Fresenius Medical Care AG reports Third Quarter and Nine Months Results 2003

Summary third quarter 2003:

• Net Revenues : $ 1,409 million, + 10%
• Operating income (EBIT): $ 197 million, + 18%
• Net income: $ 87 million, + 25%
• Operating Cash Flow : $ 203 million, + 34%
• Free Cash Flow: $ 152 million, + 81%
• The Company confirms its outlook for 2003

Fresenius Medical Care AG (Frankfurt Stock Exchange: FME, FME3) (NYSE: FMS, FMS_p), the world's largest provider of Dialysis Products and Services, today announced the results for the third quarter and the first nine months of 2003.

OPERATIONS

Third Quarter 2003:

Fresenius Medical Care AG reports a 25% increase in net income to $ 87 million for the third quarter 2003.

Total revenue for the third quarter 2003 increased 10% (+7% at constant currency) to $ 1,409 million. Dialysis Care revenue grew by 8% to $ 1,018 million (+7% at constant currency) in the third quarter of 2003.
Dialysis Product revenues (including internal sales) increased by 14% to $ 510 million (+8% at constant currency) in the same period. The internal sales increased to $ 119 million after $ 103 million in the third quarter of 2002.

North America:
Revenue rose 3% to $ 978 million, compared to $ 947 million in the same period last year. Dialysis Care revenue in the US increased by 5% to $ 873 million. The average revenue per treatment was at $ 279 in the third quarter of 2003 (Q2 2003: $ 275). North American Dialysis Product revenue, including sales to company-owned clinics, increased 1% to $ 194 million. Product sales to the net available external market grew by 4%.

International:
Revenue was $ 432 million, up 28% (+16% adjusted for currency). Dialysis Care revenue reached $ 146 million in the third quarter 2003, up 35% (+22% currency adjusted). Dialysis Products revenue, including sales to company-owned dialysis clinics, increased 24% to $ 317 million (13% currency adjusted).

Operating Income (EBIT) increased 18% to $ 197 million resulting in an operating margin of 14.0% (Q3 2002: 13.0%). The increase of 100 basis points was mainly due to increased treatments and efficiency improvements in North America but partially offset by pricing pressure in Central Europe. In the second quarter of 2003, the Company achieved an operating margin of 13.5%. The margin in North America and in International increased by 50 basis points compared to the prior quarter.

Earnings per share (EPS) in the third quarter 2003 rose 25% to $ 0.90 per ordinary share ($ 0.30 per ADS), compared to $ 0.72 ($ 0.24 per ADS) in the third quarter of 2002. The weighted average number of shares outstanding during both the third quarter of 2003 and the third quarter of 2002 was approximately 96.2 million.

In the third quarter of 2003, the Company generated $ 203 million in cash from operations (14% of net revenues). A total of $ 51 million (net of disposals) was spent for capital expenditures, resulting in Free Cash Flow before acquisitions for the third quarter 2003 of $ 152 million (11% of net revenues), a solid 81% growth compared with third quarter of 2002 with $ 84 million. A total of $ 22 million in cash was spent for acquisitions. Free Cash Flow after acquisitions was $ 130 million. In the third quarter of 2002, Free Cash Flow after acquisitions was $ 51 million.

First Nine Months 2003:
For a complete overview of the first nine months 2003 please refer to the appendix.

In the first nine months of 2003, net income was $ 237 million, up 14% from the same period in 2002.

In accordance with the new US-GAAP Accounting Standard SFAS 145, the loss from the early redemption of the Trust Preferred Securities in the first quarter of 2002 of $ 12 million after taxes ($ 20 million before taxes) had to be reclassified from extraordinary loss to interest expense and income tax expense. Excluding the redemption loss, net income for the first nine months of 2002 would have been $ 219 million. Net revenue was $ 4,075 million, up 9% from the nine months of 2002. Currency adjusted, net revenue rose 6% from January to September of 2003 compared to 2002. Operating Income (EBIT) increased 8% to $ 550 million resulting in an operating margin of 13.5%. In the nine months of 2003, earnings per ordinary share rose 14% to $ 2.44. Earnings per ordinary ADS for the first nine months of 2003 were $ 0.81.

Cash from operations during the first nine months of 2003 was up 27% or $ 503 million compared to $ 395 million in the first nine months of 2002. A total of $ 129 million was spent for capital expenditures (net of disposals) resulting in a Free Cash Flow before acquisitions for the first nine months of 2003 of $ 374 million compared to $ 238 million in the first nine months of 2002. Free Cash Flow for the first nine months already exceeded the $ 349 million Free Cash Flow generated in the full year 2002. This exceptional performance is primarily driven by strong improvements in working capital management. Net cash used for acquisitions was $ 79 million. Free Cash Flow after acquisitions increased therefore 78% to $ 295 million.

As of September 30, 2003, the Company operated a total of 1,540 clinics worldwide (1,100 clinics/+3% in North America and 440 clinics/+16% International). Fresenius Medical Care AG performed approximately 13.2 million treatments, which represents an increase of 9% year over year. North America accounted for 9.2 million treatments (+7%) and the International segment for 4.0 million (+16%). At the end of the third quarter 2003, Fresenius Medical Care served about 117,600 patients worldwide which represents an increase of 7%. North America accounted for ~81,700 patients (+4%) and the International segment for ~35,900 patients (+14%).


OUTLOOK 2003

For the year 2003, the Company reconfirms its outlook and expects mid single digit revenue growth (in constant currency) and net income growth in the high single digit to low double digit range. As mentioned in the first quarter of 2003, the Company expects to achieve net income growth for the full year 2003 near the lower end within the predicted range.

Ben Lipps, Chief Executive Officer of Fresenius Medical Care, commented: "Our results for the third quarter of 2003 improved in all key financial metrics and showed a strong performance of our underlying operations. We achieved another record operating and free cash flow for the third quarter 2003 and we are confident that our global strategy is on the right track. We are well positioned to achieve our full year targets and we can look favourably to the future."