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Fresenius Medical Care Reports Strong Second Quarter and Half Year Results and Confirms Outlook for 2010
Second Quarter 2010
Net revenue for the second quarter of 2010 increased by 7% to $2,946 million (also +7% at constant currency) compared to the second quarter of 2009. Organic revenue growth worldwide was 6%. Dialysis services revenue grew by 8% to $2,224 million (also +8% at constant currency) in the second quarter of 2010. Dialysis product revenue rose by 2% to $722 million (+3% at constant currency) in the same period.
North America revenue increased by 8% to $2,027 million. Organic revenue growth was 7%. Dialysis services revenue grew by 8% to $1,817 million. Average revenue per treatment for U.S. clinics increased to $356 in the second quarter of 2010 compared to $344 for the same quarter in 2009 and $355 for the first quarter of 2010. This development was attributable principally to reimbursement increases and increased utilization of pharmaceuticals. Dialysis product revenue increased by 5% to $210 million due to higher sales of hemodialysis disposables and dialysis machines.
International revenue increased by 4% to $919 million. Based on constant currency, revenue grew by 5%. Organic revenue growth was 3%. Dialysis services revenue was $407 million, an increase of 8% (+9% at constant currency). Dialysis product revenue was stable at $512 million compared to the corresponding figure last year and increased by 2% at constant currency, led by increased sales of hemodialysis solutions and concentrates, dialyzers and bloodlines as well as products for acute care treatment.
Operating income (EBIT) increased by 11% to $465 million compared to $418 million in the second quarter of 2009 resulting in an operating margin of 15.8% compared to 15.1% for the corresponding quarter in 2009.
In North America, the operating margin increased from 15.9% to 16.3% in the second quarter of 2010. The margin development was mainly impacted favorably by an increase in revenue per treatment as well as the effect of economies of scale from revenue growth.
In the International segment, the operating margin increased from 17.3% to 18.8%. The margin development was mainly influenced positively by economies of scale from revenue growth, favorable foreign exchange rates and lower bad debt expenses. This was partially offset by higher depreciation expenses as a result of the expansion of our production capacities.
Net interest expense for the second quarter of 2010 was $68 million compared to $76 million in the comparable quarter of 2009, mainly attributable to lower shortterm interest rates.
Income tax expense was $129 million for the second quarter of 2010 compared to $103 million in the second quarter of 2009, reflecting effective tax rates of 32.6% and 30.2%, respectively. In both the second quarter of 2010 and 2009 tax expense benefited from changes in estimates of future tax payments.
Net income attributable to FMC AG & Co. KGaA for the second quarter of 2010 was $248 million, an increase of 12% compared to the same quarter of 2009.
Earnings per share (EPS) for the second quarter of 2010 rose by 12% to $0.83 per ordinary share compared to $0.74 for the second quarter of 2009. The weighted average number of shares outstanding for the second quarter of 2010 was approximately 300.0 million shares compared to 298.0 million shares for the second quarter of 2009. The increase in shares outstanding resulted from stock option exercises in the past twelve months.
In the second quarter of 2010, the Company generated $294 million in cash from operations, representing approximately 10% of revenue. The cash flow performance was influenced positively by improvements in elements of working capital and increased earnings, partially offset by higher income tax payments.
A total of $119 million was spent for capital expenditures, net of disposals. Free Cash Flow before acquisitions was $175 million compared to $143 million in the second quarter of 2009. A total of $68 million in cash was spent for acquisitions, net of divestitures. Free Cash Flow after acquisitions and divestitures was $107 million compared to $98 million in the second quarter of last year.
First Half 2010
Revenue and Earnings
Net revenue was $5,828 million, up 9% from the first half of 2009. At constant currency, net revenue rose 8%. Organic growth was 7% in the first six months of 2010.
Operating income (EBIT) increased by 9% to $888 million compared to $813 million in the first half of 2009, resulting in an operating margin of 15.2% compared to 15.3% for the first half of 2009.
Net interest expense for the first six months of 2010 was $135 million compared to $149 million in the same period of 2009.
Income tax expense was $257 million in the first half of 2010 compared to $214 million in the same period in 2009, reflecting effective tax rates of 34.1% and 32.2%, respectively.
For the first half of 2010, net income attributable to FMC AG & Co. KGaA was $459 million, up 10% from the first half of 2009.
In the first six months of 2010, earnings per ordinary share rose 9% to $1.53. The weighted average number of shares outstanding during the first half of 2010 was approximately 299.8 million.
Cash from operations during the first six months of 2010 was $643 million compared to $437 million for the same period in 2009, representing approximately 11% of revenue.
A total of $218 million was spent for capital expenditures, net of disposals. Free Cash Flow before acquisitions for the first six months of 2010 was $425 million compared to $188 million in the same period in 2009. A total of $150 million in cash was spent for acquisitions, net of divestitures. Free Cash Flow after acquisitions and divestitures was $275 million compared to $107 million in the first half of last year.
Please refer to the attachments for a complete overview on the second quarter and first half 2010.
Patients - Clinics - Treatments
As of June 30, 2010, Fresenius Medical Care treated 202,414 patients worldwide, which represents a 6% increase compared to the previous year. North America provided dialysis treatments for 135,088 patients, the number of patients treated rose by 5%. Including 29 clinics managed by Fresenius Medical Care North America, the number of patients in North America was 136,884. The International segment served 67,326 patients, the number of patients treated increased by 11%.
As of June 30, 2010, the Company operated a total of 2,599 clinics worldwide, which represents a 5% increase compared to the previous year. The number of clinics is comprised of 1,795 clinics in North America (1,824 including managed clinics) and 804 clinics in the International segment, representing an increase of 4% and 9%, respectively.
Fresenius Medical Care delivered approximately 15.26 million dialysis treatments worldwide during the first six months of 2010. This represents an increase of 6% compared to the corresponding period last year. North America accounted for 10.22 million treatments, an increase of 6%, and the International segment delivered 5.03 million treatments, an increase of 8%.
As of June 30, 2010, Fresenius Medical Care had 70,096 employees (fulltime equivalents) worldwide compared to 67,988 employees at the end of 2009. The increase of approximately 2,100 employees is due to overall growth in the Company's business.
The ratio of debt to Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) decreased from 2.78 at the end of the second quarter of 2009 to 2.46 at the end of the second quarter 2010. At the end of 2009, the debt/EBITDA ratio was 2.46.
Standard & Poor's Rating Services continued to rate the Company's corporate credit as 'BB'. On April 29, 2010, Standard & Poor's has raised the outlook from 'stable' to 'positive'. Moody's continued to rate the Company's corporate credit as 'Ba1' with a 'stable' outlook. Fitch rates the Company's corporate credit as 'BB' also with a 'stable' outlook. For further information on Fresenius Medical Care's credit ratings, maturity profiles and credit instruments, please visit our website at www.fmc-ag.com / Investor Relations / Credit Relations.
Outlook for 2010
For the full year of 2010, the Company confirms its outlook.
Revenue is expected to grow to more than $12 billion.
Net income attributable to FMC AG & Co. KGaA is expected to be between $950 million and $980 million in 2010.
The Company expects to spend $550 million to $650 million on capital expenditures and up to $500 million (previously up to $400 million) on acquisitions. The debt/EBITDA ratio is expected to be below 2.5 by the end of 2010.
Ben Lipps, Chief Executive Officer of Fresenius Medical Care, commented: "We are pleased to report that, after our successful start into the year, Fresenius Medical Care has carried forward a strong performance this past quarter and half year that is fully on track with our fullyear guidance and strategy. Our operational performance, but also our quality performance in products and services has been excellent. We have continued to strategically expand our global presence in dialysis services through acquisitions in attractive growing markets such as the Russian Federation and Asia. And we look forward to the opportunities posed by the upcoming "bundled" reimbursement system in the U.S. - opportunities we feel we are uniquely poised to seize, given our vertical integration and consistent focus on delivering the best quality care for our patients in the most efficient way possible."
This release contains forwardlooking statements that are subject to various risks and uncertainties. Actual results could differ materially from those described in these forwardlooking statements due to certain factors, including changes in business, economic and competitive conditions, regulatory reforms, foreign exchange rate fluctuations, uncertainties in litigation or investigative proceedings, and the availability of financing. These and other risks and uncertainties are detailed in Fresenius Medical Care AG & Co. KGaA's reports filed with the U.S. Securities and Exchange Commission. Fresenius Medical Care AG & Co. KGaA does not undertake any responsibility to update the forwardlooking statements in this release.
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