American Renal Associates Holdings, Inc. (NYSE: ARA) (the
“Company”), a leading provider of outpatient dialysis services,
today announced financial and operating results for the third
quarter ended September 30, 2018.
Certain metrics, including those expressed on an adjusted basis,
are Non-GAAP financial measures (See “Use of Non-GAAP Financial
Measures” and the reconciliation tables further below).
Third Quarter 2018 Highlights (all percentage changes
compare Q3 2018 to Q3 2017 unless noted):
- Net patient service operating revenues
increased 12.4% to $211.0 million;
- Net income attributable to American
Renal Associates Holdings, Inc. was $2.5 million as compared to net
income of $8.0 million in Q3 2017;
- Adjusted EBITDA less noncontrolling
interests (“Adjusted EBITDA-NCI”) was $26.6 million as compared to
$28.1 million in Q3 2017;
- Adjusted net income attributable to
American Renal Associates Holdings, Inc. was $6.7 million, or $0.19
per share, for Q3 2018;
- Total dialysis treatments increased
5.0%, of which 3.9% was non-acquired growth. Normalized total
treatment growth was 6.1% and normalized non-acquired treatment
growth was 5.0%; and
- As of September 30, 2018, the
Company operated 235 outpatient dialysis clinics serving
approximately 16,000 patients.
Joseph (Joe) Carlucci, Chairman and Chief Executive Officer,
said, “We had a productive third quarter supported by solid revenue
growth, sustained progress with labor productivity, positive
business development activity and continued stability with
commercial payor mix. Our progress in the third quarter was
impacted by normalized treatment growth that was slightly below our
expectations, as well as higher self-funded employee insurance
costs, which were the primary factors leading to Adjusted
EBITDA-NCI that was at the lower-end of our expectations. As a
result of our normalized treatment growth performance during the
first nine months of 2018, we are lowering our full-year treatment
growth expectation to a range of 6.0% to 6.5% from the previous
range of 6.5% to 7.5%.”
Carlucci added, “We are encouraged with the Company’s progress
in the area of business development through the addition of six new
deals signed during the third quarter of 2018. We opened two de
novo clinics during the third quarter of 2018, and expect to add
15-20 new clinics during 2018. As of September 30, 2018, we had 30
signed clinics scheduled to open in the future.”
“We continue to believe that our long-term success will be
driven by our experienced team, dedicated caregivers and our
differentiated physician partnership model. Our organization
remains centered on our Core Values and we are gratified that our
partnership model continues to be validated by strong quality
metrics and patient satisfaction rates and industry-leading
physician satisfaction rates. We remain optimistic about the
growing interest in our partnership model among many of the leading
nephrologists throughout the U.S.,” continued Carlucci.
Financial and operating highlights include:
Revenue: Patient service operating revenues for the third
quarter of 2018 were $211.0 million, an increase of 12.4% as
compared to $187.7 million for the prior-year period, primarily due
to treatment growth and reimbursement of certain pharmaceuticals
under the Medicare ESRD PPS Transitional Drug Add-on Payment
Adjustment, which became effective on January 1, 2018.
Treatment Volume: Total dialysis treatments for the third
quarter of 2018 were 578,982, representing an increase of 5.0% over
the third quarter of 2017. Non-acquired treatment growth was 3.9%,
and acquired treatment growth was 1.1% for the third quarter of
2018. Normalized total treatment growth was 6.1% and non-acquired
treatment growth was 5.0% as compared to Q3 2017.
Clinic Activity: As of September 30, 2018, the
Company provided services at 235 outpatient dialysis clinics
serving 16,092 patients. During the third quarter of 2018, we
opened two de novo clinics. As of September 30, 2018, we had
30 signed clinics scheduled to open in the future.
Net income, Net income attributable to
noncontrolling interests, Net income attributable to American
RenalAssociates Holdings, Inc., Adjusted EBITDA and Adjusted
EBITDA-NCI:
(Unaudited)
Three Months EndedSeptember
30,
Increase (Decrease) (in thousands) 2018
2017 Amount
PercentageChange
Net income $ 18,294 $ 26,672 $ (8,378 ) (31.4 )% Net income
attributable to noncontrolling interests (15,804 ) (18,689 ) $
2,885 15.4 % Net income attributable to American Renal
Associates Holdings, Inc. $ 2,490 $ 7,983 $ (5,493 )
NM*
Non-GAAP financial measures**: Adjusted EBITDA $ 42,435
$ 46,838 $ (4,403 ) (9.4 )% Adjusted EBITDA-NCI $ 26,631 $ 28,149 $
(1,518 ) (5.4 )%
(Unaudited)
Nine Months EndedSeptember
30,
Increase (Decrease) (in thousands) 2018
2017 Amount
PercentageChange
Net income $ 34,284 $ 55,965 $ (21,681 ) (38.7 )% Net income
attributable to noncontrolling interests (50,712 ) (51,339 ) $ 627
1.2 % Net (loss) income attributable to American Renal
Associates Holdings, Inc. $ (16,428 ) $ 4,626 $ (21,054 )
NM*
Non-GAAP financial measures**: Adjusted EBITDA $ 131,589
$ 128,306 $ 3,283 2.6 % Adjusted EBITDA-NCI $ 80,877 $ 76,967 $
3,910 5.1 %
_______________________________________________________
* Not Meaningful
** See “Reconciliation of Non-GAAP Financial Measures.”
Operating Expenses: Patient care costs for the third
quarter of 2018 were $145.3 million, or 68.9% of patient service
operating revenues, as compared to $119.6 million, or 63.7% of
patient service operating revenues, in the prior-year period.
General and administrative expenses were $24.6 million,
or 11.7% of patient service operating revenues, as compared to
$22.3 million, or 11.9% of patient service operating revenues, in
the prior-year period.
Patient care costs for the nine months
ended September 30, 2018 were $419.6
million, or 67.4% of patient service operating
revenues, as compared to $358.0
million, or 65.0% (or 64.7% excluding the
Modification Expense, (defined below), severance expense and gain
on sale of assets) of patient service operating revenues, in the
prior-year period. Patient care costs include $2.2
million of stock-based compensation related to modification of
options at the time of the Company’s initial public offering (the
“Modification Expense”), $0.1 million of severance costs and $0.6
million gain on sale of assets for the nine months
ended September 30, 2017. General and administrative
expenses during the nine months
ended September 30, 2018 were $76.4
million, or 12.3% of patient service operating
revenues, as compared to $79.9
million, or 14.5% (or 12.6% excluding the
Modification Expense and severance expense) of patient service
operating revenues, in the prior-year period. General and
administrative expenses include $9.5 million of
Modification Expense and $0.8 million in severance costs for
the nine months ended September 30, 2017.
Cash Flow: Cash provided by operating activities for the
third quarter of 2018 was $25.4 million as compared to $45.0
million in the prior-year period. Adjusted cash provided by
operating activities less distributions to noncontrolling interests
(see “Reconciliation of Non-GAAP Financial Measures”) for the third
quarter of 2018 was $4.5 million as compared to $23.0 million in
the prior-year period. Cash flow for the third quarter of 2018 was
negatively impacted by a $10.0 million installment payment related
to a previously disclosed legal settlement. Total capital
expenditures for the third quarter of 2018 were $10.7 million,
which is consistent with the prior-year period. Capital
expenditures for the three months ended September 30, 2018
included $4.1 million for maintenance and $6.6 million for
expansions and new clinic development.
Cash provided by operating activities for
the nine months ended September 30,
2018 was $83.9 million as compared to $97.4
million in the prior-year period. Adjusted cash provided by
operating activities less distributions to noncontrolling interests
(see “Reconciliation of Non-GAAP Financial Measures”) for
the nine months ended September 30,
2018 was $29.6 million as compared to $37.6
million in the prior-year period. Total capital expenditures
for the nine months ended September 30,
2018 were $29.1 million as compared to $24.8
million in the prior-year period. Capital expenditures for
the nine months ended September 30,
2018 included $9.0 million for maintenance
and $20.1 million for expansions and new clinic
development.
Balance Sheet: At September 30, 2018, the Company’s
balance sheet included consolidated cash of $61.9 million and
consolidated debt of $554.0 million, including the current portion
of long-term debt. Excluding clinic-level debt not guaranteed by
the Company and clinic-level cash not owned by the Company,
Adjusted owned net debt (see “Reconciliation of Non-GAAP Financial
Measures”) was $464.1 million at September 30, 2018, as
compared to $459.5 million at December 31, 2017. Adjusted owned net
debt to last twelve months Adjusted EBITDA-NCI leverage ratio was
4.2x at September 30, 2018, an improvement of 0.2x from
December 31, 2017. As of September 30, 2018, net patient
accounts receivable was $90.6 million, and days sales outstanding
(“DSO”) for the period was 40 days as compared to 38 days as of
June 30, 2018.
2018 Outlook for Adjusted EBITDA-NCI:
The Company expects 2018 Adjusted EBITDA-NCI to be at the lower
end of the previously stated range of $105 million to $111
million.
The Company is not providing a quantitative reconciliation of
our Non-GAAP outlook to the corresponding GAAP information because
the GAAP measures that we exclude from our Non-GAAP outlook are not
available without unreasonable effort on a forward-looking basis
due to their unpredictability, high variability, complexity and low
visibility. These excluded GAAP measures include noncontrolling
interests, interest expense, income taxes, and other charges. We
expect the variability of these charges to have a potentially
unpredictable, and potentially significant, impact on our future
GAAP financial results.
Please see the “Forward-Looking Statements” section of this
release for a discussion of certain risks to our outlook.
Conference Call
American Renal Associates Holdings, Inc. will hold a conference
call to discuss this release on Friday, November 9, 2018, at
9:00 a.m. Eastern time. Investors will have the opportunity to
listen to the conference call by dialing (877) 407-8029, or for
international callers (201) 689-8029, or may listen over the
Internet by going to the Investor Relations section at
www.ir.americanrenal.com. For those who cannot listen to the live
broadcast, a replay will be available and can be accessed by
dialing (877) 660-6853, or for international callers (201)
612-7415. The conference ID for the live call and the replay is
13683468.
About American Renal Associates
American Renal Associates (“ARA”) is a leading provider of
outpatient dialysis services in the United States. As of
September 30, 2018, ARA operated 235 dialysis clinic locations
in 26 states and the District of Columbia serving approximately
16,000 patients with end stage renal disease. ARA operates
principally through a physician partnership model, in which it
partners with approximately 400 local nephrologists to develop, own
and operate dialysis clinics. ARA’s Core Values emphasize taking
good care of patients, providing physicians with clinical autonomy
and operational support, hiring and retaining the best possible
staff and providing best practices management services. For more
information about American Renal Associates, visit
www.americanrenal.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements, which have been included in reliance of
the “safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995, involve risks and uncertainties and assumptions
relating to our operations, financial condition, business,
prospects, growth strategy and liquidity, which may cause our
actual results to differ materially from those projected by such
forward-looking statements, and the Company cannot give assurances
that such statements will prove to be correct. You can identify
forward-looking statements because they do not relate strictly to
historical or current facts. These statements may include words
such as “aim,” “anticipate,” “believe,” “estimate,” “expect,”
“forecast,” “outlook,” “potential,” “project,” “projection,”
“plan,” “intend,” “seek,” “may,” “could,” “would,” “will,”
“should,” “can,” “can have,” “likely,” the negatives thereof and
other words and terms of similar meaning in connection with any
discussion of the timing or nature of future operating or financial
performance or other events.
The forward-looking statements appear in a number of places
throughout this press release and include statements regarding our
intentions, beliefs or current expectations concerning, among other
things, our results of operations, financial condition, liquidity,
prospects, growth, strategies and the industry in which we operate.
All forward-looking statements are subject to risks and
uncertainties, including but not limited to those risks and
uncertainties described in “Risk Factors” and “Special Note
Regarding Forward-Looking Statements” in our Annual Report on Form
10-K for the year ended December 31, 2017, as updated by our
reports on Form 10-Q filed or to be filed with the Securities and
Exchange Commission (“SEC”) that may cause actual results to differ
materially from those that we expected.
Some of the factors that could cause actual results to differ
materially from those expressed or implied by the forward-looking
statements include, among others, the following:
- continuing decline in the number of
patients with commercial insurance, including as a result of
changes to the healthcare exchanges or changes in regulations or
enforcement of regulations regarding the healthcare exchanges and
challenges from commercial payors or any regulatory or other
changes leading to changes in the ability of patients with
commercial insurance coverage to receive charitable premium
support;
- decline in commercial payor
reimbursement rates;
- the ultimate resolution of the Centers
for Medicare and Medicaid Services (“CMS”) Interim Final Rule
published December 14, 2016 related to dialysis facilities
Conditions for Coverage (CMS 3337-IFC), including an issuance of a
different but related Final Rule;
- reduction of government-based payor
reimbursement rates or insufficient rate increases or adjustments
that do not cover all of our operating costs;
- our ability to successfully develop de
novo clinics, acquire existing clinics and attract new physician
partners;
- our ability to compete effectively in
the dialysis services industry;
- the performance of our joint venture
subsidiaries and their ability to make distributions to us;
- changes to the Medicare end-stage renal
disease (“ESRD”) program that could affect reimbursement rates and
evaluation criteria, as well as changes in Medicaid or other
non-Medicare government programs or payment rates, including the
ESRD prospective payment rate system final rule for 2019 issued
November 1, 2018;
- federal or state healthcare laws that
could adversely affect us;
- our ability to comply with all of the
complex federal, state and local government regulations that apply
to our business, including those in connection with federal and
state anti-kickback laws and state laws prohibiting the corporate
practice of medicine or fee-splitting;
- heightened federal and state
investigations and enforcement efforts;
- the impact of the now-settled
litigation by affiliates of UnitedHealth Group, Inc. and the
resolution thereof, including entry into a national network
agreement with United;
- the impact of the ongoing Department of
Justice inquiry;
- changes in the availability and cost of
erythropoietin-stimulating agents and other pharmaceuticals used in
our business;
- changes in the reimbursement rates of
the calcimimetics pharmaceutical class under the Medicare
Transitional Drug Add-on Payment Adjustment;
- development of new technologies that
could decrease the need for dialysis services or decrease our
in-center patient population;
- our ability to timely and accurately
bill for our services and meet payor billing requirements;
- claims and losses relating to
malpractice, professional liability and other matters; the
sufficiency of our insurance coverage for those claims and rising
insurances costs; and any negative publicity or reputational damage
arising from such matters;
- loss of any members of our senior
management;
- damage to our reputation or our brand
and our ability to maintain brand recognition;
- our ability to maintain relationships
with our medical directors and renew our medical director
agreements;
- shortages of qualified skilled clinical
personnel, or higher than normal turnover rates;
- competition and consolidation in the
dialysis services industry;
- deteriorations in economic conditions,
particularly in states where we operate a large number of clinics,
or disruptions in the financial markets;
- the participation of our physician
partners in material strategic and operating decisions and our
ability to favorably resolve any disputes;
- our ability to honor obligations under
the joint venture operating agreements with our physician partners
were they to exercise certain put rights and other rights;
- unauthorized disclosure of personally
identifiable, protected health or other sensitive or confidential
information;
- our ability to meet our obligations and
comply with restrictions under our substantial level of
indebtedness; and,
- the ability of our principal
stockholder, whose interests may conflict with yours, to strongly
influence or effectively control our corporate decisions.
The forward-looking statements made in this press release are
made only as of the date hereof. Except as required by law, we
undertake no obligation to update any forward-looking statement,
whether as a result of new information or otherwise. More
information about potential factors that could affect our business
and financial results is included in our filings with the SEC.
Use of Non-GAAP Financial Measures
In addition to the results prepared in accordance with generally
accepted accounting principles in the United States (“GAAP”)
provided throughout this press release, the Company has presented
the following Non-GAAP financial measures: Adjusted EBITDA,
Adjusted EBITDA less noncontrolling interests, Adjusted net income
attributable to American Renal Associates Holdings, Inc., Adjusted
cash provided by operating activities and Adjusted owned net debt,
which exclude various items detailed in the attached
“Reconciliation of Non-GAAP Financial Measures.”
These Non-GAAP financial measures are not intended to replace
financial performance and liquidity measures determined in
accordance with GAAP. Rather, they are presented as supplemental
measures of the Company's performance and liquidity that management
believes may enhance the evaluation of the Company's ongoing
operating results. Please see “Reconciliation of Non-GAAP Financial
Measures” for additional reasons why these measures are
provided.
American Renal Associates Holdings,
Inc. and SubsidiariesConsolidated Statements of
Operations(Unaudited)(dollars in thousands, except
for share data)
Three Months Ended September 30,
Nine Months Ended September 30, 2018
2017 2018 2017 Patient service
operating revenues $ 211,019 $ 187,711 $ 622,869 $ 550,728
Operating expenses: Patient care costs 145,300 119,599 419,593
357,959 General and administrative 24,619 22,292 76,382 79,917
Transaction-related costs — — 856 717 Depreciation and amortization
10,023 9,438 29,460 27,894 Certain legal matters 1,028 3,481
37,677 11,714 Total operating expenses 180,970
154,810 563,968 478,201 Operating
income 30,049 32,901 58,901 72,527 Interest expense, net (8,241 )
(7,255 ) (23,829 ) (22,052 ) Loss on early extinguishment of debt —
— — (526 ) Income tax receivable agreement (expense) income (3,480
) 3,585 (2,765 ) 5,461 Income before income taxes
18,328 29,231 32,307 55,410 Income tax expense (benefit) 34
2,559 (1,977 ) (555 ) Net income 18,294 26,672 34,284 55,965
Less: Net income attributable to noncontrolling interests (15,804 )
(18,689 ) (50,712 ) (51,339 ) Net income (loss) attributable to
American Renal Associates Holdings, Inc. 2,490 7,983 (16,428 )
4,626 Less: Change in the difference between the redemption value
and estimated fair value for accounting purposes of the related
noncontrolling interests (481 ) 5 (783 ) (13,605 ) Net
income (loss) attributable to common shareholders $ 2,009 $
7,988 $ (17,211 ) $ (8,979 ) Earnings (loss) per
share: Basic $ 0.06 $ 0.26 $ (0.54 ) $ (0.29 ) Diluted $ 0.06 $
0.24 $ (0.54 ) $ (0.29 ) Weighted-average number of common shares
outstanding: Basic 32,005,544 31,095,418 31,912,934 30,997,218
Diluted 34,578,592 33,833,822 31,912,934 30,997,218
American Renal Associates Holdings,
Inc. and SubsidiariesConsolidated Balance
Sheets(dollars in thousands, except for share data)
September 30, 2018 December
31, 2017 Assets (Unaudited) Cash $ 61,872 $ 71,521
Accounts receivable, less allowance for doubtful accounts of $426
and $6,757, respectively 90,596 79,662 Inventories 6,382 4,665
Prepaid expenses and other current assets 20,608 24,998 Income tax
receivable 5,306 6,745 Total current assets 184,764
187,591 Property and equipment, net of accumulated depreciation of
$191,979 and $167,390, respectively 168,346 168,537 Intangible
assets, net of accumulated amortization of $24,022 and $23,419,
respectively 24,811 25,368 Other long-term assets 18,198 9,285
Goodwill 570,944 573,427 Total assets $ 967,063
$ 964,208
Liabilities and Equity Accounts
payable $ 54,023 $ 33,421 Accrued compensation and benefits 34,658
28,985 Accrued expenses and other current liabilities 43,153 49,963
Current portion of long-term debt 47,206 44,534 Total
current liabilities 179,040 156,903 Long-term debt, less current
portion 506,750 515,554 Income tax receivable agreement payable
9,476 7,500 Other long-term liabilities 24,378 14,880 Deferred tax
liabilities 4,843 8,991 Total liabilities 724,487
703,828 Commitments and contingencies Noncontrolling interests
subject to put provisions 150,152 139,895
Equity Preferred
stock, $0.01 par value; 1,000,000 shares authorized; none issued
Common stock, $0.01 par value; 300,000,000 shares authorized;
32,514,777 and 32,034,439 issued and outstanding at September 30,
2018 and December 31, 2017, respectively 195 193 Additional paid-in
capital 65,965 67,853 Receivable from noncontrolling interests
(1,340 ) (358 ) Accumulated deficit (140,003 ) (123,789 )
Accumulated other comprehensive income (loss), net of tax 1,654
(677 ) Total American Renal Associates Holdings, Inc.
deficit (73,529 ) (56,778 ) Noncontrolling interests not subject to
put provisions 165,953 177,263 Total equity 92,424
120,485 Total liabilities and equity $ 967,063
$ 964,208
American Renal Associates Holdings,
Inc. and SubsidiariesConsolidated Statements of Cash
Flows(Unaudited) (dollars in thousands)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
Operating activities 2018 2017
2018 2017 Net income $ 18,294 $ 26,672
$ 34,284 $ 55,965 Adjustments to reconcile net income to cash
provided by operating activities: Depreciation and amortization
10,023 9,438 29,460 27,894 Amortization of discounts, fees and
deferred financing costs 395 469 1,384 1,534 Loss on extinguishment
of debt — — — 526 Stock-based compensation 1,247 1,031 4,174 14,762
Premium paid for interest rate cap agreements — — — (1,186 )
Deferred taxes — 1 (5,014 ) 730 Income tax receivable agreement
expense (income) 3,480 (3,585 ) 2,765 (5,461 ) Non-cash charge
related to derivative agreements 13 — 18 173 Non-cash rent charges
239 157 400 588 Loss (gain) on disposal of assets 63 (567 ) 342
(377 ) Change in operating assets and liabilities, net of
acquisitions: Accounts receivable 912 (3,393 ) (10,934 ) (107 )
Inventories 153 288 (1,717 ) 4 Prepaid expenses and other current
assets (310 ) 8,212 6,809 (1,425 ) Other assets 1,442 (6 ) (7,291 )
(558 ) Accounts payable 1,174 5,679 20,602 2,736 Accrued
compensation and benefits 3,777 3,113 5,673 2,664 Accrued expenses
and other liabilities (15,510 ) (2,497 ) 2,916 (1,090 ) Cash
provided by operating activities 25,392 45,012 83,871 97,372
Investing activities Purchases of property, equipment and
intangible assets (10,656 ) (10,727 ) (29,074 ) (24,780 ) Proceeds
from asset sales 2 1,075 2,502 1,075
Cash used in investing activities (10,654 ) (9,652 ) (26,572 )
(23,705 )
Financing activities Net proceeds from issuance of
long-term debt — — — 267,564 Cash paid for financing costs — — —
(3,914 ) Proceeds from term loans, net of deferred financing costs
23,630 22,751 52,576 34,742 Payments on long-term debt (26,705 )
(26,275 ) (59,903 ) (312,800 ) Dividends and dividend equivalents
paid (40 ) (35 ) (320 ) (8,715 ) Proceeds from exercise of stock
options 759 147 1,157 683 Vested restricted stock awards withheld
on net share settlement (54 ) — (421 ) — Distributions to
noncontrolling interests (20,942 ) (21,967 ) (55,131 ) (60,509 )
Contributions from noncontrolling interests 1,125 960 3,645 3,847
Purchases of noncontrolling interests (128 ) (18,347 ) (8,729 )
(27,854 ) Proceeds from sales of additional noncontrolling
interests 86 66 178 66 Cash used in
financing activities (22,269 ) (42,700 ) (66,948 ) (106,890 )
Decrease in cash and restricted cash (7,531 ) (7,340 )
(9,649 ) (33,223 ) Cash and restricted cash at beginning of period
69,503 75,033 71,621 100,916 Cash and
restricted cash at end of period $ 61,972 $ 67,693 $
61,972 $ 67,693
Supplemental Disclosure of
Cash Flow Information Cash paid for income taxes $ 627 $ 251 $
2,152 $ 1,571 Cash paid for interest 9,556 6,676 22,221 20,111
American Renal Associates Holdings,
Inc. and SubsidiariesUnaudited GAAP, Non-GAAP, and Other
Supplemental Business Metrics(dollars in thousands, except
per treatment amounts)
Three Months Ended
September 30,2018
June 30, 2018
September 30,2017
Dialysis Clinic Activity: Number of clinics (as of end of
period) 235 233 217 Number of de novo clinics opened (during
period) 2 5 1 Sold or merged clinics (during period) — (1 ) (1 )
Signed clinics (as of end of period) 30 26 36
Patients and
Treatment Volume: Patients (as of end of period) 16,092 16,018
15,237 Number of treatments 578,982 572,929 551,258 Number of
treatment days 78 78 79 Treatments per day 7,423 7,345 6,978
Sources of treatment growth (year over year % change):
Non-acquired growth 3.9 % 4.5 % 6.8 % Normalized Non-acquired
growth 5.0 % 5.3 % 7.2 % Acquired growth 1.1 % 1.1 % — % Total
treatment growth 5.0 % 5.6 % 6.8 % Normalized Total treatment
growth 6.1 % 6.3 % 7.2 %
Revenue: Patient service operating
revenues $ 211,019 $ 217,178 $ 187,711 Patient service operating
revenues per treatment $ 364 $ 379 $ 341
Expenses: Patient
care costs Amount $ 145,300 $ 140,562 $ 119,635 As a % of patient
service operating revenues 68.9 % 64.7 % 63.7 % Per treatment $ 251
$ 245 $ 217 General and administrative expenses Amount $ 24,619 $
26,803 $ 22,292 As a % of patient service operating revenues 11.7 %
12.3 % 11.9 % Per treatment $ 43 $ 47 $ 40
Accounts receivable
DSO (days) 40 38 39
Adjusted EBITDA* Adjusted EBITDA
including noncontrolling interests $ 42,435 $ 51,793 $ 46,838
Adjusted EBITDA-NCI $ 26,631 $ 31,508 $ 28,149
Clinical
(quarterly averages): Dialysis adequacy - % of patients with
Kt/V > 1.2 98 % 98 % 98 % Vascular access - % catheter in use
> 90 days 12 % 12 % 10 %
* See “Reconciliation of Non-GAAP Financial Measures.”
American Renal Associates Holdings,
Inc. and SubsidiariesNet Income (Loss) per Share
Reconciliation(Unaudited)(dollars in thousands,
except per share data)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2018 2017 2018
2017 Basic Net income (loss) attributable to American
Renal Associates Holdings, Inc. $ 2,490 $ 7,983 $ (16,428 ) $ 4,626
Change in the difference between the redemption value and estimated
fair value for accounting purposes of the related noncontrolling
interests (481 ) 5 (783 ) (13,605 ) Net income (loss)
attributable to common shareholders for basic earnings per share
calculation $ 2,009 $ 7,988 $ (17,211 ) $ (8,979 )
Weighted-average common shares outstanding 32,005,544
31,095,418 31,912,934 30,997,218 Earnings
(loss) per share, basic $ 0.06 $ 0.26 $ (0.54 ) $
(0.29 )
Diluted Net income (loss) attributable to American
Renal Associates Holdings, Inc. $ 2,490 $ 7,983 $ (16,428 ) $ 4,626
Change in the difference between the redemption value and estimated
fair value for accounting purposes of the related noncontrolling
interests (481 ) 5 (783 ) (13,605 ) Net income (loss)
attributable to common shareholders for diluted earnings per share
calculation $ 2,009 $ 7,988 $ (17,211 ) $ (8,979 )
Weighted-average common shares outstanding, basic 32,005,544
31,095,418 31,912,934 30,997,218 Weighted-average common shares
outstanding, diluted 34,578,592 33,833,822 31,912,934
30,997,218 Earnings (loss) per share, diluted $ 0.06
$ 0.24 $ (0.54 ) $ (0.29 ) Outstanding options
excluded as impact would be anti-dilutive 1,234,245 1,357,957
2,736,134 1,988,257
American Renal Associates Holdings, Inc. and
SubsidiariesReconciliation of Non-GAAP Financial
Measures(Unaudited)(dollars in thousands)
We use Adjusted EBITDA and Adjusted EBITDA-NCI to track our
performance. “Adjusted EBITDA” is defined as net income before
income taxes and other non-income based tax, interest expense, net,
depreciation and amortization, as adjusted for stock-based
compensation and associated payroll taxes, loss on early
extinguishment of debt, transaction-related costs, certain legal
matters costs, executive and management severance costs, income tax
receivable agreement income and expense, and gain on sale of
assets. “Adjusted EBITDA-NCI” is defined as Adjusted EBITDA less
net income attributable to noncontrolling interests. We
believe Adjusted EBITDA and Adjusted EBITDA-NCI provide information
useful for evaluating our business and a further understanding of
the Company's results of operations from management's perspective.
We believe Adjusted EBITDA is helpful in highlighting trends
because Adjusted EBITDA excludes the results of actions that are
outside the operational control of management, but 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.
We believe Adjusted EBITDA-NCI is helpful in highlighting the
amount of Adjusted EBITDA that is available to us after reflecting
the interests of our joint venture partners. Adjusted EBITDA and
Adjusted EBITDA-NCI are not measures 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 operations or cash flow data
prepared in conformity with GAAP, or as measures of profitability
or liquidity. In addition, Adjusted EBITDA and Adjusted EBITDA-NCI
may not be comparable to similarly titled measures of other
companies. Adjusted EBITDA and Adjusted EBITDA-NCI may not be
indicative of historical operating results, and we do not mean for
these items to be predictive of future results of operations or
cash flows. Adjusted EBITDA and Adjusted EBITDA-NCI have
limitations as analytical tools, and you should not consider
these items in isolation, or as substitutes for an analysis of our
results as reported under GAAP. Some of these limitations are that
Adjusted EBITDA and Adjusted EBITDA-NCI:
- do not include stock-based compensation
expense, and beginning with the quarter ended June 30, 2017, do not
include associated payroll taxes;
- do not include transaction-related
costs;
- do 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;
- do 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;
- do not include income tax receivable
agreement income and expense;
- do not include loss on early
extinguishment of debt;
- do not include costs related to certain
legal matters;
- do not include executive and management
severance costs;
- do not include income tax expense or
benefit and other non-income based taxes; and
- do not reflect gain on sale of
assets.
In addition, Adjusted EBITDA is not adjusted for the portion of
earnings that we distribute to our joint venture partners.
You should not consider Adjusted EBITDA and Adjusted EBITDA-NCI
as alternatives to income from operations or net income, determined
in accordance with GAAP, as an indicator of our operating
performance, or as alternatives to cash provided by operating
activities, determined in accordance with GAAP, as an indicator of
cash flows or as a measure of liquidity. This presentation of
Adjusted EBITDA and Adjusted EBITDA-NCI may not be directly
comparable to similarly titled measures of other companies, since
not all companies use identical calculations.
We use Adjusted net income attributable to American Renal
Associates Holdings, Inc. because it is a useful measure to
evaluate our performance by excluding the impact of certain items
that we believe are not related to our normal business operations
and/or are a result of changes in our liabilities from period to
period. See the notes to the tables below for further explanation
of the exclusion of certain items. By excluding these items, we
believe Adjusted net income allows us and investors to evaluate our
net income on a more consistent basis. “Adjusted net income
attributable to American Renal Associates Holdings, Inc.” is
defined as Net income (loss) attributable to American Renal
Associates Holdings, Inc. plus or minus, as
applicable, stock-based compensation due to option
modifications and other transactions at the time of the Company’s
initial public offering, certain legal matter costs, loss on early
extinguishment of debt, transaction-related costs, executive and
management severance costs, gain on sale of assets, income tax
receivable agreement income/expense, tax valuation allowance
and other tax adjustments, and accounting changes in fair value of
non-controlling interest puts, net of taxes. We use the Adjusted
weighted average number of diluted shares to calculate Adjusted net
income attributable to American Renal Associates Holdings, Inc. per
share. For the first and second quarter of 2017, the Adjusted
weighted average number of diluted shares outstanding is calculated
using the treasury method as if certain unvested in-the-money
options subject to a contingency are treated as being vested to
provide investors with a calculation of the fully-diluted number of
shares assuming certain pre-IPO options vested prior to their
actual vesting on April 21, 2017.
We use Adjusted cash provided (used) by operating activities
less distributions to NCI because it is a useful measure to
evaluate the cash flow that is available to the Company for
investment in property, plant and equipment, debt service, growth
and other general corporate purposes. “Adjusted cash provided
(used) by operating activities less distributions to NCI” is
defined as cash provided by operating activities plus
transaction-related costs less distributions to noncontrolling
interests.
We use Adjusted owned net debt because it is a useful metric to
evaluate the Company’s share of interests in the cash on our
consolidated balance sheet and the debt of the Company. “Adjusted
owned net debt” is defined as debt (other than clinic-level debt)
plus clinic-level debt guaranteed by our wholly owned subsidiaries
less unamortized debt discounts and fees less cash (other than
clinic-level cash) less the Company’s pro rata interest in
clinic-level cash.
The following table presents the reconciliation from net income
to Adjusted EBITDA and Adjusted EBITDA-NCI for the periods
indicated:
(Unaudited)
Reconciliation of Net income to
Adjusted EBITDA
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
LTM (1) as ofSeptember30,
2018
2018 2017 2018
2017 Net income $ 18,294 $ 26,672 $ 34,284 $ 55,965 $ 54,002
Interest expense, net 8,241 7,255 23,829 22,052 31,066 Income tax
expense (benefit) and other non-income based tax 71 2,559 (1,638 )
(555 ) 7,391 Depreciation and amortization 10,023 9,438 29,460
27,894 39,200 Transaction-related costs — — 856 717 856 Loss on
early extinguishment of debt — — — 526 — Income tax receivable
agreement expense (income) 3,480 (3,585 ) 2,765 (5,461 ) 992
Certain legal matters (2) 1,028 3,481 37,677 11,714 41,212
Executive and management severance costs — — — 917 — Stock-based
compensation and related payroll taxes 1,298 1,054 4,356 15,090
5,625 Gain on sale of assets — (36 ) — (553 ) (704 )
Adjusted EBITDA (including noncontrolling interests) $ 42,435 $
46,838 $ 131,589 $ 128,306 $ 179,640 Less: Net income attributable
to noncontrolling interests (15,804 ) (18,689 ) (50,712 ) (51,339 )
(70,199 ) Adjusted EBITDA-NCI $ 26,631 $ 28,149 $
80,877 $ 76,967 $ 109,441
__________________________________
(1) Last twelve months (“LTM”) is the period beginning October
1, 2017 through September 30, 2018.
(2) Certain legal matters costs include legal fees and other
expenses associated with matters outside the ordinary course of our
business, including, but not limited to, our handling of, and
response to, the UnitedHealth Group Incorporated litigation and
settlement, the subpoena from the United States Attorney's Office,
District of Massachusetts, a now-concluded SEC inquiry, the CMS
request for information, the securities and derivative litigation,
and the Company’s internal review and analysis of factual and legal
issues relating to the aforementioned matters as previously
disclosed. We have excluded these costs because they represent
unusual fees and expenses that are not related to the usual
operation of our business.
The following table presents the reconciliation from Net loss
attributable to American Renal Associates Holdings, Inc. to
Adjusted net income attributable to American Renal Associates
Holdings, Inc. for the periods indicated:
Reconciliation of Net Income (Loss)
Attributable to American Renal Associates Holdings, Inc. to
Adjusted Net IncomeAttributable to American Renal Associates
Holdings, Inc.:
(dollars in thousands, except per share data)
(Unaudited)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2018 2017 2018
2017 Net income (loss) attributable to American Renal
Associates Holdings, Inc. $ 2,490 $ 7,983 $ (16,428 ) $ 4,626
Change in the difference between the redemption value and estimated
fair value for accounting purposes of the related noncontrolling
interests (1) (481 ) 5 (783 ) (13,605 ) Net income
(loss) attributable to common shareholders $ 2,009 $ 7,988 $
(17,211 ) $ (8,979 ) Adjustments: Stock-based compensation
due to option modification and IPO transactions (2) — — — 11,748
Certain legal matters (3) 1,028 3,481 37,677 11,714 Loss on early
extinguishment of debt — — — 526 Transaction-related costs — — 856
717 Executive and management severance costs — — — 917 Gain on sale
of assets (36 ) — (553 ) Total pre-tax adjustments $
1,028 $ 3,445 $ 38,533 $ 25,069 Tax effect 267 1,429
7,446 10,396 Net taxable adjustments $ 761 $ 2,016 $
31,087 $ 14,673 Income tax receivable agreement expense (income)
3,480 (3,585 ) 2,765 (5,461 ) Tax valuation allowance and other tax
adjustments — — — 730 Change in the difference between the
redemption value and estimated fair value for accounting purposes
of the related noncontrolling interests (1) (481 ) 5 (783 )
(13,605 ) Total adjustments, net $ 4,722 $ (1,574 ) $ 34,635
$ 23,547 Adjusted net income attributable to American
Renal Associates Holdings, Inc. $ 6,731 $ 6,414 $
17,424 $ 14,568 Basic shares outstanding
32,005,544 31,095,418 31,912,934 30,997,218 Adjusted effect of
dilutive stock options (4) 2,573,048 2,738,404
2,192,375 2,884,753 Adjusted weighted average number
of diluted shares used to compute adjusted net income attributable
to American Renal Associates Holdings, Inc. per share (4)
34,578,592 33,833,822 34,105,309 33,881,971
Adjusted net income attributable to American Renal
Associates Holdings, Inc. per share $ 0.19 $ 0.19
$ 0.51 $ 0.43
________________________
(1) Changes in fair values of contractual noncontrolling
interest put provisions are related to certain put rights that were
accelerated as a result of the IPO.
(2) Stock-based compensation due to option modification and
other transactions at the time of the IPO which were expensed
within 12 months after the IPO have been excluded since they arose
based on transactions that are not expected to occur in the
future.
(3) Certain legal matters costs include legal fees and other
expenses associated with matters outside the ordinary course of our
business, including, but not limited to, our handling of, and
response to, the UnitedHealth Group Incorporated litigation and
settlement, the subpoena from the United States Attorney's Office,
District of Massachusetts, a now-concluded SEC inquiry, the CMS
request for information, the securities and derivative litigation,
and the Company’s internal review and analysis of factual and legal
issues relating to the aforementioned matters as previously
disclosed. We have excluded these costs because they represent
unusual fees and expenses that are not related to the usual
operation of our business.
(4) For the nine months ended September 30, 2017, adjusted
weighted average number of diluted shares outstanding calculated
using the treasury method as if 2.5 million shares related to
unvested in-the-money options subject to a contingency are
vested.
American Renal Associates Holdings,
Inc. and SubsidiariesUnaudited Supplemental Cash Flow
Information(dollars in thousands)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2018 2017 2018
2017 Cash provided by operating activities $ 25,392 $
45,012 $ 83,871 $ 97,372 Plus: Transaction-related costs (1) —
— 856 717
Adjusted cash provided by
operating activities $ 25,392 $ 45,012 $ 84,727 $ 98,089
Distributions to noncontrolling interests (20,942 ) (21,967 )
(55,131 ) (60,509 )
Adjusted cash provided by operating
activities less distributions to NCI $ 4,450 $ 23,045
$ 29,596 $ 37,580
Capital expenditure
breakdown: Routine and maintenance capital expenditures $ 4,037
$ 1,522 $ 8,931 $ 5,436 Development capital expenditures 6,619
9,205 20,143 19,344
Total capital
expenditures $ 10,656 $ 10,727 $ 29,074 $
24,780
_________________________
(1) For the nine-months ended September 30, 2018,
transaction-related costs represent costs associated with our
registration statement and the secondary offering that was
withdrawn in March 2018. These costs include legal, accounting,
valuation and other professional or consulting fees. For the
nine-months ended September 30, 2017, transaction-related costs
represent costs associated the June 2017 debt refinancing. These
costs include legal, accounting, valuation and other professional
or consulting fees.
American Renal Associates Holdings,
Inc. and SubsidiariesUnaudited Supplemental Leverage
Statistics(dollars in thousands)
As of September 30, 2018 Total ARA
ARA "Owned" Cash (other than clinic-level
cash) $ 139 $ 139 Clinic-level cash 61,733 32,529
Total cash $ 61,872 $ 32,668 Debt (other than
clinic-level debt) $ 440,183 $ 440,183 Clinic-level debt 122,249
64,820 Unamortized debt discounts and fees (8,475 ) (8,280 ) Total
debt $ 553,957 $ 496,723
Adjusted owned net debt
(total debt - total cash) $ 464,055
Adjusted EBITDA-NCI,
LTM $ 109,441
Leverage ratio (2) 4.2x
_________________________
(2) Leverage ratio is calculated as follows: Adjusted owned net
debt divided by Adjusted EBITDA -NCI, last twelve months.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181108005549/en/
American Renal Associates Holdings, Inc.Darren Lehrich,
978-522-6063SVP Strategy & Investor
Relationsdlehrich@americanrenal.com
American Renal Associates (NYSE:ARA)
Historical Stock Chart
From Aug 2024 to Sep 2024
American Renal Associates (NYSE:ARA)
Historical Stock Chart
From Sep 2023 to Sep 2024