Fresenius Medical Care reports Fourth Quarter and Full Year 2004 Results

Summary Full Year 2004:
The Company exceeded its financial targets, achieved record earnings and will propose the 8th consecutive dividend increase.

• Net Revenue: $ 6,228 million, +13%
• Operating Income (EBIT): $ 852 million, +13%
• Net Income: $ 402 million, +21%
• Operating Cash Flow: $ 828 million, +10%
• Free Cash Flow: $ 567 million, + 19%
• Dividend Proposal: Ordinary Share: € 1.12, + 10% Preference Share: € 1.18, + 9%

Fresenius Medical Care AG ("the Company") (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 fourth quarter and the full year of 2004.

Operations Fourth Quarter 2004

Revenue
Total revenue for the fourth quarter 2004 increased by 13% (10% at constant currency) to $ 1,640 million. The consolidation of businesses in accordance with a new accounting regulation (FIN 46R) contributed approx. 2% to the growth rate. Dialysis Care revenue grew by 12% to $ 1,167 million (11% at constant currency) in the fourth quarter of 2004. Organic revenue growth worldwide was 6%. Dialysis Product revenue increased by 14% to $ 473 million (8% at constant currency) in the same period.

North America revenue increased by 10% to $ 1,089 million, compared to $ 993 million in the same period last year. Dialysis Care revenue increased by 10% to $ 977 million. The average revenue per treatment increased to $ 290 in the fourth quarter 2004 (Q4 2003: $ 280). Dialysis Product revenue increased by 5% to $ 112 million.

International revenue was $ 551 million, up 20% from the fourth quarter of 2003, an increase of 11% adjusted for currency. Dialysis Care revenue reached $ 190 million, an increase of 26% (17% at constant currency). Dialysis Products revenue increased by 17% to $ 361 million (9% at constant currency).

Earnings
Operating income (EBIT) increased by 10% to $ 227 million resulting in an operating margin of 13.9%. The group operating margin was impacted mainly by price pressure in Japan as a result of bi-annual reimbursement rate reductions and the implementation of the new accounting rule FIN 46R.
On a comparable basis excluding FIN 46R, the operating margin in North America remained stable at 14.6% compared to the fourth quarter 2003. In the International segment the comparable margin was 14.9% in the fourth quarter of 2004.

Group net interest expenses decreased by 11% to $ 46 million, compared to $ 52 million last year. This positive development was mainly attributable to a lower debt level based on the strong Cash Flow generation in combination with lower interest rates.

Income tax expense was $ 72 million versus $ 61 million in the fourth quarter 2003, reflecting an effective tax rate of 39.8% compared to 39.0% in the fourth quarter of last year.

Net income in the fourth quarter 2004 was $ 108 million, an increase of 14%.

Earnings per share (EPS) in the fourth quarter 2004 rose correspondingly by 14% to $ 1.12 per ordinary share ($ 0.37 per ADS), compared to $ 0.98 ($ 0.33 per ADS) in the fourth quarter of 2003. The weighted average number of shares outstanding was approximately 96.3 million.

Cash Flow
In the fourth quarter of 2004, the Company generated $ 268 million in net cash from operations, representing about 16.3% of total revenue.

A total of $ 117 million (net of disposals) was spent for capital expenditures. This resulted in a Free Cash Flow before acquisitions of $ 151 million compared to $ 104 million in the fourth quarter of 2003. The high level of Free Cash Flow was supported by the increase in net income and improvements in working capital management. In addition, the days sales outstanding (DSO) were reduced by one day to 84 days in the fourth quarter compared to the third quarter 2004. Compared with the fourth quarter of the previous year DSO were reduced by 5 days.

A total of $ 31 million in cash was spent for acquisitions. The Free Cash Flow after acquisitions increased by 33% to $ 120 million compared to $ 91 million last year.

Operations Full Year 2004:

Earnings and revenue
For the full year 2004, net income was $ 402 million, up 21% from 2003. Net revenue was $ 6,228 million, up 13% from 2003. Currency adjusted, net revenue rose 10% in 2004 as compared to 2003. Operating income (EBIT) increased by 13% to $ 852 million resulting in an operating margin of 13.7%. On a comparable basis (excl. the new accounting regulation FIN 46R) the operating margin would have been 13.85% vs. 13.7% for the year 2003.

Group net interest expenses for the full year 2004 decreased by 13% to $ 183 million, compared to $ 211 million last year. Income tax expense was $ 266 million for the full year 2004 versus $ 213 million in 2003. This reflects an effective tax rate of 39.7% compared to 39.0% for 2003.

For the full year of 2004, earnings per ordinary share rose 21% to $ 4.16. Earnings per ordinary ADS for 2004 were $ 1.39. The weighted average number of shares outstanding during 2004 was approximately 96.2 million.

Cash flow
Cash from operations during the full year 2004 was up 10% to $ 828 million compared to $ 754 million in 2003. A total of $ 261 million was spent for capital expenditures (net of disposals). This resulted in a record Free Cash Flow before acquisitions for 2004 of $ 567 million compared to $ 478 million in 2003. Net cash used for acquisitions was $ 104 million. The Free Cash Flow after acquisitions increased by 20% to $ 463 million compared to $ 386 million last year.

Patients - Clinics - Treatments
At the end of 2004, Fresenius Medical Care served about 124,400 patients worldwide which represents an increase of 4%. North America provided dialysis treatments for ~85,500 patients (+4%) and the International segment for ~38,900 patients (+6%).

As of December 31, 2004, the Company operated a total of 1,610 clinics worldwide (1,130 clinics/+2% in North America and 480 clinics/+7% International).

Fresenius Medical Care AG performed approximately 18.8 million treatments in 2004, which represents an increase of 5% year over year. North America accounted for 12.9 million treatments (+4%) and the International segment for 5.9 million (+8%).

Dividends:

The Company will continue to follow an earnings-driven dividend policy. For the eighth consecutive year, shareholders can expect an increased dividend for the fiscal year 2004. At the Annual General Meeting on May 24, 2005 shareholders will be asked to approve a dividend of € 1.12 per ordinary share (2003: € 1.02/+10%) and € 1.18 per preference share (2003: € 1.08/+9%).

Outlook 2005:

For the year 2005, the Company expects a revenue growth at constant currencies between six and nine percent and net income growth in the low double-digit range.

Furthermore, the Company expects capital expenditures of about $ 350-400 million and spending on acquisitions of about $ 200-250 million.

Ben Lipps, Chief Executive Officer of Fresenius Medical Care, commented: "Our results for the fourth quarter and the full year 2004 demonstrate solid operating fundamentals that translate into strong top line revenue growth and bottom line net income growth. We have accomplished record earnings in 2004. We are particularly pleased with the results of Europe, North America and Latin America. In addition, our Free Cash Flow performance was very strong. This accomplishment gives us the opportunity to increase investments going forward which will sustain our future growth."

Video Webcast
Fresenius Medical Care will hold a press conference at its headquarters in Bad Homburg, Germany, to discuss the results of the fourth quarter and the full year of 2004 on February 24, 2005 at 10 a. m. CET. You are cordially invited to listen to the live video webcast of the meeting at the Company's website www.fmc-ag.com. A replay will be available shortly after the meeting.