Adjusted net income attributable to
Net income attributable to
Financial and operating highlights include:
- Cash Flow: For the year ended
December 31, 2012 , operating cash flow was$1,101 million and free cash flow was$715 million . For the three months endedDecember 31, 2012 , operating cash flow was$200 million and free cash flow was$83 million . For a definition of free cash flow see Note 4 to the reconciliations of non-GAAP measures. - Operating Income: Adjusted operating income for the quarter ended
December 31, 2012 was$408 million , excluding the transaction expenses associated with the acquisition of HCP of$13 million and expenses associated with a legal settlement of$7 million . Operating income for the quarter endedDecember 31, 2012 including these items was$388 million .
Adjusted operating income for the year endedDecember 31, 2012 was$1,414 million , excluding transactions expenses associated with the acquisition of HCP of$31 million and a legal settlement and related expenses of$86 million . Operating income for the year endedDecember 31, 2012 including these items was$1,297 million .
Operating income for the quarter and year endedDecember 31, 2011 was$330 million and$1,155 million , respectively.
- Adjusted Diluted Net Income Per Share: Adjusted diluted net income per share attributable to
DaVita HealthCare Partners Inc. for the quarter endedDecember 31, 2012 , excluding transaction expenses associated with the acquisition of HCP, debt refinancing charges, expenses associated with a legal settlement and amortization of intangible assets associated with acquisitions, which net of related tax impacts totaled$35.0 million , was$1.85 per share.
Adjusted diluted net income per share attributable toDaVita HealthCare Partners Inc. for the year endedDecember 31, 2012 , excluding transaction expenses associated with the acquisition of HCP, debt refinancing charges, a legal settlement and related expenses, and the amortization of intangible assets associated with acquisitions, which net of related tax impacts totaled$105.4 million , was$6.55 per share.
Adjusted diluted net income per share attributable toDaVita HealthCare Partners Inc. for the quarter endedDecember 31, 2011 , excluding after-tax amortization of intangible assets associated with acquisitions totaling$3.7 million , was$1.60 per share.
Adjusted diluted net income per share attributable toDaVita HealthCare Partners Inc. for the year endedDecember 31, 2011 , excluding a goodwill impairment charge and the amortization of intangible assets associated with acquisitions, which net of related tax impacts totaled$28.2 million , was$5.25 per share.
- Volume: Total U.S. dialysis treatments for the fourth quarter of 2012 were 5,736,776, or 72,161 treatments per day, representing a per day increase of 9.1% over the fourth quarter of 2011. Non-acquired treatment growth in the quarter was 4.7% over the prior year’s fourth quarter. Our normalized non-acquired treatment growth in the quarter was 4.4% over the prior year’s fourth quarter.
- Effective Tax Rate: Our effective tax rate was 34.7% and 35.9% for the quarter and year ended
December 31, 2012 , 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 toDaVita HealthCare Partners Inc. was 38.5% and 40.1% for the quarter and year endedDecember 31, 2012 , respectively. We expect our 2013 effective tax rate attributable toDaVita HealthCare Partners Inc. to be in the range of 39.5% to 40.5%. - Acquisition: On
November 1, 2012 we completed our acquisition of HCP pursuant to an Agreement and Plan of Merger datedMay 20, 2012 , as amended, whereby HCP became a wholly-owned subsidiary ofDaVita Inc. For further details regarding this transaction, see our report on Form 8-K filed with theSEC onNovember 1, 2012 . The operating results of HCP are included in our consolidated financial results fromNovember 1, 2012 . - Debt Transactions: In conjunction with the acquisition of HCP, on
November 1, 2012 , we borrowed an additional$3,000 million under an amended Credit Agreement. The amended Credit Agreement consist of a new five year Term Loan A-3 facility in an aggregate principal amount of$1,350 million and a new seven year Term Loan B-2 facility in an aggregate principal amount of$1,650 million . The new Term Loan A-3 initially bears interest at LIBOR plus an interest rate margin of 2.50% subject to adjustment depending upon our leverage ratio and can range from 2.00% to 2.50%. The Term Loan A-3 matures in 2017. The Term Loan B-2 bears interest at LIBOR (floor at 1.00%) plus an interest rate margin of 3.00% and matures in 2019. In addition, we amended certain financial covenants and various other provisions of our Credit Agreement to provide operating and financial flexibility.
OnAugust 28, 2012 , we also issued$1,250 million of New Senior Notes. The New Senior Notes will pay interest onFebruary 15 andAugust 15 of each year, beginningFebruary 15, 2013 . The New Senior Notes are unsecured senior obligations and rank equally to other unsecured senior indebtedness and are guaranteed by certain domestic subsidiaries ofDaVita HealthCare Partners Inc.
We received total proceeds of$4,250 million from these additional borrowings,$3,000 million from the borrowings on the new Term Loan A-3 and new Term Loan B-2, and an additional$1,250 million from the New Senior Notes. We used a portion of the proceeds to finance the merger of HCP, pay-off the existing Term Loan A-2 outstanding principal balance and to pay-off a portion of HCP’s existing debt as well as to pay fees and expenses of approximately$71.8 million .
- Dialysis Center Activity: As of
December 31, 2012 , we operated or provided administrative services at 1,954 outpatient dialysis centers located inthe United States serving approximately 153,000 patients and 36 outpatient dialysis centers serving approximately 2,200 patients that are located in eight countries outside ofthe United States . During the fourth quarter of 2012, we acquired 22 dialysis centers and opened a total of 22 dialysis centers located inthe United States . We also acquired 10 dialysis centers and opened two dialysis centers outside ofthe United States .
Outlook
Our consolidated operating income guidance for 2013 is still expected to be in the range of
We will be holding a conference call to discuss our results for the fourth quarter ended
This release contains forward-looking statements, within the meaning of the federal securities laws, including statements related to our guidance and expectations for our 2013 operating income, our 2013 operating cash flows and our 2013 effective tax rate attributable to
These risks and uncertainties include but are not limited to, and are qualified in their entirety by reference to the full text of those risk factors in our
- the concentration of profits generated by, the continued downward pressure on average realized payment rates from, and a reduction in the number of patients under higher-paying commercial payor plans, which may result in the loss of revenues or patients,
- a reduction in government payment rates under the Medicare End Stage Renal Disease program or other government-based programs,
- the impact of health care reform legislation that was enacted in
the United States inMarch 2010 , - changes in pharmaceutical or anemia management practice patterns, payment policies, or pharmaceutical pricing,
- our continued compliance with complex government regulations, and current or potential investigations by various government entities and related government or private-party proceedings,
- our ability to maintain contracts with physician medical directors, changing affiliation models for physicians, and the emergence of new models of care introduced by the government or private sector, that may erode our patient base and reimbursement rates,
- our ability to complete any acquisitions, mergers or dispositions that we might be considering or announce, or to integrate and successfully operate any business we may acquire, or to expand our operations and services to markets outside
the United States , - risks arising from the use of accounting estimates in our financial statements.
- the risk that the cost of providing services under HCP’s agreements may exceed our compensation,
- the risk that reductions in reimbursement rates and future regulations may negatively impact HCP’s revenue and profitability,
- the risk that HCP may not be able to successfully establish a presence in new geographic regions, or successfully address competitive threats that could reduce its profitability, the risk that a disruption in HCP’s healthcare provider networks could have an adverse effect on HCP’s business operations and profitability,
- the risk that reductions in the quality ratings of health maintenance organization plan customers of HCP could have an adverse effect on HCP’s business, or
- the risk that health plans that acquire health maintenance organizations may not be willing to contract with HCP or may be willing to contract only on less favorable terms.
We base our forward-looking statements on information currently available to us at the time of this release, and 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. For the reasons stated in the reconciliation schedules, we believe our presentation of non-GAAP financial measures provides useful supplemental information for investors.
DAVITA HEALTHCARE PARTNERS INC. | ||||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
(dollars in thousands, except per share data) | ||||||||||||||||||
Three months ended December 31, | Year ended December 31, | |||||||||||||||||
2012 | 2011 | 2012 |
2011 |
|||||||||||||||
Patient service revenues | $ | 1,929,802 | $ | 1,715,818 | $ | 7,351,900 | $ | 6,470,540 | ||||||||||
Less: Provision for uncollectible accounts | (67,950 | ) | (51,714 | ) | (235,218 | ) | (190,234 | ) | ||||||||||
Net patient service revenues | 1,861,852 | 1,664,104 | 7,116,682 | 6,280,306 | ||||||||||||||
HCP capitated revenues | 419,431 | ─ | 419,431 | ─ | ||||||||||||||
Other revenues | 196,570 | 130,221 | 650,167 | 451,500 | ||||||||||||||
Total net operating revenues | 2,477,853 | 1,794,325 | 8,186,280 | 6,731,806 | ||||||||||||||
Operating expenses and charges: | ||||||||||||||||||
Patient care costs | 1,702,763 | 1,201,387 | 5,578,853 | 4,633,620 | ||||||||||||||
General and administrative | 278,469 | 192,019 | 894,575 | 684,715 | ||||||||||||||
Depreciation and amortization | 109,278 | 72,387 | 341,969 | 264,225 | ||||||||||||||
Provision for uncollectible accounts | 805 | 1,019 | 4,339 | 3,309 | ||||||||||||||
Equity investment income | (8,063 | ) | (2,221 | ) | (16,377 | ) | (8,776 | ) | ||||||||||
Legal settlement and related expenses | 6,545 | ─ | 85,837 | ─ | ||||||||||||||
Total operating expenses and charges | 2,089,797 | 1,464,591 | 6,889,196 | 5,577,093 | ||||||||||||||
Operating income | 388,056 | 329,734 | 1,297,084 | 1,154,713 | ||||||||||||||
Debt expense | (98,032 | ) | (61,750 | ) | (288,554 | ) | (241,090 | ) | ||||||||||
Debt refinancing charges | (8,901 | ) | ─ | (10,963 | ) | ─ | ||||||||||||
Other income | 1,039 | 787 | 3,737 | 2,982 | ||||||||||||||
Income from continuing operations before income taxes | 282,162 | 268,771 | 1,001,304 | 916,605 | ||||||||||||||
Income tax expense | 97,902 | 91,552 | 359,845 | 325,292 | ||||||||||||||
Income from continuing operations | 184,260 | 177,219 | 641,459 | 591,313 | ||||||||||||||
Discontinued operations: | ||||||||||||||||||
Loss from operations of discontinued operations, net of tax | (460 | ) | (19 | ) | (222 | ) | (13,162 | ) | ||||||||||
Loss on disposal of discontinued operations, net of tax | ─ | (1,068 | ) | ─ | (4,756 | ) | ||||||||||||
Net income | 183,800 | 176,132 | 641,237 | 573,395 | ||||||||||||||
Less: Net income attributable to noncontrolling interests |
(27,961 | ) | (28,009 | ) | (105,220 | ) | (95,394 | ) | ||||||||||
Net income attributable to DaVita HealthCare Partners Inc. | $ | 155,839 | $ | 148,123 | $ | 536,017 | $ | 478,001 | ||||||||||
Earnings per share: | ||||||||||||||||||
Basic income from continuing operations per share attributable to DaVita HealthCare Partners Inc. | $ | 1.55 | $ | 1.60 | $ | 5.58 | $ | 5.25 | ||||||||||
Basic net income per share attributable to DaVita HealthCare Partners Inc. | $ | 1.54 | $ | 1.59 | $ | 5.58 | $ | 5.05 | ||||||||||
Diluted income from continuing operations per share attributable to DaVita HealthCare Partners Inc. | $ | 1.51 | $ | 1.57 | $ | 5.47 | $ | 5.14 | ||||||||||
Diluted net income per share attributable to DaVita HealthCare Partners Inc. | $ | 1.51 | $ | 1.56 | $ | 5.47 | $ | 4.96 | ||||||||||
Weighted average shares for earnings per share: | ||||||||||||||||||
Basic | 101,107,780 | 93,485,001 | 96,017,939 | 94,658,027 | ||||||||||||||
Diluted | 103,470,985 | 94,968,029 | 97,971,080 | 96,532,110 | ||||||||||||||
Amounts attributable to DaVita HealthCare Partners Inc.: | ||||||||||||||||||
Income from continuing operations | $ | 156,283 | $ | 149,235 | $ | 536,236 | $ | 496,182 | ||||||||||
Discontinued operations | (444 | ) | (1,112 | ) | (219 | ) | (18,181 | ) | ||||||||||
Net income | $ | 155,839 | $ | 148,123 | $ | 536,017 | $ | 478,001 | ||||||||||
DAVITA HEALTHCARE PARTNERS INC. | ||||||||||||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||
Three months ended December 31, | Year ended December 31, | |||||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||||
Net income | $ | 183,800 | $ | 176,132 | $ | 641,237 | $ | 573,395 | ||||||||||
Other comprehensive (loss) income, net of tax: | ||||||||||||||||||
Unrealized losses on interest rate swap and cap agreements: | ||||||||||||||||||
Unrealized losses on interest rate swap and cap agreements | (100 | ) | (1,210 | ) | (6,204 | ) | (29,049 | ) | ||||||||||
Less: Reclassifications of net swap and cap agreements realized losses into net income | 2,543 | 2,597 | 10,130 | 9,721 | ||||||||||||||
Unrealized gains (losses) on investments: | ||||||||||||||||||
Unrealized gains (losses) on investments | 155 | (15 | ) | 1,541 | (602 | ) | ||||||||||||
Less: Reclassification of net investment realized gains into net income | ─ | ─ | (75 | ) | (57 | ) | ||||||||||||
Foreign currency translation adjustments | 388 | ─ | (1,205 | ) | ─ | |||||||||||||
Other comprehensive income (loss) | 2,986 | 1,372 | 4,187 | (19,987 | ) | |||||||||||||
Total comprehensive income | 186,786 | 177,504 | 645,424 | 553,408 | ||||||||||||||
Less: Comprehensive income attributable to the noncontrolling interests | (27,961 | ) | (28,009 | ) | (105,220 | ) | (95,394 | ) | ||||||||||
Comprehensive income attributable to DaVita HealthCare Partners Inc. | $ | 158,825 | $ | 149,495 | $ | 540,204 | $ | 458,014 | ||||||||||
DAVITA HEALTHCARE PARTNERS INC. | ||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
(unaudited) | ||||||||||
(dollars in thousands) | ||||||||||
Year ended |
||||||||||
2012 | 2011 | |||||||||
Cash flows from operating activities: | ||||||||||
Net income | $ | 641,237 | $ | 573,395 | ||||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||
Depreciation and amortization | 343,908 | 267,315 | ||||||||
Stock-based compensation expense | 45,384 | 48,718 | ||||||||
Tax benefits from stock award exercises | 88,964 | 38,199 | ||||||||
Excess tax benefits from stock award exercises | (62,036 | ) | (20,834 | ) | ||||||
Deferred income taxes | 43,765 | 53,438 | ||||||||
Equity investment income, net | 3,384 | 354 | ||||||||
Other non-cash charges | 30,390 | 20,329 | ||||||||
Goodwill impairment charge | ─ | 24,000 | ||||||||
Changes in operating assets and liabilities, other than from acquisitions and divestitures: | ||||||||||
Accounts receivable | (63,673 | ) | (88,848 | ) | ||||||
Inventories | 4,052 | 10,270 | ||||||||
Other receivables and other current assets | 51,730 | 53,697 | ||||||||
Other long-term assets | (1,775 | ) | 2,039 | |||||||
Accounts payable | 40,878 | 84,400 | ||||||||
Accrued compensation and benefits | 18,476 | 77,074 | ||||||||
Other current liabilities | 27,083 | (51,979 | ) | |||||||
Income taxes | (129,948 | ) | 77,418 | |||||||
Other long-term liabilities | 19,029 | 11,061 | ||||||||
Net cash provided by operating activities | 1,100,848 | 1,180,046 | ||||||||
Cash flows from investing activities: | ||||||||||
Additions of property and equipment, net | (550,146 | ) | (400,156 | ) | ||||||
Acquisitions | (4,294,077 | ) | (1,077,442 | ) | ||||||
Proceeds from asset sales | 3,559 | 75,183 | ||||||||
Purchase of investments available-for-sale | (3,935 | ) | (5,971 | ) | ||||||
Purchase of investments held-to-maturity | (7,418 | ) | (37,628 | ) | ||||||
Proceeds from sale of investments available-for-sale | 7,211 | 1,149 | ||||||||
Proceeds from maturities of investments held-to-maturity | 14,530 | 47,695 | ||||||||
Purchase of equity investments and other assets | (2,182 | ) | (2,398 | ) | ||||||
Distributions received on equity investments | 8 | 340 | ||||||||
Net cash used in investing activities | (4,832,450 | ) | (1,399,228 | ) | ||||||
Cash flows from financing activities: | ||||||||||
Borrowings | 43,248,175 | 36,395,105 | ||||||||
Payments on long-term debt | (39,286,027 | ) | (36,249,584 | ) | ||||||
Interest rate cap premiums and other deferred financing costs | (57,241 | ) | (17,861 | ) | ||||||
Purchase of treasury stock | ─ | (323,348 | ) | |||||||
Distributions to noncontrolling interests | (113,504 | ) | (100,653 | ) | ||||||
Stock award exercises and other share issuances, net | 6,647 | 11,316 | ||||||||
Excess tax benefits from stock award exercises | 62,036 | 20,834 | ||||||||
Contributions from noncontrolling interests | 37,395 | 21,010 | ||||||||
Proceeds from sales of additional noncontrolling interests | 1,664 | 9,687 | ||||||||
Purchases from noncontrolling interests | (26,761 | ) | (13,689 | ) | ||||||
Net cash used in financing activities | 3,872,384 | (247,183 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents | (786 | ) | ─ | |||||||
Net increase (decrease) in cash and cash equivalents | 139,996 | (466,365 | ) | |||||||
Cash and cash equivalents at beginning of year | 393,752 | 860,117 | ||||||||
Cash and cash equivalents at end of year | $ | 533,748 | $ | 393,752 | ||||||
DAVITA HEALTHCARE PARTNERS INC. | ||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||
(unaudited) | ||||||||||
(dollars in thousands, except per share data) | ||||||||||
December 31, |
December 31, |
|||||||||
ASSETS | ||||||||||
Cash and cash equivalents | $ | 533,748 | $ | 393,752 | ||||||
Short-term investments | 7,138 | 17,399 | ||||||||
Accounts receivable, less allowance of $245,122 and $250,343 | 1,437,303 | 1,195,163 | ||||||||
Inventories | 78,126 | 75,731 | ||||||||
Other receivables | 265,671 | 281,468 | ||||||||
Other current assets | 201,572 | 49,349 | ||||||||
Income tax receivable | 55,454 | ─ | ||||||||
Deferred income taxes | 324,282 | 280,382 | ||||||||
Total current assets | 2,903,294 | 2,293,244 | ||||||||
Property and equipment, net | 1,872,370 | 1,432,651 | ||||||||
Amortizable intangibles, net | 2,127,778 | 159,491 | ||||||||
Equity investments | 35,150 | 27,325 | ||||||||
Long-term investments | 59,341 | 9,890 | ||||||||
Other long-term assets | 80,194 | 34,231 | ||||||||
Goodwill | 8,964,969 | 4,946,976 | ||||||||
$ | 16,043,096 | $ | 8,903,808 | |||||||
LIABILITIES AND EQUITY | ||||||||||
Accounts payable | $ | 414,143 | $ | 289,653 | ||||||
Other liabilities | 563,365 | 328,607 | ||||||||
Accrued compensation and benefits | 566,911 | 421,735 | ||||||||
Medical payables | 261,964 | ─ | ||||||||
Current portion of long-term debt | 227,791 | 87,345 | ||||||||
Income tax payable | ─ | 37,412 | ||||||||
Total current liabilities | 2,034,174 | 1,164,752 | ||||||||
Long-term debt | 8,326,534 | 4,417,624 | ||||||||
Other long-term liabilities | 443,743 | 132,006 | ||||||||
Alliance and product supply agreement, net | 14,657 | 19,987 | ||||||||
Deferred income taxes | 715,248 | 423,098 | ||||||||
Total liabilities | 11,534,356 | 6,157,467 | ||||||||
Commitments and contingencies | ||||||||||
Noncontrolling interests subject to put provisions | 580,692 | 478,216 | ||||||||
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; 105,498,575 and 93,641,363 shares outstanding) | 135 | 135 | ||||||||
Additional paid-in capital | 1,208,800 | 596,300 | ||||||||
Retained earnings | 3,731,835 | 3,195,818 | ||||||||
Treasury stock, at cost (29,363,708 and 41,220,920 shares) | (1,162,336 | ) | (1,631,694 | ) | ||||||
Accumulated other comprehensive loss | (15,297 | ) | (19,484 | ) | ||||||
Total DaVita HealthCare Partners Inc. shareholders’ equity | 3,763,137 | 2,141,075 | ||||||||
Noncontrolling interests not subject to put provisions | 164,911 | 127,050 | ||||||||
Total equity | 3,928,048 | 2,268,125 | ||||||||
$ | 16,043,096 | $ | 8,903,808 | |||||||
DAVITA HEALTHCARE PARTNERS INC. | ||||||||||||||||||||
SUPPLEMENTAL FINANCIAL DATA | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
(dollars in millions, except for per share and per treatment data) | ||||||||||||||||||||
Three months ended |
Year ended |
|||||||||||||||||||
December 31, |
September 30, |
December 31, |
||||||||||||||||||
1. Consolidated Financial Results: | ||||||||||||||||||||
Consolidated net revenues | $ | 2,478 | $ | 1,946 | $ | 1,794 | $ | 8,186 | ||||||||||||
Operating income | $ | 388.1 | $ | 340.9 | $ | 329.7 | $ | 1,297.1 | ||||||||||||
Operating income excluding transaction expenses associated with the acquisition of HCP and the legal settlement and related expenses(1) | $ | 407.6 | $ | 343.5 | $ | 329.7 | $ | 1,413.7 | ||||||||||||
Operating income margin | 15.7 | % | 17.5 | % | 18.4 | % | 15.8 | % | ||||||||||||
Operating income margin excluding transaction expenses associated with the acquisition of HCP and the legal settlement and related expenses(1) | 16.4 | % | 17.7 | % | 18.4 | % | 17.3 | % | ||||||||||||
Net income attributable to DaVita HealthCare Partners Inc. | $ | 155.8 | $ | 144.7 | $ | 148.1 | $ | 536.0 | ||||||||||||
Net income attributable to DaVita HealthCare Partners Inc. excluding transaction expenses associated with the acquisition of HCP, debt refinancing charges and legal settlement and related expenses, which are all net of related tax(1) | $ | 173.3 | $ | 147.5 | $ | 148.1 | $ | 612.4 | ||||||||||||
Diluted net income per share attributable to DaVita HealthCare Partners Inc. | $ | 1.51 | $ | 1.50 | $ | 1.56 | $ | 5.47 | ||||||||||||
Diluted net income per share attributable to DaVita HealthCare Partners Inc. excluding transaction expenses associated with the acquisition of HCP, debt refinancing charges and legal settlement and related expenses, which are all net of related tax(1) | $ | 1.68 | $ | 1.53 | $ | 1.56 | $ | 6.25 | ||||||||||||
2. Consolidated Business Metrics: | ||||||||||||||||||||
Expenses | ||||||||||||||||||||
General and administrative expenses as a percent of consolidated net revenues(2) | 11.2 | % | 10.2 | % | 10.7 | % | 10.9 | % | ||||||||||||
Consolidated effective tax rate | 34.7 | % | 36.4 | % | 34.1 | % | 35.9 | % | ||||||||||||
Consolidated effective tax rate attributable to DaVita HealthCare Partners Inc.(1) | 38.5 | % | 40.5 | % | 38.0 | % | 40.1 | % | ||||||||||||
DAVITA HEALTHCARE PARTNERS INC. | ||||||||||||||||||||
SUPPLEMENTAL FINANCIAL DATA—continued | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
(dollars in millions, except for per share and per treatment data) | ||||||||||||||||||||
Three months ended |
Year ended |
|||||||||||||||||||
December 31, |
September 30, 2012 |
December 31, |
||||||||||||||||||
3. Segment Financial Results: (dollar amounts rounded to nearest million) | ||||||||||||||||||||
Net revenues | ||||||||||||||||||||
Dialysis and related lab services patient service revenues | $ | 1,894 | $ | 1,842 | $ | 1,717 | $ | 7,317 | ||||||||||||
Less: Provision for uncollectible accounts | (66 | ) | (60 | ) | (52 | ) | (234 | ) | ||||||||||||
Dialysis and related lab services net patient service revenues | 1,828 | 1,782 | 1,665 | 7,083 | ||||||||||||||||
Other revenues | 3 | 3 | 3 | 12 | ||||||||||||||||
Total net dialysis and related lab services revenues | 1,831 | 1,785 | 1,668 | 7,095 | ||||||||||||||||
HCP capitated revenues | 419 | ─ | ─ | 419 | ||||||||||||||||
Patient service revenues, less provision for uncollectible accounts of $2 | 34 | ─ | ─ | 34 | ||||||||||||||||
Other revenue | 24 | ─ | ─ | 24 | ||||||||||||||||
Total net HCP revenues | 477 | ─ | ─ | 477 | ||||||||||||||||
Other – Ancillary services and strategic initiatives | 173 | 163 | 129 | 625 | ||||||||||||||||
Other – Ancillary services and strategic initiatives net patient service revenues (related to international dialysis operations and a vascular access clinic) | 5 | 5 | 3 | 17 | ||||||||||||||||
Total net ancillary services and strategic initiatives revenues | 178 | 168 | 132 | 642 | ||||||||||||||||
Total net segment revenues | 2,486 | 1,953 | 1,800 | 8,214 | ||||||||||||||||
Elimination of intersegment revenues | (8 | ) | (7 | ) | (6 | ) | (28 | ) | ||||||||||||
Total net consolidated revenues | $ | 2,478 | $ | 1,946 | $ | 1,794 | $ | 8,186 | ||||||||||||
Operating Income | ||||||||||||||||||||
Dialysis and related lab services operating income | $ | 362 | $ | 367 | $ | 356 | $ | 1,379 | ||||||||||||
HCP operating income | 67 | ─ | ─ | 67 | ||||||||||||||||
Other – Ancillary services and strategic initiatives, including international dialysis operations operating losses | (15 | ) | (13 | ) | (14 | ) | (66 | ) | ||||||||||||
Total segment operating income | 414 | 354 | 342 | 1,380 | ||||||||||||||||
Reconciling items: | ||||||||||||||||||||
Corporate support and related stock-based compensation | (13 | ) | (12 | ) | (12 | ) | (52 | ) | ||||||||||||
Transaction expenses | (13 | ) | (1 | ) | ─ | (31 | ) | |||||||||||||
Consolidated operating income | $ | 388 | $ | 341 | $ | 330 | $ | 1,297 | ||||||||||||
4. Dialysis and Related Lab Services Business Metrics: | ||||||||||||||||||||
Volume | ||||||||||||||||||||
Treatments | 5,736,776 | 5,550,645 | 5,227,167 | 22,053,597 | ||||||||||||||||
Number of treatment days | 79.5 | 78.0 | 79.0 | 313.5 | ||||||||||||||||
Treatments per day | 72,161 | 71,162 | 66,167 | 70,346 | ||||||||||||||||
Per day year over year increase | 9.1 | % | 12.3 | % | 12.4 | % | 12.3 | % | ||||||||||||
Non-acquired growth year over year | 4.7 | % | 4.4 | % | 4.4 | % | 4.8 | % | ||||||||||||
Operating revenues before provision for uncollectible accounts | ||||||||||||||||||||
Dialysis and related lab services revenue per treatment | $ | 330.16 | $ | 331.93 | $ | 328.54 | $ | 331.77 | ||||||||||||
Per treatment decrease from previous quarter | (0.5 | %) | (0.2 | %) | (1.6 | %) | ─ | |||||||||||||
Per treatment increase (decrease) from previous year | 0.5 | % | (0.6 | %) | (0.8 | %) | 0.4 | % | ||||||||||||
Percent of net consolidated revenues | 73.7 | % | 91.5 | % | 92.8 | % | 86.4 | % | ||||||||||||
DAVITA HEALTHCARE PARTNERS INC. | ||||||||||||||||||||
SUPPLEMENTAL FINANCIAL DATA—continued | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
(dollars in millions, except for per share and per treatment data) | ||||||||||||||||||||
Three months ended |
Year ended |
|||||||||||||||||||
December 31, |
September 30, |
December 31, |
||||||||||||||||||
4. Dialysis and Related Lab Services Business Metrics: | ||||||||||||||||||||
Expenses | ||||||||||||||||||||
Patient care costs | ||||||||||||||||||||
Percent of total segment operating revenues | 66.6 | % | 66.5 | % | 65.4 | % | 66.3 | % | ||||||||||||
Per treatment | $ | 212.52 | $ | 214.04 | $ | 208.89 | $ | 213.18 | ||||||||||||
Per treatment (decrease) increase from previous quarter | (0.7 | %) | 0.1 | % | (3.2 | %) | ─ | |||||||||||||
Per treatment increase (decrease) from previous year | 1.7 | % | (0.9 | %) | (7.2 | %) | (2.0 | %) | ||||||||||||
General and administrative expenses | ||||||||||||||||||||
Percent of total segment operating revenues | 8.9 | % | 8.6 | % | 9.1 | % | 8.9 | % | ||||||||||||
Per treatment | $ | 28.41 | $ | 27.71 | $ | 29.12 | $ | 28.51 | ||||||||||||
Per treatment increase (decrease) from previous quarter | 2.5 | % | (2.0 | %) | 9.4 | % | ─ | |||||||||||||
Per treatment (decrease) increase from previous year | (2.4 | %) | 4.1 | % | 7.9 | % | 2.7 | % | ||||||||||||
Accounts receivable | ||||||||||||||||||||
Net receivables | $ | 1,169 | $ | 1,200 | $ | 1,150 | ||||||||||||||
DSO | 59 | 62 | 64 | |||||||||||||||||
Provision for uncollectible accounts as a percentage of net revenues | 3.50 | % | 3.25 | % | 3.00 | % | 3.20 | % | ||||||||||||
5. HCP Business Metrics: | ||||||||||||||||||||
Capitated membership | ||||||||||||||||||||
Total | 723,999 | ─ | ─ | 723,999 | ||||||||||||||||
Member months | 1,422,560 | ─ | ─ | 1,422,560 | ||||||||||||||||
Operating revenues by sources(5) | ||||||||||||||||||||
Commercial revenues | $ | 112 | $ ─ | $ ─ | $ | 112 | ||||||||||||||
Senior revenues | 298 | ─ | ─ | 298 | ||||||||||||||||
Medicaid revenues | 9 | ─ | ─ | 9 | ||||||||||||||||
Total capitated revenues | 419 | ─ | ─ | 419 | ||||||||||||||||
Patient service revenues, less provision for uncollectible accounts | 34 | ─ | ─ | 34 | ||||||||||||||||
Other revenue | 24 | ─ | ─ | 24 | ||||||||||||||||
Total net operating revenues | $ | 477 | $ ─ | $ ─ | $ | 477 | ||||||||||||||
Other | ||||||||||||||||||||
Total care dollars under management(1) | $ | 614 | ─ | ─ | $ | 614 | ||||||||||||||
Ratio of operating income to total care dollars under management | 10.9 | % | ─ | ─ | 10.9 | % | ||||||||||||||
Full time clinicians | 1,079 | ─ | ─ | 1,079 | ||||||||||||||||
IPA primary care physicians | 1,806 | ─ | ─ | 1,806 | ||||||||||||||||
Expenses | ||||||||||||||||||||
Patient care costs(5) | ||||||||||||||||||||
Total patient care costs | $ | 339.4 | ─ | ─ | $ | 339.4 | ||||||||||||||
Percent of total segment net revenues | 71.1 | % | ─ | ─ | 71.1 | % | ||||||||||||||
General and administrative expenses | $ | 51.5 | ─ | ─ | $ | 51.5 | ||||||||||||||
Percent of total segment net revenues | 10.8 | % | ─ | ─ | 10.8 | % | ||||||||||||||
DAVITA HEALTHCARE PARTNERS INC. | |||||||||||||||||||
SUPPLEMENTAL FINANCIAL DATA—continued | |||||||||||||||||||
(unaudited) | |||||||||||||||||||
(dollars in millions, except for per share and per treatment data) | |||||||||||||||||||
Three months ended |
Year ended |
||||||||||||||||||
December 31, |
September 30, |
December 31, |
|||||||||||||||||
6. Cash Flow: | |||||||||||||||||||
Operating cash flow | $ | 200.2 | $ | 366.6 | $ | 150.7 | $ | 1,100.8 | |||||||||||
Operating cash flow, last twelve months | $ | 1,100.8 | $ | 1,051.3 | $ | 1,180.0 | |||||||||||||
Free cash flow(1) | $ | 82.6 | $ | 271.4 | $ | 32.1 | $ | 715.3 | |||||||||||
Free cash flow, last twelve months(1) | $ | 715.3 | $ | 664.8 | $ | 855.0 | |||||||||||||
Capital expenditures: | |||||||||||||||||||
Routine maintenance/IT/other | $ | 86.1 | $ | 63.7 | $ | 85.3 | $ | 272.0 | |||||||||||
Development and relocations | $ | 85.1 | $ | 64.7 | $ | 63.1 | $ | 278.2 | |||||||||||
Acquisition expenditures | $ | 3,875.0 | $ | 72.3 | $ | 150.3 | $ | 4,294.1 | |||||||||||
7. Debt and Capital Structure: | |||||||||||||||||||
Total debt(3) | $ | 8,576 | $ | 5,745 | $ | 4,513 | |||||||||||||
Net debt, net of cash and cash equivalents at December 31, 2012(3) | $ | 8,042 | $ | 4,094 | $ | 4,119 | |||||||||||||
Leverage ratio (see calculation on page 12) | 3.5x | 2.6x | 2.7x | ||||||||||||||||
Overall weighted average effective interest rate during the quarter | 4.93 | % | 5.31 | % | 5.27 | % | |||||||||||||
Overall weighted average effective interest rate at end of the quarter | 4.73 | % | 5.38 | % | 5.27 | % | |||||||||||||
Weighted average effective interest rate on the Senior Secured Credit Facilities at end of the quarter | 4.02 | % | 4.61 | % | 4.61 | % | |||||||||||||
Fixed and economically fixed interest rates as a percentage of our total debt(4) | 45 | % | 66 | % | 57 | % | |||||||||||||
8. Clinical: (quarterly averages) | |||||||||||||||||||
Dialysis adequacy -% of patients with Kt/V > 1.2 at the end of the quarter | 98 | % | 98 | % | 97 | % | |||||||||||||
Dialysis patients with arteriovenous fistulas placed | 71 | % | 71 | % | 69 | % | |||||||||||||
_________________
(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) | Consolidated percentages of revenues are comprised of the dialysis and related lab services business, HCP’s business and other ancillary services and strategic initiatives, and in case of general and administrative expenses, includes other certain corporate support and related stock-based compensation and transaction expenses associated with the acquisition of HCP. | |
(3) | The reported balance sheet amounts at December 31, 2012, September 30, 2012 and December 31, 2011, are net of $21.5 million, $6.6 million and $7.8 million, respectively, of debt discounts associated with our Term Loan B-2, Term Loan B and our Term Loan A-2. | |
(4) | The Term Loan B and Term Loan B-2 are subject to LIBOR floors of 1.50% and 1.00%, respectively. Because LIBOR, for all periods presented above, was lower than either of these embedded LIBOR floors, the interest rates on the Term Loan B and the Term Loan B-2 are set at their respective floors. At such time as the LIBOR-based component of our interest rate exceeds 1.50% on the Term Loan B and 1.00% on the Term Loan B-2, we will then be subject to LIBOR-based interest rate volatility on the LIBOR variable component of our interest rate on all of the Term Loan B-2, as well as for the Term Loan B, but limited to a maximum rate of 4.00% on $1.25 billion of outstanding principal debt on the Term Loan B. The remaining $465 million outstanding principal balance of the Term Loan B is subject to LIBOR-based interest rate volatility above a floor of 1.50%. | |
(5) | Operating results of HCP are included for the period November 1, 2012 through December 31, 2012. | |
DAVITA HEALTHCARE PARTNERS INC.
SUPPLEMENTAL FINANCIAL DATA—continued
(unaudited)
(dollars in thousands)
Note 1: Calculation of the Leverage Ratio
Under the 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 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.
Year ended |
|||||||
Net income attributable to DaVita HealthCare Partners Inc. | $ | 536,017 | |||||
Income taxes | 360,040 | ||||||
Interest expense and debt refinancing charges | 280,000 | ||||||
Depreciation and amortization | 343,646 | ||||||
Noncontrolling interests and equity investment income, net | 108,604 | ||||||
Stock-based compensation | 45,384 | ||||||
Other (primarily pro-forma EBITDA on acquisitions) | 658,651 | ||||||
“Consolidated EBITDA” | $ | 2,332,342 | |||||
December 31, 2012 | |||||||
Total debt, excluding debt discount of $21.5 million | $ | 8,575,870 | |||||
Letters of credit issued | 116,139 | ||||||
8,692,009 | |||||||
Less: Cash and cash equivalents | (533,748 | ) | |||||
Consolidated net debt | $ | 8,158,261 | |||||
Last twelve months “Consolidated EBITDA” | $ | 2,332,342 | |||||
Leverage ratio | 3.5x | ||||||
In accordance with the Credit Agreement, the Company’s leverage ratio cannot exceed 5.00 to 1.00 as of
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
1. Net income and diluted net income per share attributable to
We believe that net income attributable to
Net income attributable to DaVita HealthCare Partners Inc. excluding transaction expenses associated with the acquisition of HCP, debt refinancing charges, legal settlement and related expenses and a non-cash goodwill impairment charge, which are all net of related tax: | Three months ended | Year ended | ||||||||||||||||||||||
December 31, |
September 30, |
December 31, |
December 31, |
December 31, |
||||||||||||||||||||
Net income attributable to DaVita HealthCare Partners Inc. | $ | 155,839 | $ | 144,721 | $ | 148,123 |