DENVER, Aug. 8, 2016 /PRNewswire/ -- DaVita HealthCare
Partners Inc. (NYSE: DVA) today announced results for the quarter
ended June 30, 2016. Net income
attributable to DaVita HealthCare Partners Inc. for the three
months ended June 30, 2016 was
$53 million, or $0.26 per share, which included goodwill
impairment charges related to certain HCP reporting units, a gain
on the partial sale of HCP's Tandigm Health (Tandigm) ownership
interest and a loss on the sale of our HCP Arizona business as
discussed below. Adjusted net income attributable to DaVita
HealthCare Partners Inc. for the three months ended June 30, 2016 excluding these items was
$210 million, or $1.01 per share.
Net income attributable to DaVita HealthCare Partners Inc. for
the six months ended June 30, 2016
was $151 million, or $0.73 per share, which included goodwill
impairment charges related to certain HCP reporting units, a gain
on the partial sale of HCP's Tandigm ownership interest, a loss on
the sale of our HCP Arizona business, and an estimated accrual for
damages and liabilities associated with our HCP Nevada hospice
business. Adjusted net income attributable to DaVita HealthCare
Partners Inc. for the six months ended June
30, 2016 excluding these items was $400 million, or $1.93 per share.
Additionally, adjusted net income attributable to DaVita
HealthCare Partners Inc. for the three and six months ended
June 30, 2016, excluding the items
listed above from their respective periods and excluding the
amortization of intangible assets associated with acquisitions, was
$238 million, or $1.14 per share, and $452
million, or $2.17 per share,
respectively.
Net income attributable to DaVita HealthCare Partners Inc. for
the three months ended June 30, 2015
was $170 million, or $0.78 per share, including debt redemption
charges, a tax adjustment related to the settlement of a private
civil suit and a goodwill impairment charge related to our
international operations. Adjusted net income attributable to
DaVita HealthCare Partners Inc. for the three months ended
June 30, 2015 excluding these items
was $211 million, or $0.97 per share.
Net income attributable to DaVita HealthCare Partners Inc. for
the six months ended June 30, 2015
was $60 million, or $0.27 per share, including debt redemption
charges, a settlement charge related to a private civil suit and a
subsequent related tax adjustment, and a goodwill impairment charge
related to our international operations. Adjusted net income
attributable to DaVita HealthCare Partners Inc. for the six months
ended June 30, 2015 excluding these
items was $398 million, or
$1.83 per share.
Additionally, adjusted net income attributable to DaVita
HealthCare Partners Inc. for the three and six months ended
June 30, 2015, excluding the items
listed above from their respective periods and excluding the
amortization of intangible assets associated with acquisitions, was
$237 million, or $1.09 per share and $450
million, or $2.07 per share,
respectively.
See schedules of reconciliations of non-GAAP measures.
Financial and operating highlights include:
- Cash Flow: For the rolling twelve months ended
June 30, 2016, operating cash flow
was $2,061 million and free cash flow
was $1,509 million. For the three
months ended June 30, 2016, operating
cash flow was $517 million and free
cash flow was $391 million. For the
definition of free cash flow, see Note 4 to the reconciliation of
Non-GAAP measures.
- Operating Income and Adjusted Operating Income:
Operating income for the three months ended June 30, 2016 was $329
million, which included goodwill impairment charges, a gain
on the partial sale of Tandigm and a loss on the sale of HCP
Arizona. Adjusted operating income for the three months ended
June 30, 2016 excluding these items
was $475 million. Operating income
for the six months ended June 30,
2016 was $694 million
including goodwill impairment charges, a gain on the partial sale
of Tandigm, a loss on the sale of HCP Arizona, and the estimated
HCP Nevada hospice accrual. Adjusted operating income for the six
months ended June 30, 2016 excluding
these items was $933 million.
Operating income for the three months ended June 30, 2015 was $481
million, which included a goodwill impairment charge related
to our international operations. Adjusted operating income for
the three months ended June 30, 2015
excluding this item was $485 million.
Operating income for the six months ended June 30, 2015 was $416
million including a settlement charge related to a private
civil suit and the goodwill impairment charge discussed above.
Adjusted operating income for the six months ended June 30, 2015 excluding these items was
$915 million.
- Gain on Sales of Business Interests: Effective
June 30, 2016, we sold a portion of
HCP's ownership interest in the Tandigm joint venture, reducing our
ownership from fifty percent to nineteen percent and resulting in a
gain of $40 million, or $25 million net of tax. In addition, on
June 1, 2016, we sold our HCP
Arizona business for a loss of $10
million, or $6 million net of
tax.
- Goodwill Impairment Charge: As a result of changes
in expected future government reimbursement rates (including the
Medicare Advantage final benchmark rates for 2017 announced on
April 4, 2016) and our expected
ability to mitigate them, as well as underperformance in recent
quarters, we have recognized additional goodwill impairment charges
of $176 million for two of our HCP
reporting units based on further valuation analyses during the
quarter ended June 30, 2016.
- Volume: Total U.S. dialysis treatments for the
second quarter of 2016 were 6,745,610, or 86,482 treatments per
day, representing a per day increase of 4.4% over the second
quarter of 2015. Normalized non-acquired treatment growth in the
second quarter of 2016 as compared to the second quarter of 2015
was 4.3%.
The number of member months for which HCP provided care during the
second quarter of 2016 was approximately 2.3 million, of which 1.0
million, 1.0 million and 0.3 million related to Medicare,
commercial and Medicaid members, respectively.
- Effective Tax Rate: Our effective tax rate was
58.8% and 52.9% for the three and six months ended June 30, 2016, respectively. The effective tax
rate attributable to DaVita HealthCare Partners Inc. was 71.6% and
63.4% for the three and six months ended June 30, 2016. Our effective tax rate for the
three and six months ended June 30,
2016 was impacted by the non-deductible goodwill impairment
charges, the loss on the sale of our HCP Arizona business, and the
amount of third-party owners' income attributable to non-tax paying
entities. Additionally, the effective tax rate for the six months
ended June 30, 2016 was impacted by
the non-deductible HCP Nevada hospice accrual. The adjusted
effective tax rate attributable to DaVita HealthCare Partners Inc.
for the three and six months ended June 30,
2016, excluding these items from their respective periods
was 37.2% and 38.5%, respectively. The decrease in the effective
tax rate compared to our prior quarter of 40.0% is due to
recognition of a state income tax benefit resulting from changes in
the relative allocation of income among jurisdictions.
We are updating our estimate of 2016 effective tax rate
attributable to DaVita HealthCare Partners Inc. to now be
approximately 39.0% to 40.0%, excluding goodwill impairment charges
and the estimated HCP Nevada hospice accrual. Our previous expected
2016 effective tax rate attributable to DaVita HealthCare Partners
Inc. excluding these items was 39.5% to 40.5%.
- Center Activity: As of June
30, 2016, we provided dialysis services to a total of
approximately 196,000 patients at 2,420 outpatient dialysis
centers, of which 2,293 centers were located in the United States and 127 centers were located
in 11 countries outside of the United
States. During the second quarter of 2016, we opened a total
of 15 new dialysis centers, acquired four dialysis centers and
closed three dialysis centers in the
United States. We also acquired two dialysis centers and
opened one new dialysis center outside of the United States.
- Share Repurchases: During the first six months 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. On
July 13, 2016, our Board of Directors
approved an additional share repurchase authorization in the amount
of $1,241 million. This recently
approved share repurchase is in addition to the approximately
$259 million remaining under our
Board of Directors' prior share repurchase authorization announced
on April 14, 2015. As a result, we
now have a total of $1.500 billion in
outstanding authorizations available for share repurchases. These
share repurchase authorizations have no expiration dates.
Outlook
These forward-looking measures and the
underlying assumptions involve significant risks and uncertainties,
including those described below, and actual results may vary
significantly from these current forward-looking measures. We do
not provide guidance for GAAP consolidated operating income or HCP
operating income or a reconciliation of those forward-looking
non-GAAP financial measures to the most directly comparable GAAP
financial measures on a forward-looking basis because we are unable
to predict certain items contained in the GAAP measures without
unreasonable efforts. These non-GAAP financial measures do not
include certain items, including goodwill impairment charges, the
gain on the partial sale of Tandigm, the loss on the sale of HCP
Arizona, the estimated accrual associated with the HCP Nevada
hospice business, any accelerated amortization of HCP-related trade
names and any gain we may recognize associated with the formation
of the Asia Pacific dialysis joint
venture and the expected deconsolidation.
- We are updating our adjusted consolidated operating income
guidance for 2016 to be in the range of $1.785 billion to $1.875 billion.
Our previous adjusted consolidated operating income guidance for
2016 was in the range of $1.800 billion to
$1.950 billion.
- We are updating our operating income guidance for Kidney Care
for 2016 to be in the range of $1.675
billion to $1.725 billion.
Our previous operating income guidance for Kidney Care for 2016 was
in the range of $1.625 billion to $1.725
billion.
- We are updating our adjusted operating income guidance for HCP
for 2016 to be in the range of $110
million to $150 million.
Our previous adjusted operating income guidance for HCP for 2016
was in the range of $175 million to $225
million.
- We are updating our consolidated operating cash flow for 2016
to be in the range of $1.600 billion to $1.750 billion.
Our previous consolidated operating cash flow for 2016 was in the
range of $1.550 billion to $1.750
billion.
We will be holding a conference call to discuss our results for
the second quarter ended June 30,
2016 on August 8, 2016 at
5:00 p.m. Eastern Time. To join the
conference call, please dial (877) 918-6630 from the U.S. or (517)
308-9087 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,
- 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, or to businesses outside of dialysis and HCP
business,
- 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 INCOME
(unaudited)
(dollars in thousands, except per
share data)
|
Three months
ended
|
Six months
ended
|
|
June
30,
|
June
30,
|
|
2016
|
2015
|
2016
|
2015
|
Patient service
revenues...............................................................................................................................................................................................................
|
$
2,570,654
|
$
2,363,579
|
$5,048,392
|
$
4,635,394
|
Less: Provision for
uncollectible
accounts................................................................................................................................................................................
|
(111,428)
|
(105,965)
|
(220,633)
|
(205,129)
|
Net patient service
revenues.............................................................................................................................................................................................
|
2,459,226
|
2,257,614
|
4,827,759
|
4,430,265
|
Capitated
revenues.......................................................................................................................................................................................................................
|
897,826
|
866,190
|
1,784,873
|
1,716,705
|
Other
revenues...............................................................................................................................................................................................................................
|
360,599
|
310,814
|
686,155
|
575,613
|
Total net
revenues..............................................................................................................................................................................................................
|
3,717,651
|
3,434,618
|
7,298,787
|
6,722,583
|
Operating expenses
and charges:
|
|
|
|
|
Patient care costs and
other
costs....................................................................................................................................................................................
|
2,671,025
|
2,446,076
|
5,253,358
|
4,808,688
|
General and
administrative...............................................................................................................................................................................................
|
386,895
|
347,960
|
773,324
|
689,761
|
Depreciation and
amortization........................................................................................................................................................................................
|
180,381
|
158,843
|
349,736
|
312,632
|
Provision for
uncollectible
accounts................................................................................................................................................................................
|
3,566
|
2,159
|
6,083
|
3,986
|
Equity investment loss
(income)......................................................................................................................................................................................
|
505
|
(5,033)
|
(882)
|
(7,941)
|
Goodwill impairment
charges...........................................................................................................................................................................................
|
176,000
|
4,065
|
253,000
|
4,065
|
Gain on sales of
business interests,
net...........................................................................................................................................................................
|
(29,791)
|
—
|
(29,791)
|
—
|
Settlement
charge...............................................................................................................................................................................................................
|
—
|
—
|
—
|
495,000
|
Total operating
expenses and
charges.................................................................................................................................................................
|
3,388,581
|
2,954,070
|
6,604,828
|
6,306,191
|
Operating
income..........................................................................................................................................................................................................................
|
329,070
|
480,548
|
693,959
|
416,392
|
Debt
expense..................................................................................................................................................................................................................................
|
(102,894)
|
(104,248)
|
(205,778)
|
(201,640)
|
Debt redemption
charges.............................................................................................................................................................................................................
|
—
|
(48,072)
|
—
|
(48,072)
|
Other income,
net..........................................................................................................................................................................................................................
|
3,215
|
2,311
|
6,191
|
1,778
|
Income before income
taxes.......................................................................................................................................................................................................
|
229,391
|
330,539
|
494,372
|
168,458
|
Income tax
expense......................................................................................................................................................................................................................
|
134,888
|
122,762
|
261,710
|
36,829
|
Net
income......................................................................................................................................................................................................................................
|
94,503
|
207,777
|
232,662
|
131,629
|
Less: Net income
attributable to noncontrolling
interests...........................................................................................................................................
|
(41,121)
|
(37,300)
|
(81,846)
|
(71,769)
|
Net income
attributable to DaVita HealthCare Partners
Inc................................................................................................................................................
|
$
53,382
|
$
170,477
|
$
150,816
|
$
59,860
|
Earnings per
share:
|
|
|
|
|
Basic net income per
share attributable to DaVita HealthCare Partners
Inc..........................................................................................................
|
$
0.26
|
$
0.80
|
$
0.74
|
$
0.28
|
Diluted net income per
share attributable to DaVita HealthCare Partners
Inc.......................................................................................................
|
$
0.26
|
$
0.78
|
$
0.73
|
$
0.27
|
Weighted average
shares for earnings per share:
|
|
|
|
|
Basic......................................................................................................................................................................................................................................
|
204,497,970
|
212,991,606
|
204,432,315
|
213,188,268
|
Diluted...................................................................................................................................................................................................................................
|
208,047,172
|
217,606,198
|
207,987,530
|
217,790,617
|
DAVITA HEALTHCARE PARTNERS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
(unaudited)
(dollars in
thousands)
|
Three months
ended
|
Six months
ended
|
|
June
30,
|
June
30,
|
|
2016
|
2015
|
2016
|
2015
|
Net
income...........................................................................................................................................................................
|
$
94,503
|
$
207,777
|
$
232,662
|
$
131,629
|
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...........................................................................
|
(2,616)
|
(2,453)
|
(8,085)
|
(8,213)
|
Reclassifications of
net swap and cap agreements realized losses into net
income....................................
|
448
|
789
|
913
|
1,601
|
Unrealized gains
(losses) on investments:
|
|
|
|
|
Unrealized gains
(losses) on
investments.............................................................................................................
|
638
|
(99)
|
867
|
283
|
Reclassification of
net investment realized gains into net
income.................................................................
|
—
|
(16)
|
(93)
|
(173)
|
Foreign currency
translation
adjustments......................................................................................................................
|
(4,844)
|
5,025
|
6,337
|
(12,860)
|
Other comprehensive
(loss)
income......................................................................................................................
|
(6,374)
|
3,246
|
(61)
|
(19,362)
|
Total comprehensive
income...........................................................................................................................................
|
88,129
|
211,023
|
232,601
|
112,267
|
Less: Comprehensive
income attributable to noncontrolling
interests...........................................................
|
(41,270)
|
(37,300)
|
(81,995)
|
(71,769)
|
Comprehensive income
attributable to DaVita HealthCare Partners
Inc................................................................
|
$
46,859
|
$
173,723
|
$
150,606
|
$
40,498
|
DAVITA HEALTHCARE PARTNERS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
|
Six months
ended
|
|
June
30,
|
|
2016
|
2015
|
Cash flows from
operating activities:
|
|
|
Net
income..........................................................................................................................................................
|
$
232,662
|
$
131,629
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Settlement
charge.....................................................................................................................................
|
—
|
495,000
|
Settlement
payments.................................................................................................................................
|
—
|
(493,775)
|
Depreciation and
amortization..................................................................................................................
|
349,736
|
312,632
|
Debt redemption
charges..........................................................................................................................
|
—
|
48,072
|
Goodwill impairment
charges..................................................................................................................
|
253,000
|
4,065
|
Stock-based
compensation
expense.........................................................................................................
|
23,717
|
28,299
|
Tax benefits from
stock award
exercises..................................................................................................
|
23,658
|
28,040
|
Excess tax benefits
from stock award
exercises.......................................................................................
|
(10,604)
|
(16,913)
|
Deferred income
taxes..............................................................................................................................
|
19,952
|
4,418
|
Equity investment
income,
net..................................................................................................................
|
14,275
|
5,257
|
Gain on sales of
business interests,
net....................................................................................................
|
(29,791)
|
—
|
Other non-cash
charges............................................................................................................................
|
23,120
|
20,653
|
Changes in operating
assets and liabilities, other than from acquisitions and
divestitures:
|
|
|
Accounts
receivable.................................................................................................................................
|
(104,005)
|
(142,950)
|
Inventories...............................................................................................................................................
|
(9,213)
|
(22,780)
|
Other receivables and
other current
assets................................................................................................
|
(107,610)
|
(50,362)
|
Other long-term
assets.............................................................................................................................
|
(431)
|
378
|
Accounts
payable.....................................................................................................................................
|
22,809
|
50,823
|
Accrued compensation
and
benefits.........................................................................................................
|
41,098
|
(26,316)
|
Other current
liabilities.............................................................................................................................
|
112,825
|
177,733
|
Income
taxes............................................................................................................................................
|
121,972
|
(109,460)
|
Other long-term
liabilities.........................................................................................................................
|
(31,531)
|
(2,912)
|
Net cash provided by
operating
activities......................................................................................
|
945,639
|
441,531
|
Cash flows from
investing activities:
|
|
|
Additions of property
and
equipment.......................................................................................................
|
(358,627)
|
(290,873)
|
Acquisitions.............................................................................................................................................
|
(473,314)
|
(45,059)
|
Proceeds from asset
and business
sales...................................................................................................
|
17,393
|
3,415
|
Purchase of
investments available for
sale...............................................................................................
|
(7,873)
|
(3,872)
|
Purchase of
investments
held-to-maturity................................................................................................
|
(518,965)
|
(1,039,632)
|
Proceeds from sale of
investments available for
sale................................................................................
|
5,337
|
1,550
|
Proceeds from
investments
held-to-maturity............................................................................................
|
545,685
|
434,684
|
Purchase of equity
investments................................................................................................................
|
(8,785)
|
(7,550)
|
Proceeds from sale of
equity
investments................................................................................................
|
40,920
|
—
|
Net cash used in
investing
activities..............................................................................................
|
(758,229)
|
(947,337)
|
Cash flows from
financing activities:
|
|
|
Borrowings..............................................................................................................................................
|
26,134,952
|
28,144,986
|
Payments on long-term
debt and other financing
costs............................................................................
|
(26,196,185)
|
(27,476,994)
|
Deferred financing and
debt redemption
costs.........................................................................................
|
(188)
|
(58,539)
|
Purchase of treasury
stock.......................................................................................................................
|
(274,926)
|
(84,113)
|
Distributions to
noncontrolling
interests..................................................................................................
|
(94,153)
|
(79,040)
|
Stock award exercises
and other share issuances,
net..............................................................................
|
9,465
|
4,680
|
Excess tax benefits
from stock award
exercises.......................................................................................
|
10,604
|
16,913
|
Contributions from
noncontrolling
interests.............................................................................................
|
13,117
|
18,040
|
Purchase of
noncontrolling
interests........................................................................................................
|
(6,240)
|
(10,840)
|
Net cash (used in)
provided by financing
activities.......................................................................
|
(403,554)
|
475,093
|
Effect of exchange
rate changes on cash and cash
equivalents............................................................................
|
444
|
(793)
|
Net decrease in cash
and cash
equivalents..........................................................................................................
|
(215,700)
|
(31,506)
|
Cash and cash
equivalents at beginning of the
year............................................................................................
|
1,499,116
|
965,241
|
Cash and cash
equivalents at end of the
period...................................................................................................
|
$
1,283,416
|
$
933,735
|
DAVITA HEALTHCARE PARTNERS INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except per share data)
|
June
30,
|
December
31,
|
|
2016
|
2015
|
ASSETS
|
|
|
Cash and cash
equivalents.................................................................................................................................
|
$
1,283,416
|
$
1,499,116
|
Short-term
investments.......................................................................................................................................
|
394,166
|
408,084
|
Accounts receivable,
less allowance of $279,429 and
$264,144...............................................................
|
1,875,403
|
1,724,228
|
Inventories.............................................................................................................................................................
|
197,388
|
185,575
|
Other
receivables..................................................................................................................................................
|
558,081
|
435,885
|
Other current
assets..............................................................................................................................................
|
187,763
|
190,322
|
Income taxes
receivable.....................................................................................................................................
|
—
|
60,070
|
Total current
assets...................................................................................................................................
|
4,496,217
|
4,503,280
|
Property and
equipment, net of accumulated depreciation of $2,622,476 and
$2,397,007................
|
2,972,407
|
2,788,740
|
Intangible assets,
net of accumulated amortization of $852,860 and
$770,691....................................
|
1,631,001
|
1,687,326
|
Equity
investments..............................................................................................................................................
|
64,420
|
73,368
|
Long-term
investments.......................................................................................................................................
|
102,374
|
94,122
|
Other long-term
assets.........................................................................................................................................
|
64,254
|
73,560
|
Goodwill.................................................................................................................................................................
|
9,360,957
|
9,294,479
|
|
$
18,691,630
|
$
18,514,875
|
LIABILITIES AND
EQUITY
|
|
|
Accounts
payable................................................................................................................................................
|
$
504,353
|
$
513,950
|
Other
liabilities......................................................................................................................................................
|
840,745
|
682,123
|
Accrued compensation
and
benefits................................................................................................................
|
807,135
|
741,926
|
Medical
payables.................................................................................................................................................
|
300,564
|
332,102
|
Current portion of
long-term
debt.....................................................................................................................
|
144,183
|
129,037
|
Income taxes
payable.........................................................................................................................................
|
48,682
|
—
|
Total current
liabilities..............................................................................................................................
|
2,645,662
|
2,399,138
|
Long-term
debt.....................................................................................................................................................
|
8,957,257
|
9,001,308
|
Other long-term
liabilities....................................................................................................................................
|
420,776
|
439,229
|
Deferred income
taxes........................................................................................................................................
|
772,329
|
726,962
|
Total
liabilities............................................................................................................................................
|
12,796,024
|
12,566,637
|
Commitments and
contingencies:
|
|
|
Noncontrolling
interests subject to put
provisions...............................................................................
|
936,903
|
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 206,904,375 and 209,754,247 shares
outstanding,
respectively)..........................................................................................................................................
|
217
|
217
|
Additional paid-in
capital........................................................................................................................
|
1,047,820
|
1,118,326
|
Retained
earnings......................................................................................................................................
|
4,507,651
|
4,356,835
|
Treasury stock
(10,434,254 and 7,366,099 shares,
respectively)....................................................
|
(749,598)
|
(544,772)
|
Accumulated other
comprehensive
loss................................................................................................
|
(60,036)
|
(59,826)
|
Total DaVita
HealthCare Partners Inc. shareholders'
equity.................................................
|
4,746,054
|
4,870,780
|
Noncontrolling
interests not subject to put
provisions........................................................................
|
212,649
|
213,392
|
Total
equity................................................................................................................................................
|
4,958,703
|
5,084,172
|
|
$
18,691,630
|
$
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
|
Six months
ended
June 30,
2016
|
|
|
|
June
30,
2016
|
March
31, 2016
|
June
30,
2015
|
1. Consolidated
Financial Results:
|
|
|
|
|
Consolidated net
revenues............................................................................................
|
$
3,718
|
$
3,581
|
$
3,435
|
$
7,299
|
Operating
income.........................................................................................................
|
$
329
|
$
365
|
$
481
|
$
694
|
Adjusted operating
income excluding certain
items(1)..................................................
|
$
475
|
$
458
|
$
485
|
$
933
|
Operating income
margin.............................................................................................
|
8.8%
|
10.2%
|
14.0%
|
9.5%
|
Adjusted operating
income margin excluding certain items(1)
(5)..................................
|
12.8%
|
12.8%
|
14.1%
|
12.8%
|
Net income
attributable to DaVita HealthCare Partners Inc.
........................................
|
$
53
|
$
97
|
$
170
|
$
151
|
Adjusted net income
attributable to DaVita HealthCare Partners Inc. excluding certain
items(1).........................................................................................................
|
$
210
|
$
190
|
$
211
|
$
400
|
Diluted net income per
share attributable to DaVita HealthCare Partners Inc.
.............
|
$
0.26
|
$
0.47
|
$
0.78
|
$
0.73
|
Adjusted diluted net
income per share attributable to DaVita HealthCare Partners Inc.
excluding certain
items(1)........................................................................................
|
$
1.01
|
$
0.92
|
$
0.97
|
$
1.93
|
|
|
|
|
|
2. Consolidated
Business Metrics:
|
|
|
|
|
Expenses
|
|
|
|
|
General and
administrative expenses as a percent of consolidated net
revenues(2)
|
10.4%
|
10.8%
|
10.1%
|
10.6%
|
Consolidated effective
tax rate
..............................................................................
|
58.8%
|
47.9%
|
37.1%
|
52.9%
|
Consolidated effective
tax rate attributable to DaVita HealthCare Partners
Inc.(1) .
|
71.6%
|
56.5%
|
41.8%
|
63.4%
|
Adjusted consolidated
effective tax rate attributable to DaVita HealthCare Partners
Inc.(1)..................................................................................................
|
37.2%
|
40.0%
|
38.7%
|
38.5%
|
|
|
|
|
|
3. Summary of
Division Financial Results:
|
|
|
|
|
Net
revenues
|
|
|
|
|
Kidney
Care:
|
|
|
|
|
Net U.S. dialysis and
related lab services
revenues............................................
|
$
2,264
|
$
2,227
|
$
2,154
|
$
4,492
|
Net ancillary services
and strategic initiatives revenues, including international
dialysis
operations.........................................................................................
|
423
|
391
|
334
|
814
|
Elimination of
intersegment
revenues.................................................................
|
(29)
|
(26)
|
(19)
|
(55)
|
Total Kidney Care net
revenues..................................................................
|
2,658
|
2,592
|
2,469
|
5,251
|
Net HCP
revenues.................................................................................................
|
1,060
|
989
|
966
|
2,048
|
Total net consolidated
revenues..................................................................
|
$
3,718
|
$
3,581
|
$
3,435
|
$
7,299
|
Operating
income
|
|
|
|
|
Kidney
Care:
|
|
|
|
|
U.S. Dialysis and
related lab services operating
income.....................................
|
$
449
|
$
440
|
$
438
|
$
889
|
Other – Ancillary
services and strategic initiatives, including international
dialysis operations operating
loss..................................................................
|
(13)
|
(11)
|
(26)
|
(24)
|
Corporate support and
related long-term incentive
compensation.......................
|
(5)
|
(7)
|
(3)
|
(12)
|
Total Kidney Care
operating
income...........................................................
|
431
|
422
|
409
|
853
|
HCP operating (loss)
income.................................................................................
|
(102)
|
(57)
|
72
|
(159)
|
Total consolidated
operating
income..........................................................
|
$
329
|
$
365
|
$
481
|
$
694
|
DAVITA HEALTHCARE PARTNERS INC.
SUPPLEMENTAL FINANCIAL
DATA—continued
(unaudited)
(dollars in
millions, except for per share and per treatment data)
|
Three months
ended
|
Six months
ended
June 30,
2016
|
|
|
|
June
30,
2016
|
March
31,
2016
|
June
30,
2015
|
4. Summary of
Reportable Segment Financial Results:
|
|
|
|
|
U.S. Dialysis
and Related Lab Services
|
|
|
|
|
Revenue:
|
|
|
|
|
Patient services
revenues................................................................................
|
$
2,367
|
$
2,328
|
$
2,252
|
$
4,695
|
Provision for
uncollectible
accounts.............................................................
|
(107)
|
(105)
|
(101)
|
(211)
|
Net patient service
operating
revenues................................................
|
2,260
|
2,223
|
2,151
|
4,484
|
Other
revenues..................................................................................................
|
4
|
4
|
3
|
8
|
Total net operating
revenues.................................................................
|
$
2,264
|
$
2,227
|
$
2,154
|
$
4,492
|
Operating
expenses:
|
|
|
|
|
Patient care
costs.............................................................................................
|
$
1,515
|
$
1,496
|
$
1,436
|
$
3,012
|
General and
administrative............................................................................
|
185
|
179
|
174
|
364
|
Depreciation and
amortization.....................................................................
|
119
|
116
|
110
|
236
|
Equity investment
income.............................................................................
|
(4)
|
(4)
|
(4)
|
(9)
|
Total operating
expenses........................................................................
|
1,815
|
1,787
|
1,716
|
3,603
|
Segment operating
income.............................................................................
|
$
449
|
$
440
|
$
438
|
$
889
|
|
|
|
|
|
HCP
|
|
|
|
|
Revenue:
|
|
|
|
|
HCP capitated
revenues.................................................................................
|
$
874
|
$
866
|
$
848
|
$
1,740
|
Patient services
revenues................................................................................
|
160
|
112
|
86
|
274
|
Provision for
uncollectible
accounts.............................................................
|
(4)
|
(4)
|
(4)
|
(9)
|
Net patient service
operating
revenues................................................
|
156
|
108
|
82
|
265
|
Other
revenues..................................................................................................
|
30
|
15
|
36
|
43
|
Total net operating
revenues.................................................................
|
$
1,060
|
$
989
|
$
966
|
$
2,048
|
Operating
expenses:
|
|
|
|
|
Patient care
costs.............................................................................................
|
$
840
|
$
794
|
$
750
|
$
1,633
|
General and
administrative............................................................................
|
118
|
127
|
102
|
244
|
Depreciation and
amortization.....................................................................
|
54
|
46
|
43
|
100
|
Goodwill impairment
charges........................................................................
|
176
|
77
|
─
|
253
|
Gain on sales of
business interests,
net........................................................
|
(30)
|
─
|
─
|
(30)
|
Equity investment
(income)
loss...................................................................
|
4
|
2
|
(1)
|
7
|
Total operating
expenses........................................................................
|
1,162
|
1,046
|
894
|
2,207
|
Segment operating
(loss)
income..................................................................
|
$
(102)
|
$
(57)
|
$
72
|
$
(159)
|
Reconciliation
for non-GAAP measure:
|
|
|
|
|
Add:
|
|
|
|
|
Goodwill impairment
charges.................................................................
|
176
|
77
|
─
|
253
|
Hospice
accrual.........................................................................................
|
─
|
16
|
─
|
16
|
Gain on sales of
business interests, net
|
|
|
|
|
Gain on sale of
Tandigm.........................................................................
|
(40)
|
─
|
─
|
(40)
|
Loss on sale of HCP
Arizona..................................................................
|
10
|
─
|
─
|
10
|
Adjusted segment
operating
income(1).........................................................
|
$
44
|
$
36
|
$
72
|
$
80
|
DAVITA HEALTHCARE PARTNERS
INC.
SUPPLEMENTAL FINANCIAL
DATA—continued
(unaudited)
(dollars in
millions, except for per share and per treatment data)
|
Three months
ended
|
Six months
ended
June 30,
2016
|
|
|
|
|
|
June
30,
2016
|
March
31,
2016
|
June
30,
2015
|
5. U.S.
Dialysis and Related Lab Services Business
Metrics:
|
|
|
|
|
Volume
|
|
|
|
|
Treatments..............................................................................................................................
|
6,745,610
|
6,639,874
|
6,463,058
|
13,385,484
|
Number of treatment
days.......................................................................................................
|
78.0
|
77.9
|
78.0
|
155.9
|
Treatments per
day...............................................................................................................
|
86,482
|
85,236
|
82,860
|
85,859
|
Per day year over year
increase..........................................................................................
|
4.4%
|
4.3%
|
4.3%
|
4.3%
|
Normalized
non-acquired growth year over
year............................................................
|
4.3%
|
4.1%
|
3.7%
|
4.2%
|
Operating
revenues before provision for uncollectible
accounts
|
|
|
|
|
Dialysis and related
lab services revenue per
treatment..............................................
|
$
350.90
|
$
350.60
|
$
348.32
|
$
350.75
|
Per treatment increase
from previous
quarter...............................................................
|
0.1%
|
0.7%
|
0.7%
|
|
Per treatment increase
from previous
year....................................................................
|
0.7%
|
1.4%
|
2.5%
|
1.0%
|
Percent of net
consolidated
revenues.............................................................................
|
60.5%
|
61.8%
|
62.3%
|
61.1%
|
Expenses
|
|
|
|
|
Patient care
costs
|
|
|
|
|
Percent of total
segment operating net
revenues..........................................................
|
66.9%
|
67.2%
|
66.7%
|
67.1%
|
Per
treatment.......................................................................................................................
|
$
224.75
|
$
225.30
|
$
222.17
|
$
225.02
|
Per treatment
(decrease) increase from previous
quarter............................................
|
(0.2%)
|
2.5%
|
(0.4%)
|
|
Per treatment increase
from previous
year....................................................................
|
1.2%
|
1.0%
|
1.4%
|
1.1%
|
General and
administrative expenses
|
|
|
|
|
Percent of total
segment operating net
revenues..........................................................
|
8.2%
|
8.0%
|
8.1%
|
8.1%
|
Per
treatment.......................................................................................................................
|
$
27.37
|
$
26.97
|
$
26.99
|
$
27.17
|
Per treatment increase
(decrease) from previous
quarter............................................
|
1.5%
|
(0.9%)
|
(7.7%)
|
|
Per treatment increase
(decrease) from previous
year.................................................
|
1.4%
|
(7.8%)
|
2.0%
|
(3.3%)
|
Accounts
receivable
|
|
|
|
|
Net
receivables....................................................................................................................
|
$
1,273
|
$
1,297
|
$
1,227
|
|
DSO.......................................................................................................................................
|
52
|
54
|
53
|
|
Provision for
uncollectible accounts as a percentage of
revenues............................
|
4.5%
|
4.5%
|
4.5%
|
4.5%
|
|
|
|
|
|
6. HCP Business
Metrics:
|
|
|
|
|
Capitated
membership
|
|
|
|
|
Total
members.......................................................................................................................
|
761,400
|
787,100
|
826,500
|
|
Total member
months
|
|
|
|
|
Medicare.................................................................................................................................
|
957,400
|
975,300
|
941,900
|
1,932,700
|
Commercial............................................................................................................................
|
1,037,500
|
1,048,600
|
1,134,500
|
2,086,100
|
Medicaid.................................................................................................................................
|
333,000
|
342,500
|
396,000
|
675,500
|
Total member
months....................................................................................................
|
2,327,900
|
2,366,400
|
2,472,400
|
4,694,300
|
Capitated
revenues by sources
|
|
|
|
|
Senior
revenues......................................................................................................................
|
$
638
|
$
648
|
$
623
|
$
1,286
|
Commercial
revenues...........................................................................................................
|
189
|
172
|
177
|
361
|
Medicaid
revenues................................................................................................................
|
47
|
46
|
48
|
93
|
Total capitated
revenues...............................................................................................
|
$
874
|
$
866
|
$
848
|
$
1,740
|
DAVITA HEALTHCARE PARTNERS INC.
SUPPLEMENTAL FINANCIAL
DATA—continued
(unaudited)
(dollars in
millions, except for per share and per treatment data)
|
Three months
ended
|
Six months
ended
June 30,
2016
|
|
June
30,
2016
|
March
31,
2016
|
June
30,
2015
|
6. HCP Business
Metrics: (continued)
|
|
|
|
|
Other
|
|
|
|
|
Total care dollars
under
management(1)..............................................................
|
$
1,323
|
$
1,268
|
$
1,245
|
$
2,591
|
Ratio of operating
(loss) income to total care dollars under
management(1)
|
(7.7%)
|
(4.5%)
|
5.8%
|
(6.1%)
|
Ratio of adjusted
operating income to total care dollars under
management(1)(6).........
|
3.3%
|
2.8%
|
5.8%
|
3.1%
|
Full time
clinicians...................................................................................................
|
1,760
|
1,652
|
1,272
|
|
IPA primary care
physicians..................................................................................
|
2,518
|
2,877
|
2,732
|
|
|
|
|
|
|
7. Cash
Flow:
|
|
|
|
|
Operating cash
flow.................................................................................................
|
$
516.6
|
$
429.0
|
$
31.4
|
$
945.6
|
Operating cash flow,
last twelve
months.............................................................
|
$
2,061.3
|
$
1,576.1
|
$
1,219.4
|
|
Free cash
flow(1).......................................................................................................
|
$
391.3
|
$
305.3
|
$
(76.9)
|
$
696.7
|
Free cash flow, last
twelve
months(1)....................................................................
|
$
1,509.4
|
$
1,041.2
|
$
786.0
|
|
Capital
expenditures:
|
|
|
|
|
Routine
maintenance/IT/other.......................................................................
|
$
81.5
|
$
73.3
|
$
70.8
|
$
154.8
|
Development and
relocations.........................................................................
|
$
103.9
|
$
99.9
|
$
98.7
|
$
203.8
|
Acquisition
expenditures..................................................................................
|
$
68.2
|
$
405.2
|
$
4.4
|
$
473.3
|
|
|
|
|
|
8. Debt and
Capital Structure:
|
|
|
|
|
Total
debt(3)...............................................................................................................
|
$
9,189
|
$
9,210
|
$
9,225
|
|
Net debt, net of cash
and cash
equivalents(3).....................................................
|
$
7,906
|
$
8,168
|
$
8,291
|
|
Leverage ratio (see
calculation on page
15).......................................................
|
2.93x
|
3.07x
|
3.03x
|
|
Overall weighted
average effective interest rate during the
quarter...............
|
4.42%
|
4.40%
|
4.42%
|
|
Overall weighted
average effective interest rate at end of the
quarter..........
|
4.43%
|
4.40%
|
4.38%
|
|
Weighted average
effective interest rate on the Senior Secured Credit Facilities at
end of the
quarter..........................................................................
|
3.52%
|
3.46%
|
3.44%
|
|
Fixed and economically
fixed interest rates as a percentage of our total
debt.......................................................................................................................
|
60%(4)
|
60%(4)
|
61%(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)
|
|
(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 and long-term incentive compensation, as well as
the estimated HCP Nevada hospice accrual for the three months ended
March 31, 2016 and six months ended
June 30, 2016.
(3) The reported balance sheet amounts
at June 30, 2016, March 31, 2016, and June
30, 2015, excludes $87.9
million, $92.0 million and
$96.8 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 $695 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 users to enhance their understanding of the
Company's leverage ratio under its Credit Agreement. The leverage
ratio calculated by the Company is a non-GAAP measure and should
not be considered a substitute for debt to net income attributable
to DaVita HealthCare Partners Inc., net income attributable to
DaVita HealthCare Partners Inc. or total debt as determined in
accordance with United States
generally accepted accounting principles (GAAP). The Company's
calculation of its leverage ratio might not be calculated in the
same manner as, and thus might not be comparable to, similarly
titled measures by other companies.
|
Rolling
twelve
months
ended
June 30,
2016
|
Net income
attributable to DaVita HealthCare Partners
Inc............................................................
|
$
360,688
|
Income
taxes..............................................................................................................................................
|
520,607
|
Interest
expense.........................................................................................................................................
|
384,444
|
Depreciation and
amortization...............................................................................................................
|
675,128
|
Goodwill and other
intangible asset impairment
charges...................................................................
|
459,169
|
Noncontrolling
interests and equity investment income,
net.............................................................
|
188,104
|
Stock-settled
stock-based
compensation..............................................................................................
|
51,628
|
Other
...........................................................................................................................................................
|
(15,373)
|
"Consolidated
EBITDA".................................................................................................................
|
$
2,624,395
|
|
|
|
June 30,
2016
|
Total debt, excluding
debt discount and other deferred financing costs of $87.9
million...........
|
$
9,189,354
|
Letters of credit
issued..............................................................................................................................
|
92,348
|
|
9,281,702
|
Less: Cash and cash
equivalents including short-term investments (excluding HCP's
physician owned entities
cash)..........................................................................................................
|
(1,593,716)
|
Consolidated net
debt...............................................................................................................................
|
$
7,687,986
|
Last twelve months
"Consolidated
EBITDA".....................................................................................
|
$
2,624,395
|
Leverage
ratio............................................................................................................................................
|
2.93x
|
In accordance with the Credit Agreement, the Company's
leverage ratio cannot exceed 5.00 to 1.00 as of June 30, 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 impairment charges, a gain on the partial sale
of Tandigm, a loss on the sale of HCP Arizona, estimated accruals
for our HCP Nevada hospice business, debt redemption charges, a
settlement charge, net of related tax, and a subsequent tax
adjustment related to the settlement charge.
We believe that adjusted net income and adjusted diluted net
income per share attributable to DaVita HealthCare Partners Inc.,
excluding goodwill impairment charges, a gain on the partial sale
of Tandigm, a loss on the sale of HCP Arizona, estimated accruals
for damages and liabilities associated with our HCP Nevada hospice
business, debt redemption charges and a settlement charge related
to a private civil suit, net of related tax, and a subsequent tax
adjustment related to the settlement charge, enhances a user's
understanding of our normal net income attributable to DaVita
HealthCare Partners Inc. and diluted net income per share
attributable to DaVita HealthCare Partners Inc. for these periods
by providing a measure that is meaningful because it excludes
certain items which we do not believe are indicative of our
ordinary results, 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 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 impairment charges, a gain on the partial sale of Tandigm,
a loss on the sale of HCP Arizona, estimated accruals for damages
and liabilities associated with our HCP Nevada hospice
business, debt redemption charges, a settlement charge related to a
private civil suit, net of related tax, and a subsequent tax
adjustment related to the settlement charge:
|
Three months
ended
|
Six months
ended
|
|
June
30,
2016
|
March 31,
2016
|
June
30,
2015
|
June
30,
2016
|
June
30,
2015
|
Net income
attributable to DaVita HealthCare Partners Inc. ........
|
$
53,382
|
$
97,434
|
$
170,477
|
$
150,816
|
$
59,860
|
Add:
|
|
|
|
|
|
Goodwill impairment
charges........................................................
|
176,000
|
77,000
|
4,065
|
253,000
|
4,065
|
Gain on sale of
Tandigm................................................................
|
(40,280)
|
─
|
─
|
(40,280)
|
─
|
Loss on sale of HCP
Arizona........................................................
|
10,489
|
─
|
─
|
10,489
|
─
|
HCP hospice
accrual.......................................................................
|
─
|
16,000
|
─
|
16,000
|
─
|
Debt redemption
charges...............................................................
|
─
|
─
|
48,072
|
─
|
48,072
|
Settlement
charge............................................................................
|
─
|
─
|
─
|
─
|
495,000
|
Tax adjustment related
to the settlement of a private civil
suit.................................................................................................
|
─
|
─
|
7,501
|
─
|
7,501
|
Less: Related
income
tax......................................................................
|
10,414
|
─
|
(18,892)
|
10,414
|
(216,639)
|
|
$
210,005
|
$
190,434
|
$
211,223
|
$
400,439
|
$
397,859
|
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 impairment charges, a gain on the partial
sale of Tandigm, a loss on the sale of HCP Arizona, estimated
accruals for damages and liabilities associated with our HCP Nevada
hospice business, debt redemption charges, a settlement charge
related to a private civil suit and a subsequent tax adjustment
related to the settlement charge:
|
Three months
ended
|
Six months
ended
|
|
June
30,
2016
|
March
31,
2016
|
June
30,
2015
|
June
30,
2016
|
June
30,
2015
|
Diluted net income
per share attributable to DaVita HealthCare Partners
Inc.........................................................................................
|
$
0.26
|
$
0.47
|
$
0.78
|
$
0.73
|
$
0.27
|
Add:
|
|
|
|
|
|
Goodwill impairment
charges.........................................................
|
0.84
|
0.37
|
0.02
|
1.21
|
0.02
|
Gain on sale of
Tandigm.................................................................
|
(0.19)
|
─
|
─
|
(0.19)
|
─
|
Loss on sale of HCP
Arizona..........................................................
|
0.05
|
─
|
─
|
0.05
|
─
|
HCP hospice
accrual........................................................................
|
─
|
0.08
|
─
|
0.08
|
─
|
Debt redemption
charges.................................................................
|
─
|
─
|
0.22
|
─
|
0.22
|
Settlement
charge..............................................................................
|
─
|
─
|
─
|
─
|
2.28
|
Tax adjustment related
to the settlement of a private civil
suit..........................
|
─
|
─
|
0.04
|
─
|
0.04
|
Tax effect of
adjustments...............................................................
|
0.05
|
─
|
(0.09)
|
0.05
|
(1.00)
|
|
$
1.01
|
$
0.92
|
$
0.97
|
$
1.93
|
$
1.83
|
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
associated with acquisitions from our adjusted net income
attributable to DaVita HealthCare Partners Inc., net of tax, 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 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
|
Six months
ended
|
|
June
30,
2016
|
March
31,
2016
|
June
30,
2015
|
June
30,
2016
|
June
30,
2015
|
Adjusted net income
attributable to DaVita HealthCare Partners Inc.
..........................................................................
|
$
210,005
|
$
190,434
|
$
211,223
|
$
400,439
|
$
397,859
|
Add:
|
|
|
|
|
|
Amortization of intangible assets associated with acquisitions for
the dialysis and ancillary
operations........................................................................
|
3,674
|
3,809
|
6,384
|
7,483
|
12,908
|
Amortization of intangible assets associated with acquisitions for
the HCP operations...........................
|
40,296
|
36,078
|
35,838
|
76,374
|
71,716
|
Less: Related income
tax.........................................................
|
(16,269)
|
(15,955)
|
(16,593)
|
(32,224)
|
(32,494)
|
|
$
237,706
|
$
214,366
|
$
236,852
|
$
452,072
|
$
449,989
|
|
|
|
|
|
|
Adjusted diluted net
income per share attributable to DaVita HealthCare Partners
Inc........................................
|
$
1.01
|
$
0.92
|
$
0.97
|
$
1.93
|
$
1.83
|
Add:
|
|
|
|
|
|
Amortization of
intangible assets per share associated with acquisitions for the
dialysis and ancillary
operations........................................................................
|
0.02
|
0.02
|
0.03
|
0.04
|
0.06
|
Amortization of
intangible assets per share associated with acquisitions for the
HCP operations..................
|
0.19
|
0.17
|
0.16
|
0.36
|
0.33
|
Tax effect of
adjustments.................................................
|
(0.08)
|
(0.08)
|
(0.07)
|
(0.16)
|
(0.15)
|
|
$
1.14
|
$
1.03
|
$
1.09
|
$
2.17
|
$
2.07
|
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP
MEASURES
(unaudited)
(dollars in
thousands)
2. Adjusted operating income.
Adjusted operating income is defined as operating income before
certain items we do not believe are indicative of ordinary results,
including goodwill impairment charges, a gain on the partial sale
of Tandigm, a loss on the sale of HCP Arizona, estimated accruals
for damages and liabilities associated with our HCP Nevada hospice
business, and a settlement charge related to a private civil
suit.
We use adjusted operating income as a measure to assess
operating and financial performance. We believe that this measure
enhances a user's understanding of the normal operating income and
of our consolidated enterprise and of our individual reportable
segments.
Adjusted operating income is not a measure 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 a measure of profitability or liquidity. In addition, the
calculation of adjusted operating income 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 may not be indicative of historical
operating results, and we do not intend these calculations to be
predictive of future results of operations or cash flows.
|
Three months
ended
|
Six months
ended
|
|
June
30,
2016
|
March
31,
2016
|
June
30,
2015
|
June
30,
2016
|
June
30,
2015
|
Consolidated:
|
|
|
|
|
|
Operating
income........................................................................................
|
$
329,070
|
$
364,889
|
$
480,548
|
$
693,959
|
$
416,392
|
Add:
|
|
|
|
|
|
Goodwill impairment
charges..............................................................
|
176,000
|
77,000
|
4,065
|
253,000
|
4,065
|
Hospice
accrual....................................................................................
|
─
|
16,000
|
─
|
16,000
|
─
|
Gain on sale of
Tandigm......................................................................
|
(40,280)
|
─
|
─
|
(40,280)
|
─
|
Loss on sale of HCP
Arizona..............................................................
|
10,489
|
─
|
─
|
10,489
|
─
|
Settlement
charge.................................................................................
|
─
|
─
|
─
|
─
|
495,000
|
Adjusted operating
income.........................................................................
|
$
475,279
|
$
457,889
|
$
484,613
|
$
933,168
|
$
915,457
|
|
|
|
|
|
|
U.S. dialysis and
related lab services reportable segment:
|
|
|
|
|
|
Segment operating
income..........................................................................
|
$
449,190
|
$
440,055
|
$
437,844
|
$
889,245
|
$
333,355
|
Add: Settlement
charge...............................................................................
|
─
|
─
|
─
|
─
|
495,000
|
Adjusted operating
income.........................................................................
|
$
449,190
|
$
440,055
|
$
437,844
|
$
889,245
|
$
828,355
|
|
|
|
|
|
|
HCP reportable
segment:
|
|
|
|
|
|
Segment operating
(loss)
income................................................................
|
$
(102,059)
|
$
(57,145)
|
$
72,336
|
$
(159,204)
|
$
132,630
|
Add:
|
|
|
|
|
|
Hospice
accrual....................................................................................
|
─
|
16,000
|
─
|
16,000
|
─
|
Gain on sale of
Tandigm......................................................................
|
(40,280)
|
─
|
─
|
(40,280)
|
─
|
Loss on sale of HCP
Arizona..............................................................
|
10,489
|
─
|
─
|
10,489
|
─
|
Goodwill impairment
charges..............................................................
|
176,000
|
77,000
|
─
|
253,000
|
─
|
Adjusted operating
income.........................................................................
|
$
44,150
|
$
35,855
|
$
72,336
|
$
80,005
|
$
132,630
|
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 impairment charges, a
gain on the partial sale of Tandigm, a loss on the sale of HCP
Arizona, estimated accruals for damages and liabilities associated
with our HCP Nevada hospice business, and a subsequent tax
adjustment related to the settlement charge, enhances a user'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 certain non-deductible charges which we do not
believe are indicative of our ordinary results, and, therefore,
these adjusted measures are meaningful to a user 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
|
Six months
ended
June 30,
2016
|
|
June
30,
2016
|
March
31,
2016
|
June
30,
2015
|
Income before income
taxes...............................................................
|
$
229,391
|
$
264,981
|
$
330,539
|
$
494,372
|
Income tax
expense..............................................................................
|
$
134,888
|
$
126,822
|
$
122,762
|
$
261,710
|
Effective income tax
rate.....................................................................
|
58.8%
|
47.9%
|
37.1%
|
52.9%
|
|
|
|
|
|
|
Three months
ended
|
|
|
June
30,
2016
|
March
31,
2016
|
June
30,
2015
|
Six months
ended
June 30,
2016
|
Income before income
taxes...............................................................
|
$
229,391
|
$
264,981
|
$
330,539
|
$
494,372
|
Less:
Noncontrolling owners' income primarily attributable to non-tax
paying entities.....................................
|
(41,289)
|
(40,797)
|
(37,622)
|
(82,086)
|
Income before income
taxes attributable to DaVita HealthCare Partners
Inc......................................................
|
$
188,102
|
$
224,184
|
$
292,917
|
$
412,286
|
Income tax
expense..............................................................................
|
$
134,888
|
$
126,822
|
$
122,762
|
$
261,710
|
Less: Income tax
attributable to noncontrolling interests..............
|
(168)
|
(72)
|
(322)
|
(240)
|
Income tax expense
attributable to DaVita HealthCare Partners Inc.
...............................................................
|
$
134,720
|
$
126,750
|
$
122,440
|
$
261,470
|
Effective income tax
rate attributable to DaVita HealthCare Partners Inc.
.....................................................
|
71.6%
|
56.5%
|
41.8%
|
63.4%
|
|
|
|
|
|
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 impairment charges, a gain on the partial sale
of Tandigm, a loss on the sale of HCP Arizona, estimated accruals
for damages and liabilities associated with our HCP Nevada hospice
business, and a tax adjustment related to the settlement of a
private civil suit:
|
Three months
ended
|
Six months
ended
June 30,
2016
|
June
30,
2016
|
March
31,
2016
|
June
30,
2015
|
|
|
|
|
|
Income before income
taxes...............................................................
|
$
229,391
|
$
264,981
|
$
330,539
|
$
494,372
|
Add:
|
|
|
|
|
Goodwill impairment
charges.................................................
|
176,000
|
77,000
|
4,065
|
253,000
|
Hospice
accrual.........................................................................
|
─
|
16,000
|
─
|
16,000
|
Loss on sale of HCP
Arizona..................................................
|
10,489
|
─
|
─
|
10,489
|
Less:
.
|
|
|
|
|
Noncontrolling owners'
income primarily attributable to non-tax paying
entities.......................................................
|
(41,289)
|
(40,797)
|
(37,622)
|
(82,086)
|
Gain on sale of
Tandigm.........................................................
|
(40,280)
|
─
|
─
|
(40,280)
|
Adjusted income
before income taxes attributable to DaVita HealthCare Partners
Inc.................................................................
|
$
334,311
|
$
317,184
|
$
296,982
|
$
651,495
|
|
|
|
|
|
Income tax
expense..............................................................................
|
$
134,888
|
$
126,822
|
$
122,762
|
$
261,710
|
Add:
|
|
|
|
|
Tax adjustment related
to the settlement of a private civil
suit.................................................................................
|
─
|
─
|
(7,501)
|
─
|
Income tax on sale of
HCP Arizona.....................................
|
4,490
|
─
|
─
|
4,490
|
Less:
|
|
|
|
|
Income tax
attributable to noncontrolling interests...........
|
(168)
|
(72)
|
(322)
|
(240)
|
Income tax on sale of
Tandigm............................................
|
(14,904)
|
─
|
─
|
(14,904)
|
Adjusted income tax
attributable to DaVita HealthCare Partners
Inc.......................................................................................
|
$
124,306
|
$
126,750
|
$
114,939
|
$
251,056
|
Adjusted effective
income tax rate attributable to DaVita HealthCare Partners
Inc.................................................................
|
37.2%
|
40.0%
|
38.7%
|
38.5%
|
DAVITA HEALTHCARE PARTNERS INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
4. Free cash flow.
Free cash flow represents net cash provided by operating
activities less 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 a user with an understanding
of free cash flows that are attributable to DaVita HealthCare
Partners Inc. Free cash flow is not a measure of financial
performance under GAAP and should not be considered as an
alternative to cash flows from operating, investing or financing
activities, as an indicator of cash flows or as a measure of
liquidity.
|
Three months
ended
|
Six months
ended
June 30,
2016
|
|
June
30,
2016
|
March
31,
2016
|
June
30,
2015
|
|
|
|
|
|
Cash provided by
operating
activities........................................................
|
$
516,637
|
$
429,002
|
$
31,442
|
$
945,639
|
Less:
Distributions to noncontrolling
interests.........................................
|
(43,744)
|
(50,409)
|
(37,541)
|
(94,153)
|
Cash provided by
operating activities attributable to DaVita HealthCare Partners
Inc. .............................
|
472,893
|
378,593
|
(6,099)
|
851,486
|
Less: Expenditures
for routine maintenance and information
technology........................................................................................
|
(81,546)
|
(73,288)
|
(70,757)
|
(154,834)
|
Free cash
flow.................................................................................................
|
$
391,347
|
$
305,305
|
$
(76,856)
|
$
696,652
|
|
Rolling 12-Month
Period
|
|
June
30,
2016
|
March
31,
2016
|
June
30,
2015
|
Cash provided by
operating
activities..............................................................
|
$
2,061,308
|
$
1,576,113
|
$
1,219,440
|
Less:
Distributions to noncontrolling
interests................................................
|
(189,748)
|
(183,545)
|
(162,561)
|
Cash provided by
operating activities attributable to DaVita HealthCare Partners
Inc..............................................................
|
1,871,560
|
1,392,568
|
1,056,879
|
Less: Expenditures
for routine maintenance and information technology....
|
(362,146)
|
(351,357)
|
(270,841)
|
Free cash
flow.......................................................................................................
|
$
1,509,414
|
$
1,041,211
|
$
786,038
|
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
|
Six months
ended
June 30,
2016
|
|
June
30,
2016
|
March
31,
2016
|
June
30,
2015
|
Medical
revenues........................................................................
|
$
1,030,470
|
$
974,328
|
$
930,878
|
$ 2,004,798
|
Less: Risk share
revenue,
net...................................................
|
(50,369)
|
(28,402)
|
(18,127)
|
(78,771)
|
Add: Institutional
capitation amounts...................................
|
343,077
|
321,776
|
332,456
|
664,853
|
Total care dollars
under management....................................
|
$
1,323,178
|
$
1,267,702
|
$
1,245,207
|
$
2,590,880
|
Contact:
Jim Gustafson
Investor Relations
DaVita HealthCare Partners Inc.
(310) 536-2585
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SOURCE DaVita HealthCare Partners Inc.