DaVita 2nd Quarter 2009 Results
PRNewswire-FirstCall
EL SEGUNDO, Calif.
DaVita Inc.
(Logo: http://www.newscom.com/cgi-bin/prnh/20020729/DAVITALOGO) Financial and operating highlights include: -- Cash Flow: For the rolling 12 months ended June 30, 2009 operating cash flow was $705 million and free cash flow was $527 million. For the three months ended June 30, 2009 operating cash flow was $212 million and free cash flow was $174 million. -- Operating Income: Operating income for the three and six months ended June 30, 2009 was $236 million and $457 million, respectively, as compared to $218 million and $424 million, respectively, for the same periods of 2008. -- Volume: Total treatments for the second quarter of 2009 were 4,228,179, or 54,207 treatments per day, representing a per day increase of 5.2% over the second quarter of 2008. Non-acquired treatment growth in the quarter was 4.5% over the prior year's second quarter. -- Effective Tax Rate: Our effective tax rate was 37.1% and 37.2% for the three and six months ended June 30, 2009, respectively. This effective tax rate is impacted by the amount of third party owners' income attributable to non-tax paying entities. The effective tax rate attributable to DaVita Inc. was 40.0% and 40.1% for the three and six months ended June 30, 2009 which was in the range of our previously stated guidance. Our effective tax rate for 2009 is still projected to be in the range of 37.0% to 38.0% and our 2009 effective tax rate attributable to DaVita Inc. is still projected to be in a range of 39.5% to 40.5%. -- Center Activity: As of June 30, 2009, we operated or provided administrative services at 1,493 outpatient dialysis centers serving approximately 116,000 patients, of which 1,464 centers are consolidated in our financial statements. During the second quarter of 2009, we acquired two centers, opened 23 new centers, merged five centers and sold two centers. Outlook
We are narrowing our operating income guidance for 2009 to be in the range of $900-$930 million. Our operating cash flow guidance remains unchanged at a range of $550-$600 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, 2009 on August 4, 2009 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, www.davita.com, for the following 30 days.
This release contains forward-looking statements, including statements related to our 2009 operating results and 2009 expected effective tax rate and the expected effective tax rate attributable to DaVita Inc. 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 our SEC filings, including our Form 10-K for the year ended December 31, 2008 and subsequent quarterly reports on Form 10-Q. 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,
-- a reduction in the number of patients under higher-paying commercial
plans,
-- a reduction in government payment rates or the structure of payments
under the Medicare ESRD Program which result in lower reimbursement
for services we provide to Medicare patients,
-- 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,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Net operating revenues $1,519,041 $1,407,304 $2,966,681 $2,752,028
Operating expenses
and charges:
Patient care costs 1,051,879 973,286 2,057,765 1,903,495
General and
administrative 132,166 125,199 259,439 245,964
Depreciation and
amortization 58,185 52,892 115,308 105,703
Provision for
uncollectible
accounts 41,233 37,497 77,969 72,128
Equity investment
(income) loss (376) (4) (358) 523
---- -- ---- ---
Total operating
expenses and
charges 1,283,087 1,188,870 2,510,123 2,327,813
--------- --------- --------- ---------
Operating income 235,954 218,434 456,558 424,215
Debt expense (47,088) (55,320) (95,389) (114,386)
Other income 1,273 2,987 2,027 7,850
----- ----- ----- -----
Income before income
taxes 190,139 166,101 363,196 317,679
Income tax expense 70,507 58,273 135,290 113,843
------ ------ ------- -------
Net income 119,632 107,828 227,906 203,836
Less: Net income
attributable to
noncontrolling
interests (13,813) (12,877) (25,876) (21,951)
-------- -------- -------- --------
Net income attributable
to DaVita Inc. $105,819 $94,951 $202,030 $181,885
======== ======= ======== ========
Earnings per share:
Basic earnings per
share attributable
to DaVita Inc. $1.02 $0.91 $1.95 $1.71
===== ===== ===== =====
Diluted earnings per
share attributable
to DaVita Inc. $1.02 $0.90 $1.94 $1.70
===== ===== ===== =====
Weighted average
shares for earnings
per share:
Basic 103,705,683 104,814,817 103,791,579 106,082,024
=========== =========== =========== ===========
Diluted 103,925,843 105,617,173 104,166,964 106,927,556
=========== =========== =========== ===========
DAVITA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
Six months ended
June 30,
--------
2009 2008
---- ----
Cash flows from operating activities:
Net income $227,906 $203,836
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 115,308 105,703
Stock-based compensation expense 22,412 19,216
Tax benefits from stock award exercises 9,974 5,264
Excess tax benefits from stock award exercises (7,591) (3,055)
Deferred income taxes 30,006 17,171
Equity investment (income) loss (358) 523
Loss on disposal of assets 4,813 4,462
Non-cash debt and non-cash rent charges 6,567 6,953
Changes in operating assets and
liabilities, other than from
acquisitions and divestitures:
Accounts receivable (54,073) (119,996)
Inventories 19,044 (301)
Other receivables and other current assets 4,026 (12,493)
Other long-term assets 3,324 (10,344)
Accounts payable (51,960) (18,255)
Accrued compensation and benefits 37,077 4,091
Other current liabilities (42,359) 58,078
Income taxes 35,535 (10,074)
Other long-term liabilities (13,019) 4,178
-------- -----
Net cash provided by operating
activities 346,632 254,957
------- -------
Cash flows from investing activities:
Additions of property and equipment, net (138,205) (145,007)
Acquisitions (43,314) (46,763)
Proceeds from asset sales 5,784 125
Purchase of investments available for sale (1,429) (1,352)
Purchase of investments held-to-maturity (15,193) (15,777)
Proceeds from sale of investments
available for sale 16,537 5,321
Proceeds from maturities of investments
held-to-maturity 15,620 15,462
Distributions received on equity
investments 88 513
Purchase of intangible assets and other (260) (65)
----- ----
Net cash used in investing activities (160,372) (187,543)
--------- ---------
Cash flows from financing activities:
Borrowings 9,114,319 8,397,822
Payments on long-term debt (9,136,951) (8,397,476)
Deferred financing costs (42) (130)
Purchase of treasury stock (32,016) (169,673)
Excess tax benefits from stock award
exercises 7,591 3,055
Stock award exercises and other share
issuances, net 16,691 12,770
Distributions to noncontrolling interests (29,895) (29,423)
Contributions from noncontrolling interests 6,504 10,048
Proceeds from sales of additional
noncontrolling interests 5,475 8,422
Purchases from noncontrolling interests (4,704) (22,889)
------- --------
Net cash used in financing activities (53,028) (187,474)
-------- ---------
Net increase (decrease) in cash and cash
equivalents 133,232 (120,060)
Cash and cash equivalents at beginning
of period 410,881 447,046
------- -------
Cash and cash equivalents at end of period $544,113 $326,986
======== ========
DAVITA INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except per share data)
ASSETS June 30, December 31,
2009 2008
---- ----
Cash and cash equivalents $544,113 $410,881
Short-term investments 19,109 35,532
Accounts receivable, less allowance of
$222,067 and $211,222 1,128,330 1,075,457
Inventories 65,354 84,174
Other receivables 226,931 239,165
Other current assets 37,851 33,761
Income tax receivable - 32,130
Deferred income taxes 211,709 217,196
------- -------
Total current assets 2,233,397 2,128,296
Property and equipment, net 1,075,349 1,048,075
Amortizable intangibles, net 148,923 160,521
Investments in third-party dialysis businesses 24,144 19,274
Long-term investments 6,827 5,656
Other long-term assets 44,104 47,330
Goodwill 3,908,290 3,876,931
--------- ---------
$7,441,034 $7,286,083
========== ==========
LIABILITIES AND EQUITY
Accounts payable $230,576 $282,883
Other liabilities 453,048 495,239
Accrued compensation and benefits 329,517 312,216
Current portion of long-term debt 92,290 72,725
Income taxes payable 3,409 -
----- ---
Total current liabilities 1,108,840 1,163,063
Long-term debt 3,579,417 3,622,421
Other long-term liabilities 100,209 101,442
Alliance and product supply agreement, net 33,312 35,977
Deferred income taxes 274,303 244,884
------- -------
Total liabilities 5,096,081 5,167,787
Commitments and contingencies
Noncontrolling interests subject to put
provisions 288,458 291,397
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; 103,989,672 and 103,753,673 shares
outstanding) 135 135
Additional paid-in capital 620,259 584,358
Retained earnings 2,091,480 1,889,450
Treasury stock, at cost (30,872,611 and
31,108,610 shares) (701,783) (691,857)
Accumulated other comprehensive loss (10,033) (14,339)
-------- --------
Total DaVita Inc. shareholders' equity 2,000,058 1,767,747
Noncontrolling interests not subject to put
provisions 56,437 59,152
------ ------
Total equity 2,056,495 1,826,899
--------- ---------
$7,441,034 $7,286,083
========== ==========
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended Six months
------------------ ended
June 30, March 31, June 30, June 30,
2009 2009 2008 2009
---- ---- ---- ----
1. Consolidated
Financial Results:
Revenues $1,519 $1,448 $1,407 $2,967
Operating income $236.0 $220.6 $218.4 $456.6
Operating income margin 15.5% 15.2% 15.5% 15.4%
Net income attributable to
DaVita Inc. $105.8 $96.2 $95.0 $202.0
Diluted earnings per
share attributable to
DaVita Inc. $1.02 $0.92 $0.90 $1.94
2. Consolidated Business Metrics:
Expenses
Patient care costs as a
percent of consolidated
revenue (3) 69.2% 69.5% 69.2% 69.4%
General and administrative
expenses as a percent
of consolidated revenue (3) 8.7% 8.8% 8.9% 8.7%
Bad debt expense as a
percent of
consolidated revenue 2.7% 2.5% 2.7% 2.6%
Consolidated effective
tax rate attributable to
DaVita Inc. (1) 40.0% 40.2% 38.0% 40.1%
3. Segment Financial Results:
(dollar amounts rounded to
nearest million)
Dialysis and related
lab services
Revenues $1,441 $1,377 $1,351 $2,818
Direct operating expenses $1,190 $1,140 $1,113 $2,330
------ ------ ------ ------
Dialysis segment margin $251 $237 $238 $488
==== ==== ==== ====
Other - Ancillary services
and strategic initiatives
Revenues $78 $71 $56 $149
Direct operating expenses $82 76 66 $158
--- -- -- ----
Ancillary segment loss $(4) $(5) $(10) $(9)
=== === ==== ===
Total segment margin $247 $232 $228 $479
Reconciling items:
Stock-based compensation (11) (11) (10) (22)
---- ---- ---- ----
Consolidated operating
income $236 $221 $218 $457
==== ==== ==== ====
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA--continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended Six months
------------------ ended
June 30, March 31, June 30, June 30,
2009 2009 2008 2009
---- ---- ---- ----
4. Segment Business Metrics:
Dialysis and related lab
services:
Volume
Treatments 4,228,179 4,082,439 4,018,763 8,310,617
Number of treatment days 78.0 76.5 78.0 154.5
Treatments per day 54,207 53,365 51,523 53,790
Per day year over year
increase 5.2% 5.0% 6.0% 5.1%
Non-acquired growth year
over year 4.5% 4.0% 4.5% 4.3%
Revenue
Dialysis and related lab
services revenue per
treatment $340.35 $336.73 $335.98 $338.58
Per treatment increase
from previous quarter 1.1% 1.2% 2.1% -
Per treatment increase
(decrease)from previous
year 1.3% 2.4% (0.6%) 1.8%
Percent of consolidated
revenue 94.9% 95.1% 96.0% 95.0%
Expenses
Patient care costs
Percent of segment
revenue 68.6% 68.8% 68.7% 68.7%
Per treatment $233.93 $231.88 $230.92 $232.92
Per treatment increase
from previous quarter 0.9% 1.6% 2.1% -
Per treatment increase
from previous year 1.3% 2.5% 1.2% 1.9%
General and administrative
expenses
Percent of segment
revenue 7.3% 7.4% 7.3% 7.4%
Per treatment $24.92 $24.99 $24.64 $24.96
Per treatment (decrease)
increase from previous
quarter (0.3%) (1.5%) 4.9% -
Per treatment increase
(decrease) from previous
year 1.1% 6.3% (7.2%) 3.7%
5. Cash Flow
Operating cash flow $212.4 $134.2 $147.0 $346.6
Operating cash flow last
twelve months $705.4 $640.0 $596.9
Free cash flow(1) $173.6 $89.5 $114.4 $263.1
Free cash flow, last
Twelve months(1) $526.8 $467.7 $445.1
Capital expenditures:
Development and
relocations $42.5 $42.0 $60.2 $84.5
Routine maintenance/IT
other $22.5 $31.2 $20.2 $53.7
Acquisition expenditures $3.5 $39.8 $41.1 $43.3
6. Accounts Receivable
Net receivables $1,128 $1,089 $1,047
DSO 70 70 70
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA--continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended Six months
------------------ ended
June 30, March 31, June 30, June 30,
2009 2009 2008 2009
---- ---- ---- ----
7. Debt and Capital Structure
Total debt(2) $3,669 $3,680 $3,705
Net debt, net of cash(2) $3,124 $3,275 $3,378
Leverage ratio
(see Note 1 on page 9) 2.66x 2.83x 3.07x
Overall effective weighted
average interest rate during
the quarter 4.92% 5.04% 5.75%
Overall effective weighted
average interest rate at end
of the quarter 4.87% 5.04% 5.68%
Effective weighted average
interest rate on the Senior
Secured Credit Facilities at
end of the quarter 3.02% 3.36% 4.59%
Economically fixed interest
rates as a percentage of our
total debt 64% 66% 69%
Share repurchases $- $32.0 $137.2 $32.0
8. Clinical (quarterly averages)
Dialysis adequacy -% of patients
with Kt/V > 1.2 95% 95% 95%
90 day patients with Hb>=10 <=13 88% 87% -
Patients with arteriovenous
fistulas placed 63% 62% 60%
------------------
(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) This is a non-GAAP financial measure. It excludes $3.1 million, for
the quarter ended June 30, 2009, the unamortized balance of a debt
premium associated with our senior notes that is not actually
outstanding debt principal.
(3) Consolidated percentages of revenue and per treatment amounts are
comprised of the dialysis and related lab services business, other
ancillary services and strategic initiatives, as well as stock-based
compensation expenses.
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 the presentation of "Consolidated EBITDA" is useful to investors
to enhance their understanding of the Company's leverage ratio under its
Credit Agreement.
Rolling twelve
months ended June
30, 2009
--------
Net income attributable to DaVita Inc. $394,305
Income taxes 256,918
Debt expense 205,719
Depreciation and amortization 226,522
Noncontrolling interests and equity investment loss, net 49,408
Other 15,413
Stock-based compensation expense 44,429
------
"Consolidated EBITDA" $1,192,714
==========
June 30, 2009
-------------
Total debt, excluding debt premium of $3.1 million $3,668,589
Letters of credit issued 48,401
------
3,716,990
Less: cash and cash equivalents (544,113)
---------
Consolidated net debt $3,172,877
==========
Last twelve months "Consolidated EBITDA" $1,192,714
==========
Leverage ratio 2.66x
=============
In accordance with the Company's Credit Agreement, the Company's leverage
ratio cannot exceed 4.25 to 1.0 as of June 30, 2009. At that date the
Company's leverage ratio did not exceed 4.25 to 1.0.
DAVITA INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
1. Effective Income Tax Rates
We believe that reporting the effective income tax rate attributable to
DaVita Inc. enhances a user understanding of DaVita's effective income tax
rate for the periods presented because it excludes noncontrolling owners'
income that primarily relates to non-tax paying entities and accordingly
is more comparable to prior periods presentations regarding DaVita's
effective income tax rate and is more meaningful to a user to fully
understand the related income tax effects on DaVita Inc. operating
results. 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 the effective income tax rate.
Effective income tax rate as compared to the effective income tax rate
attributable to DaVita Inc. is as follows:
Three months ended Six months
------------------ ended
June 30, March 31, June 30, June 30,
2009 2009 2008 2009
---- ---- ---- ----
Income before income taxes $190,139 $173,057 $166,101 $363,196
======== ======== ======== ========
Income tax expense $70,507 $64,783 $58,273 $135,290
======= ======= ======= ========
Effective income tax rate 37.1% 37.4% 35.1% 37.2%
==== ==== ==== ====
Three months ended Six months
------------------ ended
June 30, March 31, June 30, June 30,
2009 2009 2008 2009
---- ---- ---- ----
Income before income taxes $190,139 $173,057 $166,101 $363,196
Less: Noncontrolling
owners' income primarily
attributable to non-tax
paying entities (13,913) (12,156) (12,880) (26,069)
Income before income taxes -------- -------- -------- --------
attributable to DaVita Inc. $176,226 $160,901 $153,221 $337,127
======== ======== ======== ========
Income tax expense $70,507 $64,783 $58,273 $135,290
Less income tax attributable
to noncontrolling interests (100) (93) (3) (193)
Income tax attributable to ----- ---- --- -----
DaVita Inc. $70,407 $64,690 $58,270 $135,097
======= ======= ======= ========
Effective income tax rate
attributable to DaVita Inc. 40.0% 40.2% 38.0% 40.1%
===== ===== ===== =====
DAVITA INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
2. Free cash flow
Free cash flow represents net cash provided by operating activities less
income distributions to noncontrolling interests and 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. In addition, free cash flow excluding income distributions
to noncontrolling interests also provides a user with an understanding of
free cash flows that are attributable to DaVita Inc. 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,
2009 2009 2008 2009
---- ---- ---- ----
Cash provided by operating
activities $212,383 $134,249 $147,045 $346,632
Less: Income distributions
to noncontrolling interests (16,328) (13,567) (12,535) (29,895)
-------- -------- -------- --------
Cash provided by operating
activities attributable to
DaVita Inc. $196,055 $120,682 $134,510 $316,737
Less: Expenditures for
routine maintenance and
information technology (22,502) (31,155) (20,153) (53,657)
-------- -------- -------- --------
Free cash flow $173,553 $89,527 $114,357 $263,080
======== ======= ======== ========
Rolling 12-Month Period
-----------------------
June 30, March 31, June 30,
2009 2009 2008
---- ---- ----
Cash provided by operating
activities $705,376 $640,038 $596,860
Less: Income distributions to
noncontrolling interests (58,242) (54,449) (52,222)
-------- -------- --------
Cash provided by operating
activities attributable to
DaVita Inc. $647,134 $585,589 $544,638
Less: Expenditures for routine
maintenance and information
technology (120,286) (117,937) (99,521)
--------- --------- --------
Free cash flow. $526,848 $467,652 $445,117
======== ======== ========
First Call Analyst:
FCMN Contact: LeAnne.Zumwalt@davita.com
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/
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