Oliver Maier - Head of Investor Relations & Corporate Communications Robert Maurice Powell - Chairman of the Management Board for Fresenius Medical Care Management AG and Chief Executive Officer of Fresenius Medical Care Management AG Michael Brosnan - Chief Financial Officer of Fresenius Medical Care Management AG and Member of the Management Board for Fresenius Medical Care Management AG.

Lisa Bedell Clive - Sanford C. Bernstein & Co., LLC., Research Division Michael K. Jungling - Morgan Stanley, Research Division Kevin K.

Ellich - Piper Jaffray Companies, Research Division Gary Lieberman - Wells Fargo Securities, LLC, Research Division Veronika Dubajova - Goldman Sachs Group Inc., Research Division Anita Vasu - Redburn Partners LLP, Research Division Alexander Kleban - Barclays Capital, Research Division David Adlington - JP Morgan Chase & Co, Research Division Justin Steven Barrie Smith - Societe Generale Cross Asset Research Volker Braun - Commerzbank AG, Research Division Thomas M.

Jones - Berenberg, Research Division Whit Mayo - Robert W. Baird & Co. Incorporated, Research Division Oliver Reinberg - Kepler Cheuvreux, Research Division.

Thank you so much, Patrick. I would like to welcome all of you to the Fresenius Medical Care earnings call for the second quarter and half year 2014. Also, a warm welcome to the ones joining us on the Web today. We very much appreciate all your interest.

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

With us today are Rice Powell, our CEO and Chairman of the Management Board; and Mike Brosnan, our CFO. And, Rice, with that, I would like to hand it over to you..

Thank you, Oliver. Hello, everyone, and thank you for joining us today for our second quarter reporting. I think my headline for today is going to be strong operational performance in the second quarter. I'm proud of the progress that we've made.

Particularly as you look at this from a sequential quarter standpoint, lots of hard work has gone into delivering this set of numbers and I'm pleased with how that has gone. I think in fairness to try to give you time to have as many questions today as you can, I'm not going to go through in the usual format.

You've had the figures here for the P&L, since early this morning, so rather than going through those, let me comment just on the following. Again, as I said, we've had accelerated growth sequentially It was supported by all aspects of the business from a regional standpoint.

Anecdotally, I would share with you that our revenue, Q2 versus Q1 of this year, is up about 7.6%. And our EBIT has improved about 25%, second quarter from first quarter, so we clearly are making great progress. We've made some important steps toward expanding our Care Coordination business.

I'm sure you'll have questions, and we'll be happy to answer those for you later in today's session. But obviously, you know I'm referring to the acquisition of Sound Inpatient Physicians and Medspring Urgent Care. We also are confirming our guidance for this year. Mike will give you some more background on that when I turn this over to him.

But all in all, those are the 3, I think, main points I'd like to make for you off of Slide 1 -- or Slide 4, I apologize. Moving to Slide 5, where we look at the breakdown of revenue for the quarter. I'm really not going to go through the bottom half of this.

The revenue splits among the regions really has not changed appreciably, so I won't take you through that. I know you've had a chance to look at it. But let me at least comment and congratulate the regions on their performance. North America had an organic growth of 4% in the quarter, revenue growth of 6%, quite good and we're very pleased with that.

Looking at our International segment, 7% constant currency revenue growth, just shy of $1.3 billion and an organic growth of 5%. I think we hoped to have caught some of you by surprise with that performance. We're quite pleased with it. Moving to Slide 6. Let's spend a moment on the revenue growth, just in dialysis services.

As you know, halfway through the year, we'll give you 2 views of this. Looking at the second quarter first, we are just shy of $3 billion in revenue on the consolidated services group.

Looking at that growth in constant currency, it's at 8%, and obviously, you see a very good performance by International and North America at a 12% constant currency and 7%, respectively. Our organic growth for the combined services entities at 6% and same market growth at 4%.

Now my slide here shows, just to give you a little more color, we're actually at 4.3% same market growth in International and 3.3% in North America. I think we had it to that level of detail in the Investor News. Looking at the first half of the year view.

$5.7 billion in revenue from our services businesses, and again, you can see constant currency growth at 7%. Very strong performance in International at 10% constant currency growth and North America at 6%. Organic growth, halfway through the year, at 5% on a consolidated basis.

And you can see the same market growth is at 4% for the half year as it is for the second quarter. Moving to Slide 7. Looking at our quality outcomes. I'll direct my comments to 4 measures that I usually like to talk about with you.

Looking at our hemoglobin at the 10 to 12 grams per deciliter, which is the way we manage this in the U.S., you can see that in sequential quarters, we've had a little bit of a tick-up in the folks performing in that range.

Looking at hemoglobin from the International standpoint at 10 to 13 grams per deciliter, you can see consistent performance in EMEA and a little bit of a tick-up in Asia-Pacific as well. Our albumins, you see we've dropped a little bit in the U.S.

I'm not worried about that, but there's a little chatter in those numbers, and you see consistent performance in EMEA and Asia-Pacific. And the last point I would make on Slide 7 is simply we are very consistent in our performance on hospitalization days on a per-patient basis. Moving to Slide 8. I'd like to spend a little more time here.

I think there are some things we should talk about relative to the Products business. Looking at the second quarter, product revenue in the external market at $886 million, constant currency growth of 1%. Now let's look at International first. We've got 3% constant currency growth. Let me bring you back to first quarter.

We were, I think, around a negative 1%, so we've seen a nice swing here, still a little behind where we normally think this business should operate, but I believe we'll be able to move into that 4% to 5% territory.

You should know within the quarter, we had very good performance in our hemo disposable products, our dialyzers, our bloodlines, our concentrate and the acute product line in International was very strong as well. And our machine business was down a little, not appreciably, down some. Now let's talk about North America.

At a negative 6% constant currency growth, obviously something that we have to think about and wonder why is that the case. And let me walk you through it. Our Machine business in North America is down. It is not down to a loss of market share.

I would say it's more down to sentiment, meaning simply that a number of the independent and the smaller chains are hanging on to their capital dollars. They're not ready to make buying decisions on machines yet.

And if you calendarize this, keep in mind that the SGR fix, the docs bill fix, came on the 31st of March and then throughout basically the second quarter, we were waiting for CMS to propose their rule for next year. And that rule came in late June.

Fortunately for us, the world really mimics what Congress asked them to do, but I do think that period of time and that waiting has probably created, some concern by other providers, and we've seen the machine business be down.

Now to give you a sense of scope, I'm not saying that we're 2,000 or 3,000 machines down by any stretch, it's in the hundreds, but I did want to make you aware of that. Now if you look at the hemo disposable business in North America, it's running in the second quarter at about 3.2%, 3.3%, at market rate and that's Q2.

And we were at 12% hemo disposables in Q1, so I still think we're seeing good performance there. And then lastly, an impact to the down quarter in the U.S. or in North America, is if you recall, several quarters ago, we told you that we had walked away from some PD tender business in Mexico.

The price point there had gotten to a level that we didn't think it made sense for us to participate. But I would let you know that in the U.S., our PD business is up. I think it's around 1.5% to 2%, so we're continuing to see some growth there. I think for the sake of time, I won't walk you through the H1 numbers.

I think you've seen them there, and I think my explanations will suit for now until we get to Q&A if you have more questions. In closing, again, I would say second quarter is much improved from first quarter. I'd like to take a moment and thank all of our employees for that. A lot of hard work, operating details.

A lot of time was spent making that happen, and I appreciate it greatly, and it shows. In April, we saw many of you at our Capital Markets Day, and I believe we gave you a clear strategy for our future growth and our aspiration for $28 billion in revenue in 2020.

I think you can see that in Q2, we've started walking down that path of how we're going to get there. Not enough, more to do, stay tuned.

In our global efficiency program, we've told you that it's going to enhance our performance over time, it's going to make us more competitive and I'm confident to say to you today that as we look at our target for 2014, which is up to $60 million in pretax, I believe we'll deliver that number. I think we're off to a good start.

And with that, I'd like to turn it over to Bos [ph]..

Thank you, Rice. Picking up on Chart 11 and talking a little bit more about the Q2 P&L. Our operating earnings were up 2% or $12 million. As Rice said, we're very pleased also with our sequential quarter improvement in the second quarter of this year in terms of operating earnings. Margins year-over-year were down a bit from 15.1% to 14.5%.

Essentially 60 basis points, and what you find is that the margin effects of North America and the International operating businesses, more or less offset each other, leaving about a 60 basis point margin effect associated with corporate costs for the second quarter. So first in North America. Operating income increased $10 million.

Margins declined about 50 basis points. They were down largely due to the gain we recorded in the second quarter of 2013 relating to the last clinics we divested associated with the Liberty acquisition. Our growth in Care Coordination, which is at lower margins, and then personnel costs, some of the FDA remediation costs we've been discussing.

And these cost increases were partly offset by improved commercial mix and commercial rates. In International. Operating income increased $25 million, positive margin effect of about 90 basis points. The increase was mainly due to the margin effect associated with our business group in Asia and favorable foreign exchange effects.

In corporate, we had increased corporate spending due to some exploratory costs related to potential acquisitions in our Care Coordination business, which we ultimately decided not to pursue. In addition to that, we had higher legal and consulting expenses related to our compliance review, as well as some spending related to our GEP program.

Moving to interest and taxes. Earnings benefited from a lower net interest expense due to the interest income associated with the note receivable from a middle-market dialysis company, which we disclosed last year.

Interest expense was marginally higher with our average debt balances increasing, offset by a larger portion of that debt being carried at low short-term interest rates. Our effective tax rate increased 6.1% from 32.6% to 38.7%.

We took an unfavorable adjustment due to a recent German federal tax court ruling, which had a 5% year-over-year effect on the effective tax rate.

The underlying tax rate for the quarter is 34.8%, and for the year, we still expect to be within our guidance, which I indicated was 33% to 34%, albeit I anticipate being on the high end of that guidance range for taxes. Our noncontrolling interest has increased to $47 million due to the creation of additional joint ventures in the back half of 2013.

As Rice indicated, reporting earnings for the quarter were down 11% or roughly $29 million. The effect of the tax case is responsible for $18 million of the decline as well as the increased portion of our earnings in joint ventures. Turning to my next chart and just beginning our discussion of cash flows.

On Chart 12, you can see not a big change from the prior quarter, an improvement of 1 day worldwide from 74 to 73 days. We continue to see good performance in International, showing a steady 107 days sequential quarter.

And in North America, you may recall that we had a little bit of an increase in the fourth quarter, which I indicated was due to some delays in receivables in Mexico, as well as some filing requirements with Medicare in order to receive payments on some of these newly created joint ventures. We did see a 2-day improvement from the first quarter.

This can be directly related back to the improvement in the Medicare situation. The remaining day is a consequence of the receivables outstanding in Mexico, which we expect will improve in the back half of fiscal 2014. Turning to Chart 13 and looking at overall cash flows.

Our cash flows for the quarter were influenced by the year-over-year effect of our accounts receivable picking up 1 day in cash flows in the second quarter.

In addition, consistent with what you saw in the first quarter, we continued to build up inventories, which was planned as part of various capacity expansions we're undertaking in several locations around the world.

We also had an increase in our pharma inventories, essentially recovering historical inventory levels as we had short supply of some of our pharma products in the first half of 2013. CapEx as a percentage of revenues is up year-over-year, but it is in line with Q1, and it is in line with the guidance that we provided for 2014.

Turning to my next chart. And looking at our overall leverage ratios. There's nothing new on this front, $9.1 billion in debt, which is an increase over year end of about $700 million. This essentially reflects our acquisition activity and the financing of our annual dividend after our AGM meeting in May.

No remarkable change in our profile, and our leverage ratio, we think, is at very acceptable levels. Turning to my last chart. In terms of the 2014 guidance. You can see that we're continuing to guide in 3 broad areas.

First, in terms of the core business, we believe our Q2 performance is in line with our full year guidance, and we do expect to improve the operating performance as the year progresses. So you can see we're confirming our guidance with regard to the core business.

I did indicate net income of $1 billion to $1.05 billion, and I do think it is most likely that we'll be at the lower end of that range.

This is due principally to the tax adjustment that I just commented on in the second quarter of $18 million and continued spending on consulting and legal advisors with regard to quality systems compliance and the Granuflo case in the United States.

At the beginning of the year, we said we anticipated incremental spending of $30 million to $60 million on these matters over 2013 actuals. And I said that $30 million of that range was in the guidance.

I think we're trending towards the higher end of this $30 million to $60 million range, which could have an additional after-tax effect of about $20 million.

So between the tax case and running the -- costs running a little bit higher than we'd anticipated, or that we put in our initial forecast, I think that more than likely, we'll be towards the low end of that $1 billion to $1.05 billion range that we provided.

The second area, you'll recall, that we guided on was we said that our core business excluded acquisitions. So separately, but staying consistent with our program for this year, we're indicating based on the acquisitions we have closed to date, that would be to date through this meeting, so it would include the Sound acquisition.

We would expect additional revenues in 2014 of about $500 million. In the aggregate, the acquisitions we've closed this year will be very modestly accretive to operating earnings and will cover their financing costs. As a consequence, the contribution to earnings after tax for 2014 will be negligible.

This is in part due to the onetime costs related to the deals we have closed, as well as absorbing the exploratory costs we have had as we have evaluated but did not pursue other possible businesses related to our Care Coordination strategy.

The third point we're guiding on is we're also performing to expectation regarding our progress for the global efficiency program. In the first quarter, I indicated a low single-digit positive contribution, and we continue to see good performance in Q2, with a positive contribution of about $11 million.

So for the half year, we're at approximately $15 million positive contribution to earnings related to the GEP program. Our guidance remains unchanged, indicating we anticipate a positive contribution to operating earnings of up to $60 million on a net basis for the year. So with that, I think we can open it up for Q&A..

Thank you, Mike. Thank you, Rice, for the update. And I think, Patrick, we can now open up the lines for questions, and we can start with the Q&A..

And our first question today comes from the line of Lisa Clive, Sanford Bernstein..

Three questions. First, the very strong International services growth. Could you give us a bit more detail on where this is coming from? Have you changed your views on going into services in China? We talked a little bit about Japan at the Capital Markets Day. Maybe you could provide an update there.

Second question was on the news item, I guess about 1.5 months, 2 months ago, on signing a small Medicare Advantage deal with Aetna.

Can you comment on whether that's a fully capitated contract and how you see the opportunity in Medicare Advantage in the coming years? And then, lastly, how should we think about your Care Coordination efforts that are a bit outside of the dialysis clinic? It's clear how integrated care with Medicare Advantage, for example, fits nicely in there.

But frankly, I think Sound Physicians and also Medspring seem a bit outside of your core or at least historically.

So could you just comment about what's your interest in those areas?.

Sure, Lisa. It's Rice. Let me get started on these, and I may have Mike jump in to help me here. International services growth, I would say to you that we had good performance in all of the regions. We've seen good performance in the eastern part of Europe, so that continues to be good for us.

We saw some reimbursement increase in Turkey that helped us as well. And we've not changed -- let me say this, we're still bullish on service in China, but we're still operating under the system we've operated under, which is the partnerships that we've had with the government. That has not changed.

And Japan, yes, we talked about Japan in the Capital Markets Day, we are big believers that as that market opens and when that opportunity comes, we're going to jump through that door.

Not quite there yet, but I would also tell you I don't want to say much more about it because that's probably one of the more competitive places, Asia-Pacific, that we can operate in, in the services business. But very good performance.

The folks have done a very good job in all of those areas, getting things started for us and continuing to push growth. In the case of the Aetna contract, without getting into too much detail, it is a fully capitated opportunity.

It's about 1,000 patients, which is the size that we ran the first integrated care pilot on with the government a numbers of years ago, Lisa, as you will recall. We think Medicare Advantage is a nice opportunity. We like it. We see good growth in that book of business, if you will, for ourselves.

So we think that is an area that lends itself to risk and future ideas about how we might try to approach those patients and marrying outcomes with risk performance, et cetera. And then, your last question on coordinated care and Sound and Medspring. It's a great question, and let me try to do this so I don't take up too much time.

When we think about our patients and the fact that easily 65% of those patients come to us from the hospital, the thing that attracted us to Sound is much like we do, they base things off of protocols and algorithms that are very clinically developed and are driven toward moving a patient through the hospital efficiently, effectively and planning for the discharge and then managing that discharge into skilled nursing facilities or it could be dialysis facilities, et cetera.

So we think there is a way with Sound to help overcome some of the fragmentation that we see in our patient base as they enter the hospital. Now granted, there are 6,200 hospitals in the U.S., and they're in 100. We're in 1,500.

There's a lot of work to do there, but we think there's a way that we can learn more about their business, they can help us and we can begin to get to a place where there's a better handoff of dialysis patients as they're moving through the hospital.

And in the case of Medspring, what we feel makes sense there, a number of dialysis patients, Lisa, don't really have primary care. And so they are going to see the nephrologist, but if they need a flu shot, if they, broken bone, whatever, appendectomy, they don't really have primary care, so they go push themselves into the ER.

And that ends up being generally a very long, unpleasant experience and it can end up in hospitalization. And it keeps them from getting their therapy or their -- with us. So we like the idea of taking these urgent care centers, which provide very good, very quick, very competent effective primary care for some things.

We like the idea that this company with about 14 to 20 of these urgent care centers, we can begin to build those, you build them and they look a lot like dialysis centers in the geographies that we need them or that we're growing or we want that possibility.

And again, the goal is to overcome the fragmentation of care that we see with our patients when they're outside of our dialysis clinic..

I guess one quick follow-up, then.

I mean, in these care centers, then, would you envisage that most of those patients would -- that walk through that door would be your dialysis patients?.

Not necessarily. This is a business that's growing well. I think we would obviously take all comers, but I think from a geographic standpoint, if we're in a part of Houston and we have patients that don't have primary care, we would certainly send them there close by.

So I think it's a synergistic effect, but in and of itself, these urgent care centers are going to stand alone and be able, I think, to drive value for us. But we certainly want a place that we know what kind of therapy or what kind of treatment they're going to get. We'd like to be able to put our patients there..

Our next question comes from the line of Michael Jungling of Morgan Stanley..

I have 3 questions. Firstly, on Roche's MIRCERA, any update whether the product will be available in the United States for you to use this year? Secondly, on U.S. dialysis, the growth gap between revenue per treatment and cost per treatment is closing.

Do you think there is a chance, a reasonable chance, that revenue per treatment will grow a little bit faster than cost per treatment in the second half? And then thirdly, on the EBIT margin for the group, what would the EBIT margin have been in the second quarter if you did not have 2 extra dialysis days? I mean, you sort of highlighted a very nice improvement, but I guess some of the improvement was driven by 2 extra dialysis days.

So some sort of comparison to Q1 and Q2 EBIT margins sequentially would be useful..

Michael, it's Rice. Let me take number one and give Mike a moment on 2 and 3. He's pulling a couple of things out of our binder here. I would have predicted you'd be the gentleman that would ask me about MIRCERA, but what I would say is our pilot, it will happen this year. I'm not going to be much more specific from that.

We're making progress, but once we are actually treating and dosing patients, we would let you know that. So obviously, you can discern from this that we're not quite there yet, but we're moving in the right direction. It will come to fruition, Michael.

And on number two, Mike, can you give Michael some -- this was on the revenue per treatment, cost per treatment..

Yes, yes, no, I appreciate that. What I would say, in terms of the back half, Michael, is I expect small improvements in revenue per treatment on a sequential quarter basis. So I do think we'll see some improvements there in the back half of this year.

But I think we will also see increases in cost per treatment, although I think those increases will be less dramatic on a year-over-year basis in the second half than they were in the first half. So Q3, I think you'll probably see a similar effect or maybe a slightly improved effect off Q2.

And then I think Q4, you'll see a better profile in terms of enhancing the margins in the U.S. for the difference between revenue and cost per treatment..

Great.

And then the question on the EBIT margin, please?.

Yes. We're still running some numbers here. I mean, I have my rule of thumb, but I'm not sure I want to use that with you. Yes, I'm going to go with my rule of thumb. I would say, you're looking probably at about a $15 million to $20 million margin effect -- operating margin effect associated with a couple of dialysis days..

Okay. And then I have a follow-up question sort of on the restructuring efforts.

Can you give us a sense of what the net cost benefit is that you've been able to book in the second quarter as you begin your restructuring efforts?.

Yes, I actually disclosed that. It was $11 million. So we're [indiscernible] $15 million on a year-to-date basis..

Our next question comes from the line of Kevin Ellich of Piper Jaffray..

I guess, Rice, I wanted to start off on the Sound acquisition. You laid out the strategic rationale. Just wondering what other synergies you think we could ascertain, obviously, maybe not a whole lot of cost synergies.

And then, do you know what percent of Sound's revenues comes from hospital subsidies? And are you concerned that those could diminish over time?.

Yes, Kevin. Let's jump into that. So on the acquisition, I don't really believe, and we didn't build our models around a lot of synergy from a cost standpoint between these businesses. They operate very efficiently and leanly in a little bit different way than we do in the way they're set up.

But I think the real opportunity we see is just getting our hands around, can we take this 9.4 hospitalization days on average that FMC has, and can we really help find a way with Sound's input to driving that to something considerably less.

So we see the opportunity more in that way than we do traditionally, when we buy something in the dialysis space and we know there's a lot of synergy there. We just believe that this is going to help us down the road be able to get better at managing hospitalization for our patients.

And then as far as the hospital subsidies, I don't want to guess on that. I think when we looked at it, it was not a huge piece of their revenue, and I'm not overly worried about it, but if you'll give me a little time, I'll come back to you on that. I do need to look at something on that before I just spout something off the top of my head..

No, that's helpful. And then, I guess, on the reduction in hospitalization days and readmissions, do you have any of those metrics for Sound? And also, in your earlier response, I think it was to Lisa's question, you like the idea of how Sound helps coordinate the care of the patients going into postacute and whatnot as well.

Could we see you -- I guess, what's your appetite for expanding into hospitalist, the acute and postacute business? And did you even consider other companies? I think there's a publicly traded company out there in that space..

Yes, it's great question, Kevin. First, they do have statistics and KPIs on their hospital day reduction and their readmission rates. I'm the wrong guy to try to give you that off the top of my head. It would be dangerous, but we can certainly get that for you, but they published that. I just don't remember. What I would say is, we really like Sound.

We know those other assets that are out there. They're all in various stages of their business plans and how they operate. Sound was very clinically oriented. It's run by physicians, built by physicians for physicians. We have a lot of respect for the management team there.

We just felt like their approach was more akin to the way we go at things from a clinical standpoint in predicting outcomes, although we're looking at some different outcomes, obviously. So we like that. Would we continue to look at that space? Sure, I think we would.

But I think we've got to recognize we just got this one, so we've got to kind of get our feet on the ground. But we certainly would be open. I guess that's the way I would leave that..

Got it. And then just one question on dialysis. You -- in your prepared remarks, you commented about the Machine business in North America being a little sluggish, let's say. When do you expect that to pick back up? And then also, on the disposables, sounds like growth was down a little bit sequentially.

Do providers and the other, smaller independent guys -- do they stock up and buy early in the year? Is that why it was down? Or, I guess, can you help us with that?.

Sure. What I would say relative to machines, I think that it will get better. Generally I can tell you from all the years I've been doing this, usually in the fourth quarter, you will see people as the year comes to a close and they've got CapEx dollars left, they will tend to make some machine purchases. I'm not going to predict Q3.

I mean, we're just into it. I've looked at our August numbers. They look pretty good, but I don't want to make that the bellwether for the whole quarter. But I think the comfort you can take, even though I don't like being down, is it's not somebody else's machines that are being purchased. People are just hanging on to their dollars.

From the disposables side, I have not generally seen people really stock up in that regard. I mean, we may be down a little bit. It could be that some people bought more early on, some of the independents, but we deliver so frequently to the chains, we tend to not see a lot of variability there. So I don't think it's necessarily a big piece of that.

It could be, though, that as you get into the summer season, people that are down south, snowbirds that are coming back our way, sometimes they don't always manage inventory levels as tight as they can, because people do miss treatments.

Keep in mind, patients miss on a average a couple, 3, 4 treatments a year with vacation, travel and things like that, so it's not an exact science, is I guess what I would say..

Our next question from the line of Gary Lieberman of Wells Fargo..

Rice, maybe just to go back to your comments on MIRCERA, should we take that to mean that you do expect that MIRCERA will be used widely by you guys this year?.

Great question, Gary. No, what I would say is that we would start our pilot this year. And again, as we've talked about this before, this isn't really us trying to prove safety and efficacy. That's been done.

We're really trying to get used to longer-acting drug, different than short-acting Epogen, and how do you manage that, how do we go through the logistics of that. So think more in terms of when we get started. We would continue with that, and then we would probably, if everything's good and we liked it, we would continue to put patients on.

I just think, shouldn't read anything into -- it's July, and I didn't tell you we dosed our first patient yet, it's not that exact. I guess I'd leave it that at that..

But I guess, in terms of it being available to you, if you're happy with the way the -- not the trials, but the -- sort of the usage goes, will the drug be available to you if you want to buy it in quantity?.

I don't know why it wouldn't be. I think we'd be able to find our way through that, absolutely..

Okay. And then a question on the income from noncontrolling interest. It moved up in the quarter.

Were there any additional JVs that were done in the quarter? Or is there some strength in those assets that's worth talking about?.

Mike, you want to?.

Yes. I'd say 2 things. First, most of the increase, because we're looking at year-over-year, took place in the back half of 2013.

And then more generally, I would say, and you've actually given me an opportunity to correct a statement I made earlier, because as I was going through the cash flow statements, talking about acquisitions, I just want to correct.

It really is acquisitions and investments, and in the case of Sound, as you know, that was us acquiring a majority interest. We did not acquire the company. So I think it's, as Rice said, it's very important that, that management team continue to manage that business effectively.

And we obviously have a strong partnership with that business, but we acquired a majority interest. Speaking more broadly, we've done about -- we've done over 20 deals in the first half of fiscal 2014. So very active on the business development front.

And for several years now, more often than not, when you're doing those, even in [ph] for dialysis space, they tend to be joint ventures.

So most of what you're seeing in terms of the year-over-year increase comes from what we did in the back half of last year, but we're still very active in the space, so you'll continue to see us acquiring or investing in joint ventures in a number of markets around the world..

Great.

And then maybe just finally, is it possible to get an update on the Granuflo litigation?.

Yes, Gary. We are just sort of trundling along. We are still at this point not expecting to be in a courtroom trial, if you will, until next year, could be the back half of next year. So we are still doing discovery. I know you guys get tired of me telling you that, but we're still doing discovery, prepping ourselves.

But we don't anticipate trial date until mid to late in '15..

Our next question comes from the line of Veronika Dubajova of Goldman Sachs..

I have 3, if I can. The first one is just on the increase in the revenue per treatment in the International. And, Mike, I don't know if you have any guidance and you can help us understand how to think about it on a full year basis, because obviously, I suspect there might have been some tenders in the second quarter with health [ph].

So anything that you can share would be much appreciated. My second question is just on the GEP guidance. I'm quite surprised, given that your run rate, as of Q2, was already $11 million, and the guidance that you had given that it's mostly second-half weighted. I'm surprised that you still are only expecting $60 million to come through this year.

And maybe, Mike, you can help us understand why that's the case. And my last question is on the Aetna contract.

I don't know, Rice, if you can share with us any of the terms in terms of -- or at least I suspect you cannot share the precise terms of this, but maybe kind of put it in the context of how much of a saving would you have to generate to for this to actually be profitable? Or does it have to be better than what you delivered in the Medicare pilot? That would be really appreciated..

Thanks for that, Veronica, I'll take the first couple. In terms of International revenue per treatment, we are pleased with the results on a constant currency basis. There was a nice increase in revenue per treatment. And I think also what we're pleased with is that was the case for all of the regions, Asia, Latin America and Europe.

It's not unusual to see a bump in revenue per treatment, International revenue per treatment, because it includes the Latin American countries and those tend to be inflation adjusted. But I think it is a positive piece of news that it is -- it covers all the regions in terms of that effect.

No particular guidance for the year on the number, but we're pleased with the result, and it was a global. In terms of GEP, GEP, as you'll recall, I'm still very comfortable with up to $60 million, because what we're doing is guiding to the net effect for fiscal 2014.

So as the year progresses, that will consider not only the savings, but also whatever implementation costs we have to get on the right footing in this program, which we anticipate will be a 3-year program. So I'm very happy that we've got about $15 million put to bed in the first half of the year. But we're running 18 projects.

We're making a lot of operating decisions as we go. So I still feel pretty good that we will have a positive contribution for the year.

But I'm going to maintain the flexibility that if we need to make decisions and incur some implementation costs in the back half of the year to get the right trajectory for the $200 million we've committed to for next year, we're going to do that..

Understood, Mike. And if I can just quickly -- a quick follow-up on that one. In terms of the $15 million that you've seen, can you give us the growth and the cost of that? And apologies if I missed this in the call..

I actually don't have it handy, but again, because we're dealing with 18 projects and the idea is to get to an end run rate, I wouldn't read too much into the gross and the net as we get this thing started out this year..

Yes, and Veronica, unfortunately, I'm always the one that tells you I can't do that, but I'd have some folks in Hartford, Connecticut, probably upset with me if I gave away too much information on Aetna. So I'm going to have to pass on the terms of the deal. It just wouldn't work for me to walk you through that..

And our next question comes from the line of Anita Vasu of Redburn..

I just had a quick follow-up question on the Sound Physicians deal. I know this has kind of already been covered.

One thing I was just wondering, in terms of the fact that you're entering in certain areas that use more generalist physicians, how do you kind of expect that to cater specifically to sort of kidney disease and dialysis, specifically when you're kind of thinking about integrating it within your existing network?.

Sure, Anita. A couple of things. The profile of the physicians at Sound, in general, what we're finding with hospitalists are generally they're in internal medicine, predominantly. There are some that are really trained as primary care, believe it or not.

There are a smattering of nephrologists that have moved into the hospitalist specialty, if you will. But let's not think of this as an integration where doctors are going to be interspersed day-to-day, practicing together.

So I think there's really not a lot of difference than what we see today, meaning nephrologists in the clinic dealing with our patients. Nephrologists generally don't get into see their hospital patients. They need to be able to coordinate with someone.

So I think internal medicine, quite honestly, which is the preponderance of these hospitalists, is a very similar specialty in terms of the docs being able to understand, communicate with one another and be on the same page. But I don't think it's got to be anything that is really, truly hard and sticky from that standpoint, Anita.

I think it'll work just fine. I'm more interested, and the stickiness that we like is the fact that Sound is so protocol-algorithm-driven as we are. That's what I like the most, is because then we can look at these clinical outcomes and the inputs and the outputs are analytically derived.

I like that, versus just thinking about how the physicians will kind of interface together. If that helps..

And our next question comes from the line of Alex Kleban of Barclays..

First on Sound.

Could you talk about EBIT margins and how you expect those to evolve over the course of time with the deal? Secondly, on MIRCERA, I guess, just a -- maybe a more detail kind of question, but do you anticipate switching patients primarily onto MIRCERA from Amgen EPO? Or will you be looking more to initially dose with new-to-market patients?.

Sure, Alex. On the Sound EBIT margins, I probably won't give you a whole lot of detail. I think we would probably say, yes, in general, you're probably looking at low double-digit, something like that. I think we'll put it at that place right now.

And then, when you look at MIRCERA, it's probably too soon for me to really try to walk you through how we're going to handle that. I think that what you ought to consider is, there'll be a mixture of this. This is really going to be an independent physician decision as to how they want to do it.

Obviously, patients are going to be on EPO, and they're going to move off, and there are going to be new patients as well, but a lot of that will come down to how the individual physician wants to manage that process. I just don't want to get too far out in front of ourselves on MIRCERA yet, but I would say it could work out that way, theoretically..

Okay. And just one more, just EPO pricing for the quarter, maybe you could update on that. And also, any negotiations with Amgen? Because I think you got the [indiscernible] agreement over for -- by the end of this year for next year, if I'm not mistaken..

Well, you know I'm going to say EPO pricing is too high no matter what. But, no, we did take a price increase, I believe it was back in May, I think it was, is that right? I believe that's right. But it was within the quarter, yes. In terms of the negotiations, what I would say, as you know, both the European contract and the U.S.

contract are up at the end of the year. We're talking and we're meeting and doing the things that we need to do to sort our way through that. So I suspect this will go on for a while. We've got till end of the year to sort through how we're going to go forward, Alex..

But you'll be, I guess, primarily looking for nonexclusives agreement with them this time?.

Yes, which would be what we have today. I mean, they -- their exclusive is with DaVita, and we've been unexclusive for a while, and I wouldn't expect to change that, Alex..

How has that impacted pricing over the course of the last agreement? I mean, do you have a sense of where you are versus DaVita, in terms of how much increase you've had to take versus what they've had to take?.

Yes, I mean, we have a sense of that. The way I would answer it is, it's really more built around the discount, the level of discount you get, not so much the actual price of acquisition. But let me leave it at that. It probably wouldn't do me any good to get into any more detail than that..

And our next question comes from the line of David Adlington of JPMorgan..

Just on Sound again.

I know you said you acquired the majority, but I was wondering if you could give us some further color on whether that was nearer the 50% or the 100% in terms of what majority and therefore what impact that might have on minority interests for the rest of this year?.

Yes, David, it's Rice. What I would tell you, it's significant. I'd think more about your latter suggestion of a number, but it's not that high. But it's a significant share for us, and obviously mixed in there, there's management.

The original private equity firm kept some, and then we've got 2 hospital systems that are very enamored with the business model and the way Sound conducts themselves in the work, and they're part of that, too. But we are clearly the vast majority..

Great.

And impact on minority interest in the second half?.

It will have an influence on the minority interest, but as I said, I confirmed our guidance, and provided -- when I gave the guidance with regard to our acquisitions and essentially, modestly accretive to operating earnings and [indiscernible] contributing much in EAT.

That's in part because the deal was done in a half year and because of the onetime acquisition costs we have. So I think as you think about the back end of this year, better to think of that investment as part of our overall business development program rather than trying to tease out its individual contribution to the earnings..

Okay. Great.

And will that be reported within the Care side? Or will you have a separate line for it?.

It'll go into Care Coordination..

Yes..

And our next question comes from the line of Justin Smith of Societe Generale..

I just wondered if you could actually disclose the actual total Care Coordination revenues in the second quarter included under excluding Shiel if possible?.

Hang on, Justin, we've got to look that up, but I think we can probably give that to you..

That's in -- we'll get it. It's in our 6-K, but we haven't filed that yet. Just hang on one second..

Yes..

Sure..

And he was looking for Shiel in there too..

Yes, we'd report total Care Coordination, rather than break out the pieces, but -- yes, Care Coordination for the 3 months ended June this year is $208 million in revenues, and last year is $138 million in revenues..

And our next question comes from the line of Volker Braun of Commerzbank..

I would like to get back to growth. In Asia-Pacific you've increased the number of patients there by more than 1/3 versus Q1, so more than 6,000 patients.

Could you share information which regions are, or which countries are affected and what the margin profile could be?.

Yes, Volker, it's Rice. What I will say is that we are seeing that improvement or that increase throughout the region. I'm going to be very honest with you, I don't want to get into a whole lot of specifics because of the competitive nature of what goes on over there in the Service business, and we're not done yet with some things that we're doing.

But I would say it's a fairly well-spread-around improvement that we're looking at.

And I don't know, Mike, that we want to publish any of the margin on that?.

No, no. I don't think so. I agree with you, Rice. That market's extremely competitive right now, and we've indicated a number of times that we think we're well positioned in Asia, as a region, in terms of the positions we have in the markets that we think are appropriate for our business.

And the region is strategically very important to us in terms of what we shared with you at the CMD. So....

But to give you some sense, just keep in mind, you've got India, China, Singapore, Malaysia. There are lots of places that -- Philippines, so there's a broad area there for us to be involved with..

Yes, sure. I mean, this is the case for quite some time now, but what has changed the picture? The momentum has picked up quite dramatically.

And was it just opportunistic? Or is -- there's a trend that we can expect in the next quarters to remain?.

Let me just comment. I think in addition to what Rice said, and we're still working through this, but we did have a period of some fairly sluggish revenue growth in Asia over the last couple of quarters. And that was, as we had reported to you, largely due to restructuring our distributor network in China.

That work is still continuing, but the China situation has stabilized in this period of time. So I think we're back to a very solid base, and that's why you're seeing the revenue growth turn around a bit..

Yes, I think we've improved ourselves because we were opportunistic with a couple of opportunities, but I think we'll see a good trend there going forward, Volker..

And our next question comes from the line of Tom Jones of Berenberg..

I had 2 questions, actually. The first one, perhaps changing tack slightly. Just on the nutritional status of your patients, you did mention it, Rice, but the percentage of your patients on albumin -- with an albumin greater than 3.5 grams per deciliter, that sort of dropped from 86, I think it was in Q4, down to 85 in Q1 and now 82.

Is that really just genuinely normal volatility? Or is there anything that you're doing just to make sure that, that isn't just normal volatility and returns to a better level? And then the second question, just, I hate to harp on about it, but Sound.

How easy is that businesses to scale? Because I mean, I think 100 hospitals out of 6 and a bit 1,000, it's less than 2% of the hospitals in the U.S., it's not really going to move the needle across your whole dialysis network.

How easily, and more sort of specifically, how much capital do you think you need, if any, to expand that business into other hospitals and make it a broad enough network that it's really going to move the needle on your dialysis business?.

Thanks, Tom. This is Rice. Let me take them both. On the nutritional status, you're right, the numbers have dropped some. A couple of things that we're seeing here is, as you well know, we are not allowed to really provide consistently supplements for our patients. And so we've been in and out of our ability to provide supplements.

New patients coming in, they're able to get some and there's a time frame where they can't continue. So we're kind of cycling through some of that. It's really not ideal. I wish, and I'm going to harp on it, I wish we could get legislation that would tell us we could take care of that for patients, but it's not the case.

You do see a little bit of shift with weather as well. It does move around a little bit, depending on the season. Now with Sound, in terms of scalability, Sound has maintained and they continue their own recruiting department, if you will. They've got 50 people that they use to recruit physicians, quite successfully, I might add.

We have seen in our diligence, that they're able to add a couple of hundred physicians very quickly to bring them into the network. So I think their ability to scale, as you look at more activity in hospitals, is there. They certainly seem to have no issue with that. So I'm pretty comfortable that we can make that work.

This is not a high capital-intense business. One of the things we like about it is the fact that you're dealing with physicians, them in the hospital. If you can get the docs, you're not really looking to spend a lot of money on anything from a capital standpoint. So we think this is very scalable.

We obviously went into this thinking about with us being in 1,500 hospitals, that was the immediate scalability that we would consider as to how Sound would go from 100 to that. And then moving beyond that, we think there's a path to get there, Tom. It's not a heavy step-up, if you will, in terms of being able to get....

Because it seems to me that the value in that business is in the sort of expertise and the algorithms and the logistics that they operate.

And that seems to me something you could pretty much just -- even if you perhaps even take on existing hospitalists that are employed by the hospitals and just take them onto your books, it's something you could do pretty, pretty easily, to be honest.

Is that a sensible way of thinking about it?.

I think it's very sensible. Yes, absolutely..

And our next question comes from the line of Whit Mayo of Robert Baird..

I've got another Sounds question, maybe just a different angle. But I'm just curious what the overlap of Sounds is with your existing clinic business. And it does sound like this is a little bit of a learning experience.

And I'm just kind of curious to hear your thoughts around why it's this asset that makes sense versus maybe something targeted and smaller..

one, very clinically driven, physician started, physician managed, for physicians. We like that. Secondly, they have the ability to scale. To start smaller with a smaller company, if you will, if they didn't have the scale capabilities that we saw at Sound, it would be a rough slog, I think.

We like the fact that they've got the ability, they've got their own recruiting talent and they're able to make that happen. So we felt this was the best place for us to get our feet wet. And it's quite an experienced, seasoned management team, and that's always important when you're going to go into a new venture like this..

Yes, I would just -- sorry, I would just add to what Rice said. When you look at this business and when you look at some of the other business we're investing in, in Care Coordination, these are good businesses that stand on their own.

As we go forward, there may be some benefit that -- in terms of caring for our patients, but the footprint of Sound versus the footprint of our clinics is not the reason we invested in Sound. It's a good business on a stand-alone basis..

No, that makes sense. And just as you think about building out the Care Coordination effort, what other assets and capabilities do you think you need to buy, build or rent, as you sort of assemble that effort? I mean, clearly Home Health kind of comes to mind. Just looking for any flavor on what we could see over the next year or so..

Sure. I would say one thing, Whit, let's -- as you think about this, you have to move off of the U.S., the North American continent, because there are going to be opportunities globally. There are some things we've looked at, some of the opportunities Mike mentioned that we chose not to pursue.

There are things that we see happening here, particularly in Europe, they're going to lend itself to Care Coordination. So let's not just think in terms of the U.S. In the U.S., we could see Sound expanding. We think there's an opportunity there. There are still vascular access centers out there that we could look to expand.

So the asset base we have, we can pursue that and push it out, if you will, in the U.S.

But I just want people to not lose sight of the fact in the rest of the world, there are countries very well developed that are looking at Care Coordination, albeit a little differently, but there are going to be opportunities there, and we're evaluating those as we speak now..

Great. And just one last one. Mike, just the increase in corporate overhead in the quarter, I may have missed that..

Yes. I had said that was due to -- as Rice just mentioned, some of the exploratory costs we incurred looking at potential deals in the Care Coordination area that we decided not to pursue and also an increase in the burn rate relative to the quality compliance and Granuflo projects that were undertaken..

And our next question is a follow-up question from the line of Lisa Clive of Sanford Bernstein..

A few more questions. Just thinking about your Medicare Advantage population, I think in your last annual report traditional Medicare is now 76% of your patients.

Is it fair to assume that, that 24% remaining is split sort of 50-50 between private and Medicare Advantage? I'm just trying to think about, as you move down towards integrated care for MA, kind of what proportion of patients we're looking at there. And then, second question.

On Sound, what is the fee structure like? Do you get a fee per episode? Is it shared savings? And, I guess, more importantly, is there any tie to Medicare Advantage rates? I know we've seen other players in the sort of accountable care organization area get hit with Medicare Advantage rate squeezes and I just want to make sure you're sort of insulated from any changes like that.

And then I guess, lastly, feeding into your comments just now on Care Coordination outside of the U.S., when we think about that $5 billion target by 2020, what proportion should we expect comes from the U.S.? I mean, is it going to be sort of $4 billion from the U.S., $1 billion outside? Is that sort of reasonable?.

Yes, Lisa. Let me answer that one first. I don't know that we are really that determined in our thinking as to what that split is going to be. Obviously, probably not a surprise, we got started in the U.S. first.

We had these opportunities, but I don't think I can really tell you out of $5 billion, if it's going to be $4 billion and $1 billion, or $3 billion and $2 billion or exactly how it's going to be yet. We're going to let that unfold and see what the opportunities bring us. So just sort of stay tuned on that one.

On the Sound revenue, it's all of the above. They do get a fee per encounter. They do have some shared savings programs as well. And then there is going to be a Medicare Advantage bundle opportunity coming to them. I'm not sure it's there yet, but I think they're going to look at that. It's in '15.

But today, it's basically fee, if you will, per encounter, and then shared savings as well. So it's a little bit of all the above. And then on the Medicare Advantage piece, let's see. Yes, so I what I would tell you is, Medicare Advantage is, yes, you're thinking about it in the right way, roughly is the way you look at the split. You're good..

Okay. And just lastly, on the fees for Sound.

I guess what I was asking about with the Medicare Advantage situation is if there were another Medicare Advantage cut, would that be something that would hit Sound's rev EBIT structure, or basically profit margin? Or would they be a bit insulated from that?.

They've got some insulation there, Lisa. It's not going to be a cut that we'd have to stitch up. Let me say it that way. They're insulated..

And our next question is from the line of Oliver Reinberg of Kepler Cheuvreux..

Three questions of me. Mike, can you just help us, coming back to the minorities. If I recall it from the first quarter call, I think you sort of guided to about 8.5% of profit before tax should come in as a kind of minority charge. Percentage-wise, we have improved, but I think we're still tracking at about 11%.

Can you just talk about is this coming down? Or could you give us an updated guidance for that? Secondly, if I just look at the second quarter margins nationally, this really nicely improved, [indiscernible] country, 300 basis points and 200 year-on-year.

Is that actually sustainable? Or was there any kind of onetime currency effect in there? That would be helpful. And the third question, you talked about the cost in the corporate line for -- looking at some kind of deals that did not materialize.

Can you just give us an idea, have these deal not materialize because the due diligence wasn't meeting your expectations or because pricing in the market were too high?.

Mike, I'll let you take those..

Okay. Yes, in terms of minority interest, I think what I've said, both I think in Q3 last year, and then perhaps I said something in the first quarter of this year.

But I didn't -- in Q3 last year, I did comment that we were going to be seeing higher absolute numbers in the fourth quarter and that we'd be trending probably towards 9% of operating earnings as we initially thought about 2014. I think for this year, probably with some of the activities we've undertaken, 9% to 10% would be a good benchmark to use.

Relative to the International margins, I did comment that the beneficial effect was in part due to the growth of the business, also in terms of favorable FX on a global basis.

So that did make a contribution to the second quarter, as well as some of the growth, revenue growth that you've talked about -- sorry, folks are just showing me what I said in the third quarter, and I did say first quarter. I said 8.5% in the first quarter, so you are correct. But I'd say 9% to 10% is a better indication right now.

So FX did play a role in second quarter International operations, but I do think we're showing some good, solid underlying organic revenue growth in the International markets and constant currency growth rates there, which was the significant contributor to the earnings improvement in International.

And third question, I actually didn't write that down..

So I got it. It's on the deal cost, if it was too high priced, due diligence fallout or whatever, what kind of drove us to not....

Yes, it's both. Obviously, M&A activity on a global basis is up significantly. Health care amongst M&A activity, when you parse it out by sector, is very, very high. And that means you just have to be extraordinarily careful about what you buy and what the real kind of rock-solid earnings projections are going to be. So it was a little bit of both..

Yes, we don't have DLP [ph] for Oliver. We're going to be very careful about what we do. So we're just going to be very deliberate in how we do this..

Great.

Mike, can I just follow up? The currency charge, can you give us just any kind of indication of the magnitude? I guess it was kind of a onetime effect in the second quarter, correct?.

Yes, I don't have the number of the top of my head. I mean, it bounces all over the place quarter-to-quarter. We'll come back to it, see if we have some specificity we can share with you..

Great. And a last follow-up, if I may.

Is there actually any reason why you're still excluding the kind of savings target from your net income guidance?.

Yes. And I appreciate lots of folks would've preferred that I include it, but I didn't include it for a very specific reason because I indicated that our core business is very well known, very stable business, operating consistent with some of the metrics we shared with you for many, many years. But the GEP program is projects based.

And we're making decisions on a project-oriented basis rather than just locking it into the annual P&L, because it's a 3-year program. So that's why I separated the guidance, and that's we're commenting on our progress against those goals each quarter..

Mr.

Reinberg, did that answer your question?.

Sorry, Oliver, I'd come back and say it was about half of the margin improvement in International. We improved it by 90 basis points. It was about half, 40 to 45 basis points for FX..

And from the line of Veronika Dubajova of Goldman Sachs..

I'll just make this a really quick one. I was just wondering if you can comment on the CMS proposal that we saw at the beginning of the month.

And specifically, I guess, Rice, I don't know if you have any thoughts on the change to the pharma PPI and the rebalancing of the basket and what that might mean for what type of inflationary increases you see post-2015?.

Yes, Veronika. First, I would say, boy, what a difference a year makes. I feel a lot better about what they proposed this year than where we were last year. It was nice to see that they're going to carry through on what the Congress had asked them to act on.

I think this all -- when we look at the pharma PPI and some of the changes in there, I actually haven't studied them enough to be intelligent to give you a good comment on that other than to say there are a host of changes beyond that. They've got this 5-star program, a number of things they're looking at, so we've got some work to do.

Not to say that folks aren't looking at it now, but I'm probably a little behind. So let me not embarrass myself by saying something that's wrong, but we will look at it, and then you and I can chat another time, and we can give you a little more of our position on it. But we're still sort of going through it at the moment..

And our last question for today's call comes, is also a follow-up question from the line of Michael Jungling of Morgan Stanley..

Two final questions. Firstly on U.S. clinics. Have you closed any loss-making clinics in the quarter? And how do you view clinics closes for the second half? And then question number two is with respect to the paperwork in U.S. clinics.

At the Capital Market Day, you mentioned that you weren't as easy to deal with if you're a customer, compared to some of your competitors, and you would make it easier for your patients. Has this already been reflected perhaps in the organic growth numbers for U.S.

clinics? Or is that acceleration yet to come?.

Michael, it's Rice. What I would say to you, and if you remember, we made the distinction that we would look at closure decisions in a quarter, because it can very well take a couple of months to longer to actually close a clinic. We made the closure decision in Q1 on 8 clinics. In Q2, we made that decision on 11 clinics.

I can't actually tell you where they are in the actual being closed, because, again, there are a number of things that have to be worked through on that, but that was the Q2 number. What I would say about central admissions, which is what we talked about at Capital Markets Day, I think we're improving. I think Mike commented on that.

We're seeing some improvement. I don't think we're where we want to be. I'm not sure they're ever going to get to where I want them to be, but yes, we're making improvements, we're making changes, we're consolidating our efforts among the various admissions offices that we have and getting everybody on the same page.

So I would say so far so good, but not where we want to be ultimately..

Just on the admission side, I mean, could we see an improvement in the second half from those initiatives?.

I think you're seeing a little bit of improvement now, and I think hopefully we'll continue to see some in the second half. This isn't something that's going to go from black to white overnight. It's going to be incremental over time, but we're happy to chat about it every quarter. But it's not going to be a sea change, Michael, in one quarter.

Don't think about it that way..

Okay.

And then how many clinics do you intend to close in the second half?.

I don't know yet. Honestly, I let these guys sit down and work through that themselves. And we really do take it quarter-to-quarter. If you remember back in April, we said we thought we would be considering something around 25 or so. So we're sort of on that pace now. Could it be a few more, a few less? I don't know at this point.

I'd have to spend some time with the guys in the U.S., which I'll do and get a better read of that, Michael..

Okay, gentlemen. There are no further questions for today's call..

Okay, thank you so much, everybody, for participating in today's call. Very much appreciated your interest. So talk to you soon, latest in November for Q3. Thank you so much. Take care..