DaVita Inc. 1st Quarter 2018 Results
DaVita Inc. 1st Quarter 2018 Results
DENVER, May 3, 2018 /PRNewswire/ -- DaVita Inc. (NYSE: DVA) today announced results for the quarter ended March 31, 2018.
-- Net income from continuing operations attributable to DaVita Inc. for
the quarter ended March 31, 2018 was $191 million, or $1.05 per share.
-- Net income from continuing operations attributable to DaVita Inc. for
the quarter ended March 31, 2017 was $441 million, or $2.26 per share.
Adjusted net income from continuing operations attributable to DaVita
Inc. for the quarter ended March 31, 2017 was $147 million, or $0.75 per
share.
For the definitions of non-GAAP financial measures such as adjusted net income from continuing operations attributable to DaVita Inc., see the note titled "Note on Non-GAAP Financial Measures" below.
Financial and operating highlights include:
Cash flow: For the rolling twelve months ended March 31, 2018, consolidated operating cash flow was $1.405 billion, of which $993 million was from continuing operations. For the three months ended March 31, 2018, consolidated operating cash flow was $363 million, of which $206 million was from continuing operations. Free cash flow from continuing operations was $62 million and $447 million for the quarter and rolling twelve months ended March 31, 2018, respectively.
Operating income and adjusted operating income: Operating income for the quarter ended March 31, 2018 was $411 million. Operating income for the quarter ended March 31, 2017 was $876 million, and adjusted operating income for the same period was $380 million.
Calcimimetics: On January 1, 2018, both oral and IV forms of calcimimetics, a drug class taken by many patients with end stage renal disease to treat mineral bone disorder, became the financial responsibility of our U.S. dialysis and related lab services business for Medicare patients and are included in our payment under Medicare Part B. During the pass-through period, Medicare payment for calcimimetics is based on a pass through rate of the average sales price plus approximately 4%. Previously, calcimimetics were reimbursed under Medicare Part D through traditional pharmacies, including our pharmacy business, DaVita Rx. For the three months ended March 31, 2018, calcimimetics increased revenues and patient care costs at our U.S. dialysis and related lab services business, offset in part by a decrease in revenues and costs in our other ancillary services and strategic initiatives business due to calcimimetics.
Volume: Total U.S. dialysis treatments for the first quarter of 2018 were 7,174,026, or 92,568 treatments per day, representing a per day increase of 4.8% over the first quarter of 2017. Normalized non-acquired treatment growth in the first quarter of 2018 as compared to the first quarter of 2017 was 3.4%.
Effective income tax rate: Our effective income tax rate attributable to continuing operations was 23.4% for the quarter ended March 31, 2018. This effective tax rate is impacted by the amount of third party owners' income attributable to non-tax paying entities. The effective income tax rate attributable to DaVita Inc. was 27.0% for the quarter ended March 31, 2018.
Center activity: As of March 31, 2018, we provided dialysis services to a total of approximately 221,600 patients at 2,780 outpatient dialysis centers, of which 2,539 centers were located in the United States and 241 centers were located in 10 countries outside of the United States. During the first quarter of 2018, we opened a total of 28 new dialysis centers, acquired one dialysis center, and closed one center in the United States. We also acquired six dialysis centers and closed two dialysis centers outside of the United States.
New revenue accounting standard: On January 1, 2018, we adopted Topic 606, Revenue from Contracts with Customers, using the cumulative effect method. Results for reporting periods beginning on January 1, 2018 are presented under this new guidance, while prior periods remain unchanged. Due to a policy election we made allowing us to apply the new guidance only to contracts not completed as of January 1, 2018, we recognized $24 million in the first quarter of 2018 relating to Medicare bad debt revenue from 2017 dates of service.
Pending sale of DMG: As previously announced in December 2017, we entered into an agreement to sell our DMG division to Optum, a subsidiary of UnitedHealth Group Inc. for $4.9 billion in cash, subject to net working capital and other customary adjustments. The transaction is subject to regulatory approvals and other customary closing conditions, and we continue to expect it to close in 2018. As a result, the DMG business is classified as held for sale and the results of operations are reported as discontinued operations for all periods presented.
New debt capacity: On March 29, 2018, we entered into an agreement to increase our borrowing capacity under our existing Senior Secured Credit Agreement. Pursuant to this agreement, the Company entered into an additional $995 million Term Loan A-2 which bears interest at LIBOR plus 1.00%. As of March 31, 2018 the Company had drawn an initial $452 million on Term Loan A-2. The Company has drawn and intends to continue to draw on this new debt capacity as needed for any share repurchases made prior to the closing of the sale of DMG.
Share repurchases: During the quarter ended March 31, 2018, we repurchased a total of 4,197,304 shares of our common stock for approximately $298 million at an average price of $71.09 per share. We have also repurchased 4,350,135 shares of our common stock for $276 million at an average price of $63.44 per share from April 1, 2018 through May 2, 2018. As of May 2, 2018, we have a total of approximately $545 million in outstanding Board repurchase authorizations remaining under our stock repurchase program. These share repurchase authorizations have no expiration dates.
Outlook
The following forward-looking measures and the underlying assumptions involve significant risks and uncertainties, including those described herein, and actual results may vary significantly from these current forward-looking measures. The guidance below does not include the impact of currency fluctuations.
-- We still expect our Kidney Care consolidated operating income for 2018
to be in the range of $1.5 billion to $1.6 billion.
-- We still expect our operating cash flow from continuing operations for
2018 to be in the range of $1.4 billion to $1.6 billion.
-- We still expect our 2018 effective tax rate attributable to DaVita Inc.
to be approximately 26.5% to 27.5%.
We will be holding a conference call to discuss our results for the first quarter ended March 31, 2018 on May 3, 2018 at 5:00 p.m. Eastern Time. To join the conference call, please dial (877) 918-6630 from the U.S. or (517) 308-9042 from outside the U.S., and provide the operator the password 'Earnings'. A replay of the conference call will be available on our website at investors.davita.com, for the following 30 days.
Note on Non-GAAP Financial Measures
As used in this press release the term "adjusted" refers to non-GAAP measures as follows, each as reconciled to its most comparable GAAP measure as presented in the non-GAAP reconciliations in the notes to this press release: (i) for income measures, the term "adjusted" refers to operating performance measures that exclude certain items such as impairment charges, gains (losses) on ownership changes, restructuring charges, accruals for legal matters, recent federal tax reform legislation, and gains and charges associated with settlements; and (ii) the term "adjusted effective income tax rate attributable to DaVita Inc." represents the Company's effective tax rate excluding applicable non-GAAP items and noncontrolling owners' income that primarily relates to non-tax paying entities.
These non-GAAP or "adjusted" measures are presented because management believes these measures are useful adjuncts to GAAP results. However, these non-GAAP measures should not be considered alternatives to the corresponding measures determined under GAAP.
Specifically, we use adjusted operating income, adjusted net income from continuing operations and adjusted diluted net income from continuing operations per share attributable to DaVita Inc. to compare and evaluate our performance period over period and relative to competitors, to analyze the underlying trends in our business, to establish operational budgets and forecasts and for incentive compensation purposes. We believe these non-GAAP measures are useful to management, investors and analysts in evaluating our performance over time and relative to competitors, as well as in analyzing the underlying trends in our business. We also believe these presentations enhance a user's understanding of our normal consolidated operating income by excluding certain items which we do not believe are indicative of our ordinary results of operations. As a result, adjusting for these amounts allows for comparison to our normalized prior period results.
In addition, the effective income tax rate attributable to DaVita Inc. excludes noncontrolling owners' income that primarily relates to non-tax paying entities and the adjusted effective income tax rate attributable to DaVita Inc. excludes noncontrolling owners' income that primarily relates to non-tax paying entities, and certain non-deductible and other charges which we do not believe are indicative of our ordinary results. Accordingly, we believe these adjusted effective income tax rates are useful to management, investors and analysts in evaluating our performance concerning and establishing expectations for income taxes incurred on our ordinary results attributable to DaVita Inc.
Finally, free cash flow from continuing operations represents net cash provided by operating activities from continuing operations less distributions to noncontrolling interests and capital expenditures for routine maintenance and information technology from continuing operations. We believe this non-GAAP measure is useful to management, investors and analysts as an adjunct to cash flow from operating activities from continuing operations and other measures under GAAP, since free cash flow from continuing operations is meaningful for assessing our ability to fund acquisition and development activities and meet our debt service obligations.
It is important to bear in mind that these non-GAAP "adjusted" measures are not measures of financial performance or liquidity under GAAP and should not be considered in isolation from, nor as substitutes for, their most comparable GAAP measures. Reconciliations of the non-GAAP measures presented herein to their most comparable GAAP measures are included at Notes 2, 3, 4 and 5 at the end of this press release.
DaVita Inc. and its representatives may from time to time make written and oral forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), including statements in this release, filings with the Securities and Exchange Commission ("SEC"), reports to stockholders and in meetings with investors and analysts. All such statements in this release, during the related presentation or other meetings, other than statements of historical fact, are forward-looking statements and as such are intended to be covered by the safe harbor for "forward-looking statements" provided by the PSLRA. Without limiting the foregoing, statements including the words "expect," "intend," "will," "plan," "anticipate," "believe," "forecast," "guidance," "outlook," "goals," and similar expressions are intended to identify forward-looking statements.
The forward-looking statements should be considered in light of these risks and uncertainties. All forward-looking statements in this release are based on information available to us on the date of this presentation. We undertake no obligation to publicly update or revise any of our guidance, the assessment of the underlying assumptions or other forward-looking statements, whether as a result of changed circumstances, new information, future events or otherwise.
These forward-looking statements could include but are not limited to statements related to our guidance and expectations for our 2018 Kidney Care consolidated operating income, our 2018 operating cash flows from continuing operations, our 2018 effective tax rate attributable to DaVita Inc., our expectations related to our stock repurchase program, and uncertainties associated with the other risk factors set forth in our most recent annual report on Form 10-K for the year ended December 31, 2017, and the other risks discussed in our subsequent periodic and current reports filed with the SEC from time to time.
Our actual results could differ materially from any forward-looking statements due to numerous factors that involve substantial known and unknown risks and uncertainties. These risks and uncertainties include, among other things, and are qualified in their entirety by reference to the full text of those risk factors in our SEC filings relating to:
-- the concentration of profits generated by higher-paying commercial payor
plans for which there is continued downward pressure on average realized
payment rates, and a reduction in the number of patients under such
plans, including as a result of restrictions or prohibitions on the use
and/or availability of charitable premium assistance, which may result
in the loss of revenues or patients, or our making incorrect assumptions
about how our patients will respond to any change in financial
assistance from charitable organizations;
-- the extent to which the ongoing implementation of healthcare exchanges
or changes in or new legislation, regulations or guidance, or
enforcement thereof, including among other things those regarding the
exchanges, results in a reduction in reimbursement rates for our
services from and/or the number of patients enrolled in 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 the Medicare Advantage benchmark structure;
-- risks arising from potential and proposed federal and/or state
legislation or regulation, including healthcare-related and
labor-related legislation or regulation;
-- the impact of the changing political environment and related
developments on the current health care marketplace and on our business,
including with respect to the future of the Affordable Care Act, the
exchanges and many other core aspects of the current health care
marketplace;
-- uncertainties related to the impact of federal tax reform legislation;
-- changes in pharmaceutical practice patterns, reimbursement and payment
policies and processes, or pharmaceutical pricing, including with
respect to calcimimetics;
-- legal compliance risks, such as our continued compliance with complex
government regulations and the provisions of our current corporate
integrity agreement and current or potential investigations by various
government entities and related government or private-party proceedings,
and restrictions on our business and operations required by our
corporate integrity agreement and other current or potential settlement
terms, and the financial impact thereof and our ability to recover any
losses related to such legal matters from third parties;
-- continued increased competition from large- and medium-sized dialysis
providers and others who compete, or will compete directly with us;
-- our ability to reduce administrative expenses while maintaining targeted
levels of service and operating performance, including our ability to
achieve anticipated savings from our recent restructurings;
-- our ability to maintain contracts with physician medical directors,
changing affiliation models for physicians, and the emergence of new
models of care introduced by the government or private sector that may
erode our patient base and reimbursement rates, such as accountable care
organizations, independent practice associations and integrated delivery
systems;
-- our ability to complete acquisitions, mergers or dispositions that we
might announce or be considering, on terms favorable to us or at all, or
to integrate and successfully operate any business we may acquire or
have acquired, or to successfully expand our operations and services to
markets outside the United States, or to businesses outside of dialysis;
-- noncompliance by us or our business associates with any privacy laws or
any security breach involving the misappropriation, loss or other
unauthorized use or disclosure of confidential information;
-- the variability of our cash flows;
-- factors that may impact our ability to repurchase stock under our stock
repurchase program and the timing of any such stock repurchases,
including market conditions, the price of our common stock, our cash
flow position, borrowing capacity and leverage ratios, and legal,
regulatory and contractual requirements;
-- the risk that we might invest material amounts of capital and incur
significant costs in connection with the growth and development of our
international operations, yet we might not be able to operate them
profitably anytime soon, if at all;
-- risks arising from the use of accounting estimates, judgments and
interpretations in our financial statements;
-- impairment of our goodwill, investments or other assets;
-- the risks and uncertainties associated with the timing, conditions and
receipt of regulatory approvals and satisfaction of other closing
conditions of the DMG sale transaction and potential disruption in
connection with the DMG sale transaction making it more difficult to
maintain business and operational relationships;
-- the risk that laws regulating the corporate practice of medicine could
restrict the manner in which DMG conducts its business;
-- the risk that the cost of providing services under DMG's agreements may
exceed our compensation;
-- the risk that reductions in reimbursement rates, including Medicare
Advantage rates, and future regulations may negatively impact DMG's
business, revenue and profitability;
-- the risk that DMG may not be able to successfully establish a presence
in new geographic regions or successfully address competitive threats
that could reduce its profitability;
-- the risk that a disruption in DMG's healthcare provider networks could
have an adverse effect on DMG's business operations and profitability;
-- the risk that reductions in the quality ratings of health maintenance
organization plan customers of DMG could have an adverse effect on DMG's
business; and
-- the risk that health plans that acquire health maintenance organizations
may not be willing to contract with DMG or may be willing to contract
only on less favorable terms.
Contact: Jim Gustafson
Investor Relations
DaVita Inc.
(310) 536-2585
DAVITA INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars in thousands, except per share data)
Three months ended March 31,
2018 2017
---- ----
Dialysis
and
related
lab
patient
service
revenues $2,591,074 $2,422,786
Provision
for
uncollectible
accounts 25,545 (107,058)
------ --------
Net
dialysis
and
related
lab
patient
service
revenues 2,616,619 2,315,728
Other
revenues 232,825 315,523
-------
Total
revenues 2,849,444 2,631,251
--------- ---------
Operating expenses and
charges:
Patient
care
costs
and
other
costs 2,035,585 1,852,045
General
and
administrative 266,529 262,895
Depreciation
and
amortization 142,799 132,884
Equity
investment
income (155) (677)
Provision
for
uncollectible
accounts (6,000) 1,910
Investment
and
other
asset
impairments - 15,168
Goodwill
impairment
charges - 24,198
Gain
on
changes
in
ownership
interests - (6,273)
Gain
on
settlement,
net - (526,827)
Total
operating
expenses
and
charges 2,438,758 1,755,323
--------- ---------
Operating
income 410,686 875,928
Debt
expense (113,516) (104,397)
Other
income,
net 4,582 3,986
----- -----
Income
from
continuing
operations
before
income
taxes 301,752 775,517
Income
tax
expense 70,737 281,665
------ -------
Net
income
from
continuing
operations 231,015 493,852
Net
(loss)
income
from
discontinued
operations,
net
of
tax (5,786) 6,433
------ -----
Net
income 225,229 500,285
Less:
Net
income
attributable
to
noncontrolling
interests (46,543) (52,588)
------- -------
Net
income
attributable
to
DaVita
Inc. $178,686 $447,697
======== ========
Earnings per share:
Basic
net Inc.
income
from
continuing
operations
per
share
attributable
to
DaVita $1.07 $2.29
===== =====
Basic
net
income
per
share
attributable
to
DaVita
Inc. $1.00 $2.33
===== =====
Diluted
net Inc.
income
from
continuing
operations
per
share
attributable
to
DaVita $1.05 $2.26
===== =====
Diluted
net
income
per
share
attributable
to
DaVita
Inc. $0.98 $2.29
===== =====
Weighted average shares
for earnings per share:
Basic 178,957,865 192,376,735
=========== ===========
Diluted 181,834,547 195,281,014
=========== ===========
Amounts attributable to
DaVita Inc.:
Net
income
from
continuing
operations $191,015 $440,905
Net
(loss)
income
from
discontinued
operations (12,329) 6,792
Net
income
attributable
to
DaVita
Inc. $178,686 $447,697
======== ========
DAVITA INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(dollars in thousands)
Three months ended
March 31,
2018 2017
---- ----
Net income $225,229 $500,285
Other comprehensive income, net
of tax:
Unrealized gains (losses) on
interest rate cap agreements:
Unrealized gains
(losses) on
interest rate
cap agreements 1,050 (3,188)
Reclassifications
of net realized
losses on
interest rate
cap agreements
into net income 1,537 1,265
Unrealized gains on investments:
Unrealized gains
on investments - 1,557
Reclassification
of net
investment
realized gains
into net income - (140)
Unrealized gains on foreign
currency translation:
Foreign currency
translation
adjustments 19,881 13,261
Other
comprehensive
income 22,468 12,755
------ ------
Total
comprehensive
income 247,697 513,040
Less:
Comprehensive
income
attributable to
noncontrolling
interests (46,543) (52,586)
-------
Comprehensive
income
attributable to
DaVita Inc. $201,154 $460,454
======== ========
DAVITA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
Three months ended
March 31,
2018 2017
---- ----
Cash flows from operating
activities:
Net income $225,229 $500,285
Adjustments to reconcile net
income to net cash provided by
operating
activities:
Depreciation
and
amortization 142,799 190,206
Impairment
charges - 39,366
Stock-based
compensation
expense 9,685 9,601
Deferred income
taxes 43,617 20,091
Equity
investment
income, net 3,564 1,423
Other non-cash
charges, net 9,959 9,464
Changes in operating assets and
liabilities, net of effect of
acquisitions and
divestitures:
Accounts
receivable (63,701) 16,168
Inventories 57,621 (8,909)
Other
receivables
and other
current assets (34,120) (84,511)
Other long-
term assets 2,054 (2,310)
Accounts
payable (62,830) (26,214)
Accrued
compensation
and benefits (62,550) (62,825)
Other current
liabilities 49,379 (9,633)
Income taxes 30,772 258,490
Other long-
term
liabilities 11,061 14,479
------ ------
Net cash
provided by
operating
activities 362,539 865,171
------- -------
Cash flows from investing
activities:
Additions of
property and
equipment (232,443) (214,535)
Acquisitions (16,582) (77,236)
Proceeds from
asset and
business sales 18,535 46,612
Purchase of
investments
available for
sale (2,646) (2,358)
Purchase of
investments
held-to-
maturity (3,586) (121,645)
Proceeds from
sale of
investments
available for
sale 5,151 4,025
Proceeds from
investments
held-to-
maturity 31,454 116,285
Purchase of
equity
investments (2,476) (1,135)
Distributions
received on
equity
investments 2,465 -
----- ---
Net cash used
in investing
activities (200,128) (249,987)
-------- --------
DAVITA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
(unaudited)
(dollars in thousands)
Three months ended
March 31,
2018 2017
---- ----
Cash flows from financing activities:
Borrowings 13,306,898 12,803,015
Payments on long-term debt and other
financing costs (13,202,225) (12,839,156)
Purchase of treasury stock (290,377) -
Stock award exercises and other share
issuances, net (1,185) 3,330
Distributions to noncontrolling
interests (45,467) (43,316)
Contributions from noncontrolling
interests 12,009 17,989
Purchases of noncontrolling interests (2,200) (799)
------ ----
Net cash used in financing activities (222,547) (58,937)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash 6,668 2,820
Net (decrease) increase in cash, cash
equivalents and restricted cash (53,468) 559,067
Less: Net increase in cash, cash
equivalents and restricted cash from
discontinued operations 17,834 24,493
------ ------
Net (decrease) increase in cash, cash
equivalents and restricted cash from
continuing operations (71,302) 534,574
Cash, cash equivalents and restricted
cash of continuing operations at
beginning of the year 518,920 683,463
------- -------
Cash, cash equivalents and restricted
cash of continuing operations at end of
the period $447,618 $1,218,037
======== ==========
DAVITA INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except per share data)
March 31, December 31,
2018 2017
---- ----
ASSETS
Cash and cash equivalents $358,874 $508,234
Restricted cash and equivalents 88,744 10,686
Short-term investments 4,602 32,830
Accounts receivable, net 1,830,590 1,714,750
Inventories 125,555 181,799
Other receivables 415,914 372,919
Income tax receivable 18,660 49,440
Prepaid and other current assets 106,351 112,058
Current assets held for sale 5,724,265 5,761,642
Total current assets 8,673,555 8,744,358
Property and equipment, net of accumulated
depreciation of $3,230,717 and $3,103,662 3,185,223 3,149,213
Intangible assets, net of accumulated
amortization of $360,828 and $356,774 113,366 113,827
Equity method and other investments 245,564 245,534
Long-term investments 34,344 37,695
Other long-term assets 51,728 47,287
Goodwill 6,638,592 6,610,279
$18,942,372 $18,948,193
=========== ===========
LIABILITIES AND EQUITY
Accounts payable $437,733 $509,116
Other liabilities 544,846 552,662
Accrued compensation and benefits 526,183 616,116
Current portion of long-term debt 184,136 178,213
Current liabilities held for sale 1,254,625 1,185,070
Total current liabilities 2,947,523 3,041,177
Long-term debt 9,279,885 9,158,018
Other long-term liabilities 391,156 365,325
Deferred income taxes 507,226 486,247
Total liabilities 13,125,790 13,050,767
Commitments and contingencies:
Noncontrolling interests subject to put
provisions 1,034,501 1,011,360
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; 182,660,712 and 182,462,278
shares issued and 178,463,408 and 182,462,278
shares outstanding, respectively) 183 182
Additional paid-in capital 1,030,772 1,042,899
Retained earnings 3,820,767 3,633,713
Treasury stock (4,197,304 and zero shares,
respectively) (298,377) -
Accumulated other comprehensive income 27,335 13,235
------ ------
Total DaVita Inc. shareholders' equity 4,580,680 4,690,029
Noncontrolling interests not subject to put
provisions 201,401 196,037
------- -------
Total equity 4,782,081 4,886,066
--------- ---------
$18,942,372 $18,948,193
=========== ===========
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended
March 31, December 31, March 31,
2018 2017 2017 (1)
---- ---- -------
1. Consolidated Financial Results:
Consolidated revenues(2) $2,849 $2,781 $2,631
Operating income $411 $150 $876
Adjusted operating income excluding certain
items(3) $411 $430 $380
Operating income margin 14.4% 5.4% 33.3%
Adjusted operating income margin excluding
certain items(3) (7) 14.4% 15.5% 14.4%
Net income from continuing operations
attributable to DaVita Inc. $191 $156 $441
Adjusted net income from continuing
operations attributable to DaVita Inc.
excluding certain items(3) $191 $170 $147
Diluted net income from continuing operations
per share attributable to DaVita Inc. $1.05 $0.85 $2.26
Adjusted diluted net income from continuing
operations per share attributable to DaVita
Inc. excluding certain items (3) $1.05 $0.92 $0.75
2. Consolidated Business Metrics:
Expenses
General and administrative expenses as a
percent of consolidated revenues(4) 9.4% 9.5% 10.0%
Effective tax rate 23.4% (320.9)% 36.3%
Effective tax rate attributable to DaVita
Inc.(3) 27.0% (2,590.5)% 39.0%
Adjusted effective tax rate attributable to
DaVita Inc.(3) 27.0% 40.4% 39.6%
3. Summary of Division Financial Results:
Revenues(2)
Kidney Care:
U.S. dialysis and related lab patient
services and other $2,538 $2,393 $2,271
Other-Ancillary services and strategic initiatives
U.S. other 237 316 315
International dialysis patient service and
other 103 95 63
340 410 378
Eliminations (29) (23) (18)
Total consolidated revenues $2,849 $2,781 $2,631
====== ====== ======
Operating income (loss)
Kidney Care:
U.S. dialysis and related lab services $433 $459 $945
Other-Ancillary services and strategic initiatives
U.S. (5) (2) (53)
International (2) (294) (5)
--- ---- ---
(7) (296) (58)
--- ---- ---
Corporate administrative support (16) (12) (11)
Total consolidated operating income $411 $150 $876
==== ==== ====
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA - continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended
March 31, December 31, March 31,
2018 2017 2017 (1)
---- ---- -------
4. Summary of Reportable Segment Financial Results:
U.S. Dialysis and Related Lab Services
Revenue:(2)
Net dialysis and related lab
patient service revenues $2,533 $2,388 $2,266
Other revenues 5 5 5
Total operating revenues 2,538 2,393 2,271
Operating expenses:
Patient care costs 1,779 1,619 1,548
General and administrative 196 186 188
Depreciation and amortization 135 134 125
Equity investment income (5) (5) (8)
Gain on settlement, net - - (527)
--- --- ----
Total operating expenses 2,105 1,934 1,326
Segment operating income $433 $459 $945
==== ==== ====
Reconciliation for non-GAAP measure:
Less:
Gain on settlement, net - - (527)
Equity investment income related to
gain on settlement - - (3)
Adjusted segment operating
income(3) $433 $459 $415
==== ==== ====
5. U.S. Dialysis and Related Lab Services Business
Metrics:
Volume
Treatments 7,174,026 7,244,555 6,804,384
Number of treatment days 77.5 78.5 77.0
Treatments per day 92,568 92,287 88,369
Per day year over year increase 4.8% 5.8% 3.7%
Normalized non-acquired treatment
growth year over year 3.4% 3.5% 3.8%
Operating net revenues(2)
Dialysis and related lab services
net revenue per treatment $353.05 $329.68 $333.00
Revenue per treatment changes from
previous quarter 7.1% 0.1% (1.0)%
Revenue per treatment changes from
previous year 6.0% (2.0)% (0.5)%
Percent of consolidated revenues 88.4% 85.5% 85.9%
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA - continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended
March 31, December 31, March 31,
2018 2017 2017 (1)
---- ---- -------
5. U.S. Dialysis and Related Lab Services Business Metrics:
(continued)
Expenses
Patient care costs
Percent of total segment operating net revenues 70.1% 67.6% 68.1%
Per treatment $248.02 $223.47 $227.47
Per treatment changes from previous quarter 11.0% - % (0.1)%
Per treatment changes from previous year 9.0% (1.8)% 1.0%
General and administrative expenses
Percent of total segment operating net revenues 7.7% 7.8% 8.3%
Per treatment $27.28 $25.67 $27.65
Per treatment changes from previous quarter 6.3% (6.2)% (4.1)%
Per treatment changes from previous year (1.3)% (10.9)% 2.5%
Accounts receivable
Net receivables 1,620 1,524 1,335
DSO 59 60 54
6. Discontinued Operations
Operating results
Net revenues(2) $1,228 $1,215 $1,087
Expenses 1,226 1,238 1,075
----- -----
Income (loss) from discontinued operations before
taxes 2 (23) 12
Income tax (expense) benefit (7) 167 (6)
Net (loss) income from discontinued operations,
net of tax $(6) $144 $6
=== ==== ===
7. Cash Flow:
Operating cash flow $362.5 $342.9 $865.2
Operating cash flow from continuing operations $206.3 $286.7 $769.6
Operating cash flow from continuing operations,
last twelve months $992.6 $1,555.9 $2,105.3
Free cash flow from continuing operations(3) $61.6 $149.9 $657.0
Free cash flow from continuing operations, last
twelve months(3) $446.9 $1,042.3 $1,610.9
Capital expenditures from continuing operations:
Routine maintenance/IT/other $99.3 $91.4 $69.3
Development and relocations $102.1 $151.8 $117.4
Acquisition expenditures $15.7 $57.0 $58.4
Proceeds from sale of self-developed properties $18.2 $7.0 40.9
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA - continued
(unaudited)
(dollars in millions, except for per share and per treatment data)
Three months ended
March 31, December 31, March 31,
2018 2017 2017 (1)
---- ---- -------
8. Debt and Capital Structure:
Total debt(5)(6) $9,526 $9,400 $9,162
Net debt, net of cash and cash
equivalents(5)(6) $9,167 $8,892 $7,952
Leverage ratio (see
calculation on page 15) 3.75x 3.63x 3.03x
Overall weighted average
effective interest rate
during the quarter 4.87% 4.80% 4.55%
Overall weighted average
effective interest rate at
end of the quarter 4.98% 4.88% 4.64%
Weighted average effective
interest rate on the senior
secured credit facilities at
end of the quarter 4.67% 4.45% 3.95%
Fixed and economically fixed
interest rates as a
percentage of our total debt 51% 52% 53%
Fixed and economically fixed
interest rates, including our
interest rate cap agreements,
as a percentage of our total
debt 88% 89% 91%
Certain columns, rows or percentages may not sum or recalculate due to the use of rounded numbers.
(1) As a result of the pending sale of
DMG announced in December 2017, the
DMG business has been classified as
held for sale and its results of
operations are presented as
discontinued operations for all
periods presented.
(2) On January 1, 2018, the Company
adopted FASB Accounting Standards
Codification Topic 606 Revenue from
Contracts with Customers using the
cumulative effect method for those
contracts which were not completed
as of January 1, 2018. Results for
reporting periods beginning on and
after January 1, 2018 are presented
under Topic 606, while prior period
amounts continue to be reported in
accordance with our historical
accounting under Revenue Recognition
(Topic 605).
(3) 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, and for a
definition of adjusted amounts, see
attached reconciliation schedules.
(4) Consolidated percentages of revenues
are comprised of the dialysis and
related lab services business and
other ancillary services and
strategic initiatives. General and
administrative expenses includes
certain corporate support and long-
term incentive compensation.
(5) The reported balance sheet amounts
at March 31, 2018, December 31,
2017, and March 31, 2017, exclude
$62.0 million, $64.0 million and
$75.9 million, respectively, of a
debt discount associated with our
Term Loan B and other deferred
financing costs. The reported
balance sheet amounts exclude DMG
debt which is classified as held
for sale liabilities for all
periods presented.
(6) The reported total debt and net
debt, net of cash and cash
equivalents excludes DMG cash and
debt classified as held for sale
assets and liabilities,
respectively, for all periods
presented.
(7) Adjusted operating income margin is
a calculation of adjusted operating
income divided by consolidated
revenues.
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA-continued
(unaudited)
(dollars in thousands)
Note 1: Calculation of the Leverage Ratio
Under the 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, including short-term investments, 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 users to enhance their understanding of the Company's leverage ratio under its Credit Agreement. The leverage ratio calculated by the Company is a non-GAAP measure and should not be considered a substitute for debt to net income attributable to DaVita Inc., net income attributable to DaVita Inc. or total debt as determined in accordance with United States generally accepted accounting principles (GAAP). The Company's calculation of its leverage ratio might not be calculated in the same manner as, and thus might not be comparable to, similarly titled measures by other companies.
Rolling twelve
months ended
March 31, 2018
--------------
Net income attributable to DaVita Inc. $394,607
Income taxes (250,715)
Interest expense 407,239
Depreciation and amortization 730,077
Impairment charges 942,223
Noncontrolling interests and equity
investment income, net 193,007
Stock-settled stock-based compensation 35,097
Gain on changes in ownership interest,
net (17,129)
Other 1,552
"Consolidated EBITDA" $2,435,958
==========
March 31, 2018
--------------
Total debt, excluding debt discount and
other deferred financing costs of $62.0
million $9,563,255
Letters of credit issued 36,917
------
9,600,172
Less: Cash and cash equivalents
including short-term investments
(excluding DMG's physician owned
entities cash) (470,088)
Consolidated net debt $9,130,084
==========
Last twelve months "Consolidated EBITDA" $2,435,958
==========
Leverage ratio 3.75x
=====
In accordance with the Credit
Agreement, the Company's
leverage ratio cannot exceed
4.50 to 1.00 as of March 31,
2018. At that date the
Company's leverage ratio did
not exceed 4.50 to 1.00.
DAVITA INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands, except for per share data)
The following Notes 2 through 5 provide reconciliations of non-GAAP financial measures presented in this press release to their most comparable GAAP measures. For more information on the nature, purposes and limitations of these non-GAAP measures, see our "Note on Non-GAAP Financial Measures" on page 3.
Note 2: Adjusted net income from continuing operations and adjusted diluted net income from continuing operations per share attributable to DaVita Inc.
Three months ended
March 31, December 31, March 31,
2018 2017 2017
---- ---- ----
Net income from
continuing operations
attributable to DaVita
Inc. $191,015 $156,210 $440,905
Tax reform - (251,510) -
Goodwill impairment
charges - - 24,198
Impairment of investments - 280,066 -
Impairment of other
assets - - 15,168
Gain on settlement, net - - (526,827)
Equity investment income
related to gain on
settlement - - (2,677)
Gain on APAC JV ownership
changes - - (6,273)
Noncontrolling interests associated with
adjustments:
Goodwill impairment
charges - - (6,880)
Gain on settlement, net - - 24,029
Related income tax - (14,418) 185,162
--- ------- -------
Adjusted net income from
continuing operations
attributable to DaVita
Inc. $191,015 $170,348 $146,805
======== ======== ========
Diluted net income from
continuing operations
per share attributable
to $1.05 $0.85 $2.26
DaVita Inc.
Tax reform - (1.36) -
Goodwill impairment
charges - - 0.12
Impairment of investments - 1.52 -
Impairment of other
assets - - 0.08
Gain on settlement, net - - (2.70)
Equity investment income
related to gain on
settlement - - (0.01)
Gain on APAC JV ownership
changes - - (0.03)
Noncontrolling interests associated with
adjustments:
Goodwill impairment
charges - - (0.04)
Gain on settlement, net - - 0.12
Related income tax - (0.08) 0.95
Adjusted diluted net
income from continuing
operations per share
attributable to DaVita
Inc. $1.05 $0.92 $0.75
===== ===== =====
Certain columns or rows may not sum or recalculate due to the use of rounded numbers.
DAVITA INC.
RECONCILIATIONS FOR NON-GAAP MEASURES - continued
(unaudited)
(dollars in thousands)
Note 3: Adjusted operating income
Three months ended
March 31, December 31, March 31,
2018 2017 2017
---- ---- ----
Consolidated:
Operating income $410,686 $150,337 $875,928
Goodwill impairment charges - - 24,198
Impairment of investments - 280,066 -
Impairment of other assets - - 15,168
Gain on settlement, net - - (526,827)
Equity investment income related to
gain on settlement - - (2,677)
Gain on APAC JV ownership changes - - (6,273)
Adjusted operating income $410,686 $430,403 $379,517
======== ======== ========
Three months ended
March 31, December 31, March 31,
2018 2017 2017
---- ---- ----
Kidney Care:
U.S. dialysis and related lab services:
Segment operating income $433,380 $459,210 $944,740
Gain on settlement, net - - (526,827)
Equity investment income related to
gain on settlement - - (2,677)
Adjusted U.S. dialysis and related
lab services operating income 433,380 459,210 415,236
------- ------- -------
Other - Ancillary services and strategic initiatives:
U.S.
Segment operating loss (5,186) (2,452) (53,027)
Goodwill impairment charges - - 24,198
Impairment of other assets - - 15,168
Adjusted operating loss (5,186) (2,452) (13,661)
------ ------ -------
International
Segment operating loss (1,804) (294,043) (5,193)
Impairment of investments - 280,066 -
Gain on APAC JV ownership changes - - (6,273)
Adjusted operating loss (1,804) (13,977) (11,466)
------
Adjusted Other -Ancillary services
and strategic initiatives operating
loss (6,990) (16,428) (25,127)
------ ------- -------
Corporate administrative support:
Segment operating loss (15,704) (12,378) (10,592)
Adjusted Kidney Care operating income $410,686 $430,403 $379,517
Certain columns or rows may not sum or recalculate due to the use of rounded numbers.
DAVITA INC.
RECONCILIATIONS FOR NON-GAAP MEASURES - continued
(unaudited)
(dollars in thousands)
Note 4: Effective income tax rates and adjusted effective income tax rates
The effective income tax rate and effective income tax rate attributable to DaVita Inc. is computed as follows:
Three months ended
March 31, December 31, March 31,
2018 2017 2017
---- ---- ----
Income from
continuing
operations before
income taxes $301,752 $46,825 $775,517
======== ======= ========
Income tax expense
(benefit) $70,737 $(150,267) $281,665
======= ========= ========
Effective income tax
rate 23.4% (320.9)% 36.3%
==== ======= ====
Three months ended
March 31, December 31, March 31,
2018 2017 2017
---- ---- ----
Income from
continuing
operations before
income taxes $301,752 $46,825 $775,517
Less: Noncontrolling
owners' income
primarily
attributable to
non-tax paying
entities (40,088) (41,019) (53,012)
Income before income
taxes attributable
to DaVita Inc. $261,664 $5,806 $722,505
======== ====== ========
Income tax expense
(benefit) $70,737 $(150,267) $281,665
Less: Income tax
attributable to
noncontrolling
interests (88) (137) (65)
--- ---- ---
Income tax expense
(benefit)
attributable to
DaVita Inc. $70,649 $(150,404) $281,600
======= ========= ========
Effective income tax
rate attributable
to DaVita Inc. 27.0% (2,590.5)% 39.0%
==== ========= ====
Certain columns, rows or percentages may not sum or recalculate due to the use of rounded numbers.
DAVITA INC.
RECONCILIATIONS FOR NON-GAAP MEASURES - continued
(unaudited)
(dollars in thousands)
The adjusted effective income tax rate attributable to DaVita Inc. is computed as follows:
Three months ended
March 31, December 31, March 31,
2018 2017 2017
---- ---- ----
Income from continuing
operations before income
taxes $301,752 $46,825 $775,517
Goodwill impairment
charges - - 24,198
Impairment of investments - 280,066 -
Impairment of other assets - - 15,168
Gain on settlement, net - - (526,827)
Equity investment income
related to gain on
settlement - - (2,677)
Gain on APAC JV ownership
changes - - (6,273)
Noncontrolling owners'
income primarily
attributable to non-tax
paying entities (40,088) (41,019) (53,012)
Noncontrolling interests associated with
adjustments
Goodwill impairment
charges - - (6,880)
Gain on settlement, net - - 24,029
Adjusted income from
continuing operations
before income taxes
attributable to DaVita
Inc. $261,664 $285,872 $243,243
======== ======== ========
Income tax expense
(benefit) $70,737 $(150,267) $281,665
Add income tax related to:
Tax reform - 251,510 -
Goodwill impairment
charges - - 6,568
Impairment of investments - 14,418 -
Impairment of other assets - - 5,752
Less income tax related to:
Gain on settlement, net - - (197,482)
Noncontrolling interests (88) (137) (65)
--- ---- ---
Adjusted income tax
attributable to DaVita
Inc. $70,649 $115,524 $96,438
======= ======== =======
Adjusted effective income
tax rate attributable to
DaVita Inc. 27.0% 40.4% 39.6%
==== ==== ====
Certain columns, rows or percentages may not sum or recalculate due to the use of rounded numbers.
DAVITA INC.
RECONCILIATIONS FOR NON-GAAP MEASURES - continued
(unaudited)
(dollars in thousands)
Note 5: Free cash flow from continuing operations
Three months ended
March 31, December 31, March 31,
2018 2017 2017
---- ---- ----
Cash provided by
continuing
operating
activities $206,291 $286,716 $769,586
Less: Distributions
to noncontrolling
interests (45,467) (45,429) (43,316)
Cash provided by
continuing
operating
activities
attributable to
DaVita Inc. 160,824 241,287 726,270
Less: Expenditures
for routine
maintenance and
information
technology (99,268) (91,355) (69,302)
Free cash flow from
continuing
operations $61,556 $149,932 $656,968
======= ======== ========
Rolling 12-Month Period
March 31, December 31, March 31,
2018 2017 2017
---- ---- ----
Cash provided by
continuing
operating
activities $992,597 $1,555,892 $2,105,259
Less: Distributions
to noncontrolling
interests (213,043) (210,892) (185,089)
Cash provided by
continuing
operating
activities
attributable to
DaVita Inc. 779,554 1,345,000 1,920,170
Less: Expenditures
for routine
maintenance and
information
technology (332,663) (302,697) (309,311)
Free cash flow from
continuing
operations $446,891 $1,042,303 $1,610,859
======== ========== ==========
Certain columns or rows may not sum or recalculate due to the use of rounded numbers.
View original content with multimedia:http://www.prnewswire.com/news-releases/davita-inc-1st-quarter-2018-results-300642475.html
SOURCE DaVita Inc.
