DaVita Inc.
(Logo: http://www.newscom.com/cgi-bin/prnh/20020729/DAVITALOGO)
Net income for the three and six months ended June 30, 2007 including the valuation gain on the Company's alliance and product supply agreement with Gambro and including after-tax gains on the sale of investment securities was $125.0 million and $201.6 million, or $1.17 per share and $1.89 per share, respectively.
Financial and operating highlights include:
-- Cash Flow: For the rolling 12 months ended June 30, 2008 operating cash flow was $545 million and free cash flow was $446 million. For the three months ended June 30, 2008 operating cash flow was $135 million and free cash flow was $114 million.
-- Operating Income: Operating income for the three and six months ended June 30, 2008 was $206 million and $402 million, respectively, as compared to $206 million and $399 million, respectively, for the same periods of 2007, which exclude a pre-tax valuation gain of $55 million on the product supply agreement.
-- Volume: Total treatments for the second quarter of 2008 were 4,018,763 or 51,523 treatments per day, representing a per day increase of 6.0% over the second quarter of 2007. Non-acquired treatment growth in the quarter was 4.5% over the prior year's second quarter.
-- Effective Tax Rate: The effective tax rate was 38.0% and 38.5% for the three and six months ended June 30, 2008, respectively. As a result of realizing certain tax benefits during the second quarter of 2008 we are lowering the range of our projected 2008 annual effective tax rate to 38.5%-39.5%. We currently project our 2009 effective tax rate to return to around 40.0%.
-- Share Repurchases: During the second quarter of 2008 and for the six months ended June 30, 2008, we repurchased a total of 2,778,853 and 3,461,353 shares, respectively, of our common stock for $137.2 million and $169.7 million, or an average price of $49.35 and $49.02 per share, respectively, pursuant to previously announced Board authorizations. We have not repurchased any additional shares of our common stock subsequent to June 30, 2008.
-- Center Activity: As of June 30, 2008, we operated or provided administrative services at 1,401 outpatient dialysis centers serving approximately 109,000 patients, of which 1,378 centers are consolidated in our financial statements. During the second quarter of 2008, we acquired 6 centers, opened 12 new centers, merged 2 centers, closed 4 centers, and discontinued providing administrative services to 1 center.
Outlook
We are narrowing our operating income guidance for 2008 to a range of $800-$840 million. Our operating income for 2009 is currently projected to be in the range of $820-$880 million. These projections and the underlying assumptions involve significant risks and uncertainties, including those described below and actual results may vary significantly from these current projections.
DaVita will be holding a conference call to discuss its results for the second quarter ended June 30, 2008 on August 4, 2008 at 5:00 p.m. Eastern Time. The dial in number is (800) 399-4406. A replay of the conference call will be available on DaVita's official web page, http://www.davita.com/, for the following 30 days.
This release contains forward-looking statements, including statements related to our 2008 and 2009 operating results and our 2009 expected effective tax rate. Factors which could impact future results include the uncertainties associated with governmental regulations, general economic and other market conditions, competition, accounting estimates and the risk factors set forth in the Company's SEC filings, including its Form 10-Q for the quarter ended March 31, 2008. The forward-looking statements should be considered in light of these risks and uncertainties.
These risks and uncertainties include those relating to: -- the concentration of profits generated from commercial payor plans,
-- continued downward pressure on average realized payment rates from commercial payors, which may result in the loss of revenue or patients, and possible reductions in government payment rates,
-- changes in the structure of and payment rates under the Medicare ESRD Program which may further reduce Medicare payment rates,
-- changes in pharmaceutical or anemia management practice patterns, payment policies, or pharmaceutical pricing,
-- our ability to maintain contracts with physician medical directors,
-- legal compliance risks, including our continued compliance with complex government regulations and compliance with the corporate integrity agreement applicable to the dialysis centers acquired from Gambro Healthcare and assumed in connection with such acquisition, and
-- the resolution of ongoing investigations by various federal and state governmental agencies.
We undertake no obligation to update or revise any forward-looking statements, whether as a result of changes in underlying factors, new information, future events or otherwise.
This release contains non-GAAP financial measures. For reconciliations of these non-GAAP financial measures to their most comparable measure calculated and presented in accordance with GAAP, see the attached reconciliation schedules.
DAVITA INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
Net operating revenues $1,407,304 $1,312,735 $2,752,028 $2,590,901
Operating expenses and
charges:
Patient care costs 973,286 891,013 1,903,495 1,772,598
General and
administrative 125,199 122,432 245,964 235,653
Depreciation and
amortization 52,892 47,058 105,703 92,848
Provision for
uncollectible
accounts 37,497 33,944 72,128 67,579
Minority
interests and
equity income, net 12,876 12,346 22,457 22,964
Valuation gain on
alliance and
product supply
agreement - (55,275) - (55,275)
Total operating
expenses and
charges 1,201,750 1,051,518 2,349,747 2,136,367
Operating income 205,554 261,217 402,281 454,534
Debt expense (55,320) (62,911) (114,386) (131,781)
Other income 2,987 7,658 7,850 10,853
Income before
income taxes 153,221 205,964 295,745 333,606
Income tax expense 58,270 80,940 113,860 132,000
Net income $94,951 $125,024 $181,885 $201,606
Earnings per share:
Basic earnings
per share $0.91 $1.19 $1.71 $1.92
Diluted earnings
per share $0.90 $1.17 $1.70 $1.89
Weighted average shares
for earnings per
share:
Basic 104,814,817 105,451,306 106,082,024 105,246,995
Diluted 105,617,173 107,011,248 106,927,556 106,879,727
DAVITA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
Six months ended
June 30,
2008 2007
Cash flows from operating activities:
Net income $181,885 $201,606
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 105,703 92,848
Valuation gain on alliance and product
supply agreement - (55,275)
Stock-based compensation expense 19,216 16,326
Tax benefits from stock award exercises 5,264 12,481
Excess tax benefits from stock award
exercises (3,055) (10,516)
Deferred income taxes 17,171 27,458
Minority interests in income of
consolidated subsidiaries 21,934 23,502
Distributions to minority interests (29,423) (25,230)
Equity investment losses (income) 523 (538)
Loss (gain) on disposal of assets 4,462 (1,866)
Non-cash debt and non-cash rent charges 6,953 8,430
Changes in operating assets and liabilities,
other than from acquisitions and divestitures:
Accounts receivable (119,996) (27,427)
Inventories (301) 19,503
Other receivables and other current assets (12,493) (33,793)
Other long-term assets (10,344) (5,095)
Accounts payable (18,255) (31,146)
Accrued compensation and benefits 4,091 (701)
Other current liabilities 58,078 13,891
Income taxes (10,057) (10,292)
Other long-term liabilities 4,178 (234)
Net cash provided by operating
activities 225,534 213,932
Cash flows from investing activities:
Additions of property and equipment, net (145,007) (104,999)
Acquisitions and purchases of other
ownership interests (69,652) (6,262)
Proceeds from asset sales 125 622
Purchase of investments available for sale (1,352) (21,214)
Purchase of investments held-to-maturity (15,777) (15,862)
Proceeds from sale of investments available
for sale 5,321 25,403
Proceeds from maturities of investments
held-to-maturity 15,462 15
Contributions from minority owners 18,983 13,476
Purchase of intangible assets (65) (556)
Net cash used in investing activities (191,962) (109,377)
Cash flows from financing activities:
Borrowings 8,397,822 8,227,417
Payments on long-term debt (8,397,476) (8,271,098)
Deferred financing costs (130) (4,228)
Purchase of treasury stock (169,673) -
Excess tax benefits from stock award
exercises 3,055 10,516
Stock award exercises and other share
issuances, net 12,770 19,538
Net cash used in financing activities (153,632) (17,855)
Net (decrease) increase in cash and cash
equivalents (120,060) 86,700
Cash and cash equivalents at beginning of
period 447,046 310,202
Cash and cash equivalents at end of period $326,986 $396,902
DAVITA INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except per share data)
June 30, December 31,
ASSETS 2008 2007
Cash and cash equivalents $326,986 $447,046
Short-term investments 51,138 40,278
Accounts receivable, less allowance of
$202,489 and $195,953 1,046,665 927,949
Inventories 81,222 80,173
Other receivables 220,343 198,744
Other current assets 34,756 34,482
Deferred income taxes 228,129 247,578
Total current assets 1,989,239 1,976,250
Property and equipment, net 985,503 939,326
Amortizable intangibles, net 170,831 183,042
Investments in third-party dialysis businesses 18,350 19,446
Long-term investments 7,896 22,562
Other long-term assets 45,745 35,401
Goodwill 3,831,996 3,767,933
$7,049,560 $6,943,960
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $207,206 $225,461
Other liabilities 544,229 486,151
Accrued compensation and benefits 345,830 334,961
Current portion of long-term debt 52,195 23,431
Income taxes payable - 16,492
Total current liabilities 1,149,460 1,086,496
Long-term debt 3,657,118 3,683,887
Other long-term liabilities 83,344 83,448
Alliance and product supply agreement, net 38,642 41,307
Deferred income taxes 181,419 166,055
Minority interests (fair value under potential
put obligations - $292,000 and $330,000) 159,698 150,517
Commitments and contingencies
Shareholders' equity:
Preferred stock ($0.001 par value, 5,000,000
shares authorized; none issued)
Common stock ($0.001 par value, 450,000,000
shares authorized; 134,862,283 shares
issued; 104,221,739 and 107,130,127 shares
outstanding) 135 135
Additional paid-in capital 734,845 707,080
Retained earnings 1,697,175 1,515,290
Treasury stock, at cost (30,640,544 and
27,732,156 shares) (647,225) (487,744)
Accumulated other comprehensive loss (5,051) (2,511)
Total shareholders' equity 1,779,879 1,732,250
$7,049,560 $6,943,960
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended Six months
June 30, March 31, June 30, ended
2008 2008 2007 June 30, 2008
Financial Results excluding the
valuation gain on the alliance
and product supply agreement and
gains on sale of investment
securities for the three months
ended June 30, 2007:
Net income(1) $95.0 $86.9 $88.7 $181.9
Diluted earnings per
share(1) $0.90 $0.80 $0.83 $1.70
Operating income(1) $205.6 $196.7 $205.9 $402.3
Operating income
margin(1) 14.6% 14.6% 15.7% 14.6%
Business Metrics:
Volume
Treatments 4,018,763 3,934,777 3,792,419 7,953,540
Number of treatment
days 78.0 77.4 78.0 155.4
Treatments per day 51,523 50,837 48,621 51,181
Per day year over year
increase 6.0% 6.3% 5.3% 6.1%
Non-acquired growth year
over year 4.5% 5.0% 4.6% 4.8%
Revenue
Total operating revenue $1,407 $1,345 $1,313 $2,752
Dialysis revenue per
treatment, including
the lab $335.98 $328.95 $337.94 $332.51
Per treatment increase
from previous quarter 2.1% 0.3% 0.0% -
Per treatment (decrease)
increase from previous
year (0.6%) (2.6%) 2.7% (1.6%)
Expenses
A. Patient care costs
Percent of revenue 69.2% 69.2% 67.9% 69.2%
Per treatment $242.19 $236.41 $234.95 $239.33
Per treatment increase
(decrease) from
previous quarter 2.4% 1.5% (1.4%) -
Per treatment increase
(decrease) from
previous year 3.1% (0.8%) 0.4% 1.2%
B. General & administrative
expenses
Percent of revenue 8.9% 9.0% 9.3% 8.9%
Per treatment $31.15 $30.69 $32.28 $30.93
Per treatment increase
(decrease) from
previous quarter 1.5% (9.4%) 5.5% -
Per treatment
increase (decrease)
from previous year (3.5%) 0.3% 4.4% (1.7%)
C. Bad debt expense as a
percent of current -
period revenue 2.7% 2.6% 2.6% 2.6%
D. Consolidated effective
tax rate 38.0% 39.0% 39.3% 38.5%
These are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to their most comparable measure calculated and presented in accordance with GAAP, see attached reconciliation schedules.
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA-continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended Six months
June 30, March 31, June 30, ended
2008 2008 2007 June 30, 2008
Cash Flow
Operating cash flow $134.5 $91.0 $125.9 $225.5
Operating cash flow,
last twelve months $544.6 $536.0 $501.0
Free cash flow(1) $114.4 $73.2 $101.7 $187.6
Free cash flow, last
twelve months(1) $445.7 $433.1 $389.5
Capital expenditures:
Development and
relocations $60.2 $46.1 $30.8 $106.3
Routine maintenance
/IT other $20.2 $18.5 $24.7 $38.7
Acquisition
expenditures $60.9 $8.8 $6.1 $69.7
Accounts Receivable
Net receivables $1,047 $960 $960
DSO 70 68 69
Debt/Capital Structure
Total debt(2) $3,705 $3,701 $3,703
Net debt, net of cash(2) $3,378 $3,222 $3,306
Leverage ratio (see Note 1) 3.07x 2.94x 3.23x
Overall effective weighted
average interest rate
during the quarter 5.75% 6.10% 6.52%
Effective weighted average
interest rate end of the
quarter 5.68% 5.79% 6.43%
Effective weighted average
interest rate on the Senior
Secured Credit Facilities
end of the quarter 4.59% 4.80% 6.01%
Economically fixed interest
rates as a percentage of our
total debt 69% 72% 79%
Share repurchases $137.2 $32.5 $- $169.7
Clinical (quarterly averages)
Dialysis adequacy - % of
patients with Kt/V > 1.2 95% 95% 93%
Patients with albumin > 3.5 82% 82% 84%
Patients with Hb>=11 81% 80% 84%
(1) These are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to their most comparable measure calculated and presented in accordance with GAAP, see attached reconciliation schedules.
(2) Excludes an unamortized balance of a debt premium associated with our senior notes that is not actually outstanding debt principal.
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA-continued
(unaudited)
(dollars in thousands)
Note 1: Calculation of the Leverage Ratio
Under the Company's current Senior Secured Credit Facilities (Credit Agreement), the leverage ratio is defined as all funded debt plus the face amount of all letters of credit issued, minus cash and cash equivalents, divided by "Consolidated EBITDA". The leverage ratio determines the interest rate margin payable by the Company for its term loan A and revolving line of credit under the Credit Agreement by establishing the margin over the base interest rate (LIBOR) that is applicable. The following leverage ratio was calculated using "Consolidated EBITDA" as defined in the Credit Agreement. The calculation below is based on the last twelve months of "Consolidated EBITDA", pro forma for the routine acquisitions that occurred during the period. The Company's management believes that the presentation of "Consolidated EBITDA" is useful to investors to enhance their understanding of the Company's leverage ratio under its Credit Agreement.
Rolling 12-months
ended June 30, 2008
Net income $362,057
Income taxes 227,604
Debt expense including the write-off
of deferred financing costs 239,752
Depreciation and amortization 206,325
Minority interests and equity income, net 44,978
Other 727
Stock-based compensation expense 37,040
"Consolidated EBITDA" $1,118,483
June 30, 2008
Total debt, excluding debt premium of $4.1 million $3,705,195
Letters of credit issued 50,002
3,755,197
Less: cash and cash equivalents (326,986)
Consolidated net debt $3,428,211
Last twelve months "Consolidated EBITDA" $1,118,483
Leverage ratio 3.07x
In accordance with the Company's Credit Agreement, the Company's leverage ratio cannot exceed 4.75 to 1.0 as of June 30, 2008. At that date, the Company's leverage ratio did not exceed 4.75 to 1.0.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
1. Net income excluding the valuation gain on the alliance and product supply agreement (the Product Supply Agreement) and gains on the sale of investment securities:
We believe that net income excluding the valuation gain on the Product Supply Agreement and gains on the sale of investment securities enhances a user's understanding of our normal net income for these periods by providing a measure that is more meaningful because it excludes a non-recurring non-cash item that resulted from the termination of our purchase obligation for dialysis machines from Gambro Renal Products Inc. under the Amended Product Supply Agreement and non-recurring gains on the sale of investment securities and accordingly is more comparable to current and prior periods and indicative of consistent net income. This measure is not a measure of financial performance under United States generally accepted accounting principles and should not be considered as an alternative to net income.
Six months ended
Three months ended June 30,
June 30, March 31, June 30,
2008 2008 2007 2008 2007
Net income
$94,951 $86,934 $125,024 $181,885 $201,606
Less: Valuation gain - - (55,275) - (55,275)
Gain on the sale
of investment
securities - - (4,234) - (4,234)
Add: Related income tax - - 23,149 - 23,149
$94,951 $86,934 $88,664 $181,885 $165,246
2. Operating income excluding the pre-tax valuation gain on the Product Supply Agreement:
We believe that operating income excluding the valuation gain on the Product Supply Agreement enhances a user's understanding of our normal operating income for these periods by providing a measure that is more meaningful because it excludes a non-recurring non-cash item that resulted from the termination of our purchase obligation for dialysis machines from Gambro Renal Products Inc. under the Amended Product Supply Agreement and accordingly is more comparable to prior periods and indicative of consistent operating income items. This measure is not a measure of financial performance under United States generally accepted accounting principles and should not be considered as an alternative to operating income.
Six months ended
Three months ended June 30,
June 30, March 31, June 30,
2008 2008 2007 2008 2007
Operating income $205,554 $196,727 $261,217 $402,281 $454,534
Less: Valuation
gain - - (55,275) - (55,275)
$205,554 $196,727 $205,942 $402,281 $399,259
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
3. Free cash flow
Free cash flow represents net cash provided by operating activities less capital expenditures for routine maintenance and information technology. We believe free cash flow is a useful adjunct to cash flow from operating activities and other measurements under United States generally accepted accounting principles, since free cash flow is a meaningful measure of our ability to fund acquisition and development activities and meet our debt service requirements. Free cash flow is not a measure of financial performance under United States generally accepted accounting principles and should not be considered as an alternative to cash flows from operating, investing or financing activities, as an indicator of cash flows or as a measure of liquidity.
Three months ended Six months
ended
June 30, March 31, June 30, June 30,
2008 2008 2007 2008
Cash provided by operating
activities $134,510 $91,024 $125,901 $225,534
Less: Expenditures for
routine maintenance and
information technology (20,153) (17,827) (24,157) (37,980)
Free cash flow $114,357 $73,197 $101,744 $187,554
Rolling 12-Month Period
June 30, March 31, June 30,
2008 2008 2007
Cash provided by operating
activities $544,638 $536,029 $500,977
Less: Expenditures for routine
maintenance and information
technology (98,897) (102,901) (111,511)
Free cash flow $445,741 $433,128 $389,466
First Call Analyst:
FCMN Contact: LeAnne.Zumwalt@davita.com
AP Archive: http://photoarchive.ap.org/
PRN Photo Desk,
SOURCE: DaVita Inc.
CONTACT: LeAnne Zumwalt, Investor Relations of DaVita Inc.,
+1-650-696-8910
Web site: http://www.davita.com/
Contact Us
Alerts
Journalist Resources