American Renal Associates Holdings, Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - American Renal Associates Holdings, Inc.	d254493d8k.htm

Exhibit 99.1

LOGO

AMERICAN RENAL ASSOCIATES ANNOUNCES THIRD QUARTER 2011 RESULTS

Beverly, Massachusetts (November 9, 2011) – American Renal Associates Holdings, Inc., and its subsidiary American Renal Holdings Inc. announced results today for the quarter ended September 30, 2011. Financial and operating highlights include:

•

Revenues – Revenues for the three and nine months ended September 30, 2011 were $92.7 million and $267.0 million, respectively, as compared to $77.2 million and $222.9 million, respectively, for the same periods in 2010.

•

Adjusted EBITDA⁽¹⁾ – Adjusted EBITDA for the three and nine months ended September 30, 2011 was $17.3 million and $48.3 million, respectively. This compares to Adjusted EBITDA on a pro forma basis⁽²⁾ for the three and nine months ended September 30, 2010 of $13.3 million and $38.3 million, respectively.

•

Center Activity – As of September 30, 2011, we provided services at 101 outpatient dialysis centers serving 7,070 patients.

•

Volume – Total treatments for the third quarter of 2011 were 260,976 or 3,303 treatments per day, representing a per day increase of 19.0% over the third quarter of 2010. Non-acquired treatment growth was 16.5% in the third quarter.

American Renal Associates will hold a conference call to discuss its results for the third quarter ended September 30, 2011 today at 5:00 p.m. Eastern Time. The live call can be accessed by dialing either 1-877-407-8029 or 201-689-8029.

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on management’s current expectations, the accuracy of which is necessarily subject to risks and uncertainties. These statements are not historical in nature and use words such as “anticipate”, “estimate”, “expect”, “project”, “intend”, “forecast”, “plan”, “believe”, and other words of similar meaning in connection with any discussion of future operating or financial performance. Many factors may cause actual results to differ materially from anticipated results including product developments, sales efforts, income tax matters, the outcomes of contingencies such as legal proceedings, and other economic, business, competitive and regulatory factors. We undertake no obligation to update our forward-looking statements.

(1)

This press release includes Adjusted EBITDA, Adjusted EBITDA including noncontrolling interests and Pro Forma Adjusted EBITDA, all of which are not financial measures defined by Generally Accepted Accounting Principles (GAAP). See Reconciliation of Non-GAAP Financial Measures section at the end of this press release for the definitions of these measures as well as their reconciliations to net income.

(2)	See discussion and reconciliation of historical to pro forma results on pages 5-6.

(1)

About American Renal Associates

American Renal Associates LLC (“ARA”) is the operating subsidiary of American Renal Associates Holdings, Inc. and is a leading owner and provider of outpatient kidney dialysis centers operating centers in partnership with nephrologists throughout the United States. The Company’s unique operating philosophy merges physician autonomy, leading edge patient care and financial partnership between the nephrologists and ARA. Consequently, ARA has become one of the largest providers of outpatient kidney dialysis services in the nation with more than 101 facilities owned. ARA centers are located in 19 states and the District of Columbia. For more information, visit www.americanrenal.com.

Contact:

Jonathan Wilcox

Chief Financial Officer

978-922-3080 ext. 385

(2)

American Renal Associates Holdings, Inc.

Consolidated Statements of Income

Three Months Ended September 30, 2011

(unaudited and in thousands)


	Successor			Successor
	Three Months Ended September 30, 2011			Three Months Ended September 30, 2010
Net operating revenues	$	92,666		$	77,231
Operating expenses:
Patient care costs		54,922			49,321
General and administrative		9,701			8,001
Merger and transaction-related costs		228			152
Depreciation and amortization		4,509			4,085
Provision for uncollectible accounts		1,118			371

Total operating expenses		70,478			61,930

Operating Income		22,188			15,301
Interest expense, net		(9,752	)		(5,885	)

Income before income taxes		12,436			9,416
Income tax expense		1,038			977

Net income		11,398			8,439
Less: Net income attributable to noncontrolling interests		(10,050	)		(6,907	)

Net income attributable to ARAH	$	1,348		$	1,532

(3)

American Renal Associates Holdings, Inc.

Consolidated Statements of Operations

Nine Months Ended September 30, 2011

(unaudited and in thousands)


	Successor			Successor			Predecessor
	Nine Months Ended September 30, 2011			May 8 through September 30, 2010			January 1 through May 7, 2010
Net operating revenues	$	266,975		$	120,833		$	102,094
Operating expenses:
Patient care costs		162,497			78,335			66,042
General and administrative		29,418			14,991			10,016
Merger and transaction-related costs		450			14,839			7,378
Depreciation and amortization		13,222			6,434			4,429
Provision for (recoveries) uncollectible accounts		3,492			1,021			(334	)

Total operating expenses		209,079			115,620			87,531

Operating Income		57,896			5,213			14,563
Interest expense, net		(26,376	)		(9,205	)		(5,717	)

Income (loss) before income taxes		31,520			(3,992	)		8,846
Income tax expense (benefit)		1,812			(649	)		2,264

Net income (loss)		29,708			(3,343	)		6,582
Less: Net income attributable to noncontrolling interests		(27,186	)		(10,949	)		(9,266	)

Net income (loss) attributable to ARAH	$	2,522		$	(14,292	)	$	(2,684	)

(4)

American Renal Associates Holdings, Inc.

Pro Forma Consolidated Statement of Operations

Three Months Ended September 30, 2010

(unaudited and in thousands)

Set forth below is our summary historical and pro forma consolidated statements of operations for the periods indicated. The unaudited consolidated statements of income give effect to the pro forma adjustments as if the “Merger” and “Transactions” occurred as of January 1, 2010. See the American Renal Holdings Inc. form S-4 as filed with the Securities and Exchange Commission on November 4, 2010 for a definition of the “Merger” and “Transactions”. The unaudited pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances. The unaudited pro forma condensed consolidated statement of operations is presented for informational purposes only. The unaudited pro forma statement of operations does not purport to represent what our results of operations would have been had the adjustments actually occurred on the dates indicated, and they do not purport to project our results of operations for any future period or as of any future date.

The Merger was accounted for as a business combination using the acquisition method of accounting. The pro forma information presented includes all adjustments required to reflect the fair value of assets, both tangible and intangible, acquired, liabilities assumed and noncontrolling interests based upon valuations of assets acquired, liabilities assumed and noncontrolling interests.


	Historical (a)			Pro Forma Adjustments			Pro Forma Results
	Successor
	Three Months Ended September 30, 2010						Three Months Ended September 30, 2010
Net operating revenues	$	77,231		$	—		$	77,231
Operating expenses:
Patient care costs		49,321			—			49,321
General and administrative		8,001			—			8,001
Merger and transaction-related costs		152			(152	)(b)		—
Depreciation and amortization		4,085			—			4,085
Provision for uncollectible accounts		371			—			371

Total operating expenses		61,930			(152	)		61,778

Operating Income		15,301			152			15,453
Interest expense, net		(5,885	)		(3,700	)(c)		(9,585	)

Income before income taxes		9,416			(3,548	)		5,868
Income tax (benefit) expense		977			(1,445	)(d)		(468	)

Net income		8,439			(2,103	)		6,336
Less: Net income attributable to noncontrolling interests		(6,907	)		—			(6,907	)

Net income (loss) attributable to ARAH	$	1,532		$	(2,103	)	$	(571	)

Notes to Pro Forma Adjustments:

(a)	The amounts in these columns represent our historical balances and results for the periods reflected.

(b)	Reflects a pro forma adjustment to exclude Transaction costs incurred and expensed by us resulting from the Transactions.

(c)	Reflects increased interest expense assuming the Senior Secured Notes, Senior PIK Toggle Notes and Revolving Credit Facility were outstanding on January 1, 2010.

(d)	Reflects the effects of our income tax provision of the pro forma adjustments.

(5)

American Renal Associates Holdings, Inc.

Pro Forma Consolidated Statement of Operations

Nine Months Ended September 30, 2010

(unaudited and in thousands)


	Historical (a)						Pro Forma Adjustments			Pro Forma Results
	Successor			Predecessor						Nine Months Ended September 30, 2010
	May 8 through September 30, 2010			January 1 through May 7, 2010						Nine Months Ended September 30, 2010
Net operating revenues	$	120,833		$	102,094		$	—		$	222,927
Operating expenses:
Patient care costs		78,335			66,042			(1,640	)(b)		142,737
General and administrative		14,991			10,016			(2,257	)(c)		22,750
Merger and transaction-related costs		14,839			7,378			(22,217	)(d)		—
Depreciation and amortization		6,434			4,429			1,459	(e)		12,322
Provision for (recoveries) uncollectible accounts		1,021			(334	)		—			687

Total operating expenses		115,620			87,531			(24,655	)		178,496

Operating Income		5,213			14,563			24,655			44,431
Interest expense, net		(9,205	)		(5,717	)		(13,699	)(f)		(28,621	)

Income (loss) before income taxes		(3,992	)		8,846			10,956			15,810
Income tax (benefit) expense		(649	)		2,264			(3,265	)(g)		(1,650	)

Net income (loss)		(3,343	)		6,582			14,221			17,460
Less: Net income attributable to noncontrolling interests		(10,949	)		(9,266	)		632	(h)		(19,583	)

Net income (loss) attributable to ARAH	$	(14,292	)	$	(2,684	)	$	14,853		$	(2,123	)

Notes to Pro Forma Adjustments:

(a)	The amounts in these columns represent our historical balances and results for the periods reflected.

(b)	Reflects removing cost associated with accelerated vesting of equity awards of $1,586 and decreased rent expense from the valuation of leases of $54.

(c)	Reflects removing cost associated with accelerated vesting of equity awards of $2,450 offset by a pro forma sponsor management fee of $193.

(d)	Reflects a pro forma adjustment to exclude costs incurred and expensed by us resulting from the Transactions.

(e)	Reflects increased depreciation and amortization for the allocation of the purchase price to tangible and intangible assets.

(f)	Reflects increased interest expense assuming the Senior Secured Notes, Senior PIK Toggle Notes and Revolving Credit Facility were outstanding on January 1, 2010.

(g)	Reflects the effects of our income tax provision of the pro forma adjustments.

(h)	Reflects the noncontrolling interest impact of the pro forma adjustment to depreciation and amortization.

(6)

American Renal Associates Holdings, Inc.

Condensed Consolidated Balance Sheets

(unaudited and in thousands)


	Successor		Successor
	September 30,		December 31,
	2011		2010
Assets
Cash and cash equivalents	$	37,872	$	21,179
Patient accounts receivable, net		56,534		51,431
Income tax receivable		283		1,458
Inventories, prepaid expenses and other current assets		15,571		16,318

Total current assets		110,260		90,386
Property and equipment, net		68,049		62,742
Deferred financing costs, net		5,125		4,973
Intangible assets, net		35,860		38,511
Other long-term assets		1,686		1,592
Goodwill		502,175		501,790

Total assets	$	723,155	$	699,994

Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses	$	58,818	$	49,923
Amount due to sellers		2,192		5,083
Current portion of long-term debt		3,902		4,096
Current portion of capital lease obligations		50		48

Total current liabilities		64,962		59,150
Long-term debt, less current portion		386,288		245,594
Capital lease obligations, less current portion		124		162
Other long-term liabilities		3,153		2,881
Deferred tax liabilities		13,807		13,807
Noncontrolling interests subject to put provisions		45,570		44,236
Total equity		209,251		334,164

Total liabilities & equity	$	723,155	$	699,994

(7)

American Renal Associates Holdings, Inc.

Supplemental Business Metrics

(unaudited)


	Successor						Pro Forma			Successor			Pro Forma
	Three Months			Three Months			Three Months			Nine Months			Nine Months
	Ended			Ended			Ended			Ended			Ended
	September 30,			June 30,			September 30,			September 30,			September 30,
	2011			2011			2010			2011			2010
Volume
Treatments		260,976			252,917			219,225			757,131			632,556
Number of treatment days		79			78			79			234			234
Treatments per day		3,303			3,243			2,775			3,236			2,703
Non-acquired growth year over year		16.5	%		15.2	%		12.1	%		16.8	%		15.5	%
Revenue
Net operating revenues (in thousands)	$	92,666		$	89,641		$	77,231		$	266,975		$	222,927
Net operating revenues per treatment	$	355.07		$	354.43		$	352.29		$	352.61		$	352.42
Per treatment increase from previous quarter	$	0.65		$	6.34		$	0.11			N/A			N/A
Expenses
Patient care costs
Amount (in thousands)	$	54,922		$	53,295		$	49,321		$	162,497		$	142,737
As a % of net operating revenues		59.3	%		59.5	%		63.9	%		60.9	%		64.0	%
Per treatment	$	210.45		$	210.72		$	224.98		$	214.62		$	225.65
Per treatment increase (decrease) from previous quarter	$	(0.28	)	$	(12.44	)	$	1.38			N/A			N/A
General and administrative expenses
Amount (in thousands)	$	9,701		$	9,329		$	8,001		$	29,418		$	22,750
As a % of net operating revenues		10.5	%		10.4	%		10.4	%		11.0	%		10.2	%
Per treatment	$	37.17		$	36.89		$	36.50		$	38.85		$	35.97
Per treatment increase (decrease) from previous quarter	$	0.29		$	(5.82	)	$	(3.98	)		N/A			N/A
Provision for uncollectible accounts
Percentage of revenue		1.2	%		1.2	%		0.5	%		1.3	%		0.3	%
Adjusted EBITDA
Adjusted EBITDA including noncontrolling interests (in thousands)	$	27,354		$	26,274		$	20,220		$	75,503		$	57,929
Adjusted EBITDA (in thousands)	$	17,304		$	16,687		$	13,313		$	48,317		$	38,346
Accounts receivable DSO (days)		55			57			54			N/A			N/A

(8)

American Renal Associates Holdings, Inc.

Reconciliation of Non-GAAP Financial Measures:

(unaudited and in thousands)

To supplement our consolidated financial statements prepared in accordance with GAAP, we use the following measures defined as Non-GAAP measures by the SEC: Adjusted EBITDA (including noncontrolling interests) and Adjusted EBITDA. Adjusted EBITDA is defined as net income attributable to ARAH before income taxes, interest expense, depreciation and amortization, and we further adjust for other non-cash charges and non-recurring charges. We believe this information is useful for evaluating our business and understanding our operating performance in a manner similar to management. We believe Adjusted EBITDA is helpful in highlighting trends because Adjusted EBITDA excludes the results of decisions that are outside the control of operating management and can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. In addition, we present Adjusted EBITDA because it is one of the components used in the calculations under the covenants contained in our revolving credit facility. Adjusted EBITDA is not a measure of operating performance computed in accordance with GAAP and should not be considered as a substitute for operating income, net income, cash flows from operations, or other statement of income or cash flow data prepared in conformity with GAAP, or as measures of profitability or liquidity. In addition, Adjusted EBITDA may not be comparable to similarly titled measures for other companies. Adjusted EBITDA may not be indicative of historical operating results, and we do not mean for it to be predictive of future results of operations or cash flows. Adjusted EBITDA has limitations as an analytical tool, and you should not consider this item in isolation, or as a substitute for an analysis of our results as reported under GAAP. Some of these limitations are that Adjusted EBITDA:

•

does not include interest expense—as we have borrowed money for general corporate purposes, interest expense is a necessary element of our costs and ability to generate profits and cash flows;

•

does not include depreciation and amortization—because construction and operation of our dialysis clinics requires significant

•

capital expenditures, depreciation and amortization are a necessary element of our costs and ability to generate profits;

•

does not include stock-based compensation expense;

•

does not reflect changes in, or cash requirements for, our working capital needs; and

•

does not include certain income tax payments that represent a reduction in cash available to us.

The following table presents the reconciliation from net income to Adjusted EBITDA for the periods indicated:


	Successor						Pro Forma			Successor			Pro Forma
	Three Months			Three Months			Three Months			Nine Months			Nine Months
	Ended			Ended			Ended			Ended			Ended
	September 30,			June 30,			September 30,			September 30,			September 30,
	2011			2011			2010			2011			2010
Reconciliation of Net income to Adjusted EBITDA:
Net income	$	11,398		$	10,905		$	6,336		$	29,708		$	17,460
Interest expense, net		9,752			9,583			9,585			26,376			28,621
Income tax expense		1,038			869			(468	)		1,812			(1,650	)
Depreciation and amortization		4,509			4,364			4,085			13,222			12,322
Merger and transaction-related costs		228			186			—			450			—
Stock-based compensation		257			194			544			3,419			763
Management fee		172			173			138			516			413

Adjusted EBITDA (including noncontrolling interests)	$	27,354		$	26,274		$	20,220		$	75,503		$	57,929
Less: Net income attributable to noncontrolling interests		(10,050	)		(9,587	)		(6,907	)		(27,186	)		(19,583	)

Adjusted EBITDA	$	17,304		$	16,687		$	13,313		$	48,317		$	38,346

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American Renal Associates Holdings, Inc.

Supplemental Information

(unaudited and in thousands)

The following tables present our selected consolidating financial information, for American Renal Associates Holdings, Inc. (ARAH) and American Renal Holdings Inc. (ARH) which you should read in conjunction with our condensed consolidated financials.


	For the Three Months Ended September 30, 2011									For the Pro Forma Three Months Ended September 30, 2010
	ARAH			ARH			Total			ARAH			ARH			Total
Interest expense, net		($3,936	)		($5,816	)		($9,752	)		($3,940	)		($5,645	)		($9,585	)
Income tax (benefit) expense		(1,564	)		2,602			1,038			(1,565	)	$	1,097			(468	)

	For the Nine Months Ended September 30, 2011									For the Pro Forma Nine Months Ended September 30, 2010
	ARAH			ARH			Total			ARAH			ARH			Total
Interest expense, net		($8,982	)		($17,394	)		($26,376	)		($11,686	)		($16,935	)		($28,621	)
Income tax (benefit) expense		(3,568	)		5,380			1,812			(4,642	)		2,992			(1,650	)

	As of September 30, 2011									As of December 31, 2010
	ARAH			ARH			Total			ARAH			ARH			Total
Assets
Cash and cash equivalents	$	307		$	37,565		$	37,872		$	2,940		$	18,239		$	21,179
Deferred financing costs, net		646			4,479			5,125			—			4,973			4,973
Liabilities
Current portion of long-term debt		—			3,902			3,902			—			4,096			4,096
Long-term debt, less current portion		137,821			248,467			386,288			—			245,594			245,594

(10)

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