Quarterly Report • Aug 19, 2011
Quarterly Report
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applying United States Generally Accepted Accounting Principles (U.S. GAAP)
1st Half and 2nd Quarter 2011
51 Financial Calendar
This Quarterly Financial Report amends the Quarterly Financial Report as fi led by Fresenius SE & Co. KGaA on August 5, 2011.
The amendment is fi led due to a reclassifi cation within Fresenius Medical Care AG & Co. KGaA´s balance sheet at June 30, 2011 in an amount of € 260 million from "Long-term debt and capital lease obligations, less current portion" to "Current portion of long-term debt and capital lease obligations".
The Amended Report provides disclosures as of June 30, 2011 and does not refl ect events or disclosures after the submission of the Original Report, other than the reclassifi cation described above.
Amendments are included on the following pages:
This Quarterly Financial Report was published on August 19, 2011.
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 2010, group sales were approximately € 16.0 billion. On June 30, 2011, more than 140,000 employees have dedicated themselves to the service of health in about 100 countries worldwide.
| € in millions | Q2 / 2011 | Q2 / 2010 | Change | H1 / 2011 | H1 / 2010 | Change |
|---|---|---|---|---|---|---|
| Sales | 4,042 | 4,043 | 0% | 8,004 | 7,686 | 4% |
| EBIT | 632 | 620 | 2% | 1,207 | 1,121 | 8% |
| Net income 1 | 193 | 183 | 5% | 363 | 302 | 20% |
| Earnings per ordinary share in € 1 | 1.18 | 1.12 | 5% | 2.23 | 1.86 | 20% |
| Operating cash fl ow | 372 | 367 | 1% | 650 | 805 | - 19% |
| € in millions | June 30, 2011 | Dec. 31, 2010 | Change |
|---|---|---|---|
| Total assets | 23,909 | 23,577 | 1% |
| Non-current assets | 17,157 | 17,142 | 0% |
| Equity 2 | 8,704 | 8,844 | - 2% |
| Net debt | 8,404 | 8,015 | 5% |
| Investments 3 | 1,143 | 471 | 143% |
| € in millions | Q2 / 2011 | Q2 / 2010 | H1 / 2011 | H1 / 2010 |
|---|---|---|---|---|
| EBITDA margin | 19.5% | 19.2% | 19.1% | 18.6% |
| EBIT margin | 15.6% | 15.3% | 15.1% | 14.6% |
| Depreciation and amortization in % of sales | 3.9 | 3.9 | 4.0 | 4.0 |
| Operating cash flow in % of sales | 9.2 | 9.1 | 8.1 | 10.5 |
| Equity ratio (June 30 / December 31) |
36.4 % | 37.5% | ||
| Net debt / EBITDA (June 30 / December 31) |
2.7 | 2.6 |
Net income attributable to Fresenius SE; adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and the Contingent Value
Rights (CVR) relating to the acquisition of APP Pharmaceuticals. These effects are not cash relevant.
| US\$ in millions | H1 / 2011 | H1 / 2010 | Change |
|---|---|---|---|
| Sales | 6,230 | 5,828 | 7% |
| EBIT | 955 | 892 | 7% |
| Net income 1 | 481 | 459 | 5% |
| Operating cash fl ow | 487 | 643 | -24% |
| Investments / Acquisitions 5 | 1,368 | 396 | -- |
| R & D expenses | 53 | 44 | 19% |
| Employees, per capita on balance sheet date (June 30 / December 31) | 81,357 | 77,442 | 5% |
Medical devices / Transfusion technology
| € in millions | H1 / 2011 | H1 / 2010 | Change |
|---|---|---|---|
| Sales | 1,971 | 1,745 | 13% |
| EBIT | 411 | 347 | 18% |
| Net income 2 | 181 | 136 | 33% |
| Operating cash fl ow | 205 | 189 | 8% |
| Investments / Acquisitions | 76 | 80 | - 5% |
| R & D expenses | 80 | 65 | 23% |
| Employees, per capita on balance sheet date (June 30 / December 31) | 23,670 | 22,851 | 4% |
| € in millions | H1 / 2011 | H1 / 2010 | Change |
|---|---|---|---|
| Sales | 1,293 | 1,223 | 6% |
| EBIT | 123 | 110 | 12% |
| Net income 3 | 72 | 62 | 16% |
| Operating cash fl ow | 121 | 133 | - 9% |
| Investments / Acquisitions | 45 | 83 | - 46% |
| Employees, per capita on balance sheet date (June 30 / December 31) | 33,931 | 33,321 | 2% |
| € in millions | H1 / 2011 | H1 / 2010 | Change |
|---|---|---|---|
| Sales | 313 | 338 | - 7% |
| EBIT | 12 | 15 | - 20% |
| Net income 4 | 9 | 12 | - 25% |
| Operating cash fl ow | 7 | 35 | - 80% |
| Investments / Acquisitions | 4 | 4 | 0% |
| Order intake | 164 | 328 | - 50% |
| Employees, per capita on balance sheet date (June 30 / December 31) | 3,170 | 3,110 | 2% |
Net income attributable to Fresenius Medical Care AG & Co. KGaA
Net income attributable to Fresenius Kabi AG
Net income attributable to HELIOS Kliniken GmbH Net income attributable to VAMED AG
Does not include a US\$133 million cash out for a short-term bank deposit in Q2 2010.
In the second quarter of 2011, the Fresenius share continued its upswing and reached a new all-time high. With an increase of 15% compared to the year-end quotation of 2010, the ordinary shares significantly outperformed the DAX.
An upwind considerably supported the Fresenius ordinary share price from the end of January onwards, after a reluctant start into 2011. But the positive development at the capital markets was impacted by the catastrophe in Japan in March. In the second quarter of 2011, the share price continued to climb again, driven by the strong earnings development of the fi rst quarter of 2011 and the raised guidance, reaching a new all-time-high of € 73.58 on May 12, 2011.
The Fresenius share increased by 15% to € 71.98 as of June 30, 2011, compared with the year-end quotation of 2010. In the same period, the DAX grew by 7%.
In the fi rst half of 2011, the Fresenius shares improved the average daily trading volume by 3% compared to the average daily trading volume of 2010 2 .
DAX Ordinary share
| H1 / 2011 | 2010 | Change | |
|---|---|---|---|
| Number of shares (June 30 / December 31) | 162,788,889 | 162,450,090 1 | |
| Quarter-end quotation in € | 71.98 | 62.75 | 15% |
| High in € | 73.58 | 67.59 | 9% |
| Low in € | 59.90 | 41.80 | 43% |
| Ø Trading volume (number of shares per trading day) | 446,011 | 431,460 2 | 3% |
| Market capitalization, € in millions (June 30 / December 31) | 11,718 | 10,301 3 | 14% |
Number of shares of the legal predecessor Fresenius SE, equally divided into 81,225,045 preference shares and 81,225,045 ordinary shares Based on the average XETRA trading volume of both the ordinary and preference shares of the legal predecessor Fresenius SE in 2010 Based on the XETRA closing prices of both the ordinary and preference shares of the legal predecessor Fresenius SE as of Dec. 31, 2010
Fresenius achieved excellent financial results in the first half. We are very pleased with Fresenius Kabi's growth in North America and in emerging markets, in particular in China. Based on the results of the first half of 2011, we raise our 2011 earnings guidance. Fresenius Medical Care's significant M & A activity this year shows that our Group's double-barreled growth strategy combining organic growth and acquisitions remains fully intact.
| H1 / 2011 | at actual rates |
in constant currency |
|
|---|---|---|---|
| Sales | € 8.0 bn | + 4% | + 6% |
| EBIT | € 1.2 bn | + 8% | + 11% |
| Net income 1 | € 363 m | + 20% | + 22% |
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. 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.
Net income attributable to Fresenius SE & Co. KGaA; adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) relating to the acquisition of APP Pharmaceuticals. Both are non-cash charges.
Group sales increased by 4% (6% in constant currency) to € 8,004 million (H1 2010: € 7,686 million). Organic sales growth was 5%. Acquisitions contributed a further 1%. Currency translation had a negative effect of 2%. This is mainly attributable to the average U.S. dollar rate decreasing 5% against the euro in the fi rst half of 2011.
Organic sales growth was 3% in both, North America and Europe. Prior year sales in Europe were positively infl uenced by Fresenius Vamed's large medical supply contract to the Ukraine. Organic sales growth reached 15% in Latin America, 19% in Asia-Pacifi c and 23% in Africa.
Group EBITDA grew by 7% (10% in constant currency) to € 1,526 million (H1 2010: € 1,428 million). Group EBIT in creased by 8% (11% in constant currency) to € 1,207 million (H1 2010: € 1,121 million). The EBIT margin improved by 50 basis points to 15.1% (H1 2010: 14.6%).
Group net interest was -€ 276 million (H1 2010: -€ 281 million).
The other fi nancial result was - € 151 million and includes valuation changes of the fair redemption value of the Mandatory Exchangeable Bonds (MEB) of - € 156 million and the Contingent Value Rights (CVR) of € 5 million. Both are noncash items. As the CVR were delisted in March 2011, the effect relates solely to the fi rst quarter of 2011. The MEB will come to maturity on August 14, 2011.
The Group tax rate 1 was 30.9% (H1 2010: 31.9%). Noncontrolling interest increased to € 280 million (H1 2010: € 270 million), of which 93% was attributable to the noncontrolling interest in Fresenius Medical Care.
Group net income 2 increased by 20% (22% in constant currency) to € 363 million (H1 2010: € 302 million). Earnings per ordinary share increased by 20% to € 2.23.
SALES BY REGION
| € in millions | H1 / 2011 | H1 / 2010 | Change at actual rates |
Currency trans lations effects |
Change at constant rates |
Organic growth |
Acquisitions / Divestitures |
Total sales |
|---|---|---|---|---|---|---|---|---|
| North America | 3,325 | 3,409 | - 2% | - 5% | 3% | 3% | 0% | 42% |
| Europe | 3,330 | 3,176 | 5% | 0% | 5% | 3% | 2% | 42% |
| Asia-Pacifi c | 754 | 590 | 28% | 1% | 27% | 19% | 8% | 9% |
| Latin America | 430 | 379 | 13% | - 2% | 15% | 15% | 0% | 5% |
| Africa | 165 | 132 | 25% | 3% | 22% | 23% | - 1% | 2% |
| Total | 8,004 | 7,686 | 4% | - 2% | 6% | 5% | 1% | 100% |
| € in millions | H1 / 2011 | H1 / 2010 | Change at actual rates |
Currency trans lations effects |
Change at constant rates |
Organic Growth |
Acquisitions / Divestitures |
Total sales |
|---|---|---|---|---|---|---|---|---|
| Fresenius Medical Care | 4,440 | 4,392 | 1% | - 4% | 5% | 3% | 2% | 55% |
| Fresenius Kabi | 1,971 | 1,745 | 13% | - 1% | 14% | 13% | 1% | 25% |
| Fresenius Helios | 1,293 | 1,223 | 6% | 0% | 6% | 4% | 2% | 16% |
| Fresenius Vamed | 313 | 338 | - 7% | 0% | - 7% | - 6% | - 1% | 4% |
Adjusted for the effect of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) related to the acquisition of APP Pharmaceuticals Net income attributable to Fresenius SE & Co. KGaA; adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) relating to the acquisition of APP Pharmaceuticals. Both are non-cash items.
| € in millions | Q2 / 2011 | Q2 / 2010 | H1 / 2011 | H1 / 2010 |
|---|---|---|---|---|
| EBIT | 632 | 620 | 1,207 | 1,121 |
| Net income 1 | 193 | 183 | 363 | 302 |
| Net income 2 | 129 | 152 | 257 | 240 |
| Earnings per ordinary share in € 1 | 1.18 | 1.12 | 2.23 | 1.86 |
| Earnings per ordinary share in € 2 | 0.79 | 0.94 | 1.58 | 1.48 |
The Group's U.S. GAAP fi nancial results as of June 30, 2011 and as of June 30, 2010 include the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) related to the acquisition of APP Pharmaceuticals. Those special items are recognized in the fi nancial result of the "Corporate / Other" segment. Adjusted earnings represent the Group's business operations in the reporting period.
The table reconciles adjusted net income to net income according to U.S. GAAP in the fi rst half and the second quarter.
Both the Mandatory Exchangeable Bonds and the Contingent Value Rights are viewed as liabilities and therefore
recognized with their fair redemption value. Valuation changes will lead to gains or expenses on a quarterly basis until maturity of the instruments. This will only have an effect on 2011 results. As the CVR were delisted in March 2011, the effect relates solely to the fi rst quarter of 2011. The MEB come to maturity in August 2011.
Group net income 2 (including special items) reached € 257 million or € 1.58 per ordinary share.
The Fresenius Group spent € 286 million on property, plant and equipment (H1 2010: € 320 million). Acquisition spending was € 857 million (H1 2010: € 151 million), mainly due to the
| € in millions | Q2 / 2011 | Q2 / 2010 | H1 / 2011 | H1 / 2010 |
|---|---|---|---|---|
| Earnings 1 | 193 | 183 | 363 | 302 |
| Other fi nancial result: | ||||
| Mandatory Exchangeable Bonds (MEB) (mark-to-market) |
- 64 | - 34 | - 111 | - 83 |
| Contingent Value Rights (CVR) (mark-to-market) |
— | 3 | 5 | 21 |
| Earnings according to U.S. GAAP 2 | 129 | 152 | 257 | 240 |
| € in millions | H1 / 2011 | H1 / 2010 | thereof property, plant and equipment |
thereof acquisitions |
Change | % of total |
|---|---|---|---|---|---|---|
| Fresenius Medical Care 3 | 960 | 299 | 170 | 790 | -- | 84% |
| Fresenius Kabi | 76 | 80 | 70 | 6 | - 5% | 7% |
| Fresenius Helios | 45 | 83 | 40 | 5 | - 46% | 4% |
| Fresenius Vamed | 4 | 4 | 2 | 2 | 0% | 0% |
| Corporate / Other | 58 | 5 | 4 | 54 | -- | 5% |
| Total | 1,143 | 471 | 286 | 857 | 143% | 100% |
Net income attributable to Fresenius SE & Co. KGaA; adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) relating to the acquisition of APP Pharmaceuticals. Both are non-cash items.
Net income attributable to Fresenius SE & Co. KGaA
Does not include a €100 million cash out for a short-term bank deposit by Fresenius Medical Care in Q2 2010.
acquisitions of Euromedic's dialysis service business as well as a minority stake in Renal Advantage, Inc., both by Fresenius Medical Care.
Operating cash fl ow was € 650 million (H1 2010: € 805 million). Strong earnings growth was more than offset by increased DSOs (days sales outstanding), primarily related to the introduction of the new Medicare end-stage renal disease prospective payment system in the U.S. dialysis service business, and raised inventory levels. The cash fl ow margin was 8.1% (H1 2010: 10.5%). Net capital expenditure was € 292 million (H1 2010: € 320 million). Free cash fl ow before acquisitions and dividends was € 358 million (H1 2010: € 485 million). Free cash fl ow after acquisitions and dividends was - € 791 million (H1 2010 1 : € 58 million).
The Group's total assets increased slightly to € 23,909 million (Dec. 31, 2010: € 23,577 million). In constant currency, the increase was 6%. Current assets increased by 5% (9% in constant currency) to € 6,752 million (Dec. 31, 2010: € 6,435 million). Non-current assets were € 17,157 million (Dec. 31, 2010: € 17,142 million). In constant currency, the increase was 5%.
Total shareholders' equity decreased by 2% to € 8,704 million (Dec. 31, 2010: € 8,844 million). In constant currency, however, shareholders' equity increased by 4%. The equity ratio was 36.4% (Dec. 31, 2010: 37.5%).
Group debt grew by 3% (8% in constant currency) to € 9,012 million (Dec. 31, 2010: € 8,784 million) primarily resulting from acquisition fi nancing. Net debt increased by 5% (10% in constant currency) to € 8,404 million (Dec. 31, 2010: € 8,015 million).
The net debt / EBITDA ratio increased slightly to 2.66 as of June 30, 2011 (Dec. 31, 2010: 2.62).
| € in millions | H1 / 2011 | H1 / 2010 | Change |
|---|---|---|---|
| Net income | 537 | 510 | 5% |
| Depreciation and amortization | 319 | 307 | 4% |
| Change in accruals for pensions | - 2 | 13 | - 115% |
| Cash fl ow | 854 | 830 | 3% |
| Change in working capital | - 310 | - 87 | -- |
| Changes in mark-to-market evaluation of the MEB and the CVR | 106 | 62 | 71% |
| Operating cash fl ow | 650 | 805 | - 19% |
| Property, plant and equipment | - 301 | - 330 | 9% |
| Proceeds from the sale of property, plant and equipment | 9 | 10 | - 10% |
| Cash fl ow before acquisitions and dividends | 358 | 485 | - 26% |
| Cash used for acquisitions / proceeds from disposals | - 846 | - 131 | -- |
| Dividends | - 303 | - 296 | - 2% |
| Free cash fl ow after acquisitions and dividends | - 791 | 58 | -- |
| Financial investments | 0 | - 100 | 100% |
| Cash provided by / used for fi nancing activities | 655 | 183 | -- |
| Effect of exchange rates on change in cash and cash equivalents | - 25 | 47 | - 153% |
| Net change in cash and cash equivalents | - 161 | 188 | - 186% |
Group sales were € 4,042 million at actual rates (Q2 2010: € 4,043 million). In constant currency, sales increased by 6%. Organic sales growth was 4%.
EBIT increased by 2% at actual rates to € 632 million (Q2 2010: € 620 million). In constant currency, EBIT increased by 8%. Group net income 1 rose by 5% to € 193 million (Q2 2010 1 : € 183 million). In constant currency, growth of 10% was achieved. Earnings per share 1 increased by 5% to € 1.18 per ordinary share (Q2 2010 1 : € 1.12). In constant currency, earnings per share improved by 10%.
Group net income 2 including special items was € 129 million (Q2 2010 2 : € 152 million). Earnings per ordinary share 2 including special items was € 0.79.
Investments in property, plant and equipment were € 150 million (Q2 2010: € 196 million). Acquisition spending increased to € 546 million (Q2 2010: € 70 million). More than 98% of the acquisition spending relates to the business segment Fresenius Medical Care.
At the Annual General Meeting 2011, the shareholders of Fresenius SE & Co. KGaA approved all agenda items with an overwhelming majority. Shareholders received € 0.86 per share (2009: € 0.75). This is an increase of 15%. A shareholder majority of over 99% approved the actions of both the Management and Supervisory Boards for the 2010 fi scal year. The voting results are as follows:
| Yes votes | No votes | ||
|---|---|---|---|
| Item no. 1 | Resolution on the Approval of the Annual Financial Statements of Fresenius SE & Co. KGaA (previously Fresenius SE) for the Financial Year 2010 |
99.98% | 0.02% |
| Item no. 2 | Resolution on the Allocation of the Distributable Profi t | 99.99% | 0.01% |
| Item no. 3 | Resolution on the Approval of the Actions of the Then Management Board for the Financial Year 2010 |
99.64% | 0.36% |
| Item no. 4 | Resolution on the Approval of the Actions of the Then Supervisory Board for the Financial Year 2010 |
99.63% | 0.37% |
| Item no. 5 | Election of the Auditor and Group Auditor for the Financial Year 2011 | 99.76% | 0.24% |
| Item no. 6 | Resolution on the Cancellation of the Existing Authorized Capitals I to V and the Creation of New Authorized Capital I as well as a Corresponding Amendment to the Articles of Association |
96.07% | 3.93% |
| Item no. 7 | Resolution on the Amendment to the Articles of Association | 99.87% | 0.13% |
| Item no. 8 | Elections to the Joint Committee Dr. Gerd Krick Dr. Gerhard Rupprecht |
99.51% 99.32% |
0.49% 0.68% |
Net income attributable to Fresenius SE & Co. KGaA; adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) relating to the acquisition of APP Pharmaceuticals. Both are non-cash items.
Net income attributable to Fresenius SE & Co. KGaA
Fresenius Medical Care is the world's leading provider of services and products for patients with chronic kidney failure. As of June 30, 2011, Fresenius Medical Care was treating 225,909 patients in 2,838 dialysis clinics.
| US\$ in millions | Q2 / 2011 | Q2 / 2010 | Change | H1 / 2011 | H1 / 2010 | Change |
|---|---|---|---|---|---|---|
| Sales | 3,194 | 2,946 | 8% | 6,230 | 5,828 | 7% |
| EBITDA | 646 | 588 | 10% | 1,227 | 1,138 | 8% |
| EBIT | 510 | 467 | 9% | 955 | 892 | 7% |
| Net income 1 | 261 | 248 | 5% | 481 | 459 | 5% |
| Employees (June 30 / December 31) | 81,357 | 77,442 | 5% |
Fresenius Medical Care achieved sales growth of 7% to US\$6,230 million (H1 2010: US\$ 5,828 million). Organic sales growth was 3%, acquisitions contributed a further 2%.
Sales in dialysis services increased by 6% to US\$ 4,647 million (H1 2010: US\$ 4,395 million). Dialysis product sales grew by 10% to US\$ 1,583 million (H1 2010: US\$ 1,433 million).
In North America sales were US\$ 4,005 million (H1 2010: US\$ 3,986 million). Dialysis services sales increased by 1% to US\$3,610 million. Average sales per treatment for U.S. clinics was US\$ 348 in the second quarter of 2011 compared to US\$ 356 for the corresponding quarter in 2010. This is a result of the targeted implementation of the new Medicare end-stage renal disease prospective payment system. Dialysis product sales decreased to US\$ 395 million (H1 2010: US\$ 408 million) as increased sales of dialysis products could not entirely offset lower pricing of renal drugs.
Sales outside North America ("International" segment) grew by 20% to US\$ 2,218 million (H1 2010: US\$ 1,842 million). Sales in dialysis services increased by 27% to US\$ 1,037 million. Dialysis product sales increased by 15% to US\$ 1,181 million.
EBIT increased by 7% to US\$ 955 million (H1 2010: US\$ 892 million). The EBIT margin of 15.3% remained at previous year's level.
In North America, the EBIT margin increased to 16.5% (H1 2010: 16.1%). This increase was mainly favorably infl uenced by the development of pharmaceutical costs and higher income from the joint venture with Vifor Pharma.
In the International segment, the EBIT margin was 16.9% (H1 2010: 17.6%), primarily driven by unfavorable currency effects.
Net income 1 increased by 5% to US\$ 481 million (H1 2010: US\$ 459 million).
Fresenius Medical Care has executed a merger agreement with Liberty Dialysis Holdings, Inc., the holding company for Liberty Dialysis and Renal Advantage. The investment including assumed debt will be approximately US\$ 1.7 billion. In addition, Fresenius Medical Care previously invested approximately US\$ 300 million in Renal Advantage. The transaction is expected to close in early 2012. Liberty Dialysis Holdings, Inc., has annual sales of approximately US\$ 1 billion and operates approximately 260 dialysis clinics. Fresenius Medical
Care anticipates that facilities may need to be divested to secure regulatory clearance of the transaction.
Furthermore, Fresenius Medical Care has executed an agreement to acquire the U.S. based company American Access Care Holdings, LLC (AAC) for US\$ 385 million. AAC operates 28 freestanding out-patient interventional radiology centers primarily dedicated to serving the vascular access needs of dialysis patients. The transaction is expected to close in the fourth quarter of 2011. On completion, the acquired operations would add approximately US\$ 175 million in annual sales.
Both acquisitions will be fi nanced from cash fl ow and debt and are expected to be accretive to earnings in the fi rst year after closing of the transactions. Both transactions remain subject to clearance under the Hart–Scott–Rodino Antitrust Improvements Act.
Fresenius Medical Care increased sales by 8% to US\$3,194 million (Q2 2010: US\$ 2,946 million). Organic sales growth was 3%. EBIT improved by 9% to US\$ 510 million (Q2 2010: US\$ 467 million). Net income 1 for the second quarter of 2011 was US\$261 million, an increase of 5% (Q2 2010: US\$ 248 million).
For further information, please see Fresenius Medical Care's Investor News at www.fmc-ag.com.
Fresenius Kabi offers infusion therapies, intravenously administered generic drugs and clinical nutrition for seriously and chronically ill patients in the hospital and outpatient environments. The company is also a leading supplier of medical devices and transfusion technology products.
| € in millions | Q2 / 2011 | Q2 / 2010 | Change | H1 / 2011 | H1 / 2010 | Change |
|---|---|---|---|---|---|---|
| Sales | 1,011 | 945 | 7% | 1,971 | 1,745 | 13% |
| EBITDA | 249 | 239 | 4% | 483 | 419 | 15% |
| EBIT | 214 | 202 | 6% | 411 | 347 | 18% |
| Net income 1 | 94 | 90 | 4% | 181 | 136 | 33% |
| Employees (June 30 / December 31) | 23,670 | 22,851 | 4% |
Fresenius Kabi achieved excellent fi nancial results. Growth in North America was driven by new product launches as well as continued supply constraints in the injectable drug market. Ongoing high demand from emerging markets contributed strongly to Fresenius Kabi's excellent organic sales growth.
Sales increased both organically and at actual rates by 13% to € 1,971 million (H1 2010: € 1,745 million). Acquisitions contributed 1%. Currency translation had a negative effect of 1%. U.S. dollar weakness was largely offset by the strength of the currencies in Switzerland, Brazil and Australia against the euro.
In Europe, sales grew by 9% to € 909 million (H1 2010: € 836 million), driven by organic sales growth of 7%. In North America, sales increased by 17% to € 519 million (H1 2010: € 445 million) with excellent organic sales growth of 22%. In Asia-Pacifi c, all-organic growth of 19% drove sales to € 332 million (H1 2010: € 279 million). Sales in Latin America and Africa increased by 14% to € 211 million (H1 2010: € 185 million) with organic sales growth contributing 12%.
EBIT grew by 18% to € 411 million (H1 2010: € 347 million). The EBIT margin improved to 20.9% (H1 2010: 19.9%), mainly attributable to the strong development in North America.
Net interest was -€ 143 million (H1 2010: -€ 141 million). Net income 1 increased by 33% to € 181 million (H1 2010: € 136 million).
Fresenius Kabi's operating cash fl ow increased by 8% to € 205 million (H1 2010: € 189 million). The cash fl ow margin was 10.4% (H1 2010: 10.8%). Given increased capital expenditures, cash fl ow before acquisitions and dividends of € 124 million remained unchanged from previous year's level.
In the second quarter of 2011, Fresenius Kabi increased sales by 7% at actual rates and by 11% in constant currency to € 1,011 million (Q2 2010: € 945 million). Organic sales growth was also 11%. EBIT grew by 6% to € 214 million (Q2 2010: € 202 million). EBIT margin was 21,2% (Q2 2010: 21,4%). Fresenius Kabi's net income 1 improved to € 94 million (Q2 2010: € 90 million).
In the second quarter of 2011, Fresenius Kabi announced the expansion of its Grand Island, New York, manufacturing facility. A total of US\$ 38 million will be invested over the next two years, adding six additional production lines for I.V. drugs in order to secure the future growth of the business.
Special items relating to the acquisition of APP Pharmaceuticals are included in the segment "Corporate / Other".
Fresenius Helios is one of the largest private hospital operators in Germany. Helios owns 64 hospitals, including fi ve maximum care hospitals in Berlin-Buch, Erfurt, Krefeld, Schwerin and Wuppertal. Helios treats more than 2 million patients per year, thereof approximately 650,000 inpatients, and operates approximately 19,000 beds.
| € in millions | Q2 / 2011 | Q2 / 2010 | Change | H1 / 2011 | H1 / 2010 | Change |
|---|---|---|---|---|---|---|
| Sales | 645 | 615 | 5% | 1,293 | 1,223 | 6% |
| EBITDA | 87 | 78 | 12% | 166 | 150 | 11% |
| EBIT | 65 | 58 | 12% | 123 | 110 | 12% |
| Net income 1 | 39 | 34 | 15% | 72 | 62 | 16% |
| Employees (June 30 / December 31) | 33,931 | 33,321 | 2% |
Sales increased by 6% to € 1,293 million (H1 2010: € 1,223 million), mainly driven by solid organic sales growth of 4%. Acquisitions contributed 2% to growth due to the consolidation of the St. Marienberg hospital in Helmstedt / Lower Saxony.
EBIT grew by 12% to € 123 million (H1 2010: € 110 million). The EBIT margin improved to 9.5% (H1 2010: 9.0%).
The established clinics increased sales by 4% to € 1,276 million. EBIT improved by 13% to € 124 million. The EBIT margin was 9.7%.
Net income 1 increased by 16% to € 72 million (H1 2010: € 62 million).
In the second quarter of 2011, Fresenius Helios reported sales growth of 5% to € 645 million (Q2 2010: € 615 million). Organic sales growth was 4%, aquisitions contributed 1% to growth. EBIT increased by 12% to € 65 million (Q2 2010: € 58 million). EBIT margin improved to excellent 10.1% (Q2 2010: 9.4%). Net income 1 increased by 15% to € 39 million (Q2 2010: € 34 million).
The acquisition of the municipal hospital in Rottweil, Southwestern Germany, was successfully completed in the second quarter of 2011. The hospital was consolidated as from July 1, 2011.
Fresenius Vamed offers engineering and services for hospitals and other health care facilities.
| € in millions | Q2 / 2011 | Q2 / 2010 | Change | H1 / 2011 | H1 / 2010 | Change |
|---|---|---|---|---|---|---|
| Sales | 173 | 182 | - 5% | 313 | 338 | - 7% |
| EBITDA | 8 | 10 | - 20% | 15 | 19 | - 21% |
| EBIT | 7 | 8 | - 13% | 12 | 15 | - 20% |
| Net income 1 | 5 | 6 | - 17% | 9 | 12 | - 25% |
| Employees (June 30 / December 31) | 3,170 | 3,110 | 2% |
Fresenius Vamed's sales reached € 313 million (H1 2010: € 338 million). Sales in the project business were € 202 million (H1 2010: € 230 million). Prior year sales included a substantial medical supply contract with the Ukraine. Sales in the service business increased by 3% to € 111 million (H1 2010: € 108 million).
EBIT was € 12 million (H1 2010: € 15 million). The EBIT margin was 3.8% (H1 2010: 4.4%). Net income 1 was € 9 million (H1 2010: € 12 million).
Order backlog of € 762 million as of June 30, 2011, remained close to its all-time high (Dec. 31, 2010: €801 million). Order intake of € 164 million (H1 2010: € 328 million) was impacted by the postponement of orders to the second half of 2011.
Sales in the second quarter of 2011 were € 173 million (Q2 2010: € 182 million). EBIT was € 7 million (Q2 2010: € 8 million). EBIT margin was 4.0% (Q2 2010: 4.4%). Net income 1 was € 5 million (Q2 2010: € 6 million).
As of June 30, 2011, Fresenius Group increased the number of its employees by 4% to 142,933 (Dec. 31, 2010: 137,552).
| Number of employees | June 30, 2011 | Dec 31, 2010 | Change |
|---|---|---|---|
| Fresenius Medical Care | 81,357 | 77,442 | 5% |
| Fresenius Kabi | 23,670 | 22,851 | 4% |
| Fresenius Helios | 33,931 | 33,321 | 2% |
| Fresenius Vamed | 3,170 | 3,110 | 2% |
| Corporate / Other | 805 | 828 | - 3% |
| Total | 142,933 | 137,552 | 4% |
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, and 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 | 128 | 114 | 12% |
|---|---|---|---|
| Corporate / Other | 10 | 15 | - 33% |
| Fresenius Vamed | 0 | 0 | |
| Fresenius Helios | — | — | -- |
| Fresenius Kabi | 80 | 65 | 23% |
| Fresenius Medical Care | 38 | 34 | 12% |
| € in millions | H1 / 2011 | H1 / 2010 | Change |
Fresenius focuses its R & D efforts on its core competencies in the following areas:
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 are and improve the patient's quality of life. At the same time, we want to make high-quality treatments available to patients worldwide.
Our R & D strategy is aligned with this focus:
A key focus of our R & D work is to expand global distribution of our product portfolio. We are constantly working on dossiers for the registration of our products for all the world's major markets.
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 sales increased by 11% to € 14.6 million in the fi rst half of 2011 (H1 2010: € 13.1 million). ATG sales increased by 9% to € 12.8 million and Removab sales by 29% to € 1.8 million.
In the second quarter of 2011, Fresenius Biotech received approval from the Austrian Federal Offi ce for Safety in Health Care for the use of ATG-Fresenius S in stem cell transplantations. Austria is the fi fth country to approve the immunosuppressive agent in this indication, following Germany, Portugal, Argentina and Thailand.
In June 2011, the Italian Medicines Agency, AIFA, has added Fresenius Biotech's trifunctional antibody Removab to its list of reimbursable medications.
In July 2011, the European Medicines Agency's (EMA) Committee for Medicinal Products for Human Use (CHMP) recommended a variation of the existing approval of Removab. The infusion time of currently 6 hours can now be reduced to 3 hours, which facilitates the use of Removab in an out-patient setting. Moreover, the CHMP recommendation allows marketing of follow-up results for the pivotal study in patients with malignant ascites showing that the 1-year survival rate in Removab-treated patients was more than four times higher than in the control group (11.4% Removab group vs. 2.6% control group).
In the fi rst half of 2011, Fresenius Biotech's EBIT was - € 13 million (H1 2010: - € 15 million).
Compared to the presentation in the 2010 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 estimated expenses for legal services, as appropriate.
In addition, we report on legal proceedings, currency and interest risks on pages 41 to 45 in the Notes of this report.
On August 2, 2011, Fresenius Medical Care announced its plans to acquire 100% of Liberty Dialysis Holdings, Inc., and to acquire the U.S. based company American Access Care Holdings, LLC. Further information on the acquisitions can be found on pages 11 f. of the Group Management Report.
Other than that, there were no signifi cant changes in the Group position or environment sector since the end of the fi rst half of 2011.
Fresenius now expects 2011 net income 1 to increase by 15% to 18% in constant currency. Previously, the Company expected net income 1 growth of 12% to 16% in constant currency. Fresenius confi rms its sales guidance. Sales are expected to increase by 7% to 8% in constant currency.
In 2011, the net debt / EBITDA ratio is expected to stay in the range of 2.5 to 3.0. Also for calendar year 2012, Fresenius Medical Care's announced and entirely debtfi nanced acquisitions are not expected to cause Group leverage to exceed that target range.
Fresenius Medical Care fully confi rms the outlook for 2011. The company projects sales of more than US\$ 13 billion. Net income 2 is expected between US\$ 1,070 million and US\$ 1,090 million.
Fresenius Kabi further raises its outlook for 2011. The company now forecasts organic sales growth of ~ 8%. Previously, Fresenius Kabi targeted organic sales growth of > 5%. The EBIT margin is now expected to be ~ 20% with net income clearly surpassing 2010 earnings 3 . The previous guidance was 19% to 20%.
Net income attributable to Fresenius SE & Co. KGaA; adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) related to the acquisition of APP Pharmaceuticals. Both are non-cash items
Net income attributable to Fresenius Medical Care AG & Co. KGaA Net income attributable to Fresenius Kabi AG
Fresenius Helios raises its EBIT outlook to ~ € 260 million. Previously, the company expected to reach the upper half of a range from € 250 million to € 260 million. Fresenius Helios fully confi rms its sales outlook and projects organic sales growth of 3% to 5%.
Fresenius Vamed revises its full-year guidance as a consequence of project delays in Middle East / North Africa due to the unrest in the region. The company now projects sales and EBIT growth of 0% to 5%. Previously, the company expected sales and EBIT growth between 5% and 10%. Fresenius Vamed expects a signifi cant increase in order intake in the second half of 2011 and continued sales and earnings growth following the temporary project delays.
For 2011, Fresenius Biotech expects an EBIT of about - € 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 in the future as a result of expected expansion. We expect that the percentage increase in the number of employees will be in the mid-single digits in 2011.
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) | 7% – 8% | confi rmed |
| Net income 1 , growth (in constant currency) |
12% – 16% | 15% – 18% |
Net income attributable to Fresenius SE & Co. KGaA, adjusted for the effects of the mark-to-market accounting of the Mandatory Exchangeable Bonds
and the Contingent Value Rights relating to the acquisition of APP Pharmaceuticals. Both are non-cash items.
| Previous guidance | New guidance | ||
|---|---|---|---|
| Fresenius Medical Care | Sales | > US\$ 13.0 bn | confi rmed |
| Net income 1 | US\$1,070 m – US\$ 1,090 m | confi rmed | |
| Fresenius Kabi | Sales, growth (organic) | > 5% | ~ 8% |
| EBIT-margin | 19% – 20% | ~ 20% | |
| Fresenius Helios | Sales, growth (organic) | 3% – 5% | confi rmed |
| EBIT | € 250 m – € 260 m 2 | ~ € 260 m | |
| Fresenius Vamed | Sales, growth | 5% – 10% | 0% – 5% |
| EBIT, growth | 5% – 10% | 0% – 5% | |
| Fresenius Biotech | EBIT | ~ - € 30 m | confi rmed |
Net income attributable to Fresenius Medical Care AG & Co. KGaA
2 Upper half of range
| € in millions | Q2 / 2011 | Q2 / 2010 | H1 / 2011 | H1 / 2010 |
|---|---|---|---|---|
| Sales | 4,042 | 4,043 | 8,004 | 7,686 |
| Cost of sales | - 2,658 | - 2,682 | - 5,293 | - 5,152 |
| Gross profi t | 1,384 | 1,361 | 2,711 | 2,534 |
| Selling, general and administrative expenses | - 687 | - 684 | - 1,376 | - 1,299 |
| Research and development expenses | - 65 | - 57 | - 128 | - 114 |
| Operating income (EBIT) | 632 | 620 | 1,207 | 1,121 |
| Net interest | - 141 | - 138 | - 276 | - 281 |
| Other fi nancial result | - 89 | - 45 | - 151 | - 96 |
| Financial result | - 230 | - 183 | - 427 | - 377 |
| Income before income taxes | 402 | 437 | 780 | 744 |
| Income taxes | - 128 | - 135 | - 243 | - 234 |
| Net income | 274 | 302 | 537 | 510 |
| Less noncontrolling interest | 145 | 150 | 280 | 270 |
| Net income attributable to Fresenius SE & Co. KGaA | 129 | 152 | 257 | 240 |
| Earnings per ordinary share in € | 0.79 | 0.94 | 1.58 | 1.48 |
| Fully diluted earnings per ordinary share in € | 0.78 | 0.92 | 1.56 | 1.46 |
| Earnings per preference share in € | n/a | 0.95 | n/a | 1.49 |
| Fully diluted earnings per preference share in € | n/a | 0.93 | n/a | 1.47 |
| € in millions | Q2 / 2011 | Q2 / 2010 | H1 / 2011 | H1 / 2010 |
|---|---|---|---|---|
| Net income | 274 | 302 | 537 | 510 |
| Other comprehensive income (loss) | ||||
| Foreign currency translation | - 102 | 459 | - 455 | 800 |
| Cash flow hedges | 0 | - 78 | 34 | - 113 |
| Actuarial gains / losses on defined benefit pension plans | 3 | - 5 | 9 | - 7 |
| Income taxes related to components of other comprehensive income (loss) | - 4 | 15 | - 10 | 19 |
| Other comprehensive income (loss) | - 103 | 391 | - 422 | 699 |
| Total comprehensive income | 171 | 693 | 115 | 1,209 |
| Comprehensive income (loss) attributable to noncontrolling interest subject to put provisions |
3 | 24 | - 2 | 39 |
| Comprehensive income attributable to noncontrolling interest not subject to put provisions |
81 | 349 | 37 | 606 |
| Comprehensive income attributable to Fresenius SE & Co. KGaA | 87 | 320 | 80 | 564 |
| € in millions | June 30, 2011 | Dec. 31, 2010 |
|---|---|---|
| Cash and cash equivalents | 608 | 769 |
| Trade accounts receivable, less allowance for doubtful accounts | 3,086 | 2,935 |
| Accounts receivable from and loans to related parties | 11 | 15 |
| Inventories | 1,548 | 1,411 |
| Other current assets | 1,090 | 925 |
| Deferred taxes | 409 | 380 |
| I. Total current assets | 6,752 | 6,435 |
| Property, plant and equipment | 3,880 | 3,954 |
| Goodwill | 11,399 | 11,464 |
| Other intangible assets | 908 | 984 |
| Other non-current assets | 843 | 628 |
| Deferred taxes | 127 | 112 |
| II. Total non-current assets | 17,157 | 17,142 |
| Total assets | 23,909 | 23,577 |
| Trade accounts payable | 694 | 691 |
| Short-term accounts payable to related parties | 2 | 2 |
| Short-term accrued expenses and other short-term liabilities | 3,009 | 2,731 |
| Short-term debt | 646 | 606 |
| Short-term loans from related parties | 2 | 2 |
| Current portion of long-term debt and capital lease obligations | 865 | 420 |
| Mandatory Exchangeable Bonds | 554 | 554 |
| Trust preferred securities of Fresenius Medical Care Capital Trusts | 0 | 468 |
| Short-term accruals for income taxes | 135 | 163 |
| Deferred taxes | 94 | 74 |
| A. Total short-term liabilities | 6,001 | 5,711 |
| Long-term debt and capital lease obligations, less current portion | 4,444 | 4,919 |
| Senior Notes | 3,055 | 2,369 |
| Long-term accrued expenses and other long-term liabilities | 409 | 458 |
| Pension liabilities | 391 | 383 |
| Long-term accruals for income taxes | 174 | 196 |
| Deferred taxes | 519 | 488 |
| B. Total long-term liabilities | 8,992 | 8,813 |
| I. Total liabilities | 14,993 | 14,524 |
| II. Noncontrolling interest subject to put provisions | 212 | 209 |
| A. Noncontrolling interest not subject to put provisions | 3,783 | 3,879 |
| Subscribed capital | 163 | 162 |
| Capital reserve | 2,100 | 2,085 |
| Other reserves | 2,800 | 2,683 |
| Accumulated other comprehensive income (loss) | - 142 | 35 |
| B. Total Fresenius SE & Co. KGaA shareholders' equity | 4,921 | 4,965 |
| III. Total shareholders' equity | 8,704 | 8,844 |
| Total liabilities and shareholders' equity | 23,909 | 23,577 |
| € in millions | H1 / 2011 | H1 / 2010 |
|---|---|---|
| Operating activities | ||
| Net income | 537 | 510 |
| Adjustments to reconcile net income to cash and cash equivalents provided by operating activities |
||
| Depreciation and amortization | 319 | 307 |
| Change in deferred taxes | 7 | - 31 |
| Gain on sale of fixed assets | - 3 | - 2 |
| Changes in assets and liabilities, net of amounts from businesses acquired or disposed of |
||
| Trade accounts receivable, net | - 233 | - 139 |
| Inventories | - 180 | - 141 |
| Other current and non-current assets | - 81 | - 34 |
| Accounts receivable from / payable to related parties | 6 | 7 |
| Trade accounts payable, accrued expenses and other short-term and long-term liabilities |
316 | 324 |
| Accruals for income taxes | - 38 | 4 |
| Net cash provided by operating activities | 650 | 805 |
| Investing activities | ||
| Purchase of property, plant and equipment | - 301 | - 330 |
| Proceeds from sales of property, plant and equipment | 9 | 10 |
| Acquisitions and investments, net of cash acquired | ||
| and net purchases of intangible assets | - 851 | - 237 |
| Proceeds from divestitures | 5 | 6 |
| Net cash used in investing activities | - 1,138 | - 551 |
| Financing activities | ||
| Proceeds from short-term loans | 76 | 835 |
| Repayments of short-term loans | - 82 | - 788 |
| 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 | 467 | 388 |
| Repayments of long-term debt and capital lease obligations | - 217 | - 591 |
| Proceeds from the issuance of Senior Notes | 753 | 242 |
| Changes of accounts receivable securitization program | 93 | 65 |
| Proceeds from the exercise of stock options | 32 | 35 |
| Redemption of trust preferred securities of Fresenius Medical Care Capital Trusts |
- 466 | 0 |
| Dividends paid | - 303 | - 296 |
| Change in noncontrolling interest | – | - 2 |
| Exchange rate effect due to corporate financing | - 1 | - 1 |
| Net cash provided by / used in fi nancing activities | 352 | - 113 |
| Effect of exchange rate changes on cash and cash equivalents | - 25 | 47 |
| Net decrease / increase in cash and cash equivalents | - 161 | 188 |
| Cash and cash equivalents at the beginning of the reporting period | 769 | 420 |
| Cash and cash equivalents at the end of the reporting period | 608 | 608 |
| 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, 2009 | 80,658 | 80,658 | 80,658 | 80,658 | 161,316 | 161 |
| Proceeds from the exercise of stock options | 216 | 216 | 216 | 216 | 432 | 1 |
| Compensation expense related to stock options | ||||||
| Dividends paid | ||||||
| Purchase 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 | ||||||
| Adjustments relating to pension obligations |
||||||
| Comprehensive income | ||||||
| As of June 30, 2010 | 80,874 | 80,874 | 80,874 | 80,874 | 161,748 | 162 |
| 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 | 339 | 339 | 339 | 1 | ||
| 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 | ||||||
| Adjustments relating to pension obligations |
||||||
| Comprehensive income (loss) | ||||||
| As of June 30, 2011 | 162,789 | 162,789 | 0 | 0 | 162,789 | 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, 2009 | 2,035 | 2,183 | - 145 | 4,234 | 3,257 | 7,491 |
| Proceeds from the exercise of stock options | 13 | 14 | 21 | 35 | ||
| Compensation expense related to stock options | 9 | 9 | 7 | 16 | ||
| Dividends paid | - 122 | - 122 | - 152 | - 274 | ||
| Purchase of noncontrolling interest not subject to put provisions |
0 | 9 | 9 | |||
| Change in fair value of noncontrolling interest subject to put provisions |
- 4 | - 4 | - 8 | - 12 | ||
| Comprehensive income (loss) | ||||||
| Net income | 240 | 240 | 259 | 499 | ||
| Other comprehensive income (loss) | ||||||
| Cash flow hedges | - 79 | - 79 | 0 | - 79 | ||
| Foreign currency translation | 407 | 407 | 347 | 754 | ||
| Adjustments relating to pension obligations |
- 4 | - 4 | 0 | - 4 | ||
| Comprehensive income | 240 | 324 | 564 | 606 | 1,170 | |
| As of June 30, 2010 | 2,053 | 2,301 | 179 | 4,695 | 3,740 | 8,435 |
| 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 | 9 | 10 | 22 | 32 | ||
| Compensation expense related to stock options | 10 | 10 | 7 | 17 | ||
| Dividends paid | - 140 | - 140 | - 150 | - 290 | ||
| Sale of noncontrolling interest not subject to put provisions |
0 | - 5 | - 5 | |||
| Change in fair value of noncontrolling interest subject to put provisions |
- 4 | - 4 | - 7 | - 11 | ||
| Comprehensive income (loss) | ||||||
| Net income | 257 | 257 | 267 | 524 | ||
| Other comprehensive income (loss) | ||||||
| Cash flow hedges | 19 | 19 | 0 | 19 | ||
| Foreign currency translation | - 202 | - 202 | - 230 | - 432 | ||
| Adjustments relating to pension obligations |
6 | 6 | 0 | 6 | ||
| Comprehensive income (loss) | 257 | - 177 | 80 | 37 | 117 | |
| As of June 30, 2011 | 2,100 | 2,800 | - 142 | 4,921 | 3,783 | 8,704 |
| ME G D SE ATE D OLI NS CO |
T REP N |
RTI O |
G FI N |
RST H | ALF (U | N | DI AU |
D) TE |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Fresenius Medical Care | Fresenius Kabi | Fresenius Helios | Fresenius Vamed | Corporate / Other 2 | Fresenius Group | |||||||||||||
| by business segment, € in millions | 2011 | 2010 | Change | 2011 | 2010 | Change | 2011 | 2010 | Change | 2011 | 2010 | Change | 2011 | 2010 | Change | 2011 | 2010 | Change |
| Sales | 4,440 | 4,392 | 1% | 1,971 | 1,745 | 13% | 1,293 | 1,223 | 6% | 313 | 338 | - 7% | - 13 | - 12 | - 8% | 8,004 | 7,686 | 4% |
| thereof contribution to consolidated sales |
4,438 | 4,391 | 1% | 1,948 | 1,723 | 13% | 1,293 | 1,223 | 6% | 313 | 338 | - 7% | 12 | 11 | 9% | 8,004 | 7,686 | 4% |
| thereof intercompany sales | 2 | 1 | 100% | 23 | 22 | 5% | 0 | 0 | – | – | -- | - 25 | - 23 | - 9% | 0 | 0 | ||
| contribution to consolidated sales | 55% | 57% | 25% | 23% | 16% | 16% | 4% | 4% | 0% | 0% | 100% | 100% | ||||||
| EBITDA | 874 | 857 | 2% | 483 | 419 | 15% | 166 | 150 | 11% | 15 | 19 | - 21% | - 12 | - 17 | 29% | 1,526 | 1,428 | 7% |
| Depreciation and amortization | 194 | 185 | 5% | 72 | 72 | 0% | 43 | 40 | 8% | 3 | 4 | - 25% | 7 | 6 | 17% | 319 | 307 | 4% |
| EBIT | 680 | 672 | 1% | 411 | 347 | 18% | 123 | 110 | 12% | 12 | 15 | - 20% | - 19 | - 23 | 17% | 1,207 | 1,121 | 8% |
| Net interest | - 104 | - 102 | - 2% | - 143 | - 141 | - 1% | - 26 | - 27 | 4% | 1 | 1 | 0% | - 4 | - 12 | 67% | - 276 | - 281 | 2% |
| Income taxes | - 195 | - 193 | - 1% | - 76 | - 60 | - 27% | - 18 | - 17 | - 6% | - 3 | - 4 | 25% | 49 | 40 | 23% | - 243 | - 234 | - 4% |
| Net income attributable to Fresenius SE & Co. KGaA |
343 | 346 | - 1% | 181 | 136 | 33% | 72 | 62 | 16% | 9 | 12 | - 25% | - 348 | - 316 | - 10% | 257 | 240 | 7% |
| Operating cash fl ow | 347 | 485 | - 28% | 205 | 189 | 8% | 121 | 133 | - 9% | 7 | 35 | - 80% | - 30 | - 37 | 19% | 650 | 805 | - 19% |
| Cash fl ow before acquisitions | ||||||||||||||||||
| and dividends | 183 | 321 | - 43% | 124 | 124 | 0% | 82 | 50 | 64% | 5 | 31 | - 84% | - 36 | - 41 | 12% | 358 | 485 | - 26% |
| Total assets 1 | 13,182 | 12,793 | 3% | 6,754 | 6,860 | - 2% | 3,275 | 3,270 | 0% | 576 | 549 | 5% | 122 | 105 | 16% | 23,909 | 23,577 | 1% |
| Debt 1 | 4,922 | 4,400 | 12% | 4,146 | 4,298 | - 4% | 1,056 | 1,096 | - 4% | 29 | 16 | 81% | - 1,141 | - 1,026 | - 11% | 9,012 | 8,784 | 3% |
| Capital expenditure, gross | 170 | 171 | - 1% | 70 | 57 | 23% | 40 | 83 | - 52% | 2 | 4 | - 50% | 4 | 5 | - 20% | 286 | 320 | - 11% |
| Acquisitions, gross / investments 3 | 790 | 228 | -- | 6 | 23 | - 74% | 5 | – | -- | 2 | – | -- | 54 | 0 | 857 | 251 | -- | |
| Research and development expenses | 38 | 34 | 12% | 80 | 65 | 23% | – | – | -- | 0 | 0 | 10 | 15 | - 33% | 128 | 114 | 12% | |
| (per capita on balance sheet date) 1 Employees |
81,357 | 77,442 | 5% | 23,670 | 22,851 | 4% | 33,931 | 33,321 | 2% | 3,170 | 3,110 | 2% | 805 | 828 | - 3% | 142,933 | 137,552 | 4% |
| Key fi gures | ||||||||||||||||||
| EBITDA margin | 19.7% | 19.5% | 24.5% | 24.0% | 12.8% | 12.3% | 4.8% | 5.6% | 19.1% | 18.6% | ||||||||
| EBIT margin | 15.3% | 15.3% | 20.9% | 19.9% | 9.5% | 9.0% | 3.8% | 4.4% | 15.1% | 14.6% | ||||||||
| Depreciation and amortization in % of sales |
4.4% | 4.2% | 3.7% | 4.1% | 3.3% | 3.3% | 1.0% | 1.2% | 4.0% | 4.0% | ||||||||
| Operating cash flow in % of sales | 7.8% | 11.0% | 10.4% | 10.8% | 9.4% | 10.9% | 2.2% | 10.4% | 8.1% | 10.5% | ||||||||
| ROOA 1 | 12.0% | 12.5% | 12.3% | 11.9% | 8.1% | 7.8% | 15.6% | 22.2% | 11.2% | 11.6% | ||||||||
FRESENIUS SE & CO. KGAA
1 2010: December 31
2 Including special items from the acquisition of APP Pharmaceuticals, Inc. 3 Includes a € 100 million cash out for a short-term bank deposit by Fresenius Medical Care in the second quarter of 2010
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.
| A US SE & CO. KG NI FRESE |
A | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| N ME G D SE ATE D OLI NS CO |
T REP | RTI O |
N | N G SECO |
D Q | ARTE U |
R (U | AU N |
TE DI |
D) | ||||||||
| Fresenius Medical Care | Fresenius Kabi | Fresenius Helios | Fresenius Vamed | Corporate / Other 1 | Fresenius Group | |||||||||||||
| by business segment, € in millions | 2011 | 2010 | Change | 2011 | 2010 | Change | 2011 | 2010 | Change | 2011 | 2010 | Change | 2011 | 2010 | Change | 2011 | Change 2010 |
|
| Sales | 2,220 | 2,308 | - 4% | 1,011 | 945 | 7% | 645 | 615 | 5% | 173 | 182 | - 5% | - 7 | - 7 | 0% | 4,042 | 4,043 |
| by business segment, € in millions | 2011 | 2010 | Change | 2011 | 2010 | Change | 2011 | 2010 | Change | 2011 | 2010 | Change | 2011 | 2010 | Change | 2011 | 2010 | Change |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sales | 2,220 | 2,308 | - 4% | 1,011 | 945 | 7% | 645 | 615 | 5% | 173 | 182 | - 5% | - 7 | - 7 | 0% | 4,042 | 4,043 | 0% |
| thereof contribution to consolidated sales |
2,219 | 2,307 | - 4% | 999 | 933 | 7% | 645 | 615 | 5% | 173 | 182 | - 5% | 6 | 6 | 0% | 4,042 | 4,043 | 0% |
| thereof intercompany sales | 1 | 1 | 0% | 12 | 12 | 0% | 0 | 0 | – | – | -- | - 13 | - 13 | 0% | 0 | 0 | ||
| contribution to consolidated sales | 55% | 57% | 25% | 23% | 16% | 15% | 4% | 5% | 0% | 0% | 100% | 100% | ||||||
| EBITDA | 449 | 460 | - 2% | 249 | 239 | 4% | 87 | 78 | 12% | 8 | 10 | - 20% | - 4 | - 9 | 56% | 789 | 778 | 1% |
| Depreciation and amortization | 94 | 95 | - 1% | 35 | 37 | - 5% | 22 | 20 | 10% | 1 | 2 | - 50% | 5 | 4 | 25% | 157 | 158 | - 1% |
| EBIT | 355 | 365 | - 3% | 214 | 202 | 6% | 65 | 58 | 12% | 7 | 8 | - 13% | - 9 | - 13 | 31% | 632 | 620 | 2% |
| Net interest | - 52 | - 53 | 2% | - 75 | - 67 | - 12% | - 13 | - 14 | 7% | 1 | 0 | - 2 | - 4 | 50% | - 141 | - 138 | - 2% | |
| Income taxes | - 104 | - 101 | - 3% | - 39 | - 39 | 0% | - 10 | - 9 | - 11% | - 2 | - 2 | 0% | 27 | 16 | 69% | - 128 | - 135 | 5% |
| Net income attributable to Fresenius SE & Co. KGaA |
182 | 193 | - 6% | 94 | 90 | 4% | 39 | 34 | 15% | 5 | 6 | - 17% | - 191 | - 171 | - 12% | 129 | 152 | - 15% |
| Operating cash fl ow | 219 | 233 | - 6% | 138 | 115 | 20% | 53 | 97 | - 45% | - 19 | - 54 | 65% | - 19 | - 24 | 21% | 372 | 367 | 1% |
| Cash fl ow before acquisitions and dividends |
138 | 140 | - 1% | 102 | 82 | 24% | 31 | 36 | - 14% | - 20 | - 57 | 65% | - 24 | - 24 | 0% | 227 | 177 | 28% |
| Capital expenditure, gross | 84 | 94 | - 11% | 39 | 36 | 8% | 23 | 60 | - 62% | 1 | 3 | - 67% | 3 | 3 | 0% | 150 | 196 | - 23% |
| Acquisitions, gross / investments 2 | 537 | 160 | -- | 5 | 10 | - 50% | 1 | – | -- | 2 | 0 | 1 | 0 | 546 | 170 | -- | ||
| Research and development expenses | 19 | 17 | 12% | 42 | 32 | 31% | – | – | -- | 0 | – | -- | 4 | 8 | - 50% | 65 | 57 | 14% |
| Key fi gures | ||||||||||||||||||
| EBITDA margin | 20.2% | 19.9% | 24.6% | 25.3% | 13.5% | 12.7% | 4.6% | 5.5% | 19.5% | 19.2% | ||||||||
| EBIT margin | 16.0% | 15.8% | 21.2% | 21.4% | 10.1% | 9.4% | 4.0% | 4.4% | 15.6% | 15.3% | ||||||||
| Depreciation and amortization in % of sales |
4.3% | 4.1% | 3.5% | 3.9% | 3.4% | 3.3% | 0.6% | 1.1% | 3.9% | 3.9% | ||||||||
| Operating cash flow in % of sales | 9.7% | 10.0% | 13.6% | 12.2% | 8.2% | 15.8% | - 11.0% | - 29.7% | 9.2% | 9.1% | ||||||||
1 Including special items from the acquisition of APP Pharmaceuticals, Inc.
2 Includes a € 100 million cash out for a short-term bank deposit by Fresenius Medical Care in the second quarter of 2010
The consolidated segment reporting is an integral part of the notes.
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 June 30, 2011:
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 "–".
On May 12, 2010, Fresenius SE's Annual General Meeting approved the change of Fresenius SE's legal form into a partnership limited by shares (Kommanditgesellschaft auf Aktien, KGaA) with the name Fresenius SE & Co. KGaA in combination with the conversion of all non-voting preference shares into voting ordinary shares. The change of legal form as well as the conversion of shares was also approved by the preference shareholders through a special resolution.
Upon registration with the commercial register of the local court in Bad Homburg v. d. Höhe, the change of legal form into Fresenius SE & Co. KGaA became effective on January 28, 2011. According to the resolution passed, the holders of preference shares received one ordinary share of Fresenius SE & Co. KGaA for each preference share held in Fresenius SE;
the ordinary shareholders received one ordinary share of Fresenius SE & Co. KGaA for each ordinary share held in Fresenius SE. The notional proportion of each non-par value share in the subscribed capital as well as the subscribed capital itself remained unchanged. The change of Fresenius SE's legal form into a KGaA neither led to the liquidation of the Company nor to the formation of a new legal entity. The legal and commercial identity of the Company was preserved.
The legal form of the KGaA enables Fresenius to achieve the benefi ts of a single share class while maintaining the control position of the Else Kröner- Fresenius- Stiftung which held approximately 58% of the ordinary shares in Fresenius SE prior to the change. The European company Fresenius Management SE, a wholly-owned subsidiary of the Else Kröner-Fresenius- Stiftung, is the general partner (Komplemen tä rin) of Fresenius SE & Co. KGaA. Concerning the personnel composition, the Management Board of Fresenius Management SE is identical to the previous Fresenius SE Management Board and has taken over the management of Fresenius SE & Co. KGaA. The Else Kröner- Fresenius- Stiftung's right to provide the general partner is tied to the holding of more than 10% of the subscribed capital in Fresenius SE & Co. KGaA.
The effects of the change of legal form are described in the respective notes.
The registration of the change of legal form with the commercial register was fi nally cleared following a court settlement of pending disputes initiated by minority shareholders.
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, 2010.
The condensed consolidated fi nancial statements and management report for the fi rst half and the second quarter ended June 30, 2011 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, 2010, published in the 2010 Annual Report.
Except for the reported acquisitions (see note 2, Acquisitions and investments), there have been no other major changes in the entities consolidated.
The consolidated fi nancial statements for the fi rst half and the second quarter ended June 30, 2011 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 half ended June 30, 2011 are not necessarily indicative of the results of operations for the fi scal year 2011.
Certain items in the consolidated fi nancial statements for the fi rst half of 2010 and for the year 2010 have been reclassifi ed to conform with the current year's presentation.
The preparation of consolidated fi nancial statements in conformity with U.S. GAAP requires 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 June 30, 2011 in conformity with U.S. GAAP in force for interim periods on January 1, 2011.
In the fi rst half of 2011, the Fresenius Group did not apply any new standards relevant for its business for the fi rst time.
The Financial Accounting Standards Board (FASB) issued the following relevant new standards for the Fresenius Group:
In July 2011, the FASB issued Accounting Standards Update 2011–06 (ASU 2011–06), FASB Accounting Standards Codifi cation (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 a 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.
In July 2011, the FASB issued Accounting Standards Update 2011–07 (ASU 2011–07), FASB ASC Topic 954, Health Care Entities – Presentation and Disclosure of Patient Service 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 is currently evaluating the impact of ASU 2011–07 on its operations.
In June 2011, the FASB issued Accounting Standards Update 2011–05 (ASU 2011–05), FASB ASC Topic 220, Comprehensive Income – Presentation of Comprehensive Income. The amendments in ASU 2011–05 require that all non-owner changes in stockholders' equity 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. The disclosures required under ASU 2011–05 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 presents two separate but continuous statements of net income and comprehensive income, the Fresenius Group is already in compliance with the amended guidance issued in ASU 2011–05.
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 will apply the guidance under ASU 2011–04 beginning January 1, 2012.
The Fresenius Group does not generally adopt new accounting standards before compulsory adoption date.
The Fresenius Group made acquisitions and investments of € 857 million and € 251 million in the fi rst half of 2011 and 2010, respectively. Of this amount, € 851 million was paid in cash and € 6 million was assumed obligations in the fi rst half of 2011.
In the fi rst half of 2011, Fresenius Medical Care spent € 790 million on acquisitions, that consisted of the following:
During the fi rst quarter of 2011, Fresenius Medical Care loaned US\$ 294 million (€ 203 million) to Renal Advantage Partners LLC, the parent company of Renal Advantage, Inc., a provider of dialysis services, which included a US\$ 60 million (€ 41 million) conversion right for a 49% minority equity interest in Renal Advantage Partners LLC. The conversion right was exercised and became effective May 1, 2011. The remaining loan and the participation received resulting from the exercise of the conversion right are classifi ed within other non-current assets in the consolidated statement of fi nancial position. Additionally, Fresenius Medical Care has entered into agreements to provide renal products and pharmaceutical supplies as well as other services to Renal Advantage Partners LLC and Liberty Dialysis, Inc. On August 2, 2011, Fresenius Medical Care announced its plans to acquire 100% of Liberty Dialysis Holdings, Inc., the owner of all of the business of Liberty Dialysis and owner of the remaining 51% stake in Renal Advantage, Inc. (see note 24, Subsequent events).
In January 2011, Fresenius Medical Care announced the signing of a purchase agreement to acquire International Dialysis Centers (IDC), Euromedic International's dialysis service business, for € 529 million. The increase over the original purchase price of € 485 million refl ects adjustments for the seller's fi nal cash and debt positions at closing and the effects of the delay in closing resulting from the regulatory approval process. IDC treats over 8,200 hemodialysis patients predominantly in Central and Eastern Europe and operates a total of 70 clinics in 9 countries. With the exception of Portugal, where the review is still ongoing, closing occurred on June 30, 2011 following fi nal regulatory approvals by the relevant anti-trust authorities which includes a mandate for the divestiture of fi ve of the acquired clinics. Fresenius Medical Care recorded the acquired assets and liabilities at book value as of June 30, 2011, as it was unable to perform a preliminary review to determine an initial purchase price allocation due to the late date of the closing. The difference of approximately € 456 million between the purchase price and the seller's book values of its assets and liabilities has been recorded by Fresenius Medical Care as goodwill. Fresenius Medical Care expects to complete the purchase price allocation by the end of 2011. Further acquisition spending related mainly to the purchase of dialysis clinics.
Fresenius Kabi spent € 6 million on acquisitions in the fi rst half of 2011.
Fresenius Helios spent € 5 million on acquisitions, mainly for an additional purchase price payment for the HELIOS St. Marienberg Klinik Helmstedt GmbH, Germany, in the fi rst half of 2011. Furthermore, Fresenius Helios completed the acquisition of the Gesundheitszentren Landkreis Rottweil GmbH, Germany, in May 2011.
Fresenius Vamed spent € 2 million on acquisitions in the fi rst half on 2011.
In the fi rst quarter of 2011, in the segment Corporate / Other, the remaining shares of HELIOS Kliniken GmbH, Germany, were acquired for a purchase price of € 54 million.
Net income attributable to Fresenius SE & Co. KGaA for the fi rst half of 2011 in the amount of € 257 million includes several special items relating to the acquisition of APP Pharmaceuticals, Inc. (APP) in 2008. These special items in a total amount of - € 106 million (before tax: - € 151 million) are described in note 4, Other fi nancial result. Net income attributable to Fresenius SE & Co. KGaA before special items was € 363 million (H1 2010: € 302 million).
Sales by activity were as follows:
| € in millions | H1 / 2011 | H1 / 2010 |
|---|---|---|
| Sales of services | 4,739 | 4,664 |
| Sales of products and related goods | 3,062 | 2,790 |
| Sales from long-term production contracts | 203 | 232 |
| Other sales | – | – |
| Sales | 8,004 | 7,686 |
The item other fi nancial result includes the following special expenses and income with regard to the acquisition of 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 half of 2011 (H1 2010: income of € 21 million resulting from the valuation of the liability).
Due to their contractual defi nition, the issued Mandatory Exchangeable Bonds (MEB) include derivative fi nancial instruments that have to be measured at fair value. This measurement resulted in an expense (before tax) of € 156 million in the fi rst half of 2011 (H1 2010: expense before tax of € 117 million).
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 their audit for the years 1996 and 1997. Fresenius Medical Care has fi led a complaint with the appropriate German court to challenge the tax authorities' decision. In January 2011, Fresenius Medical Care reached an agreement with the tax authorities, estimated to be slightly more favorable than the tax benefi t recognized previously. The additional benefi t is expected to be recognized in the second half of 2011.
Furthermore, during the fi rst half of 2011, 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 2010 Annual Report.
The following table shows the earnings per share including and excluding the dilutive effect from stock options issued and the MEB:
| H1 / 2011 | H1 / 2010 | |
|---|---|---|
| Numerators, € in millions | ||
| Net income attributable to Fresenius SE Co. KGaA |
257 | 240 |
| less preference on preference shares | n/a | 1 |
| less effect from dilution due to Fresenius Medical Care shares and MEB |
1 | 1 |
| Income available to all classes of shares |
256 | 238 |
| Denominators in number of shares | ||
| Weighted-average number of ordinary shares outstanding |
162,548,436 | 80,721,481 |
| Weighted-average number of preference shares outstanding |
0 | 80,721,481 |
| Weighted-average number of shares outstanding of all classes |
162,548,436 | 161,442,962 |
| Potentially dilutive ordinary shares |
1,587,687 | 569,006 |
| Potentially dilutive preference shares |
0 | 569,006 |
| Weighted-average number of ordinary shares outstanding assuming dilution |
164,136,123 | 81,290,487 |
| Weighted-average number of preference shares outstanding assuming dilution |
0 | 81,290,487 |
| Weighted-average number of shares outstanding of all classes assuming dilution |
164,136,123 | 162,580,974 |
| Basic earnings per ordinary share in € |
1.58 | 1.48 |
| Preference per preference share in € 1 | n/a | 0.01 |
| Basic earnings per preference share in € |
n/a | 1.49 |
| Fully diluted earnings per ordinary share in € |
1.56 | 1.46 |
| Preference per preference share in € 1 | n/a | 0.01 |
| Fully diluted earnings per preference share in € |
n/a | 1.47 |
1 Until December 31, 2010
Due to the conversion of the preference into ordinary shares in combination with the change of legal form, the dilutive effects are only calculated on ordinary shares as of the fi scal year 2011.
As of June 30, 2011 and December 31, 2010, cash and cash equivalents were as follows:
| € in millions | June 30, 2011 | Dec. 31, 2010 |
|---|---|---|
| Cash | 594 | 650 |
| Time deposits and securities (with a maturity of up to 90 days) |
14 | 119 |
| Total cash and cash equivalents | 608 | 769 |
As of June 30, 2011 and December 31, 2010, earmarked funds of € 130 million and € 65 million, respectively, were included in cash and cash equivalents.
As of June 30, 2011 and December 31, 2010, trade accounts receivable were as follows:
| € in millions | June 30, 2011 | Dec. 31, 2010 |
|---|---|---|
| Trade accounts receivable | 3,418 | 3,252 |
| less allowance for doubtful accounts | 332 | 317 |
| Trade accounts receivable, net | 3,086 | 2,935 |
As of June 30, 2011 and December 31, 2010, inventories consisted of the following:
| € in millions | June 30, 2011 | Dec. 31, 2010 |
|---|---|---|
| Raw materials and purchased components |
353 | 350 |
| Work in process | 281 | 255 |
| Finished goods | 979 | 874 |
| less reserves | 65 | 68 |
| Inventories, net | 1,548 | 1,411 |
The investments and long-term loans comprised investments in an amount of € 241 million as of June 30, 2011 (December 31, 2010: € 190 million), that were accounted for under the equity method. In the fi rst half of 2011, income of € 12 million (H1 2010: € 2 million) resulting from this valuation was included in general and administrative expenses in the consolidated statement of income. Furthermore, other noncurrent assets include € 162 million which Fresenius Medical Care loaned to Renal Advantage Partners LLC.
As of June 30, 2011 and December 31, 2010, intangible assets, split into amortizable and non-amortizable intangible assets, consisted of the following:
AMORTIZABLE INTANGIBLE ASSETS
| June 30, 2011 | Dec. 31, 2010 | |||||
|---|---|---|---|---|---|---|
| € in millions | Acquisition cost |
Accumulated amortization |
Carrying amount |
Acquisition cost |
Accumulated amortization |
Carrying amount |
| Patents, product and distribution rights | 582 | 152 | 430 | 617 | 139 | 478 |
| Technology | 79 | 21 | 58 | 83 | 19 | 64 |
| Non-compete agreements | 172 | 122 | 50 | 184 | 125 | 59 |
| Other | 485 | 283 | 202 | 484 | 278 | 206 |
| Total | 1,318 | 578 | 740 | 1,368 | 561 | 807 |
| June 30, 2011 | Dec. 31, 2010 | |||||
|---|---|---|---|---|---|---|
| € in millions | Acquisition cost |
Accumulated amortization |
Carrying amount |
Acquisition cost |
Accumulated amortization |
Carrying amount |
| Tradenames | 161 | 0 | 161 | 173 | 0 | 173 |
| Management contracts | 7 | 0 | 7 | 4 | 0 | 4 |
| Goodwill | 11,399 | 0 | 11,399 | 11,464 | 0 | 11,464 |
| Total | 11,567 | 0 | 11,567 | 11,641 | 0 | 11,641 |
In the second quarter of 2010, administrative services agreements of Fresenius Medical Care in an amount of US\$215 million (€ 162 million) were reclassifi ed from the category management contracts to goodwill due to a change in New
York state regulations that allowed Fresenius Medical Care, beginning in April 2010, to directly own the managed facilities in that state.
Estimated regular amortization expenses of intangible assets for the next fi ve years are shown in the following table:
| € in millions | Q3 – 4 / 2011 | 2012 | 2013 | 2014 | 2015 | Q1 – 2 / 2016 |
|---|---|---|---|---|---|---|
| Estimated amortization expenses | 49 | 92 | 87 | 80 | 73 | 34 |
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, 2010 | 5,214 | 3,466 | 1,626 | 44 | 6 | 10,356 |
| Additions | 324 | 30 | 1 | 4 | 0 | 359 |
| Reclassifi cations | 162 | 0 | 0 | 0 | 0 | 162 |
| Foreign currency translation | 392 | 195 | 0 | 0 | 0 | 587 |
| Carrying amount as of December 31, 2010 | 6,092 | 3,691 | 1,627 | 48 | 6 | 11,464 |
| Additions | 490 | 2 | 74 | 0 | 0 | 566 |
| Foreign currency translation | - 423 | - 208 | 0 | 0 | 0 | - 631 |
| Carrying amount as of June 30, 2011 | 6,159 | 3,485 | 1,701 | 48 | 6 | 11,399 |
As of June 30, 2011 and December 31, 2010, the carrying amounts of the other non-amortizable intangible assets were € 152 million and € 161 million, respectively, for Fresenius Medical Care as well as € 16 million, respectively, for Fresenius Kabi.
The Fresenius Group had short-term debt of € 646 million and € 606 million at June 30, 2011 and December 31, 2010,
As of June 30, 2011 and December 31, 2010, long-term debt and capital lease obligations consisted of the following:
| € in millions | June 30, 2011 | Dec. 31, 2010 |
|---|---|---|
| Fresenius Medical Care 2006 Senior Credit Agreement | 2,404 | 2,211 |
| 2008 Senior Credit Agreement | 1,313 | 1,484 |
| Euro Notes | 600 | 800 |
| European Investment Bank Agreements | 518 | 531 |
| Capital lease obligations | 50 | 54 |
| Other | 424 | 259 |
| Subtotal | 5,309 | 5,339 |
| less current portion | 865 | 420 |
| Long-term debt and capital lease obligations, less current portion | 4,444 | 4,919 |
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 on March 31, 2006 which replaced a prior credit agreement.
Since entering into the 2006 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 Fresenius Medical Care 2006 Senior Credit Agreement at June 30, 2011 and December 31, 2010:
| June 30, 2011 | |||||
|---|---|---|---|---|---|
| Maximum amount available | Balance outstanding | ||||
| US\$ in millions | € in millions | US\$ in millions | € in millions | ||
| Revolving Credit | 1,200 | 830 | 669 | 463 | |
| Term Loan A | 1,275 | 882 | 1,275 | 882 | |
| Term Loan B | 1,530 | 1,059 | 1,530 | 1,059 | |
| Total | 4,005 | 2,771 | 3,474 | 2,404 | |
| Dec. 31, 2010 | |||||
|---|---|---|---|---|---|
| Maximum amount available | Balance outstanding | ||||
| US\$ in millions | € in millions | US\$ in millions | € in millions | ||
| Revolving Credit | 1,200 | 898 | 81 | 61 | |
| Term Loan A | 1,335 | 999 | 1,335 | 999 | |
| Term Loan B | 1,538 | 1,151 | 1,538 | 1,151 | |
| Total | 4,073 | 3,048 | 2,954 | 2,211 |
respectively. As of June 30, 2011, this consisted of € 203 million borrowed by certain subsidiaries of the Fresenius Group under lines of credit with commercial banks and US\$ 640 million (€ 443 million) outstanding short-term borrowings under the accounts receivable facility of Fresenius Medical Care.
In addition, at June 30, 2011 and December 31, 2010, US\$ 181 million and US\$ 122 million, respectively, were utilized as letters of credit which were not included as part of the above mentioned balances outstanding at those dates.
As of June 30, 2011, FMC-AG & Co. KGaA and its subsidiaries were in com pliance 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 June 30, 2011 and December 31, 2010:
| June 30, 2011 | |||
|---|---|---|---|
| Balance outstanding | |||
| € in millions | € in millions | ||
| US\$ 550 million | 381 | US\$ 0 million | 0 |
| US\$ 687 million | 476 | US\$ 687 million | 476 |
| US\$ 977 million | 676 | US\$ 977 million | 676 |
| € 161 million | 161 | € 161 million | 161 |
| 1,313 | |||
| € in millions | € in millions | ||
| US\$ 550 million | 411 | US\$ 0 million | 0 |
| US\$ 782 million | 586 | US\$ 782 million | 586 |
| US\$ 984 million | 736 | US\$ 984 million | 736 |
| € 162 million | 162 | € 162 million | 162 |
| 1,895 | 1,484 | ||
| Maximum amount available 1,694 Maximum amount available |
Dec. 31, 2010 Balance outstanding |
In March 2011, the 2008 Senior Credit Agreement was amended to refi nance Term Loan C. As a result, the tranches of Term Loan C were replaced in full by Term Loan D tranches with lower interest rates.
As of June 30, 2011, the Fresenius Group was in compliance with all covenants under the 2008 Senior Credit Agreement.
As of June 30, 2011 and December 31, 2010, Euro Notes (Schuldscheindarlehen) of the Fresenius Group consisted of the following:
| Book value / nominal value € in millions |
||||
|---|---|---|---|---|
| Maturity | Interest rate | June 30, 2011 | Dec. 31, 2010 | |
| 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 |
| FMC-AG & Co. KGaA 2009 / 2012 | Oct. 27, 2012 | 7.41% | 36 | 36 |
| FMC-AG & Co. KGaA 2009 / 2012 | Oct. 27, 2012 | variable | 119 | 119 |
| FMC-AG & Co. KGaA 2009 / 2014 | Oct. 27, 2014 | 8.38% | 15 | 15 |
| FMC-AG & Co. KGaA 2009 / 2014 | Oct. 27, 2014 | variable | 30 | 30 |
| Euro Notes | 800 | 800 |
The Euro Notes issued by Fresenius Finance B.V. in the amount of € 200 million, which are due on April 2, 2012, are shown as current portion of long-term debt and capital lease obligations in the consolidated statement of fi nancial position.
The following table shows the amounts outstanding under the European Investment Bank (EIB) facilities as of June 30, 2011 and December 31, 2010:
| Maximum amount available € in millions |
Book value € in millions |
||||
|---|---|---|---|---|---|
| Maturity | June 30, 2011 | Dec. 31, 2010 | June 30, 2011 | Dec. 31, 2010 | |
| Fresenius SE & Co. KGaA | 2013 | 196 | 196 | 196 | 196 |
| FMC-AG & Co. KGaA | 2013 / 2014 | 2711 | 271 1 | 2541 | 263 1 |
| HELIOS Kliniken GmbH | 2019 | 68 | 72 | 68 | 72 |
| Loans from EIB | 535 | 539 | 518 | 531 |
1 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 amount to US\$ 165 million (€ 114 million).
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. As of June 30, 2011, the additional fi nancial cushion resulting from unutilized credit facilities was approximately € 1.4 billion.
As of June 30, 2011 and December 31, 2010, Senior Notes of the Fresenius Group consisted of the following:
| Book value € in millions |
|||||
|---|---|---|---|---|---|
| Notional amount | Maturity | Interest rate | June 30, 2011 | Dec. 31, 2010 | |
| 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% | 636 | 635 |
| Fresenius US Finance II, Inc. 2009 / 2015 | € 275 million | July 15, 2015 | 8 3⁄4% | 263 | 261 |
| Fresenius US Finance II, Inc. 2009 / 2015 | US\$ 500 million | July 15, 2015 | 9.00% | 331 | 356 |
| Fresenius Medical Care US Finance, Inc. 2007 / 2017 | US\$ 500 million | July 15, 2017 | 6 7 ⁄8% |
342 | 370 |
| FMC Finance VI S.A. 2010 / 2016 | € 250 million | July 15, 2016 | 5.50% | 247 | 247 |
| FMC Finance VII S.A. 2011 / 2021 | € 300 million | Feb. 15, 2021 | 5.25% | 291 | 0 |
| Fresenius Medical Care US Finance, Inc. 2011 / 2021 | US\$ 650 million | Feb. 15, 2021 | 5.75% | 445 | 0 |
| Senior Notes | 3,055 | 2,369 |
On June 20, 2011, Fresenius Medical Care US Finance, Inc. acquired substantially all of the assets of FMC Finance III S.A. and assumed the obligations of FMC Finance III S.A. under its US\$ 500 million 6 7/8% Senior Notes due 2017 and the related indenture. The guarantees of FMC-AG & Co. KGaA, Fresenius Medical Care Holdings, Inc. and Fresenius Medical Care Deutschland GmbH for these Senior Notes have not been amended and remain in full force and effect.
On February 3, 2011, Fresenius Medical Care US Finance, Inc. and FMC Finance VII S.A. issued unsecured Senior Notes of US\$ 650 million and € 300 million, respectively. The Senior Notes are due in 2021. Net proceeds were used to repay indebtedness, for acquisitions and for general corporate purposes.
The Senior Notes of Fresenius Medical Care US Finance, Inc. and FMC Finance VII S.A. (wholly-owned subsidiaries of FMC-AG & Co. KGaA) are guaranteed on a senior basis jointly and severally by FMC-AG & Co. KGaA, Fresenius Medical Care Holdings, Inc. and Fresenius Medical Care Deutschland GmbH.
As of June 30, 2011, the Fresenius Group was in compliance with all of its covenants.
On June 15, 2011, Fresenius Medical Care redeemed the trust preferred securities that became due on that date and that were issued in 2001 by Fresenius Medical Care Capital Trust IV and V in the amount of US\$ 225 million and € 300 million, respectively, primarily with funds obtained under existing credit facilities.
At June 30, 2011, the pension liability of the Fresenius Group was € 403 million. The current portion of the pension liability in an amount of € 12 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 € 391 million is recorded as pension liability.
Contributions to Fresenius Group's pension fund were € 2 million in the fi rst half of 2011. The Fresenius Group expects approximately € 5 million contributions to the pension fund during 2011.
Defi ned benefi t pension plans' net periodic benefi t costs of € 21 million were comprised of the following components:
| 9 | ||
|---|---|---|
| Service cost | 7 | |
| Interest cost | 17 | 16 |
| Expected return on plan assets | - 8 | - 8 |
| Amortization of unrealized actuarial losses, net |
3 | 2 |
| Amortization of prior service costs | – | – |
| Amortization of transition obligations | – | – |
| Settlement loss | – | – |
| Net periodic benefi t cost | 21 | 17 |
As of June 30, 2011 and December 31, 2010, the Fresenius Group's potential obligations under noncontrolling interest subject to put options were € 212 million and € 209 million, respectively, of which, at June 30, 2011, € 65 million were exercisable.
As of June 30, 2011 and December 31, 2010, noncontrolling interest not subject to put provisions in the Group was as follows:
| € in millions | June 30, 2011 |
Dec. 31, 2010 |
|---|---|---|
| Noncontrolling interest not subject to put provisions in Fresenius Medical Care AG & Co. KGaA |
3,484 | 3,574 |
| Noncontrolling interest not subject to put provisions in HELIOS Kliniken GmbH |
0 | 4 |
| Noncontrolling interest not subject to put provisions in VAMED AG |
23 | 23 |
| Noncontrolling interest not subject to put provisions in the business segments |
||
| Fresenius Medical Care | 104 | 110 |
| Fresenius Kabi | 44 | 46 |
| Fresenius Helios | 126 | 119 |
| Fresenius Vamed | 2 | 3 |
| Total noncontrolling interest not subject to put provisions |
3,783 | 3,879 |
In the fi rst half of 2011, noncontrolling interest not subject to put provisions decreased by € 96 million to € 3,783 million. The change resulted from the noncontrolling interest not subject to put provisions in profi t of € 267 million, less dividend payments of € 150 million as well as a reduction of noncon trolling interest not subject to put provisions in stock options, currency effects and fi rst-time consolidations in a total amount of € 213 million.
As a result of Fresenius SE's change of legal form to Fresenius SE & Co. KGaA and its registration with the commercial register on January 28, 2011, all bearer preference shares were converted into bearer ordinary shares.
During the fi rst half of 2011, 338,799 stock options were exercised. Consequently, at June 30, 2011, the subscribed capital of Fresenius SE & Co. KGaA consisted of 162,788,889 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 22, Stock options).
After the registration of the change of legal form with the commercial register on January 28, 2011, the Conditional Capitals in the articles of association of Fresenius SE & Co. KGaA correspond in their scope to the Conditional Capitals of the former Fresenius SE, adjusted for stock options that have been exercised in the interim.
Due to the conversion of all preference shares into ordinary shares, the Conditional Capital was amended to the effect that only subscription rights for bearer ordinary shares are granted.
The following table shows the development of the Conditional Capital:
| in € | Ordinary shares | Preference shares | Total |
|---|---|---|---|
| Conditional Capital I Fresenius AG Stock Option Plan 1998 | 495,255 | 495,255 | 990,510 |
| Conditional Capital II Fresenius AG Stock Option Plan 2003 | 1,743,159 | 1,743,159 | 3,486,318 |
| Conditional Capital III Fresenius SE Stock Option Plan 2008 | 3,100,000 | 3,100,000 | 6,200,000 |
| Total Conditional Capital as of January 1, 2011 | 5,338,414 | 5,338,414 | 10,676,828 |
| Conversion of the preference shares into ordinary shares in combination with the change of legal form |
5,337,526 | - 5,337,526 | 0 |
| Fresenius AG Stock Option Plan 1998 – options exercised | - 76,020 | 0 | - 76,020 |
| Fresenius AG Stock Option Plan 2003 – options exercised | - 261,891 | - 888 | - 262,779 |
| Total Conditional Capital as of June 30, 2011 | 10,338,029 | 0 | 10,338,029 |
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 above 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 2011, a dividend of € 0.86 per bearer ordinary share was approved by Fresenius SE & Co. KGaA's shareholders at the Annual General Meeting and paid. The total dividend payment was € 140 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. The outcome of litigation and other legal matters is always diffi cult to accurately predict 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 2010 Annual Report. In the following, only the changes during the fi rst half ended June 30, 2011 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 2010 Annual Report; defi ned terms or abbreviations having the same meaning as in the 2010 Annual Report.
In January and February 2011, the U.S. Bankruptcy Court entered orders confi rming the joint plan of reorganization. These confi rmation orders are pending before the U.S. District Court.
The District Court denied Baxter's request to overturn the jury verdict and Baxter has appealed the verdict and resulting judgment to the United States Court of Appeals for the Federal Circuit.
On June 17, 2011, the District Court entered summary judgment against Renal Care Group, Inc. (RCG) for US\$ 83 million on one of the False Claims Act counts of the complaint. On June 23, 2011, Fresenius Medical Care appealed to the United States Court of Appeals for the Sixth Circuit. Fresenius Medical Care believes that RCG's operation of its Method II supply company was in compliance with applicable law, that no relief is due to the United States, that the decisions made by the District Court on March 22, 2010 and June 17, 2011 will be reversed, and that its position in the litigation will ultimately be sustained.
On February 15, 2011, a qui tam relator's complaint under the False Claims Act against Fresenius Medical Care Holdings, Inc. (FMCH) was unsealed by order of the United States District Court for the District of Massachusetts and served by the relator. The United States has not intervened in the case United States ex rel. Chris Drennen v. Fresenius Medical Care Holdings, Inc., 2009 Civ. 10179 (D. Mass.). The relator's complaint, which was fi rst fi led under seal in February 2009, alleges that FMCH seeks and receives reimbursement from government payers for serum ferritin and hepatitis B laboratory tests that are medically unnecessary or not properly ordered by a physician. On March 6, 2011, the United States Attorney for the District of Massachusetts issued a Civil Investigative Demand seeking the production of documents related to the same laboratory tests that are the subject of the relator's complaint. FMCH will cooperate fully in responding to the additional Civil Investigative Demand, and will vigorously contest the relator's complaint.
On June 29, 2011, FMCH received a subpoena from the United States Attorney for the Eastern District of New York. The subpoena is part of a criminal and civil investigation into relationships between retail pharmacies and outpatient dialysis facilities in the State of New York and into the reimbursement under government payer programs in New York for medications provided to patients with end-stage renal disease. Among the issues encompassed by the investigation is whether retail pharmacies may have received compensation from the New
York Medicaid program for pharmaceutical products subsumed in the Medicaid payment to the dialysis facilities. FMCH intends to cooperate in the investigation.
The Fresenius Group regularly analyzes current information about such claims for probable losses and provides accruals for such matters, including estimated expenses for legal services, as appropriate.
The signifi cant methods and assumptions used to estimate the fair values of fi nancial instruments 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 receivables and payables 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 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 fair value of Fresenius Medical Care's loan to Renal Advantage Partners LLC is based on signifi cant unobservable inputs of comparable
instruments. The fair values of the noncontrolling interest subject to put provisions are determined using signifi cant unobservable inputs.
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.
The carrying amounts of derivatives embedded in the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) correspond with their fair values. The embedded derivatives have to be measured at fair value, which is estimated based on a Black-Scholes model. 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. 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.
Derivatives, mainly consisting of interest rate swaps and foreign exchange forward contracts, are valued as follows: The fair value of interest rate swaps is calculated by discounting the future cash fl ows on the basis of the market interest rates applicable for the remaining term of the contract as of the date of the statement of fi nancial position. To determine the fair value of foreign exchange forward contracts, the contracted forward rate is compared to the current forward rate for the remaining term of the contract as of the date of the statement of fi nancial position. The result is then discounted on the basis of the market interest rates prevailing at the date of the statement of fi nancial position for the respective currency.
Fresenius Group's own credit risk is incorporated in the fair value estimation of derivatives that are liabilities. Counterparty credit-risk adjustments are factored into the valuation of derivatives that are assets.
The following table presents the carrying amounts and fair values of Fresenius Group's fi nancial instruments as of June 30, 2011 and December 31, 2010, respectively:
| June 30, 2011 | Dec. 31, 2010 | |||
|---|---|---|---|---|
| € in millions | Carrying amount | Fair value | Carrying amount | Fair value |
| Cash and cash equivalents | 608 | 608 | 769 | 769 |
| Assets recognized at carrying amount | 3,259 | 3,263 | 2,950 | 2,950 |
| Liabilities recognized at carrying amount | 10,262 | 10,460 | 10,031 | 10,259 |
| Liabilities recognized at fair value | 279 | 279 | 133 | 133 |
| Noncontrolling interest subject to put provisions recognized at fair value | 212 | 212 | 209 | 209 |
| Derivatives for hedging purposes | - 17 | - 17 | - 225 | - 225 |
Derivative and non-derivative fi nancial instruments recognized at fair value are classifi ed according to the three-tier fair value hierarchy. For the fair value measurement of derivatives 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. The derivatives embedded in the MEB are also classifi ed as Level 2. Until December 31, 2010, the valuation of the CVR was based on the current stock exchange price, they were
therefore classifi ed as Level 1. The liabilities recognized at fair value consisted of embedded derivatives and the CVR and were consequently classifi ed in their entirety as the lower hierarchy Level 2. As of June 30, 2011, the liabilities recognized at fair value are comprised only of derivatives embedded in the MEB due to the expiration of the CVR. The valuation of the noncontrolling interests subject to put provisions is determined using signifi cant unobservable inputs, they are therefore classifi ed as Level 3.
| June 30, 2011 | Dec. 31, 2010 | |||
|---|---|---|---|---|
| € in millions | Assets | Liabilities | Assets | Liabilities |
| Interest rate contracts (current) | 0 | 27 | – | 43 |
| Interest rate contracts (non-current) | 0 | 68 | 1 | 115 |
| Foreign exchange contracts (current) | 80 | 8 | 8 | 49 |
| Foreign exchange contracts (non-current) | 1 | 1 | 5 | 2 |
| Derivatives designated as hedging instruments 1 | 81 | 104 | 14 | 209 |
| Interest rate contracts (current) | 0 | 1 | 0 | 2 |
| Foreign exchange contracts (current) 1 | 25 | 18 | 10 | 34 |
| Foreign exchange contracts (non-current) 1 | 6 | 7 | 1 | 7 |
| Derivatives embedded in the MEB (current) | 0 | 263 | 0 | 111 |
| Derivatives not designated as hedging instruments | 31 | 289 | 11 | 154 |
1 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 concluded to hedge economic business transactions and not for speculative purposes.
Derivatives for hedging purposes as well as derivatives embedded in the MEB were recognized at gross value within other assets in an amount of € 112 million and other liabilities in an amount of € 392 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 are recognized within other short-term liabilities.
ON THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| H1 / 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 | - 3 | - 4 | |||
| Foreign exchange contracts | 3 | – | – | |||
| Derivatives in cash fl ow hedging relationships 1 | 31 | - 3 | - 4 | |||
| Foreign exchange contracts | 22 | |||||
| Derivatives in fair value hedging relationships | 22 | |||||
| Derivatives designated as hedging instruments | 31 | - 3 | 18 | |||
The amount of gain or loss recognized in the consolidated statement of income solely relates to the ineffective portion.
| H1 / 2010 | |||||
|---|---|---|---|---|---|
| € 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 | - 73 | - 3 | - 1 | ||
| Foreign exchange contracts | - 48 | - 5 | – | ||
| Derivatives in cash fl ow hedging relationships 1 | - 121 | - 8 | - 1 | ||
| Foreign exchange contracts | - 48 | ||||
| Derivatives in fair value hedging relationships | - 48 | ||||
| Derivatives designated as hedging instruments | - 121 | - 8 | - 49 |
1 The amount of gain or loss recognized in the consolidated statement
| Gain or loss recognized in the consolidated statement of income |
||
|---|---|---|
| € in millions | H1 / 2011 | H1 / 2010 |
| Interest rate contracts | 1 | 0 |
| Foreign exchange contracts | 51 | - 102 |
| Derivatives embedded in the MEB | - 152 | - 113 |
| Derivatives not designated as hedging instruments | - 100 | - 215 |
Losses from derivatives in fair value hedging relationships and from foreign exchange contracts not designated as hedging instruments recognized in the consolidated statement of income are faced by gains from the underlying transactions in the corresponding amount.
The Fresenius Group expects to recognize a net amount of € 3 million of the existing gains 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 € 63 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. The position other fi nancial result in the consolidated statement of income includes gains and losses from the valuation of the derivatives embedded in the MEB (see note 4, 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, trust preferred securities 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 concluded 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 implemented.
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 June 30, 2011, the notional amounts of foreign exchange contracts totaled € 3,546 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 € 58 million and € 14 million, respectively.
As of June 30, 2011, the Fresenius Group was party to foreign exchange contracts with a maximum maturity of 53 months.
The Fresenius Group enters into interest rate swaps and, on a small scale, into interest rate options in order to hedge against interest rate exposures arising from long-term borrowings at variable rates by swapping them into fi xed rates.
The Fresenius Group enters into interest rate swaps that are mainly designated as cash fl ow hedges with a notional volume of US\$ 3,025 million (€ 2,093 million) and € 406 million as well as a fair value of - US\$ 120 million and - € 13 million, respectively, which expire between 2011 and 2016.
The Fresenius Group has a solid fi nancial profi le. As of June 30, 2011, the equity ratio was 36.4% and the debt ratio (debt / total assets) was 37.7%. As of June 30, 2011, the net debt / EBITDA ratio was 2.7.
The aims of the capital management and further information can be found in the consolidated fi nancial statements in the 2010 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 | positive | stable | stable |
On August 2, 2011, Fitch has upgraded the company rating to BB+ from BB, the outlook is stable.
The consolidated segment reporting shown on pages 25 to 26 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 organ iza tional and reporting structures (Management Approach) at June 30, 2011.
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 225,909 patients in its 2,838 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 as well as 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.
Explanations regarding the notes on the business segments can be found in the consolidated fi nancial statements in the 2010 Annual Report.
RECONCILIATION OF KEY FIGURES TO
CONSOLIDATED EARNINGS
| € in millions | H1 / 2011 | H1 / 2010 |
|---|---|---|
| Total EBIT of reporting segments | 1,226 | 1,144 |
| General corporate expenses Corporate / Other (EBIT) |
- 19 | - 23 |
| Group EBIT | 1,207 | 1,121 |
| Net interest | - 276 | - 281 |
| Other fi nancial result | - 151 | - 96 |
| Income before income taxes | 780 | 744 |
RECONCILIATION OF NET DEBT WITH THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| € in millions | June 30, 2011 |
Dec. 31, 2010 |
|---|---|---|
| Short-term debt | 646 | 606 |
| Short-term loans from related parties | 2 | 2 |
| Current portion of long-term debt and capital lease obligations |
865 | 420 |
| Trust preferred securities of Fresenius Medical Care Capital Trusts (current) |
0 | 468 |
| Long-term debt and capital lease obligations, less current portion |
4,444 | 4,919 |
| Senior Notes | 3,055 | 2,369 |
| Debt | 9,012 | 8,784 |
| less cash and cash equivalents | 608 | 769 |
| Net debt | 8,404 | 8,015 |
According to the defi nitions in the underlying agreements, the MEB are and the CVR were not categorized as debt.
On June 30, 2011, 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.
Upon registration of Fresenius SE's change of legal form to Fresenius SE & Co. KGaA with the commercial register on January 28, 2011, adaptations of the three stock option plans were required. Due to the conversion of all preference shares into ordinary shares in combination with the change of legal form, all previously issued subscription rights under the respective stock option plan are to be satisfi ed, in case of exercise, with ordinary shares. Furthermore, the benefi ciaries under the 2008 Plan are exclusively granted subscription rights for ordi nary shares. With regard to the eligible benefi ciaries, the members of Fresenius Management SE's Management Board replace the previous members of the Fresenius SE Management Board for future stock option grants. With regard to the 2008 Plan, the Supervisory Board of Fresenius Management SE determines the grants for the Management Board members of that company. All other plan participants will be determined by the Management Board of Fresenius Management SE. In addition, due to the discontinuation of the preference shares, the success target of the 2003 Plan was adjusted to the effect, that it is deemed to be achieved if and when the sum of the following price increases amounts to at least 25%:
Whereas the number of stock options remained unchanged, in the future, the exercise price of the stock options corresponds to the stock exchange price of the ordinary share without considering the stock exchange price of the preference share.
During the fi rst half of 2011, Fresenius SE & Co. KGaA received cash of € 10 million from the exercise of 338,799 stock options.
Under the 1998 Plan, 56,004 stock options were outstanding and exercisable at June 30, 2011. No options were held by the members of the Fresenius Management SE Management Board. 1,665,819 convertible bonds were outstanding under the 2003 Plan, of which 1,387,441 were exercisable. The members of the Fresenius Management SE Management Board held 331,380 convertible bonds. Out of 3,084,086 outstanding stock options issued under the 2008 Plan, 559,860 were held by the members of the Fresenius Management SE Management Board.
At June 30, 2011, 1,443,445 options for ordinary shares were outstanding and exercisable. As of June 30, 2011, total unrecognized compensation costs related to non-vested options granted under the 2003 Plan and the 2008 Plan were € 12 million. These costs are expected to be recognized over a weighted-average period of 1.7 years.
On May 12, 2011, the Fresenius Medical Care AG & Co. KGaA Stock Option Plan 2011 (2011 Plan) was established by resolution of Fresenius Medical Care AG & Co. KGaA's (FMC-AG & Co. KGaA) Annual General Meeting with a conditional capital increase up to € 12 million subject to the issue of up to 12 million non-par value bearer ordinary shares with a nominal value of € 1.00 each. Under the 2011 Plan, up to 12 million options can be issued, each of which can be exercised to obtain one ordinary share, with up to 2 million options designated for members of the Management Board of Fresenius Medical Care Management AG (FMC Management AG), the general
partner, up to 2.5 million options designated for members of management boards of direct or indirect subsidiaries of FMC-AG & Co. KGaA and up to 7.5 million options designated for managerial staff members of FMC-AG & Co. KGaA and such subsidiaries. FMC-AG & Co. KGaA may issue new shares to fulfi ll the stock option obligations, or FMC-AG & Co. KGaA may issue shares that it has acquired or which FMC-AG & Co. KGaA itself has in its own possession. With respect to participants who are members of the Management Board of FMC Management AG, its Supervisory Board has sole authority to grant stock options and exercise other decision making powers under the 2011 Plan (including decisions regarding certain adjustments and forfeitures). FMC Management AG has such authority with respect to all other participants in the 2011 Plan.
Options under the 2011 Plan can be granted on the last Monday in July and / or the fi rst Monday in December during the life of the plan. The exercise price of options granted under the 2011 Plan shall be the average stock exchange price on the Frankfurt Stock Exchange of FMC-AG & Co. KGaA's ordinary shares during the 30 calendar days immediately prior to each grant date. Options granted under the 2011 Plan have an eight-year term and can be exercised only after a four-year vesting period. The vesting of options granted is subject to achievement of performance targets measured over a four-year period beginning with the fi rst day of the year of the grant. For each such year, the performance target is achieved if FMC-AG & Co. KGaA's adjusted basic income per ordinary share (Adjusted EPS), as calculated in accordance with the 2011 Plan, increases by at least 8% year over year during the vesting period or, if this is not the case, the compounded annual growth rate of the Adjusted EPS refl ects an increase of at least 8% per year of the Adjusted EPS during the four-year vesting period beginning with the Adjusted EPS for the year of grant as compared to the Adjusted EPS for the year preceding such grant. At the end of the vesting period, one-fourth of the options granted are forfeited for each year in which the performance target is not met or exceeded. Vesting of the portion or portions of a grant for a year or years in which the performance target is met does not occur until completion of the four-year vesting period.
Options granted under the 2011 Plan to U.S. participants are non-qualifi ed stock options under the United States Internal Revenue Code of 1986, as amended. Options under the 2011 Plan are not transferable by a participant or a participant's heirs, and may not be pledged, assigned, or disposed of otherwise.
The Fresenius Medical Care AG & Co. KGaA Phantom Stock Plan 2011 (2011 Phantom Stock Plan) was established in the second quarter of 2011. Awards of phantom stock under the 2011 Phantom Stock Plan can be granted on the last Monday in July and / or the fi rst Monday in December. Phantom stock awards under the 2011 Phantom Stock Plan entitles the holders to receive payment in Euro from FMC-AG & Co. KGaA upon exercise of the phantom stock. The payment per Phantom Stock share in lieu of the issuance of such stock shall be based upon the stock exchange price on the Frankfurt Stock Exchange of one of FMC-AG & Co. KGaA's ordinary shares on the exercise date. Phantom stock will be granted over a fi ve year period of time and all phantom stock will have a fi ve-year term but can be exercised only after a four-year vesting period, or as otherwise expressly stated in the plan, beginning with the fi rst day of the year of the grant. The vesting of the phantom stock granted is subject to achievement of performance targets measured over a four-year period. For each such year, the performance target is achieved if FMC-AG & Co. KGaA's adjusted EPS, as calculated in accordance with the 2011 Phantom Stock Plan (Adjusted EPS), increases by at least 8% year over year during the vesting period or, if this is not the case, the compounded annual growth rate of the Adjusted EPS refl ects an increase of at least 8% per year of the Adjusted EPS during the four-year vesting period beginning with the Adjusted EPS for the year of grant as compared to the Adjusted EPS for the year preceding such grant. At the end of the vesting period, one-fourth of the phantom stock granted are forfeited for each year in which the performance target is not met or exceeded. Vesting of the portion or portions of a grant for a year or years in which the performance target is met does not occur until completion of the four-year vesting period.
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 and was the chairman of the supervisory board of Roland Berger Strategy Consultants until August 1, 2010. In the fi rst half of 2011, the Fresenius Group paid € 0.1 million for consulting services rendered to this company.
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 half of 2011, the Fresenius Group paid € 0.5 million for services in connection with the issuance of Senior Notes by FMC Finance VII S.A.
Dr. Gerhard Rupprecht, a member of the Supervisory Board of Fresenius SE & Co. KGaA, was a member of the management board of Allianz SE until December 31, 2010 and the chairman of the management board of Allianz Deutschland AG until June 30, 2010. Dr. Franceso De Meo, a member of the Management Board of the general partner of Fresenius SE & Co. KGaA, is a member of the supervisory board of Allianz Private Krankenversicherungs-AG. In the fi rst half of 2011, the Fresenius Group paid € 2 million for insurance premiums to Allianz.
Dr. Dieter Schenk, deputy chairman of the Supervisory Board of Fresenius SE until January 28, 2011, member of the Supervisory Board of Fresenius Management SE since March 11, 2010 and deputy chairman of the Supervisory Board of Fresenius Management SE since May 12, 2010, is a partner in the law fi rm Noerr LLP that provides legal services to the Fresenius Group. In the fi rst half of 2011, the Fresenius Group paid this law fi rm € 0.3 million for services rendered.
On August 2, 2011, Fresenius Medical Care announced its plans to acquire 100% of Liberty Dialysis Holdings, Inc., the owner of all of the business of Liberty Dialysis and owner of a 51% stake in Renal Advantage, Inc. Fresenius Medical Care
currently owns a 49% stake in Renal Advantage. The total investment for Fresenius Medical Care including the assumption of incremental debt will be approximately US\$ 1.7 billion. The transaction remains subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act and is expected to close in early 2012. On completion, the acquired operations would add approximately 260 out-patient dialysis clinics to Fresenius Medical Care's network in the U.S. and approximately US\$ 1 billion in annual revenue before the anticipated divestiture of some centers as a condition of the transaction. The transaction will be fi nanced from cash fl ow from operations and debt and is expected to be accretive to earnings in the fi rst year after closing of the transaction.
On August 2, 2011, Fresenius Medical Care announced its plans to acquire the U.S. based company American Access Care Holdings, LLC (AAC) for US\$ 385 million. AAC operates 28 freestanding out-patient interventional radiology centers throughout 12 states in the U.S. primarily dedicated to the vascular access needs of dialysis patients. The transaction remains subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act and is expected to close in the fourth quarter of 2011. On completion, the acquired operations will add approximately US\$ 175 million in annual revenue and are expected to be accretive to earnings in the fi rst year after closing of the transaction. The transaction will be fi nanced from cash fl ow from operations and available borrowing capacity.
There have been no signifi cant changes in the Fresenius Group's operating environment following the end of the fi rst half of 2011. 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 half of 2011.
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.
"To the best of our knowledge, and in accordance with the applicable reporting principles for interim fi nancial reporting, the interim consolidated fi nancial statements give a true and fair view of the assets, liabilities, fi nancial position and
profi t or loss of the Group, and the interim Group management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group for the remaining months of the fi nancial year."
Bad Homburg v. d. H., August 19, 2011
Fresenius SE Co. KGaA, represented by: Fresenius Management SE, its General Partner
The Management Board
Dr. U. M. Schneider R. Baule Dr. F. De Meo
Dr. J. Götz Dr. B. Lipps S. Sturm Dr. E. Wastler
| Report on 1st – 3rd quarters 2011 | |
|---|---|
| Conference call Live webcast |
November 2, 2011 |
| Report on fi scal year 2011 Analyst Meeting, Bad Homburg v. d. H. Press conference, Bad Homburg v. d. H. Live webcast |
February 21, 2012 |
| Report on 1st quarter 2012 Conference Call Live webcast |
May 3, 2012 |
| Annual General Meeting, Frankfurt am Main, Germany | May 11, 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 |
Subject to change
| Ordinary share | |
|---|---|
| Securities identifi cation no. | 578 560 |
| Ticker symbol | FRE |
| ISIN | DE0005785604 |
| Bloomberg symbol | FRE GR |
| Reuters symbol | FREG.de |
| Main trading location | Frankfurt / Xetra |
Else-Kröner-Straße 1 Bad Homburg v. d. H.
Contact for shareholders 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
Forward-looking statements:
This Quarterly Financial Report contains forward-looking statements. These statements represent assessments which we have made on the basis of the information available to us at the time. Should the assumptions on which the statements are based on not occur, or if risks should arise – as mentioned in the risk report in the 2010 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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