Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - DAVITA INC. | d8k.htm |
EXHIBIT 99.1
Contact: Jim Gustafson
Investor Relations
DaVita Inc.
(310) 536-2585
DAVITA 4th QUARTER 2010 RESULTS
Denver, Colorado, February 10, 2011 – DaVita Inc. (NYSE: DVA) today announced results for the quarter and year ended December 31, 2010. Net income attributable to DaVita Inc. for the quarter and year ended December 31, 2010, excluding after-tax debt refinancing and redemption charges of $42.9 million and $45.4 million respectively, was $111.9 million and $451.1 million, or $1.13 per share and $4.38 per share, respectively. This compares to net income attributable to DaVita Inc. for the quarter and year ended December 31, 2009 of $109.7 million and $422.7 million, or $1.06 per share and $4.06 per share, respectively.
Net income attributable to DaVita Inc. for the quarter and year ended December 31, 2010, including the after-tax debt refinancing and redemption charges was $69.0 million and $405.7 million, or $0.70 per share and $3.94 per share, respectively.
Financial and operating highlights include:
| — | Cash Flow: For the year ended December 31, 2010 operating cash flow was $840 million and free cash flow was $597 million. For the three months ended December 31, 2010 operating cash flow was $121 million and free cash flow was $36 million. |
| — | Operating Income: Operating income for the quarter and year ended December 31, 2010 was $255 million and $997 million, respectively, as compared to $239 million and $940 million, respectively, for the same periods of 2009. |
| — | Volume: Total treatments for the fourth quarter of 2010 were 4,657,498, or 58,956 treatments per day, representing a per day increase of 6.8% over the fourth quarter of 2009. Non-acquired treatment growth in the quarter was 4.4% over the prior year’s fourth quarter. |
| — | Effective Tax Rate: Our effective tax rate was 30.2% and 35.0% for the quarter and year ended December 31, 2010, respectively. This effective tax rate is impacted by the amount of third party owners’ income attributable to non-tax paying entities. The effective tax rate attributable to DaVita Inc. was 36.5% and 39.0% for the quarter and year ended December 31, 2010, respectively. We expect our effective tax rate attributable to DaVita Inc. for 2011 to be in the range of 39.5% to 40.5%. |
| — | Share Repurchases: During the fourth quarter of 2010, we repurchased a total of 5,883,600 shares of our common stock for $420.0 million, or an average price of $71.38 per share. For the year ended December 31, 2010, we repurchased a total of 8,918,760 shares of our common stock for $618.5 million, or an average price of $69.35 per share. We have not repurchased any additional shares of our common stock subsequent to December 31, 2010. As a result of these transactions, our remaining board authorization for share repurchases is currently $681.5 million. |
| — | Acquisition: As previously announced on February 4, 2011, we entered into a definitive agreement to acquire DSI Renal, Inc. (“DSI”), for approximately $690 million, subject to adjustments. The transaction is subject to approval by the Federal Trade Commission including Hart-Scott-Rodino antitrust clearance. We anticipate that we will have to divest some centers as a condition of the transaction. We expect to close the transaction in the second or third quarter of this year. |
| — | Debt Transactions: As previously disclosed in our third quarter earnings release, on October 20, 2010, we completed $4.55 billion of debt refinancing transactions. |
| In January 2011, we entered into interest rate swap agreements with amortizing notional amounts totaling $1.0 billion that went effective on January 31, 2011. These agreements have the economic effect of modifying the LIBOR variable component of our interest rate on an equivalent amount of our Term Loan A debt to fixed rates ranging from 1.59% to 1.64%, resulting in an overall weighted average effective interest rate of 4.36% including the Term Loan A margin of 2.75%. The swap agreements expire on September 30, 2014 and require monthly interest payments. |
| In addition, in January 2011, we also entered into interest rate cap agreements with notional amounts totaling $1.25 billion that went effective on January 31, 2011. These agreements have the economic effect of capping the LIBOR variable component of our interest rate at a maximum of 4.00% on an equivalent amount of our Term Loan B debt. The cap agreements expire on September 30, 2014. |
| — | Center Activity: As of December 31, 2010, we operated or provided administrative services at 1,612 outpatient dialysis centers serving approximately 125,000 patients, of which 1,580 centers are consolidated in our financial statements. During the fourth quarter of 2010, we acquired seven centers, opened 14 new centers, sold two centers and closed five centers. |
1
Outlook
Because of the uncertainties of operating under the new Medicare bundled payment system and the ongoing uncertainties associated with our payor mix, we will not be providing a specific guidance range for 2011 operating income at this time. However, excluding the impact of our recently announced acquisition of DSI that is not expected to close until the second or third quarter of this year, our current projections indicate that 2011 operating income will be flat or modestly down compared to 2010. 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 to discuss our results for the fourth quarter and year ended December 31, 2010 on February 10, 2011 at 5:00 p.m. Eastern Time. The dial in number is (800) 399-4406. A replay of the conference call will be available on DaVita’s official web page, www.davita.com, for the following 30 days.
This release contains forward-looking statements, within the meaning of the federal securities laws, including statements related to our 2011 operating income, our 2011 expected effective tax rate attributable to DaVita Inc. and the anticipated closing of the acquisition. Factors which could impact future results include the uncertainties associated with governmental regulations, general economic and other market conditions, competition, accounting estimates, the variability of our cash flows and the risk factors set forth in our SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2009, our quarterly report on Form 10-Q for the third quarter ended September 30, 2010. The forward-looking statements should be considered in light of these risks and uncertainties.
These risks and uncertainties include those relating to:
| — | the concentration of profits generated from commercial payor plans, |
| — | continued downward pressure on average realized payment rates from commercial payors, which may result in the loss of revenue or patients, |
| — | a reduction in the number of patients under higher-paying commercial plans, |
| — | a reduction in government payment rates or changes to the structure of payments under the Medicare End Stage Renal Disease program or other government-based programs, including, for example, the implementation of a bundled payment rate system beginning January 2011, which will lower reimbursement for services we provide to Medicare patients, and the impact of health care reform legislation that was enacted in the United States in March 2010, |
| — | changes in pharmaceutical or anemia management practice patterns, payment policies, or pharmaceutical pricing, |
| — | our ability to maintain contracts with physician medical directors, |
| — | legal compliance risks, including our continued compliance with complex government regulations, |
| — | the resolution of ongoing investigations by various federal and state governmental agencies, |
| — | continued increased competition from large and medium-sized dialysis providers that compete directly with us, and |
| — | our ability to complete any acquisitions, mergers or dispositions that we might be considering or announce, or integrate and successfully operate any business we may acquire. |
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.
2
DAVITA INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars in thousands, except per share data)
| Three months
ended December 31, |
Year
ended December 31, |
|||||||||||||||
|
2010 |
2009 | 2010 | 2009 | |||||||||||||
| Net operating revenues |
$ | 1,649,417 | $ | 1,568,204 | $ | 6,447,391 | $ | 6,108,800 | ||||||||
| Operating expenses and charges: |
||||||||||||||||
| Patient care costs |
1,135,012 | 1,095,046 | 4,474,735 | 4,248,668 | ||||||||||||
| General and administrative |
157,578 | 137,161 | 579,000 | 531,531 | ||||||||||||
| Depreciation and amortization |
60,071 | 56,865 | 234,378 | 228,986 | ||||||||||||
| Provision for uncollectible accounts |
43,382 | 41,796 | 171,250 | 161,786 | ||||||||||||
| Equity investment income |
(2,031 | ) | (1,376 | ) | (8,999 | ) | (2,442 | ) | ||||||||
| Total operating expenses and charges |
1,394,012 | 1,329,492 | 5,450,364 | 5,168,529 | ||||||||||||
| Operating income |
255,405 | 238,712 | 997,027 | 940,271 | ||||||||||||
| Debt expense |
(53,879 | ) | (44,831 | ) | (181,607 | ) | (185,755 | ) | ||||||||
| Debt refinancing and redemption charges |
(70,255 | ) | _ | (74,382 | ) | _ | ||||||||||
| Other income |
1,091 | 682 | 3,420 | 3,708 | ||||||||||||
| Income before income taxes |
132,362 | 194,563 | 744,458 | 758,224 | ||||||||||||
| Income tax expense |
39,917 | 68,980 | 260,239 | 278,465 | ||||||||||||
| Net income |
92,445 | 125,583 | 484,219 | 479,759 | ||||||||||||
| Less: Net income attributable to noncontrolling interests |
(23,425 | ) | (15,859 | ) | (78,536 | ) | (57,075 | ) | ||||||||
| Net income attributable to DaVita Inc. |
$ | 69,020 | $ | 109,724 | $ | 405,683 | $ | 422,684 | ||||||||
| Earnings per share: |
||||||||||||||||
| Basic earnings per share attributable to DaVita Inc. |
$ | 0.71 | $ | 1.07 | $ | 4.00 | $ | 4.08 | ||||||||
| Diluted earnings per share attributable to DaVita Inc. |
$ | 0.70 | $ | 1.06 | $ | 3.94 | $ | 4.06 | ||||||||
| Weighted average shares for earnings per share: |
||||||||||||||||
| Basic |
97,099,341 | 102,711,126 | 101,504,373 | 103,603,885 | ||||||||||||
| Diluted |
99,058,745 | 103,735,571 | 103,059,171 | 104,167,685 | ||||||||||||
3
DAVITA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
| Year
ended December 31, |
||||||||
| 2010 | 2009 | |||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 484,219 | $ | 479,759 | ||||
| Adjustments to reconcile net income to cash provided by operating activities: |
||||||||
| Depreciation and amortization |
234,378 | 228,986 | ||||||
| Stock-based compensation expense |
45,551 | 44,422 | ||||||
| Tax benefits from stock award exercises |
26,706 | 18,241 | ||||||
| Excess tax benefits from stock award exercises |
(6,283 | ) | (6,950 | ) | ||||
| Deferred income taxes |
75,399 | 50,869 | ||||||
| Equity investment income, net |
(3,298 | ) | (204 | ) | ||||
| Loss on disposal of assets and other non-cash charges |
9,585 | 20,945 | ||||||
| Debt refinancing and redemption charges |
74,382 | - | ||||||
| Changes in operating assets and liabilities, other than from acquisitions and divestitures: |
||||||||
| Accounts receivable |
55,379 | (32,313 | ) | |||||
| Inventories |
(3,892 | ) | 15,115 | |||||
| Other receivables and other current assets |
(44,719 | ) | (35,104 | ) | ||||
| Other long-term assets |
901 | 7,288 | ||||||
| Accounts payable |
4,228 | (104,879 | ) | |||||
| Accrued compensation and benefits |
39,588 | (9,138 | ) | |||||
| Other current liabilities |
(111,444 | ) | (43,543 | ) | ||||
| Income taxes |
(45,737 | ) | 44,578 | |||||
| Other long-term liabilities |
4,740 | (11,362 | ) | |||||
| Net cash provided by operating activities |
839,683 | 666,710 | ||||||
| Cash flows from investing activities: |
||||||||
| Additions of property and equipment, net |
(273,602 | ) | (274,605 | ) | ||||
| Acquisitions |
(188,502 | ) | (87,617 | ) | ||||
| Proceeds from asset sales |
22,727 | 7,697 | ||||||
| Purchase of investments available for sale |
(1,125 | ) | (2,062 | ) | ||||
| Purchase of investments held-to-maturity |
(56,615 | ) | (22,664 | ) | ||||
| Proceeds from sale of investments available for sale |
900 | 16,693 | ||||||
| Proceeds from maturities of investments held-to-maturity |
59,932 | 16,380 | ||||||
| Purchase of equity investments and other assets |
(709 | ) | (2,429 | ) | ||||
| Distributions received on equity investments |
361 | 2,547 | ||||||
| Net cash used in investing activities |
(436,633 | ) | (346,060 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Borrowings |
24,809,258 | 18,767,592 | ||||||
| Payments on long-term debt |
(24,134,502 | ) | (18,828,824 | ) | ||||
| Debt refinancing costs including tender and call premiums |
(113,810 | ) | (42 | ) | ||||
| Purchase of treasury stock |
(618,496 | ) | (153,495 | ) | ||||
| Distributions to noncontrolling interests |
(83,591 | ) | (67,748 | ) | ||||
| Stock award exercises and other share issuances, net |
53,760 | 67,908 | ||||||
| Excess tax benefits from stock award exercises |
6,283 | 6,950 | ||||||
| Contributions from noncontrolling interests |
9,510 | 13,071 | ||||||
| Proceeds from sales of additional noncontrolling interests |
3,410 | 9,375 | ||||||
| Purchases from noncontrolling interests |
(14,214 | ) | (6,859 | ) | ||||
| Net cash used in financing activities |
(82,392 | ) | (192,072 | ) | ||||
| Net increase in cash and cash equivalents |
320,658 | 128,578 | ||||||
| Cash and cash equivalents at beginning of period |
539,459 | 410,88 | ||||||
| Cash and cash equivalents at end of period |
$ | 860,117 | $ | 539,459 | ||||
4
DAVITA INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except per share data)
| ASSETS | December 31, 2010 |
December 31, 2009 |
||||||
| Cash and cash equivalents |
$ | 860,117 | $ | 539,459 | ||||
| Short-term investments |
23,003 | 26,475 | ||||||
| Accounts receivable, less allowance of $235,629 and $229,317 |
1,048,976 | 1,105,903 | ||||||
| Inventories |
76,008 | 70,041 | ||||||
| Other receivables |
304,366 | 263,456 | ||||||
| Other current assets |
43,994 | 40,234 | ||||||
| Income tax receivables |
40,330 | - | ||||||
| Deferred income taxes |
226,060 | 256,953 | ||||||
| Total current assets |
2,622,854 | 2,302,521 | ||||||
| Property and equipment, net |
1,170,808 | 1,104,925 | ||||||
| Amortizable intangibles, net |
162,635 | 136,732 | ||||||
| Equity investments |
25,918 | 22,631 | ||||||
| Long-term investments |
8,848 | 7,616 | ||||||
| Other long-term assets |
32,054 | 32,615 | ||||||
| Goodwill |
4,091,307 | 3,951,196 | ||||||
| $ | 8,114,424 | $ | 7,558,236 | |||||
| LIABILITIES AND EQUITY | ||||||||
| Accounts payable |
$ | 181,033 | $ | 176,657 | ||||
| Other liabilities |
342,943 | 461,092 | ||||||
| Accrued compensation and benefits |
325,477 | 286,121 | ||||||
| Current portion of long-term debt |
74,892 | 100,007 | ||||||
| Income taxes payable |
- | 23,064 | ||||||
| Total current liabilities |
924,345 | 1,046,941 | ||||||
| Long-term debt |
4,233,850 | 3,532,217 | ||||||
| Other long-term liabilities |
89,290 | 87,692 | ||||||
| Alliance and product supply agreement, net |
25,317 | 30,647 | ||||||
| Deferred income taxes |
421,436 | 334,855 | ||||||
| Total liabilities |
5,694,238 | 5,032,352 | ||||||
| Commitments and contingencies |
||||||||
| Noncontrolling interests subject to put provisions |
383,052 | 331,725 | ||||||
| Equity: |
||||||||
| Preferred stock ($0.001 par value, 5,000,000 shares authorized; none issued) |
||||||||
| Common stock ($0.001 par value, 450,000,000 shares authorized; 134,862,283 shares issued; 96,001,535 and 103,062,698 shares outstanding) |
135 | 135 | ||||||
| Additional paid-in capital |
620,546 | 621,685 | ||||||
| Retained earnings |
2,717,817 | 2,312,134 | ||||||
| Treasury stock, at cost (38,860,748 and 31,799,585 shares) |
(1,360,579 | ) | (793,340 | ) | ||||
| Accumulated other comprehensive income (loss) |
503 | (5,548 | ) | |||||
| Total DaVita Inc. shareholders’ equity |
1,978,422 | 2,135,066 | ||||||
| Noncontrolling interests not subject to put provisions |
58,712 | 59,093 | ||||||
| Total equity |
2,037,134 | 2,194,159 | ||||||
| $ | 8,114,424 | $ | 7,558,236 | |||||
5
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
(dollars in millions, except for per share and per treatment data)
| Three months ended | Year
ended December 31, 2010 |
|||||||||||||||
| December 31, 2010 |
September 30, 2010 |
December 31, 2009 |
||||||||||||||
| 1. Consolidated Financial Results: |
||||||||||||||||
| Revenues |
$ | 1,649 | $ | 1,652 | $ | 1,568 | $ | 6,447 | ||||||||
| Operating income |
$ | 255.4 | $ | 256.6 | $ | 238.7 | $ | 997.0 | ||||||||
| Operating income margin |
15.5 | % | 15.5 | % | 15.2 | % | 15.5 | % | ||||||||
| Net income attributable to DaVita Inc. |
$ | 69.0 | $ | 119.4 | $ | 109.7 | $ | 405.7 | ||||||||
| Net income attributable to DaVita Inc., excluding debt refinancing and redemption charges(1) |
$ | 111.9 | $ | 119.4 | $ | 109.7 | $ | 451.1 | ||||||||
| Diluted earnings per share attributable to DaVita Inc. |
$ | 0.70 | $ | 1.15 | $ | 1.06 | $ | 3.94 | ||||||||
| Diluted earnings per share attributable to DaVita Inc., excluding debt refinancing and redemption charges(1) |
$ | 1.13 | $ | 1.15 | $ | 1.06 | $ | 4.38 | ||||||||
| 2. Consolidated Business Metrics: |
||||||||||||||||
| Expenses |
||||||||||||||||
| Patient care costs as a percent of consolidated |
68.8 | % | 69.4 | % | 69.8 | % | 69.4 | % | ||||||||
| General and administrative expenses as a percent of consolidated revenue (2) |
9.6 | % | 9.0 | % | 8.7 | % | 9.0 | % | ||||||||
| Bad debt expense as a percent of consolidated revenue |
2.6 | % | 2.7 | % | 2.7 | % | 2.7 | % | ||||||||
| Consolidated effective tax rate attributable to DaVita |
36.5 | % | 38.5 | % | 38.5 | % | 39.0 | % | ||||||||
| 3. Segment Financial Results: (dollar amounts rounded to nearest million) |
||||||||||||||||
| Dialysis and related lab services |
||||||||||||||||
| Revenues |
$ | 1,545 | $ | 1,553 | $ | 1,483 | $ | 6,073 | ||||||||
| Direct operating expenses |
1,277 | 1,288 | 1,230 | 5,034 | ||||||||||||
| Dialysis segment operating income |
$ | 268 | $ | 266 | $ | 253 | $ | 1,039 | ||||||||
| Other – Ancillary services and strategic initiatives |
||||||||||||||||
| Revenues |
$ | 105 | $ | 98 | $ | 85 | $ | 374 | ||||||||
| Direct operating expenses |
107 | 98 | 90 | 380 | ||||||||||||
| Ancillary segment operating loss |
$ | (2 | ) | $ | - | $ | (5 | ) | $ | (6 | ) | |||||
| Total segment operating income |
$ | 265 | $ | 266 | $ | 248 | $ | 1,034 | ||||||||
| Reconciling items: |
||||||||||||||||
| Stock-based compensation |
(12 | ) | (11 | ) | (11 | ) | (46 | ) | ||||||||
| Equity investment income |
2 | 2 | 1 | 9 | ||||||||||||
| Consolidated operating income |
$ | 255 | $ | 257 | $ | 239 | $ | 997 | ||||||||
6
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA—continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
| Three months ended | Year ended December 31, 2010 |
|||||||||||||||
| December 31, 2010 |
September 30, 2010 |
December 31, 2009 |
||||||||||||||
| 4. Segment Business Metrics: |
||||||||||||||||
| Dialysis and related lab services |
||||||||||||||||
| Volume |
||||||||||||||||
| Treatments |
4,657,498 | 4,578,622 | 4,360,638 | 17,992,805 | ||||||||||||
| Number of treatment days |
79.0 | 79.0 | 79.0 | 313.0 | ||||||||||||
| Treatments per day |
58,956 | 57,957 | 55,198 | 57,485 | ||||||||||||
| Per day year over year increase |
6.8 | % | 5.5 | % | 5.2 | % | 5.6 | % | ||||||||
| Non-acquired growth year over year |
4.4 | % | 3.7 | % | 4.8 | % | 4.1 | % | ||||||||
| Revenue |
||||||||||||||||
| Dialysis and related lab services revenue per treatment |
$ | 331.12 | $ | 338.70 | $ | 339.43 | $ | 336.92 | ||||||||
| Per treatment (decrease) increase from previous quarter |
(2.2 | %) | 1.2 | % | (1.1 | %) | ||||||||||
| Per treatment (decrease) increase from previous year |
(2.4 | %) | (1.3 | %) | 2.1 | % | (0.9 | %) | ||||||||
| Percent of consolidated revenue |
93.7 | % | 94.0 | % | 94.5 | % | 94.2 | % | ||||||||
| Expenses |
||||||||||||||||
| Patient care costs |
||||||||||||||||
| Percent of segment revenue |
67.8 | % | 68.7 | % | 68.9 | % | 68.6 | % | ||||||||
| Per treatment |
$ | 224.91 | $ | 232.93 | $ | 234.40 | $ | 231.65 | ||||||||
| Per treatment (decrease) increase from previous quarter |
(3.4 | %) | 0.3 | % | (1.3 | %) | ||||||||||
| Per treatment (decrease) increase from previous year |
(4.0 | %) | (1.9 | %) | 2.7 | % | (1.3 | %) | ||||||||
| General and administrative expenses |
||||||||||||||||
| Percent of segment revenue |
8.3 | % | 7.8 | % | 7.6 | % | 7.8 | % | ||||||||
| Per treatment |
$ | 27.65 | $ | 26.58 | $ | 25.76 | $ | 26.18 | ||||||||
| Per treatment increase from previous quarter |
4.0 | % | 9.1 | % | 4.8 | % | ||||||||||
| Per treatment increase from previous year |
7.3 | % | 8.2 | % | 0.7 | % | 4.1 | % | ||||||||
| 5. Cash Flow: |
||||||||||||||||
| Operating cash flow |
$ | 120.6 | $ | 161.4 | $ | 152.6 | $ | 839.7 | ||||||||
| Operating cash flow, last twelve months |
$ | 839.7 | $ | 871.7 | $ | 666.7 | ||||||||||
| Free cash flow(1) |
$ | 36.0 | $ | 90.9 | $ | 96.7 | $ | 597.0 | ||||||||
| Free cash flow, last twelve months(1) |
$ | 597.0 | $ | 657.7 | $ | 485.2 | ||||||||||
| Capital expenditures: |
||||||||||||||||
| Routine maintenance/IT other |
$ | 62.1 | $ | 46.7 | $ | 35.1 | $ | 159.1 | ||||||||
| Development and relocations |
$ | 44.5 | $ | 23.3 | $ | 33.9 | $ | 119.7 | ||||||||
| Acquisition expenditures |
$ | 50.9 | $ | 45.9 | $ | 23.6 | $ | 188.5 | ||||||||
| 6. Accounts Receivable: |
||||||||||||||||
| Net receivables |
$ | 1,049 | $ | 1,083 | $ | 1,106 | ||||||||||
| DSO |
|
61 |
|
63 | 68 | |||||||||||
7
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA—continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
| Three months ended | Year ended December 31, 2010 |
|||||||||||||||
| December 31, 2010 |
September 30, 2010 |
December 31, 2009 |
||||||||||||||
| 7. Debt and Capital Structure: |
||||||||||||||||
| Total debt(3) |
$ | 4,317 | $ | 3,361 | $ | 3,630 | ||||||||||
| Net debt, net of cash(3) |
$ | 3,457 | $ | 2,826 | $ | 3,090 | ||||||||||
| Leverage ratio (see Note 1 on page 9) |
2.72 | x | 2.31 | x | 2.56 | x | ||||||||||
| Overall weighted average effective interest rate during the quarter |
4.86 | % | 4.45 | % | 4.69 | % | ||||||||||
| Overall weighted average effective interest rate at end of the quarter |
4.94 | % | 4.18 | % | 4.68 | % | ||||||||||
| Weighted average effective interest rate on the Senior Secured Credit Facilities at end of the quarter |
4.05 | % | 1.80 | % | 2.63 | % | ||||||||||
| Fixed interest rates at December 31, 2010 and September 30, 2010 and economically fixed interest rates as a percentage of our total debt at December 31, 2009(4) |
77 | % | 46 | % | 59 | % | ||||||||||
| Share repurchases |
$ | 420.0 | $ | 98.5 | $ | 59.1 | $ | 618.5 | ||||||||
| 8. Clinical: (quarterly averages) |
||||||||||||||||
| Dialysis adequacy -% of patients with Kt/V > 1.2 |
96 | % | 96 | % | 95 | % | ||||||||||
| 90 day patients average Hb>=10 <=12 |
73 | % | 69 | % | 64 | % | ||||||||||
| Patients with arteriovenous fistulas placed |
67 | % | 67 | % | 65 | % | ||||||||||
| (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 revenue are comprised of the dialysis and related lab services business, other ancillary services and strategic initiatives, as well as stock-based compensation expenses. |
| (3) | This is a non-GAAP financial measure. It excludes an $8.4 million debt discount associated with out Term Loan B for the quarter ended December 31, 2010 that is not actually outstanding debt principal. The quarters ended September 30, 2010 and December 31, 2009, exclude $1.6 million and $2.7 million, respectively, of the unamortized balance of a debt premium associated with our senior notes that is not actually outstanding debt principal. |
| (4) | This includes the Term Loan B outstanding amount for the quarter ended December 31, 2010, since the Term Loan B bears interest at LIBOR (floor of 1.50%) plus a margin of 3.00%. |
8
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA—continued
(unaudited)
(dollars in thousands)
Note 1: Calculation of the Leverage Ratio
Under the Company’s Senior Secured Credit Facilities (Credit Agreement), the leverage ratio is defined as all funded debt plus the face amount of all letters of credit issued, minus cash and cash equivalents, divided by “Consolidated EBITDA”. The leverage ratio determines the interest rate margin payable by the Company for its Term Loan A and revolving line of credit under the Credit Agreement by establishing the margin over the base interest rate (LIBOR) that is applicable. The following leverage ratio was calculated using “Consolidated EBITDA” as defined in the Credit Agreement. The calculation below is based on the last twelve months of “Consolidated EBITDA”, pro forma for routine acquisitions that occurred during the period. The Company’s management believes the presentation of “Consolidated EBITDA” is useful to investors to enhance their understanding of the Company’s leverage ratio under its Credit Agreement.
| Rolling twelve months ended December 31, 2010 |
||||
| Net income attributable to DaVita Inc. |
$ | 405,683 | ||
| Income taxes |
260,239 | |||
| Interest expense |
171,293 | |||
| Depreciation and amortization |
234,378 | |||
| Debt refinancing and redemption charges |
74,382 | |||
| Noncontrolling interests |
78,536 | |||
| Equity investment income, net |
(3,298 | ) | ||
| Amortization of deferred financing costs |
9,341 | |||
| Other |
11,680 | |||
| Stock-based compensation expense |
45,551 | |||
| “Consolidated EBITDA” |
$ | 1,287,785 | ||
| December 31, 2010 | ||||
| Total debt, excluding debt discount of $8.4 million |
$ | 4,317,123 | ||
| Letters of credit issued |
45,789 | |||
| 4,362,912 | ||||
| Less: cash and cash equivalents |
(860,117 | ) | ||
| Consolidated net debt |
$ | 3,502,795 | ||
| Last twelve months “Consolidated EBITDA” |
$ | 1,287,785 | ||
| Leverage ratio |
2.72x | |||
In accordance with the Credit Agreement, the Company’s leverage ratio cannot exceed 4.25 to 1.0 as of December 31, 2010. At that date the Company’s leverage ratio did not exceed 4.25 to 1.0.
9
DAVITA INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
1. Net income attributable to DaVita Inc. excluding after-tax debt refinancing and redemption charges and diluted earnings per share attributable to DaVita Inc. excluding after-tax debt refinancing and redemption charges.
We believe that net income attributable to DaVita Inc. excluding after-tax debt refinancing and redemption charges and diluted earnings per share attributable to DaVita Inc. excluding after-tax debt refinancing and redemption charges enhances a user’s understanding of our normal net income attributable to DaVita Inc. and diluted earnings per share attributable to DaVita Inc. for these periods by providing a measure that is more meaningful because it excludes charges that resulted from the refinancing of our Senior Secured Credit Facilities and the redemption of the aggregate principal amount of our outstanding 6 5/8% senior notes due 2013 and the aggregate principal amount of our outstanding 7 1/4% senior subordinated notes 2015 and accordingly, is more comparable to prior periods and indicative of consistent net income attributable to DaVita Inc. and diluted earnings per share attributable to DaVita 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 Inc. and diluted earnings per share attributable to DaVita Inc.
| Net income attributable to DaVita Inc. excluding after-tax debt refinancing and redemption charges: |
Three months ended | Year ended December 31, 2010 |
||||||||||||||
| December 31, 2010 |
September 30, 2010 |
December 31, 2009 |
||||||||||||||
| Net income attributable to DaVita Inc. |
$ | 69,020 | $ | 119,387 | $ | 109,724 | $ | 405,683 | ||||||||
| Add: Debt refinancing and redemption charges |
70,255 | - | - | 74,382 | ||||||||||||
| Less: Related income tax |
(27,329 | ) | - | - | (28,935 | ) | ||||||||||
| $ | 111,946 | $ | 119,387 | $ | 109,724 | $ | 451,130 | |||||||||
| Diluted earnings per share attributable to DaVita Inc. excluding after-tax debt refinancing and redemption charges: |
Three months ended | Year ended December 31, 2010 |
||||||||||||||
| December 31, 2010 |
September 30, 2010 |
December 31, 2009 |
||||||||||||||
| Diluted earnings per share attributable to DaVita Inc. |
$ | 0.70 | $ | 1.15 | $ | 1.06 | $ | 3.94 | ||||||||
| Add: Net after-tax debt refinancing and redemption charges |
0.43 | - | - | 0.44 | ||||||||||||
| $ | 1.13 | $ | 1.15 | $ | 1.06 | $ | 4.38 | |||||||||
10
DAVITA INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
2. Effective Income Tax Rates
We believe that reporting the effective income tax rate attributable to DaVita Inc. enhances an investor’s understanding of DaVita’s effective income tax rate for the periods presented because it excludes noncontrolling owners’ income that primarily relates to non-tax paying entities and accordingly is more comparable to prior periods presentations regarding DaVita’s effective income tax rate and is more meaningful to an investor to fully understand the related income tax effects on DaVita Inc.’s operating results. This is not a measure 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 Inc. is as follows:
| Three months ended | Year ended December 31, 2010 |
|||||||||||||||
| December 31, 2010 |
September 30, 2010 |
December 31, 2009 |
||||||||||||||
| Income before income taxes |
$ | 132,362 | $ | 217,860 | $ | 194,563 | $ | 744,458 | ||||||||
| Income tax expense |
$ | 39,917 | $ | 74,979 | $ | 68,980 | $ | 260,239 | ||||||||
| Effective income tax rate |
30.2 | % | 34.4 | % | 35.5 | % | 35.0 | % | ||||||||
| Three months ended | Year ended December 31, 2010 |
|||||||||||||||
| December 31, 2010 |
September 30, 2010 |
December 31, 2009 |
||||||||||||||
| Income before income taxes |
$ | 132,362 | $ | 217,860 | $ | 194,563 | $ | 744,458 | ||||||||
| Less: Noncontrolling owners’ income primarily attributable to non-tax paying entities |
(23,602 | ) | (23,703 | ) | (16,149 | ) | (79,405 | ) | ||||||||
| Income before income taxes attributable to DaVita Inc. |
$ | 108,760 | $ | 194,157 | $ | 178,414 | $ | 665,053 | ||||||||
| Income tax expense |
$ | 39,917 | $ | 74,979 | $ | 68,980 | $ | 260,239 | ||||||||
| Less income tax attributable to noncontrolling interests |
(177 | ) | (209 | ) | (290 | ) | (869 | ) | ||||||||
| Income tax attributable to DaVita Inc. |
$ | 39,740 | $ | 74,770 | $ | 68,690 | $ | 259,370 | ||||||||
| Effective income tax rate attributable to DaVita Inc. |
36.5 | % | 38.5 | % | 38.5 | % | 39.0 | % | ||||||||
11
DAVITA INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
3. Free cash flow
Free cash flow represents net cash provided by operating activities less income distributions to noncontrolling interests and capital expenditures for routine maintenance and information technology. We believe free cash flow is a useful adjunct to cash flow from operating activities and other measurements under GAAP, since free cash flow is a meaningful measure of our ability to fund acquisition and development activities and meet our debt service requirements. In addition, free cash flow excluding income distributions to noncontrolling interests provides an investor with an understanding of free cash flows that are attributable to DaVita 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 | Year ended December 31, 2010 |
|||||||||||||||
| December 31, 2010 |
September 30, 2010 |
December 31, 2009 |
||||||||||||||
| Cash provided by operating activities |
$ | 120,551 | $ | 161,366 | $ | 152,591 | $ | 839,683 | ||||||||
| Less: Income distributions to noncontrolling interests |
(22,479 | ) | (23,811 | ) | (20,860 | ) | (83,591 | ) | ||||||||
| Cash provided by operating activities attributable to DaVita Inc. |
98,072 | 137,555 | 131,731 | 756,092 | ||||||||||||
| Less: Expenditures for routine maintenance and information technology |
(62,083 | ) | (46,690 | ) | (35,066 | ) | (159,096 | ) | ||||||||
| Free cash flow |
$ | 35,989 | $ | 90,865 | $ | 96,665 | $ | 596,996 | ||||||||
| Rolling 12-Month Period | ||||||||||||||||
| December 31, 2010 |
September 30, 2010 |
December 31, 2009 |
||||||||||||||
| Cash provided by operating activities |
$ | 839,683 | $ | 871,723 | $ | 666,710 | ||||||||||
| Less: Income distributions to noncontrolling interests |
(83,591 | ) | (81,972 | ) | (67,748 | ) | ||||||||||
| Cash provided by operating activities attributable to DaVita Inc. |
756,092 | 789,751 | 598,962 | |||||||||||||
| Less: Expenditures for routine maintenance and information technology |
(159,096 | ) | (132,079 | ) | (113,763 | ) | ||||||||||
| Free cash flow |
$ | 596,996 | $ | 657,672 | $ | 485,199 | ||||||||||
12