DENVER, Nov. 3, 2015 /PRNewswire/ -- DaVita HealthCare
Partners Inc. (NYSE: DVA) today announced results for the quarter
ended September 30, 2015. Net income
attributable to DaVita HealthCare Partners Inc. for the three
months ended September 30, 2015 was
$216 million, or $1.00 per share.
Adjusted net income attributable to DaVita HealthCare Partners
Inc. for the nine months ended September 30,
2015 was $610 million, or
$2.80 per share, excluding after-tax
debt redemption charges, after-tax settlement charge related to the
Vainer suit and a related tax adjustment. Net income attributable
to DaVita HealthCare Partners Inc. for the nine months ended
September 30, 2015 including these
items was $276 million, or
$1.27 per share.
Adjusted net income attributable to DaVita HealthCare Partners
Inc. for the three months ended September
30, 2014 was $195 million, or
$0.90 per share, excluding an
after-tax loss contingency accrual related to the 2010 and 2011
U.S. Attorney physician relationship investigations. Adjusted net
income attributable to DaVita HealthCare Partners Inc. for the nine
months ended September 30, 2014 was
$584 million, or $2.69 per share, excluding after-tax debt
redemption and refinancing charges, and an after-tax loss
contingency accrual as discussed above. Net income attributable to
DaVita HealthCare Partners Inc. for the three and nine months ended
September 30, 2014 including these
items was $184 million and
$515 million, or $0.85 and $2.38 per
share, respectively.
See schedules of reconciliations of non-GAAP measures.
Financial and operating highlights include:
- Cash Flow: For the rolling twelve months ended
September 30, 2015, operating cash
flow was $1.051 billion and free cash
flow was $602 million. For the three
and nine months ended September 30,
2015, operating cash flow was $679
million and $1.121 billion,
respectively, and free cash flow was $557
million and $799 million,
respectively. Operating cash flow and free cash flow for the nine
months ended and rolling twelve months ended September 30, 2015 were negatively impacted by
approximately $304 million of
after-tax payments made during the second quarter of 2015 in
connection with the settlement of the Vainer suit. In
addition, the rolling twelve months ended September 30, 2015 was negatively impacted by
approximately $269 million of
after-tax payments made in connection with the settlement of the
2010 and 2011 U.S. Attorney physician relationship investigations.
Excluding these items, operating cash flow for the nine months
ended and the rolling twelve months ended September 30, 2015 would have been $1.424 billion and $1.623
billion, respectively.
- Operating Income and Adjusted Operating
Income: Operating income for the three months
ended September 30, 2015 was
$509 million. Adjusted operating
income for the nine months ended September
30, 2015 was $1.421 billion,
excluding a settlement charge of $495
million related to the Vainer suit. Operating income for the
nine months ended September 30, 2015,
including this item was $926
million.
For the quarter ended September 30, 2015, we recognized a net benefit
of approximately $22 million in our
HCP segment, related to the recognition of certain risk sharing
settlements. In addition, we reserved $23
million for refunds of prior period reimbursements in our
pharmacy business.
Adjusted operating income for the
three and nine months ended September 30,
2014 was $455 million and
$1.380 billion, respectively,
excluding a loss contingency accrual related to the 2010 and 2011
U.S. Attorney physician relationship investigations. Operating
income for the three and nine months ended September 30, 2014 including this item was
$438 million and $1.363 billion, respectively.
- Adjusted Diluted Net Income Per Share:
Adjusted net income attributable to DaVita HealthCare Partners Inc.
for the three months ended September 30,
2015, excluding the amortization of intangible assets
associated with acquisitions, net of tax, was $241 million and adjusted diluted net income per
share was $1.12. Adjusted net
income attributable to DaVita HealthCare Partners Inc. for the nine
months ended September 30, 2015, as
adjusted to exclude additional certain other non-GAAP measures was
$687 million, and adjusted diluted
net income per share was $3.16.
Adjusted net income attributable
to DaVita HealthCare Partners Inc. for the three months ended
September 30, 2014, as adjusted to
further exclude certain items was $220
million, and adjusted diluted net income per share was
$1.01. Adjusted net income
attributable to DaVita HealthCare Partners Inc. for the nine months
ended September 30, 2014, as adjusted
to exclude additional certain other non-GAAP measures was
$659 million, and adjusted diluted
net income per share was $3.04.
See schedules of reconciliations
of non-GAAP measures.
- Volume: Total U.S. dialysis treatments for the
third quarter of 2015 were 6,611,799, or 83,694 treatments per day,
representing a per day increase of 4.2% over the third quarter of
2014. Non-acquired treatment growth and normalized non-acquired
treatment growth in the third quarter of 2015 were 4.0% and 3.5%,
respectively.
The number of member months for
which HCP provided capitated care during the third quarter of 2015
specifically related to its legacy markets was approximately 2.4
million, which was flat compared to the third quarter of 2014,
inclusive of growth contributed from acquisitions.
- Effective Tax Rate: Our effective tax rate was
36.0% and 31.9% for the three and nine months ended September 30, 2015, respectively. This effective
tax rate is impacted by the amount of third party owners' income
attributable to non-tax paying entities. The effective tax rate
attributable to DaVita HealthCare Partners Inc. was 40.5% and 39.9%
for the three and nine months ended September 30, 2015, respectively. The adjusted
effective tax rate attributable to DaVita HealthCare Partners Inc.
excluding the Vainer suit settlement charge was 39.2% for the nine
months ended September 30, 2015.
We currently expect our 2015
effective tax rate attributable to DaVita HealthCare Partners Inc.
to be approximately 39.0% to 40.0%, excluding the Vainer suit
settlement charge.
- Center Activity: As of September 30, 2015, we provided dialysis services
to a total of approximately 187,000 patients at 2,329 outpatient
dialysis centers, of which 2,225 centers are located in
the United States and 104 centers
are located in ten countries outside of the United States. During the third quarter of
2015, we acquired five dialysis centers, opened a total of 15 new
dialysis centers, and closed five dialysis centers in the United States. We also acquired six, and
opened two new dialysis centers outside of the United States.
- Share Repurchases: During the three months ended
September 30, 2015, we repurchased a
total of 4,555,868 shares of our common stock for $341 million, or an average price of $74.76 per share. During the nine months ended
September 30, 2015, we repurchased
5,623,007 shares of our common stock for $425 million, or an average price of $75.53 per share. We also repurchased 2,200
shares of our common stock for $0.2
million, or an average price of $71.01 per share, of our common stock subsequent
to September 30, 2015. As a result of
these transactions we now have a total of approximately
$659 million remaining under our
current board authorization for share repurchases.
Outlook
- We are updating our consolidated operating income for 2015 to
now be in the range of $1.870 billion to
$1.915 billion.
Our previous consolidated
operating income guidance for 2015 was in the range of $1.825 billion to $1.925 billion.
- We are also updating our operating income for Kidney Care for
2015 to now be in the range of $1.630
billion to $1.655 billion.
Our previous operating income
guidance for Kidney Care for 2015 was in the range of $1.600 billion to $1.650 billion.
- We are updating our operating income for HCP for 2015 to now be
in the range of $240 million to $260
million.
Our previous operating income
guidance for HCP for 2015 was in the range of $225 million to $275 million.
- We are updating our consolidated operating cash flows for 2015
to now be in the range of $1.675 billion to
$1.775 billion.
Our previous consolidated
operating cash flow for 2015 was in the range of $1.600 billion to $1.750 billion.
The above projected ranges exclude the Vainer suit settlement
charge and the corresponding settlement payments made in 2015.
These projections and the underlying assumptions involve
significant risks and uncertainties, including those described
below, and actual results may vary significantly from these current
projections.
We will be holding a conference call to discuss our results for
the third quarter ended September 30,
2015 on November 3, 2015 at
5:00 p.m. Eastern Time. To join the
conference call, please dial (888) 282-0359 from the U.S. or (312)
470-7167 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 2015 consolidated
operating income, our 2015 Kidney Care operating income, HCP's 2015
operating income, our 2015 consolidated operating cash flows and
our 2015 effective tax rate attributable to DaVita HealthCare
Partners Inc. 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, 2014, 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 a reduction in the
number of patients under such plans, which may result in the loss
of revenues or patients,
- 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 including compliance with
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 HealthCare Partners' (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,
- loss of 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 except
as required by law 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
September 30,
|
Nine
months ended
September 30,
|
|
2015
|
2014
|
2015
|
2014
|
Patient service
revenues...............................................................................................................................................................................................
|
$ 2,414,034
|
$2,242,533
|
$ 7,049,428
|
$ 6,543,880
|
Less: Provision for
uncollectible
accounts................................................................................................................................................................
|
(109,452 )
|
(98,971 )
|
(314,581 )
|
(270,220 )
|
Net patient service
revenues.............................................................................................................................................................................
|
2,304,582
|
2,143,562
|
6,734,847
|
6,273,660
|
Capitated
revenues........................................................................................................................................................................................................
|
926,847
|
848,546
|
2,643,552
|
2,435,480
|
Other
revenues...............................................................................................................................................................................................................
|
294,236
|
259,716
|
869,849
|
757,949
|
Total net
revenues...............................................................................................................................................................................................
|
3,525,665
|
3,251,824
|
10,248,248
|
9,467,089
|
Operating expenses
and charges:
|
|
|
|
|
Patient care costs and
other
costs....................................................................................................................................................................
|
2,501,015
|
2,326,534
|
7,309,703
|
6,752,844
|
General and
administrative.................................................................................................................................................................................
|
353,492
|
322,822
|
1,047,318
|
905,519
|
Depreciation and
amortization...........................................................................................................................................................................
|
162,062
|
149,196
|
474,694
|
437,682
|
Provision for
uncollectible
accounts................................................................................................................................................................
|
2,511
|
3,961
|
6,497
|
9,680
|
Equity investment
income..................................................................................................................................................................................
|
(2,783 )
|
(5,225 )
|
(10,724 )
|
(18,692 )
|
Loss contingency
accrual and settlement
charge..........................................................................................................................................
|
|
17,000
|
495,000
|
17,000
|
Total operating
expenses and
charges..................................................................................................................................................
|
3,016,297
|
2,814,288
|
9,322,488
|
8,104,033
|
Operating
income...........................................................................................................................................................................................................
|
509,368
|
437,536
|
925,760
|
1,363,056
|
Debt
expense...................................................................................................................................................................................................................
|
(103,481 )
|
(99,878 )
|
(305,121 )
|
(312,345 )
|
Debt redemption and
refinancing
charges.................................................................................................................................................................
|
|
|
(48,072 )
|
(97,548 )
|
Other income (loss),
net................................................................................................................................................................................................
|
2,484
|
(1,246 )
|
4,262
|
2,145
|
Income before income
taxes..........................................................................................................................................................................................
|
408,371
|
336,412
|
576,829
|
955,308
|
Income tax
expense........................................................................................................................................................................................................
|
147,064
|
116,628
|
183,893
|
342,366
|
Net
income.......................................................................................................................................................................................................................
|
261,307
|
219,784
|
392,936
|
612,942
|
Less: Net income
attributable to noncontrolling
interests............................................................................................................................
|
(45,435 )
|
(35,662 )
|
(117,204 )
|
(97,848 )
|
Net income
attributable to DaVita HealthCare Partners
Inc.....................................................................................................................................
|
$
215,872
|
$ 184,122
|
$ 275,732
|
$
515,094
|
Earnings per
share:
|
|
|
|
|
Basic net income per
share attributable to DaVita HealthCare Partners
Inc...............................................................................................
|
$
1.02
|
$
0.87
|
$
1.30
|
$
2.43
|
Diluted net income per
share attributable to DaVita HealthCare Partners
Inc...........................................................................................
|
$
1.00
|
$
0.85
|
$
1.27
|
$
2.38
|
Weighted average
shares for earnings per share:
|
|
|
|
|
Basic......................................................................................................................................................................................................................
|
212,374,897
|
212,617,238
|
212,914,126
|
212,086,735
|
Diluted...................................................................................................................................................................................................................
|
216,691,461
|
217,236,493
|
217,421,213
|
216,695,033
|
DAVITA HEALTHCARE PARTNERS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
(unaudited)
(dollars in
thousands)
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
|
2015
|
2014
|
2015
|
2014
|
Net
income......................................................................................................................................................................
|
$ 261,307
|
$ 219,784
|
$ 392,936
|
$ 612,942
|
Other comprehensive
(loss) income, net of tax:
|
|
|
|
|
Unrealized losses on
interest rate swap and cap agreements:
|
|
|
|
|
Unrealized (losses)
gains on interest rate swap and cap
agreements.............................................................
|
(1,851)
|
537
|
(10,064)
|
(7,177)
|
Reclassifications of
net swap and cap agreements realized losses into net
income.......................................
|
771
|
1,403
|
2,372
|
9,759
|
Unrealized (losses)
gains on investments:
|
|
|
|
|
Unrealized (losses)
gains on
investments.........................................................................................................
|
(1,651)
|
(392)
|
(1,368)
|
517
|
Reclassification of
net investment realized gains into net
income.....................................................................
|
(203)
|
─
|
(376)
|
(207)
|
Foreign currency
translation
adjustments.....................................................................................................................
|
(7,023)
|
(13,838)
|
(19,883)
|
(11,871)
|
Other comprehensive
loss..................................................................................................................................
|
(9,957)
|
(12,290)
|
(29,319)
|
(8,979)
|
Total comprehensive
income..........................................................................................................................................
|
251,350
|
207,494
|
363,617
|
603,963
|
Less: Comprehensive
income attributable to noncontrolling
interests...............................................................
|
(45,435)
|
(35,662)
|
(117,204 )
|
(97,848 )
|
Comprehensive income
attributable to DaVita HealthCare Partners
Inc........................................................................
|
$ 205,915
|
$ 171,832
|
$ 246,413
|
$ 506,115
|
DAVITA HEALTHCARE PARTNERS
INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(unaudited)
(dollars in
thousands)
|
Nine months
ended
September 30,
|
|
2015
|
2014
|
Cash flows from
operating activities:
|
|
|
Net
income.......................................................................................................................................................
|
$
392,936
|
$
612,942
|
Adjustments to
reconcile net income to cash provided by operating
activities:
|
|
|
Settlement charge and
loss contingency
accrual...............................................................................
|
495,000
|
17,000
|
Settlement
payments............................................................................................................................
|
(493,775 )
|
|
Depreciation and
amortization..............................................................................................................
|
474,694
|
437,335
|
Debt redemption and
refinancing
charges...........................................................................................
|
48,072
|
97,548
|
Stock-based
compensation
expense...................................................................................................
|
42,794
|
44,323
|
Tax benefits from
stock award
exercises...........................................................................................
|
31,069
|
45,527
|
Excess tax benefits
from stock award
exercises...............................................................................
|
(19,555 )
|
(32,665 )
|
Deferred income
taxes..........................................................................................................................
|
(1,994 )
|
(2,167 )
|
Equity investment
income,
net...............................................................................................................
|
10,563
|
6,007
|
Other non-cash charges
and loss on disposal of
assets....................................................................
|
26,583
|
30,604
|
Changes in operating
assets and liabilities, other than from acquisitions and
divestitures:
|
|
|
Accounts
receivable............................................................................................................................
|
(178,148 )
|
16,610
|
Inventories............................................................................................................................................
|
(35,856 )
|
(25,198 )
|
Other receivables and
other current
assets......................................................................................
|
54,924
|
7,563
|
Other long-term
assets........................................................................................................................
|
1,940
|
2,622
|
Accounts
payable................................................................................................................................
|
11,473
|
2,332
|
Accrued compensation
and
benefits.................................................................................................
|
123,081
|
147,570
|
Other current
liabilities........................................................................................................................
|
96,671
|
72,932
|
Income
taxes........................................................................................................................................
|
35,282
|
72,283
|
Other long-term
liabilities.....................................................................................................................
|
4,773
|
(23,770 )
|
Net cash provided by
operating
activities................................................................................
|
1,120,527
|
1,529,398
|
Cash flows from
investing activities:
|
|
|
Additions of property
and
equipment...................................................................................................
|
(462,213 )
|
(443,507 )
|
Acquisitions..........................................................................................................................................
|
(90,709 )
|
(218,117 )
|
Proceeds from asset
and business
sales...........................................................................................
|
6,865
|
3,620
|
Purchase of
investments available for
sale........................................................................................
|
(6,667 )
|
(7,138 )
|
Purchase of
investments
held-to-maturity..........................................................................................
|
(1,555,604 )
|
(163,046 )
|
Proceeds from sale of
investments available for
sale........................................................................
|
1,961
|
1,321
|
Proceeds from
investments
held-to-maturity.......................................................................................
|
969,549
|
27,781
|
Purchase of intangible
assets...............................................................................................................
|
─
|
(50 )
|
Purchase of equity
investments.........................................................................................................
|
(13,623 )
|
(32,483 )
|
Distributions received
on equity
investments.....................................................................................
|
57
|
434
|
Net cash used in
investing
activities......................................................................................
|
(1,150,384 )
|
(831,185 )
|
Cash flows from
financing activities:
|
|
|
Borrowings............................................................................................................................................
|
41,371,392
|
46,619,292
|
Payments on long-term
debt and other financing
costs................................................................
|
(40,732,075 )
|
(46,587,984 )
|
Deferred financing
costs and debt redemption and refinancing
costs........................................
|
(59,354 )
|
(122,154 )
|
Purchase of treasury
stock.................................................................................................................
|
(384,110 )
|
|
Distributions to
noncontrolling
interests.........................................................................................
|
(125,938 )
|
(105,143 )
|
Stock award exercises
and other share issuances,
net...................................................................
|
19,802
|
14,524
|
Excess tax benefits
from stock award
exercises...............................................................................
|
19,555
|
32,665
|
Contributions from
noncontrolling
interests...................................................................................
|
28,212
|
38,083
|
Proceeds from sales of
additional noncontrolling
interests..........................................................
|
|
3,777
|
Purchase of
noncontrolling
interests................................................................................................
|
(23,605 )
|
(12,069 )
|
Net cash provided by
(used in)financing
activities.............................................................
|
113,879
|
(119,009 )
|
Effect of exchange
rate changes on cash and cash
equivalents.............................................................
|
(1,844 )
|
1,582
|
Net increase in cash
and cash
equivalents.................................................................................................
|
82,178
|
580,786
|
Cash and cash
equivalents at beginning of the
year................................................................................
|
965,241
|
946,249
|
Cash and cash
equivalents at end of the
period........................................................................................
|
$
1,047,419
|
$
1,527,035
|
DAVITA HEALTHCARE PARTNERS
INC.
CONSOLIDATED BALANCE
SHEETS
(unaudited)
(dollars in thousands,
except per share data)
|
September
30,
2015
|
December
31, 2014
|
ASSETS
|
|
|
Cash and cash
equivalents.................................................................................................................................
|
$
1,047,419
|
$
965,241
|
Short-term
investments.......................................................................................................................................
|
922,848
|
337,399
|
Accounts receivable,
less allowance of $261,850 and
$242,674....................................................................
|
1,699,892
|
1,525,849
|
Inventories............................................................................................................................................................
|
173,050
|
136,085
|
Other
receivables..................................................................................................................................................
|
416,932
|
400,916
|
Other current
assets.............................................................................................................................................
|
175,715
|
186,842
|
Income tax
receivable...........................................................................................................................................
|
48,963
|
83,839
|
Deferred income
taxes..........................................................................................................................................
|
253,067
|
240,626
|
Total current
assets...................................................................................................................................
|
4,737,886
|
3,876,797
|
Property and
equipment, net of accumulated depreciation of $2,305,141 and
$2,029,506.........................
|
2,621,918
|
2,469,099
|
Intangibles, net of
accumulated amortization of $751,806 and
$621,891......................................................
|
1,826,782
|
1,949,498
|
Equity
investments..............................................................................................................................................
|
67,883
|
65,637
|
Long-term
investments........................................................................................................................................
|
90,393
|
89,389
|
Other long-term
assets........................................................................................................................................
|
62,387
|
77,000
|
Goodwill.................................................................................................................................................................
|
9,487,579
|
9,415,295
|
|
$ 18,894,828
|
$ 17,942,715
|
LIABILITIES AND
EQUITY
|
|
|
Accounts
payable................................................................................................................................................
|
$
487,945
|
$
445,453
|
Other
liabilities......................................................................................................................................................
|
632,331
|
510,223
|
Accrued compensation
and
benefits................................................................................................................
|
835,518
|
698,475
|
Medical
payables.................................................................................................................................................
|
340,143
|
314,347
|
Current portion of
long-term
debt......................................................................................................................
|
114,617
|
120,154
|
Total current
liabilities..............................................................................................................................
|
2,410,554
|
2,088,652
|
Long-term
debt.....................................................................................................................................................
|
9,082,096
|
8,383,280
|
Other long-term
liabilities....................................................................................................................................
|
406,035
|
389,806
|
Deferred income
taxes..........................................................................................................................................
|
906,807
|
890,701
|
Total
liabilities............................................................................................................................................
|
12,805,492
|
11,752,439
|
Commitments and
contingencies:
|
|
|
Noncontrolling
interests subject to put
provisions.............................................................................
|
897,139
|
829,965
|
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; 216,632,600 and
215,640,968 shares issued and 211,009,593 and 215,640,968 shares
outstanding, respectively)...................
|
217
|
216
|
Additional paid-in
capital.........................................................................................................................
|
1,106,342
|
1,108,211
|
Retained
earnings......................................................................................................................................
|
4,362,835
|
4,087,103
|
Treasury stock
(5,623,007
shares)...........................................................................................................
|
(424,705)
|
|
Accumulated other
comprehensive
loss................................................................................................
|
(54,336)
|
(25,017)
|
Total DaVita
HealthCare Partners Inc. shareholders'
equity...................................................
|
4,990,353
|
5,170,513
|
Noncontrolling
interests not subject to put
provisions......................................................................
|
201,844
|
189,798
|
Total
equity................................................................................................................................................
|
5,192,197
|
5,360,311
|
|
$ 18,894,828
|
$ 17,942,715
|
DAVITA HEALTHCARE PARTNERS
INC.
SUPPLEMENTAL FINANCIAL
DATA
(unaudited)
(dollars in millions, except
for per share and per treatment data)
|
Three months
ended
|
Nine months
ended
September 30,
2015
|
|
September
30,
2015
|
June
30,
2015
|
September
30,
2014
|
1. Consolidated
Financial Results:
|
|
|
|
|
Consolidated net
revenues.................................................................................................................................
|
$ 3,526
|
$ 3,435
|
$ 3,252
|
$ 10,248
|
Operating
income...............................................................................................................................................
|
$ 509
|
$ 481
|
$ 438
|
$ 926
|
Adjusted operating
income excluding certain items
(1).......................................................................................
|
$ 509
|
$ 481
|
$ 455
|
$ 1,421
|
Operating income
margin....................................................................................................................................
|
14.4%
|
14.0%
|
13.5%
|
9.0%
|
Adjusted operating
income margin excluding certain items
(1)...........................................................................
|
14.4%
|
14.0%
|
14.0%
|
13.9%
|
Net income
attributable to DaVita HealthCare Partners
Inc.................................................................................
|
$ 216
|
$ 170
|
$ 184
|
$ 276
|
Adjusted net income
attributable to DaVita HealthCare Partners Inc. excluding certain
items (1)......................
|
$ 216
|
$ 207
|
$ 195
|
$ 610
|
Diluted net income per
share attributable to DaVita HealthCare Partners
Inc.....................................................
|
$ 1.00
|
$ 0.78
|
$ 0.85
|
$ 1.27
|
Adjusted diluted net
income per share attributable to DaVita HealthCare Partners Inc.
excluding certain items
(1)...............................................................................................................................................................
|
$ 1.00
|
$ 0.95
|
$ 0.90
|
$ 2.80
|
|
|
|
|
|
2. Consolidated
Business Metrics:
|
|
|
|
|
Expenses
|
|
|
|
|
General and
administrative expenses as a percent of consolidated net
revenues(2) ...............................
|
10.0%
|
10.2%
|
9.9%
|
10.2%
|
Consolidated effective
tax rate ..................................
|
36.0%
|
37.1%
|
34.7%
|
31.9%
|
Consolidated effective
tax rate attributable to DaVita HealthCare Partners
Inc.(1) .....................................
|
40.5%
|
41.8%
|
38.7%
|
39.9%
|
Adjusted consolidated
effective tax rate attributable to DaVita HealthCare Partners
Inc.(1).......................
|
40.5%
|
39.2%
|
38.7%
|
39.2%
|
|
|
|
|
|
3. Summary of
Division Financial Results:
|
|
|
|
|
Net
revenues
|
|
|
|
|
Kidney
Care:
|
|
|
|
|
Net dialysis and
related lab services
revenues.......................................................................................
|
$ 2,201
|
$ 2,154
|
$ 2,076
|
$ 6,426
|
Net ancillary services
and strategic initiatives revenues, including international
dialysis
operations.................................................................................................................................................
|
345
|
334
|
300
|
984
|
Elimination of
intersegment
revenues.......................................................................................................
|
(21)
|
(19)
|
(16)
|
(57)
|
Total Kidney Care net
revenues......................................................................................................
|
2,525
|
2,469
|
2,360
|
7,353
|
Net HCP
revenues........................................................................................................................................
|
1,001
|
966
|
892
|
2,895
|
Total net consolidated
revenues.....................................................................................................
|
$ 3,526
|
$ 3,435
|
$ 3,252
|
$ 10,248
|
Operating
income
|
|
|
|
|
Kidney
Care:
|
|
|
|
|
Dialysis and related
lab services operating income
|
$
462
|
$ 438
|
$ 400
|
$ 795
|
Other – Ancillary
services and strategic initiatives, including international
dialysis operations operating
loss...........................................................................................................................................
|
(30)
|
(26)
|
(6)
|
(70)
|
Corporate support and
related long-term incentive
compensation...........................................................
|
(6)
|
(3)
|
(3)
|
(14)
|
Total Kidney Care
operating
income................................................................................................
|
426
|
409
|
391
|
711
|
HCP operating
income..................................................................................................................................
|
83
|
72
|
47
|
215
|
Total consolidated
operating
income...............................................................................................
|
$ 509
|
$ 481
|
$ 438
|
$ 926
|
DAVITA HEALTHCARE PARTNERS
INC.
SUPPLEMENTAL FINANCIAL
DATA—continued
(unaudited)
(dollars in
millions, except for per share and per treatment data)
|
Three months
ended
|
Nine months
ended
September 30,
2015
|
|
September 30,
2015
|
June
30,
2015
|
September 30,
2014
|
4. Summary of
Reportable Segment Financial Results:
|
|
|
|
|
Dialysis and
Related Lab Services
|
|
|
|
|
Revenue:
|
|
|
|
|
Patient services
revenues.............................................................................................
|
$ 2,301
|
$ 2,252
|
$ 2,165
|
$ 6,718
|
Provision for
uncollectible
accounts...........................................................................
|
(103)
|
(101)
|
(92)
|
(302)
|
Net patient service
operating
revenues..............................................................
|
2,198
|
2,151
|
2,073
|
6,416
|
Other
revenues...............................................................................................................
|
3
|
3
|
3
|
10
|
Total net operating
revenues...............................................................................
|
$ 2,201
|
$ 2,154
|
$ 2,076
|
$ 6,426
|
Operating
expenses:
|
|
|
|
|
Patient care
costs...........................................................................................................
|
$ 1,461
|
$ 1,436
|
$ 1,390
|
$ 4,294
|
General and
administrative............................................................................................
|
170
|
174
|
170
|
528
|
Depreciation and
amortization......................................................................................
|
112
|
110
|
102
|
326
|
Equity investment
income.............................................................................................
|
(4)
|
(4)
|
(3)
|
(12)
|
Loss contingency
accrual and settlement
charge.....................................................
|
─
|
─
|
17
|
495
|
Total operating
expenses......................................................................................
|
1,739
|
1,716
|
1,676
|
5,631
|
Segment operating
income............................................................................................
|
$
462
|
$ 438
|
$ 400
|
$
795
|
HCP
|
|
|
|
|
Revenue:
|
|
|
|
|
HCP capitated
revenues................................................................................................
|
$
907
|
$ 848
|
$ 828
|
$ 2,588
|
Patient services
revenues.............................................................................................
|
84
|
86
|
56
|
252
|
Provision for
uncollectible
accounts...........................................................................
|
(5)
|
(4)
|
(6)
|
(11)
|
Net patient service
operating
revenues..............................................................
|
79
|
82
|
50
|
241
|
Other
revenues...............................................................................................................
|
15
|
36
|
14
|
66
|
Total net operating
revenues...............................................................................
|
$ 1,001
|
$ 966
|
$ 892
|
$ 2,895
|
Operating
expenses:
|
|
|
|
|
Patient care
costs...........................................................................................................
|
$ 768
|
$ 750
|
$ 719
|
$ 2,250
|
General and
administrative............................................................................................
|
106
|
102
|
86
|
300
|
Depreciation and
amortization......................................................................................
|
43
|
43
|
42
|
130
|
Equity investment loss
(income)..................................................................................
|
1
|
(1)
|
(2)
|
─
|
Total operating
expenses......................................................................................
|
918
|
894
|
845
|
2,680
|
Segment operating
income............................................................................................
|
$
83
|
$
72
|
$
47
|
$
215
|
|
|
|
|
|
5. Dialysis and
Related Lab Services Business Metrics:
|
|
|
|
|
Volume
|
|
|
|
|
Treatments..........................................................................................................................
|
6,611,799
|
6,463,058
|
6,343,706
|
19,337,492
|
Number of treatment
days................................................................................................
........................................................................................................................................
|
79.0
|
78.0
|
79.0
|
233.6
|
Treatments per
day............................................................................................................
|
83,694
|
82,860
|
80,300
|
82,780
|
Per day year over year
increase.......................................................................................
|
4.2%
|
4.3%
|
5.1%
|
4.3%
|
Non-acquired growth
year over
year..............................................................................
|
4.0%
|
3.7%
|
4.4%
|
3.8%
|
Normalized
non-acquired growth year over
year..........................................................
|
3.5%
|
3.7%
|
4.9%
|
3.9%
|
Operating
revenues before provision for uncollectible
accounts
|
|
|
|
|
Dialysis and related
lab services revenue per
treatment.............................................
|
$ 348.01
|
$ 348.32
|
$ 341.22
|
$ 347.43
|
Per treatment
(decrease) increase from previous
quarter............................................
|
(0.1%)
|
0.7%
|
0.4%
|
|
Per treatment increase
from previous
year.....................................................................
|
2.0%
|
2.5%
|
0.4%
|
2.0%
|
Percent of net
consolidated
revenues............................................................................
|
62.9%
|
62.3%
|
63.5%
|
62.6%
|
DAVITA HEALTHCARE PARTNERS
INC.
SUPPLEMENTAL FINANCIAL
DATA—continued
(unaudited)
(dollars in
millions, except for per share and per treatment data)
|
Three months
ended
|
Nine months
ended
September 30,
2015
|
|
September
30,
2015
|
June
30,
2015
|
September
30,
2014
|
5. Dialysis and
Related Lab Services Business Metrics:
(continued)
|
|
|
|
|
Expenses
|
|
|
|
|
Patient care
costs
|
|
|
|
|
Percent of total
segment operating
revenues............................................................
|
66.4%
|
66.7%
|
66.9%
|
66.8%
|
Per
treatment...................................................................................................................
|
$ 220.92
|
$ 222.17
|
$ 219.07
|
$ 222.01
|
Per treatment decrease
from previous
quarter...........................................................
|
(0.6%)
|
(0.4%)
|
0.4%
|
|
Per treatment increase
from previous
year.................................................................
|
0.8%
|
1.4%
|
0.9%
|
1.0%
|
General and
administrative expenses
|
|
|
|
|
Percent of total
segment operating
revenues............................................................
|
7.7%
|
8.1%
|
8.2%
|
8.2%
|
Per
treatment...................................................................................................................
|
$ 25.78
|
$ 26.99
|
$ 26.86
|
$ 27.31
|
Per treatment
(decrease) increase from previous
quarter.........................................
|
(4.5%)
|
(7.7%)
|
1.5%
|
|
Per treatment
(decrease) increase from previous
year..............................................
|
(4.0%)
|
2.0%
|
(11.3%)
|
3.3%
|
Accounts
receivable
|
|
|
|
|
Net
receivables...............................................................................................................
|
$ 1,243
|
$ 1,227
|
$ 1,117
|
─
|
DSO..................................................................................................................................
|
51
|
53
|
50
|
─
|
Provision for
uncollectible accounts as a percentage of
revenues........................
|
4.5%
|
4.5%
|
4.25%
|
4.5%
|
|
|
|
|
|
6. HCP Business
Metrics:
|
|
|
|
|
Capitated
membership
|
|
|
|
|
Total.....................................................................................................................................
|
808,300
|
826,500
|
828,300
|
─
|
Member
months.................................................................................................................
|
2,445,300
|
2,472,400
|
2,481,100
|
7,400,100
|
Capitated revenues
by sources
|
|
|
|
|
Commercial
revenues........................................................................................................
|
$ 181
|
$ 177
|
$
188
|
$
543
|
Senior
revenues.................................................................................................................
|
641
|
623
|
605
|
1,866
|
Medicaid
revenues............................................................................................................
|
85
|
48
|
35
|
179
|
Total capitated
revenues...........................................................................................
|
$ 907
|
$ 848
|
$
828
|
$ 2,588
|
Other
|
|
|
|
|
Total care dollars
under
management(1).........................................................................
|
$ 1,260
|
$ 1,245
|
$ 1,148
|
$ 3,738
|
Ratio of operating
income to total care dollars under
management(1).......................
|
6.6%
|
5.8%
|
4.0%
|
5.8%
|
Full time
clinicians.............................................................................................................
|
1,311
|
1,272
|
1,153
|
─
|
IPA primary care
physicians............................................................................................
|
2,935
|
3,018
|
3,313
|
─
|
|
|
|
|
|
7. Cash
Flow:
|
|
|
|
|
Operating cash
flow..........................................................................................................
|
$ 679.0
|
$ 31.4
|
$ 847.9
|
$ 1,120.5
|
Operating cash flow,
last twelve
months.......................................................................
|
$ 1,050.5
|
$ 1,219.4
|
$ 1,883.6
|
─
|
Free cash
flow(1)................................................................................................................
|
$ 556.6
|
$ (76.9)
|
$ 740.3
|
$ 799.3
|
Free cash flow, last
twelve
months(1)..............................................................................
|
$ 602.3
|
$ 786.0
|
$ 1,447.3
|
─
|
Capital
expenditures:
|
|
|
|
|
Routine
maintenance/IT/other..................................................................................
|
$ 75.5
|
$ 70.8
|
$ 68.3
|
$ 195.3
|
Development and
relocations...................................................................................
|
$ 95.8
|
$ 98.7
|
$ 96.6
|
$ 266.9
|
Acquisition
expenditures...........................................................................................
|
$ 45.7
|
$ 4.4
|
$ 119.7
|
$ 90.7
|
DAVITA HEALTHCARE PARTNERS
INC.
SUPPLEMENTAL FINANCIAL
DATA—continued
(unaudited)
(dollars in
millions, except for per share and per treatment data)
|
Three months
ended
|
|
|
September
30,
2015
|
June
30,
2015
|
September
30,
2014
|
8. Debt and
Capital Structure:
|
|
|
|
|
Total
debt(3)..........................................................................................
|
$ 9,211
|
$ 9,225
|
$ 8,519
|
|
Net debt, net of cash
and cash
equivalents(3).....................................
|
$ 8,164
|
$ 8,291
|
$ 6,992
|
|
Leverage ratio (see
calculation on page
14).......................................
|
2.93x
|
3.03x
|
2.79x
|
|
Overall weighted
average effective interest rate during the
quarter..................................................................................................
|
4.40%
|
4.42%
|
4.52%
|
|
Overall weighted
average effective interest rate at end of the
quarter..................................................................................................
|
4.40%
|
4.38%
|
4.46%
|
|
Weighted average
effective interest rate on the Senior Secured Credit Facilities at
end of the
quarter...................................................
|
3.50%
|
3.44%
|
3.43%
|
|
Fixed and economically
fixed interest rates as a percentage of our total
debt..............................................................................................
|
61%(4)
|
61%(4)
|
57%
|
|
Fixed and economically
fixed interest rates, including our interest rate cap agreements,
as a percentage of our total debt....................
|
90%(4)
|
90%(4)
|
90%
|
|
|
|
|
|
|
9. Clinical:
(quarterly averages)
|
|
|
|
|
Dialysis adequacy -%
of patients with Kt/V > 1.2 at the end of the
quarter..................................................................................................
|
97%
|
98%
|
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 and related long-term incentive
compensation.
(3) The reported balance
sheet amounts at September 30, 2015, June 30, 2015 and September
30, 2014, excludes $14.3 million, $14.9 million and $16.9 million,
respectively, of a debt discount associated with our Term Loan
B.
(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 $2.75 billion
of outstanding principal debt on the Term Loan B as a result of
interest rate cap agreements. The remaining $721 million
outstanding principal balance of the Term Loan B is subject to
LIBOR-based interest rate volatility above a floor of
0.75%.
|
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
September 30,
2015
|
Net income
attributable to DaVita HealthCare Partners
Inc................................................................
|
$
483,752
|
Income
taxes...............................................................................................................................................
|
287,870
|
Interest
expense.........................................................................................................................................
|
379,502
|
Depreciation and
amortization.................................................................................................................
|
627,947
|
Settlement
charge......................................................................................................................................
|
495,000
|
Noncontrolling
interests and equity investment income,
net.............................................................
|
176,945
|
Stock-settled
stock-based
compensation..............................................................................................
|
55,443
|
Debt redemption
charges.........................................................................................................................
|
48,072
|
Other
...........................................................................................................................................................
|
(22,888)
|
"Consolidated
EBITDA"..................................................................................................................
|
$
2,531,643
|
|
|
|
September 30,
2015
|
Total debt, excluding
debt discount of $14.3
million............................................................................
|
$
9,210,995
|
Letters of credit
issued.............................................................................................................................
|
96,274
|
|
9,307,269
|
Less: Cash and cash
equivalents including short-term investments (excluding HCP's
physician owned entities
cash)..........................................................................................................
|
(1,886,291)
|
Consolidated net
debt...............................................................................................................................
|
$
7,420,978
|
Last twelve months
"Consolidated
EBITDA"......................................................................................
|
$
2,531,643
|
Leverage
ratio.............................................................................................................................................
|
2.93x
|
In accordance with the Credit Agreement, the Company's
leverage ratio cannot exceed 5.00 to 1.00 as of September 30, 2015. 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 diluted net income per
share attributable to DaVita HealthCare Partners Inc. excluding
debt redemption and refinancing charges, a loss contingency
accrual and a settlement charge, net of related tax, and tax
adjustment related to the settlement of the Vainer suit.
We believe that adjusted net income attributable to DaVita
HealthCare Partners Inc. excluding debt redemption and refinancing
charges, a loss contingency accrual and settlement charge, net of
related tax, and a tax adjustment related to the settlement of the
Vainer suit, 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 unusual amounts related to the debt
redemption charges that resulted from the redemption of the
$775 million 6 ⅝% Senior Notes due
2020, debt refinancing charges that resulted from the refinancing
of our Secured Credit Facilities, the redemption of the
$775 million 6 ⅜% Senior Notes due
2018, as well as the termination of certain interest rate swap
agreements, and a loss contingency accrual related to the 2010 and
2011 U.S. Attorney physician relationship investigations, as well
as a settlement charge, net of related tax, and tax adjustment
related to the settlement of the Vainer suit, 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 debt redemption and
refinancing charges, a loss contingency accrual related
to the 2010 and 2011 U.S. Attorney physician
relationship investigations, and a settlement charge,
net of related tax, and tax adjustment related to the
settlement of the Vainer suit:
|
Three months
ended
|
Nine months
ended
|
|
September
30,
2015
|
June
30,
2015
|
September
30,
2014
|
September
30,
2015
|
September
30,
2014
|
Net income
attributable to DaVita HealthCare
Partners Inc.
...............................................................................
|
$ 215,872
|
$170,477
|
$ 184,122
|
$ 275,732
|
$ 515,094
|
Add:
|
|
|
|
|
|
Debt redemption and
refinancing charges..........................
|
─
|
48,072
|
─
|
48,072
|
97,548
|
Loss contingency
accrual..................................................
|
─
|
─
|
17,000
|
─
|
17,000
|
Settlement
charge...............................................................
|
─
|
─
|
─
|
495,000
|
─
|
Tax adjustment related
to the settlement of the Vainer
suit......................................................................................
|
─
|
7,501
|
─
|
7,501
|
─
|
Less: Related
income
tax...........................................................
|
─
|
(18,892)
|
(6,588)
|
(216,639)
|
(46,095)
|
|
$ 215,872
|
$ 207,158
|
$ 194,534
|
$ 609,666
|
$ 583,547
|
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 debt
redemption and refinancing charges, a loss
contingency accrual related to the 2010 and 2011 U.S.
Attorney physician relationship investigations, and a
settlement charge and tax adjustment related to the
settlement of the Vainer suit:
|
Three months
ended
|
Nine months
ended
|
|
September
30,
2015
|
June
30,
2015
|
September
30,
2014
|
September
30,
2015
|
September
30,
2014
|
Diluted net income
per share attributable to DaVita HealthCare Partners
Inc...........................................................
|
$ 1.00
|
$ 0.78
|
$ 0.85
|
$ 1.27
|
$ 2.38
|
Add:
|
|
|
|
|
|
Debt redemption and
refinancing charges........................
|
─
|
0.13
|
─
|
0.13
|
0.26
|
Loss contingency
accrual.................................................
|
─
|
─
|
0.05
|
─
|
0.05
|
Settlement
charge..............................................................
|
─
|
─
|
─
|
1.36
|
─
|
Tax adjustment related
to the settlement of the
Vainer
suit.........................................................................
|
─
|
0.04
|
─
|
0.04
|
─
|
|
$ 1.00
|
$ 0.95
|
$ 0.90
|
$ 2.80
|
$ 2.69
|
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. 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 to fair value, and
accordingly is indicative of consistent 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:
|
Three months
ended
|
Nine months
ended
|
|
September
30,
2015
|
June
30,
2015
|
September
30,
2014
|
September
30,
2015
|
September
30,
2014
|
Adjusted net income
attributable to DaVita HealthCare Partners Inc.
.......................................................................
|
$ 215,872
|
$207,158
|
$ 194,534
|
$ 609,666
|
$ 583,547
|
Add:
|
|
|
|
|
|
Amortization of
intangible assets associated with acquisitions for the dialysis and
ancillary
operations.....................................................................
|
6,285
|
6,384
|
6,673
|
19,193
|
20,253
|
Amortization of
intangible assets associated with acquisitions for the HCP
operations.............................
|
35,911
|
35,838
|
35,276
|
107,627
|
105,426
|
Less: Related income
tax....................................................
|
(17,089)
|
(16,593)
|
(16,256)
|
(49,583)
|
(50,166)
|
|
$ 240,979
|
$232,787
|
$ 220,227
|
$ 686,903
|
$ 659,060
|
|
|
|
|
|
|
Adjusted diluted net
income per share attributable to DaVita HealthCare Partners
Inc.......................................
|
$ 1.00
|
$ 0.95
|
$ 0.90
|
$ 2.80
|
$ 2.69
|
Add:
|
|
|
|
|
|
Amortization of
intangible assets per share associated with acquisitions for the
dialysis and ancillary operations, net of
tax..................................
|
0.02
|
0.02
|
0.02
|
0.06
|
0.06
|
Amortization of
intangible assets per share associated with acquisitions for the
HCP operations, net of
tax....................................................................
|
0.10
|
0.10
|
0.09
|
0.30
|
0.29
|
|
$ 1.12
|
$ 1.07
|
$ 1.01
|
$ 3.16
|
$ 3.04
|
DAVITA HEALTHCARE PARTNERS
INC.
RECONCILIATIONS FOR NON-GAAP
MEASURES
(unaudited)
(dollars in
thousands)
2. Adjusted operating income excluding a loss
contingency accrual and a settlement charge
We believe that adjusted operating income excluding a loss
contingency accrual and a settlement charge enhances a user's
understanding of our normal operating income for these periods by
providing a measure that is meaningful because it excludes an
unusual amount that was accrued as part of a settlement related to
the 2010 and 2011 U.S. Attorney physician relationship
investigations, as well as a settlement charge and accordingly, are
comparable to prior periods and indicative of consistent operating
income. These measures are not measures of financial performance
under GAAP and should not be considered as an alternative to
operating income.
Adjusted operating
income excluding a loss
contingency accrual related to the 2010 and
2011 U.S. Attorney physician relationship
investigations, and a settlement charge related
to the Vainer suit:
|
Three months
ended
|
Nine months
ended
|
|
September
30,
2015
|
June
30,
2015
|
September
30,
2014
|
September
30,
2015
|
September
30,
2014
|
Operating
income..........................................................
|
$ 509,368
|
$ 480,548
|
$ 437,536
|
$ 925,760
|
$ 1,363,056
|
Add:
|
|
|
|
|
|
Loss contingency
accrual......................................
|
─
|
─
|
17,000
|
─
|
17,000
|
Settlement
charge...................................................
|
─
|
─
|
─
|
495,000
|
─
|
Adjusted operating
income............................................
|
$ 509,368
|
$ 480,548
|
$ 454,536
|
$ 1,420,760
|
$ 1,380,056
|
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 a loss contingency accrual
related to the 2010 and 2011 U.S. Attorney physician relationship
investigations, as well as a settlement charge and tax adjustment
related to the settlement of the Vainer 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 unusual amounts that include
a loss contingency accrual and a settlement charge and tax
adjustment related to the settlement of the Vainer suit, 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
|
Nine months
ended
September
30,
2015
|
|
September
30,
2015
|
June
30,
2015
|
September
30,
2014
|
Income from
continuing operations before income taxes.....
|
$ 408,371
|
$ 330,539
|
$ 336,412
|
$ 576,829
|
Income tax
expense.............................................................
|
$ 147,064
|
$ 122,762
|
$ 116,628
|
$ 183,893
|
Effective income tax
rate.....................................................
|
36.0%
|
37.1%
|
34.7%
|
31.9%
|
|
|
|
|
|
|
Three months
ended
|
Nine months
ended
September
30,
2015
|
|
September
30,
2015
|
June
30,
2015
|
September
30,
2014
|
Income from
continuing operations before income
taxes.......................
|
$ 408,371
|
$330,539
|
$ 336,412
|
$ 576,829
|
Less:
Noncontrolling owners' income primarily attributable to non-tax
paying
entities.........................................................................................
|
(45,559)
|
(37,622)
|
(35,810)
|
(117,717)
|
Income before income
taxes attributable to DaVita HealthCare Partners
Inc............................................................................................
|
$ 362,812
|
$292,917
|
$ 300,602
|
$ 459,112
|
|
|
|
|
|
Income tax
expense...............................................................................
|
$147,064
|
$122,762
|
$ 116,628
|
$ 183,893
|
Less: Income tax
attributable to noncontrolling
interests.......................
|
(124)
|
(322)
|
(148)
|
(513)
|
Income tax expense
attributable to DaVita HealthCare Partners
Inc.
.........................................................................................................
|
$ 146,940
|
$ 122,440
|
$ 116,480
|
$ 183,380
|
|
|
|
|
|
Effective income tax
rate attributable to DaVita HealthCare
Partners Inc.
...........................................................................................
|
40.5%
|
41.8%
|
38.7%
|
39.9%
|
DAVITA HEALTHCARE PARTNERS
INC.
RECONCILIATIONS FOR NON-GAAP
MEASURES
(unaudited)
(dollars in
thousands)
|
Three months
ended
|
Nine months
ended
September 30,
2015
|
Adjusted effective
income tax rates attributable to DaVita HealthCare Partners Inc.
excluding a loss contingency accrual related to the 2010 and 2011
U.S. Attorney physician relationship investigations, and a
settlement charge and tax adjustment related to the settlement of
the Vainer suit:
|
September
30,
2015
|
June
30,
2015
|
September
30,
2014
|
Income from
continuing operations before income
taxes..........................
|
$ 408,371
|
$ 330,539
|
$ 336,412
|
$ 576,829
|
Add:
|
|
|
|
|
Loss contingency
accrual..................................................................
|
─
|
─
|
17,000
|
─
|
Settlement
charge................................................................................
|
─
|
─
|
─
|
495,000
|
|
408,371
|
330,539
|
353,412
|
1,071,829
|
Less:
Noncontrolling owners' income primarily attributable to non-tax
paying
entities...................................................................................
|
(45,559)
|
(37,622)
|
(35,810)
|
(117,717)
|
Adjusted income
before income taxes attributable to DaVita HealthCare Partners
Inc.............................................................................
|
$ 362,812
|
$ 292,917
|
$ 317,602
|
$ 954,112
|
Income tax
expense..........................................................................................
|
$ 147,064
|
$ 122,762
|
$ 116,628
|
$ 183,893
|
Add:
|
|
|
|
|
Income taxes
attributable to the loss contingency accrual..........
|
─
|
─
|
6,588
|
─
|
Income taxes
attributable to the settlement
charge.......................
|
─
|
─
|
─
|
197,747
|
Tax adjustment
related to the settlement of the Vainer
suit......................
|
─
|
(7,501)
|
─
|
(7,501)
|
Less: Income tax
attributable to noncontrolling
interests.........................
|
(124)
|
(322)
|
(148)
|
(513)
|
Adjusted income tax
attributable to DaVita HealthCare Partners Inc......
|
$ 146,940
|
$ 114,939
|
$ 123,068
|
$ 373,626
|
Adjusted effective
income tax rate attributable to DaVita HealthCare Partners
Inc.................................................................................................
|
40.5%
|
39.2%
|
38.7%
|
39.2%
|
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 the Vainer 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
|
Nine months
ended
September
30,
2015
|
|
September
30,
2015
|
June
30,
2015
|
September
30,
2014
|
Cash provided by
operating
activities........................................................
|
$ 678,996
|
$ 31,442
|
$ 847,900
|
$ 1,120,527
|
Less:
Distributions to noncontrolling
interests..........................................
|
(46,898)
|
(37,541)
|
(39,325)
|
(125,938)
|
Cash provided by
(used in) operating activities attributable to DaVita HealthCare
Partners Inc.
......................................................
|
632,098
|
(6,099)
|
808,575
|
994,589
|
Less: Expenditures
for routine maintenance and information
technology..................................................................................................
|
(75,543)
|
(70,757)
|
(68,263)
|
(195,310)
|
Free cash
flow...........................................................................................
|
$ 556,555
|
$ (76,856)
|
$ 740,312
|
$ 799,279
|
|
Rolling 12-Month
Period
|
|
September
30,
2015
|
June
30,
2015
|
September
30,
2014
|
Cash provided by
operating
activities..................................................................
|
$ 1,050,536
|
$1,219,440
|
$ 1,883,585
|
Less:
Distributions to noncontrolling
interests.................................................
|
(170,134)
|
(162,561)
|
(144,733)
|
Cash provided by
operating activities attributable to DaVita HealthCare Partners
Inc..........................................................................................................
|
880,402
|
1,056,879
|
1,738,852
|
Less: Expenditures
for routine maintenance and information technology......
|
(278,121)
|
(270,841)
|
(291,563)
|
Free
cash
flow...........................................................................................................
|
$ 602,281
|
$ 786,038
|
$ 1,447,289
|
|
September 30,
2015
|
|
Three months
ended
|
Nine months
ended
|
Rolling twelve
months ended
|
Cash provided by
operating
activities.................................................................
|
$678,996
|
$1,120,527
|
$1,050,536
|
Payment in connection
with the settlement of the Vainer
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)
|
(331,733)
|
Adjusted operating
cash
flow...............................................................................
|
$678,996
|
$1,424,056
|
$1,622,934
|
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
|
Nine months
ended
September 30,
2015
|
|
September
30,
2015
|
June
30,
2015
|
September
30,
2014
|
Medical
revenues.......................................................................
|
$ 985,483
|
$ 930,878
|
$ 879,130
|
$ 2,828,949
|
Less: Risk share
revenue,
net...................................................
|
(70,752)
|
(18,127)
|
(32,568)
|
(101,836)
|
Add: Institutional
capitation amounts....................................
|
345,550
|
332,456
|
301,079
|
1,011,114
|
Total care dollars
under management......................................
|
$ 1,260,281
|
$1,245,207
|
$ 1,147,641
|
$ 3,738,227
|
Contact: Jim Gustafson
Investor
Relations
DaVita HealthCare Partners Inc.
(310) 536-2585
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SOURCE DaVita HealthCare Partners Inc.