05.5
Notes to Consolidated Financial Statements
6. INTANGIBLE ASSETS AND GOODWILL
As of December 31, 2008 and 2007, the carrying value and accumulated amortization of intangible assets consisted of the following:
| Table 05.5.6 | ACQUISITION COSTS |
| $ in thousands | Balance at Jan. 1, 2008 |
Currency change |
Changes in consolidation group |
Additions | Reclassi- fications |
Disposals | Balance at Dec. 31, 2008 |
|---|---|---|---|---|---|---|---|
| Amortizable intangible assets | |||||||
| Non-compete agreements | 212,105 |
(1,451) |
7,782 |
142 |
– |
(333) |
218,245 |
| Technology | 100,016 |
– |
– |
– |
– |
– |
100,016 |
| License and distribution agreements |
52,422 |
(6,963) |
– |
128,962 |
– |
(1,177) |
173,244 |
| Construction in progress | – |
(26) |
– |
173 |
49,739 |
– |
49,886 |
| Other | 257,886 |
(9,272) |
7,377 |
24,295 |
10,301 |
(20,115) |
270,472 |
| TOTAL | 622,429 |
(17,712) |
15,159 |
153,572 |
60,040 |
(21,625) |
811,863 |
| Non-amortizable intangible assets |
|||||||
| Tradename | 256,850 |
(372) |
– |
874 |
(15,878) |
– |
241,474 |
| Management contracts | 241,391 |
(17) |
– |
– |
– |
– |
241,374 |
| TOTAL | 498,241 |
(389) |
– |
874 |
(15,878) | – |
482,848 |
| TOTAL INTANGIBLE ASSETS | 1,120,670 |
(18,101) |
15,159 |
154,446 |
44,162 |
(21,625) |
1,294,711 |
| GOODWILL | 7,691,763 |
(44,693) |
95,818 |
341 |
14,997 |
(1,572) |
7,756,654 |
| Table 05.5.7 | DEPRECIATION / AMORTIZATION |
| $ in thousands | Balance at Jan. 1, 2008 |
Currency change |
Changes in consolidation group |
Additions | Reclassi- fications |
Disposals | Balance at Dec. 31, 2008 |
|---|---|---|---|---|---|---|---|
| Amortizable intangible assets | |||||||
| Non-compete agreements | 129,559 |
(1,163) |
– |
14,594 |
– |
(16) |
142,974 |
| Technology | 4,872 |
– |
– |
6,618 |
– |
– |
11,490 |
| License and distribution agreements |
35,809 |
(2,298) |
– |
7,825 |
– |
– |
41,336 |
| Construction in progress | – |
– |
– |
– |
– |
– |
– |
| Other | 205,066 |
(5,158) |
9 |
18,347 |
2,067 |
(21,142) |
199,189 |
| TOTAL | 375,306 |
(8,619) |
9 |
47,384 |
2,067 |
(21,158) |
394,989 |
| Non-amortizable intangible assets |
|||||||
| Tradename | 33,500 |
(42) |
– |
– |
(2,140) |
– |
31,318 |
| Management contracts | 21,908 |
– |
– |
– |
– |
– |
21,908 |
| TOTAL | 55,408 |
(42) |
– |
– |
(2,140) |
– |
53,226 |
| TOTAL INTANGIBLE ASSETS | 430,714 |
(8,661) |
9 |
47,384 |
(73) |
(21,158) |
448,215 |
| GOODWILL | 446,174 |
(1,654) |
– |
– |
2,224 |
– |
446,744 |
| Table 05.5.8 | NET BOOK VALUE |
| $ in thousands | Dec. 31, 2008 | Dec. 31, 2007 |
|---|---|---|
| Amortizable intangible assets | ||
| Non-compete agreements | 75,271 |
82,546 |
| Technology | 88,526 |
95,144 |
| License and distribution agreements | 131,908 |
16,613 |
| Construction in progress | 49,886 |
– |
| Other | 71,283 |
52,820 |
| TOTAL | 416,874 |
247,123 |
| Non-amortizable intangible assets | ||
| Tradename | 210,156 |
223,350 |
| Management contracts | 219,466 |
219,483 |
| TOTAL | 429,622 |
442,833 |
| TOTAL INTANGIBLE ASSETS | 846,496 |
689,956 |
| GOODWILL | 7,309,910 |
7,245,589 |
Amortization on intangible assets amounted to $47,384 and $34,003 for the years 2008 and 2007, respectively.
| Table 05.5.9 | ESTIMATED AMORTIZATION EXPENSES |
| $ in thousands | 2009 | 2010 | 2011 | 2012 | 2013 | ||
|---|---|---|---|---|---|---|---|
| Estimated Amortization Expenses | 46,420 |
44,479 |
40,219 |
37,923 |
36,747 |
||
INTANGIBLE ASSETS: LICENSE AND DISTRIBUTION AGREEMENTS
In July 2008, Fresenius Medical Care entered into two separate distribution agreements, one for the U.S. (with Galenica Ltd. and Luitpold Pharmaceuticals Inc.), the “U.S. Agreement”, and one for certain countries in Europe and the Middle East (with Galenica AG and Vifor (International) AG), the “International Agreement”, to market and distribute Galenica Ltd’s and Luitpold Pharmaceuticals Inc.’s intravenous iron products, such as Venofer and Ferinject for dialysis treatment. In North America, the license agreement among our subsidiary, fusa Manufacturing Inc. (“FMI”), Luitpold Pharmaceuticals Inc, American Regent, Inc. and Vifor (International), Inc. provides FMI with exclusive rights to manufacture and distribute Venofer to freestanding (non-hospital based) U.S. dialysis facilities. In addition, it grants FMI similar rights for Injectafer (ferric carboxymaltose), a proposed new intravenous iron medication currently under clinical study in the U.S. The U.S. license agreement has a term of ten years, includes FMI extension options, and requires payment by FMI over the ten year term of approximately $2,000,000, which the Company will expense as incurred (based upon the annual estimated units of sale of the licensed product), subject to certain early termination provisions. In addition to these payments, the Company will pay a total of approximately $47,000 over a four year period for the U.S. Agreement of which $22,000 was paid in 2008. The Company recorded a liability for the balance. The cost of the U.S. Agreement and related transaction costs of $5,843 will be amortized over their 10-year expected useful life (based upon the annual estimated units of sale of the licensed product). The Company paid $14,566 upon signing of the International Agreement in 2008 and could pay up to €40,000 more upon certain milestones being met. The International Agreement costs will be amortized over their expected 20-year useful life. Milestone payments will be capitalized and amortized over their useful lives at the time the milestone payments are made.
GOODWILL
Changes in the carrying amount of goodwill are mainly a result of acquisitions and the impact of foreign currency translations. During 2008, the Company’s acquisitions consisted primarily of clinics in the normal course of operations. During 2007, the Company’s acquisitions consisted primarily of RSI and clinics in the normal course of operations (see Note 2). The segment detail is as follows:
| Table 05.5.10 | GOODWILL |
| $ in thousands | North America | International | Corporate | Total |
|---|---|---|---|---|
| BALANCE AS OF JANUARY 1, 2007 | 6,437,995 |
454,166 |
– |
6,892,161 |
| Goodwill acquired | 52,674 |
59,491 |
159,385 |
271,550 |
| Reclassifications | 17,952 |
8,195 |
– |
26,147 |
| Foreign currency translation adjustment | (146) |
55,877 |
– |
55,731 |
| BALANCE AS OF DECEMBER 31, 2007 | 6,508,475 |
577,729 |
159,385 |
7,245,589 |
| Goodwill acquired | 64,809 |
30,577 |
432 |
95,818 |
| Reclassifications | (1,231) |
12,773 |
– |
11,542 |
| Foreign currency translation adjustment | (642) |
(42,397) |
– |
(43,039) |
| BALANCE AS OF DECEMBER 31, 2008 | 6,571,411 |
578,682 |
159,817 |
7,309,910 |
