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Fresenius Medical Care has won the 26th German Business Innovation Award for its newly developed 5008 therapy system for patients with chronic kidney failure. The award was presented during a gala celebration on the evening of January 21 at the Old Opera House in Frankfurt. The prize recognizes the best innovations and outstanding technical-scientific advancements in Germany since 1980. Nearly 220 companies took part in the 2005 competition.
"We are very excited about the German Business Innovation Award. For many years our research and development activities in Germany have played a significant role in giving patients with chronic kidney failure the best-possible dialysis treatment. With the 5008 therapy system we want to continue our success and to further expand our leadership position in this sector. The 5008 is a fundamental milestone of our product portfolio strategy and it will be followed by other innovative devices," said Dr. Emanuele Gatti, the Management Board Member responsible for the development.
The 5008 therapy system comprises a newly designed dialysis machine, an artificial kidney or dialyzer, the related bloodlines and the dialysis concentrate. It sets itself apart with a simple interface and an improvement in treatment quality. Routine processes as well as maintenance have also been reduced significantly. "Nurses and doctors can spent even more time for patients," said Dr. Gatti. Furthermore, the new dialysis machine saves operating costs since it consumes as much as 30 percent less water and electricity. With that Fresenius Medical Care proves that medical progress does not lead to increased costs for health insurers – it could even provide financial relief for an even improved treatment.
Side-effects appear less often with the new system than with conventional dialysis machines. Long-term treatment with the newly developed machine has also proven to be more gentle. For the first time, Online-Hemodiafiltration (Online-HDF) is also a standard part of the 5008 therapy system. This best-possible therapy for patients with chronic kidney failure has a positive effect on risk factors related to cardiovascular diseases and could lower the mortality rate. "This type of treatment can now be used widely since the 5008 therapy system offers more simple operation and requires fewer resources," said Dr. Gatti.
The research and development department started the design of the new dialysis machine from the scratch. The developers were able to build on experience gathered by Fresenius Medical Care as a vertically integrated company that treats patients with chronic kidney failure at more than 1,600 clinics. The system was intensively tested not only in the laboratory but also in a number of dialysis centers. Before they were ready for release, the new developments were successfully tested in more than 240,000 treatments.
The dialysis machine is one of the most important products for the treatment of patients with chronic kidney failure. It pumps blood from a special access in a patient's arm to the dialyzer where metabolic toxins are removed with the help of dialysis solution. The filtered blood is then pumped back into the patient. The dialysis machine controls the circulation of blood outside the body and the composition of the dialysis fluid. In addition, it adds substances to prevent clotting. This life-saving therapy is usually administered three times a week and lasts about four hours.
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Fresenius Medical Care AG (Frankfurt Stock Exchange: FME - ISIN: DE0005785802, FME3 - ISIN: DE0005785836) (NYSE: FMS, FMS-p) is the world's largest, integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure, a condition that affects more than 1,300,000 individuals worldwide. Through its network of approximately 1,670 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to approximately 130,400 patients around the globe. Fresenius Medical Care is also the world's leading provider of dialysis products such as hemodialysis machines, dialyzers and related disposable products.
For more information about Fresenius Medical Care visit the Company's website at www.fmc-ag.com.
(U.S. offer to conclude at midnight EST tonight)
Fresenius Medical Care AG ("the Company") (Frankfurt Stock Exchange: FME, FME3) (NYSE: FMS, FMS-p), the world's largest provider of Dialysis Products and Services, today announced that approximately 95% of all outstanding preference shares have been tendered for conversion into ordinary shares during the 4 week conversion period. This includes American Depositary Shares (ADS), of which roughly 92% of all the outstanding preference ADS have been tendered. The U.S. conversion offer ends tonight at 12.00 midnight EST. The final number of tendered preference shares (including tendered ADSs) is expected to be announced on February 8, 2006.
Ben Lipps, Chief Executive Officer of Fresenius Medical Care, commented: "I am very pleased that approximately 95% of all outstanding preference shares have been tendered. This demonstrates the attractiveness of the conversion offer. With the completion of the conversion we have fulfilled the mandate of the extraordinary shareholder meeting on August 30, 2005. The conversion and the change of the legal form of our Company are major steps towards enhancing the attractiveness of our shares and in providing flexibility for future growth opportunities for the benefit of all stakeholders."
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Fresenius Medical Care AG is the world's largest, integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure, a condition that affects more than 1,300,000 individuals worldwide. Through its network of approximately 1,670 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to approximately 130,400 patients around the globe. Fresenius Medical Care is also the world's leading provider of dialysis products such as hemodialysis machines, dialyzers and related disposable products.
For more information about Fresenius Medical Care visit the Company's website at www.fmc-ag.com.
The conversion offer may be made in the United States only by prospectus and ends today at 12:00 midnight EST. Each United States resident preference shareholder of Fresenius Medical Care AG should read the prospectus because it contains important information about the conversion offer. Fresenius Medical Care preference shareholders can obtain the U.S. prospectus and other documents that are filed with the United States Securities and Exchange Commission's website at www.sec.gov. Preference shareholders may also obtain copies of the prospectus and other documents filed with the Securities and Exchange Commission for free by contacting Fresenius Medical Care.
Fresenius Medical Care AG & Co. KGaA ("the Company") (Frankfurt Stock Exchange: FME, FME3) (NYSE: FMS, FMS-p), the world's largest provider of Dialysis Products and Services, today announced the completion of the conversion of preference shares into ordinary shares and the transformation of the legal form of the Company from an Aktiengesellschaft into a partnership limited by shares (Kommanditgesellschaft auf Aktien – KGaA). The transformation and the conversion have become effective upon registration with the commercial register of the local court (Amtsgericht), in Hof an der Saale (Germany) on Friday evening, February 10, 2006. All Shareholders in former Fresenius Medical Care AG have now become shareholders in Fresenius Medical Care AG & Co. KGaA. The new ordinary shares which resulted from the conversion will start trading today.
As of February 10, 2006, the share capital of Fresenius Medical Care AG & Co. KGaA amounts to €250,271,178.24 consisting of 96,629,422 ordinary bearer shares and 1,132,757 non-voting preference bearer shares which have not been converted within the conversion offer.
Ben Lipps, Chief Executive Officer of Fresenius Medical Care, commented: "I am very pleased that we completed both, the conversion and the change of the legal form. With that we have fulfilled the mandate of the extraordinary shareholder meeting on August 30, 2005. The conversion and the change of the legal form of our Company are major steps towards enhancing the attractiveness of our shares and in providing flexibility for future growth opportunities for the benefit of all stakeholders."
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Fresenius Medical Care is the world's largest, integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure, a condition that affects more than 1,300,000 individuals worldwide. Through its network of approximately 1,670 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to approximately 130,400 patients around the globe. Fresenius Medical Care is also the world's leading provider of dialysis products such as hemodialysis machines, dialyzers and related disposable products.
For more information about Fresenius Medical Care visit the Company's website at www.fmc-ag.com.
Fresenius Medical Care AG & Co. KGaA (Frankfurt Stock Exchange: FME, FME3) (NYSE: FMS, FMS-p), the world's largest provider of dialysis products and services, today announced that its wholly-owned subsidiary Fresenius Medical Care Holdings, Inc. and Renal Care Group, Inc. (NYSE:RCI) have entered into a definitive agreement to sell approximately 100 dialysis clinics serving on average approximately 60 to 65 patients per clinic to National Renal Institutes, Inc., a wholly owned subsidiary of DSI Holding Company, Inc. (DSI). The execution of this agreement is an important step toward concluding the review by the United States Federal Trade Commission (FTC) of Fresenius Medical Care's acquisition of Renal Care Group.
The purchase price for the divested clinics is approximately $450 million to be paid in cash, subject to post-closing adjustments for working capital and other routine matters. The sale of the clinics is expected to close shortly after the completion of Fresenius Medical Care's acquisition of Renal Care Group, Inc.
Ben Lipps, Chief Executive Officer of Fresenius Medical Care, commented: "We are very pleased to have reached an agreement with such a qualified and committed buyer at a facility valuation that is comparable to recently announced transactions in the renal industry. We are confident that DSI is as committed as Fresenius Medical Care and Renal Care Group to continuing to provide high-quality care for our patients while we accomplish a smooth and prompt transition that supports our employees and affiliated physicians. We look forward to completing our merger with Renal Care Group, which is targeted to close on or before March 31, 2006, subject to meeting all closing conditions including final approval by the FTC."
Fresenius Medical Care is hosting a conference call to be broadcast live via the Internet on Wednesday, February 22, 2006, at which time the Company will present its full year 2005 financial results. During the call, the Company will also discuss the divestiture of the clinics.
Following the completion of the acquisition of Renal Care Group, Fresenius Medical Care will own and operate approximately 1,500 dialysis clinics in North America, which will serve approximately 115,000 patients.
Banc of America Securities LLC acted as financial advisor to Fresenius Medical Care in connection with this transaction.
About National Renal Institutes, Inc.
National Renal Institutes, Inc., is a wholly-owned subsidiary of DSI Holding Company, Inc. (DSI), a healthcare services company based in Nashville, Tennessee, that operates kidney dialysis treatment clinics, hospitals and acute care centers. By placing emphasis on specific areas of medicine and surgery, DSI facilities can focus on delivering comprehensive care that carefully coordinates all the disciplines in one setting. The DSI concept is designed to provide excellent patient care and improve the quality of life for the patients, patients' families, employees, and physicians at DSI facilities.
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Fresenius Medical Care is the world's largest, integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure, a condition that affects more than 1,300,000 individuals worldwide. Through its network of approximately 1,670 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to approximately 130,400 patients around the globe. Fresenius Medical Care is also the world's leading provider of dialysis products such as hemodialysis machines, dialyzers and related disposable products.
For more information about Fresenius Medical Care visit the Company's website at www.fmc-ag.com.
The Company exceeded its financial targets, achieved record earnings and proposes its 9th consecutive annual dividend increase.
Net Revenue : $ 6,772 million, + 9%
Operating Income (EBIT): $ 939 million, + 10%
Operating Income (EBIT) excluding one-time-costs: $ 961 million, + 13%
Net Income: $ 455 million, + 13%
Net Income excluding one-time-costs: $ 472 million, + 17%
Dividend Proposal
Ordinary Share: € 1.23, + 10%
Preference Share: € 1.29, + 9%
Fresenius Medical Care AG & Co. KGaA ("the Company") (Frankfurt Stock Exchange: FME, FME3) (NYSE: FMS, FMS-p), the world's largest provider of Dialysis Products and Services, today announced its results for the fourth quarter and full year of 2005.
Fourth Quarter 2005:
Revenue
Total revenue for the fourth quarter 2005 compared to the fourth quarter 2004 increased by 8% (10% at constant currency) to $1,772 million. The organic growth rate worldwide was 9%. Dialysis Services revenue grew by 8% to $1,257 million (8% at constant currency) in the fourth quarter of 2005. Dialysis Products revenue increased by 9% to $516 million (13% at constant currency) in the same period.
North America revenue increased by 9% to $1,194 million. Dialysis Services revenue increased by 7% to $1,049 million. Average revenue per treatment for the U.S. clinics increased by 4% to $302 in the fourth quarter 2005, as compared to $290 for the same quarter in 2004. Dialysis Products revenue increased by 22% to $145 million led by strong sales of our 2008K hemodialysis machines and dialyzers.
International revenue was $578 million, an increase of 7% (12% at constant currency) as compared to the fourth quarter of 2004. Dialysis Services revenue reached $208 million, an increase of 11% (15% at constant currency). Dialysis Products revenue increased by 5% to $370 million (10% at constant currency).
Earnings
Operating income (EBIT) increased by 7% to $244 million. Operating income for the fourth quarter 2005 includes $14 million of one-time costs associated with the transformation of Fresenius Medical Care's legal form into a Kommanditgesellschaft auf Aktien (or KGaA, a partnership limited by shares) and related legal fees and costs concerning the settlement of shareholder litigation.
Excluding one-time costs, operating income for the fourth quarter 2005 increased by 14% to $258 million. This very good performance resulted in an operating margin of 14.6% as compared to 13.9% for the same quarter in 2004.
Compared to the fourth quarter 2004, the operating margin in North America increased by 50 basis points to 14.5%. In our International segment, the operating margin increased by 210 basis points to 17.4%. Our strong operational performance in the International segment was positively impacted by better production efficiencies, a favorable reimbursement environment in major dialysis service countries and foreign currency gains.
Net interest expense remained unchanged at $46 million for the fourth quarter of 2005 as compared to the same quarter in 2004.
Income tax expense was $82 million in the fourth quarter of 2005, as compared to $72 million in the fourth quarter of 2004, reflecting effective tax rates of 41.3% and 39.8%, respectively.
Net income for the fourth quarter 2005 was $116 million, an increase of 7%. Excluding one-time costs, net income increased by 18% to $127 million.
Earnings per share (EPS) for the fourth quarter of 2005 rose by 5% to $1.18 per ordinary share ($0.39 per American Depositary Share (ADS), as compared to $1.12 ($0.37 per ADS) for the fourth quarter of 2004. The weighted average number of shares outstanding for the fourth quarter of 2005 was approximately 97.6 million shares, as compared to 96.3 million shares for the fourth quarter 2004. The increase in shares outstanding results from stock option exercises in 2005.
Cash Flow
In the fourth quarter of 2005, the Company generated $200 million in net cash from operations, or 11.3% of revenue, which is at the high end of our expectations.
A total of $135 million, net of disposals, was used for capital expenditures. Free Cash Flow before acquisitions was $65 million for the fourth quarter of 2005. Days Sales Outstanding (DSO) in the fourth quarter of 2005 remained unchanged at 82 days from the third quarter of 2005 as a result of strong cash collection efforts. A total of $39 million in cash was used for acquisitions.
Full Year 2005:
Earnings and Revenue
For the full year 2005, net income was $455 million, up 13% from 2004. Excluding one-time costs, net income increased by 17% to $472 million.
Net revenue was $6,772 million, up 9% compared to 2004. Adjusted for currency, net revenue rose 8%.
Operating income (EBIT) increased by 10% to $939 million. Operating income for the full year 2005 includes $22 million of one-time costs associated with the transformation of Fresenius Medical Care's legal form into a Kommanditgesellschaft auf Aktien and related legal fees and costs concerning the settlement of shareholder litigation.
Excluding one-time costs, operating income increased by 13% to $961 million, resulting in an operating margin of 14.2% as compared to 13.7% for the year 2004.
Net interest expense for the full year 2005 decreased by 6% to $173 million. Income tax expense was $309 million for the full year as compared to $265 million in 2004. This reflects an effective tax rate of 40.3% for 2005.
For the full year 2005,earnings per ordinary share rose by 13% to $4.68 ($1.56 per ADS). The weighted average number of shares outstanding during 2005 was approximately 96.8 million.
Cash Flow
Cash from operations during the full year 2005 was $670 million as compared to $828 million for 2004. This decrease was mainly due to income tax payments for prior years in Germany and North America, and a reduction in cash generated due to a slower rate of DSO improvement this year.
A total of $297 million was used for capital expenditures, net of disposals. Free Cash Flow before acquisitions for 2005 was $373 million as compared to $567 million in 2004. Net cash used for acquisitions was $125 million in 2005.
For a complete overview of the fourth quarter and the full year 2005, please refer to the appendix.
Patients - Clinics – Treatments
As of December 31, 2005, Fresenius Medical Care treated approximately 131,450 patients worldwide, which represents a 6% increase in patients. North America provided dialysis treatments for more than 89,300 patients (up 3%) and the International segment served approximately 42,150 patients (up 11%).
As of December 31, 2005, the Company operated a total of 1,680 clinics worldwide, comprised of 1,155 clinics, an increase of 2% in North America, and 525 clinics, an increase of 11%, in the International segment.
Fresenius Medical Care delivered approximately 19.73 million dialysis treatments worldwide in 2005, which represents an increase of 5% year over year. North America accounted for 13.47 million treatments, an increase of 4%, and the International segment delivered 6.26 million treatments, an increase of 8% over last year.
Dividends
The Company will continue to follow an earnings-driven dividend policy. For the ninth consecutive year, shareholders can expect to receive an increased annual dividend for the fiscal year 2005. At the Annual General Meeting to be held on May 09, 2006, shareholders will be asked to approve a dividend of € 1.23 per ordinary share, an increase of 10% from 2004 (€ 1.12) and € 1.29 per preference share, an increase of 9% from 2004 (€ 1.18).
Renal Care Group Acquisition:
On February 15, 2006, the Company announced that its wholly-owned subsidiary, Fresenius Medical Care Holdings, Inc. and Renal Care Group, Inc. (RCG) have signed an agreement to sell a total of approximately 100 dialysis clinics to National Renal Institutes, Inc., a wholly-owned subsidiary of DSI Holding Company, Inc. The purchase price for the clinics is approximately $450 million to be paid in cash, subject to post-closing adjustments for working capital and other routine matters. The sale of the clinics is expected to close shortly after the completion of Fresenius Medical Care's acquisition of Renal Care Group, Inc.
The execution of this agreement is an important step toward concluding the review by the United States Federal Trade Commission (FTC) of Fresenius Medical Care's acquisition of Renal Care Group. The completion of the merger with Renal Care Group is targeted to close on or before March 31, 2006, subject to meeting all closing conditions including final approval by the FTC.
Transformation of Legal Form to a KGaA and Conversion of Preference Shares into Ordinary Shares:
Within the 4-week tender period ended February 3, 2006, approximately 96% of all outstanding preference shares were tendered for conversion into ordinary shares. This includes tenders of roughly 92% of outstanding preference shares represented by American Depositary Shares (ADS). The transformation into a Kommanditgesellschaft auf Aktien (KGaA – partnership limited by shares) and the conversion of preference shares into ordinary shares became effective upon registration with the commercial register of the local court (Amtsgericht) in Hof an der Saale (Germany) on Friday evening, February 10, 2006.
As of February 10, 2006, the share capital of Fresenius Medical Care AG & Co. KGaA consists of 96,629,422 ordinary bearer shares and 1,132,757 non-voting preference bearer shares.
Outlook for 2006:
For the full year 2006, the Company expects revenue growth at constant currencies of approximately 25% on a pro forma basis, giving effect to the RCG merger as compared to 2005 reported revenues. Pro forma amounts assume consolidation of RCG's operations into Fresenius Medical Care for the full twelve months of 2006. For the full year 2006, the Company expects to report revenue of more than $8 billion.
The Company's projected net income growth on a pro forma basis for 2006 is expected to be between 10 and 15 percent, based on the $472 million net income excluding one-time costs, achieved in 2005.
Guidance provided by the Company does not take into effect any expected one-time items and the change of accounting principle for stock options - SFAS 123(R) in the fiscal year 2006. The Company expects the after tax impact of the one-time items and SFAS 123(R) to be around $50 million.
In addition in 2006, the Company expects capital expenditures on a pro forma basis to be approximately $450 million, and approximately $100 million for acquisitions.
Ben Lipps, Chief Executive Officer of Fresenius Medical Care, commented: "Once again, we have exceeded our financial targets and achieved record earnings. Our financial performance shows the continued strength of our business segments worldwide. In addition, we are proposing our ninth consecutive annual dividend increase. Having now selected a qualified and committed buyer for the clinics to be divested, we are focusing on the completion of the RCG transaction, which is targeted to close on or before March 31, 2006, subject to meeting all closing conditions including final approval by the FTC. We are clearly well positioned for the future. "
Video Webcast
Fresenius Medical Care will hold a press conference at its headquarters in Bad Homburg, Germany, to discuss the results of the fourth quarter and full year of 2005 on February 22, 2006, at 10:00 a.m. CET. The Company cordially invites you to view the live video webcast of the meeting at the Company's website www.fmc-ag.com. A replay will be available shortly after the meeting.
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Fresenius Medical Care is the world's largest, integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure, a condition that affects more than 1,400,000 individuals worldwide. Through its network of approximately 1,680 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to approximately 131,450 patients around the globe. Fresenius Medical Care is also the world's leading provider of dialysis products such as hemodialysis machines, dialyzers and related disposable products. For more information about Fresenius Medical Care visit the Company's website at www.fmc-ag.com.
Fresenius Medical Care AG & Co. KGaA (FWB: FME, FME3) (NYSE: FMS, FMS-p), the world's largest provider of dialysis products and services, today announced the expansion of its Ogden, Utah production facility. This expansion will increase the production capacity from 27 million to more than 33 million dialyzers annually. The plant expansion supports Fresenius Medical Care North America's commitment to provide single-use dialyzers to the U.S. market, which is estimated to be over 60% single-use dialyzer therapy, including independent dialysis care providers.
In North America, Fresenius Medical Care provides innovative treatment therapy through its UltraCare® program, which employs single-use dialyzers as the preferred method of care for approximately 90,000 patients in more than 1,150 clinics.
The expansion of the Ogden, Utah plant is expected to be completed during the first half of 2007. The capital expenditure for this expansion is included in the Company's 2006 financial guidance, and demonstrates a clear commitment to meet the continued demand for the single-use dialyzer product line.
Rice Powell, CEO of the Products and Hospital Group and Co-CEO of FMCNA, commented. "It is clear from the growth in our single-use dialyzer product line that our customers prefer this modality to treat their patients who suffer from chronic kidney disease. We view this expansion as our pledge to the future of renal patient care. As the world's premier manufacturer of dialyzers, we believe this expansion will benefit the local community, our employees, our patients and our shareholders."
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Fresenius Medical Care is the world's largest, integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure, a condition that affects more than 1,400,000 individuals worldwide. Through its network of approximately 1,680 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to approximately 131,450 patients around the globe. Fresenius Medical Care is also the world's leading provider of dialysis products such as hemodialysis machines, dialyzers and related disposable products. For more information about Fresenius Medical Care visit the Company's website at www.fmc-ag.com.
Fresenius Medical Care AG & Co. KGaA (FWB: FME, FME3) (NYSE: FMS, FMS-p), the world's largest provider of dialysis products and services, and its wholly-owned subsidiary, Fresenius Medical Care Holdings, Inc., today announced the closing of the acquisition of Renal Care Group, Inc. (NYSE: RCI) effective March 31, 2006. The closing follows the completion of the Federal Trade Commission's review of the acquisition and the issuance of a consent order to permit the closing of the acquisition.
To finance the acquisition, Fresenius Medical Care today entered into and drew upon a replacement $4.6 billion senior credit facility, with Banc of America Securities LLC and Deutsche Bank Securities Inc. serving as joint lead arrangers. The new senior credit facility consists of a five year $1 billion revolving credit facility, a five year $1.85 billion term loan A facility and a seven year $1.75 billion term loan B facility.
Immediately prior to the acquisition, Florence Acquisition, Inc, a subsidiary of Fresenius Medical Care, accepted its previously announced tender offer and consent solicitation for $159,685,000 in outstanding principal amount of 9% Senior Subordinated Notes of Renal Care Group for a total consideration of $1,097.95 per $1,000 principal amount of Notes. All of the Notes were tendered and all obligations of Renal Care Group and its subsidiaries in respect of the Notes have now been discharged. Credit Suisse Securities (USA) LLC acted as Dealer Manager for the tender offer and as Solicitation Agent for the consent solicitation.
Ben Lipps, Chief Executive Officer of Fresenius Medical Care, commented: "We are very pleased to complete the acquisition of Renal Care Group. This is a milestone for our company. Clearly, we create the most valuable vertically integrated provider of patient care and dialysis products. This makes us unique and strengthens our position as the world's largest renal therapy company. As we combine the best of both companies, we do so for the benefit of all – patients, employees, physicians, customers and shareholders. Along with our commitment to innovate, we are always seeking to achieve the best-possible quality in every aspect of renal therapies."
After completion of the divestitures required by the FTC consent order, Fresenius Medical Care will own and operate approximately 1,500 dialysis clinics in North America, serving approximately 115,000 patients.
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Fresenius Medical Care is the world's largest, integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure, a condition that affects more than 1,400,000 individuals worldwide. Through its network of approximately 2,000 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to approximately 157,000 patients around the globe. Fresenius Medical Care is also the world's leading provider of dialysis products such as hemodialysis machines, dialyzers and related disposable products.
For more information about Fresenius Medical Care visit the Company's website at www.fmc-ag.com.
Fresenius Medical Care AG & Co. KGaA (Frankfurt Stock Exchange: FME, FME3) (NYSE: FMS, FMS-p), the world's largest provider of dialysis products and services, today announced that its subsidiaries, Fresenius Medical Care Holdings, Inc. and Renal Care Group, Inc., completed the sale of 96 freestanding renal dialysis centers to a wholly-owned subsidiary of DSI Holding Company, Inc ("DSI"), including centers divested pursuant to a consent agreement with the Federal Trade Commission ("FTC"). An additional 9 centers located in Illinois will be sold upon receipt of Illinois regulatory approval, which is expected in the second quarter of 2006. The sale was made pursuant to an agreement to sell a total of 105 centers.
Fresenius Medical Care will receive aggregate cash consideration of approximately $511 million for all of the centers being divested, subject to post-closing adjustments.
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Fresenius Medical Care is the world's largest, integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure, a condition that affects more than 1,400,000 individuals worldwide. Through its network of approximately 2,000 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to approximately 157,000 patients around the globe. Fresenius Medical Care is also the world's leading provider of dialysis products such as hemodialysis machines, dialyzers and related disposable products.
For more information about Fresenius Medical Care visit the Company's website at www.fmc-ag.com.
Fresenius Medical Care AG & Co. KGaA (Frankfurt Stock Exchange: FME, FME3) (NYSE: FMS, FMS-p), the world's largest provider of dialysis products and services, is one of the few German companies to voluntarily adopt new U.S. regulations early and assessed the Company's internal control over financial reporting as effective. The purpose of the law is to increase investors' confidence in capital markets by improving the financial reporting and the existence and effectiveness of internal controls of listed companies. The Sarbanes-Oxley Act was passed by U.S. Congress in July 2002 and was initiated by Senator Paul Sarbanes and Representative Michael Oxley. Foreign companies (so called foreign filers) like Fresenius Medical Care that are listed on U.S. stock exchanges are not required to comply with Section 404 of the Sarbanes-Oxley Act for fiscal years ending before July 15, 2006.
"Early compliance with the new regulations benefit shareholders and other stakeholders by providing an added level of confidence already in our 2005 financial statements. Fresenius Medical Care has traditionally been managed according to high standards of corporate governance. As such, we were able to implement the guidelines quickly and reliably. By implementing Section 404 rules in advance of the requirement date, we have further increased the transparency of our financial reporting and strengthened the internal controls related to our processes," said Lawrence Rosen, Chief Financial Officer of Fresenius Medical Care.
Section 404 is one of the key components of the Sarbanes-Oxley Act and assigns responsibility to the Management Board for an internal control system that ensures reliable financial reporting. The law requires comprehensive documentation of not only processes and controls but also of the assessment of these controls and the evaluation of any deficiencies that may be detected.
Special project teams at Fresenius Medical Care began evaluating and documenting processes and related internal controls in April 2003 in anticipation of the new regulations. The project teams are comprised of internal auditors and employees from all business segments. A steering committee led by the Chief Financial Officer regularly discusses the project team work and compliance with the Sarbanes-Oxley Act. The committee also reviews potential control deficiencies and remediation initiatives. The Supervisory Board's Audit Committee also regularly receives information on this topic. As part of the 2005 financial reporting, the Management Board of Fresenius Medical Care has provided written assurance that the internal control system is effective as of December 31, 2005. The effectiveness of the internal controls over financial reporting as well as the assessment by management have been audited.
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Fresenius Medical Care is the world's largest, integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure, a condition that affects more than 1,400,000 individuals worldwide. Through its network of approximately 2,000 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to approximately 157,000 patients around the globe. Fresenius Medical Care is also the world's leading provider of dialysis products such as hemodialysis machines, dialyzers and related disposable products.
For more information about Fresenius Medical Care visit the Company's website at www.fmc-ag.com.
Summary First Quarter 2006:
- Net Revenue : $ 1,747 million, + 9%
- Operating Income (EBIT): $ 244 million, + 11%
- Operating Income (EBIT) excluding SFAS 123 (R) and one-time-costs: $ 247 million, + 12%
- Net Income: $ 116 million, + 8%
- Net Income excluding SFAS 123 (R) and one-time-costs: $ 127 million, + 18%
Fresenius Medical Care AG & Co. KGaA ("the Company") (Frankfurt Stock Exchange: FME, FME3) (NYSE: FMS, FMS-p), the world's largest provider of Dialysis Products and Services, today announced the results for the first quarter 2006.
Revenue
Total revenue for the first quarter 2006 compared to the first quarter 2005 increased by 9% (10% at constant currency) to $1,747 million. Total organic revenue growth worldwide was 9%. Dialysis Services revenue grew by 9% to $1,273 million (10% at constant currency) in the first quarter of 2006. Dialysis Product revenue increased by 6% to $474 million (11% at constant currency) in the same period.
North America revenue increased by 10% to $1,194 million. Dialysis Services revenue increased by 9% to $1,059 million. Average revenue per treatment for the U.S. clinics increased by 6% to $310 in the first quarter 2006 as compared to $293 for the same quarter in 2005. Dialysis Product revenue increased by 12% to $134 million led by strong sales of our 2008K hemodialysis machines and single-use dialyzer sales (Carepak™).
International revenue was $553 million, an increase of 6% (12% at constant currency) as compared to the first quarter of 2005. Dialysis Services revenue reached $213 million, an increase of 10% (15% at constant currency). Dialysis Product revenue increased by 4% to $340 million (10% at constant currency), led by strong machine (both the 4008 and 5008 series) and peritoneal dialysis sales.
Earnings
Operating income (EBIT) increased by 11% to $244 million. Operating income for the first quarter 2006 includes $3 million of costs related to the change of accounting principles for stock options (SFAS 123R) and one-time costs associated with the transformation of Fresenius Medical Care's legal form into a Kommanditgesellschaft auf Aktien (or KGaA, a partnership limited by shares) and related legal fees.
Excluding these costs, operating income for the first quarter 2006 increased on a comparable basis by 12% to $247 million. This very good performance resulted in an operating margin of 14.2% as compared to 13.7% for the same quarter in 2005.
Compared with the first quarter 2005, the operating margin in North America increased by 40 basis points to 13.8%. In our International segment, the operating margin increased by 150 basis points to 17.3%. Our strong operational performance in the International segment was positively impacted by improvements in key countries in Latin America and Asia Pacific and reimbursement increases in some dialysis service countries as well as very strong product sales.
Net interest expense increased by 33% to $56 million compared to the same quarter in 2005. The increase was due to write-off of one-time deferred financing costs related to the 2003 senior credit facility of $15 million.
Income tax expense was $71 million in the first quarter of 2006 as compared to $70 million in the first quarter 2005, reflecting effective tax rates of 37.9% and 39.2%, respectively.
Net income for the first quarter 2006 was $ 116 million, an increase of 8%. Excluding one-time costs, net income increased on a comparable basis by 18% to $127 million. Due to this very positive development, the net income margin increased to 7.3% of sales compared with 6.7% in the first quarter 2005.
Earnings per share (EPS) 1) for the first quarter of 2006 rose by 7% to $1.19 per ordinary share ($0.40 per American Depositary Share (ADS)), as compared to $1.11 ($0.37 per ADS) for the first quarter of 2005. The weighted average number of shares outstanding for the first quarter of 2006 was approximately 97.8 million shares, as compared to 96.3 million shares for the first quarter 2005. The increase in shares outstanding results from stock option exercises in 2005 and in the first quarter 2006.
1) Conversion of preference shares treated as capital contributions, subject to change.
Cash Flow
In the first quarter of 2006, the Company generated $162 million in net cash from operations, or 9.3% of revenue, compared to $138 million last year. The increase was mainly due to lower income tax payments in North America.
A total of $65 million (net of disposals) was spent for capital expenditures. Free Cash Flow before acquisitions was $97 million compared to $98 million in the first quarter of 2005. Days Sales Outstanding (DSO) in the first quarter of 2006 decreased by another 4 days to 78 days from the fourth quarter 2005. Compared with the first quarter of the previous year DSO were reduced by 6 days.
A total of $10 million in cash was used for acquisitions excluding the RCG acquisition. The Free Cash Flow after acquisitions excluding the RCG acquisition increased by 14% to $87 million compared to $76 million last year. Including the RCG acquisition, a total of $3,951 million in cash was used for acquisitions.
Patients - Clinics – Treatments
As of March 31, 2006, Fresenius Medical Care treated approximately 133,100 patients worldwide, which represents a 6% increase in patients compared with Q1 of last year. North America provided dialysis treatments for more than 89,800 patients (up 3%) and the International segment served approximately 43,300 patients (up 11%). Including Renal Care Group and after divestitures, the Company provides dialysis for approximately 158,700 patients worldwide, thereof 115,400 patients in North America.
As of March 31, 2006, the Company operated a total of 1,700 clinics worldwide, comprised of 1,165 clinics, an increase of 2% in North America, and 535 clinics, an increase of 9%, in the International segment. Including Renal Care Group and after divestitures, the Company operates a total of 2,045 clinics worldwide, thereof 1,510 clinics in North America.
Fresenius Medical Care delivered approximately 5.02 million dialysis treatments worldwide, which represents an increase of 6% year over year. North America accounted for 3.38 million treatments, an increase of 4%, and the International segment delivered 1.65 million treatments, an increase of 12% over last year. Including Renal Care Group and after divestitures, the Company would have delivered approximately 6.01 million dialysis treatments worldwide, thereof 4.36 million dialysis treatments in North America.
Renal Care Group Acquisition
On March 31, 2006, the Company announced the closing of the acquisition of Renal Care Group, Inc. effective March 31, 2006. The closing followed the completion of the Federal Trade Commission's (FTC) review of the acquisition and the issuance of a consent order to permit the closing of the acquisition. The result of operations of Renal Care Group will be consolidated from April 1, 2006 onwards.
On April 7, 2006 the Company completed the sale of 96 freestanding renal dialysis centers to a wholly-owned subsidiary of DSI Holding Company, Inc ("DSI"), including centers divested pursuant to a consent agreement with the FTC. An additional 9 centers located in Illinois will be sold upon receipt of Illinois regulatory approval, which is expected in the second quarter of 2006. Fresenius Medical Care will receive aggregate cash consideration of approximately $512 million for all of the centers being divested, subject to post-closing adjustments.
Outlook for 2006 Confirmed
For the year 2006, the Company confirms its outlook and expects to report revenue of more than $8 billion.
The Company expects reported net income for 2006 to be between $515 million and $535 million.
Guidance provided by the Company does not take into effect any expected one-time items and the change of accounting principle for stock options - SFAS 123(R) in the fiscal year 2006. The Company expects the after tax impact of the one-time items and SFAS 123(R) to be around $60 million for the full year 2006.
In addition in 2006, the Company expects capital expenditures to be approximately $450 million, and spending of approximately $100 million for acquisitions, excluding the RCG acquisition.
Ben Lipps, Chief Executive Officer of Fresenius Medical Care, commented: "Our results for the first quarter 2006 show an excellent start for the year. With our global base we continue to be well positioned for the continuing success of our business. We clearly confirm our previous forecast for the full year 2006. We are pleased that all regions and business segments grew at or above market. North America and Europe, which represent over ninety percent of our business, continued their strong growth momentum in both the products and services segments. It is particularly gratifying that we were able to keep our strong focus on operating performance while we completed the transformation, the preference share conversion and the RCG acquisition in the first quarter. Going forward, we will emphasize the integration of RCG, the further growth of our net income and the reduction of our leverage ratio."
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Fresenius Medical Care is the world's largest, integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure, a condition that affects more than 1,400,000 individuals worldwide. Through its network of approximately 2,045 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to approximately 158,700 patients around the globe. Fresenius Medical Care is also the world's leading provider of dialysis products such as hemodialysis machines, dialyzers and related disposable products.
For more information about Fresenius Medical Care visit the Company's website at www.fmc-ag.com.