The Management Board uses various financial indicators when operating the Company. In 2010, it also based its decisions on the growth strategies GOAL 10 and GOAL 13. Since GOAL 10 came to a close in 2010, we specified new targets in September last year (GOAL 13). They will help us to maintain our excellent market position and to explore new paths into the future of dialysis. Fresenius Medical Care pursues four parallel approaches to assure its success in the worldwide dialysis market and achieve its growth targets. More information on this can be found in the “Growth strategy” section.

We also manage the activities of our segments based on their operational results, defined as EBITEBIT (Earnings Before Interest and Taxes)This is used to assess the company’s earnings position. More precisely, it is the operating result before earnings from financial activities and investments. (Earnings before Interest and Taxes). EBITDAEBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)Corresponds to operative cash flow before taxes. (Earnings before Interest, Taxes, Depreciation and Amortization) is specifically used as an indicator to determine the debt/EBITDA ratioDebt/EBITDA ratioImportant indicator in corporate management. It compares a company’s debt to earnings before interest, tax, depreciation and amortization and other noncash charges. allowing us to assess the Company’s creditworthiness.

The Management Board evaluates each segment based on target figures that reflect those revenues and expenses that the segments are actually able to control. For instance, financing is a corporate function and therefore an area over which the individual segments have no control. Therefore, interest expenses for financing are not included in the segments’ target figures. Moreover, corporate costs – mainly expenses for research and development, legal cost, corporate expenses for accounting and finance, taxes as well as professional services – are not included.

The operating cash flow is used to assess whether a business can itself generate the cash required to maintain the assets reported in its balance sheet and make expansion investments.

To determine the debt/EBITDA ratio, financial liabilities are compared to EBITDA plus other non-cash expenses. The debt/EBITDA ratio is an indicator of the amount of debt and the length of time needed to service it. It provides more reliable information about the extent to which a company is able to meet its payment obligations than simply taking the absolute amount of financial liability into account. Fresenius Medical Care holds a strong market position in a growing, global and mainly non-cyclical market. Furthermore, most of the Company’s customers have a high credit rating as the industry is characterized by stable and sustained cash flows that can be planned. This means that we can work with a relatively large share of debt capital compared with companies in other industries. For the current year, we have defined our target debt/EBITDA ratio at under 2.8; see “Outlook” section.

We also gear our corporate management towards operating indicators based on the following yield calculations:

• ROIC (Return on invested capitalReturn On Invested Capital (ROIC)The return on a Company’s adjusted invested capital divided by average invested capital. Invested capital consists of current and noncurrent assets plus accumulated goodwill amortization less cash and cash equivalents, deferred tax assets, accounts payable (including those due to related parties), accrued expenses and other liabilities (including income tax accruals).) is relevant as it expresses how efficiently a company allocates the capital under its control or how well it employs its capital with regard to a specific investment project. Fresenius Medical Care’s ROIC in 2010 of 8.8% was higher than in the previous year (2009: 8.5%).
• ROOA (Return on operating assetsReturn On Operating Assets (ROOA)EBIT divided by average operating assets. Operating assets consist of cash and cash equivalents, accounts receivable (including those due from related parties), inventories, prepaid expenses and other current assets, noncurrent assets, less noncurrent deferred tax assets and accounts payable (including those due to related parties).) expresses how efficiently employed capital is managed throughout the Company by calculating profit in relation to total capital. Fresenius Medical Care’s ROOA in 2010 of 12.5% was also higher than in the prior year (2009: 12.2%
• ROE (Return on equityReturn on Equity (ROE)The Return on Equity is an indicator of company profitability related to the shareholders’ financing.) provides an insight into the Company’s profitability. To calculate it, corporate net income (net income attributable to Fresenius Medical Care AG & Co. KGaA) is placed in relation to employed shareholder capital (capital of shareholders of Fresenius Medical Care AG & Co. KGaA). In the past business year, ROE (after tax) remained constant at 13.3%, mainly due to the strong increase in shareholder capital.
• When calculating our cost of capital, we use the WACC (Weighted average cost of capital) formula. The WACC is derived using the weighted average of costs incurred for equity and debt. Fresenius Medical Care’s WACC in 2010 remained unchanged compared to the previous year at 6.8% (2009: 6.9%). Comparing the Company’s WACC with its ROIC of 8.8% reveals that in 2010, Fresenius Medical Care not only generated its capital costs, but also increased its shareholder value.

We manage our investments using a detailed coordination and evaluation process. The Management Board sets the complete investment budget for the group as well as the investment targets. Before concrete investment projects or acquisitions are realized, our internal Acquisition Investment Committee (AIC) examines the individual projects and measures taking into account the return on investment and potential yield. The investment projects are evaluated based on commonly used methods such as the net present value and internal interest rate methods; payback periods are also included in the assessment. In this way, we try to ensure that we only make and implement investments and acquisitions that actually increase shareholder value.

Details on the development of these indicators as well as other financial figures can also be found in the chapters “Results of operations”, “Financial situation”, and in the  “Financial report”.

Back in spring 2005, we presented a long-term strategy with defined targets in the form of GOAL 10. GOAL 10 stands for “Growth Opportunities to Assure Leadership in 2010” and describes four paths see chart 2.1.6 that Fresenius Medical Care follows with the aim of boosting its success across the broadest possible spectrum of the global dialysis market and achieving its long-term growth targets. Since we met our GOAL 10 targets in the reporting year, Fresenius Medical Care defined new targets in September 2010 as GOAL 13 see table 2.1.5. Our plan is to continue pursuing the four paths in a financially responsible way to consolidate our position as the world’s market leader in dialysis.

In 2010, our revenue amounted to $12.05 BN. This is more than the over $12 BN we had expected at the start of the year. The figure was also clearly above the original GOAL 10 target of $10 BN mark from 2005 and the revised GOAL 10 target of $11.5 BN from 2006. With a net income of $979 M, we also achieved our goal adviced at the beginning of the year of between $950 M and $980 M for 2010. This corresponds to an average annual increase of approximately 17% since 2005, again by far exceeding our GOAL 10 objective of more than 10%.

Path 1: Organic growth

We intend to achieve annual organic growth of approximately 5 to 6% per year until 2013 by introducing dialysis services and innovative dialysis products such as the newly developed 5008 and 5008 S as well as 2008 T and 2008 K series dialysis machines. In the product business, we expect an annual organic growth of 4 to 5%. We are planning to expand our clinic network in all important markets and growth regions worldwide to maintain and even improve our leading market position. At the same time, we aim to advance our comprehensive, innovative treatment concepts UltraCare and NephroCare (see “Our dialysis service business”) and combine them with dialysis drugs, for example. This strategy makes us stand out significantly against our competitors.

Path 2: Acquisitions

With our long-term growth objectives and our aim to boost profitability in mind, we regularly investigate possible acquisitions to selectively expand our dialysis clinic network. To this end, we focus on particularly attractive regions. However, our future investments in North America will be on a smaller scale than in the past as the U.S. has the most consolidated dialysis market. Nonetheless, we assume that most of our future growth will be generated organically. Acquisitions should help us achieve our long-term objectives. Further information on acquisitions can be found in the section “Capital expenditures and acquisitions”.

Path 3: Horizontal expansion

In the business year 2010, we expanded our range of dialysis drugs reasonably and in accordance with our strategy see chart 2.1.6. Together with the Swiss company Galenica Ltd. we founded a joint company in 2010 with the aim of developing and distributing drugs for kidney patients worldwide. The products are used to counteract anemia and to regulate the bone metabolism of dialysis patients as well as patients with chronic kidney failure who do not yet need dialysis treatment. The company registered in Switzerland is named Vifor Fresenius Medical Care Renal Pharma Ltd. and extends the existing cooperation between Fresenius Medical Care and Galenica. Fresenius Medical Care holds a 45% share in the new company.

Path 4: Home dialysis

As in the past, only a relatively small number of dialysis patients, approximately 11%, perform dialysis at home. Most patients receive their treatment in specialized dialysis clinics. In the long term, we want to assume an important role in the home therapies market, which includes peritoneal dialysis as well as home hemodialysis. To achieve this goal, we intend to combine our comprehensive and innovative product portfolio with our expertise in the area of dialysis services. More information can be found in the “Home dialysis” section .

Our strategy takes account of concrete, measurable growth targets as well as long-term trends forecast by us in the dialysis market. We not only expect the number of patients to increase but also the quality of services provided and of the products available to become even more important in future. The ability to fulfill certain quality criteria will determine to what extend dialysis services are reimbursed. More information on this can be found in the “Quality management” section as well as in the “Dialysis market” section.

Integrated care for kidney patients is another area that we are convinced will continue to grow in the future. In response to this, 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.

Our detailed forecast is discussed in detail in the “Outlook” section.