Alternative Performance Measures
Usage of Alternative Performance Measures
The Fresenius Group uses alternative performance measures in its regulatory and mandatory publications that may represent so called non-GAAP-measures. These indicators are neither defined by US-GAAP nor by IFRS.
Within the internal control system of Fresenius non-GAAP-measures are used as key performance indicators.
The use of non-GAAP-measures for evaluating assets, financial and earnings position of Fresenius is not recommended on an isolated basis or as an alternative to the key performance indicators provided within the consolidated financial statements prepared in accordance with US-GAAP and IFRS.
The non-GAAP-measures used are listed and explained below:
In order to measure the operating performance extending over several periods, key performance measures are “adjusted“ where applicable.
Adjustments may arise from acquisitions/divestitures or the adoption of new accounting standards. Reconciliation tables are available within the respective quarterly or annual report and present the composition of adjustments.
EBIT does include depreciation and write-ups on property, plant and equipment.
EBIT is calculated by subtracting cost of sales, selling, general and administrative expenses and research and development expenses from sales.
EBIT margin is calculated as the ratio of EBIT to sales.
EBITDA is calculated from EBIT by adding depreciations recognized in income and deducting write-ups recognized in income, both, on intangible assets as well as property, plant and equipment.
EBITDA margin is calculated as the ratio of EBITDA to sales.
Financial key figure that shows the net balance of incoming and outgoing payments during a reporting period.
Operating cash flow is a financial measure showing cash inflows from operating activities during a period. Operating cash flow is calculated by subtracting non-cash income and adding non-cash expenses to net income.
Cash flow from investing activities is a financial measure opposing payments for the acquisition or purchase of property, plant and equipment and investments versus proceeds from the sale of property, plant and equipment and investments.
Cash flow from financing activities is a financial measure showing how the investments of the reporting period were financed.
Cash flow from financing activities is calculated from additions to equity plus proceeds from the exercise of stock options less dividends paid plus proceeds from debt increase (loans, bonds, senior notes, etc.) less repayments of debt plus the change in noncontrolling interest plus proceeds from the hedge of exchange rate effects due to corporate financing.
Fresenius uses the cash flow before acquisitions and dividends as the financial measure for free cash flow. Cash flow before acquisitions and dividends is calculated by operating cash flow less investments (net). Net investments are calculated by payments for the purchase of property, plant and equipment less proceeds from the sale of property, plant and equipment.
The cash conversion rate is defined as the ratio of adjusted free cash flow (cash flow before acquisitions and dividends; before interest, tax and special items) to operating income (EBIT) before special items. This allows us to assess our ability to generate cash and amongst others, also to pay dividends.
Net debt/EBITDA is a financial measure reflecting the ability of Fresenius to fulfill its payment obligations. Net debt and EBITDA are calculated at LTM (last twelve month) average exchange rates respectively.
Calculation of net debt:
Short-term debt
+ Short-term debt from related parties
+ Current portion of long-term debt and capital lease obligations
+ Current portion of Senior Notes
+ Long-term debt and capital lease obligations, less current portion
+ Senior Notes, less current portion
+ Convertible bonds
= Debt
- less cash and cash equivalents
= Net debt
Indicates the average number of days it takes for a receivable to be paid.
Growth that is generated by a company’s existing businesses and not by acquisitions, divestitures, or foreign exchange impact.
Constant currencies for income and expenses are calculated using prior year average rates; constant currencies for assets and liabilities are calculated using the mid-closing rate on the date of the respective statement of financial position.
Measure of a corporation’s profitability revealing how much profit a company generates
with the money shareholders have invested. ROE is calculated by fiscal year’s net income / total equity x 100.
Calculated by: (EBIT - taxes) / Invested capital
Invested capital = total assets + amortization of goodwill (accumulated) - deferred tax assets - cash and cash equivalents - trade accounts payable - accruals (without pension accruals) - other liabilities not bearing interest
Reconciliation of average invested capital and ROIC
| € in millions, except for ROIC | 31.12.2021 | 31.12.2020 |
|---|---|---|
Total assets | 71,962 | 66,646 |
Plus: Cumulative goodwill amortization | 719 | 690 |
Minus: Cash and cash equivalents | - 2,764 | - 1,837 |
Minus: Loans to related parties | - 63 | - 62 |
Minus: Deferred tax assets | -858 | -812 |
Minus: Accounts payable | - 2,039 | - 1,816 |
Minus: Accounts payable to related parties | - 92 | - 67 |
Minus: Provisions and other current liabilities1 | - 8,925 | - 8,649 |
Minus: Income tax payable | - 495 | - 504 |
Invested Capital | 57,445 | 53,589 |
Average invested capital as of December 31, 2021 / 20202 | 55,893 | 54,648 |
Operating income3,4 | 4,260 | 4,614 |
Income tax expense | - 964 | - 1,065 |
NOPAT3,4 | 3,296 | 3,549 |
ROIC in % | 5.9 % | 6.5 % |
-
1 Includes non-current provisions and payments outstanding for acquisition; does not include pension liabilities and noncontrolling interest subject to put provisions.
2 Includes adjustments for acquisitions in the respective reporting period with a purchase price above a certain level
(2021: € 752 million; 2020: € 220 million).
3 Includes adjustments for acquisitions in the respective reporting period with a purchase price above a certain level
(2021: € 8 million; 2020: € 2 million).
4 Before special items
Calculated as the ratio of EBIT to operating assets (average).
Operating assets = total assets - deferred tax assets - trade accounts payable - cash held in trust - payments received on account - approved subsidies
Reconciliation of average operating assets and ROOA
| € in millions, except for ROOA | 31.12.2021 | 31.12.2020 |
|---|---|---|
Total assets | 71,962 | 66,646 |
Minus: Contract liabilities | - 535 | - 962 |
Minus: Payments received on account | 0 | 0 |
Minus: Cash held in trust | - 154 | - 121 |
Minus: Loans to related parties | - 63 | - 62 |
Minus: Deferred tax assets | - 858 | - 812 |
Minus: Accounts payable | - 2,039 | - 1,816 |
Minus: Accounts payable to related parties | - 92 | - 67 |
Minus: Approved subsidies due to Hospital Funding Act („Krankenhausfinanzierungsgesetz“, KHG) | - 118 | - 82 |
Operating assets | 68,103 | 62,724 |
Average operating assets as of December 31, 2021 / 20201 | 65,384 | 62,976 |
Operating income2,3 | 4,260 | 4,614 |
ROOA in % | 6.5 % | 7.3 % |
-
1 Includes adjustments for acquisitions in the respective reporting period with a purchase price above a certain level
(2021: € 868 million; 2020: € 346 million).
2 Includes adjustments for acquisitions in the respective reporting period with a purchase price above a certain level
(2021: € 8 million; 2020: € 2 million).
3 Before special items
Indicates the average number of days between receiving goods as inventory and the sale of the finished product.
Calculated by: (Inventories / Costs of goods sold) x 365 days
In order to measure the operating performance extending over several periods, key performance measures are adjusted by special items, where applicable. Adjusted measures are labelled with “before special items”. A reconciliation table is available within the respective quarterly or annual report and presents the composition of special items.
Current assets (including deferred assets) - accruals - trade accounts payable - other liabilities - deferred charges