DaVita Inc. (NYSE: DVA) today announced results for the quarter
and year ended December 31, 2011. Income from continuing operations
attributable to DaVita Inc. for the quarter and year ended December
31, 2011 was $149.4 million and $496.2 million, or $1.58 and $5.14
per share, respectively, which for the year ended December 31, 2011
excludes an after-tax non-cash goodwill impairment charge of
approximately $14.4 million, or $0.15 per share, that was recorded
in the second quarter of 2011 related to our infusion therapy
business. Income from continuing operations attributable to DaVita
Inc. for the year ended December 31, 2011 including this item was
$481.8 million, or $4.99 per share.
Income from continuing operations attributable to DaVita Inc.
for the quarter and year ended December 31, 2010 was $111.9 million
and $450.8 million, or $1.13 and $4.37 per share, respectively,
which excludes after-tax debt refinancing and redemption charges of
$42.9 million and $45.4 million, or $0.43 per share and $0.44 per
share, respectively. Income from continuing operations attributable
to DaVita Inc. for the quarter and year ended December 31, 2010
including these items was $68.9 million and $405.4 million, or
$0.70 per share and $3.93 per share, respectively.
Financial and operating highlights include:
- Cash Flow: For the year ended
December 31, 2011 operating cash flow was $1,180 million and free
cash flow was $855 million. For the three months ended December 31,
2011 operating cash flow was $151 million and free cash flow was
$32 million.
- Operating Income: Operating
income for the quarter and year ended December 31, 2011 was $330
million and $1,155 million, respectively, which for the year ended
December 31, 2011, excludes the pre-tax non-cash goodwill
impairment charge of $24 million. Operating income for the year
ended December 31, 2011 including this item was $1,131
million.Operating income for the quarter and year ended December
31, 2010 was $255 million and $997 million, respectively.
- Volume: Total U.S. treatments
for the fourth quarter of 2011 were 5,227,167, or 66,167 treatments
per day, representing a per day increase of 12.4% over the fourth
quarter of 2010. Non-acquired treatment growth in the quarter was
4.4% over the prior year’s fourth quarter. Our normalized
non-acquired treatment growth in the quarter was 4.8% over the
prior year’s fourth quarter.
- Effective Tax Rate: Our
effective tax rate was 34.1% and 35.4% for the quarter and year
ended December 31, 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 38.0% and 39.6% for the quarter and year ended
December 31, 2011, respectively. We currently expect our 2012
effective tax rate attributable to DaVita Inc. to be in the range
of 40.0% to 41.0%.
- Center Activity: As of December
31, 2011, we operated or provided administrative services at 1,809
outpatient dialysis centers located in the United States serving
approximately 142,000 patients and 11 outpatient dialysis centers
that are located in three countries outside of the United States. A
total of 1,784 centers are consolidated in our financial
statements, of which eight centers are located outside of the
United States. During the fourth quarter of 2011, we acquired and
opened a total of 45 centers, and divested two centers in
connection with the acquisition of DSI.
Outlook
Our operating income guidance for 2012 is still expected to be
in the range of $1,200 million to $1,300 million. We also expect
our operating cash flows for 2012 to be in the range of $950
million to $1,050 million. 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 ended December 31, 2011 on February 16, 2012 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 2012 operating income, our 2012 operating cash flows
and our 2012 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 annual report on Form
10-K for the year ended December 31, 2010, our quarterly report on
Form 10-Q for the third quarter ended September 30, 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 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,
- current or potential investigations by
various government entities and related government or private-party
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 December 31,
Year ended December 31, 2011
2010 2011
2010 Net operating revenues $ 1,862,318 $ 1,646,924 $
6,982,214 $ 6,438,050 Operating expenses and charges: Patient care
costs 1,213,912 1,133,008 4,680,772 4,467,107 General and
administrative 193,210 157,578 691,243 579,000 Depreciation and
amortization 72,987 59,910 266,628 233,730 Provision for
uncollectible accounts 54,318 43,201 197,565 170,652 Equity
investment income (2,221 ) (2,031 ) (8,776 ) (8,999 ) Goodwill
impairment charge - - 24,000
- Total operating expenses and charges
1,532,206 1,391,666 5,851,432
5,441,490 Operating income 330,112 255,258 1,130,782
996,560 Debt expense (61,750 ) (53,879 ) (241,090 ) (181,607 ) Debt
refinancing and redemption charges - (70,255 ) - (74,382 ) Other
income 787 1,091 2,982
3,419 Income from continuing operations before income
taxes 269,149 132,215 892,674 743,990 Income tax expense
91,710 39,863 315,744
260,052 Income from continuing operations 177,439 92,352
576,930 483,938 Discontinued operations: Income (loss) from
operations of discontinued operations, net of tax (239 ) 93 1,221
281 Loss on disposal of discontinued operations, net of tax
(1,068 ) - (4,756 ) - Net
income. 176,132 92,445 573,395 484,219 Less: Net income
attributable to noncontrolling interests (28,009 )
(23,425 ) (95,394 ) (78,536 ) Net income attributable
to DaVita Inc. $ 148,123 $ 69,020 $ 478,001 $
405,683
Earnings per share: Basic income from
continuing operations per share attributable to DaVita Inc. $ 1.60
$ 0.71 $ 5.09 $ 3.99 Basic net income
per share attributable to DaVita Inc. $ 1.59 $ 0.71 $
5.05 $ 4.00 Diluted income from continuing operations
per share attributable to DaVita Inc. $ 1.58 $ 0.70 $
4.99 $ 3.93 Diluted net income per share attributable
to DaVita Inc. $ 1.56 $ 0.70 $ 4.96 $ 3.94
Weighted average shares for earnings per share: Basic
93,485,001 97,099,341 94,658,027
101,504,373 Diluted 94,968,029
99,058,745 96,532,110
103,059,171
Amounts attributable to DaVita Inc.:
Income from continuing operations $ 149,430 $ 68,927 $ 481,755 $
405,402 Discontinued operations (1,307 ) 93
(3,754 ) 281 Net income $ 148,123 $
69,020 $ 478,001 $ 405,683
DAVITA INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (dollars in thousands) Year
endedDecember 31, 2011
2010 Cash flows from operating
activities: Net income $ 573,395 $ 484,219 Adjustments to
reconcile net income to cash provided by operating activities:
Depreciation and amortization 267,315 234,378 Stock-based
compensation expense 48,718 45,551 Tax benefits from stock award
exercises 38,199 26,706 Excess tax benefits from stock award
exercises (20,834 ) (6,283 ) Deferred income taxes 53,438 75,399
Equity investment income, net 354 (3,298 ) Loss on disposal of
assets and other non-cash charges 20,329 9,585 Goodwill impairment
charge 24,000 - Debt refinancing and redemption charges - 74,382
Changes in operating assets and liabilities, other than from
acquisitions and divestitures: Accounts receivable (88,848 ) 55,379
Inventories 10,270 (3,892 ) Other receivables and other current
assets 53,697 (44,719 ) Other long-term assets 2,039 901 Accounts
payable 84,400 4,228 Accrued compensation and benefits 77,074
39,588 Other current liabilities (51,979 ) (111,444 ) Income taxes
77,418 (45,737 ) Other long-term liabilities 11,061
4,740 Net cash provided by operating activities
1,180,046 839,683
Cash flows from
investing activities: Additions of property and equipment, net
(400,156 ) (273,602 ) Acquisitions (1,077,442 ) (188,502 ) Proceeds
from asset sales 75,183 22,727 Purchase of investments available
for sale (5,971 ) (1,125 ) Purchase of investments held-to-maturity
(37,628 ) (56,615 ) Proceeds from sale of investments available for
sale 1,149 900 Proceeds from maturities of investments
held-to-maturity 47,695 59,932 Purchase of equity investments and
other assets (2,398 ) (709 ) Distributions received on equity
investments 340 361 Net cash used in
investing activities (1,399,228 ) (436,633 )
Cash
flows from financing activities: Borrowings 36,395,105
24,809,258 Payments on long-term debt (36,249,584 ) (24,134,502 )
Interest rate cap premiums and other deferred financing costs
(17,861 ) - Debt refinancing costs including tender and call
premiums - (113,810 ) Purchase of treasury stock (323,348 )
(618,496 ) Distributions to noncontrolling interests (100,653 )
(83,591 ) Stock award exercises and other share issuances, net
11,316 53,760 Excess tax benefits from stock award exercises 20,834
6,283 Contributions from noncontrolling interests 21,010 9,510
Proceeds from sales of additional noncontrolling interests 9,687
3,410 Purchases from noncontrolling interests (13,689 )
(14,214 ) Net cash used in financing activities
(247,183 ) (82,392 ) Net (decrease) increase in cash and
cash equivalents (466,365 ) 320,658 Cash and cash equivalents at
beginning of period 860,117 539,459
Cash and cash equivalents at end of period $ 393,752 $
860,117
DAVITA INC. CONSOLIDATED
BALANCE SHEETS (unaudited) (dollars in thousands,
except per share data) December
31,2011 December 31,2010 ASSETS
Cash and cash equivalents $ 393,752 $ 860,117 Short-term
investments 17,399 23,003 Accounts receivable, less allowance of
$250,343 and $235,629 1,195,163 1,048,976 Inventories 75,731 76,008
Other receivables 269,832 304,366 Other current assets 49,349
43,994 Income tax receivables - 40,330 Deferred income taxes
280,382 226,060 Total current assets 2,281,608
2,622,854 Property and equipment, net 1,432,651 1,170,808
Amortizable intangibles, net 159,491 162,635 Equity investments
27,325 25,918 Long-term investments 9,890 8,848 Other long-term
assets 34,231 32,054 Goodwill 4,946,976
4,091,307 $ 8,892,172 $ 8,114,424
LIABILITIES AND EQUITY Accounts payable $ 289,653 $ 181,033
Other liabilities 325,734 342,943 Accrued compensation and benefits
412,972 325,477 Current portion of long-term debt 87,345 74,892
Income tax payable 37,412 - Total
current liabilities 1,153,116 924,345 Long-term debt 4,417,624
4,233,850 Other long-term liabilities 132,006 89,290 Alliance and
product supply agreement, net 19,987 25,317 Deferred income taxes
423,098 421,436 Total liabilities
6,145,831 5,694,238 Commitments and contingencies Noncontrolling
interests subject to put provisions 478,216 383,052 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; 93,641,363 and 96,001,535
shares outstanding) 135 135 Additional paid-in capital 596,300
620,546 Retained earnings 3,195,818 2,717,817 Treasury stock, at
cost (41,220,920 and 38,860,748 shares)
(1,631,694
)
(1,360,579
)
Accumulated other comprehensive (loss) income
(19,484
)
503 Total DaVita Inc. shareholders’ equity 2,141,075
1,978,422 Noncontrolling interests not subject to put provisions
127,050 58,712 Total equity
2,268,125 2,037,134 $ 8,892,172 $
8,114,424
DAVITA INC. SUPPLEMENTAL
FINANCIAL DATA (unaudited) (dollars in millions,
except for per share and per treatment data)
Three months ended
Year endedDecember 31,
2011
December 31,2011
September 30,2011
December 31,2010
1. Consolidated Financial Results: Revenues $ 1,862 $ 1,808
$ 1,647 $ 6,982 Operating income $ 330.1 $ 318.7 $ 255.3 $ 1,130.8
Operating income, excluding the pre-tax non-cash goodwill
impairment charge(1) $ 330.1 $ 318.7 $ 255.3 $ 1,154.8 Operating
income margin 17.7 % 17.6 % 15.5 % 16.2 % Operating income margin,
excluding the pre-tax non-cash goodwill impairment charge(1) 17.7 %
17.6 % 15.5 % 16.5 % Income from continuing operations attributable
to DaVita Inc. $ 149.4 $ 138.2 $ 68.9 $ 481.8 Income from
continuing operations attributable to DaVita Inc., excluding the
after-tax non-cash goodwill impairment charge and debt refinancing
and redemption charges(1) $ 149.4 $ 138.2 $ 111.9 $ 496.2 Diluted
income from continuing operations per share attributable to DaVita
Inc. $ 1.58 $ 1.45 $ 0.70 $ 4.99 Diluted income from continuing
operations per share attributable to DaVita Inc., excluding the
after-tax non-cash goodwill impairment charge and debt refinancing
and redemption charges(1) $ 1.58 $ 1.45 $ 1.13 $ 5.14
2.
Consolidated Business Metrics: Expenses Patient care
costs as a percent of consolidated revenue(2) 65.2 % 65.8 % 68.8 %
67.0 % General and administrative expenses as a percent of
consolidated revenue (2) 10.4 % 10.1 % 9.6 % 9.9 % Bad debt
expense as a percent of consolidated revenue 2.9 % 2.9 % 2.6 % 2.8
% Consolidated effective tax rate attributable to DaVita
Inc.(1) 38.0 % 40.5 % 36.5 % 39.6 %
3. Segment Financial
Results: (dollar amounts rounded to nearest million)
Revenues Dialysis and related lab services $ 1,720 $ 1,675 $
1,542 $ 6,485 Other – Ancillary services and strategic initiatives
148 137 107 514
Total segment revenue 1,868 1,812 1,649 6,999 Less
elimination of intersegment revenue (6 ) (4 )
(2 ) (17 ) Total consolidated revenue $ 1,862 $ 1,808
$ 1,647 $ 6,982
Operating Income
Dialysis and related lab services $ 353 $ 332 $ 268
$ 1,225 Other – U.S. Ancillary services and strategic
initiatives (5 ) 2 (2 ) (34 ) – International operations (8
) (5 ) - (20 ) Total other – Ancillary
services and strategic initiatives (13 ) (3 )
(2 ) (54 ) Total segment operating income $ 340 $ 329 $ 266
$ 1,171 Reconciling items: Stock-based compensation (12 ) (13 ) (12
) (49 ) Equity investment income 2 3
2 9 Consolidated operating income $ 330
$ 319 $ 255 $ 1,131
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,
2011
December 31,2011
September 30,2011
December 31,2010
4. Segment Business Metrics: Dialysis and related lab
services Volume Treatments 5,227,167 5,008,094 4,649,610
19,599,472 Number of treatment days 79.0 79.0 79.0 313.0 Treatments
per day 66,167 63,394 58,856 62,618 Per day year over year increase
12.4 % 9.6 % 6.8 % 9.1 % Non-acquired growth year over year 4.4 %
5.0 % 4.4 % 4.6 %
Revenue Dialysis and related lab
services revenue per treatment $ 328.54 $ 333.86 $ 331.14 $ 330.31
Per treatment (decrease) increase from previous quarter (1.6 %) 0.5
% (2.3 %) Per treatment decrease from previous year (0.8 %) (1.5 %)
(2.4 %) (2.0 %) Percent of consolidated revenue 92.2 % 92.5 % 93.5
% 92.7 %
Expenses Patient care costs Percent of
segment revenue 63.4 % 64.5 % 67.8 % 65.7 % Per treatment $ 208.66
$ 215.66 $ 224.86 $ 217.32 Per treatment decrease from previous
quarter (3.2 %) (3.2 %) (3.4 %) Per treatment decrease from
previous year (7.2 %) (7.4 %) (4.1 %) (6.2 %) General and
administrative expenses Percent of segment revenue 8.9 % 8.8 % 8.4
% 8.5 % Per treatment $ 29.45 $ 29.28 $ 27.70 $ 28.12 Per treatment
increase from previous quarter 0.6 % 9.3 % 4.1 % Per treatment
increase from previous year 6.3 % 10.0 % 7.4 % 7.2 %
5.
Cash Flow: Operating cash flow $ 150.7 $ 495.2 $ 120.6 $
1,180.0 Operating cash flow, last twelve months $ 1,180.0 $ 1,149.9
$ 839.7 Free cash flow(1) $ 32.1 $ 423.1 $ 37.3 $ 855.0 Free cash
flow, last twelve months(1) $ 855.0 $ 860.2 $ 599.9 Capital
expenditures: Routine maintenance/IT/other $ 85.3 $ 51.1 $ 60.8 $
224.4 Development and relocations $ 63.1 $ 45.7 $ 44.5 $ 175.8
Acquisition expenditures $ 150.3 $ 775.9 $ 50.9 $ 1,077.4
6. Accounts Receivable: Net receivables $ 1,195 $ 1,165 $
1,049 DSO 61 60 61
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,
2011
December 31,2011
September 30,2011
December 31,2010
7. Debt and Capital Structure: Total debt(3) $ 4,513 $ 4,508
$ 4,317 Net debt, net of cash(3) $ 4,119 $ 3,967 $ 3,457
Leverage ratio (see Note 1 on page 9)
2.72x
2.73x
2.72x
Overall weighted average effective interest rate during the quarter
5.27 % 5.30 % 4.86 % Overall weighted average effective interest
rate at end of the quarter 5.27 % 5.27 % 4.94 % Weighted average
effective interest rate on the Senior Secured Credit Facilities at
end of the quarter 4.61 % 4.61 % 4.05 % Effectively fixed interest
rates as a percentage of our total debt at December 31, 2011(4) and
September 30, 2011(4) and fixed interest rates at December 31, 2010
100 % 100 % 77 % Share repurchases $ - $ 7.3 $ 420.0 $ 323.3
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 % 69 % 67 %
_________________
(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) The
quarters ended December 31, 2011 and September 30, 2011, excludes
$7.8 million and $8.3 million, respectively, of debt discounts
associated with our Term Loan B and our Term Loan A-2 that are not
actually outstanding debt principal. The quarter ended December 31,
2010, excludes $8.4 million of a debt discount associated with our
Term Loan B that is not actually outstanding debt principal. (4)
The Term Loan A-2 and Term Loan B are subject to LIBOR floors of
1.00% and 1.50%, respectively. Because LIBOR, as of December 31,
2011, was lower than either of these floors, the interest rates on
the Term Loan A-2 and the Term Loan B are treated as “fixed” for
purposes of the table above. We have included both of these Term
loans in the fixed rate totals in the table above until such time
as the LIBOR-based component of our interest rate exceeds 1.00% on
the Term Loan A-2 and 1.50% on the Term Loan B. at such time, we
will then be subject to LIBOR-based interest rate volatility on the
LIBOR variable component of our interest rate on all of the Term
Loan A-2, as well as for the Term Loan B, but limited to a maximum
rate of 4.00% on $1.25 billion of outstanding principal debt on the
Term Loan B. The remaining $483 million outstanding principal
balance of the Term Loan B is subject to LIBOR-based interest rate
volatility above a floor of 1.50%.
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.
Year ended December 31,
2011
Net income attributable to DaVita Inc. $ 478,001 Income taxes
315,726 Interest expense 224,909 Depreciation and amortization
267,315 Non-cash goodwill impairment charge 24,000 Noncontrolling
interests and equity investment income, net 95,748 Other, including
pro-forma EBITDA associated with acquisitions 80,029 Stock-based
compensation expense 48,718 “Consolidated EBITDA” $
1,534,446
December 31, 2011 Total debt,
excluding debt discount of $7.8 million $ 4,512,811 Letters of
credit issued 47,711 4,560,522 Less: cash and cash
equivalents (393,752 ) Consolidated net debt $ 4,166,770
Last twelve months “Consolidated EBITDA” $ 1,534,446
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, 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. Income from continuing
operations attributable to DaVita Inc. excluding an after-tax
non-cash goodwill impairment charge and after-tax debt refinancing
and redemption charges and diluted income from continuing
operations per share attributable to DaVita Inc. excluding an
after-tax non-cash goodwill impairment charge and after-tax debt
refinancing and redemption charges.
We believe that income from continuing
operations attributable to DaVita Inc. excluding an after-tax
non-cash goodwill impairment charge and after-tax debt refinancing
and redemption charges enhances a user’s understanding of our
normal income from continuing operations attributable to DaVita
Inc. and diluted income from continuing operations per share
attributable to DaVita Inc. for these periods by providing a
measure that is more meaningful because it excludes: (1) 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 (2) charges that resulted from the refinancing of our
Senior Secured Credit Facilities and the redemption of the
aggregate principal amounts of our outstanding 6 ⅝% senior notes
due 2013 and the aggregate principal amount of our outstanding 7 ¼%
senior subordinated notes due 2015, as well as a partial 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 income from continuing operations attributable to
DaVita Inc. and diluted income from continuing operations 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 income from continuing operations attributable to
DaVita Inc. and diluted income from continuing operations per share
attributable to DaVita Inc.
Income from continuing operations attributable to DaVita
Inc. excluding an after-tax non-cash goodwill impairment charge and
after-tax debt refinancing and redemption charges: Three
months ended Year ended December 31,
2011
September 30,
2011
December 31,
2010
December 31,
2011
December 31,
2010
Net income attributable to DaVita Inc. $ 148,123 $ 135,361 $ 69,020
$ 478,001 $ 405,683 Discontinued operations attributable to DaVita
Inc. 1,307 2,831 (93 ) 3,754
(281 ) Income from continuing operations attributable to
DaVita Inc. 149,430 138,192 68,927 481,755 405,402 Add: Non-cash
goodwill impairment charge - - - 24,000 - Add: Debt refinancing and
redemption charges - - 70,255 - 74,382 Less: Related income tax
- - (27,329 ) (9,600 ) (28,935 )
$ 149,430 $ 138,192 $ 111,853 $ 496,155 $ 450,849
Diluted income from continuing operations
per share attributable to DaVita Inc. excluding an after-tax
non-cash goodwill impairment charge and after-tax debt refinancing
and redemption charges: Three months ended Year
ended December 31,
2011
September 30,
2011
December 31,
2010
December 31,
2011
December 31,
2010
Diluted net income per share attributable to DaVita Inc. $ 1.56 $
1.42 $ 0.70 $ 4.96 $ 3.94 Discontinued operations 0.01 0.03 - 0.04
(0.01 ) Rounding 0.01 - - (0.01
) - Diluted income from continuing operations per
share attributable to DaVita Inc. 1.58 1.45 0.70 4.99 3.93 Add:
Non-cash goodwill impairment charge - - - 0.15 - Add: Debt
refinancing and redemption charges - - 0.43
- 0.44 $ 1.58 $ 1.45 $ 1.13
$ 5.14 $ 4.37
DAVITA INC.
RECONCILIATIONS FOR NON-GAAP MEASURES (unaudited)
(dollars in thousands)
2. Operating income excluding a
pre-tax non-cash goodwill impairment charge.
We believe that operating income excluding
a 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 GAAP and should not
be considered as an alternative to operating income.
Operating income excluding a pre-tax non-cash goodwill
impairment charge: Three months ended Year ended
December 31,
2011
September 30,
2011
December 31,
2010
December 31,
2011
December 31,
2010
Operating income $ 330,112 $ 318,712 $ 255,258 $ 1,130,782 $
996,560 Add: Non-cash goodwill impairment charge - -
- 24,000 - $ 330,112 $ 318,712 $ 255,258 $
1,154,782 $ 996,560
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
Year ended December 31,
2011
December 31,
2011
September 30,
2011
December 31,
2010
Income from continuing operations before income taxes $ 269,149
$ 258,662 $ 132,215 $ 892,674 Income
tax expense $ 91,710 $ 94,204 $ 39,863 $
315,744 Effective income tax rate 34.1 % 36.4
% 30.2 % 35.4 %
Three months
ended
Year ended December 31,
2011
December 31,
2011
September 30,
2011
December 31,
2010
Income from continuing operations before income taxes $ 269,149 $
258,662 $ 132,215 $ 892,674 Less: Noncontrolling owners’ income
primarily attributable to non-tax paying entities (28,128 )
(26,604 ) (23,602 ) (96,049 ) Income before
income taxes attributable to DaVita Inc. $ 241,021 $ 232,058
$ 108,613 $ 796,625 Income tax expense
91,710 94,204 $ 39,863 $ 315,744 Less income tax attributable to
noncontrolling interests (119 ) (119 ) (177 )
(655 ) Income tax attributable to DaVita Inc. $ 91,591
$ 94,085 $ 39,686 $ 315,089
Effective income tax rate attributable to DaVita Inc. 38.0 %
40.5 % 36.5 % 39.6 %
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
Year ended December 31,
2011
December 31,2011
September 30,2011
December 31,2010
Cash provided by operating activities $ 150,659 $ 495,194 $ 120,551
$ 1,180,046 Less: Income distributions to noncontrolling interests
(33,245 ) (20,985 ) (22,479 ) (100,653
) Cash provided by operating activities attributable to DaVita Inc.
117,414 474,209 98,072 1,079,393 Less: Expenditures for routine
maintenance and information technology (85,304 )
(51,107 ) (60,798 ) (224,366 ) Free cash flow $
32,110 $ 423,102 $ 37,274 $ 855,027
Rolling 12-Month Period
December 31,2011
September 30,2011
December 31,2010
Cash provided by operating activities $ 1,180,046 $ 1,149,938 $
839,683 Less: Income distributions to noncontrolling interests
(100,653 ) (89,887 ) (83,591 ) Cash provided
by operating activities attributable to DaVita Inc. 1,079,393
1,060,051 756,092 Less: Expenditures for routine maintenance and
information technology (224,366 ) (199,860 )
(156,228 ) Free cash flow $ 855,027 $ 860,191 $
599,864
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