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(Mark One) | ||
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2007 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to | ||
OR | ||
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Date of event requiring this shell company report |
Title of each class | Name of each exchange on which registered | |
American Depositary Shares representing Preference Shares | New York Stock Exchange | |
Preference Shares, no par value | New York Stock Exchange(1) | |
American Depositary Shares representing Ordinary Shares | New York Stock Exchange | |
Ordinary Shares, no par value | New York Stock Exchange(1) |
(1) | Not for trading, but only in connection with the registration of American Depositary Shares representing such shares. |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o |
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• | changes in governmental and commercial insurer reimbursement for our products and services; | |
• | a possible decline in erythropoietin, or EPO, utilization or EPO reimbursement; | |
• | dependence on government reimbursements for dialysis services; | |
• | the outcome of ongoing government investigations; | |
• | the influence of private insurers and managed care organizations and health care reforms; | |
• | product liability risks and patent litigation; | |
• | risks relating to the integration of acquisitions and our dependence on additional acquisitions; | |
• | the impact of currency fluctuations; | |
• | changes in pharmaceutical utilization patterns; and | |
• | other statements of our expectations, beliefs, future plans and strategies, anticipated development and other matters that are not historical facts. |
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2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
(In millions except share and per share amounts) | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Net revenues | $ | 9,720 | $ | 8,499 | $ | 6,772 | $ | 6,228 | $ | 5,528 | ||||||||||
Cost of revenues | 6,364 | 5,621 | 4,564 | 4,266 | 3,793 | |||||||||||||||
Gross profit | 3,356 | 2,878 | 2,208 | 1,962 | 1,735 | |||||||||||||||
Selling, general and administrative | 1,709 | 1,549 | 1,218 | 1,059 | 928 | |||||||||||||||
Gain on sale of dialysis clinics | — | (40 | ) | — | — | — | ||||||||||||||
Research and development | 67 | 51 | 51 | 51 | 50 | |||||||||||||||
Operating income | 1,580 | 1,318 | 939 | 852 | 757 | |||||||||||||||
Interest expense, net | 371 | 351 | 173 | 183 | 211 | |||||||||||||||
Income before income taxes | 1,209 | 967 | 766 | 669 | 546 | |||||||||||||||
Net income | $ | 717 | $ | 537 | $ | 455 | $ | 402 | $ | 331 | ||||||||||
Weighted average of: | ||||||||||||||||||||
Preference shares outstanding | 3,739,470 | 3,575,376 | 80,369,448 | 78,729,177 | 78,573,033 | |||||||||||||||
Ordinary shares outstanding | 291,929,141 | 290,621,904 | 210,000,000 | 210,000,000 | 210,000,000 | |||||||||||||||
Basic earnings per Ordinary share and Ordinary ADS(1) | $ | 2.43 | $ | 1.82 | $ | 1.56 | $ | 1.39 | $ | 1.14 | ||||||||||
Fully diluted earnings per Ordinary share and Ordinary ADS(1) | 2.42 | 1.81 | 1.55 | 1.38 | 1.14 | |||||||||||||||
Basic earnings per Preference share and Preference ADS(1) | 2.45 | 1.85 | 1.58 | 1.41 | 1.16 | |||||||||||||||
Fully diluted earnings per Preference share and Preference ADS(1) | 2.44 | 1.84 | 1.57 | 1.40 | 1.16 | |||||||||||||||
Dividends declared per Ordinary share (€)(a) | 0.54 | (b) | 0.47 | 0.41 | 0.37 | 0.34 | ||||||||||||||
Dividends declared per Preference share (€)(a) | 0.56 | (b) | 0.49 | 0.43 | 0.39 | 0.36 | ||||||||||||||
Dividends declared per Ordinary share ($)(a) | — | 0.64 | 0.52 | 0.47 | 0.42 | |||||||||||||||
Dividends declared per Preference share ($)(a) | — | 0.67 | 0.55 | 0.49 | 0.44 |
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2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
(In millions except share and per share amounts) | ||||||||||||||||||||
Balance Sheet Data | ||||||||||||||||||||
Working capital | $ | 833 | $ | 1,036 | $ | 883 | $ | 508 | $ | 794 | ||||||||||
Total assets | 14,170 | 13,045 | 7,983 | 7,962 | 7,503 | |||||||||||||||
Total long-term debt (excluding current portion) | 4,668 | 5,083 | 1,895 | 1,824 | 2,354 | |||||||||||||||
Shareholders’ equity | 5,575 | 4,870 | 3,974 | 3,635 | 3,244 | |||||||||||||||
Capital Stock — Preference shares — Nominal Value | 4 | 4 | 91 | 85 | 85 | |||||||||||||||
Capital Stock — Ordinary shares — Nominal Value | 361 | 360 | 271 | 271 | 271 |
(1) | As a result of the Company’sthree-for-one share split of both the Ordinary shares and the Preference shares effective June 15, 2007 and the contemporaneous change of the ratio of American Depositary Shares (“ADSs”) to shares, one Ordinary ADS represents one Ordinary share and one Preference ADS represents one Preference share. Accordingly, dividends per Ordinary ADS and per Preference ADS are not shown separately. |
(a) | Amounts shown for each year from 2007 to 2003 represent dividends paid with respect to such year. The actual declaration and payment of the dividend was made in the following year, after approval of the dividend at our Annual General Meeting. |
(b) | Our general partner’s Management Board has proposed dividends for 2007 of €0.54 per Ordinary share and €0.56 per Preference share. These dividends are subject to approval by our shareholders at our Annual General Meeting to be held on May 20, 2008. |
• | the quality, safety and efficacy of medical and pharmaceutical products and supplies; | |
• | the operation of manufacturing facilities, laboratories and dialysis clinics; | |
• | accurate reporting and billing for government and third-party reimbursement; and | |
• | compensation of medical directors and other financial arrangements with physicians and other referral sources. |
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• | a portion of our business that is currently reimbursed by private insurers or hospitals may become reimbursed by managed care organizations, which generally have lower rates for our services; or | |
• | a portion of our business that is currently reimbursed by private insurers at rates based on our billed charges may become reimbursed under a contract at lower rates. |
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• | the dosing volumes of CERA® or Aranesp® required to treat anemia in dialysis patients may be less than the corresponding volume of EPO®, without an offsetting adjustment in relative reimbursement rates; | |
• | our margins realized from the administration of Aranesp® or CERA® could be lower than the margins realized on the administration of EPO®; or | |
• | a shift in the method or site for administration of Aranesp® or CERA® to patients that excludes our Company from such administration and the related reimbursement for such products. |
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• | the economic situation in developing countries could deteriorate; | |
• | fluctuations in exchange rates could adversely affect profitability; | |
• | we could face difficulties in enforcing and collecting accounts receivable under some countries’ legal systems; | |
• | local regulations could restrict our ability to obtain a direct ownership interest in dialysis clinics or other operations; | |
• | political and economic instability, especially in developing and newly industrializing countries, could disrupt our operations; | |
• | some customers and governments could have longer payment cycles, with resulting adverse effects on our cash flow; and | |
• | some countries could impose additional taxes or restrict the import of our products. |
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A. | History and Development of the Company |
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• | all of the outstanding common stock of W.R. Grace & Co., whose sole business at the time of the transaction consisted of National Medical Care, Inc., its global dialysis business, in exchange for 94,080,000 Ordinary shares; and | |
• | the publicly-held minority interest in Fresenius USA, Inc., in exchange for 10,290,000 Ordinary shares. |
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Actual | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(in millions) | ||||||||||||
Acquisitions | ||||||||||||
North America | $ | 62 | $ | 4,295 | $ | 77 | ||||||
International | 86 | 21 | 57 | |||||||||
Corporate | 204 | — | — | |||||||||
Total Acquisitions | $ | 352 | $ | 4,316 | $ | 134 | ||||||
Capital expenditures for property, plant and equipment | ||||||||||||
North America | $ | 335 | $ | 306 | $ | 176 | ||||||
International | 245 | 161 | 139 | |||||||||
Total Capital Expenditures | $ | 580 | $ | 467 | $ | 315 | ||||||
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B. | Business Overview |
2007 | 2006 | 2005 | ||||||||||
(in millions) | ||||||||||||
North America | ||||||||||||
Dialysis Care | $ | 6,002 | $ | 5,464 | $ | 4,054 | ||||||
Dialysis Products | 661 | 561 | 523 | |||||||||
6,663 | 6,025 | 4,577 | ||||||||||
International | ||||||||||||
Dialysis Care | 1,211 | 913 | 813 | |||||||||
Dialysis Products | 1,846 | 1,561 | 1,382 | |||||||||
3,057 | 2,474 | 2,195 |
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• | increased general life expectancy and the overall aging of the general U.S. and European population; | |
• | shortage of donor organs for kidney transplants; | |
• | improved dialysis technology that makes life-prolonging dialysis available to a larger patient population; | |
• | greater access to treatment in developing countries; and | |
• | better treatment and survival of patients with hypertension, diabetes and other illnesses that lead to ESRD. |
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Annual Progress | GOAL | |||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2010 | ||||||||||||||
Revenue ($ in million) | $ | 6,772 | $ | 6,772 | $ | 8,499 | $ | 9,720 | $ ~11,500 | |||||||||
Annual revenue growth at constant currency | 10% | 8% | 25% | 12% | ~6–9% | |||||||||||||
Share of dialysis market* | 12.00% | 12.90% | 15.5% | 16.8% | ~18% | |||||||||||||
Market volume* ($ in billion) | $ | ~50 | $ | ~52,5 | $ | ~55 | $ | ~58 | $ ~67 | |||||||||
Annual net income growth percentage** | 21% | 17% | 24% | 25% | Low to mid teens |
* | Company estimates |
** | 2005 excluding one-time effects, 2006 excluding one-time effects and FAS 123(R) and 2007 excluding one-time effects |
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• | our reputation for quality patient care and treatment | |
• | our reputation for technologically advanced products for dialysis treatment; and | |
• | our extensive network of dialysis clinics, which enables physicians to refer their patients to conveniently located clinics. |
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• | our reputation for quality patient care and treatment; | |
• | our extensive network of dialysis clinics, which enables physicians to refer their patients to conveniently located clinics; and | |
• | our reputation for technologically advanced products for dialysis treatment. |
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Year Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Medicare ESRD program | 53.2% | 54.5% | 56.0% | |||||||||
Private / alternative payors | 36.5% | 34.4% | 31.6% | |||||||||
Medicaid and other government sources | 4.2% | 3.9% | 4.2% | |||||||||
Hospitals | 6.1% | 7.2% | 8.2% | |||||||||
Total | 100.0% | 100.0% | 100.0% | |||||||||
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• | HD machines and PD cyclers | |
• | Dialyzers, our largest product group | |
• | PD solutions in flexible bags | |
• | HD concentrates, solutions and granulates | |
• | Bloodlines | |
• | Systems for water treatment |
Year Ended December 31, | ||||||||||||||||||||||||
2007 | 2006 | 2005 | ||||||||||||||||||||||
Total | Total | Total | ||||||||||||||||||||||
Product | % of | Product | % of | Product | % of | |||||||||||||||||||
Revenues | Total | Revenues | Total | Revenues | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Hemodialysis Products | $ | 2,007.5 | 80 | $ | 1,720.7 | 81 | $ | 1,588.6 | 83 | |||||||||||||||
Peritoneal Dialysis Products | 326.7 | 13 | 307.8 | 14 | 275.5 | 15 | ||||||||||||||||||
Other | 173.1 | 7 | 93.1 | 5 | 40.9 | 2 | ||||||||||||||||||
Total | $ | 2,507.3 | 100 | $ | 2,121.6 | 100 | $ | 1,905.0 | 100 | |||||||||||||||
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• | Volumetric dialysate balancing and ultrafiltration control system. This system, which we introduced in 1977, provides for safe and more efficient use of highly permeable dialyzers, permitting efficient dialysis with controlled rates of fluid removal; | |
• | Proven hydraulic systems, providing reliable operation and servicing flexibility; | |
• | Compatibility with all manufacturers’ dialyzers and a variety of bloodlines and dialysis solutions, permitting maximum flexibility in both treatment and disposable products usage; | |
• | Modular design, which permits us to offer dialysis clinics a broad range of options to meet specific patient or regional treatment requirements. Modular design also allows upgrading through module substitution without replacing the entire machine; | |
• | Specialized modules that provide monitoring and response capability for selected biophysical patient parameters, such as body temperature and relative blood volume. This concept, known as physiological dialysis, permits hemodialysis treatments with lower incidence of a variety of symptoms or side effects, which still occur frequently in standard hemodialysis. | |
• | Sophisticated microprocessor controls, displays and/or readout panels that are adaptable to local language requirements; | |
• | Battery backup, which continues operation of the blood circuit and all protective systems up to 20 minutes following a power failure; | |
• | Online clearance, measurement of dialyzer clearance for quality assurance with On-Line Clearance Monitoring, providing immediate effective clearance information, real time treatment outcome monitoring, and therapy adjustment during dialysis without requiring invasive procedures or blood samples; | |
• | In the series 5008 and 4008H, the most efficient therapy mode ONLINE-Hemodiafilitration as standard; | |
• | On-line data collection capabilities and computer interfacing with our TDMS and/or FDS08 systems. Our systems enable us to: |
— | monitor and assess prescribed therapy; | |
— | connect a large number of hemodialysis machines and peripheral devices, such as patient scales, blood chemistry analyzers and blood pressure monitors, to a personal computer network; | |
— | enter nursing records automatically at bedside to register and document patient treatment records, facilitate billing, and improve record-keeping and staff efficiency; | |
— | adapt to new data processing devices and trends; | |
— | perform home hemodialysis with remote monitoring by a staff caregiver; and | |
— | record and analyze trends in medical outcome factors in hemodialysis patients. |
• | higher biological compatibility, resulting in reduced incidence of adverse reactions to the fibers; | |
• | greater capacity to clear uremic toxins from patient blood during dialysis, permitting more thorough, more rapid dialysis, resulting in shorter treatment time; and | |
• | a complete range of permeability or membrane pore size, which permits dialysis at prescribed rates — high flux and low flux, as well as ultra flux for acute dialysis and allows tailoring of dialysis therapy to individual patients. |
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• | Fewer possibilities for touch contamination. Our unique PIN and DISC technology was designed to reduce the number of steps in the fluid exchange process and by doing so has lessened the risk of infection, particularly in the disconnection step in which the patient connector is closed automatically without the need for manual intervention. | |
• | Improved biocompatibility. The newbalance and bicaVera® solutions are pH neutral and have very low glucose degradation products providing greater protection for the peritoneal membrane. | |
• | Environmentally friendly material: Ourstay•safe® system is made of Biofine®, a material, developed by Fresenius, which upon combustion is reduced to carbon dioxide and water and does not contain any plasticizers. |
• | Improved quality of life. The patient is treated at night and can lead a more normal life during the day without fluid exchange every few hours. | |
• | Improved adequacy of dialysis. By adjusting the parameters of treatment it is possible to provide more dialysis to the patient compared to conventional CAPD therapy. This therapy offers important options to physicians such as improving the delivered dose of dialysis for certain patients. |
• | sleep•safe: Thesleep•safe machine has been used since 1999. It has automated connection technology thus further reducing the risk on touch contamination. Another key safety feature is the barcode recognition system for the types of solution bags used. This improves compliance and ensures that the prescribed dosage is administered to the patient. There is also a pediatric option for the treatment of infants. | |
• | North American cycler portfolio: This includes the (a) Freedom® and 90/2® cyclers for pediatric and acute markets, (b) the Freedom® Cycler PD+ with IQ cardtm and (c) the Newton IQ® Cycler. The credit card-sized IQcardtm can provide actual treatment details and results for compliance monitoring to the physician and, when used with the Newton IQtm Cycler, can upload the patient’s prescription into the machine. The Newton IQtm Cycler also pumps waste dialysate directly into a receptacle. |
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• | failure to receive required licenses, certifications or other approvals for new facilities or products or significant delays in such receipt; | |
• | complete or partial loss of various federal certifications, licenses, or other permits required under the laws of any state or other governmental authority by withdrawal, revocation, suspension, or termination or restrictions of such certificates and licenses by the imposition of additional requirements or conditions, or the initiation of proceedings possibly leading to such restrictions or the partial or complete loss of the required certificates, licenses or permits; and | |
• | changes resulting from health care reform or other government actions that reduce reimbursement or reduce or eliminate coverage for particular services we provide. |
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• | future changes in the ESA reimbursement methodology and/or rate; | |
• | inclusion of ESAs in the Medicare composite rate without sufficient offsetting increases to such rate; | |
• | reduction in the typical dosage per administration, including by imposition of a requirement to administer ESAs to Medicare beneficiaries subcutaneously rather than intravenously; | |
• | increases in the cost of ESAs without offsetting increases in the ESA reimbursement rate; or | |
• | reduction by the manufacturer of ESAs of the amount of overfill in the ESA vials. |
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C. | Organizational Structure |
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D. | Property, plant and equipment |
Currently | ||||||||||
Owned | ||||||||||
Floor Area | or Leased | |||||||||
(Approximate | by Fresenius | Lease | ||||||||
Location | Square Meters) | Medical Care | Expiration | Use | ||||||
Bad Homburg, Germany | 15,646 | leased | December 2016 | Corporate headquarters and administration | ||||||
St. Wendel, Germany | 58,767 | leased | December 2016 | Manufacture of polysulfone membranes, dialyzers and peritoneal dialysis solutions; research and development | ||||||
Schweinfurt, Germany | 28,427 | leased | December 2016 | Manufacture of hemodialysis machines and peritoneal dialysis cyclers; research and development | ||||||
Bad Homburg (OE) | 10,304 | leased | December 2016 | Manufacture of hemodialysis concentrate solutions / Technical Services / Logistics services Amgen | ||||||
Darmstadt | 21,597 | leased | November 2010 | Regional Distribution Center Central Europe | ||||||
Gernsheim, Germany | 32,307 | leased | December 2009 | Regional Distribution A4/WE/AP/LA | ||||||
Palazzo Pignano, Italy | 19,990 | owned | Manufacture of bloodlines and tubing | |||||||
L’Arbresle, France | 13,524 | owned | Manufacture of polysulfone dialyzers, special filters and dry hemodialysis concentrates | |||||||
Nottinghamshire, UK | 5,110 | owned | Manufacture of hemodialysis concentrate solutions | |||||||
Vrsac, Serbia | 2,642 | owned | Production area, Laboratory, lobby, maintenance, administration, logistics | |||||||
Barcelona, Spain | 2,000 | owned | Manufacture of hemodialysis concentrate solutions | |||||||
Antalya, Turkey | 8,676 | leased | December 2022 | Manufacture of bloodlines | ||||||
Casablanca, Morocco | 2,823 | owned | Manufacture of hemodialysis concentrate solutions | |||||||
Guadalajara, México | 26,984 | owned | Manufacture of peritoneal dialysis bags | |||||||
Buenos Aires, Argentina | 10,500 | owned | Manufacture of hemodialysis concentrate solutions, dry hemodialysis concentrates, bloodlines and desinfectants | |||||||
São Paulo, Brazil | 8,566 | owned | Manufacture of hemodialysis concentrate solutions, dry hemodialysis concentrates, peritoneal dialysis bags, intravenous solutions bags, peritoneal dialysis and blood lines sets | |||||||
São Paulo, Brazil | 5,000 | leased | October 2008 | Warehouse |
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Currently | ||||||||||
Owned | ||||||||||
Floor Area | or Leased | |||||||||
(Approximate | by Fresenius | Lease | ||||||||
Location | Square Meters) | Medical Care | Expiration | Use | ||||||
Bogotá, Colombia | 11,825 | owned | Manufacture of hemodialysis concentrate solutions, peritoneal dialysis bags, intravenous solutions, administration | |||||||
Valencia, Venezuela | 3,562 | leased | May 2009 | Head Office and Warehouse | ||||||
Hong Kong | 3,588 | leased | November 2009 | Various leases of Warehouse facility | ||||||
Suzhou, China (Changshu Plant) | 25,736 | owned | Manufacture of hemodialysis bloodline sets / AV Fistula set | |||||||
Smithfield, Australia | 5,350 | owned | Manufacture of hemodialysis concentrate | |||||||
Scoresby, Australia | 7,000 | leased | March 2009 | Manufacture of hemodialysis products, warehouse and administration | ||||||
Altona VIC, Australia | 1,500 | leased | May 2009 | Warehouse | ||||||
Yongin, South Korea | 2,645 | leased | December 2009 | Warehouse | ||||||
Seoul, South Korea | 3,074 | leased | January 2012 | Administration | ||||||
Oita, Japan (Inukai Plant) | 3,065 | owned | Manufacture of polysulfone filters | |||||||
Oita, Japan | 793 | owned | Warehouse and Building | |||||||
Fukuoka, Japan (Buzen Plant) | 12,100 | owned | Manufacture of peritoneal dialysis bags | |||||||
Saga, Japan | 5,966 | leased | January 2010 with 1 year renewal option | Warehouse | ||||||
Waltham, Massachusetts | 21,142 | leased | April 2017 — July 2017 with a 10 year renewal and a second 5 year renewal option | Corporate headquarters and administration — North America | ||||||
Lexington, Massachusetts | 670 | leased | March 2012 with 5 year renewal option | Research and Development | ||||||
Lexington, Massachusetts | 6,425 | leased | October 2012 with 5 year renewal option | IT headquarters and administration — North America | ||||||
Nashville, Tennessee | 3,053 | leased | April 2009 | IT administration | ||||||
Walnut Creek, California | 9,522 | leased | June 2012 with 5-year renewal option | Manufacture of Hemodialysis machines and peritoneal dialysis cyclers; research and development; warehouse space | ||||||
Ogden, Utah | 63,639 | owned | Manufacture polysulfone membranes and dialyzers and peritoneal dialysis solutions; research and development | |||||||
Ogden, Utah | 33,385 | leased | December 2011 | Warehouse | ||||||
Ogden, Utah | 2,072 | leased | December 2008 — year to year lease | Warehouse | ||||||
Oregon, Ohio | 13,934 | leased | April 2019 | Manufacture of liquid hemodialysis concentrate solutions | ||||||
Perrysburg, Ohio | 3,252 | leased | August 2008 | Manufacture of dry hemodialysis concentrates | ||||||
Livingston, California | 6,689 | leased | October 2011 with a 5-year renewal option | Manufacture of liquid hemodialysis concentrates and resupply |
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Currently | ||||||||||
Owned | ||||||||||
Floor Area | or Leased | |||||||||
(Approximate | by Fresenius | Lease | ||||||||
Location | Square Meters) | Medical Care | Expiration | Use | ||||||
Milpitas, California | 8,670 | leased | December 2015 with 5-year renewal option | Clinical laboratory testing — 1 Building | ||||||
Rockleigh, New Jersey | 9,812 | leased | May 2012 | Clinical laboratory testing | ||||||
Irving, Texas | 6,506 | leased | December 2010 | Manufacture of liquid hemodialysis solution | ||||||
Reynosa, Mexico | 13,936 | leased | June 2013 | Manufacture of bloodlines | ||||||
Reynosa, Mexico | 4,645 | owned | Warehouse | |||||||
Province of Quebec, Canada | 1,914 | leased | April 2012 | Plant Building #1 — Manufacture of dry and liquid concentrates |
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At December 31, 2007 | ||||||||||||||||||||||||||||
overdue | ||||||||||||||||||||||||||||
overdue | by more | |||||||||||||||||||||||||||
overdue | more than | than | overdue | % of | ||||||||||||||||||||||||
by | 3 months | 6 months | by | net | ||||||||||||||||||||||||
up to | up to | up to | more than | trade | ||||||||||||||||||||||||
current | 3 months | 6 months | 1 year | 1 year | Total | A/R | ||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
U.S. Medicare and Medicaid Programs | $ | 261 | $ | 63 | $ | 30 | $ | 28 | $ | 19 | $ | 401 | 20 | |||||||||||||||
U.S. Commercial Payors | 209 | 139 | 57 | 56 | 62 | 523 | 26 | |||||||||||||||||||||
U.S.Hospitals | 69 | 39 | 2 | 1 | 1 | 112 | 6 | |||||||||||||||||||||
Self-Pay of U.S. patients | 1 | 2 | 4 | 3 | 1 | 11 | 1 | |||||||||||||||||||||
Other North America | 5 | 1 | 0 | 0 | 0 | 6 | 0 | |||||||||||||||||||||
International product customers and dialysis payors | 614 | 178 | 75 | 56 | 51 | 974 | 47 | |||||||||||||||||||||
Total | $ | 1,159 | $ | 422 | $ | 168 | $ | 144 | $ | 134 | $ | 2,027 | 100 | |||||||||||||||
At December 31, 2006 | ||||||||||||||||||||||||||||
overdue | ||||||||||||||||||||||||||||
overdue | by more | |||||||||||||||||||||||||||
overdue | more than | than | overdue | % of | ||||||||||||||||||||||||
by | 3 months | 6 months | by | net | ||||||||||||||||||||||||
up to | up to | up to | more than | trade | ||||||||||||||||||||||||
current | 3 months | 6 months | 1 year | 1 year | Total | A/R | ||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
U.S. Medicare and Medicaid Programs | $ | 164 | 100 | $ | 76 | $ | 39 | $ | 32 | $ | 411 | 22 | ||||||||||||||||
U.S. Commercial Payors | 183 | 115 | 84 | 44 | 48 | 474 | 26 | |||||||||||||||||||||
U.S.Hospitals | 29 | 20 | 10 | 6 | 6 | 71 | 4 | |||||||||||||||||||||
Self-Pay of U.S. patients | 12 | 4 | 2 | 0 | 1 | 19 | 1 | |||||||||||||||||||||
Other North America | 38 | 19 | 1 | 0 | 2 | 60 | 3 | |||||||||||||||||||||
International product customers and dialysis payors | 499 | 128 | 72 | 54 | 61 | 814 | 44 | |||||||||||||||||||||
Total | $ | 925 | 386 | $ | 245 | $ | 143 | $ | 150 | $ | 1,849 | 100 | ||||||||||||||||
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A. | Results of Operations |
For the years ended | ||||||||||||
December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(in millions) | ||||||||||||
Total revenue | ||||||||||||
North America | $ | 6,664 | $ | 6,026 | $ | 4,578 | ||||||
International | 3,134 | 2,534 | 2,250 | |||||||||
Totals | 9,798 | 8,560 | 6,828 | |||||||||
Inter-segment revenue | ||||||||||||
North America | 1 | 1 | 1 | |||||||||
International | 77 | 60 | 55 | |||||||||
Totals | 78 | 61 | 56 | |||||||||
Total net revenue | ||||||||||||
North America | 6,663 | 6,025 | 4,577 | |||||||||
International | 3,057 | 2,474 | 2,195 | |||||||||
Totals | 9,720 | 8,499 | 6,772 | |||||||||
Amortization and depreciation | ||||||||||||
North America | 220 | 187 | 140 | |||||||||
International | 141 | 120 | 109 | |||||||||
Corporate | 2 | 2 | 2 | |||||||||
Totals | 363 | 309 | 251 | |||||||||
Operating Income | ||||||||||||
North America | 1,130 | 965 | 644 | |||||||||
International | 544 | 440 | 362 | |||||||||
Corporate | (94 | ) | (87 | ) | (67 | ) | ||||||
Totals | 1,580 | 1,318 | 939 | |||||||||
Interest income | 29 | 21 | 18 | |||||||||
Interest expense | (400 | ) | (372 | ) | (191 | ) | ||||||
Income tax expense | (466 | ) | (413 | ) | (309 | ) | ||||||
Minority interest | (26 | ) | (17 | ) | (2 | ) | ||||||
Net income | $ | 717 | $ | 537 | $ | 455 | ||||||
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Change in % | ||||||||||||||||
at constant | ||||||||||||||||
2007 | 2006 | as reported | exchange rates | |||||||||||||
Number of treatments | 26,442,421 | 23,739,733 | 11 | % | ||||||||||||
Same market treatment growth in % | 3.9 | % | 4.2 | % | ||||||||||||
Revenue in $ million | 9,720 | 8,499 | 14 | % | 12 | % | ||||||||||
Gross profit in % of revenue | 34.5 | % | 33.9 | % | ||||||||||||
Selling, general and administrative costs in % of revenue | 17.6 | % | 18.2 | % | ||||||||||||
Net income in $ million | 717 | 537 | 34 | % |
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2007 | 2006 | Change in % | ||||||||||
Number of treatments | 18,451,381 | 16,877,911 | 9% | |||||||||
Same market treatment growth in % | 2.9 | % | 2.1 | % | ||||||||
Revenue in $ million | 6,663 | 6,025 | 11% | |||||||||
Depreciation and amortization in $ million | 220 | 187 | 18% | |||||||||
Operating income in $ million | 1,130 | 965 | 17% | |||||||||
Operating income margin in % | 17.0 | % | 16.0 | % |
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Change in % | ||||||||||||||||
at constant | ||||||||||||||||
2007 | 2006 | as reported | exchange rates | |||||||||||||
Number of treatments | 7,991,040 | 6,861,822 | 16 | % | ||||||||||||
Same market treatment growth in % | 6.2 | % | 8.6 | % | ||||||||||||
Revenue in $ million | 3,057 | 2,474 | 24 | % | 15% | |||||||||||
Depreciation and amortization in $ million | 141 | 120 | 18 | % | ||||||||||||
Operating income in $ million | 544 | 440 | 24 | % | ||||||||||||
Operating income margin in % | 17.8 | % | 17.8 | % |
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For the years ended | ||||||||||||
December 31, | ||||||||||||
2006 | 2005 | Change in % | ||||||||||
(in millions) | ||||||||||||
Operating income | $ | 1,318 | $ | 939 | 40% | |||||||
Transformation & Settlement | 2 | 22 | ||||||||||
Restructuring costs and in-process R&D | 35 | — | ||||||||||
Gain from FTC-related clinic divestment | (40 | ) | — | |||||||||
Stock option compensation expense (FAS 123(R)) | 14 | — | ||||||||||
Operating income excluding one time effects and Fas 123(R) | $ | 1,329 | $ | 961 | 38% | |||||||
For the years ended | ||||||||||||
December 31, | ||||||||||||
2006 | 2005 | Change in % | ||||||||||
(in millions) | ||||||||||||
Net income | $ | 537 | $ | 455 | 18% | |||||||
Transformation & Settlement | 1 | 17 | ||||||||||
Restructuring costs and in-process R&D | 23 | — | ||||||||||
Write-off FME prepaid financing fees | 9 | — | ||||||||||
Loss from FTC-related clinic divestment | 4 | — | ||||||||||
Stock option compensation expense (FAS 123(R)) | 10 | — | ||||||||||
Net income excluding one time effects and Fas 123(R) | $ | 584 | $ | 472 | 24% | |||||||
Change in % | ||||||||||||||||
at constant | ||||||||||||||||
2006 | 2005 | as reported | exchange rates | |||||||||||||
Number of treatments | 23,739,733 | 19,732,753 | 20% | |||||||||||||
Same market treatment growth in % | 4.2 | % | 4.6 | % | ||||||||||||
Revenue in $ million | 8,499 | 6,772 | 26% | 25% | ||||||||||||
Gross profit in % of revenue | 33.9 | % | 32.6 | % | ||||||||||||
Selling, general and administrative costs in % of revenue | 18.2 | % | 18.0 | % | ||||||||||||
Net income in $ million | 537 | 455 | 18% |
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2006 | 2005 | Change in % | ||||||||||
Number of treatments | 16,877,911 | 13,471,158 | 25% | |||||||||
Same market treatment growth in % | 2.1 | % | 3.3 | % | ||||||||
Revenue in $ million | 6,025 | 4,577 | 32% | |||||||||
Depreciation and amortization in $ million | 187 | 140 | 34% | |||||||||
Operating income in $ million | 965 | 644 | 50% | |||||||||
Operating income margin in % | 16.0 | % | 14.1 | % |
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Change in % | ||||||||||||||||
at constant | ||||||||||||||||
2006 | 2005 | as reported | exchange rates | |||||||||||||
Number of treatments | 6,861,822 | 6,261,595 | 10% | |||||||||||||
Same market treatment growth in % | 8.6 | % | 7.6 | % | ||||||||||||
Revenue in $ million | 2,474 | 2,195 | 13% | 12% | ||||||||||||
Depreciation and amortization in $ million | 120 | 109 | 9% | |||||||||||||
Operating income in $ million | 440 | 362 | 22% | |||||||||||||
Operating income margin in % | 17.8 | % | 16.5 | % |
B. | Liquidity and Capital Resources |
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December 31, | December 31, | |||||
2007 | 2006 | |||||
North America | 58 | 59 | ||||
International | 110 | 119 | ||||
Total | 74 | 76 | ||||
• | a5-year $1 billion revolving credit facility (of which up to $0.25 billion is available for letters of credit, up to $0.3 billion is available for borrowings in certainnon-U.S. currencies, up to $0.15 billion is available as swing line loans in U.S. dollars, up to $0.25 billion is available as a competitive loan facility and up to $0.05 billion is available as swing line loans in certainnon-U.S. currencies, the total of all of which cannot exceed $1 billion) which will be due and payable on March 31, 2011. | |
• | a5-year term loan facility (“Term Loan A”) of $1.85 billion also scheduled to mature on March 31, 2011. The 2006 Senior Credit Agreement requires 19 quarterly payments on Loan A of $30 million each that |
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permanently reduce the term loan facility. The repayments began on June 30, 2006 and continue through December 31, 2010. The remaining amount outstanding is due on March 31, 2011. |
• | a7-year term loan facility (“Term Loan B”) of $1.75 billion scheduled to mature on March 31, 2013. The 2006 Senior Credit Agreement requires 28 quarterly payments on Loan B that permanently reduce the term loan facility. The repayment began June 30, 2006. The first 24 quarterly payments will be equal to one quarter of one percent (0.25%) of the original principal balance outstanding, payments 25 though 28 will be equal to twenty-three and one half percent (23.5%) of the original principal balance outstanding with the final payment due on March 31, 2013, subject to an early repayment requirement on March 1, 2011 if the Trust Preferred Securities due June 15, 2011 are not repaid or refinanced or their maturity is not extended prior to that date |
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Payments due by period of | ||||||||||||||||
in millions | Total | 1 Year | 2-5 Years | Over 5 Years | ||||||||||||
Trust Preferred Securities(a) | $ | 1,512 | $ | 725 | $ | 788 | $ | — | ||||||||
Long Term Debt(b) | 5,156 | 322 | 3,744 | 1,090 | ||||||||||||
Capital Lease Obligations | 14 | 3 | 8 | 3 | ||||||||||||
Operating Leases | 1,943 | 358 | 1,021 | 564 | ||||||||||||
Unconditional Purchase Obligations | 296 | 188 | 108 | — | ||||||||||||
Other Long-term Obligations | 19 | 18 | 1 | |||||||||||||
Letters of Credit | 87 | 87 | — | — | ||||||||||||
$ | 9,027 | $ | 1,700 | $ | 5,669 | $ | 1,657 | |||||||||
(a) | Interest payments are determined on these debt instruments until their respective maturity dates and based on their applicable balances and fixed interest rates for each period presented. We redeemed $670 million of Trust Preferred Securities on February 1, 2008, primarily by utilizing funds available under our existing credit facilities. |
(b) | Interest payments are based upon the principal repayment schedules and fixed interest rates or estimated variable interest rates considering the applicable interest rates (e.g. Libor, Prime), the applicable margins, and the effects of related interest rate swaps. |
Expiration per period of | ||||||||||||||||
Available Sources of Liquidity | Total | 1 Year | 2-5 Years | Over 5 Years | ||||||||||||
Accounts receivable facility(a) | $ | 565 | $ | 565 | $ | — | $ | — | ||||||||
Unused Senior Credit Lines | 875 | — | 875 | — | ||||||||||||
Other Unused Lines of Credit | 99 | 99 | — | — | ||||||||||||
$ | 1,539 | $ | 664 | $ | 875 | $ | — | |||||||||
(a) | Subject to availability of sufficient accounts receivable meeting funding criteria. |
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2008 | ||
($ in millions) | ||
Net Revenues | > $10,400 | |
Net Income | $805-$825 | |
Leverage ratio | < 2.8 | |
Capex | ~$650-$750 | |
Acquisitions | ~$150-$250 |
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For the years ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(in thousands) | ||||||||||||
Total EBITDA | $ | 1,943,451 | $ | 1,626,825 | $ | 1,190,370 | ||||||
Settlement of shareholder proceedings | — | (888 | ) | 7,335 | ||||||||
Interest expense (net of interest income) | (371,047 | ) | (351,246 | ) | (173,192 | ) | ||||||
Income tax expense, net | (465,652 | ) | (413,489 | ) | (308,748 | ) | ||||||
Change in deferred taxes, net | 1,177 | 10,904 | (3,675 | ) | ||||||||
Changes in operating assets and liabilities | 46,876 | 58,294 | (45,088 | ) | ||||||||
Tax payments related to divestitures and acquisitions | — | (63,517 | ) | — | ||||||||
Compensation Expense | 24,208 | 16,610 | 1,363 | |||||||||
Cash inflow from Hedging | — | 10,908 | — | |||||||||
Other items, net | 20,561 | 13,429 | 1,939 | |||||||||
Net cash provided by operating activities | $ | 1,199,574 | $ | 907,830 | $ | 670,304 | ||||||
• | May be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method; |
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• | Is irrevocable (unless a new election date occurs); and | |
• | Is applied only to entire instruments and not to portions of instruments. |
C. | Research and Development |
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D. | Trend information |
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A. | Directors and senior management |
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Age as of | ||||
December 31, | ||||
Name | 2007 | |||
Dr. Ulf M. Schneider, Chairman | 42 | |||
Dr. Dieter Schenk, Vice-Chairman | 55 | |||
Dr. Gerd Krick(1) | 69 | |||
Dr. Walter L. Weisman(1)(2) | 72 | |||
John Gerhard Kringel(1)(2) | 68 | |||
William P. Johnston(1)(2) | 63 |
(1) | Members of the Audit and Governance Committee of FMC-AG & Co. KGaA |
(2) | Independent director for purposes of our pooling agreement |
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Age as of | ||||||||||
Dec 31, | Year term | |||||||||
Name | 2007 | Position | expires | |||||||
Dr. Ben J. Lipps | 67 | Chairman of the Management Board, Chief Executive Officer of Management AG | 2011 | |||||||
Roberto Fusté | 55 | Chief Executive Officer for Asia Pacific | 2011 | |||||||
Dr. Emanuele Gatti | 52 | Chief Executive Officer for Europe, Middle East, Africa and Latin America | 2010 | |||||||
Lawrence Rosen | 50 | Chief Financial Officer | 2011 | |||||||
Dr. Rainer Runte | 48 | General Counsel and Chief Compliance Officer | 2010 | |||||||
Rice Powell | 52 | Co-Chief Executive Officer, Fresenius Medical Care North America and President and CEO of Renal Therapy Group (“RTG”) of Fresenius Medical Care in North America | 2011 | |||||||
Mats Wahlstrom | 53 | Co-Chief Executive Officer, Fresenius Medical Care North America and President and CEO of Medical Services of Fresenius Medical Care in North America | 2011 |
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B. | Compensation |
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• | non-performance related compensation (basic salary) | |
• | performance related compensation (variable bonus) | |
• | components with long-term incentive effect (share options, share-based compensation with cash settlement) |
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Performance | ||||||||||||||||||||||||||||||||
Non-Performance Related | Related | Cash Compensation | ||||||||||||||||||||||||||||||
Compensation | Compensation | (without long-term | ||||||||||||||||||||||||||||||
Salary | Other(3) | Bonus | Incentive Components) | |||||||||||||||||||||||||||||
2007 | 2006(1)(2) | 2007 | 2006(1)(2) | 2007 | 2006(1)(2) | 2007 | 2006(1)(2) | |||||||||||||||||||||||||
(in thousands) | (in thousands) | (in thousands) | (in thousands) | |||||||||||||||||||||||||||||
Dr. Ben Lipps | $ | 1,050 | $ | 1,050 | $ | 315 | $ | 189 | $ | 2,257 | $ | 2,043 | $ | 3,622 | $ | 3,282 | ||||||||||||||||
Roberto Fusté | 480 | 370 | 251 | 221 | 624 | 421 | 1,355 | 1,012 | ||||||||||||||||||||||||
Dr. Emanuele Gatti | 637 | 584 | 63 | 48 | 1,530 | 1,177 | 2,230 | 1,809 | ||||||||||||||||||||||||
Rice Powell | 700 | 700 | 46 | 20 | 1,541 | 1,267 | 2,287 | 1,987 | ||||||||||||||||||||||||
Lawrence A. Rosen | 548 | 424 | 115 | 105 | 1,197 | 935 | 1,860 | 1,464 | ||||||||||||||||||||||||
Dr. Rainer Runte | 452 | 414 | 41 | 39 | 979 | 760 | 1,472 | 1,213 | ||||||||||||||||||||||||
Mats Wahlstrom | 800 | 800 | 47 | 17 | 1,761 | 1,448 | 2,608 | 2,265 | ||||||||||||||||||||||||
Total | $ | 4,667 | $ | 4,342 | $ | 878 | $ | 639 | $ | 9,889 | $ | 8,051 | $ | 15,434 | $ | 13,032 | ||||||||||||||||
(1) | Up to February 9, 2006 payment by Fresenius Medical Care AG. |
(2) | From February 9, 2006 payment by Fresenius Medical Care Management AG as general partner in Fresenius Medical Care AG & Co. KGaA. |
(3) | Includes, insurance premiums, private use of company cars, contributions to pension and health insurance and other benefits. |
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Components with Long-term Incentive Effect | ||||||||||||||||||||||||||||||||
Stock Options | Share-based Compensation with Cash Settlement | Total | ||||||||||||||||||||||||||||||
2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||||||||
(Number) | (in thousands) | (in thousands) | (in thousands) | |||||||||||||||||||||||||||||
Dr. Ben Lipps | 99,600 | 99,600 | $ | 1,318 | $ | 1,237 | $ | 1,243 | $ | 993 | $ | 2,561 | $ | 2,230 | ||||||||||||||||||
Roberto Fusté | 49,800 | 49,800 | 659 | 619 | 0 | 0 | 659 | 619 | ||||||||||||||||||||||||
Dr. Emanuele Gatti | 49,800 | 49,800 | 659 | 619 | 366 | 360 | 1,025 | 979 | ||||||||||||||||||||||||
Rice Powell | 49,800 | 49,800 | 659 | 619 | 841 | 568 | 1,500 | 1,187 | ||||||||||||||||||||||||
Lawrence A. Rosen | 49,800 | 49,800 | 659 | 619 | 649 | 401 | 1,308 | 1,020 | ||||||||||||||||||||||||
Dr. Rainer Runte | 49,800 | 49,800 | 659 | 619 | 535 | 392 | 1,194 | 1,011 | ||||||||||||||||||||||||
Mats Wahlstrom | 49,800 | 49,800 | 659 | 619 | 961 | 648 | 1,620 | 1,267 | ||||||||||||||||||||||||
Total | 398,400 | 398,400 | $ | 5,272 | $ | 4,951 | $ | 4,595 | $ | 3,362 | $ | 9,867 | $ | 8,313 | ||||||||||||||||||
Cash Compensation | Components with | Total Compensation | ||||||||||||||||||||||
(without long-term | long-term | (including long-term | ||||||||||||||||||||||
Incentive components) | Incentive Effect | Incentive Components) | ||||||||||||||||||||||
2007 | 2006 | 2007 | 2006(1) | 2007 | 2006(1) | |||||||||||||||||||
(in thousands) | (in thousands) | (in thousands) | ||||||||||||||||||||||
Dr. Ben Lipps | $ | 3,622 | $ | 3,282 | $ | 2,561 | $ | 2,230 | $ | 6,183 | $ | 5,512 | ||||||||||||
Roberto Fusté | 1,355 | 1,012 | 659 | 619 | 2,014 | 1,631 | ||||||||||||||||||
Dr. Emanuele Gatti | 2,230 | 1,809 | 1,025 | 979 | 3,255 | 2,788 | ||||||||||||||||||
Rice Powell | 2,287 | 1,987 | 1,500 | 1,187 | 3,787 | 3,174 | ||||||||||||||||||
Lawrence A. Rosen | 1,860 | 1,464 | 1,308 | 1,020 | 3,168 | 2,484 | ||||||||||||||||||
Dr. Rainer Runte | 1,472 | 1,213 | 1,194 | 1,011 | 2,666 | 2,224 | ||||||||||||||||||
Mats Wahlstrom | 2,608 | 2,265 | 1,620 | 1,267 | 4,228 | 3,532 | ||||||||||||||||||
Total | $ | 15,434 | $ | 13,032 | $ | 9,867 | $ | 8,313 | $ | 25,301 | $ | 21,345 | ||||||||||||
(1) | The prior year figures 2006 are adjusted to the presentation format for the year 2007, reflecting grant date fair value. In 2006 total compensation included the expense recognized in the fiscal year. |
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Expense | Expense | |||||||||||||||||||||||
for Long-term | for Long-term | Total Expense | ||||||||||||||||||||||
Incentive | Incentive Components | for | ||||||||||||||||||||||
Components | by Share-based | Share-based | ||||||||||||||||||||||
with Equity Instruments | Compensation with Cash Settlement | Compensation | ||||||||||||||||||||||
2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||
(in thousands) | (in thousands) | (in thousands) | ||||||||||||||||||||||
Dr. Ben Lipps | $ | 769 | $ | 483 | $ | 379 | $ | 0 | $ | 1,148 | $ | 483 | ||||||||||||
Roberto Fusté | 384 | 265 | 0 | 0 | 384 | 265 | ||||||||||||||||||
Dr. Emanuele Gatti | 384 | 265 | 133 | 0 | 517 | 265 | ||||||||||||||||||
Rice Powell | 378 | 224 | 224 | 0 | 602 | 224 | ||||||||||||||||||
Lawrence A. Rosen | 398 | 246 | 147 | 0 | 545 | 246 | ||||||||||||||||||
Dr. Rainer Runte | 384 | 264 | 144 | 0 | 528 | 264 | ||||||||||||||||||
Mats Wahlstrom | 378 | 278 | 256 | 0 | 634 | 278 | ||||||||||||||||||
Total | $ | 3,075 | $ | 2,025 | $ | 1,283 | $ | 0 | $ | 4,358 | $ | 2,025 | ||||||||||||
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C. | Board Practices |
• | overseeing management’s conduct or our financial reporting process and the internal accounting and financial control systems and auditing of our financial statements; | |
• | monitoring our internal controls risk program; | |
• | monitoring our corporate governance performance according to the German corporate governance codex; | |
• | monitoring the independence and performance of our outside auditors; | |
• | providing an avenue of communication among the outside auditors, management and the Supervisory Board; |
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• | retaining the services of our independent auditors (subject to the approval by our shareholders at our Annual General Meeting) and approval of their fees; and | |
• | pre-approval of all audit and non-audit services performed by KPMG Deutsche Treuhand-Gesellschaft AG Wirtschaftsprüfungsgesellschaft, the accounting firm which audits our consolidated financial statements. |
• | A joint committee (the “Joint Committee”) (gemeinsamer Ausschuss) of the supervisory boards of Management AG and FMC-AG & Co. KGaA consisting of two members designated by each supervisory board to advise and decide on certain extraordinary management measures, including |
• | transactions between us and Fresenius SE with a value in excess of 0.25% of our consolidated revenue, and | |
• | acquisitions and sales of significant participations and parts of our business, the spin-off of significant parts of our business, initial public offerings of significant subsidiaries and similar matters. A matter is “significant” for purposes of this approval requirement if 40% of our consolidated revenues, our consolidated balance sheet total assets or consolidated profits, determined by reference to the arithmetic average of the said amounts shown in our audited consolidated accounts for the previous three fiscal years, are affected by the matter. |
• | An Audit and Corporate Governance Committee within the Supervisory Board of FMC-AG & Co. KGaA consisting of five members, at least two of whom shall be persons with no significant business, professional or personal connection with FMC-AG & Co. KGaA or any of our affiliates, apart from membership on our supervisory board or the supervisory board of Management AG or Fresenius SE. The Audit and Corporate Governance Committee will be responsible for reviewing the report of our general partner on relations with related parties and for reporting to the overall supervisory board thereon. In addition to these functions, the Audit and Corporate Governance Committee has acted as our audit committee since it was established. |
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• | The acquisition, disposal and encumbrance of real property if the value or the amount to be secured exceeds a specified threshold (€5 million); | |
• | The acquisition, formation, disposal or encumbrance of an equity participation in other enterprises if the value of the transaction exceeds a specified threshold (€5 million); | |
• | The adoption of new or the abandonment of existing lines of business or establishments; | |
• | Conclusion, amendment and termination of affiliation agreements; and | |
• | Certain inter-company legal transactions. |
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D. | Employees |
2007 | 2006 | 2005 | ||||||||||
North America | ||||||||||||
Dialysis Care | 32,087 | 31,431 | 24,737 | |||||||||
Dialysis Products | 7,007 | 6,110 | 5,392 | |||||||||
39,094 | 37,541 | 30,129 | ||||||||||
International | ||||||||||||
Dialysis Care | 13,728 | 11,663 | 10,626 | |||||||||
Dialysis Products | 8,454 | 7,545 | 6,715 | |||||||||
22,182 | 19,208 | 17,341 | ||||||||||
Corporate | 130 | 54 | 51 | |||||||||
Total Company | 61,406 | 56,803 | 47,521 | |||||||||
E. | Share ownership |
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Item 7. | Major Shareholders and Related Party Transactions |
A. | Major Shareholders |
B. | Related party transactions |
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• | the term “we (or us) and our affiliates” refersonly to Fresenius Medical Care AG & Co. KGaA and its subsidiaries; and | |
• | the term “Fresenius SE and its affiliates” refersonly to Fresenius SE and affiliates of Fresenius SEother than Fresenius Medical Care AG & Co. KGaA and its subsidiaries. |
• | to use the “Fresenius Medical Care” mark in the then current National Medical Care non-renal business if it is used as part of “Fresenius Medical Care” together with one or more descriptive words, such as “Fresenius Medical Care Home Care” or “Fresenius Medical Care Diagnostics”; | |
• | to use the “F” logo mark in the National Medical Care non-renal business, with the consent of Fresenius SE. That consent will not be unreasonably withheld if the mark using the logo includes one or more additional descriptive words or symbols; and | |
• | to use “Fresenius Medical Care” as a trade name in both the renal business and the National Medical Care non-renal business. |
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Per Share Amount | 2007 | 2006 | 2005 | |||||||||
Preference share | € | 0.49 | € | 0.43 | € | 0.39 | ||||||
Ordinary share | € | 0.47 | € | 0.41 | € | 0.37 |
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• | permanent quotation during trading hours |
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• | best price execution (in terms of spread and speed) | |
• | full execution. |
Price per | Price per | |||||||||||||||||||
ordinary share (€) | preference share (€) | |||||||||||||||||||
High | Low | High | Low | |||||||||||||||||
2008 | January | 39.10 | 33.80 | 37.60 | 32.80 | |||||||||||||||
2007 | December | 38.67 | 35.40 | 36.78 | 34.20 | |||||||||||||||
November | 38.22 | 34.56 | 36.25 | 33.00 | ||||||||||||||||
October | 37.13 | 35.33 | 35.53 | 33.40 | ||||||||||||||||
September | 37.85 | 35.48 | 36.22 | 33.90 | ||||||||||||||||
August | 36.40 | 34.40 | 34.70 | 33.31 | ||||||||||||||||
2007 | Fourth Quarter | 38.67 | 34.56 | 36.78 | 33.00 | |||||||||||||||
Third Quarter | 37.85 | 33.05 | 36.22 | 31.32 | ||||||||||||||||
Second Quarter | 38.02 | 33.57 | 36.43 | 32.00 | ||||||||||||||||
First Quarter | 37.71 | 33.67 | 36.00 | 31.93 | ||||||||||||||||
2006 | Fourth Quarter | 36.30 | 33.13 | 33.83 | 30.73 | |||||||||||||||
Third Quarter | 34.53 | 29.57 | 32.33 | 27.30 | ||||||||||||||||
Second Quarter | 33.33 | 27.50 | 31.70 | 25.03 | ||||||||||||||||
First Quarter | 33.07 | 28.60 | 31.33 | 25.30 | ||||||||||||||||
2007 | Annual | 38.67 | 33.05 | 36.78 | 31.32 | |||||||||||||||
2006 | Annual | 36.30 | 27.50 | 33.83 | 25.03 | |||||||||||||||
2005 | Annual | 29.82 | 19.12 | 26.44 | 13.87 | |||||||||||||||
2004 | Annual | 21.21 | 16.49 | 15.15 | 11.24 | |||||||||||||||
2003 | Annual | 19.00 | 12.67 | 13.67 | 9.50 |
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Price per | Price per | |||||||||||||||||||
ordinary ADS ($) | preference ADS ($) | |||||||||||||||||||
High | Low | High | Low | |||||||||||||||||
2008 | January | 57.59 | 49.77 | 55.00 | 45.80 | |||||||||||||||
2007 | December | 56.70 | 51.20 | 53.50 | 49.65 | |||||||||||||||
November | 56.57 | 50.20 | 51.34 | 47.00 | ||||||||||||||||
October | 52.99 | 50.33 | 50.00 | 48.50 | ||||||||||||||||
September | 53.46 | 48.90 | 48.50 | 45.90 | ||||||||||||||||
August | 50.30 | 47.32 | 47.00 | 43.00 | ||||||||||||||||
2007 | Fourth Quarter | 56.70 | 50.20 | 53.50 | 47.00 | |||||||||||||||
Third Quarter | 53.46 | 45.68 | 48.50 | 42.00 | ||||||||||||||||
Second Quarter | 51.56 | 45.04 | 49.50 | 41.75 | ||||||||||||||||
First Quarter | 49.75 | 43.69 | 46.25 | 40.00 | ||||||||||||||||
2006 | Fourth Quarter | 47.60 | 42.10 | 40.00 | 38.00 | |||||||||||||||
Third Quarter | 44.50 | 37.80 | 38.00 | 33.30 | ||||||||||||||||
Second Quarter | 41.40 | 34.50 | 34.80 | 33.30 | ||||||||||||||||
First Quarter | 40.00 | 34.90 | 34.80 | 31.00 | ||||||||||||||||
2007 | Annual | 56.70 | 43.69 | 53.50 | 40.00 | |||||||||||||||
2006 | Annual | 47.60 | 34.50 | 40.00 | 31.00 | |||||||||||||||
2005 | Annual | 35.22 | 25.09 | 31.20 | 18.16 | |||||||||||||||
2004 | Annual | 27.23 | 20.41 | 19.15 | 13.86 | |||||||||||||||
2003 | Annual | 23.54 | 13.20 | 16.68 | 9.85 |
B. | Articles of Association |
• | the development, production and distribution of as well as the trading in health care products, systems and procedures, including dialysis; |
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• | the projecting, planning, establishment, acquisition and operation of health care businesses, including, dialysis centers, also in separate enterprises or through third parties as well as the participation in such dialysis centers; | |
• | the development, production and distribution of other pharmaceutical products and the provision of services in this field; | |
• | the provision of advice in the medical and pharmaceutical areas as well as scientific information and documentation; | |
• | the provision of laboratory services for dialysis and non-dialysis patients and homecare medical services. |
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• | we increase our share capital against contributions in cash; | |
• | the amount of the capital increase does not exceed 10% of our existing share capital; and | |
• | the issue price of the new shares is not significantly lower than the price for the shares quoted on a stock exchange. |
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• | Cash. The depositary shall convert cash distributions from foreign currency to U.S. dollars if this is permissible and can be done on a reasonable basis. The depositary will endeavor to distribute cash in a practicable manner, and may deduct any taxes or other governmental charges required to be withheld, any expenses of converting foreign currency and transferring funds to the United States, and certain other fees and expenses. In addition, before making a distribution the depositary will deduct any taxes withheld. If exchange rates fluctuate during a time when the depositary cannot convert a foreign currency, investors may lose some or all of the value of the distribution. | |
• | Shares. If we make a distribution in shares, the depositary may deliver additional ADSs to represent the distributed shares, unless the number of ordinary shares or preference shares represented by our ADSs is adjusted in connection with the distribution. Only whole ADSs will be issued. Any shares which would result in fractional ADSs will be sold and the net proceeds will be distributed to the ADS holders otherwise entitled to receive fractional ADSs. |
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• | Rights to receive additional shares. In the case of a distribution of pre-emption rights to subscribe for ordinary shares or preference shares, or other subscription rights, if we provide satisfactory evidence that the depositary may lawfully distribute the rights, the depositary may arrange for ADS holders to instruct the depositary as to the exercise of the rights. However, if we do not furnish the required evidence or if the depositary determines it is not practical to distribute the rights, the depositary may: |
• | allow the rights to lapse, in which case ADS holders will receive nothing, or | |
• | sell the rights if practicable and distribute the net proceeds as cash. |
• | Other Distributions. If we make a distribution of securities or property other than those described above, the depositary may either: |
• | distribute the securities or property in any manner it deems fair and equitable; | |
• | sell the securities or property and distribute any net proceeds in the same way it distributes cash; or | |
• | hold the distributed property in which case the ADSs will also represent the distributed property. |
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• | temporary delays caused by closing our transfer books or those of the depositary, or the deposit of shares in connection with voting at a shareholders’ meeting, or the payment of dividends, | |
• | the payment of fees, taxes and similar charges, or | |
• | compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs. |
• | we do not wish a discretionary proxy to be given; | |
• | we think there is substantial shareholder opposition to the particular question; or | |
• | we think the particular question would have an adverse impact on our shareholders. |
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• | a fee of $0.02 or less per ADS (or portion thereof) for any cash distribution made pursuant to the deposit agreement; | |
• | a fee of $0.02 per ADS (or portion thereof) per year for services performed by the depositary in administering our ADS program (which fee shall be assessed against holders of ADSs as of the record date set by the depositary not more than once each calendar year and shall be payable in the manner described in the next succeeding provision); | |
• | any other charge payable by any of the depositary, any of the depositary’s agents, including, without limitation, the custodian, or the agents of the depositary’s agents in connection with the servicing of our shares or other deposited securities (which charge shall be assessed against registered holders of our ADSs as of the record date or dates set by the depositary and shall be payable at the sole discretion of the depositary by billing such registered holders or by deducting such charge from one or more cash dividends or other cash distributions); | |
• | a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities (treating all such securities as if they were shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the depositary to those holders entitled thereto; | |
• | stock transfer or other taxes and other governmental charges; | |
• | cable, telex and facsimile transmission and delivery charges incurred at your request; | |
• | transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities; and | |
• | expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars. |
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• | are only obligated to take the actions specifically set forth in the applicable deposit agreement without negligence or bad faith; | |
• | are not liable if we are or it is prevented or delayed by law or circumstances beyond our control from performing our or its obligations under the applicable deposit agreement; | |
• | are not liable if we or it exercises discretion permitted under the applicable deposit agreement; | |
• | have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the applicable deposit agreement on your behalf or on behalf of any other person; | |
• | may rely upon any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the proper person. |
• | payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any shares or other deposited securities; | |
• | satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and | |
• | compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents. |
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• | maintain the effectiveness of (i) the deposit agreement for the ordinary shares, or a similar agreement, and to assure that the ADSs evidencing the ordinary shares are listed on either the New York Stock Exchange or the Nasdaq Stock Market and (ii), while the preference ADSs are eligible for listing on the New York Exchange or the Nasdaq Stock Market, the deposit agreement for the preference shares, or a similar agreement, and to assure that, if eligible for such listing, the ADSs evidencing the preference shares are listed on either the New York Stock Exchange or the Nasdaq Stock Market; | |
• | file all reports, required by the New York Stock Exchange or the Nasdaq Stock Market, as applicable, the Securities Act, the Securities Exchange Act of 1934, as amended, and all other applicable laws; | |
• | prepare all financial statements required for any filing in accordance with generally accepted accounting principles of the U.S. (“U.S. GAAP”); | |
• | on an annual basis, prepare audited consolidated financial statements including, without limitation, a balance sheet, a statement of income and retained earnings, and a statement of changes in financial position, and all appropriate notes, all in accordance U.S. GAAP, and, on a quarterly basis, prepare and furnish consolidated financial statements prepared in accordance with U.S. GAAP; | |
• | furnish materials with the SEC with respect to annual and special shareholder meetings under cover ofForm 6-K and make the materials available to the depositary for distribution to holders of ordinary share ADSs and, if we maintain a preference share ADS facility, to holders of preference share ADSs at any time that holders of preference shares are entitled to voting rights; and | |
• | make available to the depositary for distribution to holders of ADSs representing our ordinary shares and, if we maintain a preference share ADS facility, ADSs representing our preference shares on an annual basis, a copy of any report prepared by the supervisory board or the supervisory board of the general partner and provided to our shareholders generally pursuant to Section 314(2) of the German Stock Corporation Act, or any successor provision. These reports concern the results of the supervisory board’s examination of the managing board’s report on our relation with affiliated enterprises. |
• | Fresenius SE or its affiliates acquire all our voting capital stock; | |
• | Fresenius SE’s beneficial ownership of our outstanding share capital is reduced to less than 25%; | |
• | Fresenius SE or an affiliate of Fresenius SE ceases to own the general partner interest in FMC-AG & Co. KGaA; or | |
• | we no longer meet the minimum threshold for obligatory registration of the ordinary shares or ADSs representing our ordinary shares and the preference shares or ADSs representing our preference shares, as applicable, under Section 12(g)(1) of the Securities Exchange Act of 1934, as amended, andRule 12g-1 thereunder. |
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C. | Material contracts |
D. | Exchange controls |
E. | Taxation |
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H. | Documents on display |
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Item 11. | Quantitative and Qualitative Disclosures About Market Risk |
• | changes in reimbursement rates; | |
• | intense competition; | |
• | foreign exchange rate fluctuations; | |
• | varying degrees of acceptance of new product introductions; | |
• | technological developments in our industry; | |
• | uncertainties in litigation or investigative proceedings and regulatory developments in the health care sector; and | |
• | the availability of financing. |
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Fair | Credit | |||||||||||||||||||
2008 | 2009 | Total | value | risk | ||||||||||||||||
Purchase of EUR against US$ | $ | 238 | 21 | $ | 259 | $ | 9 | $ | 9 | |||||||||||
Sale of EUR against US$ | 19 | — | 19 | (1 | ) | — | ||||||||||||||
Purchase of EUR against others | 323 | 17 | 340 | 7 | 9 | |||||||||||||||
Sale of EUR against others | 35 | — | 35 | — | — | |||||||||||||||
Others | 52 | 3 | 55 | (1 | ) | 1 | ||||||||||||||
Total | $ | 667 | 41 | $ | 708 | $ | 14 | $ | 19 | |||||||||||
Year’s | Year’s | Year’s | Year’s | |||||||||||||
Year ending December 31, | High | Low | Average | Close | ||||||||||||
2003 US$ per EUR | 1.2630 | 1.0377 | 1.1312 | 1.2630 | ||||||||||||
2004 US$ per EUR | 1.3633 | 1.1802 | 1.2439 | 1.3621 | ||||||||||||
2005 US$ per EUR | 1.3507 | 1.1667 | 1.2442 | 1.1797 | ||||||||||||
2006 US$ per EUR | 1.3331 | 1.1826 | 1.2558 | 1.3170 | ||||||||||||
2007 US$ per EUR | 1.4874 | 1.2893 | 1.3705 | 1.4721 |
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Fair Value | ||||||||||||||||||||||||||||||||
Dec. 31, | ||||||||||||||||||||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | Thereafter | Totals | 2007 | |||||||||||||||||||||||||
FLOATING RATE US$ DEBT | ||||||||||||||||||||||||||||||||
Principal payments on Senior Credit Agreement | $ 67 | 134 | 134 | 1,310 | 1,142 | 379 | $ | 3,166 | $ | 3,166 | ||||||||||||||||||||||
Variable interest rate = 6.13% | ||||||||||||||||||||||||||||||||
Accounts receivable securitization programs | $ 85 | $ | 85 | $ | 85 | |||||||||||||||||||||||||||
Variable interest rate = 5.44% | ||||||||||||||||||||||||||||||||
EIB loans | $ | 49 | $ | 49 | $ | 49 | ||||||||||||||||||||||||||
Variable interest rate = 4.92% | ||||||||||||||||||||||||||||||||
FLOATING RATE € DEBT | ||||||||||||||||||||||||||||||||
Euro Notes 2005/2009 | $109 | $ | 109 | $ | 109 | |||||||||||||||||||||||||||
Variable interest rate = 6.563% | ||||||||||||||||||||||||||||||||
FIXED RATE US$ DEBT | ||||||||||||||||||||||||||||||||
Company obligated mandatorily | ||||||||||||||||||||||||||||||||
redeemable preferred securities of subsidiaries | ||||||||||||||||||||||||||||||||
Fresenius Medical Care Capital Trusts | ||||||||||||||||||||||||||||||||
Fixed interest rate = 7.875% / issued in 1998 | $444 | $ | 444 | $ | 456 | |||||||||||||||||||||||||||
Fixed interest rate = 7.875% / issued in 2001 | $ | 224 | $ | 224 | $ | 233 | ||||||||||||||||||||||||||
Senior Notes 2007/2017; fixed interest rate = 6.875% | $ | 492 | $ | 492 | $ | 496 | ||||||||||||||||||||||||||
FIXED RATE € DEBT | ||||||||||||||||||||||||||||||||
Company obligated mandatorily | ||||||||||||||||||||||||||||||||
redeemable preferred securities of subsidiaries | ||||||||||||||||||||||||||||||||
Fresenius Medical Care Capital Trusts | ||||||||||||||||||||||||||||||||
Fixed interest rate = 7.375% / issued in 1998 (denominated in DEM) | $226 | $ | 226 | $ | 226 | |||||||||||||||||||||||||||
Fixed interest rate = 7.375% / issued in 2001 (denominated in EUR) | $ | 440 | $ | 440 | $ | 455 | ||||||||||||||||||||||||||
Euro Notes 2005/2009 | $185 | $ | 185 | $ | 184 | |||||||||||||||||||||||||||
Fixed interest rate = 4.57% | ||||||||||||||||||||||||||||||||
INTEREST RATE DERIVATIVES | ||||||||||||||||||||||||||||||||
US$ Payer Swaps Notional amount | $615 | 450 | 250 | 1,000 | 1,150 | — | $ | 3,465 | $ | (35 | ) | |||||||||||||||||||||
Average fixed pay rate = 4.43% | 4.69 | % | 4.84 | % | 4.28 | % | 4.10 | % | 4.45 | % | 4.43 | % | ||||||||||||||||||||
Receive rate =3-month $LIBOR | ||||||||||||||||||||||||||||||||
US$ Receiver Swaps Notional amount | $450 | — | — | — | — | — | $ | 450 | $ | (6 | ) | |||||||||||||||||||||
Average fixed receive rate = 3.50% | 3.50 | % | 3.50 | % | ||||||||||||||||||||||||||||
Pay rate =6-month $LIBOR | ||||||||||||||||||||||||||||||||
All variable interest rates dipicted above are as of December 31, 2007 |
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Item 12. | Description of Securities other than Equity Securities |
Item 13. | Defaults, Dividend Arrearages and Delinquencies |
Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds |
Item 15A. | Disclosure Controls and Procedures |
Item 15B. | Management’s annual report on internal control over financial reporting |
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Item 15C. | Attestation report of the registered public accounting firm |
Item 15D. | Changes in Internal Control over Financial Reporting |
Item 16A. | Audit Committee Financial Expert |
Item 16B. | Code of Ethics |
Item 16C. | Principal Accountant Fees and Services |
2007 | 2006 | |||||||
Audit fees | $ | 8,574 | $ | 7,659 | ||||
Audit related fees | 739 | 296 | ||||||
Tax fees | 568 | 582 | ||||||
Total | $ | 9,881 | $ | 8,537 | ||||
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Item 16D. | Exemptions from the Listing Standards for Audit Committees |
Item 16E. | Purchase of Equity Securities by the Issuer and Affiliated Purchasers |
Item 17. | Financial Statements |
Item 18. | Financial Statements |
Item 19. | Exhibits |
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(1) | Confidential treatment has been granted as to certain portions of this document in accordance with the applicable rules of the Securities and Exchange Commission. |
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Title: | Chief Executive Officer and |
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Page | ||||
Audited Consolidated Financial Statements | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
F-9 | ||||
F-10 | ||||
S-1 |
F-1
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Title: | Chief Executive Officer and |
F-2
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Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
F-3
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ON INTERNAL CONTROL OVER FINANCIAL REPORTING
F-4
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F-5
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Consolidated Statements of Income
For the years ended December 31,
(in thousands, except share data)
2007 | 2006 | 2005 | ||||||||||
Net revenue: | ||||||||||||
Dialysis Care | $ | 7,213,000 | $ | 6,377,390 | $ | 4,866,833 | ||||||
Dialysis Products | 2,507,314 | 2,121,648 | 1,904,986 | |||||||||
9,720,314 | 8,499,038 | 6,771,819 | ||||||||||
Costs of revenue: | ||||||||||||
Dialysis Care | 5,130,287 | 4,538,234 | 3,583,781 | |||||||||
Dialysis Products | 1,234,232 | 1,083,248 | 979,900 | |||||||||
6,364,519 | 5,621,482 | 4,563,681 | ||||||||||
Gross profit | 3,355,795 | 2,877,556 | 2,208,138 | |||||||||
Operating expenses: | ||||||||||||
Selling, general and administrative | 1,709,150 | 1,548,369 | 1,218,265 | |||||||||
Gain on sale of dialysis clinics | — | (40,233 | ) | — | ||||||||
Research and development | 66,523 | 51,293 | 50,955 | |||||||||
Operating income | 1,580,122 | 1,318,127 | 938,918 | |||||||||
Other (income) expense: | ||||||||||||
Interest income | (28,588 | ) | (20,432 | ) | (18,187 | ) | ||||||
Interest expense | 399,635 | 371,678 | 191,379 | |||||||||
Income before income taxes and minority interest | 1,209,075 | 966,881 | 765,726 | |||||||||
Income tax expense | 465,652 | 413,489 | 308,748 | |||||||||
Minority interest | 26,293 | 16,646 | 2,026 | |||||||||
Net income | $ | 717,130 | $ | 536,746 | $ | 454,952 | ||||||
Basic income per ordinary share | $ | 2.43 | $ | 1.82 | $ | 1.56 | ||||||
Fully diluted income per ordinary share | $ | 2.42 | $ | 1.81 | $ | 1.55 | ||||||
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December 31, | December 31, | |||||||
2007 | 2006 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 244,690 | $ | 159,010 | ||||
Trade accounts receivable, less allowance for doubtful accounts of $247,800 in 2007 and $207,293 in 2006 | 2,026,865 | 1,848,695 | ||||||
Accounts receivable from related parties | 99,626 | 143,349 | ||||||
Inventories | 636,234 | 523,929 | ||||||
Prepaid expenses and other current assets | 495,630 | 443,854 | ||||||
Deferred taxes | 356,427 | 293,079 | ||||||
Total current assets | 3,859,472 | 3,411,916 | ||||||
Property, plant and equipment, net | 2,053,793 | 1,722,392 | ||||||
Intangible assets | 689,956 | 661,365 | ||||||
Goodwill | 7,245,589 | 6,892,161 | ||||||
Deferred taxes | 83,615 | 62,722 | ||||||
Other assets | 237,840 | 294,125 | ||||||
Total assets | $ | 14,170,265 | $ | 13,044,681 | ||||
Liabilities and shareholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 329,919 | $ | 316,188 | ||||
Accounts payable to related parties | 201,049 | 236,619 | ||||||
Accrued expenses and other current liabilities | 1,352,013 | 1,194,939 | ||||||
Short-term borrowings | 217,497 | 331,231 | ||||||
Short-term borrowings from related parties | 2,287 | 4,575 | ||||||
Current portion of long-term debt and capital lease obligations | 84,816 | 160,135 | ||||||
Company-obligated mandatorily redeemable preferred securities of subsidiary Fresenius Medical Care Capital Trusts holding solely Company-guaranteed debentures of subsidiaries — current portion | 669,787 | — | ||||||
Income tax payable | 146,536 | 116,059 | ||||||
Deferred taxes | 22,589 | 15,959 | ||||||
Total current liabilities | 3,026,493 | 2,375,705 | ||||||
Long-term debt and capital lease obligations, less current portion | 4,004,013 | 3,829,341 | ||||||
Other liabilities | 193,604 | 149,684 | ||||||
Pension liabilities | 111,352 | 112,316 | ||||||
Income tax payable | 111,280 | — | ||||||
Deferred taxes | 378,497 | 378,487 | ||||||
Company-obligated mandatorily redeemable preferred securities of subsidiary Fresenius Medical Care Capital Trusts holding solely Company-guaranteed debentures of subsidiaries | 663,995 | 1,253,828 | ||||||
Minority interest | 105,814 | 75,158 | ||||||
Total liabilities | 8,595,048 | 8,174,519 | ||||||
Shareholders’ equity: | ||||||||
Preference shares, no par value, €1.00 nominal value, 12,356,880 shares authorized, 3,778,087 issued and outstanding | 4,191 | 4,098 | ||||||
Ordinary shares, no par value, €1.00 nominal value, 373,436,220 shares authorized, 292,786,583 issued and outstanding | 361,384 | 359,527 | ||||||
Additional paid-in capital | 3,221,644 | 3,153,556 | ||||||
Retained earnings | 1,887,120 | 1,358,397 | ||||||
Accumulated other comprehensive income (loss) | 100,878 | (5,416 | ) | |||||
Total shareholders’ equity | 5,575,217 | 4,870,162 | ||||||
Total liabilities and shareholders’ equity | $ | 14,170,265 | $ | 13,044,681 | ||||
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Consolidated Statements of Cash Flows
For the years ended December 31,
(in thousands)
2007 | 2006 | 2005 | ||||||||||
Operating Activities: | ||||||||||||
Net income | $ | 717,130 | $ | 536,746 | $ | 454,952 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Settlement of shareholder proceedings | — | (888 | ) | 7,335 | ||||||||
Depreciation and amortization | 363,330 | 308,698 | 251,452 | |||||||||
Change in minority interest | 43,237 | 24,333 | — | |||||||||
Change in deferred taxes, net | 1,177 | 10,904 | (3,675 | ) | ||||||||
Loss on sale of fixed assets and investments | 3,616 | 5,742 | 3,965 | |||||||||
Compensation expense related to stock options | 24,208 | 16,610 | 1,363 | |||||||||
Cash inflow from Hedging | — | 10,908 | — | |||||||||
Changes in assets and liabilities, net of amounts from businesses acquired: | ||||||||||||
Trade accounts receivable, net | (62,735 | ) | (31,276 | ) | (63,574 | ) | ||||||
Inventories | (72,825 | ) | (42,553 | ) | (9,811 | ) | ||||||
Prepaid expenses, other current and non-current assets | (11,680 | ) | (21,629 | ) | (41,036 | ) | ||||||
Accounts receivable from / payable to related parties | (22,265 | ) | (4,875 | ) | 9,596 | |||||||
Accounts payable, accrued expenses and other current andnon-current liabilities | 113,960 | 182,877 | 148,735 | |||||||||
Income tax payable | 102,421 | (24,250 | ) | (88,998 | ) | |||||||
Tax payments related to divestitures and acquisitions | — | (63,517 | ) | — | ||||||||
Net cash provided by operating activities | 1,199,574 | 907,830 | 670,304 | |||||||||
Investing Activities: | ||||||||||||
Purchases of property, plant and equipment | (579,641 | ) | (467,193 | ) | (314,769 | ) | ||||||
Proceeds from sale of property, plant and equipment | 31,070 | 17,658 | 17,427 | |||||||||
Acquisitions and investments, net of cash acquired | (257,877 | ) | (4,307,282 | ) | (125,153 | ) | ||||||
Proceeds from divestitures | 29,495 | 515,705 | — | |||||||||
Net cash used in investing activities | (776,953 | ) | (4,241,112 | ) | (422,495 | ) | ||||||
Financing Activities: | ||||||||||||
Proceeds from short-term borrowings | 96,995 | 56,562 | 44,655 | |||||||||
Repayments of short-term borrowings | (107,793 | ) | (55,789 | ) | (75,493 | ) | ||||||
Proceeds from short-term borrowings from related parties | 43,554 | 269,920 | 56,381 | |||||||||
Repayments of short-term borrowings from related parties | (46,071 | ) | (285,430 | ) | (42,632 | ) | ||||||
Proceeds from long-term debt and capital lease obligations (net of debt issuance costs of $16,703 in 2007 and $85,828 in 2006) | 516,762 | 4,007,450 | 426,531 | |||||||||
Repayments of long-term debt and capital lease obligations | (486,513 | ) | (973,885 | ) | (331,407 | ) | ||||||
(Decrease) Increase of accounts receivable securitization program | (181,000 | ) | 172,000 | (241,765 | ) | |||||||
Proceeds from exercise of stock options | 46,934 | 53,952 | 79,944 | |||||||||
Proceeds from conversion of preference shares into ordinary shares | — | 306,759 | — | |||||||||
Repurchase of preferred stock | (7,660 | ) | — | — | ||||||||
Dividends paid | (188,407 | ) | (153,720 | ) | (137,487 | ) | ||||||
Distributions to minority interest | (27,469 | ) | (15,130 | ) | 1,506 | |||||||
Net cash (used in) provided by financing activities | (340,668 | ) | 3,382,689 | (219,767 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents | 3,727 | 24,526 | (1,931 | ) | ||||||||
Cash and Cash Equivalents: | ||||||||||||
Net increase in cash and cash equivalents | 85,680 | 73,933 | 26,111 | |||||||||
Cash and cash equivalents at beginning of period | 159,010 | 85,077 | 58,966 | |||||||||
Cash and cash equivalents at end of period | $ | 244,690 | $ | 159,010 | $ | 85,077 | ||||||
F-8
Table of Contents
Consolidated Statements of Shareholders’ Equity
For the years ended December 31, 2007, 2006 and 2005
(in thousands, except share data)
Accumulated other comprehensive income (loss) | ||||||||||||||||||||||||||||||||||||||||
Preference Shares | Ordinary Shares | Additional | Foreign | |||||||||||||||||||||||||||||||||||||
Number of | No par | Number of | No par | paid in | Retained | currency | Cash flow | |||||||||||||||||||||||||||||||||
shares | value | shares | value | capital | earnings | translation | hedges | Pensions | Total | |||||||||||||||||||||||||||||||
Balance at December 31, 2004 | 78,888,258 | 85,283 | 210,000,000 | 270,501 | 2,690,061 | 657,906 | $ | (1,462 | ) | $ | (24,164 | ) | $ | (43,309 | ) | 3,634,816 | ||||||||||||||||||||||||
Proceeds from exercise of options and related tax effects | 4,398,279 | 5,457 | — | 81,114 | 86,571 | |||||||||||||||||||||||||||||||||||
Compensation expense related to stock options | 1,363 | 1,363 | ||||||||||||||||||||||||||||||||||||||
Dividends paid | (137,487 | ) | (137,487 | ) | ||||||||||||||||||||||||||||||||||||
Settlement of shareholder proceedings | 7,335 | 7,335 | ||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | ||||||||||||||||||||||||||||||||||||||||
Net income | 454,952 | 454,952 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) related to: | ||||||||||||||||||||||||||||||||||||||||
Cash flow hedges, net of related tax effects | 43,128 | 43,128 | ||||||||||||||||||||||||||||||||||||||
Foreign currency translation | (104,723 | ) | (104,723 | ) | ||||||||||||||||||||||||||||||||||||
Adjustments relating to pension obligations, net of related tax effects | (12,249 | ) | (12,249 | ) | ||||||||||||||||||||||||||||||||||||
Comprehensive income | 381,108 | |||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2005 | 83,286,537 | $ | 90,740 | 210,000,000 | $ | 270,501 | $ | 2,779,873 | $ | 975,371 | $ | (106,185 | ) | $ | 18,964 | $ | (55,558 | ) | $ | 3,973,706 | ||||||||||||||||||||
Proceeds from exercise of options | ||||||||||||||||||||||||||||||||||||||||
and related tax effects | 313,164 | 395 | 1,561,407 | 1,989 | 51,202 | 53,586 | ||||||||||||||||||||||||||||||||||
Proceeds from conversion of preference shares into ordinary shares | (79,888,266 | ) | (87,037 | ) | 79,888,266 | 87,037 | 306,759 | 306,759 | ||||||||||||||||||||||||||||||||
Compensation expense related to stock options | 16,610 | 16,610 | ||||||||||||||||||||||||||||||||||||||
Dividends paid | (153,720 | ) | (153,720 | ) | ||||||||||||||||||||||||||||||||||||
Settlement of shareholder proceedings | (888 | ) | (888 | ) | ||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | ||||||||||||||||||||||||||||||||||||||||
Net income | 536,746 | 536,746 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) related to: | ||||||||||||||||||||||||||||||||||||||||
Cash flow hedges, net of related tax effects | 18,223 | 18,223 | ||||||||||||||||||||||||||||||||||||||
Foreign currency translation | 114,494 | 114,494 | ||||||||||||||||||||||||||||||||||||||
Adjustments relating to pension obligations, net of related tax effects | 15,952 | 15,952 | ||||||||||||||||||||||||||||||||||||||
Comprehensive income | 685,415 | |||||||||||||||||||||||||||||||||||||||
Effect of adoption of SFAS 158 | (11,306 | ) | (11,306 | ) | ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2006 | 3,711,435 | $ | 4,098 | 291,449,673 | $ | 359,527 | $ | 3,153,556 | $ | 1,358,397 | $ | 8,309 | $ | 37,187 | $ | (50,912 | ) | $ | 4,870,162 | |||||||||||||||||||||
Proceeds from exercise of options | ||||||||||||||||||||||||||||||||||||||||
and related tax effects | 66,652 | 93 | 1,336,910 | 1,857 | 43,880 | 45,830 | ||||||||||||||||||||||||||||||||||
Compensation expense related to stock options | 24,208 | 24,208 | ||||||||||||||||||||||||||||||||||||||
Dividends paid | (188,407 | ) | (188,407 | ) | ||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | ||||||||||||||||||||||||||||||||||||||||
Net income | 717,130 | 717,130 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) related to: | ||||||||||||||||||||||||||||||||||||||||
Cash flow hedges, net of related tax effects | (54,053 | ) | (54,053 | ) | ||||||||||||||||||||||||||||||||||||
Foreign currency translation | 137,048 | 137,048 | ||||||||||||||||||||||||||||||||||||||
Adjustments relating to pension obligations, net of related tax effects | 23,299 | 23,299 | ||||||||||||||||||||||||||||||||||||||
Comprehensive income | 823,424 | |||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2007 | 3,778,087 | $ | 4,191 | 292,786,583 | $ | 361,384 | 3,221,644 | $ | 1,887,120 | $ | 145,357 | $ | (16,866 | ) | $ | (27,613 | ) | $ | 5,575,217 | |||||||||||||||||||||
F-9
Table of Contents
1. | The Company, Basis of Presentation and Summary of Significant Accounting Policies |
F-10
Table of Contents
F-11
Table of Contents
F-12
Table of Contents
o) | Use of Estimates |
p) | Concentration of Risk |
q) | Legal Contingencies |
F-13
Table of Contents
r) | Earnings per Ordinary share and Preference share |
s) | Employee Benefit Plans |
Before Adoption | After Adoption | |||||||||||
of Statement 158 | Adjustments | of Statement 158 | ||||||||||
Deferred tax assets | $ | 26,058 | $ | 7,134 | $ | 33,192 | ||||||
Accrued expenses and other current liabilities | $ | — | $ | 1,692 | $ | 1,692 | ||||||
Pension liabilities | $ | 95,568 | $ | 16,748 | $ | 112,316 | ||||||
Accumulated other comprehensive loss | $ | (39,606 | ) | $ | (11,306 | ) | $ | (50,912 | ) |
t) | Stock Option Plans |
F-14
Table of Contents
u) | Recent Pronouncements |
• | May be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method; | |
• | Is irrevocable (unless a new election date occurs); and | |
• | Is applied only to entire instruments and not to portions of instruments. |
F-15
Table of Contents
2. | Transformation of Legal Form and Conversion of Preference Shares |
F-16
Table of Contents
3. | Acquisitions |
F-17
Table of Contents
Assets held for sale | $ | 330,092 | ||
Other current assets | 414,006 | |||
Property, plant and equipment | 301,498 | |||
Intangible assets and other assets | 149,486 | |||
Goodwill | 3,389,907 | |||
Accounts payable, accrued expenses and other current liabilities | (289,378 | ) | ||
Income tax payable and deferred taxes | (58,756 | ) | ||
Long-term debt and capital lease obligations | (3,882 | ) | ||
Other liabilities | (75,289 | ) | ||
Total allocation of acquisition cost | $ | 4,157,684 | ||
For the years ended | ||||||||
December 31, | ||||||||
Unaudited | 2006 | 2005 | ||||||
Pro forma net revenue | $ | 8,809,573 | $ | 7,983,941 | ||||
Pro forma net income | 536,223 | 449,481 | ||||||
Pro forma net income per ordinary share: | ||||||||
Basic | 1.82 | 1.54 | ||||||
Fully diluted | 1.81 | 1.53 |
F-18
Table of Contents
4. | Related Party Transactions |
a) | Service Agreements |
F-19
Table of Contents
b) | Products |
c) | Financing Provided by Fresenius SE |
d) | Other |
5. | Inventories |
2007 | 2006 | |||||||
Raw materials and purchased components | $ | 136,013 | $ | 108,584 | ||||
Work in process | 51,829 | 41,272 | ||||||
Finished goods | 350,478 | 269,496 | ||||||
Health care supplies | 97,914 | 104,577 | ||||||
Inventories | $ | 636,234 | $ | 523,929 | ||||
F-20
Table of Contents
6. | Property, Plant and Equipment |
2007 | 2006 | |||||||
Land and improvements | $ | 39,791 | $ | 32,492 | ||||
Buildings and improvements | 1,348,727 | 1,123,691 | ||||||
Machinery and equipment | 2,191,418 | 1,844,299 | ||||||
Machinery, equipment and rental equipment under capitalized leases | 21,533 | 17,044 | ||||||
Construction in progress | 235,144 | 255,994 | ||||||
3,836,613 | 3,273,520 | |||||||
Accumulated depreciation | (1,782,820 | ) | (1,551,128 | ) | ||||
Property, plant and equipment, net | $ | 2,053,793 | $ | 1,722,392 | ||||
7. | Intangible Assets and Goodwill |
December 31, 2007 | December 31, 2006 | |||||||||||||||
Gross | Gross | |||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
Amortizable Intangible Assets | ||||||||||||||||
Non-compete Agreements | $ | 212,105 | $ | (129,559 | ) | $ | 203,123 | $ | (118,553 | ) | ||||||
Technology | 100,016 | (4,872 | ) | 64,800 | (406 | ) | ||||||||||
Other | 310,308 | (240,875 | ) | 305,509 | (233,099 | ) | ||||||||||
$ | 622,429 | $ | (375,306 | ) | $ | 573,432 | $ | (352,058 | ) | |||||||
Carrying | Carrying | |||||||||||||||
Amount | Amount | |||||||||||||||
Non-amortizable Intangible Assets | ||||||||||||||||
Tradename | $ | 223,350 | $ | 222,122 | ||||||||||||
Management contracts | 219,483 | 217,869 | ||||||||||||||
$ | 442,833 | $ | 439,991 | |||||||||||||
Total Intangible Assets | $ | 689,956 | $ | 661,365 | ||||||||||||
F-21
Table of Contents
2005 | $ | 40,349 | ||
2006 | $ | 43,210 | ||
2007 | $ | 34,003 | ||
2008 | $ | 32,345 | ||
2009 | $ | 28,306 | ||
2010 | $ | 26,902 | ||
2011 | $ | 25,737 | ||
2012 | $ | 24,179 | ||
North | ||||||||||||||||||||
America | International | Corporate | Total | |||||||||||||||||
Balance as of January 1, 2006 | $ | 3,076,333 | $ | 380,544 | $ | — | $ | 3,456,877 | ||||||||||||
Goodwill acquired RCG (excl. divestitures) | 3,381,901 | — | — | 3,381,901 | ||||||||||||||||
Goodwill acquired other | 68,106 | 36,843 | — | 104,949 | ||||||||||||||||
Goodwill disposed of | (119,942 | ) | — | — | (119,942 | ) | ||||||||||||||
Reclassification from Patient Relationships | 35,240 | — | — | 35,240 | ||||||||||||||||
Other Reclassifications | (3,603 | ) | (424 | ) | — | (4,027 | ) | |||||||||||||
Foreign Currency Translation Adjustment | (40 | ) | 37,203 | — | 37,163 | |||||||||||||||
Balance as of December 31, 2006 | $ | 6,437,995 | $ | 454,166 | $ | — | $ | 6,892,161 | ||||||||||||
Goodwill acquired | 52,674 | 59,491 | 159,385 | 271,550 | ||||||||||||||||
Reclassifications | 17,952 | 8,195 | — | 26,147 | ||||||||||||||||
Foreign Currency Translation Adjustment | (146 | ) | 55,877 | — | 55,731 | |||||||||||||||
Balance as of December 31, 2007 | $ | 6,508,475 | $ | 577,729 | $ | 159,385 | $ | 7,245,589 | ||||||||||||
F-22
Table of Contents
8. | Accrued Expenses and Other Current Liabilities |
2007 | 2006 | |||||||
Accrued salaries and wages | $ | 331,931 | $ | 283,859 | ||||
Unapplied cash and receivable credits | 173,424 | 148,985 | ||||||
Accrued insurance | 146,377 | 124,422 | ||||||
Special charge for legal matters | 115,000 | 115,000 | ||||||
Other | 585,281 | 522,673 | ||||||
Total accrued expenses and other current liabilities | $ | 1,352,013 | $ | 1,194,939 | ||||
9. | Short-Term Borrowings and Short-Term Borrowings from Related Parties |
2007 | 2006 | |||||||
Borrowings under lines of credit | $ | 132,497 | $ | 65,231 | ||||
Accounts receivable facility | 85,000 | 266,000 | ||||||
Short-term borrowings | 217,497 | 331,231 | ||||||
Short-term borrowings from related parties | 2,287 | 4,575 | ||||||
Short-term borrowings including related parties | $ | 219,784 | $ | 335,806 | ||||
F-23
Table of Contents
10. | Long-term Debt and Capital Lease Obligations |
2007 | 2006 | |||||||
2006 Senior Credit Agreement | $ | 3,166,114 | $ | 3,564,702 | ||||
Senior Notes | 491,569 | — | ||||||
Euro Notes | 294,420 | 263,400 | ||||||
EIB Agreements | 48,806 | 84,618 | ||||||
Capital lease obligations | 14,027 | 8,286 | ||||||
Other | 73,893 | 68,470 | ||||||
4,088,829 | 3,989,476 | |||||||
Less current maturities | (84,816 | ) | (160,135 | ) | ||||
$ | 4,004,013 | $ | 3,829,341 | |||||
F-24
Table of Contents
• | a5-year $1,000,000 revolving credit facility (of which up to $250,000 is available for letters of credit, up to $300,000 is available for borrowings in certainnon-U.S. currencies, up to $150,000 is available as swing line loans in U.S. dollars, up to $250,000 is available as a competitive loan facility and up to $50,000 is available as swing line loans in certainnon-U.S. currencies, the total of which cannot exceed $1,000,000) which will be due and payable on March 31, 2011. | |
• | a5-year term loan facility (“Term Loan A”) of $1,850,000, also scheduled to mature on March 31, 2011. The 2006 Senior Credit Agreement requires 19 quarterly payments on Term Loan A of $30,000 each that permanently reduce the term loan facility which began June 30, 2006 and continue through December 31, 2010. The remaining amount outstanding is due on March 31, 2011. | |
• | a7-year term loan facility (“Term Loan B”) of $1,750,000 scheduled to mature on March 31, 2013. The terms of the 2006 Senior Credit Agreement require 28 quarterly payments on Term Loan B that permanently reduce the term loan facility. The repayment began June 30, 2006. The first 24 quarterly payments will be equal to one quarter of one percent (0.25%) of the original principal balance outstanding, payments 25 through 28 will be equal to twenty-three and one half percent (23.5%) of the original principal balance outstanding with the final payment due on March 31, 2013, subject to an early repayment requirement on March 1, 2011 if the Trust Preferred Securities due June 15, 2011 are not repaid or refinanced or their maturity is not extended prior to that date. |
F-25
Table of Contents
Maximum Amount Available | Balance Outstanding | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Revolving Credit | $ | 1,000,000 | $ | 1,000,000 | $ | 37,989 | $ | 67,827 | ||||||||
Term Loan A | 1,550,000 | 1,760,000 | 1,550,000 | 1,760,000 | ||||||||||||
Term Loan B | 1,578,125 | 1,736,875 | 1,578,125 | 1,736,875 | ||||||||||||
$ | 4,128,125 | $ | 4,496,875 | $ | 3,166,114 | $ | 3,564,702 | |||||||||
F-26
Table of Contents
• | €90,000 multi-currency revolving credit facility expiring in 2013 | |
• | €41,000 multi-currency term-loan credit facility expiring in 2013 which was fully drawn down in U.S. dollars in the amount of $48,806 in September 2005. | |
• | €90,000 multi-currency term-loan credit facility expiring in 2014 |
2008 | $ | 84,816 | ||
2009 | 471,453 | |||
2010 | 145,133 | |||
2011 | 1,318,561 | |||
2012 | 1,143,899 | |||
Thereafter | 933,398 | |||
$ | 4,097,260 | |||
F-27
Table of Contents
11. | Employee Benefit Plans |
F-28
Table of Contents
2007 | 2006 | |||||||
Change in benefit obligation: | ||||||||
Benefit obligation at beginning of year | $ | 334,375 | $ | 320,975 | ||||
Foreign currency translation | 12,193 | 10,843 | ||||||
Service cost | 8,835 | 8,113 | ||||||
Interest cost | 18,506 | 16,945 | ||||||
Transfer of plan participants | 670 | (728 | ) | |||||
Actuarial (gain) loss | (36,637 | ) | (16,194 | ) | ||||
Benefits paid | (6,293 | ) | �� | (5,579 | ) | |||
Benefit obligation at end of year | $ | 331,649 | $ | 334,375 | ||||
Change of plan assets: | ||||||||
Fair value of plan assets at beginning of year | $ | 220,367 | $ | 196,013 | ||||
Actual return on plan assets | 12,276 | 18,128 | ||||||
Employer contributions | 1,173 | 10,982 | ||||||
Benefits paid | (5,235 | ) | (4,756 | ) | ||||
Fair value of plan assets at end of year | $ | 228,581 | $ | 220,367 | ||||
Funded status at year end | $ | 103,068 | $ | 114,008 | ||||
F-29
Table of Contents
Actuarial | Additional | |||||||
losses | Minimum | |||||||
(gains) | Liability | |||||||
Adjustments related to pensions at January 1, 2006 | $ | — | $ | 92,180 | ||||
Additions | — | — | ||||||
Releases | — | (28,189 | ) | |||||
Adjustment FAS 158 | 84,104 | (65,664 | ) | |||||
Foreign Currency Translation Adjustment | — | 1,673 | ||||||
Adjustments related to pensions at December 31, 2006 | $ | 84,104 | $ | — | ||||
Additions | (32,551 | ) | — | |||||
Releases | (5,163 | ) | — | |||||
Foreign Currency Translation Adjustment | 1,985 | — | ||||||
Adjustments related to pensions at December 31, 2007 | $ | 48,375 | $ | — | ||||
in % | 2007 | 2006 | ||||||
Discount rate | 6.16 | 5.52 | ||||||
Rate of compensation increase | 4.16 | 4.18 |
Components of net periodic benefit cost: | 2007 | 2006 | 2005 | |||||||||
Service cost | $ | 8,835 | $ | 8,113 | $ | 5,103 | ||||||
Interest cost | 18,506 | 16,945 | 15,927 | |||||||||
Expected return on plan assets | (16,362 | ) | (15,361 | ) | (13,163 | ) | ||||||
Amortization unrealized losses | 5,163 | 8,420 | 6,753 | |||||||||
Amortization of prior service cost | — | 846 | 210 | |||||||||
Settlement loss | — | 238 | — | |||||||||
Net periodic benefit costs | $ | 16,142 | $ | 19,201 | $ | 14,830 | ||||||
in % | 2007 | 2006 | 2005 | |||||||||
Discount rate | 5.52 | 5.16 | 5.61 | |||||||||
Expected return of plan assets | 7.50 | 7.50 | 7.50 | |||||||||
Rate of compensation increase | 4.18 | 4.18 | 4.22 |
F-30
Table of Contents
2008 | $ | 7,903 | ||
2009 | 8,862 | |||
2010 | 10,031 | |||
2011 | 10,720 | |||
2012 | 11,875 | |||
2013-2017 | 82,413 |
Allocation in | Allocation in | Target allocation | ||||||||||
2007 in % | 2006 in % | in % | ||||||||||
Categories of plan assets | ||||||||||||
Equity securities | 32 | 38 | 36 | |||||||||
Debt securities | 68 | 62 | 64 | |||||||||
Total | 100 | 100 | 100 | |||||||||
12. | Mandatorily Redeemable Trust Preferred Securities |
F-31
Table of Contents
Mandatory | ||||||||||||||||||||||||
Year | Stated | Interest | Redemption | |||||||||||||||||||||
Issued | Amount | Rate | Date | 2007 | 2006 | |||||||||||||||||||
Fresenius Medical Care Capital Trust II | 1998 | $ 450,000 | 77/8 | % | February 1, 2008 | $ | 443,985 | $ | 434,942 | |||||||||||||||
Fresenius Medical Care Capital Trust III | 1998 | D | M 300,000 | 73/8 | % | February 1, 2008 | 225,802 | 202,011 | ||||||||||||||||
Fresenius Medical Care Capital Trust IV | 2001 | $ 225,000 | 77/8 | % | June 15, 2011 | 223,684 | 223,300 | |||||||||||||||||
Fresenius Medical Care Capital Trust V | 2001 | € 300,000 | 73/8 | % | June 15, 2011 | 440,311 | 393,575 | |||||||||||||||||
$ | 1,333,782 | $ | 1,253,828 | |||||||||||||||||||||
13. | Shareholders’ Equity |
F-32
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F-33
Table of Contents
F-34
Table of Contents
14. | Earnings Per Share |
2007 | 2006 | 2005 | ||||||||||
Numerators: | ||||||||||||
Net income | $ | 717,130 | $ | 536,746 | $ | 454,952 | ||||||
less: | ||||||||||||
Dividend Preference on Preference shares | 103 | 90 | 2,000 | |||||||||
Income available to all class of shares | $ | 717,027 | $ | 536,656 | $ | 452,952 | ||||||
Denominators: | ||||||||||||
Weighted average number of: | ||||||||||||
Ordinary shares outstanding | 291,929,141 | 290,621,904 | 210,000,000 | |||||||||
Preference shares outstanding | 3,739,470 | 3,575,376 | 80,369,448 | |||||||||
Total weighted average shares outstanding | 295,668,611 | 294,197,280 | 290,369,448 | |||||||||
Potentially dilutive Ordinary shares | 1,079,683 | 1,673,649 | — | |||||||||
Potentially dilutive Preference shares | 127,324 | 140,976 | 2,337,990 | |||||||||
Total weighted average Ordinary shares outstanding assuming dilution | 293,008,824 | 292,295,553 | 210,000,000 | |||||||||
Total weighted average Preference shares outstanding assuming dilution | 3,866,794 | 3,716,352 | 82,707,438 | |||||||||
Basic income per Ordinary share | $ | 2.43 | $ | 1.82 | $ | 1.56 | ||||||
Plus preference per Preference share | 0.02 | 0.03 | 0.02 | |||||||||
Basic income per Preference Share | $ | 2.45 | $ | 1.85 | $ | 1.58 | ||||||
Fully diluted income per Ordinary share | $ | 2.42 | $ | 1.81 | $ | 1.55 | ||||||
Plus preference per Preference share | 0.02 | 0.03 | 0.03 | |||||||||
Fully diluted income per Preference share | $ | 2.44 | $ | 1.84 | $ | 1.58 | ||||||
15. | Stock Options |
F-35
Table of Contents
2005 | ||||
Net income: | ||||
As reported | $ | 454,952 | ||
Add: Stock-based employee compensation expense included in reported net income, net of tax effects | 1,090 | |||
Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects | (8,302 | ) | ||
Pro forma | $ | 447,740 | ||
Basic net income per: | ||||
Ordinary share | ||||
As reported | $ | 1.56 | ||
Pro forma | $ | 1.54 | ||
Preference share | ||||
As reported | $ | 1.58 | ||
Pro forma | $ | 1.56 | ||
Fully diluted net income per: | ||||
Ordinary share | ||||
As reported | $ | 1.55 | ||
Pro forma | $ | 1.52 | ||
Preference share | ||||
As reported | $ | 1.57 | ||
Pro forma | $ | 1.55 |
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F-37
Table of Contents
Weighted | Weighted | |||||||||||
Average | Average | |||||||||||
Exercise | Exercise | |||||||||||
Options | Price | Price | ||||||||||
(in thousands) | € | $ | ||||||||||
Ordinary shares | ||||||||||||
Balance at December 31, 2006 | 9,222 | 20.39 | 30.02 | |||||||||
Granted | 2,396 | 33.91 | 49.92 | |||||||||
Exercised | 1,337 | 20.18 | 29.71 | |||||||||
Forfeited | 308 | 27.64 | 40.69 | |||||||||
Balance at December 31, 2007 | 9,973 | 26.64 | 39.22 | |||||||||
Preference shares | ||||||||||||
Balance at December 31, 2006 | 368 | 16.19 | 23.83 | |||||||||
Exercised | 67 | 15.10 | 22.23 | |||||||||
Forfeited | 26 | 19.23 | 28.31 | |||||||||
Balance at December 31, 2007 | 275 | 16.16 | 23.79 | |||||||||
F-38
Table of Contents
Fully Vested Outstanding and Exercisable Options | ||||||||||||||||||||||||
Weighted | ||||||||||||||||||||||||
average | Weighted | Weighted | ||||||||||||||||||||||
remaining | average | average | Aggregate | Aggregate | ||||||||||||||||||||
Number of | contractual | exercise | exercise | intrinsic | intrinsic | |||||||||||||||||||
Options | life in years | price | price | value | value | |||||||||||||||||||
(in thousands) | € | US$ | € | US$ | ||||||||||||||||||||
Options for preference shares | 202 | 3.58 | 14.77 | 21.74 | 4,158 | 6,122 | ||||||||||||||||||
Options for ordinary shares | 3,335 | 4.88 | 20.40 | 30.03 | 54,326 | 79,973 |
2007 | 2006 | |||||||
Expected dividend yield | 1.93% | 1.64% | ||||||
Risk-free interest rate | 4.19% | 3.78% | ||||||
Expected volatility | 27.13% | 30.03% | ||||||
Expected life of options | 7 years | 7 years | ||||||
Exercise price | € | 33.91 | € | 30.54 | ||||
(Exercise price in US$) | ($ | 46.22 | ) | ($ | 40.23 | ) |
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Table of Contents
2005 | ||||
Expected dividend yield | 2.88% | |||
Risk-free interest rate | 2.76% | |||
Expected volatility | 40.00% | |||
Expected life of options | 5.3 years |
16. | Income Taxes |
2007 | 2006 | 2005 | ||||||||||
Germany | $ | 225,963 | $ | 167,258 | $ | 109,407 | ||||||
United States | 781,868 | 645,360 | 512,697 | |||||||||
Other | 201,244 | 154,263 | 143,622 | |||||||||
$ | 1,209,075 | $ | 966,881 | $ | 765,726 | |||||||
2007 | 2006 | 2005 | ||||||||||
Current: | ||||||||||||
Germany | $ | 124,598 | $ | 107,609 | $ | 40,386 | ||||||
United States | 283,350 | 150,550 | 206,551 | |||||||||
Other | 75,534 | 57,462 | 48,133 | |||||||||
483,482 | 315,621 | 295,070 | ||||||||||
Deferred: | ||||||||||||
Germany | (11,377 | ) | (15,219 | ) | (12,990 | ) | ||||||
United States | 4,052 | 118,800 | 27,391 | |||||||||
Other | (10,505 | ) | (5,713 | ) | (723 | ) | ||||||
(17,830 | ) | 97,868 | 13,678 | |||||||||
$ | 465,652 | $ | 413,489 | $ | 308,748 | |||||||
F-40
Table of Contents
2007 | 2006 | 2005 | ||||||||||
Expected corporate income tax expense | $ | 465,131 | $ | 371,959 | $ | 294,345 | ||||||
Tax free income | (50,131 | ) | (33,912 | ) | (18,442 | ) | ||||||
Foreign tax rate differential | (5,434 | ) | (3,013 | ) | (8,431 | ) | ||||||
Non-deductible expenses | 5,081 | 17,055 | 27,757 | |||||||||
Taxes for prior years | 41,868 | 41,332 | 20,509 | |||||||||
Tax on divestitures | 0 | 29,128 | 0 | |||||||||
Change of German tax rate | (4,257 | ) | 0 | 0 | ||||||||
Other | 13,394 | (9,060 | ) | (6,990 | ) | |||||||
Actual income tax expense | $ | 465,652 | $ | 413,489 | $ | 308,748 | ||||||
Effective tax rate | 38.5 | % | 42.8 | % | 40.3 | % | ||||||
2007 | 2006 | |||||||
Deferred tax assets: | ||||||||
Accounts receivable, primarily due to allowance for doubtful accounts | $ | 37,572 | $ | 42,753 | ||||
Inventory, primarily due to additional costs capitalized for tax purposes, and inventory reserve accounts | 42,301 | 32,512 | ||||||
Plant, equipment, intangible assets and other non current assets, principally due to differences in depreciation and amortization | 50,829 | 45,949 | ||||||
Accrued expenses and other liabilities for financial accounting purposes, not currently tax deductible | 321,665 | 253,730 | ||||||
Net operating loss carryforwards | 64,792 | 37,965 | ||||||
Derivatives | 22,260 | 8,313 | ||||||
Other | 10,716 | 10,978 | ||||||
Total deferred tax assets | $ | 550,135 | $ | 432,200 | ||||
Less: valuation allowance | (51,326 | ) | (41,231 | ) | ||||
Net deferred tax assets | $ | 498,809 | $ | 390,969 | ||||
Deferred tax liabilities: | ||||||||
Accounts receivable, primarily due to allowance for doubtful accounts | $ | 13,630 | $ | 10,398 | ||||
Inventory, primarily due to inventory reserve accounts for tax purposes | 6,306 | 6,994 | ||||||
Accrued expenses and other liabilities deductible for tax prior to financial accounting recognition | 4,286 | 30,714 | ||||||
Plant, equipment and intangible assets, principally due to differences in depreciation and amortization | 400,408 | 302,187 | ||||||
Derivatives | 14,636 | 33,831 | ||||||
Other | 20,587 | 45,491 | ||||||
Total deferred tax liabilities | 459,853 | 429,615 | ||||||
Net deferred tax assets, (liabilities) | $ | 38,956 | $ | (38,646 | ) | |||
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Table of Contents
2008 | $ | 17,283 | ||
2009 | 6,914 | |||
2010 | 5,191 | |||
2011 | 9,926 | |||
2012 | 19,889 | |||
2013 | 13,945 | |||
2014 | 15,164 | |||
2015 | 14,861 | |||
2016 | 9,679 | |||
2017 and thereafter | 11,809 | |||
Without expiration date | 61,839 | |||
Total | $ | 186,500 | ||
F-42
Table of Contents
2007 | ||||
Unrecognized tax benefits (net of interest): | ||||
Balance at January 1, 2007 | $ | 302,552 | ||
Increases in unrecognized tax benefits prior periods | 29,236 | |||
Decreases in unrecognized tax benefits prior periods | (9,965 | ) | ||
Increases in unrecognized tax benefits current period | 14,893 | |||
Changes related to settlements with tax authorities | (2,960 | ) | ||
Reductions as a result of a lapse of the statute of limitations | — | |||
Foreign currency translation | 20,294 | |||
Balance at December 31, 2007 | $ | 354,050 | ||
17. | Operating Leases |
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Table of Contents
2008 | $ | 357,597 | ||
2009 | 318,634 | |||
2010 | 277,100 | |||
2011 | 233,088 | |||
2012 | 192,928 | |||
Thereafter | 563,574 | |||
$ | 1,942,921 | |||
18. | Legal Proceedings |
F-44
Table of Contents
F-45
Table of Contents
F-46
Table of Contents
F-47
Table of Contents
19. | Financial Instruments |
F-48
Table of Contents
F-49
Table of Contents
2007 | 2006 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
Non-derivatives | ||||||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 244,690 | $ | 244,690 | $ | 159,010 | $ | 159,010 | ||||||||
Receivables | 2,026,865 | 2,026,865 | 1,848,695 | 1,848,695 | ||||||||||||
Liabilities | ||||||||||||||||
Accounts payable | 530,968 | 530,968 | 552,807 | 552,807 | ||||||||||||
Long term debt, excluding Euro and Senior Notes | 3,302,840 | 3,302,840 | 3,726,076 | 3,726,076 | ||||||||||||
Trust Preferred Securities | 1,333,782 | 1,364,188 | 1,253,828 | 1,331,802 | ||||||||||||
Euro Notes | 294,420 | 292,466 | 263,400 | 266,480 | ||||||||||||
Senior Notes | 491,569 | 496,035 | 0 | 0 | ||||||||||||
Derivatives | ||||||||||||||||
Foreign exchange contracts | 13,636 | 13,636 | 2,613 | 2,613 | ||||||||||||
Dollar interest rate hedges | (40,735 | ) | (40,735 | ) | 45,217 | 45,217 | ||||||||||
Yen interest rate hedges | (32 | ) | (32 | ) | (75 | ) | (75 | ) |
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20. | Other Comprehensive Income (Loss) |
Year ended December 31, 2007 | Year ended December 31, 2006 | Year ended December 31, 2005 | ||||||||||||||||||||||||||||||||||
Tax | Tax | Tax | ||||||||||||||||||||||||||||||||||
Pretax | Effect | Net | Pretax | Effect | Net | Pretax | Effect | Net | ||||||||||||||||||||||||||||
Other comprehensive (loss) income relating to cash flow hedges: | ||||||||||||||||||||||||||||||||||||
Changes in fair value of cash flow hedges during the period | $ | (83,919 | ) | $ | 32,961 | $ | (50,958 | ) | $ | 25,513 | $ | (9,300 | ) | $ | 16,213 | $ | 72,440 | $ | (28,653 | ) | $ | 43,787 | ||||||||||||||
Reclassification adjustments | (4,455 | ) | 1,360 | (3,095 | ) | 3,280 | (1,270 | ) | 2,010 | (1,243 | ) | 584 | (659 | ) | ||||||||||||||||||||||
Total other comprehensive (loss) income relating to cash flow hedges: | (88,374 | ) | 34,321 | (54,053 | ) | 28,793 | (10,570 | ) | 18,223 | 71,197 | (28,069 | ) | 43,128 | |||||||||||||||||||||||
Foreign-currency translation adjustment | 137,048 | 0 | 137,048 | 114,494 | 0 | 114,494 | (104,723 | ) | 0 | (104,723 | ) | |||||||||||||||||||||||||
Adjustments related to pension obligations | 35,729 | (12,430 | ) | 23,299 | 8,074 | (3,428 | ) | 4,646 | (19,996 | ) | 7,747 | (12,249 | ) | |||||||||||||||||||||||
Other comprehensive income (loss) | $ | 84,403 | $ | 21,891 | $ | 106,294 | $ | 151,361 | $ | (13,998 | ) | $ | 137,363 | $ | (53,522 | ) | $ | (20,322 | ) | $ | (73,844 | ) | ||||||||||||||
21. | Business Segment Information |
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North | Segment | |||||||||||||||||||
America | International | Total | Corporate | Total | ||||||||||||||||
2007 | ||||||||||||||||||||
Net revenue | $ | 6,663,221 | 3,057,030 | 9,720,251 | $ | 63 | $ | 9,720,314 | ||||||||||||
Inter-segment revenue | 516 | 77,492 | 78,008 | (78,008 | ) | — | ||||||||||||||
Revenue | 6,663,737 | 3,134,522 | 9,798,259 | (77,945 | ) | 9,720,314 | ||||||||||||||
Depreciation and amortization | (220,210 | ) | (140,968 | ) | (361,178 | ) | (2,151 | ) | (363,329 | ) | ||||||||||
Operating Income | 1,129,801 | 544,214 | 1,674,015 | (93,894 | ) | 1,580,121 | ||||||||||||||
Segment assets(1) | 10,586,316 | 3,330,955 | 13,917,271 | 252,994 | 14,170,265 | |||||||||||||||
Capital expenditures and acquisitions(2) | 396,705 | 320,507 | 717,212 | 120,306 | 837,518 | |||||||||||||||
2006 | ||||||||||||||||||||
Net revenue | $ | 6,025,314 | $ | 2,473,724 | $ | 8,499,038 | $ | — | $ | 8,499,038 | ||||||||||
Inter-segment revenue | 1,281 | 60,043 | 61,324 | (61,324 | ) | — | ||||||||||||||
Revenue | 6,026,595 | 2,533,767 | 8,560,362 | (61,324 | ) | 8,499,038 | ||||||||||||||
Depreciation and amortization | (186,826 | ) | (119,938 | ) | (306,764 | ) | (1,934 | ) | (308,698 | ) | ||||||||||
Operating Income | 964,609 | 440,552 | 1,405,161 | (87,034 | ) | 1,318,127 | ||||||||||||||
Segment assets(1) | 10,196,844 | 2,744,833 | 12,941,677 | 103,004 | 13,044,681 | |||||||||||||||
Capital expenditures and acquisitions(3) | 4,599,276 | 175,062 | 4,774,338 | 137 | 4,774,475 | |||||||||||||||
2005 | ||||||||||||||||||||
Net revenue | $ | 4,577,379 | $ | 2,194,440 | $ | 6,771,819 | $ | — | $ | 6,771,819 | ||||||||||
Inter-segment revenue | 1,327 | 54,449 | 55,776 | (55,776 | ) | — | ||||||||||||||
Revenue | 4,578,706 | 2,248,889 | 6,827,595 | (55,776 | ) | 6,771,819 | ||||||||||||||
Depreciation and amortization | (139,747 | ) | (109,812 | ) | (249,559 | ) | (1,893 | ) | (251,452 | ) | ||||||||||
Operating Income | 643,917 | 362,134 | 1,006,051 | (67,133 | ) | 938,918 | ||||||||||||||
Segment assets | 5,634,985 | 2,216,630 | 7,851,615 | 131,485 | 7,983,100 | |||||||||||||||
Capital expenditures and acquisitions(4) | 252,822 | 187,030 | 439,852 | 70 | 439,922 |
(1) | Segment assets of North America include the goodwill of RCG of $3,381,901 as of December 31, 2007 and 2006. |
(2) | International and Corporate acquisitions exclude $9,964 and $83,812, respectively, of non-cash acquisitions for 2007. |
(3) | North America and International acquisitions exclude $2,500 and $6,208 of non-cash acquisitions for 2006. North America acquisitions include $4,148,200 at December 31, 2006 of the total $4,157,619 purchase price of RCG. |
(4) | North America and International acquisitions exclude $260 and $9,031, respectively, of non-cash acquisitions for 2005. |
F-52
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North | Rest of | |||||||||||||||
Germany | America | the World | Total | |||||||||||||
2007 | ||||||||||||||||
Net revenue | $ | 308,603 | $ | 6,663,221 | $ | 2,748,490 | $ | 9,720,314 | ||||||||
Long-lived assets | 195,846 | 8,471,870 | 1,558,364 | 10,226,080 | ||||||||||||
2006 | ||||||||||||||||
Net revenue | $ | 288,047 | $ | 6,025,314 | $ | 2,185,677 | $ | 8,499,038 | ||||||||
Long-lived assets | 144,877 | 8,274,104 | 1,080,301 | 9,499,282 | ||||||||||||
2005 | ||||||||||||||||
Net revenue | $ | 288,923 | $ | 4,577,379 | $ | 1,905,517 | $ | 6,771,819 | ||||||||
Long-lived assets | 157,362 | 4,372,453 | 906,220 | 5,436,035 |
22. | Supplementary Cash Flow Information |
2007 | 2006 | 2005 | ||||||||||
Supplementary cash flow information: | ||||||||||||
Cash paid for interest | $ | 407,882 | $ | 378,233 | $ | 180,853 | ||||||
Cash paid for income taxes | $ | 349,058 | $ | 423,514 | $ | 380,764 | ||||||
Cash inflow for income taxes from stock option exercises | $ | 8,177 | $ | 7,428 | $ | — | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Details for acquisitions: | ||||||||||||
Assets acquired | $ | (431,289 | ) | $ | (4,784,713 | ) | $ | (149,189 | ) | |||
Liabilities assumed | 47,779 | 348,898 | 18,161 | |||||||||
Minorities | 13,040 | 56,300 | (5,017 | ) | ||||||||
Notes assumed in connection with acquisition | 93,775 | 8,708 | 9,291 | |||||||||
Cash paid | (276,695 | ) | (4,370,807 | ) | (126,754 | ) | ||||||
Less cash acquired | 18,818 | 63,525 | 1,601 | |||||||||
Net cash paid for acquisitions | $ | (257,877 | ) | $ | (4,307,282 | ) | $ | (125,153 | ) | |||
23. | Supplemental Condensed Combining Information |
F-53
Table of Contents
For the year ended December 31, 2007 | ||||||||||||||||||||||||||||
Issuer | Guarantor Subsidiaries | |||||||||||||||||||||||||||
FMC | FMC-AG & | Non-Guarantor | Combining | Combined | ||||||||||||||||||||||||
Finance III | Co. KGaA | D-GmbH | FMCH | Subsidiaries | Adjustment | Total | ||||||||||||||||||||||
Net revenue | $ | — | $ | — | $ | 2,423,597 | $ | — | $ | 9,239,917 | $ | (1,943,200 | ) | $ | 9,720,314 | |||||||||||||
Cost of revenue | — | — | 1,871,403 | — | 6,400,239 | (1,907,123 | ) | 6,364,519 | ||||||||||||||||||||
Gross profit | — | — | 552,194 | — | 2,839,678 | (36,077 | ) | 3,355,795 | ||||||||||||||||||||
Operating (income) expenses: | ||||||||||||||||||||||||||||
Selling, general and administrative | 37 | 104,449 | 181,283 | (1,900 | ) | 1,477,793 | (52,512 | ) | 1,709,150 | |||||||||||||||||||
Research and development | — | — | 45,047 | — | 21,476 | — | 66,523 | |||||||||||||||||||||
Operating (loss) income | (37 | ) | (104,449 | ) | 325,864 | 1,900 | 1,340,409 | 16,435 | 1,580,122 | |||||||||||||||||||
Other (income) expense: | ||||||||||||||||||||||||||||
Interest, net | (358 | ) | 18,536 | 15,257 | 188,644 | 192,335 | (43,367 | ) | 371,047 | |||||||||||||||||||
Other, net | — | (893,558 | ) | 196,415 | (591,969 | ) | — | 1,289,112 | — | |||||||||||||||||||
Income (loss) before income taxes and minority interest | 321 | 770,573 | 114,192 | 405,225 | 1,148,074 | (1,229,310 | ) | 1,209,075 | ||||||||||||||||||||
Income tax expense (benefit) | 94 | 53,443 | 123,247 | (74,698 | ) | 413,981 | (50,415 | ) | 465,652 | |||||||||||||||||||
Income (loss) before minority interest | 227 | 717,130 | (9,055 | ) | 479,923 | 734,093 | (1,178,895 | ) | 743,423 | |||||||||||||||||||
Minority interest | — | — | — | — | — | 26,293 | 26,293 | |||||||||||||||||||||
Net income (loss) | $ | 227 | $ | 717,130 | $ | (9,055 | ) | $ | 479,923 | $ | 734,093 | $ | (1,205,188 | ) | $ | 717,130 | ||||||||||||
F-54
Table of Contents
For the year ended December 31, 2006 | ||||||||||||||||||||||||
Guarantor Subsidiaries | ||||||||||||||||||||||||
FMC-AG & | Non-Guarantor | Combining | Combined | |||||||||||||||||||||
Co. KGaA | D-GmbH | FMCH | Subsidiaries | Adjustment | Total | |||||||||||||||||||
Net revenue | $ | — | $ | 1,750,605 | $ | — | $ | 8,242,843 | $ | (1,494,410 | ) | $ | 8,499,038 | |||||||||||
Cost of revenue | — | 1,297,157 | — | 5,804,814 | (1,480,489 | ) | 5,621,482 | |||||||||||||||||
Gross profit | — | 453,448 | — | 2,438,029 | (13,921 | ) | 2,877,556 | |||||||||||||||||
Operating (income) expenses: | ||||||||||||||||||||||||
Selling, general and administrative | 98,761 | 145,700 | 16,829 | 1,345,974 | (58,895 | ) | 1,548,369 | |||||||||||||||||
Gain on sale of legacy clinics | — | — | — | (40,233 | ) | — | (40,233 | ) | ||||||||||||||||
Research and development | — | 36,801 | — | 14,492 | — | 51,293 | ||||||||||||||||||
Operating (loss) income | (98,761 | ) | 270,947 | (16,829 | ) | 1,117,796 | 44,974 | 1,318,127 | ||||||||||||||||
Other (income) expense: | ||||||||||||||||||||||||
Interest, net | 23,228 | 13,108 | 186,988 | 126,338 | 1,584 | 351,246 | ||||||||||||||||||
Other, net | (728,116 | ) | 160,094 | (448,408 | ) | — | 1,016,430 | — | ||||||||||||||||
Income (loss) before income taxes and minority interest | 606,127 | 97,745 | 244,591 | 991,458 | (973,040 | ) | 966,881 | |||||||||||||||||
Income tax expense (benefit) | 69,381 | 101,042 | (81,527 | ) | 379,268 | (54,675 | ) | 413,489 | ||||||||||||||||
Income (loss) before minority interest | 536,746 | (3,297 | ) | 326,118 | 612,190 | (918,365 | ) | 553,392 | ||||||||||||||||
Minority interest | — | — | — | — | 16,646 | 16,646 | ||||||||||||||||||
Net income (loss) | $ | 536,746 | $ | (3,297 | ) | $ | 326,118 | $ | 612,190 | $ | (935,011 | ) | $ | 536,746 | ||||||||||
F-55
Table of Contents
For the year ended December 31, 2005 | ||||||||||||||||||||||||
Guarantor Subsidiaries | ||||||||||||||||||||||||
FMC-AG & | Non-Guarantor | Combining | Combined | |||||||||||||||||||||
Co. KGaA | D-GmbH | FMCH | Subsidiaries | Adjustment | Total | |||||||||||||||||||
Net revenue | $ | — | $ | 1,059,401 | $ | — | $ | 7,010,734 | $ | (1,298,316 | ) | $ | 6,771,819 | |||||||||||
Cost of revenue | — | 664,871 | — | 5,058,548 | (1,284,265 | ) | 4,439,154 | |||||||||||||||||
Gross profit | — | 394,530 | — | 1,952,186 | (14,051 | ) | 2,332,665 | |||||||||||||||||
Operating (income) expenses: | ||||||||||||||||||||||||
Selling, general and administrative | (14,805 | ) | 135,899 | — | 1,075,777 | 145,921 | 1,342,792 | |||||||||||||||||
Research and development | 3,271 | 32,702 | — | 14,982 | — | 50,955 | ||||||||||||||||||
Operating income (loss) | 11,534 | 225,929 | — | 861,427 | (159,972 | ) | 938,918 | |||||||||||||||||
Other (income) expense: | ||||||||||||||||||||||||
Interest, net | 35,391 | 11,750 | 51,981 | 112,199 | (38,129 | ) | 173,192 | |||||||||||||||||
Other, net | (525,497 | ) | 131,392 | (294,649 | ) | — | 688,754 | — | ||||||||||||||||
Income (loss) before income taxes and minority interest | 501,640 | 82,787 | 242,668 | 749,228 | (810,597 | ) | 765,726 | |||||||||||||||||
Income tax expense (benefit) | 46,688 | 79,606 | (20,792 | ) | 286,629 | (83,383 | ) | 308,748 | ||||||||||||||||
Income (loss) before minority interest | 454,952 | 3,181 | 263,460 | 462,599 | (727,214 | ) | 456,978 | |||||||||||||||||
Minority interest | — | — | — | — | 2,026 | 2,026 | ||||||||||||||||||
Net income (loss) | $ | 454,952 | $ | 3,181 | $ | 263,460 | $ | 462,599 | $ | (729,240 | ) | $ | 454,952 | |||||||||||
F-56
Table of Contents
At December 31, 2007 | ||||||||||||||||||||||||||||
Issuer | Guarantor Subsidiaries | |||||||||||||||||||||||||||
FMC | FMC-AG & | Non-Guarantor | Combining | Combined | ||||||||||||||||||||||||
Finance III | Co. KGaA | D-GmbH | FMCH | Subsidiaries | Adjustment | Total | ||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 44 | $ | — | $ | 45 | $ | — | $ | 244,601 | $ | — | $ | 244,690 | ||||||||||||||
Trade accounts receivable, less allowance for doubtful accounts | — | — | 158,052 | — | 1,868,813 | — | 2,026,865 | |||||||||||||||||||||
Accounts receivable from related parties | 17,450 | 1,300,573 | 521,671 | 381,635 | 1,239,700 | (3,361,403 | ) | 99,626 | ||||||||||||||||||||
Inventories | — | — | 165,186 | — | 554,171 | (83,123 | ) | 636,234 | ||||||||||||||||||||
Prepaid expenses and other current assets | 1 | 30,404 | 16,828 | 50 | 508,859 | (60,512 | ) | 495,630 | ||||||||||||||||||||
Deferred taxes | — | — | — | — | 323,133 | 33,294 | 356,427 | |||||||||||||||||||||
Total current assets | 17,495 | 1,330,977 | 861,782 | 381,685 | 4,739,277 | (3,471,744 | ) | 3,859,472 | ||||||||||||||||||||
Property, plant and equipment, net | — | 296 | 145,156 | — | 1,983,968 | (75,627 | ) | 2,053,793 | ||||||||||||||||||||
Intangible assets | — | 248 | 12,028 | — | 677,680 | — | 689,956 | |||||||||||||||||||||
Goodwill | — | — | 3,585 | — | 7,242,004 | — | 7,245,589 | |||||||||||||||||||||
Deferred taxes | — | — | 4,674 | — | 82,061 | (3,120 | ) | 83,615 | ||||||||||||||||||||
Other assets | 491,569 | 6,194,201 | 1,233,386 | 8,021,199 | (4,452,579 | ) | (11,249,936 | ) | 237,840 | |||||||||||||||||||
Total assets | $ | 509,064 | $ | 7,525,722 | $ | 2,260,611 | $ | 8,402,884 | $ | 10,272,411 | $ | (14,800,427 | ) | $ | 14,170,265 | |||||||||||||
Current liabilities: | ||||||||||||||||||||||||||||
Accounts payable | $ | — | $ | 542 | $ | 22,821 | $ | — | $ | 306,556 | $ | — | $ | 329,919 | ||||||||||||||
Accounts payable to related parties | — | 408,156 | 366,443 | 987,111 | 1,824,901 | (3,385,562 | ) | 201,049 | ||||||||||||||||||||
Accrued expenses and other current liabilities | 17,124 | 27,787 | 108,047 | 6,477 | 1,194,598 | (2,020 | ) | 1,352,013 | ||||||||||||||||||||
Short-term borrowings | — | — | — | — | 217,497 | — | 217,497 | |||||||||||||||||||||
Short-term borrowings from related parties | — | 1,076,516 | — | — | (965,997 | ) | (108,232 | ) | 2,287 | |||||||||||||||||||
Current portion of long-term debt and capital lease obligations | — | 832 | 294 | 502,462 | 16,757 | (435,529 | ) | 84,816 | ||||||||||||||||||||
Company-guaranteed debentures of subsidiaries – current portion | — | — | — | — | 669,787 | — | 669,787 | |||||||||||||||||||||
Income tax payable | 94 | 64,607 | — | — | 81,187 | 648 | 146,536 | |||||||||||||||||||||
Deferred taxes | — | 526 | 5,074 | — | 21,049 | (4,060 | ) | 22,589 | ||||||||||||||||||||
Total current liabilities | 17,218 | 1,578,966 | 502,679 | 1,496,050 | 3,366,335 | (3,934,755 | ) | 3,026,493 | ||||||||||||||||||||
Long term debt and capital lease obligations, less current portion | 491,569 | 293,695 | 147 | 1,604,181 | 5,243,330 | (3,632,329 | ) | 4,000,593 | ||||||||||||||||||||
Long term borrowings from related parties | — | 4,642 | 228,531 | 491,569 | 969,417 | (1,690,739 | ) | 3,420 | ||||||||||||||||||||
Other liabilities | — | 24,346 | 11,309 | — | 142,167 | 15,782 | 193,604 | |||||||||||||||||||||
Pension liabilities | — | 2,748 | 112,188 | — | (3,584 | ) | — | 111,352 | ||||||||||||||||||||
Income tax payable | — | 44,739 | — | — | 18,049 | 48,492 | 111,280 | |||||||||||||||||||||
Deferred taxes | — | 1,369 | — | — | 383,595 | (6,467 | ) | 378,497 | ||||||||||||||||||||
Company obligated mandatorily redeemable preferred securities of subsidiary Fresenius Medical Care Capital Trusts holding solely Company-guaranteed debentures of subsidiary | — | — | — | — | 663,995 | — | 663,995 | |||||||||||||||||||||
Minority interest | — | — | — | — | 105,814 | — | 105,814 | |||||||||||||||||||||
Total liabilities | 508,787 | 1,950,505 | 854,854 | 3,591,800 | 10,889,118 | (9,200,016 | ) | 8,595,048 | ||||||||||||||||||||
Shareholders’ equity | 277 | 5,575,217 | 1,405,757 | 4,811,084 | (616,707 | ) | (5,600,411 | ) | 5,575,217 | |||||||||||||||||||
�� | ||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 509,064 | $ | 7,525,722 | $ | 2,260,611 | $ | 8,402,884 | $ | 10,272,411 | $ | (14,800,427 | ) | $ | 14,170,265 | |||||||||||||
F-57
Table of Contents
At December 31, 2006 | ||||||||||||||||||||||||
Guarantor Subsidiaries | ||||||||||||||||||||||||
FMC-AG & | Non-Guarantor | Combining | Combined | |||||||||||||||||||||
Co. KGaA | D-GmbH | FMCH | Subsidiaries | Adjustment | Total | |||||||||||||||||||
Current assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 22 | $ | 34 | $ | — | $ | 158,954 | $ | — | $ | 159,010 | ||||||||||||
Trade accounts receivable, less allowance for doubtful accounts | — | 122,987 | — | 1,725,708 | — | 1,848,695 | ||||||||||||||||||
Accounts receivable from related parties | 1,483,462 | 835,512 | 290,288 | 1,830,293 | (4,296,206 | ) | 143,349 | |||||||||||||||||
Inventories | — | 130,967 | — | 457,426 | (64,464 | ) | 523,929 | |||||||||||||||||
Prepaid expenses and other current assets | 18,455 | 20,633 | 50 | 408,850 | (4,134 | ) | 443,854 | |||||||||||||||||
Deferred taxes | 1,586 | — | — | 262,476 | 29,017 | 293,079 | ||||||||||||||||||
Total current assets | 1,503,525 | 1,110,133 | 290,338 | 4,843,707 | (4,335,787 | ) | 3,411,916 | |||||||||||||||||
Property, plant and equipment, net | 174 | 97,244 | — | 1,678,511 | (53,537 | ) | 1,722,392 | |||||||||||||||||
Intangible assets | 70 | 13,969 | — | 647,326 | — | 661,365 | ||||||||||||||||||
Goodwill | — | 3,207 | — | 6,888,954 | — | 6,892,161 | ||||||||||||||||||
Deferred taxes | — | 11,825 | — | 40,429 | 10,468 | 62,722 | ||||||||||||||||||
Other assets | 5,105,547 | 869,630 | 5,998,241 | (1,532,867 | ) | (10,146,426 | ) | 294,125 | ||||||||||||||||
Total assets | $ | 6,609,316 | $ | 2,106,008 | $ | 6,288,579 | $ | 12,566,060 | $ | (14,525,282 | ) | $ | 13,044,681 | |||||||||||
Current liabilities: | ||||||||||||||||||||||||
Accounts payable | $ | 306 | $ | 20,399 | $ | — | $ | 295,483 | $ | — | $ | 316,188 | ||||||||||||
Accounts payable to related parties | 351,450 | 642,878 | 926,178 | 3,496,135 | (5,180,022 | ) | 236,619 | |||||||||||||||||
Accrued expenses and other current liabilities | 17,617 | 91,634 | 8,450 | 1,064,412 | 12,826 | 1,194,939 | ||||||||||||||||||
Short-term borrowings | — | — | — | 331,231 | — | 331,231 | ||||||||||||||||||
Short-term borrowings from related parties | 954,896 | 9,155 | — | (950,321 | ) | (9,155 | ) | 4,575 | ||||||||||||||||
Current portion of long-term debt and capital lease obligations | 744 | 263 | 137,500 | 21,628 | — | 160,135 | ||||||||||||||||||
Income tax payable | 40,551 | — | — | 63,929 | 11,579 | 116,059 | ||||||||||||||||||
Deferred taxes | — | 6,174 | — | 15,982 | (6,197 | ) | 15,959 | |||||||||||||||||
Total current liabilities | 1,365,564 | 770,503 | 1,072,128 | 4,338,479 | (5,170,969 | ) | 2,375,705 | |||||||||||||||||
Long term debt and capital lease obligations, less current portion | 329,918 | 395 | 2,367,731 | 4,853,043 | (3,721,746 | ) | 3,829,341 | |||||||||||||||||
Long term borrowings from related parties | 4,153 | 204,453 | — | — | (208,606 | ) | — | |||||||||||||||||
Other liabilities | 18,872 | 9,462 | — | 112,350 | 9,000 | 149,684 | ||||||||||||||||||
Pension liabilities | 2,580 | 107,357 | — | 2,379 | — | 112,316 | ||||||||||||||||||
Deferred taxes | 18,067 | — | 309,140 | 51,280 | 378,487 | |||||||||||||||||||
Company obligated mandatorily redeemable preferred securities of subsidiary Fresenius Medical Care Capital Trusts holding solely Company-guaranteed debentures of subsidiary | — | — | — | 1,253,828 | — | 1,253,828 | ||||||||||||||||||
Minority interest | — | — | 7,412 | 67,746 | — | 75,158 | ||||||||||||||||||
Total liabilities | 1,739,154 | 1,092,170 | 3,447,271 | 10,936,965 | (9,041,041 | ) | 8,174,519 | |||||||||||||||||
Shareholders’ equity | 4,870,162 | 1,013,838 | 2,841,308 | 1,629,095 | (5,484,241 | ) | 4,870,162 | |||||||||||||||||
Total liabilities and shareholders’ equity | $ | 6,609,316 | $ | 2,106,008 | $ | 6,288,579 | $ | 12,566,060 | $ | (14,525,282 | ) | $ | 13,044,681 | |||||||||||
F-58
Table of Contents
For the year ended December 31, 2007 | ||||||||||||||||||||||||||||
Issuer | Guarantor Subsidiaries | |||||||||||||||||||||||||||
FMC | FMC-AG & | Non-Guarantor | Combining | Combined | ||||||||||||||||||||||||
Finance III | Co. KGaA | D-GmbH | FMCH | Subsidiaries | Adjustment | Total | ||||||||||||||||||||||
Operating Activities: | ||||||||||||||||||||||||||||
Net income (loss) | $ | 227 | $ | 717,130 | $ | (9,055 | ) | $ | 479,923 | $ | 734,093 | $ | (1,205,188 | ) | $ | 717,130 | ||||||||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||||||||||||||||||||||
Equity affiliate income | — | (559,674 | ) | — | (591,969 | ) | — | 1,151,643 | — | |||||||||||||||||||
Depreciation and amortization | — | 2,025 | 33,620 | — | 344,844 | (17,159 | ) | 363,330 | ||||||||||||||||||||
Change in minority interest | — | — | — | — | 5,057 | 38,180 | 43,237 | |||||||||||||||||||||
Change in deferred taxes, net | — | (14,012 | ) | 396 | — | 21,821 | (7,028 | ) | 1,177 | |||||||||||||||||||
(Gain) Loss on sale of fixed assets and investments | — | (303 | ) | 776 | — | 3,527 | (384 | ) | 3,616 | |||||||||||||||||||
Write-up of loans from related parties | — | 17,390 | — | — | — | (17,390 | ) | — | ||||||||||||||||||||
Compensation expense related to stock options | — | 24,208 | — | — | — | — | 24,208 | |||||||||||||||||||||
Changes in assets and liabilities, net of amounts from businesses acquired: | ||||||||||||||||||||||||||||
Trade accounts receivable, net | — | — | (18,536 | ) | — | (44,199 | ) | — | (62,735 | ) | ||||||||||||||||||
Inventories | — | — | (13,322 | ) | — | (72,294 | ) | 12,791 | (72,825 | ) | ||||||||||||||||||
Prepaid expenses and other current and non-current assets | 49 | (7,907 | ) | 13,690 | 8,588 | (5,463 | ) | (20,637 | ) | (11,680 | ) | |||||||||||||||||
Accounts receivable from/ payable to related parties | (17,450 | ) | (77,549 | ) | (53,019 | ) | 38,473 | 99,746 | (12,466 | ) | (22,265 | ) | ||||||||||||||||
Accounts payable, accrued expenses and other current and non-current liabilities | 17,124 | 15,247 | 17,312 | 15,477 | 56,808 | (8,008 | ) | 113,960 | ||||||||||||||||||||
Income tax payable | 94 | 38,393 | — | (74,698 | ) | 99,923 | 38,709 | 102,421 | ||||||||||||||||||||
Net cash provided by (used in) operating activities | 44 | 154,948 | (28,138 | ) | (124,206 | ) | 1,243,863 | (46,937 | ) | 1,199,574 | ||||||||||||||||||
Investing Activities: | ||||||||||||||||||||||||||||
Purchases of property, plant and equipment | — | (452 | ) | (63,910 | ) | — | (547,430 | ) | 32,151 | (579,641 | ) | |||||||||||||||||
Proceeds from sale of property, plant and equipment | — | 4 | 1,153 | — | 29,913 | — | 31,070 | |||||||||||||||||||||
Disbursement of loans to related parties | — | 3,435 | 155 | 120,437 | (9,527 | ) | (114,500 | ) | — | |||||||||||||||||||
Acquisitions and investments, net of cash acquired | — | 35,612 | (59 | ) | — | (257,411 | ) | (36,019 | ) | (257,877 | ) | |||||||||||||||||
Proceeds from divestitures | — | — | — | — | 29,495 | — | 29,495 | |||||||||||||||||||||
Net cash provided by (used in) investing activities | — | 38,599 | (62,661 | ) | 120,437 | (754,960 | ) | (118,368 | ) | (776,953 | ) | |||||||||||||||||
Financing Activities: | ||||||||||||||||||||||||||||
Short-term borrowings, net | — | (3,015 | ) | 91,080 | — | (101,380 | ) | — | (13,315 | ) | ||||||||||||||||||
Long-term debt and capital lease obligations, net | — | (38,916 | ) | (274 | ) | 11,897 | (56,958 | ) | 114,500 | 30,249 | ||||||||||||||||||
(Decrease) increase of accounts receivable securitization program | — | — | — | — | (181,000 | ) | — | (181,000 | ) | |||||||||||||||||||
Proceeds from exercise of stock options | — | 38,757 | — | — | 8,177 | — | 46,934 | |||||||||||||||||||||
Cash paid for repurchase preferred stock | — | — | — | (7,660 | ) | — | — | (7,660 | ) | |||||||||||||||||||
Dividends paid | — | (188,407 | ) | — | — | (12,671 | ) | 12,671 | (188,407 | ) | ||||||||||||||||||
Capital (decrease) increase | — | — | — | — | (36,018 | ) | 36,018 | — | ||||||||||||||||||||
Distributions to minority interest | — | — | — | (468 | ) | (27,001 | ) | — | (27,469 | ) | ||||||||||||||||||
Net cash (used in) provided by financing activities | — | (191,581 | ) | 90,806 | 3,769 | (406,851 | ) | 163,189 | (340,668 | ) | ||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | (1,988 | ) | 4 | — | 3,595 | 2,116 | 3,727 | ||||||||||||||||||||
Cash and Cash Equivalents: | ||||||||||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 44 | (22 | ) | 11 | — | 85,647 | — | 85,680 | ||||||||||||||||||||
Cash and cash equivalents at beginning of period | — | 22 | 34 | — | 158,954 | — | 159,010 | |||||||||||||||||||||
Cash and cash equivalents at end of period | $ | 44 | $ | — | $ | 45 | $ | — | $ | 244,601 | $ | — | $ | 244,690 | ||||||||||||||
F-59
Table of Contents
For the year ended December 31, 2006 | ||||||||||||||||||||||||
Guarantor Subsidiaries | ||||||||||||||||||||||||
FMC-AG & | Non-Guarantor | Combining | Combined | |||||||||||||||||||||
Co. KGaA | D-GmbH | FMCH | Subsidiaries | Adjustment | Total | |||||||||||||||||||
Operating Activities: | ||||||||||||||||||||||||
Net income (loss) | $ | 536,746 | $ | (3,297 | ) | $ | 326,118 | $ | 612,190 | $ | (935,011 | ) | $ | 536,746 | ||||||||||
Adjustments to reconcile net income to cash and cash equivalents provided by (used in) operating activities: | ||||||||||||||||||||||||
Equity affiliate income | (451,099 | ) | — | (448,408 | ) | — | 899,507 | — | ||||||||||||||||
Settlement of shareholder proceedings | — | — | — | — | (888 | ) | (888 | ) | ||||||||||||||||
Depreciation and amortization | 1,934 | 30,715 | — | 290,425 | (14,376 | ) | 308,698 | |||||||||||||||||
Change in minority interest | — | — | — | — | 24,333 | 24,333 | ||||||||||||||||||
Change in deferred taxes, net | (14,072 | ) | (14 | ) | — | 32,927 | (7,937 | ) | 10,904 | |||||||||||||||
Loss (gain) on investments | 24,660 | — | — | — | (24,660 | ) | — | |||||||||||||||||
Write-up of loans from related parties | (1,695 | ) | — | — | — | 1,695 | — | |||||||||||||||||
Loss on sale of fixed assets and investments | — | — | — | 5,742 | — | 5,742 | ||||||||||||||||||
Compensation expense related to stock options | 16,610 | — | — | — | — | 16,610 | ||||||||||||||||||
Cash inflow from hedging | 10,908 | — | — | — | — | 10,908 | ||||||||||||||||||
Changes in assets and liabilities, net of amounts from businesses acquired: | ||||||||||||||||||||||||
Trade accounts receivable, net | — | (9,094 | ) | — | (22,182 | ) | — | (31,276 | ) | |||||||||||||||
Inventories | — | (4,210 | ) | — | (44,067 | ) | 5,724 | (42,553 | ) | |||||||||||||||
Prepaid expenses and other current and non-current assets | 10,123 | (4,566 | ) | 28,936 | (15,204 | ) | (40,918 | ) | (21,629 | ) | ||||||||||||||
Accounts receivable from/ payable to related parties | 3,993 | 106,552 | 40,739 | (192,257 | ) | 36,098 | (4,875 | ) | ||||||||||||||||
Accounts payable, accrued expenses and other current and non-current liabilities | (8,113 | ) | 8,726 | 7,675 | 158,132 | 16,457 | 182,877 | |||||||||||||||||
Income tax payable | 22,585 | — | (81,527 | ) | 24,568 | 10,124 | (24,250 | ) | ||||||||||||||||
Tax payments related to divestitures and acquisitions | — | — | — | (63,517 | ) | — | (63,517 | ) | ||||||||||||||||
Net cash provided by (used in) operating activities | 152,580 | 124,812 | (126,467 | ) | 786,757 | (29,852 | ) | 907,830 | ||||||||||||||||
Investing Activities: | ||||||||||||||||||||||||
Purchases of property, plant and equipment | (137 | ) | (31,267 | ) | — | (454,524 | ) | 18,735 | (467,193 | ) | ||||||||||||||
Proceeds from sale of property, plant and equipment | 846 | 395 | — | 16,417 | — | 17,658 | ||||||||||||||||||
Disbursement of loans to related parties | (361,156 | ) | 134 | (2,879,204 | ) | — | 3,240,226 | — | ||||||||||||||||
Acquisitions and investments, net of cash acquired | (22,671 | ) | (793 | ) | — | (4,314,968 | ) | 31,150 | (4,307,282 | ) | ||||||||||||||
Proceeds from divestitures | — | — | — | 515,705 | — | 515,705 | ||||||||||||||||||
Net cash (used in) provided by investing activities | (383,118 | ) | (31,531 | ) | (2,879,204 | ) | (4,237,370 | ) | 3,290,111 | (4,241,112 | ) | |||||||||||||
Financing activities: | ||||||||||||||||||||||||
Short-term borrowings, net | (17,239 | ) | (92,397 | ) | — | 94,899 | — | (14,737 | ) | |||||||||||||||
Long-term debt and capital lease obligations, net | 27,769 | (879 | ) | 1,756,191 | 4,490,710 | (3,240,226 | ) | 3,033,565 | ||||||||||||||||
Increase of accounts receivable securitization program | — | — | — | 172,000 | — | 172,000 | ||||||||||||||||||
Proceeds from exercise of stock options | 46,528 | — | — | 7,424 | — | 53,952 | ||||||||||||||||||
Proceeds from conversion of preference shares into ordinary shares | 306,759 | — | — | — | — | 306,759 | ||||||||||||||||||
Dividends paid | (153,720 | ) | — | — | (4,184 | ) | 4,184 | (153,720 | ) | |||||||||||||||
Capital increase | — | — | 1,250,000 | (1,226,202 | ) | (23,798 | ) | — | ||||||||||||||||
Change in minority interest | — | — | (520 | ) | (14,610 | ) | — | (15,130 | ) | |||||||||||||||
Net cash provided by (used in) financing activities | 210,097 | (93,276 | ) | 3,005,671 | 3,520,037 | (3,259,840 | ) | 3,382,689 | ||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | 20,459 | 3 | — | 4,483 | (419 | ) | 24,526 | |||||||||||||||||
Cash and Cash Equivalents: | ||||||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 18 | 8 | — | 73,907 | — | 73,933 | ||||||||||||||||||
Cash and cash equivalents at beginning of period | 1 | 26 | — | 85,050 | — | 85,077 | ||||||||||||||||||
Cash and cash equivalents at end of period | $ | 19 | $ | 34 | $ | — | $ | 158,957 | $ | — | $ | 159,010 | ||||||||||||
F-60
Table of Contents
For the year ended December 31, 2005 | ||||||||||||||||||||||||
Guarantor Subsidiaries | ||||||||||||||||||||||||
FMC-AG & | Non-Guarantor | Combining | Combined | |||||||||||||||||||||
Co. KGaA | D-GmbH | FMCH | Subsidiaries | Adjustment | Total | |||||||||||||||||||
Operating Activities: | ||||||||||||||||||||||||
Net income (loss) | $ | 454,952 | $ | 3,181 | $ | 263,460 | $ | 462,599 | $ | (729,240 | ) | $ | 454,952 | |||||||||||
Adjustments to reconcile net income to cash and cash equivalents provided by (used in) operating activities: | ||||||||||||||||||||||||
Equity affiliate income | (228,488 | ) | — | (294,649 | ) | — | 523,137 | — | ||||||||||||||||
Settlement of shareholder proceedings | — | 7,335 | 7,335 | |||||||||||||||||||||
Depreciation and amortization | 1,893 | 31,967 | — | 232,749 | (15,157 | ) | 251,452 | |||||||||||||||||
Change in deferred taxes, net | 7,836 | (528 | ) | — | (5,138 | ) | (5,845 | ) | (3,675 | ) | ||||||||||||||
(Gain) loss on investments | (48,373 | ) | — | — | — | 48,373 | — | |||||||||||||||||
Write-up of loans from related parties | (17,276 | ) | — | — | — | 17,276 | — | |||||||||||||||||
Loss on sale of fixed assets and investments | — | 284 | — | 3,681 | — | 3,965 | ||||||||||||||||||
Compensation expense related to stock options | 1,363 | — | — | — | — | 1,363 | ||||||||||||||||||
Cash inflow from hedging | — | (1,339 | ) | — | 1,339 | — | — | |||||||||||||||||
Changes in assets and liabilities, net of amounts from businesses acquired: | ||||||||||||||||||||||||
Trade accounts receivable, net | — | (14,645 | ) | — | (48,929 | ) | — | (63,574 | ) | |||||||||||||||
Inventories | — | (4,507 | ) | — | (7,069 | ) | 1,765 | (9,811 | ) | |||||||||||||||
Prepaid expenses and other current and non-current assets | 4,738 | 4,490 | 3,320 | (119,397 | ) | 65,813 | (41,036 | ) | ||||||||||||||||
Accounts receivable from/ payable to related parties | (72,755 | ) | (26,544 | ) | 37,235 | 16,225 | 55,435 | 9,596 | ||||||||||||||||
Accounts payable, accrued expenses and other current and non-current liabilities | 8,749 | 33,639 | 234 | 104,596 | 1,517 | 148,735 | ||||||||||||||||||
Income tax payable | (100,380 | ) | — | (20,792 | ) | 31,883 | 291 | (88,998 | ) | |||||||||||||||
Net cash provided by (used in) operating activities | 12,259 | 25,998 | (11,192 | ) | 672,539 | (29,300 | ) | 670,304 | ||||||||||||||||
Investing Activities: | ||||||||||||||||||||||||
Purchases of property, plant and equipment | (90 | ) | (27,649 | ) | — | (311,157 | ) | 24,127 | (314,769 | ) | ||||||||||||||
Proceeds from sale of property, plant and equipment | — | 1,417 | — | 16,010 | — | 17,427 | ||||||||||||||||||
Disbursement of loans to related parties | (64,349 | ) | 125 | 25,512 | — | 38,712 | — | |||||||||||||||||
Acquisitions and investments, net of cash acquired | (49,087 | ) | — | — | (99,938 | ) | 23,872 | (125,153 | ) | |||||||||||||||
Net cash (used in) provided by investing activities | (113,526 | ) | (26,107 | ) | 25,512 | (395,085 | ) | 86,711 | (422,495 | ) | ||||||||||||||
Financing activities: | ||||||||||||||||||||||||
Short-term borrowings, net | 17,298 | 1,151 | — | (35,538 | ) | — | (17,089 | ) | ||||||||||||||||
Long-term debt and capital lease obligations, net | 137,766 | — | (13,800 | ) | 9,870 | (38,712 | ) | 95,124 | ||||||||||||||||
Increase of accounts receivable securitization program | — | (1,045 | ) | — | (240,720 | ) | — | (241,765 | ) | |||||||||||||||
Proceeds from exercise of stock options | 80,366 | — | — | (422 | ) | — | 79,944 | |||||||||||||||||
Dividends paid | (137,487 | ) | — | — | (5,320 | ) | 5,320 | (137,487 | ) | |||||||||||||||
Capital increase (decrease) of Non-Guarantor-Subsidiaries | — | — | — | 23,872 | (23,872 | ) | — | |||||||||||||||||
Change in minority interest | — | — | (520 | ) | — | 2,026 | 1,506 | |||||||||||||||||
Net cash provided by (used in) financing activities | 97,943 | 106 | (14,320 | ) | (248,258 | ) | (55,238 | ) | (219,767 | ) | ||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | 1,173 | (3 | ) | — | (3,420 | ) | 319 | (1,931 | ) | |||||||||||||||
Cash and Cash Equivalents: | ||||||||||||||||||||||||
Net (decrease) increase in cash and cash equivalents | (2,151 | ) | (6 | ) | — | 25,776 | 2,492 | 26,111 | ||||||||||||||||
Cash and cash equivalents at beginning of period | 2,152 | 32 | — | 56,782 | — | 58,966 | ||||||||||||||||||
Cash and cash equivalents at end of period | $ | 1 | $ | 26 | $ | — | $ | 82,558 | $ | 2,492 | $ | 85,077 | ||||||||||||
F-61
Table of Contents
Financial Statement Schedule
(in thousands, except share data)
2007 | 2006 | 2005 | ||||||||||
Allowance for doubtful accounts as of January 1 | $ | 207,293 | $ | 176,568 | $ | 179,917 | ||||||
Change in valuation allowances as recorded in the consolidated statements of income | 201,998 | 177,285 | 140,799 | |||||||||
Write-offs and recoveries of amounts previously written-off | 167,519 | 151,400 | 139,435 | |||||||||
Foreign currency translation | 6,028 | 4,840 | (4,713 | ) | ||||||||
Allowance for doubtful accounts as of December 31 | $ | 247,800 | $ | 207,293 | $ | 176,568 | ||||||
S-1