DaVita Inc.
(Photo: http://www.newscom.com/cgi-bin/prnh/20020729/DAVITALOGO )
Net earnings for the three and nine months ended September 30, 2002 were $54 million and $99 million, or $0.72 and $1.20 per share, respectively. Net earnings for the quarter, excluding the prior period Medicare laboratory receipts and accounts receivable recoveries totaling $28 million, were $37 million or $0.51 per share. Net earnings for the nine months, excluding prior period lab receipts and accounts receivable recoveries totaling $32 million, valuation gains of $2.4 million and a $29 million after-tax extraordinary loss related to the early extinguishment of debt, were $107 million or $1.29 per share.
Financial and operating highlights include:
-- For the rolling 12 months ended September 30, 2002 operating cash flow
was $280 million and free cash flow was $230 million. Operating cash
flow for the quarter was $119 million and free cash flow was $110
million. These cash flow numbers exclude prior period lab receipts and
accounts receivable recoveries.
-- Total treatments for the third quarter were 1,516,840. Non-acquired
same center treatment growth was 3.8%.
-- Third quarter dialysis revenue per treatment (excluding lab, management
fees and other revenue) was essentially flat from the second quarter at
$291 and up 3.8% from the third quarter of 2001.
-- The Company began recognizing current-period Medicare lab revenue in
the third quarter of 2002, which amounted to $5.4 million. During the
third quarter, the Medicare carrier began paying claims from the
Company's lab for the first time in more than four years.
-- EBITDA margin, excluding all prior-period recoveries, was 22.0%.
EBITDA margin improved 100 basis points from the second quarter
primarily as a result of the recognition of current period Medicare
laboratory revenue.
-- DSO improved 3 days from the second quarter to 70 days.
-- Third quarter prior-period recoveries included $27 million associated
with Medicare lab claims and $0.5 million in cash recoveries associated
with accounts receivable reserved in 1999.
-- Based on recent communications with the Medicare carrier, the Company
expects to receive, over the next few months, additional payments of
$20 million or more related to prior years' Medicare lab claims. The
revenue associated with these recoveries will be recognized as the
payments are received.
-- As of September 30, 2002, we operated 504 outpatient centers serving
approximately 44,000 patients. During the third quarter we closed 1
under-performing center, acquired 6 centers and opened 7 de novo
centers. Included in this patient and center count are approximately
3,300 patients in 29 centers under management.
Since the Company is now recognizing Medicare laboratory revenue, we are raising our 2002 EBITDA guidance to $380 million to $386 million. Correspondingly, our 2003 EBITDA guidance has been increased to $380 million to $400 million.
DaVita will be holding an investor meeting on November 6, 2002, at the New York Palace Hotel. The event will begin at 9:30 AM Eastern Standard Time. Kent Thiry, Chairman and CEO, and Rich Whitney, CFO, will discuss the Company's financial results for the quarter ended September 30, 2002 followed by a presentation on the state of the Company.
Please join us in person at the New York Palace Hotel located at 455 Madison Avenue @50th Street. If you are unable to attend you can participate in both presentations via conference call at 800-399-4406. A replay of both presentations will be available on DaVita's official web page, www.davita.com, for the following 30 days.
This release 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-Q for the quarter ended June 30, 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 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.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except per share data)
September 30, December 31,
2002 2001
ASSETS
Cash and cash equivalents $115,361 $36,711
Accounts receivable, less allowance of
$50,165 and $52,475 339,955 333,546
Inventories 21,931 34,901
Other current assets 17,068 9,364
Deferred income taxes 63,741 60,142
Total current assets 558,056 474,664
Property and equipment, net 278,761 52,778
Amortizable intangibles, net 65,635 73,108
Investments in third-party dialysis businesses 3,266 4,346
Other long-term assets 1,831 2,027
Goodwill 860,425 855,760
$1,767,974 $1,662,683
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $77,846 $74,630
Other liabilities 106,456 111,164
Accrued compensation and benefits 99,070 88,826
Current portion of long-term debt 8,166 9,034
Income taxes payable 33,473 15,027
Total current liabilities 325,011 298,681
Long-term debt 1,313,847 811,190
Other long-term liabilities 8,034 5,012
Deferred income taxes 49,910 23,441
Minority interests 22,462 20,722
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; 88,314,176 and 85,409,037
shares issued) 88 85
Additional paid-in capital 511,627 467,904
Retained earnings 154,526 56,008
Treasury stock, at cost (26,325,677 and
888,700 shares) (617,531) (20,360)
Total shareholders' equity 48,710 503,637
$1,767,974 $1,662,683
DAVITA INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars in thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
2002 2001 2002 2001
Net operating
revenues $481,194 $434,239 $1,351,536 $1,221,096
Operating expenses:
Dialysis centers
and labs 308,438 277,252 900,624 809,771
General and
administrative 37,048 31,150 115,125 95,380
Depreciation and
amortization 16,267 26,281 47,770 79,053
Provision for
uncollectible
accounts 8,117 2,689 19,254 (5,874)
Impairments and
valuation adjustments (2,390)
Total operating
expenses 369,870 337,372 1,080,383 978,330
Operating income 111,324 96,867 271,153 242,766
Other income, net 1,124 1,856 4,972 4,324
Debt expense 19,967 18,319 52,178 56,758
Minority interests in
income of consolidated
subsidiaries (1,911) (2,126) (7,171) (6,852)
Income before income
taxes and extraordinary
item 90,570 78,278 216,776 183,480
Income tax expense 36,400 34,000 88,900 79,700
Income before
extraordinary item 54,170 44,278 127,876 103,780
Extraordinary (loss)
gain related to early
extinguishment of debt,
net of tax of $19,572
in 2002 and $652 in
2001 (29,358) 977
Net income $54,170 $44,278 $98,518 $104,757
Basic earnings per share:
Income before
extraordinary item $0.84 $0.52 $1.69 $1.25
Extraordinary (loss)
gain, net of tax (0.39) 0.01
Net income $0.84 $0.52 $1.30 $1.26
Diluted earnings per share:
Income before
extraordinary item $0.72 $0.47 $1.51 $1.15
Extraordinary (loss)
gain, net of tax (0.31) 0.01
Net income $0.72 $0.47 $1.20 $1.16
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA
Q3 2002 Q2 2002 Q3 2001 YTD 2002
Financial Results:
Net earnings,
excluding prior
period Medicare lab
revenue, extraordinary
items, recoveries,
valuation adjustments
and goodwill
amortization
(in 000's) (1) $37,400 $35,100 $34,300 $107,100
Basic EPS $0.58 $0.44 $0.41 $1.42
EPS assuming
dilution $0.51 $0.41 $0.38 $1.29
EBITDA, excluding
prior period Medicare
lab revenue, recoveries
and valuation adjustments
Consolidated
(in 000's) $99,800 $92,300 $96,000 $284,600
Continental U.S
(in 000's). $99,800 $92,700 $95,600 $284,400
Continental EBITDA
margin 22.0% 21.0% 23.4% 21.6%
Business Metrics (Continental U.S.):
Category #1 Volume
Treatments 1,516,840 1,486,816 1,432,453 4,437,459
Per day sequential
increase 0.7% 1.6% 1.6% --
Per day year over
year increase 4.6% 5.5% 7.6% 5.4%
Same center growth
(year over year) 3.7% 4.5% 4.1% 4.2%
Non-acquired growth
(year over year) 3.8% 4.5% 4.1% 4.2%
Category #2 Revenue,
excluding prior period
Medicare lab revenue
and recoveries
Revenue
(in 000's) $454,000 $441,000 $408,000 $1,318,000
Dialysis revenue
per treatment $290.92 $290.52 $280.16 $290.63
Per treatment
increase from
previous quarter 0.1% 0.0% 1.6% --
Per treatment
increase from prior
year 3.8% 5.3% 7.6% 5.0%
Category #3 Expenses
A. Dialysis centers
and lab operating
expenses
Percent of revenue 67.9% 67.7% 67.1% 67.9%
Per treatment $203.34 $200.46 $191.13 $201.64
Per treatment
increase (decrease)
from previous
quarter 1.4% (0.3%) 0.6% --
B. General &
administrative
Percent of revenue 8.2% 9.5% 7.6% 8.7%
Per treatment $24.42 $28.26 $21.75 $25.94
Per treatment
increase (decrease)
from previous
quarter (13.6%) 12.4% (5.4%) --
C. Bad debt expense
as a percent of
current-period
revenue 1.9% 1.8% 1.9% 1.8%
D. Consolidated
effective tax
rate 40.0% 41.2% 43.4% 41.0%
Category #4, Cash Flow
(Consolidated,
including prior period
recoveries, in 000's)
Operating cash
flow $136,000 $61,000 $112,000 $282,000
Free cash flow
(before share
repurchase,
acquisition and
development
spending) $127,000 $43,000 $104,000 $246,000
Capital expenditures:
Development $11,700 $8,100 $4,800 $27,400
Routine
maintenance/IT/
other $10,500 $19,600 $7,200 $39,200
Acquisition
expenditures, net $10,600 -- $15,500 $12,000
Category #5 Accounts
Receivable
Net receivables
(in 000's) $340,000 $347,000 $309,000 $340,000
DSO 70 73 71 --
Category #6 Debt/
Capital Structure
(Consolidated)
Total debt
(in 000's) $1,322,000 $1,324,000 $820,000 $1,322,000
Net debt, net
of cash
(in 000's) $1,207,000 $1,187,000 $775,000 $1,207,000
LTM net leverage
ratio 3.2x 3.2x 2.1x 3.2x
Shares
repurchased
(in 000's) 5,600 16,900 -- 25,400
Average repurchase
price $21.88 $24.08 -- $23.48
Category #7 Clinical
Dialysis adequacy
- % of patients
with URR > 65 88% 89% -- --
Dialysis adequacy
- % of patients
with Kt/V > 1.2 91% 92% -- --
Anemia measure
- % of patients
with HCT > 33 81% 80% -- --
(1)Effective January 1, 2002 goodwill is no longer amortized in
accordance with new accounting standards.Third quarter 2001 net
earnings and per-share amounts, including goodwill amortization but
excluding extraordinary items and recoveries, were $28 million or
$0.33 basic EPS and$0.31 diluted EPS.
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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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