Fresenius Medical Care AG (FMS) 2010 Q4 法說會逐字稿

Okay, everybody. I think it's time to continue. Also from my end, I would also like to welcome all of you here for Fresenius Medical Care's Q4 and full year 2010 meeting. A warm welcome, also, from our end to everybody actually on the web.

We much appreciate your continued interest in our Company. With us today here in the room are Ben Lipps, our Chief Executive Officer, and Mike Brosnan, our Chief Financial Officer.

I would like to start our presentation also by mentioning our cautionary language mentioned in our Safe Harbor statement at the end of the presentation. For further details concerning risks and uncertainties, please refer to our filings, including our SEC filings.

Now with that, it's my sincere pleasure to turn over the presentation to (technical difficulty). The floor is yours.

Thank you, Oliver. Ladies and gentlemen, all of our employees, management board, and our associates around the world, and those who have joined us on the Internet, welcome. We're glad you could join us, and we also appreciate very much your interest in Fresenius Medical Care. As Oliver said, I'll cover the business outlook, Mike will cover the finance, and then we'll open it up for questions and answers.

I also have the privilege that Rice Powell, the CEO of North America and the Deputy Chairman will be available to us by audio -- he's in the US -- and to answer questions at the end of the session here. So we'll be able to hopefully able to handle your questions on a global basis.

All right, first slide. As you know, we're very pleased with our performance for the year, the performance of our employees. It was a difficult year, because we had two balances here. One of them is obviously to continue to grow the business in, as was mentioned earlier, an interesting economic situation. But at the same time, when we continue to move forward our strategic objectives, we expanded our service network in International -- I'll talk about it a little later -- significantly this year. You'll see it as it rolls in, in 2011. And at the same time, the actual performance in North America was very satisfying. North America did very well this year, with respect to the financial and also the quality metrics.

Now, as you have seen from all the press releases, revenue, a little over $12 billion, and net income, over -- around $980 million, a growth of 10% for the year. We basically spent a little bit less in acquisitions than we had planned. You'll see later, we're getting some real traction with our new cyclers in terms of home treatments and peritoneal dialysis, and this saves a little bit in terms of some of the clinics. And at the same time, we had excellent acquisition opportunities, so we spent a little more than what we had talked in the -- talked about in the acquisition area.

Looking at the revenue by region, all of the regions did very well this year. North America turned in $8.1 billion in revenue, 7% growth for the year. International turned in almost $4 billion in revenue, a growth of 8% in constant currency. Asia-Pacific was a standout, again, approaching $800 million in Asia-Pacific with a 15% constant currency growth, followed growth-wise by Latin America, who continues to do very well, and again, turned in almost $600 million in revenue. We reached the $2.5 billion mark in Europe, and again, constant currency growth of around 6%.

So all in all, each of the regions contributed, and we're very pleased with the performance and the growth in all of the regions.

Looking at Q4 briefly, I think again, this has been in the press release. We saw about $3.1 billion revenue, we saw strong operating performance for the year, driven by North America. And we also saw net income up by 10%.

Now, as you look at the revenue for the year, as I go forward here, I'll talk a little bit about some of the things that we're doing to get ready for the bundle, which impacted the revenue in North America. But basically, we had a revenue growth of 5% constant currency for the quarter, which essentially would have been up by about another 2%, considering some of the things that we are doing in fourth quarter North America.

Looking now at the fourth quarter numbers, you can see that, again, North America grew at about 3% in terms of revenue. As we've moved into the -- preparing for the bundle, we essentially have done a number of things in terms of protocols and the -- with our physicians, which essentially, you'll see later, dropped the revenue per treatment. If we looked at putting that aside, or correcting for it, the revenue growth in North America would have been about 5%.

But as we look at the quarter, still, a very strong quarter. Europe grew, our International grew at 10%, Asia-Pacific continued to grow at 21%, the acquisitions were kicking in, the organic growth, solid growth in China and India, and Latin America, double digit at 14% growth. So, fourth quarter was a very strong quarter as we completed the year in all of our regions, and essentially, financially, it was also -- met or exceeded our plans for the year.

Looking now at Dialysis Services. As you can see, fourth quarter Dialysis Services, we did about $2.3 billion in revenue. We have about a $9 billion operation now in Dialysis Services. It's three quarters of our revenue around the world, and we had a very, very strong year in this area. And if you go over here and look at, for the fourth quarter, we had an 8% organic growth in, basically, in International, and a very strong same market growth of 6%, and we were able to add 2% in terms of revenue per treatment.

Now again, if you look at North America, there's two parts to this. Again, our same market growth was very strong at 4.4%, basically a little bit above what we think the market is. The organic growth was less by -- now, it was 3.3%, because of the fourth quarter, so if you add a couple percent to that, which essentially -- I'll show you why -- you're in the range, then, of 5% to 6% organic growth. Again, where we've been for the year, and we're quite pleased.

So if you look at our service area right now, we operate about -- almost 2,800 clinics, 2,760 clinics. We've got almost 1,800 in the US, and we're treating about 215,000 patients, or about 10% of the population.

So by and large, we had a very strong fourth quarter. We did spend, I'll show you in the US, preparing for the bundle, in terms of introducing some of the protocols and earning some of the pilots. And so, I think we've prepared ourselves, then, for 2011.

And again, if you'll think about it, Asia-Pacific, it grew almost 40% when it came to service growth in fourth quarter, again, because Asia Renal Care and the acquisitions are kicking in, and the programs around the international areas, especially Asia-Pacific, are growing quite strong. And Latin America grew at about 13%.

So our service part of the business is growing very strongly, and at the same time, we now have expanded into International, as well as North America in a major way.

Looking at the year, it's almost the same. Again, as I mentioned, we did about $9 billion worth of revenue. We see 9% growth in constant currency for the year, and you can look again into our organic growth. It's around 7%, 6.6%. And again, what's very encouraging is, our same market growth is 4.5%, and again, in Europe, over 5%, which in the countries that we're operating in, this is above market. And in the US, we averaged slightly above the market at 4.3%.

So anyhow, we're pretty much in line with what we expected for the year, and our Service business then grew at about 9%. And we will expect that to continue as we go into 2011.

Looking now at quality, and I think I've been here many times and talked about it. Quality is number one. It's clearly something that -- we are in an industry that depends on providing life-saving support to patients who are very ill, and I have to say, I have here both the European data and the US data, and I'm extremely proud of what our Groups have accomplished around the world. And if you look at it, first of all, as I've mentioned, the Kt/V is just a measure of how well we match the physicians' prescriptions, and you can see, both in Europe and in the US, we're doing 95% of the time, we deliver what is being prescribed. And that's really quite significant.

The other couple points I'd like to point out, if you look at the hemoglobin between 10 and 12 g/dl, this is where, in the US, the new -- basically the new bundle will be pointing. There will be basically quality disincentives if you have too many patients below 10, or too many patients above 12. So this is the first time in the US where we have a pay-for-performance, or a deduct if we don't have the performance.

So you can see that all of these protocols, and the work that's being done in the US, we are increasing the number of patients that fall in that quarter, and that's really in the right direction. And you can see that we clearly have below 10 a very small number, but we've been pretty much there for a number of years, and we've watched that.

Now, we still have work to do in the phosphate control. Albumin, we're getting into the range where I think it's fairly acceptable. We'd like to get closer to 90, but we're making good progress. I'd like to point out that we've added a new criteria, which is catheters. How many patients do not have catheters?

Now, the reason this is important, and I'm sure you probably know this, is that essentially, you have two ways to access the circulatory system of the patient. In hemodialysis, one of them is basically through a catheter, which is put in the various parts of the body, or a fistula, where you -- essentially, it's something that you transport a vein and create the [anastomosis] in the body.

What we have found -- and I think the whole industry knows this, is that there's significant difficulties with catheters in terms of infections, hospitalization, mortality. But they are convenient to put in, and they basically take far less time to put a catheter in versus [maturing] a fistula.

So, there's been a major progress. I think Europe is way ahead of the US in terms of lack of catheters, but we're making good progress. This is very important in the bundle, because what happens in any comprehensive care, this is where a lot of your expense come from, is basically from patients with catheters. So we're making a good progress in that area.

And hospitalization, still very proud. Around the world, we're less than ten days of hospitalization per year per patient, and that's probably a best-in-class type of example. And it's going to be difficult, these are sick patients, to get much below that, but we're doing that in a very standard -- basically, around the world.

The last thing, on quality, I've got to say that both in Europe and in North America, we continue to improve our overall mortality. We have a 20 basis point improvement in the US, and a 40 basis point improvement in Europe. So all of these quality issues, our patients are living longer, and it's our goal to, essentially, provide them the best life.

And so, if you step back and look at 2010, we've continued to make advances in terms of quality around the world, and we continue to be highly dedicated to that. And that's one of the things that we want to look at very carefully as we go into the bundle, is, we do not want to trade off any quality for -- basically, for any of the protocols in the bundle.

Now, at the same time, this is where we are as far as the quality systems. I'll talk a little bit more about some of the new products that we have later on, but we're clearly dedicated to this in a major way around the world.

Turning to the next slide, this is really fourth quarter, and I want to emphasize, and this is the revenue per treatment in North America. When we started the year, we said that we would end up with somewhere between 2% and 3% average growth revenue per treatment in North America. And I want to show you from the slide there, we clearly accomplished that.

Now, as we moved into fourth quarter, we started to put in some protocols. We're looking at basically how to optimize the therapy, how to optimize the pharma utilization, how to optimize the overall quality for the patients. So we saw a slight dip in fourth quarter as some of these programs are put in place, and I want to reassure you that, number one, that's part of the program that we put in place. Number two, we continue to see rate increases in the fourth quarter in our commercial area. So this is just part of us transitioning into -- basically into the bundle.

And again, I want to mention that with respect to the bundle, and with respect to where we are in the implementation -- obviously, we're a month and a half into it -- we still believe, and I personally have great confidence in CMS. We'll have worked with them now for over 15 years. And we understand that CMS is basically finalizing the number of clinics that really went into the bundle, opted into the bundle, or didn't. And again, the reason I mention this is because I'll talk about the transition adjuster here a little bit, which has been a topic that I've talked about for at least three sessions.

Now, we believe that CMS is finally getting the precise number of clinics that went into the bundle. We also strongly believe that it should be fixed as sooner rather than later, because it does put a burden on the industry, a significant burden on the industry with respect to cash flow. And we think that they know this, and we have high confidence that they will correct it.

And the reason it's particularly important is, as you go into the bundle, you have to change your billing methods, so therefore, you're going to have a little bit of hiccup in terms of when you get paid. So Mike will talk about -- our days outstanding will go up slightly. But this applies to the whole industry.

So we really believe that, and the whole industry is working with Congress, working with CMS to try to essentially correct this issue. They've given us assurance they'll do it in '12, but we'd like to see it corrected earlier for the industry.

Now, what that says is, when we talk about the guidance, we assume that it will not be corrected in '12, and so we'll talk about that later. But we still have great confidence in CMS, that they will correct it, and it is something that needs to be done. And I just wanted to mention that here, as we talk about moving into the bundle.

Okay, looking at Dialysis Products for the fourth quarter, we had revenue growth of around 6% when you look at the total product growth, and essentially, 3% external. And I wanted to mention that as we do acquisitions, as they become within our network, then of course, the external revenue disappears. It goes internal, and you don't see it.

So during periods of very high acquisition times, which we're in, we need to keep a focus both on the external and the total revenue, because basically, that is the industry.

So again, we're clearly at the industry -- at the market, as we look at the markets, Asia-Pacific growing very strongly at 11% constant currency, North America is pretty much flat, slightly down. And part of that is, again, as I mentioned last , we see a number of our customers getting ready for the bundle, and so they're using basically a -- select a dialyzer that will, if they dialyzed a little longer, it will clearly be okay for them, so they're selecting dialyzers that are smaller.

To give you some idea, our actual dialyzer volume growth was up 7%, but basically, we were flat with respect to revenue, because people have done the [mix shift].

Now, as we move into 2011, that will disappear and you'll see us come back pretty much in the mid single-digit growth. But those are the things that are happening. And again, it was a very strong quarter, when you look at what we've accomplished as people migrated in the US, getting ready for the bundle. And again, the International business was quite strong, especially in Asia-Pacific.

Looking at the full year, of course, that effect gets moderated a little bit, and you end up seeing then, that again, the growth is in the 5% to 6% at the top -- at the total market, and at 3% on the external market. And again, that's driven primarily by the US being in the 1% range versus Europe, versus International, which is clearly at market.

So, this is where we are in the products as far as 2010, and as we move into 2011, we would expect North America to basically normalize a little bit, back to what we've seen in the past.

Okay, now, talking about the dividend. This is our fourteenth year of which we will propose to the AGM an increase in dividend. Our philosophy over those 14 years is to try to take half of our growth in earnings and apply that to the dividend with respect to growth rates. And so, we had a 9% to 10% growth in -- I think, a 10% growth in net income this year, and we're going to provide a 7% increase in the dividend, to EUR 0.65, is what we'll be proposing. So this will be the fourteenth year in which we have had this consecutive increase, and we'll be proposing a 7% increase in the dividend for 2010.

Since it is 2010, and we've now completed 2010, I thought maybe I'd just go back a minute and talk about our GOAL 10. And probably everyone has forgotten it, but we haven't. Back in 2005, we set for ourselves a GOAL 10 of reaching $10 billion in sales by the year 2010.

Of course, that was before the RCG acquisition in 2006, so once we made that acquisition, we upped it to $12 billion in 2010. And I want to say that we did accomplish that in 2010. We also were looking at a revenue increase -- or, a net income increase. We actually, in 2005, we had a $455 million net income, and we did $979 million this year, so we grew, we doubled it over that five years. But the main point is, we did accomplish our GOAL 10 which we set for ourselves back in 2005, and again, I just wanted to point it out, since we have talked about it over the years.

Now, let's talk about the demonstration project. Again, we're -- as you look at the future, I've talked a number of times about our comprehensive care program, about our comprehensive payment scheme, the bundle. And we think this is all moving in the right direction, because we're able, then, to provide the best care for the patients with basically some coordinated care in terms of the hospitalization, the dialysis, the home treatment, essentially, and also the nutrition.

Now, the first three years of the demo project, it's a five year project, were -- was published by an independent source here during the first quarter. I just want to point out four different accomplishments that came from this project, and this sets the stage, I think, for us trying to move to an accountable care model sometime in '11 or '12, depending on the decision of CMS.

We saw basically almost a 12% reduction in hospitalization. Readmissions was down by 16%. The cost of care, essentially, if you compare it just to the fee for service that -- for these patients, we saved at least 6% net. If you look at the medical loss ratio, which is the way an insurance company looks, and that's the cost versus the premium, this was done under Medicare Advantage, so there was a slight premium that they provided for this program. We had a 12% savings in medical loss ratio, or savings and omissions.

Now, the good news is, also, for over the two years, which is just the first two years of the program, we saw a 24% decrease in mortality. So this was good for the patients, good for the payers, and we think we contributed to advancing the -- essentially, the way to treat patients long-term.

So those results were published, they were verified. I think the results are even better as you looked at the last two years of the demonstration project.

Now, as I wrap up 2010, talk a little bit about '11 and then turn it over to Mike, I want to say that the drivers that we see for '10 and '11 are really these topics discussed here. First of all, as was published, we acquired Asia Renal Care, about 100 clinics. But the good news is, this provided us with the right critical mass in a number of countries in the Asia-Pacific area, and so, that basically closed midyear. And so we'll see the full effect of that in 2011.

The second one, we are making -- we have always had a dedication to, basically, home care, home dialysis. And again, we believe that peritoneal dialysis is good for about 10% of the patients. We were able to acquire Gambro's peritoneal dialysis business this year. Mainly, their business was in Asia and in Europe. This is fine, this supports our growth in this area, and they had some products that were complementary to some of our products. So again, this was a dedication to the home dialysis business.

We also formed a joint venture with Galenica. Again, we believe that one of the fundamental issues, or fundamental difficulties with dialysis patients is, they're basically iron-deficient, they have iron deficiency anemia. We feel that Venofer was and is a great product, and so we've gone -- we've developed a joint venture to where we're actually now back integrated more into the API, where we can work with Galenica. And at the same time, they have a product that we're interested in, in terms of bone mineral metabolism, their PA21 product.

So, we are now back integrated, and totally back to the API with that joint venture. And essentially, we see those two products as fundamentally require -- or, the iron is fundamentally required over the next many, many years for dialysis patients, because they're all anemic, and they need to have that, along with EPO.

And finally, we were able to expand our service business in Eastern Europe, but in European theater with the Euromedics acquisition. Very helpful, because it gives us critical mass in a number of countries. And at the same time, them, I think our service business in Europe is doing very, very well, and we've got all the ingredients in Europe to essentially continue to build a major service business with our products and with our clinics. So this was one of those opportunities that came along, and the European group did a great job of accomplishing this acquisition.

Now, the last thing I'll talk about here is products. I think, as you know, we basically are focusing on the home business in the US, essentially with peritoneal dialysis. We are very pleased with the results of our Liberty Cycler. We are growing basically double digit with respect to putting patients on peritoneal dialysis. We just had our K@Home re-registered, or reapproved by the FDA. And this is an example of our commitment to work with the regulatory agency. That product had been on the market for a number of years, but as the regulations changed, we were asked to go back and re-register it, and we did.

And so, it has been re-registered. It is back on the market, and we're pleased the timing is perfect now in terms of being able to advance home dialysis, hemo, or PD.

And finally, we've talked about the T machine, which is the real significance of that, it has a computer interface that will work with all of the providers' computer interfaces, so that now as you move into the bundle, you can essentially be much more efficient in collecting data and getting it into your clinical systems.

International, we're introducing a new product, the 4008. It's basically based on our largest seller in International, which is the 4008S Classic machine, it's based on the 4008. Our 5008 does very well, we've now expanded that product line to the 5008S, which is designed to run online hemodiafiltration, and clearly, the medical benefits of that continue to come through. It's a great new therapy, they're doing very well. And of course, we're always bringing out some models and new dialyzers.

So as we look at '11, we clearly have expanded service business. I think we are in a position to grow the home business, up to the level of probably somewhere 10% to 12% in the US, is probably where it will level off. We basically then have the products, and have advanced our strategy this year.

So in summary then, we've maintained our leadership, we can focus on quality. Clearly, we have not been hesitant about growth. We've spent over $600 million this year, and you'll see that we're going to spend another $1.2 billion next year, so we've not been hesitant about that. But at the same time, we've been very conscious of cost controls, and you can see, that's why we saw a margin tick-up this year. And so we're trying to basically not pass up opportunities, but at the same time, be prudent with respect to how we run the Company, which is obviously everybody's objectives in any company.

So at this point in time, I'd like to turn it over to Mike, and Mike will give you more insight into the

Thank you, Ben, and I'd like to extend my welcome to all of the participants in the call today, both here in the room and on the Internet, the financial community, our employees, and our Board members.

Ben reviewed the details of our top line, and you can see again, just very quickly, in terms of revenues, the 4% growth, 5% on a constant currency basis, 4% organic for the fourth quarter.

Our employees around the world transformed that into $539 million of earnings, or a 10% level of growth. And that was done, essentially, by continuing to produce efficiencies with regard to our EBIT margins from 16.2% to 17% for the fiscal year.

In North America, the margins went up 20%. As Ben commented, that was the result of reduction in our pharma costs, largely as a result of the lower dependence on pharma utilization in terms of our top line, lower personnel costs, slightly offset by higher bad debts in North America.

On the International side, the margins contributed -- the margins improved by 60 basis points, and that was largely the result of continued economies of scale as we grow our International business, as well as favorable FX, and a slight reduction associated with the lower gross margins on acquisitions that we recently completed over the course of 2010, which, when they're fully synergized, we expect will not be dilutive to the gross margins in the International markets.

If we continue to walk through the P&L, interest expense, you can see, was slightly favorable to the fourth quarter of 2009. That was largely the result of lower LIBOR and EURIBOR rates, despite the fact that year-over-year, there was an increase in the borrowing.

If you looked at sequential quarters, Q3 to Q4, there was an increase of about $4 million in interest expense, and that was also the consequence of the restructuring we did of our credit agreement in the third quarter, where we extended the maturity of that by two years, as well as a slight increase in borrowing to fund some of our acquisitions between Q3 2010 and Q4 2010.

So we do think we're well positioned with regard to our capitalization of the Company, and we're showing good year-over-year results with regard to interest expense.

That provided some additional leverage for us with regard to income before tax, a 12% increase to $465 million. And obviously, income tax expense, we are showing a slightly higher rate. That was largely driven by settling some one-time tax audit items. A little bit less efficiency with regard to our tax efficient financing vehicles, with which we manage some of our international operations, because the lower interest expense you have, the less tax efficient your financing is.

And if you were to look at the effective tax rate for the year, we're consistent with our guidance that we've provided you at the beginning of the year.

Lastly, that produced $271 million of net income, a 10% increase year-over-year, and that drove the 9% increase in earnings per share for the quarter that Ben has already mentioned.

Moving to the full year, again, you can see very strong top line growth -- 7% actuals, 7% constant currency, 6% organic growth for the year, transformed to just under $2 billion of earnings before interest and taxes, a 16% operating margin, up 40 basis points from last year.

You may recall, at the beginning of the year, I indicated we would have flat margins as a consequence of some of the activity in the International markets, specifically the devaluation of the bolivar. We did have a strong performance in the back half of 2010, which has allowed us to overcome that effect on our margins, and continue to improve the efficiency of the operations year-over-year, which is traditional for the Company.

Interest expense, $280 million, down about $20 million year-over-year for the reasons that I cited in the fourth quarter as well. And income tax expense, roughly at expectation, 35% for the full fiscal year. Net income of $979 million, again, 10% growth, which is very consistent with what we've been demonstrating for all four quarters of 2010.

If I move to cash flows, I think you know that days sales outstanding is a key driver of our overall cash flow performance for the Company. Ben has commented on this a little bit already, but you can see that we did move up a bit from Q3 to Q4, from 73 days total Company to 76 days. That was driven by a 1 day increase in North America, and a 2 day increase in the International markets.

We continue to be very pleased with the operating performance on receivables in North America. We've been operating at historical lows for some time, and we're not concerned about the 1 day increase that's largely the result of just transforming some of our billing systems in the US to the new IT system that we've been working on now for the past couple of years.

In the International markets, the increase in days sales outstanding that you see is really the consequence of a couple of things. First, the fact that we are growing our business internationally, we've been very busy with acquisitions over the course of 2010. You are seeing a shift in mix relative to the contribution of various countries around the world to the receivables balance. So, depending on the local customs in those countries, you'll see fluctuations both up and down with regard to International DSOs.

In addition to that, you know that we have a large base of operations in Europe, and we are seeing some increases in DSOs with regard to some of our markets in the continent. Specifically, we are seeing increases in DSO for Spain, Portugal and Italy. We're very much ingrained in the culture of those companies. We understand what's happening in terms of the drivers to our business. We're confident that there is no extraordinary risk associated with those receivables, and we do anticipate that we will collect them, albeit it may be over an extended period of time.

Moving to the next page, I'll just quickly walk you through the fourth quarter cash flows. You're looking at, on an operating basis, $341 million of cash flows, or roughly 11% of revenues. That is down from 15% in the fourth quarter of 2009. The two key drivers behind that are the fluctuation in days sales outstanding that I just mentioned, as well as in the fourth quarter of 2010, we did choose to make some tax payments, which changes the effect of our working capital. So due to the acceleration of certain tax payments and the increase in DSOs, you're seeing the drop from 15% to 11% on a year-over-year basis.

Capital expenditures are in line with expectation, roughly from just under 5% to 5%, which is traditionally what we spend, and fairly consistent on a year-over-year basis.

With regard to acquisitions, you are seeing the evidence in the fourth quarter of the heavier spending that we talked about in 2010. We had guided to about $500 million of acquisition spend, and we did spend a little bit more than that, which you'll see on the next chart. Ben has detailed the key acquisitions we've gone through for the fiscal year, so I won't repeat that here, other than to say I think we've made some very good acquisitions, consistent with the guidance we gave you, in the markets that we indicated -- Eastern Europe, Russia, and Asia, over the course of 2010.

Full fiscal year, you're seeing a more common relationship in terms of the operating cash flows, 11% this year versus 10% last year. That's largely explained by just the shift in DSOs on a full year basis.

Capital spending, at $507 million, is slightly below the low end of the range that we provided at the beginning of the year, roughly about 10% less. Acquisitions for the full year, $618 million. That's the cash effect associated with our activities over the course of this year.

The -- we had guided to less than two and a half times, in terms of our leverage ratio, debt to EBITDA. Because of the strong earnings we've had over the course of the year, and inclusive of the fourth quarter, we have continued to reduce our overall leverage, improving another 10 basis points, both year-over-year and Q3 to the Q4.

Let me talk about the outlook a bit. And when I talk about the outlook, I'll also talk about the restructuring we've done of our debt over the course of 2010, and most recently, in January of 2011.

As you can see, we're providing some very strong outlook for 2011, particularly in light of the reimbursement reforms in North America, in the United States. We anticipate our top line will grow from $12.8 billion to $13 billion. That is a 6% to 8% growth rate for the full fiscal year, both in terms of an actual and on a constant currency basis. Bear with me one second here, I apologize. That growth is coming from 3% organic and 5% acquisition.

Now, to give you a little bit more insight into that number, let me just talk briefly about the US. So we're seeing good overall growth. Typically in the US, we would counsel to expect something on the order of 5%, and typically, or historically, that has been roughly 3% organic treatment growth, and a couple of percentage points associated with rate improvements and acquisitions.

With the bundle, and in particular, with the budget neutrality cut of 2%, and the transition adjuster of 3.1%, the top line revenues in North America, Medicare revenues, would come down roughly about 5%.

Considering all this, and the smaller effects associated with the bundle, we anticipate our organic revenue growth in the US will be less than 1% for 2011.

We are able to provide such strong top line, such a strong top line growth outlook on a global basis, because our International businesses are growing very nicely, and we anticipate organic growth in the markets we operate in of over 7% for fiscal year 2011.

Moving to net income, we anticipate a range of $1.035 billion to $1.055 billion. And just to be clear, our net income guidance does not include any correction for the transition adjuster of 3.1% in the US. I'll come back to that a little bit later, but our earnings growth does contemplate margin accretion, consistent with what we guided at our Capital Markets Day of roughly 20 basis points of margin improvement in fiscal 2011 on a worldwide basis.

We would anticipate interest expense for 2011 in the range of $350 million, and this range considers the bond offering that we just funded at the beginning of February of this year. And it also considers all of the refinancing activities we undertook last year.

Our effective tax rate, we anticipate will be 34.5% to 35%. And with that, let me move to the capital side of our guidance for 2011.

Consistent with what we historically guide, we anticipate we'll be at approximately 5% in terms of capital spending for the fiscal year. That will be split roughly 50/50 between expansion and maintenance capital, and it will be jaundiced in favor of continuing to build our service network on a global basis.

With regard to acquisitions, we indicated at our Capital Markets Day that we expected a baseline, a minimum acquisition spend for the next three years of about $1.2 billion. That would equate to roughly $300 million to $400 million a year, if you assumed it was linear. We also indicated that we would be opportunistic in the marketplace as asset acquisitions presented themselves.

Clearly we addressed one such opportunity with our announcement of the Euromedic acquisition in January. And this spending level for 2011 anticipates that that acquisition will close this fiscal year, and that is roughly $650 million of acquisition spend.

We also have carryover into 2011 of -- from $200 million to $300 million, associated with payments related to prior acquisitions that we've already announced and closed.

So that leaves you, essentially, about with $300 million to $400 million of incremental acquisition spend in 2011 that's considered in the guidance of approximately $1.2 billion. And I would say that we have smaller opportunities that we are currently pursuing, and in addition to that, I would say that we have our normal pipeline that will present additional transactions to us later in the year. So that's why we've created some headroom in this guidance at $1.2 billion.

Regarding our leverage, obviously, with the activities we've been involved in, we are going to increase our leverage in fiscal 2011. We're finishing 2010 at 2.38, and we're guiding to less than or equal to 2.8 times debt to EBITDA for the fiscal year.

And I should also mention that we do anticipate coming back into the capital markets in 2011, to address the maturity of our trust preferred securities that will mature in the second quarter of this year. We have created enough flexibility in our credit structure so that we can choose to return to the market, either before or after the actual maturity of those securities.

So, now, let me just take a minute and elaborate a little bit on the transition adjuster.

In our third quarter call, we outlined our plan to mitigate the impact of the transition adjuster as one of three elements of our overall mitigation plan for the adoption of the new reimbursement rates in the United States. That plan included working with Congress and the Administration to ameliorate the effects of the transition adjuster in fiscal 2011.

With the available information today, it's very clear that the transition adjuster, at 3.1% for 2011, overreached its targeted effect on the industry. A much larger number of clinics opted into the bundle, which clearly, from a mathematical perspective, would tell you that the transition adjuster should be substantially lower than the 3.1%.

It has not yet been remediated, and we're going to continue to work with Congress and the Administration. But we thought it best to eliminate it from our guidance on earnings for 2011.

As the year progresses and as we get further information from Washington, if at such time they make any announcement with regard to addressing the transition adjuster in fiscal 2011, we will consider revising our guidance at that time. As Ben mentioned, I think it's also possible that they may look at the reimbursement adjustments for 2012 and consider at that time some remedial effect or some (inaudible) effect for 2011. So that's why we've eliminated it from our earnings guidance for the current fiscal year.

So, the number that we've used is, if you were to estimate the full value of the transition adjuster, that would be about $100 million, if it all went away. There have been -- there has been work done by non-government organizations that would suggest that the correct transition adjuster should be something in the 0.3% to 0.4% range. So therefore, we took $85 million out of our revenue guidance associated with the transition adjuster.

So the revenue and earnings guidance that we're providing shows we anticipate our Company will have a very strong financial performance in 2011, particularly in our International markets. In conclusion, quite simply, we are acting on the opportunities we've identified. Our employees in the United States and around the world have been doing an outstanding job addressing regulatory and reimbursement reforms everywhere in the world, always ensuring that we operate the business focused on our patients and providing them high quality care with the best products.

Thank you, and with that, I will turn the meeting back to Oliver Maier.

Great. Thank you, Mike; thank you, Ben, for the update and the presentation. And same procedure here, we're going to start with the questions actually n the room. So who is going to start? [Oliver?]

Just two or three, for my understanding. First of all, probably, could you give us some thoughts about probably change in landscape with regard to EPO Amgen going forward beyond 2011, and contracts need to be renegotiated, some hematide probably getting into the market. So I think Amgen stated that they are very closely currently monitoring the marketplace. I'm not sure on how far they will be willing to push through price increases beyond probably contracts which are due to expire, I think, also at the end of the year.

And secondly, I think -- I just want to hear your thoughts on SFP, probably, and how the dialysis side from Rockwell might work going forward with regard to iron replacement, which seems to be a quite interesting proposal towards treating patients, especially on the iron deficiency side, and probably less used than Venofer going forward.

And last but not least, on Euromedic, just probably to my understanding -- I mean, the asset, I think, has been on the market three or four years ago already. Why the timing? I'm just trying to understand, did the purchase price come down, or what happened there? Just for my understanding. Thanks.

Looks like I'll take all three of those. As far as the Amgen negotiations, let me say that they've been a very good partner for FMC over the years. We usually do not comment on the negotiations, I'm sorry, at this point in time. But as we've mentioned before, our contract operates through all of 2011, and we hope -- we expect by the end of the year that we will have renewed that contract. And at this point in time, I probably shouldn't go any further than that, in terms of discussing it.

But it holds true that you said in past why we would have liked to have a couple of years, whatever data on the competitive product, biosimilar, whatever, is out there, in order to make a switch. Is that true still?

Yes. The second question is, as new products come to the market, how do we look at them in terms of bringing them in to the clinics? Generally, what we do is, we have a medical advisory board, and they essentially will lay out a protocol. And when you have something that's as important as EPO or iron, you generally try to get somewhere in the years of 4 million to 5 million years of experience, based on experience on these, because these are something that you administer every -- continuously, for these patients. But again, we do 30 million treatments a year, so this is something that's not out of line, OK?

So that's essentially what we would start doing with a new product when it came to market, if it's not got that kind of base coming in, and most of them don't have that base. So when it comes to market, that's the type of safety profile we'd need.

The next question is basically the dialysis provided iron. There's -- and again, don't want to say anything that is detrimental to the company, we know them well. But one of the -- we've all looked at that for years and years, and one of the difficulties you have is basically, how do you dose it? Because the dosing depends on the membrane, depends on the transport, it depends on the concentration. So you're really creating for basically, a situation that is much more complicated.

Now, if you're just trying to replete someone, that might be doable, because you just overcompensate. But at the same time, we're looking at some very specific iron protocols to be able to optimize the outcomes for the patients, and we think that would be pretty hard to do when you don't control the dosing.

And finally, on Euromedics, I think Euromedic has certainly been, let's say, discussed, as far as availability, for the last couple, three years. One of the situations that basically deterred us from doing something two years ago is that it was structured financially in such a way that we would be part of the entire company, which includes diagnostics. That did not make sense to us. We're in dialysis, we're always interested in buying the dialysis assets. So for their own reasons, those came to the market in 2010.

And quite frankly, because of all of the synergies that are developed by the European group in terms of operating clinics, we basically just bought the facilities, okay? So when you look at the actual purchase price to EBITDA, it actually turns out to be quite reasonable for a group that's rolled up 8,000 patients.

So it became very attractive to us this year because they were willing to sell, essentially, the dialysis section. And Dr. [Gotti] and his team, knew them well, they're our customers, and he was able to pull it off.

Okay, next question here? Holger?

I'm Holger Blum, Deutsche Bank. Just two questions, one on the same market growth, where you have seen an acceleration again. What was driving that, and why did you go above the market? What was the attractiveness there of your clinics?

Second question on ACOs and accountable care. How is the timeline there progressing, and the feedback after the demos? What can we expect over the course of this year in terms of news flow?

All right, thank you, Holger. With respect to the same market growth -- and I assume you're talking about the US?

Yes.

Because Europe (inaudible) -- there's two components to that. Again, exactly what is the market growing at, and we always said between 3.5% and 4%. But our mortality has continued to increase, so it's a combination, essentially, of your physicians getting the representative market in their areas, and at the same time, the mortality improves. And I think that's why you find DaVita and ourselves doing quite well in terms of same market growth, in that 4% range, because everything I can see on their mortality, it's been improving also.

And now, we have not, as an industry, agreed on how to measure mortality, so all we do is talk about the incremental gain. But we have gained almost 400 basis points in the last four years in reducing mortality.

So sooner or later, we'll come together as an industry and provide you that information, but that's the combination effect you're seeing there.

Now, ACOs, it's my understanding from the latest email this morning that the regulations are coming out at the end of February, but it's also, our feeling right now is that they have not decided, CMS has not decided to include renal. It's basically going to stay more on the private, on the primary physicians.

I personally think that's a major mistake on the part of the Administration and on the part of CMS, because the five year demonstration program by both DaVita and ourselves have shown that this is an industry, this is a situation where these patients can do better under accountable care concepts, and at the same time, the government can save money, and everybody can benefit. But somehow, we have not been able to get that point across to where we'll be in the first wave, but -- at least, that's what they're telling us, but we hope we'll be in the second wave, and maybe the second wave will come fast.

So at this point in time, we are still encouraging -- talk with anybody who wants to talk with us about it, but we don't get the data that we'll be in the first wave. Which I hope is wrong, but that's what I'm hearing today.

I think Marcus was next?

Yes, Marcus Wieprecht, Main First Bank. One technical question, probably for Mike. How should we model the Galenica joint venture? Who is booking the revenues, or recognizing the benefit of sales? What is the impact as far I understand with the 45% stake you have in this new company? Will you book probably the profit below the EBIT line at equity, or how -- what kind of impact, what kind of guidance would you give us?

Thank you, Oliver. It -- we're a 45% participant in the joint venture, so the joint venture will record the revenues, and we'll record our minority share of the earnings in the venture. And you record the minority share, actually, in your operating earnings. So it will show up in EBIT for the 45% share of the joint venture.

That's the technical accounting associated with the nature of the investment.

Would you consider them slightly accretive to your EBIT, the new contract?

Yes. Yes, absolutely. Yes.

Okay, thanks.

One more question here in the room?

Could you just amplify on your comments with respect to the balance sheet and the level of floating rate debt as a percentage of the total, and where you see your balance sheet longer term, whether you are happy with the ratings as they stand today, or whether you'd like those to change, and for you to become investment grade?

Sure. Let me deal with the ratings and investment grade first, and then I'll come back to the fixed and variable structure. We're very comfortable being just below investment grade. We believe that if we were to have -- we do not have, as a corporate objective, to become investment grade. We believe that if we were to undertake that, we would have to take a break with regard to some of our acquisition activity for at least one or two years, because the worst thing you can do if you're ready to become investment grade is to achieve the objective, and then because you see an opportunity in the marketplace, fall back down into high yield.

So, we think that being a very high quality credit at the just below investment grade in terms of the high yield market is absolutely where we need to be, and that is also driven by the fact that when you look at the opportunities on a global basis, we think that there is still plenty of room to grow, particularly in the International markets, in the developing markets, over the course of the next several years.

So that's where we stand with regard to our rating.

In terms of the structure of the debt, if you look back over the last couple of years, we did have a very large credit agreement, as you know. And the notional, or the core earnings or interest expense on that was variable, but we had done some swap agreements back in 2006 and 2007, such that we had swapped about half of that into fixed rate debt. So our ratios for the last couple of years had been about 70/30 fixed to floating.

When you look at 2011, on a higher debt balance -- because we just floated the $1 billion associated -- the 10 year bond, which is obviously fixed, we'll be probably in the range of 60/40, fixed to floating. And it's quite possible, over the course of 2011, we'll be looking at the market, we'll be looking in particular at what the Central Bankers are doing around the world, and we might decide to swap more of the variable into floating at that time. But that's essentially the ratios we have at the moment. We have not added to our swaps, pending what we see happening with short-term rates.

I think that answers all your --

Yes. Thank you.

Next question? Martin (inaudible)?

Thank you. Martin Whitbread at Credit Suisse. So, can you remind us what percentage of your US clinics offer the Liberty Cycler at the moment? And the second question to that is, what is the CapEx, the capital cost per Cycler? And then, next question is on the synergies from Euromedic. What percentage of the acquired EBITDA do you think you can add to through synergies? Thank you.

Okay, I think as far as the questions on the Cycler, Rice, are you -- can you hear us? Would you take that question?

I can hear you just fine. In terms of the percent of US clinics that are offering the Liberty Cycler, we are fully engaged for those clinics that provide PD therapy. Not every clinic does that, they're not set up that way, but of those clinics, probably a third of our clinics that are offering PD therapy, they all have access to the Liberty Cycler, and are training and placing patients on that Cycler as we speak.

I won't go into too much detail on cost, but I will say that the Cycler stays on our books in the Products business. It is a rental piece of equipment, if you will, for the time that a patient is on the PD therapy. We treat it that way both internally as well as externally for our patients that are third party independent externals, or perhaps DaVita, someone else. So it really doesn't impact the capital allocation.

Thank you, Rice. And again, it's in our capital projections for next year, is where it is. Thank you, Rice. Mike, will you take the Euromedics?

Sure.

Okay.

This is working? Yes. We typically don't talk specifically about the synergies associated with an acquisition, but what I will say is -- and I think we've already commented that the acquisition is accretive in year one. We have also said that -- and I think it's well known that Euromedic was actually a customer of Fresenius prior to the acquisition, but we did not have 100% penetration.

So there is a synergistic effect that we'll see with regard with products, but perhaps not as great as some of our prior acquisitions, where they were not customers of ours prior to acquiring the clinics.

And the third, I would say, that we are acquiring the clinics, so we think that there's a synergistic effect associated with the legacy G&A, which we don't need to bring across.

That's great. Thank you.

Thank you.

Florian, next?

Thank you for taking my two questions. The first one relates to margins, as they -- as we go through 2011, how would you see the phasing saved as more through the quarter? Second question, you mentioned that drug utilization was lower in Q4 versus Q3. Could you give us a bit of an update, sort of, what changed into the fourth quarter specifically when it comes to the utilization of EPO?

I'll take that one first, and then share it with Rice. And as a process in Q4, as we've mentioned in the past, we were instituting a number of pilots to basically determine where is the optimum level of pharma utilization.

So I think, Rice, would you like to -- and that's what you're seeing in Q4. Rice, would you like to add something to that?

I think, Ben, the only comment that would be of benefit for folk is if you recall in our Capital Markets Day, I had projected that we thought we might see EPO utilization drop in the 5%, 10% range. I think I would update you that that range is more in the 10% to 15% corridor, and we're really quite comfortable with the work our medical advisory boards have done in developing the protocols and having them implemented. And obviously, we'll continue to monitor them very closely with the single minded goal of making sure that our quality stays where it has been, and where we can improve it, we will, with our protocols for anemia management.

Thank you, Rice. Let me make one comment back on Galenica and on the question of Euromedics.

Again, there's two parts to the Galenica deal. One of them is, FMC is a distributor of the product, and that's where the revenue will show up. And the second joint venture is basically at the API level, and the development of new products.

Another synergy that we didn't mention for Euromedics is, the European operation has a very strong pharmaceutical, renal pharma program, and so these are clinics, then, that that product could be sold to the new acquisition Euromedics, or used internally for more revenue.

So we've got a couple synergies, as Mike mentioned, plus an additional synergy here in the renal pharma area.

I thought with three, Ben, I wouldn't miss one, but I'm glad you added a fourth. Just to respond to your question, with regard to margin phasing, we actually don't guide on margin phasing, other than to say that we do expect to be accretive by about 20 basis points on margins. But I will take the opportunity of your question, though, to comment a little bit about earnings over the period.

The -- I would tell you that if I just think in terms of first half, second half, I think the first half, for all the reasons that we've been discussing in the last two or three or four calls that we've had, the first half will be a challenge for us. We think that the first half will still be positive on a year-over-year basis.

But we do see, to achieve the earnings guidance I just gave you, that we will build momentum over the course of the year, and I would expect the back half of the year to be stronger than the first half of the year, if that's helpful.

Any more questions here in the room? If that's not the case, operator, I think we can open up the line, since we have some people actually in the queue for further questions from the audio line.

We are now starting the question and answer session. (Operator instructions) The first question is from Ilan Chaitowitz, Redburn Partners. Please go ahead, sir.

Good afternoon. It's Ilan Chaitowitz from Redburn Partners in London. I've got three questions to start off with.

We heard from Abbott that they're expecting Vitamin D to drop 40% from their end. Wondering if we should put into our models a 40% drop in your US patient population treatments as well?

With regard to your machine products, can you please talk around the T machine uptake, how that's progressing in North America? And also, maybe talk a bit about your home hemo approval recently, and what you think for the prospects of that business.

And finally, I'd just like you to please go over the 5% reduction that you see for Medicare patients for 2011. You mentioned the 2% absolute (inaudible) and the 3% transition adjustments. I was wondering if you had factored in the inflation adjustment for 2011, or the 120 day booster from early start patients. If you have factored those in, can you just go into where you might see any other headwinds?

Thank you, Ilan. I'll take the Vitamin D, and then if I could, Rice, I'd like you to take the T and the home machine, and then Mike and I will do the 3%.

Again, I'd have to read the Abbott announcement, but there's sort of two things going on. Obviously, there's competition in Vitamin D between Abbott and Genzyme, and there might be a product mix. As far as what we see in Vitamin D, yes, there -- we believe that we probably are optimizing the Vitamin D at this time, so we're not really calling it out separately, but at the same time, it's part of the pharma utilization that we're looking at, in terms of having the right algorithms that provide the right patient care, but also meeting the economic constraints of the bundle.

So I think that's my comments on the Vitamin D. Rice, why don't I turn it over to you to do the machines, and if you have additional comments on Vitamin D, could you go -- feel free to add those.

Sure. Ilan, hi, it's Rice. On our T machine, we sold approximately about 1,300 machines in the fourth quarter, so we were very happy with that. We did our official launch in November at the American Society of Nephrology meeting. But the machine seems to be well received, it's functioning well, so we've been very happy with that.

And yes, we do have good news on 2008K@home. That was a recent approval. We expect to be shipping that machine in the second quarter of this year. We've got some ramp-up and a few things in the factory that we'd like to do before we start shipping those machines.

I'm excited, because I think it offers a great opportunity in the home hemodialysis arena, because with the technology of that machine, we will be able to have home patients take three times a week treatments. They'll get the same, if not better, clearance three times a week with our therapy proposal than having to do five or six days a week on perhaps the other home machines that are out in the market.

And additionally to that, we learned through our demonstration project with integrated care that Ben mentioned, we used a home device, our kidney [tail] device, which basically sits in a patient's home, allows them to record data such as blood pressure, weight, how do you feel today, and send that in to our care managers.

We are anticipating to take an offshoot of that technology, use that with our K@home machine to make sure that we are getting as precise management of the hydration of the patient, do we need to pour more water off, what's going on? It really gives us an insight day to day as to how that patient feels, and what our therapy is providing, or perhaps, do we need to be looking at something different.

So we are quite bullish and excited that we'll be back on the market with that product. And Ben, I think you covered Abbott just fine, so let me turn it back to you and Mike.

Okay. I think Mike and I will do the 5%, and again, the 5% I talked about was the 2% which was agreed upon by the industry and by ourselves, because we get an automatic update starting in 2012.

Now, there is an update in 2011 of 1% to 2% that's in the program. The transition adjuster, as we mentioned, should really at 0.6%, but right now, it's still 3%. So if you take all that net together, there still will be commercial increases, there is the other 1%. So we're saying on general, you won't see a total 5% reduction in reimbursement. You'll see something more, I think like in the range of 3%. Right? Is that what we're saying?

So does that sort of lay out the picture? Without any moderation on the transition adjuster, obviously, we're looking somewhere, then, in the -- our projections for the revenue per treatment would be down 3% for 2011, but -- why don't you pick it up from there? That's not a -- again, our cost structure that we're working with will not drop that to the bottom line. You want to add anything to that?

Yes, I would just say that when I commented about our guidance at the 6% to 8% growth in revenues on a worldwide basis, that's strongly positive for the Company. And when I talked about the effect of the transition adjuster and the Medicare cut, I was doing it in the context of organic growth. And I think you're used to seeing an organic revenue growth number from us in the 4% to 5% range in the US, and I've indicated it's going to be less than 1%.

So there's two ways to look at it. I had not commented specifically about a revenue rate, for a couple of reasons, even though I know historically, we typically give you growth guidance with regard to the revenue rate in the US. And I didn't do it, because when you have a common platform, year-over-year, in a very -- in a reimbursement environment that's not changing, it makes perfect sense to do that.

2011, everything has changed. So I think the most important thing for us to do is to give you guidance on what we expect the Company will report, and that's what we did.

The other reason I haven't gotten so specific with regard to the US, is in the third quarter, when I talked about the three areas that we would address mitigation of the bundle, the first one, we just talked about several times, which is the transition adjuster, and because of the lack of activity in Washington, I've taken that out. The second was the pharma protocols and acquisition costs.

The third, which was worth about 20% of the mitigation, I really took a number of different activities and categorized them as one basket of mitigation activities. I said that we would have the traditional cost reduction activities in the clinics, but I also said that we had an initiative to increase our home penetration. We have initiatives around training patients on outcomes, which gets to the kind of access they have. And I said that we would improve the care at initiation of dialysis.

Three of those four have a revenue effect. And I can't tell you specifically today -- I can't parse out those four different initiatives to give you more granular guidance with regard to what's going to happen on the revenue rate in the US.

So that's why I've stayed away from -- I don't want to pretend that nothing has changed, and I can give you US revenue guidance with the same kind of clarity that we've provided historically. I think it's better that we give you global guidance, and describe the mitigation activities in the three categories that we've done now for a couple of quarters.

Ilan, I think we must have answered that question, right?

Well, kind of. Can I just recap briefly, and you can tell me if I'm on the right lines or not?

Right.

Your 5% revenue reduction relates to US Medicare patients. That does include the agreed upon 2% reimbursement [count] across the industry. It also includes a 3% transition adjustment, but does not include any of the other mitigants, including the 2011 inflation adjustments, and the early mover benefits and other changes that you aren't sure how are going to play out as a booster to the revenue. Is that a clear summary?

I think that -- almost. I think the only thing I've said absolutely categorically is, we have taken out any mitigation of the transition adjuster. So, it's in the revenue rate adjustment because it was -- because you're going from 2010 to 2011, and there's a reduction in the reimbursement rate which I've essentially said, because Congress is not acting, we will not represent we're mitigating, for 2011.

With regard to all the other detailing associated with the 120 days, and with the different rate adjusters you would get with regard to your patient population, we are -- we did look at those. We are obviously billing in accordance with the new regulations. And when we prepared our budgets and those become the basis for our guidance, we did consider what our patient population was, and how much they would contribute to the revenue rate in 2011.

But compared, frankly, to the budget -- the 2% budget cut and the transition adjuster, those are much smaller, and those are, frankly, based on fact. As we've commented before, it remains to be seen, particularly with regard to some of the comorbid conditions, how successful the industry will be in terms of being able to capture the precise comorbid conditions of the patient in order to bill for those.

But we are capturing them. We have adjusted our IT systems to treat them appropriately in terms of the invoicing. And I -- so I think I've answered your question in that we've used our business judgment with regard to the comorbid conditions, with regard to the initiation of dialysis, and all those other smaller elements of the move to the bundle.

And I'm going to make one more comment, and then I'll let Ben further elaborate on this point, I'm sure.

And there's one piece of good news which I think is worth mentioning, and that is, despite all of the complexity associated with the new bundle, we did bill on a timely basis the month of January. So we have -- we are submitting actual bills to Medicare, which is not an inconsequential thing. Thank you.

And not being the CFO with all the information, Ilan, I think the way you stated it, you're correct. And what Mike is talking about is the things we're trying to do to move that -- to basically mitigate that 5%. Is that a fair overstatement? Is that a fair statement?

I'm not going to comment. (laughter)

Okay. Ilan, I think that's --

(multiple speakers) (laughter)

Ilan, I think the answer is, your statements are correct, and you can see, we're very active in trying to mitigate as much as we can of this haircut this year. Does that get you where you need to be?

Eventually, yes. Thank you.

Thank you very much.

The next question is from Kevin Ellich, Collins Stewart. Please go ahead, sir.

Thanks for taking my questions. I've got a couple questions for each of you. Maybe I could start with Mike. The easiest one is, with the Euromedic acquisition, is that included in your 2011 guidance? And if so, how much should we expect?

Sorry. Oliver's adjusting my mike, so I'm never sure when it's on. It is included in our guidance, and we would, as I think you know, some of the markets require regulatory review, so we've assumed that the closing will happen sometime in the first half of the year. So it's pretty much the back half of the year, in terms of when we would anticipate it would come on board.

So about 50% of the revenues. Okay, got it. And then you also mentioned in your prepared remarks that bad debt in the US was higher. Overall, as a percent of sales, it looked kind of flat on a year-over-year basis. But can you give us some color as to how much you saw bad debt increase in the US, and what was driving that?

Yes. The way I was commenting about bad debt was more in the nature of the fact that when the business is growing, we're providing more or less at the same level. It may change by just a couple of basis points from one quarter to the next, but it was not a material change in the risk assessment on receivables in the US.

Okay, that's what I thought. And then, maybe this is for Ben or Rice. But Rice, you mentioned that EPO utilization was down, maybe more like 10% to 15% in Q4, when you guys thought it might have been 5% to 10%. How much do you think you can continue to drive down [ESA] use?

Rice, I'll let you take that one, if you don't mind.

Oh, thanks, Ben.

(laughter) Yes, sorry about that.

I would tell you that I am fairly comfortable in that 10% to 15% range. If you are asking me, do I think it could go from 15% to 20%, I don't think that's practical. We seem to be in a fairly good spot, in the 10% to 15%. Could it go a little over? Perhaps. But we're really in a space now where we are pushing the algorithm and the protocol through our system. We are adjusting it as necessary, based on the quality outcomes we see.

So let me leave it at 10% to 15%, and yes, could it go a percent or two more? Perhaps. But I'm not going to start out trying to say the drop will be 15% to 20%. I just don't believe the data suggests that. Ben has looked at the data as well, he can jump in if he would like. But I'm comfortable with the range I'm giving you.

Yes, I am too, Rice. Totally agree with you.

Okay. What type of pricing increases or rate increases did you guys see in the US?

Pricing increases on EPOGEN, or on --

Revenue per treatment.

Revenue -- well, year-over-year, we saw a 3% increase in terms of average revenue per treatment for 2010 versus 2009.

Okay. So, that's pretty much what you saw in Q4 as well?

Yes. That was within the target range that we gave you, from 2% to 3%. So we ended up on the high end of that range.

Got it. And then, last question, Ben. One of your presentations has a Medicare waterfall diagram, if you would. It shows where you guys are able to make back, maybe mitigate some of the impact of the bundling effect. And you still have a $7.00 deficit.

Just wondering, what's your confidence that you'll be able to make that up? I mean, it shows a $14.00 add-back for a case mix adjusters, and $3.00 for [outlier] adjustments. Can you -- are there other ways you can make up that $7.00 deficit?

Well, I think that was the reason both Mike and I talked about the transition adjuster, because that's the size of the transition adjuster, and that turns out to be a penalty for everyone in the industry and for the patients.

So at this point, we're working very hard to try and find ways to mitigate that, but it really -- it's an unfair calculation at this point. And that's why it's not in our guidance, so we have to take it out.

So at this point, we're still active, trying to get the right decisions for the industry and for the patients, but at this point, we are trying to also find ways to make up for it if it doesn't happen this year.

Okay. Thanks, that's helpful.

The next question is from Frank Morgan, RBC Capital Markets. Please go ahead, sir.

Good morning. You touched on this a little bit, but I wanted to go back to the issue of the new coding requirements under the bundle payment system, specifically on the documentation from other healthcare providers that are involved in the delivery process.

Could you talk a little bit more about any kind of issues you may have seen, in terms of getting the necessary documentation in order to get -- to recognize rates at what you think are the appropriate levels? And then, there has been an issue there in terms of your ability to accrue for the rate, or are you accruing it -- the ultimate rate you think you'll receive, or at a lower rate?

Let me -- let's do that in two steps, and maybe you and Rice -- we -- this is a problem for the industry, and this is why I mentioned that it's so unfair that the transition adjuster hasn't been fixed, because we've got a double issue here. But again, from FMC's standpoint, I think the first quarter -- Mike, you want to mention, we've come pretty close to what we would expect to see, looking at the impact files. So you and Rice want to say any more on that?

I would -- I guess I'd say two things. One is, having billed one month, we did come pretty close to what our expectations were relative to the impact files. But when you look at all the componentry, you don't necessarily get there by every single item being exactly where it was pegged in the impact file.

And I would say generally, when you look at the comorbid conditions, that our experience is that it's difficult to get that information from the physicians and the medical professionals that don't work for us. They're not obligated to provide it.

So that -- so I think we're very close to where we expected to be in terms of our actual billings in January. We're getting there with a different componentry. But I would also say, with regard to your specific question in terms of the comorbid conditions, we are not accruing for what we cannot support.

So, we're billing what we can support, consistent with what the requirements are for Medicare, and if we can't support it, we're not accruing for it.

But it clearly is a problem for the industry. I think we know that, we're working on it. And that's the additional difficulties we've seen.

And to the extent that you can ultimately get documentation, is there an opportunity to go back and rebuild, to catch up for any kind of incremental shortfall?

Rice, do you want to take that? I don't know that I have that answer.

I think there is the possibility, but quite honestly, we want to be very clear and very sure about a rebill opportunity, if you will, Frank. So could it happen? Yes, but as Mike said, we want to be very conservative and concise in what we're doing here.

So we wouldn't say no to that opportunity, but we're going to study it very carefully before we go after that.

Okay. Thank you very much.

The next question is from Lisa Clive, Sanford Bernstein. Please go ahead.

Good afternoon. A few questions. First, on your private patient mix, yet again DaVita mentioned that they have seen their proportion of private patients decline in the most recent quarter. Could you just give some -- give us some thoughts on the trends you've seen in your private patient mix over the past, perhaps, 24 months, and if you could possibly think of any reasons why you may or may not be having a different experience from your -- on a large US competitor?

Second question is around private patient bundling. Now, given that all the patients are on the same or very similar protocol, regardless of payer, from a financial perspective, if you are optimizing drug utilization, that's clearly a good thing, financially, on the Medicare patient side, but that's potentially a headwind for revenues on the private patient side.

Could you just talk through how you are thinking about mitigating that issue, or give us some sense of the proportion of your private patients that are bundled?

And then my third question, you've -- Rice, thank you for that revised guidance around potential EPO reductions of 10% to 15%. That is -- sounds like it's due to the changes in the protocols that you've been working on for the last several months. You've also talked about reducing the number of patients with catheters, and as I remember from your Capital Markets Day, you cited that patients who have infections, which are often caused by catheters, tend to need more EPO.

Is that something that could, over a period of perhaps a few years, give you a bit of -- give you an ability to reduce EPO even more around the fact that basically you'll have healthier patients who need less of it?

Lisa, I'll -- this will be between Rice and myself. I think as far as the long-term effect of catheter reduction, it's really too early to speculate on that one. Let me pass on that.

I think as far as the private pay bundling, we've religiously not commented on what percent have been bundled, for various reasons.

So having addressed those two, let me turn it to Rice. Maybe, Rice, you can talk a little bit about the private -- about the mix, and on your suggestions on the 10% to 15%.

Yes, Lisa, from our standpoint, we have seen a slight increase in our mix, and improvement over year to year, '10 to '09. So we're up a little bit, we're comfortable with that. I don't think it would be appropriate for me to try to figure out what's going on with Kent and his team, because they're very capable in their situation. Perhaps we're just approaching something a little differently. But -- so our mix has improved slightly for us year-over-year.

I would tell you that in the 10% to 15% utilization drop with EPO, yes, that was affected by our protocols and the approach we took it, trying to find exactly the algorithm that we and our medical advisory boards were comfortable with, so that was a big piece of that.

And to sort of touch where Ben is, we are pushing hard for catheter reduction. There's no question, theoretically, that you're going to have some less EPO there. I think it's very early to try to -- you know, give you a proposal as to what that could do over time. We don't know. But I think you should just be aware and comfortable with the fact that we are working hard to drop that reduction in the number of patients with catheters, but I think it's too early to try to give you any warning or any guidance on what we think that ultimately could do for a drop in EPO dose.

Great, that's very helpful. Thanks.

Okay, I think we have time for two more questions. Actually, I think we have two more on the line.

The next question is from Martin Wales, UBS AG. Please go ahead.

I just wanted to understand what (inaudible) to your net acquisitions in Q4. As I recall, there were a couple of -- three acquisitions closed in Q4. And you quoted a total of $386 million. What was the split between -- the spend between the Gambro deal, which closed at the end of the year, I guess Asia Renal Care, and any upfront payment for the Galenica JV? Could you give me some sense of how that $386 million is split, please?

Sure, it's Mike Brosnan. (inaudible). We actually are not disclosing the specifics, with regard to the Galenica transaction. I think we previously disclosed ARC, but that transaction closed in the second quarter, not the fourth quarter.

Okay, so it (inaudible).

And Gambro, I think we previously disclosed, and that was $80 million, which did close in the fourth quarter.

So if $80 million was Gambro, what was the other $300 million? By definition, it must have been the upfront to the Galenica JV. Is that a reasonable assumption, or am I missing something?

No, I don't think you can draw that straight a line, because we did have a number of other smaller acquisitions around the world that closed in the fourth quarter.

What were they? Or you're not disclosing them?

Well, I think given that I started by saying I'm not disclosing the Galenica transaction, I've probably given you as much color as I can at this point.

I didn't ask you to disclose the amount. I only asked you to disclose what the acquisitions actually were.

Oh, okay. Let's -- we have a number of smaller acquisitions, which again, as Mike says, we don't disclose the amount, because they're clinics that are owned by people known in the industry. So I think, Mike, there were some dialysis clinics closed, ARC closed at the end of the year, Galenica?

Not ARC. (multiple speakers), Gambro.

Not ARC, but no, (inaudible).

I'm sorry, I misunderstood your question. I thought you were just trying one more time to come back around, so --

Oh, no. I've given up on that one.

If I misunderstood, I apologize. Yes, the -- I think it's safe to say, in the fourth quarter, as I'm thinking about it, they were all services acquisitions. There were no products deals in the fourth quarter.

Okay, fantastic. Thank you very much.

The last question is from Tom Jones, Berenberg Bank. Please go ahead.

Thanks for very much for letting me speak at the end. I've got two questions, which hopefully, you'll be able to answer both of.

Just on the acquisitions front, the $300 million to $400 million that you've sort of got left over in your $1.2 billion for acquisitions in 2011, I just wondered how we should be thinking about the spread of that across your main business units, your international clinics, US clinics, maybe in the Products business. And I've only asked because I notice that the non-same store growth in North America ticked up to its highest level since, I think, Q2 2006, or 2007, rather. So I just wondered whether that was a -- something we should view as a sustainable trend, or was just a one-off anomaly that happened in Q4 with -- there was a bunch of mom and pops decided they'd had enough under bundling and wanted out before it started. Just wondered if that was a sustainable thing.

And then the second question, I just wondered if there will be any further writedowns on your Venezuelan business following the second devaluation of the currency throughout the end of 2010, or did you completely write that off in Q1 2010?

Okay, why don't I take the second question, and then Ben and I can decide who takes the first one? The -- yes, with regard to Venezuela, in the first quarter of last year, that was the most dramatic effect, because we had to mark the balance sheet to market, so that was about a $12 million effect that had to be taken in the first quarter. And then, as the year progressed, we had to use hyperinflationary accounting, so we recognized whatever the currency effects were each quarter.

And so, so you had a jaundiced effect in the first quarter of last year with regard to Venezuela.

I guess, as long as you've asked the question, with regard to Venezuela, because they did another devaluation at the end of 2010, but the government is handling that one differently, in that they're honoring the exchange rates for all prior transactions. So we will not see the kind of dramatic effect for this most recent devaluation that we did in the beginning of 2010.

Okay, so it would be fair to assume there would be some effect, but it's similar to what you've expensed through Q2, Q4 last year?

Exactly, yes. You'll see it -- it will kind of drip in over the course of the year. It has a smaller effect.

That's it. Then on the capital allocation front?

Yes, the -- are you looking specifically at Q4, or year-over-year?

No, no, for 2011. I just wondered where your preference for allocating that $300 million or $400 million of capital would go on the acquisition front. International, or US clinics, or into the Products business, perhaps?

Okay. Well, I always think in terms of acquisitions, acquisitions and licensing, if you'll give me that liberty, in the three fronts -- Services, Products deals, and potentially, additional pharma deals.

I was very specific in the beginning of 2010 in that I commented that I would see the acquisition activity jaundiced towards Eastern Europe, Russia and Asia. We did continue to do what we've done for many years, in terms of tuck-away acquisitions in the United States.

With regard to 2011, I think we're looking on a global basis. And when I provided the -- when I gave you the metric with regard to organic and acquisition growth this year, I didn't specify as to what part of the world it would be in.

I do think you're going to continue to see us very active in the International markets, and that's probably all I'd want to say at this point in terms of the guidance for the $300 million to $400 million.

And the tick up in non-same store growth and volumes in North America, is that kind of -- I think it's 1.4%. Is that likely to continue at that level, or was that just a one-off effect, really, in Q4?

I think -- I'm just thinking for a minute to try to dovetail that into what I just told you. I think that there will always be some non-acquired growth. It is up a little bit, but 1% to 1.5% is not extraordinary. So I think it's reasonable to assume that you might see something on the order of, let's say, 0.5% to 1.5% in North America, over the course of 2011, based on what I know today.

That's very helpful. Thanks very much.

Great. With that, actually, I'd like to thank everybody for your interest and your questions, and we will talk to you soon. And I think the only housekeeping I have, as always, we have some food being served actually in the room behind us. So, thank you very much. Whoever has time, please join us. Thank you.

Thank you.

Thank you.