DAVITA INC. DENVER, July 31, 2014 /PRNewswire/ -- DaVita HealthCare Partners Inc. (NYSE: DVA) today announced results for the quarter ended June 30, 2014. Adjusted income from continuing operations attributable to DaVita HealthCare Partners Inc. for the three and six months ended June 30, 2014 was $205.7 million and $389.0 million, or $0.95 and $1.80 per share, respectively, excluding debt refinancing charges. Income from continuing operations attributable to DaVita HealthCare Partners Inc. for the three and six months ended June 30, 2014 including this item was $147.7 million and $331.0 million, or $0.68 and $1.53 per share, respectively.
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Adjusted income from continuing operations attributable to DaVita HealthCare Partners Inc. for the three and six months ended June 30, 2013 was $197.4 million and $394.3 million, or $0.92 and $1.84 per share, respectively, excluding a contingent earn-out obligation adjustment. In addition, adjusted income from continuing operations attributable to DaVita HealthCare Partners Inc. for the six months ended June 30, 2013 excluded a loss contingency reserve. Income from continuing operations attributable to DaVita HealthCare Partners Inc. for the three and six months ended June 30, 2013 including these items was $254.4 million and $271.3 million, or $1.18 and $1.26 per share, respectively.
Financial and operating highlights include:
-- Cash Flow: For the rolling twelve months ended June 30, 2014, operating
cash flow was $1.769 billion and free cash flow was $1.350 billion. For
the three months ended June 30, 2014, operating cash flow was $262
million and free cash flow was $165 million. For a definition of free
cash flow see Note 4 to the reconciliations of non-GAAP measures.
-- Operating / Adjusted Operating Income: Operating income for the three
and six months ended June 30, 2014 was $484 million and $926 million,
respectively. Adjusted operating income for the three and six months
ended June 30, 2013 was $465 million and $932 million, respectively,
excluding a contingent earn-out obligation. In addition, adjusted
operating income for the six months ended June 30, 2013 excluded a
pre-tax loss contingency reserve. Operating income for the three and six
months ended June 30, 2013 including these items was $522 million and
$689 million, respectively.
HCP's operating income for the three months ended June 30, 2014, benefited from the recognition of net deferred revenues of approximately $26 million related to the maintenance of existing physician networks, of which $6 million was related to the first quarter of 2014 and the remaining $20 million was primarily related to 2013.
-- Adjusted Diluted Income from Continuing Operations Per Share: Adjusted
income from continuing operations attributable to DaVita HealthCare
Partners Inc. for the three and six months ended June 30, 2014,
excluding the amortization of intangible assets associated with
acquisitions and debt refinancing charges, which net of tax impacts was
$231 million and $439 million, respectively, and adjusted diluted income
from continuing operations was $1.06 and $2.03 per share, respectively.
Adjusted income from continuing operations attributable to DaVita HealthCare Partners Inc. for the three months ended June 30, 2013, excluding the amortization of intangible assets associated with acquisitions, and a contingent earn-out obligation adjustment, which net of tax impacts was $222 million, and adjusted diluted income from continuing operations was $1.03 per share. In addition, adjusted income from continuing operations for the six months ended June 30, 2013 as further adjusted to exclude a loss contingency reserve, which net of tax impacts was $443 million, and adjusted diluted income from continuing operations was $2.06 per share.
-- Volume: Total U.S. dialysis treatments for the second quarter of 2014
were 6,196,394, or 79,441 treatments per day, representing a per day
increase of 5.6% over the second quarter of 2013. Non-acquired treatment
growth and normalized non-acquired treatment growth in the quarter
increased 5.0% over the second quarter of 2013.
The number of member months for which HCP provided capitated care during the second quarter of 2014 was approximately 2.5 million representing an increase of 11% as compared to the second quarter of 2013, inclusive of growth contributed from acquisitions.
-- Effective Tax Rate: Our effective tax rate was 35.7% and 36.5% for the
three and six months ended June 30, 2014, respectively. This effective
tax rate is impacted by the amount of third party owners' income
attributable to non-tax paying entities. The effective tax rate
attributable to DaVita HealthCare Partners Inc. was 40.5% for the three
and six months ended June 30, 2014.
We still expect our 2014 effective tax rate attributable to DaVita HealthCare Partners Inc. to be in the range of 40.0% to 41.0%.
-- Debt Transactions: As previously announced in June 2014, we entered
into $5.5 billion of New Senior Secured Credit Facilities consisting of
a $1.0 billion revolving line of credit, a $1.0 billion New Term Loan A
and a $3.5 billion New Term Loan B. In addition, we issued $1.75 billion
5 1/8% Senior Notes due 2024. As a result, we received total proceeds of
$6.25 billion and used a portion of the proceeds to pay-off all
outstanding principal balances under our then existing Senior Secured
Credit Facilities, to purchase or redeem all of our $775 million 6 3/8%
Senior Notes due 2018 (6 3/8% Senior Notes), to pay fees and other
expenses related to the refinancing, as well as for general corporate
purposes.
As a result of these transactions, we recorded debt refinancing charges of $97.5 million that consist of the cash tender premiums, a redemption premium, the write-off of existing deferred financing costs, the write-off of certain new refinancing costs, other professional fees and $3.1 million of losses associated with the termination of several of our interest rate swap agreements.
-- Center Activity: As of June 30, 2014, we provided dialysis services to
a total of approximately 174,000 patients at 2,203 outpatient dialysis
centers, of which 2,119 centers are located in the United States and 84
centers are located in ten countries outside of the United States.
During the second quarter of 2014, we opened a total of 22 new dialysis
centers in the United States. We also acquired three dialysis centers
and opened six new dialysis centers outside of the United States.
Outlook
-- We are updating our consolidated operating income guidance for 2014 to
now be in the range of $1.755 billion to $1.840 billion. Our previous
consolidated operating income guidance for 2014 was in the range of
$1.725 billion to $1.840 billion.
-- We are also updating our operating income guidance for our dialysis
services and related ancillary businesses including our corporate level
expenses, which we refer to as Kidney Care, for 2014 to now be in the
range of $1.550 billion to $1.600 billion. Our previous operating income
guidance for Kidney Care for 2014 was in the range of $1.520 billion to
$1.580 billion.
-- We are lowering the high end of our operating income guidance for HCP
for 2014 to now be in the range of $205 million to $240 million. Our
previous operating income guidance for HCP for 2014 was in the range of
$205 million to $260 million.
-- We still expect our consolidated operating cash flow for 2014 to be in
the range of $1.450 billion to $1.550 billion.
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. Our consolidated operating cash flow amounts for 2014 exclude any potential payment relating to the 2010 and 2011 U.S. Attorney Physician Relationship Investigations.
We will be holding a conference call to discuss our results for the second quarter ended June 30, 2014 on July 31, 2014 at 5:00 p.m. Eastern Time. The dial in number for the U.S. is (888) 950-9401 and for international is (517) 308-9354. A replay of the conference call will be available on DaVita's official web page, www.davitahealthcarepartners.com, for the following 30 days.
This release contains forward-looking statements within the meaning of the federal securities laws, including statements related to our guidance and expectations for our 2014 consolidated operating income, our 2014 Kidney Care operating income, HCP's 2014 operating income, our 2014 consolidated operating cash flows and our 2014 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, 2013, 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) 2014
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 and current or potential investigations by
various government entities and related government or private-party
proceedings, including risks relating to the resolution of the 2010 and
2011 U.S. Attorney Physician Relationship Investigations, such as
restrictions on our business and operations required by a corporate
integrity agreement and other settlement terms, and the financial impact
thereof,
-- 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 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 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,
-- 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 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 INCOME
(unaudited)
(dollars in thousands, except per share data)
Three months ended Six months ended
June 30,
June 30,
--------
2014 2013 2014 2013
---- ---- ---- ----
Patient service revenues $2,187,249 $2,048,651 $4,301,347 $4,028,524
Less: Provision for uncollectible
accounts (88,052) (72,191) (171,249) (142,248)
------- ------- -------- --------
Net patient service revenues 2,099,197 1,976,460 4,130,098 3,886,276
Capitated revenues 799,369 710,074 1,586,934 1,472,689
Other revenues 273,923 185,139 498,233 342,290
------- ------- ------- -------
Total net revenues 3,172,489 2,871,673 6,215,265 5,701,255
--------- --------- --------- ---------
Operating expenses and charges:
Patient care costs and other costs 2,246,538 2,014,320 4,426,310 3,975,211
General and administrative 298,636 268,110 582,697 552,520
Depreciation and amortization 145,907 130,589 288,486 256,498
Provision for uncollectible accounts 3,208 1,260 5,719 2,138
Equity investment income (6,095) (7,649) (13,467) (17,016)
Loss contingency reserve - - - 300,000
Contingent earn-out obligation
adjustment - (56,977) - (56,977)
--- ------- --- -------
Total operating expenses and charges 2,688,194 2,349,653 5,289,745 5,012,374
--------- --------- --------- ---------
Operating income 484,295 522,020 925,520 688,881
Debt expense (106,132) (108,096) (212,467) (213,913)
Debt refinancing charges (97,548) - (97,548) -
Other income (loss), net 1,693 (1,374) 3,391 (776)
----- ------ ----- ----
Income from continuing operations
before income taxes 282,308 412,550 618,896 474,192
Income tax expense 100,887 129,192 225,738 144,336
------- ------- ------- -------
Income from continuing operations 181,421 283,358 393,158 329,856
Discontinued operations:
Loss from operations of discontinued
operations, net of tax - - - (139)
Gain on disposal of discontinued
operations, net of tax - - - 13,375
--- --- --- ------
Net income 181,421 283,358 393,158 343,092
Less: Net income attributable to
noncontrolling interests (33,738) (28,982) (62,186) (58,552)
------- ------- ------- -------
Net income attributable to DaVita
HealthCare Partners Inc. $147,683 $254,376 $330,972 $284,540
-------- -------- -------- --------
Earnings per share:
Basic income from continuing
operations per share attributable to
DaVita HealthCare Partners Inc. $0.70 $1.21 $1.56 $1.29
===== ===== ===== =====
Basic net income per share
attributable to DaVita HealthCare
Partners Inc. $0.70 $1.21 $1.56 $1.36
===== ===== ===== =====
Diluted income from continuing
operations per share attributable to
DaVita HealthCare Partners Inc. $0.68 $1.18 $1.53 $1.26
===== ===== ===== =====
Diluted net income per share
attributable to DaVita HealthCare
Partners Inc. $0.68 $1.18 $1.53 $1.33
===== ===== ===== =====
Weighted average shares for earnings per share:
Basic 212,258,994 209,797,334 211,817,893 209,385,380
=========== =========== =========== ===========
Diluted. 216,720,944 214,849,164 216,420,713 214,490,452
=========== =========== =========== ===========
Amounts attributable to DaVita HealthCare Partners Inc.:
Income from continuing operations $147,683 $254,376 $330,972 $271,291
Discontinued operations - - - 13,249
--- --- --- ------
Net income $147,683 $254,376 $330,972 $284,540
======== ======== ======== ========
DAVITA HEALTHCARE PARTNERS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
(unaudited)
Three months ended Six months ended
June 30,
June 30,
--------
2014 2013 2014 2013
---- ---- ---- ----
Net income $181,421 $283,358 $393,158 $343,092
-------- -------- -------- --------
Other comprehensive income (loss), net of tax:
Unrealized losses on interest rate swap and cap agreements:
Unrealized (loss) gain on interest rate
swap and cap agreements (5,209) 11,685 (7,714) 9,316
Reclassifications of net swap and cap
agreements realized loss into net
income 4,997 3,462 8,356 5,969
Unrealized gains on investments:
Unrealized gain on investments 578 101 909 719
Reclassification of net investment
realized gains into net income - - (207) (94)
Foreign currency translation
adjustments 1,939 (1,841) 1,967 (3,947)
----- ------ ----- ------
Other comprehensive income 2,305 13,407 3,311 11,963
----- ------ ----- ------
Total comprehensive income 183,726 296,765 396,469 355,055
Less: Comprehensive income attributable
to noncontrolling interests (33,738) (28,982) (62,186) (58,552)
------- ------- ------- -------
Comprehensive income attributable to
DaVita HealthCare Partners Inc. $149,988 $267,783 $334,283 $296,503
======== ======== ======== ========
DAVITA HEALTHCARE PARTNERS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
Six months ended
June 30,
--------
2014 2013
---- ----
Cash flows from operating activities:
Net income $393,158 $343,092
Adjustments to reconcile net income to cash provided by operating
activities:
Loss contingency reserve - 300,000
Depreciation and amortization 288,470 256,382
Debt refinancing charges 97,548 -
Stock-based compensation
expense 29,699 32,266
Tax benefits from stock award
exercises 42,110 36,524
Excess tax benefits from
stock award exercises (30,238) (28,442)
Deferred income taxes 13,826 (102,039)
Equity investment income, net 2,257 (496)
Other non-cash (income)
charges and loss on disposal
of assets 22,861 (69,050)
Changes in operating assets and liabilities, other than from
acquisitions and divestitures:
Accounts receivable (65,079) (17,829)
Inventories (10,731) 924
Other receivables and other
current assets (95,580) (65,349)
Other long-term assets 2,158 (1,220)
Accounts payable (46,022) (94,894)
Accrued compensation and
benefits 19,912 (14,279)
Other current liabilities 31,970 82,905
Income taxes 2,886 (9,182)
Other long-term liabilities (17,707) 36,713
------- ------
Net cash provided by
operating activities 681,498 686,026
------- -------
Cash flows from investing activities:
Additions of property and
equipment, net (278,593) (258,396)
Acquisitions (98,442) (152,112)
Proceeds from asset and
business sales 215 64,363
Purchase of investments
available for sale (6,117) (3,286)
Purchase of investments held-
to-maturity (121,333) (1,032)
Proceeds from sale of
investments available for
sale 1,277 1,091
Proceeds from sale of
investments held to maturity 64,561 1,376
Purchase of intangible assets
and equity investment (4,760) (7)
Distributions received on
equity investments 337 116
--- ---
Net cash used in investing
activities (442,855) (347,887)
-------- --------
Cash flows from financing activities:
Borrowings 33,136,743 33,445,567
Payments on long-term debt
and other financing costs (32,788,307) (33,696,216)
Deferred financing costs and
debt redemption costs (106,937) (716)
Distributions to
noncontrolling interests (65,818) (65,206)
Stock award exercises and
other share issuances, net 7,274 8,819
Excess tax benefits from
stock award exercises 30,238 28,442
Contributions from
noncontrolling interests 28,265 20,132
Proceeds from sales of
additional noncontrolling
interests 933 5,903
Purchases from noncontrolling
interests (5,743) (474)
------ ----
Net cash provided by (used
in) financing activities 236,648 (253,749)
Effect of exchange rate
changes on cash and cash
equivalents (567) (234)
---- ----
Net increase in cash and cash
equivalents 474,724 84,156
Cash and cash equivalents at
beginning of the year 946,249 533,748
------- -------
Cash and cash equivalents at
end of the year $1,420,973 $617,904
========== ========
DAVITA HEALTHCARE PARTNERS INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except per share data)
June 30, December 31, 2013
2014
----
ASSETS
Cash and cash equivalents $1,420,973 $946,249
Short-term investments 63,835 6,801
Accounts receivable, less allowance of
$244,878 and $237,143 1,550,252 1,485,163
Inventories 99,650 88,805
Other receivables 455,620 349,090
Other current assets 164,591 176,414
Income tax receivable 6,965 10,315
Deferred income taxes 399,361 409,441
------- -------
Total current assets 4,161,247 3,472,278
Property and equipment, net of accumulated
depreciation of $1,936,494 and $1,778,259 2,290,844 2,189,411
Intangibles, net of accumulated amortization
of $565,839 and $483,773 2,022,875 2,024,373
Equity investments 42,842 40,686
Long-term investments 87,614 79,557
Other long-term assets 66,106 79,598
Goodwill 9,254,043 9,212,974
--------- ---------
$17,925,571 $17,098,877
=========== ===========
LIABILITIES AND EQUITY
Accounts payable $405,751 $435,465
Other liabilities 465,242 464,422
Accrued compensation and benefits 626,617 603,013
Medical payables 304,551 287,452
Loss contingency reserve 397,000 397,000
Senior notes (6 3/8% Senior Notes) 291,907 -
Current portion of long-term debt 117,080 274,697
------- -------
Total current liabilities 2,608,148 2,462,049
Long-term debt 8,390,578 8,141,231
Other long-term liabilities 386,033 380,337
Deferred income taxes 823,745 812,419
------- -------
Total liabilities 12,208,504 11,796,036
Commitments and contingencies
Noncontrolling interests subject to put
provisions 760,242 697,300
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; 214,759,091 and
213,163,248 shares issued and outstanding at
June 30, 2014 and at December 31, 2013,
respectively) 215 213
Additional paid-in capital 1,089,929 1,070,922
Retained earnings 3,694,961 3,363,989
Accumulated other comprehensive income (loss) 666 (2,645)
--- ------
Total DaVita HealthCare Partners Inc.
shareholders' equity 4,785,771 4,432,479
Noncontrolling interests not subject to put
provisions 171,054 173,062
------- -------
Total equity 4,956,825 4,605,541
--------- ---------
$17,925,571 $17,098,877
=========== ===========
DAVITA HEALTHCARE PARTNERS INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended Six months
ended
June 30, 2014
-------------
June 30, March 31, June 30,
2014 2014 2013
---- ---- ----
1. Consolidated Financial Results:
Consolidated net revenues $3,172 $3,043 $2,872 $6,215
Operating income $484.3 $441.2 $522.0 $925.5
Operating income margin 15.3% 14.5% 18.2% 14.9%
Operating income excluding a contingent earn-
out obligation adjustment(1) $484.3 $441.2 $465.0 $925.5
Operating income margin excluding a contingent
earn-out obligation adjustment(1) 15.3% 14.5% 16.2% 14.9%
Income from continuing operations attributable
to DaVita HealthCare Partners Inc. $147.7 $183.3 $254.4 $331.0
Income from continuing operations attributable
to DaVita HealthCare Partners Inc. excluding
debt financing charges and a contingent earn-
out obligation adjustment, which are all net
of related tax(1) $205.7 $183.3 $197.4 $389.0
Diluted income from continuing operations per
share attributable to DaVita HealthCare
Partners Inc. $0.68 $0.85 $1.18 $1.53
Diluted income from continuing operations per
share attributable to DaVita HealthCare
Partners Inc. excluding debt financing charges
and a contingent earn-out obligation
adjustment, which are all net of related
tax(1) $0.95 $0.85 $0.92 $1.80
2. Consolidated Business Metrics:
Expenses
General and administrative expenses as a
percent of consolidated net revenues(2) 9.4% 9.3% 9.3% 9.4%
Consolidated effective tax rate 35.7% 37.1% 31.3% 36.5%
Consolidated effective tax rate attributable to
DaVita HealthCare Partners Inc.(1) 40.5% 40.5% 33.6% 40.5%
Adjusted consolidated effective tax rate
attributable to DaVita HealthCare Partners
Inc.(1) 40.5% 40.5% 39.5% 40.5%
3. Summary of Division Financial Results:
Net revenues
Kidney Care:
Net dialysis and related lab services revenues $2,025 $1,958 $1,922 $3,983
Net ancillary services and strategic
initiatives revenues, including international
dialysis operations 274 257 200 530
Elimination of intersegment revenues (14) (13) (11) (26)
--- --- --- ---
Total kidney care net revenues 2,285 2,202 2,111 4,487
Net HCP revenues 887 841 761 1,728
--- --- --- -----
Total net consolidated revenues $3,172 $3,043 $2,872 $6,215
====== ====== ====== ======
Operating income
Kidney Care:
Dialysis and related lab services operating
income $408 $387 $402 $795
Other - Ancillary services and strategic
initiatives, including international dialysis
operations operating losses (2) 2 (7) -
Corporate support and related long-term
incentive compensation (4) (2) (11) (5)
Contingent earn-out obligation adjustment - - 57 -
Total kidney care operating income 402 387 441 790
HCP operating income 82 54 81 136
--- --- --- ---
Total consolidated operating income $484 $441 $522 $926
==== ==== ==== ====
DAVITA HEALTHCARE PARTNERS INC.
SUPPLEMENTAL FINANCIAL DATA-continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended Six months
ended
June 30, 2014
-------------
June 30, March 31, June 30,
2014 2014 2013
---- ---- ----
4. Summary of Reportable Segment Financial Results:
Dialysis and Related Lab Services
Revenue:
Patient services revenues $2,106 $2,037 $1,988 $4,142
Provision for uncollectible accounts (84) (82) (69) (166)
--- --- --- ----
Net patient service operating revenues 2,022 1,955 1,919 3,976
Other revenues 3 3 3 7
--- --- --- ---
Total net operating revenues $2,025 $1,958 $1,922 $3,983
------ ------ ------ ------
Operating expenses:
Patient care cost $1,358 $1,323 $1,265 $2,680
General and administrative 164 155 169 319
Depreciation and amortization 99 96 89 196
Equity investment income (4) (3) (3) (7)
--- --- --- ---
Total operating expenses 1,617 1,571 1,520 3,188
----- ----- ----- -----
Segment operating income $408 $387 $402 $795
==== ==== ==== ====
HCP
Revenue:
HCP capitated revenues $783 $772 $693 $1,555
---- ---- ---- ------
Patient services revenues 62 58 52 119
Provision for uncollectible accounts (4) (2) (3) (5)
--- --- --- ---
Net patient service operating revenues 58 56 49 114
--- --- --- ---
Other revenues 46 13 19 59
--- --- --- ---
Total net operating revenues $887 $841 $761 $1,728
==== ==== ==== ======
Operating expenses:
Patient care cost $688 $672 $590 $1,360
General and administrative 77 78 56 155
Depreciation and amortization 42 42 39 84
Equity investment income (2) (5) (5) (7)
--- --- --- ---
Total operating expenses 805 787 680 1,592
--- --- --- -----
Segment operating income $82 $54 $81 $136
=== === === ====
5. Dialysis and Related Lab Services Business Metrics:
Volume
Treatments 6,196,394 5,975,627 5,867,973 12,172,021
Number of treatment days 78.0 76.4 78.0 154.4
Treatments per day 79,441 78,215 75,230 78,834
Per day year over year increase 5.6% 6.3% 7.6% 5.9%
Non-acquired growth year over year 5.0% 5.5% 5.0% 5.0%
Normalized non-acquired growth year over
year 5.0% 5.0% 5.0% 5.0%
Operating revenues before provision for uncollectible accounts
Dialysis and related lab services revenue
per treatment $339.82 $340.81 $338.86 $340.31
Per treatment (decrease) increase from
previous quarter (0.3%) 0.2% (0.5%) -
Per treatment increase from previous year 0.3% 0.1% 1.9% 0.2%
Percent of net consolidated revenues 63.5% 64.1% 66.6% 63.9%
DAVITA HEALTHCARE PARTNERS INC.
SUPPLEMENTAL FINANCIAL DATA-continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended Six months
ended
June 30, 2014
-------------
June 30, March 31, June 30,
2014 2014 2013
---- ---- ----
5. Dialysis and Related Lab Services Business Metrics: (continued)
Expenses
Patient care costs
Percent of total segment operating revenues 67.1% 67.5% 65.8% 67.3%
Per treatment $219.16 $221.31 $215.70 $220.22
Per treatment (decrease) increase from previous quarter (1.0%) 2.0% (0.2%) -
Per treatment increase from previous year 1.6% 2.4% 0.8% 2.0%
General and administrative expenses
Percent of total segment operating revenues 8.1% 7.9% 8.7% 8.0%
Per treatment $26.47 $26.00 $28.86 $26.24
Per treatment increase (decrease) from previous quarter 1.8% (13.9%) (4.1%) -
Per treatment (decrease) increase from previous year (8.3%) (13.6%) 1.4% (11.0%)
Accounts receivable
Net receivables $1,148 $1,168 $1,117 $ -
DSO 53 55 54 -
Provision for uncollectible accounts as a percentage of
net revenues 4.0% 4.0% 3.5% 4.0%
6. HCP Business Metrics:
Capitated membership
Total 829,000 795,000 733,000 -
Member months 2,456,000 2,373,000 2,209,000 4,829,000
Capitated revenues by sources
Commercial revenues $177 $187 $176 $363
Senior revenues 576 565 496 1,141
Medicaid revenues 30 20 21 51
--- --- --- ---
Total capitated revenues $783 $772 $693 $1,555
==== ==== ==== ======
Other
Total care dollars under management(1) $1,125 $1,083 $997 $2,208
Ratio of operating income to total care dollars under
management 7.3% 5.0% 8.2% 6.2%
Full time clinicians 1,134 1,129 1,073 -
IPA primary care physicians 3,402 3,337 2,846 -
7. Cash Flow:
Operating cash flow $262.4 $419.1 $306.8 $681.5
Operating cash flow, last twelve months $1,768.8 $1,813.2 $1,252.9 $ -
Free cash flow(1) $165.2 $336.6 $218.3 $501.8
Free cash flow, last twelve months(1) $1,350.2 $1,403.3 $871.2 $ -
Capital expenditures:
Routine maintenance/IT/other $64.5 $49.3 $58.3 $113.9
Development and relocations $87.5 $77.2 $83.4 $165.4
Acquisition expenditures $30.6 $67.9 $60.6 $98.4
DAVITA HEALTHCARE PARTNERS INC.
SUPPLEMENTAL FINANCIAL DATA-continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended
------------------
June 30, March 31, June 30,
2014 2014 2013
---- ---- ----
8. Debt and Capital Structure:
Total debt(3) $8,817 $8,381 $8,496
Net debt, net of cash and cash
equivalents(3) $7,396 $7,273 $7,878
Leverage ratio (see calculation on
page 12) 2.98x 2.98x 3.39x
Overall weighted average effective
interest rate during the quarter 4.85% 4.89% 4.86%
Overall weighted average effective
interest rate at end of the
quarter 4.56% 4.87% 4.85%
Weighted average effective interest
rate on the Senior Secured Credit
Facilities at end of the quarter 3.51% 4.19% 4.18%
Fixed and economically fixed
interest rates as a percentage of
our total debt(4) 59% 60% 61%
Fixed and economically fixed
interest rates, including our
interest rate cap agreements, as a
percentage of our total debt(4) 90% 93% 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% 72% 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 also
includes other certain corporate support and
related long-term incentive compensation.
(3) The reported balance sheet amount at June
30, 2014, excludes $17.5 million of debt
discount associated with our New Term Loan B. In
addition, the reported balance sheet amounts at
March 31, 2014, and June 30, 2013, exclude $16.7
million and $19.6 million, respectively, 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, 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 $765 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
June 30, 2014
-------------
Income from continuing operations
attributable to DaVita HealthCare
Partners Inc. $679,878
Income taxes 462,415
Interest expense 396,273
Depreciation and amortization 560,725
Loss contingency reserve 97,000
Noncontrolling interests and
equity investment income, net 133,014
Stock-based compensation 57,431
Debt refinancing charges 97,548
Other 42,293
------
"Consolidated EBITDA" $2,526,577
==========
June 30, 2014
-------------
Total debt, excluding debt
discount of $17.5 million $8,817,065
Letters of credit issued 83,607
------
8,900,672
Less: Cash and cash equivalents
(less HCP's physician owned
entities cash) (1,367,871)
----------
Consolidated net debt $7,532,801
==========
Last twelve months "Consolidated
EBITDA" $2,526,577
==========
Leverage ratio 2.98x
=====
In accordance with the Credit
Agreement, the Company's leverage
ratio cannot exceed 5.00 to 1.00
as of June 30, 2014. 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. Income from continuing operations and
diluted income from continuing operations per
share attributable to DaVita HealthCare
Partners Inc. excluding debt refinancing
charges, a contingent earn-out obligation
adjustment and a loss contingency reserve, net
of related tax.
We believe that income from continuing
operations attributable to DaVita HealthCare
Partners Inc. excluding debt refinancing
charges, a contingent earn-out obligation
adjustment and a loss contingency reserve, net
of related tax, enhances a user's
understanding of our normal income from
continuing operations attributable to DaVita
HealthCare Partners Inc. and diluted income
from continuing operations per share
attributable to DaVita HealthCare Partners
Inc. for these periods by providing a measure
that is meaningful because it excludes unusual
amounts related to the debt refinancing
charges that resulted from the refinancing of
our Senior Secured Credit Facilities, the
redemption of the $775 million 6 3/8% Senior
Notes, as well as the termination of certain
interest rate swap agreements, an adjustment
to HCP's contingent earn-out obligation and a
loss contingency reserve related to the 2010
and 2011 U.S. Attorney Physician Relationship
Investigations and accordingly, is comparable
to prior periods and indicative of consistent
income from continuing operations attributable
to DaVita HealthCare Partners Inc. and diluted
income from continuing operations 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 income from continuing
operations attributable to DaVita HealthCare
Partners Inc. and diluted income from
continuing operations per share attributable
to DaVita HealthCare Partners Inc.
Income from continuing
operations
attributable to DaVita
HealthCare Partners
Inc. excluding debt
refinancing charges, a
contingent earn-out
obligation adjustment
and a loss contingency
reserve, net of
related tax: Three months ended Six months ended
------------------ ----------------
June 30, March 31, June 30, June 30, June 30,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Income from continuing
operations
attributable to DaVita
HealthCare Partners
Inc. $147,683 $183,289 $254,376 $330,972 $271,291
Add (Less):
Debt refinancing
charges 97,548 - - 97,548 -
Contingent earn-out
obligation adjustment - - (56,977) - (56,977)
Loss contingency
reserve - - - - 300,000
Less: Related income
tax (39,507) - - (39,507) (120,000)
------- --- --- ------- --------
$205,724 $183,289 $197,399 $389,013 $394,314
======== ======== ======== ======== ========
Diluted income from
continuing operations
per share attributable
to DaVita HealthCare
Partners Inc.
excluding debt
refinancing charges, a
contingent earn-out
obligation adjustment
and a loss contingency
reserve, net of tax: Three months ended Six months ended
------------------ ----------------
June 30, March 31, June 30, June 30, June 30,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Diluted income from
continuing operations
per share attributable
to DaVita HealthCare
Partners Inc. $0.68 $0.85 $1.18 $1.53 $1.26
Add (Less):
Debt refinancing
charges 0.27 - - 0.27 -
Contingent earn-out
obligation adjustment - - (0.26) - (0.26)
Loss contingency
reserve - - - - 0.84
--- --- --- --- ----
$0.95 $0.85 $0.92 $1.80 $1.84
===== ===== ===== ===== =====
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 income from continuing
operations attributable to DaVita HealthCare
Partners Inc. and from our adjusted diluted
income from continuing operations 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 remeasurement of acquired intangible
assets associated with our acquisitions to
fair value, and accordingly is indicative of
consistent income from continuing operations
attributable to DaVita HealthCare Partners
Inc. and diluted income from continuing
operations 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 income from continuing
operations attributable to DaVita HealthCare
Partners Inc. and diluted income from
continuing operations per share attributable
to DaVita HealthCare Partners Inc.
Error occurred while generating ASCII Content for table
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
2. Operating income excluding a pre-tax
contingent earn-out obligation adjustment and
a pre-tax loss contingency reserve.
We believe that operating income excluding a
pre-tax contingent earn-out obligation and a
pre-tax loss contingency reserve, enhances a
user's understanding of our normal operating
income for these periods by providing a
measure that is meaningful because it excludes
unusual amounts for an adjustment for HCP's
contingent earn-out obligation adjustment and
for a loss contingency reserve related to the
2010 and 2011 U.S. Attorney Physician
Relationship Investigations, 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 income
excluding a pre-tax
contingent earn-out
obligation adjustment
and a pre-tax loss
contingency reserve: Three months ended Six months ended
------------------ ----------------
June 30, March 31, June 30, June 30, June 30,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Operating income $484,295 $441,225 $522,020 $925,520 $688,881
Add (Less):
Contingent earn-out
obligation adjustment - - (56,977) - (56,977)
Loss contingency
reserve - - - - 300,000
--- --- --- --- -------
Adjusted operating
income $484,295 $441,225 $465,043 $925,520 $931,904
======== ======== ======== ======== ========
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 a
contingent earn-out obligation adjustment,
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 an
unusual amount related to an adjustment to
HCP's contingent earn-out obligation
adjustment, and 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 Six months
ended
June 30, 2014
-------------
June 30, March 31, June 30,
2014 2014 2013
---- ---- ----
Income from
continuing
operations before
income taxes $282,308 $336,588 $412,550 $618,896
======== ======== ======== ========
Income tax expense $100,887 $124,851 $129,192 $225,738
======== ======== ======== ========
Effective income
tax rate 35.7% 37.1% 31.3% 36.5%
==== ==== ==== ====
Three months ended Six months
ended
June 30, 2014
-------------
June 30, March 31, June 30,
2014 2014 2013
---- ---- ----
Income from
continuing
operations before
income taxes $282,308 $336,588 $412,550 $618,896
Less:
Noncontrolling
owners' income
primarily
attributable to
non-tax paying
entities (34,105) (28,539) (29,294) (62,644)
------- ------- ------- -------
Income before
income taxes
attributable to
DaVita HealthCare
Partners Inc. $248,203 $308,049 $383,256 $556,252
======== ======== ======== ========
Income tax expense 100,887 124,851 $129,192 $225,738
Less: Income tax
attributable to
noncontrolling
interests (367) (91) (312) (458)
---- --- ---- ----
Income tax
attributable to
DaVita HealthCare
Partners Inc. $100,520 $124,760 $128,880 $225,280
======== ======== ======== ========
Effective income
tax rate
attributable to
DaVita HealthCare
Partners Inc. 40.5% 40.5% 33.6% 40.5%
==== ==== ==== ====
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
Three months ended Six months
ended
June 30, 2014
-------------
Adjusted effective
income tax rates
attributable to
DaVita HealthCare
Partners Inc.
excluding a
contingent earn-
out obligation
adjustment: June 30, March 31, June 30,
2014 2014 2013
---- ---- ----
Income from
continuing
operations before
income taxes $282,308 $336,588 $412,550 $618,896
Less: Contingent
earn-out
obligation
adjustment - - (56,977) -
--- --- ------- ---
282,308 336,588 355,573 618,896
Less:
Noncontrolling
owners' income
primarily
attributable to
non- tax paying
entities (34,105) (28,539) (29,294) (62,644)
------- ------- ------- -------
Adjusted income
before income
taxes attributable
to DaVita
HealthCare
Partners Inc. $248,203 $308,049 $326,279 $556,252
======== ======== ======== ========
Income tax expense $100,887 $124,851 $129,192 $225,738
Less: Income tax
attributable to
noncontrolling
interests (367) (91) (312) (458)
---- --- ---- ----
Adjusted income tax
attributable to
DaVita HealthCare
Partners Inc. $100,520 $124,760 $128,880 $225,280
======== ======== ======== ========
Adjusted effective
income tax rate
attributable to
DaVita HealthCare
Partners Inc. 40.5% 40.5% 39.5% 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 Six months ended
June 30, 2014
-------------
June 30, March 31, June 30,
2014 2014 2013
---- ---- ----
Cash provided by
operating
activities $262,391 $419,107 $306,819 $681,498
Less:
Distributions to
noncontrolling
interests (32,671) (33,147) (30,280) (65,818)
------- ------- ------- -------
Cash provided by
operating
activities
attributable to
DaVita HealthCare
Partners Inc. 229,720 385,960 276,539 615,680
Less: Expenditures
for routine
maintenance and
information
technology (64,549) (49,349) (58,264) (113,898)
------- ------- ------- --------
Free cash flow $165,171 $336,611 $218,275 $501,782
======== ======== ======== ========
Rolling 12-Month Period
-----------------------
June 30, March 31, June 30,
2014 2014 2013
---- ---- ----
Cash provided by
operating
activities $1,768,813 $1,813,241 $1,252,895
Less:
Distributions to
noncontrolling
interests (139,938) (137,547) (128,232)
-------- -------- --------
Cash provided by
operating
activities
attributable to
DaVita HealthCare
Partners Inc. 1,628,875 1,675,694 1,124,663
Less: Expenditures
for routine
maintenance and
information
technology. (278,707) (272,422) (253,473)
-------- -------- --------
Free cash flow $1,350,168 $1,403,272 $871,190
========== ========== ========
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 Six months
ended
June 30, 2014
-------------
June 30, March 31, June 30,
2014 2014 2013
---- ---- ----
Medical revenues $839,877 $827,831 $741,790 $1,667,709
Less: Risk share
revenue, net (8,924) (29,558) (20,504) (38,482)
Add:
Institutional
capitation
amounts 294,244 284,389 276,003 578,632
------- ------- ------- -------
Total care
dollars under
management $1,125,197 $1,082,662 $997,289 $2,207,859
========== ========== ======== ==========
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SOURCE DaVita HealthCare Partners Inc.
