American Renal Holdings Inc. - FORM 8-K - EX-99.1 - PRELIMINARY FINANCIAL RESULTS - February 1, 2013

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Exhibit 99.1

American Renal Associates Holdings, Inc.

Consolidated Statements of Income

(preliminary and unaudited and in thousands)

 

    

Three Months Ended

December 31,

    

Year Ended

December 31,

  
     2012     2011     2012     2011  

Patient service operating revenues

    $ 116,686      $ 93,106      $ 424,010      $ 360,081   

Provision for uncollectible accounts

      (796 )      (686 )      (2,543 )      (4,178 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net patient service operating revenues

      115,890        92,420        421,467        355,903   

Operating expenses:

         

Patient care costs

      65,856        54,539        244,973        217,036   

General and administrative

      12,281        9,908        45,904        39,326   

Merger related costs

      —          154        —          604   

Depreciation and amortization

      5,840        4,643        20,991        17,865   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total operating expenses

      83,977        69,244        311,868        274,831   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating Income

      31,913        23,176        109,599        81,072   

Interest expense, net

      (10,459 )      (9,860 )      (40,884 )      (36,236 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income before income taxes

      21,454        13,316        68,715        44,836   

Income tax expense

      2,628        2,588        8,266        4,400   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income

      18,826        10,728        60,449        40,436   

Less: Net income attributable to noncontrolling interests

      (14,884 )      (10,344 )      (50,808 )      (37,530 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income attributable to ARAH

    $ 3,942      $ 384      $ 9,641      $ 2,906   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

(1)

American Renal Associates Holdings, Inc.

Condensed Consolidated Balance Sheets

(preliminary and unaudited and in thousands)

 

     December 31,      December 31,  
     2012      2011  

Assets

      

Cash

    $ 31,023       $ 36,774   

Patient accounts receivable, net

      60,019         56,027   

Income tax receivable

      —           1,322   

Inventories, prepaid expenses and other current assets

      16,816         15,101   
  

 

 

     

 

 

  

Total current assets

      107,858         109,224   

Property and equipment, net

      91,026         72,416   

Deferred financing costs, net

      4,400         4,962   

Intangible assets, net

      34,480         35,416   

Other long-term assets

      3,238         1,734   

Goodwill

      551,390         504,045   
  

 

 

     

 

 

  

Total assets

    $ 792,392       $ 727,797   
  

 

 

     

 

 

  

Liabilities and Equity

      

Current liabilities:

      

Accounts payable and accrued expenses

    $ 51,738       $ 52,682   

Amount due to sellers

      675         2,192   

Current portion of long-term debt

      3,644         2,662   

Current portion of capital lease obligations

      98         51   
  

 

 

     

 

 

  

Total current liabilities

      56,155         57,587   

Long-term debt, less current portion

      416,816         391,084   

Capital lease obligations, less current portion

      129         111   

Other long-term liabilities

      4,213         3,362   

Deferred tax liabilities

      17,425         16,233   

Noncontrolling interests subject to put provisions

      59,538         47,492   

Total equity

      238,116         211,928   
  

 

 

     

 

 

  

Total liabilities and equity

    $ 792,392       $ 727,797   
  

 

 

     

 

 

  

 

(2)

American Renal Associates Holdings, Inc.

Supplemental Business Metrics

(preliminary and unaudited)

 

     Three Months     Three Months     Three Months     Year     Year  
     Ended     Ended     Ended     Ended     Ended  
     December 31,     September 30,     December 31,     December 31,     December 31,  
     2012     2012     2011     2012     2011  

Volume

           

Treatments

      324,810        301,901        266,313        1,187,390        1,023,444   

Number of treatment days

      79        78        79        313        313   

Treatments per day

      4,112        3,871        3,371        3,794        3,270   

Non-acquired growth year over year

      14.5 %      8.5 %      11.3 %      11.7 %      17.4 % 

Revenue

           

Patient service operating revenues (in thousands)

    $ 116,686      $ 108,288      $ 93,106      $ 424,010      $ 360,081   

Patient service operating revenues per treatment

    $ 359.24      $ 358.69      $ 349.61      $ 357.09      $ 351.83   

Per treatment increase from previous quarter

    $ 0.55      $ 1.29      $ (5.46 )      N/A        N/A   

Provision for uncollectible accounts

           

As a % of patient service operating revenues

      0.7 %      0.8 %      0.7 %      0.6 %      1.2 % 

Expenses

           

Patient care costs

           

Amount (in thousands)

    $ 65,856      $ 62,245      $ 54,539      $ 244,973      $ 217,036   

As a % of patient service operating revenues

      56.4 %      57.5 %      58.6 %      57.8 %      60.3 % 

Per treatment

    $ 202.75      $ 206.18      $ 204.79      $ 206.31      $ 212.06   

Per treatment decrease from previous quarter

    $ (3.43 )    $ (0.08 )    $ (5.66 )      N/A        N/A   

General and administrative expenses

           

Amount (in thousands)

    $ 12,281      $ 11,705      $ 9,908      $ 45,904      $ 39,326   

As a % of patient service operating revenues

      10.5 %      10.8 %      10.6 %      10.8 %      10.9 % 

Per treatment

    $ 37.81      $ 38.77      $ 37.20      $ 38.66      $ 38.43   

Per treatment (decrease) increase from previous quarter

    $ (0.96 )    $ (1.53 )    $ 0.03        N/A        N/A   

Adjusted EBITDA

           

Adjusted EBITDA including noncontrolling interests (in thousands)

    $ 38,330      $ 34,028      $ 28,376      $ 132,784      $ 103,879   

Adjusted EBITDA (in thousands)

    $ 23,446      $ 20,859      $ 18,032      $ 81,976      $ 66,349   

Accounts receivable DSO (days)

      47        47        54        N/A        N/A   

 

(3)

American Renal Associates Holdings, Inc.

Reconciliation of Non-GAAP Financial Measures:

(preliminary and 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:

 

     Three Months     Three Months     Three Months     Year     Year  
     Ended     Ended     Ended     Ended     Ended  
     December 31,     September 30,     December 31,     December 31,     December 31,  
     2012     2012     2011     2012     2011  

Reconciliation of Net income to Adjusted EBITDA:

           

Net income

    $ 18,826      $ 14,898      $ 10,728      $ 60,449      $ 40,436   

Interest expense, net

      10,459        10,247        9,860        40,884        36,236   

Income tax expense

      2,628        2,991        2,588        8,266        4,400   

Depreciation and amortization

      5,840        5,333        4,643        20,991        17,865   

Merger related costs

      —          —          154        —          604   

Stock-based compensation

      233        221        230        897        3,649   

Management fee

      344        338        173        1,297        689   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA (including noncontrolling interests)

    $ 38,330      $ 34,028      $ 28,376      $ 132,784      $ 103,879   

Less: Net income attributable to noncontrolling interests

      (14,884 )      (13,169 )      (10,344 )      (50,808 )      (37,530 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA

    $ 23,446      $ 20,859      $ 18,032      $ 81,976      $ 66,349   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(4)

American Renal Holdings Inc. Reports