Fresenius Medical Care AG (FMS) 2011 Q4 法說會逐字稿

Thank you, everybody, for being back. I would like to welcome all of you, actually, to Fresenius Medical Care's full year and fourth quarter 2011 results analyst meeting. Also, a warm welcome to everybody who joins us out there on the Web. We much appreciate your continued interest in the Company.

With us today here are Ben Lipps, our Chief Executive Officer and Chairman of the Management Board of Fresenius Medical Care, from right to left, Mike Brosnan, Chief Financial Officer, and Rice Powell, Deputy Chairman of Fresenius Medical Care and Chief Executive Officer of Fresenius Medical Care North America.

My duty, as always, I would like to start our presentation also by mentioning our cautionary language mentioned in our Safe Harbor statement of our presentation and the material we distributed today. For further details concerning risks and uncertainties, please refer to our filings, including our SEC filings.

And with that, Ben, I would like to hand over to you. The floor is yours. Thank you.

Thank you, Oliver. Ladies and gentlemen, again, let me extend a warm welcome to you, our Board members, our associates around the world, and all of you who have joined us on the Internet today.

In terms of the agenda, I'll do a business update, Rice will talk about the business update for North America, and Mike will basically give us the financial overview, the guidance for the year, and we'll go into questions and answers.

Before I start with this slide, I'd like to thank, again, all of the staff around the world, all of our physician associates, and everyone who have worked so hard this past year to produce quality products for our dialysis patients, and quality services in our almost 3,000 clinics around the world. Again, thank you very much, and thank you for keeping your focus on quality.

We had another good year financially in 2011. As you can see in fourth quarter, it was a strong fourth quarter, revenue growth 5% at constant currency, 5% actual -- 6% constant currency, 5% actual, and 14% net income bottom line.

Again, this is very impressive. International has done very well in an environment that continues to be persistently challenging because of the debt crisis around the world, and they did an excellent -- have conducted an excellent job this year, and North America has done very well, I'll show you, in terms of coping with the Bundle and developing excellent quality, as well as excellent financial results.

Fourth quarter was, as we expected, a strong fourth quarter, as we ended the year. I'm very proud of the results for fourth quarter.

Moving now for the year, again, I mentioned that it was an interesting year around the world. We've done -- the staff, the Board members, everyone has done an excellent job. But we had almost touched $13 billion in revenue, $12.795 billion in terms of revenue. Again, 6% actual, 5% constant currency, 9% bottom line, $1.071 billion net income on the bottom line this year.

We saw very strong cash flow. Mike will talk about that. We exceeded our cash flow from operations, about $1.5 billion in cash flow from operations. So by and large, again, a good finish to the year, and a good year with a number of challenges that our staff worked and met during the year.

Looking a little bit at the revenue by region for the full year, North America accounted for about $8.15 billion of the revenue, about 64%. Rice will talk a little bit about some of the activities there. But again, as I have mentioned, a very good job coping with the Bundle. And North America ended up with a record operating margin of 17.6%, which was a high water mark for North America.

Turning now to the International, International saw excellent growth, 14% constant currency, $4.628 billion in revenue -- again, that represents about 36% of our revenue. Excellent growth in 2011.

The strongest -- and again, the operating margin in North America was about 17.3%, and Mike will talk about it, but again, a very strong operating margin for the year. The Asia/Pacific grew at 19% constant currency growth. It was by far the strongest market with respect to growth -- hit almost $1 billion in revenue, $980 million. Again, a tremendous accomplishment in Asia/Pacific.

Latin America turned in $700 million in revenue, and again, a very strong constant currency growth of 16%. Excellent job in Latin America, I'm very pleased. And then Europe, of course, came by with another very strong performance of 11% constant currency growth.

So as you look at International this year, considering all the acquisitions, everything that we've been doing this year in International, it was a very strong year for International, and they carried the revenue for the year.

Again, congratulations to the Group. I really very much appreciate the performance in the International area this year.

Looking now at the Dialysis Services network, as we'll talk about a little bit here later, one of the focuses that we've had in 2011 and 2012 is to expand our Dialysis Services network, because this is the foundation, just like the Products were the foundation for us moving into the Services 15 years ago, this is the foundation that we see that will lead us into the next -- in five years, into more opportunities that I'll talk about later, with respect to the services we can offer for the dialysis patients.

Now, if you look at our network this year, most of the activity was in International. We acquired 110 clinics. We actually had 30 de novos. In the US, very light on acquisitions. What we basically looked at moving into other services -- Rice will talk about vascular access, but we did not expand and purchase many clinics. However, we did do the normal 34 to 35 de novos.

And so, if you look at this past year, it was all about growing the network, clinical network, in International, both Asia/Pacific and into -- and in Europe, and we did an excellent job of basically growing that network.

We did about -- we performed about 34 million treatments, 22 million of them in the US, and around 16 million -- about 13 million in the International. So you can see, and we have about 233,000 patients that we're treating, 144,000 of them in the US, and about 90,000 in the International. So you can see that we're very well represented around the world. We have a major service network in 40 countries, even though we sell products in almost 120. So we continue to build that.

We will continue to build that network next year, but it will be focused primarily in North America, with the acquisition of Liberty, which Rice will talk about, but we're planning for it to close first quarter. So the activity, then, in the network growth is really in North America next year.

Turning to the next slide, talking a little bit about Dialysis Services and the revenue, again, we had a strong fourth quarter, and a comparable year to date. Again, the revenue was driven by International. You see a 19% growth in constant currency. And an 8% organic growth. And so, during this time, we continue to expand our service network, which we talked about, and at the same time, we saw excellent organic growth in the region.

Latin America led the region in organic growth, an actual 19% revenue growth in Latin America, organic growth in Latin America. Again, very impressive in terms of what we were able -- what they were able to accomplish in 2011.

Looking at the same market growth, we are essentially, I think, right at where we'll probably operate for a couple of years, with all this activity. Clearly, International has a same market patient growth of around 5%, North America 3%, giving us an average growth of patients then 4% year over year. That's pretty much where we operated last year. We will probably end up close to that next year.

I'll show you, though, as we go forward and we get all these clinics basically integrated into our system, then we'll see the following years, I'm sure, a little improvement there.

Now, let's talk about quality. You know that we treat, as an industry, almost 2.1 million patients. These are patients that have many co-morbid diseases, but they're also patient that can live. We have some patients that live almost, I think we looked at it, 25 to 30 years on dialysis. And so clearly, it is a way of life that we're trying to make better for the patients, and it's all about quality, and what can we do in the dialysis clinics.

I'm very pleased to say, if you look at our metrics, year over year, we keep improving, and around the world, we offer -- 95% to 97% of the time, we provide the therapy that the doctor prescribes. And we've continued to inch that up a little each year, and that's pretty impressive, because that shows the very close cooperation between the medical staff and our clinical staff.

The other thing I'd like to point out, you see that in terms of hemoglobin levels -- this is anemia level -- North America has done an outstanding job of, essentially, tightening the distribution. They now have almost 78% of their patients between 10 grams and 12 grams per deciliter. And that's a major accomplishment that the team has put forth in North America.

Looking at bone mineral and phosphate, you can see North America, only about 64% of our patients in North America basically achieved the target for phosphate removal. Again, this is an important area that has a unmet need, and you'll hear more about it as we go forward. We've got some things to do.

Interestingly, if you look at Europe, you'll see almost 76%. And I think that's a function, in our clinics in Europe, primarily, we have about 50% of the patients' treatments being done with online hemodiafiltration, which does a better job at removing phosphate. So this is an example where one of our new therapies, actually, you can measure it and see the effect here.

And finally, when it comes to hospitalization days, we continue to see an improvement. So, as you step back, and we don't want to lose sight that essentially, we're here to help treat those patients, we continue year after year to improve the quality of care around the world, and it's pretty comparable, if you look at the three regions of the world.

Turning now to the Products slide. We had a strong fourth quarter, 10% constant currency growth in the Products area, again, led by International, with 12% and North America with 2%. But again, North America's been running on the negative side through the year, so they started to basically move forward. And Rice will talk with you about it, but the business, very solid, and what we found -- what we've seen, and I'll explain a little bit and Rice will give you more as we go through.

If you look at the Global Products business, we -- and just around the world, the strongest growth of machines was in Asia/Pacific, with a 33% increase in machines. Very, very significant last year.

The other areas that we have seen significant growth is in peritoneal dialysis. We've seen a 23% growth in peritoneal dialysis in International. Again, that's because early in the year, we acquired the Gambro PD line, but that's not all just adding Gambro to it. That's really a function of, we now are, essentially, focused very heavily on peritoneal dialysis. We have the capability, we have good products, and there's really only two suppliers of peritoneal dialysis in the world of any significance, and that's Baxter and ourselves. And so, we've seen a very significant growth in peritoneal dialysis around the world.

And also, in North America, we actually, if you look at the total growth of our products, and that's really what we sell, inside plus outside, it was positive for the year of 2%. And Rice, again, will tell you, will talk a little more. But we also saw PD grow 13% in North America. And even though we gave some discounts to our customers last year to help them on the pharma side to get through the Bundle, we actually saw the volume of IV iron grow about 10%.

So again, all the products, we -- our market shares have maintained themselves or grown in each of the areas, and we've grown better than the market.

So by and large, the Products is a good story also around the world, and there's an acceptance of our products without hesitation I think everywhere in the world.

Okay. Let's turn a little bit to the dividend. This is the 15th year, I believe, that we'll offer an increasing dividend. Again, that is significant to us, and I believe it is to our shareholders. We're basically -- we'll be recommending to the AGM and to our Supervisory Board that we increase the dividend from EUR 0.65 to EUR 0.69 for 2011, in May of 2012. We're proud of that, and we're proud of the continued ability to continue to offer an increasing dividend year over year, since we started as Fresenius Medical Care in 1997.

In addition, if you step back and look at the return for those shareholders that have held our stock, or have participated in our stock over the last ten years, we've done reasonably well with a -- in the euro shareholdings of about 10% against the DAX, which is about 1.4%, and for those who bought ADRs, about 15% versus the Dow Jones 4.6%. And that's the total return. So we feel that, again, thanks to your help, thanks to everyone's guidance, and especially what our staff have done over those years, that we've basically done a reasonable job then of providing a return for those investors that invested in our stock.

Okay. Now let's look out a few years, and why are we buying all these clinics, and what is our game plan looking out the next five years or the next ten years?

Interestingly, by 2015, we expect that there will probably be 2.7 million patients being treated by dialysis, okay? There's really nothing on the horizon that's going to stop the need for dialysis. It's just a matter of, what is going to be the economics, and are they going to be taken care of. And the answer is, for the next few years, we see, yes, they probably will, and our job, we'll show you what we plan to do about them, make sure that ten years from now, that same -- those that need dialysis can get it.

Now, what that means is, that by 2015, just the products that we sell and the services, that business is not the whole picture, but that business will be about $34 billion. So that's the market that we're playing in today, in terms of selling products and providing service.

That is not the whole story, because if you look at what are the medical requirements, and what are the costs of the medical requirements to treat these patients, it's closer -- it will be closer to $88 billion to $90 billion in 2015. And so, what we believe as a company is, with our resources, with our knowledge, with our physician associates, with our dedication, that we can actually continue to increase and offer more services, and therefore, essentially, most of that additional cost is hospitalization.

And so, we think, and we've proven that in our demo project, we've got, I think, some traction in the US. Rice will talk about it. And around the world, that yes, we can actually offer more services, and probably do a better job of quality and essentially maintaining the cost, flat or not having it grow at the level of the patients. And you see, that's what happened, is the costs have grown equal to the patients.

So. This is what we're looking at in terms of the long term, increasing our services, and it's very similar to what we did going from Products to Dialysis, and now we're going to -- depends on the part of the world, disease management, integrated care, whatever you want to call it. But that's essentially where we're headed.

And we think that as we look at the last couple of years, we've taken the right steps to be prepared to offer this service. And again, it doesn't happen immediately. It steps a little bit each year, and we've made a major move last year in expanding our vascular access business in the US. And so -- and again, we're doing that in other parts of the world on limited basis.

So, what we really felt, what we feel is, we have a leading position in the industry, I don't need to dwell on that. But more than that, we continue to have innovative products. But it's more than just the having the products. You have to manufacture them, you have to have the quality, you have to deliver them, and we've got probably one of the best networks in terms of this industry, in terms of manufacturing, 41 sites, 30 countries. And, about 30% of our revenue comes from products we've introduced the last years, so you can see, innovation cycle is alive and well.

So all of the acquisitions that we're doing this year and last year really are driven -- are driving towards increasing our clinic network, and offering more services. And so, that's what you see, and that's the bottom piece of what we're doing. So that's the overall view of why we've gone out -- and Mike will talk about the financing of these acquisitions and what we -- what he had to go through to do that, but that's our plan. We're well on it. We believe that there's real opportunity long-term, and we think we're in a position to, essentially, maximize that opportunity for all stakeholders within our Company.

So at this point in time, let me turn it over to Rice Powell, who will give you some insight into our North American operation. Rice?

Good morning, good afternoon to everyone. I'd like to have some remarks to guide you a little bit deeper into what went on in North America for 2011.

As you know, it was a year of what we call the Bundle, or the Prospective Payment System implementation. This, as Mark said earlier today, was the biggest change in the US dialysis industry in the last 25 years, fundamentally changing the way that we were paid by the government on our Medicare patients.

We are comfortable and we are proud of the fact that we were able to mitigate many of the effects, negative effects, that came about as a result of this change. And what you might ask is, well, exactly what were those negative effects? There was a 2% cut in our revenue, and that was legislated by the US government. And then additionally, in the first quarter of last year, there was an additional 3% cut, as they call it, a transition adjuster, because it was not clear to the government how many providers would opt into the Bundle or take the approach of going in 25% a year over a 4 year period.

So, we had a headwind of a 5% reduction in the first quarter. Through a lot of hard work, and foresight on the government's part, they took the 3% transition adjuster away the end of Q1, so we only had the 2% headwind as we went through the remainder of 2011.

During this time, being very operationally focused on trying to make sure we mitigated those effects, we were still able to expand our network. As Ben said, we built 34 new clinics. We acquired only 9 clinics. But most substantially, we acquired the American Access Care business. We brought 28 new vascular access centers into our operation, plus the additional 12 that we already had, puts us at 40, and a nice base to continue to focus on, additional services that are necessary, and an integral part of dialysis care.

As Ben mentioned, we saw significant growth in our peritoneal dialysis business. Organic treatment growth for PD was 13.8% in 2011, and additionally, our home penetration -- so PD plus home hemodialysis, we increased that by 80 basis points. We're up to about 8.8% of our population of patients is being taken care of at home in 2011.

And then lastly, continued growth of our hemodialysis products. If you simply were to exclude the pharma business as a way of looking at what has happened with traditional dialysis products, dialyzers, hemo equipment, etc., that growth, on the external book of business, was 6% in 2011, so an excess of market growth, and we're very proud of that result.

Now, something as monumental as the Bundle coming about, you have to ask yourself, because this is healthcare, what is the effect, if any, on our patient base? So what I've tried to do is just give you some sense of how our clinical parameters fared in the course of 2011.

As you know, it was a big year for changes in EPO. In the middle of the year, the Food & Drug Administration made a change to the EPO labeling. We have protocols that our physicians use, for how we dose EPO. With that change coming to us in July, we had to change all those protocols, as I mentioned in November, and I'm happy to say now that we've changed them, and we've pushed those protocols back out to our physicians in January, so we think for the time being, our EPO algorithm and how we're going to approach EPO management should be settled for a period of time. We also optimized our iron protocols.

What's important is if you look at this first bullet, patients with hemoglobin level less than 10 grams per deciliter. In the US, we refer to that as our sub-10s. Remember, hemoglobin gets below 10, patients then get to a point where they might require transfusions. It's a very significant point for them. And so, we've watched and tried to manage the sub-10 group, and not let that increase significantly as a result of all the changes that went on with EPO over the course of 2011. And you can see that in '10, we were just above 7% of our patients were there, and we increased a little bit, but not significantly. So we're comfortable that our attention to this has paid off, and we'll continue to do that.

Nutritional safety net, looking at patients with an albumin level of greater than or equal to 3.8 grams per deciliter, you can see that we're at 66% in 2011. So we've improved from the prior year. And nutritional status is incredibly important for this patient base. As you've heard us mention many times, dialysis patients with catheters tend to have more infections, they tend to go to hospitalizations. We would like to not have patients come into the clinics with central venous catheters, and you can see that we've continued to improve that picture. 79% of our patients in 2011 came in with no catheter, up from 76% in the prior year.

And then looking at our crude mortality, simply looking at the death rate of those patients that are on dialysis at that point in time, we have a 5 year period, showing you almost a 350 basis point improvement. And again, this is healthcare. This is why we do this. So to have mortality improvements of that nature over a 5 year period is significant, and we're proud of that.

And then lastly, as been mentioned, our hospital base per patient improved again in 2011, from where they were in the prior year.

Now, delivering better clinical outcomes with improved technology. There's no question that good clinical outcomes are gotten because you have a good physician base, we have skilled nursing care to take care of patients. But Fresenius's history has been through innovation and technology at the product level. We allow caregivers to increase clinical outcomes and improve them. And so, it's a fundamental tenet of how we operate, not only in North America, but throughout the world.

Simply put, these are some examples of new technology in the last year that are helping drive better clinical outcomes for our patient base, not only within Fresenius Medical Care, but keeping in mind that we sell all of these products to DaVita and other providers. We believe that we're helping them achieve better clinical outcomes through our technology.

The 2008T machine with the venofer pump, this is the current machine that we're selling. The venofer pump is another piece of innovation that, rather than having nurses have to draw up IV iron in a syringe and inject it, they now can simply put a vial on the machine, pump it on the machine, record the dosage given, and go about their business of being closer and more hands-on with patients.

The 2008K@home is a home machine. We like this. It allows us maximum therapy for patients. Patients can get in three days the amount of therapy that it might take four or five or six days on other products. And we're -- we like that. We think it's a safe, proven way to go about home hemodialysis for our patients.

Critline is an acquisition that we made, in the first box. What you see, and I realize the pictures aren't particularly clear, but the little box that you see on the right there is the Critline monitor. We simply put that on our machine. It allows us to reach dry weight, and try to manage better how much fluid to pull off of patients. We hope in the future that that little box will be incorporated into the machine and actually be a module on our machine, so you won't have to bolt it on separately, if you will.

And then lastly, we have a new family of dialyzers, the Optiflux Ultra, that will be coming out about mid-year of this year. Those dialyzers are a little smaller, thinner membrane, higher clearance. I like to use the analogy, think of a four cylinder engine, very turbocharged, versus having to have a big eight cylinder engine. We're trying to drive efficiency. We're trying to be more efficient with a smaller kidney, and yet, give you better clearance.

Now if I may, I'd like to move into Dialysis Services, and follow up on some comments that Ben made. And I realize this is a busy chart, so let me orientate you to this.

If you look on the left, what we've tried to do with the bars is show you where our revenue per treatment has been over the last couple of years -- $347 in '09, $356, and then you see the 2% drop in 2011. The blue bar down below that, what we're showing you, is our cost per treatment. And what you can see here, and the reason we've driven margin expansion in this particular case is, a 2% drop in revenue, and yet we've been able to take 3% out of our cost per treatment.

And then looking on the right side of the slide, you can see a nice progression of where the EBIT margin in North America has been, where it is today, from 16.4% in '09, up to 17.6% in 2011.

Now, it takes three minutes to set that chart up and explain it to you, but it takes a whole year to generate that kind of result, and I'd like to thank those people that are on the North American team that are listening in for their incredible effort, because this is not something that's easily done. It takes a lot of hard work, and they really work diligently to get this result.

If we're going to talk about the US dialysis system, we have to talk about healthcare and where we are. So a couple of things that would probably be good for you to know.

The Prospective Payment System, or the Bundle rule, has now come out for next year, or for 2012, this year. We were given a 2.1% increase in our dialysis reimbursement. If you remember, one of the premises of the Bundle is that they were going to cut the revenue in the first year, but then we would be able to get an automatic inflation adjuster in the out years, and we see that happening here.

As I mentioned, we eliminated the 3.1% transition adjuster in the first quarter of 2011. We wanted to make sure that it didn't come back in 2012, and to our delight, it did not. And then we have one issue that we continue to work on with the US government. We have a number of case mix adjusters that will vary the reimbursement rate that you are paid based on certain conditions that patients have. But at this point, we feel the math that was done, the approach to this, still allows for a $1.00 to $2.00 per treatment leakage, meaning, we don't think the rates that the government looked at are accurate to what we see in the dialysis population.

We know these rates were calculated using hospital patients and more general nature than specific to dialysis clinics, but we continue the dialogue with the US government, and we hope that will be corrected over time.

Another new feature that we went through in 2011, and it will continue, is Quality Incentive Program. In other words, not necessarily being paid a bonus for good quality, but if you don't have good quality, taking a decrement to your revenue.

I'm happy to report that in 2011, of the maximum 2% decrement that could have been given to us, out of 1,816 clinics, we only had 8 that were negatively impacted at the 2% rate. So our quality remains to be good. These are the two measures that you will see us being calculated against in 2013, hemoglobins greater than 12 g/dl, and urea reduction ratio at greater than or equal to 65%.

Now, looking in 2014, the government is already suggesting what they would like to use as part of the Quality Incentive Program. There are roughly five clinical measures and three reporting measures. We're talking to the government about this. We want to make sure this doesn't become overly complicated with time. We're happy to meet whatever clinical parameters they're looking for, but we want them to be well understood and disseminated, so there's more work to be done there.

And then lastly, Ben mentioned this, integrated care. If you follow us closely, you know that in the US, over a three or four year period, we did a demonstration project where Fresenius Medical Care took the responsibility for the patients.

Another way to look at this, a dialysis patient in the US generates about $88,000 worth of cost. Somewhere around $30,000 of that is the actual dialysis treatment, so there's around $55,000, $58,000 that goes into hospitalization, their physician fees there, and some drugs.

What we learned in our project that we worked with the government that we could save somewhere around 5% or 6% of that $58,000 that we're not currently seeing today, and it really came about, the savings from less hospital days. We were able to keep the hospital days down considerably in this pilot. And we did that through technology.

It shouldn't be strange for you to know that Fresenius would approach it that way. We actually were able to put technology in patients' homes, where we could talk to them every day. They could measure their blood pressure, their weight. We could ask them, did you take your medicines? If there was an issue, then we could have a nurse call them and try to prevent any issue of them going to the hospital on an emergency basis, could we do something proactively.

And as I say, that worked well for us. We, and DaVita, have gone to the government and suggested that we would like to do a much larger pilot on integrated care, because we think this is the very best way to take costs out of the US healthcare system, as it relates to dialysis patients. And we are optimistic, and we continue to have dialogue with CMS, the Center for Medicare Services, that -- back and forth, about when we might be able to have a pilot of a significant number of patients -- not 1,000, not 2,000, but we would love to see tens of thousands of patients that we could manage under this scenario.

And lastly, what might you expect from North America in 2012? We'll work very hard for strong revenue growth. It will be a challenge, but we think we're up to that challenge. There's much that we can do there, and we're active.

The Liberty transaction that's been mentioned today, we are on track to close that in the first quarter of this year. So we expect to close in Q1, and then as you can imagine, it will take the remainder of 2012 for us to integrate Liberty as well as Renal Advantage into the Fresenius operations.

Operating performance is key. Several things that we will be facing over the course of the year that we'll continue to attack aggressively, to overcome and mitigate, pharmaceutical cost increases. There are a couple of those that we'll have to deal with in the course of 2012. We need to really prepare ourselves for the advent of integrated care. It's something that can be scaled up, but we obviously need to be ready and prepared to scale it up in a large way, keeping in mind that the experience that we've had with it to date has been on 1,000 or so patients. To all of a sudden go to 25,000 or 30,000 patients, there's some scale things that need to be done there, but we're beginning to prep for that, and continue to talk to the US government about the opportunities.

And again, this is healthcare. We take care of patients. We cannot lose our focus on quality and continue growth of our franchise. And I hope to stand here in front of you this time next year and continue to show you better clinical outcomes with more technology, but at the end of the day, providing for a better life for our patients.

Thank you very much.

Good afternoon, and good morning. Mike Brosnan. I'll just finish up.

Ben and Rice have both commented about 2011, and where the business is headed. I'll take you through the remainder of the P&L, and also, provide you guidance for 2012.

Looking at our fourth quarter profit and loss, I won't talk about sales. Ben has covered that. But you can see that we transformed the sales performance in the fourth quarter to $587 million dollars of operating income, with very good margins, 17.7%, up 70 basis points from 2010, and a 9% improvement in year over year growth in terms of absolute dollars.

The margin improvement of 70 basis points had contributions from both the US and - or, the North American and the International business. Most notably, the North American business was up 120 basis points. This was largely a result of the efforts that were undertaken all year in the US with regard to mitigating the impact of the Bundle that Rice referred to a few minutes ago. So not surprisingly, there was a contribution made by the reduction of pharmaceutical costs, both in terms of the acquisition costs, as well as utilization over the course of 2011. There was higher income from equity method investees, which is the result of our joint venture with Vifor, the Vifor/Fresenius/Renal joint venture.

And some of that was offset by slightly higher personnel costs, and obviously, the impact of the reduction from Medicare, netting to a 120 basis point improvement in margins in North America.

On the International side of the business, 70 basis point improvement in the quarter. That's the result of foreign exchange, growth of our business around the world, but particularly in Asia, and a small gain -- small one time gain, and a slight increase in bad debt expense for the fourth quarter.

Looking at interest expense, $82 million, you can see that the net change in interest expense was about 11%. I've been commenting as well all year on the gross change of interest expense, not including interest income. That is up 23% for the quarter. And as you would expect, our interest costs are up, because we've been very active in acquisitions, both over the course of 2010, as well as, as Ben has commented on already, 2011.

In particular, the acquisitions we're talking about in the fourth quarter are the American Access acquisition, and the second closing of our Vifor/Fresenius/Renal Pharma that related to the rights on the international side of that market.

Turning to taxes, 32.7%. That's a little bit less than the guidance that I provided for the year. We did have in the fourth quarter some effects associated with wrapping up some tax audits, particularly here in Germany. And then you have the ongoing effect of the tax free income from our equity method investees, and the presentation effects with regard to our non-controlling interests that resulted in less than a 33% tax rate in the fourth quarter.

Finally, in terms of net income to Fresenius Medical Care, $310 million, a 14% increase year over year, which was completely consistent with the guidance that we provided to you for 2011. We indicated at the beginning of the year that we'd see a relatively low growth in the first half of '11, and substantially better growth in the back half. Over the quarters, that represented, in terms of earnings growth, 5% in the first and second quarter, 13% in the third quarter, and now 14% in the fourth quarter.

Taking a quick look at the year to date results. Revenues, as been commented, up 5% constant currency. Operating earnings, $2.1 billion, 8% growth year over year. 16.2% in margin, which is spot on, the guidance that we provided. We've indicated that we expect margin accretion of 10 to 20 basis points a year in our Capital Markets Day in 2010, and you're seeing that performance being delivered in fiscal year 2011.

Interest expense, again, 6% on a net basis, up to just under $300 million, 17% on a gross basis as a consequence of our acquisitions. And tax expense, consistent with the overall guidance we provided for the year, leading to earnings growth of 9%, or $1.071 billion, as Ben commented on.

Moving -- starting to move towards cash flows, and first taking a look at our days sales outstanding as an indicator of the overall health of the business. As you can see, we're at 80 days. That is flat with the third quarter. We think that's very good performance, given the markets in which we operate around the world. Consistent with the guidance that we provided, the US is at -- or, excuse me, North America is at 55 days. That is up one day year over year, which is what we indicated in the second -- in the first quarter analyst meeting. And International is up 3 days, sequential quarter, and 5 days year over year. We continue to monitor all the markets on the International side of the business. Not surprisingly, what you're seeing is an increase in DSOs for Italy, Spain and Portugal. We still anticipate that those receivables will be collected over time.

I should also comment that, like a number of other businesses, we are seeing the government in China tightening the credit policies for try to slow the economy down a bit, so we have a very robust business in China, but we are seeing a lengthening of the payment cycles there as well.

Turning to Q4 cash flows, just under $500 million for the quarter, and operating cash flows up 46%, I think most notably, you're looking at about 15% of revenues, which is substantially better than the fourth quarter of last year. And also, I would say, higher than the guidance that we typically provide for a full year.

So while we're very happy that we had very strong cash flows in the fourth quarter, you'll see both for the full fiscal year and you'll see in the guidance we're providing for 2012, that we're anticipating that will be normalized over the course of time, down to the consistent performance that we've delivered.

The 15%, or if you will, the 4% or 5% better than guidance performance, was largely driven -- 3% of that came from earnings associated cash flows, essentially cash net income plus amortization and depreciation. Receivables and DSOs were relatively flat in total, and the remaining 2% was provided by our other working capital, largely less cash taxes paid in the fourth quarter.

Capital expenditures, at $191 million, is about 5.7% of revenues, slightly higher than our norm, reasonably consistent with last year, which was at 5.3%. And free cash flow, not surprisingly, because of the operating performance, is up substantially, just under double digits, at 9%.

Acquisitions in the fourth quarter of $604 million, as I mentioned, was largely due to the vascular access acquisitions, the Vifor closing, and several smaller deals in the International markets.

Taking a look at full year cash flows, you're seeing performance consistent with the guidance, 11% of revenues, $1.4 billion in operating cash, 4.5% of revenues in terms of capital expenditures, and finishing up the year with our acquisition program of $1.8 billion, which now captures some of the deals that we closed earlier in the year, particularly the IDC/Euromedic deal which was the largest deal we've done in the International markets, as well as our initial investment into Renal Advantage, done in the first quarter of 2011, for $300 million, which was the harbinger of the Liberty acquisition that we hope to close one year later.

Just one other quick graphic, with regard to cash flows. You can see the numbers that I've reported. In addition, the net increase in financing activities of $1.1 billion, representing both what we rolled over, as well as new monies that we raised over the course of fiscal 2011 to finance our acquisitions, the dividend of just under $300 million, finishing the year with about $450 million in cash on the balance sheet.

I would add to that, that we had $1.2 billion of available liquidity under our existing credit lines, so we're well positioned in 2012 to deliver whatever the business needs in terms of working capital, as well as to finance our acquisitions over the course of that year.

Taking a look at the balance sheet, Ben commented on this to a certain extent. We had an increase in total assets of about $2.4 billion. $2.1 billion of that was driven by our acquisition program, so we had actually a very modest increase in total assets related to the needs of the underlying business, some capital expansion, and a little bit of working capital. But you'll also note, despite what's happening, that accounts receivable actually consumed a little bit less of our assets.

On the liabilities side, you're seeing that we continue to finance our business largely with debt. That has worked for us, given the natural annuity nature of dialysis services and the fairly quick turnaround in terms of cash flows. If you were to look at this on an enterprise value basis, you'd find that with about a $28 billion enterprise value, we're still very conservatively financed, with about 25% of our enterprise value funded with debt.

There has been a lot of conversation about the ability to access credit markets in the last two years. We think it's notable that in that period of time, we've raised $5 billion in bonds, and we extended our credit agreement for $4 billion. So, we've had absolutely no problem accessing the credit markets over the course of the last two years, including the transactions that we did in January just after the end of the fiscal year.

Total debt to EBITDA, 2.7, well within the guidance that we provided of less than 3.0 times. We were able to finance everything we needed to over the course of the year with no difficulties, and I'll provide guidance on that going into fiscal 2012.

So, let me, with that, start talking a little bit about what we think 2012 is going to look like. And I would start by saying that in terms of revenue growth, and I have several charts with regard to the outlook, so I'll briefly cover each point here, and then I'll get into a little bit more detail with regard to the revenue projection in particular.

We had -- we're coming off a record year in 2011, and we anticipate that 2012 will be another record year in terms of performance -- increased revenues, improved earnings, and that we'll have the liquidity to deliver, to continue to deliver good returns to our shareholders in fiscal 2012.

Starting out, as Stephan mentioned, I would like to just point out that we do have an accounting change with regard to the revenue recognitions, particularly as it relates to certain treatments that are performed, where you don't have an assurance via contract that the obligation will be paid in accordance with how it has been invoiced. In the US, because of the healthcare system, that largely falls to the patient responsibilities associated with the treatments that are provided.

Historically, we recorded all of that in our bad debt provision, which was an expense in SG&A. Beginning in fiscal 2012, that portion of bad debt, because it's not something that's clearly contractual at the time the service is performed, will now be recorded as a reduction of revenues, very similar to contractual adjustments in the healthcare sector, and in particular, in the hospital market in the US.

So, in effect, there's no substantive change to the EBIT margins or the earnings of the Company. All we're doing is, we're taking about $225 million of expense that used to be in SG&A and we're now showing it contra-revenue, so we're reducing our revenues by the same amount.

So if you think of that in terms of our base period of 2011, we just reported to you that we had revenues of $12.795 billion. The base period now, 2011, when we look to measure the performance of our top line, is now $12.571 billion, which you can see as a footnote to the outlook chart, if you have better eyesight than I do, from the back of the room.

So, what we're doing is providing you a metric, a constant currency guidance year over year, '12 over '11, of 13% to 15% growth in the top line. That translates, in terms of dollars, to about $14 billion in revenues in fiscal 2012.

I should also comment that our guidance has been prepared using current exchange rates, which, for the euro/dollar exchange rate, is $1.29. And for all the other markets in which we operate, a similarly relevant current exchange rate. I'll talk about exchange rates a little bit more in depth later in my presentation.

Turning to EBIT margins, we anticipate margins of approximately 16.9%. This is an increase of about 40 basis points over fiscal 2011. Again, just to give you some perspective, we just reported that we had 16.2% EBIT margins in calendar year 2011. When you make the accounting change that I just referred to in the base period, essentially what you've done is, you have not changed your earnings, but you have lowered your revenues, so the effect of that is 30 basis points. So, the new base period with which to compare 2012 is 16.5%. So where I get my 40 basis points is the adjusted EBIT margins for 2011 over the numbers that you see on the page, of 16.9%. And I'll elaborate a little bit more about where those earnings are coming from as we progress.

Net income of $1.3 billion, which we're guiding to, and at the same time, net income attributable to Fresenius Medical Care of $1.14 billion, which is the number that Ben mentioned earlier in the presentation. I emphasize that, because as you know, for many years now, the business model includes joint ventures, so it's very much a part of how we do business. It's very much a part of the acquisitions that we undertake, particularly in North America. And it's, in fact, part of how you finance your ongoing acquisition activities in this market.

So you're seeing a corresponding increase in our earnings, but you're seeing an increase in net income, which represents the full value of the businesses that we're acquiring.

I'd like to spend a minute on the next two metrics we're providing. We've talked about providing guidance on revenues in constant currency. What we're also adding this year is an indication of what our net income growth would be on a constant currency basis. This is essentially giving you some perspective on the impact of translation of our local currency profit and loss statements into our reporting currency, the US dollar. So it essentially takes what our expectations are for 2012 and translates it at the average rate used, in particular, for the dollar/euro for 2011 of $1.39, and similarly for all the other countries in which we operate. So you can see very good performance on a constant currency basis in terms of the underlying organics in the business of 9% year over year.

We also, over the years, have begun to appreciate that many of our investors that are buying the stock on the DAX and are interested in an investment for a euro denominated stock in euros, so we've done a similar translation using the current $1.29 euro/dollar relationship to give you a perspective on what our performance in 2012 looks like if you're an investor in euros and interested in the euro performance of the Company. That would be a 15% improvement year over year in terms of net income growth.

Turning to the capital side, we are planning on $1.8 billion of acquisitions. $1.5 billion of that, we anticipate will be the net monies needed to close the Liberty transaction, including the cash inflows associated with divestitures. And that will leave $300 million for the remaining acquisition program of the Company in fiscal '12, which is consistent with the guidance we provided at our Capital Markets Day of $300 million to $400 million a year in what I call base acquisitions.

$700 million approximately of CapEx, and we believe we'll be able to accomplish this, maintaining our leverage ratio, at less than 3.0 times debt to EBITDA in fiscal 2012, so no change to the guidance nor the performance at less than 3.0 times after we accomplish the Liberty acquisition.

Just a little bit more insight, in terms of our revenues, in particular, and how we derive the performance of approximately $14 billion from our restated base performance of $12.571 billion. And just three broad measures that I'd like to cover. The acquisitions -- the organic growth, excuse me, first, of approximately $850 million. The acquisitions that we anticipate we will close, and the earnings performance associated in particular with the three large deals we've done recently. That would be the IDC/Euromedic acquisition here in Europe, the American Access and related vascular access acquisitions in the US, and the Liberty acquisition that we plan on closing in the first quarter.

So let me talk first about acquisitions. As you know, we've been very active in this area. The American Access acquisition has gone exceptionally smoothly, and we will continue to invest in this service offering over the course of 2012.

The IDC acquisition is also moving forward with good results. However, I would tell you, the regulatory review took longer than we had anticipated, and will result in larger divestitures than we had originally planned. In addition, we have more non-cash purchase price amortization, which those of you may appreciate is what the valuation and the experts and the accountants do after you've bought an enterprise. You have a split between goodwill and amortizing intangible assets. So we'll have a slightly higher expectation with regard to those non-cash charges in the early years following the acquisition.

So, this acquisition will be accretive to cash flows in calendar year 2012. But it will be at about breakeven to a slight loss, in terms of the run rate, from an earnings perspective in the P&L, largely driven by these non-cash charges that we have to absorb. So from an earnings perspective, it will take us a little bit longer to get to the performance that we were looking for from that acquisition.

And we'll continue to -- we continue to anticipate the Liberty acquisition will close in the first quarter. Right now, we think that the divestitures will be on the order of 20% to 25%, if you were to measure that in terms of clinics. And the integration teams from both companies have been working together to ensure that we have a very smooth process, integrating that acquisition after the transaction is approved and closed.

In terms of organic growth, I think I'll comment in two ways. The first is, if we look at the same market treatment growth on a worldwide basis, what we've included in our guidance is an assumption of about 4% growth on a worldwide basis, in terms of same market treatment growth, which we think is a conservative assumption, but an appropriate one in the economy that we're operating in, in 2012.

For International, we think -- we continue to believe we've selected excellent markets in which to operate, and that we continue to have the right strategy with regard to investing in those markets.

The other perspective I'll provide on the organic growth is, to comment on reimbursement. And not surprisingly, we do have a global perspective on reimbursement. Our management in the US of the Bundle implementation that Rice went through was very successful, and we believe this reimbursement reform put North America and the US on a very stable footing -- put the entire industry, frankly, in the US, on a very stable footing.

In 2012, we've talked now for many years about continued pressure in the commercial contracting side. We think that 2012 will continue to see those pressures. And as our commercial contracts come up for renewal with our private pay contracts, we'll address that over the course of the calendar year. In addition, we've reflected our new deal with the Veterans Administration in 2012.

On the International side, we believe, and we've always, I think, demonstrated to our financial investors, that the number of countries in which we operate is a natural hedge, with regard to our exposure associated with reimbursement risk. By way of example, in fiscal 2011, we again saw a net improvement in international reimbursement rates for the Company, despite the headlines that you sometimes read through, particularly over the course of fiscal 2011.

In our guidance for 2012, we do expect that the frequency of reimbursement reductions will increase, particularly here in Europe, as countries deal with their spending issues, and as the Eurozone deals with its fiscal and monetary issues. So we do expect to see an increase in the frequency of these reductions, and what I would comment on in these public markets is that in every country in which we operate, we focus on anticipating these events, and we work with the local appropriate authorities to minimize the anticipated impact on our patients, and on dialysis in general. We set objectives and plans to mitigate the effects of whatever ultimately is passed in the local country with regard to the reimbursement rate.

As you know, Portugal announced a reimbursement reduction in the fourth quarter of 2012. And there have been several other European countries that have announced relatively small reimbursement cuts. We'll address all of these operationally in 2012. And our guidance does include, we anticipate the effect of all known and approved reimbursement cuts, so that is included in our guidance, what we know today.

And considering the market, we have incorporated a slight positive development in reimbursement in the international markets globally. And that gets back to the number of countries in which we operate, and the fact that that is a natural hedge against cuts in any particular country, in any particular year.

I said I was going to comment on foreign exchange, and that will be my last remark relative to our revenue guidance. As you can see on the page that we're anticipating about a $300 million effect with regard to our 2012 revenues, lowering our revenues by that amount, and you see below that a sense of the relative mix of where those currencies have impacted our revenue guidance the most.

I'll talk about this for a minute, because in 2009, when we announced our guidance for that fiscal year, we had a very similar set of events with regard to the volatility of currencies, and we provided the financial community a metric with which to guide them in terms of currency impacts, particularly on our earnings after tax. And since that time, our business has changed, and the currency markets have changed, so first, I'll comment on our business.

We have continued to grow our business, as you can all appreciate, and if you take the measurement period from the end of 2008 to the end of 2012 in terms of our guidance, we anticipate that the US dollar and the euro based revenues for the Company will decline 4% and 2% respectively. So the business is growing, the business is growing, obviously, in a number of markets around the world, so when you look at that revenue base, you'll see about a 6% change from dollar/euro markets to non-euro European markets, Asia, and Latin America.

The growth we've had in these countries has increased our foreign exchange volatility, whether you compare it to either the dollar or the euro. And in addition, the volatility of the euro itself has increased, because we're dealing with so many budget, fiscal and monetary issues right now in the Eurozone.

So, historically, we've said that about a 10% change in the euro/dollar relationship has about a 1.5% impact on our earnings after tax. We continue to believe that that metric still is a reasonable metric for us, because while there's been increased volatility in the euro, we've had a small reduction in our exposure to the Eurozone over the period that we're discussing.

But I would add, however, that the change in the currency mix of our business, and the behavior of exchange rates, we anticipate now a secondary effect from all of our other markets, that can either mitigate or accentuate that euro/dollar relationship by 2% to 2.5%. So you've got a little bit more volatility with regard to foreign exchange because of the markets in which we're operating. You could have something -- with a 10% change in the euro/dollar, you could have an impact on our bottom line as low as, let's say, 0% to 0.5%, or as high as up to 4%.

Okay. As I said earlier, our guidance was prepared based on recent exchange rates in light of the new benchmarks that I've given you, our rule of thumb in US English parlance, I would also tell you that when we provide updates to our guidance over the course of the year, that's part of our process in which we look at the then-current spot rates prior to each analyst meeting. We then consider those spot rates, we consider specifically the hedge positions we've taken with regard to some of the foreign currency markets, and we anticipate both the translation as well as the transaction foreign exchange effects in the guidance in which we provide, when we give you updates over the course of the year.

My last chart, and I think Stephan commented on this a little bit earlier. Just by way of giving you something to concretely update you with regard to the run rate associated with our cost of money, I think importantly, we are ending fiscal 2011 at about $300 million of interest expense. I also think that it's worth noting that that's at about a 5.3% annual gross interest rate. So that is the gross cost of interest, not including interest income that's included in the net disclosure that you have in front of you.

When you look at the acquisition activity and the associated financing that we undertook, particularly at the -- in the back half of 2011, which we used to fund the American Access and some other Q3, Q4 deals, and then the new bond that we just did a few weeks ago to finance the Liberty acquisition, you can easily see how we get from $300 million to $440 million for the full fiscal year 2012. And I think also, most importantly, we've had very good success in the capital markets in terms of accessing relatively low cost capital for a high yield, BB rated company, so our actual interest cost is 10 basis points better for the fiscal 2012, at 5.2%.

In terms of seasonality, I'll just comment that when we look at 2012, we're anticipating, in particular for the first quarter, that we'll have relative -- it will have a, I'd say, low to mid single digits growth rate year over year for the first quarter.

Thank you, and I'll turn the meeting back to Oliver.

Great. Thank you, Ben, thank you, Rice, thank you, Mike, for your comments and remarks. And I think we can open up the Q&A session, and we start with questions here from the audience. So who's going to be first, please? Chris?

I have three questions again, you know? The first relates to the International business, and the same facility growth rate in Q4. Could you elaborate a bit on that? It was quite a big change from recent trends, (inaudible) there was any special effect, or just a quarterly fluke to Asian?

The second relates to the commercial mix development in the US. And I noticed that your revenue per treatment was up nicely, sequentially. Could you confirm that the commercial mix now has been relatively stable? So (inaudible) [other things now] play the role?

And thirdly -- no, that question now was answered, the 20% to 25% divestiture rate for Liberty. Thanks.

I think I'll start with --

Mike.

Oh. That's probably better.

Ben had whispered for me to take this, so the -- in International, I -- there was nothing really unusual. I had indicated that we had had a small divestiture in the fourth quarter that had benefited earnings a bit, but nothing, frankly, that material. The rest was, as I had indicated, foreign currency, the underlying solid performance of the International business.

In terms of the rate per treatment, I do think and I believe that comment is really directed at the US business. I think the performance over the course of 2011, actually, in the end, was very consistent. We had indicated in our first quarter analyst meeting that we'd anticipate about a 3% decline in the rate per treatment quarter over quarter, and that's how the US played out right through to the fourth quarter. And I think we also indicated that we'd have improvements in our cost per treatment, which would result in margin accretion in North America, which we have also seen in terms of delivering our full year and our fourth quarter results.

And the third question was -- oh, the divestiture. The third question was the divestiture. I think you were asking me to confirm that, at least our current thinking is that we think divestitures will be in the 20% to 25% range, which is what I indicated. I would just caution you that the deal has not closed yet, but we anticipate it will close in the first quarter, so that's really just a little bit of insight we've provided, because we can appreciate that you've got some work to do with regard to your models. It's not intended to represent anything related to the specifics with regard to when we actually finish with the regulatory review process in the US.

And maybe a follow up question, actually, if you allow. With respect to -- I notice now if you look at the development of your business relative to my expectation, whatever they are worth, but I noticed that your Product business performed better, relatively speaking. Could you elaborate a bit? And I know you don't provide no margins, but I know Product and Services, but whether there is no substantial mix effect from outperformance on the Product side, relative to your original expectation, maybe, and how the Service business, and the Product business, performed margin wise over the year, just now basically qualitative statement, maybe.

No, you're correct, we don't typically split the business in terms of margin performance between Products and Services. I do think that Ben reports in each quarter on the International and the US Products and Services business, so you get a perspective in terms of, relatively speaking, the top line performance. And I think also importantly, he emphasizes each quarter what's happened in terms of the total Products business, because with the acquisition plans that we've executed over many, many years, but in particular, over the last two years, where we've spent on the order of $4 billion, you do end up, essentially, acquiring Services businesses, which turn the external Products revenues into internal cost supply. And that's why we show both the external revenues as well as the total Products revenues for the Company on a worldwide basis.

I would say we've had very consistent performance in the Products business, and I'd say we have a consistent mix in terms of disposables and machine sales when you take a broader view of the performance over the last four to eight quarters, last year or two. So I wouldn't say there's any particular inference you should draw in one quarter versus another, in terms of the Services/Products split. If that's helpful. Yes? Okay.

Okay, next question. Holger?

Holger Blum, Deutsche Bank. Just a question on your outlook for 2012 organic growth of, I think, 6.8%, where it's just 3% in 2011, and looking at the moving parts, we have better Medicare reimbursement, but you mentioned the challenges as well. What is really driving the big improvement in organic growth in 2012? Are there special product launches? Where do you see the key drivers behind that?

I think that -- two things. One, I'll comment about a couple of specifics, but what I'm referencing is really a global view. One thing, when we think in terms of the improved organic growth in 2012, one of the benefits you see is that we do have 2.1% inflation adjustment in the US, which the Bundle optically, it lowered what the organic growth was for fiscal 2011, because obviously, you start the year with a 2% rate cut in the US. And we had indicated that when we provided 2011 guidance, that we thought the organic growth would normalize in '12 and beyond, because we would get the benefit of this inflation adjustment.

Secondly, I would say, we continue to see internationally a recognition that it does cost money to provide the dialysis services, so what benefits our organic growth rate is also the fact that we've continued to have that slight accretion in terms of pricing in the international markets on the Services side.

So, you end up with the numbers that you've perfectly quoted for 2012, with an organic growth rate globally of just a little bit under 7%.

Okay, and if we take what you also mentioned, the Medicare or the positive reimbursement moves to some extent in 2012, then looking at your earnings guidance, which appears relatively moderate in relation to the top line growth you have in 2012, if you have the Medicare reimbursement increase, or burdens you mentioned for 2011 like high acquisition costs, transition fee, which have burdened your results in '11, then looking at 2012, that should be, then, a relatively good year. Or if you could help me, maybe share your progression of how you think about the business, all the moving into 2013, maybe even. What will then be the key drivers there if growth in '12 is a little bit moderate despite some very positive contributing factors?

Well, I think for 2013, you're absolutely right. We have a number of moving parts in 2012, both in terms of integrating the operations that we've acquired, as well as what's happening in the marketplace around the world. For 2013, we've talked in terms of a 13% to a 15% growth in revenues on a constant currency basis. I think for 2013, we'd expect to come down to what we've indicated in our Capital Markets Day, which is probably a revenue growth of 6% to 8%. But obviously, that 6% to 8% off a much higher base of revenues, coming out of 2012.

So I think you'll begin to see the business function in more, perhaps, the historical way that it has in the past, both in terms of top line and bottom line expectations.

Maybe sticking to the earnings statement, you explained the top line progression. How would you think, then, about earnings? Because 2012, you -- the Medicare increase that are planned in 2012, with a lower inflation adjustment, and maybe the 2% cut on the Medicare budget seems to be, on paper, much tougher as a starting point compared to 2012.

Yes, I think again, when I look at the business globally, we're indicating guidance of about 16.9% EBIT margin, which is a 40 basis improvement off the adjusted results for 2011, and I say adjusted just to indicate the effect of the reclassification of the bad debts.

And typically, what we've indicated is, we always expect margin accretion of 10 to 20 basis points a year, and that margin accretion has always been based on the core business, and the extent to which we have what I call baseline acquisitions in the given period. So, what we've been operating on for '11, '12 and '13 is baseline acquisitions of $300 million to $400 million.

So the combined effect of the base business and those acquisitions should lead to accretion of 10 to 20 basis points. You're seeing 40 basis points in '12, and that's because of, looking at the whole business, all the effect you're discussing, and the fact that those earnings will be enhanced by the acquisition program beyond our baseline acquisitions. So it incorporates all the changes in the business, including the ones you're referring to in terms of the inflation adjustment in the US.

Okay, final follow up, and then I'm done.

Okay.

So, would you expect 2013 to be a better earnings growth year than 2012?

A better what, Holger? I'm sorry.

A better year, in terms of earnings growth, earnings progression.

I think that we have -- in our Capital Markets Day, we indicated that earnings growth would be in high single, low double digits. Now, obviously, we gave that a year ago, when -- yes. I think that there's no reason to change our target for 2013. We obviously -- we have a lot of work to do in 2012, because we've set a high bar for ourselves, and we'd be very active in the market in terms of acquisitions that we need to integrate. But that's what I would indicate for '13.

Okay. Thank you.

You're welcome.

Ingeborg Oie, Jefferies. A couple of questions. Firstly, the doc fix was out last week, and it seems a part of playing for this lower reimbursement for bad debt. How much do you think this will impact you, and just confirming that this is, indeed, included in the guidance that you have provided on the margin here, and if you could just help us understand a bit the [maths] behind that?

Secondly, on EPO utilization, DaVita made some comments that they expect this to be stable to increasing in 2012, and I just wanted to hear what your view on that was, and maybe also, how that will impact the mix between the Medicare on the Bundle and the commercial payers, which are not bundled.

And thirdly and finally, could you help us with what your expectation is for the amortization of acquisition intangibles, which you mentioned would come out a bit higher than expected? Thank you.

Thank you. We're having a little trouble hearing you, but I'll take the doc fix. Rice, will you take the EPO, and Mike, will you take the acquisitions?

Sure.

Sure.

Okay. The doc fix basically discussed the bad debt recovery for dialysis, and it will have a very de minimis effect on us, because we had a negotiated different set of conditions back when we settle the OIG many years ago. So I don't expect -- I think Mike and Rice -- he confirmed that it should have no effect on us, be very de minimis effect.

Rice, why don't you take the EPO question?

Sure. (technical difficulty), if you (technical difficulty) full year 2010 versus full year 2011, (technical difficulty), and I think you're (technical difficulty) guided you that somewhere in the teens is where we thought it would be.

Also, I think interesting to note is from (technical difficulty) of last year, when the label copy change came out through Q4, so about a 5% drop. So to just give you some grounding.

So our opinion is, there is probably still some room for drop in the EPO dose, and again, I think, I understand that there was different guidance perhaps given with DaVita. But I think we are very comfortable where we see our sub-10 population, and maintaining that at about where it is, so we're fairly comfortable there's still a little room there, that might come about, could be high single digit, 10%, something like that.

Again, we've just gotten our new protocol rolled out, it's in all of our clinics, and so we'll see how the physicians approach this. But we don't see it flat to up. We tend to think it could go down a little bit more.

I think your last question was, what our expectations are with regard with the amortization of intangible assets, which I have to appreciate the question, after I just talked about our IDC acquisition. But I guess, two things. And I can't give you a precise measure, because we make estimates in terms of what our expectations are, but then we have to, once the deal is closed, give it to independent valuation firms, which will come back with their view, and in developing their view, they consider the accounting guidance.

So I would hesitate, in light of the confessional I just went through on IDC, to give you a number for 2012. What I would say is, it's an important element of the acquisition process, but when we do these deals, we look at cash on cash. We look at what we actually think the underlying earnings performance of the asset will be, without regard to the accounting treatment, and then, make the decision on the purchase price based on that.

So, I'm -- we're usually very good at this, and I think in the past many years, we haven't had that kind of a tweak to the intangibles amortization. I would hope that will be true in 2012 once we finish up with Liberty.

Okay, at this point, we should open up the audio lines for questions coming from the outside. Jerry?

(Operator instructions) The first question is from Mr. Tom Jones of Berenberg Bank. Please go ahead, sir.

Oh, good afternoon, everybody. Just had a couple of -- kind more general questions, really. The first one, you've pushed out into vascular access, so I just wondered if you'd might make some comments about what else you're doing in this (inaudible) care area. The two areas I was thinking of, particularly, the Fresenius RX program, whether you plan to expand that significantly, potentially ahead of the Part D coming into the Bundle in 2014.

And also, what your plans are for your inpatient service business. I think you're servicing over 1,000 hospitals now. That business seems to be growing okay. I just wondered whether there's potential to build that out a little bit more.

And then, the second question, probably a bit more tricky. Just be interested to hear your thoughts on the structure of your EPO contract, and I think the obvious read-across is that you've left the door open for a biosimilar EPO. But I just wondered if there was anything a bit deeper than that, or any other aspects to it that are worthy of discussion at this point?

Tom, thank you. Most of these refer to North America, so Rice, I have to ask you to start with the answers, if you don't mind.

Sure, Ben. Hey, Tom. So, a couple of things. So, first question, we're very excited about the vascular access opportunity. We're going to continue to pursue that aggressively. We think it's just a very fundamental part of the Dialysis Service offering.

We are active with FMCRX, our pharmacy business, and we'll continue to see that grow. We have not approached it in quite a big a way to date as we did vascular access, obviously, but we're active in that area, and we'll continue to be, as you suggest, as we look towards 2014 and the orals going into the Bundle. It will be a key asset for us to deploy throughout our network.

Our inpatient services business, we're active there. I would tell you, we've added some significant senior staff, we're looking at a very coordinated approach on how we could better engage in that business, but we'll continue to do that month to month, and week to week, just trying to make sure we're putting the best offering forward, and getting business that comes our way.

On the EPO situation, I think probably the thing that I would offer you there is that the deal that we have with Amgen is a multi-year deal. It is non-exclusive, as you have surmised, which means there's flexibility for us to work with potential new products as they come on the market, and obviously, that work would be in the area of clinical studies, things of that nature.

So we're going to continue to be flexible, we're going to be focused on safety, as we always have been. But it is a multi-year contract but non-exclusive, and I think I'll just leave it at that.

Fair enough. Fair enough.

Thank you, Rice. Tom, does that --

And just one other kind of question, just a tidy up question. You referred to, just 8 of your 2,000-odd clinics will suffer the full 2% QIP penalty. What's the aggregate penalty across the entire network?

Let me give it to you on a clinic basis, Tom. Don't hold me to this number, I'm going to have to check it, but I think we had something like 500 clinics total involved. The vast majority, though, were like at 0.5%, there were 8 at 2%, and then we may have had low double digit in the 1% range. But I'm giving you information from about two weeks ago when I looked at it. But that's roughly the ballpark that we're in.

Okay, so that's a useful benchmark for us to work with. And then just a last question on the reimbursement. There was some discussion at the time that the 2012 rules were put out that the adjustments to the outlier payments might have some slight beneficial effect. You didn't make any mention of it on the -- in the presentation. Is that note the case anymore, or is there likely to be a little bit of an upwards year on year adjustment from some changes to the outlier payment methodologies?

We're not anticipating any upshot there at this point. We think it's going to be fairly stable, from what we experienced in '11, Tom, would be my answer.

Okay, perfect, that's very helpful. Thanks.

Thanks, Tom.

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

Hi, Rice. You cut out a little bit when you were talking about EPO utilization. I was just wondering, could you again repeat where you were in Q4 2011, how much EPO had come down in aggregate versus 2010 full year?

And then you mentioned potentially, sort of high single digits, 10% decline. Is that from the Q4 number?

Yes, Lisa. Hopefully, this is a little bit better transmission. But if you look full year, 2011 versus 2010, we saw a dose drop of about 18, 1-8, 18.5%. Then, from when I spoke with you last, I think it was in November, and the label copy had changed in the summer, I commented that we weren't sure what we would see in that last quarter, if you would, and that was just right at about a 5% drop in that last quarter.

As we look at 2012 from what we saw in fourth quarter, that's the basis I'm giving you. We could see another high single digit, perhaps 10% drop. I think. I mean, obviously, that's going to come from our physicians and how they approach the algorithm. But as best I can understand in sitting with our chief medical office staff, we think it's not out of the realm of possibility we could see another drop like that.

Versus the Q4 number?

That's correct.

Okay, great. And we spent a lot of time talking about EPO utilization. Can you talk about the Vitamin D costs? I think previously, we had discussed this, and you hadn't really changed protocols, so dosing hadn't changed much within Vitamin D. But what was your pricing like for 2011, full year versus last year? I understand DaVita had actually been pretty aggressive in negotiating, and I think cut off one of their suppliers.

Have you managed to get some cost discounts in 2011? If you didn't in 2011, is that something you could get in 2012?

Yes, Lisa, a couple things, first. Let's talk clinically, I think, first. We are beginning to look at our bone mineral metabolism, and beginning to make some decisions about how we want to approach that in '12, which is what I had mentioned to you back in November. I think the best thing I would say to you is, we did see some improved pricing in our Vitamin D offering. We didn't do anything as drastic as, pick one over the other in an aggressive way or anything. We were comfortable with our supplier and the history and the safety that we had had, and they worked with us. We did see some improvement there. There might be a little more, perhaps, in '12. I think the bulk of what we saw probably came in '11. But we have more work to do on Vitamin D, as I've told you.

We're going to look at this clinically, figure out where we want to go with bone mineral metabolism, and then we'll go back and look at economics and talk with our supplier.

Okay, thanks. And then lastly, on International margins, you closed several acquisitions in 2011. Given that you've had some time to integrate, etc., could we see an improvement in your International margins, based on the fact that you'll now have those acquisitions integrated for the full 2012?

Lisa, I'm going to turn that over to Mike. Mike, you want to --

Yes, Lisa. I would just repeat what I had said during my presentation. I think in particular, the large one we did, IDC, 2012, we're looking at about breakeven performance. So I would say that will not uplift the International margins, at least for 2012. I think as we go out beyond '12, I'd anticipate that that's going to add the value that we expect, and you'll see some margin accretion from that relatively large deal.

The other smaller deals we do year in and year out in the International space, I think performed quite nicely, and I think the margin performance you've seen over the past few years, if not over the course of the Company's history, benefit from those baseline acquisitions, as I call them.

So I think good news on the smaller ones. On the larger one, 2012, we'll keep pushing to get the performance we're looking for. Yes?

Great, that's very helpful, thanks.

I think Mike nailed it, as far as the acquisitions. One thing I'd like to add is, remember, International is a number of regions. And Europe carries the highest margin in the Company, and we're growing very strongly, as you saw, in Asia/Pacific. The margins are increasing, but they're not quite at the same level of Europe. So what Mike said is absolutely right on the acquisitions, but you have to be a little careful in terms of looking at the International margin year over year, because we are growing very aggressively in Asia/Pacific, and you heard the same thing at Latin America. Both of those don't match the margins which -- nothing negative about it, but don't match the European margins.

So -- but as a whole, what will happen with the acquisitions, Mike's right spot on, okay?

Okay, that's very clear. Thanks.

The next question is from Ed Ridley, Bank of America.

Hi, good afternoon. Thank you. First of all, a follow up on the organic growth that you're looking for in 2012. We've slightly danced around this, but on the private payers side in the US -- I mean, you've got the 2.1% inflation adjustment from Medicare. Are we -- I mean, from where I'm sitting, we're looking still for a positive growth on the private insurers side, even if it's very low positive growth. Could you comment on that, on a revenue per treatment basis?

And also, on the Products side, could you comment on whether or not Products are going to accelerate with the new products that you've outlined today, to growth, perhaps, above the Group growth that you're estimating for 2012? If we could start with that, please.

Mike, you -- no, you go ahead, (multiple speakers).

Okay. Yes, I think, Ed, I'll answer the first one, and then I'll ask you to elaborate a little bit more on the Products side. But on the first one, as we look at the US, probably the best guidance we can give you would be if you just look at the US in total in terms of what our -- what we expect our performance to be with regard to revenue per treatment, and I'll have to walk you through this a little bit, because unfortunately, again, we're dealing with the accounting change.

We reported $348 per treatment for fiscal calendar year '11, and the $225 million adjustment that we referred to for the -- just the bookkeeping, is worth about $11 a treatment. So I think the base period in the US, all in, is about $337. And what we're anticipating for the US in total for the fiscal year is about a 3% to 4% improvement in revenue per treatment. And then on the expense side, to answer the question I anticipate you or someone would ask, probably a 2% or 3% increase in cost per treatment.

So we're anticipating that there will be some expansion in the US, when you look at the total business in calendar year 2012.

No, great -- that's great clarity, thanks. And on the Products side, I really mean, you are launching some interesting new products, you have seen an uptick in the Product growth rate. Should we actually be looking to, for the Products business to grow, to outgrow, should we say, the guidance that you've given for the Group?

So, if we're looking for, should we say, just shy of 7% organic growth for the Group, could we see Products actually outgrowing that?

I think, Ed, if you take it globally, like we showed you -- and again, it moves around a little bit region by region. But I believe if you take it globally, as we look at next year, we ended this year at 7%. That's our calculation in terms of our organic growth. So I think we're going to be in the same range.

I do expect, as Rice had indicated, we've got some -- we'll see, basically, the US Products come back. But again, 7% is probably a good global number at this point.

Good, that's -- thanks. And my second question was on integrated care, DaVita indicating that we may hear, within months, the first proposals from Medicare. Would you comment on that?

Rice, would you take that one?

Sure. Ed, I think that's accurate. As you know, we've worked closely with DaVita, as we've approached the government and had numerous discussions about integrated care. So I think that the guidance that Kent was giving the other day of, we would hope to hear something in the next several months, I think that's rational and reasonable, based on the contact between ourselves, DaVita, and the government. So we continue to be optimistic that that will come to pass with a significant pilot opportunity for us.

And for that pilot, we'd be looking at sort of mid '13 or early '14 start for that pilot?

Hard to say now. If I -- left to my own imagination, I will agree on those -- that timing with you, but we really need to have those conversations with the government to really understand what they might other be looking for in the proposal that we gave them. So it's a little hard to predict at this point when it could actually get underway.

No, great. Thanks very much. That's great.

Thanks, Ed. I'm a little bit of the timekeeper, so we have time for about two more questions, actually, from the audio line.

We have a question from Kevin Ellich, Piper Jaffray. Please go ahead, sir.

Good morning. Thanks for taking the questions. I just wanted to start off with Ben. Recently, I think we saw something come out from Aetna, that you guys have a new CKD management program in partnership with Aetna. Just wondering if you could provide some color behind that?

Yes, I'd be glad to. I think Rice, you should cover that. That was a North American announcement, I believe.

Sure. Kevin, that's correct. What we've done with Aetna is constructed a program not dissimilar of what we did in the pilot with the government over the last couple of years, where we are case managing patients. We're trying to help Aetna patients that are coming into dialysis, perhaps they're stage 3, stage 4, obviously moving to stage 5. We're trying to help educate, case manage, intervene, if you will, so that we can make that a smooth progression over time. And it's really sort of -- what I call the front end opportunity to help patients as they ease into this disease state, and that's really what we've done, and we're excited to be working with Aetna on that basis.

Got it. And then, I guess, just going back to the integrated care [demo], one, how long would a pilot last, and I guess, when could things be fully implemented? And then two, are there other strategic services -- you know, you guys have vascular access. Is there anything else that you're thinking about adding?

In terms of how long would the pilot last, again, we'd like this to be a substantially larger pilot, but it's what we would like, and not necessarily where the government will go. But we would think it would typically be three, four, five years in duration, and we would love to have the opportunity, that is, we'd look at intervals of data analysis, and if things are continuing to look good, that we would be able to then extend this to a regular, full time basis.

But we would think all of the assets that you want for successful integrated care would consider the ability to use your own pharmacy to get the correct medications to patients, vascular access, etc. Those are all things that we think are part and parcel to being able to successfully manage integrated care, and drive down cost of healthcare.

Got it. Okay, and then maybe just going back to Ben. You know, home dialysis is changing, and you guys gave some good details behind your exposure. Have you changed your opinion much yet about more frequent home hemodialysis? United Healthcare recently issued a medical policy for more frequent home hemodialysis, saying it's a viable alternative to in-center. I think that's the first time we've seen anything from a commercial payer in the US come out with something like this. So, just wondering what you think about that.

Okay, I think I'll take that, and maybe, Rice, if you want to add something. We saw that come out, and it's very similar to a few years ago, there was a couple others that came out, again, sort of justifying home hemodialysis. I don't think anything has changed in my mind since the last time. We see it's a good therapy for 1% to 2% of the patients. We clearly believe it's something that we want to offer our patients, and I don't know, Rice, right now in the US, what would be the percent home hemo? I'm a little behind. Is it --

(inaudible).

It's about 1%. So we're still seeing it in the 1% to 2% range. So I don't think I've changed my opinion. I don't think, Rice, you have either. So we're still pretty much in that space.

Got it. And then just lastly, Ben, any updated thoughts on some of the EPO alternatives like hematide? Obviously, there's been some activity on that front. Just wondering what you plan to do with your ESA use, and if you could go to some alternatives.

I think at this point, Rice had commented that we're certainly, with our non-exclusive position, we're able to look at a number of these, so I believe, Rice, the intention during '12 and '13 would be to look at some of these new products clinically.

Yes.

Yes. So -- but at this point, we have no other plans that we -- no other plans that we can share with you, until we get more experience with them clinically, I think.

Got it. Thank you.

Thank you, Kevin. Just one more.

The last question is from Veronika Dubajova, Goldman Sachs. Please go ahead.

Good afternoon. Veronika Dubajova here from Goldman Sachs. Thank you very much for squeezing me in. I will keep it short.

My first question is, I just want to clarify, because in terms of your expectations for cost per treatment for the US, Rice, you're being quoted on Reuters as expecting a 1% to 2% decline. And Mike, I know you had said you were looking for a 2% to 3% increase in average cost. So if you could clarify which one of the two is the number we should be thinking about.

Second, I did want to get an update on your new PAK home hemo machine, if you can give us a sense of where you are in the regulatory process with the FDA on that, and also, how that relates to your assisted dialysis clinic pilots, and what your expectations are for when we might get to see some data on how that went?

Okay, let me respond to the first one, Veronika. I think there may have been a misunderstanding earlier in the day today, and I'll do the same on the cost per treatment that I did on the revenue per treatment a minute ago, just in the interests of clarity.

We had a cost per treatment for fiscal year 2011 of $282. Again, the reclassification of bad debt has an impact on that, which is about $11, so you're looking at about $271, and we would anticipate that that would increase 2% to 3% over the course of 2012.

I think the confusion came from the notion that obviously, if those probabilities work out the way that we hope they work out, you get margin -- you know, you get an improvement in margin, because your absolute value of your cost goes up less than the absolute value of your revenues. So that's where, I think, maybe the misunderstanding about costs coming down, I think it was more just the margin will improve slightly.

Understood. Thank you.

Thank you.

With respect to our PAK, or Portable Artificial Kidney using sorbents, we're very close to filing with the authorities in the US, and we hope to actually be using the product towards the end of the year in what we call assisted care situation, and then in '13, basically, look at using it for a home product, okay?

That's great. Thank you very much.

Great. Thank you, everybody. So thank you, everybody here in the audience, for the questions, and out there on the Web. Very much appreciate your support. Hope to see you soon. Thank you.

Thank you very much for everyone's interest, and we'll keep working very hard. Right, Mike, Rice? Thank you.