Davita Inc. Reports 1st Quarter 2003 Results
PRNewswire-FirstCall
TORRANCE, Calif.
DaVita Inc.
(Photo: http://www.newscom.com/cgi-bin/prnh/20020729/DAVITALOGO ) Financial and operating highlights include: -- For the rolling 12 months ended March 31, 2003 operating cash flow was $302 million and free cash flow was $244 million. These cash flow numbers exclude prior period lab receipts, accounts receivable recoveries and valuation adjustments. Operating cash flow for the quarter ended March 31, 2003 was $81 million and free cash flow was $70 million. -- Operating income for the quarter was $79 million. -- EBITDA and EBITDA margin for the quarter were $98 million and 21.3%, respectively. -- Total treatments for the first quarter were 1,503,031 up 4.8% over the prior year's quarter. Non-acquired treatment growth was 3.3%, with acquisitions contributing the additional 1.5% to treatment growth. -- First quarter dialysis revenue per treatment was $296, compared to $291 in the fourth quarter, an increase of 1.8%. -- DSO for the first quarter decreased by one day during the quarter to 69 days. -- As of March 31, 2003, we operated 523 outpatient centers serving approximately 45,000 patients. During the first quarter we acquired a controlling interest in two centers in which we previously had minority ownership and opened seven de novo centers. We also closed one center. Included in this patient and center count are approximately 3,300 patients in 30 centers under management.
Our 2003 EBITDA guidance remains at $380 million to $400 million. This guidance implies Generally Accepted Accounting Principles (GAAP) operating income of $300 million to $320 million for 2003.
DaVita will be holding a conference call to discuss its first quarter 2003 results on May 5, 2003, at 1:30 PM Eastern Daylight Time. The dial in number is 800 399-4406. A replay of the conference call will be available on DaVita's official web page, www.davita.com , for the following 30 days.
This press release includes non-GAAP financial measures, which we believe provide useful information to investors by excluding certain nonrecurring expenses and prior period recoveries and by allowing consistency and comparability in our financial reporting to prior periods for which these non- GAAP measures were previously reported. These measures should be considered in addition to results prepared in accordance with GAAP, but are not a substitute for or superior to GAAP results. Included in this press release is a reconciliation of these non-GAAP measures to the most comparable GAAP financial measures.
This release also contains forward-looking statements. Factors which could impact future results include the uncertainties associated with governmental regulation, general economic and other market conditions, and the risk factors set forth in the Company's SEC filings, including its Form 10-K for the year ended December 31, 2002. The forward-looking statements should be considered in light of these risks and uncertainties. These risks include those relating to:
-- possible reductions in private mix and private and government
reimbursement rates,
-- the concentration of profits generated from PPO and private indemnity
patients and from ancillary services including the administration of
pharmaceuticals,
-- changes in pharmaceutical practice patterns or reimbursement policies,
the ongoing review of the Company's Florida laboratory subsidiary by
its Medicare carrier and the Department of Justice,
-- the ongoing review by the US Attorney's Office and HHS Office of
Inspector General in Philadelphia and
-- the Company's ability to maintain contracts with physician medical
directors.
DAVITA INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
March 31, December 31,
2003 2002
ASSETS
Cash and cash equivalents $304,994 $96,475
Accounts receivable, less allowance
of $48,743 and $48,927 346,145 344,292
Inventories 25,465 34,929
Other current assets 24,049 28,667
Deferred income taxes 41,773 40,163
Total current assets 742,426 544,526
Property and equipment, net 305,742 298,475
Amortizable intangibles, net 60,080 63,159
Investments in third-party dialysis businesses 3,368 3,227
Other long-term assets 2,609 1,520
Goodwill 865,449 864,786
$1,979,674 $1,775,693
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $71,295 $77,890
Other liabilities 113,505 101,389
Accrued compensation and benefits 82,391 95,435
Current portion of long-term debt 43,908 7,978
Income taxes payable 26,550 9,909
Total current liabilities 337,649 292,601
Long-term debt 1,420,585 1,311,252
Other long-term liabilities 10,346 9,417
Deferred income taxes 72,381 65,930
Minority interests 27,156 26,229
Shareholders' equity:
Preferred stock ($0.001 par value,
5,000,000 shares authorized; none issued)
Common stock ($0.001 par value, 195,000,000
shares authorized; 89,162,390 and 88,874,896
shares issued) 89 89
Additional paid-in capital 523,572 519,369
Retained earnings 249,750 213,337
Treasury stock, at cost (28,187,326 and
28,216,177 shares) (661,854) (662,531)
Total shareholders' equity 111,557 70,264
$1,979,674 $1,775,693
DAVITA INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(dollars in thousands, except per share data)
Three months ended
March 31,
2003 2002
Net operating revenues $459,807 $427,665
Operating expenses and charges:
Dialysis centers and labs 316,710 291,634
General and administrative 36,787 36,053
Depreciation and amortization 17,445 15,805
Provision for uncollectible accounts 8,237 5,255
Minority interests and equity income, net 1,294 2,135
Total operating expenses and charges 380,473 350,882
Operating income 79,334 76,783
Debt expense 19,456 15,072
Other income, net 785 267
Income before income taxes 60,663 61,978
Income tax expense 24,250 26,000
Net income $36,413 $35,978
Comprehensive income $36,413 $35,978
Earnings per share:
Basic $0.60 $0.43
Diluted $0.52 $0.40
Weighted average shares for earnings
per share:
Basic 60,905,056 82,967,141
Diluted 78,772,410 102,246,452
DAVITA INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Three months ended
March 31,
2003 2002
Cash flows from operating activities:
Net income $36,413 $35,978
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 17,445 15,805
Loss (gain) on divestitures 119 (458)
Deferred income taxes 4,841 7,861
Non-cash debt expense 840 634
Stock options, principally tax benefits 1,378 8,931
Equity investment income (519) (298)
Minority interests in income of
consolidated subsidiaries 1,813 2,433
Distributions to minority interests (2,465) (1,501)
Changes in operating assets and liabilities,
excluding acquisitions and divestitures:
Accounts receivable (676) (11,163)
Inventories 9,543 6,726
Other current assets 4,721 (2,840)
Other long-term assets (2,457)
Accounts payable (6,674) 8,969
Accrued compensation and benefits (13,075) (2,617)
Other current liabilities 11,952 15,050
Income taxes 16,641 261
Other long-term liabilities 809 (287)
Net cash provided by
operating activities 80,649 83,484
Cash flows from investing activities:
Additions of property and equipment, net (21,708) (16,115)
Acquisitions and divestitures, net (718) (1,379)
Investments in affiliates, net 1,931 499
Intangible assets (300)
Net cash used in investing activities (20,795) (16,995)
Cash flows from financing activities:
Borrowings 623,822 335,883
Payments on long-term debt (478,659) (355,803)
Deferred financing costs (57)
Purchase of treasury stock (67,877)
Proceeds from issuance of common stock 3,502 16,351
Net cash provided by (used in)
financing activities 148,665 (71,503)
Net increase (decrease) in cash 208,519 (5,014)
Cash and cash equivalents at
beginning of period 96,475 36,711
Cash and cash equivalents at end of period $304,994 $31,697
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA
Q1 2003 Q4 2002 Q1 2002
Financial Results:
Net earnings, excluding
prior period Medicare
lab revenue,
extraordinary items,
recoveries, and
valuation adjustments
(in 000's) $36,400 $34,600 $34,600
Basic EPS $0.60 $0.57 $0.42
EPS assuming dilution $0.52 $0.50 $0.39
EBITDA, excluding prior
period Medicare lab
revenue, recoveries
and valuation adjustments
Consolidated (in 000's) $98,000 $97,000 $92,500
Continental
U.S (in 000's). $98,000 $97,000 $91,900
Continental EBITDA margin 21.3% 21.0% 21.7%
Business Metrics
(Continental U.S.):
Volume
Treatments 1,503,031 1,537,821 1,433,803
Number of treatment days 76.4 79.6 76.4
Treatments per day 19,673 19,319 18,767
Per day year over
year increase 4.8% 3.8% 6.2%
Same center growth 3.1% 2.9% 4.2%
Non-acquired growth 3.3% 2.9% 4.2%
Revenue, excluding prior
period Medicare lab revenue
and recoveries of $41,555
in Q4 2002
Revenue (in 000's) $460,000 $462,000 $424,000
Dialysis revenue
per treatment $296.31 $291.02 $290.45
Per treatment increase
from previous quarter 1.8% 0.0% 2.6%
Per treatment increase
from prior year 2.0% 2.8% 5.9%
Expenses, excluding prior
period Medicare lab
revenue and recoveries
A. Dialysis centers and
lab operating expenses
Percent of revenue 68.9% 68.7% 68.0%
Per treatment $210.71 $206.17 $201.02
Per treatment increase
from previous quarter 2.2% 1.4% 3.6%
B. General & administrative
expenses
Percent of revenue 8.0% 8.5% 8.5%
Per treatment $24.48 $25.57 $25.14
Per treatment increase
(decrease) from
previous quarter (4.3%) 4.7% 10.2%
C. Bad debt expense as a
percent of current-period
revenue 1.8% 1.8% 1.8%
D. Consolidated effective
tax rate 40.0% 40.8% 42.0%
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA, CONTINUED
Q1 2003 Q4 2002 Q1 2002
Cash Flow (Consolidated,
including prior period
recoveries, in 000's)
Operating cash flow $81,000 $66,000 $83,000
Free cash flow (before
share repurchase,
acquisition and
development spending) $70,000 $49,000 $74,000
Capital expenditures:
Development $11,900 $19,600 $7,600
Routine maintenance/
IT/other $10,500 $16,700 $9,100
Acquisition expenditures,
net $700 $6,500 $1,400
Accounts Receivable
Net receivables
(in 000's) $346,000 $344,000 $337,000
DSO 69 70 73
Debt/Capital Structure
(Consolidated)
Total debt (in 000's) $1,464,000 $1,319,000 $800,000
Net debt, net of cash
(in 000's) $1,159,000 $1,223,000 $769,000
LQA net leverage ratio 3.0x 3.1x 2.1x
Shares repurchased
(in 000's) -- 1,900 2,900
Average repurchase price -- $23.80 $23.02
Clinical
Dialysis adequacy - %
of patients with
URR > 65 89% 88% 88%
Dialysis adequacy - %
of patients with
Kt/V > 1.2 92% 92% 92%
Anemia measure - % of
patients with HCT > 33 83% 83% 79%
DAVITA INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
Rolling
12-month
period
ended
Q1 2003 Q1 2003 Q4 2002 Q1 2002
(dollars in thousands)
1. Operating cash
flow excluding
lab and accounts
receivable
recoveries
related to
prior years'
services and
free cash flow:
Cash provided
by operating
activities $339,160 $80,649 $66,318 $83,484
Exclusions:
Prior period
lab receipts (58,778) (41,555)
Impairments
and valuations
adjustments (380) 2,010
Accounts
receivable
recoveries (2,938) (510) (2,254)
(62,096) (40,055) (2,254)
Related income
tax expense 24,559 15,842 891
Exclusions, net
of tax (37,537) (24,213) (1,363)
Operating cash
flow excluding
lab and accounts
receivable
recoveries
related to
prior years'
services 301,623 80,649 42,105 82,121
Less expenditures
for routine
maintenance and
information
technology (57,337) (10,490) (16,706) (9,090)
Free cash flow $244,286 $70,159 $25,399 $73,031
2. Net income,
excluding
impairments,
prior period
lab receipts
and accounts
receivable
recoveries:
Net income $36,413 $58,811 $35,978
Less exclusions,
net of tax (24,213) (1,363)
$36,413 $34,598 $34,615
3. EBITDA, excluding
impairments,
prior period lab
receipts and
accounts receivable
recoveries:
Operating income $79,334 $118,377 $76,783
Additions:
Depreciation 14,946 14,385 13,295
Amortization 2,499 2,510 2,510
Minority
interests and
equity income,
net 1,294 1,802 2,135
EBITDA 98,073 137,074 94,723
Exclusions:
Prior period lab
receipts (41,555)
Impairments and
valuations
adjustments 2,010
Accounts
receivable
recoveries (510) (2,254)
(40,055) (2,254)
$98,073 $97,019 $92,469
4. Last quarter
annualized (LQA)
net leverage ratio:
EBITDA, excluding
impairments, prior
period lab receipts
and accounts
receivable
recoveries $98,073 $97,019 $92,469
x 4 x 4 x 4
Annualized EBITDA,
less exclusions $392,292 $388,076 $369,876
Net debt, net
of cash $1,159,000 $1,223,000 $769,000
Annualized EBITDA,
less exclusions
divided by net
debt, net of
cash 2.95x 3.15x 2.08x
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SOURCE: DaVita Inc.
CONTACT: LeAnne Zumwalt, Investor Relations of DaVita Inc.,
+1-310-750-2072
Web site: http://www.davita.com/
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