Operations and Business Environment - Fresenius Medical Care

02. 1
Our Fiscal year
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In the fiscal year 2006, Fresenius Medical Care was
not subject to any legal conditions which had a significant
influence on the Company’s operating business.
The transformation of the Company’s legal form addressed
previously did not have an impact on Fresenius
Medical Care’s operating activities.
Accounting
Fresenius Medical Care reports on the basis of US GAAP
(United States Generally Accepted Accounting Principles)
and in U.S. dollars.
Corporate Performance Measures,
Objectives and Strategy
Control Criteria
Fresenius Medical Care is controlled based on various
financial ratios in line with a long-term growth strategy.
Long-term growth presupposes stable profitability. In
our view, a useful yardstick for measuring the profitability
of the Company is EBIT (earnings before interest
and taxes). Consequently, we control the activities of
our business segments based on their EBIT.
Financing is a central function over which the business
segments have no control. Therefore, neither interest
expenses resulting from financing activities nor tax
expenses are included in the financial targets for the
business segments. We believe that, in addition to
operating profit, EBITDA (earnings before interest,
taxes, depreciation and amortization) is a good indicator
of Fresenius Medical Care’s ability to achieve positive
financial results.
Fresenius Medical Care controls its operating cash flow
by managing its days sales outstanding. A high operating
cash flow, for example, indicates that our customers
are paying our invoices in a short period of time.
The debt/EBITDA ratio is another important criterion
for assessing corporate performance. This ratio compares
the debt of our Company to our earnings before
interest, tax, depreciation and amortization (EBITDA)
and other non-cash charges. A low or decreasing debt/
EBITDA ratio indicates that Fresenius Medical Care is in
a position to service debt and increase the EBITDA.
Details on the development of these financial ratios can
be found in the section “Results of Operations, Financial
Situation, Assets and Liabilities” starting on page 68 .
Growth Objectives
GOAL 10 is our long-term strategy for sustained growth
until 2010. The strategy was implemented in the spring
of 2005. Our GOAL 10 objectives are shown on page 51 .
Fresenius Medical Care raised its long-term revenue
goals in the year under review. Our aim now is to generate
revenue of $11.5 billion by 2010 – $1.5 billion
more than originally planned. Fresenius Medical Care
should hold an 18 % share of the worldwide dialysis
market in 2010; we had previously assumed it would
be approximately 15 %.
Growth Paths
GOAL 10 defines four paths that Fresenius Medical Care
intends to take in order to perform successfully in a
broader spectrum of the global dialysis market and to
achieve our own growth objectives:
Path 1: Organic Growth. In the coming years, we intend
to achieve an annual organic revenue growth in dialysis
care of 5 % to 6 %. To meet this goal, we are further
expanding our offer of integrated, innovative treatment
concepts such as UltraCare and Cardioprotective Hemodialysis
and combining them, for example, with dialysis
drugs. With these measures, we want our portfolio
to stand out from our competitors’. In addition, we
plan to open new dialysis clinics and further increase the
number of patients whose treatments are covered by
private health insurance.
We intend to prove our ability to innovate with dialysis
products. New high-quality products such as the 5008
therapy system and cost-effective manufacture are
intended to contribute significantly to the further growth
of our dialysis products sector. Detailed information
on our worldwide network of production sites can be
found on page 83 in the “Production” section.
Fresenius Medical Care 2006