Management Report

Calculation of EBIT(DA) Before Special Items

Key performance indicators for the Bayer Group are EBIT before special items, EBITDA before special items and the EBITDA margin before special items. These indicators are reported in order to allow a more accurate assessment of business operations. The special items – one-time effects that are non-recurring or do not regularly recur or attain similar magnitudes – are detailed in the following table. “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. The company considers EBITDA before special items to be a more suitable indicator of operating performance since it is not affected by depreciation, amortization, write-downs / write-backs or special items. The company also believes that this indicator gives readers a clearer picture of the results of operations and ensures greater comparability of data over time. The EBITDA margin before special items, which is the ratio of EBITDA before special items to sales, serves as a relative indicator for the internal and external comparison of operational earning power.

Depreciation and amortization in the first three quarters of 2009 was level with the prior-year figure, at €2,056 million (+1.2%), comprising €1,112 million in amortization and write-downs of intangible assets and €944 million in depreciation and write-downs of property, plant and equipment. Of the €62 million in included write-downs, €52 million constituted special items.

Special Items Reconciliation	EBIT* 3rd Quarter 2008	EBIT* 3rd Quarter 2009	EBIT* First Nine Months 2008	EBIT* First Nine Months 2009	EBITDA** 3rd Quarter 2008	EBITDA** 3rd Quarter 2009	EBITDA** First Nine Months 2008	EBITDA** First Nine Months 2009
	€ million	€ million	€ million	€ million	€ million	€ million	€ million	€ million
After special items	684	646	3,132	2,640	1,334	1,326	5,163	4,696
HealthCare	160	105	386	60	113	104	300	58
Schering PPA effects***	51	0	157	0	51	0	157	0
Schering integration	48	35	79	(36)	43	34	45	(38)
of which gain from divestitures	0	0	(69)	(114)	0	0	(69)	(114)
Write-downs	56	0	77	0	14	0	25	0
Litigations	5	56	73	56	5	56	73	56
Pension assurance association	0	14	0	40	0	14	0	40
CropScience	42	43	104	121	40	30	98	104
Restructuring	42	48	104	76	40	35	98	59
Litigations	0	(1)	0	34	0	(1)	0	34
Pension assurance association	0	(4)	0	11	0	(4)	0	11
MaterialScience	5	15	14	95	6	11	13	62
Restructuring	5	17	14	79	6	13	13	46
Pension assurance association	0	(2)	0	16	0	(2)	0	16
Reconciliation	0	28	0	39	0	28	0	39
Pension assurance association	0	28	0	39	0	28	0	39
Total special items	207	191	504	315	159	173	411	263
Before special items	891	837	3,636	2,955	1,493	1,499	5,574	4,959
* EBIT as per income statements EBITDA: EBIT plus amortization of intangible assets and depreciation of property, plant and equipment. * 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). 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 and deducted when calculating EBIT before special items.