American Renal Associates Holdings, Inc. (NYSE: ARA) (ARA or the
“Company”), a leading provider of outpatient dialysis services,
today announced financial and operating results for the second
quarter ended June 30, 2016.
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).
Second Quarter 2016 Highlights (all percentage changes
compare Q2 2016 to Q2 2015 unless noted):
- Net patient service operating revenues
increased 15% to $185.6 million;
- Net income (loss) attributable to
American Renal Associates Holdings, Inc. was ($9.1) million or
($0.75) per share as compared to $5.0 million or $0.22 per share in
Q2 2015;
- Adjusted EBITDA less noncontrolling
interests (“EBITDA-NCI”) increased 13% to $31.6 million;
- Adjusted net income attributable to
American Renal Associates Holdings, Inc. was $8.3 million or $0.26
per share for the second quarter of 2016;
- Total dialysis treatments increased
11.8%, of which 10.8% was non-acquired growth (“NAG”);
- As of June 30, 2016, the Company
operated 201 outpatient dialysis centers serving approximately
13,755 patients.
Joseph (Joe) Carlucci, Chairman and Chief Executive Officer,
said, “We are very pleased to report strong second quarter results.
Our first priority is the delivery of high quality patient care,
and our organization remains focused on delivering dialysis care in
an integrated and coordinated manner with our physician partners.
Our second quarter 2016 results demonstrate the continued momentum
of our physician partnership model, and the growing acceptance of
our differentiated operating philosophy within the nephrology
community. We produced net revenue growth of 14.9%, while also
continuing to manage our expansion in a disciplined manner.”
“During the second quarter, ARA reached another milestone: we
opened our 200th dialysis clinic,” continued Carlucci. “We also
added another regional team to support the anticipated growth
related to the 35 signed clinics in our pipeline as of June 30,
2016. ARA remains positioned well to execute on this signed
pipeline due to high levels of engagement with our physician
partners, an experienced team, dedicated caregivers, and a strong
management services infrastructure.”
Financial and operating highlights include:
Revenue: Net patient service operating revenues for the
second quarter of 2016 were $185.6 million, an increase of 14.9% as
compared to $161.5 million for the prior-year period due to
treatment growth and improvements in payor mix. Net patient service
operating revenues for the six months ending June 30, 2016 were
$357.7 million, an increase of 15.1% as compared to $310.8 million
for the prior-year period.
Treatment Volume: Total dialysis treatments for the
second quarter of 2016 were 498,368 representing an increase of
11.8% over the second quarter of 2015. Non-acquired treatment
growth was 10.8% and acquired treatment growth was 1.0% for the
second quarter of 2016.
Center Activity: As of June 30, 2016, the Company
provided services at 201 outpatient dialysis centers serving 13,755
patients. During the second quarter of 2016, we opened six de novo
centers. We also acquired a dialysis clinic in New York during the
second quarter of 2016. As of June 30, 2016, we had 35 signed de
novo clinics scheduled to open in the future.
Net income, Net income attributable to noncontrolling
interests, Net income (loss) attributable to American Renal
Associates Holdings, Inc., Adjusted EBITDA and Adjusted EBITDA less
noncontrolling interests:
Three Months Ended June
30, Increase (Decrease) (in thousands, except per
share amounts) 2016 2015 Amount
PercentageChange*
Net income $ 13,396 $ 23,181 $ ( 9,785 ) NM Net income attributable
to noncontrolling interests (22,488) (18,159) 4,329 23.8 % Net
income (loss) attributable to American Renal Associates Holdings,
Inc. (9,092) 5,022 (14,114) NM
Non-GAAP financial
measures**: Adjusted EBITDA $ 54,118 $ 46,143 $ 7,975 17.3 %
Adjusted EBITDA less noncontrolling interests $ 31,630 $ 27,984 $
3,646 13.0 %
Six Months Ended June 30, Increase
(Decrease) (in thousands, except per share amounts)
2016 2015 Amount
PercentageChange*
Net income $ 35,953 $ 41,761 $ ( 5,808 ) NM Net income attributable
to noncontrolling interests (41,289) (33,863) 7,426 21.9 % Net
income (loss) attributable to American Renal Associates Holdings,
Inc. (5,336) 7,898 (13,234) NM
Non-GAAP financial
measures**: Adjusted EBITDA $ 100,138 $ 86,874 $ 13,264 15.3 %
Adjusted EBITDA less noncontrolling interests $ 58,849 $ 53,011 $
5,838 11.0 %
* NM – Not Meaningful** See reconciliation of Non-GAAP Financial
Measures.
Operating Expenses: Patient care costs for the second
quarter of 2016 were $109.7 million or 59.1% of net patient service
operating revenues as compared to $96.1 million or 59.5% of net
patient service operating revenues in the prior-year period.
Patient care costs for the second quarter of 2016 include $1.4
million of stock-based compensation related to modification of
options and other transactions at the time of the Company’s initial
public offering. General and administrative expenses were $31.6
million or 17.1% of net patient service operating revenues as
compared to $20.1 million or 12.4% of net patient service operating
revenues in the prior-year period. General and administrative
expenses for the second quarter of 2016 include $8.0 million of
stock-based compensation related to modification of options and
other transactions at the time of the Company’s initial public
offering.
Patient care costs for the six months ended June 30, 2016 were
$215.2 million or 60.2% of net patient service operating revenues
as compared to $188.2 million or 60.6% of net patient service
operating revenues in the prior-year period. Patient care costs for
the six months ended June 30, 2016 include $1.4 million of
stock-based compensation incurred during the second quarter of 2016
related to the modification of options and other transactions at
the time of the Company’s initial public offering. General and
administrative expenses during the six months ended June 30, 2016,
were $53.1 million or 14.9% of net patient service operating
revenues as compared to $37.3 million or 12.0% of net patient
service operating revenues in the prior-year period. General and
administrative expenses for the six months ended June 30, 2016
include $8.0 million of stock-based compensation incurred during
the second quarter of 2016 related to modification of options and
other transactions at the time of the Company’s initial public
offering.
Cash Flow: Cash provided by operating activities for the
second quarter of 2016 were $52.4 million as compared to $34.2
million in the prior-year period. Adjusted cash provided by
operating activities less distributions to noncontrolling interests
for the second quarter of 2016 were $32.1 million as compared to
$11.5 million in the prior-year period. Total capital expenditures
for the second quarter of 2016 were $17.8 million as compared to
$16.9 million in the prior-year period. Capital expenditures for
the second quarter of 2016 included $2.9 million for maintenance
and $14.9 million for expansions and new clinic development.
Cash provided by operating activities for the six months ended
June 30, 2016 were $89.0 million as compared to $61.8 million in
the prior-year period. Adjusted cash provided by operating
activities less distributions to noncontrolling interests for the
six months ended June 30, 2016 were $47.3 million as compared to
$20.9 million in the prior-year period. Total capital expenditures
for the six months ended June 30, 2016 were $34.2 million as
compared to $27.9 million in the prior-year period. Capital
expenditures for the six months ended June 30, 2016 included $5.7
million for maintenance and $28.5 million for expansions and new
clinic development.
Initial Public Offering: ARA completed its initial public
offering on April 26, 2016 of 8,625,000 newly-issued shares of
common stock. Net proceeds of $176.9 million from the initial
public offering, together with borrowings under our first lien
credit facility and cash on hand, were used to repay in full, all
outstanding amounts under our second lien credit facility. As of
June 30, 2016, ARA had 30.9 million shares of common stock
outstanding.
Balance Sheet: At June 30, 2016, the Company’s balance
sheet included consolidated cash of $93.3 million and consolidated
debt of $558.4 million, including the current portion of long-term
debt. Excluding clinic-level debt not guaranteed by ARA and
clinic-level cash not owned by ARA, Adjusted owned net debt was
$440.6 million at June 30, 2016. Adjusted owned net debt to last
twelve months Adjusted EBITDA less NCI leverage ratio was 3.7x at
June 30, 2016. As of June 30, 2016, net patient accounts receivable
were $76.9 million and DSO for the period was 38 days as compared
to 40 days for the three months ended March 31, 2016.
Conference Call
American Renal Associates Holdings, Inc. will hold a conference
call to discuss this release on Wednesday, August 10, 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 13638002.
About American Renal Associates
American Renal Associates Holdings, Inc. (NYSE: ARA) is a
leading provider of outpatient dialysis services in the United
States. As of June 30, 2016, ARA operated 201 dialysis clinic
locations in 25 states and the District of Columbia serving
approximately 13,750 patients with end stage renal disease. ARA
operates exclusively through a physician joint venture model, in
which it partners with 369 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 Prospectus dated April
20, 2016 filed with the 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:
- decline in the number of patients with
commercial insurance or decline in commercial payor reimbursement
rates;
- 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 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 Medicare ESRD proposed rule
for 2017 released June 24, 2016;
- 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 outcome of the United Health Group
litigation and related matters;
- changes in the availability and cost of
ESAs and other pharmaceuticals used in our business;
- development of new technologies that
could decrease the need for dialysis services or decrease our
in-center patient population;
- our ability to correctly estimate the
amount of revenues that we recognize in a reporting period;
- 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 after the
completion of the IPO.
The forward-looking statements made in this press release are
made only as of the date of the 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: EBITDA, Adjusted EBITDA,
Adjusted EBITDA less noncontrolling interests (NCI), Adjusted net
income attributable to American Renal Associates Holdings, Inc. and
Adjusted cash provided by operating activities, 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 measures determined in accordance with GAAP.
Rather, they are presented as supplemental measures of the
Company's performance 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 for why these measures are provided.
American Renal Associates Holdings,
Inc. Consolidated Statements of Operations
(Unaudited) (dollars in thousands except per share
amounts) Three Months Ended June 30, Six
Months Ended June 30, 2016 2015 2016
2015 Patient service operating revenues $ 186,938 $ 162,585
$ 360,492 $ 312,929 Provision for uncollectible accounts
(1,371 ) (1,084 ) (2,794 ) (2,105 ) Net
patient service operating revenues 185,567 161,501 357,698 310,824
Operating expenses: Patient care costs 109,719 96,103 215,174
188,233 General and administrative 31,648 20,087 53,147 37,290
Transaction-related costs 2,215 — 2,239 — Depreciation and
amortization 8,252 7,431 15,929
15,172 Total operating expenses 151,834
123,621 286,489 240,695
Operating income 33,733 37,880 71,209 70,129 Interest
expense, net (8,941 ) (11,361 ) (21,199 ) (22,823 ) Loss on early
extinguishment of debt (4,708 ) — (4,708 ) — Income tax receivable
agreement expense (7,835 ) — (7,835 )
— Income before income taxes 12,249 26,519 37,467
47,306 Income tax (benefit) expense (1,147 ) 3,338
1,514 5,545 Net income 13,396
23,181 35,953 41,761 Less: Net income attributable to
noncontrolling interests (22,488 ) (18,159 )
(41,289 ) (33,863 ) Net income (loss) attributable to
American Renal Associates Holdings, Inc. $ (9,092 ) $ 5,022
$ (5,336 ) $ 7,898 Earnings (loss) per share: Basic $ (0.75
) $ 0.23 $ (0.69 ) $ 0.36 Diluted $ (0.75 ) $ 0.22 $ (0.69 ) $ 0.35
Weighted-average number of common shares outstanding Basic
28,406,999 22,124,805 25,344,510 22,116,155 Diluted 28,406,999
22,657,375 25,344,510 22,633,463 Cash dividends declared per share*
$ 1.30 — $ 1.30 —
* Paid to shareholders prior to the Company’s initial public
offering.
American Renal Associates Holdings, Inc.
Consolidated Balance Sheets (dollars in thousands except
for share data) June 30, 2016
December 31, 2015 Assets (Unaudited) Cash $ 93,268 $
90,988 Accounts receivable, less allowance for doubtful accounts of
$8,867 and $7,435, respectively 76,904 76,919 Inventories 4,790
4,291 Prepaid expenses and other current assets 14,977 18,863
Income tax receivable 144 2,686 Total
current assets 190,083 193,747 Property and equipment, net of
accumulated depreciation of $151,367 and $138,163, respectively
160,887 142,701 Intangible assets, net of accumulated depreciation
of $22,731 and $22,378, respectively 25,938 25,662 Other long-term
assets 6,174 6,850 Goodwill 569,930 569,318
Total assets $ 953,012 $ 938,278
Liabilities and Equity Accounts payable $ 23,515 $ 22,571
Accrued compensation and benefits 25,469 22,504 Accrued expenses
and other current liabilities 45,642 26,788 Current portion of
long-term debt 40,579 25,610 Total
current liabilities 135,205 97,473 Long-term debt, less current
portion 517,798 657,372 Income tax receivable agreement payable
27,800 — Other long-term liabilities 10,361 9,483 Deferred tax
liabilities 7,169 15,029 Total
Liabilities 698,333 779,357 Commitments and contingencies
Noncontrolling interests subject to put provisions 134,762 108,211
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; 30,845,109 and 22,213,937 issued and outstanding
at June 30, 2016 and December 31, 2015, respectively 184 98
Additional paid-in capital 72,405 — Receivable from noncontrolling
interests (498 ) (529 ) Accumulated deficit (133,597 ) (128,261 )
Accumulated other comprehensive loss, net of tax (301 )
(501 ) Total American Renal Associates Holdings, Inc.
deficit (61,807 ) (129,193 ) Noncontrolling interests not subject
to put provisions 181,724 179,903 Total
equity 119,917 50,710 Total liabilities
and equity $ 953,012 $ 938,278
American Renal Associates Holdings, Inc. Consolidated
Statements of Cash Flows (Unaudited) (dollars in
thousands) Three Months
Ended Six Months Ended June 30, June 30,
Operating activities 2016 2015 2016
2015 Net income $ 13,396 $ 23,181 $ 35,953 $ 41,761
Adjustments to reconcile net income to cash provided by operating
activities: Depreciation and amortization 8,252 7,431 15,929 15,172
Amortization of discounts, fees and deferred financing costs 1,010
717 1,807 1,432 Loss on Extinguishment of Debt 4,708 — 4,708 —
Stock-based compensation 9,825 289 10,211 572 Excess tax benefit
from exercise or vesting of equity awards (210 ) — (225 ) —
Deferred taxes (7,836 ) 155 (7,769 ) 1,970 Income tax receivable
agreement expense 7,835 — 7,835 — Non-cash charge related to
interest rate swap 227 94 850 494 Non-cash rent charges 408 287 920
354 Change in operating assets and liabilities, net of
acquisitions: Accounts receivable (1,073 ) 1,264 15 (3,979 )
Inventories 725 (145 ) (499 ) (7 ) Prepaid expenses and other
current assets 1,457 (3,952 ) 1,305 (1,864 ) Other assets 710 (328
) 692 (1,237 ) Accounts payable (342 ) 318 944 (684 ) Accrued
compensation and benefits 3,973 2,564 2,965 5,226 Accrued expenses
and other liabilities 9,378 2,350
13,363 2,608 Cash provided by operating
activities 52,443 34,225 89,004 61,818
Investing
activities Purchases of property, equipment and intangible
assets (17,825 ) (16,895 ) (34,221 ) (27,892 ) Cash paid for
acquisitions (800 ) — (800 )
(600 ) Cash used in investing activities (18,625 ) (16,895 )
(35,021 ) (28,492 )
Financing activities Proceeds
from issuance of common stock sold in initial public offering, net
of underwriting discounts and offering expense 175,845 — 175,378 —
Proceeds from issuance of long-term debt 60,000 — 60,000 — Cash
paid for debt issuance and other financing costs (1,350 ) — (1,350
) — Proceeds from term loans, net of deferred financing costs
27,482 28,590 39,764 34,485 Payments on long-term debt (248,344 )
(9,236 ) (255,806 ) (13,411 ) Payments on capital lease obligations
— — — (5 ) Dividends and dividend equivalents paid (30,176 ) —
(30,176 ) — Proceeds from issuance of common stock — 156 — 156
Excess tax benefit from exercise or vesting of equity awards 210 —
225 — Common stock repurchases for tax withholdings of net
settlement equity awards (71 ) (30 ) (71 ) (82 ) Distributions to
noncontrolling interests (22,533 ) (22,775 ) (43,973 ) (40,932 )
Contributions from noncontrolling interests 2,557 1,066 4,441 2,416
Purchases of noncontrolling interests (277 ) (852 ) (277 ) (3,326 )
Proceeds from sales of additional noncontrolling interests
142 79 142 329
Cash used in financing activities (36,515 ) (3,002 ) (51,703 )
(20,370 ) Increase (Decrease) in cash (2,697 ) 14,328 2,280
12,956 Cash at beginning of period 95,965
60,103 90,988 61,475 Cash at end
of period $ 93,268 $ 74,431 $ 93,268 $ 74,431
Supplemental Disclosure of Cash Flow
Information Cash paid for income taxes $ 5,183 $ 4,262 $ 5,376
$ 4,262 Cash paid for interest 12,726 20,758 23,307 20,758
Supplemental Disclosure of Non-Cash Financing Activities
Accrued offering costs $ 314 $ — $ 314 $ — Tax Receivable Agreement
23,400 — 23,400 — Non-Cash Dividend 26,232 — 26,232 — Liability for
accrued dividend equivalent payments 1,540 — 1,540 —
American Renal Associates Holdings,
Inc. Unaudited Supplemental Business Metrics
(dollars in thousands, except per
treatment amounts)
Three Months Ended June 30, March 31,
June 30, Dialysis Clinic Activity: 2016
2016 2015 Number of clinics (as of end of period)
201 194 181 Number of de novo clinics opened
(during period)
6 2 5 Number of acquired
clinics (during period)
1 0 0 Signed clinics
(as of end of period)
35 35 31
Patients and Treatment Volume: Patients (as of end of
period)
13,755 13,420 12,300 Treatments
498,368 482,666 445,695 Number of treatment days 78 78 78
Treatments per day 6,389 6,188 5,714
Sources of treatment
growth (year over year % change): Non-acquired growth 10.8%
14.4% 11.7% Acquired growth 1.0% 0.5% 4.4% Total treatment growth
11.8% 14.9% 16.1%
Revenue: Patient service operating
revenues $ 186,938 $ 173,554 $ 162,585 Patient service operating
revenues per treatment $ 375.10 $ 359.57 $ 364.79 Net patient
service operating revenues $ 185,567 $ 172,131 $ 161,501
Expenses: Patient care costs (1) Amount $ 108,290 $ 105,455
$ 96,103 As a % of net patient service operating revenues 58.4%
61.3% 59.5% Per treatment $ 217.29 $ 218.48 $ 215.63 General
and administrative expenses (2) Amount $ 23,629 $ 21,499 $ 20,087
As a % of net patient service operating revenues 12.7% 12.5% 12.4%
Per treatment $ 47.41 $ 44.54 $ 45.07 Provision for
uncollectible accounts Amount $ 1,371 $ 1,423 $ 1,084 As a % of net
patient service operating revenues 0.7% 0.8% 0.7% Per treatment $
2.75 $ 2.95 $ 2.43
Accounts receivable DSO (days) 38
40 42
Adjusted EBITDA* Adjusted EBITDA including
noncontrolling interests $ 54,118 $ 46,020 $ 46,143 Adjusted EBITDA
- NCI $ 31,630 $ 27,219 $ 27,984
Clinical (quarterly
averages): Dialysis adequacy - % of patients with Kt/V > 1.2
98% 98% 98% Vascular access - % catheter in use > 90 days 10%
11% 12%
* See reconciliation of Non-GAAP Financial Measures.(1) Q2 2016
excludes $1.4 million of stock based compensation related to
modification of options and other transactions at the time of the
Company’s IPO.(2) Q2 2016 excludes $8.0 million of stock based
compensation related to modification of options and other
transactions at the time of the Company’s IPO.
American Renal Associates Holdings,
Inc. Net Income (Loss) per Share Reconciliation
(Unaudited)
(dollars in thousands except for share data) Three
Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015 Basic Net
income (loss) attributable to American Renal Associates Holdings,
Inc. $ (9,092 ) $ 5,022 $ (5,336 ) $ 7,898 Change in the difference
between the estimated fair values of contractual noncontrolling
interest put provisions and estimated fair values for accounting
purposes of the related noncontrolling interests (12,133 )
— (12,133 ) — Net income (loss) attributable
to American Renal Associates Holdings, Inc. for basic earnings per
share calculation $ (21,225 ) $ 5,022 $ (17,469 ) $ 7,898
Weighted-average common shares outstanding 28,406,999
22,124,805 25,344,510 22,116,155
Earnings (loss) per share, basic $ (0.75 ) $ 0.23 $ (0.69 ) $ 0.36
Diluted Net income (loss) attributable to American Renal
Associates Holdings, Inc. $ (9,092 ) $ 5,022 $ (5,336 ) $ 7,898
Change in the difference between the estimated fair values of
contractual noncontrolling interest put provisions and estimated
fair values for accounting purposes of the related noncontrolling
interests (12,133 ) — (12,133 ) — Net
income (loss) attributable to American Renal Associates Holdings,
Inc. for diluted earnings per share calculation $ (21,225 ) $ 5,022
$ (17,469 ) $ 7,898 Weighted-average common shares outstanding,
basic 28,406,999 22,124,805 25,344,510 22,116,155 Weighted-average
effect of dilutive securities: Effect of assumed exercise of stock
options — 532,570 —
517,308 Weighted-average common shares outstanding, diluted
28,406,999 22,657,375 25,344,510
22,633,463 Earnings (loss) per share, diluted $ (0.75 ) $ 0.22 $
(0.69 ) $ 0.35 Outstanding options excluded as impact would be
anti-dilutive 555,329 10,541 336,133 9,558
American Renal Associates Holdings,
Inc.Reconciliation 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, interest expense, depreciation and amortization, as
adjusted for stock-based compensation, loss on early extinguishment
of debt, transaction-related costs, income tax receivable agreement
expense, and management fees. “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
understanding our operating performance in a manner similar to
management. We believe Adjusted EBITDA is helpful in highlighting
trends because Adjusted EBITDA excludes the results of decisions
that are outside the operational control of management and 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
it 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;
- 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 expense;
- do not include loss on early
extinguishment of debt;
- do not include certain income tax
payments that represent a reduction in cash available to us;
and
- do not reflect changes in, or cash
requirements for, our working capital needs.
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 one-time or
non-recurring charges. “Adjusted net income attributable to
American Renal Associates Holdings, Inc.” is defined as Net income
(loss) attributable to American Renal Associates Holdings, Inc.
plus transaction-related expenses, loss on early extinguishment of
debt, management fees, income tax receivable agreement expense, and
share-based compensation due to option modifications and other
transactions at the time of the Company’s initial public offering,
net of taxes. We use Adjusted weighted average number of diluted
shares to calculate Adjusted net income attributable to American
Renal Associates Holdings, Inc. per share. 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.
We use Adjusted cash provided 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 by operating
activities less distributions to noncontrolling interests” is
defined as cash provided by operating activities plus
transaction-related expenses less distributions to noncontrolling
interests.
We use Adjusted owned net debt because it is a useful metric to
evaluate the Company’s pro rata share of our interests in the cash
on our balance sheet and the pro rata share of the debt guaranteed
by the Company. “Adjusted owned net debt” is defined as Debt (other
than clinic-level debt) plus Clinic-level debt guaranteed by
American Renal Associates Holdings, Inc. less Cash (other than
clinic-level cash) less the Company’s pro rata interest in
Clinic-level cash. “Owned Net Leverage” is defined as the ratio of
Owned Net Debt to our trailing twelve months Adjusted EBITDA less
NCI.
The following table presents the reconciliation from net income
to Adjusted EBITDA and Adjusted EBITDA-NCI for the periods
indicated:
Reconciliation of Net
income to Three Months Ended Six Months Ended
LTM (1) as of Adjusted EBITDA: June 30,
June 30, June 30, June 30, June
30,
(dollars in thousands)
2016 2015 2016 2015 2016 Net
income $ 13,396 $ 23,181 $ 35,953 $ 41,761 $ 87,269 Interest
expense, net 8,941 11,361 21,199 22,823 43,776 Income tax
expense/(benefit) (1,147 ) 3,338 1,514 5,545 8,342 Depreciation and
amortization 8,252 7,431 15,929 15,172 32,603 Transaction-related
costs 2,215 - 2,239 - 4,325 Loss on early extinguishment of debt
4,708 - 4,708 - 4,708 Income tax receivable agreement expense 7,835
- 7,835 - 7,835 Stock-based compensation 9,838 297 10,224 603
11,072 Management fee 80 535 537
970 1,389 Adjusted EBITDA (including
noncontrolling interests) $ 54,118 $ 46,143 $ 100,138 $ 86,874 $
201,319 Less: Net income attributable to noncontrolling interests
(22,488 ) (18,159 ) (41,289 ) (33,863 )
(81,658 ) Adjusted EBITDA-NCI $ 31,630 $ 27,984 $
58,849 $ 53,011 $ 119,661
(1) Last twelve months (“LTM”) is the period beginning July 1,
2015 through June 30, 2016
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 Income Attributable to American Renal Associates
Holdings, Inc.:
(dollars in thousands, except per share
data)
Three Months Ended June 30, 2016
Net income (loss) attributable to American Renal Associates
Holdings, Inc. $ ( 9,092 ) Change in the difference between the
estimated fair values of contractual noncontrolling interest put
provisions and estimated fair values for accounting purposes of the
related noncontrolling interests ( 12,133 ) Net income (loss)
attributable to American Renal Associates Holdings, Inc. for basic
earnings per share calculation $ ( 21,225 ) Adjustments:
Share-based compensation due to option modification and IPO
transactions (1) 9,448 Transaction-related costs (2) 2,215 Loss on
early extinguishment of debt 4,708 Total pre-tax adjustments
$ 16,371 Tax effect 6,789 Income tax receivable agreement expense
7,835 Change in the difference between the estimated fair values of
contractual noncontrolling interest put provisions and estimated
fair values for accounting purposes of the related noncontrolling
interests (3) 12,133 Total adjustments, net $ 29,550
Adjusted net income attributable to American Renal Associates
Holdings, Inc. $ 8,325 Basic shares outstanding
28,406,999 Adjusted effect of dilutive stock options (4) 3,322,325
Adjusted weighted average number of diluted shares used to
compute adjusted net income attributable to American Renal
Associates Holdings, Inc. per share (4) 31,729,324
Adjusted net income attributable to American Renal Associates
Holdings, Inc. per share $ 0.26
(1) Share-based compensation due to option modification and
other transactions at the time of the IPO are considered one-time
costs.
(2) Transaction-related costs due to the IPO and debt
refinancing, including accounting, valuation, legal and other
consulting and professional fees.
(3) Changes in fair values of contractual noncontrolling
interest put provisions are related to certain put rights that may
be accelerated as a result of the IPO.
(4) Adjusted weighted average number of diluted shares
outstanding calculated using the treasury method as if 2.8 million
shares related to unvested in-the-money options subject to a
contingency are vested.
American Renal Associates
Holdings, Inc. Unaudited Supplemental Cash Flow
(dollars in thousands) Three Months Ended
Six Months Ended Ended June 30, Ended June 30,
2016 2015 2016 2015
Cash provided by operating activities $52,443 $34,225
$89,004 $ 61,818 Plus: Transaction-related costs (1) 2,215 —
2,239 —
Adjusted cash provided by
operating activities 54,658 34,225 91,243 61,818 Distributions
to noncontrolling interests (22,533 ) (22,775 ) (43,973 )
(40,932 )
Adjusted cash provided by operating activities less
distributions to NCI 32,125 11,450 47,270 20,886
Capital expenditure breakdown: Routine and maintenance
capital expenditures $2,890 $2,676 $5,748 $ 4,607 Development
capital expenditures 14,935 14,219 28,473
23,285
Total capital expenditures $17,825
$16,895 $34,221 $ 27,892
American Renal Associates
Holdings, Inc. Unaudited Supplemental Balance Sheet
(dollars in thousands) As of June 30,
2016 Total ARA ARA "Owned" Cash (other than clinic-level cash)
$ 19,087 $ 19,087 Clinic-level cash 74,181
37,015 Total cash $ 93,268 $ 56,102
Debt (other than clinic-level debt) $ 439,362 $ 439,362
Clinic-level debt 124,055 62,417 Unamortized debt discounts and
fees (5,040 ) (5,040 ) Total debt $ 558,377 $
496,739
Net debt (total debt - total cash)
$ 440,637 Adjusted EBITDA less NCI, LTM
$ 119,661
Leverage ratio (2)
3.7x
(1) Transaction-related costs due to the IPO and debt
refinancing, including accounting, valuation, legal and other
consulting and professional fees.
(2) Leverage ratio calculated as follows: Net debt divided by
Adjusted EBITDA less NCI, last twelve months.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160809006412/en/
American Renal Associates Holdings, Inc.Darren Lehrich,
978-922-3080 x134SVP Strategy & Investor Relationsdlehrich@americanrenal.com
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