Fresenius Medical Care Reports Strong Start For 2008 and Confirms Outlook for Full Year

Fresenius Medical Care AG & Co. KGaA (NYSE: FMS)(FWB: FME):   Summary First Quarter 2008:   Net revenue           $  2,512 million           + 8 % Operating income (EBIT) $ 389 million + 7 % Net income $ 186 million + 16 % Earnings per share $ 0.63 + 15 %   Fresenius Medical Care AG & Co. KGaA ("the Company”), the world’s largest provider of dialysis products and services, today announced its results for the first quarter of 2008. Revenue Net revenue for the first quarter 2008 increased by 8% to $2,512 million (4% at constant currency) compared to the first quarter 2007. Organic revenue growth worldwide was 5%. Dialysis services revenue grew by 5% to $1,844 million (3% at constant currency) in the first quarter of 2008. Dialysis product revenue increased by 19% to $667 million (10% at constant currency) in the same period. North America revenue increased by 2% to $1,668 million. Dialysis services revenue grew by 1% to $1,495 million. Excluding effects of the divestiture of the perfusion business in spring 2007, dialysis services revenue increased by 3%. Average revenue per treatment for the U.S. clinics was at $326 in the first quarter 2008 compared to $ 329 for the first quarter of 2007 and $325 for the fourth quarter of 2007. Versus the fourth quarter of 2007, this development was based on an increase in underlying reimbursement rates and an increase in EPO utilization. Dialysis product revenue increased by 12% to $172 million well above market and was led by strong sales of all of our major products, the 2008K hemodialysis machines, concentrates, dialyzers and the phosphate binding drug PhosLo. International revenue was $844 million, an increase of 23% (10% at constant currency) compared to the first quarter of 2007. Dialysis services revenue reached $349 million, an increase of 26% (13% at constant currency). Dialysis product revenue rose by 22% to $495 million (9% at constant currency), led by strong dialyzer and dialysis machine sales. Earnings Operating income (EBIT) increased by 7% to $389 million compared to $365 million in the first quarter 2007. Operating margin decreased from 15.7% in the first quarter of 2007 to 15.5% in the first quarter of 2008 reflecting mainly the increased expenditures for our corporate research and development activities and the expansion in the International dialysis services business. In North America, the operating margin increased by 60 basis points from 15.8% to 16.4% in the first quarter of 2008. The strong underlying business was supported by the increase in underlying reimbursement rates, dialysis services cost containment and a continued strong performance of renal products and PhosLo. This was partially offset by a lower utilization and reduced reimbursement rates for EPO. In the International segment, the operating margin decreased by 60 basis points to 17.0% mainly due to the growth in the dialysis care business through an increased number of De Novo clinics and associated start-up costs. Net interest expense for the first quarter 2008 was $83 million compared to $95 million in the same quarter of 2007. This positive development was mainly attributable to lower average interest rates. Income tax expense was $114 million for the first quarter of 2008 compared to $103 million in the first quarter of 2007, reflecting effective tax rates of 37.3% and 38.0%, respectively. Net income for the first quarter 2008 was $186 million, an increase of 16%. Earnings per share (EPS) for the first quarter of 2008 rose by 15% to $0.63 per ordinary share compared to $0.54 for the first quarter of 2007. The weighted average number of shares outstanding for the first quarter of 2008 was approximately 296.6 million shares compared to 295.2 million shares for the first quarter of 2007. The increase in shares outstanding resulted from stock option exercises in 2007 and in the first quarter 2008. Cash Flow In the first quarter of 2008, the Company generated $192 million in cash from operations, representing approximately 8% of revenue. The cash flow generation was primarily affected by an increase in Days Sales Outstanding (DSO) in the first quarter of 2008 compared to 2007 and higher income tax payments. A total of $154 million was spent for capital expenditures, net of disposals. Free Cash Flow before acquisitions was $38 million compared to $174 million in the first quarter of 2007 on a reported basis. A total of $32 million in cash was used for acquisitions net of divestitures. Free Cash Flow after acquisitions and divestitures was $6 million compared to $84 million in the first quarter last year. Please refer to the attachments for a complete overview on the first quarter of 2008 and the reconciliation of non-GAAP financial measures included in this release to the most comparable GAAP financial measures. Patients – Clinics – Treatments As of March 31, 2008, Fresenius Medical Care treated 177,059 patients worldwide, which represents a 5% increase in patients compared to the same period last year. North America provided dialysis treatments for 122,691 patients, an increase of 3%. Including 32 clinics managed by Fresenius Medical Care North America, the number of patients in North America was 124,403. The International segment served 54,368 patients, an increase of 8% over last year. As of March 31, 2008, the Company operated a total of 2,297 clinics worldwide. This is comprised of 1,640 clinics in North America, an increase of 4%, and 657 clinics in the International segment, an increase of 6%. Fresenius Medical Care delivered approximately 6.72 million dialysis treatments worldwide during the first quarter of 2008. This represents an increase of 5% year over the same quarter last year. North America accounted for 4.65 million treatments, an increase of 4%, and the International segment delivered 2.08 million treatments, an increase of 8% over last year. Employees As of March 31, 2008, Fresenius Medical Care had 62,504 employees (full-time equivalents) worldwide compared to 61,406 employees at the end of 2007. The increase of approximately 1,100 employees is primarily due to the Company’s overall growth in business. Debt/EBITDA Ratio The ratio of debt to Earnings before Interest, Taxes and Amortization (EBITDA) decreased from 3.09 at the end of the first quarter 2007 to 2.82 at the end of the first quarter 2008. At the end of 2007, the debt/EBITDA ratio was 2.84. Rating Standard & Poor’s has assigned upgraded debt and recovery ratings to the Company’s unsecured debt issues in the first quarter of 2008. The Company’s corporate credit rating as 'BB' with a ‘stable’ outlook remained unchanged. Moody's continued to rate the Company’s corporate credit rating as ‘Ba2’ with a ‘positive’ outlook in the first quarter of 2008. Outlook for 2008 fully confirmed For the full year 2008, the Company confirms its outlook and expects to achieve revenue of more than $10.4 billion, an increase of more than 7%. Net income is projected to be between $805 million and $825 million in 2008, an increase of 12% to 15%. In addition, the Company expects to spend $650 to $750 million on capital expenditures and $150 to $250 million on acquisitions. The debt/EBITDA ratio is projected to decrease below 2.8 by the end of 2008. For 2010, Fresenius Medical Care continues to expect revenue of more than $11.5 billion. Earnings after tax are projected to grow in the low- to mid-teens per year. Ben Lipps, Chief Executive Officer of Fresenius Medical Care, commented: "We are pleased to have a strong start into the year, which is fully in line with our expectations and guidance. We have made good progress on our growth initiatives and continue to expand our global products and services presence. We also have expanded our corporate research activities that will benefit our future. Our new product launches in International and North America, along with the ongoing capacity expansions, provide the basis for the continued growth. We also expect the trend of anemia outcomes in the U.S. to improve further. We are confident to achieve our targets for 2008.” Conference Call Fresenius Medical Care will hold a conference call to discuss the results of the first quarter of 2008 on Wednesday, April 30, 2008, at 3.30 p.m. CEDT / 9.30 a.m. EDT. The Company invites investors to listen to the live webcast of the call 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 1,600,000 individuals worldwide. Through its network of 2,297 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa, Fresenius Medical Care provides dialysis treatment to 177,059 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. This release contains forward-looking statements that are subject to various risks and uncertainties. Actual results could differ materially from those described in these forward-looking 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 forward-looking statements in this release.   Fresenius Medical Care Statements of Earnings   Three Months Ended March 31,     (in US-$ thousands, except share and per share data)   2008   2007   % Change (unaudited)   Net revenue Dialysis Care 1,844,287 1,760,354 4.8 % Dialysis Products 667,437 560,317 19.1 % Total net revenue 2,511,724 2,320,671 8.2 %   Cost of revenue 1,656,425 1,536,320 7.8 % Gross profit 855,299 784,351 9.0 % Selling, general and administrative 447,510 406,319 10.1 % Research and development 19,118 13,342 43.3 % Operating income (EBIT) 388,671 364,690 6.6 %   Interest income (5,380 ) (3,582 ) 50.2 % Interest expense 88,198 98,493 -10.5 % Interest expense, net 82,818 94,911 -12.7 % Earnings before income taxes and minority interest 305,853 269,779 13.4 % Income tax expense 114,097 102,566 11.2 % Minority interest 5,883 6,935 Net income 185,873 160,278 16.0 %   Operating income (EBIT) 388,671 364,690 6.6 % Depreciation and amortization 96,626 84,912 13.8 % EBITDA 485,297 449,602 7.9 %   Total bad debt expenses 49,146 48,681   Earnings per ordinary share $ 0.63 $ 0.54 15.4 % Earnings per ordinary ADS $ 0.63 $ 0.54 15.4 %   Weighted average number of shares Ordinary shares 292,786,583 291,449,673 Preference shares 3,779,822 3,716,250   Percentages of revenue Cost of revenue 65.9 % 66.2 % Gross profit 34.1 % 33.8 % Selling, general and administrative 17.8 % 17.5 % Research and development 0.8 % 0.6 % Operating income (EBIT) 15.5 % 15.7 %   Interest expense, net 3.3 % 4.1 % Earnings before income taxes and minority interest 12.2 % 11.6 % Income tax expense 4.5 % 4.4 % Minority interest 0.2 % 0.3 % Net income 7.4 % 6.9 %   EBITDA     19.3 %     19.4 %         Fresenius Medical Care Segment and Other Information   Three Months Ended March 31,     (in US-$ million) 2008 2007 % Change (unaudited)   Net revenue North America 1,668 1,637 1.9 % International 844 684 23.4 % Total net revenue 2,512 2,321 8.2 %   Operating income (EBIT) North America 273 258 5.5 % International 143 121 18.8 % Corporate (27 ) (14 ) 89.9 % Total operating income (EBIT) 389 365 6.6 %   Operating income in percentage of revenue North America 16.4 % 15.8 % International 17.0 % 17.6 % Total 15.5 % 15.7 %   Employees Full-time equivalents (March 31 compared to Dec. 31)     62,504       61,406         Fresenius Medical Care Reconciliation of non US-GAAP financial measures to the most directly comparable US-GAAP   Three Months Ended financial measures   March 31, (in US-$ million) 2008   2007 (unaudited)   Segment information North America Net revenue 1,668 1,637 Costs of revenue and research and development 1,128 1,114 Selling, general and administrative 267 264 Costs of revenue and operating expenses 1,395 1,378 Operating income (EBIT) 273 258 Percent of revenue 16.4 % 15.8 %   Dialysis Products revenue incl. and excl. internal sales North America Dialysis Products revenue incl. internal sales 303 281 less internal sales (131 ) (128 ) Dialysis Products external sales 172 153 International Dialysis Products revenue incl. internal sales 566 459 less internal sales (71 ) (52 ) Dialysis Products external sales 495 407   Reconciliation of cash flow from operating activities to EBITDA(1) Total EBITDA 485 450 Interest expense, net (83 ) (95 ) Income tax expense (114 ) (103 ) Change in working capital and other non cash items (96 ) 31 Net cash provided by operating activities 192 283   Annualized EBITDA Operating income (EBIT) last twelve months 1,604 1,436 Depreciation and amortization last twelve months 375 332 Non cash charges 41 36 Annualized EBITDA   2,020     1,804     (1) EBITDA is the basis for determining compliance with certain covenants in Fresenius Medical Care's long-term debt instruments.     Fresenius Medical Care March 31, December 31, Balance Sheet   (unaudited)   (audited) (in US-$ million) 2008 2007   Assets Current assets 4,054 3,859 Intangible assets 8,019 7,936 Other non-current assets 2,520 2,375 Total assets 14,593 14,170   Shareholders' equity and liabilities Current liabilities 2,886 3,026 Long-term liabilities 5,897 5,569 Shareholders' equity 5,810 5,575 Total shareholders' equity and liabilities 14,593 14,170   Equity/assets ratio: 40 % 39 %     Debt Short-term borrowings 707 217 Short-term borrowings from related parties 11 2 Current portion of long-term debt and capital lease obligations 119 85 Current portion of Trust Preferred Securities - 670 Long-term debt and capital lease obligations, less current portion 4,156 4,004 Trust Preferred Securities, less current portion 697 664 Total debt   5,690     5,642       Fresenius Medical Care Cash Flow Statement   2008   2007 Three Months Ended March 31, (in US-$ million) (unaudited)   Operating activities Net income 186 160 Depreciation / amortization 97 85 Change in working capital and other non cash items (91 ) 38 Cash Flow from operating activities 192 283   Investing activities Purchases of property, plant and equipment (160 ) (117 ) Proceeds from sale of property, plant and equipment 6 8 Capital expenditures, net (154 ) (109 ) Free Cash Flow 38 174   Acquisitions, net of cash acquired (71 ) (90 ) Proceeds from divestitures 39 - Acquisitions net of divestitures (32 ) (90 ) Free Cash Flow after investing activities 6 84   Financing activities Change in accounts receivable securitization program 492 35 Change in intercompany debt 8 17 Change in other debt 141 (86 ) Redemption of Trust Preferred Securities (678 ) - Proceeds from exercise of stock options 7 4 Change in minority interest (8 ) (6 ) Cash Flow from financing activities (38 ) (36 )   Effects of exchange rates on cash 7 1 Net increase in cash (25 ) 49   Cash at beginning of period 245 159 Cash at end of period   220     208     Fresenius Medical Care Quarterly Performance Scorecard - Revenue Three months ended March 31,   2008   cc   2007   cc (in US-$ thousands, except per-treatment revenue)   North America Net revenue 1,667,541 1,636,573 Growth year-over-year 1.9 % 37.1 %   Dialysis Care 1,495,241 1,483,255 Growth year-over-year 0.8 % 40.0 % U.S. per treatment 326 329 Per treatment 322 325 Sequential growth 0.3 % -0.1 % Growth year-over-year -0.9 % 5.9 %   Dialysis Products incl. internal sales 302,870 280,825 Growth year-over-year 7.9 % 25.0 % External sales 172,299 153,318 Growth year-over-year 12.4 % 14.2 %   International Net revenue 843,995 684,098 Growth year-over-year 23.4 % 10.4 % 23.6 % 16.8 %   Dialysis Care 349,045 277,099 Growth year-over-year 26.0 % 13.0 % 29.9 % 24.1 % Per treatment 168 151 144 137 Sequential growth 5.1 % 3.7 % Growth year-over-year 17.1 % 5.0 % 10.8 % 5.8 %   Dialysis Products incl. internal sales 566,214 459,116 Growth year-over-year 23.3 % 10.1 % 21.7 % 14.2 % External sales 494,950 407,000 Growth year-over-year   21.6 %   8.7 %   19.7 %   12.2 %   cc = at constant exchange rates   Fresenius Medical Care Quarterly Performance Scorecard - Dialysis Care Volume Three months ended March 31,   2008   2007   North America Number of treatments 4,647,996 4,481,077 Treatments per day 60,364 58,191 Per day sequential growth 1.6 % 1.2 % Per day year-over-year growth 3.7 % 32.7 % Same market growth year-over-year 2.7 % 2.8 %   International Number of treatments 2,075,783 1,929,275 Same market growth year-over-year   7.1 %   6.3 %     Fresenius Medical Care Quarterly Performance Scorecard - Expenses Three months ended March 31, 2008 2007   North America Costs of revenue and operating expenses Percent of revenue 83.6 % 84.2 % Selling, general and administrative Percent of revenue 16.0 % 16.1 % Bad debt expenses Percent of revenue 3.0 % 2.9 % Dialysis Care operating expenses/Treatment (in US-$) 271 272 Sequential growth 3.2 % 1.8 % Growth year-over-year -0.3 % 3.3 %   Total Group Costs of revenue and operating expenses Percent of revenue 84.5 % 84.3 % Selling, general and administrative Percent of revenue 17.8 % 17.5 % Effective tax rate   37.3 %   38.0 %     Fresenius Medical Care Quarterly Performance Scorecard - Cash Flow/Investing Activities Three months ended March 31, 2008 2007 (in US-$ thousands, except number of de novos)   Total Group Operating Cash Flow 191,945 282,754 Percent of revenue 7.6 % 12.2 %   Free Cash Flow before acquisitions 37,499 174,111 Percent of revenue 1.5 % 7.5 %   Acquisitions net of divestitures 31,620 89,930   Capital expenditures, net 154,446 108,643 Percent of revenue 6.1 % 4.7 %   Maintenance 78,652 52,932 Percent of revenue 3.1 % 2.3 %   Growth 75,794 55,712 Percent of revenue 3.0 % 2.4 %   Number of de novos 44 18 North America 29 12 International   15     6       Fresenius Medical Care Quarterly Performance Scorecard - Balance Sheet Three months ended March 31, 2008 2007   Total Group Debt (in US-$ million) 5,690 5,569 Debt/EBITDA 2.8 3.1   North America Days sales outstanding 60 58   International Days sales outstanding   107     109       Fresenius Medical Care Quarterly Performance Scorecard Three months ended March 31, 2008 2007   Clinical Performance North America (U.S.) Single Pool Kt/v > 1.2 95 % 93 % Hemoglobin >= 11g/dl 74 % 82 % Albumin >= 3.5 g/dl(1) 80 % 79 % Phosphate 3.5-5.5mg/dl 53 % 51 % Hospitalization days per patient(2) (12 months ending March 31,) 10.7 11.3     Demographics North America (U.S.) Average age (yr) 62 62 Average time on dialysis (yr) 3.5 3.4 Average body weight (kg) 79 78 Prevalence of diabetes   53 %   52 %   (1) International standard BCR CRM470 (2) Hospitalization data without former RCG facilities