Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Fresenius Medical Care AG & Co. KGAA (NYSE:FMS)

Q3 2012 Earnings Call

October 31, 2012 10:30 am ET

Executives

Oliver Maier - Head of Investor Relations & Corporate Communications- Fresenius Medical Care Management Ag

Benjamin J. Lipps - Chairman of The Management Board of Fresenius Medical Care Management Ag and Chief Executive Officer of Fresenius Medical Care Management Ag

Robert Maurice Rice Powell - Vice Chairman of The Management Board of Fresenius Medical Care Management AG and Chief Executive Officer of North America of Fresenius Medical Care Management AG

Michael Brosnan - Chief Financial Officer of Fresenius Medical Care Management AG and Member of Management Board - Fresenius Medical Care Management

Analysts

Thomas M. Jones - Berenberg Bank, Research Division

Lisa Bedell Clive - Sanford C. Bernstein & Co., LLC., Research Division

Edward Ridley-Day - BofA Merrill Lynch, Research Division

Gary Lieberman - Wells Fargo Securities, LLC, Research Division

Christoph Gretler - Crédit Suisse AG, Research Division

Oliver Reinberg - CA Cheuvreux, Research Division

Veronika Dubajova - Goldman Sachs Group Inc., Research Division

Ingeborg Øie - Jefferies & Company, Inc., Research Division

Martin Wales - UBS Investment Bank, Research Division

Holger Blum - Deutsche Bank AG, Research Division

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Fresenius Medical Care Q 2012 Conference Call. [Operator Instructions] I would now like to turn the conference over to Oliver Maier, Head of Investor Relations. Please go ahead, sir.

Oliver Maier

Great. Thank you so much, Jerry. Thank you, everybody for being back. I would like to welcome all of you to Fresenius Medical Care's Earnings Call for the third quarter and for the first 9 months of 2012.

Also a very warm welcome to everybody who joined us today out there on the Web. We very much appreciate your continued interest actually on the company.

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

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

One more housekeeping item for today's call, because of the impact of Hurricane Sandy on the East Coast in the U.S., many analysts and investors are still without power or may not have reliable server access to join today's call online.

However, for fair disclosure considerations and that we are aware of the fact that we always have a big crowd joining us for our disclosure calls, I would like to ask those who have dialed in to limit their questions to just 2, absolutely max 3 questions per round, in an effort to give everyone an opportunity to participate in the Q&A portion. Obviously, absolutely feel free to reenter the queue if you wish. We will, of course, provide a playback with -- but we would appreciate everyone being considerate of our time constraint. That's it for my end, Ben, and the floor is yours.

Benjamin J. Lipps

Thank you, Oliver. Ladies and gentlemen, again, let me extend a warm welcome to you, our Board members, all of our employees, associates and people who've joined us on the Internet.

In terms of the agenda, I'll cover the global business update, Rice will cover our progress in North America, Michael with financials. Then we'll go into questions and answers.

Clearly, third quarter was a very challenging quarter yet we did make progress defining our going forward prospects with a number of focused projects that I believe will strengthen our business as we look ahead. In light of the negative implications from the difficult economic environment, the currency fluctuations, we did accomplish a good operating result with excellent cash flow for the third quarter.

Although the third quarter is my last quarter that I will report to you as a CEO and Chairman of the Management Board, I would like to point out that the CEO transition to Rice Powell continues on track with the appointment of Ron Kuerbitz as the new CEO for North America effective January 2013.

Working with Rice and the management Board, as we have done for the past 13 years, I believe that our prospects for continued growth remain very solid and excellent.

I would now like to turn to Chart 4 and talk about the numbers for third quarter.

As you can see, our revenue was approximately $3.4 billion, a 7% increase prior -- over prior year. This reflects an 11% constant currency increase. North America grew at 13%, impressive, and the growth in International was 7% at constant currency. Asia Pacific and Europe had seen weaker revenue growth in the -- than normal in the Services business, which I'll talk a little bit about as I get to talking about the services.

However, despite the challenges, our operating profit increased by 6% in dollars to approximately $570 million.

In North America, we saw strong development of our operating results in the high 18% range, which Rice will discuss as we go through later.

Now our net income attributable to shareholders however did decrease 3% in dollars, and in euros, it increased 9%.

So again, I'd like to thank all of the dedicated staff around the world, the management board, for their continued dedication to providing the highest quality products and services in our center as you'll see from the quality charts later in my presentation.

Turning now to Chart 5. We'll take a quick look at the 9 months. Obviously, I won't spend a lot of time on it. Rice -- Mike will cover more later. Our revenue for 9 months is approximately $10 billion, an 8% increase over last year, an 11% increase in constant currency.

Our operating profit is also increased by about 11% to approximately $1.65 million.

Our reported net income attributable to shareholders including the investment gain was 22% to approximately $930 million.

I would like to comment a little bit about this because this gain, which was a result of our minority investment programs in the U.S. in 2010, allows us the opportunity to execute some special projects this year, which Rice will talk about later and set the stage for future growth and future continued solid performance.

So I would like to -- Rice will talk about them, Mike will talk about them, but this is an opportunity that we clearly are focusing on in the fourth quarter.

Now excluding this investment gain, as we have during the year as we set our guidance, clearly, our net income grew by 4% in U.S. dollars for the 9 months and 14%, again, in euros because of the fluctuations between the Euro-Dollar.

Turning now to Chart 6 and we'll take a little closer look at the revenue in terms of the regions. North America, approximately $2.25 billion in revenue, 13% growth. Again, reflecting a strong underlying organic growth as the integrations of our acquisition in North America continue to -- Rice will talk about, continue to provide revenue and profit.

Now we saw very strong revenue growth in Latin America, plus 23% in constant currency. However, in Europe, Middle East and Africa, EMEA, we saw a 4% growth in constant currency. This is primarily driven, I'll show you later, by the activities in the service area. And again, because we're vertically integrated, we got the benefit in the products area.

Turning now to Asia, we see a further acceleration in the growth of Asia from second quarter to about 7% constant currency, however, the norm for Asia is -- Asia Pacific is usually in the range of double-digit and the reason that we are a little bit behind the norm is that we made a decision to change our distributor relationships in China and this allows us to essentially approach then in 2013, a very strong opportunity in China, which we continue to see growing at a 25-plus percent range in terms of patients.

So our revenue growth in China then for third quarter was only about 19%. And again, when I say only about, 19% is extremely impressive, but in China, we've been kicking the lights out at approximately 25% to 30% growth over the past couple of years.

I'd also like to point out that we're actually in our NephroCare Cooperative Dialysis Clinics in China, which we essentially help manage with the regional ministries. We are now treating 6,500 patients in almost 70 clinics. So of course, that shows up as products business, but we have a very good profile in China, both the products and the service. And again, like I say, it was the right time to change the distributorships and essentially optimize our China distribution system.

Turning now to Slide -- Chart #7, we'll talk about dialysis care and clinics. This is a fairly standard slide, I think almost everybody probably memorized it by now, but essentially, we're treating about 250,000 patients as we complete Q3. We're back into the normal mode of de novos. We had very few acquisitions in the third quarter and our de novo rate is essentially 100 per year in that range and we're back at that, you'll notice we're doing about 25 a quarter.

Now we have seen a 12% -- if you look year-over-year, we've seen a 12% increase in clinics. This is from the acquisitions and the normal growth. We did, for the first 3 quarters of the year, deliver almost 29 million treatments, which also is up about 12%.

North America has about 2,000 clinics, International has about 1,000 clinics distributed between Europe, in Asia-Pacific, and Latin America.

So essentially our network is pretty solid. We're in all the right regions, we're pretty much back on a de novo growth rather than major acquisitions, and it's pretty much we're moving back towards business as usual.

Turning now to Chart 8 and talking about the performance in our Dialysis Services business. You can see that globally, we have a very strong 12% constant currency growth in Q3. This was really driven strongly by North America. I'd like to point out that the organic growth, the same market growth in International, which usually is in the 4% range, is a little lower than that this quarter and it's because of a very interesting phenomenon that we see in a couple of countries: Spain and the U.K.

Because of limited admittance to hospitals, the actual -- these countries now have hospital space which, in the past, they did not and so they are actually treating some of the patients that would normally go to our clinics and hospitals. The good news is we're selling a lot of machines because they have to setup to essentially run dialysis. So the same market growth is low in the International at about 2%, I do believe it will come back to the normal 4% range over -- in the foreseeable future.

The other good news is that we also see that the organic revenue growth in the International is 5%, and that is a reflection of our success in continuing to see increase in revenue per treatment. We have received reimbursement increases of -- in 13 out of 30 countries over the past year. We've also offered and are being paid for additional services such as hydration management and hemodiafiltration. So the International group, their average constant currency revenue growth this year actually increased by 2%, which is clearly a little -- clearly above what we had expected in terms of the actual revenue per treatment increase.

So International, we're seeing a little bit less same market growth, but we're also seeing good organic growth and we're able to capitalize on our structure in those countries that have issues in terms of open hospital space.

Turning now to Chart #9, our quality chart, a lot of numbers on here. I apologize that, but quality is very important. We monitor it, we work with our medical colleagues around the world and we're very proud of the fact that we actually have an opportunity to share with the world some very key quality metrics that are in Asia Pacific, Europe and the U.S.

I think I would like to point out that we continue to deliver globally between 96% and 97% of the time the prescriptions that our physicians prescribe for their patients. That is a significant accomplishment when you look at operating in 3,000 clinics around the world under many, many different conditions.

I'd also like to point out that we are also globally making progress on replacing catheters with fistulas after 90 days because, again, it depends on the intake system whether they come with a catheter or not. We're actually up to 82% of our patients in both North America without -- that do not have catheters. And clearly, Asia Pacific leads with about 93%. So making good progress and that, of course, shows up in many ways in terms of improved outcomes and also hospitalization.

The other thing I'd like to point out is that we have had a focus and I think a recent paper has been published in terms of improving the overall nutrition of our state of the patients and we're now proud of the fact that over 85% of our patients globally have albumins of greater than 3.5.

And finally, that leads to even with some of the anemia management activity that Rice will talk about in terms of the anemia protocols, we actually have been able to continue to slightly improve the hospitalization days around the world and that's a major accomplishment and Rice will talk a little more about what we've done there to ensure excellent outcomes for our patients.

So again, I think, in the quality area, we're focused on it, we're proud of what we're doing and we clearly have a unique data set here that we always enjoy sharing with you.

Turning now to Slide 10. We'll talk then -- I'd like to talk about the products business. If you look at the total product sales, we had growth of 6% in constant currency. Externally, we had growth of 7% in constant currency, globally.

Now that was clearly driven by the International region with a 9% growth in constant currency. Again, driven by machines and driven by dialyzers, the Pharma products and some -- and the Pharma products in a number of countries. So if you look in it -- and Rice will talk a little more about North America, that number you see here doesn't really tell you the whole story on North America, and Rice will point that out to you. So the Products business globally is growing above the market. We're maintaining our market share and we're capitalizing on our structure internationally where we need to in terms of how the various hospitals are being allocated to treat patients.

Turning now to my summary slide. I'd like to say that, yes, we've had some slower divestitures of clinics and we expect it again because we are good partners around the world. We want to make sure that we pass all the regulatory hurdles and we also want to make sure that wherever the clinics go, they go to a good operator so that clearly, we can, with pride, talk about the divestitures.

Now there's also some other things that Rice will talk about in terms of just the normal regulatory scrutiny, but that has affected our same market growth in Europe and I think Rice will talk about it, it's had an impact on our revenue growth in North America.

Mike will talk about our outstanding cash collections and quite frankly, this is no easy task in this environment to continue to collect from essentially 125 countries, but our team has been doing an excellent job and I believe we're respected for the services that we provide.

Now we also, I think, are working with our payors in the U.S. and around the world. Our intention is to continue to grow our reimbursement rate, either through additional services or essentially increases in reimbursement that reflect our cost increases from inflation.

Now also, I got to mention then, we'll spend a lot of time on it today, as everyone knows from reading the newspaper, any place there's a major new standards being imposed by the regulatory agencies in terms of products quality, pharma quality around the world, we believe that we're ahead of this as we have tried to be for years and we've invested significantly in 2012 to increase our quality systems and absolutely make sure that we're out on the best-in-class or clearly, on the top end of what the regulators would expect from us.

Now that's not all completed. We need to finish the validation in fourth quarter and then, of course, you eventually get to your test when you get inspected, but we have invested significantly in that area.

I'd mention that our CEO transition is on track. Really enjoy working with Rice and the group. I believe it's a seamless transition, but I also have to tell you that, yes, our guidance is we're projecting the lower end of guidance, we're excluding the investment gain and the special projects that we're talking about because we believe those essentially complement each other. And so I believe that we have a lot of work to do in Q4, but there's no question that this team has been here before and we've accomplished it many, many times and I'm just really proud to say I think we're doing the right things and I'd like, at this point, to turn it over to Rice to give you some more details on North America. Rice?

Robert Maurice Rice Powell

Thank you. Ben. Good morning, good afternoon, everyone. Slide 13 begins my prepared remarks. I think it's important that if you'll allow me, to at least start with an update that's not depicted on Slide 13, on Hurricane Sandy. Obviously, it was a tremendous storm, a lot of impact for us. We had 207 clinics that were affected by this monster storm, all the way from North Carolina to Massachusetts. We had roughly 10,000 patients whose scheduled treatments were impacted and what I mean by that is we either were able to move those treatments up and do them on a Sunday, we had great cooperation with our staff to come in and treat patients ahead of the storm. Yes, we had some patients that couldn't do that and we're trying to make those treatments up as quickly as we can. We, today, have around 150 clinics that are closed and will begin opening. The good news for us is our clinics have power. We have generators in each of our clinics and allow them to perform treatments during these difficult times, which happened to us in many cases as roads are closed, municipalities have asked people to stay off the road and we have certainly abided by that request and we do have some water damage in areas, but we are coming back up. We have employees whose homes have been impacted. We're going to work with them to make sure that we can help them get back on their feet as quickly as possible, but all in all, this terrible event we've been able to handle with preparation and tremendous teamwork from our staff, the local municipalities and all of those that take patient care as seriously as we do.

Now with my prepared remarks, the integration of Liberty and Renal Advantage along with American Access Care continues. As you'll recall, American Access Care was the acquisition of the Vascular business that we made just about a year ago, it's running well. We're happy with that business and that management team.

Liberty, Renal Advantage, we are a little behind where I want it to be. The simple fact is when we closed the deal in February, the Federal Trade Commission issued a hold separate order to us, which simply means they asked us to not get involved in some of the normal integration activities while we allow the divestiture process to go on and we made sure that the entity that was accepting our divested clinics was up and running and doing well.

What this really did for us is put us a couple of months behind getting at the heart of the type of integration activities that we typically would do looking at revenue rates, looking at payor contracts, things of that nature. And yes, I know you'll ask me the question, so I'll give you the answer now. We have seen some softness in the Renal Advantage revenue rates and we're working on that. The business that we've brought in from Liberty is strong, performing just as we had expected it will. The revenue rates at Renal Advantage were being worked on, but there is some softness there and we ended up getting at that in those activities a couple of months later than we had planned.

Even with that, as Ben has mentioned, you know that we had strong revenue growth in services. I'll speak to that a little bit later and we continue to see the improvement in our same-store growth. As depicted on Slide 13, we continue to walk up approaching that 4-plus percent and I'd like to see us maintain in terms of same-store growth.

Now anemia management. A couple of points that I'd like to make that are not on the slide. Our average in center dose per treatment is beginning to level off. We are seeing consistency. We think we're down at a level where we may have a little more room, but generally, we believe we're in a leveling off period and we've taken the curve down to the point that we had told you we would over time.

Secondly, OMONTYS, the trial, I know that is of interest to a number of you, as well as to me. We have accrued the 10,000 patients that we set out to accrue in this pilot study. The results, we believe, we'll see in March and April of next year. We're continuing to dose patients, the study does not end until December of this year, and I would say to you that it's been a very well-run study. We're roughly about 1 week or 2 behind where we want it to be and that simply we took a little more time and some planning and training, but we are at the 10,000 patient mark. We see this study running through the end of the year as we told you and then we'll be talking with you about results as we get into the first quarter of next year.

A couple of quality indicators on anemia management that are very important. We are below the national average in the sub 10 hemoglobin rounds per deciliter rate and in transfusion rate.

Now what does that mean? If you look over a 3-month basis under sub 10 control, what it tells you is that we are operating with about 13% of our patients in sub 10. The national average among Dallas' providers in the U.S. is around 19%.

If you will recall, back in February, we talk to you about the fact that is we saw our dose go down. It was very important to us that we didn't see a high spike in our sub 10 patient group, which would tell us that perhaps we're putting them in jeopardy of requiring transfusions which we don't want to do.

Conversely, if you look at the 2012 U.S. RDS annual data that shows the percent increase in transfusion rate from September of '11 to September of '10, the overall industry is at a 24% increase in the number of transfusions that are being given. We are operating at 4.3%. Again, another indicator that although we have -- we may have been slow to the party, to look at EPO dose drop, we've done this in a thoughtful way with our Chief Medical Officer, Frank Maddux and his team, in making sure that our patients have gone through this activity in a very controlled safe manner.

Another question that I know you'll want to ask is where are we with integrated care? We continue to answer questions when asked from CMS. I can't predict when this will happen, but we believe that it will happen. We continue to be engaged, when we're asked, we try to be cooperative and help answer any questions that we can.

If we go to Slide 14, we've talked about this slide many times. Again, we're looking at the revenue per treatment on the left-hand scale, cost per treatment on the right-hand scale. What this tells you is that we've had a 1.3% increase, $349 per treatment versus $345 quarter-over-quarter last year. And yes, you see an uptick in our cost per treatment.

What we see here is simply we are running a little higher personnel costs as we've gone through the Liberty, Renal Advantage integration activities. I would tell you we may be running with a little more people than we initially had planned, but the decision that we made there was let's be better safe than sorry, we'll take the extra staff, we'll take the extra folks to make sure things are going well.

Please do not read into this that, that means we're going to have a layoff or we're going to be letting people go. It simply means we've made a conscious decision to keep enough people through this time and it has turned out to be fortuitous given that we've had 2 hurricanes in the last 6 to 8 weeks. It has turned out to be the right decision for us.

Last Slide, which is Slide 15. Again, I just want to highlight the strong revenue growth in North America quarter-over-quarter of 13%. You can see in our Services businesses we're up 15%. Ben mentioned in his remarks to you that if you look at the negative 1.1% in the Products business, you could certainly infer from that, that we're not doing a good job. I would counter that's not the case. If you recall, Liberty, Renal Advantage was our second or third largest external customer. We have now brought them into the family.

So if you correct for that, you can see we were right at about 2% growth in the quarter. The measure that's very important to me and that I gauge the success of our Products business in the U.S. by, is looking at our hemo disposable products, dialyzers, blood lines, concentrate, all of the disposables that you need to perform a hemodialysis treatment in our clinics. And keep in mind, that's roughly about 90% of the treatment base in the U.S. not just Fresenius, but in the U.S., is done via hemodialysis, that we're growing at 7.3%. So as an indicator, I feel good about that.

You will ask me, well, Rice, if that's the case, what's not going so well? We do see some softness in our machine sales, particularly in the independent market. We continue to put our best effort. We feel comfortable. Our data tells us that we're not losing share, we're not losing sales to competitors. We are simply competing with the economy and I don't know that we'll overcome that every time, but that's the case.

I would like, as my last prepared remark before I turn it over to Mike, to get it on the record, I want to thank Ben for his leadership and his guidance through the 15 years. I apologize for any emotion, but it's quite a change for me to think about this. Mike, please?

Michael Brosnan

Thank you, Rice. And good morning, and good afternoon to everyone. I'll go through the financials starting on the Q3 P&L.

As you can see, the top line growth of $3.4 billion, as Ben has already commented on, our operating earnings grew 6% to $568 million worldwide.

Our EBIT margin is down slightly from 16.8% to 16.6% or roughly 20 basis points and we saw the margin decline in both North America and in our International business.

North America, our margins declined by 10 basis points as a result of higher personnel costs this year and higher rebates recorded in Q3 2011 results than the same quarter this year for pharma products. This was partly offset by higher revenue rates and the progression of the Liberty acquisition that Rice reported on.

In International the decline in margin was about 50 basis points, driven mostly by a change in methodology regarding cost allocations in our production units related to the International business and some smaller unfavorable reimbursement effects, partly offset by improvements in our debt expense in the International business.

Continuing to move through the P&L, our net interest expense increased from $68 million to $108 million, roughly $10 million of this relates to the earnings on the investment note we had on the Renal Advantage business in 2011, prior to our acquisition of Liberty with the balance of the change related to our capital markets activities and our acquisition activities on a year-over-year basis.

As you can see from the reported numbers, our debt is up about $1.7 billion from the end of 2011.

Moving to tax expense for the quarter, you can see the reported effective tax rate is down about 170 basis points. This difference is essentially due to the higher cost in 2011 due to some tax audits and the release of some reserves in 2012 for risks that will not materialize.

The underlying rate is still in 34% range operational.

Our noncontrolling interest increased from $24 million to $37 million due to our acquisitions and as a result of growth in our joint venture operations. This is consistent with our guidance. And as Ben indicated, our reported earnings at $270 million are up roughly 3%.

Turning to the 9 months results. Again, Ben has already commented on the revenues, 8% growth, current 11% constant currency. Operating income was up 11% to $1.7 billion with margins showing about 40 basis points of accretion. North America's margins on a 9-month basis grew 60 basis points due to the improvements in our revenue rate, the benefits associated with the Liberty acquisition, lower pharmaceutical costs and divestiture gains, which were somewhat offset by personnel cost increases.

Our International margins have improved 20 basis points coming largely from favorable FX business growth in the Asia-Pacific region, partly offset by some lower margin tenders, one in 2011.

Net interest expense is consistent with what I indicated for Q3 and our income taxes on a 9-month basis are showing roughly at 34% operational tax rate. Net income is $930 million as indicated in the charts.

Turning to the start of the cash flow discussion and our day sales outstanding. You can see that our DSO improved worldwide by one day sequentially, ending the quarter at 76 days. North America is down 1 day to 53 days and the International business is flat. We're very pleased with the overall picture of our receivables on a worldwide basis.

Turning to my next chart for the third quarter cash flow statements. You can see operating cash flows are strong at 16% of revenues, up even over last year's strong Q3 performance of 15%.

We benefited in the quarter from improvements in our relative performance of receivables and inventory, capital expenditures at $164 million are roughly flat with last year and consistent with our guidance.

As a result, free cash flow is about 10% of revenues.

Acquisition spending reflects a modest level of spending at $37 million. This was mostly related to the U.S. with a small true up of the Liberty acquisition and some costs associated with the acquisition of additional vascular access centers.

Turning to my next chart, operating cash flows for the 9 months at $1,467,000,000, again, reflects the strong improvement in receivables and inventory. Capital investments are consistent on a year-over-year basis and the acquisition spending of $1.6 billion [ph] reflects the activity that we've been discussing all year.

We finished the quarter with just under $620 million of cash and available -- availability under our borrowing lines of roughly $1 billion.

Yesterday, we closed on a new 5-year credit agreement, which consists of $2.6 billion term loan A and 3 revolvers totaling $1.2 billion. The loan was well-received and will carry initially a LIBOR of plus 200 basis point margin, which will drop to a margin of 175 basis points after 6 months.

The company's debt maturity schedule now stretches out to 2022, with little required refinancing activity between now and 2016.

Turning to my next chart on leverage. Our debt at the end of the quarter is $8.4 billion. And as expected, our [indiscernible] decreased slightly to 2.8 million times [ph].

And now turning to my last chart, which is our outlook. Ben has already commented on this in part. You can see we're continuing our guidance regarding our operating earnings. We are finding the year to be a very challenging one. In our August call, we added a formal definition to the mark, indicating that, that would reference a range of plus or minus 0% to 2%.

Currently, for the full year, we're at the low end of our guidance range for both revenues and earnings. And as Ben indicated, we anticipate some special collection efforts related to services performed in prior years and other initiatives in the fourth quarter that will help us to achieve this guidance.

We have excluded the investment gain from our guidance all year. And in addition, as Ben described, we plan to take some charges in the fourth quarter that are not included in this operating guidance. These charges mainly relate to the intended renegotiation of the distribution, manufacturing and supply agreement providing products, and a donation to the American Society of Nephrology to found the Benjamin J. Lipps Research Fellowship program.

To provide you a couple of additional guide post with regard to our guidance for the year. As Rice commented, same market growth in services continues to be in the 4% range worldwide, which is what we indicated at the beginning of the year.

As I had said in the second quarter call, our organic revenue growth has softened a bit due to our expectations beginning of the year, largely due to some of the pricing and bundling discussions we've had over the course of the year. And in the third quarter, our commercial mix was down slightly sequentially.

Therefore, I'm expecting that revenue per treatment in the U.S. will be in the 1% to 2% range for the year. And regarding the collection efforts that we referenced in the guidance, we are referring to the U.S. As many of you know, it's not unusual in the U.S. healthcare system to have revenue elements related to prior years services carried in the current period due to the contractual nature of the business. We're highlighting this in our guidance because we are at the low end of the range and this effort is reporting our guidance at that level.

With that, I will turn the meeting back to Ben. Thank you very much.

Benjamin J. Lipps

Thank you, Mike. Appreciate it. Just a closing comment and we'll go into Q&A. Again, as I've mentioned since this is my last analyst meeting as CEO, I'd like to express my appreciation to all of you, the investors and the analysts, who have been -- who have followed the company for a number of years, who have been supportive. We really do appreciate your support and we try to work with you in any possible way. And I think your support has been key to our success. And as I said, I really firmly believe, and I think everybody does on the management team throughout the company, that we have a very bright future. Very proud of the new management team and essentially, that the management team is essentially all from inside FMC. And that's a real credit, I think, to the group that I worked with for the last many years.

So after all that, I think why don't we open up for questions and answers and get back to the questions that are on their minds. So, Oliver?

Oliver Maier

Great. Thank you very much, everybody, for the update on the presentation. So, Jerry, I think we can open up the lines for Q&A, and please remember my opening housekeeping remarks in terms of the amount of questions. Thank you so much.

Question-and-Answer Session

Operator

[Operator Instructions] The first question is from Tom Jones, Berenberg Bank.

Thomas M. Jones - Berenberg Bank, Research Division

Thanks for taking my 2 questions. The first was just on commercial revenue per treatment rates. I mean you've seen some softness in Q2 and Q3. Some of it has been of your own volition, some of it has been coming from external pressures. From our perspective, when should we start to think about that annualizing out and you getting back to a more normal, so low single-digit, year-on-year increase in commercial revenue per rate -- commercial rates, sorry? And then the second question was really just on these other measures. I'm still slightly confused about, number one, if you might be able to give us a little bit more detail on what exactly they involve, from what the potential magnitude of them is, I mean in terms of what you're pulling forward or from past periods into Q4 to help you get to your guidance range.

Benjamin J. Lipps

Why don't you get in, Mike?

Michael Brosnan

Yes. In terms of the commercial revenue treatment rates, I think the 2 things we've talked about the most, and I'll just, in terms of order of importance, I guess, would be that, as both Rice and I have commented during the year, we have had some of the larger commercial contracts come up for renewal this year. And we completed those, I think, in the second quarter, we said we're done. So I think you may see some year-over-year effects coming into the first part of 2013 just given the timing of those, but I'd say by midyear, that should be behind us, 2013. And then the other effects, which we commented on both last year and this year, is that with the unbundled commercial contracts, you do have a pharma effect associated with that, that shows up in your revenue rate. Because Rice is reporting on the fact that we're more or less in a stable position at this point on, I would expect that will stop having a volatile effect on the top line. In terms of the collection efforts, I don't have too much more to say, frankly. We felt because we are at the low end of the range that we should highlight it. It's more than we've traditionally seen in terms of normal day-to-day operations, so we just wanted to make that point.

Operator

The next question is from Lisa Clive, Sanford Bernstein.

Lisa Bedell Clive - Sanford C. Bernstein & Co., LLC., Research Division

Two questions. One, you mentioned that the commercial mix was also unfavorable this quarter. Could you just give us a little more detail? I was under the impression this is really the first time in quite a while that, that's been an issue for you, so maybe comment on how you think we should consider that going forward. And then the second question on the International revenue per treatment. You did mention you have gotten increases in a number of countries, but are there areas in particular where you've had pressure and again, what should we expect for that over the next year or so?

Benjamin J. Lipps

Thank you, Lisa. Again, Mike, I think why don't you take those, okay? Or do you want -- Rice, do you want to do the commercial?

Robert Maurice Rice Powell

I'll chime in. Go ahead, Mike.

Michael Brosnan

Yes. On the commercial mix, you are correct. Typically, what we've said now for many, many quarters is that it was stable. There's always a little bit of plus, minus in that, but in the third quarter, there was some softness. So just in terms of transparency, we're reporting out on that. I frankly wouldn't read anything into that in terms of any kind of long-term trending. We typically comment on it as to whether it's stable or not, and so we've just maintained our consistency there and we did see some softness in Q3. But I wouldn't do any predicting with regard to as we go forward. On the International rates, Ben, absolutely, is correct, of course. And we have seen, particularly in the third quarter, some favorability. When you look at that on a year-to-date basis, it's a little bit closer to what we had guided to for the year because you did have, as I had commented beginning of the year, we had increased volatility in International rates, both ups and downs. So Q3 was very strong. The full year is a positive, a little over 1%. And what I'd said at the beginning of the year, when you look at revenue rates internationally, that we roughly had a break even to a slight positive. And when I think of revenue rate, including not just the base business, but also the acquisitions we've done, I think my guidance still holds because some of the countries we're growing in and having very good results in are lower-revenue-rate countries than some of the legacy countries. So you've got a little bit of country mix in there that if you were to look at the revenue rate all-in, without regard to legacy business and acquisitions, we'd be right within the range that I'd indicated the beginning of the year.

Lisa Bedell Clive - Sanford C. Bernstein & Co., LLC., Research Division

And just lastly, I wanted to say, Ben, you will be missed. Rice, clearly, we think the company is in good hands. And, Ben, I hope you have a good time in Washington, harassing those politicians and Medicare to get integrated care done.

Benjamin J. Lipps

We will, we will. Thank you, Lisa.

Operator

The next question is from Edward Ridley-Day, Bank of America.

Edward Ridley-Day - BofA Merrill Lynch, Research Division

Firstly, on your IV Iron business, can you give us a little bit more detail on the performance of that business? Clearly, there are some significant challenges in that market. And how -- basically, how you're going to go about renegotiating your agreement there on benefit? That would be my first question. And secondly, I think just quickly on the med tech tax, are you now in a position where you could give us more guidance on the potential impact of that on your business next year?

Benjamin J. Lipps

Ed, this is Ben. I think as far as the IV Iron business and our position that we're in the process of executing this quarter, I'm going to turn that to Rice. And I think, Rice, the tax this year?

Robert Maurice Rice Powell

Sure. Ed, let's see if I can give you some guidance here. A couple of things, yes, in general, the market is extremely competitive, extremely tight, so let's go back and just a couple of historic points. A couple of years ago was we were going into the bundle, we guided you when we said to you we felt that the IV Iron dose would, in fact, go up in the near future, and we did see that. And then consequently, as EPO has dropped, people have now settled into their iron dose and we are seeing in our own clinics and in the industry in the U.S. that the IV Iron dose has now come down on a trailing effect, if you will, from where EPO ended up. So just in general, we've seen the dose come down some. The renegotiation, there's not a lot I can tell you other than to say the following, Ed. It's a partnership. We contemplated in doing the deal that if there were external circumstances that would fundamentally change the market, that we would both be willing to sit down at the table and try to re-craft the deal in a way that provides economic benefit to all the parties involved, and we're at that point in time. It's just the right time. There is some competition with new products out. Pricing is tightening up, if you will. So we're taking advantage of the gain and those moneys that are available to us to renegotiate and put a more realistic, if you will, deal in place. I don't think there's much more that I can say. We are continuing to meet with our partner, American Regent, Luitpold, and those discussions are ongoing. So there's probably not much more I can say other than we did contemplate that the market could change fundamentally with the bundle coming and all of these things, and we are at the point where renegotiation makes sense.

Edward Ridley-Day - BofA Merrill Lynch, Research Division

Rice, if I could just quickly, just a quick follow-up on that.

Robert Maurice Rice Powell

Yes.

Edward Ridley-Day - BofA Merrill Lynch, Research Division

Is there -- do you feel there is something you can do really to sort of otherwise stabilize your business? I mean obviously, renegotiating the contract is one thing, but stabilize the volumes, is there any initiatives you can give us some detail on?

Robert Maurice Rice Powell

Yes, what we would like to do, obviously, we had a commitment to our partner as to the amount of Venofer we'd be purchasing. And what we're doing, we're trying to redefine what makes sense, what's rational on those commitments. I will tell you that our market share has not dropped. We are continuing to manage the market. We're continuing to invest on our Venofer puff [ph], which will automatically dose Venofer in the clinics. It's a module that goes in our machine. We'll continue to roll that out, but the volumes -- the fact is the volumes are down. And we need to deal with that, Ed. And that's what we're attempting to do. And then secondly, on the med tech tax, I would guide you that the impact of that is somewhere in the $20 million to, say, $25 million range for us as we look at next year.

Operator

The next question is from Gary Lieberman, Wells Fargo.

Gary Lieberman - Wells Fargo Securities, LLC, Research Division

The first question, Mike, I think you addressed, but I just want to make sure I'm clear on it. You said, I guess, that the AR and also, to some extent, the revenue and the guidance is benefiting from prior period recording of revenue?

Michael Brosnan

Yes, services performed in the prior periods. Just when you think about the U.S. healthcare system and how revenues are recognized on services performed, sometimes you get -- you routinely get some carryover from one period to the next. I just highlighted it because it's a little bit bigger.

Gary Lieberman - Wells Fargo Securities, LLC, Research Division

Is there any way you can sort of quantify it for us or at least directionally kind of quantify for us?

Michael Brosnan

Well, I said it's helping us with our guidance, so that gives you some directional input. And I think beyond that, I've said all I'm planning on saying today.

Gary Lieberman - Wells Fargo Securities, LLC, Research Division

Okay. And then, I guess, my next question, it sounds -- looks like the volatility with the currency maybe is a little bit bigger than it's been in the past. Have you given any thought to sort of increasing the hedging effort of some of the volatility there?

Michael Brosnan

Yes, I think why don't you take that one.

Benjamin J. Lipps

Okay. When we were more just products, we could have some internal hedges, but we're now 50-plus percent services, so, Mike, second?

Michael Brosnan

Yes. No, I think I'd said in the past, but just to kind of refresh it, we do have an active hedging program but -- and we typically do most of our hedging as we're preparing our operating plan for the following year. We take a look at what we think the overall currency levels are and we typically hedge a portion of the revenue stream, particularly as it relates to the products businesses Ben indicated. And then each region monitors that over the course of the year, paying particular attention to the more volatile countries, and hedging when we think it's appropriate from a cost perspective. Because, as you know, some of the more esoteric currencies get pretty expensive when we look at the forward rates. So I wouldn't say we're changing anything, we're very mindful of it and we've got really very good folks monitoring it around the world and in our central treasury group in Bad Homburg. And as a consequence, I'm not changing the guidance that I provided at the beginning of the year relative to the impact of currency on the business.

Gary Lieberman - Wells Fargo Securities, LLC, Research Division

Okay. And then if I could just maybe sneak a last question in. You mentioned the change in distributor relationships in China. Could you give us maybe just a little bit more detail on that?

Benjamin J. Lipps

Yes, I think in China, as Japan, there's always what they call, intermediary distributors. You have your own sales force there, but there's a whole system for delivery of the products. And we see -- we've had in China alone, there would be maybe 15 distributors. And again, depending on their financial position, we have to assess that and we do that from time to time when their contracts come up. We particularly believe that with all this, the activity going on between Japan and China, that there may be some very unique opportunities for us over the next couple of years. So we just decided it was time to make sure that we have all the strong horses that we need in terms of this secondary distributorship, and when you do that, there's obviously some loss of revenue at the time. So that's really all it is. We're just truing up that group, truing up that distributorship and getting prepared for what we think is going to be north of 25% growth for the next few years.

Gary Lieberman - Wells Fargo Securities, LLC, Research Division

And that should take 1 quarter or 2 quarters to kind of smooth itself out?

Benjamin J. Lipps

You could see the main hit of it probably in the third quarter.

Operator

The next question is from Chris Gretler, Crédit Suisse.

Christoph Gretler - Crédit Suisse AG, Research Division

Now, 2 questions. Now the first relates to your cost per treatment. I think your guidance during last conference call, you mentioned that you expect that to be down 1%, 2%. And now, it looks more like, a little bit, an ambitious assumption. How do you stand to that statement nowadays? And then the second question relates to the cost allocation that hit in your International margins. Can you explain that to me? I thought that would be basically in the consolidation process, now that is would basically now canceled out. So I was just wondering, any more insights? And then lastly also, I wanted to wish all the best to Ben for his future.

Benjamin J. Lipps

Thank you. I think, Mike, that's clearly your question.

Michael Brosnan

Okay. Thanks, Chris. Yes, on the cost per treatment in Q2, I did say that I knocked the cost increase down from 2% to 3% to 1% to 2%, and in light of what we're seeing in the fourth quarter, I think I would adjust that further in terms of our full year expectations on the cost per treatment probably being in the flat to plus 1% range. So you're taking note of the favorability that we have to earn in the U.S. on the cost side. And in terms of the change in allocating methodology, I commented on it only because when you're looking at just the -- you're actually correct, it makes no difference to the consolidated results. But when you're looking at only the International margins, any change we make with regard to how we allocate those costs around the world has an impact. So it's my way of explaining the change in margin, but it actually has absolutely no impact on the consolidated business worldwide.

Operator

The next question is from Oliver Reinberg, Cheuvreux.

Oliver Reinberg - CA Cheuvreux, Research Division

Yes, Oliver Reinberg from Cheuvreux. And I have 2 questions, plus one housekeeping. Firstly, I'd like to come back to the mix of commercial patients, how much of these are actually bundled and unbundled? I fully understand that you do not give any kind of color what the percentage is, but given the fact that there's now probably a meaning for all moving item, can you just give us any kind of idea of how many percentage points the mix of bundled contracts has actually increased? That would be helpful. And secondly, I think at the beginning of the year, you guided us to what's the kind of increase in minority charges to about $160 million. I think if we take Q3 as a run rate, we would probably only get half of this increase coming through. So probably we fall $25 million to $30 million short of that. Could you just give us an idea of how much of this kind of shortfall would probably initial conservatism and how much of this is the fact that the Liberty integration is somewhat behind schedule, in which we should actually consider some kind of increase among all these charges next year? And on the housekeeping briefly, Michael, can you just give us any kind of color from the refinancing, what would be the absolute impact on the interest cost on a 12 months basis in absolute dollar terms?

Benjamin J. Lipps

Rice, do you want to take the...

Robert Maurice Rice Powell

Yes. Oliver, it's Rice. On the mix of commercials and the bundling, I know I'm not going to make you happy. I'm probably not going to give you what you're looking for, unfortunately. Again, what I will take you back to is the comment that Mike made earlier. We had some big contracts. We've done those. Those are behind us now. We are comfortable with where we sit, but I'm not particularly comfortable giving you any more color than that. I apologize, but I think I'm going to hold it at that point.

Benjamin J. Lipps

Mike, you want to cover the other questions?

Michael Brosnan

Sure. Yes, Oliver. On the minority interest, you have a better memory than I do. I didn't remember the $160 million earlier in the year. But yes, with 3 -- with 9 months done, I think you're right. I think the minorities will come in a little bit better than that for the full year. And I think Q3 and -- or the 9-month date is probably a pretty reasonable guide for the full year. On the interest side, we'll provide more guidance when we do our -- or more transparency when we do our full year guidance for 2013. I think overall, we are very happy with our cost of money, and I think we've taken advantage of the market for the last couple of years to do most of our refinancing activity at very favorable rates. But I'll say more on that probably when I do my full year guidance with the year-end results.

Oliver Reinberg - CA Cheuvreux, Research Division

Okay. Can I just -- and coming back to the minorities, I mean the shortfall, is that mostly conservatism or is it the kind of delay of delivered integration? So would that actually be something that we have to be in mind for next year?

Michael Brosnan

Yes, it was just conservatism in the guidance. The fact that it's lower than the $160 million is, I think, good news.

Operator

The next question is from Veronika Dubajova, Goldman Sachs.

Veronika Dubajova - Goldman Sachs Group Inc., Research Division

I also want to start off by thanking Ben for guiding us over the past number of years and we wish you all the best for your retirement. We will miss you and, Rice, congratulations and we look forward to working with you. I have 2 questions, if I can. My first one is on the International same-store growth rate. And you've now seen meaningful deceleration here from 5.5%, 6%, if I look back at where you were tracking in '09, '10 to this quarter, 2%. And I understand that there are some onetime efforts or effects here that are driving that, but I'm just slightly puzzled and trying to think through this not just for 2012 or 2013, but really thinking about this trend on a 3- to 5-year view. What do you think is a realistic expectation for a same-store growth rate given the type of demographic trends that you are seeing? And also, what type of profitability impact might this have on your business if we do see this lower growth rate persist down in the medium term? And then my second question, and I appreciate, Mike, you might not be able to comment on this fully, but given that 2013 will be somewhat of a tough year in the U.S., we have the sequester coming in, we have the medical device tax and your business did benefit from some onetime gains this year on disposals, any guidance initially you can give us in terms of how we should be thinking about developments in cost lines across 2013?

Benjamin J. Lipps

Thank you. Look, this is Ben. I'll try to put more clarity on the same market growth in International. Yes, the 2%, as I mentioned, was clearly below the norm and there's no change in patient growth in these areas, so it's not something that we see is going to be permanent. And also, what we're looking at is around the 4% same market growth into the future. And right now, so a couple of countries are. They have room in their hospitals so the patients are going to their hospitals because it's all paid by the government. So this is a temporarily trend, long-term plan on the 4%, I think, same market growth...

Veronika Dubajova - Goldman Sachs Group Inc., Research Division

Ben, I was just going to quickly follow up because if I look historically, I mean this business used to grow 7%, 8%, 9% same market or 5% in '09 and '10. So is there a reason -- is the geographic mix changed or were those earlier years not good indications for underlying patient demand?

Benjamin J. Lipps

No, I think we have 2 metrics we're looking at. One of them is the same market growth and it was always in the 5% to 6% range in terms of if we're buying clinics or have clinics in the developing countries. And then there was the organic growth, which would have the revenue increase or additional services. And when we jumped up to a higher organic growth, which is revenue growth, that was when Portugal went to a bundle, and so we ended up with a 50% increase in reimbursement. And so the actual same market growth has been in the 5% to 6%, we believe, now because we are in all the countries, not just the developing countries, that a 4% is a better same market growth, okay? And so I don't think we've ever had a same market growth that high that I can remember. But we did have an organic growth because of some bundling in some countries, primarily Portugal.

Robert Maurice Rice Powell

Veronika, It's Rice. On guidance, let me try to give you a little bit of color, but I will preface it by saying, obviously, guidance for 2013 will be one of my first duties. We will plan to do that at the end of February as we give you full year results. We will be as transparent as we can be on that. Let me answer your question on sequestration and then on the device tax. If you look at it in terms of North America, we estimate that to be somewhere in the neighborhood of around $100 million to $105 million impact on us. The sequestration in and of itself is around $80 million to $85 million. And as I said to Ed, I told Ed the other day, we did see the device taxes around $20 million to $25 million. Now that's big numbers. Obviously, we don't know yet exactly how this will play out. It is the law of the land, so as we budget, we're planning on that. So that's the numbers that we're trying to work with. But if you put it in the context of a global company, the impact of sequestration is about 0.5% on our overall revenue. So we have to kind of look at it in 2 ways, but that's probably the best I can give you in terms of color at this point, is to how we see the impact and to let you know that at this point, it is the law of the land and so we are expecting that this will happen.

Operator

The next question is from Ingeborg Oie from Jefferies.

Ingeborg Øie - Jefferies & Company, Inc., Research Division

My first question is on the International margin and the developments which are going on internationally where it seems that governments are willing to listen to kind of increasing bundling and increasing numbers of services taken on by you, which could drive revenue growth but at lower margins. So should we expect the margins in the International segment actually to trend downwards and over time? And then my second question is on the $70 million renegotiation, well, up to $70 million renegotiation charge. Is this high number relating to any penalties for volumes that you have not used or is there another reason why the charge seems relatively high?

Benjamin J. Lipps

Mike, why don't you take [indiscernible] and Rice [indiscernible].

Michael Brosnan

Yes, and you'll forgive me, and I think I probably have the best excuse known to man. I'm not going to prognosticate with regard to the midterm on the International margins because we're in the middle of our CEO transition, so I'll take Rice up on his comment that we'll come back to you next year on that and leave it at that because we are -- obviously, we had a Capital Markets Day several years ago, so when you look at the natural cycle of things, probably at some point in '13, we'll also refresh our midterm guidance and you'll get some more transparency on that. And I'll pass it to Rice relative to the renegotiation.

Robert Maurice Rice Powell

Yes. Ingeborg, what I will tell you is that there are no penalties assessed. The deal that we struck was not put together in that way so there's not a penalty per se. I don't know that I can give you much more color on the size of the number. I will listen to your judgment that, that's a big number, I'll hold my comments on that, but we're not in a penalty phase. We are in what I would call a proactive and positive relationship renegotiation phase. If this thing were really not going well, I would tell you that, and that's not the case. But we're not in a penalty phase. We're trying to plan for the future and just re-craft the deal based off what's going on in the marketplace.

Operator

The next question comes from Mr. Martin Wales of UBS.

Martin Wales - UBS Investment Bank, Research Division

Two quick ones. Thinking about 2013, which I know you don't want to comment on, but obviously, we have to forecast it. As sure we'd be worried if 2012 is an artificially high base as a result of these payments from prior years or is it awash with the other impacts you've talked about? Secondly, coming back to this renegotiation charge...

Robert Maurice Rice Powell

Martin, can you repeat the question? We didn't get that actually. Sorry.

Martin Wales - UBS Investment Bank, Research Division

Sorry. Should we be concerned that we're looking at an artificially high base in 2012 as result of these special collections from prior years or does it wash with some of the other things you've talked about that impacted the year?

Michael Brosnan

I understand the questions. I think if I read these things together, I would say that with comments that Rice has made on sequestration and the device tax, '13 is going to be -- we'll have to look at it differently in terms of the starting point. And I'd actually chunk your question up to that level and say that '13 is going to have to be different because of all the things we're talking about. And we're being very open about it. If the sequestration happens, that's a pretty -- Rice, we're talking about some fairly large numbers.

Robert Maurice Rice Powell

Yes.

Martin Wales - UBS Investment Bank, Research Division

Okay. But that's -- actually, you can't exclude it because like you say, it's the law of the land. But I'm just trying to get a sense of the 2012 base ex-sequestration and the devices tax. Is it going to be -- is it artificially high because of these collections or not?

Michael Brosnan

No, I think -- I had said before that I probably answered it what I'm going to do, so I -- we'll come to this point. I appreciate every question I answer is going to lead to another question.

Martin Wales - UBS Investment Bank, Research Division

Okay. And just a very quick clarification on the $70 million or up to $70 million renegotiation charge. Just to be clear, that would all be cash?

Michael Brosnan

We -- actually, I think it's a safe assumption because it's a conservative one, but since we haven't finished the discussion, it's not entirely clear how that will manifest itself relative to cash or charge.

Robert Maurice Rice Powell

Yes, Martin, I think Mike's right. I really just want to stress to give you a little more color. We are in discussion as we are speaking. We have folks that are sitting down with our partner and meeting, and I will be part of those meetings in another day or so. So it's just too in the moment for us to give you much more guidance than what Mike just did.

Operator

The next question comes from Holger Blum of Deutsche Bank.

Holger Blum - Deutsche Bank AG, Research Division

Holger Blum from Deutsche. I want to start off with [indiscernible] a company to resolve to anything like that, but, Ben, in that specific case, I think thank you very much. Congratulate to your career at FMC, really impressive. Always been a pleasure working with you. So most of the questions are answered, maybe just a short one. What would the -- what are the hedging gains year-to-date in the first 9 months that you have booked?

Benjamin J. Lipps

Holger, while we're thinking about that, I want to thank you for the compliment and again, as I mentioned, we very much enjoy working with all the analysts. I don't know that Rice -- we're caucusing on your questions. We probably don't have an answer on that.

Michael Brosnan

No, it's -- I'm trying to think of the best way to answer your question, Holger. And I think we don't think of it as a pure hedging gain because in our International business, we actually use the currencies that we're hedging. So if you will, in the sense of if the folks in Asia are paying euros associated with some of the material they're procuring, we just sell the bill with the hedged currencies. So we're not capturing and calculating all these things in the context of a gain. From time to time, we do talk about the translation and the transaction effects of currency. And when I give guidance, I'm typically commenting on the fact that those naturally offset each other so you have a much lower impact on earnings than you do on revenues, for instance, when you look at the currency effects. So I don't have a year-to-date or reported number to give you, but typically, what you'd see it in is you'd see it in the transaction effects that we comment on from time to time as opposed to the translation. Appreciate that's not spot on for you, but we just don't think of it that way in the business because we're actually using the hedged currency to settle the obligation.

Benjamin J. Lipps

And that's primarily on the products side?

Michael Brosnan

Yes, yes, it's primarily products. And as we increase manufacture in each of the regions, that becomes less and less of a long-term issue, Holger. But that's -- potentially, that's what we do. Anything -- does that -- Holger, does that give you enough clarity? That helps you on that?

Robert Maurice Rice Powell

Close enough. [indiscernible]

Holger Blum - Deutsche Bank AG, Research Division

Yes, that's fine. Basically, a little about making the bridge from '12 from a fair base and headwinds, tailwinds, where we could end up then in '13. But I understand that it's, in summary, a bit too early for you to comment on that earnings bridge going into next year.

Operator

Mr. Maier, there are no further questions at this time. Please continue with any other points you wish to raise.

Oliver Maier

Okay, great. Thank you so much, everybody. All the comments about Fresenius Medical Care and the management are much appreciated. We really appreciate your support in working with you guys for the last 14 years. I guess, internally, we will have the pleasure to work with Ben since he's going to be the Honorary Chairman of the Supervisor Board, so, nevertheless, thank you so much and we are looking forward to talk to you next time actually when we announce the full year results. Thank you so much.

Benjamin J. Lipps

Thank you for your kind comments.

Operator

Ladies and gentlemen, this concludes the Fresenius Medical Care Earnings Conference Call. Thank you for participating. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Fresenius Medical Care AG & Co. KGAA Management Discusses Q3 2012 Results - Earnings Call Transcript
This Transcript
All Transcripts