Fresenius Medical Care AG (FMS) 2004 Q1 法說會逐字稿

Good morning and good afternoon, ladies and gentlemen. I would like to welcome you for joining us for the Fresenius Medical Care's first-quarter 2004 conference call. By now you should have received a copy of this morning's press release. The release and the presentation for this call are available on our website under the Investor Relations section. Let me also point out that the conference call is also broadcast via the Web.

Let me now start with a forward-looking disclosures. The cautionary language regarding forward-looking statements is indicated in the press release. The same language also applies to comments made on today's conference call, and you will be able to refer to our SEC filings for more detail.

In the press release and at the end of our presentation, as you can see, which we use on the call, we included reconciliation of all the U.S. non-GAAP measures used to the most comparable U.S. GAAP financial measures. In compliance with the section of 401 of Sarbanes Oxley, we're providing you with a complete bridge for any U.S. non-GAAP measures that we utilize, and relate such to the nearest U.S. GAAP measure available. Please use this information and measures we have used and how that relates to U.S. GAAP numbers.

Let me also point out that for those that are participating via audio please note that you are in the listening only mode during this entire call, and you may ask questions during the Q&A session via audio and via the Internet. This you can do by signing onto our website on www.FMC-Ag.com.

With us today is Ben Lipps, Chief Executive Officer for Fresenius Medical Care; and Larry Rosen, Chief Financial Officer for Fresenius Medical Care -- who will brief you both on the results for the first-quarter 2004 and give you a business update.

Let me now turn over this call to Ben Lipps, our Chief Executive Officer. Ben?

Thank you, Oliver, and welcome, everyone. What will cover today is the business update, key highlights of our service and products business, financial results Q1, and then an outlook for 2004. After that we will go into the question-and-answer session.

Let me start by saying that our results for first quarter 2004 showed very strong performance in our key financial metrics, and is supported by underlying solid operational growth.

We achieved another outstanding performance in free cash flow and we're confident that our global strategy is on the right track. So, with that, let me move onto the next slide.

Let me turn to the key figures for Q1 on slide three. We keep total revenues of $1.459 billion -- a growth of 12 percent -- in constant currency -- in current dollars -- in constant currency 8 percent. Growth was primarily driven organically with the key market initiatives in both our service and our products business.

Our operating earnings was $198 million, up 17 percent over Q1 2003. And our EBIT margin was 13.6 percent up 60 basis points from Q1 2003. Both our service and our products businesses in North America and in the international contributed to this strong improvement.

Net income for the first quarter was up 30 percent. Our free cash flow for the quarter was $130 million, up 55 percent compared to Q1 2003, and it was 8.9 percent of revenue. Now, impacting the cash flow results in the first quarter were continuous improvements in our working capital -- particularly if further reductions in DSOs, as well as our overall focus on cash management. Larry will give you some more insight into this in his part of the presentation.

On slide 4 you can see the revenue development. As I mentioned, it was $1.45 billion for the quarter, and again, a very strong start for 2004. The revenue growth in North America was 7 percent, driven primarily by solid improvements in our service business revenue for treatment -- which we had indicated would be our focus for 2004. North America accounted for 68 percent of the worldwide revenue.

International achieved a 25 percent revenue growth in actual currency, and a strong 10 percent revenue growth in constant currency. Looking at Europe, we achieved a strong constant currency revenue growth of 10 percent -- which is clearly above the market.

Asia-Pacific also had a strong growth of 20 percent in actual currency and 10 percent in constant currency. In particular, the revenue growth in Latin America remains very strong, with a constant currency growth of 13 percent. So all-in-all, very strong revenue growth first quarter.

Turning now to slide 5. Let me give you some more details about our revenue development for our services business. Our worldwide service business developed a solid performance for the first quarter. Total services revenue grew 12 percent in actual currency, and 10 percent in constant currency.

The North American services grew at a strong 9 percent in Q1. The underlying driver was the specific focus to increase the revenue treatment through overall contractual improvements. North American services accounts for 90 percent of the total North American revenues.

International services continued to show strong momentum and grew by 33 percent in actual currency, and 17 percent in the first quarter in constant currency. The services business is now 35 percent of the total international revenues.

Turning to slide 6, let me give you some more details about our organic revenue development in the North America and the International segments for our service business.

Organic revenue growth in North American services was 8 percent and for International, it was 11 percent in Q1 -- resulting in a worldwide organic revenue growth of 9 percent. This solid growth corresponds with a revenue per treatment of $286 in North America and $113 for international.

Our same-store growth in International continued to be strong at plus 7 percent. In North America, we saw a same-store growth -- excluding corporate Puerto Rico -- of 3 percent. This reflects a low January value because of holiday treatment shifts. We're very confident that in the quarters to come, our treatment growth will be in our targeted range of 3.5 to 4 percent and above the market.

We will be opening a number of de novo (ph) clinics throughout the rest of the year, which further accelerates this growth.

Total treatments for Q1 2004 were 4.57 billion -- million -- up 8 percent, which North America was 3.15 million, up 6 percent, and international was 1.42 million, treatments up 12 percent for the quarter.

Turning now to slide 7. Let me give you some more details about our revenue development in North American services business. We made good progress in Q1 with an improvement of $8 in our revenue per treatment compared to Q1 '03. We expect to hold this revenue per treatment level, and possibly improve it slightly during the rest of 2004.

Additionally, I would like to comment on our quality results, which are also very good. For example, 94 percent of our patients received treatments with a KC/B (ph) greater than 1.2, and 84 percent of our patients achieved our advanced target of 1.4, which is monitored by online clearance.

In terms of our anemia and bone management programs, our quality outcomes are on track with our targets.

In addition, we continue to seek further improvements in the gross mortality rate of our nondiabetic population with a further reduction of 40 basis points on a year-over-year basis.

Now, we saw a cost increase year-over-year of $6 per treatment. Like to point out that half of this increase represents payments of our profit-sharing bonus program, which in parts replaces the pension plan which was canceled in 2001. We have seen a significant improvement in our employee turnover during the last 12 months and we're now below 20 percent employee turnover. Excluding this effect, our cost per treatment increase was in the range of 1 to 2 percent, which highlights our continued focus on cost control. So, in summary, we had a solid Q1 in North America service business.

Let me now turn to slide 8. And let me give you some more details on our revenue development in both North America and International for the products business.

Worldwide products revenue grew at 13 percent in actual currency, and 4 percent in constant currency -- and accounts for 28 percent of our total revenues in Q1 2004. International products grew by 22 percent, and with tailwind from the Euro, however, they still showed a every strong constant currency growth of 7 percent.

Products account for 65 percent of the total International revenues. We saw particularly strong geographic growth in Germany, Mexico, Southern Europe, and especially Italy and Spain.

Turning now to the North American products. North American products growth was flat on overall an basis, even though we saw strong external growth in our key products. This was primarily due to two internal decisions. With our continued strong cash flow, it is more economical to purchase rather than lease internal machines. In 2003, the operating leases for these machines were recorded as external sales.

In addition, we're reducing our emphasis on low margin distributed ancillary products and focusing more on internally produced products.

These two affects account for an intended revenue reduction of about 4 percent in Q1 '04. The next chart shows how we performed on key external products.

Turning out to slide 9. As I mentioned, let me give you some more detail on the dynamics of the products business in North America.

In terms of our growth in the net available external market, we achieved a 1 percent growth. The shift away from low margin distributed ancillary products reduced this by about 2 percent. In the area of external sales of key products, we saw 6 percent revenue growth in machines and dialyzers, with a 14 percent increase in single use dialyzer units sold. PD grew also at double digits during this quarter.

So, in North America we continue to hold a very solid market share position in machines of around 70 percent, and in single use dialyzers we have now moved to a 66 percent market share. Our focus in North America is primarily with the products business optimization of our margins, which we accomplished to a major degree in first quarter.

Turning now to slide 10. I would like to talk a little bit more about our strong fundamentals in our International business. Specifically, let me give you some highlights on our achievements and developments in this segment.

Europe and Latin America performed exceptionally well in Q1. First we continue to see a strong international products business, driven by our ability to compete with the portfolio products across-the-board and across therapies.

Revenue growth on HD products was 18 percent, and PD was up 26 percent. In addition, we saw our Latin American business do very well and develop quite solidly. For the first time, we treat more than 15,000 patients in Latin America. In addition, we were able to realize a reimbursement increase in Turkey, and all regions continued to have strong cash collections.

Turning now to slide 11. Let me briefly recap Q1. We have a solid start to the year 2004, with strong operating performance worldwide, strong cash flow generation worldwide. Our revenue per treatment program in North America is on track, and quite frankly, our first quarter turned out ahead of expectations.

Turning now to slide 12. Given the strong performance in Q1 2004, I would like to comment on four key points as we look ahead.

The ultra care certification program at the local level is on track, and we expect to see the North American service business continue to perform well.

From a service standpoint, the reimbursement environment is stable to improving around the world.

Thirdly, our decentralized and established manufacturing infrastructure will continue to moderate currency impacts.

And fourth, we expect our net income to be on the high end of our guidance for 2004.

Now, let me turn it over to Larry Rosen, our CFO, who will provide you with more detail on the financial results of Q1. Larry?

Thank you, Ben, and my welcome -- all the ladies and gentlemen out there.

What I will be covering today is our financial performance for Q1 2004, and specifically, I will give some more color and insight on the financial results for Q1 on the P&L, the operating margin developments, and then finally the cash flow and financial ratio performance -- including the great performance on days-sales-outstanding development. And then I will give a brief summary and update on our outlook before we go into the question and answer session.

So, turning now to Page 14. You see that revenue grew at 12 percent in the first quarter in actual currency, and 8 percent in constant currency terms. The strong growth was due to good performance in all of our regions, including revenue per treatment improvements and a specific focus on margin optimization when it comes to our products business.

Operating income in the first quarter grew by 17 percent to 198 million, and was certainly a strong start for 2004. This is further reinforced by an EBIT margin improvement of 60 basis points compared to the first quarter of 2003 where we had 13 percent.

We'll look more closely in a minute for the reasons for the margin improvement.

Net income in the first quarter of 2004 was 91 million and was up 30 percent compared with net income in the same period last year. EPS in the first quarter was 94 cents, also up 30 percent as the number of shares remain unchanged at 96.2 million.

Turning now to Page 15, let's take a closer look at the EBIT margin development.

You see we made significant improvement in both major segments -- in North America -- we were up 40 basis points on a year-over-year basis in Q1. And in International we were up 100 basis points compared to last year.

The drivers of this positive development were products sales growth, but with a focus on margin optimization. Same-store growth in both the U.S. and International segments -- revenue per treatment growth during Q1 and greater fixed cost coverage whereby we could spread our fixed costs over a larger sales volume.

In addition, we had a couple of reimbursement increases in key International markets -- like Turkey and Italy. And finally, we had two additional dialysis days compared to last year.

Turning to Page 16, we start to look at the cash flow and balance sheet development. And you can see here the further progress that we have had on DSO. In North America, we further reduced by 1 more day sequentially and are now at 71 days at the end of Q1. An overall improvement of 8 days over the last four quarters.

In International, the DSO also was further reduced by a remarkable 7 days sequentially from Q4 2003 to Q1, and we are now at 120 days. Reduction in DSO on a Q1 '04 versus Q1 2003 basis is even more dramatic in International with a total of 16 days.

In total, we have reduced DSO by 3 days sequentially, and 9 days over the last four quarters, 16 days over the last eight quarters. Clearly this has continued to contribute to a very good cash flow performance for the Company.

And now, turning to Page 17 -- we look at our cash flow performance for the first quarter. It was a very strong quarter. And clearly a strong start for the year. Our net cash from operations was up 37 percent over last year at 171 million.

Our CapEx was 41 million -- generally in line with our guidance and at the same level as Q1 of 2003.

Free cash flow ended up at 130 million after capital expenditures -- up 55 percent on a year-over-year basis. Acquisition spending was 42 million, which was ahead of last year, but nonetheless, we still see overall acquisition expenditures in the $100 million range for the full year 2004.

So, we had a free cash flow after acquisitions of 88 million, up 57 percent over the same period last year.

Now, turning to Page 18 and looking at our debt position at the end of Q1 compared to the end of 2003 -- we have made further progress reducing the debt by 71 million over the quarter, and reducing further our leverage ratio -- our debt EBITDA ratio which you see at the bottom of page, from 2.76 at the end of the year to 2.6 at the end of March.

Also lower debt the higher EBITDA contributed to the ratio performance. And we're getting ever closer to our goal of breaking through 2.5 for this ratio -- typically seen as being required to reach investment grade.

Now, turning to Page 19 -- I would like to summarize and update our outlook for the year.

We had a very strong start in Q1. Our topline revenue performed ahead of our expectations, as did our net income growth in Q1. We now expect net income to be on the high-end of guidance for 2004. The other metrics which we gave the original guidance -- than that revenue growth, capital expenditure level and the acquisition level remain at the original levels of guidance.

So, on a fishing note I would like to remind you of a new accounting standard which will come into force in Q2 for the P&L. It's called FIN 46. Here, we will begin to consolidate some subsidiaries which we have not consolidated before where we own less than 50 percent, but nevertheless, are the controlling shareholders for the entities. They are called variable interest entities, and we will begin to consolidate them in our P&L in Q2.

We would expect an increase and sales revenue from that consolidation of about $100 million annualized.

With that, we've reached the end of my report and I would like to now turn over the call for questions and answers.

(Operator Instructions). Hans Bostrom (ph), Goldman Sachs.

I had a few questions, perhaps, starting off with what you, Larry, mentioned, the very last statement about the change in accounting standards. I presume that this is partly relating to the acquisition you made a few years ago from Edwards. Are there any other businesses that you will also be consolidating?

And also, what would be profit impact or indeed if you could calculate the margin impact on a full year basis be from this new accounting rule?

Second question I had is relating to your statement that you had reached 66 percent market share in single use dialyzers. It was not clear to me -- maybe I missed it -- what region this referred to, whether this was U.S. or global market share? And could you give a sense of how that market share has changed, in particular, in view of your relatively muted sales growth in the U.S. market -- I do recognize that you had some change in the way that you reported that, but just to give a sense of the dynamics of that market share.

And, thirdly, could you also quantify the financial impact from the profit sharing scheme going forward -- what is the contributions that you're likely to make on an ongoing basis to the scheme and other (indiscernible) in the profit and loss statements. Thanks so much.

Your next question comes from Holger Blum, Deutsche Bank.

Why don't we go ahead and answer Hans' questions, and then we will go to the next one, okay? Ma'am?

Yes, sir.

Okay. Hans, this is Ben. I will answer part of it and then Larry will take a part of it.

The consolidation is clearly oriented towards the CBR or the Edwards acquisition of two or three years ago. And that is primarily the entity we're looking at.

As far as its impact on margins, it's not, easily, to totally quantified, because they're making some movements in terms of improving their margin. But I think on a rough (ph) basis -- do you want to comment on that, Larry?

I would say -- first, it's just about non-material. But if anything it's very, very slightly dilutive.

So, with respect to our guidance, we're clearly not changing any guidance or anything.

Due to that consolidation.

Due to that consolidation. Okay.

The second topic -- question, was on single use. That was America, North America. And, really, prior to us launching in and expanding our capacity in 2001, 2002, we were not active in the single use market. And we were very heavy in the revs (ph) market. So we have come from a very low market share up to 66 percent -- and of course are climbing in the single use market -- external market, not counting the sales of our cells.

So, that's why I pointed out the market share as a single use topic. We're in the same range total now if you counted reusable.

Okay, as far as the profit share, that program was set up to in part to replace the defined pension program which was very expensive, and we curtailed that in 2003 -- or, 2001. And this program is really a program that is based on overachieving, in terms of profits. So it's really not something you can put into your program and calculate it on an ongoing basis.

So, the guidance, again, that we have given you I think is totally accurate.

So this is one of these -- if it's overachieved, then part of that is shared with employees. Hans, does that take care of your questions? Ma'am?

Yes, sir. Holger Blum, Deutsche Bank.

Just a follow-up on the last answer. The profit sharing will only be front loaded in Q1? Or do I understand that correctly?

Yes, we tend to pay that if, indeed, we have accomplished it on a once a quarter -- once a year in the first quarter. So, it's a first quarter type of activity.

Okay. Great. And could you also provide us with net income growth rate at constant currency? And maybe another financial question with regards to the corporate costs which was 9 million in the quarter lagging Q4. A bit higher than a year ago? Is this the underlying basis now? Or extraordinary items included?

Holger, let me go back -- this is Ben. I'll take the first one -- why it's difficult to provide that.

Basically, you have both transaction and translation effects. As we're set up, we try to balance. Because we do produce a fair amount of our product for non-Euro countries in Euro area. So from that standpoint, we only look at constant currency at the revenue line. And just looking a translation effects down at the bottom line is not, basically, we think appropriate. If you only use the translation effects then you are somewhere in the mid-20s. If you look only at the translation -- I think, Larry, is that (inaudible)?

That's right.

We feel that does not really reflect what the businesses doing.

Okay.

I think the next question, Larry, let me give you that one. Go ahead, Holger, on the second question.

What I wanted to get, maybe, kind of competitive view with regard to your economic growth in the third quarter? Maybe you could, again, repeat on the factors -- like holidays or (indiscernible) that you mentioned, which might lead to acceleration going forward?

And could comment on that compared to your peers or maybe with regard to potential reimbursement changes on the horizon?

I mean the OIG papers probably not that important, but, maybe a kind of relative positioning view would be helpful at this stage. Thanks.

Okay. Let me comment on the corporate costs. We did see an increase first in Q1 of last year. A couple of items mentioned, one is translation. All the cost you see in corporate are pretty much in Euros.

And the second factor is that we have got some projects going at the corporate level that we didn't have last year. In particular, related to the new governance features like sox 404 (ph)implementation, and other compliance-type projects. That's really what accounts for the increase in the corporate costs.

Okay. Holger, on your question, again, I believe that was just North America you were asking it about, right?

Right.

Yep. Okay. If you look at it -- one way to look at it -- if you look at the six-month period, which basically blends out any holiday effects, you'll see that we're basically in high threes. High three -- close to four. Our objective here would be -- as we said -- we do see an opportunity to grow in that 3.5 to 4 range. The market looks like it might be in the 3.5 range. It's hard to tell. But we feel comfortable we will grow above it.

Now, as far as to de novo, we did 5 de novos first quarter. We did 40 last year. Our run rate is close to 10 to 12 de novos a quarter. So you'll see an acceleration of de novos as we go through.

So we're pretty comfortable, (indiscernible) and the group are pretty comfortable that we will meet our goals as far as our goal on same-store growth. And he's keeping the focus on revenue per treatment increases also.

Okay. But do you see additional upsides from the Q1 figure? Will this be the kind of underlying basis to expect?

The Q1 is three -- yes, we have seen upside to that. (indiscernible) will be back in the range of the 3.5 to 4 percent.

I mean this (indiscernible) revenue per treatment -- 286.

Okay. I said that a revenue per treatment we might see a slight increase. But at this point in time it is a little difficult to say. So at this point we're saying -- hold that, but we're not commenting we will raise it any more.

Okay.

So, let me take a question that came in on the Internet. And the question is whether the new accounting regulation is going to have an impact on our balance sheet and specifically will increase the amount of debt that we will be showing at the end of Q2.

In fact, this new regulation has required us to consolidate the balance sheet level already on March 31st. And as a result, we had 16 million U.S. dollars of additional debt included in Q1. We will have that amount in our net debt going forward.

Again, it's not material. Holger, I think we handled your questions -- or did we cover your questions? If so, we're ready for more questions.

Charles Weston, Morgan Stanley.

Could you breakout the revenue per treatment increase that we saw this quarter? I would like to know how much of it was due to commercial payor contracts, and how much was due to pharmaceutical use?

And then, on the cost side, we have this -- as far as I can tell, around $4 per treatment in profit expense going forward. So, every first quarter. But of the other 1 to 2 percent -- can you give us an indication of where that cost came from?

The first question is -- where did the $8 increase in revenue per treatment year-over-year -- it's primarily contracting and ancillary services, which are part of the additional bundled services. And there also is a component -- of what we call bone mineral and anemia management. Which basically at the end of the day is programs for anemia management. And with the new calcitol (ph).

(indiscernible) from that standpoint, it's primarily contracting ancillary services. And with a component of the other, which is about one-third.

Now, as far as the cost increase, I really cannot break it out by individual factors. But, the fact that the entire cost increase is less than 2 percent pretty much shows that we are still maintaining a very strong cost control in terms of our operations. And the proper share was more like about half of that, or basically about $3 instead of 4.

So we're very comfortable that we're maintaining our target of being less than 2 percent growth in our actual overall costs, which includes the cost of drugs and everything.

Okay, thanks, and just as a follow-on. The table you have at the back showing how your Q1 performance and your full year guidance -- I'm just struggling a little bit to understand why the guidance is now for the kind of low double-digit range when you made the first quarter 30 percent? I just wondered if you anticipate a change in the environment -- something to bring that growth rate down?

Larry, do you want to take that?

I don't think that there really is anything fundamental -- obviously, we don't expect to have 3 percent every quarter. We had a very fairly low first quarter in Q1 of '03. And a very good performance this year.

But, nevertheless, we would expect the growth in net income to moderate. And we feel that is most appropriate for the guidance now to be at low double digits.

Alright. Thank you very much.

Andreas Bischof, CAI Chevreux.

Some months ago you mentioned, you talked about an article to be on better medical outcomes of a single use dialyzers to be published in April of this year. Has this article already been published? Or when will it be published? And in which scientific journal will it be published? Thank you.

I think the April was never a point in time that I really called out. I said it usually takes anywhere from nine months to a year. And I think it was submitted last year.

It's still in, the ticket's (ph) still in the process of being reviewed and published. So, I cannot give you a date. These things sometimes take a long period of time. I will certainly let you know when it comes out. But, at this point, it's still in that process.

But you would tell us the name of the journal?

No. I can do that.

Okay, thank you.

Ilan Chaitowitz, Cazenove.

Firstly, congratulations then on a very specular set of numbers.

Just a couple of questions. Firstly, yesterday evening, the OIG published its recommendation for (indiscernible) with respect to pharmaceutical billings. (indiscernible) already come out with a statement in the market that they think it may impact operating income by about 4 to $8 million. As it seems like they've been aggressively using certain pharmaceuticals.

I was wondering if you would comment on any impact (indiscernible) legislation from January the 1st would have on your business?

Thank you. I first want to say that the quarter -- the results of the quarter -- really reflect the employees and the management around the world. And that we have got a really great team and there'll all working well together. And it's a fun opportunity.

As far as the report -- yes, it was on their website last night. Unfortunately, I didn't get to read it totally today. But, from what I can see of it, it's an accurate report. And of course, the next step is the CMS needs to decide on the actual composite rate change.

Again, we're working with the industry. And of course, we will assist CMS if they need anything from us. So all of that is background.

We think they have instituted a good process. Now, what does that mean to FMC? I really can't comment, except I have said in the past that it's going to be at least neutral. And at this point, it's really difficult for me to say anymore than that. Because the second phase of it hasn't been done yet. Actually look at the utilization criteria they're going to use.

So, again, I would like to complement them. I think they're proceeding very rationally. And that's all we can say at this time. So I can't make a statement like I believe you mentioned Gambro or the Divida (ph) made.

Okay. Thank you. Also, you had those costs -- sort of one off costs at least in Q1. Can you give some sort of guidance as to what you think the U.S. cost per treatment will be going forward for the rest of this year?

Yes, our target, as we started the year, was to stay under an increase of about 2 percent all in. And again, we pretty much optimize our staffing over the last two years, where we've had no increase in labor per treatment. And so I think that the goal that the team has of staying under -- around 2 percent -- is probably, on a life-for-life basis, is probably the right target for the year.

Right, thanks. I'm just a little bit confused. Just to make it clear then. On the revenue per treatment side, you think there may be some slight upside to the strong performance in Q1 going forward? And, from what you've just said on the cost per treatment, (indiscernible) basically come down from Q1 levels for the remainder of this year. Is that correct?

That, we would expect that you would see it come down because that first quarter bonus payment, profit-sharing payment, was paid in first quarter (technical difficulty). It should drop back a little bit. And the underlying then should be in the range of about 2 percent per year.

Excellent. Thank you very much.

Steve Finley (ph), Bernstein (ph).

Two questions. On the same-store treatment growth of 3 percent -- just wanted to understand for sure how that is calculated, with the extra days in the first quarter? Is that adjusted for that? So it is treatments per day? Or with the extra days, do you get the benefit of that in that growth? Meaning, with the leap year day and the extra treatment day, are you benefiting from that in the 3 percent? So your adjusted gross would be even less?

No. The way we do it -- I can only speak for FMC, is we essentially have two more days. We call it two more years for the quarter compared to last year. And, we of course do that calculation. Then looking at your treatments per day, those two days are put into there.

Now, what happens is it depends on really -- on January 1st, that's really the only day of the year. If some of treatments were done before this year -- before 2004 -- then they will be in last year's -- and they're basically not in this year.

We do the two days. So if anything, it's basically under represents our growth. It's really higher than that.

And, can you just clarify -- what was the distortion coming from Puerto Rico in that number?

It runs about 10 basis points.

Okay. Not a huge amount.

No. It's on -- I think it's on the chart. It's about 10 basis points.

Okay and then the second question was in the U.S. product market -- external market revenue growth -- where you saw rapid growth in single use and PD and relatively robust growth in machines and dialyzers, so where was -- to get to the positive 1 percent growth for total in that external market, you obviously had negative growth in some substantial categories. Where was that negative -- where was that shrinkage?

That was primarily a decision that we made last year, because of the cost of distribution and everything that we distribute saline, we don't -- okay.

And so we made the decision, because that's a money loser, to start winding ourselves out of that externally. And that's essentially what I said -- was about 2 percent -- if you corrected for that. And basically that was about 2 percent on the net available external market. Because the market is growing somewhere in the 3 to 5 range in terms of the products as far as we can tell at this point.

Right. And in terms of the -- in terms of pricing on things like dialyzers and machines in the U.S. market, are you seeing flat pricing, negative pricing, any comment on that?

Well, I can't let -- machines of course are a function of whether introduce a new one and (multiple speakers) Dialyzers -- of course, the single use dialyzers, obviously, sell for less than the (multiple speakers) so that's really the effect we're seeing as we convert more and more over.

Right. A mix effect. Okay, thanks.

But no specific changes other than that.

Alan Lyons (ph), Polygon (ph).

I (indiscernible) more technical question, which is -- it's rather an unfortunate consequence of the way the rules are structured. It seems like the stock may fall out of the DACs (ph) (indiscernible) at the next review.

I wondered if any thought had been given to what you might do to get a better account of your capital structure in your waiting to prevent that from happening. Other than, of course, the share price doubling on the back on the back of the first quarter results, as I'm sure it will.

Okay. Thank you for that question. It seems like an interesting timing. Let me just start by saying -- we are pleased as FMC to be a component of the DACs -- we think our size and our footprint around the world, our activities, make us a valuable component.

Now, all that having been said, we are studying options and evaluating at all times options and alternatives to ensure that we continue in the DACs, as FMC. But at this point, we have no specific plans.

And I would like to a draw your attention that, really, we have to keep focused on our fundamentals of our business. As you can see for first quarter going forward.

So, yes we are aware of it. Yes, we're obviously looking at options. And, yes, we are proud to be there. But at the same time, we are also very focused on our business.

Okay. Thank you very much.

(Operator Instructions). There are no further questions. Sir, do you have any closing remarks?

Thank you very much for your interest in Fresenius Medical Care. We are pleased to have been with you today by Internet and phone. And we are looking forward to seeing you in person then at the next one after the second quarterly call in August. And, again, thank you very much.

Thank you.

Good day. Bye-bye.

Thank you for participating in today's teleconference. You may now disconnect.