at actual rates |
Currency trans lations effects |
Change at constant rates |
Organic Growth |
Acquisitions / Divestitures |
Total sales |
|---|---|---|---|---|---|---|---|---|
| Fresenius Medical Care | 2,478 | 2,181 | 14% | 4% | 10% | 3% | 7% | 56% |
| Fresenius Kabi | 1,092 | 960 | 14% | 2% | 12% | 11% | 1% | 25% |
| Fresenius Helios | 717 | 648 | 11% | 0% | 11% | 5% | 6% | 16% |
| Fresenius Vamed | 142 | 140 | 1% | 0% | 1% | 1% | 0% | 3% |
Previous year's sales were adjusted according to a U.S. GAAP accounting change. The sales adjustment of - € 39 million in Q1 2011 and of - € 161 million for the full year 2011 solely relate to Fresenius Medical Care North America.
Adjusted for the non-taxable investment gain at Fresenius Medical Care; 2011 adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds
Net income attributable to shareholders of Fresenius SE & Co. KGaA – adjusted for a non-taxable investment gain of € 30 million at Fresenius Medical Care;
2011 adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds and the Contingent Value Rights
| € in millions | Q1 / 2012 | Q1 / 2011 |
|---|---|---|
| EBIT | 661 | 575 |
| Net income 1 | 200 | 170 |
| Net income 2 | 230 | 128 |
| Earnings per share in € 1 | 1.23 | 1.05 |
| Earnings per share in € 2 | 1.41 | 0.79 |
INVESTMENTS
The Fresenius Group spent € 151 million on property, plant and equipment (Q1 2011: € 136 million). Acquisition spending was € 1,927 million (Q1 2011: € 311 million). This is primarily due to the completion of Fresenius Medical Care's acquisition of Liberty Dialysis Holdings, Inc. as well as of the acquisition of Damp Group by Fresenius Helios.
Group net income 2 including the non-taxable investment gain at Fresenius Medical Care was € 230 million or € 1.41 per share. This is a non-cash item.
Operating cash fl ow increased to € 538 million (Q1 2011: € 278 million), mainly driven by strong earnings growth and tight working capital management. The cash fl ow margin was 12.2% (Q1 2011: 7.1%). Net capital expenditure was € 152 million (Q1 2011: € 147 million). Free cash fl ow before acquisitions and dividends was € 386 million (Q1 2011: € 131 million). Free cash fl ow after acquisitions and dividends was - € 1,096 million (Q1 2011: - € 133 million).
| € in millions | Q1 / 2012 | Q1 / 2011 | thereof property, plant and equipment |
thereof acquisitions |
Change | % of total |
|---|---|---|---|---|---|---|
| Fresenius Medical Care | 1,361 | 339 | 95 | 1,266 | -- | 65% |
| Fresenius Kabi | 37 | 32 | 33 | 4 | 16% | 2% |
| Fresenius Helios | 563 | 21 | 20 | 543 | -- | 27% |
| Fresenius Vamed | 1 | 1 | 1 | 0 | 0% | 0% |
| Corporate / Other | 116 | 54 | 2 | 114 | 115% | 6% |
| Total | 2,078 | 447 | 151 | 1,927 | -- | 100% |
Net income attributable to shareholders of Fresenius SE & Co. KGaA – adjusted for a non-taxable investment gain of € 30 million at Fresenius Medical Care; 2011 adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds and the Contingent Value Rights Net income attributable to shareholders of Fresenius SE & Co. KGaA
The Group's total assets increased by 8% (10% in constant currency) to € 28,542 million (Dec. 31, 2011: € 26,321 million). Current assets grew by 7% (9% in constant currency) to € 7,682 million (Dec. 31, 2011: € 7,151 million). Non-current assets increased by 9% (11% in constant currency) to € 20,860 million (Dec. 31, 2011: € 19,170 million).
Total shareholders' equity increased by 2% (4% in constant currency) to € 10,829 million (Dec. 31, 2011: € 10,577 million). The equity ratio was 37.9% (Dec. 31, 2011: 40.2%).
Group debt grew by 17% (19% in constant currency) to € 11,459 million (Dec. 31, 2011: € 9,799 million), primarily resulting from acquisition fi nancing. Net debt increased by 16% (18% in constant currency) to € 10,604 million (Dec. 31, 2011: € 9,164 million).
In March 2012, Fresenius successfully placed € 500 million of senior unsecured notes. Proceeds are used for acquisitions, including the acquisition of the Damp Group, refi nancing of short-term debt, and general corporate purposes. The senior notes have a coupon of 4.250%, a maturity of seven years and were issued at par. The transaction was well received by investors and substantially oversubscribed.
As of March 31, 2012, the net debt / EBITDA1 ratio was 3.01 (Dec. 31, 2011: 2.83). At identical exchange rates for net debt and EBITDA, the ratio was 2.95.
| € in millions | Q1 / 2012 | Q1 / 2011 | Change |
|---|---|---|---|
| Earnings after tax | 455 | 263 | 73% |
| Depreciation and amortization | 177 | 162 | 9% |
| Change in accruals for pensions | 9 | 7 | 29% |
| Cash fl ow | 641 | 432 | 48% |
| Change in working capital | - 6 | -196 | 97% |
| Changes in mark-to-market evaluation of the MEB and the CVR | 0 | 42 | - 100% |
| Investment gain 2 | - 97 | 0 | |
| Operating cash fl ow | 538 | 278 | 94% |
| Property, plant and equipment | - 154 | -150 | -3% |
| Proceeds from the sale of property, plant and equipment | 2 | 3 | -33% |
| Cash fl ow before acquisitions and dividends | 386 | 131 | 195% |
| Cash used for acquisitions / proceeds from disposals | - 1,458 | -249 | -- |
| Dividends paid | - 24 | -15 | -60% |
| Free cash fl ow paid after acquisitions and dividends | - 1,096 | -133 | -- |
| Cash provided by / used for fi nancing activities | 1,329 | 276 | -- |
| Effect of exchange rates on change in cash and cash equivalents | - 13 | -18 | 28% |
| Net change in cash and cash equivalents | 220 | 125 | 76% |
Q1 2012: € 97 million non-taxable investment gain of Fresenius Medical Care AG & Co. KGaA; thereof € 30 million attributable to shareholders of Fresenius SE & Co. KGaA
Pro forma including Damp Group and Liberty Dialysis Holdings, Inc.
Fresenius Medical Care is the world's leading provider of services and products for patients with chronic kidney failure. As of March 31, 2012, Fresenius Medical Care was treating 253,041 patients in 3,119 dialysis clinics.
| US\$ in millions | Q1 / 2012 | Q1 / 2011 | Change |
|---|---|---|---|
| Sales 1 | 3,249 | 2,984 | 9% |
| EBITDA | 646 | 581 | 11% |
| EBIT | 503 | 445 | 13% |
| Net income 2 | 244 | 221 | 10% |
| Employees (March 31 / December 31) | 87,582 | 83,476 | 5% |
Sales increased by 9% to US\$ 3,249 million (Q1 20111 : US\$ 2,984 million). Organic sales growth was 3%. Acquisitions contributed a further 7%. Currency translation had a negative effect of 1%.
Sales in dialysis services increased by 11% to US\$ 2,478 million (Q1 2011: US\$ 2,233 million). Dialysis product sales grew by 3% to US\$ 771 million (Q1 2011: US\$ 751 million).
In North America sales grew 9% to US\$ 2,105 million (Q1 2011: US\$ 1,925 million). Dialysis services sales grew by 11% to US\$ 1,918 million (Q1 2011: US\$ 1,730 million). Average revenue per treatment for U.S. clinics increased to US\$ 353 in the fi rst quarter of 2012 compared to US\$ 348 in the fi rst quarter of 2011. Dialysis product sales decreased by 4% to US\$ 187 million (Q1 2011: US\$ 195 million) mainly as a result of lower pricing of renal pharmaceuticals.
Sales outside North America ("International" segment) grew by 8% to US\$ 1,136 million (Q1 2011: US\$ 1,055 million). Sales in dialysis services increased by 11% to US\$ 560 million (Q1 2011: US\$ 503 million). Dialysis product sales increased by 4% to US\$ 576 million (Q1 2011: US\$ 552 million). The growth was mainly driven by higher sales of dialysis machines.
EBIT increased by 13% to US\$ 503 million (Q1 2011: US\$ 445 million). The EBIT margin improved to 15.5% (Q1 2011: 14.9%).
The EBIT margin in North America improved by 30 basis points to 16.5% (Q1 2011: 16.2%). The increase in Medicare rates and the growth of the expanded services contributed favorably to this development. In the International segment the EBIT margin improved to 17.2% (Q1 2011: 16.2%).
Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA for the fi rst quarter of 2012 was US\$ 370 million, an increase of 68% compared to the corresponding quarter of 2011. This includes a non-taxable investment gain of US\$ 127 million related to the acquisition of Liberty Dialysis Holdings, Inc. (Liberty), including its 51% stake in Renal Advantage Partners, LLC (RAI). The gain is a result of measuring the 49% equity interest in RAI held by the company at its fair value at the time of the Liberty acquisition and is subject to the fi nalization of the Liberty purchase accounting. Excluding this investment gain, net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA in creased by 10% to US\$244 million (Q1 2011: US\$221 million).
Fresenius Medical Care has closed the acquisition of Liberty Dialysis Holdings, Inc., the holding company of Liberty Dialysis and Renal Advantage effective February 28, 2012. The closing followed the completion of the review of the transaction and issuance of a consent decree by the United States' Federal Trade Commission. In connection with the consent decree, Fresenius Medical Care completed the sale of 44 clinics to Dialysis Newco, Inc. The acquisition of Liberty Dialysis Holdings, Inc. is expected to add annual sales of around US\$ 700 million and 201 clinics to Fresenius Medical Care's network for an investment, net of proceeds from divestiture, of approximately US\$ 1.5 billion.
For further information, please see Fresenius Medical Care's Investor News at www.fmc-ag.com.
Previous year's sales were adjusted according to a U.S. GAAP accounting change. The sales adjustment amounts to - US\$ 52 million in Q1 2011;
the 2011 sales adjustment amounts to -US\$ 224 million. Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA – adjusted for a non-taxable investment gain of US\$ 127 million in the fi rst quarter 2012.
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 / 2012 | Q1 / 2011 | Change |
|---|---|---|---|
| Sales | 1,092 | 960 | 14% |
| EBITDA | 254 | 234 | 9% |
| EBIT | 215 | 197 | 9% |
| Net income 1 | 98 | 87 | 13% |
| Employees (March 31 / December 31) | 24,632 | 24,106 | 2% |
Sales increased by 14% to € 1,092 million (Q1 2011: € 960 million). Organic sales growth of 11% was driven by all regions. Currency translation had an effect of 2%. Acquisitions contributed 1%.
In Europe sales grew by 8% (organic growth: 8%) to € 487 million (Q1 2011: € 449 million). Sales in North America increased by 15% (organic growth: 10%) to € 292 million (Q1 2011: € 254 million). Organic sales growth was driven by new product launches and continued competitor supply constraints. In Asia-Pacifi c sales increased by 28% (organic growth: 20%) to € 199 million (Q1 2011: € 156 million). Sales in Latin America and Africa increased by 13% (organic growth: 15%) to € 114 million (Q1 2011: € 101 million).
EBIT grew by 9% to € 215 million (Q1 2011: € 197 million). EBIT growth was in particular driven by the emerging markets and North America. The EBIT margin was 19.7% (Q1 2011: 20.5%).
Net income1 increased by 13% to € 98 million (Q1 2011: € 87 million).
Fresenius Kabi will host a Capital Market Day on June 12, 2012 in Bad Homburg to provide an update on the company's strategy and growth prospects.
Fresenius Helios is the largest private hospital operator in Germany. HELIOS owns 75 hospitals, including six maximum care hospitals in Berlin-Buch, Duisburg, Erfurt, Krefeld, Schwerin and Wuppertal. HELIOS treats more than 2.7 million patients per year, thereof more than 750,000 inpatients, and operates more than 23,000 beds.
| € in millions | Q1 / 2012 | Q1 / 2011 | Change |
|---|---|---|---|
| Sales | 717 | 648 | 11% |
| EBITDA | 92 | 79 | 16% |
| EBIT | 68 | 58 | 17% |
| Net income 1 | 41 | 33 | 24% |
| Employees (March 31 / December 31) | 43,430 | 37,198 | 17% |
Sales increased by 11% to € 717 million (Q1 2011: € 648 million). This was driven by strong organic sales growth of 5%. Acquisitions contributed 6% to overall sales growth.
EBIT grew by 17% to € 68 million (Q1 2011: € 58 million). The EBIT margin improved by 50 basis points to 9.5% (Q1 2011: 9.0%).
Net income 1 increased by 24% to € 41 million (Q1 2011: € 33 million).
Sales at the established hospitals grew by 5% to € 676 million. EBIT improved by 24% to € 72 million. The EBIT margin increased to excellent 10.7% (Q1 2011: 9.0%). Sales of the acquired hospitals (consolidation < 1 year) were € 41 million, and, as expected, EBIT was - € 4 million. Restructuring of these hospitals is fully on track.
As of March 31, 2012, HELIOS fully consolidates Damp Group. Damp Group was among the ten largest private hospital operators in Germany. Damp Group's 2010 sales were € 427 million (without Damp hospital Wismar, divested in the fi rst quarter of 2012).
Fresenius Vamed offers engineering and services for hospitals and other health care facilities.
| € in millions | Q1 / 2012 | Q1 / 2011 | Change |
|---|---|---|---|
| Sales | 142 | 140 | 1% |
| EBITDA | 7 | 7 | 0% |
| EBIT | 5 | 5 | 0% |
| Net income 1 | 4 | 4 | 0% |
| Employees (March 31 / December 31) | 3,760 | 3,724 | 1% |
Sales increased to € 142 million (Q1 2011: € 140 million). Sales in the project business were € 77 million (Q1 2011: € 84 million). Sales in the service business increased by 16% to € 65 million (Q1 2011: € 56 million).
EBIT was € 5 million (Q1 2011: € 5 million). The EBIT margin reached 3.5% (Q1 2011: 3.6%).
Net income 1 remained at previous year's level of € 4 million.
In Q1 2012, Fresenius Vamed had a good order intake of € 104 million (Q1 2011: € 127 million). Order backlog increased to € 872 million as of March 31, 2012 (Dec. 31, 2011: € 845 million).
As of March 31, 2012, Fresenius Group increased the number of its employees by 7% to 160,249 (Dec. 31, 2011: 149,351).
| Number of employees | Mar. 31, 2012 | Dec. 31, 2011 | Change |
|---|---|---|---|
| Fresenius Medical Care | 87,582 | 83,476 | 5% |
| Fresenius Kabi | 24,632 | 24,106 | 2% |
| Fresenius Helios | 43,430 | 37,198 | 17% |
| Fresenius Vamed | 3,760 | 3,724 | 1% |
| Corporate / Other | 845 | 847 | 0% |
| Total | 160,249 | 149,351 | 7% |
We place great importance on research and development at Fresenius, where we develop products and therapies for severely and chronically ill patients. High quality is crucial for providing patients with optimal care, improving their quality of life, thus increasing their life expectancy. As an integral part of our corporate strategy, research and development also serves to secure the Company's economic growth and success.
| Total | 71 | 63 | 13% |
|---|---|---|---|
| Corporate / Other | 4 | 6 | - 33% |
| Fresenius Vamed | – | 0 | |
| Fresenius Helios | – | – | -- |
| Fresenius Kabi | 45 | 38 | 18% |
| Fresenius Medical Care | 22 | 19 | 16% |
| € in millions | Q1 / 2012 | Q1 / 2011 | Change |
Fresenius focuses its R & D efforts on its core competencies in the following areas:
Apart from products, we focus on developing optimized or completely new therapies, treatment methods, and services.
The R & D activities of Fresenius Medical Care are aimed at translating new in-sights into novel or improved developments and bring them to market as quickly as possible, and thus make an important contribution toward rendering the treatment of patients increasingly comfortable, safe, and individualized. On this basis, we continue to expand our global leadership in the dialysis market.
Fresenius Kabi's R & D activities concentrate on products for the treatment and care of critically and chronically ill patients. We develop products that help to support medical advancements in acute and post acute care and improve the patients' quality of life. At the same time, we want to make high-quality treatments available to patients worldwide through our comprehensive range of generics.
Our R & D strategy is aligned with this focus:
To obtain marketing approval for new products we are constantly working on dossiers for the registration for all the world's major markets. This applies to our established portfolio, which we roll out on a broader international basis through marketing authorizations for new local markets, while at the same time we work on applications for new products.
Fresenius Biotech develops and commercializes innovative therapies with immunotherapeutic products. Two products are currently being marketed: fi rstly, ATG-Fresenius S in transplantation medicine and, secondly, the trifunctional antibody Removab for the treatment of cancer patients with malignant ascites.
Fresenius Biotech's sales increased by 11% to € 8.1 million compared to € 7.3 million in the fi rst quarter of 2011.
Sales with the trifunctional antibody Removab grew by 38% to € 1.1 million (Q1 2011: € 0.8 million). Sales of the immunosuppressive agent ATG Fresenius S increased by 8% to € 7.0 million (Q1 2011: € 6.5 million).
Fresenius Biotech's EBIT was - € 6 million (Q1 2011: - € 7 million).
Compared to the presentation in the 2011 annual report, there have been no material changes in Fresenius' overall opportunities and risk situation. 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 esti mated expenses for legal services, as appropriate.
In addition, we report on legal proceedings, currency and interest risks on pages 39 to 43 in the Notes of this report.
On April 26, 2012 Fresenius announced its intention to make a voluntary public takeover offer to Rhön-Klinikum AG shareholders of € 22.50 per share in cash. The total purchase price for all outstanding shares in the company is approximately € 3.1 billion. The offer is contingent upon a minimum acceptance threshold of 90% and one share of Rhön-Klinikum AG's share capital at the end of the offer period and on antitrust approval.
Rhön-Klinikum AG is one of Germany's largest private hospital operators, with reported sales of € 2.6 billion and net income of € 161 million in 2011. Rhön-Klinikum AG has 53 hospitals with a total of approximately 16,000 beds, as well as 39 health medical care centers, and treated nearly 2.3 million patients last year.
Based on the Group's excellent fi nancial results in the fi rst quarter of 2012, Fresenius raises its guidance. For 2012, Fresenius now expects net income1 growth of 12% to 15% in constant currency. Previously, the Company expected net income growth of 8% to 11%. Sales2 growth of 10% to 13% in constant currency is now projected at the upper end of the targeted range.
The net debt / EBITDA ratio is projected to be ≤ 3.0 at year end.
Fresenius Medical Care confi rms its sales and earnings outlook for 2012. The company expects sales to grow to around US\$ 14 billion. Net income is expected to grow to around \$ 1.3 billion and net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA is expected to grow to around US\$ 1.14 billion. This does not include the investment gain of approximately US\$ 127 million in the fi rst quarter of 2012.
Based on the excellent fi nancial results in the fi rst quarter of 2012, Fresenius Kabi raises its outlook for 2012 and now forecasts organic sales growth of 6% to 8%. Previously, organic sales growth of 4% to 6% was expected.
Fresenius Kabi expects to achieve an EBIT margin at the upper end of the targeted range of 19.5% to 20%.
Net income attributable to shareholders of Fresenius SE & Co. KGaA – adjusted for a non-taxable investment gain of € 30 million at Fresenius Medical Care; 2011 adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds and the Contingent Value Rights. Previous year's sales were adjusted according to a U.S. GAAP accounting change. The sales adjustment of - € 39 million in Q1 2011 and of - € 161 million for the full year 2011 solely relate to Fresenius Medical Care North America.
Fresenius Helios raises its EBIT outlook for 2012. The company now projects EBIT to increase to the upper end of the targeted range of € 310 million to € 320 million. Fresenius Helios continues to expect organic sales growth of 3% to 5%.
Fresenius Vamed confi rms its 2012 outlook and expects to achieve sales and EBIT growth of 5% to 10%.
For 2012, Fresenius Biotech continues to expect an EBIT of - € 25 million to - € 30 million.
The Group plans to invest approximately 5% of sales in property, plant and equipment.
The number of employees in the Group will continue to rise. We expect that the number of employees will increase to more than 165,000 mainly due to the recently closed acquisitions by Fresenius Medical Care and Fresenius Helios.
Our R & D activities will continue to play a key role in securing the Group's long-term growth through innovations and new therapies.
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 the improvement of treatment concepts. We are concentrating our R & D activities on products and therapies for the treatment of patients with chronic kidney failure. Another focus is infusion and nutrition therapies and the development of generic IV drugs. In Biotechnology research, we will be focusing on the further clinical development of the antibody Removab.
| Previous guidance | New guidance | |
|---|---|---|
| Sales, growth (in constant currency) | 10% – 13% | upper end of range |
| Net income 1 , growth (in constant currency) |
8% – 11% | 12% – 15% |
Net income attributable to shareholders of Fresenius SE & Co. KGaA – adjusted for a non-taxable investment gain of € 30 million at Fresenius Medical Care; 2011 adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds and the Contingent Value Rights.
| Previous guidance | New guidance | ||
|---|---|---|---|
| Fresenius Medical Care | Sales | ~ US\$ 14.0 bn | confi rmed |
| Net income 1 | ~ US\$1.14 bn | confi rmed | |
| Fresenius Kabi | Sales, growth (organic) | 4% – 6% | 6% – 8% |
| EBIT-margin | 19.5% – 20% | upper end of range | |
| Fresenius Helios | Sales, growth (organic) | 3% – 5% | confi rmed |
| EBIT | € 310 m– € 320 m | upper end of range | |
| Fresenius Vamed | Sales, growth | 5% – 10% | confi rmed |
| EBIT, growth | 5% – 10% | confi rmed | |
| Fresenius Biotech | EBIT | - € 25 m to - € 30 m | confi rmed |
Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA – adjusted for a non-taxable investment gain of US\$ 127 million in the fi rst quarter 2012.
| € in millions | Q1 / 2012 | Q1 / 2011 |
|---|---|---|
| Sales | 4,419 | 3,923 |
| Cost of sales | - 2,980 | - 2,660 |
| Gross profi t | 1,439 | 1,263 |
| Selling, general and administrative expenses | - 707 | - 625 |
| Research and development expenses | - 71 | - 63 |
| Operating income (EBIT) | 661 | 575 |
| Investment gain | 97 | 0 |
| Net interest | - 147 | - 135 |
| Other fi nancial result | 0 | - 62 |
| Financial result | - 50 | - 197 |
| Income before income taxes | 611 | 378 |
| Income taxes | - 156 | - 115 |
| Net income | 455 | 263 |
| Less noncontrolling interest | 225 | 135 |
| Net income attributable to shareholders of Fresenius SE & Co. KGaA | 230 | 128 |
| Earnings per ordinary share in € | 1.41 | 0.79 |
| Fully diluted earnings per ordinary share in € | 1.39 | 0.78 |
| € in millions | Q1 / 2012 | Q1 / 2011 |
|---|---|---|
| Net income | 455 | 263 |
| Other comprehensive income (loss) | ||
| Foreign currency translation | - 144 | - 353 |
| Cash flow hedges | 12 | 34 |
| Actuarial gains on defined benefit pension plans | 8 | 6 |
| Income taxes related to components of other comprehensive income (loss) | - 16 | - 6 |
| Other comprehensive loss | - 140 | - 319 |
| Total comprehensive income (loss) | 315 | - 56 |
| Comprehensive income (loss) attributable to noncontrolling interest subject to put provisions |
1 | - 5 |
| Comprehensive income (loss) attributable to noncontrolling interest not subject to put provisions |
126 | - 44 |
| Comprehensive income (loss) attributable to shareholders of Fresenius SE & Co. KGaA | 188 | - 7 |
| € in millions | March 31, 2012 | Dec. 31, 2011 |
|---|---|---|
| Cash and cash equivalents | 855 | 635 |
| Trade accounts receivable, less allowance for doubtful accounts | 3,541 | 3,234 |
| Accounts receivable from and loans to related parties | 17 | 13 |
| Inventories | 1,797 | 1,717 |
| Other current assets | 1,115 | 1,184 |
| Deferred taxes | 357 | 368 |
| I. Total current assets | 7,682 | 7,151 |
| Property, plant and equipment | 4,543 | 4,210 |
| Goodwill | 14,275 | 12,669 |
| Other intangible assets | 988 | 981 |
| Other non-current assets | 930 | 1,185 |
| Deferred taxes | 124 | 125 |
| II. Total non-current assets | 20,860 | 19,170 |
| Total assets | 28,542 | 26,321 |
| Trade accounts payable | 805 | 807 |
| Short-term accounts payable to related parties | 14 | 21 |
| Short-term accrued expenses and other short-term liabilities | 3,042 | 2,898 |
| Short-term debt | 218 | 171 |
| Short-term loans from related parties | 3 | 3 |
| Current portion of long-term debt and capital lease obligations | 2,951 | 1,852 |
| Current portion of Senior Notes | 500 | 0 |
| Short-term accruals for income taxes | 262 | 184 |
| Deferred taxes | 50 | 52 |
| A. Total short-term liabilities | 7,845 | 5,988 |
| Long-term debt and capital lease obligations, less current portion | 2,471 | 3,777 |
| Senior Notes, less current portion | 5,316 | 3,996 |
| Long-term accrued expenses and other long-term liabilities | 434 | 409 |
| Pension liabilities | 487 | 484 |
| Long-term accruals for income taxes | 188 | 200 |
| Deferred taxes | 596 | 573 |
| B. Total long-term liabilities | 9,492 | 9,439 |
| I. Total liabilities | 17,337 | 15,427 |
| II. Noncontrolling interest subject to put provisions | 376 | 317 |
| A. Noncontrolling interest not subject to put provisions | 4,739 | 4,606 |
| Subscribed capital | 163 | 163 |
| Capital reserve | 2,117 | 2,115 |
| Other reserves | 3,817 | 3,658 |
| Accumulated other comprehensive income (loss) | - 7 | 35 |
| B. Total Fresenius SE & Co. KGaA shareholders' equity | 6,090 | 5,971 |
| III. Total shareholders' equity | 10,829 | 10,577 |
| Total liabilities and shareholders' equity | 28,542 | 26,321 |
| € in millions | Q1 / 2012 | Q1 / 2011 |
|---|---|---|
| Operating activities | ||
| Net income | 455 | 263 |
| Adjustments to reconcile net income to cash and cash equivalents provided by operating activities |
||
| Depreciation and amortization | 177 | 162 |
| Change in deferred taxes | 18 | 15 |
| Gain on sale of fixed assets | – | - 2 |
| Changes in assets and liabilities, net of amounts from businesses acquired or disposed of |
||
| Trade accounts receivable, net | -185 | - 180 |
| Inventories | -81 | - 118 |
| Other current and non-current assets | 55 | 28 |
| Accounts receivable from / payable to related parties | -11 | 7 |
| Trade accounts payable, accrued expenses and other short-term and long-term liabilities |
80 | 110 |
| Accruals for income taxes | 30 | - 7 |
| Net cash provided by operating activities | 538 | 278 |
| Investing activities | ||
| Purchase of property, plant and equipment | -154 | - 150 |
| Proceeds from sales of property, plant and equipment | 2 | 3 |
| Acquisitions and investments, net of cash acquired and net purchases of intangible assets |
-1,593 | - 253 |
| Proceeds from divestitures | 135 | 4 |
| Net cash used in investing activities | -1,610 | - 396 |
| Financing activities | ||
| Proceeds from short-term loans | 29 | 73 |
| Repayments of short-term loans | -38 | - 53 |
| 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 | 38 | 6 |
| Repayments of long-term debt and capital lease obligations | -96 | - 138 |
| Proceeds from the issuance of Senior Notes | 1,768 | 756 |
| Changes of accounts receivable securitization program | -254 | - 373 |
| Proceeds from the exercise of stock options | 8 | 4 |
| Dividends paid | -24 | - 15 |
| Change in noncontrolling interest | -126 | – |
| Exchange rate effect due to corporate financing | – | 1 |
| Net cash provided by fi nancing activities | 1,305 | 261 |
| Effect of exchange rate changes on cash and cash equivalents | -13 | - 18 |
| Net increase in cash and cash equivalents | 220 | 125 |
| Cash and cash equivalents at the beginning of the reporting period | 635 | 769 |
| Cash and cash equivalents at the end of the reporting period | 855 | 894 |
| Ordinary shares | Preference shares | Subscribed Capital | |||||
|---|---|---|---|---|---|---|---|
| Number of shares in thousand |
Amount € in thousands |
Number of shares in thousand |
Amount € in thousands |
Amount € in thousands |
Amount € in millions |
||
| As of December 31, 2010 | 81,225 | 81,225 | 81,225 | 81,225 | 162,450 | 162 | |
| Conversion of the preference shares into ordinary shares | 81,225 | 81,225 | - 81,225 | - 81,225 | 0 | 0 | |
| Proceeds from the exercise of stock options | |||||||
| Compensation expense related to stock options | |||||||
| Dividends paid | |||||||
| Sale of noncontrolling interest not subject to put provisions |
|||||||
| Change in fair value of noncontrolling interest subject to put provisions |
|||||||
| Comprehensive income (loss) | |||||||
| Net income | |||||||
| Other comprehensive income (loss) | |||||||
| Cash flow hedges | |||||||
| Foreign currency translation | |||||||
| Actuarial gains on defined benefit pension plans | |||||||
| Comprehensive income (loss) | |||||||
| As of March 31, 2011 | 162,450 | 162,450 | 0 | 0 | 162,450 | 162 | |
| As of December 31, 2011 | 163,237 | 163,237 | 0 | 0 | 163,237 | 163 | |
| Proceeds from the exercise of stock options | 98 | 98 | 0 | 0 | 98 | – | |
| Compensation expense related to stock options | |||||||
| Dividends paid | |||||||
| Purchase of noncontrolling interest not subject to put provisions |
|||||||
| Purchase of ordinary shares of Fresenius Medical Care AG & Co. KGaA |
|||||||
| Change in fair value of noncontrolling interest subject to put provisions |
|||||||
| Comprehensive income (loss) | |||||||
| Net income | |||||||
| Other comprehensive income (loss) | |||||||
| Cash flow hedges | |||||||
| Foreign currency translation | |||||||
| Actuarial gains on defined benefit pension plans | |||||||
| Comprehensive income (loss) | |||||||
| As of March 31, 2012 | 163,335 | 163,335 | 0 | 0 | 163,335 | 163 | |
| Reserves | ||||||
|---|---|---|---|---|---|---|
| Capital reserve € in millions |
Other reserves € in millions |
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, 2010 | 2.085 | 2,683 | 35 | 4,965 | 3,879 | 8,844 |
| Conversion of the preference shares into ordinary shares | 0 | 0 | 0 | |||
| Proceeds from the exercise of stock options | 2 | 2 | 2 | 4 | ||
| Compensation expense related to stock options | 5 | 5 | 3 | 8 | ||
| Dividends paid | 0 | - 9 | - 9 | |||
| Sale of noncontrolling interest not subject to put provisions |
0 | - 5 | - 5 | |||
| Change in fair value of noncontrolling interest subject to put provisions |
- 1 | - 1 | - 2 | - 3 | ||
| Comprehensive income (loss) | ||||||
| Net income | 128 | 128 | 128 | 256 | ||
| Other comprehensive income (loss) | ||||||
| Cash flow hedges | 23 | 23 | 0 | 23 | ||
| Foreign currency translation | - 162 | - 162 | - 172 | - 334 | ||
| Actuarial gains on defined benefit pension plans | 4 | 4 | 0 | 4 | ||
| Comprehensive income (loss) | 128 | - 135 | - 7 | - 44 | - 51 | |
| As of March 31, 2011 | 2,091 | 2,811 | - 100 | 4,964 | 3,824 | 8,788 |
| As of December 31, 2011 | 2,115 | 3,658 | 35 | 5,971 | 4,606 | 10,577 |
| Proceeds from the exercise of stock options | 4 | 4 | 4 | 8 | ||
| Compensation expense related to stock options | 5 | 5 | 3 | 8 | ||
| Dividends paid | 0 | - 15 | - 15 | |||
| Purchase of noncontrolling interest not subject to put provisions |
0 | 75 | 75 | |||
| Purchase of ordinary shares of Fresenius Medical Care AG & Co. KGaA |
- 71 | - 71 | - 43 | - 114 | ||
| Change in fair value of noncontrolling interest subject to put provisions |
- 7 | - 7 | - 17 | - 24 | ||
| Comprehensive income (loss) | ||||||
| Net income | 230 | 230 | 215 | 445 | ||
| Other comprehensive income (loss) | ||||||
| Cash flow hedges | - 4 | - 4 | 0 | - 4 | ||
| Foreign currency translation | - 43 | - 43 | - 89 | - 132 | ||
| Actuarial gains on defined benefit pension plans | 5 | 5 | 0 | 5 | ||
| Comprehensive income (loss) | 230 | - 42 | 188 | 126 | 314 | |
| As of March 31, 2012 | 2,117 | 3,817 | - 7 | 6,090 | 4,739 | 10,829 |
| Fresenius Medical Care | Fresenius Kabi | Fresenius Helios | Fresenius Vamed | Corporate / Other | Fresenius Group | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| by business segment, € in millions | 2012 | 2011 | Change | 2012 | 2011 | Change | 2012 | 2011 | Change | 2012 | 2011 | Change | 2012 3 | 2011 2 | Change | 2012 | 2011 | Change |
| Sales | 2,478 | 2,181 | 14% | 1,092 | 960 | 14% | 717 | 648 | 11% | 142 | 140 | 1% | - 10 | - 6 | - 67% | 4,419 | 3,923 | 13% |
| thereof contribution to consolidated sales |
2,474 | 2,180 | 13% | 1,080 | 949 | 14% | 717 | 648 | 11% | 142 | 140 | 1% | 6 | 6 | 0% | 4,419 | 3,923 | 13% |
| thereof intercompany sales | 4 | 1 | -- | 12 | 11 | 9% | 0 | 0 | – | – | -- | - 16 | - 12 | - 33% | 0 | 0 | ||
| contribution to consolidated sales | ||||||||||||||||||
| 56% | 56% | 25% | 24% | 16% | 16% | 3% | 4% | 0% | 0% | 100% | 100% | |||||||
| EBITDA | 493 | 425 | 16% | 254 | 234 | 9% | 92 | 79 | 16% | 7 | 7 | 0% | - 8 | - 8 | 0% | 838 | 737 | 14% |
| Depreciation and amortization | 109 | 100 | 9% | 39 | 37 | 5% | 24 | 21 | 14% | 2 | 2 | 0% | 3 | 2 | 50% | 177 | 162 | 9% |
| EBIT | 384 | 325 | 18% | 215 | 197 | 9% | 68 | 58 | 17% | 5 | 5 | 0% | - 11 | - 10 | - 10% | 661 | 575 | 15% |
| Net interest | - 75 | - 52 | - 44% | - 69 | - 68 | - 1% | - 14 | - 13 | - 8% | – | – | -- | 11 | - 2 | -- | - 147 | - 135 | - 9% |
| Income taxes | - 105 | - 91 | - 15% | - 40 | - 37 | - 8% | - 10 | - 8 | - 25% | - 1 | - 1 | 0% | – | 22 | - 100% | - 156 | - 115 | - 36% |
| shareholders of Fresenius SE & Co. KGaA 4 Net income attributable to |
186 | 161 | 16% | 98 | 87 | 13% | 41 | 33 | 24% | 4 | 4 | 0% | - 99 | - 157 | 37% | 230 | 128 | 80% |
| Operating cash fl ow | 367 | 128 | 187% | 93 | 67 | 39% | 34 | 68 | - 50% | 45 | 26 | 73% | - 1 | - 11 | 91% | 538 | 278 | 94% |
| Cash fl ow before acquisitions and dividends |
274 | 45 | -- | 57 | 22 | 159% | 15 | 51 | - 71% | 44 | 25 | 76% | - 4 | - 12 | 67% | 386 | 131 | 195% |
| Total assets 1 | 16,463 | 15,096 | 9% | 7,531 | 7,282 | 3% | 4,205 | 3,495 | 20% | 668 | 594 | 12% | - 325 | - 146 | - 123% | 28,542 | 26,321 | 8% |
| Debt 1 | 6,595 | 5,573 | 18% | 4,533 | 4,395 | 3% | 1,661 | 1,104 | 50% | 55 | 44 | 25% | - 1,385 | - 1,317 | - 5% | 11,459 | 9,799 | 17% |
| Capital expenditure, gross | 95 | 86 | 10% | 33 | 31 | 6% | 20 | 17 | 18% | 1 | 1 | 0% | 2 | 1 | 100% | 151 | 136 | 11% |
| Acquisitions, gross / investments | 1,266 | 253 | -- | 4 | 1 | -- | 543 | 4 | -- | 0 | 0 | 114 | 53 | 115% | 1,927 | 311 | -- | |
| Research and development expenses | 22 | 19 | 16% | 45 | 38 | 18% | – | – | -- | – | 0 | 4 | 6 | - 33% | 71 | 63 | 13% | |
| (per capita on balance sheet date) 1 Employees |
87,582 | 83,476 | 5% | 24,632 | 24,106 | 2% | 43,430 | 37,198 | 17% | 3,760 | 3,724 | 1% | 845 | 847 | 0% | 160,249 | 149,351 | 7% |
| Key fi gures | ||||||||||||||||||
| EBITDA margin | 19.9% | 19.5% | 23.3% | 24.4% | 12.8% | 12.2% | 4.9% | 5.0% | 19.0% | 18.8% | ||||||||
| EBIT margin | 15.5% | 14.9% | 19.7% | 20.5% | 9.5% | 9.0% | 3.5% | 3.6% | 15.0% | 14.7% | ||||||||
| Depreciation and amortization in % of sales |
4.4% | 4.6% | 3.6% | 3.9% | 3.3% | 3.2% | 1.4% | 1.4% | 4.0% | 4.1% | ||||||||
| Operating cash flow in % of sales | 14.8% | 5.9% | 8.5% | 7.0% | 4.7% | 10.5% | 31.7% | 18.6% | 12.2% | 7.1% | ||||||||
| ROOA 1 | 11.4% | 12.0% | 12.7% | 12.4% | 8.0% | 8.4% | 13.9% | 16.0% | 10.9% | 10.9% | ||||||||
| 1 2011: December 31 |
FRESENIUS SE & CO. KGAA CONSOLIDATED SEGMENT REPORTING FIRST QUARTER (UNAUDITED)
2 Including special items from the acquisition of APP Pharmaceuticals, Inc. 3 Including special item from the acquisition of Liberty Dialysis Holdings, Inc.
4 Fresenius Medical Care: excluding special item from the acquisition of Liberty Dialysis Holdings, Inc.
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 worldwide operating health care group with products and services for dialysis, the hospital and the medical care of patients at home. Further areas of activity are hospi tal operations as well as engineering and services for hospitals and other health care facilities. In addition to the activities of the parent company Fresenius SE & Co. KGaA, Bad Homburg v. d. Höhe, the operating activities were split into the following legally-independent business segments (subgroups) as of March 31, 2012:
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, 2011.
The condensed consolidated fi nancial statements and management report for the fi rst quarter ended March 31, 2012 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, 2011, published in the 2011 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, 2012 include all adjustments that, in the opinion of the Management Board, are of a normal and recurring nature, 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, 2012 are not necessarily indicative of the results of operations for the fi scal year 2012.
Certain items in the consolidated fi nancial statements for the fi rst quarter of 2011 and for the year 2011 have been reclassifi ed to conform with the current year's presentation.
In the business segment Fresenius Medical Care, bad debt expense in the amount of US\$ 53 million (€ 39 million) was reclassifi ed from selling, general and administrative expenses to sales as a result of adoption of Accounting Standards Update 2011-07. Furthermore, in the business segment Fresenius Medical Care, freight expense in the amount of US\$ 35 million (€ 25 million) was reclassifi ed from selling, general and administrative expenses to cost of sales to harmonize the presentation for all business segments.
The preparation of consolidated fi nancial statements in conformity with U.S. GAAP requires the 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, 2012 in conformity with U.S. GAAP in force for interim periods on January 1, 2012.
The Fresenius Group applied the following standards, as far as they are relevant for Fresenius Group's business, for the fi rst time in the fi rst quarter ended March 31, 2012:
In July 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2011-07 (ASU 2011-07), FASB Accounting Stand ards Codifi cation (ASC) Topic 954, Health Care Entities – Presentation and Disclosure of Patient Serv ice Revenue, Provision for Bad Debts and the Allowance for Doubt ful Accounts for Certain Health Care Entities, in order to provide fi nancial statement users with greater transparency about a health care entity's net patient service revenue and the related allowance for doubtful accounts. The amendments require health care entities that recognize signifi cant amounts of patient service revenue at the time the services are rendered even though they do not assess the patient's ability to pay to present the provision for bad debts related to patient service revenue as a deduction from patient service revenue (net of contractual allowances and discounts) on their statement of operations. The provision for bad debts must be reclassifi ed from an operating expense to a deduction from patient service revenue. Additionally, these health care entities are required to provide enhanced disclosures about their policies for recognizing revenue and assessing bad debts. The amendments also require disclosures of patient service revenue (net of contractual allowances and discounts) as well as qualitative and quantitative information about changes in the allowance for doubtful accounts. For public entities, the disclosures required under ASU 2011-07 are effective for fi scal years and interim periods within those fi scal years beginning after December 15, 2011, with early adoption permitted. The amendments to the presentation of the provision for bad debts related to patient service revenue in the statement of operations should be applied retrospectively to all prior periods
presented. The Fresenius Group adopted the provisions of ASU 2011-07 as of January 1, 2012 and has restated the fi nancial results of 2011 accordingly.
In June 2011, the FASB issued Accounting Standards Update 2011-05 (ASU 2011-05), FASB ASC Topic 220, Comprehensive Income – Presentation of Comprehensive Income. In December 2011, the FASB issued Accounting Standards Update 2011-12 (ASU 2011-12), FASB ASC Topic 220, Comprehensive Income – Deferral of the Effective Date for Amendments to the Presentation of Reclassifi cations of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU 2011-12 defers certain income statement and other comprehensive income statement presentation requirements noted in ASU 2011-05. ASU 2011-05 still requires that all components of comprehensive income be presented either in a single continuous statement of comprehensive income or in two separate but continuous statements. In the two statement approach, the fi rst statement should present total net income and its components followed consecutively by a second statement presenting total other comprehensive income, the components of other comprehensive income and total of comprehensive income. Additionally, the requirement for adjustments to the components and their related tax effects to be presented on the face of the statement in which the components of other comprehensive income are presented or in the notes to the fi nancial statements remains for year-end disclosure. The disclosures required are effective retrospectively for fi scal years and interim periods within those years, beginning after December 15, 2011, with earlier adoption permitted. As the Fresenius Group currently pre sents two separate but continuous statements of net income and comprehensive income, the Fresenius Group is in compliance with presentation of FASB ASC Topic 220, Comprehensive Income – Presentation of Comprehensive Income.
In May 2011, the FASB issued Accounting Standards Update 2011-04 (ASU 2011-04), FASB ASC Topic 820, Fair Value Measurement – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in ASU 2011-04
result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. These amendments include clarifi cations of the application of highest and best use and valuation premise concepts, the measurement of the fair value of an instrument classifi ed in a reporting entity's shareholders' equity, and disclosures about fair value measurements. ASU 2011-04 also changes the measurement or disclosure requirements related to measuring the fair value of fi nancial instruments that are managed within a portfolio, the application of premiums and discounts in a fair value measurement, and additional disclosure about fair value measurements. The disclosures required under ASU 2011-04 are effective for interim and annual reporting periods beginning on or after December 15, 2011. Earlier adoption by public entities is not permitted. The Fresenius Group applies the guidance under ASU 2011-04 since January 1, 2012, which did not have a material impact on the results of the Fresenius Group.
The FASB issued the following relevant new standards for the Fresenius Group:
In December 2011, the FASB issued Accounting Standards Update 2011-11 (ASU 2011-11), FASB ASC Topic 210, Balance Sheet – Disclosures about Offsetting Assets and Liabilities. This amendment requires disclosing and reconciling gross and net amounts for fi nancial instruments that are offset in the statement of fi nancial position, and amounts for fi nancial instruments that are subject to master netting arrangements and other similar clearing and repurchase arrangements. ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Fresenius Group is currently evaluating the impact on its consolidated fi nancial statements.
In July 2011, the FASB issued Accounting Standards Update 2011-06 (ASU 2011-06), FASB ASC Topic 720, Other Expenses – Fees Paid to the Federal Government by Health Insurers. The amendments in ASU 2011-06 address how health insurers should recognize and classify their income statement fees mandated by the Health Care and Educational Affordability Reconciliation Act. The amendments require that the liability for the fee be estimated and recorded in full once the entity provides qualifying health insurance in the
applicable calendar year in which the fee is payable with a corresponding deferred cost that is amortized to expense using a straight-line allocation method unless another method better allocates the fee over the entire calendar year for which it is payable. In addition, the amendments state that this fee does not meet the defi nition of an acquisition cost. The disclosures required under ASU 2011-06 are effective for calendar years beginning after December 31, 2013, when the fee initially becomes effective. The Fresenius Group will apply the guidance under ASU 2011-06 beginning January 1, 2014.
The Fresenius Group generally does not adopt new accounting standards before compulsory adoption date.
The Fresenius Group made acquisitions and investments of € 1,927 million and € 311 million in the fi rst quarter of 2012 and 2011, respectively. Of this amount, € 1,723 million was paid in cash and € 204 million was assumed obligations in the fi rst quarter of 2012.
On February 28, 2012, Fresenius Medical Care acquired 100% of the equity of Liberty Dialysis Holdings, Inc. (LD Holdings), the owner of Liberty Dialysis and owner of a 51% stake in Renal Advantage Partners, LLC (the Liberty Acquisition) and accounted for this transaction as a business combination, subject to fi nalization of the acquisition accounting which will be fi nalized when certain information arranged to be obtained has been received. LD Holdings mainly provides dialysis services in the United States through the 263 clinics it owns (the Acquired Clinics).
Total consideration for the Liberty Acquisition was US\$ 2,161 million, consisting of US\$ 1,693 million cash, net of cash acquired and US\$ 468 million non-cash consideration. Accounting standards for business combinations require previously held equity interests to be fair valued with the difference to book value to be recognized as a gain or loss in income. Prior to the Liberty Acquisition, Fresenius Medical Care
had a 49% equity investment in Renal Advantage Partners, LLC, the fair value of which, US\$ 189 million, is included as non-cash consideration. The estimated fair value has been determined based on the discounted cash fl ow method, utilizing an approximately 13% discount rate. In addition to Fresenius Medical Care's investment, it also had a loan receivable of US\$ 279 million from Renal Advantage Partners, LLC which was retired as part of the transaction. This retirement is also considered non-cash consideration bringing the total non-cash consideration in the Liberty Acquisition to US\$ 468 million.
The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the date of the acquisition. This preliminary acquisition accounting is based upon the best information available to management. Any adjustments to the acquisition accounting, net of related income tax effects, will be recorded with a corresponding adjustment to goodwill.
| Assets held for sale | 153 |
|---|---|
| Trade accounts receivable | 155 |
| Other current assets | 35 |
| Property, plant and equipment | 181 |
| Intangible assets and other assets | 90 |
| Goodwill | 2,032 |
| Accounts payable, accrued expenses and other short-term liabilities |
- 143 |
| Income tax payable and deferred taxes | - 65 |
| Short-term borrowings and other fi nancial liabilities and long-term debt and capital lease obligations |
- 58 |
| Other liabilities | - 35 |
| Noncontrolling interests (subject and not subject to put provisions) |
- 184 |
| Total acquistion cost | 2,161 |
| Less, at fair value, non-cash contributions | |
| Investment at acquisition date | - 189 |
| Long-term Notes Receivable | - 279 |
| Total non-cash items | - 468 |
| Net Cash paid | 1,693 |
It is currently estimated that amortizable intangible assets acquired in this acquisition will have weighted-average useful lives of 6 – 8 years.
Goodwill, in the amount of US\$ 2,032 million was acquired as part of the Liberty Acquisition. Goodwill is an asset representing the future economic benefi ts arising from other assets acquired in a business combination that are not individually identifi ed and separately recognized. Goodwill arises principally due to the fair value placed on acquiring an established stream of future cash fl ows versus building a similar franchise. Of the goodwill recognized in this acquisition, approximately US\$ 436 million is expected to be deductible for tax purposes and amortized over a 15 year period.
The noncontrolling interests acquired as part of the acquisition are stated at estimated fair value, subject to fi nalization of the acquisition accounting, based upon utilized implied multiples used in conjunction with the Liberty Acquisition, as well as Fresenius Medical Care's overall experience and contractual multiples typical for such arrangements.
Liberty's incremental operating results, including acquisition related costs of US\$ 16 million and a benefi t from the retirement of the loan receivable discussed below, are included in Fresenius Groups's consolidated fi nancial statements effective February 29, 2012 and consist of the following:
| € in millions | |
|---|---|
| Net revenues | 63 |
| Operating income | 3 |
| Net income attributable to shareholders of Fresenius SE & Co. KGaA |
- 1 |
The fair valuation of the Fresenius Medical Care's investment at the time of the Liberty Acquisition resulted in a non-taxable gain of approximately US\$ 127 million and is presented in the separate line item investment gain in the consolidated statement of income. The retirement of the loan receivable resulted in a benefi t of US\$5.5 million which was recognized in net interest.
In accordance with a consent order issued by the United States Federal Trade Commission in connection with its clearance of the Liberty Acquisition, Fresenius Medical Care was required to divest 62 clinics. In March 2012, 49 clinics were sold of which 15 were legacy clinics. The remaining 13 clinics are expected to be sold during 2012 and 2013 once the necessary approvals for change of ownership by state regulatory authorities have been obtained.
Fresenius Medical Care received cash consideration of US\$ 176 million for all centers divested. The sale of the legacy clinics resulted in a pre-tax gain of approximately US\$ 9.3 million which is recorded in the line item selling, general and administrative expenses in the consolidated statement of income. Fresenius Medical Care incurred an income tax expense related to the sale of the legacy clinics of approximately US\$ 6.6 million which is appropriately included in the line item income taxes in the consolidated statement of income, resulting in a net gain of US\$ 2.7 million. The sale of 34 Acquired Clinics did not have any profi t or loss impact for the Fresenius Group.
In the fi rst quarter of 2012, Fresenius Helios spent € 543 million on acquisitions, mainly for the acquisition of 94.7% of the share capital in the Damp Holding AG (Damp), Germany, completed in March 2012. The transaction could be closed after approval by local and antitrust authorities.
The Fresenius Group has consolidated Damp as of March 31, 2012. Therefore, Damp did not yet have an infl uence on the net income attributable to shareholders of Fresenius SE & Co. KGaA of the fi rst quarter of 2012.
The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the date of the acquisition. This preliminary allocation of the purchase price is based upon the best information available to management at present. Due to the relatively short interval between the closing date of the acquisition and the date of the consolidated statement of fi nancial position, this information may be incomplete. Any adjustments to the preliminary allocation, net of related income tax effects, will be recorded with a corresponding adjustment to goodwill.
The preliminary purchase price allocation is as follows:
| Working capital and other assets | |
|---|---|
| 86 | |
| Assets | 274 |
| Other liabilities | - 171 |
| Goodwill | 338 |
| Total | 527 |
The acquisition increased the total assets of the Fresenius Group by € 0.7 billion. The capitalized goodwill in an amount of € 0.3 billion is not deductible for tax purposes.
In November and December 2011, Fresenius SE & Co. KGaA purchased 1,399,996 ordinary shares of Fresenius Medical Care AG & Co. KGaA. In January and February 2012, Fresenius SE & Co. KGaA purchased further 2,100,004 ordinary shares of Fresenius Medical Care AG & Co. KGaA. Therefore, the voting rights in Fresenius Medical Care AG & Co. KGaA increased to 31.4% at March 31, 2012. A total of 3.5 million shares were acquired with a total transaction volume of approximately € 184 million.
Net income attributable to shareholders of Fresenius SE & Co. KGaA for the fi rst quarter of 2012 in the amount of € 230 million includes a special item relating to the acquisition of Liberty Dialysis by Fresenius Medical Care. This special item in an amount of € 30 million (before noncontrolling interest: € 97 million) is described in note 4, Investment gain. Net income attributable to shareholders of Fresenius SE & Co. KGaA before the special item was € 200 million.
Sales by activity were as follows:
| Sales | 4,419 | 3,923 |
|---|---|---|
| Other sales | 2 | – |
| Sales from long-term production contracts |
77 | 86 |
| Sales of products and related goods | 1,656 | 1,486 |
| less patient service bad debt provision | - 51 | - 39 |
| Sales of services | 2,735 | 2,390 |
| € in millions | Q1 / 2012 | Q1 / 2011 |
Fresenius Medical Care's acquisition of the remaining 51% stake in Renal Advantage Partners, LLC, in addition to its 49% equity investment held previously, represents a business combination achieved in stages in which the previous equity investment was measured at its fair value at the date of the acquisition of Liberty Dialysis Holdings, Inc. The resultant non-taxable income of US\$ 127 million (€ 97 million) is presented in the separate line item investment gain in the consolidated statement of income.
Until 2011, the item other fi nancial result included the following special expenses and income with regard to the acquisition of APP Pharmaceuticals, Inc. (APP) and its fi nancing:
The Contingent Value Rights (CVR) awarded to the APP shareholders were traded on the NASDAQ Stock Exchange in the United States. Following a request to the U.S. Securities and Exchange Commission, in the fi rst quarter of 2011, the CVR were deregistered and delisted from the NASDAQ due to the expiration of the underlying agreement and became valueless. As a result, an income of € 5 million was recognized in the fi rst quarter of 2011.
The issued Mandatory Exchangeable Bonds matured on August 14, 2011. Due to their contractual defi nition, they included derivative fi nancial instruments that were measured at fair value. This measurement resulted in an expense (before tax) of € 67 million in the fi rst quarter of 2011.
For the tax year 1997, Fresenius Medical Care recognized an impairment of one of its subsidiaries which the German tax authorities disallowed in 2003 at the conclusion of its audit for the years 1996 and 1997. Fresenius Medical Care fi led a complaint with the appropriate German court to challenge the tax authority's decision. In January 2011, Fresenius Medical Care reached an agreement with the tax authorities. The additional benefi t related to the agreement has been recognized in the consolidated fi nancial statements in 2011.
The Internal Revenue Service (IRS) tax audits of Fresenius Medical Care Holdings, Inc. for the years 2002 through 2008 have been completed. On January 23, 2012, Fresenius Medical Care executed a closing agreement with the IRS with respect to the 2007 – 2008 tax audit. The agreement refl ected a full allowance of interest deductions on intercompany mandatorily
redeemable preferred shares for the 2007 – 2008 tax years. In addition, on February 16, 2012, Fresenius Medical Care executed a closing agreement with IRS Appeals that refl ects the full allowance of interest deductions associated with mandatorily redeemable shares for the years 2002 – 2006.
Furthermore, during the fi rst quarter of 2012, there were no 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 2011 Annual Report.
The following table shows the earnings per share including and excluding the dilutive effect from stock options issued:
| Q1 / 2012 | Q1 / 2011 | |
|---|---|---|
| Numerators, € in millions | ||
| Net income attributable to share holders of Fresenius SE & Co. KGaA |
230 | 128 |
| less effect from dilution due to Fresenius Medical Care shares |
1 | – |
| Income available to all classes of shares |
229 | 128 |
| Denominators in number of shares | ||
| Weighted-average number of ordinary shares outstanding |
163,302,717 | 162,450,090 |
| Potentially dilutive ordinary shares |
1,863,109 | 1,583,405 |
| Weighted-average number of ordinary shares outstanding assuming dilution |
165,165,826 | 164,033,495 |
| Basic earnings per ordinary share in € |
1.41 | 0.79 |
| Fully diluted earnings per ordinary share in € |
1.39 | 0.78 |
As of March 31, 2012 and December 31, 2011, cash and cash equivalents were as follows:
| € in millions | March 31, 2012 | Dec. 31, 2011 |
|---|---|---|
| Cash | 833 | 627 |
| Time deposits and securities (with a maturity of up to 90 days) |
22 | 8 |
| Total cash and cash equivalents | 855 | 635 |
As of March 31, 2012 and December 31, 2011, earmarked funds of € 127 million and € 40 million, respectively, were included in cash and cash equivalents.
As of March 31, 2012 and December 31, 2011, trade accounts receivable were as follows:
| € in millions | March 31, 2012 | Dec. 31, 2011 |
|---|---|---|
| Trade accounts receivable | 3,930 | 3,617 |
| less allowance for doubtful accounts | 389 | 383 |
| Trade accounts receivable, net | 3,541 | 3,234 |
As of March 31, 2012 and December 31, 2011, inventories consisted of the following:
| € in millions | March 31, 2012 | Dec. 31, 2011 |
|---|---|---|
| Raw materials and purchased components |
426 | 385 |
| Work in process | 354 | 326 |
| Finished goods | 1,081 | 1,076 |
| less reserves | 64 | 70 |
| Inventories, net | 1,797 | 1,717 |
Investments and long-term loans comprised investments of € 480 million at March 31, 2012 (December 31, 2011: € 537 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 2012, income of € 4 million (Q1 2011: € 6 million) resulting from this valuation was included in selling, general and administrative expenses in the consolidated statement of income. Furthermore, investments and long-term loans included € 181 million as of December 31, 2011 that Fresenius Medical Care loaned to Renal Advantage Partners, LLC.
As of March 31, 2012 and December 31, 2011, intangible assets, split into amortizable and non-amortizable intangible assets, consisted of the following:
| March 31, 2012 | Dec. 31, 2011 | |||||
|---|---|---|---|---|---|---|
| € in millions | Acquisition cost |
Accumulated amortization |
Carrying amount |
Acquisition cost |
Accumulated amortization |
Carrying amount |
| Patents, product and distribution rights | 567 | 188 | 379 | 582 | 182 | 400 |
| Technology | 83 | 25 | 58 | 86 | 25 | 61 |
| Non-compete agreements | 231 | 145 | 86 | 201 | 144 | 57 |
| Other | 609 | 323 | 286 | 596 | 317 | 279 |
| Total | 1,490 | 681 | 809 | 1,465 | 668 | 797 |
| March 31, 2012 | Dec. 31, 2011 | |||||
|---|---|---|---|---|---|---|
| € in millions | Acquisition cost |
Accumulated amortization |
Carrying amount |
Acquisition cost |
Accumulated amortization |
Carrying amount |
| Tradenames | 173 | 0 | 173 | 178 | 0 | 178 |
| Management contracts | 6 | 0 | 6 | 6 | 0 | 6 |
| Goodwill | 14,275 | 0 | 14,275 | 12,669 | 0 | 12,669 |
| Total | 14,454 | 0 | 14,454 | 12,853 | 0 | 12,853 |
Estimated regular amortization expenses of intangible assets for the next fi ve years are shown in the following table:
| € in millions | Q2 – 4 / 2012 | 2013 | 2014 | 2015 | 2016 | Q1 / 2017 |
|---|---|---|---|---|---|---|
| Estimated amortization expenses | 79 | 100 | 92 | 84 | 79 | 19 |
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, 2011 | 6,092 | 3,691 | 1,627 | 48 | 6 | 11,464 |
| Additions | 822 | 14 | 95 | 0 | 0 | 931 |
| Foreign currency translation | 186 | 88 | 0 | 0 | 0 | 274 |
| Carrying amount as of December 31, 2011 | 7,100 | 3,793 | 1,722 | 48 | 6 | 12,669 |
| Additions | 1,556 | 1 | 338 | 0 | 0 | 1,895 |
| Foreign currency translation | - 201 | - 88 | 0 | 0 | 0 | - 289 |
| Carrying amount as of March 31, 2012 | 8,455 | 3,706 | 2,060 | 48 | 6 | 14,275 |
As of March 31, 2012 and December 31, 2011, the carrying amounts of the other non-amortizable intangible assets were € 163 million and € 168 million, respectively, for Fresenius Medical Care as well as € 16 million, respectively, for Fresenius Kabi.
The Fresenius Group had short-term debt of € 218 million and € 171 million at March 31, 2012 and December 31, 2011, respectively. As of March 31, 2012, this debt consisted of borrowings by certain subsidiaries of the Fresenius Group under lines of credit with commercial banks.
As of March 31, 2012 and December 31, 2011, long-term debt and capital lease obligations consisted of the following:
| € in millions | March 31, 2012 | Dec. 31, 2011 |
|---|---|---|
| Fresenius Medical Care 2006 Senior Credit Agreement | 2,076 | 2,161 |
| 2008 Senior Credit Agreement | 1,290 | 1,326 |
| Euro Notes | 800 | 800 |
| European Investment Bank Agreements | 523 | 527 |
| Accounts receivable facility of Fresenius Medical Care | 151 | 413 |
| Capital lease obligations | 50 | 53 |
| Other | 532 | 349 |
| Subtotal | 5,422 | 5,629 |
| less current portion | 2,951 | 1,852 |
| Long-term debt and capital lease obligations, less current portion | 2,471 | 3,777 |
Fresenius Medical Care AG & Co. KGaA (FMC-AG & Co. KGaA) and several of its subsidiaries entered into a US\$ 4.6 billion syndicated credit facility ( Fresenius Medical Care 2006 Senior Credit Agreement) with several banks and institutional investors (the Lenders) on March 31, 2006, which replaced a prior credit agreement.
Since entering into the 2006 Senior Credit Agreement, Fresenius Medical Care arranged several amendments with the Lenders and effected voluntary prepayments of the Term Loans, which led to a change in the total amount available under this facility.
The following tables show the available and outstanding amounts under the Fresenius Medical Care 2006 Senior Credit Agreement at March 31, 2012 and December 31, 2011:
| March 31, 2012 | ||||
|---|---|---|---|---|
| Maximum amount available | Balance outstanding | |||
| US\$ in millions | € in millions | US\$ in millions | € in millions | |
| Revolving Credit | 1,200 | 899 | 70 | 53 |
| Term Loan A | 1,185 | 887 | 1,185 | 887 |
| Term Loan B | 1,518 | 1,136 | 1,518 | 1,136 |
| Total | 3,903 | 2,922 | 2,773 | 2,076 |
| Dec. 31, 2011 | ||||
|---|---|---|---|---|
| Maximum amount available | Balance outstanding | |||
| US\$ in millions | € in millions | US\$ in millions | € in millions | |
| Revolving Credit | 1,200 | 927 | 59 | 46 |
| Term Loan A | 1,215 | 939 | 1,215 | 939 |
| Term Loan B | 1,522 | 1,176 | 1,522 | 1,176 |
| Total | 3,937 | 3,042 | 2,796 | 2,161 |
In addition, at March 31, 2012 and December 31, 2011, Fresenius Medical Care had letters of credit outstanding in the amount of US\$ 161 million and US\$ 181 million, respectively, 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, 2012, FMC-AG & Co. KGaA and its subsidiaries were in compliance with all covenants under the Fresenius Medical Care 2006 Senior Credit Agreement.
On August 20, 2008, in connection with the acquisition of APP Pharmaceuticals, Inc., the Fresenius Group entered into a syndicated credit agreement (2008 Senior Credit Agreement) in an original amount of US\$ 2.45 billion.
Since entering into the 2008 Senior Credit Agreement, amendments and voluntary prepayments have been made which have resulted in a change of the total amount available under this facility.
The following tables show the available and outstanding amounts under the 2008 Senior Credit Agreement at March 31, 2012 and December 31, 2011:
| March 31, 2012 | ||||
|---|---|---|---|---|
| Maximum amount available | Balance outstanding | |||
| € in millions | € in millions | |||
| Revolving Credit Facilities | US\$ 550 million | 412 | US\$ 0 million | 0 |
| Term Loan A | US\$ 537 million | 402 | US\$ 537 million | 402 |
| Term Loan D (in US\$) | US\$ 971 million | 728 | US\$ 971 million | 728 |
| Term Loan D (in €) | € 160 million | 160 | € 160 million | 160 |
| Total | 1,702 | 1,290 |
| December 31, 2011 | ||||||
|---|---|---|---|---|---|---|
| Maximum amount available | Balance outstanding | |||||
| € in millions | € in millions | |||||
| Revolving Credit Facilities | US\$ 550 million | 425 | US\$ 0 million | 0 | ||
| Term Loan A | US\$ 537 million | 415 | US\$ 537 million | 415 | ||
| Term Loan D (in US\$) | US\$ 971 million | 751 | US\$ 971 million | 751 | ||
| Term Loan D (in €) | € 160 million | 160 | € 160 million | 160 | ||
| Total | 1,751 | 1,326 |
As of March 31, 2012, the Fresenius Group was in compliance with all covenants under the 2008 Senior Credit Agreement.
As of March 31, 2012 and December 31, 2011, Euro Notes (Schuldscheindarlehen) of the Fresenius Group consisted of the following:
| Book value / nominal value € in millions |
||||
|---|---|---|---|---|
| Maturity | Interest rate | March 31, 2012 | Dec. 31, 2011 | |
| Fresenius Finance B.V. 2008 / 2012 | April 2, 2012 | 5.59% | 62 | 62 |
| Fresenius Finance B.V. 2008 / 2012 | April 2, 2012 | variable | 138 | 138 |
| Fresenius Finance B.V. 2007 / 2012 | July 2, 2012 | 5.51% | 26 | 26 |
| Fresenius Finance B.V. 2007 / 2012 | July 2, 2012 | variable | 74 | 74 |
| Fresenius Finance B.V. 2008 / 2014 | April 2, 2014 | 5.98% | 112 | 112 |
| Fresenius Finance B.V. 2008 / 2014 | April 2, 2014 | variable | 88 | 88 |
| Fresenius Finance B.V. 2007 / 2014 | July 2, 2014 | 5.75% | 38 | 38 |
| Fresenius Finance B.V. 2007 / 2014 | July 2, 2014 | variable | 62 | 62 |
| Fresenius Medical Care AG & Co. KGaA 2009 / 2012 | Oct. 27, 2012 | 7.41% | 36 | 36 |
| Fresenius Medical Care AG & Co. KGaA 2009 / 2012 | Oct. 27, 2012 | variable | 119 | 119 |
| Fresenius Medical Care AG & Co. KGaA 2009 / 2014 | Oct. 27, 2014 | 8.38% | 15 | 15 |
| Fresenius Medical Care AG & Co. KGaA 2009 / 2014 | Oct. 27, 2014 | variable | 30 | 30 |
| Euro Notes | 800 | 800 |
On April 2, 2012, Fresenius SE & Co. KGaA issued Euro Notes in an amount of € 400 million. Proceeds were used to refi nance the tranches of the Euro Notes of Fresenius Finance B.V. which were due in April 2012 and for general corporate purposes. The new Euro Notes are guaranteed by Fresenius Kabi AG and Fresenius ProServe GmbH.
The Euro Notes issued by Fresenius Finance B.V. in the amounts of € 200 million, which were due on April 2, 2012 and € 100 million, which are due on July 2, 2012, respectively, are shown as current portion of long-term debt and capital lease obligations in the consolidated statement of fi nancial position. The Euro Notes issued by FMC-AG & Co. KGaA of € 155 million, which are due on October 27, 2012, are also shown as current portion of long-term debt and capital lease obligations in the consolidated statement of fi nancial position.
As of March 31, 2012, the Fresenius Group was in compliance with all of its covenants under the Euro Notes.
The following table shows the amounts outstanding under the European Investment Bank (EIB) facilities as of March 31, 2012 and December 31, 2011:
| Maximum amount available € in millions |
Book value € in millions |
||||
|---|---|---|---|---|---|
| Maturity | March 31, 2012 | Dec. 31, 2011 | March 31, 2012 | Dec. 31, 2011 | |
| Fresenius SE & Co. KGaA | 2013 | 196 | 196 | 196 | 196 |
| Fresenius Medical Care AG & Co. KGaA | 2013 / 2014 | 271 1 | 271 1 | 263 1 | 267 1 |
| HELIOS Kliniken GmbH | 2019 | 64 | 64 | 64 | 64 |
| Loans from EIB | 531 | 531 | 523 | 527 |
Difference due to foreign currency translation
The majority of the loans are denominated in euros. The U.S. dollar denominated borrowings of FMC-AG & Co. KGaA amounted to US\$ 165 million (€ 123 million) on March 31, 2012.
As of March 31, 2012, the Fresenius Group was in compliance with the respective covenants.
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, 2012, the additional fi nancial cushion resulting from unutilized credit facilities was approximately € 2 billion.
As of March 31, 2012 and December 31, 2011, Senior Notes of the Fresenius Group consisted of the following:
| Book value € in millions |
|||||
|---|---|---|---|---|---|
| Notional amount | Maturity | Interest rate | March 31, 2012 | Dec. 31, 2011 | |
| Fresenius Finance B.V. 2006 / 2013 | € 500 million | Jan. 31, 2013 | 5.00% | 500 | 500 |
| Fresenius Finance B.V. 2006 / 2016 | € 650 million | Jan. 31, 2016 | 5.50% | 637 | 637 |
| Fresenius Finance B.V. 2012 / 2019 | € 500 million | Apr. 15, 2019 | 4.25% | 500 | 0 |
| Fresenius US Finance II, Inc. 2009 / 2015 | € 275 million | July 15, 2015 | 8.75% | 265 | 264 |
| Fresenius US Finance II, Inc. 2009 / 2015 | US\$ 500 million | July 15, 2015 | 9.00% | 361 | 372 |
| FMC Finance VI S.A. 2010 / 2016 | € 250 million | July 15, 2016 | 5.50% | 248 | 248 |
| FMC Finance VII S.A. 2011 / 2021 | € 300 million | Feb. 15, 2021 | 5.25% | 294 | 294 |
| 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% | 395 | 395 |
| FMC Finance VIII S.A. 2012 / 2019 | € 250 million | July 31, 2019 | 5.25% | 243 | 0 |
| Fresenius Medical Care US Finance, Inc. 2007 / 2017 | US\$ 500 million | July 15, 2017 | 6.875% | 371 | 383 |
| Fresenius Medical Care US Finance, Inc. 2011 / 2021 | US\$ 650 million | Feb. 15, 2021 | 5.75% | 483 | 498 |
| Fresenius Medical Care US Finance II, Inc. 2011 / 2018 | US\$ 400 million | Sept. 15, 2018 | 6.50% | 296 | 305 |
| Fresenius Medical Care US Finance II, Inc. 2012 / 2019 | US\$ 800 million | July 31, 2019 | 5.625% | 599 | 0 |
| Fresenius Medical Care US Finance II, Inc. 2012 / 2022 | US\$ 700 million | Jan. 31, 2022 | 5.875% | 524 | 0 |
| Senior Notes | 5,816 | 3,996 |
On March 28, 2012, Fresenius Finance B.V. issued unsecured Senior Notes of € 500 million at par which are due in 2019. Net proceeds were used for acquisitions, including the acquisition of the Damp Group, to refi nance short-term debts and for general corporate purposes.
On January 26, 2012, Fresenius Medical Care US Finance II, Inc. issued unsecured Senior Notes of US\$ 800 million, due in 2019, and of US\$ 700 million, due in 2022, respectively. In addition, FMC Finance VIII S.A. issued unsecured Senior
Notes of € 250 million which are due in 2019. Net proceeds were used for acquisitions, to refi nance indebtedness and for general corporate purposes.
The Senior Notes of Fresenius Finance B.V. are guaranteed by Fresenius SE & Co. KGaA, Fresenius Kabi AG and Fresenius ProServe GmbH. The Senior Notes of Fresenius Medical Care US Finance II, Inc. and FMC Finance VIII S.A. (wholly-owned subsidiaries of FMC-AG & Co. KGaA) are guaranteed on a senior basis jointly and serverally by FMC-AG & Co. KGaA, Fresenius Medical Care Holdings, Inc. and Fresenius Medical Care Deutschland GmbH.
The Senior Notes issued by Fresenius Finance B.V. which are due on January 1, 2013 are shown as current portion of Senior Notes in the consolidated statement of fi nancial position.
As of March 31, 2012, the Fresenius Group was in compliance with all of its covenants.
At March 31, 2012, the pension liability of the Fresenius Group was € 500 million. The current portion of the pension liability of € 13 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 € 487 million is recorded as pension liability.
Contributions to Fresenius Group's pension fund were € 1 million in the fi rst quarter of 2012. The Fresenius Group expects approximately € 13 million contributions to the pension fund during 2012.
Defi ned benefi t pension plans' net periodic benefi t costs of € 14 million (Q1 2011: € 11 million) were comprised of the following components:
| Net periodic benefi t cost | 14 | 11 |
|---|---|---|
| Settlement loss | 0 | – |
| Amortization of transition obligations | – | – |
| Amortization of prior service costs | – | – |
| Amortization of unrealized actuarial losses, net | 4 | 1 |
| Expected return on plan assets | - 4 | - 4 |
| Interest cost | 9 | 9 |
| Service cost | 5 | 5 |
| € in millions | Q1 / 2012 | Q1 / 2011 |
As of March 31, 2012 and December 31, 2011 the Fresenius Group's potential obligations under noncontrolling interest subject to put options were € 376 million and € 317 million, respectively, of which, at March 31, 2012, € 108 million were exercisable.
As of March 31, 2012 and December 31, 2011, noncontrolling interest not subject to put provisions in the Group was as follows:
| € in millions | March 31, 2012 |
Dec. 31, 2011 |
|---|---|---|
| Noncontrolling interest not subject to put provisions in Fresenius Medical Care AG & Co. KGaA |
4,315 | 4,254 |
| Noncontrolling interest not subject to put provisions in VAMED AG |
29 | 28 |
| Noncontrolling interest not subject to put provisions in the business segments |
||
| Fresenius Medical Care | 211 | 123 |
| Fresenius Kabi | 70 | 63 |
| Fresenius Helios | 112 | 136 |
| Fresenius Vamed | 2 | 2 |
| Total noncontrolling interest not subject to put provisions |
4,739 | 4,606 |
From November 2011 to February 2012, Fresenius SE & Co. KGaA purchased 3,500,000 ordinary shares of Fresenius Medical Care AG & Co. KGaA (FMC-AG & Co. KGaA). Therewith, Fresenius SE & Co. KGaA's shareholding in FMC-AG & Co. KGaA amounted to 31.4% of the ordinary share capital as of March 31, 2012.
Noncontrolling interest not subject to put provisions changed as follows:
| € in millions | Q1 / 2012 |
|---|---|
| Noncontrolling interest not subject to put provisions at December 31, 2011 |
4,606 |
| Noncontrolling interest not subject to put provisions in profi t |
215 |
| Stock options | 7 |
| Dividend payments | - 15 |
| Purchase of ordinary shares of FMC-AG & Co. KGaA | - 43 |
| Currency effects, fi rst-time consolidations and other changes |
- 31 |
| Noncontrolling interest not subject to put provisions at March 31, 2012 |
4,739 |
During the fi rst quarter of 2012, 97,334 stock options were exercised. Consequently, as of March 31, 2012, the subscribed capital of Fresenius SE & Co. KGaA consisted of 163,334,670 bearer ordinary shares. The shares are issued as non-par value shares. The proportionate amount of the subscribed capital is € 1.00 per share.
Corresponding to the stock option plans, the Conditional Capital of Fresenius SE & Co. KGaA is divided into Conditional Capital I, Conditional Capital II and Conditional Capital III. These are used to satisfy the subscription rights in connection with previously issued stock options or convertible bonds, as the case may be, for bearer ordinary shares under the stock option plans of 1998, 2003 and 2008 (see note 23, Stock options).
The following table shows the development of the Conditional Capital:
| in € | Ordinary Shares |
|---|---|
| Conditional Capital I Fresenius AG Stock Option Plan 1998 | 888,428 |
| Conditional Capital II Fresenius AG Stock Option Plan 2003 | 2,976,630 |
| Conditional Capital III Fresenius SE Stock Option Plan 2008 | 6,024,524 |
| Total Conditional Capital as of January 1, 2012 | 9,889,582 |
| Fresenius AG Stock Option Plan 1998 – options exercised | - 7,844 |
| Fresenius AG Stock Option Plan 2003 – options exercised | - 44,164 |
| Fresenius SE Stock Option Plan 2008 – options exercised | - 45,326 |
| Total Conditional Capital as of March 31, 2012 | 9,792,248 |
By resolution of the Annual General Meeting on May 13, 2011, the previous Authorized Capitals I to V were revoked and a new Authorized Capital I was created.
In accordance with the new provision in the articles of association of Fresenius SE & Co. KGaA, the general partner, Fresenius Management SE, is authorized, with the approval of the Supervisory Board, until May 12, 2016, to increase Fresenius SE & Co. KGaA's subscribed capital by a total amount of up to € 40,320,000 through a single issue or multiple issues of new bearer ordinary shares against cash contributions and / or contributions in kind (Authorized Capital I). A subscription right must be granted to the shareholders in principle. In defi ned cases, the general partner is authorized, with the consent of the Supervisory Board, to decide on the exclusion of the shareholders' subscription right (e. g. to eliminate fractional amounts). For cash contributions, the authorization can only be exercised if the issue price is not signifi cantly below the stock exchange price of the already listed shares at the time the issue price is fi xed with fi nal effect by the general partner. Furthermore, the proportionate amount of the shares issued with exclusion of subscription rights may not exceed 10% of the subscribed capital neither at the time of the resolution on the authorization nor at the time of the utilization of the authorization. In the case of a contribution in
kind, the subscription right can be excluded only in order to acquire a company, parts of a company or a participation in a company. The authorizations granted concerning the exclusion of subscription rights can be used by the general partner only to such extent that the proportional amount of the total number of shares issued with exclusion of the subscription rights does not exceed 20% of the subscribed capital, neither at the time of the resolution on the authorization nor at the time of the utilization of the authorization.
The changes to the Authorized Capital became effective upon registration of the amendments to the articles of association with the commercial register on July 11, 2011.
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 2012, the general partner and the Supervisory Board of Fresenus SE & Co. KGaA will propose a dividend of € 0.95 per bearer ordinary share to the Annual General Meeting, i.e. a total dividend payment of € 155 million.
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 healthcare services and products. Legal matters that the Fresenius Group currently deems to be material 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 2011 Annual Report. In the following, only the changes during the fi rst quarter ended March 31, 2012 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 2011 Annual Report; defi ned terms or abbreviations having the same meaning as in the 2011 Annual Report.
In January and February 2011, the U.S. Bankruptcy Court entered orders confi rming the joint plan of reorganization and the confi rmation orders were affi rmed by the U.S. District Court on January 31, 2012.
Upon the remand in 2011, the district court reduced the post verdict damages award to US\$ 9 million. In the parallel reexamination of the last surviving patent, the U.S. Patent and Trademark Offi ce and the Board of Patent Appeals and Interferences ruled that the remaining Baxter patent is invalid. Baxter appealed the Board's ruling to the Federal Circuit which heard the appeal in December 2011. That decision is pending and Fresenius Medical Care Holdings, Inc.'s payment obligation on the District Court damage award it stayed pending the Federal Circuit's ruling on Baxter's 2011 appeal.
On February 13, 2012, the Federal Circuit affi rmed the District Court's non-infringement verdict.
The Fresenius Group regularly analyzes current information about claims for probable losses and provides accruals for such matters, including estimated expenses for legal services, as appropriate.
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, 2012 and December 31, 2011, classifi ed into classes:
| March 31, 2012 | Dec. 31, 2011 | |||
|---|---|---|---|---|
| Fair value hierarchy level |
Carrying amount |
Fair value | Carrying amount |
Fair value |
| 1 | 855 | 855 | 635 | 635 |
| 3 | 3,558 | 3,558 | 3,428 | 3,427 |
| 2 | 12,278 | 12,630 | 10,627 | 10,874 |
| 2 | 18 | 18 | 18 | 18 |
| 3 | 376 | 376 | 317 | 317 |
| 2 | - 102 | - 102 | - 212 | - 212 |
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 of these instruments.
The fair value of Fresenius Medical Care's loan to Renal Advantage Partners, LLC was based on signifi cant unobservable inputs of comparable instruments and thus the class assets recognized at carrying amount consisting of trade accounts receivable and this loan is classifi ed as fair value hierarchy Level 3.
The fair values of the 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 liabilities recognized at carrying amount is classifi ed as hierarchy Level 2.
The carrying amounts of derivatives embedded in the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) corresponded with their fair values. The MEB matured on August 14, 2011. The embedded derivatives were meas ured at fair value, which was estimated based on a Black-Scholes model which uses signifi cant other observable inputs. Therefore, they were classifi ed as Level 2.
The CVR were traded on the stock exchange in the United States and were therefore valued with the current stock exchange price until December 31, 2010. Consequently, they were classifi ed as Level 1. In the fi rst quarter of 2011, the CVR were deregistered and delisted from the NASDAQ due to the expiration of the underlying agreement and became valueless.
The class liabilities recognized at fair value mainly consisted of embedded derivatives and the CVR and was consequently classifi ed in its entirety as the lower hierarchy 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.
For the fair value measurement of the class deriv atives for hedging purposes, signifi cant other observable inputs are used. Therefore, they are 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, 2012 | Dec. 31, 2011 | |||
|---|---|---|---|---|
| € in millions | Assets | Liabilities | Assets | Liabilities |
| Interest rate contracts (current) | 0 | 19 | 0 | 103 |
| Interest rate contracts (non-current) | 0 | 45 | 0 | 60 |
| Foreign exchange contracts (current) | 12 | 22 | 9 | 39 |
| Foreign exchange contracts (non-current) | 1 | – | 1 | 5 |
| Derivatives designated as hedging instruments 1 | 13 | 86 | 10 | 207 |
| Interest rate contracts (non-current) | 0 | 3 | 0 | 3 |
| Foreign exchange contracts (current) 1 | 10 | 39 | 43 | 58 |
| Foreign exchange contracts (non-current) 1 | 1 | 1 | 1 | 1 |
| Derivatives not designated as hedging instruments | 11 | 43 | 44 | 62 |
Derivatives designated as hedging instruments and foreign exchange contracts not designated as
hedging instruments 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 were recognized at gross value within other assets in an amount of € 24 million and other liabilities in an amount of € 126 million.
The current portion of interest rate contracts and foreign exchange contracts indicated as assets in the previous 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 MEB were recognized within other short-term liabilities until the maturity of the MEB.
| Q1 / 2012 | |||||
|---|---|---|---|---|---|
| € 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 | - 7 | - 5 | – | ||
| Foreign exchange contracts | 17 | 3 | 0 | ||
| Derivatives in cash fl ow hedging relationships 1 | 10 | - 2 | – | ||
| Foreign exchange contracts | 8 | ||||
| Derivatives in fair value hedging relationships | 8 | ||||
| Derivatives designated as hedging instruments | 10 | - 2 | 8 |
1 The amount of gain or loss recognized in the consolidated statement of income solely relates to the ineffective portion.
| Q1 / 2011 | |||
|---|---|---|---|
| € 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 | 28 | - 1 | 1 |
| Foreign exchange contracts | 4 | - 1 | 0 |
| Derivatives in cash fl ow hedging relationships 1 | 32 | - 2 | 1 |
| Foreign exchange contracts | 17 | ||
| Derivatives in fair value hedging relationships | 17 | ||
| Derivatives designated as hedging instruments | 32 | - 2 | 18 |
The amount of gain or loss recognized in the consolidated statement
| € in millions | Q1 / 2012 | Q1 / 2011 |
|---|---|---|
| Interest rate contracts | – | 1 |
| Foreign exchange contracts | 1 | 44 |
| Derivatives embedded in the MEB | 0 | - 65 |
| Derivatives not designated as hedging instruments | 1 | - 20 |
Gains 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 losses from the underlying transactions in the corresponding amount.
The Fresenius Group expects to recognize a net amount of € 14 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 € 46 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. Until 2011, the position other fi nancial result in the consolidated statement of income included gains and losses from the valuation of the derivatives embedded in the MEB, which was made until August 14, 2011 (see note 5, Other fi nancial result).
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 (Schuldscheindarlehen) 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 institutions 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.
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, 2012, the notional amounts of foreign exchange contracts totaled € 3,094 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 - € 7 million and - € 2 million, respectively.
As of March 31, 2012, the Fresenius Group was party to foreign exchange contracts with a maximum maturity of 44 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.
As of March 31, 2012, the interest rate swaps had a notional volume of US\$ 1,200 million (€ 898 million) and € 866 million as well as fair values of - US\$ 47 million and - € 32 million, respectively, which expire between 2012 and 2016.
The Fresenius Group has a solid fi nancial profi le. As of March 31, 2012, the equity ratio was 37.9% and the debt ratio (debt / total assets) was 40.1%. As of March 31, 2012, the net debt / EBITDA ratio was 3.0.
The aims of the capital management and further information can be found in the consolidated fi nancial statements in the 2011 Annual Report.
Fresenius is covered by the rating agencies Moody's, Standard & Poor's and Fitch.
The following table shows the company rating of Fresenius SE & Co. KGaA:
| Standard & Poor's | Moody's | Fitch | |
|---|---|---|---|
| Company rating | BB+ | Ba1 | BB+ |
| Outlook | stable | stable | stable |
On February 27, 2012, Standard & Poor's upgraded the company rating to BB+ from BB, the outlook is stable.
The following table provides additional information with regard to the consolidated statement of cash fl ows:
| € in millions | Q1 / 2012 | Q1 / 2011 |
|---|---|---|
| Interest paid | 179 | 147 |
| Income taxes paid | 36 | 96 |
Cash paid for acquisitions (without investments in licenses) consisted of the following:
| € in millions | Q1 / 2012 | Q1 / 2011 |
|---|---|---|
| Assets acquired | 2,419 | 42 |
| Liabilities assumed | - 284 | - 4 |
| Noncontrolling interest | - 140 | 0 |
| Notes assumed in connection with acquisitions | - 149 | - 1 |
| Cash paid | 1,846 | 37 |
| Cash acquired | - 124 | – |
| Cash paid for acquisitions, net | 1,722 | 37 |
The consolidated segment reporting shown on page 23 of this interim report is an integral part of the notes.
The Fresenius Group has identifi ed the business segments Fresenius Medical Care, Fresenius Kabi, Fresenius Helios and Fresenius Vamed, which corresponds to the internal organi za tional and reporting structures (Management Approach) at March 31, 2012.
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 leading provider of dialysis products and dialysis care for the life-saving treatment of patients with chronic kidney failure. Fresenius Medical Care treats 253,041 patients in its 3,119 own dialysis clinics.
Fresenius Kabi is a globally active company, providing infusion therapies, intravenously administered generic drugs, clinical nutrition and the related medical devices. The products are used for the therapy and care of critically and chronically ill patients in and outside the hospital. In Europe, Fresenius Kabi is the market leader in infusion therapies and clinical nutrition, in the U.S., the company is a leading provider of intravenously administered generic drugs.
Fresenius Helios is one of the largest private hospital operators in Germany.
Fresenius Vamed provides engineering and services for hospitals and other health care facilities internationally.
The segment Corporate / Other mainly comprises the holding functions of Fresenius SE & Co. KGaA as well as Fresenius Netcare GmbH, which provides services in the fi eld of information technology and Fresenius Biotech, which does not fulfi ll the characteristics of a reportable segment. In addition, the segment Corporate / Other includes intersegment consolidation adjustments as well as special items in connection with the fair value measurement of the Mandatory Exchangeable Bonds and the Contingent Value Rights until 2011.
Explanations regarding the notes on the business segments can be found in the consolidated fi nancial statements in the 2011 Annual Report.
| € in millions | Q1 / 2012 | Q1 / 2011 |
|---|---|---|
| Total EBIT of reporting segments | 672 | 585 |
| General corporate expenses Corporate / Other (EBIT) |
- 11 | - 10 |
| Group EBIT | 661 | 575 |
| Investment gain | 97 | 0 |
| Net interest | - 147 | - 135 |
| Other fi nancial result | 0 | - 62 |
| Income before income taxes | 611 | 378 |
| € in millions | March 31, 2012 |
Dec. 31, 2011 |
|---|---|---|
| Short-term debt | 218 | 171 |
| Short-term loans from related parties | 3 | 3 |
| Current portion of long-term debt and capital lease obligations |
2,951 | 1,852 |
| Current portion of Senior Notes | 500 | 0 |
| Long-term debt and capital lease obligations, less current portion |
2,471 | 3,777 |
| Senior Notes, less current portion | 5,316 | 3,996 |
| Debt | 11,459 | 9,799 |
| less cash and cash equivalents | 855 | 635 |
| Net debt | 10,604 | 9,164 |
As of March 31, 2012, Fresenius SE & Co. KGaA had three stock option plans in place: the Fresenius AG stock option based plan of 1998 (1998 Plan), the Fresenius AG Stock Option Plan 2003 (2003 Plan) which is based on convertible bonds and the stock option based Fresenius SE Stock Option Plan 2008 (2008 Plan). Currently, stock options can only be granted under the 2008 Plan.
During the fi rst quarter of 2012, Fresenius SE & Co. KGaA received cash of € 4 million from the exercise of 97,334 stock options.
Under the 1998 Plan, 22,098 stock options were outstanding and exercisable as of March 31, 2012. No options were held by the members of the Fresenius Management SE Management Board. 1,364,789 convertible bonds were outstanding and exercisable under the 2003 Plan as of March 31, 2012. The members of the Fresenius Management SE Management Board held 291,530 convertible bonds. At March 31, 2012, out of 3,990,124 outstanding stock options issued under the 2008 Plan, 757,480 were exercisable and 758,520 were held by the members of the Fresenius Management SE Management Board.
As of March 31, 2012, 2,144,367 options for ordinary shares were outstanding and exercisable. On March 31, 2012, total unrecognized compensation cost related to non-vested options granted under the 2008 Plan was € 21 million. This cost is expected to be recognized over a weighted-average period of 1.9 years.
During the fi rst quarter of 2012, 89,102 stock options for ordinary shares and 831 stock options for preference shares were exercised. Fresenius Medical Care AG & Co. KGaA received cash of € 2.9 million upon exercise of these stock options and € 0.4 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 Universitätsklinikum Carl Gustav Carus Dresden and a member of the supervisory boards of the Universitätsklinika Aachen, Rostock and Magdeburg. The Fresenius Group maintains business relations with these clinics in the ordinary course and under customary conditions.
Prof. Dr. h. c. Roland Berger, a member of the Supervisory Board of Fresenius SE & Co. KGaA, is a partner of Roland Berger Strategy Consultants Holding GmbH. In the fi rst quarter of 2012, no services were rendered to the Fresenius Group by the Roland Berger group.
Klaus-Peter Müller, a member of the Supervisory Board 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. In the fi rst quarter of 2012, the Fresenius Group paid € 0.7 million to Commerzbank AG for services provided in connection with the Senior Notes issuances in January and March 2012.
Dr. Franceso De Meo, a member of the Management Board of the general partner of Fresenius SE & Co. KGaA, was a member of the supervisory board of Allianz Private Krankenversicherungs-AG until July 6, 2011. In the fi rst quarter of 2012, the Fresenius Group paid € 1.2 million for insurance premiums to the Allianz group.
Dr. Dieter Schenk, deputy chairman of the Supervisory Board of Fresenius SE until January 28, 2011 and deputy chairman of the Supervisory Board of Fresenius Management SE, is a partner in the law fi rm Noerr LLP, which provides legal services to the Fresenius Group. In the fi rst quarter of 2012, the Fresenius Group paid this law fi rm € 0.6 million for services rendered.
On April 26, 2012, Fresenius announced its intention to make a voluntary public takeover offer to Rhön-Klinikum AG shareholders of € 22.50 per share in cash. The total purchase price for all outstanding shares in the company is approximately € 3.1 billion. The offer is contingent upon a minimum acceptance threshold of 90% and one share of Rhön-Klinikum AG's share capital at the end of the offer period and on antitrust approval.
Rhön-Klinikum AG is one of Germany's largest private hospital operators, with reported sales of € 2.6 billion and net income of € 161 million in 2011. Rhön-Klinikum AG has 53 hospitals with a total of approximately 16,000 beds, as well as 39 health care centers, and treated nearly 2.3 million patients last year.
There have been no signifi cant changes in the Fresenius Group's operating environment following the end of the fi rst quarter of 2012. 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 2012.
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 under Who we are / Corporate Governance / Declaration of Conformity and of Fresenius Medical Care AG & Co. KGaA www.fmc-ag.com under Investor Relations / Corporate Governance / Declaration of Compliance, respectively.
| Annual General Meeting, Frankfurt am Main, Germany | May 11, 2012 |
|---|---|
| Payment of dividend 1 | May 14, 2012 |
| Capital Market Day Fresenius Kabi, Bad Homburg v. d. H. |
June 12, 2012 |
| Report on 1st half 2012 Conference call Live webcast |
August 1, 2012 |
| Report on 1st – 3rd quarters 2012 Conference call Live webcast |
October 31, 2012 |
1 Subject to prior approval by the Annual General Meeting Subject to change
| Securities identifi cation no. | 578 560 | Structure | Sponsored Level 1 ADR |
|---|---|---|---|
| Ticker symbol | FRE | Trading location | OTC-market |
| ISIN | DE0005785604 | Ratio | 8 ADR : 1 ORD |
| Bloomberg symbol | FRE GR | Ticker symbol | FSNUY |
| Reuters symbol | FREG.de | CUSIP | 35804M1053 |
| Main trading location | Frankfurt / Xetra | ISIN | US35804M1053 |
Corporate Headquarters Else-Kröner-Straße 1 Bad Homburg v. d. H.
Fresenius SE & Co. KGaA 61346 Bad Homburg v. d. H.
| Ordinary share | ADR |
|---|---|
Investor Relations Telephone: ++ 49 61 72 6 08-26 37 Telefax: ++ 49 61 72 6 08-24 88 e-mail: [email protected]
Corporate Communications Telefon: (0 61 72) 6 08-23 02 Telefax: (0 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), Rainer Baule, Dr. Francesco De Meo, Dr. Jürgen Götz, Dr. Ben Lipps, 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 2011 Annual Report and the SEC fi lings of Fresenius Medical Care AG & Co. KGaA and Fresenius Kabi Pharmaceuticals Holding, Inc. – the actual results could differ materially from the results currently expected.
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