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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of October 2016
FRESENIUS MEDICAL CARE AG & Co. KGaA
(Translation of registrant's name into English)
Else-Kröner Strasse 1
61346 Bad Homburg
Germany
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of
Form 20-F or Form 40-F.
Form 20-F ý Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(7):
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also
thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o No ý
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with
Rule 12g3-2(b): 82 – .
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
i
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and
nine months ended September 30, 2016 and 2015
FINANCIAL INFORMATION
Management's Discussion and Analysis
Forward-looking Statements
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). When used in this report, the words "outlook," "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates" and similar expressions are generally intended to identify forward looking statements. Although we believe that the expectations reflected in such forward-looking statements are
reasonable, forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated, and future
events and actual results, financial and otherwise, could differ materially from those set forth in or contemplated by the forward-looking statements contained
elsewhere in this report. We have based these forward-looking statements on current estimates and assumptions made to the best of our knowledge. By their nature, such forward-looking statements
involve risks, uncertainties, assumptions and other factors which could cause actual results, including our financial condition and profitability, to differ materially positively or negatively
relative to the results expressly or implicitly described in or suggested by these statements. Moreover, forward-looking estimates or predictions derived from third parties' studies or information may
prove to be inaccurate. Consequently, we cannot give any assurance regarding the future accuracy of the opinions set forth in this report or the actual occurrence of the projected developments
described herein. In addition, even if our future results meet the expectations expressed here, those results may not be indicative of our performance in future periods.
These
risks, uncertainties, assumptions, and other factors that could cause actual results to differ from our projected results include, among others, the
following:
- •
- changes in governmental and commercial insurer reimbursement for our complete products and services portfolio, including the United States
("U.S.") Medicare reimbursement system for dialysis and other health care services;
- •
- the outcome of government and internal investigations as well as litigation;
- •
- risks relating to compliance with the government regulations applicable to our business including, in the U.S., the Anti-Kickback Statute, the
False Claims Act, the Stark Law, the Health Insurance Portability and Accountability Act, the Health Information Technology for Economic and Clinical Health Act and the Foreign Corrupt Practices Act,
the Food, Drug and Cosmetic Act and comparable regulatory regimes in many of the more than 120 countries in which we supply health care services and/or products;
- •
- the influence of commercial insurers and managed care organizations, including efforts by these organizations to manage costs by limiting
healthcare benefits, reducing provider reimbursement and/or restricting options for patient funding of health insurance premiums;
- •
- the impact of health care reforms and regulation;
- •
- product liability risks;
- •
- risks relating to our ability to continue to make acquisitions;
- •
- the impact of currency fluctuations;
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FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
- •
- the United Kingdom vote in favor of withdrawal from the European Union and its possible effects on the tax, tax treaty, currency, operational,
legal and regulatory regimes to which our businesses in the region are subject, as well as the present uncertainty regarding these and related issues;
- •
- our ability to protect our information technology systems against cybersecurity attacks or prevent other privacy or data security incidents;
- •
- changes in utilization patterns for pharmaceuticals and in our costs of purchasing pharmaceuticals;
- •
- introduction of generic or new pharmaceuticals that compete with our pharmaceutical products;
- •
- increases in raw material and energy costs or the inability to procure raw materials;
- •
- collectability of our receivables, which depends primarily on the financial stability and liquidity of our governmental and commercial payors;
- •
- our ability to achieve cost savings in various health care risk management programs in which we participate or intend to participate; and
- •
- the greater size, market power and experience of certain competitors in certain geographic regions and business lines.
Important
factors that could contribute to such differences are noted in "Financial Condition and Results of Operations – Overview, legislation and growth –
Overview" below, in Note 11 of the Notes to Consolidated Financial Statements (unaudited), "Commitments and Contingencies" included in this report, in Note 19 of the Notes to
Consolidated Financial Statements, "Commitments and Contingencies" included in our Annual Report on Form 20-F for the year ended December 31, 2015, and under "Risk Factors" and elsewhere
in that report.
Our
business is also subject to other risks and uncertainties that we describe from time to time in our public filings. Developments in any of these areas could cause our results to
differ materially from the results that we or others have projected or may project.
Our
reported financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that are the basis of our financial statements. The actual
accounting policies, the judgments made in the selection and application of these policies and the sensitivities of reported results to changes in accounting policies, assumptions and estimates, are
factors to be considered along with our financial statements and the discussion under "Financial Condition and Results of Operations – Results of Operations" below. There have been no
significant changes during the nine months ended September 30, 2016 to the items disclosed within the critical accounting policies and estimates in Item 5, "Operating and Financial
Review and Prospects – Critical Accounting Policies" in our Annual Report on Form 20-F for the year ended December 31, 2015.
Financial Condition and Results of Operations
You should read the following discussion and analysis of the results of operations of Fresenius Medical Care AG & Co. KGaA
("FMC-AG & Co. KGaA," or the "Company") and its subsidiaries in conjunction with our unaudited consolidated financial statements and related notes contained elsewhere in this report and
our disclosures and discussions in our Annual Report on Form 20-F for the year ended December 31, 2015. The results within this discussion and analysis are
unaudited. In this report, "FMC-AG & Co. KGaA," or the "Company," "we," "us" or "our" refers to the Company or the Company and its subsidiaries on a consolidated basis, as the context
requires. The term "North America Segment" refers to our North America operating segment; the term "EMEA Segment" refers to the Europe, Middle East and
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FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Africa
operating segment, the term "Asia-Pacific Segment" refers to our Asia-Pacific operating segment, and the term "Latin America Segment" refers to our Latin America operating segment. The term
"Corporate" includes certain headquarters' overhead charges, including accounting and finance, centrally managed production, asset management, quality management, procurement and research and
development. The term "Constant Currency" or at "Constant Exchange Rates" means that we have translated local currency revenues for the current reporting period into U.S. dollars using the same
average foreign currency exchange rates for the conversion of revenues into U.S. dollars that we used to translate local currency revenues for the comparable reporting period of the prior year, as
described below under "Non-US GAAP Measures for Presentation – Constant Currency."
Overview, legislation and growth
Overview
We are the world's largest kidney dialysis company, based on publicly reported sales and number of patients treated and our dialysis product
offerings. We provide dialysis care and related services to persons who suffer from end stage renal disease ("ESRD") as well as other health care services. We develop and manufacture a full range of
dialysis machines, systems and disposable products, which we sell to customers in more than 120 countries and also use in our internal health care service operations. Our dialysis business is
therefore vertically integrated. We describe our other health care services as "Care Coordination." Care Coordination currently includes coordinated delivery of pharmacy services, vascular,
cardiovascular and endovascular specialty services, non-dialysis laboratory testing services, physician services, hospitalist and intensivist services, health plan services, ambulatory surgery center
services and urgent care services, which, together with dialysis care services represent our health care services. We estimated the volume of the global dialysis market was approximately
$73 billion in 2015. Dialysis patient growth results from factors such as the aging population and increased life expectancies; shortage of donor organs for kidney transplants; increasing
incidence of kidney disease and better treatment of and survival of patients with diabetes, hypertension and other illnesses, which frequently lead to the onset of chronic kidney disease; improvements
in treatment quality, which prolong patient life; and improving standards of living in developing countries, which make life-saving dialysis treatment available.
As
a global company delivering health care services and dialysis products, we face the challenge of addressing the needs of a wide variety of stakeholders, such as patients, customers,
payors, regulators
and legislators in many different economic environments and health care systems. In general, government-funded programs (in some countries in coordination with private insurers) pay for certain health
care items and services provided to their citizens. Not all health care systems provide for dialysis treatment. Therefore, the reimbursement systems in various countries and ancillary services
utilization environment significantly influence our business.
The
majority of health care services we provide are paid for by governmental institutions. Approximately 32% of our consolidated revenues are attributable to U.S. federally-funded health
care benefit programs, such as Medicare and Medicaid reimbursement, under which reimbursement rates are set by the Centers for Medicare & Medicaid Services ("CMS"). Legislative changes could
affect Medicare reimbursement rates for a significant portion of the services we provide. To date, while we have generally
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FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
experienced
stable reimbursement globally, the stability of reimbursement in the U.S. has been affected by the following legislative developments:
Significant Legislative Impacts on U.S. Reimbursement
- •
- Under the Medicare Improvements for Patients and Providers Act of 2008 ("MIPPA"), for patients with Medicare coverage, all ESRD payments for
dialysis treatments are made under a single bundled payment rate which provides a fixed payment rate, ESRD prospective payment system ("ESRD PPS"), to encompass substantially all goods and services
provided during the dialysis treatment. MIPPA further created the ESRD quality incentive program ("QIP") which dictates that dialysis facilities that fail to achieve quality standards established by
CMS could have payments reduced by up to 2 percent.
- •
- MIPPA also includes a provision for an annual adjustment to the ESRD PPS base rate based on changes in the costs of a "market basket" of
certain health care items and services, less a productivity adjustment.
- •
- Additionally, as a result of the Budget Control Act of 2011 ("BCA") and subsequent activity in Congress, a $1.2 trillion sequester
(across-the-board spending cuts) in discretionary programs took effect on March 1, 2013 and is expected to continue through mid-2024. In particular, a 2% reduction to Medicare payments took
effect on April 1, 2013 and continues in force. Spending cuts pursuant to U.S. Sequestration have adversely affected and will continue to adversely affect our revenues, earnings and cash flows.
- •
- In 2014, as mandated by American Taxpayer Relief Act of 2012 ("ATRA"), CMS issued a final rule for the ESRD PPS, which phased in payment
reductions to account for changes in utilization of certain pharmaceuticals and biologicals that are included in the ESRD PPS, which were subsequently modified by Protecting Access to Medicare Act of
2014 ("PAMA"). These reductions will reduce our market basket inflation adjustment by (1.25%) in 2016 and 2017, and 1% in 2018.
- •
- On July 7, 2016, CMS issued a proposed rule that, if implemented, would modify certain payment policies, payment rates, and quality
provisions in the Physician Fee Schedule for calendar year 2017. The proposed rule includes material decreases in the reimbursement rates for many of the procedures performed routinely by Fresenius
Vascular Care. Fresenius Vascular Care and various other interested parties have asked CMS to reconsider the extent of the proposed reimbursement cuts based on various perceived errors in CMS's
methodologies for calculating the providers' healthcare delivery costs. CMS is expected to issue a final rule in November 2016. To the extent the rule is implemented as proposed these reimbursement
cuts may have a material adverse impact on our revenues, earnings and cash flows.
Significant Administrative Impacts on U.S. Reimbursement
On November 6, 2015, CMS published a final rule to update payment policies and rates under the ESRD PPS for renal dialysis services
furnished on or after January 1, 2016. In this final rule, CMS clarified that once a non-oral version of a previously oral-only drug, such as phosphate binders and calcimimetics, is approved by
the Food and Drug Administration ("FDA"), such drug will cease to be considered oral-only. At such time, CMS will commence a process to issue billing codes so that both the oral and non-oral versions
of the drug are billable under Part B for a period of at least two years using a transition drug add-on payment adjustment such as average sales price plus 6%, or some other mechanism set in
accordance with Section 1847A of the Social Security Act. During this transition period, CMS will not pay outlier payments for these drugs, but will collect data reflecting utilization of both
the oral and injectable or intravenous forms of the drugs, as well as payment patterns, in order to more accurately determine the
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FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
appropriate
payment rate to be included in the ESRD PPS for these drugs. At the end of this transition period, CMS will add payment for the oral and non-oral versions of the drug into the ESRD PPS
through a public rulemaking process similar to that used to set annual ESRD PPS rates. Any failure by CMS to provide adequate additional reimbursement for new drugs or other products that are added to
the ESRD PPS could have a material adverse effect on our health care services business and results of operations.
Recent CMS ESRD PPS Payment Rates
On November 6, 2015, CMS published the final ruling regarding the ESRD PPS rate for 2016. We and other large dialysis organizations will
experience a 0.2% increase in payments. The base rate per treatment is $230.39, which represents an approximate reduction of 4%, net, from the 2015 base rate. The 2016 final ruling reflects a net
market basket increase of 0.15% (2% less 1.25% PAMA reduction and 0.6% productivity adjustment), application of a wage index budget-neutrality adjustment factor of 1.000495 and application of a
refinement budget-neutrality adjustment factor of 0.960319. However, the approximate 4% reduction is almost completely offset with CMS proposed case mix adjustments based upon their analysis of the
fiscal years 2012 and 2013.
On
June 30, 2016, CMS published a proposed ruling regarding the ESRD PPS rate for 2017. We and other large dialysis organizations will experience a 0.3% increase in payments as
compared to the ESRD PPS rate for 2016. The proposed base rate per treatment is $231.04, which reflects a reduced market basket increase of 0.35%, application of a wage index budget neutrality
adjustment factor of 1.0004482 and application of budget-neutrality adjustment factors of 0.999552 and 0.999729. This proposed rule also includes potential changes to the 2019 and 2020 ESRD QIP
measures.
Reimbursement Expectation
As a consequence of the pressure to decrease health care costs, government reimbursement rate increases in the U.S. have historically been
limited and are expected to continue in this fashion. We have generally experienced stable reimbursement globally, including the balancing of unfavorable reimbursement changes in certain countries
with favorable changes in other countries. In the future, we expect to experience generally stable reimbursements for dialysis services globally. However, any significant decreases in Medicare or
commercial reimbursement rates or patient access to commercial insurance plans could have material adverse effects on our health care services business and, because the demand for dialysis products is
affected by Medicare reimbursement, on our products business. To the extent that increases in operating costs that are affected by inflation, such as labor and supply costs, are not fully reflected in
a compensating increase in reimbursement rates, our business and results of operations may be adversely affected.
Participation in new Medicare Payment Arrangements
CMS is working with various health care providers to develop, refine and implement innovative models of care for Medicare and Medicaid
beneficiaries. The extent to which the long-term operation and evolution of these care models, including Accountable Care Organizations, Bundled Payments for Care Improvement Initiative, the
Comprehensive ESRD Care Model ("CEC Model"), which includes the development of ESRD Seamless Care Organizations ("ESCOs") and other models, will impact the health care market over time is uncertain.
Our U.S. health care services businesses may choose to participate in certain of these models in certain markets either as a partner with other providers or independently. As existing and new models
of care emerge and evolve both in the government and private sectors, patients
5
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FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
may
choose to be treated by or may be assigned by CMS or other insurers to another provider's care organization, which could have a materially adverse effect on our revenues, earnings and cash flow.
As discussed below, we are currently participating in certain of these models.
We
participate in CMS's CEC Model, through ESCOs in six markets. The CEC Model seeks to deliver better health outcomes for ESRD patients while lowering Medicare's costs. ESCOs that
achieve the program's minimum quality thresholds and generate reductions in CMS's cost of care above certain thresholds for the ESRD patients covered by the ESCO will receive a share of the cost
savings. Our ESCOs also share the risk of cost increases above certain thresholds and are required to reimburse CMS for a share of any such increases. The CEC Model commenced on October 1,
2015, and the initial agreement period lasts three years. Thereafter, CMS may offer to extend an ESCO's agreement for an additional two years based on the ESCO's performance. CMS is expanding the CEC
Model in 2017 and has requested applications for new ESCOs that would start on January 1, 2017. The Company has applied and is waiting public announcement from CMS of the new ESCO markets.
The
Bundled Payments for Care Improvement ("BPCI") initiative is a CMS three-year pilot initiative through which qualified provider organizations can take financial accountability for
all Part A and Part B services, including acute inpatient hospital services, physician services, and post-acute services, furnished to Medicare beneficiaries during an episode of illness
or course of treatment that initiates with a hospitalization and continues for 90 days following hospital discharge. Our majority-owned subsidiary, Sound Inpatient Physicians, Inc.
("Sound") commenced participation under BPCI in April 2015 in several markets. Under the BPCI, Sound has the ability to receive additional payments if its physicians are able to deliver quality care
at a cost that is lower than certain targets pre-established by CMS, but it also has the risk of incurring financial penalties if episode of care costs are higher than the targets. Should Sound fail
to perform as required under its BPCI agreement, CMS may terminate Sound's participation in the BPCI program, in whole or in part.
We
have entered into various arrangements with both government and private sector health care insurers which involve taking risk for the complete care of certain ESRD patients in
exchange for set payments. We are currently operating Medicare Advantage ESRD Chronic Special Needs Plan ("MA-CSNP") in three states and will launch on January 1, 2017 new MA-SNPs in two
additional
states. MA-CSNPs are Medicare Advantage health plans offered by private companies that contract with Medicare to provide patients with Medicare benefits. Enrollment in these plans is limited to
special needs individuals with specific severe or disabling chronic conditions, such as ESRD. Our MA-CSNPs provide services, including Care Coordination services, and receive capitated payments from
Medicare for the complete care of enrolled ESRD patients. On April 4, 2016, CMS finalized the 2017 payments for Medicare Advantage plans and the Part D Prescription Drug Program. CMS
expects a revenue change of 0.85% without consideration for expected growth in coding acuity which typically provides an additional 2.2%.
We
also participate in sub-capitation and other shared savings and risk arrangements with certain Medicare Advantage plans, accountable care organizations and other integrated care
organizations under which we assume risk and share in savings realized in providing care to the plans' ESRD patients.
Premium Assistance Programs
On August 18, 2016, CMS issued a Request for Information ("RFI") seeking public comment on concerns about providers' steering patients
inappropriately to individual plans offered on the Patient Protection and Affordable Care Act individual market plans. We and other dialysis providers, commercial
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FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
insurers
and other industry participants responded to the RFI, and in that response, we reported that we do not engage in such steering. In the RFI, CMS sought public comments about regulatory changes
that, if adopted by CMS, may negatively impact the ability of some of Company's patients to receive charitable assistance to fund their commercial insurance premiums.
Company Structure
Our operating segments are the North America Segment, the Europe, Middle East and Africa ("EMEA") Segment, the Asia-Pacific Segment and the
Latin America Segment. Our management evaluates each segment using measures that reflect all of the segment's controllable revenues and expenses. With respect to the performance of business
operations, our management believes that the most appropriate U.S. GAAP measures are revenue, operating income and operating income margin. We do not include income taxes as we believe this is
outside the segments' control. Financing is a corporate function which our segments do not control. Therefore, we do not include interest expense relating to financing as a segment measurement.
Similarly, we do not allocate certain costs which relate primarily to certain headquarters' overhead charges, including accounting and finance, because we believe that these costs are also not within
the control of the individual segments.
Production of products, production asset management, quality management and procurement related to production are centrally managed at Corporate. The Company's global research and development is also
centrally managed at Corporate. These Corporate activities do not fulfill the definition of a segment. Products are transferred to the segments at cost; therefore no internal profit is generated. The
associated internal revenues for the product transfers and their elimination are recorded as Corporate activities (See Note 14 of the Notes to Consolidated Financial Statements (unaudited)
"Segment and Corporate Information" found elsewhere in this report). Capital expenditures for production are based on the expected demand of the segments and consolidated profitability considerations.
In addition, certain revenues, investments and intangible assets, as well as any related expenses, are not allocated to a segment but accounted for at Corporate. Accordingly, all of these items are
excluded from our analysis of segment results and are discussed below in our consolidated results of operations.
7
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FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Results of Operations
The following tables summarize our financial performance and certain operating results by principal reporting segment and Corporate for the
periods indicated. We prepared the information using a management approach, consistent with the basis and manner in which our management internally disaggregates financial information to assist in
making internal operating decisions and evaluating management performance. See the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended September 30, |
|
For the nine months
ended September 30, |
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
(in millions)
|
|
(in millions)
|
|
| Total revenue(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
$ |
3,300 |
|
$ |
3,013 |
|
$ |
9,512 |
|
$ |
8,730 |
|
EMEA |
|
|
675 |
|
|
659 |
|
|
1,982 |
|
|
1,956 |
|
Asia-Pacific |
|
|
427 |
|
|
378 |
|
|
1,198 |
|
|
1,107 |
|
Latin America |
|
|
192 |
|
|
176 |
|
|
520 |
|
|
576 |
|
Corporate |
|
|
4 |
|
|
5 |
|
|
12 |
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
4,598 |
|
|
4,231 |
|
|
13,224 |
|
|
12,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
536 |
|
|
515 |
|
|
1,486 |
|
|
1,284 |
|
EMEA |
|
|
125 |
|
|
130 |
|
|
395 |
|
|
405 |
|
Asia-Pacific |
|
|
85 |
|
|
68 |
|
|
225 |
|
|
219 |
|
Latin America |
|
|
20 |
|
|
(8 |
) |
|
47 |
|
|
25 |
|
Corporate |
|
|
(96 |
) |
|
(91 |
) |
|
(302 |
) |
|
(268 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
670 |
|
|
614 |
|
|
1,851 |
|
|
1,665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest income |
|
|
10 |
|
|
6 |
|
|
38 |
|
|
80 |
|
| Interest expense |
|
|
(110 |
) |
|
(106 |
) |
|
(346 |
) |
|
(384 |
) |
| Income tax expense |
|
|
(164 |
) |
|
(168 |
) |
|
(471 |
) |
|
(441 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Income |
|
|
406 |
|
|
346 |
|
|
1,072 |
|
|
920 |
|
| Less: Net Income attributable to noncontrolling interests |
|
|
(73 |
) |
|
(84 |
) |
|
(217 |
) |
|
(207 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Income attributable to shareholders of FMC-AG & Co. KGaA |
|
$ |
333 |
|
$ |
262 |
|
$ |
855 |
|
$ |
713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net of patient service bad debt provision
8
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FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Three months ended September 30, 2016 compared to three months ended September 30, 2015
Consolidated Financials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Key Indicators for Consolidated Financial Statements |
|
|
|
For the three months ended
September 30, |
|
Change in % |
|
|
|
as
reported |
|
at Constant
Exchange
Rates(1) |
|
|
|
2016 |
|
2015 |
|
Revenue in $ million(2) |
|
|
4,598 |
|
|
4,231 |
|
|
9% |
|
|
9% |
|
Health Care(2) |
|
|
3,734 |
|
|
3,402 |
|
|
10% |
|
|
10% |
|
Dialysis Products |
|
|
864 |
|
|
829 |
|
|
4% |
|
|
5% |
|
Number of dialysis treatments |
|
|
11,833,493 |
|
|
11,312,347 |
|
|
5% |
|
|
|
|
Same market treatment growth in % |
|
|
3.0% |
|
|
4.5% |
|
|
|
|
|
|
|
Gross profit as a % of revenue |
|
|
32.0% |
|
|
32.7% |
|
|
|
|
|
|
|
Selling, general and administrative costs as a % of revenue |
|
|
17.1% |
|
|
17.5% |
|
|
|
|
|
|
|
Operating income in $ million |
|
|
670 |
|
|
614 |
|
|
9% |
|
|
|
|
Operating income margin in % |
|
|
14.6% |
|
|
14.5% |
|
|
|
|
|
|
|
Delivered EBIT in $ million(3) |
|
|
597 |
|
|
530 |
|
|
13% |
|
|
|
|
Net income attributable to shareholders of FMC-AG & Co. KGaA in $ million |
|
|
333 |
|
|
262 |
|
|
27% |
|
|
|
|
Basic earnings per share in $ |
|
|
1.09 |
|
|
0.86 |
|
|
26% |
|
|
|
|
(1) For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for Presentation – Constant Currency" below.
(2) Net of patient service bad debt provision.
(3) For further information on Delivered EBIT, including a reconciliation of Delivered EBIT to Operating Income for each
our reporting segments, see "Non-U.S. GAAP Measures for Presentation – Delivered EBIT" below.
Total Revenue increased by 9% (9% increase at Constant Exchange Rates) to $4,598 million for the three months ended September 30,
2016 from $4,231 million in the same period of 2015 due to increases in Health Care revenue and dialysis product revenue.
Health
Care revenue increased by 10% to $3,734 million (10% increase at Constant Exchange Rates) for the three months ended September 30, 2016 from $3,402 million in
the same period of 2015, mainly due to increases in organic revenue per treatment (5%), growth in same market treatments (3%) and contributions from acquisitions (2%).
Dialysis
treatments increased by 5% for the three months ended September 30, 2016 as compared to the same period in 2015. The increase is due to same market treatment growth (3%)
and contributions from acquisitions (2%).
9
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
At
September 30, 2016, we owned, operated or managed (excluding those managed but not consolidated in the U.S.) 3,579 dialysis clinics compared to 3,402 dialysis clinics at
September 30, 2015. During the three months ended September 30, 2016, we acquired 57 dialysis clinics, opened 31 dialysis clinics and combined or closed 13 clinics. The number of
patients treated in dialysis clinics that we own, operate or manage (excluding patients of dialysis clinics managed but not consolidated in the U.S.) increased by 5% to 306,366 at September 30,
2016 from 291,229 at September 30, 2015.
Dialysis
product revenue increased by 4% (5% increase at Constant Exchange Rates) to $864 million as compared to $829 million in the same period of 2015. The increase at
Constant Exchange Rates was driven by increased sales of machines, dialyzers, products for acute care treatments, bloodlines as well as hemodialysis solutions and concentrates, partially offset by
lower sales of renal pharmaceuticals.
The
decrease in gross profit margin to 32.0% from 32.7% primarily reflects decreases in the North America Segment and the EMEA Segment. The decrease in the North America Segment was
mainly due to an unfavorable impact from Care Coordination services and higher personnel expense related to dialysis services, partially offset by lower costs for health care supplies and a favorable
impact from a higher volume of dialysis treatments with commercial payors. The decrease in the EMEA Segment was driven by an unfavorable impact from manufacturing costs and an unfavorable impact from
foreign exchange.
Selling,
general and administrative ("SG&A") expenses increased to $787 million in the three months ended September 30, 2016 from $742 million in the same period of
2015. SG&A expenses as a percentage of sales decreased to 17.1% for the three months ended September 30, 2016 in comparison with 17.5% in the same period of 2015 due to decreases in the Latin
America Segment and a favorable impact of varying margins across our four reporting segments, partially offset by an increase in the North America Segment. The decrease in the Latin America Segment
was mainly due to the prior year loss related the divestment of the dialysis service business in Venezuela and the impact from higher revenue in the region, partially offset by unfavorable foreign
exchange effects. The increase in the North America Segment was attributable to a cost impact related to the vesting of long term incentive plan grants, an unfavorable impact from Care Coordination
services and higher personnel expense, partially offset by lower legal expenses.
Research
and development ("R&D") expenses increased by 26% to $44 million for the three months ended September 30, 2016 from $35 million for the same period of 2015
driven by higher personnel expense.
Income
from equity method investees increased to $29 million for the three months ended September 30, 2016 from $9 million for the same period of 2015. This increase
is primarily related to higher income
from the Vifor Fresenius Medical Care Renal Pharma Ltd. joint venture due to increased revenue resulting from the expansion of its product portfolio.
Operating
income increased to $670 million for the three months ended September 30, 2016 from $614 million for the same period in 2015. Operating income margin
increased to 14.6% for the three months ended September 30, 2016 as compared to 14.5% for the same period in 2015 as a result of decreased SG&A as a percentage of revenue and increased income
from equity method investees, partially offset by decreased gross profit margin.
Delivered
EBIT increased to $597 million for the three months ended September 30, 2016 from $530 million for the same period in 2015 as a result of increased
operating income, coupled with decreased noncontrolling interests due to a change in how the effects of CMS cost recoveries are recognized in our
10
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
joint
ventures involving dialysis clinics and decreased noncontrolling interest expense related to Care Coordination.
Interest
expense increased by 4% to $110 million for the three months ended September 30, 2016 from $106 million for the same period in 2015 due to the higher impact
of the valuation of the embedded derivative related to the equity-neutral convertible bonds issued in September 2014 and the related call option on our shares. Interest income increased by 52% to
$10 million for the three months ended September 30, 2016 as compared to $6 million for the same period in 2015 due to the higher impact of the valuation of the derivative
embedded in the convertible debt and the related call option on our shares as well as interest income related to delayed payments, partially offset by lower interest income due to the repayment of
interest bearing notes receivables in the fourth quarter of 2015.
Income
tax expense decreased to $164 million for the three months ended September 30, 2016 as compared to $168 million for the same period in 2015. The effective tax
rate decreased to 28.8% from 32.8% for the same period of 2015 mainly driven by lower tax expense as a result of released tax liabilities in the third quarter of 2016 due to tax audit settlements with
the tax authorities and a favorable impact from the prior year non-tax deductible loss from the divestment of our dialysis service business in Venezuela, partially offset by a lower portion of
tax-free income attributable to noncontrolling interests compared to income before taxes.
Net
income attributable to noncontrolling interests for the three months ended September 30, 2016 decreased to $73 million from $84 million for the same period of
2015 primarily driven by a change in how the effects of CMS cost recoveries are recognized in our joint ventures involving dialysis clinics and decreased noncontrolling interest expense related to
Care Coordination.
Net
income attributable to shareholders of FMC-AG & Co. KGaA for the three months ended September 30, 2016 increased by 27% to $333 million from
$262 million for the same period in 2015 as a result of the combined effects of the items discussed above. Excluding the 2015 impacts of (i) the after
tax loss, $26.9 million, from the divestment of our dialysis service business in Venezuela and (ii) the realized portion of the after tax gain, $4.8 million, from the sale of our
European marketing rights for certain renal pharmaceuticals to our joint venture, Vifor Fresenius Medical Care Renal Pharma, net income attributable to FMC KGaA increased by 17%.
Basic
earnings per share increased by 26% for the three months ended September 30, 2016 to $1.09 as compared with $0.86 for the same period in 2015 primarily due to the increase
in net income attributable to shareholders of FMC-AG & Co. KGaA described above. The average weighted number of shares outstanding for the period was approximately 306.0 million
in 2016 (304.7 million in 2015).
We
employed 108,851 people (full-time equivalents) as of September 30, 2016 compared to 102,591 as of September 30, 2015, an increase of 6%, primarily due to overall growth
in our business.
The
following discussions pertain to the North America Segment, the EMEA Segment, the Asia-Pacific Segment and the Latin America Segment and the measures we use to manage these segments.
11
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
North America Segment
|
|
|
|
|
|
|
|
|
|
|
| Key Indicators and Business Metrics for North America Segment |
|
|
|
For the three months ended
September 30, |
|
|
|
|
|
2016 |
|
2015 |
|
Change in % |
|
Total North America Segment |
|
|
|
|
|
|
|
|
|
|
| Revenue in $ million(1) |
|
|
3,300 |
|
|
3,013 |
|
|
10% |
|
Health Care(1) |
|
|
3,068 |
|
|
2,794 |
|
|
10% |
|
Dialysis Products |
|
|
232 |
|
|
219 |
|
|
7% |
|
| Operating income in $ million |
|
|
536 |
|
|
515 |
|
|
4% |
|
| Operating income margin in % |
|
|
16.2% |
|
|
17.1% |
|
|
|
|
| Delivered EBIT in $ million(2) |
|
|
466 |
|
|
435 |
|
|
7% |
|
Dialysis |
|
|
|
|
|
|
|
|
|
|
| Revenue in $ million(1) |
|
|
2,682 |
|
|
2,533 |
|
|
6% |
|
| Number of dialysis treatments |
|
|
7,330,325 |
|
|
7,058,960 |
|
|
4% |
|
| Same market treatment growth in % |
|
|
2.7% |
|
|
4.3% |
|
|
|
|
| Operating income in $ million |
|
|
505 |
|
|
482 |
|
|
5% |
|
| Operating income margin in % |
|
|
18.8% |
|
|
19.1% |
|
|
|
|
| Delivered EBIT in $ million(2) |
|
|
440 |
|
|
413 |
|
|
7% |
|
Care Coordination |
|
|
|
|
|
|
|
|
|
|
| Revenue in $ million(1) |
|
|
618 |
|
|
480 |
|
|
29% |
|
| Operating income in $ million |
|
|
31 |
|
|
33 |
|
|
(5% |
) |
| Operating income margin in % |
|
|
5.0% |
|
|
6.8% |
|
|
|
|
| Delivered EBIT in $ million(2) |
|
|
26 |
|
|
22 |
|
|
16% |
|
| Member Months Under Medical Cost Management(3)(4) |
|
|
97,197 |
|
|
67,275 |
|
|
44% |
|
| Medical Cost Under Management in $ million(3)(4) |
|
|
718 |
|
|
502 |
|
|
43% |
|
| Care Coordination Patient Encounters(3)(4) |
|
|
1,411,251 |
|
|
1,232,632 |
|
|
14% |
|
(1) Net of patient service bad debt provision.
(2) For further information on Delivered EBIT, including a reconciliation of Delivered EBIT to Operating Income for each
our reporting segments, see "Non-U.S. GAAP Measures for Presentation – Delivered EBIT" below.
(3) For further information on these metrics, please refer to the discussion below of our Care Coordination measures
under "Care Coordination Business Metrics for Presentation."
(4) The 2016 metric may be understated due to a physician mapping issue related to the BPCI program within a CMS system
which has not yet been resolved. Additionally, data presented for the metrics are subject to finalization by CMS, which may result in changes from previously reported metrics.
Dialysis
Revenue
Dialysis revenue increased for the three months ended September 30, 2016 by 6% to $2,682 million from $2,533 million in the
same period of 2015.
Dialysis
care revenue increased for the three months ended September 30, 2016 by 6% to $2,450 million from $2,314 million in the same period of 2015. This increase
was driven by same market treatment growth (3%), increases in organic revenue per treatment (1%), contributions from acquisitions (1%) and a reduction of bad debt (1%).
12
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Dialysis treatments increased by 4% for the three months ended September 30, 2016 as compared to the same period in 2015 primarily due to same market
treatment growth (3%) and contributions from acquisitions (1%). At September 30, 2016, 187,611 patients (a 4% increase from September 30, 2015) were being treated in the 2,277 dialysis
clinics that we own or operate in the North America Segment, compared to 181,230 patients treated in 2,205 dialysis clinics at September 30, 2015.
In
the U.S., the average revenue per treatment was $350 for the three months ended September 30, 2016 and $347 for the same period in 2015. The increase was mainly attributable to
a favorable impact from a higher volume of dialysis treatments with commercial payors.
Cost
per treatment in the U.S. increased to $278 for the three months ended September 30, 2016 from $273 in the same period of 2015. This increase was largely driven by higher
personnel expense and administrative costs, partially offset by a favorable impact from lower cost for health care supplies.
Dialysis
product revenue increased by 7% to $232 million for the three months ended September 30, 2016 as compared to $219 million in the same period in 2015. This
was driven by higher sales of machines, dialyzers, renal pharmaceuticals and peritoneal dialysis products.
Operating Income
Dialysis operating income increased to $505 million for the three months ended September 30, 2016 as compared to
$482 million in the same period in 2015. Operating income margin decreased to 18.8% for the three months ended September 30, 2016 from 19.1% for the same period in 2015, due to higher
personnel expense and a cost impact related to the vesting of long term incentive plan grants, partially offset by lower costs from health care supplies, a higher volume with commercial payors and
increased income from equity method investees.
Delivered EBIT
Dialysis delivered EBIT increased by 7% to $440 million for the three months ended September 30, 2016 from $413 million for
the same period of 2015 mainly as the result of increased operating income coupled with decreased noncontrolling interests due to a change in how the effects of CMS cost recoveries are recognized in
our joint ventures involving dialysis clinics.
Care Coordination
Revenue
Care Coordination revenue increased by 29% to $618 million for the three months ended September 30, 2016 from $480 million
for the same period of 2015. This increase was driven by increases in organic revenue growth (24%), contributions from acquisitions (4%) and effects of bad debt (1%).
13
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Operating Income
Care Coordination operating income decreased to $31 million for the three months ended September 30, 2016 from $33 million
for the same period of 2015. The operating income margin decreased to 5.0% for the three months ended September 30, 2016 from 6.8% mainly driven by increased costs for hospitalist and
intensivist services due to infrastructure development and an unfavorable impact from endovascular and cardiovascular services, partially offset by ESCO shared savings revenue recognition.
Delivered EBIT
Care Coordination delivered EBIT increased to $26 million for the three months ended September 30, 2016 from $22 million
for the same period of 2015 mainly as the result of decreased noncontrolling interests effects, partially offset by decreased operating income.
Member Months Under Medical Cost Management
Care Coordination's member months under medical cost management for the three months ended September 30, 2016 was 97,197 months as
compared to 67,275 months for the same period of 2015. The increase in membership volume was largely due to furthered enrollment in our ESCOs coupled with the ESCOs initial inclusion in the
fourth quarter of 2015 as well as growth in our sub-capitation and other shared savings arrangements and the continued contribution from MA-CSNPs which commenced in the first quarter of 2016,
partially offset by a decrease in member months related to BPCI. See note 4 to the table "Key Indicators and Business Metrics for North America Segment," above.
Medical Cost Under Management
Care Coordination's medical cost under management for the three months ended September 30, 2016 was $718 million as compared to
$502 million for the same period of 2015. The increase in medical cost under management was attributable to the furthered enrollment in our ESCOs coupled with the ESCOs initial inclusion in the
fourth quarter of 2015 as well as growth in our sub-capitation and other shared savings arrangements and the continued contribution from MA-CSNPs which commenced in the first quarter of 2016,
partially offset by the decrease in BPCI member months noted above. See note 4 to the table "Key Indicators and Business Metrics for North America Segment," above.
Care Coordination Patient Encounters
Care Coordination's patient encounters for the three months ended September 30, 2016 were 1,411,251 encounters and procedures as compared
to 1,232,632 encounters and procedures for the three months ended September 30, 2015. The increase was driven by patient encounters and procedures provided by hospitalist and intensivist
services, Fresenius Medical Care Rx Bone Mineral Metabolism ("Rx BMM") program, urgent care centers, vascular procedures as well as cardiovascular and endovascular services. See note 4 to the
table "Key Indicators and Business Metrics for North America Segment," above.
14
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
New Care Coordination Activities
In the second quarter of 2016, we expanded our Care Coordination activities with an investment in a physician practice which provides a
professional fee capitation program for cardiology services. We will incorporate this new activity into our Care Coordination business metrics in the fourth quarter of 2016.
EMEA Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Key Indicators for EMEA Segment |
|
|
|
For the three months ended
September 30, |
|
Change in % |
|
|
|
as
reported |
|
at Constant
Exchange
Rates(1) |
|
|
|
2016 |
|
2015 |
|
| Revenue in $ million(2) |
|
|
675 |
|
|
659 |
|
|
2% |
|
|
4% |
|
Health Care(2) |
|
|
335 |
|
|
309 |
|
|
8% |
|
|
10% |
|
Dialysis Products |
|
|
340 |
|
|
350 |
|
|
(3% |
) |
|
(1% |
) |
Number of dialysis treatments |
|
|
2,281,346 |
|
|
2,086,793 |
|
|
9% |
|
|
|
|
Same market treatment growth in % |
|
|
3.8% |
|
|
3.9% |
|
|
|
|
|
|
|
Operating income in $ million |
|
|
125 |
|
|
130 |
|
|
(4% |
) |
|
|
|
Operating income margin in % |
|
|
18.5% |
|
|
19.7% |
|
|
|
|
|
|
|
Delivered EBIT in $ million(3) |
|
|
124 |
|
|
129 |
|
|
(4% |
) |
|
|
|
(1) For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for Presentation – Constant Currency" below.
(2) Net of patient service bad debt provision.
(3) For further information on Delivered EBIT, including a reconciliation of Delivered EBIT to Operating Income for each
our reporting segments, see "Non-U.S. GAAP Measures for Presentation – Delivered EBIT" below.
Revenue
Total revenue for the EMEA Segment increased by 2% (4% increase at Constant Exchange Rates) to $675 million for the three months ended
September 30, 2016 as compared to $659 million for the same period of 2015. Health care service revenue for the EMEA Segment increased by 8% (10% increase at Constant Exchange Rates) to
$335 million during the three months ended September 30, 2016 as compared to $309 million for the same period of 2015. This is a result of contributions from acquisitions (8%) and
same market treatment growth (4%), partially offset by the negative effect of exchange rate fluctuations (2%), decreases in organic revenue growth per treatment (1%) and the effect of closed or sold
clinics (1%). Dialysis treatments increased by 9% for the three months ended September 30, 2016 over the same period in 2015 mainly due to contributions from acquisitions (6%) and same market
treatment growth (4%), partially offset by the effect of closed or sold clinics (1%). As of September 30, 2016, we had 59,233 patients (10% increase from September 30, 2015) being
treated at the 701 dialysis clinics that we own, operate or manage in the EMEA Segment compared to 53,887 patients treated at 648 clinics at September 30, 2015.
15
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Dialysis
product revenue for the three months ended September 30, 2016 decreased by 3% (1% decrease at Constant Exchange Rates) to $340 million as compared to
$350 million in the same period of 2015. The decrease at Constant Exchange Rates was driven by lower sales of renal pharmaceuticals, dialyzers, and peritoneal dialysis products, partially
offset by higher sales of machines and bloodlines.
Operating Income
Operating income decreased to $125 million for the three months ended September 30, 2016 as compared to $130 million for
the same period in 2015. Operating income margin decreased to 18.5% for the three months ended September 30, 2016 from 19.7% for the same period in 2015 mainly due to the prior year impact from
a gain from the sale of our European marketing rights for certain renal pharmaceuticals, an unfavorable impact from manufacturing costs and higher bad debt expense, partially offset by favorable
foreign exchange effects.
Delivered EBIT
Delivered EBIT decreased by 4% to $124 million for the three months ended September 30, 2016 as compared to $129 million
for the same period in 2015 due to decreased operating income, partially offset by increased noncontrolling interests.
Asia-Pacific Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Key Indicators for Asia-Pacific Segment |
|
|
|
For the three months ended
September 30, |
|
Change in % |
|
|
|
as
reported |
|
at Constant
Exchange
Rates(1) |
|
|
|
2016 |
|
2015 |
|
| Revenue in $ million(2) |
|
|
427 |
|
|
378 |
|
|
13% |
|
|
8% |
|
Health Care(2) |
|
|
192 |
|
|
168 |
|
|
15% |
|
|
3% |
|
Dialysis Products |
|
|
235 |
|
|
210 |
|
|
11% |
|
|
12% |
|
Number of dialysis treatments |
|
|
1,006,992 |
|
|
960,924 |
|
|
5% |
|
|
|
|
Same market treatment growth in % |
|
|
4.3% |
|
|
4.2% |
|
|
|
|
|
|
|
Operating income in $ million |
|
|
85 |
|
|
68 |
|
|
25% |
|
|
|
|
Operating income margin in % |
|
|
19.8% |
|
|
17.9% |
|
|
|
|
|
|
|
Delivered EBIT in $ million(3) |
|
|
83 |
|
|
65 |
|
|
27% |
|
|
|
|
(1) For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for Presentation – Constant Currency" below.
(2) Net of patient service bad debt provision.
(3) For further information on Delivered EBIT, including a reconciliation of Delivered EBIT to Operating Income for each
our reporting segments, see "Non-U.S. GAAP Measures for Presentation – Delivered EBIT" below.
16
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Revenue
Total revenue for the Asia-Pacific Segment increased by 13% (8% increase at Constant Exchange Rates) to $427 million for the three months
ended September 30, 2016 as compared to $378 million for the same period of 2015. Health care service revenue for the Asia-Pacific Segment increased during the three months ended
September 30, 2016 by 15% (3% increase at Constant Exchange Rates) to $192 million from $168 million in the same period of 2015. This increase is a result of the effect of
exchange rate fluctuations (12%) and same market treatment growth (4%), partially offset by the effect of closed or sold clinics (1%). Dialysis treatments increased by 5% for the three months ended
September 30, 2016 over the same period in 2015 mainly due to same market treatment growth (4%) and acquisitions (2%), partially offset by the effect of closed or sold clinics (1%). As of
September 30, 2016, we had 29,358 patients (a 13% increase from September 30, 2015) being treated at the 369 dialysis clinics that we own, operate or manage in the Asia-Pacific Segment
compared to 25,995 patients treated at 320 clinics at September 30, 2015.
Dialysis
product revenue for the three months ended September 30, 2016 increased by 11% (12% increase at Constant Exchange Rates) to $235 million compared to
$210 million in the same period of 2015. The increase at Constant Exchange Rates was driven by increased sales of products for acute care, machines, dialyzers, bloodlines, peritoneal dialysis
products and hemodialysis solutions and concentrates.
Operating Income
Operating income increased by 25% to $85 million for the three months ended September 30, 2016 as compared to $68 million
for the same period in 2015. Operating income margin increased to 19.8% for the three months ended September 30, 2016 compared to 17.9% in the same period of 2015 due to a positive impact from
business growth and favorable foreign exchange effects.
Delivered EBIT
Delivered EBIT increased by 27% to $83 million for the three months ended September 30, 2016 as compared to $65 million for
the same period in 2015 due to increased operating income.
17
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Latin America Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Key Indicators for Latin America Segment |
|
|
|
For the three months ended
September 30, |
|
Change in % |
|
|
|
as
reported |
|
at Constant
Exchange
Rates(1) |
|
|
|
2016 |
|
2015 |
|
| Revenue in $ million(2) |
|
|
192 |
|
|
176 |
|
|
9% |
|
|
27% |
|
Health Care(2) |
|
|
139 |
|
|
131 |
|
|
6% |
|
|
31% |
|
Dialysis Products |
|
|
53 |
|
|
45 |
|
|
19% |
|
|
18% |
|
Number of dialysis treatments |
|
|
1,214,830 |
|
|
1,205,670 |
|
|
1% |
|
|
|
|
Same market treatment growth in % |
|
|
2.0% |
|
|
7.2% |
|
|
|
|
|
|
|
Operating income in $ million |
|
|
20 |
|
|
(8 |
) |
|
Not applicable |
|
|
|
|
Operating income margin in % |
|
|
10.5% |
|
|
(4.7% |
) |
|
|
|
|
|
|
Delivered EBIT in $ million(3) |
|
|
20 |
|
|
(8 |
) |
|
Not applicable |
|
|
|
|
(1) For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for Presentation – Constant Currency" below.
(2) Net of patient service bad debt provision.
(3) For further information on Delivered EBIT, including a reconciliation of Delivered EBIT to Operating Income for each
our reporting segments, see "Non-U.S. GAAP Measures for Presentation – Delivered EBIT" below.
Revenue
Total revenue for the Latin America Segment increased by 9% (27% increase at Constant Exchange Rates) to $192 million for the three
months ended September 30, 2016 as compared to $176 million for the same period of 2015. Health care service revenue for the Latin America Segment increased by 6% (31% increase at
Constant Exchange Rates) during the three months ended September 30, 2016 to $139 million as compared to $131 million in the same period of 2015. This increase is a result of
increases in organic revenue per treatment primarily driven by a retrospective reimbursement rate increase (30%), contributions from acquisitions (3%) and growth in same market treatments (2%),
partially offset by the negative effect of exchange rate fluctuations (25%) and the effect of closed or sold clinics (4%). Dialysis treatments increased by 1% for the three months ended
September 30, 2016 over the same period in 2015 mainly due to contributions from acquisitions (3%) and same market treatment growth (2%), partially offset by the effect of closed or sold
clinics (4%). As of September 30, 2016, we had 30,164 patients being treated at the 232 dialysis clinics that we own, operate or manage in the Latin America Segment compared to 30,117 patients
treated at 229 clinics at September 30, 2015.
Dialysis
product revenue for the three months ended September 30, 2016 increased by 19% (18% increase at Constant Exchange Rates) to $53 million compared to
$45 million in the same period of 2015. The 18% increase at Constant Exchange Rates was mainly driven by higher sales of dialyzers, hemodialysis solutions and concentrates and bloodlines,
partially offset by lower sales of peritoneal dialysis products and machines.
18
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Operating Income
Operating income increased to $20 million for the three months ended September 30, 2016 as compared to $(8) million for the same
period in 2015. Operating income margin increased to 10.5% for the three months ended September 30, 2016 from (4.7%) for the same period in 2015 mainly due to the prior year loss from the
divestment of the dialysis service business in Venezuela and the impact from higher revenue in the region, partially offset by unfavorable foreign exchange effects and higher costs mainly related to
inflation.
Delivered EBIT
Delivered EBIT increased to $20 million for the three months ended September 30, 2016 as compared to $(8) million for the same
period in 2015 due to increased operating income.
Nine months ended September 30, 2016 compared to nine months ended September 30, 2015
Consolidated Financials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Key Indicators for Consolidated Financial Statements |
|
|
|
For the nine months ended
September 30, |
|
Change in % |
|
|
|
as
reported |
|
at Constant
Exchange
Rates(1) |
|
|
|
2016 |
|
2015 |
|
| Revenue in $ million(2) |
|
|
13,224 |
|
|
12,390 |
|
|
7% |
|
|
8% |
|
Health Care(2) |
|
|
10,720 |
|
|
9,929 |
|
|
8% |
|
|
9% |
|
Dialysis Products |
|
|
2,504 |
|
|
2,461 |
|
|
2% |
|
|
4% |
|
Number of dialysis treatments |
|
|
34,654,614 |
|
|
33,220,246 |
|
|
4% |
|
|
|
|
Same market treatment growth in % |
|
|
3.3% |
|
|
4.4% |
|
|
|
|
|
|
|
Gross profit as a % of revenue |
|
|
31.7% |
|
|
31.2% |
|
|
|
|
|
|
|
Selling, general and administrative costs as a % of revenue |
|
|
17.2% |
|
|
17.1% |
|
|
|
|
|
|
|
Operating income in $ million |
|
|
1,851 |
|
|
1,665 |
|
|
11% |
|
|
|
|
Operating income margin in % |
|
|
14.0% |
|
|
13.4% |
|
|
|
|
|
|
|
Delivered EBIT in $ million(3) |
|
|
1,634 |
|
|
1,458 |
|
|
12% |
|
|
|
|
Net income attributable to shareholders of FMC-AG & Co. KGaA in $ million |
|
|
855 |
|
|
713 |
|
|
20% |
|
|
|
|
Basic earnings per share in $ |
|
|
2.80 |
|
|
2.34 |
|
|
19% |
|
|
|
|
(1) For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for Presentation – Constant Currency" below.
(2) Net of patient service bad debt provision.
(3) For further information on Delivered EBIT, including a reconciliation of Delivered EBIT to Operating Income for each
our reporting segments, see "Non-U.S. GAAP Measures for Presentation – Delivered EBIT" below.
19
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Total Revenue increased by 7% (8% increase at Constant Exchange Rates) to $13,224 million for the nine months ended September 30,
2016 from $12,390 million in the same period of 2015 due to increases in Health Care revenue and dialysis product revenue.
Health
Care revenue increased by 8% to $10,720 million (9% increase at Constant Exchange Rates) for the nine months ended September 30, 2016 from $9,929 million in
the same period of 2015, mainly due to increases in organic revenue per treatment (4%), growth in same market treatments (3%),
contributions from acquisitions (2%) and an increase in dialysis days (1%), partially offset by the negative effect of exchange rate fluctuations (1%)and the effect of closed or sold clinics (1%).
Dialysis
treatments increased by 4% for the nine months ended September 30, 2016 as compared to the same period in 2015. The increase is due to same market treatment growth (3%)
and contributions from acquisitions (2%), partially offset by the effect of closed or sold clinics (1%).
Dialysis
product revenue increased by 2% (4% increase at Constant Exchange Rates) to $2,504 million as compared to $2,461 million in the same period of 2015. The increase
at Constant Exchange Rates was driven by increased sales of dialyzers, machines, bloodlines, products for acute care treatments, hemodialysis solutions and concentrates and peritoneal dialysis
products, partially offset by lower sales of renal pharmaceuticals.
The
increase in gross profit margin to 31.7% from 31.2% primarily reflects increases in the North America Segment and the Asia-Pacific Segment. The increase in the North America Segment
was mainly due to lower costs for health care supplies and a higher volume of dialysis treatments with commercial payors, partially offset by higher personnel expense related to dialysis services and
an unfavorable impact from Care Coordination services. The increase in the Asia-Pacific Segment was driven by business growth and favorable foreign exchange effects.
Selling,
general and administrative ("SG&A") expenses increased to $2,278 million in the nine months ended September 30, 2016 from $ 2,120 million in the same period
of 2015. SG&A expenses as a percentage of sales increased to 17.2% for the nine months ended September 30, 2016 in comparison with 17.1% in the same period of 2015 due to increases in the
Asia-Pacific Segment, Corporate and the EMEA Segment, partially offset by a decrease in the Latin America Segment and a favorable impact of varying margins across our four reporting segments. The
increase in the Asia-Pacific Segment was mainly due to increased costs related to further sales development, costs associated with changes in the Management Board and unfavorable foreign exchange
effects. The increase at Corporate was primarily driven by higher overhead costs for manufacturing. The increase in the EMEA Segment was driven by the prior year impact from a gain from the sale of
our European marketing rights for certain renal pharmaceuticals and higher bad debt expense, partially offset by the impact from higher sales. The decrease in the Latin America Segment was mainly due
to the prior year loss related to the divestment of the dialysis service business in Venezuela as well as the impact from higher sales, partially offset by higher costs related to inflation.
Research
and development ("R&D") expenses increased by 20% to $120 million for the nine months ended September 30, 2016 from $100 million for the same period of 2015
driven by higher personnel expense and project costs related to an expansion of our project portfolio.
Income
from equity method investees increased to $61 million for the nine months ended September 30, 2016 from $22 million for the same period of 2015. This increase
is primarily related to
20
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
higher
income from the Vifor Fresenius Medical Care Renal Pharma Ltd. joint venture due to increased revenue resulting from the expansion of its product portfolio.
Operating
income increased to $1,851 million for the nine months ended September 30, 2016 from $1,665 million for the same period in 2015. Operating income margin
increased to 14.0% for the nine months ended September 30, 2016 as compared to 13.4% for the same period in 2015 as a result of increased gross profit margin and income from equity method
investees, partially offset by an increase in SG&A as a percentage of revenue.
Delivered
EBIT increased to $1,634 million for the nine months ended September 30, 2016 from $1,458 million for the same period in 2015 as a result of increased
operating income, partially offset by increased noncontrolling interests driven by higher operating income of our joint ventures involving dialysis clinics.
Interest
expense decreased by 10% to $346 million for the nine months ended September 30, 2016 from $384 million for the same period in 2015 due to the lower impact
of the valuation of the embedded derivative related to the equity-neutral convertible bonds issued in September 2014 and the related call option on our shares as well as due to a reduction in our
overall debt level. Interest income decreased by 52% to $38 million for the nine months ended September 30, 2016 as compared to $80 million for the same period in 2015 due to the
lower impact of the valuation of the derivative embedded in the convertible debt and the related call option on our shares as well as the repayment of interest bearing notes receivables in the fourth
quarter of 2015.
Income
tax expense increased to $471 million for the nine months ended September 30, 2016 as compared to $441 million for the same period in 2015. The effective tax
rate decreased to 30.5% from 32.4% for the same period of 2015 mainly driven by lower tax expense as a result of released tax liabilities in the third quarter of 2016 due to tax audit settlements with
the tax authorities and a prior year impact from the non-tax deductible loss from the divestiture of our dialysis service business in Venezuela, partially offset by a lower portion of tax free income
attributable to noncontrolling interests compared to income before taxes.
Net
income attributable to noncontrolling interests for the nine months ended September 30, 2016 increased to $217 million from $207 million for the same period of
2015 primarily driven by higher operating income of joint ventures with dialysis clinics, partially offset by decreased noncontrolling interest expense related to Care Coordination, both in the North
America Segment.
Net
income attributable to shareholders of FMC-AG & Co. KGaA for the nine months ended September 30, 2016 increased by 20% to $855 million from
$713 million for the same period in 2015 as a result of the combined effects of the items discussed above. Excluding the impacts of (i) the 2015 after tax loss, $26.9 million,
from the divestiture of our dialysis service business in Venezuela and (ii) the 2015 realized portion of the after tax gain, $4.8 million, from the sale of our European marketing rights
for certain renal pharmaceuticals to our joint venture, Vifor Fresenius Medical Care Renal Pharma, net income attributable to FMC KGaA increased by 16%.
Basic
earnings per share increased by 19% for the nine months ended September 30, 2016 to $2.80 as compared with $2.34 for the same period in 2015 primarily due to the increase in
net income attributable to shareholders of FMC-AG & Co. KGaA described above. The average weighted number of shares outstanding for the period was approximately 305.6 million in
2016 (304.2 million in 2015).
21
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FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
The
following discussions pertain to the North America Segment, the EMEA Segment, the Asia-Pacific Segment and the Latin America Segment and the measures we use to manage these segments.
North America Segment
|
|
|
|
|
|
|
|
|
|
|
| Key Indicators and Business Metrics for North America Segment |
|
|
|
For the nine months
ended September 30, |
|
|
|
|
|
Change in % |
|
|
|
2016 |
|
2015 |
|
| Total North America Segment |
|
|
|
|
|
|
|
|
|
|
| Revenue in $ million(1) |
|
|
9,512 |
|
|
8,730 |
|
|
9% |
|
Health Care(1) |
|
|
8,838 |
|
|
8,087 |
|
|
9% |
|
Dialysis Products |
|
|
674 |
|
|
643 |
|
|
5% |
|
| Operating income in $ million |
|
|
1,486 |
|
|
1,284 |
|
|
16% |
|
| Operating income margin in % |
|
|
15.6% |
|
|
14.7% |
|
|
|
|
| Delivered EBIT in $ million(2) |
|
|
1,276 |
|
|
1,085 |
|
|
18% |
|
Dialysis |
|
|
|
|
|
|
|
|
|
|
| Revenue in $ million(1) |
|
|
7,808 |
|
|
7,348 |
|
|
6% |
|
| Number of dialysis treatments |
|
|
21,551,727 |
|
|
20,586,228 |
|
|
5% |
|
| Same market treatment growth in % |
|
|
3.2% |
|
|
4.1% |
|
|
|
|
| Operating income in $ million |
|
|
1,420 |
|
|
1,199 |
|
|
18% |
|
| Operating income margin in % |
|
|
18.2% |
|
|
16.3% |
|
|
|
|
| Delivered EBIT in $ million(2) |
|
|
1,232 |
|
|
1,033 |
|
|
19% |
|
Care Coordination |
|
|
|
|
|
|
|
|
|
|
| Revenue in $ million(1) |
|
|
1,704 |
|
|
1,382 |
|
|
23% |
|
| Operating income in $ million |
|
|
66 |
|
|
85 |
|
|
(22% |
) |
| Operating income margin in % |
|
|
3.9% |
|
|
6.1% |
|
|
|
|
| Delivered EBIT in $ million(2) |
|
|
44 |
|
|
52 |
|
|
(15% |
) |
| Member Months Under Medical Cost Management(3)(4) |
|
|
281,964 |
|
|
111,867 |
|
|
152% |
|
| Medical Cost Under Management in $ million(3)(4) |
|
|
2,036 |
|
|
965 |
|
|
111% |
|
| Care Coordination Patient Encounters(3)(4) |
|
|
4,057,022 |
|
|
3,774,936 |
|
|
7% |
|
(1) Net of patient service bad debt provision.
(2) For further information on Delivered EBIT, including a reconciliation of Delivered EBIT to Operating Income for each
our reporting segments, see "Non-U.S. GAAP Measures for Presentation – Delivered EBIT" below.
(3) For further information on these metrics, please refer to the discussion below of our Care Coordination measures
under "Care Coordination Business Metrics for Presentation."
(4) The 2016 metric may be understated due to a physician mapping issue related to the BPCI program within a CMS system
which has not yet been resolved. Additionally, data presented for the metrics are subject to finalization by CMS, which may result in changes from previously reported metrics.
22
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Dialysis
Revenue
Dialysis revenue increased for the nine months ended September 30, 2016 by 6% to $7,808 million from $7,348 million in the
same period of 2015.
Dialysis
care revenue increased for the nine months ended September 30, 2016 by 6% to $7,134 million from $6,705 million in the same period of 2015. This increase
was driven by same market treatment growth (3%), increases in organic revenue per treatment (2%), an increase in dialysis days (1%) and contributions from acquisitions (1%), partially offset by the
effect of closed or sold clinics (1%).
Dialysis
treatments increased by 5% for the nine months ended September 30, 2016 as compared to the same period in 2015 primarily due to same market treatment growth (3%), an
increase in dialysis days (1%) and contributions from acquisitions (1%).
In
the U.S., the average revenue per treatment was $350 for the nine months ended September 30, 2016 and $345 for the same period in 2015. The increase was mainly attributable to
a higher volume of dialysis treatments with commercial payors.
Cost
per treatment in the U.S. decreased to $281 for the nine months ended September 30, 2016 from $282 in the same period of 2015. This decrease was largely driven by a favorable
impact from lower cost for health care supplies, partially offset by higher personnel expense, rent expense and administration costs.
Dialysis
product revenue increased by 5% to $674 million for the nine months ended September 30, 2016 as compared to $643 million in the same period in 2015. This
was driven by higher sales of machines, dialyzers and peritoneal dialysis products, partially offset by lower sales of renal pharmaceuticals.
Operating Income
Dialysis operating income increased to $1,420 million for the nine months ended September 30, 2016 as compared to
$1,199 million in the same period in 2015. Operating income margin increased to 18.2% for the nine months ended September 30, 2016 from 16.3% for the same period in 2015, due to lower
costs from health care supplies, a higher volume with commercial payors, higher income from equity method investees and lower legal expenses, partially offset by higher personnel expense, and a cost
impact related to the vesting of long term incentive plan grants.
Delivered EBIT
Dialysis delivered EBIT increased by 19% to $1,232 million for the nine months ended September 30, 2016 from $1,033 million
for the same period of 2015 mainly as the result of increased operating income, partially offset by increased noncontrolling interests driven by higher operating income of our joint ventures involving
dialysis clinics.
23
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Care Coordination
Revenue
Care Coordination revenue increased by 23% to $1,704 million for the nine months ended September 30, 2016 from
$1,382 million for the same period of 2015. This increase was
driven by increases in organic revenue growth (19%), contributions from acquisitions (3%) and effects of bad debt (1%).
Operating Income
Care Coordination operating income decreased to $66 million for the nine months ended September 30, 2016 from $85 million
for the same period of 2015. The operating income margin decreased to 3.9% for the nine months ended September 30, 2016 from 6.1% mainly driven by increased costs for hospitalist and
intensivist services as well as physician practice services due to infrastructure development, partially offset by increased sales of pharmacy services.
Delivered EBIT
Care Coordination delivered EBIT decreased to $44 million for the nine months ended September 30, 2016 from $52 million for
the same period of 2015 mainly as the result of decreased operating income partially offset by decreased noncontrolling interests effects.
Member Months Under Medical Cost Management
Care Coordination's member months under medical cost management for the nine months ended September 30, 2016 was 281,964 months as
compared to 111,867 months for the same period of 2015. The increase in membership volume was largely attributable to BPCI development, furthered enrollment in our ESCOs coupled with the ESCOs
initial inclusion in the fourth quarter of 2015, growth in sub-capitation and our other shared savings arrangements as well as the continued contribution from MA-CSNPs which commenced in the first
quarter of 2016. See note 4 to the table "Key Indicators and Business Metrics for North America Segment," above.
Medical Cost Under Management
Care Coordination's medical cost under management for the nine months ended September 30, 2016 was $2,036 million as compared to
$965 million for the same period of 2015. The increase in medical cost under management was largely attributable to BPCI development, furthered enrollment in our ESCOs coupled with the ESCOs
initial inclusion in the fourth quarter of 2015, growth in sub-capitation and our other shared savings arrangements as well as the continued
contribution from MA-CSNPs which commenced in the first quarter of 2016. See note 4 to the table "Key Indicators and Business Metrics for North America Segment," above.
24
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Care Coordination Patient Encounters
Care Coordination's patient encounters for the nine months ended September 30, 2016 were 4,057,022 encounters and procedures as compared
to 3,774,936 encounters and procedures for the nine months ended September 30, 2015. The increase was driven by patient encounters and procedures provided by hospitalist and intensivist
services, Rx BMM program, urgent care centers, vascular procedures as well as cardiovascular and endovascular services. See note 4 to the table "Key Indicators and Business Metrics for North
America Segment," above.
New Care Coordination Activities
In the second quarter of 2016, we expanded our Care Coordination activities with an investment in a physician practice which provides a
professional fee capitation program for cardiology services. We will incorporate this new activity into our Care Coordination business metrics in the fourth quarter of 2016.
EMEA Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Key Indicators for EMEA Segment |
|
|
|
For the nine months
ended September 30, |
|
Change in % |
|
|
|
as
reported |
|
at Constant
Exchange
Rates(1) |
|
|
|
2016 |
|
2015 |
|
| Revenue in $ million(2) |
|
|
1,982 |
|
|
1,956 |
|
|
1% |
|
|
4% |
|
Health Care(2) |
|
|
967 |
|
|
919 |
|
|
5% |
|
|
9% |
|
Dialysis Products |
|
|
1,015 |
|
|
1,037 |
|
|
(2% |
) |
|
0% |
|
Number of dialysis treatments |
|
|
6,594,063 |
|
|
6,110,036 |
|
|
8% |
|
|
|
|
Same market treatment growth in % |
|
|
3.7% |
|
|
4.2% |
|
|
|
|
|
|
|
Operating income in $ million |
|
|
395 |
|
|
405 |
|
|
(3% |
) |
|
|
|
Operating income margin in % |
|
|
19.9% |
|
|
20.7% |
|
|
|
|
|
|
|
Delivered EBIT in $ million(3) |
|
|
393 |
|
|
403 |
|
|
(3% |
) |
|
|
|
(1) For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for
Presentation – Constant Currency" below.
(2) Net of patient service bad debt provision.
(3) For further information on Delivered EBIT, including a reconciliation of Delivered EBIT to Operating Income for each
our reporting segments, see "Non-U.S. GAAP Measures for Presentation – Delivered EBIT" below.
Revenue
Total revenue for the EMEA Segment increased by 1% (4% increase at Constant Exchange Rates) to $1,982 million for the nine months ended
September 30, 2016 as compared to $1,956 million for the same period of 2015. Health care service revenue for the EMEA Segment increased by 5% (9% increase at Constant Exchange Rates) to
$967 million during the nine months ended September 30, 2016 as compared to $919 million for the same period of 2015. This increase is a result of contributions from acquisitions
25
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
(6%),
same market treatment growth (4%), and an increase in dialysis days (1%), partially offset by the negative impact of exchange rate fluctuations (4%), the effect of closed or sold clinics (1%)
and decreases in organic revenue growth per treatment (1%). Dialysis treatments increased by 8% for the nine months ended September 30, 2016 over the same period in 2015 mainly due to
contributions from acquisitions (5%) and same market treatment growth (4%), partially offset by the effect of closed or sold clinics (1%).
Dialysis
product revenue for the nine months ended September 30, 2016 decreased by 2% (remained unchanged at Constant Exchange Rates) to $1,015 million as compared to
$1,037 million in the same period of 2015. Dialysis product revenue was largely static at Constant Exchange Rates due to lower sales of renal pharmaceuticals, dialyzers and machines, mostly
offset by increased sales of products for acute care treatments, bloodlines and hemodialysis solutions and concentrates.
Operating Income
Operating income decreased to $395 million for the three months ended September 30, 2016 as compared to $405 million for
the same period in 2015. Operating income margin decreased to 19.9% for the nine months ended September 30, 2016 from 20.7% for the same period in 2015 mainly due to unfavorable foreign
exchange effects, the prior year impact from a gain from the sale of our European marketing rights for certain renal pharmaceuticals and higher bad debt expense, partially offset by further sales
development at Constant Exchange Rates.
Delivered EBIT
Delivered EBIT decreased by 3% to $393 million for the nine months ended September 30, 2016 as compared to $403 million for
the same period in 2015 due to decreased operating income.
Asia-Pacific Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Key Indicators for Asia-Pacific Segment |
|
|
|
|
|
|
|
Change in % |
|
|
|
For the nine months ended
September 30, |
|
|
|
|
|
|
|
as
reported |
|
at Constant
Exchange
Rates(1) |
|
|
|
2016 |
|
2015 |
|
| Revenue in $ million(2) |
|
|
1,198 |
|
|
1,107 |
|
|
8% |
|
|
8% |
|
Health Care(2) |
|
|
538 |
|
|
496 |
|
|
9% |
|
|
3% |
|
Dialysis Products |
|
|
660 |
|
|
611 |
|
|
8% |
|
|
12% |
|
Number of dialysis treatments |
|
|
2,956,107 |
|
|
2,822,942 |
|
|
5% |
|
|
|
|
Same market treatment growth in % |
|
|
4.9% |
|
|
3.4% |
|
|
|
|
|
|
|
Operating income in $ million |
|
|
225 |
|
|
219 |
|
|
3% |
|
|
|
|
Operating income margin in % |
|
|
18.7% |
|
|
19.8% |
|
|
|
|
|
|
|
Delivered EBIT in $ million(3) |
|
|
220 |
|
|
213 |
|
|
3% |
|
|
|
|
26
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
(1) For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for
Presentation – Constant Currency" below.
(2) Net of patient service bad debt provision.
(3) For further information on Delivered EBIT, including a reconciliation of Delivered EBIT to Operating Income for each
our reporting segments, see "Non-U.S. GAAP Measures for Presentation – Delivered EBIT" below.
Revenue
Total revenue for the Asia-Pacific Segment increased by 8% (8% increase at Constant Exchange Rates) to $1,198 million for the nine months
ended September 30, 2016 as compared to $1,107 million for the same period of 2015. Health care service revenue for the Asia-Pacific Segment increased during the nine months ended
September 30, 2016 by 9% (3% increase at Constant Exchange Rates) to $538 million from $496 million in the same period of 2015. This increase is a result of exchange rate
fluctuations (6%) and same market treatment growth (5%), partially offset by decreases in organic revenue growth per treatment (1%) and the effect of closed or sold clinics (1%). Dialysis treatments
increased by 5% for the nine months ended September 30, 2016 over the same period in 2015 mainly due to same market treatment growth (5%) and contributions from acquisitions (1%), partially
offset by the effect of closed or sold clinics (1%).
Dialysis
product revenue for the nine months ended September 30, 2016 increased by 8% (12% increase at Constant Exchange Rates) to $660 million compared to
$611 million in the same period of 2015. The increase at Constant Exchange Rates was driven by increased sales of dialyzers, bloodlines, machines, products for acute care treatments, peritoneal
dialysis products and hemodialysis solutions and concentrates.
Operating Income
Operating income increased by 3% to $225 million for the nine months ended September 30, 2016 as compared to $219 million
for the same period in 2015. Operating income margin decreased to 18.7% for the nine months ended September 30, 2016 compared to 19.8% in the same period of 2015 due to costs associated with
changes in the Management Board and increased costs related to further sales development.
Delivered EBIT
Delivered EBIT increased by 3% to $220 million for the nine months ended September 30, 2016 as compared to $213 million for
the same period in 2015 due to increased operating income coupled with a decrease in noncontrolling interests.
27
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Latin America Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Key Indicators for Latin America Segment |
|
|
|
|
|
|
|
Change in % |
|
|
|
For the nine months ended
September 30, |
|
|
|
|
|
|
|
as
reported |
|
at Constant
Exchange
Rates(1) |
|
|
|
2016 |
|
2015 |
|
| Revenue in $ million |
|
|
520 |
|
|
576 |
|
|
(10% |
) |
|
13% |
|
Health Care(2) |
|
|
377 |
|
|
427 |
|
|
(12% |
) |
|
16% |
|
Dialysis Products |
|
|
143 |
|
|
149 |
|
|
(4% |
) |
|
7% |
|
Number of dialysis treatments |
|
|
3,552,717 |
|
|
3,701,040 |
|
|
(4% |
) |
|
|
|
Same market treatment growth in % |
|
|
1.9% |
|
|
6.8% |
|
|
|
|
|
|
|
Operating income in $ million |
|
|
47 |
|
|
25 |
|
|
86% |
|
|
|
|
Operating income margin in % |
|
|
9.1% |
|
|
4.4% |
|
|
|
|
|
|
|
Delivered EBIT in $ million(3) |
|
|
47 |
|
|
25 |
|
|
88% |
|
|
|
|
(1) For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for
Presentation – Constant Currency" below.
(2) Net of patient service bad debt provision.
(3) For further information on Delivered EBIT, including a reconciliation of Delivered EBIT to Operating Income for each
our reporting segments, see "Non-U.S. GAAP Measures for Presentation – Delivered EBIT" below.
Revenue
Total revenue for the Latin America Segment decreased by 10% (13% increase at Constant Exchange Rates) to $520 million for the nine
months ended September 30, 2016 as compared to $576 million for the same period of 2015. Health care service revenue for the Latin America Segment decreased by 12% (16% increase at
Constant Exchange Rates) during the nine months ended September 30, 2016 to $377 million as compared to $427 million for the same period of 2015. The health care service revenue
decreased as a result of the negative effect of exchange rate fluctuations (28%) and the effect of closed or sold clinics (mainly in Venezuela) (8%), partially offset by increases in organic revenue
per treatment (20%), growth in same market treatments (2%) and contributions from acquisitions (2%). Dialysis treatments decreased by 4% for the nine months ended September 30, 2016 over the
same period in 2015 mainly due to the effect of closed or sold clinics (mainly in Venezuela) (8%), partially offset by same market treatment growth (2%), contributions from acquisitions (2%).
Dialysis
product revenue for the nine months ended September 30, 2016 decreased by 4% (7% increase at Constant Exchange Rates) to $143 million compared to
$149 million in the same period of 2015. The 7% increase at Constant Exchange Rates was driven by increased sales of dialyzers, hemodialysis solutions and concentrates and bloodlines, partially
offset by lower sales of peritoneal dialysis products and machines.
28
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Operating Income
Operating income increased by 86% to $47 million for the nine months ended September 30, 2016 as compared to $25 million
for the same period in 2015. Operating income margin increased to 9.1% for the nine months ended September 30, 2016 from 4.4% for the same period in 2015 mainly due the prior year loss from the
divestment of the dialysis service business in Venezuela and the impact from higher revenue in the region, partially offset by unfavorable foreign exchange effects, higher costs mainly related to
inflation and an unfavorable impact from manufacturing production costs driven by higher costs for quality development.
Delivered EBIT
Delivered EBIT increased by 88% to $47 million for the nine months ended September 30, 2016 as compared to $25 million for
the same period in 2015 due to the impacts noted above in operating income.
Liquidity and Capital Resources
Nine months ended September 30, 2016 compared to nine months ended September 30, 2015
Our
primary sources of liquidity are typically cash provided by operating activities, cash provided by short-term debt from third parties and related parties, as well
as proceeds from the issuance of long-term debt and equity securities. We require this capital primarily to finance working capital needs, fund acquisitions and joint ventures, develop free-standing
renal dialysis clinics and other health care facilities, purchase equipment for existing or new renal dialysis clinics and production sites, repay debt and pay dividends (see "Net Cash Provided By
(Used In) Investing Activities" and "Net Cash Provided By (Used In) Financing Activities" below).
At
September 30, 2016, we had cash and cash equivalents of $630 million. For information regarding utilization and availability of cash under our principal credit facility
(the "Amended 2012 Credit Agreement") and our Accounts Receivable Facility, see Note 5 of the Notes to Consolidated Financial Statements (unaudited), "Long-term Debt and Capital Lease
Obligations – Amended 2012 Credit Agreement," and "– Accounts Receivable Facility" included in this report.
Net Cash Provided By (Used In) Operating Activities
In the first nine months of 2016 and 2015, we generated net cash provided by operating activities of $1,296 million and
$1,412 million, respectively. Cash provided by operating activities is impacted by the profitability of our business, the development of our working capital, principally inventories,
receivables and cash outflows that occur due to a number of specific items as discussed below. The decrease in 2016 versus 2015 was mainly a result of a $100 million discretionary contribution
to pension plan assets in the United States, the timing of other working capital items, higher income tax payments due to both a tax refund in the comparable period of 2015 and increased earnings in
the current period, partially offset by increased earnings and reduced inventory levels driven by decreased volume of health care supplies, particularly due to a decrease in erythropoietin-stimulating
agents inventory.
The
profitability of our business depends significantly on reimbursement rates. Approximately 81% of our revenues are generated by providing health care services, a major portion of
which is reimbursed by
29
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
either
public health care organizations or private insurers. Legislative changes could affect reimbursement rates for a significant portion of the services we provide, as well as the scope of
coverage. A decrease in reimbursement rates or the scope of coverage could have a material adverse
effect on our business, financial condition and results of operations and thus on our capacity to generate cash flow. See "Overview, Legislation and Growth," above.
Our
working capital, which is defined as current assets less current liabilities, was $1,965 million at September 30, 2016 which decreased from $2,619 million at
December 31, 2015. The change is primarily the result of increased short-term debt due to issuance of short-term notes under our commercial paper program (see Note 4 of the Notes to
Consolidated Financial Statements (unaudited), "Short-Term Debt and Short-Term Debt from Related Parties"), the reclassification of our dollar-denominated senior notes to current liabilities as these
notes mature during the third quarter of 2017, increased accrued expenses and other current liabilities and short-term debt from related parties, partially offset by increased trade accounts
receivable, the repayment of our Euro-denominated notes that matured in the third quarter of 2016 and increased cash and cash equivalents. Our ratio of current assets to current liabilities was 1.37
and 1.63 at September 30, 2016 and December 31, 2015, respectively.
We
intend to continue to address our current cash and financing requirements using cash provided by operating activities, our existing and future credit agreements, issuances under the
Commercial Paper Program (See Note 4 of the Notes to the Consolidated Financial Statements, "Short-Term Debt and Short-Term Debt from Related Parties," included in this report) as well as the
issuance of debt securities. In addition, when funds are required for acquisitions or to meet other needs, we expect to successfully complete long-term financing arrangements, such as the issuance of
senior notes. We aim to preserve financial resources with a minimum $500 million of committed and unutilized credit facilities.
Cash
provided by operating activities depends on the collection of accounts receivable. Commercial customers and governments generally have different payment cycles. A lengthening of
their payment cycles could have a material adverse effect on our capacity to generate cash flow. In addition, we could face difficulties in enforcing and collecting accounts receivable under some
countries' legal systems and due to the economic conditions in some countries. Accounts receivable balances, net of valuation allowances, represented Days Sales Outstanding ("DSO") of 72 at
September 30, 2016, an increase as compared to 71 at December 31, 2015.
DSO
by segment is calculated by dividing the segment's accounts receivable, as converted to U.S. dollars using the average exchange rate for the period presented, less any value added
tax included in the receivables, by the average daily sales for the last twelve months of that segment, as converted to U.S. dollars using the average exchange rate for the period. Receivables and
sales are adjusted for amounts
30
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
related
to significant acquisitions made during the periods presented. The development of DSO by reporting segment is shown in the table below:
|
|
|
|
|
|
|
September 30,
2016 |
|
December 31,
2015 |
North America days sales outstanding |
|
55 |
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMEA days sales outstanding |
|
108 |
|
104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia-Pacific days sales outstanding |
|
110 |
|
113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latin America days sales outstanding |
|
144 |
|
141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FMC-AG & Co. KGaA average days sales outstanding |
|
72 |
|
71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
DSO increase in the North America Segment is largely due to ordinary business fluctuations as well as an adjustment to invoicing practices within the quarter. The EMEA Segment's DSO
increase reflects increased sales in the region coupled with fluctuations in payments of public health care organizations. The Asia-Pacific Segment's DSO decrease reflects an improvement of payment
collections in China. The Latin America Segment's DSO increase reflects periodic delays in payment of public health care organizations in certain countries.
Due
to the fact that a large portion of our reimbursement is provided by public health care organizations and private insurers, we expect that most of our accounts receivable will be
collectible.
Net Cash Provided By (Used In) Investing Activities
We used net cash of $928 million and $759 million in investing activities in the nine months ended September 30, 2016 and
2015, respectively.
Capital
expenditures for property, plant and equipment, net of proceeds from sales of property, plant and equipment were $734 million and $636 million in the first nine
months of 2016 and 2015, respectively. In the first nine months of 2016, capital expenditures were $437 million in the North America Segment, $168 million at Corporate,
$83 million for the EMEA Segment, $25 million for the Asia-Pacific Segment and $21 million for the Latin America Segment. Capital expenditures in the first nine months of 2015
were $328 million in the North America Segment, $179 million at Corporate, $81 million for the EMEA Segment, $25 million for the Asia-Pacific Segment and $23 million
for the Latin America Segment. The majority of our capital expenditures were used for maintaining existing clinics, equipping new clinics, maintenance and expansion of production facilities (primarily
in the North America Segment, Germany and France) and capitalization of machines provided to our customers and for Care Coordination. Capital expenditures were approximately 6% of total revenue in the
first nine months of 2016 as compared to 5% for the same period in 2015.
In
addition to the capital expenditures discussed above, we invested approximately $387 million cash in the first nine months of 2016, $304 million in the North America
Segment, $55 million in the EMEA Segment, $13 million in the Asia-Pacific Segment, $8 million at Corporate and $7 million in the Latin America Segment. The investment in
the first nine months of 2016 is primarily related to acquisitions of
31
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
dialysis
clinics, available for sale financial assets, acquisitions in our hospitalist and intensivist business, and a loan provided to an equity method investee in the North America Segment as well
as the acquisition of dialysis clinics in the EMEA Segment, the Asia-Pacific Segment as well as the Latin America Segment. Additionally, during the first nine months of 2016, we received
$193 million from divestitures, including approximately $111 million related to available for sale financial assets and an approximately $80 million repayment of unsecured loans
provided to an equity method investee in 2015 and 2016. In the first nine months of 2015, we invested approximately $166 million cash, approximately $99 million in the North America
Segment, $37 million in the EMEA Segment, $21 million at Corporate, $8 million in the Asia-Pacific Segment and $1 in the Latin America Segment. Additionally, during the nine
months ended 2015, we received $42 million from divestitures, primarily driven by a $21 million repayment of an unsecured loan provided to an equity method investee in 2014,
$10 million related to the sale of our European marketing rights for certain renal pharmaceuticals (See Note 2 of the Notes to the Consolidated Financial Statements (unaudited)) as well
as $9 million from the sale of our plasma collection device manufacturing business to Fresenius Kabi USA, Inc.
We
anticipate capital expenditures of $1.0 to $1.1 billion and expect to make acquisitions of approximately $0.75 billion in 2016. See "Outlook" below.
Net Cash Provided By (Used In) Financing Activities
Net cash used in financing activities was $318 million in the first nine months of 2016 compared to net cash used in financing activities
of $634 million in the first nine months of 2015.
In
the nine-month period ended September 30, 2016, cash was mainly used for the repayments of long-term debt and capital lease obligations, payment of dividends, distributions to
noncontrolling interests as well as repayments of short-term debt, partially offset by proceeds from short-term debt. In the first nine months of 2015, cash was mainly used for repayments of long-term
debt, the payment of dividends, repayments of short-term debt, distributions to noncontrolling interests and a reduction in the Accounts Receivable facility, partially offset by proceeds from
short-term debt, proceeds from the exercise of stock options and proceeds from short-term debt from related parties.
On
May 13, 2016, we paid a dividend with respect to 2015 of €0.80 per share (for 2014 paid in 2015 €0.78). The total dividend payment
was €244 million ($277 million) as compared with €237 million ($263 million) in the prior year.
32
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Non-U.S. GAAP Measures for Presentation
Constant Currency
Changes in revenue include the impact of changes in foreign currency exchange rates. We use the non-GAAP financial measure at Constant Exchange
Rates or Constant Currency in our filings to show changes in our revenue without giving effect to period-to-period currency fluctuations. Under U.S. GAAP, revenues received in local (non-U.S.
dollar) currency are translated into U.S. dollars at the average exchange rate for the period presented. Once we translate the local currency revenues for the Constant Currency, we then calculate the
change, as a percentage, of the current period revenues using the prior period exchange rates versus the prior period revenues. This resulting percentage is a non-GAAP measure referring to a change as
a percentage at Constant Currency.
We
believe that revenue growth is a key indication of how a company is progressing from period to period and that the non-GAAP financial measure Constant Currency is useful to investors,
lenders, and other creditors because such information enables them to gauge the impact of currency fluctuations on a company's revenue from period to period. However, we also believe that the
usefulness of data on
Constant Currency period-over-period changes is subject to limitations, particularly if the currency effects that are eliminated constitute a significant element of our revenue and significantly
impact our performance. We therefore limit our use of Constant Currency period-over-period changes to a measure for the impact of currency fluctuations on the translation of local currency revenue
into U.S. dollars. We do not evaluate our results and performance without considering both Constant Currency period-over-period changes in non-U.S. GAAP revenue on the one hand and changes in
revenue prepared in accordance with U.S. GAAP on the other. We caution the readers of this report to follow a similar approach by considering data on Constant Currency period-over-period
changes only in addition to, and not as a substitute for or superior to, changes in revenue prepared in accordance with U.S. GAAP. We present the fluctuation derived from U.S. GAAP
revenue next to the fluctuation derived from non-GAAP revenue. Because the reconciliation is inherent in the disclosure, we believe that a separate reconciliation would not provide any additional
benefit.
Delivered EBIT
As a result of the increase of noncontrolling interest holders in our operations, we believe a measure that is meaningful to investors is
operating income less noncontrolling interests ("Delivered EBIT"). Delivered EBIT approximates the operating income attributable to the shareholders of FMC-AG & Co. KGaA. As such, we
believe that operating income, or EBIT, is the closest comparable U.S. GAAP
33
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
measure.
Below is a table showing the reconciliation of Delivered EBIT to Operating Income for each of our reporting segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30 |
|
Nine months ended
September 30 |
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
(in millions, unaudited)
|
|
(in millions, unaudited)
|
|
Delivered EBIT reconciliation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (EBIT) |
|
$ |
670 |
|
$ |
614 |
|
$ |
1,851 |
|
$ |
1,665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
less noncontrolling interests |
|
|
(73 |
) |
|
(84 |
) |
|
(217 |
) |
|
(207 |
) |
Delivered EBIT |
|
|
597 |
|
|
530 |
|
|
1,634 |
|
|
1,458 |
|
North America |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (EBIT) |
|
|
536 |
|
|
515 |
|
|
1,486 |
|
|
1,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
less noncontrolling interests |
|
|
(70 |
) |
|
(80 |
) |
|
(210 |
) |
|
(199 |
) |
Delivered EBIT |
|
|
466 |
|
|
435 |
|
|
1,276 |
|
|
1,085 |
|
Dialysis |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (EBIT) |
|
|
505 |
|
|
482 |
|
|
1,420 |
|
|
1,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
less noncontrolling interests |
|
|
(65 |
) |
|
(69 |
) |
|
(188 |
) |
|
(166 |
) |
Delivered EBIT |
|
|
440 |
|
|
413 |
|
|
1,232 |
|
|
1,033 |
|
Care Coordination |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (EBIT) |
|
|
31 |
|
|
33 |
|
|
66 |
|
|
85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
less noncontrolling interests |
|
|
(5 |
) |
|
(11 |
) |
|
(22 |
) |
|
(33 |
) |
Delivered EBIT |
|
|
26 |
|
|
22 |
|
|
44 |
|
|
52 |
|
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (EBIT) |
|
|
125 |
|
|
130 |
|
|
395 |
|
|
405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
less noncontrolling interests |
|
|
(1 |
) |
|
(1 |
) |
|
(2 |
) |
|
(2 |
) |
Delivered EBIT |
|
|
124 |
|
|
129 |
|
|
393 |
|
|
403 |
|
Asia-Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (EBIT) |
|
|
85 |
|
|
68 |
|
|
225 |
|
|
219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
less noncontrolling interests |
|
|
(2 |
) |
|
(3 |
) |
|
(5 |
) |
|
(6 |
) |
Delivered EBIT |
|
|
83 |
|
|
65 |
|
|
220 |
|
|
213 |
|
Latin America |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (EBIT) |
|
|
20 |
|
|
(8 |
) |
|
47 |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
less noncontrolling interests |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
Delivered EBIT |
|
|
20 |
|
|
(8 |
) |
|
47 |
|
|
25 |
|
Non-U.S. GAAP Measures
EBITDA
EBITDA (earnings before interest, tax, depreciation and amortization expenses) was approximately $2,424 million, 18.3% of revenues for
the nine-month period ended September 30, 2016, and
34
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
$2,202 million,
17.8% of revenues for the same period of 2015. EBITDA is the basis for determining compliance with certain covenants contained in our Amended 2012 Credit Agreement,
euro-denominated notes and the indentures relating to our senior notes. You should not consider EBITDA to be an alternative to net earnings determined in accordance with U.S. GAAP or to cash
flow from operations, investing activities or financing activities. In addition, not all funds depicted by EBITDA are available for management's discretionary use. For example, a substantial portion
of such funds are subject to contractual restrictions and functional requirements for debt service, to fund necessary capital expenditures and to meet other commitments from time to time as described
in more detail elsewhere in this report. EBITDA, as calculated, may not be comparable to similarly titled measures reported by other companies. A reconciliation of EBITDA to cash flow provided by
(used in)
operating activities, which we believe to be the most directly comparable U.S. GAAP financial measure, is calculated as follows:
Reconciliation of EBITDA to net cash provided by (used in) operating activities
|
|
|
|
|
|
|
|
|
|
For the nine months
ended September 30, |
|
|
|
2016 |
|
2015 |
|
|
|
(in millions)
|
|
Total EBITDA |
|
$ |
2,424 |
|
$ |
2,202 |
|
Interest expense (net of interest income) |
|
|
(308 |
) |
|
(304 |
) |
Income tax expense |
|
|
(471 |
) |
|
(441 |
) |
Change in deferred taxes, net |
|
|
(55 |
) |
|
(103 |
) |
Changes in operating assets and liabilities |
|
|
(261 |
) |
|
69 |
|
Stock compensation expense |
|
|
26 |
|
|
6 |
|
Other items, net |
|
|
(59 |
) |
|
(17 |
) |
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
$ |
1,296 |
|
$ |
1,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow measures
Our consolidated statement of cash flows indicates how we generated and used cash and cash equivalents. When used in conjunction with the other
primary financial statements, it provides information that helps us evaluate the changes in our net assets and our financial structure (including our liquidity and solvency). The net cash provided by
(used in) operating activities is used to assess whether our business can generate the cash required to make replacement and expansion investments. Net cash provided by (used in) operating activities
is impacted by the profitability of our business and development of working capital, principally receivables. The financial key performance indicator of net cash provided by (used in) operating
activities in percentage of revenue shows the percentage of our revenue that is available in terms of financial resources.
Free
cash flow is the cash flow provided by (used in) operating activities after capital expenditures for property, plant and equipment but before acquisitions and investments. The key
performance indicator used by management is free cash flow as a percentage of revenue. This represents the percentage of revenue that is available for acquisitions, dividends to shareholders, or the
reduction of debt financing.
35
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
The
following table shows the significant cash flow key performance indicators for the nine months ended September 30, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
For the nine months
ended
September 30, |
|
|
|
2016 |
|
2015 |
|
|
|
(in millions)
|
|
Revenue |
|
$ |
13,224 |
|
$ |
12,390 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
1,296 |
|
|
1,412 |
|
Capital expenditures |
|
|
(748 |
) |
|
(647 |
) |
Proceeds from sale of property, plant and equipment |
|
|
14 |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
Capital expenditures, net |
|
$ |
(734 |
) |
$ |
(636 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow |
|
|
562 |
|
|
776 |
|
Net cash provided by (used in) operating activities as a % of revenue |
|
|
9.8 |
% |
|
11.4 |
% |
Free cash flow as a % of revenue |
|
|
4.3 |
% |
|
6.3 |
% |
Care Coordination Business Metrics for Presentation
The measures for our North America Segment discussed below include current and future programs that we will be participating in and will be
reflected in the discussion of our business within the North America Segment. Currently, only the sub-capitation, BPCI, ESCO programs and other shared savings programs are included within the Member
Months and Medical Cost Under Management calculations below. In the future, there may be other programs that could be included in the following metrics. These metrics may be developed further in
future periods. Note that due to the timing required by CMS to review the BPCI program data that we provide, estimates have been used in order to report these metrics in a timely manner. Capitation
arrangements under physician practice services will be incorporated into our Care Coordination business metrics in the fourth quarter of 2016.
Member Months Under Medical Cost Management
Member months under medical cost management is calculated by multiplying the number of members who are included in value-based reimbursement
programs, such as Medicare Advantage plans or other value-based programs in the U.S., by the corresponding number of months these members participate in those programs ("Member Months"). In the
aforementioned programs, we are assuming the risk of generating savings. The financial results will be recorded in earnings as our performance is determined. The membership offerings within Care
Coordination are sub-capitation arrangements, MA-CSNPs, ESCO and BPCI programs as well as other shared savings programs. An increase in patient membership may indicate future earnings or losses as our
performance is determined through these managed care programs.
Medical Cost Under Management
Medical cost under management represents the management of medical costs associated with our patient membership in value-based programs. For
ESCO, BPCI and other shared savings programs, this is calculated by multiplying the Member Months in each program by the benchmark of expected medical cost per member per month. The sub-capitation and
MA-CSNPs calculation multiplies the premium per
36
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
member
of the program per month by the number of Member Months associated with the plan, as noted above.
Care Coordination Patient Encounters
Care Coordination patient encounters represents the total patient encounters and procedures conducted by certain of our Care Coordination
activities. Specifically, Care Coordination patient encounters is the sum of all encounters and procedures completed during the period by Sound, MedSpring Urgent Care, Fresenius Vascular Care, and
National Cardiovascular Partners as well as patients in our Rx BMM program.
Balance Sheet Structure
Total assets as of September 30, 2016 increased to $26,658 million from $25,365 million as compared to December 31,
2015. Current assets as a percent of total assets remained flat at 27% at September 30, 2016 as compared to December 31, 2015. The equity ratio, the ratio of our equity divided by total
liabilities and shareholders' equity, increased to 42% at September 30, 2016 as compared to 41% as of December 31, 2015.
Outlook
Below is a table showing our growth outlook for 2016. The outlook for 2016 is based on exchange rates prevailing at the beginning of 2016:
|
|
|
|
|
Targets 2016 |
| Revenue(1)(2) |
|
Growth 7 – 10% (at Constant Exchange Rates) |
| Operating income(3) |
|
Growth > revenue growth |
| Delivered EBIT(3) |
|
Growth > revenue growth |
| Net income growth(2)(3)(4) |
|
15 – 20% |
| Basic earnings per share growth(2)(3)(4) |
|
based on development of net income |
| Capital Expenditures |
|
$1.0 – 1.1 billion |
| Acquisitions and investments |
|
~ $0.75 billion |
| Net cash provided by (used in) operating activities in % of revenue(3) |
|
> 10% |
| Free cash flow in % of revenue(3) |
|
> 4% |
| Debt/EBITDA Ratio |
|
< 3.0 |
| Employees(5) |
|
> 109,000 |
| Research and development expenses |
|
$160 – 170 million |
(1) Net of patient service bad debt provision
(2)
Targets 2016 exclude contributions from acquisitions closed in 2015 and 2016
(3)
Targets 2016 exclude special items
(4)
Net income attributable to shareholders of FMC AG & Co. KGaA
(5)
Full-time equivalents
37
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Recently Implemented Accounting Pronouncements
On February 18, 2015, FASB issued Accounting Standards Update 2015-02 ("ASU 2015-02"), Consolidation (Topic 810):
Amendments to the Consolidation Analysis, which focuses on clarifying guidance related to the evaluation of various types of legal entities such as limited partnerships,
limited liability corporations and certain security transactions for consolidation. The update is effective for fiscal years beginning after December 15, 2015, and for interim periods within
fiscal years beginning after December 15, 2015. We have implemented ASU 2015-02. These types of legal entities are predominantly utilized in the U.S. The consolidation disclosures in
Note 1 of our 2016 annual report on Form 20-F will include amended disclosures in relation to this ASU.
On
November 20, 2015, FASB issued Accounting Standards Update 2015-17 ("ASU 2015-17") Income Taxes (Topic 740): Balance Sheet Classification of Deferred
Taxes, which focuses on reducing the complexity of classifying deferred taxes on the balance sheet. ASU 2015-17 eliminates the current requirement for organizations to present
deferred tax liabilities and assets as current and noncurrent in a classified balance sheet and requires the classification of all deferred tax assets and liabilities as noncurrent. The update is
effective for fiscal years and interim periods within those years beginning after December 15, 2016. We adopted this ASU as of March 31, 2016. In accordance with ASU 2015-17, deferred
taxes recorded as of December 31, 2015 within current assets and liabilities have been reclassified to noncurrent assets and liabilities in the amount of $216 million and
$36 million, respectively. As a result of deferred tax netting, noncurrent assets and liabilities were then adjusted in the amount of $168 million.
Recent Accounting Pronouncements Not Yet Adopted
On May 28, 2014, the FASB issued Accounting Standards Update 2014-09 ("ASU 2014-09"), Revenue from Contracts with
Customers, Topic 606. Simultaneously, the IASB published its equivalent revenue standard, "IFRS 15," Revenue from Contracts with
Customers. The standards are the result of a convergence project between FASB and the IASB. This update specifies how and when companies reporting under U.S. GAAP will
recognize revenue as well as providing users of financial statements with more informative and relevant disclosures. ASU 2014-09 supersedes some guidance included in topic 605, Revenue Recognition,
some guidance within the scope of Topic 360, Property, Plant, and Equipment, and some guidance within the scope of Topic 350, Intangibles – Goodwill and Other. This ASU applies to nearly
all contracts with customers, unless those contracts are within the scope of other standards (for example, lease contracts or insurance contracts). With the issuance of Accounting Standards Update
2015-14 ("ASU 2015-14"), Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date on August 12, 2015, the effective date
of ASU 2014-09 for public business entities, among others, was deferred from fiscal years and interim periods within those years beginning after December 15, 2016 to fiscal years and interim
periods within those
years beginning after December 15, 2017. Earlier adoption is permitted. We are currently evaluating the impact of ASU 2014-09, in conjunction with all amendments, on our Consolidated Financial
Statements.
On
January 5, 2016, FASB issued Accounting Standards Update 2016-01 ("ASU 2016-01") Financial Instruments – Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 focuses on improving the recognition and measurement of financial instruments to provide
users of financial statements with more decision-useful information. ASU 2016-01 affects the accounting treatment and disclosures related to financial instruments and equity instruments. The update is
effective for fiscal years and interim periods within those years beginning after December 15, 2017.
38
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Interim Report of Financial Condition and Results of Operations
for the three and nine months ended September 30, 2016 and 2015
Earlier
adoption is generally not permitted. We are currently evaluating the impact of ASU 2016-01 on our Consolidated Financial Statements.
On
February 25, 2016, FASB issued Accounting Standards Update 2016-02 ("ASU 2016-02") Leases (Subtopic 842). ASU 2016-02 is
expected to increase transparency and comparability by recognizing lease assets and lease liabilities from lessees on the balance sheet and disclosing key information about leasing arrangements in the
financial statements. The lessor accounting is largely unchanged. The updates are effective for fiscal years and interim periods within those years beginning after December 15, 2018. Early
applications of the amendments in these updates are permitted. We are currently evaluating the impact of ASU 2016-02 on our Consolidated Financial Statements.
On
March 30, 2016, FASB issued Accounting Standards Update 2016-09 ("ASU 2016-09") Compensation – Stock Compensation (Topic 718): Improvements
to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies guidance with regard to income tax consequences for share-based payment transactions, classification of
awards as equity or liabilities as well as cash flow impacts. The updates are effective for fiscal years and interim periods within those years beginning after December 15, 2016. Early adoption
is permitted. We are currently evaluating the impact of ASU 2016-09 on our Consolidated Financial Statements.
On
June 16, 2016, FASB issued Accounting Standards Update 2016-13 ("ASU 2016-13") Financial Instruments – Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends guidance on reporting credit losses for assets held at amortized cost basis and available for
sale financial assets. For Securities and Exchange Commission filers, these updates are effective for fiscal years and interim periods within those years beginning after December 15, 2019.
Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact of ASU 2016-13
on our Consolidated Financial Statements.
39
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Financial Statements
Consolidated Statements of Income
(unaudited)
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended September 30, |
|
For the nine months
ended September 30, |
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
| Net revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care |
|
$ |
3,839,604 |
|
$ |
3,506,487 |
|
$ |
11,061,234 |
|
$ |
10,249,419 |
|
Less: Patient service bad debt provision |
|
|
105,134 |
|
|
104,248 |
|
|
341,389 |
|
|
319,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Health Care |
|
|
3,734,470 |
|
|
3,402,239 |
|
|
10,719,845 |
|
|
9,929,441 |
|
Dialysis Products |
|
|
863,771 |
|
|
829,112 |
|
|
2,504,213 |
|
|
2,460,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
4,598,241 |
|
|
4,231,351 |
|
|
13,224,058 |
|
|
12,390,014 |
|
Costs of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care |
|
|
2,746,492 |
|
|
2,458,449 |
|
|
7,933,567 |
|
|
7,355,881 |
|
Dialysis Products |
|
|
380,091 |
|
|
391,140 |
|
|
1,102,654 |
|
|
1,171,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
3,126,583 |
|
|
2,849,589 |
|
|
9,036,221 |
|
|
8,526,935 |
|
Gross profit |
|
|
1,471,658 |
|
|
1,381,762 |
|
|
4,187,837 |
|
|
3,863,079 |
|
Operating (income) expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
786,849 |
|
|
742,330 |
|
|
2,277,451 |
|
|
2,119,864 |
|
Research and development |
|
|
43,898 |
|
|
34,939 |
|
|
120,136 |
|
|
100,360 |
|
Income from equity method investees |
|
|
(29,031 |
) |
|
(9,037 |
) |
|
(61,073 |
) |
|
(22,038 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income |
|
|
669,942 |
|
|
613,530 |
|
|
1,851,323 |
|
|
1,664,893 |
|
Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
(9,849 |
) |
|
(6,490 |
) |
|
(38,346 |
) |
|
(79,599 |
) |
Interest expense |
|
|
109,869 |
|
|
105,935 |
|
|
346,151 |
|
|
383,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income before income taxes |
|
|
569,922 |
|
|
514,085 |
|
|
1,543,518 |
|
|
1,361,382 |
|
| Income tax expense |
|
|
164,233 |
|
|
168,434 |
|
|
470,933 |
|
|
441,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income |
|
|
405,689 |
|
|
345,651 |
|
|
1,072,585 |
|
|
919,715 |
|
Less: Net income attributable to noncontrolling interests |
|
|
72,511 |
|
|
83,331 |
|
|
217,441 |
|
|
207,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income attributable to shareholders of FMC-AG & Co. KGaA |
|
$ |
333,178 |
|
$ |
262,320 |
|
$ |
855,144 |
|
$ |
712,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic earnings per share |
|
$ |
1.09 |
|
$ |
0.86 |
|
$ |
2.80 |
|
$ |
2.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fully diluted earnings per share |
|
$ |
1.09 |
|
$ |
0.86 |
|
$ |
2.79 |
|
$ |
2.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to unaudited consolidated financial statements.
40
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Consolidated Statements of Comprehensive Income
(unaudited, in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended September 30, |
|
For the nine months
ended September 30, |
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
| Net Income |
|
$ |
405,689 |
|
$ |
345,651 |
|
$ |
1,072,585 |
|
$ |
919,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) related to cash flow hedges |
|
|
8,074 |
|
|
15,633 |
|
|
20,388 |
|
|
43,571 |
|
Actuarial gain (loss) on defined benefit pension plans |
|
|
7,686 |
|
|
8,660 |
|
|
23,053 |
|
|
25,995 |
|
Gain (loss) related to foreign currency translation |
|
|
19,170 |
|
|
(142,313 |
) |
|
135,165 |
|
|
(250,948 |
) |
Income tax (expense) benefit related to components of other comprehensive income |
|
|
(5,257 |
) |
|
(7,494 |
) |
|
(14,523 |
) |
|
(22,160 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income (loss), net of tax |
|
|
29,673 |
|
|
(125,514 |
) |
|
164,083 |
|
|
(203,542 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income |
|
$ |
435,362 |
|
$ |
220,137 |
|
$ |
1,236,668 |
|
$ |
716,173 |
|
Comprehensive income attributable to noncontrolling interests |
|
|
73,418 |
|
|
82,726 |
|
|
221,404 |
|
|
203,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive income attributable to shareholders of FMC-AG & Co. KGaA |
|
$ |
361,944 |
|
$ |
137,411 |
|
$ |
1,015,264 |
|
$ |
512,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to unaudited consolidated financial statements.
41
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Consolidated Balance Sheets
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
September 30,
2016 |
|
December 31,
2015 |
|
|
|
(unaudited)
|
|
(audited)
|
|
| Assets |
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
629,837 |
|
$ |
549,500 |
|
Trade accounts receivable less allowance for doubtful accounts of $553,011 in 2016 and $465,790 in 2015 |
|
|
3,620,554 |
|
|
3,285,196 |
|
Accounts receivable from related parties |
|
|
171,463 |
|
|
218,285 |
|
Inventories |
|
|
1,406,594 |
|
|
1,340,751 |
|
Prepaid expenses and other current assets |
|
|
1,389,950 |
|
|
1,374,715 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
7,218,398 |
|
|
6,768,447 |
|
Property, plant and equipment, net |
|
|
3,734,628 |
|
|
3,425,574 |
|
| Intangible assets |
|
|
818,654 |
|
|
830,489 |
|
| Goodwill |
|
|
13,487,911 |
|
|
13,032,750 |
|
| Deferred taxes |
|
|
193,235 |
|
|
188,833 |
|
| Investment in equity method investees |
|
|
709,814 |
|
|
644,709 |
|
| Other assets |
|
|
495,845 |
|
|
474,452 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
26,658,485 |
|
$ |
25,365,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and shareholders' equity |
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
|
$ |
527,424 |
|
$ |
627,828 |
|
Accounts payable to related parties |
|
|
257,960 |
|
|
153,023 |
|
Accrued expenses and other current liabilities |
|
|
2,631,279 |
|
|
2,503,137 |
|
Short-term debt |
|
|
721,246 |
|
|
109,252 |
|
Short-term debt from related parties |
|
|
98,886 |
|
|
19,052 |
|
Current portion of long-term debt and capital lease obligations |
|
|
891,299 |
|
|
664,335 |
|
Income tax payable |
|
|
125,716 |
|
|
72,819 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
5,253,810 |
|
|
4,149,446 |
|
Long-term debt and capital lease obligations, less current portion |
|
|
7,174,008 |
|
|
7,853,487 |
|
| Other liabilities |
|
|
545,721 |
|
|
465,625 |
|
| Pension liabilities |
|
|
514,480 |
|
|
585,328 |
|
| Income tax payable |
|
|
128,397 |
|
|
162,500 |
|
| Deferred taxes |
|
|
581,721 |
|
|
624,500 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
14,198,137 |
|
|
13,840,886 |
|
Noncontrolling interests subject to put provisions and other temporary equity |
|
|
1,222,643 |
|
|
1,028,368 |
|
Shareholders' equity: |
|
|
|
|
|
|
|
| Ordinary shares, no par value, €1.00 nominal value, 385,913,972 shares authorized, 307,141,323 issued and 306,141,372 outstanding |
|
|
380,872 |
|
|
387,162 |
|
| Treasury stock, at cost |
|
|
(136,976 |
) |
|
(505,014 |
) |
| Additional paid-in capital |
|
|
3,074,913 |
|
|
3,470,308 |
|
| Retained earnings |
|
|
8,448,949 |
|
|
7,870,981 |
|
| Accumulated other comprehensive income (loss) |
|
|
(1,176,175 |
) |
|
(1,336,295 |
) |
|
|
|
|
|
|
|
|
|
Total FMC-AG & Co. KGaA shareholders' equity |
|
|
10,591,583 |
|
|
9,887,142 |
|
| Noncontrolling interests not subject to put provisions |
|
|
646,122 |
|
|
608,858 |
|
Total equity |
|
|
11,237,705 |
|
|
10,496,000 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
26,658,485 |
|
$ |
25,365,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to unaudited consolidated financial statements.
42
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Consolidated Statements of Cash Flows
(unaudited, in thousands)
|
|
|
|
|
|
|
|
|
|
For the nine months
ended September 30, |
|
|
|
2016 |
|
2015 |
|
| Operating Activities: |
|
|
|
|
|
|
|
Net income |
|
$ |
1,072,585 |
|
$ |
919,715 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
572,583 |
|
|
536,651 |
|
Change in deferred taxes, net |
|
|
(54,899 |
) |
|
(103,203 |
) |
(Gain) loss on sale of fixed assets and investments |
|
|
(3,095 |
) |
|
(5,177 |
) |
Compensation expense related to stock options |
|
|
26,308 |
|
|
5,902 |
|
Investments in equity method investees, net |
|
|
(55,749 |
) |
|
(10,722 |
) |
Changes in assets and liabilities, net of amounts from businesses acquired: |
|
|
|
|
|
|
|
Trade accounts receivable, net |
|
|
(269,958 |
) |
|
(273,337 |
) |
Inventories |
|
|
(45,188 |
) |
|
(265,595 |
) |
Prepaid expenses, other current and non-current assets |
|
|
32,842 |
|
|
284,718 |
|
Accounts receivable from related parties |
|
|
(19,484 |
) |
|
31,244 |
|
Accounts payable to related parties |
|
|
101,235 |
|
|
70,428 |
|
Accounts payable, accrued expenses and other current and non-current liabilities |
|
|
(63,275 |
) |
|
247,618 |
|
Income tax payable |
|
|
2,411 |
|
|
(26,518 |
) |
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
1,296,316 |
|
|
1,411,724 |
|
|
|
|
|
|
|
|
|
|
| Investing Activities: |
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(747,642 |
) |
|
(647,350 |
) |
Proceeds from sale of property, plant and equipment |
|
|
13,586 |
|
|
11,167 |
|
Acquisitions and investments, net of cash acquired, and purchases of intangible assets |
|
|
(386,968 |
) |
|
(165,694 |
) |
Proceeds from divestitures |
|
|
193,135 |
|
|
42,513 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
(927,889 |
) |
|
(759,364 |
) |
|
|
|
|
|
|
|
|
|
| Financing Activities: |
|
|
|
|
|
|
|
Proceeds from short-term debt |
|
|
818,691 |
|
|
211,027 |
|
Repayments of short-term debt |
|
|
(219,120 |
) |
|
(236,295 |
) |
Proceeds from short-term debt from related parties |
|
|
138,744 |
|
|
59,063 |
|
Repayments of short-term debt from related parties |
|
|
(59,382 |
) |
|
- |
|
Proceeds from long-term debt and capital lease obligations |
|
|
225 |
|
|
5,972 |
|
Repayments of long-term debt and capital lease obligations |
|
|
(553,045 |
) |
|
(264,693 |
) |
Increase (decrease) of accounts receivable securitization program |
|
|
(51,000 |
) |
|
(45,750 |
) |
Proceeds from exercise of stock options, net |
|
|
46,522 |
|
|
67,234 |
|
Dividends paid |
|
|
(277,176 |
) |
|
(263,244 |
) |
Distributions to noncontrolling interests |
|
|
(234,742 |
) |
|
(201,884 |
) |
Contributions from noncontrolling interests |
|
|
72,462 |
|
|
34,299 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(317,821 |
) |
|
(634,271 |
) |
|
|
|
|
|
|
|
|
|
| Effect of exchange rate changes on cash and cash equivalents |
|
|
29,731 |
|
|
(30,567 |
) |
|
|
|
|
|
|
|
|
|
| Cash and Cash Equivalents: |
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
80,337 |
|
|
(12,478 |
) |
Cash and cash equivalents at beginning of period |
|
|
549,500 |
|
|
633,855 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
629,837 |
|
$ |
621,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
43
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Consolidated Statement of Shareholders' Equity
For the nine months ended
September 30, 2016 (unaudited) and
year ended December 31, 2015 (audited)
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary Shares |
|
Treasury Stock |
|
|
|
|
|
|
|
Total
FMC-AG & Co.
KGaA
shareholders'
equity |
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Other
comprehensive
income (loss) |
|
Noncontrolling
interests not
subject to put
provisions |
|
|
|
|
|
Number of
shares |
|
No par
value |
|
Number of
shares |
|
Amount |
|
Additional
paid in
capital |
|
Retained
earnings |
|
Total Equity |
|
| Balance at December 31, 2014 |
|
|
311,104,251 |
|
$ |
385,215 |
|
|
(7,548,951 |
) |
$ |
(505,014 |
) |
$ |
3,546,075 |
|
$ |
7,104,780 |
|
$ |
(1,087,743 |
) |
$ |
9,443,313 |
|
$ |
585,058 |
|
$ |
10,028,371 |
|
| Proceeds from exercise of options and related tax effects |
|
|
1,758,820 |
|
|
1,947 |
|
|
- |
|
|
- |
|
|
87,065 |
|
|
- |
|
|
- |
|
|
89,012 |
|
|
- |
|
|
89,012 |
|
| Compensation expense related to stock options |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
12,323 |
|
|
- |
|
|
- |
|
|
12,323 |
|
|
- |
|
|
12,323 |
|
| Vested subsidiary stock incentive plans |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(4,613 |
) |
|
- |
|
|
- |
|
|
(4,613 |
) |
|
- |
|
|
(4,613 |
) |
| Dividends paid |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(263,244 |
) |
|
- |
|
|
(263,244 |
) |
|
- |
|
|
(263,244 |
) |
| Purchase/ sale of noncontrolling interests |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
7,461 |
|
|
- |
|
|
- |
|
|
7,461 |
|
|
7,169 |
|
|
14,630 |
|
| Contributions from/ to noncontrolling interests |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(100,852 |
) |
|
(100,852 |
) |
| Expiration of put provisions and other reclassifications |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(5,206 |
) |
|
(5,206 |
) |
| Changes in fair value of noncontrolling interests subject to put provisions |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(178,003 |
) |
|
- |
|
|
- |
|
|
(178,003 |
) |
|
- |
|
|
(178,003 |
) |
Net income |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,029,445 |
|
|
- |
|
|
1,029,445 |
|
|
124,577 |
|
|
1,154,022 |
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
- |
|
|
(248,552 |
) |
|
(248,552 |
) |
|
(1,888 |
) |
|
(250,440 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive income |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
780,893 |
|
|
122,689 |
|
|
903,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at December 31, 2015 |
|
|
312,863,071 |
|
$ |
387,162 |
|
|
(7,548,951 |
) |
$ |
(505,014 |
) |
$ |
3,470,308 |
|
$ |
7,870,981 |
|
$ |
(1,336,295 |
) |
$ |
9,887,142 |
|
$ |
608,858 |
|
$ |
10,496,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Proceeds from exercise of options and related tax effects |
|
|
827,252 |
|
|
927 |
|
|
- |
|
|
- |
|
|
44,648 |
|
|
- |
|
|
- |
|
|
45,575 |
|
|
- |
|
|
45,575 |
|
| Compensation expense related to stock options |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
26,308 |
|
|
- |
|
|
- |
|
|
26,308 |
|
|
- |
|
|
26,308 |
|
| Vested subsidiary stock incentive plans |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(2,609 |
) |
|
- |
|
|
- |
|
|
(2,609 |
) |
|
- |
|
|
(2,609 |
) |
| Withdrawal of treasury stock |
|
|
(6,549,000 |
) |
|
(7,217 |
) |
|
6,549,000 |
|
|
368,038 |
|
|
(360,821 |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
| Dividends paid |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(277,176 |
) |
|
- |
|
|
(277,176 |
) |
|
- |
|
|
(277,176 |
) |
| Purchase/ sale of noncontrolling interests |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
12,404 |
|
|
- |
|
|
- |
|
|
12,404 |
|
|
20,895 |
|
|
33,299 |
|
| Contributions from/ to noncontrolling interests |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(74,800 |
) |
|
(74,800 |
) |
| Expiration of put provisions and other reclassifications |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
3,917 |
|
|
3,917 |
|
| Changes in fair value of noncontrolling interests subject to put provisions |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(115,325 |
) |
|
- |
|
|
- |
|
|
(115,325 |
) |
|
- |
|
|
(115,325 |
) |
Net income |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
855,144 |
|
|
- |
|
|
855,144 |
|
|
84,174 |
|
|
939,318 |
|
Other comprehensive income (loss) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
160,120 |
|
|
160,120 |
|
|
3,078 |
|
|
163,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive income |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,015,264 |
|
|
87,252 |
|
|
1,102,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at September 30, 2016 |
|
|
307,141,323 |
|
$ |
380,872 |
|
|
(999,951 |
) |
$ |
(136,976 |
) |
$ |
3,074,913 |
|
$ |
8,448,949 |
|
$ |
(1,176,175 |
) |
$ |
10,591,583 |
|
$ |
646,122 |
|
$ |
11,237,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
44
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
1. The Company and Basis of Presentation
The Company
Fresenius Medical Care AG & Co. KGaA ("FMC-AG & Co. KGaA" or the "Company"), a German partnership limited by shares
(Kommanditgesellschaft auf Aktien), is the world's largest kidney dialysis company, based on publicly reported sales and number of patients treated. The Company provides dialysis treatment and related
dialysis care services to persons who suffer from end-stage renal disease ("ESRD"), as well as other health care services. The Company provides dialysis products for the treatment of ESRD, including
products manufactured and distributed by the Company such as hemodialysis machines, peritoneal cyclers, dialyzers, peritoneal solutions, hemodialysis concentrates, solutions and granulates,
bloodlines, renal pharmaceuticals and systems for water treatment. The Company supplies dialysis clinics it owns, operates or manages with a broad range of products and also sales dialysis products to
other dialysis service providers. The Company describes its other health care services as "Care Coordination." Care Coordination currently includes the coordinated delivery of pharmacy services,
vascular, cardiovascular and endovascular specialty services, non-dialysis laboratory testing services, physician services, hospitalist and intensivist services, health plan services, ambulatory
surgery center services and urgent care services, which, together with dialysis care services represent the Company's health care services.
In
these unaudited consolidated financial statements, "FMC-AG & Co. KGaA," or the "Company," "we," "us" or "our" refers to the Company or the Company and its subsidiaries
on a consolidated basis, as the context requires. The term "North America Segment" refers to the North America operating segment; the term "EMEA Segment" refers to the Europe, Middle East and Africa
operating segment, the term "Asia-Pacific Segment" refers to the Asia-Pacific operating segment, and the term "Latin America Segment" refers to the Latin America operating segment. For further
discussion of the Company's operating segments, see Note 14 "Segment and Corporate Information."
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with the United States' generally accepted accounting
principles ("U.S. GAAP").
The
consolidated financial statements at September 30, 2016 and for the three and nine months ended September 30, 2016 and 2015 contained in this report are unaudited and
should be read in conjunction with the consolidated financial statements contained in the Company's 2015 Annual Report on Form 20-F. The preparation of consolidated financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Such financial
statements reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of the periods presented. All such adjustments are of a normal recurring
nature.
The
accounting policies applied in the accompanying consolidated financial statements are the same as those applied in the consolidated financial statements at and for the year ended
December 31, 2015, contained in the Company's 2015 Annual Report on Form 20-F.
45
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
Certain
items in the prior year's comparative consolidated financial statements have been reclassified to conform to the current year's presentation. Deferred taxes which were classified
as current at December 31, 2015, were reclassified to noncurrent as of January 1, 2016 in accordance with Accounting Standards Update 2015-17, Income Taxes (Topic
740) Balance Sheet Classification of Deferred Taxes. Deferred taxes in current assets and liabilities have been reclassified to noncurrent assets and liabilities in the amount
of $216,127 and $36,399, respectively. As a result of deferred tax netting, noncurrent assets and liabilities have been adjusted in the amount of $168,232.
The
results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results of operations for the year ending
December 31, 2016.
2. Related Party Transactions
The Company's parent, Fresenius SE & Co. KGaA ("Fresenius SE"), a German partnership limited by shares, owns 100% of the share capital of Fresenius Medical Care Management
AG, the Company's general partner ("General Partner"). Fresenius SE is also the Company's largest shareholder and owns approximately 30.8% of the Company's outstanding shares at September 30,
2016. The Company has entered into certain arrangements for services, leases and products with Fresenius SE or its subsidiaries and with certain of the Company's equity method investees as described
in item a) below. The Company's terms related to the receivables or payables for these services, leases and products are generally consistent with the normal terms of the Company's ordinary
course of business transactions with unrelated parties. Financing arrangements as described in item b) below have agreed upon terms which are determined at the time such financing transactions
occur and reflect market rates at the time of the transaction. The relationship between the Company and its key management personnel who are considered to be related parties is described in
item c) below. Our related party transactions are settled through Fresenius SE's cash management system where appropriate.
a) Service Agreements, Lease Agreements and Products
The
Company is party to service agreements with Fresenius SE and certain of its affiliates (collectively the "Fresenius SE Companies") to receive services, including, but not limited to:
administrative
services, management information services, employee benefit administration, insurance, information technology services, tax services and treasury management services. The Company also provides central
purchasing services to the Fresenius SE Companies. The Company provides certain administrative services to one of its equity method investees. In 2015, the Company also performed marketing and
distribution services for certain of its equity method investees. These related party agreements generally have a duration of 1 – 5 years and are renegotiated on an as
needed basis when the agreement comes due.
The
Company is a party to real estate operating lease agreements with the Fresenius SE Companies, which include leases for the Company's corporate headquarters in Bad Homburg, Germany
and production sites in Schweinfurt and St. Wendel, Germany. The majority of the leases expire in 2016 and the Company intends to extend these leases.
In
addition to the above mentioned service and lease agreements, the Company sold products to the Fresenius SE Companies and made purchases from the Fresenius SE Companies and equity
method investees. In addition, Fresenius Medical Care Holdings, Inc. ("FMCH") purchases heparin supplied by Fresenius Kabi USA, Inc. ("Kabi USA"), through an independent group purchasing
organization
46
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
("GPO").
Kabi USA is an indirect, wholly-owned subsidiary of Fresenius SE. The Company has no direct supply agreement with Kabi USA and does not submit purchase orders directly to Kabi USA. FMCH
acquires heparin from Kabi USA, through the GPO contract, which was negotiated by the GPO at arm's length on behalf of all members of the GPO.
The
Company entered into an agreement with a Fresenius SE company for the manufacturing of plasma collection devices. The Company agreed to produce 3,500 units which can be further
increased to a maximum of 4,550 units, over the length of the five year contract. On January 1, 2015, this manufacturing business was sold to Kabi USA for $9,327 for which a fairness opinion
was obtained from a reputable global accounting firm. The disposal was accounted for as a transaction between parties under common control at the carrying amounts without the generation of profits.
In
December 2010, the Company formed a renal pharmaceutical company with Galenica Ltd., named Vifor Fresenius Medical Care Renal Pharma Ltd. ("VFMCRP"), an equity method
investee of which the Company owns 45%. The Company has entered into exclusive supply agreements to purchase certain pharmaceuticals from VFMCRP.
Below
is a summary, including the Company's receivables from and payables to the indicated parties resulting from the above described transactions with related parties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Service Agreements, Lease Agreements and Products |
|
|
|
For the nine months ended
September 30, 2016 |
|
For the nine months ended
September 30, 2015 |
|
September 30, 2016 |
|
December 31, 2015 |
|
|
|
Sales of
goods and
services |
|
Purchases
of goods
and services |
|
Sales of
goods and
services |
|
Purchases
of goods
and services |
|
Accounts
Receivables |
|
Accounts
Payables |
|
Accounts
Receivables |
|
Accounts
Payables |
|
Service Agreements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresenius SE |
|
|
156 |
|
|
16,864 |
|
|
145 |
|
|
14,550 |
|
|
337 |
|
|
5,922 |
|
|
422 |
|
|
3,185 |
|
Fresenius SE affiliates |
|
|
2,694 |
|
|
62,164 |
|
|
5,557 |
|
|
56,818 |
|
|
735 |
|
|
2,386 |
|
|
2,104 |
|
|
4,079 |
|
Equity method investees |
|
|
14,150 |
|
|
- |
|
|
16,392 |
|
|
- |
|
|
847 |
|
|
- |
|
|
10,180 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
17,000 |
|
$ |
79,028 |
|
$ |
22,094 |
|
$ |
71,368 |
|
$ |
1,919 |
|
$ |
8,308 |
|
$ |
12,706 |
|
$ |
7,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Agreements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresenius SE |
|
|
- |
|
|
7,869 |
|
|
- |
|
|
7,161 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Fresenius SE affiliates |
|
|
- |
|
|
11,396 |
|
|
- |
|
|
10,967 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
- |
|
$ |
19,265 |
|
$ |
- |
|
$ |
18,128 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresenius SE |
|
|
2 |
|
|
- |
|
|
5 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Fresenius SE affiliates |
|
|
19,365 |
|
|
35,999 |
|
|
19,957 |
|
|
27,675 |
|
|
9,428 |
|
|
4,127 |
|
|
8,774 |
|
|
3,768 |
|
Equity method investees |
|
|
- |
|
|
326,401 |
|
|
- |
|
|
168,287 |
|
|
- |
|
|
85,481 |
|
|
- |
|
|
8,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
19,367 |
|
$ |
362,400 |
|
$ |
19,962 |
|
$ |
195,962 |
|
$ |
9,428 |
|
$ |
89,608 |
|
$ |
8,774 |
|
$ |
12,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
b) Financing
The
Company receives short-term financing from and provides short-term financing to Fresenius SE. The Company also utilizes Fresenius SE's cash management system for the settlement of
certain intercompany receivables and payables with its subsidiaries and other related parties. As of September 30, 2016 and December 31, 2015, the Company had accounts receivables from
Fresenius SE related to short-term financing in the amount of $160,026 and $131,252, respectively. As of September 30, 2016 and December 31, 2015, the Company had accounts payables to
Fresenius SE related to short-term financing in the amount of $155,701 and $115,932, respectively. The interest rates for these cash management arrangements are set on a daily basis and are based on
the then-prevailing overnight reference rate for the respective currencies.
47
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
On
August 19, 2009, the Company borrowed €1,500 ($1,674 at September 30, 2016 and $1,633 at December 31, 2015) from the General Partner on an
unsecured basis at 1.335%. The loan repayment has been extended periodically and is currently due August 22, 2017 with an interest rate of 1.054%. On November 28, 2013, the Company
borrowed an additional €1,500 ($1,674 at September 30, 2016 and $1,633 at December 31, 2015) with an interest rate of 1.875% from the General Partner. This loan is due on
November 25, 2016 with an interest rate of 1.223%.
The
Company provided unsecured term loans to one of its equity method investees during 2015 and 2016 in the amount of CHF 78,416 ($80,037 based upon the average exchange rate for
the nine months ended September 30, 2016). These loans were repaid in full during the first half of 2016.
At
September 30, 2016 and December 31, 2015, a subsidiary of Fresenius SE held unsecured Senior Notes issued by the Company in the amount of €8,300 and
€8,300 ($9,264 at September 30, 2016 and $9,036 at December 31, 2015), respectively. The Senior Notes were issued in 2011 and 2012, mature in 2021 and 2019, respectively,
and each has a coupon rate of 5.25% with interest payable semiannually.
At
September 30, 2016 and December 31, 2015, the Company borrowed from Fresenius SE in the amount of €85,600 and €14,500 ($95,538 at
September 30, 2016 and $15,786 at December 31, 2015) on an unsecured basis at an interest rate of 0.729% and 0.970%, respectively. For further information on these loan agreements, see
Note 4. "Short-Term Debt and Short-Term Debt from Related Parties – Short-Term Debt from Related Parties."
c) Key Management Personnel
Due
to the legal form of a German partnership limited by shares, the General Partner holds a key management position within the Company. In addition, as key management personnel, members
of the Management Board and the Supervisory Board, as well as their close relatives, are considered related parties.
The
Company's Articles of Association provide that the General Partner shall be reimbursed for any and all expenses in connection with management of the Company's business, including
remuneration of the members of the General Partner's supervisory board and the members of the General Partner's management board. The aggregate amount reimbursed to the General Partner was $17,398 and
$10,718, respectively, for its management services during the nine months ended September 30, 2016 and 2015. As of September 30, 2016 and December 31, 2015, the Company had
accounts receivable from the General Partner in the amount of $90 and $486, respectively. As of September 30, 2016 and December 31, 2015, the Company had accounts payable to the General
Partner in the amount of $4,343 and $17,806, respectively.
48
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
3. Inventories
At September 30, 2016 and December 31, 2015, inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
September 30,
2016 |
|
December 31,
2015 |
|
Finished goods |
|
$ |
733,183 |
|
$ |
670,291 |
|
Health care supplies |
|
|
357,778 |
|
|
395,342 |
|
Raw materials and purchased components |
|
|
232,561 |
|
|
206,525 |
|
Work in process |
|
|
83,072 |
|
|
68,593 |
|
|
|
|
|
|
|
|
|
|
Inventories |
|
$ |
1,406,594 |
|
$ |
1,340,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4. Short-Term Debt and Short-Term Debt from Related Parties
At September 30, 2016 and December 31, 2015, short-term debt and short-term debt from related parties consisted of the following:
|
|
|
|
|
|
|
|
|
|
September 30,
2016 |
|
December 31,
2015 |
|
Borrowings under lines of credit |
|
$ |
99,074 |
|
$ |
109,230 |
|
Commercial Paper Program |
|
|
613,801 |
|
|
- |
|
Other financial liabilities |
|
|
8,371 |
|
|
22 |
|
|
|
|
|
|
|
|
|
|
Short-term debt |
|
$ |
721,246 |
|
$ |
109,252 |
|
Short-term debt from related parties (see Note 2.b) |
|
|
98,886 |
|
|
19,052 |
|
|
|
|
|
|
|
|
|
|
Short-term debt and short-term debt from related parties |
|
$ |
820,132 |
|
$ |
128,304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company and certain consolidated entities operate a multi-currency notional pooling cash management system. The Company met the conditions to offset balances within this cash pool
for reporting purposes. At September 30, 2016 and December 31, 2015, cash and borrowings under lines of credit in the amount of $274,996 and $48,277 were offset under this cash
management system.
Commercial
paper programs are flexible financing instruments to obtain short-term funding on the money market. Typically, commercial paper maturities range from a few days up to under
two years. The Company can issue short-term notes of up to €1,000,000 ($1,116,100).
Other financial liabilities
At September 30, 2016 and December 31, 2015, the Company had $8,371 and $22 of other financial liabilities which were mainly
related to outstanding acquisition payments.
49
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
Short-term Debt from related parties
The Company is party to an unsecured loan agreement with Fresenius SE under which the Company or its subsidiaries may request and receive one or
more short-term advances up to an aggregate amount of $400,000 until maturity on October 30, 2017. The interest on the advance(s) will be at a fluctuating rate per annum equal to LIBOR or
EURIBOR as applicable plus an applicable margin. Advances can be repaid and reborrowed. At September 30, 2016 and December 31, 2015, the Company borrowed from Fresenius SE
€85,600 and €14,500 ($95,538 at September 30, 2016 and $15,786 at December 31, 2015) on an unsecured basis. For further information on short-term debt
from related parties, see Note 2 b).
5. Long-term Debt and Capital Lease Obligations
As of September 30, 2016 and December 31, 2015, long-term debt and capital lease obligations consisted of the following:
|
|
|
|
|
|
|
|
|
|
September 30,
2016 |
|
December 31,
2015 |
|
| Amended 2012 Credit Agreement |
|
$ |
2,439,158 |
|
$ |
2,611,580 |
|
| Senior Notes |
|
|
5,090,652 |
|
|
5,325,618 |
|
| Equity-neutral convertible bonds |
|
|
423,196 |
|
|
407,705 |
|
| Accounts Receivable Facility |
|
|
- |
|
|
50,185 |
|
| Capital lease obligations |
|
|
48,500 |
|
|
40,621 |
|
| Other |
|
|
63,801 |
|
|
82,113 |
|
|
|
|
|
|
|
|
|
|
| Long-term debt and capital lease obligations |
|
$ |
8,065,307 |
|
$ |
8,517,822 |
|
| Less current portion |
|
|
(891,299 |
) |
|
(664,335 |
) |
|
|
|
|
|
|
|
|
|
| Long-term debt and capital lease obligations, less current portion |
|
$ |
7,174,008 |
|
$ |
7,853,487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended 2012 Credit Agreement
The following table shows the available and outstanding amounts under the Amended 2012 Credit Agreement at September 30, 2016 and
December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Amount Available
September 30, 2016 |
|
Balance Outstanding
September 30, 2016(1) |
|
| Revolving Credit USD |
|
$ |
1,000,000 |
|
$ |
1,000,000 |
|
$ |
12,523 |
|
$ |
12,523 |
|
| Revolving Credit EUR |
|
€ |
400,000 |
|
$ |
446,440 |
|
€ |
- |
|
$ |
- |
|
| USD Term Loan |
|
$ |
2,150,000 |
|
$ |
2,150,000 |
|
$ |
2,150,000 |
|
$ |
2,150,000 |
|
| EUR Term Loan |
|
€ |
258,000 |
|
$ |
287,954 |
|
€ |
258,000 |
|
$ |
287,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
$ |
3,884,394 |
|
|
|
|
$ |
2,450,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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50
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Amount Available
December 31, 2015 |
|
Balance Outstanding
December 31, 2015(1) |
|
| Revolving Credit USD |
|
$ |
1,000,000 |
|
$ |
1,000,000 |
|
$ |
25,110 |
|
$ |
25,110 |
|
| Revolving Credit EUR |
|
€ |
400,000 |
|
$ |
435,480 |
|
€ |
- |
|
$ |
- |
|
| USD Term Loan |
|
$ |
2,300,000 |
|
$ |
2,300,000 |
|
$ |
2,300,000 |
|
$ |
2,300,000 |
|
| EUR Term Loan |
|
€ |
276,000 |
|
$ |
300,481 |
|
€ |
276,000 |
|
$ |
300,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
$ |
4,035,961 |
|
|
|
|
$ |
2,625,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts shown are excluding debt issuance costs.
At
September 30, 2016 and December 31, 2015, the Company had letters of credit outstanding in the amount of $3,550 and $3,600, respectively, under the USD revolving credit
facility, which are not included above as part of the balance outstanding at those dates, but which reduce available borrowings under the applicable revolving credit facility.
Accounts Receivable Facility
The following table shows the available and outstanding amounts under the Accounts Receivable Facility at September 30, 2016 and at
December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Amount Available(1) |
|
Balance Outstanding(2) |
|
|
|
September 30,
2016 |
|
December 31,
2015 |
|
September 30,
2016 |
|
December 31,
2015 |
|
| Accounts Receivable Facility |
|
$ |
800,000 |
|
$ |
800,000 |
|
$ |
- |
|
$ |
51,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Subject to availability of sufficient accounts receivable meeting funding criteria.
(2) Amounts shown are excluding debt issuance costs.
The
Company also had letters of credit outstanding under the Accounts Receivable Facility in the amount of $13,822 and $16,622 at September 30, 2016 and December 31, 2015,
respectively. These letters of credit are not included above as part of the balance outstanding at September 30, 2016 and December 31, 2015; however, they reduce available borrowings
under the Accounts Receivable Facility.
6. Performance Shares
Fresenius Medical Care AG & Co. KGaA Long-Term Incentive Plan 2016
As of May 11, 2016, the issuance of stock options and phantom stocks under the FMC AG & Co. KGaA Long-Term Incentive
Program 2011 ("LTIP 2011") is no longer possible. In order to continue to enable the members of the Management Board, the members of the management boards of affiliated companies and managerial staff
members to adequately participate in the long-term, sustained success of the Company, the Management Board and the Supervisory Board of the Management AG have approved and adopted the
FMC-AG & Co. KGaA Long-Term Incentive Plan 2016 ("LTIP 2016") as a successor program effective January 1, 2016.
51
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
The
LTIP 2016 is a variable compensation program with long-term incentive effects. Pursuant to the LTIP 2016, the plan participants may be granted so-called "Performance Shares" annually
or semiannually during 2016 to 2018. Performance Shares are non-equity, cash-settled virtual compensation instruments which may entitle plan participants to receive a cash payment depending on the
achievement of pre-defined performance targets further defined below as well as the Company's share price development.
For
members of the Management Board, the Supervisory Board will, in due exercise of its discretion and taking into account the individual responsibility and performance of each
Management Board member, determine an initial value for each grant for any awards to Management Board members. For plan participants other than the members of the Management Board, such determination
will be made by the Management Board. In order to determine the number of Performance Shares each plan participant receives, their respective grant value will be divided by the value per Performance
Share at
the time of the grant, which is mainly determined based on the average price of the Company's shares over a period of thirty calendar days prior to the respective grant date. The number of granted
Performance Shares may change over the performance period of three years, depending on the level of achievement of the following: (i) revenue growth, (ii) growth in net income
attributable to shareholders of FMC-AG & Co. KGaA ("net income growth") and (iii) return on invested capital ("ROIC") improvement.
Revenue,
net income and ROIC are determined according to IFRS in Euro based on full year results. Revenue growth and net income growth, for the purpose of this plan, are determined at
constant currency.
An
annual target achievement level of 100% will be reached for the revenue growth performance target if revenue growth is 7% in each individual year of the three-year performance period;
revenue growth of 0% will lead to a target achievement level of 0% and the maximum target achievement level of 200% will be reached in the case of revenue growth of at least 16%. If revenue growth
ranges between these values, the degree of target achievement will be linearly interpolated between these values.
An
annual target achievement level of 100% for the net income growth performance target will be reached if net income growth is 7% in each individual year of the three-year performance
period. In the case of net income growth of 0%, the target achievement level will also be 0%; the maximum target achievement of 200% will be reached in the case of net income growth of at least 14%.
Between these values, the degree of target achievement will be determined by means of linear interpolation.
With
regard to ROIC improvement, an annual target achievement level of 100% will be reached if the target ROIC as defined for the respective year is reached. The target ROIC is 7.3% for
2016 and will increase by 0.2 percentage points per year to 7.5% (2017), 7.7% (2018), 7.9% (2019) and 8.1% (2020). A target achievement level of 0% will be reached if the ROIC falls below the
target ROIC for the respective year by 0.2 percentage points or more, whereas the maximum target achievement level of 200% will be reached if the target ROIC for the respective year is exceeded
by 0.2 percentage points or more. The degree of target achievement will be determined by means of linear interpolation if the ROIC ranges between these values. In case the annual ROIC target
achievement level in the third year of a performance period is equal or higher than the ROIC target achievement level in each of the two previous years of such performance period, the ROIC target
achievement level of the third year is deemed to be achieved for all years of the respective performance period.
The
achievement level for each of the three performance targets will be weighted annually at one-third to determine the yearly target achievement for each year of the three-year
performance period. The level
52
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
of
overall target achievement over the three-year performance period will then be determined on the basis of the mean of these three average yearly target achievements. The overall target achievement
can be in a range of 0% to 200%.
The
number of Performance Shares granted to the plan participants at the beginning of the performance period will each be multiplied by the level of overall target achievement in order
to determine the final number of Performance Shares.
The
final number of Performance Shares is generally deemed earned four years after the day of a respective grant (the vesting period). The number of such vested Performance Shares is
then multiplied by the average Company share price over a period of thirty days prior to the lapse of this four-year vesting period. The respective resulting amount will then be paid to the plan
participants as cash compensation. For further detail regarding the terms and conditions of the LTIP 2016 please see exhibit 4.25 of this report.
The
first awards under the Long-Term Incentive Plan 2016 were granted on July 25, 2016. The Company awarded 633,967 Performance Shares, the equivalent in Euros at the grant date
being €48,689 ($53,470), including 79,888 Performance Shares or €6,135 ($6,738) awarded to the members of the Management Board of the Management AG. The fair value per
Performance Share at the grant date was €76.80 ($84.34).
7. Earnings Per Share
The following table contains reconciliations of the numerator and denominators of the basic and diluted earnings per share computations for the three and nine months ended
September 30, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended September 30, |
|
For the nine months
ended September 30, |
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
| Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income attributable to shareholders of FMC-AG & Co. KGaA |
|
$ |
333,178 |
|
$ |
262,320 |
|
$ |
855,144 |
|
$ |
712,636 |
|
Denominators: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average number of Ordinary shares outstanding |
|
|
305,972,432 |
|
|
304,738,291 |
|
|
305,602,983 |
|
|
304,201,787 |
|
| Potentially dilutive Ordinary shares |
|
|
531,891 |
|
|
450,218 |
|
|
452,247 |
|
|
454,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total weighted average Ordinary shares outstanding assuming dilution |
|
|
306,504,323 |
|
|
305,188,509 |
|
|
306,055,230 |
|
|
304,656,360 |
|
Basic earnings per share |
|
$ |
1.09 |
|
$ |
0.86 |
|
$ |
2.80 |
|
$ |
2.34 |
|
| Fully diluted earnings per share |
|
$ |
1.09 |
|
$ |
0.86 |
|
$ |
2.79 |
|
$ |
2.34 |
|
By
resolution of the Company's annual general meeting on May 12, 2011, the Company was authorized to conduct a share buy-back program to repurchase ordinary shares. The buy-back
program commenced
53
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
on
May 20, 2013 and was completed on August 14, 2013 after 7,548,951 shares had been repurchased in the amount of €384,966 ($505,014). On February 16, 2016, the
Company retired 6,549,000 of the repurchased shares from the buy-back program at an average weighted price of €51 per share ($57 per share on February 16, 2016).
8. Employee Benefit Plans
The Company currently has two principal pension plans, one for German employees, the other covering employees in the United States, the latter of which was curtailed in 2002. Plan
benefits are generally based on years of service and final salary. As there is no legal requirement in Germany to fund defined benefit plans, the Company's pension obligations in Germany are unfunded.
Each year FMCH contributes to the plan covering United States employees at least the minimum required by the Employee Retirement Income Security Act of 1974, as amended.
The
following table provides the calculations of net periodic benefit cost for the three and nine months ended September 30, 2016 and 2015, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended September 30, |
|
For the nine months
ended September 30, |
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
| Components of net periodic benefit cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Service cost |
|
$ |
4,746 |
|
$ |
6,243 |
|
$ |
18,430 |
|
$ |
18,764 |
|
| Interest cost |
|
|
7,289 |
|
|
6,949 |
|
|
21,864 |
|
|
20,864 |
|
| Expected return on plan assets |
|
|
(3,870 |
) |
|
(4,100 |
) |
|
(11,610 |
) |
|
(12,302 |
) |
| Amortization of unrealized losses |
|
|
7,715 |
|
|
8,660 |
|
|
23,141 |
|
|
25,995 |
|
| Amortization of prior service cost |
|
|
(29 |
) |
|
- |
|
|
(88 |
) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net periodic benefit costs |
|
$ |
15,851 |
|
$ |
17,752 |
|
$ |
51,737 |
|
$ |
53,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the three months ended September 30, 2016, the Company made a discretionary cash contribution of $100,000 to its pension plan assets in the United States.
9. Noncontrolling Interests Subject to Put Provisions and Other Temporary Equity
The Company has potential obligations to purchase the noncontrolling interests held by third parties in certain of its consolidated subsidiaries. These obligations are in the form of put
provisions and are exercisable at the third-party owners' discretion within specified periods as outlined in each specific put provision. If these put provisions were exercised, the Company would be
required to purchase all or part of third-party owners' noncontrolling interests at the appraised fair value at the time of exercise. The methodology the Company uses to estimate the fair values of
the noncontrolling interest subject to
put provisions assumes the greater of net book value or a multiple of earnings, based on historical earnings, development stage of the underlying business and other factors. Additionally, there are
put provisions that are valued by an external valuation firm. The external valuation estimates the fair values using a combination of discounted cash flows and a multiple of earnings and/or revenue.
The estimated fair values of the noncontrolling interests subject to these put provisions can also fluctuate, the discounted cash flows
54
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
and
the implicit multiple of earnings and/or revenue at which these noncontrolling interest obligations may ultimately be settled could vary significantly from our current estimates depending upon
market conditions.
At
September 30, 2016 and December 31, 2015, the Company's potential obligations under these put options were $1,216,801 and $1,023,755. At September 30, 2016 and
December 31, 2015, put options with an aggregate purchase obligation of $293,192 and $258,552, respectively, were exercisable. Two put options were exercised for a total consideration of $740
during the first nine months of 2016.
The
following is a roll forward of noncontrolling interests subject to put provisions for the nine months ended September 30, 2016 and the year ended December 31, 2015:
|
|
|
|
|
|
|
|
|
|
September 30,
2016 |
|
December 31,
2015 |
|
| Beginning balance as of January 1, |
|
$ |
1,023,755 |
|
$ |
824,658 |
|
| Contributions to noncontrolling interests |
|
|
(133,511 |
) |
|
(164,830 |
) |
| Purchase/ sale of noncontrolling interests |
|
|
50,699 |
|
|
7,915 |
|
| Contributions from noncontrolling interests |
|
|
30,298 |
|
|
16,749 |
|
| Expiration of put provisions and other reclassifications |
|
|
(3,917 |
) |
|
5,206 |
|
| Changes in fair value of noncontrolling interests |
|
|
115,325 |
|
|
178,003 |
|
| Net income |
|
|
133,267 |
|
|
159,127 |
|
| Other comprehensive income (loss) |
|
|
885 |
|
|
(3,073 |
) |
|
|
|
|
|
|
|
|
|
| Ending balance as of September 30, 2016 and December 31, 2015 |
|
$ |
1,216,801 |
|
$ |
1,023,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
addition to the amounts in the table above, Other Temporary Equity related to subsidiary stock incentive plans was $5,842 and $4,613 as of September 30, 2016 and
December 31, 2015, respectively.
10. Sources of Revenue
Outside of the U.S., the Company does not recognize patient service revenue at the time the services are rendered without assessing the patient's ability to pay. Accordingly, the
additional disclosure requirements introduced with ASU 2011-07 apply solely to U.S. patient service revenue. Below is a table showing the sources of our U.S. patient service revenue (net of
contractual allowance and discounts but before patient service bad debt provision), included in the Company's Health Care revenue, for the nine months ended September 30, 2016 and 2015.
|
|
|
|
|
|
|
|
|
|
2016 |
|
2015 |
|
| Medicare program |
|
$ |
3,991,859 |
|
$ |
3,759,692 |
|
| Private/alternative payors |
|
|
3,971,847 |
|
|
3,574,919 |
|
| Medicaid and other government sources |
|
|
465,610 |
|
|
398,912 |
|
| Hospitals |
|
|
750,233 |
|
|
673,721 |
|
|
|
|
|
|
|
|
|
|
| Total patient service revenue |
|
$ |
9,179,549 |
|
$ |
8,407,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
11. Commitments and Contingencies
Legal and Regulatory Matters
The Company is routinely involved in claims, lawsuits, regulatory and tax audits, investigations and other legal matters arising, for the most
part, in the ordinary course of its business of providing health care services and products. Legal matters that the Company currently deems to be material or noteworthy are described below. For the
matters described below in which the Company believes a loss is both reasonably possible and estimable, an estimate of the loss or range of loss exposure is provided. For the other matters described
below, the Company believes that the loss probability is remote and/or the loss or range of possible losses cannot be reasonably estimated at this time. The outcome of litigation and other legal
matters is always difficult to predict accurately and outcomes that are not consistent with the Company's view of the merits can occur. The Company believes that it has valid defenses to the legal
matters pending against it and is defending itself vigorously. Nevertheless, it is possible that the resolution of one or more of the legal matters currently pending or threatened could have a
material adverse effect on its business, results of operations and financial condition.
Commercial Litigation
On April 5, 2013, the U.S. Judicial Panel on Multidistrict Litigation ordered that the numerous lawsuits pending in various federal
courts alleging wrongful death and personal injury claims against FMCH and certain of its affiliates relating to FMCH's acid concentrate products NaturaLyte® and GranuFlo® be
transferred and consolidated for pretrial management purposes into a consolidated multidistrict litigation in the United States District Court for the District of Massachusetts. See, In Re: Fresenius
Granuflo/Naturalyte Dialysate Products Liability Litigation, Case No. 2013-md-02428. The Massachusetts state courts and the
St. Louis City (Missouri) court subsequently established similar consolidated litigation for such cases filed in Massachusetts county courts and St. Louis City court. See, In Re: Consolidated
Fresenius Cases, Case No. MICV 2013-03400-O (Massachusetts Superior Court, Middlesex County). These lawsuits allege generally
that inadequate labeling and warnings for these products caused harm to patients. In addition, similar cases have been filed in other state courts. On February 17, 2016, the Company reached
with a committee of plaintiffs' counsel and reported to the courts an agreement in principle for settlement of potentially all cases. The agreement in principle calls for the Company to pay $250,000
into a settlement fund in exchange for releases of all or substantially all of the plaintiffs' claims, subject to the Company's right to void the settlement under certain conditions, including if more
than 3% of all plaintiffs reject the settlement or the distribution of rejecters meet certain criteria. As subsequently amended with the courts' approval as to the applicable timetable, plaintiffs
must advise FMCH of acceptance of the settlement by November 7, 2016; the Company has until November 15, 2016 to exercise any rights to void the settlement; and payment of the settlement
amount must be made in November 2016 if the settlement is confirmed. The Company's affected insurers have agreed to fund $220,000 of the settlement fund, with a reservation of rights regarding certain
coverage issues between and among the
Company and its insurers. The Company has accrued a net expense of $60,000 for consummation of the settlement, including legal fees and other anticipated costs.
Subsequent
to the agreement in principle, the Company's insurers in the AIG group initiated an action for declaratory judgment in New York state court advancing various arguments for
reducing the amount of their coverage obligations. The Company filed an action in Massachusetts state court seeking to compel the AIG group carriers to honor their obligations under applicable
policies, including reimbursement to the Company of litigation defense costs incurred before the agreement in principle was reached. The
56
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
affected
carriers have confirmed that the coverage litigation does not impact their commitment to fund $220,000 of the settlement with plaintiffs.
Certain
of the complaints in the Granuflo®/Naturalyte® litigation named combinations of FMC-AG & Co. KGaA, FMC Management AG, Fresenius SE and
Fresenius Management SE as defendants, in addition to FMCH and its domestic United States affiliates. The agreement in principle provides for dismissals and releases of claims encompassing the
European defendants.
Four
institutional plaintiffs have filed complaints against FMCH or its affiliates under state deceptive practices statutes resting on certain background allegations common to the
GranuFlo®/NaturaLyte® personal injury litigation, but seeking as remedy the repayment of sums paid to FMCH attributable to the Granuflo®/Naturalyte®
products. These cases implicate different legal standards, theories of liability and forms of potential recovery from those in the personal injury litigation and their claims will not be extinguished
by the personal injury litigation settlement described above. The four plaintiffs are the Attorneys General for the States of Kentucky, Louisiana and Mississippi and the commercial insurance company
Blue Cross Blue Shield of Louisiana in its private capacity. See, State of Mississippi ex rel. Hood, v. Fresenius Medical Care Holdings, Inc.,
No. 14-cv-152 (Chancery Court, DeSoto County); State of Louisiana ex re. Caldwell and Louisiana Health Service & Indemnity Company v. Fresenius Medical Care Airline, 2016 Civ. 11035
(U.S.D.C. D. Mass.); Commonwealth of Kentucky ex rel. Beshear v. Fresenius Medical Care Holdings, Inc. et al., No. 16-CI-00946 (Circuit Court, Franklin County).
Other Litigation and Potential Exposures
On February 15, 2011, a whistleblower (relator) action under the False Claims Act against FMCH was unsealed by order of the United States
District Court for the District of Massachusetts and served by the relator. See, United States ex rel. Chris Drennen v. Fresenius Medical Care
Holdings, Inc., 2009 Civ. 10179 (D. Mass.). The United States did not intervene initially in the case. The relator's complaint, which was first filed under seal in February 2009, alleged that
the
Company sought and received reimbursement from government payors for serum ferritin and multiple forms of hepatitis B laboratory tests that were medically unnecessary or not properly ordered by a
physician. Discovery on the relator's complaint closed in May 2015. On October 2, 2015, the United States Attorney moved to intervene on the relator's complaint with respect only to certain
Hepatitis B surface antigen tests performed prior to 2011, when Medicare reimbursement rules for such tests changed. FMCH opposed the government's motion to intervene, which remains undecided.
On
October 6, 2015, the Office of Inspector General of the United States Department of Health and Human Services ("OIG") issued a subpoena to the Company seeking information about
utilization and invoicing by Fresenius Vascular Care facilities as a whole for a period beginning after the Company's acquisition of American Access Care LLC in October 2011 ("AAC"). The
Company is cooperating in the government's inquiry, which is being managed by the United States Attorney for the Eastern District of New York. Allegations against AAC arising in districts in
Connecticut, Florida and Rhode Island relating to utilization and invoicing were settled in 2015.
57
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
The Company has received communications alleging conduct in countries outside the U.S. and Germany that may violate the U.S. Foreign Corrupt Practices Act
("FCPA") or other anti-bribery laws. The Audit and Corporate Governance Committee of the Company's Supervisory Board is conducting investigations with the assistance of independent counsel. The
Company voluntarily advised the U.S. Securities and Exchange Commission ("SEC") and the U.S. Department of Justice ("DOJ"). The Company's investigations and dialogue with the SEC and DOJ are ongoing.
The Company is cooperating with the government investigations.
Conduct
has been identified that may result in monetary penalties or other sanctions under the FCPA or other anti-bribery laws. In addition, the Company's ability to conduct business in
certain jurisdictions could be negatively impacted. The Company has previously recorded a non-material accrual for an identified matter. Given the current status of the investigations and remediation
activities, the Company cannot reasonably estimate the range of possible loss that may result from identified matters or from the final outcome of the investigations or remediation activities.
The
Company is implementing enhancements to its anti-corruption compliance program, including internal controls related to compliance with international anti-bribery laws. The Company
continues to be fully committed to FCPA and other anti-bribery law compliance.
In
August 2014, FMCH received a subpoena from the United States Attorney for the District of Maryland inquiring into FMCH's contractual arrangements with hospitals and physicians,
including contracts relating to the management of in-patient acute dialysis services. FMCH is cooperating in the investigation.
In
July 2015, the Attorney General for Hawaii issued a civil complaint under the Hawaii False Claims Act alleging a conspiracy pursuant to which certain Liberty subsidiaries of FMCH
overbilled Hawaii Medicaid for Liberty's Epogen® administrations to Hawaii Medicaid patients during the period from 2006 through 2010, prior to the time of FMCH's acquisition of Liberty. See, Hawaii
v. Liberty Dialysis – Hawaii, LLC et al., Case No. 15-1-1357-07 (Hawaii
1st Circuit). The State alleges that Liberty acted unlawfully by relying on incorrect and unauthorized billing guidance provided to Liberty by Xerox State Healthcare LLC,
which acted as Hawaii's contracted administrator for its Medicaid program reimbursement operations during the relevant period. The amount of the overpayment claimed by the State is approximately
$8,000, but the State seeks civil remedies, interest, fines, and penalties against Liberty and FMCH under the Hawaii False Claims Act substantially in excess of the overpayment. FMCH filed third-party
claims for contribution and indemnification against Xerox. The State's False Claims Act complaint was filed after Liberty initiated an administrative action challenging the State's recoupment of
alleged overpayments from sums currently owed to Liberty. The administrative action is continuing.
On
August 31 and November 25, 2015, respectively, FMCH received subpoenas from the United States Attorneys for the District of Colorado and the Eastern District of New York
inquiring into FMCH's participation in and management of dialysis facility joint ventures in which physicians are partners. FMCH is cooperating in the investigations.
On
June 30, 2016, FMCH received a subpoena from the United States Attorney for the Northern District of Texas (Dallas) seeking information about the use and management of
pharmaceuticals including Velphoro® as well as FMCH's interactions with DaVita Healthcare Partners, Inc. The Company
58
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
understands
that the subpoena relates to an investigation previously disclosed by DaVita and that the investigation encompasses DaVita, Amgen, and Sanofi. FMCH is cooperating in the investigation.
From
time to time, the Company is a party to or may be threatened with other litigation or arbitration, claims or assessments arising in the ordinary course of its business. Management
regularly analyzes current information including, as applicable, the Company's defenses and insurance coverage and, as necessary, provides accruals for probable liabilities for the eventual
disposition of these matters.
The
Company, like other healthcare providers, insurance plans and suppliers, conducts its operations under intense government regulation and scrutiny. It must comply with regulations
which relate to or govern the safety and efficacy of medical products and supplies, the marketing and distribution of such products, the operation of manufacturing facilities, laboratories, dialysis
clinics and other health care facilities, and environmental and occupational health and safety. With respect to its development, manufacture, marketing and distribution of medical products, if such
compliance is not maintained, the Company could be subject to significant adverse regulatory actions by the FDA and comparable regulatory authorities outside the U.S. These regulatory actions could
include warning letters or other enforcement notices from the FDA, and/or comparable foreign regulatory authority which may require the Company to expend significant time and resources in order to
implement appropriate corrective actions. If the Company does not address matters raised in warning letters or other enforcement notices to the satisfaction of the FDA and/or comparable regulatory
authorities outside the U.S., these regulatory authorities could take additional actions, including product recalls, injunctions against the distribution of products or operation of manufacturing
plants, civil penalties, seizures of the Company's products and/or criminal prosecution. FMCH is currently engaged in remediation efforts with respect to one pending FDA warning letter. The Company
must also comply with the laws of the United States, including the federal Anti-Kickback Statute, the federal False Claims Act, the federal Stark Law, the federal Civil Monetary Penalties Law and the
federal Foreign Corrupt Practices Act as well as other federal and state fraud and abuse laws. Applicable laws or regulations may be amended, or enforcement agencies or courts may make interpretations
that differ from the Company's interpretations or the manner in which it conducts its business. Enforcement has become a high priority for the federal government and some states. In addition, the
provisions of the False Claims Act authorizing payment of a portion of any recovery to the party bringing the suit encourage private plaintiffs to commence whistleblower actions. By virtue of this
regulatory environment, the Company's business activities and practices are subject to extensive review by regulatory authorities and private parties, and continuing audits, subpoenas, other
inquiries, claims and litigation relating to the Company's compliance with applicable laws and regulations. The Company may not always be aware that an inquiry or action has begun, particularly in the
case of whistleblower actions, which are initially filed under court seal.
The
Company operates many facilities and handles personal health information of its patients and beneficiaries throughout the United States and other parts of the world. In such a
decentralized system, it is often difficult to maintain the desired level of oversight and control over the thousands of individuals employed by many affiliated companies. The Company relies upon its
management structure, regulatory and legal resources, and the effective operation of its compliance program to direct, manage and monitor the activities of these employees. On occasion, the Company
may identify instances where employees or other agents deliberately, recklessly or inadvertently contravene the Company's policies or violate applicable law. The actions of such persons may subject
the Company and its subsidiaries to liability under the Anti-Kickback Statute, the Stark Law, the False Claims Act, Health Insurance Portability and Accountability Act, the Health Information
Technology for Economic and Clinical Health Act and the Foreign Corrupt Practices Act, among other laws and comparable laws of other countries.
59
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
Physicians,
hospitals and other participants in the healthcare industry are also subject to a large number of lawsuits alleging professional negligence, malpractice, product liability,
worker's compensation or related claims, many of which involve large claims and significant defense costs. The Company has been and is currently subject to these suits due to the nature of its
business and expects that those types of lawsuits may continue. Although the Company maintains insurance at a level which it believes to be prudent, it cannot assure that the coverage limits will be
adequate or that insurance will cover all asserted claims. A successful claim against the Company or any of its subsidiaries in excess of insurance
coverage could have a material adverse effect upon it and the results of its operations. Any claims, regardless of their merit or eventual outcome, could have a material adverse effect on the
Company's reputation and business.
The
Company has also had claims asserted against it and has had lawsuits filed against it relating to alleged patent infringements or businesses that it has acquired or divested. These
claims and suits relate both to operation of the businesses and to the acquisition and divestiture transactions. The Company has, when appropriate, asserted its own claims, and claims for
indemnification. A successful claim against the Company or any of its subsidiaries could have a material adverse effect upon its business, financial condition, and the results of its operations. Any
claims, regardless of their merit or eventual outcome, could have a material adverse effect on the Company's reputation and business.
The
Company is also subject to ongoing and future tax audits in the U.S., Germany and other jurisdictions. With respect to other potential adjustments and disallowances of tax matters
currently under review, the Company does not anticipate that an unfavorable ruling could have a material impact on its results of operations. The Company is not currently able to determine the timing
of these potential additional tax payments.
Other
than those individual contingent liabilities mentioned above, the current estimated amount of the Company's other known individual contingent liabilities is immaterial.
60
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
12. Financial Instruments
Non-derivative Financial Instruments
The following table presents the carrying amounts and fair values of the Company's non-derivative financial instruments at September 30,
2016, and December 31, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016 |
|
December 31,
2015 |
|
|
|
Fair Value
Hierarchy |
|
Carrying
Amount |
|
Fair
Value |
|
Carrying
Amount |
|
Fair
Value |
|
| Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
1 |
|
$ |
629,837 |
|
|
629,837 |
|
$ |
549,500 |
|
|
549,500 |
|
Accounts receivable(1)(2) |
|
2 |
|
|
3,804,550 |
|
|
3,804,550 |
|
|
3,521,741 |
|
|
3,521,741 |
|
Available for sale financial assets(3) |
|
1 |
|
|
284,060 |
|
|
284,060 |
|
|
275,770 |
|
|
275,770 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable(1) |
|
2 |
|
|
785,384 |
|
|
785,384 |
|
|
780,851 |
|
|
780,851 |
|
Short-term debt(1) |
|
2 |
|
|
820,132 |
|
|
820,186 |
|
|
128,304 |
|
|
128,304 |
|
Long-term debt, excluding Amended 2012 Credit Agreement, Senior Notes and convertible bonds |
|
2 |
|
|
112,301 |
|
|
112,797 |
|
|
172,919 |
|
|
172,919 |
|
Amended 2012 Credit Agreement |
|
2 |
|
|
2,439,158 |
|
|
2,432,360 |
|
|
2,611,580 |
|
|
2,625,591 |
|
Senior Notes |
|
2 |
|
|
5,090,652 |
|
|
5,617,692 |
|
|
5,325,618 |
|
|
5,782,937 |
|
Convertible bonds |
|
2 |
|
|
423,196 |
|
|
559,273 |
|
|
407,705 |
|
|
546,057 |
|
| Noncontrolling interests subject to put provisions |
|
3 |
|
|
1,216,801 |
|
|
1,216,801 |
|
|
1,023,755 |
|
|
1,023,755 |
|
(1) Also includes amounts from related parties.
(2) Includes long-term accounts receivable, which are included in "Other assets" in the Consolidated Balance Sheets.
(3) Available for sale financial assets are included in "Prepaid expenses and other current assets" and "Other assets" in
the Consolidated Balance Sheets.
The
carrying amounts in the table are included in the Consolidated Balance Sheets under the indicated captions, or in the case of long-term debt and noncontrolling interests subject to
put provisions, in the captions shown in Note 5 and Note 9.
The
significant methods and assumptions used in estimating the fair values of non-derivative financial instruments are as follows:
Cash
and cash equivalents are stated at nominal value which equals the fair value.
Short-term
financial instruments such as accounts receivable, accounts payable and short-term debt are valued at their carrying amounts, which are reasonable estimates of the fair value
due to the relatively short period to maturity of these instruments.
61
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
The
fair value of available for sale financial assets quoted in an active market is based on price quotations at the period-end date.
The
fair values of major long-term financial liabilities are calculated on the basis of market information. Instruments for which market quotes are available are measured using these
quotes. The fair values of the other long-term financial liabilities are calculated at the present value of the respective future cash flows. To determine these present values, the prevailing interest
rates and credit spreads for the Company as of the balance sheet date are used.
The
valuation of noncontrolling interests subject to put provisions is determined using significant unobservable inputs. See Note 9 for a discussion of the Company's methodology
for estimating the fair value of these noncontrolling interests subject to put obligations.
Currently,
there is no indication that a decrease in the value of the Company's financing receivables is probable. Therefore, the allowances on credit losses of financing receivables are
immaterial.
Derivative Financial Instruments
The Company is exposed to market risk from changes in foreign exchange rates and interest rates. In order to manage the risk of currency
exchange rate and interest rate fluctuations, the Company enters into various hedging transactions by means of derivative instruments with highly rated financial institutions as authorized by the
Company's General Partner. On a quarterly basis, the Company performs an assessment of its counterparty credit risk. The Company currently considers this risk to be low. The Company's policy, which
has been consistently followed, is that financial derivatives be used only for the purpose of hedging foreign currency and interest rate exposure.
In
certain instances, the Company enters into derivative contracts that do not qualify for hedge accounting but are utilized for economic purposes ("economic hedges"). The Company does
not use financial instruments for trading purposes.
The
Company established guidelines for risk assessment procedures and controls for the use of financial instruments. They include a clear segregation of duties with regard to execution
on one side and administration, accounting and controlling on the other.
To
reduce the credit risk arising from derivatives the Company concluded Master Netting Agreements with banks. Through such agreements, positive and negative fair values of the
derivative contracts could be offset against one another if a partner becomes insolvent. This offsetting is valid for transactions where the aggregate amount of obligations owed to and receivable from
are not equal. If insolvency occurs, the party which owes the larger amount is obliged to pay the other party the difference between the amounts owed in the form of one net payment.
The
Company elects not to offset the fair values of derivative financial instruments subject to master netting agreements in its Consolidated Balance Sheets.
62
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
At
September 30, 2016 and December 31, 2015, the Company had $8,285 and $24,366, respectively, of derivative financial assets subject to netting arrangements and $27,189
and $12,765, respectively, of derivative financial liabilities subject to netting arrangements. Offsetting these derivative financial instruments would have resulted in net assets of $3,488 and
$16,273 as well as net liabilities of $22,392 and $4,672 at September 30, 2016 and December 31, 2015, respectively.
In
connection with the issuance of the equity-neutral convertible bonds in September 2014, the Company purchased share options. Any change in the Company's share price above the
conversion price would be offset by a corresponding value change in the share options.
Foreign Exchange Risk Management
The Company conducts business on a global basis in various currencies, though a majority of its operations are in Germany and the United States.
For financial reporting purposes, the Company has chosen the U.S. dollar as its reporting currency. Therefore, changes in the rate of exchange between the U.S. dollar and the local currencies in which
the financial statements of the Company's international operations are maintained affect its results of operations and financial position as reported in its consolidated financial statements.
Additionally,
individual subsidiaries are exposed to transactional risks mainly resulting from intercompany purchases between production sites and other subsidiaries with different
functional currencies. This exposes the subsidiaries to fluctuations in the rate of exchange between the invoicing currencies and the currency in which their local operations are conducted. For the
purpose of hedging existing and foreseeable foreign exchange transaction exposures the Company enters into foreign exchange forward contracts and, on a small scale, foreign exchange options. At
September 30, 2016 and December 31, 2015, the Company had no foreign exchange options.
Changes
in the fair value of the effective portion of foreign exchange forward contracts designated and qualifying as cash flow hedges of forecasted product purchases and sales are
reported in Accumulated Other Comprehensive Income ("AOCI"). Additionally, in connection with intercompany loans in foreign currency, the Company uses foreign exchange swaps thus assuring that no
foreign exchange risks arise from those loans, which, if they qualify for cash flow hedge accounting, are also reported in AOCI. These amounts recorded in AOCI are subsequently reclassified into
earnings as a component of cost of revenues for those contracts that hedge product purchases and sales or as an adjustment of interest income/expense for those contracts that hedge loans, in the same
period in which the hedged transaction affects earnings. The notional amounts of foreign exchange contracts in place that are designated and qualify as cash flow hedges totaled $138,148 and $193,880
at September 30, 2016 and December 31, 2015, respectively.
The
Company also enters into derivative contracts for forecasted product purchases and sales and for intercompany loans in foreign currencies which do not qualify for hedge accounting
but are utilized for economic hedges as defined above. In these two cases, the change in value of the economic hedge is recorded in the income statement and usually offsets the change in value
recorded in the income statement for the underlying asset or liability. The notional amounts of economic hedges that do not qualify for hedge accounting totaled $1,143,247 and $1,637,129 at
September 30, 2016 and December 31, 2015, respectively.
63
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
Interest Rate Risk Management
The Company enters into derivatives, particularly interest rate swaps and to a certain extent, interest rate options, to protect against the
risk of rising interest rates. These interest rate derivatives are designated as cash flow hedges and have been entered into in order to effectively convert payments based on variable interest rates
into payments at a fixed interest rate. The euro-denominated interest rate swaps expire between 2016 and 2019 and have a weighted average interest rate of 0.72%. Interest payable and receivable under
the swap agreements is accrued and recorded as an adjustment to interest expense.
At
September 30, 2016 and December 31, 2015, the notional amount of the euro-denominated interest rate swaps in place was €358,000 and
€376,000 ($399,564 and $409,351 at September 30, 2016 and December 31, 2015, respectively).
In
addition, the Company also enters into interest rate hedges ("pre-hedges") in anticipation of future long-term debt issuance, from time to time. These pre-hedges are used to hedge
interest rate exposures with regard to interest rates which are relevant for the future long-term debt issuance and which could rise until the respective debt is actually issued. These pre-hedges were
settled at the issuance date of the corresponding long-term debt with the settlement amount recorded in AOCI amortized to interest expense over the life of the debt. At September 30, 2016 and
December 31, 2015, the Company had $45,118 and $58,581, respectively, related to such settlements of pre-hedges deferred in AOCI, net of tax.
64
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
Derivative Financial Instruments Valuation
The following table shows the carrying amounts of the Company's derivatives at September 30, 2016 and December 31, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016 |
|
December 31, 2015 |
|
|
|
Assets(2) |
|
Liabilities(2) |
|
Assets(2) |
|
Liabilities(2) |
|
|
Derivatives in cash flow hedging relationships(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
|
2,228 |
|
|
(1,965 |
) |
|
3,114 |
|
|
(2,921 |
) |
Interest rate contracts |
|
|
- |
|
|
(107 |
) |
|
- |
|
|
(1,637 |
) |
Non-current |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
|
668 |
|
|
(165 |
) |
|
171 |
|
|
(127 |
) |
Interest rate contracts |
|
|
- |
|
|
(1,987 |
) |
|
- |
|
|
(961 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
2,896 |
|
$ |
(4,224 |
) |
$ |
3,285 |
|
$ |
(5,646 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
|
9,641 |
|
|
(22,969 |
) |
|
23,908 |
|
|
(7,056 |
) |
Non-current |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
|
- |
|
|
(656 |
) |
|
1,062 |
|
|
(65 |
) |
Derivatives embedded in the convertible bonds |
|
|
- |
|
|
(105,664 |
) |
|
- |
|
|
(115,990 |
) |
Share options to secure the convertible bonds |
|
|
105,664 |
|
|
- |
|
|
115,990 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
115,305 |
|
$ |
(129,289 |
) |
$ |
140,960 |
|
$ |
(123,111 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) At September 30, 2016 and December 31, 2015, the valuation of the Company's derivatives was determined
using Significant Other Observable Inputs (Level 2) in accordance with the fair value hierarchy levels established in U.S. GAAP.
(2) Derivative instruments are marked to market each reporting period resulting in carrying amounts being equal to fair
values at the reporting date.
The
carrying amounts for the current portion of derivatives indicated as assets in the table above are included in Prepaid expenses and other current assets in the Consolidated Balance
Sheets while the current portion of those indicated as liabilities are included in Accrued expenses and other current liabilities. The non-current portions indicated as assets or liabilities are
included in the Consolidated Balance Sheets in Other assets or Other liabilities, respectively.
The
significant methods and assumptions used in estimating the fair values of derivative financial instruments are as follows:
The
fair value of interest rate swaps is calculated by discounting the future cash flows on the basis of the market interest rates applicable for the remaining term of the contract as of
the balance sheet date. To determine the fair value of foreign exchange forward contracts, the contracted forward rate is compared to
65
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
the
current forward rate for the remaining term of the contract as of the balance sheet date. The result is then discounted on the basis of the market interest rates prevailing at the balance sheet
date for the applicable currency. The fair value of the embedded derivative of the convertible bonds is calculated using the difference between the market value of the convertible bond and the market
value of an adequate straight bond discounted with the market interest rates as of the reporting date.
The
Company's own credit risk is incorporated in the fair value estimation of derivatives that are liabilities. Counterparty credit risk adjustments are factored into the valuation of
derivatives that are assets. The Company monitors and analyses the credit risk from derivative financial instruments on a regular basis. For the valuation of derivative financial instruments, the
credit risk is considered in the fair value of every individual instrument. The default probability is based upon the Credit Default Swap Spreads of each counterparty appropriate for the duration. The
calculation of the credit risk considered in the valuation is performed by multiplying the default probability appropriate for the duration with the expected discounted cash flows of the derivative
financial instrument.
The Effect of Derivatives on the Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain or (Loss) Recognized in AOCI on
Derivatives (Effective Portion) for the nine months
ended September 30, |
|
|
|
Amount of (Gain) or Loss Reclassified from
AOCI in Income (Effective Portion) for the nine
months ended September 30, |
|
|
|
Location of (Gain) or
Loss Reclassified from
AOCI in Income
(Effective Portion) |
|
Derivatives in Cash Flow
Hedging Relationships
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
| Interest rate contracts |
|
$ |
800 |
|
$ |
8,168 |
|
Interest income/expense |
|
$ |
18,581 |
|
$ |
21,675 |
|
| Foreign exchange contracts |
|
|
1,394 |
|
|
(2,528 |
) |
Costs of Revenue |
|
|
(387 |
) |
|
16,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
2,194 |
|
$ |
5,640 |
|
|
|
$ |
18,194 |
|
$ |
37,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (Gain) or Loss Recognized in Income on
Derivatives for the nine months ended September 30, |
|
|
|
Location of (Gain) or
Loss Recognized in
Income on Derivative |
|
Derivatives not Designated
as Hedging Instruments
|
|
2016 |
|
2015 |
|
| Foreign exchange contracts |
|
Selling, general and administrative expense |
|
$ |
27,586 |
|
$ |
(48,552 |
) |
| Foreign exchange contracts |
|
Interest income/expense |
|
|
3,472 |
|
|
8,555 |
|
| Derivatives embedded in the convertible bonds |
|
Interest income/expense |
|
|
(13,246 |
) |
|
42,655 |
|
| Share options to secure the convertible bonds |
|
Interest income/expense |
|
|
13,246 |
|
|
(42,655 |
) |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
$ |
31,058 |
|
$ |
(39,997 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
foreign exchange derivatives at September 30, 2016, the Company expects to recognize $1,232 of losses deferred in AOCI in earnings during the next twelve months.
The
Company expects to incur additional interest expense of $21,886 over the next twelve months which is currently deferred in AOCI. This amount reflects the projected amortization of
the settlement amount of the terminated swaps and the current fair value of the additional interest payments resulting from the interest rate swaps maturing between 2016 and 2019 at
September 30, 2016.
At
September 30, 2016, the Company had foreign exchange derivatives with maturities of up to 18 months and interest rate swaps with maturities of up to 37 months.
66
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
13. Other Comprehensive Income (Loss)
The changes in the components of other comprehensive income (loss) for the nine months ended September 30, 2016 and 2015 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss)
related to
cash flow
hedges |
|
Actuarial
gain (loss) on
defined
benefit
pension plans |
|
Gain (Loss)
related to
foreign-
currency
translation |
|
Total, before
non-
controlling
interests |
|
Non-
controlling
interests |
|
Total |
|
| Balance at December 31, 2014 |
|
$ |
(103,277 |
) |
$ |
(282,019 |
) |
$ |
(702,447 |
) |
$ |
(1,087,743 |
) |
$ |
(5,261 |
) |
$ |
(1,093,004 |
) |
Other comprehensive income (loss) before reclassifications |
|
|
3,542 |
|
|
- |
|
|
(247,256 |
) |
|
(243,714 |
) |
|
(3,692 |
) |
|
(247,406 |
) |
Amounts reclassified from AOCI |
|
|
27,517 |
|
|
16,347 |
|
|
- |
|
|
43,864 |
|
|
- |
|
|
43,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income (loss) after reclassifications |
|
|
31,059 |
|
|
16,347 |
|
|
(247,256 |
) |
|
(199,850 |
) |
|
(3,692 |
) |
|
(203,542 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at September 30, 2015 |
|
$ |
(72,218 |
) |
$ |
(265,672 |
) |
$ |
(949,703 |
) |
$ |
(1,287,593 |
) |
$ |
(8,953 |
) |
$ |
(1,296,546 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at December 31, 2015 |
|
$ |
(60,214 |
) |
$ |
(225,091 |
) |
$ |
(1,050,990 |
) |
$ |
(1,336,295 |
) |
$ |
(10,222 |
) |
$ |
(1,346,517 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications |
|
|
1,386 |
|
|
- |
|
|
131,202 |
|
|
132,588 |
|
|
3,963 |
|
|
136,551 |
|
Amounts reclassified from AOCI |
|
|
13,006 |
|
|
14,526 |
|
|
- |
|
|
27,532 |
|
|
- |
|
|
27,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income (loss) after reclassifications |
|
|
14,392 |
|
|
14,526 |
|
|
131,202 |
|
|
160,120 |
|
|
3,963 |
|
|
164,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at September 30, 2016 |
|
$ |
(45,822 |
) |
$ |
(210,565 |
) |
$ |
(919,788 |
) |
$ |
(1,176,175 |
) |
$ |
(6,259 |
) |
$ |
(1,182,434 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications
out of AOCI for the nine months ended September 30, 2016 and 2015 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Amount of (Gain) Loss reclassified from
AOCI in Income |
|
|
Details about AOCI Components
|
|
Location of (Gain) Loss reclassified
from AOCI in Income |
|
|
2016 |
|
2015 |
| (Gain) Loss related to cash flow hedges |
|
|
|
|
|
|
|
|
Interest rate contracts |
|
$ |
18,581 |
|
$ |
21,675 |
|
Interest income/expense |
Foreign exchange contracts |
|
|
(387 |
) |
|
16,256 |
|
Costs of Revenue |
|
|
|
|
|
|
|
|
|
|
| |
|
|
18,194 |
|
|
37,931 |
|
Total before tax |
|
|
|
|
|
|
|
|
|
|
| |
|
|
(5,188 |
) |
|
(10,414 |
) |
Tax expense or benefit |
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
13,006 |
|
$ |
27,517 |
|
Net of tax |
|
|
|
|
|
|
|
|
|
|
| Actuarial (Gain) Loss on defined benefit pension plans |
|
|
|
|
|
|
|
|
Amortization of unrealized (gain) loss |
|
|
23,053 |
|
|
25,995 |
|
(1) |
|
|
|
|
|
|
|
|
|
|
| |
|
|
23,053 |
|
|
25,995 |
|
Total before tax |
|
|
|
|
|
|
|
|
|
|
| |
|
|
(8,527 |
) |
|
(9,648 |
) |
Tax expense or benefit |
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
14,526 |
|
$ |
16,347 |
|
Net of tax |
|
|
|
|
|
|
|
|
|
|
| Total reclassifications for the period |
|
$ |
27,532 |
|
$ |
43,864 |
|
Net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Included in the computation of net periodic pension cost (see Note 8 for additional details).
67
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
14. Segment and Corporate Information
The Company's operating segments are the North America Segment, the EMEA Segment, the Asia-Pacific Segment and the Latin America Segment. Management evaluates each segment using measures
that reflect all of the segment's controllable revenues and expenses. With respect to the performance of business operations, management believes that the most appropriate U.S. GAAP measures
are revenue, operating income and operating income margin. The Company does not include income taxes as it believes this is outside the segments' control. Financing is a corporate function,
which the Company's segments do not control. Therefore, the Company does not include interest expense relating to financing as a segment measurement. Similarly, the Company does not allocate certain
costs, which relate primarily to certain headquarter overhead charges, including accounting and finance, because the Company believes that these costs are also not within the control of the individual
segments. Production of products, production asset management, quality management and procurement related to production are centrally managed at Corporate. The Company's global research and
development is also centrally managed at Corporate. These Corporate activities do not fulfill the definition of a segment. Products are transferred to the segments at cost; therefore no internal
profit is generated. The associated internal revenues for the product transfers and their elimination are recorded as Corporate activities. Capital expenditures for production are based on the
expected demand of the segments and consolidated profitability considerations. In addition, certain revenues, investments and intangible assets, as well as any related expenses, are not allocated to a
segment but are accounted for at Corporate.
68
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
Information
pertaining to the Company's segment and Corporate activities for the three and nine months ended September 30, 2016 and 2015 is set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
Segment |
|
EMEA
Segment |
|
Asia-
Pacific
Segment |
|
Latin
America
Segment |
|
Segment
Total |
|
Corporate |
|
Total |
|
| Three months ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue external customers |
|
$ |
3,300,374 |
|
$ |
675,331 |
|
$ |
427,224 |
|
$ |
191,670 |
|
$ |
4,594,599 |
|
$ |
3,642 |
|
$ |
4,598,241 |
|
Inter - segment revenue |
|
|
888 |
|
|
- |
|
|
8 |
|
|
50 |
|
|
946 |
|
|
(946 |
) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
3,301,262 |
|
|
675,331 |
|
|
427,232 |
|
|
191,720 |
|
|
4,595,545 |
|
|
2,696 |
|
|
4,598,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
536,187 |
|
|
125,240 |
|
|
84,703 |
|
|
20,032 |
|
|
766,162 |
|
|
(96,220 |
) |
|
669,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(108,460 |
) |
|
(30,636 |
) |
|
(12,474 |
) |
|
(4,663 |
) |
|
(156,233 |
) |
|
(40,358 |
) |
|
(196,591 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from equity method investees |
|
|
26,164 |
|
|
1,200 |
|
|
1,163 |
|
|
504 |
|
|
29,031 |
|
|
- |
|
|
29,031 |
|
Capital expenditures, acquisitions and investments |
|
|
192,340 |
|
|
41,881 |
|
|
20,627 |
|
|
13,714 |
|
|
268,562 |
|
|
55,701 |
|
|
324,263 |
|
Three months ended September 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue external customers |
|
$ |
3,012,532 |
|
$ |
658,875 |
|
$ |
377,981 |
|
$ |
175,573 |
|
$ |
4,224,961 |
|
$ |
6,390 |
|
$ |
4,231,351 |
|
Inter - segment revenue |
|
|
1,646 |
|
|
- |
|
|
2 |
|
|
148 |
|
|
1,796 |
|
|
(1,796 |
) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
3,014,178 |
|
|
658,875 |
|
|
377,983 |
|
|
175,721 |
|
|
4,226,757 |
|
|
4,594 |
|
|
4,231,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
515,465 |
|
|
129,822 |
|
|
67,552 |
|
|
(8,170 |
) |
|
704,669 |
|
|
(91,139 |
) |
|
613,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(100,842 |
) |
|
(28,207 |
) |
|
(11,070 |
) |
|
(2,326 |
) |
|
(142,445 |
) |
|
(37,393 |
) |
|
(179,838 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from equity method investees |
|
|
6,873 |
|
|
1,101 |
|
|
652 |
|
|
411 |
|
|
9,037 |
|
|
- |
|
|
9,037 |
|
Capital expenditures, acquisitions and investments |
|
|
140,126 |
|
|
53,235 |
|
|
9,530 |
|
|
14,144 |
|
|
217,035 |
|
|
77,667 |
|
|
294,702 |
|
Nine months ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue external customers |
|
$ |
9,511,885 |
|
$ |
1,982,453 |
|
$ |
1,198,315 |
|
$ |
519,888 |
|
$ |
13,212,541 |
|
$ |
11,517 |
|
$ |
13,224,058 |
|
Inter - segment revenue |
|
|
3,024 |
|
|
- |
|
|
18 |
|
|
148 |
|
|
3,190 |
|
|
(3,190 |
) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
9,514,909 |
|
|
1,982,453 |
|
|
1,198,333 |
|
|
520,036 |
|
|
13,215,731 |
|
|
8,327 |
|
|
13,224,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
1,485,502 |
|
|
394,583 |
|
|
224,671 |
|
|
47,178 |
|
|
2,151,934 |
|
|
(300,611 |
) |
|
1,851,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(317,674 |
) |
|
(89,816 |
) |
|
(36,073 |
) |
|
(12,511 |
) |
|
(456,074 |
) |
|
(116,509 |
) |
|
(572,583 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from equity method investees |
|
|
57,103 |
|
|
1,859 |
|
|
936 |
|
|
1,175 |
|
|
61,073 |
|
|
- |
|
|
61,073 |
|
Total assets |
|
|
17,998,260 |
|
|
3,669,248 |
|
|
1,956,653 |
|
|
751,451 |
|
|
24,375,612 |
|
|
2,282,873 |
|
|
26,658,485 |
|
thereof investments in equity method investees |
|
|
330,686 |
|
|
238,947 |
|
|
112,555 |
|
|
27,626 |
|
|
709,814 |
|
|
- |
|
|
709,814 |
|
Capital expenditures, acquisitions and investments(1) |
|
|
741,879 |
|
|
145,651 |
|
|
38,482 |
|
|
29,532 |
|
|
955,544 |
|
|
179,066 |
|
|
1,134,610 |
|
Nine months ended September 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue external customers |
|
$ |
8,729,595 |
|
$ |
1,955,537 |
|
$ |
1,107,119 |
|
$ |
576,145 |
|
$ |
12,368,396 |
|
$ |
21,618 |
|
$ |
12,390,014 |
|
Inter - segment revenue |
|
|
4,472 |
|
|
- |
|
|
20 |
|
|
392 |
|
|
4,884 |
|
|
(4,884 |
) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
8,734,067 |
|
|
1,955,537 |
|
|
1,107,139 |
|
|
576,537 |
|
|
12,373,280 |
|
|
16,734 |
|
|
12,390,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
1,283,782 |
|
|
405,320 |
|
|
219,098 |
|
|
25,398 |
|
|
1,933,598 |
|
|
(268,705 |
) |
|
1,664,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(298,911 |
) |
|
(85,349 |
) |
|
(33,505 |
) |
|
(11,375 |
) |
|
(429,140 |
) |
|
(107,511 |
) |
|
(536,651 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from equity method investees |
|
|
15,383 |
|
|
3,983 |
|
|
1,848 |
|
|
824 |
|
|
22,038 |
|
|
- |
|
|
22,038 |
|
Total assets(2)(3) |
|
|
16,944,472 |
|
|
3,437,731 |
|
|
1,752,893 |
|
|
616,199 |
|
|
22,751,295 |
|
|
2,400,678 |
|
|
25,151,973 |
|
thereof investments in equity method investees |
|
|
291,323 |
|
|
238,542 |
|
|
111,784 |
|
|
26,050 |
|
|
667,699 |
|
|
- |
|
|
667,699 |
|
Capital expenditures, acquisitions and investments(4) |
|
|
427,529 |
|
|
125,419 |
|
|
33,465 |
|
|
25,045 |
|
|
611,458 |
|
|
201,586 |
|
|
813,044 |
|
(1) North America, EMEA, Latin America and Asia Pacific acquisitions exclude $9,130, $91,813, $4,999 and $4,860
respectively of non-cash acquisitions for 2016.
(2) At September 30, 2015 debt issuance costs in the amount of $53,156 have been reclassified from Prepaid expenses
and other current assets and Other assets to Long-term debt and capital lease obligations to conform to the current year´s presentation.
(3) Deferred taxes which were classified as current at September 30, 2015 have been reclassified to noncurrent in
accordance with Accounting Standards Update 2015-17, Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes. Deferred taxes previously recorded in 2015 within current assets
and liabilities have been reclassified to noncurrent assets and liabilities in the amount of $242,169 and $34,671, respectively. As a result of deferred tax netting, noncurrent assets and liabilities
were then adjusted in the amount of $209,094.
(4) North America, EMEA, Asia-Pacific, Latin America and Corporate acquisitions and investments exclude $2,600, $21,195,
$36,273, $246 and $7,926, respectively, of non-cash acquisitions and investments for 2015.
69
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
15. Supplementary Cash Flow Information
The following additional information is provided with respect to the Consolidated Statements of Cash Flows:
|
|
|
|
|
|
|
|
|
|
For the nine months
ended September 30, |
|
|
|
2016 |
|
2015 |
|
| Supplementary cash flow information: |
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
345,892 |
|
$ |
341,496 |
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes(1) |
|
$ |
502,163 |
|
$ |
372,711 |
|
|
|
|
|
|
|
|
|
|
Cash inflow for income taxes from stock option exercises(2) |
|
$ |
8,469 |
|
$ |
13,859 |
|
|
|
|
|
|
|
|
|
|
| Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
Details for acquisitions: |
|
|
|
|
|
|
|
Assets acquired |
|
$ |
(465,121 |
) |
$ |
(159,535 |
) |
Liabilities assumed |
|
|
67,378 |
|
|
35,233 |
|
Noncontrolling interest subject to put provisions |
|
|
43,897 |
|
|
8,358 |
|
Noncontrolling interest |
|
|
15,119 |
|
|
956 |
|
Non-cash consideration |
|
|
79,993 |
|
|
49,324 |
|
|
|
|
|
|
|
|
|
|
Cash paid |
|
|
(258,734 |
) |
|
(65,664 |
) |
Less cash acquired |
|
|
15,377 |
|
|
3,316 |
|
|
|
|
|
|
|
|
|
|
Net cash paid for acquisitions |
|
|
(243,357 |
) |
|
(62,348 |
) |
Cash paid for investments |
|
|
(133,844 |
) |
|
(78,372 |
) |
Cash paid for intangible assets |
|
|
(9,767 |
) |
|
(24,974 |
) |
|
|
|
|
|
|
|
|
|
Total cash paid for acquisitions and investments, net of cash acquired, and purchases of intangible assets |
|
$ |
(386,968 |
) |
$ |
(165,694 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net of tax refund.
(2) Thereof the excess tax benefit allocated to additional paid-in capital for the nine months ended September 30,
2016 and 2015 was $6,254 and $10,456, respectively.
70
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
16. Supplemental Condensed Combining Information
FMC Finance III, a former wholly-owned subsidiary of the Company, issued 67/8% Senior Notes due 2017 in July 2007. On June 20, 2011, Fresenius Medical Care US
Finance, Inc. ("US Finance") acquired substantially all of the assets of FMC Finance III and assumed its obligations, including the 67/8% Senior Notes and the related indenture.
The 67/8% Senior Notes are fully and unconditionally guaranteed, jointly and severally on a senior basis, by the Company and by FMCH and D-GmbH, together the ("Guarantor Subsidiaries").
The 67/8% Senior Notes and related guarantees were issued in an exchange offer registered under the Securities Act of 1933. The financial statements in this report present the
financial condition of the Company, on a consolidated basis at September 30, 2016 and December 31, 2015 and its results of operations and cash flows for the nine-months periods ended
September 30, 2016 and 2015. The following combining financial information for the Company is at September 30, 2016 and December 31, 2015 and for the nine-months periods ended
September 30, 2016 and 2015, segregated between FMC US Finance as issuer, the Company, D-GmbH and FMCH as guarantors, and the Company's other businesses (the "Non-Guarantor Subsidiaries"). For
purposes of the condensed combining information, the Company and the guarantors carry their investments under the equity method. Other (income) expense includes income (loss) related to investments in
consolidated subsidiaries recorded under the equity method for purposes of the condensed combining information. In addition, other (income) expense includes income and losses from profit and loss
transfer agreements as well as dividends received.
71
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2016 |
|
|
|
Issuer |
|
Guarantors |
|
|
|
|
|
|
|
|
|
FMC US
Finance |
|
FMC - AG &
Co. KGaA |
|
D-GmbH |
|
FMCH |
|
Non-Guarantor
Subsidiaries |
|
Combining
Adjustment |
|
Combined
Total |
|
| Net revenue |
|
$ |
- |
|
$ |
- |
|
$ |
1,423,176 |
|
$ |
- |
|
$ |
14,219,979 |
|
$ |
(2,419,097 |
) |
$ |
13,224,058 |
|
| Cost of revenue |
|
|
- |
|
|
- |
|
|
903,280 |
|
|
- |
|
|
10,531,770 |
|
|
(2,398,829 |
) |
|
9,036,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
- |
|
|
- |
|
|
519,896 |
|
|
- |
|
|
3,688,209 |
|
|
(20,268 |
) |
|
4,187,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative(1) |
|
|
- |
|
|
147,631 |
|
|
159,567 |
|
|
(37,729 |
) |
|
1,937,593 |
|
|
9,316 |
|
|
2,216,378 |
|
Research and development |
|
|
- |
|
|
- |
|
|
66,232 |
|
|
- |
|
|
53,904 |
|
|
- |
|
|
120,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating (loss) income |
|
|
- |
|
|
(147,631 |
) |
|
294,097 |
|
|
37,729 |
|
|
1,696,712 |
|
|
(29,584 |
) |
|
1,851,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net |
|
|
(5,344 |
) |
|
140,489 |
|
|
(2,921 |
) |
|
174,012 |
|
|
1,569 |
|
|
- |
|
|
307,805 |
|
Other, net |
|
|
- |
|
|
(1,173,243 |
) |
|
200,639 |
|
|
(674,201 |
) |
|
- |
|
|
1,646,805 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) before income taxes |
|
|
5,344 |
|
|
885,123 |
|
|
96,379 |
|
|
537,918 |
|
|
1,695,143 |
|
|
(1,676,389 |
) |
|
1,543,518 |
|
Income tax expense (benefit) |
|
|
1,939 |
|
|
29,979 |
|
|
87,829 |
|
|
(53,764 |
) |
|
629,058 |
|
|
(224,108 |
) |
|
470,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Income (loss) |
|
|
3,405 |
|
|
855,144 |
|
|
8,550 |
|
|
591,682 |
|
|
1,066,085 |
|
|
(1,452,281 |
) |
|
1,072,585 |
|
| Net Income attributable to noncontrolling interests |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
217,441 |
|
|
- |
|
|
217,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) attributable to shareholders of FMC-AG & Co. KGaA |
|
$ |
3,405 |
|
$ |
855,144 |
|
$ |
8,550 |
|
$ |
591,682 |
|
$ |
848,644 |
|
$ |
(1,452,281 |
) |
$ |
855,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Selling, general and administrative is presented net of income from equity method investees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2015 |
|
|
|
Issuer |
|
Guarantors |
|
|
|
|
|
|
|
|
|
FMC US
Finance |
|
FMC - AG &
Co. KGaA |
|
D-GmbH |
|
FMCH |
|
Non-Guarantor
Subsidiaries |
|
Combining
Adjustment |
|
Combined
Total |
|
| Net revenue |
|
$ |
- |
|
$ |
- |
|
$ |
1,391,965 |
|
$ |
- |
|
$ |
13,234,250 |
|
$ |
(2,236,201 |
) |
$ |
12,390,014 |
|
| Cost of revenue |
|
|
- |
|
|
- |
|
|
893,319 |
|
|
- |
|
|
9,870,460 |
|
|
(2,236,844 |
) |
|
8,526,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
- |
|
|
- |
|
|
498,646 |
|
|
- |
|
|
3,363,790 |
|
|
643 |
|
|
3,863,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative(1) |
|
|
- |
|
|
141,963 |
|
|
148,544 |
|
|
170,985 |
|
|
1,629,919 |
|
|
6,415 |
|
|
2,097,826 |
|
Research and development |
|
|
- |
|
|
- |
|
|
53,941 |
|
|
- |
|
|
46,419 |
|
|
- |
|
|
100,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating (loss) income |
|
|
- |
|
|
(141,963 |
) |
|
296,161 |
|
|
(170,985 |
) |
|
1,687,452 |
|
|
(5,772 |
) |
|
1,664,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net |
|
|
(5,236 |
) |
|
153,670 |
|
|
(3,182 |
) |
|
170,360 |
|
|
(12,112 |
) |
|
11 |
|
|
303,511 |
|
Other, net |
|
|
- |
|
|
(1,015,723 |
) |
|
201,874 |
|
|
(598,506 |
) |
|
- |
|
|
1,412,355 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) before income taxes |
|
|
5,236 |
|
|
720,090 |
|
|
97,469 |
|
|
257,161 |
|
|
1,699,564 |
|
|
(1,418,138 |
) |
|
1,361,382 |
|
Income tax expense (benefit) |
|
|
1,900 |
|
|
7,454 |
|
|
89,153 |
|
|
(134,661 |
) |
|
639,635 |
|
|
(161,814 |
) |
|
441,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Income (loss) |
|
|
3,336 |
|
|
712,636 |
|
|
8,316 |
|
|
391,822 |
|
|
1,059,929 |
|
|
(1,256,324 |
) |
|
919,715 |
|
| Net Income attributable to noncontrolling interests |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
207,079 |
|
|
- |
|
|
207,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) attributable to shareholders of FMC-AG & Co. KGaA |
|
$ |
3,336 |
|
$ |
712,636 |
|
$ |
8,316 |
|
$ |
391,822 |
|
$ |
852,850 |
|
$ |
(1,256,324 |
) |
$ |
712,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Selling, general and administrative is presented net of income from equity method investees.
72
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2016 |
|
|
|
Issuer |
|
Guarantors |
|
|
|
|
|
|
|
|
|
FMC US
Finance |
|
FMC - AG &
Co. KGaA |
|
D-GmbH |
|
FMCH |
|
Non-Guarantor
Subsidiaries |
|
Combining
Adjustment |
|
Combined Total |
|
| Net Income |
|
$ |
3,405 |
|
$ |
855,144 |
|
$ |
8,550 |
|
$ |
591,682 |
|
$ |
1,066,085 |
|
$ |
(1,452,281 |
) |
$ |
1,072,585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) related to cash flow hedges |
|
|
- |
|
|
19,381 |
|
|
2,177 |
|
|
- |
|
|
(1,170 |
) |
|
- |
|
|
20,388 |
|
Actuarial gain (loss) on defined benefit pension plans |
|
|
- |
|
|
301 |
|
|
5,097 |
|
|
17,185 |
|
|
470 |
|
|
- |
|
|
23,053 |
|
Gain (loss) related to foreign currency translation |
|
|
- |
|
|
(78,627 |
) |
|
14,487 |
|
|
- |
|
|
203,456 |
|
|
(4,151 |
) |
|
135,165 |
|
Income tax (expense) benefit related to components of other comprehensive income |
|
|
- |
|
|
(5,660 |
) |
|
(2,159 |
) |
|
(6,780 |
) |
|
76 |
|
|
- |
|
|
(14,523 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income (loss), net of tax |
|
|
- |
|
|
(64,605 |
) |
|
19,602 |
|
|
10,405 |
|
|
202,832 |
|
|
(4,151 |
) |
|
164,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income |
|
$ |
3,405 |
|
$ |
790,539 |
|
$ |
28,152 |
|
$ |
602,087 |
|
$ |
1,268,917 |
|
$ |
(1,456,432 |
) |
$ |
1,236,668 |
|
Comprehensive income attributable to noncontrolling interests |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
221,404 |
|
|
221,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive income attributable to shareholders of FMC-AG & Co. KGaA |
|
$ |
3,405 |
|
$ |
790,539 |
|
$ |
28,152 |
|
$ |
602,087 |
|
$ |
1,268,917 |
|
$ |
(1,677,836 |
) |
$ |
1,015,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2015 |
|
|
|
Issuer |
|
Guarantors |
|
|
|
|
|
|
|
|
|
FMC US
Finance |
|
FMC - AG &
Co. KGaA |
|
D-GmbH |
|
FMCH |
|
Non-Guarantor
Subsidiaries |
|
Combining
Adjustment |
|
Combined Total |
|
| Net Income |
|
$ |
3,336 |
|
$ |
712,636 |
|
$ |
8,316 |
|
$ |
391,822 |
|
$ |
1,059,929 |
|
$ |
(1,256,324 |
) |
$ |
919,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) related to cash flow hedges |
|
|
- |
|
|
29,944 |
|
|
- |
|
|
- |
|
|
13,627 |
|
|
- |
|
|
43,571 |
|
Actuarial gain (loss) on defined benefit pension plans |
|
|
- |
|
|
296 |
|
|
5,360 |
|
|
19,800 |
|
|
539 |
|
|
- |
|
|
25,995 |
|
Gain (loss) related to foreign currency translation |
|
|
- |
|
|
(118,003 |
) |
|
(47,431 |
) |
|
- |
|
|
(101,599 |
) |
|
16,085 |
|
|
(250,948 |
) |
Income tax (expense) benefit related to components of other comprehensive income |
|
|
- |
|
|
(8,685 |
) |
|
(1,588 |
) |
|
(7,811 |
) |
|
(4,076 |
) |
|
- |
|
|
(22,160 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income (loss), net of tax |
|
|
- |
|
|
(96,448 |
) |
|
(43,659 |
) |
|
11,989 |
|
|
(91,509 |
) |
|
16,085 |
|
|
(203,542 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income |
|
$ |
3,336 |
|
$ |
616,188 |
|
$ |
(35,343 |
) |
$ |
403,811 |
|
$ |
968,420 |
|
$ |
(1,240,239 |
) |
$ |
716,173 |
|
Comprehensive income attributable to noncontrolling interests |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
203,387 |
|
|
203,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive income attributable to shareholders of FMC-AG & Co. KGaA |
|
$ |
3,336 |
|
$ |
616,188 |
|
$ |
(35,343 |
) |
$ |
403,811 |
|
$ |
968,420 |
|
$ |
(1,443,626 |
) |
$ |
512,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2016 |
|
|
|
Issuer |
|
Guarantors |
|
|
|
|
|
|
|
|
|
FMC
US Finance |
|
FMC - AG &
Co. KGaA |
|
D-GmbH |
|
FMCH |
|
Non-
Guarantor
Subsidiaries |
|
Combining
Adjustment |
|
Combined
Total |
|
| Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1 |
|
$ |
13 |
|
$ |
330 |
|
$ |
- |
|
$ |
902,807 |
|
$ |
(273,314 |
) |
$ |
629,837 |
|
Trade accounts receivable, less allowance for doubtful accounts |
|
|
- |
|
|
- |
|
|
168,590 |
|
|
- |
|
|
3,452,640 |
|
|
(676 |
) |
|
3,620,554 |
|
Accounts receivable from related parties |
|
|
1,248,414 |
|
|
1,167,351 |
|
|
884,668 |
|
|
2,390,002 |
|
|
3,621,964 |
|
|
(9,140,936 |
) |
|
171,463 |
|
Inventories |
|
|
- |
|
|
- |
|
|
267,842 |
|
|
- |
|
|
1,311,012 |
|
|
(172,260 |
) |
|
1,406,594 |
|
Prepaid expenses and other current assets |
|
|
- |
|
|
66,220 |
|
|
75,468 |
|
|
33 |
|
|
1,207,397 |
|
|
40,832 |
|
|
1,389,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,248,415 |
|
|
1,233,584 |
|
|
1,396,898 |
|
|
2,390,035 |
|
|
10,495,820 |
|
|
(9,546,354 |
) |
|
7,218,398 |
|
Property, plant and equipment, net |
|
|
- |
|
|
613 |
|
|
288,195 |
|
|
- |
|
|
3,552,565 |
|
|
(106,745 |
) |
|
3,734,628 |
|
| Intangible assets |
|
|
- |
|
|
1,247 |
|
|
48,614 |
|
|
- |
|
|
768,871 |
|
|
(78 |
) |
|
818,654 |
|
| Goodwill |
|
|
- |
|
|
- |
|
|
54,717 |
|
|
- |
|
|
13,433,194 |
|
|
- |
|
|
13,487,911 |
|
| Deferred taxes |
|
|
- |
|
|
112,580 |
|
|
32,885 |
|
|
- |
|
|
176,160 |
|
|
(128,390 |
) |
|
193,235 |
|
| Other assets(1) |
|
|
- |
|
|
14,866,993 |
|
|
45,046 |
|
|
13,843,126 |
|
|
6,297,842 |
|
|
(33,847,348 |
) |
|
1,205,659 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,248,415 |
|
$ |
16,215,017 |
|
$ |
1,866,355 |
|
$ |
16,233,161 |
|
$ |
34,724,452 |
|
$ |
(43,628,915 |
) |
$ |
26,658,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
- |
|
$ |
1,107 |
|
$ |
27,291 |
|
$ |
- |
|
$ |
499,026 |
|
$ |
- |
|
$ |
527,424 |
|
Accounts payable to related parties |
|
|
- |
|
|
265,389 |
|
|
708,475 |
|
|
1,652,439 |
|
|
5,952,752 |
|
|
(8,321,095 |
) |
|
257,960 |
|
Accrued expenses and other current liabilities |
|
|
11,833 |
|
|
75,545 |
|
|
146,480 |
|
|
11,001 |
|
|
2,387,799 |
|
|
(1,379 |
) |
|
2,631,279 |
|
Short-term debt |
|
|
- |
|
|
888,797 |
|
|
- |
|
|
- |
|
|
107,445 |
|
|
(274,996 |
) |
|
721,246 |
|
Short-term debt from related parties |
|
|
- |
|
|
1,175,644 |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,076,758 |
) |
|
98,886 |
|
Current portion of long-term debt and capital lease obligations |
|
|
503,904 |
|
|
26,786 |
|
|
1,294 |
|
|
200,000 |
|
|
159,315 |
|
|
- |
|
|
891,299 |
|
Income tax payable |
|
|
- |
|
|
12,199 |
|
|
- |
|
|
- |
|
|
105,365 |
|
|
8,152 |
|
|
125,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
515,737 |
|
|
2,445,467 |
|
|
883,540 |
|
|
1,863,440 |
|
|
9,211,702 |
|
|
(9,666,076 |
) |
|
5,253,810 |
|
Long term debt and capital lease obligations, less current portion |
|
|
650,000 |
|
|
669,194 |
|
|
4,597 |
|
|
1,947,776 |
|
|
6,398,359 |
|
|
(2,495,918 |
) |
|
7,174,008 |
|
| Long term debt from related parties |
|
|
- |
|
|
2,333,897 |
|
|
- |
|
|
2,721,696 |
|
|
- |
|
|
(5,055,593 |
) |
|
- |
|
| Other liabilities |
|
|
- |
|
|
109,224 |
|
|
1,441 |
|
|
423,440 |
|
|
(24,402 |
) |
|
36,018 |
|
|
545,721 |
|
| Pension liabilities |
|
|
- |
|
|
16,923 |
|
|
338,854 |
|
|
- |
|
|
189,226 |
|
|
(30,523 |
) |
|
514,480 |
|
| Income tax payable |
|
|
890 |
|
|
48,729 |
|
|
- |
|
|
- |
|
|
(11,975 |
) |
|
90,753 |
|
|
128,397 |
|
| Deferred taxes |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
617,044 |
|
|
(35,323 |
) |
|
581,721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,166,627 |
|
|
5,623,434 |
|
|
1,228,432 |
|
|
6,956,352 |
|
|
16,379,954 |
|
|
(17,156,662 |
) |
|
14,198,137 |
|
Noncontrolling interests subject to put provisions and other temporary equity |
|
|
- |
|
|
- |
|
|
0 |
|
|
- |
|
|
1,222,643 |
|
|
- |
|
|
1,222,643 |
|
| Redeemable Preferred Stock |
|
|
- |
|
|
- |
|
|
- |
|
|
235,141 |
|
|
(235,141 |
) |
|
- |
|
|
- |
|
Total FMC-AG & Co. KGaA shareholders' equity |
|
|
81,788 |
|
|
10,591,583 |
|
|
637,923 |
|
|
9,041,668 |
|
|
16,710,874 |
|
|
(26,472,253 |
) |
|
10,591,583 |
|
| Noncontrolling interests not subject to put provisions |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
646,122 |
|
|
- |
|
|
646,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total equity |
|
|
81,788 |
|
|
10,591,583 |
|
|
637,923 |
|
|
9,041,668 |
|
|
17,356,996 |
|
|
(26,472,253 |
) |
|
11,237,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
1,248,415 |
|
$ |
16,215,017 |
|
$ |
1,866,355 |
|
$ |
16,233,161 |
|
$ |
34,724,452 |
|
$ |
(43,628,915 |
) |
$ |
26,658,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Other assets are presented net of investment in equity method investees.
74
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2015 |
|
|
|
Issuer |
|
Guarantors |
|
|
|
|
|
|
|
|
|
FMC
US Finance |
|
FMC - AG &
Co. KGaA |
|
D-GmbH |
|
FMCH |
|
Non-
Guarantor
Subsidiaries |
|
Combining
Adjustment |
|
Combined
Total |
|
| Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2 |
|
$ |
448 |
|
$ |
5,055 |
|
$ |
- |
|
$ |
544,443 |
|
$ |
(448 |
) |
$ |
549,500 |
|
Trade accounts receivable, less allowance for doubtful accounts |
|
|
- |
|
|
- |
|
|
144,105 |
|
|
- |
|
|
3,140,355 |
|
|
736 |
|
|
3,285,196 |
|
Accounts receivable from related parties |
|
|
1,266,557 |
|
|
985,449 |
|
|
682,359 |
|
|
2,434,976 |
|
|
4,002,451 |
|
|
(9,153,507 |
) |
|
218,285 |
|
Inventories |
|
|
- |
|
|
- |
|
|
233,012 |
|
|
- |
|
|
1,256,252 |
|
|
(148,513 |
) |
|
1,340,751 |
|
Prepaid expenses and other current assets |
|
|
- |
|
|
91,902 |
|
|
60,024 |
|
|
983 |
|
|
1,186,883 |
|
|
34,923 |
|
|
1,374,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,266,559 |
|
|
1,077,799 |
|
|
1,124,555 |
|
|
2,435,959 |
|
|
10,130,384 |
|
|
(9,266,809 |
) |
|
6,768,447 |
|
Property, plant and equipment, net |
|
|
- |
|
|
595 |
|
|
267,926 |
|
|
- |
|
|
3,260,604 |
|
|
(103,551 |
) |
|
3,425,574 |
|
| Intangible assets |
|
|
- |
|
|
1,653 |
|
|
51,593 |
|
|
- |
|
|
777,319 |
|
|
(76 |
) |
|
830,489 |
|
| Goodwill |
|
|
- |
|
|
- |
|
|
49,599 |
|
|
- |
|
|
12,983,151 |
|
|
- |
|
|
13,032,750 |
|
| Deferred taxes |
|
|
- |
|
|
91,392 |
|
|
27,626 |
|
|
- |
|
|
221,211 |
|
|
(151,396 |
) |
|
188,833 |
|
| Other assets(1) |
|
|
- |
|
|
13,950,467 |
|
|
43,452 |
|
|
13,256,088 |
|
|
6,372,300 |
|
|
(32,503,146 |
) |
|
1,119,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,266,559 |
|
$ |
15,121,906 |
|
$ |
1,564,751 |
|
$ |
15,692,047 |
|
$ |
33,744,969 |
|
$ |
(42,024,978 |
) |
$ |
25,365,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
- |
|
$ |
7,233 |
|
$ |
22,914 |
|
$ |
- |
|
$ |
597,681 |
|
$ |
- |
|
$ |
627,828 |
|
Accounts payable to related parties |
|
|
- |
|
|
277,986 |
|
|
497,410 |
|
|
1,668,390 |
|
|
5,386,272 |
|
|
(7,677,035 |
) |
|
153,023 |
|
Accrued expenses and other current liabilities |
|
|
29,771 |
|
|
61,216 |
|
|
118,047 |
|
|
15,527 |
|
|
2,285,939 |
|
|
(7,363 |
) |
|
2,503,137 |
|
Short-term debt |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
109,700 |
|
|
(448 |
) |
|
109,252 |
|
Short-term debt from related parties |
|
|
- |
|
|
1,757,402 |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,738,350 |
) |
|
19,052 |
|
Current portion of long-term debt and capital lease obligations |
|
|
- |
|
|
25,228 |
|
|
- |
|
|
200,000 |
|
|
439,107 |
|
|
- |
|
|
664,335 |
|
Income tax payable |
|
|
- |
|
|
20,898 |
|
|
- |
|
|
- |
|
|
51,921 |
|
|
- |
|
|
72,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
29,771 |
|
|
2,149,963 |
|
|
638,371 |
|
|
1,883,917 |
|
|
8,870,620 |
|
|
(9,423,196 |
) |
|
4,149,446 |
|
Long term debt and capital lease obligations, less current portion |
|
|
1,157,603 |
|
|
663,515 |
|
|
- |
|
|
2,113,544 |
|
|
6,657,108 |
|
|
(2,738,283 |
) |
|
7,853,487 |
|
| Long term debt from related parties |
|
|
- |
|
|
2,276,600 |
|
|
- |
|
|
2,680,741 |
|
|
- |
|
|
(4,957,341 |
) |
|
- |
|
| Other liabilities |
|
|
- |
|
|
117,444 |
|
|
1,612 |
|
|
488,142 |
|
|
(176,998 |
) |
|
35,425 |
|
|
465,625 |
|
| Pension liabilities |
|
|
- |
|
|
15,342 |
|
|
315,171 |
|
|
- |
|
|
284,589 |
|
|
(29,774 |
) |
|
585,328 |
|
| Income tax payable |
|
|
801 |
|
|
11,900 |
|
|
- |
|
|
- |
|
|
22,060 |
|
|
127,739 |
|
|
162,500 |
|
| Deferred taxes |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
693,815 |
|
|
(69,315 |
) |
|
624,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,188,175 |
|
|
5,234,764 |
|
|
955,154 |
|
|
7,166,344 |
|
|
16,351,194 |
|
|
(17,054,745 |
) |
|
13,840,886 |
|
Noncontrolling interests subject to put provisions and other temporary equity |
|
|
- |
|
|
- |
|
|
0 |
|
|
- |
|
|
1,028,368 |
|
|
- |
|
|
1,028,368 |
|
| Redeemable Preferred Stock |
|
|
- |
|
|
- |
|
|
- |
|
|
235,141 |
|
|
(235,141 |
) |
|
- |
|
|
- |
|
Total FMC-AG & Co. KGaA shareholders' equity |
|
|
78,384 |
|
|
9,887,142 |
|
|
609,597 |
|
|
8,290,562 |
|
|
15,991,690 |
|
|
(24,970,233 |
) |
|
9,887,142 |
|
| Noncontrolling interests not subject to put provisions |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
608,858 |
|
|
- |
|
|
608,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total equity |
|
|
78,384 |
|
|
9,887,142 |
|
|
609,597 |
|
|
8,290,562 |
|
|
16,600,548 |
|
|
(24,970,233 |
) |
|
10,496,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
1,266,559 |
|
$ |
15,121,906 |
|
$ |
1,564,751 |
|
$ |
15,692,047 |
|
$ |
33,744,969 |
|
$ |
(42,024,978 |
) |
$ |
25,365,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Other assets are presented net of investment in equity method investees.
75
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2016 |
|
|
|
Issuer |
|
Guarantors |
|
|
|
|
|
|
|
|
|
FMC US
Finance |
|
FMC - AG &
Co. KGaA |
|
D-GmbH |
|
FMCH |
|
Non-
Guarantor
Subsidiaries |
|
Combining
Adjustment |
|
Combined
Total |
|
| Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
3,405 |
|
$ |
855,144 |
|
$ |
8,550 |
|
$ |
591,682 |
|
$ |
1,066,085 |
|
$ |
(1,452,281 |
) |
$ |
1,072,585 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity affiliate income |
|
|
- |
|
|
(741,148 |
) |
|
- |
|
|
(674,201 |
) |
|
- |
|
|
1,415,349 |
|
|
- |
|
Depreciation and amortization |
|
|
- |
|
|
636 |
|
|
44,369 |
|
|
- |
|
|
549,971 |
|
|
(22,393 |
) |
|
572,583 |
|
Change in deferred taxes, net |
|
|
- |
|
|
(25,391 |
) |
|
(7,077 |
) |
|
- |
|
|
(17,762 |
) |
|
(4,669 |
) |
|
(54,899 |
) |
(Gain) loss on sale of fixed assets and investments |
|
|
- |
|
|
(28 |
) |
|
23 |
|
|
- |
|
|
(3,090 |
) |
|
- |
|
|
(3,095 |
) |
(Write Up) write-off loans from related parties |
|
|
- |
|
|
(415 |
) |
|
(5,395 |
) |
|
- |
|
|
- |
|
|
5,810 |
|
|
- |
|
Compensation expense related to stock options |
|
|
- |
|
|
23,096 |
|
|
- |
|
|
- |
|
|
3,212 |
|
|
- |
|
|
26,308 |
|
Investments in equity method investees, net |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(55,749 |
) |
|
- |
|
|
(55,749 |
) |
Changes in assets and liabilities, net of amounts from businesses acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net |
|
|
- |
|
|
- |
|
|
(20,860 |
) |
|
- |
|
|
(250,528 |
) |
|
1,430 |
|
|
(269,958 |
) |
Inventories |
|
|
- |
|
|
- |
|
|
(28,968 |
) |
|
- |
|
|
(36,090 |
) |
|
19,870 |
|
|
(45,188 |
) |
Prepaid expenses and other current and non-current assets |
|
|
- |
|
|
73,101 |
|
|
(12,702 |
) |
|
34,698 |
|
|
(64,362 |
) |
|
2,107 |
|
|
32,842 |
|
Accounts receivable from / payable to related parties |
|
|
19,596 |
|
|
(881,407 |
) |
|
215,007 |
|
|
101,964 |
|
|
552,320 |
|
|
74,271 |
|
|
81,751 |
|
Accounts payable, accrued expenses and other current and non-current liabilities |
|
|
(17,937 |
) |
|
(4,439 |
) |
|
50,258 |
|
|
(4,526 |
) |
|
(89,152 |
) |
|
2,521 |
|
|
(63,275 |
) |
Income tax payable |
|
|
89 |
|
|
27,308 |
|
|
- |
|
|
(53,764 |
) |
|
60,780 |
|
|
(32,002 |
) |
|
2,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
5,153 |
|
|
(673,543 |
) |
|
243,205 |
|
|
(4,147 |
) |
|
1,715,635 |
|
|
10,013 |
|
|
1,296,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
- |
|
|
(237 |
) |
|
(59,105 |
) |
|
- |
|
|
(711,376 |
) |
|
23,076 |
|
|
(747,642 |
) |
Proceeds from sale of property, plant and equipment |
|
|
- |
|
|
73 |
|
|
307 |
|
|
- |
|
|
13,206 |
|
|
- |
|
|
13,586 |
|
Disbursement of loans to related parties |
|
|
- |
|
|
183,821 |
|
|
- |
|
|
301,151 |
|
|
- |
|
|
(484,972 |
) |
|
- |
|
Acquisitions and investments, net of cash acquired, and purchases of intangible assets |
|
|
- |
|
|
(26,392 |
) |
|
(271 |
) |
|
- |
|
|
(386,684 |
) |
|
26,379 |
|
|
(386,968 |
) |
Proceeds from divestitures |
|
|
- |
|
|
80,037 |
|
|
- |
|
|
- |
|
|
175,221 |
|
|
(62,123 |
) |
|
193,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
- |
|
|
237,302 |
|
|
(59,069 |
) |
|
301,151 |
|
|
(909,633 |
) |
|
(497,640 |
) |
|
(927,889 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings, net |
|
|
- |
|
|
690,092 |
|
|
(189,244 |
) |
|
- |
|
|
453,081 |
|
|
(274,996 |
) |
|
678,933 |
|
Long-term debt and capital lease obligations, net |
|
|
(5,154 |
) |
|
(20,092 |
) |
|
256 |
|
|
(297,004 |
) |
|
(715,798 |
) |
|
484,972 |
|
|
(552,820 |
) |
Increase (decrease) of accounts receivable securitization program |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(51,000 |
) |
|
- |
|
|
(51,000 |
) |
Proceeds from exercise of stock options |
|
|
- |
|
|
39,433 |
|
|
- |
|
|
- |
|
|
7,089 |
|
|
- |
|
|
46,522 |
|
Dividends paid |
|
|
- |
|
|
(277,176 |
) |
|
- |
|
|
- |
|
|
(17,222 |
) |
|
17,222 |
|
|
(277,176 |
) |
Capital increase (decrease) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
12,437 |
|
|
(12,437 |
) |
|
- |
|
Distributions to noncontrolling interest |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(234,742 |
) |
|
- |
|
|
(234,742 |
) |
Contributions from noncontrolling interest |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
72,462 |
|
|
- |
|
|
72,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(5,154 |
) |
|
432,257 |
|
|
(188,988 |
) |
|
(297,004 |
) |
|
(473,693 |
) |
|
214,761 |
|
|
(317,821 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Effect of exchange rate changes on cash and cash equivalents |
|
|
- |
|
|
3,549 |
|
|
127 |
|
|
- |
|
|
26,055 |
|
|
- |
|
|
29,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and Cash Equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net increase (decrease) in cash and cash equivalents |
|
|
(1 |
) |
|
(435 |
) |
|
(4,725 |
) |
|
- |
|
|
358,364 |
|
|
(272,866 |
) |
|
80,337 |
|
| Cash and cash equivalents at beginning of period |
|
|
2 |
|
|
448 |
|
|
5,055 |
|
|
- |
|
|
544,443 |
|
|
(448 |
) |
|
549,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents at end of period |
|
$ |
1 |
|
$ |
13 |
|
$ |
330 |
|
$ |
- |
|
$ |
902,807 |
|
$ |
(273,314 |
) |
$ |
629,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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76
Table of Contents
FRESENIUS MEDICAL CARE AG & Co. KGaA
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share data)
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For the nine months ended September 30, 2015 |
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|
Issuer |
|
Guarantors |
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|
|
|
|
|
|
|
FMC US
Finance |
|
FMC - AG &
Co. KGaA |
|
D-GmbH |
|
FMCH |
|
Non-
Guarantor
Subsidiaries |
|
Combining
Adjustment |
|
Combined
Total |
|
| Operating Activities: |
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|
|
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|
|
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|
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|
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|
Net income (loss) |
|
$ |
3,336 |
|
$ |
712,636 |
|
$ |
8,316 |
|
$ |
391,822 |
|
$ |
1,059,929 |
|
$ |
(1,256,324 |
) |
$ |
919,715 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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|
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|
|
|
|
Equity affiliate income |
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|
- |
|
|
(612,421 |
) |
|
- |
|
|
(598,506 |
) |
|
- |
|
|
1,210,927 |
|
|
- |
|
Depreciation and amortization |
|
|
- |
|
|
410 |
|
|
37,935 |
|
|
- |
|
|
477,116 |
|
|
21,190 |
|
|
536,651 |
|
Change in deferred taxes, net |
|
|
- |
|
|
(23,269 |
) |
|
415 |
|
|
- |
|
|
(77,168 |
) |
|
(3,181 |
) |
|
(103,203 |
) |
(Gain) loss on sale of fixed assets and investments |
|
|
- |
|
|
(12 |
) |
|
(81 |
) |
|
- |
|
|
(5,084 |
) |
|
- |
|
|
(5,177 |
) |
Compensation expense related to stock options |
|
|
- |
|
|
2,395 |
|
|
- |
|
|
- |
|
|
3,507 |
|
|
- |
|
|
5,902 |
|
Investments in equity method investees, net |
|
|
- |
|
|
5,560 |
|
|
- |
|
|
- |
|
|
(16,282 |
) |
|
- |
|
|
(10,722 |
) |
Changes in assets and liabilities, net of amounts from businesses acquired: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net |
|
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- |
|
|
- |
|
|
(22,366 |
) |
|
- |
|
|
(251,675 |
) |
|
704 |
|
|
(273,337 |
) |
Inventories |
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- |
|
|
- |
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|
(17,353 |
) |
|
- |
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(254,165 |
) |
|
5,923 |
|
|
(265,595 |
) |
Prepaid expenses and other current and non-current assets |
|
|
- |
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|
39,897 |
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(34,412 |
) |
|
173,705 |
|
|
105,446 |
|
|
82 |
|
|
284,718 |
|
Accounts receivable from / payable to related parties |
|
|
19,611 |
|
|
396,217 |
|
|
(184,948 |
) |
|
145,164 |
|
|
(303,029 |
) |
|
28,657 |
|
|
101,672 |
|
Accounts payable, accrued expenses and other current and non-current liabilities |
|
|
(17,939 |
) |
|
39,904 |
|
|
48,169 |
|
|
(1,071 |
) |
|
179,666 |
|
|
(1,111 |
) |
|
247,618 |
|
Income tax payable |
|
|
80 |
|
|
(7,615 |
) |
|
- |
|
|
(134,661 |
) |
|
97,808 |
|
|
17,870 |
|
|
(26,518 |
) |
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|
|
|
|
|
|
|
|
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|
|
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|
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|
Net cash provided by (used in) operating activities |
|
|
5,088 |
|
|
553,702 |
|
|
(164,325 |
) |
|
(23,547 |
) |
|
1,016,069 |
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|
24,737 |
|
|
1,411,724 |
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| Investing Activities: |
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|
Purchases of property, plant and equipment |
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- |
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(181 |
) |
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(60,096 |
) |
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- |
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|
(560,929 |
) |
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(26,144 |
) |
|
(647,350 |
) |
Proceeds from sale of property, plant and equipment |
|
|
- |
|
|
26 |
|
|
322 |
|
|
- |
|
|
10,819 |
|
|
- |
|
|
11,167 |
|
Disbursement of loans to related parties |
|
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- |
|
|
(314,328 |
) |
|
- |
|
|
275,700 |
|
|
- |
|
|
38,628 |
|
|
- |
|
Acquisitions and investments, net of cash acquired, and purchases of intangible assets |
|
|
- |
|
|
(76,823 |
) |
|
(572 |
) |
|
- |
|
|
(132,688 |
) |
|
44,389 |
|
|
(165,694 |
) |
Proceeds from divestitures |
|
|
- |
|
|
20,652 |
|
|
- |
|
|
- |
|
|
42,513 |
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(20,652 |
) |
|
42,513 |
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Net cash provided by (used in) investing activities |
|
|
- |
|
|
(370,654 |
) |
|
(60,346 |
) |
|
275,700 |
|
|
(640,285 |
) |
|
36,221 |
|
|
(759,364 |
) |
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| Financing Activities: |
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Short-term borrowings, net |
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- |
|
|
64,992 |
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|
225,488 |
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|
- |
|
|
(250,724 |
) |
|
(5,961 |
) |
|
33,795 |
|
Long-term debt and capital lease obligations, net |
|
|
(5,088 |
) |
|
(20,001 |
) |
|
- |
|
|
(252,153 |
) |
|
57,149 |
|
|
(38,628 |
) |
|
(258,721 |
) |
Increase (decrease) of accounts receivable securitization program |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(45,750 |
) |
|
- |
|
|
(45,750 |
) |
Proceeds from exercise of stock options |
|
|
- |
|
|
53,375 |
|
|
- |
|
|
- |
|
|
13,859 |
|
|
- |
|
|
67,234 |
|
Dividends paid |
|
|
- |
|
|
(263,244 |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(263,244 |
) |
Capital increase (decrease) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
22,330 |
|
|
(22,330 |
) |
|
- |
|
Distributions to noncontrolling interest |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(201,884 |
) |
|
- |
|
|
(201,884 |
) |
Contributions from noncontrolling interest |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
34,299 |
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|
- |
|
|
34,299 |
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|
|
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|
Net cash provided by (used in) financing activities |
|
|
(5,088 |
) |
|
(164,878 |
) |
|
225,488 |
|
|
(252,153 |
) |
|
(370,721 |
) |
|
(66,919 |
) |
|
(634,271 |
) |
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|
| Effect of exchange rate changes on cash and cash equivalents |
|
|
- |
|
|
(18,271 |
) |
|
(437 |
) |
|
- |
|
|
(11,859 |
) |
|
- |
|
|
(30,567 |
) |
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|
| Cash and Cash Equivalents: |
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|
|
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|
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| Net increase (decrease) in cash and cash equivalents |
|
|
0 |
|
|
(101 |
) |
|
380 |
|
|
- |
|
|
(6,796 |
) |
|
(5,961 |
) |
|
(12,478 |
) |
| Cash and cash equivalents at beginning of period |
|
|
1 |
|
|
117 |
|
|
5,722 |
|
|
- |
|
|
628,015 |
|
|
- |
|
|
633,855 |
|
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| Cash and cash equivalents at end of period |
|
$ |
1 |
|
$ |
16 |
|
$ |
6,102 |
|
$ |
- |
|
$ |
621,219 |
|
$ |
(5,961 |
) |
$ |
621,377 |
|
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77
Table of Contents
Quantitative and Qualitative Disclosures About Market Risk
During the period ended September 30, 2016, no material changes occurred to the information presented in Item 11 of the Company's
Annual Report on Form 20-F for the year ended December 31, 2015.
78
Table of Contents
Controls and Procedures
The Company is a "foreign private issuer" within the meaning of Rule 3b-4(c) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). As such, the Company is not required to file quarterly reports with the Securities and Exchange Commission and is required to provide an evaluation of the effectiveness of its
disclosure controls and procedures, to disclose significant changes in its internal control over financial reporting, and to provide certifications of its Chief Executive Officer and Chief Financial
Officer under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 only in its Annual Report on Form 20-F. The Company furnishes quarterly financial information to the Securities and
Exchange Commission (the "Commission") and such certifications under cover of Form 6-K on a voluntary basis and pursuant to the provisions of the Company's pooling agreement entered into for
the benefit of the public holders of our shares. In connection with such voluntary reporting, the Company's management, including the Chief Executive Officer and the Chief Financial Officer of the
Company's general partner, has conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report, of the type
contemplated by Securities Exchange Act Rule 13a-15. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded in connection with the furnishing of this
report, that the Company's disclosure controls and procedures are designed to ensure that the information the Company is required to disclose in the reports filed or furnished under the Act is
recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms and are effective to ensure that the information the Company is required to disclose
in its reports is accumulated and communicated to the General Partner's Management Board, including the General Partner's Chief Executive Officer and the Chief Financial Officer, as appropriate to
allow timely decisions regarding required disclosure. During the past fiscal quarter, there have been no significant changes in internal controls, or in factors that could significantly affect
internal controls. See Item 15B. "Management's annual report on internal control over financial reporting" in the Annual Report on Form 20-F for the year ended December 31, 2015
for more information regarding the effectiveness and inherent limitations over internal controls.
During
the three-month period ended September 30, 2016, our Audit and Corporate Governance Committee continued its investigation, with the assistance of independent counsel, into
allegations of conduct outside of the North America Segment that may violate the U.S. Foreign Corrupt Practices Act or other anti-bribery laws. For information with respect to compliance
investigations, see Note 11 of the Notes to the Consolidated Financial Statements (unaudited), "Commitments and Contingencies – Legal and Regulatory
Matters – Other Litigation and Potential Exposures," presented elsewhere in this Report. The Company is implementing enhancements to its anti-corruption compliance program,
including internal controls related to compliance with international anti-bribery laws.
79
Table of Contents
OTHER INFORMATION
Legal and Regulatory Matters
The information in Note 11 of the Notes to Consolidated Financial Statements (Unaudited), "Commitments and Contingencies" presented
elsewhere in this report is incorporated by this reference.
80
Table of Contents
Exhibits
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Exhibit No.
|
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| 2.3 |
|
Amended to the Pooling Agreement dated September 28, 2016 by and between Fresenius AG, Fresenius Medical Care Management AG acting for itself and in its capacity as general partner of Fresenius Medical Care AG & Co. KGaA,
Mr. William P. Johnston in his capacity as a GP Independent Director and Mr. Rolf A. Classon in his capacity as a GP Independent Director. |
4.25 |
|
English convenience translation of the Fresenius Medical Care & Co KGaA Long Term Incentive Plan 2016. |
31.1 |
|
Certification of Chief Executive Officer and Chairman of the Management Board of the Company's General Partner Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 |
|
Certification of Chief Financial Officer and member of the Management Board of the Company's General Partner Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 |
|
Certification of Chief Executive Officer and Chairman of the Management Board of the Company's General Partner and Chief Financial Officer and member of the Management Board of the Company's General Partner Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (this exhibit accompanies this report as required by the Sarbanes-Oxley Act of 2002 and is not to be deemed "filed" for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended). |
101 |
|
The following financial statements as of and for the nine-months period ended September 30, 2016 from FMC-AG & Co. KGaA's Report on Form 6-K for the month of October 2016, formatted in XBRL (eXtensible Business Reporting
Language): (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of
Shareholders' Equity and (vi) Notes to Consolidated Financial Statements. |
81
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
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DATE: October 27, 2016 |
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FRESENIUS MEDICAL CARE AG & Co. KGaA
a partnership limited by shares, represented by: |
|
|
FRESENIUS MEDICAL CARE MANAGEMENT AG,
its general partner |
|
|
By: /s/ RICE
POWELL |
|
|
Name: |
|
Rice Powell |
|
|
Title: |
|
Chief Executive Officer and
Chairman of the Management Board of the
General Partner |
|
|
By: /s/ MICHAEL
BROSNAN
|
|
|
Name: |
|
Michael Brosnan |
|
|
Title: |
|
Chief Financial Officer and
member of the Management Board of the
General Partner |
82
