DENVER, May 4, 2016 /PRNewswire/ -- DaVita HealthCare
Partners Inc. (NYSE: DVA) today announced results for the quarter
ended March 31, 2016. Adjusted net
income attributable to DaVita HealthCare Partners Inc. for the
quarter ended March 31, 2016 was
$190 million, or $0.92 per share, excluding a goodwill impairment
charge, as discussed below, and an estimated accrual for damages
and liabilities associated with our HCP Nevada hospice business,
all net of tax. Net income attributable to DaVita HealthCare
Partners Inc. for the quarter ended March
31, 2016 including these items was $97 million, or $0.47 per share.
Adjusted net income attributable to DaVita HealthCare Partners
Inc. for the quarter ended March 31,
2015 was $187 million, or
$0.86 per share, excluding a
settlement charge related to a private civil suit, net of tax. Net
loss attributable to DaVita HealthCare Partners Inc. for the
quarter ended March 31, 2015
including this item was $(111)
million, or $(0.52) per
share.
See schedules of reconciliations of non-GAAP measures.
Financial and operating highlights include:
- Adjusted Diluted Net Income Per Share:
Adjusted net income attributable to DaVita HealthCare Partners Inc.
for the three months ended March 31,
2016, excluding the amortization of intangible assets
associated with acquisitions, the goodwill impairment charge and
the estimated HCP Nevada hospice accrual, net of tax, was
$214 million, or $1.03 per share.
Adjusted net income attributable to DaVita HealthCare Partners Inc.
for the three months ended March 31,
2015, excluding the amortization of intangible assets
associated with acquisitions and a settlement charge, net of tax
impacts, was $213 million, or
$0.98 per share.
See schedules of reconciliations of non-GAAP measures.
- Cash Flow: For the rolling twelve months ended
March 31, 2016, operating cash flow
was $1,576 million and free cash flow
was $1,041 million. For the three
months ended March 31, 2016,
operating cash flow was $429 million
and free cash flow was $305 million.
Operating cash flow and free cash flow for the rolling twelve
months ended March 31, 2016 were
negatively impacted by approximately $304
million of after-tax payments made during the second quarter
of 2015 in connection with the settlement of a private civil
suit. Excluding these items, adjusted operating cash flow for
the twelve months ended March 31,
2016 would have been $1,880
million.
- Adjusted Operating Income and Operating Income
(Loss): Adjusted operating income for the three
months ended March 31, 2016 was
$458 million, excluding a goodwill
impairment charge and the estimated HCP Nevada hospice accrual.
Operating income for the three months ended March 31, 2016 including these items was
$365 million.
Adjusted operating income for the three months ended March 31, 2015 was $431
million, excluding a settlement charge related to a private
civil suit. Operating loss for the three months ended March 31, 2015 including this item was
$(64) million.
- Goodwill Impairment Charge: During the quarter
ended March 31, 2016 we concluded our
fourth quarter 2015 impairment assessment work on certain HCP
reporting units with no material change. As a result of continued
underperformance in recent quarters and further analyses performed
during the first quarter, we have recognized an additional goodwill
impairment charge of $77 million for
one of our HCP reporting units in the quarter ended March 31, 2016.
- Volume: Total U.S. dialysis treatments for the
first quarter of 2016 were 6,639,874, or 85,236 treatments per day,
representing a per day increase of 4.3% over the first quarter of
2015. Normalized non-acquired treatment growth in the first quarter
of 2016 as compared to the first quarter of 2015 was 4.1%.
The number of member months for which HCP provided care during the
first quarter of 2016 was approximately 2.4 million, of which 1.0
million, 1.1 million and 0.3 million related to Medicare,
commercial and Medicaid members, respectively.
- Effective Tax Rate: Our effective tax rate was
47.9% for the three months ended March 31,
2016. The effective tax rate attributable to DaVita
HealthCare Partners Inc. was 56.5% for the three months ended
March 31, 2016. Our effective tax
rate is impacted by the non-deductible goodwill impairment charge,
the non-deductible HCP Nevada hospice accrual, as well as the
amount of third-party owners' income attributable to non-tax paying
entities. The adjusted effective tax rate attributable to
DaVita HealthCare Partners Inc. for the quarter ended March 31, 2016, excluding the goodwill impairment
charge and the estimated HCP Nevada hospice accrual, was 40.0%.
We are updating our estimate of 2016 effective tax rate
attributable to DaVita HealthCare Partners Inc. to now be
approximately 39.5% to 40.5% excluding the goodwill impairment
charge and the estimated HCP Nevada hospice accrual. Our
previous expected 2016 effective tax rate attributable to DaVita
HealthCare Partners Inc. was 40.0% to 41.0%.
- Center Activity: As of March 31, 2016, we provided dialysis services to
a total of approximately 192,000 patients at 2,402 outpatient
dialysis centers, of which 2,278 centers are located in
the United States and 124 centers
are located in ten countries outside of the United States. During the first quarter of
2016, we opened a total of 30 new dialysis centers and closed four
dialysis centers in the United
States. We also acquired one dialysis center and opened five
new dialysis center outside of the United
States.
- Share Repurchases: During the first quarter of
2016, we repurchased a total of 3,689,738 shares of our common
stock for $249 million, or an average
price of $67.61 per share. As a
result of these transactions we now have approximately $259 million remaining under our current board
authorization for share repurchases.
- Acquisition: On March 1,
2016 we completed our acquisition of The Everett Clinic
Medical Group (TEC) pursuant to an Agreement and Plan of Merger
dated November 23, 2015, as amended,
whereby TEC became a 100% consolidated subsidiary of HCP. The
operating results of TEC and its subsidiaries are included in our
consolidated financial results from March 1,
2016.
Outlook
- We still expect our consolidated operating income for 2016 to
be in the range of $1.800 billion to $1.950
billion.
- We still expect our operating income for Kidney Care for 2016
to be in the range of $1.625 billion to
$1.725 billion.
- We still expect our operating income for HCP for 2016 to be in
the range of $175 million to
$225 million.
- We still expect our consolidated operating cash flow for 2016
to be in the range of $1.550 billion to $1.750 billion.
These projections and the underlying assumptions involve
significant risks and uncertainties, including those described
below, and do not give effect to potential non-recurring items,
including the goodwill impairment charge and the estimated accrual
associated with the HCP Nevada hospice business, and actual results
may vary significantly from these current projections.
We will be holding a conference call to discuss our results for
the first quarter ended March 31,
2016 on May 4, 2016 at
5:00 p.m. Eastern Time. To join the
conference call, please dial (877) 918-6630 from the U.S. or (212)
547-0235 from outside the U.S. A replay of the conference call will
be available on our website at
investors.davitahealthcarepartners.com, for the following 30
days.
This release contains forward-looking statements within the
meaning of the federal securities laws, including statements
related to our guidance and expectations for our 2016 consolidated
operating income, our 2016 Kidney Care operating income, HCP's 2016
operating income, our 2016 consolidated operating cash flows, our
2016 effective tax rate attributable to DaVita HealthCare Partners
Inc. and our estimated charges and accruals. Factors that could
impact future results include the uncertainties associated with the
risk factors set forth in our SEC filings, including our annual
report on Form 10-K for the year ended December 31, 2015, our subsequent quarterly and
annual reports, and our current reports on Form 8-K. The
forward-looking statements should be considered in light of these
risks and uncertainties.
These risks and uncertainties include, but are not limited
to, 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 the risk of a
reduction in the number of patients under such plans, which may
result in the loss of revenues or patients, and the extent to which
the ongoing implementation of healthcare exchanges or changes in
regulations or enforcement of regulations 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 Center for Medicare and Medicaid Services
(CMS) 2015 Medicare Advantage benchmark structure,
- risks arising from potential federal and/or state
legislation that could have an adverse effect on our operations and
profitability,
- changes in pharmaceutical or anemia management practice
patterns, payment policies, or pharmaceutical
pricing,
- legal compliance risks, including 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 settlement terms, and the financial impact
thereof,
- continued increased competition from large- and medium-sized
dialysis providers that compete directly with us,
- 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, or to businesses
outside of dialysis and HCP business,
- our ability to complete acquisitions, mergers or
dispositions that we might be considering or announce, or to
integrate and successfully operate any business we may acquire or
have acquired, including HCP, or to expand our operations and
services to markets outside the United
States,
- the variability of our cash flows,
- 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,
- risks of losing key HCP employees, potential disruption from
the HCP transaction making it more difficult to maintain business
and operational relationships with customers, partners, associated
physicians and physician groups, hospitals and others,
- the risk that laws regulating the corporate practice of
medicine could restrict the manner in which HCP conducts its
business,
- the risk that the cost of providing services under HCP's
agreements may exceed our compensation,
- the risk that reductions in reimbursement rates, including
Medicare Advantage rates, and future regulations may negatively
impact HCP's business, revenue and profitability,
- the risk that HCP 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 HCP's healthcare provider
networks could have an adverse effect on HCP's business operations
and profitability,
- the risk that reductions in the quality ratings of health
maintenance organization plan customers of HCP could have an
adverse effect on HCP's business, or
- the risk that health plans that acquire health maintenance
organizations may not be willing to contract with HCP or may be
willing to contract only on less favorable terms.
We base our forward-looking statements on information
currently available to us at the time of this release, and we
undertake no obligation to update or revise any forward-looking
statements, whether as a result of changes in underlying factors,
new information, future events or otherwise.
This release contains non-GAAP financial measures. For
reconciliations of these non-GAAP financial measures to their most
comparable measure calculated and presented in accordance with
GAAP, see the attached reconciliation schedules. For the reasons
stated in the reconciliation schedules, we believe our presentation
of non-GAAP financial measures provides useful supplemental
information for investors.
|
|
DAVITA HEALTHCARE
PARTNERS INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(unaudited)
|
(dollars in
thousands, except per share data)
|
|
|
|
Three
months ended
March 31,
|
|
2016
|
2015
|
Patient service
revenues...............................................................................................................................................................................................................
|
$ 2,477,738
|
$ 2,271,815
|
Less: Provision for
uncollectible
accounts................................................................................................................................................................................
|
(109,205)
|
(99,164)
|
Net patient service
revenues.............................................................................................................................................................................................
|
2,368,533
|
2,172,651
|
Capitated
revenues.......................................................................................................................................................................................................................
|
887,047
|
850,515
|
Other
revenues...............................................................................................................................................................................................................................
|
325,556
|
264,799
|
Total net
revenues..............................................................................................................................................................................................................
|
3,581,136
|
3,287,965
|
Operating expenses
and charges:
|
|
|
Patient care costs and
other
costs....................................................................................................................................................................................
|
2,582,333
|
2,362,612
|
General and
administrative...............................................................................................................................................................................................
|
386,429
|
341,801
|
Depreciation and
amortization........................................................................................................................................................................................
|
169,355
|
153,789
|
Provision for
uncollectible
accounts................................................................................................................................................................................
|
2,517
|
1,827
|
Equity investment
income................................................................................................................................................................................................
|
(1,387)
|
(2,908)
|
Goodwill impairment
charge.............................................................................................................................................................................................
|
77,000
|
—
|
Settlement
charge...............................................................................................................................................................................................................
|
—
|
495,000
|
Total operating
expenses and
charges.................................................................................................................................................................
|
3,216,247
|
3,352,121
|
Operating income
(loss)................................................................................................................................................................................................................
|
364,889
|
(64,156)
|
Debt
expense..................................................................................................................................................................................................................................
|
(102,884 )
|
(97,392)
|
Other income (loss),
net................................................................................................................................................................................................................
|
2,976
|
(533)
|
Income (loss) before
income
taxes............................................................................................................................................................................................
|
264,981
|
(162,081)
|
Income tax expense
(benefit).....................................................................................................................................................................................................
|
126,822
|
(85,933)
|
Net income
(loss)...........................................................................................................................................................................................................................
|
138,159
|
(76,148)
|
Less: Net income
attributable to noncontrolling
interests...........................................................................................................................................
|
(40,725)
|
(34,469)
|
Net income (loss)
attributable to DaVita HealthCare Partners
Inc......................................................................................................................................
|
$ 97,434
|
$ (110,617)
|
Earnings per
share:
|
|
|
Basic net income
(loss) per share attributable to DaVita HealthCare Partners
Inc................................................................................................
|
$
0.48
|
$ (0.52)
|
Diluted net income
(loss) per share attributable to DaVita HealthCare Partners
Inc.............................................................................................
|
$
0.47
|
$ (0.52)
|
Weighted average
shares for earnings per share:
|
|
|
Basic......................................................................................................................................................................................................................................
|
204,366,869
|
213,387,253
|
Diluted...................................................................................................................................................................................................................................
|
207,928,096
|
213,387,253
|
|
|
DAVITA HEALTHCARE
PARTNERS INC.
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
(unaudited)
|
(dollars in
thousands)
|
|
|
|
Three months
ended
March
31,
|
|
2016
|
2015
|
Net income
(loss)......................................................................................................................................................
|
$ 138,159
|
$ (76,148)
|
Other comprehensive
(loss) income, net of tax:
|
|
|
Unrealized losses on
interest rate swap and cap agreements:
|
|
|
Unrealized losses on
interest rate swap and cap
agreements.................................................................
|
(5,469)
|
(5,760)
|
Reclassifications of
net swap and cap agreements realized losses into net
income..........................
|
465
|
812
|
Unrealized gains
(losses) on investments:
|
|
|
Unrealized gains on
investments.................................................................................................................
|
229
|
382
|
Reclassification of
net investment realized gains into net
income.......................................................
|
(93)
|
(157)
|
Foreign currency
translation
adjustments............................................................................................................
|
11,181
|
(17,885)
|
Other comprehensive
income
(loss)............................................................................................................
|
6,313
|
(22,608)
|
Total comprehensive
income
(loss).......................................................................................................................
|
144,472
|
(98,756)
|
Less: Comprehensive
income attributable to noncontrolling
interests................................................
|
(40,725)
|
(34,469)
|
Comprehensive income
(loss) attributable to DaVita HealthCare Partners
Inc...........................................
|
$ 103,747
|
$ (133,225)
|
|
|
DAVITA HEALTHCARE
PARTNERS INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(unaudited)
|
(dollars in
thousands)
|
|
|
|
Three months
ended
March 31,
|
|
2016
|
2015
|
Cash flows from
operating activities:
|
|
|
Net income
(loss)................................................................................................................................................
|
$
138,159
|
$
(76,148)
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Settlement
charge.....................................................................................................................................
|
—
|
495,000
|
Depreciation and
amortization..................................................................................................................
|
169,355
|
153,789
|
Goodwill impairment
charge....................................................................................................................
|
77,000
|
—
|
Stock-based
compensation
expense.........................................................................................................
|
13,097
|
12,762
|
Tax benefits from
stock award
exercises..................................................................................................
|
8,668
|
9,366
|
Excess tax benefits
from stock award
exercises.......................................................................................
|
(4,383)
|
(7,584)
|
Deferred income
taxes..............................................................................................................................
|
47,519
|
(203,940)
|
Equity investment
income,
net..................................................................................................................
|
5,238
|
2,539
|
Other non-cash
charges............................................................................................................................
|
11,507
|
7,865
|
Changes in operating
assets and liabilities, other than from acquisitions and
divestitures:
|
|
|
Accounts
receivable.................................................................................................................................
|
(78,097)
|
(151,743)
|
Inventories...............................................................................................................................................
|
(4,924)
|
(9,193)
|
Other receivables and
other current
assets................................................................................................
|
(75,326)
|
(18,619)
|
Other long-term
assets.............................................................................................................................
|
(965)
|
153
|
Accounts
payable.....................................................................................................................................
|
7,782
|
(10,933)
|
Accrued compensation
and
benefits.........................................................................................................
|
(32,909)
|
30,638
|
Other current
liabilities.............................................................................................................................
|
55,673
|
60,772
|
Income
taxes............................................................................................................................................
|
72,400
|
106,970
|
Other long-term
liabilities.........................................................................................................................
|
19,208
|
8,395
|
Net cash provided by
operating
activities......................................................................................
|
429,002
|
410,089
|
Cash flows from
investing activities:
|
|
|
Additions of property
and
equipment.......................................................................................................
|
(173,187)
|
(121,421)
|
Acquisitions.............................................................................................................................................
|
(405,154)
|
(40,650)
|
Proceeds from asset
and business
sales...................................................................................................
|
4,657
|
2,565
|
Purchase of
investments available for
sale...............................................................................................
|
(4,435)
|
(1,448)
|
Purchase of
investments
held-to-maturity................................................................................................
|
(228,198)
|
(290,774)
|
Proceeds from sale of
investments available for
sale................................................................................
|
5,155
|
1,217
|
Proceeds from
investments
held-to-maturity............................................................................................
|
252,701
|
205,650
|
Purchase of equity
investments................................................................................................................
|
(5,850)
|
(7,426)
|
Net cash used in
investing
activities..............................................................................................
|
(554,311)
|
(252,287)
|
Cash flows from
financing activities:
|
|
|
Borrowings..............................................................................................................................................
|
13,098,553
|
13,353,767
|
Payments on long-term
debt and other financing
costs............................................................................
|
(13,123,124)
|
(13,382,203)
|
Purchase of treasury
stock.......................................................................................................................
|
(274,926)
|
(70,063)
|
Distributions to
noncontrolling
interests..................................................................................................
|
(50,409)
|
(41,499)
|
Stock award exercises
and other share issuances,
net..............................................................................
|
3,167
|
5,648
|
Excess tax benefits
from stock award
exercises.......................................................................................
|
4,383
|
7,584
|
Contributions from
noncontrolling
interests.............................................................................................
|
10,190
|
15,898
|
Proceeds from sales of
additional noncontrolling
interests.......................................................................
|
3,557
|
—
|
Purchase of
noncontrolling
interests........................................................................................................
|
(4,300)
|
—
|
Deferred financing
costs..........................................................................................................................
|
(188)
|
—
|
Net cash used in
financing
activities..............................................................................................
|
(333,097)
|
(110,868)
|
Effect of exchange
rate changes on cash and cash
equivalents............................................................................
|
717
|
(904)
|
Net (decrease)
increase in cash and cash
equivalents..........................................................................................
|
(457,689)
|
46,030
|
Cash and cash
equivalents at beginning of the
year............................................................................................
|
1,499,116
|
965,241
|
Cash and cash
equivalents at end of the
period...................................................................................................
|
$
1,041,427
|
$
1,011,271
|
|
|
|
DAVITA HEALTHCARE
PARTNERS INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(unaudited)
|
(dollars in
thousands, except per share data)
|
|
|
|
|
March
31,
2016
|
December
31,
2015
|
ASSETS
|
|
|
Cash and cash
equivalents.................................................................................................................................
|
$ 1,041,427
|
$ 1,499,116
|
Short-term
investments.......................................................................................................................................
|
396,468
|
408,084
|
Accounts receivable,
less allowance of $280,988 and
$264,144...............................................................
|
1,855,285
|
1,724,228
|
Inventories.............................................................................................................................................................
|
192,689
|
185,575
|
Other
receivables..................................................................................................................................................
|
525,548
|
435,885
|
Other current
assets..............................................................................................................................................
|
187,287
|
190,322
|
Income taxes
receivable.....................................................................................................................................
|
856
|
60,070
|
Total current
assets...................................................................................................................................
|
4,199,560
|
4,503,280
|
Property and
equipment,
net..............................................................................................................................
|
2,911,205
|
2,788,740
|
Intangible assets,
net...........................................................................................................................................
|
1,678,707
|
1,687,326
|
Equity
investments..............................................................................................................................................
|
75,059
|
73,368
|
Long-term
investments.......................................................................................................................................
|
97,770
|
94,122
|
Other long-term
assets.........................................................................................................................................
|
66,269
|
73,560
|
Goodwill.................................................................................................................................................................
|
9,485,628
|
9,294,479
|
|
$ 18,514,198
|
$ 18,514,875
|
LIABILITIES AND
EQUITY
|
|
|
Accounts
payable................................................................................................................................................
|
$
480,288
|
$ 513,950
|
Other
liabilities......................................................................................................................................................
|
779,141
|
682,123
|
Accrued compensation
and
benefits................................................................................................................
|
728,476
|
741,926
|
Medical
payables.................................................................................................................................................
|
317,747
|
332,102
|
Current portion of
long-term
debt.....................................................................................................................
|
137,966
|
129,037
|
Total current
liabilities..............................................................................................................................
|
2,443,618
|
2,399,138
|
Long-term
debt.....................................................................................................................................................
|
8,979,855
|
9,001,308
|
Other long-term
liabilities....................................................................................................................................
|
464,250
|
439,229
|
Deferred income
taxes........................................................................................................................................
|
792,038
|
726,962
|
Total
liabilities............................................................................................................................................
|
12,679,761
|
12,566,637
|
Commitments and
contingencies:
|
|
|
Noncontrolling
interests subject to put
provisions...............................................................................
|
912,705
|
864,066
|
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; 217,338,629 and
217,120,346 shares issued and 206,392,776 and 209,754,247 shares
outstanding,
respectively)..........................................................................................................................................
|
217
|
217
|
Additional paid-in
capital........................................................................................................................
|
1,089,305
|
1,118,326
|
Retained
earnings......................................................................................................................................
|
4,454,269
|
4,356,835
|
Treasury stock
(10,945,853 and 7,366,099 shares,
respectively)....................................................
|
(786,352)
|
(544,772)
|
Accumulated other
comprehensive
loss................................................................................................
|
(53,513)
|
(59,826)
|
Total DaVita
HealthCare Partners Inc. shareholders'
equity.................................................
|
4,703,926
|
4,870,780
|
Noncontrolling
interests not subject to put
provisions........................................................................
|
217,806
|
213,392
|
Total
equity................................................................................................................................................
|
4,921,732
|
5,084,172
|
|
$ 18,514,198
|
$ 18,514,875
|
|
DAVITA HEALTHCARE
PARTNERS INC.
|
SUPPLEMENTAL
FINANCIAL DATA
|
(unaudited)
|
(dollars in
millions, except for per share and per treatment
data)
|
|
|
|
Three months
ended
|
|
|
|
March
31,
2016
|
December
31,
2015
|
March
31,
2015
|
1. Consolidated
Financial Results:
|
|
|
|
Consolidated net
revenues..............................................................................................
|
$ 3,581
|
$ 3,534
|
$ 3,288
|
Operating income
(loss)..................................................................................................
|
$ 365
|
$ 245
|
$ (64)
|
Adjusted operating
income excluding certain items
(1)....................................................
|
$ 458
|
$ 474
|
$ 431
|
Operating income
(loss)
margin......................................................................................
|
10.2%
|
6.9%
|
(2.0%)
|
Adjusted operating
income margin excluding certain items (1)
(5)....................................
|
12.8%
|
13.4%
|
13.1%
|
Net income (loss)
attributable to DaVita HealthCare Partners Inc.
................................
|
$
97
|
$
(6)
|
$ (111)
|
Adjusted net income
attributable to DaVita HealthCare Partners Inc. excluding certain
items
(1)......................................................................................................................
|
$ 190
|
$ 214
|
$ 187
|
Diluted net income
(loss) per share attributable to DaVita HealthCare Partners Inc.
.....
|
$ 0.47
|
$ (0.03)
|
$ (0.52)
|
Adjusted diluted net
income per share attributable to DaVita HealthCare Partners
Inc. excluding certain items
(1)........................................................................................
|
$ 0.92
|
$ 1.01
|
$ 0.86
|
|
|
|
|
2. Consolidated
Business Metrics:
|
|
|
|
Expenses
|
|
|
|
General and
administrative expenses as a percent of consolidated net
revenues(2) ...
|
10.8%
|
11.6%
|
10.4%
|
Consolidated effective
tax rate
.................................................................................
|
47.9%
|
76.4%
|
53.0%
|
Consolidated effective
tax rate attributable to DaVita HealthCare Partners
Inc.(1) ...
|
56.5%
|
105.7%
|
43.7%
|
Adjusted consolidated
effective tax rate attributable to DaVita HealthCare
Partners
Inc.(1)...................................................................................................................
|
40.0%
|
36.0%
|
37.5%
|
|
|
|
|
3. Summary of
Division Financial Results:
|
|
|
|
Net
revenues
|
|
|
|
Kidney
Care:
|
|
|
|
Net dialysis and
related lab services
revenues.......................................................
|
$ 2,227
|
$ 2,216
|
$ 2,072
|
Net ancillary services
and strategic initiatives revenues, including international
dialysis
operations............................................................................................
|
391
|
398
|
305
|
Elimination of
intersegment
revenues....................................................................
|
(26)
|
(22)
|
(17)
|
Total Kidney Care net
revenues.....................................................................
|
2,592
|
2,592
|
2,360
|
Net HCP
revenues....................................................................................................
|
989
|
942
|
928
|
Total net consolidated
revenues.....................................................................
|
$ 3,581
|
$ 3,534
|
$ 3,288
|
Operating
income
|
|
|
|
Kidney
Care:
|
|
|
|
Dialysis and related
lab services operating income
(loss)......................................
|
$
440
|
$
464
|
$ (104)
|
Other – Ancillary
services and strategic initiatives, including international
dialysis operations operating
loss.....................................................................
|
(11)
|
(34)
|
(14)
|
Corporate support and
related long-term incentive
compensation..........................
|
(7)
|
(4)
|
(6)
|
Total Kidney Care
operating income
(loss)....................................................
|
422
|
426
|
(124)
|
HCP operating (loss)
income....................................................................................
|
(57)
|
(181)
|
60
|
Total consolidated
operating income
(loss)...................................................
|
$ 365
|
$ 245
|
$ (64)
|
|
|
DAVITA HEALTHCARE
PARTNERS INC.
|
SUPPLEMENTAL
FINANCIAL DATA—continued
|
(unaudited)
|
(dollars in
millions, except for per share and per treatment
data)
|
|
|
|
Three months
ended
|
|
March
31,
2016
|
December
31,
2015
|
March
31,
2015
|
4. Summary of
Reportable Segment Financial Results:
|
|
|
|
Dialysis and
Related Lab Services
|
|
|
|
Revenue:
|
|
|
|
Patient services
revenues................................................................................
|
$ 2,328
|
$ 2,316
|
$ 2,166
|
Provision for
uncollectible
accounts.............................................................
|
(105)
|
(104)
|
(97)
|
Net patient service
operating
revenues................................................
|
2,223
|
2,212
|
2,069
|
Other
revenues..................................................................................................
|
4
|
4
|
3
|
Total net operating
revenues.................................................................
|
$ 2,227
|
$ 2,216
|
$ 2,072
|
Operating
expenses:
|
|
|
|
Patient care
costs.............................................................................................
|
$ 1,496
|
$ 1,462
|
$ 1,396
|
General and
administrative............................................................................
|
179
|
181
|
183
|
Depreciation and
amortization.....................................................................
|
116
|
112
|
105
|
Equity investment
income.............................................................................
|
(4)
|
(3)
|
(3)
|
Settlement
charge............................................................................................
|
─
|
─
|
495
|
Total operating
expenses........................................................................
|
1,787
|
1,752
|
2,176
|
Segment operating
income
(loss)..................................................................
|
440
|
464
|
(104)
|
Reconciliation
for non-GAAP measure:
|
|
|
|
Add: Settlement
charge.............................................................................
….
|
─
|
─
|
495
|
Adjusted segment
operating
income(1).........................................................
|
$
440
|
$
464
|
$ 391
|
|
|
|
|
HCP
|
|
|
|
Revenue:
|
|
|
|
HCP capitated
revenues.................................................................................
|
$
866
|
$
850
|
$ 833
|
Patient services
revenues................................................................................
|
112
|
80
|
81
|
Provision for
uncollectible
accounts.............................................................
|
(4)
|
(4)
|
(1)
|
Net patient service
operating
revenues................................................
|
108
|
76
|
80
|
Other
revenues..................................................................................................
|
15
|
16
|
15
|
Total net operating
revenues.................................................................
|
$
989
|
$
942
|
$ 928
|
Operating
expenses:
|
|
|
|
Patient care
costs.............................................................................................
|
$ 794
|
$ 757
|
$ 733
|
General and
administrative............................................................................
|
127
|
121
|
92
|
Depreciation and
amortization.....................................................................
|
46
|
44
|
43
|
Goodwill and other
intangible asset impairment
charges.........................
|
77
|
206
|
─
|
Equity investment
(income)
loss...................................................................
|
2
|
(5)
|
─
|
Total operating
expenses........................................................................
|
1,046
|
1,123
|
868
|
Segment operating
(loss)
income..................................................................
|
(57)
|
(181)
|
60
|
Reconciliation
for non-GAAP measure:
|
|
|
|
Add:
|
|
|
|
Goodwill and other
intangible asset impairment charges..................
|
77
|
206
|
─
|
Hospice
accrual.........................................................................................
|
16
|
─
|
─
|
Adjusted segment
operating
income(1).........................................................
|
$
36
|
$
25
|
$
60
|
|
|
DAVITA HEALTHCARE
PARTNERS INC.
|
SUPPLEMENTAL
FINANCIAL DATA—continued
|
(unaudited)
|
(dollars in
millions, except for per share and per treatment
data)
|
|
|
|
Three months
ended
|
|
|
|
March
31,
2016
|
December
31,
2015
|
March
31,
2015
|
5. Dialysis and
Related Lab Services Business Metrics:
|
|
|
|
Volume
|
|
|
|
Treatments.............................................................................................................................
|
6,639,874
|
6,649,227
|
6,262,635
|
Number of treatment
days.....................................................................................................
|
77.9
|
79.1
|
76.6
|
Treatments per
day...............................................................................................................
|
85,236
|
84,061
|
81,758
|
Per day year over year
increase..........................................................................................
|
4.3%
|
3.2%
|
4.5%
|
Normalized
non-acquired growth year over
year............................................................
|
4.1%
|
3.7%
|
4.5%
|
Operating
revenues before provision for uncollectible
accounts
|
|
|
|
Dialysis and related
lab services revenue per
treatment..............................................
|
$ 350.60
|
$ 348.26
|
$ 345.88
|
Per treatment increase
(decrease) from previous
quarter............................................
|
0.7%
|
0.1%
|
(0.3%)
|
Per treatment increase
from previous
year....................................................................
|
1.4%
|
0.4%
|
1.5%
|
Percent of net
consolidated
revenues.............................................................................
|
61.8%
|
62.3%
|
62.7%
|
Expenses
|
|
|
|
Patient care
costs
|
|
|
|
Percent of total
segment operating net
revenues..........................................................
|
67.2%
|
66.0%
|
67.4%
|
Per
treatment.......................................................................................................................
|
$ 225.30
|
$ 219.86
|
$ 222.99
|
Per treatment increase
(decrease) from previous
quarter............................................
|
2.5%
|
(0.5%)
|
1.9%
|
Per treatment increase
from previous
year....................................................................
|
1.0%
|
0.5%
|
0.8%
|
General and
administrative expenses
|
|
|
|
Percent of total
segment operating net
revenues..........................................................
|
8.0%
|
8.2%
|
8.8%
|
Per
treatment.......................................................................................................................
|
$ 26.97
|
$ 27.21
|
$ 29.25
|
Per treatment
(decrease) increase from previous
quarter............................................
|
(0.9%)
|
5.5%
|
(1.7%)
|
Per treatment
(decrease) increase from previous
year.................................................
|
(7.8%)
|
(8.5%)
|
12.5%
|
Accounts
receivable
|
|
|
|
Net
receivables...................................................................................................................
|
$ 1,297
|
$ 1,255
|
$ 1,261
|
DSO....................................................................................................................................
|
54
|
53
|
56
|
Provision for
uncollectible accounts as a percentage of
revenues............................
|
4.5%
|
4.5%
|
4.5%
|
|
|
|
|
6. HCP Business
Metrics:
|
|
|
|
Capitated
membership
|
|
|
|
Total
members.......................................................................................................................
|
787,100
|
807,400
|
830,400
|
Total member
months
|
|
|
|
Medicare.................................................................................................................................
|
975,300
|
951,500
|
930,800
|
Commercial............................................................................................................................
|
1,048,600
|
1,109,900
|
1,132,900
|
Medicaid.................................................................................................................................
|
342,500
|
367,100
|
418,800
|
Total member
months....................................................................................................
|
2,366,400
|
2,428,500
|
2,482,500
|
Capitated
revenues by sources
|
|
|
|
Senior
revenues......................................................................................................................
|
$ 648
|
$ 607
|
$
602
|
Commercial
revenues...........................................................................................................
|
172
|
184
|
185
|
Medicaid
revenues................................................................................................................
|
46
|
59
|
46
|
Total capitated
revenues...............................................................................................
|
$ 866
|
$ 850
|
$
833
|
Other
|
|
|
|
Total care dollars
under
management(1)...........................................................................
|
$ 1,268
|
$ 1,213
|
$ 1,233
|
Ratio of operating
(loss) income to total care dollars under
management(1).............
|
(4.5%)
|
(14.9%)
|
4.9%
|
Ratio of adjusted
operating income to total care dollars under
management(1)(6)..........
|
2.8%
|
2.1%
|
4.9%
|
Full time
clinicians.................................................................................................................
|
1,652
|
1,315
|
1,299
|
IPA primary care
physicians...............................................................................................
|
2,877
|
2,937
|
2,829
|
|
DAVITA HEALTHCARE
PARTNERS INC.
|
SUPPLEMENTAL
FINANCIAL DATA—continued
|
(unaudited)
|
(dollars in
millions, except for per share and per treatment
data)
|
|
|
|
Three months
ended
|
|
|
|
March
31,
2016
|
December
31,
2015
|
March
31,
2015
|
7. Cash
Flow:
|
|
|
|
Operating cash
flow.................................................................................................
|
$ 429.0
|
$ 436.7
|
$ 410.1
|
Operating cash flow,
last twelve
months.............................................................
|
$ 1,576.1
|
$ 1,557.2
|
$ 1,450.4
|
Free cash
flow(1).......................................................................................................
|
$ 305.3
|
$ 256.2
|
$ 319.6
|
Free cash flow, last
twelve
months(1)....................................................................
|
$ 1,041.2
|
$ 1,055.5
|
$ 1,028.1
|
Capital
expenditures:
|
|
|
|
Routine
maintenance/IT/other.......................................................................
|
$ 73.3
|
$ 131.8
|
$ 49.0
|
Development and
relocations.........................................................................
|
$ 99.9
|
$ 114.0
|
$ 72.4
|
Acquisition
expenditures..................................................................................
|
$ 405.2
|
$
5.8
|
$ 40.7
|
|
|
|
|
8. Debt and
Capital Structure:
|
|
|
|
Total
debt(3)...............................................................................................................
|
$ 9,210
|
$ 9,226
|
$ 8,513
|
Net debt, net of cash
and cash
equivalents(3).....................................................
|
$ 8,168
|
$ 7,727
|
$ 7,502
|
Leverage ratio (see
calculation on page
13).......................................................
|
3.07x
|
2.95x
|
2.94x
|
Overall weighted
average effective interest rate during the
quarter...............
|
4.40%
|
4.40%
|
4.48%
|
Overall weighted
average effective interest rate at end of the
quarter..........
|
4.40%
|
4.39%
|
4.47%
|
Weighted average
effective interest rate on the Senior Secured Credit
Facilities at end of the
quarter..........................................................................
|
3.46%
|
3.46%
|
3.44%
|
Fixed and economically
fixed interest rates as a percentage of our total
debt.......................................................................................................................
|
60%(4)
|
61%(4)
|
58%(4)
|
Fixed and economically
fixed interest rates, including our interest rate
cap agreements, as a percentage of
our total
debt..............................................
|
90%(4)
|
90%(4)
|
90%(4)
|
|
|
|
|
9. Clinical:
(quarterly averages)
|
|
|
|
Dialysis adequacy -%
of patients with Kt/V > 1.2 at the end of the quarter
|
98%
|
97%
|
98%
|
Dialysis patients with
arteriovenous fistulas
placed..........................................
|
73%
|
73%
|
73%
|
(1) These are non-GAAP financial measures. For
a reconciliation of these non-GAAP financial measures to their most
comparable measure calculated and presented in accordance with
GAAP, and for a definition of adjusted amounts, see attached
reconciliation schedules.
(2) Consolidated percentages of revenues
are comprised of the dialysis and related lab services business,
HCP's business and other ancillary services and strategic
initiatives. General and administrative expenses includes certain
corporate support, long-term incentive compensation, as well as the
estimated hospice and pharmacy accruals for the three months ended
March 31, 2016 and December 31, 2015, respectively.
(3) The reported balance sheet amounts
at March 31, 2016, December 31, 2015 and March 31, 2015, excludes $92.0 million, $96.0
million and $96.9 million,
respectively, of a debt discount associated with our Term Loan B
and other deferred financing costs.
(4) The Term Loan B is subject to a
LIBOR floor of 0.75%. Because actual LIBOR, for all periods
presented above, was lower than this embedded LIBOR floor, the
interest rate on the Term Loan B is set at its respective floor. At
such time as the actual LIBOR-based variable component of our
interest rate exceeds 0.75% on the Term Loan B, we will then be
subject to LIBOR-based interest rate volatility on the LIBOR
variable component of our interest rate on all of the Term Loan B.
However, we are limited to a maximum rate of 2.50% on $2.735 billion of outstanding principal debt on
the Term Loan B as a result of interest rate cap agreements. The
remaining $704 million outstanding
principal balance of the Term Loan B is subject to LIBOR-based
interest rate volatility above a floor of 0.75%.
(5) Adjusted operating income margin is
a calculation of adjusted operating income divided by consolidated
net revenues.
(6) Ratio of adjusted operating income
to total care dollars under management is a calculation of adjusted
operating income divided by total care dollars under
management.
DAVITA HEALTHCARE PARTNERS 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 investors to enhance their understanding of
the Company's leverage ratio under its Credit Agreement.
|
Rolling
twelve
months
ended
March 31,
2016
|
|
|
Net income
attributable to DaVita HealthCare Partners
Inc............................................................
|
$
477,783
|
Income
taxes..............................................................................................................................................
|
508,481
|
Interest
expense.........................................................................................................................................
|
386,546
|
Depreciation and
amortization...............................................................................................................
|
653,590
|
Goodwill and other
intangible asset impairment
charges...................................................................
|
287,234
|
Noncontrolling
interests and equity investment income,
net.............................................................
|
182,794
|
Stock-settled
stock-based
compensation..............................................................................................
|
56,586
|
Debt redemption
charges.........................................................................................................................
|
48,072
|
Other
...........................................................................................................................................................
|
9,604
|
"Consolidated
EBITDA".................................................................................................................
|
$
2,610,690
|
|
|
|
|
|
March 31,
2016
|
|
|
Total debt, excluding
debt discount and other deferred financing costs of $92.0
million...........
|
$
9,209,771
|
Letters of credit
issued..............................................................................................................................
|
92,464
|
|
9,302,235
|
Less: Cash and cash
equivalents including short-term investments (excluding HCP's
physician owned entities
cash)..........................................................................................................
|
(1,291,696)
|
Consolidated net
debt...............................................................................................................................
|
$
8,010,539
|
Last twelve months
"Consolidated
EBITDA".....................................................................................
|
$
2,610,690
|
Leverage
ratio............................................................................................................................................
|
3.07x
|
In accordance with the Credit Agreement, the Company's
leverage ratio cannot exceed 5.00 to 1.00 as of March 31, 2016. At that date the Company's
leverage ratio did not exceed 5.00 to 1.00.
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands except for per
share data)
1. Adjusted net income and adjusted diluted net
income per share attributable to DaVita HealthCare Partners Inc.
excluding goodwill and other intangible asset impairment charges,
estimated accruals for our HCP Nevada hospice business and our
pharmacy business, and a settlement charge, net of related
tax.
We believe that adjusted net income attributable to DaVita
HealthCare Partners Inc., excluding goodwill and other intangible
asset impairment charges, primarily related to certain HCP
reporting units, estimated accruals for damages and liabilities
associated with our HCP Nevada hospice business and our pharmacy
business, and a settlement charge related to a private civil suit,
net of related tax, enhances a user's understanding of our normal
net income attributable to DaVita HealthCare Partners Inc. and
adjusted diluted net income per share attributable to DaVita
HealthCare Partners Inc. for these periods by providing a measure
that is meaningful because it excludes these unusual amounts, and
accordingly, is comparable to prior periods and indicative of
normal net income attributable to DaVita HealthCare Partners Inc.
and diluted net income per share attributable to DaVita HealthCare
Partners Inc. These measures are not measures of financial
performance under United States
generally accepted accounting principles (GAAP) and should not be
considered as an alternative to net income attributable to DaVita
HealthCare Partners Inc. and diluted net income per share
attributable to DaVita HealthCare Partners Inc.
Adjusted net
income attributable to DaVita HealthCare Partners Inc. excluding
goodwill and other intangible asset impairment charges, estimated
accruals for damages and liabilities associated with our HCP
Nevada hospice business and our pharmacy business, and a settlement
charge related to a private civil suit, net of related
tax:
|
|
|
Three months
ended
|
|
March
31,
2016
|
December
31,
2015
|
March
31,
2015
|
Net income (loss)
attributable to DaVita HealthCare Partners Inc.
...............................................................................................................
|
$ 97,434
|
$ (6,000)
|
$ (110,617)
|
Add:
|
|
|
|
Goodwill and other
intangible asset impairment charges.........
|
77,000
|
206,169
|
─
|
HCP hospice
accrual.......................................................................
|
16,000
|
─
|
─
|
Pharmacy
accrual...........................................................................
|
─
|
22,530
|
|
Settlement
charge............................................................................
|
─
|
─
|
495,000
|
Less: Related
income
tax......................................................................
|
─
|
(8,643)
|
(197,747)
|
|
$ 190,434
|
$ 214,056
|
$ 186,636
|
|
|
DAVITA HEALTHCARE
PARTNERS INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands except for per share data)
|
|
|
Adjusted diluted
net income per share attributable to DaVita HealthCare Partners
Inc. excluding goodwill and other intangible asset impairment
charges, estimated accruals for damages and liabilities associated
with our HCP Nevada hospice business and our pharmacy business, and
a settlement charge related to a private civil suit:
|
|
|
Three months
ended
|
|
March
31,
2016
|
December
31,
2015
(1)
|
March
31,
2015
(1)
|
Diluted net income
(loss) per share attributable to DaVita HealthCare Partners
Inc...................................................................
|
$ 0.47
|
$ (0.03)
|
$ (0.52)
|
Add:
|
|
|
|
Goodwill and other
intangible asset impairment charges..........
|
0.37
|
0.94
|
─
|
HCP hospice
accrual........................................................................
|
0.08
|
─
|
─
|
Pharmacy
accrual.............................................................................
|
─
|
0.10
|
─
|
Settlement
charge..............................................................................
|
─
|
─
|
1.38
|
|
$ 0.92
|
$ 1.01
|
$ 0.86
|
(1) Adjusted diluted net income per
share attributable to DaVita HealthCare Partners Inc. for the three
months ended December 31, 2015 is
calculated using 212,777,826 shares, which includes shares that
would be dilutive based on adjusted net income attributable to
DaVita HealthCare Partners Inc. of $214,056, excluding goodwill and other intangible
asset impairment charges and an estimated accrual for damages and
liabilities associated with our pharmacy business. Adjusted diluted
net income per share attributable to DaVita HealthCare Partners
Inc. for the three months ended March 31,
2015 is calculated using 217,977,358 shares, which includes
shares that would be dilutive based on adjusted net income
attributable to DaVita HealthCare Partners Inc. of $186,636 excluding a settlement charge.
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES – (continued)
(unaudited)
(dollars in thousands except for per
share data)
In addition, we have excluded amortization of intangible assets,
net of tax, associated with acquisitions from our adjusted net
income attributable to DaVita HealthCare Partners Inc. and from our
adjusted diluted net income per share attributable to DaVita
HealthCare Partners Inc. as we believe this presentation enhances a
user's understanding of our operating results for these periods by
providing a different reflection of the Company's operating
performance since it excludes the amortization of intangible
assets, net of tax, that relate to the fair value measurement of
acquired intangible assets associated with our acquisitions, and
accordingly is indicative of consistent adjusted net income
excluding amortization of acquired intangibles, attributable to
DaVita HealthCare Partners Inc. and diluted net income per share
attributable to DaVita HealthCare Partners Inc. These measures are
not measures of financial performance under GAAP and should not be
considered as an alternative to net income attributable to DaVita
HealthCare Partners Inc. and diluted net income per share
attributable to DaVita HealthCare Partners Inc.
Adjusted net
income and adjusted diluted net income per share attributable to
DaVita HealthCare Partners Inc., further adjusted to exclude the
amortization of intangible assets associated with acquisitions, net
of tax:
|
|
|
Three months
ended
|
|
March
31,
2016
|
December
31,
2015
|
March
31,
2015
|
Adjusted net income
attributable to DaVita HealthCare Partners Inc.
.................................................................................
|
$ 190,434
|
$ 214,056
|
$ 186,636
|
Add:
|
|
|
|
Amortization of intangible assets associated with acquisitions for
the dialysis and ancillary operations.....
|
3,809
|
3,992
|
6,524
|
Amortization of intangible assets associated with acquisitions for
the HCP operations..................................
|
36,078
|
35,727
|
35,878
|
Less: Related income
tax.................................................................
|
(15,955)
|
(14,418)
|
(15,901)
|
|
$ 214,366
|
$ 239,357
|
$ 213,137
|
|
|
|
|
Adjusted diluted net
income per share attributable to DaVita HealthCare Partners
Inc.............................................................
|
$ 0.92
|
$ 1.01
|
$ 0.86
|
Add:
|
|
|
|
Amortization of
intangible assets per share associated with acquisitions for the
dialysis and ancillary operations, net of
tax............................................................
|
0.01
|
0.01
|
0.02
|
Amortization of
intangible assets per share associated with acquisitions for the
HCP operations, net of tax......
|
0.10
|
0.10
|
0.10
|
|
$ 1.03
|
$ 1.12
|
$ 0.98
|
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP
MEASURES
(unaudited)
(dollars in
thousands)
2. Adjusted operating income and adjusted
EBITDA.
Adjusted operating income is defined as operating income before
unusual charges, including where applicable goodwill and other
intangible asset impairment charges, estimated accruals for damages
and liabilities associated with our HCP Nevada hospice business and
our pharmacy business, and a settlement charge related to a private
civil suit. Adjusted EBITDA is defined as adjusted operating
income excluding depreciation and amortization.
We use adjusted operating income and adjusted EBITDA as measures
to assess operating and financial performance. We believe
that these measures enhance a user's understanding of the normal
operating income and normal operating income excluding depreciation
and amortization of our consolidated enterprise and of our
individual reportable segments.
Adjusted operating income and adjusted EBITDA are not measures
of financial performance computed in accordance with GAAP and
should not be considered in isolation nor 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, the calculation of adjusted operating income and adjusted
EBITDA is susceptible to varying interpretations and calculations,
and the amounts presented may not be comparable to similarly titled
measures of other companies. Adjusted operating income and adjusted
EBITDA may not be indicative of historical operating results, and
we do not intend them to be predictive of future results of
operations or cash flows.
|
Three months
ended
|
|
March
31,
2016
|
December
31,
2015
|
March
31,
2015
|
Consolidated:
|
|
|
|
Operating income
(loss)..............................................................................
|
$ 364,889
|
$ 244,935
|
$ (64,156)
|
Add:
|
|
|
|
Goodwill and other
intangible asset impairment
charges......................
|
77,000
|
206,169
|
─
|
Hospice
accrual....................................................................................
|
16,000
|
─
|
─
|
Pharmacy
accrual.................................................................................
|
─
|
22,530
|
─
|
Settlement
charge.................................................................................
|
─
|
─
|
495,000
|
Adjusted operating
income.........................................................................
|
$ 457,889
|
$ 473,634
|
$ 430,844
|
|
|
|
|
U.S. dialysis and
related lab services reportable segment:
|
|
|
|
Segment operating
income
(loss)................................................................
|
$ 440,055
|
$ 464,378
|
$ (104,489)
|
Add: Settlement
charge...............................................................................
|
—
|
—
|
495,000
|
Adjusted operating
income.........................................................................
|
$ 440,055
|
$ 464,378
|
$ 390,511
|
|
|
|
|
HCP reportable
segment:
|
|
|
|
Segment operating
(loss)
income................................................................
|
$ (57,145)
|
$ (181,263)
|
$ 60,294
|
Add:
|
|
|
|
Hospice
accrual....................................................................................
|
16,000
|
—
|
—
|
Goodwill and other
intangible asset impairment
charges......................
|
77,000
|
206,169
|
—
|
Adjusted operating
income.........................................................................
|
$ 35,855
|
$ 24,906
|
$ 60,294
|
Depreciation and
amortization.....................................................................
|
46,263
|
44,229
|
43,279
|
Adjusted
EBITDA......................................................................................
|
$ 82,118
|
$ 69,135
|
$ 103,573
|
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
3. Effective income tax rates and adjusted
effective income tax rates.
We believe that reporting the effective income tax rate
attributable to DaVita HealthCare Partners Inc. as well as the
adjusted effective income tax rate attributable to DaVita
HealthCare Partners Inc., excluding goodwill and other intangible
asset impairment charges, primarily related to certain HCP
reporting units, estimated accruals for damages and liabilities
associated with our HCP Nevada hospice business and our pharmacy
business, and a settlement charge related to a private civil suit,
enhances an investor's understanding of DaVita HealthCare Partners
Inc.'s effective income tax rate and DaVita HealthCare Partners
Inc.'s adjusted effective income tax rate for the periods presented
because it excludes noncontrolling owners' income that primarily
relates to non-tax paying entities and these unusual amounts, and,
therefore, are meaningful to an investor to fully understand the
related income tax effects on DaVita HealthCare Partners Inc.'s
operating results. These are not measures under GAAP and should not
be considered as an alternative to the effective income tax rate
calculated in accordance with GAAP.
Effective income tax rate as compared to the effective income
tax rate attributable to DaVita HealthCare Partners Inc. is as
follows:
|
Three months
ended
|
|
|
|
March
31,
2016
|
December
31,
2015
|
March
31,
2015
|
|
|
|
|
Income (loss) before
income
taxes.........................................................
|
$ 264,981
|
$ 146,307
|
$ (162,081)
|
Income tax expense
(benefit)..................................................................
|
$ 126,822
|
$ 111,833
|
$ (85,933)
|
Effective income tax
rate.........................................................................
|
47.9%
|
76.4%
|
53.0%
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
March
31, 2016
|
December
31, 2015
|
March
31, 2015
|
Income (loss) before
income
taxes.........................................................
|
$ 264,981
|
$ 146,307
|
$ (162,081)
|
Less:
Noncontrolling owners' income primarily attributable to
non-tax paying
entities.................................................................
|
(40,797)
|
(40,587)
|
(34,536)
|
Income (loss) before
income taxes attributable to DaVita
HealthCare Partners
Inc......................................................................
|
$ 224,184
|
$ 105,720
|
$ (196,617)
|
Income tax expense
(benefit)..................................................................
|
$ 126,822
|
$ 111,833
|
$ (85,933)
|
Less: Income tax
attributable to noncontrolling
interests..................
|
(72)
|
(113)
|
(67)
|
Income tax expense (benefit) attributable to DaVita
HealthCare
Partners Inc.
..........................................................................................
|
$ 126,750
|
$ 111,720
|
$ (86,000)
|
Effective income tax
rate attributable to DaVita HealthCare
Partners Inc.
..........................................................................................
|
56.5%
|
105.7%
|
43.7%
|
|
|
DAVITA HEALTHCARE
PARTNERS INC.
|
RECONCILIATIONS
FOR NON-GAAP MEASURES
|
(unaudited)
|
(dollars in
thousands)
|
|
|
Adjusted effective
income tax rates attributable to DaVita HealthCare Partners Inc.
excluding goodwill and other intangible asset impairment charges,
estimated accruals for damages and liabilities associated
with our HCP Nevada hospice business and our pharmacy business, and
a settlement charge related to a private civil suit:
|
Three months
ended
|
March
31,
2016
|
December
31,
2015
|
March
31,
2015
|
|
|
|
|
Income (loss) before
income
taxes..............................................................
|
$ 264,981
|
$ 146,307
|
$ (162,081)
|
Add:
|
|
|
|
Goodwill and other
intangible asset impairment charges...........
|
77,000
|
206,169
|
─
|
Hospice
accrual..................................................................................
|
16,000
|
─
|
─
|
Pharmacy
accrual..............................................................................
|
─
|
22,530
|
─
|
Settlement
charge..............................................................................
|
─
|
─
|
495,000
|
Less:
Noncontrolling owners' income primarily attributable to non-tax
paying
entities............................................................................
|
(40,797)
|
(40,587)
|
(34,536)
|
Adjusted income
before income taxes attributable to DaVita HealthCare Partners
Inc...........................................................................
|
$ 317,184
|
$ 334,419
|
$ 298,383
|
|
|
|
|
Income tax expense
(benefit).......................................................................
|
$ 126,822
|
$ 111,833
|
$ (85,933)
|
Add:
|
|
|
|
Income taxes
attributable to the goodwill and other intangible asset impairment
charges....................................................
|
─
|
6,647
|
─
|
Income taxes
attributable to the pharmacy accrual...................
|
─
|
1,996
|
─
|
Income taxes
attributable to the settlement
charge....................
|
─
|
─
|
197,747
|
Less: Income tax
attributable to noncontrolling
interests.......................
|
(72)
|
(113)
|
(67)
|
Adjusted income tax
attributable to DaVita HealthCare Partners Inc.
|
$ 126,750
|
$ 120,363
|
$ 111,747
|
Adjusted effective
income tax rate attributable to DaVita HealthCare Partners
Inc...........................................................................
|
40.0%
|
36.0%
|
37.5%
|
DAVITA HEALTHCARE PARTNERS
INC.
RECONCILIATIONS FOR NON-GAAP
MEASURES
(unaudited)
(dollars in
thousands)
4. Free cash flow and adjusted operating cash
flow.
Free cash flow represents net cash provided by operating
activities less distributions to noncontrolling interests and
capital expenditures for routine maintenance and information
technology. We believe free cash flow is a useful adjunct to cash
flow from operating activities and other measurements under GAAP,
since free cash flow is a meaningful measure of our ability to fund
acquisitions and development activities and meet our debt service
requirements. In addition, free cash flow excluding distributions
to noncontrolling interests provides an investor with an
understanding of free cash flows that are attributable to DaVita
HealthCare Partners Inc. We have also presented adjusted operating
cash flow excluding the payments made in the second quarter of 2015
related to the settlement of a private civil suit and in the fourth
quarter of 2014 related to the settlement of the 2010 and 2011 U.S.
Attorney physician relationship investigations, net of tax, in each
case. We believe this measure is meaningful to investors to
understand our operating cash flows that were generated excluding
these unusual payments that were part of the settlements. Free cash
flow and adjusted operating cash flow are not measures of financial
performance under GAAP and should not be considered as an
alternative to cash flows from operating, investing or financing
activities, as an indicator of cash flows or as a measure of
liquidity.
|
Three months
ended
|
|
|
|
March
31,
2016
|
December
31,
2015
|
March
31,
2015
|
Cash provided by
operating
activities...............................................................
|
$ 429,002
|
$ 436,673
|
$ 410,089
|
Less:
Distributions to noncontrolling
interests.................................................
|
(50,409)
|
(48,697)
|
(41,499)
|
Cash provided by
operating activities attributable to DaVita HealthCare
Partners Inc......................................................................................................
|
378,593
|
387,976
|
368,590
|
Less: Expenditures
for routine maintenance and information technology
|
(73,288)
|
(131,769)
|
(49,010)
|
Free cash
flow........................................................................................................
|
$ 305,305
|
$ 256,207
|
$ 319,580
|
|
Rolling 12-Month
Period
|
|
March
31,
2016
|
December
31,
2015
|
March
31,
2015
|
Cash provided by
operating
activities..............................................................
|
$ 1,576,113
|
$ 1,557,200
|
$ 1,450,389
|
Less:
Distributions to noncontrolling
interests................................................
|
(183,545)
|
(174,635)
|
(157,691)
|
Cash provided by
operating activities attributable to DaVita HealthCare Partners
Inc......................................................................................................
|
1,392,568
|
1,382,565
|
1,292,698
|
Less: Expenditures
for routine maintenance and information technology....
|
(351,357)
|
(327,079)
|
(264,633)
|
Free cash
flow.......................................................................................................
|
$ 1,041,211
|
$ 1,055,486
|
$ 1,028,065
|
|
Rolling 12-Months
ended
|
|
March
31,
2016
|
December
31,
2015
|
March
31,
2015
|
Cash provided by
operating
activities.......................................................................................
|
$ 1,576,113
|
$ 1,557,200
|
$ 1,450,389
|
Payment in connection
with the settlement of a private civil
suit.......................................
|
493,775
|
493,775
|
—
|
Payment in connection
with the settlement of the 2010 and 2011 U.S. Attorney physician
relationship
investigations...................................................................................
|
—
|
—
|
410,356
|
Related tax
benefit.......................................................................................................................
|
(190,246)
|
(190,246)
|
(141,487)
|
Adjusted operating
cash
flow.....................................................................................................
|
$ 1,879,642
|
$ 1,860,729
|
$ 1,719,258
|
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP
MEASURES
(unaudited)
(dollars in
thousands)
5. Total care dollars under management.
In California, as a result of
our managed care administrative services agreements with hospitals
and health plans, HCP does not assume the direct financial risk for
institutional (hospital) services in most cases, but is responsible
for managing the care dollars associated with both the professional
(physician) and institutional services being provided for the Per
Member Per Month (PMPM) fee attributable to both professional and
institutional services. In cases where HCP does not assume the
direct financial risk, HCP recognizes the surplus of institutional
revenue less institutional expense as HCP net revenue. In addition
to revenues recognized for financial reporting purposes, HCP
measures its total care dollars under management, which includes
the PMPM fee payable to third parties for institutional services
where HCP manages the care provided to its members by the hospitals
and other institutions, which are not included in GAAP revenues.
HCP uses total care dollars under management as a supplement to
GAAP revenues as it allows HCP to measure profit margins on a
comparable basis across both the global capitation model (where HCP
assumes the full financial risk for all services, including
institutional services) and the risk sharing models (where HCP
operates under managed care administrative services agreements
where HCP does not assume the full risk). HCP believes that
presenting amounts in this manner is useful because it presents its
operations on a unified basis without the complication caused by
models that HCP has adopted in its California market as a result of various
regulations related to the assumption of institutional risk. Total
care dollars under management is not a measure of financial
performance computed in accordance with GAAP and should not be
considered in isolation or as a substitute for revenues calculated
in accordance with GAAP. Total care dollars under management
includes PMPM payments received from third parties that are
recorded net of expenses in our accounting records. The following
table reconciles total care dollars under management to medical
revenues for the periods indicated.
|
Three months
ended
|
|
|
|
March
31,
2016
|
December
31,
2015
|
March
31,
2015
|
Medical
revenues...................................................................................................
|
$ 974,328
|
$ 925,764
|
$ 912,588
|
Less: Risk share
revenue,
net...............................................................................
|
(28,402)
|
(44,134)
|
(12,956)
|
Add: Institutional
capitation
amounts...............................................................
|
321,776
|
331,736
|
333,108
|
Total care dollars
under
management...............................................................
|
$ 1,267,702
|
$ 1,213,366
|
$ 1,232,740
|
Contact:
Jim
Gustafson
Investor Relations
DaVita HealthCare Partners Inc.
(310) 536-2585
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SOURCE DaVita HealthCare Partners Inc.