Financial and operating highlights include:
- Cash Flow: For the rolling twelve months ended
March 31, 2012 operating cash flow was$1,182 million and free cash flow was$837 million . For the three months endedMarch 31, 2012 operating cash flow was$332 million and free cash flow was$250 million . - Operating Income: Operating income for the quarter ended
March 31, 2012 was$321 million as compared to$235 million for the same period of 2011. - Volume: Total U.S. treatments for the first quarter of 2012 were 5,314,275, or 68,132 treatments per day, representing a per day increase of 14.2% over the first quarter of 2011. Non-acquired treatment growth in the quarter was 5.5% over the prior year’s first quarter. Our normalized non-acquired treatment growth in the quarter was 5.3% over the prior year’s first quarter.
- Effective Tax Rate: Our effective tax rate was 36.7% for the quarter ended
March 31, 2012 . 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 Inc. was 40.5% for the quarter endedMarch 31, 2012 . We still expect our 2012 effective tax rate attributable toDaVita Inc. to be in the range of 40.0% to 41.0%. - Center Activity: As of
March 31, 2012 , we operated or provided administrative services at 1,841 outpatient dialysis centers located inthe United States serving approximately 145,000 patients and 15 outpatient dialysis centers that are located in three countries outside ofthe United States . During the first quarter of 2012, we acquired 28 centers and opened a total of 13 centers located inthe United States . We previously provided management and administrative services to nine of the acquired centers. In addition, we also opened a total of four centers outside ofthe United States .
Outlook
We are raising our operating income guidance for 2012 to now be in the range of
We will be holding a conference call to discuss our results for the first 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 2012 operating income, our 2012 operating cash flows and our 2012 effective tax rate attributable to
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 revenues or patients,
- a reduction in the number of patients under higher-paying commercial plans,
- a reduction in government payment rates under the Medicare End Stage Renal Disease program or other government-based programs,
- the impact of health care legislation that was enacted in
the United States inMarch 2010 , - 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,
- current or potential investigations by various government entities and related government or private-party proceedings,
- continued increased competition from large and medium-sized dialysis providers that compete directly with us,
- our ability to complete any acquisitions, mergers or dispositions that we might be considering or announce, or integrate and successfully operate any business we may acquire, and
- expansion of our operations and services to markets outside
the United States , or to businesses outside of dialysis.
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 INC. |
||||||||||
|
CONSOLIDATED STATEMENTS OF INCOME |
||||||||||
|
(unaudited) |
||||||||||
|
(dollars in thousands, except per share data) |
||||||||||
| Three months ended March 31, | ||||||||||
| 2012 | 2011 | |||||||||
| Patient service operating revenues | $ | 1,763,700 | $ | 1,497,434 | ||||||
| Less: Provision for uncollectible accounts related to patient service operating revenues | (53,008 | ) | (41,071 | ) | ||||||
| Net patient service operating revenues | 1,710,692 | 1,456,363 | ||||||||
| Other revenues | 155,943 | 105,950 | ||||||||
| Total net operating revenues | 1,866,635 | 1,562,313 | ||||||||
| Operating expenses and charges: | ||||||||||
| Patient care costs | 1,263,159 | 1,114,086 | ||||||||
| General and administrative | 207,389 | 151,602 | ||||||||
| Depreciation and amortization | 75,975 | 61,838 | ||||||||
| Provision for uncollectible accounts | 2,024 | 972 | ||||||||
| Equity investment income | (2,632 | ) | (1,519 | ) | ||||||
| Total operating expenses and charges | 1,545,915 | 1,326,979 | ||||||||
| Operating income | 320,720 | 235,334 | ||||||||
| Debt expense | (61,381 | ) | (58,595 | ) | ||||||
| Other income | 1,039 | 841 | ||||||||
| Income from continuing operations before income taxes | 260,378 | 177,580 | ||||||||
| Income tax expense | 95,495 | 62,959 | ||||||||
| Income from continuing operations | 164,883 | 114,621 | ||||||||
| Discontinued operations: | ||||||||||
| Income from operations of discontinued operations, net of tax | ─ | 131 | ||||||||
|
Net income |
164,883 | 114,752 | ||||||||
| Less: Net income attributable to noncontrolling interests |
(24,763 | ) | (20,250 | ) | ||||||
| Net income attributable to DaVita Inc. | $ | 140,120 | $ | 94,502 | ||||||
| Earnings per share: | ||||||||||
| Basic income from continuing operations per share attributable to DaVita Inc. | $ | 1.49 | $ | 0.98 | ||||||
| Basic net income per share attributable to DaVita Inc. | $ | 1.49 | $ | 0.98 | ||||||
| Diluted income from continuing operations per share attributable to DaVita Inc. | $ | 1.46 | $ | 0.96 | ||||||
| Diluted net income per share attributable to DaVita Inc. | $ | 1.46 | $ | 0.96 | ||||||
| Weighted average shares for earnings per share: | ||||||||||
| Basic | 93,769,092 | 96,263,802 | ||||||||
| Diluted | 95,729,105 | 98,378,371 | ||||||||
| Amounts attributable to DaVita Inc.: | ||||||||||
| Income from continuing operations | $ | 140,120 | $ | 94,371 | ||||||
| Discontinued operations | ─ | 131 | ||||||||
| Net income | $ | 140,120 | $ | 94,502 | ||||||
|
DAVITA INC. |
||||||||||
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
||||||||||
|
(unaudited) |
||||||||||
|
(dollars in thousands, except per share data) |
||||||||||
| Three months ended March 31, | ||||||||||
| 2012 | 2011 | |||||||||
| Net income | $ | 164,883 | $ | 114,752 | ||||||
| Other comprehensive income (loss), net of tax: | ||||||||||
| Unrealized losses on interest rate swap and cap agreements: | ||||||||||
| Unrealized losses on interest rate swap and cap agreements | (2,261 | ) | (4,134 | ) | ||||||
| Less: Reclassifications of net swap and cap agreements realized losses into net income | 2,520 | 1,743 | ||||||||
| Unrealized gains on investments: | ||||||||||
| Unrealized gains on investments | 1,146 | 268 | ||||||||
| Less: Reclassification of net investment realized gains into net income | (75 | ) | (57 | ) | ||||||
| Foreign currency translation adjustments | (619 | ) | ─ | |||||||
| Other comprehensive income (loss) | 711 | (2,180 | ) | |||||||
| Total comprehensive income | 165,594 | 112,572 | ||||||||
| Less: Comprehensive income attributable to the noncontrolling interest | (24,763 | ) | (20,250 | ) | ||||||
| Comprehensive income attributable to DaVita Inc. | 140,831 | $ | 92,322 | |||||||
|
DAVITA INC. |
||||||||||
|
CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||||
|
(unaudited) |
||||||||||
|
(dollars in thousands) |
||||||||||
| Three months ended March 31, |
||||||||||
| 2012 | 2011 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net income | $ | 164,883 | $ | 114,752 | ||||||
| Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||
| Depreciation and amortization | 75,975 | 62,037 | ||||||||
| Stock-based compensation expense | 12,550 | 9,716 | ||||||||
| Tax benefits from stock award exercises | 10,890 | 13,868 | ||||||||
| Excess tax benefits from stock award exercises | (6,101 | ) | (7,196 | ) | ||||||
| Deferred income taxes | (13,335 | ) | 18,221 | |||||||
| Equity investment income, net | 483 | 1,420 | ||||||||
| Loss on disposal of assets and other non-cash charges | 7,125 | 5,506 | ||||||||
| Changes in operating assets and liabilities, other than from acquisitions and divestitures: | ||||||||||
| Accounts receivable | (71,706 | ) | (20,461 | ) | ||||||
| Inventories | 4,851 | 7,429 | ||||||||
| Other receivables and other current assets | 56,452 | 24,922 | ||||||||
| Other long-term assets | 3,742 | 990 | ||||||||
| Accounts payable | (20,624 | ) | 26,565 | |||||||
| Accrued compensation and benefits | 41,623 | 31,542 | ||||||||
| Other current liabilities | 17,462 | 9,483 | ||||||||
| Income taxes | 43,072 | 29,878 | ||||||||
| Other long-term liabilities | 4,532 | 1,111 | ||||||||
| Net cash provided by operating activities | 331,874 | 329,783 | ||||||||
| Cash flows from investing activities: | ||||||||||
| Additions of property and equipment, net | (112,459 | ) | (67,530 | ) | ||||||
| Acquisitions | (132,699 | ) | (81,523 | ) | ||||||
| Proceeds from asset sales | 825 | 2,812 | ||||||||
| Purchase of investments available for sale | (489 | ) | (298 | ) | ||||||
| Purchase of investments held-to-maturity | (3,212 | ) | (15,161 | ) | ||||||
| Proceeds from sale of investments available for sale | 6,791 | 1,149 | ||||||||
| Proceeds from maturities of investments held-to-maturity | 7,551 | 15,163 | ||||||||
| Distributions received on equity investments | 2 | — | ||||||||
| Net cash used in investing activities | (233,690 | ) | (145,388 | ) | ||||||
| Cash flows from financing activities: | ||||||||||
| Borrowings | 8,634,603 | 10,983,125 | ||||||||
| Payments on long-term debt | (8,658,001 | ) | (11,000,635 | ) | ||||||
| Interest rate cap premiums and other deferred financing costs | 3 | (13,399 | ) | |||||||
| Distributions to noncontrolling interests | (26,405 | ) | (22,187 | ) | ||||||
| Stock award exercises and other share issuances, net | 1,663 | 3,410 | ||||||||
| Excess tax benefits from stock award exercises | 6,101 | 7,196 | ||||||||
| Contributions from noncontrolling interests | 3,651 | 3,959 | ||||||||
| Proceeds from sales of additional noncontrolling interests | 100 | 785 | ||||||||
| Purchases from noncontrolling interests | (4,372 | ) | (756 | ) | ||||||
| Net cash used in financing activities | (42,657 | ) | (38,502 | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 11 | — | ||||||||
| Net increase in cash and cash equivalents | 55,538 | 145,893 | ||||||||
| Cash and cash equivalents at beginning of period | 393,752 | 860,117 | ||||||||
| Cash and cash equivalents at end of period | $ | 449,290 | $ | 1,006,010 | ||||||
|
DAVITA INC. |
||||||||||
|
CONSOLIDATED BALANCE SHEETS |
||||||||||
|
(unaudited) |
||||||||||
|
(dollars in thousands, except per share data) |
||||||||||
|
March 31, |
December 31, |
|||||||||
| ASSETS | ||||||||||
| Cash and cash equivalents | $ | 449,290 | $ | 393,752 | ||||||
| Short-term investments | 8,616 | 17,399 | ||||||||
| Accounts receivable, less allowance of $289,238 and $250,343 | 1,266,869 | 1,195,163 | ||||||||
| Inventories | 72,285 | 75,731 | ||||||||
| Other receivables | 216,493 | 269,832 | ||||||||
| Other current assets | 47,492 | 49,349 | ||||||||
| Deferred income taxes | 313,355 | 280,382 | ||||||||
| Total current assets | 2,374,400 | 2,281,608 | ||||||||
| Property and equipment, net | 1,490,572 | 1,432,651 | ||||||||
| Amortizable intangibles, net | 160,617 | 159,491 | ||||||||
| Equity investments | 26,956 | 27,325 | ||||||||
| Long-term investments | 9,897 | 9,890 | ||||||||
| Other long-term assets | 30,065 | 34,231 | ||||||||
| Goodwill | 5,064,577 | 4,946,976 | ||||||||
| $ | 9,157,084 | $ | 8,892,172 | |||||||
| LIABILITIES AND EQUITY | ||||||||||
| Accounts payable | $ | 269,029 | $ | 289,653 | ||||||
| Other liabilities | 347,096 | 325,734 | ||||||||
| Accrued compensation and benefits | 455,825 | 412,972 | ||||||||
| Current portion of long-term debt | 89,646 | 87,345 | ||||||||
| Income tax payable | 80,519 | 37,412 | ||||||||
| Total current liabilities | 1,242,115 | 1,153,116 | ||||||||
| Long-term debt | 4,401,865 | 4,417,624 | ||||||||
| Other long-term liabilities | 139,656 | 132,006 | ||||||||
| Alliance and product supply agreement, net | 18,655 | 19,987 | ||||||||
| Deferred income taxes | 448,372 | 423,098 | ||||||||
| Total liabilities | 6,250,663 | 6,145,831 | ||||||||
| Commitments and contingencies | ||||||||||
| Noncontrolling interests subject to put provisions | 504,491 | 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; 93,983,930 and 93,641,363 shares outstanding) | 135 | 135 | ||||||||
| Additional paid-in capital | 575,364 | 596,300 | ||||||||
| Retained earnings | 3,335,938 | 3,195,818 | ||||||||
| Treasury stock, at cost (40,878,353 and 41,220,920 shares) | (1,618,134 | ) | (1,631,694 | ) | ||||||
| Accumulated other comprehensive loss | (18,773 | ) | (19,484 | ) | ||||||
| Total DaVita Inc. shareholders’ equity | 2,274,530 | 2,141,075 | ||||||||
| Noncontrolling interests not subject to put provisions | 127,400 | 127,050 | ||||||||
| Total equity | 2,401,930 | 2,268,125 | ||||||||
| $ | 9,157,084 | $ | 8,892,172 | |||||||
|
DAVITA INC. |
|||||||||||||||
|
SUPPLEMENTAL FINANCIAL DATA |
|||||||||||||||
|
(unaudited) |
|||||||||||||||
|
(dollars in millions, except for per share and per treatment data) |
|||||||||||||||
| Three months ended | |||||||||||||||
| March 31,
2012 |
December 31,
2011 |
March 31,
2011 |
|||||||||||||
| 1. Consolidated Financial Results: | |||||||||||||||
| Consolidated operating revenues | $ | 1,920 | $ | 1,862 | $ | 1,603 | |||||||||
| Consolidated net operating revenues | $ | 1,867 | $ | 1,810 | $ | 1,562 | |||||||||
| Operating income | $ | 320.7 | $ | 330.1 | $ | 235.3 | |||||||||
| Operating income margin | 16.7 | % | 17.7 | % | $ | 14.7 | % | ||||||||
| Income from continuing operations attributable to DaVita Inc. | $ | 140.1 | $ | 149.4 | $ | 94.4 | |||||||||
| Net income attributable to DaVita Inc. | $ | 140.1 | $ | 148.1 | $ | 94.5 | |||||||||
| Diluted income from continuing operations per share attributable to DaVita Inc. | $ | 1.46 | $ | 1.58 | $ | 0.96 | |||||||||
| Diluted net income per share attributable to DaVita Inc. | $ | 1.46 | $ | 1.56 | $ | 0.96 | |||||||||
| 2. Consolidated Business Metrics: | |||||||||||||||
| Expenses | |||||||||||||||
| Patient care costs as a percent of consolidated operating revenues(1) | 65.8 | % | 65.2 | % | 69.5 | % | |||||||||
| General and administrative expenses as a percent of consolidated operating revenues(1) | 10.8 | % | 10.4 | % | 9.5 | % | |||||||||
| Total provision for uncollectible accounts as a percent of consolidated operating revenues | 2.9 | % | 2.9 | % | 2.6 | % | |||||||||
| Consolidated effective tax rate attributable to DaVita Inc.(2) | 40.5 | % | 38.0 | % | 40.0 | % | |||||||||
| 3. Segment Financial Results: (dollar amounts rounded to nearest million) | |||||||||||||||
| Operating revenues | |||||||||||||||
| Dialysis and related lab services patient service operating revenues | $ | 1,767 | $ | 1,717 | $ | 1,500 | |||||||||
| Less: Provision for uncollectible accounts related to patient service operating revenues | (53 | ) | (52 | ) | (41 | ) | |||||||||
| Dialysis and related lab services net patient service operating revenues | $ | 1,714 | $ | 1,665 | $ | 1,459 | |||||||||
| Other revenues | 3 | 3 | 2 | ||||||||||||
| Total net dialysis and related lab services operating revenues | 1,717 | 1,668 | 1,461 | ||||||||||||
| Other – Ancillary services and strategic initiatives | 155 | 147 | 106 | ||||||||||||
| Other – Ancillary services and strategic initiatives net patient service operating revenues | 1 | 1 | ─ | ||||||||||||
| Total net segment operating revenues | 1,873 | 1,816 | 1,567 | ||||||||||||
| Elimination of intersegment revenues | (6 | ) | (6 | ) | (5 | ) | |||||||||
| Total net consolidated operating revenues | $ | 1,867 | $ | 1,810 | $ | 1,562 | |||||||||
| Operating Income | |||||||||||||||
| Dialysis and related lab services operating income | $ | 348 | $ | 353 | $ | 252 | |||||||||
| Other – Ancillary services and strategic initiatives, including international dialysis operations operating losses | (17 | ) | (13 | ) | (9 | ) | |||||||||
| Total segment operating income | $ | 331 | $ | 340 | $ | 244 | |||||||||
| Reconciling items: | |||||||||||||||
| Stock-based compensation | (13 | ) | (12 | ) | (10 | ) | |||||||||
| Equity investment income | 3 | 2 | 2 | ||||||||||||
| Consolidated operating income | $ | 321 | $ | 330 | $ | 235 | |||||||||
|
DAVITA INC. |
|||||||||||||||
|
SUPPLEMENTAL FINANCIAL DATA—continued |
|||||||||||||||
|
(unaudited) |
|||||||||||||||
|
(dollars in millions, except for per share and per treatment data) |
|||||||||||||||
| Three months ended | |||||||||||||||
| March 31,
2012 |
December 31,
2011 |
March 31,
2011 |
|||||||||||||
| 4. Segment Business Metrics: | |||||||||||||||
| Dialysis and related lab services | |||||||||||||||
| Volume | |||||||||||||||
| Treatments | 5,314,275 | 5,227,167 | 4,594,550 | ||||||||||||
| Number of treatment days | 78.0 | 79.0 | 77.0 | ||||||||||||
| Treatments per day | 68,132 | 66,167 | 59,669 | ||||||||||||
| Per day year over year increase | 14.2 | % | 12.4 | % | 7.2 | % | |||||||||
| Non-acquired growth year over year | 5.5 | % | 4.4 | % | 4.0 | % | |||||||||
| Operating revenues before provision for uncollectible accounts | |||||||||||||||
| Dialysis and related lab services revenue per treatment | $ | 332.43 | $ | 328.54 | $ | 326.40 | |||||||||
| Per treatment increase (decrease) from previous quarter | 1.2 | % | (1.6 | %) | (1.4 | %) | |||||||||
| Per treatment increase (decrease) from previous year | 1.8 | % | (0.8 | %) | (5.0 | %) | |||||||||
| Percent of consolidated revenues | 92.0 | % | 92.2 | % | 93.6 | % | |||||||||
| Expenses | |||||||||||||||
| Patient care costs | |||||||||||||||
| Percent of total segment operating revenues | 63.7 | % | 63.4 | % | 68.3 | % | |||||||||
| Per treatment | $ | 212.12 | $ | 208.66 | $ | 223.28 | |||||||||
| Per treatment increase (decrease) from previous quarter | 1.7 | % | (3.2 | %) | (0.7 | %) | |||||||||
| Per treatment decrease from previous year | (5.0 | %) | (7.2 | %) | (5.8 | %) | |||||||||
| General and administrative expenses | |||||||||||||||
| Percent of total segment operating revenues | 9.5 | % | 8.9 | % | 8.2 | % | |||||||||
| Per treatment | $ | 31.51 | $ | 29.45 | $ | 26.72 | |||||||||
| Per treatment increase (decrease) from previous quarter | 7.0 | % | 0.6 | % | (3.5 | %) | |||||||||
| Per treatment increase from previous year | 17.9 | % | 6.3 | % | 2.4 | % | |||||||||
| 5. Cash Flow: | |||||||||||||||
| Operating cash flow | $ | 331.9 | $ | 150.7 | $ | 329.8 | |||||||||
| Operating cash flow, last twelve months | $ | 1,182.1 | $ | 1,180.0 | $ | 907.6 | |||||||||
| Free cash flow(2) | $ | 249.9 | $ | 32.1 | $ | 267.7 | |||||||||
| Free cash flow, last twelve months(2) | $ | 837.2 | $ | 855.0 | $ | 645.3 | |||||||||
| Capital expenditures: | |||||||||||||||
| Routine maintenance/IT/other | $ | 55.6 | $ | 85.3 | $ | 39.9 | |||||||||
| Development and relocations | $ | 56.8 | $ | 63.1 | $ | 27.6 | |||||||||
| Acquisition expenditures | $ | 132.7 | $ | 150.3 | $ | 81.5 | |||||||||
| 6. Accounts Receivable: | |||||||||||||||
| Net receivables | $ | 1,267 | $ | 1,195 | $ | 1,069 | |||||||||
| DSO | 63 | 61 | 62 | ||||||||||||
|
DAVITA INC. |
|||||||||||||||
|
SUPPLEMENTAL FINANCIAL DATA—continued |
|||||||||||||||
|
(unaudited) |
|||||||||||||||
|
(dollars in millions, except for per share and per treatment data) |
|||||||||||||||
| Three months ended | |||||||||||||||
| March 31,
2012 |
December 31,
2011 |
March 31,
2011 |
|||||||||||||
| 7. Debt and Capital Structure: | |||||||||||||||
| Total debt(3) | $ | 4,499 | $ | 4,513 | $ | 4,301 | |||||||||
| Net debt, net of cash(3) | $ | 4,050 | $ | 4,119 | $ | 3,295 | |||||||||
| Leverage ratio (see Note 1 on page 10) | 2.55x | 2.72x | 2.58x | ||||||||||||
| Overall weighted average effective interest rate during the quarter | 5.27 | % | 5.27 | % | 5.20 | % | |||||||||
| Overall weighted average effective interest rate at end of the quarter | 5.28 | % | 5.27 | % | 5.34 | % | |||||||||
| Weighted average effective interest rate on the Senior Secured Credit Facilities at end of the quarter | 4.63 | % | 4.61 | % | 4.67 | % | |||||||||
| Effectively fixed interest rates as a percentage of our total debt(4) | 100 | % | 100 | % | 100 | % | |||||||||
| Share repurchases | $ | - | $ | - | $ | 13.6 | |||||||||
| 8. Clinical: (quarterly averages) | |||||||||||||||
| Dialysis adequacy -% of patients with Kt/V > 1.2 at the end of the quarter | 97 | % | 97 | % | 97 | % | |||||||||
| Patients with arteriovenous fistulas placed | 69 | % | 69 | % | 68 | % | |||||||||
_________________
| (1) | Consolidated percentages of revenues are comprised of the dialysis and related lab services business, other ancillary services and strategic initiatives, as well as stock-based compensation expenses. | ||
| (2) | 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. | ||
| (3) | The quarters ended March 31, 2012, December 31, 2011 and March 31, 2011, exclude $7.4 million, $7.8 million and $8.0 million, respectively, of debt discounts associated with our Term Loan B and our Term Loan A-2 that are not actually outstanding debt principal. | ||
| (4) | The Term Loan A-2 and Term Loan B are subject to LIBOR floors of 1.00% and 1.50%, respectively. Because LIBOR, for all periods presented above, was lower than either of these floors, the interest rates on the Term Loan A-2 and the Term Loan B are treated as “fixed” for purposes of the table above. We have included both of these Term Loans in the fixed rate totals in the table above until such time as the LIBOR-based component of our interest rate exceeds 1.00% on the Term Loan A-2 and 1.50% on the Term Loan B. At such time, 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 A-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 $478 million outstanding principal balance of the Term Loan B is subject to LIBOR-based interest rate volatility above a floor of 1.50%. |
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA—continued
(unaudited)
(dollars in thousands)
Note 1: Calculation of the Leverage Ratio
Under the Company’s 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.
| Rolling twelve months ended March 31, 2012 | |||||||
| Net income attributable to DaVita Inc. | $ | 523,619 | |||||
| Income taxes | 348,174 | ||||||
| Interest expense | 226,855 | ||||||
| Depreciation and amortization | 281,253 | ||||||
| Noncontrolling interests and equity investment income, net | 99,324 | ||||||
| Other items | 127,847 | ||||||
| “Consolidated EBITDA” | $ | 1,607,072 | |||||
| March 31, 2012 | |||||||
| Total debt, excluding debt discount of $7.4 million | $ | 4,498,938 | |||||
| Letters of credit issued | 52,297 | ||||||
| 4,551,235 | |||||||
| Less: cash and cash equivalents | (449,290 | ) | |||||
| Consolidated net debt | $ | 4,101,945 | |||||
| Last twelve months “Consolidated EBITDA” | $ | 1,607,072 | |||||
| Leverage ratio | 2.55x | ||||||
In accordance with the Credit Agreement, the Company’s leverage ratio cannot exceed 4.25 to 1.0 as of
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
Effective income tax rate as compared to the effective income tax rate attributable to
| Three months ended | |||||||||||||||
| March 31,
2012 |
December 31,
2011 |
March 31,
2011 |
|||||||||||||
| Income from continuing operations before income taxes | $ | 260,378 | $ | 269,149 | $ | 177,580 | |||||||||
| Income tax expense | $ | 95,495 | $ | 91,710 | $ | 62,959 | |||||||||
| Effective income tax rate | 36.7 | % | 34.1 | % | 35.5 | % | |||||||||
| Three months ended | |||||||||||||||
| March 31,
2012 |
December 31,
2011 |
March 31,
2011 |
|||||||||||||
| Income from continuing operations before income taxes | $ | 260,378 | $ | 269,149 | $ | 177,580 | |||||||||
| Less: Noncontrolling owners’ income primarily attributable to non-tax paying entities | (24,883 | ) | (28,128 | ) | (20,297 | ) | |||||||||
| Income before income taxes attributable to DaVita Inc. | $ | 235,495 | $ | 241,021 | $ | 157,283 | |||||||||
| Income tax expense | 95,495 | 91,710 | $ | 62,959 | |||||||||||
| Less income tax attributable to noncontrolling interests | (120 | ) | (119 | ) | (47 | ) | |||||||||
| Income tax attributable to DaVita Inc. | $ | 95,375 | $ | 91,591 | $ | 62,912 | |||||||||
| Effective income tax rate attributable to DaVita Inc. | 40.5 | % | 38.0 | % | 40.0 | % | |||||||||
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 GAAP, 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 provides an investor with an understanding of free cash flows that are attributable to
| Three months ended | |||||||||||||||
| March 31,
2012 |
December 31,
2011 |
March 31,
2011 |
|||||||||||||
| Cash provided by operating activities | $ | 331,874 | $ | 150,659 | $ | 329,783 | |||||||||
| Less: Income distributions to noncontrolling interests | (26,405 | ) | (33,245 | ) | (22,187 | ) | |||||||||
| Cash provided by operating activities attributable to DaVita Inc. | 305,469 | 117,414 | 307,596 | ||||||||||||
| Less: Expenditures for routine maintenance and information technology | (55,609 | ) | (85,304 | ) | (39,928 | ) | |||||||||
| Free cash flow | $ | 249,860 | $ | 32,110 | $ | 267,668 | |||||||||
| Rolling 12-Month Period | |||||||||||||||
| March 31,
2012 |
December 31,
2011 |
March 31,
2011 |
|||||||||||||
| Cash provided by operating activities | $ | 1,182,137 | $ | 1,180,046 | $ | 907,619 | |||||||||
| Less: Income distributions to noncontrolling interests | (104,871 | ) | (100,653 | ) | (87,120 | ) | |||||||||
| Cash provided by operating activities attributable to DaVita Inc. | 1,077,266 | 1,079,393 | 820,499 | ||||||||||||
| Less: Expenditures for routine maintenance and information technology | (240,047 | ) | (224,366 | ) | (175,181 | ) | |||||||||
| Free cash flow | $ | 837,219 | $ | 855,027 | $ | 645,318 | |||||||||
Source:
DaVita Inc.
Jim Gustafson
Investor Relations
(310) 536-2585
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