DaVita Inc. (NYSE: DVA) today announced results for the quarter
ended June 30, 2011. Net income attributable to DaVita Inc. for the
three and six months ended June 30, 2011 was $114.4 million and
$208.9 million, or $1.17 and $2.13 per share, respectively,
excluding an after-tax non-cash goodwill impairment charge of
approximately $14.4 million, or $0.14 per share related to
HomeChoice Partners, which provides infusion therapy services. This
compares to net income attributable to DaVita Inc. for the three
and six months ended June 30, 2010 of $110.4 million and $219.8
million, or $1.06 and $2.10 per share, respectively, excluding
after-tax debt redemption charges of $2.5 million, or $0.02 per
share.
Net income attributable to DaVita Inc. for the three and six
months ended June 30, 2011 including the after-tax non-cash
goodwill impairment charge was $100.0 million and $194.5 million or
$1.03 and $1.99 per share, respectively. Net income attributable to
DaVita Inc. for the three and six months ended June 30, 2010
including the after-tax debt redemption charges was $107.9 million
and $217.3 million, or $1.04 and $2.08 per share, respectively.
Financial and operating highlights include:
- Cash Flow: For the rolling
twelve months ended June 30, 2011 operating cash flow was $816
million and free cash flow was $518 million. For the three months
ended June 30, 2011 operating cash flow was $204 million and free
cash flow was $125 million.
- Operating Income: Operating
income for the three and six months ended June 30, 2011 was $271
million and $507 million, respectively, excluding the pre-tax
non-cash goodwill impairment charge of $24 million. Operating
income for the three and six months ended June 30, 2011 including
this item was $247 million and $483 million, respectively.
Operating income for the three and six months ended June 30, 2010
was $242 million and $485 million, respectively.
- Volume: Total treatments for the
second quarter of 2011 were 4,777,817, or 61,254 treatments per
day, representing a per day increase of 7.1% over the second
quarter of 2010. Non-acquired treatment growth in the quarter was
4.6% over the prior year’s second quarter. Our normalized
non-acquired treatment growth in the quarter was also 4.6% over the
prior year’s second quarter.
- Effective Tax Rate: Our
effective tax rate was 35.7% and 35.6% for the three and six months
ended June 30, 2011, 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 six months ended June 30,
2011. We still expect our effective tax rate attributable to DaVita
Inc. for 2011 to be in the range of 39.0% to 40.0%.
- Share Repurchases: During the
first six months of 2011, we repurchased a total of 3,710,086
shares of our common stock for $316.1 million, or an average price
of $85.20 per share. As of June 30, 2011, a total of $25.5 million
of share repurchases had not yet been settled in cash. We also
repurchased 84,600 additional shares of our common stock for $7.3
million, or an average price of $85.83 per share during the period
July 1, 2011 through July 31, 2011. As a result of these
transactions, our remaining board authorization for share
repurchases as of July 31, 2011 is approximately $358 million.
- Center Activity: As of June 30,
2011, we operated or provided administrative services at 1,669
outpatient dialysis centers serving approximately 131,000 patients,
of which 1,637 centers are consolidated in our financial
statements. During the second quarter of 2011, we acquired and
opened a total of 27 centers.
Outlook
We are raising our operating income guidance for 2011 to now be
in the range of $1,080 million to $1,120 million. This guidance
excludes the non-cash goodwill impairment charge recorded in the
second quarter of 2011. Our previous operating income guidance for
2011 was in the range of $1,040 million to $1,100 million. We are
raising our operating cash flow guidance for 2011 to now be in the
range of $900 million to $980 million. Our previous operating cash
flow guidance for 2011 was in the range of $840 million to $940
million. We are also raising our operating income guidance for 2012
to now be in the range of $1,200 million to $1,300 million. Our
previous operating income guidance for 2012 was in the range of
$1,100 million to $1,200 million. The guidance above assumes the
DSI acquisition closes in the third quarter of 2011. 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 second quarter ended June 30, 2011 on August 3, 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 and 2012 operating income, our 2011 operating
cash flows and our 2011 expected effective tax rate attributable to
DaVita Inc. Factors that 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 quarterly report on
Form 10-Q for the first quarter ended March 31, 2011 and subsequent
quarterly reports to be filed 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
under the Medicare End Stage Renal Disease program or other
government-based programs,
- 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,
- investigations by various governmental
entities and potential other related proceedings,
- continued increased competition from
large and medium-sized dialysis providers that compete directly
with us,
- 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, and
- expansion of our operations and
services to markets outside the United States, or to businesses
outside of dialysis.
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.
DAVITA INC. CONSOLIDATED STATEMENTS OF INCOME
(unaudited) (dollars in thousands, except per share
data) Three months ended June 30,
Six months ended June 30, 2011 2010
2011 2010 Net operating revenues $
1,711,529 $ 1,586,907 $ 3,317,487 $ 3,146,325 Operating expenses
and charges: Patient care costs 1,165,220 1,110,552 2,281,216
2,193,341 General and administrative 163,793 136,104 315,395
273,381 Depreciation and amortization 64,470 58,353 126,507 115,821
Provision for uncollectible accounts 49,417 42,367 91,706 83,930
Equity investment income (2,417 ) (2,834 ) (3,936 ) (5,179 )
Goodwill impairment charge 24,000 -
24,000 -
Total operating expenses and charges
1,464,483 1,344,542 2,834,888
2,661,294 Operating income 247,046 242,365
482,599 485,031 Debt expense
(59,897
)
(43,655
)
(118,492 )
(88,238
)
Debt redemption charges - (4,127 ) -
(4,127
)
Other income 556 739 1,397
1,570 Income before income taxes 187,705
195,322 365,504 394,236 Income tax expense 67,040
71,429 130,087 145,343
Net income 120,665 123,893 235,417 248,893
Less: Net income attributable to
noncontrolling interests
(20,650
)
(16,040
)
(40,900
)
(31,617
)
Net income attributable to DaVita Inc. $ 100,015 $ 107,853
$ 194,517 $ 217,276
Earnings per share:
Basic earnings per share attributable to
DaVita Inc.
$ 1.05 $ 1.05 $ 2.03 $ 2.11
Diluted earnings per share attributable to
DaVita Inc.
$ 1.03 $ 1.04 $ 1.99 $ 2.08
Weighted
average shares for earnings per share: Basic 95,488,449
103,003,623 95,872,466
103,182,403 Diluted 97,657,578
104,449,065 98,014,315 104,605,489
DAVITA INC. CONSOLIDATED STATEMENTS
OF CASH FLOWS (unaudited) (dollars in thousands)
Six months ended June 30, 2011
2010 Cash flows from operating
activities: Net income $ 235,417 $ 248,893 Adjustments to
reconcile net income to cash provided by operating activities:
Depreciation and amortization 126,507 115,821 Stock-based
compensation expense 23,058 22,399 Tax benefits from stock award
exercises 33,765 12,896 Excess tax benefits from stock award
exercises (19,009 ) (1,647 ) Deferred income taxes 24,225 (10,697 )
Equity investment income, net 472 (2,781 ) Loss on disposal of
assets and other non-cash charges 10,842 3,085 Goodwill impairment
charge 24,000 - Debt redemption charges - 4,127 Changes in
operating assets and liabilities, other than from acquisitions and
divestitures: Accounts receivable (83,075 ) 33,724 Inventories
9,369 2,005 Other receivables and other current assets 23,791
33,053 Other long-term assets 2,164 (587 ) Accounts payable 41,436
62,255 Accrued compensation and benefits 68,008 65,495 Other
current liabilities (25,716 ) (26,127 ) Income taxes 34,799 (5,103
) Other long-term liabilities 4,140 955
Net cash provided by operating activities 534,193
557,766
Cash flows from investing
activities: Additions of property and equipment, net (154,929 )
(99,351 ) Acquisitions (151,196 ) (91,701 ) Proceeds from asset
sales 2,954 17,681 Purchase of investments available for sale
(1,868 ) (745 ) Purchase of investments held-to-maturity (19,684 )
(15,836 ) Proceeds from sale of investments available for sale
1,149 900 Proceeds from maturities of investments held-to-maturity
19,683 19,249 Purchase of equity investments and other assets
(5,005 ) (350 ) Distributions received on equity investments
340 350 Net cash used in investing
activities (308,556 ) (169,803 )
Cash flows
from financing activities: Borrowings 19,169,580 9,689,658
Payments on long-term debt (19,201,362 ) (9,938,312 ) Interest rate
cap premiums and other deferred financing costs (13,457 ) - Debt
call premium - (3,314 ) Purchase of treasury stock (290,593 )
(100,048 ) Distributions to noncontrolling interests (46,423 )
(37,301 ) Stock award exercises and other share issuances, net
7,410 34,113 Excess tax benefits from stock award exercises 19,009
1,647 Contributions from noncontrolling interests 6,490 3,408
Proceeds from sales of additional noncontrolling interests 2,067
2,845 Purchases from noncontrolling interests (8,650 )
(5,402 ) Net cash used in financing activities
(355,929 ) (352,706 ) Net (decrease) increase in cash
and cash equivalents (130,292 ) 35,257 Cash and cash equivalents at
beginning of period 860,117 539,459
Cash and cash equivalents at end of period $ 729,825
$ 574,716
DAVITA INC. CONSOLIDATED
BALANCE SHEETS (unaudited) (dollars in thousands,
except per share data) June 30,
December 31, 2011 2010 ASSETS Cash and
cash equivalents $ 729,825 $ 860,117 Short-term investments 23,014
23,003 Accounts receivable, less allowance of $225,150 and $235,629
1,132,051 1,048,976 Inventories 68,629 76,008 Other receivables
274,783 304,366 Other current assets 49,784 43,994 Income tax
receivables 5,451 40,330 Deferred income taxes 229,827
226,060 Total current assets 2,513,364
2,622,854 Property and equipment, net 1,223,662 1,170,808
Amortizable intangibles, net 152,856 162,635 Equity investments
30,106 25,918 Long-term investments 10,083 8,848 Other long-term
assets 35,264 32,054 Goodwill 4,227,386
4,091,307 $ 8,192,721 $ 8,114,424
LIABILITIES AND EQUITY Accounts payable $ 254,129 $ 181,033
Other liabilities 317,291 342,943 Accrued compensation and benefits
388,965 325,477 Current portion of long-term debt 75,226
74,892 Total current liabilities 1,035,611
924,345 Long-term debt 4,210,823 4,233,850 Other long-term
liabilities 104,644 89,290 Alliance and product supply agreement,
net 22,652 25,317 Deferred income taxes 456,361
421,436 Total liabilities 5,830,091 5,694,238
Commitments and contingencies Noncontrolling interests subject to
put provisions 416,504 383,052 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; 93,481,011 and 96,001,535 shares outstanding) 135
135 Additional paid-in capital 614,304 620,546 Retained earnings
2,912,334 2,717,817 Treasury stock, at cost (41,381,272 and
38,860,748 shares) (1,634,127 ) (1,360,579 ) Accumulated other
comprehensive (loss) income (11,787 ) 503
Total DaVita Inc. shareholders’ equity 1,880,859 1,978,422
Noncontrolling interests not subject to put provisions
65,267 58,712 Total equity 1,946,126
2,037,134 $ 8,192,721 $
8,114,424
DAVITA INC. SUPPLEMENTAL
FINANCIAL DATA (unaudited) (dollars in millions,
except for per share and per treatment data)
Three months ended
Six monthsendedJune 30,
2011
June 30,2011
March 31,2011
June 30,2010
1. Consolidated Financial Results: Revenues $ 1,712 $ 1,606
$ 1,587 $ 3,317 Operating income $ 247.0 $ 235.6 $ 242.4 $ 482.6
Operating income, excluding the pre-tax non-cash goodwill
impairment charge(1) $ 271.0 $ 235.6 $ 242.4 $ 506.6 Operating
income margin 14.4 % 14.7 % 15.3 % 14.5 % Operating income margin,
excluding the pre-tax non-cash goodwill impairment charge(1) 15.8 %
14.7 % 15.3 % 15.3 % Net income attributable to DaVita Inc. $ 100.0
$ 94.5 $ 107.9 $ 194.5 Net income attributable to DaVita Inc.,
excluding the after-tax non-cash goodwill impairment charge and
debt redemption charges(1) $ 114.4 $ 94.5 $ 110.4 $ 208.9 Diluted
earnings per share attributable to DaVita Inc. $ 1.03 $ 0.96 $ 1.04
$ 1.99 Diluted earnings per share attributable to DaVita Inc.,
excluding the after-tax non-cash goodwill impairment charge and
debt redemption charges(1) $ 1.17 $ 0.96 $ 1.06 $ 2.13
2.
Consolidated Business Metrics: Expenses Patient care
costs as a percent of consolidated revenue(2) 68.1 % 69.5 % 70.0 %
68.8 % General and administrative expenses as a percent of
consolidated revenue (2) 9.6 % 9.4 % 8.6 % 9.5 % Bad debt
expense as a percent of consolidated revenue 2.9 % 2.6 % 2.7 % 2.8
% Consolidated effective tax rate attributable to DaVita
Inc.(1) 40.0 % 40.0 % 39.75 % 40.0 %
3. Segment Financial
Results: (dollar amounts rounded to nearest million)
Revenues: Dialysis and related lab services $ 1,591 $ 1,505
$ 1,496 $ 3,096 Other – Ancillary services and strategic
initiatives 123 106 93
229 Total segment revenue 1,714 1,611 1,589 3,325
Less elimination of intersegment revenue (2 ) (5 )
(2 ) (8 ) Total consolidated revenue $ 1,712 $
1,606 $ 1,587 $ 3,317
Operating
income Dialysis and related lab services $ 283 $ 250 $ 254 $
533 Other – Ancillary services and strategic initiatives (25
) (6 ) (2 ) (31 ) Total segment operating
income $ 258 $ 244 $ 252 $ 502 Reconciling items: Stock-based
compensation (13 ) (10 ) (12 ) (23 ) Equity investment income
2 2 3 4
Consolidated operating income $ 247 $ 236 $ 242
$ 483
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA—continued (unaudited)
(dollars in millions, except for per share and per treatment
data) Three months ended
Six monthsendedJune 30,
2011
June 30,2011
March 31,2011
June 30,2010
4. Segment Business Metrics: Dialysis and related lab
services Volume Treatments 4,777,817 4,602,375 4,462,565
9,380,191 Number of treatment days 78.0 77.0 78.0 155.0 Treatments
per day 61,254 59,771 57,212 60,517 Per day year over year increase
7.1 % 7.2 % 5.5 % 7.1 % Non-acquired growth year over year 4.6 %
4.0 % 4.1 % 4.4 %
Revenue Dialysis and related lab
services revenue per treatment $ 332.34 $ 326.40 $ 334.64 $ 329.43
Per treatment increase (decrease) from previous quarter 1.8 % (1.4
%) (2.6 %) Per treatment decrease from previous year (0.7 %) (5.0
%) (1.7 %) (2.8 %) Percent of consolidated revenue 92.9 % 93.7 %
94.3 % 93.3 %
Expenses Patient care costs Percent of
segment revenue 66.9 % 68.3 % 69.2 % 67.6 % Per treatment $ 222.86
$ 223.32 $ 232.16 $ 223.09 Per treatment decrease from previous
quarter (0.2 %) (0.7 %) (2.1 %) Per treatment decrease from
previous year (4.0 %) (5.8 %) (0.9 %) (4.9 %) General and
administrative expenses Percent of segment revenue 8.3 % 8.3 % 7.3
% 8.3 % Per treatment $ 27.79 $ 27.19 $ 24.36 $ 27.50 Per treatment
increase (decrease) from previous quarter 2.2 % (1.7 %) (6.5 %) Per
treatment increase (decrease) from previous year 14.1 % 4.4 % (3.1
%) 9.2 %
5. Cash Flow: Operating cash flow $ 204.4 $
329.8 $ 295.9 $ 534.2 Operating cash flow, last twelve months $
816.1 $ 907.6 $ 877.8 Free cash flow(1) $ 125.1 $ 266.5 $ 249.5 $
391.6 Free cash flow, last twelve months(1) $ 518.4 $ 642.9 $ 692.3
Capital expenditures: Routine maintenance/IT/other $ 55.1 $ 41.1 $
27.8 $ 96.2 Development and relocations $ 39.4 $ 27.6 $ 29.0 $ 67.0
Acquisition expenditures $ 69.7 $ 81.5 $ 90.6 $ 151.2
6.
Accounts Receivable: Net receivables $ 1,132 $ 1,069 $ 1,071
DSO 63 62 64
DAVITA INC. SUPPLEMENTAL
FINANCIAL DATA—continued (unaudited) (dollars in
millions, except for per share and per treatment data)
Three months ended
Six monthsendedJune 30,
2011
June 30,2011
March 31,2011
June 30,2010
7. Debt and Capital Structure: Total debt(3) $ 4,294 $ 4,301
$ 3,382 Net debt, net of cash(3) $ 3,564 $ 3,295 $ 2,808 Leverage
ratio (see Note 1 on page 9) 2.69x 2.58x 2.31x Overall weighted
average effective interest rate during the quarter 5.33 % 5.20 %
4.68 % Overall weighted average effective interest rate at end of
the quarter 5.34 % 5.34 % 4.62 % Weighted average effective
interest rate on the Senior Secured Credit Facilities at end of the
quarter 4.68 % 4.67 % 2.66 % Economically fixed interest rates as a
percentage of our total debt at June 30, 2011(4) and March 31,
2011(4) and fixed interest rates at June 30, 2010 100 % 100 % 56 %
Share repurchases $ 302.4 $ 13.6 $ 100 $ 316.1
8.
Clinical: (quarterly averages) Dialysis adequacy -% of patients
with Kt/V > 1.2 at the end of the quarter 97 % 97 % 96 %
Patients with arteriovenous fistulas placed 69 % 68 % 66 %
_________________
(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 $7.6 million and $8.0 million, respectively,
of a debt discount associated with our Term Loan B for the quarters
ended June 30, 2011 and March 31, 2011 that is not actually
outstanding debt principal. The quarter ended June 30, 2010
excludes $1.8 million 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 quarters ended June 30, 2011 and March
31, 2011, since the Term Loan B bears interest at LIBOR (floor of
1.50%) plus a margin of 3.00%.
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 June 30, 2011 Net
income attributable to DaVita Inc. $ 382,924 Income taxes 244,983
Interest expense 198,358 Depreciation and amortization 245,064
Non-cash goodwill impairment charge 24,000 Debt refinancing and
redemption charges 70,255 Noncontrolling interests 87,819 Equity
investment income, net 1,387 Amortization of deferred financing
costs 9,588 Other 32,327 Stock-based compensation expense
46,209 “Consolidated EBITDA” $ 1,342,914
June 30, 2011 Total debt, excluding debt discount of $7.6
million $ 4,293,691 Letters of credit issued 45,789
4,339,480 Less: cash and cash equivalents (729,825 )
Consolidated net debt $ 3,609,655 Last twelve months
“Consolidated EBITDA” $ 1,342,914
Leverage ratio
2.69x
In accordance with the Credit Agreement, the Company’s
leverage ratio cannot exceed 4.25 to 1.0 as of June 30, 2011. At
that date the Company’s leverage ratio did not exceed 4.25 to
1.0.
DAVITA INC.RECONCILIATIONS FOR
NON-GAAP MEASURES(unaudited)(dollars in
thousands)
1. Net income attributable to DaVita Inc. excluding
after-tax non-cash goodwill impairment charge and debt redemption
charges and diluted earnings per share attributable to DaVita Inc.
excluding after-tax non-cash goodwill impairment charge and debt
redemption charges.
We believe that net income attributable to DaVita Inc. excluding
after-tax non-cash goodwill impairment charge and debt 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 a non-cash
goodwill impairment charge that resulted from a decrease in the
implied fair value of goodwill below its carrying amount associated
with our infusion therapy business during the second quarter of
2011 and also from the redemption of $200 million aggregate
principal amount of our outstanding 6⅝% senior notes due 2013 that
occurred in the second quarter of 2010 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 non-cash goodwill impairment charge and debt redemption
charges: Three months ended Six months
ended June 30, March 31, June
30, June 30, June 30, 2011
2011 2010 2011 2010 Net income
attributable to DaVita Inc. $ 100,015 $ 94,502 $ 107,853 $ 194,517
$ 217,276 Add: Non-cash goodwill impairment charge 24,000 - -
24,000 - Add: Debt redemption charges - - 4,127 - 4,127 Less:
Related income tax (9,600 ) - (1,605 )
(9,600 ) (1,605 ) $ 114,415 $ 94,502 $ 110,375
$ 208,917 $ 219,798
Diluted earnings
per share attributable to DaVita Inc. excluding after-tax non-cash
goodwill impairment charge and debt redemption charges:
Three months ended Six months ended June
30, March 31, June 30, June
30, June 30, 2011 2011 2010
2011 2010 Diluted earnings per share attributable to
DaVita Inc. $ 1.03 $ 0.96 $ 1.04 $ 1.99 $ 2.08 Add: Non-cash
goodwill impairment charge 0.14 - - 0.14 - Add: Debt redemption
charges - - 0.02 - 0.02 $ 1.17 $
0.96 $ 1.06 $ 2.13 $ 2.10
DAVITA INC.RECONCILIATIONS FOR
NON-GAAP MEASURES(unaudited)(dollars in
thousands)
2. Operating income excluding pre-tax non-cash
goodwill impairment charge.
We believe that operating income excluding pre-tax non-cash
goodwill impairment charge enhances a user’s understanding of our
normal operating income for these periods by providing a measure
that is more meaningful because it excludes a non-cash goodwill
impairment charge that resulted from a decrease in the implied fair
value of goodwill below its carrying amount associated with our
infusion therapy business during the second quarter of 2011 and
accordingly, is more comparable to prior periods and indicative of
consistent operating income. This measure is not a measure of
financial performance under United States generally accepted
accounting principles (GAAP) and should not be considered as an
alternative to operating income.
Operating income excluding an pre-tax non-cash goodwill
impairment charge: Three months ended
Six months ended June 30, March 31,
June 30, June 30, June 30,
2011 2011 2010 2011 2010
Operating income $ 247,046 $ 235,553 $ 242,365 $ 482,599 $ 485,031
Add: Non-cash goodwill impairment charge 24,000 -
- 24,000 - $ 271,046 $ 235,553 $ 242,365 $
506,599 $ 485,031
DAVITA 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 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
Six monthsendedJune 30,
2011
June 30,2011
March 31,2011
June 30,2010
Income before income taxes $ 187,705 $ 177,799 $
195,322 $ 365,504 Income tax expense $ 67,040
$ 63,047 $ 71,429 $ 130,087 Effective income
tax rate 35.7 % 35.5 % 36.6 % 35.6 %
Three months ended
Six monthsendedJune 30,
2011
June 30,2011
March 31,2011
June 30,2010
Income before income taxes $ 187,705 $ 177,799 $ 195,322 $ 365,504
Less: Noncontrolling owners’ income primarily attributable to
non-tax paying entities (21,020 ) (20,297 )
(16,319 ) (41,317 ) Income before income taxes attributable
to DaVita Inc. $ 166,685 $ 157,502 $ 179,003 $
324,187 Income tax expense 67,040 $ 63,047 $ 71,429 $
130,087 Less income tax attributable to noncontrolling interests
(370 ) (47 ) (279 ) (417 ) Income tax
attributable to DaVita Inc. $ 66,670 $ 63,000 $
71,150 $ 129,670 Effective income tax rate
attributable to DaVita Inc. 40.0 % 40.0 %
39.75 % 40.0 %
DAVITA 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 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
Six monthsendedJune 30,
2011
June 30,2011
March 31,2011
June 30,2010
Cash provided by operating activities $ 204,410 $ 329,783 $ 295,919
$ 534,193 Less: Income distributions to noncontrolling interests
(24,236 ) (22,187 ) (18,643 ) (46,423 )
Cash provided by operating activities attributable to DaVita Inc.
180,174 307,596 277,276 487,770 Less: Expenditures for routine
maintenance and information technology (55,096 )
(41,079 ) (27,760 ) (96,175 ) Free cash flow $
125,078 $ 266,517 $ 249,516 $ 391,595
Rolling 12-Month Period June 30,
March 31, June 30, 2011
2011 2010 Cash provided by operating activities $
816,110 $ 907,619 $ 877,844 Less: Income distributions to
noncontrolling interests (92,713 ) (87,120 )
(75,154 ) Cash provided by operating activities attributable to
DaVita Inc. 723,397 820,499 802,690 Less: Expenditures for routine
maintenance and information technology (204,948 )
(177,612 ) (110,429 ) Free cash flow $ 518,449 $
642,887 $ 692,261
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