Shareholders of Fresenius Medical Care today approved the ninth consecutive dividend increase at the Annual General Meeting in Frankfurt, Germany. Ordinary shareholders will receive €1.23 per share (2004: €1.12) and preference shareholders will receive €1.29 (2004: €1.18). Shareholders discharged Management and Supervisory Board with a large majority of more than 90%.
In addition, shareholders of Fresenius Medical Care elected the Supervisory Board: Dr. Gerd Krick, Dr. Dieter Schenk, Prof. Dr. Bernd Fahrholz, Walter L. Weisman and John Gerhard Kringel will continue to serve as Supervisory Board members. William P. Johnston, former Chairman of the Board of Directors of Renal Care Group, which was recently acquired by Fresenius Medical Care, joins the Supervisory Board as a new member.
The shareholders also approved a new stock option program which is directly linked to the company's success. Accordingly managerial staff members will receive up to five million options for bearer ordinary shares over the next five years, which are exercisable after a period of three years, if the Earnings Per Share (EPS) hurdle has been achieved. If this hurdle is achieved in only one or two years, the options are reduced accordingly. If the hurdle is entirely not achieved, the options are cancelled.
The new stock option program 2006 ensures that managerial staff members participate in the financial risks and opportunities of the Company and offers them an internationally competitive remuneration system also in the future. Representatives from the two German shareholders' associations, Schutzgemeinschaft der Kleinaktionäre and Schutzvereinigung für Wertpapierbesitz, supported the new Stock Option Program.
In addition, the shareholders approved several formalities and adoptions to the Articles of Association of Fresenius Medical Care AG & Co. KGaA.
About 60% of the ordinary share capital was represented at the Annual General Meeting.
# # #
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.
The mortality rate among patients with kidney disease is significantly lower with hemodiafiltration than with conventional hemodialysis. This is the result of a new study conducted by specialists at the University Hospital in Lapeyronie in Montpellier and led by French nephrology professor Bernard Canaud. The study showed that kidney patients treated with high-efficiency hemodiafiltration (HDF) therapy had a 35 percent better chance of survival than those that received traditional hemodialysis. The three-year Dialysis Outcomes and Practice Patterns Study (DOPPS) from five European countries involved 2,165 patients who received treatment an average of three times per week.
This is the first time a prospective observational study, adjusted to exclude influencing factors such as age and multiple illnesses, proved that HDF treatment has reduced mortality rates among patients with chronic kidney disease. A retrospective study published last year and using existing data had already provided the first indications of the positive effects of HDF. Specialists attribute the improved survival rates with the HDF therapy to a more efficient removal of harmful substances from the blood, less side-effects and a lower overall risk of cardiovascular illness. Cardiovascular complications remain the most common cause of mortality among dialysis patients and are responsible for almost every second death.
Dr. Emanuele Gatti, Fresenius Medical Care Management Board Member responsible for Europe, Latin America, the Middle East and Africa: "The positive results of the new study support our efforts to provide innovative treatment methods such as hemodiafiltration to allow patients with chronic kidney failure to look confidently towards the future. We expect the demand for online-HDF to continue growing."
For the first time, Fresenius Medical Care offers online-HDF as standard treatment as part of its new 5008 Therapy System. Until now, increased costs made online-HDF viable for only a few patients. With the 5008, operating costs have been significantly reduced through simpler user-interfaces, lower maintenance effort and as much as 30 percent reduction in electricity and water usage. Now, more dialysis patients can be provided with online-HDF. Fresenius Medical Care was presented with the German Business Innovation Award at the start of the year for the 5008 Therapy System.
Online-hemodiafiltration combines two different methods of removal of toxins: diffusion-based hemodialysis, and hemofiltration whereby blood is filtered through a membrane. HDF is particularly efficient and gentle when filtering toxins and removing water from the patient's blood. The 5008 Therapy System automatically replaces the fluid removed with an appropriate quantity of ultrapure electrolyte solution; the solution is prepared by the dialysis machine "online", eliminating the need for additional infusion solutions in bags.
The study has been published in the online-edition of "Kidney international" at: www.nature.com/ki/journal/vaop/ncurrent/full/5000447a.html.
# # #
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.
Fresenius Medical Care AG & Co. KGaA announced today that its wholly-owned subsidiary, Renal Care Group, Inc., has received a subpoena from the United States Attorney's Office for the Southern District of New York requesting documents relating to grants of stock options by Renal Care Group during the period from when Renal Care Group was formed in 1996 through the present. Fresenius Medical Care completed the acquisition of Renal Care Group on March 31, 2006.
Based on Fresenius Medical Care's confidence in the management of Renal Care Group, the Company believes that Renal Care Group's option program was appropriately administered. On behalf of Renal Care Group, Fresenius Medical Care will cooperate with the U.S. Attorney's office to resolve this matter expeditiously.
# # #
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.
Fresenius Medical Care has been recognized for its new 5008 therapy system with the "red dot award: product design". This therapy system is used for treating for patients with chronic kidney failure. Since 1955, the Design Zentrum Nordrhein Westfalen has been marking outstanding international product design with the award. This year, more than 2,000 products from companies in 41 countries took part in the competition. The jury praised the noticeable improvement in the level of the entries: "Even in product categories where design was typically more neglected, such as medicine, design has now become an important competitive factor," the jury noted in a statement.
Dr. Emanuele Gatti, Management Board Member of Fresenius Medical Care responsible for development: "We are very pleased about the ‘red dot award: product design'. With the 5008 therapy system, we have primarily improved treatment quality and efficiency but also placed an emphasis on design. The award proves that medical equipment fits perfectly with creative product design." This benefits treatment personnel in dialysis clinics since they can operate and monitor the 5008 therapy system centrally, simply and, above all, safely using a large touch-screen monitor with an intuitive menu. During the design of the dialysis machine, developers integrated the latest ergonomic knowledge. All elements of the therapy system were laid out according to the most ideal working positions and procedures. Blood lines are easier to install and remove on the machine and all components are readily accessible and easily replaced.
The "red dot award: product design" will be presented during a gala celebration at the opera house in Essen, Germany on June 26. Some 1,200 guests from culture, business and politics are expected. Following the ceremony, the products recognized with the award will be on-display during a special "Design on stage – winners red dot award: product design 2006" exhibition at the red dot design museum in Essen through July 23. The 5008 therapy system has already won the 26th German Business Innovation Award last January.
Dialysis machines such as the new 5008 therapy system count among the most important products for the treatment of patients with chronic kidney disease. The machines pump blood from a special access in the arm of a patient into the dialyzer where metabolic toxins and excess water are filtered from the blood with the help of a dialysis solution. The filtered blood is then infused back into the patient. The dialysis machine controls the circulation of blood outside the body and the composition of the dialysis solution. In addition, it introduces anti-coagulation drugs to prohibit clotting. This life-sustaining treatment is normally administered three times a week and lasts about four hours.
The 5008 differentiates itself from traditional dialysis systems by cost-effectively combing two different treatment procedures: diffusion-based hemodialysis and hemofiltration, where blood is filtered through a membrane. The increased amount of fluids filtered by the machine is countered automatically with the introduction of ultrapure electrolyte solution. This solution is produced by the dialysis machine itself – traditional machines would require extra solution in bags. The procedure is called online hemodiafiltration (Online-HDF) and is regarded by experts as the best-possible treatment type because of its many advantages for patients. Until now, an increase in costs limited Online-HDF to only a few patients. The new 5008 therapy system is able to significantly reduce operating costs through simpler operation, fewer maintenance requirements and an as-much-as 30% reduction in the amount of electricity and water needed. For the first time, this enables cost-effective access to Online-HDF treatment for a broader number of patients.
High resolution pictures and additional information on the new 5008 therapy system are available online at www.fresenius-ag.com/presskit. Further details on the red dot award: product design can be found on the Design Zentrum Web site at http://en.red-dot.org/77.html.
# # #
The Design Zentrum Nordrhein Westfalen was originally founded in 1954 in Essen as an association called „Industrieform e.V." The association's aim was to "facilitating an appropriate design of the environment for the public at large". Today, The Design Zentrum Nordrhein Westfalen is a globally recognized qualification and communication centre for industry, politics and society. Since 1997, it has been based in the former boiler house of Zeche Zollverein, a mine complex included in the UNESCO World Cultural Heritage list. There, in the unique architecture of the red dot design museum - the mine building converted by Lord Foster of Thames Bank - the Design Zentrum presents the present and future of design.
For more information about the Design Zentrum visit its website at www.red-dot.de.
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. Fresenius Medical Care is listed on the Frankfurt Stock Exchange (FME, FME3) and the New York Stock Exchange (FMS, FMS-p).
For more information about Fresenius Medical Care visit the Company's website at www.fmc-ag.com.
Fresenius Medical Care ("the Company"), the world's largest provider of Dialysis Products and Services, has received regulatory approval from Germany's Federal Institute for Drugs and Medical Devices (Bundesinstitut für Arzneimittel und Medizinprodukte) for a new phosphate binding agent. The drug "OsvaRen" is expected to be introduced to the German market in the second half of 2006. The Company aims at quickly receiving accelerated approval for the new phosphate binding agent in other countries within the European Union using the mutual recognition process. The new phosphate binding agent should be introduced in all European Countries in 2007.
The newly approved product is a phosphate binding agent that is made from a combination of calcium acetate and magnesium carbonate. Excess phosphate consumed with food is normally removed by the kidneys in a process that can only partially be replaced by dialysis in patients with chronic kidney failure. Too much phosphate in the blood can result in mid-term damages to bones and blood vessels. The risk of such damages can be lowered by regularly taking in phosphate binders. The new compound from Fresenius Medical Care combines two substances known to support bone health while optimizing the levels of calcium.
With the approval of the new drug Fresenius Medical Care has made a further step to develop new business opportunities with new renal therapy options combining dialysis expertise in products and services with certain drugs commonly used in dialysis.
"The expansion of our business into the renal drug arena for the treatment of patients with chronic kidney failure is part of our horizontal diversification. By further strengthening our broad portfolio of dialysis-related products and therapies, we create the basics for sustainable and profitable growth of our Company. This is a very interesting step where we are now able to partially address such opportunities in the market place" said Dr. Emanuele Gatti, Fresenius Medical Care Management Board Member responsible for Europe, Latin America, the Middle East and Africa.
# # #
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. Fresenius Medical Care is listed on the Frankfurt Stock Exchange (FME, FME3) and the New York Stock Exchange (FMS, FMS-p).
For more information about Fresenius Medical Care visit the Company's website at www.fmc-ag.com.
Summary Second Quarter 2006:
- Net revenue: $2,165 million, +29%
- Operating income (EBIT): $372 million, +56%
Operating income (EBIT) excluding SFAS 123(R) and one-time items: $340 million, +42%
- Net income: $130 million, +12%
- Net income excluding SFAS 123(R) and one-time items: $139 million, +19%
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 second quarter and the first six months 2006.
Second Quarter 2006:
Please note, the result of operations of Renal Care Group (RCG) is consolidated from April 1, 2006 onwards.
Revenue
Total revenue for the second quarter 2006 compared to the second quarter 2005 increased by 29% (30% at constant currency) to $2,165 million. Total organic revenue growth worldwide was 9%. Dialysis Services revenue grew by 38% to $1,652 million (38% at constant currency) in the second quarter of 2006. Dialysis Product revenue increased by 9% to $514 million (9% at constant currency) in the same period. Excluding Renal Care Group (RCG) and the divested dialysis clinics in conjunction with the acquisition of RCG, revenue for the second quarter 2006 grew by 9%.
North America revenue increased by 38% to $1,561 million. Dialysis Services revenue increased by 43% to $1,428 million. Average revenue per treatment for the U.S. clinics increased by 8% to $317 in the second quarter 2006 as compared to $294 for the same quarter in 2005. Dialysis Product revenue increased by 5% to $133 million led by strong sales of our 2008K hemodialysis machines and single-use dialyzer sales (Carepak™). Excluding RCG and the related divestitures, the dialysis product revenue increased by 10% versus last year.
International revenue was $604 million, an increase of 11% (11% at constant currency) as compared to the second quarter of 2005. Dialysis Services revenue reached $224 million, an increase of 12% (13% at constant currency). Dialysis Product revenue increased by 10% to $380 million (10% at constant currency), led by strong machine (both the 4008 and 5008 series) sales.
Earnings
Operating income (EBIT) increased by 56% to $372 million, including a $39 million gain from the divestiture of dialysis clinics in conjunction with the regulatory approval for the acquisition of RCG. In addition, operating income for the second quarter 2006 includes $3 million of costs related to the change of accounting principles for stock options (SFAS 123R) and $4 million of one-time costs associated with the restructuring of RCG and the transformation of Fresenius Medical Care's legal form and related legal fees.
Excluding these costs and the gain from the divestiture, operating income for the second quarter 2006 increased by 42% to $340 million resulting in an operating margin of 15.7%. For the second quarter 2005 the operating margin was 14.3%.
Compared with the second quarter 2005, the operating margin in North America increased by 180 basis points to 15.8% due to the consolidation of RCG, an increase in the revenue per treatment and strong demand for dialysis products. In the International segment, the operating margin increased by 120 basis points to 18.0%. The strong operational performance in the International segment was driven by strong product sales in all regions and positively impacted by improvements in key countries in Latin America and Asia-Pacific.
Net interest expense for the second quarter 2006 was $100 million compared to $43 million in the same quarter of 2005. This increase is absolutely in line with expectations and is purely the result of the debt financing for the RCG acquisition.
Income tax expense was $135 million in the second quarter of 2006 as compared to $79 million in the second quarter 2005, reflecting effective tax rates of 49.6% and 40.4%, respectively. The tax rate has been impacted in the second quarter by tax payments in connection with the divestiture of dialysis clinics in the U.S. and the change of accounting principles for stock options (SFAS 123R). Excluding this impact, the tax rate was at 38.8%.
Net income for the second quarter 2006 was $130 million, an increase of 12%. Excluding one-time costs and SFAS 123(R), the net income increased on a comparable basis by 19% to $139 million.
Earnings per share (EPS) for the second quarter of 2006 rose by 10% to $1.32 per ordinary share ($0.44 per American Depositary Share (ADS)), as compared to $1.20 ($0.40 per ADS) for the second quarter of 2005. The weighted average number of shares outstanding for the second quarter of 2006 was approximately 98.0 million shares, as compared to 96.4 million shares for the second quarter 2005. The increase in shares outstanding results from stock option exercises in 2005 and in the first half of 2006.
Cash Flow
In the second quarter of 2006, the Company generated $165 million in cash from operations, compared to $130 million last year. Cash from operations in the second quarter includes $75 million net tax payments related to the divestiture of clinics and the RCG acquisition. Excluding these tax payments, the underlying cash from operations in the second quarter 2006 was $240 million, or 11.1% of revenue. The strong cash flow generation was supported by reductions in Days Sales Outstanding (DSO) and increased earnings.
A total of $95 million was spent for capital expenditures, net of disposals. Free Cash Flow before acquisitions was $70 million compared to $72 million in the second quarter of 2005. Excluding tax payments related to the divestiture of clinics the underlying Free Cash Flow before acquisitions in the second quarter 2006 was $145 million. A total of $24 million in cash was used for acquisitions excluding the RCG acquisition.
First Half 2006:
Earnings and Revenue
In the first half of 2006, net income was $246 million, up 10% from the first half of 2005. Excluding costs related to the change of accounting principles for stock options (SFAS 123R) and one-time items net income increased by 19% to $266 million.
Net revenue was $3,912 million, up 19% from the first half of 2005. Adjusted for currency, net revenue rose 20% in the first half of 2006. Excluding Renal Care Group and the divested clinics revenue for the first half of 2006 grew by 10%.
Operating income (EBIT) increased by 34% to $616 million. Operating income for the first half of 2006 includes $29 million of income as a result of the gain from the clinic divestitures, net of costs mainly related to the RCG restructuring and the change of accounting principles for stock options.
Excluding these costs, operating income for the first half of 2006 increased by 28% to $587 million. This performance resulted in an operating margin of 15.0% as compared to 14.0% for the first half of 2005.
Net interest expense for the first six months of 2006 was $156 million as a result of the write-off of deferred financing costs related to the 2003 senior credit facility of $15 million and one quarter worth of additional interest expense, both in conjunction with the financing of the RCG acquisition. Income tax expense was $206 million in the first half of 2006 as compared to $149 million in the same period in 2005, reflecting effective tax rates of 44.8% and 39.8%, respectively. The tax rate has been impacted by tax payments in connection with the gain on divestiture of dialysis clinics in the U.S. and the change of accounting principles for stock options (SFAS 123R). Excluding this impact, the tax rate was at 38.5%.
For the first half of 2006, earnings per ordinary share rose by 9% to $2.51 ($0.84 per ADS). The weighted average number of shares outstanding during the first half of 2006 was approximately 97.9 million.
Cash Flow
Cash from operations during the first half of 2006 was $327 million as compared to $268 million in the first half of 2005. Cash from operations in the first half of 2006 includes $75 million net tax payments related to the divestiture of clinics and the RCG acquisition. Excluding these tax payments the underlying cash from operations was $402 million in the first half of 2006. The increase compared to prior year was mainly due to strong collection of receivables, improvements in earnings and lower income tax payments for prior years.
A total of $160 million was used for capital expenditures, net of disposals. Free Cash Flow before acquisitions for the first half of 2006 was $167 million as compared to $171 million in the first half of 2005. Excluding tax payments due to the divestiture of clinics the underlying Free Cash Flow before acquisitions in the first half of 2006 was $242 million. A total of $35 million in cash was used for acquisitions other than the RCG acquisition in the first half of 2006.
For a complete overview of the second quarter and the first half of 2006, please refer to the appendix.
Patients - Clinics - Treatments
As of June 30, 2006, Fresenius Medical Care treated 161,675 patients worldwide, which represents a 26% increase in patients compared to the second quarter of last year. North America provided dialysis treatments for 117,830 patients (up 33%) and the International segment served 43,845 patients (up 11%).
As of June 30, 2006, the Company operated a total of 2,078 clinics worldwide, comprised of 1,540 clinics, an increase of 34% in North America, and 538 clinics, an increase of 8%, in the International segment.
Fresenius Medical Care delivered approximately 11.18 million dialysis treatments worldwide, which represents an increase of 16% year over year. North America accounted for 7.84 million treatments, an increase of 19%, and the International segment delivered 3.34 million treatments, an increase of 11% over last year.
Employees
As of June 30, 2006, Fresenius Medical Care employed 55,243 people (full-time equivalents) worldwide after 47,521 at the end of 2005. The increase of 7,722 employees is primarily due to the acquisition of Renal Care Group.
Renal Care Group Acquisition
As expected, Fresenius Medical Care completed the sale of additional 9 dialysis clinics in Illinois on June 30, 2006 after receiving the Illinois regulatory approval.
Outlook for 2006 Upgraded
Based on the strong performance in the first half of 2006, the Company upgrades its guidance for the full year 2006. After expecting to report a revenue of about $8.1 billion, the Company now expects a revenue for 2006 of about $8.3 billion.
The Company also upgrades its outlook for reported net income for 2006. After expecting a net income between $515 million and $535 million, the Company now expects to report a net income of at least $542 million, which represents an increase of at least 15% over the 2005 level.
In order to show the underlying performance of the Company, the guidance 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.
After previously assuming the after tax impact of one-time items and SFAS 123(R) to be about $60 million the Company now expects this impact to be about $40 million for the full year 2006.
In addition, the Company confirms its guidance on capital expenditures and acquisition spending to be approximately $550 million in 2006.
Ben Lipps, Chief Executive Officer of Fresenius Medical Care, commented: "Our second quarter and half year financial results were excellent and exceeded expectations. We continue to see earnings growth momentum which is based on the success of our global business strategies and the dedication of our employees. In addition, Renal Care Group is continuing to perform very well and our integration is well underway and on track. 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 in both the products and services segments. Based on the strong start in 2006, we have raised our revenue and net income guidance for 2006."
Video Webcast
Fresenius Medical Care will hold an analyst meeting at its headquarters in Bad Homburg, Germany, to discuss the results of the second quarter and the first half of 2006 on August 3, 2006, at 3.15 p.m. CEDT / 9.15 a.m. EDT. The Company invites you to view the live video webcast of the meeting at the Company's website www.fmc-ag.com in the "Investor Relations" section. A replay will be available shortly after the meeting.
# # #
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 2,078 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to 161,675 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 today announced that it has signed a definitive agreement to acquire the worldwide phosphate binder business (PhosLo) from Nabi Biopharmaceuticals Inc. (Nabi). PhosLo is a calcium acetate phosphate binder for oral application in end-stage renal disease patients that has total product line revenues in the U.S. of approximately $40 million. The total consideration paid in the transaction will be $65 million cash at closing, royalties on a new potential product formulation plus milestone payments. The milestone payments consist of $10 million expected to be paid in 2007 and $10 million to be paid over the next two to three years, contingent upon the achievement of certain performance milestones.
Excess phosphate consumed with food is normally removed by the kidneys in a process that can only partially be replaced by dialysis in patients with chronic kidney failure. Too much phosphate in the blood can result in a number of adverse events, including bone disease, thyroid problems and vascular calcification. The risk of such damage in end-stage renal disease patients can be lowered by regularly taking phosphate binders. Currently, the phosphate binder market exceeds $500 million worldwide.
Dr. Ben Lipps, Chairman of the Management Board and Chief Executive Officer commented, "Our acquisition of the PhosLo product line represents an important strategic step. With PhosLo, we are able to expand our clinical therapy offerings using safe, effective and proven drugs. We plan to use PhosLo as part of our overall integrated "pharma-tech" therapy to better manage bone mineralization during dialysis treatment. This acquisition enhances our growth opportunities in this important new initiative for Fresenius Medical Care."
The transaction is subject to customary closing conditions including the expiration of the applicable waiting period under the Hart Scott Rodino Antitrust Act. The Company anticipates closing this transaction in 2006.
# # #
PhosLo is a trademark of Nabi Biopharmaceutical Inc.
About Nabi Biopharmaceuticals
Nabi Biopharmaceuticals leverages its experience and knowledge in powering the immune system to develop and market products that fight serious medical conditions. Nabi Biopharmaceuticals is focused on developing products that address unmet medical needs and offer commercial opportunities in its core business areas: hepatitis and transplant, kidney disease (nephrology), Gram-positive bacterial infections and nicotine addiction. The company is headquartered in Boca Raton, Florida. Nabi Biopharmaceuticals is listed on the NASDAQ (NABI).
For more information about Nabi Biopharmaceuticals visit the website: www.nabi.com.
About Fresenius Medical Care
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 2,078 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to 161,675 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. Fresenius Medical Care is listed on the Frankfurt Stock Exchange (FME, FME3) and the New York Stock Exchange (FMS, FMS-p).
For more information about Fresenius Medical Care visit the website: www.fmc-ag.com.
Fresenius Medical Care AG & Co. KGaA (or "Company") today announced that its subsidiary, Fresenius Medical Care Holdings Inc. (FMC-NA) has entered into a new sourcing and supply agreement with Amgen USA, Inc. (Amgen) under which Amgen will supply FMC-NA's commercial requirements in the United States and Puerto Rico for erythropoiesis stimulating proteins for dialysis patients, inclusive of EPOGEN (Epoetin alfa) and Aranesp (Darbepoetin alfa). Amgen is the sole supplier of these products for use with dialysis patients in the U.S. The new sourcing and supply agreement runs from October 1, 2006 to December 31, 2011, and replaces the previous product purchase agreement between the parties. In addition, the companies will explore collaborations to develop new product formulations to further enhance standards of care.
EPOGEN and Aranesp contain artificially produced hormone which stimulate the production of red blood cells. Dialysis patients cannot produce this hormone on their own; therefore, artificial erythropoietin is administered during dialysis treatments to regulate anemia.
Dr. Ben Lipps, Chairman of the Management Board and Chief Executive Officer of the Company commented, "We selected Amgen as our sole supplier based on more than ten years of demonstrated clinical efficacy and safety with Epogen which has led to significant clinical outcome improvements in anaemic dialysis patients. Amgen and Fresenius Medical Care are well known for their commitment to developing and establishing new therapies for the benefit of patients with end-stage renal disease worldwide. Fresenius Medical Care and Amgen will also explore opportunities to collaborate to further improve patient outcomes."
# # #
Aranesp and Epogen are trademarks of Amgen Inc.
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 2,078 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to 161,675 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. Fresenius Medical Care is listed on the Frankfurt Stock Exchange (FME, FME3) and the New York Stock Exchange (FMS, FMS-p). For more information about Fresenius Medical Care visit the website: www.fmc-ag.com.
About Amgen
Amgen discovers, develops and delivers innovative human therapeutics. A biotechnology pioneer since 1980, Amgen was one of the first companies to realize the new science's promise by bringing safe and effective medicines from lab, to manufacturing plant, to patient. Amgen therapeutics have changed the practice of medicine, helping millions of people around the world in the fight against cancer, kidney disease, rheumatoid arthritis, and other serious illnesses. With a broad and deep pipeline of potential new medicines, Amgen remains committed to advancing science to dramatically improve people's lives. For more information about Amgen visit the Company's website at www.amgen.com.
About EPOGEN®
EPOGEN® (Epoetin alfa) is a recombinant protein with the same mechanism of action as endogenous human erythropoietin, a protein produced by the kidneys to stimulate the production of oxygen-transporting red blood cells. Patients with end-stage renal disease do not produce adequate amounts of erythropoietin and consequently suffer from the energy-draining signs and symptoms of chronic anemia. Epogen is indicated for patients with chronic kidney disease and anemia receiving dialysis.
About Aranesp®
Introduced in 2001, Aranesp® (darbepoetin alfa) is a recombinant erythropoietic protein that stimulates production of oxygen-carrying red blood cells, with greater biological activity and a longer half-life than Epoetin alfa. Aranesp is indicated for patients with chronic kidney disease and anemia receiving dialysis and not on dialysis and chemotherapy-induced anemia.
Summary Third Quarter 2006:
- Net revenue: $ 2,234 million; + 30%
- Operating income (EBIT): $ 349 million; + 47%
- Net income: $ 139 million; + 20%
Excluding SFAS 123(R) and one-time items
- Operating income (EBIT): $ 358 million; + 47%
- Net income: $ 145 million; + 21%
Fresenius Medical Care AG & Co. KGaA ("the Company"), the world's largest provider of Dialysis Products and Services, today announced the results for the third quarter and nine months of 2006.
Please note, the result of operations of Renal Care Group (RCG) are consolidated from April 1, 2006 onwards.
Third Quarter 2006:
Revenue
Net revenue for the third quarter 2006 compared to the third quarter 2005 increased by 30% (29% at constant currency) to $2,234 million. Total organic revenue growth worldwide was 10%. Dialysis Services revenue grew by 37% to $1,704 million (36% at constant currency) in the third quarter of 2006. Dialysis Product revenue increased by 13% to $530 million (11% at constant currency) in the same period.
North America revenue increased by 38% to $1,613 million. Dialysis Services revenue increased by 42% to $1,472 million. Average revenue per treatment for the U.S. clinics increased by 9% to $324 in the third quarter 2006 as compared to $299 for the same quarter in 2005. Dialysis Product revenue increased by 7% to $141 million led by strong sales of our 2008K hemodialysis machines and single-use dialyzer sales (CarepakTM). Excluding RCG and the related divestitures, the dialysis product revenue increased by 14% compared to last year.
International revenue was $621 million, an increase of 13% (11% at constant currency) as compared to the third quarter of 2005. Dialysis Services revenue reached $232 million, an increase of 10% (9% at constant currency). Dialysis Product revenue increased by 15% to $389 million (12% at constant currency), led by strong machine (both the 4008 and 5008 series) and dialyzer sales.
Earnings
Operating income (EBIT) increased by 47% to $349 million. Operating income for the third quarter 2006 includes $9 million of costs related to the change of accounting principles for stock options (SFAS 123R), and the acquisition of RCG.
Excluding these costs, operating income for the third quarter 2006 increased by 47% to $358 million resulting in an operating margin of 16.0%. For the third quarter 2005 the operating margin was 14.2%.
Compared with the third quarter 2005, the operating margin in North America increased by 200 basis points to 16.3% due to the consolidation of RCG, an increase in the revenue per treatment and strong demand for dialysis products. In the International segment, the operating margin increased by 230 basis points to 18.2%. The high operational performance in the International segment was driven by strong product sales in all regions and positively impacted by improvements in key countries in Europe and Latin America.
Net interest expense for the third quarter 2006 was $100 million compared to $42 million in the same quarter of 2005. This increase is entirely attributable to the debt financing for the RCG acquisition.
Income tax expense was $105 million in the third quarter of 2006 as compared to $79 million in the third quarter 2005, reflecting effective tax rates of 42.3% and 40.3%, respectively. The tax rate in the third quarter has been impacted by a tax audit in Germany. Excluding this impact, the tax rate was at approximately 39%.
Net income for the third quarter 2006 was $139 million, an increase of 20%. Excluding one-time costs and SFAS 123(R), the net income increased on a comparable basis by 21% to $145 million.
Earnings per share (EPS) for the third quarter of 2006 rose by 19% to $1.42 per ordinary share ($0.47 per American Depositary Share (ADS), as compared to $1.19 ($0.40 per ADS) for the third quarter of 2005. The weighted average number of shares outstanding for the third quarter of 2006 was approximately 98.2 million shares, as compared to 96.8 million shares for the third quarter 2005. The increase in shares outstanding results from stock option exercises in 2005 and in the first nine months of 2006.
Cash Flow
In the third quarter of 2006, the Company generated $153 million in cash from operations, compared to $202 million last year. Cash from operations in the third quarter includes an U.S. tax payment of $99 million for the years 2000 and 2001. In addition, $9 million payments related to RCG restructuring and integration were made in the third quarter 2006. Excluding these payments, the underlying cash from operations in the third quarter of 2006 was $261 million, or 11.7% of revenue – at the high end of our target. The strong cash flow generation was supported by increased earnings.
A total of $113 million was spent for capital expenditures, net of disposals. Free Cash Flow before acquisitions was $40 million compared to $137 million in the third quarter of 2005. Excluding the tax payment and the payments related to the RCG acquisition, the underlying Free Cash Flow before acquisitions in the third quarter 2006 was $148 million. A total of $10 million in cash was used for acquisitions.
Nine Months ended September 30, 2006:
Earnings and Revenue
For the nine months ended September 30, 2006, net income was $385 million, up 13% from the same period in 2005. Excluding costs related to the change of accounting principles for stock options (SFAS 123R) and one-time items net income increased by 20% to $412 million.
Net revenue for the nine months 2006 was $6,147 million, up 23% from the same period in 2005. Adjusted for currency, net revenue also rose by 23%. Excluding Renal Care Group and the divested clinics revenue for the nine months 2006 grew by 10%.
Operating income (EBIT) increased by 39% to $964 million. Operating income for the nine months ended September 30, 2006 includes a gain of $18 million as a result of the gain from the clinic divestitures, net of costs mainly related to the RCG restructuring and the change of accounting principles for stock options.
Excluding these items, operating income for the nine months 2006 increased by 35% to $946 million. This performance resulted in an operating margin of 15.4% as compared to 14.1% in the same period in 2005.
Net interest expense for the nine months ended September 30, 2006 was $255 million as a result of the write-off of deferred financing costs related to the 2003 senior credit facility of $15 million and two quarters worth of additional interest expense, both in conjunction with the financing of the RCG acquisition.
Income tax expense was $314 million for the nine months compared to $227 million in the same period in 2005, reflecting effective tax rates of 44.3% and 40.0%, respectively. The tax rate has been impacted by tax payments in the U.S. Excluding these impacts, the tax rate was at 40.3%, increased due to tax audit adjustments in Germany.
For the nine months ended September 30, 2006, earnings per ordinary share rose by 12% to $3.93 ($1.31 per ADS). The weighted average number of shares outstanding during the nine months 2006 was approximately 98.0 million.
Cash Flow
Cash from operations for nine months of 2006 was $465 million as compared to $470 million in the same period of 2005. Cash from operations for nine months of 2006 includes $75 million net tax payments and $24 million other payments related to the divestiture of clinics and the RCG acquisition. Also included is an U.S. tax payment of $99 million for the years 2000 and 2001. Excluding these payments the underlying cash from operations was $663 million for nine months of 2006. The increase compared to prior year was mainly due to a favorable development of accounts receivables and improvements in earnings.
A total of $273 million was used for capital expenditures, net of disposals. Free Cash Flow before acquisitions for the nine months of 2006 was $192 million as compared to $308 million in the same period of 2005. Excluding the tax payments and payments related to the RCG acquisition, the underlying Free Cash Flow before acquisitions for nine months of 2006 was $390 million. A total of $44 million in cash was used for acquisitions other than the RCG acquisition in the nine months ended September 30, 2006.
For a complete overview of the third quarter and nine months of 2006 and a reconciliation on non-GAAP financial measures included in this release to the most comparable GAAP financial measures, please refer to the appendix.
Patients - Clinics - Treatments
As of September 30, 2006, Fresenius Medical Care treated 161,433 patients worldwide, which represents a 24% increase in patients compared to the third quarter of last year. North America provided dialysis treatments for 116,868 patients (up 32%) and the International segment served 44,565 patients (up 7%).
As of September 30, 2006, the Company operated a total of 2,085 clinics worldwide, comprised of 1,542 clinics, an increase of 34% in North America, and 543 clinics, an increase of 6%, in the International segment.
Fresenius Medical Care delivered approximately 17.43 million dialysis treatments worldwide, which represents an increase of 19% year over year. North America accounted for 12.34 million treatments, an increase of 23%, and the International segment delivered 5.10 million treatments, an increase of 10% over last year.
Employees
As of September 30, 2006, Fresenius Medical Care employed 56,154 people (full-time equivalents) worldwide compared to 47,521 at the end of 2005. The increase of 8,633 employees is primarily due to the acquisition of Renal Care Group.
PhosLo Acquisition
On October 12, 2006, the Company announced the acquisition of worldwide phosphate binder business (PhosLo) from Nabi Biopharmaceuticals Inc. PhosLo is a calcium acetate phosphate binder for oral application in end-stage renal disease patients. The Company anticipates closing this transaction in 2006. The total consideration paid in the transaction will be $65 million cash at closing, royalties on a new potential product formulation plus milestone payments. The milestone payments consist of $10 million expected to be paid in 2007 and $10 million to be paid over the next two to three years, contingent upon the achievement of certain performance milestones.
New Sourcing and Supply Agreement with Amgen
On October 19, 2006, the Company announced that its subsidiary, Fresenius Medical Care Holdings Inc. (FMC-NA) has entered into a new sourcing and supply agreement with Amgen USA, Inc. (Amgen) under which Amgen will supply FMC-NA's commercial requirements in the United States and Puerto Rico for erythropoiesis stimulating proteins for dialysis patients. The new sourcing and supply agreement runs from October 1, 2006 to December 31, 2011.
Outlook for 2006 – Upgraded
Based on the strong performance in the third quarter of 2006, the Company upgrades its guidance for the full year 2006.
After expecting to report net revenue of about $8.3 billion, the Company now expects net revenue for 2006 of about $8.4 billion.
The Company also upgrades its outlook for net income for 2006. After expecting a net income of at least $542 million, the Company now expects a net income of at least $557 million, representing an increase of at least 18% over the corresponding level in 2005.
In order to show the underlying performance of the Company on a basis comparable with the prior year, the guidance 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 about $44 million for the full year 2006.
In addition, the Company confirms its guidance on capital expenditures and acquisition spending to be approximately $550 million in 2006.
Ben Lipps, Chief Executive Officer of Fresenius Medical Care, commented: "Our third quarter and nine months financial results were excellent and exceeded expectations. We continue to see strong growth in both our renal products and services business segments worldwide. In addition, we have taken the next step in our integrated therapy approach acquiring the phosphate binder business (PhosLo) from Nabi Biopharmaceuticals Inc. This acquisition will allow us to further our patient quality outcome initiatives and expand our renal products and therapy business worldwide. Based on our continued successful integration of RCG and the strong financial performance of our underlying business worldwide, we have raised our revenue and net income guidance for 2006."
Video Webcast
Fresenius Medical Care will hold a press conference at its headquarters in Bad Homburg, Germany, to discuss the results of the third quarter and the first nine months of 2006 on October 31, 2006, at 10:00 am CET. The Company cordially invites journalists 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.
# # #
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 2,085 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to 161,433 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. Fresenius Medical Care is listed on the Frankfurt Stock Exchange (FME, FME3) and the New York Stock Exchange (FMS, FMS-p).
For more information about Fresenius Medical Care visit the Company's website at www.fmc-ag.com.
Fresenius Medical Care
Statement of Earnings see PDF-file
Fresenius Medical Care AG & Co. KGaA today announced that it has completed the acquisition of the worldwide phosphate binder business (PhosLo) from Nabi Biopharmaceuticals Inc.
With the acquisition, Fresenius Medical Care further expands its market position in the field of dialysis-related drugs. PhosLo is a calcium acetate phosphate binder for oral application in end-stage renal disease patients.
# # #
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 2,085 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to 161,433 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). Fresenius Medical Care is listed on the Frankfurt Stock Exchange (FME, FME3) and the New York Stock Exchange (FMS, FMS-p).
For more information about Fresenius Medical Care visit the website: www.fmc-ag.com.