Bayer AG - Stockholders' Newsletter Second Quarter 2007 - Calculation of EBIT(DA) Before Special Items

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Management Report

Calculation of EBIT(DA) Before Special Items

To permit a more accurate assessment of business operations, EBIT and EBITDA are also stated “before special items.” The special items concerned are detailed in the table below. “EBITDA” , “EBITDA before special items” and “EBIT before special items” are not defined in the International Financial Reporting Standards and should therefore be regarded only as supplementary information.

Special Items Reconciliation	EBIT 2nd Quarter 2006	EBIT 2nd Quarter 2007	EBIT 1st Half 2006	EBIT 1st Half 2007	EBITDA 2nd Quarter 2006	EBITDA 2nd Quarter 2007	EBITDA 1st Half 2006	EBITDA 1st Half 2007
€ million
After special items	877	917	1,926	2,092	1,269	1,572	2,705	3,346
HealthCare	16	209	22	348	16	181	22	346
Schering PPA effects*	0	33	0	53	0	50	0	114
Employees (Schering integration costs)	0	85	0	158	0	85	0	158
External consultancy and IT costs (Schering integration costs)	4	22	4	29	4	22	4	29
Depreciation and amortization (Schering integration costs)	0	45	0	63	0	0	0	0
Other Schering integration costs	10	24	10	45	10	24	10	45
Litigation	0	0	5	0	0	0	5	0
Other	2	0	3	0	2	0	3	0
CropScience	0	51	0	90	0	48	0	84
Restructuring	0	18	0	57	0	15	0	51
Litigation	0	33	0	33	0	33	0	33
MaterialScience	18	24	130	30	18	20	130	20
Restructuring	0	24	0	30	0	20	0	20
Litigation	18	0	130	0	18	0	130	0
Reconciliation	0	(16)	10	0	0	(15)	10	0
Restructuring Industry Services	0	(16)	0	0	0	(15)	0	0
Litigation	0	0	10	0	0	0	10	0
Total special items	34	268	162	468	34	234	162	450
Before special items	911	1,185	2,088	2,560	1,303	1,806	2,867	3,796

2006 figures restated
* The purchase price paid for Schering AG, Germany, was allocated among the acquired assets and assumed liabilities in accordance with the International Financial Reporting Standards (IFRS). The purchase price allocation resulted in total charges to EBIT of €242 million in the second quarter of 2007. To ensure comparability with future earnings data, the expected long-term effects of the step-up are reflected in EBIT and EBITDA before special items, whereas temporary, non-cash effects of the purchase price allocation are eliminated. When calculating EBIT before special items, we deducted a €33 million special charge recorded in this connection. EBIT before special items therefore reflects €209 million in charges resulting from the purchase price allocation. EBITDA before special items remains unaffected by the purchase price allocation.