Fresenius Medical Care AG reports Second Quarter and Six Months Results 2003

Summary second quarter 2003:

• Total Revenue of $ 1,366 million up 9%
• Operating income (EBIT) of $ 184 million up 8%
• Net income of $ 79 million up 7%
• Free Cash Flow at record level of $ 138 million
• Operating margin and same store treatment growth improvement in North America and International compared to the first quarter 2003
• The company confirms its outlook for 2003

Fresenius Medical Care AG ("FME") (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 second quarter and the first six months of 2003.

OPERATIONS

Second Quarter 2003:
Fresenius Medical Care AG reports a 7% increase in net income to $ 79 million for the second quarter 2003.

Total revenue for the second quarter 2003 increased 9% (4.5% at constant currency) to $ 1,366 million. Dialysis Care revenues grew by 7% to $ 978 million (+5% at constant currency) in the second quarter of 2003. Same store treatment growth worldwide was 5%.

Dialysis Product revenues (including internal sales) increased by 14% to $ 504 million (+5% at constant currency) in the same period. The internal sales increased to $ 116 million after $ 98 million in the second quarter of 2002.

North America:
Revenue rose 3% to $ 955 million, compared to $ 928 million in the same period last year. Dialysis Care revenue in the US increased by 4% to $ 846 million. Same store treatment growth increased sequentially 40 basis points to 3.7%. The average revenue per treatment was within the forecasted range at $ 275 in the second quarter of 2003.

North American Dialysis Product revenue, including sales to company-owned clinics, increased 3% to $ 195 million. Product sales to the available external market increased by 5%.

International:
Revenue was $ 412 million, up 26% (+9% adjusted for currency). Dialysis Care revenue reached $ 133 million in the second quarter 2003, up 36% (+18% at constant currency). Dialysis Products revenue, including sales to company-owned dialysis clinics, increased 23% to $ 309 million (6% currency adjusted).

Operating Income (EBIT) increased 8% to $ 184 million resulting in an operating margin of 13.5% (Q2 2002: 13.6%). In the first quarter of 2003, the Company achieved an operating margin of 13.0%. The increase of approximately 50 basis points in the second quarter was mainly due to increased treatments, improved product margins in North America and increased dialyzer sales in International. The International EBIT-margin was still influenced by the same items discussed for the first quarter, such as the crisis in Middle East / Latin America and the pricing pressure in Central Europe. With implemented measures some of these impacts became less influential in the second quarter of 2003. The margin in the International area went up by 70 basis points compared to the prior quarter.

Earnings per share (EPS) in the second quarter 2003 rose 7% to $ 0.82 per ordinary share ($ 0.27 per ADS), compared to $ 0.77 ($ 0.26 per ADS) in the second quarter of 2002. The weighted average number of shares outstanding during both the second quarter of 2003 and the second quarter of 2002 was approximately 96.2 million.

In the second quarter of 2003, the Company generated $ 175 million in cash from operations. A total of $ 37 million (net of disposals) was spent for capital expenditures, resulting in a Free Cash Flow for the second quarter 2003 of $ 138 million. This is an all-time record for any single historical quarter and was mainly driven by improved accounts receivable collections in North America and low capital expenditures. A total of $ 29 million in cash was spent for acquisitions. Free Cash Flow after acquisitions was at a Q2 record level of $ 109 million.

First Half Year 2003:
For a complete overview of the first half year of 2002/3 please refer to the appendix (see pdf-file).

In the first half of 2003, net income was $ 149 million, up 8% from the first half of 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 to operating earnings. Excluding the redemption loss, net income in the first half of 2002 would have been $ 149 million. Net revenue was $ 2.67 billion, up 9% from the first half of 2002. Currency adjusted, net revenue rose 5% in the first half of 2003. Operating income (EBIT) increased 2% to $ 353 million resulting in an operating margin of 13.2%. In the first half of 2003, earnings per ordinary share rose 8% to $ 1.54. Earnings per ordinary ADS for the first half of 2003 were $ 0.51.

Cash from operations during the first six months of 2003 was up 23% or $ 300 million compared to $ 244 million in the first six months of 2002. A total of $ 78 million was spent for capital expenditures (net of disposals) resulting in a Free Cash Flow for the first half of 2003 of $ 222 million compared to $ 154 million in the first half of 2002. Net cash used for acquisitions was $ 57 million.

As of June 30, 2003, the Company operated a total of 1,510 clinics worldwide (1,095 clinics/+4% in North America and 415 clinics/+9% International). Fresenius Medical Care AG performed approximately 8.7 million treatments, which represents an increase of 9% year over year. North America accounted for 6.1 million treatments (+7%) and the International segment for 2.6 million (+15%). At the end of the second quarter 2003, Fresenius Medical Care AG provided treatment to around 115,800 patients worldwide which represents an increase of 7%. North America accounted for ~81,000 patients (+4%) and the International segment for ~34,800 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 due to the increased risks and unpredictability.

Ben Lipps, Chief Executive Officer of Fresenius Medical Care, commented: "The results of the second quarter reinforce our confidence that Fresenius Medical Care's global strategy in patient care is on the right track. We expect that our initiatives will lead to continuous improvements in our financial results. In addition, we see continued strong acceptance of our new renal product technologies, underscoring that our strategy and investments of the past several years are correct. We clearly can accomplish more in terms of financial returns from these investments and our targets are clear. Our management team and employees have the dedication, skills and resources to achieve our objectives."