DAVITA INC. DENVER, May 4, 2015 /PRNewswire/ -- DaVita HealthCare Partners Inc. (NYSE: DVA) today announced results for the quarter ended March 31, 2015. Adjusted net income attributable to DaVita HealthCare Partners Inc. for the quarter ended March 31, 2015 was $187 million, or $0.86 per share, excluding an accrual of an after-tax estimated loss contingency of $298 million, or $1.38 per share. Net loss attributable to DaVita HealthCare Partners Inc. for the quarter ended March 31, 2015 including this item was $(111) million, or $(0.52) per share.
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Net income attributable to DaVita HealthCare Partners Inc. for the three months ended March 31, 2014 was $183 million, or $0.85 per share.
Financial and operating highlights include:
-- Cash Flow: For the rolling twelve months ended March 31, 2015, operating
cash flow was $1.450 billion and free cash flow was $1.028 billion. For
the three months ended March 31, 2015, operating cash flow was $410
million and free cash flow was $320 million. Operating cash flow and
free cash flow for the rolling twelve months ended March 31, 2015 was
negatively impacted by approximately $269 million of after-tax payments
made in connection with the settlement of the 2010 and 2011 U.S.
Attorney Physician Relationship Investigations during the fourth quarter
of 2014.
-- Operating Income and Adjusted Operating Income: Adjusted operating
income for the three months ended March 31, 2015 was $431 million
excluding an accrual of an estimated loss contingency of $495 million.
Operating loss for the three months ended March 31, 2015, including this
item was $(64) million.Operating income for the three months ended March
31, 2014 was $441 million.
-- Adjusted Diluted Net Income Per Share: Adjusted net income attributable
to DaVita HealthCare Partners Inc. for the three months ended March 31,
2015, excluding the amortization of intangible assets associated with
acquisitions and an accrual of an estimated loss contingency, net of tax
impacts, was $213 million, and adjusted diluted net income per share was
$0.98. Adjusted net income attributable to DaVita HealthCare Partners
Inc. for the three months ended March 31, 2014, excluding the
amortization of intangible assets associated with acquisitions, net of
tax impacts, was $208 million, and adjusted diluted net income per share
was $0.97.
-- Vainer Private Civil Suit: During the first quarter of 2015, we reached
an agreement in principle with the plaintiffs in the Vainer private
civil suit pursuant to which the Court stayed the litigation and the
plaintiffs withdrew their motion for further sanctions. While the
specific terms of settlement have not yet been finalized, we have
accrued an estimated loss contingency of $495 million related to this
matter, or $298 million after-tax. The $495 million consists of a
settlement amount of $450 million and attorney fees and other costs of
$45 million. Negotiations are ongoing and until all parties have entered
into a definitive final agreement, we can make no assurances about the
specific settlement terms, including monetary and nonmonetary terms, or
whether the Vainer suit ultimately will settle for an amount that is not
greater than the amount of the estimated loss contingency.
-- Volume: Total U.S. dialysis treatments for the first quarter of 2015
were 6,262,635, or 81,758 treatments per day, representing a per day
increase of 4.5% over the first quarter of 2014. Non-acquired treatment
growth in the first quarter of 2015 was 3.9% over the first quarter of
2014 and normalized non-acquired treatment growth in the first quarter
of 2015 was 4.5% over the first quarter of 2014.The number of member
months for which HCP provided capitated care during the first quarter of
2015 was approximately 2.5 million representing an increase of 5.6% as
compared to the first quarter of 2014, inclusive of growth contributed
from acquisitions.
-- Effective Tax Rate: Our effective tax rate was 53.0% for the three
months ended March 31, 2015. 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 HealthCare
Partners Inc. was 43.7% for the three months ended March 31, 2015. The
adjusted effective tax rate attributable to DaVita HealthCare Partners
Inc. excluding an estimated loss contingency was 37.5% for the three
months ended March 31, 2015.We are updating our 2015 effective tax rate
attributable to DaVita HealthCare Partners Inc. to now be approximately
39.0% to 40.0%. Our previous expected 2015 effective tax rate
attributable to DaVita HealthCare Partners Inc. was 39.5% to 40.5%.
-- Center Activity: As of March 31, 2015, we provided dialysis services to
a total of approximately 181,000 patients at 2,290 outpatient dialysis
centers, of which 2,197 centers are located in the United States and 93
centers are located in ten countries outside of the United States.
During the first quarter of 2015, we opened a total of 18 new dialysis
centers, acquired one dialysis center, and closed two dialysis centers
in the United States. We also opened two new dialysis centers outside of
the United States.
-- Share Repurchases: During the first quarter of 2015, we repurchased a
total of 891,429 shares of our common stock for $70 million, or an
average price of $78.60 per share. In addition, in April 2015, we
repurchased a total of 175,710 shares of our common stock for $14
million, or an average price of $79.96 per share.On April 14, 2015, our
Board of Directors approved additional share repurchases in the amount
of $726 million. These recently approved share repurchases are in
addition to the approximately $274 million remaining under our Board of
Directors' prior share repurchase approval announced on November 4,
2010. As a result, we now have a total of $1.0 billion in outstanding
authorizations available for share repurchases. These share repurchase
authorizations have no expiration dates.
-- Issuance of New Senior Notes: In April 2015, we issued $1.500 billion
5.0% Senior Notes due 2025 (the 5.0% Senior Notes). The 5.0% Senior
Notes are unsecured senior obligations and rank equally in right of
payment with our existing and future unsecured senior indebtedness. The
5.0% Senior Notes are guaranteed by certain of our domestic
subsidiaries. The proceeds from the 5.0% Senior Notes are being used to
repurchase all of the outstanding principal balances of the $775 million
6 5/8% Senior Notes due 2020 through a combination of a tender offer and
a redemption process, to pay fees and expenses and for general corporate
purposes, which may include future acquisitions and share repurchases.
Outlook
-- We are updating our consolidated operating income for 2015 to now be in
the range of $1.800 billion to $1.925 billion.Our previous consolidated
operating income guidance for 2015 was in the range of $1.750 billion to
$1.900 billion.
-- We are updating our operating income for Kidney Care for 2015 to now be
in the range of $1.575 billion to $1.650 billion.Our previous operating
income guidance for Kidney Care for 2015 was in the range of $1.525
billion to $1.625 billion.
-- We still expect our operating income for HCP for 2015 to be in the range
of $225 million to $275 million.
-- We still expect our consolidated operating cash flow for 2015 to be in
the range of $1.500 billion to $1.700 billion.
The above projected ranges exclude the accrual of the estimated loss contingency, or any potential settlement payment, related to the Vainer Private Civil Suit.
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.
We will be holding a conference call and webcast to discuss our results for the first quarter ended March 31, 2015 on May 5, 2015 at 9:00 a.m. Eastern Time. The earnings discussion will be immediately followed by our Capital Markets Day. To join the presentation by conference call, please dial (888) 950-9401 from the U.S. or (517) 308-9354 from outside the U.S., and refer to the "Capital Markets" call and provide the operator with your name and company affiliation. To join the presentation via webcast, please visit our web-site at investors.davitahealthcarepartners.com. A replay of the presentation will be available on DaVita's official web page for the following 30 days. There will be no telephone replay.
This release contains forward-looking statements within the meaning of the federal securities laws, including statements related to our guidance and expectations for our 2015 consolidated operating income, our 2015 Kidney Care operating income, HCP's 2015 operating income, our 2015 consolidated operating cash flows and our 2015 effective tax rate attributable to DaVita HealthCare Partners Inc. Factors that could impact future results include the uncertainties associated with the risk factors set forth in our SEC filings, including our annual report on Form 10-K for the year ended December 31, 2014, our subsequent quarterly and annual reports, and our current reports on Form 8-K. The forward-looking statements should be considered in light of these risks and uncertainties.
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 SEC filings relating to:
-- the concentration of profits generated by higher-paying commercial payor
plans for which there is continued downward pressure on average realized
payment rates, and a reduction in the number of patients under such
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 the Center for Medicare and Medicaid Services (CMS) 2015
Medicare Advantage benchmark structure,
-- risks arising from potential federal and/or state legislation that could
have an adverse effect on our operations and profitability,
-- changes in pharmaceutical or anemia management practice patterns,
payment policies, or pharmaceutical pricing,
-- legal compliance risks, including our continued compliance with complex
government regulations including compliance with the provisions of our
current corporate integrity agreement and current or potential
investigations by various government entities and related government or
private-party proceedings, and restrictions on our business and
operations required by our corporate integrity agreement and other
settlement terms, and the financial impact thereof,
-- continued increased competition from large- and medium-sized dialysis
providers that compete directly with us,
-- 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, such as accountable care
organizations, independent practice associations and integrated delivery
systems, or to businesses outside of dialysis and HealthCare Partners'
(HCP) business,
-- our ability to complete acquisitions, mergers or dispositions that we
might be considering or announce, or to integrate and successfully
operate any business we may acquire or have acquired, including HCP, or
to expand our operations and services to markets outside the United
States,
-- the variability of our cash flows,
-- the risk that we might invest material amounts of capital and incur
significant costs in connection with the growth and development of our
international operations, yet we might not be able to operate them
profitably anytime soon, if at all,
-- risks arising from the use of accounting estimates, judgments and
interpretations in our financial statements,
-- loss of key HCP employees, potential disruption from the HCP transaction
making it more difficult to maintain business and operational
relationships with customers, partners, associated physicians and
physician groups, hospitals and others,
-- the risk that laws regulating the corporate practice of medicine could
restrict the manner in which HCP conducts its business,
-- the risk that the cost of providing services under HCP's agreements may
exceed our compensation,
-- the risk that reductions in reimbursement rates, including Medicare
Advantage rates, and future regulations may negatively impact HCP's
business, 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 except as required by law 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.
Contact: Jim Gustafson
Investor Relations
DaVita HealthCare Partners
Inc.
(310) 536-2585
DAVITA HEALTHCARE PARTNERS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in thousands, except per share data)
Three months ended
March 31,
---------
2015 2014
---- ----
Patient service revenues $2,271,815 $2,114,098
Less: Provision for uncollectible
accounts (99,164) (83,197)
------- -------
Net patient service revenues 2,172,651 2,030,901
Capitated revenues 850,515 787,565
Other revenues 264,799 224,310
------- -------
Total net revenues 3,287,965 3,042,776
--------- ---------
Operating expenses and charges:
Patient care costs and other costs 2,362,612 2,179,772
General and administrative 341,801 284,061
Depreciation and amortization 153,789 142,579
Provision for uncollectible
accounts 1,827 2,511
Equity investment income (2,908) (7,372)
Loss contingency accrual 495,000 -
------- ---
Total operating expenses and
charges 3,352,121 2,601,551
--------- ---------
Operating (loss) income (64,156) 441,225
Debt expense (97,392) (106,335)
Other (loss) income, net (533) 1,698
---- -----
(Loss) income before income taxes (162,081) 336,588
Income tax (benefit) expense (85,933) 124,851
------- -------
Net (loss) income (76,148) 211,737
Less: Net income attributable to
noncontrolling interests (34,469) (28,448)
------- -------
Net (loss) income attributable to
DaVita HealthCare Partners Inc $(110,617) $183,289
--------- --------
Earnings per share:
Basic net (loss) income per share
attributable to DaVita HealthCare
Partners Inc $(0.52) $0.87
====== =====
Diluted net (loss) income per share
attributable to DaVita HealthCare
Partners Inc $(0.52) $0.85
====== =====
Weighted average shares for earnings per share:
Basic 213,387,253 211,375,232
=========== ===========
Diluted 213,387,253 216,118,922
=========== ===========
DAVITA HEALTHCARE PARTNERS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(dollars in thousands)
Three months ended
March 31,
---------
2015 2014
---- ----
Net (loss) income $(76,148) $211,737
-------- --------
Other comprehensive (loss) income, net of tax:
Unrealized losses on interest rate swap and cap agreements:
Unrealized loss on interest rate swap and
cap agreements (5,760) (2,505)
Reclassifications of net swap and cap
agreements realized loss into net income 812 3,359
Unrealized gains on investments:
Unrealized gains on investments 382 331
Reclassification of net investment
realized gains into net income (157) (207)
Foreign currency translation adjustments (17,885) 28
------- ---
Other comprehensive (loss) income (22,608) 1,006
------- -----
Total comprehensive (loss) income (98,756) 212,743
Less: Comprehensive income attributable to
noncontrolling interests (34,469) (28,448)
------- -------
Comprehensive (loss) income attributable
to DaVita HealthCare Partners Inc $(133,225) $184,295
========= ========
DAVITA HEALTHCARE PARTNERS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
Three months ended
March 31,
---------
2015 2014
---- ----
Cash flows from operating activities:
Net (loss) income $(76,148) $211,737
Adjustments to reconcile net (loss) income to cash provided by
operating activities:
Loss contingency accrual 495,000 -
Depreciation and amortization 153,789 142,565
Stock-based compensation expense 12,762 15,074
Tax benefits from stock award
exercises 9,366 22,978
Excess tax benefits from stock
award exercises (7,584) (18,336)
Deferred income taxes (benefit) (203,940) 8,902
Equity investment income (loss),
net 2,539 (187)
Other non-cash charges and loss on
disposal of assets 7,865 8,346
Changes in operating assets and liabilities, other than from
acquisitions and divestitures:
Accounts receivable (151,743) (54,565)
Inventories (9,193) (12,280)
Other receivables and other current
assets (18,619) (17,740)
Other long-term assets 153 1,418
Accounts payable (10,933) (42,558)
Accrued compensation and benefits 30,638 23,570
Other current liabilities 60,772 20,615
Income taxes 106,970 92,905
Other long-term liabilities 8,395 16,663
----- ------
Net cash provided by operating
activities 410,089 419,107
------- -------
Cash flows from investing activities:
Additions of property and equipment (121,421) (126,562)
Acquisitions (40,650) (67,857)
Proceeds from asset and business
sales 2,565 56
Purchase of investments available
for sale (1,448) (1,824)
Purchase of investments held-to-
maturity (290,774) (2,511)
Proceeds from sale of investments
available for sale 1,217 1,262
Proceeds from investments held-to-
maturity 205,650 1,508
Purchase of intangible assets - (11)
Purchase of equity investments (7,426) -
Distributions received on equity
investments - 146
--- ---
Net cash used in investing
activities (252,287) (195,793)
-------- --------
Cash flows from financing activities:
Borrowings 13,353,767 16,179,463
Payments on long-term debt and
other financing costs (13,382,203) (16,244,613)
Purchase of treasury stock (70,063) -
Distributions to noncontrolling
interests (41,499) (33,147)
Stock award exercises and other
share issuances, net 5,648 3,450
Excess tax benefits from stock
award exercises 7,584 18,336
Contributions from noncontrolling
interests 15,898 13,625
Proceeds from sales of additional
noncontrolling interests - 761
--- ---
Net cash used in financing
activities (110,868) (62,125)
Effect of exchange rate changes on
cash and cash equivalents (904) 631
---- ---
Net increase in cash and cash
equivalents 46,030 161,820
Cash and cash equivalents at
beginning of the year 965,241 946,249
------- -------
Cash and cash equivalents at end of
the period $1,011,271 $1,108,069
========== ==========
DAVITA HEALTHCARE PARTNERS INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except per share data)
March 31, December 31,
2014
2015
----
ASSETS
Cash and cash equivalents $1,011,271 $965,241
Short-term investments 422,365 337,399
Accounts receivable, less allowance of
$255,146 and $242,674 1,675,182 1,525,849
Inventories 145,740 136,085
Other receivables 423,713 400,916
Other current assets 186,165 186,842
Income tax receivable - 83,839
Deferred income taxes 436,359 240,626
------- -------
Total current assets 4,300,795 3,876,797
Property and equipment, net of accumulated
depreciation of $2,123,818 and $2,029,506 2,500,596 2,469,099
Intangibles, net of accumulated amortization
of $666,995 and $621,891 1,904,176 1,949,498
Equity investments 70,017 65,637
Long-term investments 91,441 89,389
Other long-term assets 68,248 77,000
Goodwill 9,431,390 9,415,295
--------- ---------
$18,366,663 $17,942,715
=========== ===========
LIABILITIES AND EQUITY
Accounts payable $423,986 $445,453
Other liabilities 581,411 506,579
Accrued compensation and benefits 733,708 698,475
Medical payables 304,205 314,347
Loss contingency 495,000 3,644
Current portion of long-term debt 118,076 120,154
Income tax payable 23,130 -
------ ---
Total current liabilities 2,679,516 2,088,652
Long-term debt 8,380,153 8,383,280
Other long-term liabilities 407,068 389,806
Deferred income taxes 880,820 890,701
------- -------
Total liabilities 12,347,557 11,752,439
Commitments and contingencies
Noncontrolling interests subject to put
provisions 848,392 829,965
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; 215,949,997 and
215,640,968 shares issued and 215,058,568
and 215,640,968 shares outstanding,
respectively) 216 216
Additional paid-in capital 1,112,396 1,108,211
Retained earnings 3,976,486 4,087,103
Treasury stock (891,429 shares) (70,063) -
Accumulated other comprehensive loss (47,625) (25,017)
------- -------
Total DaVita HealthCare Partners Inc.
shareholders' equity 4,971,410 5,170,513
Noncontrolling interests not subject to put
provisions 199,304 189,798
------- -------
Total equity 5,170,714 5,360,311
--------- ---------
$18,366,663 $17,942,715
=========== ===========
DAVITA HEALTHCARE PARTNERS INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended
------------------
March 31, December 31, March 31,
2015 2014 2014
---- ---- ----
1. Consolidated Financial Results:
Consolidated net revenues $3,288 $3,328 $3,043
Operating (loss) income $(64) $452 $441
Adjusted operating income excluding an accrual
of an estimated loss contingency(1) $431 $452 $441
Operating (loss) income margin (2.0%) 13.6% 14.5%
Adjusted operating income margin excluding an
accrual of an estimated loss contingency(1) 13.1% 13.6% 14.5%
Net (loss) income attributable to DaVita
HealthCare Partners Inc $(111) $208 $183
Adjusted net income attributable to DaVita
HealthCare Partners Inc. excluding an accrual
of an estimated loss contingency(1) $187 $208 $183
Diluted net (loss) income per share
attributable to DaVita HealthCare Partners Inc $(0.52) $0.96 $0.85
Adjusted diluted net income per share
attributable to DaVita HealthCare Partners
Inc. excluding an accrual of an estimated loss
contingency(1) $0.86 $0.96 $0.85
2. Consolidated Business Metrics:
Expenses
General and administrative expenses as a
percent of consolidated net revenues(2) 10.4% 10.7% 9.3%
Consolidated effective tax rate 53.0% 29.3% 37.1%
Consolidated effective tax rate attributable to
DaVita HealthCare Partners Inc.(1) 43.7% 33.3% 40.5%
Adjusted consolidated effective tax rate
attributable to DaVita HealthCare Partners
Inc. (1) 37.5% 33.3% 40.5%
3. Summary of Division Financial Results:
Net revenues
Kidney Care:
Net dialysis and related lab services revenues $2,072 $2,151 $1,958
Net ancillary services and strategic
initiatives revenues, including international
dialysis operations 305 309 257
Elimination of intersegment revenues (17) (14) (13)
--- --- ---
Total Kidney Care net revenues 2,360 2,446 2,202
Net HCP revenues 928 882 841
--- --- ---
Total net consolidated revenues $3,288 $3,328 $3,043
====== ====== ======
Operating (loss) income
Kidney Care:
Dialysis and related lab services operating
(loss) income $(104) $443 $387
Other - Ancillary services and strategic
initiatives, including international dialysis
operations operating (losses) income (14) (19) 2
Corporate support and related long-term
incentive compensation (6) (5) (2)
--- --- ---
Total Kidney Care operating (loss) income (124) 419 387
HCP operating income 60 33 54
--- --- ---
Total consolidated operating (loss) income $(64) $452 $441
==== ==== ====
DAVITA HEALTHCARE PARTNERS INC.
SUPPLEMENTAL FINANCIAL DATA-continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended
------------------
March 31, December 31, March 31,
2015 2014 2014
---- ---- ----
4. Summary of Reportable Segment Financial Results:
Dialysis and Related Lab Services
Revenue:
Patient services revenues $2,166 $2,243 $2,037
Provision for uncollectible accounts (97) (95) (82)
--- --- ---
Net patient service operating revenues 2,069 2,148 1,955
Other revenues 3 3 3
--- --- ---
Total net operating revenues $2,072 $2,151 $1,958
------ ------ ------
Operating expenses:
Patient care costs $1,396 $1,415 $1,323
General and administrative 183 192 155
Depreciation and amortization 105 105 96
Equity investment income (3) (4) (3)
Loss contingency accrual 495 - -
--- --- ---
Total operating expenses 2,176 1,708 1,571
----- ----- -----
Segment operating (loss) income $(104) $443 $387
===== ==== ====
HCP
Revenue:
HCP capitated revenues $833 $808 $772
---- ---- ----
Patient services revenues 81 56 58
Provision for uncollectible accounts (1) (1) (2)
--- --- ---
Net patient service operating revenues 80 55 56
--- --- ---
Other revenues 15 19 13
--- --- ---
Total net operating revenues $928 $882 $841
==== ==== ====
Operating expenses:
Patient care costs $733 $717 $672
General and administrative 92 90 78
Depreciation and amortization 43 43 42
Equity investment income - (1) (5)
--- --- ---
Total operating expenses 868 849 787
--- --- ---
Segment operating income $60 $33 $54
=== === ===
5. Dialysis and Related Lab Services Business Metrics:
Volume
Treatments 6,262,635 6,465,826 5,975,627
Number of treatment days 76.6 79.4 76.4
Treatments per day 81,758 81,434 78,215
Per day year over year increase 4.5% 6.2% 6.3%
Non-acquired growth year over year 3.9% 5.2% 5.5%
Normalized non-acquired growth year over
year 4.5% 4.6% 5.0%
Operating revenues before provision for uncollectible accounts
Dialysis and related lab services revenue
per treatment $345.88 $346.95 $340.81
Per treatment (decrease) increase from
previous quarter (0.3%) 1.7% 0.2%
Per treatment increase from previous year 1.5% 2.0% 0.1%
Percent of net consolidated revenues 62.7% 64.4% 64.1%
DAVITA HEALTHCARE PARTNERS INC.
SUPPLEMENTAL FINANCIAL DATA-continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended
------------------
March 31, December 31, March 31,
2015 2014 2014
---- ---- ----
5. Dialysis and Related Lab Services Business Metrics: (continued)
Expenses
Patient care costs
Percent of total segment operating revenues 67.4% 65.8% 67.5%
Per treatment $222.99 $218.81 $221.31
Per treatment increase (decrease) from previous quarter 1.9% (0.1%) 2.0%
Per treatment increase from previous year 0.8% 0.9% 2.4%
General and administrative expenses
Percent of total segment operating revenues 8.8% 8.9% 7.9%
Per treatment $29.25 $29.75 $26.00
Per treatment (decrease) increase from previous quarter (1.7%) 10.8% (13.9%)
Per treatment increase (decrease) from previous year 12.5% (1.5%) (13.6%)
Accounts receivable
Net receivables $1,261 $1,157 $1,168
DSO 56 50 55
Provision for uncollectible accounts as a percentage of
revenues 4.5% 4.25% 4.0%
6. HCP Business Metrics:
Capitated membership
Total 830,400 837,300 790,200
Member months 2,482,500 2,502,800 2,351,900
Capitated revenues by sources
Commercial revenues $185 $174 $187
Senior revenues 602 573 565
Medicaid revenues 46 61 20
--- --- ---
Total capitated revenues $833 $808 $772
==== ==== ====
Other
Total care dollars under management(1) $1,233 $1,165 $1,083
Ratio of operating income to total care dollars under
management(1) 4.9% 2.8% 5.0%
Full time clinicians 1,299 1,156 1,129
IPA primary care physicians 2,829 3,331 3,302
7. Cash Flow:
Operating cash flow $410.1 $(70.0) $419.1
Operating cash flow, last twelve months $1,450.4 $1,459.4 $1,813.2
Free cash flow(1) $319.6 $(197.0) $336.2
Free cash flow, last twelve months(1) $1,028.1 $1,045.1 $1,403.3
Capital expenditures:
Routine maintenance/IT/other $49.0 $82.8 $49.3
Development and relocations $72.4 $115.0 $77.2
Acquisition expenditures $40.7 $54.0 $67.9
DAVITA HEALTHCARE PARTNERS INC.
SUPPLEMENTAL FINANCIAL DATA-continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended
------------------
March 31, December 31, March 31,
2015 2014 2014
---- ---- ----
8. Debt and Capital Structure:
Total debt(3) $8,513 $8,520 $8,381
Net debt, net of cash and cash
equivalents(3) $7,502 $7,555 $7,273
Leverage ratio (see calculation on
page 14) 2.94x 2.99x 2.98x
Overall weighted average effective
interest rate during the quarter 4.48% 4.46% 4.89%
Overall weighted average effective
interest rate at end of the
quarter 4.47% 4.46% 4.87%
Weighted average effective interest
rate on the Senior Secured Credit
Facilities at end of the quarter 3.44% 3.43% 4.19%
Fixed and economically fixed
interest rates as a percentage of
our total debt 58%(4) 58%(4) 60%
Fixed and economically fixed
interest rates, including our
interest rate cap agreements, as a
percentage of our total debt 90%(4) 90%(4) 93%
9. Clinical: (quarterly averages)
Dialysis adequacy -% of patients
with Kt/V > 1.2 at the end of the
quarter 98% 98% 98%
Dialysis patients with
arteriovenous fistulas placed 73% 73% 72%
_________________
(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.
General and administrative expenses
includes certain corporate support
and related long-term incentive
compensation.
(3) The reported balance sheet amounts
at March 31, 2015 and December 31,
2014, excludes $15.6 million and
$16.2 million, respectively, of a
debt discount associated with our
Term Loan B. In addition, the
reported balance sheet amounts at
March 31, 2014 exclude $16.7
million of debt discounts
associated with our then existing
Term Loan B and Term Loan B-2.
(4) The Term Loan B is subject to a
LIBOR floor of 0.75%. Because
actual LIBOR, for all periods
presented above, was lower than
this embedded LIBOR floor, the
interest rate on the Term Loan B is
set at its respective floor. At
such time as the actual LIBOR-
based variable component of our
interest rate exceeds 0.75% on the
Term Loan B, 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.
However, we are limited to a
maximum rate of 2.50% on $2.75
billion of outstanding principal
debt on the Term Loan B as a result
of interest rate cap agreements.
The remaining $739 million
outstanding principal balance of
the Term Loan B is subject to
LIBOR-based interest rate
volatility above a floor of 0.75%.
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.
Rolling twelve
months ended
March 31, 2015
--------------
Net income attributable to DaVita
HealthCare Partners Inc $429,208
Income taxes 235,559
Interest expense 376,506
Depreciation and amortization 602,145
Loss contingency accruals 512,000
Noncontrolling interests and equity
investment income, net 155,062
Stock-settled stock-based
compensation 54,838
Debt refinancing charges 97,548
Other 13,425
------
"Consolidated EBITDA" $2,476,291
==========
March 31, 2015
--------------
Total debt, excluding debt discount
of $15.6 million $8,513,791
Letters of credit issued 96,424
------
8,610,215
Less: Cash and cash equivalents
(less HCP's physician owned
entities cash) (1,329,736)
----------
Consolidated net debt $7,280,479
==========
Last twelve months "Consolidated
EBITDA" $2,476,291
==========
Leverage ratio 2.94x
=====
In accordance with the Credit
Agreement, the Company's leverage
ratio cannot exceed 5.00 to 1.00
as of March 31, 2015. At that
date the Company's leverage ratio
did not exceed 5.00 to 1.00.
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands except for per share
data)
1. Net income and diluted net income per
share attributable to DaVita HealthCare
Partners Inc. excluding an accrual of an
estimated loss contingency.
We believe that adjusted net income
attributable to DaVita HealthCare Partners
Inc. excluding an accrual of an estimated loss
contingency, net of related tax, enhances a
user's understanding of our normal net income
attributable to DaVita HealthCare Partners
Inc. and adjusted diluted net income per share
attributable to DaVita HealthCare Partners
Inc. for these periods by providing a measure
that is meaningful because it excludes an
unusual amount that was accrued for an
estimated loss contingency related to the
Vainer Private Civil Suit, and accordingly, is
comparable to prior periods and indicative of
normal net income attributable to DaVita
HealthCare Partners Inc. and diluted net
income per share attributable to DaVita
HealthCare Partners Inc. These measures are
not measures of financial performance under
United States generally accepted accounting
principles (GAAP) and should not be considered
as an alternative to net income attributable
to DaVita HealthCare Partners Inc. and diluted
net income per share attributable to DaVita
HealthCare Partners Inc.
Adjusted net income
attributable to DaVita
HealthCare Partners
Inc. excluding an
accrual of an
estimated loss
contingency: Three months ended
------------------
March 31, December 31, March 31,
2015(1) 2014 2014
------ ---- ----
Net (loss) income
attributable to DaVita
HealthCare Partners
Inc $(110,617) $208,020 $183,289
Add:
Accrual of an estimated
loss contingency 495,000 - -
Less: Related income
tax (197,747) - -
-------- --- ---
$186,636 $208,020 $183,289
======== ======== ========
Adjusted diluted net
income per share
attributable to DaVita
HealthCare Partners
Inc. excluding an
accrual of an
estimated loss
contingency: Three months ended
------------------
March 31, December 31, March 31,
2015(1) 2014 2014
------ ---- ----
Diluted net (loss)
income per share
attributable to DaVita
HealthCare Partners
Inc $(0.52) $0.96 $0.85
Add:
Accrual of an estimated
loss contingency
including the effects
of diluted net loss
per share attributable
to DaVita HealthCare
Partners Inc 1.38 - -
---- --- ---
$0.86 $0.96 $0.85
===== ===== =====
______________
(1) Adjusted diluted net income per
share attributable to DaVita
HealthCare Partners Inc. for
the three months ended March
31, 2015 is calculated using
217,977,358 shares, which
includes shares that would be
dilutive based on adjusted net
income attributable to DaVita
HealthCare Partners Inc. of
$186,636 excluding the accrual
of an estimated loss
contingency.
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES -
(continued)
(unaudited)
(dollars in thousands except for per share
data)
In addition, we have excluded amortization of
intangible assets associated with acquisitions
from our adjusted net income attributable to
DaVita HealthCare Partners Inc. and from our
adjusted diluted net income per share
attributable to DaVita HealthCare Partners
Inc. as we believe this presentation enhances
a user's understanding of our operating
results for these periods by providing a
different reflection of the Company's
operating performance since it excludes the
amortization of intangible assets that relate
to the fair value measurement of acquired
intangible assets associated with our
acquisitions to fair value, and accordingly is
indicative of consistent net income excluding
amortization of acquired intangibles,
attributable to DaVita HealthCare Partners
Inc. and diluted net income per share
attributable to DaVita HealthCare Partners
Inc. These measures are not measures of
financial performance under GAAP and should
not be considered as an alternative to net
income attributable to DaVita HealthCare
Partners Inc. and diluted net income per share
attributable to DaVita HealthCare Partners
Inc.
Adjusted net income and
adjusted diluted net
income per share
attributable to DaVita
HealthCare Partners
Inc., further adjusted
to exclude the
amortization of
intangible assets
associated with
acquisitions: Three months ended
------------------
March 31, December 31, March 31,
2015 2014 2014
---- ---- ----
Adjusted net income
attributable to DaVita
HealthCare Partners Inc $186,636 $208,020 $183,289
Add:
Amortization of
intangible assets
associated with
acquisitions for the
dialysis and ancillary
operations 6,524 6,468 6,867
Amortization of
intangible assets
associated with
acquisitions for the
HCP operations 35,878 35,792 34,852
Less: Related income tax (15,901) (14,073) (16,896)
------- ------- -------
$213,137 $236,207 $208,112
======== ======== ========
Adjusted diluted net
income per share
attributable to DaVita
HealthCare Partners Inc $0.86 $0.96 $0.85
Add:
Amortization of
intangible assets per
share associated with
acquisitions for the
dialysis and ancillary
operations, net of tax 0.02 0.02 0.02
Amortization of
intangible assets per
share associated with
acquisitions for the
HCP operations, net of
tax 0.10 0.11 0.10
---- ---- ----
$0.98 $1.09 $0.97
===== ===== =====
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
2. Operating income excluding a pre-tax
accrual of an estimated loss contingency
We believe that operating income excluding a
pre-tax accrual of an estimated loss
contingency enhances a user's understanding of
our normal operating income for these periods
by providing a measure that is meaningful
because it excludes an unusual amount that was
accrued for an estimated loss contingency
related to the Vainer Private Civil Suit and
accordingly, is comparable to prior periods
and indicative of consistent operating income.
This measure is not a measure of financial
performance under GAAP and should not be
considered as an alternative to operating
income.
Operating Three months ended
income contingency:
excluding
a
pre-
tax
accrual
of
an
estimated
loss
------------------
March 31, December 31, March 31,
2015 2014 2014
---- ---- ----
Operating
(loss)
income $(64,156) $452,085 $441,225
Add:
Accrual
of
an
estimated
loss
contingency 495,000 - -
------- --- ---
Adjusted
operating
income $430,844 $452,085 $441,225
======== ======== ========
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
3. Effective Income Tax Rates
We believe that reporting the effective income
tax rate attributable to DaVita HealthCare
Partners Inc. as well as the adjusted
effective income tax rate attributable to
DaVita HealthCare Partners Inc., excluding an
estimated loss contingency, enhances an
investor's understanding of DaVita HealthCare
Partners Inc.'s effective income tax rate and
DaVita HealthCare Partners Inc.'s adjusted
effective income tax rate for the periods
presented because it excludes noncontrolling
owners' income that primarily relates to non-
tax paying entities and unusual amounts that
include an estimated loss contingency related
to the Vainer Private Civil Suit, and,
therefore, is meaningful to an investor to
fully understand the related income tax
effects on DaVita HealthCare Partners Inc.'s
operating results. These are not measures
under GAAP and should not be considered as an
alternative to the effective income tax rate
calculated in accordance with GAAP.
Effective income tax rate as compared to the
effective income tax rate attributable to
DaVita HealthCare Partners Inc. is as follows:
Three months ended
------------------
March 31, December 31, March 31,
2015 2014 2014
---- ---- ----
(Loss) income from
continuing
operations before
income taxes $(162,081) $354,365 $336,588
========= ======== ========
Income tax
(benefit) expense $(85,933) $103,977 $124,851
======== ======== ========
Effective income
tax rate 53.0% 29.3% 37.1%
==== ==== ====
Three months ended
------------------
March 31, December 31, March 31,
2015 2014 2014
---- ---- ----
(Loss) income from
continuing
operations before
income taxes $(162,081) $354,365 $336,588
Less:
Noncontrolling
owners' income
primarily
attributable to
non-tax paying
entities (34,536) (42,495) (28,539)
------- ------- -------
(Loss) income
before income
taxes attributable
to DaVita
HealthCare
Partners Inc $(196,617) $311,870 $308,049
========= ======== ========
Income tax
(benefit) expense (85,933) 103,977 $124,851
Less: Income tax
attributable to
noncontrolling
interests (67) (127) (91)
--- ---- ---
Income tax
(benefit) expense
attributable to
DaVita HealthCare
Partners Inc $(86,000) $103,850 $124,760
======== ======== ========
Effective income
tax rate
attributable to
DaVita HealthCare
Partners Inc 43.7% 33.3% 40.5%
==== ==== ====
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
Three months ended
------------------
Adjusted effective
income tax rates
attributable to
DaVita HealthCare
Partners Inc.
excluding an
estimated loss
contingency: March 31, December 31, March 31,
2015 2014 2014
---- ---- ----
(Loss) income from
continuing
operations before
income taxes $(162,081) $354,365 $336,588
Add: Estimated loss
contingency 495,000 - -
------- --- ---
332,919 354,365 336,588
Less: Noncontrolling
owners' income
primarily
attributable to
non- tax paying
entities (34,536) (42,495) (28,539)
------- ------- -------
Adjusted income
before income taxes
attributable to
DaVita HealthCare
Partners Inc $298,383 $311,870 $308,049
======== ======== ========
Income tax (benefit)
expense $(85,933) $103,977 $124,851
Add: Income taxes
attributable to an
estimated loss
contingency 197,747 - -
Less: Income tax
attributable to
noncontrolling
interests (67) (127) (91)
--- ---- ---
Adjusted income tax
attributable to
DaVita HealthCare
Partners Inc $111,747 $103,850 $124,760
======== ======== ========
Adjusted effective
income tax rate
attributable to
DaVita HealthCare
Partners Inc 37.5% 33.3% 40.5%
==== ==== ====
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
4. Free cash flow
Free cash flow represents net cash provided by
operating activities less 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
distributions to noncontrolling interests
provides an investor with an understanding of
free cash flows that are attributable to
DaVita HealthCare Partners Inc. Free cash flow
is not a measure of financial performance
under GAAP 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
------------------
March 31, December 31, March 31,
2015 2014 2014
---- ---- ----
Cash provided by
(used in)
operating
activities $410,089 $(69,991) $419,107
Less: Distributions
to noncontrolling
interests (41,499) (44,196) (33,147)
------- ------- -------
Cash provided by
(used in)
operating
activities
attributable to
DaVita HealthCare
Partners Inc 368,590 (114,187) 385,960
Less: Expenditures
for routine
maintenance and
information
technology (49,010) (82,811) (49,349)
------- ------- -------
Free cash flow $319,580 $(196,998) $336,611
======== ========= ========
Rolling 12-Month Period
-----------------------
March 31, December 31, March 31,
2015 2014 2014
---- ---- ----
Cash provided by
operating
activities $1,450,389 $1,459,407 $1,813,241
Less: Distributions
to noncontrolling
interests (157,691) (149,339) (137,547)
-------- -------- --------
Cash provided by
operating
activities
attributable to
DaVita HealthCare
Partners Inc 1,292,698 1,310,068 1,675,694
Less: Expenditures
for routine
maintenance and
information
technology (264,633) (264,972) (272,422)
-------- -------- --------
Free cash flow $1,028,065 $1,045,096 $1,403,272
========== ========== ==========
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
5. Total care dollars under management
In California, as a result of our managed care
administrative services agreements with
hospitals, HCP does not assume the direct
financial risk for institutional (hospital)
services in most cases, but is responsible for
managing the care dollars associated with both
the professional (physician) and institutional
services being provided for the Per Member Per
Month (PMPM) fee attributable to both
professional and institutional services. In
cases where HCP does not assume the direct
financial risk, HCP recognizes the surplus of
institutional revenue less institutional
expense as HCP net revenue. In addition to
revenues recognized for financial reporting
purposes, HCP measures its total care dollars
under management, which includes the PMPM fee
payable to third parties for institutional
(hospital) services where HCP manages the care
provided to its members by the hospitals and
other institutions, which are not included in
GAAP revenues. HCP uses total care dollars
under management as a supplement to GAAP
revenues as it allows HCP to measure profit
margins on a comparable basis across both the
global capitation model (where HCP assumes the
full financial risk for all services,
including institutional services) and the risk
sharing models (where HCP operates under
managed care administrative services
agreements where HCP does not assume the full
risk). HCP believes that presenting amounts in
this manner is useful because it presents its
operations on a unified basis without the
complication caused by models that HCP has
adopted in its California market as a result
of various regulations related to the
assumption of institutional risk. Total care
dollars under management is not a measure of
financial performance computed in accordance
with GAAP and should not be considered in
isolation or as a substitute for revenues
calculated in accordance with GAAP. Total care
dollars under management includes PMPM
payments received from third parties that are
recorded net of expenses in our accounting
records. The following table reconciles total
care dollars under management to medical
revenues to the periods indicated.
Three months ended
------------------
March 31, December 31, March 31,
2015 2014 2014
---- ---- ----
Medical
revenues $912,588 $863,555 $827,831
Less:
Risk
share
revenue,
net (12,956) (12,805) (29,558)
Add:
Institutional
capitation
amounts 333,108 314,100 284,389
------- ------- -------
Total
care
dollars
under
management $1,232,740 $1,164,850 $1,082,662
========== ========== ==========
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SOURCE DaVita HealthCare Partners Inc.
