DaVita Inc. (NYSE: DVA) today announced results for the quarter
ended September 30, 2009. Net income attributable to DaVita Inc.
for the three and nine months ended September 30, 2009 was $110.9
million and $313.0 million, or $1.06 per share and $3.00 per share,
respectively. This compares to net income attributable to DaVita
Inc. for the three and nine months ended September 30, 2008 of
$93.9 million and $275.8 million, or $0.89 per share and $2.59 per
share, respectively.
Financial and operating highlights include:
- Cash Flow: For the
rolling 12 months ended September 30, 2009 operating cash flow was
$713 million and free cash flow was $533 million. For the three
months ended September 30, 2009 operating cash flow was $167
million and free cash flow was $125 million.
- Operating Income:
Operating income for the three and nine months ended September 30,
2009 was $245 million and $702 million, respectively, as compared
to $222 million and $646 million, respectively, for the same
periods of 2008.
- Volume: Total treatments
for the third quarter of 2009 were 4,339,195, or 54,927 treatments
per day, representing a per day increase of 6.1% over the third
quarter of 2008. Non-acquired treatment growth in the quarter was
5.2% over the prior year’s third quarter.
- Effective Tax Rate: Our
effective tax rate was 37.0% and 37.2% for the three and nine
months ended September 30, 2009, 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 40.0% for the three and nine months
ended September 30, 2009 which was in the range of our previously
stated guidance. Our effective tax rate for 2009 is projected to be
in the range of 36.5% to 37.5% and our 2009 effective tax rate
attributable to DaVita Inc. is still projected to be in a range of
39.5% to 40.5%.
- Share Repurchases: During
the third quarter of 2009, we repurchased a total of 1,108,784
shares of our common stock for $62.4 million, or an average price
of $56.25 per share. For the first nine months of 2009 we
repurchased a total of 1,853,184 shares of our common stock for
$94.4 million, or an average price of $50.93 per share. In
addition, we repurchased 1,049,435 shares of our common stock for
$59.1 million, or an average price of $56.32 per share, from
October 1, 2009 through October 7, 2009. All of these share
repurchases were consummated pursuant to previously announced
authorizations by our Board of Directors. On October 8, 2009, our
Board of Directors authorized an additional $500 million for share
repurchases. We have not repurchased any additional shares of our
common stock under this authorization. Therefore, the total
outstanding authorization for share repurchases is currently $500
million.
- Center Activity: As of
September 30, 2009, we operated or provided administrative services
at 1,513 outpatient dialysis centers serving approximately 117,000
patients, of which 1,481 centers are consolidated in our financial
statements. During the third quarter of 2009, we acquired four
centers, opened 21 new centers, merged five centers, closed one
center and provided administrative and management services to one
additional third-party owned center.
Outlook
We are raising our operating income guidance range for 2009 from
$900-$930 million to $930-$950 million. Also, we may modestly
exceed the upper end of our previous operating cash flow guidance
of $550-$600 million. Currently we expect our operating income for
2010 to be in the range of $950 million to $1.02 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.
DaVita will be holding a conference call to discuss its results
for the third quarter ended September 30, 2009 on November 3, 2009
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, including
statements related to our 2009 and 2010 operating income, 2009
operating cash flow and 2009 expected effective tax rate and the
expected effective tax rate attributable to DaVita Inc. 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 Form 10-K for the year ended December
31, 2008 and subsequent quarterly reports on Form 10-Q. 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 ESRD program, including the implementation of a bundled
payment rate system which result in lower reimbursement for
services we provide to Medicare patients,
- 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 and compliance with the corporate integrity agreement
applicable to the dialysis centers acquired from Gambro Healthcare
and assumed in connection with such acquisition, and
- the resolution of ongoing
investigations by various federal and state governmental
agencies.
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.
DAVITA INC.
CONSOLIDATED STATEMENTS OF
INCOME
(unaudited)
(dollars in thousands, except
per share data)
Three months
endedSeptember 30,
Nine months
endedSeptember 30,
2009 2008 2009
2008 Net operating revenues $ 1,573,915 $ 1,447,135 $
4,540,596 $ 4,199,163 Operating expenses and charges: Patient care
costs 1,095,857 1,005,648 3,153,622 2,909,143 General and
administrative 134,931 128,617 394,370 374,581 Depreciation and
amortization 56,813 54,970 172,121 160,673 Provision for
uncollectible accounts 42,021 37,305 119,990 109,433 Equity
investment income (708 ) (1,177 ) (1,066 )
(654 ) Total operating expenses and charges 1,328,914
1,225,363 3,839,037
3,553,176 Operating income 245,001 221,772 701,559 645,987
Debt expense (45,535 ) (54,505 ) (140,924 ) (168,891 ) Other income
999 2,481 3,026
10,331 Income before income taxes 200,465 169,748 563,661
487,427 Income tax expense 74,195 62,010
209,485 175,853 Net income
126,270 107,738 354,176 311,574 Less: Net income attributable to
noncontrolling interests (15,340 ) (13,828 )
(41,216 ) (35,779 ) Net income attributable to DaVita Inc. $
110,930 $ 93,910 $ 312,960 $ 275,795
Earnings per share: Basic earnings per share attributable to
DaVita Inc. $ 1.07 $ 0.90 $ 3.01 $ 2.61
Diluted earnings per share attributable to DaVita Inc. $ 1.06
$ 0.89 $ 3.00 $ 2.59 Weighted average
shares for earnings per share: Basic 104,127,334
104,556,770 103,904,768
105,569,971 Diluted 104,607,318
105,577,823 104,315,019 106,421,184
DAVITA INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(unaudited)
(dollars in thousands)
Nine months
endedSeptember 30,
2009 2008 Cash
flows from operating activities: Net income $ 354,176 $ 311,574
Adjustments to reconcile net income to cash provided by operating
activities: Depreciation and amortization 172,121 160,673
Stock-based compensation expense 33,850 29,975 Tax benefits from
stock award exercises 12,434 10,174 Excess tax benefits from stock
award exercises (8,115 ) (5,054 ) Deferred income taxes 45,417
56,157 Equity investment income (1,066 ) (654 ) Loss on disposal of
assets 7,826 9,688 Non-cash debt and non-cash rent charges 7,497
9,971 Changes in operating assets and liabilities, other than from
acquisitions and divestitures: Accounts receivable (68,235 )
(130,022 ) Inventories 15,858 (1,248 ) Other receivables and other
current assets (2,164 ) (28,684 ) Other long-term assets 5,641
(12,761 ) Accounts payable (58,995 ) (12,800 ) Accrued compensation
and benefits 20,733 (11,752 ) Other current liabilities (68,383 )
29,838 Income taxes 55,226 (3,086 ) Other long-term liabilities
(9,702 ) 3,163 Net cash provided by operating
activities 514,119 415,152
Cash
flows from investing activities: Additions of property and
equipment (205,653 ) (223,851 ) Acquisitions (64,001 ) (77,157 )
Proceeds from asset sales 6,256 451 Purchase of investments
available for sale (1,737 ) (1,695 ) Purchase of investments
held-to-maturity (16,942 ) (19,005 ) Proceeds from sale of
investments available for sale 16,537 5,323 Proceeds from
maturities of investments held-to-maturity 16,123 18,728
Distributions received on equity investments 929 802 Purchase of
intangible assets and other (260 ) (65 ) Net cash
used in investing activities (248,748 ) (296,469 )
Cash flows from financing activities: Borrowings 13,924,642
12,937,047 Payments on long-term debt (13,961,667 ) (12,938,297 )
Deferred financing costs (42 ) (130 ) Purchase of treasury stock
(61,223 ) (169,673 ) Excess tax benefits from stock award exercises
8,115 5,054 Stock award exercises and other share issuances, net
30,309 33,670 Distributions to noncontrolling interests (46,888 )
(43,391 ) Contributions from noncontrolling interests 11,117 13,525
Proceeds from sales of additional noncontrolling interests 7,733
8,422 Purchases from noncontrolling interests (6,668 )
(24,009 ) Net cash used in financing activities
(94,572 ) (177,782 ) Net increase (decrease) in cash and
cash equivalents 170,799 (59,099 ) Cash and cash equivalents at
beginning of period 410,881 447,046
Cash and cash equivalents at end of period $ 581,680 $
387,947
DAVITA INC.
CONSOLIDATED BALANCE
SHEETS
(unaudited)
(dollars in thousands, except
per share data)
ASSETS
September
30,2009
December 31,2008
Cash and cash equivalents $ 581,680 $ 410,881 Short-term
investments 20,680 35,532 Accounts receivable, less allowance of
$225,931 and $211,222 1,142,861 1,075,457 Inventories 69,014 84,174
Other receivables 235,785 239,165 Other current assets 34,816
33,761 Income tax receivable - 32,130 Deferred income taxes
223,697 217,196 Total current assets 2,308,533
2,128,296 Property and equipment, net 1,088,446 1,048,075
Amortizable intangibles, net 141,925 160,521 Investments in
third-party dialysis businesses 24,011 19,274 Long-term investments
7,567 5,656 Other long-term assets 34,262 47,330 Goodwill
3,932,964 3,876,931 $ 7,537,708 $
7,286,083
LIABILITIES AND EQUITY Accounts payable $
256,707 $ 282,883 Other liabilities 426,856 495,239 Accrued
compensation and benefits 314,677 312,216 Current portion of
long-term debt 100,677 72,725 Income taxes payable 14,592
- Total current liabilities 1,113,509
1,163,063 Long-term debt 3,555,853 3,622,421 Other long-term
liabilities 100,722 101,442 Alliance and product supply agreement,
net 31,980 35,977 Deferred income taxes 304,675
244,884 Total liabilities 5,106,739 5,167,787
Commitments and contingencies Noncontrolling interests subject to
put provisions 292,636 291,397 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;
103,232,774 and 103,753,673 shares outstanding)
135 135 Additional paid-in capital 638,253 584,358 Retained
earnings 2,202,410 1,889,450 Treasury stock, at cost (31,629,509
and 31,108,610 shares) (756,157 ) (691,857 ) Accumulated other
comprehensive loss (7,838 ) (14,339 ) Total DaVita
Inc. shareholders’ equity 2,076,803 1,767,747 Noncontrolling
interests not subject to put provisions 61,530
59,152 Total equity 2,138,333 1,826,899
$ 7,537,708 $ 7,286,083
DAVITA INC.
SUPPLEMENTAL FINANCIAL
DATA
(unaudited)
(dollars in millions, except
for per share and per treatment data)
Three months ended
Nine
monthsendedSeptember 30,2009
September
30,2009
June 30,2009
September
30,2008
1. Consolidated Financial Results: Revenues $ 1,574 $ 1,519
$ 1,447 $ 4,541 Operating income $ 245.0 $ 236.0 $ 221.8 $ 701.6
Operating income margin 15.6 % 15.5 % 15.3 % 15.5 % Net income
attributable to DaVita Inc. $ 110.9 $ 105.8 $ 93.9 $ 313.0 Diluted
earnings per share attributable to DaVita Inc. $ 1.06 $ 1.02 $ 0.89
$ 3.00
2. Consolidated Business Metrics:
Expenses
Patient care costs as a percent of
consolidated revenue(3)
69.6 % 69.2 % 69.5 % 69.5 %
General and administrative
expenses as a percent of consolidated revenue(3)
8.6 % 8.7 % 8.9 % 8.7 % Bad debt expense as a percent of
consolidated revenue 2.7 % 2.7 % 2.6 % 2.6 %
Consolidated effective tax rate
attributable to DaVita Inc.(1)
40.0 % 40.0 % 39.7 % 40.0 %
3. Segment Financial Results:
(dollar amounts rounded to nearest million) Dialysis and
related lab services Revenues $ 1,491 $ 1,441 $ 1,378 $ 4,309
Direct operating expenses 1,231 1,191
1,143 3,563 Dialysis segment margin $
260 $ 250 $ 235 $ 746
Other –
Ancillary services and strategic initiatives Revenues $ 83 $ 78
$ 69 $ 232 Direct operating expenses 87 81
73 243 Ancillary segment loss $
(4 ) $ (3 ) $ (4 ) $ (12 )
Total segment margin $ 256
$ 247 $ 231 $ 734 Reconciling items: Stock-based compensation (11 )
(11 ) (11 ) (34 ) Equity investment income 1 -
1 1 Consolidated operating
income $ 245 $ 236 $ 222 $ 702
DAVITA INC.
SUPPLEMENTAL FINANCIAL
DATA—continued
(unaudited)
(dollars in millions, except
for per share and per treatment data)
Three months ended
Nine
monthsendedSeptember 30,2009
September
30,2009
June 30,2009
September
30,2008
4. Segment Business Metrics: Dialysis and related lab
services: Volume Treatments 4,339,195 4,228,179
4,091,099 12,649,812 Number of treatment days 79.0 78.0 79.0 233.5
Treatments per day 54,927 54,207 51,786 54,175 Per day year over
year increase 6.1 % 5.2 % 5.1 % 5.4 % Non-acquired growth year over
year 5.2 % 4.5 % 3.8 % 4.5 %
Revenue Dialysis and
related lab services revenue per treatment $ 343.14 $ 340.35 $
336.42 $ 340.14 Per treatment increase from previous quarter 0.8 %
1.1 % 0.1 % - Per treatment increase from previous year 2.0 % 1.3 %
0.9 % 1.9 % Percent of consolidated revenue 94.7 % 94.9 % 95.2 %
94.9 %
Expenses Patient care costs Percent of segment
revenue 69.0 % 68.6 % 69.0 % 68.8 % Per treatment $ 237.21 $ 233.93
$ 232.50 $ 234.40 Per treatment increase from previous quarter 1.4
% 0.9 % 0.7 % - Per treatment increase from previous year 2.0 % 1.3
% 3.9 % 1.9 % General and administrative expenses Percent of
segment revenue 7.1 % 7.4 % 7.4 % 7.3 % Per treatment $ 24.39 $
25.14 $ 24.88 $ 24.90 Per treatment decrease from previous quarter
(3.0 %) (0.2 %) - - Per treatment (decrease) increase from previous
year (2.0 %) 1.1 % (1.5 %) 1.6 %
5. Cash Flow
Operating cash flow $ 167.5 $ 212.4 $ 160.2 $ 514.1 Operating cash
flow last twelve months $ 712.7 $ 705.4 $ 651.3 Free cash flow(1) $
125.5 $ 173.6 $ 119.0 $ 388.5 Free cash flow, last twelve months(1)
$ 533.3 $ 526.8 $ 490.6 Capital expenditures: Development and
relocations $ 42.4 $ 42.5 $ 51.6 $ 127.0 Routine maintenance/IT
other $ 25.0 $ 22.5 $ 27.2 $ 78.7 Acquisition expenditures $ 20.7 $
3.5 $ 30.4 $ 64.0
6. Accounts Receivable Net
receivables $ 1,143 $ 1,128 $ 1,057 DSO 70 70 70
DAVITA INC.
SUPPLEMENTAL FINANCIAL
DATA—continued
(unaudited)
(dollars in millions, except
for per share and per treatment data)
Three months ended
Nine months
endedSeptember
30,2009
September
30,2009
June 30,2009
September
30,2008
7. Debt and Capital Structure Total debt(2) $ 3,654 $ 3,669
$ 3,704 Net debt, net of cash(2) $ 3,072 $ 3,124 $ 3,316
Leverage ratio (see Note 1
below)
2.57x 2.66x 2.98x Overall effective weighted average interest rate
during the quarter 4.79 % 4.92 % 5.66 % Overall effective weighted
average interest rate at end of the quarter 4.76 % 4.87 % 6.09 %
Effective weighted average interest rate on the Senior Secured
Credit Facilities at end of the quarter 2.81 % 3.02 % 5.39 %
Economically fixed interest rates as a percentage of our total debt
61 % 64 % 70 % Share repurchases $ 62.4 $ - $ - $ 94.4
8.
Clinical (quarterly averages) Dialysis adequacy -% of patients
with Kt/V > 1.2 95 % 95 % 94 %
90 day patients with Hb >=
10
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