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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 20-F

(Mark One)    

o

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

or

ý

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

or

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

or

o

 

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number 001-32749



FRESENIUS MEDICAL CARE AG & Co. KGaA
(Exact name of Registrant as specified in its charter)

FRESENIUS MEDICAL CARE AG & Co. KGaA
(Translation of Registrant's name into English)

Germany
(Jurisdiction of incorporation or organization)



Else-Kröner Strasse 1, 61352 Bad Homburg, Germany
(Address of principal executive offices)

Josef Dinger, +49 6172 608 2522, Josef.Dinger@FMC-AG.com,
Else-Kröner Strasse 1, 61352 Bad Homburg, Germany
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class   Name of each exchange on which registered
American Depositary Shares representing Ordinary Shares   New York Stock Exchange
Ordinary Shares, no par value   New York Stock Exchange(1)

(1)
Not for trading, but only in connection with the registration of American Depositary Shares representing such shares.

           Securities registered or to be registered pursuant to Section 12(g) of the Act: None

           Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: 67/8% Senior Notes due 2017

           Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:

Ordinary Shares, no par value: 305,314,120

           Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Security Act. ý Yes    o No

           If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. o Yes    ý No

           Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

           Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ý Yes    o No

           Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes    o No

           Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o

           Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

ý U.S. GAAP        o International Financial Reporting Standards as issued by        o Other
the International Accounting Standards Board

           If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

           o Item 17                o Item 18

           If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes                ý No

   


Table of Contents


TABLE OF CONTENTS

 
   
   
  Page  

INTRODUCTION

       

PART I

     

 

       

Item 1.

  N/A  

Identity of Directors, Senior Management and Advisors

    3  

Item 2.

  N/A  

Other Statistics and Expected Timetable

    3  

Item 3.

     

Key Information

    3  

Item 4.

     

Information on the Company

    15  

Item 4A.

  N/A  

Unresolved Staff Comments

    47  

Item 5.

     

Operating and Financial Review and Prospects

    47  

Item 6.

     

Directors, Senior Management and Employees

    82  

Item 7.

     

Major Shareholders and Related Party Transactions

    103  

Item 8.

     

Financial Information

    108  

Item 9.

     

The Offer and Listing Details

    109  

Item 10.

     

Additional Information

    111  

Item 11.

     

Quantitative and Qualitative Disclosures About Market Risk

    125  

Item 12.

     

Description of Securities other than Equity Securities

    129  

PART II

     

 

       

Item 13.

  N/A  

Defaults, Dividend Arrearages and Delinquencies

    131  

Item 14.

     

Material Modifications to the Rights of Security Holders and Use of Proceeds

    131  

Item 15A.

     

Disclosure Controls and Procedures

    131  

Item 15B.

     

Management's annual report on internal control over financial reporting

    131  

Item 15C.

     

Attestation report of the registered public accounting firm

    132  

Item 15D.

     

Changes in Internal Control over Financial Reporting

    132  

Item 16A.

     

Audit Committee Financial Expert

    132  

Item 16B.

     

Code of Ethics

    132  

Item 16C.

     

Principal Accountant Fees and Services

    133  

Item 16D.

  N/A  

Exemptions from the Listing Standards for Audit Committees

    134  

Item 16E.

     

Purchase of Equity Securities by the Issuer and Affiliated Purchaser

    134  

Item 16F.

  N/A  

Change in Registrant's Certifying Accountant

    134  

Item 16G.

     

Corporate Governance

    134  

PART III

     

 

       

Item 17.

  N/A  

Financial Statements

    143  

Item 18.

     

Financial Statements

    143  

Item 19.

     

Exhibits

    143  

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Certain Defined Terms

        In this report, (1) the "Company" refers to both Fresenius Medical Care AG prior to the transformation of legal form discussed in Item 4.A, "Information on the Company – History and Development of the Company – History" below and to Fresenius Medical Care AG & Co. KGaA after the transformation; (2) "we", "us" and "our" refer either to the Company or the Company and its subsidiaries on a consolidated basis both before and after the transformation, as the context requires; (3) "Fresenius Medical Care AG" and "FMC-AG" refer to the Company as a German stock corporation before the transformation of legal form and "FMC-AG & Co. KGaA" refer to the Company as a German partnership limited by shares after the transformation and (4) "FMCH" and "D-GmbH" refer, respectively, to Fresenius Medical Care Holdings, Inc., the holding company for our North American operations and to Fresenius Medical Care Deutschland GmbH, one of our German subsidiaries. In addition, "Fresenius SE" and "Fresenius SE & Co. KGaA" refer to Fresenius SE & Co. KGaA, a German partnership limited by shares resulting from the change of legal form of Fresenius SE (effective as of January 2011), a European Company (Societas Europaea) previously called Fresenius AG, a German stock corporation. Fresenius SE owns 100% of the share capital of our general partner and 94,380,382 of our ordinary shares as of February 19, 2016, 30.91% based on 305,314,120 outstanding shares, as reported herein. In this report, we use Fresenius SE to refer to that company as a partnership limited by shares, effective on and after January 28, 2011, as well as both before and after the conversion of Fresenius AG from a stock corporation into a European Company on July 13, 2007. The phrase "Fresenius SE and its subsidiaries" refers to Fresenius SE and all of the companies of the Fresenius SE group, other than FMC-AG & Co. KGaA and the subsidiaries of FMC-AG & Co. KGaA. Each of "Management AG", "FMC Management AG" and the "General Partner" refers to Fresenius Medical Care Management AG, FMC-AG & Co. KGaA's general partner and a wholly owned subsidiary of Fresenius SE. "Management Board" and "our Management Board" refer to the members of the management board of Management AG and, except as otherwise specified, "Supervisory Board" and "our Supervisory Board" refer to the supervisory board of FMC-AG & Co. KGaA. The term "North America Segment" refers to our North America operating segment; the term "EMEA Segment" refers to the Europe, Middle East and Africa operating segment, the term "Asia-Pacific Segment" refers to our Asia-Pacific operating segment, and the term "Latin America Segment" refers to our Latin America operating segment. The term "Corporate" includes certain headquarters' overhead charges, including accounting and finance, centrally managed production, asset management, quality management and procurement within our Global Manufacturing Operations and research and development. All references in this report to the notes to our financial statements are to the Notes to Consolidated Financial Statements included in this report.

Forward-looking Statements

        This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). When used in this report, the words "outlook," "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions are generally intended to identify forward looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated, and future events and actual results, financial and otherwise, could differ materially from those set forth in or contemplated by the forward-looking statements contained elsewhere in this report. We have based these forward-looking statements on current estimates and assumptions made to the best of our knowledge. By their nature, such forward-looking statements involve risks, uncertainties, assumptions and other factors which could cause actual results, including our financial condition and profitability, to differ materially positively or negatively relative to the results expressly or implicitly described in or suggested by these statements. Moreover, forward-looking estimates or predictions derived from third parties' studies or information may prove to be inaccurate. Consequently, we cannot give any assurance regarding the future accuracy of the opinions set forth in this report or the actual occurrence of the projected developments described herein. In addition, even if our future results meet the expectations expressed here, those results may not be indicative of our performance in future periods.

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        These risks, uncertainties, assumptions, and other factors that could cause actual results to differ from our projected results include, among others, the following:

    changes in governmental and commercial insurer reimbursement for our complete products and services portfolio, including the United States ("U.S.") Medicare reimbursement system for dialysis services;

    the outcome of government and internal investigations as well as litigation;

    risks relating to compliance with the government regulations applicable to our business including, in the U.S., the Anti-Kickback Statute, the False Claims Act, the Stark Law and the Foreign Corrupt Practices Act, the Food, Drug and Cosmetic Act and comparable regulatory regimes in many of the 120 countries in which we supply health care services and/or products;

    the influence of commercial insurers and managed care organizations;

    the impact of health care reforms;

    product liability risks;

    risks relating our ability to continue to make acquisitions;

    the impact of currency fluctuations;

    changes in utilization patterns for pharmaceuticals and in our costs of purchasing pharmaceuticals;

    introduction of generic or new pharmaceuticals that compete with our pharmaceutical products;

    changes in raw material and energy costs or the ability to procure raw materials;

    collectability of our receivables, which depends primarily on the financial stability and liquidity of our governmental and commercial payors;

    our ability to achieve cost savings in various health care risk management programs in which we participate or intend to participate; and

    the greater size, market power and experience of certain competitors in certain geographic regions and business lines.

        Important factors that could contribute to such differences are noted in Item 3D, "Key Information – Risk Factors" in Item 4, "Information on the Company," under "Business Overview," in Item 5, "Operating and Financial Review and Prospects" and in Note 19 of the Notes to Consolidated Financial Statements, "Commitments and Contingencies" included in this report.

        Our business is also subject to other risks and uncertainties that we describe from time to time in our public filings. Developments in any of these areas could cause our results to differ materially from the results that we or others have projected or may project.

        Our reported financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that are the basis of our financial statements. The actual accounting policies, the judgments made in the selection and application of these policies, and the sensitivities of reported results to changes in accounting policies, assumptions and estimates, are factors to be considered along with our financial statements and the discussion under "Results of Operations" in Item 5 below, "Operating and Financial Review and Prospects." For a discussion of our critical accounting policies, see Item 5, "Operating and Financial Review and Prospects – Critical Accounting Policies" below in this report.

Market and Industry Data

        Except as otherwise specified herein, all patient and market data in this report have been derived using our internal information tool called "Market & Competitor Survey" ("MCS"). See Item 4.B, "Information on the Company – Business Overview – Major Markets and Competitive Position."

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PART I

Item 1.    Identity of Directors, Senior Management and Advisors

        Not applicable

Item 2.    Other Statistics and Expected Timetable

        Not applicable

Item 3.    Key Information

A.    Selected Financial Data

        The following table summarizes the consolidated financial information for our business for each of the years 2015 through 2011. We derived the selected financial information from our consolidated financial statements. We prepared our financial statements in accordance with accounting principles generally accepted in the United States of America and KPMG AG Wirtschaftsprüfungsgesellschaft ("KPMG"), an independent registered public accounting firm, audited these financial statements. All American Depositary Share ("ADS") and per ADS data reflect the two-for-one split of the ADSs representing our ordinary shares and the ADSs representing our previously outstanding preference shares, which was effective December 3, 2012. As a result of the split of our ADSs, the ratio of each class of ADSs was changed from one ADS representing one share to two ADSs representing one share. (See Item 4.A, "Information on the Company – History and Development of the Company – History"). All per ADS amounts in the table have been restated to reflect the ADS splits. You should read this information together with our consolidated financial statements and the notes to those statements appearing elsewhere in this report and the information under Item 5, "Operating and Financial Review and Prospects."

 
  2015   2014   2013   2012   2011  
 
  (in millions except share and per share amounts)
 

Statement of Operations Data:

                               

Revenue(a)

 
$

16,738
 
$

15,832
 
$

14,610
 
$

13,800
 
$

12,570
 

Cost of revenues

    11,407     10,836     9,872     9,199     8,418  

Gross profit

    5,331     4,996     4,738     4,601     4,152  

Selling, general and administrative(b)

    2,895     2,644     2,382     2,187     1,997  

Research and development

    140     122     126     112     111  

Income from equity method investees

    (31 )   (25 )   (26 )   (17 )   (31 )

Other operating expenses

                100      

Operating income

    2,327     2,255     2,256     2,219     2,075  

Investment gain

                140      

Interest expense, net

    391     411     409     426     297  

Income before income taxes

    1,936     1,844     1,847     1,933     1,778  

Net income attributable to shareholders of FMC-AG & Co. KGaA

  $ 1,029   $ 1,045   $ 1,110   $ 1,187   $ 1,071  

Weighted average ordinary shares outstanding

    304,440,184     302,339,124     301,877,304     301,139,652     299,012,744  

Basic earnings per Ordinary share

 
$

3.38
 
$

3.46
 
$

3.65
 
$

3.89
 
$

3.54
 

Basic earnings per Ordinary ADS(c)

   
1.69
   
1.73
   
1.83
   
1.94
   
1.77
 

Fully diluted earnings per Ordinary share

    3.38     3.45     3.65     3.87     3.51  

Fully diluted earnings per Ordinary ADS(c)

    1.69     1.73     1.83     1.93     1.75  

Dividends declared and paid per Ordinary share (€)(d)

   
0.78
   
0.77
   
0.75
   
0.69
   
0.65
 

Dividends declared and paid per Ordinary share ($)(d)

    0.87     0.93     1.03     0.89     0.93  

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  2015   2014   2013   2012   2011  
 
  (in millions except share and per share amounts)
 

Balance Sheet Data at December 31:

                               

Working capital

  $ 2,799   $ 3,247   $ 2,733   $ 2,957   $ 1,432  

Total assets

    25,533     25,381     23,054     22,249     19,473  

Total long-term debt (excluding current portion)           

    7,853     9,014     7,681     7,709     5,435  

Shareholders' equity

    10,496     10,028     9,485     9,207     8,061  

Capital Stock – Preference shares – Nominal Value(e)

   
   
   
   
4
   
4
 

Capital Stock – Ordinary shares – Nominal Value

    387     385     382     375     372  

(a)
The provision for bad debts relating to health care services which we presented as an operating expense before 2012 has been reclassified to a deduction from patient service revenue in accordance with US GAAP.

(b)
Included in Selling, general and administrative are gains on the sale of dialysis clinics in the amount of $1, $9, $36 and $5 for 2014, 2013, 2012 and 2011, respectively.

(c)
Basic earnings per Ordinary ADS and fully diluted earnings per Ordinary ADS have been restated to reflect a two-for-one split of our Ordinary ADSs outstanding effected on December 3, 2012, which changed the ratio from one ADSs representing one share to two ADSs representing one share.

(d)
Amounts shown for each year from 2015 to 2011 represent dividends declared and paid in each such year with respect to our operations in the year preceding payment. Our General Partner's Management Board has proposed dividends with respect to our operations in 2015 of €0.80 per Ordinary share . These dividends are subject to approval by our shareholders at our Annual General Meeting ("AGM") to be held on May 12, 2016.

(e)
As of June 28, 2013 all preference shares for capital stock were converted into ordinary shares. As of December 31, 2015 only one class of shares exists.

        We conduct our business on a global basis in various currencies, although our operations are located principally in the United States ("U.S") and Germany. We prepare our consolidated financial statements, from which we derived the selected financial data above, utilizing the U.S. dollar as our reporting currency. We have converted the balance sheets of our non-U.S. dollar denominated operations into U.S. dollars at the exchange rates prevailing at the balance sheet date. Revenues and expenses are translated at the average exchange rates for the respective period, as shown. For information regarding the exchange rates used in preparing our consolidated financial statements, see Item 11, "Quantitative and Qualitative Disclosures About Market Risk – Management of Foreign Exchange and Interest Rate Risks – Foreign Exchange Risks."

D.    Risk Factors

        Before you invest in our securities, you should be aware that the occurrence of any of the events described in the following risk factors or elsewhere in this report, and other events that we have not predicted or assessed could have a material adverse effect on our results of operations, financial condition and business. If the events described below or other unpredicted events occur, then the trading price of our securities could decline and you may lose all or part of your investment.

Risks Relating to Regulatory Matters.

A change in U.S. government reimbursement for dialysis care could materially decrease our revenues and operating profit.

        For the year ended December 31, 2015, approximately 32% of our consolidated revenues resulted from Medicare and Medicaid reimbursement. Legislative changes or changes in government reimbursement practice may affect the reimbursement rates for the services we provide, as well as the scope of Medicare and Medicaid coverage. A decrease in Medicare or Medicaid reimbursement rates or covered services could have a material adverse effect on our business, financial condition and results of operations. For further information regarding Medicare and Medicaid reimbursement, see Item 4B, "Information on the Company – Business Overview – Regulatory and Legal Matters – Reimbursement" and Item 5, "Operating and Financial Review and Prospects – Overview."

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If we do not comply with the many governmental regulations applicable to our business, we could be excluded from government healthcare reimbursement programs or our authority to conduct business could be terminated, either of which would result in a material decrease in our revenue.

        Our operations in both our health care services business and our products business are subject to extensive governmental regulation in virtually every country in which we operate. We are also subject to other laws of general applicability, including antitrust laws. The applicable regulations, which differ from country to country, cover areas that include:

    the quality, safety and efficacy of medical and pharmaceutical products and supplies;

    the operation of manufacturing facilities, laboratories and dialysis clinics;

    product labeling, advertising and other promotion;

    accurate reporting and billing for government and third-party reimbursement;

    the discounting of reimbursed drug and medical device products and the reporting of drug prices to government authorities;

    the collection, dissemination, access, use, security and privacy of protected health information; and

    compensation of medical directors and other financial arrangements with physicians and other referral sources.

        Failure to comply with one or more of these laws or regulations may give rise to a number of legal consequences. These include, in particular, loss or suspension of federal certifications, loss or suspension of licenses under the laws of any state or governmental authority from which we generate substantial revenues, monetary and administrative penalties, increased costs for compliance with government orders, complete or partial exclusion from government reimbursement programs, refunds of payments received from government payors and government health care program beneficiaries due to failures to meet applicable requirements or complete or partial curtailment of our authority to conduct business. Any of these consequences could have a material adverse impact on our business, financial condition and results of operations.

        The Company's medical devices and drug products are subject to detailed, rigorous and frequently changing regulation by the U.S. Food and Drug Administration ("FDA"), and numerous other national, supranational, federal and state authorities. These regulations apply to, among other things, product approvals, manufacturing practices, product labeling and promotion, quality control, quality assurance, and post-marketing safety reporting, including adverse event reporting and reporting of certain field actions. We cannot assure that all necessary regulatory approvals for new products or product improvements will be granted on a timely basis or at all. In addition, the Company's facilities and procedures and those of its suppliers are subject to periodic inspection by the FDA and other regulatory authorities. The FDA and comparable regulatory authorities outside the U.S. may suspend, revoke, or adversely amend the authority necessary for manufacture, marketing, or sale of our products and those of our suppliers. The Company and its suppliers must incur expense and spend time and effort to ensure compliance with these complex regulations, and if such compliance is not maintained, they could be subject to significant adverse administrative and judicial enforcement actions in the future. These possible enforcement actions could include warning letters, injunctions, civil penalties, seizures of the Company's products, and criminal prosecutions as well as dissemination of information to the public about such enforcement actions. These actions could result in, among other things, substantial modifications to the Company's business practices and operations; refunds; a total or partial shutdown of production while the alleged violation is remedied; and withdrawals or suspensions of current products from the market. Any of these events, in combination or alone, could disrupt the Company's business and have a material adverse effect on the Company's business, financial condition and results of operations. For a discussion of open FDA warning letters, see "Regulatory and Legal Matters – FDA Warning Letters."

        We rely upon the Company's management structure, regulatory and legal resources and the effective operation of our compliance programs to direct, manage and monitor our operations to comply with government regulations. If employees were to deliberately, recklessly or inadvertently fail to adhere to these regulations, then our authority to conduct business could be terminated and our operations could be significantly curtailed. Any such terminations or reductions could materially reduce our sales. If we fail to identify in our diligence process or to promptly remediate any non-compliant business practices in

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companies that we acquire, we could be subject to penalties, claims for repayment or other sanctions. Any such terminations or reductions could materially reduce our sales, with a resulting material adverse effect on our business, financial condition and results of operations.

        By virtue of this regulatory environment, our business activities and practices are subject to extensive review by regulatory authorities and private parties, and continuing audits, subpoenas, other inquiries, claims and litigation relating to the Company's compliance with applicable laws and regulations. We may not always be aware that an inquiry or action has begun, particularly in the case of "qui tam" or "whistle blower" actions brought by private plaintiffs under the False Claims Act, which are initially filed under seal. We are the subject of a number of governmental inquiries and civil suits by the federal government and private plaintiffs. For information about certain of these pending investigations and lawsuits, see Note 19 of the Notes to our Consolidated Financial Statements, "Commitments and Contingencies – Other Litigation and Potential Exposures," included in this report.

If we are unable to protect our information technology security systems against cybersecurity attacks or prevent other privacy or data security incidents that result in security breaches that disrupt our operations or result in the unintended dissemination of sensitive personal information or proprietary or confidential information, we could be exposed to significant regulatory fines or penalties, liability or reputational damage, or experience a material adverse effect on our results of operations, financial position, and cash flows.

        We routinely process, store and transmit large amounts of data in our operations, including sensitive personal information as well as proprietary or confidential information relating to our business or third-parties. We may be subject to breaches of the information technology security systems we use.

        A cybersecurity attack may penetrate our security controls and misappropriate or compromise sensitive personal information or proprietary or confidential information, create system disruptions, cause shutdowns, or deploy viruses, worms, and other malicious software programs that attack our systems. Any failure to keep our information technology systems and our patients' and customers' sensitive information secure from attack, damage, loss or unauthorized disclosure or access, whether as a result of our action or inaction or that of our business associates or vendors, could adversely affect our reputation and operations and also expose us to mandatory public disclosure requirements, litigation and governmental enforcement proceedings, material fines, penalties and/or remediation costs, and compensatory, special, punitive and statutory damages, consent orders and other adverse actions, any of which could adversely affect our business, results of operations, financial condition or liquidity.

        As we increase the amount of personal information that we store and share digitally, our exposure to these data security and related cybersecurity risks increases, including the risk of undetected attacks, damage, loss or unauthorized disclosure or access, and the cost of attempting to protect against these risks also increases. We have implemented security technologies, processes and procedures to protect our confidential data; however, there are no assurances that such measures will be effective against all types of breaches.

We operate in many different jurisdictions and we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-corruption laws.

        The U.S. Foreign Corrupt Practices Act ("FCPA") and similar worldwide anti-corruption laws generally prohibit companies and their intermediaries from making improper payments to public officials for the purpose of obtaining or retaining business. Our internal policies mandate compliance with these anti-corruption laws. We operate many facilities throughout the United States and other parts of the world. Our decentralized system has thousands of persons employed by many affiliated companies, and we rely on our management structure, regulatory and legal resources and effective operation of our compliance program to direct, manage and monitor the activities of these employees. Despite our training, oversight and compliance programs, we cannot assure you that our internal control policies and procedures always will protect us from deliberate, reckless or inadvertent acts of our employees or agents that contravene the Company's compliance policies or violate applicable laws. Our continued expansion, including in developing countries, could increase the risk of such violations in the future. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operations or financial condition. The Company has received communications alleging conduct in countries outside the U.S. and Germany that may violate the FCPA or other anti-bribery laws. The Audit and Corporate Governance Committee of the Company's Supervisory Board is conducting investigations with the assistance of independent counsel. The Company voluntarily advised the U.S.

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Securities and Exchange Commission ("SEC") and the U.S. Department of Justice ("DOJ"). The Company's investigations and dialogue with the SEC and DOJ are ongoing. The Company has received a subpoena from the SEC requesting additional documents and a request from the DOJ for copies of the documents provided to the SEC. The Company is cooperating with the requests. Conduct has been identified that may result in monetary penalties or other sanctions under the FCPA or other anti-bribery laws. In addition, the Company's ability to conduct business in certain jurisdictions could be negatively impacted. The Company has previously recorded a non-material accrual for an identified matter. Given the current status of the investigations and remediation activities, the Company cannot reasonably estimate the range of possible loss that may result from identified matters or from the final outcome of the investigations or remediation activities. See "Item 15B. Management's annual report on internal control over financial reporting" and Note 19 of the Notes to our Consolidated Financial Statements, "Commitments and Contingencies – Other Litigation and Potential Exposures," included in this report.

If our joint ventures violate the law, our business could be adversely affected.

        A number of the dialysis clinics and health care centers that we operate are owned, or managed, by joint ventures in which one or more hospitals, physicians or physician practice groups hold an interest. Physician owners, who are usually nephrologists, or dialysis clinics may also provide medical director services and physician owners may refer patients to those centers or other centers we own and operate or to other physicians who refer patients to those centers or other centers we own and operate. Because our relationships with physicians are governed by the federal and state anti-kickback statutes, we have structured our joint venture arrangements to comply with many of the criteria for safe harbor protection under the U.S. Federal Anti- Kickback Statute; however, our investments in these joint venture arrangements do not satisfy all elements of such safe harbor. While we have established comprehensive compliance policies, procedures and programs to ensure ethical and compliant joint venture business operations, if one or more of our joint ventures were found to be in violation of the Anti-Kickback Statute, the Stark Law or other similar laws worldwide, we could be required to restructure or terminate them. We also could be required to repay to Medicare amounts received by the joint ventures pursuant to any prohibited referrals, and we could be subject to criminal and monetary penalties and exclusion from Medicare, Medicaid and other U.S. federal and state healthcare programs. Imposition of any of these penalties could have a material adverse effect on our business, financial condition and results of operations. In 2015, we received subpoenas from the U.S. Attorneys for Colorado and New York requesting information pertaining to certain of our joint venture dialysis facilities. See Note 19 of the Notes to our Consolidated Financial Statements, "Commitments and Contingencies – Other Litigation and Potential Exposures," included in this report

Proposals for healthcare reform, or relating to regulatory approvals, could decrease our revenues and operating profit.

        Many of the countries in which we operate have been considering proposals to modify their current healthcare systems to improve access to health care and to control costs. Policymakers in the U.S. and elsewhere are also considering reforms that could change the methodology used to reimburse providers of health care services. As a result of the Budget Control Act of 2011 ("BCA") and subsequent activity in Congress, a $1.2 trillion sequester (across-the-board spending cuts) in discretionary programs took effect on March 1, 2013 and is expected to continue through mid-2024. In particular, a 2% reduction to Medicare payments took effect on April 1, 2013 which continues in force. Any decrease in spending or other significant changes in state funding in countries in which we operate, particularly significant changes in the U.S. Medicare and Medicaid programs, could reduce our sales and profitability and have a material adverse effect on our business, financial condition and results of operations.

        See Item 4, "Information on the Company – Business Overview – Regulatory and Legal Matters – Reimbursement" and "– Healthcare reform:" and Item 5, "Operating and Financial Review and Prospects – Financial Condition and Results of Operations – Overview" for information regarding the impact of the Medicare end stage renal disease ("ESRD") prospective payment system ("ESRD PPS") on our business, our efforts to mitigate some of its effects, and the anticipated effects of the Patient Protection and Affordable Care Act ("ACA") and other legislation on our business, as well as additional information regarding the legislation and other matters discussed above.

        In addition, there may be future legislative or regulatory changes that affect FDA procedures or decision-making for approving medical device or drug products. Any such legislation or regulations, if enacted or promulgated, could result in a delay or denial of regulatory approval for our products. If any of

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our products do not receive regulatory approval, or there is a delay in obtaining approval, this also could have a material adverse effect on our business, financial condition and results of operations.

        In the United States, the ACA authorized state and federal health care exchanges to provide greater access to private health insurance coverage. These exchanges went into effect in 2014, and it is not yet known how the insurance coverage available through the exchanges will impact reimbursement for health care services, if at all. There can be no assurance that we can achieve future price increases from private insurers and managed care organizations offering coverage through the federal and state health care exchanges that are comparable to those we have historically received. In addition, consolidation among private insurers may have an adverse impact on our ability to negotiate commercially reasonable rates with such insurers. Any reductions in reimbursement from private insurers and managed care organizations could materially and adversely impact our operating results.

        Moreover, further changes in the U.S. healthcare reforms may be debated by Congress. Whether significant changes in policy will result is unknown. Changes, if any, that may result from these events could, depending on the details, have positive or adverse effects, possibly material, on our businesses and results of operations. Any significant healthcare reforms that substantially change the financing and regulation of the healthcare industry in countries in which we operate could reduce our sales and profitability and have a material adverse effect on our business, financial condition and results of operations.

Risks Relating to Our Business

A significant portion of our North America Segment profits is dependent on the services we provide to a minority of our patients who are covered by private insurance.

        Government reimbursement programs generally pay less than private insurance. Medicare pays us only 80% of the Medicare allowable amount (the patient, Medicaid or secondary insurance being responsible for the remaining 20%), and Medicaid rates are comparable. As a result, the payments we receive from private payors generate a substantial portion of the profits we report. We derived 32% of our worldwide revenue from Medicare and Medicaid. In 2015, approximately 35% of our consolidated Health Care revenues were attributable to private payors in the North America Segment. Therefore, if the private payors in the North America Segment reduce their payments for our services, or if we experience a material shift in our revenue mix toward Medicare or Medicaid reimbursement, then our revenue, cash flow and earnings would materially decrease.

        Over the last few years, we have generally been able to implement modest annual price increases for private insurers and managed care organizations, but government reimbursement has remained flat or has been increased at rates below typical consumer price index ("CPI") increases. There can be no assurance that we can achieve future price increases from private insurers and managed care organizations comparable to those we have historically received. With increased governmental reform and regulatory activity, reimbursement from private insurers may be subject to downward pressure in the coming years. The advent of the federal and state health care exchanges may also negatively impact reimbursement from private insurance. Any reductions in reimbursement from private insurers and managed care organizations could materially and adversely impact our operating results. Any reduction in our ability to attract private pay patients to utilize our health care services relative to historical levels could adversely impact our operating results. Any of the following events, among others, could have a material adverse effect on our operating results:

    a portion of our business that is currently reimbursed by private insurers or hospitals may become reimbursed by managed care organizations, which generally have lower rates for our services; or

    a portion of our business that is currently reimbursed by private insurers at rates based on our billed charges may become reimbursed under contracts at lower rates.

The utilization of ESAs could materially impact our operating profit. An interruption of supply or our inability to obtain satisfactory terms for ESAs could reduce our operating profit.

        Erythropoietin stimulating agents, or ESAs, are manufactured for sale in the U.S. by Amgen Inc., under the brand names Epogen® (epoeitin alfa) and Aranesp® (darbepoetin alfa) and Hoffmann-La Roche under the brand name Mircera®. Our current non-exclusive ESA sourcing and supply contract with Amgen covers the period from January 1, 2016 to December 31, 2018. Additionally, our current exclusive supply agreement for Mircera® from 2015 continues through December 31, 2018.

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        Any of the following developments could materially adversely affect our business, financial condition and results of operations: (i) a reduction of the current overfill amount in ESA vials that we currently use (liquid medications, including certain ESAs in vial containers, typically include a small overfill amount to ensure that the fill volume can be extracted from the vial as administered to the patient), (ii) an interruption of supply of ESAs, or (iii) material increases in the utilization of ESAs.

If we fail to estimate, price for and manage our medical costs in an effective manner, the profitability of our value-based products and services could decline and could materially and adversely affect our results of operations, financial position and cash flows.

        Through our value-based agreements and health insurance products, we assume the risk of both medical and administrative costs for certain patients in return for fixed periodic payments from governmental and commercial insurers. We currently participate in various value-based programs, including (i) CMS's Bundled Payments for Care Improvement (BPCI) program and Comprehensive ESRD Care initiative, (ii) Medicare Advantage chronic special needs plans and (iii) capitation agreements with commercial insurers in which FMCH receives a fixed fee to cover all or a defined portion of the medical costs of a defined population of patients. See Item 4, "Information on the Company – Business Overview" for additional information.

    The Bundled Payments for Care Improvement initiative ("BPCI") is a CMS three-year pilot initiative with bundled payments for the individual services furnished to Medicare beneficiaries during a single episode of illness or course of treatment, including acute inpatient hospital services, physician services, and post-acute services. Our majority-owned subsidiary, Sound Inpatient Physicians, Inc. ("Sound") commenced participation under BPCI in April 2015 in several markets. Under the BPCI, we have the ability to receive additional payments if we are able to deliver quality care at a cost that is lower than certain established benchmarks, but also have the risk of incurring financial penalties if we are not successful in doing so. Should we fail to perform as required under the BPCI initiative and our agreement with CMS, CMS may, among other remedies, terminate our right to participate in the BPCI program, in whole or in part.

    Under CMS's new Comprehensive ESRD Care Model ("the Model"), dialysis providers and physicians can form entities known as ESRD Seamless Care Organizations, or "ESCOs," as part of a new payment and care delivery model that seeks to deliver better health outcomes for ESRD patients while lowering CMS's costs. ESCOs that achieve the program's minimum quality thresholds and generate reductions in CMS's cost of care above certain thresholds for the ESRD patients covered by the ESCO will receive a share of the cost savings. ESCOs that include dialysis chains with more than 200 facilities are required to share in the risk of cost increases and reimburse CMS a share of any such increases. The Model commenced on October 1, 2015 with 13 ESCOs across the country, six of which were organized with our dialysis facilities. The initial agreement period for the Model lasts through 2018. CMS and each ESCO then have the option of extending this agreement for an additional two years based on the ESCO's performance.

    We are providing Medicare Advantage ESRD Chronic Conditions Special Needs Plan ("MA-CSNP") products in three states as of January 1, 2016. MA-CSNPs are Medicare health plans offered by private companies that contract with Medicare to provide patients with Medicare benefits. Membership is limited to special needs individuals with specific severe or disabling chronic conditions such as ESRD. MA-CSNPs focus on improving the coordination of care by monitoring health status, managing chronic diseases, avoiding inappropriate hospitalizations and helping beneficiaries manage their condition more effectively on the care continuum. As a MA-CSNP, we will provide health care services and receive set payments from CMS for the complete care of ESRD patients who have enrolled in our MA-CSNP. For each MA-CSNP, we manage medical costs through underwriting criteria, product design, negotiation of favorable provider contracts and care management programs. Total medical costs are affected by the number of individual services rendered, the cost of each service and the type of service rendered. Our revenue on Medicare Advantage policies is based on CMS's premiums set for ESRD beneficiaries, based on the average cost of similar beneficiaries in the Medicare program. The benefits, and projected medical costs, of these plans are submitted to CMS in June the year before the contract year ("Bid"). Although we base the premiums we charge and our Bids on our estimates of future medical costs over the fixed contract period, many factors may cause actual costs to exceed those estimated and reflected in premiums or Bids. These factors may include medical cost inflation, increased use of services, increased cost of individual services, natural

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      catastrophes or other large-scale medical emergencies, epidemics, the introduction of new or costly drugs, treatments and technology, new mandated benefits (such as the expansion of essential benefits coverage) or other regulatory changes and insured population characteristics. Failure to adequately price our products or estimate the costs of providing benefits to our beneficiaries, or effectively manage our operating expenses, may result in a material adverse effect on our results of operations, financial position, and cash flows. There is also the possibility that Medicare Advantage Special Needs plans will not be re-authorized by Congress. Without Congressional action, these plans will expire on December 31, 2018. If the Special Needs plans are not re-authorized, our insurance business financial results could be materially and adversely impacted.

    We have also entered into sub-capitation and other shared savings arrangements with certain payors to provide care to Medicare Advantage ESRD patients. Under these arrangements, a baseline per patient per month amount is established. If we provide complete care for less than the baseline, we retain the difference. If the cost of complete care exceeds the baseline, we owe the payor the difference.

        The reserves that we establish for health insurance policy benefits and other contractual rights and benefits are based upon assumptions and judgments concerning a number of factors, including trends in health care costs, expenses, general economic conditions and other factors. To the extent the actual claims experience is less favorable than estimated based on our underlying assumptions, our incurred losses would increase and future earnings could be adversely affected.

        Our profitability is dependent in part upon our ability to contract on favorable terms with hospitals, physicians and other health care providers. The failure to maintain or to secure cost-effective health care provider contracts may result in a loss of beneficiaries or higher medical costs, which could adversely affect our business.

We are exposed to product liability, patent infringement and other claims which could result in significant costs and liability which we may not be able to insure on acceptable terms in the future.

        Healthcare companies are typically subject to claims alleging negligence, product liability, breach of warranty, malpractice and other legal theories that may involve large claims and significant defense costs whether or not liability is ultimately imposed. Healthcare products may also be subject to recalls and patent infringement claims which, in addition to monetary penalties, may restrict our ability to sell or use our products. We cannot assure that such claims will not be asserted against us; for example, that significant adverse verdicts will not be reached against us for patent infringements or that large scale recalls of our products will not become necessary. In addition, the laws of some of the countries in which we operate provide legal rights to users of pharmaceutical products that could increase the risk of product liability claims. Product liability and patent infringement claims, other actions for negligence or breach of contract and product recalls or related sanctions could result in significant costs. These costs could have a material adverse effect on our business, financial condition and results of operations. See Note 19 of the Notes to Consolidated Financial Statements, "Commitments and Contingencies," included in this report.

        While we have been able to obtain liability insurance in the past to partially cover our business risks, we cannot assure that such insurance will be available in the future either on acceptable terms or at all. In addition, FMCH, our largest subsidiary, is partially self-insured for professional, product and general liability, auto liability and worker's compensation claims, up to pre-determined levels above which our third-party insurance applies. A successful claim in excess of the limits of our insurance coverage could have a material adverse effect on our business, results of operations and financial condition. Liability claims, regardless of their merit or eventual outcome, also may have a material adverse effect on our business and reputation, which could in turn reduce our sales and profitability.

Our growth depends, in part, on our ability to continue to make acquisitions.

        The healthcare industry has experienced significant consolidation in recent years, particularly in the dialysis services sector. Our ability to make future acquisitions depends, in part, on our available financial resources and could be limited by restrictions imposed by the United States or other countries' competition laws or under our credit documents. If we make future acquisitions, we may need to incur additional debt or assume significant liabilities, either of which might increase our financial leverage and cause the prices of our debt securities to decline. In addition, any financing that we might need for future acquisitions might be available to us only on terms that restrict our business. Acquisitions that we complete are also

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subject to risks relating to, among other matters, integration of the acquired businesses (including combining the acquired company's infrastructure and management information systems with ours, harmonization of its marketing, patient service and logistical procedures with ours and, potentially, reconciling divergent corporate and management cultures), possible non-realization of anticipated synergies from the combination, potential loss of key personnel or customers of the acquired companies, and the risk of assuming unknown liabilities not disclosed by the seller or not uncovered during due diligence. If we are not able to effect acquisitions on reasonable terms, there could be an adverse effect on our business, financial condition and results of operations.

        We also compete with other health care companies in seeking suitable acquisition targets. The continuing consolidation of dialysis providers and combinations of dialysis providers with dialysis product manufacturers and other consolidation in the health care industry generally could affect future growth, including growth of our product sales. If we are not able to continue to effect acquisitions on reasonable terms, especially in the international area, this could have an adverse effect on our business, financial condition and results of operations.

We face specific risks from international operations.

        We operate dialysis clinics in more than 45 countries and sell a range of products and services to customers in more than 120 countries. Our international operations are subject to a number of risks, including but not limited to the following:

    the economic situation in certain countries could deteriorate;

    fluctuations in exchange rates could adversely affect profitability;

    we could face difficulties in enforcing and collecting accounts receivable under some countries' legal systems;

    we could be negatively impacted by the ability of certain countries to service their sovereign debt obligations;

    local regulations could restrict our ability to obtain a direct ownership interest in dialysis clinics or other operations;

    political, social or economic instability, especially in developing and newly industrializing countries, could disrupt our operations;

    some customers and governments could increase their payment cycles, with resulting adverse effects on our cash flow;

    some countries could impose additional or higher taxes or fees or restrict the import of our products;

    we could fail to receive or could lose required licenses, certifications or other regulatory approvals for the operation of subsidiaries or dialysis clinics, sale of products and services or acquisitions;

    civil unrest, turmoil, or outbreak of disease in one or more countries in which we have material operations or material product revenue;

    differing labor regulations and difficulty in staffing and managing geographically widespread operations;

    different or less robust regulatory regimes controlling the protection of our intellectual property; and

    transportation delays or interruptions.

        International growth and expansion into emerging markets could cause us difficulty due to greater regulatory barriers than in the United States or Western Europe, the necessity of adapting to new regulatory systems, and problems related to entering new markets with different economic, social, legal and political systems and conditions. For example, unstable political conditions or civil unrest could negatively impact our operations and sales in a region or our ability to collect receivables or reimbursements or operate or execute projects in a region.

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        Any one or more of these or other factors could increase our costs, reduce our revenues, or disrupt our operations, with possible material adverse effects on our business, financial condition and results of operations.

We could be adversely affected if we experience shortages of components or material price increases from our suppliers.

        Our purchasing strategy is aimed at developing partnerships with strategic suppliers through long-term contracts and at the same time ensuring, where reasonably practicable, that it has at least two sources for all supply and price-critical primary products (dual sourcing, multiple sourcing). To prevent loss of suppliers, we monitor our supplier relationships on a regular basis. Suppliers which are integral to our procurement functions are subject to performance and risk analyses. Through constant market analyses, a demands-based design of supplier relationships and contracts, as well as the use of financial instruments, we seek to mitigate disruptive component shortages and potential price increases. If the Company is unable to counteract the risk of bottleneck situations at times of limited availability of components and other materials in spite of its purchasing strategy in combination with ongoing monitoring of market developments, this could result in delays in production and hence have an adverse effect on the Company's results of operations. Similarly, material price increases by suppliers could also adversely affect the Company's result of operations.

If physicians and other referral sources cease referring patients to our health care service businesses and clinics or cease purchasing or prescribing our products, our revenues would decrease.

        In providing services within our health care business, we depend upon patients choosing our health care facilities as the location for their care. Patients may select a clinic based, in whole or in part, on the recommendation of their physician. We believe that physicians and other clinicians typically consider a number of factors when recommending a particular dialysis facility, pharmacy, physician practice, vascular surgery center or urgent care center to an ESRD patient, including, but not limited to, the quality of care at a clinic, the competency of a clinic's staff, convenient scheduling, and a clinic's location and physical condition. Physicians may change their facility recommendations at any time, which may result in the movement of new or existing patients to competing clinics, including clinics established by the physicians themselves. At most of our clinics, a relatively small number of physicians often account for the referral of all or a significant portion of the patient base. Our dialysis business also depends on recommendations by hospitals, managed care plans and other healthcare institutions. If a significant number of physicians, hospitals or other healthcare institutions cease referring their patients to our clinics; this would reduce our health care revenue and could materially adversely affect our overall operations.

        The decision to purchase or prescribe our dialysis products and other services or competing dialysis products and other services will be made in some instances by medical directors and other referring physicians at our dialysis clinics and by the managing medical personnel and referring physicians at other dialysis clinics, subject to applicable regulatory requirements. A decline in physician recommendations or recommendations from other sources for purchases of our products or ancillary services would reduce our dialysis product and other services revenue, and would materially adversely affect our business, financial condition and results of operations.

Our pharmaceutical product business could lose sales to generic drug manufacturers or new branded drugs.

        Our branded pharmaceutical product business is subject to significant risk as a result of competition from manufacturers of generic drugs and other new competing medicines or therapies. Any of the expiration or loss of patent protection for one of our products, the "at-risk" launch by a generic manufacturer of a generic version of one of our branded pharmaceutical products or the launch of new branded drugs that compete with one or more of our products could result in the loss of a major portion of sales of that branded pharmaceutical product in a very short time period, which could materially and adversely affect our business, financial condition and results of operations.

Our competitors could develop superior technology or otherwise impact our sales.

        We face numerous competitors in both our health care services business and our dialysis products business, some of which may possess substantial financial, marketing or research and development resources. Competition and especially new competitive developments could materially adversely affect the future pricing and sale of our products and services. In particular, technological innovation has historically

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been a significant competitive factor in the dialysis products business. The introduction of new products by competitors could render one or more of our products or services less competitive or even obsolete.

Global economic conditions as well as further disruptions in financial markets may have an adverse effect on our businesses.

        Although there has been some improvement in the global economy and financial markets since the market deterioration of the global economy and tightening of the financial markets in 2008 and 2009, the overall global economic outlook remains uncertain and current economic conditions could adversely affect our business and our profitability. Among other things, the potential decline in federal and state revenues that may result from such conditions may create additional pressures to contain or reduce reimbursements for our services from public payors around the world, including Medicare, Medicaid in the United States and other government sponsored programs in the United States and other countries around the world.

        Job losses or slow improvement in the unemployment rate in the United States may result in a smaller percentage of our patients being covered by an employer group health plan and a larger percentage being covered by lower paying Medicare and Medicaid programs. Employers and individuals who obtain insurance through exchanges established under the ACA might also begin to select more restrictive commercial plans with lower reimbursement rates. To the extent that payors are negatively impacted by a decline in the economy, we may experience further pressure on commercial rates, a further slowdown in collections and a reduction in the amounts we expect to collect.

        We depend on the financial markets for access to capital, as do our renal product customers and commercial healthcare insurers. Limited or expensive access to capital could make it more difficult for these customers to do business with us, or to do business generally, which could adversely affect our businesses. In addition, uncertainty in the financial markets could adversely affect the variable interest rates payable under our credit facilities or could make it more difficult to obtain or renew such facilities or to obtain other forms of financing in the future. Any or all of these factors, or other consequences of the continuation, or worsening, of domestic and global economic conditions which cannot currently be predicted, could continue to adversely affect our businesses and results of operations.

Any material disruption in federal government operations and funding could have a material adverse effect on our revenues, earnings, cash flows and financial condition.

        A substantial portion of our revenues is dependent on federal healthcare program reimbursement, and any disruptions in federal government operations could have a material adverse effect on our revenues, earnings and cash flows. If the U.S. government defaults on its debt, there could be broad macroeconomic effects that could raise our cost of borrowing funds, and delay or prevent our future growth and expansion. Any future federal government shutdown, U.S. government default on its debt and/or failure of the U.S. government to enact annual appropriations could have a material adverse effect on our revenues, earnings and cash flows. Additionally, disruptions in federal government operations may negatively impact regulatory approvals and guidance that are important to our operations, and create uncertainty about the pace of upcoming health care regulatory developments.

If we are unable to attract and retain skilled medical, technical and engineering personnel, we may be unable to manage our growth or continue our technological development.

        Our continued growth in the health care business will depend upon our ability to attract and retain skilled employees, such as highly skilled nurses and other medical personnel. Competition for those employees is intense. Moreover, we believe that future success in the provider business will be significantly dependent on our ability to attract and retain qualified physicians to serve as employees of or consultants to our health care services businesses. If we are unable to achieve that goal or if doing so requires us to bear increased costs this could adversely impact our growth and results of operations.

        Our dialysis products business depends on the development of new products, technologies and treatment concepts to be competitive. Competition is also intense for skilled engineers and other technical research and development personnel. If we are unable to obtain and retain the services of key personnel, the ability of our officers and key employees to manage our growth would suffer and our operations could suffer in other respects. These factors could preclude us from integrating acquired companies into our operations, which could increase our costs and prevent us from realizing synergies from acquisitions. Lack of skilled research and development personnel could impair our technological development, which would increase our costs and impair our reputation for production of technologically advanced products.

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Diverging views of fiscal authorities could require us to make additional tax payments.

        We are subject to ongoing tax audits in the U.S., Germany and other jurisdictions. We could potentially receive notices of unfavorable adjustments and disallowances in connection with certain of these audits. If we are unsuccessful in contesting unfavorable determinations we could be required to make additional tax payments, which could have a material adverse impact on our results of operations and operating cash flow in the relevant reporting period. See Item 5, "Operating and Financial Review and Prospects – B. Liquidity and Capital Resources."

Risks Relating to our Securities

Our indebtedness may limit our ability to pay dividends or implement certain elements of our business strategy.

        At December 31, 2015, we had consolidated debt of $8,646 million and consolidated total shareholders' equity of $ 10,496 million. Our debt could have significant consequences to our operations and our financial condition. For example, it could require us to dedicate a substantial portion of our cash flow from operations, as well as the proceeds of certain financings and asset dispositions, to payments on our indebtedness, thereby reducing the availability of our cash flow and such proceeds to fund working capital, capital expenditures and for other general corporate purposes.

        In October 2012, we entered into a syndicated Credit Agreement, which was amended in November 2014 (the "Amended 2012 Credit Agreement"). Our Amended 2012 Credit Agreement, the indentures relating to our senior notes ("Senior Notes") and our accounts receivable securitization program (the "A/R Facility") include covenants that require us to maintain certain financial ratios or meet other financial tests. Under our Amended 2012 Credit Agreement and the A/R Facility, we are obligated to maintain our consolidated leverage at or below an established maximum ratio (ratio of consolidated net funded debt to consolidated EBITDA) as these terms are defined in the respective financing agreements.

        Our Amended 2012 Credit Agreement and the indentures related to our Senior Notes include other covenants which, among other things, restrict or could have the effect of restricting our ability to dispose of assets, incur debt, pay dividends and other restricted payments, create liens or make investments or acquisitions. These covenants may otherwise limit our activities. The breach of any of the covenants could result in a default and acceleration of the indebtedness under the credit agreement or the indentures, which could, in turn, create additional defaults and acceleration of the indebtedness under the agreements relating to our other long-term indebtedness which would have an adverse effect on our business, financial condition and results of operations.

Fresenius SE owns 100% of the shares in the General Partner of our Company and is able to exercise management control of FMC-AG & Co. KGaA.

        Fresenius SE owns approximately 30.91% of our outstanding ordinary shares, excluding treasury shares, as of February 19, 2016. Fresenius SE also owns 100% of the outstanding shares of Management AG, the General Partner of the Company. As the sole shareholder of the General Partner, Fresenius SE has the sole right to elect the supervisory board of the General Partner which, in turn, appoints the General Partner's Management Board. The Management Board of the General Partner is responsible for the management of the Company. Through its ownership of the General Partner, Fresenius SE is able to exercise de facto management control of FMC-AG & Co. KGaA, even though it owns less than a majority of our outstanding voting shares. Such de facto control limits public shareholder influence on management of the Company and precludes a takeover or change of control of the Company without Fresenius SE's consent, either or both of which could adversely affect the price of our shares.

Because we are not organized under U.S. law, we are subject to certain less detailed disclosure requirements under U.S. federal securities laws.

        Under the pooling agreement that we have entered into for the benefit of non-related holders of our Ordinary shares (including, in each case, holders of American Depositary Receipts representing beneficial ownership of such shares), we have agreed to file quarterly reports with the SEC, to prepare annual and quarterly financial statements in accordance with U.S. generally accepted accounting principles ("GAAP"), and to file information with the SEC with respect to annual and general meetings of our shareholders. The pooling agreement also requires that the supervisory board of Management AG, our General Partner, include at least two members who do not have any substantial business or professional relationship with Fresenius SE, Management AG or FMC-AG & Co. KGaA and its affiliates and requires the consent of those independent directors to certain transactions between us and Fresenius SE and its affiliates.

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        We are a "foreign private issuer," as defined in the SEC's regulations, and consequently we are not subject to all of the same disclosure requirements applicable to domestic companies. We are exempt from the SEC's proxy rules, and our annual reports contain less detailed disclosure than reports of domestic issuers regarding such matters as management, executive compensation and outstanding options, beneficial ownership of our securities and certain related party transactions. Also, our officers, directors and beneficial owners of more than 10% of our equity securities are exempt from the reporting requirements and short – swing profit recovery provisions of Section 16 of the Exchange Act. We are also generally exempt from most of the governance rules applicable to companies listed on the New York Stock Exchange (including the obligation to maintain a compensation committee of independent directors), other than the obligation to maintain an audit committee in accordance with Rule 10A – 3 under the Exchange Act and to provide an annual affirmation of our compliance. Exemptions from many governance rules applicable to U.S. domestic issuers may adversely affect the market prices for our securities. See Item 16G, "Corporate Governance."

Item 4.    Information on the Company

A.    History and Development of the Company

General

        Fresenius Medical Care AG & Co. KGaA ("FMC-AG & Co. KGaA" or the "Company"), is a partnership limited by shares (Kommanditgesellschaft auf Aktien or "KGaA"), formerly known as Fresenius Medical Care AG ("FMC-AG"), a German stock corporation (Aktiengesellschaft or "AG") organized under the laws of Germany.

        The Company was originally incorporated on August 5, 1996 as a stock corporation and transformed into a partnership limited by shares upon registration on February 10, 2006. FMC-AG & Co. KGaA is registered with the commercial register of the local court (Amtsgericht) of Hof an der Saale, Germany, under the registration number HRB 4019. Our registered office (Sitz) is Hof an der Saale, Germany. Our registered business address is Else-Kröner-Strasse 1, 61352 Bad Homburg, Germany, telephone +49-6172-609-0.

History

        On September 30, 1996, we completed a series of transactions to consummate an Agreement and Plan of Reorganization entered into on February 4, 1996 by Fresenius SE (then Fresenius AG) and W.R. Grace & Co. which we refer to as the "Merger" elsewhere in this report. Pursuant to that agreement, Fresenius SE contributed Fresenius Worldwide Dialysis, its global dialysis business, including its controlling interest in Fresenius USA, Inc., in exchange for 105,630,000 FMC-AG Ordinary shares. Thereafter, we acquired:

    all of the outstanding common stock of W.R. Grace & Co., whose sole business at the time of the transaction consisted of National Medical Care, Inc., its global dialysis business, in exchange for 94,080,000 Ordinary shares; and

    the publicly-held minority interest in Fresenius USA, Inc., in exchange for 10,290,000 Ordinary shares.

        On February 10, 2006, the Company completed the transformation of its legal form under German law as approved by its shareholders during the Extraordinary General Meeting ("EGM") held on August 30, 2005. Upon registration of the transformation of legal form in the commercial register of the local court in Hof an der Saale, on February 10, 2006, Fresenius Medical Care AG's legal form was changed from a German AG to a KGaA with the name Fresenius Medical Care AG & Co. KGaA. The Company as a KGaA is the same legal entity under German law, rather than a successor to the stock corporation. Management AG, a subsidiary of Fresenius SE, which was the majority voting shareholder of FMC-AG prior to the transformation, is the general partner of FMC-AG & Co. KGaA. Shareholders in FMC-AG & Co. KGaA participated in all economic respects, including profits and capital, to the same extent and with the same number of shares in FMC-AG & Co. KGaA as they held in FMC-AG prior to the transformation. Upon effectiveness of the transformation of legal form, the share capital of FMC-AG became the share capital of FMC-AG & Co. KGaA, and persons who were shareholders of FMC-AG became shareholders of the Company in its new legal form. In connection with the transformation of form, the holders of substantially all of FMC-AG's non-voting preference shares, including preference shares

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represented by American Depositary Shares (ADSs), converted their preference shares into ordinary shares. The remaining preference shares were mandatorily converted into ordinary shares in July 2013.

        In 2013 we conducted a share buy-back program. We purchased a total of 7,548,951 ordinary shares on the Frankfurt Stock Exchange at a total cost of €385 million (US $505 million). The program was financed from cash flow and existing credit facilities.

        Part of the Company's stated strategy is to expand and complement its existing business through acquisitions. On March 31, 2006, the Company completed the acquisition of Renal Care Group, Inc. ("the RCG Acquisition"), a Delaware corporation with principal offices in Nashville, Tennessee, for an all cash purchase price, net of cash acquired, of approximately $4.2 billion including the concurrent repayment of approximately $657.8 million of indebtedness of RCG.

        We acquired Phoslo®, a phosphate binder in 2006. During 2008, we entered into various license and distribution agreements to market and distribute intravenous iron products and in December 2010 we formed a new renal pharmaceutical company with one of the licensors, Galenica Ltd. "Galenica", named Vifor Fresenius Medical Care Renal Pharma Ltd. ("VFMCRP"). See the discussion of "Renal Pharmaceuticals" below.

        In 2012 we acquired 100% of the equity of Liberty Dialysis Holdings, Inc. ("Liberty Dialysis"), a Delaware corporation with principal offices in Mercer Island, Washington and the owner of all of the business of Liberty Dialysis, Inc. and 51% of Renal Advantage, Inc., for total cash consideration of $2,182 million consisting of $1,697 million cash, net of cash acquired and $485 million non-cash consideration (the "Liberty Acquisition"). Prior to entering into the merger agreement for the Liberty Acquisition, we owned 49% of Renal Advantage, Inc., and we also had a loan receivable from Renal Advantage Partners, LLC of $280 million which was retired as part of the transaction. Liberty Dialysis mainly provided dialysis services in the United States through the 263 clinics it operated. Liberty Dialysis' results have been included in the Company's Consolidated Statement of Income since February 29, 2012.

        On July 1, 2014, we made an investment for a majority interest in Sound Inpatient Physicians, Inc. ("Sound"), a physician services organization focused on hospitalist and post-acute care services, furthering our strategic investments and expanding the health care services we offer, and in November 2014, Sound acquired Cogent Healthcare ("Cogent"), expanding Sound to serve over 180 hospitals in 35 states with more than 1,750 providers. On October 21, 2014 we acquired Laurus Healthcare L.P., which does business under the trade name National Cardiovascular Partners ("NCP"). NCP is the leading operator of outpatient cardiac catheterization and vascular laboratories in the U.S.

        See Item 4B, "Information on the Company – Business Overview – Our Strategy and Competitive Strengths." Additionally, for information regarding our capital expenditures during the past three years, see 4B, "Information on the Company -Business Overview – Capital Expenditures."

B.    Business Overview

Our Business

        We are the world's largest kidney dialysis company. We provide dialysis treatment and related dialysis care services to persons who suffer from ESRD, as well as other health care services. Our dialysis business is vertically integrated, providing dialysis treatment at dialysis clinics we own, operate or manage and supplying these clinics with a broad range of products in addition to selling dialysis products to other dialysis service providers. We develop, manufacture and distribute dialysis products for the treatment of ESRD, including hemodialysis machines, peritoneal cyclers, dialyzers, peritoneal solutions, hemodialysis concentrates, solutions and granulates, bloodlines, renal pharmaceuticals and systems for water treatment. We describe our other health care services as "Care Coordination". Care Coordination services include the coordinated delivery of pharmacy services, vascular, cardiovascular and endovascular specialty services, non-dialysis laboratory testing services, physician services, hospitalist and intensivist services, health plan

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services and urgent care services, which, together with dialysis care services represent our health care services. A summary representation of our services and products is as follows:

     
 
  Health Care
   
   
  Dialysis Products
   
     
    Dialysis Care services   Care Coordination services           Major product groups    

 

 

ESRD-related treatments

 

Hospitalist and intensivist

         

Hemodialysis machines and peritoneal dialysis cyclers

   

 

 

ESRD-related laboratory testing services

 

Pharmacy

         

Dialyzers

   

 

 

Acute dialysis services

 

Vascular, cardiovascular and endovascular specialty services

         

Peritoneal dialysis solutions

   

 

     

Non-dialysis laboratory testing services

         

Hemodialysis concentrates, solutions and granulates

   

 

     

Health plan

         

Bloodlines

   

 

     

Urgent care

         

Systems for water treatment

   

 

     

Physician Practice services

         

Renal pharmaceuticals

   

 

                 

Other equipment & medical devices

   

 

 

 

        For the year ended December 31, 2015, we had net revenues of $16.7 billion, a 6% increase (11% in constant currency, see Item 5, "Operating and Financial Review and Prospects – Non U.S. GAAP Measures for Presentation – Constant Currency") over 2014 revenues. In 2015, we derived 71% of our revenues from our North America Segment, 16% from our EMEA Segment, 9% from our Asia-Pacific Segment and 4% from our Latin America Segment.

        At December 31, 2015, we provided dialysis treatment to 294,381 patients in 3,418 clinics worldwide, located in more than 45 countries. In 2015, we provided 44,596,446 million dialysis treatments, an increase of 4% compared to 2014.

        The following table summarizes net revenues for our North America Segment, EMEA Segment, Asia-Pacific Segment and our Latin America Segment in our major categories of activity, health care services and dialysis products for the three years ended December 31, 2015, 2014 and 2013.

 
  2015   2014   2013  
 
  (in millions)
 

North America Segment

                   

Health Care

  $ 10,932   $ 9,655   $ 8,772  

Dialysis Products

    881     845     834  

    11,813     10,500     9,606  

EMEA Segment

                   

Health Care

  $ 1,226     1,438     1,406  

Dialysis Products

    1,403     1,634     1,617  

    2,629     3,072     3,023  

Asia-Pacific Segment

                   

Health Care

  $ 667   $ 569   $ 363  

Dialysis Products

    835     788     741  

    1,502     1,357     1,104  

Latin America Segment

                   

Health Care

  $ 567   $ 588   $ 589  

Dialysis Products

    199     248     254  

    766     836     843  

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        We receive a substantial portion of our North America segment revenue from the U.S. Medicare program and other government sources. The following table provides information for the years ended December 31, 2015, 2014 and 2013 regarding the percentage of our U.S. patient service net revenues from (a) the Medicare program, (b) private/alternative payors, such as commercial insurance and private funds, (c) Medicaid and other government sources and (d) hospitals.

 
  Year Ended December 31,  
 
  2015   2014   2013  

Medicare program

    44.6 %   47.5 %   49.4 %

Private / alternative payors

    42.6 %   43.1 %   42.6 %

Medicaid and other government sources

    4.7 %   3.5 %   3.3 %

Hospitals

    8.1 %   5.9 %   4.7 %

Total

    100.0 %   100.0 %   100.0 %

        Under the Medicare program, Medicare reimburses dialysis providers for the treatment of certain individuals who are diagnosed as having ESRD, regardless of age or financial circumstances. See "Regulatory and Legal Matters – Reimbursement."

Our Services, Products and Business Processes

        ESRD is the stage of advanced chronic kidney disease characterized by the irreversible loss of kidney function and requires regular dialysis treatment or kidney transplantation to sustain life. A normally functioning human kidney removes waste products and excess water from the blood, which prevents toxin buildup, water overload and the eventual poisoning of the body. Most patients suffering from ESRD must rely on dialysis, which is the removal of toxic waste products and excess fluids from the body by artificial means. A number of conditions – diabetes, hypertension, glomerulonephritis and inherited diseases – can cause chronic kidney disease. The majority of people with ESRD acquire the disease as a complication of one or more of these primary conditions.

        There are currently only two methods for treating ESRD: dialysis and kidney transplantation. Due to the scarcity of compatible kidneys for transplant, most patients suffering from ESRD rely on dialysis.

        At the end of 2015, about 2.8 million patients regularly underwent dialysis worldwide. For dialysis treatment, we distinguish between two types: hemodialysis ("HD") and peritoneal dialysis ("PD"). In HD, a hemodialysis machine controls the flow of blood from the patient, the blood is cleansed by means of a specially designed filter known as a dialyzer and then pumped back into the body. With PD, the patient introduces a dialysis solution into his or her abdominal cavity and the patient's peritoneum is used as a dialyzing membrane. We provide dialysis services and products for both therapy methods. As a leading global healthcare company, we offer health care services and products in more than 120 countries around the world with a focus on the following areas:

    Hemodialysis – treatment in specialized clinics

    Peritoneal dialysis – treatments largely administered by patients

    Home hemodialysis – a niche market

    Acute dialysis – in case of a sudden loss of renal function, typically in a hospital inpatient setting

    Dialysis drugs – expanding our product range

    Additional services under Care Coordination

Dialysis Treatment Options for ESRD

        Hemodialysis.    Hemodialysis removes toxins and excess fluids from the blood in a process in which the blood flows outside the body through plastic tubes known as bloodlines into a specially designed filter, called a dialyzer. The dialyzer separates waste products and excess water from the blood. Dialysis solution flowing through the dialyzer carries away the waste products and excess water, and supplements the blood with solutes which must be added due to renal failure. The treated blood is returned to the patient. The hemodialysis machine pumps blood, adds anti-coagulants, regulates the purification process and controls the mixing of dialysis solution and the rate of its flow through the system. This machine can also monitor and record the patient's vital signs.

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        The majority of hemodialysis patients receive treatment at outpatient dialysis clinics, such as ours, where hemodialysis treatments are performed with the assistance of a nurse or dialysis technician under the general supervision of a physician. Hemodialysis patients generally receive treatment three times per week, typically for three to five hours per treatment.

        Peritoneal Dialysis.    Peritoneal dialysis removes toxins from the blood using the peritoneum, the membrane lining covering the internal organs located in the abdominal area, as a filter. Most peritoneal dialysis patients administer their own treatments in their own homes and workplaces, either by a treatment known as continuous ambulatory peritoneal dialysis ("CAPD"), or by a treatment known as continuous cycling peritoneal dialysis ("CCPD"), also called automated peritoneal dialysis ("APD"). In both of these treatments, a surgically implanted catheter provides access to the peritoneal cavity. Using this catheter, the patient introduces a sterile dialysis solution from a solution bag through a tube into the peritoneal cavity. The peritoneum operates as the filtering membrane and, after a specified dwell time, the solution is drained and disposed. A typical CAPD peritoneal dialysis program involves the introduction and disposal of dialysis solution four times a day. With CCPD, a machine pumps or "cycles" solution to and from the patient's peritoneal cavity while the patient sleeps. During the day, one and a half to two liters of dialysis solution remain in the abdominal cavity of the patient. The human peritoneum can be used as a dialyzer only for a limited period of time, ideally only if the kidneys are still functioning to some extent.

Dialysis Services

        We provide dialysis treatment and related laboratory and diagnostic services through our global network of 3,418 outpatient dialysis clinics. At our clinics, we provide hemodialysis treatments at individual stations through the use of dialysis machines and disposable products. In hemodialysis treatment, a nurse connects the patient to the dialysis machine with the necessary tubing, known as bloodlines, and monitors the dialysis equipment and the patient's vital signs. The capacity of a clinic is a function of the number of stations and additional factors such as type of treatment, patient requirements, length of time per treatment, and local operating practices and ordinances regulating hours of operation.

        As part of the dialysis therapy, we provide a variety of services to ESRD patients at our dialysis clinics in the U.S. These services include administering erythropoietin stimulating agents, or ESAs, which are synthetic engineered hormones that stimulate the production of red blood cells. ESAs are used to treat anemia, a medical complication that ESRD patients frequently experience. We administer ESAs to most of our patients in the U.S. Any interruption in supply of ESAs could materially adversely affect our business, financial condition and results of operations. A material increase in our utilization or acquisition cost for ESAs without an increase in the Medicare ESRD prospective payment system, or the ESRD PPS bundled reimbursement rate, could materially adversely affect our financial condition and results of operations.

        Our clinics also offer services for home dialysis patients, the majority of whom receive PD dialysis treatment. For these patients, we provide materials, training and patient support services, including clinical monitoring, follow-up assistance and arranging for delivery of the supplies to the patient's residence. (See "– Regulatory and Legal Matters – Reimbursement – U.S." for a discussion of the ESRD PPS and billing for these products and services.)

        We also provide dialysis services under contract to hospitals in the U.S. on an "as needed" basis for hospitalized ESRD patients and for patients suffering from acute kidney failure. Acute kidney failure can result from trauma, or similar causes, and requires dialysis until the patient's kidneys recover their normal function. We provide services to these patients either at their bedside, using portable dialysis equipment, or at the hospital's dialysis site. Contracts with hospitals provide for payment at negotiated rates that are generally higher than the Medicare reimbursement rates for chronic in-clinic outpatient treatments.

Dialysis Products

        Based on internal estimates prepared using our Market & Competitor Survey ("MCS") (see "Major Markets and Competitive Position," below), publicly available market data and our data of significant competitors, we are the world's largest manufacturer and distributor of equipment and related products for hemodialysis and the second largest manufacturer and distributer of peritoneal dialysis products, measured by publicly reported revenues. We supply dialysis products to our dialysis clinics and we also sell our dialysis products directly and through distributors in more than 120 countries. Most of our customers are dialysis clinics. For the year 2015, dialysis products accounted for 20% of our total revenue.

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        We produce and distribute a wide range of machines and disposables for HD, PD and acute dialysis. The following table shows the breakdown of our dialysis product revenues into sales of HD products, PD dialysis products and other dialysis products. The following amounts exclude intercompany product sales:

 
  Year Ended December 31,  
 
  2015   2014   2013  
 
  Total
Product
Revenues
  % of
Total
  Total
Product
Revenues
  % of
Total
  Total
Product
Revenues
  % of
Total
 
 
  (in millions)
 

Hemodialysis Products

  $ 2,722     81   $ 2,904     81   $ 2,813     81  

Peritoneal Dialysis Products

    385     12     427     12     424     12  

Other

    239     7     251     7     243     7  

Total

  $ 3,346     100   $ 3,582     100   $ 3,480     100  

Hemodialysis Products

        Our advanced line of hemodialysis machines includes two series. We developed the 4008 and 5008 Series for our markets outside of North America. For the North American market, we developed the 2008 Series. Our various models of these machine series utilize our latest research and development efforts to improve the dialysis process for our patients. Examples of these improvements include the addition of Clinical Data Exchange, which allows machine users to toggle their 2008T dialysis machine monitor view to provide access to their medical information system and dialysis screen and Wet Alert, a wireless wetness detector for the identification of blood leakage during dialysis.

        Other features of our dialysis machines include:

    Volumetric dialysate balancing and ultrafiltration control system

    Compatibility with all manufacturers' dialyzers and a variety of bloodlines and dialysis solutions

    Modular design

    Sophisticated microprocessor controls, touch screen interfaces, displays and/or readout panels that are adaptable to local language requirements

    Battery backup which continues operations of the blood circuit and all protective systems up to 20 minutes following a power failure

    Online clearance, measurement of dialyzer clearance for quality assurance with On-Line Clearance Monitoring

    bibag® Online Dry Bicarbonate Concentrate system, which produces bicarbonate concentrate directly in the machine eliminating the need for liquid bicarbonate jugs or a central bicarbonate system

    Online data collection capabilities and computer interfacing with our Therapy Data Management System and/or Fresenius Information Systems which:

    monitor and assess prescribed therapy;

    connect a large number of hemodialysis machines and peripheral devices, such as patient scales, blood chemistry analyzers and blood pressure monitors, to a computer network;

    enter nursing records automatically at bedside;

    adapt to new data processing devices and trends;

    perform home hemodialysis with remote monitoring by a staff caregiver; and

    record and analyze trends in medical outcome factors in hemodialysis patients.

Dialyzers

        Dialyzers are specialized filters that remove waste products, toxins and excess water from the blood during dialysis. We estimate that we are the leading worldwide producer of polysulfone dialyzers. We manufacture our F-Series and premium FX class® series of dialyzers and our Optiflux® polysulfone

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single-use dialyzer using hollow fiber Fresenius Polysulfone® and Helixone® membranes from synthetic materials. Our FX CorDiax dialyzer contains the Helixone®plus high performance membrane. The Helixone®plus membrane selectively filters out toxins such as phosphates to reduce the risk of cardiovascular disease.

Peritoneal Dialysis Products

        We offer a full line of peritoneal dialysis systems and solutions for both CAPD and APD treatments.

        CAPD Therapy: The stay·safe® system has been specifically designed to help patients with their daily self-care CAPD treatment in a safe and convenient way. Our CAPD products have a number of advantages for patients including:

    Fewer possibilities for touch contamination.  Our unique PIN and DISC technology simplifies the fluid exchange and minimizes the risk of infection, particularly in the disconnection step in which the stay·safe® patient connector is closed automatically without any direct touch intervention.

    Optimal biocompatibility.  Outside of the North America Segment, our PD stay·safe® balance and stay·safe® bicaVera® solutions are pH neutral and have ultra-low glucose degradation product contents reducing the advanced glycation end product ("AGE") formation and aiming for better preservation of the peritoneal membrane and allowing for the protection of residual renal function of PD patients.

    Environmentally friendly material:  Outside of the North America Segment, our stay·safe® system is made of Biofine®, a material developed by Fresenius, which upon combustion is reduced to carbon dioxide and is PVC and plasticizer free. Biofine® requires less energy to manufacture, generates less waste and is easy to recycle.

        APD Therapy: The effectiveness of APD therapy depends on the solution dwell time in the abdomen, the composition of the solution used, the volume of solution and the duration of the treatment, usually 8 - 10 hours. APD using our product line, which includes our sleep·safe cycler, sleep·safe harmony cycler and Liberty® cycler, offers a number of benefits to PD patients:

    Improved quality of life.  The patient is treated at night and can lead a more normal life during the day without fluid exchange every few hours.

    Improved adequacy of dialysis.  By adjusting the parameters of treatment, it is possible to provide more dialysis to the patient compared to CAPD therapy. This therapy offers important options to physicians such as improving the delivered dose of dialysis for certain patients.

    Personalized adapted APD.   sleep·safe cycler and sleep·safe harmony cyclers allow patients to be treated using a modified version of APD where short dwell times with small fill volumes are used first to promote ultrafiltration and subsequently longer dwell times and larger fill volumes promote the removal of uremic toxins from the blood.

    Patient Management Software:  We have developed specific patient management software tools to support both CAPD and APD therapies in the different regions of the world. These include: PatientOnLine, IQsystem® and Pack-PD®. These tools can be used by physicians and nurses to design and monitor treatment protocols thus ensuring that therapy is optimized and that patient care is maximized.

Renal Pharmaceuticals

        We continue to develop, acquire and in-license renal pharmaceuticals to improve dialysis treatment for our patients. Below are the primary renal pharmaceuticals we have developed or for which we have obtained licenses for use:

PhosLo®

        In November 2006, We acquired PhosLo®, a calcium-based phosphate binder. We have received approval of PhosLo® in selected European countries. In October 2008, a competitive generic phosphate binder was introduced in the U.S. market, which reduced our PhosLo® sales in 2009. In October 2009, we launched an authorized generic version of PhosLo® to compete in the generic calcium acetate market. In April 2011, the FDA approved our New Drug Application (NDA) for Phoslyra®, a liquid formulation of PhosLo®, and we continue to commercialize this product in the U.S. market.

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Venofer® and Ferinject®

        In 2008, we entered into two separate and independent license and distribution agreements, one for certain countries in Europe and the Middle East (with Galenica AG and Vifor (International) AG) and one for the U.S. (with Luitpold Pharmaceuticals Inc. and American Regent, Inc.), to market and distribute intravenous iron products, such as Venofer® (iron sucrose) and Ferinject® (ferric carboxymaltose) (outside of the U.S.). Both drugs are used to treat iron deficiency anemia experienced by non-dialysis CKD (chronic kidney disease) patients as well as dialysis patients. Venofer® is the leading intravenous iron product worldwide. The first agreement concerns all commercialization activities for these intravenous iron products in the field of dialysis and became effective on January 1, 2009. In North America, a separate license agreement effective November 1, 2008 provides our subsidiary Fresenius USA Manufacturing Inc. ("FUSA") with exclusive rights to manufacture and distribute Venofer® to freestanding (non-hospital based) U.S. dialysis facilities and, in addition, grants FUSA similar rights for certain new formulations of the drug. The U.S. license agreement has a term of ten years and includes FUSA extension options. The international agreement has a term of 20 years.

        In December 2010, we announced the expansion of our agreements with Galenica by forming a new renal pharmaceutical company, Vifor Fresenius Medical Care Renal Pharma, ("VFMCRP"), with the intention to develop and distribute products to treat iron deficiency anemia and bone mineral metabolism for pre-dialysis and dialysis patients. FMC-AG & Co. KGaA owns 45% of the company which is headquartered in Switzerland. Galenica contributed licenses (or the commercial benefit in the U.S.) to its Venofer® and Ferinject® products for use in the dialysis and pre-dialysis market (CKD stages III to V). Vifor Pharma, the pharmaceutical division of Galenica and its existing key affiliates or partners retain the responsibility for commercialization of both of these products outside the renal field.

Velphoro®

        As part of the agreement to create VFMCRP, Galenica also contributed to the new company the asset (excluding Japan) Velphoro®, a novel iron-based phosphate binder. Fresenius Medical Care North America ("FMCNA") markets the product on behalf of VFMCRP in the U.S. and commercial sales of Velphoro® commenced in the first quarter of 2014 in the US market. The product for the U.S. market is supplied by an FDA approved, Vifor manufacturing facility in Switzerland and an FDA approved contract manufacturer also located in Switzerland. Velphoro has also been approved in Europe via the central approval process and has been commercially launched in Germany, the United Kingdom, Sweden, Denmark, the Netherlands, Belgium and Switzerland. Velphoro has also been approved in France, Italy and Spain. The VFMCRP partner Kissei also received approval from the Ministry of Health, Labour and Welfare in Japan during 2015 for the product which is marketed in Japan under the brand name P-TOL.

OsvaRen® and Phosphosorb®

        In June 2015, we further developed our joint venture, VFMCRP, with Galenica. In addition to the iron replacement products Ferinject® and Venofer® for use in nephrology indications as well as the phosphate binder Velphoro® in our shared product portfolio, VFMCRP acquired nephrology medicines commercialized by us, including the phosphate binders OsvaRen® and Phosphosorb®. The transfer of the marketing rights was largely completed during the fourth quarter of 2015, allowing the joint venture to further develop its sales and marketing in key European markets.

Care Coordination

Laboratory Services

        We provide general testing, clinical anatomic pathology and molecular testing for health care providers in the New York region.

Pharmacy Services

        We offer pharmacy services, mainly in the U.S. These services include providing renal medications and supplies to the homes of patients or to their dialysis clinic directly from renal pharmacists who are specially trained in treating and counseling patients living with kidney disease.

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Vascular, Cardiovascular and Endovascular Specialty Services

        We operate vascular access centers mainly in the U.S. Patients receiving hemodialysis need to have a vascular access site implanted before their dialysis therapy starts to enable their blood to exit their bodies to our dialysis machines for cleansing and to return the newly cleaned blood into their bodies. Additionally, our vascular access services include both cardiovascular and endovascular specialty services. Cardiovascular procedures are similar to the vascular access procedures discussed above with a focus on treatment for heart disease, while endovascular surgical procedures are minimally invasive and designed to access many regions of the body via major blood vessels and assist in both the maintenance of hemodialysis accesses and other non-dialysis medical operations.

Hospitalist and Intensivist Services

        We employ physicians providing care in hospitals and post-acute care centers across the United States. Our hospitalist services utilize a consistent, patient-centered approach that relies on experienced physician leadership and a web-based workflow platform. We also provide intensivist services, which focus on the general medical care of hospitalized patients and the care of critically ill patients, usually in the intensive care unit (ICU), and the care of patients in post-acute centers.

Medical Cost Management

        We are expanding our activities in value-based healthcare contracting. Value based contracting includes shared savings arrangements in which a private payors or government programs share the savings from reductions in the overall medical spend of a population under management assuming that certain quality thresholds are also met. Such contacting also includes capitated arrangements in which payors or government programs pay us a fixed amount per member under management to fund beneficiary medical expenses. Since capitation arrangements often can be recognized as premium revenue and the full medical premium for ESRD beneficiaries generally is very large, capitation programs can drive significant revenue and, when costs are effectively managed, profit opportunities.

Major Markets and Competitive Position

        To obtain and manage information on the status and development of global, regional and national markets we have developed our Market & Competitor Survey, or MCS. We use the MCS within the Company as a tool to collect, analyze and communicate current and essential information on the dialysis market, developing trends, our market position those of our competitors. Country – by – country surveys are performed at the end of each calendar year which focus on the total number of patients treated for ESRD, the treatment modality selected, products used, treatment location and the structure of ESRD patient care providers. The survey has been refined over the years to facilitate access to more detailed information and to reflect changes in the development of therapies and products as well as changes to the structure of our competitive environment. The questionnaires are distributed to professionals in the field of dialysis who are in a position to provide ESRD-relevant country specific information themselves or who can coordinate appropriate input from contacts with the relevant know-how in each country. The surveys are then centrally validated and checked for consistency by cross-referencing them with the most recent sources of national ESRD information (e.g. registry data or publications if available) and with the results of surveys performed in previous years. All information received is consolidated at a global and regional level and analyzed and reported together with publicly available information published by our competitors. While we believe the information contained in our surveys and competitor publications to be reliable, we have not independently verified the data or any assumptions from which our MCS is derived or on which the estimates they contain are based, and we do not make any representation as to the accuracy of such information. Except as otherwise specified herein, all patient and market data in this report have been derived using our MCS.

        We estimate that the volume of the global dialysis market was $73 billion in 2015 comprising approximately $13 billion of dialysis products and approximately $60 billion dialysis services (including administration of dialysis drugs). The currency-adjusted growth rate amounted to 4% during the last year.

        We are the world's leading provider of dialysis services with a market share of about 10% based on the number of treated patients. In addition to providing services to the largest number of dialysis patients of any health care company, we also operate more dialysis clinics than any of our competitors: in 2015, we had 3,418 (2014: 3,361) clinics worldwide. We treated 62% of our patients in North America, 19% in Europe, 10% in Latin America and 9% in the Asia-Pacific region.

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        We are also the market leader in dialysis products with a 34% worldwide dialysis product market share. Dialyzers represent the largest product group in the worldwide dialysis market. In 2015, the worldwide dialyzer market was over $270 million including our market share of approximately $120 million. Dialysis machines also represent a substantial dialysis product market. In 2015, we produced more than half of the 81,000 machines sold worldwide. In 2014, we also held approximately 34% of the worldwide dialysis product market. Our share of the global dialyzer market was approximately 44% and our share of the dialysis machines market was approximately 50%.

Our competitive environment is described in more detail below:

        Health Care Services:    Over the last decade the dialysis industry has been characterized by ongoing consolidations. Internationally, the dialysis services market is much more fragmented, with a higher degree of public ownership in many countries. Our largest competitors are DaVita HealthCare Partners, Inc and U.S. Renal Care, Inc. in the North America Segment, Diaverum and Kuratorium für Heimdialyse in the EMEA Segment, Showa-Kai and B. Braun in the Asia-Pacific Segment, and Baxter International Inc. and Diaverum in the Latin America Segment.

        U.S. government programs are the primary source of reimbursement for services to the majority of patients and, as such, competition for patients in the U.S. is based primarily on quality and accessibility of service and the ability to obtain admissions from physicians with privileges at the facilities. However, the extension of periods during which commercial insurers are primarily responsible for reimbursement and the growth of managed care have placed greater emphasis on service costs for patients insured with private insurance.

        In most countries other than the U.S., we compete primarily against individual freestanding clinics and hospital-based clinics. In many of these countries, especially the developed countries, governments directly or indirectly regulate prices and the opening of new clinics. Providers compete in all countries primarily on the basis of quality and availability of service and the development and maintenance of relationships with referring physicians.

        Laboratory Services:    Spectra competes in the U.S. with large nationwide laboratories, dedicated dialysis laboratories and numerous local and regional laboratories, including hospital laboratories. In the laboratory services market, companies compete on the basis of performance, including quality of laboratory testing, timeliness of reporting test results and cost-effectiveness. We believe that our services are competitive in these areas.

        Products:    We compete globally in the product market which is largely segmented between hemodialysis and peritoneal dialysis. Our competitors include Baxter International Inc. (which acquired the hemodialysis product business of Gambro AB in 2013), Asahi Kasei Medical Co. Ltd., Bellco S.r.l., B. Braun Melsungen AG, Nipro Corporation, Nikkiso Co., Ltd., NxStage Medical, Inc., Terumo Corporation, Kawasumi Laboratories Inc., Fuso Pharmaceuticals Industries Ltd., and Toray Industries, Inc. We have invested significantly in developing proprietary processes, technologies and manufacturing equipment which we believe provide a competitive advantage in manufacturing our products.

Our Strategy and Competitive Strengths

Company Strategy

        We focus our business activities on our patients' health and hence on the quality of treatment and our products with the objective of improving their quality of life and raising their life expectancy. Our aim is to maintain our position as the world's leading provider of dialysis treatment and products and to use that position as a basis for sustainable, profitable growth. In this way, we seek to continuously increase the enterprise value of the Company and create added value for patients, healthcare systems and investors worldwide.

        Our strategy takes into account concrete, measurable growth targets as well as long-term trend forecasts in the dialysis market. The Management Board uses a number of different tools and indicators to evaluate our business performance, develop our strategy and make investment decisions. See Item 5, "Operating and Financial Review and Prospects." We expect not only the number of dialysis patients to increase but also the quality of services provided and of the products available to become even more important in the future with improved access to medical care. We believe comprehensive care, a more holistic approach to address the needs of our kidney patients, is another area that will continue to grow in the future. In response to these trends, we will not only focus our business on individual services or dialysis products, but also on combining the different areas of application related to dialysis, such as combining treatment concepts with dialysis drugs.

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Pillars for Strategic Growth

        We rely upon four strategic operational pillars that govern the Company's primary strategy and activities and position us to achieve our growth and profitability objectives. Our four strategic pillars are described below:

    (1)    Continuous Growth and Expansion

        We are committed to giving more people access to life-saving dialysis treatment, as well as developing innovative products and therapies that improve our patients' quality of life. This includes our execution of strategic alliances with various healthcare institutions, which help to shape the development of the industry, while benefitting from the global growth of the market. To strengthen our market position, we have developed various approaches ranging from organic growth to the continuous assessment of acquisitions and partnerships that create synergies with our existing products and services.

        To accomplish lasting, profitable growth we are also steering our business activities towards attractive future markets. This includes expanding our presence through public private partnerships ("PPP") in the dialysis business. We are already involved in several PPP initiatives in Europe, Africa, Asia and Australia with the intent to further expand these strategic alliances in the future.

    (2)    Development of New Business Areas

        Our main focus continues to be on comprehensive care for dialysis patients and dialysis-related treatments. In many regions, in addition to our products and dialysis treatments, we offer an increasing range of additional health care services which were aligned in 2014 under the title Care Coordination, as described above. See "Business Overview – Our Services, Products and Business Processes." We continue to develop other services to meet the growing demand for the care of patients with chronic kidney disease. Care Coordination will also allow us to expand into new business areas and meet the growing overall demand for quality health care services.

    (3)    Enhancing Products and Services

        Our sustainable growth strategy includes the development of innovative products and continuous improvement for dialysis treatments. We benefit from the vertically-integrated structure of our Company, which enables our Research and Development division to apply our experience as the world's largest provider of dialysis treatments to product development, and our technical department benefits from our daily practical experience as a provider of dialysis treatment and being in direct communication with doctors, nurses and patients to keep track of and meet customer and patient needs.

        Chronic kidney failure is a global problem, with demand for improved, high-quality yet cost-efficient products growing worldwide. We leverage synergies for product development that will allow us to address this need through our Global Research and Development. Our research also focuses on the vital aspects of the quality and safety of our products and services. This continued focus on quality makes us a reliable partner for patients, doctors, and care staff alike. We continue to operate local research and development sites in our global network which provides us with an advantage to familiarize ourselves with local requirements and respond to them quickly.

    (4)    Fostering Operational Excellence

        In a challenging economic environment, we also place importance on enhancing our profitability in the long term, while positioning and managing the Company more efficiently. We consider this as we optimize and modernize our administrative structures and processes and make greater use of synergies, building on the benefits realized through the establishment of our Global Manufacturing & Quality and Global Research & Development divisions. This will enable us to meet the increased demand for our products and services and create a flexible environment which fosters rapid response to changes in the dialysis market. At the same time, we have benefited, and will continue to benefit, from our decentralized structure, allowing us to remain a reliable local partner in patient treatment by providing quick responses to customer specific needs, and changes to local market and regulatory environment. We believe this flexibility coupled with our localized decision making structure helps us to gain access to new markets. Additionally, we launched a global efficiency program in 2013 with the aim of gaining Company-wide cost reductions. We expect these efficiencies to result in $300 million per year of sustained savings before tax beginning in 2017.

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Vision 2020

        Based on this strategic focus, we set long-term targets in 2014 and announced our growth strategy for 2020. This strategy aims to increase the Company's revenues to $28 billion by fiscal year 2020, corresponding to an average annual growth rate of approximately 10% compared to 2013 revenue of $15 billion. In addition to the growth of our core ESRD business, we expect this growth in revenue to be driven by Care Coordination. The percentage share of the Company's total net revenue attributable to Care Coordination is expected to rise from 7% in 2014 to approximately 18% in 2020. In 2015, the percentage share of our total net revenue attributable to Care Coordination was 11%. Overall growth in net revenue will be driven by both organic growth and through acquisitions.

Customers, Marketing, Distribution and Service

        We sell most of our products to clinics, hospitals and specialized treatment clinics. Close interaction between our sales and marketing as well as research and development ("R&D") personnel enables us to integrate concepts and ideas that originate in the field into product development. We maintain a direct sales force of trained salespersons engaged in the sale of both hemodialysis and peritoneal dialysis products. Sales and Marketing engages in direct promotional efforts, including visits to physicians, clinical specialists, hospitals, clinics and dialysis clinics, and represents us at industry trade shows. Our clinical nurses provide clinical support, training and assistance to customers and assist our sales force. We offer customer service, training and education in the applicable local language, and technical support such as field service, repair shops, maintenance, and warranty regulation for each country in which we sell dialysis products.

        In our basic distribution system, we ship products from factories to central warehouses which are frequently located near the factories. From these central warehouses, we distribute our dialysis products to regional warehouses. We also distribute home hemodialysis and peritoneal dialysis products to the patient at home, and ship hemodialysis products directly to dialysis clinics and other customers. Additionally, local sales forces, independent distributors, dealers and sales agents sell all our products.

Patient, Physician and Other Relationships

        We believe that our success in establishing and maintaining health care centers, both in the U.S. and in other countries depends significantly on our ability to obtain the acceptance of and referrals from local physicians, hospitals and managed care plans. Our ability to provide high-quality dialysis care and to fulfill the requirements of patients and doctors depends significantly on our ability to enlist nephrologists for our dialysis clinics and receive referrals from nephrologists, hospitals and general practitioners.

        Medicare program reimbursement regulations require that a medical director generally supervise treatment at a dialysis clinic. Generally, the medical director must be board certified or board eligible in internal medicine or pediatrics, have completed a board-approved training program in nephrology and have at least twelve months of experience providing care to patients undergoing dialysis. We have engaged physicians or groups of physicians to serve as medical directors for our outpatient dialysis centers and inpatient dialysis service relationships with hospitals. The compensation of our medical directors and other contracted physicians is negotiated individually and depends in general on local factors such as competition, the professional qualification of the physicians, the physicians' experience and tasks as well as the size and the offered services of the clinic. The total annual compensation of the medical directors and the other contracted physicians is stipulated at least one year in advance and the medical directors agree to seek to continue to improve efficiency and quality. We believe that the compensation of our medical directors is in line with the fair market value of their services.

        Almost all contracts we enter into with our medical directors in the United States, as well as the typical contracts which we obtain when acquiring existing clinics, contain non-competition clauses concerning certain activities in defined areas for a defined period of time. These non-compete agreements restrict the physicians from owning or providing medical director services to other outpatient dialysis centers, but these clauses do not restrict the physicians from performing patient services directly at other locations/areas or referring patients to other facilities. We do not require physicians to send patients to us or to specific clinics.

        In addition to our dialysis clinics, a number of our other health care centers employ or contract with physicians to provide professional services. We have financial relationships with these physicians in the form of compensation arrangements for the services rendered. These contractual arrangements are

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designed to comply with federal and state laws applicable to financial relationships with physicians, such as the Stark Law and the Anti-Kickback Statute. In addition to these legal requirements, we face competition from other communities and facilities for these physicians, which continues while the physician is practicing at one of our centers.

        A number of the dialysis clinics and other health care centers we operate are owned, or managed, by joint ventures in which we hold a controlling interest and one or more hospitals, physicians or physician practice groups hold a minority interest. We also have agreements with physicians to provide management and administrative services at health care centers in which physicians or physicians groups hold an ownership interest and agreements with physicians to provide professional services at such health care centers. Our relationships with physicians and other referral sources relating to these joint ventures must comply with a federal Anti-Kickback Statute. Although there is a safe harbor for certain investment interests in small entities, our joint ventures do not satisfy all of the requirements for safe harbor protection. Failure to comply with a safe harbor does not render an arrangement illegal under the federal Anti-Kickback Statute and, therefore, physician joint ventures that fall outside the safe harbors are not, by definition, prohibited by law.

Capital Expenditures

        We invested, by operating segment and Corporate, the gross amounts shown in the table below during the twelve month periods ended December 31, 2015, 2014, and 2013.

 
  Actual  
 
  2015   2014   2013  
 
  (in millions)
 

Capital expenditures for property, plant and equipment

                   

North America

  $ 481   $ 404   $ 377  

EMEA

    121     163     149  

Asia-Pacific

    36     37     33  

Latin America

    49     38     23  

Corporate

    266     290     166  

Total Capital Expenditures

  $ 953   $ 932   $ 748  

Acquisitions and Investments

                   

North America

  $ 235   $ 1,638   $ 461  

EMEA

    95     51     65  

Asia-Pacific

    49     255     12  

Latin America

    2     41     23  

Corporate

    46     2     2  

Total Acquisitions and Investments

  $ 427   $ 1,987   $ 563  

        For additional information regarding our capital expenditures, see Item 4. B, "Business Overview – Acquisitions and Investments" and Item 5.B, "Operating and Financial Review and Prospects – Liquidity and Capital Resources"

Acquisitions and Investments

        A significant factor in the growth in our revenue and operating earnings in prior years has been our ability to acquire healthcare businesses, particularly dialysis clinics, on reasonable terms. In the U.S., doctors might decide to sell their clinics to obtain relief from day-to-day administrative responsibilities and changing governmental regulations, to focus on patient care and to realize a return on their investment. Outside of the U.S., doctors might determine to sell to us and/or enter into joint ventures or other relationships with us to achieve the same goals and to gain a partner with extensive expertise in dialysis products and services. Privatization of health care in Eastern Europe and Asia could present additional acquisition opportunities. We believe we are also viewed as a valuable strategic health care partner outside the dialysis business due to our experience in managing chronic disease for dialysis patients and our record of improving quality and patient satisfaction and reducing the overall cost of care, and our leadership in advancing innovation and improvement in health care.

        During 2015 and 2014, we had total cash and non-cash acquisitions and investments of $427 million and $1,987 million, respectively. In 2015, the investment in the North America Segment was mainly driven

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by available for sale financial assets, the acquisition of dialysis clinics and notes receivables related to an equity method investee. The investment in the EMEA Segment largely relates to the acquisition of dialysis clinics and the contribution to an equity method investee. The investment in the Asia-Pacific Segment was mainly driven by the takeover of a distributor. In 2014, the investment in the North American Segment was mainly driven by acquisitions completed to expand our services within Care Coordination, available for sale financial assets, deferred acquisition payments related to an equity method investee, notes receivables related to an equity method investee and other acquisitions. The investments in the EMEA Segment, Asia-Pacific Segment and Latin America Segment largely relate to acquisitions of clinics and deferred acquisition payments related to an equity method investee. In 2013, our investments in the North America Segment primarily consisted of an investment-type loan granted to a middle market dialysis provider (see Note 7 of the Notes to the Consolidated Financial Statements, "Other Assets and Notes Receivables," included in this report). The investments made in the EMEA Segment and the Asia-Pacific Segment largely relate to acquisitions of dialysis clinics and deferred acquisition payments related to an equity method investee. The investment in the Latin America Segment largely relates to the acquisitions of dialysis clinics. For further discussion of our 2015 acquisitions and investments, see Item 5, "Operating and Financial Review and Prospects – Liquidity and Capital Resources – Net Cash Provided By (Used in) Investing Activities."

Procurement and Production

        We operate state-of-the-art production facilities worldwide to meet the demand for machines, cyclers, dialyzers, solutions, concentrates, bloodlines, and disposable tubing assemblies and equipment for water treatment in dialysis clinics. We have invested significantly in developing proprietary processes, technologies and manufacturing equipment which we believe provide a competitive advantage in manufacturing our products. Our strategically located production and distribution centers help to reduce transport costs. We are using our facilities in St. Wendel, Germany and Ogden, Utah as centers of competence for development and manufacturing.

        We produce and assemble hemodialysis machines and CCPD cyclers in our Schweinfurt, Germany and our Concord, California facilities. We also maintain facilities at our service and local distribution centers in Argentina, Egypt, France, The Netherlands, China, Brazil, and Russia for testing and calibrating dialysis machines manufactured or assembled elsewhere, to meet local end user market needs. We manufacture and assemble dialyzers and polysulfone membranes in our St. Wendel, Germany, L'Arbresle, France, Vrsac, Serbia, Buzen, Japan and Jiangsu, China facilities and at production facilities of our joint ventures in Belarus and Japan. At our Ogden, Utah facilities, we manufacture and assemble dialyzers and polysulfone membranes and manufacture PD solutions. We manufacture hemodialysis concentrate at various facilities worldwide, including France, Italy, Great Britain, Spain, Turkey, Serbia, Morocco, Argentina, Brazil, Columbia, Australia, Malaysia, Germany, Canada, Mexico and the U.S. We manufacture PD products in North America, Europe, Latin America, and Asia, with two of our largest plants for production of PD products in Germany and the U.S. We are also pursuing the approval process for the manufacturing of PD solutions as well as hemodialysis concentrates in Jiangsu, China. Additionally, we produce bloodlines in Mexico, China, Italy, Turkey and Serbia. Our plant in Reynosa, Mexico is the world's largest (by volume) bloodline manufacturing facility.

        The Global Manufacturing and Quality (GMQ) division manages all of Fresenius Medical Care's activities in purchasing of raw materials and semi-finished goods used in manufacturing activities, production including quality management, and distribution in North America. This centralized approach enables us to

    continuously enhance the efficiency of our processes,

    optimize cost structures,

    improve returns on our capital invested in manufacturing,

    respond more flexibly, and

    fulfill our commitment to meeting high quality and safety standards.

        In this way, we are able to make a lasting contribution to the success of our operating activities.

        With a focus on quality, costs and availability, GMQ has introduced a state-of-the-art infrastructure with corresponding efficient processes and systems in the last few years, as well as bundling and optimizing existing structures. All production sites follow the Lean Manufacturing approach which in North America

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and our Schweinfurt plant includes the "Lean Six Sigma" management system. The focus of Lean Manufacturing and Six Sigma is continuous improvement of all manufacturing processes to achieve a very low error rate resulting in better quality production while shortening manufacturing time. We have implemented our Information Management System ("IMS"), which fulfills ISO 9001:2008 for quality control in combination with ISO norm 14001:2009, in all our European production sites. We are preparing the timely adoption of the new ISO 9001:2015. (See also "Regulatory and Legal Matters – Facilities and Operational Regulation" below). All of our production facilities have undergone annual ISO 13485 Quality Systems inspections, maintaining all certifications, with no major non-conformances affecting our established management system being noted. The Quality Management System ("QMS") in the Latin America Segment has been established and implemented based upon local or international regulations. At a minimum, each country must comply with the local regulation which provides the specific certification for production. The QMS of each country is reviewed through periodic management review, internal and corporate audits. In the Asia-Pacific Segment, every plant for medical devices or pharmaceutical products has a local QMS that is either ISO 13485:2003 and/or ISO 9001:2008 certified. The update of ISO 9001:2015 will be implemented in required plants in accordance with the standard. Where applicable, each plant also complies to the Medical Device Directive 93/42/EEC. As there are additional requirements on QMSs in most of the countries in the Asia-Pacific Segment for medical device or pharmaceutical manufacturing, additional requirements are based upon target markets and countries of production. All plants have successfully passed the annual ISO 13485/ISO 9001 QMS inspections for maintaining their required certifications.

        Our procurement policy combines worldwide sourcing of high-quality materials with the establishment of long-term supplier relationships. Additionally, we carefully assess the reliability of all materials purchased to ensure that they comply with the rigorous quality and safety standards required for our dialysis products. We outsource only if we have confirmed that a supplier can meet or exceed our internal standards. An interactive information system connects all our global procurement activities to ensure standardized processes and constant monitoring of our projects.

        We focus on further optimizing procurement logistics and reducing total purchasing costs. Supplemental raw material contracts for all manufacturers of semi-finished goods will enable us to improve purchasing terms for our complete network. We are continuously intensifying, where appropriate, our use of internet-based procurement tools to increase agility and global transparency. Our sophisticated routing software enables us to distribute our supplies to best accommodate customer requests while maintaining operational efficiency. Additionally we have an automated replenishment control in our national warehouses that allows the warehouses to be refilled when their inventory reaches a preset defined minimum level and allows us to continue to improve our operational efficiency.

Quality Assurance and Quality Management in Dialysis Care

        Our clinics work in conformance with the generally accepted quality standards of the industry, particularly the KDOQI (Kidney Disease Outcomes Quality Initiative) guidelines from the United States, the European ERBP standard (European Renal Best Practice) and increasingly, the KDIGO (Kidney Disease: Improving Global Outcomes), an industry initiative for global clinical practice guidelines. Clinical data management systems are used to routinely collect certain medical parameters, which we evaluate in anonymized form in compliance with these guidelines.

        In our EMEA Segment, our quality management activities are primarily focused on comprehensive development and implementation of a Healthcare Services QMS as part of an IMS. Our goals in this area include meeting quality requirements for our dialysis clinics and environmental concerns. This approach results in an IMS structure that closely reflects existing corporate processes. We are also able to use the IMS to fulfill many legal and normative regulations covering service lines. In addition, the IMS standard offers a highly flexible structure that allows us to adapt to future regulations. Our IMS fulfills the ISO-Norm 9001:2008 requirements for QMSs and links it with the ISO-Norm 14001:2004 for environmental management systems. At the same time, the IMS conforms to the medical devices requirements of ISO-Norm 13485:2003 and of the Medical Device Directive 93/42/EEC. Currently, dialysis clinics in 17 countries within our EMEA region have QMSs which are certified according to the quality management standard ISO 9001:2008.

        Additionally, we have a comprehensive program, NephroCare Excellence, in our EMEA region. NephroCare is our service that provides complete life-saving treatments for renal failure at the point of

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care using advanced technologies and listening to and understanding our patients' needs to enable the best therapies, ensure a high-quality of care and empower patients.

        At each of our North America Segment dialysis clinics, a quality assurance committee is responsible for reviewing quality of care data, setting goals for quality enhancement and monitoring the progress of quality assurance initiatives. We believe that we enjoy a reputation of providing high quality care to dialysis patients. In 2015, we continued to develop and implement programs to assist in achieving our quality goals. Our Access Intervention Management Program detects and corrects arteriovenous access failure in hemodialysis treatment and the percentage of patients who use catheters, which is the major cause of hospitalization and morbidity.

        The UltraCare® program of our North America Segment dialysis services group represents our commitment to deliver excellent care to patients through innovative programs, state-of-the art technology, continuous quality improvement and a focus on superior patient service. It combines our latest product technology with our highly trained and skilled staff to offer our patients what we believe is a superior level of care.

        Our principal focus of our research and development activities is the development of new products, technologies and treatment concepts to optimize treatment quality and safety for dialysis patients and for the reduction in the costs of providing care. See Item 5.C, "Operating and Financial Review and Prospects – Research and Development."

        The Medicare Improvements for Patients and Providers Act of 2008 ("MIPPA") created the ESRD quality incentive program under which dialysis facilities that fail to achieve quality standards established by the Centers for Medicare and Medicaid Service ("CMS") could have payments reduced by up to 2%. See Item 5, "Operating and Financial Review and Prospects – Overview."

Environmental Management

        We have integrated environmental protection targets into our operations. To reach these goals, our IMS has been in use at our production facilities as well as at a number of dialysis clinics. IMS fulfills the requirements of QMSs as well as environmental management. Environmental goals are set, adhered to and monitored during all stages of the lives of our products, from their development to their disposal.

        We continually seek to improve our production processes for environmental compatibility, which frequently generates cost savings.

        In some of our dialysis facilities, we establish, depending on the particular facility and circumstance, a priority environmental protection target on which our dialysis clinics concentrate for at least one year. Environmental performance in other dialysis facilities is used as the basis for comparisons and targets. Improvements are implemented on a site-by-site basis after evaluation of the site's performance.

        In our European clinics, we continue to introduce our environmental management system in dialysis clinics and we continue to monitor and assess the management system performance in clinics where it was previously implemented. Currently, dialysis clinics in 14 countries in our European region are certified according to the environmental management standard ISO 14001:2004. We achieved ISO 14001:2004 certification for two dialysis clinics in North America as of December 31, 2015. We also conduct EHS regulatory audits of our manufacturing, distribution and laboratories annually and as needed. We continued to roll out the integrated software solution e-con 5 for the management of eco-controlling data in over 700 clinics in the EMEA Segment and the Latin America Segment. This software is intended to reduce environmental management working time while increasing the eco-controlling data quality and possibilities for data analysis at the place of origin.

        In our North America Segment dialysis clinics, we implemented recycling programs for corrugated materials and hemodialysis machines. Targeted environmental performance criteria in other locations include fresh water consumption and improved separation of waste.

Patents and Licenses

        As the owner of patents or licensee under patents throughout the world, we currently hold rights in 6,643 patents and patent applications in major markets. Patented technologies that relate to dialyzers include our generation of DiaSafeplus® filters and FX® dialyzers which are the subject of patents and pending patent applications.

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        Patents and pending patent applications relate to components of our 5008 dialysis equipment series, including, for example, the pump technology, extracorporeal blood pressure measurement and the connector system for our proprietary biBag bicarbonate concentrate container.

        A new therapy system by itself is protected by more than 80 patent families that protect the disposable, the machine or the system, respectively. A number of applications are pending or were recently issued for the North American 2008T HD machine including, for example, the CDX system for the display of medical information directly on the 2008T screen, a wireless wet detector for sensing line disconnect, an improved Crit-Line hematocrit measuring system and a U. S. version of the biBag filling system.

        Applications are also pending or were recently issued relating to our next generation peritoneal dialysis cycler which has a number of innovative attributes such as greatly reduced size and an innovative pumping system. Additionally, a large number of new patent applications have been filed related to our new table top portable HD machine, which is in an advanced development stage that utilizes sorbent technology to greatly reduce water usage.

        Patents for our polyolefine film, Biofine®, which is suitable for packaging intravenous and peritoneal dialysis fluids, have been granted in Australia, Brazil, Canada, South Korea, the United States and parts of Europe, including Germany and Belarus.

        Patents have also been granted in Brazil, Japan, South Korea, the United States and parts of Europe, including Germany, for claims related to a special film for a peelable, non-PVC, multi-chamber bag for peritoneal dialysis solutions. However, oppositions against the patents in parts of Europe remain pending.

        We believe that our success will continue to depend significantly on our technology. As a standard practice, we obtain the legal protections we believe are appropriate for our intellectual property. Nevertheless, we are in a position to successfully market a material number of products for which patent protection has lapsed or where only particular features are patented. We believe that even after the expiration of some of our patents, our proprietary know how for the manufacturing of our products and our continuous efforts in obtaining targeted patent protection for newly developed upgraded products will continue to provide us with a competitive advantage. From time to time our patents may be infringed by third parties and in such case we will assert and enforce our rights. Initially registered patents may also be subject to invalidation or infringement claims made by competitors in formal proceedings (oppositions, trials, re-examinations, etc.) either in part or in whole. In addition, technological developments could suddenly and unexpectedly reduce the value of some of our existing intellectual property.

Trademarks

        Our principal trademarks are the name "Fresenius" and the "F" logo, for which we hold a perpetual, royalty-free license from Fresenius SE, our major shareholder and the sole shareholder of our general partner. See Item 7.B, "Related Party Transactions – Trademarks."

Risk Management

        We see risk management as the ongoing task of determining, analyzing and evaluating the spectrum of potential and actual risks in the Company and its environment and, where possible, taking pre-emptive and corrective action. Our risk management system, which is described in more detail below, provides us with a basis for doing so. It enables management to identify at an early stage risks that could jeopardize our growth or going concern, and to take steps to minimize any negative impact. As such, it is an important component of the Company's management and governance.

        Risk management is part of our integrated management system. The main objective is to identify potential risks as early as possible to assess their impact on business activities and to enable us, where necessary, to take appropriate countermeasures. Opportunities are not covered by the implemented risk management system. The two pillars of our risk management are the corporate controlling function, which is used for the identification and steering of short-term risks, and the internal risk monitoring system, which is typically used for the identification and steering of mid- to long-term risks. In the monitoring system, regional risk managers are responsible for identifying, assessing, and managing potential as well as existing industry- and market-related risks in their region and reporting them to the regional chief financial officers. Twice a year, the regional chief financial officers send their aggregated risk management reports to the central risk management coordinator who consolidates the reports and presents them to the Management Board. The main focus lies with material risks that have a total potential negative impact of €25 million or more in relation to operating income. The risk management reports contain further

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information on potential risks. Our Management Board is informed directly and immediately of any newly identified significant risks. The effectiveness of the risk management system is monitored by the Audit and Corporate Governance Committee of the Supervisory Board.

        In addition to risk reporting, traditional reporting to management is an important tool for managing and controlling risks, as well as for taking preventive measures in a timely manner. Therefore, our Management Board is informed on a monthly basis about the industry situation, our operating and non-operating business and the outcome of analyses of our earnings and financial position, as well as of our assets position on a quarterly basis.

        Part of our risk management system is the Global Internal Audit department. The Global Internal Audit department is regularly informed about the results of the risk management system. This department audits a selected number of departments and subsidiaries worldwide each year. The department works according to the internationally accepted standards of the Institute of Internal Auditors. The scope of internal auditing is widespread and involves, among other activities, periodic assessment of the effectiveness of controls (including legal compliance controls) over business processes, the reliability of financial reporting and compliance with accounting regulations and internal policies. The Company's locations and units to be audited are determined annually on the basis of a selection model taking various risks into consideration. This annual audit plan is reviewed by the Management Board and approved by the Audit and Corporate Governance Committee of the Supervisory Board. All audit reports are presented to the Management Board.

        The Global Internal Audit department is also responsible for monitoring the implementation of measures documented in the reports. The Management Board is informed about the implementation status on a quarterly basis. The Audit and Corporate Governance Committee of the Supervisory Board is also informed of the audit results. In 2015, a total of 54 audits were carried out.

        As a company required to file reports under the Exchange Act, we are subject to the provisions of the Sarbanes-Oxley Act of 2002 and related listing rules of the New York Stock Exchange applicable to foreign private issuers. For further information on these requirements, see Items 15.A. and 15.B, "Disclosure Controls and Procedures" and "Management's annual report on internal control over financial reporting."

Regulatory and Legal Matters

Regulatory and Compliance Overview

        Our operations are subject to extensive governmental regulation by virtually every country in which we operate including, most notably, in the U.S., at the federal, state and local levels. Although these regulations differ from country to country, in general, non-U.S. regulations are designed to accomplish the same objectives as U.S. regulations governing the operation of health care centers, laboratories and manufacturing facilities, the provision of high quality health care for patients, compliance with labor and employment laws, the maintenance of occupational, health, safety and environmental standards and the provision of accurate reporting and billing for governmental payments and/or reimbursement. In the U.S., some states establish regulatory processes that must be satisfied prior to the establishment of new health care centers. Outside the U.S., each country has its own payment and reimbursement rules and procedures, and some countries prohibit ownership of healthcare providers or establish other regulatory barriers to direct ownership by foreign companies. In such jurisdictions, we may establish alternative contractual arrangements to provide services to those facilities.

        Any of the following matters could have a material adverse effect on our business, financial condition and results of operations:

    failure to receive required licenses, certifications, clearances or other approvals for new facilities or products or significant delays in such receipt;

    complete or partial loss of various certifications, licenses, or other permits required under governmental authority by withdrawal, revocation, suspension, or termination or restrictions of such certificates and licenses by the imposition of additional requirements or conditions, or the initiation of proceedings possibly leading to such restrictions or the partial or complete loss of the required certificates, licenses or permits;

    recoupment of payments received from government payors and government health care program beneficiaries because of any failures to meet applicable requirements;

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    a non-appealable finding of material violations of applicable healthcare laws; and

    changes resulting from healthcare reform or other government actions that restrict our operations, reduce reimbursement or reduce or eliminate coverage for particular products or services we provide.

        We must comply with all U.S., German and other legal and regulatory requirements under which we operate, including the U.S. federal Medicare and Medicaid Fraud and Abuse Amendments of 1977, as amended, generally referred to as the "Anti-Kickback Statute", the federal False Claims Act, the federal restrictions on certain physician referrals, commonly known as the "Stark Law", the U.S. Civil Monetary Penalties Law, including the prohibition on inducements to patients to select a particular healthcare provider, U.S. federal rules protecting the privacy and security of patient medical information, as promulgated under the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and, as amended by the Health Information Technology for Economic and Clinical Health ("HITECH") Act (enacted as part of the American Recovery and Reinvestment Act of 2009), and other fraud and abuse laws and similar state statutes, as well as similar laws in other countries.

        A number of states in which we operate have laws that prohibit business entities, such as our Company and our subsidiaries, from practicing medicine, employing physicians to practice medicine or exercising control over medical decisions by physicians (known collectively as the corporate practice of medicine prohibition). These states also prohibit entities from engaging in certain arrangements, such as fee-splitting, with physicians.

        The Patient Protection and Affordable Care Act (Pub.L. 111-148), as amended by the Health Care and Education Reconciliation Act (Pub.L. 111-152) (collectively, "ACA") enacted in the U.S. in 2010 and other recent laws expanded the reach of many of these laws and expanded federal enforcement authority. Moreover, there can be no assurance that applicable laws, or the regulations thereunder, will not be amended, or that enforcement agencies or the courts will not make interpretations inconsistent with our own, any one of which could have a material adverse effect on our business, reputation, financial condition and operating results. Sanctions for violations of these statutes may include criminal or civil penalties, such as imprisonment, fines or forfeitures, denial of payments, and suspension or exclusion from the Medicare and Medicaid programs. In the U.S., some of these laws have been broadly interpreted by a number of courts, and significant government funds and personnel have been devoted to their enforcement because such enforcement has become a high priority for the federal government and some states. Our company, and the healthcare industry in general, will continue to be subject to extensive federal, state and foreign regulation, the full scope of which cannot be predicted. In addition, the U.S. Congress and federal and state regulatory agencies continue to consider modifications to healthcare laws that may create further restrictions.

        We maintain a comprehensive worldwide compliance program under the overall supervision of our chief compliance officer. The program includes a compliance staff, a written code of conduct applicable worldwide, training programs, regulatory compliance policies and procedures including corrective action for failure to follow policies, provisions for anonymous reporting of suspected violations of applicable laws or Company policies, and periodic internal audits of our compliance procedures. We operate many facilities throughout the United States and other countries in which we do business. In such a decentralized system, it is often difficult to maintain the desired level of oversight and control over the thousands of individuals employed by many affiliated companies. We rely on our management structure, regulatory and legal resources, and the effective operation of our compliance program to direct, manage and monitor the activities of these employees. If our employees, deliberately or inadvertently, were to submit inadequate or incorrect billings to any federally-funded healthcare program, or engage in impermissible conduct with physicians or other referral sources or vendors with which we do business, the actions of such persons could subject us and our subsidiaries to liability under the Anti-Kickback Statute, the Stark Law, the False Claims Act or the FCPA, among other laws. See Note 19, "Commitments and Contingencies – Other Litigation and Potential Exposures" of the Notes to our audited consolidated financial statements, included in this report.

Product Regulation

U.S. Pharmaceuticals

        In the U.S. numerous regulatory bodies, including the Food and Drug Administration ("FDA") and comparable state regulatory agencies impose requirements on certain of our subsidiaries as a

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manufacturer, distributor and a seller of drug products under their jurisdiction. Some of the products our subsidiaries manufacture and/or distribute are subject to regulation under the Federal Food, Drug, and Cosmetic Act of 1938, as amended ("FDCA") and FDA's implementing regulations. They include our peritoneal dialysis and saline solutions, PhosLo® (calcium acetate), Phoslyra® (calcium acetate oral solution), Venofer® (iron sucrose injection, USP), and Velphoro (sucroferric oxyhydroxide). Many of these requirements are similar to those for devices, as described below. We are required to register as an establishment with the FDA, submit listings for drug products in commercial distribution and comply with regulatory requirements governing product approvals, drug manufacturing, labelling, promotion, distribution, post market safety reporting and recordkeeping. We are subject to periodic inspections by the FDA and other authorities for compliance with these requirements. Our pharmaceutical products must be manufactured in accordance with current Good Manufacturing Practices ("cGMP"). We are required to provide information to the FDA whenever we become aware of a report of an adverse drug experience associated with the use of one of our drug products that is both serious and unexpected, as defined in FDA regulations and guidance. In addition, as with the marketing of our medical devices, in order to obtain marketing approval of our drug products we must satisfy mandatory procedures and safety and efficacy requirements. Furthermore, the FDA prohibits our products division from promoting our pharmaceutical products in a false or misleading manner or for unapproved indications and from otherwise misbranding or adulterating them. Finally, if the FDA believes that a company is not in compliance with applicable drug regulations, it has similar enforcement authorities as those discussed below with respect to medical devices.

Pharmaceuticals Outside the U.S.

        Some of our products, such as peritoneal dialysis solutions and PhosLo® and Phoslyra®, are considered medicinal products subject to the specific drug law provisions in various countries. The European Union has issued a directive on medicinal products for human use, No. 2001/83/EC (November 6, 2001), as amended. Each member of the European Union is responsible for conforming its law to comply with this directive. In Germany, the German Drug Law (Arzneimittelgesetz) ("AMG"), which implements European Union requirements, is the primary regulation applicable to medicinal products.

        The provisions of the German Drug Law are comparable with the legal standards in other European countries. As in many other countries, the AMG provides that a medicinal product may only be placed on the market if it has been granted a corresponding marketing authorization. Such marketing authorization is granted by the licensing authorities only if the quality, efficacy and safety of the medicinal product have been scientifically proven. Medicinal products marketed on the basis of a corresponding marketing authorization are subject to ongoing control by the competent authorities. The marketing authorization may also be subsequently restricted or made subject to specific requirements.

        The production of medicinal products requires a corresponding manufacturing license which is granted by the competent authorities of the relevant EU Member State for a specific manufacturing facility and for specific medicinal products and forms of medicinal products. The manufacturing license is granted only if the manufacturing facility, production techniques and production processes comply with the national drug law requirements, with the principles and guidelines of EU-Good Manufacturing Practice ("EU-GMP") as well as the terms of the particular marketing authorization. International guidelines also govern the manufacture of medicinal products and, in many cases, overlap with national requirements. Material regulations concerning manufacture and registration related to medicinal products have been issued by the European Commission and the International Conference on Harmonization of Technical Requirements for Human Use ("ICH"). In particular, the Pharmaceutical Inspection Co-operation Scheme ("PIC/S"), an international treaty, contains rules binding many countries in which medicinal products are manufactured. Among other things, the European Commission, PIC/S and ICH establish requirements for GMP which are then adopted at the national level. Another international standard, which is non-binding for medicinal products, is the ISO9001:2008 system for assuring quality management system requirements. This system has a broader platform than EU-GMP, which is more detailed and is primarily acknowledged outside the field of medicinal products, e.g., with respect to medical devices.

U.S. Medical Devices

        Our subsidiaries engaged in the manufacture of medical devices are required to register with the FDA as device manufacturers and submit listing information for devices in commercial distribution. As a manufacturer of medical devices, we are subject to requirements governing premarket approval and clearance, labelling, promotion, clinical research, medical device adverse event reporting, manufacturing

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practices, reporting of corrections and removals, and recordkeeping, and we are subject to periodic inspection by the FDA for compliance with these requirements. With respect to manufacturing, we are subject to FDA's Quality System Regulation (21 C.F.R. Part 820) and related FDA guidance, which requires us to manufacture products in accordance with cGMP, including standards governing product design. The medical device reporting regulations and guidance require that we report to the FDA whenever we receive or become aware of information that reasonably suggests that a device may have caused or contributed to a death or serious injury, or that a device has malfunctioned and a device or similar device would be likely to cause or contribute to a death or serious injury if the malfunction were to recur. In addition, the FDA prohibits our products division from promoting our manufactured products for unapproved or uncleared indications or in a false or misleading manner. We are also prohibited from promoting unapproved or uncleared drugs or devices more generally. Finally, as with our pharmaceutical products, states impose additional requirements on our drug manufacturing and distribution activities including requiring additional state licenses. We are subject to periodic inspections by the FDA and other authorities for compliance with these requirements.

Medical Devices Outside the U.S.

        In the EU, the requirements to be satisfied by medical devices are laid down in three European directives to be observed by all Member States and all Member States of the European Economic Area ("EEA"), as well as all future accession states: (1) Directive 90/385/EEC of June 20, 1990 relating to active implantable medical devices ("AIMDs"), as last amended ("AIMD Directive"), (2) Directive 93/42/EEC of June 14, 1993 relating to medical devices, as last amended ("MD Directive"), and (3) Directive 98/79/EC of October 27, 1998 relating to in vitro diagnostic medical devices as last amended ("IVD Directive"). In addition, Directive 2001/95/EC of December 3, 2001, as last amended, concerning product safety should be noted. The MD Directive, has been amended, 2007/47/EC, with the intention to achieve improvements, including in the following areas: clinical assessment by specification of the requirements in more detail; monitoring of the devices after their placing on the market; and decision making by enabling the Commission to make binding decisions in case of contradictory opinions of states regarding the classification of a product as a medical device. In the future, the industry will face increasing requirements for medical devices. In September 2012, the first draft of a new regulation on medical devices ("MDR") was published by the European Commission. In October 2013, this draft, supplemented by additional amendments, was voted on by the European Parliament and subsequently published. It provided for further tightening of regulations for the manufacture of medical devices, as it applies to both manufacturers and accredited organizations within the EU ("Notified Bodies") for assessing product standards. In October 2015, the European Commission, Parliament and Council met to form a consolidated opinion for the MDR. The final regulation is expected to replace the MD Directive by 2016.

        According to the EU directives relating to medical devices, the CE mark (the abbreviation of Conformité Européenne signifying that the device complies with all applicable requirements) shall serve as a general product passport for all Member States of the EU and the EEA. Upon receipt of a CE certificate for a product according to the applicable conformity assessment procedure, e.g. a certified full quality management system for medical devices according to ISO13485:2012, and the documented declaration and proof of conformity of our products to the harmonized European norms (Declaration of Conformity), we as the legal manufacturer are able to mark products as being in compliance with the European Community ("EC") requirements. If able to do so, the manufacturer must place a "CE" mark on the products. Medical devices that do not bear the "CE" mark cannot be imported, sold or distributed within the EC.

FDA Enforcement Action

        If the FDA believes that a regulated company is not in compliance with applicable laws and regulations, it can pursue various administrative and enforcement actions, including, for example, issuing an untitled or warning letter, initiating a seizure action, or seeking an injunction. Among other things, these actions can result in the assessment of administrative penalties, product recalls, and civil or criminal enforcement. Such actions could also lead to additional enforcement by other state or federal government agencies as well as law suits by patients or shareholders.

        On September 15, 2010, the FDA issued a warning letter to us citing several cGMP deficiencies, in response to which we have been taking corrective action. On November 5, 2015, following re-inspection, the FDA issued a close-out letter for this warning letter, stating that the FDA had completed its evaluation of the corrective actions taken in response to the warning letter and that the alleged violations have been addressed. In any re-inspection the FDA is not limited to reviewing only the processes, procedures, and

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facilities that triggered the re-inspection, particularly if the FDA believes the issues may be systemic. We are engaged in ongoing remediation efforts and continued dialogue with the FDA regarding remediation.

        On April 6, 2011 the FDA issued to us a warning letter alleging that we marketed certain blood tubing sets without required premarket 510(k) clearance, in response to which we ceased marketing and distributing those blood tubing sets that were the subject of a January 2011 recall. We received 510(k) clearance of the blood tubing set product from the FDA on June 15, 2012 and subsequently recommenced marketing and distribution of these products. In addition, we have completed a comprehensive review of our 510(k) filings and submitted our findings to the FDA, and we continue to work with the FDA regarding effective submission strategies for certain product lines.

        On March 29, 2012, we issued an urgent product notification regarding our NaturaLyte® Liquid and Granuflo® acid concentrate products that are used as one component of dialysate. The notification, which was also incorporated into revised product labels, reflected a memorandum issued by the Fresenius Medical Services Chief Medical Office in November 2011 and cautioned clinicians about possible risks for acid-base management in patients associated with inappropriate prescription of these products. The FDA subsequently classified the notification and related labeling revisions as a Class I recall, and issued its own Safety Communication warning physicians about the need to prescribe all acid concentrate products currently available on the market appropriately.

        After reconsideration of the November 2011 memorandum, the FDA in May 2014 permitted the Company to withdraw the March 29, 2012 notification and to revise its product labels consistently with that withdrawal. The FDA has not requested any change in the composition of the Company's acid concentrate products, nor has it requested any return or removal of products in connection with the controversy surrounding the November 2011 memorandum. The FDA's Safety Communication directed at all dialysate products remains in effect. Wrongful death and personal injury litigation predicated on the November 2011 memorandum continues. See Note 20 of the Notes to Consolidated Financial Statements, "Commitments and Contingencies – Commercial Litigation" included in this report.

        On March 6, 2013, the FDA issued a warning letter following a two week inspection of the Ogden, Utah facility. The warning letter alleged two violations of cGMP requirements. First, the FDA asserted that FMCNA did not conduct adequate design verification studies related to electron beam (E-Beam) sterilized polysulfone dialyzers. Second, the FDA alleged that the corresponding design validation of these dialyzers is incomplete. On April 30, 2015, the FDA issued a close-out letter for this warning letter, stating that the FDA had completed its evaluation of the corrective actions taken in response to the warning letter and that the alleged violations have been addressed.

        We cannot assure that all necessary regulatory clearances or approvals, including those for new products or product improvements, will be granted on a timely basis, if at all. Delays in or failure to receive clearance or approval or delays in or failures to carry out product recalls may result in liability and reputational harm and may materially adversely affect our operating results. We also cannot assure that the FDA will be satisfied by our corrective and preventative actions taken as part of our ongoing remediation efforts. If the FDA does not accept our corrective and preventative actions, the FDA could take administrative, civil, or criminal enforcement action, resulting in liability and reputational harm, which could materially affect our operating results.

Sales of Dialysis Products to Iran

        The Company actively employs comprehensive policies, procedures and systems to ensure compliance with applicable controls and economic sanctions laws. The Company has allocated resources to design, implement and maintain a compliance program specific to the Company's U.S. and non-U.S. activities. At the same time, the Company's dedication to providing its life-saving dialysis products to patients and sufferers of end-stage renal disease extends worldwide, including conducting humanitarian-related business with distributors in Iran in compliance with applicable law. In particular, the Company's product sales to Iran from Germany are not subject to the EU's restrictive measures against Iran established by Council Regulation (EU) No. 267/2012 of March 23, 2012, as last amended by Council Regulation (EU) 2016/31 of January 14, 2016, as the Company's products sold to Iran do not fall within the scope of the EU sanctions and none of the end users or any other person or organization involved is listed on the relevant EU sanctions lists. Because the Company's sales to Iran were and are made solely by its German subsidiaries, the sales are not subject to the Iranian Transactions and Sanctions Regulations, 31 C.F.R Part 560 ("ITSR"), and are not eligible for licenses from the U.S. Treasury Department's Office of Foreign Assets Control ("OFAC") pursuant to the Trade Sanctions Reform and Export Enhancement

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Act of 2000. Also, ITSR § 560.215(a) is not applicable in the present case because the Company does not have a U.S. parent company and is not in any other way owned or controlled by a United States person, and the Company's affiliates involved in Iran-related transactions are not owned or controlled by a United States person. That the Company has a U.S. subsidiary does not cause the ITSR to apply to the Company's Iran-related transactions (because the sales by the Company's non-U.S. affiliates are outside the scope of ITSR §560.215(a)). In any case, OFAC's public guidance provides that sales of medical devices to Iran by non-U.S. companies are generally subject to humanitarian exceptions under U.S. sanctions targeting Iran.

        During the year ended December 31, 2015, the Company sold approximately $9.4 million of dialysis products to independent Iranian distributors and other foreign distributors for resale, processing and assembling in Iran. The products included fibre bundles, hemodialysis concentrates, dialysis machines and parts, and related disposable supplies. The sales of these products generated approximately $6.7 million in operating income. During 2015, we also paid approximately $11.5 thousand in transportation costs most of which were reimbursed by the distributors. All such sales were made by the Company's German subsidiaries. Based on information available to the Company, the Company believes that most if not all products were eventually sold to hospitals in Iran through state purchasing organizations affiliated with the Iranian Ministry of Health and were therefore sales to the "Government of Iran" as defined in ITSR § 560.304. The Company's 2015 sales to Iran represent 0.6% of its total revenues. The Company has no subsidiaries, affiliates or offices, nor does it have any direct investment or own any assets, in Iran. In light of the humanitarian nature of its products and the patient communities that benefit from our products, the Company expects to continue selling dialysis products to Iran, provided such sales continue to be permissible under applicable export control and economic sanctions laws and regulations.

Environmental Regulation

        We are subject to a broad range of federal, foreign, state and local laws and regulations relating to pollution and the protection of the environment. These laws regulate, among other things, the discharge of materials into the environment, the handling and disposal of wastes, remediation of contaminated sites and other matters relating to worker, public and consumer health, and safety as well as to the protection of the environment. In addition, the Company uses substances regulated under U.S. and EU environmental laws, primarily in manufacturing and sterilization processes. Noncompliance with these regulations can result in significant fines or penalties or limitations on our operations. The applicable environmental, health and safety laws and regulations, and any changes to them or their enforcement, may require us to make material expenditures with respect to ongoing compliance with or remediation under these laws and regulations or require that we modify our products or processes in a manner that increases our costs or reduces revenues.

        An Environmental Management System ("EMS") based on ISO 14001:2004 has been established in our main European production plants and in a high number of dialysis clinics in the European region. Compliance with environmental laws and regulations is a core objective of our EMS. Internal and external audits are organized and performed to verify compliance with the EMS requirements and applicable environmental laws and regulations.

Facilities and Operational Regulation

U.S.

        Federal, state and local regulations (implemented by CMS, FDA, the Occupational Health and Safety Administration ("OSHA"), the Drug Enforcement Administration, and state departments or boards of public health, public welfare, medicine, nursing, pharmacy, and medical assistance, among others) require us to meet various standards relating to, among other things, the management, licensing, safety, security and operation of facilities (including, e.g., laboratories, pharmacies, and clinics), personnel qualifications and licensing, the maintenance of proper records, equipment, and quality assurance programs, and the dispensing, storage, and administration of controlled substances. All of our operations in the U.S. are subject to periodic inspection by federal, state and local agencies to determine if the operations, premises, equipment, personnel and patient care meet applicable standards. To receive Medicare/Medicaid reimbursement, our health care centers, renal diagnostic support business and laboratories must be certified by CMS. While all of our entities that furnish Medicare or Medicaid services maintain and renew the required certifications, it is possible that any such entity could lose or be delayed in renewing a certification, which could have a material adverse effect on our business, financial condition, and results of operations.

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        Our operations are subject to various U.S. Department of Transportation, Nuclear Regulatory Commission, Environmental Protection Agency, and OSHA requirements and other federal, state and local hazardous and medical waste disposal laws. As currently in effect, laws governing the disposal of hazardous waste do not classify most of the waste produced in connection with the provision of our health care services as hazardous, although disposal of non-hazardous medical waste is subject to specific state regulation. Our operations are also subject to various air emission and wastewater discharge regulations.

        A few states have certificate of need programs regulating the establishment or expansion of healthcare facilities, including dialysis centers. We believe that we have obtained all necessary approvals for the operation of our healthcare facilities in accordance with all applicable state certificate of need laws.

Germany and Other Non-U.S.

        Most countries outside of the U.S. regulate operating conditions of dialysis clinics and hospitals and the manufacturing of dialysis products, medicinal products and medical devices.

        We are subject to a broad spectrum of regulation in almost all countries. Our operations must comply with various environmental and transportation regulations in the various countries in which we operate. Our manufacturing facilities and dialysis clinics are also subject to various standards relating to, among other things, facilities, management, personnel qualifications and licensing, maintenance of proper records, equipment, quality assurance programs, the operation of pharmacies, the protection of workers from blood-borne diseases and the dispensing of controlled substances. All of our operations may be subject to periodic inspection by various governmental authorities to determine if the operations, premises, equipment, personnel and patient care meet applicable standards. Our dialysis clinic operations and our related activities generally require licenses, which may be subject to periodic renewal and may be revoked for violation of applicable regulatory requirements.

        In addition, many countries impose various investment restrictions on foreign companies. For instance, government approval may be required to enter into a joint venture with a local partner. Some countries do not permit foreign investors to own a majority interest in local companies or require that companies organized under their laws have at least one local shareholder. Investment restrictions therefore affect the corporate structure, operating procedures and other characteristics of our subsidiaries and joint ventures in these and other countries.

        We believe our facilities are currently in compliance in all material respects with the applicable national and local requirements in the jurisdictions in which they operate.

Reimbursement

        As a global company delivering health care and dialysis products, we are represented in more than 120 countries worldwide. Consequently, we face the challenge of addressing the needs of a wide variety of stakeholders, such as patients, customers, payors and legislators in very different economic environments and healthcare systems.

        Healthcare systems and reimbursement structures for ESRD treatment vary significantly by country. In general, the government (in some countries in coordination with private insurers) or social insurance programs pay for health care. Funding is achieved through taxes and other sources of government income, from social security contributions, or a combination of those sources. However, not all healthcare systems provide for dialysis treatment. In some developing countries, only limited subsidies from government, social insurances or charitable institutions are available, and typically dialysis patients must personally finance all or a substantial share of the treatment cost. Irrespective of the funding structure, in some countries patients in need of dialysis do not receive treatment on a regular basis but rather when the financial resources allow it.

U.S.

        Our dialysis clinics provide outpatient hemodialysis treatment and related services for ESRD patients. Medicare pays as the primary insurer for Medicare-eligible individuals under some circumstances. For Medicare-primary patients, Medicare pays 80% of the prospective payment amount for the ESRD PPS items and services. The beneficiary or third-party insurance payors (including employer-sponsored health insurance plans, commercial insurance carriers and the Medicaid program) on behalf of the beneficiary are responsible for paying the beneficiary's cost-sharing obligations (typically an annual deductible and 20% co-insurance), subject to the specific coverage policies of such payors. Each third-party payor, including

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Medicaid, makes payment under contractual or regulatory reimbursement provisions that may or may not cover the full 20% co-payment or annual deductible. Where the beneficiary has no third-party insurance or the third-party insurance does not fully cover the co-payment or deductible, the beneficiary is responsible for paying the co-payments or the deductible, which we frequently cannot fully collect despite collection efforts. Medicare Advantage plans are required to pay at least the traditional Medicare fee for service rate to their out of network providers. As a result, Medicare Advantage plans with whom we do not have a contract will pay at least 80% of the prospective payment amount for the ESRD PPS items and services we provide their members. We have also entered into network contracts with several Medicare Advantage plans pursuant to which we may be entitled to higher reimbursement than traditional Medicare rates.

        Medicare's ESRD Prospective Payment System.    Under the ESRD PPS, CMS reimburses dialysis facilities with a single payment for each dialysis treatment, inclusive of (i) all items and services included in the former composite rate, (ii) oral vitamin D analogues, oral levocarnitine (an amino acid derivative) and all ESAs and other pharmaceuticals (other than vaccines) furnished to ESRD patients that were previously reimbursed separately under Part B of the Medicare program, (iii) most diagnostic laboratory tests and (iv) certain other items and services furnished to individuals for the treatment of ESRD.

        The base ESRD PPS payment is subject to case mix adjustments that take into account individual patient characteristics (e.g., age, body surface area, body mass, time on dialysis) and certain co-morbidities. The base payment is also adjusted for (i) certain high cost patient outliers due to unusual variations in medically necessary care, (ii) disparately high costs incurred by low volume facilities relative to other facilities, (iii) provision of home dialysis training and (iv) wage-related costs in the geographic area in which the provider is located.

        The Protecting Access to Medicare Act of 2014 ("PAMA") provides that rates will be updated by the market basket rate of increase net of the multifactor productivity adjustment. PAMA further specified that reductions of 1.25 percentage points in each of 2016 and 2017 and a 1.0 percentage point reduction in 2018. In addition, the law mandates that ESRD-related drugs with only an oral form, including PhosLo®, are expected to be reimbursed under the ESRD PPS in the future with an adjusted payment amount to be determined by the Secretary of Health and Human Services to reflect the additional cost to dialysis facilities of providing these medications. Subsequently, the Achieving a Better Life Experience Act of 2014 delayed inclusion of such drugs in the ESRD PPS until January 1, 2025.

        On October 29, 2015, CMS issued a final rule to update payment policies and rates under the ESRD PPS for renal dialysis services furnished on or after January 1, 2016. In this final rule, CMS clarified that once a non-oral version of a previously oral-only drug, such as phosphate binders and calcimimetics, is approved by the Food and Drug Administration ("FDA"), such drug will cease to be considered oral-only. At such time, CMS will include both the oral and any non-oral version of the drug in the ESRD PPS. However, for at least two years after FDA approval, CMS will pay for both oral and non-oral versions of the drug using a transition drug add-on payment adjustment such as average sales price plus 6%, or some other mechanism set in accordance with Section 1847A of the Social Security Act. During this transition period, CMS will not pay outlier payments for these drugs, but will collect data reflecting utilization of both the oral and injectable or intravenous forms of the drugs, as well as payment patterns, in order to more accurately determine the appropriate payment rate to be included in the ESRD PPS for these drugs. At the end of this transition period, CMS will add payment for the oral and non-oral versions of the drug into the ESRD PPS through public rulemaking process similar to that used to set annual ESRD PPS rates.

        Sequestration of Medicare Payments.    On August 2, 2011, the U.S. Budget Control Act of 2011 ("BCA") was enacted, raising the U.S. debt ceiling and putting into effect a series of actions for deficit reduction. The BCA, in effect, required automatic across-the-board spending cuts for most government programs over nine fiscal years (2013-2021); these cuts were projected to total $1.2 trillion. The first cuts for Medicare payments to providers and suppliers were implemented on April 1, 2013. The Bipartisan Budget Act of 2013 extended the cuts to mandatory spending programs, including Medicare, for an additional two years. The reduction in Medicare payments to providers and suppliers (the "U.S. Sequestration") is limited to one adjustment of no more than 2 percent in each year through 2022, rising to 2.9 percent for the first half of FY 2023 and dropping to 1.11 percent for the second half of FY 2023. As mandated by PAMA, the reductions pursuant to U.S. Sequestration for the first six months of 2024 will be 4 percent, and there will be no reductions for the second six months of 2024. The Medicare sequestration reimbursement reduction is independent of annual inflation update mechanisms, such as the market basket update pursuant to the ESRD PPS.

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        On October 29, 2015 the Centers for Medicare and Medicaid Service ("CMS") issued the final ruling regarding the ESRD PPS rate for 2016. Large dialysis organizations will experience a 0.2% increase in payments. The base rate per treatment is $230.39, which represents an approximate reduction of 4%, net, from the 2015 base rate of $239.43. The 2016 final ruling reflects a net market basket increase of 0.15% (2% less a 1.25% PAMA reduction and 0.6% productivity adjustment), application of a wage index budget-neutrality adjustment factor of 1.000495 and application of a refinement budget-neutrality adjustment factor of 0.960319. However, the approximate 4% reduction is almost completely offset with CMS case mix adjustments based upon their analysis of the fiscal years 2012 and 2013

        Revisions to Medicare's physician fee schedule.    The Medicare and CHIP Reauthorization Act of 2015 ("MACRA") removed the periodic threat of substantial reductions in payment rates under the Physician Fee Schedule ("PFS") that could have, if they had been permitted to take effect, significantly affected our businesses and those of our affiliated physicians. MACRA permanently removed the "sustainable growth rate" provision and in its place specified modest increases in PFS payment rates for the next several years. MACRA creates an elaborate scheme of incentive payments and penalty adjustments starting in 2019 based on physician performance as reflected in various measures of cost and quality of care and on possible participation in "alternative payment models," such as accountable care organizations. We cannot predict whether this scheme is likely to have material effects on our revenues and profitability in our nephrology, urgent care, vascular, cardiovascular and endovascular speciality services or in our hospitalist business.

        The ESRD PPS's quality incentive program ("QIP"), affects Medicare payments based on performance of each facility on a set of quality measures. Dialysis facilities that fail to achieve the established quality standards have payments for a particular year reduced by up to 2 percent, based on a prior year's performance. CMS updates the set of quality measures each year, adding, revising or retiring measures. The 2016 QIP payment adjustment is based on each facility's performance in 2014 on a set of measures that focus on anemia management, dialysis adequacy, reporting of dialysis events to the Centers for Disease Control and Prevention ("CDC"), administration of patient satisfaction surveys and monthly reporting of mineral metabolism. For payment year 2016, CMS continued all of the 2015 QIP measures and added two new clinical measures (proportion of patients with hypercalcemia and dialysis-related infections reported to the CDC's National Health Safety Network). For payment year 2017, CMS will retire one measure of hemoglobin adequacy and add a measure of hospital readmissions in order to assess coordinated care. For payment year 2018, CMS will add two new clinical measures (standardized transfusion ratio and pediatric peritoneal dialysis adequacy) and three new reporting measures (pain assessment and follow-up, clinical depression screening and follow-up and influenza vaccination of healthcare personnel). For payment year 2019, CMS will replace four separate measures of dialysis adequacy with a single comprehensive dialysis adequacy clinical measure.

        The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 implements broad healthcare system reforms, including (i) provisions to facilitate access to affordable health insurance for all Americans, (ii) expansion of the Medicaid program, (iii) an industry fee on pharmaceutical companies starting in 2011 based on sales of brand name pharmaceuticals to government healthcare programs, (iv) increases in Medicaid prescription drug rebates effective January 1, 2010, (v) commercial insurance market reforms that protect consumers, such as bans on lifetime and annual limits, coverage of pre-existing conditions, and limits on waiting periods, (vi) provisions encouraging integrated care, efficiency and coordination among providers (vii) provisions for reduction of healthcare program waste and fraud and (viii) a 2.3% excise tax on manufacturers' medical device sales starting in 2013, However, pursuant to the Consolidated Appropriations Act of 2016, which was signed into law on December 18, 2015, the medical device excise tax has been suspended for all sales of such devices in 2016 and 2017. (ACA's dialysis provision was subsequently amended by the American Taxpayer Relief Act of 2013 ("ATRA") and then by P AMA, as noted above.)

        Pharmaceuticals.    We participate in the federal Medicaid rebate program established by the Omnibus Budget Reconciliation Act of 1990, as well as several state supplemental rebate programs. We make our pharmaceutical products available to authorized users of the Federal Supply Schedule ("FSS") of the General Services Administration under an FSS contract negotiated by the Department of Veterans Affairs ("VA"). Under our license to market and distribute the IV Iron medication Venofer® to freestanding dialysis clinics, we also are considered, for statutory price reporting purposes, to be the manufacturer of Venofer® (when sold by us under one of our national drug codes ("NDCs")), which is reimbursed under Part B of the Medicare program. Our products also are subject to a federal requirement that any company

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participating in the Medicaid rebate or Medicare program charge prices comparable to the rebates paid to State Medicaid agencies on purchases under the Public Health Services ("PHS") pharmaceutical pricing program managed by the Department of Health and Human Services ("HHS") (also known as the "340B program" by virtue of the section of the Public Health Service Act ("PHSA") that created the program). The PHS pricing program extends these deep discounts on outpatient drugs to a variety of community health clinics and other entities that receive health services grants from the PHS, certain "look alikes," as well as various other providers. ACA expanded the 340B program to include additional providers.

        Under the Medicaid rebate program, we pay a rebate to each state Medicaid program based upon sales of our covered outpatient drugs that are separately reimbursed by those programs. ACA increased the minimum federal Medicare rebate percentages, effective January 1, 2010. Rebate calculations and price reporting rules are complex and, in certain respects, subject to interpretations of law, regulation, or policy guidance by us, government or regulatory agencies and the courts. The Medicaid rebate amount is computed each quarter based on our submission to CMS of our current Average Manufacturer Price ("AMP") and Best Price for our pharmaceutical products. The Veterans Health Care Act imposes a requirement that the prices we charge to certain federal entities under the FSS must be no greater than the Federal Ceiling Price, which is determined by applying a statutory discount to the average price charged to non-federal customers through wholesalers. Because the amount the government pays to reimburse the cost of a drug under Part B of the Medicare program is ordinarily based on the drug's average sales price ("ASP"), additional price calculation and reporting obligations are imposed on the manufacturers of Part B drugs under that program (to the extent these manufacturers participate in the Medicaid rebate program, from which an obligation to report Part B drug prices flows). Since Venofer® is a Part B drug (i.e., one ordinarily administered incident to a physician service), we are responsible for compiling and utilizing a wide range of sales data elements to determine the ASP of Venofer® marketed under our NDC, and reporting it to CMS. We are subject to specific ASP reporting obligations with respect to our Venofer® sales under a consent order issued by the Federal Trade Commission in October 2008 in connection with establishment of our licensing and distribution arrangements with Galenica and Luitpold (File No. 081-0146) described under "B. Business Overview – Renal Pharmaceuticals." The Medicare ESRD PPS system incorporates payment for Venofer® at dialysis facilities.

        Government agencies may make changes in program interpretations, requirements or conditions of participation, and retain the right to audit the accuracy of our computations of rebates and pricing, some of which may result in implications (such as recoupment) for amounts previously estimated or paid which may have a material adverse effect on the Company's revenues, profitability and financial condition.

        Laboratory Tests.    Spectra obtains a portion of its net revenue from Medicare, which pays for clinical laboratory services provided to dialysis patients in two ways. Payment for most tests is included in the ESRD PPS bundled rate paid to dialysis clinics. The dialysis clinics obtain the laboratory services from laboratories and pay the laboratories for the services. In accordance with industry practice, Spectra usually provides such testing services under capitation agreements with its customers pursuant to which it bills a fixed amount per patient per month to cover the laboratory tests included in the ESRD PPS rate at the frequencies designated in the capitation agreement.

        Second, laboratory tests provided by Shiel Laboratory and the few laboratory tests performed by Spectra for Medicare beneficiaries that are not included in the ESRD PPS bundled rate are billed separately to Medicare. Such tests are paid at 100 percent of the payment amounts on Medicare's Clinical Laboratory Fee Schedule ("CLFS"); these amounts vary across different geographic areas but which cannot exceed national ceilings on payment rates, called national limitation amounts ("NLAs"). Medicare updates the payment rates to reflect inflation by the change in consumer price index, subject to certain reductions.

        PAMA requires CMS to substantially revise how payment rates are determined under the CLFS, with new payment rates scheduled to be effective January 1, 2017. The new rates will be determined based on the median of rates paid by private payors for these tests in the period before the new rates take effect. The new rates will be effective for most tests for a three-year period, with no updates during that period for inflation or other factors. CMS is establishing the detailed parameters for reporting of private rates by laboratories and for the calculation of rates. Reliable estimates of the effects of the new rate-setting system on CLFS payment amounts are not yet available, but in general payment rates for most tests are expected to decline.

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        Coordination of Benefits.    Medicare entitlement begins for most patients at least three months after the initiation of chronic dialysis treatment at a dialysis center. During the first three months, considered to be a waiting period, the patient or patient's insurance, Medicaid or a state renal program is generally responsible for payment.

        Patients who are covered by Medicare and are also covered by an employer group health plan ("EGHP") are subject to a 30-month coordination period during which the EGHP is the primary payor and Medicare the secondary payor. During this coordination period the EGHP pays a negotiated rate or in the absence of such a rate, our standard rate or a rate defined by its plan documents. The EGHP payments are generally higher than the Medicare payment. EGHP insurance, when available, will therefore generally cover as the primary payor a total of 33 months, the 3-month waiting period plus the 30-month coordination period. Any significant decreases in EGHP reimbursement rates could have material adverse effects on our provider business and, because the demand for products is affected by provider reimbursement, on our products business.

        Participation in new Medicare payment arrangements.    Six of our dialysis organizations participate in CMS's new Comprehensive ESRD Care Model ("the Model"), which involves ESRD Seamless Care Organizations, or "ESCOs." This Model seeks to deliver better health outcomes for ESRD patients while lowering Medicare's costs. ESCOs that achieve the program's minimum quality thresholds and generate reductions in CMS's cost of care above certain thresholds for the ESRD patients covered by the ESCO will receive a share of the cost savings. Our ESCOs also share in the risk of cost increases and are required to reimburse CMS a share of any such increases. The Model commenced on October 1, 2015, and the initial agreement period lasts three years. CMS and an ESCO then have the option of extending the ESCO's agreement for an additional two years based on the ESCO's performance.

        The Bundled Payments for Care Improvement ("BPCI") initiative is a CMS three-year pilot initiative involving bundled payments for the individual services, including acute inpatient hospital services, physician services, and post-acute services, furnished to Medicare beneficiaries during a single episode of illness or course of treatment. Our majority-owned subsidiary, Sound Inpatient Physicians, Inc. ("Sound") commenced participation under BPCI in April 2015 in several markets. Under the BPCI, Sound has the ability to receive additional payments if its physicians are able to deliver quality care at a cost that is lower than certain established benchmarks, but it also has the risk of incurring financial penalties if it is unsuccessful. Should Sound fail to perform as required under its BCPI agreement, CMS may terminate Sound's participation in the BPCI program, in whole or in part.

        We have entered into various arrangements which involve taking risk for the complete care of certain ESRD patients in exchange for set payments. CMS approved our application to offer Medicare Advantage ESRD Chronic Special Needs Plan ("MA-CSNP") in three states as of January 1, 2016. MA-CSNPs are Medicare Advantage health plans offered by private companies that contract with Medicare to provide patients with Medicare benefits. Enrollment in these plans is limited to special needs individuals with specific severe or disabling chronic conditions, such as ESRD. Our MA-CSNPs will provide services, including Care Coordination services, and receive capitated payments from Medicare for the complete care of enrolled ESRD patients.

        We have also entered into sub-capitation and other shared savings arrangements with certain Medicare Advantage plans under which we assume risk in providing care to the plans' ESRD patients while paid on a per patient per month basis.

        Possible Changes in Statutes or Regulations.    Further legislation or regulations may be enacted in the future that could substantially modify or reduce the amounts paid for services and products offered by us and our subsidiaries. It is also possible that statutes may be adopted or regulations may be promulgated in the future that impose additional eligibility requirements for participation in the federal and state healthcare programs. Such new legislation or regulations could, depending upon the detail of the provisions, have positive or adverse effects, possibly material, on our businesses and results of operations. See "Risk Factors – Risks Relating to Regulatory Matters – Proposals for healthcare reform, or relating to regulatory approvals, could decrease our revenues and operating profit," and "– Healthcare Reform" below.

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Germany and Other Non-U.S.

        As a global company delivering health care and dialysis products in more than 120 countries worldwide, we face the challenge of addressing the needs of patients and customers in widely varying economic and healthcare environments.

        In the major European and British Commonwealth countries, healthcare systems are generally based on one of two funding models. The healthcare systems of countries such as Germany, France, Belgium, Austria, Czech Republic, Poland, Hungary, Turkey and the Netherlands are based on the Bismarck-type system, which is based on mandatory employer and employee contributions dedicated to health care financing. Countries such as the United Kingdom, Canada, Denmark, Finland, Portugal, Sweden and Italy established their national health services using the Beveridge-type system, which provides a national health care system financed by taxes. However, during the last decade, healthcare financing under many social security systems has also been significantly subsidized with tax money.

        In Asia-Pacific, tax-based funding, which implies health provision coverage and presents governments with more direct levers to control expenditure, is available in Australia, New Zealand, Hong Kong, Macau, Malaysia, South Korea, Taiwan and Thailand. Co-payment requirements differ among these countries according to services. Japan and the Philippines run a Bismarck-style system, which are financed through premiums paid into funds, while Indonesia has announced its intention to establish universal coverage in a comparable system by 2019. National Insurance Systems have been characterized by greater decentralisation and in general a more widespread use of "fee for service' agreements. Singaporeans contribute to a mandatory medical savings plan that can be used to cover hospital costs and may receive a limited amount of tax-based subsidies to cover catastrophic illnesses. China aims for universal coverage by 2020 by enrolling patients in various mixed social insurance and taxation-based schemes.

        Remuneration for ESRD treatment widely differs between countries. There are three main types of reimbursement modalities: national budget allocation, reimbursement based on fee-for-service and a flat periodic rate. In some cases, the reimbursement modalities also vary within the same country depending on the type of healthcare provider (public or private). Budget allocation is a reimbursement modality used mainly for public providers in most of the European countries where the funding is based on taxation and in some of the countries where it is based on social security. Fee for service is still the most common reimbursement modality for private providers in all European and Asia-Pacific countries (with exceptions, such as Germany, where reimbursement to private providers is based on a weekly flat rate) and for public providers in countries where the funding system is based on social security payments.

        Where treatment is reimbursed on a fee-for-service basis, reimbursement rates are sometimes allocated in accordance with the type of treatment performed. We believe that it is difficult to judge reimbursement based on an average global reimbursement amount because the services and costs for which reimbursement is provided in any such average global amount would likely bear little relation to the actual reimbursement system in any one country. Generally, in European countries with established dialysis programs, reimbursements range from $100 to more than $400 per treatment. In Asia-Pacific, reimbursement rates can be significantly lower. However, a comparison from country to country would not be meaningful if made in the absence of a detailed analysis of the cost components reimbursed, services rendered and the structure of the dialysis clinic in each country being compared.

Anti-Kickback Statutes, False Claims Act, Stark Law and Other Fraud and Abuse Laws in the United States

        Some of our operations are subject to federal and state statutes and regulations governing financial relationships between healthcare providers and potential referral sources and reimbursement for services and items provided to Medicare and Medicaid patients. Such laws include the Anti-Kickback Statute, the False Claims Act, the Stark Law, and other federal healthcare fraud and abuse laws and similar state laws. The U.S. Government, many individual states and private third-party risk insurers have devoted increasing resources to combat fraud, waste, and abuse in the healthcare sector.

        The Office of the Inspector General of HHS ("OIG"), state Medicaid fraud control units, and other enforcement agencies have dedicated substantial resources to their efforts to detect agreements between physicians and service providers that may violate fraud and abuse laws. In its most recent Work Plan for Fiscal Year 2016, OIG will review Medicare payments for and utilization of renal dialysis services and related drugs pursuant to ESRD PPS. OIG will compare facilities' acquisition costs for certain drugs to inflation-adjusted cost estimates and determine how costs for the drugs have changed.

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        Recent health reform legislation has also enhanced the government's ability to pursue actions against potential violators, by expanding the government's investigative authority, expanding criminal and administrative penalties, by increasing funding for enforcement and providing the government with expanded opportunities to pursue actions under the federal Anti-Kickback Statute, the False Claims Act, and the Stark Law. For example, ACA narrowed the public disclosure bar under the False Claims Act, allowing increased opportunities for whistleblower litigation. In addition, the legislation modified the intent standard under the federal Anti-Kickback Statute, making it easier for prosecutors to prove that alleged violators had met the requisite knowledge requirement. ACA also requires providers and suppliers to report any Medicare or Medicaid overpayment and return the overpayment on the later of 60 days of identification of the overpayment or the date the cost report is due (if applicable), or all claims associated with the overpayment will become false claims. The ACA also provides that any claim submitted from an arrangement that violates the Anti-Kickback Statute is a false claim.

Health Care Reform

        In response to increases in health care costs in recent years, there have been, and continue to be, proposals by the federal government, state governments, regulators and third-party payors to control these costs and reform the U.S. healthcare system. ACA contains broad healthcare system reforms, including (i) provisions to facilitate access to affordable health insurance for all Americans, (ii) expansion of the Medicaid program, (iii) an industry fee on pharmaceutical companies starting in 2011 based on sales of brand name pharmaceuticals to government healthcare programs, (iv) increases in Medicaid prescription drug rebates effective January 1, 2010, (v) commercial insurance market reforms that protect consumers, such as bans on lifetime and annual limits, coverage of pre-existing conditions, and limits on waiting periods, (vi) provisions encouraging integrated care, efficiency and coordination among providers (vii) provisions for reduction of healthcare program waste and fraud and (viii) a 2.3% excise tax on manufacturers' medical device sales starting in 2013, However, pursuant to the Consolidated Appropriations Act of 2016, which was signed into law on December 18, 2015, the medical device excise tax has been suspended for all sales of such devices in 2016 and 2017.

        In National Federation of Independent Business v. Sebelius, the U.S. Supreme Court affirmed the right of individual states to elect to participate or not in ACA's Medicaid expansion. As of January 2016, almost one-third of the states elected not to expand their programs. As a result, the decrease in the number of uninsured individuals will be smaller than originally expected. We cannot predict whether additional states will agree to participate in the expansion in future years. In King v. Burwell, the U.S Supreme Court ruled that federal tax credits are available for health insurance purchased through federally-operated insurance exchanges in states that have not established their own exchanges. This ruling encourages individual participation in federally-operated insurance exchanges, and may lead to a further decrease in the number of uninsured individuals.

        CMS and the Department of Health and Human Services are continuing to implement various provisions of ACA. As a result, further regulations may be promulgated in the future that could substantially change the Medicare and Medicaid reimbursement systems, or that could impose additional eligibility requirements for participation in the federal and state healthcare programs. Moreover, such regulations could alter the current responsibilities of third-party insurance payors (including employer-sponsored health insurance plans, commercial insurance carriers and the Medicaid program) including, without limitation, with respect to cost-sharing.

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C.    Organizational Structure

        The following chart shows our organizational structure and our significant subsidiaries as of December 31, 2015. Fresenius Medical Care Holdings, Inc. conducts its business as "Fresenius Medical Care North America."

GRAPHIC

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D.    Property, plant and equipment

Property

        The table below describes our principal facilities. We do not own the land and buildings comprising our principal facilities in Germany. Rather, we lease those facilities on a long-term basis from Fresenius SE or one of its affiliates. These leases are described under "Item 7.B. Related Party Transactions – Real Property Lease."

Location   Floor Area
(Approximate
Square Meters)
  Currently
Owned or
Leased by
Fresenius
Medical Care
  Lease Expiration   Use

Ogden, Utah

    102,193   owned/leased   December 2033   Manufacture polysulfone membranes and dialyzers and peritoneal dialysis solutions; research and development

St. Wendel, Germany

    92,107   leased   December 2016   Manufacture of polysulfone membranes, dialyzers and peritoneal dialysis solutions; research and development

Suzhou, China (Changshu Plant)

    83,808   owned       Manufacture of hemodialysis bloodline sets & AV Fistula set, HD dialyzer

Schweinfurt, Germany

    38,100   leased   December 2016   Manufacture of hemodialysis machines and peritoneal dialysis cyclers; research and development

Fukuoka, Japan (Buzen Plant)

    37,092   owned       Manufacture of peritoneal dialysis bags and dialyzers

Waltham, Massachusetts

    33,688   leased   April 2029   North America corporate headquarters

Biebesheim, Germany

    33,500   leased   December 2023   Central distribution Europe, Asia Pacific and Latin America

Enstek, Malaysia

    28,778   owned       Manufacture hemodialysis concentrate

Fukuoka, Japan (Buzen Plant) – Site Area for future expansion

    27,943   owned       Manufacture of peritoneal dialysis bags and dialyzers

Knoxville, Tennessee

    25,734   owned       Manufacture of peritoneal dialysis solutions

L´Arbresle, France

    25,483   owned       Manufacture of polysulfone dialyzers, special filters, dry & liquid hemodialysis concentrates, empty pouches, injection molding

Guadalajara, México

    24,234   owned       Manufacture of peritoneal dialysis bags

Palazzo Pignano, Italy

    21,440   owned       Manufacture of bloodlines and tubing, office

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Location   Floor Area
(Approximate
Square Meters)
  Currently
Owned or
Leased by
Fresenius
Medical Care
  Lease Expiration   Use

Buenos Aires, Argentina

    20,000   owned       Manufacture of hemodialysis concentrate solutions, dry hemodialysis concentrates and desinfectants

Rockleigh, New Jersey

    19,974   leased   December 2028   Clinical laboratory testing

Bad Homburg, Germany

    18,700   leased   December 2016   Corporate headquarters and administration

Concord, California

    17,015   leased   October 2028   Manufacture of Hemodialysis machines and peritoneal dialysis cyclers; research and development; warehouse space

São Paulo, Brazil

    16,992   owned       Manufacture of hemodialysis concentrate solutions, dry hemodialysis concentrates, peritoneal dialysis bags, intravenous solutions bags, peritoneal dialysis and blood lines sets and Warehouse

Vrsac, Serbia

    15,365   owned       Administration, production and warehouse building

Bad Homburg (OE), Germany

    10,304   leased   December 2016   Manufacture of hemodialysis concentrate solutions / Technical Services / Logistics services

        We lease most of our dialysis clinics, manufacturing, laboratory, warehousing and distribution and administrative and sales facilities in the U.S. and other countries on terms which we believe are customary in the industry. We own those dialysis clinics and manufacturing facilities that we do not lease.

        For information regarding plans to expand our facilities and related capital expenditures, see "Item 4.B. Business Overview – Capital Expenditures."

Item 4A.    Unresolved Staff Comments

        Not applicable.

Item 5.    Operating and Financial Review and Prospects

        You should read the following discussion and analysis of the results of operations of Fresenius Medical Care AG & Co. KGaA and its subsidiaries in conjunction with our historical consolidated financial statements and related notes contained elsewhere in this report. Some of the statements contained below, including those concerning future revenue, costs and capital expenditures and possible changes in our industry and competition and financial conditions include forward-looking statements. We made these forward-looking statements based on the expectations and beliefs of the management of the Company's General Partner concerning future events which may affect us, but we cannot assure that such events will occur or that the results will be as anticipated. Because such statements involve risks and uncertainties, actual results may differ materially from the results which the forward-looking statements express or imply. Such statements include the matters and are subject to the uncertainties that we described in the discussion in this report entitled "Introduction – Forward-Looking Statements." See also Item 3.D., "Key Information – Risk Factors."

        Our business is also subject to other risks and uncertainties that we describe from time to time in our public filings. Developments in any of these areas could cause our results to differ materially from the results that we or others have projected or may project.

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Critical Accounting Policies

        The Company's reported financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that are the basis for our financial statements. The critical accounting policies, the judgments made in the creation and application of these policies, and the sensitivities of reported results to changes in accounting policies, assumptions and estimates are factors to be considered along with the Company's financial statements, and the discussion below in "Results of Operations."

Recoverability of Goodwill and Intangible Assets

        The growth of our business through acquisitions has created a significant amount of intangible assets, including goodwill and other non-amortizable intangible assets such as trade names and management contracts. At December 31, 2015, the carrying amount of goodwill amounted to $13,033 million and non-amortizable intangible assets amounted to $216 million representing in total approximately 51% of our total assets.

        In accordance with current accounting standards, we perform an impairment test of goodwill and non-amortizable intangible assets at least once a year for each reporting unit, or if we become aware of events that occur or if circumstances change that would indicate the carrying value might be impaired. See also Note 1e) in the Notes to Consolidated Financial Statements.

        To comply with the provisions of the accounting standards for impairment testing, the fair value of the reporting unit is compared to the reporting unit's carrying amount. As we are subject to the International Financial Reporting Standards requirements, which utilizes the two-step approach, we do not follow the qualitative assessment within ASC 350-20-35. We estimate the fair value of each reporting unit using estimated future cash flows for the unit discounted by an after-tax weighted average cost of capital ("WACC") specific to that reporting unit. Estimating the future cash flows involves significant assumptions, especially regarding future reimbursement rates and sales prices, treatments and sales volumes and costs. In determining cash flows, the Company utilizes for every reporting unit, its three-year budget, projections for years 4 to 10 and a representative growth rate for all remaining years. Projections for up to ten years are possible due to the non-discretionary nature of the healthcare services we provide, the need for products utilized to provide such services and the availability of government reimbursement for a substantial portion of our services. The reporting units' respective expected growth rates for the period beyond ten years are: the North America Segment 1%, the EMEA Segment 0%, the Asia-Pacific Segment 4% and the Latin America Segment 4%. The discount factor is determined by the WACC of the respective reporting unit. The Company's WACC consisted of a basic rate of 6.15% for 2015. This basic rate is then adjusted by a weighted average country risk rate and, if appropriate, by a factor to reflect higher risks associated with the cash flows from recent material acquisitions until they are appropriately integrated within each reporting unit.

        If the fair value of the reporting unit is less than its carrying value, a second step would be performed which compares the implied fair value of the reporting unit's goodwill to the carrying value of its goodwill. If the fair value of the goodwill is less than its carrying value, the difference is recorded as an impairment.

        A prolonged downturn in the healthcare industry with lower than expected increases in reimbursement rates and/or higher than expected costs for providing healthcare services and for procuring and selling products could adversely affect our estimated future cash flows. Future adverse changes in a reporting unit's economic environment could affect the country-specific rate and therefore the discount rate. An increase in interest rates could impact the basic rate and accordingly our WACC. These changes could result in impairment charges to goodwill and other intangible assets which could materially and adversely affect our future financial position and operating results.

Legal Contingencies

        We are party to litigation and subject to investigations relating to a number of matters as described in Note 19 of the Notes to Consolidated Financial Statements, "Commitments and Contingencies," included in this report. The outcome of these matters may have a material effect on our financial position, results of operations or cash flows.

        We regularly analyze current information including, as applicable, our defenses and we provide accruals for probable contingent losses including the estimated legal expenses to resolve the matters. We use the resources of our internal legal department as well as external lawyers for the assessment. In making

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the decision regarding the need for loss accrual, we consider the degree of probability of an unfavorable outcome and our ability to make a reasonable estimate of the amount of loss.

        The filing of a suit or formal assertion of a claim or assessment, or the disclosure of any such suit or assertion, does not automatically indicate that accrual of a loss may be appropriate.

Accounts Receivable and Allowance for Doubtful Accounts

        Trade accounts receivable are a substantial asset of ours and the allowance for doubtful accounts is based upon a significant estimate made by management. Trade accounts receivable were $3,285 million and $3,204 million at December 31, 2015 and 2014, respectively, net of allowances for doubtful accounts of $466 million and $419 million, respectively.

        We sell dialysis products directly or through distributors in more than 120 countries and we provide health care services in more than 45 countries. Most payors are government institutions or government-sponsored programs with significant variations between the countries and even between payors within one country in local payment and collection practices.

        Receivables are recognized and billed at amounts estimated to be collectable under government reimbursement programs and reimbursement arrangements with third party payors. U.S. Medicare and Medicaid government programs are billed at pre-determined net realizable rates per treatment that are established by statute or regulation. Revenues for non-governmental payors with which we have contracts or letters of agreement in place are recognized at the prevailing contract rates. The remaining non-governmental payors are billed at our standard rates for services and, in our North America Segment, a contractual adjustment is recorded to recognize revenues based on historic reimbursement. The contractual adjustment and the allowance for doubtful accounts are reviewed quarterly for their adequacy. No material changes in estimates were recorded for the contractual allowance in the periods presented. The collectability of accounts receivable is reviewed locally on a regular basis, generally monthly.

        In our U.S. operations, the collection process is usually initiated 30 days after service is provided or upon the expiration of the time provided by contract. For Medicare and Medicaid, once the services are approved for payment, the collection process begins upon the expiration of a period of time based upon experience with Medicare and Medicaid. In all cases where co-payment is required the collection process usually begins within 30 days after service has been provided. In those cases where claims are approved for amounts less than anticipated or if claims are denied, the collection process usually begins upon notice of approval of the lesser amounts or upon denial of the claim. The collection process can be confined to internal efforts, including the accounting and sales staffs and, where appropriate, local management staff. If appropriate, external collection agencies may be engaged.

        Public health institutions in a number of countries outside the U.S. require a significant amount of time until payment is made because a substantial number of payors are government entities whose payments are often determined by local laws and regulations and budget constraints. Depending on local facts and circumstances, the period of time to collect can be quite lengthy. In those instances where there are commercial payors, the same type of collection process is initiated as in the U.S.

        Due to the number of our subsidiaries and different countries that we operate in, our policy of determining when a valuation allowance is required considers the appropriate individual local facts and circumstances that apply to an account. While payment and collection practices vary significantly between countries and even agencies within one country, government payors usually represent low to moderate credit risks. It is our policy to determine when receivables should be classified as bad debt on a local basis taking into account local payment practices and local collection experience. A valuation allowance is calculated locally if specific circumstances indicate that amounts will not be collectible.

        In our EMEA Segment, Asia-Pacific Segment and Latin America Segment as well as our North America Segment product division, for receivables overdue by more than one year, an additional valuation allowance is recorded based on an individual country risk, since we believe that the length of time to collect does indicate an increased credit risk.

        When all efforts to collect a receivable, including the use of outside sources where required and allowed, have been exhausted, and after appropriate management review, a receivable deemed to be uncollectible is considered a bad debt and written off.

        In the Consolidated Statements of Income, expenses from our allowance for doubtful accounts is presented either as a deduction from revenue or as operating expense depending on the source of the

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receivable. For our health care business, we determine an allowance for patient services provided where all or a portion of the amounts billed or billable cannot be determined to be collectible at the time services are performed, e.g., when we provide treatment to a patient when such treatment is not covered by an insurance program or a reimbursement arrangement regardless of the patient's ability to pay. This allowance is shown as a reduction to our Consolidated Statements of Income line item Health Care. All of our other receivables are evaluated with the changes in the allowance for doubtful accounts recorded as an operating expense.

        Write offs are taken on a claim-by-claim basis when the collection efforts are exhausted. Due to the fact that a large portion of our reimbursement is provided by public health care organizations and private insurers, we expect that most of our accounts receivable will be collectible, albeit potentially more slowly outside of the North America Segment. See "B. Liquidity and Capital Resources," below, for a discussion of days sales outstanding developments in 2015. A significant change in our collection experience, deterioration in the aging of receivables and collection difficulties could require that we increase our estimate of the allowance for doubtful accounts. Any such additional bad debt charges could materially and adversely affect our future operating results.

        If, in addition to our existing allowances, 1% of the gross amount of our trade accounts receivable as of December 31, 2015 were uncollectible through either a change in our estimated contractual adjustment or as bad debt, our operating income for 2015 would have been reduced by approximately 1.6%.

        The following tables show the portion and aging of trade accounts receivable of major debtors or debtor groups at December 31, 2015 and 2014. No single debtor other than U.S. Medicaid and Medicare accounted for more than 5% of total trade accounts receivable in either year. Amounts pending approval from third party payors represented less than 3% at December 31, 2015.

        Aging of Net Trade Accounts Receivable by Major Payor Groups:

 
  At December 31, 2015  
 
  current   overdue by
up to
3 months
  overdue
more than
3 months up
to 6 months
  overdue
more than
6 months
up to 1 year
  overdue by
more than
1 year
  Total   % of net
trade A/R
 
 
  (in millions)
 

U.S. Government health care programs

  $ 535   $ 125   $ 55   $ 38   $ 119   $ 872     27  

U.S. commercial payors

    264     161     50     41     30     546     17  

U.S. hospitals

    186     81     34     7     0     308     9  

Self-pay of U.S. patients

    1     5     4     3     2     15     0  

Other North America Segment payors

    3     29     5     1     0     38     1  

Product customers and health care payors outside the North America Segment

    845     311     124     98     128     1,506     46  

Total

  $ 1,834   $ 712   $ 272   $ 188   $ 279   $ 3,285     100  

 

 
  At December 31, 2014  
 
  current   overdue by
up to
3 months
  overdue
more than
3 months up
to 6 months
  overdue
more than
6 months
up to 1 year
  overdue by
more than
1 year
  Total   % of net
trade A/R
 
 
  (in millions)
 

U.S. Government health care programs

  $ 542   $ 102   $ 54   $ 49   $ 106   $ 853     27  

U.S. commercial payors

    245     140     40     40     17     482     16  

U.S. hospitals

    138     56     10     6     2     212     7  

Self-pay of U.S. patients

    1     4     2     2     1     10     0  

Other North America Segment payors

    3     1     1     0     0     5     0  

Product customers and health care payors outside the North America Segment

    918     325     136     105     158     1,642     50  

Total

  $ 1,847   $ 628   $ 243   $ 202   $ 284   $ 3,204     100  

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Self-Insurance Programs

        Under the insurance programs for professional, product and general liability, auto liability, worker's compensation and medical malpractice claims, FMCH, our largest subsidiary, is partially self-insured for professional liability claims. For all other coverages we assume responsibility for incurred claims up to predetermined amounts above which third party insurance applies. Reported liabilities for the year represent estimated future payments of the anticipated expense for claims incurred (both reported and incurred but not reported) based on historical experience and existing claim activity. This experience includes both the rate of claims incidence (number) and claim severity (cost) and is combined with individual claim expectations to estimate the reported amounts.

Financial Key Performance Indicators used for Internal Management

        The Management Board oversees our Company by setting strategic and operational targets and measuring various financial key performance indicators used for internal management determined in U.S. dollars based on accounting principles generally accepted in the U.S. ("U.S. GAAP"). These key performance indicators do not differ between the operating segments. Each operating segment is evaluated based on target figures that reflect revenue and expenses the operating segments control. See "Financial Condition and Results of Operations- Overview" below for a discussion of exclusion of certain costs from operating segment results.

U.S. GAAP-based measures

Revenue

        For our operating segments, revenue is a financial key performance indicator. The number of treatments performed each year is an indicator of revenue generation. For further information regarding revenue recognition and measurement, refer to Note 1h of the Notes to Consolidated Financial Statements, "The Company and Basis of Presentation – Summary of Significant Accounting Policies – Revenue Recognition and Allowance for Doubtful Accounts," included in this report. Revenue is also benchmarked based on movement at Constant Exchange Rates. See the "Non-U.S. GAAP Measures" below.

Operating Income

        Operating income is used to measure the profitability of the operating segments and therefore is also a financial key performance indicator.

Operating Income Margin

        Operating income margin, the ratio of operating income to revenue, represents the percentage of operating income earned on revenue generated and is another financial key performance indicator for each segment.

Growth in Net Income

        On a consolidated level, the percentage growth in net income (net income attributable to shareholders of FMC-AG & Co. KGaA), which compares current period to prior period net income, is an additional financial key performance indicator used for internal management of the Company.

Growth in Basic Earnings per Share

        Percentage growth in basic earnings per share is a financial key performance indicator to evaluate our profitability. This indicator helps to manage our overall performance. Basic earnings per share is calculated by dividing net income attributable to shareholders by the weighted-average number of ordinary shares outstanding during the year. Prior to the conversion of preference shares to ordinary shares during the second quarter of 2013, basic earnings per share was computed according to the "two-class method" by dividing net income attributable to shareholders, less preference amounts, by the weighted average number of ordinary and preference shares outstanding during the year. Additionally, we compute a percentage growth in adjusted basic earnings per share for use in our management incentive program targets.

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Capital Expenditures

        Capital expenditures for property, plant, and equipment is an indicator used by our internal management. We manage our capital expenditures using a detailed coordination and evaluation process. The Management Board sets this capital expenditures budget. Before capital expenditures projects are approved, our internal Acquisition Investment Committee examines the individual projects and measures the potential return on these expenditures and their expected yield. The capital expenditures projects are evaluated based on commonly used methods such as the net present value and internal interest rate methods, as well as payback periods.

Updates to Key Performance Indicators

        As a result of the increase of noncontrolling interest holders in our operations, we believe a measure that is meaningful to investors is operating income less noncontrolling interests ("Delivered EBIT"). Delivered EBIT approximates the operating income attributable to the shareholders of FMC-AG & Co. KGaA.

Delivered EBIT

        Delivered EBIT reflects the operating income attributable to the shareholders of FMC AG & Co. KGaA.

Non-U.S. GAAP Measures

EBITDA

        EBITDA (earnings before interest, tax, depreciation and amortization expenses) was approximately $3,044 million, 18.2% of revenues for 2015, $2,954 million, 18.7% of revenues for 2014 and $2,904 million, 19.9% of revenues for 2013. EBITDA is the basis for determining compliance with certain covenants contained in our Amended 2012 Credit Agreement, the A/R Facility and the indentures relating to our senior notes. You should not consider EBITDA to be an alternative to net earnings determined in accordance with U.S. GAAP or to cash flow from operations, investing activities or financing activities. In addition, not all funds depicted by EBITDA are available for management's discretionary use. For example, a substantial portion of such funds are subject to contractual restrictions and functional requirements for debt service, to fund necessary capital expenditures and to meet other commitments from time to time as described in more detail elsewhere in this report. EBITDA, as calculated, may not be comparable to similarly titled measures reported by other companies. A reconciliation of EBITDA to cash flow provided by (used in) operating activities, which we believe to be the most directly comparable U.S. GAAP financial measure, is calculated as follows:

Reconciliation of EBITDA to net cash provided by (used in) operating activities

 
  For the years ended
December 31,
 
 
  2015   2014   2013  
 
  (in millions)
 

Total EBITDA

  $ 3,044   $ 2,954   $ 2,904  

Interest expense (net of interest income)

    (391 )   (411 )   (409 )

Income tax expense, net

    (623 )   (584 )   (592 )

Change in deferred taxes, net

    (45 )   114     16  

Changes in operating assets and liabilities

    (17 )   (246 )   137  

Stock compensation expense

    12     9     14  

Other items, net

    (20 )   26     (35 )

Net cash provided by (used in) operating activities

  $ 1,960   $ 1,861   $ 2,035  

        The ratio of debt to EBITDA is a key financial performance indicator used for overseeing the Company. To determine the total debt to EBITDA ratio, financial liabilities are compared to EBITDA (adjusted for other non-cash charges and largest acquisitions). We believe this ratio provides more reliable information regarding the extent to which we are able to meet our payment obligations than considering only the total amount of financial liabilities.

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Cash flow measures

        Our Consolidated Statements of Cash Flows indicate how we generated and used cash and cash equivalents. When used in conjunction with the other primary financial statements, it provides information that helps us evaluate the changes in our net assets and our financial structure (including our liquidity and solvency). The net cash provided by (used in) operating activities is used to assess whether our business can generate the cash required to make replacement and expansion investments. Net cash provided by (used in) operating activities is impacted by the profitability of our business and development of working capital, principally receivables. The financial key performance indicator of net cash provided by (used in) operating activities in percentage of revenue shows the percentage of our revenue that is available in terms of financial resources.

        Free cash flow is the cash flow provided by (used in) operating activities after capital expenditures for property, plant and equipment but before acquisitions and investments. The key performance indicator used by management is free cash flow in percentage of revenue. This represents the percentage of revenue that is available for acquisitions, dividends to shareholders, or the reduction of debt financing.

        The following table shows the significant cash flow key performance indicators:

Significant Cash Flow key performance indicators

 
  For the years ended December 31,  
 
  2015   2014   2013  
 
  (in millions)
 

Revenue

  $ 16,738   $ 15,832   $ 14,610  

Net cash provided by (used in) operating activities

    1,960     1,861     2,035  

Capital expenditures

    (953 )   (932 )   (748 )

Proceeds from sale of property, plant and equipment

    18     12     20  

Capital expenditures, net

    (935 )   (920 )   (728 )

Free cash flow

    1,025     941     1,307  

Net cash provided by (used in) operating activities in % of revenue

    11.7 %   11.8 %   13.9 %

Free cash flow in % of revenue

    6.1 %   5.9 %   8.9 %

Non-U.S. GAAP Measures for Presentation

Constant Currency

        Changes in revenue include the impact of changes in foreign currency exchange rates. We use the non-GAAP financial measure at Constant Exchange Rates or Constant Currency in our filings to show changes in our revenue without giving effect to period-to-period currency fluctuations. Under U.S. GAAP, revenues received in local (non-U.S. dollar) currency are translated into U.S. dollars at the average exchange rate for the period presented. Once we translate the current period local currency revenues for the Constant Currency, we then calculate the change, as a percentage, of the current period revenues using the prior period exchange rates versus the prior period revenues. This resulting percentage is a non-GAAP measure referring to a percentage change at Constant Currency.

        We believe that revenue growth is a key indication of how a company is progressing from period to period and that the non-GAAP financial measure Constant Currency is useful to investors, lenders, and other creditors because such information enables them to gauge the impact of currency fluctuations on a company's revenue from period to period. However, we also believe that the usefulness of data on Constant Currency period-over-period changes is subject to limitations, particularly if the currency effects that are eliminated constitute a significant element of our revenue and significantly impact our performance. We therefore limit our use of Constant Currency period-over-period changes to a measure for the impact of currency fluctuations on the translation of local currency revenue into U.S. dollars. We do not evaluate our results and performance without considering both Constant Currency period-over-period changes in non-U.S. GAAP revenue on the one hand and changes in revenue prepared in accordance with U.S. GAAP on the other. We caution the readers of this report to follow a similar approach by considering data on Constant Currency period-over-period changes only in addition to, and not as a substitute for or superior to, changes in revenue prepared in accordance with U.S. GAAP. We present the fluctuation derived from U.S. GAAP revenue next to the fluctuation derived from non-GAAP revenue. Because the reconciliation of non-GAAP to U.S. GAAP measures is inherent in the disclosure, we believe that a separate reconciliation would not provide any additional benefit.

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Additional Non-GAAP Measures for 2015

Delivered EBIT

        As a result of the increase of noncontrolling interest holders in our operations, we believe a measure that is meaningful to investors is operating income less noncontrolling interests ("Delivered EBIT"). Delivered EBIT approximates the operating income attributable to the shareholders of FMC-AG & Co. KGaA. Below is a table showing the reconciliation of Delivered EBIT to Operating Income for each of our reporting segments:

 
  For the years ended
December 31,
 
 
  2015   2014   2013  
 
  (in millions)
 

Delivered EBIT reconciliation

                   

Total

                   

Operating income (EBIT)

  $ 2,327   $ 2,255   $ 2,256  

less noncontrolling interests

    (284 )   (215 )   (145 )

Delivered EBIT

    2,043     2,040     2,111  

North America

                   

Operating income (EBIT)

    1,798     1,643     1,623  

less noncontrolling interests

    (274 )   (207 )   (139 )

Delivered EBIT

    1,524     1,436     1,484  

Dialysis

                   

Operating income (EBIT)

    1,701     1,566       *

less noncontrolling interests

    (234 )   (187 )     *

Delivered EBIT

    1,467     1,379       *

Care Coordination

                   

Operating income (EBIT)

    97     77       *

less noncontrolling interests

    (40 )   (20 )     *

Delivered EBIT

    57     57       *

EMEA

                   

Operating income (EBIT)

    577     590     601  

less noncontrolling interests

    (3 )   (3 )   (1 )

Delivered EBIT

    574     587     600  

Asia-Pacific

                   

Operating income (EBIT)

    298     279     168  

less noncontrolling interests

    (7 )   (5 )   (5 )

Delivered EBIT

    291     274     163  

Latin America

                   

Operating income (EBIT)

    48     101     128  

less noncontrolling interests

             

Delivered EBIT

  $ 48   $ 101   $ 128  

*
We revised our North America Segment disclosures in 2015 to align with structural changes and acquisitions during 2015 and 2014. However, we do not believe separate discussions of our dialysis business and Care Coordination will provide clarity on the North America Segment performance and operations in the comparison between 2014 and 2013 as this structure and the related metrics were not in place during 2013.


New Business Metrics

Care Coordination

        The measures for our North America Segment discussed below include current and future programs that we will be participating in and will be reflected in the discussion of our business within the North America Segment. Currently, only the sub-capitation, BPCI, ESCO programs and other shared savings programs are included within the Member Months and Medical Cost Under Management calculations below. In the future we expect a few other programs will be included in the following metrics as information on reimbursements becomes available. These metrics may be developed further in future

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periods. Note that due to the timing required by CMS to review the BPCI program data we provide, estimates have been used in order to report these metrics in a timely manner.

Member Months Under Medical Cost Management

        Member months under medical cost management is calculated by multiplying the number of members who are included in value-based reimbursement programs, such as Medicare Advantage plans or other value-based programs in the U.S., by the corresponding number of months these members participate in those programs ("Member Months"). In the aforementioned programs, we are assuming the risk of generating savings. The financial results will be recorded in earnings as our performance is determined. The membership offerings within Care Coordination are sub-capitation arrangements, MA-CSNPs, ESCO and BPCI programs as well as other shared savings programs. An increase in patient membership may indicate future earnings or losses as our performance is determined through these managed care programs.

Medical Cost Under Management

        Medical cost under management represents the management of medical costs associated with our patient membership in value-based programs. For ESCO, BPCI and other shared savings programs, this is calculated by multiplying the Member Months in each program by the benchmark of expected medical cost per member per month. The sub-capitation and MA-CSNPs calculation multiplies the premium per member of the program per month by the number of Member Months associated with the plan, as noted above.

Care Coordination Patient Encounters

        Care Coordination patient encounters represents the total patient encounters and procedures conducted by certain of our Care Coordination activities. Specifically, Care Coordination patient encounters is the sum of all encounters and procedures completed during the period by Sound, MedSpring Urgent Care ("MedSpring"), Fresenius Vascular Care, and National Cardiovascular Partners ("NCP") as well as patients in our Fresenius Medical Care Rx Bone Mineral Metabolism program ("BMM program").

Financial Condition and Results of Operations

Overview, legislation and growth

Overview

        We are the world's largest kidney dialysis company. We provide dialysis care and related services to persons who suffer from end stage renal disease ("ESRD") as well as other health care services. We develop and manufacture a full range of dialysis machines, systems and disposable products, which we sell to customers in more than 120 countries. Our dialysis business is vertically integrated, providing dialysis treatment at our own dialysis clinics and supplying these clinics with a broad range of products. In addition, we sell dialysis products to other dialysis service providers. We describe our other health care services as "Care Coordination." Care Coordination services include coordinated delivery of pharmacy services, vascular, cardiovascular and endovascular specialty services, non-dialysis laboratory testing services, physician services, hospitalist and intensivist services, health plan services and urgent care services, which, together with dialysis care services represent our health care services. Based on publicly reported sales and number of patients treated, our health care operations in dialysis services and dialysis products make us the world's largest kidney dialysis company. In 2015, we estimated the volume of the global dialysis market was approximately $73 billion. Dialysis patient growth results from factors such as the aging population and increased life expectancies; shortage of donor organs for kidney transplants; increasing incidence of kidney disease and better treatment of and survival of patients with diabetes, hypertension and other illnesses, which frequently lead to the onset of chronic kidney disease; improvements in treatment quality, which prolong patient life; and improving standards of living in developing countries, which make life-saving dialysis treatment available. The key to continued growth in revenue in our dialysis business is our ability to attract new patients in order to increase the number of treatments performed each year. For that reason, we believe the number of treatments performed each year is a strong indicator of continued revenue growth. For information regarding key indicators in Care Coordination, see "Non-U.S. GAAP Measures – New Business Metrics – Care Coordination," above.

        As a global company delivering health care and dialysis products we face the challenge of addressing the needs of a wide variety of stakeholders, such as patients, customers, payors, regulators and legislators

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in very different economic environments and healthcare systems. In general, government-funded programs (in some countries in coordination with private insurers) pay for certain health care items and services provided to their citizens. Not all healthcare systems provide for dialysis treatment. Therefore, the reimbursement and ancillary services utilization environment significantly influences our business.

        The majority of treatments we provide are paid for by governmental institutions. Approximately 32% of our consolidated revenues are attributable to U.S. federally-funded health care benefit programs, such as Medicare and Medicaid reimbursement, under which reimbursement rates are set by the Centers for Medicare & Medicaid Services ("CMS"). Legislative changes could affect Medicare reimbursement rates for a significant portion of the services we provide. To date, while we have generally experienced stable reimbursement globally, the stability of reimbursement in the U.S. has been affected by (i) the implementation of the ESRD prospective payment system ("ESRD PPS") in the U.S. in January 2011, (ii) the U.S. federal government across the board spending cuts in payments to Medicare providers commonly referred to as "U.S. Sequestration" (iii) the reduction to the ESRD PPS rate to account for the decline in utilization of certain drugs and biologicals associated with dialysis pursuant to the American Taxpayer Relief Act of 2012 ("ATRA") and (iv) the enactment of Protecting Access to Medicare Act of 2014 ("PAMA"). Please see the broader discussion of these legislative developments below:

Significant Legislative Impacts on U.S. Reimbursement

    Under Medicare Improvements for Patients and Providers Act of 2008 ("MIPPA"), for patients with Medicare coverage, all ESRD payments for dialysis treatments are made under a single bundled payment rate which provides a fixed payment rate, ESRD PPS, to encompass substantially all goods and services provided during the dialysis treatment. MIPPA further created the ESRD quality incentive program ("QIP") which dictates that dialysis facilities that fail to achieve quality standards established by CMS could have payments reduced by up to 2 percent.

    MIPPA also includes a provision for an annual adjustment to the ESRD PPS base rate based on changes in the costs of a "market basket" of certain healthcare items and services, less a productivity adjustment.

    Additionally, as a result of the Budget Control Act of 2011 ("BCA") and subsequent activity in Congress, a $1.2 trillion sequester (across-the-board spending cuts) in discretionary programs took effect on March 1, 2013 and is expected to continue through mid-2024. In particular, a 2% reduction to Medicare payments took effect on April 1, 2013 which continues in force. Spending cuts pursuant to U.S. Sequestration have adversely affected and will continue to adversely affect our revenues, earnings and cash flows.

    In 2014, as mandated by ATRA, CMS issued a final rule for the ESRD PPS, which phased in payment reductions to account for changes in utilization of certain drugs and biologicals that are included in the ESRD PPS, which were subsequently modified by PAMA. These reductions will reduce our market basket inflation adjustment by – 1.25% in 2016 and 2017, and 1% in 2018.

Recent CMS ESRD PPS Payment Rates

        On November 6, 2014, CMS issued the final rule regarding the ESRD PPS rate for 2015. The base rate per treatment was revised from $239.02 for 2014 to $239.43 for 2015. This change reflected a wage index budget-neutrality adjustment factor of 1.001729.

        On November 6, 2015, CMS published the final ruling regarding the ESRD PPS rate for 2016. We and other large dialysis organizations will experience a 0.2% increase in payments. The base rate per treatment is $230.39, which represents an approximate reduction of 4%, net, from the 2015 base rate. The 2016 final ruling reflects a net market basket increase of 0.15% (2% less 1.25% PAMA reduction and 0.6% productivity adjustment), application of a wage index budget-neutrality adjustment factor of 1.000495 and application of a refinement budget-neutrality adjustment factor of 0.960319. However, the approximate 4% reduction is almost completely offset with CMS proposed case mix adjustments based upon their analysis of the fiscal years 2012 and 2013.

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Reimbursement Expectation

        As a consequence of the pressure to decrease health care costs, government reimbursement rate increases have historically been limited and are expected to remain stable in the future. We have generally experienced stable reimbursement globally, including the balancing of unfavorable reimbursement changes in certain countries with favorable changes in other countries. In the future we expect to experience generally stable reimbursements for dialysis services globally. However, any significant decreases in Medicare reimbursement rates could have material adverse effects on our health care services business and, because the demand for dialysis products is affected by Medicare reimbursement, on our products business. To the extent that increases in operating costs that are affected by inflation, such as labor and supply costs, are not fully reflected in a compensating increase in reimbursement rates, our business and results of operations may be adversely affected.

New or Developing Revenue Streams

        We also participate in the following programs, initiatives and arrangements, each with specific reimbursement models as described in the discussion under "Reimbursement" in Item 4.B above, "Information on the Company – B. Business Overview."

    ESCOs

    BPCI

    MA-CSNPs

    Sub-capitation and other shared savings arrangements

Company Structure

        In 2015, we increased our operating segments from three to four segments in conjunction with a change in the structure of how we manage our business. Our operating segments are the North America Segment, the EMEA Segment, the Asia-Pacific Segment and the Latin America Segment. Accordingly, the two reporting segments disclosed in prior years (the North America Segment and the International Segment, which was comprised of EMEA, Asia-Pacific and Latin America) have now been reclassified into four reporting segments during 2015. Our management evaluates each segment using measures that reflect all of the segment's controllable revenues and expenses. With respect to the performance of business operations, our management believes that the most appropriate U.S. GAAP measures are revenue, operating income and operating income margin. We do not include income taxes as we believe this is outside the segments' control. Financing is a corporate function which our segments do not control. Therefore, we do not include interest expense relating to financing as a segment measurement. Similarly, we do not allocate certain costs which relate primarily to certain headquarter overhead charges, including accounting and finance, because we believe that these costs are also not within the control of the individual segments. Production of products, production asset management, quality management and procurement related to production are centrally managed at Corporate. The Company´s global research and development is also centrally managed at Corporate. These Corporate activities do not fulfill the definition of a segment. Products are transferred to the segments at cost; therefore no internal profit is generated. The associated internal revenues for the product transfers and their elimination are recorded as Corporate activities (See Note 23 of the Notes to Consolidated Financial Statements "Segment and Corporate Information" found elsewhere in this report). Capital expenditures for production are based on the expected demand of the segments and consolidated profitability considerations. In addition, certain revenues, investments and intangible assets, as well as any related expenses, are not allocated to a segment but accounted for as Corporate. Accordingly, all of these items are excluded from our analysis of segment results and are discussed below in our consolidated results of operations.

A.    Results of Operations

        The following tables summarize our financial performance and certain operating results by principal reporting segment and Corporate for the periods indicated. Inter-segment revenues primarily reflect sales of medical equipment and supplies. We prepared the information using a management approach, consistent with the basis and manner in which our management internally disaggregates financial

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information to assist in making internal operating decisions and evaluating management performance. See the table below for the years ended December 31:

 
  2015   2014   2013  

Total revenue(1)

                   

North America

  $ 11,813   $ 10,500   $ 9,606  

EMEA

    2,629     3,072     3,023  

Asia-Pacific

    1,502     1,357     1,104  

Latin America

    766     836     843  

Corporate

    28     67     34  

Total

    16,738     15,832     14,610  

Operating income

                   

North America

    1,798     1,643     1,623  

EMEA

    577     590     601  

Asia-Pacific

    298     279     168  

Latin America

    48     101     128  

Corporate

    (394 )   (358 )   (264 )

Total

    2,327     2,255     2,256  

Interest income

    117     84     39  

Interest expense

    (508 )   (495 )   (448 )

Income tax expense

    (623 )   (584 )   (592 )

Net Income

    1,313     1,260     1,255  

Less: Net Income attributable to noncontrolling interests

    (284 )   (215 )   (145 )

Net Income attributable to shareholders of FMC-AG & Co. KGaA

  $ 1,029   $ 1,045   $ 1,110  

(1)
Net of patient service bad debt provision

Year ended December 31, 2015 compared to year ended December 31, 2014

Highlights

        Revenue increased by 6% to $16,738 million (11% increase at constant exchange rates) mainly due to contributions from acquisitions (6%) and increases in organic revenue (6%), partially offset by the negative impact of exchange rate fluctuations (5%) and the effect of closed or sold clinics (1%).

        Net income attributable to shareholders of FMC-AG & Co. KGaA for the year ended December 31, 2015 decreased by 2% to $1,029 million from $1,045 million for the same period in 2014. This development was driven by the following 2015 transactions:

    (i)
    On February 17, 2016, we reached and reported to the courts an agreement in principle with a committee for all plaintiffs in regards to the GranuFlo® and NaturaLyte® multidistrict litigation in Massachusetts and Missouri. The agreement in principle calls for us to pay $250 million into a settlement fund in August 2016 in exchange for releases of all or substantially all of the plaintiffs' claims, provided that certain thresholds and restrictions are met. Our affected insurers have agreed to fund $220 million of the settlement fund, with a reservation of rights regarding certain coverage issues between and among us and our insurers. We have accrued a net expense of $60 million for consummation of the settlement, including legal fees and other anticipated costs ("Net Settlement Expense"), which is included in Selling, general and administrative. For further information, see Note 19 of the Notes to the Consolidated Financial Statements, "Commitments and Contingencies," included in this report. The after tax loss related to the Net Settlement Expense was $36.3 million for the year ended December 31, 2015.

    (ii)
    An after tax loss of $26.9 million from the divestiture of our dialysis service business in Venezuela.

    (iii)
    The realized portion of the after tax gain, $11.1 million, from the sale of our European marketing rights for certain renal pharmaceuticals to our joint venture, Vifor Fresenius Medical Care Renal Pharma.

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        For further discussion on our net income attributable to shareholders of FMC-AG & Co. KGaA, see the consolidated key financial performance indicators discussed below.

Consolidated Financials

Key Indicators for Consolidated Financial Statements
 
   
   
  Change in %
 
  2015   2014   as
reported
  at Constant
Exchange
Rates(1)

Revenue in $ million(2)

    16,738     15,832   6%   11%

Health Care(2)

    13,392     12,250   9%   13%

Dialysis Products

    3,346     3,582   (7%)   4%

Number of dialysis treatments

    44,596,446     42,744,977   4%    

Same market treatment growth in %

    4.3%     3.7%        

Gross profit as a % of revenue

    31.9%     31.6%        

Selling, general and administrative costs as a % of revenue

    17.3%     16.7%        

Operating income in $ million

    2,327     2,255   3%    

Operating income margin in %

    13.9%     14.2%        

Delivered EBIT in $ million(3)

    2,043     2,040   0%    

Net income attributable to shareholders of FMC-AG & Co. KGaA in $ million

    1,029     1,045   (2%)    

Basic earnings per share in $

    3.38     3.46   (2%)    

(1)
For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for Presentation – Constant Currency" above.

(2)
Net of patient service bad debt provision.

(3)
For further information on Delivered EBIT, see "Additional Non-GAAP Measures for 2015 – Delivered EBIT" above.

        Health Care revenue increased by 9% to $13,392 million (13% increase at Constant Exchange Rates) for the year ended December 31, 2015 from $12,250 million in the same period of 2014, mainly due to contributions from acquisitions (7%), growth in same market treatments (4%) and increases in organic revenue per treatment (3%), partially offset by the negative impact of exchange rate fluctuations (4%) and the effect of closed or sold clinics (1%).

        Dialysis treatments increased by 4% for the year ended December 31, 2015 as compared to the same period in 2014. The increase is due to same market treatment growth (4%) and acquisitions (1%), partially offset by the effect of closed or sold clinics (1%).

        At December 31, 2015, we owned, operated or managed (excluding those managed but not consolidated in the U.S.) 3,418 clinics compared to 3,361 clinics at December 31, 2014. For the year ended December 31, 2015, we acquired 31 clinics, opened 83 clinics and combined, closed or sold 57 clinics. The number of patients treated in clinics that we own, operate or manage (excluding patients of clinics managed but not consolidated in the U.S.) increased by 3% to 294,381 at December 31, 2015 from 286,312 at December 31, 2014.

        Dialysis product revenue for the year ended December 31, 2015 decreased by 7% (4% increase at Constant Exchange Rates) to $3,346 million as compared to $3,582 million in the same period of 2014. The 4% increase at Constant Exchange Rates was driven by increased sales of machines, dialyzers, hemodialysis solutions and concentrates, peritoneal dialysis products, bloodlines, products for acute care treatments and renal pharmaceuticals.

        The increase in gross profit margin to 31.9% from 31.6% primarily reflects increases in the North America Segment, EMEA Segment and the Asia-Pacific Segment, partially offset by an unfavorable impact of varying margins across our four reporting segments as well as a decrease in the Latin America Segment. The increase in the North America Segment was mainly due to lower costs for health care supplies, particularly due to cost decreases in ESAs, a favorable impact from a higher volume of commercial payors and a positive impact from manufacturing primarily driven by beneficial foreign exchange effects on purchases from intercompany production sites outside the U.S., partially offset by

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generally lower gross profit margins for hospitalist and intensivist services (including the effects of acquisition integration costs), higher personnel expense related to dialysis services and stronger growth in pharmacy services at lower than average margins. The increase in the EMEA Segment was driven by a favorable impact from volume and efficiency improvements on manufacturing costs. The increase in the Asia-Pacific Segment was largely due to favorable foreign exchange effects and a positive impact from acquisitions, partially offset by a write-off of a customs duty receivable in India. The decrease in the Latin America Segment was as a result of an unfavorable impact from inflationary driven manufacturing costs and higher costs related to inflation, partially offset by favorable foreign exchange effects.

        Selling, general and administrative ("SG&A") expenses increased to $2,895 million for the year ended December 31, 2015 from $2,644 million in the same period of 2014. SG&A expenses as a percentage of sales increased to 17.3% for the year ended December 31, 2015 in comparison with 16.7% in the same period of 2014 due to increases in the North America Segment, the Latin America Segment and the Asia-Pacific Segment, partially offset by a decrease in the EMEA Segment and favorable impact of varying margins across our four reporting segments. The increase in the North America Segment was mainly driven by the Net Settlement Expense, higher legal and consulting expenses, higher costs for employee benefit plans and an unfavorable impact from hospitalist and intensivist services. The increase in the Latin America Segment was driven by the impact of the loss from the divestment of the dialysis service business in Venezuela, higher costs related to inflation and increased bad debt expense, partially offset by higher reimbursement in part of the region. The increase in the Asia Pacific Segment was due to unfavorable foreign exchange effects, increased costs related to furthered sales development and higher consulting expense, partially offset by a favorable impact from acquisitions. The decrease in the EMEA Segment was largely due to a gain from the sale of our European marketing rights for certain renal pharmaceuticals (See Note 2 of the Notes to the Consolidated Financial Statements, "Related Party Transactions," included in this report), lower expenses related to compliance investigations we are conducting (See Note 19 of the Notes to the Consolidated Financial Statements, "Commitments and Contingencies," included in this report) and lower IT project costs.

        Research and development ("R&D") increased to $140 million for the year ended December 31, 2015 from $122 million for the same period of 2014.

        Income from equity method investees increased to $31 million for the year ended December 31, 2015 from $25 million for the same period of 2014. This increase is primarily related to higher income from the joint venture with Vifor due to expansion of activities.

        Operating income increased to $2,327 million for the year ended December 31, 2015 from $2,255 million for the same period in 2014. Operating income margin decreased to 13.9% for the year ended December 31, 2015 as compared to 14.2% for the same period in 2014 as a result of higher SG&A as a percentage of revenue, partially offset by an increase in gross profit margin, as discussed above.

        Delivered EBIT increased to $ 2,043 million for the year ended December 31, 2015 from $2,040 million for the same period in 2014 as a result of the increased operating income partially offset by increased noncontrolling interests driven by higher operating income of the joint ventures with dialysis clinics, Care Coordination acquisitions in 2014 and the creation of new joint ventures with dialysis clinics the North America Segment.

        Interest expense increased by 3% to $508 million for the year ended December 31, 2015 as compared to $495 million for the same period in 2014 due to a higher impact from the valuation of the embedded derivative related to the equity-neutral convertible bonds issued in September 2014 and an increase in the average debt level during the year, partially offset by a favorable impact from the translation of interest expense on Euro-denominated bonds and the impact of amendments to our Amended 2012 Credit Agreement in 2014. Interest income increased to $117 million for the year ended December 31, 2015 from $84 million for the same period in 2014 mainly as a result of the higher impact from the valuation of the call option on the Company's shares related the issuance of equity-neutral convertible bonds issued in September 2014, which fully offsets the increase in interest expense due to the valuation of the embedded derivative noted above, as well as higher interest income as a result of the early repayment of interest-bearing notes receivables.

        Income tax expense increased to $623 million for the year ended December 31, 2015 from $584 million for the same period in 2014. The effective tax rate increased to 32.1% from 31.7% for the same period of 2014. The change in tax rate for the year ended December 31, 2015, as compared to the same period in 2014, was affected negatively by the positive impact of the resolution of challenged

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deductions for civil settlement payments taken in prior years on our 2014 tax rate and the negative effect from the non-tax deductible loss from the sale of the dialysis service business in Venezuela, partially offset by higher non-taxable noncontrolling interest expense. The effective tax rate is also impacted by tax rate differentials which are determined by calculating the difference between the applicable tax rate in each jurisdiction in which we operate and the combined German tax rate (a corporate tax rate, which includes a solidarity surcharge, and a trade tax rate). This difference is then applied to the taxable income generated in each of the jurisdictions. The significant rate differential for 2015 (see Note 17 of the Notes to Consolidated Financial Statements, "Income Taxes," included in this report) is the result of the U.S. effective tax rate being significantly higher than the German tax rates – 39.5% compared to the combined German tax rate of 29.6%. The U.S. effective tax rate is comprised of the U.S. federal corporate tax rate of 35% adjusted for the impact of the various tax rates in the states in which we do business. The North America Segment is still and is expected to be in the future the main driver for this significant tax differential.

        Net income attributable to noncontrolling interests for the year ended December 31, 2015 increased to $284 million from $215 million for the same period of 2014 primarily driven by increased operating income of the joint ventures with dialysis clinics, Care Coordination acquisitions in 2014 and the creation of new joint ventures with dialysis clinics the North America Segment.

        Net income attributable to shareholders of FMC-AG & Co. KGaA for the year ended December 31, 2015 decreased by 2% to $1,029 million from $1,045 million for the same period in 2014 as a result of the combined effects of the items discussed above. Excluding (i) the after tax loss related to the Net Settlement Expense, (ii) the after tax loss from the divestiture of our dialysis service business in Venezuela and (iii) the realized portion of the after tax gain from the sale of our European marketing rights for certain renal pharmaceuticals to our joint venture, Vifor Fresenius Medical Care Renal Pharma, in 2015, as well as (iv) the after tax loss, $13.1 million, related to the closing of manufacturing plants in 2014, net income attributable to FMC KGaA increased by 2%.

        Basic earnings per share decreased by 2% for the year ended December 31, 2015 to $3.38 as compared with $3.46 in 2014 due to the decrease in net income attributable to shareholders of FMC-AG & Co. KGaA above. The average weighted number of shares outstanding for the period was approximately 304.4 million in 2015 (302.3 million in 2014). The increase in the number of shares outstanding was the result of stock options exercised.

        We employed 104,033 people (full-time equivalents) as of December 31, 2015 compared to 99,895 as of December 31, 2014, an increase of 4%, primarily due to overall growth in our business and acquisitions.

        The following discussions pertain to the North America Segment, the EMEA Segment, the Asia-Pacific Segment and the Latin America Segment as well as the measures we use to manage these segments.

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North America Segment

Key Indicators and Business Metrics for North America Segment
 
  2015   2014   Change in %

Total North America Segment

               

Revenue in $ million(1)

    11,813     10,500   13%

Health Care(1)

    10,932     9,655   13%

Dialysis Products

    881     845   4%

Operating income in $ million

    1,798     1,643   9%

Operating income margin in %

    15.2%     15.6%    

Delivered EBIT in $ million(2)

    1,524     1,436   6%

Dialysis

   
 
   
 
 
 

Revenue in $ million(1)

    9,931     9,461   5%

Number of dialysis treatments

    27,686,877     26,610,624   4%

Same market treatment growth in %

    4.1%     3.5%    

Operating income in $ million

    1,701     1,566   9%

Operating income margin in %

    17.1%     16.5%    

Delivered EBIT in $ million(2)

    1,467     1,379   6%

Care Coordination

   
 
   
 
 
 

Revenue in $ million(1)

    1,882     1,039   81%

Operating income in $ million

    97     77   26%

Operating income margin in %

    5.2%     7.4%    

Delivered EBIT in $ million(2)

    57     57   1%

Member Months Under Medical Cost Management(3),(4)

    208,933     15,853   1218%

Medical Cost Under Management in $ million(3),(4)

    1,660     122   1255%

Care Coordination Patient Encounters(3)

    5,005,695     1,818,170   175%

(1)
Net of patient service bad debt provision.

(2)
For further information on Delivered EBIT, see "Additional Non-GAAP Measures for 2015 – Delivered EBIT" above.

(3)
For further information on these metrics, please refer to the discussion above on our Care Coordination measures under "Additional Non-GAAP Measures for 2015 – New Business Metrics – Care Coordination."

(4)
The 2015 metric may be understated as there was a physician mapping issue related to the BPCI program within a CMS system which has not yet been resolved.

        North America Segment revenue is driven by our dialysis business as well as by Care Coordination. Our dialysis business comprises both products and services while Care Coordination incorporates services only. The discussion of the North America Segment is focused on our dialysis business and on Care Coordination. Reporting our health care services revenue separately for our dialysis business and Care Coordination has the effect of reducing average revenue per treatment and cost per treatment compared to amounts reported in prior years. In the discussion below, average revenue per treatment and cost per treatment for the year ended December 31, 2014, has been adjusted to conform to the current presentation.


Dialysis

Revenue

        Dialysis revenue increased for the year ended December 31, 2015 by 5% to $9,931 million from $9,461 million in the same period of 2014.

        Dialysis Care revenue increased for the year ended December 31, 2015 by 5% to $9,050 million from $8,616 million in the same period of 2014. This increase was driven by growth in same market treatments (4%) and increases in organic revenue per treatment (1%).

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        Dialysis treatments increased by 4% for the year ended December 31, 2015 as compared to the same period in 2014 primarily due to same market treatment growth (4%). At December 31, 2015, 182,852 patients (4% increase over December 31, 2014) were being treated in the 2,210 dialysis clinics that we own or operate in the North America Segment, compared to 176,203 patients treated in 2,162 dialysis clinics at December 31, 2014.

        In the U.S., the average revenue per treatment was $346 for the year ended December 31, 2015 and $342 for the same period in 2014. The increase was mainly attributable to a favorable impact from higher volume with commercial payors.

        Cost per treatment in the U.S. decreased to $279 for the year ended December 31, 2015 from $280 in the same period of 2014. This decrease was mainly due to a favorable impact from health care supplies, partially offset by higher personnel expense, higher property expense and increased bad debt provisions.

        Dialysis product revenue for the year ended December 31, 2015 increased by 4% to $881 million compared to $845 million in the same period in 2014. This was driven by higher sales of machines, renal pharmaceuticals and dialyzers.

Operating Income

        Dialysis operating income increased to $1,701 million for the year ended December 31, 2015 as compared to $1,566 million in the same period in 2014. Operating income margin increased to 17.1% for the year ended December 31, 2015 from 16.5% for the same period in 2014, due to lower costs for health care supplies and a favorable impact from commercial payors, partially offset by higher personnel expense, the Net Settlement Expense and increased consulting and legal expenses.

Delivered EBIT

        Dialysis delivered EBIT increased by 6% to $1,467 million for the year ended December 31, 2015 from $1,379 million for the same period of 2014, mainly as a result of increased operating income, partially offset by increased noncontrolling interests driven by higher operating income of the joint ventures with dialysis clinics and the creation of new joint ventures with dialysis clinics.


Care Coordination

Revenue

        Care Coordination revenue increased by 81% to $1,882 million for the year ended December 31, 2015 from $1,039 million for the same period of 2014. This increase is primarily driven by contributions from acquisitions (56%) and increases in organic revenue growth (25%).

Operating Income

        Care Coordination operating income increased to $97 million for the year ended December 31, 2015 from $77 million for the same period of 2014. The operating income margin decreased to 5.2% for the year ended December 31, 2015 from 7.4% mainly driven by higher costs and lower margin hospitalist and intensivists services (including the effects of acquisition integration costs for Cogent Healthcare), an unfavorable impact from laboratory services driven by higher costs and an unfavorable impact from urgent care services driven by operational losses, partially offset by a favorable impact from cardiovascular and endovascular specialty services as well as pharmacy services.

Delivered EBIT

        Care Coordination delivered EBIT remained relatively flat at $57 million for the year ended December 31, 2015 as compared to the same period of 2014 mainly as the result of increased operating income, fully offset by noncontrolling interests effects associated with Care Coordination acquisitions in 2014.

Member Months Under Medical Cost Management

        Care Coordination's member months under medical cost management for the year ended December 31, 2015 was 208,933 months as compared to 15,853 months for the same period of 2014. The increase in membership volume was attributable to the inclusion of BPCI amounts beginning in the second quarter of 2015 and ESCOs in the fourth quarter of 2015.

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Medical Cost Under Management

        Care Coordination's medical cost under management for the year ended December 31, 2015 was $1,660 million as compared to $122 million for the same period of 2014. The increase in medical cost under management was attributable to the inclusion of BPCI amounts beginning in the second quarter of 2015 and ESCOs in the fourth quarter of 2015.

Care Coordination Patient Encounters

        Care Coordination's patient encounters for the year ended December 31, 2015 was 5,005,695 encounters and procedures as compared to 1,818,170 encounters and procedures for the same period of 2014. The increase was driven by patient encounters and procedures provided by hospitalist and intensivist services, urgent care centers, the BMM program, cardiovascular and endovascular services as well as vascular procedures.

EMEA Segment

Key Indicators for EMEA Segment
 
   
   
  Change in %
 
  2015   2014   as reported   at Constant
Exchange
Rates(1)

Revenue in $ million(2)

    2,629     3,072   (14%)   3%

Health Care(2)

    1,226     1,438   (15%)   3%

Dialysis Products

    1,403     1,634   (14%)   3%

Number of dialysis treatments

    8,211,464     8,053,633   2%    

Same market treatment growth in %

    3.8%     4.7%        

Operating income in $ million

    577     590   (2%)    

Operating income margin in %

    21.9%     19.2%        

Delivered EBIT in $ million(3)

    574     587   (2%)    

(1)
For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for Presentation – Constant Currency" above.

(2)
Net of patient service bad debt provision.

(3)
For further information on Delivered EBIT, see "Additional Non-GAAP Measures for 2015 – Delivered EBIT" above.

Revenue

        Total revenue for the EMEA Segment decreased by 14% (3% increase at Constant Exchange Rates) to $2,629 million for the year ended December 31, 2015 as compared to $3,072 million for the same period of 2014. Health Care service revenue for the EMEA Segment decreased during the year ended December 31, 2015 by 15% (3% increase at Constant Exchange Rates) to $1,226 million from $1,438 million in the same period of 2014. This decrease is a result of the negative impact of exchange rate fluctuations (18%) and the effect of closed or sold clinics (3%), partially offset by same market treatment growth (4%) and contributions from acquisitions (2%). Dialysis treatments increased by 2% for the year ended December 31, 2015 over the same period in 2014 mainly due to same market treatment growth (4%) and contributions from acquisitions (2%), partially offset by the effect of closed or sold clinics (4%). As of December 31, 2015, we had 54,857 patients (4% increase over December 31, 2014) being treated at the 659 dialysis clinics that we own, operate or manage in the EMEA Segment compared to 52,848 patients treated at 635 clinics at December 31, 2014.

        Dialysis product revenue for the year ended December 31, 2015 decreased by 14% (3% increase at Constant Exchange Rates) to $1,403 million compared to $1,634 million in the same period of 2014. The 3% increase at Constant Exchange Rates was driven by increased sales of dialyzers, products for acute care treatments, peritoneal dialysis products, and hemodialysis solutions and concentrates, partially offset by lower sales of machines and renal pharmaceuticals.

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Operating Income

        Operating income decreased by 2% to $577 million for the year ended December 31, 2015 as compared to $590 million for the same period in 2014. Operating income margin increased to 21.9% for the year ended December 31, 2015 from 19.2% for the same period in 2014 mainly due to a gain on the sale of our European marketing rights of certain renal pharmaceuticals (See Note 2 of the Notes to the Consolidated Financial Statements, "Related Party Transactions," included in this report), a favorable impact from volume and efficiency improvements on manufacturing costs, lower expenses related to compliance investigations we are conducting (see Note 19 of the Notes to the Consolidated Financial Statements, "Commitments and Contingencies," included in this report) and lower IT project costs.

Delivered EBIT

        Delivered EBIT decreased by 2% to $574 million for the year ended December 31, 2015 as compared to $587 million for the same period in 2014 primarily due to decreased operating income coupled with a slight increase in noncontrolling interests.

Asia-Pacific Segment

Key Indicators for Asia-Pacific Segment
 
   
   
  Change in %
 
  2015   2014   as reported   at Constant
Exchange
Rates(1)

Revenue in $ million(2)

    1,502     1,357   11%   20%

Health Care(2)

    667     569   17%   30%

Dialysis Products

    835     788   6%   13%

Number of dialysis treatments

    3,790,924     3,269,080   16%    

Same market treatment growth in %

    3.8%     3.3%        

Operating income in $ million

    298     279   7%    

Operating income margin in %

    19.8%     20.6%        

Delivered EBIT in $ million(3)

    291     274   6%    

(1)
For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for Presentation – Constant Currency" above.

(2)
Net of patient service bad debt provision.

(3)
For further information on Delivered EBIT, see "Additional Non-GAAP Measures for 2015 – Delivered EBIT" above.

Revenue

        Total revenue for the Asia-Pacific Segment increased by 11% (20% increase at Constant Exchange Rates) to $1,502 million for the year ended December 31, 2015 as compared to $1,357 million for the same period of 2014. Health Care service revenue for the Asia-Pacific Segment increased during the year ended December 31, 2015 by 17% (30% increase at Constant Exchange Rates) to $667 million from $569 million in the same period of 2014. This increase is a result of contributions from acquisitions (27%), same market treatment growth (4%) and increases in organic revenue per treatment (1%), partially offset by the negative effect of exchange rate fluctuations (13%) and the effect of closed or sold clinics (2%). Dialysis treatments increased by 16% for the year ended December 31, 2015 over the same period in 2014 mainly due to contributions from acquisitions (13%) and same market treatment growth (4%), partially offset by the effect of closed or sold clinics (1%). As of December 31, 2015, we had 26,472 patients (a 5% increase over December 31, 2014) being treated at the 320 dialysis clinics that we own, operate or manage in the Asia-Pacific Segment compared to 25,278 patients treated at 317 clinics at December 31, 2014.

        Dialysis product revenue for the year ended December 31, 2015 increased by 6% (13% increase at Constant Exchange Rates) to $835 million compared to $788 million in the same period of 2014. The 13% increase at Constant Exchange Rates was driven by increased sales of machines, dialyzers, hemodialysis solutions and concentrates, peritoneal dialysis products and bloodlines.

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Operating Income

        Operating income increased by 7% to $298 million for the year ended December 31, 2015 as compared to $279 million for the same period in 2014. Operating income margin decreased to 19.8% for the year ended December 31, 2015 from 20.6% for the same period in 2014 mainly due to increased costs related to furthered sales development, a write-off of a customs duty receivable in India, unfavorable foreign exchange effects and an unfavorable impact from manufacturing costs, partially offset by a positive impact from acquisitions and a favorable revenue rate impact in Taiwan.

Delivered EBIT

        Delivered EBIT increased by 6% to $291 million for the year ended December 31, 2015 as compared to $274 million for the same period in 2014 due to increased operating income partially offset by increased noncontrolling interests associated with certain management contracts.

Latin America Segment

Key Indicators for Latin America Segment
 
   
   
  Change in %
 
  2015   2014   as reported   at Constant
Exchange
Rates(1)

Revenue in $ million(2)

    766     836   (8%)   13%

Health Care(2)

    567     588   (4%)   17%

Dialysis Products

    199     248   (19%)   4%

Number of dialysis treatments

    4,907,181     4,811,640   2%    

Same market treatment growth in %

    6.5%     4.1%        

Operating income in $ million

    48     101   (52%)    

Operating income margin in %

    6.3%     12.1%        

Delivered EBIT in $ million(3)

    48     101   (53%)    

(1)
For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for Presentation – Constant Currency" above.

(2)
Net of patient service bad debt provision.

(3)
For further information on Delivered EBIT, see "Additional Non-GAAP Measures for 2015 – Delivered EBIT" above.

Revenue

        Total revenue for the Latin America Segment decreased by 8% (13% increase at Constant Exchange Rates) to $766 million for the year ended December 31, 2015 as compared to $836 million for the same period of 2014. Health Care service revenue for the Latin America Segment decreased by 4% (17% increase at Constant Exchange Rates) during the year ended December 31, 2015 at $567 million as compared $588 for the same period of 2014. Health Care service revenue decreased as a result of the negative effect of exchange rate fluctuations (21%) and the effect of closed or sold clinics mainly in Venezuela (5%), partially offset by increases in organic revenue per treatment (14%), growth in same market treatments (6%) and contributions from acquisitions (2%). Dialysis treatments increased by 2% for the year ended December 31, 2015 over the same period in 2014 mainly due to same market treatment growth (6%), partially offset by the effect of closed or sold clinics (4%). As of December 31, 2015, we had 30,200 patients (a 6% decrease over December 31, 2014) being treated at the 229 dialysis clinics that we own, operate or manage in the Latin America Segment compared to 31,983 patients treated at 247 clinics at December 31, 2014.

        Dialysis product revenue for the year ended December 31, 2015 decreased by 19% (4% increase at Constant Exchange Rates) to $199 million compared to $248 million in the same period of 2014. The 4% increase at Constant Exchange Rates was driven by increased sales of dialyzers, hemodialysis solutions and concentrates as well as peritoneal dialysis products.

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Operating Income

        Operating income decreased by 52% to $48 million for the year ended December 31, 2015 as compared to $101 million for the same period in 2014. Operating income margin decreased to 6.3% for the year ended December 31, 2015 from 12.1% for the same period in 2014 mainly due to the divestiture of the dialysis service business in Venezuela, an unfavorable impact from inflationary driven manufacturing costs, increased costs related to inflation and higher bad debt expense, partially offset by favorable foreign exchange effects and a higher reimbursement rate in part of the region.

Delivered EBIT

        Delivered EBIT decreased by 53% to $48 million for the year ended December 31, 2015 as compared to $101 million for the same period in 2014 due to decreased operating income with virtually no change in noncontrolling interests.

Year ended December 31, 2014 compared to year ended December 31, 2013

Highlights

        Revenues increased by 8% to $15,832 million (10% at constant exchange rates) mainly due to contributions from acquisitions (5%) and increases in organic revenue (5%), partially offset by the negative impact of exchange rate fluctuations (2%).

        In 2014, we successfully completed acquisitions to expand our services within Care Coordination, we renegotiated our credit facilities and issued senior notes and convertible debt.

Consolidated Financials

Key Indicators for Consolidated Financial Statements
 
   
   
  Change in %
 
  2014   2013   as reported   at Constant
Exchange
Rates(1)

Revenue in $ million(2)

    15,832     14,610   8%   10%

Health Care(2)

    12,250     11,130   10%   12%

Dialysis Products

    3,582     3,480   3%   4%

Number of dialysis treatments

    42,744,977     40,456,900   6%    

Same market treatment growth in %

    3.7%     3.6%        

Gross profit as a % of revenue

    31.6%     32.4%        

Selling, general and administrative costs as a % of revenue

    16.7%     16.3%        

Operating income in $ million

    2,255     2,256   (0%)    

Operating income margin in %

    14.2%     15.4%        

Delivered EBIT in $ million(3)

    2,040     2,111   (3%)    

Net income attributable to shareholders of FMC-AG & Co. KGaA in $ million

    1,045     1,110   (6%)    

Basic earnings per share in $

    3.46     3.65   (5%)    

(1)
For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for Presentation – Constant Currency" above.

(2)
Net of patient service bad debt provision.

(3)
For further information on Delivered EBIT, see "Additional Non-GAAP Measures for 2015 – Delivered EBIT" above.

        Total Revenue increased by 8% (10% increase at Constant Exchange Rates) to $15,832 million for the year ended December 31, 2014 from $14,610 million in the same period of 2013 due to increases in Health Care revenue and dialysis product revenue.

        Health Care revenue increased by 10% to $12,250 million (12% increase at Constant Exchange Rates) for the year ended December 31, 2014 from $11,130 million in the same period of 2013, mainly due to contributions from acquisitions (6%), growth in same market treatments (4%) and increases in organic revenue per treatment (2%), partially offset by the negative impact of exchange rate fluctuations (2%).

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Included in our Health Care revenue is Care Coordination revenue in the U.S. of $1,039 million and $528 million for the years ended December 31, 2014 and 2013, respectively.

        Dialysis treatments increased by 6% for the year ended December 31, 2014 as compared to the same period in 2013. The increase is due to same market treatment growth (4%) and acquisitions (3%), partially offset by the effect of closed or sold clinics (1%).

        At December 31, 2014, we owned, operated or managed (excluding those managed but not consolidated in the U.S.) 3,361 clinics compared to 3,250 clinics at December 31, 2013. For the year ended December 31, 2014, we acquired 95 clinics, opened 79 clinics and combined, closed or sold 63 clinics. The number of patients treated in clinics that we own, operate or manage (excluding patients of clinics managed but not consolidated in the U.S.) increased by 6% to 286,312 at December 31, 2014 from 270,122 at December 31, 2013.

        Dialysis product revenue increased by 3% (4% increase at Constant Exchange Rates) to $3,582 million for the year ended December 31, 2014 as compared to $3,480 million in the same period of 2013. The increase at Constant Exchange Rates was driven by increased sales of dialyzers, bloodlines, products for acute care treatments, hemodialysis solutions and concentrates and devices manufactured under a five-year contract with a Fresenius SE company, partially offset by lower sales of machines.

        The decrease in gross profit margin to 31.6% from 32.4% reflects a decrease in the North America Segment, partially offset by an increase in the Asia Pacific Segment. The decrease in the North America Segment was mainly due to higher personnel expense, the impact from ATRA reductions on the ESRD PPS payment rate, growth in lower margin Care Coordination services, higher costs as a result of FDA remediation, an unfavorable impact from the U.S. Sequestration and higher costs for freight and distribution, partially offset by a favorable impact from the ESRD PPS market basket update and a favorable impact from commercial payors. The increase in the Asia Pacific Segment was due to organic growth, partially offset by an unfavorable impact from acquisitions.

        Selling, general and administrative ("SG&A") expenses increased to $2,644 million in the year ended December 31, 2014 from $2,382 million in the same period of 2013. SG&A expenses as a percentage of sales increased to 16.7% for the year of 2014 as compared to 16.3% in the same period of 2013 due to an increase in Corporate, the Latin America Segment and the EMEA Segment, partially offset by a decrease in the Asia Pacific Segment and an unfavorable impact of varying margins across our four reporting segments. The increase at Corporate was mainly driven by higher legal and consulting expenses related to the compliance investigation we are conducting (see Note 19 of the Notes to the Consolidated Financial Statements, "Commitments and Contingencies." Included in this report), higher costs related to the changes in the Management Board, costs related to the closing of manufacturing plants and higher acquisition related costs. The increase in the Latin America Segment was mainly due to the impact from a gain on the sale of real estate in Colombia in 2013, partially offset by favorable foreign exchange effects. The increase in the EMEA Segment was primarily due to an accrual related to the compliance investigation noted above. The decrease in the Asia Pacific Segment was mainly due to lower bad debt expense, favorable foreign exchange effects and a favorable impact from acquisitions, partially offset by an increased level of spending to support the business growth in Asia-Pacific.

        Research and development ("R&D) expenses decreased by 3% to $122 million for the year ended December 31, 2014 from $126 million for the same period of 2013.

        For the year ended December 31, 2014 we had a $1 million gain from the sale of FMC-AG Co. KGaA dialysis clinics as compared to a $9 million gain from the sale of dialysis clinics for the year ended December 31, 2013.

        Operating income decreased to $2,255 million for the year ended December 31, 2014 from $2,256 million for the same period in 2013. Operating income margin decreased to 14.2% for the year ended December 31, 2014 as compared to 15.4% for the same period in 2013 as a result of a decrease in gross profit margin and higher SG&A as a percentage of revenue, as discussed above.

        Delivered EBIT decreased by 3% to $2,040 million for the year ended December 31, 2014 from $ 2,111 million for the same period in 2013 as a result of decreased operating income coupled with increased noncontrolling interests associated with the creation of new joint ventures.

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        Interest expense increased by 11% to $495 million for the year ended December 31, 2014 from $448 million for the same period in 2013 due to the valuation of the embedded derivative related to the equity-neutral convertible bonds issued in September 2014, an increase in the average debt level during the year and one-time costs related to the Amended 2012 Credit Agreement, partially offset by a higher portion of debt with lower interest rates. Interest income increased by 116% to $84 million for the year ended December 31, 2014 from $39 million for the same period in 2013 mainly as a result of the valuation of the call option on our shares related the issuance of equity-neutral convertible bonds, which fully offsets the increase in interest expense due to the valuation of the embedded derivative noted above, as well as higher interest income from interest-bearing notes receivables.

        Income tax expense decreased to $584 million for the year ended December 31, 2014 from $592 million for the same period in 2013. The effective tax rate decreased to 31.7% from 32.0% for the same period of 2013.The tax rate for the year ended December 31, 2014 was affected favorably by the resolution of challenged deductions for civil settlement payments taken in prior years, resulting in a net tax benefit of $23 million. This benefit has partially been offset by a tax court decision against another company on a similar transaction for a tax position we took on a prior year's transaction which resulted in $18 million of additional expense in the second quarter of 2014. The effective tax rate is also impacted by tax rate differentials which are determined by calculating the difference between the applicable tax rate in each jurisdiction in which we operate and the combined German tax rate (a corporate tax rate, which includes a solidarity surcharge, and a trade tax rate). This difference is then applied to the taxable income generated in each of the jurisdictions. The significant rate differential for 2014 (see Note 17 of the Notes to Consolidated Financial Statements, "Income Taxes," included in this report) is the result of the U.S. effective tax rate being significantly higher than the German tax rates – 39.5% compared to the combined German tax rate of 29.2%. The U.S. effective tax rate is comprised of the U.S. federal corporate tax rate of 35% adjusted for the impact of the various tax rates in the states in which we do business. The North America Segment is still and is expected to be in the future the main driver for this significant tax differential.

        Net income attributable to noncontrolling interests for the year ended December 31, 2014 increased to $215 million from $145 million for the same period of 2013 primarily driven by the creation of new joint ventures in the North America Segment.

        Net income attributable to shareholders of FMC-AG & Co. KGaA for the year ended December 31, 2014 decreased by 6% to $1,045 million from $1,110 million for the same period in 2013 as a result of the combined effects of the items discussed above.

        Basic earnings per share decreased by 5% for the year ended December 31, 2014 to $3.46 as compared with $3.65 for the same period in 2013 due to the decrease in net income attributable to shareholders of FMC-AG & Co. KGaA above. The average weighted number of shares outstanding for the period was approximately 302.3 million in 2014 (303.8 million in 2013). The decrease in the number of shares outstanding was the result of the share buyback program completed during the third quarter of 2013, partially offset by stock options exercised.

        We employed 99,895 people (full-time equivalents) as of December 31, 2014 compared to 90,690 as of December 31, 2013, an increase of 10%, primarily due to acquisitions and overall growth in our business.

        The following discussions pertain to the North America Segment, the EMEA Segment, the Asia-Pacific Segment and the Latin America Segment and the measures we use to manage these segments.

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North America Segment

Key Indicators and Business Metrics for North America Segment
 
  2014   2013   Change in %

Total North America Segment

               

Revenue in $ million(1)

    10,500     9,606   9%

Health Care(1)

    9,655     8,772   10%

Dialysis Products

    845     834   1%

Number of dialysis treatments

    26,610,624     25,656,357   4%

Same market treatment growth in %

    3.5%     3.5%    

Operating income in $ million

    1,643     1,623   1%

Operating income margin in %

    15.6%     16.9%    

Delivered EBIT in $ million(2)

    1,436     1,484   (3%)

(1)
Net of patient service bad debt provision.

(2)
For further information on Delivered EBIT, see "Additional Non-GAAP Measures for 2015 – Delivered EBIT" above.

We revised our North America Segment disclosures in 2015 to align with structural changes and acquisitions during 2015 and 2014. However, we do not believe separate discussions of our dialysis business and Care Coordination will provide clarity on the North America Segment performance and operations in the comparison between 2014 and 2013 as this structure and the related metrics were not in place during 2013. The discussion below is presented as previously disclosed.

Revenue

        Health Care revenue increased for the year ended December 31, 2014 by 10% to $9,655 million from $8,772 million in the same period of 2013. This increase was driven by contributions from acquisitions (5%), same market treatment growth (3%) and increases in organic revenue per treatment (2%). Included in our net health care revenue is Care Coordination revenue in the U.S. of $1,039 million and $528 million for the years ended December 31, 2014 and 2013, respectively.

        Treatments increased by 4% for the year ended December 31, 2014 as compared to the same period in 2013 mainly due to same market treatment growth (3%) and contributions from acquisitions (1%). At December 31, 2014, 176,203 patients (a 3% increase over December 31, 2013) were being treated in the 2,162 clinics that we own or operate in the North America Segment, compared to 171,440 patients treated in 2,133 clinics at December 31, 2013. Average revenue per treatment includes certain amounts related to Care Coordination, specifically attributable to pharmacy services, laboratory services and vascular access services. Average North America Segment revenue per treatment, which includes Canada and Mexico, before bad debt expense, was $360 for the year ended December 31, 2014 and $352 in the same period in 2013. In the U.S., the average revenue per treatment was $368 for the year ended December 31, 2014 and $359 for the same period in 2013. The increase in the U.S. was mainly attributable to increased revenue related to pharmacy and laboratory testing services, a favorable impact from the ESRD PPS market basket update and a favorable impact from commercial payors, partially offset by impact from ATRA reductions on the ESRD PPS payment rate, decreased revenue for renal pharmaceuticals and the impact from the U.S. Sequestration.

        Dialysis product revenue increased for the year ended December 31, 2014 by 1% to $845 million from $834 million in the same period of 2013. This increase was driven by higher sales of dialyzers, renal pharmaceuticals and peritoneal dialysis products, partially offset by lower sales of machines.

Operating Income

        Operating income increased to $1,643 million for the year ended December 31, 2014 from $1,623 million for the same period in 2013. Operating income margin decreased to 15.6% for the year ended December 31, 2014 from 16.9% for the same period in 2013, due to the impact from ATRA reductions on the ESRD PPS payment rate, higher personnel expense, growth in lower margin Care Coordination services, higher legal and consulting expense, higher costs as a result of FDA remediation and an unfavorable impact from the U.S. Sequestration, partially offset by a favorable impact from the ESRD PPS market basket update and a favorable impact from commercial payors. Cost per treatment for the North America Segment increased to $297 for the year ended December 31, 2014 as compared to $287

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for the same period of 2013. Cost per treatment in the U.S. increased to $303 for the year ended December 31, 2014 from $293 in the same period of 2013.

Delivered EBIT

        Dialysis delivered EBIT decreased by 3% to $1,436 million for the year ended December 31, 2014 from $1,484 million for the same period of 2013 mainly as the result of increased noncontrolling interests associated with the creation of new joint ventures partially offset by increased operating income.

EMEA Segment

Key Indicators for EMEA Segment
 
   
   
  Change in %
 
 
2014
 
2013
  as reported   at Constant
Exchange
Rates(1)

Revenue in $ million(2)

    3,072     3,023   2%   4%

Health Care(2)

    1,438     1,406   2%   5%

Dialysis Products

    1,634     1,617   1%   2%

Number of dialysis treatments

    8,053,633     7,734,706   4%    

Same market treatment growth in %

    4.7%     2.9%        

Operating income in $ million

    590     601   (2%)    

Operating income margin in %

    19.2%     19.9%        

Delivered EBIT in $ million(3)

    587     600   (2%)    

(1)
For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for Presentation – Constant Currency" below.

(2)
Net of patient service bad debt provision.

(3)
For further information on Delivered EBIT, see "Additional Non-GAAP Measures for 2015 – Delivered EBIT" below.

Revenue

        Total revenue for the EMEA Segment increased by 2% (4% increase at Constant Exchange Rates) to $3,072 million for the year ended December 31, 2014 as compared to $3,023 million for the same period of 2013. Health Care service revenue for the EMEA Segment increased during the year ended December 31, 2014 by 2% (5% increase at Constant Exchange Rates) to $1,438 million from $1,406 million in the same period of 2013. This increase is a result of same market treatment growth (5%) and contributions from acquisitions (1%), partially offset by the negative impact of exchange rate fluctuations (3%) and the effect of closed or sold clinics (1%). Dialysis treatments increased by 4% for the year ended December 31, 2014 over the same period in 2013 mainly due to same market treatment growth (5%) and contributions from acquisitions (1%), partially offset by the effect of closed or sold clinics (2%).

        Dialysis product revenue for the year ended December 31, 2014 increased by 1% (2% increase at Constant Exchange Rates) to $1,634 million compared to $1,617 million in the same period of 2013. The 2% increase at Constant Exchange Rates was driven by increased sales of bloodlines, products for acute care treatments, dialyzers, hemodialysis solutions and concentrates as well as peritoneal dialysis products, partially offset by lower sales of machines and renal pharmaceuticals.

Operating Income

        Operating income decreased by 2% to $590 million for the year ended December 31, 2014 as compared to $601 million for the same period in 2013. Operating income margin decreased to 19.2% for the year ended December 31, 2014 from 19.9% for the same period in 2013 mainly due to lower expenses related to the compliance investigation we are conducting (see Note 19 of the Notes to the Consolidated Financial Statements, "Commitments and Contingencies," included in this report) and unfavorable foreign exchange effects, partially offset by efficiency improvements.

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Delivered EBIT

        Delivered EBIT decreased by 2% to $587 million for the year ended December 31, 2014 as compared to $ 600 million for the same period in 2013 primarily due to decreased operating income, coupled with an increase in noncontrolling interests.

Asia-Pacific Segment

Key Indicators for Asia-Pacific Segment
 
   
   
  Change in %
 
 
2014
 
2013
  as reported   at Constant
Exchange
Rates(1)

Revenue in $ million(2)

    1,357     1,104   23%   26%

Health Care(2)

    569     363   57%   64%

Dialysis Products

    788     741   6%   8%

Number of dialysis treatments

    3,269,080     2,647,245   23%    

Same market treatment growth in %

    3.3%     3.1%        

Operating income in $ million

    279     168   66%    

Operating income margin in %

    20.6%     15.2%        

Delivered EBIT in $ million(3)

    274     163   67%    

(1)
For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for Presentation – Constant Currency" below.

(2)
Net of patient service bad debt provision.

(3)
For further information on Delivered EBIT, see "Additional Non-GAAP Measures for 2015 – Delivered EBIT" below.

Revenue

        Total revenue for the Asia-Pacific Segment increased by 23% (26% increase at Constant Exchange Rates) to $1,357 million for the year ended December 31, 2014 as compared to $1,104 million for the same period of 2013. Health Care service revenue for the Asia-Pacific Segment increased during the year ended December 31, 2014 by 57% (64% increase at Constant Exchange Rates) to $569 million from $363 million in the same period of 2013. This increase is a result of contributions from acquisitions (63%), same market treatment growth (3%), partially offset by the negative effect of exchange rate fluctuations (7%) and the effect of closed or sold clinics (2%). Dialysis treatments increased by 23% for the year ended December 31, 2014 over the same period in 2013 mainly due to contributions from acquisitions (22%) and same market treatment growth (3%), partially offset by the effect of closed or sold clinics (2%).

        Dialysis product revenue for the year ended December 31, 2014 increased by 6% (8% increase at Constant Exchange Rates) to $788 million compared to $741 million in the same period of 2013. The increase at Constant Exchange Rates was driven by increased sales of dialyzers, bloodlines, products for acute care treatments as well as hemodialysis solutions and concentrates, partially offset by lower sales of machines.

Operating Income

        Operating income increased by 66% to $279 million for the year ended December 31, 2014 as compared to $168 million for the same period in 2013. Operating income margin increased to 20.6% for the year ended December 31, 2014 from 15.2% for the same period in 2013 mainly due to lower bad debt expense, favorable foreign exchange effects, business growth and a favorable impact from acquisitions.

Delivered EBIT

        Delivered EBIT increased by 67% to $274 million for the year ended December 31, 2014 as compared to $ 163 million for the same period in 2013 due to increased operating income partially offset by increased noncontrolling interests associated with certain management contracts.

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Latin America Segment

Key Indicators for Latin America Segment
 
   
   
  Change in %
 
  2014   2013   as reported   at Constant
Exchange
Rates(1)

Revenue in $ million(2)

    836     843   (1%)   16%

Health Care(2)

    588     589   (0%)   21%

Dialysis Products

    248     254   (2%)   6%

Number of dialysis treatments

    4,811,640     4,418,592   9%    

Same market treatment growth in %

    4.1%     5.8%        

Operating income in $ million

    101     128   (21%)    

Operating income margin in %

    12.1%     15.2%        

Delivered EBIT in $ million(3)

    101     128   (21%)    

(1)
For further information on Constant Exchange Rates, see "Non-U.S. GAAP Measures for Presentation – Constant Currency" below.

(2)
Net of patient service bad debt provision.

(3)
For further information on Delivered EBIT, see "Additional Non-GAAP Measures for 2015 – Delivered EBIT" below.

Revenue

        Total revenue for the Latin America Segment decreased by 1% (16% increase at Constant Exchange Rates) to $836 million for the year ended December 31, 2014 as compared to $843 million for the same period of 2013. Health Care service revenue for the Latin America Segment decreased slightly (21% increase at Constant Exchange Rates) during the year ended December 31, 2014 to $588 million as compared to $589 million in the same period of 2013. The Health Care service revenue remained constant as a result of increases in organic revenue per treatment (13%), contributions from acquisitions (5%) and growth in same market treatments (4%), which were fully offset by the negative effect of exchange rate fluctuations (21%) and the effect of closed or sold clinics (1%). Dialysis treatments increased by 9% for the year ended December 31, 2014 over the same period in 2013 mainly due to contributions from acquisitions (6%) and same market treatment growth (4%), partially offset by the effect of closed or sold clinics (1%).

        Dialysis product revenue for the year ended December 31, 2014 decreased by 2% (6% increase at Constant Exchange Rates) to $248 million compared to $254 million in the same period of 2013. The 6% increase at Constant Exchange Rates was driven by increased sales of hemodialysis solutions and concentrates, peritoneal dialysis products, dialyzers, bloodlines and products for acute care treatments, partially offset by lower sales of machines.

Operating Income

        Operating income decreased by 21% to $101 million for the year ended December 31, 2014 as compared to $128 million for the same period in 2013. Operating income margin decreased to 12.1% for the year ended December 31, 2014 from 15.2% for the same period in 2013 mainly due to the impact from a gain on the sale of real estate in Colombia in 2013, partially offset by favorable foreign exchange effects.

Delivered EBIT

        Delivered EBIT decreased by 21% to $101 million for the year ended December 31, 2014 as compared to $ 128 million for the same period in 2013 due to decreased operating income with virtually no change in noncontrolling interests.

B.    Liquidity and Capital Resources

        Our primary sources of liquidity are typically cash provided by operating activities, cash provided by short-term debt from third parties and related parties, as well as proceeds from the issuance of long-term debt and equity securities. We require this capital primarily to finance working capital needs, fund acquisitions and joint ventures, develop free-standing renal dialysis clinics and other health care facilities,

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purchase equipment for existing or new renal dialysis clinics and production sites, repay debt, pay dividends and repurchase shares (see "Net Cash Provided By (Used In) Investing Activities" and "Net Cash Provided By (Used In) Financing Activities" below).

        At December 31, 2015, we had cash and cash equivalents of $550 million. For information regarding utilization and availability of cash under our principal credit facility (the "Amended 2012 Credit Agreement"), see Note 10 of the Notes to Consolidated Financial Statements, "Long-term Debt and Capital Lease Obligations – Amended 2012 Credit Agreement," included in this report.

Net Cash Provided By (Used In) Operating Activities

        During 2015, 2014 and 2013, we generated net cash provided by operating activities of $1,960 million, $1,861 million and $2,035, respectively. Cash provided by operating activities is impacted by the profitability of our business, the development of our working capital, principally inventories, receivables and cash outflows that occur due to a number of specific items as discussed below. The increase in 2015 versus 2014 was mainly a result of the $115 million payment for the W.R. Grace bankruptcy settlement which occurred in the first quarter of 2014, a tax payment in 2014 of $101 million as a result of a tax audit in Germany for fiscal years 2002 through 2005, which had been previously provided for, and in 2015 a $51 million cash income tax refund related to a district court judgment, partially offset by an increase in inventory levels that was mainly as a result of increased health care supplies, particularly due to an increase in ESA inventory.

        The profitability of our business depends significantly on reimbursement rates. Approximately 80% of our revenues are generated by providing health care services, a major portion of which is reimbursed by either public health care organizations or private insurers. For the year ended December 31, 2015, approximately 32% of our consolidated revenues were attributable to U.S. federal health care benefit programs, such as Medicare and Medicaid reimbursement. Legislative changes could affect Medicare reimbursement rates for a significant portion of the services we provide, as well as the scope of Medicare coverage. A decrease in reimbursement rates or the scope of coverage could have a material adverse effect on our business, financial condition and results of operations and thus on our capacity to generate cash flow. While we have generally experienced stable reimbursement globally, including the balancing of unfavorable reimbursement changes in certain countries with favorable changes in other countries, the stability of reimbursement in the U.S. has been affected by (i) the implementation of the ESRD PPS in the U.S. in January 2011, (ii) the U.S. Sequestration cuts, (iii) the reduction to the ESRD PPS rate to account for the decline in utilization of certain drugs and biologicals associated with dialysis and (iv) the enactment of PAMA (see "Financial Condition and Results of Operations – Overview, legislation and growth" above). In the future, we expect to experience generally stable reimbursements for dialysis services globally.

        Our working capital, which is defined as current assets less current liabilities, was $2,799 million at December 31, 2015 which decreased from $3,241 million at December 31, 2014. The change is primarily the result of the reclassification of our euro-denominated senior notes as these notes mature during the third quarter of 2016 as well as the floating rate senior notes which mature in the fourth quarter of 2016, the recognition of the accrued settlement (see Note 19 of the Notes to the Consolidated Financial Statements, "Commitments and Contingencies," included in this report), decreased cash and cash equivalents, increased accounts payable and decreased deferred taxes, partially offset by increased inventories due to a planned build-up of health care supplies and increased trade accounts receivable. Our ratio of current assets to current liabilities was 1.67 and 1.93 at December 31, 2015 and December 31, 2014, respectively.

        We intend to continue to address our current cash and financing requirements using cash provided by operating activities, our existing and future credit agreements, issuances under the Commercial Paper Program (See Note 9 of the Notes to the Consolidated Financial Statements, "Short-Term Debt and Short-Term Debt from Related Parties," included in this report) as well as the issuance of debt securities. In addition, when funds are required for acquisitions or to meet other needs, we expect to successfully complete long-term financing arrangements, such as the issuance of senior notes. We aim to preserve financial resources with a minimum of $500 million of committed and unutilized credit facilities.

        Cash provided by operating activities depends on the collection of accounts receivable. Commercial customers and governments generally have different payment cycles. A lengthening of their payment cycles could have a material adverse effect on our capacity to generate cash flow. In addition, we could face difficulties in enforcing and collecting accounts receivable under some countries' legal systems and due to

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the economic conditions in some countries. Accounts receivable balances, net of valuation allowances, represented Days Sales Outstanding ("DSO") of 71 at December 31, 2015, a decrease as compared to 72 at December 31, 2014.

        DSO by segment is calculated by dividing the segment's accounts receivable, as converted to U.S. dollars using the average exchange rate for the period presented, less any value added tax included in the receivables, by the average daily sales for the last twelve months of that segment, as converted to U.S. dollars using the average exchange rate for the period. Receivables and sales are adjusted for amounts related to significant acquisitions made during the periods presented. The development of DSO by reporting segment is shown in the table below:

 
  2015   2014  

North America days sales outstanding

    53     50  

EMEA days sales outstanding

    104     104  

Asia-Pacific days sales outstanding

    113     124  

Latin America days sales outstanding

    141     128  

FMC-AG & Co. KGaA average days sales outstanding

    71     72